Exmim Bank

Foreign Exchange Operation of EXIM Bank
CHAPTER-I INTRODUCTION 1.1 Statement of the problems 1.2 Background of the Report 1.3 Objective of the Report 1.4 Reason of the Report 1.5 Scope of the Report 1.6 Methodology of the Report 1.7 Limitations of the Report
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1.1. STATEMENT OF THE PROBLEMS
Reporting means the written presentation of the evidence and findings of a research. After completion of the internship program report submission is essential..The report is based on a topic that can satisfy both organization and my academic institution. Internship is the last part of my BBA course. Being a BBA student internship and report submission is essential for me without completion of internship and submission of report I cannot be able to complete my BBA course. ` This report is submitted to my internship supervisor,Dr. Moniruzzaman, Professor, Dept. of Management, Islamic University, Kushtia, after completion of the three months internship program in the EXIM Bank Limited (Mirpur Branch). I have assigned a topic "Foreign Exchange Operation Of EXIM Bank Limited" and the EXIM Bank Authority gave me the opportunity to work at the Mirpur Branch for three months on the topic.
1.2. BACKGROUND OF THE REPORT In the later 19th century, Finance was a part of the Economics. But due to the globalization and more expansion of international trade, Finance plays the major role for the economic development. The development of a modern economy would not have been possible without the use of money. Bank is an important and essential financial institution for the necessity of the use of money and the protection of the money. Due to the globalization and technological innovation, banking business has become competitive. To cope up with this, Bankers should have professional knowledge as well as technical basic. As a BBA student whose are major in Management, Studies, Bank one of the most appropriate field to gather the experience. With a view to supply skilled personnel in Banking arena, Islamic University has undertaken the Internship training program for BBA students. As a part of the BBA program, l was sent to EXIM Bank Ltd, Mirpur Branch for having practical exposure in the Bank for three months internship program.
1.3. OBJECTIVE OF THE REPORT
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The main objective of practical orientation is to get a clear-cut idea about Bank, how it runs and what functions it does i.e. to be acquainted with practical everyday functions of Banking Business. Along with the main objective other objectives of Report are 1. To get and idea about EXIM bank of Bangladesh Ltd. 2. To analyze the Banking environment of Bangladesh. 3. To identify the problems faced by the customers and the Bankers. 4. To analyze the financing system of the Bank and to have greater contribution towards country's economy. 5. To determine the factors that influences the choice of a Bank by the customers. 6. To analysis the performance of sanction, disbursement and recovery of Foreign trade of EXIM Bank. 7. Bank. To acquire knowledge about the everyday Banking operation of EXIM
1.4. REASON FOR THE REPORT Bankers are the most important part for the economy. They play a vital role in the economic development of the country. They keep the wheel of the economy for moving forward. So, efficient and qualified persons are needed for doing such development. To build up potential future Banker BBA program can help a lot. For this Finance can play a special role for making potential Bankers. Internship program can also help them to be acquainted with day-to-day affairs of such people.
1.5. SCOPE OF THE REPORT There is a certain boundary to cover this report. To achieve the objective of the report, i.e. through knowledge about the organizational functions and its management, it is not possible Page # 3
to cover each and every activity performed in the organization. The report has covered only the general overview of the organization. Moreover the company itself and financial institutions have got some confident information which are not possible to disclose publicly, so those data am information had to be ignored for this report.
1.6. METHODOLOGY OF THE REPORT For making any report or statistical survey most of the data should be taken that reflect actual situation. For my report I have collected various types of primary and secondary data while I was performing my job. I have collected various data from various sources, by interviewing the respective officers and from journals published by the authority i.e. Annual Reports, Prospectus, Brochures, and different Policies and so on. I have also collected data from their Training Institution's papers those are supplied to the trainee. In a disciplined way I can say that the Report input were collected from two sources Primary Sources: (i) (ii) (iii) Practical deskwork. Face to face conversation with the officers. Face to face conversation with the clients.
Secondary sources: ( i ) Annual Report of EXIM Bank. (ii) Brochures of EXIM Bank (iii) Prospectus of EXIM Bank. (iv) Policies of EXIM Bank. ( v ) Published or unpublished or personally collected data from Officers Mirpur Branch and Head Office of EXIM Bank
1.7. LIMITATIONS OF THE REPORT
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I have encountered some problems 1. Time constraint was major drawback in the report. The duration of the Report was only three months. 2. The Report was limited by the size of sample. 3. Some essential data could not be gathered because of confidentiality concerns. 4. Many procedural matters were conducted directly in the operations by the top management
CHAPTER-II
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OVERALL BANKING POSITION IN BANGLADESH 2.1 Introduction 2.2 An Overview of Banking Systems 2.3 Classifications of Banking Sectors at a glance in Bangladesh.
2.1 INTRODUCTION A Bank is the lifeblood of any economy. It is an establishment which trades in
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money, an establishment for deposit custody and issue of money and also for granting loans and discounting bills and facilitating transmission of remittance from one place to another. Bank is an organization chartered by the State or Federal Government principal function of which are To receive demand deposits and pay customers cheques drawn against them. To receive time deposits & pay interest there on. To discount notes make loans and invest in govt. or other securities. To collect cheques, drafts and notes etc. To issue drafts & cashier cheques. To certify depositors cheques.
When authorized by a chartering govt. it may act in a fiduciary capacity. A Bank is an economic institution whose main aim is to earn profit through exchange money & credit instruments. Finally we can say that, a Bank is an institution, which creates money with money. The definition of Banking has been changed at the new millennium. Now Banks are performing more vital role in the society than before. Due to globalization and technological innovation, Banking business has become very competitive. In our country there are 8 Nationalized or Government controlled Banks, 32 Private Commercial Banks and 14 Foreign Commercial Banks. 2.2. AN OVERVIEW OF THE BANKING SECTOR After Independence of Bangladesh the Banking sector was restructured as a fall out of war of liberation. Banking grew primarily in the public sector with main emphasis development needs of the war-torn economy with gradual liberalization in subsequent years. It was increasingly felt that Banks should be allowed in the private sector. In the 80's for the first time a number of Banks in the private sector was allowed. Subsequently in the mid 90's some more Banks in private sector commenced operations. Finally 1999 3rd Generation of private sector Bank was given permission to operate. As a result while up to 80's public sector Banks dominated financial sector, Banks in the private sector were given increased responsibility with the passage of time. The share of deposits of Nationalized Commercial Banks (NCBs) in total deposits, which stood at 89% in 1980 gradually, declined over the years to reach the level of 55% in 2000. Simultaneously, Private Commercial Banks (PCBs), which were responsible for only 18% of deposits in 1.985, this share increased gradually over the years to Page # 7
constitute about one third of the total deposits of the country by the end of the millennium. But market share of deposits of Foreign Commercial Banks (FCBs) did not change much during the last twenty years. In the early 80's, the share was 6% and it stood at 7% by the end of the century with a relatively small branch network in the country.
Likewise share of NCBs in total advances of the country declined gradually from 80% in 1980 to reach the level of 47% by the end of year 2000. At the same time, share in advances of the PCBs increased from 14% to 31 % over the same period.
A break-up of deposits and advances indicates that share of rural branches contribute higher share in advances. Rural deposits constitute slightly more than one-fifth of the total deposits of the Banks. On the other hand, rural advances constitute around 17% of the total advances of the Banking sector. In our country, there are 54 Banks at present. Among them 10 Nationalized or Government controlled Banks, 30 Private Commercial Banks and 14 Foreign Commercial Banks. List of them are Nationalized Commercial Banks: I . Sonali Bank. 2. Janata Bank 3. Agrani Bank 4. Rupali Bank Development Financial Institutions: 1. Bangladesh Krishi Bank. 2. Bangladesh Shilpa Bank 3. Bangladesh Shilpa Rin Sangstha 4. BASIC Bangladesh Limited 5. Rajshahi Krishi Unnayan Bank. 6. Karma Sangstha Bank. Private Batik - First Generation: 1. AB Bank Limited 2. IFIC Bank Limited Page # 8
3. Islami Bank Bangladesh Limited 4. National Bank Limited 5. Pubali Bank Limited 6. The City Bank Limited 7. United Commercial. Bank Limited 8. Uttara Bank Limited 9. Oriental Bank Bangladesh Limited
Private Bank - Second Generation: 1. 2. 3. 4. 5. 6. 7. 8. AI-Arafah Islam] Bank Limited Dhaka Bank Limited. Dutch Bangla Bank Limited Eastern Bank Limited National Credit and Commerce Bank Limited Prime Bank Limited Social Investment Bank Limited Southeast Bank Limited
Private Bank - Third Generation: I. Bangladesh Commerce Bank Limited 2. Bank Asia Limited 3. EXIM Bank Limited 4. First Security Bank Limited 5. Mercantile Bank Limited 6. Mutual Trust Bank Limited 7. One Bank Limited 8. The Premier Bank Limited 9. The Trust Bank Limited 10. Standard Bank Limited 11. BRAC Bank Limited 12. Jamuna Bank Limited 13. Shahjalal Islami Bank Limited..
Foreign Private Bank: 1. American Express Bank Limited 2. City Bank N A 3. Credit Agricole Indosuez 4. Habib Bank Limited Page # 9
5. Hanvit Bank 6. Mashreq Bankk psc (Liaison office) 7. Muslim Commercial Bank limited 8. National Bank of Pakistan 9. Shamil Bank of Bahrain EC (Islamic Bankers) 10. Standard Chartered Group 11. State Bank of India 12. The Bank of Tokyo Mitsubishi Limited 13. The Hong Kong and Shanghai. Banking Corporation (I-ISBC} Limited. 14. Commercial Bank of Ceylon.
2.3 CLASSSIFICATION OF THE BANK AT AGLANCE
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On the Basis of On Structure
the
Basis
of On the Basis of On the Basis of ownership forms Business
Function
organization 1.Unit Banking 2.Branch Banking 3.Chain Banking 4.Group Banking 5.Correspondent Banking 1.Central Bank 2.Commercial Bank 3.Agricultural Bank 4.Industrial Bank 5.Co-ooperative Bank 6.Exchange Bank 7.Investment Bank 8.Savings Bank 9.Mortgage Bank 10.Transport Bank 1.Govt.Bnak 2.Private Bank 3.Joint Venture 4.Autonomous Bank 5.Foreign Bank 1.Sole Trader ship 2.Partnership 3.Joint Bank 4.Co-operative Bank 5.State owned Bank stock co.
CHAPTER-III A BRIEF PROFILE ABOUT EXIM BANK LTD.
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3.1 Overview of EXIM Bank 3.2 Historical background of EXIM Bank 3.3 Objective of EXIM Bank 3.4 Strategies of EXIM Bank 3.5 Mission Vision and philosophy of EXIM Bank 3.6 Corporate Culture of EXIM Bank 3.7 Hierarchy of EXIM Bank 3.8 Branches of EXIM Bank 3.9 Profile of EXIM Bank 3.10 View of EXIM Bank 3.11 Structure of EXIM Bank
3.1. OVERVIEW OF THE EXIM BANK EXlM Bank Ltd is the name implies a newly formed commercial Bank but is the 1st of its kind in Bangladesh. It has been incorporated in Dhaka, EX1M Bank as a public limited company and its Head Office of the Bank is located at Printers Buildings, 5, Rajuk
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Avenue, Motijheel Commercial Area, Dhaka-1000. In the world of consumerism the business organization of the world strive for the consumers satisfaction as a number one business strategy whatever may be the product of the organization, either service or non service. Service is the product of Bank. There is a saying that customer service starts rights right from the stairs of the Bank building. The guard at the door is first person represents of the Bank, receives a customer with wishes in smiling face.
3.2. HISTORICAL BACKGROUND OF THE EXIM BANK EXIM Bank Ltd. was incorporated under the Companies Act 1994, on the 2nd June 1999. EXIM Bank Ltd. believes in togetherness with its customers, in its march on the road to growth and progress with service. As a commercial Bank we will do all traditional Banking, business including introduction of a wide rang of savings and credit products, retail Banking and ancillary services with the support of modem technology and professional skills. The Export Import Bank of Bangladesh Ltd. commenced formal commercial Banking operatic from 3rd August 1999 with the permission of Bangladesh Bank. The sponsors of the Bank are leading business personalities and reputed industrialists. The Bank has a sound capital base; its Authorized Capital is Tk.1000.00 Million while its Initial Paid up Capital is Tk. 225.00 Million subscribed by the sponsors. To solidify its capital by further the paid up capital will raise to Tk. 450.00 Million within a reasonable period by pub offering of shares of the Company. The Bank will be immensely benefited further more from the able leadership of the Chairman and the valuable advice and guidance the advisor. Originally the name of the Bank was BEXIM Bank of Bangladesh Ltd. Later the management BEXIM Bank of Bangladesh. Ltd. changes the name of the Bank to EXIM Bank Ltd. because the case lodged by BEXIMCO Group of Industries. The Board of Directors wants to carry out in the management all of this service industry's administration and credit portfolio independent without any undue influence from out side. The board will formulate policy and give policy directives to the Management Transparency and accountability will be strictly ensured at all levels of the Bank. The Bank will operate with integrity, competence and farsightedness abiding by all principles and provisions laid down the Bank Company Act, 1991, the guidelines of Bangladesh Bank. Considering the inherent desire of the religious Muslims of Bangladesh, EXIM Bank Ltd. has been decided to convert the entire conventional system of the Bank into Islami Banking with effect from 1st July, 2004.
