Report-Foreign Exchange Mangaemnet of Janata Bank Ltd

7/25/2019 Report-Foreign Exchange Mangaemnet of Janata Bank Ltd

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Committed Partner in Progress

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At the very beginning I would like to express my deepest gratitude to the Almighty God for

giving me the strength and the composure to finish the task within scheduled time.

I would like to express my gratitude and indebtedness to my respected supervisor Ms. Naznin

Sultana Chaity, Lecturer, School of Business, Ahsanullah University of Science and

Technology from the core of my heart for her kind support, guidance, supervision,

instructions and advice that motivating me to do this report.

I am also thankful to Mr. Md. Sirajul Haque(Assistant General Manager), Janata Bank

Limited, Kawran Bazar Corporate Branch for giving me the opportunity to conduct my

internship. I am also grateful to B. K. Kar (Senior Executive Officer) and Subrata Roy

(Executive Officer) of this branch who helped me a lot to complete my internship report by

providing various financial data of the bank.

Finally, I would also like to thank to the authority of Ahsanullah University of science and

Technology, for their kind co-operation.


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Executive Summary

The economic development of a country depends largely on the activities of commercialBanks. Especially a country like Bangladesh, our agricultural, industrial and economicdevelopments are very much depending on smooth operation of Banks. So we must ensurethe efficient and effective performance of this sector.

Janata Bank Ltd is one of the largest commercial Bank of Bangladesh. The main objective ofthe Bank is to provide all of banking services at the doorsteps of the people. The Bank also

participates in various social and development programs and takes part in implementation ofvarious policies and promises made by the Government.

The bank plays a pioneering role in handling foreign exchange transactions. With widenetwork of branches at home and abroad, the bank maintains the largest volume of export-import business including homebound remittances. For this reason, Foreign Exchange of theBank is very much essential.

This internship report is aimed at providing a comprehensive picture to the areas of Foreign

Exchange Activities of Janata Bank Limited and a pinpoint analysis of the operations and

performances of the bank, also recommending for possible solution of problems. The report

isbased on primary and secondary data from different sources. In this report I have tried to

show the contribution of JBLs earnings regarding export, import and remittance.

The report contains of the followings parts: Introduction of the Report, Profile of the

Organization, Operational Procedure of the Foreign Exchange Division, Activities of Letter

of Credit, Import Section, Export section, Remittance Section, Findings & Analysis,

Recommendation and conclusion.


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Table of Contents

Serial No. Contents Page No.

Letter of Transmittal iAcknowledgement 1

Executive Summary 2

List of Acronyms 7

Chapter 1 Introduction of the Report 8-151.1 Origin of the Report 9

1.2 Objectives of the Report 9

1.3 Methodology of the Report 9

1.4 Scope of the Report 10

1.5 Limitations of the Report 15

Chapter 2 Profile of the Organization 11-212.1 Background of the Organization 12

2.2 Mission & Vision of the organization 12

2.3 Purposes of Janata Bank Limited as a Commercial Bank 13

2.4 Functions of Janata Bank Limited as a Commercial bank 14

2.5 Corporate Profile of Janata Bank LimitedAt a Glance 14

2.6 Management Organogram of Jnanta Bank Limited 16

2.7 Management Organogram of Jnanta Bank Limited,

Kawran Bazar Corporate Branch

17

2.8 Service offerings/ Products of the Bank 17

2.9 Number of Branches 18

2.10 Five years Comparative Financial and Operational

performance

19

2.11 Corporate Social Responsibilities (CSR) 20

2.12 Reward and Recognition 20

2.13 Future Plans of the Organization 21

Chapter 3 Foreign Exchange Division 22-273.1 Foreign Exchange 23

3.2 Meaning of Foreign Exchange 23

3.3 Necessity of Foreign Exchange 23

3.4 Activities of Foreign Exchange Division 24

3.5 Regulation for Foreign Exchange Division 24

3.6 How Foreign Exchange is being Controlled 25

3.7 Foreign Exchange Performance of JBL 25

3.8 Risk Management of Foreign Exchange Operation 27

Chapter 4 Activities of Letter of credit (L/C) 28-334.1 Letter of credit (L/C) 29

4.2 Types of Letter of credit (L/C) 29

4.3 Letter of credit (L/C) Transaction Process 30

4.4 Parties involved in the Letter of Credit 31

4.5 Basic Procedures for Opening a Letter of Credit (L/C) 31

4.6 L/C Application Form (L/CAF) 32


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Chapter 5 Import Section 34-415.1 Meaning of Import 35

5.2 Import Department 35

5.3 Import Policy 35

5.4 Import Procedures 365.5 Import Mechanism 36

5.6 Types of Import 36

5.7 Goods are not Importable 37

5.8 Import Financing 37

5.9 Documents Receipt and Scrutiny 38

5.10 Graphical Presentation and Discussion of Import 39

Chapter 6 Export Section 42-536.1 Meaning of Export 43

6.2 Export Department 43

6.3 Documents used in Export 436.4 Registration for the Exporter 45

6.5 Formalities and procedures of export L/C 45

6.6 Export Financing 46

6.7 Graphical Presentation and Discussion of Export 51

Chapter 7 Remittance Section 54-627.1 Meaning of Remittance 55

7.2 Foreign Remittance 55

7.3 Remittance Services in Janata Bank limited 55

7.4 Types of Remittance 56

7.5 Remittance market in Bangladesh 58

7.6 Problems /Roadblocks in Current Remittance Process 59

7.7 Help Desk Related to Foreign Remittance Problem 59

7.8 Steps Taken for Remittance Process Improvement 59

7.9 Graphical Presentation and Discussion of Foreign

Remittance

60

Chapter 8 Findings and Analysis 63-748.1 SWOT Analysis 64

8.2 Comparison and Performance evaluation of Janata Bank

Limited

66

8.3 Comparison of profit performance of Janata, Agrani andRupali Bank Ltd:

66

8.4 Total Income, Expenditure and Profit Performance of

JBL, Kawran Bazar Corporate Branch

68

8.5 Import Performance of JBL Compare to National Import 70

8.6 Foreign Remittance Performance of JBL Compare to

National Foreign Remittance

72

8.7 Shortcomings of JBL from my Viewpoint 74

Chapter 9 Recommendation and Conclusion 75-799.1 Recommendation 76

9.2 Conclusion 79

Reference 80


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List of Figure

Serial No. Contents Page No.Figure 1 Functions of Janata Bank Ltd 14

Figure 2 ManagementOrganogram of Jnanta Bank Limited 16

Figure 3 Management Organogram of JBL, Kawran BazarCorporate Branch

17

Figure 4 CSR Activities of Janata Bank Ltd 20

Figure 5 Activities of Foreign Exchange Division 24

Figure 6 Types of Letter of Credit 29

Figure 7 Letter of Credit Transaction Process 30

Figure 8 Types of Remittance 56

Figure 9 Modes of Inward Remittance. 57

Figure 10 Modes of Outward Remittance 58

Figure 11 SWOT Analysis 64

List of Table


Table 1 Corporate Profile of Janata Bank Limited 14

Table 2 Number of Branches 18

Table 3 Five years Comparative Financial and Operational

performance

19

List of Graph


Graph 1 Foreign Exchange Performance of JBL 26

Graph 2Import performance of JBL

39

Graph 3 Import Performance of JBL, Kawran Bazar Corporate

Branch

40

Graph 4 Import Growth Percentage (%) of JBL, Kawran Bazar

Corporate Branch.

41

Graph 5Export performance of JBL

51

Graph 6 Export Performance of JBL, Kawran Bazar Corporate

Branch

52

Graph 7 Export Growth Percentage (%) of JBL, Kawran Bazar

Corporate Branch

53

Graph 8Foreign Remittance performance of JBL

60


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Corporate Branch

Graph 10 Growth of Foreign Remittance in Percentage (%) of JBL,

Kawran Bazar Corporate Branch.

62

Graph 11 Comparison of profit performance of the Janata, Agrani

and Rupali Bank Ltd.

66

Graph 12 profit percentage from 2009-2010 of the Janata, Agrani

and Rupali Bank Ltd.

67

Graph 13 Total Income, Expenditure and Profit Performance of JBL,

Kawran Bazar Corporate Branch

68

Graph 14 Growth of Profit Percentage (%) of JBL, Kawran Bazar

Corporate Branch.

