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Executive Summary

The report is prepared on the basis of practical experiences at EXIM Bank Ltd. The internship programs help me a lot to learn about the practical situation of a financial. This program helps me to implement my theoretical knowledge into practical realistic environment In the age of modern civilization Bank is playing its spending role to keep to the economic activity. In fact there is hardly any aspect of development activity whether state inspired or otherwise where Bank do not have a major role to play. Bank provides means and mechanism of transferring command over resources from those who have an excess of income over expenditure to those can make use of the same for adding to the volume of productive capital. There are large numbers of small saver with small amount of saving who are generally reluctant to invest their surplus income because of their lack of adequate knowledge about complicated investment affaires. The Bank provide them with the safety, liquidity and profitability by means of different saving media offering varying degrees of mix liquidity, return and safety of saving. Export Import Bank of Bangladesh Limited is schedule commercial Bank is registered by the Bangladesh Bank. EXIM Bank follows the rules and regulations prescribed by the Bangladesh Bank for scheduled commercial Banks.

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Exim Bank of Bangladesh Ltd.

1.0 Introduction:
Banking system is expending its hand in different financial events every day. At the same time the banking service is becoming faster, easier and the banking arena is becoming wider as the demand for better service increases day by day, they are coming with different innovative ideas & products. In order to survive in the competitive field of the banking sector, all banking organizations are looking for better service opportunities to provide their fellow clients. As a result, it has become essential for every person to have some idea on the bank and banking procedure. Internship program is essential for every student, especially for the students of Business Administration, which helps them to known the real life situation.

1.1 Background of the Report:

This report was being assigned as a part of the BBA Program. To prepare the report under the BBA program requirement, I accommodate my internship program in the EXIM Bank Limited. For the completion of the program, I have already prepared a report. This report is being formed on the most important issue Foreign Exchange performance of EXIM Bank Limited. The entire report is based on practical experience of EXIM Bank Limited. I have tried to furnish all the issue that I gathered from through working with EXIM Bank limited.

1.2 Objective of the Report:

The objective of the report are mentioned according to the priority1. The most significant objective of preparing and submitting this report is to completion of the BBA program. 2. To gain practical experience in the job field is another most important objective. 3. To have a clear idea about the foreign exchange performance of EXIM Bank Limited is also required.

1.3 Scope of the Report:

This report provides a brief idea about the banking functions, management, organizational structure, foreign exchange activities export and import, foreign remittance, financial performance, performance of foreign exchange activities and risk management. The report mainly focuses on the banking performance of EXIM Bank

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Limited from 2005 to 2009. The report also highlighted the SOWT analysis of this bank. The report mainly concerned with the performance of EXIM Bank.

1.4 Limitations:
This is an individual research work where only one individual researcher needs to undertake the whole process done alone. In all remain within I failed to escape by any means. These are as follows: 1. Two months time for internship is a pretty short time to acquire in depth knowledge about all the departments of EXIM Bank Limited. 2. To collect information I faced difficulty because of the excessive nature of confidentiality. 3. EXIM Bank is an Islamic bank for that reason I face some problems to understand their products & facilities they provide. Because some of the rules of the Islamic banking are different from the general banking rules. 4. It requires a lot of assistance from all level officers and stuff but as a bank the officer was busy in doing their jobs. 5. Since I was confined by a specific topic and should work on the topic related department (foreign exchange) but some time I need to worked in different department so it is not possible to learn hundred percent on that topic. 6. The study was limited by the availability of the data.

Using both of the two sources primary and secondary has collected data.




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The primary sources of data:

Face to face conversation with the Bank officers and staffs. Direct conversation with the clients. File study of different sections. Deskwork: during my practical orientation I worked in head office and Satmosjid Branch Branch. In head office I worked in foreign and credit division. In Satmosjid Branch I worked in the Sections.

The secondary sources of data:

Annual Report of EXIM Bank of Bangladesh Ltd., 2012. Deferment paper of EXIM Bank. Unpublished data received from the head office and branch. Different text books.

I tried my best to discuss my subject in analytical way. I also have represented some graphs and tables, which show performance of EXIM Bank Ltd. based on financial data. To collect necessary information I used questionnaire method, which is shown in the chapter six. I have given some recommendations to solve the problems of EXIM Bank Ltd. as per my own thought.

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Overview OF EXIM Bank of Bangladesh Limited 2.1 Background of the Bank

EXIM Bank came in to operation as scheduled commercial bank on 3rd August 1999 as per rules and regulations of Bangladesh Bank. It is established under the leadership of Late Mr. Shahjahan Kabir, founder chairman who had a long dream of floating a commercial bank which would contribute to the socio-economic development of our country. He had a long experience as a good banker. A group of highly qualified and successful entrepreneurs joined their hands with the founder chairman to materialize his dream. In deed, all of them proved themselves in their respective business as most successful star with their endeavor, intelligence, hard working and talent entrepreneurship. Among them, Mr. Nazrul Islam Mazumder became the honorable chairman after the demise of the honorable founder chairman. Of its very beginning EXIM Bank Bangladesh limited was known as BEXIM Bank Limited. But some legal constraints the bank renamed as EXIM Bank, which means Export Import Bank of Bangladesh Limited. At present the bank is performing its work all over the country by 53 branches. The bank has migrated all of its conventional banking operation into Shariah based Islamic banking since July/2004.

2.2 Vision of EXIM Bank Limited

The gist of the vision is Together Towards Tomorrow. Export Import Bank of Bangladesh Limited believes in togetherness with its customers, in its march on the road to growth and progress with service. To achieve the desired goal, there will be pursuit of excellence at all stages with a climate of continuous improvement, because, in EXIM Bank, we believe, the line of excellence is never ending. Banks strategic plans and networking will strengthen its competitive edge over others in rapidly changing competitive environment. Its personalized quality services to the customers with the trend of constant improvement will be the keystone to achieve our operational success.

2.3 Mission of EXIM Bank Limited

The bank has chalked out the following corporate objectives in order to ensure smooth achievement of its goals To be the most caring and customer friendly and service oriented bank. To create a technology based most efficient banking environment for its customers. To ensure ethics and transparency at all levels.

