Internship Report on Janata Bank Foregin Exchange

A PROPOSAL LETTER

On

Foreign Exchange Operations of Janata Bank Limited (JBL)

Subimtted To Department of Management Studies Jagannath University, Dhaka.

Submitted By Mithun Kumer Saha ID: M120202103 MBA 4th Batch Major in Human Resouce Management Department of Management Studies Jagannath University, Dhaka.

Supervised By Prof. Md. Mosharraf Hossain Ph.D Department of Management Studies Jagannath University, Dhaka.

01.01. Introduction The theoretical knowledge and practical training is not the same theme. T h e t h e o r e t i c a l knowledge is fulfilled when it can be used in the practical field. The goal of internship is to apply one’s theoretical knowledge in practical fields. Generally by the word “Bank” we can easily understand that the financial institution deals with money. But there are different types of banks such as; Central Banks, Commercial Banks, Savings Banks, Investment Banks, Industrial Banks, Co-operative Banks etc. But when we use the term “Bank” without any prefix, or qualification, it refers to the ‘Commercial banks’. Commercial banks are the primary contributors to the economy of a country. a kind of commercial Bank in our country. J a n a t a B a n k a n a t i o n a l i z e d c o m m e r c i a l b a n k e s t a b l i s h e d u n d e r t h e B a n g l a d e s h B a n k s (Nationalization) Order 1972. With its head office at Dhaka the bank started its operations within initial authorized capital of Tk 50 million and paid up capital of Tk 10.5 million. The value of assets created by the OBS activities of the bank was Tk 26.07 billion in 1998 and Tk 25.46 billion in 2000.J a n a t a B a n k h a s a l a r g e p a r t i c i p a t i o n i n f o r e i g n e x c h a n g e b u s i n e s s i n c l u d i n g o v e r s e a s remittance services. The total volume of foreign exchange business handled by the bank in servicing imports and exports and remittances during 1999-2000 amounted to Tk 40.312 billion. In 2009, the bank had correspondent relationships with 3,180 foreign banks/bank offices. In 1972, Janata Bank started its banking operations with a total initial deposit of Tk 1.57 billion. A special deposit mobilization programmed introduced by the bank in 1976 resulted in remarkable increases in the volume of its deposits, which grew at a rate of approximately 63% and 42% during 1972-74 and 1978-80.Major areas that received financing from the bank were jute trade, jute industries, tanneries, sugar industries, textile trade and industries, transport, iron and steel, tea plantation and trade, livelihood trades/income generating activities and housing. During 1999, Janata Bank disbursed Tk 16.383 billion in loans and advances and the recovery during the year was Tk 4.541 billion.

01.02. Objective of the Report 01.02.01. Major Objectives The major objective of the study is to observe & evaluate Foreign Exchange operations of Janata Bank Limited . 01.02.02. Specific Objectives Every report has an objective. The objective of the internship program is to familiarize students with the real business situation, to compare them with the business theories & at the last stage make a report on assigned task. Specific objectives are as follow:    

To know the activities of the foreign exchange department. To know function of foreign exchange. To know export procedures of JBL. To know import procedures of JBL.

01.03. Origin of the report This report is being assigned as a part of the MBA Degree (Internship) of Jagannath University. To prepare this report, I accommodate my internship program in Janata Bank Ltd. For the completion of the course, as an essential part I had prepared a Report. This report is being formed on the “A Study on Foreign Exchange operations of the Janata Bank Ltd., Kaligonj Branch”. From the very beginning of my internship I have w o r k e d o n G e n e r a l banking. After few weeks later I was shifted on Foreign Exchange department. For that reason I made my Report on Foreign Exchange activities of ., K a l i g o n j B r a n c h . Janata Bank Limited (JBL) is a place where I could learn the business dealings. This organization has created a positive image to the customer’s mind by providing better service. This bank has introduced some modern banking scheme that has got high market demand. As an intern, I have got the opportunity to work with this organization from January 1, 2015 to March 31, 2015 and acquire idea about foreign division.

01.04. Background of study All over the world the dimension of Banking has been changing rapidly due to Deregulation, Technological innovation and Globalization. Banking in Bangladesh has to keep pace with the global change. Now Banks must compete in the market place both with local institution as well as foreign ones. To survive thrive in such a competitive banking world, two important requirements are – i) ii)

Development of appropriate financial infrastructure by the Central bank and Development of “Professionalism” in the sense of developing an appropriate manpower structure and its expertise and experience.

To introduce skilled Banker, only theoretical knowledge in the field of banking studies is not sufficient. An academic course of the study has a great value when it has practical application in real life situation. So, I needed proper application to get some benefit from my theoretical knowledge to make it more tactful, when I engaged myself in my practical life situation. Such all application is made possible through Internship.

01.04. Scope Scope means area of operations or field of the study. The scope of this report was extended to the Foreign Exchange activities of JBL.

01.05. Methodology of the Report The study requires a systematic procedure from selection of the topic to final report preparation. To perform the study the data sources are to be identified and collected, they are to be classified, analyzed, interpreted and presented in a systematic manner and key points are to be found out. The overall process of methodology is given below: A. Selection of the topic: The topic of the study was suggested by our supervisor. Before assigning the topic it was discussed with me so that a well organized internship report can be prepared.

B. Identifying data sources: Essential data sources both primary and secondary are identified which will be needed to complete and work out the study. To meet up the need of data primary data are used and study also requires interviewing the official and staffs were necessary. The report also required secondary data. This report is mainly prepared by the secondary sources of information and some few primary sources of information like – Primary Sources:    

Practical desk work Employees of the JBL Clients of the JBL Examine and study client files

 Expert’s opinions and comments  Direct involvement in the foreign exchange activities in JBL  Direct Observation  Questioning the concerned persons Secondary Sources: Most of the necessary information will be collected from the client’s document.    

JBL Annual Report 2009-2014 Published documents Website of JBL Relevant books.

 Various brochures  Daily summary sheet  Various type of statement

A. Collection of data:

Primary data are collected by using Questionnaire. The report is based on open ended questions asked to the Bank official. B. Classification, Analysis, Interpretations and Presentation of data: Some graphical tools are used in this report for analyzing the collected data and to classify those to interpret them clearly. C. Findings of the study: The collected data were scrutinized very well and pointed out and shown as findings. Recommendations are also made for the improvement of the current situation. D. Final report preparation: On the basis of the suggestions of my honorable supervisor, some corrections were made to present the report in this form.

01.06. Limitations of the Study The report is written mainly on the basis of face to face conversation with the officials and little practical experience in the bank. So, no perfect study is conducted to measure the viability of the report. The following are some other limitations –  Limitation of time was one of the most important factors that shortened the present study. Due to time constraints, many aspects could not by discuss in the present study.  Lack of comprehension of the respondents was the major problem that created many confusions regarding verification of conceptual questions.  Confidentiality of data was another important barrier that was faced during the conduct of this study. Every organization has their own secrecy that cannot be revealed in publics.  Rush hours and business was another reason that acts as an obstacle while gathering data.  As, I had more dependence on the primary sources, so there might be some level of inaccuracy with those collected information.  Insufficient books, publications, Facts and figures narrowed the scope of accurate analysis.  JBL does not have rich and wealthy collection of various types of Banking related Books and Journals.

 Confidential information regarding past profit or product cost, financial information was not accurately obtained. Alike all other banking institutions, JBL is also very conservative and strict in providing those information. In those cases, I have relied upon some assumptions, which in result have created certain level of inaccuracy. Still, I had tried my best in obtaining that sensitive information, as much as possible. 01.05.07 Data Collection Method: Most of the data required for the study was collected form primary s o u r c e s t h r o u g h o r a l interviewing the employees. 01.05.08 Data Analysis Process: To analyze the gathered data of foreign exchange department, I used different types of charts, t a b l e s a n d g r a p h s . To d o t h a t a n a l ys i s I u s e d d i f f e r e n t t yp e s o f c o m p u t e r s o f t w a r e l i k e Microsoft Word and Microsoft Excel. Findings of the study: After finding out the data problems of the study were pointed out and they were shown under concerned heads. Recommendations were suggested thereafter to overcome the problems. Final report preparation: On the basis of the suggestions of my honorable supervisor some deductions and additions were made and final report was prepared thereafter. Significance of the Report: This report is the result of three month internship in JBL. And I have completed this internship period successfully. This internship report contains all the knowledge that I have gathered at the time of my internee at JBL in the Gadara Branch. My topic is study on Foreign Exchange operations of JBL. This is the basic rationale behind the study. Besides, it would be a great opportunity for me to get familiar with this system. So this study is very significant for both the company and as well as for me. 01.06. Limitations of the Report There were some problems while I doing internship. A whole hearted effort was applied to conduct the internship and to bring a reliable and fruitful result. In spite of having the wholehearted effort,

there exit some limitations, which acted as a barrier to conduct the program. The limitations were noted to this page:    

Bankers don’t want to disclose all the information I need. Non-availability of some preceding and latest data. Some information was withheld to retain the confidentiality of the bank. Although the officers of the have been very helpful, they didn’t have enough time to provide, as they are very busy with their assigned works. So, in some cases, observation was needed.

