Foreign Exchange Operations on Jamuna Bank Limited

Introduction:

In today’s first moving world, business is more complex and competitive. Banking is an essential industry. It is where we often wind up when we’re seeking a loan to purchase a new automobile, tuition for college or trade school, financial advice on how to invest our savings, credit to begin a new business, a safe deposit box to safeguard our valuable documents, a checking account or Credit card to keep track of when and where we spend our money.

In fact, bank is vitally of modern economy. Developed and organized banking system is a prerequisite of every kinds of economy –Capitalist, socialist, and developed and undeveloped countries whatever it may be. Today’s banking is continually becoming new- Offering new services, merging and consolidating into much larger and more complex business, and facing a new the banks that serve their citizen.

Bangladesh is not exception in this case. Marketing strategies for banking business is one of the most vital issues now in Bangladesh. After liberation, the government of the people’s republic of Bangladesh formally took over the charge of administration of different banks. The banking institutions are the custodian’s private savings and by powerful instrument to provide credit. They mobilize resources of the saving by accepting deposits. At that time, all the existing 12 banks were nationalizing.

During this year, many new haves emerged to cater the needs of the customer. They are continually trying to attract people towards them by offering new types of product and services to face competition and challenges thrown by their rival.During my Three months internship program, I’ve try to know about the overall  banking services offered by Jamuna bank limited, the problems faced by bank and the prospect they will enjoy.

 Statement of the research problem:

The topic of this report is titled “A comprehensive analysis on foreign exchange on foreign exchange operations on Jamuna Bank Limited.”

Foreign Exchange dealing is a technical job and has a greater prospect in our country. Floating exchange rate has been introduced very recently and it has put the banking sector into a new era. Bangladesh Banks total control is not there but there are some risk factors involved in it. I hereby through the internship program in Jamuna Bank Limited, wanted to find out the growth of foreign exchange, understand foreign exchange risk management, assessing the foreign exchange business, understand the real management situation and try to recommend for improving existing problems regarding foreign exchange department of Jamuna Bank Limited

Objectives of the study:

This report is prepared primarily to fulfill the Master’s of Business Administration (MBA) degree requirement in MBA program of the faculty of business studies, department of management studies, Jagannath University.

 Re secondary objectives of this report are:

• To have exposure to the credit operation and other function of Jamuna Bank Limited.
• To have a clear understanding of the business operation of Jamuna Bank Limited.
• To discuss the services offered by Jamuna Bank Limitcd.
• To assess and evaluate the growth trends of Jamuna Bank Limited.
• To evaluate the profitability of Jamuna Bank Limited.
• To identify the major strength and weakness of Jamuna Bank Limited in respect to other banks.
• To recommend ways and means to solve problems regarding banking of Jamuna Bank Limited.

Methodology of the Study:

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

The “Primary Sources” are as follows:

1. Face-to-face conversation with the respective officers and staffs of the Branch
2. Informal conversation with the clients

1    Practical work exposures from the different desks of the four  departments of the Branch covered

2  Relevant file study as provided by the officers concerned

The “Secondary Sources” are as follows:

1         Annual Report (2009) of Jamuna Bank Ltd.

2         Periodicals published by Bangladesh Bank.

3   Various books, articles, complications etc. regarding general banking function, foreign exchange operation and credit policies.

Table     Sources of Secondary Information

FRAMEWORK OF THE OVERALL STRUCTURE OF THE TOTAL WORK

Collection of Data:

Primary data are collected by using interviewing technique.

The report is an exploratory research and for qualitative survey open ended

question were ask to the Bank official.

 Population:

All the Branches of JBL located in everywhere in Bangladesh has been taken into consideration as population.

 Sample:

JBL, Motijheel Branch, is the vital sample.classification, analysis, interpretations and presentation of data; some arithmetic and graphical tools are used in this report for analyzing the collected data and to classifying those to interpret them clearly.

Findings of the study:

The collected data were scrutinized very well and were pointed out and shown as findings. Few recommendations are also made for improvement of the current situation.

Final report preparation:

On the basis of the suggestions of our honorable faculty

advisor some corrections were made to present the paper in this form.

Limitation of the study:

To prepare a report on the achieved practical experience in a short duration(only three months) is not an easy task. In preparing this report some problemsand limitation have encountered which are as follows:

 Time frame for the research was very limited. Large-scale research was not possible due to constraints.In many cases, up to date information is not published.The information regarding the competitors is difficult to get.Time was one of the concerns for not having the exact scenario.And it is my first work, and inexperience was a problem.

