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Chapter 1


Introduction of the study

Origin of the study
Objectives of the study
Scope of the study
Significance of the study
Methodology of the study
Limitations of the study

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1.1 Introduction of the study:

Bank is a financial institution which deals with money. Not all banks are the same. There are
different types of banks: co-operative banks, savings banks, investment banks and central
banks. Because of its transitional role, banking system occupies a vital place in a countrys
economy. It confirms distribution and re-allocation of assets and keeps up the motion of
economic activities. As monetary intermediaries, banks stand between investors who invest
capital and debtors who demand capital. It assembles asset for both the public and private
sectors, and provides inventive answers to meet the requirements of entrepreneurs and
government agencies. Thus the banking segment plays a key role in the evolution of
Bangladeshs economy. After the independence of Bangladesh in 1971, six state owned
commercialized banks were composed, two state owned banks that specialized in lending to
the agriculture and industry, three foreign banks including standard chartered bank. Foreign
trading is a large business which is run by commercial banks. Foreign trade means the
exchange of capitals and services across the border. Expertise is provided by commercial
banks. Foreign trade requires a flow of goods from seller to buyer and payment from buyer to
seller. Here, bank plays as a conciliator between the buyer and seller. The United
Commercial Bank (UCB) was established in Bangladesh as a banking company. I worked in
the General Banking (account opening, clearing, transfer, deposit and cash), loan department,
and LC department of this bank. This gave me the opportunity to know more on different
aspects of the company. So, I have prepared my internship report on General Banking of
United Commercial Bank Limited.

1.2 Origin of the study:

The internship program is an essential part of BBA and this report is prepared as a part of my
internship. Every student must take a three month attachment with an organization to take
part in different types of works. The organizational supervisor assigns the report and the
faculty advisor endorses the report. This assignment is given to collect practical knowledge
and experience of corporate life. I got the opportunity to complete my assignment in United
Commercial Bank Limited, Gulshan Corporate branch, Dhaka. It was a three month long
program. My supervisor asked me to conduct my study on Foreign Exchange Operations
and also authorized to prepare a report on it.

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1.3 Objectives of the study:

1.3.1 Main Objective:

The main objective of this study was to assess the foreign exchange operations of
United Commercial Bank Limited and their services.

1.3.1 Specific Objectives:

To observe the Foreign correspondences of UCBL

To identify the problems regarding Foreign Exchange Operation of UCBL at Gulshan
Corporate Branch.
To provide some recommendations to improve service quality of the foreign exchange
operations of UCBL at Gulshan Corporate Branch.

1.4 Scope of the study:

As I worked in Foreign Exchange department so I have completed my report on this

department where ignored the other departments of the bank. And the information of my
report is related with my working experience. This report covers Foreign Exchange
Operations of United Commercial Bank Limited. It will give a wide view of the different
stages of foreign exchange operational procedure of United Commercial Bank Limited,
starting from the Import, Export and Remittance with total Foreign Exchange Procedures.

1.5 Significance of the study:

Foreign exchange is an important department of United Commercial Bank Limited which

deals with import, export, and foreign remittances. It brings between importers and exporters.
This department plays an important role in enhancing export earnings, which aids economic
growth and in turn it helps for economic development. On the other hand, it also helps to
meet those goods and services, which are most demand able and not adequate in our country.
Thats why practical orientation is a positive development in professional area. In such state
of affairs the present aiming at analyzing the experience of practical orientation related to an
appraisal of United Commercial Bank Limited. And if the bank will follow my findings and
take proper steps to solve them on the basis of my recommendations it will able to reach a
better position in future.

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1.6 Methodology of the study:

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

The primary Sources of data are:

Directly observing the activities of export and import department.
Face to face conversation with the respective officers of the department.
Face to face conversation with the clients.
Relevant file study as provided by the officers concerned.

The Secondary Sources of Data are:

Annual Reports of the UCBL.
Periodicals Published by Bangladesh Bank.
Different books, articles etc. regarding foreign exchange operations.
Other websites.

1.7 Limitations of the study:

Unavailability of sufficient written documents as required making a comprehensive

In many cases, up to date information is not published.
Because of the unwillingness of the busy key persons, necessary data collection
became hard.
Foreign Exchange sometimes is very confidential, so getting adequate relevant
information was difficult.

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Chapter 2
Overview of United Commercial Bank Limited

Overview of United Commercial Bank Limited

Board of director
Objectives of UCBL
Business moto
Strategic Priority
Branches and network
Products and Services
Organogram of UCBL
Corporate Information at a Glance
SWOT Analysis of UCBL

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2.1 Overview of United Commercial Bank Limited:

Alike other banking institutions United Commercial Bank does not produce any tangible product but
it offers a variety of money related services to its customers. However, United Commercial Bank
started as a small Bank in mid-1983 and established itself as one of the largest first generation banks
in Bangladesh. It distinguishes itself from other private banks by its personalized services, innovative
practices and effective management system. Also a huge networking system of 168 branches made it
easier to success.

The Bank has its in different and diverse segments of banking like Retail Banking, SME Banking,
Corporate Banking, Off-shore Banking, and Remittance etc. United Commercial Bank has
lengthened its arena by diversion among different segments of banking like:

Retail Banking: Retail Banking is a mass-market banking where customers use all banking
services from local branches of larger commercial banks. Services include personal loans,
opening and checking different account, issuing debit or credit card etc.

The Bank also provides its clients with both incoming and outgoing remittance services. Thus the
expatriates find an easy way to send money through proper channel. The Bank, aiming to play a
leading role in the economic activities of the country, is firmly engaged in the development of
trade, commerce and industry by investing in network expansion and new technology adoption to
have competitive advantage.

2.2 Board of director:

Board of Directors of UCBL includes the high professional and high-qualified business men of
Bangladesh. Well-designed directions of those bodies help the management to achieve the
ultimate goal of the bank. The members of the Board of Directors are the very renowned business
Man of Bangladesh. The flow of board of directors of the UCBL is added in appendix.

