Dealing with Foreign Exchange Procedure for ...

3 downloads 0 Views 814KB Size Report
Jun 8, 2006 - participated in fund syndication with other banks. The Bank has ..... NIB Bank Ltd.,. 15. ...... Health Certificate not submitted. Page : 41 ...
Internship On “Principles & practices of Foreign Exchange and Remittance”

Submitted To: Faculty of Business Administration International Islamic University Chittagong

June 08, 2006.

Internship On “Principles & practices of Foreign Exchange and Remittance”

Submitted By: Halima Begum BBA-9th Matric No: B013047 Finance & Banking. International Islamic University Chittagong (IIUC)

Supervised By: Mr. Monir Chowdhury Astt Professor Department of Business Administration International Islamic University Chittagong (IIUC)

Date of Submission: June 08, 200

Declaration

I hereby certify that, this report contains the research work, which has been performed by me, and this has not been submitted or copied elsewhere for any purpose except the permission of my institute.

International Islamic University Chittagong And Standard Bank limited Khatunganj Branch, Ctg.

Date: June 08, 2006. T0 The Head, Department Of Business Administration, International Islamic University Chittagong, Chittagong.

Subject: Submission of Internship Report.

Dear Sir,

With due honor and humble submission I beg to state that I am submitting the Internship Report on “Principles & practices of Foreign Exchange and Remittance” of

SBL

(khatunganj Branch).While preparing this report, I tried to gather what I believe to be the most complete information regarding our study available in the area. In collecting data and information I found all the top executive of Standard Bank Limited in the main stream with their co-operative mind and informative brochures and publications.

It is my honest belief that it would elicit your kind and fairest application.

Yours truly, ---------------Halima Begum BBA-9th Matric No: B013047 Finance & Banking. International Islamic University Chittagong (IIUC)

Table of Contents

Particulars Preface Acknowledgement Executive Summary

i ii iii-iv

Part : 1 Introduction Objectives of the study Methodology Scope of the study Limitation of the study

1 2 3 4 5 6

Part : 2 Standard Bank Limited Overview

Part : 3 Customer service Cash Management

7 8-13

14 15-19 20-22

Part : 4 Foreign Exchange Imports Exports Remittances

Page no

23 24-27 28-38 39-44 45-46

Particulars

Part : 5 Partial SWOT Analysis Recommend Conclusion Bibliography

Page no

47 48 49 50 51

Ending Of the Total Study

Preface

After completion of our BBA 8th semester final examination like other classmates, I also started my Internship in an organization. My internship program started at 28th March 2006 in SBL, Khatungonj Branch of Chittagong.

Here I have spent three months of my internship Program. In three months program I tried to learn as much as possible about the institution’s characteristics, natures, functions, competitiveness and work flows etc. As banking institution Standard Bank Limited is one of the leading banks in the country. With the banking functions it is very much huge and complex. My first challenge here to understand these complex and huge characteristics, natures and realized most of those things. The word most in the previous line is used because for me it was very much difficult to understand within three months duration.

I tried to gather all information and knowledge from different books and brochures to understand the difficult task of bank. In this report I have presented those, in proper, chronological and precise way. During my internship program I worked on every sector of a bank. So I thought it would be better for me if I prepared my internship report on foreign exchange and remittance of a bank. That’s why I prepared my report based on “Practices Of Foreign Exchange and Remittances Of Standard Bank Limited. “. At the end I can only state by this internship program we are able to complete the hardworking four years BBA course in International Islamic University Chittagong. I found all sorts of co-operation and good working environment in three months with SBL unit. All concerned with management and administrate of the bank from higher to lower echelon were compassionate to me.

Page : i

Acknowledgement

I am extremely delighted to thanks all those respectable authorities, professionals and beloved person without whom I could have failed to complete successfully the internship program in SBL.

At the advent I want to express my deep gratitude to Almighty Allah for his endless bless in the successful completion of my internship program based on “Practices Of Foreign Exchange and Remittances Of Standard Bank Limited” .

A large number of individuals have contributed directly in this program. I express my gratitude to all of them. I am particularly grateful to all the teachers of my department.

My heartfelt thanks are accrued to SBL officials whom I with my tenderly brains and whose kind co-operation and affection made me have a clear conception on my assignment. I found them all versatile genius in their fields. My thanks also to direct bosses for there dynamic and sincere leadership and brotherly feelings.

Page : ii

Executive Summery

BBA is a Special course. The course conducted by IIUC is designed with an excellent combination of Practical & Theoretical aspect. After Completing the BBA program 12weeks or 3months is preserved for Internship. The sole aim of Internship program is to increase our academic knowledge with that of practical wants & gives us an insight into management of organization in real life situation. Standard Bank Limited was incorporated as a public Limited Company on May 11, 1999 under the Companies Act, 1994 and the bank achieved satisfactory progress from its commercial operation since June 03, 1999. SBL has introduced several new products & participated in fund syndication with other banks. The Bank has commenced its operation on 3rd June, 1999 with an authorized capital of Tk.750 million & paid up capital of Tk.200 million. Problems: As a head branch of SBL (Khatunganj branch), does not provide necessary prospectus that can supply the overall information about various schemes & the office space is not sufficient enough. Foreign exchange section is one of the busiest sections in Bank. Sometimes it is found that all works are not performed efficiently due to insufficiency to office/ Staff. Lack of online Banking system & they follow the traditional Banking system. SBL has no Reception section & has no Receptionist that may receive Phone calls & complaints from customer and supply the Information. Opportunities: Client’s reliability on SBL is growing day by day on the bank. SBL has the global market operation. SBL offers many popular schemes of the people. Recently SBL provides credit card facility to the customer. Methodology: The data conducting the study has been collected from the primary sources as well as secondary sources. In collecting the data, care has been taken so that all the variables that in someway can’t effect the objectives of the study. I have divided my report in five main parts while depicting aspects SBL main parts are: Part1: Encompasses objectives of the study, Part 2: Focuses on an overview of SBL, Part 3: Focuses on general Banking of SBL, Part 4: Deals with Foreign Exchange procedure of Importing & Exporting goods beyond the Boarders. Part 5: Includes recommendation & Conclusion Page: iii

Part 1: I here described the Introduction, Objectives, Methodology, and Limitation & Scope of the Study. Part 2: This parts Includes the Findings i.e. an overview of SBL. (At a glance) with Graphical presentation. In an overview of SBL, I described here the past history of the bank. It is the part of my reports where I have discussed all these factors that determine the position of the Bank. Part 3: This part is one of the largest parts of my report. & Includes the following: In the customer service section I described different types of accounts, the requirements for opening such accounts, remittance of fund, lost instrument procedure, & death case procedure. In the cash management section, I shortly indicate the maintenance cash vault, cash deposit & encashment of cheque mechanism, & the criteria for verification of cheque. And I also indicate the credit & clearing department. And also indicate the vouchers: how clearing balance is maintained. Part 4: Focused on Definition of Foreign Exchange, Exchange control & its objectives, sources & uses of F.E., Exchange rate in Foreign Exchange Transaction, Direct & Indirect quotation, Maxim of rate, Quoting rate in Bangladesh, Buying & Selling rate, Emergence of International Trade, & Importance of foreign In our economy are described. In Important Section, Import Definition, types of L/c, Requirements of opening L/c, mechanism of L/c, Parties involve in International trade, Functions of foreign trade, Pre shipment Inspection, amendment, documents involve in lodgment & received by the issuing bank, settlement, Submission of return, matching Bill of Entry, NO. of L/C with Graphs, Import procedure in Flow chart. In Export section, Requirements of obtaining export L/C, Securing of export order, signing the contract, Receiving export L/C, Back-to-back L/c, settlement, shipment of goods, forwarding f. bills for collection, cash subsidiary, Important documents associates with export are analyzed, Export graphs & procedure in flow chart. In Remittance, Focused on def, check points in different types of remittance, Inward & outward foreign Remittance with Graphs. Part 5: Here I prescribed about some banking services by introducing which SBL can modernize its customer service suiting the latest demand of their clients, i.e. to cater better service suiting to the clients & my total experience with SBL during this Internship Program. SBL provides the best quality service to the society through different financial products & perfect utilization of its fund. Page: IV

Part :1

Encompasses Objectives Of The Study

Page: 1

Introduction

Internship program is requirement to get BBA Degree from International Islamic University Chittagong. As it is a Part of our Bachelor Program for practical experiences to compete in the job sector. I was assigned to complete my Internship at Standard Bank Limited (SBL). I started my Internship program or Internee from March 08 to June 08, 2006. I completed the Internship under a Supervisor from the organization as well as under the Faculty member of my Institution.