CHAPTER-2

Organization Part 02.01. An overview of (JBL) is the leading sector bank in Bangladesh offering full range of Personal, Corporate, International Trade, Foreign Exchange and Lease Finance. is the preferred choice in banking for friendly and personalized services, cutting edge technology, tailored solutions for business needs, global reach in trade and commerce and high yield on investments, assuring Excellence in Banking Services. 02.02. Brief Overview of the Bank Formation of Janata Bank: Immediately after the independence of Bangladesh in 1971, the erstwhile United Bank Limited and Union Bank Limited were nationalized and renamed as Janata Bank.  Date of Incorporation as PLC: May 21, 2007.  Authorized Capital:  Tk. 8,000 million (as on 31.12.08) (now 20,000 Million as approved in the AGM/EGM dated 29.09.09).  Pre IPO Paid up Capital:  Tk. 2,593.90 million (as on 31.12.08) (however the bank has issued Bonus shares amounting to Tk. 1156.10 million and rights shares of Tk. 1250.00in the said AGM/EGM i.e., paid- up would be Tk. 5,000 million).  No. of Branches:  Almost 850

02.03. At a Glance Key points Name Logo Date of incorporation as PLC

Particulars JBL janata bank ltd May 21,2007

Status Chairman Managing Director

Public company ltd DR. Abul Barkat S.M. Aminur Rahman Managing Director & CEO

02.04. Hierarchy of Hierarchy of

2.05. Objective of organization JANATA Bank Ltd will be the absolute market leader in the number of loans given to small and medium sized enterprises throughout Bangladesh. It will be a world – class organization in terms of service quality and establishing relationships that help its customers to develop and grow successfully. 02.06. Mission of (JBL)

will be an effective commercial bank by maintaining a stable growth strategy delivering high quality financial products, providing excellent customer service through an experienced management team and ensuring good corporate governance in every step of banking network. 02.07. Vision of (JBL) To become the effective largest commercial bank in Bangladesh to support socioeconomic development of the country and to be a leading bank in South Asia. 02.08. Core Values of (JBL)       

Integrity Fairness Harmony Courtesy Commitment Enthusiasm for work Business ethics

02.09. Core Strengths of (JBL)    

Quick Decision Making Efficient team performance Satisfied Customer Internal Control

02.10. Foreign Corresponding Janata Bank has already established a worldwide network and relationship with international banking through its four (4) overseas branches in UAE, subsidiaries “Janata Exchange S.R.l’ in Italy & 1125 foreign correspondents all over the world. 02.11Business Philosophy .Janata Bank Ltd, a full service commercial bank with Local and International Institutional shareholding, is primarily driven by creating opportunities and pursuing market niches not traditionally met by conventional banks. Today Janata Bank Ltd is one of the fastest growing banks in the country to support the planned growth of its distribution, network and for its various business segments. The reason Janata Bank Ltd is in business is to build a profitable and socially responsible financial institution focused on markets and businesses with growth potential, thereby assistingJanata and stakeholders

build a “just, enlightened, healthy, democratic and poverty free Bangladesh”. Which mean to help make communities and economy of the country stronger and to help people achieve their dreams. They fulfill the purpose by reaching for high standards in e v e r y t h i n g w e d o . For

their

customers,

their

shareholders,

their

associates

and

t h e i r communities upon, which the future prosperity of their company rests. 02.12. Management of (JBL) : For any financial and non financial organization Management is the most v a l u a b l e a n d important resources of any kind of organization. And a well-organize management provides the organization to reach its ultimate goal. Management means planning, organizing, staffing, d i r e c t i n g a n d c o n t r o l l i n g o f a l l f i n a n c i a l a n d n o n f i n a n c i a l r e s o u r c e s o f a n o r g a n i z a t i o n . Different aspects of management practice in are discussed below. • Planning has done its planning within the preview of the corporate plan. The o v e r a l l p l a n n i n g a p p r o a c h o f i s Top - d o w n . E a c h b r a n c h c a n p l a n according to the goal imposed by the corporate level. It doesn’t plan independently. And, has a planning division. This department is mainly responsible for the overall planning. • Organizing Is organized as per the existing business locations. It has 851 branches, e a c h o f w h i c h i s a s e p a r a t e e n t i t y. E a c h u n i t i s r e s p o n s i b l e f o r i t s o w n p e r f o r m a n c e a n d followed by Managers each. He is directly responsible for performance of their unit. Within each branch it is organized functionally. • Staffing The recruitment of is done in two ways. One as a “probationary officer “for the management program and it has probation period of one year. Another one is non-management level as “Trainee Officer” Probationary officer is recruited in officer category and their career path is headed towards different managerial jobs. • Directing and controlling

The management approach in is top-down or authoritative. Information just seeks through lower management layer. Setting Management in all office is done in way that the superior can monitor the subordinate can all time. Budgeting, rewarding, punishing etc. are also practiced as control mechanism. 02.13. Product and services JBL has a very broad line products under the various business group, from short term to longterm deposits, various types loans and advances, account service, it provides finance for export and import, finance for working capital, project financing, capital investment, remittance service, trade service, foreign exchange service, cash management service, Profit & loss sharing and also has other miscellaneous product and services around the nation.

02.14. Product of Trade service 3.3.1 Fund Based:  Cash Credit (CC Hypo)  Cash Credit (CC Pledge)  Overdraft (OD)  Trust Receipt (TR)  Foreign Bill Purchase (FBP)  Loan against Important Merchandise (LIM) 3.3.2 Non-Fund Based:

Letter of Credit (LC) Deferred LC Sight LC Letter of Guarantee (LG)A limit (amount) is set by the bank that can be availed by a particular Customer based on his /her Credit worthiness and record of business transactions with the bank. 02.15. Business area of (JBL) There are mainly eight major business areas where the Janata Bank Ltd. is performing with high reputation. These areas are --------       

General Banking Foreign Exchange Small & Medium Scale Enterprise (SME) Large Scale Industries Agriculture Sector Transport Sector Financing In Housing Sector& Land Developing Finance in Home Appliance Since I completed my internship on foreign exchange, it would be convenient for me to focus Foreign Exchange of Janata Bank Ltd.

02.15.01 General Banking It is most important side of the bank. Bank is nothing but a middleman b e t w e e n l e n d e r s (surplus unit) and borrowers (deficit unit). To provide loan, a bank needs a huge amount of money from the depositors. General banking is the side where banks offer different alternatives to the clients to deposit and remit their money. To encourage the clients, bank offers different options in front of their clients. Most of these options are very much similar between the banks, but the customer services and facilities may not be the same. General Banking of JBL is divided into 4 divisions: •Account opening • Remittance • Clearing • Cash. 2.15.1.1 Account Opening

The relationship between the banker and the customer begins with the opening of an account by the customer. Initially all the accounts are opened with a deposit money by the customer and hence these accounts are called deposit account. Usually a person needs to open an account to take services form it. Without opening an account, one can get only a few services from then. So the banking begins actually by opening an account with a bank. Generally, there are four types of accounts in our country’s banking system: 1. 2. 3. 4. 5. 6.

Current account or Demand Deposit (C D Account) Savings Deposit (S B Account) Fixed or Time Deposit (F D R) J B D S (Janata Bank Deposit Scheme) M D S (Medical Deposit Scheme) E D S (Education Deposit Scheme)

2.15.1.2 Remittance Remittance of funds is ancillary services of JBL. It aids to remit fund from one place to another place on behalf of its customers as well as non- customers of Bank. JBL has its branches in the major cities of the country and therefore, it serves as one of the best mediums for remittance of funds from one place to another. The main instruments used by JBL:i. ii. iii.

Payment Order Issue/Collection Demand Draft Issue / Collection T.T. Issue/Collection

i. Payment Order: The pay order is an instrument issued by bank, instructing itself a certain amount of money mentioned in the instrument taking amount of money and commission when it is presented in bank. Only the branch of the bank that has issued it will make the payment of pay order. Issuing of Pay Order: The procedures for issuing a Pay Order are as follows: o Deposit money by the customer along with application form. o Give necessary entry in the bills payable (Pay Order) register where payee’s name, date, PO no, etc is mentioned. o Prepared the instrument. o After scrutinizing and approval of the instrument by the authority, it is delivered to.

ii. Demand Draft: 

The person intending to remit the money through a Demand Draft (DD) has to deposit the money to be remitted with the commission which the banker c h a r g e s f o r i t s services. The amount of commission depends on the amount to be remitted. On issue of the DD, the remitter does not remain a party to the instrument:  Drawer branch  Drawn branch  Payee. Customer. Signature of customer is taken on the counterpart.

iii. Telegraphic or Telephonic Transfer (TT) This Method transfers money to one place to another place by telegraphic message. The sender branch will request another branch to pay required money to the required payee on demand. Generally for such kind of transfer payee should have account with the paying bank. Otherwise it is very difficult for the paying bank to recognize the exact payee. When sending money is urgent then the bank uses telephone for remittance. This service is only provided for valued customers, who is very reliable and with which banks have longstanding relationship.

TT (Issue)  Customer fills up the TT form and pays the amount along with commission in cash or by cheque.  The respected officer issues a cost memo after receiving the TT form with payment seal, then signs it and at last give it to the customer.  Next a TT confirmation slip is issued and its entry is given in the TT issue register.  A test number is also put on the face of the slip. Two authorized officer 

signs this slip. The respective officer transfers the message to the drawer branch mentioning the amount, name of the payee, name of the issuing branch,

date, test number and hasher power of attorney (P.A.) number.  The confirmation slip is send by post.

2.15.1.3 Clearing Clearing house is an assembly of the locally operating scheduled banks f o r e x c h a n g e o f cheques, drafts, pay orders and other demand instruments drawn on each other and received from their respective customers for collection. The house meets at the appointed hour on all working days under the supervision of two central bank officers or its agent as the case may be, and works within the regulations framed therefore on the basis of prevailing banking practices. I n B a n g l a d e s h , c l e a r i n g h o u s e s i t e s a t B a n g l a d e s h b a n k w h e r e t h e r e i s n o o f f i c e o f t h e Bangladesh bank, Sonali Bank acts as agent of Bangladesh bank. There are mainly two types of clearing systems in Bangladesh, such as:  Internal clearing or inter branch clearing or inward clearing  External clearing or inter banks clearing or outward clearing What is clearing House? In Bangladesh Bank, there is a very large room, which contains fifty (50) or more tables for each bank that is called the clearing house. Nature of clearing house:  1st Clearing House  Return Clearing House Types of Clearing Cheque JBL Gadara Branch, Dhaka performs the clearing function through Bangladesh Bank. JBLL o c a l Office, Dhaka acts as the agent of all JBL branches for the clearing house o f t h e Bangladesh Bank. There are two types of cheque which are• Inward clearing Cheque. • Outward clearing Cheque. Inward clearing Cheques Inward clearing cheques are those ones which have drawn on the other branches of JBL, which will be cleared / honored through the internal clearing system of JBL operated by the Local Office of JBL.

