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Internship Report

On “Foreign Exchange System of Mercantile Bank Limited”

Prepared for Mr. Riad Hassan Senior Lecturer School of Business Studies Southeast University

Prepared by Md. Jahidul Islam ID# 2006110000033 Batch # 13th (Finance) BBA Southeast University

Date of Submission:

June, 2010

FOREIGN EXCHANGE SYSTEM OF MERCANTILE BANK LIMITED

I

this report seeks to identify and recommend the prospects for the Bank in that particular market. “Foreign Exchange System of Mercantile Bank Limited” is the final outcome of successful completion of my internship program at the bank. In this endeavor. Thanking you. The report titled is. It would be my immense pleasure if you find this report useful and informative to have an apparent perspective on the issue. Jahidul Islam ID# 2006110000097 Batch: 13th (Finance) BBA Southeast University FOREIGN EXCHANGE SYSTEM OF MERCANTILE BANK LIMITED II . Riad Hassan Senior Lecturer School of Business Studies Southeast University Banani. The report contains eight chapters – the first two chapters contain an overview of the host organization and rest of the chapters contain the findings and recommendations.Letter of Transmittal June. Uttara Branch. Dear Sir. It has been a joyful and enlightening experience for me to work in the organization of my likings and prepare this report. Yours sincerely. It is an honor to submit the report of my 3 months long Internship Program in the Mercantile Bank Limited. _____________________ Md. 2010 Mr. Please feel free to contact me if you have any query on this issue or any other relevant matters. Dhaka-1213 Subject: Submission of Internship Report.

I would like to convey my sincere appreciation to the almighty Allah for giving me the strength and the ability to finish the task within the planned time. Oliur Rahman. Executive Summary FOREIGN EXCHANGE SYSTEM OF MERCANTILE BANK LIMITED III . At all I am greatly thanking to the persons whose enrich books.Acknowledgement At the very beginning. Riad Hassan. Executive Vice President and Head of Mercantile Bank Limited. Mercantile Bank Limited at Uttara Branch. Dhaka for giving me the opportunity to work in his branch. My special thanks go to I. Mahmud Hossain Limon (Proba. Hossainuz Zaman (EO) and Md. His valuable suggestions and guidance helped me a lot to prepare the report in a wellorganized manner. Abdul Halim. Moreover. I would like to thank Mr. for supervising me at the time of my internship attachment with their best efforts. Dr. Siddiqur Rahman (EO) and Ferdousi Bente Latif (PO) Mercantile Bank Limited. School of Business Studies. Finally.A. I am very much grateful to all officials of Mercantile Bank Limited. So my heartiest appreciation goes to those officials. Uttara Branch. Senior Lecturer.O). Uttara Branch. Uttara Branch. Southeast University for his whole-hearted supervision to me during the Internship period. Syed Masud Husain. Mr. A.M. I would like to thank all others whose strong support makes us able to complete this report. Shamim Rahman (PO). It is my privilege that I had the opportunity to complete internship in. This report would not be possible without the cooperation of all officials of MBL. Uttara branch. First of all I am deeply indebted to our honorable Dean Prof.K. First Assistant Vice President of Mercantile Bank Limited. journals and working papers on international financial management have provided a guideline to me in preparing this report. I would also like to express my gratitude to Mr. then my Internship Supervisor Mr. I would like to thanks all the people with whom I have carried out my internship.

I examine different aspects foreign exchanges innovation.Today necessity of a Bank as a financial institution is undeniable. This report tries to identify banks role foreign exchange management through evaluating foreign exchange operations of MBL. A country is financially rich when it has modern financial institutions of its own. position and usefulness as banking procedures. Uttara branch. As a financial institution bank mainly operate to communicate among persons and effectively works as safeguard among them in this age globalization. the banking business has become very competitive now a day. Table of contents FOREIGN EXCHANGE SYSTEM OF MERCANTILE BANK LIMITED IV . This study also tries to clarify the operating procedures of foreign exchange department of MBL as a commercial bank and also tries to identify some aspects of further improvement in operations. The report provides a general view on Mercantile Bank Limited. For giving friendly service to the customers they need experienced and well-educated working force. Banks operates most effectively to settle any transactions within different countries either trade purposes or personal purposes. Banks are most active financial intermediary in today’s world. Due to Globalization and Technological changes. All banks are competing to give effective real time service to their customers. regulations and related work papers to identify its impact. theoretical aspects related to international trade and foreign exchange transactions as well as gives idea about foreign exchange regulations used in Bangladesh to control related financial institutions. Banking sector is one of the stable financial institutions of a country. It may help us to provide a scenario of foreign exchange control system in Bangladesh and foreign exchange transitions procedures applied in Bangladeshi commercial banks. it’s quite impossible to commit international without help of banks and it also properly works to hedge away risk international traders. These institutions play a vital role in the field of financial stability of a country. In recent economy banks plays a vital role to entrust international trade. development.

