Internship Report on Performance Evaluation of EXIM Bank of Bangladesh Ltd

Executive summary:

The report is prepared on the basis of practical experiences at EXIM Bank Ltd. The internship programs help me a lot to learn about the practical situation of a financial. This program helps me to implement my theoretical knowledge into practical realistic environment.In the age of modern civilization Bank is playing its spending role to keep to the economic activity. In fact there is hardly any aspect of development activity whether state inspired or otherwise where Bank do not have a major role to play.

Bank provides means and mechanism of transferring command over resources from those who have an excess of income over expenditure to those can make use of the same for adding to the volume of productive capital. There are large numbers of small saver with small amount of saving who are generally reluctant to invest their surplus income because of their lack of adequate knowledge about complicated investment affaires. The Bank provide them with the safety, liquidity and profitability by means of different saving media offering varying degrees of mix liquidity, return and safety of saving.Export Import Bank of Bangladesh Limited is schedule commercial Bank is registered by the Bangladesh Bank. EXIM Bank follows the rules and regulations prescribed by the Bangladesh Bank for scheduled commercial Banks.

INTRODUCTION:

It is possible to gather theoretical knowledge passing through books but it is insufficient to acquire practical experience. We collect data to know about unknown factors, we can have accurate knowledge about the factors by analyzing data.

As a student of accounting and finance department in southeast University, I have earned theoretical knowledge, which is not exactly same with the practical business environment. The compulsory internship program applied by the faculty of Business study helps us to have practical experience and it’s reporting also.Through this internship program, I come to know about the organizational performance, problems, prospects and operational procedures of EXIM Bank Ltd. So, it is impossible to deny the importance of internship program.

ORIGIN OF THE REPORT:

The report entitled “performance evaluation” of Export Import Bank of Bangladesh Ltd.” has been prepared as a partial fulfillment of BBA program authorized by my department head.

OBJECTIVES OF THE REPORT:

The objective of practical orientation is to familiarize with the practical market and to familiarize with the practical market and to compare it with the Business theories that we have learnt.

The main objectives of the practical orientation are as follow:

  To familiarize with practical job environment.

 To have and exposure on the financial institutions such as banking environment of Bangladesh.

 To gain experience on different functions of the different department of the Bank.

 To observe Banker – customer relationship.

 To relate the theories of Banking with the practical Banking.

 To examine the profitability and productivity of the Bank.

METHODOLOGY:

Using both of the two sources – primary and secondary has collected data.

The primary sources of data:

• Ø Face to face conversation with the Bank officers and staffs.
• Ø Direct conversation with the clients.
• Ø File study of different sections.
• Ø Deskwork: during my practical orientation I worked in head office and Gazipur Chowrasta Branch.
• Ø In head office I worked in foreign and credit division. In Gazipur Chowrasta Branch I worked in the Sections.

The secondary sources of data:

• Annual Report of EXIM Bank of Bangladesh Ltd., 2000.
• Deferment paper of EXIM Bank.
• Ø Unpublished data received from the head office and branch.
• Ø Different text books.

         I tried my best to discuss my subject in analytical way. I also have represented some graphs and tables, which show performance of EXIM Bank Ltd. based on financial data.

To collect necessary information I used questionnaire method, which is shown in the chapter six. I have given some recommendations to solve the problems of EXIM Bank Ltd. as per my own thought.

SCOPE:

The reports cover the Banking service to the customers & performance of EXIM Bank of Bangladesh Ltd. This report has been prepared though extensive discussion with Bank employes.

The study was kept Ltd. to the head office and Gazipur Chowrasta Branch of EXIM Bank. This Bank Deal with all type of general Banking operations foreign exchange and credit operations according to the rules and regulations provided by the Bangladesh Bank.

LIMITATIONS:

• Ø The main constraint of the study was shortage of time.
• Ø The constraint of the study was insufficiency of information, which is highly required for the study. EXIM Bank is a new unable to provide some formatted documents and publications for the study.
• Since the Bank personnel were very busy, they failed to given me enough time to complete the report.
• The clients were very busy, so they were unable to give me much time for interview.
• Ø I carried out such a study for the first time. So, inexperience is one of the main factors that constituted the limitation of the study.

 It is also a limitation that only 100 client’s opinion takes as a sample of whole Bank, which may not represent the overall or real condition of the Bank.

A BRIEF IDEA ABOUT THE EXIM BANK LTD

(Including organizational structure)

1. Historical background of the EXIM Bank.

2. Slogan of the EXIM Bank.

3. Key function of the EXIM Bank.

4. Organizational structure of EXIM Bank Ltd.

5. Strategies and policies of EXIM Bank Ltd.

6. Identity of EXIM Bank Ltd. in a short.

7. Performance of the Bank at a glance

8. Some important descriptions and a graphical representation.

9. Maintaining procedure of Accounting Statement at branch level.

10. What statement branch sent to the Head office?

11. Salary and benefits are provided to the Executives and employees.

12. Accounting system of the Bank.

13. Organizational development of EXIM Bank Ltd.

1. HISTORICAL BACKGROUND OF THE EXIM BANK.

EXIM Bank – Export Import Bank of Bangladesh Ltd. was named at first as BEXIM Bank. BEXIM stands for Bengal Export Import Bank of Bangladesh. This new commercial Bank was opened in August 03, 1999 with some new innovative visions in customer services. The Bank received the certificate of incorporate no. C – 37864 (2164)/99 under the commencement of the business on the same day by the section 150(2) under companies Act. Apart from the head office in Dilkusha C/A, it stared its first local branch in Motijheel C/A simultaneously in order to provide all kinds of Banking support to the clients. On December 02, 1999 the second branches both in DhakaCity and other cities. Now it has twenty five branches in the country.

2. SLOGAN OF THE EXIM BANK – “Local Bank global network”

The world EXIM implies the meaning of its operation. Through it is a new type of Bank in Bangladesh; it is familiar with so many countries in the world such as Export Import Bank of the United states, Export Import Bank of Japan. Despite it is a local Bank, It has spread of its operation in the whole world through foreign Banking. To achieve the desired goal, It has intention to pursuit of excellence at stages with a climate of continuous improvement. Because it believes, the line of excellence is never ending. It also believes that its strategic plans and business networking will strength its competitive edge over in rapidly changing competitive environment.

3. Key function of the EXIM Bank.

Like other commercial Banks EXIM Banks performs all traditional Banking business including introduction of a wide range of caving and credit products, retail Banking and professional management. But the EXIM Bank of Bangladesh Ltd. emphasizes its functions in export and import trade handling and financing of export oriented industries will enhance wealth, quotes more employment’s opportunities, helps formation of capital and reduces in the balance in the balance of payment of the country.

Other functions are as follows:

  Receiving deposit.

  Granting loan.

  Creation of deposit by loan.

  Transfer of money.

  Discounting of bill of exchange.

  Investment in profitable sectors.

  Export and Import.

  Bill collection (Electric bill, telephone bill gas bill etc.)

4. ORGANIZATIONAL STRUCTURE OF EXIM BANK LTD.

The development of an organization depends on the management style of their organization. As the same the developments of this Bank is being occurred only for the management team. Management team management of EXIM Bank of Bangladesh Ltd. controlling of all the resources of the organization. When the Bank Was opened in 1999 the chairmen of board of director was late. Mr. Shahjahan Kabir. He had 35 years of banking experience in senior position. When he died Mr. Md. Nazrul Islam Mazumder had been selected the chairmen of the board of directors. He is a skilled person in business world. Alamgir Kabir, the advisor of the Bank is a reputed senior chartered accountant heaving 30 years vast experience in accounts. Audit, and Finance in banking at home and abroad. The bank will be immensely benefited from the above leadership of the chairmen and the valuable advise and guidance of the advisor.

