Internship Report On BASIC Bank Limited

Foreign Exchange Operation
Of
BASIC Bank Limited
“Gulshan Branch”
BASIC BANK
LIMITED
Internship Report
on
Foreign Exchange Operation of BASIC Bank Limited
Submitted to:
The Department of Business Administration, Daffodil International University, In
partial fulfillment of the requirement for the award of BBA Degree, Major in
Finance.
Prepared by:
Md. Ferdous Hosain
ID: 09182-11-1144
Batch: 20th
Major: Finance
Department of Business& Economic
Daffodil International University
Under the Supervision of

Rafiqul Islam
Professor & Dean
Department of Business& Economic
Date of submission – 2nd May 2013

Letter of Transmittal
2nd may 2013
Rafiqul Islam
Professor and Dean
Department of Business Administration
Subject: Submission of Internship Report on Foreign Exchange operation of

“BASIC Bank Ltd.”
Dear Sir,
It is a pleasure to present the internship report on “Foreign Exchange operation of
BASIC Bank Ltd.” which was assigned to me as a partial requirement for the
completion of the BBA Program. I am very much grateful to Almighty Allha because he
gave me an opportunity to complete my internship program smoothly. I have tried to
combine the secondary data available with my own investigation in order to come up
with a complete report. In spite of several constraints, I gave my all efforts to make this
report a meaningful one.
I hope and sincerely believe that this report will serve the purpose of my Internship
Program. My effort will be rewarded only if it adds value to the research literature.
Thank you again for valuable direction and cooperation.
Sincerely yours,
……………………….
Md.Ferdous Hossain
Program: BBA, Batch: 20th
ID No. 09182-11-1144
Declaration of the student
I do hereby solemnly declare that , that work presented in this Internship report has been
by done by me and has not been previously submitted to any other university or
organization for an academic qualifications/certification /diploma or degree.
The work I have presented does not breach any existing copyright law and no portion of
this report is copied from any work done earlier for a degree or otherwise.
I further undertake to indemnify the Department against any loss or damage arising from
breach of the forgoing obligation.
Md.Ferdous Hossain
ID No. 09182-11-1144
Batch: 20th
Program: BBA
Major: Finance
Letter of Approval
I am pleased to certify that the internship report on “Foreign Exchange Operation of

BASIC Bank Limited”. A study on Gulshan Branch conducting by Md. Ferdous
Hossin is bring ID No:09181-11-1144 of the department of Business and Economic has
been approved for presentation and defense / viva –voce. Under my supervision Md .
Ferdous Hossain worked with BASIC Bank Limited as an intern. He completed the work
during the spring 2013 semester.
I am pleased to hereby certify that the findings presented in the report are the authentic
work by Md.Ferdous Hossain. I strongly recommend the report presented by Md.Ferdous
Hossain for further academic commendation and defense / viva-voce.
Md.Ferdous Hossain bears a strong moral character and a very pleasing personality. It
has indeed a great pleasure working with him. I wish him all success in life.
Rafiqul Islam
Professor and Dean
Department of Business and Economies
PREFACE
Organizational Internship is a program, which is a conducted to acquire practical knowledge.

It is believe that practical working experience will be added advance in our future life, which
may also help to achieve our aim and ambition. It is provide a chance to acquire knowledge
from global business and earmark for executive .It identifies the practical phenomena
including risk and opportunities and also enable to take probable alternative decisions. The
knowledge is best on learning and experience.
It is really a matter of great pleasure that, I have completed my internship program in BASIC
Bank Limited, Gulshan Branch. Thos program was conduct from 1 st January , 2013 to 1st
April , 2013 under the faculty of Business and Business Administration, (Daffodil
International University).
The report has been prepared for the fulfillment of academic curriculum as required under the
program .While preparing this report , I gather practical experience of working field and I
also think that closer Internship program are further gathered . Finally I would like say that
tireless struggle would become successful when any person or organizational will get benefit
from this report.
Page 7 of 69
ACKNOWLEDGEMENTS
It is high time for me to express my deepest gratitude and humble submission to the almighty
Allha but for whose support I would not be able to complete a huge task of preparing this
Internship report within the scheduled time.
I would like to take the opportunity to express my gratitude to my Internship Advisor,

Rafiqul Islam, Professor & Dean, Department of Business administration, Daffodil
International University, whose direction, guidance and support helped me a lot in writing
this report.
My deepest appreciation and special thanks goes to the Business Administration of Daffodil
International University for providing me an opportunity to come closer to the real world and
help me in enriching my knowledge.
I would specially like to thank the authority of BASIC Bank Limited for recruiting me as
Internship student which brings me to come closer to the real world and help me in enriching
my knowledge.
I would like to thank, all staff of Gulshan Branch of BASIC Bank Limited for adopting me
with corporate culture and providing necessary information which is essential for preparing
my Internship report.
Page 8 of 69
Executive Summary
The internship is designed to bridge the gulf between the theoretical knowledge and real life
experienced as a part of Bachelor of Business Administration (BBA) program. It is designed
to have a practical experience while passing through the theoretical understanding.
The report is a combination of three months internship program with BASIC Bank Limited.
The report is about Foreign Exchange Operation of BASIC Bank Limited
This report contents seven chapters. In chapter 1 is introduction and background of the study
that included rational of the study, objective, methodology and limitation of the study. In
chapter 2 is organizational profile of BASIC Bank Limited that have background,
organizational goal, organizational structure, organogram of BASIC Bank Limited. In chapter
3 is a foreign trade activity of BASIC Bank Limited that is most important thing in a bank
sector contents export, import and remittance. In chapter 4 is evaluation of foreign exchange
operation of BASIC bank limited. In chapter 5 is theoretical deliberation of foreign exchange
risk management. In chapter 6 is other department of BASIC and last chapter is conclusion.
Page 9 of 69
Table of content
Chapter Content Page
Chapter 1 1.1 Rational of the study 2
1.2 Objective of the study 2

Introduction and
Background if the 1.3 Methodology of the Study 3
study
1.4 Limitation of the Study 4
2.1 Background 6-8
2.2 Organizational Goal 9

Chapter 2
2.3 Organizational Structure 9
Organizational 2.4 Customer Service 10
profile of BASIC
2.5 Bank Performance at a glance 11-15
2.6 Technology of BASIC 16
2.7 Risk management 16
Chapter 3 3.1. Information and location 18
Gulshan Branch 3.2. At a Glance of BASIC Bank Limited “Gulshan 18

Branch”
4.1 Literature Review 20

4.2 BASIC Bank and Trade Finance 201 - 22
4.3 IMPORT Bills 23 - 30

Chapter: 4
4.3 Export Bills 31 - 37
Foreign Trade 4.5 Collection 38 - 40
Page 10 of 69
Activities of 4.6. Banks facilities and Services to Exporter and 41 – 42
BASIC Importer
4.7. Remittance 42 - 44
3.8. Core Concept of Foreign Exchange 45 - 46

4.9. Factor Affecting Fluctuation In Exchange Rates 47
4.10. Ways of avoiding Exchange Risk 48
Chapter: 5 5.1 General Banking Department 50

Other Department
5.2 Advance or Loan Department 51 - 53
Chapter: 6 6.1.Findings: 55
Finding, 6.2.Recommendation 56
Recommendation 6.3 Conclusion 57
& Conclusion
6.4 Reference 58
Page 11 of 69
Chapter: 1
Introduction and Background of the Study
Page 12 of 69
Chapter: 1
Introduction and Background of the Study
1.5 Rational of the study

Now a days, foreign trade plays a vital role in banking. It is a system or process in which
one national currency is converted into another and of transferring money from one
country to another. It is mainly consist of export, import and other foreign Remittance. In
a developing country, foreign direct investment (FDI), export, import, foreign remittance
etc. plays very significant role. There is a great opportunity to invest the foreign
remittance which also comes from “wages earners” working abroad, in several
prospective investing fields like energy sector, telecommunication, information
technology etc, in our economy.
Therefore, “Foreign Exchange” has an important role to play in the financial sector of
Bangladesh. Consequently, the study of “Foreign Exchange” the context of
Bangladesh’s developing economy is of great opportunity.
1.6 Objective of the study
1.6.1 General objective
The general objective is that; practically know about foreign exchange actives and it
how to apply our real life.
1.6.2 Specific objective
 To present an over view of The BASIC Bank Ltd.

