General Banking and Foreign Exchange Management of National Bank Limited

Internship Report
Submitted by: Rahman H. Shahriar ID# 07-09011-2 BBA Program (Accounting & Finance)

UNDER THE GUIDANCE OF AND SUBMITTED TO: Mahal Ishter Shitee Department of Accounting and Finance American International University-Bangladesh


1.1 Background of the study: This report is prepared as the degree requirement of BBA, Institute of Business Administration, American International University-Bangladesh . As practical orientation is integral part of BBA, I was sent to the National Bank Ltd, New Eskaton Branch to have real life exposure on a 90 days internship program (from March 01 to May 01, 2010). The academic study has a great value when it has practical application in the real life. Theoretical knowledge has little significance unless it is applicable in the practical life. In order to consolidate the theoretical learning some practical exposure is need. With this motive in view this intern report titled A Study on General Banking and Foreign Exchange Management of National Bank Ltd. is prepared to show the reporting, analyzing and analytical ability of the individual knowledge seeker.

1.2 Rationale of the Study: As a student of BBA, Major in Accounting and Finance I always been fascinated to build a carrier in a financial institution. Through this internship I have got a chance to work in a financial institution like National bank Ltd. While working in a country’s one of the largest and oldest private-sector commercial bank, with years of experience, I realized how a bank contributes to a country’s economy and how could be a foreign exchange division so important for a bank and why banks always try to give more emphasize on proper management of its foreign exchange divisions. We all know that Bangladesh’s economy basically depends on its Agriculture, exporting Readymade Garments and foreign remittance. Every year also she has to import products ranging from capital machineries to daily life commodities to meet up her growing demand. Today in open market world business firms are no more constrained in to their domestic market. They are also letting them engage with their foreign counterparts through export and import. With the help of state of the art technology like internet, hi-speed transportation system doing millions of dollar

transactions are no more science fiction has become daily life chores in business world of Bangladesh. And financial institutions mostly banks play very vital role in these sectors. Banks help business firms to import goods from foreign countries and in exporting goods to other countries through its foreign exchange wing and expertise. All this foreign deals are being true through the bank; to be more specific through foreign exchange division of bank. For these all reasons I do believe the knowledge and experience I will congregate while working on this report titled A Study on General Banking and Foreign Exchange Management of National Bank Ltd. will give me a apparent idea about the mechanism of general banking and its foreign exchange management. With this motive in view I am proposing to do my intern report titled A Study on General Banking and Foreign Exchange Management of National Bank Ltd.

1.3 Statements of the Problems: What is the condition of the Economic and Banking sectors of Bangladesh?    How National Bank Ltd. has come to its present state? How National Bank Ltd operates its general banking? How Foreign Exchange management system of National Bank Ltd. is running?  What are the problems of National Bank Ltd. in foreign Exchange management?

1.4 Scope of the Study: The academic study has a great value when it has practical application in the real life. Theoretical knowledge has little significance unless it is applicable in the practical life. In order to consolidate the theoretical learning some practical exposure is need. With this motive in view this intern report titled A Study on General Banking and Foreign

Exchange Management of National Bank Ltd. will enhance the analyzing and analytical ability of the individual knowledge seeker. 1.5 Limitations of the study: This study has been conducted with the motive to prepare a report on the Bank’s general activities and state of affairs in foreign trade. On doing the study, I personally came across some problems that may be cited as the limitations of the study, which are as followsVery inadequate time to make an in-depth inference about foreign exchange business.     Enough information was not available to make a comprehensive study. In many case, Up to date information was not available. Incomplete and obscure data. Relevant papers and documents were not available.

1.6 Objectives of the Study: Main Objective: To be proverbial with General Banking and Foreign Exchange Management of National Bank Ltd. Other Objectives:     To observe the Economic and Banking sectors of Bangladesh. To overview National Bank Ltd. To show foreign Exchange management system of National Bank Ltd. To identify the problems of National Bank Ltd. in foreign Exchange management.  To generate appropriate recommendations regarding the problems of National Bank Ltd. in foreign Exchange management.

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

Primary sources of information:    Face to face conversation with the respective officer of the branch Face to face conversation with the clients Relevant file study as provided by the officer of the concerned organization

Secondary sources of information:    Annual report of the National Bank Ltd. Periodicals NBL listed by the Bangladesh Bank Different books, articles etc.


2.1 Company Overview:
National Bank Limited was established as the first hundred percent Bangladeshi owned Bank in the private sector. The then President of the People's Republic of Bangladesh Justice Ahsanuddin Chowdhury inaugurated the bank formally on March 28, 1983 but the first branch at 48, Dilkusha Commercial Area, Dhaka started commercial operation on March 23, 1983. The 2nd Branch was opened on 11th May 1983 at Khatungonj, Chittagong. National Bank Limited has its prosperous past, glorious present, prospective future and under processing projects and activities. Established as the first private sector Bank fully owned by Bangladeshi entrepreneurs, NBL has been flourishing as the largest private sector Bank with the passage of time after facing many stress and strain. The member of the board of directors is creative businessman and leading industrialist of the country. To

The function of the Bank mainly three categories: a) General Banking b) Credit and investment c) Foreign Trade (Import. as a financial institution automated all its branches with computer network in accordance with the competitive commercial demand of time.3 Principles and values: The National Bank Limited is committed to five core business principles: 1) Outstanding customer service. NBL. 2) Effective and efficient operations. And difference between lower rate of deposit and higher rate of investment is the earnings of the Bank. The expectation of all class businessman. . establish new industry and working capital assistances with this Bank play’s a significant role in Bangladesh economy. National Bank Limited mainly invests in industrial sector like short-term. 3) Strong capital and liquidity. Moreover. middle term as well as long term for import of capital machineries. considering its forth-coming future the infrastructure of the Bank has been rearranging. 2. The Bank within the stipulations laid down by Bank CompaniesAct-1991 and directives as received from Bangladesh Bank from time to time provides all types of Commercial Banking Services.2 Nature of Business: The Bank engaged in all types of commercial Banking services within the stipulations laid down by Bank Companies Act 1991 and directives as received from Bangladesh Bank from time to time.keep pace with time and in harmony with national and international economic activities and for rendering all modern services. Export & Remittance) 2. entrepreneurs and general public is much more to NBL. Mainly National Bank Limited collects deposit from the people at lower rate and invests the same to the people again at higher rate.

5 Mission: Effort for expansion of our activities at home and abroad by adding new dimensions to our banking services are being continued unabated. 9) Commitment to truth and fair dealing. 14) Putting the team’s interests ahead of the individual's. . 15) The appropriate delegation of authority with accountability.4 Vision: Ensuring highest standard of clientele services through best application of latest information technology. through which we want to get closer and closer to the people of all strata. and improved clientele service as well as to our commitment to serve the society. 17) A diverse team. 8) The highest personal standards of integrity at all levels. Winning an everlasting seat in the hears of the people as a caring companion in uplifting the national economic standard through continuous s up gradation and diversification of our clientele services in line with national and international requirements is the desired goal we want to reach. making due contribution to the national economy and establishing ourselves firmly at home and abroad as a front ranking bank of the country are our cherished vision. 2. 2. 12) A minimum of bureaucracy. 6) Loyal and committed employees who make lasting customer relationships and International teamwork easier to achieve support the business principles. accountability. Alongside. 7) National Bank Limited also operates according to certain key business values. 13) Fast decisions and implementation. 10) Hands-on management at all levels.4) Prudent lending policy. we are also putting highest priority in ensuring transparency. 16) Fair and objective employer. 11) Commitment to quality and competence. 5) Strict expense discipline.

institutional investors and high net-worth individual in Bangladesh. Strategy & Strengths: National Bank’s Goal is to become a leading provider of integrated financial services for small and medium-sized enterprises (SMEs).Composition of the board Zainul Haque Sikder Honorable Chairman Prof.6.7 Core Values: National Bank’s Core Values consists of 6 key elements. “We create new by forming teams of specialists in various fields and providing optimal service to our customers” . 2. Mahbub Ahmed Director Zakaria Taher Director Rick Haque Sikder Director A K M Enamul Haque Director Lt. These values bind our people together with an emphasis that our people are essential to everything being done in the Bank. Abu Sayeed Monir Director 2. Col. (Rtd) Md Aziziul Ashraf Director Praveen Haque Sikder Director Alhaj Khalilur Rahman Director Ron Haque Sikder Director Mabroor Hossain Director Selim Rahman Director Capt. The Bank intends to achieve this central goal by taking the following measures.

