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View with images and charts “Foreign Exchange Operations in Bangladesh”

Foreign exchange operation Foreign exchange operations in banks takes place through four basic operational part of a bank’s day to day activity. They are Import

 Foreign Remittance

 Export

 International Division &Treasury

Import Operation 2.1 In every import export transaction there must be:    

An Agreed products or services A sales contract Delivery details and Incoterms Shipping and delivery details

  

Terms of payment Required documentation Insurance coverage

International Trade Cycle

Insurance Company

Trade/ Govt. Authority

Surveyor

Consignment

Carrier

Agent

Payment

Buyer

Seller

Banker


Law of Contract

Importer vs. Carrier

Trade Finance

Exporter vs. Exporter’s Banker

Law

Exporter vs. Insurer

Importer vs. Exporter Importer vs. Warehouse Importer vs. Importer’s Bank

Commonly used payment terms

Open Account

Advanced Payments

Documentary Documentary Collections Credits

Open Account

Exporter

1. Sales Contract

2. Shipments of Goods

3. Payment

Importer


Advance Payment

1. Sales Contract

Exporter

Importer

2. Payment

Documentary Collection

3. Shipments of Goods

1. Sales Contract

Exporter

3. Presents Documents for Collection

Importer

2. Shipment of Goods

8. Credit A/C

5. Presents Documents Import Collection

Export Collection

Remitting Bank

6. Payments

7. Remit Proceeds (fund) 4. Remit Documents & Collection Instructions

Collecting Bank


Documentary Credit

1. Sales Contract

Exporter

Importer

2. Shipment of Goods 5. Presents Documents for Negotiation

4. Advises/ Confirms L/C

Presenting/ Negotiating Bank

Export L/C

Advising/ Confirming Bank

7. Asks for Settlement 2. Apply for L/C Import L/C

6. Sends Documents for Reimbursement

Issuing Bank

3. Issues L/C

What is Documentary Credit? It is a conditional guarantee by a bank (Issuing Bank) given to be the seller (Beneficiary) at the request, and in accordance with the instructions of the buyer (applicant) to effect payment up to a stated sum of money, within a prescribed time limit and against stipulated documents. Parties involved in a Documentary Credit The Applicant : Importer who applies for DC The Issuing Bank : Importer’s Bank who issues the DC The Advising Bank : The Bank in Exporter’s Country authenticating the genuineness of the DC (UCP#7) The Beneficiary : Exporter in whose favor the DC is issued The Reimbursing Bank : The Bank designated by the issuing Bank to effect payment to the Negotiating Bank upon their request. The Confirming Bank

: The Bank which adds its confirmation to the credit (UCP#9B, C, D) Special Types of Documentary Credit     

Freely Negotiable vs. Restricted Revocable Irrevocable Confirmed Local

    

Foreign Red Clause Revolving Transferable Back to Back


LC defined It is a conditional undertaking given by a bank (Issuing Bank) at the request of a customer (Applicant) or on its own behalf to pay a seller (Beneficiary) against stipulated documents provided all the terms and conditions of the credit are complied with. Uses: A letter of credit is an essential element for conducting world today. It ensures beneficiary to get price of his consignment consigned to an unknown buyer. So it acts as a bridge between buyer and seller of two different countries, that helps foreign trade to a great extent. Parties to L/C i. Importer/ buyer/ applicant

v. Confirming bank

ii. Exporter/ Seller/ beneficiary/ Supplier

vi. Negotiating bank

iii. Issuing bank/ Opening bank

vii. Paying bank

bank/

Reimbursing

iv. Advising bank/ Notified bank To import goods of services, the buyer approaches his/ her bank to open letter of credit in favor of foreign supplier. The opening bank issues the L/C and advise it through its correspondents. Importer: The person who requests the opening bank to open L/ C. Exporter: The party in whose favor L/ C is established. Issuing Bank: The bank which opens/ issues L/ C. Advising Bank: The bank through which L/ C is advised. Confirming Bank: The bank, which adds its confirmation to the credit. Negotiation bank: The bank, which negotiates the bill. TYPES OF LETTER OF CREDIT Almost all commercial letters of credit are documentary credits. Therefore, the UCP deals only with documentary credits. A documentary credit may be classified under the following types depending upon the particular provisions it contains:  Payment, acceptance and negotiating credits  Revocable and irrevocable credits  Confirmed and unconfirmed credits

 With Resources and without resources credits  Fixed and revolving credits  Transferable credits  Back-to-back credits


ďƒ˜ Red clause and green clause credits

ďƒ˜ Stand by credits

Payment, acceptance and negotiating credits " All credits must clearly indicate whether they are available by sight payment, by deterred payment, by acceptance or by negotiation. " Thus a letter of credit may bea) b)

Payment credit; Negotiating credit;

c) d)

Acceptance credit; Deferred payment

Revocable and irrevocable credit: A credit may be I) Revocable, or II) Irrevocable The credit should therefore clearly indicate whether it is revocable or irrevocable. A revocable credit is one, which can be cancelled or amended by the issuing bank at any time without prior notice to the beneficiary. The cancellation or amendment however, takes effect against the bank, which has negotiated bills under the credit only on receipt of notice of such cancellation, or amendment. The issuing is liable for bills negotiated confirming to the terms and condition of the credit before the notice of revocation is received by the negotiating bank. An irrevocable credit constitutes a definite undertaking of the issuing bank or makes payment provide the terms and conditions of the credit are complied with. An irrevocable credit can neither be amended nor cancelled without the agreement of all parties concerned. The difference between a revocable credit and an irrevocable credit is quite clear. While a revocable credit can be cancelled or modified without the consent of the exporter, it is not possible in the case of irrevocable credit. Confirmed and unconfirmed credit : When a letter of credit is advised to the beneficiary through a bank in the beneficiary's country without adding its confirmation. If the advising bank adds confirmation to the credit, it becomes a confirming bank and the credit a confirmation credit.All confirmed credit is also irrevocable letter of credit. It is so because no bank in the exporter's country would be willing to undertaking a liability on a revocable credit on which there is no definite undertaking by the issuing bank. With resources and without recourse Credit: The bill of exchange drawn under a letter of credit may indicate that it is drawn without resources to the drawer. Unless the credit authorizes drawing a 'without resource' bill of exchange, it is not proper to present such a bill of exchange. A bill of exchange is only one documents drawn under the letter of credit and can't be discussed in isolation of legal imported the credit. Therefore, to understand the utility of


drawing a 'without resource' bill of exchange, we should first know the recourse available to the parties involved, viz., the negotiating bank, confirming bank and the issuing bank. The exporter's intention in drawing a without recourse bill of exchange is to ensure that in case of the documents are rejected by the issuing bank or payment is not made by the issuing bank for any reason, he should not be called upon to pay back the amount he received earlier on negotiation of documents. Fixed and Revolving credits : A fixed letter of credit is one which the limit is reduced permanently to the extent of bills drawn under the credit.Under a revolving letter of credit, the limit under the credit is renewed as and when bills drawn under it are paid, to the extent of such bills.A revolving letter of credit is useful where continuous transactions between the exporter and importer are expected and the amount of each drawing is sought to be limited.For an exporter with a large contract spreading over a period of years, a revolving credit offers the following advantages: i) ii)

He need not await receipt of letter of credit every time he exports, and Since the same credit covers all the transactions the terms and condition do not change.It makes it easy for him to prepare documents as required by the credit.

Transferable credit: A transferable credit is one under which the exporter has the right to make the credit available to third parties. The exporter may be only an intermediary who procures goods from the suppliers and arranges them to be sent to the importer. A credit is transferred in the following ways: the exporter, now called the first beneficiary, will apply to the negotiating bank to transfer and establish in favor of the manufacturer a letter of credit with the same terms and condition as that of the original with the exception to the following: a)

The amount of the credit may be reduce. The difference would be the profit or commission on the transaction for the first beneficiary.

b)

The validity period and date of shipment may be curtailed.

c)

Because the value of good is reduced, the percentage for which insurance cover must be effected may be in such a way as to provide the amount of cover stipulated in the original credit.

Red clause and green clause Letter of Credit: Also known as 'packing' or 'anticipatory' credit a red clause letter of credit printed in red, authorizing the negotiating bank to grant advances to the exporter for the purchase of processing, packing and arranging for movement of goods up to the port of shipment. The advance, with interest and other charges, is recoverable from the bills that would be turned under the letter of credit and only the balance would be paid of exporter. The amount of letter of credit should be less than the amount of the letter of credit so that it remains fully secured by the obligation of the opening of bank. The negotiating bank is not required to supervise the utilization of the advance.


Back to back L/ C: When one L/ C is backed by another L/C then the L/C is called back to back L/C. For procurement of raw materials and accessories banks sometimes provide finance by opening back to back letter of credit. Back to back L/Cs are frequently used for export of readymade garments. Bank to bank L/C does not involve cash outlay at the time of pre-shipped stage. It constitutes a commitment to pay when the goods are shipped as per the terms of the credit. Back to back L/C is opened for a issuance period basis. This bill will be paid after received the export proceeds. Back-to-Back LC

Seller (1 Beneficiary)

Buyer

st

1. Apply for L/C

3. Advise LC 4. Request to issue Back-toBack LC

Advising Bank

2nd Issuing Bank

5. Issues Back -to-Back L/C

2nd Advising Bank

2. Issue LC

1st Issuing Bank

6. Advise BB LC Beneficiary

of the Back-toBack LC

Standby Letter of Credit or Guarantee Credit: A standby letter of credit is any letter of credit, or similar arrangement however named or described, which represents an obligation to the beneficiary on the part of the issuer; a)

To repay money borrowed by or advanced to for the account of the party: or

b)

To make payment on account of any indebtedness undertaken by the account party; or

c)

To make payment on account of any default by the account party in performance on the obligation.

Under a standby credit, also known as guarantee credit, the issuing bank assures the beneficiary that in the event of non-perforn1ance and non-payment of an obligation by the


applicant, the beneficiary may get the payment from the issuing bank. The claim should be a draft accompanied by the request documentary evidence of non-performance as stipulated in the credit. Letter of Credit and its terms and conditions: In the top of the L/C, issuing bank address along with telephone no, telex no, and fax no is quoted. L/C no with date and amount both in words and figures are also quoted. In the L/C, beneficiary's name and address, advising bank and applicant's name and address are clearly quoted. To the advising bank, original and duplicate L/C are forwarded here original for beneficiary and duplicate for advising bank. Name of merchandise with quantity, quality, per unit price etc., Performa invoice no or indent no with date along with indenture's Bangladesh bank pern1ission no are also quoted in merchandise pare. IMPORT PROCEDURES Formalities & Restrictions : The word "Import" is most familiar to the bankers, which means bringing of goods and service to own country from other countries. The word is widely used by the bankers allover the world for the same purpose as stated earlier. Way of Import: Import into Bangladesh may be two ways - (1) By way of opening L/C & (2) Without opening L/C. (I) Import by way of opening L/C requires to fulfill following criteria of private sector importer; a) Registered importer having valid IRC b) Trade license (valid) c) Membership certificate from local chamber of commerce of related association (valid). d) Income tax clearance/ declaration in case of new comer. e) VAT registration certificate. If a private sector importer fulfils above requirements, a banker can process an L/C for import of goods & services from abroad but following papers/documents are to be obtained before opening of L!C in addition it the above mentioned papers/documents: 1. L/C application. 2. Indent! Performa invoice/purchase order/contract/agreement. 3. Charge documents duly & properly executed. 4. LCAF duly sealed & signed. 5. Insurance cover note The importer must be a customer of the L/C issuing bank / branch & the L/C may be opened after sanction by the competent authority. (2) Import into Bangladesh without opening L/C may be made in the following cases against LCAF: a) Books, journals, magazines, periodicals against sight draft or usance bills. Any importable item


by making payment from Bangladesh to the tune of maximum USD. 2500/ -in a year b) The items allowed by the credit, Loan, Grant. c) International chemical reference by registered allopathic industrial unit with the approval of Director, Drug Administration. Scrutiny of Documents : The letter of credit constitutes one of the most important methods of financing trade. Under a banker's letter of credit, the issuing bank gives a undertaking on behalf of the buyer that the bank will honor the obligation of payment on presentation of stipulated documents. Thus letter of credit provides security if the beneficiary observes its terms and conditions. The beneficiary of the documentary letter of credit when presents the stipulated documents to the negotiating bank, he expects the bank to honor its obligation under the credit in return. The negotiating bank scrutinizes the document in strict accordance with the L/C terms and negotiates the bill if the documents are in order. After negotiation, the bank claims reimbursement as per L/C terms.The L/C issuing bank / draw bank, after receiving of the above documents, scrutinizes all the documents before lodgment of the same in their books / registers. The following points are considered mainly at the time of scrutiny of documents. Common Documents under DC

Commercial Invoice

Drafts Bill of Lading/ Airway Bill

Insurance certificate Certificate of origin

Documents

Inspection Certificate

Packing List Customs/ Consular Invoice

Bill of exchange/Draft:  The draft must be date before expiry of the L/C and within the stipulated period for negotiation.  It must be dawn or endorsed to the order of the bank.  It is drawn by the party indicated as the beneficiary of the credit.  It is drawn on the party indicated as the draw of the credit.  It is market as drawn under the proper L/C of the bank quoting the L/C number.  The tenor is in conformity with that stipulated in the L/C.  The amount is identical with the amount mentioned in terms of the credit.