69

Graph 15 Import Performance of JBL Compare to National Import 70

Graph 16 Contribution Percentage of JBL in National Import 71

Graph 17 Contribution of JBL in National Foreign Remittance 72

Graph 18 Contribution Percentage of JBL in National Foreign

Remittance

73


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List of Acronyms

AD Authorized Dealer

AGM Assistant General Manager

ATM Automated Teller MachineBB Bangladesh Bank

CAMELS C- Capital Adequacy

A- Asset Quality

M- Management

E- Earnings

L- Liquidity

S- Sensitivity to Market Risk

CCI&E Chief Controller of Import & Export

CIF Cost, Insurance and Freight

C&F Cost & Freight

CSR Corporate Social Responsibilities

DD Demand Draft

FER Foreign Exchange Regulation

FOB Free On Board

GATT General Agreement on Tariff and Trade

GDP Gross Domestic Product

HRM Human Resource Management

ICC International Chamber of Commerce

ICMAB Institute of Cost and Management Accountants of

Bangladesh

IME International Money Express

IRC Import Registration Certificate

JBL Janata Bank Limited

L/C Letter of Credit

L/CAF Letter of credit Application Form

LIM Loan against Imported Merchandise

LTR Loan against Trust Receipt

MT Mail Transfer

MIS Management Information System

NCB Nationalized Commercial Bank

PAD Payment Against Documents

PO Pay Order

PRC Proceeds Realization Certificate

RMG Ready Made Garments

SEO Senior Executive Officer

SWIFT Society for Worldwide Interbank Financial

Telecommunication

TC Travelers Cheque

TIN Tax Identification Number

TT Telegraphic TransferUCPDC Uniform Customs & Practices for Documentary Credit


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Chapter 1

Introduction of the Report


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1.1 Origin of the Report

This report has been prepared as an internship report which is a mandatory requirement forsuccessful completion of BBA program under Ahsanullah University of Science andTechnology and which aims to reflect the professional view of real world working experience

and environment. This internship report is required to submit after fulfilling 3 months ofworking experience in an organization as a trainee. This Three months internship period hashelped me to match my theoretical knowledge with practical understanding. My report is onthe foreign exchange activities of Janata Bank Limited. In this part I have tried to see thethings what are being done in this department of the branch. I have also tried to present my

personal observations from each department of this branch. I had an opportunity to beacquainted with the practical banking prevailing in Kawran Bazar Corporate Branch. Theknowledge which has been acquired in my Internship Period, I have tried my level best toshow in this report.

1.2 Objectives of the Report

The main objective of the study is to analyze the foreign exchange business of Janata BankLimited through practical exposures about Foreign Exchange Activities a comprehensiveStudy of Janata Bank Ltd. (considering Janata Bank Ltd, Kawran Bazar Corporate Branch).There are some specific objectives on the way of achieving the main objective. These are asfollows:

To fulfill the partial requirement of BBA Program To apply theoretical knowledge in the practical field Draw a general picture of foreign exchange operations of JBL

The views of export, import & remittance operation of Bangladesh through JBL The contribution of JBL in national remittance To analyze the export and import procedure maintained by JBL To describe the organizational structure, management, background, functions and

objectives of the bank and its contribution to the national economy. To know about different types of financial products offered by JBL To know about the objectives and planning of JBL To analyze the barriers faced by the bank To evaluate performance of the bank To make myself more confident and active in future

1.3 Methodology of the Report

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

The Primary Sources of data are as follows:

Face-to-face conversation with the respective officers and staffs of the Branch. Informal conversation with the clients. Practical work exposures from the different desks in the bank. Relevant file study as provided by the concerned officers.

The Secondary Sources of data are as follows:


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Periodicals published by Bangladesh Bank Different documents related to bank Relevant Books, Research Papers, Journals etc. regarding general banking functions

and foreign exchange activities.

I hope these criteria will be enough to find out different picture of financial performance in

the related sector of the bank.

1.4 Scope of the Report

Mainly the scope of this report is confined to the analysis of Foreign Exchange Activitiesof Janata Bank Ltd. Besides this the report covers the background, organizational structure,functions and performance of the bank also. This report is fully based on the practicalknowledge and experience by working and observing the activities done by the officials.

1.5 Limitations of the Report

It is obvious that every study has some limitations. The study I have made is of greatimportance and require me huge work. While conducting I had to face a number of problems.Those limiting factors that hampered my smooth workings in bank and finally in preparingthis report are as follows:

The organization maintains strict confidentiality about their financial and otherinformation.

Any type of such presentation requires a long time. But duration of this study was tooshort to have a sound understanding of the overall banking.

It was very difficult to collect the information from various personnel for their jobconstraint.

Nonavailability of the most recent statistical data.

Lack of sufficient books, papers and periodicals take me go on serious brainstormingwhile preparing this report.

I carried out such a study for the first time, so inexperience is one of the mainconstraints of the study.


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Chapter 2

Profile of the Organization


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2.1 Background of the Organization

A Committed Partner in Progress by this slogan Janata Bank Limited is one of the state

owned commercial banks in Bangladesh, has an authorized capital of Tk. 20000 million

(approx US$ 283.33 million), paid up capital of Tk. 5000 million, reserve of Tk.10823.01million and retained surplus Tk.5167.18 million. The Bank has total assets of Tk.345233.92

million as on 31stDecember 2010. Immediately after the liberation of Bangladesh in 1971,

the erstwhile United Bank Limited and Union Bank Limited were renamed as Janata Bank.

On 15th November, 2007 the bank has been corporatized and renamed as Janata Bank

Limited.

Janata Bank Limited has also a subsidiary company named Janata Exchange Company SRL

in Italy. Janata Bank Limited is going to launch Islamic Banking operation its five branches

and also diversified its product they are going to launch Merchant Banking Unit to play an

important role in the capital market. Janata Bank Limited, first among the Nationalized

Commercial Banks, has introduced ATM Services

Janata Bank Limited has already established a worldwide network and relationship innational and international Banking through 872 branches including 4 overseas

branches and 1215 foreign correspondents.

The Board of Directors is composed of 15(Fifteen) members headed by a Chairman.The Directors are representatives from both public and private sectors.

Total number of employees are 12826 (twelve thousand eight hundred twenty six) up

to December 31, 2010. There are three committees of the board for different purposes. They are:

1.

Executive Committee

2. Audit Committee

3. Management Committee

The Bank has earned an excellent business reputation in handling and funding

international trade, particularly in boosting export & import of the country.

2.2 Mission & Vision of the organization

2.2.1 Mission

Janata Bank Limited will be an effective commercial bank by maintaining a stable growthstrategy, delivering high quality financial products, providing excellent customer servicethrough an experienced management team and ensuring good corporate governance in everystep of banking network.

2.2.2 Vision

To become the effective largest commercial bank in Bangladesh to support socio-economic

development of the country and to be a leading bank in south Asia


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2.3 Purposes of Janata Bank Limited as a Commercial Bank

Making profitThe first and foremost purpose of Janata Bank is to attain profit generally through

collecting deposits and lending this money to earn interest income or by makinginvestment.

Providing service and relation developmentThis bank increases the volume of financial transaction through the development ofrelation with the clients.

Collecting more deposit and money lendingAs a commercial bank Janata Bank aims to collect as much as possible money fromthe clients through different type of deposit.

Increasing flow of moneyJanata Bank in replace of currency uses different medium as cheque, bank draft, payorder, latter of credit when doing transaction. Thus it increases the actual flow ofcurrency.

Janata Bank Limited however serves the following social purposes

Creating savings

Janata Bank Limited offers different kinds of Savings Account and thus simulates thepeople to make savings.

Formation of capital

The accumulation of savings enables Janata Bank to form capital.

Ensuring safety

This bank has another purpose to ensure the safety of its clients depository money.

Investment and Industrialization

Janata Bank through short-term, intermediate-term and long-term investmentsimulates the investment and industrialization in the country.

Employment facility

Besides earning profit Janata Bank offers employment facility to the communitypeople and thus helps increase income.


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2.4 Functions of Janata Bank Limited as a Commercial bank

Figure 1: Functions of Janata Bank Ltd.

