Standard Bank Ltd.

INTERNSHIP REPORTON

Topic: Local remittance & Foreign Exchange.

Submitted To

MD. TAYUB CHOWDHURY Professor

Department of Marketing Studies & International MarketingUniversity of Chittagong

Submitted By

Letter of Submission31MAY 2012

MR. TAYUB CHOWDHURY

Professor

Department of Marketing Studies & International Marketing

University of Chittagong.

.Subject : Submission of Internship Report.

Sir,

This is a great pleasure for me to submit the Internship Report after successful completion of all courses of MBA program in your University. I have joined as an in Standard Bank Limited on January.

During my service, I have gone through various parts of General Banking & Foreign Exchange at Standard Bank Limited (Head Office, Dhaka). I have tried my level best to observe and judge as they are and do the things as they are ought to be done. It would be a great pleasure for me if this report is of any use.

In this connection, I therefore, hope that you would be so kind as to accept my report and oblige thereby.

Thank you,

Sincerely yours,HELAL UDDINMBA ExamineeClass Roll# 15636Exam Roll# 2010/15

________________________

Prologue

Internship program is a scope for acquiring practical knowledge after successful completion of a academic curriculum. Theoretical knowledge gets a complete shape only when it is applied in a practical field. To bridge up the gap between theory and practice, Commerce Faculty of University of Chittagong has introduced the internship program for MBA course to bring the student closer to the practical work. This is undoubtedly a valuable appreciable in addition to the institutional education.

I have joined Standard Bank Limited, Branch. It is a bank of third generation and is one step ahead from other banks not only in making profit but also in serving people in an efficient way. To meet the customer need and demand, the bank has launched some lucrative products and services that show their deep orientation toward marketing philosophies.

During my service, I’ve tried my best to get knowledge about the overall banking operation with special emphasis on their performance.

The program in fact a great endeavor to make the students familiar with the real business situation and to prepare them to match their theoretical knowledge with practical field.

Acknowledgement

At first, I express the gratefulness from the core of my heart to the internship supervisor, honorable Professor, MR. TAYUB CHOWDHURY Department of Marketing Studies & International Marketing University of ChittagongIt was a great pleasure to prepare Internship Report on the various aspects of Genernal Banking

Activities, loans & Advances & Foreign Exchange Business operating by Standard Bank

Limited.

I am also grateful to the management of Standard Bank Limited for giving the job opportunity in

their Institution.. My special thanks to Mr. Lutfar Rahman, SAVP, & Mrs. Rumana Kutubuddin,

AVP, Mr. Aminul Islam, Senior Executive officer, Mr. Saiful Islam, Senior Executive Officer,

Mr. Syed Mahmud Hossain, Executive Officer of Standard Bank Limited, Head Office, Dhaka

and the staffs who have given me the practical knowledge about the banking operations.

Finally, I would like to express my wholehearted appreciation to all officers and staff of Standard

Bank Limited, Head Office, for their help during my preparation of internship report.

EXECUTIVE SUMMARY Banking system of Bangladesh has gone through three phases of development- Nationalization, Privatization, and Lastly Financial Sector Reform. Standard Bank Limited has started its journey as a private commercial bank in 1999.While running practical orientation with Standard Bank Limited, I was placed in three vital departments. These were: General banking Credit Foreign exchange

General banking is the starting point of all the banking operations. It is the department, which provides day-to-day services to the customers. It opens new accounts, remit funds, issue bank drafts and pay orders etc. Provide customer through quick and sincere service is the goal of the general banking department.

Bank credit is an important catalyst for bringing about economic development in a country. Without adequate finance, there can be no growth or maintenance of a stable economy. Standard Bank Limited, being one of the largest private commercial bank of the country, has some prejudice to finance directly on priority basis to agriculture, industry and commerce sector for strengthening the economic base of the country. Hence, it is very clear that, Standard Bank Limited plays an important role to move the economic wheel of the country. Providing different sorts of credit and schemes like loan against imported merchandise (LIM), Trust Receipt, Bank Guarantee, Industrial Loan, IT loan, Consumer Credit scheme, Executives Car Loan, House Finance is the main spring of the credit department. Foreign exchange department plays significant roles through providing different services for the customers. Letters of credit is the key player in the foreign exchange business. With the globalization of economies, international trade has become quite competitive. Timely payment for exports and quicker delivery of goods is, therefore, a pre-requisite for successful international trade operations. To ensure this purpose Standard Bank Limited transmit L/C through SWIFT (Society for Worldwide Inter-bank Financial Telecommunication) to the advising bank.Standard Bank Limited is providing different sorts LC services like L/C opening, lodgment, BLC (bills under letter of credit), Back to back LC etc. Foreign exchange department also provide foreign remittance lie traveler’s cheque, Money Gram, foreign demand draft, endorsement of US$ in passport.

NO CHAPTER ONE: PAGE N0

INTRODUCTION

1.1 1.1 AUTH0RIZATION OF STUDY 1 AUTH0RIZATION OF STUDY 1

1.21.2 SCOPE OF THE STUDY 1SCOPE OF THE STUDY 1

1.31.3 OBJECTIVES OF THE STUDY OBJECTIVES OF THE STUDY 11

1.41.4 METHODOLOGY OF THE STUDYMETHODOLOGY OF THE STUDY 22

1.5 JOB ROTATUON 31.6 LIMITATIONS OF THE STUDY1.6 LIMITATIONS OF THE STUDY 33

CHAPTER TWO:

2.1 HISTORICAL PERSPECTIVE2.1 HISTORICAL PERSPECTIVE 442.22.2 NATURE OF THE BUSINESSNATURE OF THE BUSINESS 442.32.3 FACTS AND FIGURESFACTS AND FIGURES 552.42.4 MANAGEMENT HIERARCHYMANAGEMENT HIERARCHY 662.52.5 DESCRIPTION OF THE BRANCHDESCRIPTION OF THE BRANCH 772.62.6 PERFORMANCE OF SBL,OR NIZAM ROAD BRANCE AS PERFORMANCE OF SBL,OR NIZAM ROAD BRANCE AS ON 20-12-2005 ON 20-12-2005 7-97-92.72.7 HIERARCHY OF SBL OR NIZAM ROAD BRANCHHIERARCHY OF SBL OR NIZAM ROAD BRANCH 1010

CHAPTER THREE:

3. GENERAL BANKING DEPARTMENT3. GENERAL BANKING DEPARTMENT 11113.1 ACCEPTING DEPOSITS3.1 ACCEPTING DEPOSITS 11113.2 DEMAND DEPOSITS3.2 DEMAND DEPOSITS 11113.2.13.2.1 CURRENT ACCOUNTCURRENT ACCOUNT 12123.2.23.2.2 SAVINGS BANK ACCOUNTSAVINGS BANK ACCOUNT 12-1312-133.33.3 TIME DEPOSITSTIME DEPOSITS 13-1413-143.3.13.3.1 FIXED DEPOSIT ACCOUNTFIXED DEPOSIT ACCOUNT 14-1714-173.3.23.3.2 SPECIAL FIXED DEPOSIT SCHEMESPECIAL FIXED DEPOSIT SCHEME 17173.3.33.3.3 STD ACCOUNTSTD ACCOUNT 18183.3.43.3.4 SPECIAL SAVING SCHIME (SSS)SPECIAL SAVING SCHIME (SSS) 18183.3.53.3.5 BEARER CERTIFICATE OF DEPOSIT (BCD)BEARER CERTIFICATE OF DEPOSIT (BCD) 19-2019-203.43.4 ACCOUNT OPENING SECTIONACCOUNT OPENING SECTION 20-2520-25

3.53.5 ISSUING CHEQUE BOOK TO THE CUSTOMERSISSUING CHEQUE BOOK TO THE CUSTOMERS 25-2725-273.6 TRANSFER OF AN ACCOUNT3.6 TRANSFER OF AN ACCOUNT 27273.7 CLOSING THE ACCOUNT3.7 CLOSING THE ACCOUNT 27-2827-283.83.8 STOP PAYMENT OF CHEQUESTOP PAYMENT OF CHEQUE 28283.93.9 DISHONOR OF CHEQUEDISHONOR OF CHEQUE 28283.103.10 CLEARING & BILLS SECTIONCLEARING & BILLS SECTION 28-3228-323.113.11 ENDORSEMENTENDORSEMENT 32323.123.12 DISPATCH SECTIONDISPATCH SECTION 32-3332-333.13 CASH SECTION3.13 CASH SECTION 33-3433-343.14 MY OBSERVATIONS3.14 MY OBSERVATIONS 3535

CHAPTER FOUR:

4.1 LOCAL REMITTANCEM 36

4.1.2 TELEGRAPHIC/TELEPHONE TRANSFER (TT)4.1.2 TELEGRAPHIC/TELEPHONE TRANSFER (TT) 36-3836-38

4.1.3 DEMAND DRAFT4.1.3 DEMAND DRAFT 38-3938-39

4.2 FOREIGN REMITTANCE4.2 FOREIGN REMITTANCE 39-4139-41

4.2.1 FOREIGN DEMAND DRAFT (F.D.D)4.2.1 FOREIGN DEMAND DRAFT (F.D.D) 41-4241-42

4.2.2 TRAVELER’S CHEQUE4.2.2 TRAVELER’S CHEQUE 4242

4.2.3 MONEYGRAM4.2.3 MONEYGRAM 42-4442-44

4.2.4 LOCKER SERVICES4.2.4 LOCKER SERVICES 4444

4.2.5 E-CASH {ATM (AUTOMATED TELLER MACHINE)}:4.2.5 E-CASH {ATM (AUTOMATED TELLER MACHINE)}: 44-4544-45

CHAPTER FIVE:

6.1 IMPORT DEPARTMENT 71-72

6.26.2 DOCUMENTARY CREDIT/LETTER OF CREDIT (LC): DOCUMENTARY CREDIT/LETTER OF CREDIT (LC): 7272

6.2.1 BANK AS A PARTY OF DOCUMENTARY CREDIT:6.2.1 BANK AS A PARTY OF DOCUMENTARY CREDIT: 7373

6.2.2 TYPES OF DOCUMENTARY CREDIT6.2.2 TYPES OF DOCUMENTARY CREDIT 7474

6.3 TYPES OF IMPORTER6.3 TYPES OF IMPORTER 7474

6.4 IMPORT PROCEDURE6.4 IMPORT PROCEDURE 7575

6.5 PROCEDURE INVOLVED IN L/C OPENING6.5 PROCEDURE INVOLVED IN L/C OPENING 75-8175-81

6.6 IMPORT FINANCING 81

6.6.1 LIM (LOAN AGAINST IMPORT MERCHANDISE) 81-82

6.6.2 LTR (LOAN AGAINST TRUST RECEIPT) 82

6.7 EXPORT DEPARTMENT 83

6.7.1 EXPORT L/C 83-84

6.7.2 PROCEDURE FOR EXPORT L/C 85-86

6.7.3 FOREIGN DOCUMENRARY BILL PURCHASE (FDBP): 87

6.7.4 SETTLEMENT OF LOCAL BILL 886.7.5 FOREIGN DOCUMENTARY BILLS FOR COLLECTION6.7.5 FOREIGN DOCUMENTARY BILLS FOR COLLECTION 88886.7.6 MODE OF PAYMENT OF EXPORT BILLS UNDER L/C6.7.6 MODE OF PAYMENT OF EXPORT BILLS UNDER L/C 88-9088-906.8 EXPORT FINANCING 90-926.9 REPORTING TO BANGLADESH BANK6.9 REPORTING TO BANGLADESH BANK 926.10 MY OBSERVATIONS 92

CHAPTER S IX :

8 RECOMMEMDATIONS 100

9 CONCLUSION 101

10 BIBLIOGRAPHY 102

11 ACRONYMS 103

CHAPTER ONE

INTRODUCTION

The prosperity of a country depends upon its economic activities. Like any other sphere of

modern socio-economic activities, banking is a powerful medium of bringing about socio-

economic changes of a developing country. Agriculture, commerce and industry provide the bulk

of a country’s wealth. Without adequate banking facility these three cannot flourish. For a rapid

economic growth a fully developed banking system can provide the necessary boost. The whole

economy of a country is linked up with its banking system.

