Commercial Banking Operations w ith Special Reference to Foreign Exchange Business of Southeast Bank Limited
CHAPTER ONE PROFILE OF THE BANK SOUTHEAST BANK 1.1 Historical Background: Southeast Bank Limited is a scheduled Bank under private sector established under the ambit of bank Company Act, 1991 and Incorporated as a Public Limited Company under Companies Act, 1994 on March 12, 1995. The Bank started commercial banking operations effective from May 25, 1995 during this short span of time the Bank had been successful to position itself as a progressive and dynamic financial institution in the country. The Bank had been widely acclaimed by the business community, from small entrepreneur or large traders and industrial conglomerates, including the top rated corporate borrowers for forward-looking business outlook and innovative financing solutions Thus within this very short period of time it has been able to create an image for itself and has earned significant reputation in the country's banking sector as a Bank with vision. Presently it has sixty three branches in operation. The emergence of Southeast Bank Limited at the function of liberation of global economic activities, after URUGUAY ROUND has been an important event in the financial sector of Bangladesh. The experience of the prosperous economies of Asian Vision" has been preciously the essence of the legend of bank's success. Southeast Bank Limited has been awarded license by the Government of Bangladesh as a Scheduled Bank in the private sector in pursuance of the policy of liberalization of banking and financial services and facilities in Bangladesh. In view of the above, the up capital adequacy requirement of Bangladesh bank Commercial Banks are one of the key contributors to die economy of Bangladesh. The allocate die capital resources to the proper development agencies. People and the government itself are very much dependent on the services provided by these banks in the financial market for the process of economic
development to function properly. Commercial banks act as financial intermediaries by performing the function of mobilization the funds from one group and lending the same to another while making a reasonable amount of profit after meeting the cost of funding. Lending is said to be the clients. There are various types of loans and advances through which the bank exercises the function of Lending. It is well recognized that there IB an urgent need for better-qualified management and better-trained staff in the dynamic global financial market Bangladesh is no excepting of this trend Banking sector in Bangladesh is facing challenges from different angles though its prospect is bright in the future Money and Banking is the center around which all-economic science clusters. So this report is carried on to find out the problems faced for by Southeast Bank and recommend some measures to overcome these problems for economic development of Bangladesh. 1.2 SEBL’s Vision: The vision is to be a premier banking institution in Bangladesh and contribute significantly to the national economy. 1.3 SEBL’s mission: •
High quality financial services with state of the art technology.
•
Fast & accurate customer service.
•
Sustainable growth strategy.
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Follow ethical standards in business.
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Steady return on shareholders' equity.
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Innovative banking at a competitive price.
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Attract and retain quality human resource.
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Commitment to corporate social responsibility.
1.4 SEBL’s Core Values:
•
Integrity
•
Respect
•
Fairness
•
Harmony
•
Team spirit
•
Courtesy
•
Commitment
•
Service Excellence
•
Insight and Spirit
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Enthusiasm for Work
•
Business Ethics
1.5 SEBL's Core Strengths:
•
Transparent and quick decision making;
•
Efficient team of performers
•
Satisfied customers
•
Internal control
•
Skilled risk management
•
Diversification
1.6 SEBL’s Client Commitments: Our customer is focused modem banking institution in Bangladesh. Our business motives center on the emerging needs of the market our commitments to the clients re the following:
•
Provide service with high degree of professionalism and use of modern technology.
•
Create life-long relationship baaed on mutual trust and respect.
•
Response to customer needs with quickness and accuracy.
•
Sharing their values and beliefs
•
Grow as our customers grow.
•
Provide products and services at Competitive pricing
•
Ensure Safety and security of customers' valuables in Crust with us.
1.7 SEBL's corporate culture: Southeast Bank is one of the most disciplined Banks with a distinctive corporate culture. The people of bank can see and understand events, activities, objects and situation in a distinctive way They mould their manners and etiquette, character individually to suit the purpose of the Bank and the needs of the customers who are of paramount importance to them The people in the Bank see themselves as a tight knit team/family that believes in working together for growth. The corporate culture they belong has not been imposed; it has rather been achieved through their corporate culture. 1.8 Business Objectives of Southeast Bank:
•
Make sound investments.
•
Meet capital adequacy requirement at all the time.
•
Ensure a satisfied work force.
•
Ensure 100% recovery of all advances.
•
Focus on fee-based income.
•
Adopt an appropriate management technology
1.9 Corporate Slogan: .....A bank with vision CHAPTER TWO Foreign Exchange Operations of Southeast bank
2.1 Introduction
The foreign exchange has played a vital role in the last decade or so in guiding the purchase and Sales of goods, services and raw materials globally. Every country has certain natural advantages and disadvantages in producing certain commodities while they have some natural disadvantage as well in other areas .As a result, we find that some countries need to import certain commodities while others need to export their surpluses .Foreign trade brings the fruits of the earth to the homes of the humblest among the countries .These transactions are the basis upon which international trade is made. Foreign exchange, like foreign trade, is a part of economic science. It deals with the means and methods by which rights to wealth in one country’s currency are converted into those of another country. By the same token, it covers the methods used for conversion, the forms in which such conversions take place and the causes which render this conversion necessary. Foreign Exchange means exchange foreign currency between two countries. If we consider “Foreign Exchange” as a subject, then it means all kind of transactions related to foreign currency. In other words foreign exchange deals with foreign financial transactions. 2.3 Objective of the Study 2.3.1 Primary objective: The primary objective of this report is to familiar with the working environment of present institutions. And also fulfill the requirement of BBA theoretical knowledge gained from the coursework of the BBA program in a specific field. 2.3.2 Secondary Objective: •
To Understand and analyze the over all activities of Southeast Bank Limited
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To evaluate the existing activities and techniques of Southeast Bank Limited
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To study the operational efficiency of southeast Bank Limited
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To suggest the ways and means for improvement in policy and techniques
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To relate the theoretical learning with the real life situation to assess and evaluate the growth trends on Southeast Bank Limited among other Banks.
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To get acquainted with the loan structure, size, profile of sector wise outstanding position of loans and system of loan classification of Southeast.
•
To identify major strength and weakness of Southeast Bank Limited in respect to other Banks.
•
To explain the procedures, systems of the foreign exchange operations of Southeast Bank
2.4 Scope of the study: The Report mainly focuses on the following areas: • • • • •
The kinds of foreign exchange facilities extended by Southeast Bank Limited. General procedures for getting those foreign exchange facilities. What kinds of standard documents are required for getting those international trade facilities How different kinds of projects are appraised and financed at southeast Bank Limited. Present scenario of recovery rate and classified transactions of Southeast Bank.
2.5 Limitation of the Study; •
All the time of preparing this report tried to gather every details of process but the major limitation is lack of adequate information, Lack of opportunity to visit more than one branch Sufficient records, publications were not available as per that requirement. Time constraint. Non-cooperative behavior of some officials of the bank. 3 months are very short time to prepare this.
