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CHAPTER ONE

INTRODUCTION
1.1 Introduction of the study

Now the world is very much competitive and the banking sector of Bangladesh has grown
day by day. As a financial institution, most of the banks perform some common functions
but there is some difference between conventional banking and Islamic banking. So
everybody has to be expert in his field in both practical knowledge and theoretical
knowledge. As SUB aims is to build future magnate with the practical knowledge of
economic field of our country, Internship course and its report is a significant aspect in the
direction of accomplishing the goal. It is a systematic process for gathering, recording and
analyzing of data about the topic that a student goes to learn on the program.

The aim of this internship report is to connect practical knowledge with theoretical
aspects. Being a student of MBA with major in Finance I have completed my internship
from Shahjalal Islami Bank Limited, Dhaka.

During my internship period, I have tried my best to use the opportunity to enrich my
knowledge on banking system. My findings were mostly related to the Foreign Exchange,
as I have been working under this department. Beside this, I came many other findings,
which are reflected through this internship report.

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1.2 Objectives of the study

The objective of the study is to gather practical knowledge regarding over all Islamic
Banking system and its operations. However my targeted area is know about the details
operation of Foreign Exchange on SJIBL. So I tried my best to gather practical and over
all idea about Foreign Exchange on SJIBL.

The Main Objective:

To get a good understanding of over all Foreign Exchange operation of Shahjalal Islami
Bank Ltd.

The Specific Objectives:

 To gather knowledge know about the Export Operations and evaluate the
performance.

 To gather knowledge know about the Import Operations and evaluate the
performance

 To gather knowledge know about the Remittance Operations and evaluate the
performance

 To explore the problems of Foreign Exchange operation.

 To recommend solutions of the problems faced by SJIBL.

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1.3 Methodologies

A method involves a process or technique in which various stages or steps of collection


data/information are explained and the analytical techniques are defined. A dictionaries of
social science observes, “Methodology is the systematic and logical study of the principles
guiding scientific investigation”

The information that I used in this study is collected from the following sources:

 Primary Sources 1.Information discuss and observe


2. Daily dairy
3. Practical deskwork.

 Secondary sources 1.Various publication of SJIBL


2. Annual statements of the bank.
3. SJIBL website.
4. Different books about banking.

All this Primary and Secondary data were collected, organized, analyzed and interpreted to
draw some findings.

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1.4 Limitation of the study

I have tried my best to fulfill my report properly but there is some constraint during my
internship period which otherwise would enabled me in making my study more
appropriate and logical. The limitations were from side, the bank and as well myself.

 Foreign Exchange is too big to cover: Foreign Exchange is a too big to cover
wholly in this limited scope. It required huge time and huge space to cover. So, I
have covered only some important topics of credit management.

 Engaged in work: Every man of the branch was so busy in their work, so they
were not able to provide sufficient care to make the internship’s clear about
different topics.

 Time constraint: I had to prepare this report within a period less than three month
which was not enough to prepare such a report. Because collection and
arrangement of information is a time consuming job. Then again I had to
summarize those. So I had to work in haste.

 Confidential matter: It is not possible to get all sorts of information due to


official confidentiality.

 Lack of practical knowledge: For the lack of practical knowledge, some short
coming may be available in the report. Because in some cases I could not
practically involved because of bank’s limitation and risky nests.

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CHAPTER TWO

ORGANIZATIONAL OVER VIEW OF


SHAHJALAL ISLAMI BANK

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2.1 About Shahjalal Islami Bank Limited

Shahjalal Islami Bank Limited (SJIBL) commenced its commercial operation in


accordance with principle of Islamic Shariah on the 10th May 2001 under the Bank
Companies Act, 1991. During last eight years SJIBL has diversified its service coverage
by opening new branches at different strategically important locations across the country
offering various service products both investment & deposit. Islamic Banking, in essence,
is not only INTEREST-FREE banking business, it carries deal wise business product
thereby generating real income and thus boosting GDP of the economy. Board of
Directors enjoys high credential in the business arena of the country, Management Team is
strong and supportive equipped with excellent professional knowledge under leadership of
a veteran Banker Mr. Muhammad Ali.

At present, SJIBL has been carrying on business through its 51 branches and 8 SME
Centre spread all over the country. The Bank has in its use the latest information
technology services of SWIFT. SJIBL is actively involved in Scholarship as well as in
various Socio-Cultural activities.

Banking is not only a profit-oriented commercial institution but it has a public base and
social commitment. Admitting this true SJIBL is going on with its diversified banking
activities. Inspired by its social obligation and commitment and responsibility, In CAMEL
rating SJIBL’s Position is 1st place in “A” category.

2.2 Profile of Shahjalal Islami Bank Limited (SIBL).

With the emergence of Bangladesh as an independent country in 1971, the then Govt.
nationalized all commercial banks with the hope of accelerating industrial growth through
financial, fiscal and other support. Since the inception of independent Bangladesh,
commercial banks, Development Financial Institution and Investment Corporation of
Bangladesh have been the major sources of finance in the country. These banks were
predominantly serving the public sectors by extending support in the form of long term
loan, working capital finance, bridge finance etc. and had limited experience in trade,

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commerce and industry. Due to dearth of experience in investment decision, project
financing, recovery of loan and recycle of loan, both entrepreneurs and banking financial
institutions coupled with difficulties at every stage of development and accomplishment
which ultimately led to the emergence of private commercial banks in Bangladesh.

Following are the potential areas for the private sector banks:

 Social contribution by banks- sponsoring sports, anti drug campaign etc.


