Import Division Focusing on L/C of the City Bank Limited

Import Division Focusing on L/C of the City Bank Limited

Executive Summary

This report on “Import Division Focusing on L/C of The City Bank Limited is submitted to MRS.MAHMUDA AKTER, Assistant Professor, Department of Accounting and Information Systems, Faculty of Business Studies, University of Dhaka. This report was prepared as a requirement of internship program.

 As an intern I have worked in Foreign Exchange Division of The City Bank Limited, Dhaka New market branch for three months. As an intern, i had the opportunity to do different types of tasks related to Foreign exchange, which broadened his perception about The City Bank Limited operation. During this period, i used my observation and gained experience about various banking functions and day-to-day operation regarding the foreign Exchange.

 The City Bank Limited is one of the largest and oldest commercial bank in Bangladesh whose operations dates back to 1983. Today over the country & about three hundred oversea correspondences covering all the major cities and business center of the world.

 The City Bank Limited services encompass wide diversified areas of trade, commerce & industry which tailored to the specific needs of the customers and are distinguished by an exceptional level of prompt and personal attention. Over the years the Bank has expanded the spectrums of Its Services. The extensive and ever growing domestic network provides and carries various products and services to the doorsteps of millions.
The City Bank Limited has already introduced some new Banking products like duel currency Credit Cards, ATM and Online services which has created attraction among the clients. The Bank is going to introduce real time Internet, SMS and Phone Banking systems with all modern delivery channels.

In this report basically I emphasis on the various rules and regulations of foreign exchange and it’s different parts like L/C, Export, Import, Remittance etc.

The vision of The City Bank Limited is to make it an experience, which delight the customer and an environment where the people excel. This bank has earned a good place in the hearts of Bangladeshi people for its long-standing service and quality.

I again at the end of the summary would like to express my special thanks to my internal supervisor, Md. Nur Hossain, Second Officer. Mr S.K. Gulam Sarker, Manager, . And all my colleagues of The City Bank Limited, Dhaka New market branch for providing me all the guidance and support that I need.

Besides, my thanks go to all the other member of The City Bank and all my family members and friends for their co-operation at different level of my study.


The City Bank Limited is the first private sector Bank in Bangladesh. The Bank has been operating since 1983 with an authorized capital of Tk. 1.75 Billion under the entrepreneurship of twelve prominent & leading businessman of the country. The noble intention behind starting this Bank was to bring about qualitative changes In the sphere of Banking and Financial management. Today The City Bank serves it’s customers at home & abroad with 82 branches spread over the country & about three hundred oversea correspondences covering all themajorcitiesandbusinesscenteroftheworld.

The services encompass wide diversified areas of trade, commerce & industry which tailored to the specific needs of the customers and are distinguished by an exceptional level of prompt and personal attention. Over the years the Bank has expanded the spectrums of Its Services. The extensive and ever growing domestic network provides and carries various products and services to the doorstepsofmillions.

The City Bank Limited has already introduced some new Banking products like duel currency Credit Cards, ATM and Online services which has created attraction among the clients. The Bank is going to introduce real time Internet, SMS and Phone Banking systems with all modern delivery channels at an early date.
For significant performance, The Bank has earned national & international recognition. The City Bank Limited was one of the 12 Banks Of Bangladesh among the 500 Banks in Asia for it’s asset, deposit & profit as evaluated by “ASIA WEEK” In The Year 2000. Other than that, The City Bank Limited received the “Top Ten Company” award from the Prime Minister of the People’s Republic OfBangladesh.
We have a distinguished Board Of Directors which consists of thirteen successful and reputed businessmen. Mr. Deen Mohammad, a top leading businessman, industrialist, pioneer personality & entrepreneur of private sector’s Bank in BangladeshstheChairmanoftheBank.
Mr. Abbas Uddin Ahmed a dynamic, nationally & internationally reputed Banker is the Managing Director of the Bank. After taking his charge as chief executive in the year 2000, the Bank’s entire activities have achieved tremendous momentum. Since then, the overall scenario of the Bank has been Changed drastically and started making nonstop progress

Board of Directors

Vice Chairman
Mr.RajibulHuqChowdhury Director Mr.AhmedRajeebSamdani
Mr. Mobarak Ali
 Mr. Dilwar. H. Choudhury (CC)
Managing Director

 Origin of the Report:

As part of the completion of Graduation period, the reports on different desk works in the branch had been assigned by personnel and administration division of The City Bank Limited. This report shows my desk work on foreign exchange for the stipulated period.


  • To reflect tile level of understanding the issues on foreign exchange.
  • To understand how foreign exchange desk work is completed.
  • To work in a group environment.

