Introduction: In today's fast growing world, business is more competitive. Banking is an essential industry. We often seek different credit lines such as Health line, Education line, Professionals line, Marriage line, Travel line, festival line, and some other retail loans. It also provides different types of incoming and outgoing deposits, checking account, ATM cards etc. Bank also provides financial advice on how and where to invest our savings. It also helps us in foreign trade. Banking industry is composed of thousand of firms worldwide. The role of Business Administration is increasing day by day. Every organization is concerned about the competency of their executive. To execute the duty and responsibility in efficient way and to cope with the technological advances in industrial and commercial development in this fast growing global environment, the ability and capability of the executive must be enhanced. The purpose of this program is to prepare students in such a manner so as to enable them to meet any challenging situation and to work with competence in the competitive business environment. Bank is the core of the modern economy. Banking industry is moving faster and changing rapidly by offering new services continuously and consolidating into much large and complex business adopting new technologies that seem to change faster than most of us can comprehend and facing a new and changing set of rules to regulate and supervise the banks that serve their citizen. Currently there are four state owned commercial banks are operating in Bangladesh. Agrani Bank Ltd. is one of the most successful nationalized commercial banks among them.
Profile of Agrani Bank: Agrani Bank Limited, a leading commercial bank with 867 outlets strategically located in almost all the commercial areas throughout Bangladesh, overseas Exchange Houses and hundreds of overseas Correspondents, came into being as a Public Limited Company on May 17, 2007 with a view to take over the business, assets, liabilities, rights and obligations of the Agrani Bank which emerged as a nationalized commercial bank in 1972 immediately after the emergence of Bangladesh as an independent state. Agrani Bank Limited started functioning as a going concern basis through a Vendors Agreement signed between the ministry of finance, Government of the People's Republic of Bangladesh on behalf of the former Agrani Bank and the Board of Directors of Agrani Bank Limited on November 15, 2007 with retrospective effect from 01 July, 2007. Agrani Bank Limited is governed by a Board of Directors consisting of 13(thirteen) members headed by a chairman. The Bank is headed by the Managing Director & Chief Executive Officer; Managing Director is assisted by Deputy Managing Directors and General Managers. The bank has 7 Circle offices, 30 Divisions in head office, 52 zonal offices and 867 branches including 10 corporate and 40 AD( authorized dealer) branches. The corporate and AD branches are authorized to deal in Foreign exchange business. The authorized capital of the Bank is Tk. 800 crore.
1.3 Objectives of the Study: The study has some objectives. They are •
The report is aimed at studying and understanding the various products offered by the Bank's each Department to its clients as well as the several activities carried out to achieve the departmental objectives.
To know about the influencing of money market in Agrani Bank.
To know about L/C document handling i.e. settlement procedure of L/C
To know about the import L/C opening procedure.
To know about the remit of funds.
The report also studies how AGRANI BANK LIMITED maintaining growth in overall banking activities.
This internship report also aims to analyze the performance of the branch as well as AGRANI BANK LIMITED as a whole.
Methodology: Certain methods and techniques were utilized to collect data for this report. Both primary and secondary sources were chosen as effective means of collecting data relevant for this report. Interview was the basic technique that was employed to collect primary data from people within the organization. For the procedure of different banking operations, I had observed the operations and worked with the officers at the same time. On the other hand, secondary sources were used to collect data regarding the company's performance. Publications and database within the organization helped me to gather data not only about the organization. In addition, further more the secondary sources of information are the different annual report kept in the banks.
Scope of the Study: This is a competitive world no doubt about that. The days to come would be more competitive. The present study which is assigned for in Agrani Bangla-Bank Limited is both if theoretical and practical one. It covers different aspects of Foreign Exchange activities and of a commercial bank's like AGRANI BANK LIMITED, Panthapath branch. In addition to above areas the study covers the overall banking in AGRANI BANK LIMITED. Without concept of general banking, other activities i.e. foreign trade is difficult to understand. CHAPTER TWO
BACKGROUND OF AGRANI BANK
2.1 Agrani Bank at a Glance: Agrani Bank Limited Type: 100% State Owned commercial Bank Founded: Dhaka, Bangladesh as a nationalized commercial bank (1972) Headquarters: Dilkusha Commercial Area, Dhaka, Bangladesh Circle Offices: 7 Division: 30
Zonal Offices: 52 Branches: 867 Corporate Offices: 7 AD Offices: 40 Industry: Banking Products: Deposits, ATM card, Online banking, Advances, Agrani
Unnayan Bond. Slogan
: Committed to serve the Nation
Agrani Bank Limited is a scheduled 100% state owned commercial bank. AGRANI BANK LIMITED
emerged as nationalized commercial bank in 1972 immediately after
the emergence of Bangladesh as an independent state. As part of the plan of the government’s long term financial sector reformation and modernization it has been incorporated as a public limited company on 17 may, 2007 and acquired all assets, liabilities, rights and obligations of the former Agrani Bank. This has offered the bank new opportunity and the possibility for shaping its’ future with greater autonomy and flexibility. The bank continued to grow steadily in all major areas. Deposits increased by 8 percent in 2008 and reached at Tk. 146.81 billion from Tk 135.92 billion in 2007. The banks profit continued to grow. The operating profit rose by 20 percent to Tk 6.33 billion in 2008 from Tk 5.26 billion in 2007, due to which capital shortfall has been reduced in 2007. AGRANI BANK LIMITED commenced formal operation on May17, 1972. Agrani Bank Limited has over 234 ATM’s installed all over Bangladesh, making it the largest network by a large margin. Banks that have signed agreements to use Agrani Bank Limited’s ATM network: •
Islami Bank BD Limited(IBBL)
Social Investment Bank Limited(SIBL)
Dhaka Bank Limited
AB Bank Limited
• United Commercial Bank Limited (UCBL) • Southeast Bank Limited (SEBL)
Vision of Agrani Bank Limited: To become a leading bank of Bangladesh operating at international level of efficiency, quality and customer service.
Mission of the bank: We will go operating ethically and fairly within the stringent framework set by our regulators. We will go fusing ideas and lessons from best practice to explore new avenues to stay stronger and more efficient and competitive as well. We will apply advance information and communication technology for the benefit of our customers and employees. We will invest to strengthen the future of the bank.
Motto of the Bank: To adopt and adapt modern approaches to stand supreme in the banking arena of Bangladsh.
Credo of the Bank: Believing in integrity, transparency and accountability, along with professional skill that will provide high standard of service to all customers and stakeholders.
Management: The management of the bank is vested in a 7-member board of directors appointed by the government. The managing director is the chief executive and he is assisted by deputy managing director, six general managers and other senior executives. The general managers are in charge of the bank's branches in seven administrative divisions of the country namely Dhaka, Chittagong, Rajshahi, Khulna, Sylhet, Barisal and Rangpur. The bank has 22 departments at its head office, including a training institute at Dhaka. Total number of employees of the bank was 13269. Agrani Bank had 246 branches, of which 37 were temporarily closed. The bank has now 867 branches of which 7 circle offices, 30 division, 52 zonal offices, 7 corporate offices and 40 authorized dealer offices.
Management Setup: SETUP Name Dr. Khondoker Bazlul Hoque Mr. Ranjit Kumar Chakraborty Mr. Shekhar Dutta Mr. Nagibul Islam Dipu Mr. Md. Ekramul Hakim Mr. Lian Kim Seng Mr. Nik Hisham Nik Md. Abul Bashar Md. Monir Uddin Md. Enamul Hoque Md.Omar Farooque Md. Khalilur Rahman Md. Khurshed Hossain Md. Sarwar Jahan Mrs.Aqiqunnessa Md. Mijanur Rabbi Md. Abdur Rashid A.S.M. Rafique
Designation Chairman Director Director Director Company Secretary Company Secretary Company Secretary CEO and Director General Manager General Manager General Manager General Manager General Manager Deputy General Manager Deputy General Manager Deputy General Manager Deputy General Manager Deputy General Manager
Functions: In addition to traditional deposit taking in various accounts and providing loans to almost all sectors of the economy, the bank offers many other services through its schemes of school banking, inland travelerâ€™s cheques, pension funds, industrial development bond and inland remittance. The bank operates some income generating and economic development projects such as the Productive Employment Project, Netrokona Integrated Agri-product and Water Management Project, IFAD Project for poverty Alleviation through
Intensification Project, National Micro Irrigation Development Project, Micro Entrepreneurship
Intensification Project. The bank participates actively in foreign exchange business including overseas remittance services. The total volume of foreign exchange business handled by the bank in servicing imports and exports and remittances during 2008-2009
amounted to Tk 211750 million compared to only Tk 310 million in 1972-73. At present, the bank has correspondent relationship with 903 foreign banks/bank offices throughout the world. The company has subsidiaries in Singapore and Malaysia.
