Unit 4 Foreign Exchange Market. I. Definitions of Foreign Exchange & Foreign Exchange Market.
Foreign Exchange Operations of JBL
-
Upload
alauddin-ahmed-jahan -
Category
Documents
-
view
123 -
download
5
Transcript of Foreign Exchange Operations of JBL
62
Daffodil International University
Internship Report Foreign Exchange operations of JBL
1.1. Introduction
1.2. Objectives of the Report
1.3. Origin of the report
1.4. Scope
1.5. Methodology of Study
1.6. Limitations of Study
62
Daffodil International University
01.01. Introduction
The theoretical knowledge and practical training is not the same theme. The theoretical
knowledge is fulfilled when it can be used in the practical field. The goal of internship is to
apply one’s theoretical knowledge in practical fields.
Generally by the word “Bank” we can easily understand that the financial institution deals
with money. But there are different types of banks such as; Central Banks, Commercial
Banks, Savings Banks, Investment Banks, Industrial Banks, Co-operative Banks etc. But
when we use the term “Bank” without any prefix, or qualification, it refers to the
‘Commercial banks’. Commercial banks are the primary contributors to the economy of a
country. Janata Bank Limited a kind of commercial Bank in our country.
Janata Bank a nationalized commercial bank established under the Bangladesh Banks
(Nationalization) Order 1972. With its head office at Dhaka the bank started its operations
with an initial authorized capital of Tk 50 million and paid up capital of Tk 10.5 million. The
authorized capital was raised to Tk 30 million in 1973. In addition to traditional deposit
taking in various accounts and providing loans to almost all sectors of the economy, the bank
offers different types of other services and conducts 'off-balance sheet (OBS)' activities. The
value of assets created by the OBS activities of the bank was Tk 26.07 billion in 1998 and Tk
25.46 billion in 2000.
Janata Bank has a large participation in foreign exchange business including overseas
remittance services. The total volume of foreign exchange business handled by the bank in
servicing imports and exports and remittances during 1999-2000 amounted to Tk 40.312
billion. In 2009, the bank had correspondent relationships with 3,180 foreign banks/bank
offices. In 1972, Janata Bank started its banking operations with a total initial deposit of Tk
1.57 billion. Ever since the bank has been making continuous and sustained efforts to
mobilize deposits from untapped resources in both urban and rural areas. A special deposit
mobilization programmed introduced by the bank in 1976 resulted in remarkable increases in
the volume of its deposits, which grew at a rate of approximately 63% and 42% during 1972-
74 and 1978-80. Major areas that received financing from the bank were jute trade, jute
industries, tanneries, sugar industries, textile trade and industries, transport, iron and steel, tea
plantation and trade, livelihood trades/income generating activities and housing.
During 1999, Janata Bank disbursed Tk 16.383 billion in loans and advances and the
recovery during the year was Tk 4.541 billion.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
01.02. Objective of the Report
01.02.01. Major Objectives
The major objective of the study is to observe & evaluate Foreign Exchange operations of the
Janata Bank Limited.
01.02.02. Specific Objectives
Every report has an objective. The objective of the internship program is to familiarize
students with the real business situation, to compare them with the business theories & at the
last stage make a report on assigned task. Specific objectives are as follow:
To know the activities of the foreign exchange department.
To know function of foreign exchange.
To know export procedures of JBL.
To know import procedures of JBL.
01.03. Origin of the report
This report is being assigned as a part of the BBA Degree (Internship) of Daffodil
International University. To prepare this report, I accommodate my internship program in
Janata Bank Ltd. For the completion of the course, as an essential part I had prepared a
Report. This report is being formed on the “A Study on Foreign Exchange operations of the
Janata Bank Limited., Gandaria Branch”. From the very beginning of my internship I have
worked on General banking. After few weeks later I was shifted on Foreign Exchange
department. For that reason I made my Report on Foreign Exchange activities of Janata Bank
Limited., Gandaria Branch.
01.04. Scope
Scope means area of operations or field of the study. The scope of this report was extended to
the Foreign Exchange activities of Janata Bank Limited.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
01.05. Methodology of the Report
01.05.01. Appointing as an internship
All the formalities have been completed I joined in Janata Bank Limited (JBL) in the
Gandaria Branch.
01.05.02 Selection of the topic
Internship topic selected very important for a student. I am a student of Daffodil International
University and internship program completed in Janata Bank Limited (JBL) in the Gandaria
Branch. The area chosen designed for the learning was selected by me and permitted by
Professor M. Shahjahan Mina, Advisor, Faculty of Business & Economics, Daffodil
International University.
01.05.03 Data Sources
Two types of data are used to prepare the report, which are primary and secondary data.
1.5.3.1 Primary Sources:
Practical desk work
Employees of the JBL
Clients of the JBL
Examine and study client files
1.5.3.2 Secondary Sources: Most of the necessary information will be collected from the
client’s document.
JBL Annual Report 2004-2009
Published documents
Website of JBL
Relevant books.
01.05.04 Target Populations
All employees, management level and customer of JBL.
01.05.05 Sample Size:
25 employees
20 Clients
01.05.06 Sampling Technique:
Convenience sampling technique has been used.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
01.05.07 Data Collection Method:
Most of the data required for the study was collected form primary sources through oral
interviewing the employees.
01.05.08 Data Analysis Process:
To analyze the gathered data of foreign exchange department, I used different types of charts,
tables and graphs. To do that analysis I used different types of computer software like
Microsoft Word and Microsoft Excel.
Findings of the study: After finding out the data problems of the study were pointed out and
they were shown under concerned heads. Recommendations were suggested thereafter to
overcome the problems.
Final report preparation: On the basis of the suggestions of my honorable supervisor some
deductions and additions were made and final report was prepared thereafter.
Significance of the Report
This report is the result of three month internship in Janata Bank Limited (JBL). And I have
completed this internship period successfully. This internship report contains all the
knowledge that I have gathered at the time of my internee at Janata Bank Limited (JBL) in
the Gandaria Branch. My topic is study on Foreign Exchange operations of Janata Bank
Limited (JBL). This is the basic rationale behind the study. Besides, it would be a great
opportunity for me to get familiar with this system. So this study is very significant for both
the company and as well as for me.
01.06. Limitations of the Report
There were some problems while I doing internship. A whole hearted effort was applied to
conduct the internship and to bring a reliable and fruitful result. In spite of having the
wholehearted effort, there exit some limitations, which acted as a barrier to conduct the
program. The limitations were noted to this page:
Bankers don’t want to disclose all the information I need.
Non-availability of some preceding and latest data.
Some information was withheld to retain the confidentiality of the bank.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
Although the officers of the Janata Bank Limited have been very helpful, they didn’t
have enough time to provide, as they are very busy with their assigned works. So, in
some cases, observation was needed.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
02.01. An overview of Janata Bank Limited (JBL)
Janata Bank Limited is the leading sector bank in Bangladesh offering full range of Personal,
Corporate, International Trade, Foreign Exchange and Lease Finance. Janata Bank Limited is
the preferred choice in banking for friendly and personalized services, cutting edge
technology, tailored solutions for business needs, global reach in trade and commerce and
high yield on investments, assuring Excellence in Banking Services.
02.02. Brief Overview of the Bank
Formation of Janata Bank: Immediately after the independence of Bangladesh in
1971, the erstwhile United Bank Limited and Union Bank Limited were nationalized
and renamed as Janata Bank.
Date of Incorporation as PLC: May 21, 2007.
Authorized Capital: Tk. 8,000 million (as on 31.12.08) (now 20,000 Million as
approved in the AGM/EGM dated 29.09.09).
Pre IPO Paid up Capital: Tk. 2,593.90 million (as on 31.12.08) (however the bank
has issued Bonus shares amounting to Tk. 1156.10 million and rights shares of Tk.
1250.00 in the said AGM/EGM i.e., paid- up would be Tk. 5,000 million).
No. of Branches: Almost 850.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
02.03. Janata Bank Limited At a Glance
Key Points Particulars
Name Janata Bank Limited
Logo
Date of incorporation as PLC May 21, 2007
Status Public Limited Company
Chairman DR. Abul Barkat
Managing Director S.M. Aminur RahmanManaging Director & CEO
Number of Branches 851
Total Manpowers 13,122
Earnings Per Share 78.02-(TK)
Total Assets Tk.2,93,662 million
Authorized Capital Tk.20,000 millions
Paid up capital Tk.5000 millions
Net Profit 2982 millions(2009)
Total Deposits 2,46,175 millions
Total Loan and Advances 1,66,359 millions
Fully committed To Deliver Shareholders ValueHead Office Janata Bhaban Corporate branch
110, Motijheel Com. Area Dhaka-1000Bangladesh.