Outward clearing Cheques Outward clearing cheques are those ones, which have drawn on the other bank branches which are presented on the concerned branch for collection through clearing house of Bangladesh Bank. The cash section of any branch plays very significant role in Banking Section. Because, it deals with most liquid assets. The JBL, Gandaria Branch has an equipped cash section. This section receives cash from depositors and pay cash against cheque, draft, PO, and pay in slip over the counter. Every Bank must have a cash counter where customer withdrawn and deposit their money. When the valued client’s deposit their money at the cash counter they must have to fulfill the deposit slip his/her own, then they sing as the depositor option’s then they deposit their money through cash officer at the cash counter. Several Types of Deposit Slip There are several types of deposit slip as follows:

 Current Deposit A/C Slip,  Saving’s Deposit A/C Slip,  Fixed or Time Deposit A/C Slip, Other Types of Deposit A/C Slip,  Pay order Slip,  Demand Draft Slip,  T.T. Slip. Receiving Cash Any people who want to have deposit money will fill up the deposit slip and give the form along with the money to the cash officer over the counter. The cash officer counts the cash and compares with the figure written in the deposit slip. Then he put his signature on the slip along with the ‘cash received’ seal and records in the cash receive register book against A/C

number. At the end of the procedure, the cash officer passes the deposit slip to the counter section for posting purpose and delivers duplicate slip to the clients. Disbursing Cash The client who wants to receive money against cheque comes to the payment counter and presents his cheque to the officer. He verifies the following information: o o o o o o

Date of the cheque Signature of the A/C holder Material alteration Whether the cheque is crossed or not Whether the cheque is endorsed or not Whether the amount in figure and in word correspondent or not T h e n h e c h e c k s t h e cheque from computer for further verification. Here the following information is checked: Whether there is sufficient balance or not Whether there is stop payment instruction or not

Whether there is any legal obstruction or not After checking everything, if all are in order the cash officer gives amount to the holder and records in the paid register.

2.15.1.4 New Technology Adopting the state-of-the art technology in banking operations.

2.15.1.5 Management Hierarchy Chairman

Board of Director

Managing Director

Additional Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President Senior Vice President

Vice President

First Vice President

Assistance Vice President

First Assistance Vice President

Principal Officer

Senior Executive Officer

Executive Officer

Officer

Assistance Officer

Trainee Assistance Officer

2.15.1.6 Features of Janata Bank Limites. There are so many reasons behind the better performance of JBL than any other newly established banks:    

Highly qualified and efficient professionals manage the bank JBL has established a core Research & Planning Division with efficient persons The bank has established correspondent relationship with 240 of foreign banks The computerized operation systems in all branches of JBL have provided the frequent and

prompt customer service  The strict leadership along with the supervision of efficient management directs all the branches  The inner environment and teamwork, of all branches in MBL motivated all experienced employees to achieve the ultimate object of JBL  JBL has become a member of the SWIFT system expedite foreign trade transaction

 JBL has become introduced some scheme for the purpose of saving of low income people which are not available in other banks like “Family Maintenance Deposit (FMD)”, “Personal Loan Scheme”, “Car Loan Scheme” etc.  The bank offers attractive saving rate than other financial institutes  JBL provides loan to the customers at lower interest with easy and flexible condition than the others do  Along with the profit generation Janata Bank Limited also maintain social responsibilities  Janata Bank Limited charges lower commission from their customer in comparison with other banks  The Bank is always guided their potential customers by giving valuable advises

2.15.1.7 MBL Brokerage House

Mercantile Bank Limited Brokerage House has been developed to ensure development of sound capital market and to provide higher, better and diversified services to a wide range of customers. MBL is offering high quality products and services at a competitive rate. Mercantile Bank Limited Brokerage House offers full-fledged international standard brokerage service with margin loan facility. They are also a full service Depository Participant (DP) of Central Depository Bangladesh Ltd. (CDBL). The brokerage service is designed to provide customers with necessary support profitably in the stock market. MBL is dedicated to provide high level of professional and personalized services to its domestic and international clients at a reasonable cost. MBL’s services are comprehensive in nature, including brokerage, margin loan, CDBL facilities, and research and custodian needs of customers.

CHAPTER-3 Foreign exchange operation 03.01. Foreign Exchange Foreign Exchange- its Meaning and Definition Foreign Exchange is a process which is converted one national currency into another and transferred money from one country to another country. Foreign exchange refers to the processor mechanism by which the currency of one country is converted into the currency of another country. Foreign exchange is the means and methods by which rights to wealth in a

country’s currency are converted into rights to wealth in another country’s currency. In banks when we talk of foreign exchange, we refer to the general mechanism by which a bank converts currency of one country into that of another. Foreign trade gives rise to foreign exchange. Modern banks facilitate trade and commerce by rendering valuable services to the business community. According to foreign exchange regulation act 1947, “Any thing that conveys the right to wealth in another country is foreign exchange”. Foreign exchange department plays significant roles through providing different services for the customers. Opening or issuing letters of credit is one or the important services provided by the banks. Every country has certain natural advantages and disadvantages in producing certain commodities while they have some natural disadvantages as well in other areas. As a result we find that some countries need to import certain commodities while others need to export their surpluses. Foreign trade brings the fruits of the earth to the homes of the humblest among the countries. These transactions are the basis upon which international trade is made. As more than one currency is involved in foreign trade, it gives rise to exchange of currencies which is known as Foreign Exchange.

This definition implies that all business activities relating to Import, Export, Outward & Inward Remittances, buying & selling of foreign commissions, etc. come under the purview of foreign exchange business. Foreign exchange can simply be defined as a process of conversion of one national currency into another and of transferring money from one country into another.

03.01.2.Principles of Foreign Exchange The following principles are involved in Foreign exchange: • The entire system. • The media used. • The monetary unit.

03.01.3. Functions of Foreign Exchange Operations The Bank actions as a media for the system of foreign exchange policy. For this reason, the employee who is related of the bank to foreign exchange, especially foreign business should have knowledge of these following functions:  Rate of exchange.            

How the rate of exchange works. Forward and spot rate. Methods of quoting exchange rate. Premium and discount. Risk of exchange rate. Causes of exchange rate. Exchange control Convertibility. Financing of foreign trade. Foreign exchange transaction. Foreign exchange trading. Export and import letter of credit.

   

Non-commercial letter of trade. Nature and function of foreign exchange market. Rules and Regulation used in foreign trade. Exchange Arithmetic.

03.02. Different Types of foreign exchange operations: There are three kind of foreign exchange transaction:  Import  Export  Foreign Remittance. The following chart is showing different types of activities of foreign exchange operation:

Chart 14: Different Wings of Foreign Exchange Operation 03.03 Import: Import trade in Bangladesh is controlled under the Import and Export control Act 1950. Authorized Dealer Banks will import the goods into Bangladesh following the import policy, public notice, F.E. circular and other instructions from competent authorities from time to time. The whole import functions of the branch as far I have understood are discussed below:

03.03.1. Procedure of import Import of merchandise essentially involves two things:

 Bringing of goods physically into the country  Remittance of foreign exchange towards the cost of the merchandise The Ministry of Commerce through the Chief Controller of Import regulates physical import and Exports being office at the important trade center while Bangladesh Bank regulates the payment for the imports through its various departments. The following are the steps involved in import of merchandise into Bangladesh. Registration of importer In terms of the Importers, Exporters and Indenters (Registration) Order 1981, no person can import goods into Bangladesh unless he is registered with the Chief Controller of Import and Export or exempted from the provisions of the said order. So the following documents are required to be submitted to the licensing authority for registration as importers:       

Questionnaire form duly filled in and signed Income tax registration certificate Trade License from the Municipal or Local Authority Bank certificate Nationality certificate Partnership Deed where applicable Certificate of Registration with the Registrar of Joint Stock Companies,

 Certificate from the Chamber of Commerce/Registered Trade Association  Ownership documents or rent receipts of the place of business  Credit Authorization Form). Blank LCA forms can be obtained by the importer from their banker. The following documents are     

required to be submitted by the import to his banker. LCA Form property filled-in and signed. LC Application Purchase Contract in the shape of an Indent or Pro forma Invoice. Insurance Cover Note Membership Certificate from a chamber of Commerce and Industry or Registered

Trade Association  Import Registration Certificate (IRC).  In case of Public Sector, attested photocopy of allocation letter issued by the allocation authority, Administrative Ministry or Division specifying

the source, amount, purpose, validity, and other terms and conditions against the imports.

03.03.2. Licensing for Imports Most imports into Bangladesh require a license from the Licensing Authority. In recent years, the task of licensing has been delegated to the commercial banks. It is done by LCA (Letter of Credit Authorization Form). Blank LCA forms can be obtained by the importer from their banker. The following documents are required to be submitted by the import to his banker.     

LCA Form property filled-in and signed. LC Application Purchase Contract in the shape of an Indent or Pro forma Invoice. Insurance Cover Note Membership Certificate from a chamber of Commerce and Industry or Registered Trade

Association  Import Registration Certificate (IRC).  In case of Public Sector, attested photocopy of allocation letter issued by the allocation authority, Administrative Ministry or Division specifying the source, amount, purpose, validity, and other terms and conditions against the imports.

03.03.3. An Opening of Letter of Credit o Importer applies to the bank to open L/C in favor of foreign supplier. The bank has its printed application form and the importer should carefully fill in this form. On receiving this application, the bank scrutinizes it to ensure that: o Whether the customer fulfils all the required conditions/criteria to be eligible as an importer as per provisions of the Import Policy Order and Guidelines for

Foreign

exchange

Transactions

in

force

and

the

supporting

documents/papers required are submitted. o Whether the items for import of which the documentary credit need to be opened is permissible i.e. not included in the negative/restrictive list as per Import Policy order in force. o Whether we are holding satisfactory credit report on the beneficiary to satisfy the relevant provisions of the guidelines for Foreign Exchange transactions

o On receipt of the L/C application over the counter or through dispatch/mail section, the receiving date and time to be recorded on the L/C application. o Signature of the customer on the L/C application to be verified by a u t h o r i z e d / designated officer’s/C application with all supporting papers to be checked to ensure that the required papers areas per requirement of Guidelines for Foreign Exchange Transactions and are consistent to each …..L/C application must show the following clearly:         

Full name & address of the beneficiary The amount of the credit The Credit whether to be irrevocable or confirmed irrevocable. Whether the credit is available by payment, acceptance or negotiation On which party the drafts are to be drawn and the tenure of such drafts A brief description of the goods, including details of quantity and unit price Whether freight is to be prepaid or not The port of shipment and the destination Whether the transfer of the goods from one vessel to another, or from one mode

   

of transport to another, route, is prohibited. The last date for shipment The date and place of expiry of the credit Negotiation period Details of the documents required and how those are to be dispatched to the issuing bank i.e. by ordinary mail/courier: Whether the credit is to be a

transferable one. How the credit is to be advised i.e. by mail/telex.  Letter of Credit authorization from duly filled in and signed.  Indent or Performa Invoice issued by Seller or his agent (Indenter) duly counter signed by the customer.  Insurance certificate or policy (Marine/Air/Mail/Truck) covering the goods at 10%a b o v e L / C v a l u e f o r t h e w h o l e j o u r n e y / s h i p m e n t t o g e t h e r w i t h u n c o n d i t i o n a l premium paid receipt.  Prior permission/registered LCA form, No objection/any other certificates from the concerned authority as required as per provision of the Import Policy Order.  I.M.P. form duly filled in and signed.  In case the L/C application is not complete or in consistence or the required papers are not submitted, the customer should be promptly contacted for rectification of the

 Check whether the opening of the Letter of Credit is approved b y t h e c o m p e t e n t authority.  Review all documents including the Letter of Credit and vouchers.  If found in order, sign the letter of credit including the accounting vouchers.  The original L/C must be signed jointly by two authorized signatories.