Financial Highlight of Agrani Bank Limited: Financial highlights of AGRANI BANK LIMITED for last two years are given below: Highlights on the overall activities of the Bank for the years 2009 and 2008 Serial No. 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 19 18 17 18 19 20 21 22
Particulars Authorized capital Paid up capital Reserve Fund Retained Profit Total Equity Total Deposit Total Loans and advances Interest Suspense and Penal interest Provisions for Loans and Advances Net Loans and Advances Investments Export business Import Business Remittances Guarantee Business Total Income Total Expenditure Fixed Assets Total Assets Net profit after provision, amortization and tax Operating Profit Returning on Equity (ROE) Return on asset (ROA) Net interest margin in percent Earnings per share
(In million) 8000 2480 160 700 3340 135920 118490 9500 13900 95090 21900 48920 113430 42810 1050 13680 8420 2220 186280 860 5260 29.55% .92% 3.69% 34.56%
(In million) 8000 2480 740 2770 6420 146810 113360 6720 11530 95110 29330 49540 109520 52690 1120 14980 8650 2110 187320 2650 6330 41.28% 1.41% 4.24% 106.52%
Products of Agrani Bank Limited: •
Deposits, ATM card, Online banking
Agrani Bank Shilpa Unnayan Bond
Advances: General Credit, SME, Industrial Credit, Rural Credit, Export Finance Import Finance
Other Banking Product.
ATM Card: Account Holders of Agrani Bank Limited can now avoid the risk of carrying cash by subscribing to our Automated Teller Machine (ATM) Service. ATM Card Holders can draw cash from any ATM location and also enjoy other services like paying variety utility bills like those of BTTB, AKTEL and Grameen Phone through ATM service. The service is open round the clock in all the days including holidays. The ATM cardholder can enquire about the balance of his/her ATM Account from any outlet at any moment. Cash withdrawal of TK. 500, to TK 10,000 can be made from ATMs. Maximum cash withdrawal limit is TK 10,000 at a time and TK 20,000 in a day. Maximum 10 transactions can be made in a day. Agrani Bank Limited's ATM Account Holders can enjoy the services from the following outlets under a "shared network arrangement" with other Banks.
Online Banking: AGRANI BANK LIMITED truly On-Line Banking is a fully automated real-time, anywhere, any way banking service which covers: 24 hours a day and 365 days a year uninterrupted banking services. AGRANI BANK LIMITED has selected all the necessary items for truly on-line Banking. The truly on-line banking will officially be inaugurated on 3rd January, 2005. In this unique real-time, any-where, any-way banking program of AGRANI BANK LIMITED, the valued customers and trusted partners will enjoy a full range of modern banking services at desired speed, absolute accuracy and competitive Price. AGRANI BANK LIMITED is fully aware of the confidentiality and security of your personal and account's information stored into our computer systems. The confidentiality and security of your data is achieved by establishing four layers of security - at application, network, database and operating system levels.
Agrani Bank Shilpa Unnayan Bond: Agrani Bank Shilpa Unnayan Bonds of TK 50,000 TK 100,000 & TK 500,000
denominations were introduced in July 1999 with a view to accumulating a fund of Taka 500 crore to finance industrialization. Purchaser of this Bond can separately withdraw the accumulated interest of six months. The purchaser enjoys a lot of Tax benefits. Agrani Bank Shilpa Unnayan Bond for 5 years
Agrani Bank Shilpa Unnayan Bond for 7 years
General Credit: Agrani Bank Limited delivers credit facilities to any businessman or trader engaged in any commercial activity having productive purposes that should contribute to economic growth of the country. Loan pricing system is customer friendly and prime customers enjoy rebates in repayment of loans.
Industrial Credit: The Bank extends loans to big entrepreneurs and also to small and medium industrial ventures to boost up overall investment in the industrial sector of the country. The Bank offers financing on easy terms to the following "Thrust Sectors": i.
Computer Software & IT
Export oriented non- traditional agro product
Export oriented leather goods
Oil & Gas
Jewelry and Diamond cutting & polishing
Silk worm cultivation & silk industry
Agrani Bank Ltd. provides credits also to the following sectors:
Food & allied
Rural Credit: After the nationalization in 1972 and the Bank's involvement in financing agricultural sector in 1977, Agrani Bank Limited has been reinforcing efforts of the government to meet its strategic objective of increasing production, output and employment through undertaking different agricultural credit programmes / projects. Some of these programmes / projects are outlined below for understanding the role of Agrani Bank Limited in increasing agricultural production & poverty alleviations: •
Crop loan programme
Crop Diversification Project:
Shrimp Culture Programme ( General):
Semi -intensive shrimp culture programme:
Fisheries Financing Programme
Credit for Irrigation Equipment:
Agricultural Equipment Project:
Credit Scheme for Bananas Cultivation:
Credit to Salt Growers:
Daridra Bimochon Karmasuchi (DABIK)
Productive Employment Project (PEP):
Marginal and Small Farm Systems Crop Intensification Project ( MSFSCIP ) -IFAD Loan no.-194-BD
Swanirvar Credit Programme:
Financing in small scale cottage industries:
Rural Finance Project ( RFP)
Shoshya Gudam Rin Prokalpa :
Small Enterprises Development Project (SEDP, BGD-041):
Self Employment Programme for the Unemployed Youth
Financing NGOs for On-lending to rural poor
Netrakona Integrated Agricultural Production and Water Management Project
Credit for Rural Transport
Agrani Bank Ltd. Foreign Exchange Corporate Branch: BRANCH Foreign Exchange Corporate is located at DIT Avenue, a commercial area in Motijheel. All kinds of banking operations are done by Agrani Bank Ltd, Foreign Exchange Corporate Branch. General banking, foreign Exchange and credit departments provide high class services to their clients. Agrani Bank Ltd. Foreign Exchange Corporate Branch is one of the highest profits earning branch of Foreign Exchange Corporate area.
Performance of Foreign Exchange Corporate Branch:
The financial performance from 2008 to 2009 of the Agrani Bank Ltd. Foreign Exchange Corporate branch is given in the following charts: Operating Profit: Foreign Exchange Corporate Branch earns TK. 5597000 in January, 2008 and TK. 10912000 in January, 2009. All the details are given below: YEAR
PROFIT 08 (TK.) PROFIT 09 (TK.)
Figure in Thousand
Above information are shown below in chart Profit 08 Profit 09
ď ą Profit 09 6%
6% 9% 4%
Current Deposit: Current Deposit from 2008 to 2009 is given in the following table: Year Jan Feb March April May June July Aug Sep Oct Nov Dec
CD 2008 92.56 99.11 96.22 106.73 117.16 110.31 77.95 95.33 125.22 92.29 87.51 151.15
CD 2009 119.76 115.24 117.78 145.77 129.45 225.11 209.58 215.73 229.99 190.29 151.28 134.59
Above information are shown below in chart:
400 350 300 250
150 100 50 e c D
o v N
e b M a rc h A p ri l M a y J u n e
0 J a
Amounts in Tk.
Saving Deposit: Saving Deposit from 2008 to 2009 are given in the following table: Year Jan Feb March April May June July Aug Sep Oct Nov Dec
SD 2008 104.27 108.83 103.48 109.5 112.1 127.25 120.97 118.26 123.92 125.65 136.42 146.95
SD 2009 175.07 152.02 155.55 170.11 180.95 207.3 194.22 218.62 209.62 251.93 229.11 247.33
Above information are shown below in chart
300 250 200 Series1
e c D
o v N
e p S
u g A
u ly J
u n e J
a y M
p ri A
F e b M a rc h
In the above chart it is observed that Savings deposit increased in 2009 as compared to 2008.
Short Term Deposit:
Short Term Deposit from 2008 to 2009 are given in the following table: Year Jan Feb March
Std 2008 354.89 441.22 392.36
Std 2009 397 403.91 462.25
Overture: In international trade, because of distance involved, buyers and sellers do not know each other. Besides both these parties are subject to rules and regulations of their respective countries it is difficult for them to appreciate each other integrity and creditworthiness, and apart from this, it is also difficult to know various regulations prevailing in their respective countries regarding imports and exports. Thus the buyer
wants to be assured of goods and seller to be assured of payments, Commercial Banks, therefore assure these things to happen simultaneously by opening Letter of Credit guaranteeing payment to seller and goods to buyer. By opening a letter of credit on behalf of' a seller, commercial bank undertakes to make payment to a seller subject to submission of documents drawn in strict compliance with letter of credit terms giving title to goods to the buyer. Thus, letter of credit is a conditional guarantee.