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To ensure sustainable growth and establish full value to the honorable stakeholders and Above all, to add effective contribution to the national economy. Eventually the bank also emphasis on Provide high quality financial services in export and import trade. Providing efficient customer service. Maintaining corporate and business ethics. Being the trusted depository of customers money and their financial adviser. Making its products superior and rewarding to the customers. Display team spirit and professionalism. Sound capital base. Enhancement of shareholders wealth. Fulfilling its social commitment by expanding its charitable and humanitarian activities.

2.4 Corporate Culture

This bank is one of the most regimented banks with an idiosyncratic corporate culture. Here we believe in shared meaning, shared understanding and shared sense making. Banks people can see and understand events, activities, objects and situation in a distinguishing way. They mould their manners and etiquette, character individually to suit the purpose of the bank and the needs of the customers who are of paramount importance to the bank. The personnel in the bank see themselves as a tight knit team / family that believe in working together for growth. The corporate culture of bank belong has not been imposed; it has rather been achieved through banks corporate demeanor.

2.5 Prime Operational Area

As a full-fledged islamic bank in Bangladesh, EXIM Bank has extended all islamic services including wide range of saving and investment products, foreign exchange and ancillary services with the support of sophisticated IT and professional management. The Page - 6

investment portfolio of the bank comprises of diversified areas of business and industry sectors. The sectors include textile, edible oil, ready-made garments, chemicals, cement, telecom, steel, real estate, and other service industry including general trade finance. The bank has given greatest important to acquire quality assets and is committed to retain good customers through customer relationship management and financial counseling. At the same time efforts have been made to explore or induct new clients having good potentiality to diversify and create a well- established structured investment portfolio and to minimize overall portfolio risks.

2. 6 Products & Services of EXIM Bank Limited

Deposit Products: 1. Al-Wadiah Current Deposit Account. 2. Mudaraba savings deposit account (MSD, MSTD, RFCD, and NFCD). 3. Mudaraba Term Deposit Receipt. 4. Mudaraba monthly saving scheme. 5. Mudaraba monthly income scheme. 6. Mudaraba Super Savings Scheme. 7. Mudaraba Hajj Scheme Investment Products: 1. Corporate Finance. 2. Commercial Finance. 3. Industrial Finance. 4. Project Finance. 5. Lease Finance. 6. Syndicate Finance. 7. Hire Purchase Finance. 8. Real Estate Finance.

2.7 Social Commitment

The purpose of company business is, obviously, to earn profit, but the promoters and the equity holders are aware of their commitment to the society to which they belong. A chunk of the profit is kept aside and/or spent for socio-economic development through trustee and in patronization of art, culture and sports of the country. At least 2% of our annual profit of every year put aside for the foundation to conduct Corporate Social Responsibilities (CSR) activities. The mainstream of CSR activity that carries out through this foundation is: Healthcare services. Education Promotion Scheme (Interest free loan). Helping people affected by natural calamities. Helping people in slum areas. Donation to educational institutions to setup computer lab. Beautification of Dhaka City.

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2.8 Achievements
It is a great pleasure that by the grace of Almighty Allah, we have migrated at a time all the branches from its conventional banking operation into Shariah based Islamic banking operation without any trouble in 2004. Lot of uncertainties and adversities were there into this migration process. The officers and executives of our bank motivated the valued customers by counseling and persuasion in light with the spirit of Islam especially for the non-Muslim customers. Our IT division has done the excellent job of converting and fitting the conventional business processes into the processes based on Shariah. It has been made possible by following a systematic procedure of migration under the leadership of honorable Managing Director.

2.9 Management Profile and Divisions:

EXIM Bank Limited has does this work very well. Different departments of EXIM Bank Limited are as follows: Financial Administration Division., Head Office Human Resources Division, Head Office International Division, Head Office EXIM Bank Training Institute Information Technology Division, Head Office Special Audit Division, Head Office, Dhaka. Accounts Division Treasury Division Operations Division Investment Division.

2.10 Human Resource Practices in EXIM Bank Limited

Employees are the core resources of any organization. Without them, one cannot run their organization. And, human resources approach is concerned with the growth and development of people toward higher level of competency, creativity and fulfillment. It helps employees become better, more responsible persons, and then it tries to create a climate in which they may contribute to the limits of their improved abilities. It assumes that expanded capabilities and opportunities for people will lead directly to improvements in operating effectiveness. Essentially, the human resources approach means that better people achieve better results.

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2.11 Shariah Board

The Board of directors has formed a Sharia Supervisory Board for the Bank. Their duty is to monitor the entire Banks transactional procedures, & assuring its Sharia compliancy. This board consists of the following members headed by the chairmn. The tasks of the Sharia supervisor in summary is replying to queries of the Banks administration, staff members, shareholders, depositors, & customers, follow up with the Sharia auditors and provide them with guidance, submitting reports & remarks to the Fatwa & Sharia Supervision Board and the administration, participating in the Banks training programs, participating in the supervision over the AlIqtisad AlIslami magazine, & handling the duty of being the General Secretary of the Board.

2.12 Shariah Council

Chairman: Professor Maulana mohammad salah uddin Members: Moulana Mohammad Sadequl Islam Professor H.M. Shahidul Islam Barakaty Mr. A.S.M. Fakhrul Ahsan Hafez Moulana Mufti Mohammad Khair Ullah Mr. Md. Nazrul Islam Mazumder Mr. A.K.M Nurul Fazal Bulbul Mr. Md. Abdul Mannan |Mr. Zubayer Kabir | |Mr. Abdullah Al-Zahir Sawpan | |Mr. Kazi Masihur Rahman |
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2.13 Corporate Information Matters

Date of incorporation Inauguration Authorized capital Paid-up capital Number of branches Proposed branches Fax: SWIFT: |Foreign Exchange: Non Resident Foreign Currency Deposit Account. Foreign Currency Deposit Account.