Page: 2

Scope of the study

The study is only related in STANDARD BANK LTD. Khatunganj Branch Ctg. This report focuses on the overview of management, organizational structure and mainly foreign exchange business procedure related with foreign exchange business and involvement of the bank. I analyzed mainly two sector of foreign exchange business i.e., import and export section. Also worked in the field of services related in transfer of foreign currency from different country of the to Bangladesh. Present study is covered a period of four years from 2002 to 2005.

Page : 3

LIMITATIONS OF THE STUDY

Although I have got co-operation from employee of SBL & they also gave me much time to make this report properly in the way of my study, I have faced many problems that may be terms as the limitation or shortcoming of the study.

1) Time limits: It should be certainly mentioned that the time constraint is that first limitation of the study. Only two months is not sufficient for gather perfect knowledge on the vast area of the ‘General Banking Activities’, ‘Credit Activities’, and ‘Foreign exchange Business’. Because bank’s one sector related with another sector.

2) Data collection:   

In some cases they could able to supply my topic related data for preparing a more in depth presentation. It was also seen that maximum time they are found busy and many officers related tour topics were not able to give enough time and briefings due to insufficiency of time. The study also suffered from inadequacy of data provided by SB.

3) Lack of practical knowledge: For the lack of our practical knowledge, some shortcoming may be available in the paper. Because in some cases we could not practically involved because of Bank’s limitations and for risky ness.

4) Personal limitation : My personal limitations also contributed greatly in making the study.

Page: 4

METHODOLOGY

The data needed for conducting the study have been collected from the primary sources as well as secondary sources. In collecting the necessary data, care has been taken so that all the variables that in some way can’t effect the objectives of the study. The information that I used in this study is collected by the following way:

Primary data sources: 

Direct working with officials of SBL.



Face to face conversation with the client.



Practical desk work.

Secondary sources: 

Bulletin published by the bank.



Annual report of the bank.



Previous research books and journals.



Different books about banking.



Teachers sheet.

The data and information collected were processed and tabulated manually, statistical tools namely average & percentage and financial tools for analysis, the financial statement e.g. ratios were study in the study. The major portion of the data sources have been collected secondary data sources. Information required formulating suggestions and recommendation have been availed from related text and research papers.

Page: 5

Part: 2

OVERVIEW OF STANDARD BANK LIMITED (At a glance)

Page: 6

Standard Bank Limited INTRODUCING THE ORGANIZATION

Standard bank limited was incorporated as a public limited company on May 11, 1999 under the companies Act, 1994 and the bank achieved satisfactory progress from its commercial operation since June 03, 1999. SBL has introduced several new products and participated in fund syndication with other Banks. Through all these myriad activities, SBL,has created a positive impact in the ban king sector. The management team of the Bank consists of highly motivated, well-educated and highly skilled and dynamic executives who have been contributing substantially in the continued growth and progress of the bank. The management is ably supported and assisted by well-motivated and experienced officers members of staff. The Managing Director of the bank Mr. Mosharraf Hossain is one of the senior bankers having meritorious performance and distinctive competence in his 35 years of long banking carrier. He is well known as an innovative, efficient and all rounder Banker to his colleagues and customers. The chief banking consultant Mr. S.S Nizamuddin Ahmed is one of the senior most bankers of the country both in the public and private sector banking with 42 years experience. He held various top executive positions such as General Manager of BKB, Janata bank, and Sonali Bank, Deputy Managing Director of Janata bank. The bank has commenced its operation on 3rd June, 1999 with an authorized capital of Tk.750 million and paid capital of Tk.200 million. The authorized capital of the bank has been enhanced to Tk.1250 million and the paid up capital amounted to Tk.910.8 million as on December 31st, 2005. The total shareholders equity and reserve stood at Tk.1412.35 million including sponsors capital of Tk.467.69 million as on December 31st 2005. The Bank has earned an operating profit 616.34 million during the year 2005 compared to Tk.492.33 million during the year 2004, showing an increase of 25.19%. The operating profit of Tk.291.48 million of the bank during the year 2003 compared to Tk.121.97 million of 2002, registered an increase of 138.98%.

Page: 7

Graphical Presentation : 700

700

600

600

500

500

400 Operating Profit

300 200

400

Growth in Profit

300 200

100

100

0 2002 2003 2004 2005

0 2002 2003 2004 2005

Figure 01: Operating Profit

Figure 02: Growth Rate

The deposit base of the bank continues to register steady growth and stood at Tk.5612.418 million as on December 31st, 2003 as against Tk.4101.56 million as on December 31st, 2002. It was an increase of 36.84%. And The deposit of the bank continue to register steady growth and stood at Tk.12043.39 million as on December 31 st, 2005 as against Tk.8731.35 million as on December 31, 2005. It is an increase of 37.93%, the bank has by this achieved a stable and sizeable deposit base and has managed its deposit and investible fund efficiently for the purpose of both liquidity and profitability. GRAPHICAL PRESENTATION:

2002 2003 2004 2005

Figure 03: Graphical representation of deposit fixed.

Page : 8

The total loans and advances of the bank stood at Tk.4952.24 million (including bill purchased and discounted) as on December 31st, 2003 compared to Tk.3495.71 million as of December 31st 2002 showing an increase of 41.76%. and the total loans and advances of the bank continue to register steady growth and stood at Tk.10183.59 million as on December 31st , 2005 compared to Tk.7800.95 million as on December 31 , 2004. it is on increase of 30.54%. The bank has been continuing to explore and diversity the area of operation to extend credit facility throughout the year to the various sectors of the economy. In distributing loans the bank mainly concentrated an agriculture fishery sector, wholesale/retail trading, hotel, restaurant, real estate and service sector and transport sector. The total loans are grouped in Tk.10137.26 million as unclassified loans and Tk.46.33 million as bad/loss loan.

GRAPHICAL PRESENTATION:

2002 2003 2004 2005

Figure 04: Overdraft, term loan,Short loan.

The investment has always an inverse relationship with capital adequacy ratio although it contributes to the desired bottom figure. The size of the investment portfolio in the year 2005 in the year 2005 raised at Tk.1272.46 million including government treasury bill and the other security bonds against Tk.943.08 million showing an increase of 34.93%.

Page : 9

Graphical presentation:

1400 1200 1000 800

Investm ent

600 400 200 0 2004

2005

Figure 05: Graphical representation of Investments.