2.3 Management:

The Bank has in its Management a combination of highly skilled and eminent bankers of the
country of varied experience and expertise successfully led by Mr. Muhammed Ali, a dynamic
banker, as its Managing Director and well educated young, energetic and dedicated officers
working with missionary zeal for the growth and progress of the institution.

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2.4 Objectives of UCBL:

To provide quick and superior service by applying modern information technology.

In all aspects the UCBL lanced development growth of the bank to be sustained and this
technique is to be maintained.
By improving congenial relationship between the Bank and the customers, we want to
come closer to play a vital role in national development.
By investing the liquidity of our valued shareholders income generating projects and give
them maximum dividend.
In this competitive market, the bank is to provide new innovation banking services to its
valued customers and build up its own image.
To ensure the improvement of professional quality of man power by increasing the work
efficiency and technological knowledge.

To its own position by creating creative banking service in competitive market.

2.5 Mission:

To offer financial salutations that create, manage and increase our clients wealth while
improving the quality of life in the communities we serve.

2.6 Vision:

To be the bank of first choice through maximizing value for our clients, shareholders &
employees and contributing to the national economy with social commitments.

2.7 Business moto:

United Commercial Bank Ltd. started its journey with the motto of socio-economic
development of the country about three decades ago. It will keep continue to provide best
financial services in coming days as well. The corporate motto of UCBL is
United We Achieve

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2.8 Strategic Priority:
Strategic objectives ranked by their importance in achieving the strategic goals. All
subsequent operational or tactical planning and resource allocation is based on strategic

2.9 Branches and network:

UCBL always put utmost importance on the client service. To make customer service more
available to the customers Bank continued its personalized approach to improve services.
Presently the number of branches stands at 168 covering almost all the important places of
the country. UCBL maintained proper equipment along with computers in addition to modern
facilities, logistics and professional competent manpower in each and every branch it has.
Number of authorized branches are 21. UCBL has tried to expand its branches all over the
important countries. Till now UCBL has arranged a number of exchange houses at Singapore,
U.A.E, Oman, Qatar and Kuwait to facilitate remittance from expatriate Bangladeshis.

Presently the number of branches stands at 168 covering almost all the important places of
the country. Division wise urban and rural branches are given below.

Division Name Urban Rural Total

Dhaka 51 26 77
Chittagong 29 29 58
Rajshahi 7 7 14
Rangpur 8 1 9
Sylhet 2 1 3
Khulna 6 0 6
Barisal 1 0 1
Total 104 64 168

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2.10 Products and Services:

Deposit Account Saving deposit

Short term deposit
Fixed deposit
Foreign currency deposit A/c
NECD ( Non Resident Foreign Currency Deposit
RFCD ( Resident Foreign Currency Deposit

Deposit UCB Multi Millionaire

schemes UCB Money Maximizer
UCB Earning Plus
Time Deposit Scheme
Monthly savings scheme
Deposit insurance scheme
Consumer credit scheme

Investment Import finance

Schemes Underwriting & bridge financing
Export finance
Working capital finance
Trade finance
Industrial finance

Computer SMS banking services

services Online service
One stop service
Any branch banking
Integrated system
Signature verification

Card services UCBL debit card

UCBL credit card
VISA classic blue local/ dual/ international
VISA Gold-dual/ international
VISA classic black- local/ dual
VISA classic pink-local/ dual
Supple card-local gold/ dual /international classic
Supple card-dual/international gold.

Other services Travelers cheques

Inward & outward remittances
Locker services

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2.11 Organogram of UCBL:

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2.12 Corporate Information at a Glance:

Name of the Company United Commercial Bank Ltd.

Date of Incorporation 26 June, 1983
Commencement of Business 27 June, 1983
Registered Office Bulus Center, Plot CWS (A) 1, No 34, Gulshan
Avenue, Dhaka 1212, Bangladesh
Date of Listing with DSE &
CSE DSE 30 November, 1986 & CSE 15 November, 1995
No. of Branches 168
No. of ATM Booth 101
No. of SME Centers 2
Off-Shore Banking Unit 1
Auditors Hoda Vasi Chowdhury & Co. Chartered Accountants
Swift Code UCBL BDDH
Telephone No. +88-02-55668070, +88-09611999999
Slogan United We Achieve

2.13 SWOT analysis of UCBL:

SWOT mean strength, weakness, opportunity and threat. The detailed study of an organizations
coverage and prospective in perception of its potency, flaws, chances and risks is called SWOT
analysis. It is needed to make the current way of performance and also predict the outlook to
develop their performance compared to opponents. The organization can learn about their current
situation in the market with the help of this tool. It also plays an important role in making
modification in the planned administration of the organization. The SOWT of UCBL is given
here in brief:

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A state owned schedule Bank in the country.

Interest rate is too much low compare to other commercial Bank.

Staffs are very much cordial and always dedicated to clients as well as organization.

A short listed of customer as because no congestion in Dispatch.

Reputation and Goodwill within the Banking sector.

Lack of technological know-how among the staff.

Lack of technological resources compare to some other modern banks.

Lack of customer attraction products for customers.

Lack of marketing strategy to attract customer.

Lack of training and motivation to the employees.

Increasing the number of Branches in the country.

Potential market for Modern banking services.

Small Industries are increasing.

Online Banking.

Globalization effect

Other Commercial Banks are offering higher salaries to the employees that may
create problem for United Commercial Bank Ltd.

Intense competition in the market lot of private commercial banks, foreign banks and
multinational banks pose significant threats of United Commercial Bank Ltd.

Lack of appeal to younger, student potential customers.

Political instability in the country.