 Consumer credit to improve quality of life
 More jobs created
 Entrepreneur ship development
 Electronic Banking (ATM)
 Fund Transfer from abroad through overseas correspondents
 Credit Card/Debit card
 Online banking (Phone link , money link)
 Innovative Investment scheme
 Contribution to export sector
 Relationship banking
 One stop service
 Lease finance by bank

2.3 Mission:

 To provide quality services to customers.

 To set high standards of integrity.

 To make quality investment.

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 To ensure sustainable growth in business.

 To ensure maximization of Shareholders' wealth.

 To extend our customers innovative services acquiring state-of-the-art technology


blended with Islamic principles.

 To ensure human resource development to meet the challenges of the time.

2.4 Vision

To be the unique modern Islami Bank in Bangladesh and to make significant contribution
to the national economy and enhance customers' trust & wealth, quality investment,
employees' value and rapid growth in shareholders' equity.

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2.5 Slogan of the Bank

The slogan of the Shahjalal Islami Bank Limited is -

“Committed to Cordial Service”

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2.6 Strategies

 To strive for customers best satisfaction & earn their confidence.

 To manage & operate the Bank in the most effective manner.

 To identify customers needs & monitor their perception towards meeting those
requirements.

 To review & updates policies, procedures & practices to enhance the ability to
extend better services to the customers.

 To train & develop all employees & provide them adequate resources so that the
customer’s needs are reasonably addressed.

 To promote organizational efficiency by communicating company plans, polices &


procedures openly to the employees in a timely fashion.

 To cultivate a congenial working environment.

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 To diversify portfolio both the retail & wholesale markets.

2.7 Organizational Structure

Managing Director

Deputy Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

Senior Assistant Vice President

Assistant Vice President

First Assistant Vice President

Junior Assistant Vice President

Senior Executive Officer

Executive Officer

First Executive Officer

Junior Executive Officer 12


Assistant Executive Officer

Senior Officer

Officer

2.8 Shariah council of SJIBL

Shariah Council of the Bank is playing a vital role in guiding and supervising the
implementation and compliance of Islamic Shariah principles in all activities of the
Bank since its very inception. The Council, which enjoys a high status in the structure of
the Bank, consists of prominent ulema, reputed banker, renowned lawyer and eminent
economist.
Members of the Shariah Council meet frequently and deliberate on different issues
confronting the Bank on Shariah matters. They also conduct Shariah inspection of
branches regularly so as to ensure that the Shariah principles are implemented and
complied with meticulously by the branches of the Bank.

Members of Shariah Council:

1. Chairman 2. Member
Moulana Mufti Abdur Rahman Prof. Dr. Muhammad Mustafizur Rahaman
Founder Director Former Vice Chancellor
Islamic Research Centre Bangladesh Islamic Uiversity, Kustia.

3. Member 4. Member
Moulana Abul Kalam Azad Prof. Hamidur Rahman
Khateeb Islamic University of Technology (IIUT)
Banani Bazar Bara Masque Gazipur

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5. Member 6. Member
Shah Abdul Hannan Barrister M. Ziaul Hasan
Former Chairman Head of the Chamber
Islami Bank Bangladesh Ltd. Hassan & Associates

7. Member 8. Member
M. Kamaluddin Chowdhury Alhaj Md. Solaiman
CEO Chairman, Board of Directors
Shahjalal Islami Bank Securities Ltd. Shahjalal Islami Bank Ltd.

2.9 Conventional VS Islamic Banking

Terms Conventional banking Islamic banking


Origin The functions and operating modes It is based on Islamic Shariah.
of conventional banking are based
on fully man maid principles.

Area It is concerned with the higher It is concerned with all classes


classes and middle classes of of people.
people
Principle The investor is assured of a In contrast, it promotes risk
predetermined rate of interest. sharing between investor and
entrepreneur.
Objective Profit maximization is the core Maximization of welfare of
concepts of this banking. the society and profit in basis
of Islamic Shariah are the goal
of this banking.
Function Lending money and getting it back Participation in partnership
with compounding interest is the business is the fundamental
fundamental function of function of Islamic bank.
conventional bank.

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Relationship The status of a conventional bank, The status of Islamic bank in
in relation to its clients, is that relation to its clients is that
creditor and debtor. partners, investor and traders.
Flexibility It does not flexible banking It is a flexible banking system.
system. Rate of interest is fixed. Here profit rate is flexible
changeable.
Restriction It is invest any sector. It does not invest in haram
sector.
Distribution It does not believe the equitable It is believe the equitable
system distribution of wealth. distribution of wealth.

CHAPTER THREE

FOREIGN EXCHANGE

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3.1 Definition of Foreign Exchange

Foreign Exchange means exchange of foreign currency between two countries. If we


consider ‘Foreign Exchange’ as a subject, then it means all kinds of transaction related to
foreign currency. In other words, foreign exchange deals with foreign financial
transactions.

Necessity of foreign exchange

No country is self-sufficient in this world. Everyone is, more or less, dependent on


another, for goods or services. Say, Bangladesh has cheap manpower whereas Saudi
Arabia has cheap petroleum. So Bangladesh is dependent on Saudi Arabia for petroleum
and Saudi Arabia is dependent on Bangladesh for cheap manpower. People of one country
are going to abroad for Education, Medical service etc. Thus there is exchange of foreign
currency.

Regulations for foreign exchange

Local Regulations:

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Our foreign exchange transactions are being controlled by the following rules &
regulation.

 Foreign Exchange Regulation Act 1947.


