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Chapter One Introductory Part 1.1 Introduction Internship report is the outcomes of perfect coordination between theoretical and practical experience throughout the session of weeks. This report is on the assessment of foreign exchange dealings of Jamuna Bank Ltd.. Generated based on another's three month practical experience with this division of Jamuna Bank Ltd.. This report mainly consists of three parts which are; Organizational part, Literature part and Learning part. The organizational part consists of various aspects of Jamuna Bank Ltd. as mission, vision, historical review, financial condition, various departments and divisions, management aspect, branches, product and services, social responsibilities etc. The later part focuses the department author worked with and the learning experiences he gathered during the session as, functions of the department, policy and practices, objectives, mission, vision, SWOT analysis, structure, activities performed by the author etc. 1.2 Origin & Scope of the Report The BBA internship program is a mandatory requirement for the students who are graduating from the INTERNATIONAL ISLAMIC UNIVERSITY OF CHITTAGONG. In the internship program, was attached to a host organization named "Jamuna Bank Ltd." for three month. During this period learned how the host organization works with the help of the internal supervisor. As a result have decided to write a report on "Assessment of foreign exchange dealings of Jamuna Bank Ltd. (JBL). During the three months of work experience with Jamuna Bank Ltd. (Dhanmondi Branch) on this internship program. joined on February15, 2010. This Division of Jamuna Bank Ltd. provides services for the employees. 1.3 Objectives of the Study The main objective of the study was to know about the financing in bank products of the Jumana Bank Ltd. Besides this we have also following objectives: To have an exposure on the financial institutions such as banking environment of Bangladesh. •

To gain experience on different functions of banking business in Bangladesh.

To know about the Jamuna Bank Ltd.

To know about the scopes of deposit collection of the bank.

To know about different kinds of loans and advances those are given by the Jamuna Bank Ltd.

To familiarize with practical job environment

1.4 Methodology The first step of this project was problem identification and deciding on the topic. Tin's was achieved through consulting with the faculty advisor and the supervisor in JBL. Next the particular objectives of the project were set. Based on these objectives, the necessary data for completion of the project were identification. Next, those internal sources were identified who would be able to provide the necessary information. After this, the data collection process began. Both primary and secondary sources were used. The primary sources of information were the concerned officials of JBL. Data were collected from them through interview. The sources of secondary information were various publications, board interview. The sources of secondary information were various publications; the data was analyzed to find out their implications. Based on those findings, the final report was completed. 1.5 Limitations The employees of JBL had been very supportive and helpful. I helpful a lot of knowledge from them which helped me prepare this report. But in spite of these I have faced some problems that may term as the limitation of the study. These are follows: •

It should be certainly mentioned that time constraint is the first limitation of the study. Such as short period is not sufficient for a detailed report covering all the aspects of bank products.

I had no opportunity to deal with some of the banking activities deeply. I just observed what the bankers were doing and how.

For the lack of practical knowledge and experience.

To analysis SWOT of emerging market is a wide spread survey material. However, time constraint restricted the report to specific feature.


Jamuna Bank 6th Annual General Meeting (AGM) was held on 9th September, 2007 at BDR Darbar Hall, Peelkhana, and Dhaka presenting huge number of shareholders. Al-Haj Nur Mohammed, Chairman of the Bank presiding over the meeting. Mr. Nur Mohammed delivered thanks everybody and the proud privilege to place the Financial Statement and Auditors report for the last year. Parallel he expressed that the Bank to continue the works strongly and fruitfully to achieve the goal in the coming year. The Board of Directors of Jamuna Bank Limited has declared of 7:1 Bonus Share and the 6th Annual General Meeting also approved the Balance Sheet and accountability of the bank for the year 2006. Md. Sirajul Islam Varosha, Vice Chairmen, Directors, Sponsor Directors and Managing Director Mohammed Lakiotullah, Additional Managing Director Md. Motior Rahman, EVP & Company Secretary Md. Anower Hossain, EVP and Head of Public Relations and Human Resources Division M. Hassan Ali were present in the meeting.

2.1 Background of Jamuna Bank Ltd. Jamuna Bank Limited (JBL) is a Banking Company registered under the Companies Act, 1994 with its Head Office at Printers Building (2nd & 8th Floor), 5, Rajuk Avenue, Dhaka1000. The Bank started its operation from 3rd June 2001.

Jamuna Bank Limited is a highly capitalized new generation Bank started operation with an Authorized Capital and Paid-up Capital of Tk. 1600.00 million and Tk.390.00 million respectively as of December 2004 the paid up capital of the Bank stands at Tk.429.00 million the number of branches raised to nineteen : 10 in Dhaka, 4 in Chittagong, 3 in Sylhet and 2 in Naogaon (including five Rural Branches & two Islamic Banking Branches). More branches are planned to be opened soon. JBL undertakes all types of Banking transactions to support the development of trade and commerce of the country. JBL's services are also available for the entrepreneurs to set up new ventures and BMRE of industrial units. 2.2 VISION

To become a leading banking institution and to play a pivotal role in the development of the, country.

2.3 MISSION The Bank is committed to satisfying diverse needs of its customers through an array of products at a competitive price by using appropriate technology and providing timely service so that a sustainable growth, reasonable return and contribution to the development of the country can be ensured with a motivated and professional workforce. 2.4 JBL CORPORATE CULTURE Employees of JBL share certain common values, which help create a JBL culture: • The client comes first. • Search for professional excellence. • Openness to new ideas and new methods to encourage creativity. • Quick decision making. • Flexibility and prompt response. • A sense of professional ethics. 2.5 Values • • • • •

Service Excellence Openness Trust Commitment Integrity

Responsible corporate citizen

Jamuna Bank Ltd. see their customers trust as the lifeline of their business, control and compliance as license to operate, dynamic and motivated people as their strength to multiply and technology as their weapon to service excellence. 2.6 OBJECTIVES • • • • • • • • • • • •

To maintain CAMEL Rating 'Strong1. To establish relationship banking and service quality through development of Strategic Marketing Plans. To remain one of the best banks in Bangladesh in terms of profitability and Assets Quality To introduce fully automated systems through integration of Information Technology. To ensure an adequate rate of return on investment. To keep risk position at an acceptable range (including any off balance sheet risks) To maintain adequate liquidity to meet maturing obligations and commitments. To maintain a healthy growth of business with desired image. To maintain adequate control systems and transparency in procedures. To develop and retain a quality work force through an effective Human Resources Management System. To ensure optimum utilization of all available resources. To pursue an effective system of management by ensuing compliance to ethical norms, transparency and accountability at all levels.

2.7 STRATEGIES • To raise up capital up to Tk.1000.00 million • To manage and operate the Bank in the most - efficient manner to enhance financial performance and to control cost of fund. • To strive for customer satisfaction through quality and timely services. • To identify customers credit and other banking needs and monitor their perception towards our performance in meeting those requirements. • To review and update policies, procedures and practices to enhance the ability to extend better services to customers. • To train and develop all employees and provide them adequate resources so that customers' needs can be responsibly addressed. • To promote organizational effectiveness by openly communicating company plans, policies, practices and procedures to all employees. • To cultivate a working environment that fosters positive motivation for improved performance. • To diversify portfolio both in the retail and wholesale markets. • To increase direct contact with customers in order to cultivate a closer relationship between the Bank and its customer. 2.8 Current Profile of Jamuna Bank Ltd. Since beginning, the bank acquired confidence and trust of the public and business houses by rendering high quality services in different areas of banking operations, professional competence and employment of the state of art technology.

The bank has been restructured their five main business which are responsible for earning the revenues of the bank. These are: • • • • •

Corporate Banking Consumer Banking SME Banking Treasury and Cards

All other department of the bank acts as support for these units and helps them in every possible way. Under this arrangement, the responsibilities and functions of those branches have been reduced dramatically. Many of the activities like credit evaluation and approval, monitoring of loans, trade services activities etc. are now centralized in the Head Office. The branches of the bank are now termed as the "sales and service Centers" which are solely concentrated on delivering services to the corporate and consumer clients and maintain relationship with them. On account of Foreign Trade, the Bank made a significant headway in respect of import, export and inflow of foreign exchange remittances from abroad. 2.9 Management Aspects The Jamuna Bank Ltd. Management Team comprises of a group of people and each them comes with an international working background and is committed in leveraging their experience to take JBL to greater heights by ensuring top line revenues with dynamic capabilities. This Management Team is unique in being able to envision the need of the business by bringing in admixture of advanced technology solutions know-how and revamping the organizational make-up for maximum profitability. Other than the President and Managing Director, the remaining Management Team Members each lead a functional Department. This mix of people is persistent to provide unparallel services to its customers, come up with timely and innovative products and services and to enhance the capabilities of its people of its people while emphasizing on the latest technology. This they believe will take the bank to a foremost position in the country by the turn of the year 2008. This team is to drive the business to maximize the operational excellence and efficiency through acquisition of talent, developing systems, processes and people and through blending of these to let customers revel in with fulfillment and permanency. Like any other business organization, all the major decisions in JBL are made by the top management committee. The board mainly establishes the objectives and policies of the bank. There are three committees of the board for different purpose: 2.10 Executive Committee This committee is comprised of Chairman, four members of the bank and one member secretary. The functional and responsibilities of this committee is to establish and periodically review the bank's overall credit and lending policies and procedures, development and implement uniform and minimum acceptable credit standards for the bank, new credit proposal assessment and approval etc.