The Work approach:

  • The report shows the practice of foreign exchange with studyof banking operation.
  • It shows the functions of foreign exchange.
  • It shows how a bank perform foreign exchange business.


  • From different circular and letter of Bangladesh Bank & Head Office.
  • Synopsis from The City Bank Training Institute.
  • “Guidelines for Foreign Exchange Transactions” issued by Bangladesh Bank.


 Import is the flow of goods and services purchased by economic agents located in one country from economic agents located in another another.

Import Policy

 Under the imports and Exports (Control) Act, 1950 the Government of Bangladesh formulates the import Policy through Ministry of Commerce.

The Existing Import Policy (1997-2002) has come into effect from June 14, 1998 to June 30-2002. (It can be reviewed every year if needed).

Main Features of Import Policy

A. Different import facilities

1. Import Facility up to 52.000 for actual user without permission

2. Import facility on the basis of direct payment in foreign countries

3. Import under L.C. L.C must be irrevocable. But in case of perishable items like food from $5,000 to $ 7,500 transported by road L/C in not required.

4. Import through LCA/ Letter of Credit Authorization) form without opening of any L.C Books, Magazines, Publications (on the basis of sight draft/ Usance bill).

5. Government sector bodies can import without any license, permit and IRC.

6. 6. Special import facility for non resident Bangladeshi scientists doctors, engineers etc. to import instruments and appliances without any permission

7. Commercial import by cash payment only.

B. Liberalization measures

8. The number of banned and conditional items has been reduced to 121 from 703

9. Maximum customs duty has been reduced to 37.5% in 199-2000 budget: Nominal tariff rate has been reduced to 20.3% (1991/92-57.5%)

C. Policy measures for export expansion

10. Import to EPZ and export from it beyond the purview of this policy. It will be regulated by respective BB and NBR orders.

11. BEPZA, BSCIC and BOI have been treated as patron organizations in the case of industrial capital machinery import

12. Facility of imports for export- oriented industries by Govt, Foreign Exchange rate. :

D. Policy measures assisting industrial development

13. Industrial raw materials and capital goods can be imported without opening L/C

14. L/C on import of capital machinery and spare parts for new industrial unite can be opened without IRC (Import Registration Certificate).

 Import Restrictions

In the schedule-1 there is a list of banned items, which cannot be imported.

In Schedule-2 there is a list of restricted items, which import subject to fulfillment of certain conditions.

General Conditions for commodity Import

     Using of ten digits H.S Code is compulsory according to Import Trade Control Schedule1988.

     No goods can be imported from Israel or produced in Israel and transportation by the Israeli flag carrying ships is prohibited.

     Goods must be imported through Bangladesh flag carrying ships. For individual importers maximum 20 ton and for group importers maximum 100 ton is allowed to be transported through foreign ships. In other cases, if foreign ship is required, the Certificate of waiver must be taken from directorate of Sea Transpiration.

     In case of export-oriented industries, shipment is permitted through ships of other countries.

     Import must be made at highest completive price.

     Import on CFR or FOB basis can be done by road, sea and air ways. In case of import on FOB basis, Purchase of Insurance Cover Note from Saharan Bema Corporation or any other local insurance companies is required Import on C.I.F basis is not permitted without prior approval of Ministry of Commerce.

     Importers are bound to submit import reared document at any time to chief Controller of import and Export if required.

     Radioactivity certificate is compulsory for the import of food items (Except Cigarettes Cigarette paper, pipe tobacco, wine, spices, drugs)

     Country of origin should be mentioned clearly in case of all imports. (This certified that the goods are produced in a auricular country )

     Pre-shipment inspection is compulsory for all imports of goods and services excelling public sector imports Pre-shipment charge-1% of CFR Value of Imports.

Import Procedure

  1. 1.    The Importer must obtain Import Registration Certificate (IRC) from the CCI&E. submitting the following papers:
  1. 2.    Then the importer has to contact with the seller outside the country to obtain the preformed invoice.
  1. 3.    After the importer accepts the Proforma Invoice, he makes a purchase contract with the exporter detailing the terms and conditions of the import.
  1. 4.    After making the purchase contract, import procedure differs with different means of payment. In most cases import payment is made by the documentary letter of credit in our country.
  1. 5.    Requesting the concerned bank (importer’s bank/issuing bank) to open an L/C (Irrevocable) on behalf of importer favoring the exporter/seller.

Papers required at the time of opening an L/C:

      Import Registration certificate

      Trade License

      IMP Form

      Letter of Credit Authorization (LCA) form

      Indent in case of indented

      Credit report of the importer

      Credit report of the seller should be collected from correspondent bank

      In case of F.O.B C&F insurance cover note

      In case of quota item, quota allocation paper.

