Foreign Exchange Department of Mercantile Bank Limited

 EXECUTIVE SUMMARY

The report “Operational Aspect of Foreign Exchange Department of Mercantile Bank Limited” unwraps with the purpose of the report and the method used to prepare the report.

After the introduction an overview of the foreign exchange is given where it is explained how it works, significant of the study, scope & objectives, mathodology ,limitations and explanation of foreign exchange operation of Mercantile Bank Limited is identified and the details of their operation is also discussed.

Step by step analysis is done on Operational Aspect of Foreign Exchange Department of Mercantile Bank Limited.

Finally the report has been concluded analyzing the contribution and future plan about Foreign Exchange Department of Mercantile Bank Limited.

Origin of the Report

As a part of the internship Program of BBA course requirement, I was assigned to do my internship in Mercantile Bank Limited for the period of three months starting from June 01, 2008 to August 31, 2008 as an intern where I was assigned in Mercantile Bank Limited, Mirpur Branch, Dhaka. My project is on the foreign Exchange operations of Mercantile Bank Limited, Mirpur Branch.

Background of the Report:

Mercantile Bank Ltd. (MBL) is a specialized financial institution that performs most of the standard banking services and investment activities on the basis not only profit sharing but also social partnership. This study attempts to analyze the nature of modern banking activities and performance of MBL. All through the internship program, close observation was made on different banking activities of MBL. Its performance was reviewed and analyzed through the annual reports, and internal records of the bank.

Significance of the report

The prime reason of this study is to become familiar with the realistic business world and to attain practical knowledge about the banking and corporate world. We all know that there is no alternative of practical knowledge which is more beneficial than theoretical aspects.

Scope of the Report:

During my internship period l came close to the different functional departments of the bank and was introduced with the modern banking activities carried on different divisions such as cash, remittance, export, import, foreign exchange, credit, foreign trade, and general accounts. This study covers the pieces of jobs done in these sections. It also highlights:

• An Overview on foreign exchange operations of MBL
• Financial Performance of the Bank
• Export and Import Performance.

• Services offered by the Bank
• The origin and social activities of the bank. Etc.

The study focuses on the foreign exchange operations of Mercantile Bank Ltd. The world economy is opening up and hence the foreign exchange part of the banking system is gaining importance over other functions. This report has the details of the procedures of the foreign exchange department of MBL along with that, a relevant stream of discussion has been made on the theory and policy issues relating to foreign exchange.

For gathering experience on foreign Exchange system, my schedule time was divided in various departments, such as:

In my report I have tried at my level best to describe Foreign Exchange operations elaborately and the rest division briefly.

 Objective of the Report:

The primary purpose of writing this report is to fulfill the internship requirement of BBA program and the collateral purpose is of the study is to analyze the general banking activities, loan & advance procedure and performance of MBL. The growth of the bank has also been interpreted and some recommendations have been made. However, the specific objectives of the study are as follows:

The Broad objective:

The Primary objective of preparing this report is ——–

(a) To attain practical knowledge on the foreign exchange operations performed by MBL.

(b) To represents the general operations of foreign exchange department in efficient way.

(c) In another sense, the prime objective is to gain practical knowledge on Foreign exchange operations and overall banking system which assist us to compare the theoretical and practical aspects as a whole.

 Specific Objective: Furthermore, the specific objective of this report is ——-

(a)    To focus on service portfolio

(b)   To co-ordinate between theory and practice and to make a bridge between theoretical and practical knowledge in fulfillment of the internship program.

(c)    To get overall idea about financial performance of MBL

(d)   A clear and lucid knowledge about the corporate culture.

(e)    Critically analyzing the overall foreign exchange operations

(f)    To have better direction to identify and suggest the scope of enhancement in foreign exchange operations to fulfill the requirement of the internship program.

Specific objectives are as follows:

1. To know the export procedures in detail

2. To know the import procedure

3. L/c Opening

4. To learn about the benefits and incentives provides to the export proceeds.

5. To know the collection process of export proceeds

6. To detect the problems involved and to obtain solutions

 Methodology of the Report:

Research Type:

This is an “Exploratory Research”, which briefly reveals the overall activities of the Bank.

This Internship Report has been prepared based on the information extracted from different sources collected by using a specific methodology. The methodology is mentioned below:

Sources of Data Collection:

All the necessary information to prepare the report is collected from both primary and secondary source of data.

Primary Sources: It includes the fresh or completely new data sources collected for a specified objective.

• Interview with key informant that is the senior official and the head of the divisions in order to collect information about the services.
• Observation
• Asking Questions.
• Informal discussion.

 Secondary Sources: It includes data which is already exits to prepare the report.

• Annual reports of MBL
• Published documents
• Office records
• General banking manual
• Relevant books, newspaper, journals, website, and various study reports.

 Methods of data collection:

Primary data:

All the necessary information are collected by using——

• Informal discussion with professional of MBL.
• In depth interview
• Observation while working in different desk.

 Secondary data:

• Brochure of MBL
• Net searching
•  Leaflet
• Annual Report
• Published books

 Data Analysis & Reporting:

To analyze the gathered data both qualitative (SWOT Analysis) and Quantitative (Ratio analysis) are used and different types of computer software like Microsoft Excel, Microsoft Word are used to prepare the report.

 Report of the Organization:

To prepare the whole report Mercantile Bank Limited, Mirpur Branch is the vital sample.

As a requirement of BBA Program it is necessary to complete internship in any Organization but duration of observation is very limited to prepare the report properly and in a efficient manner. It would take almost 12 weeks to work here but is not convenient to understand all operations of foreign exchange and Overall banking system.

 Limitation of the Report:

Although I have obtained whole hearted co-operation from employee of MBL, Mirpur Branch and Head Office in Dhaka but on the way of my study, I have faced the following problems, which may be termed as the limitations of the study. These are:

• Since it is a service oriented organization, the probability of the accurate data is always low.
• The duration that is for internship program is not enough to learn about an organization as well as its customer perception towards the organization like Mercantile Bank Limited.
• It’s also fail to focus on sector wise function of foreign trade department.

The project has encountered these limitations that may hinder the progress of the study but with constant effort, I try to minimize the negative effects of these limitations.

Background and History of MBL:

Mercantile Bank Limited is a third generation bank in Bangladesh. Mercantile Bank has been incorporated on May 20^th, 1999 in Head office at 61 Dilkhusha C/A, Dhaka, Bangladesh as a public limited company with the permission of the Bangladesh Bank. Mercantile Bank Limited commenced formal commercial banking operation from the June 02, 1999. The founders of MBL are committed to make it a little more different and a bit special qualitatively.

The Authorized Capital of the Bank is BDT 3000 million and the Paid -up Capital is BDT 1498.90 million. MBL make it most efficient to meet the needs of 21^st century with assets of BDT 44,940.54 million and more than 1000 employees. The Bank provides a broad range of financial services to its customers and corporate clients in retail banking, corporate banking and international trade.

The total amount of deposit is BDT 39,348 million and the total loans and advances are BDT 31,877.86 million at the end of the year 2007 that shows a great performance of MBL. The credit deposit ratio is 81.02%. The net profit after tax at the end of the year 2007 is BDT 540.50 million.

(Source: www.mblbd.com)

The bank has 10 divisions namely HRD, Credit division, Development and marketing division, Research and planning division, Information technology division, General banking division, Treasury and money market division,

The opening of the Principal Office was the big leaf forward and successively the opening of the Mothijil Branch expanded the horizon of Mercantile Bank Limited to bring its services to the valued clients more effectively. The second Branch opened at Dhanmondi Residential Area, Dhaka on August 04, 1999. The third branch was opened at Agrabad, Chittagong on November 06, 1999. The bank stood 41 branches all over the country up to February 25^th, 2008. With a firm commitment to achieve an excellence in service, Mercantile Bank Limited has always tried for creating wide array of banking solution and offer supervision value proposition.

There are thirty Sponsors in involved in creating MBL; the Sponsors of the Bank have a long heritage of trade, commerce and industry. They are highly regarded for their entrepreneurial competence. The Sponsors happen to be the members of different professional groups among whom are also renowned banking professionals having vast range of banking knowledge.

Core Values:

For the Customers: Providing with caring services by being innovative in the development of new banking products and services.

For the Shareholders: Maximizing wealth of the Bank.

For the Employees: Respecting worth and dignity of individual employees devoting their energies for the progress of the Bank.

For the Community: Strengthening the corporate values and taking environment and social risks and reward into account.

Vision of Mercantile bank:

• The established Mercantile bank Limited as a role model in the Banking sector of Bangladesh.
• To meet the needs of our Customers, provide fulfillment for our People and create shareholder Value.
• Bank’s vision is to build a society where human dignity and human rights receive the highest consideration along with reduction of poverty.
• MBL would make finest corporate citizen.

 Mission of the bank:

The aim of Mercantile Bank Limited is to become a leading private bank of the 3rd generation by providing better service to the clients along with other quality operations in the banking sector. The bank has some mission to achieve the organizational goals. These are –

      To assist in bringing high quality service to the customers and to participate in the growth and expansion of national economy.

      It will become most caring

      Focused for equitable growth based on diversified deployment of resources, and

      Nevertheless would remain healthy and gainfully profitable Bank.

