Exchange Activities of Selected Banks in Bangladesh

8/11/2019 Exchange Activities of Selected Banks in Bangladesh

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Thesis Paper on Foreign Exchange Activities of Selected

Banks in Bangladesh

1.1 Origin of the Report

I am lucky to say that, Stamford University, Bangladesh, assigned me the report on foreignExchange operations of selected banks. The data reuired for preparing this report has

!een collected from the annual reports of most recent years.

"BB#, $%%, $B# & South 'ast Banks that perform most of the standard !anking servicesand investment activities on the !asis not only profit sharing !ut also social partnership. Thisstudy attempts to analy(e the nature of modern !anking activities and performance ofselected !anks. Its performance )as revie)ed and analy(ed through the annual reports, andinternal records of the !ank.

This thesis report covers*

+ An Overview on foreign exchange operations of B!

+ Financial Perfor"ance of the Bank

+ Export and #"port Perfor"ance$

The o!ectives of the study are as follo)s*

%eneral Ob&ectives*

The general o!ective of the report is the evaluation of foreign e-change operation of selected!anks and compare )ith its competitor.

Specific Ob&ective*

+ To apply theoretical kno)ledge into practical area.

+ To !e familiar )ith the !anking management system.

+ To attain practical kno)ledge on the foreign e-change operations performed !y selected!anks.

+ To evaluate the performance of eneral Banking division.

+ To kno) the !anking operational guideline of a !ank.

+ To get a !rief idea a!out operational procedure.

+ To analy(e the financing systems of the !ank and find out )hether the !ank needs anyimprovement to !e done and make greater contri!ution to)ards the country/s economy.

+ To familiari(e different rules and regulations of Bank/s formalities.


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+ To familiari(e the )orking hours, values and environment of the !ank.

+ To adopt )ith the everyday !anking activities.

+ To find out the contri!ution of private commercial !anks for the economic development

of the country.

+ To attain practical kno)ledge on the foreign e-change operations performed !y 0B#.

+ To have !etter direction to identify and suggest the scope of enhancement in foreigne-change operations to fulfill the reuirement of the internship program.

+ #% Opening.

+ To learn a!out the !enefits and incentives provides to the e-port proceeds.

+ To kno) the collection process of e-port proceeds.

+ To detect the pro!lems involved and to o!tain solutions.

The main o!ective of the study is to o!tain a clear idea a!out the 2oreign '-change !usinessof our !anking operation i.e. ho) the #% is opened and ho) the import & e-port is done

To meet the o!ectives of the study, I reali(ed that a single method )ould not !e effective.2ormal & oral discussion, direct o!servation, uestioning clients & printed papers of theBanks )ere found useful. To collect the necessary and meaningful information, the follo)ing

methods )ere applied. Both primary and secondary sources )ere used here.

'$($' )esearch *esign

'-ploratory research has !een conducted for gathering !etter information that )ill give a!etter understanding on different financial data. Both primary and secondary sources of datacollection procedure have !een used in the report. 3rimary data has !een collected mainlythrough the )riter/s o!servation of the approval process and monitoring techniues, informalintervie)s of e-ecutives, officers and employees of selected !anks.

To make the Report more meaningful and presenta!le, t)o sources of data and information

have !een used )idely.

2igure 1.1 Sources of data


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Both primary and secondary data sources )ere used to generate the report. The informationincorporated in this report has !een gathered from primary and secondary sources. 4part fromthis, a revie) of related circular and office circular as )ell as face5to5face intervie) of thee-ecutives, officials and clients )ere carried out.

'$+$' Pri"ar, So-rces

+ 2ace to conversation )ith the respective officers and stuffs of the !anks.

+ "iscussing )ith my supervising teacher and manager.

+ In5depth study of selected cases.

5 See more at* http*))).assignmentpoint.com!usinessthesis5paper5on5foreign5e-change5

activities5of5selected5!anks5in5!angladesh.html6sthash.7t8%429h.dpuf

'$+$. Secondar, So-rces

+ 4nnual Report of the !anks.

+ :e!site of the !anks.

+ Several !ooks and periodicals related to the !anking sector.

+ Bangladesh Bank Report.

+ ;arious documentary file of the !anks.

+ 3rior research report.

9.1 Banking System of Bangladesh

The 8e)s in 8erusalem introduced a kind of !anking in the form of money lending !efore the!irth of %hrist. The )ord

2irst modern !anking )as introduced in 1==> in Stockholm as


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The num!er of !anks in all no) stands at 7 in Bangladesh. Out of the 7 !anks, four are$ationalised %ommercial Banks C$%BsD, 9> local private commercial !anks, 19 foreign!anks and the rest five are "evelopment 2inancial Institutions C"2IsD.

Sonali Bank is the largest among the $%Bs )hile 3u!ali is leading in the private ones.

4mong the 19 foreign !anks, Standard %hartered has !ecome the largest in the country.Besides the scheduled !anks, Sama!ai C%ooperativeD Bank, 4nsar5;"3 Bank,?armasansthan C'mploymentD Bank and rameen !ank are functioning in the financialsector.The num!er of total !ranches of all scheduled !anks is =,E@> as of 8une 9EEE. Of the

!ranches, @.F per cent C9,719D are located in the ur!an areas and =E.EF per cent C@,=9=D inthe rural areas. Of the !ranches $%Bs hold @,=1=, private commercial !anks 1,917, foreign

!anks @1 and speciali(ed !anks 1,1GG.

Bangladesh Bank CBBD regulates and supervises the activities of all !anks. The BB is no)carrying out a reform programme to ensure uality services !y the !anks.

Bangladesh Bank CBBD has !een )orking as the central !ank since the country/sindependence. Its prime o!s include issuing of currency, maintaining foreign e-changereserve and providing transaction facilities of all pu!lic monetary matters. BB is alsoresponsi!le for planning the government/s monetary policy and implementing it there!y.

The BB has a governing !ody comprising of nine mem!ers )ith the overnor as its chief.4part from the head office in "haka, it has nine more !ranches, of )hich t)o in "haka andone each in %hittagong, Rashahi, ?hulna, Bogra, Sylhet, Rangpur and Barisal.

4 co""ercial bankCor b-siness bankD is a type of financial institution and intermediary. Itis a !ank that provides transactional, savings, and money market accounts and that acceptstime deposits.

.$/$' Service

Acco-nts0 1-rrent0 F*)0 P*S 2 *eposit Sche"e

.$/$'$' 1-rrent Acco-nt

enerally this sort of account opens for !usiness purpose. %ustomers can )ithdra) moneyonce or more against their deposit. $o interest can !e paid to the customers in this account. Ifthe amount of deposit is !elo) taka 1,EEE on an average the !ank has authority to cut taka FEfrom each account as incidental charge after every si- months. 4gainst this account loanfacility can !e ensured. Usually one can open this account )ith taka FEE. One can open thissort of account through cash or check!ill. 4ll the !anks

.$/$'$. Saving Bank Acco-nt

Usually customers open this sort of account at a lo) interest for only security. This is also aninitiative to create people/s savings tendency. enerally, this account is to !e opened at taka

1EE. Interest is to !e paid in 8une and "ecem!er after every si- months. If money is)ithdra)n t)ice a )eek or more than taka 1E,EEE is )ithdra)n Cif 9FH more compared to


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total depositD then interest is not paid. This account guarantees loan. 4lmost all the !anksfollo) the same rules in the field of savings account, e-cept foreign !anks for varyingdeposit. On an average, all the !anks give around si- percent interest.

.$/$'$3 Special Service

Some Banks render special services to the customers attracting other !anks.

.$/$'$/ #nternet Banking

%ustomers need an Internet access service. 4s an Internet Banking customer, he )ill !e givena specific user I" and a confident pass)ord. The customer can then vie) his account

!alances online. It is the industry5standard method used to protect communications over theInternet.

To ensure that customers/ personal data cannot !e accessed !y anyone !ut them, all reporting

information has !een secured using ;ersion and Secure Sockets #ayer CSS#D.

.$/$'$( 4o"e Banking

ome !anking frees customers of visiting !ranches and most transactions )ill !e automatedto ena!le them to check their account activities transfer fund and to open #% sitting in theiro)n desk )ith the help of a 3% and a telephone.

.$/$'$( Electronic Banking Service for 5indows

'lectronic Banking Service for :indo)s C'BS:D provides a full range of reportingcapa!ilities, and a comprehensive range of transaction initiation options.

The customers )ill !e a!le to process all payments as )ell as initiate #%s and amendments,through 'BS:. They )ill !e a!le to vie) the !alances of all accounts, )hether )ith Standard%hartered or )ith any other !anks using S:I2T. 4dditionally, transactions may !e approved

!y remote authori(ation even if the approver is out of station.

.$/$'$+ A-to"ated Teller achine 6AT7

4utomated Teller 0achine C4T0D, a ne) concept in modern !anking, has already !een

introduced to facilitate su!scri!ers 97 hour cash access through a plastic card. The net)ork of4T0 installations )ill !e adeuately e-tended to ena!le customers to non5!ranch !anking

!eyond !anking.

.$/$'$8 Tele Banking

Tele Banking allo)s customers to get access into their respective !anking information 97hours a day. Su!scri!ers can update themselves !y making a phone call. They can transferany amount of deposit to other accounts irrespective of location either from home or office.

.$/$'$9 S5#FT


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S:I2T is a !ank o)ned non5profit co5operative !ased in Belgium servicing the financialcommunity )orld)ide. It ensures secure messaging having a glo!al reach of =,7F Banks and2inancial Institutions in 1G> countries, 97 hours a day. S:I2T glo!al net)ork carries anaverage 7 million message daily and estimated average value of payment messages is US" 9trillion.