Different Modes of International Trade Payments: In international trade methods of payment could take any of the following forms: I. Cash in advance 1. Cash in advance 2. Open account 3. Collection 4. Documentary credit The first three are the traditional trade payment methods and under documentary credit, the bank assures payment subject to the completion of documentary condition. Cash in Advance:
Under this system the buyer puts funds at the disposal of the seller prior to shipment of goods and provision of services, i.e. this may done by cheque, draft or TT favoring the exporter. Open Account: An open account method is an arrangement between the buyer and whereby the goods are manufactured and delivered before payment is made. Unlike cash in advance method, the open account payment is obviously more advantageous to the buyer as he pays for the goods only after receiving them and satisfying him about delivery time, quantity and quality. Collection: Collection is a method under which goods are shipped and the bill of exchange (draft)
is drawn by the Seller on the buyer. The documents are sent to the bank with clear instruction for collection through one of its correspondent bank located in the buyer's country. The documents are to be delivered only after the payment has been made or draft is accepted. There are two examples of collection method are D/P and D/A bills. Documents against Payment (D/P Bill): This is one of the most widely used methods of trade payment. The seller ship the goods and draw a sight bill of exchange (draft) on the buyer and the is presented to the drawee (buyer or importer) along with shipping documents for payment. Drawee pays the draft and takes delivery of documents. Documents against Acceptance (D/A 13111): In this method usance bill of exchange is drawn on the buyer by the seller which is presented to the drawee for acceptance by a bank on his own country (collecting bank). Drawee accepts draft and fix up a date of payment (date of maturity). The collection system is less risky for the seller as compared to open account trading, but the seller is still dependent on the buyer to take delivery of documents and pay or accept the Draft(s). Clean collection: Another variant of collection is clean collection under which the seller draws only a draft on the buyer for the value of goods/services and presents the draft to his bank which sends the draft along with a collection letter to a correspondent bank usually in the buyer's Country. Documentary Credit: In international trade the seller wants to make sure that the buyer is able to pay in time once the goods have been shipped and that risk of non-payment is minimized. He therefore, wants to find out bow a third party i.e. the bank can help him in the practical arrangements for these transactions. Similarly, the buyer is interested that he gets possession of goods before he pays for them and he is able to make sure that the goods are exactly those he ordered.
Definition of Letter of Credit:
Letter of credit (L/C) can be defined as a Credit Contract where the buyer's bank is committed (on behalf of the buyer) to place an agreed amount of money at the seller's disposal under some agreed conditions. Since the agreed conditions include, amongst other things, the presentation of some specified documents, the letter of credit is called Documentary Letter of Credit.
Different Types of Letter of Credit: Letter of Credit is an important instrument in the business world. On the basis of different criteria it may classify in the following way. Based on Revocability: •
Confirmed Irrevocable Credit
Revocable Credit: This type of credit can be revoked or cancel at any time without the constant of, or notice of the beneficiary. As per Article of UCPDC600 "A revocable credit may be define Revocable credit gives the buyer maximum flexible, as it can be amended or cancelled without prior notice to the seller up to the moment of payment by the issuing bank at which the issuing bank has made the credit available. In modem banking, the use of revocable credit is not widely spread. Irrevocable Credit: The irrevocable credit is a commonly used type of documentary credit. The Credit which cannot be revoked varied or changed/amended without the consent of all parties-seller (beneficiary), Issuing Bank and Confirming Bank (in case of confirmed L/C). As per UCPDC 600, an Irrevocable Credit constitutes a definite undertaking of the issuing bank, provided that the terms and conditions of the credit are complied with. Irrevocable Credit may be confirmed or unconfirmed. Confirmed credit gives the seller double assurance of payment. Under confirmed credit, the seller has not only get the undertaking of issuing bank; but also enjoy the protection/assurance from a bank in his own country with definite undertaking for payment and acceptance. On the Basis of payment Criteria:
• Sight payment L/C • Deferred Payment L/C Sight Payment L/C: This type of L/C is based upon payment on presentation of documents. When the L/C bears a clause of payment at sight then the L/C is called sight payment L/C. It is settle by sight bill- a bill which is payable on demand or at sight or on presentation and when no time for payment is specified in it. Sight bill also called D.P. Bill i.e. Document against Payment. Deferred Payment L/C: When the payment of L/C is to be made after a specified period of time of shipment then the L/C is called deferred payment L/C. A clause of payment, i.e. payment at 90 days sight, must be included on L/C. It is settled by a time bill which is payment at determined future time. It is also term as D.A Bill i.e. Document against Acceptance. In D.A Bill. The documents of the bill are delivered to the drawee of the bill on acceptance and payment is made afterwards per terms of the bill by the drawee. On The Basis of Destination Criteria: •
Inland L/C: When the L/C applicant & beneficiary from same country and goods handled with in country then the L/C is called Inland L/C. Foreign L/C: Parties of L/C specially applicant and beneficiary of two different countries deals each other through L/C, this type of L/C is called foreign L/C. Revolving Credit: A Revolving Credit is one where, under the terms and conditions thereof, the amount of the Credit is renewed or reinstated without specific amendment to the credit being needed. Revolving credit may be revocable or irrevocable. Transferable Credit:
A transferable is one which can be transferred by the original beneficiary to one or more parties. In transferable credit, the beneficiary becomes the middlemen and transferee becomes the actual supplier of the goods. It is normally used when the first beneficiary does not Supply the merchandise himself, but is a middleman and thus wishes to transfer part, or all, of his sights and obligations to the actual supplier(s) as second beneficiary (s). This type of credit can only be transferred once. Back to Back Credit: One credit backs by another. It may so happen that the beneficiary/seller of an L/C is unable to supply the goods direct as specified in the Credit as a result of which he needs to purchase the same goods and make payment to another supplier by opening a second letter of credit. In this case, the second credit called a â€œBack to Back Credit". Under Back to Back concept, the mother L/C stands as security for opening of second credit, i.e. Back to Back Credit. Back to Back credit are opened in conformity to the terms and conditions as stipulated in mother credit except the price of the goods, shipment period and validity of L/C . In Back to Back credit the negotiated price is quoted. Red clause Credit: A Red Clause Credit is a credit with special clause incorporated into it that authorizes the advising bank or conforming bank to make advances to the beneficiary before presentation of documents. The clause is incorporated at the specific request of the applicant, and the wording is dependent upon his requirements. It is so called because the clause was originally written in red ink to draw attention to the unique nature of this credit. Under the above mentioned clause, the opening bank is liable for the pre-shipment advances made by the negotiated bank, in case the beneficiary fails to repay or deliver the documents for negotiation. Green Clause Credit: A Green Clause Credit is a credit with a special clause incorporated into it that which not only authorizes the advising bank to grant pre-shipment advances but also storage cost for storing the goods prior to shipment. It is useful in situation where shipping space is not readily available, i.e. some African countries. It is so called because the clause was written in green ink to draw attention to the unique nature of this Credit. At
present this type of Credit is not in use. Standby Letter of Credit: The standby letter of credit is very similar in nature to guarantee. The beneficiary can claim payment in the event that the principal does not comply with its obligations to the beneficiary. Payment can usually be realized against presentation of a sight draft and written statement that the principal has failed to fulfill his obligations.
Parties to a Letter of Credit: There are a number of parties involved in an L/C and the rights & obligations of the different involved parties also differ from each other. The involved parties can be named below • Importer/buyer/applicant; • Opening/issuing bank; • Exporter/seller/beneficiary; • Advising /notifying bank; • Confirming bank; • Negotiating bank; • Paying/reimbursing bank; • The transferring bank, if any. Importer/Buyer is the people who request/instructs the opening bank to open an L/C. He is also called opener or applicant of the credit. Opening/Issuing Bank is the bank which opens /issues an L/C on behalf of the importer. It is also called the importer's /buyer's bank. Exporter/Seller/Beneficiary is the party in whose favor the L/C is established. Advising/Notifying Bank is the bank through which the L/C is advised to the exporter. It is a bank situated in the exporting country and it may be a branch of the opening bank or a correspondent bank. Confirming Bank is a bank which adds its confirmation to the credit and it is done at the request of the issuing bank. The confirming bank may or may not be the advising bank. Negotiating Bank is the bank which negotiates the bill and pays the amount to the
beneficiary. It has to carefully scrutinize the documentary credit before negotiation in order to see whether the documents apparently are in order or not. The advising bank and negotiating bank may or may not be one and the same. Sometimes it can also be the confirming bank. Paying/Reimbursing Bank is the bank or whom the bill will be drawn. It is nominated in the credit to make payments against stipulated documents complying with the terms and conditions of the credit. It may be or may not be the issuing bank. Transferring Bank is the bank, which will transfer the L/C, being instructed by the original beneficiary.
3.6 Operation of Documentary Letter of Credit: LETTER OF CREDIT The following five major steps are involved in the operation of a documentary letter of credit: •
• Amendment (if necessary) •
• Settlement Issuing a Letter of Credit: Before issuing an L/C, the buyer and seller located in different countries, concludes `sales contract' providing for payment by documentary credit. As per requirement of the seller, the buyer then instructs the bank- to issue a credit in favor of seller (beneficiary). Instruction / Application for issuing a credit should be made by the buyer (importer) in the issuing bank's standard form. Advising a Letter of Credit: Advising through a bank is a proof of apparent authenticity of the credit to the seller. The process of advising a credit consists of forwarding the original credit to the beneficiary to whom it is addressed. Before forwarding, the advising bank has to verify the signature(s) of the officer(s) of the opening bank and insure that the terms and conditions of the credit are not in violation of the existing exchange control regulations and other regulations relating to export.