. market environment & society and employees. patronizing and taking part in social development activities as well as making due contribution to growth of the national economy. 2) To make investment. 4) To conduct other Banking services. To reinforce CSR activities. 5) To conduct social welfare activities.11 Functions of National bank Ltd: Some general functions of National Bank are given below1) To maintained all types of deposit Accounts. 2. shareholders.10 Organizational Strategy: As the financial services industry is a very competitive industry.2.8 Corporate Social Responsibility: Earning the highest level of trust requires the balanced provision of value to four constituents: customers. education. and to fulfill corporate social responsibly (CSR). and disaster relief. sports & cultural activities. 2. 3) To conduct of reign exchange business.9 Business Ideology: Alongside providing the best services to the clienteles. the bank has focused in the areas of employment. Through this process. 6) To work for continues business innovation and improvements. the main strategy of NBL is the organic growth – to build branches and strengthen their distribution network. The bank has taken strong initiative in various areas for attaining greater social goals. the Bank aims to contribute to the sustainable development of society as a whole. 7) To bui1d up strong-based capita1ization of the country. They will continue to invest and expand in Bangladesh as fast as local regulations allow. 2.

In every batch.8) To ensure the best uses of its creativity. 2. not merely recruitment of workforce but a regular program for imparting time benefiting training to them is all the more important. but diversified work efficiency of human resource is the key to sustained progress of an institution. well disciplined. Beside faculty members of the Institute. Thus. well manages and perfect growth. . With this realization. which is fully residential. The National Bank Training Institution (NBTI) was established at Shamoli on 24 October 1989.12 Training and Training Institute: Not number. teachers and researches are invited to deliver lectures in training programs. economists. 25 trainees can attain in training program with residential facilities. NBTI has a rich library for use by the trainees. NBL has a program to open a Research and Publication Division soon during the years under review 225 employees attained in training programs arranged by the training institute of the bank. renewed professionals like banker.

13 Organizational Structure: Board of Directors Managing Director Deputy Managing Director Sr.2.1: Organizational Structure . Executive Vice President Executive Vice President Senior Vice President Vice President Senior Assistant Vice President Assistant Vice President Senior Principal Officer Principle Officer Senior officer Assistant Officer Junior Officer Chart 2.

68 2.85 1741.59 Deposits & other account Borrowings 83.15 Property & Assets: Table: Total Property & Assets of National Bank Limited: Cash & Bank Balance Call Money Investment Loans & advance Fixed assets Other Assets 9338.28 2200.57 1359.14 Source of Fund (%): Table: Source of Fund of National Bank Limited: Paid up capital Reserve & Surplus 3.2 65129.8 12315.44 1.09 6.06 .2.

82 2846.16 Liabilities & Capital: Table: Total Liabilities & Capital of National Bank Limited: Borrowing Deposits Other Liabilities Paid up Capital Reserve & Surplus 6070.54 4789.54 6070.56 76838.64 Borrowing Deposits Other Liabilities Paid up Capital Reserve & Surplus .64 4789.82 1539.56 76838.2.16 Liabilities & Capital (in million) 2846.23 Graph 2.23 1539.

25% 37. Citibank N. A depositor can deposit 500-10000 Taka monthly for 3-8 years.65.08. These new generation banks introduced many attractable products for customers. National Bank Ltd. 2.17 Consumer services Expansion Program of National bank Ltd: Present age is the age of competition.274/Return after 8 years @ 9.166/3.091/5.1 Monthly Savings Scheme: It is an attractable savings project for limited income group people.394/4. has got quick response in this project. 3) Consumer Credit Scheme.788/7. 2) E-Cash/ATM card. American Express.06.00% 20.957/Return after 10 years 9.485/- .791/1.374/3. A good number of new private commercial banks came to banking sector in Bangladesh during the last decade.627/41. The products introduced during the last five years are as follows: 1) Monthly Savings Scheme.83. 5) Power Card.41.583/2.25.A.697/2.50% 70. National Bank Ltd. Table: Monthly Savings Scheme of National Bank Limited: Monthly Installment 500/1000/2000/3000/4000/5000/Return after 5 years @ 4) SWIFT Services.23.510/1. is also introduced many products to attract customers.896/75.765/1.020/2. HSBC. etc) also conduct banking business in Bangladesh very successfully.27.2.255/82. Foreign banks (Standard chartered.

57.16.2 E. Thus “Consumer credit” is the credit.10000/- 4. This scheme gives an advantage of part payment to cope with high price tags of many necessary home and office appliances. National bank Ltd. The note able characteristics of ATM are: 1) Payment facility for 24 hours a day 2) Arrangements for payment of bills 3) Instant inquiries 4) Multiple location facility Dhaka.17.914/- 14. d) To participate in the socio-economic development of the country. .17.3 Consumer credit Scheme: National Bank’s consumer credit scheme gives a great opportunity to buy house and office items on easy installments. 2. has elevated services to the highest standard by bringing Electronic banking (E-Banking) and ATM services at the doorstep of clients.Cash/ ATM CARD: ATM service is the dynamic process of electronic technology in modern banking. Goods and services under the scheme: Under the “Consumer Credit Scheme” NBL grants pecuniary help for the following goods and services. A consumer is the ultimate user of a good. c) To help the professionals to raise their living standard. Chittagong. which directly comes into the use of consumer. Today the entire banking system has been undergoing are evolution change in providing improved services to the clients. b) To provide financial assistance to the limited income group people toward buying utility products.12. One of ATM has made the lifestyle of our clients much easier and comfortable. Objectives of Consumer Credit Scheme: The Objectives of Consumer Credit Scheme of National Bank Ltd. is as follows: a) To bring the credit facility to wide range of customers. and Sylhet.549/- 7.970/ 2.

17. The bank has a trade of choosing customer from diversified groups. SWIFT is a members’ owned cooperative which a first and accurate communication network for financial transaction such as Letter of credit. g) Other goods that are not mentioned above but are considered essential. heavy construction and roads and high way construction. 2. d) Sewing machine. the bank inherited its top corporate customers.4 SWIFT Services: NBL is one of the first few Bangladesh Banks to obtain membership of SWIFT.a) Private car and station wagon new and reconditioned. By being a member of SWIFT. Moreover the bank is involved in import trade financing. the bank has opened up possibilities for uninterrupted connectivity with over5700 user institutions in 150 countries all over the world. . e) Photocopier f) Generator. Water Purifier. The bank has financed in textile and apparels sectors. NBL has first introduced the power card.18 Market and target customers: Due to the predecessor Company’s involvement financing sector of the country. 2. Room-heater. Air condition. Bulk importers of consumer durable. The use of power card is very easy and the cost of transactions is very low.5 Power Card: In Bangladesh. b) Refrigerator and deep fridge. Fund Transfer etc. The bank has first class customers in the construction sectors involved in high-rise building. So anybody can use it like cash to do their daily transaction. food gains industrial raw materials are its customers. 2. c) Air cooler.17.

