The main objectives of education are to acquire knowledge. To acquire knowledge ultimately we must do some practical application in addition to theoretical knowledge. Through this report, I tried my level best to present my practical knowledge as find out some objectives.
The main objectives of the Report: –
Company Background.
Company’s major functions.
Financial Highlights.
Types of Account.
Paper/Documents required for opening & closing of various types of Accounts.
Special cases in Account opening.
Cash receive and payment.
Procedures of T.T, D.D, P/O, I.B.C.A & O.B.C.
Clearing House – Inward & Outward Clearing.
Investment.
Foreign Trade.
BASIC Bank Limited offers:
Term loans to industries especially to small-scale enterprise.
Full-fledged commercial banking services including collection of deposit, short-term trade finance, working capital finance in processing and manufacturing units and financing and facilitating international trade.
Technical support to Small Scale Industries (SSIs) I order to enable them to run their enterprise successfully.
Micro-credit to the urban poor linkage with Non-Government Organizations (NGOs) with view facilitating their access to the formal financial market for mobilization of funds.
In order to perform the above tasks, BASIC works closely with the clients, the regularly authorities the shareholders Government Of Bangladesh (GOB), banks and other financial institution.
CORPORATE STRATEGY: –
Financial establishment of small units industries and businesses and facilitate their growth.
Steady and sustainable growth.
Investment in a cautious way.
Adoption of new building technology.
Profit maximization.
Establishing small industries.
Lending Criteria:
Entrepreneur:
Entrepreneur/promoter has to be creditworthy and compete enough to run the proposed industry.
Viability of the Project:
The project should be viable from organizational, technical, commercial, financial and economic points of view.
Technical Viability:
The project should be technically sound and environment friendly.
Building should be well planned and well constructed.
Commercial viability:
Market prospect potential for the product has to be fully assured at competitive prices.
Marketing channel for the product should be accessible to the entrepreneurs.
Financial Viability:
There should be reasonable debt equity ratio as determined by the a bank on individual case basis.
Debt service coverage ratio should be at least 2.5 times at the optimum level of production.
IRR should preferably be not less than 20 percent.
Economic viability:
The project should ensure benefit to the national economy and create sufficient employment opportunity.
Organizational Structure:
To achieve its organizational goals, the Bank conducts its operations in accordance with the major policy guidelines laid down by the Board of Directors, the highest policy making body. The management looks after the day-to-day operation of the Bank.
MANAGEMENT:
The Managing Director heads the management. The two General Managers and Departmental Heads in the Head office assist him. BASIC is different in respect hierarchical structure from other banks in that it is much more vertically integrated as far as reporting to the Chief executive is concerned. The Branch Managers of the Bank report direct to the Managing Director and, for functional purpose, to the Heads of Departments. Consequently, quick decision making in disposal of assess is ensured.
Organizational Goals:
BASIC Bank’s ambitions:
BASIC Bank Limited dedicated their service to the nation through active financial participation in all segments of economy, small industries, trade, commerce and service sector etc.
The Banks main manifest to progress as an institution par excellence to customer satisfaction.
Global Banking has change rapidly and BSIC as worked hard to adapt to these changes.
To pay a vital role in human development and employment generation.
To undertake project promotion to identify profitable areas of investment.
To search for newer avenues for investment and develop new products to suit such needs.
To establish linkage with other institution which are engaged in financing micro enterprise.
BASIC keeping pace with the changing environment.
To corporate and collaborate with institutions entrusted with the responsibility of promoting and aiding SSI sector.
Deep commitment to the society and growth of national economy.
Resource and Capabilities:
Basic Bank is a well prepared to and capable of meeting the demand for a broad range of banking services .It has got adequate resources, both human and physical, to provide the customers with the best possible services.
Physical and technological resources:
A great deal of investment for developing the physical resource base of the Bank has been made. BASIC has its presence in all the major industrial and commercial hubs of Bangladesh in order to cater to the needs of industry and trade. At present, there are twenty-seven conveniently located branches in all over Bangladesh. There are ten branches in the capital city Dhaka, Twelve in Chittagong, and Six in Narayanganj and one each in Narshingdi, Rajshahi, Saidpur, Bogra, Khulna, Jessore, Sylhet, Moulovibazhar, Barisal, Khatunganj, Chawmuhoni, and Comilla.
Major features and Benefits of these Branches:
Global banking has changed rapidly and BASIC as worked hard to adapt to these changes.