2.5 Corporate Profile of Janata Bank LimitedAt a GlanceName of the Company Janata Bank Limited

Chairman Dr. Abul Barkat

CEO & Managing

Director

S.M Aminur Rahman

Legal Status Public Limited Company

Date of Incorporation 21 May, 2007

Registered Address Janata Bhaban, 110 Motijheel Commercial Area, Dhaka-1000Bangladesh.

Authorized Capital Tk.20000 million

Paid up Capital Tk.5000 million

Face value per share Tk. 100 per share

Shareholding Pattern 100% share owned by the Government of Bangladesh

Domestic Network Numbers of Branch-868Numbers of Divisional Office-08

Numbers of Area Office-15Numbers of Regional Office-29

Functions of

Janata BankLimited

General

function

Collecting deposit ,Lending loan ,Honouring cheque ,Creation of medium

of exchange,Discounting bills,

Money transfer etc.

Development

function

Creation of savings andformation of capital,

helps export and importbusiness, Investment indevelopment sector, HR

development etc.

Representative

function

Receive and payment asthe representative of

clients, selling of shareand securities,

Service function

Transaction offoreign currencies,

information sharing,Consulting andothers service

functions.


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Overseas Network Numbers of Branch-4 ( all branches located in United ArabEmirates)

Numbers of Employees 12826

Telex 675840 JBDBJ, 671288 JBHOBJ

Phone PABX: 9560000, 9566020, 9556245-49, 9565041-45, 9560027-30

Fax 88-02-9564644, 9560869

E-mail [email protected]

Website www.janatabank-bd.com

Swift Code JANB BD DH

Source: Janata Bank Ltd, Annual Report-2010

Table 1: Corporate Profile of Janata Bank Ltd.


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2.6 ManagementOrganogram of Jnanta Bank Limited

Figure 2: ManagementOrganogram of Jnanta Bank Ltd.

Chairman

Managing Director

Deputy Managing Director

General Manager

Assitant General Manager

Manager

Senior Executive Officer

Executive Officer

Assistant Executive Officer

Support Stuff


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2.7 Management Organogram of Jnanta Bank Limited, Kawran Bazar

Corporate Branch.

Figure 3: ManagementOrganogram of JBL, Kawran Bazar Corporate Branch

2.8 Service offerings/ Products of the Bank

Janata Bank Ltd provides all commercial banking services to its clients focusing on thenational interest and sustainable growth. The major fields of its activities may be representedas below:

Deposit Products

Current Deposit Account

Short Term Deposit

Savings Bank Deposit Account

Asstt.General

Manager

Manager

Senior

Executive

Officer

Senior

Executive

Officer

Executive

Officer

Executive

Officer

Asstt.

Executive

Officer

Asstt.

Executive

Officer

Asstt.

Executive

Officer

Support Stuff Support Stuff Support Stuff Support Stuff Support Stuff Support Stuff

Asstt.

Executive

Officer

Asstt.

Executive

Officer

Executive

Officer


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Foreign Currency Deposit

Monthly Savings Scheme

Janata Bank Double Deposit Scheme

Monthly Profit Based Savings Scheme Janata Bank Savings Pension Scheme

Janata Bank Deposit Scheme

Education Deposit Scheme

Medical Deposit Scheme

Janata Bank Monthly Savings Scheme

Janata Bank Special Deposit Scheme

Janata Bank School Banking Savings Karjakram

Credits Products

Term Loan

Trade Finance

Import Finance

Export Finance

SME Financing

Micro Credit

Agriculture & Rural Credit

Consumer Credit

Home loan

Loan for Merchant Banking

E-Service

Speedy Remittance Western Union Money Transfer

Automated Clearing

Internet Banking

ATM Banking

ATM Operation

Debit Card Operation

Salary Card

2.9 Number of Branches

Branches in Bangladesh 868

Rural Branches 486

Urban Branches 382

Overseas Branches 4

Total Branches 872

S W b i f J B k L d


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List of Branches (Grade/Category wise)

SL Name No

01 Local Office 1

02 Corporate -1 Branches 12

03 Corporate -2 Branches 41

04 Overseas Branches 4

05 Grade - 1 Branches 204




Total 872Source: Website of Janata Bank Ltd.

Table 2: List of branches

2.10 Five years Comparative Financial and Operational performance

(Taka in million)

Particulars 2006 2007 2008 2009 2010

Authorized Capital 8000 8000 8000 20000 20000

Paid up Capital 2595 2595 2595 5000 5000

Reserve Fund 1727 3224 4183 8207 10224

Deposits 182947 198636 221336 246175 286567

Advance 138493 121200 144678 166359 225732

Investment 24785 55862 57824 72533 57514

Revenue 16272 18522 20922 24074 30614

Cost 12059 13559 13919 15496 18577

Operating Profit 4213 4963 7003 8578 12037

Provisions forLoan/Assets

10707 11698 9051 8748 8975

Net Profit --- 1681 3145 2982 4907

Export 70897 71855 85418 88653 118515

Import 128809 84065 129413 118525 183744

Total Number ofEmployees

14772 13860 13379 13122 12826

No.of foreignCorrespondent

1198 1198 1202 1208 1215

No. of Branches(including 4 OverseasBr.)

848 848 849 851 872


Table 3: Five years Comparative Financial and Operational performance


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2.11 Corporate Social Responsibilities (CSR)

As a state-owned bank, its goal is not only make profit, but also to serve people through our

Corporate Social Responsibilities (CSR) .The Bank has adequate scope to provide financial

assistance to the distressed and deprived people individually and through various

organization towards human development. The Bank pursuing CSR activities with funds

generated from profit. The Bank disbursed Tk.61.29 million in 2010 as against allocated 70

million. CSR aims at maximizing realization of human potentials and minimizing human

deprivation.

CSR activities of Janata Bank Limited of 2010 are given below:


Figure 4: CSR Activities of Janata Bank Ltd.

2.12 Reward and Recognition

The bank has received The banker Award in 2003 & 2005, Asian Banking Award in2004 & 2005, The Best Bank Award in 2006, 2007, 2008 & 2009 and in 2010 Productive

Location Champion Award-2010 from Western Union for remarkable growth, extraordinary

performance, and maintaining international standard in the quality of services.

Besides these very recently the bank has honored two national and international awards.

These are given below:

International Award-The Bank of the year-2011 in Bangladesh

Janata Bank Limited has been awarded TheBank of the Year-2011 in Bangladesh by the

London based Financial Magazine the Banker of the Financial Times Group. This is for the

sixth time the bank has been awarded The Bank of the Year. Janata Bank Limited achieved

25%

25%

20%

16%

7%

7%

Corporate Social Responsibilities

Poverty reduction and

rehabilitation

Health

Knowledge building

Disaster mitigation

Education

Culture


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ICMAB Best Corporate Award-2011

Janata Bank Limited has been awarded 'ICMAB Best Corporate 1Award - 2011' by the

Institute of Cost and Management Accountants of Bangladesh. The Bank secured the first

position among the state owned Commercial Banks in Bangladesh.

2.13 Future Plans of the Organization

Involvement in export activity largely by maintaining good communication with

diverse parties.

More facilities will be provided to the exporters on the basis of export priority and

facilitate them on the basis of performance.

Sufficient workforce has involved increasing export and import business, providing

special services and initiated different training program of officers has been started.

Very dynamic new dimensional Credit Product will be started in a large scale.

To take the competitive position charge, decrease commission and other facilities will

continue to complete the journey


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Chapter 3

Foreign Exchange Division


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3.1 Foreign Exchange

Foreign exchange is an important and integral part of commercial banking. It is very much

Lucrative and remunerative operation for the bank, if it is conducted systematically and

methodically as per norms. In order to conduct Foreign Exchange Activities systematicallyand methodically the Foreign Exchange Regulation (FER) Act, 1947 enacted on the 11

March 1947 in the British- India provides the legal basis for regulating receipts and payments

and dealings in the foreign exchange and securities. Basic regulations for conducting Foreign

Exchange Operation are issued by the Government as well as by the Bangladesh Bank in the

form of Public notice, circulars, SROs etc. From time to time Authorized Dealers (Ads) in

Foreign Exchange should meticulously follow the said circulars and guidelines of Bangladesh

Bank

3.2 Meaning of Foreign Exchange

Foreign Exchange means the exchange of currency in terms of goods includes all deposits,credits, balance payable, drafts, T.Cs, bill of exchange, L/C etc. from one country to another.This is the most well-known and well-organized business uniform in world business. Allforeign exchange transactions in Bangladesh are subject to exchange control regulation ofBangladesh Bank.

