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Documente Cultură
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nedtointroduceyouwiththereport. Youwilllearnherethebackground,methodology, rationale, objective, andscope&limitationofthereport.Youwillknowinthissection,howtheresearchisperformedandhowtheyaredescribed.
ChapterContents
BackgroundoftheStudy
Methodology
Rationaleofthestudy
Objectiveofthereport
ReportOrganization
Scope&Limitation
Page 1 of 75
INTRODUCTION
TO THE INTERNSHIP REPORT
(i)
Broad objectives:
The broad objective of the study is to search the different types of foreign operations
of Dhaka Bank Ltd. and the detail process of this.
Specific objectives:
(ii)
To discuss the details business, the process, the process of maintaining this business by
the bank, the risks related to this business and the steps for minimizing risks.
The policies related to business and the compliance with the policies of Bangladesh
Bank.
To do some other tests like regression analysis, trend analysis etc to know the condition
of this type of business over last few years.
To explore the opportunities and competitive advantages that has been ignored by DBL.
1.3 Methodology
1.3.1 Research type:
This is basically an explanatory research because it will try going insight the problem and
trying to understand the problem more clearly.
1.3.2 Data collection method
Primary & Secondary sources of data have been used in the study.
Primary sources of data has been collected from
Page 3 of 75
Daily diary
Practical work exposures from the different desks of the departments of the Branch
covered.
Trend analysis
Comparative analysis
Line graphs
Tables
Page 4 of 75
though to gather.
Besides due to time limitation I cant cover credit department part properly.
The most functions of DBL are manual and lengthy though it is trying to upgrade.
The officials of the organization remain extremely busy throughout the day. So in spite of
their keen interest they did not have enough time to supervise and guide me.
: CONCLUSION
References
CHAPTER - 2
LITERATURE REVIEW
Page 6 of 75
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LITERATURE REVIEW
The History of Foreign Exchange
Page 7 of 75
The Foreign Exchange trading history was started in 1875. Prior to 1875, countries primarily
used gold and silver as a form of international payment. Payment using gold and silver were
hampered by their devaluation according to external factors such as an increase in the discovery
of new deposits, which would lead to a change in supply and demand. This factor would change
the Foreign Exchange trading history forever.
From the infantile stages of foreign exchange during the Middle Ages to WWI, the foreign
exchange markets were relatively stable and without much speculative activity. After WWI, the
foreign exchange markets became very volatile and speculative activity increased tenfold. From
1931 until 1973, the foreign exchange market went through a series of changes. These changes
greatly affected the global economies at the time and speculation in the foreign exchange
markets during these times was little, if any.
The foreign exchange market (fx or forex) as we know it today originated in 1973. However,
money has been around in one form or another since the time of Pharaohs. The Babylonians are
credited with the first use of paper bills and receipts, but Middle Eastern moneychangers were
the first currency traders who exchanged coins from one culture to another. During the middle
ages, the need for another form of currency besides coins emerged as the method of choice.
These paper bills represented transferable third-party payments of funds, making foreign
currency exchange trading much easier for merchants and traders and causing these regional
economies to flourish.
According to Julian Walmsley, author of The Foreign Exchange and Money Markets Guide,
although foreign exchange has existed since before biblical times, a formal global market for
foreign exchange did not develop until the 1800s with cable transfers taking place between
London and New York.
Historically, governments attempted to set exchange rates themselves to improve a country's
trade position. If a country set its exchange rate low relative to others, it could improve the
country's trade position by making its exports more affordable and imports from other countries
less affordable. Such policies led to trade wars as countries struggled to improve their trade
positions.
Page 8 of 75
This section surveys practical contributions on various aspects of foreign exchange scenario in
Bangladesh. Several studies have attempted to analyze the behavior of foreign exchange trade in
Bangladesh.
Zahid Hussain Co-authored with Farria Naeem (2009) analyzed the foreign remittance in
Bangladesh and found that Remittances have emerged as a key driver of economic growth and
poverty reduction in Bangladesh, increasing at an average annual rate of 19 percent in the last 30
years (1979-2008). They also found that number of workers finding employment abroad every
year, oil price, exchange rate and GDP growth are the key determinants of changes in the level of
remittance inflow.
Mohammad Mafizur Rahman (2004) analyzed The Foreign Trade of Bangladesh: Its
Composition, Performance, Trend, and Policy and found that the export earnings are
continuously increasing over the years with increased import payments. Though import
payments are always higher than the export earnings in absolute terms, the percentage of
Bangladeshs export to imports is improving gradually and it is quite impressive. They also
found that the export growth rate of Bangladesh was higher than the export growth rate of the
world and the SAARC countries. The import growth rate of Bangladesh was also higher than that
of the world and the SAARC countries during the 1980s and 1990s. Bangladeshs import share
as percentage of world and SAARC countries imports has also increased over the years.
Monzur Hossain & Mansur Ahmed (October, 2009) published a working paper series named
Exchange Rate Policy under Floating Regime in Bangladesh: An Assessment and Strategic
Policy Options. They identified two issues that may justify intervention in the foreign exchange
market. One is the exchange market pressure and the other is exchange rate pass-through. They
also found a positive link between domestic credit growth (or reserve depletion) and exchange
rate market pressure is observed, indicating that any sterilized intervention would lead to
exchange rate market pressure.
