Foreign Exchange Operations of JBL

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Daffodil International University

Internship Report Foreign Exchange operations of JBL

1.1. Introduction

1.2. Objectives of the Report

1.3. Origin of the report

1.4. Scope

1.5. Methodology of Study

1.6. Limitations of Study

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01.01. Introduction

The theoretical knowledge and practical training is not the same theme. The theoretical

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. Janata Bank Limited a kind of commercial Bank in our country.

Janata Bank a nationalized commercial bank established under the Bangladesh Banks

(Nationalization) Order 1972. With its head office at Dhaka the bank started its operations

with an initial authorized capital of Tk 50 million and paid up capital of Tk 10.5 million. The

authorized capital was raised to Tk 30 million in 1973. In addition to traditional deposit

taking in various accounts and providing loans to almost all sectors of the economy, the bank

offers different types of other services and conducts 'off-balance sheet (OBS)' activities. 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.

Janata Bank has a large participation in foreign exchange business including overseas

remittance services. The total volume of foreign exchange business handled by the bank in

servicing imports and exports and remittances during 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. Ever since the bank has been making continuous and sustained efforts to

mobilize deposits from untapped resources in both urban and rural areas. 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.


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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 the

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 BBA Degree (Internship) of Daffodil

International 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 Limited., Gandaria Branch”. From the very beginning of my internship I have

worked on General banking. After few weeks later I was shifted on Foreign Exchange

department. For that reason I made my Report on Foreign Exchange activities of Janata Bank

Limited., Gandaria Branch.

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 Janata Bank Limited.


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01.05. Methodology of the Report

01.05.01. Appointing as an internship

All the formalities have been completed I joined in Janata Bank Limited (JBL) in the

Gandaria Branch.

01.05.02 Selection of the topic

Internship topic selected very important for a student. I am a student of Daffodil International

University and internship program completed in Janata Bank Limited (JBL) in the Gandaria

Branch. The area chosen designed for the learning was selected by me and permitted by

Professor M. Shahjahan Mina, Advisor, Faculty of Business & Economics, Daffodil

International University.

01.05.03 Data Sources

Two types of data are used to prepare the report, which are primary and secondary data.

1.5.3.1 Primary Sources:

Practical desk work

Employees of the JBL

Clients of the JBL

Examine and study client files

1.5.3.2 Secondary Sources: Most of the necessary information will be collected from the

client’s document.

JBL Annual Report 2004-2009

Published documents

Website of JBL

Relevant books.

01.05.04 Target Populations

All employees, management level and customer of JBL.

01.05.05 Sample Size:

25 employees

20 Clients

01.05.06 Sampling Technique:

Convenience sampling technique has been used.


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01.05.07 Data Collection Method:

Most of the data required for the study was collected form primary sources through oral

interviewing the employees.

01.05.08 Data Analysis Process:

To analyze the gathered data of foreign exchange department, I used different types of charts,

tables and graphs. To do that analysis I used different types of computer software like

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 Janata Bank Limited (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 Janata Bank Limited (JBL) in

the Gandaria Branch. My topic is study on Foreign Exchange operations of Janata Bank

Limited (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.


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Although the officers of the Janata Bank Limited 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.


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02.01. An overview of Janata Bank Limited (JBL)

Janata Bank Limited is the leading sector bank in Bangladesh offering full range of Personal,

Corporate, International Trade, Foreign Exchange and Lease Finance. Janata Bank Limited 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.

1250.00 in the said AGM/EGM i.e., paid- up would be Tk. 5,000 million).

No. of Branches: Almost 850.


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02.03. Janata Bank Limited At a Glance

Key Points Particulars

Name Janata Bank Limited

Logo

Date of incorporation as PLC May 21, 2007

Status Public Limited Company

Chairman DR. Abul Barkat

Managing Director S.M. Aminur RahmanManaging Director & CEO

Number of Branches 851

Total Manpowers 13,122

Earnings Per Share 78.02-(TK)

Total Assets Tk.2,93,662 million

Authorized Capital Tk.20,000 millions

Paid up capital Tk.5000 millions

Net Profit 2982 millions(2009)

Total Deposits 2,46,175 millions

Total Loan and Advances 1,66,359 millions

Fully committed To Deliver Shareholders ValueHead Office Janata Bhaban Corporate branch

110, Motijheel Com. Area Dhaka-1000Bangladesh.

Web and E-mail Address www.janatabank-bd.com

02.04. Hierarchy of Janata Bank Limited


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Hierarchy of Janata Bank Limited


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02.05. Objective of Janata Bank Limited

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 Janata Bank Limited

Janata Bank Limited 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 Janata Bank Limited

To become the effective largest commercial bank in Bangladesh to support socio-economic

development of the country and to be a leading bank in South Asia.