Web and E-mail Address www.janatabank-bd.com
02.04. Hierarchy of Janata Bank Limited
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
Hierarchy of Janata Bank Limited
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
02.05. Objective of Janata Bank Limited
JANATA Bank Ltd will be the absolute market leader in the number of loans given to small
and medium sized enterprises throughout Bangladesh. It will be a world – class organization
in terms of service quality and establishing relationships that help its customers to develop
and grow successfully.
02.06. Mission of Janata Bank Limited
Janata Bank Limited will be an effective commercial bank by maintaining a stable growth
strategy delivering high quality financial products, providing excellent customer service
through an experienced management team and ensuring good corporate governance in every
step of banking network.
02.07. Vision of Janata Bank Limited
To become the effective largest commercial bank in Bangladesh to support socio-economic
development of the country and to be a leading bank in South Asia.
02.08. Core Values of Janata Bank Limited
Integrity
Fairness
Harmony
Courtesy
Commitment
Enthusiasm for work
Business ethics
02.09. Core Strengths of Janata Bank Limited
Quick Decision Making
Efficient team performance
Satisfied Customer
Internal Control
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
02.10. Foreign Corresponding
Janata Bank has already established a worldwide network and relationship with international
banking through its four (4) overseas branches in UAE, subsidiaries “Janata Exchange S.R.l’
in Italy & 1125 foreign correspondents all over the world.
02.11 Business Philosophy of Janata Bank Limited.
Janata Bank Ltd, a full service commercial bank with Local and International Institutional
shareholding, is primarily driven by creating opportunities and pursuing market niches not
traditionally met by conventional banks.
Today Janata Bank Ltd is one of the fastest growing banks in the country to support
the planned growth of its distribution, network and for its various business segments.
The reason Janata Bank Ltd is in business is to build a profitable and socially responsible
financial institution focused on markets and businesses with growth potential, thereby
assisting Janata and stakeholders build a “just, enlightened, healthy, democratic and poverty
free Bangladesh”. Which mean to help make communities and economy of the country
stronger and to help people achieve their dreams. They fulfill the purpose by reaching for
high standards in everything we do. For their customers, their shareholders, their associates
and their communities upon, which the future prosperity of their company rests.
02.12. Management of Janata Bank Limited:
For any financial and non financial organization Management is the most valuable and
important resources of any kind of organization. And a well-organize management provides
the organization to reach its ultimate goal. Management means planning, organizing, staffing,
directing and controlling of all financial and non financial resources of an organization.
Different aspects of management practice in Janata Bank Limited are discussed below.
Planning
Janata Bank Limited has done its planning within the preview of the corporate plan. The
overall planning approach of Janata Bank Limited is Top-down. Each branch can plan
according to the goal imposed by the corporate level. It doesn’t plan independently. And,
Janata Bank Limited has a planning division. This department is mainly responsible for the
overall planning.
Organizing
Janata Bank Limited is organized as per the existing business locations. It has 851 branches,
each of which is a separate entity. Each unit is responsible for its own performance and
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
followed by Managers each. He is directly responsible for performance of their unit. Within
each branch it is organized functionally.
Staffing
The recruitment of Janata Bank Limited is done in two ways. One as a “probationary officer”
for the management program and it has probation period of one year. Another one is non-
management level as “Trainee Officer” Probationary officer is recruited in officer category
and their career path is headed towards different managerial jobs.
Directing and controlling
The management approach in Janata Bank Limited is top-down or authoritative. Information
just seeks through lower management layer. Setting Management in all office is done in way
that the superior can monitor the subordinate can all time. Budgeting, rewarding, punishing
etc. are also practiced as control mechanism.
02.13. Product and services
JBL has a very broad line products under the various business group, from short term to long
term deposits, various types loans and advances, account service, it provides finance for
export and import, finance for working capital, project financing, capital investment,
remittance service, trade service, foreign exchange service, cash management service, Profit
& loss sharing and also has other miscellaneous product and services around the nation.
Janata Bank Limited
Internship Report Foreign Exchange operations of JBL
GENERAL BANKING
LOAN AND ADVANCE
FOREIGN EXCHANGE
LEGAL AND RECOVERY
CD, SD, STD, FDR, SND, DD, TT, MT, PO, SALE OF PRIZE
BOND & SP.
CC, TR, LIM, OD, PROJECT LOAN.
EXPORT & IMPORT.
LEGAL MEASURE FOR RECOVERY.
RECOVERY
62
Daffodil International University
02.14. Product of Trade service
3.3.1 Fund Based:
Cash Credit (CC Hypo)
Cash Credit (CC Pledge)
Overdraft (OD)
Trust Receipt (TR)
Foreign Bill Purchase (FBP)
Loan Against Important Merchandise (LIM)
3.3.2 Non-Fund Based:
Letter of Credit (LC)
Deferred LC
Sight LC
Letter of Guarantee (LG)
A limit (amount) is set by the bank that can be availed by a particular Customer based on his /
her Credit worthiness and record of business transactions with the bank.
02.15. Business area of Janata Bank Limited
There are mainly eight major business areas where the Janata Bank Ltd. is performing
with high reputation. These areas are:
General Banking
Foreign Exchange
Small & Medium Scale Enterprise (SME)
Large Scale Industries
Agriculture Sector
Transport Sector
Financing In Housing Sector& Land Developing
Finance in Home Appliance
Since I completed my internship on foreign exchange, it would be convenient for me to focus
Foreign Exchange of Janata Bank Ltd.
02.15.01 General Banking
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
It is most important side of the bank. Bank is nothing but a middleman between lenders
(surplus unit) and borrowers (deficit unit). To provide loan, a bank needs a huge amount of
money from the depositors. General banking is the side where banks offer different
alternatives to the clients to deposit and remit their money. To encourage the clients, bank
offers different options in front of their clients. Most of these options are very much similar
between the banks, but the customer services and facilities may not be the same.
General Banking of JBL is divided into 4 divisions:
Account opening
Remittance
Clearing
Cash.
2.15.1.1 Account Opening
The relationship between the banker and the customer begins with the opening of an account
by the customer. Initially all the accounts are opened with a deposit money by the customer
and hence these accounts are called deposit account. Usually a person needs to open an
account to take services form it. Without opening an account, one can get only a few services
from the bank. So the banking begins actually by opening an account with a bank. Generally,
there are four types of accounts in our country’s banking system:
1. Current account or Demand Deposit (CD Account)
2. Savings Deposit (SB Account)
3. Fixed or Time Deposit (FDR)
4. JBDS (Janata Bank Deposit Scheme)
5. MDS (Medical Deposit Scheme)
6. EDS (Education Deposit Scheme) & SPS
2.15.1.2 Remittance
Remittance of funds is ancillary services of JBL. It aids to remit fund from one place to
another place on behalf of its customers as well as non- customers of Bank. JBL has its
branches in the major cities of the country and therefore, it serves as one of the best mediums
for remittance of funds from one place to another. The main instruments used by JBL:-
i. Payment Order Issue/Collection
ii. Demand Draft Issue/Collection
iii. T.T. Issue/Collection
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
i. Payment Order:
The pay order is an instrument issued by bank, instructing itself a certain amount of money
mentioned in the instrument taking amount of money and commission when it is presented in
bank. Only the branch of the bank that has issued it will make the payment of pay order.
Issuing of Pay Order:
The procedures for issuing a Pay Order are as follows:
Deposit money by the customer along with application form.
Give necessary entry in the bills payable (Pay Order) register where payee’s
name, date, PO no, etc is mentioned.
Prepared the instrument.
After scrutinizing and approval of the instrument by the authority, it is delivered to.
ii. Demand Draft:
The person intending to remit the money through a Demand Draft (DD) has to deposit
the money to be remitted with the commission which the banker charges for its
services. The amount of commission depends on the amount to be remitted. On issue
of the DD, the remitter does not remain a party to the instrument:
Drawer branch
Drawn branch
Payee. Customer. Signature of customer is taken on the counterpart.
iii. Telegraphic or Telephonic Transfer (TT)
This Method transfers money to one place to another place by telegraphic message. The
sender branch will request another branch to pay required money to the required payee on
demand. Generally for such kind of transfer payee should have account with the paying bank.
Otherwise it is very difficult for the paying bank to recognize the exact payee.
When sending money is urgent then the bank uses telephone for remittance. This service is
only provided for valued customers, who is very reliable and with which banks have long
standing relationship.
TT (Issue)
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
Customer fills up the TT form and pays the amount along with commission in
cash or by cheque.
The respected officer issues a cost memo after receiving the TT form with
payment seal, then signs it and at last give it to the customer.
Next a TT confirmation slip is issued and its entry is given in the TT issue
register.
A test number is also put on the face of the slip. Two authorized officer signs this
slip.
The respective officer transfers the message to the drawee branch mentioning the
amount, name of the payee, name of the issuing branch, date, test number and his
her power of attorney (P.A.) number.
The confirmation slip is send by post.