CHAPTER - 3
OVERVIEW OF THE ORGANIZATION: Dhaka
Page 9 of 75
Chapter Hints.......
Chapter Contents
Chapter Hints.......
This section is designed to introduce the Dhaka Bank at a glance. All about the bank is bring here together in a summary form. History, function, management system, network of its Branch, and the services it offered includes this chapter. The prospect of Import-Export Business of total Bank is also summarized here.
Chapter Contents
Management Hierarchy
Branch network
Mission
Motto
Organization Structure
Objective of the DBL
Performance Highlights of the Company -2012
History of the Bank
Vission
Values
Bangladesh owned Bank in the private sector. From the very inception it is the firm
determination of Dhaka Bank Limited to play a vital role in the national economy. It is
determined to bring back the long forgotten taste of banking services and flavors. It wants to
serve each one promptly and with a sense of dedication and dignity.
Dhaka Bank Limited is the leading private sector bank in Bangladesh offering full range of
Personal, Corporate, International Trade, Foreign Exchange, Lease Finance and Capital Market
Services. Dhaka Bank Limited is the preferred choice in banking for friendly and personalized
services, cutting edge technology, tailored solutions for business needs, global reach in trade and
commerce and high yield on investments, assuring Excellence in Banking Services.
A group of highly acclaimed businessmen of the country grouped together to responded to this
need and established Dhaka Bank Limited in the year 1995.
Dhaka Bank Limited was incorporated as a public limited company under the Companies Act.
1994. The Bank started its commercial operation on July 05, 1995 with an authorized capital of
Tk. 1,000 million and paid up capital of Tk. 100 million. The paid up capital of the Bank stood at
Tk 1,934,252,875 as on June 30, 2008. The total equity (capital and reserves) of the Bank as on
June 30, 2008 stood at Tk 3,424,609,016.
Bank efforts to provide Excellence in banking services, the Bank has launched Online Banking
service, joined a countrywide shared ATM network and has introduced a co-branded credit card.
A process is also underway to provide e-business facility to the bank's clientele through Online
and Home banking solution.
Banks are not only profit oriented commercial institution but have a public base and social
commitment. Admitting this true DBL is going on with its diversified banking activities. DBL
introduced monthly Savings Scheme, special Deposit Scheme, and Consumers Credit Scheme
and savings Insurance scheme etc. to combine the people of lower and middle income group.
3.1 Mission
Page 11 of 75
To be the premier financial institution in the country providing high quality products and services
backed by latest technology and a team of highly motivated personnel to deliver Excellence in
Banking.
3.2 Vision
Dhaka Bank draws their inspiration from the distant stars. Its team is committed to assure a
standard that makes every banking transaction a pleasurable experience. Their endeavor is to
offer you razor sharp sparkle through accuracy, reliability, timely delivery, cutting edge
technology, and tailored solution for business needs, global reach in trade and commerce and
high yield on investments.
3.3 Values
Customer Focus
Integrity
Teamwork
Quality
Responsible Citizenship
3.4 Motto
The bank will be a confluence of the following three interests:
Of the bank
: Profit maximization
: Maximization of welfare
Page 12 of 75
Page 13 of 75
12.
improved information technology, so that they get encouraged to continue and feel proud
of banking with DBL.
The Bank offers the full range of banking and investment services for personal and
corporate customers, backed by the latest technology and a team of highly
motivated officers and staff. DBL has tailored a complete solution to its export
driven customers with a countrywide network of 15 Authorized Dealer (AD)
Branches, 1 offshore banking unit and other 56 Non - AD branches.
Page 14 of 75
Page 15 of 75
The whole operation of DBL has been divided into different divisions for the optimal
performance of the workforce. The roles of each division are well defined. The divisions have
got interrelations between them of DHAKA BANK LTD are:
Credit Division
Operation Division
Central Accounts Division
Information Technology Division
Retail Banking Division
Investment Division
Human Resources Division
Audit & Risk Management Division
Dhaka Bank Training Institute
Page 17 of 75
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CHAPTER 4
FOREIGN EXCHANGE OPERATION OF
Page 18 of 75
ChapterHints.......
Chaptercontents
ChapterHints.......
ThissectionisdesignedtoshowtheforeignexchangeoperationofNBL.ThisisallabouttheForeignexchangeperformance,partiesandaccountsrelatedtotheforeignexchange,L/Coperationprocess,etc.
Chaptercontents
OperationalFlowofExport&Import
ActivitiesofForeignExchangeSection
ForeignExchangeOperationsofDBL
DifferentAccountsRelatedtoForeignExchangeTransaction
DocumentsinForeignExchangeBusiness
StepsinL/Copening
DBL
Foreign exchange is an important department of Dhaka Bank Limited, which deals with import,
export and foreign remittances. Foreign exchange department is international department of the
bank. It deals globally and facilitates international trade through its various modes of services. It
bridges between importers and exporters. Bangladesh Bank issues license to scheduled banks to
deal with foreign exchange. These banks are known as Authorized Dealers (AD). If the branch is
AD in foreign exchange market, it can remit foreign exchange from local country to foreign
country. This department mainly deals with foreign currency. This is why this department is
called foreign exchange department.