S:I2T is a highly secured messaging net)ork ena!les Banks to send and receive 2undTransfer, #% related and other free format messages to and from any !anks active in thenet)ork.

aving S:I2T facility, Bank )ill !e a!le to serve its customers more profita!le !y providing#%, 3ayment and other messages efficiently and )ith utmost security. 'specially it )ill !e ofgreat help for our clients dealing )ith Imports, '-ports and Remittances etc.

.$( one, and Banking sector review

.$($' onetar, 2 1redit Polic,

The monetary and credit policy for the financial year that ended in 8une,9EEE )as formulated)ith the o!ective of full utili(ation of domestic resources and rapid economic gro)ththrough priorities for agriculture, industry, e-port, and e-pansion and strengthening of the

private sector, at the same time keeping inflation )ithin tolera!le limits. 4 moderne-pansionary monetary and credit policy )as adopted in order to make good the losses toagriculture, industry, and infrastructure !y the devastating floods of 1>. 4fter the flood theeconomy remained sluggish in the first uarter of 159EEE and the private sector demandfor credit shrank. In vie) of this, the 4nnual "evelopment 3rogrammed C4"3D )ase-panded and development activities in the private sector )ere geared up. 4s a result, the

pu!lic sector a!sor!ed credit at an accelerated rate. Though credit to the private sector pickedup to)ards the end of the year, the overall annual gro)th )as smaller than programmed,although gross domestic credit e-panded a little faster than proected. 0oney supplyincreased !y 1F.@H in 159EEE compared to the e-pansion of >.=H in the preceding year.

.$($. :arrow one,

$arro) 0oney increased !y Tk. 9,[email protected] crores or 1F.@H to Tk.1,>>1.@E crores in 159EEE. Of the components of $arro) 0oney, currency outside !anks )ent up !y Tk.1,7>.7Ecrores or 1G.9H to Tk.1E,1G=.EE crores, and demand deposits )ent up !y Tk.1,179.FE crores

or 1@.@H to Tk.,GEF.@E crores.

.$($3 Broad one,

Broad 0oney increased !y Tk.11,[email protected] crores or 1>.=H to Tk. G7,G=9.7E crores in 159EEE compared to the increase of 19.>H in the preceding year. Of the components of Broad0oney, $arro) 0oney increased !y 1F.@H and time deposits rose !y 1.H compared to theincrease of >.=H in $arro) 0oney and 17.FH in time deposits in the preceding year. Theshares of currency outside !anks, demand deposits and time deposits in Broad 0oney stoodat 1@.=H, [email protected], and [email protected] respectively on @Eth 8une, 9EEE compared to 1@.>H, 1@.=H andG9.=H respectively on @Eth 8une, 1.'-pansion of credit to the private sector, government

sector CnetD, pu!lic sector, and other assets CnetD, along )ith a surplus in net foreign assetscontri!uted to the e-pansion of Broad 0oney.


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.$($/ )eserve one,

Reserve 0oney increased !y Tk.9, @91.>E crores or 1F.GH to Tk.1G,E=7.FE crores in 159EEE compared to the increase of >.@H during the preceding year. Of the components ofReserve 0oney, currency outside !anks increased !y Tk.1,7>.7E crores or 1G.1H compared

to the increase of Tk.F@@.@E crores or =.FH during the preceding year. Scheduled !anks!alances )ith the Bangladesh Bank increased !y Tk.GGE.E crores or 1F.@H in 159EEEcompared to the increase of Tk.7>>.9E crores or 1E.>H in the preceding year. Their cash intills increased !y Tk.=1.FE crores or =.EH as against the increase of Tk.1E@.=E crores or11.9H in the preceding year. The increase in Bangladesh Bank/s credit to the governmentCnetD !y Tk.1,G@>.1E crores and net surplus in the foreign sector !y Tk.1,9=9.7E crores playedthe main role in e-erting e-pansionary influence on the Reserve 0oney. o)ever the declineof Tk.@@@.=E crores and Tk.77.E crores in the !orro)ings !y the scheduled !anks and otherfinancial institutions respectively along )ith the fall of [email protected] crores in other assets CnetD

partly offset the e-pansionary impact of those sectors.

.$($( *o"estic 1redit

Total domestic credit increased !y Tk.>, F>1.9E crores or 1@.=H to Tk. G1,7>.EE croresC including adustment of !onds issued !y the governmentD in 159EEE as compared to theincrease of Tk.G,9=G.=E crores or [email protected] in the preceding year. '-pansion of credit to thegovernment, private, and pu!lic sectors to the e-tent of Tk.@,F97.@E crores C@1.@HD,Tk.7,E=.1E crores C1E.GHD, and Tk.1FE.>E crores C9.FHD respectively contri!uted to thee-pansion in total domestic credit in 159EEE. %redit to the government and private sectorhad increased !y 91.@H and 1@.>H respectively, )hile credit to the pu!lic sector declined [email protected] in the preceding year.

.$($+ Bank 1redit

The outstanding level of !ank credit Ce-cluding foreign !ills and inter5!ank itemsD increased!y Tk.F, 19@.@E crores or 1E.@H to Tk.F7, =7=.1E crores in 159EEE as compared to theincrease of 19.7H in the preceding year. Of the components of !ank credit, advancesincreased !y Tk.7, >9.GE crores or 1E.@H and the !ills purchased and discounted )ent up !yTk.9@E.=E crores or 11.@H.

.$($8 Bank *eposit

Bank deposits Ce-cluding inter5!ank itemsD increased !y Tk.11,E77.GE crores or 1>.=H toTk.GE,9G>.GE crores in 9EE59E1E compared to the increase of 17.9H in the preceding year.Of this increase , time deposits )ent up !y Tk.,1E@.>E crores or 1.H to Tk.F7,>>1.1Ecrores, government deposits !y Tk.G9@.=E crores or 17.>H to Tk.F,=1F.9E crores and demanddeposits !y Tk. 1,179.FE crores or 1@.@H to Tk.,GEF.@E crores. On the other hand, restricteddeposits increased !y Tk.G7.>E crores in 9EE59E1E.

@.1 3rofile of Southeast Bank #imited


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The emergence of Southeast Bank #imited )as at the uncture of li!erali(ation of glo!aleconomic activities. The e-perience of the prosperous economies of the 4sian countries andin particular of South 4sia has !een the driving force and the strategic operational policyoption of the Bank. The company philosophy J K4 Bank )ith ;isionA has !een precisely anessence of the legend of success in the 4sian countries.

Southeast Bank #imited is a scheduled commercial !ank in the private sector, )hich isfocused on the esta!lished and emerging markets of Bangladesh. In "haka, the first !ranch)as launched in 1F and the !ank has !een gro)ing ever since. Southeast Bank #imited has99 !ranches throughout Bangladesh and its aim is to !e the leading !ank in the country/s

principal markets. The !ank !y concentrating on the activities in its area of speciali(ation hasachieved good market reputation )ith efficient customer service. The Bank is committed to

providing continuous training to its staff to keep them up to date )ith modern practices intheir respective fields of )ork. The Bank also tries to fulfill its share in communityresponsi!ilities. By such measures the Bank intends to gro) and increase shareholders/earning per share. Southeast Bank #imited pledges to ma-imi(e customer satisfaction

through services and !uild a trusting relationship )ith customers, )hich has stood the test oftime for the last nine years.

3$'$. ;ision of Bank

+ To stand out as a pioneer !anking institution in Bangladesh

+ To contri!ute significantly to the national economy.

3$'$3 ission of Bank

+ igh uality financial services )ith the help of latest technology.

+ 2ast & accurate customer service.

+ Balanced gro)th strategy.

+ igh standard !usiness ethics.

+ Steady return on shareholders/ euity.

+ Innovative !anking at a competitive price.

+ "eep commitment to the society and the gro)th of national economy.

+ 4ttract and retain uality human resource.

3$'$/ Social )esponsibilit,

4n organi(ation cannot move along. Organi(ation needs people to generate its activities &people needs organi(ation to get some kind of services. Southeast !ank is an organi(ation thatis concerned to ma-imi(e its profit along )ith maintaining some kind of social

responsi!ilities. It is fully devoted to fulfil the needs for its customer/s satisfaction as )ell asit is involved socio5economic development activities. O!ectives of the !anks are*


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+ %reating employment opportunities )ithin the !ank through e-panding its net)ork

+ %ooperating )ith organi(ations such as ramen Bank )hich are helping the poor throughmicro credit and other facilities.

+ It finances the small scale industries to help them survive.

3$'$( anage"ent Tea"

To achieve the mission, a set of efficient drivers is mandatory. %ommercial !anks inBangladesh are no) in a hard competition. This is !ecause of continuous gro)th of similarservice oriented local !ank along )ith special service providing foreign !ank due toglo!ali(ation.

In this respect, Southeast !ank enoys a team of sound professionals. It is managed !y a teamof professionals having long e-perience in the !anking industry. :hile the !oard sets the

management o!ectives and policies, the management is instrumental in providing the inputsand implementing the strategies set !y the !oard. The !ank maintains a continuous policy ofdeveloping its human resources. It !elieves that, the professionals are the key forces !ehindthe achievement of success in !anking !usiness at the face of prevailing rigorous competitivemarket situation.

3$'$+ anage"ent #nfor"ation S,ste"

South east !ank uses 3% Bank0 a !ranch !anking soft)are developed !y leads%orporation5 developed on SL* on )indo)s platform. The head office and !ranches use the

soft)are for !ook keeping, automatic interest calculation, daily transaction listing and audittrials, auto maturity and auto rene)al of 2"RS, automatic integration of customer/s ledgerand general ledger, printing of general ledger position including !alance of su!sidiaries,monthly income and e-penditure position etc.

3$'$8 Service 2 Prod-cts

S'B# al)ays try to provide !est services and products to their clients to acuire theirsatisfaction. The !ank provides the follo)ing the products and services to consider client/sdemand

LockerServices

YearlyCharge

SecurityDeposit Service Available at

Small Tk. GFE5Tk.9, FE5

CRefunda!leD

2or all types of

lockers.