• • • • •
2.6 Methodology of the study: To make the Report more meaningful and presentable, two sources of data and information’s have been used widely. Source of Data
Primary Data
Secondary Data
Both primary and secondary data sources were used to generate the report.
2.6.1 Primary Data sources: • • •
Practical banking work. Personal discussion with the officers and executives of Southeast Bank Limited. Personal interview with the customers.
2.6.2 Secondary Data sources • • •
Annual Report, Publications, Training materials of Southeast Bank Limited. Periodical statements of the Beak, Brochures, Booklets etc. Office circular
And carefully developed, disguised queries, trend and growth rate analysis, ratio analysis, graphical presentation such as pie chart, bar, graphs have been used. Raw data collected from various sources required to be processed, edited for the purpose of the study. For this study mainly secondary source of data had been relied on, because secondary data can be an immediate and cost effective means to gaining valuable insight into research issues, provided that the information comes from reliable and timely sources. Its sample was small and no representative. The
research has been started with secondary data and preceded to primary data only when the secondary data sources have been exhausted or yield marginal returns. An analytical approach has been followed to conclude the decisions. 2.7 Performance analysis and Findings: The capital and reserve of the bank as on 31st December,2010 are append below: 2.7.1 Capital and reserves: (a) Core Capital(tier-I Capital):
Taka in million
Paid up capital
6930.84
Statutory reserve
3265.60
General reserve
337.65
Retained earnings Total capital
2078.87 12612.96
(Supplementary capital was 17095.90)
2.7.2 Resources and Capabilities
Financial Stability (Taka in million) Authorized Capital
December, 2010
10,000.00
Paid - up Capital
December, 2010
6930.84
Total Capital (Tier I + Tier II)
December, 2010
17,095.90
Deposit
December, 2010
107,729.58
Advances
December, 2010
92,452.62
Investments
December, 2010
18,327.65
Operating Profit
December, 2010
6,754.94
* Initial public offering of shares of Tk. 150.00 million was completed in 1999
SOUTHEAST Bank Limited is well prepared to and capable of meeting the demand for a broad range of banking services. It has got adequate resources, both human and physical, to provide the customers with the best possible services. 2.7.3 Physical and Technological Resources A great deal of investment for developing the physical resource base of the Bank has been made. The Bank has its presence in all the major industrial and commercial hubs of Bangladesh in order to cater to the needs of industry and trade. At present, there are sixty-three conveniently located branches throughout Bangladesh. There are most of the branches in the capital city of Dhaka, each and every division there are one more branches and almost every district there have at least one branch. Major features of these branches are: • • •
• •
Fully computerized accounts maintenance. Well decorated air conditioned facilities. A fully operational computer network which is currently being implemented. The work of Local Area Network (LAN) and Wide Area Network (WAN) installation having reliable and secured communication between the branches and the Head Office is in progress to facilitate any Branch Banking and ATM Services. Money counting machine for making cash transactions easy and prompt. Forty six out of sixty three branches are authorized dealers of foreign exchange. This facilitates speedy disposal of transaction of export and import trade.
2.7.4 Monetary/Financial Resources Like any other financial intermediaries, SOUTHEAST Bank Limited is no exception in performing its core functions viz. Mobilization of fund and utilizing such mobilized fund for profitable purposes. 2.7.4.1 Mobilization of fund The main sources of fund for the Bank are: I. Deposit, and ii. Borrowing
2.7.4.1 Deposit: Deposit is the mainstay of the Bank's sources of funds. Following usual practices, it collects deposit through:
a. Current Deposit b. Savings Deposit c. Term Deposit
2.7.4.2Borrowing: Apart from deposit, SOUTHEAST Bank Limited received funds from: • • •
Bangladesh Bank Asian Development Bank (ADB) A German development bank. All of these funding sources are for relatively longer period. Receiving the credit lines from ADB has been a recognizing of the Bank's highly satisfactory performance.
Five years performance at a glance: (2005-2009)
(million in taka)
Particulars
2009
2008
2007
2006
2010
Authorized Capital
10,000.00
3,500.00
3,500.00
3,500.00
10,000.00
Paid up Capital
3,422.64
2,852.20
2,281.76
2,112.74
6930.84
Reserve Fund / Others
6,504.62
4,804.81
4,186.60
2,828.18
10,165.06
Deposit
96,669.05
68,714.67 55,474.05 46,056.18 107,729.58
Advance
77,497.57
60,281.26 48,164.60 41,147.28 32,551.09
Investment
21,350.23
12,299.61 8,462.86
Import Business
69,582.92
58,019.77 38,470.34 35,125.12 103,726.70
Export Business
46,724.47
42,178.60 28,771.36 25,874.61 58,158.06
Guarantee Business
11,916.74
15,078.99 9,008.32
Remittance Business
23,800.00
15,221.87 11,040.17 13,479.83 28,082.25
Total Income
13,702.25
10,250.13 8,670.47
6,766.11
16,071.33
Total Expenditure
9,087.79
7,237.55
5,754.27
4,703.45
9,316.39
Operating Profit
4,614.66
3,012.58
2,916.20
2,062.66
6,754.94
Net Profit after Tax and 1,870.19 Provision
887.24
1,222.97
909.88
2,763.13
Fixed Assets
4,338.35
2,685.56
1,708.11
1,300.39
4463.08
Total Assets
112,676.98
81,181.53 64,370.69 53,706.12 131,943.48
6,265.55
8,656.80
18,327.65
22,781.19
Total Income:
Amount in Total Taka
Year
2002
2003
2004
2005
2006
Income
1936.52
2772.52
3043.49
4689.55
6766.11
Source: Annual Repot 2006 Total Expenditure:
Figure2: Total Expenditure
Amount Million in Taka Year
2002
2003
2004
2005
2006
Expenditure
1.443.98
2,107.36
2,234.83
3,216.11
4.70345
Source: Annual Report 2006 Reserve and Funds:
Figure 3: Reserve fund /other Amount Million in Taka
Year
2002
2003
2004
2005
2006
Reserve
571 .68
522.98
769.13
1880.47
2828.18
4.4 Deposit:
Figure 4: Deposit Amount Million in Taka Year
2002
2003
2004
2005
2006
Deposit
1534345
19618.82
27930.84
38258.15
46056.18
Source: Annual Repot 2006
4.5 Total Capital:
Figure 5: Total Capital
Amount Million in Taka
Year
2002
2003
2004
2005
2006
Capital
970.96
1300.14
1649.44
2236.B4
4940.92
Source: Annual Report
Opening Profit:
Figure 6: Opening Profit
Amount Million in Taka Year
2002
2003
2004
2005
2006
Capital
492.56
665.16
808.66
1473.44
2062.66
2.7.5 SWOT ANALYSIS FOR SEBL:
SWOT is a short form that is used to describe the particular strengths, weakness, opportunities and threats that are strategies factors for a specific company. For the Southeast Bank Limited I found it as follows: Strengths:
Opportunities:
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Efficient management.
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Market leadership.
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Leading Retail loan providers
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Growth of the banking sector.