3.3.4. Verification and Lodgment of Documents by the L/C Opening Bank On receipt of the shipping documents from the negotiating bank, the L/C Opening Bank should carefully examine these to ensure that they confirm to the term of the credit:    

The documents have been negotiated within the stipulated date. The amount drawn does not exceed the amount authorized in to credit. The merchandise is properly invoiced. The bill of Lading is clean, shipped on board, showing freight p r e p a r e d a n d endorsed to the order of the issuing bank shows the port of shipment, the port of destination, the name of the consignee and the

date of shipment are in keeping with the term of the credit.  It is properly signed by the shipping company  The Certificate of Origin  Other documents like weight list, packing list, pre-shipment Inspection Certificate etc .After the lodgment, the bank asks the importer to retire the bill. After retirement the amount of remittance towards cost of the merchandise is reported to Bangladesh Bank on Form “IMP”.

03.03.5. Shipping Guarantee: Shipping guarantee is a Letter of Guarantee/Indemnity issued jointly by importer (consignee)together with a bank (L/C opening Bank) in favor of a commercial carrier or their agent whereby they are authorized to release imported merchandise (title being in favor of the co- issuer Bank) to a consignee in the absence of original shipping bill i.e. bill of Lading/airway bill while the co-issuer furnish an assurance/undertaking to submit the original Bill of Lading/airway Bill to the carrier as soon as the same is in their possession. However against the issuance of a letter of indemnity, the bank should obtain a counter indemnity signed by the importer in favor of the issuing bank whereby they assume full responsibility for any obligation the bank assume in issuing the shipping guarantee and also

undertake acceptance/payment of documents/draft under the related Letter of Credit irrespective of whether those are discrepant or not. Before Issuing the Shipping Guarantee: o Head Office approval is essential in cash where the customer has not adjusted the related import liabilities or do not have approved LIM/LTR facility limit. o The Branch shall obtain counter indemnity from the customer in favor of the Bank. o The customer shall submit an unconditional undertaking to a c c e p t t h e r e l a t e d shipping documents even with any discrepancies. o The Shipping Guarantee/Letter of indemnity must be signed j o i n t l y b y t w o authorized signatories. Important points to prepare an L/C: To prepare an L/C the branch takes care on the following points: L/C number: The branch will put a number for each L/C., which is the serial number of the L/C for a particular year. First L/C of JBL SKB branch in 2009 may be numbered like JBL /SKB / 1742010401. Place and date of issue: L/C must indicate the place and date of issue. Date and place of expiry: L/C must have an expiry date. This is the last date of presentation of document under the L/C. Place of expiry of the L/C also to be mentioned in the L/C. Normally it should be the counter of the Negotiating Bank. Shipment date: There should be a last shipment date after which shipment is not allowed. Bank may also fix-up a first shipment date before which shipment will not be allowed. Presentation period: Issuing bank will allow a period within which exporter must present the export documents to the negotiating bank or to any other nominated bank. This may be 15 days from the date of shipment. Maximum may be allowed one month, but within the expiry date of the credit. Applicant:

Name of the applicant with business address to be put in the L/C. Beneficiary: Name of the beneficiary with address also to the indicated in the L/C. Advising Bank: Name of the advising bank with address to be mentioned in the L/C

Amount: : Every L/C must show the amount of the L/C. The word “About” may be used with amount, which means 10% more or less of the said amount. Part-shipment and Trans shipment: Issuing bank also clearly indicate in the L/C whether part-shipment and Trans shipment are allowed or not. Availability: L/C must indicate whether the credit is available by payment, by negotiation or by acceptance. Port of shipment and port of destination: L/C will also indicate from where shipment to beamed and where goods to be delivered. Tenure of the draft: Whether the draft to be drawn at sight or since, also to be cleared in the L/C. Documents required: Bank will give the list of required documents and data content therein. Each and every term must be supported by the documents, because any term without asking document is valueless. Payment: When, where and by whom payment is to be made, also to be indicated in the L/C. Bill of lading: B/L must be issued or endorsed to the order of the Issuing Bank. It should be ‘clean’ and “freight prepaid” if L/C is on CFR basis short form and charter party B/L to be avoided. All these terms must be incorporated in the B/L clause of the L/C. Bill of exchange: bill of exchange to be drawn on the Issuing Bank.

Pre-shipment Inspection: P r e - s h i p m e n t i n s p e c t i o n c e r t i f i c a t e i s c o m p u l s o r y f o r b o t h government and private import except in few cases. Data content: Invoice and other documents if required should indicate the H.S. code number .LCAF No with description of the item and country of origin. Special conditions: Special conditions, such as in case of food, machineries, vehicles and another items should be incorporated in the L/C where required. Authenticity of the credit: L/C to be authenticated by putting a test number or signing by two authorized officers. Additional confirmation to import Letter of Credit The beneficiary of L/C may ask for the additional confirmation to a letter of credit by an i n t e r n a t i o n a l l y r e p u t e d b a n k l o c a t e d i n b e n e f i c i a r y ’s c o u n t r y. I n t h a t c a s e a f t e r a d d i n g confirmation, the negotiation becomes restricted to the bank who has added their confirmation to the credit. In case there is no branch of the advising bank of the beneficiary’s country, the reimbursing bank may confirm to the advising bank that they are holding reimbursing authority. This may also serve the purpose of adding confirmation. As per normal practice, the charges of adding confirmation are borne by the beneficiary. In case the charges are to be borne by the importer, the L/C opening bank is to recover charges atthe time of issuance of such instructions.

03.03.6. Amendment to Letter of Credit The letter of credit opened by a bank may need amendment. If the supplier finds that the term of the credit cannot be complied with in full, he would arrange for necessary amendment by the opener before the goods are shipped. These amendments must be advised by the opening bank to the supplier through advising bank. Sometimes the opener also may like to amend the credit after it has been advised. These amendments may relate to the decrease or increase in amount of credit, change in foreign currency, and change in the dates of

shipment or negotiation, change in merchandise and other t e r m s o f t h e c r e d i t . T h e s e a m e n d m e n t s m u s t a l s o b e a d v i s e d b y t h e o p e n i n g b a n k t o t h e supplier through the advising or confirmation bank before the shipment is made. For this kind of amendment, the bank would need a written request from the importer who generally makes this request after obtaining consent of the supplier. Such amendments will, of c o u r s e , b e e f f e c t i v e i f a l l t h e p a r t i e s t o l e t t e r o f c r e d i t n a m e l y t h e L / C o p e n i n g b a n k , t h e advertising bank and the supplies, agree to it. Amendment is to be typed, like L/C, in the printed format in manifold. The copies of the amendment must be dispatched to all concerned as done in dispatching the L/C. Amendment can be done by SWIFT or Airmail. Amendment commission and other charges are to be realized from the party by debiting his account. If the amount of L/C is increased, the liability voucher is to be passed including the amount of increase on the date of amendment reserving the old entry passed at the time of opening the L/C.

03.03.7. L/C Advising The L/C duly signed by two authorized officers, whose specimen signatures are already recorded with the correspondent banks, must be addressed to the beneficiary. Bank generally does not enter into direct contact with the beneficiary. Instead they utilize the services of its own branch office (if any) or correspondent bank at seller’s country for the purpose of advising it to the seller (beneficiary). Before forwarding/advising the credit to the seller under appropriate forwarding coverage, the advising bank has to verify the signatures of the officers of the opening bank and ensure that the terms and conditions of the credit are not in violation of regulations relating to export. While advising, the advising bank does not undertake any liability. Advising a letter of credit.

03.03.8. Lodgment If import documents are found in order, they are to be made entry in the bill register and necessary vouchers to be passed, putting Bill number on the documents. This process is called Lodgment of the bill. The word “Lodgment’ means temporary stay. Since the documents stay sat this stage for a temporary period i.e. up to retirement of the documents, the process is called lodgment. Bank must lodge the documents immediately after receipt of the same, not exceeding7 banking days, following the day of receipt of the documents, (Article 14, UCPDC-500). Security Documents The L/C opening bank being received the documents from the negotiated bank will scrutinize the documents with the respective L/C terms and condition.           

Forwarding schedule of Negotiating Bank Whether there is any instruction. Whether these instruction can be complied with. Whether the negotiating commission realized. Bill of Exchange (Draft) Whether it is drawn in order. Whether the amount of draft corresponds with the L/C amount. Draft amount should be equal or less than the L/C amount. Whether the date of the draft of the within the date as per L/C etc. Bill of Lading (B/L) Whether the B/L is clean i.e. there is no clause like some cartons are broken or any other

        

clause. Whether there is signature of shipping Authority. Whether the date of B/L is within the date of shipment as per L/C. Whether the freight is prepared or not as per L/C terms. Whether the part of shipment and part of destination are similar as per L/C. Whether the title of B/L belongs to L/C opening bank. Whether the full sets of B/L dispatched by negotiating bank etc. Commercial Invoice Whether the full particulars of goods have been incorporated. Whether the amount of invoice corresponds with the amount of Bill of Exchange and as

   

per the L/C terms. Whether IRC No. LCA No etc. have been incorporated. Whether it is signed by the beneficiary Whether all other documents are prepared as per L/C. In case of discrepant documents The Article 16 of UCPDC (Publication 600) says,

 When the issuing bank determines that a presentation does not comply, it may refuse to honor or negotiate.  When the issuing bank determines that a presentation does not comply, it may in its sole judgment approach the applicant for a waiver of discrepancies.  When the issuing bank decides to refuse to honor or negotiate, it must give a single notice to that effect to the presenter.  The notice must state:  That the bank is refusing to honor or negotiate; and  Each discrepancy in respect of which the bank refuses to honor or negotiate; and a) That the bank is holding the documents pending further instructions from the presenter; or b) That the issuing bank is holding the documents until it receives a waiver of the applicant agree to accept it, or receives for the instruction from the presenter prior to agreeing to accept a waiver; or c) That the bank is returning the documents; or d) That the bank is acting in accordance with Instructions previously receipt from the presenter.  The notice required in sub-article (c) must be given by telecommunication or, if that is not possible, by other expeditious means no letter than the close of the fifth banking day following the day of presentation. If the documents are found in order and these are acceptable to the importer, the bank lodge the bill in PAD (Payment Against Documents) by converting the foreign currency representing the bill amount and foreign correspondences charges into Taka and asks the importer to retire the bill by sending a cost memo indicating the amounts payable by him under different heads.