Bill of Lading (B/L)  The full set of B/C is submitted including original copy.  It is marked "Shipped on Board"  It is drawn in favor of the bank endorsed to the order off the bank and dated after issuance of the L/C  The B/L is clean  If the terms of sale is C& F, B/L is to be marked "Freight paid".  Short from B/L is not acceptable  Charter party B/L is not allowed unless specified in the L/C  B/L is not stale  Other (if any) as per L/C terms. Commercial invoice     

The invoice is signed by the exporter / beneficiary The required numbers of copies of the invoice are placed as per L/C terms. Description of the goods with measurement / weight are mentioned in full. The value and price of the goods to be tallied with L/C terms The L/C number, name of the ship with shipping mark, shipments date L.C.A.F/ license numbers of the importer, indent number etc. are to be quoted in the invoice properly.  The quality and quantity of the goods as mentioned in the invoice must agree with that of L/C terms.  The name of the importer and the L/C issuing bank is mentioned in the invoice. Certificate of origin  The certificate of origin may be issued by the chamber of commerce & Industry of exporter's locality or by the supplier as stipulated in the L/C.  The goods must be originated from the country as per indication given in the L/C.  All other documents like packing list, per-shipment inspection certificate etc are in accordance with the terms of the credit.  The importer retires the bill within a reason -able period paying all the charges and bill value. If importer fails to retire the bill from his own source, he may approach for loan against imported merchandise from the bank. Lodgment of Documents: After shipment of goods the beneficiary sends the documents to the opening bank through the negotiating bank. After receiving the documents from the negotiating bank, the opening bank checks the documents very carefully as per terms & conditions of the back- to- back L/C. if there is no discrepancy or the applicant accepts the discrepancy, if any, then the documents are lodged. International foreign Bills Collection register according to the serial number. After getting the shipping documents in order i.e. clean documents lodgment of documents to be made with in three working days. Steps to be taken in lodgment. Bank and branch name seal to be affixed on the forwarding schedule, B/E seal on all shipping documents and banks crossing seal in bill of exchange and bill of lading to protect fraudulent use of the same. To put B/E serial number on all shipping documents. To make entry in the B/E ledger. 2.10 Retirement of Documents: After the arrival of goods in the port the party comes to retire the documents. Then the following entry is passed.


Dr. Party's A!C Dr. Marginal Deposit A/C Cr. Bill of exchange A/C Cr. Interest A!C. Interest is calculated on be amount from the date of reimbursement to the date of retirement. If the margin is kept with the bank a minimum 30 days, then interest is paid to the party at the savings rate and following vouchers are passed. Dr. Expense control A!C Interest paid on margin L/C cash. Cr. Party's A!C. Original documents are handed over to the importer after proper endorsement along with original LCA. The importer clear the goods on showing all these documents. The customs authority gives a bill of entry as a document of entering the importer goods in the country. The importer surrenders this bill of entry to the bank and forwards the bill of entry to Bangladesh bank along with the duplicate of IMP from.

EXPORT OPERATION 3.1 An exporter has to obtain a firm contract or an export L/C/Firm contract he has to make the goods ready and necessary arrangement for shipment particularly the following arrangements have to be done:  Booking of shipping space.  Packing of the goods with shipping makes as per instruction of Export L/C/contract.  Booking of space for storage of export cargo at the port of loading.  Arrangement for transportation of goods to the port.  Approaching bank (A.D) for issuing EXP.  Whenever an exporter approaches the branch for issuing and certifying EXP. Branch is to satisfy that he maintains a CD A/c with the branch. He is a manufacturer, producers or supplier of the goods to be exported. Market reputation is satisfactory. Being satisfied following papers and documents are to be obtained:  Application for the exporter.  Valid export Registration certificate (ERC).  Original copy of export L/C/Firm contract. 3.2 Checking of papers and documents by the branch: i. Application:  Items are permissible for export.  Arrangement made for realization of Export Proceeds within 4(Four) months.  Arrangement has been made for receipt of title of he goods like Bill of Loading, Air Way Bill etc. ii) Export L/C:  Irrevocable / Confirmed L/C issued by an Internationally reputed bank under UCPDC inforce and transfer made (if transferable) as per provision of article 48 of ICC- 600.  Genuineness of Advising or Transferring the L/C is to be verified.  Time for shipment is sufficient.  Negotiation authority is provided therein.  Reimbursement clause is definite.


 B/L clause conforms to the provision of Guidelines for foreign Exchange Transactions.  All other terms and conditions are favorable. iii) Contract:  Contract is confirmed and duly signed by the seller and the purchaser.  Buyer consignee is bonafide (Branch has to obtain credentials of the buyer through Foreign Correspondence).  Full description of the goods to be exported with quantity, quality, price and unite price are given.  Mode of transport with port of shipment and destination.  Date of shipment.  Delivery Term-FOB, CFR, CIF etc. mentioned clearly.  Payment clause at Sight DC/ DP/ USANCE.  Validity of the Contract.  Being satisfied branch is to issue a set of EXP. Duly recorded in Export Register as per specification given in appendix in 5/65 of Guidelines For Foreign Exchange Transaction Volume-1 published by Bangladesh Bank.  Exporter is to fill up and sign EXP. Under his seal. Branch is to check that all the copies EXP have correctly been filled in as per particulars of export L/C/contract. Signature of the export is to be verified and certify under seal and signature of the branch manager on the space provided. Papers and documents are to be handed over to C& F Agent:  EXP duly signed by Export and certified by the bank.  Copy of Export L/C Contract.  Commercial invoice duly issued and signed by the exporter.  Packing List.  Insurance cover note in case of Export on CIF basis.  From VBF-9 (Prescribed by Custom Authority for declaration of Export Cargo).  Detail instructions regarding shipment:  Date by which the goods should be put on board.  Name of the bank in Bangladesh to whose order BL/air way duty Bill should be drawn.  Number of original and non-negotiable B.L to be obtained.  A proof of export from the Custom Authority for claiming duty draw back (wherever admissible). C & F Agent has to arrange:  Booking of shipping space.  Storage of Export Cargo at the port.  Marking the shipping marks on each packet / container.  Issue instruction to the carrier regarding the date by which goods are to be shipped on board and shipping documents to be issue with necessary clauses and number of copies to be supplied. After shipment Exporter will submit the following documents to the branch:  All negotiable copies of B/L  Commercial Invoice duly signed.  Bill of Exchange.  Consular invoice (If required).  Pecking list.


      

Certificate of Origin.(If required). Pre-shipment inspection certificate (If required). GSP certificate (wherever necessary). Original copy of export L/C/Contract. EXP duly certified by the custom authority. Any other documents required as per export L/C Contract. Exporter is to submit the export documents under cover of a letter mentioning a number of documents submitted and detail instructions regarding payment and delivery of documents.

Branch is to verify thatThe number of the documents mentioned in the forwarding letter are found intact. Instruction regarding payment and delivery of documents are in confirming with the terms and conditions of Export L/C contract. i) Sight Documents are to be delivered against payment at sight of the draft. ii) D.A Documents to be delivered against acceptance of the draft by the drawee and documents are to presented on due date for payments. iii) D-P-Documents are to be delivered against payment. iv) All the documents required as per terms and conditions of L/C contract are submitted. Documents submitted are to be scrutinized and the discrepancies are to be noted on the scrutiny sheet.Exporter is to be informed of the discrepancies immediately. Export will rectify the discrepancies which are rectifiable by them. Export Financing Financing of exports constitutes an important part of a bank’s activities. Exporters require financial services at different stages of their export operation. During each of these phase exporters need different types of financial assistance depending on the nature of the export contract. Export financing can be classified into two categories. 1) Pre-shipment credit 2) Post-shipment credit Pre-shipment credit Pre-shipment credit, as the name suggests, given to finance the activities of an exporter prior to the actual shipment of goods for export. The purpose of such credit is to meet working capital needs starting from the point of purchasing of raw materials to transportation of goods for export to foreign country. Pre-shipment credit takes place the following forms: 1) Export Cash Credit (Hypothecation) 2) Export Cash Credit (Pledge) 3) Export Cash Credit against Trust Receipt 4) Packing Credit 5) Back to Back letter of credit 6) Credit against Red-Clause letter of credit Export Cash Credit (Hypothecation) Under this arrangement a credit is sanctioned against hypothecation of the raw materials or finished goods intended for export. Such facility is allowed to the first class exporters. As the bank has got no security in this case, except charge documents and lien of export L/C or contract, bank normally insists on the exporter in furnishing collateral security. The letter of credit creates a charge against the merchandise in favor of the bank but neither the ownership nor the possession is passed to it. Export Cash Credit (Pledge)


Such credit facility is 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 godown under bank’s control by signing letter of pledge and other pledge documents. The exporter surrenders the physical possession of the goods under bank’s effective control as security for payment of bank dues. Export Cash Credit against Trust Receipt In this case, credit limit is sanctioned against Trust Receipt. The exportable goods remain in the custody of the exporter. He is required to execute a stamped export trust receipt in favor of the bank. This facility is allowed only to the first class party and aollateral security is generally obtained in this case. Packing Credit In this cash credit, facilities are extended against security of Railway Receipt / Steamer Receipt / Barge Receipt / Truck Receipt evidencing transportation of goods to the port for shipment of the goods in addition to the usual charge documents and lien of export letter of credit. This type of credit is sanctioned for the transitional period from dispatch of the goods till negotiation of the export documents. The drawings under Export cash credit (Hypothecation/Pledge) limit are generally adjusted by drawings in packing credit limit which in turn, liquidated by negotiation of export documents. Back to Back Letter of Credit Under this arrangement, the bank finances export by opening a letter of credit on behalf of the exporter who has received a letter of credit from the overseas buyer. Since the second letter of credit is opened on the strength of and backed by another letter of credit it is called Back to Back Letter of credit. The need for a back to back letter of credit arise because the beneficiary of the original (export) letter of credit may have to procure the goods from the actual producer who may not supply the goods unless its payment is guaranteed by the bank in the form of letter of credit. The bank’s credit related to back to back letter of credit is realized subsequently from export proceeds. Credit against Red-Clause letter of credit Under Red clause letter of credit, the opening bank authorizes the advising bank/Negotiating bank to make advance to the beneficiary prior to shipment to enable him to procure and store the exportable goods in anticipation of his effecting the shipment and submitting a bill under the L/C. as the clause containing such authority is printed /typed in red ink the L/C is called Red clause and Green Clause L/C respectively. Though it is not prohibited, it is very rare in Bangladesh. Post-shipment credit This type of credit facilities extended to the exporters by the banks after shipment of the goods against export documents. Necessity for such credit arises as the exporter can not afford to wait for a long time for without paying manufacturers / suppliers. Banks in our country extend post-shipment credit to the exporters through: 1) Negotiation of documents under L/C 2) Purchase of DP and DA bill’s 3) Advance against Export Bills surrendered for collection Negotiation of documents under L/C