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Better employee relations.
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Different consumer service scheme of the
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Better location of the branch.
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Better financial standing.
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Make the goodwill.
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Interesting consumer schemes.
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Perform more quickly services.
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Quick delivery of foreign exchange.
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Go beyond the national boundaries.
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On line Banking
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SMS banking.
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ATM facility
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Simultaneously Islamic Banking
Weakness:
SEBL.
Threats:
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Inadequate work force.
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Political instability.
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Conservative loan facility.
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Intense competition.
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Profit rate is less than others.
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Government rules and regulation.
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Lack of sufficient own ATM booths
•
Economical variation.
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Policy of competitive banks.
Terms used in Foreign Exchange Operations Activities of Foreign Exchange: There are three kinds of foreign exchange transactions: • • •
Import
Import Export Remittance
Under the import policy of Bangladesh the Importer has get the valid Import Registration Certificate (IRC) from the Chief Controller of Import & Export (CCI&E). Letter of credit (L/C) Letter of credit means any arrangement whereby a Bank (the issuing Bank) is committed (on behalf of the buyer/applicant) to pay certain amount at the seller’s disposal under some agreed conditions. Types of documentary credit Documentary credit may be of three types • • •
Recoverable credit Irrecoverable credit Add confirmed credit
Recoverable credit: This type of credit can be cancelled or amended at any time by the issuing Bank without prior notice to the seller. It is not in use. Irrecoverable credit: This type of credit can’t be cancelled or amended by the issuing Bank without agreement of parties concerned thereto. All the credits issued in our country are of recoverable nature. Add confirmed credit: When a third Bank provides guarantee to the beneficiary to make payment, if issuing Bank fail to make payment, the L/C is called confirmed L/C. In case of a conformed L/C a third Bank adds their confirmation to the beneficiary, to make payment, in addition to that of issuing Bank. Confirmed L/C gives the beneficiary a double assurance of payment. Special documentary letters of credit: The following five major steps are involved in the operation of a documentary letter of credit: • • • • •
Opening Advising Amendment Presentation Settlement
Import Financing: The post import finance extends the import credit in the following forms: • • •
PAD (Payment against documents) LTR (Loan against trust receipt) LIM (Loan against imported merchandise
Export
Under the export policy of Bangladesh, the exporter has to get the valid export registration certificate (ERC) from chief controller of import & export (CCI&E). The ERC is required to renew every year. The ERC number is to be incorporated on export Form & other paper connected with exports.
Receiving the letter of credit: After getting contract for sale, exporter should ask the buyer for L/C clearly starting terms & condition of export & payment. Procuring the materials: After knowing that the L/C has opened in his favor, the next step for the exporter is to set about the task of procuring or manufacturing the contracted merchandise. If the exporter has to procure the raw materials from another supplier (local or abroad) he has to open Back-to-Back L/C. Back-to-Back L/C: Back-to-Back L/C is one type of L/C, which is opened against lien on a valid export L/C. It is opened for inland & abroad as well. Bank will supply the following papers/documents for opening a Back-toBack L/C. • • • •
L/C application form LCA form IMP form Charge document papers
The above papers must be completed, filled & signed by the party there to. The party will submit the entire filled document along with application in printed form of the designated Bank which is also an agreement between application & the Bank. Export Financing: An export is who exports the goods to another customer whether in domestic country or in abroad. In exporting the stipulated goods he may require financing. So export financing may be required at two stages. • •
Pre shipment credit Post shipment credit
Pre shipment credit: Pre shipment credit is the credit, which is given to finance the export activities of an exporter for the actual shipment of goods. The purpose of each credit is to meet the working capital needs from the procuring of raw materials to the transportation of goods for the export the foreign country. Before sanctioning of that credit the Bank takes into consideration the credit worthiness, export performance of the exporter’s together worthiness all other information required for sanctioning the credit in accordance with the existing rules & regulations.
Post shipment credit: There is a time gap between export of the goods and realization of the proceeds. So exporter may require finance in that period to continue his business. So Bank may finance against export documents ensuring the following: • • •
Export documents comply with the credit terms Party’s past performance is satisfactory Any other security in case of exporting under contract
Foreign Remittance Foreign remittance means remittance of foreign currencies from one place/person to another place/person. In broad sense, foreign remittance includes all sale and purchase of foreign currencies on account of Import Export, Travel and other purposes. However, especially foreign remittance means sale & purpose of foreign currencies for the purposes other than export and import. SOUTHEAST Bank Limited performs the remittance function with different countries. It maintains the foreign remittance in the following form: • • •
Foreign Demand Draft Inward Remittance Outward Remittance
Foreign Demand Draft (FDD): A foreign demand draft is a negotiable instrument issued by a Bank drawn on other Bank with another country the instruction to pay a certain amount to the beneficiary on demand. Remittance through demand draft may be inward or outward. Inward Remittance: Inward remittance refers to the extent where the bank makes payment to the client against foreign demand draft. Bank will make payment to the client by verifying the, test number, and signature of the authorized officer. Outward Remittance: It refers to the extent where by the bank issues foreign demand draft. The bank charges TK.300 per Demand Draft. Two forms are used for Outward Remittance of foreign currency such as: IMP Form: All outward remittance on account of Imports is done by from IMP. TM Form: For all other outward remittance from TM is used.
Western Union Money Transfer Services
Western Union, a global leader in money transfer service, helps to send money to loved ones quickly and reliably with convenience and control through more than 245,000 Western Union Agent locations in over 200 countries and territories. Western Union money transfer service is ideal for transferring money virtually at any time, anywhere, providing a high level of security, flexibility and reach with the fastest, easiest money transfer solutions. With the signing of the Representation Agreement between Western Union Financial Services, Inc., U.S.A. and Southeast Bank Ltd., Bangladeshi Wage Earners abroad can now send their hard - earned money through Western Union and their families and friends can receive the money in minutes by visiting any of the 53 branches and 10 SME locations of Southeast Bank Ltd. all over Bangladesh. The Beneficiary does not have to pay any fee to receive the money transfer. With Western Union and Southeast Bank Ltd., money transfer has never been so easy; it is a 3 step process: •
The sender will receive money receipt with Money Transfer Control Number (MTCN) from any of the Western Union agent location outside Bangladesh after depositing money.
•
The sender will inform the money transfer detail (amount of money sent, sender's name, receiver's name, destination country, and MTCN) to the receiver.
•
The receiver will receive the money from any of the 63 Branches of Southeast Bank Ltd. by showing a valid Identification and filling a form.
Money transfers can be received from 10:00 A.M. to 4:00 PM on Sunday through Thursday and from 10:00 A.M. to 12:00 PM on Saturday in 17 Authorized Dealer branches. From the above discussion we can detail the term foreign exchange operations: 2.7.6 Foreign trade finance: So far the bank has established correspondence relationships with as many as 22 foreign banks in order to facilitate foreign trade. The Bank handled total export business of Taka 46,724.47 million and import business of Taka 69582.92 million in 2009. The Bank’s export and import business grew by 8.61 percent and 19.45 percent respectively. Major items of exports were ready made knit & woven garments, sweater, jute products, leather and leather goods, handicrafts etc. Items of import included mainly industrial raw materials, garments accessories, and capital machinery, raw cotton, electronic consumer goods, chemicals, tires and tubes, reconditioned vehicles, bicycle spare parts, food items such as rice, wheat, garlic, onion, sugar, chilly and other essential commodities.