• Lack of previous experience to prepare this type of report and it is totally new to me as an intern.
• Foreign exchange division follows Uniform Customs and Practice for Documentary Credits (UCPDC), but within this short period, I was totally stunned to understand.
• Learning all the banking foreign exchange functions within just two months is really difficult.
• The branch too  much dependable on head office for L/C opening
• Another limitation of this report is Bank’s policy of not disclosing some data and information for obvious reason, which could be very much helpful.
• Financial statement only depicts the figures/numbers and their break down but do not clarifies the rational in most of the time. Interviewing the officials on specific disclosure items sometimes was not fruitful because of generalized answers.
• For the whole internship I had only 60 days, which was totally insufficient. So I faced time shortage extremely.
• Number of year taken as a sample is limited to come to any specific conclusion out of this study.

 Background:

Jamuna Bank Limited (JBL) is a Banking Company registered under the Companies Act, 1994 with its Head Office at Chini Shilpa Bhaban, 3, Dilkusha C/A, Dhaka-1000. The Bank started its operation from 3rd June 2001.The Bank undertakes all types of Banking transactions to support the development of trade and commerce of the country. JBL’s services are also available for the entrepreneurs to set up new ventures of industrial units. Jamuna Bank Ltd., the only Bengali named new generation private commercial  bank was established by a group of winning local entrepreneurs conceiving an idea of creating a model banking institution with different outlook to offer the valued customers,  a comprehensive range of financial services and innovative products for sustainable mutual growth and prosperity. The sponsors are reputed personalities in the filed of trade, commerce and industries.

The Bank is being managed and operated by a group of highly educated and professional team with diversified experience in finance and banking.  The Management of the bank constantly focuses on understanding and anticipating customers needs. The scenario of banking business is changing day by day, so the bank’s responsibility is to device strategy and new products to cope with the changing environment. Jamuna Bank Ltd. has already achieved tremendous progress within only eight years. The bank has already ranked as one of top quality service providers & is known for its reputation.

Corporate Information of Jamuna Bank:

Registered Office:

Chini Shilpa Bhaban

3, Dilkusha C/A, Dhaka-1000.

Company Registration Number:

C-42780 (2139)/2001

External Audior(s)

Howladar Yunus & Co

Chartered Accountants

67, Dilkusha C/A (2^nd Floor), Dhaka-1000

Legal Advisor

Mr. Habibul Islam Bhuiyan

Senior Advocate

Bhuiyan Islam & Zaidi

Advocates and Barristers

H# 29, Rd# 9/A, Dhanmondi R/A, Dhaka

Number of Branches & SME/ Agri Branches / Centers

Total Branches: 52

SME/ Agri Branches: 3

SME/ Agri Centers: 1

Allied Concern

Jamuna Bank Foundation

Hadi Mansion (4^th Floor), 2, Dilkusha C/A, Dhaka

Subsidiary Company

Jamuna Bank Capital Management Ltd (Proposed)

Chini shilpa Bhaban

3, Dilkusha C/A, Dhaka-1000

 Organizational Structure of JBL:

Organization Chart of Jamuna Bank Limited

Branch Information

Branch: 52 & SME / Agri Branch : 4

Number of employees:

Number of employees in the main branch of Jamuna bank is 65

Vision statement of the bank:

To be in the forefront of national development by providing all the customers inspirational strength, dependable support and the most comprehensive range of business solutions, through our team of professionals who work passionately to be outstanding in everything we do.

Mision statement of the bank:

Jamuna Bank Ltd will become most caring, focused for equitable growth based on diversified deployment of resources, and nevertheless would remain healthy and gainfully profitable Bank.

Will become most caring, focused for equitable growth based on diversified deployment resources, and nevertheless would remain healthy and gainfully profitable Bank. Jamuna Bank Limited aims to become one of the leading banks in Bangladesh by prudence, flair and quality of operations in their banking sector. The bank has some mission to achieve the organizational goals. Some of them are as follows as:

• Jamuna Bank Limited provide high quality financial services to strengthen the well being and success of individual, industries and business communities.
• Its aim to ensure their competitive advantages by upgrading banking technology and information system.
• JBL intends to play more important role in economic development of Bangladesh and its financial relations with the rest of the world by interlining both modernistic and international operations.
• JBL encourages investors to boost up share market.
• The bank creates wealth for the shareholders.
• The bank believes in strong capitalization.
• It maintains high standard of corporate and business ethics.
• Jamuna Bank Limited extend highest quality of services, which attracts the customers to choose them first.
• The bank creates wealth for the shareholders.
• The bank maintains congenial atmosphere for which people are proud and eager to word with Jamuna Bank Limited.
• Jamuna Bank Limited intend to provide better benefits to their customers and good returns to their shareholders.