June 02,1999 August 03, 1999 Tk.1000.00 Corer Tk. 337.39 Corer 80 10

Credit Rating
Long term Short term Notification of reporting Registered office Plot No. SE (F): Gulshan Avenue,

AA-(High Safety) ST-2(High Grade) June 02, 2010 SYMPHONY 9 Road No .142 Dhaka-1212, Bangladesh 880-2-988 9363,

880-2-988 9358 PABX: EXIMBKBDDH Website :

2.13 Deposit:
1. Al-Wadia Current Deposit 2. Mudaharaba Saving Deposit:

Mudaraba Monthly Saving Scheme (Money Grower) Mudaraba Monthly Income Scheme (Steady Money)

3. Mudaraba Super saving Scheme (Double in6Years)

Mudaraba Multiple Saving Scheme (More than triple in 10years) Mudaraba Education Saving Scheme

4. Mudaraba Short Term Deposit One Month Six Months Twenty Four Months Three Months Twelve Months Thirty Six Months

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Foreign Exchange Banking of EXIM Bank 3.0 EXIM Bank of Bangladesh Limited
The general meaning Foreign exchange is the methods by which rights to wealth in a countrys currency are converted into rights to wealth in another countrys currency. In banks foreign exchange means, the general mechanism by which a bank converts currency of one country into that of another. Foreign Exchange Department (FED) is the international department Bangladesh Bank issues license to scheduled banks to deal with foreign exchange. These banks are known as Authorized Dealers. If the branch is authorized dealer in foreign exchange market, it can remit foreign exchange from local country to foreign countries. EXIM Bank, Principal branch is an authorized dealer. Other branches also maintain foreign exchange division on behalf of main branch. There are three kinds of foreign exchange transaction:

According to Import and Export Control Act, 1950, the Office of Chief Controller of Import and Export provides the registration (IRC) to the importer. In an international business environment, buyers and sellers are generally unknown to each other. So seller of goods always seeks security for the payment of his exported goods. Bank gives export guarantee that it will pay for the goods on behalf of the buyer if the buyer does not pay.

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This guarantee is called Letter of Credit. Thus the contract between importer and exporter is given a legal shape by the banker by Letter of Credit.

3.2 Letter of Credit (LC)

A letter of credit is a letter issued by a bank (know as the opening or the issuing bank) at the instance of its customer (known as the opener) addressed to a person (beneficiary) undertaking that the bills drawn by the beneficiary will be duly honored by it (opening bank) provided certain conditions mentioned in the letter gave been complied with. Parties to the L/C Importer: Who applies for LC. Issuing Bank: It is the bank which opens/issues a L/C on behalf of the Importer. Confirming Bank: It is the bank, which adds its confirmation to the credit and it is done at the request of issuing bank. Confirming bank may or may not be advising bank. Advising or Notifying Bank: It is the bank through which the L/C is advised to the exporters. This bank is actually situated in exporters country. It may also assume the role of confirming and /or negotiating bank depending upon the condition of the credit. Negotiating Bank: It is the bank, which negotiates the bill and pays the amount of the beneficiary. The advising bank and the negotiating bank may or may not be the same. Sometimes it can also be confirming bank. Accepting Bank: It is the bank on which the bill will be drawn (as per condition of the credit). Usually it is the issuing bank Reimbursing Bank: It is the bank, which would reimburse the negotiating bank after getting payment instructions from issuing bank.

3.3 Steps for import L/C Operation

There are eight steps of L/C operation is given below Step 1 Registration with CCI&E For engaging in international trade, every trader must be first registered with the Chief Controller of Import and Export. By paying specific registration fees to the CCI&E- the trader will get IRC/ERC (import/Export Registration Certificate) to open L/C with bank, this IRC is must.

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Step 2 Determination terms of credit The terms letter of credit are depending upon the contract between the importer and exporter. The terms of the credit specify the amount of credit, name and address of the beneficiary and opener, tenor of the bill of exchange-period and mode of shipment and of destination, nature of credit, expiry date name and number of sets of shipping documents etc. Step 3 Proposal for Opening of L/C To have an import LC limit an importer submits an application to department to EXIM Bank. The proposal contains the following particulars:

Full particulars of the bank account Nature of business Required amount of limit Payment terms and conditions Goods to be imported Offered security Repayment schedule

Step 4 Application by importer to the banker to open letter of credit For opening L/C, the importer is required to fill up a prescribed application provided by the banker along with the following documents: 1. L/C Application form 2. Filled up LCA form 3. Demand Promissory Note 4. Pro-forma invoice 5. Tax Identification number (TIN) 6. Import registration certificate 7. Authority to debit account 8. Filled up amendment request Form 9. IMP form 10. Insurance cover note and money receipt. 11. Membership certificate 12. Rate fluctuation undertaking

Step 5 Opening of L/C by the bank for the opener:

Taking filled up application form from the importer. Collects credit report of exporter from exporters country through its foreign correspondence there. Opening bank then issues credit by air mail/TELEX/SWIFT followed by L/C advice as asked by the opener through his foreign correspondent or branch as the case may be, at the place of beneficiary. The advising bank advises the L/C to the beneficiary on his own form where it is addressed to him or merely hand over the Original L/C to the beneficiary if it is so addressed.

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Step 6 Shipment of goods and lodgment of documents by exporter: Then exporters make shipment (the goods) to the destination of the importer country. Sends the documents to the L/C opening bank through his negotiating bank. Generally the following documents are sent to the Opening Ranker with L/C 1. 2. 3. 4. 5. Bill of Exchange Bill of Lading Commercial Invoice Certification of Origin A certificate stating that each packet contains the description of goods over the packet. 6. Packing List 7. Advice Details of Shipment 8. Pre-shipment Inspection Certificate 9. Vessel Particular 10. Shipment Certificate Step 7 Lodgment of Documents by the opening Bank from the negotiating bank: After receiving the documents, the opening banker scrutinizes the documents. If any discrepancy found, it informs the importer. If importer accepts the fault, then opening bankers call importer retiring the document. At this time many thing can happen. These are indicated in the following: Discrepancy found but the importer accepts No problem occurs in lodgment.

Discrepancy found and importer not agreed to accept In this case, importers complains and send back all the documents to the exporter and request them to make in the specified manner. Here banker is not bound to pay because the documents send by exporter is not in accordance with the terms of L/C. Documents are OK but importer is willing to retire the documents In this case bank is obligated to pay the price of exported goods. (This payment is one kind of credit to the importer and this credit in banking is known as PAD). Everything is O.K. but importer fails to clear goods from the port and request hank to clear In this case banks clear the goods and takes delivery of the same by paying customs duty and sales tax etc.