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Chapter 3
Foreign Exchange Operations of United Commercial Bank

Foreign Exchange Operations of United Commercial Bank Ltd

Export Section
Import Section
Collection of LCA form
Letter of Credit (LC)
Performa Invoice
Bill of exchange
Shipment Advice
Bill of entry
Bill of entry includes
Declaration of authorities
Dealing with Foreign Currency
Major Discrepancies
Commercial Invoice (C/I)
Packing List
Bill of Lading/ Airway Bill ETC (Transport Documents)
Collection Documents
Foreign Remittance Section
Identification of Documents Used in Foreign Exchange Banking
Instruments of Inward & Outward Remittance

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3.1 Foreign Exchange Operations of United Commercial Bank Ltd:

3.1.1 Foreign Exchange- 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. Foreign exchange is the means and methods
by which rights to wealth in a countrys currency are converted into rights to wealth in
another countrys currency. In banks when we talk of foreign exchange, we refer to the
general mechanism by which a bank converts currency of one country into that of another.
Foreign trade gives rise to foreign exchange. Modern banks facilitate trade and commerce by
rendering valuable services to the business community. Apart from providing appropriate
mechanism for making payments arising out of trade transactions, the banks gear the
machinery of commerce, especially in case of international commerce, by acting as a useful
link between the buyer and the seller, who are often too far away from and too unfamiliar
with each other. According to foreign exchange regulation act 1947, Anything that conveys
the right to wealth in another country is foreign exchange. Foreign exchange department
plays significant roles through providing different services for the customers. Opening or
issuing letters of credit is one or the important services provided by the banks.

3.1.2 Foreign Exchange:

Foreign Exchange means foreign currency and it includes any instrument drawn, accepted,
made or issued under clause (13), Article 16 of the Bangladesh Bank Order, 1972. All
deposits, credits and balances payable in any foreign currency and draft, travellers cheque,
letter of credit and bill of exchange expressed or drawn in Bangladeshi currency but payable
in any foreign currencies. Bangladesh Bank issues Authorized Dealer (AD) license by
observing the banks performance and also the customers associated with the bank for
conducting foreign dealings

Foreign Exchage

Im port Section Export Section Rem ittance Section

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Foreign Exchange

Export Import Remittance

1. Export L/C Scrutiny. 1. L/C Opening. 1) Inward & Outward

2. Back to Back L/C
2. Document checking.
opening. 2) Statement,
3. Acceptance of Back 3. L/C Payment &Returns related to
to Back L/C. Remittance.
(Lodgment and
4. Payment of Back to retirement).
Back L/C.

5. Export Bill 4. Statement, Returns

Negotiation & related to Import.
Repatriation of
Export proceed.

6. Statement, Returns
& Correspondence
related to Export.

L/C advising & Cash Incentive Overall supervision of

Local bill negotiation.
Purchase of Local Bill.
Adjustment of Local

Figure: Foreign Exchange Market Operations

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3.1.3 Source of finance:

Import may be allowed under the following sources of finance:

(a) Cash

1. Cash foreign exchange (balance of the foreign exchange reserve of Bangladesh

2. Foreign currency accounts maintained by Bangladeshi Nationals working/living

(b) External economic aid.

(c) Commodity exchange.

Terms related to Import / Export

The following terms are related to the import/export business

(A) Letter of credit (L/C)

A-1 Definition of letter of credit

A-2 Consideration of letter of credit

A-3 Types of letter of credit

A-4 Parties of letter of credit

(B) Commercial Invoice

(C) Bill of lading

(D) Certificate of origin

(E) Inspection certificate

(F) Certificate of manufacture

(G) Insurance certificate

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(H) Pro-forma invoice

(I) Bills of exchange

(J) Packing list

(K) Shipment advice

(L) Bill of entry

3.2 Export Section:

Foreign Exchange Regulation Act, 1947 nobody can export by post and otherwise than by
post any goods either directly or indirectly to any place outside Bangladesh, unless a
declaration is furnished by the exporter to the collector of customs or to such other person as
the Bangladesh Bank (BB) may specify in this behalf that foreign exchange representing the
full export value of the goods has been or will be disposed of in a manner and within a period
specified by BB.

Bangladesh exports a large quantity of goods and services to foreign households. Readymade
textile garments (both knitted and woven), Jute, Jute-made products, frozen shrimps, tea are
the main goods that Bangladeshi exporters exports to foreign countries. Garments sector is
the largest sector that exports the lion share of the country's export. Bangladesh exports most
of its readymade garments products to U.S.A and European Community (EC) countries.
Bangladesh exports about 40% of its readymade garments products to U.S.A. Most of the
exporters who export United Commercial Bank Ltd are readymade garment exporters. They
open export L/Cs here to export their goods, which they open against the import L/Cs opened
by their foreign importers.

3.2.1 Scrutiny and negotiation of export bill:

Bank deals with documents not with goods. The bankers are to ascertain that the documents
are strictly as per terms of L/C. Before negotiation of the export Bill the bankers are to
scrutinize and examine each and every documents with care. Negligence on that part of the
bankers may result in non repatriation or delay in realization of export proceeds are incorrect
documents may put the importers abroad into unnecessary troubles.

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The scrutiny of the bill of exchange (Draft) and other related documents should ensure

The documents are presented for negotiation before the expiry of the relative credit.
The amount does not exceed the amount available under the credit.
All the documents stipulated in the L/C are submitted.
The corrections and alteration are properly authenticated in all documents.

3.2.2 Export documents checking of UCBL:

i. General verification:

L/C restricted or not

Exporter submitted documents before expiry date of the credit.
Shortage of documents etc.

ii. Particular verification:

Each and every document should be verified with the L/C.

iii. Cross verification:

Verified one documents to another.

3.2.3 Export Formalities UCBL:

There is certain formalities involved exporting such as maintaining the books register, L/C
checking etc.

1. Procedure of Registration of Exporter.

2. Books and Register/ Ledger required for export
3. B.B. Bill checking/ Lodgements.
4. Export document checking and negotiation/ collection basis
5. Pre- shipment financing
6. Disposal of EXP forms
7. Export Incentives
8. Disputes and settlement of Export claim.

