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Introduction

:
Bank is defined as a financial institution that collects deposits from various individual and
organizations and provides loans to those who need it. But modern banks do not mean only the
means of collecting and disbursing money to various entities. Rather it provides various services
to various entities which facilitate their business operations. A foreign exchange operation of
banks is one of those services that not only facilitates the business of businessmen but also
contributes to the development of the economy as a whole. Foreign exchange is defined as the
mechanisms by which the currency of one country is converted into the currency of another
country. Foreign exchange is the means and methods by which rights to wealth in a country’s
currency are converted into rights to wealth in another country’s currency. Foreign exchange
department of banks plays significant roles through providing different services for the
customers.
1.1. Background of the Mercantile Bank Limited (MBL):
Mercantile Bank Limited, incorporated on May 20, 1999 and commenced business on June 02,
1999, is now one of the most important entity in the banking industry of Bangladesh. With the
passage of time it has expanded its number of branches and variety of services along with its
core business of taking deposits and granting loans. Now MBL has emerged as a new
commercial bank to provide efficient banking services and to contribute socio-economic
development of the country. Rising trend of the banks profitability over the last 8 years is also
materialized. The MBL is committed to the delivery of the superior shareholders’ value. Foreign
Exchange Department of the bank is one of the most important departments. Now it has become
the backbone of the bank. With the aim to be the ‘Bank of choice’, it is operating in the industry
with a team of devoted personnel to excel both their own career and the bank’s future.
1.2. Origin of the study:
This report is originated as the course requirement of the BBA program under the business
studies faculty of Stamford University Bangladesh. Under this program students of every
department of this faculty must go through an internship program of 3(Three) months duration.
As practical orientation is an integral part of the BBA degree requirement, I was sent by the
department of Finance to take real life exposure of the activities of banking financial institutions
from July 16, 2009 to October 18, 2009.
1.3. Background of the Study:
Mercantile Bank Limited (MBL) is one of the risen Banks in Bangladesh. This year they have
declared 40% dividend to their shareholders. This Bank has already 42 branches located in
different places and also going to establish more branches.
The Internship program is an essential and mandatory of the BBA Program of Stamford
University Bangladesh. After completion of four years theoretical training, I got the opportunity
as a practical exposure to business horizon through internship program. Mercantile Bank Limited
is one of the well- reputed private commercial bank of Bangladesh with paid up capital of BDT

1,798.68 (in million, 2008). Banks strong capital base allows it to make large chunk of advances
to its corporate clients.
My internship supervisor and respected teacher Md. Ifte Kharul Alam, Assistant Professor &
HOD Finance, Department of Business Administration, Stamford University Bangladesh,
assigned me the topic “A study on the Foreign Exchange Operations of Mercantile Bank
Limited.” I hope this report would able to portray the real picture of the operation of foreign
exchange department of Mercantile bank Ltd.
1.4. Rationale of the Study:
This report is broadly organized into two broad parts. The first part (first 3 chapters) is an
overview of the organization itself. The second part concentrates on the assigned topic “A study
on the Foreign Exchange Operations of Mercantile Bank Limited.” Finally it includes the
evaluation of Foreign Exchange performance, findings, and recommendation to make understood
the scope of overall Foreign Exchange with its constraints of MBL.
1.5. Objective of the study:
The objective of the study is to obtain an understanding of the practical banking activities and
relate them with theoretical knowledge that I gained through the theoretical training in the
university and from various documents of the bank. Beside this, the followings are the specific
objectives which I will try to cover in my report:
1.5.1. Primary objective:
The primary objective of preparing this report is to represent the Mercantile Bank Limited and to
have a clear conception about all of the essential parts of the internship program.
1.5.2. Secondary objective:
1. To give an idea about the evolution of the banking business.
2. To give an idea about the evolution of banking in Bangladesh.
3. To give an overview of the current Bangladesh economic scenario.
4. To give an overview of the MBL.
5. To give some idea about the international trade, different types of exchange rates, process of
executing transactions relating international trade, accounting of these transactions, etc.
1.6. Scope of the study:
As I was sent to Mercantile Bank Limited, Main Branch, the scope of the study is only limited to
this branch. The report covers its overall foreign exchange function. The report covers import,
export and remittance activities about MBL. Besides it covers topic such as evolution of banking
business, evolution banking business in BD, Bangladesh economy scenario, background of MBL
has also been discussed.
1.7. Internship at Mercantile Bank Limited:
My Three months at the Mercantile Bank Limited as an internee had been the most enjoyable
time of my life. Doing my internship at one of the leading private commercial banks in

Bangladesh, I believe I have accumulated an experience unmatched to any other.
I was assigned to the project of “A study on the foreign exchange operations of Mercantile Bank
Ltd.” as my project report. I am extremely happy to work in such a project. Though as a student
of finance it was a new situation to me.
For the internship program the contact person of the head office sent me to the Main branch of
the bank. My objective was to get a clear idea about the function of the foreign exchange of the
branch. But my host supervisor sent me first to the Local Export department to have a
preliminary idea and to be acquainted with various types of local export bills and related matters;
I worked there for 60 days and learned the procedure of issuance of pay order, demand draft
(DD), and method of maintaining books for the above mentioned activities. Then I was sent to
the clearing section, of worked there for 20 days and learned how inward and outward checks are
cleared, how transfer delivery from one branch to another branch is made. After that, I was sent
to the IT department of this branch. I worked there for 5 days. Here I learn how to give bank
statement, Tax purpose statement. After that I was sent to the export section of the foreign
exchange department of this branch. I work there for the rest of the period of my internship
program. In the export section I mainly observed the export procedures, files and documents of
different exporters, export proceed collection procedures and compliance of export procedures
with the set rules of export policy and Bangladesh bank rules. Actually this period was my area
of concentration and activities of this period is mainly focused in my report. I extended my best
effort to collect as much information as possible to prepare my report. The working environment
of this division of the Mercantile Bank Limited is conductive and friendly. The staffs are
specialized in their respective fields. Each of them works on their own and there is supervision
from the top. The motivation of the staff, I believe comes from the very sense of responsibility
for his or her work.
1.8.Limitations of the study:
On the way of the study, I have faced the problems that are given below that may be terms as the
limitation or shortcoming of the studyShort Time Period:
The first obstruct is time itself. Due to the time limit, the scope and dimension of the study has
been curtailed. For an analytical purpose adequate time is required. But I got a short time period
to prepare the report.
Data Insufficiency:
It was very difficult to collect data, because the branch of Mercantile Bank Limited is very large.
But the data is very essential to prepare the report. All of the employees of this branch are very
busy. For the time limitation they could not able to supply my topic related data.
Lack of Records:
Sufficient books, publications, facts and figures narrowed the scope of accurate analysis. If this
limitation were not been there, the report would have been more useful and attractive.
Poor Library Facility:

The over all process of methodology is given in the following page in a form of flow chart that has been followed in the study. C. interpreted and presented in a systematic manner and key points are to be found out. To meet up the need of data primary data are used and study also requires interviewing the official and staffs were necessary. . That’s why inexperience creates obstacle to follow the systematic and logical research methodology. B. I do such kind of research activity for the first time. The report also required secondary data. i) The primary sources are: Face to face conversation with the officers.Most of the commercial banks have its own modern. Relevant books. Publications of Bangladesh Bank (BB). Practical desk work. etc. But the library of Mercantile Bank Limited is not well ornamented and decorated. case studies. journals. papers. assignment etc. Publications of BIBM. journals. Annual Reports of Bangladesh Bank (BB). To perform the study the data sources are to be identified and collected. Information kept by branch manager. term papers. rich and wealthy collection of huge and various types of banking related books. Methodology of the study: The study requires a systematic procedure from selection of the topic to final report preparation. they are to be classified. Information collected to furnish this report is both from primary and secondary sources. Identifying data sources: Essential data sources both primary and secondary are identified which will be needed to complete and work out the study. Foreign exchange of MBL. ii) The Secondary sources are: Annual reports of MBL. analyzed. Lesser Experience: Experience makes a man efficient.9. The reports are an exploratory research and for qualitative survey open ended question were ask to the Bank official. 1. Collection of data: Primary data are collected by using interviewing technique. Office circulars of MBL. Periodic reports of MBL. Publicly published documents. magazine. MTO recruitment materials of MBL. operations manager in their own files. Relevant files study as provided by the concerned officers. newspapers. A. Before assigning the topic it was discussed with me so that a well organized internship report can be prepared. Selection of the topic: The topic of the study was assigned by our supervisor.

Main Branch. is not the result of a short period. there was no surplus production. . Final report preparation: On the basis of the suggestions of our honorable faculty advisor some corrections were made to present the paper in this form. Few recommendations are also made for improvement of the current situation. CHAPTER. If they the person with rice has the need of cloths and the person with cloth needs rice. a cow is not exchangeable for 1 meter cloth. Sample: MBL. Findings of the study: The collected data were scrutinized very well and were pointed out and shown as findings. Evolution of Banking Business: The word bank. This caused a big problem for transaction. metals. one person has some surplus rice and another person has some surplus cloths. which means a financial intermediary that collects deposits from savers and disburses loans to the fund seekers and acts as the principal medium of internal resources mobilization of an economy. F. interpretations and presentation of data: some arithmetic and graphical tools are used in this report for analyzing the collected data and to classifying those to interpret them clearly. Classification. But. This resulted in the introduction of money in the form of stone.D. it has to pass through a very long period. As a result. This lead to the introduction of ‘BARTER SYSTEM’ in which commodities were exchanged for commodities directly. people had to think for a mechanism that would solve these problems and facilitate the transaction process. as the division of work took place in the society. people had to satisfy all of their needs by themselves. analysis.2 Evolution of Banking Business 2. there was surplus as well as deficit production in each society. E. G. bones etc. neither it can be dividable in smaller units. For example. Instead. In the ancient age. 1) Double coincidence of needs: this means the needs of two persons must meet the surplus that they have. But it was difficult.1. 2) Indivisibility of goods: all goods are not divisible and not of same worth. At this stage. For example. only then the transaction will take place. But this transaction system could not last for a long time for some problems such as. Sampling: Population: All the Branches of MBL located in everywhere in Bangladesh has been taken into consideration as population. is the vital sample. Hence the concept of transaction was yet to be introduced.

Day by day. ‘Traces of Credit by compensation and by transfer’ orders were found in Assyria. From here. People started to keep their surplus money and jewelry deposited with them. is full of regulations for governing credit. The book of old Hindu saw giver. Loan banks which lent money to the poor without any interest on the security of land for a period of 3 of 4 years were also common in Rome.. This was the ‘transaction of utmost faith’. He speaks of judicial proceedings credit instruments were called for. so as the concept of bank.After the introduction of money. the history of bank counts. volume and complexity of transactions kept increasing. businessmen were the most honorable and trusted people in the society. on bankers. bankers were called Argentarii. users and even of the renewals of commercial papers. The banking systems of ancient age and the banking systems of modern age are two distinctively separate entities. In ancient Greece and Rome the practice of granting credit was widely prevailed. Babylonians had developed a system of bank. goldsmiths.1: Diagram of evolution of banking business After some time. At that stage. . In Rome. It was the goldsmiths who introduced the ‘deposit slips’ in the history. MANU.C. Some banks carried business on their own account and others were appointed by the Government to receive the taxes. The situations and flaws that resulted the banking systems in the present form are highlighted below: As early as 2000 B. Phoenicia and Egypt before the system attained full development in Greece and Rome. priests. the volume of transactions increased to a great extent. businessmen started to charge some charges on those who took loan from them. They lent this money without any charge to those who needed money. The previous discussion can be presented in the following diagram: Figure 2. interest on loans. People with surplus money started to feel insecure about their money.

In various periods. different countries have different contributions to the banking institutions to appear in the present form. So. established in 1157. In the words of Bagehot. In fact. “It had perpetrated one of those monstrous frauds which are likewise gross blunders”. But Charles II shut down the Exchequer and paid nothing to the goldsmiths. History shows the existence of a ‘Monte’ in the Florence in 1336 the meaning of ‘Monte’ is given in the Italian Dictionary 1959 as ‘a standing bank or mount of money. as early as Vedic period. is supposed to be the most ancient bank. These notes. The bloods of Manu contain references regarding deposits. The evolution of banking institutions became more and more organized as the time passed. speaks about ‘the three banks of Venice’ meaning the three public loans of Monte. the goldsmiths’ notes may be considered as the precursor of the bank note. The goldsmiths used to deposit their reserve of treasure in the ‘Exchequer’ with the sanction and under the care of government. It was not a bank in the modern sense being simply an office for the transfer of public debt. Truly. different amendments were made in different countries throughout the world. The beginning of the English banking may correctly be attributed to the London goldsmiths. They used to receive their customers’ valuables and funds for safety custody and issue receipts acknowledging the same. as they have in diverse cities of Italy’. the ruin of goldsmiths marks a turning point in the history of the English banking. It led to the growth of private banking and the establishment of the ‘Bank of England’.The Bank of Venice. became payable to bearer on demand and hence enjoyed considerable circulation. However. Banbrigge. banking existed in the crudest form. pledges and policy of loans and rates of interest. an English writer. . in the course of time. banking in those days largely meant money lending and they did not know the complicated mechanisms modern banking. In the India. The business of the goldsmiths got a rude shock by the ill treatment of the Government of Charles II. under the Cabal ministry. This is true not only in case of India but also in case of other countries.

1. Bank of Venice 1st Government Bank Italy 1157 .2: At a glance-Evaluation in Banking Institutions in World According to Different Age 2.Figure 2.1. List of some important Ancient Banks: Name of the Bank Place of Year of Establishmen Establishmen t t Shansi Bank Remarks 1st Bank in the World China 600 B.C.

members Central Bank of Owned by private owners but controlled by Govt. incentive Italy 1401 Risk Bank of Sweden Sweden 1656 U.Bank of San Georgio Jointly established by traders Geneva 1178 Bank of Barcelona Established by Govt. 1694 Calcutta 1700 Bank of England 1st Central Bank in the World Hindustan Bank Bank of Prussia 1st commercial Bank in Indian subcontinent 1st Bank in Germany Germany 1765 Bengal Bank Ancient Bank of Indian Continent India 1785 Central Bank of India Ancient Bank of Indian Continent India 1785 France 1800 Calcutta 1806 Bank of France Central Bank of France Bank of Calcutta 1st Precedence Bank of India Bank of Netherlands Netherlands 1814 Norway 1817 Central Bank of Owned by private owners but controlled by Govt.K. Denmark 1818 Central Bank of Owned by private owners Bombay 1840 Bank of Norway National Bank of Denmark 1st licensed Bank in World which issued notes Bank of Bombay 2nd Precedence Bank of India . law.

Bombay The Ban coda Brazil Brazil 1941 Pakistan 1948 Pakistan 1949 State Bank of Pakistan National Bank of Pakistan Central Bank of Japan Owned by both private and Government owners. which was nationalized in 1949 Central Bank of Canada.Bank of Madras 3rd Precedence Bank of India Madras 1843 Reichs Bank Central Bank of Germany Germany 1875 Bank of Japan Japan 1882 Italy 1893 Switzerland 1907 Bank of Italy Switch National Bank Federal Reserve System Central Bank of U. which was nationalized in 1949 India 1935 1st central Bank in Indian Subcontinent. 1941 1st Muslim Bank in Indian subcontinent. Bank of Canada Reserve Bank of India Habib Bank Ltd. Bank of establish in private ownership. 1st Central Bank of Pakistan 1st Commercial and enlisted Bank of Pakistan .A U.A 1913 Impreial Bank of India India 1920 Bank of China Largest commercial Bank of India in the period China 1928 Canada 1934 Bank of establishment in private ownership. which gets right to issue note at 1926 Central Bank owned by both private and Government owners. Central Bank of Brazil owned by both private and Government owners.S.S.

. 2. The law relating to negotiable instruments is not the law of our country or of one nation. a. Private Commercial Banks.1: List of some important Ancient Banks 2. b. raising or taking up money.3. which are in common mercantile use in the monetary instructions. Its prime jobs include issuing currencies. Table 2.2. Nothing of this ordinance shall apply to a co-operative bank registered under the co-operative Securities Act (1912). Specialized Banks / Development Banks and credit agencies. Banking System in Bangladesh: Bangladesh has a mixed banking system comprises of nationalized. Bills of Exchange and Cheques. Nationalized Commercial Banks.2. Such as: 1. c. Central Bank. Banking Companies Ordinances: The Banking Companies Ordinance was promulgated on the 7th June 1962. o The lending or advancing of money either upon or without security. Foreign Banks. Negotiable Instrument Act: The Negotiable Instrument Act.2. Commercial Banks.Eastern Mercantile Bank Chittagong 1959 1st Bank established in Bengali Ownership. maintaining foreign exchange reserve and providing transaction facilities of all public monetary mattes.2. private and foreign commercial banks. It came into force on 1st March 1882.2. Categories of Banks: In our country. 2. This has been adopted in Bangladesh and is applicable to the banking companies only. Main forms of business of Banking Companies o Borrowing. It is the law of the mercantile world in general. 3. 2.1. 1881 is the legislative enactment of the Law relating to three classes of Negotiable Instruments namely: Promissory Notes. o Dealing in securities and investment. Bangladesh Bank (BB) has working as the central bank of the country since the independence of the country. there are four types of banks exists. It consists of “Certain principles of equity usages of trade. BB is responsible for planning and implementing the government’s monetary policy 2. which general convenience and commonsense of justice had established to regulate the dealings in merchants and mariners in all the commercial countries of the civilized world”. o Other business as detailed in section 7.

which helped improve the international reserve position. and lower growth of crop production.3.8 percent. while maintaining a moderate Consumer Price Index (CPI) inflation.6 percent. Bangladesh Samabaya Bank. Inflation was on uptrend during FY07 due mainly to rising import prices of fuel oil. slightly lower than 6. while credit to private sector increased by 15. . remittances from non-resident Bangladesh nationals increased substantially by 24. Economic growth was also aided by increased inflow of workers’ remittances from abroad and reasonable growth in exports.3: Classification of Banks in Bangladesh 2. These policies contributed toward a strong real GDP growth of 6. Figure 2.16 percent in June 2006.5 percent in FY07. dislocation of market structure created by anti-hoarding drive and crackdown on corrupt business houses.20 percent in June 2007 from 7. food grain and some other essentials in the international market coupled with problems in the domestic supply chains like political turmoil in the first half of FY07. while the growth of import payments remained to a sustainable level at 16. At the same time. With a view to achieving higher economic growth. the Bangladesh economy maintained a strong growth underpinned mainly by robust growth in services and notable expansion in manufacturing activities. the Government and the Bangladesh Bank continued to adopt policies to support economic activities to the highest sustainable level. Total domestic credit grew by 14. metal. The country’s external current account balance continued to record a significant surplus with a substantial increase in remittances more than offsetting trade deficit and services deficit. dollar terms.5 percent. Economic Overview of Bangladesh: During FY08 (July 2007 – June 2008). export earnings recorded a moderate growth of 15. while 12-month consumer price inflation on point to point basis increased over the same period to 9. A significant surplus in current account balance and a sharp rise in financial account surplus led to a sizeable surplus in the overall balance.6 percent of FY06. despite facing high and volatile oil prices in the international market.4.20 percent.1 percent in FY07.S. In U.5 percent. Increasing domestic demand induced by high monetary and credit growth added to the uptrend in consumer prices. The annual average inflation increased to 7.

against US$ 5978.1.33% to US$ 8932. 200607.0-5. this was higher than the US$ 4199. 2.59 million against US$ 8023. Fresh opening of import LCs during July-February.3.70 million during July-February. Exports: during July February.52 million reserves as of end March. However. The rate of inflation on point basis. 2006-07.04% to US$ 13387. 2007-08 export increase by US$ 908. decreased to 10.46 million as of end March.20 or 21.90 million compared to US$ 11060.5-6. Import payments & Fresh opening of import LCs: During July-February. 2008 from 11.16 . 2008 due o ACU payment of US$ 733017 million on 6th March.3. IMF also suggested to improve the efficiency of the state owned commercial banks.56 million against US$ 11202. 2008. import payments increased by US$ 2327.2.79 Taka Inflation Index Per Capita Income (2000=100) (as % of USA) 58 1.33 million during July-March. 2.72 million or 11. 2007-08.3. 2008. Due to increase of export and strong Boro harvest.234 35. 2007. 2008. Inflation: The annual average rate of inflation increased to 9. however.5% due to natural disasters and slowdown in economic activities due to factors like anti hording drive and negative growth in export during the first half of the fiscal year.90 million against US$ 4361. Remittances receipts: During July-March.3. 2.In more recent period. the economic situation of Bangladesh is like this: The IMF expects that the real GDP growth of Bangladesh will be possible 5.55% to US$ 5649.3.3.16% in February.0% in FY 08. this reflects only the formal sector of the economy.3.4. 2. 2. real GDP growth expected to be higher than anticipated earlier.70% to US$ 15089. 2007-08 increased by US$ 3887.33 million or 34. Year Gross Domestic Product US Dollar Exchange 1990 1.56% of January. 2006-07. 2. 2008.5.87 million during the same period of the previous year.79 in February.23 million during July-February.6.43% of January.60 million as of end February. The IMF has earlier projected the country’s GDP growth at 5. Gross foreign exchange reserves: Gross foreign exchange reserves of Bangladesh Bank stood lower at US$ 5302. However. 2007-08 remittances increase by US$ 1288057 million or 29.054. 2008 from 9. Macro-economic trend: This is a chart of trend of gross domestic product of Bangladesh at market prices estimated by the International Monetary Fund with figures in millions of Bangladeshi Taka.