 To analysis the Foreign Exchange Transaction procedures maintained by the BBL
 To know overall activities of the Foreign Exchange division
 To evaluate Foreign Exchange performance of The BASIC Bank Ltd.
 To identify problems in Foreign Exchange operations of The BASIC Bank Ltd.
 To recommend suggestions for the successful Foreign Exchange Operations of the
BASIC Ltd.
Page 13 of 69
Chapter 1: Introduction and Background of the Study
1.3 Methodology of the Study

The following methodology has been followed to come to a successful conclusion of
the report:-
1.3.1 Sources of Information and data:
The sources of information are:
 Primary data
 Officers.
 Conversion with clients.
 Questionnaire.
 Secondary data
 Different Circulars issued by the head office of Bangladesh Bank.
 Banks Annual reports. (years.2009,2010,2011)
 Prior research report.
 Some printed materials like brushier, hand notes etc.
 Data Collection through personal interviews.
1.3.2 Period covered
Department Total Days

General banking 7
Credit Division 7
Foreign Exchange 76
Total 90
Table 1.1 shows the period covered during the internship
Page 14 of 69
Chapter 1: Introduction and Background of the Study
1.3.3 The process of application of the techniques and reason
A critical analysis of the data has been made through the bar diagram and line
graph over the last five years. This has enabled me to visualize the trend of the
variables of interest over time; indicators of bank perforation have also been
computed through ratios of variables and spread-burden analysis. In addition
ROE, Profitability etc. have been critically analyzed.
Trade finance procedure of documentary credit of the BASIC Bank has been
critically evaluated through the analysis of diagram, flow charts. This will
provide the identification of the problems faced by BASIC and ways of
removing the problems.
Protection of foreign exchange risk occurring out of transaction exposure for
BASIC by flowchart.
1.4 Limitation of the Study
Deposit all out co-ordination from the bank official, I faced some limitations. The main
problem I faced in preparing the paper was that inadequacy and lack of availability of
required data. This report is an overall view of Foreign Exchange of BASIC Bank Ltd. But
the is some limitation for preparing this report. These barriers, which hinder may work, are
as follows:
 Difficulty of accessing latest data of internal operation.
 Most limitation of this report is Bank’s policy is not to disclose some data
and information for obvious reason, which could be very much useful.
 Lack of Experience on preparing these type of report
 Sometimes data could not be verified.
 The scope limited by the availability of data.
 I was placed to this department for only 3 months of time and working like a
regular employee hindered the opportunity to put the better effort for the
study.
With All this limitation I try my best to make this report as best as possible. So readers are
requested to consider these limitations while reading and justifying any part of my study .
Page 15 of 69
Chapter: 2
Organizational Profile of BASIC
Page 16 of 69
Chapter: 2
Organizational Profile of BASIC
2.1 Background
Bangladesh Small industries and Commerce (BASIC) Bank Limited was established as a
banking company under the companies act 1913 and was incorporated under this act on the
2nd august 1988. The Bank launched its operation from the 21 st January 1989. It is governed
by the Banking Companies act 1991. The Bank started as a joint venture enterprise of the
BCC foundation with 70 percent share and the Government of Bangladesh (GOB) with the
remaining 30 percent shares. The BCC foundation being nonfunctional following the closure
of the BCCI, the Govt. of Bangladesh took over 100 percent ownership of the Bank on
4thJune 1992. However, the Bank is not nationalized; it operates like a private Bank as before.
BASIC is unique in its objective. It is a blend of development and commercial Banking

functions. The memorandum and Articles of Association of the Bank stipulate that 50 percent
of loan able funds required to be invested in small and cottage industries sector. As others
commercial Banks, BASIC provides their clients full-fledged commercial Banking services
including collection of deposits. Short term trade finance, working capital finance in
processing and manufacturing units and financing and facilitating international trade.
CAPITAL POSITION (up to 2011)

Authorized capital Tk. 2000.00 million.
Paid-up capital Tk. 1964.65 million.
Total Reserve up to31.12.2011 Tk. 2509.78 million
The Bank is required to transfer 50 percent of its net profit before tax to capital
Fund as per the Banking Companies
Page 17 of 69
Chapter 2: Organizational Profile of BASIC
2.1.1 Capital structure and ratios
At the end of the year 2011 Bank's capitalization stood at 8.68 percent for tier 1 and 10.13
percent for total capital against the total risk weighted assets exceeding the required
minimum levels of 5 percent and 10 percent respectively. Thus the Bank was able to
maintain the confidence of investors and depositors while providing a lucrative return to the
Government, the sole shareholder of the Bank. Details of the capital structure were as
follows:
Particulars 2011 2010

(Amount in million take)
Core Capital (Tier 1)
Paid up capital 235759 1964.66
Statutory reserve 2224.69 1824.69
Other reserve and surplus 653.17 469.99
Total of Tier 1 Capital 5235.45 4259.34
Supplementary Capital (Tire 2)
1%general provision on unclassified loans and
752.35 706.18
off balance sheet exposures
Revaluation reserve of HTM and HFT
123.16 107.55
securities
Total of Tier 2 capital 875.51 813.73
Total Capital (Tier 1 +Tier 2) 6110.96 5073.07
Ratios to risk weighted 60304.50 53907.00
Capital Ratios to risk weighted
Tier 1Capital 8.68% 7.90%
Tier 2Capital 1.45% 1.51 %
Total Capital 10.13% 9.41%
Page 18 of 69
2.1.2. At a Glance of BASIC Bank Limited
Name BASIC BANK LIMITED

Date of incorporation August 2, 1988
Date of inauguration of operation January 21, 1989
Registered office Bana Shilpa Bhaban
73, Motijeel Commercial Area
Dhaka-1000, Bangladesh.
Head Office Sena Kalyan Bhaban(6th floor)

195, , Motijeel Commercial Area
Dhaka-1000, Bangladesh.
Logo
Name of the chairman of the Board Mr. Sheikh Abdul Hye Bacchu
Name of Managing Director Mr. AKM. Sajedur Rahman
Number of Branches (In year 2012) 65
Services provided Deposit scheme, Credit facility and Foreign
exchange services
Paid up capital Taka 1964.65 million (2011)
Profit after tax and provision Taka 660.93 million (2011)
Ownership Government of Bangladesh
Banking software used CASTLETM
Technology used Member of SWIFT
Earnings per share 33.64 (2011)
E-Mail basicho@citechco.net
Website www.basicbanklimited.com
SWIFT BKSIBDDHA015
Number of Authorized Dealer 15
Table:1 At a Glance of BASIC Bank Limited
Page 19 of 69
2.2 Organizational Goal

To employ funds for profitable purpose in various fields with special emphasis on small scale
Industries.
 To undertake project promotion to identify profitable areas of investment.
 To search for newer avenues for investment and develop new product to suit such needs.
 To establish linkage with other institutions which are engaged in financing micro enterprises?
 To co- operate and collaborate with institutions entrusted with the responsibility of
promoting and aiding SSI sector.
2.3 Organizational Structure

To achieve its organizational goal, the bank conducts its operation in accordance with
the major policy guidelines laid down by the Board of Directors, the highest policy
making body. The day to day operation off the bank is looked after by the
management.
2.3.1 Board of Director

The Government holds 200 percent ownership of the bank. All the Directors
of the board are appointed by the Government of Bangladesh. The Secretary
of the Ministry of Industries is the chairman of the bank other directors of the
bank are high Government executive. The managing Directo5r are at the
present 6 directors including the Managing Director on the board. The present
Board of Directors of the bank consists of the following members:
2.3.2 Management
The management is headed by the Managing Director. He is assisted by the
General Manage and Departmental heads in the head office. BASIC is
different in respect of hierarchical structure from other Bank in that it is much
more vertically integrated as far as reporting to the chief executive is
concerned. The Branches incharge of the Bank report directly to the Managing
Director and, for functional purpose, to the head of the departments.
Consequently, quick decision making in disposal of cases is ensured.
Page 20 of 69
Organ gram of BASIC Bank Limited
BOARD OF DIRECTORS
MANAGING DIRECTORS
GM GM
OPERATION DEVELOPMENT
OFFICER IN OFFICER IN AGM DGM AGM DGM

INDUSTRIAL
AGM
CHARGE CHARGE COMPUTER ADMINIS
INTERNA CREDIT ESTABLI
ACCOUNT CREDIT
TIONAL SHMENT TRATION
2.4 Customer Service

In this department, the customer service officer is the bank representative and is often
the first person contract with clients. The main job of the customer service officer is to
attend any concerns expressed by the clients. They are responsible for handling any
quarries by the clients and also serve as initial interviewers and inform future clients of
what kinds of accounts BASIC offers.
They explain what accounts is available for what clients and what prerequisites are
necessary for these accounts. BASIC has saving accounts, current accounts, fixed
deposits, Short- term notice account, Bearer certificate of deposit accounts etc. The
customer service department works closely with the Remittance and Bills department.
Page 21 of 69
2.5 Bank Performance at a glance
This section deals with performance analysis of BASIC highlighting the certain aspect of
BASIC through chart and the situation of spread, Burden and productivity indicator over the
last five years.
Progress at a glance 2007 2008 2009 2010 2011

