Forhad-Report Most Final

1.
1 Introduction
Internship program is the systematic process for gathering, recording and analyzing of data about the subject that a student goes to learn the program. This program is conducted by IIUC. It is a very much theoretical and practical oriented program in the arena of business and non business financial sector. Now the world is a competitive so everybody has to be expert in both practical knowledge and theoretical knowledge. The main objectives of this internship program is to learn something about practical of the selected organization/ Bank / Insurance Company or any one can do his internship as per as curriculum of the university. That is why I attached to JBL, at Jubilee Road Branch in Chittagong.
There are numerous reasons for which the Foreign Exchange Department has been chosen for my Internship report. First of all, Foreign Exchange is the most important Department of any bank. Secondly, it consists of Import, Export, Foreign Remittance, Foreign Currency Transactions etc. which are the core activities of foreign trade of any state. In foreign trade, this department is very crucial for the bank, which requires knowledge based banking activities.
Prepared by: Md. Hasan Forhad, Matric No: B063108, MBA (Finance & Banking), IIUC
1.2 OBJECTIVE OF THE STUDY

The objective of the study is to gather practical knowledge regarding Foreign Exchange and its Operations. More precisely we can identify the objectives of this report as follows:
1) To know about import operationof
JBIBBL.
2) To know about export operation of JBIBBL.

3) To understand foreign remittance mechanism.
4) To find out the foreign exchange related problems of JBIBBL. 5) To give some suggestions to overcome the problems.
1.3 METHODOLOGY OF THE STUDY
This report has been prepared on the basis of the experience gained during the period of practical work. Data has been collected from primary as well as secondary sources but emphasis was put on primary sources. Findings are based on practical work and methods are as follows:
Data sources The data source used to prepare this report delineated as follows: a) Primary sources-
i. ii.
Face to face to interview with the clients. Personal interview.
iii. Observation in the organization. iv. Practical desk task.
v. b)
Try to get information from different sources.
Secondary sources-
i.
ii. iii. iv. v.
vi.
vii. viii.
Annual report of JBL. Banks financial statement. Marketing research book. Periodicals. Bulletins and Circular. Website of the bank. Circular. Monthly transaction record of the bank.
The collected data and information have been tabulated, processed, analyzed and graphically presented in order to make the study more informative, useful and purposeful.
1.4 SCOPE OF THE STUDY

The study was kept limited to Jamuna Bank Limited,Jubilee Road Islami Banking Branch, Chittagong. This Branch deals in all kinds of banking business under the control of Bangladesh Bank. Scope of the study has been described in terms of two grounds: Organizational scope. Field scope.
Organizational scope: I have been working in every important department of JBL, Jubilee Road Islami Banking Branch, Chittagong. Among all the departments of JBL, I have given emphasis on Foreign Exchange Department. Field scope: This study has been started after completing the MBA course and continued for three months. Primary and secondary data have been collected from different aspects and different branches of JBL, and I got a lot of support from field level. I got full supports from the officials of JBL.
1.5 LIMITATIONS OF THE STUDY
Although employees of JBL cooperated with me and they also gave me much time to make this report properly in the way of my study, I faced a lot of problems that may be termed as the limitations of the study. These are as follows: .
It should be certainly mentioned that the time constraints are the first limitation of the study. Only three months is not sufficient to gather perfect knowledge on the vast area of the banking activities.
Sometimes they could not be able to supply my topic related data for preparing a depth presentation. It was also seen that maximum time they were found busy and many officers related with topics were not able to give enough time and briefings due to insufficiency of time.
The bank has naturally shown us some indifference connecting its most confidential information. The study wasnt done very successfully due to inexperience. Some time the customer were in rush so they didnt want to give the information wilfully. The information is limited; to that available in Jubilee Road, Chittagong branch only. Insufficient Supply of more practical and contemporary data is another shortcoming.
2.1 About Jamuna Bank Limited

Jamuna Bank Limited (JBL) is Banking Company registered under the Companies Act, 1994 with its Head Office at Chini Shilpa Bhaban, 3, Dilkusha C/A, Dhaka-1000. The Bank started its operation from 3rd June 2001. Jamuna Bank Limited is a highly capitalized new generation Bank with an Authorized Capital and Paid-up Capital of Tk.1600.00 million and Tk.390.00 million respectively. The Paid-up Capital has been raised to 2230.00 million and the total equity of the bank stands at 3132.00 million as on September 30, 2010. Currently the Bank has 62(sixty-two) branches 31 in Dhaka Zone, 12 in Chittagong Zone, 12 in Rajshahi Zone, 3 in Sylhet Zone, 2 in Comilla Zone, 1 in Barisal Zone and 1 in Khulna zone. The Bank undertakes all types of banking transactions to support the development of trade and commerce of the country. JBL's services are also available for the entrepreneurs to set up new ventures and BMRE of industrial units. Jamuna Bank Ltd., the only Bengali named new generation private commercial bank was established by a group of winning local entrepreneurs conceiving an idea of creating a model banking institution with different outlook to offer the valued customers, a comprehensive range of financial services and innovative products for sustainable mutual growth and prosperity. The sponsors are reputed personalities in the filed of trade, commerce and industries. The Bank is being managed and operated by a group of highly educated and professional team with diversified experience in finance and banking. The Management of the bank constantly focuses on understanding and anticipating customers needs. The scenario of banking business is changing day by day, so the bank's responsibility is to device strategy and new products to cope with the changing environment. Jamuna Bank Ltd. has already achieved tremendous progress within only two years. The bank has already ranked as one of the quality service providers & is known for its reputation. Jamuna Bank offers different types of Corporate and Personal Banking Services involving all segments of the society within the purview of rules and regulations laid down by the Central Bank and other regulatory authorities.
2.2 BOARD OF DIRECTORS

BOARD OF DIRECTORS
Chairman Al-Haj Md. Rezaul Karim Ansari Vice Chairman Gazi Golam Murtoza Directors Al-Haj M. A. Khayer Engr. A. K. M. Mosharraf Hussain Engr. Md. Atiqur Rahman Golam Dastagir Gazi (Bir Protik) Fazlur Rahman Al-Haj Nur Mohammed Md. Tajul Islam Sakhawat, Abu Khair Mohammad Md. Belal Hossain Md. Mahmudul Hoque Md. Sirajul Islam Varosha Farhad Ahmed Akand Kanutosh Majumder Shaheen Mahmud Md. Ismail Hossain Siraji
Managing Director Md. Motior Rahman
Executive Committee of the Board of Directors All routine matters beyond delegated powers of Management are decided upon by or routed through the Executive Committee, subject to ratification by the Board of Directors. The Executive Committee consist of 7 (seven) members of the Board of Directors and the Managing Director. The Chairman of this Committee is being selected by rotation. Chairman Engr. A. K. M. Mosharraf Hussain Audit Committee of the Board of Directors In line with the guidelines of Bangladesh Bank, a three member Audit Committee of the Board of Directors has been formed to assist the Board in matters related to Audit and Internal Control system of the Bank. Chairman Md. Tajul Islam Co-Chairman Engr. Md. Atiqur Rahman Member A. S. M. Abdul Halim Independent Director Malik Muntasir Reza
2.3 MISSION AND VISION
MISSION The Bank is committed to satisfying diverse needs of its customers through an array of products at a competitive price by using appropriate technology and providing timely service so that a sustainable growth, reasonable return and contribution to the development of the country can be ensured with a motivated and professional work-force.
VISION
To become a leading banking institution and to play a pivotal role in the development of the country.
2.4 SLOGAN OF THE BANK The slogan of the Jamuna Bank Limited is-
Your partner for growth
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2.5 ORGANIZATIONAL STRUCTURE

Managing Director Additional Managing Director (A.M.D.) Senior Executive vice President (S.E.V.P) Executive vice President (E.V.P) Senior vice President (S.V.P) Vice President (V.P) Senior Assistant Vice President (S.A.V.P) Assistant Vice President (A.V.P) First Assistant Vice President (F.A.V.P) Junior Assistant Vice President (J.A.V.P) Senior Executive Officer (S.E.O) Executive Officer (E.O) First Executive Officer (F.E.O) Officer
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2.6 FINANCIAL PRODUCTS AND SERVICES

Jamuna Bank Limited is a full service Bank with adverse array of comprehensive range of carefully tailored financial services and customer friendly uncompleted banking products geared for the needs of all customers segments. The clients come first JBLs corporate culture is to look for new ideas and new methods to encourage creativity to provide best possible customer services. Financial products and services of JBL can be broadly classified as follows:
Financial product of Jamuna Bank Limited: Deposit Product 1. Savings Accounts 2. Current Accounts 3. Short Term Deposit 4. Fixed Deposit Receipt (FDR) Deposit Schemes: 5. Lakhapati Deposit 6. Millionaire Deposit 7. Kotipathi Deposit 8. Double Growth 9. Triple Growth 10. Monthly Benefit 11. Monthly Saving 12. Marriage Deposit 13. Education Scheme Loan Product 1. Project Financing 2.Working Capital Financing 3.Agricultural Loan 4. Consumer Loan 5. Lease Financing 6. Hire Purchase 7. SME Loan 8. House Building Loan 9. Personal Loan For Women. 10. Import Financing 11. Export Financing 12. Syndication Loan Other service Products 1. International Trade Finance 2. Corporate Banking 3. Tele Banking 4. SMS Banking 5. Internet Banking 6. 24 Hours Banking: Q-Cash ATM Facility. 7.Remitance Collection
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2.7 CREDIT RATING REPORT