      To set high standards of integrity and bring total satisfaction to bank’s clients, shareholders and employees.

Objective of Mercantile Bank:

 Strategic Objectives

The company believes that communication with, and feedbacks from its clients help it to achieve its goal by providing world-class products and services. Mercantile Bank regularly conducts client satisfaction surveys and make immediate accommodations and adjustments where needed. It also constantly monitors its standards, and strives to meet clients’ requirements.

Mercantile Bank’s objectives are reflected in the following areas:

• To achieve positive economic value added (EVA) each year.
• To be market leader in product innovation.

• To be one of the top three financial institutions in Bangladesh in terms of cost efficiency.
• To be one of the top five financial institutions in Bangladesh in terms of market share in all significant market segments they serve. Customer-driven focus.

 Function of MBL:

A bank has a lot of function in different ways. A Bank means an institution, which borrows money from the surplus unit of the society and lends money to the deficit unit for earning profit. The deposits are mainly accepted by the banker through current and saving account that is withdrawal by cheques. A bank includes a body of person’s weather incorporated or not who carry on business of banking. Thus a bank is a profit intuition which deals in money and credit.

The functions of Commercial banks are now wide and varied. However, the functions of Commercial Banks may broadly be classified under the following two categories:

 Primary Function:

The Primary functions of Commercial Bank/MBL are as follows-

Accepts Deposits:

The first primary functions of bank are to accept deposits of money from the public

or sever group. The total deposits held by the banker are broadly classified as-

 Demand Deposit: Demand deposits are withdrawn able on demand and thus no prior notice is needed. Deposits in Current Account and Saving Account fall in this category.

Time Deposit: Time deposits are repayable on the expiry of a fixed period of time only. Fixes deposit Accounts, recurring Deposit Accounts and deposit payable at specified notice fall in this category.

 Lends Money:

Banking system essentially involves lending. Depending on the requirements of the borrower, banks lend money in the forms following:

  Loans: In case of loan, the entire amount is paid to the borrower in lump sump, either in cash or way of transfer to his account. The borrower can withdraw the amount at any time. Interest is calculated and charged on the debit balance usually with quarterly rests. A loan once repaid in full or in part cannot be withdrawn further. Thus, no cheque book is issued against the loan account.

   Overdraft: Overdraft is usually a temporary arrangement where the customer is allowed to withdraw money exceeding the credit balance of the current account up to an agreed limit. Interest in charged only for the amount drawn.

   Cash Credit: A cash credit is an arrangement where the customer is allowed to withdraw money up to the sanctioned limit.  Unlike overdraft this is a permanent arrangement and usually used to meet the working capital needs of business housed, industries etc. in cash credit account withdrawals and deposits may be effected frequently. Interest is charged on the daily balanced. Cash credit arrangement is usually made against pledge or goods but this could also be extended against personal security.

   Bill Discounted and Purchase: Another mode of advancing money is discounting of the issuance bill of exchange. The banks buy the bill before its maturity at a price less than the face value. The amount, which the bank deducts from the face value of the instrument, is actually the interest calculated up to the date of maturity of the bills.

   Creates Credit: The creation of credit is one of the important functions of Commercial Bank. The bank accepts deposits from the public and lends money to its customers. When a bank extends loan, it does not pay the amount in the bank account of the borrower and allow withdrawing the required amount by cheques. In this way the bank creates credit or deposit which is regarded as money and can be used for the purchase goods and services and also for the payment of debt just like currency notes.

 Creates medium of Exchange: Commercial bank usually issues cheque which circulates like money in the society and creates the medium of exchange

Secondary Function: Modern commercial bank like MBL, besides performing the primary functions, cover a wide range of financial and non-financial services to meet the growing needs of the time. Some of the services are available only to the customer while others are available to the public in general. The subsidiary services provided by a modern banker may be classified into the following two groups:

 Agency Services: In many cases the Commercial Banks acts the agent of the customers. As agents the banks provide the following services:

Collection of cheque, draft, bill of exchange, promissory note, dividends, salaries, pension, rent etc. on behalf of the customer.

 Acting as correspondent and representative of its customers, other banks, and financial institutions.

 Conducting stock exchange transaction i.e. purchase and sale of share and securities for the customers.

Functioning as trustee, executor or administrator of estate of a customer.

 General Utility Services: Commercial banks provide a variety of general utility services to the customers. They are given below:

• Issue letter of credit (L/C)
• Accepts valuables for safe custody
• Conducts in foreign exchange business
• Lease financing
• Provides Internet banking services
• Provides specialized advisory services
• Issues debit and credit cards
• Underwrites of share and securities
• Merchant Banking
• Serving as a referee as to the financial standing business reputation and respectability of their customers

Organ gram:

Branch Expansion

The bank commenced its business on June 02, 1999. The first Branch was opened at 61 Dilkusha Commercial Area on the Inauguration Day of the Bank. The second Branch opened at Dhanmondi Residential Area, Dhaka on August 04, 1999. The third branch was opened at Agrabad, Chittagong on November 06, 1999.

Now the total number of branches stood at 41 at the end of the year February 25, 2008.

 Coverage of Mercantile Bank Ltd:

Foreign Exchange business:

A commercial Bank/MBL is involved in financing foreign trade apart from financing internal credit requirement in the economy. This involves handling of import business through opening L/C and handling of export business. As banking has become very keenly competitive, banks find it convenient to involve in foreign exchange business as a lucrative source of earning income and profit.

Apart from financing foreign trade, Commercial Banks also provide guarantees of various types to their clients. While these facilities clients to undertake jobs assigned to them by various corporations and organization, this enables the bank to earn commission.

A commercial Bank also provides the facilities of remittance to its clients for transfer of funds to various traded centers within the country and also outside the country in keeping with the foreign restrictions of the Central Bank.

Different Types of Scheme & services of MBL:

Mercantile Bank Limited has different types of scheme for a customer. These are given below:

Introduction or Reference:

The applicant is also required to furnish in the application form the name (s) of the referee(s) from whom the banker may inquires regarding character, integrity and respectability of the applicant. Generally this reference is sought from an already trusted customer of the bank. The employee of a bank also forms a good reference. In exceptional cases the bank may accept the reference of the well known person (s). The introduction is done by signing on the application form. The person so signing gives his account number (if any) with the bank and his address.

• Specimen Signature:

The customer is required to furnish his specimen signature on the account application form as well as on the specimen signature card. A customer is required to put more than one signature on the specimen signature card.

Accounts service :

Operation of Savings/Current Account:

Operating a bank account means transacting with the banker i.e. depositing further sums of money into the account and withdrawal of money from the account whenever needed. This is a special feature of banking business that each and every transaction with the bank has to be supported by a document. Every deposit whether in cash or by cheque has to be accompanied by pay-in-ship. Similarly cheque book facilitate withdrawals or transfer of money from the account. Pass book/statement of account acts as an authenticated record of transactions in the customers account and it enables the customer to verify the entries made therein. In case any discrepancy is noticed, the customer must take it into the notice of the banker to rectify the same.

 Closing of Savings/Current Account:

The relationship between banker and customer is a contractual relationship. Like any other contract, therefore, it may be terminated as and when the parties so desire. Moreover, the banker is under a statutory obligation to suspend payment from customer’s account under certain legislative provision. However, customer’s account with a banker may be closed in the following circumstances:

(i)                 The customer may requests/directs the banker in writing to close the account. In that case, the banker should immediately ask the customer to return the unused cheques (if any) and close the account. Usually the banker charges a sum of money for closing the account.

(ii)               The banker may itself ask the customer to close his account when the account has not been operated for a long time. A notice to that effect can be given to the customer.

(iii)             In case the banker finds that the customer is not desirable e.g. customer is found guilty of having forged cheques or bill of exchange etc. or flouting rules of operating the account, the banker may by notice in writing inform the customer of its intention and may close that account.

In the following cases, the banker should suspend all payments from the customer’s account till the matter is finally settled:

(a)        When the banker receives notice of customer’s death or insanity/lunacy.

(b)               When the customer becomes insolvent or in case of a company, it goes into liquidation. In such cases the money standing to the credit balance of the customer will be transferred to the official receiver or the official liquidator as the case may be.

(c)        When the banker receives a Garnishee Order

(d)        When the banker receives notice from the customer regarding assignment of the balance standing to the credit of his account by him to a third party .The banker in such a case is bound to pay the money to the third party.

 Securities:

Its is essential that the proposal define clearly the purpose of the facility, the sources of repayment, the agreed repayment schedule, the value of security and the customer relationship consideration implicit in the credit decision. Where security is to be accepted as collateral for the facility all documentation relating to the security shall be in the approved form.

All approval procedures and required documentation shall be completed and all securities shall be placed rior to the disbursement of the facilities.

The bank for creation of mortgage of the property – require the following documents:

 Original sale Deed favoring owner of the landed property.

  Certified copy of the Sale deed of the previous owner of the same property

  Certified copy of Mutation Khatian

  Duplicate Carbon Receipt

  Up to date rent receipt and Municipal tax Receipt

  Certified copy f CSSARS khatians

  Up-to-date Non Encumbrance certificate

  Valuation certificate

  Clearance from the RAJUK/ WORKS MINISTRY in connection of availing the Loa facility from Mercantile Bank Limited, Banani Branch, Dhaka by mortgaging the property.