Amendment of Credit: Parties involved in an L/C, particularly the seller and the buyer can not always satisfy the terms and conditions in full as expected due to some obvious and genuine reasons. In such a situation, the credit should be amended. In case of revocable credit, it can be amended or canceled by the issuing bank at any time and without prior notice to the beneficiary. But in case of irrevocable credit, it can neither be amended nor canceled without the agreement of the issuing bank, the confirming bank (if any) and the beneficiary. UCPDC 600 regarding amendment to a Credit: Article 10(a): Except as otherwise provided by article 38, a credit can neither be amended nor cancelled without the arrangement of the issuing bank, the confirming bank, if any, and the beneficiary. Article 10(b): An issuing bank is irrevocably bound by an amendment as of the time it issues the amendment. A confirming bank may extend its confirmation to an amendment and it will be irrevocably bound as of the time it advises the amendment. A confirming may, however, choose to advise an amendment without extending its confirmation and, if so, it must the issuing bank without delay and inform the beneficiary in its advice. Article 10 (c): The terms and conditions of the original credit (or a credit incorporating previously accepted amendments) will remain in force for the beneficiary until the beneficiary communicates its acceptance of the amendment to the bank that advises such amendment. The beneficiary should give notification of acceptance or rejection of an amendment. If the beneficiary fails to give such notification, a presentation that complies with the credit and to any acceptance by the beneficiary of such amendment(s). As of that moment the credit will be amended. Article 10(e): Partial acceptance of an amendment is not allowed and will be deemed to be notification of rejection of the amendment. Presentation of Documents: The seller being satisfied with the terms and conditions of the credit proceeds to
dispatch the required goods to the buyer and after that, has to present the documents evidencing dispatching of goods to the negotiating bank on or before the stipulated expiry date of .he credit. After receiving all the documents, the negotiating bank then checks the documents against the credit. If the documents are found if order, the bank will pay, accept the documents and if they are found as per credit requirements, either (a) Effects payments, or (b) Reimburses in the pre-agreed manner Settlement: Settlement means fulfilling the commitment of issuing bank in regard to effecting payment subject to satisfying the credit terms fully. This settlement may be done under three separate arrangements as stipulated in the credit. These are: (a) Settlement by Payment: The seller presents the documents to the paying bank and the bank scrutinizes the documents. 1f satisfied, the paying bank makes payment to the beneficiary and in case this bank is other than the issuing bank, then sends the documents to the issuing bank. If the issuing bank is satisfies with the requirements, payment is obtained by the paying bank from the issuing bank. (b) Settlement by Acceptance: Under this arrangement, the seller submits the documents evidencing the shipment to the accepting bank accompanied by the draft drawn on the bank (where credit is available) as the specified tenor. After being satisfied with the documents, the bank accepts the documents and the draft and if it is a bank other than the issuing bank, then sends the documents to the issuing bank stating that it has accepted the draft and at maturity the reimbursement will be obtained in the pre-agreed manner. (c) Settlement by Negotiation: The settlement procedure starts with the submission of documents by the seller to the negotiating bank accompanied by a draft drawn on the buyer or any other drawee, at sight or at a tenor, as specified in the credit. After scrutinizing that the documents meet the credit requirements, the bank may negotiate the draft. This bank, if other than the issuing bank, then sends the documents and the draft to the issuing bank. As usual, reimbursement will be obtained in the pre-agreed manner.
Agency Arrangement: Agency arrangement is the establishment of correspondent relationship between two
separate banks to canalized transitions between the designated banks for promoting mutually beneficial business relationship. Establishing Agency Arrangements This is usually done by letter. The first letter can be initiated by the bank based on the need to have a relationship with an institutional in a particular country. Likewise Agrani bangle-Bank Limited approached by another bank to route their business in Bangladesh. Where there is an already existing arrangement, AGRANI BANK LIMITED may have to formalize relations through exchange of letters. The gist of the letter should simply state that you want to formalize/set up agency arrangements with the bank concerned, list the branches to be included, give full mailing address, advise whose test keys are to be used give details of main FC accounts with names of correspondent Banks where account is held, type of arrangements (L/C advising, guarantees etc.). On being formally approached by a bank for the counter party in turn obtains a list of correspondents of that bank in the region of operation. Then an analysis is done on the basis of latest Annual Report/Balance Sheet of the intending correspondent with regard to its financial position (capital, assets and profitability). The creditability is also judged by obtaining confidential opinion/report through its foreign correspondent or through the correspondent of the bank. If the informationâ€™s mentioned above are satisfactory, agency arrangement/ correspondent relationship is established between the two banks with an exchange of keys, authorized signatory booklet BK.E (Bilateral Key Exchange). Test Keys AGRANI BANK LIMITED has their own test keys for their branches, and if they wish to issue these to correspondent banks/branches, it can also be so generated. Several correspondent banks are using our test keys. Usually however, AGRANI BANK LIMITED advises correspondent banks that AGRANI BANK LIMITED desires to use the correspondent bank's test key and ask them to send the test to AGRANI BANK LIMITED head office or send them
directly to UBE3L branches at mailing address provided. With the establishment of SWIFT the existing test key are being replaced by BKE with correspondent banks.
Foreign Currency Accounts of Authorized Dealer: In order to be executing foreign exchange transaction, the authorized dealers in foreign exchange maintain branches, normally in current accounts, in the form of foreign currencies with the overseas branches/correspondent banks. The foreign currency account maintained by the authorized dealers in foreign exchange with the foreign banks/correspondents is called Nostro Accounts. When we talk about `Nostro', we should also be familiar with the relevant terms 'Vostro' and 'Loro'. All are Italian words which literally mean `our' `your' and `their' respectively. Current accounts of foreign banks with their correspondents in the latter's currency is called Vostro Accounts. What is Nostro account for a bank in particular country is a Vostro Account for the bank abroad maintaining the account. So taka account of an overseas correspondent of a bank in Bangladesh is Vostro Account for the latter which is Nostro Account for the former. Loro accounts are (other banks) current account which the banks maintain with banks abroad in behalf of their clients. These may be inter-bank entries, whereby a transfer in foreign currency is made by one bank to another for an account of third bank. For example, Standard Chartered Bank New York may remit to Agrani Bank Limited, Dhaka for the credit to the account of American express bank maintained with them. Therefore the foreign currency account maintained by our correspondent abroad in the name of third party may be termed as Loro Accounts, meaning their account with you. However the most important accounts for the authorized dealers in foreign exchange in Bangladesh are Nostro Accounts. They keep their balances in these Nostro Accounts for executing day by day transaction.
Book Keeping and Reconciliation of Nostro Account:
For the purpose of book-keeping & reconciliation of accounts of the banks marinating Nostro Accounts abroad, it is required to maintained proforma account in the general ledger under the heading of each foreign correspondent. The proforma account is also termed as SHADOW account or MIRROR account as the entries made in the books of the foreign correspondent are reflected in the proforma account of the bank.
Reporting to Bangladesh Bank Authorized dealer in Bangladesh are required to exchange control department. Bangladesh Bank, head office, Dhaka within I S days of opening of the 'Nostro Account with the following particulars. •
Name of the currency in which the account is opened
Name and address of the foreign bank/correspondent with whom the account is opened
Date of opening of the account.
CHAPTER FOUR FOREIGN
EXCHANGE DIVISION OF AGRANI BANK LIMITED LITERATURE REVIEW Foreign Exchange: Foreign exchange is the mechanism by which the currency of one country gets converted into the currency to another country. Foreign Currency is any currency other than domestic currency. The term, foreign exchange has different connotations in different contexts. Sometimes it is referred to as the process of conversion of one currency into another, sometimes as the process of transferring money from one
country to another. In Bangladesh it has a legal definition too. In terms of section 2(u) of the F.E.R Act, 1947, as adapted in Bangladesh, 'foreign exchange' means foreign currency and includes instruments expressed in foreign exchange, all deposits credits. and balances payable in 4'oreian currency as well as foreign currency instruments such as draft, tt, bills o` exchange, promissory note and letter of credit payable if, any foreign currency. Bangladesh earns foreign exchange mainly through export of' goods and services. Foreign exchange business has been identified as one of the key areas!’ or development of 'the bank's business. Foreign take place in following three ways in AGRANI BANK LIMITED: •
Import: Imports are purchase of foreign goods or services by Consumers, Firms, Companies, Government, Semi government Organization in Bangladesh. Import Procedures/ Formalities (Steps Involved) in AGRANI BANK LIMITED T o carry on the business of import by AGRANI BANK LIMITED, the first thing one need is registration with the licensing authority of the area. 'To get this registration the interested person/institution submits, the application along with the following papers/documents directly to the Chief Controller of Imports and Exports or respective zonal offices of CCI & E. •
Income tax registration certificate.
Certificate from Chamber of Commerce and Industry or Registered Trade Association.
Bank solvency certificate
Copy of trade license.