Gulshan

Branch

0edium Tk. 1,9FE5

Dhanmondi

Branch

!arge Tk$ .0


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*eposit Sche"es

*eposit )ate 6*$)$7 6Effective

fro" April


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Sche"e 6P$S$S$7

Sche"e 6E$S$S7

%arriage Savings S Scheme (%+S+S)

Ta!le* @5@

Savers Benefit *eposit Sche"e

Deposited

A"o-nt

(


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Loan Schemes Lending Categories Lending /ates

(L+/+)

.gricultural

Scheme

Loan to primary Producers

'.$


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importers and e-porters. If the !ranch is authori(ed dealer in foreign e-change market, it canremit foreign e-change from local country to foreign country. This department mainly dealsin foreign currency. This is )hy this department is called foreign e-change department.

Some national and international la)s regulate functions of this department. 4mong these,

2oreign '-change 4ct, 17G is for dealing in foreign e-change !usiness, and Import and'-port %ontrol 4ct, 1FE is for "ocumentary %redits CU%3"% J 1@ revision &International %ham!er of %ommerce 3u!lication no J FEED is also an important la) forsettlement of terms and conditions !et)een e-porter and importer in international trade.overnments/ Import &'-port policy is another important factor for import and e-portoperation for !anks.

3$'$/ F-nctions of *epart"ent

#"port Operation

Import section helps !usiness and other people to import goods. In international environment,!uyers and sellers are often unkno)n to each other. So seller al)ays seek guarantee for thepayment for his goods e-ported. ere is the role of !ank. Bank gives e-port guarantee that it)ill pay for the goods on !ehalf of the !uyer. This guarantee is called #etter of %redit. Thusthe contract !et)een importer and e-porter is given a legal shape !y the !anker !y its


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:hen a !uyer goes to import some goods from a foreign !uyer, he reuest his !ank makespayments to the e-porter of goods. 4nd the !ank recovers the amount from the importer.

oreign

Bills

P-rchased

6FBP7

This loan is given to the e!porter+ 0hen local e!porter

gets a 3sance 4ill o-

exchange0 he has to wait -ntil the "at-rit, of the bill for receiving

pa,"ent$

So"eti"es he cannot wait -ntil "at-rit, and reC-est the bank to

p-rchase it$ #f

bank decides to p-rchase it0 then it "akes pa,"ents to the exporter

against the

bill of exchange$ Dpon "at-rit,0 banks present it to the drawee of the

bill for

encash"ent$ Bank p-rchases it at disco-nt$

5* Loan (hen L)" opener has no su*cient fund to purchase +oreign

%'change to

open #%, then !ank provides him credit to purchase necessary foreign

e-change under the :'SS'0. This loan is called Import #oan under

:'SS'0 or I3 loan.

Export Operation

Bangladesh e-ports a large uantity of goods and services to foreign households. Readymadete-tile garments C!oth knitted and )ovenD, 8ute, 8ute5made products, fro(en shrimps, tea arethe main goods that Bangladeshi e-porters e-ports to foreign countries. arments sector isthe largest sector that e-ports the lion share of the country/s e-port. Bangladesh e-ports mostof its readymade garments products to U.S.4 and 'uropean %ommunity C'%D countries.Bangladesh e-ports a!out 7EH of its readymade garments products to U.S.4. 0ost of thee-porters )ho e-port through SB#are readymade garment e-porters. They open e-port #%shere to e-port their goods, )hich they open against the import #%s opened !y their foreignimporters.

'-port #% operation is ust reverse of the import #% operation. 2or e-porting goods !y thelocal e-porter, !ank may act as advising !anks and collecting !ank Cnegotia!le !ankD for thee-porter.

a$ As an advising bank* It receives documents from the foreign importer and hands it over tothe e-porter. Sometimes it adds confirmation on the #% on reuest from the Opening Bank.By adding confirmation, it assumes the responsi!ility to make payment to the e-porter.


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1# 4+ .s Negotiating Bank, It negotiates the -ills and other shippingdocuments in favor of the e'porter# hat is. it collects the proceeds of thee'port/-ill from the dra0ee and credits the e'porters account for thesame# "ollection proceed from the e'port -ill is deposited in the -ansN'ST/' account in the importers country# $ometimes the -anpurchases the -ills at discount and 0aits till maturity of the -ill# (hen the-ill matures. -an presents it to the dra0ee to encase it#

In our country, '-port and Import operation of !ank is very much related )ith one another!ecause of use of Back to Back and maturity of payment for Back5to5Back #% is set in suchthat it can !e paid out of e-port proceeds. So e-port and import sections )orks as one unit.These t)o operations can hardly !e separated from one another in the !ranch.

Foreign )e"ittance *epart"ent

This !ank is authori(ed dealer to deal in foreign e-change !usiness. 4s an authori(ed dealer,

a !ank must provide some services to the clients regarding foreign e-change and thisdepartment provides these services. The !asic function of this department are out)ard andin)ard remittance of foreign e-change from one country to another country. In the process of

providing this remittance service, it sells and !uys foreign currency. In such transactions theforeign currencies are like any other commodities offered for sales and purchase, the costCconvention valueD !eing paid !y the !uyer in home currency, the legal tender.

iscellaneo-s Services b, this *epart"ent

Student

File

Students ho are desirous to study a4road can open6le in the 4ank+

B, opening this file0 bank ass-res the re"ittance of f-nds in

abroad for

st-d,$

N/5T

Acco-nt

Non resident Investors Takaccount is account

$on5resident Bangladeshi can deposit foreign currency for investment

in security of stock e-changes. 2or such accountholders, FH of

primary shares are reserved.

+C+

Acco-nt

Foreign Currency accountsopened in the names of

angladeshi

nationals or persons of Bangladeshi origin )orking or self5employed

a!road can no) are maintained as long as the account holders desire.

NCD $tands for Non-resident Foreign Currency Deposit


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'ligi!le persons may open such accounts even after their return to

Bangladesh, )ithin si- months of their arrival.

Ta!le* @5=

Anal,sis of this *epart"ent

T,pes of Acco-nt

No+ '-

.ccounts A"o-nts 6#n Taka$7

&+&+&+&+&+& CD7oreign

Currency Deposit91G G=>>1=.EE

NCD

G 9>GEG.EF

/CD

19 1FF79G.GF

8!port Cash Credit 9 8CC

@ 9@[email protected]@

Ta!le* @5G

:-"ber of *ifferent Acco-nts aintained b, this *epart"ent

:-"ber of *ifferent Acco-nts aintained b, this *epart"ent

2ig. @.9

4mount "eposited and 4dvanced in "ifferent 4ccounts 0aintained


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2ig. @.@

3$'$( Banks Perfor"ance

The !ank/s overall o!ective is to have a higherMprofita!ility than that of the )eighted average

of other !anks

1apital and )eserve

The authori(ed capital of the !ank )as Tk. @,FEE.EE million and paid5up capital )as Tk.9,>F9.9E million as of "ecem!er @1, 9EE>. The capital and reserve of the !anks in 9EE> stoodat Tk. G,=FG.E1 million compared )ith Tk. =,7=>.@= million of the previous year sho)ing anincrease of 1>.@>H

The capital and reserve position of the Bank as on @151959EEF is appended as*

Taka in %illion

6a7 1O)E 1AP#TA! 6Tier># 1apital7

3aid Jup %apital 9,>F9.9E

Shares 3remium 4% 7>F.@

Statutory Reserve 1,GF.9F

eneral Reserve 97G.=F

Retained 'arnings F79.G

6a7 Total 1ore 1apital +0'## 1apital7

3rovision for Unclassified 4dvances =71.@1eneral 3rovision on off Balance

Sheet '-posures@[email protected]@

4ssets Revaluation Reserves FE.=>

Revaluation Reserves of T0 Securities @.=

'-change 'uali(ation 4% 7.9E

6b7 Total S-pple"entar, 1apital '0((3$'?


18/66

Total 1apital 2 )eserves 61apital7 6ab7 80+(8$


19/66

Bangladesh 'conomy recorded satisfactory gro)th in 29EE> in spite of e-periencing t)oconsecutive floods and devastating cyclone Sidre, price hike of oil and other commodities inthe )orld market. overnments gro)th generating and poverty reduction programs coupled)ith the prudent monetary policy of Bangladesh Bank lead to achieve =.9H gro)th in29EE>, slightly lo)er than =.7H of 29EEG. $early all sectors contri!uted to the "3

gro)th, particularly significant )ere the gro)th of e-port5oriented sectors, inflo) ofremittances and some service sector like transport and communication.

3$.$3 Backgro-nd of B!

Banking system occupies an important place in an economy. 4 !anking institution isindispensa!le in modern society. It plays a li!erali(ation of economics policies inBangladesh. 0ercantile Bank #imited emerged as a ne) commercial !ank to provideefficient !anking service )ith a vie) to improving the socio5economic development of thecountry.

0ercantile Bank #imited has !een incorporated on 0ay 9E, 1 in "haka, Bangladesh as a3rivate limited company )ith the permission of the Bangladesh BankP 0ercantile Bank#imited commenced formal commercial !anking operation from the 8une 9, 1. The !ankstood 7F !ranches all over the country up to "ecem!er, 9EE>.

There are 9> sponsors involved in creating 0ercantile Bank #imited. The sponsors of the!ank have a long heritage of tradeP commerce and industry. They are highly regarded for theirentrepreneurial competence. The sponsors happen to !e mem!ers of different professionalgroups among )hom are also reno)ned !anking professionals having vast range of !ankingkno)ledge. There are also mem!ers )ho are associated )ith other financial institutions likeinsurance companies, leasing company etc.