From the Balance sheet(Million in TK)
Authorized Capital 2000 2000 2000 2000 5000
Paid-up Capital 1247.4 1309.77 1455.3 964.65 2357.59
Reserve & Surplus 1349.17 1672.82 2468.65 2509.78 3124.17
Shareholder's Equity 2596.58 2982.59 3923.95 4474.43 5481.76
Fixed Assets 196.11 228.36 232.65 283.12 364.46
Total Assets 38773.91 4660.03 54308.31 61569.38 78031.73
Deposits 31947.98 38368.23 34501.69 49259.6 62650.73
Long-term Debt 1385.81 1708.4 2875.16 2718.46 2788.15
Loan & Advances 22263.35 27269.13 29261.53 46341.51 56884.76
Placement & Investment 13560.92 15659.03 12244.91 9294.02 13760.82
From the Income Statement

(Million Taka)
Gross Income 3,549.51 5,060.29 5,162.30 6120.53 8,825.20
Gross Expenditure 2458.41 3626.35 3,593.96 4,403.49 6,476.70
Profit before Tax 1091.1 1533.94 1568.34 1717.05 2348.5
Profit after Tax 282.96 549.86 648.85 660.93 976.11
Tax Paid (Cumulative) 2790.98 3538.01 4,225.37 4,948.64 5,987.61
Others (Million Taka)

Import Business 21,266.57 27,359.77 33,976.60 42,206 47,087.80
Export Business 16,794.96 22,270.87 19,887.70 23,999 33,061.10
Financial Ratios (Percentage)

Capital Adequacy Ratio 12.91 12.04 13.48 9.41 10.13
Capital Fund to Deposit Liabilities 9.23 7.81 11.37 9.08 10.36
Liquid Assets to Deposit Liabilities 49.1 47.7 24.67 12.06 58.01
Loan to Deposit Liabilities 69.69 71.07 84.81 94.08 69.74
Earning Assets to Deposit Liabilities 109.7 114.69 116.44 81.55 114.56
After Tax Return on Average Assets 0.83 1.3 1.41 1.24 1.23
Net Profit to Gross Income 7.97 10.87 12.57 10.8 12.81
Interest Magin Cover 176.8 137.08 135.79 95.15 214.56
After Tax Return on Equity 11.7 19.68 18.79 14.95 17.75
SMI/SSI Loan and
Micro Credit to Total Loan 56.73 59.32 56.93 56.78 67
Number of Branches 31 31 32 34 45
Number of Employees 721 735 776 964 601
Page 22 of 69
Chart 2.1: Total Asset
Amount in Million TK
80000
70000
60000
50000
40000
Total Asset
30000
20000
10000
0
2007 2008 2009 2010 2011
Chart 2.1 shows the Total Asset in million taka of BASIC Bank. The Total Asset
has increased during the period 2010 to 2011.
Chart 2.2: Placement & Investment
16000
14000
12000
10000
8000 Placement &
6000 Investment
4000
2000
0
2007 2008 2009 2010 2011
Chart 2.2 shows the Placement& Investment in million taka of BASIC Bank. The
Placement& Investment has increased during the period 2010 to 2011.
Page 23 of 69
Chart 2.3: Operating Income
1000
800
600
Operating Income
400
200
0
2007 2008 2009 20010 2011
Chart 2.3 shows the Operating Income in million taka of BASIC Bank. The
Operating Income has increased during the period 2010 to 2011.
Chart 2.4: Operating Expenses
400
350
300
250
200
Operating Expenses
150
100
50
0
2007 2008 2009 2010 20011
Chart 2.4 shows the Operating Income in million taka of BASIC Bank. The
Page 24 of 69
Chart 2.5: Net Income
1000
800
600
Net Income
400
200
0
2007 2008 2009 2010 2011
Chart 2.5 shows the Net Income in million taka of BASIC Bank. The
Net Income has increased during the period 2010 to 2011.
Chart 2.6: No of Employee
Number of People
1200
1000
800
600
400 No of Employee
200
0
2007 2008 2009 2010 2011
Chart 2.6 shows the No. of Employ of BASIC Bank. The No. of Employ
has increased during the period 2010 to 2011.
Page 25 of 69
Chart 2.7: Total Deposits
70000
60000
50000
40000
30000 Total Deposits
20000
10000
0
2007 2008 2009 2010 2011
Chart 2.7 shows the Total Deposit in million taka of BASIC Bank. The
2.5.1 Return on Equity of BASIC

The return on Equity (ROE) of BASIC has decreased in 2011 compared to the year 2010.
Interest margin cover has been increased due to increase of interest income of BASIC is in
2011. Net profit to Gross income is decreased during the year 2011. The after tax return on
average asset has been also been decreased in 2011 compared to 2010.
Page 26 of 69
2.6 Technology of BASIC

The Board attaches grant importance on acquisition and use of appropriate information
technology in the bank. Since inception the bank has continued its effort to meet the complex
and dynamic needs of customers. BASIC bank has its own software developed in 1991. Local
area network (LAN) has been installed in Head office and 15 branches of the bank. Wide area
network (WAN) has been set up between Head office and branches using X.28 leased line of
BTTB. The bank has undertaken a project for5 introduction of “ Any Branch Banking ATM
“automated Teller Machine” and Debit Card “ at its 16 branches in Dhaka and Chittagong.
The project will be implemented in 2002. Once completed, the valued customers will be able
to withdraw or deposit cash from any branch in Dhaka and Chittagong during office hours,
withdraw cash, transfer funds and pay utility bill at any time from any ATM and pay their
shopping bills using a debit card. These system is called centralized.
2.7 Risk management

In banking business, no reward can be expected without risk. In this backdrop, the
management has established a formal program for managing the business risk faced by the
bank. Considering the present non- performing loan position of the country, BASIC bank is
very much cautious about its investment. Every loan proposal is placed under careful scrutiny
before approval. Proposal of large amount of loans need approval of the board of Directors.
Credit lines are established for each borrower or borrower group. Internet audit team and
recovery team exercise close monitoring on every loan transaction. Management regularly
reviews the banks overall assets and liabilities structure and makes necessary changes in the
mix asset/liabilities of balance sheet. The Bank also has a liquidity policy to ensure financing
flexibility to cope with unexpected future cash demand. The Bank takes necessary action to
avoid foreign exchange risk which is called as exposure.
Page 27 of 69
Chapter: 3
BASIC Bank Limited “Gulshan Branch”
Page 28 of 69
Chapter: 3
BASIC Bank Gulshan Branch
3.1. Information and location
Adders: Ridge park, crystal place (1st floor) H#22

R#140, Gulshan south avenue, Gulshan, Dhaka-
1212
DGM/ Branch in charge : ShiperAhamed
AGM : Imrul Islam
SWIFT Code : BKSIBDDH021
Zip Code: 1212
Institution Code: 1212
No of Employ : 54
Corporate customer : BTRC
Phone : 9883501-2
Fax : 880 -2-9857307
Rent: 28,00,000 (28 lac tk)
Advance: 6,00,00,000tk (6 core tk)
3.2. At a Glance of BASIC Bank Limited “Gulshan Branch”
Particular Year2010 Year2011

Deposit 71494,00,000 624,00,00,000
Advance 72,00,00,000 180,00,00,000
Expenditure 57,00,00,000 180,00,00,000
Net profit 38,90,00,000 53,93,00,000
Total Income 96,00,00,000 229,00,00,000
Import 250,00,00,000 352,00,00,000
Export 470,00,00,000 538,00,00,000
Page 29 of 69
Chapter: 4
Foreign Trade Activities of BASIC
Page 30 of 69
Chapter 4: Foreign Trade Activities of BASIC
Chapter: 3
Foreign Trade Activities of BASIC
4.1 Literature Review

Banks play a very important role in effecting Foreign Exchange Transaction of a country.
Mainly transaction with overseas countries is respect of imports; exports and Foreign
Remittance come under the preview of foreign exchange transactions. Banks are the vital
sector by which such transactions are effected/settled. Central Bank records all sorts of
foreign exchange transaction and therefore, transaction effected by the Banks and other
authorized quarters are to be reported regularly (Daily, Fortnightly, Monthly, Quarterly,
Yearly etc) to Bangladesh Bank by the foreign exchange department of every Banks. Foreign
Exchange Department plays a vital role to earn the Banks maximum profit. This department
is classified according to their activities. The foreign exchange department consists of three
sections, these are as follows:
 Import Section
 Export Section
 Foreign Remittance Section
Foreign Exchange Department, Banks facilitates their clients in enhancing International

Trade. The provision of finance to importers (Trust Receipt Facility, Documentary Credit
Facility) and exporters (Negotiation of export Bills, Purchase of Bill for collection)
encourages enterprises to engage in trade and enhance their liquidity position. Bank makes
the payment International Trade through letter of credit to the exporter on behalf importers.
Banks is a media of fund transfer from one party to another. In International Trade, as both
importers and exporters in different countries and do not deal with same currency, they have
to confront the risk of currency fluctuation. This exchange risk can be transferred from the
trader to the bank i. e. ready to provide the former with forward foreign exchange or currency
option so that the importer and the seller can devote their time to their business.
Page 31 of 69
4.2 BASIC Bank and Trade Finance