Mr. Mohammed Lokiotullah, the Managing Director of the Bank is widely trained at home and abroad, heaving three decades of long experience in Banking profession in as well as outside the country. He is energetic and dynamic person. His leadership style and innovative ideas, coupled with his knowledge and experiences, are to inspire and motive his team of highly qualified and professionals to resister better result in every aspect of bank’s operational activity. To achieve the ultimate objectives of making EXIM Bank the finest Banking of the country, the workforce will be futuristic in outlook, professional in attitude and honest in reputation

The Board of director wants to repose in the management all executive powers to run this service industry’s administration and credit portfolio independently without any undue influence from outside. The board formulates policy and gives the policy directives to the management. Transparency and accountability are strictly ensured at all levels of the Bank. Bank operators with integrity, competence and farsightedness abiding by all the principles and provisions laid down in the Banks companies Act – 1991, the company’s Act – 1994 and the guidelines of Bangladesh Bank. The Bank is committed to pursue a straight forward, upright, legitimate Banking business, never be tempted by the abnormal prosecute of large returns to do anything. It will only do what may done under the national policy.

5. STRATEGIES AND POLICIES OF EXIM BANK LTD.

• BUILDING STRATEGY AND POLICY

When any business is started, At first it is necessary to set up its vision and mission. In order to reach the goal it is important to build strategy and follow the policies. If it can select the appropriate strategy and choose the right policy, it will be very easy to touch its desired position. The distinguishing attribute of policy is to set up the over all boundaries for activities. According to this system, when the bank was started it has to decide what kind of business it is going to be in. The Bank also has to decide on its growth goal and its desired profit. The purpose of strategies then is to determine and communicate through a system of major objective of the business is to reach the goal, to reach the desired position from the current status. There might be a number of ways to reach there and its has to be decided which path would be easier to reach the objective. So the authority has to decide which path they select to proceed. The following figure can be explain clearly.

• CORPORATE MISSION AND VISION

In strategic management system each organization has some missions and also some visions. Effective strategic beings with a concept of what the organization should and should not do and a vision of where the organization needs to be headed. Arriving at a good business definition usually requires taking three factors into account.

    i)        Customer needs, or what is being satisfied.

  ii)        Customer groups or who is being satisfied.

iii)        The technologies used and function performed – how customer needs and satisfy.

“Demonstration of commitment” is the corporate vision of EXIM Bank. The commitments to the country and its economy from EXIM Bank regarding the following corporate vision.

  Provide high quality financial in export and import trade.

  Provide defect – free quality customer service.

  Maintenance of corporate and business ethics.

  Become trusted repository of customer’s money and their financial advisor.

  Make our stock superior and rewarding to the customers.

  Display team sprit and professionalism.

  Sound capital base.

  Enhance shareholders wealth.

6. IDENTITY OF EXIM BANK LTD. IN A SHORT.

Registered Name                                                  Export Import Bank of

                                                                             Bangladesh Ltd. (EXIM)

Registered Head office                                          Printers building (5^th floor)

                                                                             5. Rajuk Avenue

                                                                             Motijheel Dhaka- 1000

                                                                             Phone: 9566764,

                                                                             955382, 9561604

                                                                             Telex: 642527 EXIMHO BJ

                                                                             Fax: 880-2-9556988

                                                                             E-mail: eximho@bdonline.com

Date of incorporation                                           June 02, 1999

Inauguration of first branch                                 August 03, 1999

Chairman                                                             Md. Nazrul Islam Mazumder

Managing Director                                                         Mohammad Lakiotullah

Auditor                                                                Rahman Rahman Huq.

                                                                             Chartered Accountants.

Authorized capital                                                         100.00 crore

Paid up capital                                                     22.5 crore

No. of branches                                                    28

7. PERFORMANCE OF THE BANK AT A GLANCE.

(Taka in million)

8. SOME IMPORTANT DESCRIPTIONS AND A GRAPHICAL REPRESENTATION.

Operating profit:

In 2000 EXIM Bank Ltd. made commendable progress in all business area, Like Deposit, Credit, find Management, Investment and foreign exchange related business. The Bank achieved satisfactory progress in all areas of its operation and earned operating profit of Tk. 562.66 million in 2003 and 885.62 million in 2004.

Capital:

          The authorized capital of EXIM Bank Ltd. is Tk. 1000.00 million and the initial paid up capital of the Bank is Tk. 313.88 million in 2003. It may be mentioned here that the reserve fund of total Tk. 557.89 million in 2003 and 938.07 million up to 2004.

Deposit:

          The total deposit of the Bank, which includes bill payable of Tk. 30.24 million rose to Tk. 19095.72 million as on 2004. In the following chart, CD account show higher deposit than deposit accounts.

The total deposit of the Bank, which includes Bills Payable of Tk. 13.56 Iac rose to Tk. 3972.44 lac as on June 30, 2004.

Name                                                              Amount (Fig in lac)

Deposit                                                          3958.88

Bills Payable                                                 13.56

Total Deposit                                                3972.44

Deposit Mix in EXIM Bank Ltd.

Name                                                Amount (In lac)

AWCD                                              141.85

MSB                                                 775.32

STD                                                  111.02

MTDR                                              2257.49

SUNDRY                                          162.43

SCHEMES                                        524.31

TOTAL                                             3972.44

(According to the year –June 30,2004.)

Loans and Advance:

            The total loans and advance of the Bank stood at Tk. 17682.49 million as on 2004. against Tk. 12289.12 million of last year. Due to liberal credit to export sector, the Bank was able to handle larger volume of foreign exchange business. The Bank also extended a number of project finance and syndication industrial loans singularly or in with other Banks. The following graph show that the advance of the Bank increasing gradually.

 Investment:

            The size of investment of the Bank as on 2003 stood at Tk. 2377.073 million against Tk. 1419 million in the previous year recording growth of Tk. 958.073 million. The comprises of treasury bill and shares. According to the following graphs, we can say that the investment of the Bank show increasing trend.

Import business:

            The total business handle during the year 2004 was Tk. 26781.82 million as handle compared against to Tk. 19260.06 Million in the previous year, showing and increase of Tk. 7521.76 million.The Significant items of import were industrial raw materials, customer’s goods, machine, Fabrics and Accessories etc. From the above graph we found that the import business of the Bank doing well day by day.

 Export business:

          The total volume of export business during the year 2004 handle by the Bank was Tk. 22418.43million compared to Tk. 10088.30 Million in the previous year, registering an increase of Tk.12330.13 million. The export trade continues to be a major growth area for the Bank and the Bank intends to concentrate in this area of the business in coming years. The following graph show – increasing trend of export business of the Bank.

9. Maintaining procedure of Accounting Statement at branch level.

The branches of the Bank maintain their Accounting Statement According to Monthly, quarterly, Half yearly and yearly.

10. What statement branch sent to the Head office?

Monthly Statements:

  Monthly Statement of Borrowers having outstanding liabilities of Tk. 1.00 crore (CBI-01 From).

  Monthly Statement of Loans & Advances of Tk. 1.00 crore and above but less than 10.00 crore.

  Monthly Statement of Loans & Advances Sanction of Tk. 1.00 crore and above.

  Monthly Statement of credit Reschedule / Increased / Newly Sanctioned Tk. 1.00 crore and above.

  Monthly Statement of Advances classified by securities.

  Statement of loan Sanctioned to the Govt. / Automated Organization. Advancement Statement of recovery default and classified loan.

Quarterly Statements:

  Quarterly Statement of CIB (Tk. 50000 above but below Tk. 01 crore).

  Submission of CL Statement.

  Quarterly Statement of loan and advances in the name of Directors.

  Quarterly Statement of sector wise outstanding loan.