2.15.1.3 Clearing
Clearing house is an assembly of the locally operating scheduled banks for exchange of
cheques, drafts, pay orders and other demand instruments drawn on each other and received
from their respective customers for collection. The house meets at the appointed hour on all
working days under the supervision of two central bank officers or its agent as the case may
be, and works within the regulations framed therefore on the basis of prevailing banking
practices. In Bangladesh, clearing house sites at Bangladesh bank where there is no office of
the Bangladesh bank, Sonali Bank acts as agent of Bangladesh bank.
There are mainly two types of clearing systems in Bangladesh, such as:
Internal clearing or inter branch clearing or inward clearing
External clearing or inter banks clearing or outward clearing
What is clearing House?
In Bangladesh Bank, there is a very large room, which contains fifty (50) or more tables for
each bank that is called the clearing house.
Nature of clearing house:
1st Clearing House
Return Clearing House
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
Types of Clearing Cheque
JBL Gandaria Branch, Dhaka performs the clearing function through Bangladesh Bank. JBL
Local Office, Dhaka acts as the agent of all JBL branches for the clearing house of the
Bangladesh Bank. There are two types of cheque which are-
Inward clearing Cheque.
Outward clearing Cheque.
Inward clearing Cheques
Inward clearing cheques are those ones which have drawn on the other branches of JBL,
which will be cleared / honored through the internal clearing system of JBL operated by the
Local Office of JBL.
Outward clearing Cheques
Outward clearing cheques are those ones, which have drawn on the other bank branches
which are presented on the concerned branch for collection through clearing house of
Bangladesh Bank.
2.15.1.4 Cash
The cash section of any branch plays very significant role in Banking Section. Because, it
deals with most liquid assets. The JBL, Gandaria Branch has an equipped cash section. This
section receives cash from depositors and pay cash against cheque, draft, PO, and pay in slip
over the counter. Every Bank must have a cash counter where customer withdrawn and
deposit their money. When the valued client’s deposit their money at the cash counter they
must have to full fill the deposit slip his/her own, then they sing as the depositor option’s then
they deposit their money through cash officer at the cash counter.
Several Types of Deposit Slip
There are several types of deposit slip as follows:
Current Deposit A/C Slip,
Saving’s Deposit A/C Slip,
Fixed or Time Deposit A/C Slip,
Other Types of Deposit A/C Slip,
Pay order Slip,
Demand Draft Slip,
T.T. Slip.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
Receiving Cash
Any people who want to have deposit money will fill up the deposit slip and give the form
along with the money to the cash officer over the counter. The cash officer counts the cash
and compares with the figure written in the deposit slip. Then he put his signature on the slip
along with the ‘cash received’ seal and records in the cash receive register book against A/C
number.
At the end of the procedure, the cash officer passes the deposit slip to the counter section for
posting purpose and delivers duplicate slip to the clients.
Disbursing Cash
The client who wants to receive money against cheque comes to the payment counter and
presents his cheque to the officer. He verifies the following information:
Date of the cheque
Signature of the A/C holder
Material alteration
Whether the cheque is crossed or not
Whether the cheque is endorsed or not
Whether the amount in figure and in word correspondent or not
Then he checks the cheque from computer for further verification. Here the following
information is checked:
Whether there is sufficient balance or not
Whether there is stop payment instruction or not
Whether there is any legal obstruction or not
After checking everything, if all are in order the cash officer gives amount to the holder and
records in the paid register.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
03.01. Foreign Exchange
03.01.1. Foreign Exchange- its Meaning and Definition
Foreign Exchange is a process which is converted one national currency into another and
transferred money from one country to another country. Foreign exchange refers to the
process or mechanism by which the currency of one country is converted into the currency of
another country. Foreign exchange is the means and methods by which rights to wealth in a
country’s currency are converted into rights to wealth in another country’s currency. In banks
when we talk of foreign exchange, we refer to the general mechanism by which a bank
converts currency of one country into that of another. Foreign trade gives rise to foreign
exchange. Modern banks facilitate trade and commerce by rendering valuable services to the
business community. According to foreign exchange regulation act 1947, “Any thing that
conveys the right to wealth in another country is foreign exchange”. Foreign exchange
department plays significant roles through providing different services for the customers.
Opening or issuing letters of credit is one or the important services provided by the banks.
03.01.2. Principles of Foreign Exchange
The following principles are involved in Foreign exchange:
The entire system.
The media used.
The monetary unit.
03.01.3. Functions of Foreign Exchange
The Bank actions as a media for the system of foreign exchange policy. For this reason, the
employee who is related of the bank to foreign exchange, especially foreign business should
have knowledge of these following functions:
Rate of exchange.
How the rate of exchange works.
Forward and spot rate.
Methods of quoting exchange rate.
Premium and discount.
Risk of exchange rate.
Causes of exchange rate.
Exchange control.
Convertibility.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
Exchange position.
Intervention money.
Foreign exchange transaction.
Foreign exchange trading.
Export and import letter of credit.
Non-commercial letter of trade.
Financing of foreign trade.
Nature and function of foreign exchange market.
Rules and Regulation used in foreign trade.
Exchange Arithmetic.
03.02. Different Types of foreign exchange operations:
There are three kind of foreign exchange transaction:
Import
Export
Foreign Remittance. The following chart is showing different types of
activities of foreign exchange operation:
Chart 14: Different Wings of Foreign Exchange Operation
03.03 Import:
Import trade in Bangladesh is controlled under the Import and Export control Act 1950.
Authorized Dealer Banks will import the goods into Bangladesh following the import policy,
public notice, F.E. circular and other instructions from competent authorities from time to
time. The whole import functions of the branch as far I have understood are discussed below:
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
03.03.1. Procedure of import
Import of merchandise essentially involves two things:
Bringing of goods physically into the country
Remittance of foreign exchange towards the cost of the merchandise
The Ministry of Commerce through the Chief Controller of Import regulates physical import
and Exports being office at the important trade center while Bangladesh Bank regulates the
payment for the imports through its various departments. The following are the steps
involved in import of merchandise into Bangladesh.
Registration of importer
In terms of the Importers, Exporters and Indenters (Registration) Order 1981, no person can
import goods into Bangladesh unless he is registered with the Chief Controller of Import and
Export or exempted from the provisions of the said order. So the following documents are
required to be submitted to the licensing authority for registration as importers:
Questionnaire form duly filled in and signed
Income tax registration certificate
Trade License from the Municipal or Local Authority
Bank certificate
Nationality certificate
Partnership Deed where applicable
Certificate of Registration with the Registrar of Joint Stock Companies,
Certificate from the Chamber of Commerce/Registered Trade Association
Ownership documents or rent receipts of the place of business
Any other documents required under the relevant import policy.
03.03.2. Licensing for Imports
Most imports into Bangladesh require a license from the Licensing Authority. In recent years,
the task of licensing has been delegated to the commercial banks. It is done by LCA (Letter
of Credit Authorization Form). Blank LCA forms can be obtained by the importer from their
banker. The following documents are required to be submitted by the import to his banker.
LCA Form property filled-in and signed.
LC Application
Purchase Contract in the shape of an Indent or Pro forma Invoice.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
Insurance Cover Note
Membership Certificate from a chamber of Commerce and Industry or Registered
Trade Association
Import Registration Certificate (IRC).
In case of Public Sector, attested photocopy of allocation letter issued by the
allocation authority, Administrative Ministry or Division specifying the source,
amount, purpose, validity, and other terms and conditions against the imports.
03.03.3. An Opening of Letter of Credit
Importer applies to the bank to open L/C in favor of foreign supplier. The bank has its
printed application form and the importer should carefully fill in this form. On
receiving this application, the bank scrutinizes it to ensure that:
Whether the customer fulfils all the required conditions/criteria to be eligible as an
importer as per provisions of the Import Policy Order and Guidelines for Foreign
exchange Transactions in force and the supporting documents/papers required are
submitted.
Whether the items for import of which the documentary credit need to be opened is
permissible i.e. not included in the negative/restrictive list as per Import Policy order
in force.
Whether we are holding satisfactory credit report on the beneficiary to satisfy the
relevant provisions of the guidelines for Foreign Exchange transactions
On receipt of the L/C application over the counter or through dispatch/mail section,
the receiving date and time to be recorded on the L/C application.
Signature of the customer on the L/C application to be verified by authorized/
designated officer.
L/C application with all supporting papers to be checked to ensure that the required papers
are as per requirement of Guidelines for Foreign Exchange Transactions and are consistent to
each other
…..L/C application must show the following clearly:
Full name & address of the beneficiary
The amount of the credit
The Credit whether to be irrevocable or confirmed irrevocable.
Whether the credit is available by payment, acceptance or negotiation
On which party the drafts are to be drawn and the tenure of such drafts
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
A brief description of the goods, including details of quantity and unit price
Whether freight is to be prepaid or not
The port of shipment and the destination
Whether the transfer of the goods from one vessel to another, or from one mode of
transport to another, route, is prohibited.
The last date for shipment
The date and place of expiry of the credit
Negotiation period
Details of the documents required and how those are to be dispatched to the issuing
bank i.e. by ordinary mail/courier.