Among all departments Foreign Exchange departments of Janata Bank Ltd is one of the mostimportant. The Bank is providing excellent services to the clientele in foreign exchange andforeign trade operations through the above foreign correspondents.

3.3 Necessity of Foreign Exchange

No country self-sufficient in this world. Everyone is, more or less dependent on other, forgoods or services. Say, Bangladesh has cheap manpower whereas Saudi Arabia has cheap

petroleum. So, Bangladesh is dependent on Saudi Arabia for petroleum and Saudi Arabia isdependent on Bangladesh for cheap manpower. People of one country are going to abroad formedical service, education etc. thus there is an exchange of foreign currency.


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3.4 Activities of Foreign Exchange Division

Activities of Foreign Exchange Division can be broadly divided into three parts:

1. Export

2. Import

3.

Remittance

Figure 5: Activities of Foreign Exchange Division

3.5 Regulation for Foreign Exchange Division

Foreign Exchange transactions are being controlled by the following rules and regulations:

3.5.1 Local Regulation

Foreign Exchange act 1047. Bangladesh bank issues Foreign Exchange Circular from time to time to control the

export, import and remittance operation. Ministry of commerce issues export and import policies giving basic formalities for

import and export. Sometimes CCI issues public notices for any kind of change in Foreign Exchange

transaction. Bangladesh bank publishes two volumes in 1996. These comprise the complete

instructions to be followed by the authorized dealers in transactions related to ForeignExchange.


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3.5.2 International Regulation

There are some international organizations influencing our Foreign Exchange transactions.These are:

International chambers of Commerce (ICC) is a worldwide non-governmentalorganization of the thousands of companies. It was founded in 1919. ICC has beenissued some publication like UCPDC, URC and URR etc, which are being followed

by all the member countries. There is also International Court of Arbitration to solvethe international business disputes.

World Trade Organization (WTO) is another international trade organizationestablished in 1995. General Agreement on Tariff and Trade (GATT) was establishedin 1948, after completion 8th round the organization has been abolished and replaced

by WTO. This organization has role in international trade, through its 124 membercountries.

3.6 HowForeign Exchange is being Controlled

Foreign Exchange is being controlled by the following ways:

To stabilize the rate of exchange

To protect domestic industries

For proper implementation of plans

To increase the bargaining strength

To check over invoicing & Under invoicing

To check the Blank marketing and smuggling

For regulating the international movements of goods

3.7 Foreign Exchange Performance of JBL

1. Import:The Banks foreign exchange business relating to import was Tk.118525 millionin 2009 and Tk. 183744 million in2010.

2. Export:The Banks foreign exchange business relating to export was Tk.88653 million in2009 and Tk.118515 in 2010.

3. Foreign Remittance: The achievement JBL in attracting foreign remittance was Tk.56190million in 2009 and Tk.52640 in 2010.


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3.7.1 Foreign Exchange Performance of JBL from 2009-2010

(Figure in million TK.)

Particulars Year

2009 2010

Import 118525 183744

Export 88653 118515

Foreign Remittance 56190 52640

Source: Janata Bank Ltd, Annual Report-2010Graph 1: Foreign Exchange Performance of JBL

Explanation: The above graph shows the foreign exchange earnings regarding to import,export and foreign remittance. In 2010 the import earnings was TK. 183744 million withgrowth rate of 55.02%, export earnings was TK.118515 million with growth rate of 33.68%and the foreign remittance earnings was TK. 52640 million with growth rate of (-) 6.32%compare to 2009.

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

200000

2009 2010

Import 118525 183744

Export 88653 118515

Foreign Remittance 56190 52640

Figureinmillion

Foreign Exchange Business of JBL


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3.8 Risk Management of Foreign Exchange Activities

Foreign exchange risk is a risk that a bank may suffer losses as a result of adverse movement

in either spot or forward rate or combination of the two, in individual foreign currency. This

risk is associated with the transaction involved in import, export, remittance and foreigncurrency in hand and bank.

To mitigate the risk involved in foreign exchange business, the foreign exchange dealing

operation in Janata Bank Limited is performed through Dealing Room(Front Office) ,Mid

Office and Back Office. The dealers manage market risk, avoid adverse exchange fluctuation,

look for better investment of funds, maintain sound liquidity and protect the Bank from any

unforeseen loss in the situation of any market volatility. The Mid Office and Back Office are

assigned the responsibility of related support functions. Dealing room is restricted for all

excepting dealers and authorized executives.

The dealing room is equipped with modern facilities i.e. Reuterss information, SWIFT,

receptors monitor, telephone, voice recorder etc. Moreover stop/ loss limit, trading limit,

overnight limit is given by the concerned authorities. The daily blotter and mark to market

revaluation report is placed to management for their review.


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Chapter 4

Activities of Letter of credit (L/C)


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4.1 Letter of credit (L/C)

Letter of credit (L/C) can be defined as a Credit Contract whereby the buyers bank iscommitted (on behalf of the buyer) to place an agreed amount of money at the sellers

disposal under some agreed conditions. L/C is called documentary letter of Credit because the

undertaking of the issuing bank is subject to presentation of some specified documents. TheUniform Customs & Practices for Documentary Credit (UCPDC) published by InternationalChamber of Commerce (1993) Revision Publication No. 500 defines Documentary Credit:

Any arrangement however named or described whereby banks (the issuing bank) acting atthe request and on the instructions of a customer (the Applicant) or on its own behalf:

1. Is to make a payment or to the order of a third party(the beneficiary) or is to acceptand pay bills of exchange(Drafts)drawn by the beneficiary, or

2. Authorizes another bank to effect such payment or to accept and pay such bills of

exchange (Drafts)

3. Authorizes another bank to negotiate against stipulated documents provide that termsand conditions are complied with.

4.2 Types of L/C

Letter of Credit basically divided into two types:

Figure 6: Types of Letter of Credit

1. Revocable L\C

Revocable L\C is a credit which can be amended/ cancelled by issuing bank, without

prior notice to the seller.

2. Irrevocable L/C

Irrevocable L/C is a credit, which cannot be amended or cancelled without the

agreement of all parties.

Letter of Credit

Revocable L/C Irrevocable L/C


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Some other types of L\C s are:

Confirmed L\C.

Transferable L\C.

Confirmed L\C.

Revolving L\C.

Restricted L\C.

Red Clause L\C.

Green Clause L\C.

Back-to-Back L\C.

4.3 Letter of Credit Transaction

Figure 8: Letter of Credit Transaction process

Figure 7: Letter of Credit Transaction Process

Advising

Bank

Issuing Bank

Exporter Importer

(8) Importers

accounting is

debited (or

financed) and

documents are

release.

(6) Documents forwarded to issuing

bank to authorize payment

(2) L/C

(1) Application

(3) Advises

exporter of L/C

(5) Freight

forwarder

presents

documents to

bank payment

(4) Freight forwarder ships and

Merchandise

(7) Payment


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4.4 Parties involved in the L/C

Importer/Applicant

Applicant who is referred to as account party is normally a buyer or customer of the

goods, who has to make payment to beneficiary. Simply the person applies for L/C iscalled importer.

Exporter (Beneficiary)Beneficiary of the L/C is the party in whose favor the letter of credit is issued. Usuallythey are the seller or exporter.

Issuing Bank

It is the bank which opens/issues a L/C on behalf of the Importer.

Confirming Bank

It is the bank, which adds its confirmation to the credit and it is done at the request of

issuing bank. Confirming bank may or may not be advising bank.

Advising /Notifying Bank

It is the bank through which the L/C is advised to the exporters. This bank is actually

situated in exporter's country. It may also assume the role of confirming and /or

negotiating bank depending upon the condition of the credit.

Negotiating Bank

It is the bank, which negotiates the bill and pays the amount of the beneficiary. The

advising bank and the negotiating bank may or may not be the same. Sometimes it can

also be confirming bank.

Accepting Bank

It is the bank on which the bill will be drawn (as per condition of the credit). Usually

it is the issuing bank

Reimbursing Bank

It is the bank, which would reimburse the negotiating bank after getting payment -

instructions from issuing bank.