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3.3. OBJECTIVE OF THE EXIM BANK. Bangladesh is now an integral part of global market. As such there is an urgent requirement for Bangladesh to place the traditional Banking practices in harness with the global trades of a free market economy by following international Banking customs, practices and standards. Today clients of a Bank in Bangladesh are exposed as well as international markets. They have to stay update with their practice and standards to meet the demands of achieving harmony in the high standards of a free economy. Hence, by getting into both corporate and retail Banking and rapid innovation and networking the Bank believes that it can accomplish its goals. EXIM Bank fully appreciates the importance and implication of the rapidly emerging competition in the Banking and finance sector of Bangladesh. It intends financing its customer Suited to his or her place in the market. In this regards EX1 M Bank emphasizes in its employment the software aspects of human resource capability. It also emphasizes competence among its Banking professional to cater to varied customer requirements to the modem time. The core objectives are To carry on, Transact, undertake and conduct the business of Banking in all its branches and to transact and do all matters and things incidental there to in Bangladesh and abroad. To receive, borrow or raise money on deposits, loan or otherwise, upon such terms as the Company may approve and to hive guarantees and indemnities in respect of all debts and contracts. To establish welfare oriented Banking systems. To play a vital role in human development and employment generation. To invest money in such manner as may from time to time be thought proper. To carry on the business of buying and selling bullion, gold and other valuable assets.
3.4. STRATEGIES OF THE EXIM BANK The business of Banking consists of borrowing and lending. As in other businesses, operation must be based on capital, but Banks employ comparatively little of their own capital in relation to the total volume of their transactions. The purpose of capital and reserve accounts is primarily providing an ultimate cover against losses on loans and investments. Introduction of online Banking services, ATM cards, etc. is something that the Bank Page # 14
looks forward to introducing as soon as possible because of the current demand in the market place. Hence rapid innovation is definitely a key strategy of this Bank. 3.5. MISSION & VISION OF THE EXIM BANK Vision of the Bank The gist of our vision is 'Together towards Tomorrow'. Export Import Bank of Bangladesh Limited, as the name implies, is not a type of Bank in some countries on the globe, but is the first of its kind in Bangladesh. It believes in togetherness with its customers, in its march on the road to growth and progress with services. To achieve the desired goal, there will be pursuit of excellence at all stages with a climate of continuous improvement, because, in EXIM Bank, we believe, the line of excellence is never ending. Bank's strategic plans and networking will strengthen its competitive edge over others in rapidly changing competitive environments. Its personalized quality services to the customers with the trend of constant improvement will be cornerstone to achieve our operational success.
Mission of the Bank: The bank has chalked out the following corporate objectives in order to ensure smooth achievement of its goals: To be the most caring and customer friendly and service oriented bank. To create a technology based most efficient banking environment for our customers. To ensure ethics and transparency in all levels To ensures sustainable growth and establish full value of the honorable shareholders and Above all, to add effective contribution to the national economy
As a part of the said issues, the bank also emphasizes on the following area of services, such as: Provide high quality financial services in export and import trade Provide defect free quality customer service Maintenance of corporate and business ethics Become trusted repository of customers' money and their financial adviser Make our stock superior and rewarding to the customers Display team spirit and professionalism Sound Capital Base Enhance shareholders wealth
3.6. CORPORATE CULTURE OF EXIM BANK Page # 15
This bank is one of the most disciplined Banks with a distinctive corporate culture. Here we believe in shared meaning, shared understanding and shared sense making. Our people can see and understand events, activities, objects and situation in a distinctive way. They mould their manners and etiquette, character individually to suit the purpose of the Bank and the needs of the customers who are of paramount importance to us. The people in the Bank see themselves as a tight knit team/family that believes in working together for growth. The corporate culture we belong has not been imposed; it has rather been achieved through our corporate conduct.
3.7. HIERARCHY OF THE EXIM BANK Chairman Managing Director Deputy Managing Director Senior Executive Vice President Executive Vice President
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Senior Vice President Vice-President Senior Assistant Vice President Assistant Vice President Senior Principal Officer Principal Officer Executive Officer Officer Management Trainee Officer Junior Officer Assistant Officer Trainee Assistant Officer
3.8 Branches of EXIM Bank Limited Motijheel Panthapath Agrabad Khatunganj Gazipur Imamganj Gulshan Sunaimuri Sylhet 9568093, 9568534, 9554988 8124261,9145911 031-715795, 031-715796 031-615544, 610711 9256492-3 7315527,7315529 9886296, 9862262 0171-750610 0821-722457
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Nawabpur Narayanganj Symrail RAJUK Avenue New Eskaton Uttara Laksham Mirpur Jubilee Road Elephant Road Maona Bogra Jessore Malibag Ashulia Ashuganj CDA Avenue Choumuhoni Satmosjid Road
7125306,7125307 7610213-4 7609268, 7609672 9556884,9565397 8314159,8314435 8919785,8952847 0171-726302 8056776, 8054226 031-611170 9667097 06825-52359 051-60702-5 0421-67980-3, 011-887537 9340444 01713040588 01713063433 031-652074 0321-52700 8118680
3.9. PROFILE OF EXIM BANK EXIM Bank Ltd at a Glance Established Incorporated Activity Starts Legal Status Authorized Capital Issued Capital No. Of Branches No. Of employees 1991 2nd June,
1999
3rd August, 1999 Public Limited Company Tk. 1000.00 (Million) Tk.313.875 (Million) 28 (Twenty Eight) 934 (31-On-2005)
Employees' Position (as on 31-12-2005) Page # 18
Sl. No 01 02 03 04
Designation Executive Officers Sub-Staff (Casual) Total
As on 31-12-2005 48 680 206 934
3.10. VIEW OF EXIM BANK (MIRPUR BRANCH) In the world of consumerism, the business organization of the world try for the consumer satisfaction as a number one business strategy whatever may be the product of the organization either service or non-service. Service is the product of Bank. There is a saying that custom service starts right from the stairs of the Bank building. The guard at the door is the first person represents the Bank, receives a customer with wishes in smiling face.
There are mainly three divisions in this Branch. The General Banking Division (GB) deals the day-to-day transactions. The Investment! Advance Division gives advance to the customer a monitor whether he repays regularly or not. The Foreign. Exchange Division is the highest earning Division among all the three Division that deals their operations by two sub departments Export (EXP) and Import (IMP).
3.11. STUCTURE OF EXIM BANK (MIRPUR BRANCH) Sr.Vice President & Manager
Principal Officer (2 d Manager)
Dispatch Junior Officer
Cash Assistant Officer
Deposit Executive Officer
Remittance Junior Officer
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Trainee Assit. Officer
Investment 1 Executive Officer Officer
Foreign Exchange Clearing & Accounting Executive Officer Junior Officer
IT Assistant Officer
CHAPTER-IV AN INSIGHT INTO FOREIGN EXCHANGE OPERATIONS 4.1 Introduction 4.2 Foreign Exchange Regulation Act, 1947 4.3 Foreign Exchange Regulation act, 1994 4.4 Deregulatory Measures 4.5 Authorized Dealers and Money Changers 4.6 Bangladesh Bank's Transactions with ADS 4.7 Forward Dealings in Foreign Exchange 4.8 Outward Remittances 4.9 Inward Remittances 4.10 Convertible and Non-Convertible Taka Accounts
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4.11 Foreign Investment and Operation in Securities 4.12 Some Foreign Exchange Related Terms 4.13 Some Definitions of Foreign Exchange
4.1. INTRODUCTION
In the modem world no country is self-sufficient, one country is to depend on other countries and from this point of view there arises the question of foreign trade and foreign currency transactions. That is, the international trade involves foreign exchange transactions particularly for receipt and payment against export and import of goods and services from one country to another. Because, without foreign exchange transactions we cannot think of foreign trade. Of course, various rules and regulations are to be followed in connection with the foreign trade and foreign exchange transactions.
It is well known fact that the money is a medium of exchange for all transactions that take place inside the country as well as outside the country. In Bangladesh, we have the Taka for Page # 21
financing the internal trade and other obligation. So, the home currency has to be converted into currencies of other currencies, to meet the obligation that arises out import of goods and services from other countries. That part of the economic science that deals with the conversion of Home Currency into Foreign Currency for the purpose of setting international obligations is called Foreign Exchange.
4.2. FOREIGN EXCHANGE REGULATION ACT, 19 47
Foreign Exchange Regulation (FER) Act, 1947 (Act No. VII of 1947) enacted on llth March, 1947 in the then British India provides the legal basis for regulating certain payments, dealings in foreign exchange and securities and the import and export of currency and bullion. This Act was first adapted in Pakistan and then, in Bangladesh. The Act is reproduced. Bangladesh Bank is responsible for administration of regulations under the Act. Basic regulations under the FER Act are issued by the Government as well as by the Bangladesh Bank in the form of Notifications, which are published in the Bangladesh Gazette. Notifications issued by the Bangladesh Government and the erstwhile Government of Pakistan and the Bangladesh Bank and the erstwhile State Bank of Pakistan are reproduced. Directions having general application are issued by the Bangladesh Bank in the form of notifications, foreign exchange circulars and circular letters. The major objectives of the act are to conserve the limited foreign exchange resources and to ensure that the available foreign exchange is utilized only for priority requirements the economic and financial interests of Bangladesh and the maintenance of the proper accounting of foreign exchange receipt and payments. Bangladesh Bank is responsible for administration of regulations under the Act. Bangladesh Bank reviews the exchange control measures from time to time and revises the instructions on policy and measures, whenever necessary through different Foreign Exchange (FE) circulars. Authorized dealers in foreign exchange are required to bring the foreign exchange regulations to the notice of their customers in their day-to-day dealings. Actually, the Authorized dealers at the level where transactions with the customers take place implement all the regulatory amendments or changes. And so Authorized dealers are to ensure compliance with the regulations by the customers. The ADs should report to the Bangladesh Bank any attempt, direct or indirect, of evasion of the provisions of the Act, or any rules, orders or directions issued they are under.
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.Bangladesh Bank issues licenses to deal in foreign exchanges empowered by the Foreign Exchange Regulation Act, 1947.Central Bank may issue general licenses with authority to perform limited functions only. The Authorized dealers must maintain adequate and proper records of all foreign exchange transactions and furnish such particulars in the prescribed returns for submission to the Bangladesh Bank. They should continue to preserve the records for a reasonable period for ready reference as also for inspection, if necessary, by Bangladesh Bank's officials. This publication summarizes the instructions issued under the FER Act as well as the prudential instructions issued by Bangladesh Bank (as of 30th September, 1996) to be followed by ADs in their day-to-day foreign exchange transactions. Bangladesh Bank Bangladesh Bank (BB) means the Bangladesh Bank established under the Bangladesh Bank Order, 1972 (President's Order No. 127 of 1972). Taka Taka means the Bangladesh Taka unless otherwise specified. Dollar Unless otherwise indicated the term dollar used in this publication shall mean the US dollar. Authorized Dealers Wherever used in this publication, the term Authorized Dealer or AD would mean a bank Authorized -by Bangladesh Bank to deal in foreign exchange under the FER Act, 1947.
4.3 FOREIGN EXCHANGE REGULATION ACT, 1994 This Act regulates the exchange of foreign currencies, remittances and opening of foreign currency account under various classifications. According to this law, FC Accounts can be opened without initial deposits, and bears no interest and both the account holder and the nominee can operate the account. The entire remittance from adored is free from income tax. It also states the documents required for the opening of such account.
4.4. DEREGULATORY MEASURES Since 1976 a lot of reform measures have been undertaken in Bangladesh. On October 20, 1993 Bangladesh Taka was declared convertible on current account transactions and in April, 1994 Bangladesh government has been awarded with the status of article VII of IMF. Page # 23
The major deregulatory Measures and changes taken place during last few years have been pointed out in the following paragraphs Bangladesh bank in exercise of the powers conferred by the Foreign Exchange Regulations act, 1947 issue licenses to commercial banks to deals in foreign exchanges. Recently the Central bank also permitted a number of Moneychangers to exchange cash foreign currency notes, coins or foreign currency instruments such as Travelers' Cheques. With the exception of a few reserved sectors, foreign investors are free to make investment in Bangladesh in industrial enterprises. Foreign investors are free to remit their post-tax profits and dividend to their own country. Foreign owned as well as joint venture industrial units located in Bangladesh might freely borrow funds in foreign currency from abroad. Local banks may extend working capital loans or term loans in local currency to foreign controlled or foreign owned firms operating in Bangladesh. Annual foreign exchange quota for business travel abroad for the new exporters has been set at US $ 6000. Merchandise exporters may retain 25% of realized FOB value of their export in foreign currency accounts. Non-resident foreign currency deposit (NFCD) accounts may now be maintained as long as the account holders desire. Bangladesh nationals having bank accounts abroad who were opened while working there may now maintain such accounts even after return to Bangladesh. A Bangladeshi national returning from abroad may bring to Bangladesh up to 2 kilograms of gold or silver in bullion/ingot from subject to payment duties and taxes as levied by the Government. Education sectors were declared folly convertible. Prior permission of Bangladesh Bank is not required for releasing foreign exchange in favor of Bangladesh students studying abroad or willing to proceed abroad for studies. A Authorized Dealers may release foreign exchange up to US $ 10,000 for medical treatment abroad on the basis of recommendation of the Medical Board constituted by the Health Directorate and cost estimate from the foreign medical institutions. A Remittance of moderate amounts of FE for family maintenance abroad of Bangladesh nationals are allowed by Bangladesh Bank on written request supported by certificate from the Bangladesh mission in the concerned country.