  RAJUK approved plan of the building with the approval letter.

  Photograph of the property from three different angles and the owner of the landed property

  Site plan

  Board Resolution of mortgaging the Property if the same belongs to any Limited Company.

The borrower is request to submit the above – mentioned papers in original for verification by the bank lawyer and creation of mortgage on the property intended to mortgage against the advance.

The Corporate Structure:

Board of Directors, the apex body of the Bank, formulates policy guidelines, provides strategic planning and supervises business actives and performance of management while the Board remains accountable to the company and its shareholders. The Board is assisted by the Executive Committee and Audit Committee.

Board of Directors:

Board of Directors who decides the composition of each committee determines the responsibilities of each committee. The board of directors, the apex body of the Bank, formulates policy guidelines, provides strategic planning and supervises business activities and performance of management while The Board remains accountable to the company and its shareholders. The Board is assisted by the Executive Committee and Audit Committee.

 Executive Committee of MBL:

All routine matters beyond delegated powers of management are decided by or routed through the Executive Committee, subject to rectification by the Board of Directors.

Audit Committee of MBL:

The Audit Committee assists the Board in fulfilling its auditing responsibilities. The Audit Committee maintains effective liaison with the Board of Directors, Management and the Internal and External Auditors.

Organization Structure:

To achieve its organizational goals, the bank conducts its operations in accordance with the major policy guidelines laid down by the Board of  Directors, the highest policy making body. The management looks after the day-to-day operation of the Bank.

Management System and Style:

The decision making process of MBL is democratic and decentralized. The upper level of management hardly bothers about the operation task of the Bank.

The sponsor directors of the bank are well establishing businessmen and professionals of the country having business in and out of Bangladesh. A board of directors is formed taking 20 members out of the entrepreneurs a.

The bank is manned and managed by highly qualified professionals. The managing Directors of the Bank is Mr. Shah Md. Nurul Alam who also has rich experience of managing both the nationalized and private sector banks as chief executive.

The chief advisor of the bank, Mr. Lutfor Rahman Sarker (Ex. Governor of Bangladesh Bank) brings him a vast wealth of experience of managing both the private and public sector banks.

All the decision made at head office level through different committee. These are:

• Board of Directors
• Board Committee
• Policy Committee
• Executive Committee

Correspondent Relationships:

The Bank has established correspondent relationship across the world with a number of foreign banks namely Citibank N.A., The bank of Tokyo Mitsubishi Ltd., Standard Chartered Bank, American Express Bank, HSBC, Commerzbank, Commonwealth Bank of Australia, Scotia Bank, Toronto Dominion Bank, Unicredito ltaliano, Wachovia Bank, N.A., Hutton National Bank, HypoVereinsbank, Bank Australia, Sumitomoto Mitsui Banking Corp., ING Bank, United Bank of India, ICICI Bank etc. The number of foreign correspondents is 584 as of December 31, 2007. Efforts are being continued to further expand the Correspondent Relationship to facilitate Bank’s growing foreign trade transactions.

The number of foreign correspondents established by the bank is 70 on December 31, 1999. Efforts are being continued to further expand the correspondent relationship to facilitate bank’ growing foreign trade transaction

 Human resource development:

In today’s competitive business environment, only the quality of human resources makes the difference. The bank’s commitment to attract the best persons to work for its and the adaptation of the latest technologies is reflected in the efforts of the bank in the development of its human resources. in the face of today’s global competition the bank envisages to develop highly motivated  workforce and to equip them with latest skills and technologies. A good working environment promotes a level of loyalty and commitment, devotion and dedication of the part of the employees.

The bank sent number of officers to Bangladesh Institute of Bank Management and the other training institutes for specialized training various aspects of banking. The bank is contemplating to set up “Training Institute” for providing facilities to its executive and officers. The bank believes in professional excellence and considers its working force as its most valuable asset and the basis of its efficiency and strength.

Office Automation:

Basic accounting system of the bank has been fully computerized to minimize cost and risks and to optimize benefits and increase overall efficiency for improved services. The bank is capable of generating the relevant the financial statements at the end of the day.

The Bank has also hosted a web page of its own to take a place in the World Wide Web. On-line Banking has been introduced by the Bank to provide better services to the customer. The Bank has already introduces ATM ‘Q-Cash’. The Bank has installed SWIFT to facilitate quick international trade and payments arrangements. The Bank is going to introduce Credit Card soon.

Investment into the future:

Excellence in banking operation depends largely on a well equipped and efficient Research and Development Divisions. Such activities require the investment of substantial money and a set of highly qualified personnel with multidisciplinary background. Although it is mot possible at this stage to undertake Research and Development activities similar to those a bank on the developed countries, MBL established a core Research and planning Division comprising skilled persons from the very inception of the bank.

 Interest Rate of different Types of Advances:

Table: Interest rate of different Types of Advances

The Procedures of sanctioning Loans and Advances :

Actually loans and advances are provided through a procedure. It takes different steps to sanction a loan. Clients are required to fulfill some requirements to get loan. The ultimate decision is totally depended upon the specific department of the Mercantile Bank Limited. After getting the

Clearance from the branch the central authority takes decisions whether the loan will be granted or not.

Financial Highlights Of the Company:

Sources of fund:

MBL uses various sources to raise its funds. Among the available sources, deposits occupy the lion share of the sources. MBL has introduced various types of attractive savings schemes that motivate the saver to save their money at a pretty interest rate.

The most amounts of deposits, which was BDT 39,348.00 million at the end of the year 2008. It shows a greater improvement in creating funds beside deposits, paid up capital, provision, and reserves and other liabilities.

Performance of MBL:

Table: 1- Performance of MBL                                           (Figure in BDT in million)

Operating Efficiency:

Comments: It is found that the highest authorized capital was in the year 2006 and 2007.

Paid up Capital:

Comments: It is found that the highest paid up capital was in the year 2007. The capital now rises to 1798.68 million up to June 2008 mentioned in the above list.

Every country has certain natural advantages and disadvantages in producing certain commodities while they have some natural disadvantages as well in other areas. As a result we find that some countries need to import certain commodities while others need to export their surpluses. Foreign trade brings the fruits of the earth to the homes of the humblest among the countries. These transactions are the basis upon which international trade is made.

As more than one currency is involved in foreign trade, it gives rise to exchange of currencies which is known as Foreign Exchange. The term ‘Foreign Exchange’ has three principal meanings:

Firstly it is a term used referring to the currencies of other countries in terms of any single one currency. To a Bangladeshi, Dollar, Pound Sterling, etc. are foreign currencies and as such foreign exchanges.

Secondly, the term also commonly refer to some instruments used in international trade, such as bill of exchange, drafts, traveler’s cheque and other means of international remittance.

In terms of section 2(d) of the Foreign Exchange Regulations-1947, as adopted in Bangladesh foreign exchangemeans foreign currency and includes any instrument drawn, accepted, made or issued under clause 13 of article 16 of the Bangladesh Bank Order, 1972, all deposits, credits and balances payable in any foreign currency and draft, travelers cheque, letter of credit and bill of exchange expressed or drawn in Bangladesh currency but payable in any foreign currencies.

In exercise of the powers conferred by sec. 3 of the Foreign Exchange Regulations-1947, Bangladesh Bank issues license to scheduled banks to deal with foreign exchange. These banks are known as AuthorizedDealers (AD). Licenses are also issued by Bangladesh Bank to persons or firms to exchange foreign currency instruments such as T.C., Currency notes and coins. They are known as Authorized Money Changers.

International Trade and Foreign Exchange

The import business of the Bank decreased to Tk. 40,380.10 million in 2007 from Tk. 42,442.80 million in 2006 and export bills decreased to Tk.32, 670.10 million in 2007 from Tk.34, 592.10 million in 2006. Remittances handled by the Bank increased and reached Tk. 3,510.40 million and Tk. 2,989.10 million respectively in 2007 and 2006 It was tk. 679.10 million in 2005.

The number of foreign correspondents is 584 as of December 31, 2007. Efforts are being continued to further expand the Correspondent Relationship to facilitate Bank’s growing foreign trade transactions. The Bank is using SWIFT communication system for fast and accurate handling for foreign trade. The Bank is connected to REUTERS also for up-to-date information on the foreign exchange markets.

To have crystal clear idea about the Foreign Exchange of MBL Critical analysis of the following are essential

Sections:

Foreign exchange department of MBL, Main Branch is divided into two sections:

      L/C Operation

      Foreign Remittance

L/C OPERATION

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

The Uniform Customs and Practices for Documentary Credit (UCPDC) published by International Chamber of Commerce (1993) publication no 500 define Documentary Credit:

a)         Any arrangement however named or described whereby a bank (the issuing bank) acting at the request and on the instructions of a customs (the Applicant) or on it’s own behalf,

b)        Is to make a payment to or to the order of a third party(the beneficiary) or is to accept and pay bills of exchange(Drafts)drawn by the beneficiary or

c)         Authorize another bank to effect such payment or to accept and pay such bills of exchange (Drafts).

d)        Authorize another bank to negotiate against stipulated documents provide that terms and conditions are complied with

Types of Documentary Letter of Credit:

Documentary letter of credit, basically, can be classified into two segments:

a)         Revocable letter of credit

b)        Irrevocable letter of credit

a) Revocable Letter of Credit:

This type of letter of credit can be revoked or cancelled at any time without consent of, or notice to the beneficiary. As per article 8 (a) of UCPDC-500 “A revocable credit may be amended or cancelled by the issuing bank at any moment and without prior notice to the beneficiary”.