(STRONG CAPACITY & HIGH QUALITY)
Rating 2009 Rating - 2008 Date of Rating
Long Term Short Term A2 ST - 2 AST - 3 29 th April, 2010
Credit rating Agency of Bangladesh (CRAB) upgrades long term credit rating of Jamuna Bank Limited (JBL) to A 2 (pronounced as single A) from A- ( pronounced as A minus) and short term rating to ST-2 from ST-3 based on audited financials of 31 December, 2009. Commercial Banks rated A 2 (Strong Capacity & High Quality) in the long term belong to Strong Capacity group. Banks rated A 2 have strong capacity to meet their financial commitments but are somewhat more susceptible to the adverse effects of changes in circumstance and economic conditions than commercial Banks in higher-rated categories. Banks rated in this category are judged to be of high quality and are subject to low credit risk. Commercial Banks rated in the short term ST-2 (High Grade) category are considered to have strong capacity for timely repayment of obligations. Commercial Banks rated in this category are characterized with commendable position in terms of liquidity, internal fund generation and access to alternative sources of funds.
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2.8 OBJECTIVES OF JBL
To earn and maintain CAMEL Rating 'Strong' To establish relationship banking and improve service quality through development of Strategic Marketing Plans. To remain one of the best banks in Bangladesh in terms of profitability and assets quality. To introduce fully automated systems through integration of information technology. To ensure an adequate rate of return on investment To keep risk position at an acceptable range (including any off balance sheet risk) To maintain adequate liquidity to meet maturing obligations and commitments. To maintain a healthy growth of business with desired image. To maintain adequate control systems and transparency in procedures. To develop and retain a quality work-force through an effective human Resources Management System. To ensure optimum utilization of all available resources To pursue an effective system of management by ensuring compliance to ethical norms, transparency and accountability at all levels.
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2.9 SWOT ANALYSIS

SWOT consists of Strength, Weakness, Opportunity and Threat. It exhibits Strength of the Organization, weakness of it, Potential opportunity exiting in the market and prevailing or upcoming threats in the market place. SWOT Analysis of Jamuna Bank Limited: STRENGTH: Wide image Excellent Management High commitment of customer and qualified and experienced human resource. . Strong and qualified policy maker. Sophisticate automated system and strong network.
WEAKNESS: Lack of motivation of employees Heavily depends on Head Office for decision making Absence of teamwork Promotional activities can be high Can set up separate ATM both in some major points. Can launch some new consumer scheme. Can set up educational institutions, hospital to create the social image. Can set specified branch, like Islami Branch, Foreign Exchange Branch etc. Can diversify the investment.
OPPORTUNITIES:
THREATS: Unstable political situation Existing govt. may change the previous govt.s policy it also hamper the operation. Unhealthy & illegal competition Overall economic condition of the country as well as the world. Some commercial/foreign banks as well as private banks. 15
PERFORMANCE EVALUATION BANK LIMITED
JAMU NA
(Jubilee Road Islami Banking Branch, Chittagong)

2.10. DEPOSIT The deposit volume of Jamuna Bank Limited, Jubilee Road Islami Banking Branch, Chittagong is continuously increasing. The deposit amount was Tk. 184.91 million at the end of the year 2005 and it has increased to Tk. 961.14 million at the end of the year 2009.
Year Deposit
[Figures in million] 2005 184.91 2006 301.31 2007 420.71 2008 539.34 2009 961.14
Table 2.10. : Showing the Yearly deposit of JBL. Graph 2.10. : Showing the Yearly deposit of JBL.
1000 800 600 Deposit 400 200 0 2005 2006 2007 2008 2009
Reasons for fluctuation in the Deposit Figures: Deposit comes from various clients of the bank. Deposits withdrawn by the clients also. So, figures of Deposit is very much dynamic and frequently changeable. Normally it goes up by dint of the efforts of the bank for procuring more deposit.
2.11. ADVANCE
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From 2005 to 2009 Credit volume of Jamuna Bank has increased from Tk 91.03 Million to Tk 641.03 million. [Figures in million] Year Advance 2005 91.03 2006 441.93 2007 542.12 2008 548.41 2009 641.03
Table 2.11. : Showing the yearly Credit figures of JBL.
700 600 500 400 300 200 100 0 2005 2006 2007 2008 2009 Advance
Graph 2.11. : Showing the yearly Credit figures of JBL .
Reasons for fluctuation in the Advance Figures: Advance portfolio of a bank has to be diversified to minimize risk. As deposit increases, it can not be kept idle. The fund must be invested in different profitable sectors to different clients. So there is a positive correlation between deposit and advance. That is why Advance figures are not a rigid figure, rather it used to fluctuate regularly, normally upward.
2.12. INCOME & EXPENDITURE
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The Income and Expenditure volume of Jamuna Bank Limited (Jubilee Road Islami Banking Branch, Chittagong) is continuously increasing. The income amount was Tk. 9.89 Million in the year 2005 and it has increased to Tk. 200.58 million at the end of the year 2009.While the expenditure amount was Tk. 7.23 million in the year 2005 and it has increased to Tk. 137.44 million at the end of the year 2009. [Figures in million] Year Income Expenditure 2005 9.89 7.23 2006 44.55 30.23 2007 88.59 69.61 2008 122.45 96.33 2009 200.58 137.44
Table 2.12. : Showing the yearly Income & Expenditure figures of JBL.
200 180 160 140 120 100 80 60 40 20 0 2005 2006 2007 2008 2009
Income Expenditure
Table 2.12. : Showing the yearly Income & Expenditure figures of JBL.
Reasons for fluctuation in the Income and Expenditure Figures: With increase in volume, manpower and scope of operation, expenditures of the bank increases keeping pace with that. Similarly, as advance of a bank increases, the income figure is supposed to increase. So, fluctuation in income & expenditure is inevitable.
2.13. PROFIT
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The profit volume of JBL, Jubilee Road Islami Banking Branch, Chittagong, is continuously increasing. The profit amount was Tk.2.66 million in the year 2005, and it has increased to Tk. 63.14 million at the end of the year 2009. [Figures in Million] Year Profit 2005 2.66 2006 14.32 2007 18.98 2008 26.12 2009 63.14
Table 2.13. : Showing the yearly profit figures of JBL.
70 60 50 40 30 20 10 0 2005 2006 2007 2008 2009 Profit
Graph 2.13. : Showing the yearly profit figures of JBL.
Reasons for increasing in the profit figure : With increase in volume of business, scope of operation, increase in the number of import clients, increase in the number of exporters, , and increase in contracts with various FC remitting agencies and companies in abroad, the profit figure is supposed to increase substantially.
FOREING EXCHANGE
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3.1 UNDERSTANDING FOREIGN EXCHANGE

3.1.1. Foreign exchange H.E. Evitt defined Foreign Exchange as the means and methods by which rights to wealth expressed in terms of the currency of one country are converted into rights to wealth in terms of the currency of another country. In other words, Foreign exchange deals with foreign financial transactions.
3.1.2. Necessity of foreign exchange Foreign Exchange Department is international department of the bank. It deals with globally and facilitates international trade through its various modes of services. It bridges between importers and exporters. Bangladesh Bank issues license to scheduled banks to deal with foreign exchange. These banks are known as Authorized Dealers. If the branch is authorized dealer in foreign exchange market, it can remit foreign exchange from local country to foreign country. This department mainly deals with foreign currency. This is why this department is called foreign exchange department.
3.1.3. Activities of foreign exchange There are three Kinds of foreign exchange transaction: Import. Export. Foreign Remittance.
3.2 REGULATIONS FOR FOREIGN EXCHANGE

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3.2.1. Local Regulations

Our foreign exchange transactions are being controlled by the following rules & regulation. Foreign Exchange Regulation Act 1947. Bangladesh Bank issues foreign exchange circular from time to time control the export, import & remittance business. Ministries of commerce issues export & import policy giving basic formalities for import & export business. Sometime CCI & E issues export & import for any kind of change in foreign exchange transaction. Bangladesh Bank published two volumes in 1996. This is compilation of the instructions to be followed by the authorized dealers in transactions relation to foreign exchange.
3.2.2 International regulations of foreign exchange