2.11 Audit Committee The main objective of this committee is to assist Board of Directors with regard to the audit of financial reports, management reports by the external auditors, internal controls and internal audits. JBL have four members in audit committee. 2.12 Management Committee The main objective of this committee is to ensure business operations are in line with the Bank's policies, strategies and objectives, the bank has set up. This committee consists of the Managing Director, Deputy Managing Director and different business unit heads. 2.13 Management Hierarchy of Jamuna Bank Ltd. Chairman Board of Director Management Director Deputy Managing Director Senior Executive Vice President Executive Vice President Vice President Senior Assistant Vice President Assistant Vice President First Assistant Vice President Junior Assistant Vice President Senior Executive Officer Executive Officer First Executive Officer Trainee Officer (Entry Level) Contractual Officer (Entry Level)

RISK MANAGEMENT Bangladesh Bank as a regulatory body advised all banks to implement an effective risk management system focusing on five core risks such as I) Asset Liability Management II) Credit Risk Management III) Foreign Exchange Risk Management IV) Internal Control & Compliance V) Prevention of Money Laundering. These risks are termed as an integral part of business and such risk management and monitoring of loan portfolio was always treated with the highest priority in JBL. The bank is always trying to establish superior monitoring of its credit risks and returns, in maturity mismatch between Asset and liabilities has always been reviewed in the ALCO meeting to maintain acceptable risk. The banks credit policy guidelines and procedures as continuously reviewed and upgraded by the well-established internal credit committee. The bank also maintains an effective system of internal control, establishing systems and procedures to scrutinize the transactions, encompassing key back-up procedures and commissioning regular contingency plans. Through establishment of proper governance structure, risks and returns are evaluated with a goal of producing sustainable revenue, reducing earnings volatility and increasing shareholder's value. JBL is always aware of classification of advances, which now stands at a negligible 0.04%. EXPANSION OF BRANCH NETWORK In 2004 JBL opened 4 (Four) new branches at the commercially important places of the country in Dhaka, Chittagong and Gazipur. The total number of branches stood at 19 (Nineteen) as on 31st December 2004. Out of the 4 (Four) branches 2 (Two) branches were opened at commercially important place of Chittagong and one of them at Bhatiary (Rural Branch) and the other at Jubilee Road (Islamic Banking Branch). The other 2 (Two) branches were opened at Konabari (Rural Branch), Gazipur another at DIT Avenue, Motijheel, Dhaka. The Bank has a plan to open another 4 (Four) branches at Gausia Market (Dhaka), Bogra, Hili (Dinajpur) and Narayangonj in the year 2005. CORRESPONDENT RELATIONSHIP Jamuna Bank established correspondent relationship with most leading international banks in 105 Countries through 316 correspondents to cover all-important financial sector of the world. JBL endeavors to increase its network of correspondent relationship with most international banks and financial institutions to cater for the expended needs of its customers globally. Drawing arrangements with the overseas exchange houses has already been established to bring home remittances into the country through the banking channel. PRODUCT & SERVICE The bank has an array of tailor made financial products and services. Such, products are Monthly Savings Scheme, Consumer Credit Scheme, Lease Finance, Personal Loan for Women, Shop Finance Scheme etc. JBL also introduced Q-cash ATM cards for its customers giving 24 hours banking services through Debit cards. ON LINE BANKING Banking sector has become very competitive and to provide more satisfaction and advantages to the customers at a very low cost, On-line banking system is the solution. The board of directors and management of Jamuna Bank Limited always aware of this fact and have eagerness for providing world class banking facilities to its valued customers. With this view

a group of talented IT professionals under the excellent leadership of the Managing Director started the journey to reach the ultimate goal. JBL started its expedition at the middle of May 2004 for implementation of real time on line banking system and within a very few month and hard working of the team the bank reached the successful implementation of its on-line computerized project, which was possible due to the dedication by all the members of JBL computer team. Taking future vision for improvement of the project and minimize the cost from the very beginning JBL established centralized integrated on-line system between all of its nineteen branches. Flora Bank On-line Banking software, switching software, servers, ATM, data storage system and other hardware simultaneously set up to acquire a fully equipped data center at bank's computer Division, Head Office. To get maximum speed for operating the On-line system, JBL contracted Square Informatics Limited and Metronet Bd. Ltd. Square Informatics Limited provides information/data through satellite and Metronet provides information/data via optical fibre. The Disaster Recovery Site (DRS) is going to be established very soon. Transfer of data from old system to on-line system started in phases and all the then existing branches were brought under the new centralized system within a short span of time. All branches were added in JBL's On-line network at Chittagong, Gazipur and Dhaka from the first day of operation. The customer of JBL can now enjoy the world class banking service locally at a very reasonable cost through the fully automated On-line banking system. JBL is the only 3rd generation bank, going to introduce ONLINE BANKING service. ISLAMIC BANKING BRANCH In the year 2004, Jamuna Bank Limited opened another Islamic banking branch at Jubilee Road, Chittagong on November 27, 2004. The already existing Nayabazar Islamic Banking Branch started its operations from October 25, 2003, the total Islamic banking branches stands at 02 (Two). The operational performance of the branches as on 31-12-2008 is shown through the Balance Sheet, Profit & Loss Account of the Islam! Banking Branches below :

As at at31 31ststDecember December2008 2008 As 31-12-2008

For the Year ended 31st December 2008 31-12-2008



JBL's Shariah Council consists of 06 (Six) members, among them 02 (two) are Khatib, 01 (one) is Ex-Economic Advisor, 01 (One) is Vice chancellor, Islami University, 01 (One) is Principal and other one is Banker. During the year 2009, the Shariah council of JBL conducted 03 meetings to discuss all aspects of Islamic Branches operation. 2.15 Portfolio Management Service Since inception, we have achieved an unparalleled reputation as a leading Merchant Banker through providing portfolio management services by maintaining a high level of professional expertise and integrity in client relationships. Keeping customer preferences as an investor in mind, Jamuna Bank Ltd. has designed Investors' Discretionary Account (IDA) and Bank's Discretionary Account (BDA). In these accounts the customers may enjoy loan facilities at a ratio 1:1 for investments in private placement, IPO, and secondary market operations. Types of Accounts: Investors' Discretionary Account (IDA): This leveraged account is managed by the account holder through us. By this the investor bears the risk of investment and also its gain or loss. Banks' Discretionary Account (BDA): With this account the Bank, on behalf of the account holder, uses its discretion in managing the account. The investor lays down his/her investment objectives and the Bank designs a portfolio aligning the investors' risk-return profile.

Operational Procedure: Opening of the Account: Any two Bangladeshi nationals and NRB of sound mind having a minimum age of 18 years may open three IDA/BDA's-one each in their single name and the other in their joint names. Building of Portfolio: A diversified portfolio through investment in IPO, Private Placement and Secondary Market. Appointment of an Operator: Account holder may appoint any existing account holder of MBW as an operator of his/her Account. Services: Application, Transfer and Collection of Shares and/ or Dividends: Arranged by Jamuna Bank Ltd. on behalf of the clients. Safe Custody of Securities: Securities are kept in the Jamuna Bank Ltd. vault. IPO and Private Placement: Jamuna Bank Ltd. furnishes the account holders, information about forthcoming IPO's and Private Placement through FAX, e-mail and letters upon request. Statement of Accounts: MBW of Jamuna Bank Ltd. sends portfolio information to the account holders every 6 months. Besides, the account holders may also obtain information on their portfolios any time upon request. Investors can access their portfolio any time from any part of the country through SMS and Phone Service. Additional Services: Interest on Client's Credit Balance: MBW pays interest @ 6.5% on client's credit balance, if minimum Tk. 25,000 is kept with the account from the beginning to the end of a month. Phone Service: Phone services are available. SMS Service:Sms servicesare also provided. 2.16 Departments and Divisions of Jamuna Bank Ltd. These are the main divisions the structures and functions of each of these divisions are described below: 2.16.1 Internal Control and Compliance The main function of this division is to provide legal assistance to the branches and implement recovery strategy for stuck-up loan and to ensure strict adherence of rules and policies by all connected of the bank through routine and surprise inspection and audit. The functions of this division are as follows: •

Monitor the individual cases with respect to their securities, value of securities and finally review of possibility of recovery of banks stuck-up classified loan.