The banks main manifest during force for the banks progress as an institution par excellence to customer satisfaction.
Fully computerized accounts maintenance.
Well decorated and air conditioned facilities.
To pay a vital role in human development and employment generation.
A fully operational computer network which is currently being implemented .The work of Local Area Network (LAN) and Wide Area Network (WAN) installation having reliable and secured communication between the branches and the Head Office is in progress to facilitate Any Branch Banking and ATM Services.
Money counting & Money checking machine making cash transactions easy, security and prompt.
The bank look forward with excitement and a commitment to bring greater benefits to customers.
Eighteen out of twenty seven branches are authorized dealers of foreign exchange. This facilities speedy disposal of transaction of export and import trades.
A group of professional bankers to render personalized services.
BASIC dedicated their service to the nation through active financial participation in all segments of economy, small Industries, trade, commerce and service sector etc.
BASIC keeping pace with the changing environment.
Deep commitment to the society and the growth of national economy.
Upcoming Branches:
BASIC has already undertaken a massive Branch expansion program that would allow BASIC to establish another two more Branches in key location of the country. The program is now awaiting Bangladesh Bank clearance and approval some of the new upcoming branches are listed below.
- Rampura brunch
- Tangail branch
BRANCH NETWORK OF BANGLADESH:
At present, there are twenty-eight conveniently located branches in all over Bangladesh. These Branches are given below: –
Dhaka [Ten Branches in the capital city]
Chittagong, [Six Branches in the commercial city]
Narayanganj, [Two Branches in]
Norshinngdi, [One each in]
Rajshahi,
Saidpur,
Bogra,
Khulna,
Jessore,
Sylhet,
Barisal,
Chawmuhoni, and
Comilla.
Human Resources:
BASIC bank has a well-diversified pool of human resources, which is composed of people with high academic background. Also, there is a positive demographic characteristic –most employees are comparatively young in age yet mature in experience .As of 31st December 2003 the total number of employees is 537.
Monetary /Financial Resources:
Like any other financial intermediaries, BASIC is no exception in performing its core functions viz, mobilization of fund and utilizing such und for profitable purpose
Mobilization of Fund:
The main sources of fund for BASIC are: –
a) Deposit.
b) Borrowing.
Chart:2. Deposit Mix in 2006:
Deposit:
Deposit is the mainstay for BASIC Banks sources of funds. The following includes the usual types of deposits of the Bank:
Current Deposit–
Different group of industrial customers encouraged to open current deposit account includes: commercial, small scale industry, medium scale industry, and large-scale industry. Minimum requirements for current deposits worth TK 50,000, and maximum amount can be deposited up to TK 10,00,00000.
Savings Deposit-
General clients are targeted group of savings deposit along with the industrial customers. Savings deposit has no particulars to deposit minimum, and maximum. But depositors used to get deducted facilities for drawing money from the deposited figure.
Term Deposit-
Depositors with a minimum TK10, 000 are given term deposit facilities for at least six months by means of highest interest rates. Fix deposit term valid up to six years, and then afterwards depositor can redeposit the sum. Another form of term deposit called short-term deposit (STD), a minimal rate of interest given to deposits whereby depositors can withdraw the after term over. Both for Fixed Deposit (FDD), and Short Term Deposit (STD), all type of commercial, and industrial customers are given preferred services to open a term deposit along with a credit & commerce account.
Deposit requirements:
In order to stop money laundering Bangladesh Bank issued new agenda for depositors that is strictly followed by BASIC Bank:
Bearer Certificate of Deposit (BCD):
From 1983 a saving scheme named Bearer Certificate of Deposit (BCD) has been introduced under circular of Bangladesh Bank to bring the black money in investment cycle. BCDs are issued for multiples of
Tk.50, 000.00 such as Tk.1, 00,000.00, Tk.1, 50,000.00 and so on for unlimited amount. No signature is required to issue a BCD. The holder is owner of BCD.
Who can get it issued: Any individual without disclosing his/her identity and without Opening any account.
Period: These deposits shall be opened for a fixed period ranging from three months to two years.
Interest rate is 1% bellow as that of FDR.