Under this arrangement, after the goods are shipped, the exporter submits the concerned documents to the negotiating bank for negotiation. The documents should be negotiated strictly in accordance with the terms and conditions and within the period mentioned in the letter of credit. If the documents are found complying the terms and conditions of L/C, the bank may purchase/discount the drafts/documents. Purchase of DP and DA bill’s In such case, the banks purchase/discount the DP (Documents against Payment) and DA (Documents against Acceptance) bills operated under the payment method of documentary collection. While doing so, the banks scrutinize all the export documents separately and minutely. Clear instructions is to be obtained from the drawer of the bill in regard to all important issues related to the negotiation of the bills. Advance against Export Bills surrendered for collection Banks generally accept export bills for collection of proceeds when they are not drawn under a L/C or when the documents, even though drawn against an L/C contains some discrepancies. Bills drawn under L/C, without any discrepancy in the documents, are generally negotiated by the bank and the exporter gets the money from the bank immediately. However, if the bill is not eligible for negotiation, the exporter may obtain advance from the bank against the security of export bills. In addition to the export bills, banks usually ask for collateral security like a guarantee by a third party and equitable / registered mortgage of property. FOREIGN REMITTANCE Function of Foreign Remittance Department OUTWARD REMITTANCES: Outward remittances are those sent aboard in foreign exchange. These also include payment into convertible Taka account or non-resident Taka Account (the so-called vostro Account) of foreign banks maintained with banks in Bangladesh. The bank must exercise utmost care to see that foreign exchange sold to a client is used for the declared purpose. Travel Related Services: There would be a large number of customers-- regular as well as casual-- coming to the bank to buy foreign exchange for travel abroad on various purposes.Up to US$ 1000 or equivalent per person may be issued during a calendar year to Bangladesh nationals proceeding by air to destinations in SAARC member countries and Myanmar. Within this annual limit, up to $ 500 or equivalent may be issued per person for overland travels to these countries. For visits to destinations in other countries foreign exchange up to $ 3,000 per person may be issued during a calendar year. Medical Treatment Abroad : Up to $10,000 or equivalent may be released by the branch on the basis of a recommendation of the Medical Board set up by the Health Directorate, foreign exchange may be released as per the cost estimate given by the foreign medical institution. Applications for release of


exchange exceeding $10,000 should be forwarded along with supporting documents to Bangladesh Bank for prior approval. Participation in Seminars, Conferences etc: Up to $ 250 per diem for countries in the SAARC region and Myanmar and $200 per diem may be released by the branch to private sector officials for attending seminars, conferences and workshops arranged by recognized international bodies. Release of Foreign Exchange for Hajj: The Government of Bangladesh announces each year the scale at which foreign exchange may be issued to intending pilgrims for performing Hajj. Release of foreign exchange for this purpose should be made as per instructions issued for this purpose by Bangladesh Bank at the beginning of Hajj season Remittance of Foreign Exchange for Education Abroad: Foreign exchange may be released for studies abroad by Bangladesh nationals in all regular courses (subject to being consistent with the Education Policy of the Bangladesh Govt.) in recognised institutions. Transfer of Assets: Foreign nationals leaving Bangladesh permanently on expiry of employment contracts may transfer abroad their genuine savings from salaries/benefits clearly stated in the employment contracts approved by the Board of Investment (BOI). They shall also be eligible to transfer abroad retirement benefits such as provident fund, pension, and gratuity as per the employment contracts. The branch may, without prior approval of Bangladesh Bank, effect remittances of those dues including sale proceeds of investment in government securities as per the following instructions. Family Remittance Facility: Foreign nationals who are resident in Bangladesh and have income in Bangladesh are permitted to make monthly remittances to the country of their domicile out of their current savings up to 50% of their net income to cover their commitments abroad.Bonus or commission receivable by foreign nationals cannot be added for calculating monthly entitlement in anticipation of the grant of bonus or commission This can be included only after the net amount of bonus or commission has been actually paid by the employers. Remittance will be spread over the subsequent twelve months. NWARD REMITTANCES: Inward remittances are those received from aboard in foreign exchange. Bank should encourage its customers to send more foreign exchange through various accounts. Inward remittance is vary important for Bangladesh, as a large portion of our foreign exchange comes from Wage Earners and other inward related business The branches must exercise utmost care to see that foreign exchange received from a client is credited swiftly so that they cannot be interested to sent money through unauthorized channel. Family maintenance:


Bangladeshi National Working Abroad can send foreign exchange to Bangladesh from the country of their domicile which is exempted from tax. This amount has to be credited by the bank within 03 days from that date of necessary documents by the bank. Commission earned from various business: Commission arise from business between resident and nonresident can send such amount to Bangladesh, which is may be taxable subject to the government annual gazette declaration. Disposal of Foreign Exchange on Return from Abroad : On return, unspent amounts brought back (with declaration in FMJ form for amounts more than US$ 5000) may freely be sold to an AD or may be retained in RFCD Account an amount of up to US$ 5000 may be retained in hand. Investment by Foreign Nationals in Certificates & Securities: All requests for investment by foreign nationals in Bangladesh Government Securities such as Defence Savings Certificate for the purpose of claiming income tax relief against investment allowance should be submitted through the branch to the Bangladesh Bank for prior approval. FOREIGN CURRENCY ACCOUNTS: Private Foreign Currency Accounts:    

Who Can Open the Accounts? Bangladesh nationals residing abroad, Foreign nationals residing abroad or Bangladesh, Foreign firms operating in Bangladesh or abroad, and Foreign missions and their expatriate employees in Bangladesh. Bangladesh Bank may specially allow opening of foreign currency accounts not covered by this

FC Accounts of Overseas Bangladeshi Nationals: *Bangladesh nationals working abroad or proceeding abroad to take up employment may open foreign currency accounts. *No initial deposit is required to open this account. *Account holder may operate the account himself or nominate other persons in Bangladesh for this purpose. *The account may be opened in pound sterling, US dollar, euro or Japanese yen. *The account may be maintained as long as the account holder desires. *These accounts should ordinarily be fed by remittances by account holder himself.By funds sent by other wage earners,Sale proceeds of currency notes, traveller’s cheques, drafts etc. brought into Bangladesh by the account holder while on temporary visit to Bangladesh provided foreign


exchange in excess of US$ 5000 (or its equivalent) is duly declared to the Customs on Form FMJ at the time of their arrival. *Funds lying to the credit of FC accounts of Bangladesh nationals can be utilized for import of goods and commodities as per Import Policy announced by the Government from time to time. FC Accounts of Bangladeshis Working in Foreign organisations: Foreign currency accounts may be opened in the names of resident Bangladesh nationals working in foreign/ international organizations operating in Bangladesh provided their salary is paid in foreign currency. Such accounts may be credited only with the foreign currency portion of the salary and debited for all approved current transactions like cost of travel, education for children, medical treatment etc. Non-Resident FC Deposit Accounts (NFCD): All non-resident Bangladesh nationals and persons of Bangladesh origin including those with dual nationality and ordinarily residing abroad may maintain interest bearing time deposit account named Non-Resident Foreign Currency Deposit (NFCD) Account with the authorised dealers. These accounts may be opened initially with minimum amount of US$ 1000 or pound sterling 500 or equivalent Foreign nationals and companies/ firms registered and /or incorporated abroad, banks, other financial institutions including institutional investors and 100% foreign owned (A-Type) industrial units in the Export Processing Zones in Bangladesh are also allowed to maintain NFCD Account. The minimum amount of time deposits in such cases should be US$ 25,000 or its equivalent in pound sterling, euro mark or Japanese yen. Other terms and conditions in respect of these account holders will be similar to those mentioned above for NFCD Accounts of non-resident Bangladesh nationals. Resident FC Deposit Account: Branches may allow persons ordinarily resident in Bangladesh to open and maintain Resident Foreign Currency Deposit (RFCD) accounts with foreign exchange brought in at the time of their return from travel abroad. Any amount brought into Bangladesh with declaration to the Customs authorities in form FMJ and up to $5000 brought in without any declaration can be credited to such accounts. Proceeds of export of goods or services from Bangladesh or commission arising from business deals in Bangladesh cannot be credited to such accounts. Convertible Taka Accounts: The branches may open convertible Taka Account in the names of foreign organizations/nationals viz., diplomatic missions, UN organizations, non-profit international bodies,foreign contractors and consultants engaged for specific projects under the Government or semi Government agencies,the expatriate employees of such missions / organizations who are residents in Bangladesh.


Nonconvertible Taka Account: Foreign organizations and their expatriate personnel entitled to open convertible Taka account may maintain non-convertible account with the branch without prior approval of Bangladesh Bank. This account may be debited/credited for the following purpose: Private Non-resident Taka Account: The Taka accounts maintained with banks in Bangladesh by private individuals, firms and companies resident outside Bangladesh are known as Non-resident Taka accounts. The accounts of foreign nationals residing in Bangladesh and foreign firms and companies located and operating in Bangladesh and accounts of U.N. and its organizations are, however, treated as resident accounts and kept outside the scope of Exchange Control. The accounts of Bangladesh nationals who leave the country except those who hold office in the service of Bangladesh Government are required to be treated as non-resident Taka account so long they remain outside Bangladesh. Non-resident Blocked Account: A blocked account means an account in which operation is prohibited by an order of Bangladesh Bank. Under the F.E.R. act, 1947 Bangladesh Bank can “Block” an existing Non-resident account or direct any payment due to a Non-Resident to be made only to a N/R blocked Account.Opening and operation of in a N/R blocked Account requires prior approval of Bangladesh Bank. INTERNATIONAL DIVISION Responsibilities of International Division AD Licence and Correspondent Relation: International Division at the Head office shall be responsible for providing guidance and necessary logistics to the branches and liase with Bangladesh Bank and other agencies. The Division should identify the branches in various locations based on volume of international business that can profitably operate foreign exchange business and then apply to Bangladesh Bank for Licenses to deal in foreign exchange on prescribed form. Bangladesh Bank normally insists on the prospect for adequate business to justify the authorization. The bank also has to have trained manpower as a prerequisite for issue of AD licence. International Division should arrange for establishment of correspondent’s relationship with banks in as many countries as is warranted by customers’ needs. Agency arrangement involves an agreement between bank and a foreign bank/branch for conducting international banking and financial transactions emanating from exports, imports and other foreign exchange business. Generally the following points are covered by agency arrangements:  Control Documents: Exchange of authorised signature booklets, Test Key materials etc. between two banks.  Area of Operations: The names of the branch/offices of the two banks, which will be authorised to operate under the arrangement.


 Subject of Operation: The instruments which will be used to execute the transactions viz. D.D./T.T./M.T./L.G./L.C. etc.  Currency of Operation: U.S dollar, Pound sterling, Euro, Yen etc. in which transactions are to be conducted.  Reimbursement: Mode of reimbursement of drawings on each other through Nostro and Vostro Account and providing of cover against such drawings are set out in the arrangement. Monitoring and reporting: International Division will work as watchdog over the branches to ensure that they observe the rules and regulations meticulously. For this propose it will maintain a calendar of returns to ensure (a) receipt of reports and returns from the branches and (b) transmission of reports and returns to Bangladesh Bank and other agencies on due dates. The branches should also be encouraged to apply innovative ideas to attract new business. Forms and Specimens : International Division will arrange for printing and supply of various forms to the branches. These should be periodically reviewed to reflect the emerging development in the field of technology, communication and financial products. Reference Books: International Division will collect and supply the branches with various updated reference materials including ‘Guidelines for Foreign Exchange Transactions’ and Foreign Exchange circulars issued by Bangladesh Bank from time to time, Import Policy, Export Policy, Industrial Policy and laws and regulations concerning joint stock companies, banking, insurance, contracts etc. Training and Orientations: International Division will arrange suitable orientation and training programmes for the staff in collaboration with BIBM and other organisations at home and abroad as well as in its own training institute. The Division will also hold discussion programmes with the branch staff to interact on business strategies. Nostro and Vostro Account: Foreign Currency Account maintained with correspondents’ abroad is termed by us as “Nostro Account” meaning “Our Account with you”. The foreign correspondents, however, describe our Account maintained by them as “Vostro Account” meaning ‘Your account with us’. Similarly our foreign correspondents may at times want to maintain Non-resident Taka Accounts with us. These are, from their point of view, their Nostro Accounts but from our point of view “Vostro Account”—‘Your account with us’. These types of accounts would, however, be very far and few. Foreign Currency Account if any, maintained by us with our correspondents abroad in the name of third party is termed by us as “Loro Account” meaning ‘their Account with you’. These types of accounts will also be rare. Limit of Foreign Currency Balances:


Bangladesh Bank fixes an overall limit of foreign currency balance that each bank can maintain with correspondent’s abroad as working balance. The limit is set in terms of US dollar but banks are free to maintain balances in other convertible foreign currencies in different financial centres, provided the US dollar equivalent is kept within overall limit set by Bangladesh Bank. Proforma (Shadow or Mirror) Account in General Ledger Our correspondents abroad debit our accounts for payments made by them for our sale transactions and credit with funds paid into these accounts by our correspondents abroad or overseas customers against our purchase transactions. These have the effects of either reducing or increasing the balances in foreign accounts. The Head Office maintains contra proforma account in the General Ledger in the name of each foreign correspondent. For instance, if a “Nostro Account” is maintained in US dollar with Chemical Bank in New York, a contra proforma account under the style Chemical Bank (Our Account) is opened in the General Ledger and other books of accounts. These are proforma accounts. Debit entries in the Nostro Account are reflected in the Proforma Account as credit items, while credit entries in Nostro Account are reflected as debit items in the proforma Account. Such proforma Accounts have separate columns for debits, credits and balance expressed in both foreign currency as well as their Taka equivalent, and the rates of exchange at which the relevant foreign exchange transactions are put through. Non-Resident ( N. R. ) Taka Account of Foreign Correspondents: ID will have to approve opening of Non- Resident Taka accounts in the name of the bank’s foreign correspondents, subject to report to Bangladesh Bank giving names and address of the foreign banks. Such accounts can, however, be opened only against receipt of inward remittances in freely convertible currencies. Transfer of Taka to the credit of such N. R Taka account constitutes an outward remittance and is equivalent to a sale of foreign currency. Such transfers can be made only against approved outward remittance. Transfer between two N.R. Taka accounts are however, permitted freely. All debits/credits and balances in N. R. Taka account of foreign correspondents should be reported to Bangladesh Bank on the appropriate returns. Borrowings from Abroad: Banks are allowed to obtain short term loans or overdrafts in foreign currency from their correspondents abroad only in the normal course of their foreign exchange business for a period not exceeding 7 days at a stretch but not for any speculative purpose. However, if such loans and O/Ds are to be secured by collaterals, prior approval of the Bangladesh Bank is to be obtained. Interest on such short-term loans and O/Ds can be remitted without prior approval of Bangladesh Bank but subject to submission of report to them in due course. j)Long-term loans in Foreign Currency : Prior approval of Board of Investment is required for obtaining any long-term loans in foreign currency.