There are also some international organizations, influencing our foreign exchange transactions. Few of them are discussed bellow:
International Chamber of Commerce (ICC) is a world wide nongovernmental organization of thousands of companies. It was founded in 1919. ICC has issued some publications like UCPDCF, URC, & URR etc, which are being followed by all member countries. There is also an international court of arbitration to solve the international business disputes.
World Trade Organization (W.T.O) is another international trade organization established in 1995. General Agreement on Tariff & Trade (GATT) was established in 1948, after completion of its 8th round; the organization has been abolished & replaced by W.T.O. This organization has vital role in international trade, through its 124 member countries.
3.3 FOREIGN EXCHANGE MECHANISM

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Foreign exchange department plays significant roles through providing different services for the customer. Facilitating the trade with foreign country is the most important among those services the key instrument which facilitates this trade is L/C (Letter of Credit). 3.3.1. Letter of Credit Letter of Credit may he defined as an arrangement or guarantee issued by a bank at the request of the customer to make payment to or order of the beneficiary or authorized another bank to effect such payment or to pay, accept or negotiate such bill of exchange against stipulated documents, provided that the terms and conditions of the L/C arc complied with. (UCPDC-500, 1993) 3.3.2. The Advising Bank It is the bank in the Exporters (Normally the exporters bank), which is usually the foreign correspondent of Importers bank through which the L/C is advised to the supplier. If the intermediary bank simply advises/notifies the L/C to the exporter without any obligation on its part, it is called Advising Bank. 3.3.3. The Confirming Bank If the Advising Bank also adds its own undertaking to honor the credit while advising the same to the beneficiary, he becomes the Confirming Bank, in addition, becomes liable to pay for documents in conformity with the L/Cs terms and conditions. 3.3.4. The Negotiating Bank The Bank that negotiates the bill of exporter drawn under the credit is known as Negotiating Bank. If the advising bank is also authorized to negotiate the bill drawn by the exporter, he becomes the Negotiating Bank.
3.3.5. The Accepting Bank

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A Bank that accepts time or unasked drafts on behalf of the importer is called an accepting Bank. The Issuing Bank can also the Accepting Bank.
3.3.6. The Paying Bank and the Reimbursing Bank If the Issuing Bank does not maintain any account with a bank that will be negotiating the documents under a L/C, then arrangement is made to reimburse the negotiating bank for the amount to be paid under from some other bank with which the Issuing Bank maintains his account. The latter bank is known as Reimbursing Bank.
Issuing Bank (Bangladesh)
Advising Bank (India)
Reimbursing Bank (Japan)
Negotiating Bank (India)
3.3.7.Graphical presentation of Foreign Exchange Mechanism:

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BUYER/ IMPORTER
Application for Opening l/C
INDENTOR
SELLER EXPORTER BENEFICIARY

Advises and/or confirms
Present Document
Issue L/C
Forward Document Makes Payment
ISSUING BANK
ADVISING BANK/ NEGOTIATING BANK.
REIMBURSING BANK
FIG: FOREIGN EXCHANGE MECHANISM
3.4 IMPORT DEPARTMENT

Pays or Reimburses
OR
l/c
Makes Payment against Document
Submit Documents
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Makes Payment
Instruction to Pay or Reimburse
3.4.1. Understanding Imports are foreign goods and services purchased by consumers, firms, & Governments in Bangladesh. The importers are asked by their exporters to open letter of credits so that their payment against goods is ensured. 3.4.2. Classification of importers Goods are being imported for personal use, commercial purpose or industrial use. So, there are three kinds of importers such as: Personal importer: If the importer is insisting to import goods from the abroad for his
need this importer called personal importer. Commercial importer: If the importer is insisting to import goods for commercial
purpose then it is called commercial importer. Industrial importer: If the importer is insisting to import goods for industrial purpose then it is called Industrial importer. 3.4.3 Import Policy Under the import and export control Act, 1950 the Government of Bangladesh formulates the Import policy through Ministry of Commerce. The existing Import policy (1997-02) has come into effect from June 14, 1998 to June 30, 2002. (It can he reviewed every year if needed) Main Features of Import Policy: Different import policy Import facility up to $2000 for actual user (for self consumption, not for sale) without permission, $2000-5000, and approval of regional controller of import & export (CI&E).
Above $5000, Approval of Chief Controller of Import $ Export (CCI&E). Import facility on the basis of direct payment on foreign countries.
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Import under L/C, L/C must be irrevocable. Import above $5000- L/C is required. But in case of perishable items like food up to$7500 transported by road L/C is not required. Import without opening of any L/C: Books, Magazine, Publication. Import up to $5000 in case of payment from Bangladesh. Import under foreign aid. Import of International chemical Reference by Pharmaceutical companies with prior approval of Drug Administration. Government sector bodies can import without any license, permit & IRC. Commercial import by cash payment only. 3.4.4. Import Procedure To import through JAMUNA Bank, a customer requires (i) Bank account (ii) Import Registration Certificate (IRC) (iii) Tax Paying Identification Number (TIN) (iv) Performa-Invoice Indent (v) Membership Certificate (vi) LCA (Letter of Credit Authorization) form duly attested (vii) One set of IMP Form (viii) Insurance Cover note with money receipt
3.4.5. Import Mechanism

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To import, a person should be competent to be Importer. According to Import and Export Control Act, 1950, the Office of Chief Controller of Import and Export provides the registration (IRC) to the importer. After obtaining this persons has to secure a letter of credit authorization (LCA) from Bangladesh Bank. And then a person becomes a qualified importer. He is the person who requests or instructs the opening bank to open an L/C. He is also called opener or applicant of the credit.
3.4.6. Things, which are done here:

The following things are done in this department: Total supervision of Import Department (Cash/Back to Back L/C). Foreign Correspondence related to above. Payment of Back-to-Back L/C and endorsement of Export L/C against payment. Follow-up of Back-to-Back overdue bills. Correspondence regarding Back-to-Back L/C and Cash L/C. Maintenance of Due Date Diary. Maintenance & record of related L/C Documents. Audit Compliance. Matching of Bill of Entry with IMP, follow-up of pending Bill of Entry Quarterly Statement. Batch Checking. L/C opening/ Amendment (Back to Back L/C). Endorsement of Export L/C when opening. Batch checking. Balancing of L/C Contingent Liability (Back to Back L/C). Follow-up of Sub-judicial bills and maintaining liaison with Head Office and Foreign Correspondent.
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All correspondence related to Back-to-Back L/C with Head Office and Foreign Correspondent. Supervision of checking, Lodgment and retirement of Import documents under Back-toBack L/C. Issuance of Certificate and attestation of papers/documents of garments clients as required by BGME, EPB & other regulatory bodies. Checking, Lodgment, retirement of Import documents under Back-to-Back L/C. Issuance of Shipping Guarantee (Back to Back L/C). IMP Form Fill-up (Cash L/C). Inform negotiating Bank about maturity date of Back-to-Back L/C. Quarterly statements for Bonded ware House. Balancing of Accepted Liability. Statement of outstanding accepted import bills under Back-to-Back L/C. L/C opening and Amendment of Cash L/C (and Inland L/C). Maintenance and record of Passbook and IRC. Maintenance & Record of related L/C (s) & Documents. Credit Report. Statement of IRC Renewal fees to CCI&E. Preparation of monthly foreign exchange business position. L/C Lodgment (Cash). Checking of Cash L/C documents. I /C Retirement. LCA Issue. BLC Statement.
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Differed Payment (Cash). Follow-up of outstanding BLC. Correspondent (Cash L/C). Proof Sheet of LC Margin and Contingent Liability (Cash L/C). Issuance of shipping guarantees (cash) IMP forms fill-up (cash). 3.4.7. L/C Opening: If an importer wants to import some goods from outside the country, at first he has to apply to a bank for opening a L/C. Letter of Credit (L/C) is a written undertaking of a bank written to the seller and issued at the request of the buyer to pay at site or a determinable future date. According to Import Policy, unless or otherwise specified, all import is to be made by opening irrevocable letter of credit (amendment or cancellation with the agreement of the opening bank, advising bank, beneficiary, and importer). L/C can be opened against Proforma
invoice if the exporter has no agent and L/C can be opened against Indent if the foreign supplier has indenting agent.
3.4.7.1. Documents Require for Opening a L/C: For opening letter of credit an importer is required to have some documents, which are to be submitted to the L/C issuing or popularly known as opening bank. * A valid Import Register Certificate (IRC) * Membership Certificate from the registered local Chamber of Commerce and Industry or valid trade license * Tax Paying Identification Number (TIN) * Letter of Credit Authorization form (LCA) * Insurance cover note for L/C amount * Indents for goods issued by indenter or Proforma Invoice issued by foreign supplier
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* Charge Documents duly signed * IMP form duly signed * The opener has to have a current account with the bank 3.4.7.2. Scrutinized of L/C Application: The JAMUNA Bank Official scrutinizes the application in the following manner: The terms and conditions of the L/C must be complied with UCPDC 500 and Exchange Control & Import Trade Regulation. Eligibility of the goods to be imported. The L/C must not be opened in favor of the importer. Radioactivity report in case of food item. Survey report or certificate in case of old machinery. Carrying vessel is not of Israel or of Serbia- Montenegro Certificate declaring that the item is in operation not more than 5 years in case of car.
3.4.7.3. Procedure involved in L/C opening: There are few steps involved in L/C opening process. These are: At first the L/C opener is required to fill up the prescribed application form for requesting to open a L/C for him. After receiving the application form with other required documents submitted by the opener they are to be thoroughly scrutinized. The points, which shall be scrutinized, are describing below: The amount and description of goods in the application should be relevant with the indent or Proforma invoice or import contract.
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The amount is covered by the insurance amount. The item is not a banned one. The indent produced has the Import Registration Certificate number and the indenters registration number. The indent has indenting agents signature and importers signature. Whether transshipment and partial shipment is allowed. If all the documents along with the application are in order, the financial position and credit worthiness of the importer, market demand of the good is assessed. Margin for letter of credit will also be determined. The rate of margin depends on the financial condition of the banker, Importers previous performance, status of relationship with the importer, nature of goods etc. This margin is to be retained from the importer either in cash or debiting the importers current account with the bank. The importer is also required to pay the other concerning charges like foreign corresponding charge, telex charge (if any), handling charges, and commission etc. After all these steps of letter of credit is opened and forwarded to the advising bank. 3.4.7.4. Accounting Procedure Involved in L/C opening: There are two types of accounting procedure involved in L/C. One is L/C opening, and another is Liability Register, which includes Liability amount, Margin, Foreign Correspondent etc. While opening L/C there are few accounting entries. For Margin importer account with bank is debited and Margin A/C is credited. For contingent liability (L/C amount) Customers liability on L/C cash is debited and Bankers liability on cash is credited. For other charges customers current account is debited and commission A/C, income A/C, Foreign correspondent charge A/C and other related A/C is credited. 3.4.8. Advising a Letter of Credit: The advising or notifying bank is the bank through which the L/C is advised to the exporter. It is a bank situated in the exporting country and it may he a branch of the opening bank. It becomes customary to advise a credit to the beneficiary through an advising bank.
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3.4.9. Adding Confirmation: The confirming bank does adding confirmation. Confirming bank is a bank, which adds its confirmation to the credit, and it is done at the request of the issuing bank. The confirming bank may or may not be the advising bank. 3.4.10. L/C Transmitting: Letter of credit can be transmitted to the advising bank through three methods. They are in Telex, Courier, or SWIFT (Society for Worldwide Inter-bank Financial Telecommunication). L/C is send to advising bank in three copies. The advising bank authenticates the original copy of L/C and delivers it to the exporter. The duplicate copy is kept with the advising bank. 3.4.11. Negotiating: The beneficiary (exporter) receives the letter of credit from advising bank. After proper shipment of goods as per terms and conditions of the L/C, required documents like Commercial Invoice, Bill of Lading, and bill of exchange are presented to the negotiating bank by the beneficiary for negotiation. If the documents are in order as per L/C then the negotiating bank negotiates the drafts making payment to the beneficiary. Then the negotiating bank forwards the drafts along with the shipping documents to the L/C opening bank. The negotiating bank reimburses the amount paid against the draft from reimbursement bank. 3.4.12. Amendment: Parties involved in a L/C, particularly the seller and the buyer cannot always satisfy the terms and conditions in full as expected due to some obvious and genuine reasons. In such a situation, the credit should be amended. Jamuna Bank transmits the amendment by tested telex to the advising bank .In case of revocable credit it can be amended or cancelled by the issuing bank at any moment and without prior notice to the beneficiary. But in case of irrevocable letter of credit, it can neither be amended nor cancelled without the consent of the issuing bank, the confirming bank (if any) and the beneficiary. If the L/C is amended, service charge and telex charge is debited from the party account accordingly.
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3.4.13. Examination of Documents: Jamuna Bank officials check whether these documents have any discrepancy or not. Here, discrepancy means the dissimilarity of any of the documents with the terms and conditions of L/C. 3.4.14. Adding Confirmation: Add the confirming Bank gives confirmation. An Add confirmation letter contains the followings, 1) L/C No. 2) L/C amount 3) Items to be imported, etc. 3.4.15. Lodgment: The opening bank receives import bills, which have been negotiated. After receiving the documents, they are to be thoroughly scrutinized before lodgment. 3.4.16. Scrutiny of the Documents: First of all it must be ensured that full set of documents as mentioned in the L/C has been received.