The Collection procedure through is

      Bank serves it’s L/C application form-affixing stamp, which acts as the contract between the importer and the opening bank.

      Importer submits the L/C application form duly signed along with IMP form (undertaking of the importer) and LCA form (authorization for opening of L/C).

      It is required to arrange margin from banker’s end. If L/C will be opened with 100% margin then bank collect full value of L/C.

      After opening of the L/C, issuing bank telexes or transmits the L/C by mail to the advising bank and request the advising bank located in the seller’s/exporters country to advice the L/C to the beneficiary. The issuing bank may also request the advising bank to confirm the credit if necessary. (The advising bank may be a branch of the opening bank or a correspondent bank).

      The advising bank advises/informs the seller that the L/C has been issued.

      As soon as the exporter/seller receives the L/C and is satisfied that he can meet the L/C’s terms and conditions, he is in a position to make sipment of the goods.

      Exporter produces and ships the goods as per L/C terms.

      After making shipment of goods in favor of the importer the exporter/seller submits the documents to the negotiating bank for negotiation.

      Negotiating bank scrutinizes the documents and if found O.K. negotiates the documents (Pays the amount to the beneficiary and sends the said documents to the L/C issuing bank.

      After receiving the documents the L/C issuing bank also examines the documents and if found O.K. makes payment to the negotiating bank.

      The L/C opening bank then requests the importer to receive the documents on payments.

      The importer after paying all dues receives the documents from the L/C issuing bank and then releases the imported goods from the port authority with the help of clearing and forwarding agent.

      C&F agent clears the goods from the …and hands over the goods to the importer.

      After completion of all official requirements, C&F agent submits the bill of entry to the bank.

Scrutiny, Lodgment and Retirement of Import Bills.

            In credit operations all porters concerned deal with documents and not with goods. Services other performances to which the documents may relate (Article+ of the UCP)

            The bank may only effect payment against documents conforming to the requirements of the credit in every respect. The bank cannot decide whether an irregular in the documents is important or irrelevant. The bank has only to examination of the documents on their face to ensure that conform to terms and conditions of credit. Examination of the documents generally includes checking the following points.

1. Completeness.

2. Contomay with all terms or the credit

3. Consistency of documents with each other

4. Compliance with the UCP of the international chamber of commerce

There are a number of documents involved the execution of an import and export transaction. These mainly broadly grouped into two categories

1. Substantive documents.

2. Auxilary documents

1. Substantive documents.

Substantive documents are those which are normally required to be furnished and almost all the contracts for sale of goods to overseas buyer and they include

      Draft of bill of exchange

      Commercial invoice

      Bill of lading or airway bill

      Marine Insurance Policy.

2. Auxiliary Documents

            In addition to Substantive documents the exporter may be required to prepare other documents, called auxiliary documents. The number and type of those documents depends on the terms of the contract and or the L/C but they mainly include:

     Packing list

      Consular invoice

      Certificate of origin

      Inspection certificate

      Quality control certificate

      USP certificate

We receive bills negotiated by foreign bank drawn under Letter of Credit established by us immediately upon receipt of same the all the documents are required to be examined thoroughly to ensure than the terms and conditions as laid down in the Credit have been Complied win

Basic points of checking documents are as follows

 i) Letter of credit:

     Whether the documents have been negotiated or presented before expiry of the credit?

     Whether the amount drawn exceeded the amount available under the credit

ii) The Invoice

     Is the invoice made out in the as the credit indicates?

     Is the invoice made out in the name of the buyer with the same address specific in the credit?

     Does the invoice agree exactly with the credit as regards description of good value of goods; unit prices & delivery terms ?

     Any special notation confirmation & attestation were specified in the credit an those have been complied with on the invoice and if required duly signed.

     Does the invoice evidence the following: Shipping Marks / Terms of delivery weight data & Import License Number etc. (if any)?

iii)        Bill of Exchange:

     Is the Bill of Exchange drawn in the language of the credit?

     Is the Bill Exchange properly prepared according to the credit conditions?

           (On sight or time basis) and drawn on the specified bank?

     Is it properly dated & signed?

     Is the amount in figures corresponding exactly with the amount in word?

     Does it contain all the prescribed notations & clauses?

     Does it contain the date which is within the LC validity?

     As a rule the amount of the bill of exchange must agree with the invoice amount .Is it properly endorsed?

 iv) The Bill of Lading:

     Do the credit stipulations regarding the parties to be mentioned in the Bill of Lading (shipper, order consignee, notify party as well as special notations and indications are in agreement in the Bill of Lading ?