Open Position: Bangladesh Bank sets prudential limits on bank's open (overbought/oversold) exchange position. The ID should ensure that the prescribed open position limit is not exceeded. If the bank exceeds the prescribed limit and fails to furnish satisfactory explanation for the same, it may be asked to sell the excess amount ready and cover its position by buying forward for deliveries corresponding to the maturities of its own forward obligations. In general, the Bank should aim at maintaining their ready and forward positions month by month reasonably in line, avoiding heavy ready purchases against forward commitments. Overbought/oversold position: The ID will work out the open exchange position daily and report to Bangladesh Bank the positions (overbought/oversold) as at the close of business on Thursday of each week (see chapter 2, Vol.2 of the Guidelines for Foreign Exchange Transactions). If, for reasons beyond control, the overbought/oversold position during the period under report is in excess of the prescribed limit, a letter explaining the circumstances must accompany the weekly return. Square a position: When the bank runs short in any currency it may purchase the same from the inter-bank market, overseas correspondent or Bangladesh Bank. Similarly, it can square up the long position by selling the currency in the inter-bank market, or to overseas correspondents or Bangladesh Bank. If the bank runs a short/long position in other currencies such as Swiss franc, euro etc., the cover operations may be carried out by buying or selling the required currencies in the local inter-bank or international foreign exchange market, like London, New York, Singapore etc. Open Position Vs F.C. Account Balances: The exchange position in a foreign currency is the net difference between total of sales and total of purchases on a particular day, as reflected in the General Ledger account at home, whereas, the balance in F.C. account refers to the actual debit or credit balance in the Nostro accounts with correspondents abroad. These two sets of account are not normally composed of same items. For example:  Export bills purchased/discounted are entered into position book but are not included in Nostro account until they are actually realised.  Import bills drawn under LC and negotiated by foreign correspondents are included in Nostro account but are not taken into exchange position until they are actually retired by the importer or lodged in the book as sale transactions.  Forward sales/purchases appear in the position book but are not entered in Nostro Account, until the contracted foreign currency is delivered/received.  T.T./M.T./D.D. etc. issued by foreign correspondents are entered in Nostro account but do not appear in the position book until they are paid to or encashed by the beneficiary.


 Deposit of foreign currency in Nostro Account abroad is included in the balance but is not reflected in the position book.  Some of the items of position book do not enter into Nostro Account immediately. Likewise some items of Nostro account also do not enter into the position book. Reconciliation of Nostro Account Balance with Exchange Position:  Take the General Ledger balance of the proforma account (Nostro Account) maintained in the name of the foreign bank (usually the balance will be in debit).  Add import bills drawn under LC and negotiated abroad but not yet paid/adjusted.  Add export bills purchased/discounted but not yet realised.  Add forward purchase, not yet delivered. Reconciliation of Nostro Account: For each Nostro Account ID should maintain a corresponding proforma account in the name of individual foreign correspondent bank separately for each foreign currency. As already explained, Foreign Currency Account (Nostro Account) is credited by our correspondents with the proceeds of our export bills, drafts, TC etc. sent to them for collection. They also credit our account with covers of inward remittances viz: DD/TT/ MTs etc. drawn by them on our branches in Bangladesh. The branches will receive Credit Advices of Nostro account from the foreign correspondents showing realisation of export bills/cash letters etc. and payments made by branches against DD/TTs etc. drawn on them by the foreign correspondents. The branches would send ETDAs (Debit Advice) to Head Office, International Division furnishing full narration and particulars of the transactions. The Head Office, I.D. on receipt of ETDA from the branch would respond the entry by debit to aforesaid proforma account maintained in the name of the concerned foreign correspondent by contra credit to the branch through General Account. On receipt of the statement from foreign correspondents it may at times be observed that responding debit entries in the proforma account had not yet been passed against some credit entries shown in the statement of account. This may be due to non-receipt of relative credit advice from the foreign correspondents or non-receipt of relative ETDA at the Head Office from the branch. The branches also sometimes cannot correlate the credit entry due to lack of full particulars or references from the foreign correspondents. The credits given to our “Nostro Account” by the foreign correspondent, against which no corresponding debit entries have yet been passed in the Proforma Account at the Head Office, are known as “Outstanding Credit Entries” as per statement and are therefore, required to be reconciled by the HORC. Similarly, when the Nostro Account maintained by our foreign correspondents are debited by them on account of bank charges, commission etc. and payments against foreign DD/TT/MT/LC issued on them by our branches, they send Debit Advices to our concerned branches. The branches, on receipt of the Debit Advice of Nostro Account, would send ETCAs (Credit Advice) to Head Office furnishing full particulars and references of the transactions including LC number and date etc. where applicable. The Head Office, I.D. on receipt of ETCA from the branch would respond the entry by credit


to the Proforma Account maintained in the name of the concerned foreign correspondent by contra debit to the branches through General Account. The debits raised by our foreign correspondents in our Nostro Account against which no corresponding credit entries have yet been passed in the Proforma Account maintained in the Head Office are known as “Outstanding Debit Entries as per statement” requiring reconciliation by the HORC. The branches find these debit entries in the statement of foreign correspondent outstanding mainly due to non-receipt of the relative “Debit Advice” either from the correspondent’s abroad or due to:         

Receipt of incomplete references from them, Non-receipt of ETCA by Head Office from the branches concerned. Debit/credit entries raised by the Head Office, in the proforma account of the foreign correspondents at the instance of the branches are not responded by the foreign correspondents concerned by contra credit/debit to our Nostro Account More than one-debit/credit entries are inadvertently raised in the Proforma Account either at our end or in the Nostro Account at the end of foreign correspondent. Several transactions are amalgamated in one particular debit/credit entry without furnishing full particulars of individual transactions in the Debit/Credit Advice.

For all these reasons reconciliation of Nostro Accounts with Proforma Account becomes absolutely necessary. Reconciliation Procedure and Matching: On receipt of the statement of the Nostro Account from the foreign correspondents, the debit/credit entries in the statements are checked and marked off after comparing each entry against those appearing in the Proforma Account. The debit entries in the statement are marked off against the corresponding credit entries in the Proforma Account of the foreign correspondent by putting the date of responding of particular entry, while the credit entries in the statement are marked off against the corresponding debit entries in the foreign bank’s Proforma Account in the same manner. This process is known as matching. Thereafter the entries found unmarked as per foreign bank’s Proforma Account and as per statement of Nostro Account, are jotted down in the reconciliation statement in the following format: RECONCILEMENT OF

Date _________

OUR ACCOUNT WITH________________________ Period…………………………………. Entry Date

Description

Amount Date Entry Description Amount Date since Date since credited debited a) Credit balance as per our Ledger a) Debit balance as per Our Ledger


i) Statement of Account

i) Statement of Account

b) Add unmatched individual items

b) Add unmatched individual items

i) We debited but they have not credited.

i) We credited but they have not debited

ii) They debited but we have not credited

ii) They credited but we have not debited

TOTAL: ____________

TOTAL: ____________

NOTE : The two sides must agree. Schedule of Charges: ID will provide a schedule of bank charges for the bank’s services concerning foreign exchange payments. The officer in charge of the branch may, whenever consider expedient, make special concession to attract new customers or to retain the old ones if the volume of business is considerably large. The branch in charge would normally consult the Managing Director if such concession involves significantly higher amount than the prescribed norms. TREASURY OPERATION The main functions of the Treasury Department are, to control and manage risks of dealing in the Foreign Exchange and Local Money Market.The foreign exchange dealing operations are performed through Treasury Department of a Bank. 5.5 Objectives of Treasury Operations: To hedge the Foreign Exchange Risk in foreign exchange dealing, there should have been some guidelines to achieve the objectives of treasury functions/operations. The following objectives are to be achieved in treasury operations: To achieve high degree of performance and maintain high standard in Foreign Exchange Dealing Transactions. To promote and develop inter-bank foreign exchange dealing. To manage risk exposure in Foreign Exchange Dealing. To keep informed of Foreign Exchange market technical views based on fundamental forecast. To earn profit from Foreign Exchange Dealing. To segregate dealing and back office functions and reporting lines to maintain control. Treasury Department has two separate wings: Front Office (Dealing Room) Back Office (Settlement, Reporting etc.


Treasury Operational Organization Chart: Managing Managing Director Director

Head Head of ofTreasury Treasury

Deputy DeputyManaging Managing Director Director Manager Manager Back Back Office Office

Chief ChiefDealer Dealer Front Front Office Office (D. (D. Room) Room)

Dealer Dealer Cross Cross Currency Currency

Dealer Dealer USD/BDT/Others USD/BDT/Others

Dealer Dealer MM MM Lcy Lcy

Officer Officer Reconciliation-Fcy Reconciliation-Fcy

Dealer Dealer Security Security Papers Papers

Officer Officer Reconciliation-Lcy Reconciliation-Lcy

Officer OfficerForeign Foreign Currency Currency Settlement Settlement

Officer OfficerLocal Local Currency Currency Settlement Settlement

Officer OfficerReporting Reporting B.Bank/Managment B.Bank/Managment

Functions & Responsibilities of Front Office:  Dealers must follow the rules and regulations of treasury Guidelines as well as Bangladesh Bank instructions.  Dealers are personally authorized to handle the Reuters Operation.  Dealers fix the Exchange Rate in consulting with Head of Treasury on the basis or cross rate available form the Reuters.  The rate sheet should reach within 11.30 A.M to all A/D Branches by fax or E-mail etc.  Dealers should forecast the currency market and do data analysis and views etc. in correctly.  To avoid discrepancies and errors Dealers should pass the deal slip immediately after deal is done.  Dealers are allowed to deal only over telephone and On-line dealing system.  Dealer are allowed to deal with the counter-party only who has the recording machine.  Dealer are allowed to deal from 8.30 A.M till squiring the deal on that day up to prescribed limit.  Dealer must not deal on off premises.  Dealer are allowed to deal by Telephone, Fax and Telex..  All deals should squire within the day.  Dealer are not allowed t o keep Overnight out standing position.  Dealer may review the rate sheet periodically with other Commercial Banks.  Special rate may be allowed on case-to-case basis.  Dealer should use the prescribed deal format developed by the bank.  After deal done dealers should fill up deal slip with the following information:Serial No.


                 

Deal Date Base Currency Deal Amount Rate Quoted Currency Value Date Dealer should deal with in his inter-day limit. Dealer should deal within his counterpart limit. The dealers are responsible for making deals with highest efficiency and confidence applying the judgment. Dealer are allowed to buy or sell other currency as per the requisition. After hour deal need to take permission from the Chief Dealer. Dealer should buy or Sell USD/BDT as per the requirement of fund. Ensuring that the counter party’s lines fixed by the management are complied with. To work within limit set by BBK and management. To collect and provide accurate information and market analysis. Dealing limit should be taken from the Head of Treasury before the deal start. Stop loss limit should be taken before the deal starts. Each purchase or sale shall be in proper documentation. Each deal slip should be duly signed by the Dealer, Head of Treasury and Head of Back Office. Corporate dealing in spot and forward with bank’s existing clients. Dealer should place customer’s deposit. To maintain daily liquidity position and daily Foreign Currency position. To analyse Currency Trade. Ensure compliance of regulation.