Now I will analysis the economic scenario of our country and the role of loan and advances on the economy. NBL was the sponsor of Metropolis Football League and Senior Division Football League last year. The GDP at current market price of last 5 years are given below: Table: GDP and its growth rate Year GDP at current Market Price 2005-2006 415728 2006-2007 472477 2007-2008 545822 2008-2009 614795 2009-2010 690571 Growth rate (from previous year) 0% 13. Loan and advances is very much important for the economy because it helps to increase the investment. NBL extended substantial patronization to Bangladesh Olympic Association and Bangladesh volleyball Federation in 2003. minus the value of imports. plus the value of exports. It means that if the year-to-year GDP is growing up this is thought to mean that the economy has grown by that amount over the last year.33% . and other different areas.1 Gross Domestic Product (GDP): GDP is the total market value of all final goods and services produced in a country in a given year.64% 12. To show the scenario I will present the key economic indicators. I will also explain the effect of loan and advances on our economy.19 Sports and Cultural Activities: Since its inception. NBL has been playing a pioneering role in sponsoring sports and games in the country. investment and government spending. 3.TheBank never hesitates to extend its helping hands to the people as in the days of crisis so also in the exuberant happy moments of cultural events. After that. production. GDP is expressed as a comparison to the previous quarter or year.2.52% 12.65% 15. Economic Analysis and Banking sector in Bangladesh: In this chapter I am going to focus on the current economic condition of our country. Besides. equal to total consumer.

This growth rate indicates that the income. and the growth rate is given in the following table: Table: GDP from Financial Institutions 200520062006 2007 Bank 4995 5797 Insurance 1430 1640 Others 260 307 Total 6684 7744 Percentage on total GDP 1. Although this covers very little portion of the total GDP the growth rate of this sector is increasing. export are increasing in the economy.64% Growth rate from previous 0% 15.41% 20092010 8566 2525 504 11595 1.2 GDP from Financial Institutions Financial Institutions are one of the sources of the GDP.52%.Source: Economic Review 2010. This is positive sign for the Economy. ( Taka in crore) From the table and the graph we can see that GDP is in increasing trend. The highest growth was occurred on the fiscal year 2007-08 that was 15. Ministry of Finance. its percentage on total GDP. 3. Ministry of Finance.86% year Source: Economic Review 2010. The GDP from financial institutions.33%.61% 1.67% 14. And in last fiscal year the growth was 12.18% ( Taka in crore) .68% 13.64% 20082009 7613 2201 431 10245 1. production.64% 15. 20072008 6656 1930 368 8955 1.

3: Rate of Inflation Year Inflation (12 month average) up to March 2010 2005-2006 7. The rate of inflation over the last 5 years is given below: Table 3.68%. 3.18%. Last year the GDP growth was 13.16% 2006-2007 7. the inflation is fluctuating and in March’10 the rate of inflation was 6. Government decided to increase production for the availability of the commodity as well as monitoring market and started selling . along with severe deflation. To keep the inflation in a tolerable level Government has taken some measures.3 Inflation: Inflation is the rate at which the general level of prices for goods and services is rising. Central banks attempt to stop severe inflation.61% to 1. purchasing power is falling.The table 2 shows that over the last 5 years financial institutions are covering GDP from 1. Here.26%.66% 2009-2010 6. subsequently.26% Source: Economic Trend May’10. In the last fiscal year the GDP from the institutions was Taka 11595 crore where the total GDP was Taka 690571 million. in an attempt to keep the excessive growth of prices to a minimum.20% 2007-2008 9. and.94% 2008-2009 6. Bangladesh Bank The reason behind increasing the rate of inflation is the increasing trend of commodity price rising worldwide.

65%) (6.01 15084. Therefore.8 23558.9 23063. fishing.43 (Jul.94% ) Source: Scheduled Banks Statistics. Table 3.30% Dec) ) 2009 14065.76 47482.63%) (6.83 41821.58% (10.8 216444.87%) 6 (16.5 3 5 (100%) (35.5 4 6 (100%) (35.4 196385.4: Economic Purpose-wise classification of advances Agriculture.4 Economic Purpose-wise Advances: Now I will show the economic purpose-wise classification of advances by the following table.5 35985. Industry Working Construction Transport & Fishing & Capital Communication Forestry Financing 2008 13496.5% and Statutory Liquidity Ratio (SLR) by .50%) 1 (16. Trade Others Total 69251. banks have to lend less amount of loans and advances that decrease the money supply in the market which will help to keep price level in a tolerable level. After raising the requirement these get stood at 5.19 12764. Side by side. July-September. Bangladesh Bank.13 3267.05%.0 32693. 2009.26% (11. industry. From the table we can easily understand that loan and advances play a vital role for the economy development.97%) (1.essential commodity to the consumers in open market at reasonable price so that the price level can be kept in a tolerable level.97 (Sep (6. 3.74% ) ) 77000.51%) Sep) (21.04 3294.(6.50%) (1.88% ) ) (Taka in crores) The are for advances provided agriculture.5% and 18.5% respectively. to avoid the increasing of inflation by banks it raises Cash Reserve Ratio (CRR) by 0. working .68%) (21.

46 15332.04%) 5 (100%) Source: Scheduled Banks Statistics.(Taka . The sector where loan are provided less is transport and communication that is 1. In general the amount of advances in each sector is in increasing trend. Table 3.05 Dec.9034. constructions.07 (22.) (4. 2008.8561. 3.60%) (95. July-September. Bangladesh All 191079...44%) 2009 (jul. 0.08%) Source: Scheduled Banks Statistics. From the table we can see that the highest priority sector is trade.72 216444. and different other purposes. The ratio of the public-private was 0.05 in December.8 207882.) (3.51% in last year.5 Sector-wise Classification of Advances: Now the following table will present the sector-wise that is public and private sector classification of advances: Table 3. Banks should lend more on agriculture sectors and transport and communication for the development of the economy.95%) (6.6: Advances Classified by Category of Banks SCB PCB FCB SB 2008 (Oct.78%) ( 61%) (7. trade. 2009 (Taka in crores) From the table we can see that banks are providing its loans and advances about 95% in private sector.5 : Sector-wise classification of Advances Public Private Total Ratio(public/private) Sector Sector 2008( financing. 2009. July-September.16 120610. transport.11 196385.6 14051.36%) (7.) 48638 138422. 0.49%) (7.-Sep.38 187351.96%) (96.46705.4 14463. 3.5 (100%) Bank. and industry.47%) (63.8 (100%) 216444.6 Advances Classified by Category of Bank: Now we will see the advances provided by the different types of banks over the last 2 years from the following table.8 Dec.) (23.18 14606.04 Sep.40%) 5 (100%) 2009 (jul.

in crores)Note: SCB=State-owned Bank.95% advances of total loan and advances. The five indicators used in the rating system are (I) Capital adequacy (ii) Asset quality (iii) Management soundness (iv) Earnings and (v) Liquidity.7 Performance and Rating of Banks: Performance of the banking sector under CAMEL framework. From the overall analysis it is clear that the economy of our country is growing positively. In the quarter July-September in 2009 private commercial banks are provided 63. production. It helps to accelerate the growth of investment.8 crore and it increase at Taka 216444. And the loan and advances provided by the Banks have significant impact on this economy growth. which involves analysis. PCB=Private Commercial Bank. 3. The table and the graph show that Private Commercial Banks are providing the highest portion of advances. In 2008 the total advances was Taka 191079. income of the economy. has been discussed in this chapter. and evaluation of the five crucial dimensions of banking operations. .5 crore in the quarter July-September in 2009.