Step 8 Retirement The importer receives the intimation and gives necessary instruction to the bank for retirement of the import bills or for the disposal of the shipping document to clear the imported goods from the customs authority. The importer may instruct the bank to retire

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the documents by debiting his account with the bank or may ask for LTR (Loan against Trust Receipt).

3.4 Accounting Procedure in case of L/C Openings

When the officer thinks the application is fit to open a L/C, giving the following entries creates the following charges Particulars Customers A/C L/C Margin A/C Commission A/C on L/C VAT SWIFT Charge Data max Stamp Postage DI-IL/Courier Debit/ Credit Debit Credit Credit Credit Credit Credit Credit Credit Credit Charges in Taka

5O% 15% on commission 300/= 1000/= 150/= 300% 1500/=

3.5 Amendment of L/C:

After opening of L/C some times alteration to the original terms and conditions become necessary. These amendments involve changes in a. Unit price b. Extension of validity of the L/C. c. Documentary requirements etc. 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.

3.6 Payment Procedure of Import Documents

This is the most sensitive task of the Import Department. The officials have to be very much careful while making payment. This task constitutes the following:

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Date of Payment: Usually payment is made within seven days after the documents have been received. If the payment is become deferred, the negotiating bank may claim interest for making delay. Preparing Sale Memo: A sale memo is made at B.C rate to the customer. As the T.T & O.D rite is paid to the ID, the difference between these two rates is exchange trading. Finally, an inter Branch Exchange Trading Credit Advice is sent to ID. Requisition for the Foreign Currency: For arranging necessary fund for payment, a requisition is sent to the International Department Transmission of Message: Message is transmitted to the correspondent bank ensuring that payment is being made.

3.7 Export
Generally 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 renew ever year. The ERC number is to be incorporated on EXP forms and other documents connected with exports. The formalities and procedure are as follows: 1. Obtaining exports LC: To get export LC form exporter issued by the importer. 2. Submission of export documents: Exporter has to submit all necessary documents to the collecting bank after shipment. 3. Checking of export documents: after getting the documents banker used to check the documents as per LC terms 4. Negotiation of export documents: If the bank accepts the document and pays the value draft to the exporter and forward the document to issuing bank that is called a negotiating bank. If the bank does buy the LC then the bank normally acts as collecting bank. 5. Realization of proceeds: This is the period when the issuing bank has realized the payment. 6. Reporting to the Bangladesh bank: As per instruction by Bangladesh Bank the bank has to report to respective department of Bangladesh bank by mentioning latest payment. 7. Issue to proceeds realization certificate (PRC): Bank has to issue proceed realization certificate of export LC to the supplier / exporter for getting cash assistance. Page - 16

3.8 Export operation

Bangladesh exports a large quantity of goods and services to foreign households. Readymade garments (both knitted and woven), Jute, Jute-made products, frozen shrimps, tea, leather & Leather made products are the main goods that Bangladeshi exporters exports to foreign countries. Garments sector is the largest exports sector in our country. Bangladesh exports most of its readymade garments products to USA and European Community (EC) countries, Bangladesh exports about 40% of its readymade garments products to USA. Most of the exporters who export through EXIM BANK are 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. Export L/C operation is just reverse of the import L/C operation. For exporting goods by the local exporter, bank may act as advising banks and collecting bank (negotiable bank) for the exporter. Before advising any L/C the following steps must be ensured (Checking of Export L/C): Before advising the export L/C to the beneficiary advising bank should check the terms and conditions of export to ensure the following points: 1. The exportable commodity is not banded by our export policy. 2. The terms and conditions of the L/C are not differing to the exchange control regulations of the country. 3. The payment terms must be specified in the L/C. 4. The documents which mentioned in the L/C are easily available. 5. The settlement is not allowed in a banded country. 6. All the L/Cs are subject to Uniform Custom and practice for documentary credit ICC Publication No. 500, 1993 revision.

3.9 Some Bank Terms in Export L/C:

Generally the following bank terms are funded in the export L/C: 1. Negotiation restricted: It should be freely negotiable. 2. Document: It should be in presented for negotiation in Bangladesh, not outside Bangladesh. Page - 17

3. Bill of Lading: It should be to the opening order of negotiating Bank and endorsed favoring opening bank or named bank as per L/C Terms. 4. Blank endorsement: In no circumstances in B/L blank endorsement is acceptable in exchange control Bangladesh. 5. Airway Bill to the order of applicant: It should be to the order of a bank. 6. Payment will be made after realization of proceed from a name bank or buyer. Payment terms should be clear and specific. Advising bank: It receives documents from the foreign importer and hands it over to the exporter. Sometimes it adds confirmation on the L/C on request from the Opening Bank. By adding confirmation, it assumes the responsibility to make payment to the exporter. Negotiating Bank: It negotiates the bills and other shipping documents in favor of the exporter. That is, it collects the export-bill from the drawer and credits the exporters account for the same. Collection proceed from the export bill is deposited in the banks NOSTRO account in the importers country. Sometimes the bank purchases the bills at discount and waits till maturity of the bill. When the bill matures, bank presents it to the drawer to cash it.

3.10 Back-To-Back L/C

In our country, Export and import operation of bank is very much related with one another because of use of Back to Back and maturity of payment for Back to-Back L/C is set in such that it can be paid out of export proceeds. It is simply issued to the clients against an import L/C. Back-to-Back mechanism involves two separate L/C. One is master Export L/C and another is Back-to-Back L/C. On the strength of Master Export L/C bank issues bank to back L/C. Back-to-Back L/C is commonly known as Buying L/C, on the contrary Master Export L/C is known as Selling L/C.

3.11 Features of Back-to-Back L/C:

An Import L/C to procure goods /raw materials for further processing. It is opened based on Export L/C. It is a kind of Export Finance. No margin is required to open Back to back L/C Page - 18

Application is registered with CCI&E Applicant has bonded warehouse license. L/C value shall not exceed the admissible percentage of net Free on Board (FOB) value of relative Master L/C. Period will be up to 180 days. The import L/C is opened for 75% of the value of Export L/C. Here L/C issued against the lien of export L/C. Arrangements are such that export L/C matures first then out of this export profit, import L/C is paid out.