 Bangladesh Bank issues foreign exchange circular from time to time to control the
export, import & remittance business.
 Ministries of commerce issues export & import policy giving basic formalities for
import & export business.
 Sometime CCI&E issues public notice for any kind of change in foreign exchange
transaction.
 Bangladesh bank published two volumes in 1996. This is compilation of the
instructions to be followed by the authorized dealers in transitions relation to
foreign exchange.

3.2 International regulations of foreign exchange:

There are also some international organizations, influencing our foreign exchange
transactions. Few of them are discussed below:

 International Chamber of Commerce (ICC) is a worldwide non-governmental


organization of thousands of companies. It was founded in 1919. ICC has issued
some publications like UCPDC, URC, & URR etc, which are being followed by
all the member countries. There is also an international court of arbitration to
solve the international business disputes.

 World Trade Organization (W.T.O) is another international trade organization


established in 1995. General Agreement on Tariff & Trade (GATT) was
established in 1948, after completion of its 8th round; the organization has been
abolished & replaced by W.T.O. This organization has vital role in international
trade, through its 124 member countries.

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3.4 Foreign Exchange Mechanism

Foreign exchange department plays significant roles through providing different services
for the customer. Facilitating the trade with foreign country is the most important among
those services the key instrument which facilitates this trade is L/C (Letter of Credit).

Letter of Credit:

Letter of Credit may be defined as an arrangement or guarantee issued by a bank at the


request of the customer to make payment to or order of the beneficiary or authorized
another bank to effect such payment or to pay, accept or negotiate such bill of exchange
against stipulated documents, provided that the terms and conditions of the L/C are
complied with. (UCPDC-500, 1993)

The Advising Bank:

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It is the bank in the Exporter’s (Normally the exporter’s bank), which is usually the
foreign correspondent of Importer’s bank through which the L/C is advised to the supplier.
If the intermediary bank simply advises/notifies the L/C to the exporter without any
obligation on its part, it is called “Advising Bank”.

The Confirming Bank:

If the Advising Bank also adds its own undertaking to honor the credit while advising the
same to the beneficiary, he becomes the Confirming Bank, in addition, becomes liable to
pay for documents in conformity with the L/C’s terms and conditions.

The Negotiating Bank:

The Bank that negotiates the bill of exporter drawn under the credit is known as
Negotiating Bank. If the advising bank is also authorized to negotiate the bill drawn by the
exporter, he becomes the Negotiating Bank.

The Accepting Bank:

A Bank that accepts time or unasked drafts on behalf of the importer is called an
Accepting Bank. The Issuing Bank can also be the Accepting Bank.

The Paying Bank and the Reimbursing Bank:

If the Issuing Bank does not maintain any account with a bank that will be negotiating the
documents under a L/C, then arrangement is made to reimburse the negotiating bank for
the amount to be paid under from some other bank with which the Issuing Bank maintains
his account.
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3.4 Graphical representation of Foreign Exchange Mechanism:

BUYER/ SELLER
INDENTOR EXPORTER
IMPORTER BENEFICIARY
Application for Opening l/C

Submit Documents
Advises and/or confirms
Present Document

Makes Payment
Makes Payment against
Document

Issue L/C
ADVISING
BANK/
ISSUING BANK Forward Document NEGOTIATING
BANK
Makes Payment
Instruction to Pay or

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OR
3.5 Activities of foreign exchange Pays or Reimburses

There are three kinds of foreign exchange transaction:


1. Import.
2. Export.
3. Foreign Remittance.

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CHAPTER FOUR

OVERVIEW OF IMPORT

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4.1 Understanding:

Imports are foreign goods and services purchased by consumers, firms, & Governments in
Bangladesh. The importers are asked by their exporters to open letter of credits so that
their payment against goods is ensured.

Classification of importers

Goods are being imported for personal use, commercial purpose or industrial use. So,
there are three kinds of importers such as:
1. Personal importer: if the importer is insisting to import goods from the abroad for
his need this importer called personal importer.
2. Commercial importer: if the importer is insisting to import goods for commercial
purpose then it is called commercial importer.
3. Industrial importer: if the importer is insisting to import goods for industrial
purpose then it is called Industrial importer.

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Import Policy:

Under the import and export control Act, 1950 the Government of Bangladesh formulates
the Import policy through Ministry of Commerce.
The existing Import policy (1997-02) has come into effect from June 14, 1998 to June 30,
2002. (It can be reviewed every year if needed)

4.2 Main Features of Import Policy

Different import policy

 Import facility up to $2000 for actual user (for self consumption, not for
sale) without permission, $2000-5000, and approval of regional
controller of import & export (CI&E). Above $5000, approval of Chief
Controller of Import $ Export (CCI&E).
 Import facility on the basis of direct payment on foreign countries.
 Import under L/C, L/C must be irrevocable. Import above $5000-L/C is
required. But in case of perishable items like food up to $7500
transported by road L/C is not required.
 Import without opening of any L/C:
1. Books, Magazine, Publication.
2. Import up to $5000 in case of payment from Bangladesh.
3. Import under foreign aid.

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4. Import of “International chemical Reference” by
Pharmaceutical companies with prior approval of Drug
Administration.
 Government sector bodies can import without any license, permit &
IRC.
 Commercial import by cash payment only.

Import Procedure:

To import through NATIONAL Bank, a customer requires-

(i) Bank account


(ii) Import Registration Certificate (IRC)
(iii) Tax Paying Identification Number
(iv) Performa-Invoice Indent
(v) Membership Certificate
(vi) LCA (Letter of Credit Authorization) form duly attested
(vii) One set of IMP Form
(viii) Insurance Cover note with money receipt

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4.3 Import Mechanism:

To import, a person should be competent to be ‘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. After obtaining this person's has to secure a letter of
credit authorization (LCA) from Bangladesh Bank. And then a person becomes a qualified
importer. He is the person who requests or instructs the opening bank to open an L/C. He
is also called opener or applicant of the credit.