Investigate suspicious or irregular matters being directed by higher management.

Time to time follow-up of advance to keep the branch under constant pressure.

Carryout instant audit as felt necessary.

2.16.2 Financial Institutions and Treasury Treasury unit is a core banking unit with its leading-edge technology and steadily growing volume of activity in the markets, Jamuna Bank Limited treasury unit and currency dealing desks have consolidated its position as a well-known and well establish counterpart in the newly transformed Free Floating rate, dealing daily with a wide circle of both bank and nonbank customers all over Bangladesh. Our everyday business evolves around participation in Money Market and Foreign Exchange Market in a substantial volume. 2.16.3 Share Division The Customer authorizes Jamuna Bank Ltd. to exchange, share, part with all information related to the details and transaction history of the Customers to its Affiliates / banks / financial institutions / credit bureaus / agencies/participation in any telecommunication or electronic clearing network as may be required by law, customary practice, credit reporting, statistical analysis and credit scoring, verification or risk management and shall not hold Jamuna Bank Ltd. liable for use or disclosure of this information. 2.17 A Finance Division Finance division is very significant division for any Bank, the main objectives of Finance Division are: •

Maintain daily liquidity positions, treasury bills, call money, debentures, placement of fund etc.

Monthly-accrued interest assessment of all interest bearing accounts, inter-branch assessment, and amortization of all fixed and other assets.

Preparation of statement of accounts and profit and loss account for the Bank.

Cost of fund analysis.

Fulfilling reporting requirements of Bangladesh Bank.

Maintenance of accounts, income and expenditure posting, salaries, Provident Fund etc.

2.17.1 Credits The Credit Risk Management Department is assisted by the Credit Division which is mainly concern with the post-approval functions of the division. Duties and responsibilities of Credit Division are too focused on documentation, sitting the limit of system, monitoring and disbursement of credit products. Credit Division censures that no transactions are booked

under expired limits or lines of credit accounts where security documentation or collateral have not been perfected. 2.17.2 Retail Banking Under retail banking JBL provide two types of loan, these are: • Unsecured Loan •

Secured Loan

The Unsecured loans are: • Personal Loan • Auto Loan • Easy Loan (For Executives) • Gold Grace - Jewellery Loan • House/Office Furnishing/Renovation Loan • Staff Loan • Education Loan The Secured Loans are: • Personal Loan • Personal Overdraft 2.17.3 Business Banking Division Alongside providing the best service to the client, patronizing and taking part in social development activities as well as making due contribution to growth of the national economy. 2.17.4 Corporate Affairs At Jamuna Bank Ltd. provides complete range of solutions to meet Corporate Customers requirement. JBL Corporate Banking solutions include a board spectrum of products and services backed by proven, modern technologies. JBL specialist terms offer a comprehensive service providing finance to large and medium-sized businesses based in Bangladesh. 2.17.5 Investment Banking Division Jamuna Bank Ltd. generally does four types of Investment Banking Services. They are: •

Merchant Banking Wing

Custodial Service

Brokerage Service

Future Products.

2.17.6 Jamuna Bank Ltd. Foundation

Jamuna Bank Ltd. Foundation (JBL) is a subsidiary company of Jamuna Bank Ltd. having holding 99.60% shares of the JBF. The company was first established under the trust deed constituted and registered on the 14th day of May 2002. Subsequently the trust by a resolution of its Board of trustee in its 3rd meeting held on 29.12.2002 resolved to cancel the Trust Deed and utilize the trust fund for the foundation of a company limited by guarantee primarily for charitable purpose. Then the company was incorporated on 3rd day of November 2003 under section 28 of Companies Act 1994, a company limited by guarantee. The certificate of incorporation is C-558(10)/2003. 2.17.7 Merchant Bank Wing Jamuna Bank launched its Merchant Banking Wing (MBW) operations in the year 2003. Financial statements of Merchant Banking Wing have been audited by a separately appointed independent auditor. Assets-liabilities and income-expenditures of that Wing are incorporated in similar heads of account of the Bank's financial statements. As a fully fledged merchant banker, JBL provide the following services: •

Portfolio Management

Issue Management


Corporate Advisory

Bankers to the Issue

Private Placement

2.18.1 Corporate Banking At Jamuna Bank we provide complete range of solutions to meet Corporate Customers' requirement. Our Corporate Banking solutions include a broad spectrum of products and services backed by proven, modern technologies. Corporate Lending Our specialist teams offer a comprehensive service providing finance to large and mediumsized businesses based in Bangladesh. For more information as to how we might best meet your corporate debt needs, please contact us at our Corporate Head Office. Structured Finance We have a specialist Structured Finance Team who arrange and underwrite finance solutions including Debt and Equity Syndication for financial sponsors, management teams and corporate. Also we provide corporate advisory services. We aim to provide tailored financing solutions with a dedicated team who can rapidly respond to client needs. Following are some of the products and financial tools of Corporate Banking:

Project Finance

Working Capital Finance

Trade Finance

Cash Management

Syndicated Finance, both onshore & off-shore

Equity Finance, both onshore & off-shore

Corporate Advisory Services

2.18.2 SME Banking Considering the volume, role and contribution of the SMEs, in the last two decades Jamuna Bank has been patronizing this sector by extending credit facilities of different types and tenor. As of now 54% of the bank's total loan portfolio is segmented to the SMEs which deserve all out attention in our plans, projections and forecasting. As such the bank has emphasized on the following issues: •

To provide the best services to the SME sector

To increase the SME portfolio of JBL significantly

To improve the quality of JBl’s portfolio

2.18.3 Large Loan & Project Finance •

In order to cater the demand of client Jamuna Bank has segmented its portfolio in terms of loan size. As per this segmentation any loan over Tk. 10.00 Crore falls under the purview of Large Loan Unit.

In Jamuna Bank, there is also a separate Project Finance unit who evaluate the business. The unit is entrusted to handle the portfolio in a focused manner. Jamuna Bank is always in fore front to support establishment of new projects of diverse nature which will help to broaden the manufacturing arena vis-a-vis to generate to employment.

2.18.4 Islami Banking To provide the Islamic banking services in accordance with the principles of Islamic Shariah, Jamuna Bank has established Islamic Banking Wing and started it's functioning by opening full-fledged Islamic banking branch on27.11.2004.

The goals and objectives of Islamic banking Wing are as under: • To facilitate the Islamic banking system in the country • To create new entrepreneurs and to arrange required finance for them • To play effective role for socio economic development of the country • To give assistance in launching welfare oriented economic system under Islamic values Under this wing Jamuna Bank extends the following Islamic banking services: • Deposit services • Investment services 2.18.5 Cards In the present context of banking business in the world, Card is the future of any bank. Electronic payment system is now ruling the world and some days from now cash transactions system will turn into a history found only in the text book. Jamuna Bank Limited is one of the leading first generation private sector commercial banks with Branch Network all over the country. The Bank started issuing VISA Credit Cards from the end of year 2004 as a principal member of VISA International. 2.19 Corporate Social Responsibiiities of the Jamuna Bank Limited In this 21st century, the social responsibility of an organization is unavoidable. The societal marketing concept holds that the organization should the needs wants and interest of the target markets. It should then deliver superior to customers in a way that maintains or improves the consumer's and the society's well-being. In every year JBL contribute their in various types of social activities. These are; awarding the talent student, monetary contribution in the disable fund, contribute increasing public awareness and they also invest for beatification. JBL contribute for the Sidor affected people. No one in society can avoid the due responsibilities, JBL position is positive in this regard and they wish to find a suitable segment to work with the future to meet the corporate social responsibility.