An exporter desired to have an import LC limit under Back to Back arrangement. In that case the following papers & documents are required 1. Full particulars of Bank account. 2. Balance Sheet. 3. Statement of Assets & liabilities. 4. Trade License. 5. Valid Bonded Warehouse License. 6. Membership Certificate. 7. Income tax Declaration. 8. Memorandum of Articles. 9. Partnership Deed. 10. Resolution. 11. Photographs (all Directors). On receipt of above documents and papers the Back to Back L/C Opening section will prepare a credit report. Branch must obtain sanction from Head Office for opening of BB L/C. Exporters prepare the documents and submit the same to the bank for negotiation.

3.13 Preparation of Export Documents:

1. Bill of Exchange or Draft. 2. Commercial Invoice. 3. Bill of Landing. 4. Inspection Certificate. 5. Packing List 6. Export License. 7. Shipment Advice. 8. Certificate of Origin. 9. Weight Certificate. 10. Certificate of Analysis. 11. Quality Certificate 12. EXP Form. 13. Courier Receipt.

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EXIM Bank is highly helpful for the export oriented company. The documents for an export oriented garment industries while requesting for opening a back-to-back L/C 1. 2. 3. 4. 5. 6. Master L/C Valid Import Registration Certificate (IRC) and Export Registration Certificate ERC) L/C Application form duly filled in and signed Performa Invoice Insurance Cover Note with money receipt IMP Form duly signed

In addition to the above documents, the followings are also required to export oriented garment industries while requesting for opening a back-to-back L/C 1. Textile Permission 2. Valid Bonded Warehouse License 3. Quota Allocation Letter issued by the Export Promotion Bureau (EPB) in favor of the applicant for quota items.

3.14 Export Documents Checking

1. General verification: a. L/C restricted or not. b. Is the Exporter submits those documents before expiry date of the credit. c. Shortage of documents etc. 2. Particular examination: a. Each every document should be verified with the LC. 3. Cross examination. a. Verified one document to another. On receipt of documents its must be checked properly and then a proposal sheet would be prepared as per banks format indicating the full particulars of shipment and discrepan cy under the signature of authorized person and should be placed to the manager for disposal instruction or sanction.

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3.15 Checklist of exports L/C:

Following defective points are usually found in the Master L/C. So, the bank officials so much carefully check these points. These are: 1. Name of the Advising Bank. 2. Name of Transferring Bank 3. Form of Doc. credit:

Name of Issuing Bank Documentary Credit No. and issuing date Date of shipment Expiry date and place

4. Applicant/ for order of/ On Account 5. Beneficiary/ Favoring 6. Amount 7. Availability of Credit 8. Partial shipment/ Transshipment 9. Payment condition /Draft Sight 10. Category. 11. Description of goods:

Item Total Quantity Unit price

12. B/L Clause 13. Reimbursement clause. 14. UCPDC clause. 15. Net FOB Value. Page - 21

3.16 Presentation of export documents for negotiation/Purchase:

In case back to back as 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. After shipment exporter submits the following documents to EXIM Bank for negotiation.

Bill of exchange Bill of Lading Invoice Insurance Policy/Certificate Certificate of Origin Inspection Certificate Consular Invoice Packing List Quality Control Certificate G.S.P. certificate.

3.17 Foreign documentary bills for collection (FDBC):

EXIM Bank forwards the documents for collection due to the following reasons,

If the documents have discrepancies. If the exporter is a new client.

FDBC signifies that the exporter will receive payment only when the issuing bank gives payment EXIM Bank make regular follow-up with the L/C opening Bank in case of any delay in getting payment.

3.18 Foreign Remittance

This bank is authorized dealer to deal in foreign exchange business. As an authorized dealer, a bank must provide some services to the clients regarding foreign exchange and this department provides these services. The basic function of this department are outward and inward remittance of foreign exchange from one country to another country. In this process of providing this remittance service, it sells and buys foreign currency. The conversion of one currency into another takes place an agreed rate of exchange, which the banker quotes, one for buying and another for selling. In such transactions the foreign currencies are like, other commodities offered for sales and purchase, the cost (convention value) being paid by the buyer in home currency, the legal tender.Remittance procedures of foreign currency There are two types of remittance:

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1. Inward remittance 2. Outward remittance. 1. Inward Foreign Remittance: Inward remittance covers purchase of foreign currency in the form of foreign T.T., D.D, and bills, T.C. etc. sent from abroad favoring a beneficiary in Bangladesh. Purchase of foreign exchange is to be reported to Exchange control Department of Bangladesh bank on Form-C. 2. Outward Foreign Remittance: Outward remittance covers sales of foreign currency through issuing foreign T.T. Drafts, Travelers Check etc. as well as sell of foreign exchange under L/C and against import bills retired.

3.19 Working of this department

1. Issuance of TC, Cash Dollar /Pound 2. Issuance of FDD, FIT & purchasing, Payment of the same. 3. Passport endorsement. 4. Encashment certificate 5. F/C Account opening &fifing. 6. Opening of Export FC retention Quota A/C& maintain. 7. Maintenance of ledger of Cash Dollar, FC Deposit A/C & TC. 8. Maintain FBC register &follow up FBC. In these processes of remittance, bank must have to make profit as a business institution. Profit is made in two ways: I. Commission charged 2. Difference in the buying and selling rate.

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3.20 Rate of exchange

It means the price of one currency expressed in terms of another currency. Rate of exchange is the rate by which the relation among different foreign currencies is established in terms of local currency of that country. Value at which one country currency can be converts into anothers country. In exercise of the power conferred by section three of exchange regulation ACT 1947. Bangladesh has issued license to certain bank to deal in foreign exchange is called authorized dealer. Spot rate: It is quoted for transaction where the foreign currency bought or sold is to be received or delivered immediately. The current rate of exchange quoted in the foreign exchange market. Forward rate: When a rate is applied to a future date it is called forward rate at which foreign exchange can be sold or bought for delivery at a future time. Cross rate: The rate of exchange quoted expressing the quotation for any two currencies in term of a third. SWAO: Sport rate against forward purchased or a spot purchase against forward rate. Direct quotation: Rates are quoted in tarms foreign currency per unit of foreign currency. Indirect quotation: Rates are quoted in terms of foreign currency per one unit of home currency. Buying rate: Authorized dealer applies this at the time of purchasing / negotiation of export document and payment against TT. MT, check and drafts required from abroad. Selling rate: Authorized dealer applies this at the time of lodgment of import documents, realization of LC margin from importer and other foreign exchanges transaction on overseas bank. Forward rate at a discount: when forward rate is higher than that of spot rate. Forward rate at a premium: when for ward rate is lower than that of spot rate.