2: Macro-economic trend For purchasing power parity comparisons.12 2000 2.3. There has been 18% growth in exports over the last 9 months and remittance inflow has increased at a remarkable 25% rate.3 Overview of Mercantile Bank Limited .97 2005 3.11b $25.438 68.56b $22.4 billion.210 40.594.86 Taka only.5 billion.27 Taka 78 1.205b $8.7% was predicted for FY 2006.913.9b 2008-2009 $15.453. Fiscal Year Total Export Total Import Foreign Remittance Earnings 2007-2008 $14. Export was $10.160 52.68b 2009-2010(Set Target) $17.92 Taka 126 0.003. Target export for current year is $11.1995 1.5% for current year. 2.14 Taka 100 0.6b N/A $10.7.334 63.95 2008 5.3: Economic target CHAPTER.87b Table 2. Foreign aid has seen a decline of 10% over the last few months but economists see this as a good sign for self-reliance. the US Dollar is exchanged at 12.00b+ $9. Average wages in 2008 hover around $2-3 per day.65 Taka 147 - Table2.5 billion in fiscal year 2005 exceeding the target export of $10. An estimated GDP growth of 6. Economic target: World Bank predicted economic growth of 6.

.3. The bank creates wealth for the shareholders. The bank believes in strong capitalization. 2007. Its core lending and deposit taking business have increased significantly. focused for equitable growth based on diversified deployment resources. Rising trend of the banks profitability over the last 8 years is also materialized. With the aim to be the ‘bank of choice’. commerce and industry. Mercantile Bank Limited emerged as a new commercial bank to provide efficient banking services with a view to improving the socio-economic development of the country.2. MBL intends to play more important role in economic development of Bangladesh and its financial relations with the rest of the world by interlining both modernistic and international operations. MBL encourages investors to boost up share market. The bank has some mission to achieve the organizational goals. and nevertheless would remain healthy and gainfully profitable Bank. The Sponsors happen to be members of different professional groups among whom are also renowned banking professionals having vast range of banking knowledge. Mission: Will become most caring. A banking institution is indispensable in modern society. industries and business communities. There are also members who are associated with other financial institutions like insurance companies.90 million taka as on December 31. leasing company’s etc. Some of them are as follows as: Mercantile Bank Limited provide high quality financial services to strengthen the well being and success of individual. MBL commenced formal commercial banking operation from the June 2.00 million taka and the Paid-Up Capital is 1498. Its aim to ensure their competitive advantages by upgrading banking technology and information system. Mercantile Bank Limited aims to become one of the leading banks in Bangladesh by prudence. Mercantile Bank has been incorporated on May 20. flair and quality of operations in their banking sector. Bangladesh as a limited company with the permission of the Bangladesh Bank. It plays a liberalization of economic policies in Bangladesh.The Bank provides a broad range of financial services to its customers and corporate clients. There are thirty Sponsors involved in creating MBL the Sponsors of the Bank have a long heritage of trade. 2007. 3.1. They are highly regarded for their entrepreneurial competence. it is operating in the industry with a team of personnel devoted to excel both their own career and the bank’s future. The MBL is committed to the delivery of the superior shareholders’ value. The Board of Directors consists of eminent personalities from the realm of commerce and industries of the country. Mercantile bank Limited continued its expansion program during the year ended as on December 31. 1999. An Overview of Mercantile Bank Limited : Banking system occupies an important place in a nation’s economy. 1999 in Dhaka. The bank stood 15 branches all over the country up to 2001. The Authorized Capital of the Bank is 3000.

4.2. • To be market leader in product innovation. Financial Objectives: • To achieve a return on shareholders’ equity of 20% or more. Business Philosophy of MBL: The philosophy of MBL is not to ‘Carry coal to the new castle’.3.2.2. For the community: Strengthening the corporate values and taking environment and social risks and reward into account. The bank creates wealth for the shareholders.2.1.1 Vision: “Would make finest corporate citizen.2.1. 3.2. 3.2. Objectives: 3. 3.2. Strategic Objectives: • To achieve positive Economic Value Added (EVA) each year. For customers: Providing with caring services by being innovative in the development of new banking products and services.2.3. which attracts the customers to choose them first. 3.2. It has created a cadre of young professionals in banking profession which has helped boosting productivity in the bank.It maintains high standard of corporate and business ethics.2. 3. on average.4. 3. Mercantile Bank Limited extend highest quality of services.2. MBL dreams to become the bank of choice of the general public that includes both the consumer and the corporate clients.3. The bank intends to meet the needs of their clients and enhance their profitability by creating corporate culture. For Shareholders: Maximizing wealth of the bank.2. • To be one of the top three financial institutions in Bangladesh in terms of cost efficiency.2.3.3. . • To be one of the top five financial institutions in Bangladesh in terms of market share in all significant market segments we serve. For the employees: Respecting worth and dignity of individual employees devoting their earnings for the progress of the bank.3. Core Values: 3. 3.2. 3.” is the main vision of MBL. The bank maintains congenial atmosphere for which people are proud and eager to word with Mercantile Bank Limited. Mercantile Bank Limited intend to provide better benefits to their customers and good returns to their shareholders.

Dilute Commercial Area. issuing guarantees.2. Letter of Credit (L/C) commissions and other charges are very lower than the other banks. October 21-22. 01711-535960 mbl@bol-online.7. 2003 February 16. Dhaka. making loans and advances. Banking operations of the all branches of Mercantile Bank Limited have been computerized to provide the promptly & frequently customers service. which include deposits. Mercantile Bank Limited provides attractive interest rate than the other financial institutions. The bank is responsible to maintain the social duties. 1999 June 02.5.3. Abdul Jail Dean Manipur Raman 1104 . 3. 1999. collections. The inner environments of the all branches of Mercantile Bank Limited are well decorated. conducting money transfer and foreign exchange transactions and performing other related services such as safe keeping. 3. which is not available in any other banks. The bank has established correspondent relationship with 102 of foreign banks. Nature of business: Mercantile Bank Limited offer services for all banking needs of the customers. The bank provides loan to the customers at lower interest with easy & flexible condition than the other do. 2004 February 26. 2004 61. Features of Mercantile Bank Limited: There are so many reasons behind the better performance of Mercantile Bank Limited than any other newly established banks: Mercantile Bank Limited has established a core Research & Planning Division comprising skilled person from the very inception of the bank.2.com Md. Corporate information at a glance: Name of the Bank Status Date of Incorporation Date of Commencement Subscription for Shares Listed in Dhaka Stock Exchange Listed in Citation Stock Exchange Head Office Phone E-mail Website Chairman Managing Director Number of Employees Mercantile Bank Limited Public Limited Company May20. The bank has launched some financial products.2. Profit earning is not the main aim of the MBL.com www. The bank frequent arranges customers meeting to achieve their valuable suggestions. acceptances and letters of credit. like Ajebon Pension Scheme.6.mblbd.1000 +880-2-9559333. discounting bills. The bank is committed to provide the cherub amount within 30 seconds of submission the cherub. Highly qualified and efficient professionals manage the bank.

3.4. Islami Bank Bangladesh Limited and Prime Bank Limited. provides strategic planning and supervises business and performance of management while the Board remains accountable to the company and its shareholders. Board Committees of MBL: Board of Directors who also decides the composition of each committee determines the responsibilities of each committee. Md. Mr.2. formulates policy guidelines. Composition of the board: Board of Directors. Sonali Bank. Ownership Structure: The Board of Directors consists of eminent personalities from commerce and industry of the country.com 3. 3. The chief Executive officer of the Bank is Mr. The last Government had been pleased to induct him as a Senior Cabinet Minister with the portfolio of Commerce.Number of Branches 42 Table 3. is a businessman besides being an eminent personality of the country. Lutfar Rahman Sarkar who born in 1935. the apex body of the Bank. The Bank is manned and managed by highly qualified and efficient professionals. . M.1. initiated his banking carrier from Habib Bank Limited as a provisionary officer.3. subject to rectification by the Board of Directors.1: General Information of MBL SOURCE: www. He brings with him a wealth of experience of managing both the public and private sector banks. Abdul Jail. Taheruddin who has rich experience of managing both the nationalized and the private sector banks as Managing Director. Then he served as Managing Director in Agrani Bank.3.mblbd. The Board is assisted by the Executive Committee and Audit Committee. The Chief Adviser of the Bank is the former Governor of the Central Bank of Bangladesh. Executives Committees of MBL: All routine matters beyond delegated powers of management are decided by or routed through the Executives Committee.3. 3. Mr. the founder Chairman of the Board of Directors.

Authorized Capital: .5. Capital: 3.5. Capital & Reserves: 3.1.1.1: Composition of the board SOURCE: Adapted from MBL’s Annual Report 2008 3.1.Figure 3.5.

Paid up Capital: Paid-up Capital of the bank was BDT 1498. Year Taka(BDT in million) 2006 1199.983 ordinary shares of BDT 100 each as of December 31.2: Authorized Capital Source: Audited annual report of MBL.90 million of 14. 2008. 3.00 million of 30.988.3: Paid-up Capital Source: Audited annual report of MBL. 2008.2.00 2008 3000. Year Taka(BDT in million) 2006 1200.000.798. .5.00 Table 3.12 2007 1498. 2008.The authorized capital of the bank was BDT 3.90 2008 1.68 Table3.000 ordinary shares of BDT 100 each as of December 31.00 2007 3000. 2008.1.000.

496.729. Milestones in the development of the organization: .6. 3.2.3. 2008.402 2008 966.2.864.249 Table3.4: Statutory Reserve Source: Audited annual report of MBL.5.2.5.5. 3.902 Statutory Reserve: Table 3.038.2. Other Reserve: Year Taka(BDT in million) 2007 24. 2008.1 Year Taka(BDT in million) 2007 726. Reserve: 3.5: Other Reserve Source: Audited annual report of MBL.349 2008 161.

7.Figure 3. Management Structure of MBL: Organization Chart of Mercantile Bank Limited .2: Milestones in the development of the organization SOURCE: Adapted from MBL’s Annual Report 2008 3.

Risk Management: 3. They are exposed to credit risk through traditional lending activities and transactions involving settlements between their counterparts. • Objectives [[ Maintain a well-diversified asset portfolio within approved risk tolerance levels and earn a return appropriate to the risk profile of the portfolio.8. Credit Risk: Credit risk is the potential that the borrower may not repay or fails to repay his/her debt obligation. • Approach .3 : Management Hierarchy SOURCE: Adapted from MBL’s Annual Report 2008 3.1.Figure 3.8.

8.Bond . Particulars Rate Sensitive Assets (RSA) Rate Sensitive Liabilities (RSL) Repricing Gap (RSA-RSL) Repricing Gap as % of Total Assets For 100 basis point increase in interest rate Volume 17656. Reprising Gap over 12-month period stood at positive BDT 4251. In the position. In addition.76 million as at Dec 31. measure. They are exposed to market risk when they enter into the following transactions: Loans and Advances (LDOs) Deposit with other Banks . Credit Management Committee provides and independent assessment of all significant transactions. Their Audit and Inspection Division also reviews management processes in order to ensure that establish credit policies are followed. which is within the international standard of 20%. • Approach They have established Asset Liability Committee (ALCO) to monitor their market risk activities. Market Risk: : Market risk is the potential for loss from changes in the value of financial instruments. The primary risk measurement methodology is Repricing Gap and its sensitivity to interest rate changes.Investment . The value of a financial instrument can be affected by changes in interest rates. However. monitor and report all market risk-taking activities.80 4251.Shares Foreign Exchange Positioning • Objective Identify. 3.2. 2008. Reprising Gap as percentage of total assets stood at 14.72%. the Net Interest Income (NII) of the Bank may increase by BDT 42. foreign exchange rates and equity and commodity prices. the NII of the Bank will go down by BDT 42. in case of 100 basis point decease in interest rate.76 14.Treasury Bills .52 million.Skill appraisal officers first evaluate credit transactions for commercial and corporate loans. and a concurrence form this function is usually required to make a lending commitment to a customer.52 . ensuring that exposures remain within approved risk tolerance levels and that the return from market risk activities is acceptable. Credit Management Committee performs periodic reviews of significant and higher risk transactions.72% 42.52 million in case of 100 basis point increase in interest rate.56 13404.

52) Table 3.8.  Approach Their approach to liquidity management is to project liquidity requirements based on expected and stressed economic.2. political and enterprise-specific event. debt maturities and commitment to provide credit.For 100 basis point decrease in interest rate (42.4: Liquidity Risk Source: Annual report 2008 Mercantile Bank Limited.  Liquid Assets =Cash + Balance with Bangladesh Bank + Deposit with other Banks+ Money at Call and Short Notice + Investments.Their large based of scheme deposits form individuals and strong capital positions provide a long-term stable source of funding. without having to raise funds at unreasonable prices or sell assets on forced basis. Liquidity Risk: Liquidity risk is the risk that the Bank may fail to meet is obligation due to short of cash and/or cash equivalent assets.6: Repricing Gap: 2008 3. core deposits as percentage of total deposits and net liquidity gap. The primary risk measurement methodology is to monitor liquid asset ratios. market.  Objective Main sufficient liquid assets* and finding capacity to meet their financial commitments. under all circumstances. . This enables them to ensure that they have sufficient funds available to meet their financial commitments even in times of crisis. Funds encompass both liquid assets on hand and capability to raise additional funds. deposits mix. This situation may arise in the case of withdrawal of deposits. Figure 3.

While operational risks can never be eliminated. Credit Rating Report on MBL by CRISL: Mercantile Bank Limited has been rated by Credit Rating and Information Services Limited (CRISL) on the basis of Financial Statements as on December 31.8. 2007. Our strategy is to maximize our ability to manage and measure operational risk through implementation of a framework that takes advantages of the best practices in the industry. we have established a well-formulated framework that uses the strengths and specialized knowledge of our lines of business. 3.3. capital adequacy. The summary of the rating is presented below: Credit Rating and Information Services Limited (CRISL) has upgraded the rating of Mercantile Bank Limited to ‘A’ (pronounced as single A) from ‘A-’ (pronounced as single A minus) in the Long Term and ST-2 for the Short Term from ST-3. CRISL has disclosed the said rating on March 9. mitigated and in some cases insured against to preserve and create value.  Approach Operational risk is managed through the establishment of effective infrastructure and controls.8. To this end. and the management of these risks is important to the achievement of organizational goals. 2008. people and systems or from external events. The up gradation has been done in consideration with its financials such as improvement in asset quality.5. these can be managed.  Objective Operational risk is inherent in all business activities.3. Operational Risk: Operational risk is the risk of loss resulting form inadequate or failed internal processes. stable source of .

devotion and dedication on the part of the employees. The long-term rating is valid for only one year and short-term rating is for six months. to Mercantile Bank Foundation every year. Financial institutions rated in this category are adjudged to offer adequate safety for timely repayment of financial obligations.00 million. Human Resources Development: In today’s competitive business environment.fund. In the face of today’s globalization. The short-term rating indicates high certainty of timely payment. a high level of loyalty and commitment. The Bank contributes 1% of operating profit or Tk. 3. The Foundation has been established with following objectives: .4. easy access to capital market and risk factors are very minimal. whichever is higher. the quality of human resources makes the difference. The Bank evolves human resources development strategy with a view to ensuring good working environment. good company fundamentals. diversified product lines etc. 3. the Bank envisages to develop highly motivated workforce and equip them with latest skills and technologies.9. strong liquidity factors.9. The Bank’s commitment to attract high quality persons to work for it is reflected in the efforts of the Bank.1 Mercantile Bank Foundation: The Bank has set up Mercantile Bank Foundation for extending benevolent services to the society.

Bengali Language and Literature.  Project for the development of shelter-less children. The Third Branch was opened at Kawran Bazar. 3. Research on Liberation War and Industry and Commerce.10. Science and Technology. Branch expansion: The Bank commenced its business on June 02. .  Donation for handicapped artists. The Second Branch was opened at Dhanmondi Residential Area. Education and Culture.  Interest free education loan for the meritorious but poor students  To conduct research on Bengali language and literature. Mercantile Bank Prize to 8(eight) eminent personalities of the country for the outstanding contribution in the fields of Economics and Economic Research. The Fourth Branch was opened at Agrabad. Sports. The First branch was opened at Dilkhusha Commercial Area in Dhaka on the inauguration day of the Bank. 1999. Dhaka on September 06. Journalism.  Interest free Loan to the unemployed educated people.  Book purchase and Distribution Policy to encourage writers and publishers of the country. Dhaka on August 04. 1999. 1999. literature and distressed people.

. the total number of branches stood at 42 at the end August of the year 2009. Now.Citation on November 06. 1999.

06. Bangladesh Tel: +880-2-9559333. 02.Figure 3. Main Branch Dhanmondi branch Kawran Bazar Branch Agrabad Branch Joypara Branch Banani Branch Rajshahi Branch Naogaon Branch Sylhet Branch Address Dhaka Dhaka Dhaka Citation Dhaka Dhaka Rajshahi Naogaon Sylhet . 08. 03.com Branch Network Name 01. Head Office and Branch Network: Head Office 61. Dilute Commercial Area Dhaka-1000. 09.mblbd.1.10.com Website: www. 01711535960 Fax: +880-2-9561213 Telex: 642509 MBLID BJ E-mail: mbl@bol-online.5: Branch Network of Mercantile Bank Limited 3. 05. 07. 04.