The functions of the bank are now wide and diverse. Of all the functions of modern bank,

lending is by far the most important. They provide both short-term and long-term credits. The

customers come from all walks of life, from a small business to a multi-national corporation

having its business activities all around the world. The banks have to satisfy the requirements of

different customers belonging to different social groups. The banking business has, therefore,

become complex and requires specialized skills. They function as a catalytic agent for bringing

about economic, industrial and agricultural growth and prosperity of the country. The banking

can, therefore, be conceived as a “a sector of economy on the one hand and as a lubricant for the

whole economy on the other.”

SCOPE OF THE STUDY: SCOPE OF THE STUDY:

Standard Bank Limited is one of the leading banks in Bangladesh. The scope of the study is limited to the Head Office only. The report covers the organizational structure, background, functions and the performance of the bank.

OBJECTIVES OF THE STUDY:OBJECTIVES OF THE STUDY:

The core objectives of the practical orientation program in banks are as follows:

(a)To apply theoretical knowledge in the practical field.

(b) To help the students in taking up professional courses in the second year.

(c)To have exposure to the functions of general banking section.

(d) To have exposure to the functions of credit section.

(e) To have exposure to the functions of foreign exchange section.

(f) To observe the working environment in commercial banks.

(g) To study existing banker-customer relationship.

(h) To gather knowledge about the functions and transactions of different departments of bank branch and check the compliance of practice with the theory.

METHODOLOGY OF THE STUDY:METHODOLOGY OF THE STUDY:

In order to make the report more meaningful and presentable, two sources of data and information have been used widely.

The “Primary Sources” are as follows :

Face-to-face conversation with the respective officers and staffs of the Branch.

Informal conversation with the clients.

Practical work exposures from the different desks of the four departments of the Branch covered.

Relevant file study as provided by the officers concerned.

The “Secondary Sources” of data and information are –

Annual Report (2005) of Standard Bank Limited.

Periodicals published by Bangladesh Bank.

Various books, articles, compilations etc. regarding general banking functions, foreign exchange operations and credit policies.

Limitations of the study

In every program or activities, one has to face numerous constraints. During the preparation of internship report, I have also faced some problems. These are:

1. Bank is a busy organization with comparison to others. There are rushes of people for about the whole day and the officers have to transact with them. So it is very much tough for them to allocate time for other jobs.

2. The duration of our internship program is only 1month. The allocated time is not sufficient for us to gather knowledge and to make the study a complete and fruitful one.

3. The study is restricted only to Standard Bank Limited, khulna Branch, and khulna

4. The study also suffered from inadequacy of data provided by Standard Bank Limited.

5. As a paid probationary officer of Standard Bank Limited I have to remain busy with my regular service.

6. Most of the customers were found reluctant to express their dissatisfaction in Bank’s services.

CHAPTER TWOCHAPTER TWOSHORT ORGANIZATION PROFILE

STANDARD BANK LIMITED

I) Name of the Bank: STANDARD Bank Limited of Bangladesh

2) Branch: Total 68Branches

Name of the Branches:

Principal Branch

Khatungonj Branch

Imamgonj Branch

Topkhana Road Branch

Chowdhury Hat Branch

Agrabad Branch

Khulna Branch

Gulshan Branch

Sylhet Branch

Munshikhola Branch

Jubilee Road Branch

GEC Moar Branch

Foreign Exchange Branch

Dhanmondi Branch

Uttara Branch

Takerhat Bazar Branch

Panthopath, Dhaka

Gulshan-1, Dhaka

Jessore Branch

Rajshahi Branch

3) Nature of the Organization: Service oriented

4) Head Office Metropolitan Chamber Building122-124, Motijheel C/A, Dhaka-1000

5) Year of Establishment: 11th May 1999

6) Main Products: i) Super Savings Scheme

ii) Mutiplus Savings Scheme

iii) Education Savings Scheme

iv) Money Grower (Monthly Savings

Scheme)

v) Steady Money Scheme

7) Main Customer: Corporate, Businessman, Professional etc.

8) Manpower: 324

Organization Chart

Chairman Advisor Board of Directors

Managing Director

Senior ExecutiveVice-President

ExecutiveVice-PresidentVice-President

SeniorSenior

Vice -PresidentVice -President

Senior AssistantVice-President

AssistantVice-President

Senior PrincipalOfficer

Principal Officer

ExecutiveOfficer Officer Trainee Officer

Trainee Assistant Officer

CHAPTER THREECHAPTER THREE

3. GENERAL BANKING DEPARTMENT:3. GENERAL BANKING DEPARTMENT:All business concerns earn a profit through selling either a product or a service. A bank does not produce any tangible product to sell but does offer a variety of financial services to its customers.General banking is the starting point of all the banking operations. It is the department, which provides day-to-day services to the customers. Everyday it receives deposits from the customers and meets their demand for cash by honoring cheques. It opens new accounts, remit funds, issue bank drafts and pay orders etc. Since bank is confined to provide the service everyday, general banking is also known as ‘retail banking’ The following things done in this department:

1. Accepting of deposit2. Opening of account3. Check book issue4. Transfer of account5. Closing of account

3.1 ACCEPTING DEPOSITS:3.1 ACCEPTING DEPOSITS:Accepting deposits is one of the two classic functions of commercial banks. The relationship between a banker and his customer begins with the opening of an account by the former in the name of the latter. Initially all the accounts are opened with a deposit of money by the customer and hence these accounts are called deposits accounts. Banker solicits deposits from the members of the public belonging to different lifestyles, engaged in numerous economic activities and having different financial status. There is one officer performing various functions in this department.

The deposits those are accepted by Standard Bank Limited may be classified in to:

a) Demand Deposits

b) Time Deposits.

3.2 DEMAND DEPOSITS:3.2 DEMAND DEPOSITS:The amount in accounts are payable on demand so it is called demand deposit account.

Standard Bank Limited accepts demand deposits through the opening of, -

a) Current account

b) Savings account

3.2.13.2.1 CURRENT ACCOUNT: CURRENT ACCOUNT: Both individuals and business open this type of account. Frequent transactions are (deposits as well as withdrawal) allowed in this type of account. A current a/c holder can draw checks on his account, any amount, and any numbers of times in a day as the balance in his account permits

Criteria of current account followed by Standard Bank Limited Generally opened by businessmen, government and semi-government organizations;

with proper introduction No interest is provided for deposited amount;

Overdraft is Allowed in this account;

Minimum opening balance is TK.1000;

A minimum balance of Tk.25000/- has to be maintained;

3.2.2 SAVINGS BANK ACCOUNT:3.2.2 SAVINGS BANK ACCOUNT:Individuals for savings purposes open this type of account. Current interest rate of these accounts is 8.5% per annum. Interest on SB account is calculated and accrued monthly and

credited to the account half yearly. Interest calculation is made for each month based on the lowest balance at credit of an account in that month. A depositor can withdraw from his SB account not more than twice a week up to an amount not exceeding 25% of the balance in the

account.

Criteria of savings account followed by Standard Bank Limited: An appropriate introduction is required for opening the A/C; Frequent withdrawal is not encouraged; A depositor may withdraw money from his/her account twice in a week; 7 days notice is required for withdrawal of large amount; Minimum amount of TK.5000 is required as initial deposit; Depositor may withdraw his/her deposited money up to 25% of the Balance in his/her

account without notice. The bank may realize service charge in its discretion; Depositor will get interest on the amount deposited in his/her account irrespective of

any limit;

3.3 TIME DEPOSITS:3.3 TIME DEPOSITS:A deposit which is payable at a fixed date or after a period of notice is a time deposit. Standard Bank Limited accepts time deposits through---

a) Fixed Deposit Receipt (FDR)b) Special Savings Scheme (SSS)c) Short Term Deposit (STD)d) Bearer certificate deposit (BCD)

While accepting these deposits, a contract is done between the bank and the customer. When the banker opens an account in the name of a customer, there arises a contract between the two. This contract will be a valid one only when both the parties are competent to enter contracts. As account opening initiates the fundamental relationship & since the banker has to deal with different kinds of persons with different legal status, Standard Bank Limited Officials remain very much careful about the competency of the customers.

3.3.1 FIXED DEPOSIT ACCOUNT:3.3.1 FIXED DEPOSIT ACCOUNT:These are deposits, which are made with the bank for a fixed period specified in advance. The bank needs not to maintain cash reserve against these deposits and therefore, bank gives high rate of interest on such deposits. A FDR is issued to the depositor acknowledging receipt of the sum of money mentioned therein. It also contains the rate of interest and the date on which the deposit will fall due for payment. Standard Bank Limited is now opening Fixed deposit account only for 3 (Three) years.

Procedure of Opening Fixed Deposit Account:

Before opening a Fixed Deposit Account a customer has to fill up an application form which contains the followings:

a) Amount in figuresb) Beneficiary’s name and addressc) Periodd) Rate of intereste) Date of issuef) Date of maturityg) How the account will be operated ( singly or jointly)h) Signature(s)i) F.D.R. no.j) Special instructions (if any)

After fulfilling the above information and depositing the amount, FDR account is opened and a FDR receipt is issued and it is recorded in the FDR Register which contains the following information:

a) FDR account no.b) FDR (Fixed Deposit Receipt ) no.c) Name of the FDR holder with addressd) Maturity periode) Maturity datef) Interest rate

Payment of Interest:

In case of Fixed Deposit Account the bank do not have to maintain a cash reserve. So Standard Bank Limited offers a high interest rate in Fixed Deposit accounts.

It is usually paid on maturity of the fixed deposit. Standard Bank Limited calculates interest at each maturity date and provision is made on that “Miscellaneous creditor expenditure payable accounts” is debited for the accrued interest.

Interest Rate Interest Rate Rate of Interest varies depending on the period of maturity date.

Duration Rate of Interest

3 months 9.00 - 9.25%6 months 9.25 - 9.50%

12 months 9.75- 10.50%

24 months 10.25- 11.25%

36 months 10.75-11.50%

PRE-MATURE ENCASHMENT OF TERM DEPOSIT

No TERM DEPOSIT

PRE-MATURE ENCASHMENT

RATE OF INTEREST

01 3 months 1. Before 30 days2. Every completed calendar

months

a) No Interest

b) STD Rate

02 6 months a) Before 3 monthsb) Before maturity but

completes 3 months

a) No Interestb) Interest payable at 3

months Rate for a period of 3 months

03 12 months a) Before expiry of 3 months

b) Before expiry of 6 months

c) After expiry of 6 months but before maturity

a) No Interestb) Interest payable at 3

months rate for a period of 3 months

c) Interest payable at 6 months rate for a period of 6 months

04 24 months a) Before expiry of 6 months

b) After expiry of 6 months but before maturity

c) After expiry of 12 months but before maturity

d) No Intereste) Interest may be

allowed at 6 months rate for a period of 6 months

d) Interest may be allowed at 12 months rate for a period of 12 months

Accounting treatment for FDR:

On the encashment of FDR, the following entries are made,-FDR A/C-------------- ------------------ Dr.

Interest on FDR A/C------------------ Dr.Excise Duty on FDR---------------------------------Cr.10% Income Tax on interest------------------------Cr.Cash A/C----------------------------------------------Cr.

Payment of Interest:

If the depositor wants to draw the interest only, the following entries are made:

Interest on FDR-------------------------Dr.

Cash A/C---------------------------------------------Cr.

Loss of F.D.R .:

In case of a lost FDR, the customer is asked to record a GD (General Diary) in the nearest Police Station. After that, the customer has to furnish an Indemnity Bond to Standard Bank Limited A duplicate FDR is then issued to the customer by the bank.

Renewal of FDR :

The FDR becomes automatically renewed for like periods and amounts, unless this are withdrawn by the depositor or, the bank notifies the depositor in writing at least 15 days in advance of the original Or, any renewed maturity date (s) of its desire to terminate the account or change any term and condition of the account

3.3.2 SPECIAL FIXED DEPOSIT SCHEME:3.3.2 SPECIAL FIXED DEPOSIT SCHEME:It is popularly known as “Time Deposit”. Because these deposits are not repayable on demand but they are, withdrawnable subject to a period of notice. The prospective fixed deposit holder is expected to fill an application form prescribed for the purpose, stating the amount and the period of deposit. The application itself contains the rules and regulations of the deposit including the space for specimen signature.