5.2 Things, which are done here:

The following things are done in this department:


 Total supervision of Import Department (Cash/Back to Back L/C).
 Foreign Correspondence related to above.
 Payment of Back-to-Back L/C and endorsement of Export L/C against payment.
 Follow-up of Back-to-Back overdue bills.
 Correspondence regarding Back-to-Back L/C and Cash L/C.

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 Maintenance of Due Date Diary.
 Maintenance & record of related L/C Documents.
 Audit Compliance.
 Matching of Bill of Entry with IMP, follow-up of pending Bill of Entry Quarterly
Statement.
 Batch Checking.
 L/C opening/ Amendment (Back to Back L/C).
 Endorsement of Export L/C when opening.
 Batch checking.
 Balancing of L/C Contingent Liability 9Back to Back L/C).
 Follow-up of Sub-judicial bills and maintaining liaison with Head Office and Foreign
Correspondent.
 All correspondence related to Back-to-Back L/C with Head Office and Foreign
Correspondent.
 Supervision of checking, Lodgment and retirement of Import documents under Back-
to-Back L/C.
 Issuance of Certificate and attestation of papers/documents of garments clients as
required by BGME, EPB & other regulatory bodies.
 Checking, lodgment, retirement of Import documents under Back-to-Back L/C.
 Issuance of Shipping Guarantee (Back to Back L/C).
 IMP Form Fill-up (Cash L/C).
 Inform negotiating Bank about maturity date of Back-to-Back L/C.
 Quarterly statements for Bonded ware House.
 Balancing of Accepted Liability.
 Statement of outstanding accepted import bills under Back-to-Back L/C.
 L/C opening and Amendment of Cash L/C (and Inland L/C).
 Maintenance and record of Passbook and IRC.
 Maintenance & Record of related L/C (s) & Documents.
 Credit Report.
 Statement of IRC Renewal fees to CCI&E.
 Preparation of monthly foreign exchange business position.
 L/C Lodgment (Cash).

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 Checking of Cash L/C documents.
 L/C Retirement.
 LCA Issue.
 BLC Statement.
 Differed Payment (Cash).
 Follow-up of outstanding BLC.
 Correspondent (Cash L/C).
 Proof Sheet of LC Margin and Contingent Liability (Cash L/C).
 Issuance of shipping guarantees (cash) IMP forms fill-up (cash).

4.4 L/C Opening:

If an importer wants to import some goods from outside the country, at first he has to
apply to a bank for opening a L/C. Letter of Credit (L/C) is a written undertaking of a bank
written to the seller and issued at the request of the buyer to pay at site or a determinable
future date. According to Import Policy, unless or otherwise specified, all import is to be
made by opening irrevocable letter of credit (amendment or cancellation with the
agreement of the opening bank, advising bank, beneficiary, and importer). L/C can be
opened against Performa invoice if the exporter has no agent and L/C can be opened
against Indent if the foreign supplier has indenting agent.

Documents Require for Opening a L/C:


For opening letter of credit an importer is required to have some documents, which are to
be submitted to the L/C issuing or popularly known as opening bank.

 A valid Import Register Certificate (IRC)


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 Membership Certificate from the registered local Chamber of Commerce and Industry
or valid trade license
 TIN
 Letter of Credit Authorization form (LCA)
 Insurance cover note for L/C amount
 Indents for goods issued by indenter or Performa Invoice issued by foreign supplier
 Charge Documents duly signed
 IMP form duly signed
 The opener has to have a current account with the bank

4.5 Procedure involved in L/C opening:

There are few steps involved in L/C opening process. These are: -
 At first the L/C opener is required to fill up the prescribed application form for
requesting to open a L/C for him.
 After receiving the application form with other required documents submitted by
the opener they are to be thoroughly scrutinized. The points, which shall be
scrutinized, are describing bellow-
a. The amount and description of goods in the application should be relevant with
the indent or Performa invoice or import contract.
b. The amount is covered by the insurance amount.
c. The item is not a banned one.
d. The indent produced has the Import Registration Certificate number and the
indenter’s registration number. The indent has indenting agent’s signature and
importer’s signature.
e. Whether transshipment and partial shipment is allowed.

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

Accounting Procedure Involved in L/C opening:

There are two types of accounting procedure involved in L/C. One is L/C opening, and
another is Liability Register, which includes Liability amount, Margin, Foreign
correspondent etc. While opening L/C there are few accounting entries.

► For Margin importer account with bank is debited and Margin A/C is credited.

► For contingent liability (L/C amount) Customer’s liability on L/C cash is debited and
Banker’s liability on cash is credited.
►For other charges customer’s current account is debited and commission A/C, income
A/C, Foreign correspondent charge A/C and other related A/C is credited.

Advising a Letter of Credit:

The advising or notifying bank is the bank through which the L/C is advised to the
exporter. It is a bank situated in the exporting country and it may be a branch of the

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opening bank. It becomes customary to advise a credit to the beneficiary through an
advising bank.

Adding Confirmation:

The confirming bank does adding confirmation. Confirming bank is a bank, which adds its
confirmation to the credit, and it is done at the request of the issuing bank. The confirming
bank may or may not be the advising bank.

L/C Transmitting:

Letter of credit can be transmitted to the advising bank through three methods. They are in
Telex, Courier, or SWIFT (Society for Worldwide Inter-bank Financial
Telecommunication). L/C is send to advising bank in three copies. The advising bank
authenticates the original copy of L/C and delivers it to the exporter. The duplicate copy is
kept with the advising bank.