5 Methodology of the Study 1.6 Data Analysis 1.3 Background of the Study 1.7 Rational of the Study 1. IV 1-6 2 3 3 4 4-5 5 5 6 6 7-19 8 8 9 10 11 12 12 12 13 13 13 13-14 15 16 16-17 18 18-19 20 21 21-22 22-23 23 23 24 25 26 26-27 27 28 Chapter-2: Overview of Mercantile Bank Limited 2.2 Origin of Report 1.7 Resources 2.1 Start of Operation 2.1.4.10 Local Remittance 2.8 Online Banking 2.1 Introduction 1.9 MBL Time Line 2.6.1 Mercantile Bank Limited-At a glance 2.Particulars Executive Summary Chapter-1: Introduction 1.1 Foreign Exchange and Foreign Exchange Market 3.7.7.2.2 Foreign Exchange participants 3.1 Payment mode of foreign trade FOREIGN EXCHANGE SYSTEM OF MERCANTILE BANK LIMITED V .1.13 Other Facilities Chapter-3: Theoretical Aspects of Foreign Exchange 3.1 Deposit scheme 2.5.6.3 Foreign Accounts of Banks 3.5 Financial Performance of MBL-At a Glance 2.6 MBL Uttara Branch-At a Glance 2.9 Limitation of the Study Page No.4 Foreign Exchange Position 3.3 Three Tired-Market 3.1 Foreign Exchange Regulations 3.4 Objective of the Study 1.5 Factors are considered at time foreign trade payment 3.2 Foreign Exchange Participants 3.2 Corporate Structure of MBL at Uttara Branch 2.3 Organizational Structure of Mercantile Bank Limited 2.1 Components of Exchange Position 3.11 Loans and Advances 2.4 Function of Mercantile Bank Limited 2.2 Consumer’s Credit Scheme 2.2 Objectives & Goals of Mercantile Bank Limited 2.1 Types of FX Transactions 3.1.8 Scope of the Study 1.12 Foreign Exchange 2.

3 Amendment of Credit 3.6.4.1.2 Outward Remittance of MBL 4.2.2 Post Shipment Credit 4.2 L/C Advising 3.1 Who can open the accounts? 4.3 Accounting Treatment for Opening Import L/C 4.3.5.5 Settlement 3. 5 Documentary credit under Letter of Credit 3.5.1 Introduction FOREIGN EXCHANGE SYSTEM OF MERCANTILE BANK LIMITED VI .1 Foreign Exchange Department of MBL 4.5.5.1.1.1 Export Procedures 4.5.4.5 Foreign remittance 4.4 Presentation of Document 3.2.8 Income Sources of Foreign Exchange Department 4.1 Opening of Letter of Credit 3.4.2. 2 Types of Documentary of Credit 3.2.4.5.2 Types of inward form 4.4 Accounting Treatment for Opening Exports L/C 4.1.1.3. 1 Letters of Credit Parties Involved 3.2.5.2.5.3.4.3.1 Resident Foreign Currency Deposit (RFCD) 4. 1 Cash in Advance 3.3.5.1 Pre-Shipment Credit 4.5.2. 3 Documentary Collections 3.3.2 Import Financing by MBL 4.1 Import procedures 4.2.6 Common forms of Documentary of Credit 3.2 Non Resident Foreign Currency Deposit (NFCD) 4.7 Main Types of Money Transfers through banks Chapter-4: Foreign Exchange Management of Mercantile Bank Limited 4.5.2 Letter of Credit 3.4 Export section of MBL 4.9 Income Sources of Foreign Exchange Department 4.3 Appraisal of Documentary Credit in MBL 4.5. Economic Development ( In Terms of Foreign Exchange) 5.5.3 Import Section of MBL 4.2 Export Financing by MBL 4.1.1.5.1 Types of out ward form 4.3.7 Exchange rate and exchange gain of MBL 4.10 Ending Summary 28 28 28 29 29-30 31 31-32 33 34 34 34 34 34-35 36 36-37 37 38 39 40 40 40 40-41 41 41-47 48 49-51 51 51-54 54 55-59 60-61 61-62 62-65 65 66 67 67 67 67-68 69-70 70-71 71-72 72 72 73 74 Chapter-5: Analysis.5.5.3 Inward remittance of MBL 4.2 Foreign Currency Accounts Offered by MBL 4.1 Foreign Remittance Section of MBL 4.3.3. 2 Open Account 3.4.5. 3 Operations of Documentary Letters of Credit 3. 4 Shipment on Consignment Basis 3.6.6 Reporting to Bangladesh Bank by MBL 4.