• The bank intends to meet the needs of their clients and enhance their profitability by creating corporate culture.

Jamuna Bank Ltd will become most caring, focused for equitable growth based on diversified deployment of resources, and nevertheless would remain healthy and gainfully profitable Bank.

Product Scheme:

The products and services can be classifying in two ways & those arc.

• The deposit products & services
• The lending products   & services

Corporate Banking:

The motto of JBL’s Corporate Bankin^g services is to provide personalized solutions to their customers. The Bank distinguishes and identifies corporate customers’ need and designs tailored solutions accordingly.

Jamuna Bank Ltd. Driers a complete range of advisory, financing and operational combining trade, treasury, investment and services to its corporate client groups coin transactional banking activities in one package. Whether it is a project finance, term loan, import or export deal, a working capital requirement or a forward cover for a foreign currency transition, there Corporate Banking Managers will offer you the accurate  solution, their corporate Banking specialists will render high class service for speedy approvals and efficient processing to satisfy customer needs.

Corporate Banking business envelops a broad range of businesses and industries. Every one can leverage on our know-how in the following sectors mainly:

• Agro processing industry
• Industry (Import Substitute / Export oriented)
• Textile Spinning, Dyeing / Printing
• Export Oriented Garments, Sweater.
• Food & Allied
• Paper & Paper Products
• Engineering, Steel Mills
• Chemical and chemical products etc.
• Telecommunications.
• Information Technology
• Real Estate & Construction
• Wholesale trade
• Transport • Hotels, Restaurants
• Non Bank Financial Institutions
• Loan Syndication
• Protect Finance • Investment Banking
• Lease Finance • Hire Purchase • International Banking
• Export Finance.
• Import Finance

Personal Banking:

Personal Banking of Jamuna Bank offers wide-ranging products and services matching the requirement of every customer. Transactional accounts, savings schemes or loan facilities from Jamuna Bank Ltd. make available to all a unique mixture of easy and consummate service quality.

They make every endeavor to ensure their clients’ satisfaction. Their cooperative & friendly professionals working in the branches will make your visit and enjoyable experience.

 Online Banking:

Jamuna Bank Limited has introduced real-time any branch banking onApril 05, 2005. Now, customers can withdraw and deposit money from any of its 30 branches located at Dhaka, Chittagong, Sylhet, Gazipur, Bogra, Naogaon, Narayanganj and Munshigonj. Their valued customers can also enjoy 24 hours banking service through ATM card from any of Q-cash ATMs located at Dhaka, Chittagong, Khulna, Sylhet and Bogra. All the existing customers of Jamuna Bank Limited will enjoythis service by default.

Monthly Savings Scheme (MSS):

Savings is the best friend in bad days. Small savings can build up a prosperous future. Savings can meet up any emergences. JBL has introduced Monthly Savings Scheme (MSS) that allows saving on a monthly basis and getting a handsome return upon maturity. If anyone wants to build up a significant savings to carry out you’re cherished Dream, JBL MSS is the right solution.

 Monthly Benefit Scheme (MBS):

Jamuna Bank Limited has introduced Monthly Benefit Scheme (MBS) for the prudent persons having ready cash and desiring to have fixed income on monthly basis out of it without taking risk of loss and without enchasing the principal amount. This scheme offers highest return with zero risk. Everyone can plan your monthly expenditure with the certain monthly income under the scheme.

 Double/Triple Growth Deposit Scheme:

For people who have cash flow at this moment and want to get it doubled/tripled quickly JBL has introduced Double/Triple Growth Deposit Scheme that offers to make double/triple money within 6(six) years and 9.5 (nine and a half) years respectively resulting a high rate of interest.

 Marriage Deposit Scheme:

Marriage of children, especially daughter is a matter of great concern to the parents. Marriage of children involves expense of considerable amount. Prudent parents make effort for gradual building  of fund as per their capacity to meet the matrimonial expense _of their children specially daughters. Parents get relief and can have peace of mind if they can arrange the necessary fund for marriage of their children, no matter whether they survive or not till the marriage occasion.

It can be a great help to the parents if there is any scope of deposit of a modest mount as per their financial capacity, which groves very fast at high rate of interest yielding a sizeable amount on maturity.

With this end in view JBL has introduced Marriage Deposit Scheme, which offers you an opportunity to build – up your cherished – fund by monthly deposit ofserial, amount at your affordable capacity.