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3.21 Ratio Analysis:

1. Net Interest margin: Net interest margin ration measures total interest earning to total asset. It indicates the interest generating capacity of the Bank with its total asset. Interest income Interest expense/ total asset Year Net Interest margin 2012 4.72% 2011 4.77%

See calculation of TIE ratio - Appendix Here we can see that EXIM Bank Ltd. has fluctuating interest earning. Its highest interest earning was in 2011 which was 4.77 that are higher than in 2012. From the result i find that the bank has deteriorated its position regarding earning interest from the previous years.

Net Interest margin

4.78% 4.76% 4.74% 4.72% 4.70% 4.68% 1 2 Net Interest margin



Graph: Net Interest margin of 2012 & 2011

2. Net non interest margin: Net non interest margin indicates the non interest earning compare to it total asset. Non interest revenue Non interest expense/ Total asset year Net non interest margin 2012

2011 1.65%

See calculation of TIE ratio - Appendix Page - 25

This ratio indicates the bank able to manage few non interests earning compare to its non operating income. In 2011 its non interest expense was more than in 2012. But it is not adequate from the banking perspective. Therefore the bank should increase more non interest revenue from additional sources

Net non interest margin

1.66% 1.65% 1.65% 1.64% 1.64% Net non interest margin 1 2011 1.65% 2 2012 1.64%

Graph: Net non interest margin of 2012 & 2011

3. Earning Per Share EPS indicates the average earnings that stockholders get per share. A banks goodwill and its loyalty to its stockholder as well as overall performance is reflected by the EPS of that bank. Net income before tax/ Number of ordinary shares outstanding year Earning Per Share 2012 0.12% 2011 0.14%

See calculation of TIE ratio - Appendix From the above data we see that EXIM Bank Ltd. is gradually not improve regarding earning per share. In 2011 the banks EPS was higher than 2012 because of their strong after tax net income in 2011. But it gradually decreases its EPS and has indication to disearn further EPS for the upcoming years.

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Earning Per Share

0.15% 0.14% 0.14% 0.13% 0.13% 0.12% 0.12% 0.11% 1 2012 2 2011 Earning Per Share

4. Revenue to Income ratio: It is the comparison between total operating incomes to net income after tax. It indicate show much the bank spends on its operating expenses and it taxation provisions. Total operating income/ net income after tax Year Revenue to Income ratio 2012 1.479 2011 1.310

See calculation of TIE ratio - Appendix This data shows in 2011 EXIM Bank Ltd. spent a slightly greater in operating or tax purpose and the following next years it was not able to minimize its operating expense which ensures less EPS for its stockholders

5. Cost of funding assets Cost of funding means the amount banks need to incur for raise its fund. Banks have to carefully monitor their expenses for collecting funds because it has direct impact on the total income of the bank. If bank have to incur too much cost for its funding then its income will be minimized. Total interest expense/ Total asset Year Cost of funding assets 2012 4.2% 2011 3%

See calculation of TIE ratio - Appendix Page - 27

From the above data we see that the bank was able to reduce its costing of fund in 2011 but in the year 2012 its costing of fund increased. Therefore banks total income was reduced in 2011 because it bears greater cost of raising funds than in 2012

6. Return on Equity; Return on equity is single most important indicator of overall banks performance. It indicates how much income the bank can generate for the betterment of stockholder. Here common equity represents amount of money company raises by selling its share to public. Net income available to shareholder/ Common equity Year Return on Equity 2012 17.7% 2011 20.7%

See calculation of TIE ratio - Appendix From the above data we can find that EXIM Bank Ltd. holds significant amount in ROE which are not indicates better performance. The ROE decreased 2012 then 2011 year after year which results in better position as well as the higher income generated which is beneficial for the stockholders.

Return on Equity
21.00% 20.00% 19.00% 18.00% 17.00% 16.00% Return on Equity

2012 1

2011 2

Graph: Return on Equity of 2012 & 2011

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7. Return on Asset: Return on asset is another important indicator of bank health. It measures the net income to total asset of the bank. Net income/ Total asset Year Return on Asset 2012 2% 2011 2.2%

See calculation of TIE ratio - Appendix These ROA ratios also show the better performance of Exim Bank Ltd in all two years. Though there was some fluctuation the results indicate that the management was more careful and responsible

8. P/B.V Ratio: Book value per share= Common equity/outstanding shares Year Return on Asset 2012 0.008 2011 0.007

See calculation of TIE ratio - Appendix

9. Times Interest Earned Ratio: This ratio measures the extent to which operating income can decline before the firm is unable to meet its annual interest cost. TIE ratio = EBIT / Interest Charges Year Return on Asset 2012 0.409 2011 0.769

See calculation of TIE ratio - Appendix It is basically a coverage ratio which indicates that either company has enough space to increase their interest funds through debt financing or not. The TIER of 2011 was 0.769 and 0.409 of 2012, which reveals that company has earned interest expense less than as

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compared to 2011, which is not good for the company because in this case the higher the ratio, the best it is for the company.

10. Basic earning power (BEP): Basic earning power (BEP) = EBIT/total assets Year Return on Asset 2012 0.017 2011 0.023

See calculation of TIE ratio - Appendix Basic earning power shows that how much operating assets will generate operating profit. The BEP in 2011 was 0.023 and in 2012 it was 0.011, which means that it declines in 2012 which is not good for the company because the company is not utilizing their operating assets efficiently to generate operating profit.