3$.$/ ;ision

:ould make finest corporate citi(en.

3$.$( ission

(ill -ecome most caring. +ocused for e6uita-le gro0th -ased on diversi7ed deployment of

resources. an

8evertheless 0ould remain healthy and gainfully pro7ta-le an#

3$.$+ Ob&ective

v Strategic Ob&ectives>

Q To achieve positive 'conomic ;alue 4dded C';4D each year.

Q To !e market leader in product innovation.

Q To !e one of the top three 2inancial Institutions in Bangladesh in terms of cost efficiency.


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Q To !e one of the top five 2inancial Institutions in Bangladesh in terms of market share inall significant market segments they serve.

v Financial Ob&ective>

Q To achieve a return on shareholders/ euity of 9EH or more, on average.

3$.$8 1ore val-es

v For the c-sto"ers>

3roviding )ith caring services !y !eing innovative in the development of ne) !ankingproducts and services.

v For the shareholders>

0a-imi(ing )ealth of the Bank.

v For the e"plo,ees>

Respecting )orth and dignity of individual employees devoting their energies for theprogress of the Bank.

v For the co""-nit,>

Strengthening the corporate values and taking environment and social risks and re)ard into

account.

3$.$9 4ierarch, of Positions in ercantile Bank !i"ited


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3$.$? Organ gra"


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3$.$'< 1overage of B!


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25/66


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3$.$'' F-nction of B!

4 !ank has a lot of function in different )ays. 4 Bank means an institution, )hich !orro)smoney from the surplus unit of the society and lends money to the deficit unit for earning

profit. The deposits are mainly accepted !y the !anker through current and saving account

that is )ithdra)al !y cheues. 4 !ank includes a !ody of person/s )eather incorporated ornot )ho carry on !usiness of !anking. Thus a !ank is a profit intuition )hich deals in moneyand credit.

The functions of %ommercial !anks are no) )ide and varied. o)ever, the functions of%ommercial Banks may !roadly !e classified under the follo)ing t)o categories*

Q 3rimary 2unction

Q Secondary 2unction

3$.$''$' Pri"ar, F-nction

The 3rimary functions of %ommercial Bank0B# are as follo)s5

Accepts *eposits

The first primary functions of !ank are to accept deposits of money from the pu!lic

or sever group. The total deposits held !y the !anker are !roadly classified as5

*e"and *eposit"emand deposits are )ithdra)n a!le on demand and thus no priornotice is needed. "eposits in %urrent 4ccount and Saving 4ccount fall in this category.

Ti"e *epositTime deposits are repaya!le on the e-piry of a fi-ed period of time only.2i-es deposit 4ccounts, recurring "eposit 4ccounts and deposit paya!le at specified

!ends one,

Banking system essentially involves lending. "epending on the reuirements of the !orro)er,!anks lend money in the forms follo)ing*

!oansIn case of loan, the entire amount is paid to the !orro)er in lump sump, either in

cash or )ay of transfer to his account. The !orro)er can )ithdra) the amount at any time.Interest is calculated and charged on the de!it !alance usually )ith uarterly rests. 4 loan


27/66

once repaid in full or in part cannot !e )ithdra)n further. Thus, no cheue !ook is issuedagainst the loan account.

OverdraftOverdraft is usually a temporary arrangement )here the customer is allo)ed to)ithdra) money e-ceeding the credit !alance of the current account up to an agreed limit.

Interest in charged only for the amount dra)n.

1ash 1redit 4 cash credit is an arrangement )here the customer is allo)ed to )ithdra)money up to the sanctioned limit. Unlike overdraft this is a permanent arrangement andusually used to meet the )orking capital needs of !usiness housed, industries etc. in cashcredit account )ithdra)als and deposits may !e effected freuently. Interest is charged on thedaily !alanced. %ash credit arrangement is usually made against pledge or goods !ut thiscould also !e e-tended against personal security.

Bill *isco-nted and P-rchase 4nother mode of advancing money is discounting of theissuance !ill of e-change. The !anks !uy the !ill !efore its maturity at a price less than theface value. The amount, )hich the !ank deducts from the face value of the instrument, isactually the interest calculated up to the date of maturity of the !ills.

1reates 1redit The creation of credit is one of the important functions of %ommercialBank. The !ank accepts deposits from the pu!lic and lends money to its customers. :hen a

!ank e-tends loan, it does not pay the amount in the !ank account of the !orro)er and allo)

)ithdra)ing the reuired amount !y cheues. In this )ay the !ank creates credit or deposit)hich is regarded as money and can !e used for the purchase goods and services and also forthe payment of de!t ust like currency notes.

1reates "edi-" of Exchange %ommercial !ank usually issues cheue )hich circulates likemoney in the society and creates the medium of e-change.

3$.$''$. Secondar, F-nction

0odern commercial !ank like 0B#, !esides performing the primary functions, cover a )iderange of financial and non5financial services to meet the gro)ing needs of the time. Some ofthe services are availa!le only to the customer )hile others are availa!le to the pu!lic ingeneral. The su!sidiary services provided !y a modern !anker may !e classified into thefollo)ing t)o groups*

Agenc, Services

In many cases the %ommercial Banks acts the agent of the customers. 4s agents the !anksprovide the follo)ing services*

%ollection of cheue, draft, !ill of e-change, promissory note, dividends, salaries, pension,rent etc. on !ehalf of the customer.


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4cting as correspondent and representative of its customers, other !anks, and financialinstitutions.

%onducting stock e-change transaction i.e. purchase and sale of share and securities for thecustomers.

2unctioning as trustee, e-ecutor or administrator of estate of a customer.

%eneral Dtilit, Services %ommercial !anksprovide a variety of general utility servicesto the customers. They are given !elo)*

Issue letter of credit C#%D

4ccepts valua!les for safe custody

%onducts in foreign e-change !usiness

#ease financing

3rovides Internet !anking services

3rovides speciali(ed advisory services

Issues de!it and credit cards

Under)rites of share and securities

0erchant Banking

Serving as a referee as to the financial standing !usiness reputation and respecta!ility oftheir customers

3$.$'. Foreign Exchange b-siness

4 commercial Bank0B# is involved in financing foreign trade apart from financing internalcredit reuirement in the economy. This involves handling of import !usiness throughopening #% and handling of e-port !usiness. 4s !anking has !ecome very keenly

competitive, !anks find it convenient to involve in foreign e-change !usiness as a lucrativesource of earning income and profit.

4part from financing foreign trade, %ommercial Banks also provide guarantees of varioustypes to their clients. :hile these facilities clients to undertake o!s assigned to them !yvarious corporations and organi(ation, this ena!les the !ank to earn commission.

4 commercial Bank also provides the facilities of remittance to its clients for transfer offunds to various traded centers )ithin the country and also outside the country in keeping)ith the foreign restrictions of the %entral Bank.

3$.$'3 !one Prod-cts


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Credit Schemes

1ons-"ers 1redit Sche"e

Ob&ectives>

9elp 7'ed/income people for -uying house hold dura-le# +or the amount up to # 1. ::.::: the period is t0o years#

Interest rate 0ill -e charged 6uarterly rest#

Ter"s 2 1onditions>

Interest ;ate 1


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enure of loan is :5 >+ive? years

Interest ;ate 1


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from investing in the shares of United %ommercial Bank. In doing !usiness, United%ommercial Bank follo)s the fundamental principles of %orporate overnance4ccounta!ility, Responsi!ility and Transparency. United %ommercial Bank #imited )illuphold its !usiness motto of Kpeople come firstA and strive to provide the !est !anking

products and services to its customers. In the process of reform and development, the !ank is

trying to improve its management capa!ilities and service standards through hard )ork andinnovation. 4nd such efforts have helped it gain a good reputation from its customers.

3$3$. ;ision of the Bank

To !e the !est 3rivate %ommercial Bank in Bangladesh in terms of efficiency, capitaladeuacy, asset uality, sound management and profita!ility having strong liuidity.

3$3$3 ission of the Bank

o -uild Enited "ommercial an Limited into an e*cient. maret driven.

customer focused institution 0ith good corporate governance structure# "ontinuous improvement in our -usiness policies. procedure and e*ciency

through integration of technology at all levels#

3$3$/ Strategic State"ent

To have sustained gro)th, !roaden and improve range of products and services in all areas of!anking activities )ith the aim to add increased value to shareholders investment and offerhighest possi!le !enefits to our customers.

3$3$( Ob&ectives of the Bank

To !uild up strong pillar of capital, To promote trade, commerce and industry, To discoverstrategies for achieving systematic gro)th, To improve and !roaden the range of product andservices, To develop human resource !y increasing employment opportunities, To enhanceasset of shareholders, To offer standard financial services to the people, To keep !usinessmorality, To develop )elfare oriented !anking service, To offer highest possi!le !enefit tocustomers.

3$3$+ 1orporate infor"ation of D1B!

$ame of the !ank * United %ommercial Bank #td

Status * 3rivate #imited %ompany

"ate of Incorporation * 8une 9@, 1>@

4uthori(ed %apital * [email protected] %rore

3aid5up %apital * Tk.1G1.@GF %rore

$um!ers of Branches * >F C'ighty 2iveD

3roposed Branches * 1F C2ifteenD


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%hairman * 0r.0d.8ahangir 4lam ?han

%ompany Secretary * 0r. 0ahmud Rafiur Rahman

0anaging "irector * 0r. 0. Shahahan Bhuiyan

$um!er of 'mployees * 9FEE

%redit Rating * #ong Term* 4@ C4deuate SafetyD

Short Term* ST59

Registered Office * 2ederation Bha!an C7ththrough =th2loorD

=E, 0otiheel %ommercial 4rea, "haka51EEE.