Education Savings Scheme:

Education is a basic need of every citizen. Every parent wants to impart proper education to their children. Education is the pre-requisite for socio-economic development of the country. As yet, there is no arrangement of free education to the citizens from the government level. As such, there should ^be pre-arrangement of fund to ensure higher educations the children. Otherwise higher education may be hindered due to change of economic condition, income of the parents at the future time when higher education shall be required. Today’s higher education is becoming expired day by day. Parents can get relief and can have peace of mind if they can arrange the necessary fund for higher education of their children. As such, JBI, has introduced ‘Education Savings Scheme’ which offers you an opportunity to build up your cherished fund’ by monthly deposit of small amount it at your affordable capacity or initial lump sum deposit to yield handsome amount on a future date to meet the educational expenses. Under this Scheme you have the different attractive options to avail the future benefit i.e. withdrawal of the total amount accumulated inlump sum or withdrawing monthly benefit to meet educational expense keeping die principal amount intact or to withdraw both principal and accumulated profit monthly for a certain period.

Lakhpati Deposit Scheme:

To become a lakhpati is a dream to most of the people of Bangladesh specially to the lower and lower middle class income group. They experiences their expectations and wants are enormous in nature in our small span of life. To meet our deposit and wants we need right plan. Keeping the above in mind JBL has introduced “Lakhopati Scheme” which has flexibility report of maturity and monthly installment as per affordable capacity.

 Q-Cash Round The Clock Banking:

Jamuna Bank Q-Cash ATIM Card enables the costumers to withdraw- cash variety of banking transactions 24 hours a day. Q-Cash ATMs are conveniently located covering major shopping centers, business and residential areas in Dhaka and chittagong. ATMs in Sylhet, Khulria and other cities will soon start be introduced. The network will expand to cover the whole country within a short span of time.

With customers Jamuna Bank Q-Cash ATM card they can:

• Cash withdrawal Round The Clock from any Q-Cash logo marked ATM booths.
• POS transaction (shopping malls, restaurants, Jewell Aries etc)
• Enjoy overdraft facilities _on the card (if approved)
• Utility Bill Payment facilities
• Cash transaction facilities for selective branches nationwide
• ATM service available in Dhaka and Chittagong Withdrawal allowed from ATM’s of Jamuna Bank Ltd., AB Bank, The City Bank, Janata Bank, IFIC Bank, Jamuna Bank, Pubali Bank, Eastern Bank Ltd. respectively
• And more to come Is Q-Cash

Hire Purchase:

Hire purchase is a type of installment Credit wider which the Hire  purchase agrees to take goods on hire at a stated rate which is inclusive of the repayment of principle as well as interest for adjustment of the loan within a specified period.

 Lease Finance:

Lease means a contractual relationship between the owner of the asset and its utter- fur a specified period against mutually agreed upon rent. The owner is called the Lessor and the user is called the Lessee.

Lease finance is one of the most convenient source of financing of assets viz machinery, equipment vehicle, etc. The user of the assets i.e. Lessee is benefited through tax advantages, conserving working capital and preserving debt capacity. Moreover, Lease is an off-balance sheet item 1.e lease amount is not shown in the balance sheet of the lessee and does not affect borrowing capacity.

Leasing enables the lessee to avail the services of a plant or equipment without making the investment or incurring debt obligation. The Lessee car, use the asset by paying a series of periodic amounts called “lease payment” or “lease rentals” to the owner of the asset at the predetermined rates and generally in advance. The payments may be made monthly or quarterly.

Jamuna Bark Ltd., the highly capitalized private Commercial 1 Bank in Bangladesh has introduced lease finance to facilitate funding requirement  of valued customers & growth of their business houses.

Personal loan for women Goal:

To make financially sound and solvent surd self dependent the women.

Three categories of women are under this loan-

1. Self Employed Women
2. Working Women
3. House Wife

Project Finance:

Project loan is considered as long term investment of the bank. If the period is helpful to improve the economy and has a wide market then the bank thinks about giving project loan. To give this kind of lona the bank observes the willingness of the customer, his capacity and his ability to run the project. Having obtained this kind of information the bank makes a credit report about the customers loan proposal. Interest rate on loan varies from project Ratio of investment of customer and bank varies from customer to customer and the customer’s relationship with the bank.

Loan syndication:

Bank cannot invest more then 15% of its paid up capital on one individual. When the loan amount exceeds 15% of its paid up capital then the bank share the loan with other bank for giving one individual and this is call loan syndicate.