[Table-7]
Period | Interest Rate |
3 Months and above | 5.75% |
6 Months and above | 6.00% |
12 Months and above | 6.25% |
24 Months and above | 6.50% |
Papers /Documents required for opening of
INDIVIDUAL/JOINT, PROPRITORSHIP, & PARTNERSHIP Accounts:
Individual /Joint:
Two copies of passport size photograph of the Account holder(s) or Person(s) who will operate the Account duly attested by acceptable introducer,
Passport,
Introductory Certificate from Employer,
Introductory Certificate from renowned person of the society acceptable to Bank/Financial Institutions, and
TIN Number (If applicable).
Cautions:
In Account opening form Name, Present & Permanent address, Date of birth, Age of account holder, Father’s Name, Mother’s Name, Husband’s Name in case of married lady must be filled up properly in Account opening form.
The Introducer of the proposed new account must be maintained an account with the branch for at least one year and the account must have good transactions over the last year.
The details of the identity, address and business of the new account holder must be verified and the branch In Charge should be satisfied about the person/firm/company’s credibility.
A letter of thanks shall be sent to the introducer and to the account holder on Bank’s Standard Form.
Proprietorship Firm:
Two copies of passport size photograph of the Account holder(s) or person(s) who will operate the Account duly attested by the introducer.
Certified copy of valid Trade License from the Municipality/ City Corporation/Union Parishad.
Passport/ Introductory Certificate from Employer /Introductory Certificate from renowned person of the society acceptable to Bank/Financial Institutions.
TIN Number (If applicable).
Cautions: Same as Joint/Individual Account.
Partnership Firm:
Two copies of passport size photograph of the Account holder(s) or person(s) who will operate the Account duly attested by the introducer.
Certified copy of valid Trade License from the Municipality/ City Corporation/Union Parishad.
Certified copy of the Registration Certificate of Partnership Deed duly attested by Notary Public in case of registered firm.
Partnership Account Agreement.
Resolution signed by all partners to open the A/C.
Passport/ Introductory Certificate from Employer /Introductory Certificate from renowned person of the society acceptable to Bank/Financial Institutions.
TIN Number (If applicable).
Cautions: Same as Joint/Individual Account.
Papers /Documents required for opening of
LIMITED COMPANIES Accounts:
Limited Company:
Two copies of passport size photograph of the Account holder(s) / person(s) who will operate the Account duly attested by the introducer.
Certified copy of Memorandum & Articles of Association by RJSC.
Certified copy of Certificate of Incorporation by RJSC.
Up to date list of Directors.
Certified copy of Resolution of the Board of Directors for opening & operation of the Account.
Passport/ Introductory Certificate from Employer /Introductory Certificate from renowned person of the society acceptable to Bank/Financial Institutions.
LIMITED COMPANY:
A company registered under Companies Act, 1994 has a legal entity apart from its shareholders.
A Company has been defined as ‘an artificial person created by law with a perpetual succession and a common seal”.
A Company may, therefore, be defined as a separate legal person brought into existence by registration or incorporation under The Company Act, 1994 in pursuance of several individuals agreeing to form themselves in to a Company.
Private Limited Company:
Private Limited Company means a company, which by its articles restricts the right to transfer the shares.
Minimum number of its members is 02 and maximum number may be 50 not including persons who are in the employment of the company.
Prohibits any invitation to the public to subscribe for the shares, if any, or debentures of the company can launch the business after getting Certificate of Incorporation.
Certificate of Commencement of Business is not required here.
PUBLIC LIMITED COMPANY:
Public Limited Company means a company incorporated under this Act, which is not a Private Limited Company.
In Public Limited Company has the following specialties by its articles –
Minimum number of its members is 07 and maximum number may be equal to number of shares.
Shares are transferable.
May invite to the public to subscribe for the shares, if any, or Debentures of the company.
Certificate of Commencement of Business is required to launch the business after getting Certificate of Incorporation.
Trust:
Two copies of passport size photograph of the Account holder(s) / person(s) who will operate the Account duly attested by the introducer.
Up to date list of Members of the Trustee Board.
Certified copy of Deed of Trust certified by the Chairman/Secretary of Trustee Board.
Certified copy of Resolution of the Trustee Board for opening & operation of the Account.
Cautions: Same as Joint/Individual Account.
Papers /Documents required for opening of EXECUTORSHIPS ACCOUNTS:
Executor:
An executor is a person appointed by a testator for execution of the last will leave by him. Upon production of probate of the will the executor should be allowed to close the deceased’s account and deal with the credit balance as per terms and conditions of the will, affecting the account.
In case of credit balance of the deceased’s account, it is preferable for the banker that the executor opens the required account as an executorships account instead of an account in the personal name of the executor.