11. Operating efficiency Ratio: Operating efficiency ratio gives idea about comparison between total operating revenue and total operating expense. It also implicitly indicates about profitability of the bank. Total operating revenue/ Total operating expense Year Operating Efficiency Ratio 2012


See calculation of TIE ratio - Appendix The above data shows that EXIM Bank Ltd. had greater total operating expense from the previous year and the total operating revenue was also greater from the previous year and that result in increase in profitability of the bank because operating efficiency ratio in2012 was greater than 2011 and operating efficiency ration in 2012 was greater than in 2011

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Operating Efficiency Ratio

2.70% 2.60% 2.50% 2.40% 2.30% 2.20% Operating Efficiency Ratio

2012 1

2011 2

Graph: Operating Efficiency Ratio of 2012 & 2011 12. Deposit of operating expense ratio This ratio shows the relationship between the interest on deposit and total operating expenses. Although interest on deposit is not included in total operating expenses but both are expenses that bank must have to incur. Interest on deposit/ Total operating expense Year Deposit expense 2012 of operating 94% 2011

See calculation of TIE ratio - Appendix EXIM Bank Ltd. had fluctuated deposit of operating expense ratio. In 2012 the ratio was highest that indicates the bank had greater interest on deposits than total operating expense from 2011.

Risk Ratio Analysis:

13 Loan Ratio: The loan ratio indicates the extent to which assets are devoted to loan as opposed to other assets.

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Loan Ratio = Total Loan /Total Assets Year Loan Ratio 2012 58% 2011 65%

See calculation of TIE ratio - Appendix From the table we can see that Loans and Advances Ratio of the bank has been increasing and decreasing. As bank generate its major portion of income from interest income. So, bank generates its major portion of income from interest income. So, bank has to disburse more Loans and Advances for maximizing their income. In the year 2011, the bank engaged 65% of its TA in loans and advances.

14 Interest Expense Ratio Interest Expense Ratio reveals how much interest expenses needed for the bank compared to its TA. The lower the ratio indicates the better performance of the bank. Interest Expense Ratio = Interest expense / Total Assets Year Interest Expense Ratio 2012 4.2% 2011 3%

The table shows that the Interest Expense Ratio of EXIM Bank has been increasing through 2011 from 2012.

Other Expenses Ratio:

15 Cash RatioCash ratio is measured by dividing cash by total assets of the bank. Year Cash Ratio 2012 13% 2011 10%

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16 Deposit to capital Ratio: This ratio measures Taka of deposit of per Taka capital. Deposit to Capital Ratio = Deposit/ Total Capital Year Deposit to Capital Ratio 2012 7.04 2011 7.54

See calculation of TIE ratio - Appendix Deposit to capital ratio of EXIM bank has been increasing over the years. It was 7.54 times in the year 2011 and 7.04 times in the year 2012. That means the deposit of the bank has been decreasing than its equity capital.

Deposit to Capital Ratio

7.6 7.5 7.4 7.3 7.2 7.1 7 6.9 6.8 6.7

Deposit to Capital Ratio

2012 1

2011 2

Graph: Deposit to Capital Ratio of 2012 & 2011

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4.0 Recommendation:
Recommendations to overcome the drawbacks foreign exchange division of EXIM Bank Ltd are shown below

For opening a L/C its required to contact with the Pantho poth Branch, which is an AD Branch of Exim Bank. To minimize the time lag proper attempts should immediately taken to convert this branch as an AD Branch. Diversified scheme for export and import with fewer margins for L/C should introduced by the bank or small entrepreneur to target a different segment to increase volume of export and import. Efficient and attractive marketing appearance of the bank in the printing media and electronic media would also increase knowledge of people about foreign trade. This is very much useful for increase transactions in foreign exchange department of this bank. Tight rules and requirements for opening currency account should be relaxed and make it easy and simple. EXIM Bank should change its policy regarding foreign currency transaction. It should increase its foreign currency transaction from 10% to at least 30% of its total foreign exchange transaction to complete with other banks. To earn more exchange gain, the bank should change its risk adverse policy. By charging lower commission this bank can increas3e the volume of transaction related to DD, TT, and TC and thus can improve its volume of foreign remittance. Appointment of sufficient and well-trained employee in foreign exchange department would help the branch to perform better. Commissions income occupies the major part of the total of a bank and banks profitability mainly depends on commission earning capacity, so bank should establish a research and development cell for the purpose of introducing an efficient foreign exchange department.

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4.1 Viewpoint:
In recent years, the foreign exchange business of Export Import Bank of Bangladesh Ltd, is increasing at a faster rate. Exim Bank rendering a stable support to the national foreign exchange business. Although the foreign exchange business loading day by day there are also some obstacles around I they are as per observation:

The EXIM Bank Ltd, patho poth branch is not AD (Authorized Dealer) branch, so while opening a L/C its required to contact with the Nawabpur branch, which is an AD branch of EXIM Bank. EXIM bank does not provide assistance in relation with foreign exchange to the small entrepreneur. Small entrepreneur has to keep higher margin sometimes 100% regarding opening a L/C. It mainly gives facilities foreign exchange services to the big shots. As a result their services are not diversified in to the small-scale portfolio. This may cause high financial loss in future. Lack of enthusiastic scheme or export & import. EXIM Bank performance in volume o export and volume of import are improving year by year but compare to other private banks like South-East Bank Ld, DutchBangla Bank Ltd, and NCC Bank Ltd, it secure second position Banks performance in letter o guarantee is improving year by year from 2002 to 2006 but it secure lowest position compare to other private bank taken on account. The marketing strategy adopted by the bank is effective but not efficient. The appearance of the bank in the printing media and electronic media has become a matter o fortune Foreign currency deposit was increasing year by year from 2002 to 2005 but had 13.3 negative growths in the year 2006. It secures lowest position in comparison with other banks. Volume of exchange gain of this bank in improving but South-East Bank Ltd doing better than EXIM Bank. Bank performance in foreign remittance business was unstable in the year 2002 to 2005 but it is highest in the year 2006. Compare to other bank it is very much poor. I think most profitable and difficult sector of bank is its foreign exchange department. But in this branch there are not sufficient employees to handle its huge activities. There is no research and development cell to research and case study.