carries out the whole procedure of Foreign Exchange.8 Capital Adequacy: Capital adequacy focuses on the total position of bank capital and protects the depositors from the potential shocks of losses that a bank might incur. The Mid Office plays a vital role in the process by checking the Foreign Exchange procedure performed by Front and Back Office and by reporting it directly to the Managing Director of the Bank. market risk. foreign exchange risk. Thus Foreign Exchange risk is the risk or chance of loss due to unexpected movement of market price of the currencies of different countries or the price of the assets denominated by foreign currencies. It helps absorbing major financial risks (like credit risk. Mid Office and Back Office. All Nostro accounts are reconciled on monthly basis . Banks in Bangladesh have to maintain a minimum Capital Adequacy Ratio (CAR) of not less than 9.9 Foreign exchange risk management: Foreign Exchange involves purchase and sale of foreign currencies against local currency. The Bank maintains shadow ledgers for all of its Foreign Currency Accounts. with its three distinct portions – Front Office. interest rate risk and risk involved in off-balance sheet operations). The Front Office independently conducts the transactions and the Back Office of is responsible for verification of the deals and passing of their entries in the books of account. the Bank has a well developed and well structured Foreign Exchange Risk Manual and an international standard Dealing Room Manual.3. 3. For effective and efficient management of Foreign Exchange Risk.0 percent of their risk weighted assets (with at 30). All foreign exchange transactions are revalued at Mark to Market rate as determined by Bangladesh Bank at the month end. Treasury Department. The foreign exchange risk of the Bank is minimal as all the transactions are carried out on behalf of the customers against underlying foreign exchange transactions.

Secondly.and outstanding entries beyond 30 days are reviewed by the management for their settlement. the term also commonly refer to some instruments used in international trade. The Bank. The term “Foreign Exchange” has three principal meanings. dollar. This trade among various countries causes for close linkage between the parties dealing in trade. 4. pound sterling etc. .1 Foreign Exchange Operation: Foreign trade can be easily defined as a business activity. it gives rise to exchange of currencies which is known as foreign exchange. Foreign trade can be justified on the principle of comparative advantage. International trade demands a flow of goods from seller to buyer and of payment from buyer to seller. First it is a term used referring to the currencies of the other countries in terms of any single one currency. In many countries. Travel cheques and other means of international remittance. And this flow of goods and payment are done through letter of credit (L/C). FOREIGN EXCHENGE MANAGEMENT OF NATIONAL BANK LTD. According to this economic principle. it is economically profitable for a country to specialize in the production of that commodity in which the producer country has the greater comparative advantage and to allow the other country to produce that commodity in which it has the lesser comparative advantage. 4. Thirdly. which transcends national boundaries. international trade accounts for more than 20% of their national income. These may be between parties or government ones. investments. such as bill of exchange. is referred to as rendering international Banking operations. It includes the spectrum of goods. which provides such transactions. Drafts.2 Foreign exchange: As more than one currency is involved in foreign trade. technology transfer etc. services. To a Bangladeshi. Trades among nations are a common occurrence and normally benefit both the exporter and importer. are foreign currencies and as such foreign exchange. the term foreign exchange is also quite often referred to the balance in foreign currencies held by a country.

C. all the deposits.2 Imports: Opening of letter of credit Advance bills Bills for collection Import loans and guarantees .3. as adopted in Bangladesh. 1972. Foreign Exchange means foreign currency and includes any instrument drawn.1 Exports: 1. 1947 Bangladesh Bank issues license to schedule Bank to deal with exchange. accepted made or issued under clause (13) of article 16 of the Bangladesh Bank order. They are known as Authorized Money Changers. Advance against bills for collection 4. Purchase of foreign bills 3. In exercise of the power conferred by section 3 of the foreign exchange regulation. Negotiations of Foreign Bills 4. Advance for deferred payments exports 7. Advising/confirming letters – letters of credit 6.In terms of section 2(d) of the foreign exchange regulations 1947. currency notes and coins. Licenses are also issued by Bangladesh Bank to persons or firms to exchange foreign currency instruments such as T. credits and balance payable in any foreign currency and draft cheques.3 Functions of foreign exchange department of National Bank Ltd: 4.3. 4. Pre-shipment advances 2. letter of credit and bill of exchange expressed or drawn in Bangladesh currency but payable in any foreign countries. Export guarantees 5. These Banks are known as Authorized Dealers.

4 The most commonly used documents in foreign exchange:            Documentary letter of credit Bill of Exchange Bill of lading Commercial invoice Certificate of origin of goods Inspection certificate Packing list Insurance policy Proforma invoice/indent Master receipt G. MT. TT etc. Issue and enhancement of traveler’s cheques Sale and enhancement of foreign currency notes Non-resident accounts 4.3 Remittances: Issue of DD.P certificate . MT.4.S.3. TT etc. Payment of DD.

4. and in accordance with the instructions. Expressed more fully.1 Documentary Credit: In simple term a documentary credit is a conditional Bank under taking of payment. of the buyer (applicant) to effect payment (that is.2 Parties to a letter of credit:  Importer/buyer  Opening Bank/ Issuing Bank  Exporter/Seller/Beneficiary  Advising Bank  Negotiating Bank  Confirming Bank  Paying/ Reimbursing Bank .4.  Instructions to the negotiating Bank for obtaining reimbursement of payments under the credit. by making a payment.4. 4. The customary clauses contain in a L/C are the followings:  A clause authorizing the beneficiary to draw bills of exchange up to certain on the opener. which are to accompany the bills Description of the goods to be shipped An undertaking by the opening Bank that bills drawn in accordance with the conditions will be dully honored. with in a prescribe time limit and against stipulated documents. it is a written undertaking by a Bank (issuing Bank) given to seller (beneficiary) at the request. or accepting or negotiating bill of exchange) up to a stated sum of money.    List of shipping documents.

if any The name of the carrying vessel Evidence that the goods have been loaded on board The ports of shipment and discharge The names of shipper. and is a document of title to the goods.4. A commercial invoice normally includes the following information: 1.4.4. or may be. 4.3 Bill of Lading: A bill of lading is a document that is usually stipulated in a credit when the goods are dispatched by sea. It also constituted a document that is.4Commercial Invoice: A commercial invoice is the accounting document by which the seller charges the goods to the buyer. Date 2. It is an evidence of contract of carriage. Name and address of the buyer and seller . The details on the bill of lading should includeA description of the goods in general terms not inconsistent with in the credit Identify marks and numbers. is a receipt for the goods. consignee and address of the notifying party Whether freight has been paid or is payable at destination The number of original bills of lading issued The date of issuance          A bill of lading specifically stating that goods are loaded for ultimate destination specifically mentioned in the credit. needed to support an insurance claim.

unit price and the total price 4. quantity and description of the goods. . as called for the contract and the L/C.6 Inspection Certificate: This is usually issued by an independent inspection company located in the exporting country certifying or describing the quality. 4. The inspection company is usually nominated by the buyer who also indicates the types of inspection he wishes the company to undertake. Order of contract number. 4.4. specification or other aspects of the goods.7 Insurance Certificate: The insurance certificate document must   be that specified in the credit cover the risks specified in the credit be consistent with the other documents in its identification of the voyage and description of the goods  Unless otherwise specified in the credit  Be a document issued and/or signed by an insurance company or its agent. Shipment details 4.5 Certificate of Origin: A certificate of origin is a signed statement providing evidence of the origin of the goods. or by underwriters  Be dated on or before the date of the date shipment as evidenced by the shipping documents or establish that cover is effective at the latest from such date of shipment  Be for an amount at least equal to the CIF value of the goods and in the currency of credit. Weight of the goods.4.3. number of the package.4. Terms of delivery and payment 6. shipping marks and numbers 5.