In case of seller (beneficiary), revocable credit involves risk, as the credit may be amended or cancelled while the goods are in transit and before the documents are presented, or although presented before payments has been made. The seller would then face the problem of obtaining payment on the other hand revocable credit gives the buyer maximum flexibility, as it can be amended or cancelled without prior notice to the seller up to the moment of payment buy the issuing bank at which the issuing bank has made the credit available. In the modern banking the use of revocable credit is not widespread.

b)     Irrevocable Letter of Credit:

An irrevocable credit is a documentary credit, which cannot be revoked, varied or changed/amended or cancelled without the consent of all parties- buyer (Applicant), seller (Beneficiary), Issuing Bank, and Confirming Bank (in case of confirmed L/C).

As per Article 9(a) of UCPDC 500, an irrevocable credit constitutes a definite undertaking of the Issuing Bank, provided that the stipulated documents are presented to the Nominated Bank or to the Issuing Bank and that the terms and conditions of the credit are complied with. Irrevocable Credit gives the seller greater assurance of payments, but he/she remains dependent on an undertaking of a foreign bank.

 Documents Used in L/C Operation:

The most commonly used documents in foreign exchange are:

1. Bill of Exchange
2. Bill of Lading
3. Commercial invoice
4. Certificate of origin
5. Inspection certificate
6. Packing list
7. Insurance document
8. Pro Forma Invoice (PI)/Indent

BILL OF EXCHANGE:

Bill of exchange is one of the important negotiable instruments in the mercantile world and used as a vital document facilitating settlement of payments between buyer/importer and seller/exporter at home and abroad. A bill when accepted by the drawee, gives evidence of the claim as made by the drawer as well as testimony to the acceptance of the debt by the drawee. The payment is done either in accordance with the terms of sale contract or under a L/C opened by the buyer/importer in favor of the seller/exporter.

BILL OF LADING:

A bill of lading is a document that is usually stipulated in a credit when the goods are dispatched by sea. It is evidence of a contract of carriage, is a receipt for the goods, and is a document of title to the goods. It also constitutes a document that is, or may be, needed to support an insurance claim.

The details on the bill of lading should include

¨       A description of the goods in general terms not inconsistent with that in the credit.

¨       Identifying marks and numbers.

¨       The name of the carrying vessel.

¨       Evidence that the goods have been loaded on board.

¨       The ports of shipment and discharge.

¨       The names of shipper, consignee and name and address of notifying party.

¨       Whether freight has been paid or is payable at destination.

¨       The number of original bills of lading issued.

¨       The date of issuance a bill of lading specifically stating that goods are loaded for ultimate destination specifically mentioned in the credit.

COMMERCIAL INVOICE:

A commercial invoice is the accounting document by which the seller charges the goods to the buyer. A commercial invoice normally includes the following information:

  Date

  Name and address of buyer and seller

  Order or contract number, quantity and description of the goods, unit price and the total

  Price

  Weight of the goods, number of packages, and shipping marks and numbers

  Terms of delivery and payment

  Shipment details

CERTIFICATE OF ORIGIN:

A certificate of origin is a signed statement providing evidence of the origin of the goods.

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/or the L/C. The buyer who also indicates the type of inspection he wishes the company to undertake usually nominates the inspection company.

PACKING LIST:

This is a unique document and not combined with other document. This is a listing of the contents of each package, cartoon etc. and other relevant information.

INSURANCE DOCUMENT:

Insurance is a contract whereby the insurer is undertaking to indemnify the assured to the agreed manner and extent against fortuitous losses. Insurance document generally contains the following information:

• The name of the insurer or his agent
• The name of the ship/carrier
• The name of assured
• The subject matter of insurance
• The time and/or voyage insured
• The peril(s) insured against
• The date and subscription
• The valuation
• The stamp etc.

PRO FORMA INVOICE (PI) /INDENT:

Pro Forma Invoice/indent is the sale contract between seller and buyer in import- export business. There is slight difference between indent and Proforma invoice. The sales contract, which is direct correspondence between importer and exporter, is called Proforma invoice.

There is no intermediary between them. On the other hand, there may be an agent of exporter in importer’s country.  In this regard, if the sale contract is occurred between the agent of exporter and importer then it is called indent.

Pro Forma Invoice is a form of quotation to a potential buyer, inviting him to buy the goods on stated terms. It should be clearly stated that it is pro forma and if it is accepted the details are normally transferred to a commercial invoice.

Different Accounts related to Foreign Exchange Transaction:

In L/C operation different accounts are maintained which are needed for foreign exchange transaction. These are:

Nostro Account :

Nostro account means “our account with you”. A Nostro account is a foreign currency account of a bank maintained its foreign correspondents abroad. For example, US Dollar Account of MBL maintained with Citibank, N.A, New York, USA is a Nostro account of MBL.

Vostro account :

Vostro account means “your account with us”. The account maintained with foreign correspondent in a bank of a particular country is known as Vostro account.

What is the nostro account for a bank in a particular country is a vostro account for the bank abroad maintaining the account thus the account of MBL with Citi Bank N.A, New York is regarded as it’s nostro account held with Citi Bank, while Citi Bank N.A, New York regards it as a it’s vostro account held for MBL.

Loro Account :

Loro account means “their account with you”. Account maintained by third party is known as loro account; suppose MBL is maintaining an account with Citi Bank N.A, New York and at the same time Janata Bank is also maintaining a nostro account with Citi Bank N.A, New York. From the point of view of MBL Janata Bank’s account maintained with Citi Bank N.A New York is the loro account.

Parties involved in L/C Operation:

The documentary credit is an essential implement for conducting world trade today. With the third party assurance the whole process is covered. Documentary credit substantially reduces payment related risks for both exporter and importer. So in the whole L/C operation there are many parties involved. They are:

1. Importer/Applicant
2. Issuing Bank/Opening Bank
3. Advising Bank
4. Beneficiary/Exporter/Seller
5. Negotiating Bank
6. Reimbursing Bank
7. Confirming Bank

1.       Importer/Applicant

An importer is one who wants to import goods from other country. In terms of the Importers (Registration) Order-1981 no person can import goods into Bangladesh unless he is with the Chief Controller of Import And Export (CCI&E). he is also called applicant. The bank opened L/C on the importer’s application.

2.       Issuing Bank/Opening Bank

The bank which opens L/C on behalf of the importer is called issuing bank. Issuing bank’s obligation is to make payment against presentation of documents drawn strictly as per terms of L/C.

1. 2.             Advising Bank

The bank through which the L/C is advise / forwarded to the beneficiary. It is situated in the beneficiary’s country. The most important function of this bank is to make sure the beneficiary about the authenticity of the documents.

1. 3.           Beneficiary/Exporter/Seller

Beneficiary is the party in whose favor the L/C is issued. Usually he is the seller or    exporter.

1. 4.           Negotiating Bank

The bank that negotiates the bill of exporter drawn under the credit is known as negotiating bank. If the advising bank is also authorized to negotiate the bill drawn by the exporter, he becomes the negotiating bank.

1. 5.           Reimbursing Bank:

The bank nominated in the credit by the issuing bank to make payment stipulated in the document, complying with the reimbursement bank. In reimbursing bank the issuing bank maintains its nostro account.

1. 6.           Confirming Bank

Confirming bank is a bank that adds its confirmation to the credit and it is done at the request of the issuing bank. It provides the credit report of the exporter of his country. If the advising bank also adds its own undertaking to honor the credit while advising the same to the beneficiary, he becomes the confirming bank, in addition, becomes liable to pay for documents in conformity with the L/C’s terms and condition.

The L/C operation section is divided into two. They are

Import procedure followed by MBL:

As an Authorized Dealer, MBL, Main Branch is always committed to facilitate import of different goods into Bangladesh from the foreign countries. Import Section, which is under Foreign Exchange Department of the branch, is assigned to perform this job. And to serve its client’s demand to import goods, it always maintains required formalities that are collectively termed as The Import Procedure.

1. 1.      At first, the importer must obtain Import Registration Certificate (IRC) from the CCI&E submitting the following papers:

  Up to date Trade License.

  Nationality and Asset Certificate.

  Tax Identification Number

  VAT Registration Number

  In case of company, Memorandum & Articles of Association and Certificate of Incorporation.

  Bank Solvency Certificate etc.

2.      Then the importer has to contact with the seller outside the country to obtain the Pro forma Invoice. Usually an indenter, local agent of the seller or foreign agent of the buyer makes this communication. Other sources are:

  Trade fair.

  Chamber of Commerce.

  Foreign Missions in Bangladesh.

  Journals etc.

 3.      When the importer accepts the Pro forma Invoice, he/she makes a purchase contract with the exporter detailing the terms and conditions of the import.

 4.      After making the purchase contract, importer settles the means of payment with the seller. And import procedure differs with different means of payment. The possible means are Cash in Advance, Open Account, Collection Method and Documentary Letter of Credit. In most cases, the Documentary Letter of Credit in our country makes import payment. Purchase Contract contains which payment procedure has to be applied.