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3.2.4 Procedure for obtaining Export Registration Certificate (ERC) of

For obtaining export registration certificate form CCI & E, the following documents are

1. Application form
2. Nationality Certificate
3. Partnership deed (registered)
4. Memorandum & Article of Association and Incorporation Certificate
5. Bank Certificate
6. Valid Trade License
7. Copy of rent of the business firm.

While checking the export documents following things must be taken in consideration.

L/C terms:
Each and every clause in the L/C must be complied with meticulously and ensure the

That the documents are not state.

That the documents are negotiated within the L/C validity, it a credit expire on a
recognized bank holiday its life is automatically become valid up to the next works
iii. That the documents value does not exceeds the L/C value.

3.2.5 Presentation of export documents for negotiation of UCBL:

After shipment, exporter submits the following documents to United Commercial Bank Ltd
for negotiation.

Bill of Exchange or Draft;

Bill of Lading
Commercial Invoice
Insurance Policy/Certificate
Certificate of origin
Inspection Certificate
Packing List
Courier Receipt

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3.3 Import Section:
Imports are foreign goods and services purchased by consumers, firms & Governments in
Bangladesh. To import, a person should be competent to be a importer. According to Import
and Export Control Act, 1950, the Office of Chief Controller of Import and Export provides
the registration (IRC) to the importer.

United Commercial Bank Ltd checks the documents. The usual documents are:-


Bill of lading

Certificate of origin

Packing list

Weight list

Shipping advice

Non-negotiable copy of bill of lading

Bill of exchange

Pre-shipment inspection report

Shipment certificate

3.3.1 Import Procedures:

1. Registration with CCI&E

For engaging in international trade, every trader must be first registered with the
Chief Controller of Import and Export.
By paying specified registration fees and submitting necessary papers to the
CCI&E. the trader will get IRC (Import Registration Certificate).After obtaining
IRC, the person is eligible to import.

For engaging in international trade every trader must maintain the following steps:

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2. Understanding

Import trade in Bangladesh is controlled under the import and export control Act 1950.
Authorized Dealer Banks will import the goods into Bangladesh following the import policy,
public notice, F, E, circular and other instructions from competent authorities from time to

3. Registration of importer

In terms of the importers, exporters and indenters (Registration) order 1981, no person can
import goods into Bangladesh unless he is registered with the chief controller of import and
export or exempted from the provisions of the said order. So the following documents are
required to be submitted to the licensing authority for registration as importers.

Questionnaire from duly filled in and signed.

Income tax registration certificate.
Trade License from the municipal or local authority.
Bank certificate.
Nationality certificate.
Partnership Deed where applicable.
Certificate of registration with the Registrar of joint stock companies and
Memorandum and Articles of Association in case of private and public Ltd. company.
Certificate from the chamber of Commerce/Registered Trade Association.

After submission of the above documents and payment of requisite fees, if the documents are
found in order and the C, C, E & I are satisfied, the import Registration Certificate (IRC) is
issued to the applicant- importer.

3.3.2 Purchased contract between importers and exporters:

Now the importer has to contact with the seller outside the country to obtain the pro-forma
invoice/indent, which describes goods. Indent is got through indentures a local agent of the
sellers. After the importer accept the preformed invoices, he makes a purchase contract with
the exporter declaring the terms and conditions of the import. Import procedure differs with
different means of payment.

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3.3.3 Restricted items of imported goods:

1. Maps, charts and geographical globes, which indicate the territory of Bangladesh but do
not do so in accordance with the maps published by the

Department of survey, Government of the Peoples Republic of Bangladesh. Horror comics,

obscene and subversive literature including such pamphlets, posers, newspapers, periodicals,
photographs, films, gramophone records and audio and videocassette tapes etc.

3. Unless otherwise specified in this order, old, second-hand and recondition goods, factory
rejects and goods of job-lot/stock-lot of secondary/sub-standard quality.

4. Reconditioned office equipment, photocopier, typewriter, telex, phone, computer, and fax.

5. Unless or otherwise specified in this order, all kinds of waste.

7. Goods (including their containers) bearing any obscene picture, writing inscription or
visible representation.

3.3.4 Purchase Contract between importers and exporter:

Now the importer has to contact with the seller outside the country to obtain the

preformed invoice / indent which describes goods.

Indent is got through indenters a local agent of the sellers.

After the importer accept the preformed invoice, he makes a purchase contract

with the exporter declaring the terms and conditions of the import.

Import procedure differs with different means of payment. In most cases import

payment is made by the documentary letter of credit (L/C) in our country.

3.4 Collection of LCA form:

Then the importer collects a Letter of Credit Authorization (LCA) form United Commercial Bank Ltd,
Shanti Nagar Branch.

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3.5 Letter of Credit (L/C):

3.5.1 Definition of letter of credit (L/C):

It goes without saying that you, the exporter, what to be paid as quickly as possible, whereas
your overseas customer may well want to defer payment for as long as possible. The answer
of course is credit. A letter of credit is a financing instrument opened by a foreign buyer with
a bank in her/his locality. The letter of credit stipulates the purchase price agreed upon by the
buyer and seller, the quantity of merchandise to be shipped and the type of insurance
coverage to protect the merchandise during shipment. The letter of credit names the seller as
beneficiary (that is, you are the party who gets paid) and identifies the definite time period,
the terms remain in force. The letter of credit authorized the buyers to pay when all the
stipulated conditions have been met. A letter of credit gives some assurance to the seller that
the buyer is solvent. Most letter of credit (L/C) is irrevocable and often confirmed when
requested by the sellers bank before the seller accepts them. This confirmation obligates the
confirming bank to pay you once have meet all the stated condition in the particular letter of
credit (L/C).