Negotiating:

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

Amendment:

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Parties involved in a L/C, particularly the seller and the buyer cannot always satisfy the
terms and conditions in full as expected due to some obvious and genuine reasons. In such
a situation, the credit should be amended National Bank transmits the amendment by
tested telex to the advising bank .In case of revocable credit it can be amended or
cancelled by the issuing bank at any moment and without prior notice to the beneficiary.
But in case of irrevocable letter of credit, it can neither be amended nor cancelled without
the consent of the issuing bank, the confirming bank (if any) and the beneficiary. If the
L/C is amended, service charge and telex charge is debited from the party account
accordingly.

Examination of Documents:

National Bank officials check whether these documents have any discrepancy or not.
Here, Discrepancy means the dissimilarity of any of the documents with the terms and
conditions of L/C.

Adding Confirmation:
Add the confirming Bank gives confirmation. An Add confirmation letter contains the
followings,
1) L/C No.
2) L/C amount
3) Items to be imported, etc.

Lodgment:

The opening bank receives import bills, which have been negotiated. After receiving the
documents, they are to be thoroughly scrutinized before lodgment.

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.

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 Documents have been negotiated within the negotiation period.

 The Bill of Lading/Air-Way Bill/ Railway receipt is not dated later than the last date of
shipment mentioned in the L/C.
 The L/C has not been amended or subjected to any special instructions, which might
alter the value of L/C
 Import bills include following documents, which are to be scrutinized.
 Bill of Exchange
 Commercial Invoice
 Bill of Lading
 Certificate of Origin
 Others

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.
 The amount drawn does not exceed the amount mentioned in the L/C.
 The amount in words and figures should be same.
 The bill of exchange should be properly endorsed.

Commercial Invoice:

 It has to be verified that the commercial invoice has been properly drawn and signed
by the beneficiary according to the terms and conditions of L/C.
 The beneficiary should properly invoice the merchandise.
 The merchandise is invoiced to the importer on whose account the L/C is opened.
 The description of merchandise and the unit price correspond with that given in the
L/C.

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

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.
 The B/L should include the description of the merchandise according to invoice.
 The port of shipment and destination, date of shipment and the name of the consignee
are in agreement with those mentioned in the L/C.
 The shipping company or their authorized agents properly sign the B/L.
 The date on the B/L is not ‘stale’ which means it is not dated in unreasonably long
time prior to negotiation.

Certificate of Origin:

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

Others:

There are some other documents, which are also attached, with the shipping documents
like packing list, pre-shipment inspection certificate etc. These documents are also verified
carefully before lodgment.

Steps Involved in Lodgment:

When the scrutiny of import bills is over the steps should be taken for lodgment.

 At first all the particulars of the documents are entered in the PAD (Payment against
Document) register and PAD No. Seal is given on all the copies of the received
documents.

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 Convert the foreign currency into Bangladeshi currency.
 Reverse the contingent liability and entry in the liability register.
 Prepare lodgment voucher.
 Prepare other voucher.
 Send IBCA to the head office.
 Make intimation to the importer.

CHAPTER FIVE

OVERVIEW OF EXPORT

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5.1 Understanding:

The terms, Export means selling of the goods & services to the countries abroad. Export is
the only sector that earns huge remittance for the country. So all of banks, including SJIBL
is also trying their best to provide smooth for the export operation. In order to export any
goods and services to any foreign country an Export Registration Certificate is required.
When the exporter sends sight draft and then receives the L/C from the importer, the
exporter submits the L/C to the paying bank including documents. If the authority is
satisfied the bank starts the processing to collect export bill or open Bank-to-Back L/C.
The bank provides the Back-to-Back L/C to the exporter to import the raw materials from
abroad to produce the exportable commodity for the importer. Thus Back-to-Back L/C is
for manufacturing firms importing raw materials and exporting finished goods.

In the Export section, two types of L/C s are opened-

 Back to Back L/C


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 Export L/C

5.2 Things done here:

The following things are done in this department:

 Scrutiny of Export Shipping Documents.


 Follow-up for realization of Export Proceeds.
 All Correspondence relating to Export Department.
 Compliance of Audit & Inspection.
 Advising of Export L/Cs to the beneficiary.
 Authentication of L/C and Amendments from other Correspondent Bank.
 Transfer of Export L/C to the 2nd Beneficiary & issuance of notice of transfer to L/C
issuing Bank.
 Recording of Export L/C particulars in Export L/C Transfer Register.
 Realization of transfer changes.
 Issuance of precedes realization certificates.
 And other works as & when directed by the manager and Sub-Manager.
 Certificate of EXP Forms.
 Posting of Tickets.
 Lodgment of Export Bills (FBP, FDBC, IBP & IBC).
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 Preparation of tickets elating to negotiation of documents.
 Negotiation of Inland Bills.
 Maintenance of all records related to FBP, FDBC and Inland Bills.
 Balancing of FBP, FDBC, and IPB & A/R Export A/Cs.
 Preparation of statement and all returns to Bangladesh Bank and Head Office (Weekly/
Monthly/ quarterly).

5.3 Export Bill Scrutiny

Scrutinizes the export bill on the following points,

A. General:
 Late shipment.
 Late presentation.
 L/C expired.
 L/C overdrawn.
 Partial shipment or transshipment beyond L/C terms.

B. Bill Of Exchange:
 Amount of bill differs with Invoice.
 Not drawn on L/C issuing bank not signed.
 Tenor of B/E not identical with L/C
Full set not submitted Invoice:
 Not issued by the beneficiary
 Not signed by the beneficiary
 Not made out in the name of the Applicant

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 Description, Price, quantity, sales terms of the goods not
corresponds to the credit.
 Not marked one fold as original Shipping marks differs with B/L &
packing list.