Documents have been negotiated within the negotiation period. The Bill of Lading/Air-Way Bill/ Railway receipt is not dated later than the last date of shipment mentioned in the L/C. The L/C has not been amended or subjected to any special instructions, which might alter the value of L/C Import bills include following documents, which are to be scrutinized. Bill of Exchange Commercial Invoice
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Bill of Lading Certificate of Origin Others 3.4.17. Bill of Exchange: It has to be verified that the bill of exchange has been properly drawn and signed by the beneficiary according to the terms and conditions of L/C. The amount in the Bill is identical with that mentioned in the invoice. The amount drawn does not exceed the amount mentioned in the L/C. The amount in words and figures should be same. The bill of exchange should be properly endorsed. 3.4.18. Commercial Invoice: It has to be verified that the commercial invoice has been properly drawn and signed by the beneficiary according to the terms and conditions of L/C. The beneficiary should properly invoice the merchandise. The merchandise is invoiced to the importer on whose account the L/C is opened. The description of merchandise and the unit price correspond with that given in the L/C. The import license or IRC number of the importer, indenters registration number and number of Letter of Credit Authorization number are incorporated in the Invoice. 3.4.19. Bill of Lading: First of all it has to be cleared that the Bill of Lading is showing Shipped on Board and it has to be properly endorsed to the bank. The B/L should include the description of the merchandise according to invoice. The port of shipment and destination, date of shipment and the name of the consignee are in agreement with those mentioned in the L/C.
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The shipping company or their authorized agents properly sign the B/L. The date on the B/L is not stale which means it is not dated in unreasonably long time prior to negotiation. 3.4.2O. Certificate of Origin: The Merchandise described in the Certificate is in accordance with the L/C. 3.4.21. Others: There are some other documents, which are also attached, with the shipping documents like packing list, pre-shipment inspection certificate etc. These documents are also verified carefully before lodgment. 3.4.22. Steps Involved in Lodgment: When the scrutiny of import bills is over the steps should he taken for lodgment. At first all the particulars of the documents are entered in the PAD (Payment against Document) register and PAD No. Seal is given on all the copies of the received documents. Convert the foreign currency into Bangladeshi currency. Reverse the contingent liability and entry in the liability register. Prepare lodgment voucher. Prepare other voucher. Send IBCA to the head office. Make intimation to the importer.
3.4.22.1. Accounting Effect: For reversing contingent liability contra voucher is debited by Bankers Liability A/C and credited with Customers Liability A/C.
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For PAD, income on exchange there is few credit vouchers and one debit voucher. In the debit voucher the debit head is PAD and income and head office is credited. In the credit vouchers the opposite of these entries is made. Now if the respective officer thinks that the application is fit to open a L/C, the following accounting treatments are given: Accounting Treatment: Clients Account Margin on L/C Commission on L/C VAT (15% of Commission) on L/C F.C.C (Foreign Currency Clearing) A/C Registration Fee A/C Telex / Postage charges A/C Miscellaneous Charges A/C Debit Credit Credit Credit Credit Credit Credit Credit
After that, L/C number and the above entries arc given in the L/C Register. The contra entries stating the liability of the bank and the client are as follows, Accounting Treatment: Customers Liability Bankers Liability Debit Credit
Then the transmission of L/C is done through tested telex or fax to advise the L/C to the beneficiary. If the amount of L/C exceeds US$10,000, Jamuna Bank takes the credit report of the beneficiary (CIB report) to ensure the worthiness of the supplying goods. 3.4.23. Retirement of Shipping Documents: The importer receives the intimation and gives necessary instruction to the bank for retirement of the import bills or for the disposal of the shipping document to clear the
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imported goods from the customs authority. Following steps are to be taken for retirement of documents. 3.4.23.1. Steps Involved in Retirement: The following steps are involved in Retirement: Calculation of interest if any. Calculation of other charges. Passing vouchers. Entry in the register. Endorsement in the Bill of Lading or other transport document and in the bill of exchange. 3.4.23.2. Accounting Effect: On scrutiny, if it is found that the document drawn in conformity with the terms of the credit i.e. the documents are in order Jamuna Bank lodges the documents in PAD and the following vouchers are passed, Accounting Treatment: L/C Margin A/C PAD A/C (Margin amount transferred to PAD A/C) Customer A/C PAD A/C (Customers account debited for the remaining amount) Debit Credit Debit Credit
PAD A/C Jamuna Bank General A/C Exchange gain A/C
Debit Credit Credit 37
(Amount given to JAMUNA Bank General A/C and interest credited)
Reversal Entries: Bankers Liability Customers Liability (When Lodgment is given) After realizing the Telex charge, service charge, interest (if any), the shipping documents is then stamped with PAD Number & entered in the PAD Register. Intimation is given to the customer calling on the banks counter requesting retirement of the shipping documents. After passing the necessary vouchers, endorsements is made on the back of the Bill Of Exchange as Received Payment and the Bill Of Lading is endorsed to the effect Please deliver to the order of M/S , under two authorized signatures of the banks officers (P.A. Holder). Then the documents are delivered to the importer. 3.4.24. Payment Procedure of the Import Documents: This is the most sensitive task of the Import Department. The Officials have to be very much careful while making payment. This task constitutes the following: A. Date of Payment: Usually payment is made within seven days after the documents have been received. If the payment is become deferred, the negotiating bank may claim interest for making delay. B. Preparing sale memo: A sale memo is made at B.C rate to the customer. As the T.T & O.D rate is paid to the ID, the difference between these two rates is exchange trading. Finally, an Inter Branch Exchange Trading Credit Advice is sent to ID. C. Requisition for the foreign currency: For arranging necessary fund for payment, a requisition is sent to the International Department. Debit Credit
3.4.24.1. Transmission of telex: A telex is transmitted to the correspondent bank ensuring that payment is being made.
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3.4.24.2. Back-to-Back L/C: Back to Back letter of credit may be defined as a credit which is opened at the instruction and request of the beneficiary of the original Export L/C on the basis of strength of that L/C. Ready-made garment industries and specialized textile units are allowed the facility of importing fabrics and other materials needed for manufacture of garments/ specialized textiles against back to back L/C arrangement. Back-to-Back L/C is of two types: 1. Foreign back letter of credit 2. Inland back-to-back letter of credit A back-to-back L/C is opened against an irrevocable L/C opened bank having reasonable period of validity to cover shipment of merchandise after completion of validity to cover shipment of merchandise after completion of the manufacturing process. The export L/C is lien marked with the back-to-back L/C issuing branch. Import L/C is opened on issuance basis covering since of not more than 180 days. The import L/C is opened for 75%-85% of the value of Export L/C. the payment is normally made form the proceeds of export bills negotiated after shipment.
3.4.24.3. Procedure for Opening Back-to-Back L/C: The following papers/documents are required to submit by the exporter to the bank for opening foreign back-to-back L/C. L/C Authorization forms duly filled and signed. Indent/ pro forma invoice Imp-form. Along with the above papers / documents, original export L/C is to he submitted by the exporter. On receipt of these documents the bank scrutinizes the terms and conditions of the
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export L/C. After getting approval from head office through Credit Section, The particulars of the L/C are entered in the L/C opening register.
3.5 EXPORT DEPARTMENT