Bangladesh Bank has stopped sales and purchases with Authorized dealers of any currency other than the US Dollar; to encourage the Authorized dealers to buy and sell other currencies in the inter bank market.
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To encourage Authorized Dealers to avoid frequent transactions with Central Bank and instead to resort to inter bank deals, Bangladesh bank has raised its transaction threshold to US $ 50,000. Bangladesh :Bank also widened to Taka 0.10 the spread between its own buying and selling rates of US Dollar and has left the Authorized Dealers free to quote their own rates for inter bank transactions and transactions with non-bank customers. Bangladesh Foreign Exchange Dealers Association (BAFEDA) has been formed and a 'Code of Conduct' for treasury operations and Inter-Bank foreign exchange market has been formulated.
4.5. AUTHORIZED DEALERS AND MONEY CHANGERS Bangladesh Bank issues licenses normally to scheduled banks to deal in foreign exchange if it is satisfied that the bank applying for this license has adequate manpower trained in foreign exchange, there is prospect to attract reasonable volume of foreign exchange business in the desired location and the applicant bank carefully complies with the instructions of the Bangladesh Bank especially with regard to submission of periodical returns. Bangladesh Bank may issue general licenses or licenses with authority to perform limited functions only. Licenses with limited scope are also issued to persons or firms to exchange foreign currency notes, coins and travelers' cheques in places where money-changing facilities are required. The authorizations are granted to persons or firms of adequate means and status who, in the opinion of the Bangladesh Bank, will be able to conduct their dealings strictly in accordance with the Foreign Exchange Regulations. Applications for the grant of AD licenses should be made to the General Manager, Foreign Exchange Policy Department, Bangladesh. Bank, Head Office, Dhaka. Applications for the grant of licenses to act as Authorized Money Changers should be made to the Foreign Exchange Policy Department of the area where the applicant's business is located. The applications should contain full particulars as regards the main business Page # 25
conducted by the applicant, the location of the business premises, the names and addresses of the applicant's bankers. The application should be routed through the applicant's banker who should furnish a report on the financial status of the applicant.
4.6. BANGLADESH BANK'S TRANSACTIONS WITH ADS Bangladesh Bank's purchases and sales from and to the ADs are in US Dollar only, on spot basis. All such transactions with Bangladesh Bank are required to be in multiples of US$ 10,000, subject to a minimum of US$ 50,000. ADs are free to quote their own rates, ready and forward, for transactions in the inter bank market and with their customers. The Central Banks of Bangladesh, India, Iran, Nepal, Pakistan, Sri Lanka, Bhutan and Myanmar have an Agreement to settle current transactions between these countries through the Asian Clearing Union (ACU) mechanism. All such payments to the ACU member countries excepting those covered by loan/ credit agreements are accordingly settled through the ACU mechanism in Asian Monetary Unit (AMU), also called ACU dollar which is defined as equivalent to the US dollar. The ACU Agreement referred to above provides for settlement of the following types of payments: Payments from residents in the territory of one participating country to residents in the territory of another participating country. Payments permitted by the country in which the payer resides. ADs shall maintain Nostro accounts in ACU dollars with their correspondent banks in ACU member countries for the purpose of settlements through ACU. Similarly ACU dollar accounts may be opened by the ADs in their books in the names of their correspondents in ACU member countries. An AD needing to fund its ACU dollar Nostro account with a correspondent bank in an ACU member country shall do so through Bangladesh Bank against surrender of the required amount in US dollar, or of equivalent Taka at Bangladesh Bank's selling rate. Bangladesh Bank will advise the central bank of the concerned ACU member country to make the amount available to the transferee bank in that country. After making the payment, the central bank of the recipient ACU member country shall advise the GM of the ACU secretariat to credit its account by debit to Bangladesh Bank's account.
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Bangladesh Bank on receipt of the advice, shall make the fund available to the recipient AD and shall advise the GM of the ACU secretariat to credit its account by debit to the account of the central bank of the transferor ACU member country. Bangladesh Bank operates a foreign currency clearing system enabling the AD banks to settle their mutual claims in US dollar, Pound Sterling, Euro and Japanese Yen arising from inter bank transactions; to economize the time and cost involved in settlements through correspondents abroad. The Bangladesh Bank charges interest on the debit balance in an account on daily product basis and debit the bank's account at the end of each month and pays interest on the amount of credit balance at the rates prescribed from time to time. Operation of the clearing system is centralized in the International Department of Bangladesh Bank, Head Office, Dhaka; but the ADs in other centers may transfer funds to other banks through their head/main office in Dhaka 4.7 FORWARD DEALINGS IN FOREIGN EXCHANGE ADs, on their own, are free to buy and sell foreign currencies forward in accordance with tile internationally established practices however, in all cases the ADs must ensure that the cover is intended to neutralize the risks arising from definite and genuine transactions. Be it forward sale or purchase, ADs must cover their own risk within die shortest possible time.
All forward contracts should be treated as firm and should be closed out on expiry. In such cases the ADs should charge the difference between the contracted rate and the TT clean spot buying or TT spot selling rate, as the case may be, ruling on the date the contract is closed out. The forward contract should be closed without charging any difference if the rate moves in favor of the customer on the date of the closure. Similarly, no difference should be charged for closing out a forward sale contract if the TT clean spot buying rate on the date of closure is at par or higher than the booked rate. No forward contract should be renewed at the old rate. All cases of renewal should be treated as new contracts and the rates as applicable for purchase-sale of forward contracts on the date of renewal should be applied. The ADs may undertake swap transactions to cover their risks arising from forward transactions. However, they are advised to refrain from taking speculative positions
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through swap transactions. All documents (copy of LC, contracts etc.) relating to forward contracts and Swap transactions must be, preserved for subsequent inspection by the Bangladesh Bank.
4.8. OUTWARD REMITTANCES Most outward remittances are approved by the ADs, on behalf of the Bangladesh Bank following declaration of Taka as convertible for current accounts payments from March, 1994. Only a few remittances of special nature require Bangladesh Bank's prior approval. All remittances from Bangladesh to a foreign country or local currency credited to on resident Taka accounts of foreign banks or convertible Taka account constitutes outward remittances of foreign exchange. ADs must exercise greatest caution to ensure that foreign currencies remitted or released by them are used only for the purposes for which they are released; they should also maintain proper records for submission of returns to Bangladesh Bank as also for the letters inspection from time to time. In all cases of purchase of foreign currency an application must be made to an AD and, wherever necessary to Bangladesh Bank. For payments against imports into Bangladesh, the prescribed application form is form IMP) and for other types of remittances forms TM form must be used for reporting by the ADs even when remittance is approved by Bangladesh Bank in any other manner, for instance by issuing a special permit. On receipt of the application in the prescribed form, the ADs may affect the sale of foreign exchange if they are empowered to approve the application. If the transaction requires prior approval of the Bangladesh Bank, the form should be forwarded by the AD to the Bangladesh Bank for consideration. Applications for Bangladesh Bank's prior approval for outward remittances, wherever required, should be submitted to Bangladesh Bank only through the ADs and not by their customers directly; all such applications should be forwarded by the ADs to Bangladesh Bank by their own messengers or by post It is most important that, once forms have been approved by or on behalf of the Bangladesh Bank, the ADs carry out the transactions only on behalf of the original applicants for whom the forms were approved Permits issued (where applicable) by the Bangladesh Bank must be utilized within the period of its validity indicated in the permits. The amount released must not exceed the Authorized limit. Also, the instructions, if any, given in the permits with regard to the amounts to be released periodically e.g. monthly or quarterly must be strictly adhered. Remittances made against permits or approval letters of Bangladesh Bank should be reported on TM form. The AD must state on the TM form the number of the permit against which the remittance has been made by him and must certify that the remittance has been endorsed by him on the permit. The remittance must be endorsed on the back of the permit giving the date of the remittance under the stamp and signature of the AD. When the permit is exhausted or no
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longer required, it should be returned to the Bangladesh Bank by the AD along with the TM form on which the last remittance is reported. All authorizations excepting TM forms approved by the Bangladesh Bank or by the ADs on behalf of the Bangladesh Bank remain valid for a period not exceeding 30 days from the date of approval unless they are expressly stated as valid for a specified longer period or unless they have been revalidated for a further period. TM form approved by the Bangladesh Bank will, however, remain valid for a period of three calendar months from the date of approval by the Bangladesh Bank. Permits issued by the Bangladesh Bank are also valid for specified periods as stated on the permits. The ADs should not affect any remittance against approved Forms or Permits, which have lapsed unless they have been duly revalidated. Original copies of all IMP forms, TM forms covering remittances affected by the ADs must be submitted to the Bangladesh Bank along with the appropriate Returns. In the event of any remittance, which has already been reported to the Bangladesh Bank on the prescribed return being subsequently cancelled either in full or in part, the ADs must report the cancellation of the outward remittance as an inward remittance. A letter giving the following particulars should support the return in which the reversal of the transaction is reported The date of the return in which the outward remittance was reported. The name and address of the applicant. The amount of the sale effected originally. The amount cancelled. Reasons for cancellation.
4.9. INWARD REMITTANCES The term "Inward Remittances" includes not only remittance by T.T., M.T., Drafts etc., but also purchases of bills, purchases of drafts under Travelers' Letters of Credit and purchases of Travelers' Cheques. The ADs may freely purchase foreign currencies or raise debits to non-resident Taka Accounts of the respective bank branches and correspondents. Remittances equivalent to US$ 2000 and above should be reported oil. Form C attached to the appropriate schedule. However, declaration on Form C by the beneficiary is not required against remittances sent by Bangladesh nationals working abroad. The purpose of remittances should be clearly stated on the Form C. Where the country of origin of funds and currency in which remittances received are the same, the ADs may submit a consolidated Form C in respect of those remittances attaching therewith a separate list showing details of remittances comprising the amount reported on Form. C. Remittances received against Page # 29
exports should be certified and reported on EXP Forms. In case of remittance received in advance for exports the AD should obtain a signed declaration from the beneficiary on the back of the "Advance Receipt Voucher" certifying the purpose of remittance. There is no objection to the ADs obtaining reimbursement from non-resident banks in freely convertible foreign currency in respect of Taka bills and drafts purchased by them under instructions from. Such a non-resident bank whether under Letters of Credit or under other arrangements. If an inward remittance already reported to the Bangladesh Bank is cancelled, either in full or in part, because of non-availability of beneficiary, the ADs must report the cancellation of the inward remittance as an outward remittance on TM form. The return in which the reversal of the transaction is reported should be supported by a letter giving the Reference of the return in which the inward remittance was reported. Name and address of the beneficiary Amount and the reason for cancellation and Amount of the purchase as affected originally.
4.10. CONVERTIBLE AND NON-CONVERTIBLE TAKA ACCOUNTS ADs may open convertible Taka accounts in the names of foreign organizations/ nationals viz,, diplomatic missions, UN organizations, non-profit international bodies, foreign contractors and consultants engaged for specific projects under the Govt. semi Govt. agencies and the expatriate employees of such missions/organizations who are resident in Bangladesh. These accounts may be credited with foreign currency brought in or remitted from abroad or transferred from a foreign currency account or another convertible Taka account. For transfer from another convertible Taka account, the Taka amount from the transferor's account would be converted into foreign currency for transfer and credit to the recipient account by recon version into Taka. No money emanating from a business originating in Bangladesh and otherwise reparable to Bangladesh can be credited to these accounts. A convertible Taka account may be debited for payments in foreign currency abroad, for local expenses, for transfers to foreign currency accounts or other convertible Taka accounts or for credits to a non-convertible Taka account. The ADs may open Taka STD (7-30 days special notice) accounts in the names of foreign diplomatic missions and their expatriate personnel, foreign airlines and shipping lines operating in Bangladesh, international non-profit organizations including charitable organizations, UN organizations and their respective expatriate personnel and pay interest thereon provided that the amount of interest accrued on balances of these accounts will be