• And any other document if required by CCI & E. On receiving application the respective C ('1 & F offices will scrutinize the documents and conduct physical verification (if' feel necessary) and issue Demand Notice to the
prospective importers to Furnish the following papers/documents through Agrani Bangla Bank Limited: •
Original copy of Treasury chalan deposited as IRC fees.
Affidavit from 1st class Magistrate.
2 passport size photograph.
Partnership deed in case of partnership firms.
Certificate of Registration, Memorandum and Articles of Association in case of limited company.
AGRANI BANK LIMITED will scrutinize the papers/ documents and verify the signature of the applicant. After securitization and verification, AGRANI BANK LIMITED, forward the same to the respective CCI & E office with, forwarding 'Schedule in duplicate through bank's representative. The CCI & E office wi1l acknowledge on duplicate copy of the forwarding schedule and return back the same to the bank representative. Agrani Bank Limited Supply the Following Documents/Papers •
Letter of-credit application form
Letter of credit authorization form.
Charge documents paper.
With the above essentials bank will do the following: •
Landed cost analysis
Present market position of the goods to be imported
Credit information bureau report from Bangladesh Bank
The L/C Application for Support:
To open a L/C the application must submit an application to the bank's printed format called L/C application form. The application form must be completed and filled in and signed by the authorized person of the importer giving the following details: •
Full name and address of the importer and exporter. •
L/C value for USD, which must not exceed the LCA value.
Brief description of the goods with its unit price, quantity, quality etc.
Origin of the goods, port of destination, port of loading etc.
Mode of advising L/C.
Opening of L/C under UCPDC published no 600 ICC revisions 2007.
Mode of shipment.
Insurance cover note.
Whether shipment/ Transshipment allowed.
Last date of shipment and negotiation.
Special instruction if any.
Lodgment of Documents Lodgment means retirement of funds. Usually payment is made within seven days after the documents have been received. If the payment is become deferred, the negotiations`, bank may claim interest for making delay. Lodgment constitute the to followings. Requisition for the foreign currency: For arranging necessary fund for payment, a requisition is sent to the International Department. Preparing sale memo: A sale memo is made at B.C rate to the customer. As the T.T & O.D rate is paid to the ID, the difference between these two rates is exchange trading. Finally, an Inter Branch Exchange Trading Credit Advice is sent to ID). Creation of PAD liability: AGRANI BANK LIMITED lodges the converted the bill amount at BC (Bills (-collection) rate prevailing on the date of lodgment to PAD A/C and an IBETCA prepared at the converted bill amount at T.T clear rate is sent to ID. PAD Al:' should be adjusted within 21 days.
Payment instruction: Payment instruction is given to the reimbursement bank to debit the issuing banks. NOSTRO A/C to make payment to the negotiating bank. Payment Intimation to the Negotiating Bank: A Intimation is sent negotiating batik ensuring that payment has been made. Accounting Treatment Then the telex charge, service charge, and interest (if any) are debited to the PAD A/C. Income A/C Cr. (Service charge& Telex charge) Shipping documents is then stamped with PAD Number & entered in the PAD Register Intimation to the applicant As soon as above formalities arc completed the importers are served with PAD bill intimations for retirement of concerned import document. A letter of intimation regarding receipt of the documents should be sent to the applicant with a request to hake delivery of the documents on settlement of all dues against it. Retirement of Documents: On intimation the importer approaches with a letter for retirement of' the document against full payment with up to date interest and charges payable. AGRANI BANK LIMITED prepares cost memo in printed form on account of the concerned party giving details head of charges payable. L/C Practiced In Agrani Bank Limited Foreign Exchange Corporate Branch Opening of Letter of 'Credit: At the request (.)!' the applicant (importer), AGRANI BANK LIMITED open an L/C in favor of' the Beneficiary (exporter). The bank which open or issue L/C is called L/C opening or issuing Bank.\
Required Information: Issuing an L/C hank required following information: â€˘
Full particulars of the Bank account of having same bank.
Name of business (proprietorship, partnership or limited company).
Historical background of' the individual or institution. 4. Amount of limit required.
Modes of payment.
Statement of assets & liabilities.
Trade license & import registration number with renewal date.
Balance of fund in bank account.
Insurance cover note.
Documents/Papers Supplied by Bank: •
Bank supply the following documents/ papers:
Letter of Credit/ documentary credit application form.
Letter of credit authorization form.
Continuation of documentary credit application.
Undertaking for fluctuation of foreign currency.
Undertaking for waiver of non-delivery clause in the insurance cover note.
Undertaking for war.
Import form (IMP form).
Charge documents paper. • Promissory note • Letter of arrangement • Letter of disbursement of loan • Letter of revival • Letter Of continuity. • Letter of guarantee. • General letter of TR • Letter of hypothecation. • Letter of supplementary agreement.
Application Checking: Before opening an L/C, the issuing bank must check the following: • L/C application properly stamped_ signature verified and margin approved and properly retained. • Indent/Proforma Invoice signed by the Importer and Indentor/Supplier. • Ensure that the relevant particulars of 1,/C application correspond with those stipulated in /Proforma invoice. • Validity of I.CA entitlements of goods, amount etc. confirms to the L/C application. • Conversion and rate of exchange correctly applied. • Charges like commission, F.C.C., postage, telex charge, if any, recovered. With the above essentials bank does the followings: •
Landed cost analysis.
Present market position of the goods to be imported
Credit Information Bureau report from Bangladesh Bank.
Collect credit report about beneficiary.
Credit Report about Beneficiary: Credit report is a confidential report about the exporter that is collected from information Services Company or other reliable sources such as foreign correspondent bank. It is required before L/C opening. It is collected for confirmation about honesty and reliability of exporter. A typical credit report includes the company's name & address, starting year, history, authorized capital and paid up capital, financial strength and composite appraisal. The financial strength is an indication of the tangible net worth and the composite appraisal condition is linked to the level of risk and , is an overall evaluation of credit worthiness. Composite appraisal takes into the account the financial condition and several factors such as trade reference history, legal structure, management experience and any adverse listing. Contents of a Letter of Credit: A Letter of Credit generally contains the followings: • Date of' Issue
• Letter of-Credit No. • Amount (generally in USD) • Name of issuing , Bank • Name of Advising Bank Name & Address of Applicant • Name & Address of Beneficiary • Last date of shipment. • Date of Expire • Name of the port of beneficiary. • Designation • Country of 4?rigin • Description of Merchandise. • Terms and condition • Addition terms and conditions • Reimbursement. Copies Requires of a Letter of Credit: Letter of Credit 'is an important a document to all related party and authority. So issuing bank required is generate 7 copies of a foreign L/C and 5 copies of a(ocal L/C. These are the following: • Copy, for Advising Bank • Copy for Beneficiary • Copy for Applicant • Copy for Head Office • Copy for PSI (Pre-shipment Inspection Company) • Copy for CCI & E (Chief Controller of import & Export) • Copy for own record. In case of inland L/C copses of PSI & CCI & [: are not required.] Advising Letter of Credit: Advising through a bank is a proof of apparent authenticity of the credit to the seller. The process of advising a credit consists of forwarding the original credit to the
beneficiary to whom it is addressed. Before forwarding, the advising bank has to verify the signature(s) of the officer(s) of the opening bank and insure that terms and conditions of the credit are not in violation of the existing exchange control regulations and other regulations relation to export. In such act of -advising, does not undertake any liable. Amendments to Letter of Credit: After issuance and advising a letter of credit, it may be left necessary to delete, add or after sonic of the clauses oft-he Credit. A1l these modifications are communicated to the beneficiary through the same Advising Bank of the Credit. Such modifications to a Credit are termed as amendment to a letter of credit. L/C amendments are to be communicated by telex, SWIFT or mail. if there is more than one amendment to a letter of credit, all the amendment must bear the consecutive serial number so that the missing of any amendment can be identified by the advising bank or by the beneficiary. The following clauses L/C are generally amended: • Increase decrease value of L/C` and increase/ decrease of quantity of goods. • Extension of shipment/ negotiation period. • Terms delivery i.e. FOB, C'FR, CIF etc. • Mode of shipment • Inspection clause •
Name and address of the supplier
• Name of the reimbursing bank • Name of the shipping line. etc. Cable/Telex/Fax/Letter of Credit: In international trade receipt of L/C by cable/telex/tax is preferred by all. In that case the whole telex of T/C is to be transmitted by telex cable/fax to the advising bank by the opening bank. If the importer desires that the L/C is to advised by a short cable, then a short coded is sent incorporating principle terms of the L/C, the cable must conclude with 0,;:. words ",airmailing details". Accounting Procedure at the Time of L/C Opening: As soon as L/C is opened, bank accepts a liability on behalf of the importer to make
payment against the credit, provided that the shipment is made within the period a and that the stipulated documents are presented and other terms and conditions as per L/C arc complied with. Naturally, bank has to pass an entry in L/C Liability Ledger and also in the General ledger to show its actual liability accepted on I./C. Contingent liability voucher Customerâ€™s Liability on I,/C------------------Dr. Bankâ€™s Liability on L/C -----------------------------Cr. Margin & Bank charges Margin, commission, postages and cable charges are covered from the party by passing entries as under: Applicant A/c --------------------------------
Stamp in hand ------------------------------
Other fess & commission -----------------
Margin voucher should be posted in the margin deposit register party-wise, incorporating L/C number. L/C commission and other charges are realized from the party before opening L/C. National amount may be realized as FCC(foreign correspondent's charges). FCC includes the advising, postages, cable charges, the foreign bark charges.