C. Packing List:
 Gross weight, net weight, & measurement, number of cartoons/
packages differs with B/L.
 Not marked one fold as original.
 Not signed by the beneficiary.
 Shipping marks differs with B/L.

D. Bill of Lading/Air Way Bill:

 Full set of bill not submitted.


 B/L is not drawn or endorsed to the Order Of National Bank.
 “Shipping On Board”, “Freight Prepaid” or “Freight Collect” etc.
notations are not marked on the B/L.
 B/L not indicate the name and capacity of the party i.e. carrier or
master, on whose behalf the agent is signing the B/L.
 Shipped on Board Notation not showing name of pre-carriage vessel/
intended vessel.
 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 lading).
 Short Form B/L.
 Charter party B/L.
 Description of goods in B/L not agrees with that of Invoice, B/E & P/L.
 Alterations in B/L not authenticated.
 Loaded on deck.
 B/L bearing clauses or notations expressly declaring defective condition
of the goods and / or the packages.

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E. Others:

 Non-Negotiable documents not forwarded to buyers or forwarded


beyond L/C terms.
 Inadequate number of Invoice, Packing List, & others submitted.
 Short shipment certificate not submitted.

5.4 Export Finance

Pre-shipment credit:

Pre-shipment credit usually takes the following forms:


 Overdraft against hypothecation of exportable commodities.
 Overdraft against Trust Receipt (T.R.)
 Packing Credit (P.C.)

Post shipment Credit:

Post shipment credit refers to credit facilities extended to export after actual shipment of
goods against shipping documents. It is usually provided in the following ways.
 Bill negotiation / purchase.
 Bill for collection.

Bill Negotiation / Purchase:

The most usual method of financing exporters at the post-shipment stage is negotiation of
documents under L/C. Here the bank acts as negotiating bank. After the shipment of the

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goods, the exporter submits the relative documents to the branch for negotiation. The
documents generally include a) Bill of Exchange b) Bill of Lading, c) Insurance policy d)
Invoice e) Certificate of origin etc. The documents are to submit within the period
mentioned in the L/C. The documents are sent to the L/C opening branch with a
forwarding letter. Then the branch claim reimbursement from the issuing bank or from the
reimbursing bank.
On negotiation/ Purchase of the export bills, the exporter is paid the value of the bill
(converted into Bangladeshi Tk at the ruling bill buying rates).

Documents on Collection Basis:


The documents, which are not negotiable by the branch due to some discrepancies, are
sent to L/C opening bank on collection basis. The bank mentions the discrepancies on their
forwarding schedule. On receiving the documents, the L/C opening bank will further
scrutinize the document with the L/C and inform the importer regarding discrepancies
found in the documents. If these are acceptable to the importer and or permissible with the
exiting Exchange control regulation, the documents will be lodged and L/C opening bank
will send the payment instruction to the collection bank.

Back-To-Back L/C:
In case of a Back to back letter of credit, a new L/C (an Import L/C) is opened on the basis
of an original L/C (an Export L/C). Under the 'Back to Back' concept, the seller as the
Beneficiary of the first L/C offers it as a 'security' to the advising Bank for the issuance of
the second L/C. The Beneficiary of the Back-to-Back L/C may be located inside or outside
the original Beneficiary's country. In case of a Back-to-Back L/C, no cash security (no
margin) is taken by the Bank; Bank liens the first L/C. In case of a Back-to-Back L/C, the
drawn bill is an Issuance/ Time bill.
In National Bank, papers/documents required for submission for opening of back-to-back
L/C:
a) Master L/C

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b) Valid Import Registration Certificate (IRC) & Export
Registration Certificate (ERC)
c) L/C application & LCA form duly filled in signed.
d) Pro forma Invoice or Indent.
e) Insurance Cover Note with money Receipt
f) IMP- form duly signed
In addition to the above the following papers/documents are also required for export
oriented garment industries while requesting for opening of back-to-back letter of credit,
1) Textile permission
2) Valid Bonded Warehouse License
3) Quota allocation letter issued by Export Promotion Bureau (EPB)
in favor of the applicant in case of quota items.
In case the Factory premises is a rented one, Letter of Disclaimer duly executed by the
owner of the house/premises to be submitted.
Payment of Back-to-Back L/C:

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

Reporting to Bangladesh Bank:

At the end of every month, the reporting regarding the following information is
mandatory,
A. Filling of E-2/P-2 schedule of S-1 category; which covers the entire month amount of
import, category of goods, currency, country etc.
B. Filling of E-3/P-3 schedule for all charges, commission with T/M form.
C. Disposal of IMP form, which includes,
 Original IMP is forwarded to Bangladesh Bank with invoice and Indent.
 Duplicate IMP is kept with the Bank along with the bill of entry/ Certified Invoice.
 Triplicate IMP is kept with the Bank for office record.
 Quadruplicate is kept for submission to Bangladesh Bank in case of imports where
documents are retired.

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5.5 Export L/C:

The other type of L/C facility offered by National Bank is Export L/C. 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 garment products to U.S.A and European Community (EC) countries.
Bangladesh exports about 40% of its readymade garment products to U.S.A. Most of the
exporters who export through National Bank are readymade garment exporters. They open
export L/Cs here to export their goods, which they open against the import L/Cs opened
by their foreign importers.