Chapter-3 Foreign Exchange

3.1 Introduction of Foreign Exchange Foreign Exchange means foreign currency. H.E. Evitt define "Foreign Exchange" as the means and methods by which right to wealth expressed in terms of the currency of one country are converted into right to wealth in terms of the currency of other country. International trades are a common occurrence and normally benefit both the exporter and

importer. In many countries, international trade account for more than 20%of their national income. Foreign Exchange department is the international department of a bank. It deals with globally and facilities internationally trade through its various services. It bridge between importers and exporters. The trade among various countries causes for close linkage between the parties involved. In Bangladesh, the bank that facilities such transaction is referred to as Authorized Dealer certified by Bangladesh Bank. International trade demands a flow of both goods from seller to buyer and payment from buyer to seller. This flow of goods and payments is done through credit instrument, for example, Letter credit, Bill-of exchange etc. 3.2 Meaning of Foreign Exchange As more than one currency is involved in foreign trade, conversation of one country into other country is necessary. This is why; foreign exchange refers to the process or mechanism by which the currency of one country is converted into currency of other Country. Foreign exchange has three principal meanings. These are as follows: First: It is a team popularly used to denote a foreign currency. For example, dollar, pound. Derham etc, are foreign exchange. Second: It means credit instruments, which arc capable of being used as currency and/ or convey to holder a right to wealth. Third: It means Bank balances and deposits in foreign currency. In terms of section 2(d) of the foreign exchange regulations 1947. as adopted in Bangladesh, Foreign Exchange means foreign currency and includes any instrument drawn, accepted, made or issued under clause (13) of article 16 of Bangladesh Bank order, 1972 all the deposits, credits and balances payable in any foreign currency and draft cheque, letter of credit and bill of exchange expressed or drawn in Bangladesh currency but payable in any foreign country. In exercise of the power conferred by section 3 of the foreign exchange regulation, 1947 Bangladesh Bank issue license to schedule bank to deal with exchange. These banks are known as Authorized Dealers. Licenses are also issued to persons or farms to exchange foreign currency instrument. They are known as Authorized Money Changer.

3.3 Foreign Exchange Regulation Item 3.3.1 Local regulation for foreign exchange Our foreign exchange transaction is being controlled by the following rules and regulations: Foreign exchange regulation act 1947. •

To regulate foreign exchange, Bangladesh bank has published a book namely "Guideline for foreign exchange transaction" volume I & 2. it is amended after every five years.

Bangladesh Bank issues foreign exchange circular from time to time to control the export, import and remittance business.

Ministries of commerce issues export and import policy giving basic formalities for export and import business.

Some CCI & E issues public notice for any kind of change in foreign transaction.

Bangladesh Bank published two volumes in 1996. This is compilation of the instructions related to foreign exchange.

L/C commission and other charges are realized from the party before L/C is opened. Notion amount may he realized as FCC (Foreign Correspondent's Charges). FCC is kept separately in an account and this entry may be reversed as and when the debit advice is received from the foreign correspondent by passing voucher for actual amount. If there is any shortfall, the same is to be realized from the party. 3.3.2 International regulation of foreign exchange There are also some international organizations influencing our foreign exchange transaction. Few of them are discussed below: •


chamber of commerce (ICC)

is a world wide nongovernmental

organization of thousands of companies. It was founded in 1919. ICC has issued some publications like UCPDC, URR & URC etc. which are being followed by all the member countries. There is also an international court of arbitration to solve the international business disputes. 3.4 Function of Foreign Exchange Department of Jamuna Bank Limited • i.

Remittance Insurance of DD, MT, TT etc.


Payment of DD, MT, TT etc


Insurance and enliarl4ment of travel's Cheque.


Sale and enfiariement of foreign currency notes.


Maintaining on non - resident account.




Opening of letter of credit


Advance bills


Bills for collection


Import loan and guarantees


Dollar endorsement.




Pre - shipment advances


Purchase offoreign bills


Negotiation of foreign bills


Export guaranties


Advising/ confirming later of credit


Advance against bill for collection

3.5 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 foreign currencies on account of import, export, travel acid other purpose. However, specifically foreign remittance means sale and purchase of foreign currencies for the purpose other than export and import. 3.5.1 Types of Remittance All foreign remittance transactions are grouped into two broad categories 1.

Foreign inward remittance.


Foreign outward remittance Foreign Inward Remittance Inward remittance covers remittance on account of export and private remittance on sundry items, purchase of traveler's cheque, foreign currency note and coins. Actually, inward

foreign remittance received in from abroad through normal banking channel in the form of foreign TT, MT, DD, Cheque, Bills, and Draft TCs etc. favoring a beneficiary in Bangladesh. Two forms as prescribed by Bangladesh Bank are used for purchase of foreign currencies such asa. EXP From: remittancesved against exporters of goods fro b. Bangladesh are done by from EXP. b. Form C: Inward remittance equivalent - to US$2000 and above are done by form C. however declaration in form C is not required in case of remittance by Bangladesh nations working abroad. Purpose of Inward Remittance •

Family maintenance

Indenting commission



Foreign investment

Others Mode of inward remittance •

Telegraphic Transfer (TT)

Mail Transfer (MT)

Foreign demand draft (FDD)

Payment Order (PO)

Traveler's Cheque (TC)

Foreign Currency Note Foreign outward remittance The term outward remittance include not only remittance i.e. sale of foreign currency by 17, MT, Draft, traveler Cheque but also includes payment against imports into Bangladesh an d local currency credited to non-resident Taka account of foreign banks or convertible Take account. Two forms are used for outward remittance of foreign currency such as: a. IMP Form: All outward remittance on account of imports is done by form IMP. 1). TM Form: For all other outward remittances form tin is used. Mode of outward remittance •

Foreign Telegraphic Transfer (FTT)

Foreign Mail Transfer (FMT)

Traveler Cheque (TC)

Foreign Currency Note

3.6 Import Operation Import means to bring in goods from abroad that may be in the form of goods or service. Import of goods takes in a country when the country is in a storage of that product or of purchasing it from abroad is cheaper. An importer must have import registration certificate (IRC) issued by chief controller of import and export (CCI and E) to import goods from other country. To obtain import registration certificate, the document required are discuss as follows: •

Trade license

Income tax clearance Certificate

Nationality certificate

Asset certificate

Bank solvency certificate

Registration partnership deed (if any)

Memorandum and Article of association

Certificate of incorporation (if any)

Rent receipt of the business premises

Certificate from Chamber of Commerce and Industry

3.6.10bjective of import policy Government of Bangladesh is sincerely committed to fostering a gradual development of free market economy in the light of WTO agreement. In the interest of export promotion and investment in the country it is necessary to have a long term, stable, facilitative and liberal import policy. The main objects of the current import policy are: •

To make the import policy compatible with the changes in the world market that has occurred as are suit of the introduction of market economy and singing of the WTO agreement.

To simplify the procedures for import of capital machinery and industrial raw materials with a view to promoting export.

To ensure growth of the indigenous industry and availability ol’bigh quality goods to the consumers at a reasonable price.

3.6.2 Import procedure To import through Jamuna Bank Limited a Customer / Client require a set of documents which arc to be produced before the concerned official of the foreign department. The following are the required documents: •

Bank Account

Import Registration certificate

Tax paying identification number (TIN)

Pro-forma Invoice / Indent

Membership Certificate

L/C application form dully attested

One set of IMP Form

Insurance Cover None with money receipt


IMP Form This form is prepared for maintainin g account of the money, which goes out side the country for the purpose of payment. This form is required by Bangladesh bank. It is an application for permission under 4/5 of the foreign exchange regulation act 1947 to purchase foreign currency for the payment of import. IMP form has four copies 1.

Original copy of Bangladesh Bank


Duplicate copy for authorized dealers. It is issued for processing exchange control copy of bill entry or certified invoice


Triplicate copy for authorized dealer's record


Quadruplicate copy for submission to the bank in case of import where documents are retired.