4.5 Basic Procedures for Opening a Letter of Credit (L/C)

In global business environment buyers and sellers are often unknown to each other. So seller

generally demands guarantee of payment for his exported goods. In this situation bank has an

important role. Bank gives export guarantee that it will pay for the goods on behalf of the

buyer. This guarantee is called Letter of Credit or L/C. Thus by letter of credit the contract

between importer and exporter find a legal sphere.

The letter of credit process has been standardized by a set of rules published by theI t ti l Ch b f C (ICC) Th l ll d th U if C t


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500. The following is the basic set of steps used in L/C transaction. Specific L/C transactionfollows somewhat different procedures.

1. After the buyer and seller agree on the terms of sale, the buyer arranges for his bankto open a L/C in favor of the seller.

2.

The buyer issuing bank prepares the L/C, including all of the buyers instructions tothe seller concerning shipment and required documentation.

3. The buyers bank sends the L/C to sellers advising bank.

4. The sellers advising bank forwards the L/C to the seller.

5.

The seller carefully reviews all conditions stipulated in the L/C. If the seller can not

comply with any of the provisions, it will asked the buyer to amend the L/C6.

After final terms are agreed upon, the seller ships the goods to the appropriate port or

location.

7.

After shipping the goods seller obtains the required documents.

8.

The seller presents documents to its advising bank along with a draft for payment.

9.

The sellers advising bank reviews the documents. If they are in order, it will forward

them to the buyers issuing bank. If a confirmed L/C, the advising bank will pay the

seller.

10.

Once the buyers issuing bank receives and reviews the documents, if either pays if

there are no discrepancies or forwards the documents to the buyer if there are

discrepancies for its review and approval.

4.6 L/C Application Form (L/CAF)

L/C Application Form is a sort of an agreement between customer and bank on the basis of

which letter of credit is opened. Bank provides a printed form for opening of L/C to the

importer. A special adhesive stamp of value Tk.200 is affixed on the form in accordance with

Stamp Act currently in force. While opening, the stamps are cancelled. Usually the importer

expresses his decision to open the L/C quoting the amount of margin in percentage. Usuallythe importer gives the following information

1. Full name and address of the importer

2.

Full name and address of the beneficiary

3.

Draft amount

4.

Availability of the credit by sight payment/ acceptance/ negotiation/ deferred payment

5. Time bar within which the documents should be presented

6. Sales type (CIF/FOB/C&F)

7.

Brief specification of commodities, price, quantity, indent no. etc.

8. Country of origin


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11.IRC no.

12.Account no.

13.Documents no.

14.Insurance Cover Note/Policy no., date, amount

15.

Name and address of Insurance Company16.Whether the partial shipment is allowed or not

17.Whether the transshipment is allowed or not

18.Last date of shipment

19.Last date of negotiation

20.Other terms and conditions (if any)

21.

Whether the confirmation of the credit is requested by the beneficiary or not

22.

The L/C application must be completed/filled in properly and signed by the

authorized person of the importer before it is submitted to the issuing bank

4.7 Letter of Credit-Settlement

Settlement means fulfilling the commitment of issuing bank in regard to effecting paymentsubject to satisfying the credit terms. Settlement may be done under 3 (Three) separatearrangements as stipulated in the Credit.

Settlement by Payment

Here the seller presents the documents to the nominated bank and bank scrutiny the

documents. If satisfies, the nominated bank makes payments to the beneficiary and incasethis bank is other than the issuing bank, then sends the documents to issuing bank and claimreimbursement as per arrangement.

Settlement by Acceptance

Under this arrangement the seller submits the documents evidencing the shipment to theaccepting bank (nominated by the issuing bank for acceptance) accompanied by a draft and

bank at the specified tenor.

After being satisfied with the documents, the bank accepts the documents and the drafts andif it is a bank other than issuing bank, then se4nds the documents to the issuing bank stating

that it has accepted the draft and at maturity the reimbursement will be obtained in the pre-agreed manner.

Settlement by Negotiation

This settlement proceeds with the submission of the documents by the seller to negotiatingbank. In a freely negotiable credit any bank can negotiate documents and if negotiationrestricted by the issuing bank, only nominated bank can negotiate the documents. Afterscrutinizing that the documents meet the credit requirements, the bank can negotiate thedocuments and give the value to beneficiary. The negotiation bank then sends the documentsto the issuing bank. As, usual the reimburse4mentwill be obtained in the pre-agreed manner.


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Chapter 5

Import Section


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5.1 Meaning of Import

Simply import means purchase of goods or services from abroad. Again an import is anygoods or services brought into a country from another country in a fair and acceptablefashion, typically for use in trade. Normally consumers, firms and Government organizationsimport foreign goods or services to meet their various necessities. Main import items are fooditem, edible oil, fertilizer, petroleum, machineries, chemicals, raw materials of industry,cement clinkers etc. So, in brief, we can say that import is the flow of goods and services

purchased by local agent staying in the country from foreign agent staying abroad. Theimporters are asked by their exporters to open Letter of Credits (L\C), so that their paymentagainst goods is more insured.

5.2 Import Department

Bangladesh is one of the developing countries in the world. So, like other developingcountries Bangladesh Imports largely than it Exports. Imports of goods into the Bangladesh isregulated by the Ministry of Commerce in the terms of the Import- Export Act, 1950, variousImport policy orders and also public notices issued from time to time by the office of theChief Controller of Import and Export (CCI&E).

JBLs foreign exchange business relating to import was Tk.183744 million at the ends of

December 2010.

5.3 Import Policy

Different import policy

Import facility up to $2000 for actual user (for self-consumption not for sale) withoutpermission.

Above $5000 approval of Chief Controller of Import and Export (CCI&E) is needed.

Import facility on the basis of direct payment on foreign countries

Import under L\C, L\C must be irrevocable. Import above $5000-L\C is required butin the case of perishable items like food up to $7500 transported by road L\C is notrequired.

Some other cases in which do not require L\C, are:

Books, Magazines, Publications. Import up to $5000 in case of payment from Bangladesh. Import under Foreign Aid. Import of "International Chemical Conference" by the Pharmaceutical Companies

with prior approval Drug Administration. Government sector bodies can import without any license, permit &b IRC (Import

Registration Certificate).


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5.4 Import Procedures

Authorized Dealer, banks are always committed to facilitate import of different goods intoBangladesh from the foreign countries. Import Section, which is under Foreign ExchangeDepartment of a bank, is assigned to perform this job. And to serve its parties demand toimport goods, it always maintains required formalities that are collectively termed as Import

Procedure.

1. At first, the importer must obtain Import Registration Certificate (IRC) from theCCI&E submitting the following papers: Up to date Trade License. National and Asset Certificate. Tax Identification Number (TIN ) In case of company, Memorandum & Articles of Association and Certificate of

Incorporation.

Bank Solvency Certificate etc. Required amount of registration fee2. Then the importer has to contact with the seller outside the country to obtain the

Proforma Invoice. Usually an indenter, local agent of the seller or foreign agent of thebuyer makes this communication. Beside these other sources are: Trade fair. Chamber of Commerce. Foreign Missions in Bangladesh. Journals etc.

3. When the importer accepts the Proforma Invoice, he/she makes a purchase contractwith the exporter detailing the terms and conditions of the import.

4.

After making the purchase contract, importer settles the means of payment with theseller. An import procedure differs with different means of payment. The possiblemeans are Cash in Advance, Open Account, Collection Method and DocumentaryLetter of Credit. In most cases, the Documentary Letter of Credit in our countrymakes import payment. Purchase Contract contains which payment procedure has to

be applied.

5.5 Import Mechanism

To Import, a person should be competent to be importer. According to Import and Export

Control Act-1950, the office of Chief Controller of the Import and Export (CCI&E), providesthe registration (IRC) to the importer. After obtaining thus person's has to secure a letter ofCredit authorization from Bangladesh bank. And then a person becomes a qualified importer.He is the person who requires or instructs the opening bank to open a L\C. He is also calledOpener or Applicant of the credit.

5.6 Types of Import

Mainly there are two types of import:

1. Commercial Import

2.

Industrial import


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1.Commercial Import:

Importer does commercial import only for trading purpose. These products are finishedgoods. Such as rice, wheat, soybean oil etc.