An importer must have import registration certificate (IRC) given by chief controller of import and exports (CCI & E) to import anything from other country.5 Import: Import is foreign goods and services purchased by consumers. Rent receipt of the business premises 4.1 Import procedure: To import National Bank Ltd. Certificate of Incorporation (if any) 9.4. firms & Governments in Bangladesh. Bank account 2. Memorandum and Article of Association 8. Asset certificate 6. To obtain IRC the following certificates are required1. Import registration certificate 3. Tax paying identification number 4. a customer requires1. Registration partnership deed (if any) 7.5. Nationality certificate 4.. L/C application form duly attested . Income tax clearance certificate 3. Trade License 2. Bank solvency certificate 5. Membership certificate 6. Proforma invoice/indent 5.

After obtaining this. Required amount of limit 4. He is also called opener or applicant or the credit. Insurance cover note with money receipt 9.5. Repayment schedule A credit officer scrutinizes this application and accordingly prepares a proposal (CLP) and forwarded it to the head office credit committee (HOCC). Nature of business 3. a person should be competent to be an importer. Others 4. He is the person who requests or instructs the Bank to open an L/C.2 Import Mechanism: To import. if satisfied. Payment terms and conditions 5.3 Importer’s application for L/C limit/margin: To have an import L/C limit. Goods to be imported 6. an importer submits an application to the Bank furnishing the following information1. Official security 7. And then the person becomes a qualified importer.7.5. Full particulars of Bank account 2. The committee. sanctions the limit and return back to the branch. the importer is entitled for the limit. Thus. According to import and Export control Act 1950. One set of form 8. person has to secure a letter of credit authorization (LCA) from Bangladesh Bank. . 4. the office of chief controller of Import and Export provides the registration (IRC) to the importer.

at the request of the applicant (importer) issuance of a L/C in favor of the beneficiary (exporter) by a Bank. postage. The Bank. Importer covering required risks and voyage route.5. Charges like commission. Incorporation of instruction for negotiating Bank as per Banks existing arrangement. 4.  Validity of L/C entitlement of goods. conforms to the L/C application. if any recovered. amount etc. which opens or issue L/C is called L/C opening Bank or issuing Bank. telex charge.   Indent/proforma invoice signed by the importer and indentor/supplier.4 Opening of letter of credit by National Bank: Opening of letter of credit means.4.C. Insurance cover note – in the name of issuing Bank A/C.  Reimbursement instructions for reimbursing Bank  .    Conversion and rate of exchange currently applied. the issuing Bank must check the following:  L/C application properly stamped. On receipt of the Importer’s L/C application supported by the firm contract (indent/proforma invoice) and insurance cover note the Bank scrutinize the same thoroughly and fix-up a margin on the basic of Bank customer relationship.5.5 Before opening a L/C. Ensure that the relevant particulars of L/C application correspond with those stipulated in indentor/proforma invoices.C. F. signature verified and margin approved and properly retained.

Before advising a L/C the advising Bank must see the following Signature of issuing Bank officials on the L/C.7 Advising of Letter of Credit: Advising means forwarding of a documentary letter of credit received from the issuing Bank to the beneficiary (exporter).5. provided that the stipulated documents comply with the terms and conditions of the credit. publication 500. L/C advised to the beneficiary (exporter) promptly and advising charges recovered.  If the export L/C is intended to be an operative cable L/C test code on the L/C invariably be agreed and authenticated by two authorized officers. .   4. In case of issuance L/C. verified with the specimen signature book of the said Bank when L/C received by airmail.8 Advising Bank’s Liability: Advising Bank’s liability is fixed up in Uniform Customs and Practice for Documentary Credits (UCPDC). mention rate of interest clearly in the letter of credit.5. If added information is required on account of the applicant charges should be recovered from the applicant.  L/C scrutinized thoroughly complying with the requisites of concerned UPPDC provisions.   Entry made in the L/C advising register. necessary permission should be obtained and accordingly advising Bank is advised as per Banks existing arrangement.5. an irrevocable credit constitutes a definite undertaking of the issuing Bank.6 Liability of Issuing Bank: As per article 9a of UCPDC 500. 4. 4. If foreign Bank confirmation is required.

Article 7(b): If the advising Bank cannot establish such apparent authenticity it must inform. Issue L/C and request to add confirmation Review the L/C terms Provide reimbursement Drafts to be drawn on L/C opening Bank Availability of credit facilities Line allocation from the business and ownership units in the importer’s country Confirm and advise L/C        . The confirming Bank may or may not be the advising Bank. Article 7(a): A credit may be advised to a beneficiary through another Bank (the “advising Bank”) without engagement on the part of the advising Bank. it must so inform the issuing Bank without delay. without delay. the Bank from which the instructions appear to have been received that it has been unable to establish the authenticity of the credit and if it elects nonetheless to advise the credit it must inform the beneficiary that it has not been able to establish the authenticity of the credit. but that Bank. 4. The advising Bank usually does not do it if there is not a prior arrangement with the issuing Bank. shall take reasonable care to check the apparent authenticity of the credit which it advises. II.5.I. if it elects to advise the credit. Confirming Bank is a Bank which adds its confirmation to the credit and it is done at the request of the issuing Bank. By being involved as a confirming agent the advising Bank undertakes to negotiate beneficiary’s bill without recourse to him. If the Bank elects not to advise the credit.9 Adding confirmation: Adding confirmation is done by the confirming Bank.

All these modifications are communicated to the beneficiary through the same advising Bank of the credit. All these amendment forms integral part of the original credit. There may be some of the conditions in a credit are not acceptable by the beneficiary.10 Amendments to Letter of Credit: After issuance and advising of a L/C.4. There can be more than one amendment to a credit.  In case of increase of value. The issuing Bank scrutinizes the proposal for the amendment and if the same is not in contravention with the Exchange Control Regulation and Bank’s interest. 4. it may be felt necessary to delete.5. In case of extension of shipment period.11 What is to be done by the Issuing Bank before advising amendments? The issuing Bank has to –  Obtain written application from the applicant of the credit duly signed and verified by the Bank.5.  . application for amendment is to be supported by revised indent/proforma invoice evidencing consent of the beneficiary. it should be ensured that relative LCA is valid/invalidated/increased up to the period of proposed extension. Such modifications to a credit are termed as amendment to a letter of credit. the Bank may then process for amendment. add or alter some of the clauses of the credit. In that cases beneficiary contact applicant and request applicant approaches his Banker with a written request for amendment to the credit.

Name of the reimbursing Bank. 2. 4. 5.e. Settlement may be done under three separate arrangements as stipulated in the credit. Extension of shipment/negotiated period. then sends the documents to the issuing Bank and claim reimbursement as per 4. Increase/decrease value of L/C and increase/decrease of quality of goods. Mode of shipment.13 Settlement of Letter of Credit: Settlement means fulfillment of issuing Bank in regard to affecting payment subject to satisfying the credit terms. the nominated Bank makes payment to the beneficiary and in case this Bank is other than the issuing arrangement.14 Settlement by payment: Here the seller presents the documents to the nominated Bank and the Bank scrutinizes the documents. Proper recording and filling of amendment is to be maintained. Inspection clause.5. 6.15 Settlement by acceptance: . 8. 4. Name of the shipping line etc.5.5. Amendment charges (if on account of applicant) will be recovered and necessary voucher is to be passed. If satisfied. Bank.12 The following clauses of L/C are generally amended: 1. 4. Name and address of the supplier. CIF etc. 3. FOR. CFR. Terms of delivery i.5.   4. 7. Amendments on increase of credit amount and extension of shipment period both the cases amendment of insurance cover note also to be submitted.