The capital adequacy ratio of the bank as on December 31st , 2005 was 14.46% as on against the minimum requirement of 9% of which core capital was 13.48% against minimum requirements of 4.5% supplementary capital was 1% , which testifies to the sound capital base of the bank. The capital adequacy ratio of the bank in the 2004 was 15.63% of which core capital was 14.58% and supplementary capital 1%. Foreign exchange operation of the bank played a significant role in the overall business of the bank. During the year 2005 , the bank has contributed in the country’s national economy after successfully handling of foreign exchange transactions viz. Import, export and foreign remittance. In 2005 the volume of report business has significantly increased from Tk.11353.45 million to Tk.16144.65 million, which is 42.20% higher than last year, the volume of export business has tremendously increased from Tk.3536.51 million Tk.7569.13 which is 114.02% higher than last year and foreign remittance business also remarkably increased from Tk.136.12 million to Tk.204.26 million which is 50.09% higher than last year. The volume of total foreign exchange business has significantly increased from Tk.15706.20 to Tk.25879.68 million, which is 64.77% higher than the previous year.

Page : 10

Graphical presentation:

2002 2003 2004 2005

Figure : Graphical representation of Export , Import & Foreign Exchange Remittance.

The main aim of SBL is to increase its foreign exchange business and in this connection they are doing international banking with all major banks of the world. At present they are maintaining 20 major reputed banks of the world. They are:

1. The Hong Kong and Shanghai Banking Corporation Ltd., 2. Citi Bank N.A., 3. Standard chartered Bank Ltd., 4. American Express Bank Ltd., 5. Mashreq Bank Psc, 6. Wachovia Bank, N.A., 7. The Bank of Tokyo-Mitsubishi Ltd., 8. Union De Banques ET Arabes Francaises, 9. Danske Bank A/S, 10. Commerz Bank, 11. Dresdner Bank, 12. Bank Islam Malaysia Berhad, 13. Nepal Bangladesh Bank Ltd., 14. NIB Bank Ltd., 15. Arab Bangladesh Bank Ltd., 16. AB International Finance Ltd., 17. Bhutan National Bank, 18. UTI Bank Ltd., 19. The Bank of Nova Scotia, 20. ICICI Bank Ltd.

Page : 11

SBL also maintaining 20 Nostro A/Cs in different countries.

SBL has executed drawing arrangement with one exchange house in the UK &another in the USA. During the year 2005 total income from treasury of the Bank was Tk.228.65 million. Out of which Tk.128.80 million earned from Foreign exchange transactions and Tk.99.85 million from money market transactions. The Board of Directors of SBL gives full cognizance on the importance of various risks involved in the business of banking. The risk areas are managed by experienced, skilled &prudent bankers duly supported by modern technologies i.e. credit risk grading manual under risk management. SBL has opened 4 new branches during the last year and the total number branches stood at 22 as on 2005.Out of which 12 branches are authorized dealer. During the year 2005, 14 meetings of the board of directors, 4 meetings of the EC and 5 meetings of the audit committee were held. The board of the Directors recommended 20% stock dividend for the year ended 31st December, 2005. In terms of Bangladesh Bank’s guidelines, the bank is required to have an equity base of Tk.1000 million by March 10, 2006.

Page : 12

Part : 3

General Activities Of Standard Bank Limited

Page : 13

CUSTOMER SERVICE Basic Activities of customer services: Customers are the lifeblood of a bank. In Khatunganj where there are 81 branches of various banks are situated. Customer service officers have to ensure four characterstics:

i. ii. iii. iv.

Intangibility, Inseparability, Heterogeneity, Perish ability of their services so that people believe that they are the best service provider.

Documents supplied with the account opening form are also scrutinized.        

Opening various types of accounts according to customers needs.a Local remittance incoming/outcoming. To issue cheque books. Stop payments. To issue payment order; demand drafts and Telegraphic Transfer. Fund Transfer. Maintain and balance of all security. Closure of accounts.

Documents required for opening an account: According to Bangladesh Bank’s circular the documents required by the banker to open accounts for either individuals or various types organizations are as follows: (1) For Individual:       

Name Present and Permanent Address Date of birth, Age Nationality Tax Identification Number (if any) Passport or valid identification card or Nationality certificate Two copies of Passport size recent Photograph attested by the introducer  Transaction profile Page : 14

(2) For Proprietorship Enterpriser:  Various information about the account operator along with Trade license  T.I.N. certificate  Transaction profile (3) For partnership Firm:  Partnership deed  Certified copy of the constitution of the Firm along with trade license  Transaction profile (4) For Limited Companies:        

Certified true copy of certificate of incorporation Certified true copy of Articles of association Certified true copy of Memorandum of Association Copy of the resolution of the board of Directors authorizing for opening account and specimen signatures for operation of the account duly attested by the Chairperson Latest audited Balance sheet Trade License T.I.N. certificate Transaction profile

(5) For club/society:   

Description of office bearers By laws or constitution Govt. permission certificate(If registered).

(6) For Cooperative Society:  By laws attested by the cooperative society  Description of office bearers  A copy of the resolution of the committee authorizing specific signatories to operate the account (7) For Private School, College, Madras ‘a:  Full identification of the numbers of members of governing Body or Managing Committee  A copy of the resolution of the committee authorizing specific signatories to operate the account Page : 15

(8) For Trustee board:  Certified true copy of deed of trust  Full identification of the members of trustee board  A copy of the resolution of the committee authorizing specific signatories to operate the account

Types of account: Initially the customer opens all the accounts with a deposit of money hence these accounts are called deposit accounts. The bulk of resources of a bank are mobilized by accepting deposits from public. The various types of deposits accounts are given below:        

Current account. Short term deposit account. Savings account. Sundry Deposit account. Security deposit receipt. Fixed Deposit/Term Deposit account. Standard Bank Monthly income scheme. Standard Bank Double Spinner scheme.

Opening Accounts: For opening any of these accounts a depositor is required to fill up the Account opening form of Standard Bank Ltd.

Remittance of Funds: With a network of 22(twenty two) branches spread over in Dhaka, Ctg., Khulna, Sylhet, and Madaripur Standard bank Ltd. Can facilitate remittance of funds among these branches. The main instruments for transfer of funds are:  Pay order  Demand Draft  Telegraphic Transfer

Page : 16

Pay order charges: For Tk.1 For Tk.1,00,000 For above

-TK. 1,00,000 = commission TK. 25 +Vat TK. 4 -TK. 5,00,000 = commission TK. 60 +Vat TK.9 -TK. 5,00,000 = commission TK.75 +Vat TK.12

Vouchers relating to issue of pay order: When pay order is issued by receiving cash amountCommission on pay order Vat on pay order

Cr. Cr.

When pay order is issued by debiting party’s accountParty a/c Pay order issued Commission on pay order Vat on pay order

Dr, Cr. Cr. Cr.

D. D. charges: Commission Vat Postage

-------------

15% of D.D’S Amount 15% of commission Tk.40(Fixed)

Vouchers relating to issue of demand draft: When Demand draft is issued by receiving cash amountCommission on D.D. Vat on D.D Postage recoveries

Cr. Cr. Cr.

When D.D is issued by debiting party’s a/cParty a/c SBL. GI a/c Commission on D.D. Vat on D.D. Postage recoveries

Dr. Cr. Cr. Cr. Cr. Page : 17

Telegraphic Transfer: T.T. charges Commission ------- 15%of D.D’s amount Vat ------- 15% of commission Telex ------- TK. 40( fixed) Issuing cheque book : Normally a cheque book is issued to any person who has recently opened an account with the bank for which the applicant has to fill up a “New Cheque book Requisition Form” mentioning his/her account number, date of account opening, cheque book of how many pages is required, signature of account holder, and name & address of that account holder. Death case procedure: When any client of a bank become death, it is reported by the heiress through submitting prayer letter along with death certificate to that bank and bank will block that account. After that bank requires/seeks documents from the heiress.