BASIC Bank plays an important role in international trade. The trade finance department of
BASIC is efficient of their activities and provides the best services to their clients. The major
clients of BASIC are corporate clients. Performing their activities since 1989, BASIC has a
very good relationship with the big corporate clients of Bangladesh. Trade finance
department consist of Bills (Import) and Bills (Export).
4.2.1 BASIC Bank Statement policy

All BASIC employees are responsible for ensuring compliance with the Bank policies and
procedures Operational Manual (OM), Know Your Client (KYC), and other policies. It is
imperative that the trade finance staff is fully conversant with all aspects of the above stated
documents relating to Letter of Credit (L/C), Documentary and clean Collection, Bank
Guarantee, and Bank to Bank Reimbursement and export Bills.
a. International chamber of commerce (ICC) Uniform Rules, customs and practice:
Transactions relating to L/C, Documentary and clean collection, Bank to

Bank reimbursement are processed subject to and in conformity with the
current versions of International Chamber of Commerce Publication
b. Credit policies:
Bank has their own credit policies and procedures for all Trade finance
activities. These are Credit Principle, Global credit portfolio limit, Credit
categories, Types of credit activities, Credit approval, Credit administration,
Credit monitoring and review.
c. Know Your Client (KYC):

Relationship Managers (RM) are responsible for ensuring that client profile
are kept current and that copy is distributed in accordance with the Banks
Know your client policy.
Page 32 of 69
4.2.2 Function of Trade Finance Department
 Trade finance consists of the following areas of activity:
 Import Bills
 Export Bills
 Bills Processing Unit
Basic function:
1. All transactions related to Import Transaction

2. All transactions related to Export Transaction
3. Handling of L/C reimbursements
4. Checking and collection of export bills for correspondent Banks.
4.2.3 Parties Involve in Trade Finance

1. The applicant: The applicant is the party that induces the Banks to issues
the letter of credit. The applicant is normally obligated to reimburse the
Bank for any payment made under letter of credit.
2. The issuing Bank: The issuing Bank is the Bank that issues the letter of
credit. The issuing Bank undertakes an absolute obligation to pay upon
presentation of documents drawn in strict conformity with the terms and
condition of the letter of credit.
3. The Advising Bank: An advising Bank simply advises a letter of credit

without any obligation on its part. However, the advising Bank shall take
reasonable care to check the apparent authenticity of the credit that it
advises. The advising Bank is typically a Bank in the Beneficiaries.
4. The Beneficiary: The beneficiary is the party entitled to drawn payment

under the letter of credit. The beneficiary will have to present the required
documents to avail payment under the letter of credit.
5. The Confirming Bank: The confirming Bank confirms that the issuer has
issued a letter of credit. The confirming Bank becomes directly obligated
on the credit to the extent of its confirmation and by confirming the Bank
receives the rights and obligation of an issuer
6. The Nominating Bank: The Bank where drafts drawn under the credit are
payable. In case of a usance credit where drafts are to be accepted by this
Bank.
7. The Negotiating Bank:The Bank that negotiates document under letter of

credit upon presentation. Typically advising Bank as nominated as
negotiating Bank
Page 33 of 69
4.3 IMPORT Bills

Import Bills deals with L/Cs and the issuance of L/Cs for import purposes. The letter of credit
serves as a vehicle for the importer and exporter to ensure that their goods and money are
coming. It is important to remember that the Bank deals with documents and not goods.
There are various steps towards the issuance of L/Cs; these steps will also BASIC, as will as
various Banks serving as negotiating, confirming, etc. Banks. L/Cs are used for the purchase
and sale of goods.
L/C are used mainly in trade. They usually include the mode of shipment of a specified
goods, and what the port of destination is the expiry of the shipment, the document all need to
be submitted to the issuing Bank, Certificate of Origin, of where the goods is produced,
inspection certificates, as to quantity and quality, are countries may have their own set of
demands they want to ask.
There are two criteria for importing goods:
1. Commercial ( Normally BASIC takes 50% margin of total values of goods )

2. Industrial ( Normally BASIC takes 10% margin of total values of goods)
There are also two types of L/C:
1. Sight L/C: Sight L/C has also to be immediately through advanced payment can be
allowed.
2. Usance L/C: Usance L/C has also to be paid at a fixed maturity date. For example,
payment upon the receipt of goods.
Beneficiaries that want to apply for a L/C need to have proper credit facilities. After
calculating the outstanding, and there is a still room, then L/C is issued. Calculation of
margin and charges are also done. Upon the receipt of goods, proper documentation is
certified, and then payment is done. The reimbursement of funds can be made in through
negotiating. They can be negotiated to the Bank of choice of the relevant currency.
4.3.1 Import Procedure and Practice
1. Regulation
2. Import policy
3. Licensing for Imports
4. Making the purchase contract
5. Opening the Letter of Credit
6. Amendments to Letter of Credit
7. Securing and Lodgment of Documents
8. Verification and Lodgment of Documents by the L/C opening Bank
Page 34 of 69
.
Chart 4.1: Import business of other Banks (2010 and 2011)
45000
40000
35000
30000
25000 BASIC Bank
20000 Prime Bank
15000 Dhaka Bank
10000
5000
0
2010 2011
Chart 3.1 shows the import amount in other Banks (2010 and 2011). As
compared to other Banks BASIC import amount has fallen in 2011.
Chart 4.2: Import business of BASIC Bank
16000
14000
12000
10000
8000
Import (Million Tk.)
6000
4000
2000
0
2006 2007 2008 2009 2010 2011
Chart 4.2 shows the import in million taka of BASIC Bank. The import has
increased during the period 2010 to 2011.
Page 35 of 69
Chart 4.3: Amount of Guarantee
1400
1200
1000
800
Garments (Million ok TK)
600
400
200
0
2006 2007 2008 2009 2010 2011
Amount of Garments increased as increase the number of Garments which is shown

as chart 4.3. It is increased by 30 percent in 2011 as compare in the year 2010.
4.3.2 Documentary Credit or L/C
Documentary credit is written undertaking given by a Bank ( Issuing Bank, Opening

Bank ) to a seller ( Beneficiary, Exporter ) at the request and on the instruction of the
Buyer ( Applicant, Importer ) to pay either at sight or at a determinable future date, a
stated sum of money against stipulated documents and fulfillment of all the terms
and condition in the D/C. It is most suitable on the flowing circumstances:
 When the importer is not well known, the exporter selling on credit terms
may have importers promise of payments backs by a buyer Banker.
 On the other hand, the importer may not wish to pay the exporter until it is
reasonably certain that the merchandise has been shipped in the good
condition. A D/C in this case, can satisfy both the exporter and the importer.
Page 36 of 69
4.3.2.1 Various steps in the operation of Documentary Credit
 The importer and exporter have made a contract before a L/C is issued.
 Importer applies for a letter of credit from his issuing Bank.
 Issuing Bank opensa L/C, which is channeled through its overseas correspondent
Bank, known as advising Bank.g
 Advising Bank informs the exporter of the arrival of the L/C.
 Exporter ships the goods to the importer or other designated place as stipulated in the
L/C.
COTRACT ,
IMPORTER
BUYER - SHIP EXPORTER
APPLICANT GOODS SELLER -
BENIFICIARY
TAKE
NEGOTIATI PREPARE ADVISE
DELEVERY ON OF AND PASS L/C
GOODS EXPORT DOCUMENT
APPLY L/C BILLS
RELEASE
DOCUMENTS
AGAINST
CASH
MAKE
PAYMENT
ISSUING BANK
SEND ADVISING,
DOCUMENT
CONFIRMING,NE
GOTIATING
BANK
L/C
Diagram 4.4: Steps in D/C
 Documents are sent to issuing Bank for reimbursement or payment.

 Issuing Bank release documents to importers when the letter makes payment to the
former or against the letter trust receipt facility.
 Importer takes delivery of goods upon presenting on the transport documents.
Page 37 of 69
4.3.2.2 Different types of documentary credit or L/C :
1.Red clause credit
A red clause credit is a special type of credit with a clause inserted which authorizes
the advising or confirming Bank to make advances to the Beneficiary before
presentation of the documents.
In other wards, it is a pre- shipment finance in the form of a loan the advising /
confirming Bank provides to the beneficiary, with payment of principle and interest
Guaranteed by the issuing Bank of the client.
Possible risk in issuing a Red Clause credit:
 Exporter may use the advance for other purpose.