3.5.2 Opening a Letter of Credit (L/C):

In international environment, buyers and sellers are often unknown to each other. So seller
always seek guarantee for the payment for his goods exported. Here is the role of bank. Bank
gives export guarantee that it will pay for the goods on behalf of the buyer. This guarantee is
called Letter of Credit. Thus the contract between importer and exporter is given a legal
shape by the banker by its Letter of Credit.

a. Parties to Letter of Credit:

Importer ( Buyer)/ Applicant

The issuing Bank (Opening Bank)
The Advising Bank ( Notifying Bank)
Exporter /Seller ( Beneficiary)
Confirming Bank
Negotiating Bank
The paying/Reimbursing? Accepting/Remitting Bank

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3.5.3 Consideration of letter of credits (L/C):

There are two simple considerations when using letter of credit (L/C):

(I) specify as fully as possible to your buyer the amount of credit (payment) needed, the
length of time for which this letter of credit (L/C) should be valid, whether partial shipments
are acceptable and all necessary documents.

(II) When the letter of credit (L/C) is delivered to you through the advising bank, check to see
that you can meet all provisions specified. If not, request an amendment by the foreign buyer
before proceeding.

Letter are most often used when initiating business with a new account, when a check of the
importers credit reveals it would be unwise to make shipment on a less secure basis or when
large purchases are requested by an unknown buyer.

3.5.4 Types of Letter of Credit (L/C):

Letter of credit may be-

Revolving letter of credit (L/C).

Assigned (L/C).
Bankers acceptances Revolving letter of credit (L/C):

This is useful when shipping a variety of goods to an established customer. It normally runs
for a period less than one year and it provides for prompt reinstatement when drawn against. Assigned letter of credit (L/C):

This type is the same as the normal letter of credit (L/C) except that is includes the phrase
and/or assignees following the names of the beneficiary. This allows the exporter to make his
or her domestic purchase by using the overseas buyers credit. That is you are agreeing that
payment for the letter of credit (L/C) may be made to your supplier. This is a way for an
exporter to conduct business with limited capital.

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As your business grows you will want to extend credit to your importer. One of the most
efficient methods of doing this is through a bankers acceptance, after agreeing to the terms
(e.g. 90 days at sight) the importer opens a draft (check) under a L/C in favour of the exporter
(beneficiary). The exporter presents the draft and the requested shipping documents to the
paying bank. The bank review the documentation for correctness, the accept the draft to
become payable (mature) in 90 days, or if the exporter requires accepts the draft and
discounts the amount because of the need for immediate funds. Back-to-Back Letter of Credit:

A Back-to-Back letter of credit is a new credit. It is different from the original credit based on
which the bank undertakes the risk under the back-to-back credit. In this case, the banks
main security is the original credit (Master L/C). The original credit (Selling credit) and the
back to back credit (Buying Credit) are separate instruments independent of each other and in

3.5.5 Letter of credit (L/C) also may be:

1. Revocable credit

A revocable credit is a credit, which can be amended or cancelled by the issuing bank at any
time without prior notice to the seller.

2. Irrevocable credit:

An irrevocable credit constitutes a definite undertaking of the issuing bank (Since it can not
be amended or cancelled without the agreement of all parties thereto), provided that the
stipulated documents are resented and the terms and conditions are satisfied by the seller.
This sort of credit always referred to revocable letter of credit.

3.5.6 Importer- seller who applies for opening a L/C:

Confirming Bank: It is the bank, which adds its confirmation to the credit and it is done at the
request of issuing bank. Confirming bank may or may not be advising bank.

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Issuing Bank: It is the bank which opens/issues a L/C on behalf of the importer.
Advising/Notifying Bank: It is the bank through which the L/C is advised to the exporters.
This band is actually situated in exporters country. It may also assume the role of confirming
and/or negotiating bank depending upon the condition of the credit.

Negotiating Bank: It is the bank, which negotiates the bill and pays the amount of the
beneficiary. The advising bank and the negotiating bank may or may not be the same.
Sometimes it can also be confirming bank.

Paying/Accepting Bank: It is the bank on which the bill will be drawn (as per condition of
the credit). Usually it is the issuing bank.

Reimbursing Bank: It is the bank, which would reimburse the negotiating bank after getting
payment-instructions from issuing bank.

In some instances, it is necessary for the seller to sign his or her invoices and even have them
notarized or countersigned by the local chamber of commerce or both.

3.5.7 Bills Lading:

These may be overland (truck or rail) air, or ocean bills of lading, depending on destination or
terms of sales. As in domestic shipment, there are two basic types of bills of lading:

Straight (or nonnegotiable)

Shippers order (negotiable)

This shipment must endorse the original copy of the order bill of lading before it is
presented to the bank for collection. The letter of credit will stipulate which endorsement to
use with the exception of ocean shipments; the carrier issues only one original bill of lading.
Any number of original ocean bills of lading may be issued depending on the requirements of
the buyer. Normally, all original copies are endorsed and submitted to the bank.

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3.5.8 Certificate of Origin:

Even though a commercial invoice may contain a statement of origin of the merchandise a
few countries require a separate certificate sometimes countersigned by a chamber of
commerce and possibly even visage by the countrys resident consul at the port of export.
These may be on a special from of the foreign government, or in other cases, a certificate on
the shippers own letterhead will suffice. Statements of origin are required to establish
possible preferential rates of import duties under a most favoured nation arrangement.

3.5.9 Inspection Certificate:

In order to protect themselves, many foreign firms request a certificate of inspection. This
may be either an affidavit by the shipper or by an independent inspection from, as dictated by
the buyer, certifying to the quality, quantity and conformity of goods in relation to the other.
This is usually done before the goods are shipped.

3.5.10 Certificate of Manufacture:

This document is used when a buyer intends to pay for the goods prior to shipment but the
lead time for the manufacture of the products is lengthy and the buyer dose not desire to
allocate the money so far in advance. If the seller feels that the buyer is a good credit risk, the
seller will produced with the manufacture of the products with perhaps only a down payment.
After the merchandise is ready, the seller prepare a certificate stating that the ordered goods
have been produced in accordance with the contract and have been set a side for the account
of the buyer. Commercial invoice and packing list are sent as supporting documents.