02.08. Core Values of Janata Bank Limited

Integrity

Fairness

Harmony

Courtesy

Commitment

Enthusiasm for work

Business ethics

02.09. Core Strengths of Janata Bank Limited

Quick Decision Making

Efficient team performance

Satisfied Customer

Internal Control


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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.

02.11 Business Philosophy of Janata Bank Limited.

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

assisting Janata 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 everything we do. For their customers, their shareholders, their associates

and their communities upon, which the future prosperity of their company rests.

02.12. Management of Janata Bank Limited:

For any financial and non financial organization Management is the most valuable and

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,

directing and controlling of all financial and non financial resources of an organization.

Different aspects of management practice in Janata Bank Limited are discussed below.

Planning

Janata Bank Limited has done its planning within the preview of the corporate plan. The

overall planning approach of Janata Bank Limited is Top-down. Each branch can plan

according to the goal imposed by the corporate level. It doesn’t plan independently. And,

Janata Bank Limited has a planning division. This department is mainly responsible for the

overall planning.

Organizing

Janata Bank Limited is organized as per the existing business locations. It has 851 branches,

each of which is a separate entity. Each unit is responsible for its own performance and


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followed by Managers each. He is directly responsible for performance of their unit. Within

each branch it is organized functionally.

Staffing

The recruitment of Janata Bank Limited 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 Janata Bank Limited 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 long

term 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.

Janata Bank Limited


GENERAL BANKING

LOAN AND ADVANCE

FOREIGN EXCHANGE

LEGAL AND RECOVERY

CD, SD, STD, FDR, SND, DD, TT, MT, PO, SALE OF PRIZE

BOND & SP.

CC, TR, LIM, OD, PROJECT LOAN.

EXPORT & IMPORT.

LEGAL MEASURE FOR RECOVERY.

RECOVERY

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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 Janata Bank Limited

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


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It is most important side of the bank. Bank is nothing but a middleman between lenders

(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 the bank. 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. Current account or Demand Deposit (CD Account)

2. Savings Deposit (SB Account)

3. Fixed or Time Deposit (FDR)

4. JBDS (Janata Bank Deposit Scheme)

5. MDS (Medical Deposit Scheme)

6. EDS (Education Deposit Scheme) & SPS

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. Payment Order Issue/Collection

ii. Demand Draft Issue/Collection

iii. T.T. Issue/Collection


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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:

Deposit money by the customer along with application form.

Give necessary entry in the bills payable (Pay Order) register where payee’s

name, date, PO no, etc is mentioned.

Prepared the instrument.

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 charges for its

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 long

standing relationship.

TT (Issue)


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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 drawee branch mentioning the

amount, name of the payee, name of the issuing branch, date, test number and his

her 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 for exchange of

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. In Bangladesh, clearing house sites at Bangladesh bank where there is no office of

the 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


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Types of Clearing Cheque

JBL Gandaria Branch, Dhaka performs the clearing function through Bangladesh Bank. JBL

Local Office, Dhaka acts as the agent of all JBL branches for the clearing house of the

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.

2.15.1.4 Cash

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 full fill 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.


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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:

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

Then he checks the 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.


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03.01. Foreign Exchange

03.01.1. 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

process or 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.

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

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.


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Exchange position.

Intervention money.

Foreign exchange transaction.

Foreign exchange trading.

Export and import letter of credit.

Non-commercial letter of trade.

Financing of foreign 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:


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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

Any other documents required under the relevant import policy.

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.


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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

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:

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.

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.

Whether we are holding satisfactory credit report on the beneficiary to satisfy the

relevant provisions of the guidelines for Foreign Exchange transactions

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.

Signature of the customer on the L/C application to be verified by authorized/

designated officer.

L/C application with all supporting papers to be checked to ensure that the required papers

are as per requirement of Guidelines for Foreign Exchange Transactions and are consistent to

each other

…..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


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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%

above L/C value for the whole journey/shipment together with unconditional

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

defects.

Before Dispatching/ Transmitting the L/C:

Check whether the opening of the Letter of Credit is approved by the competent

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.


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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 prepared and

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:


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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.

The Branch shall obtain counter indemnity from the customer in favor of the

Bank.

The customer shall submit an unconditional undertaking to accept the related

shipping documents even with any discrepancies.

The Shipping Guarantee/Letter of indemnity must be signed jointly by two

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.


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Port of shipment and port of destination: L/C will also indicate from where shipment to be

made and where goods to be delivered.

Tenure of the draft: Whether the draft to be drawn at sight or usance, 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: Pre-shipment inspection certificate is compulsory for both

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

any other 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

internationally reputed bank located in beneficiary’s country. In that case after adding

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

at the time of issuance of such instructions.


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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 terms of the credit. These amendments must also be advised by the opening bank to the

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 course, be effective if all the parties to letter of credit namely the L/C opening bank, the

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). Thus the correspondent bank becomes the “Advising

Bank”.