 Documents presented from the exporter may have discrepancies
unacceptable to the importer.
2.Revolving Credit
A revolving credit is a credit, which provide for the amount of the credit to be
renewed automatically after use without the need to renew the credit every time. A
Revolving credit “With respect to time” can be cumulative or non – cumulative.
It can be renewed with respect to either:

 Time
 Amount (i,e total value of the credit)
3.Transferable Letter of Credit
A Transferable letter of credit, which can be transferred in whole or in part by the

original beneficiary to one or more “ Second Beneficiaries”. It is normally used when
the first beneficiary does not supply the goods himself, but acts as a middleman
between the supplier and ultimate buyer.
4.Standby Credit
A standby credit is a guarantee type of documentary credit. It might in many form
such as pure loan forms, bid bond and performance guarantee form etc
5.Back To Back Credit

When beneficiary receives a documentary credit which is not transferable, and he can
not furnish the goods himself, he may arrange with the Banker to issue a second credit
(“which is known as Back to Back L/C”) to a supplier to supply the goods.
The Bank issuing Back to Back Credit will obtain repayment through the master
credit which is deposited to the issuing Bank of the Back to Back Credit
Page 38 of 69
FOREIGN COUNTRY BANGLADESH
ULTIMA MASTER ADVISING MIDDLEMAN

BANK BENIFICIARY
TE L/C OF MASTER
BUYER ISSUING L/C
APPLICA APPLICANT OF
BANK B/B L/C
NT L/C
B/B L/C
ISSUING
BANK
ADVISING
BANK/NEG
OTIATING
BANK
SUPPLIER
BENIFICIARY
OF B.B L/C
Diagram 4.5: Shows the Back to Back Credit Procedure
6. Standby Credit
A standby credit is a guarantee type of documentary credit. It might in many form
such as pure loan forms, bid bond and performance guarantee form etc.
7.Confirmed Credit
If a letter of credit is confirmed by a Bank (The advising Bank), this mean that, in
addition to the definite undertaking to the issuing to honor beneficiary’s draft, the
advising Bank also makes it’s a promise to pay the beneficiary.
Page 39 of 69
4.3.2.3. Stage to a documentary Credit

(A) Issuance of L/C
(B) Execution of Amendment
(C) Advising Letter Of Credit
(D) Confirming Letter OF Credit
(E) Advising Amendment
(F) Negotiation
(G) The process include following:
At negotiating Bank
At issuing Bank
BASIC Bank Banks in beneficiary locate
ISSUING BANK REIMBURSEMENT BANK
ADVING BANK CORRESPONENT BANK
CONFIRMING BANK NEGOTIATING BANK
BENIFICIARY
Diagram 4.6: BASIC involvement in D/C
Page 40 of 69
4.3.2.4 Advantages and Disadvantages of Documentary Credit
DOCUMENTARY CREDIT
Advantages Disadvantages
IMPORTER * An importer can be assured the * Since Banks deals in document
exporter has complied with certain only : Goods may not be the same
steams and conditions as specified in as these specified in the credit.
the D/C before payment. * Issuing Bank are obligated to
* He can insist of shipment of goods pay even through the conditions of
with in a certain time by stipulating a goods may be poor.
latest shipment date. * D/C commission are relatively
* He can have export advice from costly.
his Banker as to the D/C terms. * Line of credit or application is
* He can ask for financial necessary before an importer can
assistance from his Banker such as open an D/C, this may cause extra
T/R. inconvenience and is time
* Protection offered by DCP500. consuming.
EXPORTER * The risk of non – payment is lower * It is comparatively costly.

provided he complies with D/C terms * Sometimes, the terms and
and condition. condition can not be fulfilled such
* It is a safe method through which as unreasonable shipment date
to obtain prompt payment after and expiry date, adding on D/C
shipment. the clause of “ Restriction of a
* The exporter can have export designated vessel to be informed
advice from his Banker. by D/C amendment “.
* The exporter also can seek * The goods are shipped before
financial assistance from his Banker receiving payment; So it is not
before the buyer makes payment, 100% safe.
such as negotiation of export Bills
advance etc.
Page 41 of 69
4.3 EXPORT Bills

They deal with incoming L/Cs from various Banks. BASIC usually serves as an advising
Bank; but sometimes at request it also serves as confirming and negotiating Bank.
30000
25000
20000
BASIC Bank
15000
Prime Bank
10000 Dhaka Bank
5000
0
2010 2011
Chart 4.7: Export amount in other Banks
Chart 3.7 shows the export amount in other Banks (2010 and 2011).
This department has to verify L/Cs. As a confirming Bank, BASIC takes responsibility over
the issuing Bank. If the issuing Bank does not pay the beneficiary then BASIC has to as an
advising Bank its job is to verify the L/C, and if it passes their checklist ; Advise it. If all
documents are in accordance with the L/C then payment can be authorized.
12000
10000
8000
6000 Export
4000
2000
0
2007 2008 2009 2010 2011
Chart 3.8: Export
Chart 4.8 shows the increasing export in million taka over time supported by BASIC Bank
Page 42 of 69
4.3.1. Export financing
 Pre – shipment credit
 Post – shipment credit
Financing of exports constitutes an important part of Bank activities. The exporter needs
finance at various stages; some at the Pre – shipment stage and the other of the post –
shipment stage.
4.3.1.1. Pre – shipment credit
Pre – shipment credit, as the name suggest, is given to finance the Activities of an
exporter prior to the actual shipment of good. Pre – shipment credit is essentially as
short term credit and liquidated by negotiation or purchase of export bills covering the
merchandise. Generally, the Bank grants pre – shipment credit against irrevocable,
confirmed, unrestricted letter of credit received by an exporter from an overseas
buyer.
Pre – shipment credit given under the following arrangement:
1. Cash credit against hypothecation:

Under these arrangements a credit is sanctioned against
hypothecation of the raw materials or finished goods intended for export.
2. Cash credit against pledge:
Not infrequently, a cash credit limit is sanctioned against pledge of

exportable goods or raw materials.
3. Cash credit against Trust Receipt:
Under this arrangement credit limit is sanctioned against trust receipt.
4. Packing credit:
This facility is generally extended when the goods become ready for the
shipment for a very short period. Packing credit is given to
the exporter against the security of railway receipt, steamers receipts etc.
Page 43 of 69
5. Back to Back Letter of Credit:
Under this arrangement the Bank finances an export by opening a letter of

credit on behalf of the exporter who has received a letter of credit from the
overseas buyer but is not the actual manufacturers of producer of the
exportable goods.
6. Advance under Red clause Letter of Credit:
Under the red clause Letter of Credit, the Bank provides advance to the
exporter prior to shipment under the authority of the opening Bank.
Procedure for sanction of pre – shipment finance:
The following are some of the points that must be borne in mind for this purpose:
1. Export Letter of Credit should from a reputable Bank abroad whose status has to
be ascertained. The letter of credit should be irrevocable, unrestricted, and valid
and preferably confirmed.
2. Expiry date of letter of credit should be properly recorded in the book.
3. The credit worthiness of the exporter and his exporter performance are to be
invariably ascertained.
4. The period for which the credit is sanctioned should be clearly mentioned.
5. Incase of pledge “Bankers effective control should be mentioned“.
6. Charges documents and other necessary documents as stipulated in the sanction

letter should be properly obtained.
7. Guarantee / Policies should be obtained under the export credit scheme

administered by Insurance Company.
Page 44 of 69
4.3.1.2. Post Shipment Credit
Post – shipment credit is given to the exporter by Banks after the actual shipment of
goods. The necessity for post shipment credit arises because the exporters who have
shipped the goods have to wait for a long receiving payment for the overseas buyers;
the period of waiting depends on the terms of payment. The exporter needs funds to
carry on his normal export activities.
BASIC also finances the export at post – shipment stage on verification of the credit
worthiness and soundness of both the buyers and the seller by preparing application
for limit (AFL).
1. Negotiating documents under letter of credit
The document generally include
(a) Bill of exchange or Draft

(b) Bill of lading
(c) Insurance Policy
(d) Indent / Proforma Invoice
(e) Invoice
(f) Certificate of origin
(g) Inspection certificate
(h) Packing list
(i) Weight list and
(j) Any other documents specially called for in the letter of credit.
2. Purchase of DP and DA bills
The provision of finance by way of negotiation of documents against payment (DP)

and documents against acceptance (DA) bills is generally made in favor of the
exporter who have been given bill purchase limit.
The Bank should obtain instruction from the drawer of the bill covering the following
aspects:
 Documents against payment or acceptance

 Instruction to protest
3. Advance Against Bills for collection:
The Bank generally accepts bills for collection of proceeds when they are not drawn
under a letter of credit or when the documents, even through drawn against in L/Cs
contains some discrepancies
Page 45 of 69
4.3.2. Operating procedure
1. Telex / Swift Messages:
The procedures are as follows according to the system:
The following Telex and SWIFT Messages to be received from the

Register:
1. Export L/Cs
2. Amendments
3. Other messages:
Note:
a. For unauthenticated messages telex is to be sent to our
correspondent for authentication.
b. Some messages are to be sent to local Bank for test
authentication.
c. Bills and L/C related messages to be filled in the
respective fill.
2.Advising:
 Take reference for Telex, SWIFT and mail L/Cs and amendments from the
L/C register.
 Fill up L/C checklist.
 Insert L/Cs and amendments in the system.
 Making photocopy of all messages.
 Mail outside Dhaka’s L/C and amendments by courier and pack mail.
3. Document Mailing
 Type bill schedule.