Criteria of SPECIAL FIXED DEPOSIT SCHEME followed by Standard Bank Limited:

Minimum Tk 1,00,000 or multiple amounts are acceptable under this Scheme. Deposit of Tk 50,000/- is included as an exception in this scheme;

The duration of the Scheme shall be 3(Three) years after which depositors can take back the principal amount,if not renewed;

The duration of time between deposit and payment of first profit must be minimum one month;

No profit/interest shall be due for payment if the deposit is enchased before one year;

No withdrawal of principle shall usually be allowed before three years.

Rate Of Interest

Amount Rate of interest

1 Lac to 4 Lac 11.00%

5 Lac to 10 Lac 11.50%

10 Lac and above 12.00%

3.3.3 STD ACCOUNT:3.3.3 STD ACCOUNT:In Short Term Deposit account, the deposit should be kept for at least seven days to get interest. The interest offered for STD is less than that of savings deposit. In SBL, various big companies, organizations, Government Departments keep money in STD accounts. Frequent withdrawal is discouraged and requires prior notice. STD Account opening procedure is similar to that of the saving account

Interest rate for STD account----------6.00% per annum

3.3.4 SPECIAL SAVING SCHIME (SSS):3.3.4 SPECIAL SAVING SCHIME (SSS):Special saving scheme (SSS), is more familiar as Deposit Pension Scheme. Standard Bank Limited offer it to its customer to deposit fixed amount of money each month for a definite period of time, normally for 5 to 10 years.

In Standard Bank Limited, a Depositor can open any SSS account for deposit of TK.500/-, TK.1000/-, TK.1500/-, TK.2005/-, and TK.2500/- in each month. The depositor will have to deposit the fixed amount of money by the 8th day of each month. Customer may deposit his money either in cash or in cheque. The depositor can select more than one nominee for this account..

The depositor(s) will get following figure after maturity of SSS a/c.

Monthly DepositOr

Monthly Installment.

After maturity depositor will get

Five years term Ten years term500 40,000 1,12,500

1000 80,000 2,24,500

1500 1,20,000 3,00,000

2005 1,60,000 4,00,000

2500 2,00,000 5,00,000

3.3.5 BEARER CERTIFICATE OF DEPOSIT (BCD): 3.3.5 BEARER CERTIFICATE OF DEPOSIT (BCD): Bearer Certificate of Deposit account is almost same as Fixed Deposit account. But in case of BCD account, no name and address are mentioned. The customer opens this type of account as a bearer but it is negotiable. Whoever presents it to the bank has the right to get the money. There is no prescribed interest rate on such funds but SBL offers same interest rate of the term deposit of different maturity.

The face value of the instrument is the future value. The face value is the sum of the principal amount and the interest. It is beneficial to both SBL and the investor because of the following reasons :

The banker is not required to encash the deposit before the date of maturity;

The investor is assured of ready liquidity. In case of need he can sell the certificate in the secondary market.

As the identification of the owner is not given in the instrument, it is very much popular. During the encashment of the instrument, the excise duty and income tax (10%) is deducted. In case of premature encashment, the principal amount is only paid to the customer.

Interest Rate on BCD account is same FDR account -

For 3 months & above @ 9.25 %





Accounting treatment of issuing and encashment of BCD:The following accounting treatments are given,-BCD A/C-----------------------------------------------------Cr.Customer’s A/C----------------------------------------------Dr.

Cash -----------------------------------------------------------Dr.(Issuing of BCD)Privileged Creditor Excise Duty on deposit--------------Cr.Privileged Creditor 10% tax on interest-------------------Cr.BCD A/C--------------- -----------------------------------Dr.

(Encashment of BCD)

After giving necessary entries, party A/C is credited or Pay Order is issued following encashment.

3.4 ACCOUNT OPENING SECTION:3.4 ACCOUNT OPENING SECTION:It is said that, there is no banker customer relationship if there is no a/c of a person in that bank. By opening an a/c banker and customer create a contractual relationship. However, selection of customer for opening an account is very crucial for a Bank.

Account Opening Procedure in a flow chart :

Before opening of a current or savings account, the following formalities must be completed by the customer:

a) Application on the prescribed form;

b) The customer is filled up the form;

c) Introduction:

The following persons can introduce an a/c opener:

i. An existing current/savings account holder of that branch;

ii. An officer of that branch (not below the rank of an Assistant Officer.);

Applicant fills up the relevant application form in the prescribed manner.

He/She is required to fill up the specimen signature card

For individual introduction is needed by an account holder

The authorized officer scrutinize the introduction and examine the documents submitted.

Issuance of deposit slip and the deposit must be made in cash. No cheque or draft is acceptable to the Bank.

After depositing the cash one cheque book & a pay- in-slip book is issued.

ACCOUNT IS OPENED.

iii. A respectable person of the society or locality who is well known to the Manager/2nd man of the branch concerned;

d) Furnishing photographs;

e) Banker will supply a set of printed forms required for opening the account, which will normally include:i) Specimen Signature Cards (SSC);ii) Deposit Slip Book;ii) Check Book Requisition slips;

f) Customer should carefully read and full-fill the application form;

g) Putting specimen signatures in the specimen card;.

h) Any special instructions with regard to operation of the account should be noted on the relevant signature card boldly duly authenticated by the a/c holder should be obtained;

i) The required Account Number for the new Account from the Account Opening Register should be obtained;

j) Obtain the signature and a/c number of the Introducer on the advice of new accountant the place meant for the purpose and gets the signature properly verified by an Authorized official of the Bank;

k) The Deposit slip properly filled in and signed by the customer;

l) Then the new a/c number should be written at the appropriate place of the Deposit slip and mark new Account on both the copies of the deposit slip and request the customer to deposit the money at the cash counter;

m) Place the signature cards, Advice of new account, a copy of Deposit slip, photographs and other necessary papers/documents etc. in a file;

n) Obtain approval of the Authorized officer for opening the new account on all relevant papers o) while giving approval for opening an account the Authorized official should be satisfied about the of the Introducer;

o) The Authorized officer on the advice of new A/c and on the specimen signature cards should also attest the signature of the new a/c holder;

p) After approval of the opening of the a/c, get the Checkbook requisition slip signed by the customer;

q) Deliver the checkbook to the customer after properly marking the Account number name and place of the branch on each leaf of the checkbook;

r) On completion of account opening open a file for the new a/c holder and file all relevant papers forms etc. Signature cards, copies of Advice, Deposit slip Debit ticket etc. is distributed to concerned departments;

Application form for current/saving account

Following are the contents of the application form for opening Savings/current A/C Name of the Applicant

Father’s name/Husband’s name Present address Permanent address Occupation Nationality Phone No. Special instruction for operation of the account Nominee Specimen Signature Introducer’s Name Introducer’s Signature Ammount deposited

Classification of customers

a) Individual (personal);

b) Proprietorship (Sole traders);

c) Partnership firms (Registered or Unregistered);

d) Joint stock Companies (Private Limited companies/Public ltd.);

f) Public Sector Corporations;

g) Municipalities/Municipal Corporations /Local Bodies etc ;

h) Clubs/Societies/Associations/Schools/Colleges/ Universities etc;

i) Executors/Administrators;

j) Trustees;

k) Illiterate persons;

l) Constituted Attorney;

m) Wage Earners;

Documents Required for all types of Accounts & Customers:

1. Advise of New Account (in duplicate)

2. Specimen signature cards (in duplicate)

3. Account Opening Agreement Form

4. Photographs of Account Holders (in duplicate)

5. Deposit Slips Book

6. Cheque book Requisition slips

7. Letter of mandate authorizing another person/s to operate the A/c on behalf of the Account holder, where necessary.

Additional documents are to be obtained for opening some special accounts.

1) Proprietorship Firm:

Name of authorized persons, designation, specimen signature card. Trade licence. Tax Receipt ( For export/ import ) Declaration of Proprietorship Mandate if operation by third party is to be allowed.2) Partnership Firm: Account must be opened in the name of the firm. The firm should describe the names and addresses of all partners. Partnership deed is required which duly attested by Notary Public Trade licence from city corporation is needed. Tax receipt ( For import/ export ) Photocopy of Registration Certificate duly attested by Notary Public in case of a Registered

Firm. Letter of Partnership duly signed by all the partners, in case of non-Registered Firm. Resolution signed by all the partners to open the a/c. Mandate as to operation of the a/c.

3) Clubs/Societies/Trustee/Associations/Non-trading Institutions etc:

. Certified copy of Resolution for opening and operation of account

. Up to date list of office bearers

Certified copy of Bye-laws & Regulations/ Constitution.

Copy of Government approval (if registered).

In case of death, a/c. should be stopped until the club nominates another person.

Trust deed is needed-for trustee

4) Joint Accounts of two or more persons:

Mandate for Operation of Accounts:

A clear authority signed by all the joint A/C holders containing instructions as to who will operate the account and how the account is to be operated should be obtained. The mandate should mention the name of the persons authorized to draw check. In case of death /insanity/insolvency of one or more of the joint a/c holders, the authority will cease to operate.

Executor:

Probate: From a court of law along with a certified copy of the will duly attested by a notary public.

A mandate in case if there is more than one Executor, signed by all the executors, as to how the a/c will be operated.

Administrator:

Letter of Administration from a court of Law along with a certified copy duly attested by a Notary Public appointing him as an Administrator of the Estate of the deceased. The operation of the a/c is to be allowed as per instructions of the letter of administration.

5) Minor’s Account:

Putting the word "MINOR" after the title of the account.

Recording special instruction of operation of the account.

The account opening form is to be filled in and signed by either of the parents or the legal guardian appointed by the Court of Law & not by the Minor.

6) Private Limited Joint Stock Company:

Memorandum of Association and Articles of Association duly certified by Chairman or Secretary.

Resolution of the Board duly certified by chairman /Secretary authorizing to open the a/c with the Bank and naming the persons who will operate the a/c, as per provisions of Articles of Association.

Corporate Agreement Form.

Certificate of Incorporation duly certified by Chairman/Secretary.

List of Directors duly certified by Chairman/Secretary.

7) Public Limited joint Stock company:

Memorandum and Articles of Association duly certified by Chairman /Secretary.

Certificate of Incorporation duly certified by Chairman /Secretary.

Resolution of the Board duly certified by Chairman/Secretary authorizing to open the a/c with the Bank and naming the persons who will operate the a/c as per provisions of Articles of Association.

Corporate Agreement Forms

Certificate of commencement of business

List of Directors duly certified by Chairman /Secretary.

8) Non-Government College/ School/ Madrasha/ Muktab, -

Up to date list of the Governing Body/ Managing Committee.

Copy of Resolution of the Governing Body/ Managing Committee authorizing opening and operation of the account duly certified by Gazetted Officer.

9) Municipal Corporation /Local Bodies:

Copy of the Municipal Act/charter duly certified by the chairman /Administrator.

Resolution of Municipal committee authorizing the opening of the a/c in the Bank and naming the persons who will operate the a/c duly certified by the Chairman/Administrator.

Accounts of constituted Attorney: Certified copy of power of Attorney duly verified with the original by the concerned Bank official under seal and signature.

10) Co-operative Society/ societies Limited:

Copy of Bye-law duly certified by the Co-operative officer.

Up to date list of office bearers.

Resolution of the Executive Committee as regards of the account.

Certified copy of Certificate of Registration issued by Registrar, Co-operative Societies.

11) Trustee Board:

Prior approval of Head Office of the Bank.

Certified copy of Deed of Trust, up to date list of members of the Trustee Board and Certified copy of the Resolution of Trustee Board to open & operate the account

12) NGO:

The account opening procedure is same but in exception is that the Registration Certificate from the Social Welfare Department of Government must be enclosed with the application.

3.5 ISSUING CHEQUE BOOK TO THE CUSTOMERS:3.5 ISSUING CHEQUE BOOK TO THE CUSTOMERS:(A) Issue of fresh checkbook

Fresh checkbook is issued to the account holder only against requisition on the prescribed requisition slip attached with the checkbook issued earlier, after proper verification of the signature of the account holder personally or to his duly authorized representative against proper acknowledgment.

REQUISITION SLIP FILLED PROPERLY ALONG WITH THE CHECKBOOK NUMBER.

BANKER VERIFIES THE

SLIP

BANKER ISSUES NEW CHECK BOOK IF EVERY THING IN THE RIGHT FROM

Procedure of issuance of a fresh cheque book

A customer who opened a new a/c initially deposits minimum required money in the account.