03.03.9. Retirement When the importer release the import documents from the bank by acceptance/cash payment or under post import bank finance, it is known as retirement of the import document. When the importer does not come forward to retire the import documents, or requests the bank f o r f i n a n c e a g a i n s t the imported consignment, then arises the necessity of post import investment. If the consignment is not cleared within 45 days, from the date of arrival, custom authority may auction the consignment under section 167 (8) and amended section 82 of the

Custom Act 1969. Under such a situation bank becomes compelled for forced clearance of the consignments under Murayama post import investment. If the documents are discrepant, party’s acceptance is required for clearance of the goods.

03.3.11 Loan against Imported Merchandise- LIM (Post Import Finance) Definition of (LIM): Import Finance plays vital role in a country's foreign trade business. Import of goods and service are needed not only for export production but also to supply domestic industry with the necessary inputs which are not locally available or available at uneconomic cost and are needed for expansion and development. Loan against Imported Merchandise (LIM) is a facility provided by the Bank to the importers who are in shortage of fund to retire the import bills and thus to clear the goods from the post authority. In other works it may be referred as an advance against merchandise.

3.3.11.2. Cases of LIM account LIM Accounts may be created in the following two cases: 

LIM Account on importer's request. Forced LIM Account.

3.3.11.3. LIM Account in importer's request After lodgment of documents, the importers concerned to be intimated for early retirement of the documents by paying outstanding bill amount including other charge. If the importer is not in a position to retire the bill out of his own sources, at that moment they may request the bank to clear the goods by creating LIM Account. On receipt of the importers request the official of the import bills section will calculate the total landed cost of the consignment. To ascertain the landed cost the following points are to be considered. Efforts should be taken so that at least 20% to 30% margin of the landed cost may be r e a l i z e d f r o m t h e i m p o r t e r. R e a l i z a t i o n o f margin

will

depend

marketability of the goods.

on

the

banker

c u s t o m e r relationship and also on the

The following charge documents have to be executed by the importer:    

DP Note (Demand Promissory note). Letter of Arrangement. Letter of Disbursement. Letter of pledge. Any other document of necessary. The branch Managers are not empowered to sanction the LIM A/Cs in favor of the importers for clearance the goods without obtaining the approval from Head Office. On getting approval from Head Office the branch will send the documents to the port city branch by endorsing the bill of lading in favor of them with certification of invoice value for clearance the goods through importers nominated as well as Bank's approved C&F agent. In the forwarding letter clear instructions to be given for dispatching the goods either by train or by truck duly insured. Before sending the documents to the port city branch the following charge documents have to be executed by the importer:-

    

DP Note (Demand Promissory note). Letter of Arrangement. Letter of Disbursement. Letter of pledge. Any other document of necessary.

3.3.12. Comparative Position on Overall Import Performance for the last 3 Year of jbl Gandaria Branch”--------(Figer in Million) Item

2008

2007

%

of 2009

2010

%

of

Import

991.12

2056.79

Growth 108%

2056.79

2282.53

Growth 11%

From the above graph it is observed that the Import is increased steadily. In the year 2007 is increased 108% as compared with 2006.And in the year 2008 it is increased 11% as compared with 2007.

03.04 Export Export means outflow of goods and services produced in one country, which purchase by Government, Firms and individuals of other countries. Development of a country depends on its participation in the international trade by increasing production and export of commodities and service sector. By way of this a country can improve Employment

Generation-Income level-Savings-Growth-Economic Development. The imports and exports trade in Bangladesh is regulated by the Import & Exports Control Act1950. There are number of formalities an exporter has to fulfill before and after execution of export, some of areas under:

03.04.1. Benefits of Export Development of a country depends on its participation in the international trade by increasing production and export of commodities and service sector. By way of this a country can improve Employment Generation-Income level-Savings-Growth-Economic Development.

03.04.2. Procedure/Formalities for Export  The imports and exports trade is regulated by the Import & Exports Control Act 1950.  There are number of formalities an exporter has to fulfill before and after execution of export, some of areas under:  The intending exporter has to register with CCI&E and obtained Export Registration certificate [ERC]. The ERC number is to be used in all places relating to exports

03.04.3. Securing Export Order To secure export order the exporters may contact local chamber commerce of potential buyers, the export promotion bureau, Bangladesh mission abroad and by direct contact with foreign buyer through correspondences.

03.04.4. Receiving Letter of Credit After making contact with foreign buyers and reaching on agreed price and terms, conditions the exporters receive Letter of Credit.

03.04.5. Procurement and Shipment of Goods After receipt of LC the exporter has to procure or manufacture the contracted goods and ship the same.

03.04.6. Preparation and procurement of Export Documents

After making shipment the exporter has to prepare documents i.e. Bill of Exchange, Commercial Invoice, Beneficiary’s certificates and procure some documents i.e. Transport

Documents,

Certificate

of

Origin,

Insurance

certificate,

Inspection certificate and other documents as required as per LC terms.

03.04.7. Submission of documents to the bank for Negotiation After preparation and collection of all documents as per LC terms the exporter has to submit the documents to the bank for Negotiation/Payment/Purchase.

03.05. Role of Banks in the Export Sector of Bangladesh All the financial requirements of an exporter, from the time he enters into a sale contract and start working on it and till he receives final payment from abroad, are met by commercial banks. In that case banks play an important role in the export sector of Bangladesh and contribute by financing in the export sector by following categories: 

Pre-Shipment Credit: Pre-shipment credit is given to the exporters, for the activities prior to shipment of goods for export. Some example of Pre-shipment credit: Cash for local procurement of raw materials and its related expenses, Procuring & Processing of goods for export, Packing and transportation of goods for export, Payment of insurance premium, Inspection fees,



Freight charges etc. Post-Shipment Finance: Usually the exporter cannot afford to wait for a long time for payment to local manufacturer/supplier and other financial obligations. Resulting which the exporters need post-shipment credit facility. Considering the genuine need, and worthiness of export and other security measures bank allow credit facility to exporters.

03.06. Different parties involved Foreign exchange transaction Normally the following parties are involved to a documentary credit: Importer: The buyer or the importer is he who initiates the credit. He applies to bank for issue foreign documentary credit. The obligations between the importer and the issuing bank are governed by the application-cum-agreement submitted by the importer to the bank. He is bound to reimburse the bank,

which effects payment or incurred a deferred payment undertaking or has accepted or negotiated under the credit as per terms, and to take up the documents. Opening Bank: The issuing or opening bank is the importer’s bank and it issues a letter of credit normally pursuant to the terms of sales contract as set out in the application for the credit by the importer. The issuing bank should nominate the bank, which is authorized to pay or to accept drafts or to negotiate, unless the credit allows negotiation by any bank. Exporter: The seller or exporter is the beneficiary of the credit. The letter of credit is opened in his favor and addressed to him. The beneficiary has the obligation to make export as per the contract and produce the documents as required by the credit. The Advising Bank: It is the bank in the exporter’s country (normally the exporter’s bank), which is usually the foreign correspondent of importer’s bank through which the L/C is advised to the supplier. If the intermediary bank simply advises/notifies the L/C to the exporter part, it is called “Advising Bank”. The Confirming Bank: If the advising bank also adds its own undertaking to honor the credit while advising the same to the beneficiary, he becomes the confirming bank. In addition, becomes liable to pay for documents in conformity with the L/C’s terms and conditions. The liability of the confirming bank is the primary liability and it is not contingent on the fulfillment of the obligation by the issuing bank. The Accepting Bank: Accepting bank is the bank nominated in the letter of credit to accept bills drawn under the credit. If the bank so nominated accepts the nomination, its responsibility to the beneficiary is not only to accept the drafts drawn but also to make payment on their due dates.

The Paying Bank: Paying bank is a bank in the beneficiary’s country nominated in the letter of credit to make payment against documents to be tendered under the credit. Paying Bank must examine all documents with reasonable care to ascertain that these are drawn in accordance with the terms and conditions of the credit. Reimbursing Bank: The issuing bank may indicate in the credit the name of a bank.

From

whom

t h e paying/negotiating bank can obtain reimbursement. The

documents are sent to the issuing bank. The negotiating/paying bank simultaneously makes a claim with the reimbursing bank for the payment effected. Normally the reimbursing bank would be the bank with which the issuing bank maintains an account. The Transferring Bank: If the L/C is transferable, then the 1 st beneficiary of the L/C may transfer the L/C to the 2 nd beneficiary, through a bank nominated by the Issuing Bank. This bank is called the Transferring Bank.

03.07. Document required for Foreign Exchange Transactions Export-Import transactions ask for the following documents:     

Transport Documents Letter of Credit Insurance Documents Commercial Invoice Other Documents

03.07.1. Transport Documents Transport documents comprises of Bill of Lading, Airway Bills, Truck Receipts, Railway Receipts and Inland Waterway Receipts. Checking points of this document are:  

The Bill of Lading is issued/endorsed to the order of Negotiating Bank. Bill of Lading is clean, showing “Shipped on Board” notation, marked ‘Freight

03.07.2. Letter of credit

A letter of credit is a letter issued by a bank (known as the opening or the issuing bank) at the instance of its customer (known as the opener) addressed to a person (beneficiary) undertaking that the bills drawn by the beneficiary will be duly honored by it (opening bank) provided certain conditions mentioned in the letter gave been complied with. The following diagram brings out clearly the operation of letter of credit:

Chart 16: Flowchart of Letter of Credit Operation

03.07.3. Commercial Invoice It include all types of information such as description of goods, Port of destination, Port of loading, LC no, Importer name, name of issuing Bank etc. Checking points of this document are:  The invoice dated and signed by the beneficiary.  The invoice is issued to the party concerned as stated in the LC.  Description of goods is as stated in the LC.

 Unit price mentioned as stated in the LC.  Proper Trade-Term is mentioned.