7: Branch Network SOURCE: Adapted from MBL’s Annual Report 2008 . 27. 17. 13. 25. 18. 31. 39. Board Bazar Branch Nayabazar Branch Khatungong Branch Mohakhali Branch Mirpur Branch Ashulia Branch Uttara Branch Jubilee Road Branch Elephant Road Branch Motijheel Branch Madam Bibir Hat Branch Khulna Brach Rangpur Branch Satmasjid Road Branch Jhilongja Brach O R Nizam Road Branch Bogra Branch Chowmuhani Branch Konabari Branch Gulshan Branch Feny Branch Moulobhi Bazar Bijoynagar Mogbazar Branch Sataharnagar Branch Hemayetpur Branch Sapahar Branch Beanibazar Branch Barisal Branch Bhojeshwarbazar Branch Comilla Branch Green Road Branch Sheikh Mujib Road Branch Gazipur Dhaka Citation Dhaka Dhaka Savar Dhaka Citation Dhaka Dhaka Citation Khulna Rangpur Dhaka Cox’s Bazar Citation Bogra Noakhali Gazipur Dhaka Feny Sylhet Dhaka Dhaka Naogaon Dhaka Naogaon Beanibazar Barisal Shariatpur Comilla Dhaka Citation Table 3. 36. 30. 20. 26. 16. 29. 11. 41. 12. 40. 32.10. 35. 24. 34. 14. 33. 15. 28. 38. 37. 19. 23. 42. 22. 21.

2. Issuance of DD/TT/PO/FDR. Manpower is sufficient in the branch but there is no information booth for customer information. So as a new private bank. the people are mostly courteous. IT Section. Account opening and KYC procedures. Main Branch. An Overview of Main branch: The main branch of Mercantile Bank Limited is located in the Motijheel commercial area. Credit Proposals Processing Procedures.3. Documentation and Loan Disbursement Procedures. Credit Department: 1. Foreign Exchange Department General Banking & Deposit Management: 1. 4. 2.The total number of the senior vice president is 10. The total manpower of this branch is 118. friendly in nature and eager to help despite the tremendous workload.As it is the main branch of the bank.1. OBC/IBC.11. Credit Department 3. 3. General Banking & Deposit Management 2.12. Mercantile Bank Limited is running steadily. Department of Main Branch:  General Banking Division  Credit Division  Foreign Exchange Division 3. Interbank Transaction. Clearing Section. Account section. 5.11. 3. In the Mercantile Bank Limited. 6. the customer appearance in the bank is very high. . Divisions of MBL: 1.

6. 5. Opening of BTB L/C (Local/ Foreign/ EDF/ EPZ). 4. 8. I. . Follow-up. B/E Matching. Cash L/C 1. IMP Reporting. B/E Matching. II. 5. III. Scrutinizing/ Negotiation/ Send on Collection. Export L/C Checking. BTB L/C 1. Payment against Import Bill. 1. Lodgment and confirmation of maturity date. Lodgment of Import Bill. Foreign Exchange Department: 1. Export 1. 2.3. Opening of L/C. 2. Reporting. 3. Payment against realization of Export Proceeds/ Forced Loan. Allowing of PC. 2. 4. 3. Overview on all returns. 7.

13. Foreign Remittance Inward FDD. The bank is proud to have exemplified the true concept as ‘Banglar Bank’.  Explore investment opportunities for school. Deposit Schemes a) Family Maintenance Deposit (FMD): Objectives:  Help the retired persons for investing their retirement benefits. FTT. university etc. 1. 4. Among them are: 3.  Create investment opportunities for Non-Resident Bangladeshi. It is banking for the people to fulfill their needs conceptualizing product and services to meet their aspiration and expectations. Education/ Treatment/ Others. 3.1. FC issuing. . IV. 3. 2. 5. Endorsement of Traveling.3. Services Offered by MBL: The Bank does believe that it has differentiated itself from other banks through its products and services. Outward 1. college. Realization.13. Reporting. 1. The Bank launched several financial products and services since its inception. 4. Others. Cash Rebate. 2. FDD/ FTT etc.

00 or it’s multiple.  Saving for rainy days.  Attract small savers. Benefits: Amount in TK Period Monthly Installment 250 500 Benefits 1.50.000 2.  Depositor will get a certain sum of money in each month proportion to his/her deposit during the entire tenure.000 Table3. Mode:  Deposit a fixed amount of money for 05 (Five) years. Deposit 1.000 Monthly Benefit (Amount in TK. 000.000 3. Foundation etc.) 1.8: Deposit under Family Maintenance Deposit (FMD) scheme B) Monthly Savings Scheme: Objectives:  Build up habit of savings.00.000 3.00. Give investment opportunities for Trust.000 2. Benefits:  Tenure of deposit is 05 (Five) years.000 .00. Mode:  Monthly installments of various sizes.  Minimum amount of required deposit is TK.

07.750 3.30. Monthly Installment 500 1.250 3.00.000 2.000 2.125 6.000 Period 5 Years 8 Years 10 Years 82.250 2.06. customer has to deposit a fixed amount of money for five years and in return he will receive benefits on monthly basis.500 One time 1.750 57.5 Years 8 Years 10 Years 20.000 5.000 4.23.500 1.35.000 13.500 11.000 4.45.000 Monthly Installment 1500 2500 Benefits 1.  One person can deposit a certain sum in every month for certain tenure and after that period he/she can get monthly income. e) Quarterly Benefit Deposit Scheme: .75.250 One time 80.250 40.000 5.000 6.75.250 4.  Helps to meet monthly expenses after certain period of time.03.000 1.000 8.15.625 41.500 2.500 8.375 80.500 1.50.9: Deposit under Monthly savings scheme c) Pension & Family Support Deposit (PFSD): Condition:  Provides monthly income for retired person.150 2.60.70.12.000 Table3.300 5.10: Monthly Installment of Pension & Family Support Deposit (PFSD) d) Monthly Benefit Scheme: Under this Scheme.500 5.50.750 2.61.42.000 15 Years 10 Years Pension per month 625 1.000 Pension 1. Benefits start right from the first month of opening an account under Scheme and will continue up to five years when the depositor will get refund of his deposit.00.750 11.000 Table3.

000.000 .000 100.00 7.  Deposit becomes double in six years.000.5 years).5 Times Benefit Deposit Scheme g) Double Benefit Deposit Scheme: Objectives:  Give maximum benefit.00 1.000 Period 6 Years Amount Payable 2. Mode:  Tenure of the deposit is 06(Six) years.00 Table3.5 Times Benefit Deposit Scheme’ a deposit of minimum BDT 50.00.000 6.5 Times Benefit Deposit Scheme: Under the ‘1.00.00 1.00.50.00 (fifty thousand) or its multiples will be received for a period of 42 months (3.000 Table3. Example Initial Deposit (BDT) 50.000 Term 3 Years 3 Years 3 Years Quarterly Benefit Payable (BDT) 1.000.000.000 200.000. On maturity after 42 months.  Help in meeting specific needs like education.000.00 (fifty thousand) or its multiples.5 times of the deposited amount will be paid back to the account holder as per example given below: Example Initial Deposit (BDT) 50.50.The ‘Quarterly Benefit Deposit Scheme’ will be maintained for a period of 3 (three) years and the minimum amount of deposit is BDT 50.11: Initial Deposit under Quarterly Benefit Deposit Scheme f) 1.00 5.00 Return after 42 months (BDT) with benefits 75. 1. Amount of Deposit 1.000.00. marriage etc.500 3.12: Deposit under 1.000.

00.000 the period is two years. Objectives:  Help fixed-income people for buying household durable. computer and other consumer durable.  Interest rate will be charged quarterly rest.13.00.13: Deposit under Double Benefit Deposit Scheme h) Special Savings Scheme: Under this Scheme. Deposit 1. Credit Schemes: a) Consumer Credit Scheme: Consumer Credit is a relatively new field of collateral-free finance of the Bank. Terms & Conditions: .00 or it’s multiple.  Minimum deposit shall be Tk.00. People with limited income can avail this credit facility to buy household goods including car. depositor’s money will be more than three times in ten-year period. Benefits:  Triple of the amount deposited after 15 years. marriage etc. 000.000 Table 3.Table 3.14: Deposit under Special Savings Scheme 3.  For the amount up to Tk. Mode:  Deposit a fixed amount of money for any period up to 15 (Fifteen) years. Objectives:  Help in meeting specific needs like education.50. 1.000 Period 15 Years Amount Payable at Maturity 3.2. The main attraction of this Scheme is depositor can get his money back after one year and onwards with attractive benefits.

000.00 Special Feature:  The loan amount is directly credited to the customer’s account. Objectives:  Extend credit facility to small shopkeepers.25% per year on outstanding balances  Application Fee BDT 200. b) Small Loan Scheme: This Scheme has been evolved especially for small shopkeepers who need credit facility for their business and cannot provide tangible securities. Mode:  Maximum amount of loan Tk.00%  Risk Fund 1.50 Lac  Repayment period 3 years  Interest rate will be charged at quarterly rate c) Lease Finance: .00. 2.00%  Service Charge 0.00. The present maximum range of loan under the Scheme is Tk. Interest Rate 16.00  Loan Limit BDT 2.00%  Risk Fund 1.000.00%  Supervision Charge (per year on outstanding balances) 0.  Interest Rate 16. 2.25%  Application Fee BDT 200.  Give collateral-free credit.

 Help experienced doctors for refurbishing chambers and buying medical equipment. Terms & Conditions:  Lease period 3 to 7 years  Lease rent @ 16.00%  Service Charge 0.25% per year on outstanding balances. Terms and conditions of this credit have been made easier than before in order to help the potential entrepreneurs to acquire equipment of production and services and repay the liability gradually from earnings on the basis of “Pay as you earn.  Collateral: Landed property. ICB Unit Certificate etc. or post-graduate doctors for setting up chambers and buying medical equipment. clinics and hospitals on easy terms.This has been designed to assist and encourage the genuine and capable entrepreneurs and professionals for acquiring capital machinery. Objectives:  Help new F.” Objectives: Assist and encourage entrepreneurs for acquiring capital machinery. medical equipment. which may help them to be economically self-reliant.  Interest rate will be charged quarterly rest.S. computers and other items.00%  Risk Fund 1. Bank Guarantee. automobiles etc.  Assist private clinics for acquiring modern medical equipment. d) Doctors Credit Scheme: Doctor’s Credit Scheme is designed to provide financing facilities to doctors. Security:  Primary: Ownership of fixed items. Terms & Conditions: . medical equipment.C.P.

 Equity 1.  Terms & Conditions:  Group Formation 1.  Enhance the purchasing power of rural people.  Initiative to break the vicious cycle of poverty. 1. 1 group leader 3.00%  Repayment period 5 years. For experience ddoctor15% 3. Objectives:  Raise the standard of living of rural people. For new doctor10% 2. 30 people in a group 2. Clinic and Diagnostic Center 20%  Interest Rate 16. e) Rural Development Scheme: Rural Development Scheme has been evolved for the rural people of the country to make them self-employed through various incomes generating activities.00%  Risk Fund Tk.. This Scheme is operated through the rural branches of the Bank. 1 sub-group leader in each sub-group f) Women Entrepreneurs Development Scheme: . 6 sub-groups consisting 5 person each in a group 4. For Hospital.

Women Entrepreneurs Development Scheme has been introduced to encourage women in doing
business. Under this Scheme, the Bank finances the small and cottage industry projects
sponsored by women.

g) Ajibon Pension Scheme:
Ajibon Pension Scheme has been designed mainly for providing income after retirement Under
this Scheme one can get life long benefit if he deposits specific amount per month for a period of
10,15,20 or 25 years. The Scheme can also be opened in the name of minors.
h) SME Financing Scheme:
Small and Medium Enterprise (SME) Financing Scheme has been introduced to assist new or
experienced entrepreneurs to invest in small and medium scale industries.

I) Car Loan Scheme:
Car Loan Scheme has been introduced to enable middle-income people to purchase
Cars/SUVs/Jeeps.
Objectives:

Help fixed-income people for buying car

Interest rate will be charged quarterly rest.

Terms & Conditions:

Maximum loan amount is BDT 25,00,000

Tenure of loan is 05 (Five) years

Interest Rate 16.00%

Risk Fund 1.00%

Supervision Charge (per year on outstanding balances) 0.25%

Application Fee BDT 200.00

Tenure of loan is 05 (Five) years

j) Personal Loan Scheme:
Objectives:

Help fixed-income people for buying house hold Durable

For the amount up to Tk. 3,00,000 the period is 03 (Three) years

Interest rate will be charged quarterly rest.

Mode:

Interest Rate 16.00%

Risk Fund 1.00%

Supervision Charge (per year on outstanding balances) 1.00%

Application Fee BDT 200.00

3.14. Functions of Mercantile Bank Limited:
The functions of commercial banks are now wide and varied. However, the functions of
Commercial Banks may broadly be classified under the following two categories:
A. Primary Functions:
The primary functions of MBL are same as other Commercial Banks. These functions include:

Accept Deposit.

Lends Money.

Create Credit.

Creates medium of exchange.

B. Secondary Functions:
Modern Commercial Banks like MBL, besides performing the primary functions, cover a wide
range of financial and on financial services to meet the growing needs of the time. Some of these
services are available only to the customers while others are available to the public in general.
The subsidiary services provided by a modern banker may be classified into the following three
groups:

1. Agency Service.
2. Generally Utility Services.
3. Foreign Exchange Business.
Operations of MBL:
Deposit:
The Bank mobilized total deposits of BDT 49,538.36 million as of December 31, 2008 as
compared to BDT 39,348.00 million in 2007. Competitive interest rates, attractive deposit
products, deposit mobilization efforts of the Bank and confidence reposed by the customers in
the Bank contributed to the notable growth in deposits. The Bank introduced a number of
attractive deposit schemes to cater to the requirement of small and medium savers. This
improved not only the quantum of deposits; it also brought about qualitative changes in the
deposits structure.
Figure 3.8: Trend of Deposits in MBL
3.15.2. Advances:
The Bank has formulated its policy to give priority to small and medium enterprises while
financing large-scale enterprises through consortium of banks. Total loans and advances of the
Bank stood at BDT 41,993.95 million as of December 31, 2008 as compared to BDT 31,877.86
million in 2007.
The Bank has formulated its policy to give priority to small and medium businessmen while
financing large-scale enterprises through consortium of banks. Total loans and advances of the
Bank stood at BDT 31,877.86 million as of December 31, 2008 as compared to BDT 26,842.14
million in 2007. Trade and commerce, garments industry, large and medium scale industries and
construction are major sectors in which the Bank extended credit.
3.15.4. Import Trade:
Mercantile Bank Limited opted quality financing while facilitating import trade in 2008. This
year the Bank executed a total of 20,321 letters of credits amounting to BDT 56,528.80 million.
The principal items were capital machineries, garments & accessories, rice, wheat, sugar, CDSO,
vegetable oil, cement clinkers, hot roll steel, raw cotton, ships-breaking etc.
The Bank is very much supportive in export financing since its inception. As an outcome of its
positive attitude in export performance it is holding the top position among leading bank’s of
new generation. A total of 17,581 export bills were handled worth BDT 43,108.50 million in
2008. the main export items of the bank were readymade garments, jute & jute goods, leather,
handicrafts, tea frozen food, fish products etc.

Advance against Credit card: MBL cardholder can take advance as term loan up to 50% of the card limit to be repaid on the monthly installment basis. Repayment period of such loan may be from 6 months to 36 months. Supplementary Card: A Principal cardholder (local) may apply for more than one supplementary card where one supplementary card is free. 20000 but not exceeding 50% of the credit limit is convertible to Personal loan/CCS and to be repaid on monthly installment basis. gas bills. TM International Limited. Overdraft Facilities: Overdraft facilities up to 80% of the credit card limit may also be allowed for payment of the installment of scheme deposit with our Bank. Khulna. Karim Spinning Mills Limited.3. department store and the card has accessibility to any outlet having VISA logo. United Sugar Mills Limited. PHP Float Glass Industries Limited.7. BRAC. Syndication and Structured Finance: The Bank sanctioned BDT 6986. A Dual card is also accepted in most of the big cities like Dhaka. It covers various kinds of merchants like hospital. Expenses made by supplementary card will be charged to the principle card. AM Energy Limited.15. Partex Sugar Mills Limited. water bills.99 million as funded and non-funded facilities in Syndication and Structured Finance. Nasir Glass Industries Limited. Rural Power Company Limited and KYCR Coil Industries Limited. Credit Facility: Mercantile Bank Ltd. and Sylhet at more than 10. Rising Spinning Mills Limited. may be settled by card. Payment of Utility Bill: Payment of utility bills like telephone bills.000 outlets including 4500 POS. Card Business: MBL cardholder can enjoy the following benefits and much more: No Cash Withdrawal Fee: For withdrawals of cash from MBL ATM by MBL cardholders no cash advance fee is necessary and from any other Q-cash ATM the fee is Tk. restaurant. Pacific Bangladesh Telecom Limited. electric bills. Dhaka Telephone Limited. our VISA Cardholders can also withdraw cash from any Visa logo ATM locally and internationally.10 only. 3. Moreover. Citation. Acceptability: International/Dual card is accepted all over the world at millions of outlets and ATMs. Visa Credit card offers maximum 45 days credit facilities free of interest and minimum payment is 5% of outstanding billing payment for easy repayment and convenience of the customers. Rajshahi. The project in which the Bank participated in Syndication and Structured Finance included: Grameen Phone Bangladesh Limited. . hotel. Any POS transaction over TK.15. MBL is the only bank offering such unique facility. The Bank worked as lead arranger in syndication financing as well as the participating financial institution.6.

A single credit card can be used both locally and internationally to withdraw cash from ATM for POS transaction.9. Pre-Paid Card: Those who have no account with MBL may avail Pre-Paid card facilities.125 whichever is higher. Examples include gift cards and salary payment etc. b) MBL card to other Q-Cash ATM: Tk. No hassle to carry two cards (local and international). d) For international card: USD 3 or 2% of transaction amount whichever is higher.15. services.10 per transaction. Debit card can also be used for purchasing goods.15. Pre-Paid card offers the convenience and security of electronic payment in situations where one might otherwise use cash. While these facilities clients to undertake jobs assigned to them by various Corporations and Organizations. 3. Cash advance fee: a) MBL card to MBL ATM: No fee. As banking has become very keenly competitive. payment of utility bills etc as well as withdrawal of cash from ATM. Apart from financing foreign trade. Foreign Exchange Business: From the very beginning a Commercial Bank like MBL is involved in financing foreign trade apart from financing internal credit requirements in the economy. 3. The Pre-Paid cardholders pay first buy later. Debit Card: Visa debit card is mainly tagged with deposit account (CD/SB/STD) that is automatically debited from the A/C having available balance.Dual Card (two in one): Single Card with double benefits. Online Banking: . this enables the Bank to earn commission. Commercial Banks also provide guarantees of various types to their clients. c) MBL card to other ATM: 2% of transaction amount or Tk.8. This is the special feature of MBL Visa card. such as birthday gift or a monthly allowance for a young adult. which is becoming gradually major source of earning of Commercial Bank. banks find it convenient to involve in foreign exchange business as lucrative sources of earning income and profit. This involves handling of import business through opening Letter of Credit and Handling of export business.

its meaning and definition: Foreign exchange refers to the process or mechanism by which the currency of one country is converted into the currency of another country. Outward & Inward Remittances. promissory Notes and Letters of Credit payable in any foreign currency. 3. Modern banks facilitate trade and commerce by rendering valuable services to the business community.4 Introduction to Foreign Exchange 4. Apart from providing appropriate mechanism for making payments arising out of trade transactions. . Evolution of the market in Bangladesh is closely linked with the exchange rate regime of the country. SB. Foreign exchange is the means and methods by which rights to wealth in a country’s currency are converted into rights to wealth in another country’s currency. Foreign Exchange Market and Bangladesh Foreign Exchange Market allows currencies to be exchanged to facilitate international trade and financial transactions. Online service is now available for all customers – Both Cash deposit and withdrawals. Foreign Exchange.1. “Any thing that conveys the right to wealth in another country is foreign exchange. by acting as a useful link between the buyer and the seller. specially in case of international commerce. TCs. Cherub Deposits and Transfer in CD. Foreign Trade gives rise to foreign exchange. STD. In banks when we talk of foreign exchange. According to Foreign Exchange Regulation Act (FERA) 1947. we refer to the general mechanism by which a bank converts currency of one country into that of another. 2006. It had virtually no foreign exchange market up to 1993. Foreign exchange department of banks plays significant roles through providing different services for the customers. “. Loan accounts (Cherub Bearing within limit) and Monthly Savings Scheme (MSS). Export. the banks gear the machinery of commerce. come under the purview of foreign exchange business. This definition implies that all business activities relating to Import. 4. Bill of Exchange. buying & selling of foreign commissions. who are often too far away from and too unfamiliar with each other. etc. Foreign exchange means and includes all deposits.16.2. credits and balances payable in foreign currency as well as foreign currency instruments such as drafts. Financial Performance: CHAPTER.Online Banking has so far been activated with 41 Branches of the Bank from January 01.