The account opening form is sent for issuance of a cheque book

Respected Officer first draws a cheque book

Officer then sealed it with branch name.

In-charge officer enters the number of the cheque Book in Cheque Issue Register.

Officer also entry the customer’s name and the account number in the same Register.

Account number is then write down on the face of the Cheque Book and on every leaf of the Cheque book including Requisition Slip.

The name of the customer is also written down on the face of the Cheque book and on the Requisition slip.

The word “Issued on” along with the date of issuance is written down on the requisition slip.

Number of Cheque book and date of issuance is also written on the application form.

Next, the customer is asked to sign in the Cheque book issue register.

Then the respected Officer signs on the face of the requisition slip put his initial in the register and hand over the cheque to the customer.

Issue of Duplicate checkbook:

Duplicate checkbook instead of lost one should be issued only when an A/C holder personally approaches the Bank with an application Letter of Indemnity in the prescribed Performa agreeing to indemnify the Bank for the lost checkbook. Fresh check Book in lieu of lost one should be

issued after verification of the signature of the Account holder from the Specimen signature card and on realization of required Excise duty only with prior approval of manager of the branch. Check series number of the new checkbook should be recorded in ledger card and signature card as usual. Series number of lost checkbook should be recorded in the stop payment register and caution should be exercised to guard against fraudulent payment.

Issue of New Chequebook (FOR OLD ACCOUNT)

ENTER THE NEW CHEQUEBOOK NUMBER IN THE REGISTER BOOK AGAINST THE SPECIFIC CUSTOMER’S NAME

All the procedure for issuing a new Chequebook for old account is same as the procedure of new account. Only difference is that customer have to submit the requisition slip of the old Cheque book with date, signature and his/her address. Computer posting is then given to the requisition slip to know the position of account and to know how many leaf/leaves still not used. The number of new Cheque book is entered on the back of the old requisition slip and is signed by the officer.

Procedure of issuance of a new cheque book

If the cheque is handed over to any other person then the account holder the bank addressing the account holder with details of the Cheque book issues an acknowledgement slip. This acknowledgement slip must be signed by the account holder and returned to the bank. Otherwise the bank will not honor any cheque from this cheque book.

At the end of the day all the requisition slips and application forms are sent to the computer section to give entry to these new cheques.

3.6 TRANSFER OF AN ACCOUNT:3.6 TRANSFER OF AN ACCOUNT: The customer submits an application mentioning the name of the branch to which he wants

the account to be transferred.

His signature cards, advice of new account and all relevant documents are sent to that branch through registered post.

The balance standing at credit in customer’s account is sent to the other branch through Inter Branch Credit Advice (IBCA).

No exchange should be charged on such transfer.

Attention is also given in this connection.

3.7 CLOSING THE ACCOUNT:3.7 CLOSING THE ACCOUNT:Upon the request of a customer, an account can be closed. After receiving an application from the customer to close an Account, the following procedure is followed by a banker. The customer should be asked to draw the final cheque for the amount standing to the credit of his a/c less the amount of closing and other incidental charges and surrender the unused cheque leaves. The a/c should be debited for the account closing charges etc. and an authorized officer of the Bank should destroy unused cheque leaves.

A banker can also close the account of his customer or stop the operation of the account under following considerable circumstances:

Death of customer. Customer’s insanity and insolvency. Order of the court(Garnishee order) Specific charge for fraud forgery.

3.8 STOP PAYMENT OF CHEQUE:3.8 STOP PAYMENT OF CHEQUE: A banker can stop payment of cheque of his customer under following considerable

circumstances

Firstly the account holder will apply to stop the payment of his cheque

There is a register for this purpose.It is kept by the authorized officer.

The officer will see the condition of account and verify everything.

In the ledger book, the officer will marked with red ink and the cheque will not be paid.

3.9 DISHONOR OF CHEQUE:3.9 DISHONOR OF CHEQUE:If the cheque is dishonored, Standard Bank Limited sends a memorandum (cheque return memo) to the customer stating the reason in the following way:

Refer to drawer. Not arranged for. Effects not cleared May be present again. Exceeds arrangements. Full cover not received. Payment stopped by drawer. Drawer’s signature differs/ required. Alterations in date/figures/words require drawer’s full signature. Cheque is post dated/out of date/mutilated. Amount in words and figures differs. Crossed cheque must be present through a bank.

3.10 CLEARING & BILLS SECTION:3.10 CLEARING & BILLS SECTION:Standard Bank Limited receives different types of instruments, such as cheque, PO, DD etc. from its customers for collection. It also pays on behalf of its customers for those instruments that come to it through clearing house. When instruments of Standard Bank Limited are sent for collection or received for payment through clearinghouse it is called Inter Branch Collection or IBC. These are treated in a little different manner than instruments of other banks.

Outward clearing bills

It refers the instruments drawn on the other Banks received by the Standard Bank Limited. They are of three kinds.

1. Cheques drawn on another branch of Standard Bank Limited. The settlement process :

Accounting entry Party a/c ----------- Dr.

IBTA -------------- Cr.

Checks drawn on another Bank, which is situated within clearing house area.

Accounting EntryParty A/C Dr.

IBTA Cr.

Outward bills for collection

Checks drawn on another Bank or a branch of Standard Bank Limited, which is situated outside the clearinghouse area. These bills are called OBC. The process of collection is described below.

If the bill is drawn on a branch of Standard Bank Limited:

If the bill is drawn on another Bank and there is a branch of Standard Bank Limited:

Cheques are directly sent to the respective branch

OBC received along the instrument by the respective branch

Entry passed in OBC register of that branch

IBCA is sent from that branch to this branch.

When IBCA comes customer’s account is credited.

Cheques are collected by Sonargaon Road Br.

IBDA along with bills are sent to Principal Branch.

These bills are sent to clearing house from Principal Br.

If drawer’s Bank honors the bill then

Depositor’s account is credited with Standard Bank Limited Sonargaon Road Branch.

Bills are sent to that branch through mail or courier.

Branch collects the bills and sends an IBCA to this Br.

Depositor’s account is credited.

If the bill is drawn on another Bank but there is no branch of Standard Bank Limited :

Accounting Entry Party A/C…………………………………….Dr.

Suspense clearing adjustment………………..Cr.

If the bills are collected by the drawer’s bank, the drawer’s branch sends a D.D. to the collecting bank. The customer’s A/C is debited for the DD charge. The following entries are given for sending the D.D.:

Clearing A/C-----------------Dr.

Customer A/C ---------- Cr.

And the following entries are given for the charges:

Customer A/C -------------------Dr.

Income A/C Commission -------Cr.

Postage ---------------------------Cr.

In either case, OBC number is given.

PROCEDURE: Depositing the cheque alongwith deposit-slip;

Officer checks the essential features of the instrument and whether the deposit in slip is filled or not;

Crossing of the cheques are done indicating Principal Branch as collecting bank;

Endorsement “Payee’s A/C will be Credited on realization” is given;

Entries are given in the Outward Clearing Register;

Messenger sends these instruments to the clearinghouse;

Commission for outward bill collection:

Tk. 1 to 25000/- 0.10% or Minimum 20Tk which is higher

Tk 25000/-100000/- 0.15% or Tk 50 which is higher

Tk 100000/- to 500000/- 0.10% or Tk 150 which is higher

Tk 500000/- and above 0.05% or 500Tk which is higher

Inward clearing billsIt refers the instument drawn on Standard Bank Limited from other Banks in the clearing house by the representative . Settlement process is as follows:

This branch sends the bill directly to the branch of Standard Bank Limited by OBC schedule.

Request them to send the process by IBCA and collect the bill.

That branch of Standard Bank Limited can collect the bill through clearing house arrangement.

This branch sends the bill direct to the branch of Standard Bank Limited by OBC schedule.

Request them to send the process by IBCA and collect the bill.

That branch of Standard Bank Limited can collect the through clearing house arrangement exists there.

Bills collected from other Banks through clearing house by principal Br. Drawn on Standard Bank Limited Gulshan Br.

Bang. Bank debits the A/C of principal Br. Maintained with B.B.

Principal Branch sends the bills to Standard Bank Limited GulshanBr. with an IBTA

3.11 ENDORSEMENT:3.11 ENDORSEMENT:Endorsement is done by putting signature of the drawer on the back of the negotiable instrument for the purpose of negotiation. By ‘blank endorsement’, an order instrument is made as ‘bearer’.

Standard Bank Limited endorses the instrument in the following way:

ENDORSEMENT IN CASE OFPayee’s A/C credited Pay to Mr. S

Received PaymentPayee’s A/C credited

Pay to Standard Bank Limited

Payee’s A/C credited Pay to Mr. S, Standard Bank Limited

Payee’s A/C will be credited on realization

Bill for collection

3.12 CASH SECTION:3.12 CASH SECTION:The cash section of SBL deals with all types of negotiable instruments, cash and other instruments and treated as a sensitive section of the bank. It includes the vault, which is used as the store of cash, instruments. If the cash stock goes beyond this limit, the excess cash is then transferred to Bangladesh Bank. Keys to the room are kept under control of cash officer and branch in charge. The amount of opening cash balance is entered into a register. After whole days’ transaction, the surplus money remains in the cash counter is put back in the vault and known as the closing balance. Money is received and paid in this section.

Cash Payment:

First of the entire client comes to the counter with the check and give it to the officer in charge there. The officer checks whether there are two signatures on the back of the cheque and checks his balance in the computer. After that the officer will give it to the cash in charge.

Standard Bank Limited Gulshan Br. debits customer’s respective A/C

Then the cash in charge verifies the signature from the signature card and permits the officer in computer to debit the client’s account by giving posting. A posted seal with teller number is given

Then the cheque is given to the teller person and he after checking everything asks the drawer to give another signature on the back of the cheque.

If the signature matches with the one given previously then the teller will make payment keeping the paying cheque with him while writing the denomination on the back of the cheque.

If the instrument is free of all kind of error the respected officer will ask the bearer to sign on the back of it.

He will then put his/her initial beside the bearers’ signature. (S)he will also sign it on its face, will write down the amount by red pen and will put on a scroll number from his/her scroll register.

Then the cheque will be sent to the cash counter. At the cash counter bearer will be asked again to sign on the back of the instrument.

The cash officer will then enter the scroll number in his/her register and will pay the money to the bearer.

Cash Receipt:

At first the depositor fill up the Deposit in Slip. There are two types of deposit in slip in this branch. One for saving account and another for current account.

After filling the required deposit in slip, depositor deposits the money.

Officers at the cash counter receives the money, count it, enter the amount of money in the scroll register kept at the counter, seal the deposit in slip and sign on it with date.

Then this slip is passed to another officer who enter the scroll number given by the cash counter in his/her register along with the amount of the money, sign the slip and keep the anks’ part of the slip. Other part is given to the depositor.

All deposits of saving account are maintained by one officer and other accounts by another officer.

At the end of the day entries of both of these registers are cross checked with the register kept at the cash counter to see whether the transactions are correct or not.

3.13 MY OBSERVATIONS:3.13 MY OBSERVATIONS:

1. The volume of operational activities of this department is very high, but number of employees is adequate. As for example in one desk an officer in-charged for A/C opening, DD, TT, PO operating as well as cheque receiving. Though he is skilled enough to do those job but very often it creates bothering situation for customer

2. The computer removes the token system. It is very much appreciable, but the computer operator or programmer should be conversant with the system for quick and better quality services to the customers.

3. Account opening procedures are very much relaxed. The officer or introducer of the account holder should follow rules and formalities for opening the account.

4. In case of account opening, Letter of thanks is not sent to the introducer though it is a formality to be maintained by the bank. I think, if a letter of thanks is sent to an introducer, he is encouraged to send more depositors to the Bank that will be helpful for the bank to increase its deposits.

5. In busy day, it sometimes impossible for the officer to check every signature on cheque with specimen signature card as to ensure prompt service. The officer in charge some times has to honor some cheques only depending upon his familiarity with the customer’s signature, which is very risky.

6. The costly Time and Saving Deposit occupy maximum portion of total deposit. Therefore, cost of fund is increased which decreased its profit level.