     Have the provisions of the LCPDC been observed? A special authorization is required in the credit to enable the banks to accept the following Bill of Lading:

      Charter party Bills of Lading

      Bills of Lading issued by a freight forwarder if the forwarder does not act as carrier or as the agent of a named carrier.

      Received for shipment Bills of Lading.

      Bills of Lading showing stowage on deck.

      Bills of lading that are net clean i.e. those containing a notation declaring defective condition of the packaging and or of the goods.

      Has the Bill of Lading been made out in the prescribed form (Order Bill of Lading or Bill of Lading made out to a named party) ? Is it endorsed (if necessary)?

      Do the details of package units (cases, number, marks & weight etc.) agree with the other documents?

      Is there no contradiction between the notation on freight payment and the payment terms (CFR & CIF: Freight prepaid).

      Is the Bill of lading properly signed?

      Have subsequent “On Board” notations and other changes been initialed by the carrier or its agents?

v) The Insurance Documents:

     Is the insurance documents specified in the submitted?

     Does the insurance cover the risks mentioned in the credit in the currency of the credit and for the prescribed amount but loss than CIF value?

    Are the insurance documents neither dated nor later than the shipping documents?

     Does the insurance policy certificate agree with other documents as regards description weight & marks of the goods, mode of transport & the route?

     Are all the copies issued by the insurance company attached and so far as necessary endorsed?

vi) Certificate of Origin:

     Is the certificate of origin of merchandise is given as stipulated?

vii) Additional Documents:

Additional documents called for in the credit if any e.g. plucking list weight certificate, consular invoice, inspection certificate etc. to be checked whether drawn and issued in accordance with the term of the credit.

Articles 13 (b) of CCP states that the issuing bank confirming bank. If any or a nominated bank acting on their behalf shall each have a reasonable time not to exceed seven banking days following the day of documents to examine the documents and determine whether to take up or refuse the documents and to inform the party from which it received the documents accordingly.

Unless otherwise expressly stated in the credit documents are to be accepted as it is presented.

3.         On scrutiny if it is found that the documents drawn are in conformity with the terms of the credit i.e. the documents are in order the bank lodges the documents in PADBE and the following vouchers are passed:

Debit – PAD (Payment against Document)                    Tk………………….

            (Converted the till amount at B.C rate prevailing on the day of lodgment)

Credit – H.O. A/C……………                                      Tk. …………………

            (by the bill amount converted at T.T. rate prevailing on that date & credit advice is sent along with a statement of the transaction.)

Credit – LA – Exchange Earning……….                Tk. …………………

Reversal of Contra Liability Voucher                               Tk. …………………

Debit – Bankers liability for acceptance on L.C Tk. …………………

Credit – Customers liability for acceptance on L/C        Tk………………….

      The shipping documents then stamped with PAD/BE number & entered in the PAD / BE register.

      As soon as the above formalities are completed the importers are service than PAD / BE bill emanations for document of concerned import documents.

4.         On interim on the importer calls on the Bank & counter requesting retirement of the shipping documents against payment to the sent of their account by the bill amount and other charges payable Bank prepares cost memo in printed from on account the concerned party giving detailed head of charges payable referring as under:

LC No…………………………………………………………………………………………

Bill No. ………………………………….. For…………………………………………….

Converted into…………………………………………………………    Tk.

Int. @%from……………………….. To………………………… (Days)         Tk.

Commission…………………………………………………………….    Tk.

Agents charges………………………………………………………..   Tk.

Postages………………………………………………………………….   Tk.

Others……………………………………………………………………..    Tk.

                                                                                                   Total Tk.

The City Bank Limited

New Market Branch, Dhaka

Import figure 2006

As on30/12/2006

MonthTarget Achievement% of AchieveExcess/Shortfall

In 2005 Import target was250.00Crore

Acheivement:186.64 crore.

Import Perspective


Foreign Exchange

Foreign Exchange is the pivotal department of any modem bank. The phenomenon “Foreign Exchange” arises for International Trade of a country is not confined in its own territory rather it deals with most of the countries of the world so far business is concerned. So international bade and international money and capital movement are the basis of foreign exchange dealings, ‘the existence of national monetary units possesses a problem in the settlement of International Transactions. The exporter would like to get payment in the currency of his own country. A need therefore arises for conversion of the importers currency into that of exporters currency. Foreign Exchange is the mechanism by which the currency of one country gets converted into the currency of another country. ‘1’he Authorized Dealer or AD branches of a bank do the conversion of currencies. Banks maintains foreign currency account in foreign banks for the purpose of payment and repayment for different purpose.

On the other hand foreign exchange department of an AD branch plays a vital role in intermediation. Foreign exchange department acts as a media between Exporter and Importer. Opening LC, Payment of Foreign bills, FDD and all transactions relating foreign Exchange department of a bank does foreign currency and foreign trade.