- Whether the credit is to be a transferable one.
- How the credit is to be advised i.e. by mail/telex.
Letter of Credit authorization from duly filled in and signed.
Indent or Performa Invoice issued by Seller or his agent (Indenter) duly counter
signed by the customer.
Insurance certificate or policy (Marine/Air/Mail/Truck) covering the goods at 10%
above L/C value for the whole journey/shipment together with unconditional
premium paid receipt.
Prior permission/registered LCA form, No objection/any other certificates from the
concerned authority as required as per provision of the Import Policy Order.
I.M.P. form duly filled in and signed.
In case the L/C application is not complete or in consistence or the required papers
are not submitted, the customer should be promptly contacted for rectification of the
defects.
Before Dispatching/ Transmitting the L/C:
Check whether the opening of the Letter of Credit is approved by the competent
authority.
Review all documents including the Letter of Credit and vouchers.
If found in order, sign the letter of credit including the accounting vouchers.
The original L/C must be signed jointly by two authorized signatories.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
3.3.4. Verification and Lodgment of Documents by the L/C Opening Bank
On receipt of the shipping documents from the negotiating bank, the L/C Opening Bank
should carefully examine these to ensure that they confirm to the term of the credit:
The documents have been negotiated within the stipulated date.
The amount drawn does not exceed the amount authorized in to credit.
The merchandise is properly invoiced.
The bill of Lading is clean, shipped on board, showing freight prepared and
endorsed to the order of the issuing bank shows the port of shipment, the port of
destination, the name of the consignee and the date of shipment are in keeping
with the term of the credit.
It is properly signed by the shipping company
The Certificate of Origin
Other documents like weight list, packing list, pre-shipment Inspection Certificate
etc.
After the lodgment, the bank asks the importer to retire the bill. After retirement the amount
of remittance towards cost of the merchandise is reported to Bangladesh Bank on Form
“IMP”.
03.03.5. Shipping Guarantee:
Shipping guarantee is a Letter of Guarantee/Indemnity issued jointly by importer (consignee)
together with a bank (L/C opening Bank) in favor of a commercial carrier or their agent
whereby they are authorized to release imported merchandise (title being in favor of the co-
issuer Bank) to a consignee in the absence of original shipping bill i.e. bill of Lading/airway
bill while the co-issuer furnish an assurance/undertaking to submit the original Bill of
Lading/airway Bill to the carrier as soon as the same is in their possession. However against
the issuance of a letter of indemnity, the bank should obtain a counter indemnity signed by
the importer in favor of the issuing bank whereby they assume full responsibility for any
obligation the bank assume in issuing the shipping guarantee and also undertake
acceptance/payment of documents/draft under the related Letter of Credit irrespective of
whether those are discrepant or not.
Before Issuing the Shipping Guarantee:
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
Head Office approval is essential in cash where the customer has not adjusted
the related import liabilities or do not have approved LIM/LTR facility limit.
The Branch shall obtain counter indemnity from the customer in favor of the
Bank.
The customer shall submit an unconditional undertaking to accept the related
shipping documents even with any discrepancies.
The Shipping Guarantee/Letter of indemnity must be signed jointly by two
authorized signatories.
Important points to prepare an L/C:
To prepare an L/C the branch takes care on the following points:
L/C number: The branch will put a number for each L/C., which is the serial number of the
L/C for a particular year. First L/C of JBL SKB branch in 2009 may be numbered like JBL /
SKB /1742010401.
Place and date of issue: L/C must indicate the place and date of issue.
Date and place of expiry: L/C must have an expiry date. This is the last date of presentation
of document under the L/C. Place of expiry of the L/C also to be mentioned in the L/C.
Normally it should be the counter of the Negotiating Bank.
Shipment date: There should be a last shipment date after which shipment is not allowed.
Bank may also fix-up a first shipment date before which shipment will not be allowed.
Presentation period: Issuing bank will allow a period within which exporter must present
the export documents to the negotiating bank or to any other nominated bank. This may be 15
days from the date of shipment. Maximum may be allowed one month, but within the expiry
date of the credit.
Applicant: Name of the applicant with business address to be put in the L/C.
Beneficiary: Name of the beneficiary with address also to the indicated in the L/C.
Advising Bank: Name of the advising bank with address to be mentioned in the L/C.
Amount : Every L/C must show the amount of the L/C. The word “About” may be used with
amount, which means 10% more or less of the said amount.
Part-shipment and Trans shipment: Issuing bank also clearly indicate in the L/C whether
part-shipment and Trans shipment are allowed or not.
Availability: L/C must indicate whether the credit is available by payment, by negotiation or
by acceptance.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
Port of shipment and port of destination: L/C will also indicate from where shipment to be
made and where goods to be delivered.
Tenure of the draft: Whether the draft to be drawn at sight or usance, also to be cleared in
the L/C.
Documents required: Bank will give the list of required documents and data content therein.
Each and every term must be supported by the documents, because any term without asking
document is valueless.
Payment: When, where and by whom payment is to be made, also to be indicated in the
L/C.
Bill of lading: B/L must be issued or endorsed to the order of the Issuing Bank. It should be
‘clean’ and “freight prepaid” if L/C is on CFR basis short form and charter party B/L to be
avoided. All these terms must be incorporated in the B/L clause of the L/C.
Bill of exchange: bill of exchange to be drawn on the Issuing Bank.
Pre-shipment Inspection: Pre-shipment inspection certificate is compulsory for both
government and private import except in few cases.
Data content: Invoice and other documents if required should indicate the H.S. code number.
LCAF No with description of the item and country of origin.
Special conditions: Special conditions, such as in case of food, machineries, vehicles and
any other items should be incorporated in the L/C where required.
Authenticity of the credit: L/C to be authenticated by putting a test number or signing by
two authorized officers.
Additional confirmation to import Letter of Credit
The beneficiary of L/C may ask for the additional confirmation to a letter of credit by an
internationally reputed bank located in beneficiary’s country. In that case after adding
confirmation, the negotiation becomes restricted to the bank who has added their
confirmation to the credit.
In case there is no branch of the advising bank of the beneficiary’s country, the reimbursing
bank may confirm to the advising bank that they are holding reimbursing authority. This may
also serve the purpose of adding confirmation.
As per normal practice, the charges of adding confirmation are borne by the beneficiary. In
case the charges are to be borne by the importer, the L/C opening bank is to recover charges
at the time of issuance of such instructions.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
03.03.6. Amendment to Letter of Credit
The letter of credit opened by a bank may need amendment. If the supplier finds that the term
of the credit cannot be complied with in full, he would arrange for necessary amendment by
the opener before the goods are shipped. These amendments must be advised by the opening
bank to the supplier through advising bank.
Sometimes the opener also may like to amend the credit after it has been advised. These
amendments may relate to the decrease or increase in amount of credit, change in foreign
currency, and change in the dates of shipment or negotiation, change in merchandise and
other terms of the credit. These amendments must also be advised by the opening bank to the
supplier through the advising or confirmation bank before the shipment is made.
For this kind of amendment, the bank would need a written request from the importer who
generally makes this request after obtaining consent of the supplier. Such amendments will,
of course, be effective if all the parties to letter of credit namely the L/C opening bank, the
advertising bank and the supplies, agree to it.
Amendment is to be typed, like L/C, in the printed format in manifold. The copies of the
amendment must be dispatched to all concerned as done in dispatching the L/C. Amendment
can be done by SWIFT or Airmail.
Amendment commission and other charges are to be realized from the party by debiting his
account. If the amount of L/C is increased, the liability voucher is to be passed including the
amount of increase on the date of amendment reserving the old entry passed at the time of
opening the L/C.
03.03.7. L/C Advising
The L/C duly signed by two authorized officers, whose specimen signatures are already
recorded with the correspondent banks, must be addressed to the beneficiary. Bank generally
does not enter into direct contact with the beneficiary. Instead they utilize the services of its
own branch office (if any) or correspondent bank at seller’s country for the purpose of
advising it to the seller (beneficiary). Thus the correspondent bank becomes the “Advising
Bank”.
The process of advising a credit consists of forwarding the original credit to the beneficiary to
whom it is addressed. Before forwarding/advising the credit to the seller under appropriate
forwarding coverage, the advising bank has to verify the signatures of the officers of the
opening bank and ensure that the terms and conditions of the credit are not in violation of
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
regulations relating to export. While advising, the advising bank does not undertake any
liability.
Advising a letter of credit:
Chart 15: Advising of L/C
03.03.8. Lodgment
If import documents are found in order, they are to be made entry in the bill register and
necessary vouchers to be passed, putting Bill number on the documents. This process is
called Lodgment of the bill. The word “Lodgment’ means temporary stay. Since the
documents stays at this stage for a temporary period i.e. up to retirement of the documents,
the process is called lodgment. Bank must lodge the documents immediately after receipt of
the same, not exceeding 7 banking days, following the day of receipt of the documents,
(Article 14, UCPDC-500).