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disbursed locally in non-convertible Taka and that no part of the earned interest will be remittable abroad at any stage. 4.11. FOREIGN INVESTMENT AND OPERATION IN SECURITIES
1. FOREIGN INVESTMENT;
Foreign Investors are free to make investment in Bangladesh in the industrial enterprises excepting a few reserved sectors. An industrial venture may be set up in collaboration with local investors or may even be wholly owned by the foreign investors.Prior permission of the Bangladesh Bank is not required for issue and transfer of shares in favor of non-residents against foreign investment in Bangladesh; general permission is accorded in this behalf subject to the following conditions: The industrial venture will have secured permission from the Board of Investment (BOI)/ Controller of Capital Issues, under the Capital Issues (Continuance of Control) Act 1947, about its capital issue. To avail of the facilities and institutional support provided by the Government. entrepreneurs/sponsors may secure registration with the Board of Investment. Before issue of shares against foreign investment in freely convertible foreign exchange brought in from abroad through the banking channel, the funds thus brought in should be encashed to Taka with an AD; Before issue of shares against foreign investment in the form of capital machinery, the machinery will have to be cleared from the Bangladesh customs authorities at the port of entry; Foreign Investment and Inspection Department, Bangladesh Bank, head office should be informed about the issue and transfer of shares to non-residents pursuant to (a),(b) & (c) above, within 14 days of such issue/ transfer, along with the following documents/papers:
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(i) (ii)
Attested copy of registration, if any, of the foreign investment in the industrial ventures accorded by the BOI; Attested copy of the permission for the capital issue accorded by the BOI/Controller of Capital Issues:
(iii) Original certificate of encashment of foreign exchange in Taka in case of issue of shares against foreign exchange received from abroad through the banking channel; and (iv) For issue of shares against foreign. investment in the form of capital machinery, the exchange control copy of bill of entry evidencing clearance of the capital machinery from the Custom Authorities, copies of the relative import permit, invoice and bill of lading. Transfer of Bangladeshi shares and securities from one Transfer of non-resident holder to another non-resident would not require prior Bangladesh Bank approval. Non-resident persons/institutions including non-resident Bangladesh nationals may buy Bangladeshi shares and securities in Bangladesh against freely convertible foreign currency remitted from abroad through the banking channel. Transactions relating to such investments including repatriation of dividend/ interest earnings and sale proceeds shall be made through a Non-resident Investor's Taka Account (NITA) according to the following procedure (i) The non-resident investor shall open a NITA with any AD in Bangladesh, with freely convertible foreign currency remitted from abroad through normal banking channel. (ii) Balances in the NITA may freely be used to buy Bangladeshi shares/securities. (iii) The AD must ensure that the NITA is debited or credited for purchase or sell of shares at the prices prevailing in the stock market on the day of the relative purchase/sale.
(iv)Relevant instructions contained in The Securities and Exchange Commission (SEC) Notifications regarding placements, allotments and issuance of right shares are to be carefully complied with.
Incidental expenses related to sales and purchases of shares/ securities and to operation of the accounts may be debited to VITA. After the non-resident investor has purchased the shares/securities, the related
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certificates/scripts can be deposited /kept with any person/organization nominated by the investor. The investor can as well take them outside the country, if he so desires. In addition to the routine reporting regarding inward and outward remittance to and from the NITAs in the usual monthly returns, the ADs will famish quarterly statements of transactions in the NITAs, as per prescribed proforma, to the Foreign Investment and Inspection Department, Bangladesh Bank, head office, Dhaka. The ADs will also submit with the quarterly statements their own certificates/ certificates from the auditors of the concerned companies regarding payment! Withholding or exemption of taxes payable on the capital gains and on dividend/ interest earnings of the non-resident holders, as applicable. 2. OPERATIONS IN SECURITIES Section 2 of the FER Act defines "security" as shares, stocks, bonds, debentures, debenture stock and Government securities, deposit receipts in respect of securities and units or subunits of unit trusts. A "foreign security" is defined as a security issued elsewhere than in Bangladesh and any security the principal of or interest on which is payable in any foreign currency or elsewhere than in Bangladesh. Security" also includes coupons or warrants representing dividends or interest and life or endowment insurance policies. There is no restriction under the FER Act on the import of securities into Bangladesh. No securities can however be exported or taken out of Bangladesh without general or special permission of the Bangladesh Bank. Residents in Bangladesh who are holders of foreign securities and who wish to send the securities to banks, brokers or agents abroad for the purpose of sale, transfer etc. should apply to the Bangladesh Bank through an AD for necessary export permit. Bangladesh Bank is also prepared to consider applications for the exchange of foreign shares and/or securities held by residents of Bangladesh with Bangladesh shares and/or securities held by residents abroad. Applications for this Purpose should be made through an AD or Stock and Share Broker. Such applications would be considered favorably provided the Bangladeshi shares/ securities desired to be imported from abroad are approximately of the same market value as foreign shares and/or securities that are desired to be exported. Person resident in Bangladesh who are or become owners of foreign securities are permitted to hold or retain such securities provided they have acquired them in a manner not involving a breach or violation of the foreign exchange Page # 33
regulations. Holders of foreign securities who wish to sell, transfer or otherwise dispose of or deal in securities must, however, ensure that the proposed transactions do not contravene the provisions of the FER Act and the orders issued by the Government of Bangladesh and/or the Bangladesh Bank there under and must obtain prior permission of the Bangladesh Bank wherever necessary. Under the existing foreign exchange regulations all persons resident in Bangladesh who are or become the owners of any security in respect of which the principal, interest or dividend is or are payable in the currency of any foreign country or in respect of which the owner has the option to acquire the payment of principal, interest or dividend in such currencies, are required to submit a return to tile Bangladesh Bank within one month of their acquiring the securities giving certain particulars in respect of the said securities.
4.12. SOME FOREIGN EXCHANGE RELATED TERMS Foreign exchange is the part of foreign trade. Its a procedure to convert foreign currency to foreign currency and also foreign currency to home currency. Foreign trade is a procedure to convert the home currency to foreign currency and foreign currency to oreign currency and also make arrangement to import and export business as per requirement of the client/customer. Foreign Currency means any currency other than Bangladesh Currency. Currency includes all coins, currency notes, bank notes postal notes, money orders, cheques, drafts, traveler's cheques, letter of credit, bill of exchange and promissory notes. 5.13. SOME DEFINITIONS OF FOREIGN EXCHANGE Foreign exchange means foreign currency and includes all deposits, credits and balance of payable in foreign currency as well as Draft, Traveler's cheques, Letter of credit, Bills of Exchange drawn in local currency but payable in foreign currency. - Foreign Exchange Regulation Act, 47, Sec 2 (a) Foreign exchange means foreign currency and includes any instrument drawn, accepted, made or issued under clause 13 of section 16 of the Bangladesh bank Order, 1972 all deposits and credits and balances, Travelers cheques, Letter of credit and bills of exchange, expressed or drawn in Bangladesh currency but payable in any foreign Page # 34
currency. - Bangladesh bank order 1972. Foreign exchange in common usage means foreign currency. But in fact foreign exchange means not the foreign currency but the rate of exchange. The necessity for conversion of the currency into another arise for international transactions: - G.H Khan
The mechanism through which payments are effected between two countries having different currency systems is termed as foreign exchange. It is related with the exchange method & mechanism through which the payments in connection with international trade are transacted. -A Banking Expert. Denote the means of payment in which currencies are converted into each other and with which international transfers are made the activity of transacting business in such means. - A Banking Expert. It is the means and methods which rights to wealth convert into expressed interns of the currency of one country right to wealth inters of the currency of the currency of another country. - Prof.H.E.Evitt.
System or process of converting one national currency into another and of transferring money from one country into another. -Dr. Paul. Einzig.
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CHAPTER- V FOREIGN EXCHANGE OPERATION OF EXIM BANK 5.1 Introduction 5.2 Letter Of Credit (L/C) 5.2.1 Different Types of L/C Provide By EXIM Bank 5.2.2 Document Require for Opening L/C 5.2.3 Discrepancy & Indemnity Mechanism of L/C 5.3.1 Process of L/C 5.3.2 Parties Involved in L/C Foreign Exchange Operation of EXIM Bank 5.4.1. Import Section 5.4.1.1 Import Registration Certificate 5.4.1.2 Function Of Import Section. 1. Form - IMP 2. Import Procedures 3. Import mechanism 4. Proposal for opening of L/C 5. L/C application 6. Letter of credit authorization (LCA) form 7. Securitization of L/C application 8. Accounting treatment in case of L/C opening 9. Amendment of L/C 10. Presentation of the documents
5.3 5.4
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11. Examination documents 12. Retirement of shipping documents 13. Payment procedure of the import document 5.4.2 Export Section 5.4.2.1 Export Registration Certificate 5.4.2.2Function Of Import Section 1. Exp. Form 2. Disposal of Exp. Form 3. Export Procedure 4. Back-to-Back L/C 5. Reporting of Bangladesh Bank 6. Documentation for Export Purpose 7. Procedure of Collection of Bills 8. Local Documentary Bill for Purchase 9. Secured Over Draft (SOD) Export 10. Packing Credit 5.1. INTRODUCTION Foreign exchange department deals with foreign currency and the transaction of it. The major job of this department is listed below: 1. Letter of Credit (for Export and Import) 2. Dollar/Traveler's Cheque (TC) Endorsement 3. Foreign Remittance 4. Foreign Currency Account 1) LETTER OF CREDIT (LC): In case of any foreign trade requirement L/C is a must. As we know, there is no guaranteed relationship between import and export. As a result, they use a media to secure their goods and currency. So. Exporter and Importer use their respective bank as a media and L/C is a legal obligation between Exporter and Importer. In case of a single L/C, it is necessary to prepare six credit vouchers and one debit voucher. After preparing those vouchers it should be sent to the computer section for computer entry. 2) DOLLAR AND TRAVELER'S CHEQUE ENDORSEMENT: EXIM is a Authorized Dealer of American Express T/C. At the same time, they can buy and sell T/C and dollar. Every morning they get a telex from Head Office, Which carries the rate of the foreign currency transaction of the day. EXIM fix the rate by them. At the end of the each month the branch uses to submit all supportive documents (all foreign transactions documents and balance of the foreign currency) to the Bangladesh. Page # 37
Bank and their Head Office. 3) FOREIGN REMITTANCE: Foreign DD and paving or receiving any bill from foreign country is known as foreign remittance. The amount of foreign remittance is very significant in EXIM, Mirpur Branch. 4) FOREIGN CURRENCY ACCOUNT: A Foreigner, a Wage Earner working in foreign country can open this account, but it is possible to open a foreign currency (Dollar) account in Mirpur branch. The account holder gets a cheque book against the account and has to mention the amount in respective currency.
5.2. LETTER OF CREDIT (L/C) Foreign trade financing is an integral part of banking business. Letter of credit is the key player in the foreign exchange business. The import section deals with 1/c in the perspective of the exporters. In case of import, the importers are asked by the exporters to open letter of Credits so that their payment against goods is ensured. Types of Letter of Credit: The Letter of credit can be either revocable or irrevocably. It needs to be clearly indicated whether the L/C is Revocable or Irrevocable. In the absence of any indication, it will be deemed to be a Revocable Letter of Credit (UCPDC 1993 Revision, ICC No. 500). Revocable LIC: A Revocable Letter of Credit is one which can be Amended or cancelled by the Issuing Bank at any moment without prior notice to the beneficiary. So, this is clear that revocable Credit can be revoked any time without prior notice. Irrevocable L/C: An Irrevocable credit is one, which cannot be cancelled or amended any time without the consent of each party. Through this L/C, the issuing Bank gives a definite, absolute and irrevocable undertaking to honor its obligations, provided the beneficiary complies with all the terms and conditions of the Page # 38
credit. 5.2.1 Different Types of Letter of Credit provided by EXIM Bank Back to Back L/C Back-to-Back L/C is defined as a credit, which is opened at the instructions and the request of the Beneficiary of the original Export L/C on the strength credit. Back to Back is a term given to an ancillary credit, which arises where the seller's uses the credit, granted to him by the Issuing Bank to his supplier. Sometimes Back-to-Back credit is called Counter Veiling Credits, i.e. credit and counter credit. There are two types of Back-to-Back credit: Foreign Back to Back Credit Local Back to Back Credit