Formalities for Export L/C:

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The export trade of the country is regulated by the Imports and Exports (control) Act,
1950. There are a number of formalities, which an exporter has to fulfill before and after
shipment of goods. These formalities or procedures are enumerated as follows,

1. ERC: The exports from Bangladesh are subject to export trade control exercised by
the Ministry Of Commerce through Chief Controller of Imports and Exports (CCIE).
No exporter is allowed to export any commodity permissible for export from
Bangladesh unless he is registered with CCI & E and holds valid Export Registration
Certificate (ERC). The ERC is to be renewed every year. The ERC number is to be
incorporated on EXP forms and other documents connected with exports.
Obtaining EXP: After having the registration, the exporter applies to National Bank
with the trade license, ERC, and the Certificate from the concerned Government
Organization to get EXP. If the bank is satisfied, an EXP is issued to the exporter.

2. Securing the Order: Upon registration, the exporter may proceed to secure the
export order. Contracting the buyers directly through correspondence can do this.

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

 Description of the goods


 Quantity of the commodity
 Price of the commodity
 Shipment
 Insurance and marks
 Inspection
 Arbitration

The following points are to be looked for:

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

44
ii) The L/C is an irrevocable one, preferably confirmed by the advising
bank.
iii) The L/C allows sufficient time for shipment and a reasonable time
for registration.
iv) If the exporter wants the L/C to be transferable, divisible and
advisable, he should ensure those stipulations are specially
mentioned in the L/C.

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

5. Registration of Sale: This is needed when the items proposed to be export,


are raw jute and jute goods.

6. Shipment of Goods: The following are the documents normally involved at


the stage of shipment-

 EXP Form
 Photocopy of registration certificate
 Photocopy of the contract
 Photocopy of the L/C
 Customs copy of ERF Form for shipment of jute goods and EPC Form for
raw jute.
 Freight certificate from the bank in case of payment of the freight at the port of
lading is involved.
 Railway receipt, Berg Receipt or Truck Receipt.
 Shipping instructions.
 Insurance policy.

After those, exporter submits all these documents along with a Letter of Indemnity to
National Bank for negotiation. An officer scrutinizes all the documents. If the document is
45
a clean one, National Bank purchases the documents on the basis of banker- customer
relationship. This is known as Foreign Documentary Bill Purchase (FDBP).

CHAPTER SIX

FOREIGN REMITTANCE
46
6.1 FOREIGN REMITTANCE

Remittance refers to the send or receipt of money from one place to another place. Foreign
remittance refers that the exchange of money between two countries or among several
countries. This is mainly occurred through banking institution. National Bank Limited is
not beyond this. It performs the remittance function with different countries. It maintains
the foreign remittance in the following form:
 Inward Remittance.
 Outward Remittance.

Inward Remittance
Inward remittance refers to the extent where by bank makes payment to the client against
foreign demand draft. They will make payment to the client by verifying the, test number,
and signature of the authorized officer.

47
Modes of Foreign Inward Remittance:
 T.T (Telegraphic Transfer)
 M.T (Mail Transfer)
 D.D (Demand Draft)
 T.C (Travelers Cheque)
 PO (Pay Order)

Besides this foreign Inward Remittance also includes remittances on account of export,
purpose of bills, purpose of T.C Foreign currency notes and coins, cheque issued on
foreign banks in favor of beneficiaries in Bangladesh etc.

T.T
Cable or telex instructions of payment are called as Telegraphic Transfer, where a foreign
bank issue a T.T in favor of someone in Bangladesh, it credits the amount, received from
the remitter to the NOSTRO A/C of its correspondent bank. On receipt of the T.T the
paying bank in Bangladesh will make payment of the proceeds of the T.T in foreign
currency or in equivalent Bangladesh Taka to the beneficiary.

M.T
M.T is an instrument issued by a remitting bank to the paying bank advising in writing to
make payment of certain amount to specific beneficiary.

D.D
A demand draft is a negotiable instrument issued by a bank drawn on other bank with the
instruction to pay a certain amount to beneficiary on demand.

T.C

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It is an instrument issued by the Banks/ Company’s payable to the purchaser on
presentation.

P.O
A Pay order is a written under issued by a branch of bank, to pay a certain sum of money
to a specific person or a bank. It may be said as to be a banker’s cheque as it is issued by a
bank and payable by itself.

Purpose of Inward Remittance:


 Family maintenance.
 Indenting commission.
 Recruiting Agents commission.
 Realization of export proceeds
 Donation
 Gift
 Export brokers commission etc.

Outward Remittance

Foreign currency being made out abroad may be termed as foreign outward remittance.
That means remittance in foreign currency that goes out abroad is called foreign outward
remittance.

Collection of foreign currency instrument:

To collect proceed of Foreign Instrument following procedures to be maintained:

 Receive instrument with deposit slip.


 Affix crossing stamp of the Bank.
 Entry in the register putting IBCA number.
 Affix endorsement “pay to the order of any Bank or trust company,
prior endorsement guaranteed”.

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 Instrument to be sent to adjacent correspondents.

Remittances are allocated:

 Household remittance.
 Advance payment.
 Education purpose.
 Exporting traveling.

CHAPTER SEVEN

50
ANALYSIS & FINDINGS

7.1 SWOT Analysis Defined:

SWOT consists of Strength, Weakness, and Opportunity & Threat. It exhibits strengths of
the organization, weaknesses of it, potential opportunities existing in the market and
prevailing or upcoming threats in the market place.

SWOT Analysis:

1. Strength:
 Wide image
 Excellent management
 High commitment of customer and qualified & experienced human resource
 Sophisticate automated system and strong network.

2. Weakness:

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 Lack of motivation of employees
 Heavily depends on Head Office for decision making
 Absence of teamwork.