Following documents are sent with form-IMP 1.

letter of credit Authorized Dealer


One copy of invoice


Indent copy / performs invoice

The folio-,vino information is including in the Form-IMP

1. Name and address of the authorized dealer 2. Amount of foreign currency in words and figures 3. Name and address of the beneficiary 4. L/C authorized form number and date 5. Registration of L/C authorized form with Bangladesh Bank and description of goods 3.6.3 Import Mechanism According to Import and Export control Act 1950, a person should be competent Importer to import. The chief controller of import and Export office provides the registration certificate to the importer. After the importer has to secure a Credit Authorization from Bangladesh Bank and then the importer will be a qualified importer. After that the importer is the person who request or instructs Arab Bangladesh Bank Limited, the opening bank, to open L/C. therefore the importer is also called opener or applicant of the credit. 3.6.4 Importer Application for L/C Limit An importer submits an application to the department of Arab Bangladesh Bank limited furnishing the following information. A sample of the application appears the index of this report... I. Full particulars of bank account 2. Nature of business 3. Required term and conditions 4. Goods to be imported 5. Offered security 6. Repayment schedule A credit officer scrutinizes this application and accordin 8ly prepares a proposal called credit limit Proposal (CLP) and forwards it to be the head office credit committee (HOCC). If the

committee satisfied, the limit proposal sanctioned and returned back to the branch. Thus the importer is entitled for the limit. 3.6.5 Procedures of Opening L/C to Import To open an L/C the requirements of an importer are: •

He must have an account in JBL

He must have Importer Registration Certificate (IRC)

Report on past performance with other bank. JBL collects this report from Bangladesh

Bank order, 1972 all the deposits, credits and balances payable in any foreign currency and draft cheque, letter of credit and bill of exchange expressed or drawn in Bangladesh currency but payable in any foreign country. In exercise of the power conferred by section 3 of the foreign exchange regulation, 1947 Bangladesh Bank issue license to schedule bank to deal with exchange. These banks are known as Authorized Dealers. Licenses are also issued to persons or farms to exchange foreign currency instrument. They are known as Authorized Money Changer. 3.7 Foreign Exchange Regulation Item 3.7.1 Local regulation for foreign exchange Our foreign exchange transaction is being controlled by the following rules and regulations: Foreign exchange regulation act 1947. •

To regulate foreign exchange, Bangladesh bank has published a book namely "Guideline for foreign exchange transaction" volume I & 2. it is amended after every five years.

Bangladesh Bank issues foreign exchange circular from time to time to control the export, import and remittance business.

Ministries of commerce issues export and import policy giving basic formalities for export and import business.

Some CCI & E issues public notice for any kind of change in foreign transaction.

Bangladesh Bank published two volumes in 1996. This is compilation of the instructions related to foreign exchange.

L/C commission and other charges are realized from the party before L/C is opened. Notion amount may he realized as FCC (Foreign Correspondent's Charges). FCC is kept separately

in an account and this entry may be reversed as and when the debit advice is received from the foreign correspondent by passing voucher for actual amount. If there is any shortfall, the same is to be realized from the party. 3.7.2 International regulation of foreign exchange There are also some international organizations influencing our foreign exchange transaction. Few of them are discussed below: •


chamber of commerce (ICC)

is a world wide nongovernmental

organization of thousands of companies. It was founded in 1919. ICC has issued some publications like UCPDC, URR & URC etc. which are being followed by all the member countries. There is also an international court of arbitration to solve the international business disputes. 3.8 Procedures of Opening L/C to Import To open an L/C the requirements of an importer are: •

He must have an account in JBL

He must have Importer Registration Certificate (IRC)

Report on past performance with other bank. JBL collects this report from Bangladesh

Bank •

CIB (credit information bureau) report from Bangladesh Bank

A proposal approved by the meeting of executive of the bank. It is necessary only when the L/C amount is smaller or there is no limit

If the L/C amount is large or there is a limit, then an approval from Bangladesh Bank is needed. Usually this approval is needed for amount more than one crore.

Opening of L/C means, at the request of the applicant (importer), issuance of an L/C in favor of the beneficiary (exporter) by a Bank. The bank, which opens or issue L/C called L/C opening bank. Throughout this report the term "opening bank" conveys the same meaning. 3.9 Accounting Treatment for Opening L/C For opening L/C, importer will apply to the issuing bank. In that case , importer is called applicant or opener. After opening an L/C bank will create a contingent liability. In that case, the accounting posting will be the following:

Contingent liability


Customer liability


Then the issuing bank will give another entry: Payment against document (PAD)


Al 3131, general A/C


Exchange gains


JBL general account is a miscellaneous account. It will be credited by this entry JBL creates a liability. Fie has to pay the money to the advising bank. And the gain made by the transaction is shown at exchange gain account. All these entries are made after receiving some documents from the exporter. The above producer is called lodging. After giving the entry, importers pay the money and collect the document. Party account


PAD account r. Margin & Bank charges: Party account


Margin account




Postage__________ Cr. 3.10 Liability of Issuing Bank As per article 9(a) of UCPDC 500, all Irrevocable Credit constitutes a definite undertaking of the issuing Bank, provided the stipulated comply with the terms and conditions of the credit. 3.10.1 Advising of Letter of Credit Advising through a bank is a proof of evident authority of the credit to the seller (Exporter). The process of advising a credit consists of forwarding the original credit to the beneficiary to whom it is address. Before advising L/C, the advising Bank must see the following points: •

Signature of the Issuing Bank officials on the L/C verified with the specimen signature

L/C test code is invariably be agreed and authenticated by two authorized officers.

L/C is scrutinized thoroughly complying with requisites of concerned UCPDC provisions.

Entry made in the I,/C Advising Register.

L/C is advised to the beneficiary (Exporter) promptly and advising charges recovered.

3.10.2Advising Bank Liability Advising liability is fixed up in uniform customer and practice for documentary credit, publication 500. Article 7(a): Credit may be advised to a beneficiary through another bank (the advising) without engagement oil the part of the advising bank, but the bank, if selects to advise the credit, shall take reasonable care to check the apparent authentically of the credit which it advises. If the bank elects not to advise the credit, it must uniform the issuing bank without delay. Article 7(b): If the advising bank cannot established such apparent authentically it must inform delay, the bank which the instructions appear to have been advised that it has been unable to established the authentically of the credit and if it elects to advised the credit it must inform the beneficiary that it has not been able established the authentically of the bank. 3.10.3 The Conforming Bank If the advising bank also add its own undertaking to honor the credit while advising the same to the beneficiary, he becomes the Conforming Bank, in addition becomes liable to pay for documents in conformity with the L/C terms and conditions. 3.10.4 The Beneficiary Varies the Letter of Credit •

The letter of credit terms arc in conformity with terms of the original contract of sale.

That no derogatory terms are added to the letter of credit.

That lie is in a position to ship the consignment within the shipment date stipulated in the letter of credit.

That letter of credit ensures him payment upon tending of export document.

The beneficiary sees any change to contract of sale or if he feels any amendment, lie will inform the advising bank thereof. 3.10.5 L/C Amendment

After opening of L/C, the importer may feel necessary to delete, add or alter some of the clause of the credit. All there changes are communicated to the beneficiary through same advising bank of the credit. Parties involve in an L/C, particularly the seller and buyer cannot always satisfy the terms and conditions in full as expected due to some obvious mid genuine reasons. In such a situation, the credit should be amended. BA transmits the amended by tested telex to the advising bank. In case of revocable credit it can be amended or cancelled by the issuing bank at any moment and without prior notice to the beneficiary. But in case of irrevocable letter of credit, it can neither be amended nor cancelled without the consent of the issuing bank, the conforming bank (if any) and the beneficiary. If the L/C is amended, service charge and telex charge is debited from the party account accordingly. 3.10.6 Consignment After the power amended of I./C, the supplier will be willing to immediately start packing and will ship the goods when ready and obtain full set of bill of lending etc. from the carrier company and submit the same to the negotiating bank along with other document that are called for in the credit. The shipping documents usually obtained are: •

Bill of landing or consignment note or truck receipt

Bill of exchange

Commercial Invoice

Certificate of Orioin

Packing list

Weight Certificate

A copy of declaration of shipment made to the insurance Company

Pre-shipment inspection certificate from international reputed surveyor.

3.11 Scrutiny of document by negotiating bank Negotiating bank scrutinizes the documents carefully with letter of credit terms in the following forms. •

The credit is in a force and the last date of shipment and negotiation has not expired.

Documents presented are preciously those called for.

The invoice corresponds with the dealers of all other document submitted under the bill.


Insurance policy is properly stamped and made out and endorsed in conformity with the condition.


A complete set of bill of lading is ensured.


Reimbursement clause is clear and does not violet Exchange control regulation, it any.