Definition of Letter of Credit:

A Letter of credit is a ‘Credit Contract’ whereby the buyer’s bank is committed become a guarantor on behalf of the buyer to make payment of money at the seller’s disposal under some agreed conditions.

The Uniform Customs & Documentary Credit (UCPDC) published by

International Chamber of Commerce 1993) Revision, published No. 500 defines Documentary Credit (Article2):

 Any arrangement, however named or described, whereby a bank acting at the request and on the instructions of a customer or on its own behalf,

 i.   Is to make payment to or to the of third party or is to accept and pay bills of exchange drawn by the Beneficiary, or

 ii.   Authorizes another bank to effect such payment or to accept and pay such bills of exchange (Drafts),

 iii.   Authorizes another bank to negotiate, against stipulated documents, provided that the terms and conditions are compiled with.

Parties to a Letter of Credits

There are a number of parties involved in a L/C and the rights & obligations of the different involved parties also differ from each other.

The involved parties can be named below:

i.    Importer/Buyer

ii   Opening/Issuing Bank

iii  Exporter/Seller/Beneficiary

iv. Advising/Notifying Bank

v.  Confirming Bank

vi.  Negotiating Bank

vii. Paying /Reimbursing Bank

Importer/Buyer is the person who requests/instructs the opening bank to open

a L/C. He is also called Opener or Applicant of the credit.

Opening/Issuing Bank is the Bank which opens/issues a L/C on behalf of the importer. It is also called the importer’s bank.

Exporter/Seller/Beneficiary is the party in whose favor the L/C is established.

Advising/Notifying Bank is the bank through which the L/C is advised to the exporter. It is a bank situated in the exporting country and it may be a branch of the opening bank or a correspondent bank. It may also assume the goal of confirming and/or negotiating bank depending upon the conditions of the credit.

Confirming Bank is a bank which adds its confirmation to the credit and it’s done at the request of the issuing bank. The Confirming bank may on may not be the advising bank.

Negotiating Bank is the bank which negotiates the bill and pays the amount to the beneficiary. It has to carefully scrutinize the documentary credit before negotiation in order to see whether the documents apparently are in order or not.

Paying /Reimbursing Bank is the bank or whom the bill will be drawn. It is nominated in the credit to make payments against stipulated documents complying with the terms of the credit. It may or may not be the issuing bank.

A typical procedure of Letter of Credit:

Buyer Exporter

Reimburse Pays of reimburse

Sales Purchase Contract

 (1) Application for opening L/C

(2) Issues L/C

(3) Advice and/or confirms L/C

(4) Submits documents

(5) Make payments

(6) Forward documents

(7) makes payments

Summary of Procedure:

1. The buyer and the seller conclude a sales contract providing for payment by documentary credit.

2. The buyer instructs his bank the issuing bank to issue a credit in favour of the seller.

3. The issuing bank asks another bank, usually in the country of the seller, to advise or confirm the credit.

4. The advising or confirming bank informs the seller that the credit has been issued.

5. As soon as the seller receives the credit and is satisfied that he can meet its terms and conditions he is in a position to load the goods and dispatch them.

6. The seller then sends the documents evidencing the shipments to the bank where the credit is available. This may be the issuing bank or the confirming bank or a bank named in he credit as me paying accepting or negotiating bank. If the credit allows for negotiating by any banks there will not be a nominated bank and documents may be sent to any bank willing to negotiate under the credit.

7. The bank checks the documents against the credit. If the documents meet the requirements of the credit, the bank will accept or negotiate according to the terms of the credit. In the case of a credit available by negotiation the issuing bank or the confirming bank will negotiate without recourse.

8. The bank if other than the issuing bank sends the documents to the issuing bank.

9. The issuing bank checks the documents and if they meet the credit requirements, either

a. effects payments in accordance with the terms of the credit, either the seller if he has sent the documents directly to the issuing bank, or to the bank- that has made funds available to him in anticipation.


b. reimburses in the pre-agreed manner the confirming bank or any bank that has paid accepted or negotiated under the credit.

10. When the documents have been checked by the issuing bank and found to meet the credit requirements, they are released to the buyer upon payment of the amount due, or upon other terms agreed between him and the issuing bank.

11. The buyer sends the transport document to the carrier who will then proceed to deliver the goods.

Opening Letter of Credit

By the term Letter of Credit we mean a conditional undertaking to pay against supply of goods or services. The bank at the request of its client issues this undertaking. Conditions stipulated in the credit are evidences showing facts of supplying goods or services and compliance of other instruction.