Shipping documents: Five vital documents consist in an L/C document. These are as â€˘ Commercial invoice
Bill of Exchange
Bill of Lading
Certificate of origin.
Moreover, beneficiary must send shipping advice to the L/C opening bank with in five working days of shipments. Commercial Invoice: The invoice prepared relating to shipment of the goods is commonly identified as commercial invoice. Commercial invoice is an integral part of the shipping document prepared by the seller s per terms of the credit. This incorporates the description and price of goods quantity, quality, name of the buyer, origin, credit and contract number, name of the vessel, date of shipment, shipping marks, number of packages. This also may be considered as a seller's bill. This is submitted in number of copies as is asked by the credit and copies are also needed for custom. Bill of Exchange: A bill of exchange is an instrument in writing containing an unconditional order, sinned by the maker. Directing a certain person to pay on demand or at a fixed determinable future time a certain sum of money only to, or to the order of a certain person, or to the bearers of the instrument.( Negotiable Instrument Act. 1881, Section Bill of Lading: It is a transport document. The Bill of Lading gives proof of shipment/carriage of goods from port of Lading /place of receipt to port of discharge/place of destination. The bill of Lading would carry the following information: • It must be issued by a ‘named carrier or his agent'. •
Description of goods consistent with that in the credit.
Identifying marks and numbers.
The name of the carrying vessel.
Indication of dispatch or loading and the place of final destination.
The names of' shipper, consignee and the name & address of any
`notify' party. •
Whether Freight has been paid or is still to be paid.
Date of issuing.
3. Packing List: This enlists full particulars of the goods as number of cartoons, bags, pieces, net and gross weight, shipping marks. 4. Certificate of origin: This certifies his country of origin that manufactured of produced the goods. An approved chamber of commerce of the exporter's country generally issues the certificate or as has been stipulated in the credit terms. 5. Inspection certificate: An inspection prior to shipment is conducted by an independent body which confirms by certifying that the quantity and price and/ other aspects of the goods as have been specified in the contract. The inspection agency is nominated by the buyer or L/C opening or as per rule of the importer's country. When the draft is returned by the drawee (importer) having been duly accepted by him, the following retirement procedure is followed: •
The maturity date of the bill is to be worked out and noted in the PAD/be registered and also in due date dairy.
The foreign correspondent should be advised the due date of maturity and be authorized to debit the Nostro account of Authorized Dealer or to claim reimbursement on due date as per terms of L/C from the reimbursing bank.
In case of D.A bill, all documents excepted draft are delivered to the importer against a simple receipt.
The invoice is marked "Documents Delivered against Acceptance and remittance of Will be effected on due date.
Clearance in absence of shipping documents: Shipping Guarantee:
It is a guarantee- Cum-indemnity issued by the bank in favor of the shipping company on prescribed from provided by the shipping company. When shipping documents against L/C are not received by the bank but goods have arrived at port needing immediate clearance if the consignment to avoid demurrage, this guarantee is issued. The shipping company shall release goods to the importer on production of this guarantee. Procedure for issue of guarantee: Importer should submit the following documents to the bank for issue of the guarantee. •
Counter guarantee signed documents to the bank for issue of the guarantee.
Copy of invoice.
Non-negotiable copy of bill of lading/Airway bill etc.
Deposit of' It30% margin n invoice value.
On receipt of the above documents and margin, the bank will give endorsement on the shipping guarantee at the end of the following way: "The above indemnity is countersigned on condition that the bank's liability hereunder shall not exceed Tk.... and the bank will be finally discharged and released from its liability if a claim hereunder is not lodged with the bank by..." Document Retirement: After retirement' of documents by the importer, the bank will put endorsement on the draft starting -Received Payment" under seal and signature of the bank's authorized officer. The invoice is certified as "certify invoice value". The E3/L, is endorsing in favor of the importer. The draft together will all the other shipping documents are delivered to the importer showing the details of' charges debited to the importer's account along with the Customs Purpose copy of Import License / LCAF retained earlier.
Mechanism of L/C
Sales / Purchase
Makes payments by negotiating documents (5)
Submits documents (4)
Advising / Confirming L/C (3)
Applies in writing to issue L/C (1)
Presents documents (8)
Makes payment against documents (9)
Advising/Nego tiating Bank Forwards Documents (6) Makes payments (7)
Instructs to pay or reimburse
Paying / OR Reimbursing Bank
Pays or Reimburses
Back to Back L/C One credit backs by another. It may so happen that the beneficiary/seller of an L/C is unable to supply the goods direct as specified in the Credit as a result of which he needs to purchase the same goods and make payment to another supplier by opening a second letter of credit. In this case, the second credit called a "Back to Back Credit". A Back-to-Back mechanism involves two separate L/Cs. One is master Export LIC and another is Back-to-flack L/C. On the strength of Master Export L/C bank issues bank to Back I,/C. Back-to-Back L/C is commonly known as Buying L/C. On the contrary, Master Export L/C is known as Selling L/C.
Export Procedure: The imports and exports trade of our country is regulated by the Imports and Exports (Control) i1.cL 1950. No person who has been granted registration by the Chief Controller of Imports & Exports shall indent, import or export anti thing into or out of Bangladesh except in cases of exemption issued by the government. If any person contravenes any provision of the Act or any order made under this Act is punishable with imprisonment for a term, which may extend to one year or with fine or both. 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: Registration of Exporters: The exports from-, Bangladesh are subject to export trade control exercised by the Ministry of Commerce through Chief' Controller of Imports and Exports (CCI & E). No exporter is allowed to export any commodity permissible for export from Bangladesh unless he is registered with CCI & E and holds valid Export Registration Certificate (ERC) is required to be renewed every year. The ERC number is to be incorporated on EXP forms and other papers connected with exports. Procedure for obtaining Export Registration Certificate For obtaining export Registration Certificate (ERC ), intending Bangladeshi Exporters are required to apply to the Controller/Joint Controller/ Deputy Controller/Assistant; Controller of' Imports and Exports, Dhaka/ Chittagong/ Rajshahi /Khulna/Mymensingh/Sylhet/
Comilla/Barisal/Pabna//Bogra//Rangpur/Rangpur/Dinajpur, as the case may be, in the prescribed form along with the following documents-. •
Nationality and Assets Certificate of the Proprietor /Directors;
Registered Partnership Deed in case of Partnership concerns;
Memorandum and Articles of Association and Incorporation Certificate in case of Limited Company;
Income Tax Certificate (TIN),
Copy of Valid '.Trade License:
Copy of Rent Receipt of-the Business Premises,
Membership Certificate of a Trade Association:
Affidavit from a 1st class magistrate;
Any other certificate required in the Policy etc.
Registration/ Renewal On receipt of necessary advice from the offices of the Control/Joint Controller Deputy Controller/Assistant Controller of Imports and Exports, applicants for Exports Registration. Certificates are required to deposit requisite Registration Fee to the Government Head of Account "42- Trade and Commerce - Fees realized under the imports and Exports Control Act. 1950" through Bangladesh Bank Government Treasury/Sonali Bank. Copies of Treasury Chalans showing payment of' fees should be sent to the concerned offices of the Chief Controller of Imports and Exports for enabling them to issue Export Registration Certificate. Once registered, exporters are to make annual payments for having their export Re-gist ration Certificate renewed. Securing the Order: Upon registration, the exporter may proceed to secure the export order. He can do this by contracting the buyers directly through correspondence. Some buyers '.)f goods like jute and jute goods maintain liaison office, representatives or local agents who can be contracted to secure a deal. Sometimes, TCB BJMC and BJEC secure bulk contracts and pass or allocate the contracts to the actual exporters. To locate the foreign buyers, fl-Ac exporter may contract the local Chamber of Commerce of potential buyers. The Export Promotion Bureau and the Bangladeshi missions abroad are also good sources for securing information on the prospective foreign buyers.
Signing the contract: The following are the points which need to be borne in wind while making a contract. • Description of the commodity. • Quantity of the commodity. • Price of the commodity. • Shipment. • Insurance and marks. • Inspection. • Arbitration. Receiving the Letter of Credit The followings are the main points to be looked into – • The terms of the L/C are in conformity with those of the contract. • The L/C is an irrevocable one, preferably confirmed by the advising bank. • The L/C allows sufficient time for shipment and a reasonable time for negotiation. • If the exporter wants the letters of credit to be transferable, divisible inadvisable, he should ensure that these stipulations are specifically mentioned in the L/C.