Revolving L/C A revolving credit is a credit, which provides for the amount of the credit to be renewed automatically after use without the need to renew the credit every time. It can be revolved with respect to either: Time Amount (i.e. total value of the credit) Transferable L/C A transferable credit is a credit, which can be transferred in whole or part by the original beneficiary to one or more "Second beneficiaries". It is normally used when the lst beneficiary does not supply the goods himself, but acts as an intermediary between the supplier and the ultimate buyer. 5.2.2 Document require for Opening L/C: L/C Application and agreement from duly filed and signed by proposed importer. Exchange control copy of L/C Authorization Form. Indent or Proforma invoice (one kind of price list describing the details on the items wanted to import. Insurance cover note with premium paid receipt.
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Offering Sheet. L/C opening sheet. L/C Forms (in set). L/C Amendment Form (in set). L/C Forwarding Form. IMP Form (set in quadruplicate). Liability Voucher. Voucher for L/C Advising Charge & Realizing of margin. 5.2.3 Discrepancy & Indemnity After the shipment of goods, the Exporter submits the Export documents to Authorized Dealer for Negotiation of the same. Here Authorized Dealer is Exporters Bank. The Banker is to ascertain that the documents are strictly as per the terms of L/C. Before negotiation of Export Bill, the Banker should scrutinize and examine each and every document with great care and must be go through the Original L/C. In the time of scrutiny, and kind of lacking can be found by the Banker. This is called Discrepancy. The Discrepancy may be classified as major or minor. There are may be some Discrepancies which are removable. If the Discrepancies are removable, the Exporters are to be advised and the Discrepancies are to be moved. If the Discrepancies are minor, the Export bills against submission of indemnity. Documents with Discrepancies should be negotiated. With the permission of the Exporters, such documents are to be sent on collection. 5.3.1 The Letter of Credit (L/C) Process The various steps involved in the operation of a letter of credit are described as follows. Please refer to Figure below for an elaborate illustration. 1. The importer and exporter have made a contract before a L/C has been issued. 2. The importer applies for a L/C from his banker known as the issuing bank. He may have to use his credit lines. 3. The issuing bank opens the L/C that is channeled through its overseas correspondent bank, known as the advising bank. 4. The advising bank informs the exporter (beneficiary) of the arrival of the L/C. 5. Exporter ships the goods to the importer or other designated place as stipulated in the L/C. Page # 40
6. Meanwhile, the exporter also prepares his own documents & collects transport documents or other documents from relevant parties. All these documents will be sent to his banker, which is acting as the negotiating bank. 7. Negotiation of export bills happens when the banker agrees to provide him with finance. In such case, he obtains payment immediately upon presentation of documents. If not, the documents will be sent to the issuing bank for payment or on an approval basis as in the next step. 8. Documents are sent to the issuing bank (or reimbursing bank, which is a bank nominated by the issuing bank to honor reimbursement from negotiating bank) for reimbursement or payment. 9. Issuing bank honors it's undertaking to pay the negotiating bank on condition that the documents comply with the L/C terms and conditions. 10. Issuing bank releases documents to the importer when the latter makes payment to the former or against the tatter's trust receipt facility. 11. The importer takes delivery of goods upon presentation. of the transport (usually shipping) documents.
5.3.2 Parties Involved in Letter Of Credit (L/C) : The Applicant The applicant is the party who approaches a bank in order to issue the L/C. Generally, the applicant is an importer who reaches an agreement with the exporter before approaching the bank to issue the L/C. The applicant is also normally obligated to reimburse the issuing bank for any payments made under the LIC. The Issuing Bank The bank issuing the LIC is known, as the issuing bank and it is usually the bank with which the importer maintains an account. The issuing bank undertakes an absolute obligation to pay upon presentation of documents drawn in strict conformity with the terms and conditions of the LIC. The Advising Bank The correspondent bank in the beneficiary's country to which the issuing bank sends the L/C is commonly referred to as the advising bank. The advising bank simply advises the L/C without any obligation on its part. However, the advising bank shall take reasonable care to check the apparent authenticity of the credit that it advises. The Beneficiary: The beneficiary or exporter is the party entitled to draw payment under the L/C. The beneficiary will have to present the required documents to avail payment under Page # 41
the L/C. The Confirming Bank: The confirming bank confirms that the issuing bank has issued a L/C. The confirming bank becomes directly obligated on the credit to the extent of its confirmation and by confirming, it acquires the rights and obligations of an issuer. The advising bank usually does L/C confirmation or a third bank in the beneficiarys located. The Negotiating Bank: The bank that agrees to examine the documents under the L/C and pay the beneficiary is called the negotiating bank. Typically, the advising bank is nominated as the negotiating bank. Reimbursing Bank: The bank nominated by the issuing bank to provide reimbursement to the negotiating bank or the payee bank is referred to as the reimbursing bank.
5.4. FOREIGN EXCHANGE OPERATION In EXIM bank limited foreign exchange is divided in to two parts according to the major activities: Import oriented foreign exchange activities. Export oriented foreign exchange activities. 5.4.1. IMPORT SECTION Import and Export (control) Act 1950 regulate the Import and Export trade of the country. There are a number of formalities, which on Importer has to fulfill before import goods. These formalities are explained bellow -
5.4.1.1 Import Registration Certificate (IRC) The first thing one need to carry on a business of impart is called Import Registration Certificate. But registration is not required for import goods, which do not involved remittance of foreign exchange like medicine; reading materials etc. can be imported without registration by the users within monetary limit. Documents to be required for Import Registration Certificate are as follows -
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Income Registration Certificate Nationality Certificate Certificate from Chambers of Commerce and Industry Registered Trade Association Bank Solvency Certificate Copy of Trade License Requisite fees On receiving application, the respective CCI&E officer will scrutinize the documents and conduct physical verification and issue demand note to the prospective importers to furnish the following papers through their nominated Bank Original copy of treasury deposited as IRC fees Assets Certificate Affidavit from 1st class Magistrate Rent receipt Two passport size photograph Partnership deed in case of partnership firms Certificate of Registration, Memorandum and Articles of Association in case of Limited Company.
After scrutinizing and verifying, the nominated Bank will forward the same to the respective CCI&E office with forwarding schedule in duplicate through Banks representative. CCI&E then issue Import Registration Certificate to the Applicant. 5.4.1.2. FUNCTION OF IMPORT SECTION 1. IMP -FORM: The form IMP contains the followings Name and address of the Authorized dealers. Amount of remittance to be permitted (i.e. L/C amount) LCA form no. Date and value in Taka. Description of goods. Invoice value in foreign currency, (i.e. L/C amount) Country of origin. Port of shipment. Name of steamer / Airline (i.e. By road/ship/air) Port of importation.
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Indenter's name and address. Indenter's registration number with CCI & E and Bangladesh Bank. Full name and address of the applicant. Registration number of the applicant with CCI & E. Type of LOAF.
2. IMPORT PROCEDURES: The procedures, which follows at the time of Import are as, follow The buyer and the seller conclude a sale contract provided for payment by documentary credit. The buyer instructs his Bank (the issuing Bank) to issue a credit in favor of the seller / Exporter / Beneficiary. The Issuing Bank then send messages to another Bank (Advising Bank / Confirming Bank), usually situated in the country of seller, advice or confirm the Credit Issue. The Advising / confirming Bank then informs the seller through his Bank that the Credit has been issued. As soon as the seller receives the credit, if the credit satisfy him the he can reply that, he can meet its terms and conditions, he is in position to load the goods and dispatch them. The seller then sends the documents evidencing the shipment to the Bank where the Credit is available (nominated Bank). This can be the issuing Bank or Confirming Bank; Bank named in the Credit as the paying, accepting and Negotiating Bank. The Bank then checks the documents against the credit. If the documents meet the requirements of the credit, the Bank then pay, accept or negotiate according to the terms of credit. In the case of credit available by negotiation, Issuing Bank will negotiate with recourse. The Bank, if other then the issuing bank, sends the documents to the issuing Bank. The issuing Bank checks the document and if they found that the document has meet the credit requirements, they realize to the buyer upon payment of the amount due or other terms agreed between him and the issuing Bank. The buyer sends transport documents to the carrier who will then proceed to deliver the goods. An importer is required to have the followings to import Page # 44
through the bank A bank account in the bank. Import Registration certificate. Tax paying identification number. Performa invoice indent Membership certificate LCA (Letter of credit application) form duly attested. One set of IMP form. Insurance cover note with money receipts. Others.
3. IMPORT MECHANISMS To import, a person should be competent to be an importer. According to import and export control act, 1950, the officer of the chief controller of import and export provides the registration (IRC) to the importer. After obtaining this, this person 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. 4. PROPOSAL FOR OPENING OF L/C In case of an L/C of a small amount only the prescribed application form i.e. the LCA (Letter of credit application) form is enough to open an L/C. but when the L/C amount is reasonably high, then the importer is asked to submit a proposal to the bank authority to have a limit of L/C amount. This proposal should be approved in the meeting of the executive committee of the bank. The sufficient features of a proposal are Full particulars of bank account. Nature of business. Required amount of limit. Payment terms and conditions. Goods to be imported. Offered security. Repayment schedule. A credit officer scrutinizes this application and accordingly prepares a proposal (CLP) and forward it to the Head office Credit Committee (HOCC). The committee, if satisfied, sanctions the limits and returns back to the branch. Thus the importer is entitled for the limit.
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5. L/C APPLICATION BDI provides a printed form for opening of L/C to the importer. This form known as credit application form. A special adhesive stamp is affixed on the form. While opening, the stamp is cancelled. Usually the importer expresses his desire to open the L/C quoting the amount of margin percentage. The importer gives the following information Full name and address of the importer
A Full name and address of the beneficiary Availability of the credit by sight payment acceptance! negotiation/ differed Payment Time bar within which the document should be presented Sales type (Cff/FOB/C&F) Brief specification of commodities, price, and quantity, in Country of origin Bangladesh Bank registration No. Import license/ LCAF No. IRC No. Account No. Documents required Insurance cover note/policy No., date, amount. Name and address of the insurance co. Weather the partial shipment is allowed or not. Weather the Trans shipment is allowed or not. Last date of shipment. A Last date of negotiation Other terms and condition if any.
6. LETTER OF CREDIT AUTHORIZATION (LCA) FORM The LCA form contains the followings Name and the address of the importer. IRC No. And year of renewal. Amount of L/C applied for. Description of items/to is imported. ITC number (s)/HS code. Stamp and signature of the importer with seal. Page # 46
7 . SCRUTINIZATION OF L/C APPLICATION The bank officials scrutinizes the application in the following manners The terms and condition of the L/C must be complied with UCPDC 500 and Exchange control & import trade regulation. Eligibility of goods to be imported. The L/C must not be opened in favor of the importer. Radioactivity report in case of food item. Survey reports or certificate in case of machinery. Carrying vessel is not of Israel or Serbia- Montenegro. Certificate declaring that the item is in operation not more than 5 years in case of car.
On scrutiny, if the application is found fit then the L/C is opened and particulars of the same are recorded in the L/C register. Then the transmission of L/C is done through tested Telex or Fax to advise the L/C to beneficiary. If the amount exceeds US$ 10,000 the bank takes the credit report of the beneficiary (CIB report) to ensure the worthiness of the supplying goods 8. ACCOUNTING TREATMENT IN CASE OF L/C OPENING Now if the respective officer thinks that the application is fit to open an L/C, the following accounting treatment are given Client's Account ----------------------------------------------------Dr. Margin on L/C Cr Commission on L/C Cr. VAT (15% of Commission) Cr. F.C.C (Foreign currency clearing) Cr. Registration fee Cr. Telex /postage charge Cr. Miscellaneous charges Cr. After that, L/C number and the above entries are given in the L/C register. The contra Entries stating the liability of the bank and the client are as follows Customer's liability------------------------------Dr. Banker, s liability .........Cr The transmission of L/C is done through tested telex/mail/fax/Swift to advise the L/C to the beneficiary.