 Endorse bill of exchange and shipping documents.
 Endorse in L/Cs.
 Photocopy of the documents.
 Shorts Bills.
 Mail clients information
Page 46 of 69
4.4.3 Methods of payment in export sales

The following methods of payment are ranked in the order of measuring risk to the exporter.
In other wards, they are increasingly unfavorable to the exporter but favored by the importer.
A. Cash in advance
B. Documentary credit or L/C

(note: this already explained above the bills import)
C. Documentary collection
(note: this defined to next section)
D. Open document
A. Cash in advance
Cash in advance gives exporter the greatest protection because exporter
either before shipment or upon arrival of the goods receives of payment.
Sometimes exchange controls of the importers country may cause payment delays or
even prevent method it most suitable.
1. Pays exporter before exporter makes

IMPORTER Delivery of goods EXPORTER
BUYER SELLER
DRAWEE DRAWER
2. Delivery of goods upon receipt of
Payment
Diagram 3.9: Cash in Advance
B. Open account
The credit items are arranged between the buyer and the seller, but the seller has little
evidence of the importers obligation to pay a certain amount at the certain date. This
payment method is, therefore, risky for the seller.
Page 47 of 69
Chapter 4: Foreign Trade Activities of BAS
Diagram 3.10 shows open account procedure
1. Exporters ships the goods before being paid
IMPORTER EXPORTER
BUYER SELLER
DRAWEE 2. Importer makes payment upon DRAWER
Receipt of goods
Diagram 4.10: Open Account
Although the payment method bears a higher risk for seller, open accounts sales have greatly
expanded due to the major increase in international trade, and the seller’s eager to major
export volume.
A comparative statement of the methods of payment is given below with the classification of
risk category and merits and demerits of each method:
Method Risk Chief advantages Chief disadvantages

Cash in advance L No credit extension is Can limit sales potential
required. disturb some potential
customer.
Sight draft M/L Retains control and title; If customer does not or
Ensured payment before cannot accept goods, goods
goods are delivered. remains at port of entry and
no payment is due.
Letter of credit Bank accepts the If revocable, terms can
Irrevocable M responsibility to pay; payment change during contract
Revocable M/H upon presentation of papers. week.
Time draft Lowers customer resistance Same as sight draft, plus

M/H by allowing extended goods are delivered before
payment. payment is due or received.
Consignment sales M/H Facilities delivery; Lowers Capital tied up until sales;
customer resistance. must establish distributions
credit worthiness; need
political countries; increased
risk from currency controls.
Open account H Simplified procedure; No High risk; Seller must
customer resistance. finance production;
increased risk from currency
controls.
* L: Low risk ; M: Medium risk ; H: High risk
Page 48 of 69
4.5 Collection
Collection are a method of settling the monitory side of international Trade transactions in
both goods and services. Where goods are Involved, the documents allowing the buyer to
take delivery of these Goods will be routed through Banks in the exporters and importers
Countries.
Chart 4.11 Bills for Collection
4.5
4
3.5
3
2.5
2 Bill for Collection
1.5
1
0.5
0
2007 2008 2009 2010 2011
Chart 4.11 shows that the total amount of bill for collection over the
year. It is increased very sharply growth rate during the 2001 to 2005.
There are two types of collection.
1. Documentary Collection
2. Clean Collection
The first type is documentary collection, which means collection of:
 Financial documents and commercial documents.

 Commercial documents only.
The another type is clean collection. It consists of one or more bills of exchange or
promissory notes, for obtaining cash. Clean collection requires no other commercial
documents to be attached.
Page 49 of 69
Please refer to the diagram on 4.12 for an explanation of

various steps in the operation of the collection: -
Diagram 4.12 shows the collection procedure
IMPORTER 1. Goods shipped to buyer EXPORTER

BUYER SELLER
DRAWEE PRINCIPLE
4.Present 5. Makes payment or 7. Pays export

document accepts draft
for payment
2. Forward
Documents
6. Sent payment
PRESENTING REMITTING
BANK BANK
3. Forward Documents
Forward Documents
COLLECTING
BANK
Diagram 4.12: Collection
4.5.1 Documentary collection

These collection entails the use of commercial documentation, they are concerned
with goods and, although not obliged, Bank frequently take steps to protect the goods
in their customers interests.
The payment instruction in a documentary collection is usually a bill of exchange,

which is drawn by exporter (Seller) on the importer (buyer)
The bill of exchange that can be drawn is the following two types:
1. Sight bill: A bill of exchange drawn by the drawer (exporter) at sight for immediate
payment.
2. Term bill: (usance bill) A bill of exchange drawn by the drawer (exporter) and
provides times for the drawer to pay at a fixed or determinable future date, such as 30
days sight.
Page 50 of 69
4.5.2 Clean Collection
Collection, which do not include goods but consist of documentation only, usually a
bill of exchange, or occasionally a check, is known as clean collections. They are
frequently used for the settlement of trade on open account and for service rendered,
rather than goods supplied. They are very simple for Banks to process since goods are
not directly involved.
The term “Collection applies” to the procedure under which payment to the client for
a check, draft or similar instrument is made only after the proceeds have been
received from the Drawer. Thus Collection requires special handling.
4.5.3 Advantages and Disadvantages of Clean Collection
COLLECTION
Advantages Disadvantages
IMPORTER * For clean collection, buyers * If he default on an accepted Bill
can take possession of the of exchange (Notwithstanding the
goods before payment. poor condition of the goods).
* For D/A collection, the buyer Legal action can be taken against
can inspect and sell the goods him.
before payment. * If he refuse to accept or pay a
Terms bill provide the buyer bill, pretest by the exporter
with a period of credit from the against non – acceptance or the
exporter. Hence its liquidity exporter can take non – payment,
can improved. this can damage the reputation of
the importer.
EXPORTE * It is cheaper than D/A. * Loss of control over goods
R * A presenting Bank may have under D/A.
influence over the foreign * No guarantee that buyer will
buyer and thus he more able to pay because Presenting Banks
collect the payment than an are to collect the Payment only.
open account basis. * In case of delays or difficulties,
* Exporters may obtain an exporter has to bear all the cost
immediate payment by arising such as demurrage charges
negotiation of the bill or in the importer’s country.
applying for Bank advance. * He has to bear buyer’s credit
* Exporter can retain control risk and country risk.
over the goods D/P.
Page 51 of 69
4.6. Banks facilities and Services to Exporter and Importer
4.6.1. Export facilities and Services
Overdraft (O/D): Overdraft are granted to a customer in order to finance his

daily business requirements and assist his cash flow position.
Bills (Advance): The Bank may agree to offer thus type of finance if thinking
that the Exporter is reliable
Negotiation of export bills: After the beneficiary has effected shipment, he may
present documents to his Banker for negotiation. Sight bills might be negotiated
by the exporter’s Bank.
Performance Bond: This is a written instrument, issued by a Bank or a surety

company, stating that the exporter will comply with the terms of the contract with
the buyer, otherwise the buyer will receive compensation for any losses suffered
as a result of the exporter’s failure to perform under the contract.
Guarantee/Indemnity: Guarantee and Indemnity are Banking service available

to both exporters and importers.
Red clause credit: It is a pre-shipment finance granted to the exporter by and at

the risk of the issuing Bank.
Packing loan: The purpose of packing loan is to help the exporter to buy raw-
materials for production or to buy the necessary goods required by the D/C.
Letter of Indemnity: It is a undertaking given by a Bank on behalf of his

customer to another Bank. The Bank giving the promise is primarily liable.
Leasing: This is a financial arrangement in which the Banks and their subsidiary
companies known as lesser of leasing companies hold the title to property or
equipment which the customer known as the leases use it.
4.6.2. Import facilities and services

A. Overdraft (O/D)
B. Documentary Credit Facility (D/C)
C. Loan against imported merchandise: LAM is an advance to the

importer based on the imported goods as the security.
Page 52 of 69
D. Trust receipt facility: This is a document executed by a customer who

agrees to hold the goods in trust for and on behalf of the Bank.
E. Shipping Guarantee: A shipping guarantee is an undertaking given by a

Bank on behalf of his customer to a shipping company to return the
original transport documents.
F. Collection
4.7. Remittance
Designing a global Remittance policy,
The task facing International financial executives is to co-ordinate the used of the various
financial linkages in a manner consistent with value maximization for the firm as a whole.
This tasks require the following four inter-related decisions:
1. How much money (if any) to remit

2. When to do so.
3. Where to transmit these funds
4. Which transfer method(s) to use
A common or shared responsibility with cash development is the custodianship of the volt.
Two groups independently monitor the inflow and outflow of financial instruments to and
from the volt. Bangladesh Bank checks deposits are processed for collection from
Bangladesh Bank.
25
20
15
10 Remittance
0
2008 2009 2010 2011
Chart 4.13 shows Remittance in Million taka of BASIC Bank. It is shown that BASIC Banks
Remittance business has been increased by steady growth rate during the year 2008 – 2011.
Page 53 of 69
Remittance Department
This Department deals with the basic paying and receiving of funds into the Bank, for the
clients. They transfer, or wire money abroad as well as locally through TT or SWIFT, etc..
They work very closely with the cash department. They also sell Government bonds to clients
and organizations.
Remittance Department works as an intermediary for clients and actions taken on their
accounts. Automatic credits and debits are not necessary done, especially in cases of
International transactions. They deal with fund transfers both locally and abroad as well.
A principal mode of remitting fund abroad is through SWIFT. Other traditional mode TT,
Telex, Mailing of Drafts, and transfer of TCs is also used. In both case of incoming and
outgoing remittances the purpose is to be disclosed. Local fund transfer is also done here,
there areas of transfer activities include:
1. Issuance of Pay order