03.07.4. Insurance Documents Checking points of this document are (in case of CIF basis):     

The Insurance Policy is valid. The policy is issued in the name of LC Issuing bank a/c: importer. The policy is signed by the authorized official of the Insurance Company. The policy is in negotiable form, duly stamped and dated prior the BL date Description of goods, name of carrying vessel shown in Insurance Policy are

same as shown in BL.  The policy covers Transshipment [if allowed in LC] clause.  Policy covers 10% above the value of consignment.  Policy indicates where and in which currency the claim [if any] will be settled.

03.08. Foreign Remittance 03.08.1. Outward remittance: O n M a r c h 2 4 , 1 9 9 4 B a n g l a d e s h Tak a w a s d e c l a r e d c o n v e r t i b l e f o r c u r r e n t i n t e r n a t i o n a l transaction. As a result remittances become more liberalized. Outward remittance include sale of Foreign Currency by TT, MT, Draft, TC or in cash for private, official and commercial purpose. Issuance of outward DD and TT ADs may also issue DD, TT on their foreign correspondent favoring Bangladesh nationals or foreign nationals as per their entitlement. But foreign TT and DD are not issued in this branch.

03.08.2. Inward remittance: The term inward remittance includes not only purchase of foreign currency by TT, MT, Draft etc. but also purchase of bills, purchase of TC. Utmost care should be taken while purchasing notes, TC, DD and similar instrument for protecting the bank from probable loss as well as safety of the bank officials concerned. But this type of purchase is not done in this branch.

3.88.Remittance Earnings

It represents transfer of fund from one place to another via official channel.Bnaks have wide network of branches all over the country and offers different types of remittance facilities to the public:

JBL made a high record to the tune of BDT 5,061.30 million in 2009 compared to that of BDT 4,722.90 million in 2008. The Bank has deepened its step on the foreign soils further by establishing more and more remittance arrangements with overseas exchange company’s where Bangladeshi expatriates are working. These include United Kingdom, Kuwait, Bahrain, Canada, Italy, France etc.

03.08.3. Collection of foreign currency instrument The Janata Bank Ltd. collects F.C. instruments on behalf of their customer. To collect proceed of Foreign Instrument following procedures to be maintained:    

Receive instrument with deposit slip Affix crossing stamp of the bank Entry in the register putting OFBC number Affix endorsement “pay to the order of any bank or trust company, prior



endorsement guaranteed.” Instrument to be sent to adjacent correspondents.

03.09. Different Methods of International Trade Payment: Cash in Advance:

Under this arrangement, buyer pays the value to exporter against the goods t o b e s h i p p e d a n d s e r v i c e s t o b e p r o v i d e d i n s o m e f u t u r e d a t e . Af t e r r e c e i p t o f p a y m e n t exporter ship the goods and provides services to buyers. But the system is disadvantageous for buyer because buyer blocking his fund in advances having no assurance of receipt of goods and service in time as per contract. So such type of payment is considered as risky and expensive for buyers but favorable for seller. Open Account: Under this method, the sellers are in risky situation because he has to deliver the goods and service to buyer before receiving payment. Buyer makes payment only after receipt of goods and services as per contract terms. So before going such transaction sellers should check the past record, worthiness and business history of the buyer and if it is found satisfactory only seller can proceed further. Collection against Payment D/P: Under this method, exporter ship the goods and draw bill of exchange on the buyer and submit the documents to a bank with instruction to collect the proceeds through its correspondent bank located in the buyers country. In this case documents delivered only against payment.

Collection against Acceptance D/A: Under this method, exporter ships the goods and draw bill of exchange on the buyer and submit the documents to a bank with instruction to collect the proceeds through its correspondent bank located in the buyers country. In this case documents delivered against acceptance of Drafts by the buyer. Documentary Credit: D o c u m e n t a r y c r e d i t i s t h e c l a s s i c m e t h o d . T h i s m e t h o d r e d u c e d payment related risks for both exporter and importer substantially. Because documentary credits conditional payment undertaking of issuing bank to the exporter against compliance of certain terms and conditions and submission of required documents as per credit terms. Sounder this payment method both exporter and importers feel safe to deal.

03.10. Examination and Negotiation of Export Documents:

There are many instances where exporters involve themselves in committing fraud so while exporters tendered export documents for negotiation, special care should be taken in checking the said documents to avoid fraud forgery and protect the interest of the bank. Following are some important checking points:  Know your exporter  You should know your customer considering his relationship with the bank, previous track record and worthiness.  Proper checking of Export LC Export LC is authenticated,

irrevocable,

valid,

Free

Negotiable

in

Bangladesh, Payment instruction is clear, issued under UCPDC.  Proper checking of Export Documents Bill of exchange, Commercial invoice, Transport documents and other documents are prepared and presented as per LC terms. Shipment After the contract the exporter takes all necessary steps to ship the goods. He may procure or manufacture the goods. Failure to maintain the delivery schedule will expose the exporter to claim from the buyers for damages on account of non-shipment or late shipment, and in addition the exporter may also lose the patronage of the buyer for future export orders. While shipment and after shipment the exporter should obtain or prepare the following documents:  EXP Form  Photocopy of registration certificate  Photocopy of the contract  Photocopy of the L/C  Customs copy of ERF Form for shipment of jute goods and EPC Form for raw jute  Freight certificate from the bank in case of payment of the freight at the port of       

lading is involved Bill of Lading, Railway receipt, Postal receipt, Air way bill or Truck receipt Packing list Certificate of origin Shipping instructions Insurance policy. Issuance of EXP Forms A l l e x p o r t s m u s t b e d e c l a r e d o n E X P F o r m . AD b r a n c h e s s u p p l y t h e s e f o r m s . T h e b a n k certifies EXP form only after confirming

 

the following: Arrangements have been made for realization of export proceeds. Bonfires of the importer/consignees abroad



Arrangements have been made for receipt by authorized dealer of documents of



title to goods, The exporter has signed the EXP.EXP number should be as under:

Ads 0 1

1

0

Register serial No. 0 0 2 5

3

. 1

Year 0

Submission of Documents After the shipment, the exporter submits all these documents to bank for negotiation. The exporter remains in constant touch with the negotiating bank for early negotiation of export bills. If any minor mistake is detected or any document is found missing the same should immediately be corrected or supplied for early settlement of the matter. Export Documents checking After submission of exports documents by the exporter, bank must check, whether all the required documents submitted or not. Bank must examine all documents stipulated in the credit with reasonable care to ascertain whether or not they appear, on their face to be in compliance with the terms and conditions of the credit. Documents not stipulated in the credit will not be examined by the bank. The following points of documents should be carefully scrutinized:      

Bill of exchange Amount of bill differs with invoice Not drawn on L/C issuing branch Not signed Tenor of C/E not identical with L/C Full set not submitted

     

Not issued by the beneficiary Not signed by the beneficiary Not made out in the name of the applicant Description, price, quantity, sales terms of the goods not correspond to the credit Not marked one fold as original Shipping marks differs with B/L and packing list

Invoice:

Packing List: 

Gross weight, net weight and measurement, number of cartoons/ packages differs

  

with B/L. Not marked one fold as original Not signed by the beneficiary Shipping marks differs with B/L

Bill of Lading/Air Way Bill:   

Full set of bill not submitted B/L is not drawn or endorsed to the order of IBBL “Shipping on Board”, “Fright Prepaid” or “Freight collect”



e t c . n o t a t i o n s a r e n o t marked on the B/L. B/L not indicate the name and capacity of the party i.e. carrier or



master, on whose behalf the agent is signing the B/L. Shipped on board notation not showing name of pre-carriage vessel/ intended



vessel Shipped on board notation not showing port of loading and vessel name (in case B/L .indicated a place of receipt or taking in charge different from the port of

    

lading) Short form B/L. Hatter party B/L. Description of goods in B/L. not agrees with that of invoice, B/E. Alterations in B/L. not authenticated Loaded on deck

03.11. Modes of Payment The most common methods of payment under a L/C are as follows:

3.11.1. Sight or Payment credit When the credit stipulates that drafts (bill of exchange) should be drawn under it on DP terms involving payment to the beneficiary on presentation of documents, it is known as a “Sight or Payment Credit”. In this credit the issuing bank nominates a bank in the exporter’s country as the paying bank. If the paying bank accepts its nomination, its position is that of an agent of the issuing bank. When the documents under the credit are presenter to it, it pays the beneficiary provided all the terms and conditions of credit have been complied with. It gets reimbursement from the issuing bank for the amount paid.

3.11.2. Deferred Payment Credit The term “Deferred” means postponed to a future period or date. When a credit does not require the payment to the beneficiary immediately on presentation of the documents but after specified period has elapsed, it is known as “Deferred Payment Credit”. According to this type of credit, the payment is hot made in full on the tender of documents but by installments at pre-determined future dates.

3.11.3. Acceptance Credit When under the terms of a letter of credit drafts are drawn on DA terms involving payment to the beneficiary on the maturity of the accepted Bill of Exchange drawn under it, the letter or credit is referred to as an “Acceptance Credit” or a “Term Credit”. In this form of credit the beneficiary draws a draft for particular since (e.g. 30, 60, 90 days sight or even longer), payable upon either the correspondent bank or the issuing bank.

3.11.4. Negotiation Credit

In a negotiation credit the documents are accompanied by a sight draft (bill of exchange). The bill of exchange may be drawn on the issuing bank or the importer or any other bank stipulated in the credit. The bank, which negotiates documents under the credit, purchases the bill of exchange and pays the amount to the beneficiary who tenders the documents. The issuing bank reimburses the negotiating bank.

Settlements of claim Exporter very often claims of various natures from the foreign buyers against their exports. It should be ensured that genuine claims of the foreign buyers are settled expeditiously by the exporters concerned so that the reputation of the country is not jeopardized in the international market. U n d e r t h e E x c h a n g e C o n t r o l i n s t r u c t i o n s i n f o r c e , B a n g l a d e s h b a n k ’s p r i o r a p p r o v a l i n individual case is necessary for making remittances against export claims. General permission has, however, been accorded to the ADs to make remittances in foreign exchange towards claims against exports of non-traditional items, provided the exporters are willing to make such remittance from the exchange market. Settlement of claims against cash foreign exchange resources of the country will, however, require Bangladesh Bank’s prior approval.