  Quarterly Statement of lending and borrowing of other Bank’s Directors and their concerned.

  Submission of Statement of industrial credit of our Bank.

  Submission of Quarterly return B. B. SBS – 3.

  Provision and Interest suspense statement.

  Quarterly Statement of overdue loan and advances.

  Statement of large loans of credit of Tk. 01 crore and above sanctioned.

  Statement of irregular Loan sanctioned and disbursement.

  Statement of sector wise outstanding loan.

Half yearly statement:

  Statement of consumer credit loan program.

  Statement of HouseBuilding loan sanctioned and amount of date expired loan in this sector.

  Statement of Bank improvement program and loan development program.

  Statement of the case of default loan.

Yearly statement:

  Statement of sanction towards the foreign industry or organization.

  Statement of sector wise outstanding and overdue loans and advances (Inland bill purchased and discount)

  Statement of Bank wise largest amount of sanctioned.

11. SALARY AND ALLOWANCES ARE PROVIDED TO THE EXECUTIVE, OFFICERS AND NON-OFFICERS.

 Basic salary

  House rent.

  Medical allowance.

  Conveyance allowance.

  Entertainment allowance.

  Utility allowance.

  House maintenance allowance.

  Leave fair assistance.

  Special allowance.

  Car allowance.

  Washing allowance.

  Technical allowance.

  Evening Banking allowance.

  Risk allowance.

  Overtime allowance.

  Charge allowance.

  Discomfort allowance.

  Gratuity.

  leave encashment.

  Welfare and recreation.

  Bonus.

  Festival benefit.

  Incentive bonus.

  Other allowance.

12. ACCOUNTING SYSTEM OF THE BANK

EXIM Bank of Bangladesh Ltd. maintained computerized Accounting system.

13. ORGANIZATIONAL DEVELOPMENT OF EXIM BANK LTD.

            In 1450s and 1960s a new integrated type of training originated known was organizational development (OD). Organizational development is an intervention strategy that uses group processes to focus on the whole lture an organization in order to bring about planed changed. It seeks to change believe attitudes, values, structure and practices so that organization can better adapt to technology and live with the fast pace of change. Organizational development arose for needs.

Conventional training methods often had limited success for building better organizational behavior, so a new approach was needed.

 The general objective of organizational development is to change all parts of the organization in order to make it more humanly responsive, more effective and more capable of self- renewal.

            The organizational development process does not preclude the use of conventional training methods, which are useful for some purposes. Coaching, lecture and discussion, films and the case method are appropriate tools for providing and understanding of behavior or developing analytical skills. Many employees need this type training.

The management of EXIM Bank is also concern about the training for its development. They believe if the employees will be trained enough they would contribute more for the development of the Banking business. For this reason they send some employee for the training in every semester / base. Till now a number of employees took training from different training institution and they are working very smoothly. Usually they send the employees in the following training institutes:

                   i)       National Bank Training Institute (NBTI)

                ii)       Bangladesh Institute of Bank Management (BIBM)

               Export Import Bank Of Bangladesh Limited

Loans and Advances Department:

1. Introduction

2. Types of loans and advances.

3. Brief idea about the different types of loans and advances.

4. Formalities for extending project loans.

5. Documentation.

6. Disbursement.

7. Follow-up.

8. Recovery.

9. Sector wise loan disbursement and recovery chart.

10. Types of classification of the loans.

11. Basis of classification of the loans.

12. Provision.

13. Bank guarantee.

Loans and advances department

1. Introduction:

Banking is essentially a business dealing organization with money and credit like all other business activates. Banks are profit-oriented organization. A bank invites its fund many ways to earn more and more profit and most of its income is derived from loans and advances. Bank makes loans and advances to traders, Businesspersons, industrialists and many other persons against security of some cautions policy and sound lending principle in the matter of lending. EXIM Bank is a lending bank in loans and advances and it grant loans in various sectors especially in industry, trade and commerce.

2. Types of loans and advances:

            There may be different types of loans and advances given from the commercial banks such as EXIM Bank Ltd. of our country. Loans and advances may be in the following types:

  Term loan.

  Cash credit.

  Overdraft.

  HouseBuilding loan (general and staff)

  Transportation (car) loan (only for senior staff)

  Consumer credit scheme.

  Loan against Imported Merchandise (LIM).

  Loan Bills Purchases Documentary (LBPD).

  Loan against Other Securities (LAOS).

3. Brief idea about loans and advances:

 Cash Credit (CC):

A cash credit is an arrangement by which the customer is allowed to borrow many up to a certain limit. This permanent arrangement and the customers need not to draw the sanctioned amount of money at a time. The borrower can draw the money when required. The borrower can put back any surplus amount, which he/she may be affected frequently. Intersect is charged only to the amount withdrawn and not the whole amount sanctioned cash credit arrangement is usually divide into two ways such as:

  Cash credit pledge.

  Cash credit hypothecation

Cash credit pledge:

            In case of cash credit pledge possession of the goods dealings to bank and ownership of the goods belongs to borrower and bank the possessions of the goods as primary security. The goods stored in go down under lock and key by direct supervision of the bank. If the borrower wants to sell any portion of the pledged goods he/she permission of bank with returning the value of the loan amount. It is therefore regarded as the most secured type of advance

Cash credit hypothecation:

             In case of cash credit hypothecation possession of the goods not transferred to the bank and therefore such and advance is no better then a clean loan, such an advance can thus only be granted to a person in whose integrity the banked has full confidence cash credit in the form of ‘Hypothecation’ is normally accompanied with mortgage of immovable properties. The pray/borrower possesses the lock and key of the down.

The Formalities of opening cash credit:

The intending cash credit holder should submit the following documents and being fill-up properly:

  Stock report, rend receipt.

  Trade license.

  Up to date income tax clearing certificate.

  Charge documents.

  Letter of continuity.

  Letter of arrangement.

  DP (Demand Promissory) note.

  Letter of guarantee.

  Letter lien.

  Limit sanctions advice.

  Non-Encumbrance certificate.

Observing the documents the bank authority prepares a CC proposal form that contains the following information:

  Nature of business.

  Banking with EXIM.

  Transition with CD account by the client.

  Allied deposit with SB/STD account.

  Number of adjustment(s) [How many times the CC holder made his/her account nil that means debit balance equal to credit balance]

  Recycling it is the ration of total credit summation to the limit. If the ratio is higher it is better from banker’s point of view.

  Turn over in the account.

  By the encasement authority the bank holds the power to encase the FDR the encasement authority at any time in case of borrower’s failure to repay the loan amount with interest in due time.

Based on the above-mentioned information the dealing officer of the loans and advances department prepares recommendation about the prospect of granting the CC loan to the client.

Overdraft:

            Overdraft is an arrangement between the banker and the customer by which the letter is allowed to withdraw over his/her credit balance in the current account up to an agreed limit. The borrower is permitted for draw and repays any number of times, provided the total amount overdrawn dose not exceeds the agreed limit. Here the interest is charged only for the amount withdrawn over the limit, not for the whole amount. Overdraft is divided into two categories:

  Secured overdraft (SOD)

  Temporary overdraft (TOD)

Secured overdraft: It is allowed against the full security (i.e. FDR, ICB unit certificates).

Temporary Overdraft: It is allowed to the customer for a very short period of time. But EXIM bank deals only secured overdraft.

Car loans:

            This is a special type of loan, which is only provided for the staff of EXIM Bank. Usually AVP and above level officers get this kind facility. This loan is reimbursed on instrument basis and repayable after each month.

 House Building loan (general and Staff):

 Generally house building loan is providing into two sectors:

  Generally

  Staff

Naturally house-building loan is paid for the construction of commercial buildings, land owners etc. procedures for sanctioning house-building loan as follows:-

  Application for sectioning loan.