3.12 Settlement of L/C The issuing bank also checks the documents and if the documents are found as per credit requirement, it will also give payment under three separate arrangements. Although three arrangements are discussed here separately for proper understanding, it is noteworthy to say that the applicant, on the very beginning of L/C application, mentions the mode settlement. Settlement by payment Settlement by payment happens when the letter of credit contains the term "Document against payment (DP)" as the mode of payment. Under DP arrangement, the beneficiary (seller) presents the documents to the negotiating bank. If satisfied, the negotiatin g bank makes payment to the beneficiary and then sends the documents to the using bank and claim reimbursement. Settlement by Acceptance Payment, from importer to seller, must be settled through acceptance mechanism if the letter of credit L/C contains the term "Documents against Acceptance". It means that payment will occur at some fixed future date after submission of document by seller. After being satisfied with the document, the bank accepts the documents and drafts. At maturity, reimbursement is obtained in the pre-agreed manner subject to satisfy the credit requirements of the documents. Settlement by Negotiation This settlement procedure starts with the submission of documents by the seller to any negotiating bank in a freely negotiate the documents. If negotiation is restricted by the issue, bank only nominated bank cast negotiate the document. After scrutinizing that the documents meet the credit requirement, the bank may negotiate the documents and give value to the beneficiary. 3.13 Lodgment of the documents After receiving the documents from the exporters at first JBL write it in the PAD register. PAD register contains date, PAD number. L/C number and name of the drawer, name drawer, amount, and number of copies of various documents name of the imported items. The written procedure is called lodgment. Accounting Application

Whether the documents are paid or dishonored, the opening bank will reserve the liability entries in their books as under: Contingent liability reversal voucher: Bank liability on L/C


Customer's liability on Cr. Voucher on lodgment of documents Margin A/C on L/C


Payment Against document (PAD) Cr. (Margin amount transferred to PAD A/C) Party's Account




r. (Customer account debited for the remaining amount) PAD A/C


Head office General A/C


Income V interest on PAD


(Amount given Head office International Division and Interest is credited) 3.14 Retirement of the Documents The process of collecting documents from bank by the importer is called retirement of the documents. The importer gives necessary instruction to the bank for retirement of the import bills or for the disposal of the shipping documents to clear the imported goods from the Customer authority. The importer may instruct the bank to retire the documents by debiting his current account with the bank or by creating Loan against Trust Receipt (LTR). Following steps are taken while retiring docurrients•

Calculation of Profit

Calculation of other charges

Passing vouchers

Entry in the register

Endorsement in the Bill of lading and other transport and in the bill of exchange.

3.15 Import Financing

Jamuna Bank Limited generally follows some types of Import financing. These sorts of import financin8 greatly facilitate the import business and thus enable ^ importer to have credit facilities from the Bank. Import may be allowed under the following sources of finance: a. Cash: 1. Cash foreign exchange (balance of the foreign exchange reserve of Bangladesh Bank). 2. Foreign currency accounts maintained by Bangladesh Nationals working / living abroad. b. External economy aid. c. Commodity exchange. 3.15.1 Types of Import Financing Here are two types of import Financinga. b.

Pre- import financing. Post-import financing.

a. Pre- Import Financing: 1. Opening of L/C under case, loan / credit etc. at below 100% margin: While importer open L/C at 10% margin with a commercial bank indicates that the time of opening L/C, the importer concerned deposits taka equivalent to 10% of the L/C valued and the rest 90% will have to deposits at the time of taking delivery of bills from the issuing bank. Opening of Back To Back L 'C Back-to-Back letter of credit may be defined as a credit, which is opened at the instruction and request of the beneficiary of the original Export L/C on the basis of strength of that L/C. Ready- made garment industries and specialized textile units are allowed the facilities of importing fabrics and other materials needed for manufacturing of garments/ specialized textiles back-to-back L/C arrangement. These are two types: A.

Foreign back letter of credit.


Inland back-to-back letter of credit. b. Port-Import Finance


PAD (Payment against document):

Oil receipt of import bills against the L/C from the negotiation bank, the issuing bank scrutinizes the documents with the terms and conditioned of the L/C and if it is found completely in order, PAD loan in the name of the importer in order to reconcile the entries so debited by the reimbursing bank. 2)

LIM (loan against importer merchandise):

LIM may be created at the request of the importer while lie is not in a position to take delivery of import bills by making payment of entire bank dues. By creating LIM the name of the importer goods are cleared from the custom authorities by the L/C issuing bank the same at the go down under banks custody. 3) LTR (Loan against trust receipt): Advance against a trust receipt a trust receipt obtained from the customers are allowed to only first class tasted parties when the documents covering an import shipment or other goods pledged to the bank as security are given without payment. However, for such advances prior permission/ sanction from head office must be obtained. The customer holds the goods or their sale-proceeds in trust for the bank, till such time, the loan allowed against the trust receipt in fully paid off. The trust receipt is a document that creates the banker lien on goods and practically amount to hypothecation of the proceeds of sale in discharge of the lien. 3.15.2 Export Operation Export means carrying anything from one country to another country. In other way, sending of visible things outside the country for sale. Export play great role in our economy. After careful and through examination of the documents, the banker has to list out the discrepancies, which may be classified as major or minor; irremovable or removable. The removable discrepancies call be corrected by proper mechanism stated in the L/C. Different types of discrepancies are as follows: •

L/C expired


Late shipment

Amount drawn in excess of that of the L/C

Bill of exchange not properly drawn

Descriptions of goods differ

Bill of lading or Airway Bill being state

Insurance cover Note not in conformity with terms of L/C

Insurance Cover Note obtained after the bill of lading or Airway Bill date

Enough number of copies not submitted as required by L/C

Negotiation under L/C restricted

Packing list and certificate of analysis are not as per the L/C

Document not properly endorsed in favor of the bank

Full shipment not effective and part shipment prohibited

Same of the documents required by L/C not submitted

Document inadequately stamped

3.15.3 Export policy Export policies formulated by the ministry of commerce, GOB provide the guideline and incentives for promotion of export in Bangladesh. Export policies also set out commodity wise annual target. It has been decided to formulate these polices to cover a five year regime. The export oriented private sector, through their representative bodies and chambers are consulted in the formulated of export policies and are also represented in the various export promotion bodies set up by the government. 3.15.4 Export Incentives Financial incentives Restructuring of export credit guarantee scheme. Convertibility of Taka in currency account. Exports can deposits 40% of FOB value of their export earning in own accounts in dollar wd pound sterling Export development fund Expansion of export period from 180 days to 270 days. 50% tax rebate on exports earning Duty draws back. Bonded warehouse facilities to 100% export oriented firms. Duty-free import if capital equipment for 100% export oriented firms. General Incentives

National export trophy to successful exporters

Trading course on external trade.

Arrangement of international trade fairs, commodity- based exhibits in the country and participation in foreign trade fairs. Other Incentives

Assistance in improvement of quality and packing of exportable items.

Simplification of exports procedures

3.15.5 Export procedures The import and export trade in our country are regulated by the import and export control act 1950. Under the export policy of Bangladesh the exporter has to get valid Export Registration Certificate (ERC) from chief controller of import and Export (CCI & E). The ERC is required to renew every year. 3.15.6 Registration of Exporters For obtaining ERC, intending Bangladeshi exporters are required to apply to the Controller / Joint Controller / Deputy Controller / Assistant Controller of import and export, in the prescribed form along with the following documents: •

Nationality and assets certificate.

Memorandum and article of association and certificate of incorporation in case of limited company.

Bank certificate.

Income tax certificate

Trade certificate etc.

3.15.7 Securing the order After getting the ERC certificate the exporter may proceed


secure the export order. lie can

do this by contacting the buyers directly or through agent. In this purpose the exporter may get help from•

License officer.

Buyer's local agents.

Export promoting organization.

Bangladesh mission abroad

Chamber of commerce.

Trade fair etc.

3.15.8 Signing the Contract After communicating with a buyer, exporter has to get for exportin 8 exportable items from Bangladesh detailing commodity, quality, price, shipment, insurance and marks inspection and arbitration etc. 3.15.9 Receiving letter of Credit After getting contract for sale, exporter should ask tile buyer for Letter of Credit clearly starting terms and conditions of export and condition of export and payment. •

The terms of the L/C are in conformity with those of the contract.

The L/C is all irrevocable one, preferably confirmed by the advising bank.

The L/C allows sufficient time for shipment and negotiation.

Terms and conditions should be stated in the contract in case of other mode of payment: •

Cash in advance

Open account

Collection basis

3.15.10 Procuring the materials After making the deal and oil having the L/C opened in his favor the nest step for the exporter is to set about the task of procuring or manufacturing the contracted merchandise. 3.15.11 Shipment of Goods Then the exporter should take the preparation for exporter arrangement for delivery of goods as per L/C and interns, prepare and submit shipping documents for payment/ acceptance/ negotiation in due time. Documents for shipments: •


ERC (valid)

L/C copy

Shipping instruction

Transport documents

Insurance documents

Bill of exchange

Certificate of origin

Quality control certificate

Customer Duty Certificate


GSI1 certificate

Inspection certificate •


3.15.12 Export Document Checking 1) General verification 1. L/C restricted or not 2. Exporter submitted documents before expire date of credit 3.

Shortage of document etc.