Bangladesh .3.O5 Bo-* 9=F@

34B* >>5E95FFEGF5GG, F=>=E5@

2a-* >>5E95F=EF>G

'mail* iinfouc!l.com

:e! site* :::. Uc!l.com S.:.I.2.T* U%B#B""

3$3$8 1apital and )eserve

"uring the year under report authori(ed capital of the !ank remained unchanged at tk.1EEEmillion and the paid up capital stood s at [email protected] reserve fund of the !ankincreased !y @@H to Tk51E7F as against Tk5G>@ million in the previous year. The capital fundof the !ank stood at Tk. 17@ million in 9EE> against Tk.1@> million of 9EEG recording anincrease of Tk.@.>>H. %ore capital increased !y T?.79 million and stood at Tk.1G@Fmillion )hile supplementary capital increased !y Tk.=9 million and stood at Tk.9E> million.Total capital fund is euivalent to .G9H of risk )eighted 4ssets.

3$3$9 )isk anage"ent

Risks involved in different operational area are under control of the management. The !ankhas taken appropriate measures to enforce and follo) all approved risk manuals guidelinescovering the follo)ing risk area in order to control and minimi(e the !usiness as )ell asfinancial risks at an accepta!le level.

1# Policy guidelines on asset lia-ility management2# Policy guidelines on credit management

3# Policy guidelines on foreign e'change ris management

4# Policy guidelines on money laundering prevention

5# Policy guidelines on internal control and compliance


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The !ank has formed a management committee C04$%O0D to revie) properimplementation and regular monitoring of core areas of risk management.

3$3$? 4ierarch, of Positions in D1B Bank !i"ited

3$3$'< *istrict I5ise Branch *istrib-tion

"haka "ivision

1#angshal

ranch

2#hulta

ranch

3# @hanmondi

ranch

4#%lrphant ;oad

ranch

5#+aridpur

ranch


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?hulna "ivision

1#"huadanga 2# Jessore 3# Jhenaidah 4# han Jahan li;oad

5#hulna


35/66

United %ommercial Bank

Balance Sheet

4s at @1st"ecem!er, 9E1E

Particulars 2:1: 2::

*roperty < .ssets

Cash =&+>?&?=+>@

"ash in hand>including foreign currencies? +A$

Non 4anking assets / /

Total .ssets "=@>?+$==&+@A

Lia4ilities< Capital

Borroing -rom other 4anks 6nancial institution

< agents

$>+$A =A+

Deposits < others accounts ""#&@+=>>@@A+""

"urrents accounts B other accounts 4HD


36/66

ills paya-le 5H1#:: 541#5

$aving -an deposit D


37/66

$alary B allo0ance 5H3:11###

otal pro7t)loss -efore Income a' H52454:13


38/66


39/66

The num!er of foreign correspondents is F>7 as of "ecem!er @1, 9EEG. 'fforts are !eingcontinued to further e-pand the %orrespondent Relationship to facilitate Bank/s gro)ingforeign trade transactions. The Bank is using S:I2T communication system for fast andaccurate handling for foreign trade. The Bank is connected to R'UT'RS also for up5to5dateinformation on the foreign e-change markets.

To have crystal clear idea a!out the 2oreign '-change of 0B# %ritical analysis of thefollo)ing are essential

%redit policy of the Bank

%redit sanctioning 4uthority of 0B# and

%redit 0onitoring Supervision of %ell

Import section helps !usiness and other people to import goods. In international environment,

!uyers and sellers are often unkno)n to each other. So seller al)ays seek guarantee for thepayment for his goods e-ported. ere is the role of !ank. Bank gives e-port guarantee that it)ill pay for the goods on !ehalf of the !uyer. This guarantee is called #etter of %redit. Thusthe contract !et)een importer and e-porter is given a legal shape !y the !anker !y its


40/66

cD 4uthori(e another !ank to effect such payment or to accept and pay such !ills ofe-change C"raftsD.

dD 4uthori(e another !ank to negotiate against stipulated documents provide that termsand conditions are complied )ith.

/$'$3 T,pes of *oc-"entar, !etter of 1redit

"ocumentary letter of credit, !asically, can !e classified into t)o segments*

aD Revoca!le letter of credit

!D Irrevoca!le letter of credit

a7 )evocable !etter of 1redit

This type of letter of credit can !e revoked or cancelled at any time )ithout consent of, ornotice to the !eneficiary. 4s per article > CaD of U%3"%5FEE K4 revoca!le credit may !eamended or cancelled !y the issuing !ank at any moment and )ithout prior notice to the

!eneficiaryA.

In case of seller C!eneficiaryD, revoca!le credit involves risk, as the credit may !e amended orcancelled )hile the goods are in transit and !efore the documents are presented, or although

presented !efore payments has !een made. The seller )ould then face the pro!lem of

o!taining payment on the other hand revoca!le credit gives the !uyer ma-imum fle-i!ility, asit can !e amended or cancelled )ithout prior notice to the seller up to the moment of payment!uy the issuing !ank at )hich the issuing !ank has made the credit availa!le. In the modern!anking the use of revoca!le credit is not )idespread.

b7 #rrevocable !etter of 1redit

4n irrevoca!le credit is a documentary credit, )hich cannot !e revoked, varied orchangedamended or cancelled )ithout the consent of all parties5 !uyer C4pplicantD, sellerCBeneficiaryD, Issuing Bank, and %onfirming Bank Cin case of confirmed #%D.

4s per 4rticle CaD of U%3"% FEE, an irrevoca!le credit constitutes a definite undertaking ofthe Issuing Bank, provided that the stipulated documents are presented to the $ominatedBank or to the Issuing Bank and that the terms and conditions of the credit are complied )ith.Irrevoca!le %redit gives the seller greater assurance of payments, !ut heshe remainsdependent on an undertaking of a foreign !ank.

/$'$( *oc-"ents Dsed in !=1 Operation

The most commonly used documents in foreign e-change are*

i. Bill of '-change


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ii. Bill of #ading iii. %ommercial invoice iv. %ertificate of origin v. Inspection certificate vi. 3acking list

vii. Insurance document viii. 3ro 2orma Invoice C3IDIndent

B#!! OF EK14A:%E

Bill of e-change is one of the important negotia!le instruments in the mercantile )orld andused as a vital document facilitating settlement of payments !et)een !uyerimporter andsellere-porter at home and a!road. 4 !ill )hen accepted !y the dra)ee, gives evidence of theclaim as made !y the dra)er as )ell as testimony to the acceptance of the de!t !y the dra)ee.The payment is done either in accordance )ith the terms of sale contract or under a #%opened !y the !uyerimporter in favor of the sellere-porter.

B#!! OF !A*#:%

4 !ill of lading is a document that is usually stipulated in a credit )hen the goods aredispatched !y sea. It is evidence of a contract of carriage, is a receipt for the goods, and is adocument of title to the goods. It also constitutes a document that is, or may !e, needed tosupport an insurance claim.

The details on the !ill of lading should include

4 description of the goods in general terms not inconsistent )ith that in the credit.

Identifying marks and num!ers.

The name of the carrying vessel.

'vidence that the goods have !een loaded on !oard.

The ports of shipment and discharge.

1OE)1#A! #:;O#1E

4 commercial invoice is the accounting document !y )hich the seller charges the goods tothe !uyer. 4 commercial invoice normally includes the follo)ing information*

"ate

$ame and address of !uyer and seller

Order or contract num!er, uantity and description of the goods, unit price andthe total

3rice


42/66

:eight of the goods, num!er of packages, and shipping marks and num!ers

Terms of delivery and payment

Shipment details

1E)T#F#1ATE OF O)#%#:

4 certificate of origin is a signed statement providing evidence of the origin of the goods.

#:SPE1T#O: 1E)T#F#1ATE

This is usually issued !y an independent inspection company located in the e-porting countrycertifying or descri!ing the uality, specification or other aspects of the goods, as called for in

the contract andor the #%. The !uyer )ho also indicates the type of inspection he )ishes thecompany to undertake usually nominates the inspection company.

PA1#:% !#ST

This is a uniue document and not com!ined )ith other document. This is a listing of thecontents of each package, cartoon etc. and other relevant information.

#:SD)A:1E *O1DE:T

Insurance is a contract )here!y the insurer is undertaking to indemnify the assured to theagreed manner and e-tent against fortuitous losses. Insurance document generally containsthe follo)ing information*

he name of the insurer or his agent he name of the ship)carrier

he name of assured

he su-Aect matter of insurance

/$. F-nctions of Foreign Exchange *epart"ent of 6D1B!7

2oreign '-change "epartment performs many functions to facilitate the foreign e-changetransactions. These are*

v 2acilitating Import Trade

v 2acilitating '-port Trade

v 3roviding 2unded and $on5funded %redit 2acility.

v 3rovide $on %ommercial Remittance


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v 2oreign %urrency 4ccounts

v Selling of 2oreign %urrency Bond

v 3reparation and Su!mission of Statements

The International "ivision placed at the United %ommercial Bank/s head office at 0otiheelis the !ack!one of all international transaction that is conducted through the various !ranchesof the !ank. 4 total of >F !ranches of United %ommercial Bank have the license to carry outinternational trade functions. 'ach of these 4" !ranches have foreign e-change department)hose sole purpose is to carry out cross !order transaction demanded !y the customers. Thefunctions of such 2oreign '-change "epartment can !e divided into three sections*

v Import Section

Import is the flo) of goods and services purchased !y economic agent staying in the country

from economic agent staying a!road.

:e can simplify Import as a means purchase of goods and services from the foreign countriesinto Bangladesh. $ormally consumers, firms and overnment of Bangladesh import foreigngoods to meet their various necessities. Import section of the 2oreign '-change "epartmenthelps !usiness and other people to import goods. So seller al)ays seeks guarantee for the

payment for his goods e-ported. ere is the role of !ank. Bank gives e-port guarantee that it)ill pay for the goods on !ehalf of the !uyer. This guarantee is called #etter of %redit. Thusthe contract !et)een importer and e-porter is given a legal shape !y the !anker !y its


44/66

v authori(es another !ank to negotiate,

v 4gainst stipulated documentCsD, provided that the terms and conditions of the %redit andcomplied )ith.