  Application properly filled-up for credit facilities supplied by the bank.

       Personal net worth statement each director.

  Inquiry form.

Required papers for sanctioning HB loan:

  Copy of general power of attorney.

  Copy of material certificate.

  Copy of engineer’s estimate.

  Copy of projected cash flow.

Loan (General):

            In case of loan the banks sanction some of money for a certain period of time. The enter amount is one time disbursement and paid in cash or credit loan A/C. the interest is charged on full sanctioned amount @ 16%. The bank generally sanctions loan to establish industry. These types of loans are granted for capital expenditure such as purchase of land, constriction of factory building, purchase of now machinery and modernization of plant. The borrower cannot withdraw this type of loan once repaid in full or in part again.

4. Formalities for extending project loan:

Loan application form:

            After receiving the loan application from the borrower the branch scrutinizes the application whether it is viable or not. Loan application form contains the following particulars amongst other detail below.

   Particular description of the project.

  Nature of the project.

  Detail information about the borrower.

  Statements of assets and liabilities of the borrower with declaration.

  Detail information about proposed products, machineries and manpower etc.

  Project cost and source of fund.

  Market for the proposed project.

Feasibility report:

            This report is provided by the borrower, which includes the following aspects of the project:

  Marketing aspect

  Technical aspect financial aspect.

  Managerial aspect

  Socio-economic aspect

CIB report:

            Before making credit repot to the head office the lending branch takes the credit information to the borrower from the CIB (Credit Information Bureau) of Bangladesh Bank and other financial institutions. For obtaining this report the branch sends ‘Inquiry form’ to CIB duly filled in particulars of the borrower. The report is divided into 5 segments.

 Project appraisal:

            It is the reinvestment analysis done by Banker before a project is approved. Project appraisal in the Banking sector is needed for following reasons:

  To ensure repayment of the Bank finance.

  To achieve the organizational goals.

  To establish industrialists in a country.

The main tasks of the project appraisal are to justify the soundness of an investment by the Banker by means of a capital and systematic of the different elements of the project. For this purpose Banks use two types of analysis:

  Lending Risk Analysis (LRA).

  Spread Sheet Analysis (SSA)

Lending risk analysis:

 Bangladesh bank issued a letter number BCD (p) 611/13/1290 dated 17-07-1994, which now makes it mandatory for the commercial Banks to implement the LRA approach to credit analysis prior to extending credit facilities to a Borrower.

The modern concept of lending is ‘purpose and production’ oriented and not ‘security’ oriented. The emphasis should be given not no securi9ty rather on he likelihood of repayment, the credit worthiness of the customer soundness and viability of the business etc.

5. Documentation:

            Documentation is a retained statement of facts of proof or evidence arising out of particular transaction, which on placement may bind the parties there to answerable and liable to the court of law for sanction of the charge in question. In this connection Bank for the purpose of security take some charge document from the borrower.

 Common compulsory documents:

  A letter of acceptance about the terms and conditions laid down in sanction advice.

  DP note (Depending one the type of borrowers).

  Letter of arrangement.

documents depending on the type of advance

In case of loan:

  Letter of disbursement.

  Letter of authority.

  Letter of hypothecation.

  Insurance policy

  Any other document as stated in sanction advice.

In case of cash credit:

  Letter of disbursement in case of renewed go down.

  Letter of authority.

  Letter hypothecation/ Pledge.

  Insurance Policy.

  Letter of continuity.

  Personal guarantee.

  Any other document as stated in sanction advice.

In case of mortgage:

  Mortgage deed (Certified copy).

  Registration receipt in original

  CS/ SA/ RS porcha.

  Up to date rent receipt.

  Non-encumbrance certificate.

  Power of authority.

  Legal opinion from the legal advisor.

  Valuation certificate from the concerned certificate.

  Location map or site plan.

Note: In case of simple mortgage registration of the deed is essential, but in case of equitable registration is not required.

6. Disbursement:

            Loan disbursement has to be made after completion of documentation and observation of the sanctioning terms against rising of equity by sponsors as lay down. Each of loan disbursement to be supervised by Bank official that the project and the phase of implementation of the project to be affectivity supervised and borrowers persuaded for completion of project in time. There are main there important factors in the loan disbursement such as:

  Completion of documentation.

  Verification of stocks.

  All-important documentation.

7. Follow up:

            After the disbursement of the loan bank follows the borrower in the following manner:

  Constant supervision.

  Working capital assessment.

  Stock report.

  Break even analysis.

  Rescheduling of repayment.

8. Recovery:

           Loans and advance in whether from granted by the bank to its clients are repayable either on demand or at the expiry of the fixed period or as per repayment schedule agreed upon while granting the facilities. If any loan is not repaid then notices served to the customer. Sometimes legal actions also taken for recover the loan. The overdraft and cash credit is legally in installment and deferral cases in the payment of any installment entire loan usually become immediately recoverable of at the position of the Bank. Banks generally realize their advance under following cases:

  If death occur dither of the borrower or the guarantor.

  In the borrower is reported to have committed as Act of insolvency.

  Dissolution of partnership.

  Liquidation of the borrowing company.

  Failure to renew documents sufficiently before the expire of the limitation.

  Deterioration in the financial position of the party.

  If the borrower fails to maintain the stipulated Merlin.

  Change in the Bank’s policy of lending.

  The policy of selective credit control by Bangladesh Bank.

  Detection of any other undesirable feature of accounts.

9. Types of classification of loans:

In banking practice there are three types of classified loans. This classification is prepared based on the non-repayment with in particular time fame of the loan; this classification type has been developed by the Bangladesh Bank’s rules and regulations. 4.8.1 Sub-standard loan:

            In the borrower does not make any transaction with in 6 or 12 months (neither crediting nor withdrawing money) in his/her loan accent then it would be known as sub-standard loan.

Doubtful loan:

            If the borrower does not make any transaction before 18 months and above (neither crediting nor withdrawing money) in his/ her loan account then it would be known as doubtful loan.

 Bad or loss (BL) loan:

            If the borrower does not make any transaction before 18 months and above (neither crediting nor withdrawing money) in his/ her loan account then it would be known as doubtful loan.

10. Basis of classification of loans:

The Classification is done as per central Bank’s instruction in BCD circular no. 34/1989, BCD circular no. 20/1994. According to these rules and regulation EXIM Banks classifies loan on the basis of the following criteria:

Overdue: If the borrower does not repay the loan instruction within stipulated time frame then the loan would be known as overdue loan.

Limit overdrawn: If the borrower crosses the granted limit of loan then it would be known as limit overdrawn.

Required payment: If the required payment is not made within the particular time then it would be classified required payment.

Legal action: If the Bank takes any legal action at any time against borrower for defaulting the loan repayments then in it would be known a the loan classified based on legal action.

Qualitative Judgments: This is the basis of loan classification upon the borrower performance. If the Bank authority observes that the borrower has the chance not to repay the loan amount within the required time frame than they consider it as qualitative judgment classified loan.

11. Provision:

            If any borrower fails to pay his /her borrower amount the account is classified as sub-standard, doubtful and bad depending on the period of nonpayment. When the amount of classified loan is big the Bank can not operate Banking functions very smoothly. At that time Bank required provision and then a proportion of net profit transfer to the provision. The main function of provision is to overcome bad and loss on one side, a big amount of provision is good, because the Bank can operate Banking functions and disburse to the new probable sector in the economy to develop the  country and on the other hand a big amount of provision is bad, because the amount of reserve is small. As per latest BRPD circular no. 16/1998 Bangladesh bank the length of overdue and reserve for provision for classified loans are given below:

(Amount in ‘000)

 Base of provision= Total outstanding amount- Interest suspense- 50% of the collateral security.