3. Opportunity:
 Increasing demand of customer finance
 Investment potential of Bangladesh
 Relationship management
 Charge is lower.

4. Threats:
 Some commercial / foreign banks as well as private banks
 Similar type of retail banking products
 Certain Bangladesh Bank rules and regulations
 Customer awareness of pricing and services.

7.2 Foreign Exchange Business Analysis

Performance of Total Import Business:

From the very beginning the banks has embarked on foreign exchange business with a
view to facilitating international trade of the country and cope with the race of
globalization.

Year Fig in million Taka


2010 39459.50
2011 68198.50
2012 76985.60
2013 73859.40
2014 79024.20
Table: Import performance of SJIBL.

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Graphical Presentation:
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
2011 2012 2013 2014

Graphical representation of Total Import Business of SJIBL

Comment:
Import business Increased by 6.99% percent of which real value was Taka 79024.20
million in 2014 from Taka 73,859.40 million in 2013.

Performance of Total Export Business:

The total export business handled by the business amounted taka. 53044.90 million as at
December 2014.

Year Fig in million Taka


2010 21372.20
2011 34975.00
2012 42712.20
2013 51775.30
2014 53044.90
Table: Export performance of SJIBL.

Graphical Presentation:

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60000

50000

40000

30000

20000

10000

0
2011 2012 2013 2014

Graphical representation of Total Export Business of SJIBL

Comment:
On the other hand export business grew to Taka 53044.90 million in 2014 which is 2.45%
percent higher than the export of Taka 51,775.30 million in 2013.

7.3 Finding

There is some problem in foreign exchange mechanism in SJIBL these are given in below:

 Fluctuation in Exchange rate:

It is often found that the rate of foreign currency is changed at the time of lodgment of
import bill which increase import cost from the end of L/C opening.

 Anomaly between theory & practice:

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While handling the Foreign Exchange transaction we always follow the rules and
regulations laid down in UCPDC-600, but practically we face many problems which are
not integrated by UCPDC-600.

 Erratic govt. policy:

In Bangladesh rules and policies formulated by govt. change very frequently. This causes
a major problem for the growth of any industry including bank. Being a service industry
banks should be consistent in their services. But due to frequent changes in regulatory and
monetary policies hamper the growth. Again our govt. policies are short lived. With the
change of govt. policies also become invalid due to the political considerations in the
overall policy making.

 Excessive Control by Central Bank:

Banking sector in Bangladesh is underway the reform programs. Therefore Bangladesh


bank and the govt. are formulating new policies in compliance with the present scenario.
These policies are made available on a trial and error basis. Too much experimenting
thereby is making a slack in the sector.

 Scarcity of foreign currency:

Sometimes foreign currency become scarce in the market and Bangladesh bank do not
release foreign currency to maintain the reserve position.

 Finance against discrepant documents:

In most case it is observed that bank has to finance to the client against discrepant
document.

 Over invoicing of the importable commodities:

55
Sometimes the value of the importable goods is overstated in the indent/ pro-forma
invoice. The bank does not find any way to verify the authenticity of the quoted price.

 Failure to shipment of goods in due time:

Sometimes it is not possible to the party to shipments the goods as fixed time due to
inadequate power supply and political unrest. As a result of paying late charge have to
pay.

CHAPTER EIGHT
56
RECOMANDATION AND
CONCLUSION

8.1 Recommendations:

To perform better in foreign exchange SJIBL adopts some necessary steps. Here I would
like to mention some of them:

 Necessary undertaking must be obtained from the importer to cover the fluctuation
in foreign exchange rate.
 The financial authority of Bangladesh may pursue ICC (International Chamber of
Commerce) to update UCPDC-600 and necessary compromising points to be
explored to solve the problem.

57
 The international division of the bank may set up additional correspondent
relationship in potential territories on merit basis.
 The ICC & SWIFT may frame some common guidelines to nationalize the charges
in international level so that no single country becomes the victim of willful
increase in charges.
 The government may fix up tariff rates to prevent over invoicing.
 Necessary incentives may be allowed to the exporters to upgrade the reserve
position.
 The Bankers may pursue the financial authorities like Bangladesh bank, Ministry
of finance, and National board of revenue to liberalize the policy matters so that
genuine importers do not suffer due to any adverse policy matter.

 More branches/networks to be developed for greater coverage especially in rural


areas.

 To encourage foreign remittances through correspondence overseas exchangers


 To strictly follow the foreign currency regulations
 More efforts to improve customer service

8.2 Conclusion:

Banks play a very important financial role towards the country. Proper financial system of
a country can develop the country’s economy system. As a Islamic bank SJIBL try their
best to running their function on the basis of Islamic Shariah. The slogan of SJIBL is
“committed to cordial service” and day by day its area of servicing is increased all over
the country through setting up new branch at new place. As an Islamic bank SJIBL, I have
a chance to understand the Islamic banking properly and I found that the transactions are
mostly trade oriented. SJIBL can be a role model for conventional bank and show the path
of Islamic financial system that is spread all over the world.

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Finally, without any doubt it can be concluded that, SJIBL, is successfully discharging
their best service for the welfare of their client. I wish tremendous success to SJIBL &
hope that it will expand its operations across the country.

BIBLIOGRAPHY

 Shahjalal Islami Bank Limited Annual Report 2012-13.


 Terms and Conditions Published by Shahjalal Islami Bank Limited.
 Guideline for Foreign Exchange Transactions published by Bangladesh
Bank.
 Prospectus of Shahjalal Islami Bank Limited
 www.shahjalalbank.com.bd
 www.scribd.com

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 www.assignmentpoint.com

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