If there is more than one executor the account should desirably be opened under the joint signatures of all the executors through they have powers individually and a definite arrangement made whether operations on the account will be done by one executor singly or jointly by all, by two or more of them.
Where there is a debit balance in the account arrangement should be made with the executor for adjustment there of as soon as the executor is able to realize sufficient of the deceased ‘s assets.
The banker should not allow any transfer of the deceased’s assets. The banker should not allow any transfer of the deceased’s funds to the personal account of the executor nor he should allow the executor to raise any personal loan against security of the deceased’s property. Otherwise, he will be held liable for the misuse.
The executor is the legal representative of the testator for all purposes and all property of the deceased vest in him. The executor has power to sue and recover debts as the deceased had when living as well as to dispose of property and incur expenses as he may think fit and necessary for administration of the estate subject to restrictions, if any, as laid down in the will and the probate.
On the death of the executor his duties devolve on his executor and where there is more than one executor the deceased’s power vests in his survivor co-executor unless otherwise provided for in the will. An executor cannot normally delegate his power except to one of them where there is more than one.
Required Paper for an executorships account: –
Two copies of passport size photograph of the executor / person(s) who will operate the Account duly attested by appointed by the testator for execution of the last will leave by him.
Will deed executed by a testator for execution of the last will leave by him in the front of 02 male or 01 male & 02 female to operate the account.
Will probate accepted by Court.
Power of Attorney executed by a testator for execution of the last will leave by him favoring the executor in the front of 02 male or 01 male & 02 female to operate the account.
Passport/ Introductory Certificate from Employer /Introductory Certificate from renowned person of the society acceptable to Bank/Financial Institutions.
TIN Number (If applicable).
Cautions:
Same as Joint/Individual Account.
The banker should not allow any transfer of the deceased’s assets. The banker should not allow any transfer of the deceased’s funds to the personal account of the executor nor he should allow the executor to raise any personal loan against security of the deceased’s property.
Otherwise, he will be held liable for the misuse.
Papers /Documents required for opening of
ADMINISTRATOR & CLUB/SOCIETY/SCHOOL/COLLEGE Accounts:
Administrator:
An administrator is appointed under the authority of a court of competent jurisdiction where the deceased appointing an executor leaves no will. The administrator has substantially the same duties and powers as those of the executor; they differ mainly in the manner of their appointment. While the executor derives his authority from the will immediately after the testator’s death, the administrator derives his authority from the letters of administration, which he produces to the banker for inspection as an executor produces probate of the will for the purpose of a bank account. The administrator is also the legal representative of the deceased with powers to sue, recover debts and incur expenses. But he may not mortgage, charge or transfer any property without prior permission of the court granting the letters of administration. On the death of an administrator the surviving administrator, if any, acts, but on the death of the last administrator fresh letter of administrator is necessary.
Club/ Society/School/College etc:
Two copies of passport size photograph of the Account holder(s) or person(s) who will operate the Account duly attested by the introducer.
Memorandum & Articles of Association duly certified by the Chairman/Secretary.
Bye Laws & Regulation/ constitution duly certified by the Chairman or Secretary.
In case of cooperative society Bye Laws & Regulation/ constitution.
Duly certified by Cooperative Officer.
Resolution of Management Committee/ Executive Committee for opening & operation of the Account.
Up to date list of Office Bearers/ Governing Body/ Managing Committee duly certified by the Chairman/ Secretary.
Government approval in case of registered Club/society.
Cautions:
computer. So that he/she can withdraw money after being major.
The Guardian who opened the account in the minor’s name will introduce the minor after becoming adult to bank. In this introduction a renowned person should be present as a witness.
How ever the minor’s account can be opened in his own name and minor himself can operate the account in the following way:
- Minor who is 12 years or above may be allowed to maintain deposit account with us.
- Normal procedure of introduction and other formalities shall be observed.
- Minor can draw a cheque. If there is wrongful dishonor of such cheque minor can sue Bank for damage and for wrongful dishonor. If there is a wrongful payment to the minor, Bank will not be able to recover such payment. So Branch should be very cautious for any payment to the minor.
- In case of death of the minor, his legal heirs would be the beneficiaries of the Account.
Accounts of Pardanshil Ladies:
Accounts of Pardanshil ladies shall not be opened unless a respectable party known has introduced them and acceptable to the Bank provides that they can read and write English/ Bengali.