2.7.7 Export Finance In case of export business finance is perceived as one of the important elements. It is linked to nearly all the stages of conversion cycle- procurement of raw materials, processing of goods, packing storage, transportation to the port, shipment to the buyer, assembling of shipping documents & finally, collection of payments. The term Export Finance should therefore mean moneys needed by an exporting farm at each stage of the conversion cycles. Export financing sectors of SOUTHEAST Bank Limited: Export financing can play a vital role in the development process of Bangladesh. With earning on export we can meet our import bills. The export trade is always encouraged because the major portion of foreign exchange earning is derived from export. Because of shortage of adequate capital exporters have to come in contact with commercial bank and financial institution to get finance from them. SOUTHEAST bank Limited as a state-owned scheduled bank provides certain facilities to the exporters to boost up export earnings. The traditional & non-traditional sectors in which SOUTHEAST Bank Limited provides exportfinancing facilities are as follows:
• • • • • • •
Ready Made Garments in all sorts. Jute manufactures Jute - raw Fish & Prawns. Hides, Skins & Leather. Tea Fertilizer etc.
Export financing system of SOUTHEAST Bank Limited: Bangladesh as a developing country depends mainly on foreign exchange earning for its development activities. The major portion of foreign exchange earnings is derived from export obviously, to boost export, government provide certain incentives to the exporters namely:
• • • • • • • • •
Export Financing Development Financing Export Credit Guarantee Scheme Export performance benefits Duty draw back Rebate on duty & tax Income tax rebate Insurance premium rebate Conditional cash subsidy to Garments Industry , vegetables, handicrafts etc
PRE-SHIPMENT & POST-SHIPMENT: In Southeast Bank Limited export finance is required by the exports at two stages namely Pre-shipment & Post-shipment stages: 1.
Pre-shipment: It is required to purchase of raw materials, to meet cost of production, procurement of exportable goods, packing, transport, payment of insurance premium, inspection fee, freight charges, ware housing etc.
2. Post-shipment: It is required by the exporters after actual shipment of goods in order to bridge the period between shipment of the goods and receipts of sales proceeds from abroad. An exporter owns resource may not be adequate to meet all such expenses. So he / she have to come in contact with commercial bank and financial institutions to get finance from them. As a state owned scheduled bank Southeast Bank Limited provides credits to exporters at a consideration rate of interest as an export promotion measure as per government directive. : Export Form: The customer, now issued by the authorized dealers, must declare all export of which the requirement of declaration of exchange control manual of Bangladesh Bank applies on the Export Forms. Disposal of Export Forms: Original: From custom authority to Bangladesh Bank (ECD) after shipment goods. Duplicate From negotiating bank to Bangladesh Bank after negotiation. Triplicate From negotiating bank to Bangladesh Bank after realization of the proceeds of the export bill. Quadruplicate Retained by the negotiating bank as office copy. Export Development Fund: The main objective of creating an export development fund at the Bangladesh Bank is to assure a continued availability of foreign exchange to meet the import requirement of non-traditional manufactured items, this facility is available to the non-traditional exporters, particularly newer exporters, exporters diversify into higher value export and exporters diversify into new markets. An exporter identified above is eligible on the basis of the conditionally stated below: -
• • • • •
One must be an exporter of non-traditional manufacturing items. The loan should be utilized in the case of importing raw materials for manufacturing the exportable products. The exporter must have an export letter of credit. One must create a back-to-back for importing raw materials. The period of loan is 180 days.
Scrutiny of Export Document: After the shipment of goods the exporters submit export documents to authorized dealer for negotiation of the same. As bankers deal with documents only, not with commodity they are required to be very much careful about the genuineness and correctness of the documents evidencing shipment of the respective commodities. The bankers are to ascertain that the documents are strictly as per the terms of letter of credit. Before negotiation of the export bill, the bankers are to scrutinize and examine each & every document with great care. Negligence in the part of the bankers may result in non-repatriation or delay in realization of proceeds as incorrect documents may put the importers abroad into unnecessary troubles. The scrutiny procedure is as follows: I.
Scrutiny of Draft or Draft of Exchange:
• • • • • II.
The draft should be drawn by the party indicated as the beneficiary of the credit i.e. the exporter; drawer must be in accordance with the terms of the credit. The tenor and amount of the draft be in conformity with the credit terms. The bill of exchange should be properly stamped if necessary with the requisite value and the cost must be recovered from the drawers unless it is provided otherwise in the letter of credit. The draft or bill must bear the correct date and must be drawn or endorsed to the order of the bank. The drawer's signature must be verified.
Scrutiny of invoice: The physical description of the goods i.e. price, quantity, quality, markings etc. in the invoice must correspond with the specifications in the credit.
If the credit stipulates a consular invoice, the requisite invoice should be furnished. All copies must be signed and certified as correct shipper. If the credit stipulate for any other particulars to be stated in the invoice these must complied with. It should not include charges such as postage; cable etc. unless specifically authorized under the credit. III.
•
Scrutiny of shipping bill: The bill of lading should be a full set clean on board ocean bill of lading, unless the credit stipulates otherwise. 'Received for shipment' bills of lading must not be accepted unless permitted by the credit.
•
It must agree with the invoice as regards quantity and description of goods as well as in respect of ports of shipment and destination.
•
The bill of lading must also indicate where it is 'freight paid' (C & F, GIF) or freight payable at destination (FOB transaction).
•
Transshipment and port shipment clauses in the shipping bil l should be in accordance with credit terms and the provisions of the uniform custom and practice.
•
Credit frequently stipulates for shipment not letter than a specified date. Bill of lading must be examined to ensure that these are dated not later than the date mentioned.
•
Must be properly signed by or behalf of the carries, must be properly stamped and must be endorsed, expect when the relative credit stipulate for bill of lading to order of a named firm.
• •
Dock shipment not permitted unless specifically authorized and covers by insurance. Bill of lading must not be a stale one.
IV. Scrutiny of Insurance: Where insurance is to be effected by the beneficiary for GIF consignment, the policy accompanying the documents should be examined to ensure:
V.
• • •
That the insurance covers the merchandise for the value stipulated in the credit.
•
That all risk stipulate in the credit is properly covered in the insurance documents. When the credit stipulates that 'all risk' are be covered, it is not sufficient that various risks are mentioned but a clause to the credit that 'all risk' are covered, is required.
• •
That the policy is in the name of the bank and the importer.
•
That the insurance document complies with the conditions of the letter of credit is in negotiable form that it is endorsed by the party to when the loss payable, unless the credit stipulates that the insurance must be issued 'loss payable to a specified party in the country of destination'.