7. The bank does not have online computer facility, which could improve the service quality.

8. There is a rule to deposit at least an amount of money in case of opening an account. However, it is not strictly followed. Sometimes more money is asked from a new customer that who discourages him to open an account in the bank. I think the amount should be fixed at a level that is not altered from customer to customer.

4.1 LOCAL REMITTANCE:SBL has its branches spread throughout the country and therefore, it serves as best mediums for remittance of funds from one place to another. This service is available to both customers and non-customers of the bank lot of cash handling from one place to another are risky. Therefore, Bank remits funds on behalf of the customers to save them from any awkward happening through the network of their branches.

These services are providing in between country.

There are four (4) modes of remitting money from one place to another. These are – Pay Order (PO) Demand Draft (DD) Telegraphic Transfer (TT) Mail Transfer (MT)

OR NIZAM ROAD Branch of MBL is practicing 3(Three) modes of remitting funds, These are:Pay order (PO).Demand Draft (DD).Telegraphic/Telephone Transfer (TT)

4.1.1 PAY ORDER:4.1.1 PAY ORDER:A pay order is an instrument from one branch to another of the same Bank to pay a certain sum of money to the person thereon or to his order. Unlike cheque, there is no possibility of dishonoring pay order because before issuing P.O Bank takes out money of the pay order in advance.

For issuing a pay order the client is to submit an Application to the Remittance Department in the prescribed form (in triplicate) properly filled and duly signed by the applicant. The processing of the pay order Application form, deposit of cash/cheque at the Teller's counter and finally issuing an order etc, are similar to those of processing of L.D. Application.

As in case of L.D, each branch should use a running control serial number of their own for issuance of a pay order. This control serial number should be introduced at the beginning of each year, which will continue until the end of the year. A fresh number should be introduced at the beginning of the next calendar year and so on.

Pay Order (Issue)

Following procedure is maintained for the issuance of PO: Customer collects a PO form.

After filling the form, the customer deposits the money in cash or by cheque. The authorized officer then issues PO on its specific block. That block has three parts, one

for bank and other two for the customer. ‘A/C Payee’ crossing is sealed on all Pay Orders issued by the bank. The officer then put number of the PO block on the PO form. Two authorized officers sign the block. At the end customer is provided with the two parts of the block after signing on the back of

the part of the Bank. The commission is 0.15%

Entry for Pay OrderBy cash

Cash/party A/C ------------- Debit

Pay order A/C --------- Credit

Income on commission A/C------ Credit

Payment of Pay order

The payee deposited to his collecting banker.

The collecting bank sends the PO to the issuing bank through clearing house for arrangement.

The Pay order is passed and cancelled in the deposit section

Payment is given and is register in incoming payment of PO book.

As the PO issued by the bank is crossed one it is not pay over the counter. On the contrary, the amount is transfer to the payees’ account. To transfer the amount the payee must duly stamp the PO.

Refund of pay Order

The following procedure should be followed for refund of pay order by cancellation

1. The purchase should submit a written request for refund of pay order by cancellation attaching therewith the original pay order.

2. The signature of the purchaser will have to be verified from the original application form on record.

3. Manager/ Sub-manager's prior permission is to be obtained before refunding the amount of pay order cancellation.

4. Prescribed cancellation charge is to be recovered from the applicant and only the amount of the pay order less cancellation charge should be refunded. Commission recorded for issuing the pay order should not be refunded.

5. The pay order should be affixed with a stamp ''cancelled'' under proper authentication and the authorized officer's signature of the pay order should also be cancelled with RED ink but in no case should be torn. The cancelled pay order should be kept with the relevant Ticket.

6. The original entries are to be reversed with proper narration.

7. Cancellation of the pay Order should also be recorded in the pay order Issue Register.

Charges:A commission of 0.15% is charged on a pay order.

4.1.2 TELEGRAPHIC/TELEPHONE TRANSFER(TT):4.1.2 TELEGRAPHIC/TELEPHONE TRANSFER(TT):Telegram, telephone or telex transfer is another widely used mode for remittances of funds. In case of TT the message for transfer of funds is communicated through tested telephone or telegraph. TT is issue against cash, cheque, and letter of instruction. . The drawer and the payee should have accounts with SBL.

CommissionTk. 30 or 0.15% of the principle, which is higher is, charged.

T.T issue process:

The Applicant fill up the relevant part of the prescribed Application form in triplicate duly signs the same and gives it to the Remittance Department.

Remittance Department will fill up the commission part meant for Bank's use and request the Applicant to deposit necessary cash or check at the Teller's Counter.

The Teller after processing the Application form, Cash or check will validate the Application form .The first copy is treated as Debit Ticket while the second copy is treated as Credit Ticket and sent to Remittance Department for further processing. The third copy is handed over to the applicant as customer’s copy.

Remittance Department will prepare the Telex/Telegram in appropriate form, sign it and send it to the telex Operator/Dispatch Department for transmission of the message.

Remittance Department will prepare the necessary advice

Debit Advice is sent to the client if client’s a/c is debited for the amount of T.T

Debit ticket is used to debit the client's account if necessary.

T.T Confirmation Advice is sent to the Drawee Branch.

Credit Ticket (2nd copy of the Application Form) is used to credit the ABBL General Accounts.

Entry for TT

Cash /party A/C ----------------- Dr.

IBTA ----------------- Cr.

Commission ----------------- Cr.

Tele.Charge ----------------- Cr.

TT (Payment)

When a TT arrives through telex it is sent to the respected officer for the verification of the test number. If the test number is OK, the officer write down “Test Agreed” on it and sign it. Otherwise a message is sent back to the issuing branch for the correction of the test number.

After agreeing the test the branch issues a debit voucher and a credit voucher

SBL, General A/C ------ Debit

Payees A/C ---------- Credit

Branch also issues a credit advice slip addressing the payee informing him/her about the arrival of the money.

Later, when the confirmation slip arrives the contra date, on which the payment was made, is put on it and the officer sign it.

4.1.3 DEMAND DRAFT:4.1.3 DEMAND DRAFT:Demand Draft is an instrument containing an order of the Issuing branch upon another branch known as Drawee branch, for payment of a certain sum of money to the payee or to his order on demand by the beneficiary presenting the draft itself. DD is issued in favour of a customer who maintains an A/c with this branch. It can be issued against Cash.

Commission

15% charge is taken and postal charge is taken.

Issuance of Demand Draft

1. Get the Application form properly filled up and signed by the applicant.

2. Complete the lower portion of the Application Form meant for Bank's use.

3. Calculate the total Taka amount payable including Bank's commission /charges etc.

4. If a cheque is presented for the payment of the D.D officer should get the check duly passed for payment by the competent authority and record the particulars of L.D on the back of the cheque.

5. If the purchaser desires his account with the branch to be debited for the amount of D.D the officer should get the A/C. holder’s signature verified properly, from signature card on record of the branch and debit client's a/c for the total amount including commission/ charges etc.

6. If cash deposit is desired, request the purchaser to deposit the money at the Teller’s Counter.

7. The Teller, after processing the Application Form, Cash or Cheque, will validate the Application form.

8. The first copy of the Application form is treated as Debit Ticket while the second copy is treated as Credit Ticket and sent to Remittance Department for further processing. The third copy is handed over to the Applicant as customer's copy.

9. Each branch maintains a running control serial number of their own for issuance of L. D. on each Drawee branch. This control serial number should be introduced at the beginning of each year, which will continue until the end of the year.

Payment of Demand Draft

1. On receipt of Credit Advice (IBCA) from the Issuing branch the following responding entries are then be passed by the Drawee branch.Standard Bank Limited General A/c Branch …………………..Dr.Remittance Awaiting Disposal L.D payable A/c……….Cr.Extracts of Responding entries are to be sent to HORC on the same day.

2. When a D.D is presented for payment at the paying branch its details are to be carefully examined with references to the following points

a. Whether the draft is drawn on their branch.

b. Whether the draft is crossed or not Amount of a crossed draft is not paid in cash to the payee but to be paid to his account with a bank.

c. Two authorized officials of the Issuing branch must have signed draft. Their signatures are to be verified from specimen signature book let to be sure that the draft is genuine. The verifier should put his initials in red ink against the authorized signatures in the draft.

d. Endorsement on the back of the draft must be regular in case the draft is presented through clearing.

e. The amount of the draft should not exceed the amount protect graphed /written in red ink on the top of the draft.

f. The payee is to be properly identified in case of cash payment.

g. The particulars of the draft i.e. the draft number date amount and the name of payee, should be verified from the D.D payable Register.

3. On payment the D.D is affixed with the branches Paid stamp and signatures there on are cancelled with red ink. The date of payment is recorded in the D.D payable

Register necessary accounting entries are also passed and recorded in the books of Accounts.

Accounting entry

With IBCA:

Remittance Awaiting Disposal D.D payable a/c Dr.

Client's Account/Teller's Cash Cr.

Without IBCA:

A. L.D paid without Advice a/c Dr. Client's a/c/Teller's Cash Cr.

B. After receiving the IBCA

I. Standard Bank Limited General A/c Dr.Remittances Awaiting Disposal - D.D payable A/c Cr.

ii. Remittances Awaiting Disposal – D.D payable A/c Dr.D.D Paid without Advice A/c Cr.

Stop payment of Demand Draft

As the Issuing branch issues the draft, the payee or purchaser of the draft cannot give stop payment instructions to the Drawee branch. If a paying branch receives any request from the payee/endorsee or the purchaser of a draft for stopping payment of the draft, it will ask them to approach the issuing branch for the purpose. The paying branch should however exercise necessary precaution in this regard. Only the Issuing branch can issue instructions for stop payment of draft under special circumstances. However, if a stop payment order is received from a court of law the same should be carried out. If a draft on which stop payment order has been issued buy, account is presented for payment the same should be returned unpaid with the answer court prohibited payment quoting court order number and date.

4.2 FOREIGN REMITTANCE:4.2 FOREIGN REMITTANCE:These remittance services are providing for exchange foreign currency. These services are as follows:

Foreign Demand Draft

Endorsements of US$ in passport

Traveler’s Cheque

Moneygram

]4.2.1 FOREIGN DEMAND DRAFT (F.D.D): ]4.2.1 FOREIGN DEMAND DRAFT (F.D.D): Standard Bank Limited accepts the charges for TOEFL, SAT, GMAT etc. through Foreign Demand Draft. Standard Bank Limited opens Student Files to issue Foreign Demand Draft following the permission of Bangladesh Bank. Before issuance of FDD, Standard Bank Limited asks the students to fill up the TM Form, which contains the following particulars----a) Name of the studentb) Full address of the studentc) Amount of FDD in Foreign Currencyd) Purpose of Remittancee) Address of the Institution to which the FDD will be favoredf) Country receiving payment

g) Passport no. of the student with date of issueh) Signature of the student

Endorsements of US$ in passport :

Standard Bank Limited endorses US$ in passports. To endorse US Dollar, the client has to apply in the prescribed form (TM Form). The following entries are given in this regard:

Cash or Customers’ A/C---------------------------------------Dr.

Foreign Currency on Hand < Dollar Special>------------- Cr.

4.2.2 TRAVELER’S CHEQUE: 4.2.2 TRAVELER’S CHEQUE: Traveller’s cheques are issued by banks to avoid the risk of loss or inconvenience in having to carry large amount of cash while travelling. The salient features of T.C. are:

i) The buyer of T.C. needs not to be a customer of Standard Bank Limited.ii) The buyer has to deposit money with the branch of Standard Bank Limited equivalent to

the amount of the T.C. he wants to buy.iii) Each T.C. is signed by the buyer at place marked “when countersigned below with this

signature”, before the Standard Bank Limited Officer.iv) T.C. is issued in single name .It is not issued in joint names or names of clubs, societies

and companies.v) There is no expiry period for the T.C.

Accounting treatment:

The accounting treatment for the issuance of T.C. is as follows:Cash or Customers’ A/C----------------------------DrMISC. Creditor <Issuing Bank>-------------------Cr

4.2.3 MONEYGRAM:4.2.3 MONEYGRAM:

It is the new concept of transferring foreign remittance to Bangladesh. Any person residing in the abroad can remit his money through the process of Moneygram. There are more than 22,000 Moneygram agents in over 100 countries are linked worldwide. Only Standard Bank Limited is authorized to do this kind of business with their 22 branches. This kind of business is permitted by Bangladesh Bank because of foreign remittance is coming to our country.