Page : 18

Cash Management

Cash counter: The main task of the cash counter is to receive deposits and deposits and disburse payments. Nevertheless other activities are to be undertaken by cash counter are given below:    

Vault Encashment of cash cheque Accepting cash deposits from the customers Cash deposit 1) Posted 2) Transferred  Cash payment: Criteria for verification of cheque before payment: I. II. III. IV.

Amount Balance Cheque Date

The withdrawal of money is shown in the following diagram:

Examining the four corners of the cheque Error!Customer

Cash Counter

The cheque is presented

BAXI Entry

Verification & Crossing

Debit A/C generate tracer no.

Figure : Flow chart of withdrawal function .

Page : 19

Customer

Types of bank notes not accepted by the cash counter: The cash counter cannot accept the following types:  Notes torn in two parts and built up notes  Burn notes  Oily notes CLEARING DEPARTMENT: In this department clearing house balance is maintained. Bank from Standard Bank Limited, Branch wise delivery summery (1st house): Date:05/04/06 Branch

No. of

Name chqs Amount (tk.) Agrabad Branch 32 88,43,703.75 Chowdhury hat Br. 12 6,85,042.00 Jubilee Road Br. 24 88,63,920.67 Khatunganj Br. 101 6,20,83,241.00 --------------------------------------------------------------------------------------------------------------------------------Bank total= 169 8,04,75,907.4 Total:-received = 4,59,94,020.16 Favouring total balance = 3,44,81,887.26 (+) opening balance =54,12933.88 Total Balance = 3,98,94,821.14 (-)T.T. issued = 3,50,00,015.00 Current Balance =48,94,806.14 (-)Return Balance(2nd house) =35,87,604.00 Present Balance =13,07,202.14

Balancing between Return to and return received at 2nd house:-

Return to (-) Returned received Return balanced at 2nd House

=73,78,071.00 =1,09,65,675.00 = (-)35,87,604.00 Page : 20

Vouchers relating to issu of T.T. SBL GL A/C Expenditure A/c remittance of charge Bangladesh Bank

Dr. Dr. Cr.

There are also several parts of SBL , i.e.:  CREDIT MANAGEMENT  ACCOUNTS MANAGEMENT

Page : 21

Part : 4

Dealing with Foreign Exchange Procedure for Importing & Exporting goods.

Page: 22

Foreign Exchange

Definition of Foreign Exchange: In terms of section 2(d) of the F.E.R. Act, 1947 as adapted in Bangladesh Foreign means foreign currency includes all deposits, credits and balance payable in Foreign currency as well as in foreign instruments such as drafts, T.C.S., Bills of exchange, promissory notes, and letter of credit payable in any foreign currency. Exchange control and its objectives:

Exchange control was first introduced at the out break of World War II in 1939 in the then British India with the intention of controlling dealing in foreign securities, gold and silver bullion. Exchange control as wed now understand it, is used as a weapon for acquisition by the Govt. of all foreign earned by its residents for its accumulation into a central pool and rationing of these holdings into a pool. The main objectives behind the introduction of exchange control were for the purpose of conserving and directing to the best uses the limited supplies of foreign exchange available. Sources and uses of Foreign exchange :

The residents of our country to the countries outside Bangladesh mainly earn Foreign Exchange through Exports of goods and services. Foreign Exchange may also acquired out of aids, grants and credits received by us from foreign countries. Remittances of the Bangladesh National working abroad are also an important source of foreign exchange for Bangladesh. Foreign exchange is required for settlement of International payments in connection which Import of goods into the country as well as for meeting payments covering Freight charges, Insurance banking, debt servicing, travel and educational expenses etc. Exchange rate in Foreign Exchange Transaction:

Each country has its own currency and in international transaction it requires conversion of one currency into another. These conversions take place in the Foreign Exchange Market. In Foreign Exchange Market, foreign currencies are bought and sold. The Bank quotes two rates, one for selling and other for buying. The difference between a bank’s buying rate and selling rate constitutes its “dealing spread “or the exchange profit. Page : 23

The rate of Exchange between two currencies: 1) Direct quotation /Pence rate 2) Indirect quotation /Currency rate Direct quotation /Pence rate:

Direct/Pence rate is the rate where the unit of foreign currency is kept constant and home/local currency is varied. Indirect quotation / currency rate:

I.Q is the rate where the home currency is kept

constant & foreign currency is varied. Maxim of rate: Direct rate: Buy low sell high. Indirect rate: Buy high-sell low. Quoting rate in Bangladesh:

At present in Bangladesh, Direct rates are quoted. Selling rate:  Clean scale  BC scale Buying rate:  T.T Buying rate  T.T clean  T.T (DOC)  OD Buying rate  OD (sight)  OD (Transfer)  Long rate  Telguel rate  Basis of quoting rate  Selling rate International Trade:

International trade refers to trade between the residents of two different countries. Each country functions as a sovereign state with its own set of regulations and currency. The difference in the nationality of the exporter and the importer presents certain peculiar problems in the conduct of international trade. Important among such problems are:  Different countries have different monetary units.  Restrictions imposed by countries on Import and Export of goods.  Restrictions imposed by nations on payments from and into their countries.

 Differences in legal practices of different countries. Page: 23

The existence of National monetary units poses a problem in the settlement of international transactions. The exporter would like to get the payment in the currency of his/ her own country. Thus, the exporter requires payment in the currency of the exporter’s country whereas the importer can pay only the currency of the importer’s country. A need therefore arises for conversion of the currency of the importer’s country into that of the exporter’s country. Foreign exchange is the mechanism by which the currency of one country gets converted into the currency of another country. Bank those deals in foreign exchange do the conversion of the currencies. These banks maintain stocks of foreign currencies in the form of balances with banks abroad. Uniform custom and practice guides all types of formalities under documentary credit for documentary credit (UCPDC) 1993 Revised ICC Publication No. 500. Importance of Foreign Exchange business in our Economy:    

International Trades gives exchange opportunity of goods. Consume get privilege through international trade. International trade helps to produce domestic production as well as global production. Natural assets of a country are to be utilizing property.

Import & Export: Import & export of Bangladesh are regulated by the Ministry of Commerce in accordance with the Import & Export ( control ) Act 1950 as adopted in Bangladesh. Import Registration Certificates (IRC) and Export Registration Certificates (ERC) are issued by the office of Chief Controller of Imports Exports (CCI & E) intending Importers and Exporters are to submit applications to CCI & E for registration along with the required papers / documents. IRC (Required Documents): a. b. c. d. e. f. g.

Application Trade License Nationality certificate Income Tax certificate along with TIN Bank certificate Membership certificate from Trade Association Certificate of Incorporation, Memorandum and Articles of Association, (In case of ltd company), partnership deed (partnership firm) h. Any other Documents as per current Import policy order ERC (Required Documents): a. Application b. Trade license c. Nationality, Assets certificates of the Proprietor/ Partnership deed of Partnership Firm /MOA or AOA of Limited Co. Page : 25

d. Bank certificate

e. Trade license f. Income Tax certificate along with Trade g. Any other Documents as per current export policy order

On completion of required formalities & Payment of prescribed fees, concerned CCI& E Office issue IRC & ERC. IRC & ERC are renewed every year on payment of prescribed fees. For Imports & Exports of goods/services normally letter of credit are used as means of Payments.