Different Means of Payment are:

a)         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.

b)        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 some specified date.

c)     Collection Method: Collection methods are either clean collection or documentary collection. Again, Documentary Collection may be Document against Payment (D/P) or Document against Acceptance (D/A). The collection procedure is that the exporter ships the goods and draws a draft/ bill on the buyer. The exporter submits the draft/bill (only or with documents) to the remitting bank for collection and the bank acknowledges this. Then the remitting bank sends the draft/bill (with or without documents) and a collection instruction letter to the collecting bank. Acting as an agent of the remitting bank, the collecting bank notifies the importer upon receipt of the draft. The title of goods is released to the importer upon full payment or acceptance of the draft/bill.

d)        Letter of credit: Letter of credit is the well accepted and most commonly used means of payment. It is an undertaking for payment by the issuing bank to the beneficiary, upon submission of some stipulated documents and fulfilling the terms and conditions mentioned in the letter of credit.

5.      Requesting the concerned bank (importer’s bank /issuing bank) to open a L/C (irrevocable) on behalf of importer favoring the exporter/seller.

Import section deals with L/C opening and post import financing i.e. LIM & LTR. Now the procedure from opening L/C to disbursement against L/C is given below:

Application for opening L/C:

At first, an importer will request banker to open L/C along with the following documents.

¨       An application

¨       Indent or Pro forma Invoice

¨       Import Registration Certificate (IRC)

¨       Taxpayer’s Identification Number (TIN)

¨       Insurance cover note with money receipt

¨       A bank account in MBL, Main Branch

¨        Membership of chamber of commerce

Delivered forms by banker to Importer:

After scrutinizing above-mentioned documents carefully, officer delivers the following forms to be filled up by importer and the banker should check:

a)      Whether the goods to be imported is permissible or not.

b)      Whether the goods to be imported is demanding or not.

The forms are:

L/C APPLICATION FORM (LCAF):

L/C Application Form is a sort of an agreement between customer and bank on the basis of which letter of credit is opened. MBL, Main Branch provides a printed form for opening of L/C to the importer. Special adhesive stamp of value Tk.150.00 is affixed on the form in accordance with Stamp Act. While opening, the stamp is cancelled. Usually the importer expresses his decision to open the L/C quoting the amount of margin in percentage. Usually the importer gives the following information –

   Full name and address of the importer

  Full name and address of the beneficiary

  Draft amount

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

  Time bar within which the documents should be presented

  Sales type (CIF/FOB/C&F)

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

  Country of origin

  Bangladesh Bank registration number

  Import License/LCAF number

  IRC number

  Account number

  Documents number

  Insurance Cover Note / Policy number, date, amount

  Name and address of Insurance Company

  Whether the partial shipment is allowed or not

  Whether the transshipment is allowed or not

  Last date of shipment

  Last date of negotiation

  Other terms and conditions (if any)

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

  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.

L/C AUTHORIZATION FORM (LCAF):

The Letter of Credit Authorization Form (LCAF) is the form prescribed for the authorization of opening letter of credit/payment against import and used in lieu of import license. The authorized dealers are empowered to issue LCA Forms to the importers as per basis of licensing of the Import Policy Order in force to allow import into Bangladesh. If foreign exchange is intended to be bought from the Bangladesh Bank against an LCAF, it has to be registered with Bangladesh Bank’s Registration Unit located in the concerned area office of the CCI&E. The LCA Forms available with authorized dealers are issued in set of five (05) copies each. First Copy is exchange control copy, which is used for opening of L/C and effecting remittance. Second Copy is the custom purpose copy, which is used for clearance of imported goods from custom authority. Triplicate and Quadruplicate Copy of LCAF are to be sent to concerned area of CCI&E office by authorized dealer/Registration Unit of Bangladesh Bank. Quadruplicate Copy is kept as office copy by authorized dealer/Registration Unit. The Letter of Credit Authorization Form (LCAF) contains the followings –

¨       Name and address of the importer

¨       IRC number and year of renewal

¨       Amount of L/C applied for (both in figure and in word)

¨       Description of item(s) to be imported

¨       HS Code number

¨       Signature of the importer with seal

¨       List of goods to be imported

IMPORT PERMIT FORM (IMP):

¨       L/C authorization form number

¨       Date

¨       Value in Taka

¨       Registration of LCAF

¨       Quantity of goods

¨       Invoice value

¨       Country of origin

¨       Port of shipment

¨       Name of the steamer

¨       Indenter’s address.

Preparation of L/C by Banker:

Bank’s officer prepares L/C when above-mentioned forms are to be submitted by customer or importer. Before preparing L/C MBL officer scrutinizes the application in the following manner.

1. The terms and conditions of the L/C must be complied with UCPDC 500 and Exchange Control & Import Trade Regulation.
2. Eligibility of the goods to be imported.
3. The L/C must not be opened in favor of the importer.
4. Radioactivity report in case of food item.

Survey reports or certificate in case of old machinery is required. Bank of the importer is called ‘L/C Issuing Bank’. Then issuing bank inform its corresponding bank, called “Advising Bank’ or ‘Confirming Bank” located in exporter’s country to advise and credit forward to the exporter and simultaneously officer makes L/C opening vouchers.

 DESK WORK:

  One debit voucher to be passed.

  Corresponding credit vouchers to be passed. (Margin, commission, postage, stamp,    F.F.C. and others.)

  Liability voucher to be passed.

ACCOUNTING TREATMENT:

 FORWARDING DOCUMENTORY CREDIT BY ADVISING OR CONFIRMING BANK:

There are usually two banks involved in a documentary credit operation. The issuing bank and the advising bank which is usually a bank in the seller’s country. The issuing bank asks another bank to advise or confirm the credit.

If the 2^nd bank is simply “advising the credit”, it will mention that when it forwards the credit to seller, such a bank is under no commitment or obligation to pay the seller.

 If the advising bank is also “confirming the credit”, this mention that the confirming bank, regardless of any other consideration, must pay accept or negotiate without recourse to seller. Then the bank is called confirming bank also.

SUBMISSION OF NECESSARY DOCUMENTS BY EXPORTER TO THE NEGOTIATING BANK:

As soon as the seller/exporter receives the credit and is satisfied that he can meet its terms and conditions, he is in position to load the goods and dispatch them. The seller then sends the documents evidencing the shipment to the bank.

Exporter will submit those documents in accordance with the terms and conditions as mentioned in L/C. Generally the documents observed in the foreign exchange department are:

¨       Bill of exchange

¨       Commercial invoice

¨       Bill of lading

¨       Certificate of origin

¨       Packing list

¨       Clean Report of Finding (CRF)

¨       Weight list

¨       Insurance cover note

¨       Pre-shipment certificate

Clean Report Of Findings (CRF):

This certificate is provided by the Pre Shipment Inspection (PSI) Concerns. The entire world has been brought under the three supervision of the three pre shipment inspection concerns based on different territory. These are as follows

¨       Intertek Testing Service

¨       Inspectorate Griffith Ltd.

¨       Bureau Veritas

THE DOCUMENTS SENT TO THE ISSUING BANK THROUGH THE NEGOTIATING BANK:

The negotiating bank carefully checks the documents provided by the exporter against the credit, and if the documents meet all the requirement of the credit, the bank will pay, accept, or negotiate in accordance with the terms and conditions of the credit. Then the bank sends the documents to the L/C opening bank.

MAKING THE PAYMENT OF FOREIGN BILL THROUGH THE REIMBURSING BANK:

The L/C issuing bank getting the documents checks immediately and if they are in order and meet the credit requirements, it will arrange to make payment against L/C through reimbursement bank and will send the importer the document arrival notice.

 SCRUTINY OF THE DOCUMENTS:

First of all it must be ensured that full set of documents as mentioned in the L/C has been received.

Documents have been negotiated within the negotiation period.

The Bill of Lading/Air-Way Bill/ Railway receipt is not dated later than the last date of shipment mentioned in the L/C.

 The L/C has not been amended or subjected to any special instructions, which might alter the value of L/C.

Import bills include following documents, which are to be scrutinized.

 Bill of Exchange

 Commercial Invoice

Bill of Lading

Certificate of Origin

 Others

Bill of exchange:

• It has to be verified that the bill of exchange has been properly drawn and signed by the beneficiary according to the terms and conditions of L/C.
• The amount in the bill is identical with that mentioned in the invoice.
• The amount drawn does not exceed the amount mentioned in the L/C.
• The amount in words and figures should be same.
• The bill of exchange should be properly endorsed.

 Commercial Invoice:

  It has to be verified that the commercial invoice has been properly drawn and signed by the beneficiary according to the terms and conditions of L/C.

  The beneficiary should properly invoice the merchandise.

  The merchandise is invoiced to the importer on whose account the L/C is opened.

  The description of merchandise and the unit price correspond with that given in the L/C.

The import license or IRC number of the importer, indenter’s registration number and number of Letter of Credit Authorization number are incorporated in the Invoice.

 Bill of Lading:

 First of all it has to be cleared that the Bill of Lading is showing “Shipped on Board” and it has to be properly endorsed to the bank.

  The B/L should include the description of the merchandise according to invoice.