•
That the date appearing on the insurance document is not later than the date appearing on the bill of lading.
•
That the insurance document covers transshipment when the bill of lading indicates that transshipment would take place.
•
That the insurance claims are payable at the port of destination, that insurance certificate / policy acknowledges the payment of the premium.
•
That the document is of the class stipulated in the credit. That the insurance documents describe the merchandise covered and mention the name of the carrying steamer. In case where 'on board' bill of lading are not presented the following clause or words of similar indent must follow the name of the steamer' and / or 'following steamer'.
That the party designed in the documents to perform such act properly countersigns the insurance document.
Scrutiny of other documents: The other documents i.e. certificate of origin, packing list, weight / measurement certificate, inspection certificate, survey report, quality control certificate etc. should be issued or signed by the proper authorized and description of 'export - order' given in these documents not be in contradiction to the credit terms.
RISK OF EXPORT FINANCING: In the trade - there are so many risk factors involved. In banking sector - the bank face risk basically from loans & advances and foreign exchange. In this section I discuss the risk of Export Financing While there are many advantages to exporting it is not without risk. In deed there are often factors present in international market, which make foreign exchange substantially more risky than domestic ones, including the credit risk of non-payment or non-acceptance of the merchandise by the buyer. For international sales, these risks are far more pronounced than they are domestically. For these reasons Southeast Bank Ltd also accompanied with elements of uncertainty some which are as follows: I. II. III.
Commercial risk: Political risk: Informational risk:
IV.
Pre-shipment export credit risk:
2.7.8 Import Finance All over the world there is no country, which can meet its requirements from its own sources. Some imports raw materials, some finished goods & some food products or other commodities. As it is in export & import are invariably conducted through commercial banks. BASIC Bank Limited is engaged to extend the facilities to the importers. After getting the completed registration, application for opening letter of credit is made through a bank where applicant has a current account. An importer is required to fill up import application form & letter of credit authorization form (LCAF) & importer has to deposit margin money to the bank from 5% to 40% of the import value, depending on the credibility of the importer. After the letter of credit is established the exporter after executing the export, submits the negotiable document through its bankers and in terms of exporter’s bank submit the documents to the corresponding bank of the importer's bank in the country. If the documents are found correctly fulfilling all the terms & conditions stipulated in the letter of credit the corresponding bank of import's bank will realize payment that will debited to the importer's account. In banking term this is known as PAD and the importer has to pay the PAD amount in 30 days with the bank interest rate. After 30 days when importer is unable to pay the PAD amount, he can take documents but the PAD turns into Loan against Trust Receipts (LTR) Import financing sectors of SOUTHEAST Bank Ltd: SOUTHEAST Bank Limited is one of the financers of import business in our country. In extend credit, grant and other facilities SOUTHEAST Bank Ltd finance to the following sectors:
• • • • • • • • •
Machinery & transport equipment. Petroleum & petroleum products Textile, yarn, fabrics, article & related products Chemicals Bicycle parts Iron & steels Cereal & cereal preparations Dairy products & eggs Other including loans & grants.
Import financing system of SOUTHEAST Bank Limited:
Registration of import Income tax registration certificate • Partnership deed in the cases of partnership concern • Certificate of registration with the register of joint stock companies • Articles & Memorandum of association in the case of limited companies. • Nationality certificate & Bank certificate • Ownership documents in place of business
• • •
Trade license from the relevant authority. Survey clearance from the relevant authority Other documents prescribed in the import policy.
Import Registration Certificate (IRC): In case of import, IRC is the first necessity for the importer. The IRC is not required for import goods by government departments, Local authorities, statutory bodies, recognized educational institutes, Hospitals. In addition, registration is not required for import goods, which do not involved remittance of foreign exchange like -medicine, reading materials etc. can be imported without IRC by the users within monetary limit Import Procedure: Imports & Exports (control) Act 1950 regulates the import & export trade of the country. There are a number of formalities, which on 'importer has to fulfill before import goods. The importer follows the following steps:
• The buyer & the seller conclude a sales contract provided for payment by documentary credit. • The buyer instructs his / her bank i.e. issuing bank to issue a credit in favor of the seller i.e. beneficiary. • The issuing bank asks another bank usually in the country of the seller, the advice or confirms the credit. • The advising or confirming bank informs the seller that the credit has been issued.
• As
soon as the seller receives the credit and is satisfied that he / she can meet its terms & conditions, he/she are in a position to load the goods & dispatch them. • The seller then sends the documents evidencing the shipment to the bank where the credit is available i.e. the nominated bank. This may be the issuing bank, or the confirming bank, bank named in the credit as the paying, accepting or negotiating bank. • The bank if other than the issuing bank, sends the documents to the issuing bank,
• The issuing bank checks the documents and if they meet the credit requirement either o o
Affect payment in accordance with the terms of the credit either to the seller if s/he has sent the documents directly to the issuing bank or to the bank that has made funds available to him/her in anticipation. Or Reimburses in the pre-agreed manner the confirming bank or any bank that has paid, accepted or negotiated under the credit.
• The bank checks the documents against the credit. If the documents meet the requirements of the credit, the bank then pay, accept or negotiate accordingly to terms of credit. In case of a credit available by negotiation, issuing bank or the confirming bank will negotiate with recourse; another bank including the advising bank has not confirmed the credit, which negotiates will with recourse. • When the documents have been checked by the issuing bank and found to meet the credit requirements, they are released to the buyer upon payment of the amount due or upon other terms agreed between importer & the issuing bank. • The buyer sends transport documents to the carrier who will then proceed to deliver the goods.
IMPORT SCRUTINY: The import bills consist of the following documents & the order of their scrutiny should be as below:
• • • • • • • • • •
Forwarding schedule of negotiating bank. Bill of exchange. Commercial Invoice (Before shipment). Bill of lading Insurance cover note Certificate of origin Packing List PSI Report (CRF- Clean Report of findings) Pro-forma Invoice (After shipment) Any other documents.
Risk of Import Financing: In the trade - there are so many risk factors involved. In banking sector - the bank face risk basically from loans & advances and foreign exchange. In this section I discuss the risk of import financing. In international trade transaction takes place between buyers and sellers living in different socio-economic and political environments. There may be abrupt changes in socio-economic or political situation in the buyer's country or in the seller's country. Even the exchange value of currencies of the two countries had gone so much down that they were not acceptable or exchangeable in international market. More over the importer or the exporter may not be able to comply with the terms of credit for some reasons. Therefore, risk inherent in all credits. The bank has to consider following risk in financing the import procedure:-
A.
Commercial risk: I. Violation of the requirement of letter of credit authorization or letter of credit: Shipment effected before authentication of the letter of credit authorization from by the nominated bank and registration with the Bangladesh bank, whenever necessary and before opening of letter of credit or after expiry of the validity of the letter of credit authorization or letter of credit shall be treated as import in contravention of this order. Letter of credit authorization obtained in the basis of false or incorrect particulars or by adopting any fraudulent means shall be treated as invalid and void.