Page 19 of 75
Some national and international laws regulate functions of this department. Among these,
Foreign Exchange Act, 1947 is for dealing with foreign exchange business, and Import and
Export Control Act, 1950 is for Documentary Credits. Governments Import and Export policy is
another important factor for import and export operation of banks.
13 branches among 75 of DBL deal with Export and Import.
Year
Export
Import
Foreign
remittance
2,008
39,038
65,737
2,009
33,305
46,160
2,010
36,924
69,606
2,011
46,247
71,377
2,012
48,928
76,648
11,834
9,786
11,097
13,201
15,840
The banks performance in this area was satisfactory. Total import, export, and remittance
business transacted were Tk. 76,648 million, Tk. 48,928 million and Tk. 15,840
million respectively during 2012. The growth rate of the import business was 7.38% and
the main items of import were industrial machineries, raw materials, commodities, and
Page 20 of 75
other consumer products. The growth rate of the export business was 5.80% and the items
of export were RMG, Shrimp, jute & jute goods leather, tobacco, ceramic tiles, tempered
quoted glass, bone crust, betel-nut etc. The growth rate of the remittance business was
20% and remittances were mainly for household uses from the NRB ( Non Resident
Bangladeshis) living and working in various parts of the world through various exchange
house and Western Union. The growth of export gave the bank an edge in managing
required foreign currency for meeting L/C commitments. The import and export business
were contributed by their corporate clients.
Import Policy
Export Policy
Guidelines for foreign exchange transaction of Bangladesh Bank (Vol.1 &2).
Circular issued by Bangladesh Bank
Circular issued by NBR
Circular issued by CCI & E
UCPDC (ICC publication no.600) & ISBP, URC, URR.
Public Notice
Among the regulatory bodies, Chief Controller of Import and Export, Bangladesh Bank play
major role in monitoring and ensuring compliance of various regulations
Page 21 of 75
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Credit. The Uniform Customs & Practices for Documentary Credit (UCPDC) published by
international Chamber of Commerce (1993) Revision; Publication No. 500 defines
Documentary Credit.
Bill of Lading:
In international trade shipping occupies an important place as a mode of transport. The document
evidencing the carriage of goods by sea is the bill of lading. A bill of lading is a document issued
by the shipping company or its agent, acknowledging the receipt of goods for carriage which are
deliverable to the consignee or his assignee in the same condition as they were received.
The Details on the bill of Leading should include:
A description of the goods in general terms not inconsistent with in the credit.
The names of shipper, consignee, and name and address of notifying party.
The number of original bills of lading issued and the date of issuance.
Commercial Invoice:
A commercial invoice is a document containing full description of the goods shipped, its quality,
quantity, weight, unit price and total price, terms of sale, packing specifications, shipping marks,
LCAF No, LC No, exporters Registration number, B/L No, Name of the vessel etc. It is prepared
Page 23 of 75
and signed by the exporter and addressed to the importer. If shipment is made under LC, the
above descriptions must confirm to those required by the LC, Commercial invoice is normally
made out in set of five copies all of which must be signed by the exporter.
Certificate of Origin:
A Certificate of origin declares the place of actual manufacturer or growth of the goods. A
country may place restrictions on import from certain countries or preferential treatment may
accord in tariff for, imports from certain countries. For both these purposes, certificate of origin
becomes necessary. Usually such certificates are issued by the Chambers of Commerce or Trade
Associations in the exporting countries.
Inspection Certificate:
This is usually issued by an independent inspection company located in the exporting country
certifying or describing the quality, specification or other aspects of the goods, as called for in
the contract and the L/C.
Packing List:
The list would contain the details of goods contained in individual packages. This helps in
identifying the contents of specified packages and thus may facilitate assessment by the customs.
Insurance Certificate:
The insurance certificate documents must Be that specified in the credit.
of the goods.
Unless otherwise specified in the credit.
Be a document issued and / or signed by an insurance company or its agent, or by
underwriters.
Be dated on or before the date of the date of shipment as evidenced by the shipping
documents.
Be for an amount at least equal to the CIF value of the goods and in the currency of
Page 24 of 75
credit.
Import registration Certificates (IRC)
To import, a person should be competent to be an importer according to import and Export Act,
1910. Chief Controller of the Import and Export provides the registration (IRC) to importer.
Applicant has to submit IRC (Inventors Registration Certificate). It is a certificate being renewed
every year. This certificate is necessary if the contract is made between the buyers and the agents
of the sellers. IRC is of two types COM and IND. COM is given for commerce purpose and
IND is given for industrial purpose.
Bill of exchange:
It is an important instrument used primarily to finance foreign trade. It is an unconditional order
in writing signed by the person giving it requiring the receiver to pay certain sum of money to its
holders to a third person. The sum may be payable on demand or at a future time specified in the
bill. According to the section 01, Negotiable Instruments (NI) Act-1881, A bill of exchange is
an instrument in writing containing an unconditional order signed by the maker, directing a
certain person to pay [on demand or at fixed or 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.