2.Industrial import:

Importer does industrial import for industrial use only. These products are raw materialsand capital machinery. Such as; raw cotton, Crude oil etc.

5.7 Goods are not Importable

The following types of goods are not importable:

Books, Newspaper, periodicals, documents and other papers, posters photographs,films, gramophone records, audio and video cassette tapes etc containing matterslikely to outrange the religious feeling and beliefs of any class of the citizen ofBangladesh.

Maps, chart and geographical globes which indicate the territory of Bangladesh but donot do so in accordance with the maps published by the department of survey,Government of the peoples republic of Bangladesh.

Reconditioned office equipment, photocopier, type-writer machine, telex, phone,computer and fax.

Goods bearing any obscene picture, writing inscription or visible representation.

5.8 Import Financing

There is various method of Import Financing, which is regulated by legal framework andimport policy. These are:

1. Non-Funded Financing

2. Post import (funded) Financing

11..NNoonn--FFuunnddeeddFFiinnaanncciinngg

Letter of Credit constitutes the most important Non-Funded Financing in import trade. There

are a very common form of import financing because they provide a high degree of protection

for both buyer and seller.

22..PPoossttiimmppoorrtt((ffuunnddeedd))FFiinnaanncciinngg

There are major three forms of funded post import financing offered by the banks.

These are given below-

a)

Payment Against Documents (PAD)

b)

Loan Against Imported Merchandise (LIM)


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a)Payment against Documents (PAD)

Payment made by the bank against lodgment of shipping documents of goods imported through

letter of credit falls under this types. When importer bank finds documents in order and if there

is any discrepancies have which is acceptable by the importer, import bill have to give toforeign bank or exporter bank.

b)Loan against Imported Merchandise (LIM)

This is funded credit facility allowed for retirement of shipping documents and release ofgoods imported through L/C taking effect control over the goods by pledge in god ownsunder banks lock and key. This is a temporary advance connected with import which is

known as post-import finance and falls under the category Commercial Lending.

c)Loan against Trust Receipt (LTR)

JBL keeps security (such as land, Building etc) against LTR. Party can replay LTR amountpartial. JBL maintains a different ledger account for LTR in which several information havesuch as date, particular, debit and credit amount, initial, product name, interest amount, loanA/C no, interest rate, mode of payment, expiry date and margin etc. LTR interest rate varies

party to party. LTR validity date may be 30 days/ 60 days/ 120 days, which depends onsanction of NBL head office.

LTR interest rate = Days Balance Rate of interest / 360 days.

5.9 Documents Receipt and Scrutiny

After opening the Letter of Credit the next step would be to await shipment followed bynegotiation of documents by a bank abroad.

However, generally the following documents areasked to send:

Bill of lading or Airway Bill or other evidence of shipment (e.g. Railway Receipt,Truck Receipt, Barge Receipt)

Certificate of Origin

Commercial Invoice

Draft or bill of exchange

Inspection of Survey Certificate

Marine Insurance Policy

Packing List

Quality Control Certificate


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5.10 Graphical Presentation and Discussion of Import

5.10.1 Import performance of JBL


Achievement from Import

Year 2008 2009 2010

Import 129413 118525 183744


Graph 2 : Import performance of JBL

Explanation:The graph shows that the import performance of JBL from 2008-2010. In this

section TK.10888 million decreased from 2008-2009 with a negative growth rate of -11%

and TK.65219 million increased from 2009-2010 with a growth rate of 55.02%.

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

200000

2008 2009 2010

Achieved 129413 118525 183744

F

igureinmillion

Import Performance Of JBL from 2008-2010


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5.10.2 Import Performance of JBL, Kawran Bazar Corporate Branch


Achievement against Target

Year 2008 2009 2010 2011

Target 14.49 20.7 20 90

Achievement 15.75 22.5 79.5 57.6

Source: JBL, Kawran Bazar Corporate Branch.

Graph 3: Import Performance of JBL, Kawran Bazar Corporate Branch

Explanation: The graph shows that the amount of achievement against target of Kawran

Bazar Corporate Branch from 2008-2011. In 2008 the achievement was TK.15.75 million

against target TK.14.49 million. In 2009 the achievement was TK.22.5 million against target

TK.20.7 million. In 2010 the achievement was TK.79.5 million against target TK.20.million

and in 2011 the achievement was TK.57.6 million against target TK.90 million.

2008 2009 2010 2011

Target 14.49 20.7 20 90

Achieved 15.75 22.5 79.5 57.6

0

10

20

30

40

50

60

70

80

90

100

Figureinmillion



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5.10.3 Increase or (Decrease) of Import Percentage (%) of JBL, Kawran Bazar

Corporate Branch.

Increase or (Decrease) of Import Percentage (%) During

Year 2009 2010 2011Percentage Achieved 43% 253% (-)28%


Graph 4: Import Growth Percentage (%) of JBL, Kawran Bazar Corporate Branch.

Explanation: The graph shows the data of import percentage of JBL, Kawran BazarCorporate Branch. In 2009, 2010, and 2011 the percentage was respectively 43%, 253%, and

-28%. But here the percentage in 2011 was lower than the previous years, which is bad for

the branch.

-50%

0%

50%

100%

150%

200%

250%

300%

2009 2010 2011

Percentage Achieved 43% 253% -28%

Increase or (Decrease) in Percentage (%) During 2009-2011


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Chapter 6

Export Section


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6.1 Meaning of Export

The goods and services sold by Bangladesh to foreign households, businessmen andGovernment are called export. Main export items are readymade garments, frozen fish,vegetables, tea, coffee, spices etc.

6.2 Export Department

The export trade of the country is regulated by the Imports and Exports (control) Act, 1950.There are a number of formalities, which an exporter has to fulfill before and after shipmentof goods. The exports from Bangladesh are subject to export trade control exercised by theMinistry Of Commerce through Chief Controller of Imports and Exports (CCI & E). Noexporter is allowed to export any commodity permissible for export from Bangladesh unlesshe is registered with CCI & E and holds valid Export Registration Certificate (ERC). TheERC is required to be renewed every year. The ERC number is to be incorporated on EXP

forms and other documents connected with exports.

The major function of this section is comprises with purchases, collection & negotiate theexport bill, provide the exporter in financing and helps the exporter in different issues.

A person desire to export should make application to obtain ERC (Export RegistrationCertificate) from CCI&E then the person should step in to a bank along with ERC to obtainexport operation from the Bank.

Government of Bangladesh gives many facilities for the exporters. Such as -

Income tax exemption for export earning: Under the income tax law other than the

owners of factories not registered in Bangladeshi, all exporters will get 50%exemptions in their income taxes.

Exemption in insurance premium.

Bond facilities for export oriented industries.

Facilities for duty free import

of capital machineries for export - oriented industries.

The export-oriented industries will get the advantage of importing 10 percentspare parts of their capital machineries without duty in every two years.

Providing alternative facilities to export-oriented local textiles and RMG otherthan duty-bond or duty-draw-back.

Tax holiday.

Duty-draw-back scheme.

6.3Documents used in Export

When a firm sells its goods abroad, it must arrange for each export shipment to be

accompanied by various documents. Depending on the country to which the goods are being

sent, these documents will vary. But for exporting we can divide those documents in two

types-

6 3 1 Substantive Documents


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66..33..11SSuubbssttaannttiivveeDDooccuummeenntt

Substantive Documents are given below:

Draft or bill of exchange

Bill of Exchange is an instrument in writing containing an unconditional order or at afixed determinable future time a certain sum of money only to, or to the order of a

certain person or to the bearer of the instrument.

Commercial Invoice

Commercial Invoice is the export firm's invoice, addressed to the foreign importer describing

the goods shipped and the total price that it must pay. However, some countries require the

commercial invoice to be prepared on their own forms. Such forms are called customs

invoices.

Bill of lading or Airway BillBill of Lading is a document supplied to the exporter by the shipping company that is

transporting the goods to their foreign destination, listing, item by item, the goods

being shipped. It serves three basic purposes:

a) To acknowledge receipt by the carrier of the exporter's goods.

b) To indicate the carrier's contractual obligation to transport the goods to theirdestination in exchange for payment.

c) To record transfer of title from the seller to the buyer when payment for the goodstakes place. Airlines use what is called an Air Waybill.

