Literature Review

1. INTRODUCTION

1.1 Background of the report

Any academic course of study has a great value when it has practical application in real
life. Only a lot of theoretical knowledge will be little important unless it is applicable in
practical life. Therefore, it is an opportunity for the students to know about real life situation
through this internship program. This program consists of three phases:

 Orientation to Organization: To accustom the internee with the structure, functions, and
performance of the organization.
 The Project Work: Pertaining to a particular problem matching with the internee’s
capacity and organization’s requirement.
 The Report writing: To epitomize the internee’s analysis, findings and achievements, in
the proceeding one phase.

In this connection, I was assigned to EXIM Bank Ltd. Karwanbazar Branch Foreign
Exchange Department for my practical orientation. The title “A Study on Foreign
Exchange Services of EXIM Bank Ltd” was selected by my supervisor teacher. I have
prepared this report under the supervision of Dr. Riazur Rahman Chowdhury Professor of
AIS department of Dhaka University.

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1.2 Objective of the report

Behind this report, obviously there have some objectives which must have to be fulfilled.
There both have some general objectives and specific objectives.

1. General objectives-

1. To fulfill the academic requirements of internship report.

2. To acquire practical experience in Overall banking services of EXIM Bank.

2. Specific objectives

1. To have an overall idea about Islamic Banking System that is based on the Al-Quran
and Sunnah.
2. To get a clear idea about Banks and how it runs and what function it does.
3. To gather theoretical knowledge of the banking function.
4. To evaluate the financial performance of EXIM bank over last five years (FY2009-
FY2010).
5. To suggest my findings for continuous improvement of the Bank.

1.3 Scope of the reportt

This report titled “A Study on Foreign Exchange Services of EXIM Bank Ltd”-
Karwanbazar Branch, is an outcome of B.B.A.’s 6 th week extensive banking environment –
familiarization program. This program was started from 3 th July 2011 and ended on 15 th
August 2011. As it has been directed to present the report in a way reflecting the
understanding of the nature of jobs in a banking desk combined with personal observation.
The scope of the study is to find the financial aspect of the operation of the bank. In addition,
the report is done to find the operation and effectiveness of the EXIM Bank’s foreign
exchange services. The scope of the project is very limited since we are working with a
particular Bank only – which is EXIM Bank Limited. So, the results of the report may not be
reflective of the total industry scenario.

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1.4 Methodology of the study

Methodology of the study includes direct observations, face to face conversation with the
employees of different desk, study of files, circular etc. & practical deskwork. I have covered
different desk of the branch. In conducting this report basically, there have been two types of
data and information used.

1. Primary Data Collection

2. Secondary Data Collection

Source of Data

Primary sources Secondary sources

o Face to conversation with the o Annual Report of EXIM Bank ltd

respective officers and stuffs of o Website of the EXIM Bank Ltd
the branch and head office. o Several books and periodicals related
o Discussing with my to the banking sector.
supervising teacher and manager. o Bangladesh Bank Report
o Practical work experience in o Different circular sent by the head
the different desk of the office of EXIM Bank
department of the branch. o Various documentary file of EXIM
o In depth-study of selected Bank
cases. o Prior research report.
o Group discussion o Annual budget of EXIM Bank.

1.5 Limitations of the study

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The main limitations of the study are as follows:

 It was very difficult to collect the information from various personnel for their job
constraint.
 Sometimes officials deny disclosing some information as to maintain secrecy.
 Some internal data which bank does not publish for strong reason.
 Bank policy was not disclosing some data and information for obvious reasons.
 Due to the limitation of the information some assumptions are made so there may be
some personal mistakes in this report.

1.6 Benefits of Islamic Banking:

 Islamic banking and financing is not centered only on credit worthiness and
ability to repay the loans and interest; instead the worthiness and profitability
of a project are the most important criteria of Islamic financing while the
ability to repay the loan is sub-segmented under profitability.

 One of the unique and salient characteristics of Islamic banks is that the
integration of ethical and moral values with its banking operation. The ethical
and moral consideration of Islamic banks cannot be detached and their
behavior should be consistent with the moral and ethical standards laid down
by the Islamic Shari'ah.

 Unlike the conventional banks, the financing of Islamic banks are restricted to
useful goods and services and refrain from financing alcoholic beverages and
tobacco or morally unacceptable services such as casinos and pornography,
irrespective of whether or not such goods and services are legal or not in a
given country.

 In contrast with conventional banks, Islamic banks do not consider only the
credit worthiness and interest rate as standards; instead they must apply
Islamic moral/ethical criteria in their provision of financing. This adds another
merit for Islamic banks since there is a benefiticial impact on the productivity
in the economy as it reduces the social and economic cost of such harmful
products and activities.