Exchange Rate Policy: . when a currency-weighted basket method of exchange rate was introduced. In 1976. Within a short time.  Providing funded and non-funded credit facility. This resulted in a number of macro-economic imbalances prompting the government to adjust the official rate in phases. XPL. poor risk management.  Providing non-commercial remittance. Up to 1990. Immediately after liberation. multiple exchange rates were allowed under different names of export benefit schemes such as.  Selling foreign currency bond. and various types of implicit or explicit government guarantees to the users of foreign exchange. which. The situation also gradually gave rise to a number of conflicting regulations. The exchange rate management policy was again replaced in 1983 by the trade-weighted basket method and US the dollar was chosen as intervention currency.  Maintaining foreign currency accounts. IECS. By this time a secondary exchange market (SEM) was allowed to grow parallel to the official exchange rate. it was substantially devalued. EFAS. however. was the sole purveyor of foreign currency among users. Export Bonus Scheme. the Bangladesh currency taka was pegged with pound sterling but was brought at par with the Indian rupee.3 Functions of Foreign exchange department: Following are the functions that Foreign exchange department performs to facilitate the transaction of foreign exchange:  Facilitating import and export trades. the value of taka experienced a rapid decline against foreign currencies and in May 1975. Bangladesh adopted a regime of managed float. ceased to exist with introduction of current account convertibility. 4. This led to a wide divergence between the official rate and the SEM rate.  Preparing and submitting statements relating to foreign currency. 4. XPB.4. as agent of the government. and Home Remittances Scheme. which continued up to August 1979. It tried to equilibrate the demand for and supply of foreign exchange at an officially determined exchange rate.BANGLADESH BANK.

the interbank foreign exchange market sets the exchange rates for customer transactions and interbank transactions based on demand-supply interplay.38 63.00 JPY 0. Cross Rate SEK 10.5. 4.org. .00 0. But USD/BDT buying and selling rates represent previous day interbank market’s highest and lowest exchange rates. Recent Reference Exchange Rates: Currency Buying 15th October. based on demand-supply interaction.35 EUR 103.exchangerates.15 Selling 69. encouraging inflow of wage earners’ remittances. Different Foreign Exchange rates in Bangladesh: The exchange rates of Taka for inter-bank and customer transactions are set by the dealer banks themselves.77 110.19 Table 4. while the exchange rates for the Bangladesh Bank’s spot purchase and sales transactions of US Dollars with ADs is decided on a case to case basis. The Bangladesh Bank is not present in the market on a day-to-day basis and undertakes purchase or sale transactions with the dealer banks only as needed to maintain orderly market conditions.The exchange rate policy of Bangladesh Bank aims at maintaining the competitiveness of Bangladeshi products in the international markets. Bangladesh Bank does not undertake any forward transaction with ADs.39 103.08 B. USD/BDT Rates (based on interbank transaction) USD 69. adjustments in exchange rates were made while keeping in view the trends of Real Effective Exchange Rate (REER) index based on a trade weighted basket of currencies of major trading partners of Bangladesh and the trends of other important internal and external sector indicators. 2009 A. and maintaining a viable external account position.07 CAD 67. Prior to the inception of floating exchange rate regime.33 AUD 63.12 67.09 10. maintaining internal price stability.1: Recent Reference Exchange Rates SOURCE: www.77 GBP 110. The exchange rates are used as reference rates to purchase or sale transactions for Bangladesh Bank with Government or different International Organization. However. The ADs are free to quote their own spot and forward exchange rates for interbank transactions and for transactions with non-bank customers.

2 charts the monthly average nominal exchange rates against the US Dollar for the currencies of Bangladesh and some of its major Asian trading partners over a 12-month period beginning January 2008. Movements of monthly averages of USD/BDT Exchange Rate: Figure 4. \ Figure 4.The graph below shows historical exchange rates between the Bangladeshi Taka (BDT) and the US Dollar (USD) between 4/20/2009 and 10/16/2009. 4. taking that month as the base.1 Different Exchange rates in Bangladesh SOURCE: www.6.org. that cannot be said for other . Bangladesh Taka has remained fairly steady over 2008 without any major fluctuations. However.exchangerates.

18 billion over the same period of FY2007. along with the sharp fall in global food.5 we see that robust remittance inflow and satisfactory export performance and a reasonably stable trade balance in recent years have contributed much to maintain a stable exchange rate against US$. Figure 4.47 million. Types of Foreign Trades: There are mainly three types of transactions which lead to foreign exchange.5: Export and Import for Bangladesh SOURCE: Bangladesh Bank It is also observed in Figure 4.6: Ratio of International Reserves to Imports: The case of Some Asian Countries SOURCE: World Development Indicators. Figure 4. Recent Forex outlook of Bangladesh: Fiscal year 2008 has so far been marked by robust growth in Bangladesh’s exports. though to a lesser extent. However.4 and 4. As Bangladesh imports a considerable amount of food items from both India and Thailand. total exports receipts were about US$ 6. as seen in Figure 4. from Figure 4.3. A sharp upturn occurred after October. Export receipts in October were $867.currencies in Asia which have experienced sharp fluctuations. the cost of these imports should be considerably cheaper as a result of the depreciation of their currencies. oil and commodity prices.4 percent) than the same month of the previous year. a rise of over 49. A similar pattern of events occurred in Thailand. During JulyNovember 2008. while in November they amounted to$1297. US$ in 2008 SOURCE: Reserve Bank of respective countries 4.5 percent in one month.2: Monthly Average Nominal Exchange Rates vs. This.69 million.7. such a ‘stable’ exchange rate of the Taka against the US$ might have some important negative implications for export competitiveness.4: Remittance Inflow in Bangladesh SOURCE: Bangladesh Bank Figure 4. December 2008 Further. Figure 4.6 that Bangladesh maintained much lower ratio of international reserves to imports compared to other Asian countries which gave Bangladesh Bank enough flexibility to inject sufficient amount of dollar into the foreign exchange market over the periods under consideration. The Indian Rupee depreciated by about 25 percent over the year as inflows of foreign capital to India fell sharply along with withdrawals of foreign portfolio investments.8. This brought November 08 export earnings to a level higher (about 13. also resulting in a sharp decline in the stock market. ‘08 SOURCE: Bangladesh Bank.36 percent. an increase of over 23. Figure 4. has resulted in a significant fall in average inflation rates in Bangladesh. These are: . 2008 (World Bank) 4. partly as a result of the ongoing global economic crisis.54 billion as compared to $5.3: Exports Jul-Nov ‘07 vs.

sometimes instruct the authorized dealer directly or through Bangladesh Bank to follow something required for the government.com 4. Public Notice: Some times CCI &E issues public notice for any kind of change in Foreign Exchange Transaction.3.7: Types of Foreign Trades SOURCE: www. This is a compilation of the instructions to be followed by the Authorized Dealers in transactions relating to foreign exchange. There is also an international Court of Arbitration to solve the international business disputes. Local regulations: our foreign exchange transactions are being controlled by the following local regulations: 4. 4.9. This organization has vital role in international trade through its 124 member countries. URC and URR etc.2. Foreign Exchange Regulation Act: Foreign Exchange Regulation (FERA) Act.9.9. F. the organization has been abolished and replaced by WTO. Circular: Bangladesh Bank issues F. 4. 4.a) Import b) Export c) Foreign Remittance Figure 4.5.9. Few of them are discussed bellow: 4. This act was adapted in Pakistan and lastly in Bangladesh.9. 4.7.9.4..9.mblbd. Guidelines for Foreign Exchange Transaction: This publication issued by Bangladesh Bank in the year 1996 in two volumes.8.9. which are being followed by all the member countries. GATT (General Agreement on Tariff & Trade) was established on 1st January 1948.9.2.1. WTO: World Trade Organization is another International Trade Organization established on 1st January 1995. Regulations for Foreign Exchange: 4.1. 4. ICC: International Chamber of Commerce is a world wide Non-governmental Organization of thousands of companies. 4.E.8. After completion of it’s 8th round.. circular from time to time to control the export import business and remittance that is to control the foreign exchange. ICC has issued some publications like UCPDC.8. International Regulations: There are also some international organizations influencing our Foreign Exchange transactions. provides the legal basis for regulation the foreign exchange. 4. Instructions from different ministry: Different ministries of the Govt. .E. ICC National committees throughout the world present ICC views to their Governments and alert Paris Headquarters about national business concerns.9. 1947 enacted on 11th March 1947 in the then British India. Export-Import Policy: Ministry of commerce issues Export Policy and Import Policy giving basic formalities for Import and Export Business.6.9. It was founded in 1919.

Letter of credit: 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 (known as 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.1.4. where the Issuing Bank authorizes the Negotiating Bank to grant storage facilities to the beneficiary. Green Clause L/C: It is an L/C. if the exporter fails to ship the goods the financing bank has the right to demand repayment from the Issuing Bank and that bank would have a similar right of recourse against the applicant. 4. Irrevocable L/C: Irrevocable L/C cannot be amended or cancelled without the consent of the beneficiary or any other interested parties. in addition to that of Issuing Bank. 4. Revolving L/C: It is an L/C where the original amount restores after it has been utilized. Restricted L/C: If advising and/or negotiation of an L/C are restricted to a particular bank. In case of a confirmed L/C a third bank adds their confirmation to the beneficiary. the L/C is called a restricted L/C. Transferable L/C: If the word “Transferable” incorporated in an L/C. so the L/C is called Green Clause.10.10.2. if not prohibited in the L/C.10.1. the amount will restore must be specified in the L/C.8. 4. Some of them are discussed bellow: 4.10. But 2nd beneficiary cannot transfer it further to another beneficiary. There is scope to effect further shipment of USD 1000 revolving L/C may be opened to avoid difficulties of opening new L/C.3. partially. 4. For example.1. the L/C is called Add-Confirmed L/C. 4. 4. then the L/C is transferable.4. if Issuing Bank fail to make payment.6.10. to make payment.10.10. This L/C is not allowed in our present import policy. Add-confirmed L/C: When a third bank provide guarantee to the beneficiary to make payment.10. Clean Claused: It is a normal claused L/C without third bank’s confirmation.1. now the L/C restored for full value i. The 1st beneficiary can transfer transferable L/C to the 2nd beneficiary.1.e.1. Banks commonly open this type of L/C.10. an L/C opened for USD 1000 and shipment effected for USD 500. 4. Revocable L/C: This kind of L/C can be amended or cancelled by the Issuing Bank.1. Confirmed L/C gives the beneficiary a double assurance of payment. In both the case of Red Clause and Green Clause L/C.10. whether it is Revocable or Irrevocable.1. If it is not indicated in the L/C. Classification of Letter of Credit: In different considerations there are many kinds of L/Cs.5. How many times and how long. then the L/C to be treated as Irrevocable. Transfer may be done to more than one beneficiary. without the consent of the beneficiary or any other interested parties. 4. The special clause was originally written in Green-ink.7.1. .1.

is available for negotiation by a nominated bank/any bank and expiring for presentation of document at the offices of Negotiating bank. where import of the goods to be made to execute the export L/C and payment of Back to Back bills to be made normally from related export process.12.4. Clean Letter of Credit: This is a commercial letter of Credit.10. And in case of without recourse. The Issuing Bank is bound to reimburse the Negotiating Bank. 4. purchase the documents.1. there are mainly three types of L/Cs such as: a) Sight Credit: . if the B/E is dishonored by. B) Cash L/C: Where payment of import bills under L/C is being made from (i) Foreign Currency reserve in Bangladesh Bank or (ii) F. account with authorized Dealer.9. are required to present with the bill of exchange. is available for payment only at the Issuing Bank’s counter. Straight Documentary Credit: Under the irrevocable straight documentary credit.10. in honoring draft(s)/ documents and usually expires at the counter of the Issuing bank.per dozen in case of garments industries. 4. 4. Clean Letter of //Credit is not permissible in our import policy. wherein the Issuing Bank does not ask any documents as evidence of execution of the deal under the L/C. With Recourse and Without Recourse to Drawers: These terms are related with Bill of Exchange. This L/C. if it negotiates the documents complying with the credit terms. Under the said L/C only bill of exchange may be negotiated or may be paid without any supporting documents. Back to Back L/C may be opened up to 75% of export L/C. L/C can be classified according to source of fund: A) Back-to-Back L/C: Back to Back import L/C is backed by another export L/C.10.10. B/L etc.10. Under this L/C.1.1. Documentary Letter of Credit: All the commercial letter of credits. not available for negotiation. 4. If the L/C allow a Bill of Exchange with recourse to the drawer. (FOB value) and up to 80% where export price is more than USD 60/. This L/C. is called Documentary Credit. A Back-toBack L/C is opened against an irrevocable L/C. According to Payment terms. the drawee.10. the L/C is called Barter L/C. does not authorize any body to negotiate.1. C) Barter L/C: Where final settlements are being made through commodity exchange between the nations. that means the Negotiating Bank has the right to claim the amount back. the L/C is called Cash L/C. Irrevocable Negotiation Documentary Credit: This L/C.13.11. where export related documents such as invoice. the obligation of the Issuing Bank is extended only to the beneficiary. Bill of Exchange will not be honored without other required documents.C. the import L/C is called Back to Back L/C. The L/C is lien marked with the back-to-back L/C issuing branch.1. the Negotiating Bank has no right to claim the amount back. from the drawer.

11.3.11. Insurance document 4. Bill of Exchange 4. • The date of issuance A bill of lading specifically stating that goods are loaded for ultimate destination specifically mentioned in the credit. • The names of shipper.2. Documents used in LC operation: The most commonly used documents in foreign exchange are 4.1.11.4. 4.11. Inspection certificate 4. is a receipt for the goods. • The number of original bills of lading issued.11. or may be. • Whether freight has been paid or is payable at destination. needed to support an insurance claim.5. Date Name and address of buyer and seller Order or contract number.11.6. Bill of Exchange: Bill of Exchange is one of the important negotiable instruments in the mercantile world and used as a vital document facilitating settlement of payments between buyer/importer and seller/exporter at home and abroad.11. gives evidence of the claim as made by the drawer as well as testimony to the acceptance the debt by drawer.b) Accepted Credit: c) Deferred Payment Credit: 4.3.8. A commercial invoice normally includes the following information.11. Bill of Lading: A bill of lading is a document that is usually stipulated in a credit when the goods are dispatched by sea. consignee and name ad address of notifying party. Commercial of invoice: A Commercial invoice is the accounting document by which the seller charges the goods to the buyer. • The ports of shipment and discharge. quantity and description of the goods.1. Bill of Lading 4.11. The payment is done either in accordance with the terms of sale contract or under a L/C opened by the buyer/importer in favor of the seller/exporter. It evidence of a contract of carriage. • Identifying marks and numbers. A bill who accepted by the drawer. Commercial of invoice 4.11.7.11. • Evidence that the goods have been loaded on board.11. unit price and the total Price . and is a document of title to the goods. It also constitutes a document that is. • The name of the carrying vessel. 4. Pro Forma Invoice (PI)/Indent 4.2. The details on the bill of lading include: • A description of the goods in general terms not inconsistent with that in the credit. Certificate of origin 4. Packing list 4.

specification or other aspects of the goods. number of packages. is called Pro forma invoice. and shipping marks and numbers Terms of delivery and payment Shipment details 4.7. Packing list : This is unique document and not combined with other document. Certificate of origin: A certificate of origin is a singed statement providing evidence of the origin of the goods. These are: 4. inviting him to buy the goods on stated terms.Weight of the goods. the may be an agent of exporter in importer’s country. Pro Forma Invoice (PI)/Indent: Pro Forma Invoice / Indent is the sale contract between seller and buyer in import-export business. 4. On the other hand. In this regard.11.11. Insurance document generally contains the following information: The name of the insurer or his agent The name of the ship/carrier The name of assured The subject matter of insurance The peril(s) insured against The date and subscription The valuation 4. There is no intermediary between them.12. Inspection certificate: This is usually issued by an independent inspection company located in the exporting country certifying describing the quality. Pro Forma Invoice is a form of quotation to a potential buyer.11. Insurance document: Insurance is a contract whereby the insurer is undertaking to indemnify the assured to the agreed manner and extend against fortuitous losses. and other relevant information. 4.11.12. if the sale contract is occurred between the agent of exporter and importer then it is called indent. The should be clearly stated that it is pro forma and if it is accepted the details are normally transferred to a commercial invoice. as called for in the contract and/or the L/C.4. The sales contract. The buyer who also indicates the type of inspection he wishes the company to undertake usually nominates the inspection company. Nostro account: . There is slight difference between indent and Pro forma invoice.6. This is a listing of the contents of each package cartoon etc.8. 4. which is direct correspondence between importer and exporter.11.1.5. Different accounts related to foreign exchange transaction: In L/C operation different accounts are maintained which are needed for foreign exchange transaction. 4.

unless the credit allows negotiation by any bank. The letter of credit is opened in his favor and addressed to him-. Account maintained by third party is known as loro account. Exporter: The seller or exporter is the beneficiary of the credit. 4.13. 4.A New York is the loro account.12.A. If the .1. LORO Account: Loro account means “their account with you”.A. New York.13.3. 4.A. New York and at the same time Janata Bank is also maintaining a nostro account with Citi Bank N. Vostro account: Vostro account means “your account with us”. The issuing bank should nominate the bank. USA is a Nostro account of MBL.13. From the point of view of MBL Janata Bank’s account maintained with Citi Bank N. while Citi Bank N. For example. New York is regarded as it’s nostro account held with Citi Bank.3. The obligations between the importer and the issuing bank are governed by the application-cum-agreement submitted by the importer to the bank.12.A. which effects payment or incurred a deferred payment undertaking or has accepted or negotiated under the credit as per terms.13. A Nostro account is a foreign currency account of a bank maintained its foreign correspondents abroad. 4.A. Opening Bank: The issuing or opening bank is the importer’s bank and it issues a letter of credit normally pursuant to the terms of sales contract as set out in the application for the credit by the importer. Different parties involved Foreign exchange transaction: Normally the following parties are involved to a documentary credit: 4. The beneficiary has the obligation to make export as per the contract and produce the documents as required by the credit.4. The account maintained with foreign correspondent in a bank of a particular country is known as Vostro account.13. 4. He applies to bank for issue foreign a documentary credit. and to take up the documents. Importer: The buyer or the importer is he who initiates the credit. The Advising Bank: It is the bank in the exporter’s country (normally the exporter’s bank). What is the nostro account for a bank in a particular country is a vostro account for the bank abroad maintaining the account thus the account of MBL with Citi Bank N.Nostro account means “our account with you”. which is authorized to pay or to accept drafts or to negotiate.2. He is bound to reimburse the bank. 4. New York regards it as a it’s vostro account held for MBL. N. suppose MBL is maintaining an account with Citi Bank N. US Dollar Account of MBL maintained with Citibank. New York. which is usually the foreign correspondent of importer’s bank through which the L/C is advised to the supplier.2.