There are many types of L/C. But in branch we basically concentrate on two types of L/C. These are:

1. L/C (Cash)

2. Back-to-Back L/C.

L/C (Cash):

In order to import/ purchase any item from locally or from abroad, buyer (importer) may request his banker for issuance of L/C in favor of supplier for a specified amount.

To open a L/C (Cash) the following procedure are followed.

1. Application (on behalf of the arranged party) containing a request letter to open an L/C.

2. Approving the application by the manager an L/C authorization form is provided to the applicant.

3. There are 5 copies of L/C authorization form for the following purpose

I)    Exchange Control

II)   Customs

III)   Statistical Bureau

IV) CCI & E’ office.

V)   Bangladesh Bank Registration Unit.

4. In the LCA form there are two options- one is for industrial purpose and another is for commercial purpose depending on the nature of trade. A register is maintained for issuing the L/C authorization form containing Date, Form serial. Party name, A/C number and Signature,

5. Letter of Acknowledgement.

6. Letter of Disbursement

7. Promissory Note,

8. Letter of Guarantee

9. Four copies of IMP form for the following reason.

I)    For Bangladesh Bank

II)   For authorized dealers to be used for processing exchange control copy of bill of entry certified invoice.

Ill)  For authorized dealers record

IV)  For submission to Bangladesh Bank

10. Form of Undertaking mentioning-

a) Agreement of taking all sorts of risk and respectability.

b) Declaration of having no relation with the directors of city bank ltd.

Necessary Papers:

After duly filled the above form the following papers are required to open a L/C.

  Valid import registration certificate (IRC)

  TIN (Tax Payers Identification Number) certificate.

  Membership certificate from the relevant trade association.

   Pro-forma invoice or Indent duly accepted by the applicant.

  Insurance cover note with money receipt

  VAT certificate.

  Credit report from other banks

   CIB Report

  Up to Date Trade License

Bank will examine the above papers and will decide to open L/C fixing the L/C margin. Bangladesh Bank fixes the margin 50% for commercial product and 30% for industrial product. But the margin can fluctuate a little bit on the basis of hanker customer relationship.


Here a margin and liability register is maintained mentioning the respective party name. In the register we record the liability that is debit for issuing of the L/C. When payment is made we credit this and draw the nil balance.

In the margin side we record all  the margin in credit side. When we lodge we debit the total credit then the ultimate balance is nil.

L/C Proposal to HO

Then we send a proposal for approval of opening L/C to the Head Office. If the

L/C value is more than 5 lac US $ then registration with Bangladesh Bank is must.

Important Particulars of original L/C:

The application must contain the following information amongst other details

1. The full and correct name and address of beneficiary (Seller)

2. The amount of L/C and its ISO currency code.

3. The type of L/C whether it is revocable or irrevocable with the added information that the nominated bank is requested or authorized to add its confirmation to the L/C.

4. How the L/C is to be available Payment at sight, deferred payment, Acceptance and Negotiation.

5. The party on whom draft(s) if any are to be drawn and the tenor of such draft(s).

6. A brief description of goods, including details of quality and unit price, if any.

7. Details of documents required.

8. The place from where the goods are to be loaded and the place of final destination or the port of discharge.

9. Whether freight to be prepaid or not

10. Whether transshipment is prohibited or not.

11. Whether part shipment is prohibited or not.

12. The last dale of shipment (if applicable)

13. The period of time alter the date of shipment within which the documents must be presented for payment, acceptance or negotiation.

 14. The dale and place of expiry of the L/’C.

15. Whether the L/C is to be transferable credit or not.

16. How the L/C is to be advised (by mail or by SWIFT).

17. Mentioning the H.S. Code No.


After receiving the approval, a L/C register is maintained with me following head:

Date, L/C no.(maintained chronologically), Name of the opener, Name of the correspondent. Amount in (I) taka (II) foreign currency, license no. merchandise, country of origin, margin, commission, F.C charges. Cable charges. Postage, VAT, stamp, total taka. Liabilities in thousand, Expiry and



Then the following vouchers to be passed.

Dr. Party a/c

Cr. S/D a/c Margin on L/C

Cr. I/A a/c Commission on L/C

Cr. I/A a/c Telex charge/Postage

Cr. VAT on LC commission

Cr. I/A a/c Miscellaneous

Cr. S/D a/c FCC (Foreign Correspondent Charges)

Cr. Source Tax on LC commission

Contra Voucher

Dr. Customer’s liability for acceptance

Cr. Banker’s liability

Important Points to be checked before sending the L/C

Before sending the LC following points must be checked

      Whether the IRC is valid or not.

      The type of L/C and its tenor and conditions are in accordance with the pro- forma invoice

      The L/C does not contain any conditions that are unacceptable or impossible to comply with.