1.7 Difference between Islamic and conventional banks

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conventional banks
1. The functions and operating
modes of conventional banks are based
on fully manmade principles.
2. The investor is assured of a
predetermined rate of interest.
3. It aims at maximizing profit
without any restriction.
4. It does not deal with Zakat.
5. Lending money and getting it back
with compounding interest is the
fundamental function of the conventional
banks.
6. It can charge additional money
(penalty and compounded interest) in
case of defaulters.
7. Very often it results in the bank’s
own interest becoming prominent. It
makes no effort to ensure growth with
equity.
8. For interest-based commercial
banks, borrowing from the money market
is relatively easier.
9. Since income from the advances is
fixed, it gives little importance to
developing expertise in project appraisal
and evaluations.
10. The conventional banks give
greater emphasis on credit-worthiness of
the clients.
11. The status of a conventional
bank, in relation to its clients, is that of
creditor and debtors.
12. A conventional bank has to
guarantee all its deposits.
2. COMPANY PROFILE OF EXIM BANK
A Study on Foreign Exchange Services of EXIM Bank Ltd
Literature Review
Islamic banks
1. The functions and operating modes of Islamic
banks are based on the principles of Islamic Shariah.
2. In contrast, it promotes risk sharing between
provider of capital (investor) and the user of funds
(entrepreneur).
3. It also aims at maximizing profit but subject to
Shariah restrictions.
4. In the modern Islamic banking system, it has
become one of the service-oriented functions of the
Islamic banks to be a Zakat Collection Centre and
they also pay out their Zakat.
5. Participation in partnership business is the
fundamental function of the Islamic banks. So we
have to understand our customer’s business very well.
6. The Islamic banks have no provision to charge
any extra money from the defaulters. Only small
amount of compensation and these proceeds is given
to charity. Rebates are give for early settlement at the
Bank’s discretion.
7. It gives due importance to the public interest.
Its ultimate aim is to ensure growth with equity.
8. For the Islamic banks, it must be based on a
Shariah approved underlying transaction.
9. Since it shares profit and loss, the Islamic
banks pay greater attention to developing project
appraisal and evaluations.
10. The Islamic banks, on the other hand, give
greater emphasis on the viability of the projects.
11. The status of Islamic bank in relation to its
clients is that of partners, investors and trader, buyer
and seller.
12. Islamic bank can only guarantee deposits for
deposit account, which is based on the principle of al-
wadiah, thus the depositors are guaranteed repayment
of their funds, however if the account is based on the
mudarabah concept, client have to share in a loss
position.
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2.1 Historical Background of EXIM Bank Ltd.

Export Import Bank of Bangladesh Limited was incorporated in Bangladesh on 2 June 1999
as Banking Company under the Companies Act 1994. The Bank was established under the
leadership of Late Mr. Shahjahan Kabir, founder chairman who had a long dream of floating a
commercial bank which would contribute to the socio-economic development of our country. He
had a long experience as a good banker. A group of highly qualified and successful entrepreneurs
joined their hands with the founder chairman to materialize his dream. Indeed, all of them proved
themselves in their respective business as most successful star with their endeavor, intelligence,
hard working and talent entrepreneurship. Among them, Mr. Md. Nazrul Islam Mazumder
became the honorable chairman after the demise of the honorable founder chairman.
Of its very beginning, EXIM Bank of Bangladesh limited was known as BEXIM Bank,
which stands for Bangladesh Export Import Bank Limited. But for some legal constraints the
bank renamed as EXIM Bank, which means Export Import Bank Of Bangladesh Limited. This
bank starts functioning from 3 August, 1999 with Mr. Alamgir Kabir, FCA as the advisor and
Mr. Mohammed Lakiotullah as the Managing Director. Both of them have long experience in the
financial sector of our country. By their pragmatic decision and management directives in the
operational activities, this bank has earned a secured and distinctive position in the banking
industry in terms of performance, growth, and excellent management. The authorized capital and
paid up capital of the bank are Tk. 350.00 crore and Tk. 267.77 crore respectively.
The Bank converted its banking operation into Islamic Banking based on Islamic Shariah
from traditional banking operation on 1 July 2004 after obtaining approval from Bangladesh
Bank. The Bank went for public issue of shares in the year 2004 and its shares are listed with
Dhaka Stock Exchange and Chittagong Stock exchange. The commercial Banking activities of
the Bank consist of services including mobilizing deposits, providing investment facilities,
discounting bills, conducting money transfer, foreign exchange transactions and providing
services i.e. issuing guarantees, safe keeping, acceptances and letters of credit etc. The Bank
carries its banking activities through thirty branches operating as per Islamic Shariah in the
country.