The Transferring Bank: If the L/C is transferable.8. From whom the paying/negotiating bank can obtain reimbursement.13. becomes liable to pay for documents in conformity with the L/C’s terms and conditions.E. The Paying Bank: Paying bank is a bank in the beneficiary’s country nominated in the letter of credit to make payment against documents to be tendered under the credit.5. If the bank so nominated accepts the nomination. The negotiating/paying bank simultaneously makes a claim with the reimbursing bank for the payment effected. then the 1st beneficiary of the L/C may transfer the L/C to the 2nd beneficiary. This bank is called the Transferring Bank. Reimbursing Bank: The issuing bank may indicate in the credit the name of a bank.13.8: Different banks involved in Foreign exchange transaction 4.7. circular and other instructions from competent authorities from time to time. The Accepting Bank: Accepting bank is the bank nominated in the letter of credit to accept usance bills drawn under the credit. it is called “Advising Bank”. Authorized Dealer Banks will import the goods into Bangladesh following the import policy. he becomes the confirming bank. 4. The liability of the confirming bank is the primary liability and it is not contingent on the fulfillment of the obligation by the issuing bank.13. The Confirming Bank: If the advising bank also adds its own undertaking to honor the credit while advising the same to the beneficiary. The import functions of the branch as far I have understood are discussed bellow: .5 Import 5. F. The international trade can be illustrated by the following diagram: Figure 4. The documents are sent to the issuing bank. its responsibility to the beneficiary is not only to accept the drafts drawn but also to make payment on their due dates. Normally the reimbursing bank would be the bank with which the issuing bank maintains an account.intermediary bank simply advises/notifies the L/C to the exporter part. Paying Bank must examine all documents with reasonable care to ascertain that these are drawn in accordance with the terms and conditions of the credit. Figure 4. 4. 4. In addition.6. through a bank nominated by the Issuing Bank. public notice. 4. Import: Import trade in Bangladesh is controlled under the Import and Export control Act 1950.13.13.9.9: A process of international trade CHAPTER.

Before entering into an import transaction country’s legal and economic framework to be considered. Usually an indenter. At first. within which such trade takes place. • Tax Indification Number • VAT Registration Number • In case of company. which is under Foreign Exchange Department of the branch. And to serve its client’s demand to import goods.ICC PUB-522 • Incoterms 2000 ICC PUB-460 (Revised) 5. 2. ICC PUB-525 • URC.5. he/she makes a purchase contract with the exporter detailing the terms and conditions of the import. And . the importer must obtain Import Registration Certificate (IRC) from the CCI&E submitting the following papers: • Up to date Trade License. 4.C. Main Branch is always committed to facilitate import of different goods into Bangladesh from the foreign countries. Other sources are: • Trade fair. importer settles the means of payment with the seller. local agent of the seller or foreign agent of the buyer makes this communication. MBL. After making the purchase contract. it always maintains required formalities that are collectively termed as The Import Procedure.1. • Chamber of Commerce. • UCPDC. When the importer accepts the Pro forma Invoice.I. 1. is assigned to perform this job. Legal Requirements: Import of merchandise into in Bangladesh is related by the Import Policy Order (IPO) announced by the Ministry of Commerce and/or Notifications/Public Notices issued by the Ministry of Commerce and /or C. 3. Import Section. Import procedure followed by MBL: As an Authorized Dealer. • Bank Solvency Certificate etc.&E and Bangladesh Bank. • Journals etc. These include: • Restrictive governmental policies • Exchange regulations • Tariffs and transaction • Reporting to the controlling authorities It is important to have a general understanding of some of the basic legal and economic terminology internationally. Following ICC Publications framework of such terminology & rules governing international trade. • Nationality and Asset Certificate. Memorandum & Articles of Association and Certificate of Incorporation. ICC PUB-500 • URR.2. Then the importer has to contact with the seller outside the country to obtain the Pro forma Invoice. • Foreign Missions in Bangladesh.

c) Collection Method: Collection methods are either clean collection or documentary collection.e. officer delivers the following forms to be filled up by importer and the banker should check: a) Whether the goods to be imported is permissible or not. exporter will send the goods and the transport receipt to the importer. b) Open Account: Exporter ships the goods and sends transport receipt to the importer. LIM & LTR. Again. d) Letter of credit: Letter of credit is the well accepted and most commonly used means of payment. the collecting bank notifies the importer upon receipt of the draft. • An application • Indent or Pro forma Invoice • Import Registration Certificate (IRC) • Taxpayer’s Identification Number (TIN) • Insurance cover note with money receipt • A bank account in MBL. It is an undertaking for payment by the issuing bank to the beneficiary.2. The possible means are Cash in Advance. The title of goods is released to the importer upon full payment or acceptance of the draft/bill. Requesting the concerned bank (importer’s bank /issuing bank) to open a L/C(irrevocable) on behalf of importer favoring the exporter/seller. Open Account. After receiving payment.import procedure differs with different means of payment.1. or TT at some specified date. Acting as an agent of the remitting bank. The exporter submits the draft/bill (only or with documents) to the remitting bank for collection and the bank acknowledges this. Different Means of Payment: a) Cash in advance: Importer pays full. Importer will take delivery of the goods and makes payment by foreign DD. Documentary Collection may be Document against Payment(D/P) or Document against Acceptance(D/A). Application for opening L/C: At first. Main Branch • Membership of chamber of commerce 5. Then the remitting bank sends the draft/bill (with or without documents) and a collection instruction letter to the collecting bank. upon submission of some stipulated documents and fulfilling the terms and conditions mentioned in the letter of credit. Import section deals with L/C opening and post import financing i.2. . b) Whether the goods to be imported is demanding or not. partial or progressive payment by a foreign DD. Importer will take delivery of the goods from the transport company. Purchase Contract contains which payment procedure has to be applied. 5. MT or TT. an importer will request banker to open L/C along with the following documents. Now the procedure from opening L/C to disbursement against L/C is given below: 5. In most cases. The collection procedure is that the exporter ships the goods and draws a draft/ bill on the buyer. MT.2. the Documentary Letter of Credit in our country makes import payment. Collection Method and Documentary Letter of Credit. Delivered forms by banker to importer: After scrutinizing above-mentioned documents carefully.

2.2. • IRC number. • Insurance Cover Note / Policy number. • Whether the transshipment is allowed or not.2. • The L/C application must be completed/filled in properly and signed by the authorized person of the importer before it is submitted to the issuing bank. • Last date of shipment. Main Branch provides a printed form for opening of L/C to the importer. 5. • Time bar within which the documents should be presented. which is used for opening of L/C and effecting remittance. amount. Special adhesive stamp of value Tk. • Sales type (CIF/FOB/C&F).2. The authorized dealers are empowered to issue LCA Forms to the importers as per basis of licensing of the Import Policy Order in force to allow import into Bangladesh. MBL.150. First Copy is exchange control copy. Usually the importer gives the following information – • Full name and address of the importer. • Country of origin. etc. L/C Authorization Form (LCAF): The Letter of Credit Authorization Form (LCAF) is the form prescribed for the authorization of opening letter of credit/payment against import and used in lieu of import license. L/C Application Form (LCAF): L/C Application Form is a sort of an agreement between customer and bank on the basis of which letter of credit is opened. • Full name and address of the beneficiary. • Account number. which is used for clearance of imported goods from custom authority. Triplicate and Quadruplicate Copy of LCAF are to be sent to concerned area of CCI&E office by authorized dealer/Registration Unit of Bangladesh Bank. indent no. • Brief specification of commodities. price.The forms are: 5.2. Second Copy is the custom purpose copy.00 is affixed on the form in accordance with Stamp Act. date. The Letter of Credit Authorization Form (LCAF) contains the followings – . • Other terms and conditions (if any). • Last date of negotiation.1. Quadruplicate Copy is kept as office copy by authorized dealer/Registration Unit. • Bangladesh Bank registration number. • Name and address of Insurance Company. • Import License/LCAF number. • Availability of the credit by sight payment/acceptance/negotiation/deferred payment. • Draft amount. • Documents number. The LCA Forms available with authorized dealers are issued in set of five (05) copies each. quantity. • Whether the partial shipment is allowed or not.

2.F. (margin. 2. • Country of origin.1. • Date. • Quantity of goods.2. Bank of the importer is called ‘L/C Issuing Bank’. . • Port of shipment. • Description of item(s) to be imported. • Amount of L/C applied for (both in figure and in word). • Invoice value. Survey reports or certificate in case of old machinery is required.3.2. Desk work: One debit voucher to be passed.2. F. 5. postage.3. • Registration of LCAF. commission.3. Corresponding credit vouchers to be passed. 3. Then issuing bank inform its corresponding bank.) Liability voucher to be passed. 5. Eligibility of the goods to be imported. Preparation of L/C by banker: Bank’s officer prepares L/C when above-mentioned forms are to be submitted by customer or importer. Before preparing L/C MBL officer scrutinizes the application in the following manner: 1. The L/C must not be opened in favor of the importer. • HS Code number. Radioactivity report in case of food item. 4. • Indentor’s address. • Signature of the importer with seal.C. Import permit form (IMP): • L/C authorization form number. 5. • Value in Taka. stamp. • Name of the steamer. • List of goods to be imported. • IRC number and year of renewal. The terms and conditions of the L/C must be complied with UCPDC 500 and Exchange Control & Import Trade Regulation. and others.• Name and address of the importer. called “Advising Bank’ or ‘Confirming Bank” located in exporter’s country to advise and credit forward to the exporter and simultaneously officer makes L/C opening vouchers.

regardless of any other consideration. The seller then sends the documents evidencing the shipment to the bank.2. Then the bank is called confirming bank also. such a bank is under no commitment or obligation to pay the seller.2. The issuing bank and the advising bank which is usually a bank in the seller’s country.2.5. 5. Accounting treatment: 5. If the advising bank is also “confirming the credit”.5. Submission of necessary documents by exporter to the negotiating bank: As soon as the seller/exporter receives the credit and is satisfied that he can meet its terms and conditions. must pay accept or negotiate without recourse to seller. this mention that the confirming bank. The issuing bank asks another bank to advise or confirm the credit. If the 2nd bank is simply “advising the credit”. it will mention that when it forwards the credit to seller.2.4. Forwarding documentary credit by advising or confirming bank: There are usually two banks involved in a documentary credit operation. Generally the documents observed in the foreign exchange department are: • Bill of exchange • Commercial invoice • Bill of lading • Certificate of origin • Packing list • Clean Report of Finding (CRF) • Weight list • Insurance cover note • Pre-shipment certificate .2. The L/C confirming process: 5.6.3. Exporter will submit those documents in accordance with the terms and conditions as mentioned in L/C. he is in position to load the goods and dispatch them.

• Documents have been negotiated within the negotiation period. The amount drawn does not exceed the amount mentioned in the L/C.5. The bill of exchange should be properly endorsed. 5. • The L/C has not been amended or subjected to any special instructions. The amount in words and figures should be same. Making the payment of foreign bill through the reimbursing bank: The L/C issuing bank getting the documents checks immediately and if they are in order and meet the credit requirements.2: Sending L/C Documents to L/C Issuing Bank 5. it will arrange to make payment against L/C through reimbursement bank and will send the importer the document arrival notice. and if the documents meet all the requirement of the credit. accept. The documents sent to the issuing bank through the negotiating bank: The negotiating bank carefully checks the documents provided by the exporter against the credit. or negotiate in accordance with the terms and conditions of the credit. The beneficiary should properly invoice the merchandise. Then the bank sends the documents to the L/C opening bank.2.8.9. which are to be scrutinized Bill of Exchange Commercial Invoice Bill of Lading Certificate of Origin Others A) 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 that mentioned in the invoice. B) 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 description of merchandise and the unit price correspond with that given in the L/C. . the bank will pay.2. Figure5. Scrutiny of the documents: First of all it must be ensured that full set of documents as mentioned in the L/C has been received. The merchandise is invoiced to the importer on whose account the L/C is opened.2. which might alter the value of L/C. • The Bill of Lading/Air-Way Bill/ Railway receipt is not dated later than the last date of shipment mentioned in the L/C.7. • Import bills include following documents.

5. Disposal of Discrepant Documents: If the importer refuses to accept the documents because of discrepancies advised to him. International Division Account Cr. C) Bill of Lading: First of all 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. pre-shipment inspection certificate etc. Accounting treatment: The office passes the following vouchers after negotiation.The import license or IRC number of the importer. The shipping company or their authorized agents properly sign the B/L. The branch should cancel the Reimbursement Authorization provided to the Reimbursing Bank while the opening branch of the L/C and/or claim refund of reimbursement with interest from the remitting bank.O. H. PAD (Payment Against Document) Account Dr. date of shipment and the name of the consignee are in agreement with those mentioned in the L/C.12. If any discrepancy is found then the banker inform it to the importer that whether he accept the bills with discrepancies or not. with the shipping documents like packing list. according to the instruction of the negotiating bank. 5. These documents are also verified carefully before lodgment. the bank will return the full sets of documents to the presenter by courier service/Registered postal Mail. the branch should immediately advise the same to the negotiating bank by telex/cable and dishonored documents will then be handled. The B/L should include the description of the merchandise according to invoice. .2. which are also attached.10.2. if no discrepancy are found then it is treated to be accepted after the end of seven banking days following the day of receipt of the document under “Article 1(b) of UCPDC –500”. of any reimbursement which has been made to the negotiating bank. Lodgment & Retirement of shipping documents: After scrutinizing the import negotiating document. The branch shall reverse the contra liability which has been passed at the time of opening and recover/realize postal and other charges incurred by the bank on his behalf. otherwise it is treated to be accepted and the opening bank (MBL) must bound to pay against the bill and no complain against the bill will be accepted more than 4 banking days following the date of receipt of the documents under article number K1 (d) & article number 14 (c) of the UCPDC-500. If the importer does not accept.2. If no reply is received regarding disposal of the document. The port of shipment and destination. D) Others: There are some other documents.11. the banker (PBL) informs it to the negotiating bank within seven banking days from the date of receipt of the documents. The date on the B/L is not ‘stale’ which means it is not dated in unreasonably long time prior to negotiation. 5. indenter’s registration number and number of Letter of Credit Authorization number are incorporated in the Invoice. C) Certificate of Origin: The Merchandise described in the Certificate is in accordance with the L/C.

Banker’s liability Account Dr.. On the Invoice Certified that the invoice has been drawn under L/C NO………. On the Transport Document Please Deliver to the order of M/s…………………….3: Endorsement certificate SOURCE: Desk work of MBL SELLER 1. Then the documents are delivered to the L/C applicant (importer). the L/C issuing bank send message to the negotiating bank to rectify it under its risks and responsibilities. The certification should be as follows: 1.But if there is any discrepancy in the documents. the importer is served with PAD bill intimations for retirement of concerned import documents. Vouchers passed in retiring documents: L/C margin Account Dr. endorsement is made on the back of the bill of exchange as ‘Received Payment’ & bill of leading is endorsed to the effect that ‘Please deliver to the order of M/S’ under two authorized signatures of the bank officials of MBL. Goods . On intimation the importer calls on the bank’s counter requesting retirement of the shipping documents against payment to the debit of their account by the bill amount and other charges payable. Party Account Dr. Mercantile Bank Limited Authorized Signature 2. After the vouchers are passed. Customer’s liability Account Cr. Miscellaneous earning Cr. The shipping documents then stamped with PAD number and entered in the PAD register. On the Bill of Exchange Received Payment Mercantile Bank Limited Authorized Signature 3. Bank prepares cost memo in printed form on account of the concerned party giving detailed read of charges payable.Contract BUYER 5. Mercantile Bank Limited Authorized Signature Figure 5. Income Account interest on PAD Cr. As soon as the above formalities are completed. Commission on PAD Cr.:…… For USD………….Reverse entry is given. PAD Account Cr.

The following instructions should be complied with while opening Back to Back Import L/C: (i) The unit requesting for this facility should possess valid IRC.2. The branch should send a message to the concerned bank advising. Post-import financing: If there is no available cash in importer’s hand. Cancellation of L/Cs: An Irrevocable L/C can not be cancelled without the agreement of the beneficiary and the confirming bank. ERC and valid bonded warehouse license. manufacture of merchandise and shipment to consignee. refund margin and recover charges from the L/C applicant as per schedule of charges. (iii) The Master Export L/C should have validity period adequate to cover the time needed for importing inputs.1. officer makes loan proposal and sends it to H/O for approval. 5.13.3. It’s needless to say that bank only deals with the documents. For giving these types of loan. Proper sanction from the competent authority is to be obtained before clearance of consignment. subject to observance of domestic value addition requirement prescribed by the NBR/Ministry of Commerce from time to time. importer may request the bank for clearance of goods from the port (custom). (ii) The branch shall hold the Master Export L/C affixing Bank’s lien stamp thereon and keep in safe for security purpose. the branch may cancel the L/C without the consent of the beneficiary. if any. Back to back L/Cs: The branch may open back to back import L/C against export L/C received by export oriented industrial unit operating under the bonded warehouse system. LTR: On the arrival of goods and lodgment of import documents. • LTR (Loan against Trust Receipt). The branch will reverse L/C contra liabilities. if the L/C expires and the brand”. For computation of net FOB value of a master export L/C. at the request of the importer. if any.14. After getting approval from H/O. 5.2.ADVISING/CONFIRMING BANK ISSUING BANK Figure5. 5. he can request the bank to grant loan against the documents for the purpose of post import finance. bank grants loan in the form of LTR. may approach the L/C advising bank for cancellation of the L/C and such cancellation will only be effective upon consent of the beneficiary advised to the branch through the L/C advising bank. insurance cost and commission if .14. There is one form of post import finance available in MBL Main Branch. The branch. However. the freight charge. The branch will then cancel the Reimbursement Authorisation which has been provided to the Reimbursing Bank while opening the L/C. (iv) The Back to Back L/C value shall not exceed the admissible percentage of net FOB value of the relative Master Export L/C (as per prescribed value addition requirement). receives no shipping documents within 15 days” of expiry of the L/C. advising bank and confirming bank. not with goods & services in case of foreign exchange business. such cancellation and closure of L/C file due to expiry of the same.4: Flow chart of L/C Operation 5.2.