03.12. Foreign Currency Accounts: The Janata Bank Ltd opens the following accounts for dealing remittances: NFCD Accounts: Non-resident Foreign Currency Deposit (NFCD) accounts may now be maintained as long as the account holders desire. Amounts brought in by non-resident Bangladeshis can be deposited in foreign currency account any time after return to Bangladesh. F.C Accounts of non-resident Bangladeshis Foreign currency accounts opened in Bangladesh in the names of Bangladesh nationals or persons of Bangladesh origin working or self employed abroad can now be maintained as long as the account holders' desire.

RFCD Accounts: Persons ordinarily resident in Bangladesh may maintain foreign currency accounts with foreign exchange brought in at the time of their return to Bangladesh from visits a b r o a d . T h e s e accounts are termed as Resident Foreign Currency Deposit (RFCD) accounts. The amount brought in with declaration to customs authorities on form FMJ and up to US $ 5000 brought in without declaration may be credited to this account. RFCD accounts may be opened in US Dollar, Euro, Pound Sterling, Deutsche Mark or Japanese. Interest may be paid on these deposits if these are for a term of not less than one month and the balance is not less than US $1000 or Pound Sterling 500 equivalent. F.C Accounts of other entities ADs do not require prior permission of Bangladesh Bank for opening of foreign currency accounts of:    

Non-resident foreign persons/firms; diplomatic missions in Bangladesh and their expatriates; diplomatic bonded warehouses (duty free shops); Local and joint venture contracting firms employed to execute projects financed by foreign donors/international donor agencies.

Foreign Remittances occurs for the following reasons:      

Investment in shares/securities by non-residents Remittance of profits Remittance of dividend/capital gain Remittance of salaries and savings by expatriates Remittance on account of training and consultancy Remittance by shipping lines, airlines, courier service companies

Visit Abroad  Booking of Passage  Private Travel  Business travel quota for importers and manufacturers producing for domestic markets  Education  Medical treatment  Taking out/bringing in of Bangladesh Taka

 Taking out/bringing in of personal jewelry Miscellaneous Remittances    

Remittance of membership fees Evaluation and Visa Processing Fee Visa fee: Family maintenance

03.13. Other services There

are

some

other

activities

performed

by

foreign

exchange

d e p a r t m e n t . T h e s e a r e mentioned in below:   

NRB( Non-resident of Bangladesh) Share Different types of security for NRB, Wage earner Passport services

3.13.1. NRB Share: Now Non-Resident of Bangladesh can invest in capital market. Every company provides some benefit to attract NRB investors. They give quota on a portion of their authorized capital for NRB. JBL also provide these services to their NRB clients.   

JBL apply for NRB share on behalf of their clients JBL issues DD Other services like refund warrant, buy sell of their share etc.It is also most profitable for the bank. The contribution of NRB share on total earnings of foreign exchange will discuss in next part of the report.

3.13.2. Different Types of Securities for NRB: JBL also issues different types of government securities for wage earners, these are:  Wage Earners Bond  Wage Dollar Bond etc.

03.14. Financial Performance of Foreign Exchange operation of JBL3.14.1 Import Earnings:

The import earning of the JBL from the import related services has increased to Tk 23,680.00million in 2009 from Tk 9,746.00 million in 2005.

Chart 18: Import earnings growth Source: Annual Report of JBL, 2005 -2009 Interpretation: In the year 2009, import earning is in the highest level, it was increasing from the year 2005. The line is upward slopping. So it indicates a positive sign on import earnings of JBL.

3.14.2. Export Earnings: The export earning of the JBL from the export related services has increased to 6078.79 million in 2008 from Tk 2636 million in 2004. Year 2005 2006 2007 2008 2009

Export Earnings (Taka in Millions) 58394.00 70,897.00 71855.87 85418. 79 88653.00

Interpretation: The table and graph show the same result that the export earnings are increased year by year. In the year of 2009 it was in the highest point as the same time upward slopping. It is also positive sign for JBL.

3.14.3. Foreign Remittance: The foreign remittance of the JBL is increased to TK. 5789 million in 2008 from Tk 2612million in 2007. This indicates a 121% increase in remittance performance from the previous year. The following graph shows the growth in the foreign remittance: Year 2005 2006 2007 2008 2009

Foreign remittance (Taka in millions) 26572.80 29267.00 36788.00 45924.00 56190.00

3.14.3.Foreign Exchange Division One of the largest businesses carried out by the commercial bank is foreign trading. The trade among various countries falls for close link between the parties dealing in trade. The situation calls for expertise in the field of foreign operations. The bank, which provides such operation, is referred to as rending international banking operation. Mainly transactions with overseas countries are respects of import; export and foreign remittance come under the preview of foreign exchange transactions. International trade demands a flow of goods from seller to buyer and of payment from buyer to seller. In this case the bank plays a vital role to bridge between the buyer and seller. In the JBL Kawran Bazar Branch there are six officials are working continuously with great effort and teamwork there are quite efficient skill and talented the above jobs are performed in this department. The Bangladesh Bank and the respected VP of this section control them. There are more than 95 clients and 29 countries they are dealing with. They believe in teamwork and extreme hard work.

Foreign Exchange Department is an international department of the bank. It deals with globally and facilitates international trade through its various modes of services. It bridges between importers and exporters. Bangladesh Bank issues license to scheduled banks to deal with foreign exchange. These banks are known as Authorized Dealers. If the branch is authorized dealer in foreign exchange market, it can remit foreign exchange from local country to foreign country. This department mainly deals with foreign currency. This is why this department is called foreign exchange department. Some national and international laws regulate functions of this department. Among these, Foreign Exchange Act, 1947 is for dealing in foreign exchange business, and Import and Export Control Act, 1950 is for Documentary Credits. Governments’ Import and Export policy is another important factor for import and export operation of banks. JBL Kawran Bazar Branch Foreign Exchange Department started foreign exchange operation nine years ago it deals mainly in import but it also operates export remittance and other activities.

3.14.4.Foreign Trade Foreign trade can be easily defined as a business activity, which crosses national boundaries. These may be between parties or government ones. Trade among nations is a common occurrence and normally benefits both the exporter and importer. In many countries, international trade accounts for more than 25% of their national incomes. Foreign trade can usually be justified on the principle of comparative advantage. According to this economic principle, it is economically profitable for the country to specialize in the production of that commodity in which the producer country has the grater comparative advantage and to allow the other country to produce that commodity in which it has the lesser comparative advantage. It includes the spectrum of goods, services, investment, technology transfer etc. This trade among various countries calls for loses linkage between the parties dealing in trade it has been dealing with more than 40 Countries. The banks, which provide such transactions, are referred to as rendering international banking operations. International trade demands a flow of goods from seller to buyer and of payment from buyer to seller. And this flow

of goods and payment are done through Letter of Credit. MBL follows the rules of Bangladesh government and Bangladesh bank strictly.

3.14.5.Import Earnings Import earnings during financial year 2009 amounted to USD 22.51 billion compared to USD 21.63 billion in financial year 2008 showing 4.06% growth in import cost. Import trend, during the last two quarter in financial year 2009 fall below compared to that of financial year 2008.

JBL has quality financing while facility import trade in 2000 to 2009. During the year 2008, the bank executed a total of 20321 letters of credit amounting to BDT 56528.80 million. The principal items were capital machineries, garments and accessories, ships breaking. Import payments during FY08 amounted to USD 21.60 billion. ( 27.3% of GDP) compared to USD 17.16 billion (25.1 % of GDP ) In FY 07, showing an upward trend in import cost.

3.14.6.The Composition of Import Item

Percentage



Food ,

16.14%.



Intermediate goods,

28.16%.



Petroleum and petroleum products,



Textile and articles,

9.2%.



Capital mechinery,

8.2%.



Iron steel and other base metals,

5.5%.

11.8%.



Raw cotton,

5.8%.



Chemicals,

3.9%.



Yarn

3.2%,



Fertilizer,

3.1%.

3.14.6.Back-to-Back Letter of Credit (BTB): Bangladesh is a developing country. After receiving order from the importer, very frequently exporters face problems of scarcity of raw material. Because some raw materials are not available in the country. These have to be collected from abroad. In that case, exporter gives lien of export L/C to bank as security and opens an L/C against it for importing raw materials. This L/C is called Back To Back L/C. In back to back L/C, MBL keeps no margin. Sometimes there is provision in the export L/C that the importer can use the certain portion of the export L/C amount for importing accessories that are necessary for the making of the product. Only in that case, BTB is opened.

3.14.7.Payment of Back-to-Back L/C: Client gives the payment of the BTB L/C after receiving the payment from the importers. But in some cases, client sells the bills to the MBL. But if there is discrepancy, the MBL sends it for collection. In case of BTB L/C, MBL gives the payment to the beneficiary after receiving the payment from the L/C of the finished product (i.e. exporter). Bank gives the payment from DFC Account (Deposit Foreign Currency Account) where Dollar is deposited in national rate. For BTB L/C, opener has to pay interest at LIBOR rate (London Inter Bank Offering Rate). Generally LIBOR rate fluctuates from 5% to 7%. A schedule named Payment Order; Forwarding Schedule is prepared while making the payment. This schedule is prepared when the payment of L/C is made. This schedule contains the followings: i.

Reference number of the beneficiary’s bank and date.

ii.

Beneficiary’s name.

iii.

Bill value.

iv.

Payment order number and date.

v.

Equivalent amount in Taka.

3.14.8.Advance against Red-clause L/C: 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 in red ink, the L/C is called Red clause and Green clause respectively. Though it is not prohibited, yet very rare in Bangladesh.

3.14.9.Post Shipment Credit: This type of credit refers to the 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 cannot afford to wait for a long time for without paying manufacturers/suppliers.

Before extending such credit, it is necessary on the part of banks to look into carefully the financial soundness of exporters and buyers as well as other relevant documents connected with the export in accordance with the rules and regulations in force. Banks in our country extend post shipment credit to the exporters through: 1. Negotiation of documents under L/C; 2. Foreign Documentary Bill Purchase (FDBP): 3. Advances against Export Bills surrendered for collection

3.15.0.Negotiation of documents under L/C: The exporter presents the relative documents to the negotiating bank after the shipment of the goods. A slight deviation of the documents from those specified in the L/C may raise an excuse to the issuing bank to refuse the reimbursement of the payment already made by the negotiating bank. So the negotiating bank must be careful, prompt, systematic and indifferent while scrutinizing the documents relating to the export. Foreign Documentary Bill Purchase (FDBP): Sometimes the client submits the bill of export to bank for collection and payment of the BTB L/C. In that case, bank purchases the bill and collects the money from the exporter. MBL subtracts the amount of bill from BTB and gives the rest amount to the client in cash or by crediting his account or by the pay order. For this purpose, MBL maintains a separate register named FDBP Register. This register contains the following information: o

Date

o #Reference number (FDBP) o

Name of the drawer

o Name of the collecting bank o

Conversion rate

o

Bill amount both in figure & in Taka.

o

Export form number

o

Export L/C number

3.15.1.L/C Terms: Each and every clause in the L/C must be complied with meticulously and ensure the following: 1. That the documents are not state; 2. That the documents are negotiated within the L/C validity, It a credit expire on a recognized bank holiday its life is automatically become valid upto the next works day. 3. That the documents value does not exceeds the L/C value.