66..33..22AAuuxxiilliiaarryyDDooccuummeennttss

Auxiliary Documents are given below:

Cargo manifest or packing list

When quantities, weights or contents of the various packing cases in an export

shipment vary, it is usual to prepare a separate list for each case indicating its

contents, weight and measurements.

Certificate of Origin

Certificate of Origin is a document, which indicates the country in which the goods

were produced, is required whenever preferential duties are claimed. Sometime,

consular legalization of the document is necessary. Also, certification of the document

by a Chamber of Commerce is required.

Quality control certificate

While exporting products for which quality control certificate is obligatory, theexporter will have to submit, to the Customs Authorities, a quality control certificate

issued by the appropriate authority.


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Consular Invoice

Some country required consular invoice. Countries that require a consular invoice alsorequire a commercial invoice as additional proof of the details of the export shipment.

Certificate of free sale

This certificate required for pharmaceuticals and certain chemicals entering a numberof countries.

Export Declaration Forms

It is usually necessary for the exporter wishing to ship goods abroad, to fill out a formcalled an Export Declaration. The document is also used for statistical purposes sothat government authorities know exactly what has been exported from the country ineach month and year and to which country

6.4 Registration for the Exporter

In the export policy of Bangladesh any one can not export goods in abroad. To export goods

an exporter needs a valid Export Registration Certificate from the Chief Controller of Import

and Export (CCI&E). Exporters find an Export Registration Certificate (ERC) number which

is incorporate on Export form and papers connected for obtaining Export Registration

Certificate-

National ID card

Memorandum and Article of Association and Certificate of Incorporation in case of

limited company Trade license

Bank Certificate

Assets certificate

Income Tax certificate etc.

6.5 Formalities and procedures of export L/C

The formalities and procedure of export L/Cs are as follows:

Obtaining exports LC:To get export LC form exporter issued by the importer.

Submission of export documents:

Exporter has to submit all necessary documents to the collecting bank after shipment.

Checking of export documents:

After getting the documents banker used to check the documents as per LC terms

Negotiation of export documents:

If the hank accepts the document and pays the value draft to the exporter and forward

the document to issuing bank that is called a negotiating bank If the bank does buy


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Realization of proceeds:

This is the period when the issuing bank has realized the payment.

Reporting to the Bangladesh bank:

As per instruction by Bangladesh Bank the bank has to report to respective

department of Bangladesh bank by mentioning latest payment.

Issue to proceeds realization certificate (PRC):

Bank has to issue precede realization certificate of export LC to the supplier / exporter

for getting cash assistance.

6.6 Export Financing

To meet up the cost of goods to be exported, the exporter may require Bank finance. Besides,he may require finance for go down rent, freight etc. Even after shipment of the goods,exporter may require Bank finance to meet-up his expenditure up o repatriation of the export

proceeds. There are two type of export finance:

6.6.1 Pre-shipment finance

6.6.2 Post -shipment finance

6.6.1 Pre Shipment Finance in Export Trade

Pre Shipment Finance is issued by a financial institution when the seller wants the paymentof the goods before shipment. The main objectives behind pre shipment finance or pre exportfinance are to enable exporter to:

Procure raw materials.

Carry out manufacturing process.

Ship the goods to the buyers.

Meet other financial cost of the business.

Types of Pre Shipment Finance

a) Packing Credit

b) Advance against Cheques/Draft received as Advance Payments

c) Back to back L/C

a) Packing Credit:

Packing Credit is any loan or advance granted or any other credit provided by a bank to an


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shipment, on the basis of letter of credit opened in his favor or in favor of some other person,

by an overseas buyer or a confirmed and irrevocable order for the export of goods from the

producing country or any other evidence of an order for export from that country having been

placed on the exporter or some other person, unless lodgment of export orders or letter of

credit with the bank has been waived.

b) Advance against Cheque/Drafts received as advance payment:

Where exporters receive direct payments from abroad by means of cheques/drafts etc. the

bank may grant export credit at confessional rate to the exporters of goods track record, till

the time of realization of the proceeds of the cheque or draft etc. The Banks however, must

satisfy themselves that the proceeds are against an export order.

C) Back to back L/C:Back-to-back L/C means one credit backs another credit. It is new credit in favor of another

beneficiary. Besides, the normal formalities and requirements (for L/C opening) the

following formalities and documents are also required for opening back-to-back L/C:

1) Master L/C

2) Valid bonded ware house license

3) Quota allocation for quota items

4) ERC in addition to IRC

5) Indemnity

6) No objection from previous banker (if any)

7) Factory inspection certificate

8) BGMEA Membership

Vouchers and accounting treatments are the same normal L/C opening except margin. In this

case, no margin is taken by the bank. After lodgment, maturity date of the import bill is

intimated to foreign bank as per L/C terms.

EEssttaabblliisshhiinnggBBaacckkttooBBaacckkLL//CC

HHoowwwwhhoolleepprroocceesssswwoorrkkssaarreeggiivveennbbeellooww::

IIssssuueeooffoorriiggiinnaallLL//CC::

In documentary credit operations buyer (i.e. the applicant) arranges to establish the (original)

credit through a bank (the issuing bank or the opener) in favour of the seller (the beneficiary).


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IIssssuueeooffBBaacckk--ttoo--BBaacckkLL//CC::

A back-to-back credit is established when the seller-cum-original-beneficiary, after receiving

the notification about the issue of the original credit, arranges for a second, stand-alone credit

to be established in favor of the (actual) supplier or manufacturer of goods or raw materials.

No formal connection between the two L/C:

Please be careful to note that there is no legal or formal connection between the original, L/Cand the Back-to-Back Credit. Each credit stands on its own merit.

Back-to-Back L/C can be opened as a chain:

If there are several middlemen (or any manufacturers who must again procure input materials

from other manufacturers), each may use the credit in his favor as security for the credit that

he has to open in favor of his supplier in the chain of contracts, until first buyer in the chain

has effectively opened a credit in favor of original supplier.

6.6.2 Post Shipment Finance

Post shipment finance is a kind of loan provided by a financial institution to an exporter orseller against a shipment that has already been made. This type of export finance is grantedfrom the date of extending the credit after shipment of the goods to the realization date of theexporter proceeds. Exporters don't wait for the importer to deposit the funds.

Basic Features

The features of post-shipment finance are:

Post-shipment finance is meant to finance export sales receivable after the date ofshipment of goods to the date of realization of exports proceeds. In cases of deemedexports, it is extended to finance receivable against supplies made to designatedagencies.

A post-shipment finance is provided against evidence of shipment of goods orsupplies made to the importer or seller or any other designated agency.

Post -shipment finance can be secured or unsecured. Since the finance is extendedagainst evidence of export shipment and bank obtains the documents of title of goods,the finance is normally self-liquidating.

Post-shipment finance can be of short terms or long term, depending on the payment

terms offered by the exporter to the overseas importer.

In case of cash exports, the maximum period allowed for realization of exports proceeds is

six months from the date of shipment. Concessive rate of interest is available for a highest

period of 180 days, opening from the date of surrender of documents. Usually, the documents

need to be submitted within 21days from the date of shipment.


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Financing for Various Types of Export Buyer's Credit

Post-shipment finance can be provided for three types of export;

Physical exports: Finance is provided to the actual exporter or to the exporter inwhose name the trade documents are transferred.

Deemed export: Finance is provided to the supplier of the goods which aresupplied to the designated agencies.

Capital goods and project exports: Finance is sometimes extended in the name ofoverseas buyer. The disbursal of money is directly made to the domestic exporter.

Types of Post Shipment Finance

The post shipment finance can be classified as:

a) Export Bills purchased/discountedb)

Export Bills negotiatedc) Advance against export bills sent on collection basisd)

Advance against export on consignment basise) Advance against undrawn balance on exportsf) Advance against claims of Duty Drawback

a) Export Bills Purchased/ Discounted

Export bills (Non L/C Bills) is used in terms of sale contract/ order may be discounted or

purchased by the banks. It is used in indisputable international trade transactions and the

proper limit has to be sanctioned to the exporter for purchase of export bill facility.

b) Export Bills Negotiated (Bill under L/C):

The risk of payment is less under the LC, as the issuing bank makes sure the payment. The

risk is further reduced, if a bank guarantees the payments by confirming the LC.