1.2. (vi) Interest for the usance period shall not exceed LIBOR or the equivalent interest rate in the currency of settlement. Cr. Customer’s liability on BTB L/C Cr. freight certificate from the shipping company or agent should be asked for. the documents should be subjected to usual scrutiny. (viii) Back to Back L/C can either be local or foreign. etc. Cr. Customers A/c: Commission for increased amount + other charges Cr. Customers A/c: Commission for 180 days + FCC + Postal/ Telex Recoveries + Misc. If found in order. (v) The Back to Back import L/C shall be opened on up to 180 days usance (DA) basis. the customer should be asked to accept the usance bill of exchange. Inland BTB L/C denominated in foreign exchange may be opened in favour of local supplier/ manufacturer of inputs against master export L/C and BTB L/C may. The date of maturity of tie Bill of Exchange is communicated to the . Banker’s liability on BTB L/C Dr. stationery. Income A/c: Postal/ Telex Recoveries. Customers A/c: Commission for further one quarter Cr. (vii) All amendments of the master export L/C should be noted down carefully to rule out chances of excess obligation under the back to back import L/C. 5. administered by Bangladesh Bank. except in case of those opened against Export Development Fund. Acceptance & Lodgment of BTB Import Bill: On receipt of import documents against the L/C.payable by the exporter shall be deducted from the L/C value. in which case the back to back L/C will be opened on sight (DP) basis. Other Assets A/c: Stamps in Hand c) Amendment charges i) If the L/C value is increased Dr. the maturity date of the bill is to be worked out and noted in the PAD register and also in Due Date Diary (MBFx-16). Income A/c: Commission on L/C (Foreign) & other vouchers 5.e. If the freight element is not shown separately. Income A/c: Miscellaneous earnings (Handling charges if any) Cr.) Cr. Sundry Deposit A/c: FCC ii) If L/C expiry time is extended beyond 180 days Dr. Income A/c: Commission on L/C foreign.3. Customer’s liability on BTB L/C (for increased amount) Cr. Vouching Procedure: (a) Creation of L/C liability Dr. in turn. importer) after duly accepted by him. Income A/c: Postal /Telex Recoveries Cr. Cr. be opened for import of inputs against inland BTB L/C in favour of local supplier/manufacturer under bonded warehouse system up to value limits applicable as per prescribed value addition requirement. Sundry Deposit A/c: FCC Cr.3. Income A/c: Miscellaneous earnings (Handling charges.C Selling rate) (b) Commission & others charges Dr. When the bill of exchange is returned by the drawee (i. Banker’s liability on BTB L/C (Applicable rate: B.

SOD (export) A/c: Cr. Banker’s liability on BTB bills Cr. The branch will pay BTB bills according to their maturity within 3 working days from the date of realization of export proceeds.C held A/c: Bill value with usance interest @ prevailing O. the ABP liability should be liquidated by grant of SOD (Export). Bills payable A/c: Payment Order Dr. The required foreign exchange. Vouchers to be passed: i) Reversal of L/C liability Dr. Simultaneously the documents are lodged under ABP (Accepted Bills for Payment). Income A/c: Postal/ Telex Recoveries of Back to Back L/C Payment of BTB L/C shall be made at maturity. Customer’s liability on BTB Bills From: Mercantile Bank Limited Cr. Income A/c: Postage recoveries (iv) If export proceeds arc not available – settlement in FC Dr.D Taka Dr.C Selling rate) (iii) Vouchers for charges such as Telex/ Postal charges for advising maturity date and others Dr. Voucher to be passed: (i) Reversal of acceptance liability Dr. Bills Payable A/c Cr. Banker’s liability on BTB Bills (Applicable rate: B. SOD (export) A/c Cr. Income A/c: Exchange gain on FC Cr. will be set aside in a separate foreign currency account called FC held for BTB L/C. Customer’s liability on BTB L/C ii) Creation of Acceptance liability Dr. Income A/c: Commission on Pay Order Cr.D sight (export) Cr. MBL General A/c: F. A/c: Commission on Pay Order .C held A/c Cr. Banker’s liability on BTB L/C Cr. Income A/c: Exchange gain on FC Cr. Income A/c: Exchange gain on FC (v) If export proceeds are not available – settlement in BD Taka Dr. Exporters F. Income. MBL General A/c: On Nostro A/c @ prevailing OD sight (export) (iii) Out of Export Proceeds settlement in B. out of export proceeds. Experts F. MBL General A/c: On Nostro A/c Dr. Customer’s liability on BTB bills (ii) Out of export proceeds settlement in FC Dr.negotiating or collecting bank by telex/ fax. If export proceeds are not available. Party’s Account Cr.C amount on Nostro Account Cr. MBL General A/cCr. out of repatriated export proceeds.

frozen shrimps. Export policy: Export policies formulated by the Ministry of Commerce.A and European Community (EC) countries.6 Export 6. which provide the overall guideline and incentives for promotion of exports in Bangladesh.A. Exporters FC held A/c Cr. Jute-made products. Most of the exporters who export through MBL are readymade garments exporters.1. As banking has become very keenly competitive. bank may act as advising banks and collecting bank (negotiable bank) for the exporter. SOD (export) A/c: Cr. They open export L/Cs here to export their goods. This involves handling of import business through opening Letter of Credit and Handling of export business. Readymade textile garments (both knitted and woven). Bangladesh exports about 40% of its readymade garments products to U. Bills payable A/c (export) less PO commission & Postal charges Cr. Bangladesh exports a large quantity of goods and services to foreign households. Bangladesh exports most of its readymade garments products to U. Income A/c: Postage recoveries (vi) If export proceeds are not adequate to cover BTB Bill – settlement in FC Dr. Garments sector is the largest sector that exports the lion share of the country’s export. Income A/c: Exchange gain on FC Cr. banks find it convenient to involve in foreign exchange business as lucrative sources of earning income and profit. For exporting goods by the local exporter. Income A/c: Commission on Pay Order Cr. Jute. tea are the main goods that Bangladeshi exporters exports to foreign countries.C held A/c Cr. Exporters F. MBL General A/c Dr. The export-oriented private sector.S.S. SOD (export) A/c Cr. MBL General A/c Cr. MBL General A/c Dr. 6. Export: From the very beginning a Commercial Bank like MBL is involved in financing foreign trade apart from financing internal credit requirements in the economy. Income A/c: Postage recoveries CHAPTER. Export L/C operation is just reverse of the import L/C operation. MBL General A/c Dr. Export policies also set out commoditywise annual target. through their representative bodies and chambers are consulted in the formulation of export policies and are also represented in the various export promotion .Cr. Income A/c: Exchange gain on FC (vii) If export proceeds are not adequate to cover BTB bill – settlement of BD Taka Dr. It has been decided to formulate these policies to cover a five-year period to make them contemporaneous with the five-year plans and to provide the policy regime. which they open against the import L/Cs opened by their foreign importers.

000 or transferring US$ 1. • With a view to ensuring backward linkages. • Arrangement of international trade fairs. • Exporters can deposit 40% of FOB value of their export earnings in own accounts in dollar and pound sterling. • Provision for transfer of shares held by foreign shareholders to the local shareholders/investor with the permission of the BOI and the Exchange Control Department of the Bangladesh Bank. Duty draw back. Export incentives: Encouraging export oriented industries is one of the major objectives of the Industrial Policy. proportional income tax rebate on export earnings is given between . • The entire export earning from handicrafts and cottage industries is exempt from income tax.& convertibility of Taka in current account. • Facilities for repatriation of invested capital. • Expansion of export credit period from 180 days to 270 days. • Treatment of repatriable dividends as new foreign investment. Some of the facilities and incentives offered are as follows: a) Financial Incentives: • Restructuring of Export Credit Guarantee Scheme.bodies set up by the government. • No restriction in issuing work permits to foreign nationals in Bangladesh.000 to any recognized Bangladeshi financing institution (nonrepatriable).2. • The system of duty drawback is being simplified and streamlined. • Tax exemption on capital gains from the transfer of shares by the investing company. b) General incentives: • National Export Trophy to successful exporters.50% tax rebate on export earnings. 1991 and as such government ensures all support and co-operation on priority basis as per export policy.repatriable) . export oriented industries including export oriented readymade garment industries using indigenous raw materials instead of imported ones. commodity-based exhibitions in the country and participation in foreign trade fairs. In case of all other industries.000 or equivalent amount (non. • The expert oriented industries are allocated foreign exchange for publicity campaigns and for opening offices abroad. profits and dividends. • Duty free import of capital equipment for 100% export oriented firms. c) Additional Incentives for Export Oriented/Linkage Industries • Facilities such as special bonded warehouse against back-to-back letter of credit or national import duty and payment of value added tax (VAT) facilities are available. similarly citi~hip to any foreign citizen investing US$ ~. are given additional facilities and benefits at prescribed rates. Similar incentives are extended to the suppliers of raw materials to export oriented industries. Back loan up to percent of the value against irrevocable and confirmed letters of credit/sales agreements available. • Bonded warehouse facilities to 100% export oriented firms. • Allowing long term loan and working capital loan to foreign investors from local commercial banks. • Permanent residentship to a foreign citizen investing a minimum of US$ 75. 6.000. training course on external trade. • Avoidance of double taxation in case of foreign investors on the basis of bilateral agreements.

training and consultancy fees. • The local products supplied to local projects against Foreign exchange international tender are treated as indirect exports and the producer is entitled to all export facilities. 6. He can do this . luggage and fashion articles. The ERC is required to renew every year. salaries and savings by expatriates. electronic goods.30 and 100 percent. • The import of specified quantities of duty free samples for manufacturing exportable products is allowed. Export procedures followed by MBL: The import and export trade in our country are regulated by the Import and Export (Control) Act. • Memorandum and Article of Association and Certificate of Incorporation in case of Limited Company. • Trade License etc. • Export oriented industries producing toys. The ERC number is to incorporate on EXP forms and other papers connected with exports. stationery goods. receivables collected by shipping companies and an lines towards freight and passage can be effected through authorized dealers without prior approval of the Bangladesh bank. import of raw materials under the Control List is allowed.3. d) Other incentives: • Assistance in improvement of quality and packaging of exportable items. leather goods. gift items. 6. royalty and technical fees. Dhaka/ Citation/ Rajshahi/ Mymensingh/ Sylhet/ Comilla/ Barishal/ Bogra/ Rangpur/ Dinajpur in the prescribed form along with the following documents: • Nationality and Assets Certificate.2. The quantity and value of samples an determined jointly by the concerned sponsoring agency and the National Board of Revenue. • Income Tax Certificate. jewellery. e) Remittance Facilities: Remittance of profits of branches of foreign firms/companies. • Bank Certificate. intending Bangladeshi exporters are required to apply to the controller/ Joint Controller/ Deputy Controller/ Assistant Controller of Imports and Exports. 1950. diamond cutting and polishing. • For manufacturing exportable commodities. Securing the order: After getting ERC Certificate the exporter may proceed to secure the export order. Registration of exporter: For obtaining ERC. venture capital and other facilities. Those industries which export 100 percent of their products are given tax exemption up to 100 percent. • Simplification of export procedures etc.1.3.3. Under the export policy of Bangladesh the exporter has to get valid Export registration Certificate (ERC) from Chief Controller of Import & Export (CCI&E). silk cloth.Aces are 3dentiiied by the government thrust sectors and provided with special facilities through cash incentives. 6. dividends/capital gains. cut and artificial flowers and orchid vegetable processing .

• Collection basis (Documentary/ Clean) (Here the regulatory framework is URC-525. Procuring the materials: After making the deal and on having the L/C opened in his favor. • ERC (valid). • Bills of Exchange (if required) • Certificate of Origin. • Open account. exporter should ask the buyer for Letter of Credit (L/C) clearly stating terms and conditions of export and payment The following are the main points to be looked into for receiving/ collecting export proceeds by means of Documentary Credit: (1) The terms of the L/C are in conformity with those of the contract. (3) The L/C allows sufficient time for shipment and negotiation. • Other Documents. (Here the regulatory framework is UCPDC-500. • Bangladesh Mission Abroad. exporter has to get contracted (writing or oral) for exporting exportable items from Bangladesh detailing commodity. 6.3. (2) The L/C is an irrevocable one. ICC publication) Terms and conditions should be stated in the contract clearly in case of other mode of payment: • Cash in advance. quantity.4. • Shipping Instruction.3.6. 6. price. Signing the contract: After communicating buyer. • Invoice. insurance and marks. prepare and submit shipping documents for Payment/ Acceptance/ Negotiation in due time. • L/C copy. inspection and arbitration etc.5. Documents for shipment: • EXP form. • Customer Duty Certificate. • Export Promoting Organization. In this purpose the exporter may get help from: • License Officer.3. preferably confirmed by the advising bank. Shipments of goods: Then the exporter should take the preparation for export arrangement for delivery of goods as per L/C terms. ICC publication) 6.3. shipment. the next step for the exporter is to set about the task of procuring or manufacturing the contracted merchandise. 6. • Inspection Certificate. .by contacting the buyers directly or through agent. • Buyer’s Local Agent.3. Receiving letter of credit: After getting contract for sale. • Chamber of Commerce (local & foreign) • Trade Fair etc. • Insurance Documents. • Transport Documents.

Price. Not marked one fold as Original.5. 6. Tenor of B/E not identical with L/C.5. • Phyto-sanitary Certificate. Partial shipment or transshipment beyond L/C terms. L/C expired 4.4. Cross verification a) Verified one documents to another. Not market one fold as Original. 3. 2.5. Amount of B/E differ with Invoice.2. Discrepancies: After proper examination or checking of a described Export document banker may find following discrepancies: 6.• Quality Control Certificate. 6. 6. 3. Net Wt. Gross Wt. Packing list: 1. quantity. Late shipment 2. 2. c) Shortage of documents etc. Final step: Submission of the documents to the Bank for negotiation. Certificate.3. 6. Not drawn on L/C issuing Bank.7. Full set not submitted. 6. Commercial invoice (C/I): 1.S. • G. 5. 6. Particular verification: a) Each and every document should be verified with the L/C. sales terms of the goods not corresponds to the Credit. Not made out in the name of the Applicant 4. 5. Shipping Mark differs with B/L & Packing List. Not issued by the Beneficiary. & Measurement. Not signed 4. 6. Late presentation 3. 2. General: 1. Export documents checking: 1. 3. . Number of Cartoons/Packages differ with B/L.3. Not signed by the Beneficiary. Description.1. b) Exporter submitted documents before expiry date of the credit.. Bill of exchange (B/E): 1. L/C over-drawn 5.P.5.5. General verification: a) L/C restricted or not. 2.4.

6. 3. 3. The signature of the drawer must be verified by the negotiating bank.6. Charter party B/L. Shipping marks differ with B/L. It a credit expire on a recognized bank holiday its life is automatically become valid upto the next works day. 6. “Shipped on Board”. Shipped on Board Notation not showing port of loading and vessel name ( In case B/L indicates a place of receipt or taking in charge different from the port of loading).6. carrier or master. 2. “Freight Prepaid” or “Freight Collect” etc.. B/L is not drawn or endorsed to the Order of Prime Bank Ltd. B/L not indicate the name and the capacity of the party i. Others: 1. 8. Not signed by the Beneficiary. The full description of merchandise must be given in the invoice strictly as per L/C. B/E & P/L. Inadequate number of Invoice. notations are not marked on the B/L. 2. Checking: While checking the export documents following things must be taken in consideration.Bank. 9.5. L/C terms: Each and every clause in the L/C must be complied with meticulously and ensure the following: 1.5. The Invoice is addressed to the Importer 2. Description of goods in B/L not agree with that of Invoice. 7. 6. Full set of B/L not submitted. 6. It must be made out in the name of the beneficiary’s bank or to be endorsed to the bank.5.3.. It must be marked as drawn under L/C No……Dated….3 Invoice: It is to be scrutinized to ensure the following: 1.1.2 Draft/Bill of Exchange: Draft is to be examined as under: 1. Short shipment Certificate not submitted. 12. B/L & Others submitted. 6. Shipped on Board Notation not showing name of Pre-carriage vessel/intended vessel. Short Form B/L. 2. 5. 4. that the documents are negotiated within the L/C validity.6. that the documents are not state. Draft must be dated 2. B/L bearing clauses or notations expressly declaring defective condition of the goods and/or the packages. . 3.Issued by………. 6.6. on whose behalf the agent is signing the B/L. 5. 6. 11. that the documents value does not exceeds the L/C value. 4. Alterations in B/L not authenticated. 6. 4. 3. Loaded on Deck. Packing List. Bill of lading / Airway bill etc (transport documents): 1. 10.e. Needed documents not forwarded to buyers or forwarded beyond L/C terms. Amount must be tallied with the Invoice amount.

Consular Invoice must be stamped by the local consulate/embassy of the country to which the goods are imported. quantity. Export financing: Financing exports constitutes an important part of a bank’s activities. export performance of the exporters. is given to finance the activities of an exporter prior to the actual shipment of the goods for export. Invoice amount. Pre-shipment credit is given for the following purposes: • Cash for local procurement and meeting related expenses. quality. 8. if the buyer accepts the discrepancies mentioned by Negotiating Bank. 6. . 5. then the beneficiary’s invoice is not sufficient. must be as per L/C. Weight Certificate. The amount of draft and Invoice must be same and within the L/C value. quality certificate. If L/C calls for consular invoice. 6. CFR. • Payment of insurance premium. MCD duly signed and any other documents required by L/C each of these certificates/documents conform to the goods invoice and are relevant to L/C.7. • Packing and transporting of goods for export. Exporters require financial services at four different stages of their export operation. During each of these phases exporters need different types of financial assistance depending on the nature of the export contract. 10. as the name suggests.7.1 Pre-shipment credit: Pre-shipment credit. 12. 9. They will send the documents on collection or they can negotiate under reserve by the request of the exporter or they can seek permission/Negotiation authority from issuing Bank to allow Negotiating Bank to Negotiate the documents despite the discrepancies. indicate sale terms/ Incoterms VIZ FOB.3. 7. issuing bank will authorise the Negotiating bank to negotiate the discrepant documents.4 Other documents: Beneficiary statement. Inspection Certificate. 11. • Inspection fees. Phytosaitary Certificate. The shipping mark and number of packing list shown in the B/L must be identical with those given in the Invoice and other documents. The Invoice value must not be less than the value declared in EXP Forms. The Invoice must be languaged in the language of L/C. • Freight charges etc. CIF etc. No other charges are permissible in the Invoice beyond the stipulation on the L/C. L/C issuing Bank will inform the matter to buyer. The purpose of such credit is to meet working capital needs starting from the point of purchasing of raw materials to final shipment of goods for export to foreign country. 6. etc. Invoice amount must be correct on the basis of price. together with all other necessary information required for sanctioning the credit in accordance with the existing rules and regulations. 13. Certificate of Origin. quantity as per L/C. Packing List. VISA/Export License issued by EPB. The price. • Procuring and processing of goods for export.6. Before allowing such credit to the exporters the bank takes into consideration about the credit worthiness. 4. Number of Invoice will be submitted as per L/C. Certificate of analysis. 6.

Export cash credit against trust receipt. in turn liquidated by the negotiation of export documents. 6. This type of credit is sanctioned for the transitional period starting from dispatch of goods till the negotiation of the export documents.2 Export cash credit against trust receipt: In this case.4. He is required to execute a stamped export trust receipt in favor of the bank. except charge documents and lien on exports L/C or contract. This .7. Such facility is allowed to the first class exporters. exporter gives lien of export L/C to bank as security and opens an L/C against it for importing raw materials. which is.7. As the bank has got no security in this case. 6. But in no case the borrower would be allowed to exceed individual credit limit fixed for the purpose. These have to be collected from abroad. manufacture.7. The letter of hypothecation creates a charge against merchandise in favor of the bank. Practically except for single transaction. Here also unlike pledge.3. iii. This type of credit is granted when the exporter wants to utilize the credit for processing. Packing credit: Packing Credit is essentially a short-term advance granted by a Bank to an exporter for assisting him to buy. Back to back letter of credit: Bangladesh is a developing country. The drawings are required to be adjusted fully once within a period of 3 to 6 months. This facility is allowed only to the first class party and collateral security is generally obtained in this case. But neither r the ownership nor the possession is passed to it. Back to back letter of credit.7. v. Suiting to the breed and nature of export. credit limit is sanctioned against trust receipt (TR). a credit is sanctioned against hypothecation of the raw materials or finished goods intended for export. packing and rendering the goods in exportable condition and when it seems that exportable goods cannot be taken into bank’s custody. most of the pre-shipment credits are allowed in the form of limits duly sanctioned by Bank in favor of regular exporters for a particular period. After receiving order from the importer. the 3xportable goods remain in the custody of the exporter. process.An exporter can obtain credit facilities against lien on the irrevocable. he holds wherein a declaration is made that goods purchas4ed with financial assistance of bank in trust for the bank. sometimes an exporter may also be allowed to avail a combined Cash Credit and Packing Credit limit with fixed ceiling on revolving basis. Export cash credit (hypothecation): Under this arrangement.1. Because some raw materials are not available in the country. Export cash credit (Hypothecation).1. very frequently exporters face problems of scarcity of raw material. Generally for movement of goods from the hinterland areas to the ports of shipment the Banks provide interim facilities by way of Packing Credit. pack and ship the goods.1.1.1. 6. Packing credit. bank normally insists on the exporter in furnishing collateral security. confirmed and unrestricted export letter of credit in form of the followings: ii. In that case. 6. iv. The drawings under Export Cash Credit limits are generally adjusted by the drawing in packing credit limit.