      The documents required by the L/C are to be obtainable and presentable. a The description of goods, H.S code, unit price (if any) should be as stated in the pro-forma invoice.

        There are no conditions indicated in the L/C requiring payment of interest charges or expenses not contracted for in the pro-forma invoice. a The shipment and expiry dates indicated in the L/C and the period for presentation of the documents are sufficient to enable the beneficiary to comply with them in order to obtain payment mere under.

        The port of loading and the port of discharging should be mentioned in the invoice.

       The issuance requirement must be declared categorically.

      The bank’s obligation under the L/C is conditioned on total compliance with its terms and conditions and subject to the UCPDC (Uniform customs and practice for documentary credits).

Then by putting two authorized signature the L/C is send to the advising bank.

Office copy is stored.

PAD (Payment against Document)

PAD means payment against documents of the imported goods. PAD is the balance of the importer to the bank after lodgment.

After arrival of the documents the checking points are:

1. Balancing of PAD

2. Physical verification of the documents with Pad lodgment registers.

3. Documents receiving register is checked and ensures their timely lodgment.

Lodgment of Documents

Thorough scrutiny is made on the followings:

1. That the documents negotiated strictly as per terms and condition of the credit

a. Forwarding schedule of the foreign bank

b. Bill of exchange.

c. Transport\ Shipping documents

d. Invoice

e. Insurance cover note

f. Certificate of origin

g. Inspection certificate (PSI)

h. Packing list.

2. In case of minor discrepancy negotiation is made under reserve.

3. Importer’s formal acceptance is obtained

4. Conversion is made applying correct rate of exchange at B.C. selling rate,

5. Bill of exchange and bill of lading are invariably made out in favor of bank.

6. If any discrepancy found, immediate reference is made to negotiating bank/ correspondent by cable/telex.

7. Intimation to the importer is given in prescribed form.

8. Endorsement of PAD amount on the LCA form is made

9. Entry in the lodgment register is made which contains the following head

(Date, PAD No., name of forwarding bank and no., Drawee, Drawer, foreign currency, rate, equivalent to Tk., documents (B/E, invoice, P/L,

B/L, C/0, CRF), quantity and description of goods,

10. Stamping with PAD no.——, certificate of remittance on the invoice is made when lodged.

11. L/’C liability to be reversed invariably on the date of lodgment of documents.

12. Incase of documents of other banks/ other branches of our bank the following point’s o be checked:

a. Documents to be sent to claim payment within 24 hours of lodgment.

b. Follow up for payment of documents.

c. Bills and other charges to be claimed as per terms & condition of the bill.

Preparation of vouchers:

Dr. PAD (Invoice value+ Interest)

Cr.  I/A Interest on PAD

Cr.  I/A exchange gain

Cr.  C.G. A/C H.O.- IBD

Dr. S/D Margin on L/’C


Contra Voucher

Dr. Bankers Liability

Cr. Customers Liability


After lodgment of documents, the bank informs the importer by party intimation letter. The importer comes to the bank to retire his documents.

 At the time of retirement the following documents are handed over to the importer:

1. Commercial invoice (1 copy). On the back of it the bank will put seal ” invoice value certified for US$——

2. Packing list (1 copy)

3. Certificate of origin (1 copy)

4. Bill of lading On the back of it bank will put seal “deliver to the order of


5. Bill of exchange, (in case of deferred payment, B/E will not be handed over to the importer) .On the B/E the bank will put seal “received payment”

Cost memo

The bank prepares a cost memo and Party will receive a copy of it and pay the amount by a cheque.


Dr. Party A/C


Cr. I/A interest on PAD.

Amendment of Letter of Credit

Amendment is usually required to cover changes in the following

1. Unit price

2. .Extension of L/C Validity

3. Change in documentary requirements

Amendment Procedure

1 .A written application from the importer

2. Verifying the signature of the applicant

3. Checking the amendment clause

4. Supporting revised Indent/Pro-forma Invoice that evidences the consent of both of the suppliers and importers.

5. In case of extension of shipment date, the license validity must be checked.

LC Amendment Form contains the following-

1. Name and address of beneficiary.

2. Name and address of advising bank.

3. Name and address of applicant.

4. Reference mentioning the LC number, date of issuance of LC and LC amount.

5. Amendment sequence no and date.

6. Informations are mainly on——

a. Credit value change and the new holders.

b. Description of goods.

c. Shipment date and negotiation duration.

d. Date.

7. Authorized signature of two P.A holders,


Various returns are submitted to respective authority like –

(I)   Bangladesh Bank


The following returns are submitted to Bangladesh Bank-

(I)   IMP form: At the time of opening L/C the importer has to fill and sign on the IMP form. IMP form is the permission to import given by Bangladesh Bank.