The process of advising a credit consists of forwarding the original credit to the beneficiary to

whom it is addressed. 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


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regulations relating to export. While advising, the advising bank does not undertake any

liability.

Advising a letter of credit:

Chart 15: Advising of L/C

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 stays at 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 exceeding 7 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.


IMPORTER (L/C

APPLICANT)L/C OPENING BANK

L/C BENEFICIARY L/C ADVICING BANK/CONFIRMING BANK

APPLICATIONON

ISSUE L/C ADVICE

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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.

Other Documents

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 itreceives 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


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(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.

03.3.10. Post import finance

When the importer does not come forward to retire the import documents, or requests the

bank for finance against 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 Murabaha 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)

03.3.11.1 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.


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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

realized from the importer. Realization of margin will depend on the banker customer

relationship and also on the marketability of the goods.

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.


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Any other document of necessary.

3.3.12. Comparative Position on Overall Import Performance for the last 3

Years of “Janata Bank Gandaria Branch” (Figure in Million)

Item 2008 2007 % of Growth 2009 2010 % of Growth

Import 991.12 2056.79 108% 2056.79 2282.53 11%

Source: Statement of Affairs

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

Act 1950. There are number of formalities an exporter has to fulfill before and after execution

of export, some of are as 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.


2008 2009 2010

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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 are as 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.


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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 a

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.


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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 the

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 1st beneficiary of the L/C may transfer the L/C to the 2nd

beneficiary, through a bank nominated by the Issuing Bank. This bank is called the

Transferring Bank.


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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

o Prepaid” [For CFR Basis] and ‘Freight Collect” [For FOB Basis], not short

form, Blank back or pre dated.

The Bill of Lading appears the merchandise covers in Commercial Invoice.

The port of Shipment, Destination, Shipment Date, Name of consignee,

o Shipping Mark [if any] appears on the Bill of Lading are as per LC term.

Bill of Lading is signed by the carrier company or his agent.

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:


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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.


Contract of Sale(1)

Ships Goods to(5)

M/s. Concord Int’l New York, USA

(Exporter/Beneficiary)

Forwards L/C to

(4)

Presents Docts. and

obtains payment from

M/s. Mark Style73 Motijheel C/A. Dhaka

(Applicant/Importer)

Applies For

opening of L/C

RecoversAmount From

(8)

SCB, USAAdvising/Negotiating

Bank

The Trust Bank Ltd.Dhaka

(Issuing Bank)

Obtains Reimbursement From Citibank NA, USA

(7)

Opens L/C and Sends it to(3)

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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:

On March 24, 1994 Bangladesh Taka was declared convertible for current international

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.


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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 to be shipped and services to be provided in some future date. After receipt of payment

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 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 against acceptance of Drafts by the buyer.


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Documentary Credit: Documentary credit is the classic method. This method reduced

payment related risks for both exporter and importer substantially. Because documentary

credit is 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. So

under 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


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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

All exports must be declared on EXP Form. AD branches supply these forms. The bank

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 Code Register Serial No Year

0 1 1 0 0 0 2 5 3 1 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.


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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

Invoice:

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

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” etc. notations are not

marked on the B/L.


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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.

Charter 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:

Chart 17: Modes of Payment


Payment methods under L/C

Sight or Payment creditDeferred Payment Credit

Acceptance Credit Negotiation Credit

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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 a 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. Deferred payment credit may be used where the

beneficiary wishes to allow the importer time to pay for the document.

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 usance (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.


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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.

Under the Exchange Control instructions in force, Bangladesh bank’s prior approval in

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 abroad.

These 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


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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:

o Non-resident foreign persons/firms;

o Diplomatic missions in Bangladesh and their expatriates;

o Diplomatic bonded warehouses (duty free shops);

o 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


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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 department. These are

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.


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03.14. Financial Performance of Foreign Exchange operation of JBL

3.14.1 Import Earnings:

The import earning of the JBL from the import related services has increased to Tk 23,680.00

million in 2009 from Tk 9,746.00 million in 2005.

Table 11: Import Earnings

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 Import

Earnings

(Taka in

Million)

2005 72,912.00

2006 90512.00

2007 84,065.16

2008 1,11,413.98

2009 1,18,525.00

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0.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

2005 2006 2007 2008 2009

Export Earnings

Export Earnings

Table 12: Export Earnings

Chart 19: Growth of Export Earnings

Source: Annual Report of JBL, 2005-2009

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 2612

million 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 Export

Earnings

(Taka in

Million)

2005 58,394.00

2006 70,897.00

2007 71,855.87

2008 85,418.79

2009 88,653.00

Year Foreign Remittance (Taka in Million)

2005 26572.80

2006 29267.00

2007 36,788.00

2008 45,924.00

2009 56190.00

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Table 13: Foreign Remittance

Chart 20: Growth of Foreign Remittance

Source: Annual Report of JBL, 2005-2009

Interpretation: In the year 2005, JBL earn only 535.20 million taka from foreign remittance.