Then the documents are delivered to the importer. the Bank may negotiate the documents and give value to the beneficiary.16 Settlement by negotiation: This settlement procedure starts with the submission of documents by the seller to the negotiating Bank. the accepts the documents and the draft and if it is a Bank other than issuing Bank. After being satisfied with the documents. 4. The officials have to be very much careful while making payment.5. reimbursement will be obtained in the pre-agreed manner. endorsements are made on the back of the bill of exchange as “receipt payment” and the bill of lading is endorsed to the effect “please deliver to the order of M/S…” Under two authorized signatures (Bank officer’s P.A holder). 4. After passing the necessary vouchers. Intimation is given to the customer calling on the Bank’s counter requesting retirement of the shipping documents.17 Payment procedure of the import documents: This is the most sensitive task of the Import Department.5.Under this arrangement. As usual. interest (if any). the seller submits the documents evidencing the shipment to the accepting Bank (nominated by the issuing Bank for acceptance) accompanied by draft down on the Bank at the specified tenor. The negotiating Bank then sends the documents to the issuing Bank. . After scrutinizing that the documents meet the credit requirement. After realizing the telex charge. In a freely negotiable credit any Bank can negotiate documents and if negotiation restricted by the issuing Bank. only nominated Bank can negotiate the documents. This tasks constitutes the following –  Date of payment: Usually payment is made within 7 days after the documents have been received. service charge. and the shipping documents is then stamped with PAD number and entered in the PAD register. then sends the documents to the issuing Bank stating that it has accepted the draft and maturity the reimbursement will be obtained in the pre-agreed manner.

The required documents to be obtained ERC are almost same as IRC. So the negotiating Bank must be careful. Transmission of telex: A telex is transmitted to the correspondent Bank ensuring that payment is being made.   4. Then the Bank sends the original copy of the L/C to the beneficiary. the submission of stipulated documents within the stipulated time. With the earning. systematic and bias-free while scrutinizing the tender documents after careful and thorough examination of the documents. The L/C issuing Bank undertakes to honor is obligation only if the beneficiary fulfills the conditions stipulated in the L/C. the country meets the import bill. Export trade plays a vital role in the development process of an economy. the difference between these two rates is trading. promote.6 Export: Practically by the term export we mean carrying out of anything from one country to another.export means sending of visible things outside the country for sale. When National Bank (authorized dealer) receives a L/C (cable or original) it ascertains the correctness of the test number and the authorized signature. Like importer. . Requisition of the foreign currency: For arranging necessary fund for payment. May namely. From the Banker’s point of view. an Inter Branch Exchange Trading Credit Advice is sent to ID. Export Registration Certificate (ERC) given by CCI & E is required for this purpose.T & OD rate is paid to the ID. a requisition is sent to the International Department. As the T. Finally. Preparing sale memo: A sale memo is made at BC rate to the customer.Although export trade is always encouraged. The export presents the relative documents to the negotiation Bank after the shipment of the goods. anybody cannot export anything to any place. the exporters are also required to get them registered before entering into export trade. Even a slight deviation of the documents from these specified in the L/C may give an excuse to the negotiating Bank.

which may arise due to non-interpretation of proceeds. The following types of discrepancies may be noted while the negotiating Bank examines the documents: L/C expired Late shipment Amount drawn in excess of the L/C Bill of Exchange not properly drawn Descriptions of the goods differ Bill of lading or Airway bill state Bill of lading classed Insurance cover note as per terms L/C Insurance cover obtained after the bill of lading or Air bill date Enough number of copies not submitted as required by L/C Negotiation under L/C restricted Packing list and certificate of analysis not as per L/C Documents not properly endorsed Full shipment not effective and part shipment prohibited Gross weight and net weight shown in different documents differ Same documents required by L/C not submitted and Documents inadequately stamped                  . The removable discrepancies can be corrected by the tendered or future losses.The Banker has to list out the discrepancies. irremovable or removable. which may be classified as major or minor.

1 Export Procedure: The import and export trade in our country are regulated by Import and Export (Control) Act. 4. Document with major discrepancies. should be sent on collection basis with the permission of the exporter. Under the export policy of Bangladesh the exporter has to get the valid Export Registration Certificate (ERC) from Chief Controller of Import & Export (CCI & E). 1950.6.6. 4. . which could not be negotiated.2 Registration of Exporters: For obtaining ERC indenting Bangladeshi exporters are required to apply to the Controller/Joint Controller/Deputy Controller/Assistant Controller of Import and Exports. Dhaka/Chittagong/Khulna/Mymensing/Sylhet/Comilla/Barisal/Bogra/Rangpur/Dinajpur in the prescribed form along with the following documents:   Nationality and Assets Certificate Memorandum and Articles of Association and Certificate of Incorporation in case of Limited Company    Bank Certificate Income Tax Certificate Trade License etc. The ERC is required to renew every year. The ERC number is to be incorporated on EXP forms and other papers connected with exports.

6. insurance and marks. buyer has to get contracted (writing or oral) for exporting exportable item (s) from Bangladesh detailing commodity. The L/C allows sufficient time for shipment and negotiation. preferable confirmed by the advising Bank. The L/C is an irrevocable one.6.3 Securing the Order: After getting the ERC the exporter may proceed to secure the export order. exporter should ask the buyer for letter of credit clearly stating terms and conditions of export and payment. quantity.4 Signing the contract: After communicating with buyer. shipment.    Terms and conditions should be stated in contract clearly in case of other modes of payment:  Cash in advance . inspection. The followings are the main points to be looked into for receiving/collecting export proceeds by means of documentary credit: The terms of the L/C are in conformity with those of the contract. In this purpose exporter can get help from:       Liaison Office Buyer’s local agent Export Promotion Organization Bangladesh Mission Abroad Chamber of Commerce (local & foreign) Trade fair etc. 4. After getting contract for sale. arbitration etc.4. prices. He can do this by contacting the buyers directly or through agent.

4. prepare and submit shipping documents for Payment/acceptance/negotiation in due time:              EXP form ERC (valid) L/C copy Customs duty certificate Shipping instruction Transport documents Invoice Other documents Bill of Exchange (if required) Certificate of origin Inspection Certificate Quality Control Certificate G.P Certificate . ICC publication) 4.5 Procuring the materials: After making the deal and on 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.6 Shipment of goods: After that the exporter should take the preparation for export arrange for delivery of goods as per L/C and INCO-terms.S.6.  Open an account Collection basis (documentary / clean) (Here the regulatory framework is URC – 525.6.