2.2 Corporate Profile:

(Information as per last Annual Report 2011)

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Registered Name : Export Import Bank of Bangladesh Limited

Status : Public Limited Company

Slogan : Shariah Based Islami Bank

Vision Statement : “Together Towards Tomorrow”.

Date of Incorporation : June 02, 1999.

Inauguration of First Branch : August 03, 1999. (Motijheel Branch)

Registered HO Address : "SYMPHONY"

Plot # SE (F): 9, Road # 142
Gulshan Avenue, Dhaka- 1212
Phone: +880-2-9889363, 9891489
Fax: +880-2-8828962
Email: itd@eximbankbd.com

SWIFT : EXBKBDDH.

Chairman : Mr. Md. Nazrul Islam Mazumder

Managing Director : Mr. Kazi Masihur Rahman

Company Secretary : Md. Golam Mahbub

Auditor : M/S. Pinaki & Co.

Credit Rating : Long Term- A- (Adequate Safety)

Short Term- ST-3 (Good Grade)

Authorized Capital : TK. 350.00 Crore

Paid up Capital : Tk. 267.77 crore

Number of Branches : 44

Number of Proposed Branches : 09

Official LOGO : :

2.3 Values of EXIM Bank

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 To be one EXIM by holding and guiding the following values.

 To have strong customer focus and build relationship based on integrity and superior
service and mutual benefit.
 To strive for private and sound growth.
 To work as a team to serve the best interest of the organization.
 To work for continuous business innovation and improvements.
 To value and respect people and make decision based on merit.
 To provide recognition and communication.

3. KARWAN BAZAR BRANCH OF EXIM BANK

3.1 Background

EXIM Bank KARWAN BAZAR branch is one of the important branches for EXIM Bank.
From the very beginning of the branch it has proved the necessary of itself. The Bashundhara
road branch was continuing from the year of 27th December 2006. At the beginning of the branch
it has small deposit and profit is also small. But at present the deposit is increasing and operating
and net profit is also increasing. In the year of 2008 the deposit target of the branch was 80
crores and the bank achieves 81.47 crores.

3.3 Departments within Karwan Bazar Branch

This branch has four departments as the following.

1. General Banking (GB) Department
2. Credit Department
3. Cash Department &
4. Foreign Exchange Department

4. FOREIGN EXCHANGE SERVICES

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4.1 Foreign Exchange:

In the modern world no country is self-sufficient, one country is to depend on other countries
and from this point of view there arises the question of foreign trade and foreign currency
transactions. That is, the international trade involves foreign exchange transactions particularly
for receipt and payment against export and import of goods and services from one country to
another. Without foreign exchange transactions we cannot think of foreign trade. Of course,
various rules and regulations are to be followed in connection with the foreign trade and foreign
exchange transactions.

Foreign Exchange means exchange foreign currency between two countries. If we consider
‘Foreign Exchange’ as a subject, then it means all kind of transactions related to foreign
currency.

Some definitions of foreign exchange are given below:

 Foreign exchange means foreign currency and includes all deposits, credits and balance
of payable in foreign currency as well as Draft, Traveller’s checks, Letter of Credit,
Bills of Exchange drawn in local currency but payable in foreign currency.

─ Foreign Exchange Regulation Act, 1947, Sec 2 (a)

 “Foreign Exchange” as the means and methods by which rights to wealth expressed in
terms of the currency of one country are converted into rights to wealth in terms of the
currency of another country.

─ H.E. Evitt

That is, the mechanism through which payments are effected between two currencies
having different currency systems is termed as foreign exchange. It is related with the exchange
method & mechanism through which the payments in connection with international trade are
transacted..

4.2. Activities of foreign exchange

There are three kinds of foreign exchange transactions:

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 Import.

 Export.

 Remittance.

Import may be defined as bringing of visible item to the country from abroad through letter
of credit or the Authorization form (LCAF) paying foreign currency to that of exporting country.

Export may be defined as sending of visible and invisible things outside the country for sale
through letter of credit or against firm contract in exchange of Foreign Exchange.

Foreign Remittance refers remittance or transfer of foreign currency that are received in and
made out abroad. Foreign Remittance also includes purchase and sale of freely convertible
foreign bills and currencies.

4.3 Fundamentals of Foreign exchange

There are 3 fundamental aspects of the general mechanism of foreign exchange-
 Every country has its own currency legal tender distinctive unit of account.
 The conversion of one currency into another is effected by banks by book keeping entry
carried out in the two centers concerned.
 These exchanges are affected by means of credit instruments like Draft, Mail transfer,
Telegraphic transfer etc.