Consumer Credit:

Consumer credit scheme is relatively new field of micro-credit activities. People with limited income can avail of this credit facility to buy any household effects including car, computer and other consumer durable. It is a special credit scheme and the customers allow the loan on soft terms against personal guarantee and deposit of specified percentage of equity. The loan is repayable by monthly installment within a fixed period.

Import and Export handling and financing

 import Financing:

Is the most important method of import -financing International trade take place between sellers and buyers located in different countries. The parties to a trade transaction are not always known to each other. Even if they are known to each other the seller may not have full confidence in the carried worthiness of the buyer or the buyer may not like to pay before he actually receives the goods. In letter of credit the bankers credit worthiness is substituted for the credit worthiness of the importer. Under a bank- cards letter of credit, the issuing bank gives a written undertaking on behalf of the buyer that the bank will honor the obligation of payment or expectance as the case may be on presentation of stipulated documents. As the request of the importers bank issue the letter of credit at a merging by the govt. instruction. Bail: does not generally issue the letter of credit less then 50% margin. JBL follow the margin prescribed by the government strictly.

 Export Financing:

The Exporter needs finances at various stages, some at pre-shipment stage and the other at the post shipment stage.

HomeLoan Scheme

To meet the growing need of housing for middle and lower-middle income people, JBL has introduced Home Loan Scheme. We also support the Bangladesh Bank’s Home Loan Refinance Scheme. The Scheme will also boost up the growth of housing sector. Such loan shall be available for purchase or construction of new apartments for self-residing purpose.

Overseas Employment Loan Scheme:

Overseas Employment Loan Scheme is designed to facilitate the Bangladeshi youths seeking employment abroad but unable to meet the expenses to reach the workplace from their own sources. The ultimate objective of the scheme is to promote skilled -skilled manpower to different countries across the world as well as to provide support to Government Policy considering priority of this sector. By availing loan under this scheme, the active youths of middle and lower middle class can get overseas employment by avoiding borrowing from the illustrious class or village ‘mohajon’ at a very high cost or selling their paternal properties. The scheme will also help fetching foreign currency

for the country as well as fulfill the Bank’s commitment to encourage Micro-lending for poverty alleviation, improve the quality of life and thereby contribute to socio economic development of the country.

 Principal activities of Jamuna bank Ltd:

The principal activities of the bank are to provide all kind of commercial bank activities encompass a wide range of services including excepting deposits, making loans, discounting bills, conducting money transfer and foreign exchange transactions and performing other related services such as safe keeping, collections, issuing guarantees, acceptances and letters of credit to its customers through its branches in Bangladesh.

SWOT Analysis of JBL:

In the competitive area of marketing are SWOT analysis is based on product, price, place and promotion of a financial institution like private Bank. By doing the SWOT analysis it is possible to find out the strengths, Weaknesses, opportunities, and threats of the JBL. From the SWOT analysis we can figure out on going scenario of the Bank.

SWOT Analysis

 Identification of SWOT of the organization:

SWOT analysis two factors act as prime movers

  Internal factors which are prevailing inside the concern which include Strength and Weakness.

  On the other hand another factor is external factors which act as opportunity and threat.

Strength:

1. The bank provides quality service to the clients compared to it other contemporary competitors.
2. Experienced bankers and corporate personnel have formed the management.
3. The bank recently introduce on line banking which enable it to automate all of its operations. At present, several banking functions are performed by computers. The bank is also a member of SWIFT (Society for Worldwide Inter bank Financial Telecommunication) alliance Access which enables the bank to exchange critical financial messages swiftly and cost effective.

Weaknesses:

1. Delegation of authority is centralized which makes the employee to realize less responsibility. Thus, the employee morale is deteriorated.
2. The credit proposal evaluation process is lengthy. Therefore, sometimes valuable clients are lost and the bank becomes unable to meet targets.
3. No substantive use of Annual Confidential Report (performance evaluation form of the employee) to reward or to punish the employee. Hence the employee becomes ineffective.
4. The bank lacks aggressive advertising and promotional activities to get a broad geographical coverage.
5. Computer facility for all the officers is not available. Moreover, all the officers have no computer knowledge.
6. The bank has no any research and development division.

Opportunities:

1. The bank can introduce more innovative and modern products and services for then customers.
2. It can diversity its portfolio by taking new sector.
3. Many branches can be opened to reach the bank’s services to the remote areas.
4. It can recruit more efficient and experienced persons to give fast and efficient service to the customers

Threats:

1. The common attitude of Bangladeshi clients is default.
2. Multinational as well as the fast growing local banks with modern products and services are capturing huge market within short period a resulting to switch over the existing customers of the bank.

3. Bangladesh Bank Sometimes requires Private Commercial Banks to be abides by such rules and regulations which are not suitable foe every commercial Bank.