12. Bank guarantee:

            According to the section 126 of  contract Act 1872 guarantee can be defined as a contract to perform the premise of discharge of liability of a third person in case of his default. The person who gives the guarantee is called the ‘Surety’ the person in respect of whose default the guarantee is given the called ‘the principal debtor’ and the person to whom the guarantee is given is called the creditor. It is an irrecoverable under taking to pay in case of a certain eventually. Banks generally provide three types of guarantee.

  Bid Bond.

  Performance Guarantee.

  Advance Payment Guarantee. 

Bid Band (BB):

 Bid band is one type of guarantee given by the Bank. It is no fully secured guarantee. Bank takes full margin this type of guarantee.

Performance Guarantee (PG):

 Performance guarantee is fully secured guarantee. Bank gives guarantee to the beneficiary that if the party fails to perform his/ her work then Bank will take the liability.

 Advance Payment Guarantee (APG):

If the party takes from the beneficially advance payment to perform them Bank provides guarantee to the beneficially on behalf of the party. It is fully secured guarantee.

Accounting treatment:

 Export Import Bank Of Bangladesh Limited

Financial Ratio Analysis

1. Profit ratio

2. Return on Equity (ROE)

3. Return on Asset (ROA)

4. Net profit margin

5. Asset utilization

6. Unraveling profit

7. Earning per share (EPS)

8. Net interest margin

9. Risk ratio analysis

10. Provision for loan loss

11. Interest expense ratio

12. Wages & salaries ratio

13. Cash ratio

14. Other ratio

Analyzing of EXIM bank Performance with financial ratios:

Ratio Analysis

Ratio analysis is a powerful tool of financial analysis. A ratio is defined as the indicated quotient of two mathematical impressions and as the relationship between two or more things. In financial analysis, a ratio is used as benchmark for evaluating the financial position and performance of a firm. We are describing some ratios for the measurement of the performance of the bank.

Profit Ratio

1. Return on Equity (ROE)

The rate of return on equity is a good condition last five years. ROE indicates the rate of return on equity capital. Generally bank stockholders prefer ROE to be high. Here, ROE is increased last four years, but last year’s ROE indicates lower than previous year. It is possible, however, that an increase in ROE indicates increased bank’s risk.

Return on Equity (%) = Net Income /Total Equity Capital*100

From the table we can see that ROE of EXIM bank increasing except 2004. ROE of EXIM bank were 30.79%, 70.54%, 82.94%, 40.55%, and 24.03% in the year 2000, 2001, 2002, 2003 and 2004 respectively. ROE has been increased as Net Income of the Bank has been increased over the years.

2. Return on Asset

The rate of return on assets (ROA) measures the ability of management to utilize the real and financial resources of the bank to generate returns. ROA is most commonly used to evaluate bank management.

Return on Asset = Net Income/Total Asset*100

From the table we can see that ROA of EXIM bank has been increased and decreased over the year from 2000 to 2004.Both ROA and TA of EXIM bank over the last five years.

Net Profit Margin

Net profit margin ratio establishes a relationship between net income and operating income that indicates management efficiency in providing services, administrating and selling the product. It reminds us that bank can increase their earnings and their returns to their stockholders by successfully controlling expenses and maximizing revenues.

Net Profit Margin = Net Income/ Operating Revenues*100

Asset Utilization

The asset utilization ratio represents the ability of management to employ asset effectively to generate revenue. The more income generated per Taka of assets, the more profitable is the bank.

Asset utilization = Operating Revenue/ Total Asset

Unraveling Profit

1^st Formula: The relationship between the ROE and ROA can be expressed by the following formula-

ROE = ROA * Equity Multiplier

Net Income/ Total Equity = Net Income/ Total Assets* Total assets Total Equity

This formula shows that ROE as the product of ROA and a ratio indicating the extent to which the bank is using financial leverage, known as the equity (or leverage) multiplier

2^nd Formula: Another useful formula for unraveling profit ratio is as follow

ROE = Profit Margin* Asset Utilization* Equity Multiplier

Net Income/Total Equity = Net Income/ operating Revenue*Operating

Revenue/Total Assets *Total Assets/Total Equity

This formula breaks down ROA into product of profit margin and asset utilization. Together these two ratios enable the bank analyst to gain insight into the derivation of ROA.

EPS- Earning per share or EPS indicates how much taka per share earn.

EPS = Net Income/ No. Of shares

We can see from the table that EPS of EXIM has increasing since 2001 and decreasing 2003 & 2004. EPS indicates profit of the bank. In 2000, it was profit only 0.18; but in 2001 & 2002 it was increasing 0.53 & 0.63. But next two years it was decreasing 0.34 & 0.20.

Net Interest Margin

Net Interest Margin measures the net return on the bank’s earning assets.

Net interest Margin = Net interest Income/Average Earning Assets

Risk Ratio Analysis

Provision for Loan Losses

This ratio measures the proportion of total operating income that goes to pay for the investment loss.

Provision for Loss Ratio = Provision for Loan Loss/Total Loan & Leases

From the above table we can see Profit for Loan Losses of EXIM bank. In 2000, it was 3.11. PLLL of EXIM has been decreasing from the year 2001 to 2004. The bank takes PLLL ratio low, as its recovery rate is very high.

Loan Ratio-

The loan ratio indicates the extent to which assets are devoted to loan as opposed to other assets.

Loan Ratio = Total Loan /Total Assets

From the table we can see that Loans and Advances Ratio of the bank has been increasing and decreasing. As bank generate its major portion of income from interest income. So, bank generates its major portion of income from interest income. So, bank has to disburse more Loans and Advances for maximizing their income. In the year 2004, the bank engaged 61.39% of its TA in loans and advances.

Interest Expense Ratio

Interest Expense Ratio reveals how much interest expenses needed for the bank compared to its TA. The lower the ratio indicates the better performance of the bank.

The table shows that the Interest Expense Ratio of EXIM has been increasing.

Wages & Salaries Ratio

This ratio indicates how much expenses required regarding Wages & Salaries to TA of a bank. Lower the ratio indicates that the bank has been performing well.

We can see that the EXIM has been performing badly, as the ratio of the bank has been increasing from the year 2000 to 2004.

Occupancy Ratio

Occupancy Ratio indicates the occupancy expenses of the Bank to its total assets. The lower ratio indicates belier performance of the bank.

We can see that the EXIM bank has been lowering its occupancy performance is belier than the previous years comparing to the year 2004.

Other Expenses Ratio

Cash Ratio-

Cash ratio is measured by dividing cash by total assets of the bank.

Other Ratio

Tax Rate-

The tax exposure of the bank can be assessed by the following ratio

Tax rate (%) = Total tax paid/ Net income Before Tax 100

We can see that the tax rate of EXIM bank is 61.27% in 2000. But the rate is in 2001 to2002- 31.49%, 31.49% & 41.59. But the rate is very high in 2004-73.78.

Deposit to capital Ratio

This ratio measures Taka of deposit of per Taka capital.

Deposit to Capital Ratio = Deposit/ Total Capital

Deposit to capital ratio of EXIM bank has been increasing over the years. It was 13.54 times in the year 2000 and 16.97 times in the year 2004. That means the deposit of the bank has been increasing much more than its equity capital.

Deposit to Employee Ratio

This ratio indicates how much taka is deposited by each employee in the bank high the ratio indicates the better the position of the banks.

The table reveals that each employee of EXIM bank mobilized deposit of TK. 10845130 in the year 2000 and it has been increased to TK. 12705775 in the year 2004. This indicates the better performance of the bank.