Banker should open the account in name of a pardanshil woman only after getting full information of her social status, education, and proper introduction. Because it is very difficult to prove in the court that a pardanshil woman willingly opened a bank account.
Cautions:
The introduction of the pardanshil woman should be taken satisfactorily.
Accepted responsible person and signature to be made in front of Authorized Officer/Manager should verify the signature of pardanshil woman.
If the lady is married, her husband’s name, address, occupation should be written carefully. If her husband is service holder then information about his employer, place of posting should be written carefully.
No advance should allow in favors of a pardanshil lady.
Accounts of illiterate Pardanshil ladies shall not be opened under any circumstances.
Joint Account:
In case of accounts to be opened in two or more names, “Either or Survivor” containing clear and specific instructions regarding operations of the accounts. These instructions shall be obtained under the signatures of all of them.
Either or Survivor”
If in the account opening form contains the Instruction “Either or Survivor”, in case of death of any joint account holders the balance will be payable to the survivor with total satisfaction of Bank.
In absences of the instruction “Either or Survivor”
In the absence of specific instructions in the Form “ Either or Survivor” balance of the joint account will be payable to the survivors and the legal representatives of the deceased joint account holder.
Cautions:
In the event of death of any account holders, the survivor shall be requested to close the old account and open a new account in the name of the surviving account holder
No overdraft shall be allowed in a Joint Account, unless all the parties to the account operate it jointly, and charge documents in respect of the advance are also signed by all of them.
Account opening OF ILLITERATE PERSON:
1 Accounts of Illiterate Person:
An illiterate person can be identify only by his thumb impression & photograph. Illiterate persons desirous to open account may be allowed to open and operate on an account under their thumb impression. So banker should take special cautions to open and operate this account.
Required paper/documents:
i) The introduction of an illiterate person should be taken satisfactorily.
ii) The thumb impression (left hand) of the depositor must be obtained in the Account Opening Form and Specimen signature card in the presence of an authorized Officer / Manager.
iii) Two copies of recent passport size photograph duly attested by acceptable introducer. One should be pasted on the specimen
iv) Passport/ Introductory Certificate from Employer /Introductory Certificate from renowned person of the society acceptable to Bank/Financial Institutions.
v) A letter of undertaking shall be obtained from him to the effect that he will not operate on the account unless he personally come to the Bank and put his thumb impressions on the cheque in the presence of the Manager/Authorized Officer.
vi) Wherever possible, brief details of one or two identification marks of the depositor should be noted on the Account Opening Form and specimen signature card under authentication of authorized officer/Manager.
Cautions:
i) Only saving account may be open favoring an illiterate person.
ii) “Account of Illiterate Person” this seal should be marked on Account Opening Form, specimen signature and ledger.
iii) No chequebook should issue in favor of this account holder.
For withdrawal of money the account holder should be come at bank premises and he will fill up the loose cheque. He will put his thumb impression on cheque in front of Manager. After being satisfied on verification the thumb impression and photograph of specimen signature card the authorized officer will allow him to withdraw the money.
Special cases in Account DECEASED / STOP PAYMENT:
Deceased account:
In case of death of an individual accountholder, all operations in his account shall be stopped for with. A “Caution mark: Deceased account” shall be drawn just below the balance of the account.
As soon as the information is received either through newspaper or some reliable source about the death of a constituent, the date of death and source of information shall be noted in the Computer against the relevant account. Interest on the account of the Deceased shall not be paid as death terminates the contract with the Bank.
Telegraphic Transfer:
These are two types. One is inward T.T & another is outward T.T. In this procedure one can transfer money from one place to another place. For this reason money carrying risk is reduced. As well as time also save.
This procedure is only applicable for in this bank & its other branches. No one can do T.T. from in this bank to another bank. Cause for any T.T. clients must have accounts in this bank.
D.D. – Demand Draft:
Demand Draft is another way to pay money or transfer account one branch to another branch. In this case one can pay money to his client to any place of Bangladesh. In this case client does need account in this bank.
These are two types. One is in ward D.D. and another is outward D.D. In this procedure one can transfer money from one place to another place. For this reason money carrying risk is reduced. As well as time also save.
Pay orders are the safest way of making payments, as they are drawn on the bank issuing them. So there is no scope of fraudulent or cheque bouncing. A pay order is issued only within the members of the Bangladesh Bank clearing house (Dhaka Metro). It can be issued in favor of a customer holding an account, by debiting his account and crediting bills payable account. Incase of a non-customer, cash equivalent of the payment plus order charges is received in cash and held in the daily suspense account until the payment is made through clearing.