Remittance: Foreign remittance refers to the transfer of fund from one country to another either through the office channel 'i.e. banking channel, Post office or the informal channel. In Bangladesh still informal market is playing a significant role. However, we shall limit our discussion within the official channel. Inward and outward '1'.T, M.T and draft are the main component, of foreign exchange remittance. Foreign exchange earnings are very low as export earnings are very limited while import spending are huge which makes the balance of' trade position in a chronic deficit situation. 'Foreign remittance is very important for the country as valuable foreign exchange is involved in the transfer mechanism. From the year 1990, financial
liberalization has concern started which side is going on. Due to liberalization, restrictions on foreign remittance become case. Bangladeshi taka. is convertible for current account transactions on March 24, 1994 with the view to achieve better exchange ate management system. And from April 1994 Bangladesh Government has accepted the status of Article VIII of international monetary fund. Foreign remittance has two wings i.e. inward and outward remittance. This can be shown below: Foreign Remittance Foreign Inward Remittance
AGRANI BANK LIMITED provides premium quality service for repatriation and collection of remittance with the help of its first class correspondents and trained personnel. By introducing or-line banking service and becoming a SWIFT Alliance Access Member, which enable its branches to send and receive payment instruction directly, that helps provide premium services. Remittance services provided by AGRANI BANK LIMITED are: Inward Remittance: Draft, TT Outward Remittance: TC and Cash (FC) Any Person can remit by the following two ways: Foreign "Remittance through Exchange House: Agrani Exchange House Private Limited. (An Exchange House 100% owned by Agrani Bank Limited) Hundreds of Bangladeshi expatriates are engaged in a variety of professions in Singapore. Most of them have to remit money to their families as well as their kith and kin in Bangladesh. Only a meager amount of their remittance used to reach Bangladesh through banking channels before Exchange House of Agrani Bank started operation on the 24th of August, 2002. Many illiterate and gullible Bangladeshi guest workers fell prey to 'Hoondi' syndicates (unauthorized/unscrupulous intermediaries). 'Hoondi' vendors, in the name of remitting money to Bangladesh through non-banking channels
under various tricky ploys, fleeced many Bangladeshi brothers and left them bereft of their hard earning savings. Instructed by the Government of the People's Republic of Bangladesh Agrani Bank Limited opened the Exchange House to help Bangladeshi professionals and guest workers in Singapore remit their money to any Branch of any Bank in Bangladesh within the shortest possible time. There has been overwhelming response from Bangladeshi expatriates as well as other remitters in Singapore immediately after its opening. The Exchange House of Agrani Bank remains open till late in the evening every day. Besides remitting money any Bangladeshi Wage Earner staying in Singapore can also open NFCD Account and FC Account and purchase Wage Earners' Bonds through assistance from our Agrani Exchange House. Agrani Remitance House Sdn Bhd Malaysia (A Subsidiary of Agrani Bank Limited Bangladesh) Thousands of Bangladeshi expatriates are engaged in a variety of professions in Malaysia. Most of them have to remit money to their families as well as their kith and kin in Bangladesh. Only a meager amount of their remittance used to reach Bangladesh through Banking channels before our Remittance house started operation on the 27th October 2005. Many illiterate and gullible Bangladeshi guest workers fell prey to ' Hoondi' syndicates (unauthorized/unscrupulous intermediaries). ' Hoondi' vendors, in the name of remitting money to Bangladesh through non-banking channels under various tricky ploys, fleeced many Bangladeshi brothers and left them bereft of their hard earned savings. Instructed by the Government of the People's Republic of Bangladesh Agrani Bank Limited opened the Agrani Remittance House Sdn. Bhd (As the subsidiary co.) in Malaysia to help Bangladeshi professionals and guest workers to remit their money to any Branch of any Bank in Bangladesh within the shortest possible time. There has been overwhelming response from Bangladeshi expatriates as well as other remitters in Malaysia immediately after its opening. Our Remittance House remains open till late in the evening every day.
Besides remitting money any Bangladeshi Wage Earner staying in Malaysia can also open NFCD Account, FC Account and purchase Wage Earners' Development. Bonds through assistance from our Agrani Remittance House Sdn. Bhd. Malaysia. To remit money to Bangladesh By AGRANI BANK LIMITED: •
Step in to your bank.
Go to the "Customer Transfer" desk.
Tell the bank-officer that you want to send money to Bangladesh through
AGRANI BANK LIMITED (SWIFT BIC AGRANI BANK LIMITED BD DH).
Give the following SSI of AGRANI BANK LIMITED to bank-officer who needs this to remit the money prompt) Flexible way of remittance money: AGRANI BANK LIMITED introduces flexible ways of remitting money to Bangladesh using its Remittance to the Remitter’s Account This is the most flexible system 16- the remitter. To avail this service you need to open one account for yourself and another account for your beneficiary with any branch of AGRANI BANK LIMITED. All the necessary information for opening account are available in this web site. Kindly print or down load the forms and after filled-in please send to any branch of AGRANI BANK LIMITED. The addresses of the AGRANI BANK LIMITED branches are also available in this web site. Now as usual, you can remit money to your own account any time from any bank in the world. Please follow the procedure mentioned in "What to do to remit money to Bangladesh". Once you send money to your account with AGRANI BANK LIMITED„ your money will grow with us. You can open FDR From your account, pay bills / loan installments, or provide standing instruction to transfer a fixed amount of money in a particular day of' a specified period (say month, quarter, year etc.) to your beneficiary’s account. We can also monitor, our all accounts regularly including checking of our account statements. All these can be performed by you sitting abroad at any time through internet. Agrani E-cash ATM Card helps you avoid risk or carrying cash and draw cash from 40 different Auto Teller Machines located at different places.
FOREIGN EXCHANGE PERFORMANCE
ANALYSIS Historical Performance of Agrani Bank Limited: Figure in Million Tk. Sl. No.
Profit before Tax and 2140 Provision Profit after Tax and Provision 1630
Earnings per Share
Number of Employees
Number of Branches
Foreign Exchange Performance over Time: To analyze the performance of AGRANI BANK LIMITED in foreign exchange business I have established some assumptions5.2.1 ASSUMPTIONS TO THE ANALYSIS •
It is assumed that the reported financial data are free from error & bias because there were no scopes of the study is to verify the data
All the analysis & findings are valid up to 2008 because the other data are not available
The data shown of 2009 are estimated figures
I have selected banks with the following classification criterion
Nationalized Commercial Bank(State Owned Bank)
Private commercial banks (PCB)
The banks selected are assumed to be the representatives of banking sector of our country. 5.2.2 LIST OF BANKS SELECTED FOR COMPARISON
State Owned Banks:
Sonali Bank Limited Janata Bank Limited
Private commercial banks:
Bank Asia Limited One Bank Limited NCC Bank Limited Pubali Bank Limited Standard Bank Limited The City Bank Limited IFIC Bank Limited DBBL Bank Limited Uttara Bank Limited Dhaka Bank Limited National Bank Limited AB Bank Limited Dhaka Bank Ltd. National Bank Ltd. AB Bank Ltd. However, the whole analysis is based on comparison & relationships between these banks & Agrani Bank Limited Ltd. The derived comparative results may vary if other banks are selected. 5.2.3 GROWTH STATISTICS IN FOREIGN EXCHANGE BUSINESS Here is the growth statistics of the banking sector (selected banks). The figures of 2008 are estimated by the individual banks.
Growth statistics in Foreign exchange business 2004 2005 2006 2007 2008 2009 Agrani Import 29.85% 55.49% -1.40% -3.57% 16.07% Bank Export -0.62% 19.34% -5.70% 1.25% 2.85% Limited Remittance -6.57% 12.04% 8.20% 18.75% 6.48% All Banks
Import Export Remittance
Comments: In the above table we see that the growth of Import in foreign exchange sector is negative in 2007 and 2008 and the export of 2007 is negative and also lower in 2008 of Agrani Bank Limited and in the selected banks in 2007 the export and import both was lower in 2007. This is because of the macroeconomic variables like political turmoil, global economic situations etc. 5.2.4 AGGREGATE PERFORMANCE OF THE SELECTED BANKS Aggregate Performance Of Selected Banks
Tk . in Million
1,000,000 800,000 600,000 400,000 200,000 0
399,684 487,143 609,348 615,816 839,677 950,043
320,708 400,356 522,171 535,632 613,988 685,825
87,006 102,195 130,940 158,005
Comment: Here we see that downturn from 2006 to 2007 and thereafter it was rising. This is because of political & other macroeconomic variables. 5.2.5 SECTOR WISE COMPARISON The sector wise comparison reveals that
Agrani Bank Limited is lagging behind compared to the other banks in foreign exchange business. But the bank has a consistent performance with the trend of industry’s performance
The remittance business for Agrani Bank Limited is significantly lower than the other local competitors.
This can be a cause of customer focus /market segment of the bank
The bank has a huge amount of loan incentives for export & import business compared to other performances in foreign exchange activities
TK. in Crore
Export Compared To Selected Banks 100,000 80,000 60,000 40,000 20,000 0
All Selected baks
Agrani Bank Limited
Comments: Export operation of AGRANI BANK LIMITED is significantly lower than other counterparts but consistent with the ups & downs.