 Practical experience gathered through doing Internship in Jamuna Bank in Foreign Exchange:

By doing internship in Jamuna Bank I got some experience about the foreign trade. International trade is the system by which countries exchange goods and services. Countries trade with each other to obtain things that are better quality, less expensive or simply different from what is produced at home.

To buy foreign goods or services, or to invest in other countries, companies and individuals may need to first buy the currency of the country with which they are doing business. Generally, exporters prefer to be paid in their country’s currency or in U.S. dollars, which are accepted all to the world. Sometime it is paid by EURO and ACU dollars. ACU dollars country are related to India, Iran, Nepal, Pakistan, Sri Lanka, Bhutan and Myanmar will be reported to BB at ACU Dollar.

The procedures used to exchange currency in international trade are called foreign exchange system, banks plays vital roles in this procedures world widely. The Bangladeshi banks provide foreign exchange services under, Foreign Exchange Act, 1947 is for dealing in foreign exchange business, and Import and Export Control Act, and 1950 is for Documentary Credits. JBL has also become a member of SWIFT (Society For Worldwide Inter Bank Financial Telecommunication) in 2001, which provides a fast, secured & accurate communication network for financial transactions such as letter of credit, fund transfer etc. As an authorized dealer under regulations of BB, JBL Dhanmondhi Branch provides the followings three type services under their foreign exchange department.

  Import Services

  Export Services

  Remittance Services

Foreign Exchange Accounts Offered By JBL:

Following the liberalization of exchange controls Bangladesh Bank has authorized the banks to maintain different types of foreign currency accounts and convertible Taka accounts. The following are the regulations laid down by Bangladesh in respect of these accounts.

 Who can open the accounts?

Branches of Jamuna Bank Limited may open Foreign Currency Accounts in the names of:

1.                      i.            Bangladesh nationals residing abroad
2.                    ii.            Foreign nationals residing abroad or Bangladesh and foreign firms operating in    Bangladesh or abroad,
3.                  iii.            Foreign missions and their expatriate employees.

 Resident Foreign Currency Deposit (RFCD):

This is a foreign currency denominated account. Those who domicile in Bangladesh but have to remit money to abroad because of various reasons.

 Non Resident Foreign Currency Deposit (NFCD):

This is a foreign currency denominated account. Those who doesn’t domicile in Bangladesh but have to remit money to Bangladesh because of various reasons.

Import Services

Is the most important method of import -financing International trade take place between sellers and buyers located in different countries. The parties to a trade transaction are not always known to each other. Even if they are known to each other the seller may not have full confidence in the carried worthiness of the buyer or the buyer may not like to pay before he actually receives the goods. In letter of credit the banker’s credit worthiness is substituted for the credit worthiness of the importer. Under a bank- cards letter of credit, the issuing bank gives a written undertaking on behalf of the buyer that the bank will honor the obligation of payment or expectance as the case may be on presentation of stipulated documents. As the request of the importers bank issue the letter of credit at a merger by the govt. instruction. Bill does not generally issue the letter of credit less then 50% margin. JBL follow the margin prescribed by the government strictly.

 Import Section of JBL:

As a authorized dealer the major import items financed by JBL, Nayabazar IB branch are capital machinery, Tractor, electronic equipment, Stainless Steel, Non Alloy Steel, Fruits, Raw Material of Garments, chemicals, raw cotton, garments accessories, fabrics, cotton etc. To import, a person should be competent to be an importer. According to Import and Export (Control) Act, 1950, the officer of Chief Controller of Import and Export provides the registration to the importer. After obtaining this, the person has to secure a letter of credit authorization (LCA) from Bangladesh Bank. And then a person becomes a qualified importer. He requests or instructs the opening bank to open an L/C.

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

Import procedures:

Registration with CCI&E:

For engaging in international trade, every trader must be first registered with the Chief Controller or Import and Export. By paying specified registration fees and submitting necessary papers to the CCI&E. the trader will get IRC (Import Registration Certificate). After obtaining IRC, the person is eligible to import.

Purchase Contract between importers and exporter:

Now the importer has to contact with the seller outside the country to obtain the Proforma invoice/indent, which describes goods. Indent is got through indenters a local agent of the sellers. After the importer accept the proforma invoice, he makes a purchase contract with the exporter declaring the terms and conditions of the import. Import procedure differs with different means of payment. In most cases import payment is made by the documentary letter of credit (L/C) in our country.