There are some features of MoneyGram:

Fast:

When a person transfer money with the moneygram service his money gets there fast, usually in 10 minutes or less. Other services often take day or even weeks.

Convenient

There are more than 22005 MoneyGram agents over 100 countries. Therefore, a person can easily transfer his fund.

Secured

People use the moneygram service thousands of time a day all over the world. It is a trusted guaranteed and reliable thoroughly personal way to transfer money.

Easy

Just one simple form and computerized money transfer network will speed a person’s funds to destination throughout the world quickly, effortlessly and with his peace of mind priority.

How MoneyGram works

PROCESS Sender goes to the MoneyGram agent location to transfer his money to Bangladesh.

Sender initiates transfer by completing “Send” format at MoneyGram agent location.

Sender gets receipt and notifies recipients of the transaction reference number.

Receiving Agent contact the Moneygram transaction center (Head office of Standard Bank Limited) to obtain authorization to pay recipient.

Recipients receive the funds.

Additional information:

A person needn’t maintain any account in the Standard Bank Limited. Commission is taken Tk. 0.07 per Dollar amount. This amount is very low and now Standard Bank Limited is trying to impose the fixed amount limit.

.

.SEND AGENT

RECEIVE AGENT

MOENYGRAM COMPUTERIZED TRANSACTION CENTER

4.2.4 LOCKER SERVICES:4.2.4 LOCKER SERVICES:Standard Bank Limited is providing facility of locker service for the purpose of safe guarding the valuable property of customers.

The person or organization that has any account in bank branch can enjoy this service. They keep their valuable assets in banker’s custody. Customers have right to look after with a key of their individual lockers provided by bank.

The service charge is yearly Tk. 1500.

Terms and Conditions : The safe vault will open during the banking hour unless otherwise changed by the

bank.

All fees and other charges in respect of the lockers will be payable in advance.

Either party can terminate this agreement on giving to the other seven days notice in writing expiring prior to the date.

If the hirer lose the key of the locker, the bank should be notified without delay.

It is hereby agreed that the relation of the hirer and the bank is that of a bailor and bailee respectively and not that of a customer and bank.

IMPORT DEPARTMENT:

Modern banks facilitate trade and commerce by rendering valuable services to the business community. Apart from providing appropriate mechanism for making payments arising out of trade transactions, the banks gear the machinery of commerce, specially in case of international commerce, by acting as a useful link between the buyer and the seller, who are often too far away from and too unfamiliar with each other. 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 of the important services provided by the banks. Letters of credit is the key player in the foreign exchange business. With the globalization of economies, international trade has become quite competitive. Timely payment for exports and quicker delivery of goods is, therefore, a pre-requisite for successful international trade operations. Growing complexity of international trade, separation of commercial parties across the globe and operating in a totally unknown environment underlined the need for evolving a system that balances between the expectations of the seller and the buyer. Documentary Credit has emerged as a vital system of trade payment, and fulfilled the requisite commercial need. This system substantially reduces payment-related risks for both exporter and importer. Not surprisingly, therefore, the letter of credit is the classic form of international export payment, especially in trade between distant partners. The bank upon presentation of stipulated documents (e.g., bill of lading, invoice, and inspection certificate) makes payment, acceptance or negotiation of the credit by the seller.

Foreign exchange business of Standard Bank Limited has been divided into two sections:

1. Import section2. Export section

Function of Foreign exchange (An overview)

Foreign exchange

6.26.2 DOCUMENTARY CREDIT/LETTER OF CREDIT (LC):DOCUMENTARY CREDIT/LETTER OF CREDIT (LC):Documentary Credit is an assurance of payment by the bank. It is an arrangement under which the bank at the request of the buyer or on its own undertakes to make payment to the seller provided specified documents are submitted.

Documentary Credit is an arrangement whereby a bank (issuing bank) acting at the request and on the instruction of a customer (the applicant) or on its own behalf undertakes to make payment to or to the order of a third party (the beneficiary) or to accept and pay bills of exchange (draft) drawn by the beneficiary, or authorize another bank to negotiate against stipulated documents provided the terms and conditions to the credit are complied. Thus, documentary credits are akin to bank guarantees. In popular language, they are known as letters of credit (L/Cs). Thus, documentary credit offers a unique and universally used method of achieving a commercially acceptable arrangement by providing for payment to be made against complying documents that represent the goods and making possible the transfer of those goods.

Sales Contract

Reimbursing Agreement

Documentary Credit Agreement

Fig: Triangular contractual agreement under the documentary credit System

The Buyer The Seller

The Buyer The Issuing Bank

The Issuing Bank

The Beneficiary

IMPORT EXPORT FOREIGNREMITTANCE

Advising Export L/CPre- shipment financePost- shipment finance

FDBP

Opening of L/CPADLIMLTR

EndorsementFDD

Traveler chequeMoneygram

6.2.1 BANK AS A PARTY OF DOCUMENTARY CREDIT:6.2.1 BANK AS A PARTY OF DOCUMENTARY CREDIT:Parties to the documentary credit may be an issuing bank, an advising bank, a confirming bank, a reimbursing bank or a negotiating bank.

ISSUING BANKISSUING BANK : The Issuing Bank or the Opening Bank is one which issues the credit, i.e., undertakes, independent of the undertaking of the applicant, to make payment provided the terms and conditions of the credit have been complied with. The payment may be at sight if the credit provides for sight payment, or at maturity, dates if the credit provides for deferred payment. Especially the issuing bank should satisfy himself on the credit worthiness of the applicant. The credit application must be in accordance with UCP 500 and in a workable format.

ADVISING BANKADVISING BANK : The Advising Bank advises the credit to the beneficiary thereby authenticating the genuineness of the credit. The advising bank is normally situated in the country/place of the beneficiary.

CONFIRMING BANKCONFIRMING BANK: A Confirming Bank is one which adds its guarantee to the credit opened by another bank, thereby, undertaking the responsibility of payment/negotiation/acceptance under the credit in addition to that of the issuing bank. A confirming bank normally does so if requested by the issuing bank and it is normally the advising bank.

Issuing Bank (Bangladesh)

Advising Bank(Singapore)

Negotiating Bank(Singapore)

Reimbursing Bank(New York)

NEGOTIATING BANKNEGOTIATING BANK: A Negotiating Bank is the bank nominated or authorized by the issuing bank to pay, to incur a deferred payment liability, to accept drafts or to negotiate the credit.

6.2.2 TYPES OF DOCUMENTARY CREDIT:6.2.2 TYPES OF DOCUMENTARY CREDIT:Documentary credit

Documentary credit is following types :

a. Revocable credit

A revocable credit is one where the issuing bank at liberty to revoke i e. cancels the credit at any time.

b. Irrevocable creditAn irrevocable L/C is one, which can not be revoked, amended or modified by the issuing bank

6.3 TYPES OF IMPORTER:6.3 TYPES OF IMPORTER:Import is the flow of goods and services purchased by economic agents located in one country from economic agents located in another. Hence, import of merchandise essentially involves two things: bringing of goods physically into the country and remittance of foreign exchange towards the cost of the merchandise and services connected with its dispatch to the importer. In case of import, the importers are asked by their exporters to open letters of credit so that their payment against goods is ensured.

Fig: Types of Importers

Importer

Public Sector(Govt. Org. &

Corp.)

Private Sector

Commercial (finished products)

Industrial (raw materials,

machineries etc.)

Actual Users

6.4 IMPORT PROCEDURE:6.4 IMPORT PROCEDURE:An importer is required to submit the following documents in order to get a license to import through Standard Bank Limited –

a) A bank account with the branch;

b) Import Registration Certificate (IRC);

c) Tax Payer’s Identification Number (TIN);

d) Proforma Invoice Indent;

e) Membership Certificate from a recognized Chamber of Commerce & Industry or Town Association or registered Trade Association;

f) Letter of Credit Authorization (LCA) Form properly filled in duplicate signed by the importer;

g) L/C Application duly signed by the importer;

h) One set of IMP Form;

i) Insurance Cover Note with money receipt;

j) VAT Registration Certificate (for Commercial Importers);

k) 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;

l) Any such documents as may be required as per instruction issued/to be issued by the Chief Controller of Imports & Exports (CCI&E) from time to time.

On receipt of the LCA Form and the other documents, the branch officials carefully scrutinize the documents and lodge the same in their respective registration books and duly verify the signature of the importer put on the LCA Form.

To import, a person should be competent to be an ‘importer’. According to the “Import & Export Control Act, 1950”, the office of the Chief Controller of Imports & Exports (CCI&E) provides the registration (IRC) to the importer. After obtaining the IRC, the person has to secure a “Letter of Credit Authorization” (LCA) registration from the Registration Unit of Bangladesh Bank. After getting the LCA registration, a person becomes a qualified importer. He is the person who requests or instructs the opening bank to open an L/C is also called the “Opener” or “Applicant” of the credit.

6.5 PROCEDURE INVOLVED IN L/C OPENING:6.5 PROCEDURE INVOLVED IN L/C OPENING:There are few steps involved in L/C opening process.

A. APPLICATION At first, the L/C opener is required to fill the prescribed application form for requesting to

open a L/C for him.

L/C Application Form is a sort of an agreement between customer and bank based on which letter of credit is opened. Standard Bank Limited provides a printed form for opening of L/C to the importer. A special adhesive stamp of value of Tk.150 is affixed on the form in accordance with Stamp Act in force. While opening, the stamp is cancelled. Usually the importer expresses his decision to open the L/C quoting the amount of margin in percentage. Usually the importer gives the following information –

Full name and address of the importer;

Date and place of expiry of the credit;

The mode of the transmission of document (mail/courier/telex);

Whether the confirmation of the credit is requested by the beneficiary or not;

Whether the partial shipment is allowed or not;

The type of loading (loading on board;

Brief description of the goods to be imported;

Availability of the credit by sight payment acceptance /negotiation/ deferred payment;

The time bar within which the document should be presented;

Sales terms (FOB/C &F/CIF);

Account number;

L/C amount;

Shipping mark;

IRC Number;

B. PRESENTATION OF THE DOCUMENTS: As soon as the seller /exporter receives the L/C and is satisfied that he can deliver the

goods mentioning in the L/C he is going to make shipment of the required goods to the buyer and after that, he presents the documents evidencing dispatching of goods to the negotiating bank on or before the stipulated expiry date of the credit. After receiving all the documents, the negotiating bank then checks the documents against the credit. Insurance cover note;

Commercial/Performa Invoice;

Bill of lading;

Certificate of origin;

Packing list;

Shipping advice;

Bill of exchange;

C. EXAMINATION OF DOCUMENTS:The documents generally include the following and the basic points of checking by SBL are:

Letter of Credit

The documents should have been negotiated or presented before expiry of the credit

The amount which drawn should not exceed the amount available under the credit.

Commercial Invoice

It has to be verified that the commercial invoice has been properly drawn and signed by the beneficiary according to the terms and conditions of L/C.

The beneficiary should properly invoice the merchandise.

The merchandise is invoiced to the importer on whose account the L/C is opened.

The description of merchandise and the unit price correspond with that given in the L/C.

The import license or IRC number of the importer, indenters registration number and Letter of Credit Authorization number are incorporated in the Invoice.

Bill of Exchange:

It has to be verified that the bill of exchange has been properly drawn and signed by the beneficiary according to the terms and conditions of L/C.

The amount in the Bill is identical with amount mentioned in the invoice.

The amount drawn does not exceed the amount mentioned in the L/C.

The amount in words and figures should be same.

The bill of exchange should be properly endorsed.

The Bill of Lading:

First, it has to be cleared that the Bill of Lading is showing “Shipped on Board” and it has to be properly endorsed to the bank.

The B/L should include the description of the merchandise according to invoice.

The port of shipment and destination, date of shipment and the name of the consignee are in agreement with those mentioned in the L/C.

The shipping company or their authorized agents properly sign the B/L.

The date on the B/L is not ‘stale’ which means it is not dated in unreasonably long time prior to negotiation.

The Insurance Cover Note: Is the insurance documents specified in the credit submitted?

Does the insurance cover the risks mentioned in the credit in the currency of the credit and for the prescribed amount but not less than CIF value?

Is the insurance documents dated not later than the shipping documents?