Page : 26

IMPORTS

Import procedure of SBL: Letter of credit:

This is the most important task of foreign Exchange division of Khatunganj Branch of SBL. Letter of credit is an undertaking by the importer bank that if the exporter exports the goods & produces documents as stipulated in the letter, the bank would make payment to the exporter. Thus the obligation of the Importer under the contract is supplemented by a superior obligation of bank to make payment. The exporter now looks to the bank, which opened the letter of credit for payment instead of relying on the importer. Mechanism of letter of credit: A clear understanding of the definition will be facilitated if one understands how L.C operates. A summery of stages in the operation of a L.C is given below :

Exporter India (Beneficiary)

Importer Chittagong (Applicants)

Contract of sale(1)

Applies for opening of L/C (2) Forward L/C to (4) Standard Chartered Bank,India (Advising Bank)

Opens L/C and sends it to (3)

Figure : Opening of letter of credit Page : 27

Standard Bank Limited, Khatunganj, Chittagong (Issuing Bank)

Exporter India (Beneficiary)

Importer Chittagong (Applicant)

Ship Goods to (5)

Presents Documents and Obtains Payments from (6) Standard Chartered Bank,India (Negotiating Bank)

Recovers Amount from (8)

Obtain Reimbursement from (7)

Standard Bank Limited, Khatunganj,Ctg. (Issuing bank)

Figure : Utilization of Letter of Credit . 1) The transaction originates when the exporter in Mumbai & the importer in chittagong Enter into a contract of sale. The contract covers all important particulars such as the description, value and quantity of goods, the due date for shipment; method of payment etc. one of the stipulations is that a letter of credit should be opened in favor of the exporter. 2) The Importer applies to his/her (SBL) requesting and authorizing the bank to open a letter of credit in favor of the exporter and pay bills drawn by the exporter under the letter of credit. The applicant would stipulate the conditions, especially with regard to the documents to be submitted by the exporter along with the bill. 3) On the strength of the application from the Importer, the bank issues a letter of credit. It is addressed to the exporter and conditions an undertaking by the bank that bills drawn under the credit would be paid by it provided the conditions stipulated therein are met. 4) Though the LC is the addressed to the exporter, it would normally be sent to the correspondent bank of SBL in India (Standard chartered Bank) with a request to forward it to the beneficiary. The necessity arises because the exporter would not know the signature of the officials of SBL and hence he/she would be not in apposition to satisfy him/her about the genuineness of the credit. When it is sent to SCBL, which in the capacity a correspondent bank, is in possessions of the signature of the officials of SBL, the signatures on the LC are verified before it is forwarded to the exporter. 5) Within stipulated date of shipment, the exporter ships the goods to a port in the Importer’s country (ctg, Bangladesh) and obtain bill of lading from the shipping company. Page: 28

6) The exporter draws a bill of exchange on SBL along with the bill of lading and other documents required, presents them for negotiation to his/her. 7) The exporter’s bank verifies the documents to make sure that they satisfy the conditions stipulated in the LC pay the amount to the exporter. Then the documents are forwarded to SBL for payment. 8) On receipt of the Documents and after verifying that they satisfy the requirements of the LC, SBL makes payment to SCB. The bank from the Importer would recover the amount of the bill and the documents would deliver to him/her. Parties Involve in International Credit:  Importer / Buyer: Importer requests the opening bank to open an L/C. He is also called applicant of the credit.  Exporter/Seller: L/C is established by the exporter.  Issuing Bank: It is the Bank which opens /issues L/C on behalf of the importer after the Importer requests to open an L/C.  Advising Bank: The Bank through which the L/C is advised to the exporter.  Negotiating Bank: The Bank which negotiates the bill and pays the amount to the beneficiary.  Collecting Bank: The Bank, which collects the bills from the issuing bank on behalf of the negotiating bank if the negotiating bank if the negotiating bank does not have any correspondent in abroad.  Reimbursement Bank: The bank or to whom the bill will be drawn. It is mentioned in the credit to make payments against stipulated documents complying with the terms of the credit. It may or may not be the issuing bank.  Confirming Bank: The bank that adds its confirmation to the credit and it is done at the request of the issuing bank. L/C Types: Generally L/C can be divided into two broad heads: L/C

Revocable

Irrevocable

Revocable L/c : It is those types of L/c that can cancelled by either importer or exporter without prior discussion or consent of the other. Page : 29

Irrevocable: It is those types of L/C types of L/C, where Importer and Exporter have to consult with each other for any alteration of L/c. any change or cancellation here is done unanimously rather by one party. There are some other types of L/c , which are Back- to –Back L/C, Confirmed L/C, Revolving L/c, Red Clause L/C, Stand by L/C, Green Clause, Transferable L/C. Letter of Credit Type According To Tenor: a) Sight L/C b) Acceptance L/C c) Deferred Payment L/C Functions Of Letter of Credit:

Foreign trade mainly denotes four activities of bank: a) b) c) d)

Export Import Foreign Remittance Bills purchase

The Bank also does Local L/Cs apart from Foreign L/Cs. Foreign Exchange dept. at Khatunganj Branch, SBL equally deals with Importing & exporting. A huge part of the foreign trade activities are done through the creation of L/Cs. On the basis of activities dept mainly two parts:  

L/C opening L/C lodgment

BRIEF SUMMARY: L/C Opening:

Prior to opening an L/C, A company must achieve the following conditions: 1) 2) 3) 4) 5) 6)

One current account in the Branch. A valid I.R.C provided by the G.O.B. Tax Identification Number. V.A.T. number. Credit Information Bureau Report (C.I.B) &Net worth of the Custimer. Additional Information from other banks

After being assured creditability of the client, the bank advances to create an L/C on behalf of the buyer. The following documents are necessary for creating an L/C: 7) Proforma invoice also called” Sales Contract” which is signed by the Exporter. Page: 30

8) Along with the Pro-forma or Indent a prescribed application from the Importer is required to open an L/C. 9) Bank’s prescribed L/C application from should be filled up in due way. 10) The client must sign in IMP(Import Merchandise Performance) form. 11) Signature In LCAF(Letter of Credit Authorization Form). 12) The client must put signature accepting the Proforma Invoice. 13) An Insurance cover note. After all these activities are performed correctly, the branch addresses the proposal to the Zonal Head or H.O to authorize them to open L/C. 14) Then the branch requests the client to the requests amount of money in the a/c. 15) The Branch then generates 5 copies of one L/C. 16) The Branch then creates vouchers with margins &all other charges. 17) After that the branch must issue a reimbursement authority for the exporter’s bank. 18) The entire signature must be verified by the responsible officer. 19) The File will have to be filled up with due proceedings. 20) All the transaction must be entered into the register. Pre Shipment Inspection (P.S.I): Blocks: As per Circular of N.B.R. (National Board of Revenue) P.S.I documents will have to be issued 3 Block –A Interest Testing services (ITS). Block –B- PSI Inspectorate Ltd. Block –c Bureau Veritas(BIVAS) They must issue a CRAF (Clean Report Of Finding) ensuring the accurate quality & quantity of the Imported goods. The opening Bank then sends the L/C to the Advising Bank by any of the 3 following Mediums: # Mail # Swift # Telex The exporter’s bank will check all the documents & will send in formal protest if there are any problems with the clause(s). In case of Amendment the bank charges the client an amt. of BDT 1,500= for whatever number of clause changes. An L/C should not be operated under any

circumstances when the client has put any personal clause other than that of the UCPDC clauses. Page : 31

The L/Cs are given specific 12 digits coding by the B.B. (Bangladesh Bank). The First four digits consist of the specific branch bank code determined by B.B., the next digits denote the year, the other two digits denote the nature of L/C (Cash/Deferred payment) and the last four digits depicts the serial number of the specific L/C. There are a few prescribed procedures for filling an L/C. The arranged format to keep the L/C documents starts from the bottom according to the following order. i. ii. iii. iv. v. vi. vii. viii.