On the other hand #etter of credit can !e defined as a K%redit %ontractA )here!y the !uyer/s!ank is committed Con !ehalf of the !uyersD to place an agreed amount of money at theseller/s disposal under some agreed conditions. Since the agreed conditions include amongstother things, the presentation of some specified documents, the letter of credit is called"ocumentary letter of credit. The uniform customs and practices for documentary %reditCU%3"%D pu!lished !y international %ham!er of %ommerce C1@D revision, pu!lication noFEE define "ocumentary %redit*

v 4ny arrangement ho)ever named or descri!ed )here!y a !ank Cthe issuing !ankD acting atthe reuest and on the instructions of a customs Cthe 4pplicantD or on it/s o)n !ehalf,

v 4uthori(e another !ank to effect such payment or to accept and pay such !ills of e-changeC"raftsD

v 4uthori(e another !ank to negotiate against stipulated documents provide that terms andconditions are complied )ith.

/$.$. T,pes of !etter of 1redit

There are many types of #etter of %redits that are used in different countries of the )orld. ButInternational %ham!er of %ommerce CI%%D vides their U%3"%5 FEE, )hich denotes only t)o

types of #'TT'R O2 %reditsP mentioned*

;evoca-le Letter of "redit

4 revoca!le credit may !e amended or cancelled !y the issuing !ank at any moment and)ithout prior notice to the !eneficiary. That is to say, this type of letter of credit can !erevoked or cancelled at any time )ithout consent of, or notice to the !eneficiary.

In case of seller C!eneficiaryD, revoca!le credit involves risk, as the credit may !e amended orcancelled )hile the goods are in transit and !efore the documents are presented, or although

presented !efore payments has !een made. The seller )ould then face the pro!lem of

o!taining payment on the other hand revoca!le credit gives the !uyer ma-imum fle-i!ility, asit can !e amended or cancelled )ithout prior notice to the seller up to the moment of payment

!uy the issuing !ank at )hich the issuing !ank has made the credit availa!le. In the modern!anking the use of revoca!le credit is not )idespread.

In this case the issuing !anks must perform the follo)ing t)o roles*

V Reim!urse another !ank )ith )hich a revoca!le %redit has !een made availa!le for sightpayment, acceptance or negotiation J for any payment, acceptance or negotiation made !ysuch J prior to receipt !y it of notice of amendment or cancellation, against documents )hichappear on their face to !e in compliance )ith the terms and conditions of the %reditP


45/66

V Reim!urse another !ank )ith )hich a revoca!le %redit has !een made availa!le fordeferred payment, if such a !ank has, prior to receipt !y it of notice of amendment orcancellation, take up documents )hich appear on their face to !e in compliance )ith theterms and conditions of the %redit.

Irrevoca-le Letter of "redit

4n irrevoca!le credit is a documentary credit, )hich cannot !e revoked, varied orchangedamended or cancelled )ithout the consent of all parties5 !uyer C4pplicantD, sellerCBeneficiaryD, Issuing Bank, and %onfirming Bank Cin case of confirmed #etter of %reditD.Irrevoca!le %redit gives the seller greater assurance of payments, !ut heshe remainsdependent on an undertaking of a foreign !ank. In the issuance of Irrevoca!le #etter of %redit

!oth the Issuing and %onforming Bank have some lia!ility, mentioned !ello), as per U%3"%5FEE* The follo)ing types of #etter of %redits are used in the U%B#, 0ohammadpur Branch*

"ash Letter of "redit

3ayment made form cash foreign e-change not from e-port proceedsP there is not e-port #.%.)hich !acks the import #etter of %redit 3ayment term is at sight.

@eferred Letter of "redit

The only difference !et)een cash #etter of %redit and deferred #etter of %redit lied in theterms of payment. 3ayment under deferred #etter of %redit is made after certain days of

presentation of the e-port !ill. #etter of %redit the differed payment !asis may !e opened forthe follo)ing cases*

Items Period

Back to Back Imports 0a-imum 1>E days

4gricultural Industrial Ra) 0aterials C2or o)n useD 0a-imum 1>E days

Implements & %hemical 2ertili(er 0a-imum 1>E days

%apital 0achinery 0a-imum @=E days

%oastal ;essel 0a-imum @=E days

#ife Saving "rugs 0a-imum E "ay

ac to ac Letter of "redit

The !ack to !ack credit is a ne) credit opened on the !asis of an original credit in favor oranother !eneficiary. Under !ack to !ack concept, the seller as the !eneficiary of the firstcredit offers it as security to the advising !ank for the issuance of the second credit. The

!eneficiary of the !ack to !ack credit may !e located inside or the out side the original!eneficiary/s country.

nticipatory "redit


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The anticipatory credits make provision for pre5shipment payment to the !eneficiary inanticipation of his effecting the shipment as per #% conditions.

/$.$3 %eneral 1onditions of #"port of %oods

Import rade "ontrol $chedule 8um-er

+or import purpose. use of I"8um-er >9#$# "ode? 0ith at least si' digits corresponding to theclassi7cation of goods as given in the Import rade "ontrol $chedule 1HH.-ased on the 9armonized "ommodity @escription and "oding $ystem.shall -e mandatory# he seven @igit 9#$# "ode pu-lished -y angladeshureau of $tatistics may also -e mentioned in the Letter of "redit# +orm.Letter of "redit and other relevant paper 0ithin a -racet in addition tonormal 9# $# "ode as mentioned a-ove# 8o -an shall issue Letter of"redit uthorization form or open Letter of "redit 0ithout properlymentioning I# # "# num-er >9# $# "ode? thereon#

/$.$/ Parties of a !etter of 1redit

M PPLI"8 +!; 9% ";%@I, he importer or -uyer on 0hose re6uestand on 0hose -ehalf the letter of credit is opened is called the applicant#

M I$$EI8& 8) !P%8I8& 8, he -an that opens a Letter of "redit.at the re6uest of the importer. is no0n as Issuing an# he Issuing anis the -uyers -an and is also called opening -an#

M %8%+I"I;Y, he party. normally the supplier of the goods. in 0hosefavor the Letter of "redit is opened is called -ene7ciary# he seller. aftershipping the goods as per terms of the credit. presents the documents tonegotiating -an)conforming -an for negotiation#

M @FI$I8& 8, he -an is the e'porters country. usually the foreigncorrespondent of the importers -anN through 0hich Letter of "redit isadvised to the supplier is called the advising -an#

M "!8+!;CI8& 8, If the advising -an also adds its o0n undertaingto honor the credit 0hile advising the same to the -ene7ciary. it -ecomesthe conforming -an# he conforming -an. in addition. -ecomes lia-le to

pay for documents in conformity 0ith the Letter of "redit terms andconditions#

M 8%&!II8& 8, he an. 0hich negotiates the -ill >draft? of thee'porter dra0n under the credit. is no0n as negotiating -an# If theadvising -an is also authorized to negotiate the -ill >draft? dra0n -y thee'porter it itself -ecomes the negotiating -an#

M ""%PI8& 8, -an that >as speci7ed in the Letter of "redit?accepts time or usance drafts on -ehalf of the importer is called theaccepting -an# he Letter of "redit issuing -an can also tae on the

responsi-ility of an accepting -an#


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M PYI8& 8, he -an that eOects payment to the -ene7ciary >asnamed in the Letter of "redit? is no0n as paying -an)dra0ee -an#

M ;%ICE;$I8& 8, If the issuing -an does not maintain any account0ith 9%

$'OTI4TI$ !ank an alternate arrangement is made to reim!urse it for the amountpaya!le under a credit form some other !ank. The later !ank is termed as reim!ursing !ank.4n authority to de!it his account is sent to the !ank )ith )hom the account is maintained tohonor the claims placed !y a negotiating !ank.

/$.$( Preparation of Proposal and s-b"itting it to the 1o"petent A-thorit, for

Obtaining Per"ission of Opening !etter Of 1redit

Before opening #etter of %redit the applicant must take permission from the competentauthority. :hether the authority has to !e taken form the Branch or from the ead Officedepends on the amount of #etter of %redit and the percentage of margin. 4 proposal foro!taining permission for opening #etter of %redit generally contains the follo)ing points*

M 8ame and address of the importerN M 8ame and address of the &uarantor if anyN

M Particular of Cerchandise to -e imported along 0ith name of the item9armonized $ystem >9#$#? "ode. country of origin. 6uantity. unit priceand purpose of import#

M Particulars) erms of L" along 0ith name and address of the -ene7ciary.tenor of payment. port of loading and discharge. shipment validity ande'piry date etc#N

M Landed cost of the goodsN

M Caret price of the goods at @haa and "hittagong >if applica-le?N

M 8ame of the previous -aner 0ith outstanding lia-ility >if any?N

M 8um-er of "@ accounts and transaction performance through thisaccountN

M Present lia-ility position 0ith the -anN

M Present lia-ility position of allied)sister concerns 0ith the -an

M Letter of "redit performance of the party during the year)previous yearN

/$.$+ Steps for #"port !=1 operation

Step 1* Registration )ith %%I & '*

+or engaging in international trade. every trader must -e 7rst registered0ith the chief "ontroller of Import and %'port#

y paying speci7ed registration fees to the ""I B %# the trader 0ill getI;")%;" to open L)" 0ith an. this I;" is must#


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Steps 95 "etermination terms of credit*

The terms of the letter of credit are depending upon the contract !et)een the importer ande-porter. The term of the credit specify the amount of credit, name and address of the