  The port of shipment and destination, date of shipment and the name of the consignee are in agreement with those mentioned in the L/C.

  The shipping company or their authorized agents properly sign the B/L.

 The date on the B/L is not ‘stale’ which means it is not dated in unreasonably long time prior to negotiation.

Certificate of Origin:

The Merchandise described in the Certificate is in accordance with the L/C.

Others:

There are some other documents, which are also attached, with the shipping documents like packing list, pre-shipment inspection certificate etc. These documents are also verified carefully before lodgment.

 Lodgment & Retirement of shipping Documents:

After scrutinizing the import negotiating document, if no discrepancy are found then it is treated to be accepted after the end of seven banking days following the day of receipt of the document under “Article 1(b) of UCPDC –500”.

If any discrepancy is found then the banker inform it to the importer that whether he accept the bills with discrepancies or not. If the importer does not accept, the banker (PBL) informs it to the negotiating bank within seven banking days from the date of receipt of the documents, otherwise it is treated to be accepted and the opening bank (MBL) must bound to pay against the bill and no complain against the bill will be accepted more than 4 banking days following the date of receipt of the documents under article number K1 (d) & article number 14 (c) of the UCPDC-500.

Accounting Treatment:

The office passes the following vouchers after negotiation:

Reverse entry is given.

The shipping documents then stamped with PAD number and entered in the PAD register. As soon as the above formalities are completed, the importer is served with PAD bill intimations for retirement of concerned import documents.

On intimation the importer calls on the bank’s counter requesting retirement of the shipping documents against payment to the debit of their account by the bill amount and other charges payable. Bank prepares cost memo in printed form on account of the concerned party giving detailed read of   charges payable.

 About Export Policy:

Export policies formulated by the Ministry of Commerce, which provide the overall guideline and incentives for promotion of exports in Bangladesh. Export policies also set out commodity-wise annual target.

It has been decided to formulate these policies to cover a five-year period to make them contemporaneous with the five-year plans and to provide the policy regime.

The export-oriented private sector, through their representative bodies and chambers are consulted in the formulation of export policies and are also represented in the various export promotion bodies set up by the government.

 Export Incentives:

Different incentives are:

 Financial Incentives:

  Restructuring of Export Credit Guarantee Scheme;

  Convertibility of Taka in current account;

  Exporters can deposit 40% of FOB value of their export earnings in own accounts in dollar and pound sterling;

  Export Development Fund;

  Expansion of export credit period from 180 days to 270 days;

  50% tax rebate on export earnings;

  Duty draw back;

  Bonded warehouse facilities to 100% export oriented firms;

  Duty free import of capital equipment for 100% export oriented firms;

General Incentives:

  National Export Trophy to successful exporters;

  Training course on external trade;

  Arrangement of international trade fairs, commodity-based exhibitions in the country and participation in foreign trade fairs.

Other Incentives:

 Assistance in improvement of quality and packaging of exportable items;

  Simplification of export procedures;

 Export Procedure:

The import and export trade in our country are regulated by the Import and Export (Control) Act, 1950.

Under the export policy of Bangladesh the exporter has to get valid Export registration Certificate (ERC) from Chief Controller of Import & Export (CCI&E). The ERC is required to renew every year. The ERC number is to incorporate on EXP forms and other papers connected with exports.

 Registration of Exporters:

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

Nationality and Assets Certificate;

  Memorandum and Article of Association and Certificate of Incorporation in case of Limited Company;

  Bank Certificate;

 Income Tax Certificate;

  Trade License etc.

Securing the Order:

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

In this purpose the exporter may get help from:

  License Officer;

  Buyer’s Local Agent;

  Export Promoting Organization;

  BangladeshMission Abroad;

  Chamber of Commerce (local & foreign)

  Trade Fair etc.

 Signing the Contract:

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

 Receiving the Letter of credit:

After getting contract for sale, exporter should ask the buyer for Letter of Credit (L/C) clearly stating terms and conditions of export and payment.

The following are the main points to be looked into for receiving/ collecting export proceeds by means of Documentary Credit:

(1)   The terms of the L/C are in conformity with those of the contract;

(2)   The L/C is an irrevocable one, preferably confirmed by the advising bank;

(3)   The L/C allows sufficient time for shipment and negotiation.

(Here the regulatory framework is UCPDC-500, ICC publication)

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

• Cash in advance;
• Open account;
• Collection basis (Documentary/ Clean)

(Here the regulatory framework is URC-525, ICC publication)

 Procuring the Materials:

After making the deal and on having the L/C opened in his favor, the next step for the exporter is to set about the task of procuring or manufacturing the contracted merchandise.

 Shipment of Goods:

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

Documents for shipment:

  EXP form,

  ERC (valid),

  L/C copy,

  Customer Duty Certificate,

 Shipping Instruction,

  Transport Documents,

  Insurance Documents,

  Invoice,

  Other Documents,

  Bills of Exchange (if required)

  Certificate of Origin,

  Inspection Certificate,

  Quality Control Certificate,

  G.S.P. Certificate,

 Final Steps:

Submission of the documents to the Bank for negotiation.

 Export Financing:

Financing exports constitutes an important part of a bank’s activities. Exporters require financial services at four different stages of their export operation. During each of these phases exporters need different types of financial assistance depending on the nature of the export contract.

 Pre-shipment credit

Post-shipment credit

 Pre-shipment credit

Pre-shipment credit, as the name suggests, is given to finance the activities of an exporter prior to the actual shipment of the goods for export. The purpose of such credit is to meet working capital needs starting from the point of purchasing of raw materials to final shipment of goods for export to foreign country. Before allowing such credit to the exporters the bank takes into consideration about the credit worthiness, export performance of the exporters, together with all other necessary information required for sanctioning the credit in accordance with the existing rules and regulations. Pre-shipment credit is given for the following purposes:

  Cash for local procurement and meeting related expenses.

  Procuring and processing of goods for export.

  Packing and transporting of goods for export.

  Payment of insurance premium.

  Inspection fees.

  Freight charges etc.

  An exporter can obtain credit facilities against lien on the irrevocable, confirmed and unrestricted export letter of credit in form of the followings:

  Export cash credit (Hypothecation)

  Export cash credit against trust receipt.

  Packing credit.

  Back to back letter of credit.

 Post-shipment credit

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. Banks in our country extend post shipment credit to the exporters through:

1. Negotiation of documents under L/C;
2. Foreign Documentary Bill Purchase (FDBP):
3. Advances against Export Bills surrendered for collection;

 Export cash credit (HYPOTHECATION):

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 r the ownership nor the possession is passed to it.

Export cash credit against trust receipt:

 In this case, credit limit is sanctioned against trust receipt (TR). Here also unlike pledge, the 3xportable 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 purchas4ed 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 bank’s custody. This facility is allowed only to the first class party and collateral security is generally obtained in this case.

Packing Credit (P.C) :

Packing Credit is essentially a short-term advance granted by a Bank to an exporter for assisting him to buy, process, manufacture, pack and ships the goods. Generally for movement of goods from the hinterland areas to the ports of shipment the Banks provide interim facilities by way of Packing Credit. This type of credit is sanctioned for the transitional period starting from dispatch of goods till the negotiation of the export documents.

Practically except for single transaction, most of the pre-shipment credits are allowed in the form of limits duly sanctioned by Bank in favor of regular exporters for a particular period. The drawings are required to be adjusted fully once within a period of 3 to 6 months. Suiting to the breed and nature of export, sometimes an exporter may also be allowed to avail a combined Cash Credit and Packing Credit limit with fixed ceiling on revolving basis. But in no case the borrower would be allowed to exceed individual credit limit fixed for the purpose. The drawings under Export Cash Credit limits are generally adjusted by the drawing in packing credit limit, which is, in turn liquidated by the negotiation of export documents.

Charge Documents for P.C:

Banker should obtain the following charge documents duly stamped prior to disbursement:

   Demand Promissory Note

  Letter of Arrangement

  Letter of Lien of Packing Credit (On special adhesive stamp)

  Letter of Disbursement

  Packing Credit Letter

Additional Documents for P.C:

• Letter of Partnership along with Registered Partnership Deed in case of Partnership Accounts.

• Resolution of the Board of Directors along with Memorandum & Articles of association in case of Accounts of Limited Companies. In case of Corporation, Resolution of the Board Meeting along with Charter.

• Personal Guarantee of all the Partners in case of Partnership Accounts and a=of all the Directors in case of Limited Companies.

• An undertaking from the Directors of the Public Limited Company to obtain prior clearance from the Bank before declaring any interim/final dividend.

BACK TO BACK LETTER OF CREDIT (BTB) :

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 in the country. 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.  In back to back L/C, PBL keeps no margin.

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.

Payment of Back to Back L/C:

Client gives the payment of the BTB L/C after receiving the payment from the importers. But in some cases, client sells the bills to the PBL. But if there is discrepancy, the PBL sends it for collection.

In case of BTB L/C, PBL gives the payment to the beneficiary after receiving the payment from the L/C of the finished product (i.e. exporter).  Bank gives the payment from DFC Account (Deposit Foreign Currency Account) where Dollar is deposited in national rate.

For BTB L/C, opener has to pay interest at LIBOR rate (London Inter Bank Offering Rate). Generally LIBOR rate fluctuates from 5% to 7%.