3.5.11 Insurance Certificates:

Where the seller provides ocean marine insurance it is necessary to furnish insurance
certificates, usually in duplicate indicating the type and amount of coverage involved.

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3.6 Performa Invoice:

When a commercial invoice is required but it is not available at the time of foreign shipment
arrives at importers customs, the importer (not the foreign exporter) may prepare a pro-
forma invoice. This invoice contains Marketing ly the same information required on the
proper commercial invoice, which is prepared by the exporter.

3.7 Bill of exchange:

An unconditional order in writing, addressed by one person (the drawer) to another (the
drawee) and signed by the person giving it, requiring the drawee to pay on demand or at a
fixed or determinable future time a specified sum of money to or to the order of a specified
person (the payee) or to the bearer. If the bill is payable at a future time the drawee signifies
acceptance, which makes the drawee the party primarily liable upon the bill; the drawer and
endorsers may also be liable upon a bill. The use of bills of exchange enables one person to
transfer to another an enforceable right to a sum of money. A bill of exchange is not only
transferable but also negotiable, since if a person without an enforceable right to the money
transfers a bill to a holder in due course, the latter obtains a good title to it.

3.8 Shipment Advice:

The copy mentioning the name of the insurance company should be given to the client and
the remaining copies should be kept in the bank but if only one copy is given then the
photocopy should be kept in the bank and the original copy should be given to the United
commercial bank Ltd.

3.9 Bill of entry:

Bill of entry is a custom clearance copy. Custom authority certificates that imported goods
are legal or illegal. Bill of entry must deposit into the importers bank by the importer
because central bank (Bangladesh Bank) examines the parties bill of entry.

3.10 Bill of entry includes:

Name of exporter
Name of importer
Origin of product
Details about imported goods (such as unit price, quantity, total amount.

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At the time of bill of entry Custom authority charge taxes following way
Name of charge Rate of charge
Custom duty 15%
Supplementary duty 0
VAT (Value added tax) 15%
Advance income tax 3%
Development surcharge 4%
Advance trade VAT 0
PSI service charge 1%

3.11 Declaration of authorities:

I/We confirm that the documents relating to this consignment are genuine and correct. All
these records and documentation will be preserved and produced before customs authorities,
if and when demanded, within three years.

3.12 Dealing with Foreign Currency:

Banks buys and sells convertible currency at spot (immediate) or for future delivery. You,
as an importer, may contract with a bank to buy the currency for future delivery at fixed rate
of exchange because you know that, at some specific future time, you must make payment in
that foreign currency.

Conversely, as an exporter you may protect yourself by contracting to sell to a bank, at a

fixed rate of exchange. The foreign currency proceeds you expectation a given date. These
contracts provide a hedge against currency fluctuation. That is, importers and exporters
avoid the risk of fluctuating exchange rates and can better determine their true costs and
profits when they enter into such a contract. The bank dose not charges interest on these
contracts because no payments are due in advance of the due date of the contract. no way
legally connected, although they both from part of the same business operation. The suppliers
(beneficiary of the back to back credit) ships goods to the importer or suppliers goods to the
exporter and presents documents to the bank as is specified in the credit. It is intendment that
the exporter would substitute his own documents for negotiation under the original credit, his
liability under the back-to-back credit adjusted out of these proceeds. The export L/C is
marked lien and no margin taken.

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3.12.1 Application for L/C limit:
Before opening L/C, importer applies for L/C limit. To have an import L/C limit, an importer
submits an application to the Department of United Commercial Bank Ltd Limited furnishing
the following information:

Full particulars of bank account maintained with United Commercial Bank Ltd
Uttara Branch.
Nature of business
Required amount of limit
Payment terms and conditions
Goods to be imported
Offered security
Repayment schedule

A credit Officer scrutinizes this application and accordingly prepares a proposal (CLP) and
forwards it to the Head Office Credit Committee (HOCC). The Committee, if satisfied,
sanctions the limit and returns back to the branch. Thus the importer is entitled for the limit.

3.12.2 The L/C Application:

After getting the importer applies to the bank to open a letter of credit on behalf of him with
required papers.

Documentary Credit Application Form:

United Commercial Bank Ltd provides a printed form for opening of L/C to the importer.
This form is known as Credit Application form. A special adhesive stamp is affixed on
the form. While opening, the stamp is cancelled. Usually the importer expresses his
desire to open the L/C quoting the amount of margin in percentage.

The insurance cover note: The name of issuing company and the insurance
number are to be mentioned on it.
The Letter of credit authorization (LCA) form: LCA form should be duly attested.
The Form-IMP.
Tax Information Certificate
Forwarding for Pre-Shipment Inspection (PSI):
Importer sends forwarding letter to exporter for Pre-Shipment Inspection. But all
types of goods do not require PSI.

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3.12.3 Securitization of L/C Application:
The United Commercial Bank Ltd Official scrutinizes the application in the following
manner: -

The terms and conditions of the L/C must be complied with UCPDC 500 and
Exchange Control & Import Trade Regulation.
Eligibility of the goods to be imported.
The L/C must not be opened in favour of the importer.
Radioactivity report in case of food item.
Survey report or certificate in case of old machinery
Carrying vessel is not of Israel or of Serbia- Montenegro
Certificate declaring that the item is in operation not more than 5 years in case of

3.12.4 Examination of shipping documents:

One of the basic principles of documentary credit is that all parties deal with document and
not with goods (Articles 6 of UCPDC-600). That is why the documents should be scrutinized
properly. If any discrepancy in the documents is found, that is to be informed to the party. A
checklist may be followed for examining the documents.

3.13 Major Discrepancies:

Late shipment
Late presentation
L/C expired
L/C over-drawn
Partial shipment or transhipment beyond L/C terms.

3.14 Commercial Invoice (C/I):

Not issued by the Beneficiary.

Not signed by the Beneficiary.
Not made out in the name of the Applicant.