L/C application can’t be performed IMP L.C.A.F Insurance policy Minimum three copies of Proforma Invoice L/C document Pre-shipment Inspection Copy(P.S.I Amendment (if there are any)

Amendment: In some cases the Importer & exporter both or any of them may be unable to satisfy the requirements mentioned in L/C within the stipulated time. Then for alteration of actual terms & conditions amendment is required. In a Revocable L/C it can be done without prior notice to the beneficiary. But in an Irrevocable L/C it must be done with prior consent of beneficiary, confirming bank &the Importer.

Documents Involved in Lodgment: After getting the L/C on hand, the supplier prepares the following documents to validate the export: 1) Commercial Invoice: It requires 8 copies which contains the following:         

Exporter name & address L/C no. Date Name & address of the Importer Incoterms (the responsibilities of both the parties according to the 14 International commercial terms) Detailed product specification confirming with the L/C Country of Origin Unit Price H. S. code & all other codes Page : 32

2) Packing List: It is to certify that packing materials used and the packing quality is of export standard and it is prepared as per term & conditions of L/C. Normally it requires in triplicate. 3) Certificate of origin: It’s a certificate issued by the exporter’s or supplier’s countries chamber of commerce ensuring the importer that goods are of that specified document. It also requires in triplicate. 4) Bill of Lading: It is the title of goods. The shipper supplies this document containing the following documents:           

Shipper’s name Consignee Notify party (bank as well as Importer) Voyage no.(the name of the ship etc) Port of lading Place of delivery Description of products in details L/C no. & date Shipping marks Gross & Net weight Whether the freight is prepaid or not

5) Bill of Exchange: Bill of exchange contains the name of the drawee, the total US$ amount & L/C no. two types of B/E are served:  First original(second un paid)  Second original(First un paid) 6) Others: There are other documents which are not Mandatory but adds more creditibility are the insurance certificate, Shipments advice etc. Documents Received by Issuing bank: After receiving all the original documents from suppliers bank the issuing bank scrutinize the shipping documents. Now banker will release these documents to Importer in exchange of acceptance given by the Importer through following of the Mechanism given below: I. PAD (Payment against Document): The Bank here pays the due amt. after adjusting the margin and charges interest on this amt. till the date of forwarding & the date of lodgment. II. LTR(Loan Against Trust Receipt) : This loan is provided as per sanction of Head office & granted for maximum 120 days whatever the export term may be. This loan is to facilitate the Importer who does not have the necessary liquidity to wait for specified time period. Page : 33

Settlement: Settlement means fulfilling the commitment of issuing bank in regard to effecting payment subject to satisfying the credit terms fully. There are 3 separate segments:  Settlement by Payment: Here the seller presents the document to the paying bank & the bank then scrutinizes the documents. If satisfied, the payment bank makes payment to the beneficiary or issuing bank. If the issuing bank is satisfied with the requirements, is obtain by the paying from the issuing bank.  Settlement by Acceptance: Under this agreement the seller submit the documents evidencing the shipment to the accepting bank accompanied by a draft/drawn on the bank.  Settlement by Deferred Payment: The deferred payment credit differs only slightly from acceptance credit in its effect on the beneficiary. The main difference is the lack of draft. Vouchers relating to L/C: Opening vouchers: (1) contra Voucher: Customer Liability L/C cash Banker’s Liability L/C cash

Dr. Cr.

And, (2) Importer’s A/C (3) Sundry Deposit Margin on L/C

Dr. Cr.

(4)

Cr.

Commission on L/C

(5)

VAT on L/C commission (15% of L/C commission) (6) Foreign corresponding charge on L/C cash

Cr.

(7)

Postage/swift/Telex recoveries

Cr.

(8)

Stamp in Hand

Cr.

(9) Miscellaneous Amendment vouchers: i. Importer’s A/C ii. Sundry Deposit Margin on L/C iii. Commission on L/C iv. Vat on L/C commission v. Postage Recoveries

Cr.

Cr. Dr. Cr. Cr. Cr. Cr. Page : 34

Lodgment vouchers: For Foreign L/C: i. Contra voucher: Banker’s Liability L/C cash Customer’s liability L/C cash ii. iii. iv. v. vi.

Dr. Cr.

PAD a/c –Importer’s Name Telex services SBL GL A/C Head office Sundry Deposit Margin on L/C PAD a/c -Importer’s name

Dr. Cr. Cr. Dr. Cr.

For Inland L/C: i.

Contra voucher: Banker’s Liability L/C Inland Customer’s Liability L/C Inland

Dr. Cr.

And, ii. iii. iv. v. vi. vii. viii.

PAD A/C Importer’s name A/C SBL GL A/C Commission on D.D VAT on DD Postage on recoveries Sundry deposit Margin on L/C PAD A/c –Importer’s Name

Dr. Cr. Cr. Cr. Cr. Dr. Cr.

Retirement voucher: If the party has LTR credit facility with that bank, then LTR A/C-Importer’s A/C

Dr.

ii. PAD A/C-Importer’s A/C Cancellation of L/C:

Dr.

i.

i.

ii. iii.

Contra voucher: Banker’s Liability L/C cash Customer’s Liability L/C cash Sundry Deposit Margin A/C Importer’s A/C Page : 35

Dr. Cr. Dr. Cr.

Submission of Statement: Now the L/C issuing bank submits monthly return to Bangladesh Bank regional office and the respective Head office of the Branch Bank. Monthly return includes: i. ii. iii. iv.

IMP & Schedule LCAF Proforma invoice Commercial Invoice

Matching of bill of entry: Within four months the Importer must submits B/E evidencing the release of goods from Port. After receiving the Bill of entry the issuing bank match this with the shipping documents. Graphical presentation: 800 700 600 500 400 300 200 100 0

No. of L/C Im port

2002 2003 2004 2005

Fig: Graphical presentation of total no. of L/C in Import

Page : 36

Import procedure in flow chart

Importer : Import Registration Certificate, Membership Certificate, TIN Importer : Indent/Performa Invoice, Insurance Cover Note, Application

Banker : LCA, IMP Form, Application Agreement for Confirmed L/C

Banker : Check Sanctioning Approval, Credibility of Importer & Supplier, IPO, H.S. Code & Ascertain Duty etc.

Banker: Opening L/C –creating contra liability :Debit Importer’s A/C for Margin, commission, and other charges

Despatch / transmit the L/C to the beneficiary through issuing banks correspondent in the beneficiaries country.

Receipt of import documents from negotiating /Collecting bank.

Security of import documents .

Instruct reimbursing bank not to honor reimbursement claim.

Yes

Are the documents discrepant?

Inform negotiating bank about discrepancies .

Inform opener about discrepancies.

Yes Do they agree to accept documents despite discrepancies?

No

Lodgments of import bills Dr. PAD (Bill Amt. +Int. less margin) Cr. H.O. A/C reimbursing bank . Reversal of contra liability .

No

Ask negotiating bank for disposal instructions. Ask the opener to take delivery of import documents for release of goods

Yes Do they accept documents on collection basis?

Have they responded ?

Deliver the documents to importer for release of goods. No

No Yes

Send back documents Dr. SD A/C marginal L/C Cr. Importers A/C Reversal of contra liability. Have they approache d for import finance?