4.4 Letter of Credit (L/C)

In an international business environment, buyers and sellers are generally unknown to each
other. So seller of goods always seeks security for the payment of his exported goods. Bank
gives guarantee to the exporter that it will pay for the goods on behalf of the buyer if the buyer
fails to pay. This guarantee is called Letter of Credit. Thus the contract between importer and
exporter is given a legal shape by the guarantee of bank by ‘Letter of Credit’.

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A letter of credit is a letter issued by a bank (known as the opening or the issuing bank) at the
instance of its customer (known as the opener or applicant) addressed to a person (beneficiary)
undertaking that the bills drawn by the beneficiary will be duly honored by it (opening bank)
provided certain conditions mentioned in the letter have been complied with.

Letter of credit (L/C) can be defined as a “Credit Contract” whereby the buyer’s bank is
committed (on behalf of the buyer) to place an agreed amount of money at the seller’s disposal
under some agreed conditions. Since the agreed conditions include, amongst other things, the
presentation of some specified documents, the letter of credit is called Documentary Credit.

Any arrangement however named or described whereby a bank (the “issuing bank”) acting at
the request and on the instructions of a customer (the “Applicant”) or on its own behalf,

 to make a payment or to the order of a third party(the beneficiary) or to accept and

pay bills of exchange(Drafts)drawn by the beneficiary, or
 authorizes another bank to effect such payment or to accept and pay such bills of
exchange (Drafts)
 Authorizes another bank to negotiate against stipulated documents provide that
terms and conditions are complied with.
 The L/C is a superior method devised for settlement of debts which could assure the
exporter that if he exports the goods as per the contract entered into with the

Back to Back L/C:

A back to back L/C is essentially a secondary L/C opened by a bank on behalf of the beneficiary
of the original L/C in favor of a supplier located inside or outside the original beneficiary’s
country. Under this concept the seller as the beneficiary of the first credit manages to open
another L/C for the supply of the goods on the strength of the first credit. The two L/C operate
“Back to Back” the one being issued not the security of the other. Thus a “Back to Back” L/C
transaction involves two separate credits, where the beneficiary of the first L/C becomes the
applicant of the second L/C.

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4.9 Concern parties to an L/C

Importer or Buyer who applies for L/C & imports goods from abroad.
applicant
Exporter or Seller who sells & exports goods and gets the payment.
beneficiary
Issuing Bank or The bank that opens/issues a L/C on behalf of the importer.
opening Bank
Confirming The bank, which adds its confirmation to the credit and it, is
Bank done at the request of issuing bank. Confirming bank may or
may not be advising bank.
Advising Bank The bank through which the L/C is advised to the exporters.
or Notifying This bank is actually situated in exporter’s country. It may
Bank also assume the role of confirming and / or negotiating bank
depending upon the condition of the credit.
Negotiating The bank, which negotiates the bill and pays the amount of
Bank the beneficiary. The advising bank and the negotiating bank
may or may not be the same. Sometimes it can also be
confirming bank.
Accepting Bank The bank on which the bill will be drawn (as per condition of
the credit). Usually it is the issuing bank.
Reimbursing The bank, which would reimburse the negotiating bank after
Bank getting payment – instructions from issuing bank.

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5. IMPORT SERVICE

5.1 Import
Imports of goods into Bangladesh is regulated by the ministry of commerce and industry
interims of the Import and Export (Control) Act, 1950, with import policy orders issued by
annually, and Public Notices issued from time to time by the office of the Chief Controller of
Import and Export (CCI & E). Through the process of import some vital but which are
inadequate in our country products are imported to meet the local needs of the people.

Import
L/C → Lodgmen → Negotiation → Related → Payment
Opening t Investment

Figure 2: Functions of Import Division in EXIM Bank, Elephant Road Branch

5.2 Functions of the import Department of EXIM Bank

The followings are the main functions performed by the import Department:
 Total supervision of import department (back to back/cash)
 Payment of Back to Back L/C and endorsement of Export L/C against payment
 Follow-up of Back to back overall bill
 Correspondence regarding, Back to back L/C and cash L/C
 Maintenance of Due date dairy
 Maintenance and 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 and Amendment.
 Endorsement of export L/C when opening
 Balancing of L/C Contingent liability
 Follow-up sub-Judaic bills and maintaining liaison with Head Office and Foreign
Correspondent