Security Documents
The L/C opening bank being received the documents from the negotiated bank will scrutinize
the documents with the respective L/C terms and condition.
Forwarding schedule of Negotiating Bank
Whether there is any instruction.
Whether these instruction can be complied with.
Whether the negotiating commission realized.
Bill of Exchange (Draft)
Whether it is drawn in order.
Whether the amount of draft corresponds with the L/C amount.
Draft amount should be equal or less than the L/C amount.
Whether the date of the draft of the within the date as per L/C etc.
Internship Report Foreign Exchange operations of JBL
IMPORTER (L/C
APPLICANT)L/C OPENING BANK
L/C BENEFICIARY L/C ADVICING BANK/CONFIRMING BANK
APPLICATIONON
ISSUE L/C ADVICE
62
Daffodil International University
Bill of Lading (B/L)
Whether the B/L is clean i.e. there is no clause like some cartons are broken or
any other clause.
Whether there is signature of shipping Authority.
Whether the date of B/L is within the date of shipment as per L/C.
Whether the freight is prepared or not as per L/C terms.
Whether the part of shipment and part of destination are similar as per L/C.
Whether the title of B/L belongs to L/C opening bank.
Whether the full sets of B/L dispatched by negotiating bank etc.
Commercial Invoice
Whether the full particulars of goods have been incorporated.
Whether the amount of invoice corresponds with the amount of Bill of Exchange
and as per the L/C terms.
Whether IRC No. LCA No etc. have been incorporated.
Whether it is signed by the beneficiary.
Other Documents
Whether all other documents are prepared as per L/C.
In case of discrepant documents The Article 16 of UCPDC (Publication 600) says,
When the issuing bank determines that a presentation does not comply, it may refuse
to honor or negotiate.
When the issuing bank determines that a presentation does not comply, it may in its
sole judgment approach the applicant for a waiver of discrepancies.
When the issuing bank decides to refuse to honor or negotiate, it must give a single
notice to that effect to the presenter.
The notice must state:
That the bank is refusing to honor or negotiate; and
Each discrepancy in respect of which the bank refuses to honor or negotiate; and
(a) That the bank is holding the documents pending further instructions from
the presenter; or
(b) That the issuing bank is holding the documents until itreceives a waiver of the
applicant agree to accept it, or receives for the instruction from the presenter
prior to agreeing to accept a waiver; or
(c) That the bank is returning the documents; or
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
(d) That the bank is acting in accordance with Instructions previously
receipt from the presenter.
The notice required in sub-article (c) must be given by telecommunication or, if that is
not possible, by other expeditious means no letter than the close of the fifth banking
day following the day of presentation.
If the documents are found in order and these are acceptable to the importer, the bank lodge
the bill in PAD (Payment Against Documents) by converting the foreign currency
representing the bill amount and foreign correspondences charges into Taka and asks the
importer to retire the bill by sending a cost memo indicating the amounts payable by him
under different heads.
03.03.9. Retirement
When the importer release the import documents from the bank by acceptance/cash payment
or under post import bank finance, it is known as retirement of the import document.
03.3.10. Post import finance
When the importer does not come forward to retire the import documents, or requests the
bank for finance against the imported consignment, then arises the necessity of post import
investment. If the consignment is not cleared within 45 days, from the date of arrival, custom
authority may auction the consignment under section 167 (8) and amended section 82 of the
Custom Act 1969. Under such a situation bank becomes compelled for forced clearance of
the consignments under Murabaha post import investment. If the documents are discrepant,
party’s acceptance is required for clearance of the goods.
03.3.11 Loan against Imported Merchandise- LIM (Post Import Finance)
03.3.11.1 Definition of LIM
Import Finance plays vital role in a country's foreign trade business. Import of goods and
service are needed not only for export production but also to supply domestic industry with
the necessary inputs which are not locally available or available at uneconomic cost and are
needed for expansion and development.
Loan against Imported Merchandise (LIM) is a facility provided by the Bank to the importers
who are in shortage of fund to retire the import bills and thus to clear the goods from the post
authority. In other works it may be referred as an advance against merchandise.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
3.3.11.2. Cases of LIM account
LIM Accounts may be created in the following two cases:-
LIM Account on importer's request.
Forced LIM Account.
3.3.11.3. LIM Account in importer's request
After lodgment of documents, the importers concerned to be intimated for early retirement of
the documents by paying outstanding bill amount including other charge. If the importer is
not in a position to retire the bill out of his own sources, at that moment they may request the
bank to clear the goods by creating LIM Account. On receipt of the importers request the
official of the import bills section will calculate the total landed cost of the consignment. To
ascertain the landed cost the following points are to be considered.
Efforts should be taken so that at least 20% to 30% margin of the landed cost may be
realized from the importer. Realization of margin will depend on the banker customer
relationship and also on the marketability of the goods.
The following charge documents have to be executed by the importer:-
DP Note (Demand Promissory note).
Letter of Arrangement.
Letter of Disbursement.
Letter of pledge.
Any other document of necessary.
The branch Managers are not empowered to sanction the LIM A/Cs in favor of the importers
for clearance the goods without obtaining the approval from Head Office.
On getting approval from Head Office the branch will send the documents to the port city
branch by endorsing the bill of lading in favor of them with certification of invoice value for
clearance the goods through importers nominated as well as Bank's approved C&F agent. In
the forwarding letter clear instructions to be given for dispatching the goods either by train or
by truck duly insured. Before sending the documents to the port city branch the following
charge documents have to be executed by the importer:-
DP Note (Demand Promissory note).
Letter of Arrangement.
Letter of Disbursement.
Letter of pledge.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
Any other document of necessary.
3.3.12. Comparative Position on Overall Import Performance for the last 3
Years of “Janata Bank Gandaria Branch” (Figure in Million)
Item 2008 2007 % of Growth 2009 2010 % of Growth
Import 991.12 2056.79 108% 2056.79 2282.53 11%
Source: Statement of Affairs
From the above graph it is observed that the Import is increased steadily. In the year 2007 is
increased 108% as compared with 2006.And in the year 2008 it is increased 11% as
compared with 2007.
03.04 Export
Export means outflow of goods and services produced in one country, which purchase by
Government, Firms and individuals of other countries. Development of a country depends on
its participation in the international trade by increasing production and export of commodities
and service sector. By way of this a country can improve Employment Generation-Income
level-Savings-Growth-Economic Development.
The imports and exports trade in Bangladesh is regulated by the Import & Exports Control
Act 1950. There are number of formalities an exporter has to fulfill before and after execution
of export, some of are as under:
03.04.1. Benefits of Export
Development of a country depends on its participation in the international trade by increasing
production and export of commodities and service sector. By way of this a country can
improve Employment Generation-Income level-Savings-Growth-Economic Development.
Internship Report Foreign Exchange operations of JBL
2008 2009 2010
62
Daffodil International University
03.04.2. Procedure/Formalities for Export
The imports and exports trade is regulated by the Import & Exports Control Act 1950.
There are number of formalities an exporter has to fulfill before and after execution of
export, some of are as under:
The intending exporter has to register with CCI&E and obtained Export Registration
certificate [ERC]. The ERC number is to be used in all places relating to exports.
03.04.3. Securing Export Order
To secure export order the exporters may contact local chamber commerce of potential
buyers, the export promotion bureau, Bangladesh mission abroad and by direct contact with
foreign buyer through correspondences.
03.04.4. Receiving Letter of Credit
After making contact with foreign buyers and reaching on agreed price and terms, conditions
the exporters receive Letter of Credit.
03.04.5. Procurement and Shipment of Goods
After receipt of LC the exporter has to procure or manufacture the contracted goods and ship
the same.
03.04.6. Preparation and procurement of Export Documents
After making shipment the exporter has to prepare documents i.e. Bill of Exchange,
Commercial Invoice, Beneficiary’s certificates and procure some documents i.e. Transport
Documents, Certificate of Origin, Insurance certificate, Inspection certificate and other
documents as required as per LC terms.
03.04.7. Submission of documents to the bank for Negotiation
After preparation and collection of all documents as per LC terms the exporter has to submit
the documents to the bank for Negotiation/Payment/Purchase.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
03.05. Role of Banks in the Export Sector of Bangladesh
All the financial requirements of an exporter, from the time he enters into a sale contract and
start working on it and till he receives final payment from abroad, are met by commercial
banks. In that case banks play an important role in the export sector of Bangladesh and
contribute by financing in the export sector by following categories:
Pre-Shipment Credit: Pre-shipment credit is given to the exporters, for the activities
prior to shipment of goods for export. Some example of Pre-shipment credit: Cash for
local procurement of raw materials and its related expenses, Procuring & Processing
of goods for export, Packing and transportation of goods for export, Payment of
insurance premium, Inspection fees, Freight charges etc.