2) Particular verification: Each and every document should be verified with the L/C. 3) Cross verification Verified one documents to another. After proper examination or checking of a described export document banker may find the following discrepancies: General: Late shipment Late presentation L/C expired L/C over-drawn Partial shipment or transshipment beyond L/C terms. Bill of exchange (B/E) •

Amount of B/L differ with invoice

Not drawn on L/C issuing bank

Not signed

Tenor of B/E not identical with L/C

Full set not submitted.

Commercial Invoice Not issued by the beneficiary Not signed by the beneficiary Not made out in the name of the applicant Description, price, quality, sales a term of the goods not corresponds to the credit Not marked one fold as original Sipping mark differs with B/L and packing list Packing List •

Gross Wt. Net Wt. and measurement, number of cartoons differ with B/L

Not market one fold as Original.

Not signed by the beneficiary

Shipping marks differ with B/L

Bill of lading •

Full set of B/L not submitted.

B/L is not drawn endorsed to the order of ABBL

Shipped or Board". "Freight Prepaid" etc. notations are not marked or) the B/L

B/L not indicates the name and capacity of the party.

Short form 13/1

Charter party 13/1.

Loaded on Deck

Alterations are bill not authentication.

Other •

N.N documents not forwarded to buyers or forwarded beyond L/C terms.

Short shipment certificate not submitted.

While checking the export documents following things must be taken in to consideration. L/C terms Each and every clause in the L/C must be complied with meticulously and ensure the following. •

That the documents arc not state.

That the documents are negotiated within the L/C validity.

That the documents value does not exceeds the value

Draft/ bill of Exchange •

Draft must be dated

It must be made out in the name of the beneficiary's bank or to be endorsed to the bank.

The negotiation bank must verify the signature of the drawer. Amount must be tailed with the invoice amount.

Invoice It is being scrutinized to ensure the following-'the invoice is address to the importer The full description of merchandise must be given in the invoice strictly as per L/C The price, quality, etc. must be as per L/C The invoice must be language of L/C Number of invoice will be submitted as per L/C Invoice amount, indicate sale terms/ incoterms viz. FOB, GIF etc. Other documents Beneficiary statement Certificate of origin Weight certificate Inspection certificate 3.15.13 Negotiation of Document Soon after the shipment, the exporter should make arrangement for early submission of the document to the bank, correctly prepared in conformity with the terms of the credit; exporter should remain 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. 3.15.14 Type of Payment There are different types of payment method in international trade and letter of credit may include one of them.


Advance Payment

As per requirement of exporter, importer should make full payment liar the goods to be exporter in advance. This is possible where the goods enjoy sellers market. B.

Open Account

Under this method, goods are dispatched directly to the buyer who takes delivery of them without making payment. He is free to dispose of the goods as lie pleases. It is arranged that he will make payment to the seller at a predetermined future date. C.

Consignment Sale

In abroad, the seller agent of exporter received the goods, arrange for their storage and sale without making any payment for them. And when the sale proceeds are received they are remitted to the exporters. D.

Bill of Collection

A documentary collection is an operation which a bank collects payment on behalf of seller by delivering documents to the buyer. The bank hands over the documents to the importer only on receiving from the letter the value of the goods as advised by the exporter. This payment method is sometimes designed as "Cash against Payment" (CAP) or "Document against Payments" (DP). 3.15.15 Export Financing Financing export constitutes an important part of a bank's activities. Exporters require financial services at two different stages of their export operation. 3.15.16 Pre-shipment Credit Pre-shipment Credit is given to finance the activities of an exporter prior to the actual shipment of the goods for export. The purpose of such credit is to meet working capital needs starting from the point purchasing of raw materials to final shipment of goods for export to foreign country. Pre-shipment credit is given for the following purposes: Cash for local procurement and meeting related expense. Procuring and processing of goods for export. Packing and transporting of goods for export. Payment of insurance premium. Inspection fees. An exporter can obtain credit facilities against lien on the irrevocable, confirmed and unrestricted export letter of credit in form other following: Export cash credit (hypothecation):

Under this arrangement, a credit is sanctioned against hypothecation of raw materials. Such facility is allowed to the first class exporters. As the bank has got no normally insists on the furnishing collateral security. Export credit (Pledge) Such credit facilities are allowed against pledge of exportable goods or raw materials. In this case cash credit facilities are extended against pledge of goods to be stored in the go down under banker's control by signing letter of pledge and other pledge documents. In the event of failure of the exporter to honor his commitment, the bank can sell the pledge merchandise for recovery the advance. Export cash credit against trust receipt Under this arrangement, credit is allowed against trust receipt and the exportable goods remain in the custody of the exporter but he is required to execute a stamped trust receipt in favor of the bank, wherein a declaration is made that goods purchased with financial assistance of the bank are held by him in order to utilize the credit for processing, and rendering the goods in exportable condition. Packing credit Packing credit is essentials a short terms advance granted by a bank to an exporter for assisting him to buy, process, manufacturing, pack and ship the goods. Back-to back letter of credit After receiving order from the importer, very frequently exporters face problems of scarcity of raw materials, because some raw materials are not available in the country. These have to be collected from abroad. In this case, exporter gives lien of export L/C to bank as security and opens an L/C against it for importing raw materials. This L/C is called Back-to-Back L/C. In such cases, the original credit should be irrevocable one. The terms and condition of both the credits should be substantially the same, •

Supplier's name of the back-to-back credit will be different.


The invoice value of the goods on the second credit is a little less than that of the first credit to give a profit to the beneficiary of the original credit. The validity of the second credit should also be a little earlier than that of the first credit leaving sufficient time for the beneficiary to ship the goods within the validity of the first credit.

Credit against red-clause letter of credit Under red-clause letter of credit, the opening bank authorized the Advising Bank /Negotiating Bank to make advance to the beneficiary prior to shipment to enable him to produce and store the exportable goods in anticipation of his effecting the shipment and submitting a bill tinder the L/C, as the L/C as the clause containing such authority is printed in red link, the L/C is called red clause and green clause respectively. Through it is not prohibited, yet very rare in Bangladesh. 3.15.17 Post-shipment Credit The need for post-shipment finance arises because exports that sell goods abroad have to wait for a long time before payment is received front buyers. The actual period of waiting depends on the payment terms. In the meantime, the exporter needs funds to carry on his normal export activities. Banks are the main source for the exporters to seek the finance. Banks generally finance the exporters at post-shipment stage on verifying of the creditworthiness and financial soundness of both the buyers and sellers. Post-shipment credit ordinary takes the following shape. Negotiation of documents under L/C. Purchase of Foreign Bill under DP and DA bills. Advance against Foreign Bill under collection. 3.15.18 Foreign Exchange Business performance of JBL: Import Business of Jamuna Bank: TK. In million Year Amount (Tk. in million)











35000 30312

30000 25000


20000 15000 10000 7924 5000 0

15458 12152

2004 2005 2006 2007 2008

Import Business of JBL

EXPORT Bangladesh exports a large quantity of goods and services to foreign households. Creation of wealth in any country depends on the expansion of production in the export sector in international trade. By increasing the production of the export sector Bangladesh can improve the employment level of such a highly populated country. Readymade textile garments (both knitted and woven), Jute, Jute-made products, frozen shrimps, tea are the main goods that Bangladeshi exporters export to foreign countries. Garments sector is the largest sector that exports the lion share of the country's export. Bangladesh exports most of its readymade garments products to U.S.A and European Community (EC) countries. Bangladesh exports about 40% of its readymade garments products to U.S.A. Most of the exporters who export through Jamuna Bank are readymade garment exporters. They open export Letter of Credit s here to export their goods, which they open against the import Letter of Credit s opened by their foreign importers. Export policies formulated by the Ministry of Commerce, GOB provide the overall guideline and incentives for promotion of exports in Bangladesh. Export policies also set out commodity-wise annual target. It has been decided to formulate these policies to cover a fiveyear period to make them contemporaneous with the five-year plans and to provide the policy regime. The export-oriented private sectors, through their representative bodies and chambers are consulted in the formulation of export policies and are also represented in the various export promotion bodies set up by the government. EXPORT PERFORMANCE OF JAMUNA BANK LIMITED TK. In million Year 2004 Amount (Tk. 4791 in million)

2005 6522

20000 18617 18000 16000 13990 14000 12000 11584 10000 8000 6522 6000 4791 4000 2000 0 2004 2005 2006 2007 2008