Does the insurance policy/Certificate agree with other documents as regards description, weight & marks of the goods, mode of transport & the route?

Does the insurance company attached and as far as necessary, endorsed issue all the copies?

Certificate of Origin: The Merchandise described in the Certificate is in accordance with the L/C.

C. SECURITIZATION

After receiving the application form with other required documents submitted by the opener, they are to be thoroughly scrutinized.

The Standard Bank Limited Official scrutinizes the application in the following manner according Standard Bank Limited’s L/C manual:

The terms and conditions of the L/C must be complied with UCPDC 500 and Exchange Control & Import Trade Regulation.

Eligibility of the goods to import

The L/C must not be opened in favour of the importer.

Radioactivity report in case of food item.

Survey report or certificate in case of old machinery

D. If all the documents along with the application are in order, the financial position and credit worthiness of the importer, market demand of the good will be assessed. Margin for letter of credit will also be determined. The rate of margin depends on the financial condition of the banker, importers previous performance, status of relationship with the importer, nature of goods etc. This margin is to be retained from the importer either in cash or in debiting the importer current account with the bank. The importer is also required to pay the other concerning charge like foreign corresponding charge, telex charge if any, handling charge, and commission etc.

F. Accounting Procedure Involved in L/C opening

There are two, one is L/C opening and another is liability register, which includes liability amount, margin, foreign correspondent etc. While opening L/C there are few accounting entries:

Party Account----------------------------------------------------Dr.

Sundry deposit margin on L/C-----------------------------------Cr.

Foreign corresponding charge A/C (FCC)----------------------Cr.

Income A/C commissions on L/C -------------------------------Cr.

Income A/C (stamp and stamp form)------------------------- --Cr.

Income A/C SWIFT on L/C ---------------------------Cr.

G. Advising a letter of credit : The advising or notifying bank is the bank through which the L/C is advised to the exporter. It is a bank situated in the exporting country and it may be a branch of the opening bank. It becomes customary to advise a credit to the beneficiary through an advising bank. Advising depicts the proof of authenticity of the credit to the seller. The opening bank has a corresponding relationship or arrangement throughout the world by which the L/C is advised. Actually, the advising bank does not take any liability if otherwise not requested.

APPLICATION

ISSUE L/C

ADVISE & CONFIRM

H. Adding confirmation:The confirming bank does adding confirmation. Confirming bank is a bank, which adds its confirmation to the credit, and it is done at the request of the issuing bank. The confirming bank may or may not be the advising bank. The advising bank usually does not do it if there is not a prior arrangement with the issuing bank. By being involved as a confirming agent the advising bank undertakes to negotiate beneficiary’s bill without recourse to him.

I. L/C TransmittingLetter of credit can be transmitted to the advising bank through SWIFT (Society for

Worldwide Interbank Financial Telecommunication).

After verifying all that the respective officer open an L/C.

Sending message by SWIFT

In the SWIFT following information are provided

Address of the L/C issuing bank;

Input message type (700 for the new L/C, 702 for amendment and some other message number);

Name of the advising bank;

Form of documentary credit (Revocable /irrevocable);

L/C no;

Date and place of expiry;

Applicant/Importer;

IMPORTER (L/C APPLICANT)

L/C OPENING BANK

L/C BENEFICIARY L/C ADVISING BANK/CONFIRMING BANK

L/C opening/issuing bank

Advising bank/negotiating bank

Beneficiary /Exporter;

USD;

Draft at (sight/usance);

Partial shipment allowed or not;

Trans-shipment;

Ships on board or deck;

Description of goods and services.

After giving the message to the advising bank, the bank keeps Margin on total L/C value. Normally the margin is kept 25%or it is based on banker customer relationship or based on goods imported.

J. NegotiatingThe beneficiary (exporter) receives the letter of credit from advising bank. After proper shipment of goods as per terms and conditions of the L/C, required documents like Commercial Invoice, Bill of Lading, and Bill of Exchange are presented to the negotiating bank by the beneficiary for negotiation. If the documents are in order as per L/C then the negotiating bank negotiates the drafts making payment to the beneficiary. Then the negotiating bank forwards the drafts along with the shipping documents to the L/C opening bank. The negotiating bank reimburses the amount paid against the draft from reimbursement bank (authorized by opening bank) by debiting Nostro A/C of the opening bank. Negotiating banks have the option to send the drafts and documents to the opening bank for collection.

K. AmendmentAfter opening of L/C sometime alteration to the original terms and conditions become necessary. These amendments involve changes in

(I) Unit price

(ii) Extension of validity the L/C

Such amendments can be affected only if all the concerned parties agree i.e. the beneficiary, the importer, the issuing bank and the advising bank.

For any amendment the importer must request the issuing bank in writing duly supported by revised Indent/ Proforma invoice. The issuing bank then advises the required amendment to the advising bank. L/C amendment commission including postage is charged to the clients A/C.

L. Making the payment through the Reimbursing BankThe L/C issuing bank after getting the document and check the document and if the terms and condition meet the requirement, the issuing bank take initiative to make payment to the exporter through reimbursing bank

Reimbursing Bank

The issuing bank then inform the importer that his document has come to the Bank and by giving the payment he can release the document and unloading his good from the ship or any other place as per L/C terms and conditions.

After giving the payment to the bank, the bank will give the following accounting entries:

Reverse entry is given

After realizing the telex charge, service charge, interest (if any), the shipping documents is then stamped with PAD Number & entered in the PAD Register. Intimation is given to the customer calling on the bank’s counter requesting retirement of the shipping documents. After passing the necessary vouchers, endorsement is made on the back of the Bill Of Exchange as “Received Payment” and the Bill of Lading is endorsed to the effect “Please deliver to the order of M/S---------”, under two authorized signatures of the bank’s officers (P.A. Holder). Then the documents are delivered to the Importer.

6.6 Import Financing:There are two types of import finance

LIM (Loan against Imported Merchandize)

LTR (loan against Trust Receipt)

6.6.1 LIM (loan Against Import merchandise):Advances allowed for retirement of shipping documents and release of goods imported through L/C taking effective control over the goods by pledge fall under this type of advance. When the importer failed to pay the amount payable the exporter against import L/C, then Standard Bank Limited gives loan against imported merchandise to the importer. The importer will bear all the expenses i.e. the godown charge, insurance fees, etc. and the ownership of the goods retains to the bank. This is also a temporary advance connected with import, which is known as post import finance.

L/C opening bank Negotiating bank

Banker’s liability --------------------DrCustomer’s Liability ---------------- Cr

PAD (Payment Against Document)--------------DrSundry deposit Margin on L/C -------------------Dr.Income A/C on PAD --------------------------CrIncome A/C interests on PAD ---------------------Cr.Commission on PAD ------------------Cr.

On the arrival of goods and lodgment of import document, importer may request the bank for clearance of goods from the port or custom and keep the same to bank godown. The importer will bear the all the charges and expenses .By taking the money from the bank the importer will release the necessary goods.

6.6.2 LTR (loan against trust receipt):Advance against a TR obtained from the customer is allowed when the documents covering an import shipment are given without payment. The customer holds the goods or their sale proceeds in Trust for the bank until the LTR is fully paid off. TR is a document, which creates the banker’s lien on the goods. The period of TR may be 30,45,60 or 90 days. The sale proceeds of goods held in trust must be deposited to the bank by the borrower irrespective of period of TR.

6.7 Export Department:6.7.1 Export L/C:

The other type of L/C facility offered by Standard Bank Limited is Export L/C.

The goods and services sold by Bangladesh to foreign households, businessmen and Government are called export. The export trade of the country is regulated by the Imports and Exports (control) Act, 1950. There are a number of formalities, which an exporter has to fulfill before and after shipment of goods. The exports from Bangladesh are subject to export trade control exercised by the Ministry of Commerce through Chief Controller of Imports and Exports (CCI & E). No exporter is allowed to export any commodity permissible for export from Bangladesh unless he is registered with CCI & E and holds valid Export Registration Certificate (ERC). The ERC is required to be renewed every year. The ERC number is to be incorporated on EXP forms and other documents connected with exports.

Readymade textile garments (both knitted and woven), Jute, Jute-made products, frozen shrimps, tea are the main goods that Bangladeshi exporters export to foreign countries. Garments sector is the largest sector that exports the lion share of the country's export. Bangladesh exports most of

its readymade garments products to U.S.A and European countries. Bangladesh export about 40% of its readymade garments products to U.S.A.

Most of the exporters who export through Standard Bank Limited is readymade garment exporters. They open export L/Cs here to export their goods, which they open against the import L/Cs opened by their foreign importers.

Parties involved in export L/C: L/C issuing bank Importer Exporter L/C advising bank Negotiating bank

The paying /reimbursing bank

Documents for Export L/C:These documents should be submitted to the bank for negotiation:

Export L/C

EXP form

Proforma invoice

Bill of Exchange Amount of bill differs with Invoice Not drawn on L/C issuing bank not signed Tenor of B/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.

Full set of bill not submitted; B/L is not drawn or endorsed to the Order Of Eastern Bank Ltd;

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; Short Form B/L; Charter party B/L;

Gross weight, net weight & 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

Inspection certificate Insurance document Any other document as per L/C

Respective officer must scrutinize all the documents with reasonable care to confirm whether the terms and conditions are right or wrong.

6.7.2 Procedure for Export L/C:These procedures are enumerated as follows:

1. ERC: The exports from Bangladesh are subject to export trade control exercised by the Ministry of Commerce through Chief Controller of Imports and Exports (CCI & E). No exporter is allowed to export any commodity permissible for export from Bangladesh unless he is registered with CCI & E and holds valid Export Registration Certificate (ERC). The ERC is required to be renewed every year. The ERC number is to be incorporated on EXP forms and other documents connected with exports.

2.Obtaining EXP: After having the registration, the exporter applies to SBL with the trade license, ERC and the Certificate from the concerned Government Organization to get EXP. If the bank is satisfied, an EXP is issued to the exporter.

An EXP-Form contains the following particulars:

Name and address of Authorized Dealer

Particulars of the commodity to be exported with code

Country of destination

Port of destination

Quantity

L/C value in foreign currency

Terms of Sale

Name and address of Importer/ Consignee

Bill of Lading/ Railway Receipt/ Airway Bill/ Truck Receipt/ Post Parcel Receipt no. and date

Port of Shipment

Land Custom Post

Shipment Date

Name of the Exporter with address

CCI & E's Registration number and date of the Exporter

3. Securing the order: Upon registration, the exporter may proceed to secure the export order. Contracting the buyers directly through correspondence may be done. Some buyers of goods like jute and jute goods maintain liaison office, representative of local agents who can be contracted to secure a deal. Sometimes, TCB, BJMC and BJEC secure bulk contracts and pass or allocate the contracts to the actual exporters.

4. Signing of the contract: While making a contract, the following points are to be mentioned,

Description of the goods

Quantity of the commodity

Price of the commodity

Shipment

Insurance and marks

Inspection

Arbitration

5. The following points are to be looked for,

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

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

The L/C allows sufficient time for shipment and a reasonable time for registration.

If the exporter wants the L/C to be transferable, divisible and advisable, he should ensure those stipulations are specially mentioned in the L/C.

6. Procuring the materials: After making the deal and on having the L/C opened in his favour, the next step for the exporter is to set about the task of procuring or manufacturing the contracted merchandise.

7. Registration of sale: This is needed when the items proposed to be exported are raw jute and jute goods.

8. Shipment of goods: The following are the documents normally involved at the stage of shipment:

i) EXP Form

ii) photocopy of registration certificate

iii) photocopy of the contract

iv) photocopy of the L/C

v) Freight certificate from the bank in case of payment of the freight at the port of lading is involved.

6.7.3 FOREIGN DOCUMENRARY BILL PURCHASE (FDBP):After those, exporter submits all these documents along with a Letter of Indemnity to Standard Bank Limited for negotiation. An officer scrutinizes all the documents. If the document is a clean one, Standard Bank Limited purchases the documents based on banker- customer relationship. This is known as Foreign Documentary Bill Purchase (FDBP).

PROCEDURE FOR FDBP:

After purchasing the documents, SBL gives the following entries, -

FDBP A/C ------------------------------ Dr.

Customers A/C ----------------------- Cr.(Before realization of proceeds)

Head Office A/C--------------------------- Dr.