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 All correspondence related to Back to Back L/C both with Head Office and Foreign
Correspondents
 Supervision of checking Lodgment and attestation of papers of under to back L/C
 Checking, lodgment, retirement of import documents under Back to Back L/C
 Issuance shipping guarantee
 IMP form Fill-up
 Inform negotiating bank about maturity date of back to back L/C
 Quarterly statement for bonded ware house
 Balancing of accepted liability
 Statement of outstanding accepted import bills under back to back L/C
 Maintenance and record of pass Book and IRC
 Maintenance and record of related L/C s Documents
 Credit report to CIB Bangladesh Bank
 Statement of IRC Renewal fees to CCI&E
 Preparation of monthly foreign exchange business position
 L/C lodgment (Import bill paid)
 Checking of cash L/C documents
 L/C retirement
 LAC issue
 BLC statement
 Differed payment
 Follow-up of outstanding BLC
 Correspondent (Cash L/C)
 Proof sheet of L/C margin and continent liability (Cash L/C)
 Issuance of shipping guarantee (cash) IMP form fill-up (Cash)

5.3 Steps for import L/C operation – 8 steps operation

Step 1 - Registration with CCI&E:

 For engaging in international trade, every trader must be first registered with the Chief
Controller of Import and Export (CCI&E).

 By paying specified registration fees to the CCI&E. the trader will get IRC/ERC
(Import/Export Registration Certificate), to open L/C with bank, this IRC is must.

 Documents to be required for IRC are as follows:

1. Nationality Certificate

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2. Certificates from the Chamber of Commerce & Industry / Registered Trade

Association
3. Bank Solvency Certificate
4. Trade License
5. Income tax paid certificate
6. Any other documents required by CCI&E.
Step 2 – Determination terms of credit:

The terms of the letter of credit are depending upon the contract between the importer and
exporter. The terms of the credit specify the amount of credit, name and address of the
beneficiary and opener, tenor of the bill of exchange, period and mode of shipment and
destination, nature of credit, expiry date, name and number of sets of shipping documents etc.

There are 8 steps in import L/C operation but the operations of any bank start from step 3, i.e.
the operation of foreign exchange department of EXIM Bank starts from there:

Step 3 - Proposal for Opening of L/C:

To have an import L/C limit, an importer submits an application to foreign exchange

department of any branch of EXIM Bank. The proposal contains the following particulars:

 Full particulars of the bank account

 Nature of business
 Required amount of limit
 Payment terms and conditions
 Goods to be imported
 Offered security
 Repayment schedule

Requirements of opening L/C:

To open an L/C, the requirements of an importer are:
 He must have an account in EXIM Bank.
 He must have Importers Registration Certificate (IRC).
 Report on past performance with other bank. EXIM Bank collects this report from
Bangladesh Bank.

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 CIB (Credit Information Bureau) report from Bangladesh Bank.

 A proposal approved by the meeting of executive committee of the bank. It is necessary
only when the L/C amount is small or there is no limit.
 If the L/C amount is large or there is a limit, then an approval from Bangladesh Bank is
needed. Usually this approval is needed for amount more than one crore.
This step is required for a new importer. But an existing importer starts its functions directly
from step 4.

Step 4 - Application by importer to the banker to open an L/C:

 Forms of L/C:
1. EXIM Bank provides a printed form for opening L/C to the importer. This form is
known as Letter of Credit Application form.

 name and address of the applicant & beneficiary,

 draft amount,
 availability of the credit by sight payment accept/ negotiation/ deferred payment, country
of origin,
 insurance cover note/policy number, date, amount,
 Bangladesh Bank Registration number,
 import license or LCAF number,
 IRC number,
 Account number,
 Document required,
 last date of shipment,
 source to destination of shipment,
 last date negotiation, other terms and conditions if any etc.
2. Another form is Letter of Credit Authorized (LCA) Form. The LCA form
contains the followings:

 Name and the address of the importer

 IRC No. and year of renewal
 Amount of L/C applied for

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 Description for items that is imported

 ITC number(s) / HS code
 Signature of the importer with seal.

 Document Submission:

A valid importer will submit the following paper/documents to EXIM Bank to open L/C:
1. L/C Application form duly signed by the importer; with adhesive Stamp for TK. 150/-
2. Indent / proforma invoice
3. Insurance cover note with money receipt
4. LCA form duly filled in & signed by the importer
5. Membership Certificate from Chamber of Commerce/Trade Association
6. TIN Certificate and up to date Tax payment declaration
7. Charge documents, including Musharaka / Murabaha agreement
8. IMP & TM form
9. Import Registration Certificate (IRC)
10. VAT Certificate
11. Export L/C in case of Back-to-Back L/C
12. Trade license
13. Memorandum & Articles of Association
14. Partnership Deed
15. Resolution of the Board
16. Photograph
17. Others, if any
Step 5 - Opening of L/C by the bank for the applicant:

 Taking filled up application form from the importer.