Collection of L/C A form:

After scrutinizing all the documents carefully, officer of JBL delivers the following forms to be filled up by importer and banker should check:

The forms are:

• Import Mercendised Permit Form (IMP).

• L/C Application Form (L/CAF).

• L/C Authorization Form (L/CAF).

 Opening a Letter of Credit (L/C)

Bank provides guarantee to importer and exporter through Letter of Credit. Thus the contract between importer and exporter is given a legal shape by the banker by its ‘Letter of Credit’. The process of opening L/C regarding to import through JBL, Dhanmondhi branch are as following:

Interview of probable L/C opener:

At first in case of import L/C opening opener must give an oral interview to the responsible officers of JBL. If the officers are satisfied with opener’s motive of import, type of import goods, quality of imported goods and marketability of goods than they will give approval to opener to further steps.

Application for L/C limit

Before opening L/C, importer applies for L/C limit. To have an import L/C limit, an importer submits an application to the Department of JBL furnishing the following information,-

  Nature of business.

  Required amount of limit.

  Payment terms and conditions.

  Goods to be imported.

  Offered security.

  Repayment schedule.

 Application of Opening L/C

After getting the importer applies to the bank to open a letter of credit on behalf of him with required papers. Documentary Credit Application Form:

a)       An application.

b)       Indent or Performa Invoice.

c)       Import Registration Certificate (IRC)

d)       Taxpayer Identification Number (TIN)

e)       Insurance cover note with money receipts

f)        A bank Account.

g)       Membership of chamber of commerce.

h)       VAT register certificate.

i)         IMP form duly signed by the importer.

j)        L/C authorization form (LCAF) duly signed by the importer.

 Time limit for opening L/C

L/C (s) will be open within 180 days from the date of issuance of LCAF or from the date of registration of LCAF with Bangladesh Bank.

Terms of L/C

Full description of the goods along with quantity and unit price to be incorporated in the L/C and shall take all precautions to quote the correct H.S. Codes of the goods. Prices to be quoted on CER or FOB basis according to the Proforma/Invoice or Indent. No import will be made on CIF basis without prior approval from the Ministry of Commerce. All L/Cs should provide for payment to be made against full sets of on board (shipped) transport documents drawn and/or endorsed to cover by the credit to a destination in Bangladesh. All L/Cs must specify submission of signed invoices, certificates of origin & pre-shipment Inspection Certificate. L/Cs shall also incorporate any other documents, which are mandatory specified for those commodities in the IPO/Public Notices/Bangladesh Bank Circulars. It is not acceptable to open import L/Cs in favor of beneficiaries or to use shipping carriers of the countries from which import into Bangladesh are banned by the competent authority.

Shipment Validity & Expiry

All L/Cs must specify shipment validity as per terms of the Proforma/Invoice or indent or L/C application. However, shipment validity under any circumstances shall not exceed 9 (nine) months from the date of issuance of LCAF or registration LCAF with Bangladesh Bank excepting capital machinery and spare parts shipments of which will be made within 17 (seventeen) months. All L/Cs must stipulate an expiry date and a place for presentation of documents for payment/acceptance.

Forwarding Documentary Credit through Advising Bank

There are usually two banks involved in a documentary credit operation. The issuing bank and the 2nd bank, the advising bank, is usually a bank in the seller’s country. The issuing bank asks another bank to advise or confirm the credit. If the 2nd bank is simply “advice or 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 confirming bank.

 Submission of Necessary Document

As soon as the Importer / exporter receives the credit and is satisfied that he can meet its terms and conditions, he is in position to load the goods and ship 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 by me 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

 Bill of exchange: According to the section 05, Negotiable Instruments (NI) Act unconditional order signed by the maker, directing a certain person to pay [on or to the order of a certain person or to the bearer of the instrument. It may be either at sight or certain day sight. At sight means making payment whenever documents will reach in the issuing bank.

Commercial Invoice: Commercial Invoice issued by exporter is the accounting document by which the seller charges the goods to buyer.

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

Lodgment of Documents

If the documents are found in order or the discrepancies in the document if any, are subsequently accepted by the applicant, the branch will record the particulars of the documents in the PAD Register.

Retirement of Documents

JBL advise Importer about the date of lodgment of documents with full particulars of shipment to retire the   documents against payment or to dispose the import documents as per prearrangement, if any. Subsequent reminders are also to be issued every week till retirement of the bill. Such bills will be considered and be reported as overdue if the importer fails to retire the documents within 21 days of arrival of the relative import consignments at the port of destination.