Retire the bill by creation of forced LIM with H.O. approval. DR. Forced LIM (PAD amt. + int.) Cr. PAD Yes

No

Retire the import bill Dr .opener A/C (PAD + Int. ) Cr. PAD Deliver the documents to the opener for release of goods.

If you agree, recover further margin from the opener and the retire by creation of LIM Dr. opener A/C for further margin, if any Cr. PAD.

Collect customs bill of entry for matching with IMP form .

Page : 37

Collect proceeds from importers Dr. SD A/C, marginal L/C Dr. Importers A/C Cr. H.O. A/C collecting bank Reversal of contra liability.

Export Procedure

Export is one of the most important activities that can increase and social well being through transaction of goods & services from domestic economic agent for which domestic economic agent receives preferably in valuable foreign currency. The Important and Export trade in our country is regulated by the imports & exports (control) Act, 1950. There are some formalities, which an exporter has to fulfill before & after shipment of goods. There procedures are described in the following lines. No person without registration granted by the chief controller of Import & Export shall anything within or out of Bangladesh except in case of exemption issued by the Govt. Under the Export policy of Bangladesh the Exporter has to get the valid Export Registration Certificate CCI&E. The ERC is required to renew every year. The ERC number is to be incorporated on EXP forms & other papers connected with exports. Requirements for obtaining L/C:

i. Export Registration Certificate ii. Bond License (duty free importation) iii. EXP form signed by the Importer And other documents which are required at the time of opening Import L/C. Securing of Export order: In this purpose exporter can get help from:  Liaison Offices  Buyer’s Local agent  Export promoting organization  Bangladesh Mission Board  Chamber of Commerce(Local & Foreign)  Trade Fair etc. Signing the Contract:

While making a contract, the following points are to mentioned.  Price of the goods  Description of the goods  Quantity of the goods Receiving the Export Letter of credit:

 The terms of the L/C are in conformity with those of the contract  The L/C is an Irrevocable one, preferably confirmed the Bank  The L/C allows sufficient time for Shipment & negotiation Page : 38

Procuring the Material: After making the deal and on having the L/C opened in his favor, next step for the exporter is to set about the task of procuring or manufacturing the contracted merchandise. Back-to-Back L/C:

Since Exporters open this type of L/C by mortgaging the master or original L/C, so they enjoy maximum 80% credit facility against it from the banks. In this case, bank’s main security is the original L/C & the back-to-back L/C is separate instrument independent of each other. It is intended that the exporter would substitute his own documents and ships the goods to the Importer, if necessary, and present documents for negotiation under the original credit, his liability under the back to back credit would be adjusted out of these proceeds. Documents that are required to submit at SBL for the opening of a b/b L.c are given below:      

Master L/c Valid IRC & ERC L/C application & LCA form duly filled up & signed Proforma invoice or Indent Insurance cover note Duly signed IMP form

Settlement by negotiation:

This settlement procedures starts with the submission of documents by the seller to the negotiating bank accompanied by a draft drawn on the buyer or any other drawee, at sight or at tenor, as specified in the credit. After the scrutinizing that the documents meet requirements, the bank may negotiate the draft this bank , if other than the issuing bank, then sends the documents and the draft to the issuing bank. Shipment of goods:

Now the exporter ships the goods through the help of C& F agent. The following are the document normally involved at the stage of shipment:        

EXP form ERC (valid) L/C copy Customs duty certificate Shipping instructions Transport Documents Insurance Documents Invoice Page : 39

   

Bill of Exchange Certificate of origin Inspection Certificate Quality control certificate

The exporter submits all these documents along with a letter of Indemnity to SBL for negotiation. An officer scrutinizes all the documents. If the documents are in order, SBL purchases the documents on the basis of banker customer relationship. This is known as “Foreign Documentary Bill Purchase”(FDBP). Forwarding Foreign Bills for Collection:

After that, the purchased bill is forwarded for collection for any of the following reasons:  If the documents have discrepancies  If the Banker is in doubt  If the exporter is a new customer Cash Subsidiary: 10%

of the total export proceeds are received by the exporter as cash subsidiary from the Bangladesh Govt. through exporter’s Bank via Bangladesh Bank. Important Documents Associates with Export: Letter of Credit:

 

Whether it is revocable or irrevocable and, if necessary, amendment to the clauses difficult to fulfill have obtained. Whether it is subject to uniform customs & practices for documentary credit of the International C.C.

Bill of Exchange:

  

Whether the draft has been drawn to the order of the bank Whether the date, amt. in words & figures, Drawer’s name, drawer’s signature, endorsement, tenor etc. are correctly in terms of the credit. Whether stamp of requisite value has been properly affixed.

Invoice:

    

The invoice contains quality, unit price, & total value with deduction. The number of copies meets the requirement of the credit. Charges such as postage, telex etc. The description of the goods should be in conformity with the details in the bill of lading. Marks on the packages & the quantity of the goods must agree with those mentioned in the invoice & the Bill of Lading. Page : 40

Bill of Lading:

    

The bill of lading must state the number of originals and all the negotiable copies as stated in the B/L must be presented. The B/L must state that the goods have been “shipped on Board” The port of loading, the port of Destination, & the name of the carrying vessel must appear on the B/L. It must be duly signed and endorsed. It must state payment of freight.

Certificate of origin:

It should be provide evidence of the origin of the goods as specified in the credit. It is usually issued by an independent office or organization e.g. a chamber of commerce. Common Discrepancies:

Banker’s usually finding the following discrepancies while checking the above mentioned documents:                   

On board nation of in B/L undated. Shipment effected from port other than that stipulated in the credit. Full set of B/L not presented. Certificate of country of origin not provided. Weightment certificate not presented Cuttings/alteration in documents not authenticated Documents inconsistent with each other Description of goods on invoice differs from that in the credit Credit L/c amt. exceeded Credit (L/C) expired Documents not presented in time as stated in bill of lading Late shipment Absence of signature, where required, on documents presented B/L does not evidence whether freight is paid or not Packing list not submitted Notify party differs /not as per stipulation Inspection certificates not submitted Unit price not mentioned invoice Health Certificate not submitted

Page : 41

Vouchers relating to Back- to- back L/C:

(A) Contra voucher: L/C liability reserved; i. Banker’s liability B/B L/C ii. Customer’s liability B/B L/C (B) Contra voucher: ABP liability created i. Customer’s liability B/B acceptance ii. Banker’s liability B/B acceptance

Dr. Cr. Dr. Dr. Cr.

Vouchers relates to the payments of Inland B/B L/C: i. ii. iii. iv. v. vi. vii.

Sundry deposit margin on F .D. B. P. SBL G/L A/C Commission on D.D Vat on Remittance Postage recoveries Exchange gain Contra voucher (ABP liability created):

Dr. Cr. Cr. Cr. Cr. Cr.

a) Banker Liability B/B Inland b) Customer Liability

Dr. Cr.

Graphical Presentation: Performance of Khatunganj branch In export

800 700 600 500 400 300 200 100 0

No of l/c in export

2002 2003 2004 2005

Figure : Graphical presentation of total no of L/C in export.

Page : 42

Export Procedure In Flow Chart

Exporter : Obtaining export registration certificate(ERC) from CCI & E. Exporter : Securing export order from foreign buyer directly or through agent. Exporter : Receiving L/C from buyers bank through and advising bank in Bangladesh.

Bank : Certification of EXP form by authorized dealer (Bank).

Will the exporter be allowed any preshipment credit facility.

Yes Mark banks Lien on the face of the original L/C.