6. 4. exporter submits all these documents along with a letter of indemnity to National Bank Ltd. where first entry is given when the documents are forwarded to the issuing Bank for collection and the second one is done after realization of the proceeds. This is known as Foreign Documentary Bill Purchases (FDBP). 4.6. purchases the documents on the basis of Banker-customer relationship. National Bank Ltd. forwards the documents for collection due to the following reasons:    If the documents have discrepancies If the exporter is a new client If the Banker is in doubt After passing the above vouchers. General   Late shipment Late presentation . An FDBC register is maintained. has NOSTRO account with its reimbursing Bank (American Express Bank in New York).8 Foreign documentary bills for collection: National Bank Ltd. for negotiation. National Bank Ltd.7 Final step: After those. If the document is a clean one.9 Export Bill Security Sheet: Scrutinize the export bill on the following points: I.6. an inter branch exchange trading debit advice is sent for debiting the NOSTRO account. Phyto-sanitary Certificate 4. An officer scrutinizes all the documents.

price. number of cartoons/packages differ with B/L    Not marked one fold as original Not signed by the beneficiary Shipping marks differ with B/L IV. Quantity. Packing List  Gross weight. Net weight & measurement. Bill of exchange             Amount of bill differs with Invoice Not drawn on L/C issuing Bank Not signed Tenor or B/E not identical with L/C Full set not submitted Invoice Not issued by the beneficiary Not signed by the beneficiary Not made out by the name of the applicant Description. Sales terms of the goods not correspond to the credit Not marked one fold as original Shipping marks differ with B/L & Packing list III. Bill of Lading/ Airway Bill  Full set of bill not submitted .   L/C expired L/C overdrawn Partial shipment or transshipment beyond L/C terms II.

carrier or master. “Freight prepaid” or “Freight collect” etc. Others:    Non-negotiable documents not forwarded to buyers or forwarded to L/C terms Inadequate number of invoice. officials scrutinize the documents to ensure the conformity with the terms and conditions   The documents are then forwarded to the L/C opening Bank The L/C issuing Bank gives the acceptance and forwards an acceptance letter . along with the documents to negotiate  National Bank ltd. notations are not marked on the B/L B/L not indicate the name and capacity of the party i.e. on whose behalf the agent is signing the B/L Shipped on board notation not showing name of pre-carriage vessel/intended vessel Shipping on board notation not port of loading and vessel name (incase bill indicate a place of receipt or taking in charge different from the port of loading) Short form B/L Charter party B/L Description of goods in B/L not agree with that of invoice. Packing list & others submitted Short shipment certificate not submitted 4.6.  B/L is not drawn or endorsed “Shipping on Board”. B/E & P/L Alteration in B/L not authenticated Loaded on deck B/L bearing clauses or notations expressly declaring defective condition of the goods and /or the packages          V.10 Settlement of local bill:   The settlement of local bill is done in the following ways: The customer submits the L/C to the National Bank Ltd.

Until the acceptance is obtained. the Bank pays the stipulated sum immediately against the exporter’s presentation of the documents. . Advising L/C: When exporter transmits L/C to the Bank for advising than Bank sends an advising letter to the beneficiary depicting that L/C has been issued. the exporter presents a bill of exchange payable to himself and drawn at the agreed tenor (that is. Payment is given to the customer on either by collection basis or by purchasing the documents A LBPD register is maintained to record the acceptance of the issuing Bank. Sight payment credit: In a sight payment credit. The Bank signs its acceptance on the bill returns it to the exporter. payment is given to the party at the date of D. The difference between the two rates is the exchange trading for the branch. III. Test Key Arrangement: Test Key Arrangement is a secret code maintained by the Banks for the authentication for their massage. after presentation of the export documents. on a specified future date event) on the Bank that is accept it.T clean rate. (NBL).A 60-90-120-180 as the case may be. the exporter has to present a bill of exchange payable to him in addition to other documents that the Bank negotiated. V. Negotiation credit: In negotiation credit. Alternatively. II. In National Bank Ltd. VI. he can discount it in order to obtain immediate payment. IV. Acceptance credit: In acceptance credit. It is a systematic procedure by which a test number is given can easily authenticate the same test number by maintaining that same procedure. Deferred payment credit: In deferred payment. But the Head Office is paid at T. RBL has test key arrangements with so many Banks for the authentication of L/C messages and for making payment.11 Mode of payment of export bill under L/C: The most common methods of payment under a L/C are as follows: I.6. the record is kept in a collection register.  4. the Bank agrees to pay on a specified future date or event. No bill of exchange is involved. The exporter can then represent it for payment on maturity.

then the local International Division of Bank’s Head office will receive Telex message and the remittance section will record the advice and generate the advice letter to the respective branch of the bank. through that account. Bangladeshi expatriates are sending foreign remittance to their local beneficiary. The branch will first decode the letter. But sometimes complexity arises. Now. verify signature and cheek the account number and name of the beneficiary. Then the local bank has to take help of a third bank who has branch there. maintaining “Nostro Account” in US$ with the bank. when the Bangladeshi expatriates through other banks of different countries remit the fund to their “Nostro Account” with “X”. “X” Local Bank Nostro Account Foreign Bank “B” Beneficiary “A” Remitter Fig: Flow Chart of Remittance rocess National Bank Limited is the Authorized Dealer (AD) to deal in foreign exchange business. if the respective local bank has no branch where the beneficiary maintains his account.4. the bank must provide some services to the clients . After full satisfaction. As an authorized dealer. Suppose a local bank has 200 domestic branches and has the corresponding relationship with a foreign bank say-”X”.7 Foreign Remittance: Fund transfer from one country to another country goes through a process which is known as remitting process. the branch transfers the amount to the account of the beneficiary and intimates the beneficiary accordingly.

sent from abroad favoring a beneficiary in Bangladesh. Demand Draft Mail Transfer Telegraphic Transfer Bills & Travelers Cheque Export Process Inward Remittance Fig: Modes of inward remittance . purchase of foreign exchange is to be reported to Exchange Control Department of Bangladesh Bank from the Letter of Credit (L/C). In the process of providing this remittance service it sells and buys foreign currency. these are the formal channels of receiving inward remittance.7. Demand Draft (DD) and Bills & Travelers Check.1 Foreign Currency Remitting Procedures: There are two types of remittance: i) Inward Remittance: Inward remittance covers purchase of foreign currency in the form of foreign Telegraphic Transfer (T.T). Export Bill etc. The conversion of one currency into another takes place at an agreed rate of which the Banker quotes one for buying and another for selling.regarding foreign exchange and this department provides the service of remitting foreign currencies from one country to another country. A local bank receiving indenting commission of local firm also comes under the purview of inward remittance. 4. Basically.

as well as selling of foreign exchange under L/C and against Import Bills retired.T). The Authorized Dealers have to demonstrate utmost caution to ensure that foreign currencies remitted or released by them are used only for the purposes for which they are released.ii) Outward Remittance: Outward remittance covers sales of foreign Currency by Authorized Dealer (AD) or Formal Channel through issuing foreign Telegraphic Transfer (T.D). Demand Drafts (D. Traveler’s Check etc. exhibition for export promotion. Fig: Modes of outward remittance Outward Remittance . Most outward remittance is approved by the authorized dealer on behalf of Bangladesh Bank. Demand Draft Mail Transfer Telegraphic Transfer Outward Remittance may be made for following purposes:Letter of Credit  Traveling  Medical treatment  Educational purpose  Attending seminar  Balance Amount of Foreign Currency Account  Profit of foreign companies  Technical assistance  Letter of Credit (L/C) payment  Fair.

2 Remittance transfer channels: Foreign Remittance can be transferred in two ways:i) Formal Channel: Fund transfer from one country to another country through official channels. i.e.7. Informal channel Fund transfer from one country to another country through hand by hand or over telephone in an unofficial channel like “Hundi”. banking channel. Money Exchanger.4. Banking Channel Post Office Formal Channel Money Exchange Authorized Remitting Channel Fig: Forms of Formal Channel The legitimate purposes of moving money abroad through formal channel are: To invest  To lend  To meet trading or personal obligations  To safeguard assets against theft or seizure by repressive regimes. Nero Money Order. post office and other private service channels. Experts state that remittance collected by . such as: Western Union Money Transfer.