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9. AMENDMENT OF L/C Parties involved in 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. The 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 incase of irrevocable letter of credit, it neither be amended nor cancelled without the agreement of issuing bank, the confirming bank (if any) and the beneficiary. If the L/C is amended, service charge and telex charge are debited from the party account accordingly. Adding confirmation: Add the confirming bank gives confirmation. An add confirmation letter contains the followings L/C no. L/C amount Items to be imported Name and address of the applicant Name and address of the beneficiary A Tenor Date of shipment Date of apiary Port of loading Port of discharge Charges on which party Name of the advising bank Name of the reimbursing bank Name of the confirming bank 10. PRESENTATION OF THE DOCUMENTS The seller being satisfied with the terms and conditions of the credit proceeds to dispatch the required goods to the buyer and after that has to present the documents evidencing dispatching of goods to the negotiating bank on or before stipulated expiry date of the credit. After receiving all documents, the negotiating bank, then checks the documents against the credit. If the documents are found in order, the bank will pay, accept or negotiate to EXIM bank limited checks the documents. The usual documents are - Invoice Bill of lading
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Certificate of origin Packing list Shipping advice Non negotiable copy of bill of lading Bill of exchange Pre-shipment inspection report. Shipment certificate
11. EXAMINATION DOCUMENTS EXIM Bank officials check weather these documents have any discrepancy or not. Here discrepancy means the dissimilarity of any documents with the terms and conditions of L/C. 12. RETIREMENT OF SHIPPING DOCUMENTS On security if it is found that, the documents drawn are in order EXIM, lodges the documents in PAD and few vouchers are passed,
Retirement of Import Bills Importer will deposit the claim amount Banker will prepare and pass Retirement Vouchers Certifying Invoices Passing of Vouchers Entry in the Register Endorsement in the B/E and transport document i.e. B/L AWB, TR etc. At the end of the total procedure, taking the retirement of Import Bills/Clearing Certificate from the Bank, the Importer will clear the goods from the port through the Clearing Agent and Forwarding Agent. On the other hand, completing the above all steps in the issuing Bank will prepare "Foreign Exchange Transaction Schedule" and send one copy to international division of Head Office and another one copy to recommendation. 13. 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. The task constitute the followings Date of payment- Usually payment is made within seven days after the documents have been received. If the payment is become differed, the negotiating bank may claim interest for making delay.
Page # 49
Preparing sale memo- a sale memo is made at B.C rate to the customer. As the TT & 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. Requisition for foreign currency for a aging necessary fund for payment a requisition is sent to the ID. Transmission of telex- a telex is transmitted to the correspondent bank ensuring the payment is being made.
5.4.2. EXPORT SECTION Literally, the term Export, we mean that carrying of anything from one country to another. On the other hand Banker's define Export as sending of visible things outside the country for dale. Export Trade plays a vital role in the development process of an Economy. With the Export earning, we meet our
5.4.2.1. Export Registration Certificate (ERC) Like any other business it needs Registration. The chief Controller of Import and Export (CCI&E) makes export registration. For Registration, prospective Exporters required to apply through Q.E.X.P from the CCI&E along with the following documents Trade License 50 Income Tax Clearance Nationality Certificate Bank's Solvency Certificate Asset certificate Registered Partnership Deed
5.4.2.2. Function of Export Section 1. EXP. FORM All Export of which the requirements of declaration vide para-l of chapter XXI of Exchange Control Manual of Bangladesh Bank applies must be declared on the EXP forms by the customer, now issued by the Authorized Dealers. (See Appendix). Page # 50
2. DISPOSAL OF EXP. FORMS Original : From Custom Authority to Bangladesh Bank after shipment goods. Duplicate: From Negotiating Bank to Bangladesh Bank after Negotiation. Triplicate :From Negotiating Bank to Bangladesh Bank after realization of the proceeds of the Export Bill. Quadruplicate : Retained by the Negotiating Bank as Office Copy. 3. EXPORT PROCEDURE: A person desirous to export should make application to obtain ERC from CCLNE. Then the person should take step for export purpose into the bank for obtaining EXP form. He must submit following documents Trade license ERC Certificate from concerned Government Organization. After satisfaction on the documents the banker will issue EXP form to the exporter. Now exporter will be getting shipping and other documents from the shipment procedure. Exporter should submit all these documents along with letter of indemnity to his bank for negotiation. 4. BACK TO BACK L/C (BTB L/C): Back to Back L/C Open: It is a secondary letter of credit opened by the advising bank in favour of a domestic/foreign supplier on behalf of the beneficiary original foreign. L/C. As the original letter of credit of bank by import letter, it is called Back-to-Back L/C. The second L/C is opened on the strength of the original L/C for a smaller amount. Back to Back L/C (Foreign); When the B-To-B LIC is opened in a foreign country supplier it is called B-To-B L/C (Foreign). It is generally payable within 120 days at site. Back to Back L/C Export Development Fund (EDF): EDF provided by the ADB to Bangladesh Bank for export promotion of Third-World Country like Bangladesh. When the bank is not in a position to support the amount of B-to-B L/C then they apply for loans to the Bangladesh Bank for B-To-B (EDF). Back to Back L/C (Local): When the Back-to-Back L/C is opened for local purchase of materials, it is called
Page # 51
Back-to-Back L/C (Local). It is generally payable within 90 days at site. Procedures for Back to Back L/C: Exporter should make application for Back to Back LAC Export L/C or Master L/C under is lien Opening of Back to Back L/C Terms and conditions for Back to Back L/C That the customer has credit line facility That L/C is issued as per UCPDC 500 That on the Export L/C a negotiating clause is present That there is no provision for blank endorsement of B/L That payment clause is thereon the L/C issuing bank ensuring payment
Consideration for Back to Back L/C: Whether client can manufacture within time period The un it price of the finished proforma invoice should be considering while allowing margin Consider the expiry date and shipment date Onside inspection whether manufacturing is carried out Payment under Back to Back L/C: Deferred payment is made in case of BTB L/C as 60, 90,120, 180 date of maturity period. Payments will be given after realizing export proceeds from the L/C issuing bank from the abroad.
5. Reporting of Bangladesh Bank: At the end of the every month reporting of Bangladesh Bank is mandatory regarding the whole month export operation, the procedures in this respect is as follows - To fill-up the E-2/P-2 schedule of S-1 category. The whole month import amount, quantity, goods category, country, currency, etc. all are mentioned. Respective IMP forms are attached with the schedule to fill E-3/P-3 for all invisible payment. Original IMP is forwarded to Bangladesh Bank with mentioning invoice value Duplicate IMP is skipped with the bank along with the bill of entry.
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6. DOCUMENTATION FOR EXPORT PURPOSE Following major documents are required for export purpose Commercial invoice Bill of lading EXP. Form Bill of Exchange L/C copy
Packing List Certificate of Origin Quality Control Certificate Weight List Inspection Certificate Other (if required) 7. PROCEDURE FOR COLLECTION OF EXPORT BILL: There are two types of procedures regarding collection of Export Bill Foreign Documentary Bill for Collection (FDBC) Foreign Documentary Bill for Purchase (FDBP) Foreign Documentary Bill For Collection (FDBC): Exporter can collect the bill through negotiating bank on the basis of collection. Exporter in this case, will submit alt the documents to the negotiating bank for collection of bill from importer. The exporter will get money only when the issuing bank gives payment. In this connection bank will scrutinize all the documents as per terms and conditions mentioned in L/C. Accounting Treatment Head Office Account ---------------------------------Dr. Party Account---------------------------------------------Cr. Govt. Tax A/C. (@ 0.25% of invoice value) ---------Cr. Postage Account------------------------------------------Cr. Income Account Profit on Exchange-------------------Cr. Entry given twice in this register.
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When document is forwarded to the issuing bank When proceeds realized Foreign Documentary Bill For Purchase (FDBP): When exporter sale all the export documents to the negotiating bank is known as FDBP. In this case, the exporter will submit all the documents to the bank. The bank gives 60-80% amount to the exporter against total L/C value.
Accounting Treatment: Before realization of proceeds: FDBP Account-------------Dr. Party Account ------------------Cr.
Adjustment after realization of proceeds: Head Office Account -----Dr. FDBP Account-----------------Cr
8. LOCAL DOCUMENTARY BILL FOR PURCHASE (LDBP): Incoming of L/C customer come with the L/C to negotiate. 1 Documents given with L/C Scrutinizing documents as per L/C terms and conditions Forward the documents to L/C opening bank L/C issuing bank give acceptance and forward acceptance letter Payment given to the party by collection basis or by purchasing documents
Accounting Treatment: LDBP Account-------------------------Dr Party Account --------------------------Cr. Commission Account -----------------Cr. Interest Account ------------------------Cr 9. SECURED OVERDRAFT (SOD) EXPORT: Secured Overdraft is one kind of credit facility enjoying by the exporter from the export section. It is generally given to meet the back-to-back LIC claim. Sometimes it is given to the exporter by force for meet the back-to-back LIC claim due to delay of Master L/C payment. 10. PACKING CREDIT (PC): It is one kind of credit sanctioned by the export department to meet the exported goods shipment timely. The bank will give the facility after deduction of back-to-back L/C
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value from total L/C value
CHAPTER- V I ANALYSIS & FINDINGS 6.1 Performance at a Glance of EXIM. Bank 6.2 Performance of EXIM Bank 1. Deposit 2. Capital and Reserve fund 3. Investment 4. Advance 5. Foreign Exchange Business 6. Dividend 6.3 Special Features of the Bank
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6.1. PERFORMANCE AT A GLANCE EXIM BANK Amount in Taka Particulars 2005 2004 Authorized Capital 1,000,000,000 1,000,000,000 Issued, Subscribed & Paid-up Capital 878,850,000 627,750,000 Net Investment Income 639,544,675 394,772,275 Total Operating, Income. 1,611,569,217 1,211,371,153 Total Operating Expenses 435,806,139 375,563,740 Profit before Provision 1,175,763,078 835,807,413 Total Provision 32,545,636 121,237,758 Profit before Tax 1,063,298,640 645,638,202 Profit after Tax 555,335,174 381,798,1463 Investments (Govt. Securities) 1,500,480,300 1,500,689,600 Investments (Other Securities) 132,551,279 42,295,814 Import Business 41,432,100,000 19,058,720,000 Export Business 31,285,370,000 22,418,400,000 Loans & Advances 26,046,341,111 19,332,436,072 Fixed Assets 1669,979,206 150,822,688 Total Assets 33,716,699,328 24,355,751,451 Deposits 28,319,212,367 19,078,175,789 Total Liabilities 31,804,277,414 22,955,746,711 Shareholder's Equity 1,912,421,914 1,400,004,740 Annual Report of EXIM Bank Key Performance Indicators Particulars 2005 2004 2003 2002 Net Interest Margin (NIM) 2.08% 2.67% 2.06% 2.52% Retune on Average Equity (ROAE) 61.69% 66.72% 64.39% 30.58% Retune on Average Assets (ROAA) 3.19% 3.48% 3.96% 2.72%
Key Cost Ratio
Page # 56
Particulars 2005 2004 Efficiency Ratio 34.59% 34.24% Personnel Expense to Average Assets 0.91% 0.99% Operating Expense to Average Assets 1.84% 2.08% Source: Annual Report of EXIM Bank Ltd.
2003 34.73% 1.12% 2.36%
6.2. PERFORMANCE OF EXIM BANK 1. DEPOSIT A strong deposit base is necessary for the success of a Bank. During the year 2005 the Bank mobilized a substantial amount of deposits from mid-level income group people under Deposit Savings Scheme. After critical handling the Bank mobilized total Deposit of Tk.28,319.212 million as at. 31-12-2005, where it was 19,078.18 million as at December 31,2004 which is an increase of 48.44% Particulars 2002 2003 Deposit (Tk. in Million) 9945.23 15242.97 Source: Annual Report of EXIM Bank. Figure-1: Deposit of EXIM Bank. 2004 2005 19,078.18 28,319.212
9945.23 28,319.21 19,078.18 15242.97 2002 2003 2004 2005
2. CAPITAL AND RESERVE FUND Page # 57
The Authorized Capital of the Bank is Tk. 1,000.00 million. Total Shareholders Equity at the end of December 2005 stood at Tk.1,912.42 million. The Capital and Reserve of the Bank as on December 2005 stood at Tk.2179.81 million including paid up capital of Tk.878.85 million. The Bank also made provision on unclassified investment which is amounted to Tk.263.18 million. .
3. INVESTMENT The total investment of the Bank stood at Tk. 26,046.34 million as on 31-12-2005 as against Tk. 19,332.44 million in the previous year showing an increase of Tk.6,713.90 million with growth rate of 34.73%. Investment is the core asset of a Bank. The bank gives emphasis to acquire quality asset and does appropriate lending risk analysis while approving commercial and trade investment to clients.
Particulars 2002 2003 Investment (Tk. In Million) 7954.56 12289.12 Source: Annual Report of EXIM Bank. Figure-2: Investment of EXIM Bank.
2004 19332.44
2005 26046.34
30000 25000 20000 15000 10000 5000 0 2002 2003 2004 7954.56 12289.12 19332.44
26046.34
Investment
2005
Page # 58
4. ADVANCE The Bank's Loans & Advances portfolio also indicates an impressive growth. Total Loans and Advances amounted to Tk. 15654.10 million in 2005 as against Tk. 14234.15 million in 2004 and the growth is 54.49%. This is due to increased commercial and trade financing, term lending and working capital support. The classified loan position is almost nil. This was achieved by rendering due attention and monitoring high-risk advances. As a result, classified advance is amounted to Tk.298.03 million in 2005. The Bank is trying to operate its credit activities with the target of achieving Zero classified loans. The sectors financed include Manufacturing, Trading, construction, Transport, Agriculture, Fishing & Forestry, Edible Oil, Pharmaceutical, Information Technology, and Consumer Credit amongst others.
Particulars 2002 2003 Loans and Advance (Tk. In Million) 7954.56 12289.12 Source: Annual Report of EXIM Bank. Figure-3: Loans & Advances of EXIM Bank.
16000 14000 12000 10000 8000 6000 4000 2000 0 2002 2003 2004 2005 7954.56 12289.12 15654.1
2004 14234.15
2005 15654.10
14234.15
Loans & Advance
Page # 59
5. Dividend The Board of Director of EXIM Bank recommends stocks dividend of 30% per share in the form of Bonus share for the year ended 31st December 2005 subject to approval of the regulatory authorities and the ensuing Annual Genera meeting of the Company Particulars 2002 2003 Cash Dividend (%) 8% 20% Stock Dividend (Bonus Share) 24% 15% Source: Annual Report of EXIM Bank. 2004 15% 15% 2005 5% 30%
Figure-4: Cash & Stock Dividend of EXIM Bank.