Post-Shipment Finance: Usually the exporter cannot afford to wait for a long time
for payment to local manufacturer/supplier and other financial obligations. Resulting
which the exporters need post-shipment credit facility. Considering the genuine need,
and worthiness of export and other security measures bank allow credit facility to
exporters.
03.06. Different parties involved Foreign exchange transaction
Normally the following parties are involved to a documentary credit:
Importer:
The buyer or the importer is he who initiates the credit. He applies to bank for issue foreign a
documentary credit. The obligations between the importer and the issuing bank are governed
by the application-cum-agreement submitted by the importer to the bank. He is bound to
reimburse the bank, which effects payment or incurred a deferred payment undertaking or has
accepted or negotiated under the credit as per terms, and to take up the documents.
Opening Bank:
The issuing or opening bank is the importer’s bank and it issues a letter of credit normally
pursuant to the terms of sales contract as set out in the application for the credit by the
importer. The issuing bank should nominate the bank, which is authorized to pay or to accept
drafts or to negotiate, unless the credit allows negotiation by any bank.
Exporter:
The seller or exporter is the beneficiary of the credit. The letter of credit is opened in his
favor and addressed to him. The beneficiary has the obligation to make export as per the
contract and produce the documents as required by the credit.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
The Advising Bank:
It is the bank in the exporter’s country (normally the exporter’s bank), which is usually the
foreign correspondent of importer’s bank through which the L/C is advised to the supplier. If
the intermediary bank simply advises/notifies the L/C to the exporter part, it is called
“Advising Bank”.
The Confirming Bank:
If the advising bank also adds its own undertaking to honor the credit while advising the same
to the beneficiary, he becomes the confirming bank. In addition, becomes liable to pay for
documents in conformity with the L/C’s terms and conditions. The liability of the confirming
bank is the primary liability and it is not contingent on the fulfillment of the obligation by the
issuing bank.
The Accepting Bank:
Accepting bank is the bank nominated in the letter of credit to accept bills drawn under the
credit. If the bank so nominated accepts the nomination, its responsibility to the beneficiary is
not only to accept the drafts drawn but also to make payment on their due dates.
The Paying Bank:
Paying bank is a bank in the beneficiary’s country nominated in the letter of credit to make
payment against documents to be tendered under the credit. Paying Bank must examine all
documents with reasonable care to ascertain that these are drawn in accordance with the
terms and conditions of the credit.
Reimbursing Bank:
The issuing bank may indicate in the credit the name of a bank. From whom the
paying/negotiating bank can obtain reimbursement. The documents are sent to the issuing
bank. The negotiating/paying bank simultaneously makes a claim with the reimbursing bank
for the payment effected. Normally the reimbursing bank would be the bank with which the
issuing bank maintains an account.
The Transferring Bank:
If the L/C is transferable, then the 1st beneficiary of the L/C may transfer the L/C to the 2nd
beneficiary, through a bank nominated by the Issuing Bank. This bank is called the
Transferring Bank.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
03.07. Document required for Foreign Exchange Transactions
Export-Import transactions ask for the following documents:
¥ Transport Documents
¥ Letter of Credit
¥ Insurance Documents
¥ Commercial Invoice
¥ Other Documents
03.07.1. Transport Documents
Transport documents comprises of Bill of Lading, Airway Bills, Truck Receipts, Railway
Receipts and Inland Waterway Receipts.
Checking points of this document are:
The Bill of Lading is issued/endorsed to the order of Negotiating Bank.
Bill of Lading is clean, showing “Shipped on Board” notation, marked ‘Freight
o Prepaid” [For CFR Basis] and ‘Freight Collect” [For FOB Basis], not short
form, Blank back or pre dated.
The Bill of Lading appears the merchandise covers in Commercial Invoice.
The port of Shipment, Destination, Shipment Date, Name of consignee,
o Shipping Mark [if any] appears on the Bill of Lading are as per LC term.
Bill of Lading is signed by the carrier company or his agent.
03.07.2. Letter of credit
A letter of credit is a letter issued by a bank (known as the opening or the issuing bank) at the
instance of its customer (known as the opener) addressed to a person (beneficiary)
undertaking that the bills drawn by the beneficiary will be duly honored by it (opening bank)
provided certain conditions mentioned in the letter gave been complied with.
The following diagram brings out clearly the operation of letter of credit:
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
Chart 16: Flowchart of Letter of Credit Operation
03.07.3. Commercial Invoice
It include all types of information such as description of goods, Port of destination, Port of
loading, LC no, Importer name, name of issuing Bank etc.
Checking points of this document are:
The invoice dated and signed by the beneficiary.
The invoice is issued to the party concerned as stated in the LC.
Description of goods is as stated in the LC.
Unit price mentioned as stated in the LC.
Internship Report Foreign Exchange operations of JBL
Contract of Sale(1)
Ships Goods to(5)
M/s. Concord Int’l New York, USA
(Exporter/Beneficiary)
Forwards L/C to
(4)
Presents Docts. and
obtains payment from
M/s. Mark Style73 Motijheel C/A. Dhaka
(Applicant/Importer)
Applies For
opening of L/C
RecoversAmount From
(8)
SCB, USAAdvising/Negotiating
Bank
The Trust Bank Ltd.Dhaka
(Issuing Bank)
Obtains Reimbursement From Citibank NA, USA
(7)
Opens L/C and Sends it to(3)
62
Daffodil International University
Proper Trade-Term is mentioned.
03.07.4. Insurance Documents
Checking points of this document are (in case of CIF basis):
The Insurance Policy is valid.
The policy is issued in the name of LC Issuing bank a/c: importer.
The policy is signed by the authorized official of the Insurance Company.
The policy is in negotiable form, duly stamped and dated prior the BL date.
Description of goods, name of carrying vessel shown in Insurance Policy are same as
shown in BL.
The policy covers Transshipment [if allowed in LC] clause.
Policy covers 10% above the value of consignment.
Policy indicates where and in which currency the claim [if any] will be settled.
03.08. Foreign Remittance
03.08.1. Outward remittance:
On March 24, 1994 Bangladesh Taka was declared convertible for current international
transaction. As a result remittances become more liberalized. Outward remittance include
sale of Foreign Currency by TT, MT, Draft, TC or in cash for private, official and
commercial purpose.
Issuance of outward DD and TT
ADs may also issue DD, TT on their foreign correspondent favoring Bangladesh nationals or
foreign nationals as per their entitlement. But foreign TT and DD are not issued in this
branch.
03.08.2. Inward remittance:
The term inward remittance includes not only purchase of foreign currency by TT, MT, Draft
etc. but also purchase of bills, purchase of TC. Utmost care should be taken while purchasing
notes, TC, DD and similar instrument for protecting the bank from probable loss as well as
safety of the bank officials concerned. But this type of purchase is not done in this branch.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
03.08.3. Collection of foreign currency instrument
The Janata Bank Ltd. collects F.C. instruments on behalf of their customer. To collect
proceed of Foreign Instrument following procedures to be maintained:
Receive instrument with deposit slip
Affix crossing stamp of the bank
Entry in the register putting OFBC number
Affix endorsement “pay to the order of any bank or trust company, prior endorsement
guaranteed.”
Instrument to be sent to adjacent correspondents.
03.09. Different Methods of International Trade Payment:
Cash in Advance: Under this arrangement, buyer pays the value to exporter against the
goods to be shipped and services to be provided in some future date. After receipt of payment
exporter ship the goods and provides services to buyers. But the system is disadvantageous
for buyer because buyer blocking his fund in advances having no assurance of receipt of
goods and service in time as per contract. So such type of payment is considered as risky and
expensive for buyers but favorable for seller.
Open Account: Under this method, the sellers are in risky situation because he has to deliver
the goods and service to buyer before receiving payment. Buyer makes payment only after
receipt of goods and services as per contract terms. So before going such transaction sellers
should check the past record, worthiness and business history of the buyer and if it is found
satisfactory only seller can proceed further.
Collection against Payment [D/P]: Under this method, exporter ship the goods and draw bill
of exchange on the buyer and submit the documents to a bank with instruction to collect the
proceeds through its correspondent bank located in the buyers country. In this case
documents delivered only against payment.
Collection against Acceptance [D/A]: Under this method, exporter ship the goods and draw
bill of exchange on the buyer and submit the documents to a bank with instruction to collect
the proceeds through its correspondent bank located in the buyers country. In this case
documents delivered against acceptance of Drafts by the buyer.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
Documentary Credit: Documentary credit is the classic method. This method reduced
payment related risks for both exporter and importer substantially. Because documentary
credit is conditional payment undertaking of issuing bank to the exporter against compliance
of certain terms and conditions and submission of required documents as per credit terms. So
under this payment method both exporter and importers feel safe to deal.
03.10. Examination and Negotiation of Export Documents:
There are many instances where exporters involve themselves in committing fraud so while
exporters tendered export documents for negotiation, special care should be taken in checking
the said documents to avoid fraud forgery and protect the interest of the bank. Following are
some important checking points:
Know your exporter
You should know your customer considering his relationship with the bank, previous track
record and worthiness.