Letter of Indent:
Many sellers have their agent in sellers country. If the contract of buying is made between the
buyers and the agent of the sellers then letter of indent is required.
Pro forma Invoice or Indenters Certificate:
An export invoice issued by a prospective exporter to a prospective buyer for such purposes as
obtaining import and foreign exchange licenses.
Letter of credit authorization form (LCAF)
After obtains IRC persons have to secure a Letter of Credit Authorization (LCA) form
Bangladesh Bank. And then a person become a qualified importer. He is the person who requests
or instructs the opening bank to open an L/C he is also opener or applicant of the credit.
Page 25 of 75
Forwarding
Forwarding is the letter given by the advising bank to the issuing bank. Several copies are sent to
the issuing bank. All copies including original should be kept in the bank.
Tax Identification Number or TIN
Recently, there has been made a provision to give a certificate named TIN (Tax Payers
Identification Number). Taxation department issues this certificate.
Page 26 of 75
It is the most important and commonly used in connection with foreign trade. Letter of Credit is
an undertaking by a banker of the importer to the exporter, to the effect that the amount of the
L/C will be duly paid. The banker on behalf of the importer issues the L/C in favor of the
exporter (beneficiary) and forwards the same to the exporter to the effect that the bill drawn by
him shall be duly accepted and paid. It creates confidence in the mind of the exporter so far as
payment of the bill is concerned. It is also facilitate the exporter to get the benefit of
discounting the bill before the date lf maturity.
Issuing Bank: It is the buyer's bank. The bank that agrees to the request of the
applicant and issues its letter of credit in terms of the instructions of the applicant.
Advising Bank: It is the seller's or beneficiary's Bank. The bank usually situated in the
seller's or beneficiary's country (most of the time with which there exists
corresponding relationship with the buyer or issuing bank), request to advice the credit
to the beneficiary.
Confirming Bank: Sometimes issuing bank request advising bank or another bank to
add confirmation to the letter of credit. When that bank do this then such bank is called
Advising Bank
()
Reimbursing
Bank
()
Negotiating Bank
()
Page 27 of 75
Negotiating Bank: The bank, which makes payment to the exporter after scrutiny, the
documents submitted by the exporter with the original letter of credit then it is called
Negotiating Bank.
Nominated Bank: The bank that is nominated by the issuing bank to pay (nominated
bank is known as paying bank) or to accept drafts (nominated bank is known as
accepting bank) or to negotiate (nominated bank is known as negotiating bank).
Usually the advising bank is request & authorized to be the nominated bank unless the
Page 28 of 75
without Recourse.
Government letter of credit: That letter of credits, which are done by the Defense
Revolving letter of credit: When the L.C. is used again & again in same amount for a
letter of credit.
Clean or open letter of credit: The letter of credit, which provides assurance of payment
bill of exchange without submission, of any export documents that is called clean letter of
credit.
Confirmed letter of credit: When the Irrevocable letter of credit issued by issuing bank
to the exporter as assurance of the L.C., then as per advice or documents the authorized
representative or representative bank's provide assurance or payment guarantee that is
The generalized process of L/C issuing in Dhaka Bank is explained below. For a business
customer approached for the first time, the process will start with opening an account with the
bank.
Step 1: Application in companys letterhead pad
First of all, the person shall have to submit an application written or printed in the
companys letterhead pad. In the application he/she will have to mention the name of the
products to be imported, margin and so on. The applicant shall have to apply for the
required forms of the bank.
Step 2: Discussion between Dhaka Bank and the party:
After receiving the application form, the Bank pays attention to the issues mentioned
below.
The products that are going to be imported are considered. Because there are
restrictions by the government on some products.
The quoted rates are specially analyzed as there also some restrictions by the
government.
After checking the documents and L/C No. is given. Generally the officer who checks the
documents puts the L/C No.
Step 6: Preparing offering sheet:
The offering sheet is prepared by the dealing officer. Usually the officer who checks the
documents prepares the offering sheet.
Step 7: Signing offering sheet:
The offering sheet is then signed by the officer having the authority to open the L/C of
the specified amount. If it is within the maximum limit of the amount (for which the L/C
is applied) of the SAVP or branch manager, he can sign it. But if it is beyond his/her limit
proposal must be sent to the head office, either for case-to-case sanction or for credit
limit. Generally, in Dhaka Bank, SAVP or branch managers are empowered to open an
L/C without communicating with the head office, if the L/C amount is within his / her
limit.
Step 8: Typing the L/C:
After the approval of opening L/C is given, the L/C is typed in a structured format.
Step 9: Checking the L/C:
A final check is done to find out any discrepancies after the typing is completed. This is
done by the dealing officer who is generally in charge of the whole process.
Step 10: Crediting the account of the customer:
On the basis of credit arrangement with the bank of import financing, the customers
account is affected with certain credit.
Step 11: Dispatching L/C:
At the final stage, the L/C is dispatched through postage mail or telex or SWIFT or so
forth.