3.5.1. Understanding: In the Export section, two types of L/C s are opened Back to Back L/C Export L/C 3.5.2. Things done here: The following things are done in this department: Scrutiny of Export Shipping Documents. Follow-up for realization of Export Proceeds. All Correspondence relating to Export Department. Compliance of Audit & Inspection. Advising of Export L/Cs to the beneficiary. Authentication of L/C and Amendments from other Correspondent Bank. Transfer of Export L/C to the 2nd Beneficiary & issuance of notice of transfer to L/C issuing Bank. Recording of Export L/C particulars in Export L/C Transfer Register. Realization of transfer changes. Issuance of precedes realization certificates. And other works as & when directed by the manager and Sub-Manager. Certificate of EXP Forms. Posting of Tickets.
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Lodgment of Export Bills (FBP, FDBC, IBP & IBC).
Preparation of tickets elating to negotiation of documents. Negotiation of Inland Bills. Maintenance of all records related to FBP, FDBC and Inland Bills. Balancing of FBP, FDBC, and IPB & A/R Export A/Cs. Preparation of statement and all returns to Bangladesh Bank and Head Office (Weekly/ Monthly/ quarterly). 3.5.3. Export Bill Scrutiny: Scrutinizes the export bill on the following points, General: Late shipment. Late presentation. L/C expired. L/C overdrawn. Partial shipment or transshipment beyond L /C terms. Bill of exchange: Amount of bill differs with Invoice. Not drawn on L/C issuing bank not signed. Tenor of B/E not identical with L/C Full set not submitted Invoice: Not issued by the beneficiary Not signed by the beneficiary Not made out in the name of the Applicant
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Description, Price, quantity, sales terms of the goods not corresponds to the credit. Not marked one fold as original Shipping marks differs with B/L & packing list. Packing List: Gross weight, net weight, & measurement, number of cartoons/ packages differs with B/L. Not marked one fold as original. Not signed by the beneficiary. Shipping marks differs with B/L. Bill of Lading/Air Way Bill: Full set of bill not submitted. B/L is not drawn or endorsed to the Order Of Jamuna Bank. Shipping On Board, Freight Prepaid or Freight Collect etc. notations are not marked on the B/L. B/L not indicate the name and capacity of the party i.e. carrier or master, on whose behalf the agent is signing the B/L. Shipped on Board Notation not showing name of pre-carriage vessel/ intended vessel. Shipped on Board Notation not showing port of loading and vessel name (In case B/L indicates a place of receipt or taking in charge different from the port of lading). Short Form B/L. Charter party B/L. Description of goods in B/L not agrees with that of Invoice, B/E & P / L. Alterations in B/L not authenticated. Loaded on deck.
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B/L. hearing clauses or notations expressly declaring defective condition of the goods and / or the packages. Others: Non-Negotiable documents not forwarded to buyers or forwarded beyond L/C terms. Inadequate number of Invoice, Packing List, & others submitted. Short shipment certificate not submitted. 3.5.4. Export Finance: 3.5.4.1. Pre-shipment credit: Pre-shipment credit usually takes the following forms: Overdraft against hypothecation of exportable commodities. Overdraft against Trust Receipt (T.R.) Packing Credit (P.C.) 3.5.4.2. Post shipment credit: Post shipment credit refers to credit facilities extended to export after actual shipment
of goods against shipping documents. It is usually provided in the following ways. Bill negotiation / purchase. Bill for collection. Bill Negotiation / Purchase: The most usual method of financing exporters at the post-shipment stage is negotiation of documents under L/C. Here the bank acts as negotiating bank. After the shipment of the goods, the exporter submits the relative documents to the branch for negotiation. The documents generally include a) Bill of Exchange b) Bill of Lading, c) Insurance policy d) Invoice e) Certificate of origin etc. The documents are to submit within the period mentioned
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in the L/C. The documents are sent to the L/C opening branch with a forwarding letter. Then the branch claim reimbursement from the issuing bank or from the reimbursing bank. On negotiation/ Purchase of the export bills, the exporter is paid the value of the bill (converted into Bangladeshi Tk at the ruling bill buying rates). Documents on collection Basis: The documents, which are not negotiable by the branch due to some discrepancies, are sent to L/C opening bank on collection basis. The bank mentions the discrepancies on their forwarding schedule. On receiving the documents, the L/C opening bank will further scrutinize the document with the L/C and inform the importer regarding discrepancies found in the documents. If these are acceptable to the importer and or permissible with the exiting Exchange control regulation, the documents will be lodged and L/C opening bank will send the payment instruction to the collection bank. 3.5.5. Back-To-Back L/C: In case of a Back to back letter of credit, a new L/C (an Import L/C) is opened on the basis of an original L/C (an Export L/C). Under the Back to Back concept, the seller as the Beneficiary of the first L/C offers it as a security to the advising Bank for the issuance of the second L/C. The Beneficiary of the Back-to-Back L/C may be located inside or outside the original Beneficiarys country. In case of a Back-to-Back L/C, no cash security (no margin) is taken by the Bank; Bank liens the first L/C. In case of a Back-to-Back L/C, the drawn bill is an Issuance/ Time bill. In Jamuna Bank, papers/documents required for submission for opening of back-toback L/C: Master L/C Valid Import Registration Certificate (IRC) & Export Registration Certificate (ERC) L/C application & LCA form duly filled in signed. Pro forma Invoice or Indent. Insurance Cover Note with money Receipt IMP- form duly signed
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In addition to the above the following papers/documents arc also required for export oriented garment industries while requesting for opening of back-to-back letter of credit, Textile permission Valid Bonded Warehouse License Quota allocation letter issued by Export Promotion Bureau (EPB) in favor of the applicant in case of quota items. In case the Factory premises is a rented one, Letter of Disclaimer duly executed by the owner of the house/premises to be submitted. 3.5.6. Payment of Back-to-Back L/C: In case back to back as 60-90-120-180 days of maturity period, deferred payment is made. Payment is given after realizing export proceeds from the L/C issuing bank. 3.5.7. Account Treatment for Back-to-Back L/C: When the document is arrived, the following vouchers are passed Customers A/C Commission on acceptance Debit Credit
In case of payment, if the fund is at hand, the accounting entries areSundry Deposit Margin on Acceptance Customers A/C Debit Credit
If the party is paid in foreign currency, B/C. rate is applied in this regard. International Department takes the T.T. O/D. rate. If the payment is made to ID in local currency in notional rate, ID follows T.T. Clean Rate. When the party is to he paid, OD Sight rate is followed.
If the fund is not available to make the payment, the following vouchers are to he Passed,
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OAP Customers A/C
Debit Credit
3.5.8. Reporting to Bangladesh Bank: At the end of every month, the reporting regarding the following information is mandatory, A. Filling of E-2/P-2 schedule of S-I category; which covers the entire month amount of import, category of goods, currency, country etc. B. Filling of E-3/P-3 schedule for all charges, commission with T/M form. C. Disposal of IMP form, which includes, Original IMP is forwarded to Bangladesh Bank with invoice and Indent. Duplicate IMP is kept with the Bank along with the bill of entry/ Certified Invoice. Triplicate IMP is kept with the Bank for office record. Quadruplicate is kept for submission to Bangladesh Bank in case of imports where documents are retired. 3.5.9. Export L/C: The other type of L/C facility offered by Jamuna Bank is Export L/C. Bangladesh exports a large quantity of goods and services to foreign households. Readymade textile garments (both knitted and woven), Jute, Jute-made products, frozen shrimps, tea are the main goods that Bangladeshi exporters exports to foreign countries. Garments sector is the largest sector that exports the lion share of the countrys export. Bangladesh exports most of its readymade garment products to U.S.A and European Community (EC) countries. Bangladesh exports about 4O/o of its readymade garment products to U.S.A. Most of the exporters who export through Jamuna Bank are readymade garment exporters. They open export L/Cs here to export their goods, which they open against the import L/Cs opened by their foreign importers. 3.5.10. Formalities for Export L/C:
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The export trade of the country is regulated by the Imports and Exports (control) Act, 1950. There are a number of formalities, which an exporter has to fulfill before and after shipment of goods. These formalities or procedures are enumerated as follows, ERC: The exports from Bangladesh are subject to export trade control exercised by the Ministry Of Commerce through Chief Controller of Imports and Exports (CCIE). No exporter is allowed to export any commodity permissible for export from Bangladesh unless he is registered with CCI & E and holds valid Export Registration Certificate (ERC). The ERC is to be renewed every year. The ERC number is to be incorporated on EXP forms and other documents connected with exports. Obtaining EXP: After having the registration, the exporter applies to Jamuna Bank with the trade license, ERC, and the Certificate from the concerned Government Organization to get EXP. If the bank is satisfied, an EXP is issued to the exporter. Securing the Order: Upon registration, the exporter may proceed to secure the export order. Contracting the buyers directly through correspondence can do this. Signing of Contract: While making a contract, the following points are to be mentioned, Description of the goods Quantity of the commodity Price of the commodity Shipment Insurance and marks Inspection Arbitration The following points are to be looked for,
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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 a reasonable time for registration. If the exporter wants the L/C to be transferable, divisible and advisable, he should ensure those stipulations are specially mentioned in the L/C. Procuring the material: After making the deal and on having the L/C opened in his favor, the next step for the exporter is to set about the task of procuring or manufacturing the contracted merchandise. Registration of Sale: This is needed when the items proposed to be export, are raw jute and jute goods. Shipment of Goods: The following arc the documents normally involved at the stage of shipment EXP From Photocopy of registration certificate Photocopy of the contract Photocopy of the L/C Customs copy of ERF Form for shipment of jute goods and EPC Form for raw jute. Freight certificate from the bank in case of payment of the freight at the port of lading is involved. Railway receipt, Berg Receipt or Truck Receipt. Shipping instructions. Insurance policy.
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After those, exporter submits all these documents along with a Letter of Indemnity to Jamuna Bank for negotiation. An officer scrutinizes all the documents. If the document is a clean one, Jamuna Bank purchases the documents on the basis of banker- customer relationship. This is known as Foreign Documentary Bill Purchase (FDBP).
3.5.11. Procedure for FDBP: After purchasing the documents, Jamuna Bank gives the following entries: FDBPA/C Customer A/C (Before realization of proceeds) Head Office A/C FDBP A/C (Adjustment after realization of proceeds) A FDBP Register is maintained for recording all the particulars. The salient contents of a FDBP register are Date, Ref. No. (FDBP), Name of the Party (Drawer), Drawee, Name of collecting Bank, EXP Form no., Export L/C no., and etc. 3.5.12. Foreign Documentary Bills for collection: Jamuna Bank forwards the documents for collection due to the following reasons, If the documents have discrepancies. If the exporter is a new client. The banker is in doubt. Debit Credit Debit Credit
Foreign documentary bills for collection signify that the exporter will receive payment only when the issuing bank gives payment. The exporter submits duplicate EXP Form and
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Commercial Invoice. Subsequently, the value of the bill is calculated and the following accounting entries are given, Head Office A/C Clients A/C Government Tax A/C Credit @ O.25% of Invoice value Postage A/C Income A/C profit on Exchange Credit Credit Debit @T.T. Clean Credit @ O/D sight
After passing the above vouchers, an Inter Branch Exchange Trading Debit Advice is sent for debiting the NOSTRO account. Jamuna Bank has the NOSTRO accounts with its reimbursing bank. An FDBC Register is maintained, where first entry is given when the documents are forwarded to the issuing bank for collection and the second one is done after realization of the proceeds. 3.5.13. Export Bill Scrutiny Sheet: By the Export Bill Scrutiny Sheet the bankers scrutinize the details of a L/C before make the payment. Here the details refer as Exporters name, Presentation date of documents, L/C no., Expiry date, L/C amount available. Moreover the banker also look after the date within which the documents to be presented, Bill of lading, Shipment date in the L/C, Invoice number and date, Export L/C no, date, issued by, Liability position, Discrepancies, and Calculation of Bill amount (Exporters Retention Quota, Commission, and Margin). 3.5.14. Settlement of local Bill: The settlement of local bills is done in the following ways, 1. The customer submits the L/C to Jamuna Bank along with the documents to negotiate. 2. Jamuna Bank official scrutinizes the documents to ensure the conformity with the terms and conditions. 3. The documents arc then forwarded to the L/C opening bank. 4. The L/C issuing bank gives the acceptance and forwards an acceptance letter.
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5. Payment is given to the customer on either by collection basis or by purchasing the document.
3.5.15. Accounting Treatment for purchase of local Bill: Local Bill Purchase Documentary Party A/C Commission Interest A/C Debit Credit Credit Credit
A LBPD Register is maintained to record the acceptance of the issuing bank. Until the acceptance is obtained, the record is kept in a collection register. 3.5.16. Mode of Payment of Export Bills under L/C: The most common methods of payment under a L/C are as follows, Sight Payment Credit: In a Sight Payment Credit, the bank pays the stipulated sum immediately against the exporters presentation of the documents. Negotiation Credit: In Negotiation credit, the exporter has to present a bill of exchange payable to him in addition to other documents that the bank negotiates. Deferred Payment Credit: In deferred payment, the bank agrees to pay on a specified future date or event, after presentation of the export documents. No Bill of Exchange is involved. In Jamuna Bank, payment is given to the party at the rate of D.A 60-90-120-180 as the case may be. But the Head office is paid at T.T. clean rate. The difference between the two rates is the exchange trading for the branch.
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Acceptance credit: In acceptance credit, the exporter presents a bill of exchange payable to him and drawn at the agreed tenor (that is, on a specified future date or event) on the bank that is to accept it. The bank signs its acceptance on the bill and returns it to the exporter. The exporter can then represent it for payment on maturity. Alternatively he can discount it in order to obtain immediate payment.
3.5.16. Mode of Payment of Export Bills under L/C:

The most common methods of payment under a L/C are as follows, Sight Payment Credit: In a Sight Payment Credit, the bank pays the stipulated sum immediately against the exporters presentation of the documents. Negotiation Credit: In Negotiation credit, the exporter has to present a bill of exchange payable to him in addition to other documents that the bank negotiates. Deferred Payment Credit: In deferred payment, the bank agrees to pay on a specified future date or event, after presentation of the export documents. No Bill of Exchange is involved. In Jamuna Bank, payment is given to the party at the rate of D.A 60-90-120-180 as the case may be. But the Head office is paid at T.T. clean rate. The difference between the two rates is the exchange trading for the branch. Acceptance credit: In acceptance credit, the exporter presents a bill of exchange payable to him and drawn at the agreed tenor (that is, on a specified future date or event) on the bank that is to accept it. The bank signs its acceptance on the bill and returns it to the exporter. The exporter can then represent it for payment on maturity. Alternatively he can discount it in order to obtain immediate payment.
3.5.17. Advising L/C:

When export L/C is transmitted to the bank for advising, the bank sends an Advising Letter to the beneficiary depicting that L/C has been issued.
3.5.18. Test Key Arrangement:

Test- key arrangement is a secret code maintained by the banks for the authentication for their telex messages. It is a systematic procedure by which a test number is given and the person to
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whom this number is given can easily authenticate the same test number by maintaining that same procedure. Jamuna Bank has test key arrangements with so many banks for the authentication of L/C messages and for the transfer of funds.
3.5.19. Inland Letter of Credit (ILC):

ILC means L/C within the same country. These types of L/Cs are opened when the seller does not believe the buyer though they are of the same country and also in the cases where the sales contract is of a big amount.
3.6 FOREIGN REMITTANCE

Remittance refers to the send or receipt of money from one place to another place. Foreign remittance refers that the exchange of money between two countries or among several countries. This is mainly occurred through banking institution. JAMUNA Bank Limited is not beyond this. It performs the remittance function with different countries. It maintains the foreign remittance in the following form: Inward Remittance. Outward Remittance. 3.6.1. Inward Remittance Inward remittance refers to the extent where by bank makes payment to the client against foreign demand draft. They will make payment to the client by verifying the, test number, and signature of the authorized officer. The bank makes payment immediately if the amount is less than Tk.l00000. if the amount exceeds Tk.100000. it must wait to get the credit advice from the issuing bank. 3.6.1. A. Modes of Foreign Inward Remittance: T.T (Telegraphic Transfer) M.T (Mail Transfer) D.D (Demand Draft) T.C (Travelers Cheque)
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P0 (Pay Order) Besides this foreign Inward Remittance also includes remittances on account of export, purpose of bills, purpose of T.C .Foreign currency notes and coins, cheque issued on foreign banks in favor of beneficiaries in Bangladesh etc.
T.T Cable or telex instructions of payment are called as Telegraphic Transfer, where a foreign bank issue a T.T in favor of some one in Bangladesh, it credits the amount, received from the remitter to the NOSTRO A/C of its correspondent hank. On receipt of the T.T the paying bank in Bangladesh will make payment of the proceeds of the T.T in foreign currency or in equivalent Bangladesh Taka to the beneficiary. M.T M.T is an instrument issued by a remitting bank to the paying bank advising in writing to make payment of certain amount to specific beneficiary. D.D A demand draft is a negotiable instrument issued by a bank drawn on other bank with the instruction to pay a certain amount to beneficiary on demand. T.C It is an instrument issued by the Banks/ Companys payable to the purchaser on presentation. P. O A Pay order is a written under issued by a branch of bank, to pay a certain sum of money to a specific person or a bank. It may be said as to be a bankers cheque as it is issued by a bank and payable by itself. 3.6.1. B. Purpose of Inward Remittance:
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Family maintenance. Indenting commission. Recruiting Agents commission. Realization of export proceeds Donation Gift Export brokers commission etc. 3.6.2. Outward Remittance Foreign currency being made out abroad may be termed as foreign outward remittance. That means remittance in foreign currency that goes out abroad is called foreign outward remittance. Jamuna Bank Limited charges Tk.400 per demand draft. 3.6.2. a. Collection of foreign currency instrument: To collect proceed of Foreign Instrument following procedures to he maintained: Receive instrument with deposit slip. Affix crossing stamp of the Bank. Entry in the register putting IBCA number. Affix endorsement pay to the order of any Bank or trust company, prior endorsement guaranteed. Instrument to be sent to adjacent correspondents. 3.6.2. b. Remittances are allocated. Household remittance. Advance payment. Education purpose. Exporting traveling.
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3.7 EXCHANGE RATES & FOREIGN EXCHANGE MARKET

3.7.1. Exchange Rate The rate of exchange is the price of one currency in terms of another currency or in the other words the number of units of one currency, which exchange for a given number of units of another currency. 3.7.2. Theories for Determination of Exchange Rate: There are mainly 4 theories explaining the determination of exchange rate. Mint Parity Theory IMF Par Value Theory Purchasing Power Parity Theory Demand & Supply Theory 3.7.3. Factors influencing the Exchange Rate Inflation differentials Income level differentials Interest rate differentials Political & other Nov- Economic factors Govt. controls and expectations
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3.7.4. Basic Terminologies for Exchange Rate Calculation Commodity Currency: The currency being priced, usually 1 unit or fixed amount of currency. Term currency: The currency used to express the price of the commodity in varying amount of currency. Quoted currency & Base currency: The term Quoted currency means the variable currency and Based currency means the fixed currency. Thus if 1 =US$ 2.2550 then sterling is the commodity or base currency and US Dollar is the term or quoted currency. American Terms: Where US Dollar is fixed and other currency is variable say $1 units of other currency. European Terms: Where other currency is fixed and US Dollar is variable say 1 unit of other currency = $ Bid and Offer Rate: Bid rate means buying price and offer rate means selling price of a dealer. Dealing Spread / Margin: Difference between bid and offer rate is known as dealing Spread / Margin. Value Date: Value date means the date of settlement. Maxim: Maxim means buying and selling. 3.7.5. Fixation of Rate Fixed Rate: If the rate of exchange of a currency is fixed permanently with another currency it is called a fixed rate. Flexible Rate: If exchange rate is fixed for a short period subject to revision from time to time it is called flexible rate.
Floating Rate: If rate of exchange is determined by demand and supply of the currency without any intervention, as in the free economy, the rate is called Floating Rate.
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Managed Rate: If exchange rate is allowed to move within a band fixed by the central Bank it is called managed floating rate. As it is in Bangladesh. Multiple Rates: This means different rates for different countries or different rates for export and import. In Bangladesh, before December 1991 there existed official exchange rate and Secondary Exchange Market (SEM) rate. These rates were unified in January 1992. 3.7.6. Exchange Rate Quotation Pence rate or direct quotations Currency rate or indirect quotations 3.7.7. Buying and Selling Rate An exchange dealer always quotes two rates. One is buying rate another is selling rate. In currency rate the dealer will try to sell as few Foreign Currency per fixed home currency and will try to buy as many Foreign Currency per fixed home currency. Here the maxim is Buy high, sell Low. But in case of pence rate the maxim is Buy Low, sell high. 3.7.8. Some guidelines for Buying & Selling Rate: In case of currency Rate Buy high, sell low Premium deducted Discount added In case of Pence Rate Buy low, sell high Premium added Discount deducted For Buying In pence rate lower premium is added and higher discount is deducted
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In currency rate lower premium is deducted and higher discount is added For Selling In pence rate higher premium is added and lower discount is deducted. In currency rate higher premium is deducted and lower discount is added
Spot Rate It is an exchange rate for on the spot transaction. The spot price is what one must pay to buy currencies for immediate delivery. However delivery within two business days from transaction date is also considered as spot transaction. Forward Rate It is an exchange rate for the transaction to be happened at some future date, but agreement for the transaction is to be done to day. Forward rate is quoted either at premium (+) or at discount rate (-) over the spot rate. In case of pence rate or direct quotation, premium will be added to and discount will be subtracted from spot rate. The reverse is for currency rate or indirect quotation. In forward rate one will have to pay the currency when the contract matures. Cross Rate It is a rate to he found out from two given exchange rate.
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ANALYSIS OF IMPORT & EXPORT FINANCING & REMITTANCE
JAMUNA BANK LIMITED Jubilee Road Islami Banking Branch, Chittagong

4.1. IMPORT FINANCING Jamuna Bank Ltd. Jubilee Road Islami Banking Branch, Chittagong has increased Import Business amount from Tk.80.89 million in the year 2005 to Tk. 536.02 million in the year 2009. [Figures in Million] Year Import 2005 80.89 2006 250.33 2007 580.90 2008 644.69 2009 536.02
Table 4.1. : Showing the yearly Import figures of JBL.