. Smuggling Under Invoicing Informal Channel Hundi Fig: Forms of Informal Channel Others Informal channels are used for moving money abroad in order to: Deal in arms & ammunitions  Traffic drugs  Finance terrorists activities  Evade exchange regulations or control  Evade taxation  Disguise or remove proceeds of threat/fraud/bribe  Make blackmail payments  Pay ransom for kidnappers etc. Terrorist financing is also made by this sort of channel.informal “Hundi” rings are used to finance illegal trades and transactions.

although they both from part of the same business operation. It is different from the original credit based on which the Bank undertakes the risk under the back to back credit. It is intended that the exporter would substitute his own documents for negotiation under the original credit. Valid Boded Warehouse License. The original credit (selling credit) and the back to back credit (buying credit) are separate instruments independent of each other and in no way legally connected. Quota allocation letter issued by Export Promotion Bureau (EPB) in favor of the applicant in case of quota items.8 Back to back Letter of Credit: A back to back letter of credit is a new credit. The supplier (beneficiary of the back to back credit) ships goods to the importer or supplies goods to the exporter and presents documents to the Bank as is specified in the credit. The exporter L/C is marked lien and no margin is taken. In this case. his liability under the back to back credit would be adjusted out of these proceeds.  In RBL paper/documents required for submission for opening of back to back L/C:   Master L/C Valid Import Registration Certificate (IRC) & Export Registration Certificate (ERC)      L/C application & LCA form duly filled in and signed Performa invoice and Indent Insurance cover note with money receipt IMP form duly signed In addition to the above the following papers/documents are also required for export oriented garment industries while requesting for opening of back to back letter of credit   Textile permission.4. . the Bank’s main surety/security is original credit.

Payment is given after realizing export proceeds from the L/C issuing Bank. The seller himself.8.8. to third Bank. In case the factory premises is a rented one. or although transferable. It may happen that the credit in favor of the seller is not transferable.1 Defective points or clauses appear in the master L/C:      Issuing Bank is not reputed Advising credit by the advising Bank without authentication Port of destination is absent Inspection clause Nomination of specific shipping/Airline or nomination of specified vessel by subsequent amendment          B/L blank endorse. to be endorsed to buyer or to third party No subsequent reimbursing clause UCP clause not mentioned Shipment/presentation period is not sufficient Original document to be sent to buyer or nominated agent FCR or HAWB consigned to applicant or buyer “Shippers load and count is acceptable” L/C shall expire in the country of the issuing Bank Negotiation is restricted 4.2 Payment of back to back Letter of Credit: In case back to back as 60-90-120-180 days of maturity period. however. is unable to supply the goods and . letter of disclaimer duly executed by the owner of the house/premises to be submitted. deferred payment is made. cannot meet commercial requirement by transfer in accordance with article 46 (UCP) conditions. 4.

it may sometime be possible to use either a back to back credit or a counter credit. There is. the bank has exerted much emphasis on overseas operations and handled . another supplier. however. Both these concepts involved the issue if a second credit by the seller in favor of his supplier. regardless of whether or not he himself is paid under the first credit. NBL has been carrying on business through its 124 branches and 12 SME / Krishi centers (total 136 service locations) spread all over the country. many Banks will not do so. and make payable to. Major Findings The dynamic first generation bank established in 1983 focusing on technology and services At present. Under the back to back concept.needs to purchase them from. Since the very beginning. offers it as security to the advising Bank for the issuance of the second credit. no compulsion for the Bank to issue the second credit. and in fact. As application for this second credit the seller is responsible for reimbursing the Bank for payment made under it. the seller. as beneficiary of the credit. In this case.

The Bank has in its use the latest information technology services of SWIFT and REUTERS. NBL has been continuing its small credit programmed for disbursement of collateral free agricultural loans among the poor farmers of Barindra area in Rajshahi district for improving their livelihood.03 percent over the previous year and profit after tax & other provisions stood at Taka 2. bank's revenue. the pretax profit of National Bank stood at 3. the bank made a direct contribution of Tk. as well as with 37 overseas Exchange Companies located in 13 countries.a sizable quantum of home bound foreign remittance.35 percent over 2008. deposit and assets registered a growth of 22. This has meant that the expatriates can remit their hard-earned money to the country with much ease.20 million to Government Exchequer in 2009 representing an increase of 79. The earnings per share for the year 2009 was Tk.62 million. Being a regular tax payer. loans & advances. the year under review was noteworthy.53.55. Further. confidence.56 percent against statutory requirement of 10 percent.74 compared to Tk.47 million reflecting a growth of 36. 366.070. 27.1. In the meantime.53 percent respectively.45 percent.50 million.98. 124. RECOMMENDATION The previous banking system that someone has to go to some specific branch for banking purpose – for withdrawing money or depositing is diminishing day by day.72.9. NBL was the first domestic bank to establish agency arrangements with the world famous Western Union in order to facilitate quick and safe remittance of the valuable foreign exchanges earned by the expatriate Bangladeshi nationals. registering a growth of 13.197. In 2009. Despite shaken domestic economic condition due to global recession. 28. NBL was also the first among domestic banks to introduce international Master Card in Bangladesh. It has drawing arrangements with 415 correspondents in 75 countries of the world.31 of previous year. Detailed facts-figures and dsclosures are available in the financial statements and notes of accounts for the year 2009. which was 13.66 and 27. NBL has also introduced the Visa Card and Power Card. safety and speed. the customers can go to any branches for their transactions regardless where they have . Today with the help of modern day computer many banks have gone online – that means. performance of 2009. Capital adequacy maintained at Tk.

This bank has lots of products to offer already. It is to be noted that. The more customers the bank will serve with their innovative products. the bank implements true online system so that the customers of any branch can do its transaction from any other branch – branches near their offices or home or when they travel in other cities etc. auto loan. serving customer is like a branding. As a result.opened their account. The use of computer is important not only for online system but also in everyday process and activities of the employees. the bank will earn very high profit by serving just few industrial customers. banks have lots of deposits but not much of credit schemes. This has not only been a luxury but a necessity these days. But it is also to be noted that. the work becomes hectic and also mistakes are not always easy to track. This bank still uses traditional paper systems today instead of maintaining computer systems in every aspect. they would rather choose a different bank where they can use any branches. CONCLUTION In the organizational environment we feel very cozy to work in that type of convenient ambience. the bank can increase employee efficiency and effectiveness. For general consumer. the bank may capture more industrial clients. it is high time. Almost all the banks are now providing personal loan. So. the bank will earn little profit serving hundreds of customers for personal credit schemes whereas. NBL should focus on serving normal consumers.The banking industry experienced competitive pressure as the national and international banks operating in Bangladesh . By changing their process and use of advanced computer software. house loan etc. Since NBL is a thriving bank and willing to capture more market share in the upcoming days. When a customer will see that. the more exposure the bank will get – with the help of which. The premises expedite us for enhancing our knowledge as well as give us a proper safeguard about upcoming future circumstances. they are limited to a certain branch. But these products are more industrial in nature.

On the other hand. Debit Boucher. . L/C opening. Customers are demanding higher rate of return against their deposits. I believe the best possible work environment is provided bt National Bank Ltd. Export & Import and all necessary information regarding modern banking system. Besides. Bangladesh Bank is also asking the banks to reduce their lending rates without adjusting the profit on deposits. retail.strongly pursued the banking and financing needs of the corporate. SME sector customers through diversification of products and services and extending automated banking service with ATM. rates of profit became very competitive for deposit and lending. I have learned a lot of things like account opening. Credit Boucher. I am working in NATIONAL BANK LIMITED for a period of 3 months in which I have felt very welcome throughout this completion of this paper I have been given the most assistant as possible though some information were kept secret from me. Debit card facilities and internet Banking. And I have received the most assistance in training in this institution.

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