Cancellation of L/Cs

An irrevocable letter of credit cannot be cancelled by the customer without the agreement of the beneficiary and all liable banks. A revocable letter of credit can be cancelled at any time by the opening bank – usually on the instructions of the letter of credit customer – without prior notification to the beneficiary. However, revocation (cancellation) can only be affected if the documents have not been accepted by the nominated bank.

The JBL, Dhanmondhi branch at the request of the importer may approach the L/C advising bank for cancellation of the L/C and such cancellation will only be effective upon consent of the beneficiary advised to the branch through the L/C advising bank. However, the JBL, Dhanmondhi branch may cancel the L/C without the consent of the beneficiary. Advising bank and confirming bank, if any, if the L/C expires and the JBL, Dhanmondhi branch receives no shipping documents within 15 days of expiry of the L/C. The branch should send a massage to the concerned bank advising such cancellation and closure of L/C file due to expiry of the same. The JBL then cancels the Reimbursement Authorization, which has been provided to the Reimbursement Bank while opening the L/C. The branch will reverse L/C contra liabilities, refund margin and recover charges from the L/C applicant as per schedule of charges.

Import Financing by JBL

Payment against Document (PAD)

The JBL, Dhanmondhi branch starts PAD procedure after getting all documents from the exporter of importer as evidence of exporting goods. Documents required for PAD is mentioned below:

  Original (Non-negotiable) bill of Leading.

  Bill of exchange.

  Packing List.

  Certificate of Insurance.

  Commercial Invoice.

  Certificate of Origin.

  Clean Report of Findings (CRF).

  Pre-shipment Inspection Certificate.

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. But if there is any discrepancy in the documents, the L/C issuing bank send message to the negotiating bank to rectify it under its risks and responsibilities. If there is no available in cash in importer’s hand, he can request the bank to grant loan against the documents for the purpose of post import finance. There are two following forms of post import finance available in JBL, Dhanmondhi Branch.

 Loan against Trust Receipt (LTR)

Under this LTR, Loan is allowed by JBL only to first class importers. Here only on the basis of trust without paying JBL anything or a partial amount, the importer takes the documents. Then importer is allowed 60-90 days time to make payment.

 Loan against Imported Merchandise (LIM)

The imported goods come to the port the party may fall into financial crisis and requests JBL to clear the goods from the port making payment to the exporter. In this case the party later may take the goods partly or fully from JBL by making required payment, if he/she takes the goods time-to-time payment will be adjusted at the same time.

On the arrival of goods and lodgment of import documents, importer may request the bank for clearance of goods from the port (custom) and keep the same to bank go down. Proper sanction from the capable authority is to be obtained before clearance of consignment. For giving these types of lone, officer makes loan proposal and sends it to H/O for approval. After getting approval from H/O, bank grants loan in the form of either LTR or LIM.

 Accounting Dealing:

LIM/LTR creation:

After payment of the loan or delivery of goods:

U.S Dollar: The documentary credit opened on US Dollar is reported to BB under this category.

ACU Dollar: The export import related to India, Iran, Nepal, Pakistan, Sri Lanka, Bhutan and Myanmar will be reported to BB at ACU Dollar.

EURO: The documentary credits opened with EURO exchange based countries are reported under this category.

 Documentation of Import section

An Import document is a written statement of essentials of proof or evidence arising out of particular transaction, which on placement may connect the parties there to answerable and liable to the law for satisfaction of the charge in question.

The execution of documents in proper from and according to the requirements of the law is known as documentation. The Import documentation does establish a legal relationship between the Issuing bank and the Importer. The terms and conditions of L/C, the commission charged and the repayment schedule are recorded in writing Proper documentation is necessary to protection in the bank. Documents are necessary for the acknowledgement of the bank by the importer and charging of L/C to the bank by him. Proper and correct documentation is essential not only for the safety of advance but also necessary for taking legal action against the Importer in case of non-repayment of dues. Depending on the types of L/C and different documents are required. Such as:

  L/C copy

  Description of goods.

  Bill of exchange

  Commercial invoice

  Bill of lading

  Commission charge

  Packing list

  Proforma Invoice

  Import form

  Pre-shipment certificate

Import Business

The total import business handle by the bank in 2009 was Tk. 46684.73 million compared to Tk. 30311.71 million in the preceding year registering a growth of the Tk. 16373.02 million being 54.02 percent. A sizeable L/C was also opened by the bank in the year under review. The import items include industrial raw material, machinery, consumer goods, fabrics, accessories, food item etc:

 Source: Annual Report of Jamuna Bank Ltd.

Charges for Import Business

International trade is the system by which countries exchange goods and services. Countries trade with each other to obtain things that are better quality, less expensive or simply different from what is produced at home.