II. Import against indent and Performa invoice: Letter of credit may be opened against and indent issued by a local registered indenter or against a Performa invoice issued by a foreign manufacturer or seller or supplier. B. Political risk: In addition to the credit and commercial risk we have outlined, international transaction such as import financing take on the whole new dimensions of political risk. They are as follows: • Sudden outbreak of war, revolution, coups or civil disobedience in the seller's country. • Imposition of restriction on remittance. • Imposition of trade embargo or blockade. • New import restriction on the buyer or cancellation of the license. • Additional handing transport or issuance charges due to interruption or diversion of voyage, which can't be recovered from the buyer.
C.
Informational risk: There may be informational risk inherent in import financing on the importer because of shortage of required information. So it is much harder to judge the financial strength, reputation and integrity of a seller or buyer who is thousands of miles away and belongs to a different culture. Documents Used in Foreign Exchange: a) Letter of Credit (L/C): It is the most important and commonly used in connection with foreign trade. Letter of Credit is an undertaking by a banker of the importer to the exporter, to the effect that the amount of the L/C will be duly paid. The banker on behalf of the importer issues the L/C in favor of the exporter (beneficiary) and forwards the same to the exporter to the effect that the bill drawn by him shall be duly accepted and paid. It creates confidence in the mind of the exporter so far as payment of the bill is concerned. It is also facilitate the exporter to get the benefit of discounting the bill before the date lf maturity. b) Bill of exchange: A Bill of Exchange is an instrument in writing, containing an unconditional order, signed by the maker, directing a certain person to pay on demand or on fixed or determinable future time a certain sum of money only to or to the order of a certain person or to the bearer of the instrument. From the definition we get the features of bill of exchange. In generally there are three parties like- Drawer: The person who prepare the bill; Drawer: The person who is ordered for the payment in future specified time; Payee: The person who is the amount of bill receiver as per the order of the drawer to the drawer. c) Bill of Lading: A bill of lading is a document that is usually stipulated in a credit when the goods are dispatched by sea. It is evidence of a contract of carriage, is a receipt for the goods, and is a document of title to the goods. It also constitutes a document that is, or may be, needed to support an insurance claim. The detail on the bill of lading should include: • A description of the goods in general terms not inconsistent with that in the credit. • Identifying marks & numbers (if any). • The name of the carrying vessel. • Evidence that the goods have been loaded on broad. • The ports of shipment & discharge. • The names of shipper, consignee and name & address of notifying party. • The number of original bills of lading issued. • The date of issuance. A bill of lading specifically stating that goods are loaded for ultimate destination specifically mentioned in the credit. d) Commercial invoice: A commercial invoice is the accounting document by which the seller charges the goods to the buyer. A commercial invoice normally including the following information: • Date • Name & address of buyer & seller.
• • • •
Order or contract number, quantity & description of the goods, unit price and the total price. Weight of the goods, number of packages and shipping marks & number. Terms of delivery & payment. Shipment details.
e) Certificate of origin of goods: A certificate of origin is a signed statement providing evidence of the origin of the goods. f) Inspection certificate: This is usually issued by an independent inspection company located in the exporting country certifying or describing the quality, specification or other aspects of the goods, as called for in the contract and / or the letter of credit. The buyer who also indicates the type of inspection usually nominates the inspection company he /she wish the company to undertake. g) Insurance policy or Certificate: The insurance certificate document must: • Be specified in the credit • Cover the risks specified in the credit. • Be consistent with the other documents in its identification of the voyage and description of the goods. • Unless otherwise specified in the credit: a) Be a document issued and / or signed by an insurance company or its agent, or by underwriters. b) Be dated on or before the date of shipment as evidenced by the shipping documents or establish that cover is effective at the latest from such date of shipment. c) Be for an amount at least equal to the GIF value of the goods and in the currency of the credit. h) Pro-forma invoice or indent: Simply speaking, it is a Seller's quotation or agreement between seller & buyer. In this-the seller declared the rate, quantity, quality, manufacturing & other information about goods and that accepted by buyer. . Other Documents are: Packing list; Master's receipt.
Letter Of Credit (L/C): Letter of Credit is an undertaking by a banker of the importer to the exporter, to the effect that the amount of the L/C will be duly paid. The banker on behalf of the importer issues the L/C in favor of the exporter (beneficiary) and forwards the same to the exporter to the effect that the bill drawn by him shall be duly accepted and paid. It creates confidence in the mind of the exporter so far as payment of the bill is concerned. It is also facilitate the exporter to get the benefit of discounting the bill before the date lf maturity. Parties of Letter of Credit transaction: • •
Issuing Bank: It is the buyer's bank. The bank that agrees to the request of the applicant and issues its letter of credit in terms of the instructions of the applicant. Advising Bank: It is the seller's or beneficiary's Bank. The bank usually situated in the
• •
• •
•
seller's or beneficiary's country (most of the time with which there exists corresponding relationship with the buyer or issuing bank), request to advice the credit to the beneficiary. Confirming Bank: Sometimes issuing bank request advising bank or another bank to add confirmation to the letter of credit. When that bank do this then such bank is called confirming bank. So advising bank can be act as confirming bank. Reimbursing Bank: This is the bank that is nominated by the issuing bank to pay (it is also known as paying bank) or to accept drafts. It can be situated in another country. In this connection it is to say that American Express Bank & HSBC act as reimbursing bank in case of Southeast Bank Ltd. The account, which maintains Southeast Bank Ltd with HSBC & American Express Bank, is called "Nostro Account" and in rivers the account, which is maintained by HSBC & American Express Bank with Southeast Bank Ltd, is called "Vostro Account" Negotiating Bank: The bank, which makes payment to the exporter after scrutiny, the documents submitted by the exporter with the original letter of credit then it is called Negotiating Bank. Nominated Bank: The bank that is nominated by the issuing bank to pay (nominated bank is known as paying bank) or to accept drafts (nominated bank is known as accepting bank) or to negotiate (nominated bank is known as negotiating bank). Usually the advising bank is request & authorized to be the nominated bank unless the credit allows negotiation by any bank. Seller: Beneficiary of the letter of credit is seller.