Functions & Responsibilities of Back Office:  Back Office will collect the deal ticket and other documents for the deal and prepare confirmation.  Back Office will match the deal confirmation with other counter party.  If there is any error in deal confirmation Back Office will inform the Head of Treasury.  Back Office will send the payment settlement before the value date.  Settlement to be made only our Nostro and Bangladesh Bank Clearing Account.  At the end of the day, Back Office will send the following information to the Head of Treasury. Position Report List of Deals Day wise Position Maturity wise deal Outstanding deal Stop loss amount Profit & Loss Report.  Back Office will follow the counterpart limit as well as dealer’s inter-day limit.  Back Office will collect the SSI from counter party and send SSI to others.  Settlement will be made as per the SSI received duly signed by the Authorized Signatory of the Bank.


           *

To check up whether there are anomalies in deals or mismatch. To verify total position. To maintain Nostro A/Cs position and reconciliation. To issue cheque, draft, fund transfer instruction, debit authority for settlement. To pass the daily accounting entries. To pass entries within the cut out time by 3.30 P.M from Saturday-Wednesday. To maintain daily FC position and reporting to B. Bank on daily basis. To control over BBK Cheque, draft, FC clearing. To control over the deal slip. To ascertain valuation of position. Reporting to the Management through the Head of Treasury. To report risk if any, to the management through the Head of Treasury.

Restrictions: There are certain activities, which are restricted to the Dealers and the Back Office Officers. 1. Front Office (Dealing Room) is restricted from:  Deal processing  Accounting entries  Sending/ receiving deal confirmations  Issuing/ receiving Bangladesh Bank cheques  Sending settlement instructions i.e. swift messages/ telexes  Generating revaluation rates  Running the revaluation process  Regulatory reporting  Involvement in raising rate appropriateness  Setting up/ approving counter party credit limits  Setting up/ approving market risk limits 2. Back Office is restricted from:         

Dealing activities Decide on exchange rates/ quoting prices Striking deals with counter parties Raising deal slips Altering deal details Updating position blotters Deciding on Nostro funding Approving counter party credit limits Approving market risk limits

Trading Area and Limit for the Dealers:  The Foreign Exchange dealer should mark deals within the prescribed limits.  The inter day limit should be given by the Head of Treasury after approving the same from the management.  Stop loss limit should be given by the Head of Treasury approving the same from  the management.  Each deal should be USD250,000.00 or equiv.  The dealer should deal in USD/EUR, USD/GBP, USD/JPY, and USD/CHF only.


   

The Dealer can deal only spot basis if required. The dealer cannot keep any overnight position. Deal should be kept square within the day. To maintain stop loss limit.

Process of Treasury Operations: In a proper treasury setup, a dealer strikes a deal in the market and maintains his/ her own record for monitoring the exchange position. Within a reasonable time, s/he passes on the detailed information of the deal to the treasury back office. The back office arranges for the deal confirmation with the counter party, arranges settlement, reconciles exchange positions and advises to treasury and runs the valuation on a periodic basis. The dealing function requires the dealers to make very quick decisions either for taking advantages of any market movements or for unwinding an unfavorable position. Also, the treasury dealing is a wholesale function that involves large lots. These together make the job of a dealer requiring: Proper information sources e.g. Reuters Money 2000, Bloomberg, financial TV channels etc. Adequate and dedicated communication tools e.g. Reuters Dealing System, telephone, fax, telex etc. Specially designed dealing desks to appropriately accommodate the various information and communication tools High level of dealing skills Quick decision making authority Independent decision making authority Specific task allocations In order to achieve the optimum level of efficiency, returns and most importantly controls, there are certain processes that the organization’s management must put in place. The very basic ones of these that would be related to our market are explained below: Dealing Room: Since the dealers have access to global live prices of various products through their various communication tools, their desks are required to be access restricted. As a result, dealers are typically housed inside a covered room known as the “dealing room” where the access is generally restricted only to the dealers and the related personnel. Taped Conversations: In many occasions, the dealers conclude deals over the phone. This is particularly applicable where deals are done on the local market where dealers are mostly known to each other and they feel comfortable dealing by talking to other dealers over phone. Such deals over the phone do not have any hard evidence and in a fast dealing environment, there is risk of mistakes (of rates, amounts or value dates etc.) As a result, all telephonic conversations taking place in the dealing room are required to be taped. Taped conversations can assist in resolution of any disputes that may arise. In some jurisdictions, it is required to advise all dealers (of other organizations) beforehand that their conversation would be taped. Deal Recording:


The job nature of a dealer is highly demanding and the environment of a dealing room is very active. In such an environment when a dealer continues to deal, his/ her focus remains on the market. As such there is a risk of a dealer completely forgetting about a deal or part of a deal or making mistake in recording that deal. To eliminate this risk, a dealer must record the deal immediately after it is concluded with the counter party. The deal recording needs to be done in two ways: Counter party Limits: The issue of counter party limits arises from the risk that a customer with whom an organization had a reciprocal agreement defaults. Credit risk is the risk that the counter party to a financial transaction - here a foreign exchange contract, may become unable to perform as per its obligation. The extent of risk depends on whether the other party's inability to pay is established before the value date or is on the same value date of the foreign exchange contract. Settlement risk: The risk on the settlement day that one counter party pays funds or delivers a security to fulfill its side of the contractual agreement, but the other counter party fails on its side to pay or deliver. This occurs when items of agreed upon original equal values are not simultaneously exchanged between counter parties; and/or when an organization’s funds are released without knowledge that the counter value items have been received. Typically the duration is overnight/ over weekend, or in some cases even longer i.e., until the organization receives the confirmation of receipt of funds. The risk is that the organization delivers but does not receive delivery. In this situation 100% of the principal amount is at risk. The risk may be greater than 100% if in addition there was an adverse price fluctuation between the contract price and the market price. Pre-settlement risk: The risk that a client defaults on its agreement with the organization before the settlement day. Whilst the organization has not paid away any funds, it still has to replace the contract at the current market rates, which might have moved against it. In this case the organization is exposed to possible adverse price fluctuations between the contract price and the market price on the date of default or final liquidation. The organization’s loss would then be the difference between the original contract price and the current market price on the date of default. Position Blotter: Immediately after a deal is done, the dealer should record the deal on the position blotter and update his position. It is of utmost importance to a dealer to remain aware of his/ her position at all times. This is required to capture any immediate opportunity or to be in a position to immediately react to any adverse situation. A sample blotter is shown below: Bank X Limited Head Office FX POSITION BLOTTER

Date:


Currenc y:

USD

Counterparty

Currenc y:

Comments

Net Position

Purchase

Sale

Comments

Net Position

Purchase

Sale

Comments

Net Position

Comments

Net Position

EUR

Counterparty Currenc y:

Sale

GBP

Counterparty

Currenc y:

Purchase

JPY

Counterparty

Purchase

Sale

NET OPEN POSITION: Note: Organizations can add/ delete currencies according to their own requirement in the same format. Deal Slip: A dealer must, at the earliest possible time, record the details of the deal on a slip or memo which is known as the deal slip or deal ticket. In some organizations, the deal slips are electronic and are through inputs into their automated systems. A typical deal slip would contain details such as, payment instruction, value date, currencies, amounts etc. The deal slip should be passed on to the treasury back-office at the earliest for their further processing of the deal. Ideally, all deal slips should be pre-numbered for control reasons and the treasury back-office must monitor for any breakage in sequence. Where pre-numbered deal slips are in place, any cancelled deal slips must also be forwarded to treasury back-office for appropriate record keeping/ filling. A format of a typical deal slip is shown below: Bank X Limited Head Office No. 0001 Foreign Slip

Exchange

Deal

Counterparty: We Have Purchased/ Sold:

Date:


Currenc y: Amount: Against Sale/ Purchase of: Currenc y: Amount: Deal Rate: Value Date: We Receive Payment at: Their Payment at: Special Instruction: Dealer's Signature Deal Delay: All deals done by dealers are required to be processed by the treasury back-office for which they need to be informed of the details of the deals within a certain time. In this process dealers raise deal tickets that need to be sent across to the treasury back-office within shortest possible time. The timeliness of raising deal slips/ inputting into the automated system as well as passing them on to the back-office is not only sound business practice but also critical for monitoring of credit risk, price risk and regulatory compliance. The following table provides guidelines of deal capture standards: Product

Deal-slip raising/ System Input Deal-slip to reach backTime office

Spot FX

Within 10 minutes

Within 25 minutes

Forward FX

Within 10 minutes

Within 25 minutes

FX Swaps

Within 15 minutes

Within 30 Minutes

Call/ Notice Money

Within 10 minutes

Within 25 minutes


Money Market Term

Within 10 minutes

Within 25 minutes

Foreign Currency Deposits

Within 10 minutes

Within 25 minutes

Treasury Bills Purchase

By 10:30 a.m. on payment day

Within 30 minutes

Repo

By 12:30 p.m.

Within 30 minutes

Reverse Repo

By 12:00 p.m.

Within 30 minutes

The guidelines as per the above table may slightly vary depending on the distance of the physical locations of the treasury and the treasury back-office and degree of system automation within the treasury organization. However, if the deviation from the above mentioned times are in excess of 10 minutes, the concept of the deal delay process would be defeated. For monitoring of the proper functioning of this process, treasuries where manual deal-slips are raised, should use time stamping on deal tickets. In environments where treasury automated systems are used, the time stamping may not be required since the system should automatically take care of this. Triggers: A trigger is a level of a position at which an organization decides that the management should be made aware of. This may be in terms of a market value of a position or an unusual trading volume etc. This is a predetermined level given by the management. When a trigger is hit, the management needs to be informed of the same. Upon advised of a trigger, the management usually decides on closer monitoring of the particular situation. In cases of a loss trigger, the amount is generally set at a lower level than the stop loss limit (at which the position has to be un winded). Stop Loss Orders: A stop loss limit for a product is generally a certain percentage of the organization’s prior year profit from that product. For example if an organization’s FX trading revenue for the year 2002 was USD A, the management/ market risk management unit may decide to accept a maximum of 10% loss of that during the current year. In that case the stop loss limit for that organization for 2003 would be A X 10%. In managing the business within the stop loss limit, treasuries running overnight positions (within their overnight limits) must leave appropriate overnight watch orders. Appropriateness of Dealing: While transacting with a client, a dealer should be aware of the counter party’s dealing style & product mix and assess (prior to concluding a deal) whether the customer is dealing in an “appropriate” manner. A dealer should have the responsibility to ensure that the volumes of activity and types of products transacted by a client are appropriate for that particular client and the risks of these transactions are clearly understood by them. Prior to conclusion of a


deal, a dealer needs to assure that the counter party is authorized to enter into such transaction (both from counter party’s internal and regulatory perspective). To address the appropriateness issue, it might be a good idea for the organization to get a standard agreement signed by all its counter parties. For our case, such an agreement can be drafted by BAFEDA and can be made mandatory for all members to sign. Rate Appropriateness: This exercise is carried out by the treasury back-office to check for whether all deals have been dealt at market rates. Any deals done at off-market rates must be raised to the respective dealer for a satisfactory explanation bringing this to the notice of the chief dealer. In case of a non-acceptable justification provided by the dealer, the organization may decide to engage in further investigation. Deals Outstanding Limit: It is a good practice to monitor the total deals outstanding of the treasury. This exercise requires to be carried out by the treasury back office to check against any unusual volumes of activity. Each treasury would have its own volume trend and the treasury back office should monitor whether all activities are being carried out within usual trend. The management may decide to set a limit for all outstanding FX contracts at any given point of time. Daily Treasury Risk Report: The treasury back-office is required to summarize all daily positions particularly the end-ofday positions on a report format for the information of the senior management. Such report should ideally contain information about outstanding open position against limit, different currency-wise outstanding exchange position (against limits if applicable), outstanding foreign exchange forward gaps in different tenors, tenor-wise MCO report, interest rate exposures of the balance sheet, counter party credit limits usage, day’s P&L against trigger & stop loss limit etc. A sample format of a daily treasury report for the senior management is shown below:. Code of Conduct: Due to the special nature of job that dealers engage in, they are expected to act in a professional and ethical manner. Code regarding Dealing Practices 1.Opening hours in the foreign exchange market : Opening hour should be defined. 2.Confirming procedures: Dealers must confirm verbally.After dealers’ confirmation, it is the back-office’s responsibility to carry out reconfirmation independently from those who initiated deals. Recommendation must be sent out as quickly as possible after a deal has been done, and should be addressed to the back-office of the counterpart bank.


All reconfirmations should include the following information as a minimum requirement: -

date of transaction; By which means effected (phone, telexed.; Name and location of counterpart; Rate amount and currency; Type and side of deal (buying and selling) Value date, matury date, and all other relevant dates; Standered terms/conditions applicable; and All other important and revant information.