Import Compared To Al Selected Banks
Tk. in Crore
100000 80000 60000 40000 20000 0
Agrani Bank Limited
Comments: Import operation of AGRANI BANK LIMITED is also significantly lower than other counterparts but consistent with the ups & downs. Remittance Compared To All Selected banks
Tk. in Million
200,000 160,000 120,000 80,000 40,000 0
Agrani Bank Limited
Comments: Remittance operation of AGRANI BANK LIMITED is significantly lower than other counterparts and inconsistent with the ups & downs. They are much weaker in the remittance business. 5.2.6 REGRESSION ANALYSIS OF AGRANI BANK LIMITEDS
2006 Import Export Profit after Provision
Interpretation: By coefficient of correlation (R), we can measure association between export and profit after tax or import and profit after tax. Basically it provides the direction either positive or negative of the correlation. The advantage of the coefficient of correlation is that it provides a measure of the strength of the correlation & it gives the true direction of the correlation (+ or -) but only the square root of the strength of the correlation. As we know, the value -1 represents a perfect negative correlation that means when one increases, the other decreases in exactly the same proportion. The value +1 represents when one increases, the other increases in exactly the same proportion. The value 0 represents a lack of correlation. Here correlation coefficient (R) of import & profit is 0.110 This clearly indicated the movement direction of the two variables. R between import and profit is 0.110 which indicates very weekly positive relationship that means •
If import business increases Tk. 1 then profit after tax will be increased by Tk. 0.11
R2 value of 0.012indicates that about 1.2% of variations in the AGRANI BANK LIMITED profits can be explained by its import operations
Finally the results are significant at 89.0 % significance level
Interpretation: R, among Profit, Export, and Import is 0.42 which is moderately positively correlated says that •
If import & export business increases Tk. 1 then profit after tax will be increased by Tk. 0..42
R2 value of 0.173 indicates that about 17.3% of variations in the AGRANI BANK LIMITED’s profits can be explained by its combined operations of import & export
Finally the results are significant at 20.9 % significance level
Note: The above calculation was done by using Minitab & Ms-excel (Amount in Crore)
Interpretation: Stability in foreign exchange business is influenced by several international and domestic factors. Factors that influenced in foreign exchange businesses are – exchange rate, bargaining
power of exporter
competitiveness of banking sector and other macro economic factors. For measuring stability of export and import business of Agrani Bank Limited, we have calculated Standard deviation (SD) and Coefficient of variation (CV) which is relative measures of standard deviation. Here we see, Standard deviation in import business of AGRANI BANK LIMITED is Tk. 792 Crore and Coefficient of Variation is 6.8%. On the other hand export business standard deviation is Tk. 128 Crore with CV of 2.54%. So we can say that the export import operation is not stable for the bank at a satisfactory level
Problems in Foreign Exchange Business for the Bank: •
Most of the activities are done by manually and lack of the efficiencies among the employees.
Lack of latest or improved technologies and skilled manpower for operating foreign exchange business.
Lack of sophisticated software for banking solution is a great problem in modern banking era.
AGRANI BANK LIMITED makes a positive impact in the economy by their Foreign Trade which helps our country to grow.
Many of customers do riot have clear idea about the procedures of opening L/C.
AGRANI BANK LIMITED lacks good number of quality customer.
It is observed that there is lack of motivational activities
Working environment is not sound one, Most of' the officers are working under pressure and mentally depressed.
Overall Summary of the Findings: Agrani Bank Limited is a scheduled public bank established on 1972. Within this period of time the bank has been able to prove itself as one of the most progressive and dynamic banks in the country. In my internship period, I have worked in different desks in this bank and I have prepared my especially on Factors Influencing the Money Market: A Case Study of Agrani Bank Limited. Also I had to given highlight in a specific department and identify the most important factors, which influence the prescribed generation. So the internship report contains the activities of Agrani Bank Limited, Panthapath branch on the following guidelines: Factors Influencing the Money Market. In general banking section I work in accounting opening section .I also work in FDR and cash section’s tried to find out their process of work. I have prepared this report based on practical fieldwork, personal contact with the top executives of ABL and officers of different stages of the bank with the involvement of regulatory guidelines provided by central bank. Different data used in this report have been collected from different primary and secondary sources. Finally, As an ABL, special banking system is a separate bank, all the people in general have right to know how well their money is utilized through banking services by the special activities in the banking world in our country or foreign country. The profit & profitability of ABL depends on the degree, to which it’s financial health or managerial activities through the targets in all respects, which is fixed up for the particular period of time. Until now there has not been any comprehensive study on the profit & profitability trend of ABL in Bangladesh. Very few researches have been conducted on this field of ABL in Bangladesh. Keeping this in mind an important attempt has been taken in this study to measure the profit & profitability trend of ABL in Bangladesh.
CONCLUSION AND RECOMMENDATIONS
Conclusion: This report has been prepared as an effort to analysis ABL and constituencies gain a better understanding of the money influencing factors that influence money performances in market. This report examines as an example ABL and the long-term relationship. The information highlights the strong linkage between the money in stock market. By analyzing the annual report 2009 in Agrani bank, a brief discussion in my report is (1) The money supply, the proportion of non-tradable shares, and the ROE/profit margin on net assets have most significant impacts on the choice of consideration. And different factors have different impacts on the probability of consideration choice. Each choice results from integrated effects of all factors. (2) One stock’s market performance and whole capital market’s performance do not have significant impacts on certain listed company’s consideration. Their impacts mainly focus on the company’s situation and macro environment. (3) Macro economic factors have certain effects on the choice of consideration, whether the market participators realize it or not, and the effects are objective and should not be neglected. We can further draw these conclusions: 4) The proportion of non-tradable shares is an important influencing factor that affects the distribution of shareholders’ interests. Although its influences disappear on the surface, as the non-tradable shares reform is closed, it is evolved into the quantity and proportion of newly tradable shares. Therefore, we can still take this factor as the basis for protecting interests of small and medium shareholders. 5) Listed company’s condition is still an important influencing factor. Better conditions and higher ROE/profit margin on net assets mean small and medium shareholders can obtain relatively direct interests. In re-distributing interests, such as consideration payment, the trend to be lower is rational. 6) Macro factors, especially money supply, have great impacts on shareholders’ behaviors. According to studies above, tight monetary policy is still appropriate. At
present, an appropriate tight monetary policy can help to create a favorable macro environment for Chinaâ€™s capital market.
Recommendations: Though out my internship I discovered that ABL have the opportunity to improve in the followings sector: 1. Market Promotion: In todayâ€™s business, promotional activities is one of the most import tasks for improvement of the business. ABL does not concentrate much about this. Hence the firm could be benefited if it invests in the market promotional activities. 2. Provide Lease To Financial Institution: Over time it has been shown that the overdue rate is minimum in case of financial institutions. Therefore ABL could reduced its overdue rate if focus mostly on the providing lease to the financial institutions. 3. Branch Proliferation: ABL has only three branches; two in Dhaka, one in Chittagong. It would be benefited if it opens branches in the other places like Norshingdi, Jessore, Khulna etc as there are huge opportunities of business. 4. Employeeâ€™s Incentives: The bank may increase the efficiency of its personnel by increasing incentives, training etc. 5. Information System and Network: ABL could improve it information technology by employing the high technology based information system and networks. 6.
Growth Rate: The growth rate of ABL recently plummets due to low retention could improve its growth rate by reinvesting more from its earnings.
7. Diversify the source of fund: ABL basically depends on the money market borrowing, call money for source of fund. Rather ABL should concentrate in collecting deposit from depositors as sound source. When other financial institutions are looking for new ways to collect deposit, ABL concentrates in borrowing fund from other banks. Borrowings from the money market increase the cost of fund. Separate HR Department:
ABL has no separate HR Department. One of its senior officers performs HR Management duty for one year tenure along with regular duty. This method doesn’t provide proper motivation mechanism to employees. So that its employee turnover rate is high at lower level. ABL should maintain separate HR Department as early as possible.
Publishing the basic data of the company.
Preparation of monthly rental list
Preservation of rental check.
Collection of dishonored check from the concerned banks
Preparation of dishonored statements
Passing the dishonored statement to the monitoring department.
Collection of bank statement from the concerned banks
For the customers who have applied for rescheduling the accounts and finance department calculate the rescheduled amount for the client
Calculation and checking the relevant documents to match the rental list before issuing a closer memo
Preparing the monthly salary statements for the employees
Income taxes are paid through this department
Arrange fund for the company through call money and credit line agreement with different bank.
Keep the activities on track so that nothing deviates from the rules and regulation of the Bangladesh Bank
Prepare Balance Sheet, Income Statement, Cash Flow statement for half yearly and annual report
Annual Report of ABL Limited 2009.
Several Booklets from ABL
Several Newsletters from ABL
ABL Web site.
Several Reports from ABL Library.
INTERNET & WEB ADDRESS:
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