Obtain necessary securities Dr. F/C (Exporter) Cr. Exporter

No Shipment of goods by exporter Preparation of export documents submission to negotiating bank .

by

exporter

for

Arrange shipment of goods through Banks approved C & F agent &instruct them to send the original bill of lading etc. to the bank directly.

Scrutinizing export documents by negotiating bank . Ask exporter to remove discrepancies. No No

Are the documents in order ?

Are the discrepancies removal ?

Inform opening bank about discrepancies.

Yes Yes

Negotiate the documents Dr. FDBP Cr. Exporter Cr. P/C A/C(Exporter)

Yes

Do they allow negotiation?

No

Dispatch documents with reimbursement instruction Check whether you’re A/C with reimbursing bank has been credited

Send the documents for collection with reimbursement instruction. Pass liability voucher.

No Has it been credited?

Send reminder to paying Bank.

Yes Retire FDBP Dr. H.O. A/C Reimbursing Bank Cr. FDBP/Exporter A/C Cr. Income A/C exchange earning Reverse Liability Voucher.

ss Page : 43

Foreign Remittance Foreign Remittance means purchase & sale of freely convertible foreign currencies as admissible under Exchange control Regulations of the country. Purchase of foreign currencies constitutes inward foreign remittance & sale of foreign currencies constitutes outward Foreign Remittances. Check points in different types of remittances (Inward & outward remittances): Check points before opening of Foreign currency Accounts:

a. A/c opening Form must be duly filled in & signed by the account holder. b. Photo-copy of contract between employer & employee must be obtained from the account holder. c. Two pass port size photographs of nominee duly attested by account holder. d. Photocopy of passport of the accountholder from first page to visa page must be obtained. e. Signature of account holder on the A.O.F. & S.S. card must tally with the specimen given in the passport. f. Signature must be verified by F.C account holder. g. Signature must be verified by dealing officer from the original Passport at the time of opening account. Inward Foreign Remittances: I.R means remittance received in Bangladesh from abroad through normal banking channel in the form of F.T.T., F.M.T. & F. It also includes cheque; foreign demand drafts issued on foreign banks in favor of beneficiaries in Bangladesh, Traveler cheque, Foreign currency notes. Natures of I.R: a. Instrument drawn on SBL bank. b. Instrument drawn on Foreign banks c. Instrument drawn on other commercial banks in Bangladesh Graphical Presentation: Inward Remittances in Khatunganj Branches:

2002 9 8 2005

7

2003

Inw ar d Re m ittanc es

2004

Figure: inward remittances. Page: 44

Checking points of outward remittances: a. b. c. d.

Application for foreign currency draft of remittance by means of T.T. Demand note /Invoice where Bangladesh Bank permission is not required. T/M from duly filed in and signed by the applicant. Declaration of the applicant in respect of foreign currency previously consumed by him. e. Permission from B.B for remitting foreign currency exceeding normal quota as per standing circular of BB. f. Validity of permission must be seen if approved by ECD, Bangladesh Bank. Graphical Presentation: Total no. of Outward Remittances in Khatunganj branch

5 4 Outw ard Rem ittanc es

3 2 1 0 2002

2003

2003

2004

Fig :Graphical presentation of outward remittances

Page : 45

PART: 5

PARTIAL SWOT ANALYSIS, & RECOMMENDATION, CONCLUSION.

Page: 46

PARTIAL SWOT ANALYSIS

By doing the swot analysis it is possible to find out the strengths, weaknesses, opportunities, and Threats of the SBL. Strengths & weaknesses always comes from the Internal environment. On the other hand opportunities & threats come from the external environment. The Profit of the organization depends how quickly the institute recovers the weaknesses, ability to skim the different opportunities from the market and also the capability of handling the threats. Strengths of SBL:

   

Very good profit margin achieved by the last few years. Strong capital back up available liquidity. Efficient & experienced management team. Directors of the bank are not over ruling decisions made by the management TEAM.

Weaknesses of the SBL:

   

Performance of the Marketing sector is really poor. Officers are Limited experienced not enough trained. Traditional Banking system is followed. They are not interacted with other foreign bank. That’s why they don’t deal with foreign country like other foreign bank.

Opportunities for the SBL:

   

Client’s reliability on SBL is growing day by day on the Bank. SBL has the global market operation. SBL offers many popular schemes for the people. Recently SBL will provides credit card facility too the customer.

Threats to the SBL:

      

Very competitive market Our political unsuitability effects the Banking sector very often. Our economy now passing recession this also effects the bank. Central bank’s policies sometimes are not in favor of the Private’s bank. Competitors have more deposit. Competitors have more products & services. Govt. pressures to reduce interest rate. Page : 47

Recommendation:

The motto of Standard Bank Limited is to explore a new horizon of innovative modern banking creating an automated & computerized environment providing one stop services and prepare itself to face the new challenges of Globalization & 21 st century. One of the main objectives of the bank is to be a provider of high quality products & services to attract It’s potential market. Since the growing technological revolution in the bank is not –so-distant future, That’s why to fulfill the above objectives the bank has to introduce the following services as the following services as quickly as possible so as to modernize its customer service suiting the needs of their clients.        

On line Banking Money Gram Facilities E-cash System ATM card services Credit card facilities Lease Financing Merchant Banking Islamic Banking Scheme

Page : 48

Conclusion

Banking Sector deals with the most sensitive part of economy. It is vitally important for a country to provide quality-banking service for flourishing the economic sector & enhancing the overall business & manufacturing environment of the country. Recently in Bangladesh banking Industry has been considered the most prospective, compared to the other service sectors, for their quality service & transparency. At first only the Govt. banks were in operation. But now the scenario is quite different. A good number of private banks are rendering service. Today’s business world in Dynamic & ever changing. To cope up with all these changes & adapt with new scenario a group of skilled & talented workforce is the first requirement. SBL has rightly focused on skill development of employee & at the same time introducing technology in almost every step of its day to day activity to ensure prompt & quality service. Besides the above curriculums frequent training program is also conducted by the bank to increase the level of employees efficiency. In Banking sector SBL is a name of trust, now it is a model of the best service. The reliability of the customer on SBL is increased promptly day by day. Banker’s of SBL always keeping mind the needs of their customer’s & accordingly the management designs the policies & pattern of action plan to cater better services to their clients. SBL always keep itself busy to serve the society, to improve the life style of the people, and to develop the business environment. SBL has been performing since 1999 with good reputation. Day by day its area of servicing is increased all over the country through setting up new branches at new places. I believe that Banker’s of SBL confidently look forward to a new horizon with a distinctive vision for making this bank a highly competitive, Progressive, most modern, transparent commercial Banking institution. I wish tremendous success of Standard Bank Limited.

Page : 49

BIBLIOGRAPHY:

The available sources from where I have taken help to prepare this report include the followings: o

Loans & Advance and Foreign Exchange Manuals of Standard Bank Limited.

o

Bangladesh Laws on Banks & Banking--- Md. Abdul Bashar Bhuiya.

o

Banking Theory & Practice--- K. C. Shekhor & Lekshmy Shekhor.

o

Annual Report---2005 of Standard Bank Limited

o

Text Book on Credit & foreign exchange--- L.R. Chowdhury.

o

Banking Law & Practice---- S.N. Maheswari

o

ICC Guide to Documentary credit Operation for the UCPDC 500 ---- Charles Del Bus to

o

Import Policy order 1997-2004 Ministry of Commerce Government of the peoples Republic of Bangladesh.

o

Business Policy & Implementation (Banking & Insurance) .

Page : 50