Upon receipt, all reconfirmation must immediately be thoroughly checked, and appropriate action be taken to rectify differences. If the counterpart’s recommendation is considered incorrect, it must immediately be informed. A new reconfirmation (or written agreement to a correction) must be requested from, and provided by the bank whose original reconfirmation was incorrect. 3. Payment/settlement instruction: Payment/settlement instructions should be passed as quickly as possible to facilitate prompt settlement. The use of standardized payment instructions between counterparts who regularly deal with each other is recommended as their use can make a significant contribution to reducing both the incidence, and the size of differences arising from the mistaken settlement of funds. 4.Confidentiality : Confidentiality anonymity are essential to the operation of a professional foreign exchange market. Participants in the market—commercial clients as well as banks—can expect to have their interest and to ensure that its employees can readily identify information that is confidential or situations where anonymity is essential, and instruct their employees to handle such information accordingly. Whenever confidentiality is broken, management has to see that the institutions are issued swiftly to correct the conditions that permitted such a situation to occur. 5.Conversation Language: All dealing related conversations taking place in the treasury must be in an acceptable language for operational clarity. To elaborate, all conversations on the Reuters Dealing System must be in English and all conversions over telephone must be restricted to either in Bengali or in English. 6.Other Important Points of Treasury Operations: 1. Dealing Limit 2. Mandatory Leave: 3. Position Reconciliation: 4. Nostro Account Reconciliation: 5. After-hours Dealing 6. Off-premises Dealing


7. Stop Loss Limits 8. Mark-to-Market 9. Valuations 10. Model Control Policy 11. Internal Audit The following table shows the maximum time limit after which unmatched items must be referred to the operations manager. Type of Transaction L/C payments Foreign exchange settlements TC encashment Outward remittances Draft payments ACU cover funds sent through Bangladesh Bank Credits to our accounts with insufficient details Correspondent bank charges recoverable from our customers or otherwise Any other credits to our accounts, where we have not passed corresponding debit entry Any other transactions where we have debited, but they do not credit Any other transactions where they have debited, but we do not credit Any other transactions where we have credited, but they do not debit

Transit Time 3 days, ACU - 7 days Nil. Immediately notify respective department if settlement does not occur on value date 21 days 3 days 30 days 7 days 20 days 30 days 7 days 7 days 7 days 7 days

A detailed flowchart of the reconciliation process of treasury division is shown below:


ANNEXURE III

Reconciliation Flowchart Take printout of “our account� from internal system/ database Receive nostro account statement from correspondent bank. Receive via swift/ telex

Match and knock-off identical entries

Units pass the corresponding/ corrective entries as well as entries for unreconcilable items. Highlight these to the units concerned

Prepare a report (Reconciliation Balance Report) for the outstanding exceptions

legal and regulatory framework of letter of credit Domestic Regulations/ Guidelines/ Policies ICC guidelines are not complete set of rules in regulating and guiding international trade payment transactions. Since the payment guidelines do not provide for comprehensive and complete rules for international trade payment transactions, national laws play an important role. This is particularly true for the issues that are not addressed by the UCP intentionally. For example the legal nature of the credit itself and legal nature of the relationship between different parties have not be addressed in the UCP. For effective international trade payment operation, it is required that national laws be capable of providing solutions to any issues of international trade payment procedure open to interpretation. In Bangladesh, Foreign Exchange Regulation Act, 1947 [FERA, 1947] is the most important domestic regulation in the area if international banking. FERA, 1947 has empowered Bangladesh Bank to regulate all kinds of foreign exchange dealings in Bangladesh. Empowered by the act, Bangladesh Bank issues Authorized Dealers licenses to the selected bank branches for conducting trade payments and other international banking operation. Following the provisions of the act, Bangladesh Bank issues circulars/ guidelines time to time to regulate trade payment and international banking activities to be followed by the banks. While dealing in international trade payment, other than FERA, 1947 and Bangladesh Bank circulars/ Guidelines, bank are required to follow trade policies issued form the Ministry of Commerce of the country empowered by Import and Exports { Control } Act, 1950. The


export and import policies specifically prescribe the policies/ rules of the government in regard to the export and import transactions and procedure and operation of making and receiving trade payment. Importer, exporters and indenters are required to be registered in Bangladesh under Importers, Exporters and Indenters Registration Order 1981. Moreover, Customs Act 1969 is also applicable to trade transactions that deal with levy and collection of customs duties and other allied matters. The prime objective of the trade policy of Bangladesh is to maintain a favorable balance of trade through adopting an export led development strategy, focusing on expansion and diversification export, ensuring availability of imported raw materials for expanding export oriented industries and increasing share of the country in global trade. Bangladesh has been able to open up its economy substantially through undertaking trade liberalization measures since 1980s. However, GOB has taken into consideration the sensitive areas like public health, security and religious bindings, while pursuing trade liberalization measures. Simultaneously, more liberal import and export policies and programs have been adopted including reduction of tariff slabs. Bangladesh pursued one year export and import policies in the first half of eighties and two year policies in the first half of eighties and first half of the nineties. Five year export-import policies (1997-2002) were formulated and implemented during 1997-2002. After that, GOB pursued three year export-import policies during 2003-2006. The current import and export policies (2006-2009) have been made effective from May 14 and 31, 2007 respectively. The new Import Policy Order, 2006-2009, has been formulated, keeping in mind the market economy ideology, to make available the commodities to the consumers at fair prices through removing the barriers to movement of goods inter nationally, to ensure availability of quality and health compliant goods, to create a congenial environment for Foreign Direct Investment through expansion and growth of export oriented industries, expansion and consolidation of domestic industrial base so as to make Bangladesh economy active and vibrant. At this moment the number of commodities kept under restricted list is only 25. The new import policy has allowed opening of LC for importing capital machinery even without IRC. The limit of import without LC has raised from $5000 to $ 35000. For enhancing easy availability of industrial raw materials and consumer goods at fair prices, some commodities have been declared importable as raw materials. In order to sustain the level of exports of Bangladesh, productive capacity of domestic export oriented industries should be increased along with ensuring quality of exportable products and its market diversification. For this reason, all efforts should be taken for converting our comparative advantage of human resources to competitive advantage. The Export Policy of 2006-2009 has considered agro-products, light engineering products, leathers goods, pharmaceuticals commodities, ICT products and home textiles as the thrust sectors of our export development. In addition, finished leather, frozen fish foods, cottage industry products, electronic products, fresh flower etc. have been considered as special development sectors in the current export policy. The current export policy has accommodated fiscal, financial and general policies/incentives in line with requirements of globalization, with a view to facing the challenges of post-MFA and increasing the competitive capacities of all domestic stakeholders. Bangladesh has adopted a number of projects under technical assistance of donors for enhancing the quality of exportable products, new market exploration, offering new products to world markets according to market demand. GOB has also taken a lot of measures such as simplification of disposal of goods, waiver of utility bills,


loan rescheduling, cash incentives, tariff-free import etc. for development of Ready Made Garments and Textile sector. One of the important aspects of export strategy of Bangladesh is to put equal emphasis on both bilateral and regional trade. Bangladesh is playing an active role in a number of regional trading blocs including SAFTA. Foreign Exchange Regulation Act, 1947 was adapted in Bangladesh immediately after the independence. However a few provisions have been added under the foreign exchange regulation (Amendment) ordinance, 1976. Actually this Act empowered Bangladesh Bank to regulate certain payments, dealings in foreign exchange and securities and the import and export of currency. Foreign Exchange Regulation Act 1947 was basically passed on 11 th March in the year 1947. After 1947, the act was adopted by Pakistan. And after 1971, Bangladesh adopted the same act. The act has 27 sections and a number of sub sections. The major section related with the international trade payment and foreign exchange are depicted below : Authorized dealers in foreign exchange (1) The Bangladesh Bank may, on application made to it in this behalf, authorize any person to deal in foreign exchange. (2) An authorization under this section (i) May authorize dealings in all foreign currencies or may be restricted to authorizing dealings in specified foreign currencies only; (ii) May authorize transactions of all descriptions in foreign currencies or may be restricted to authorizing specified transactions only; (iii) May be granted to be effective for a specified period, or within specified amounts, and may in all cases be revoked for reasons appearing to it sufficient by the Bangladesh Bank. (3) An authorized dealer shall in all his dealings, in foreign exchange comply with such general or special directions or instructions as the Bangladesh Bank may from time to time think fit to give, and, except with the previous permission of the Bangladesh Bank an authorized dealer shall not engage in any transaction involving any foreign exchange which is not in conformity with the terms of his authorization under this section. (4) An authorized dealer shall, before undertaking any transaction in foreign exchange on behalf of any person, require that person to make such declarations and to give such information as will reasonably satisfy him that the transaction will not involve, and is not designed for the purpose of, any contravention or evasion of the provisions of this Act or of any rules, directions or orders made there under and where the said person refuses to comply with any such requirement or makes only unsatisfactory compliance therewith, the authorized dealer shall refuse to undertake the transaction and shall, if he has reason to believe that any such contravention or evasion as aforesaid is contemplated by the person, report the matter to the Bangladesh Bank. Restrictions on dealing in foreign exchange: (1) Except with the previous general or special permission of the Bangladesh Bank, no person other than an authorized dealer shall in Bangladesh and no person resident in Bangladesh other than an authorized dealer shall outside Bangladesh, buy or borrow from, or sell or lend to, or exchange with, any person not being an authorized dealer, any foreign exchange.


(2) Except with the previous general or special permission of the Bangladesh Bank, no person whether an authorized dealer or otherwise, shall enter into any transaction which provides for the conversion of Bangladesh currency into foreign currency or foreign currency into Bangladesh currency at rates of exchange other than the rates for the time being authorized by the Bangladesh Bank. (3) Where any foreign exchange is acquired by any person other than an authorised dealer for any particular purpose, or where any person has been permitted conditionally to acquire foreign exchange, the said person shall not use the foreign exchange so acquired otherwise than for that purpose or, as the case may be, fail to comply with any condition to which the permission granted to him is subject, and where any foreign exchange so acquired cannot be so used or, as the case may be, the conditions cannot be complied with, the said person shall without delay sell the foreign exchange to an authorised dealer. (4) Nothing in this section shall be deemed to prevent a person from buying from any post office, in accordance with any law or rules made there under for the time being in force, any foreign exchange in the form of postal orders or money orders. Restrictions on payments: (1) Save as may be provided in and in accordance with any general or special exemption from the provisions of this sub-section which may be granted conditionally or unconditionally by the Bangladesh Bank, no person in or resident in Bangladesh shall(a) make any payment to or for the credit of any person resident outside Bangladesh; (b) Draw, issue or negotiate any bill or exchange or promissory note or acknowledge any debt, so that a right (whether actual or contingent) to receive a payment is created or transferred in favour of any person resident outside Bangladesh; (c) make any payment to or for the credit of any person by order or on behalf of any person resident outside Bangladesh; (d) place any sum to the credit of any person resident outside Bangladesh; (e) make any payment to or for the credit of any person as consideration for or in association with他 (i) the receipt by any person of a payment or the acquisition by any person of property outside Bangladesh; (ii) the creation or transfer in favour of any person of a right whether actual or contingent to receive a payment or acquire property outside Bangladesh; (f) draw, issue or negotiate any bill of exchange or promissory note transfer any security or acknowledge any debt, so that a right (whether actual or contingent) to receive a payment is created or transferred in favour of any person as consideration for or in association with any matter referred to in clause (e). (2) Nothing in sub-section (1) shall render unlawful他 (a) the making of any payment already authorised either with foreign exchange obtained from an authorised dealer under section 4 or with foreign exchange retained by a person in pursuance of an authorisation granted by the Bangladesh Bank; (b) the making of any payment with foreign exchange received by way of salary or payment for services not arising from business in, or anything done while in Bangladesh. (3) Nothing in this section shall restrict the doing by any person of anything within the scope of any authorisation or exemption granted under this Act. (4) For the purposes of this section "security" also includes coupons or warrants representing dividends or interest and life or endowment insurance policies.