2. Salaries
3. TT to any where the country
4. TT to other parts of the country
4.7.1 Inward Remittance
Function in Inward Remittance
Step 1: Fund Received
Step 2: Clarification by
I. Own Client
II. Other Client
III. Foreign Mission and International Bodies
Step 3: If the fund is for own client
I. Check faster account

II. Valid IRC Copy
III. Vat Register Certificate
IV. Check the fund account
V. Message transfer date
Step 4: Process the fund
Page 54 of 69
4.7.2 Outward Remittance
Outward Remittance
Bank Condition:
Client must have an account in BASIC
Process:
1. Travel Mucilaginous
2. Document transfer by SWIFT other transaction activities
Types of Transaction (Remittance Department):
1. Govt. Bond Sold

2. Govt. Bond interest paid
3. Other Bank check collection
4. NFCD Open
5. NFCD interest paid
6. NFCD Encasement
7. Credit Advance/Debit Advance
8. Outgoing Payment Instruction
9. Collection item both local/Foreign
10. Incoming Payment Instruction Pay order Installed
11. Salary Disbursed
12. Foreign Currency Draft Issued
13. Correspondence
14. Incoming Collection
15. Bangladesh Bank Check Collection
Page 55 of 69
3.8. Core Concept of Foreign Exchange

a. Foreign Exchange Business
In Foreign Exchange Business, the Commodity is Currency, Buying and

Selling of any currency against local currency is called Foreign Exchange
Business.
According to Bangladesh Bank order 1972, Foreign exchange means foreign

currency and includes any Instrument drawn, accepted made and issued under
clause 13 of section 16 of the Bangladesh Bank order 1972.
b. Foreign Exchange Rate
The rate of exchange is the price of the one currency expressed inters of
another currency. The rate at which exchange dealer would buy or sell foreign
exchange in terms of the domestic currency is known as the rate of exchange.
c. Foreign Exchange Transactions
All transactions related to FOREX are monitored and controlled by the

Treasury Department of the Bank. This Department is responsible for
providing all FOREX rate, interest rates. Basically there are two types of
transactions taking place through out of the Bank – spots and forwards.
Approximately 95% of all FOREX transactions are spot transactions.
1. Different terms used in foreign exchange

Terminology of foreign exchange market. A foreign exchange rate is the price of one
currency expressed in terms of another currency.
Spot rate: A spot rate is a rate quoted immediately, for delivery of the currency to the
buyer within the working days.
Forward rate: The exchange rate quoted for transaction which called for the delivery
of the currency at future date.
Inter – Bank market: This is a foreign market for commercial Bank’s only and the
rate is known as Inter – Bank.
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A Forward Exchange Contract may be either fixed of option
1. “Fixed” means that performance of the contract may take place on a specified date in
the future.
2. “Option” means that performance of the contract may take place, at the option of the
customer, on any date before maturity.
 Premium and Discount
Forward rate for a currency is quoted as an adjustment to the spot rate. This department
Is at a either Premium or a Discount.
 If the forward rate of a currency is more expensive than the spot rate, it is
quoted in premium
 If the forward rate for a currency is more cheaper than the spot rate, it is quoted
in discount.
 Buying rate and Selling rate

 Buying rate means the Bank is buying the currency. The customer is selling the
currency to the Bank in this transaction.
 Selling rate means the Bank is selling the currency. The customer is buying the
currency to the Bank in this transaction.
Exchange rate is quoted in Buying rate and Selling rate, the difference of the rate is
Called Spread.
2. Relevancy of Foreign Exchange Revenue for BASIC

Revenue generated in Foreign Exchange (FOREX) business has turn out to be an
important element for generating income for BASIC.
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4.9. Factor Affecting Fluctuation In Exchange Rates

Medium and Long -Term Factors:
1. Balance of payment
If the country suffer from a balance of payment deficit, its currency will depreciate.
If, on the other hand, a country experiences balance of payment surplus, its currency
will appreciate.
2. Rate of Inflation
If the country suffer from high inflation rate, its currency will depreciate. On the other
hand, if a country experiences a relatively low Inflation rate, its currency will
appreciate.
3. Interest Rate
The currency, which gives a relatively high interest rate, will appreciate while the
currency, which only offer a relatively low interest rate, will depreciate.
Short –Term Factors:
1. Official Intervention
2. Hot Money
“Hot Money” refers to money, which flows in for speculative purpose. When Hot
Money Flows into a country, its currency will appreciate and vice versa. Hot money is
a very substantial forces affecting the movement in exchange rate.
4.9.1 Exchange rate in Bangladesh and its function over time

Bangladesh currency is pegged to composite of nine currency. In Bangladesh capital
account transaction are regulated even through our currency is made convertible in
current account of the Balance of Payment in 1993 and therefore our exchange rate is
technically fixed.
The four factors that are usually taken into consideration while determining exchange
rate in Bangladesh are given below
 Real effective exchange rate (REER has a positive relationship with exchange rate)
 Balance of current account (BOCA has a negative relationship with exchange rate)
 Foreign Exchange Revenue (FER has a negative relationship with exchange rate
 Unofficial exchange rate (UER has a negative relationship with exchange rate).
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4.10. Ways of avoiding Exchange Risk

1. Forward exchange contract:
 An immediately firm and binding contract

 For the purchase and sale of a specified quantity
 At a rate of exchange fixed at a time the contract is made.
 For delivery at a future time
Types: Contracts
a) “Fixed” performance at a specified data in the future
b) “Option” : Performance at any data between two
1. specified date
(Note: Option under forward exchange contract should not be mixed up with
currency option).
2. Currency Option
3. Open a foreign currency account
Buy foreign currency and deposit it in a foreign currency account. Any receipts
and payments are to be made from this account so as to avoid any losses in the
movement of exchange rate.
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Chapter: 5
Other Department
Page 60 of 69
Chapter: 5
Other Departments
5.1 General Banking Department:

1. Accepting Different Types of Deposits
1 Current Account
An active account at a bank into which deposits can be paid and from which
withdrawals can be made by cheque. The bank issues cheque books free of
charge but bank sometimes make charges for current account, based on the
number of transactions undertaken, especially for business accounts.
2 Saving Account
A bank account into which personal savings are paid. Interest paid on a saving
account is usually higher than that paid on a deposit account and withdrawals
are usually restricted.
3 Short Term Deposit
Deposits rose for a short period to cover an exceptional demand for funds over
a short period.
4 Fixed Deposit Receipt
Deposits for a specific period for a specific interest rate.
2. Account Opening
The following requirements are needed for opening an Account:
1. Two copies passport size photograph

2. One copy passport size photograph of nominee
3. National identification
4. Utility copy (Electricity, Gas, Water etc)
Page 61 of 69
Chapter 5: Other Departments
I. Cheque Book Issue

II. Transfer of an Account
III. Closing of Account
5.2 Advance or Loan Department

The Advance department performs one of the most important tasks for it generates the
income for the company. So the company must sell its product very carefully so that it
can provide more income. And the bankers get to be more about bad loss of the loans
and advances. They evaluate and assessment the credit risk of loan. They approve
loan and advance under dual signs, among these signs one must be by the lending
authority.
6.2.1. Security of Loans and Advances
Normally a banker does not lend money without adequate security. The different
types of securities which may be offered to a banker generally are as follows:-
Immovable properties.
Movable properties: -
 Goods
 Documents
 Stock exchange securities
 Life insurance policies
 Fixed deposit receipts
 Book debts
 Supply bills
Securities may also be classified as:-
1. Personal and tangible.
In all advances the bank has a right of action against borrower personally; although the
borrowers personal liability is presumed, the banker, where the
debt is not fully realized from the sale of the tangible security, the bank has usually a right of
action in law to recover the balance from the borrowers other
assets
Page 62 of 69
2. Primary and collateral.
Primary security is that which is regarded as the main cover for an advance and is deposited
by the borrower himself. The term collateral security is applied to security deposited by a
third party to secure customers borrowing if however, the banker has to realize it before
claming the balance from the debtor’s estate. In this case, therefore, if the dividend received
from the official receiver in insolvency does not cover the balance due to the banker, he will
have to suffer a loss. In the other case, the banker can recover the balance, if any, out of the
sale proceeds of the collateral security. If any Attributes of a good tangible security: There
are certain qualities, which a good tangible security should possess. Some of the important
attributes are given below
1. Marketability
2. Easy ascertainment of value
3. Stability of value:
4. Storability
5. Cost and labor of supervision
6. Durability
7. Transportability
8. Ascertainment of title
9. Easy transfer of title
10. Absence of contingent liability
11. Yield
Margin:
A bank does not meet cent percent the requirements of a borrower. The borrower
should have some stake in the business. In that case they follow some application:
 He will devote more time.