6. • Reference number (FDBP). without any discrepancy in the documents. • Export form number.3 Advances against Export Bills surrendered for collection: Banks generally accept bills for collection of proceeds when they are not drawn under an L/C or when the documents. So the negotiating bank must be careful. Foreign Documentary Bill Purchase (FDBP): Sometimes the client submits the bill of export to bank for collection and payment of the BTB L/C. • Conversion rate. bank purchases the bill and collects the money from the exporter. BTB is opened. Post shipment credit: This type of credit refers to the credit facilities extended to the exporters by the banks after shipment of the goods against export documents. 6. • Bill amount both in figure & in Taka.L/C is called Back To Back L/C. Foreign Documentary Bill Purchase (FDBP). 3. even though drawn against an L/C contain some discrepancies. • Name of the drawee. Negotiation of documents under L/C. Banks in our country extend post shipment credit to the exporters through: 1.7.7. Advances against Export Bills surrendered for collection.7. are generally negotiated by the bank and . • Export L/C number. 6.2. In that case.2. 2.7.2. it is necessary on the part of banks to look into carefully the financial soundness of exporters and buyers as well as other relevant documents connected with the export in accordance with the rules and regulations in force. prompt. Before extending such credit. In back to back L/C. PBL subtracts the amount of bill from BTB and gives the rest amount to the client in cash or by crediting his account or by the pay order. Bills drawn under L/C. Only in that case. Necessity for such credit arises as the exporter cannot afford to wait for a long time for without paying manufacturers/suppliers. PBL keeps no margin.1 Negotiation of documents under L/C: The exporter presents the relative documents to the negotiating bank after the shipment of the goods.2. A slight deviation of the documents from those specified in the L/C may rise an excuse to the issuing bank to refuse the reimbursement of the payment already made by the negotiating bank. 6. • Name of the collecting bank. systematic and indifferent while scrutinizing the documents relating to the export.2. For this purpose. PBL maintains a separate register named FDBP Register. Sometimes there is provision in the export L/C that the importer can use the certain portion of the export L/C amount for importing accessories that are necessary for the making of the product. This register contains the following information: • Date.

FDBP A/C (which was created at the time of import bill purchased) CR.C held against BTB L/C @ OD sight export. if the bill is not eligible for negotiation. Bank Ready Buying Rate and OD sight Export Rate). CR. if any .1. On realization of proceeds following vouchers to be passed: Dr. Customers liability: Outward Foreign Documentary Bills for collection (OFDBC) (ii) Realization vouchers Dr. Income A/c Interest on FDBP 6. Exporters FC held A/c FC amount For realization of overdue interest (where export bills are realized after 21 days of negotiation) Dr. In addition to the export bill. FCAD (Exp) A/c. 6. (Retention Quota) @ OD sight Intt. MBL General A/c. Exporters FC held A/c FC amount up to BTB obligation + 2-4% @ OD sight (Export) buying Dr. (CAD) ID@ OD sight export for BTB and FCAD (Exp) portion (for rest amount) CR. MBL General A/c on Nostro A/c FC amount up to BTB obligation + 2-4% @ OD sight (Export) buying Cr. Sundry Deposit A/c Reserve Margin. MBL General A/c. MBL General A/c on Nostro A/c for negotiated value Cr.the exporter gets the money from the bank immediately. However. F. Sundry Deposit A/c Courier Service Cr. MBL General A/c on Nostro A/c For balance realized FC amount Cr.8. Accounting procedure on Collection Basis: (i) Creation of contra liability while sending on collection Dr. Income A/c. the exporter may obtain advance from the bank against the security of export bill. Income A/c Exchange Gain on FDBP Cr. For BTB portion DR.8. Customers A/c for actual overdue interest as per Bank’s prescribed rate Cr. Customer’s liability: Outward Foreign Documentary Bills for collection (OFDBC) Cr. The branch will realize overdue interest as per Bank’s prescribed rate from all export bills after 21 days from the elate of negotiation to the date of realization of proceeds. Banker’s liability: Outward Foreign Documentary Bills for collection (OFDBC) On realization of proceeds (i) Reversal of contra liability Dr. Bank Ready Buying (for purchase amount) CR. (FAD) ID @ B. MBL General A/c on Nostro A/c Realized FC value less negotiated FC value @ OD sight export Cr. FDBP A/c for negotiated amount in BD Taka Cr. Realization: When the Export proceeds realized then the following vouchers are passed: Dr. Exchange gains on FBP (difference between B. Banker’s liability: Outward Foreign Documentary Bills for collection (OFDBC) Cr. banks may ask for collateral security like a guarantee by a third party and equitable/registered mortgage of property.

97% of total inflow. MBL started its remittance business in Bangladesh since December.63 million in FY 2007-08. Packing Credit A/c.930.51 Table7.160. During 2006-07 remitting amount was US Dollars 3.340.97 million. where as it stood 2.95 1.34 1.34 million which was 1. if any Cr.C value less F.02 96. Customers CD A/c in net BD Taka CHAPTER. Foreign Remittance: Convertibility of Taka in current account transactions symbolized a turning point in the country’s exchange arrangement and exchange rate system. The following statistics shows that remittance flow to Bangladesh has increased through years as well as the inflow coming through MBL has increased than the past years. Funds from this A/Cs are freely remittable to any country according to the needs of A/c holders.C held amount) Cr.1: Comparison of MBL’s remittance inflow with total foreign remittance inflow in Bangladesh Source: Bangladesh Bank and Remittance Department of MBL 7. Therefore.2 FC Account: .97 million in FY 2005-06 to US Dollars 3.371. Remittance flow of Bangladesh and it’s contribution of MBL: MBL is involved with both the form transactions of inward and outward remittance processing service.371. 1996.7 Remittance 7. Now the operation of foreign currency accounts have been more liberalized. if any Cr. MBL tries their level best to increase the flow of remittance through banking channel.76 FY 2006-2007 3. where as remittance inflow from MBL stood at US Dollar 66. Information provided in (Table-1) shows that remittances from migrant Bangladeshi workers increased significantly from US Dollars 3.704. In FY 2005-06 the contribution of remittances coming through MBL was 1.83 66.95 million in FY 2005-06 to US Dollars 96.76% of total inflow. Moreover.866.78 53.63 96. Income A/c Exchange Gain on FDBP (difference between Ready Buying/TT clean & TT (doc) Buying rate on realized F. if any Cr. the inflow of remittances coming through MBL also increased appreciably from US Dollars 53.97 FY 2007-2008 3.866. Sundry Deposit A/c Income Tax.1.948. if any Cr.061.344.93 million in FY 2007-08.061. Year Foreign Remittance Inflow in Bangladesh (US$ million) Foreign Remittance Inflow through MBL (US$) Foreign Remittance Inflow through MBL (US$ million) Remittance percentage of MBL with total remittance inflow in Bangladesh FY 2005-2006 3. Sundry Deposit A/c Local Agency Commission.51% of total inflow in the recent FY 2007-08.Cr. if nay Cr.93 2. 7.97 66. the percentage of remittance inflow through MBL also shows a gradual increase. Hire Purchase A/c.97 53. Lease Finance A/c.

Documents required for Opening FC A/Cs: (a) For Bangladeshi Wage Earners: Photocopy of first 7 (seven) pages of valid passport and visa page/arrival page. Photocopy of employment contract/appointment letter/work permit. 7. (g) Bangladeshi nationals working as employees/consultants in international bodies in Bangladesh and drawing pay and allowances/consultancy fees/honorarium in foreign currency.2.(a) Resident Foreign Currency Deposit (RFCD) Account: Persons ordinarily resident in Bangladesh may maintain foreign currency accounts with foreign currency brought in at the time of their return in Bangladesh from visits abroad. (j) Industrial enterprises in EPZ.2. (b) Non-resident Foreign Currency Deposit (NFCD) Account: Non resident Foreign Currency accounts may now be maintained as long as the account holder desire. (b) For Foreign National/Company/Firm: Two copies of photograph of account holder for individual and operators of other account holder.1. .2.2. Who can Open FC Accounts: The Branch with Authorized Dealership License may. Amount brought in by non-resident Bangladeshi can be deposited in FC account any time after to Bangladesh. These accounts are termed as RFCD accounts.3. Two copies of passport size photograph of each account holder and nominee duly attested. without prior approval of Bangladesh Bank. Currency in which FC A/C can be Opened: FC Accounts can be opened either in (a) Pound Sterling (b) USD (c)EURO (d) Japanese Yen 7. Copies of relevant pages of passport for individual and operators of other account holder. (h) Merchandise and service exporters (i) Bangladeshi Nationals who are ordinarily resident in Bangladesh may open foreign currency accounts with foreign exchange brought in at the time of their return to Bangladesh from visits abroad. open foreign currency A/Cs in their books in the name of: (a)Bangladeshi nationals residing abroad (b) Foreign nationals residing abroad or in Bangladesh (c) Foreign firms and companies registered abroad and operating in Bangladesh or abroad (d) Foreign missions/Embassies/UN organizations and their expatriate employees (e) Diplomatic bonded warehouses (duty free shops) (f) Local and Joint venture contracting firms employed to execute projects financed by foreign donors/international donor agencies. 7.

 Copies of the Memorandum and Articles of Association/Laws/Bye Laws.8. Mode of Operation: Foreign currency accounts opened in the name of Bangladesh nationals working abroad or self employed abroad can now be maintained as long as the account holder desires.Copy of service contract/appointment letter/work permit. Withdrawals: Payments may be made freely abroad from these FC accounts to the extent of balance lying therein.C account.2.7. Portion of repatriated export proceeds of Merchandise/service exporters are allowed to credit to the exporters retention quota account. drafts.5. etc. Convertible & Non-Convertible Taka A/C: . provided such foreign exchange in excess of US$ 5000 or its equivalent has been duly declared by them to the customs at the time of their arrival. Funds lying in FC Accounts can be utilized for import of goods and commodities as per instructions issued by the CC1&E and Bangladesh Bank.2. Such accounts may also be opened by the eligible persons within six months of their return to Bangladesh. 7. or Joint Venture Agreement for Joint Venture Company.2. 7.6. Interests: Ads may pay interest at prevailing Euro Currency Deposit rate if balance in the account is not less than US$ 1000 or Pound Sterling 500 and are maintained for a minimum period of one month. 7.2. etc.4. travelers’ cheques. brought into Bangladesh by the account holders while on temporary visit to Bangladesh.2. 7. Foreign exchange earned through business done or services rendered in Bangladesh can not be put into F.C account in the form of Term Deposit (NFCD). Foreign nationals/companies/firms registered and/or incorporated abroad and A-type industries of EPZ may also open F. FC accounts except foreign diplomats or privileged persons who have specific authority from Bangladesh Bank to accept such payment. if any for individual. Deposits: Credit to a foreign currency account may be made against inward remittance of foreign exchange in any form or transfer from another FC account or Non-Resident Taka Accounts of bankers abroad. Copies of registration in Bangladesh with Board of Investment / Bangladesh Bank for Foreign Joint Venture Firm. ADs may also raise credits to such accounts with the proceeds of convertible foreign exchange viz. 7. No payment in foreign exchange may be made to or on behalf of any resident in Bangladesh. currency note. Local disbursements may also be made freely in Taka from such foreign currency accounts.

For transfer from another convertible Taka account. The accounts may be credited with foreign currencies brought in or remitted from abroad or transferred from a foreign currency A/C or another convertible Taka account. Main Branch to foreign correspondents to fulfill its customers’ needs are considered to be the Outward Foreign Remittances.3. MT. Travelers cherub but also payment against imports into Bangladesh & Local currency credited to Non-Resident Taka Accounts of Foreign banks or convertible Taka account. And this section of Foreign Exchange Department deals with incoming and outgoing foreign currencies. These are: 1. Foreign organizations/their expatriate personnel mentioned above may maintain non-convertible Taka accounts with the branches without prior Bangladesh Bank approval. Foreign demand draft (FDD) issued: People have to send money to abroad for various purposes.C account/convertible Taka account may be made by debit to a non-convertible Taka account. It comprises the followings: • FDD Issued • FTT Issued • TC Issued • Endorsement of foreign currencies in the passport. foreign remittance is divided into two types. This form contains: The purpose of travel. diplomatic missions. semi-government. Types of Ramittance: Foreign remittance section of MBL.1.The branch with Authorized Dealership License may open convertible Taka Accounts in the names of foreign organizations/foreign nationals viz. UN organizations. FORM T/M has to be filled-in duly.1. These accounts may freely be debited for local expenses. This form is filled up under the Foreign Exchange Regulation Act. MBL issues most of the FDD for the purpose of payment of the application fees to the foreign universities. Main Branch is an integral part of Foreign Exchange Department. 1947. Outward Foreign Remittance and 2.e. Therefore on the basis of its function. Outward Foreign Remittance: Remittances issued by MBL. .1. Inward Foreign Remittance 7. agencies & the expatriate employees of such missions/organizations who are resident in Bangladesh. Foreign Contractors & Consultants engaged for specific projects under the government. For the issuance of FDD. the Taka amount from the transferor’s account would be converted into foreign currency for transfer & credit to the recipient account by re-conversion into Taka. 7.3. The term “Outward Remittance” include not only remittance i. Name of the country where the applicant will go. 7. sale of foreign currency by TT. No money meeting from a business originating in Bangladesh and otherwise reportable to Bangladesh can be carrier to these accounts.3. • Sale of foreign currencies. These accounts may be credited with funds from convertible Taka accounts. No remittance abroad or transfer to an F. with remittance from abroad and with Taka received from authorized sources including interest from STD accounts. Non-profit International Bodies. Drafts.

Remittance for Hajj. For giving cash foreign currency.00.1.2. 2. Foreign Nationals.M. Traveler’s cherub (TC) issued: MBL issues only American Express Traveler’s Cherub (TC). 8. the requirements are similar to those of Traveler’s Cherub. o Official & Business Travel: For the following official and business purposes. But according to the foreign exchange Regulation Act.3. 12. (b)T. one copy for PBL. If he/she made any voyage and if he/she purchase dollar at that time. Form: For all other outward remittances form TM is used. customer has to fill up T/M form. the applicant has to mention the name of the university in whose favor the FDD is issued. such as – (a)IMP Form: All outward remittances on account of imports are done by form IMP. o Forms used for Outward Remittance: Two forms are used for Outward Remittance of Foreign Currency. Family remittance facility. the concerned officer checks the last voyage of the purchaser. the customer has to purchase TC. MBL charges Tk. 400 for each FDD. Official/Semi-Official Visit by the officials of Government/Autonomous Bodies.Name of the air or shipping company. 7. Education. This form has to be duly signed by the applicant.3. Endorsement of cash: Cash foreign currency can also be remitted through the cash endorsement in the passport. outward remittance is permitted: . MBL cannot endorse more than $600. One copy for American Express Bank. For more than $600.00 as cash at a time. Remittance of Membership Fees/Registration Fees etc. In case of endorsing cash in the passport. 10. 100.3. 6. Travel. 7. o Private Remittance: For the following private purposes.1. He has to fill up the purchase form also. For TC MBL charges 1% as commission. That’s why.00 in cash in a year. Date and place of issue of the passport are given. and two copy for the customer. Purchase form has four copies. For TC. For cash endorsement MBL maintains a separate register. 7. 3. Passport number. Other Private Remittances. then the officer will deduct the amount and will give the rest to the purchaser. 11. Health & Medical. outward remittances are permitted: 1.00 as service charge. 9. MBL charges TK. Remittance of Evaluation Fees. Seminars and workshops. 5. 4. 1947 an individual cannot take more than $1000. In case of application fee. Remittance of Consular Fees.

C. 10. Taka Dr. 4. Business Travel Quota for Importers and Non-exporting producers. Remittance by shipping companies.D./D. 2. 4. T. Remittance on account of Training & Consultancy.C. O.C.C Amount @ T.C.C selling & Ready selling amount). Remittance of Profits of Foreign Firms/Branches. Income A/C: Commission on T. (b) From FC of the Customer Dr. Cr. 3. Cr.T. Mercantile General A/C Head Office(ID) for FC Amount @ Ready selling for USD & ACUD or at Mid rate of T. 5. Remittance of Dividend. Exporters’ Retention Quota. Advertisement of Bangladeshi Products in mass media abroad. Income A/C: Commission on T. Business Travel quota for New Exporters.O. Cash from Customer or Customers CD/SB Account for F.T clean for other currencies. selling plus commission & charges as per schedule. 6. 9. Bank Changes. Subscriptions to Foreign Media Services. o Accounting Mechanism: 1. Opening of branches or subsidiary companies abroad.T.(Difference amount) Cr. Cr. Income A/C: Exchange Gain on F.T & OD selling plus amount of charges as per schedule. 3.T. 2. Issuance of Travelers Cherub: (a) Against BD. (Difference amount between T. . Remittance of Royalty and Technical Fees. Issued @ Ready selling rate.C. Customers Taka A/C or cash from Customer for charges as per schedule Cr.C A/C for FC Amount @ Prevailing holding rate of F. Dr. 11.1. Sundries.T. Income A/C Commission on T.D foreign as per schedule of charges. T. 7. Mercantile General A/C H. Official Visit. Income A/C: Exchange Gain on F. 8. Cr. Taka Dr. Customers F. 2. as per schedule of charges. outward remittances are permitted: 1. Cash from Customer or Customers CD/SB Account for F. Cr.C balance. Amount @ T.C. Airlines & Courier Service. Issuance of Draft. etc: (a) Against BD. Costs/Fees for Reuters Monitors.(ID) for FC Amount @ Prevailing holding rate.D & T. o Commercial Remittance: For the following commercial purposes. Cr./D. foreign for charges schedule.

declaration in Form C is not Required in case of Remittances by Bangladesh Nationals working abroad. (c) Settlement of Travelers Cherub (weekly basis) Dr. Cash from customer or CD/SB A/C for charges as per schedule. However.(b) From F. e.C. 7.C. Purchase of foreign currencies. Followings are the Inward Foreign Remittances of MBL.C balance. balance. Mercantile General A/C Head Office (ID) 3. Main branch are considered to be its Inward Foreign Remittances. Dr. Cash from Customer or CD/SB Account for F.C. Form C: Inward remittances equivalent to US$2000. a. FTT Payable c. Encashment of foreign currencies endorsed in the passport. account for F.2. EXP Form: Remittances received against exports of goods from Bangladesh are done by form EXP. Demand Draft & similar Instrument for protecting the bank from probable loss as well as safety of the Bank officials concerned. Main branch. Issuance of F. Income A/C: Commission on F.C Account of the Customer Dr. Notes: Dr. Cr. Purchase of Currency Notes. TC Payable d. Travelers cherub.3.3.2. Cr. Inward Foreign Remittance: Normally. Travelers cheques. Inward Foreign Remittance comprises of all incoming foreign currencies.C Issued @ prevailing holding rate of F. 7. in hand Account for F. Two forms as prescribed by Bangladesh Bank are used for purchase of Foreign Currencies such as.C as per schedule of charges. Income A/C: Commission on T. Cr.1. Utmost care should be taken while purchasing Currency Notes.C Amount @ prevailing holding rate of F.C.C amount @ cash selling rate plus commission & charges as per schedule. Customers F. Drafts etc: Following General observations are required in addition to common judgment/intelligent/vigilance of the dealing officers:- .. Remittances issued by the correspondent banks situated in the foreign countries and thereby drawn on MBL. Cr. Issued Cr. T.C amount @ cash selling rate. T. F. FDD Payable b.and above are done by Form “C”.C as per schedule of charges.C.