30% 25% 20% 15% 10% 5% 0% 2002 2003 2004 8% 5% 2005 24% 20% 15% 15%15% Cash Divident Stock Divident 30%
6. FOREIGN EXCHANGE BUSINESS International Trade constitutes the main stream of business activities of EXIM Bank. It offers a full range of trade financial services namely, Issue, Advise and Confirmation of Documentary credit; arranging forward exchange coverage; Pre-shipment and Postshipment finance; Negotiation and Purchase of Export Bills; discounting bill of Exchange; collection of bills, and outward remittance etc.
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Import Business During the year, the Bank opened 21,555 import letter of credit and the import volume stood at tk.41,432.10 million with a growth of 54.70% in comparison with previous year. Particulars Import Business(Tk. Million) 2001 in 5819.70 2002 13152.50 2003 19260.10 2004 26781.80 2005 41432.10
Source: Annual Report of EXIM Bank. Figure-5: Import Business of EXIM Bank.
45000 40000 35000 30000 25000 20000 15000 10000 5000 0
41432.1
26781.8 19260.1 13152.5 5819.7 2001 2002 2003 2004 2005 Import Business
Export Business The growth of the export business has significantly been increased by 39.55%.It stood at Tk.31285.37 million as on December 31, 2005 against Tk.22,418.40 million of the previous year. Particulars 2001 2002 2003 2004 2005 Export Business(Tk. in 7442.20 10088.30 15124.60 22418.40 31285.37 Million) Page # 61
Source: Annual Report of EXIM Bank.
Figure-6: Export Business of EXIM Bank.
35000 30000 25000 20000 15000 10000 5000 0 7442.2 10088.3 15124.6
31285.37 22418.4 Export Business
2001
2002
2003
2004
2005
Foreign Correspondents EXIM Bank has correspondent Banking relationships with over 78 Banks spread across 68 countries to facilitate trade and payment related services. So far the Bank's total correspondents are 180. The Bank has maintained relationship with leading international Banks and has successfully established credit lines with major Banks to support global Foreign Trade Business. Particulars 2003 2004 Export Business(Tk. in Million) 15124.60 22418.40 Import Business(Tk. in Million) 19260.10 26781.80 Source: Annual Report of EXIM Bank. Figure-7: Export & Import Business of EXIM Bank. 2005 31285.37 41432.10
Page # 62
50000 40000 30000 20000 10000 0 2003 2004 2005 Export Business Import Business
Import and Export Business of Mirpur Branch. Particulars Import Business(Tk. in Million) Export Business(Tk. in Million) 2003 2004 509.78 696.11 39.02 113.16 Source: Annual Report of EXIM Bank. 2005 749.31 178.16
Figure-8: Import and Export Business of Mirpur Branch.
800 700 600 500 400 300 200 100 0 2003 2004 2005
Import Business Export Business
6.3. AVERAGE EARNING YIELD ON INVESTMENT
Particular Paid up Capital (Tk.) Profit after Tax (Tk)
2004 52775000 0 38711499 9
2003 31387500 0 25479215 6 Page # 63
2002 253125000 201422785
2001 22500000 0 15805763 3
2000 225000000 48135559
Return on Capital (%)
73.26
69.20
69.14
70.25
21.39
Average ROC = (73.26 +69.20+69.14+70.25+21.39)/5=61.00 Therefore, Average return on Investment on the basis of issue price at Tk.130 =(61/130)* 100 = 47% (App)
6.4.
SPECIAL
FEATURES
OF
THE
BANK
1) Though EXIM Bank is engaged in conventional commercial Banking it also consider the inherent desire of the religious Muslims, and has launched Islami Banking system and inaugurates two Islami Banking Branches in the yea one Branch in 2003. The Islami Banking Branches perform their activities under the guidance and supervisor called "SHARIAH COUNCIL". 2) It is the pioneer in introducing and launching different customer friendly deposit schemes to tap the savings of the people for channeling the same to the productive sectors of the economy. 3) For uplifting the standard of living of the limited income group of the population the Bank has introduction Saving Scheme and Educational Saving Scheme to encourage the common and fixed income group of people. 4) The Bank is committed to continuous research and development so as to keep pace with modern Banking. 5) The operations of the Bank are computerized oriented to ensure prompt and efficient services to the customers. 6) The Bank has introduced camera surveillance system (CCTV) to strengthen the security services inside premises. 7) The Bank has introduced customer relations management system to assess the needs of various customers and resolve any problem on the spot. 8) The Bank has also decided to go for Online Banking facility to the customer in near future
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CHAPTER- VII CONCLUSION 8.1. Criticism 8.2. Conclusion
Page # 65
8.1.
CRITICISM
The whole banking sector in Bangladesh is faced by challenges due to continuous foreign bank investment. EXIM Bank Limited is facing severe competition from the other key players. Though EXIM Bank Limited trying to satisfied their customers. The upcoming challenges demand higher performance level and utmost customer satisfaction. I have worked only in the Mirpur Branch. So, I am not able to know about Head Office activities regarding Credit and others. Branch Officers have to work within limited boundaries and time-to-time they have to take permission from the Head Office. Taking permission from the Head Office is time consuming. The EXIM Bank Limited send Officers for training in the BIBM but the silly mistakes by the Credit officers in preparing statement of affairs or Office note is continuing, inefficiency in initial appraising process of loan or other activities still persists. From my observation I have found that peoples are interested about that job which gives them more salary and other facilities. EXIM Bank should give its employees more salaries, job securities and other facilities to hold its existing expert and trained officers.
8.2. CONCLUSION The purpose of the report was to do an evaluation of the Foreign. Exchange Operation with the EXIM bank limited and scope for its improvement. As Mirpur branch face a tremendous pressure with the customer and the department's officials try to handle the customer carefully.
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The total deposit in the banking sector reached TK. 28319.21 million on December 31, 2005 as against TK. 19078.17 million on December 31, 2004 which registered an increase of 67.37%. The total Assets in the banking sector reached Tk. 33716.69 million on December 31, 2005 as against Tk. 24355.76 million on December 31, 2004, which registered an increase of 72.29%. The total volume of import business handled by the Bank during the year 2005 was Tk. 41432.10 million compared to Tk. 19058.72 million in 2004 registering an increase of 45.99%. The total volume of export handled by the Bank during 2005 was Tk. 31258.37 million compared to Tk. 22418.40 million in 2004 registering in increase of 71.72%. In Elephant Road branch, the total imports during the year 2005 is Tk. 749.31 million compared to Tk. 696.11 million in 2004 registering an increase of 26.56%. The total Export during the year 2005 is Tk. 178.16 million compared to Tk.113.154 million in 2003 registering an increase of 89.98%. The Foreign Exchange Operation of EXIM Bank Limited apart from the conventional procedure makes the Bank capable to be a good Bank in Bangladesh. Its earnings from interest indicate its fitness to survive and other achievement is the sign of its longevity. Growth of the bank is very dynamic. It has been able to achieve appreciable progress in all areas of its operation during the year 2005 earned a profit before tax Taka 1063.30 million compared to Taka 645.64 million in 2004 registering a growth of 61.67 % the profit of the previous year. Particulars Profit before Tax Profit after Tax Net Interest Income 2001 244.25 158.06 100.01 2002 388.02 201.42 203.88 2003 478.51 254.79 274.77 2004 645.64 381.79 297.73 (TK. in million) 2005 1063.30 555.34 347.86
Figure-9: Profit and Net Interest Income
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1200 1000 800 600 400 200 0 2001 2002 2003 2004 2005 Profit before Tax Profit after Tax Net Interest Income
In Elephant Road Branch, the total Profits during the year 2005 is Tk. 8114302 compared to Tk. 3760132 in 2004 registering an increase of 115.80%. Particular Profit 2004 760132 (Tk. in amount) 2005 8114302
Figure-10: Profit of Mirpur Branch.
760132
8114302
2004 2005
Page # 68
Although EXIM bank is yet to fully automate the bank has adequate technology to meet its present requirement and it proceeding aggressively to enhance its technology level. Many products are introduced in the market in recent days and more innovative and diversified products are in the offering. The products are well received by the market, which is evident from the growth pattern of those products. The bank has also introduced various welfare schemes for its employees with a view to retain its trained and experienced human resources on longer term basis and to create a sense of belongingness. The bank management believed that employee turn out ratio will improve productivity of the banking future. Bibliography
1. Annual Report of EXIM Bank Ltd. 2004-2005. 2. Lesiker John V, Business Communication. Second Ed. Tata McGrowhil, New Delhi India-1998. 3. Credit Operational Manual of EXIM Bank Ltd. 4. EXIM Bank Website. 5. Prospectus of EXIM Bank Ltd. 6. Syed Ashraf Ali, Foreign Exchange & Financing of Foreign trade. 7. Grane Horm- Management Accounting, 3rd Edition. 8. Kothari C.R. Research Methodology, Second Ed. Methods & Techniques, New Delhi Washwa Prakashan, India-2003. 9. Pandey I.M., Financial Management, Eighth Ed. New Delhi, Vikas Publishing House Pvt. Ltd. India.-2002.. 10. Several Newsletters from EXIM Bank Ltd.
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Foreign Exchange Operation of EXIM Bank