Page 31 of 75
Although this is the generalized process for issuing L/C, for the speed of the process sometimes
the typing and checking of documents are done before the offering sheet is signed. Then after
signing the L/C it is dispatched.
The dispatch of the L/C documents is as follows:
First & second copy - Advising Bank, which in turn forward the original copy to the
exporter.
Third copy - Reimbursing Bank.
Fourth & Fifth copyImporter
Sixth copyC.C.I. & E.
Seventh to Ninth copyLetter of credit opening bank's copy.
Page 32 of 75
Checking Documents
Dispatching L/C
Proposal letter (in proposal letter it must be mentioned that - price of goods, CCI & E
registration, pass book number, LCA form dully filled in signed & sealed, Import
Page 33 of 75
LCA (Letter of Credit Authorization) form for industrial consumer - four copies.
Name of the party, Sanctioned limit, Facility applied for letter of credit (amount &
previous outstanding).
Forward exchange
Foreign bills purchased.
Guarantees.
Trust receipts.
Clean packing credits.
Advance against imported goods.
Goods particulars
Import license
Margin already at credit.
Margin to be obtained.
Guaranteed by.
Balance of current account.
Average Balance of bank account.
Net worth of the firm.
Customs duty.
Country of export.
Other conditions.
Issuing
Advising
Amendment(if necessary)
Presentation
Settlement
Page 36 of 75
The seller being satisfied with the terms and conditions of the credit proceeds to dispatch the
required goods to the buyer and after that, has to present the documents evidencing dispatching
of goods to the negotiating bank on or before the stipulated expiry date of the credit. After
receiving all documents, the negotiating bank then checks the documents against the credit. If the
documents are found in order, the bank will pay, accept or negotiate to the issuing bank. The
issuing bank also checks the documents and if they are found as per credit requirements, either
effects payment, or reimburses in the pre-agreed manner.
Settlement
Settlement means fulfilling the commitment of issuing bank in regard to effecting payment
subject to satisfying the credit terms fully. This settlement may be done under three separate
arrangements as stipulated in the credit, these are:
Settlement by payment
Here the seller presents the document to the paying bank and the bank then scrutinizes the
documents, if satisfied the paying bank makes payment to the beneficiary and in case this bank is
other than the issuing bank, then send the documents to the issuing bank. If the issuing bank is
satisfied with the requirements, payment is obtained by the paying bank from the issuing bank.
Settlement by Acceptance
Under this arrangement, the seller submits the documents evidencing the shipment to the
accepting bank accompanied by the draft drown on the bank at the specified tenor. After being
satisfied with the documents, the bank accepts the documents and the draft and if it is a bank
other than the issuing bank, then sends 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 procedure starts with the submission of document by the seller to the negotiating
bank accompanied by a draft drown on the buyer or any other drawee, at` sight or at a tenor, as
specified in the credit. After scrutinizing that the documents meet the credit requirements, the
bank may negotiate the draft, this bank, if than the issuing bank, and then send the documents
and the draft to the issuing bank. As` usual, reimbursement will be obtained in the pre-agreed
manner.
Page 37 of 75
15
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CHAPTER 5
L/C OPERATION: EXPORT
Page 40 of 75
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National Committee for Export: Headed by the Prime Minister and comprising
Ministers of Foreign Affairs, Finance, Commerce, Industries, Planning, Jute and Textile.
The committee will review the export situation and provide necessary direction and
resolved problems.
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Substantive Document
Auxiliary Documents
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Pre-shipment credit
Post-shipment credit
Under this arrangement, a credit is sanctioned against hypothecation of the raw materials or
finished goods intended for export. Such facility is allowed to the first class exporters.
As the bank has got no security in this case, except charge documents and lien on exports L/C
or contract, bank normally insists on the exporter in furnishing collateral security. The letter of
hypothecation creates a charge against merchandise in favor of the bank. But neither are the
ownership nor the possession is passed to it.
b. Export cash Credit (Pledge)
In this case, limit is sanctioned against the pledge of the goods meant for export. The borrower
signs a stamped letter of pledge surrendering physical possession of the goods under the banks
effective control. The ownership, however, remains with the borrower. The pledge creates an
implied lien in favor of the bank. In the event of failure of the borrower to liquidate the debt, the
bank can sell the goods after giving due notice to the exporter. Normally no collateral security is
obtained in case of pledge.
c. Export cash credit against trust receipt
In this case, credit limit is sanctioned against trust receipt (TR). Here also unlike pledge, the
Exportable goods remain in the custody of the exporter. He is required to execute a stamped
export trust receipt in favor of the bank, he holds wherein a declaration is made that goods
purchased with financial assistance of bank in trust for the bank. This type of credit is granted
when the exporter wants to utilize the credit for processing, packing and rendering the goods in
exportable condition and when it seems that exportable goods cannot be taken into banks
custody. This facility is allowed only to the first class party and collateral security is generally
obtained in this case.
d. Packing Credit
Packing Credit is any loan or advance granted or any other credit provided by a bank to an
exporter for financing the purchase, processing, manufacturing or packing of goods prior to
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
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placed on the exporter or some other person, unless lodgment of export orders or letter of credit
with the bank has been waived.
e. Back to Back L/C
Bangladesh is a developing country. After receiving order from the importer, very frequently
exporters face problems of scarcity of raw material, because some raw materials are not available
at domestic market. These have to be collected from abroad. In that case, exporter gives lien of
export L/C to bank as security and opens an L/C against it for importing raw materials. This L/C
is called Back To Back L/C. Sometimes there is provision in the export L/C that the importer
can use the certain portion of the export L/C amount for importing accessories that are necessary
for the making of the product. Only in that case, BTB is opened.