 Upon receipt of the application dealing officer will issue office note the following:

o whether the client has valid Head Office Sanctioned limit

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o whether the proposal is within the limit or within the power of Branch incumbent

o the item to be imported is permissible

 If the bank satisfies then it will issue a letter of credit on behalf of the importer, to the
beneficiary, through an Agent/Correspondent bank in supplier’s country.

 L/C may be sent by Airmail duly signed by Authorized officials or by Telex

authenticated by test number or SWIFT (Society for World Wide Inter-bank Financial
Transaction).

Step 6 – Shipment of goods and lodgment of documents by exporter:

 Then exporter ships the goods to the destination of the importer country

 Sends the documents to the L/C opening bank through his negotiating bank.

Generally the following documents are sent to the Opening Bank with L/C:

1. Bill of Exchange 6. Packing List

2. Bill of Lading 7. Advice Details of Shipment
3. Commercial Invoice 8. Pre-shipment Inspection Certificate
4. Certification of Origin 9. Vessel Particular
5. A certificate stating that each packet 10.Shipment Certificate
contains the description of goods over the
packet.

Step 7 - Lodgment of Documents by the opening Bank from the negotiating bank:
After receiving the documents, the opening banker scrutinizes the documents. If any
discrepancy found, it informs the importer. If importer accepts the fault, then opening bank will
call importer for retiring the document. At this time many thing can happen.
Step 8 - Retirement:
The importer receives the intimation and gives necessary instruction to the bank for retirement of
the import bills or for the disposal of the shipping document to clear the imported goods from the
customs authority. The importer may instruct the bank to retire the documents by debiting his
account with the bank or may ask for LTR (Loan against Trust Receipt)

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6. EXPORT SERVICE

6.1 Export
Generally the goods and services sold by Bangladesh to foreign households, businessmen
and Government are called export. Exporter means any person lawfully exporting goods from
Bangladesh to any other country. The export trade of the country is regulated by the Imports and
Exports (control) Act, 1950. There are a number of formalities, which an exporter has to fulfill
before and after shipment of goods. The exports from Bangladesh are subject to export trade
control exercised by the Ministry Of Commerce through Chief Controller of Imports and Exports
(CCI & E). No exporter is allowed to export any commodity permissible for export from
Bangladesh unless he is registered with CCI & E and holds valid Export Registration Certificate
(ERC). The ERC is required to be renewed every year. The ERC number is to be incorporated on
EXP forms and other documents connected with exports.

 Types of Export:
Export must be done as under:
1. Export against L/C or firm contract
2. Export against advance payment
3. Export under consignment basis
Export L/C operation is just reverse of the import L/C operation. For exporting goods by the
local exporter, bank may act as advising banks and collecting bank (negotiable bank) for the
exporter.

L/C Back to
Advising → Back L/C → Lodgment → Negotiation → Payment

Negotiation Proceed
& Collection Realization

Figure- 3: Functions of Export Division in EXIM Bank, Karwan Bazar Branch

6.2 Functions of the Export Department of EXIM Bank:

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The following are the main functions performed by the Export Department:
 Scrutiny of Export Shipping Documents.
 Follow -up for realization of Export Proceeds.
 All Correspondence relating to export Department
 Compliance of audit and inspection
 Authentication of L/Cs to the beneficiary
 Authentication of L/C and amendments from other Correspondent bank.
 Transfer of Export L/C to the beneficiary (exporter) and issuance of notice of transfer to
L/C issuing Bank.
 Recording of export L/C particulars in export L/C transfer register.
 Realization of precedes realization certificates. 4 Issuance of precedes realization
certificates.
 And other related works as and when directed by the manager and assistant -manager.
 Certificate of EXP Forms.
 Posting of Tickets.
 Lodgment of exports bills (FBP, FDBC, IBP & IBC)
 Preparation tickets exciting to negotiation of documents.
 Negotiating in land Bills.