Classification of Letter of Credit or Basic forms letter of credit: The letter of credit can be either revocable or irrevocable. It needs to be clearly indicated whether the letter of credit Revocable or Irrevocable. When there is no indication then the letter of credit will be deemed to be a revocable L.C. The details are as follows: • Revocable letter of credit: A revocable credit is one, which can be amended or cancelled by the issuing bank. At any moment without "prior notice" to the beneficiary. So this is clear that revocable credit can be revoked any time without prior notice. • Irrevocable letter of credit: An irrevocable credit is one, which cannot be cancelled or amendment able any time without the consent of each party. Through this letter of credit the issuing bank gives a definite, absolute and irrevocable undertaking to honor its obligations, provided the beneficiary complies with all the terms & conditions of the credit. • Government letter of credit: That letter of credits, which are done by the Defense Ministry and other Ministries of the government. • Master or mother letter of credit: The L.C. which come from out side the country to the exporter from importer that is mother or master letter of credit. • Other classes of letter of credit: o Revolving letter of credit: When the L.C. is used again & again in same amount for a specific period of time that is called revolving letter of credit. o Transferable letter of credit: Exporter can transfer his / her right of letter of credit in full or partly to a third party. In generally, the exporter is not the supplier but act as a middleman with in the supplier & importer. o Back-to-Back latter of credit: The letter of credit, which done by the security of mother letter of credit. o Clean or open letter of credit: The letter of credit, which provides assurance of payment bill of exchange without submission, of any export documents that is called clean letter of credit. o Confirmed letter of credit: When the Irrevocable letter of credit issued by issuing bank to the exporter as assurance of the L.C., then as per advice or documents the authorized representative or representative bank's provide assurance or payment guarantee that is confirmed letter of credit. o At sight letter of credit: That letter of credit which expires ninety days i.e. with in this
period the documents must be sending to the negotiating bank. o Deferred payment letter of credit: That letter of credit which expires one hundred & eighty days i.e. with in this period the documents must be send to the negotiating bank. o Contract letter of credit. o Refinance Letter of Credit. o Marginal Letter of Credit. o Traveler's Letter of Credit.
2.7.9 Foreign Remittance Remittance is the sending of money etc. to a distance. Foreign remittance is the sums of foreign currency to a distance from one place another place i.e. country to country. The person who is the receiver of the remittance is remitted. The person who is the sender of the remittance is remitter. There are two types of foreign remittance, which are as below:
• •
Foreign inward remittance Foreign outward remittance
Foreign Inward Remittances: The remittance of freely convertible foreign currencies which Southeast Bank Ltd Foreign Exchange Section is receiving from abroad against which the authorized dealers making payment in local currency to the beneficiaries may be termed as foreign inward remittance. Mode of inward remittances: The term inward remittances includes not only remittances by TT., MT., Drafts etc. but also purchases of bills, purchases of drafts under travelers letter of credit and purchases of travelers cheques. Foreign currency notes against which payment is made to the beneficiary also a part of inward remittances. Thus the following are the Mode of inward remittances: • TT: Telegraphic Transfer.
• • • •
MT.: Mail Transfer. FD: Foreign Drafts. TC: Travelers Cheque. Foreign currency notes.
Purpose of inward remittance: The purpose of remittance is of various reasons. Such as:
• • • • •
For family maintenance. Realization of exports proceeds. Gift. Donation.
Export brokers commission. About” Form-C": The authorized dealer should obtain 'Form - C' from the beneficiary to know the purpose of the remittances in all cases and they are to submit the "Form - C' to Bangladesh Bank along with the monthly
returns where the proceeds of the remittances is TK. 5000/= & above.’ Form - C' is a prescribed declaration form & this 'Form -C' is to be filled up and signed by the beneficiary himself.
Payment procedures of FD. MT. & PO. Drawn on Southeast Bank Ltd: The above investments that are drawn on Southeast Bank Ltd Foreign Exchange Corporate Branch may be paid on the spot before making payment the following procedures to be observed by the authorized dealer:
• • • • • •
To obtain Form-C. To verify the signatures of the instrument. To convert the foreign currency into Bangladesh TK. with O.D. (On Demand Transfer) Buying rate prevailing on the date. To make entry in TTs, drafts & Mails received register. To prepare FET schedule and to send first five copies of FET along with vouchers to international division, Head Office, Dhaka.
Payment procedure of T.T.: • • • • • • •
To verify the 'test number'. To inform the beneficiary for submission of "Form - C". To confirm from issuing bank or reimbursing bank. To covert of foreign currency into Bangladesh currency with T.T. To make entry in T.T.s, drafts, M.T.s, received registration. To prepare vouchers. To prepare FET schedule.
Purchase of Drafts & Cheques: Authorized dealer may purchase drafts & cheques which are not drawing on SOUTHEAST Bank Ltd at the request of the beneficiary. Procedures of purchase are as below: • • • • • • •
To obtain an application or undertaking from the beneficiary with 'Form – C’ To verify the signature of the drafts (if possible). To make entry in the register for drafts & T.C. purchased. To convert foreign currency into Bangladesh currency. To prepare voucher. To prepare FET schedule. To send the instrument for collection.
Collection procedure of drafts & cheques:
To make entry in foreign Bills Collection Register. To prepare forwarding schedule in quadruplicate. To prepare vouchers on realization of proceeds i.e. on receipt of advice from the collecting bank.
Payment of traveler's cheque (TC): • To checkup the custom declaration (if any).
•
To consult with purchase agreement (if any).
• • • • • •
To obtain signature on TC and to verify the same with the previous signature of the beneficiary of the TC. To make entry in register for TC & drafts purchased. To convert foreign currency into Bangladesh currency. To prepare FET schedule. To send the TC for collection. To prepare the vouchers.
Payment of foreign currency notes:
To check the custom declaration (if any). To made entry in (kateha) raw register. To convert foreign currency into Bangladesh currency. To prepare vouchers. No FET schedule is required to be prepared & sent to head office because in this case there is no transaction with head office.
Cancellation of inward remittance: In the event of any inward remittance which has already been reported to the Bangladesh Bank being subsequently cancelled, either in full or in part because of non-availability of beneficiary. Authorized dealers must report the cancellation of the inward remittance as an outward remittance of "Form-T/M". Required documents are: • • • •
The date of return in which the inward remittance was reported. The name & address of the beneficiary. The amount of the purchase as effected. Reasons for cancellation.
Reporting to Bangladesh Bank: On the last working day of each month the transaction during the month to be reported to Bangladesh Bank through the following schedule: • •
Schedule -J-l / 0-3 for TK. 5000 & above. Inward remittance voucher-1/04 for below TK. 5000.
FOREIGN OUTWARD REMITTANCES: The remittance in foreign currency which is being made from our country to abroad is known as foreign outward remittance. Mode of outward remittance: Thus the following are the Mode of outward remittances:
• • • • •
TT. Telegraphic Transfer. MT: Mail Transfer. FD: Foreign Drafts. PO: Payment Order TC: Travelers Cheque.
•
Foreign currency notes.
Approval of Bangladesh Bank: Bangladesh Bank provides permission or approval for outward remittances to the applicants who are to lodge an application for the purpose on the following prescribed forms with an authorized dealer who forwarded the same to Bangladesh Bank for approval:
• •
The IMP form (cover remittances for imports). Form T/M (Traveling & Miscellaneous).
Issuance procedure of FD, MT. & TT.:
• • • • • •
To prepare the instrument. To make entry in DD, MT, TT issued register. To prepare draft advice in duplicate one for drawer bank & one for reimbursing bank. To make entry in draft advice dispatched register. To send reimbursement authority in case of MT & TT. T o prepare FET schedule.