A schedule named Payment Order; Forwarding Schedule is prepared while making the payment. This schedule is prepared when the payment of L/C is made. This schedule contains the followings:

1. Reference number of the beneficiary’s bank and date.
2. Beneficiary’s name.
3. Bill value.
4. Payment order number and date.
5. Equivalent amount in Taka.

 NEGOTIATION OF DOCUMENTS UNDER L/C:

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 raise 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.

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. PBL 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.

For this purpose, PBL maintains a separate register named FDBP Register. This register contains the following information:

 Date

  Reference number (FDBP)

  Name of the drawee

   Name of the collecting bank

  Conversion rate

  Bill amount both in figure & in Taka.

  Export form number

   Export L/C number

Advances against export bills surrendered for collection:

Banks generally accept bills for collection of proceeds when they are not drawn under an L/C or when the documents, even though drawn against an L/C contain some discrepancies. Bills drawn under L/C, without any discrepancy in the documents, are generally negotiated by the bank and the exporter gets the money from the bank immediately. However, if the bill is not eligible for negotiation, the exporter may obtain advance from the bank against the security of export bill. In addition to the export bill, banks may ask for collateral security like a guarantee by a third party and equitable/registered mortgage of property.

Export documents checking:

1.                  General verification: –

a)      L/C restricted or not.

b)      Exporter submitted documents before expiry date of the credit.

c)      Shortage of documents etc.

 2.                  Particular verification:

a)                  Each and every document should be verified with the L/C.

 3.                  Cross verification :

a)   Verified one documents to another.

Discrepancies:

After proper examination or checking of a described Export document banker may find following discrepancies:

GENERAL:

  Late shipment

  Late presentation

  L/C expired

  L/C over-drawn

  Partial shipment or transshipment beyond L/C terms.

Bill of exchange (B/E):

1. Amount of B/E differ with Invoice.
2. Not drawn on L/C issuing Bank.
3. Not signed
4. Tenor of B/E not identical with L/C.
5. Full set not submitted.

Commercial Invoice (C/I):    

1. Not issued by the Beneficiary.
2. Not signed by the Beneficiary.
3. Not made out in the name of the Applicant
4. Description, Price, quantity, sales terms of the goods not corresponds to the Credit.
5. Not marked one fold as Original.
6. Shipping Mark differs with B/L & Packing List.

 Packing List:  

Gross Wt., Net Wt. & Measurement, Number of Cartoons/Packages differ with B/L.

Not market one fold as Original.

Not signed by the Beneficiary.

Shipping marks differ with B/L.

Bill of lading/ airway bill ETC (Transaction Documents):

1. Full set of B/L not submitted.
2. B/L is not drawn or endorsed to the Order of Prime Bank Ltd.
3. “Shipped on Board”, “Freight Prepaid” or “Freight Collect” etc. notations are not marked on the B/L.
4. B/L not indicate the name and the capacity of the party i.e. carrier or master, on whose behalf the agent is signing the B/L.
5. Shipped on Board Notation not showing name of Pre-carriage vessel/intended vessel.
6. Shipped on Board Notation not showing port of loading and vessel name ( In case B/L indicates a place of receipt or taking in charge different from the port of loading).
7. Short Form B/L
8. Charter party B/L
9. Description of goods in B/L not agree with that of Invoice, B/E & P/L
10. Alterations in B/L not authenticated.
11. Loaded on Deck.
12. B/L bearing clauses or notations expressly declaring defective condition of the goods and/or the packages.

OTHERS:

  Needed documents not forwarded to buyers or forwarded beyond L/C terms.

  Inadequate number of Invoice, Packing List, B/L & Others submitted.

  Short shipment Certificate not submitted.

Checking:

While checking the export documents following things must be taken in consideration.

 L/C terms:

Each and every clause in the L/C must be complied with meticulously and ensure the following:

That the documents are not state;

That the documents are negotiated within the L/C validity, It a credit expire on a recognized bank holiday its life is automatically become valid up to the next works day.

 That the documents value does not exceeds the L/C value.

Draft / Bill of Exchange:

Draft is to be examined as under:

1. Draft must be dated
2. It must be made out in the name of the beneficiary’s bank or to be endorsed to the bank.
3. The signature of the drawer must be verified by the negotiating bank.
4. Amount must be tallied with the Invoice amount.
5. It must be marked as drawn under L/C No……Dated…..Issued by………..Bank.

 Invoice:

It is to be scrutinized to ensure the following:

1. The Invoice is addressed to the Importer
2. The full description of merchandise must be given in the invoice strictly as per L/C.
3. The price, quality, quantity, etc. must be as per L/C.
4. The Invoice must be language in the language of L/C.
5. No other charges are permissible in the Invoice beyond the stipulation on the L/C.
6. The amount of draft and Invoice must be same and within the L/C value.
7. If L/C calls for consular invoice, then the beneficiary’s invoice is not sufficient.
8. Number of Invoice will be submitted as per L/C.
9. The shipping mark and number of packing list shown in the B/L must be identical with those given in the Invoice and other documents.
10. The Invoice value must not be less than the value declared in EXP Forms.
11. Invoice amount must be correct on the basis of price, quantity as per L/C.
12. Invoice amount, indicate sale terms/ Incomers VIZ FOB, CFR, CIF etc.
13. Consular Invoice must be stamped by the local consulate/embassy of the country to which the goods are imported.

Other documents:    

Beneficiary statement, VISA/Export License issued by EPB, Certificate of Origin, Weight Certificate, Phytosaitary Certificate, Packing List, Inspection Certificate.

Certificate of analysis, quality certificate, MCD duly signed and any other documents required by L/C each of these certificates/documents conform to the goods invoice and are relevant to L/C.

Negotiating Bank will check the above documents whether it is as per L/C or not. If Negotiating Bank finds everything in order or as per export L/C, bank will negotiate the document and will disburse the generated fund as per Banks norms.

If the Negotiating Bank will find any discrepancies in the documents, they will send the documents on collection or they can negotiate under reserve by the request of the exporter or they can seek permission/Negotiation authority from issuing Bank to allow Negotiating Bank to negotiate the documents despite the discrepancies. L/C issuing Bank will inform the matter to buyer, if the buyer accepts the discrepancies mentioned by Negotiating Bank, issuing bank will authorize the Negotiating bank to negotiate the discrepant documents.

 Opening of Foreign Account:

MBL opens foreign currency account. Foreign currency account is used for receiving foreign currency from abroad or for sending the currency to abroad. It can be used in favor of a person or in favor of exporters.

Following papers are required to open a foreign currency account:

i)                    Exporters’ foreign currency account opening form (application form, two signature cards duly filled-in and signed by the potential account-holder with authenticated seal and introduction by a valued customer in the bank).

ii)                  Two copies of passport size photographs of each operator attested by Chairman of the company.

iii)                Export registration certificate.

iv)                Attested photocopy of the membership certificate of the concerned association (BGMEA/ Others).

v)                  Export proceeds realization certificate— declaration / undertaking regarding the utilization of foreign currency.

vi)                Incase of Limited Company:

a)      Memorandum & Articles of Association of the Company.

b)      Power of Attorney.

c)      Resolution of the Board of Directors.

d)      Certificate of Incorporation.

e)      Certificate of Commencement of Business.

f)       List of Directors.

g)      Trade License.

 Student File Opening:

Student can endorse $200.00 at a time in his own name. But if the amount exceeds $200.00, then the student has to open a student file.  For opening a student file, the following documents are required:

   Preliminary application and information for admission.

  Letter of approval by the university of the student.

  A filled-in application form for foreign currency in abroad.

  “Transcript of Records” given for the last degree by the university.

  Certificate given by the Board for S.S.C. / H.S.C. or equivalent examination.

In case of tuition fees, applicant must send the currency in favor of the institute. He cannot take the fees of the institute with him personally. Usually a student has to endorse at least one third of the fees of a year.

 Accounting Treatment:

Each day, the foreign remittance department gives the following vouchers:

  One debit voucher for cash USD sold.

  One debit voucher for TC sold.

  One debit voucher for IDT (For total amount)

  One credit voucher for foreign currency USD (cash sold)

  One credit voucher for account payable TC sold.

  One credit voucher for commission on TC.

  One credit voucher for other fees & commission.

  One credit voucher for photocopy.

  One debit voucher for account payable TC sold.

  One debit voucher for Prime General Account (For TC sold).

  One debit voucher for FDD.

  One debit voucher for Prime General Account (For FDD).

After analyzing the functions and performance of Mercantile Bank Limited, we find out some strengths and some problem of the bank. And from this point we can do a SWOT analysis of Mercantile Bank Limited.

SWOT analysis means –

• S — Strength
• W — Weakness
• O — Opportunity
• T — Threats

Strength of MBL:

During my working period I find-out some strength of Mercantile Bank Limited especially in Mirpur Branch. These are –

      Computer based banking

      Efficiency and effectiveness of the employees.

      Various special services are offered by MBL; that means verification in the offered services. Such as –ATM, Locker services, Internet Banking etc.

      Loyal customers

      Formal training program for new employee

      Formal and Informal training program for existing employee

      On-line Banking through a smart software like FLEXCUBE.