2006 11584

2007 13990

2008 18617

Export Business of JBL

Export procedures and document requirement: There are a number of formalities, which an exporter has to fulfill before and after shipment

of goods. These formalities or procedures are enumerated as follows, Import is the most important method of import -financing International trade take place between sellers and buyers located in different countries. The parties to a trade transaction are not always known to each other. Even if they are known to each other the seller may not have full confidence in the carried worthiness of the buyer or the buyer may not like to pay before he actually receives the goods. In letter of credit the bankers’ credit worthiness is substituted for the credit worthiness of the importer. Under a bank- cards letter of credit, the issuing bank gives a written undertaking on behalf of the buyer that the bank will honor the obligation of payment or expectance as the case may be on presentation of stipulated documents. As the request of the importers bank issue the letter of credit at a merging by the govt. instruction. Bail: does not generally issue the letter of credit less then 50% margin. JBL follow the margin prescribed by the government strictly. Import (2004 – 2008): Year 2004 2005 2006 2007 2008

TK. In million Growth Rate

Import 7924 12152 15458 22192 30312

53.36% 27.21% 43.56% 36.59%

The total import business handled by the Bank in 2008 was Tk. 30311.71 million compared to Tk. 22191.84 million in the preceding year registering a rise of Tk.8119.87 million being 36.59 percent. A sizeable L/C’s were also opened by the Bank in the year under review. The import items included industrial raw materials, mercenaries, consumer goods, fabrics, accessories, etc. Comparison of National and JBL’s Import Growth: Year 2004 2005 2006 2007 2008

National 722440 890220 1108170 1272210 1745698

Growth 23.22% 24.48% 14.80% 37.22%

JBL 7924 12152 15458 22192 30312


BDT in Million Contribution of JBL

53.36% 27.21% 43.56% 36.59%

1.36% 1.39% 1.74% 1.73%

Import Growth JBL Against National 60.00% 40.00% 20.00% 0.00% JBL

JBL National 2005




53.36% 27.21% 43.56% 36.59%

National 23.22% 24.48% 14.80% 37.22%

Here the trend of import of JBL is very much co-related with the national trend of import. During 2005, it has a very degree of correlation and after that the national growth rate fell slightly but JBL continued it growth from 2005 to 2007 and reached at the peak position 43.56% as compared to the national growth rate 14.80% in 2007.It is also observed that from the year 2001 to the year 2009 IBBL’s growth in import business is always well ahead of national growth. Yearly Export: BDT in Million. Growth Rate

Year 2004

Export 4791













The Bank handled export business worth TK. 18617.43 million in the year under report. In 2007 total export business handled by the bank was TK. 13990.33 million. Thus there was an increase of TK. 4627.10 million in export business handled by the Bank, being 33.07 percent over the preceding year. The major export item was Readymade Garments. Comparison of National and JBL’s Import Growth: Year 2004 2005 2006 2007

National 722440 890220 1108170 1272210

Growth 23.22% 24.48% 14.80%

JBL 4791 6522 11584 13990

Growth 77.61% 20.77% 33.07%

BDT in Million. Contribution of JBL 0.66% 0.73% 1.05% 1.10%







Export Growth of JBL Against National

80.00% 60.00% 40.00% JBL National

20.00% 0.00% JBL





77.61% 20.77% 33.07% 36.13%

National 23.22% 24.48% 14.80% 37.22% The trend of export of JBL is not much co-related with the national trend of export. During 2005, it has a very degree of correlation and after that the national growth rate and JBL’s growth rate is nearly same in 2006 & 2008.In export business, JBL’s growth shows a zigzag trend with a steady growth in 2005, But fall in 2006. After that in 2007 and 2008 it was in a stable position with the national export business. In spite of the challenges faced in 2008, JBL become one of the leader in import business ahead some of National Bank. Foreign Remittance (2004 – 2008): Year 2004 2005 2006 2007 2008

Foreign Remittance 1997 2147 2465 2943 3165

BDT in Million Growth Rate 7.51% 14.41% 19.39% 7.54%

In order to encourage wage earners for remitting funds through banking channel and ensure smooth facilities of remittance JBL is in constant efforts to make arrangements with reputed exchange house all over the world. The Bank’s such efforts are directed towards increase remittance business so as to enhance the inflow of foreign currency. With this end in view, JBL has already signed arrangement with Moneygram, Placid NK, Moneylink, Homelink, Raffles, Euro-Bangla, Romana,Money Service. The Bank is going to have accord with some other

reputed exchange house operating in different financial hubs of the world. For

providing supports to NRB’s a Remittance Cell has already been established in the Head Office under personal Banking division which is equipped with modern technology for

ensuing prompt delivery of Remittance service and replies to wage earners, and beneficiaries, queries. Total remittance business was TK. 3165 million and TK. 2943 million in 2007. Comparison of National and JBL’s Foreign Remittance Growth: Year 2004 2005 2006 2007 2008

National 212860 273043 377324 452640 621131


JBL 1997 2147 2465 2943 3165

28.27% 38.19% 19.96% 37.22%

Growth 7.51% 14.41% 19.39% 7.54%

Contribution of JBL 0.94% 0.79% 0.65% 0.65% 0.51%

Country Wise Remittance performance: In remittance business, the business volume is well diversified among all the branches. It is observed that most of the remittance of JBL has been coming from K.S.A over the years. Other major remittance source countries are UAE, Kuwait and UK with contribution of 16.50%, 11.47% and 18.40% respectively in 2008. BDT In million Year



2004 % of(total) 2005 % of(total) 2006 % of(total) 2007 % of(total) 2008 % of(total)

463.30 23.20 419.95 19.56 670.97 27.22 669.23 22.74 925.45 29.24

418.57 20.96 484.36 22.57 290.62 11.79 271.05 9.21 582.36 18.40

UAE 292.76 14.66 374.22 17.43 391.20 15.87 585.36 19.89 522.23 16.50

Kuwait 264.60 13.25 184.42 8.59 323.16 13.11 359.63 12.22 363.03 11.47

Malaysia USA 216.87 10.86 230.37 10.73 484.37 19.65 275.17 9.35 288.65 9.12

197.5 9.890 143.6 6.693 81.10 3.29 202.1 6.878 229.1 7.245

Singapore Others 76.68 3.84 104.99 4.89 63.10 2.56 233.38 7.93 159.20 5.03

66.7 3.34 204.82 9.54 160.47 6.51 345.80 11.75 94.95 3.00

Total 1997 100 2147 100 2465 100 2943 100 3165 100

Country Wise Remittance in 2008 3.00% 7.24%5.03% 9.12%


KSA UK UAE Kuwait Malaysia USA

11.47% 18.40%


Singapore Others

In 2008 the remittances was 3165 million in which KSA 29.24%, UK 18.40%, UAE 16.50%, Kuwait 11.47%, Malaysia 9.12%, USA 7.24%, Singapore 5.03%, And others 3.00%.We can see the remittances growth of JBL is increasing in every year. So the trend of remittance growth of JBL is upward moving. Chapter: 04 Problem Identification, Suggestions, Recommendations & Conclusion 4.1 Problem Identification •

First problem of foreign exchange is the credit management service process of the bank face tremendous pressure because of traditional marketing strategy and lack of proper guidance of the top level management about the customer service.

Continuous devaluation of money effects the foreign income of JBL.

Political instability effect the foreign Remittance of JBL Dhanmondi Branch.

Bargaining power of customer is increasing in foreign exchange dealings.

Lack of technological improvement in foreign exchange department.

4.2 Suggestions and Recommendations •

Prospectus always shows the features, benefit, cost, and other characteristics of the products. There are many customers who don't have any lending facilities, but want to get it.

Jamuna bank should use modem banking system, So that they can improve their customer satisfaction.

All the achievement of the bank must received due attention an all the media.

To sustain in the competition of private banking race, the bank should look for offering lucrative scheme and other customer service oriented facilities.

Jamuna Bank Ltd. should provide an effective training program for the junior level officer as though they can perform their task efficiently

Sometimes foreign exchange department is found so busy that they can't perform the entire task efficiently.

The down payment of loan can be reduced that must be increased client's number.

Lending policy should be liberalized and loan recovery must ensure.

4.3 Conclusion: Jamuna Bank Limited, the pioneer private Bank of the country has created a sense of mass participation through its diversified activities over the last 9 years. Their numbers of client's service recovers and supporters have been increase rapidly. For its diversified banking service, it has got a wide range of publicity and created a special image the banking area in the country. Jamuna Bank Ltd. has stared making profit from 2001 to still now. In recent year, a great number of reshuffled banking product offered by the different banks play a vital role in developing money market of Bangladesh. JBL, the first private bank of the country provide different kinds of loans to business firms, individuals and units of government to boost up its economic health. 1 sincerely believe that the success achieved so far by the JBL will continue in future too. References: 1.

Jamuna Bank Annual Report, 2008


Jamuna Bank Annual Report, 2004







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