Foreign Exchange Operation of EXIM Bank

1.1. STATEMENT OF THE PROBLEMS

1.3. OBJECTIVE OF THE REPORT

Foreign Exchange Operation of EXIM Bank

Foreign Exchange Operation of EXIM Bank

1.7. LIMITATIONS OF THE REPORT

Foreign Exchange Operation of EXIM Bank

Foreign Exchange Operation of EXIM Bank

Foreign Exchange Operation of EXIM Bank

Foreign Exchange Operation of EXIM Bank

Foreign Exchange Operation of EXIM Bank

Foreign Exchange Operation of EXIM Bank

2.3 CLASSSIFICATION OF THE BANK AT AGLANCE

Foreign Exchange Operation of EXIM Bank

On the Basis of On Structure

of On the Basis of On the Basis of ownership forms Business

CHAPTER-III A BRIEF PROFILE ABOUT EXIM BANK LTD.

Foreign Exchange Operation of EXIM Bank

Foreign Exchange Operation of EXIM Bank

Foreign Exchange Operation of EXIM Bank

Foreign Exchange Operation of EXIM Bank

3.6. CORPORATE CULTURE OF EXIM BANK Page # 15

Foreign Exchange Operation of EXIM Bank

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Employees' Position (as on 31-12-2005) Page # 18

Foreign Exchange Operation of EXIM Bank

Designation Executive Officers Sub-Staff (Casual) Total

As on 31-12-2005 48 680 206 934

Principal Officer (2 d Manager)

Dispatch Junior Officer

Cash Assistant Officer

Deposit Executive Officer

Remittance Junior Officer

Foreign Exchange Operation of EXIM Bank

Trainee Assit. Officer

Investment 1 Executive Officer Officer

Foreign Exchange Clearing & Accounting Executive Officer Junior Officer

Foreign Exchange Operation of EXIM Bank

Foreign Exchange Operation of EXIM Bank

4.2. FOREIGN EXCHANGE REGULATION ACT, 19 47

Foreign Exchange Operation of EXIM Bank

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Foreign Exchange Operation of EXIM Bank