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:
Master L/C
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This type of credit refers to the credit facilities extended to the exporters by the banks after
shipment of the goods against export documents. Necessity for such credit arises as the exporter
cannot afford to wait for a long time for without paying manufacturers/suppliers. Before
extending such credit, it is necessary on the part of banks to look into carefully the financial
soundness of exporters and buyers as well as other relevant documents connected with the export
in accordance with the rules and regulations in force.
Types of Post Shipment Finance
Advance against claims of Duty Drawback. Banks in our country extend post shipment credit to
the exporters through:
a
The exporter presents the relative documents to the negotiating bank after the shipment of the
goods. A slight deviation of the documents from those specified in the L/C may arise an excuse
to the issuing bank to refuse the reimbursement of the payment already made by the negotiating
bank. So the negotiating bank must be careful, prompt, systematic and indifferent while
scrutinizing the documents relating to the export.
b Foreign Documentary Bill Purchase (FDBP)
Sometimes the client submits the bill of export to bank for collection and payment of the BTB
L/C. In that case, bank purchases the bill and collects the money from the exporter. DBL
subtracts the amount of bill from BTB and gives the rest amount to the client in cash or by
crediting his account or by the pay order.
c
Exporter can collect bill through negotiating banks on the basis of collection. Exporter in this
case will submit all the documents to the negotiating bank for collection of bills from inspector.
The exporter will get only when the issuing bank gives payment. In this connection bank will
scrutinize all the documents as per terms and conditions mentioned in L/C.
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For proceed realized first DBL collect advices from their head office. After getting advice from
head office, to the effect that the proceeds are credited to Nostro A/C, the fund is realized from
H.O. A/C and all the outstanding liabilities including PC, BB LC, and FDBP etc are adjusted. If
the maturity date of the BB LC is on a later period the amount is kept in foreign Bill Proceeds
Awaiting foe Remittance A/C.
Contingency Fund should also be build up and party may keep some of the proceeds to retention
quota A/C. Then the rest amount is credited to exporters A/C and the file is closed.
DBL maintains a different register khata for this purpose. The calculation of foreign bills given
belowBill Value Realized Value Back to Back L/C amount Other charges (Courier bill Tax
Buying house commission House building loan)
Bill Value The total amount if export is called Bill value.
Realized Value After deduction of all foreign charges.
Back to Back L/C amount The amount which exporter already used for bring raw materials
from abroad.
Courier bill To send documents DBL uses DHL courier.
Tax A certain percentage of tax deduct of the bill value. DBL cut .25% for tax.
Tax = (Bill Value * .25%)
Buying house commission Sometimes need to gives commission to the buying house. Buying
house commission varies party to party. More or less it varies 2% to 8%.
Buying house commission = (Realized value*2.5%)
House building loan Some exporter may have House building loan. So when export bill come
DBL deduct this loan amount from that bills. House building loan also varies party to party.
Suppose House building loan is 5%.
House building loan = (Bill Value*5%)
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National ID card
Memorandum and Article of Association and Certificate of Incorporation in case of
c
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limited company
Trade license
Bank Certificate
Assets certificate
Income Tax certificate etc.
The Export Registration Certificate has to renew every year. The renewal fee given belowExport less than $5000000
TK.3000
Export more than $5000000
TK.5000
(5.7.2)- Securing the Order:
After getting ERC Certificate the exporter may proceed to secure the export order. He can do this
by contacting the buyers directly or through agent.
In this purpose the exporter may get help from:
Page 50 of 75
a. Liaison Office.
b. Buyers local agent.
c. Export Promotion organization.
d. Bangladesh mission abroad.
e. Chamber of Commerce (Local & Foreign)
f. Trade fair etc.
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G.S.P. Certificate
bank.
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
After scrutinizes all the documents. If the documents are clean, Dhaka Bank purchases the
documents on the banker customer relationship. This is known as Foreign Documentary Bill
purchases (FDBP).
Export Procedure at a Glance
Exporter: obtaining Export Registration Certificate (ERC) from CCI & E
Exporter: Securing export order from buyer or through agent,
receiving L/C from buyer's bank through an advising bank in
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Negotiate documents
CHAPTER 6
L/C OPERATION: IMPORT
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Chapter
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Chapter contents
Import financingmechanism
Conditions for commodity Import
Types of Import
Meaningof Import
Different means of Payment
Import procedure
Commercial Import:
Importer does commercial import only for trading purpose. These products are finished goods.
Such as rice, wheat, soybean oil etc.
2
Industrial import:
Importer does industrial import for industrial use only. These products are raw materials and
capital machinery. Such as; raw cotton, Crude oil etc.