(1) Where an exemption from the provisions of section 5 is granted by the Bangladesh Bank in respect of payment of any sum to any person resident outside Bangladesh and the exemption is made subject to the condition that the payment is made to a blocked account (a) the payment shall be made to a blocked account in tile name of that person in such manner as the Bangladesh Bank may by general or special order direct, and (b) the crediting of that sum to that account shall, to the extent of the sum credited, be a good discharge to the person making tile payment. (2) No sum standing at the credit of a blocked account shall be drawn on except in accordance with any general or special permission which may be granted conditionally or otherwise by the Bangladesh Bank. Restrictions on import and export of certain currency and bullion. (1) The Government may, by notification in the official Gazette, order that subject to such exemptions, if any, as may be contained in the notification, no person shall, except with the general or special permission of the Bangladesh Bank and on payment of the fee, if any, prescribed bring or send into Bangladesh any gold or silver or any currency notes or bank notes or coins whether Bangladesh or foreign. Explanation: The bringing or sending into any part or place in the territories of Bangladesh of any such article as aforesaid, intended to be taken out of the territories of Bangladesh without being removed from the ship or conveyance in which it is being carried. Shall nonetheless be deemed to be bringing or as the case may be, sending, into the territories of Bangladesh of that article for the purposes of this section. (2) No person shall, except with the general or special permission of the Bangladesh Bank or the written permission of a person authorised in this behalf by the Bangladesh Bank, take or send out of Bangladesh any g-old, jewellery or precious stones, or Bangladesh currency notes, bank notes or coins or foreign exchange. (3) The restrictions imposed by sub-sections (1 and 2) shall be deemed to have been imposed under section 16 of the Customs Act, 1969, without prejudice to the provisions of section 23 of this Act, and all the provisions of that Act shall have effect accordingly. 6.1.1 Guidelines for Foreign Exchange Transactions • Authorized Dealers (ADs) must deal only with known customers having a place of business in Bangladesh and can be traced easily should any occasion arise for this purpose. • ADs may issue ‘Letter of Credit Authorization Form’ in conformity with the current IPO allowing imports into Bangladesh. • ADs must not issue blank LCAF to the clients. • LCAF remain valid for shipment of goods nine months subsequent to the month of issue. Therefore ADs should not make remittance against any LCAF after the expiry of the prescribed validity period without first obtaining revalidation of the LCAF. • ADs must take all precautions to quote the correct ITC number (HS CODE) of the goods to be imported, in the LCAF and the LC. Because, failure to do so may lead to imposition of penalties by the Customs Authorities. • When LCs are opened, full particulars thereof must be endorsed on the back of the exchange control copy of the LCAF under our stamp and signature. The Taka


equivalent of the LC opened must be endorsed on the LCAF at the ruling BC selling rate. • Before delivering the import documents to the importers, ADs must invariably endorse on the invoices accompanying the bill amount both in figures and words which have been remitted from Bangladesh. The endorsement should be under our stamp and signature. • On expiry of an LC unutilized partly or wholly, or on cancellation or reversal of a sale of foreign exchange, the endorsements made on the back of the LCAF may be cancelled with appropriate remarks under our seal and signature. • In case an endorsement is made mistakenly on a wrong LCAF, ADs may cancel the endorsement provided the endorsement is transferred simultaneously to the appropriate valid LCAF • The aggregate amount of foreign exchange sold against an LCAF whether under LC or otherwise, should not exceed the value mentioned in the LCAF. • ADs may report to the Bangladesh Bank the remittance of normal bank charges as usual with TM form and necessary supporting documents. • LCAFs can normally be utilized on CFR basis. Full LCAF value is therefore not remittable as FOB value of goods. As such freight charges payable on imports on FOB basis are to be adjusted against the relative LCAF value. In case of FOB imports we should endorse, beside FOB value, the freight payable in Taka as indicated in the Bill of Lading etc. In cases where miscellaneous charges i.e. handling charges, cartage/surface transportation, documentation charge etc., are required to be paid by the importers on arrival of goods through the Airlines, the ADs should also endorse on the Exchange Control copy of the LCAFs the amount of such charges as indicated in the Airway bill along with the freight in Bangladesh Taka. ADs should also give a certificate to Importers in the form given in Appendix 5/11 of Guidelines for foreign exchange transactions to the effect that the amount of freight, handling charges etc. have been endorsed on the relative LCAF. The issue of this certificate is essential as the shipping companies etc. are under instructions not to accept payment of freight in Taka unless the above mentioned certificate is produced to them. In cases where the FOB value and the amount of freight payable in Taka exceeds the value of the LCAF the application should be referred to the Bangladesh Bank for consideration with full particulars and supporting documentary evidence. • ADs should establish LCs against specific authorization only on behalf of our own customers who maintain accounts with us and are known to be participating in the trade. Payments in retirement of the bills drawn under LCs must be received by us by debit to the account of the concerned customer or by means of a crossed cheque drawn on the drawee’s other bankers. • All LCs and similar undertaking covering imports into Bangladesh must be documentary LCs and should provide for payment to be made against full sets of on board (shipped) bills of landing, air consignment notes, railway receipts, post parcel receipts showing dispatch of goods covered by the Credit to a destination in Bangladesh. All LCs must specify submission of signed invoices and certificates of origin. If any particular LCAF require submission of any other document or the remittance of exchange at certain periodical intervals or in any other manner, the LC should incorporate those instructions of the LCAF.


• It is not permissible to open clean or revolving or packing credits. Applications for opening such LCs should be referred to the Bangladesh Bank with full particulars. • It is not permissible to open import LCs in favor of beneficiaries in countries from which import into Bangladesh are banned by the competent authority. • The ADs should, before opening an LC, see documentary evidence that a firm order for the goods to be imported has been placed and accepted. ADs should ensure while opening an LC that full description of the goods to be imported are given in each Credit along with the unit price of the merchandise. • ADs may establish LC to make payment to the country of origin of goods or any other country except those countries import from which are prohibited. • In case of import by post, we may make remittance without prior approval of the Bangladesh Bank only if the parcel is addressed directly to our Bank. • ADs may allow remittance against discrepant documents/documents received directly by the importers after the goods have been cleared from the Customs, on the basis of the relative LCAF, the exchange control copy of the Customs Bill Of Entry for consumption or Customs Certified Invoice in the case of import by post, and the relative invoices. • All application for payment for import should be made on IMP form by the importer and we have to endorse on the reverse of the IMP form in the space provided for us. • In all cases of import, the importer must submit within 4 months from the dates of remittance the relevant Exchange Control Copy of the customs Bill of Entry. • In case of import by post, the importer must submit the invoice certified by the Customs authorities in lieu of the exchange control copy of the bill of entry. • ADs have to obtain the invoice in duplicate, both of which have to be certified by us as usual. After recording in the IMP form the particulars of the remittance effected, the original copy of the IMP form alongwith the copy of the certified invoice have to be forwarded to the Bangladesh Bank with the usual monthly returns. • The duplicate copy of IMP form will be retained by ADs. Subsequently when the exchange control copy of the bill of entry/customs certified invoice is submitted by the importer, the particulars therein should be matched and checked with those in the IMP form and invoice filed earlier, to see if the merchandise for which remittance was made has been duly received in Bangladesh. If no material discrepancy is detected, the case should be considered closed, with the duplicate IMP form, invoice and custom bill of entry/custom certified invoice field together for eventual inspection and disposal instruction from inspection team from the Foreign Investment and Inspection Department of Bangladesh Bank. • Cases with material discrepancy between the particulars of merchandise for which remittance was made and the merchandise actually received as evidenced by the exchange control copy of bill of entry/customs certified invoice within four month of remittance should be reported to the area office of Bangladesh Bank quarterly, in proformas given at Appendices 5/14 and 5/15, by 15th day of the month following the quarters ended March, June, September and December. ADs should also follow up with the importers the cases material discrepancies and of non-submission of bills of entry/customs certified invoices within due time. Uniform Customs and Practices for Documentary Credit (UCPDC 600)


Uniform Customs and Practices for Documentary Credit (UCPDC) is a set of rules formulated by International Chamber of Commerce (ICC) to apply to all transactions in Letters of Credit carried out by banks. The purpose of the rules is to bring about uniformity in the form of letter of credit and the practice and procedures adopted by banks in handling the instruments. In order to provide common understanding about the interpretation of the terms and terminology, a uniform code is very essential. These uniform customs and practice is universally accepted and letters of credit transactions everywhere are subject to this set of rules. The UCPDC formulated by ICC is a set of rules but it has no force of law and should not be construed as law applicable to all cases, unless the parties to a transaction voluntarily agree to apply the codes. If a party to a credit by express reference wishes to exclude the applicability of uniform customs from the LC contract, it can do so and in such cases it is not bound by the uniform customs. Bank regulate their operations in respect of issuing, advising and confirming credits in accordance with this code and accept all obligations arising under that. In some countries, even courts of all have based their decisions regarding letters of credit on these rules. The rules have made uniform both the forms of letters of credit and all practices and procedures observed by banks in relation to them. The ICC UCP does not have legislative force but today it is accepted by the world banking community as universal codification of best practice. Moreover, banks everywhere incorporate the UCP by reference into virtually every documentary credit and other letter of credit. It covers most practical aspects of credit operations including issuance, confirmation and payment, the nature and extent of bank undertakings and banking responsibilities, the requirements to be met by documents presented in credit operations, and rules applicable to transferable credit. The UCP rules are creatures of contract that apply when the parties have voluntarily incorporated them. The LC application forms generally contain a statement to the effect that the credit will be subject to the UCP 600 which is considered legally to represent the parties’ willingness to submit interpretation of credit to the rules of the UCP. However, there is an arrangement between ICC authority and SWIFT authority according to which the LC advised through SWIFT or received through SWIFT is automatically within the framework of UCPDC. Even where the UCP is applicable, the provisions can not cover all cases, and national regulations and guidelines are required to cover the cases/areas. The revision process of UCP 500 actively began in April 2003 at the International Chamber of Commerce, Paris, and the new revision i.e. UCPDC 600 [ 2007 revision ] was adopted in November 2006 and published for the global trade and banking communities for implementation from July 1 2007. The new version of UCP 600 are the result of more than three years of intensive work by the Banking Commission. The new version of UCP 600 has been reorganized and comprises 39 articles without having any sub-head in contrast to UCP500 that has 49 articles grouped under seven broad heads. UCP 600 represents improved clarity in terms of language In general, the articles that are stated in future form in UCP 500 are restructured into present form in UCP 600. Important definitions of the UCP and all interpretive issues that are placed in scattered form under UCP 500 have been accumulated into two separate articles in the beginning of the draft version of UCP 600. The term ‘parties’ has been replaced by ‘banks’.


The 2007 revision dropped the common phrase ‘unless otherwise expressly stipulated in the credit’ used in different articles of UCP 500. The definition of letters of credit in UCP 600 is having in a new shape. Revocable letter of credit has been dropped out of the scope of the new UCP and L/C means irrevocable letter of credit or definite undertaking only. Dropping revocable LC out of the scope of UCP draft seems to be correct. The revocable LC violates the basic protective feature of letter of credit i.e., it cannot provide necessary protection to the beneficiary in connection with receiving payments. The UCP 600 has brought in the concept of ‘Second Advising Bank’ in line with the practice in different countries. In addition to the normal responsibility of checking the authenticity of the credit, it enforces additional responsibility to the advising bank in connection with giving notification about acceptance and rejection of amendments. Remarkable changes have been made in the article number 14 on ‘Standard for Examination of Documents’ of the UCP 600; which deals with examination of documents. The maximum period allowed to examine the documents has been reduced to five banking days from seven banking days, and the term ‘reasonable time’ is removed in connection with time required for examination of documents. The text of the article 16 of UCP 600 in regard to discrepant documents, waiver and notice has been placed in modified from in the new version of UCP. The article comes out explicitly with the contents of the refusal notice that was absent in UCP 500. Notice of refusal must be given by telecommunication or if that is not possible, by other expeditious means and it must be given not later than the close of fifth banking day following the day of presentation. The UCP 600 offers shift in the procedure of determining shipment date in case of a few transport documents in certain scenarios. A major change has been made in connection with determining shipment date in case of ‘Marine Bill of lading’ at the presence of both preprinted wordings and on-board notation on the bill of lading. In contrast to the UCP 500, in such a scenario, the date of on- board notation is to be considered as shipment date. In regard to determining the date of shipment of the air transport document, in the presence of a notation of actual date of shipment, the date would be the shipment date if no such indication calls for in the credit. UCP 600 has 39 articles which clearly states different aspects of international trade payment under letter of credit method. Article 1 states about the application of UCP as: “The Uniform Customs and Practice for Documentary Credit, 2007 Revision, ICC Publication No. 600 are rules that apply to any documentary credit (including, to the extent to which they may be applicable, any standby letter of credit) when the text of the credit expressly indicates that it is subject to these rules. They are binding on all parties thereto unless expressly modified or excluded by the credit.” Article 2 and 3 provide the definitions and interpretations of various parties and key terms under letter of credit. Credits v. Contracts has been indicated in Article 4 where it has been stated that “A Credit by it’s nature is a separate transaction from the sale or other contract on which it may be based. Banks are in no way concerned with o bound by such contract, even if any reference whatsoever to it is included in the credit. Consequently, the undertaking of a bank to honour, to negotiate or to fulfill any other obligation under the credit is not subject to