3.15.2.Draft/Bill of Exchange: Draft is to examined as under: 1. Draft must be dated 2. It must be made out in the name of the beneficiary’s bank or to be endorsed to the bank. 3. The negotiating bank must verify the signature of the drawer. 4. Amount must be tallied with the Invoice amount. 5. It must be marked as drawn under L/C No…Dated…Issued by………..Bank

3.15.9Foreign exchange income Foreign exchange income is a great source of revenue for the bank. This revenue comes in two forms: commission and exchange gain. Here, six years data of foreign exchange income is presented on the following way-

The different sources of income for foreign exchange business are revealed and the income is showing a continuous increasing trend. The most dominant variable in foreign exchange income is exchange gain. This is achieved from both export and remittance business. The graph is showing that foreign exchange income is increasing. In year 2009 has achieved highest income from foreign exchange. Regulation for Foreign Exchange Transaction

Many regulation have been devbeloped to do smooth functioning and controlling the international business. International Chamber of Commerce (ICC) has been playing a vital role for effective and efficient function in international business. In our country, the Central Bank, Bangladesh Bank published two foreign exchange guidelines (Foreign Exchange Guide line VolI and Vol- II) Bangladesh bank and CCI and E controls the foreign Exchange business. The central Bank issued many circulars regarding foreign exchange transactions and they are the monitoring authority by issuing up-to-date instruction circulars for smooth functioning. Ministry of commerce issued IMPO ( Import Policy Order and Export Policy Order) and EXPO. Foreign exchange transactions are regulated by the following Act/Guidelines/Circular etc: 

Foreign Exchange Regulation Act, 1947.



Import and Export (Control) Act, 1950.



Circular issued by the Central bank.



Import Policy Order and Export Policy Order and EXPO –published by the ministry of Finance.



Public Notices- issued by Chief controller of Import and Export.



Guidelines / circulars of the bank.



Publications of international Chambers of Commerce (ICC) like UCPDC)-500, URC, and URR.

CHAPTER-4 CONCLUDING PART Findings Janata bank Limited (JBL) is named from the name of a who dedicated his life for the cause of peace in this world and hereafter and served the humanity. The prime objective of Janata bank Limited is to serve the people for attainment of their economic goal and success in life here and hereafter. I have tried to represents a concrete view of this bank and find out the following major concerns:  Total capital of the Bank is Tk. 9183 million as on 31 December 2011 but in 2010 & 2009 it was Tk. 7747 million & 5430 million.  Paid up capital of the Bank stood at Tk. Tk. 4453 million on 31 December 2011 but it was Tk. 3425 million in the previous year.  Net profit After Tax in 2011 is tk. 1290176900 decreases from tk. 2072340363 in the year 2010.  The number of branches has increased from 63 in 2010 to 84 in 2012.  The bank performs corporate social responsibility with proper manner.  According to CRISL, the bank has achieved AA for long term and ST-2 for short term.  The bank has achieved an acceptable place to the customers and Government of Bangladesh by complying rules and regulations.  Lack of attractive and new loan products for the customer.  From the clients view introducer is one of the problems to open an account. it is general problem to all commercial bank  Lack of update products is also a drawback of the general banking area of the SJIBL bank .the bank provides only some limited traditional services.  JBL has introduced its ATM service. But it’s not so popular like other banks such as DBBL, BRAC Bank etc.  Lack of sufficient financial data and other information in JBL own website.

Positive Findings:  ♦Import earnings and earnings from remittance quite satisfactory levels.  ♦JBL have enough branches in our country.

 ♦The Bank Introduce NRB (Non Resident Bangladeshi) branch, which is new idea in Bangladesh. Negative Findings:  

The first problem of this bank is employees are not punctual. They have no uniform. For that reason some customer find it, difficult to identify

  

the bank employee. Some superior officers of this bank are not available sometime. Lack of motivation among mid and lower level officers. Some employees are less trained to handle technologies. Such as – computer ,



Interknitted. Modern technology is hardly used to maintain documentations yet they are using



registered based document. Where computer leads every sphere of lives including foreign exchange dept; Janata



Bank does not have experts in computer. Though JBL has qualified employee in foreign exchange department, but bank should recruit some new



employee to run this department smoothly. Most of the time they try to provide quality services to the known person, it may loses

   

general customer. JBL charge very low margin to the known clients. JBL also charge very low commission compare to another banks. Long term training much required for the foreign exchange officers. Lack of promotional initiatives to expand the foreign exchange business.

Recommendations: A. Management of JB should pressurize employees for being punctual.   

Janata Bank should arrange uniform for the employees. Should be improving customer services. JBL should take the motivational strategies among mid and lower level officers



to progress their activities. The bank waste enough time of their clients in providing services as it lacks in expert



computer operators. So JBL has to hire computer expert. In case of L/C opening, Bank provides NIL margin facility to only some known clients, but they



should also provide this facility to some small but efficient client. In case of payment of remittance, they should introduce debit card so that customer can withdraw money within a second.



JBL should be improving the promotional initiatives to expand the foreign



exchange business. The bank has the provision of internship program but there is no organized program for internship. The bank can properly utilize the interns at minimum cost. I believe these steps will be helpful to improve the performance of and the financial sector of Bangladesh.

B. Recommendations for Future Strategic Actions During my training at JBL I observed some areas that need attention of the management like:

 Should use advanced software in clearing  Train up the employees to work more efficiently  Increase the number of employees  The branch must start money exchange facilities  Bank should offer more products and services  Expand the number of branches not only in urban area but also in rural area  The branch should come up with more marketing, CRM activities.  The branch should come up with some effective CSR activities.  The Bank should be increase ATM booth facilities. Bank needs to use more marketing channels to make the public aware of its products and services. In the presence of intense competition SJIBL has to realize the importance of marketing. Management should distribute work equally among different employees. Some of the employees are overburdened while some sections are overstaffed. JBL needs to improve its website. More information relating to financial performance of the bank should be available on the website.

JBL should immediately improve its Information Technology System. The software currently in use should be made error free, as it is the need of the hour, and integrated data interchange should be inculcated to enable top management to monitor all activities going about in all branches through generation of special purpose reports. The top management should immediately start thinking in terms of rotating the employees in various departments, as this transforms work force into human capital. If a particular individual keeps on employing his/her efforts in one sphere of banking it would not only create a sense of monotony and boredom, but also not help improving the skill set of employees. Bank should make a plan to gear up its recovery efforts on war footing and reorganize the recovery function of global bases. In addition, bank should tighten up control on expenditure. To save the time of the customers and other clients, bank should adopt computerized system for book keeping and other filling systems. It will increase the efficiency of the bank. I know that there are some branches which are computerized but most of the branches in various cities of the country are not computerized. So the bank should mechanize all its branches in the country. Bank should launch advertising campaigns throughout the year to promote the habits of savings in the people. Bank should open more branches in the remote areas of the country to get deposits and idle resources. Bank should provide similar facilities to all its branches in big cities. The standard of service and other facilities are far better as compared to smaller cities.

Conclusion: From the practical implementation of customer dealing procedures during the whole period of my practical orientation in Janata Bank Limited Kawran Bazar Branch I have reached a firm and concrete a conclusion in a very confident way. I believe that my realization will be in harmony with most of the banking thinkers. It is quite evident that to build up an effective and efficient considered

as soon as possible. Besides, every bank has to survive amidst of a large number of banks including local and foreign. That’s why to keep with expected profit margin of the time being and for the future every bank should try heart and soul to please the customers in a smart and trusty way. But quite regretful to mention that most of our bank face decreasing profit trend due to switch over of their present customers to those foreign with higher customers service facilities. So, timely decision for introducing sophisticated banking instruments should be taken as early as possible. After taking effective and time defeating measures regarding efficient employees and instruments will help the local office of Janata Bank Limited, Kawran Bazar Branch to reach the principle of success with high profit and productivity. A bank they should be stronger in financial side as there is too competition and banks are growing up. If Janata Bank Limited Kawran Bazar Branch adopts professionalism within the frame work of Shariah, they will be able to earn handsome “Halal Profit” and higher return to the depositors and shareholders. Ultimately, public will get more confidence on this type of Banking. Three months of internee is really short period of time and is not enough time to know all about the function of the bank, it’s a step by step process. By talking with my supervisor Prof. Dr. M. Abu

Misir I have learned the basic function and strategy of the banking sector and about the bank. How they provide service, how they fulfill their customer need & demand and how they compete in the market with the competitor. In my intern time I have learned theories in office time and learned practical things by doing field work like Account Opening Section, Clearing Section, and Cash Section,. This kind of work conducted for provide customer service.

Abbreviation GDP – Gross Domestic Product JBL – Janata Bank Limited

EC - Executive committee MANCOM - Management Committee ALCO - Asset Liability Committee BIBM – Bangladesh Institute of Bank Management LC – Letter of Credit CIB - Credit Information Bureau CRM – Credit Risk Management LRA - Lending Risk Analysis ID - Investment Division DMD - Deputy Managing Director RM - Relationship Manager IRM - Investment Risk Management MD - Managing Director CEO – Chief Executive Officer

BIBLIOGRAPHY Reference Books

 Rose, Peter S. (1999), Commercial Bank Management, Fourth Edition, Irwin-

McGraw-Hill New York  Research Methodology of C.R. Kothari

Annual Reports  Annual Report of Mercantile Bank Limited 2009  Annual Report of Bangladesh Bank 2009

Other References        

Daily Statement of JBL Monthly Reports Schedule Bank Statistics Statement of Affairs Foreign Exchange Manuals Guidelines for Foreign Exchange Transaction Practical participation of JBL Different Types of Forms of JBL

Website    

www.jblbd.com www.bangladesh-bank.org www.janatabank.org.bd [email protected]

The end