No goods be imported from Israel or produced in Israel and transportation by the Israeli
flag carrying ships is prohibited (also from UN sanctioned countries Serbia and
Montenegro)
Goods must be imported through Bangladesh aid foreign shipping lines can be used. For
individual importers maximum 20 ton and for group importers maximum 100 ton is
allowed to be transported through foreign ships, In other cases, if foreign ship is required,
the Certificate of Waiver must be taken from Directorate of Sea Transportation. General
waiver if Bangladeshi vessels have no route in those ports. If within 7days Bangladeshi
vessels would not be available, then certificate of waiver within 24 hours (otherwise
5
6
countries.
Import must be made at highest competitive price.
Importers are bound to submit import-related documents at any time to Chief Controller
of import and Export if required.
Radioactivity certificate is compulsory for the import of food items (except Cigarettes, Cigarette
paper, pipe tobacco, wine, spices, drugs).
The importer after paying all dues receives the documents from the L/C issuing
bank and then releases the importer goods from the port authority.
Banker: LCA form, application agreement for confirmed L/C, Check sanctioning,
approval, Credibility of Importer & supplier, IPO, HS code, ascertain duty etc.
Opening L/C: creating contra liability by taking margin
Dispatch or transmit the L/C to the beneficiary through banks correspondent in the
beneficiarys country
Receiving import documents from collecting/ negotiating bank.
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Is discrepancies agreed?
Inform the opener to take the delivery of documents for realese of goods.
Importer or opener pays the further margin to the bank.
Valid IRC
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Cash in advance: Importer pays full, partial or progressive payment by a foreign DD, MT
or TT. After receiving payment, exporter will send the goods and the transport receipt to
the importer. Importer will take delivery of the goods from the transport company.
Open Account: Exporter ships the goods and sends transport receipt to the importer.
Importer will take delivery of the goods and makes payment by foreign DD, MT, or TT at
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Advance against a Trust Receipt obtained from the Customers are allowed to only first
class tested parties when the documents covering an import shipment or other goods
pledged to the Bank as security are given without payment. However, for such advances
prior permission/sanction from Head Office must be obtained.
The customer holds the goods or their sale-proceeds in trust for the Bank, till such time,
the loan allowed against the Trust Receipts is fully paid off.
The Trust Receipt is a document that creates the Bankers lien on the goods and
practically amounts to hypothecation of the proceeds of sale in discharge of the lien.
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Upon acceptance of drafts documents may be date delivered to the drawee after obtaining Trust
Receipt (Banks format). The maturity date should be communicated to the collecting bank after
noting the due date dun the due date diary (Register).
Noting and protesting
If the acceptance of the bill at the time of the delivery of documents or its payment on the due
date is not forthcoming , make immediate arrangements to get the bills noted and protested
through a Notary Public for non acceptance and/o non-payment. However, payment of the bill
may be made creating loan in the name of the party after obtaining approval from the Head
Office.
On receipt of payment / replenishment of funds from the paying authority, Tasted Telex may be
sent to whom the account of the respective currency is maintained by the Head Office, after
realizing necessary charges as per prescribed rates of the Bank with intimation to the collecting
bank/ negotiating bank.
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CHAPTER 7
FOREIGN REMITTANCE
Page 62 of 75
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Page 63 of 75
initial deposit.
Nominee can operate the account
Interest is paid on F.C. A/C
Balance in F.C. A/C can be utilized for import of goods
Balance available in the F.C. account may wholly or partially be sent abroad.
Foreign currency brought in by Wage Earners can be deposited in the F.C. A/C
Wage earners Development Bond in Taka can be purchased from the balance of
F.C. A/C
Non-Resident Foreign Currency A/C (NFCD A/C) can also be opened by Wage
Earners.
F.C. A/C & NFCD A/C may be maintained as long as the account holder
desires.
These accounts can be opened from abroad on submission of required papers duly attested by our
Embassy/ Branch/ Representative office abroad.
Page 65 of 75
CHAPTER 8
ANALYSIS
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Page 66 of 75
Page 67 of 75
Page 68 of 75
CHAPTER 9
FINDINGS AND RECOMMENDATION
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Page 69 of 75
9.0 Findings
L/C income is not satisfactory to total income.
Back To Back L/C income increased in a decreasing rate.
Foreign Remittance (Inward) through instant payment was higher than through banking
channel.
Increase in Foreign Remittance was satisfactory over the years.
Contribution of foreign Remittance through DBL was very poor to the total foreign
remittance of Bangladesh.
Import and Export trend was downward from 2008 to 2009 but upward in 2010.
Foreign Remittance trend was downward from 2008 to 2009.
There exists positive relation among Import and No. of Branches, No. of employees, and
Total expense.
There exists positive relation among Export and, No. of employees, and Total expense
but negative relation with No. of Branches because export oriented branch did not
increase with the increase of No. of branches.
There exists positive relation among Foreign Remittance and No. of Branches, No. of
employees, and Total expense.
Modern technical equipment such as computer is not sufficient in foreign exchange
department. As a result the exchange process makes delay and its also complicated.