 Weaknesses of MBL:

In the working period of Mercantile Bank Limited I personally find some lacking in the branch banking. These lacking are not a major one but management needs to improve those area. Areas where the bank needs to improve are as follows:

      Insufficient presence of modern communication equipment.

      Lack of development program for existing employee.

      Lack of fair entrepreneur class.

      Branch office is not well decorated like Head office.

      Lack of promotional activities.

      There is not sufficient Office stuff enough for operating the Branch.

Opportunity of MBL :

When we observe the overall banking function of MBL we can see the opportunity of the Mercantile Bank Limited. These are –

MBL has software like FLEXCUBE. So they can provide more quality service to the clients

 By increasing the number of branches in the rural area MBL can provide more service to the rural people as well as the urban people

Social Responsibility of Mercantile Bank Limited like – scholarship program for poor students; makes goodwill for the bank.

 Customer responsiveness

 Its up-to-date training program makes the employee more effective.

Because of on-line banking it can serve the quicker service to the clients.

  Banking sector is a most raising institution in this competitive world.

Threats of MBL:

By analyzing the functions of MBL we find out some sort of threats of the bank. These threats are not very major issue but bank need to observe these problem.

      To compete with the other commercial bank in Bangladesh; MBL need to improve their service quality

      Incumbent competitors

      New entry of competitors

      Need to increase the number of efficient employee

      Lack of promotional activities for the clients

      MBL is not well known in the rural area as well as the urban area

      Need to modernize the training program.

      This sector is much more challenging rather than other sectors.

Data Analysis:

Most common techniques for the performance evaluation of a financial institution are:

• Trend analysis and
• Ratio analysis

Trend analysis: Trend analysis is an important criterion, which can be used to evaluate the performance of a bank. The trend can represent the growth or turn down of a bank over a period of time. Here we have analyzed the trend of total import, Export, remittance, commission etc

Trend analysis of total Import:

Table: 2- Import performance of MBL

Comment: From the graph we found that the highest import was in the year of 2006 and it decreased slightly in the end of year 2007.However MBL always try to raise their present situation.

Trend analysis of total Export:

Table: 3- Export performance of MBL

Comment:

From the graph we found that the Export level increased over year 2005, 2006 and highest Export was in the year of 2007 which was BDT 34,592.10 million and it decreased slightly in the end of year 2008. However MBL always try to raise their present condition better than past.

Performance on Foreign Remittance:

Table: 4- Foreign remittance of MBL

Comment: From the above graph, we can easily clarify that amount of remittance increased over year to year. It is a positive sign for the Bank..

Performance of Import L/C Commission:

Commission income arises on services provided by the Bank and recognized on a cash receipt basis. Commission charged to customers on letter of credit and letter of guarantee are created to income at the time of effecting the transactions.

Table: 5- Import L/C Commission of MBL

 Source: Annual Report, 2008, MBL

Comment: The performance on L/C commission was better in year 2007 compare to year 2006 and 2008. It was relatively in good condition in 2007.

Exchange gain in foreign trade operations (including dealings) :

Table: 6- Exchange gain in foreign trade operations

Source: Annual Report, 2008, MBL

Letter of guarantees private:

Table: 7 – Letter of guarantees private Amount in BDT in million

Source: Annual Report, 2008, MBL

Comment: The amount of letter of guarantee (local) is turn on after year 2007 but the amount of foreign letter of guarantee was upward in year 2007 but turn down till 2008.

The study mainly focuses on the “Financial performance” and “Foreign Exchange Operations” of MBL. All the findings that are originated from my analysis are enumerated below under two broad heads:

 Findings from financial performance analysis of MBL:

After analyzing the financial and overall performance of MBL, I have identified some sort of issues which are given in below:

Liquidity: The liquidity level of the Bank is fluctuating year to year but it is not in satisfactory level. The ratio of liquid assets to total assets stood at 25.69% at December 31, 2008 as against 24.18% at December 31, 2007 .The more liquidity a firm is, more better for the firm.

Operating Efficiency: The ratio has been increased over year and in the last year (2008) it was 75.09% as against 74.54% in 2007. (Page no: 39) The operating efficiency of the bank is standard and the bank has successfully operated all the issues.

Profitability: The bank is operating with moderate profitability. ROE and ROI ratio is declining than year 2007 and 2006. The bank is losing their profitability. (Page: 38)

Capital Structure: The bank’s capital structure include both debt and equity capital. The bank has financed most of its total assets with debt. The bank’s capital adequacy ratio stood at 11.67% in 2008 as against 10.68% in 2007.

Market value: The bank’s market value (Value to the investors) is increasing year to year. It is a positive sign for the bank. The amount of investments is increasing over year. (Page 38)

Findings from foreign exchange operations analysis of MBL:

General foreign exchange service portfolio:  Foreign Exchange operations mainly include L/C, Import and export procedures. As an Authorized Dealer, MBL, Main Branch is always committed to facilitate import of different goods into Bangladesh from the foreign countries. Import Section, which is under Foreign Exchange Department of the branch.

Different Means of Payment: The bank provide different means of payment for the importers and exporters whereas they prefer. The clients make their payment by Cash in advance, Open Account, Collection Method, Letter of credit.

Concentrate on Export Incentives: The bank is currently concentrated on different types of export incentives to attract the actual and potential customers. They are Financial Incentives, General Incentives, and Other Incentives. Most of them are already implemented.

Growing fastest Correspondent Relationship: The number of foreign correspondents is 584 as of December 31, 2008. Efforts are being continued to further expand the Correspondent Relationship to facilitate Bank’s growing foreign trade transactions. The Bank is using SWIFT communication system for fast and accurate handling for foreign trade. The Bank is connected to REUTERS also for up-to-date information.

Different Accounts related to Foreign Exchange Transaction: The bank provides different accounts facilities to maintain Foreign Exchange Transaction. The clients can choose their suitable accounts facility to make foreign transaction which is more preferable. (Page-49-50)

a)      Nostro Account

b)      Vostro account

c)      Loro Account :

Performance of foreign Exchange department: Export and import performance (fig:3 and 4) of foreign exchange department of MBL is higher in year 2007. In 2008, it was slightly decreased. Amount of Foreign remittance is upward but L/C Commission was relatively lower in 2008 rather than in 2007.

Mercantile Bank Limited has been able to operate its all issues proficiently and more competently in the operations of foreign Exchange and other related perspective around the Bank. To improve the management culture and foreign exchange department’s performance in future, MBL should adopt some of the industry best practices currently. This are—-

 The bank should give close attention on its interest expense. This cost is rising over year to year. It has an affect on interest income. The bank should try to handle it on strictly and close monitoring system have been maintained.

 Amount of import and export was turn down last year but it is a concerning issue to have direct monitoring system. Foreign Exchange department’s main function is to handle export and import procedures and there is a direct relationship between amount of Export & Import and Exchange gain which is charged to customers on letter of credit and letter of guarantee are credited to income at the time of effecting the transactions. The direct monitoring and supervision process should develop where branch manager and head / in charge of the related department are hold responsible

 The bank remained selective in export trade financing in 2008. A total of 13,078 businesses were handled worth BDT 32,670.10 million in 2008. The main focal point of the bank in export financing was garments industry. The lone driving force of the economy of Bangladesh in single biggest source of foreign exchange. For that MBL should provide different incentive facilities more attractively to attract actual and potential clients.

  Total foreign remittance in a single year, in 2008 made a record high to the tune of BDT 3510.40 million. So the bank has deepened its step on the foreign soils further by establishing more and more remittance arrangements with overseas exchange companies where Bangladeshi expatriates are working.

 Moreover for prompt & safe delivery of this hard earned money to their near and dear ones in every corner of the country, the bank can established agency arrangements with some big banks.

Shortage of skilled human resource in foreign exchange department is a major problem In MBL. Vacancies should fill up with qualified and experienced personnel by offering attractive incentives. The bank should provide training facility for its existing employer for their betterment.

The procedure related with Export and Import and other formalities of foreign Exchange is so lengthy that it would take more time to finalize one transaction. The bank and Foreign Exchange department should take initiative to trim down the official formalities as possible

 For proper documentation and keeping the record, it is essential to update Management Information System (MIS). But currently they have PC Bank 2000, which is not enough for the bank.

At present the ATM, debit card, credit card etc services are so much popular. So the bank should try to make this service available for each and every client.

Conclusion:

Banking is becoming more and more vital for economic development of Bangladesh in mobilizing capital and other resources. Mercantile Bank, being a third generation bank, is also extending such contributions as to the advancement of the socioeconomic condition of the country.

It is not possible to get 100% from anywhere especially for those organizations which with mass people. MBL has some problems but it is encouraging that they are trying to overcome these obstacles.

My main objective of doing internship in a bank was to know about the Banking procedures. Though my topic is “Foreign Exchange Operations of MBL” So I have spend most of the time in this section. My experience in MBL foreign exchange department has provided me with an insight in the day –to- day operations of a bank.

sThe overall performance of MBL despite some criticism is above the average of present banking industry. Solid revenue growth together with strict discipline on expenses and a culture of sound risk management have upgraded the Bank to a level of excellence. In its pursuit of excellence, the Bank constantly reviews its systems, policies, process and prices of its products and services in line with the changing market reality. Thus, MBL intends to pave the way for a new era in banking .