!eneficiary and opener, tenor of the !ill of e-change, period and mode of shipment and of

destination, nature of credit, e-piry date, name and num!er of sets of shipping documents etc

Steps @5 3roposal for opening of #%*

To have an import #% limit an importer su!mits an application to department to unitedcommercial !ank ltd. The proposal contains the follo)ing particular*

+ull particulars of the -an account# 8ature of -usiness

;e6uired amount of limit

Payment terms and conditions

&oods to -e imported

!Oered security

;epayment schedule

Step 754pplication !y importer to the !anker to open letter of credit*

+or opening L". the importer is re6uired to 7ll up a prescri-ed applicationform provided -y the -aner along 0ith the follo0ing documents,

1# L)" application form D# authority to de-it account

1# +illed up L" form H# 7lled up amendment re6uest form

1# @emand promissory note # ICP form

1# Pro/forma invoice 1:# insurance cover note and money

receipt

1# a' identi7cation num-er 11# mem-ership certi7cate

1# Import registration certi7cate 12# rate uctuation undertaing

Step F5 Opening of #% !y the !ank for the opener*

aing 7lled up application form the importer "ollects credit report of e'porter from e'porters country through his

foreign correspondence there#

!pening -an then issues credit -y air mail) %L%Q)$(I+ follo0ed -y L)"advice as ased -y the opener through his foreign correspondent or-ranch as the case may -e. at the place of -ene7ciary# he advising -anadvises the L)" to the -ene7ciary on his o0n from 0here it is addressed tohim or merely hand over the original L)" to the -ene7ciary if it is soaddressed#

Step =5 Shipment of goods and lodgment of documents !y e-porter*


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c$ 4fter receiving all the documents, the negotiating !ank then checks the documents againstthe credit. If the documents are found in order, the !ank )ill pay, accept or negotiate to 3rime

Bank

d$ Branch & Bank received seal to !e affi-ed on the for)arding schedule

e$ The Bill of '-change & transport documents must immediately !e crossed to protect lossor fraudulent.

Step >5 Retirement*

On receipt of cost memolodgment voucher the importer pays the necessary amount. Thisstage of the documentary credit operation is kno)n as


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'-port policies formulated !y the 0inistry of %ommerce, )hich provide the overall guidelineand incentives for promotion of e-ports in Bangladesh. '-port policies also set outcommodity5)ise annual target.

It has !een decided to formulate these policies to cover a five5year period to make them

contemporaneous )ith the five5year plans and to provide the policy regime.

The e-port5oriented private sector, through their representative !odies and cham!ers areconsulted in the formulation of e-port policies and are also represented in the various e-port

promotion !odies set up !y the government.

/$3$' Export #ncentives

"ifferent incentives are*

Financial #ncentives

Restructuring of '-port %redit uarantee SchemeP

%onverti!ility of Taka in current accountP

'-porters can deposit 7EH of 2OB value of their e-port earnings in o)n accounts in dollarand pound sterlingP

'-port "evelopment 2undP

'-pansion of e-port credit period from 1>E days to 9GE daysP

FEH ta- re!ate on e-port earningsP

"uty dra) !ackP

Bonded )arehouse facilities to 1EEH e-port oriented firmsP

"uty free import of capital euipment for 1EEH e-port oriented firmsP

%eneral #ncentives

$ational '-port Trophy to successful e-portersP

Training course on e-ternal tradeP

4rrangement of international trade fairs, commodity5!ased e-hi!itions in the country andparticipation in foreign trade fairs.


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Other #ncentives

4ssistance in improvement of uality and packaging of e-porta!le itemsP

Simplification of e-port proceduresP

/$3$. Export Proced-re

The import and e-port trade in our country are regulated !y the Import and '-port C%ontrolD4ct, 1FE.

Under the e-port policy of Bangladesh the e-porter has to get valid '-port registration%ertificate C'R%D from %hief %ontroller of Import & '-port C%%I&'D. The 'R% is reuiredto rene) every year. The 'R% num!er is to incorporate on '3 forms and other papersconnected )ith e-ports.

/$3$3 )egistration of Exporters

2or o!taining 'R%, intending Bangladeshi e-porters are reuired to apply to the controller8oint %ontroller "eputy %ontroller 4ssistant %ontroller of Imports and '-ports, "haka%hittagong Rashahi 0ymensingh Sylhet %omilla Barisal Bogra Rangpur "inapur inthe prescri!ed form along )ith the follo)ing documents*

$ationality and 4ssets %ertificateP

0emorandum and 4rticle of 4ssociation and %ertificate of Incorporation in case of

#imited %ompanyP

Bank %ertificateP

Income Ta- %ertificateP

Trade #icense etc.

Signing the %ontract*

4fter communicating !uyer, e-porter has to get contracted C)riting or oralD for e-porting

e-porta!le items from Bangladesh detailing commodity, uantity, price, shipment, insuranceand marks, inspection and ar!itration etc.

/$3$/ )eceiving the !etter of credit

4fter getting contract for sale, e-porter should ask the !uyer for #etter of %redit C#%D clearlystating terms and conditions of e-port and payment.

The follo)ing are the main points to !e looked into for receiving collecting e-port proceeds!y means of "ocumentary %redit*

C1D The terms of the #% are in conformity )ith those of the contractP


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C9D The #% is an irrevoca!le one, prefera!ly confirmed !y the advising !ankP

C@D The #% allo)s sufficient time for shipment and negotiation.

Cere the regulatory frame)ork is U%3"%5FEE, I%% pu!licationD

Terms and conditions should !e stated in the contract clearly in case of other mode ofpayment*

"ash in advanceN !pen accountN

"ollection -asis >@ocumentary) "lean?

Cere the regulatory frame)ork is UR%5F9F, I%% pu!licationD

Proc-ring the aterials

4fter making the deal and on having the #% opened in his favor, the ne-t step for thee-porter is to set a!out the task of procuring or manufacturing the contracted merchandise.

Ship"ent of %oods

Then the e-porter should take the preparation for e-port arrangement for delivery of goods asper #% and Inco terms, prepare and su!mit shipping documents for 3ayment 4cceptance$egotiation in due time.

"ocuments for shipment*

'3 form,

'R% CvalidD,

#% copy,

%ustomer "uty %ertificate,

Shipping Instruction,

Transport "ocuments,

Insurance "ocuments,

Invoice,

Other "ocuments,

Bills of '-change Cif reuiredD

%ertificate of Origin,


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Inspection %ertificate,

Luality %ontrol %ertificate,

.S.3. %ertificate,

Final Steps

Su!mission of the documents to the Bank for negotiation.

/$3$( Export Financing

2inancing e-ports constitutes an important part of a !ank/s activities. '-porters reuirefinancial services at four different stages of their e-port operation. "uring each of these

phases e-porters need different types of financial assistance depending on the nature of thee-port contract.

W Pre>ship"ent credit

W Post>ship"ent credit

3re5shipment credit

3re5shipment credit, as the name suggests, is given to finance the activities of an e-porter

prior to the actual shipment of the goods for e-port. The purpose of such credit is to meet)orking capital needs starting from the point of purchasing of ra) materials to final shipmentof goods for e-port to foreign country. Before allo)ing such credit to the e-porters the !anktakes into consideration a!out the credit )orthiness, e-port performance of the e-porters,together )ith all other necessary information reuired for sanctioning the credit in accordance)ith the e-isting rules and regulations. 3re5shipment credit is given for the follo)ing

purposes*

%ash for local procurement and meeting related e-penses.

3rocuring and processing of goods for e-port.

3acking and transporting of goods for e-port.

3ayment of insurance premium.

Inspection fees.

2reight charges etc.

4n e-porter can o!tain credit facilities against lien on the irrevoca!le, confirmed andunrestricted e-port letter of credit in form of the follo)ings*

'-port cash credit CypothecationD


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'-port cash credit against trust receipt.

3acking credit.

Back to !ack letter of credit.

3ost5shipment credit

This type of credit refers to the credit facilities e-tended to the e-porters !y the !anks aftershipment of the goods against e-port documents. $ecessity for such credit arises as thee-porter cannot afford to )ait for a long time for )ithout paying manufacturerssuppliers.Before e-tending such credit, it is necessary on the part of !anks to look into carefully thefinancial soundness of e-porters and !uyers as )ell as other relevant documents connected)ith the e-port in accordance )ith the rules and regulations in force. Banks in our countrye-tend post shipment credit to the e-porters through*

1# 8egotiation of documents under L)"N2# +oreign @ocumentary ill Purchase >+@P?,

3# dvances against %'port ills surrendered for collectionN

/$3$+ Packing 1redit 6P$17

3acking %redit is essentially a short5term advance granted !y a Bank to an e-porter forassisting him to !uy, process, manufacture, pack and ships the goods. enerally for

movement of goods from the hinterland areas to the ports of shipment the Banks provideinterim facilities !y )ay of 3acking %redit. This type of credit is sanctioned for thetransitional period starting from dispatch of goods till the negotiation of the e-portdocuments.

3ractically e-cept for single transaction, most of the pre5shipment credits are allo)ed in theform of limits duly sanctioned !y Bank in favor of regular e-porters for a particular period.The dra)ings are reuired to !e adusted fully once )ithin a period of @ to = months. Suitingto the !reed and nature of e-port, sometimes an e-porter may also !e allo)ed to avail acom!ined %ash %redit and 3acking %redit limit )ith fi-ed ceiling on revolving !asis. But inno case the !orro)er )ould !e allo)ed to e-ceed individual credit limit fi-ed for the purpose.

The dra)ings under '-port %ash %redit limits are generally adusted !y the dra)ing inpacking credit limit, )hich is, in turn liuidated !y the negotiation of e-port documents.