DBL has a very good pool of human resource i.e. Foreign Exchange Officers.
There is no Reengineering Department for quicker customer service and implementation
of newer products; moreover they have no customer care which helps the customer in
case of any product or services.
In case of opening an account some big parties are come to open accounts in reference
with the high officials of the bank. They do not submit all papers that required to open
an account and in future they do not feel any urge to submit those papers, but already
they become accounts holders. I think in this case the authority is violating the rule.
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The bank provides the loans aiming at different clusters like in Belkuchi the weaving
community, in Ashulia the shops at the Markets, In Aminbazar and Joypara the boat
making business community. The bank fixed different strategy to finance a specific
business community in a cluster around the branches.
At Dhaka most of the branches are corporate customer oriented and there are no booths
in the city. So marketing and expanding the SME loan in the city area are very difficult.
9.1 Recommendations
Export oriented branch should be increase while increasing the No. of branch to
maximize the export profit.
Banking is a service-oriented marketing. Its business profit depends on its service
quality. Thats why the authority always should be aware about their service quality.
Facilities like GSP (General System of Preference), EDF (Export Development Fund) etc.
should increased to encourage the exporter to increase export.
The exporters should be given 90 percent of the L/C amount from the bank under
irrevocable letter of credit or confirmed contract.
For smoothly executing the foreign trade transaction no. of employees in foreign
exchange department should be increase. Since the employees are limited they cannot
pay much attention to all of its prospective clients. Especially the foreign department
people should get training facilities regarding their assign jobs.
Every fifteen days or thirty days after every desk especially foreign desk must be
monitored by specialist people for either their having any problem or not. Or there must
be a discussion session for every department. There must be an interactive discussion
period for every month.
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Maintain an effective communication with the foreign importer banks so the matter of
payment delay might not happen.
The more the local bank communicates with the foreign bank the more reliability;
trustiness would grow up between the local and foreign banks. In that connection matter
of payment will not delay.
To attract the foreign buyers we have to be very careful regarding the quality of the
goods, we have to set an international standard and the bank can do that more fruitfully.
Bank must assure the importer that goods must be international standard.
Need to take AD license for all the branches. Then the branches can do easily their entire
processing for the L/C.
The bank has a provision for internship program, but it is not well organized. Although
the officials are very careful and cooperative with the interns, the authority should be
more structured. If they can properly make them trained it will be very fruitful to recruit
them. Because they learn overall banking in the internship period, so in the beginning of
the job they can work as experienced persons.
The Brochures of the Products and Services of the Bank can be mailed or Circulated by
the Internees to the Potential Customers and Internees can give brief Idea to the
Customers about the Products and Services of Dhaka Bank Limited (DBL).
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CHAPTER 10
CONCLUSION
C h a p t e r H in t s .......
C h a p te r C o n te n ts
C T h i a s ps e t c e t i o r n H i s i n d e t s s i g . n . . e . d . . t . o g i v e t h e c o C n h c o l a u n s p i c o t l n e u o r s f C t i h o e n r e t p e o n r t t . s
Page 73 of 75
Conclusion
L/C is a mode of financing in foreign trade acts as a pre-import financing tool for the importer
and a pre-shipment financing tool for the exporter. Like all other commercial banks, L/C
issuance is a very important function that Dhaka Banks offers. Presently the bank has been
functioning with a network of total 75 branches. 13 branches among 75 of DBL deal with Export
and Import. The most widely used L/C in all braches is irrevocable documentary L/C and the
highest number of L/C opened is for import especially for RMG sector. Opening charge for L/C
processing constitutes highest portion of Dhaka Banks income from L/C. There is much scope
for Dhaka Bank to improve its current L/C processing system to make it more efficient.
The Dhaka Bank always tries to increase its foreign exchange performance. As the bank is
located in commercial area it is a great opportunity for the bank to attract customers. Though it
has some problem with its foreign exchange department, it is always trying to accelerate its
foreign trade. The 18 years success story though helped Dhaka Bank to attain a leading role but
to remain unrivalled among new generation banks, the bank must face new challenges.
In recent years of banking business, Dhaka Bank Limited as a leading bank of Bangladesh, DBL
contributes in the business with promising future and has shown better performance comparing
with other first generation banks.
Overall, the Dhaka Bank must make a positive attempt to be more outward looking in their goals
and aware of what is happening. They must also emphasize on the domestic scenario more
closely and analyze any certain trends and strategies of their competitors. The bank must accept
any failures and think of them as an objective to pursue future goals instead of blaming such
failures on other factors. We expect the Dhaka Bank Limited may hold its prospect in future and
can contribute a vital role in the socio-economic prospective.
Page 74 of 75
References
Rose, Peter S., Commercial Bank Management, New York, Irwin McGrew-Hill, Third
edition, 1996
A Report on practical orientation in Dhaka Bank Limited.
By- Md. Ashraful Islam
Annual report of DHAKA Bank
Website of DHAKA Bank Ltd. - www.Dhakabank.com
Website of Bangladesh Bank. www.Bangladesh-bank.org
Dhaka Bank Limited (DBL)s Brochures, Leaflets and Operational Manual
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