There are 4 copies of IMP form. The I’11 and 3″1 copies arc submitted to

Bangladesh Bank.

The IMP form contains the following particulars-

a. LCAF no. b. Date c. Value In Taka d. Description of goods e.H.S.code f. Quantity of goods g. Invoice value in FC. h. Country of origin I. Port of shipment j. Name of steamer/ airline k- port of Bangladesh l Indenter name and address (if any).

Along with IMP form, LCAF and invoice are submitted to Bangladesh Bank. On the back of the LCAF and invoice the bank puts certified seal.

(II)   EXP form: Before shipment of goods the exporter has to till and sign on the EXP form. It is the permission to export given by Bangladesh Bank.

There are four copies of an EXP form. The 1st and  copy are submitted to Bangladesh Bank.

The EXP form contains the Following particulars:

a. Commodity to be exported

b. Country of destination

c. Port of destination

d. Quantity

e. Value (amount in invoice)

f. Terms of sale (L/C no. and date)

g. Name and address of importer/ consignee

h. Name of carrying vessel

i. Bill of lading

j. Port of shipment

k. Land of custom part.

l. Shipment date

m. Name of exporter

n. CCI&E register no.

o. Sector (public or private)

p. Authorized signature and stamp of exporter with date.

(Ill) T/M form: This form is used for travel and miscellaneous purposes (other than import). By this form an applicant seeks permission to purchase foreign exchange (under foreign exchange regulation act) for the following purposes:

a. Living and traveling expenses for business purposes in foreign country.

b. Enroot expenses for traveling abroad

c. Living expenses and medical treatment

In the branch of the Bank there is a prescribed form of T/M. The applicant will till it up and put signature (must be like that of passport). Photocopy of return ticket and passport to be submitted to the Bank.

Bank will submit T/M form with photocopy of ticket and passport to

Bangladesh Bank.

A photocopy of T/M form is kept in bank as office copy.

Back -to- back L/C

Back to back LC may be defined as an LC that  backed by another LC. In

Bangladesh this type of LC is used in the form of pie- shipment finance against export order of ready-made garments. Its special characteristics have been given below-

Characteristics of Back-to-Back LC

It is usually opened against export LC of foreign buyer that is kept in the concerned bank branch as a primary security of the pre- shipment finance extends.

Prior to opening of the LC its proposal is assessed on following points

1. Workability of export LC i.e. its terms and conditions.

2. Capacity of the relevant RMG factory.

3. Credit worthiness or status of the buyer and local buying house

4. Rank of the LC issuing bank.

5. Consumption of fabrics/ yam / accessories as per requirement or exportable goods.

6. It does not any LC margin.

7.1t is usually opened m usuance terms.

8. It involves acceptance of usuance bill and payment there against maturity.

9. Payment of the import bill under BBLC is made from the export proceeds repatriated in foreign currency. In failure of repatriation of payment is made from banks own fond creating demand loan.

10. Permissibiliti of LC is subject to the compliance of quota restrictions, quantitative restrictions as imposed by our central bank.

11. It requires Bonded Wire House License.

12. It requires higher rate of LC commission.


1. Scrutiny of master LC

2. Checking related papers and documents

3. Opening Back to Back LC

4. Advising thereof

5. Maintenance of due date and diary.

6. Payment of the Import bills

7. Negotiation of related export bills.

Accounting Process

BTB (Opening)

Dr. Party a/c

 Cr. I/A commission on LC @ prescribed by

Cr. I/A Postage/Telex

Cr. Stamp in hand.

Accounting for recording contingent liability

Cr Banking liability on back to back L\C

Dr Customer liability on   back to back L\C

BTB (Lodgment/IFDBC)

Dr. Party a/c

Cr. I/A commission on accepted bills

Cr. I/A Postage

BTB (During Payment Local)


Dr. IFDBC Collection

Cr. IFDBC Lodged

Classified L/C Default:

   Classified L/C Default means in The city bank limited   document has come, The goods has come but the party importer not received the document aand also not paid for it.

   Classified amount 2005 0.9 crore

                                2006 Nil

Concluding Remarks:

I have tried of my best to make this report so as to attain its purposes. This report is like an abstract of all that I have learnt during the desk work period. I shall be glade if this report selves its purpose effectively and efficiently.


Import policy Order (1997-2002) , Ministry of Commerce, Govt. of Bangladesh, Dhaka. 1998

Syed Ashraf Ali, Foreign Exchange and financing of Foreign Trade. Dhaka. 1995.

Md. Nur Hossain, Second Officer. The City Bank Limited

Mr S.K. Gulam Sarker, Manager,The City Bank Limited,

City Bank Limited