6.3 Export Procedures

The import and export trade in our country are regulated by the Import and Export (Control)
Act, 1910.Under the export policy of Bangladesh the exporter has to get valid Export registration
Certificate (ERC) from Chief Controller of Import & Export (CCI&E). The ERC is required to
renew every year. The ERC number is to incorporate on EXP forms and other papers connected
with exports.

a) Registration of Exporters:

For obtaining ERC, intending Bangladeshi exporters are required to apply to the controller/
Joint Controller/ Deputy Controller/ Assistant Controller of Imports and Exports, Dhaka/
Chittagong/ Rajshahi/ Mymensingh/ Sylhet/ Comilla/ Barishal/ Bogra/ Rangpur/ Dinajpur in the
prescribed form along with the following documents:

 Nationality and Assets Certificate;

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 Memorandum and Article of Association and Certificate of Incorporation

in case of Limited Company;
 Bank Certificate;
 Income Tax Certificate;
 Trade License etc.

b) Securing the Order:

After getting ERC Certificate the exporter may proceed to secure the export order. He can do
this by contacting the buyers directly or through agent. In this purpose the exporter may get help
from

 License Officer;
 Buyer’s Local Agent;
 Export Promoting Organization;
 Bangladesh Mission Abroad;
 Chamber of Commerce (local & foreign)
 Trade Fair etc.
c) Signing the Contract:

After communicating buyer, exporter has to get contracted (writing or oral) for exporting
exportable items from Bangladesh detailing commodity, quantity, price, shipment, insurance and
marks, inspection and arbitration etc.

d) Receiving Letter of Credit:

After getting contract for sale, exporter should ask the buyer for Letter of Credit (L/C)
clearly stating terms and conditions of export and payment.
The following are the main points to be looked into for receiving/ collecting export proceeds
by means of Documentary Credit:
(1) The terms of the L/C are in conformity with those of the contract;
(2) The L/C is an irrevocable one, preferably confirmed by the advising bank;
(3) The L/C allows sufficient time for shipment and negotiation.
(Here the regulatory framework is UCPDC-100, ICC publication)

Terms and conditions should be stated in the contract clearly in case of other mode of

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payment:
 Cash in advance;
 Open account;
 Collection basis (Documentary/ Clean)
(Here the regulatory framework is URC-121, ICC publication)

e) 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.

f) Shipment of goods:
Then the exporter should take the preparation for export arrangement for delivery of goods as
per L/C and in terms, prepare and submit shipping documents for Payment/ Acceptance/
Negotiation in due the time.

Documents for shipment

 EXP form,
 ERC (valid),
 L/C copy,
 Customer Duty Certificate,
 Shipping Instruction,
 Transport Documents,
 Insurance Documents,
 Invoice,
 Other Documents,
 Bills of Exchange (if required)
 Certificate of Origin,
 Inspection Certificate,
 Quality Control Certificate,
 G.S.P. Certificate,
 Phyto-sanitary Certificate.

g) Final Step:

Submission of the documents to the Bank for negotiation.

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6.4 Preparation of Export documents

1. Bill of exchange or Draft. 10. Phytosanitary Certificate

2. Commercial Invoice. 11. Certificate of Analysis
3. Bill of Landing. 12. Quality Certificate
4. Inspection Certificate. 13. EXP Form.
5. Weight Certificate 14. DHL courier Receipt
6. Packing List.
7. Export License.
8. Shipment Advice.
9. Certificate of Origin.

6.5 Back To Back L/C (BTB)

A L/C which is opened annalist an Export L/C is called Back to Back L/C. It is simply issued
to the clients against an Export L/C. Back-to-Back mechanism deals with 2 separate L/Cs. One is
master Export L/C and another is Back-to-Back L/C. On the strength of Master Export L/C bank
issues bank to Back L/C. Back-to-Back L/C is commonly known as Buying L/C. On the
contrary, Master Export L/C is known as Selling L/C.

1. BTB Process
Receive of L/C

Advising

Fulfillment of all terms Lack of fulfillment of all terms

Amendment

BTB

Figure- 4: BTB Process

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2. Features of Back-To-Back L/C

o An Import L/C to procure goods /raw materials for further processing.

o It is opened based on Export L/C.
o It is a kind of Export Finance.
o Export L/C is at Sight but back to Back L/C is at issuance.
o No margin is required to open Back to back L/C
o Application is registered with CCI&E
o Applicant has bonded warehouse license.
o L/C value shall not exceed the admissible percentage of net FOB value of
relative Master L/C.
o Issuance period will be up to 180 days.
o The import L/C is opened for 75% of the value of Export L/C.
o Here L/C issued against the lien of export L/C.
O Arrangements are such that export L/C matures first then out of this export
profit, import L/C is paid out.
3. Types of BTB
1. Local BTB 2. Foreign BTB
3. EPZ BTB 4. EDF BTB
4. Processing and opening of BTB L/C

An exporter desired to have an import L/C limit under Back to Back arrangement. In that
case the following papers & documents are required:-

 Full particulars of Bank account,

 Balance Sheet.
 Statement of Assets & liabilities.
 Trade License.
 Valid Bonded Warehouse License.
 Membership Certificate.
 Income tax Declaration.
 Memorandum of Articles.
 Partnership Deed.
 Resolution.
 Photographs (all Directors).
On receipt of above documents and papers the Back to Back L/C Opening section will
prepare a credit report. Branch must obtain sanction from Head Office for opening of BB L/C.
Exporters prepare the documents and submit the same to the bank for negotiation.
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7. FOREIGN REMITTANCE SERVICE

7.1 Foreign Remittance

This bank is authorized dealer to deal in foreign exchange business. As an authorized dealer,
a bank must provide some services to the clients regarding foreign exchange and this department
provides these services.
The basic function of this department are outward and inward remittance of foreign exchange
from one country to another country. In 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 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 tender.