700 600 500 400 300 200 100 Prepared by: Md. Hasan Forhad, Matric No: B063108, MBA (Finance & Banking), IIUC 0 2005 2006 2007 2008 2009 Import
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Reasons for increasing in the Import figure: With increase in volume of business, scope of operation, increase in the number of import clients, import performance is supposed to increase substantially.
4.2. EXPORT FINANCING Jamuna Bank Ltd. Jubilee Road Islami Banking Branch, Chittagong has increased Export business form Tk. 180.75 million in the year 2005 to Tk 1757.45 million in the year 2009. [Figures in Million] Year Export 2005 180.75 2006 503.21 2007 889.74 2008 1934.66 2009 1757.45
Table 4.2. : Showing the yearly Export figures of JBL.
2500 2000 1500 1000 500 0 2005 2006 2007 2008 2009 Export
Graph 4.2. : Showing the yearly Export figures of JBL.
Reasons for increase in the Export figure: With increase in volume of business, scope of operation, increase in the number of Exporters, export performance is supposed to increase substantially.
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4.3. INWARD AND OUTWARD REMITTANCE The Inward Remittance of Jarnuna Bank Limited Jubilee Road Islami Banking Branch, Chittagong) is continuously increasing. The inward remittance amount was Tk. 9.32 million in the year 2005 and it has increased to Tk. 24.63 million after the end of the year 2009. While there was no Outward Remittance in the last five years as the branch is not an Authorized dealer of foreign currency. [Figures in million] Year Inward Outward 2005 9.32 0 2006 9.75 0 2007 12.70 0 2008 16.63 0 2009 24.63 0
Table 4.3. : Showing the yearly Inward And Outward Remittance figures of JBL. Graph 4.3. : Showing the yearly Inward And Outward Remittance figures of JBL.
25 20 15 10 5 0
Inward Outward
2005
2006
2007
2008
2009
Reasons for increase in the Inward remittance and no change in the outward remittance: With increase in volume of business, scope of operation, contracts with various FC remitting agencies and companies in abroad, inward remittance is supposed to increase substantially. But, as the branch is not an authorized dealer of FC, it can not remit FC to abroad.
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4.4. FINDINGS
Foreign Exchange performance of Jamuna Bank Limited, Jubilee Road Islami Banking Branch, Chittagong is continuously increasing. JBL Jubilee Road branch has SWIFT facilities. Very few bank in our country offer this. By using this modern technology Jubilee Road branch, provide fastest service on L/C operating to its client. The inward remittance of Jamuna Bank Limited, Jubilee Road Islami Banking Branch, Chittagong is continuously increasing. The import financing is also very good in Jubilee Road Branch and it is continuously increasing. In case of Export L/Cs, sometimes customers insist to give their payments though their documents are found discrepant. In some cases, Bank has to give payment to these customers for different reasons, which create loss for the bank.
The export financing is also good but in 2009 it reduced as compared to 2008.
Some of the time the Pre-shipment inspection certificates are not wanted by the bank, which creates fraud and forgery in case of import against master export L/C. In some cases, this branch takes different Margin and commission on L/Cs from different customer, which creates dissatisfaction among the customers. There is no provision of fixed L/C margin, so those customers are deprived of equal service. JBL Jubilee road branch did not practice revocable L/C. Lack of necessary measures to make its service cost effective, more dynamic and less time consuming. JBL Jubilee road branch has not adequate number of skilled manpower in foreign exchange department. Most of the officers have lack in communication skill and computer skill.
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There is no Customer Complain Desk, for the reason sometimes it creates cumbersome situation JBL adopt online banking, which the bank operates for their customers facilities.
5.1. RECOMMENDATION
Pre-shipment inspection certificate should obtain from the exporter of back-toback L/C.Because it reduces fraud and forgery in case of import against master export L/C.
In some cases, this branch takes different Margin and commission on L/Cs from different customer. A customer is allowed to open a L/C even with 10% margin. The bank should review the customers' behavior for a period and should develop a certain policy in this regard. In case of Export L/Cs, sometimes customers insist to give their payments though their documents are found discrepant. In some cases, Bank has to give payment to these customers for different reasons. The Bank should be as stricter as possible about giving payments against discrepant documents without hurting the customers In many cases, the foreign banks want confirmations from other foreign banks with which this bank has correspondence. This proves the poor financial condition of our country. Banks should try to improve this situation. In case of Export L/Cs, the Government encourages the exporters by giving different facilities like tax-cuts. The bank should also think about such type of facilities to be given to the Exporters because Bangladeshi exporters like Readymade garments exporters are going to face a tough situation in coming years from the exporters of other countries. The bank should try to arrange more training programs for their officials. Quality training will help the officials to enrich them with more recent knowledge of International Trade Financing.
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JBL should upgrade its website regularly and provide details information of their performances and activities.
5.2. CONCLUSION
During this internship period at Jubilee Road Branch, Chittagong, almost all desks have been observed more or less. This Internship program has been arranged for gaining knowledge of practical banking and to compare this practical knowledge with theoretical knowledge. It is very much critical to gather a vast experience about all mechanism in the short period of time. Banks should make the easiest way to make the foreign transactions. Despite stiff competition among Banks in their operation in Bangladesh, both foreign and local, JBL has achieved satisfactory progress in areas of its operation and earned impressive success in operation over the previous year. The Bank will hope to achieve a satisfactory level of progress in all areas of its operation including target of profitability. The Jamuna Bank Limited is doing its business successfully for more than nine years, which indicates their well performance in foreign exchange. Because of their well performing foreign exchange the bank has been able to reduce its bad debt every year. The bank provides their best services such as Money gram, U.A.E Exchange, and placid Express. JBL provides different facilities. It has SWIFT facilities. Very few bank in our country offer this. This branch facilitates different Margin and commission on L/Cs for different customers. JBL adopt online banking, which bank operates for their customers facilities. But this bank has some lacking in their foreign exchange business. Some of the time the Pre-shipment inspection certificates are not wanted by the bank, which creates fraud and forgery in case of import against master, export L/C. This bank does not practice revocable L/C. And they have not adequate number of skilled manpower in foreign exchange department. The more effectively banks handle foreign exchange business, the more likely they will become productive. For this purpose, JBL needs to exert concerted efforts of undertake intensive research in the field of product designing. This essentially requires employing dedicated experts who have a genuine interest in foreign exchange business and are well conversant with foreign delegates. The bank may make strong lobby with central bank of Bangladesh and the other commercial banks. This will make JBL distinguished from other banks.
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However, JBL has a good act of institutional owners, which gives it a better board director than many other baking has been successful in developing a professional job environment level of authority and responsibility.
References:
Daily Affairs Jamuna Bank Limited Profile. Annual reports 2009, Jamuna Bank Ltd. Foreign Exchange: Book B L.R Chowdhury. Information Manual of JBL. Import Procedures/ Formalities Sk. Harun Ar Rashid
Web site:
www.jamunabankbd.com www.bdbank.com www.finance.com www.nbr.com
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1.

1.2 OBJECTIVE OF THE STUDY

1) To know about import operationof

2) To know about export operation of JBIBBL.

1.3 METHODOLOGY OF THE STUDY

Face to face to interview with the clients. Personal interview.

iii. Observation in the organization. iv. Practical desk task.

Try to get information from different sources.

1.4 SCOPE OF THE STUDY

1.5 LIMITATIONS OF THE STUDY

2.1 About Jamuna Bank Limited

2.2 BOARD OF DIRECTORS

Managing Director Md. Motior Rahman

2.3 MISSION AND VISION

Your partner for growth

2.5 ORGANIZATIONAL STRUCTURE

2.6 FINANCIAL PRODUCTS AND SERVICES

2.7 CREDIT RATING REPORT

Rating 2009 Rating - 2008 Date of Rating

Long Term Short Term A2 ST - 2 AST - 3 29 th April, 2010

2.8 OBJECTIVES OF JBL

2.9 SWOT ANALYSIS

PERFORMANCE EVALUATION BANK LIMITED

(Jubilee Road Islami Banking Branch, Chittagong)

Table 2.11. : Showing the yearly Credit figures of JBL.

Graph 2.11. : Showing the yearly Credit figures of JBL .

2.12. INCOME & EXPENDITURE

Table 2.13. : Showing the yearly profit figures of JBL.

70 60 50 40 30 20 10 0 2005 2006 2007 2008 2009 Profit

Graph 2.13. : Showing the yearly profit figures of JBL.

3.1 UNDERSTANDING FOREIGN EXCHANGE

3.2 REGULATIONS FOR FOREIGN EXCHANGE

3.2.1. Local Regulations

3.2.2 International regulations of foreign exchange

3.3 FOREIGN EXCHANGE MECHANISM

3.3.5. The Accepting Bank

Issuing Bank (Bangladesh)

Advising Bank (India)

Reimbursing Bank (Japan)

Negotiating Bank (India)

3.3.7.Graphical presentation of Foreign Exchange Mechanism:

SELLER EXPORTER BENEFICIARY

ADVISING BANK/ NEGOTIATING BANK.

FIG: FOREIGN EXCHANGE MECHANISM

3.4 IMPORT DEPARTMENT

Makes Payment against Document

Instruction to Pay or Reimburse

3.4.5. Import Mechanism

3.4.6. Things, which are done here:

PAD A/C Jamuna Bank General A/C Exchange gain A/C

Debit Credit Credit 37

(Amount given to JAMUNA Bank General A/C and interest credited)

3.5 EXPORT DEPARTMENT

Lodgment of Export Bills (FBP, FDBC, IBP & IBC).

OAP Customers A/C

3.5.16. Mode of Payment of Export Bills under L/C:

3.5.17. Advising L/C:

3.5.18. Test Key Arrangement:

3.5.19. Inland Letter of Credit (ILC):

3.6 FOREIGN REMITTANCE

3.7 EXCHANGE RATES & FOREIGN EXCHANGE MARKET

ANALYSIS OF IMPORT & EXPORT FINANCING & REMITTANCE

JAMUNA BANK LIMITED Jubilee Road Islami Banking Branch, Chittagong