Proper checking of Export LC
Export LC is authenticated, irrevocable, valid, Free Negotiable in Bangladesh, Payment
instruction is clear, issued under UCPDC.
Proper checking of Export Documents
Bill of exchange, Commercial invoice, Transport documents and other documents are
prepared and presented as per LC terms.
Shipment
After the contract the exporter takes all necessary steps to ship the goods. He may procure or
manufacture the goods. Failure to maintain the delivery schedule will expose the exporter to
claim from the buyers for damages on account of non-shipment or late shipment, and in
addition the exporter may also lose the patronage of the buyer for future export orders. While
shipment and after shipment the exporter should obtain or prepare the following documents:
EXP Form
Photocopy of registration certificate
Photocopy of the contract
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
Photocopy of the L/C
Customs copy of ERF Form for shipment of jute goods and EPC Form for raw jute
Freight certificate from the bank in case of payment of the freight at the port of lading
is involved
Bill of Lading, Railway receipt, Postal receipt, Air way bill or Truck receipt
Packing list
Certificate of origin
Shipping instructions
Insurance policy.
Issuance of EXP Forms
All exports must be declared on EXP Form. AD branches supply these forms. The bank
certifies EXP form only after confirming the following:
Arrangements have been made for realization of export proceeds.
Bonfires of the importer/consignees abroad
Arrangements have been made for receipt by authorized dealer of documents of title
to goods,
The exporter has signed the EXP.
EXP number should be as under:
ADs Code Register Serial No Year
0 1 1 0 0 0 2 5 3 1 0
Submission of Documents
After the shipment, the exporter submits all these documents to bank for negotiation. The
exporter remains in constant touch with the negotiating bank for early negotiation of export
bills. If any minor mistake is detected or any document is found missing the same should
immediately be corrected or supplied for early settlement of the matter.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
Export Documents checking
After submission of exports documents by the exporter, bank must check, whether all the
required documents submitted or not. Bank must examine all documents stipulated in the
credit with reasonable care to ascertain whether or not they appear, on their face to be in
compliance with the terms and conditions of the credit. Documents not stipulated in the credit
will not be examined by the bank. The following points of documents should be carefully
scrutinized:
Bill of exchange
Amount of bill differs with invoice
Not drawn on L/C issuing branch
Not signed
Tenor of C/E not identical with L/C
Full set not submitted
Invoice:
Not issued by the beneficiary
Not signed by the beneficiary
Not made out in the name of the applicant
Description, price, quantity, sales terms of the goods not correspond to the credit
Not marked one fold as original
Shipping marks differs with B/L and packing list
Packing List:
Gross weight, net weight and measurement, number of cartoons/ packages differs
with B/L.
Not marked one fold as original
Not signed by the beneficiary
Shipping marks differs with B/L
Bill of Lading/Air Way Bill:
Full set of bill not submitted
B/L is not drawn or endorsed to the order of IBBL
“Shipping on Board”, “Fright Prepaid” or “Freight collect” etc. notations are not
marked on the B/L.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
B/L not indicate the name and capacity of the party i.e. carrier or master, on whose
behalf the agent is signing the B/L.
Shipped on board notation not showing name of pre-carriage vessel/ intended vessel
Shipped on board notation not showing port of loading and vessel name (in case B/L.
indicated a place of receipt or taking in charge different from the port of lading)
Short form B/L.
Charter party B/L.
Description of goods in B/L. not agrees with that of invoice, B/E.
Alterations in B/L. not authenticated
Loaded on deck
03.11. Modes of Payment
The most common methods of payment under a L/C are as follows:
Chart 17: Modes of Payment
Internship Report Foreign Exchange operations of JBL
Payment methods under L/C
Sight or Payment creditDeferred Payment Credit
Acceptance Credit Negotiation Credit
62
Daffodil International University
3.11.1. Sight or Payment credit
When the credit stipulates that drafts (bill of exchange) should be drawn under it on DP terms
involving payment to the beneficiary on presentation of documents, it is known as a “Sight or
Payment Credit”. In this credit the issuing bank nominates a bank in the exporter’s country as
the paying bank. If the paying bank accepts its nomination, its position is that of an agent of
the issuing bank. When the documents under the credit are presenter to it, it pays the
beneficiary provided all the terms and conditions of credit have been complied with. It gets
reimbursement from the issuing bank for the amount paid.
3.11.2. Deferred Payment Credit
The term “Deferred” means postponed to a future period or date. When a credit does not
require the payment to the beneficiary immediately on presentation of the documents but
after a specified period has elapsed, it is known as “Deferred Payment Credit”. According to
this type of credit, the payment is hot made in full on the tender of documents but by
installments at pre-determined future dates. Deferred payment credit may be used where the
beneficiary wishes to allow the importer time to pay for the document.
3.11.3. Acceptance Credit
When under the terms of a letter of credit drafts are drawn on DA terms involving payment to
the beneficiary on the maturity of the accepted Bill of Exchange drawn under it, the letter or
credit is referred to as an “Acceptance Credit” or a “Term Credit”. In this form of credit the
beneficiary draws a draft for particular usance (e.g. 30, 60, 90 days sight or even longer),
payable upon either the correspondent bank or the issuing bank.
3.11.4. Negotiation Credit
In a negotiation credit the documents are accompanied by a sight draft (bill of exchange). The
bill of exchange may be drawn on the issuing bank or the importer or any other bank
stipulated in the credit. The bank, which negotiates documents under the credit, purchases the
bill of exchange and pays the amount to the beneficiary who tenders the documents. The
issuing bank reimburses the negotiating bank.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
Settlements of claim
Exporter very often claims of various natures from the foreign buyers against their exports. It
should be ensured that genuine claims of the foreign buyers are settled expeditiously by the
exporters concerned so that the reputation of the country is not jeopardized in the
international market.
Under the Exchange Control instructions in force, Bangladesh bank’s prior approval in
individual case is necessary for making remittances against export claims.
General permission has, however, been accorded to the ADs to make remittances in foreign
exchange towards claims against exports of non-traditional items, provided the exporters are
willing to make such remittance from the exchange market. Settlement of claims against cash
foreign exchange resources of the country will, however, require Bangladesh Bank’s prior
approval.
03.12. Foreign Currency Accounts:
The Janata Bank Ltd opens the following accounts for dealing remittances:
NFCD Accounts:
Non-resident Foreign Currency Deposit (NFCD) accounts may now be maintained as long as
the account holders desire. Amounts brought in by non-resident Bangladeshis can be
deposited in foreign currency account any time after return to Bangladesh.
F.C Accounts of non-resident Bangladeshis
Foreign currency accounts opened in Bangladesh in the names of Bangladesh nationals or
persons of Bangladesh origin working or self employed abroad can now be maintained as
long as the account holders' desire.
RFCD Accounts:
Persons ordinarily resident in Bangladesh may maintain foreign currency accounts with
foreign exchange brought in at the time of their return to Bangladesh from visits abroad.
These accounts are termed as Resident Foreign Currency Deposit (RFCD) accounts. The
amount brought in with declaration to customs authorities on form FMJ and up to US $ 5000
brought in without declaration may be credited to this account. RFCD accounts may be
opened in US Dollar, Euro, Pound Sterling, Deutsche Mark or Japanese. Interest may be paid
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
on these deposits if these are for a term of not less than one month and the balance is not less
than US $ 1000 or Pound Sterling 500 equivalent.
F.C Accounts of other entities
ADs do not require prior permission of Bangladesh Bank for opening of foreign currency
accounts of:
o Non-resident foreign persons/firms;
o Diplomatic missions in Bangladesh and their expatriates;
o Diplomatic bonded warehouses (duty free shops);
o Local and joint venture contracting firms employed to execute projects
financed by foreign donors/international donor agencies.
Foreign Remittances occurs for the following reasons:
Investment in shares/securities by non-residents
Remittance of profits
Remittance of dividend/capital gain
Remittance of salaries and savings by expatriates
Remittance on account of training and consultancy
Remittance by shipping lines, airlines, courier service companies
Visit Abroad
Booking of Passage
Private Travel
Business travel quota for importers and manufacturers producing for domestic
markets
Education
Medical treatment
Taking out/bringing in of Bangladesh Taka
Taking out/bringing in of personal jewelry
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
Miscellaneous Remittances
Remittance of membership fees
Evaluation and Visa Processing Fee
Visa fee:
Family maintenance
03.13. Other services
There are some other activities performed by foreign exchange department. These are
mentioned in below:
NRB( Non-resident of Bangladesh) Share
Different types of security for NRB, Wage earner
Passport services
3.13.1. NRB Share:
Now Non-Resident of Bangladesh can invest in capital market. Every company provides
some benefit to attract NRB investors. They give quota on a portion of their authorized
capital for NRB. JBL also provide these services to their NRB clients.