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4.2 Conclusion:
I have reached a firm and concrete conclusion in a very confident way. The bank has succeeded in achieving more customer than many other competitors. In my study I have found that Exim Bank Limited, Satmosjid Road Branch has reached this position by its excellent customers service, commitment, peoples love and dedicated human resources. Exim Bank Ltd. Bank is the largest organization of mobilizing surplus domestic savings. The study focuses on overview of overall banking of EXIM Bank Ltd. Financial has been measured in terms of some selected criteria such as; Deposit accounts, Investment accounts, Authorized Capital, Paid capital, Reserve position, Scope of providing services, Work forces, Total income, Expenditure, EAT, Dividend per share, Total Asset and fixed asset. In terms this criteria it has been found that the EXIM Bank Ltd has in a very good touch in all these criteria except fixed asset and dividend per share which is not satisfactory. Success in the banking business largely depends on effective lending. The more the income from credit operations the more will be the profit of the EXIM Bank Ltd. and here lays the success of credit financing. This department is driving the bank from the front. Through the import, export and foreign remittance operations, this department is making a great contribution to the bank and the economy as a whole. If it is said that this department of the bank is running according to all of the ideal principles of modern foreign exchange business mentioned in the book, it will be exaggerated. Despite problems and weaknesses, it is driving the bank from the front. With an easy to understand operating guidelines, transparent operating procedure and a tem of highly knowledgeable and proficient personnel, this department is expanding and excelling itself day by day. From analyzing all the ratios of EXIM Bank Ltd. I find that the activities and its associated requirements and results are significant comparing the certain standard level that means the bank is able to maintain the requirements of a good bank. Its EPS is increasing gradually year after year and the amount of EPS is significant with the standard average. EXIM Bank Ltd. is adequately capitalized because it holds required amount of capital against various risk weighted assets. The banks net income is also insignificant level because ROA and ROE of the bank which are the major indicators of earning of a bank are up to the mark. The other ratios are also well associated with the standard of industry average. In totally EXIM Bank Ltd. is performing its activities maintaining all the standard average which will be able to retain all its clients, shareholders, stockholders and will encourage them to invest in the bank. During the course of my practical orientation I have tried to learn the foreign exchange banking activities to realize it with my theoretical knowledge, which I have greathearted and going to acquire from various courses of my BBA program.

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4.3 Bibliography:
1. 2. 3. 4. 5. Annual General Meeting (AGM) Report 2005. Prospectus of EXIM Bank. Several Booklets from EXIM Bank. Several Reports from EXIM bank library. Uniform Customs & Practice for Documentary Credit (UCPDA 500, 1993 revision). 6. (as on 22/10/2013) 7. (as on 22/10/2013) 8. Annual reports of 2011 and 2012. 9. Scott Besley, Eugene F. Brigham, 10. Essentials of Managerial Finance, Twelfthedition, Dryden, Orlando John V. Lesiker. 5. Strategic Management- concept and Cases (Ninth Edition). Arther a. Thompson, Jr A. J. Strickland. 6. Principles of Management (Eighth Edition). Terry and franklin. 7. Principle of Marketing (Millennium Edition). Philip Kotler. 8. Design and operation of Customer service System. Paul S. Bender. 9. Foreign Exchange and Financing of Foreign Trade. Syed Asraf Ali. 10. Business Accounting- 1 (Sixth Edition). Frand Woods. 11. Banking Theory and practice.

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4. 4 Appendix:
1 Net Interest margin = Interest income Interest expense/ total asset Year 2012 2011 (TZS Millions) 81,805 - 38,644/ 912,706 63,396 - 24,839/ 807,120 Result 0.0472 0.0477

2 Net non interest margin = Non interest revenue Non interest expense/ Total asset Year 2012 2011 (TZS Millions) 15,218 168 / 912,706 13,437 72 / 807,120 Result 0.0164 0.0165

3 Earning Per Share = Net incomes before tax/ Number of ordinary shares outstanding Year 2012 2011 (TZS Millions) 15,809 /12,900,000 19,114 /12,900,000 Result 0.0012 0.0014

4 Revenue to Income ratio = Total operating income/ net income after tax Year 2012 2011 (TZS Millions) 19,139 / 12,936 18,438 / 14,072 Result 1.479 1.310

5 Cost of funding assets = Total interest expense/ Total asset Year 2012 2011 (TZS Millions) 38,644 / 912,706 24,839 / 807,120 Result 0.042 0.030

8 Return on Equity = Net incomes available to shareholder/ Common equity Year 2012 2011 (TZS Millions) 19,139 / 107,962 18,438 / 88,823 Result 0.177 0.207

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9. Return on Asset = Net income/ Total asset Year 2012 2011 (TZS Millions) 19,139 /912,706 18,438 /807,120 Result 0.020 0.022

8 P/B.V Ratio = Book value per share= Common equity/outstanding shares Year 2012 2011 (TZS Millions) 107,962 / 12,900,000 88,823 / 12,900,000 Result 0.008 0.007

9 TIE ratio = EBIT / Interest Charges Year 2012 2011 (TZS Millions) 15,809 / 38,644 19,114 / 24,839 Result 0.409 0.769

10 Basic earning power (BEP) = EBIT/total assets Year 2012 2011 (TZS Millions) 15,809 / 912,706 19,114 / 807,120 Result 0.017 0.023

11 Operating efficiency Ratio = Total operating revenue/ Total operating expense Year 2012 2011 (TZS Millions) 1,104 / 40,970 786 / 32,180 Result 0.027 0.024

12 Deposit of operating expense ratio = Interest on deposit/ Total operating expense Year 2012 2011 (TZS Millions) 38,644 / 40,970 24,839 / 32,180 Result 0.94 0.77

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13. Loan Ratio = Total Loan /Total Assets Year 2012 2011 (TZS Millions)
127,261+410,600/912,706 120,833+408,269/807,120

Result 0.58 0.65

14 Interest Expense Ratio = Interest expense / Total Assets Year 2012 2011 (TZS Millions)
38,644 / 912,706 24,839 / 807,120

Result 0.042 0.030

15 Cash ratio = Cash/ Total Assets Year 2012 2011 (TZS Millions)
116,157 / 912,706 84,447 / 807,120

Result 0.13 0.10

16 Deposit to Capital Ratio = Deposit/ Total Capital Year 2012 2011 (TZS Millions)
684,397+76,133/107,962 586,493+83,724/88,823

Result 7.04 7.54

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