          Export Import Bank Of Bangladesh Limited

Foreign Exchange Department:

1. Introduction

2. Import Section.

3. Export Section.

4. Foreign Remittance Section.

Foreign Exchange Department

1. Introduction:

            One of the largest businesses carried out by the commercial bank is foreign trading. The trade among various countries fills for close link between the parties dealing in trade. The situation calls for expertise in the field of foreign exchange operations. The bank, which provides such operation, is refereed to as rending international Banking operation. Mainly transactions with overseas countries are respects of import, export and foreign remittance come under the preview of foreign exchange transactions. International trade demands a flow of goods from seller to buyer and of payment fro buyer to seller. In this case the Bank plays a vital role to bridge between the buyer and seller.

            Foreign Exchange department of EXIM Bank is one of the most important departments of all departments. This department handles various types of activities by three separate sections:

1. Import section.
2. Export section.
3. Foreign Remittance.

2. Import section:

 The functions are of this section is mainly to deal with various components such as:

  Letter of Credit (L/C).

  Payment against Document (PAD).ü  Payment against Trust Receipt (PTR).

  Loan against Imported Merchandise (LIM).

Letter of Credit (L/C):

Definition:

            A letter of credit can be defined as ‘an arrangement where in a Bank Guarantees on behalf of his customers to make payments to the beneficiary upon presentation of documents specified in the credit.

Parties involved in L/C:

Opener/Buyer/Importer:

            The person who opens the L/C is known as opener/buyer/importer of the L/C. The buyer and the seller conclude a sales contract providing for payment by documentary credit.

Opening Bank:

            The Bank issuing the L/C in favor of exporter is known as opening Bank. The opening bank opens L/C on request of importer according to application of the importer.

Advising Bank:

            The Bank through L/C is advised. L/C will be sent to the beneficiary through their agent (correspondent Bank) abroad. The duty of the advising Bank is to authenticate the message so that the seller cans a ct on it without any fear of forgery etc.

Beneficiary:

            Seller and exporter in whose favor the L/C are opened. The beneficiary is normally the seller of goods who receive payment under documentary credit.

Negotiating Bank:

            The Bank that is authorized to handle (purchase) the documents under the L/C in the exporting country is known as negotiating Bank. L/C will stipulate either a notified Bank to negotiate (restricted L/C) or any bank can negotiate in the seller’s country (unrestricted L/C).

Reimbursing Bank:

            The Bank that is (by the L/C issuing Bank) to effect reimbursement is known as reimbursing Bank. Reimbursing Bank is authorized to honor the reimbursement claims in settlement of negotiation/ acceptance/ payments lodged with it by the paying/ negotiating/ accepting Bank.

Confirming bank:

            A confirming bank is one which adds the guarantee to the credit opened by another Bank. Therese undertaking the responsibility of payment/ negotiating/ acceptance under the credit in addition to that of the issuing Bank. A confirming Bank normally does so it requested by the issuing Bank.

Types of L/C:

  Revocable/ irrevocable L/C.

  Confirmed/ unconfirmed L/C.

  Transferable L/C.

  Back to back L/C.

  Acceptance L/C.

  Revolving L/C.

  Red clause L/C.

  Green close L/C.

The EXIM Bank basically deals with irrevocable L/C. which can not be amended or cancelled by the issuing Bank at any moment and without prior to the beneficiary.

 It also deals back to back L/C, which is the letter of credit provided by the exporter to the import the raw materials from abroad in order to produce the exportable commodity for the importer.

Procedures for opening L/C:

Application for opening L/C:

 An importer who is desirous to import goods from foreign country will apply issuing Bank for opening a L/C. The importer will provide an application mentioning the following aspects:

  Full particulars of applicant Bank account.

  Types of business.

  Historical background.

  Amount of required L/C limit.

  Amount of L/C margin.

  Terms of payments.

  Name of imported goods.

  Repayment schedule and source of fund.

Documents required for opening L/C:

An importer or L/C opener has to submit the following documents:

  Application form (provided by the Bank).

  Import registration certificate.

  Pro-forma invoice.

  Four sets of IMP form.

  Insurance cover not.

  VAT registration number.

  Tex registration number.

  Letter of credit authorization form.

Examination for opening L/C:

 Application must be carefully checked by the concerned officer considering the facts mentioning below:

  The terms and conditions of L/C applications are consistent with exchange control and import trade resolution UCPDC 500.

  Illegibility of imported goods.

  The L/C must be opened in favor of importer.

  That is signed by the importer and agreed with the terms and conditions.

  Indenting registration number.

  Goods are not of Israel and vassals to be used are not of Israel.

  Insurance cover note with date of shipment.

  whether RC is up to date or not.

  Whether IMP form is duly filled up and signed.

  The imported goods are marketable.

After scrutinizing all these legal aspects necessary entry is given to the margin register and charge, commission and margin is realized.

Transmitting the L/C:

            The L/C is transmitted to the advising Bank for advising the L/C to the beneficiary. L/C is generally transmitted through tested Telex of Fax. Before transmission of final examination of the L/C contents is necessary for the issuing Bank. It is customary to advice a credit to the beneficiary through advising Bank. Advising Bank after receiving L/C documents informs to the beneficiary for receiving L/C.

Add confirmation:

            Very often advising Banks received request from the issuing Bank to add their confirmation while advising credit to the beneficiary. The advising can do it if there is prior arrangement between advising and issuing bank or if it feels that the issuing Bank is repute reliable and institution and good enough to discharge this obligation.

Amendment of L/C:

            In case of revocable L/C amendment be brought without prior notice of the benefici8ary or issuing Bank. But in cage of irrevocable L/C prior notice of the beneficiary is essential. Issuing Bank will accept amendment of the L/C after getting consent of both importer and exporter.

Payment against Document (PAD).

            The issuing Bank starts PAD procedure after getting all necessary documents from the exporter as evidence of export in goods. Documents required for PAD is mentioned below:ü  Original (non-negotiable) bill of landing.

  Commercial invoice

  Certificate of insurance.

  Certificate of origin.

  Bill of exchange.

  Pre-shipment inspection certificate.

  Packing list.

  Clean report of Finding (CRF).

Examination of PAD documents:

            Scrutinizing documents is very important for the issuing Bank. As after examining all the documents the issuing Bank will make payment to the negotiation Bank. So, any mistake in the examination process may cost issuing Bank.

Examining the bill of exchange:

  It is drawn a duly signed by the maker indicating as the beneficiary.

  It is drawn on the importer indicating him drawer

  Tenors of the draft are strictly in conformity with the terms stipulated in the L/C.

  Amount is identical.

  Amount in words and in figures is same.

  Examining the commercial invoice.

  It is addressed to the importer.

  It is dated, signed and submitted in required number.

  It must bear detailed description of goods that must tally with L/C and bill of landing.

  Price, quality, quantity etc. is corresponded to L/C.

  It must be prepared in the language of L/C.

  Invoice must bear L/C authorization and other relevant number.

  Charge relevant to merchandise is included in the invoice and is permitted by the L/C.

Examination of transport document:

  It is presented in full set of negotiable and non-negotiable copies.

  Date of shipment on the bill of landing.

  Bill of landing must be made out in the mane of Bank notify the importer.

  Description of goods in the bill of landing must agree with invoice and L/C.

  Port of shipment and destination is as per L/C.

  Bill of landing is signed by the shipping company or their agent.

Examination of other documents:

            Weight list, inspection certificate, quality certificate, certificate of origin, packing list etc. should agree with L/C terms and conditions and also signed by the appropriate authority. These certificates are usually dated before the date of shipment.

Common discrepancies of the import document:

 Following are the common discrepancies found in the documents operation:

  Inadequate number of invoice.

  Late shipment.

  Late shipment of transshipment beyond L/C terms.

  ‘One broad’ endorsement unsigned or not dated on the bill of lading.