JBL apply for NRB share on behalf of their clients
JBL issues DD
Other services like refund warrant, buy sell of their share etc.
It is also most profitable for the bank. The contribution of NRB share on total earnings of
foreign exchange will discuss in next part of the report.
3.13.2. Different Types of Securities for NRB:
JBL also issues different types of government securities for wage earners, these are:
Wage Earners Bond
Wage Dollar Bond etc.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
03.14. Financial Performance of Foreign Exchange operation of JBL
3.14.1 Import Earnings:
The import earning of the JBL from the import related services has increased to Tk 23,680.00
million in 2009 from Tk 9,746.00 million in 2005.
Table 11: Import Earnings
Chart 18: Import earnings growth
Source: Annual Report of JBL, 2005 -2009
Interpretation: In the year 2009, import earning is in the highest level, it was increasing
from the year 2005. The line is upward slopping. So it indicates a positive sign on import
earnings of JBL.
3.14.2. Export Earnings:
The export earning of the JBL from the export related services has increased to 6078.79
million in 2008 from Tk 2636 million in 2004.
Internship Report Foreign Exchange operations of JBL
Year Import
Earnings
(Taka in
Million)
2005 72,912.00
2006 90512.00
2007 84,065.16
2008 1,11,413.98
2009 1,18,525.00
62
Daffodil International University
0.00
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
14,000.00
2005 2006 2007 2008 2009
Export Earnings
Export Earnings
Table 12: Export Earnings
Chart 19: Growth of Export Earnings
Source: Annual Report of JBL, 2005-2009
Interpretation: The table and graph show the same result that the export earnings are
increased year by year. In the year of 2009 it was in the highest point as the same time
upward slopping. It is also positive sign for JBL.
3.14.3. Foreign Remittance:
The foreign remittance of the JBL is increased to TK. 5789 million in 2008 from Tk 2612
million in 2007. This indicates a 121% increase in remittance performance from the previous
year. The following graph shows the growth in the foreign remittance:
Internship Report Foreign Exchange operations of JBL
Year Export
Earnings
(Taka in
Million)
2005 58,394.00
2006 70,897.00
2007 71,855.87
2008 85,418.79
2009 88,653.00
Year Foreign Remittance (Taka in Million)
2005 26572.80
2006 29267.00
2007 36,788.00
2008 45,924.00
2009 56190.00
62
Daffodil International University
Table 13: Foreign Remittance
Chart 20: Growth of Foreign Remittance
Source: Annual Report of JBL, 2005-2009
Interpretation: In the year 2005, JBL earn only 535.20 million taka from foreign remittance.
After 2005 it was increased dramatically. In the year of 2009, it was earned 8669.00 million
taka which was nearly 16 times greater than the year 2005.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
During my three months internship in the Janata Bank Ltd, Gandaria Branch, Dhaka
following positive and negative things are found from my observation:
Positive Findings:
Import earnings and earnings from remittance quite satisfactory levels.
JBL have enough branches in our country.
The Bank Introduce NRB (Non Resident Bangladeshi) branch, which is new idea in
Bangladesh.
Negative Findings:
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
The first problem of this bank is employees are not punctual.
They have no uniform. For that reason some customer find it, difficult to identify the
bank employee.
Some superior officers of this bank are not available sometime.
Lack of motivation among mid and lower level officers.
Some employees are less trained to handle technologies. Such as – computer , Internet
etc.
Modern technology is hardly used to maintain documentations yet they are using
registered based document.
Where computer leads every sphere of lives including foreign exchange dept, Janata
Bank does not have experts in computer.
Though JBL has qualified employee in foreign exchange department, but bank should
recruit some new employee to run this department smoothly.
Most of the time they try to provide quality services to the known person, it may loses
general customer.
JBL charge very low margin to the known clients.
JBL also charge very low commission compare to another banks.
Long term training much required for the foreign exchange officers.
Lack of promotional initiatives to expand the foreign exchange business.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
Management of JB should pressurize employees for being punctual.
Janata Bank should arrange uniform for the employees.
Should be improving customer services.
JBL should take the motivational strategies among mid and lower level officers to
progress their activities.
The bank waste enough time of their clients in providing services as it lacks in expert
computer operators. So JBL has to hire computer expert.
In case of L/C opening, Bank provides NIL margin facility to only some known
clients, but they should also provide this facility to some small but efficient client.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
In case of payment of remittance, they should introduce debit card so that customer
can withdraw money within a second.
JBL should be improving the promotional initiatives to expand the foreign exchange
business.
The bank has the provision of internship program but there is no organized program
for internship. The bank can properly utilize the interns at minimum cost.
I believe these steps will be helpful to improve the performance of Janata Bank Limited and
the financial sector of Bangladesh.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
There are a number of nationalized and foreign banks operating their activities in
Bangladesh. Among them Janata Bank Limited is one of the leading commercial bank.
Janata Bank Ltd has introduced a new dimension in the field of innovative and
benevolent banking in our country. The bank has successfully made a positive contribution to
the economy of Bangladesh. Its profit is gradually increasing. It plays a great role in
collecting scattered Deposit, Loan settlement and International Trade etc.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
The Bank ensures quality services to the customers. For better growth and healthy
economic position, it should introduce new and lucrative long-term credit schemes especially
for new investors and schemes for poverty alleviation like micro credit.
I hope Janata Bank Ltd will do more work for socio-economic development besides
their banking business. To keep pace with ever-changing uncertain domestic business
environment and face the challenges of revised global economic scenario, the bank should be
more pro-active and responsive to introduce new marketing strategy to hold the strong
position in home and abroad.
For the future planning and the successful operation in its prime goal in this current
competitive environment I hope this report can provide a good guideline. I wish continuous
success and healthy business portfolio of Janata Bank Limited.
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
References
Annual report from the year 2005 to the year 2009, Janata Bank Limited.
Foreign Exchange Manual, Janata bank Limited.
Brochures published by Janata Bank Ltd.
Madura, Jeff International Financial Management 9th Edition
Bank Paricrama – A journal of Banking & Finance March 2006
Bangladesh Bank (1997), Guideline for Foreign Exchange Transactions, Vol-1,
Dhaka
Ali, Syed Ashraf (1995), Foreign Exchange and Finance of Foreign Trade, First
Edition, Lita Academics, Dhaka
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
Web Site
www.janatabank-bd.com
www.bangladeshpedia.search.com
Annexure
Financial and Operational Performance of Janata Bank Limited
Particulars 2004 2005 2006 2007 2008
01 Authorized Capital 8000 8000 8000 8000 8000
02 Paid Up Capital 2594 2594 2594 2594 2594
03 Reserve Fund 1293 1296 1727 3224 4183
04 Deposits 151036 168897 182947 198,636 2,21,336
05 Advance 107786 124467 138493 121200 144678
06 Revenue 10934 13143 16272 18522 20922
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
07 Cost 8621 9842 12059 13559 13919
08 Operating Profit 2312 3301 4213 4963 7003
09 Provision for Loans/Assets
2180 3123 10707 11698 9051
10 Net Profit - - - 1681 3145
11 Export 54623 58395 70897 71855 85418
12 Import 74920 72912 128809 84065 129413
13 Total No. Employees 15705 15321 14772 13860 13379
14 No. of Foreign Correspondent
1120 1125 1198 1198 1202
15 No. of Branches 847 847 848 848 849
Abbreviation
A/C : Account
B/E : Bill of exchange
B/L : Bill of Lading
BTB : Back to Back
CC : Cash Credit
CD : Current Deposit
CCI & E : Chief Controller of Import & Export
CIF : Cost Insurance & Freight
CIP : Carriage & Insurance Paid
DD : Demand Draft
EXP : Export Form
ERC : Export Registration Certificate
Internship Report Foreign Exchange operations of JBL
62
Daffodil International University
EPB : Export Promotion Bureau
ETDA : Exchange Transaction Debit Advice
ETCA : Exchange Transaction Credit Advice
EPS : Earning Per Share
EPB : Export Promotion Bureau
FDR : Fixed Deposit Receipt
FDBC : Foreign Document Bill Collection
FDBP : Foreign Document Bill Purchase
FER : Foreign Exchange Regulation
FTT : Foreign Telegraphic Transfer
ID : International Division
ITC : International Trade Control
IRC : Import Registration Certificate
L/C : Letter of Credit
LCAF : Letter of Credit Authorization Form.
LIM : Loan against Imported Merchandise
PC : Packing Credit
JBL : Janata Bank Limited
PAD : Payment against Documents
PI : Pro -forma Invoice
ROA : Return on Asset
SWIFT : Society for Worldwide Inter Bank Financial
Telecommunication
TIN : Tax Identity Number
TT : Telegraphic Transfer
TR : Trust Receipt
UCPDC : Uniform Customs & Practice for Documentary Credit
VAT : Value Added Tax
Internship Report Foreign Exchange operations of JBL