/$3$8 Foreign doc-"entar, bill p-rchase 6F*BP7

Sometimes the client su!mits the !ill of e-port to !ank for collection and payment of theBTB #%. In that case, !ank purchases the !ill and collects the money from the e-porter. 3B#su!tracts the amount of !ill from BTB and gives the rest amount to the client in cash or !ycrediting his account or !y the pay order.

2or this purpose, 3B# maintains a separate register named 2"B3 Register. This registercontains the follo)ing information*


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*ate

)eference n-"ber 6F*BP7

:a"e of the drawee

:a"e of the collecting bank

1onversion rate

Bill a"o-nt both in fig-re 2 in Taka$

Export for" n-"ber

/$/ Abo-t Export Polic, of Dnited 1o""ercial Bank !i"ited

The goods and service sold !y Bangladesh to foreign households, !usinessmen andgovernment are called '-port. The e-port trade of the country is regulated !y the imports ande-port 4ct, 1FE. There are a num!er of formalities, )hich an e-porter has to fulfill !eforeand after shipment of goods. The e-porters from Bangladesh are su!ect to e-port tradecontrol e-ercised !y the ministry of %ommerce through %hief %ontroller of import ande-port. $o e-porter is allo)ed to e-port any commodity permissi!le for e-port fromBangladesh unless he is registered )ith %%I & ' and holds valid e-port registration%ertificate. The 'R% is reuired to !e rene)ed every year. The 'R% num!er is to !eincorporated on '3 forms and other documents connected )ith e-ports.

/$/$' T,pe of Export

'-port must !e done as under*

1# %'port against L)" or 7rm contract2# %'port against advance payment

3# %'port under consignment -asis#

The formalities and procedure are enumerated as follo)s*

1# !-taining e'ports L)", o get e'port L" form e'porter issued -y the

importer#2# $u-mission of e'port documents, %'porter has to su-mit all necessary

documents to the collecting -an after shipping of goods#

3# "hecing of e'port documents, fter getting the documents -aner usedto chec the documents as per L" terms#

4# 8egotiation of e'port documents, If the -an accepts the -an documentand pay the value draft to the e'porter and for0ard the document toissuing -an that is called a negotiating -an# If the -an does -y the L"then the -an normally acts as collecting -an#

1# ;ealization of proceeds, his is the period 0hen the issuing -anhas realized the payment#


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2# ranch code

3# Year

4# "ategory

5# $erial num-er

2eatures of Back5To5Back #%*

n import L)" to procedure goods for further processing# It is opened -ased on e'port L)"#

It is a ind of e'port 7nance#

8o margin is re6uired to open -ac to -ac L)"#

pplication is registered 0ith ""I B%#

pplication has -onded 0arehouse license# Esance period 0ill -e up to 1H: days#

he import L)" is opened for D5= of the value of e'port L)"#

9ere L)" issued against the lien of e'port L)"#

"ocuments reuired for opening a Back5To Back #%*

In united commercial !ank, follo)ing papers documents are reuired for opening a !ack to!ack #%5

1# Caster L)"2# Falid Import ;egistration "erti7cate >I;"? and %'port ;egistration

"erti7cate >%;"?#

3# L)" pplication and L"+ duly 7lled in and signed

4# Proforma Invoice or Indent

5# Insurance "over 8ote 0ith money receipt


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@ocumentary credit 8o# and issuing date

@ate of shipment

%'piry date and place

1# !n account

2# ene7ciary ) +avoring

3# mount

4# vaila-ility of credit

5# Partial shipment


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goods, the e-porters su!mit the relative documents to the !ranch for negotiation. Thedocuments are to su!mit )ithin the period mentioned in the #%, after approval of negotiationof the !ill the full particulars of the documents are entered in to the foreign !ill purchasedregister. The documents are sent to the #% opening !ranch )ith a for)arding letter. The

!ranch claim reim!ursement from the issuing !ank, giving clear instruction to credit the

proceeds of the !ill to the United %ommercial Bank head office $OSTRO 4% maintained)ith the named correspondent !ank a!road under tele- intimation to the principal !ranch andhead office.

/$/$( Foreign doc-"entar, bills for collection 6F*B17

United commercial !ank for)ards the documents for collection due to the follo)ing reasons5

If the documents have discrepancies If the e'porter is a ne0 client#

2"B% signifies that the e-porter )ill receive payment only )hen the issuing !ank givespayment. U%B make regular follo) up )ith the #% opening !ank in case of any delay ingetting payment.

Settle"ent of !ocal Bills

The settlement of local !ills is done in the follo)ing )ays5

1# he consumer su-mits the L)" to Enited "ommercial an Ltd# long 0iththe documents to negotiate

2# Enited "ommercial an Ltd# !*cial scrutinizes the documents to ensurethe conformity 0ith the term and conditions

3# he documents are then for0ards to the L)" opening -an

4# he L)" issuing -an gives the acceptance and for0ards an acceptanceletter

5# Payment is given to the customer on either -y collection -asis or -y

purchasing the documents#

/$/$+ Foreign re"ittance

2oreign remittance is the transfer of foreign currency from one country to another country.In another )ord, foreign remittance means, remittance in foreign currency that are received inand made out a!road. 4ctually, foreign remittance is purchase and sale of freely converti!leforeign currencies as permissi!le under e-change control regulations of the country. 2oreignremittance is very important for the country as valua!le foreign e-change is involved in thetransfer mechanism. 2oreign remittance takes place in t)o )ays5

/$/$8 Foreign Process )e"ittance


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2und transfer from one country to another country goes through a process )hich is kno)n asremitting process. Suppose a local !ank has 9EE domestic !ranches. The !ank hascorresponding relationship )ith a foreign !ank say5KA, and maintaining K$ostro 4ccountAin US N )ith the !ank. Bangladeshi e-patriates are sending foreign remittances to their local

!eneficiary, through that account. $o), )hen the Bangladeshi e-patriates through other

!anks of different countries remit the fund to their K$ostro 4ccountA )ith KA, then the local!ank/s ead Office international division )ill receive tele- message and the remittancesection )ill record the advice and generate the advice letter to the respective !ranch of the

!ank. The !ranch )ill first decode the test, verify signature and check the account num!erand name of the !eneficiary. 4fter full satisfaction, the !ranches transfer the amount to theaccount of the !eneficiary and intimate the !eneficiary accordingly. But some times thecomple-ity arises, if the respective local !ank has no !ranch )here the !eneficiary maintainshis account. Then the local !ank has to take help of a third !ank )ho has !ranch there.

#nward )e"ittance

Remittance comes from foreign countries to our country is called in)ard remittance. To the!ankers or 4"s in)ard remittance means purchase of foreign currency !y authori(ed dealers.enerally, in)ard remittances are received !y draft, mail transfer, TT, purchase of foreign

!ills & travelers %heue, e-port !ills. Basically, these are the formal channels of receivingin)ard remittance. 4 local !ank also receives indenting commission of local firm also comesunder purvie) of in)ard remittance.

O-tward )e"ittance

Remittance from our country to foreign countries is called out)ard foreign remittance. Onthe other )ord, sales of foreign currency !y the authori(ed dealer or formal channels may !eaddressed as out)ard remittance. The authori(ed dealers must utmost caution to ensure thatforeign currencies remitted or released !y them are used only for the purposes for )hich theyare released. Out )ard remittance may !e made !y appropriate method to the country to)hich remittance is authori(ed. 0ost out)ard remittance is approved !y the authori(eddealer on !ehalf of Bangladesh Bank.

Out)ard remittance may !e made for follo)ing purposes5

ravel Cedical treatment

%ducational purpose

ttending seminar etc#

alance amount of +#" account#

Pro7t of foreign companies#

echnical assistance

8e0 e'porters up to E$@


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+#"# remittance can -e made for fare. e'hi-ition from e'port retention6uota#

Out)ard remittance in favor of !eneficiaries outside Bangladesh may !e made in any of thefollo)ing manners5

For"al 1hannel

2und transfer from one country to another country through official channels, i.e. !ankingchannel, post office, and other private service channels, such as J :estern money order, $enomoney order etc.

#nfor"al 1hannel

2und transfer from one country to another country through hand !y hand or over telephone inan unofficial channel like as KundyA. aue C19D comments, that remittance collected !yinformal KundiA rings operating in 0iddle 'ast countries and U? are also used to financeillegal trade and transactions.

Islam C9EEED o!serves that as informal channel is needed for illegal trade of goods, as )ell asgold and drugs into Bangladesh, and therefore, helping the ever5present pro!lem of capitalflight out of Bangladesh.

%riminals use informal channel for moving money a!road !ecause of5

@ealing in arms B ammunition @rug tra*cing

+inancing terrorist activities

%vasion of e'change regulations) control

%vasion of ta'ation

@isguise or remove proceeds of threat) fraud) -ri-e#

Caing -lacmail payments

Paying random for idnapper#

Findings fro" financial perfor"ance anal,sis

4fter analy(ing the financial and overall performance of 0B#, I have identified some sort ofissues )hich are given in !elo)*

+ The Bank is too much centrali(ed. 2or each and every )ork !ranch office has to getpermission from the head office. The head office tightly controls each and every !ranchoffice. This dependency on head office causes slo) do)n their activities.

+ Interest rate on deposit is much higher than other !anks, )hich increase their cost offund and it diminish the opportunity to provide loan at a lo)er interest rate. It makes high


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demand on short term deposit and manages these lia!ilities )ith loan they might need to!orro) from call money market.

+ 0ercantile Bank #imited has committed to their prospective customers to honor it/s ofcheue )ith in @E second after su!mission !ut unfortunately they are not a!le to fulfill this.

+ 0B# is @rdgeneration !ank of our country. The liuidity level of the !ank is fluctuatingyear to year and al)ays !elo) the standard limit.

+ The !ank/s operating cost to income ratio is increasing year !y year

Exchange Activities of Selected Banks in Bangladesh

Documents

Transcript of Exchange Activities of Selected Banks in Bangladesh