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Description, Price, quantity, seals terms of the goods not corresponds to the
Not marked one fold as Original.
Shipping Mark differs with B/L & Packing List.

As in a domestic shipment, good business practice dictates that a commercial

invoice includes:
1. Full address of the shipper, seller and consignee, if different;
2. The respective reference number
3. Date of the order
4. Shipping date
5. Mode of shipment
6. Delivery and payment terms
7. A complete description of the merchandise and prices
8. Discounts and quantities.

3.15 Packing List:

Packing list is the letter describing the number of packets, packets weight and their size. If
there are several copies, then two copies should be given to the client and the remaining
should be kept in the bank but if there is only one copy, then the photocopy should be kept in
the bank and the original copy should be given to the client.

Gross Wt., Net Wt. & Measurement, Number of Cartoons/ Packages differ with
Not market one fold as Original.
Not signed by the Beneficiary.
Shipping marks differ with B/L.

3.16 Bill of Lading/ Airway Bill ETC (Transport Documents):

Full set of B/L not submitted.
B/L is not drawn or endorsed to the Order of UNITED COMMERCIAL BANK
Shipped on Board, Freight Prepaid or Freight Collect etc. notations are not
marked on the B/L.

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B/L not indicate the name and the capacity of the party i.e. carrier or master, on
whose behalf the agent is signing the B/L.
Shipped on Board Notation not showing name of Pre-carriage vessel/intended
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

3.17 Others:
N.N. Documents not forwarded to buyers or forwarded beyond L/C terms.
Inadequate number of Invoice, Packing List, B/L & Others submitted.
Short shipment Certificate not submitted.

3.18 Invoice:
It is to be scrutinized to ensure the following:

The Invoice is addressed to the Importer.

The full description of merchandise must be given in the invoice strictly as per
The price, quality, quantity, etc. must be as per L/C.
The Invoice must be language in the language of L/C.
No other charges are permissible in the Invoice beyond the stipulation on the
The amount of draft and Invoice must be same and within the L/C value.
If L/C calls for consular invoice, then the beneficiarys invoice is not sufficient.
3.19 Collection Documents:
Normally negotiating Bank will send the documents on collection basis mainly for the
following discrepancies:

L/C expired;
Late shipment;
Late presentation;
L/C overdrawn;
Unit price differ between L/C and Commercial Invoice;

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3.20 Foreign Remittance Section:
The basic function of this department are outward and inward remittance of foreign exchange
from one country to another country. In the process of providing this remittance service, it
sells and buys foreign currency. The conversion of one currency into another takes place at an
agreed rate of exchange, in where the banker quotes, one for buying and another for selling.
In such transactions the foreign currencies are like any other commodities offered for sales
and purchase, the cost (convention value) being paid by the buyer in home currency, the legal

3.20.1 Inward Foreign Remittance:

Inward remittance covers purchase of foreign currency in the form of foreign T.T., D.D, T.C.

and bills etc. sent from abroad favouring a beneficiary in Bangladesh. Purchase of foreign

exchange is to be reported to Exchange control Department of Bangladesh bank on Form-C.

3.20.2 Outward Foreign Remittance:

Outward remittance covers sales of foreign currency through issuing foreign T.T. Drafts,

Travellers Check etc. as well as sell of foreign exchange under L/C and against import bills

retired. Sale of foreign exchange is reported to Exchange control Department of Bangladesh

Bank on form T/M. Foreign exchange means foreign currency and includes all deposits,

credits and balances payable in foreign currency as well as foreign currency instruments such

as Drafts, T.C.s, bill of exchange, and Letters of Credit Payable in any Foreign Currency. All

foreign exchange transactions in Bangladesh are subject to exchange control regulation of

Bangladesh Bank.

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From the above discussion we may conclude the Foreign Exchange Procedures as


(11) Document Placement

Offers Performa Invoice (1)


Offers Indent (1)

Local Agent
Request for Forward Document

L/C opening (2) (8)

Present Inform about L/C

Documents (6) (5)

After Shipment

Forward L/C (3)

Issuing Advising
Bank/Opening Bank Bank/Negotiating
Present Document (4) Bank

Order Claim for (9) (10)

Of (7)

Payment Payment Payment

Foreign A/C maintaining Bank/
Reimbursement Bank

Figure: Foreign Exchange Procedures

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3.21 Identification of Documents Used in Foreign Exchange Banking:

The following Documents are used in Export:

Bill of Exchange or Draft

Bill of Lading
Commercial Invoice
Insurance Policy/Certificate
Certificate of origin
Inspection Certificate
Packing List
Courier Receipt
EXP from
The following Documents are used in Import:
Bill of lading
Certificate of origin
Packing list
Weight list
Shipping advice
Non-negotiable copy of bill of lading
Bill of lading
Certificate of origin
The following documents are used in Foreign Remittance:

Certificate of origin
Remittance application
ID card
3.22 Instruments of Inward & Outward Remittance:
Telegraphic Transfer (T.T)
Mail transfer (M.T)
Foreign Demand Draft (F.D.D)
Payment order (P.O)
Travelers cheque (T.C)

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3.23 Foreign Remittance Section performs the following function:

3.23.1 Selling:
Selling of foreign exchange to non-resident stock investor.
Selling of Travels cheque to Bangladeshi travellers
Selling of foreign currency to Bangladeshi for medical expense

3.23.2 Buying:
Buying of foreign currency from FC account of Bangladeshi individual as well as
from exporters.
Buying of international currency from foreigner and Bangladeshi
Buying of cash foreign currency from foreigner and Bangladeshi
Buying of foreign currency from non-resident investing in shares and stocks of

3.24 Different Foreign Currency Account:

There are some accounts where customers can deposit and withdraw foreign currency-

a. NFCD (Non- Resident Foreign Currency Deposit): Travelers or visitors who are
traveling other countries may open it.
b. FC (Foreign Currency) account: Exporters or importers for the purpose of their
business may open it.

c. RFCD (Resident Foreign Currency Deposit): Any person in a country who is

working and staying in abroad can open it.