  Specifications of goods are not as per terms of L/C.

  Tenor of draft wrong.

  Inconsistent documents presented.

  Absence of some documents.

If any major discrepancies found in the documents it is informed to the buyer for his/her opinion. If discrepancies are minor then these are overlooked.

Lodgment and retirement of import document:

Date of payments: Usually payment is given within 7 days of documents received. Otherwise incase of documents purchased by negotiating Bank it may claim for interest.

Intimation letter: Before payment an intimation letter is given to the international department for arranging necessary fund before final payment.

Retirement procedures:

  Receive all kinds of documents.

  Checking of documents as per L/C terms.

  Entry of PAD registers.

  Vouching of PAD register.

  Posting of voucher.

  Sending credit advice to the head officer.

  Informing importer about receiving documents.

Accounting treatment:

When documents are received:

When margin amount is transferred to PAD:

When margin amount is made:

When reversal entry:

 Loan against Trust Receipt (LTR):

            There may be situation where storage of collateral in an independently controlled filled where house is impractical and improper may require the goods for further processing of for display the merchandise in order to make the final sale. In such cases a financing institution that has a great degree of trust in the importer may be willing to release the negotiable bill of landing and thereby also the good to the importer against the signing of trust receipt. After the importer has made his/her final sale and received the proceeds, he/her can pay the financing institution that he/ she received as advance.

 Loan against Imported Merchandise (LIM):

            If the importer does not come to negotiate the shipping documents from the issuing Bank then it creates LIM though the Bank clears the goods from the port and holds the goods in its go down. Beside the above as soon as the imported goods come to the port the party may fall into financial crisis and requests the Bank 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 the Bank by making require payment (if he/ she takes the goods time to time payment will be adjusted simultaneously).

Export section:

 This section negotiates the export documents and collects and purchases the export in relation to export credit.

  Pre-shipment finance.

  Post-shipment finance.

Export finance arises from trade between two traders trading in two different countries. A brief idea of the both categories is given below.

Pre-shipment finance:

            When an exporter intend to ship  the goods to an overseas buyer he/ she needs fund for purchasing goods to be exported. He /she may also depend upon the bank for arranging credit for the supply of goods.

Post- shipment finance:

            Post-shipment finance is more concerned with Banks than pre-shipment finance. This type of finance starts after the goods have already been shipped.

Function of export section:

Export section performs different types of tasks such as:

  Back to Back L/C open.

  Foreign Documentary Bill for Collection (FDBC).

  Foreign Documentary Bill for Purchase (FDBP).

  Local Documentary Bill for Purchase (LDBP).

  Secured Overdraft (SOD) export.

  Export Cash credit (ECC).

  Pacing Credit (PC).

  Accepted Bills Payable (ABP).

Back to Back L/C opens:

         It is secondary letter of credit opened by the advising bank in favor of a domestic / foreign supplier on behalf of the beneficiary originals foreign L/C. As the original letter of credit of Bank by import letter, it is called Back to Back L/C. The second L/C is opened on the strength of the original for a smaller amount i.e. maximum 75% is shipped under lien and 10% under packing credit. There are three of Back L/C opened by EXIM Bank of Bangladesh Ltd.

Back to Back L/C (Foreign):

When the BTB L/C is opened in a foreign country supplier it is called BTB L/C (Foreign). It is generally payable within 120 days at sight.

Back to Back L/C (EDF):

EDF stands for Export Development Fund that is provided by the ADB to Bangladesh Bank for Export promotion of 3^rd World country like Bangladesh. When the Bank is not in a position to support the amount of Back L/C then they apply for loans to the Bangladesh Bank for Back L/C(EDF).

Back to Back L/C (local)

            When the Back to Back L/C is opened for local purchase of materials is called Back to Back L/C (local). It is generally payable within 90 days at sight.

Procedures for Back to Back L/C:

  Exporter should apply for Back to Back L/C.

  Exporter L/C or master V under is lien.

  Opening of Back to Back L/C.

Terms and conditions for Back to Back L/C.

 That the customer has credit lien facility.

That L/C is issued as per UCPAD 500.

  That on the export L/C a negotiation clause is present.

  That there is no provision for Blank endorsement of B/l.

  That payment clause is thereon the L/C issuing Bank ensuring payment.

Consideration for to back L/C:

  Whether client can manufacture within the time period.

  The unit of the finished pro-forma invoice should be considering while allowing margin.

  Consider the expiry date and shipment date.

  On-side inspection whether manufacturing is carried out.

Payment under Back to Back L/C:

            Deferred payment is made in case of Back to Back L/C as 6.,90,120,180 date of maturity period. Payment will be given after realizing export proceed from the L/C issuing Bank from the abroad.

Reporting of Bangladesh Bank:

            At the end of every month reporting of Bangladesh Bank is mandatory regarding the whole month’s export operation. The procedures in this respect are as follows:

  To fill up the E-2 schedule of s-1 category. The whole month import amount, quantity, goods category, country, currency etc. all are mentioned. Respective IMP forms are also attached with the scheduled to fill up the E-3/P-3 for all invisible payment.

  Original IMP is forwarded to Bangladesh Bank with mentioning novice value.

  Duplicate IMP is skipped with the Bank along with the Bill of entry.

Export procedures:

            A person desirous to exports should apply to obtain ERC from CCLNE. Then the person should take step for export purpose in the Bank for obtaining EXP form. He/she must submit the following documents:

  Trade license.

  ERC.

  Certificate from concerned government organization.

After satisfaction on the documents the Banker will issue EXP form to the exporter. Now the exporter will be getting shipping and other documents from the shipment procedure. Exporter should submit all these documents along with letter of indemnity to the Bank for negotiation.

Documents of export

Following major documents are required for export purpose:

  Commercial invoice.

  Bill of lading.

  EXP form.

  Bill of exchange.

  L/C copy.

  Packing list.

  Certificate of origin.

  Quality control certificate.

  Weight list.

  Inspection certificate.

Procedures for collection of export Bill

There are two types of procedures regarding collection of export Bill:

  Foreign Documentary Bill for Collection (EDBC).

  Foreign Documentary Bill for Purchase (EDBP).

Foreign Documentary Bill for Collection (FDBC)

            Exporter can collect the Bill through negotiating bank on the basis of collection. Exporter in this case will submit all the documents to the negotiating Bank for collection of Bill from inspector. the exporter will get money only when the issuing Bank gives payment. In this connection Bank will scrutinize all the documents as per terms and conditions mentioned in L/C.

Accounting treatment

FDBC Register

Entry given twice in this register

  When document is forwarded to the issuing Bank.

  When proceeds realized.

Foreign Documentary Bill for purchase (FDBP)

            when exporter sale all the export documents to the negotiating Bank it is known as FDBP. In this case the exporter will submit all the documents to the Bank. The Bank give 60%-80% amounts to the exporter against total L/C value.

Accounting treatment

Before realization of proceeds:

Adjustment after realization of proceeds:

Local Documentary Bill for purchase (LDBP):

  Incoming of L/C customer with the L/C to negotiate.

  Documents given with L/C.

  Scrutinizing documents as per L/C terms and conditions.

  Forward the documents to L/C opening Bank.

  L/C issuing Bank gives acceptance and forward acceptance letter.

  Payment given to the party by collection basis or by purchasing documents.

 Accounting treatment:

Packing Credit (PC)

            It is one kind of credit sanctioned by export department to meet the exported goods shipment timely. The Bank will give the facility after deduction of Back to Back L/C from total L/C value.

Secured Overdraft (SOD)

            Secured Overdraft is one kind of facility enjoying by the exporter from the export section. It is generally given to meet the Back to Back L/C claim. Sometimes it is given to the exporter by force for meeting the Back to Back L/C claim due to delay of Master L/C payment.