However, this arises two major risk factors for the banks:

i. The risk of nonperformance by the exporter, when he is unable to meet his termsand conditions. In this case, the issuing banks do not honor the letter of credit.

ii. The bank also faces the documentary risk where the issuing bank refuses to honorsits commitment.

c) Advance against Export Bills Sent on Collection Basis:

Bills can only be sent on collection basis, if the bills drawn under LC have some


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anticipating the strengthening of foreign currency. Banks may allow advance against these

collection bills to an exporter with a confessional rates of interest depending upon the transit

period in case of DP Bills.

d) Advance against Export on Consignments Basis:

Bank may choose to finance when the goods are exported on consignment basis at the risk of

the exporter for sale and eventual payment of sale proceeds to him by the consignee

However, in this case bank instructs the overseas bank to deliver the document only against

trust receipt /undertaking to deliver the sale proceeds by specified date, which should be

within the prescribed date.

e) Advance against Undrawn Balance:

It is a very common practice in export to leave small part undrawn for payment after

adjustment due to difference in rates, weight, quality etc. Banks do finance against the

undrawn balance, if undrawn balance is in conformity with the normal level of balance left

undrawn in the particular line of export, subject to a maximum of 10 percent of the export

value.

f) Advance against Claims of Duty Drawback:

Duty Drawback is a type of discount given to the exporter in his own country. This discountis given only, if the in-house cost of production is higher in relation to international price.

This type of financial support helps the exporter to fight successfully in the international

markets. In such a situation, banks grants advances to exporters at lower rate of interest for a

maximum period of 90 days. These are granted only if other types of export finance are also

extended to the exporter by the same bank.


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6.7 Graphical Presentation and Discussion of Export

6.7.1 Export performance of JBL


Achievement from Export

Year 2008 2009 2010

Export 85418 88653 118515


Graph 5: Export performance of JBL

Explanation:The graph shows that the Export performance of JBL from 2008-2010. In this

section TK.3235 million increased from 2008-2009 with growth rate 3.78% and TK.29862

million increased from 2009-2010 with growth rate 33.68%.

0

20000

40000

60000

80000

100000

120000

2008 2009 2010

Export85418 88653 118515

Figurein

million

Export Performance Of JBL from 2008-2010


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6.7.2 Export Performance of JBL, Kawran Bazar Corporate Branch



Year 2008 2009 2010 2011

Target 8.4 12 30 60

Achievement 18.69 26.7 65.74 64


Graph 6: Export Performance of JBL, Kawran Bazar Corporate Branch

Explanation: The graph shows that the amount of achievement against target of Kawran

Bazar Corporate Branch from 2008-2011. In 2008 the achievement was TK.18.69 million

against target TK.8.4 million. In 2009 the achievement was TK.26.7 million against target

TK.12 million. In 2010 the achievement was TK.65.74 million against target TK.30.million

and in 2011 the achievement was TK.64 million against target TK.60 million.

2008 2009 2010 2011

Target 8.4 12 30 60

Achieved 18.69 26.7 65.74 64

0

10

20

30

40

50

60

70

Figureinmillion



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6.7.3 Increase or (Decrease) of Export Percentage (%) of JBL, Kawran Bazar

Corporate Branch.

Increase or (Decrease) of Export Percentage (%) During

Year 2009 2010 2011

Percentage Achieved 43% 146% (-)3%


Graph 7: Export Growth Percentage (%) of JBL, Kawran Bazar Corporate Branch

Explanation: The graph shows the data of export percentage of JBL, Kawran Bazar

Corporate Branch. In 2009, 2010, and 2011 the percentage was respectively 43%, 146%, and

- 3%. But here the percentage in 2011 was lower than the previous years, which is bad for the

branch.

-20%

0%

20%

40%

60%

80%

100%

120%

140%

160%

2009 2010 2011

Percentage Achieved 43% 146% -3%

Increase or (Decrease) in Percentage (%) During 2009-2011


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Chapter 7

Remittance Section


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7.1 Meaning of Remittance

The word Remittance originates from the word remit which means to transmit money. Inbanking terminology the work remittance means transfer of fundone place to another. Whenmoney transferred from one country to another is called Foreign Remittance

7.2 Foreign Remittance

The basic function of this department are outward and inward remittance of foreign exchangefrom one country to another country. In the process of providing this remittance services; itsells and buys foreign currency. The conversion of one currency into another takes place at anagreed rate of exchange in where the banker quotes, one for buying and another for selling. In

such transactions the foreign currencies are like any other commodities offered for sales andpurchase, the cost (convention value) being paid by the buyer in home currency, the legaltender.

7.3 Remittance Services in Janata Bank limited

As Janata Bank limited has a wide network operates 872 branches in national andinternational territory, remittance services are available at all branches and foreignremittances may be sent to any branch by the remitters favoring their beneficiaries.

Janata Bank Limited has correspondent banking relationship with all major banks &

exchange houses located in almost all the cities. Expatriate Bangladeshis may send their hardearned foreign currencies through those banks & exchange houses or may contact anyrenowned banks nearby (where they reside/work) to send their money to their dear ones inBangladesh.

Recently Janata Bank Ltd. has launched its Speedy Foreign Remittance Payment Systemwhich enables beneficiaries to receive their money within shortest possible time. The

beneficiary also gets information of remittance through automated SMS. Its a secured, easy,cost effective and speedy way of remittance for the remitter.

Janata bank Ltd. has signed an agreement with Western Union Network to facilitate wide

range of remittance of the globe. Both the organizations make it possible to receive themoney from about 300,000 locations of 200 countries instantly with prevailing mutualmechanism and workforce.

7.3.1 Janata Bank Ltd deals with foreign remittance activities on behalf other money

transfer company

Janata bank Ltd. has signed an agreement with:

Western Union Network

IME Spot Cash

Placid Express Spot Cash Xpress money etc.


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7.4 Types of Remittance

Followings are the types of remittance:

Figure 8: Types of Remittance

7.4.1 Inward Remittances

The term inward remittances includes not only remittances by TT., MT., Drafts etc. but alsopurchases of bills, purchases of drafts under travelers letter of credit and purchases of

travelers cheques. Foreign currency notes against which payment is made to the beneficiaryalso a part of inward remittances. Thus the following are the Modes of inward remittances:

Modes of Inward Remittance

Demand Draft (DD)

Mail Transfers ( MT)

Telegraphic Transfer (TT)

Pay Order (PO)

Travelers Cheque ( TC)

7.4.1.1 Demand Draft (DD)

This is an instrument through which customers money is remitted to anotherperson/Firm/organization in outstation (outside the clearing house area) form a branch of oneBank to an outstation branch of the same Bank or to a branch of another Bank (with priorarrangement between that Bank with the issuing branch).

7.4.1.2 Mail Transfers (MT)

Mail Transfer is an instrument issued by a remitting bank to the paying bank advising in

writing to make payment of certain amount to specific beneficiary.

Remittanceactivities

InlandRemittance

InwardRemittance

OutwardRemittance

Foreign

Remittance

InwardRemittance

OutwardRemittance


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Figure 9 : Modes of Inward Remittance

7.4.1.3 Telegraphic Transfer (TT)

A Telegraphic Transfer is a method of remittance, which is effected by the banker through a

coded telegram attested by secret cheek signal, on receipt of which, the paying office pay theamount to the payee by crediting his account.

7.4.1.4 Pay Order (PO)

A pay order is a written under, issued by a branch of the Bank, to pay a certain sum of moneyto a specific person or a bank. It may be said as to be a banker's cheque as it is issued by a

bank and payable by itself.

7.4.1.5 Travelers Cheque (TC)It is an instrument issued by the Banks/Companys payable to the purchaser on presentation.

7.4.2 Outward Remittance

Remittance from our country to foreign countries is called outward foreign remittance. But

Outward Foreign Remittance is highly restricted by the Bangladesh Government. Only some

especial branches can send money from Bangladesh to abroad under Bangladesh Banks rolls

& regulation.

In Janata Bank Ltd. following branches are only responsible and involve with outwardforeign remittance activities:

Local Office Dhaka.F i E h B h Bit l M k Dh k

InwardRemittance

DemandDraft (DD)

Mail Transfer(MT)

TelegraphicTransfer (TT)

PaymentOrder (PO)

TravelersCheque


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Mode of outward remittance

Thus the following are the Modes of outward remittances:

Demand Draft (DD)

Mail Tran