claims or defences by the applicant resulting from it’s relationships with the issuing bank or the beneficiary.” Article 7 and 8 clearly state the undertaking of issuing and confirming bank whereas article 9 and 10 provide a guideline regarding advising of credits and its amendments. One of the very important aspects of international trade payment under LC method is the matter of bank to bank reimbursement which has been stated in article 13 where it is inscribed that: “If a credit states that reimbursement is to be obtained by a nominated bank (claiming bank) claiming on another party (reimbursing bank)the credit must state if the reimbursement is subject to the ICC rules for bank to bank reimbursement in effect on the date of issuance of the credit.” A very significant aspect of UCPDC 600 is its article 14 where ‘standard for examination of documents’ has been extensively stated. At the inception of the article it has been said that “A nominated bank acting on its nomination, a confirming bank, if any, and the issuing bank must examine a presentation to determine, on the basis of the documents alone, whether or not the documents appear on their face to constitute a complying presentation.” Article 16 has said about discrepant documents, their waiver and notice which very astutely states “When a nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank determines that a presentation does not comply, it may refuse to honour or negotiate.” From article 18 to 28 the matter of various documents has been discussed. Among the required documents commercial invoice, transport documents, bill of lading, insurance documents are important. The rest articles emphasize on Extensions of expiry date or last day of presentation, Tolerance in credit amount, quantity and unit prices, Partial drawings or shipments, Installment drawings or shipments, Hours of presentation, Disclaimer on effectiveness of documents, Disclaimer on Transmission and Translation, Force Majeure, Disclaimer for acts of an instructed party, Transferable credits and Assignment of proceeds. All these articles provide necessary guidelines for international trade. Uniform Rules for Bank to Bank Reimbursement [ URR 525] The Uniform rules from Bank to Bank reimbursements [URR], ICC publication no 725 deals with bank-to-Bank reimbursements arrangement. This arrangement involves a third bank in the process of documentary credit in making reimbursement to the claiming bank. As the third bank is not a party to the credit, the relationship between issuing bank and reimbursing bank is not within the framework of UCPDC. In UCP, the first specific reference to reimbursement from a third bank was contained in UCP 290 [ article 13] 1974 revision. The current revision of UCP 600 refers about the arrangement. With the implementation of URR 725, the documentary credit arrangement for the first time got a set of international rules on bank-to- bank reimbursement arrangement. To get coverage under URR, banks are to incorporate in their reimbursement instructions that the reimbursements are subject to URR publication no – 525. Incoterms 2000 In the trade operation, the ownership and risk in the movement of goods from seller to buyer are usually linked to transport operation. It is vital for the exporter and the importer to


determine with precision, matters such as which party arranges and pays for the carriage of the goods, who takes out the cargo insurance, whether the goods travel at the risk of the seller or the buyer and who affects custom clearance. Over the years, traders operating internationally evolved standard definitions known as trade terms covering the main alternative arrangements that buyers and sellers may make with regard to shipment of the goods. The current ICC version of trade terms is known as ‘Incoterms-2000’ that includes 13 items placed under four groups : E Group (Departure), F Group (main carriage unpaid), C Group (Main carriage paid) and D Group (Arrival). E Group includes EXW or Ex works. “Ex works” means that the seller delivers when he places the goods at the disposal of the buyer at seller’s premises or another name place not cleared for export and not loaded on any collecting vehicle. The F terms (FCA- Free Carrier, FAS- Free Alongside Ship, FOB- Free on Board) require the seller to deliver the goods for carriage as instructed by the buyer. The C terms (CFR- Cost and Freight, CIF- Cost, Insurance and Freight, CPT- Carriage Paid to, CIPCarriage and Insurance paid to) require the seller to contract for carriage at his own expense. According to the D terms (DAF- Delivered At Frontier, DES- Delivered Ex Ship, DEQDelivered Ex Quay, DDU- delivered Duty Unpaid, DDP- Delivered Duty Paid); the sellers are responsible for the arrival of the goods at the agreed place or point of destination at the border or within the country of import. International standard Banking Practice (ISBP)- A Practical Complement of UCP600 ISBP is acronym for International Standard Banking Practice for the Examination of Documents under Documentary Credits. It is widely acclaimed by letter of credit practitioners worldwide. It provides an intelligent checklist of items; document checkers can refer to in determine how ICC’s rules on documentary credits known as UCP600 apply in daily practice. It fills a needed gap in the market between the general principles in the UCP and the daily job of practitioners. It is not the substitute for the UCP, but it demonstrates how the UCP is to be integrated into everyday practice. UCP600 incorporates international standard banking practice, which includes the practices described in it. ISBP covers the terms commonly seen on a day-to-day basis and the documents most often presented under documentary credit. It also explains how the practices articulated in UCP600 are applied by documentary practitioners. The ISBP and the UCP600 should be read in their entirely and not in isolation in order to avoid ambiguity. In the latest version of ISBP there are explicit guidance on how to deal with documents covering at least two modes of transport (UCP600, Article19), insurance documents and coverage (UCP600, Article 28); transferable credits (UCP600, Article 38 ) and a broad range of other issues. However, the incorporation of ISBP into the terms of a documentary credit is being discouraged. ISBP at a glance • • • •

The latest revision of ISBP is composed of 185 articles under 11 broad categories. Articles 1-5 articulate the limitation of incorporating terms in the documentary credit and encourages the applicants’ acquaintance with some articles of UCP600 Articles 6-42 provide guidelines and interpretations explicitly those are not articulated in UCP600 to determine that the documents fulfilled required terms and conditions of the credit. Articles 43-56 constitute composite guidance in respect of making endorsing and determining payment date of drafts under documentary credits.


• • • • • • • •

Articles 57-67 indicates contents including different issues related to invoices and also clarify tolerance in amount and quantity. Articles 68-90 form a set of directives in relation to multimodal or combined transport documents. Articles 91-114 constitute a set of directives in relation to bill of lading. Articles 115-133 constitute a set of directives in relation to charter party bill of lading Articles 134-156 constitute a set of directives in relation to air transport documents Articles 157-169 constitute a set of directives in relation to road, rail or inland waterway transport documents. Articles 170-180 constitute a set of directives in relation to insurance documents and coverage. Articles 181-185 provide guidance in relation to issuance and particulars of certificate of origin.

CONCLUSION AND RECOMMENDATION Like in many developing and least developed countries, documentary letter of credit is the most popular and widely used payment method for export and import transaction in Bangladesh. In export transaction, collection method is used in about one fourth of the cases though use of the method is significantly low in import transaction. International trade and foreign exchange transactions are generally made through Letter of Credit. It is the most popular method out of many others described earlier for importing and exporting goods and for making and receiving payments to and from abroad. It is also notable that the Import and Export policy of the country and Foreign Exchange Guideline provided by the Central Bank are also encourage this Documentary Credit system. For example import without LC is restricted for upto $35000/per year and to some restricted items like books, journals etc. (Import Policy Order 2006-2009) and import against advanced payment is comparatively complex (Foreign Exchange Guideline Vol – 1). From our above dissertation the following findings are worth noting: 1) In cases of LC advising banks generally prefer to select those banks available by their correspondent relationship. However, some banks also try to accommodate exporters’ choice but in doing so some banks avail the services of a second advising bank. This actually imposes additional cost burden on the trading parties 2) In our country garment exports are financed by the banks making lien and pledge on Export LC commonly called as Master LC. But as our exporters in many times become unable to make the shipment within validity the documents becomes discrepant. Therefore repatriation of the related proceeds becomes risky and vulnerable. Sometimes exporters can not ship the goods or due to discrepancies repatriation of proceeds fails and thus the goods become ‘stock lot’ and this way the exporter lost its business and the Bank falls in trouble 3) About one third of the cases collection method is used in export transactions. However, in recent times, trend of the use of documentary collection is increasing both in export and import payment transactions. Though open account is widely used in trades among developed countries, its use in Bangladesh is completely absent. Absence or insignificant cases of use of cash in advance and open account might be


attributed to the regulatory requirement of the country, relative bargaining power, reputation of the country’s traders and mutual trust and relationship of the domestic traders with their counterparts. 4) The beneficiary of an irrevocable documentary credit enjoys maximum protection against commercial risks since it is assured that the buyer’s bank will pay the value even if the buyer defaults to meet it’s payment obligation. If the credit is confirmed by a bank in the seller’s country, the seller also obtains protection against transfer risks since the confirming bank is obliged to pay even if the buyer’s bank is unable to transfer funds out of the country. However, of the four methods documentary letter of credit is the most expensive. 5) All letter of credits issued and received in Bangladesh are irrevocable in nature as opening or receiving revocable credit is completely banned by regulations of the country as well as by the UCPDC 600. 6) In the Garments Sector imports are made through back-to-back DP LCs to meet up the requirements for complete production and export in due time. 7) As both Bangladeshi Importer and Exporters are dominated by the foreign suppliers and buyers respectively, imports are made on CNF basis and exports are made on FOB. Due to this our country losses a substantial amount of Foreign Currency. 8) Absence of Red Clause and Revolving LCs in the trade payment is mainly due to the country’s regulatory barriers. 9) Due to regulations and policies of the country, there are great differences in the documentary requirements of export and import LCs in Bangladesh. LCs issued from abroad i.e. export LC asks for fewer documents than the LCs issued from our country. However, both import and export LCs, submission of insurance documents are rarely asked for their requirement to be covered by domestic insurance companies. 10) Almost in all cases, confirming banks are selected by the issuing bank though in some cases banks try to accommodate exporters’ choice if they have arrangement with that bank. 11) For amendment of letter of credit, generally importers approach to the bank on behalf of the exporters. An amendment can only be made if all 3 (three ) prime parties i.e. the importer, the export and the LC issuing bank agrees to do so. But in our country it is observed that the banks without receiving any request from the beneficiary make amendment to an LC only receiving an amendment application from the importer. 12) Some banks are found to have practices to give a deadline for notification of acceptance or rejection of amendment, and note that if they do not receive any message within the given period from the beneficiary, the amendment deemed to be accepted. 13) Banks in our country tends to send discrepancy notice on each and every import documents even based on negligible discrepancies to safe-guard its position on making its confirmed foreign payment. This makes payments against import


documents delayed and surely hampers the good will of the country. This is one of the reasons why UCPDC 500 year 1993 was rectified as UCPDC 600 year 2007. But these commercial banks more or less become bound to do so due to less effective legal structure in our country. CONCLUDING REMARKS Even at this real time communication world, letter of credit is considered to be the one of the safest way to remit and get proceeds. But still there are some factors to be re-considered like: a) Restructure of legal enforcement against defaulter importers and exporters in Bangladesh. b) Necessary changes in import policy to permit imports to be made without LC to reduce import cost and subsequently reduce prices on essential and consumable goods. c) Financing in the garments sector by the banks should be made more secure etc. In some countries of tight control on foreign trade operations, documentary credit is a very strong device in the government’s control and supervisory mechanism. in our country this over controlling over imports and exports are seen in a liberal ways but still some considerable changes in import and export policy and re-structuring and up-to-date foreign exchange guideline is required for our country’s smooth growth. The study came up with the following recommendations:  Some obligations of the bankers as the signatory of the EXP is beyond their control. A set of well defined specific responsibilities of the bankers as the signatory would make bankers comfortable in dealing the cases of repatriation. However, any steps in regard to above should not be compromised with signing EXP for a bad customer irresponsibly.  With the increasing popularity and use of documentary collection, greater emphasis should be given to familiarize the bankers with different aspects of documentary collection method related matters and URC.  The deviations of some practices that arise mainly because of the lack of knowledge on ICC publications should be addressed by regular effective training or workshop.  For right interpretation of UCP, the bankers should have access to an expert group on publication. The group may be formed by local ICC authority with a selected number of theoreticians and practitioners of the field.  To smoothen difficulty in handling exporters and importers, training may be arranged by their own associations. Bankers should also arrange informative training on trade payment related issues for their client as well. BIBLIOGRAPHY 1.

Choudhury & Habib: An Evaluation of the Operations.

2.

International Trade Payment and Finance by Dr. Toufic A. Choudhury

3.

Foreign Exchange Guidelines, Volume-1 by Bangladesh Bank

4.

Booklets of International Division of Prime Bank Limited

5.

Foreign Exchange Manual of Prime Bank Limited.


6.

Ali, Syed Ashraf- "Foreign Exchange and international finance.

7.

A Text Book on Foreign Exchange Transactions by L. R. Chowdhury.

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