3.25 Foreign exchange operation:

Foreign exchange means and covers all business activities relating to export, import, inward
and outward remittance and buying and selling of currency. One of the largest businesses
carried out by the commercial bank is foreign trading. The trade among various countries
falls for close link between the parties dealing in trade. The situation calls for expertise in the
field of foreign operations. The bank, which provides such operation, is referred to as rending
international banking operation.

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3.26 Foreign Trade Department:

Mainly foreign trade deals with import and export business that is two parties in foreign trade
department in United Commercial Bank Ltd. (UCBL)

1. Import department
2. Export department

Import department deals with the import oriented foreign trade while export department deals
with export oriented foreign trade.

3.27 Foreign Correspondents:

Foreign correspondent relationship facilitates foreign trade operation of the bank, mainly in
respect of export, import and foreign remittance. The number of foreign correspondents and
agents of the bank in the year 2009 stood at 322, which covers important business and trade
centers of the world. The bank maintains excellent relationship with the leading international
banks, for handling all foreign. Correspondent and maintaining all foreign business there is
an International Division, which is called ID.

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Chapter 4
Findings & Recommendations


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4.1 Findings:

1. Poor marketing strategy should affect export and import business.

Recommendation: To attract more clients UCBL has to creative a new marketing strategy,
which will increase the total export import business

2. Less Incentives packages system can be hamper to attract customer

Recommendation: Attractive incentive packages for the exporter will help to increase the
export and accordingly it will diminish the balance of payment gap of UCBL.

3. UCBL shouldn't know very well about foreign market situation and their demand.

Recommendation: Bank can provide foreign market reports, which will enable the exporter
to evaluate the demand for their products in foreign countries.

4. Lack of update knowledge about foreign exchange of the employee.

Recommendation: The Employees of Foreign Trade Department should have up to date

knowledge about new circular provided by BB and Customs offices.

5. Lack of information about investment and where they should invest their money or profit

Recommendation: UCBL should invest its fund in the profitable sector that will produce
more profit for the owner of the account so that people will attract for UCBL.

6. One problem relates to technology, the bank must try to adopt new technologies.
Otherwise the profitability of the bank may hamper.


Foreign exchange operation of other renowned Commercial banks is more dynamic and less
time consuming. United Commercial Bank limited should take some initiative to compete
with those banks.

7. To meet the challenges in the banking industry and to help employees to adapt to the
changes and new working condition, training is essential but no such training center has yet
been established in United commercial bank. Moreover, training given to employees is not

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4.2 Recommendation:
For attracting more clients United Commercial bank Limited has to create a better technology
which will increase the total export import business.

8. Besides, SWIFT is being used in some branches and the head office of the bank for trade
finance related operations like documentary credit, documentary collections, fund transfer,
guarantee, etc. with optimum security, but not in all branches.


SWIFT service should be introduced in each and every branch of the bank, which will help to
smoothen the foreign exchange operations of the bank.

9. Again, at front desk there is less number of employees for the account opening task as well
as dispatch related works. So, it takes a bit longer time to finish off his or her job.


There should be more officers appointed in the cash section and a proper instrument should
be brought to identify the fake notes which are almost impossible to identify with the current
available device though it is a matter of joy that such device will soon be arriving in near
future according to the higher official.

10. The package for export are poor because of the payment gap is higher
thats wh y customer couldnt export properl y.


Attractive incentive package for the exporter will help to increase the export and accordingly
it will diminish the balance of payment gap of United Commercial Bank limited.

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Chapter 5


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5.1 Conclusion:

United Commercial Bank Ltd. is committed to boost up export; reduce import, rising of
Gross Domestic Product (GDP) and increase employment.

All the branches of United Commercial Bank Limited are authorized dealer of Foreign
Exchange Business. The authorized dealer motivates the importer to import Raw materials,
Fabrics, Frozen fish, jute items, and electronics goods, Accessories, Chemicals, and
Vegetable Fat etc.

The import or exports are motivated by the United Commercial Bank Limited to the foreign
exchange business, particularly to open the letter of credit. A letter of credit offer advantages
both to the importer and exporter. The advantages accruing to either of the parties differ
depending upon the nature of credit opened. There are certain Common benefits accruing
from the use of credit as under. The bank should implement marketing strategy to create
better quality to present the importer and exporter. The employees of Foreign Trade
Department should up to date knowledge about new circular provided by BB and Customs

I believe, if the bank follows the suggestions provided by me against the problems I found
out, it can be able to speed up its growth in future.

United Commercial Bank Limited is playing a vital role in financing import and exports of
the country. Without Bank's co-operation, it is not possible to run any business or production
activity in this age. Exports and import need finance in various stages of their activities.
Export and import financing are letter of credit (L/C), payment against documents (PAD),
loan against imported merchandise (LIM) etc. All these facilities are being provided by
United Commercial Bank Limited. For this purpose Bank considers the borrower's business
standing, integrity, liability with the bank and term and conditions of the L/C. There is lot of
risks involved in foreign exchange business. So, the United Commercial Bank Limited has to
clearly serve the customers from a neutral point and gather the current information about the

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1. Siddikee, M. J. A., Parvin, S. and Hossain, M. S. BANKING SCENARIOS IN
BANGLADESH, Bangladesh Research Publications, Journal, Vol 8, Issue 1, Jan-
Feb, 2013. pp. 90-95.

2. Gup, B. E., Kolari, J. W. Commercial Bank Management, 3th Edition.

3. Madura, J. Financial Markets and Institutions

4. Rose, Peter S & Hudgins, Sylvia C 2005, Bank Management & Financial Services, 6 th
Edition, Mc Graw Hill International Edition, New York.

Websites:, retrieved on 22/01/2017 at 10 a.m., retrieved on 13/01/2017 at 1p.m.

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