7.2 Foreign Remittance Process

Fund transfer from one country to another country goes through a process
which is known as remitting process. Suppose a local bank has 200 domestic branches. The
bank has corresponding relationship with a foreign bank say-“X”, and maintaining “Nostro
Account” in US $ with the bank. Bangladeshi expatriates are sending foreign remittances to
their local beneficiary, through that account. Now, when the Bangladeshi expatriates through
other banks of different countries remit the fund to their “Nostro Account” with “X”, then the
local bank’s Head Office international division will receive telex message and the remittance
section will record the advice and generate the advice letter to the respective branch of the bank.
The branch will first decode the test, verify signature and check the account number and name of
the beneficiary. After full satisfaction, the branch transfers the amount to the account of the
beneficiary and intimate the beneficiary accordingly. But some times the complexity arises, if
the respective local bank has no branch where the beneficiary maintains his account. Then the
local bank has to take help of a third bank who has branch there.

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Nostro Account
“X” Local Bank Foreign Bank

“A”
”B”
Remitter
Beneficiary

chart: 1- Flow chart of Remitting Process”

7.3 Remittance procedures of foreign currency

There are two types of remittance:
1. Inward remittance
2. Outward remittance.

7.3.1 Inward Remittance

Remittance comes from foreign countries to our country is called inward remittance. To the
bankers or ADs inward remittance means purchase of foreign currency by authorized dealers.
Generally, inward remittances are received by draft, mail transfer, TT, purchase of foreign bills
& travelers Cheque, export bills. Basically, these are the formal channels of receiving inward
remittance. A local bank also receives indenting commission of local firm also comes under
purview of inward remittance.

Draft

Mail Transfer

Inward Remittance Telegraphic Transfer

Purchase of Foreign
Bills & Traveler Cheque

Export Proceed

Figure: “ Modes of Inward Remittance”

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7.3.2 Outward Remittance

Remittance from our country to foreign countries is called outward foreign remittance. On
the other word, sales of foreign currency by the authorized dealer or formal channels may be
addressed as outward remittance. The authorized dealers must utmost caution to ensure that
foreign currencies remitted or released by them are used only for the purposes for which they are
released. Out ward remittance may be made by appropriate method to the country to which
remittance is authorized. Most outward remittance is approved by the authorized dealer on
behalf of Bangladesh Bank.
Outward remittance may be made for following purposes-
1. Travel
2. Medical treatment
3. Educational purpose.
4. Attending seminar etc.
5. Balance amount of F.C account.
6. Profit of foreign companies.
7. Technical assistance
8. New exporters up to USD 6,000/- for business promotion
9. F.C. remittance can be made for fare, exhibition from export retention quota.

Demand Draft

Outward Remittance Mail Transfer

Telegraphic
Transfer
L/C Payment

Figure: “Modes of Outward Remittance”

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7.3.4 Formal channel

Fund transfer from one country to another country through official channels, i.e. banking
channel, post office, and other private service channels, such as – Western money order, Neno
money order etc.

The legitimate purposes for moving money abroad through formal channel are-
o To invest
o To lend
o To meet trading/ Personal obligations
o To safeguard assets against theft or seizure by repressive regimes.

7.3.5 Informal Channel

Fund transfer from one country to another country through hand by hand or over telephone
in an unofficial channel like as “Hundy”. Haque (1992) comments, that remittance collected by
informal “Hundi” rings operating in middle East countries and UK are also used to finance
illegal trade and transactions.

Islam (2000) observes that as informal channel is needed for illegal trade of goods, as well as
gold and drugs into Bangladesh, and therefore, helping the ever-present problem of capital flight
out of Bangladesh.

Criminals use informal channel for moving money abroad because of-
 Dealing in arms & ammunition
 Drug trafficking
 Financing terrorist activities
 Evasion of exchange regulations/ control
 Evasion of taxation
 Disguise or remove proceeds of threat/ fraud/ bribe.
 Making blackmail payments
 Paying random for kidnappers.

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