4. Foreign remittance section:

            Different funds are mobilized from foreign country to our through the foreign remittance section. Purchase of foreign currencies institutes inward foreign remittance and sale of foreign currencies constitutes outward foreign remittance. EXIM Bank has a rich environment where funds flow from different countries.

            The transaction of the authorized dealer in foreign exchange involves either inward or outward remittances of foreign exchange between the two countries.

            EXIM Bank has authorized dealership. Different branches of EXIM Bank such as Motijheel branch, panthapath branch etc. are providing the foreign remittance services to its customers. But EXIM Bank Gazipur Chowrasta branch has no authorized dealership. For this reason this branch can not provide the foreign remittance services to its customer. EXIM Banks foreign remittance facilities include FBC, LFBC purchase and  sale of FCY, FTT, and traveler’s cheque, FBP.

4.1 way of transferring the funds:

  NOSTRO Account.

  VOSTRO Account.

  LORO Account.

Nostro Account

            An Account of the branch named which in a multinational Bank for the transferring of the fund called NOSTRO Account.

VOSTRO Account.

            VOSTRO Account is the opposite of NOSTRO Account where a multinational Bank maintains account in the local Bank to meet the requirements of sending fund.

Remittance Procedure of Foreign Currency

There are two types of remittance:

  Inward remittance.

  Outward remittance.

Inward remittance

            Inward remittance can be divided into different types. These remittance procedures are describe in the following:

Foreign Demand Draft (FDD):

            If any draft is sent to the name of any organization from abroad than the draft holder is to fill up from- C Where the draft holder is to fill up who has send this draft, from where this draft has been sent etc. whether family purpose then no VAT is required against the draft. For payment of draft of concerned officer maintains a register which is called register for foreign currency paid.

Telegraphic Transfer (TT)

            TT is one of the important tools of transferring foreign currency from one country to another. The person who wants to send TT to the abroad at first he/ she has to submit an application from duly mentioned in TT amount and he /she has to deposit amount mentioned in voucher to the cash department. It is generally performed by the Bank branch through their respective NOSTRO account who is maintaining any foreign Bank account outside the country. The originating Bank send a message to the  paying foreign Bank for making payment against the mentioned TT accounts number. The foreign make payments to the party and also make debit account against respective Bank. At the same time foreign Bank send advice to head office ID division for acknowledging the debited amount. Head officer ID division sends debit advice to the respective branch for acknowledging the payment.

Outward remittance:

Outward remittance includes sales of TC and FC notes etc.

Sales of TC and FC notes:

            To get TC and FC notes at least the customer has to submit an application form. Filling up the required column, which is formatted by the Bank, is called T/M form. After checking up the desk officer passes voucher and issues a TC and gives cash dollar to the customer. In both the cases the Bank endorse total amount in customer’s passport. The Bankers requires photocopy of customer’s passport (page: 1-7) and endorsement paper. The charge of endorsement taken by the branch is Tk. 200 only. Sale of TC and FC notes amount varies from different countries:

          Export Import Bank Of Bangladesh Limited

1. Recommendations

2. Conclusion of the report

3. Reference and bibliography

RECOMMENDATIONS

  Banking is a service-oriented marketing. Its business profit depends on its service quality. That’s why the authority always should be aware about their service quality.

  To provide service to the customer it is necessary to have a trained team of an organization of an institution. For this reason the Bank should recruit more fresh, bright and energetic persons. In this case the Bank can consider MB, BBA, MBM and etc.

  The Bank has a provision for internship program, but it is not well organized. Although the officials are very careful and co-operative with the interns, the authority should be more structured. If they can properly make them trained it will be very fruitful to recruit them. Because they learn overall Banking in the internship period, so in the beginning of the job they can work as experienced persons. It is also very important that they should give an honorarium to the intern.

  Bank should offer Bank is launching ‘Customer Credit scheme’ EXIM Bank is failing to launch this kind of scheme. The management can undertake such sort of schemes and earn more profit.

  As soon as possible the Bank should start more benches in DhakaCity as well as the other cities of the country.

  Now a day’s world is going very fast. Now most of the Bank opens online customer service system. So, in order to compete in the world market they should adopt online Banking system.

  The Bank should attempt to enter into the share market by issuing share to capitalize more money and invest thereafter by expanding the number of barnacles around the city.

  One of the business strategies is promotion. Successful business depends how they can promote their products of services to the customer. In this connection to improve the business bank should introduce more promotional programs.

  The recruitment process of the Bank is very lengthy an expensive. The bank should select the employee by reducing the lengthy process.

  In general banking department it is necessary to implement modern Banking process instead of traditional system. The department should be more computerized.

  In addition with the present services they should include more services. It is badly needed to provide more services to the customer in order to compete in the market.

  Data base net working is the most modern technology to transfer data from branch to branch or branch to head office and vice versa. So, they must use this technology in Information Technology (IT) department of the Bank.

  All the clients are not in favor of introducing system, if possible the rule of introducing to pen an account should be changed. Because many people face in problem to arrange an introducer in the time of opening accounts.

  The loan sanction process should be easier that the clients can feel convenient to take loan from the Bank.

  To make exchange process more prompt the authority should use modern communication system such as E-mail, Fax, win Fax, Internet etc.

  The branches of the Bank facing the problem of shortage of manpower. So, the authority should take immediate action to solve the problem.

CONCLUSION:

Export Import Bank of Bangladesh Limited is a third- generation private commercial bank in the country with commendable operating performance Directed by the mission to provide prompt and efficient services to clients, EXIM Bank has successfully celebrated its sixth years of operation. It provides a wide rage of commercial banking services EXIM Bank has a achieved success among its peer group within a short span of time with its professional and dedicated team of management having long experience, commendable knowledge and expertise in conversion with modern banking. With all its resources, the management of the Bank firmly believes that the bank would be able to encounter problem that may arise both at micro and macro economic levels. The Management of the Bank is maintaining an efficient portfolio in order to have a healthy growth and retain customer satisfaction. EXIM Bank is engaged in modern banking. It is expected that EXIM Bank by its efficient Asset and liability management will be able to maintain its trend of growth and thus overcome the threat. Neither EXIM Bank nor any other commercial bank can effectively combat risk. However, EXIM Bank having small and targeting niche markets is likely to be less affected by restrictive monetary and/ or fiscal policy. The Management of the Bank is planning to meet the required capital adequacy withering the stipulated time frame, and a loan and advance policy that expected the loan loss provisioning in future will be within tolerable limit having little material impact on future profitability as well as net worth. A although EXIM Bank is yet to be fully automated the bank has a adequate modern technology to meet its present requirement and it proceeding aggressively to enhance its technology level. As EXIM Bank is performing good in traditional general banking and there is a good demand for Islamic Banking and the opinion of then (The management) that the performance of the Bank is getting much better than past. I wish and hope that in future EXIM Bank will be Number one commercial Bank in Bangladesh.

References And Bibliography

1. Annual report of EXIM Bank Limited, 2004.
2. Different types of brochures of EXIM Bank.
3. Articles of EXIM Bank.
4. Business Communication.

John V. Lesiker.

5. Strategic Management- concept and Cases (Ninth Edition).

Arther a. Thompson, Jr A. J. Strickland.

6. Principles of Management (Eighth Edition).

Terry and franklin.

7. Principle of Marketing (Millennium Edition).

Philip Kotler.

8. Design and operation of Customer service System.

Paul S. Bender.

9. Foreign Exchange and Financing of Foreign Trade.

Syed Asraf Ali.

10. Business Accounting- 1 (Sixth Edition).

Frand Wood’s.

11. Banking Theory and practice.

K. C. Shekhar.

12. Finance and banking dictionary.