Issuance procedures of traveler cheque:
• • • • • • •
To verify the approved T / M form or Bangladesh Bank permit. To issue TC by obtaining signature of the purchaser on the TC. To endorse in the passport. To prepare FET schedule. To make entry in the travelers cheque issue register. The TC issuing slip of the issued TC to be sent to that bank (whose TC issued) With reimbursement instruction.
Issuance procedure of foreign currency notes: • • •
To verify the approved T.M form or Bangladesh Bank permit. To issue foreign currency notes by endorsing in the passport. Voucher preparing with accounting treatment: Party's account.......................................Dr. Foreign Currency Notes on Hand A/C………… Cr.
Facilities for wages Earners:
• •
Bangladeshi national/Bangladesh origin dual citizen working abroad may open Foreign Currency account (F.C. A/C) in US Dollar and Pound Sterling without initial deposit. Nominee can operate the account
•
Interest is paid on F.C. A/C
•
Balance in F.C. A/C can be utilized for import of goods
•
Balance available in the F.C. account may wholly or partially be sent abroad.
•
Foreign currency brought in by Wage Earners can be deposited in the F.C. A/C
•
Wage earners Development Bond in Taka can be purchased from the balance of F.C. A/C
•
Non-Resident Foreign Currency A/C (NFCD A/C) can also be opened by Wage Earners.
•
F.C. A/C & NFCD A/C may be maintained as long as the account holder desires.
•
These accounts can be opened from abroad on submission of required papers duly attested by our Embassy/ Branch/ Representative office abroad.
Monthly statement to Bangladesh Bank: On the last working day of each month, the transactions of outward remittance during the month are reported to Bangladesh Bank.
2.7.10 Foreign Exchange Risk Management Foreign exchange risk is defined as the potential change in earnings arising in market prices. The market directly affects each country’s bond, equities, private property, manufacturing, and all assets that are available to foreign investors. Foreign exchange rate also play a vital role in determining who finances government deficits, which buys equities in companies and literally affects and influences the economic scenario. Due to high risk market the role of treasury operations is crucial. As per Bangladesh Bank’s guidelines the bank has segregated the Front and back office of treasury operations. Front office independently conducts the transactions and the Back office is responsible for verification of the deals and passing of their entries in the books of accounts. All NOSTRO accounts are reconciled on monthly basis and all foreign exchange transactions are revalued at market to market rate as determined by Bangladesh Bank.
2.7.11 Foreign currencies translation Foreign currencies translations are converted into equivalent taka using the ruling exchange rate on the date of transactions. Foreign currencies balances held in US dollar at the year end are translated into taka currency at the weighted average rate of inter bank market as determined by Bangladesh Bank. Balances held in foreign currencies other than US dollar are converted into mid value of the selling and buying rate of the last transaction date of the year of the bank. 2.8 Findings
While working at Southeast Bank. Shyamoli Branch, have attained to the newer kind of experience. After the collecting and analyzing of data that have got some findings. Those are given below. •
Based on experience, ii can be said that Southeast Bank should reconsider its services that better satisfy customer needs and requirements Bank should be more tactful in dealing with the customers and launch new products that fully meet customer expectations.
•
Southeast Bank Limited has already established a favorable reputation in the banking industry of the country. It is one of the leading private sector commercial banks in Bangladesh. The bank has already shown a tremendous growth the profits and deposits sectors.
•
The bank successfully stepped in to the 12th year of operations having enjoyed the complete confidence of the depositors and achieving significant growth in the entire areas of banking operations
•
The bank follow the online banking system to provide the customer better services; but all the branches of South East bank are not follow the online banking system
•
The Bank has a deposit base of Tk.38, 258.00 million and loan portfolio of taka 32,551.00 million in the year 2005, which posted a growth of 37% and 48% respectively
•
• •
During the last 6 years (1999-2005) the average growth of deposits and advance were 33% and 37% respectively, which was 20% in the case of import business. 72% in export business and 36% in guarantee business during the period, shareholders equity grew at the rate of 40%. The bank always fulfills Die provisioning requirements as set by Bangladesh Bank reflecting sound financial health and discipline The consistent and increasing growth trend of the above mentioned performance indicators has increased depositors' confidence as well as good will/reputation of the bank to a great extent and these have contributed to increase the shareholders value. The bank focused on building high-quality human resources with expertise and professional skills adopting the Human Resources Re-engineering and Development Plan with a view to creating an excellent clientele service environment for ultimate achievement of sustained profit growth making no comprises with the quality asset creation
•
The Bank’s Human resources Development strategy is to build up quality manpower with conceptual/managerial Knowledge, skills through designing/arranging of continuous in-house and outside training programs
•
The bank focuses on customer-friendly marketing approaches by offering various efficient delivery of personalized banking services at the clients door steps and caters to the evergrowing financing needs of clientele at a competitive price
•
The company philosophy to workout best solutions for customers and clients as a business and customer friendly Bank
•
South East bank has an interactive corporate culture the working environment is very friendly, interactive and informal. And there are no hidden barriers or boundaries while communication between die superior and the subordinate. This corporate culture provides as a
great motivation factor to the employees. 2.9 Conclusion: In today’s world of business without bank's co-operation, it is almost impossible to run any business or production unit of business. Exports and import need finance in various stages of their activities. Southeast Bank Limited is playing a vital role in financing import and exports of the country and helping the businesses by providing funds to run. There are lots of local and foreign banks competing in banking industry in Bangladesh and the Southeast Bank Limited is keeping its promises for about fifteen years among them very successfully. In this competitive market Southeast Bank has to compete not only the others commercial banks but also the public banks and other financial institution also. In near future I think bank and mobile companies will come together to foster the banking service and make it available to people’s hand. To survive in this dynamic market and lead it from the front the bank must take every initiative very wisely and so far they have successfully utilized their human resource efficiently compare to other private and public banks. Before internship I had idea about banking but that was only bookish. Now after completing my internship period and preparing term paper on it I got practical aspect of banking. It will definitely help me to see the things from banking perspective also. Recommendation: Southeast Bank is one of the most flourishing Banks of Bangladesh with wide growth opportunities of the industry This report gave valuable insights as to where improvements were necessary to improve the quality of service. They should open the on-line banking system all the branches. Southeast Bank with its strong corporate image and organization strength can successfully utilize the presented based on the findings. 2.11 Bibliography • Annual Report of Southeast Bank Ltd. (2005-2009) • http://www.sebankbd.com/ • www.reportbd.com •
Consultation with the Following banking Persons:
o
Md. SHAHDAT HOSSAINN (PRINCIPAL OFFICER)
o
Md. MOJAMMEL KHAN (SENIOR OFFICER)
o
MD. MASUM BILLA (PRINCIPL OFFICER)
o
MD. FERDOUS HASAN (JUNIOR OFFICER)
o
MD.TASLIM ISLAM (SENIOR OFFICER)
o
MD. REZWAN ISLAM(PRINCIPL OFFICER)
o
MD. JABED ISLAM (SENIOR OFFICER)
o
MRS. FATEMA MOSTAFA(JUNIOR OFFICER)