Income A/C: Exchange Gain on F.C. by way of sales to other ADs and the general public in accordance with the instructions of the Bangladesh Bank. The ADs may also purchase foreign currency notes.i. Buying less postal charges. Cash A/C or party’s A/C for payment to customer for F.C Account Dr.C. Cr.3. (Difference amount between Ready Buying & FBP outstanding amount) 2. F.Cs to be asked for to ensure genuineness/bonafide of the transactions.C. Income A/C: Postage as per schedule of charges. Income A/C: Exchange Gain on F.C Amount @ Cash F. Cr.C.C amount @ Cash F. Purchase of Foreign Currency Notes (a) For payment in Taka Counter value Dr.C Account @ T. FBP Clean A/C for F. While Purchasing Travelers cherub signature of the holder to be obtained on the T/Cs in front of the Bank Officials and should be verified with the signature of the holder already given at the time of issuance of T. F. Dealing in Foreign Currency Notes & Coins: The Authorized Dealer branches are permitted to deal in foreign currency notes & coinsand may freely buy foreign currency from incoming passengers regardless of nationality and regardless of whether or not a declaration on form FMJ is produced at the time of encashment. 7.2.3. Encashment of Travelers’ Cherub: (a) For Payment in Taka Counter value Dr.C Amount @ T. If this form is produced.Cs. Cr.C Amount @ T. Cash A/C or party’s A/C for payment to customer for F.C Buying Cr. (b) On realization of proceeds in Nostro A/C: Dr. the amount encashed should be endorsed on it.3. 7. Passport of the seller as well as purchase contract of the T.C Buying Cr. (b) For Credit F. Private cherub should not be purchased under any circumstances without prior approval of Head Office.C in hand Account for F.2. The branches with AD license are permitted to dispose of foreign currency notes etc.T. iv. clean buying Cr. (The difference amount between above two) .C Amount @ Ready Buying.2. Indemnity Bond to be obtained for recovering the amount paid in advance to the holder in case of dishonor of the instrument. Customers F. coins and other travel instruments freely from Authorized Moneychangers without production of FMJ. Currency Notes to be checked very carefully so as to avoid risk of purchasing counterfeit Notes. iii. Mercantile General A/C: Head Office (ID) on Nostro A/C for F.C Amount at same rate. Buying. ii. Drafts should not be purchased under any circumstances unless the holder is a regular/valued customer of the Bank. FBP Clean for outstanding amount Cr.C in hand Account for F. Accounting Mechanism: 1.

3. Encashment of T.T.:
(a) For payment in Taka Counter value
Dr. Mercantile General A/C: Head Office (ID) on Nostro A/C for F.C Amount @ Ready Buying
for USD & ACUD or at Mid rate between T.T., O.D & T.T clean for other currencies.
Cr. Customers’ CD/SB A/C or Payment Order for F.C Amount @ Clean Buying less commission
and charger as per schedule.
Cr. Income A/C: Exchange Gain on F.C. (The difference amount between Ready buying and T.T.
Clean buying Amount).
Cr. Income A/C: Commission T.T Foreign.
(b) For Credit to F.C Account
Dr. Mercantile General A/C: Head Office (ID) on Nostro A/C for F.C amount @ T.T clean
buying.
Cr. Customers F.C. Account at the same rate.
Dr. Customers CD/SB Account for charges as per schedule.
Cr. Income A/C: Commission T.T. Foreign.
4. Purchase & Collection of Foreign Draft:
(a) Purchase for payment in Taka counter value
Dr. FBP Clean A/C: for F.C Amount @ O.D. Transfer Buying.
Cr. Cash A/C: for payment to customer @ O.D Transfer less commission and charges as per
schedule.
Cr. Income A/C: Commission on F. Bills as per schedule.
Cr. Income A/C: Postage as per schedule.
(b) On realization of proceeds in Nostro A/C
Dr. Mercantile General A/C: Head Office (ID) on Nostro A/C for F.C. amount @ Ready buying
for USD& ACUD or at Mid rate between T.T., O.D &T.T clean for other currencies.
Cr. FBP Clean A/C for outstanding amount.
Cr. Income A/C: Exchange Gain on F.C (The difference amount between above two)
(c) For collection without purchase
Dr. Customer’s Liability: Foreign bill lodged A/C for F.C Amount @ O.D. Transfer buying
Cr. Banker’s Liability: Foreign bills for collection A/C for F.C amount at the same rate.
CHAPTER- 8
Analysis & Findings
8.1. Foreign exchange business of MBL:
The performance of foreign exchange business of Mercantile Bank Ltd. can be visualized from
the following data in Table-8.1. Here, five years data of foreign exchange business are presented.
These are off-balance sheet items and showed as contingent liability.

Tk in millions
Year Export L/C Import L/C Total Business
2004 15,250.60 20,380.80 35,631.40
2005 17,411.00 28,325.20 45,736.20
2006 24,108.57 33,271.90 57,380.47
2007 34,108.57 42442.80 76,551.37
2008 32,670.10 40380.10 73,050.20
Table-8.1: Foreign exchange business of MBL
Source: Annual report, 2008
Figure 8.1: Foreign Exchange Business of MBL
In the Table-8.1 it is observed that the foreign exchange business of Mercantile Bank Ltd. has
been increasing with the passage of time but last year it is declined. Growth of import and export
are decline by 4.85% and 4.21% respectively.
8.2 Foreign exchange income of MBL:
Foreign exchange income is a great source of revenue for the bank. This revenue comes in two
forms: commission and exchange gain. Here, five years data of foreign exchange income is
presented in Table-8.2.
In millions Tk
Commission
Year L/C Export Bill Bill Purchased Accepted Bill OBC, IBC PO,DD,
TT, TC Exchange
Gain TotalFX
Income
2004 100.39 2.00 0.99 4.88 1.53 9.65 96.47 215.91
2005 129.85 3.46 1.55 6.26 2.85 9.89 188.72 342.58
2006 156.51 5.22 1.39 11.16 2.53 8.96 201.06 386.83
2007 196.84 8.33 2.11 18.30 2.26 11.62 254.76 494.22
2008 216.55 11.17 2.64 19.65 3.23 12.35 274.90 540.49
Table 8.2: Foreign exchange income of MBL
Source: Annual report 2005, 2006, 2007, 2008
Figure 8.2 : Foreign exchange income of MBL
In the Table-8.2 the different sources of income for foreign exchange business are revealed and
the income is showing a continuous increasing trend. The most dominant variable in foreign
exchange income is exchange gain. This is achieved from both export and remittance business.
8.3. Foreign exchange income, operating income and profit:
The foreign exchange income, operating income and profit after tax for five years is presented in
Table-8.3. The foreign exchange income has a contribution to operating income as well as to
bank’s profit.

In million Tk
Year Total FX Income Operating Income Profit
2004 215.91 1592.21 301
2005 342.58 1970.37 389
2006 386.83 1968.83 472
2007 494.22 2401.66 543
2008 540.49 2831.53 619
Table 8.3: Foreign exchange income, operating income and profit
Source: Annual report, 2008
Figure 8.3: Operating Income & Foreign exchange income
In the Table-8.3, it is shown that along with the increasing trend in foreign exchange income the
operating income is also increasing. So, foreign exchange income has a positive effect on
operating income as well as profit. Table-8.1, 8.2, 8.3 focuses on the important information of
foreign exchange business of Mercantile Bank Ltd..
8.4. SWOT analysis:
The comparison of strengths weaknesses, opportunities, and threats is normally referred to as a
SWOT analysis. The central purpose of the SWOT analysis is to identify strategies that align, fit,
or match a company’s resources and capabilities to the demands of the environment in which the
company operates. To put it an other way, the purpose of the strategic alternatives generated by a
SWOT analysis should be to build on company strengths in order to exploit opportunities and
counter threats and to correct company weakens.
SWOT analysis explains in two broad ways on viewed of organizations environment. These are:
a) Internal Environment Analysis:
It includes:
1) Strength
2) Weakness
b) External Environment Analysis:
It includes:
1) Opportunity
2) Threats
During my internship period in MBL I have found some aspects relating to the Bank’s strength,
opportunity, weakness and threats, which are more or less. I think affecting the bank’s
performance in total, which are explained below:
8.4.1. Strengths:

 8. there are no hidden barriers or boundaries while communicate between the superior and the employees. Some of the job in MBL has no growth or advancement path.00%in 2008 as compared to 92. MBL has to more emphasize on that. As a result the services of the bank seem to be Deus in the present days. The bank failed to provide a strong quality-recruitment policy in the lower and some mid level position. In terms of promotional sector. The path of the future should be determined now with a strong feasible strategic plan. The management can consider options of starting merchant banking or diversify into leasing and insurance sector. The ratio indicates efficient utilization of resources to earn revenues. And. The quality of the service at MBL is higher than the Dhaka Bank. MBL has provided its banking service with a top leadership and management position. Banks operate in the primary financial market. The working environment is very friendly. The top management officials have all worked in reputed banks and their years of banking experience.4. skill. The Board of Directors is the skilled person in business world.2. Service quality of this bank is good but hot high as the customers want and expectation.MBL has already established a favorable reputation in the banking industry of the country. is maintaining a strong capital base. Prime Bank or Dutch Bangla Bank etc. MBL has the reputation of being the provider of good quality services too its potential customers. Weakness: This bank has not any long-term strategies of whether it wants to focus on retail banking or become a corporate bank. The number of deposits and the loans and advances are also increasing rapidly. Mercantile Bank Ltd. They have to follow aggressive marketing campaign.68% that is well above the stipulated requirements of 9%. interactive and informal. Earning base in assets of the bank was 88. Activity in the national economy controls the business of . capital adequacy ratio of the bank was 10. MBL has already achieved a high growth rate accompanied by an impressive profit growth rate in 2008. 8. This is a weakness of MBL that it is having a group of unsatisfied employees.40% in 2007. MBL has an interactive corporate culture.3. Investment in the Secondary market governs the national economic activity. By the end of December 2008. Opportunity: In order to reduce the business risk. The bank has already shown a tremendous growth in the profits and deposits sector. It is one of the leading private commercial banks in Bangladesh. and expertise will continue to contribute towards further expansion of the bank. But the bank has to compete with the Multinational Bank located here.4. MBL has to expand their business portfolio. The activity in the secondary financial market has direct impact on the primary financial market. So lack of motivation exists in persons filling those positions. This corporate culture provides as a great motivation factor among the employees.

The officers of MBL help them to properly execute their business. As a result. 8. In recent years. good quality employees leave the organization and it effects the organization as a whole. informal and attractive. For this. . Compared to their private banks of Bangladesh. Findings: Major findings of the study are: The MBL follows the traditional banking system. The top executives and officers are very helpful to the clients. The Foreign Exchange Department is very much Strong. The bulk of our population is middle class. The working environment of MBL is very interactive. It is giving a competitive advantage to the MBL. quality services. Mercantile Bank has to remain vigilant about this problem so that proactive strategies are taken to minimize this problem if not elimination. are very much expedient to the foreign Bank. Threats: The default risks of all terms of loan have to be minimizing in order to sustain in the financial market. 8. according to me. customs and practices. Clauses they use in dealing with the foreign Bank in term of L/C opening and amendment of L/C. innovative technology. A large number of private banks coming into the market in the recent time. In that product line. rules. businessmen like to deal their business with the MBL. they can emphasize more on various social activities because it has these opportunities. This poses a threat on the employees of switching to other banks from MBL.the bank. thus the level of competition rises and create threat for Mercantile bank Ltd. Daily basis interest on deposit offered by HSBC. Some of our businessmen do not know the exact procedures of international trade. Opportunity in retail banking lies in the fact that the country’s increased population is gradually learning to adopt consumer finance. Because default risk leads the organization towards to bankrupt. Different types of retail lending products have great appeal to this class. In addition of those things. The entire banking procedure is not fully computerized. In this competitive environment MBL must expand its product line to enhance its sustainable competitive advantage. So a wide variety of retail lending products has a very large and easily pregnable market. At the same time. the compensation of MBL is not so attractive.5. the numbers of private bank is increasing. The low compensation package of the employees from mid level to lower level position threats the employee motivation. they can introduce lots of the ATM to compete with the local and the foreign bank.4. These banks always pose a threat for others by coming up with new product line. MBL can introduce special corporate scheme for the corporate customer. The operations of international trade are as per local and international laws. etc. People working here are cooperative to the highest possible extent.4.

Despite being stoned in 1999. Recommendation: I had the practical exposure in Mercantile Bank Ltd. Anti money laundering procedures of the bank is very effective. tax e-mail etc. Internal Control System (ICS) of MBL is not up to the standard (as per BAS). especially in the foreign exchange department. MBL provide little assistance in relation with foreign exchange to the small entrepreneur comparing to large business houses. The specialization of the personnel on a particular task is not ensured. Incase of exporting goods the Bank should aware about under invoicing so that no body can get chance to avoid Tax. As a result the rate of opening L/C become reduces. The marketing strategy adopted by the bank is effective but not efficient. with my little experience in the bank in comparison with vast and complex banking system. from branch to another in every three years without ensuring that they are acquainted with the task. Even it does not have branch in many commercially and industrially important places. the bank has only 41 branches now. Sometimes the government imposes restriction to import and export some products. On the basis of my observation I would like to present the following recommendations: The Branch should move to the fully automated banking system. Incase of importing goods the Bank should aware about over invoicing so that nobody can get chance to send money abroad illegally. for just three months. Fund management of the Bank should be more efficient. sometimes 100%. CHAPTER. Accounting system of the Bank should be software base. The expansion process of the bank has little match with the modern pace of globalization. This cause a considerable degree of inefficiency in the bank’s performance. it is not so easy to recommend some suggestion to enhance the performance level of the organization.Financing in the international trade is very crucial for the economy as well as it is risky. The appearance of the bank in the printing media and electronic media has become a matter of fortune.9 Recommendation& Conclusion 9. . I have observed some shortcomings regarding operational and other aspects of their banking. Duty. Vat. regarding opening a L/C. MIS cell should be developed through internal. This will save a lot of time of personnel working here and will increase their and the Bank’s performance thereby.1. It has been found that executives are transferred from one department to another department frequently. Small entrepreneur has to keep higher margin. This will reduce the average cost of working fund. The presence of modern data processing and communication equipments is inadequate in MBL.

Human resources in the branch need to be equipped with adequate banking knowledge. efficiency cannot be optimized. There are more gaps are showing between perception and expectation of the respondents. Attention should be given on proper maintenance and replacement of phone. printer fax. Bank can arrange sufficient training program on these subjects. Improve own ATM network and maintain sufficient fund in ATM booth. Bank can introduce more advanced MIS system to mobilize its day to day activities. The bankers must be careful in financing international trade So that. But recently the bank is taking initiatives for installing new software named ‘TEMONUS T24’. The bank should introduce new innovative products to attract new potential customers and also keep its existing customer happy. so research and development cell of the bank should put more effort for the purpose of introducing an efficient Foreign Exchange department. light behavior. physical facilities and so on. the branch’s photocopier remains out of order. Stuck up advances should be reduced through more recovery at lower rate of interest.Productivity measurement should be done from time to time through developing customer services. It has real time online banking. It is very dedicated software. The Assistant Commissioners of Tax can contribute more. Foreign Exchange Department now using only one software and that is “PC BANK”. Printers are of obsolete technology. It will help the employee to do their works more quickly and at the same time maintaining their quality . They should have basic knowledge regarding money. Without proper knowledge in these subjects. So I think it will be a great progress for the bank. the bank does not fall in bad loss provision sated by BB. ACs gets out of order frequently. Internal control system MBL to be further strengthened. ATM card facilities are not easy of MBL. So they are losing their many potential customers. banking. computer. They must be more careful about invoicing and restricted products. finance and accounting. Bank should hold and increase overall satisfaction rate and provide modern service. which are existing between clients and Bank. machine and photocopier. Mercantile Bank Ltd. Many times. modern equipment. If the bankers can scrutinize the Commercial invoice it will decrease the Money Laundering. As soon as possible remove this gap. Commission income occupies the major part of the total earnings of a bank and bank’s profitability mainly depends on commission earning capacity. So I think MBL should take necessary step to easy their ATM card facilities for their customers. Human resource is another sector for the branch to be developed urgently. ATM facilities and E-banking and lot of more. Bank should fixed-up specific types of client strategy according to the different character of client.

The workload in this department is so high that at every quarter in the year MBL places a good number of interns in this division. Being established in 1999. it is driving the bank from the front. MBL does offer a real practical orientation to the new comers with typical corporate culture. Rather. I think the Management should employ at least few more employees in Foreign Exchange Department of Main Branch. The banks are contributing much than the previous years for the growth and development of the country. Branches should be opened in every industrial and commercial corner of the country. Credit for such contribution by the industry goes to the Bangladesh Bank. accuracy and proficiency.of work. it is the most important department of the Bank. More products of varied interests should be introduced for the diversified client group. Perhaps. Mercantile Bank is one of the pioneers in many criteria. This three months internship orientation with MBL undoubtedly will help me a lot to understand and cope with any typical corporate culture. this department is expanding and excelling itself day by day. This department is driving the bank from the front. foreign exchange department is one of the most important departments of MBL. it will be exaggerated. Through the import. 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. export and foreign remittance operations. The management should impart more imphasis on the advertisement of the bank in different electronic and printing media.2. the bank has established only 41 branches in ten (10)years. The greater bulk of our population is of middle classed. The mode of extension is much slower than other contemporary and equivalent banks. MBL is committed towards the excellence in the service with efficiency. Despite problems and weaknesses. Opportunity in retail banking lies in the fact that the country’s increased population is gradually learning to adopt consumer finance. So a wide variety of retail lending products has a very large and easily pregnable market. Conclusion: Banking industry in Bangladesh is now on the right track. The spread out mechanism of the bank should be faster and progressive as well. transparent operating procedure and a tem of highly knowledgeable and proficient personnel. Different types of retail lending products would create great appeal to this mammoth class. Banking industry is much organized because of strong vigilance and supervision of Bangladesh Bank. The Basic goal of the advertisement should be firstly to make people know and understand that the bank is universal one and permits anyone’s access. it offers people like us an environment where the appetite for learning just gets intense. In the industry. I have seen from my practical experience that many customers wait for a long time for any service as they see that the some concerned officials are doing their best to meet the requirements of the customers. Like of most of the commercial banks. 9. To the gateway to practical professional life an experience at MBL as an internee was a privilege for me. With an easy to understand operating guidelines. But as the Foreign Exchange procedure is designed with many small tasks. . There is a burning need for some additional employees. this department is making a great contribution to the bank and the economy as a whole.

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