 He will effort to make the business a success than may be in the case when he
is dealing entirely with borrowed funds
The difference between the value of the securities and the amount up to which the
borrower can draw is known as margin. The value of securities, less margin, is known
as drawable limit or advance value.
A banker must keep adequate margin while granting loans because of the following
reasons:
 The market value of the security is subject to fluctuations.

 The security remains the same while advance against the borrower may go on
increasing on account of non-payment of interest, charges etc.
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Factors determining margin:

The margin to be kept by a banker in respect of a particular security depends on
several factors. Some of them are follows
a) Fluctuations in market prices.

b) Financial soundness.
c) Central Bank’s control
Page 64 of 69
Chapter: 6
Finding, Recommendation & Conclusion
Page 65 of 69
Chapter 6: Finding, Recommendation & Conclusion
Chapter: 6
Finding, Recommendation & Conclusion
6.1. Findings
In recent years, the foreign exchange business of BASIC Bank ltd is increasing at a faster
rate. As a state owned scheduled bank, BASIC Bank Ltd is playing an important role toward
the growth and economic development of Bangladesh. BASIC bank is rendering a stable
support to the national foreign exchanges business. Although the foreign exchange business
is increasing day by day there are also some obstacles around it which are as follows:
1. One problem relates to technology, the bank must try to adopt new
technologies. Otherwise the profitability of the bank may hamper.
2. To meet the challenges in the banking industry and to help employees to adapt
to the changes and new working condition, training is essential but no such
training center has yet been established in BASIC Bank. Moreover, training
given to employees is not adequate.
3. Besides, SWIFT is being used in some branches and the head office of the
bank for trade finance related operations like documentary credit,
documentary collections, fund transfer, guarantee, etc. with optimum security,
but not in all branches.
4. The officers are very helpful to the business men. Some of our business men
do not know exactly the procedures of opening L/C. the officers of BASIC
bank help them properly to execute their business.
5. To make the process easy, bank should give emphasis to use the modern
communication media like e-mail, fax, internet etc.
6. Modern technical equipment like computer, ups, modem etc. is not sufficient
in foreign exchange department, which results in the delay of exchange
process.
7. The data base system of foreign exchange department is not very systematic.
Also documentation and filing process of foreign exchange operation is not
user friendly, which sometimes wastes valuable time.
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8. Letter of credit (L/C) opening system for the importer is easy. it consumes
time and money as well.
6.2. Recommendation
I had the practical exposure in BASIC Bank Ltd. for just twelve weeks, with my little
experience in the bank in comparison with vast and complex banking system, it is very
difficult for me to recommend. We have observed some shortcomings regarding operational
and other aspects of their banking. On the basis of my observation we would like to
recommend the followings:
 The branch need to set up well designed IT section by using more updated
technology and information.
 Adequate on the job training is required for the newly employed personnel.
 SWIFT service should be introduced in each and every branch of the bank, which
will help to smoothen the foreign exchange operations of the bank.
 Some officers of the bank are not self motivated. They should be self- motivated
by training.
 The bank should do more advertisement for attracting new customers.
 Bank needs sufficient computer, ups, modem etc for foreign exchange department.
 The bank should develop an effective database system to analyze the data of
foreign exchange business.
 Bank should provide emphasis to make the documentation and filing process of
foreign exchange operation user friendly.
 Letter of credit L/C opening system for the exporter should be easier.
I think the Management should employ at least few more employee in foreign trade
department as I have seen from my practical experience that many customers wait for a long
time for any service as they see that only one concerned official is doing their best to meet the
requirements of the customers.
Page 67 of 69
6: Finding, Recommendation & Conclusion
6.3. Conclusion
BASIC Bank Ltd. is committed to Boost up export, reduce import, raising of Gross Domestic
Product (GDP) and increase employment.
All the branches of BASIC Bank Limited are authorized dealer of Foreign Exchange
Business. The authorized dealer motivates the importer to import Raw materials, Fabrics,
Frozen fish, jute items, and electronics goods, Accessories, Chemicals, and Vegetable Fat
etc.
The import or exports are motivated by the BASIC Bank Limited to the foreign exchange
business, particularly to open the letter of credit. A letter of credit offer advantages both to
the importer and exporter. The advantages accruing to either of the parties differ depending
upon the nature of credit opened. There are certain Common benefits accruing from the use
of credit as under.
BASIC Bank Limited is playing a vital role in financing import and exports of the country.
Without Bank's co-operation, it is not possible to run any business or production activity in
this age. Exports and import need finance in various stages of their activities. Export and
import financing need letter of credit (L/C), payment against documents (PAD), loan against
imported merchandise (LIM) etc. All these facilities are being provided by BASIC Bank
Limited. For this purpose Bank considers the borrower's business standing, integrity, liability
with the bank and term and conditions of the L/C. There is lot of risks involved in foreign
exchange business. So, the Basic Bank Limited has to clearly serve the customers from a
neutral point and gather the current information about the market.
Page 68 of 69
6.4. REFERANCE
In Text
1. “Foundation of International trade finance”, KWLUK, The Hong Kong Institute of
Bankers.
2. “Multinational Business Finance” Eiteman, Stonehill and Moffelt. 6th edition.
3. “Multinational Financial Management”, Allan C. Shapiro, 4 th edition.
4. “Business Finance”, Prof. M Shahjahan Mina, 3rd edition.
5. Annual report of Exim Bank, Prime Bank and Dhaka Bank, 2005.
On profile of BASIC Bank
1. BASIC Bank Limited ;Annul Report 2011&2010
2. BASIC Bank policy Guide lines on Foreign Exchange – 2009
3. BASIC Bank Limited Several Booklist
4. BASIC Bank prospectus
Online
1. http://www.basicbanklimited.com/
2. basicbanklimited.com/files/Annual_Report_2011_BASIC_Bank.pdf
3. http://www.basicbanklimited.com/Annual_Report_2010_BASIC_Bank.pdf
Page 69 of 69

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Foreign Exchange Operation

Under the Supervision of

Date of submission – 2nd May 2013

Subject: Submission of Internship Report on Foreign Exchange operation of

Thank you again for valuable direction and cooperation.

I am pleased to certify that the internship report on “Foreign Exchange Operation of

Organizational Internship is a program, which is a conducted to acquire practical knowledge.

I would like to take the opportunity to express my gratitude to my Internship Advisor,

Chapter 1 1.1 Rational of the study 2

1.2 Objective of the study 2

2.1 Background 6-8

2.2 Organizational Goal 9

2.6 Technology of BASIC 16

2.7 Risk management 16

Chapter 3 3.1. Information and location 18

Gulshan Branch 3.2. At a Glance of BASIC Bank Limited “Gulshan 18

4.1 Literature Review 20

4.3 IMPORT Bills 23 - 30

3.8. Core Concept of Foreign Exchange 45 - 46

4.10. Ways of avoiding Exchange Risk 48

Chapter: 5 5.1 General Banking Department 50

Introduction and Background of the Study

1.5 Rational of the study

1.6 Objective of the study

1.6.1 General objective

1.6.2 Specific objective

 To present an over view of The BASIC Bank Ltd.

1.3 Methodology of the Study

1.3.1 Sources of Information and data:

The sources of information are:

 Different Circulars issued by the head office of Bangladesh Bank.

 Banks Annual reports. (years.2009,2010,2011)

 Prior research report.

 Some printed materials like brushier, hand notes etc.

 Data Collection through personal interviews.

1.3.2 Period covered

Department Total Days

Table 1.1 shows the period covered during the internship

1.3.3 The process of application of the techniques and reason

1.4 Limitation of the Study

 Difficulty of accessing latest data of internal operation.

 Lack of Experience on preparing these type of report

 Sometimes data could not be verified.

 The scope limited by the availability of data.

Organizational Profile of BASIC

BASIC is unique in its objective. It is a blend of development and commercial Banking

CAPITAL POSITION (up to 2011)

2.1.1 Capital structure and ratios

Particulars 2011 2010

2.1.2. At a Glance of BASIC Bank Limited

Name BASIC BANK LIMITED

Head Office Sena Kalyan Bhaban(6th floor)

Table:1 At a Glance of BASIC Bank Limited

2.2 Organizational Goal

 To undertake project promotion to identify profitable areas of investment.

2.3 Organizational Structure

2.3.1 Board of Director

Organ gram of BASIC Bank Limited

OFFICER IN OFFICER IN AGM DGM AGM DGM

2.4 Customer Service

2.5 Bank Performance at a glance

Progress at a glance 2007 2008 2009 2010 2011

From the Income Statement