FDBP A/C---------------------------------- Cr.(Adjustment after realization of proceeds)

A FDBP Register is maintained for recording all the particulars. The salient contents of a FDBP register are as follows:

Date Ref. No. (FDBP) Name of the Party (Drawer) Drawee Name of collecting Bank Conversion Rate Bill Amount Amount in currency EXP Form no. Export L/C no.

6.7.4 SETTLEMENT OF LOCAL BILL:The settlement of local bills is done in the following ways:

The customer submits the L/C to Standard Bank Limited along with the documents for negotiate;

Standard Bank Limited official scrutinizes the documents to ensure the conformity with the terms and conditions;

The documents are then forwarded to the L/C opening bank;

The L/C issuing bank gives the acceptance and forwards an acceptance letter;

Payment is given to the customer on either by collection basis or by purchasing the document;

The following accounting treatments are made for the purchasing of local bill –Local Bill Purchased (LBP)------------------------------------------Dr.Party’s A/C-----------------------------------------------------------Cr.Commission-----------------------------------------------------------Cr.Interest A/C-----------------------------------------------------------Cr.

An LBP Register is maintained to record the acceptance of the Issuing Bank. Until the acceptance is obtained, the record is kept in a Collection Register.

6.7.5 FOREIGN DOCUMENTARY BILLS FOR COLLECTION:6.7.5 FOREIGN DOCUMENTARY BILLS FOR COLLECTION:Standard Bank Limited forwards the documents for collection due to the following reasons

If the documents have discrepancies. If the exporter is a new client. The banker is in doubt.

Foreign documentary bills for collection signify that the exporter will receive payment only when the issuing bank gives payment. The exporter submits duplicate EXP Form and Commercial Invoice. Subsequently, the value of the bill is calculated and the following accounting entries are given:

Head Office A/C----------------------------------DrClient’s A/C---------------------------------------Cr. Government Tax A/C-----------------------------Cr. Postage A/C----------------------------------------Cr.Income A/C profit on Exchange------------------Cr.

After passing the above vouchers, an Inter Branch Exchange Trading Debit Advice is sent for debiting the NOSTRO account. SBL has NOSTRO accounts in the New York Standard Chartered Bank. An FDBC Register is maintained, where first entry is given when the documents are forwarded to the issuing bank for collection and the second one is done after realization of the proceeds.

6.7.6 MODE OF PAYMENT OF EXPORT BILLS UNDER L/C:6.7.6 MODE OF PAYMENT OF EXPORT BILLS UNDER L/C:The most common methods of payment under a L/C are as follows

Sight Payment Credit :

In a Sight Payment Credit, the bank pays the stipulated sum immediately against the exporter’s presentation of the documents.

Negotiation Credit:

In Negotiation credit, the exporter has to present a bill of exchange payable to himself in addition to other documents, that the bank negotiates.

Deferred Payment Credit:

In deferred payment, the bank agrees to pay on a specified future date or event, after presentation of the export documents. No bill of exchange is involved. In Standard Bank Limited, payment is given to the party at the rate of D.A 60-90-120-180 as the case may be. But the Head office is paid at T.T clean rate. The difference between the two rates is the exchange trading for the branch.

Acceptance credit:

In acceptance credit, the exporter presents a bill of exchange payable to himself and drawn at the agreed tenor (that is, on a specified future date or event) on the bank that is to accept it. The bank signs its acceptance on the bill and returns it to the exporter. The exporter can then represent it for payment on maturity. Alternatively he can discount it in order to obtain immediate payment.

Payment methods under L/C

At Sight Payment Credit

Deferred Payment Credit

Negotiation Payment Credit

Acceptance Payment Credit

ADVISING L/C: When export L/C is transmitted to the bank for advising, the bank sends an Advising Letter to the beneficiary depicting that L/C has been issued.

INLAND LETTER OF CREDIT (ILC):ILC means L/C within the same country. This type of L/Cs are opened when the seller does not believe the buyer though they are of the same country and also in the cases where the sales contract is of a big amount.

6.8 Export financing:Financing of export credits is made of two stages:

1. Pre-shipment

2. Post-shipment

1. PACKING CREDIT (PRE-SHIPMENT FINANCING) Packing is a short term advance granted by a bank to an exporter against valid export L/C contract for the purpose of purchase of materials or finished goods or manufacturing, processing, packing, transporting up to ware house/port of shipment etc of exportable.

Voucher to be passed.

Packing credit A/C ------------Dr

Customer’s A/C ---------------Cr

Adjustment entry

Customer A/C --------------Dr

Packing credit A/C --------Cr

2. BACK-TO-BACK LETTER OF CREDIT (L/C) In case of a Back to back letter of credit, a new L/C (an Import L/C) is opened based on an original L/C (an Export L/C). Under the 'Back to Back' concept, the seller as the Beneficiary of the first L/C offers it as a 'security' to the advising Bank for the issuance of the second L/C. The Beneficiary of the Back to Back L/C may be located inside or outside the original Beneficiary's country. In case of a Back to Back L/C, no cash security (no margin) is taken by the Bank; Bank liens the first L/C. In case of a Back to Back L/C, the drawn bill is an Usance/ Time bill. The export L/C is marked lien and no margin is taken. SBL facilitates about 75% back to back facility to the party.

In Standard Bank Limited, papers/documents required for submission for opening of back to back L/C:

CD account in the bank.

Master L/C

Valid Import Registration Certificate (IRC) & Export Registration Certificate(ERC)

VAT /TIN Number

L/C application & LCA form duly filled in signed.

Proforma Invoice or Indent.

Insurance Cover Note with Money Receipt

Bonded warehouse license

EXP form duly signed by the authorize officer

In addition to the above the following papers/documents are also required for export oriented garment industries while requesting for opening of back to back letter of credit:

Textile permission

Valid Bonded Warehouse License

Quota allocation letter issued by Export Promotion Bureau (EPB) in favor of the applicant in case of quota items.

Membership of chamber of commerce.

In case the Factory premises is a rented one, Letter of Disclaimer duly executed by the owner of the house/premises to be submitted.

PAYMENT OF BACK-TO-BACK LETTER OF CREDIT:In case of back to back L/C of 60-90-120-180 days of maturity period, deferred payment is made. Payment is given after realizing export proceeds from the L/C issuing bank.

ACCOUNTING TREATMENT FOR BACK-TO-BACK L/C: When the document is arrived, the following vouchers are passed

Commission on acceptance----------------Cr.

Customer’s A/C ----------------------------Dr.

While payment, if the fund is at hand, the accounting entries are:

Sundry Deposit Margin on L/C------------------Dr.

Customer’s A/C ---------------------------------Cr.

6.9 REPORTING TO BANGLADESH BANK:6.9 REPORTING TO BANGLADESH BANK:

At the beginning of the each month (within the first week), the reporting regarding the following information is mandatory. Filling of E-2/P-2 schedule of S-1 category; which covers the entire month amount of import, category of goods, currency, country etc. Filling of E-3/P-3 schedule for all charges, commission with T/M form. Disposal of IMP form, which includes:1) Original IMP is forwarded to Bangladesh Bank with invoice;2) Duplicate IMP is kept with the bank along with the bill of entry;3) Triplicate IMP is kept for office record;4) Quadruplicate is kept for Bangladesh Bank;

6.10 MY OBSERVATIONS:

1) Standard Bank Limited has SWIFT facilities. Very few bank in our country offer this. By using this modern technology Standard Bank Limited, provides fastest service on L/C operating to it’s client.

2) Pre-shipment inspection certificate should obtain from the exporter of back to back L/C. Because it reduces fraud and forgery in case of import against master export L/C. But all the time this Pre-shipment inspection certificate are not wanted by the bank.

3) On some cases, this branch takes different Margin and commission on L/Cs from different customer. A customer is allowed to open a L/C even with 10% margin. I think that the bank should review the customers' behavior for a period and should develop a certain policy in this regard.

4) In case of Export L/Cs, sometimes customers insist to give their payments though their documents are found discrepant. In some cases, Bank has to give payment to these customers for different reasons. I think the Bank should be as much strict as possible about giving payments against discrepant documents without hurting the customers.

5) Standard Bank Limited branch does not practices revocable L/C.

6) In many cases, the foreign banks want confirmations from other foreign banks with which this bank has correspondence. This proves the poor financial condition of our country. Banks should try to improve this situation.

7) The bank should try to arrange more training programs for their officials. Quality training will help the officials to enrich them with more recent knowledge of International Trade Financing.

CHAPTER SEVEN

RecommendationsWith a view to ensure exciting services and opening up the new window of progression as well as uplift, I would like to present the Standard Bank Limited with several recommendations like:

Credit Department:

Should be launch small business operation along with excelling account..

Introducing robust consumer credit scheme and executive credit scheme for employees.

Strict supervision is necessary to avoid loan defaulters.

There is lack of division of labor in the department. Therefore every body has to handle every type of banking services. This decreases the level of performance of the personnel. Lack of division of labor hampers the Discipline of working environment. So customers are to wait for some time for the desired service, which is contrary to the Premium Banking’s objective.

Human Resources:

Some qualified officers should be promoted properly. Without it they become demoralized.

Giving training facilities in the specialized institutions in the country as well as out of the country.

Motivating employees with special bonus and to foreign country.

Should be developing more interpersonal relation.

Sales Promotion and Ad Campaign:

Offering scholarship for the Varsity Students and School goers.

Establishing ample eye catching billboards in the shopping centers and other important places.

This initiatives will ensure healthy sales volume as well as well progression for the Standard Bank Limited and a new door of possibility will open up.

CONCLUSION

During the three months Practical orientation program at Standard Bank Limited, almost all the desks have been observed more or less. This Practical orientation program, in first, has been arranged for gaining knowledge of practical banking and to compare this practical knowledge with theoretical knowledge. Comparing practical knowledge with theoretical involves identification of weakness in the branch activities and making recommendations for solving the weakness identified. Though all departments and sections are covered in the internship program, it is not possible to go to the depth of each activities of branch because of time limitation. However, highest effort has been given to achieve the objectives the internship program.

In the conclusion, I want to give thanks to the Standard Bank Limited Khulna Branch authority, especially My special thanks to Mr. Lutfar Rahman, SAVP, & Mrs. Rumana Kutubuddin, AVP, Mr. Aminul Islam, Senior Executive officer, Mr. Saiful Islam, Senior Executive Officer, Mr. Syed Mahmud Hossain, Executive Officer of Standard Bank Limited, Head Office, Dhaka and the staffs who have given me the practical knowledge about the banking operations and who helped me a lot about my practical exposure in the Bank.

BIBLIOGRAPHY

Ali, S.A., Foreign Exchange and Financing of Foreign Trade, Lita Academics,

Dhaka, 1995.

Awasthi, G.D., Trade Payments: Commentary, Cases & Text, Academy of

Business Studies, New Delhi, 1997.

Basudevan, S.V., Theories of Commercial Banking, Reading Materials on Theory

& Practice of Banking (B-101), Bangladesh Institute of Bank Management (BIBM), 2000.

Chowdhury, L.R., A Textbook On Foreign Exchange, Fair Corporation, Dhaka,

2000.

Chowdhury, Dr. T.A., Modes of Payment in International Trade, Reading Materials

on International Trade & Finance (E-102), Bangladesh Institute of Bank Management

(BIBM), 2000.

Credit Manual, NCC Bank Ltd.

O.R NIZAM ROAD, S.S. & Kapoor, G.K., Banking Law and Practice, S Chand &

Company, New Delhi, 1994.

Miah, A.A., Scrutiny, Lodgement and Retirement of Import Bills, Reading

Materials on International Trade & Finance (E-102), Bangladesh Institute of Bank

Management (BIBM), 2000.

Acronyms

BGMEA Bangladesh Garments Manufacturers & Exporters AssociationBB Bangladesh BankBL Bill of Lading

CCI & E Chief Comptroller of Import & Export

EPB Export Promotion BureauERC Export Registration CertificateEXP Form Export FormIBCA Inter Branch Credit AdviceIBCT Inter-branch Credit TransactionIBDA Inter Branch Debit AdviceID International DivisionIMP Form Import FormIRC Import Registration Certificate

SBL Standard Bank LimitedOBC Outward Bills for Collection

SWIFT Society for Worldwide Inter-bank Financial TelecommunicationTIN Tax Identification Number

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