After 2005 it was increased dramatically. In the year of 2009, it was earned 8669.00 million

taka which was nearly 16 times greater than the year 2005.


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During my three months internship in the Janata Bank Ltd, Gandaria Branch, Dhaka

following positive and negative things are found from my observation:

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:


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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 , Internet

etc.

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.


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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.


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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 Janata Bank Limited and

the financial sector of Bangladesh.


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There are a number of nationalized and foreign banks operating their activities in

Bangladesh. Among them Janata Bank Limited is one of the leading commercial bank.

Janata Bank Ltd has introduced a new dimension in the field of innovative and

benevolent banking in our country. The bank has successfully made a positive contribution to

the economy of Bangladesh. Its profit is gradually increasing. It plays a great role in

collecting scattered Deposit, Loan settlement and International Trade etc.


62


The Bank ensures quality services to the customers. For better growth and healthy

economic position, it should introduce new and lucrative long-term credit schemes especially

for new investors and schemes for poverty alleviation like micro credit.

I hope Janata Bank Ltd will do more work for socio-economic development besides

their banking business. To keep pace with ever-changing uncertain domestic business

environment and face the challenges of revised global economic scenario, the bank should be

more pro-active and responsive to introduce new marketing strategy to hold the strong

position in home and abroad.

For the future planning and the successful operation in its prime goal in this current

competitive environment I hope this report can provide a good guideline. I wish continuous

success and healthy business portfolio of Janata Bank Limited.


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References

Annual report from the year 2005 to the year 2009, Janata Bank Limited.

Foreign Exchange Manual, Janata bank Limited.

Brochures published by Janata Bank Ltd.

Madura, Jeff International Financial Management 9th Edition

Bank Paricrama – A journal of Banking & Finance March 2006

Bangladesh Bank (1997), Guideline for Foreign Exchange Transactions, Vol-1,

Dhaka

Ali, Syed Ashraf (1995), Foreign Exchange and Finance of Foreign Trade, First

Edition, Lita Academics, Dhaka


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Web Site

www.janatabank-bd.com

www.bangladeshpedia.search.com

Annexure

Financial and Operational Performance of Janata Bank Limited

Particulars 2004 2005 2006 2007 2008

01 Authorized Capital 8000 8000 8000 8000 8000

02 Paid Up Capital 2594 2594 2594 2594 2594

03 Reserve Fund 1293 1296 1727 3224 4183

04 Deposits 151036 168897 182947 198,636 2,21,336

05 Advance 107786 124467 138493 121200 144678

06 Revenue 10934 13143 16272 18522 20922


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07 Cost 8621 9842 12059 13559 13919

08 Operating Profit 2312 3301 4213 4963 7003

09 Provision for Loans/Assets

2180 3123 10707 11698 9051

10 Net Profit - - - 1681 3145

11 Export 54623 58395 70897 71855 85418

12 Import 74920 72912 128809 84065 129413

13 Total No. Employees 15705 15321 14772 13860 13379

14 No. of Foreign Correspondent

1120 1125 1198 1198 1202

15 No. of Branches 847 847 848 848 849

Abbreviation

A/C : Account

B/E : Bill of exchange

B/L : Bill of Lading

BTB : Back to Back

CC : Cash Credit

CD : Current Deposit

CCI & E : Chief Controller of Import & Export

CIF : Cost Insurance & Freight

CIP : Carriage & Insurance Paid

DD : Demand Draft

EXP : Export Form

ERC : Export Registration Certificate


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EPB : Export Promotion Bureau

ETDA : Exchange Transaction Debit Advice

ETCA : Exchange Transaction Credit Advice

EPS : Earning Per Share

EPB : Export Promotion Bureau

FDR : Fixed Deposit Receipt

FDBC : Foreign Document Bill Collection

FDBP : Foreign Document Bill Purchase

FER : Foreign Exchange Regulation

FTT : Foreign Telegraphic Transfer

ID : International Division

ITC : International Trade Control

IRC : Import Registration Certificate

L/C : Letter of Credit

LCAF : Letter of Credit Authorization Form.

LIM : Loan against Imported Merchandise

PC : Packing Credit

JBL : Janata Bank Limited

PAD : Payment against Documents

PI : Pro -forma Invoice

ROA : Return on Asset

SWIFT : Society for Worldwide Inter Bank Financial

Telecommunication

TIN : Tax Identity Number

TT : Telegraphic Transfer

TR : Trust Receipt

UCPDC : Uniform Customs & Practice for Documentary Credit

VAT : Value Added Tax


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