4: Charges for Online Banking of MBL Table 2.2: Import L/C is Opened Table Table Table Table Table 4.1: Contingent liability reversal voucher Table 3.9: Due date arises Table 4.1 In Case of Import 5.4: 4.3: 4.3: Corporate Structure of MBL.3 In Case of Remittance Chapter-6: Findings 6.6: Economic development of Bangladesh in terms of remittance 75 76 77 78 80 81 FOREIGN EXCHANGE SYSTEM OF MERCANTILE BANK LIMITED VII .1.2: Financial Performance of MBL-At a Glance Table2.5: Sector-Wise Loans and Advances 9 11 12 14 17 35 35 Page No.11: FDBP loan created Chapter-5: Analysis.1 SWOT 6.5: 4. Chapter-3: Theoretical Aspects of Foreign Exchange Table 3.1: Organization Structure of MBL Table 2.1.5.7: Charges are taken by MBL Documents are received Payment Made Packing Voucher BTB L/C is opened Table 4.2: Voucher on lodgment of documents Chapter-4: Foreign Exchange Management of Mercantile Bank Limited Table 4.1 : Growth of MBL by conducting import Table 5.3 : Growth of MBL by conducting export Table 5.6: 4.1 : Accounting treatment at the time of opening Import L/C 49 49 50 50 51 62 63 63 64 65 Table 4.5 : Growth of MBL by conducting remittance business Table 5.2 Special Findings 75-77 77-80 80-82 83-86 84 85-86 87-90 91-92 93-98 99 Chapter-7 & 8: Recommendation and conclusion Bibliography Appendix Abbreviation List of Tables Particulars Chapter-1: Introduction Chapter-2: Overview of Mercantile Bank Limited Table 2. Uttara Branch Table 2.4 : Economic development of Bangladesh in terms of export Table 5.2 In Case of Export 5. Economic Development ( In Terms of Foreign Exchange) Table 5.8 : BTB L/C is received lodgment made but due date is realized Table 4.2 : Economic development of Bangladesh in terms of import Table 5.1.

1: Type of Foreign Correspondent Accounts Figure 3.1: MBL Uttara Branch-At a glance Figure 2.2: Mechanism of letter of credit Chapter-4: Foreign Exchange Management of Mercantile Bank Limited Figure 4.5: Growth of MBL by conducting remittance business Figure 5.4: Economic development of Bangladesh in terms of export 75 76 78 79 80 81 Figure 5. Chapter-3: Theoretical Aspects of Foreign Exchange Figure 3.3: Sector-Wise Loans and Advances 12 15 17 25 30 Page No.List of Figures Particulars Chapter-1: Introduction Chapter-2: Overview of Mercantile Bank Limited Figure 2.2: MBL time line Figure 2.1: Growth of MBL by conducting import Figure 5.1: Different stages of export L/C 61 Chapter-5: Analysis Economic Development( In Terms of f Foreign Exchange) Figure 5.2: Economic development of Bangladesh in terms of import Figure 5.6: Economic development of Bangladesh in terms of remittance FOREIGN EXCHANGE SYSTEM OF MERCANTILE BANK LIMITED VIII .3 : Growth of MBL by conducting export Figure 5.