It is another facility for client to transfer his money to another place. In this he must has an account in this bank. If he has no account in this bank, he can deposit money in this bank and does Pay Order. But in this case he must need a person how knows him. He can deposit check, which is confirmed, by Bangladesh bank’s clearinghouse. If it is correct than bank does this Pay Order.
Application must fill up the Pay Order form. Where Pay Order number, Payee name, Amount in figure and in wards.
Refund of Pay Order:
The following procedure should be followed for refund of pay order by cancellation: –
The purchase should submit a written request for refund of pay order by cancellation attaching therewith the original pay order.
The signature of the purchaser will have to be verified from the original application form on record.
Manager/ sub-manager’s prior permission is to be obtained before refunding the amount of pay order cancellation.
Prescribed cancellation charge is to be recovered from the applicant and only the amount of the pay order less cancellation charge should be refunded. Commission recorded for issuing the pay order should not be refunded.
The pay order should be affixed with a stamp ”Cancelled” under proper authentication and the authorized officer’s signature of the pay order should also be cancelled with red ink but in no case should be torn. The cancelled pay order should be kept with the relevant ticket. be reversed with proper narration. Cancellation of the pay order should also be recorded in the pay order issue register.
Definition of Foreign Exchange:
Foreign exchange is a process, which is converted one national currency into another and transferred money from one country to another countries.
According To MR H. E, EVUTT. Foreign exchange is that section of economic science which deals with means and method by which right to wealth in one country’s currency are covered into rights to wealth in terms of another country’s currency. It involved the investigation of the method, which exchanges the currency of one country for that of another, the causes which rented such exchange necessary the forms, which exchange may take and the foreign exchanges are affected.
Foreign Trade and Foreign Exchange:
International trade refers to trade between the residents of two different countries. Each country functions a sovereign state with its set of regulations and currency. The difference between the National Exporters and Importers presence certain peculiar problems in their conduct of international trade and settlement of the transaction arising there from. Important among such problems is-
Different countries have different monetary units.
Restrictions imposed by countries on import and export of goods.
Restrictions imposed by nations on payment form and into their countries, and
Differences in legal practices in different countries.
Foreign exchange means foreign currency and includes: –
All deposits, credits and balances payable in may foreign currency and any drafts, traveler’s checkups, letters of credit and bills of exchange, expressed or drawn in Indian currency but payable in any foreign currency.
Any instrument payable, at the option of the draw or holder thereof or any other party there to, Either in Indian currency or in foreign currency or partly in one and partly in the other. Thus, foreign exchange includes foreign currency, balances kept abroad and instruments payable in foreign currency.
Diversity in Natural Resources:
Trade may take place because of the diversity in productive possibilities among countries. For example one country may be blessed with a supply of petroleum, while another may have a large amount of fertile land.
Differences in Tastes:
A second reason for trade lies in preference, Even if the conditions of production were identical in all regions, countries might engage in trade if their tastes for goods were different.Differences in Costs:
The most important reason for trade is differences some counties in production costs. For example, manufacturing processes enjoys economies of scale; that is they tend to have lower average costs of productions as the volume of output expands.
PRINCIPLES OF FOREIGN EXCHANGE:
The following principles are involved in foreign exchange:
The entire system
The media used
The monetary unit
The principle of Comparative Advantage:
It is only common sense that countries will produce and export goods for which they are uniquely qualified. But there is a deeper principle underlying all trade. The principal of comparative holds that a country can benefit from trade even if it is absolutely more efficient (or absolutely lees efficient) then other countries in the production of every good.
COMPARATIVE ADVANTAGE:
The Principle of comparative advantage holds that each country will benefit if it specializes in the production and export of those goods that it can produce at relatively low cost. Conversely, each country will benefit if it imports those goods that it produces at relatively high cost. This simple principal provides the unshakeable basis for international trade.
No country is self-sufficient. One country has to depend on other countries for various reasons. One country may have a sound structure in one sector while its other sectors are not so well structured. As a result naturally it has to depend on another country to minimize these lacking of those sectors. On the other hand, according to Ricardo’s comparative analysis theory. If a country is good at various sectors then it will continue its operations in its best sector, while for the other sectors it will depend on others. When countries concentrate on their areas of comparative advantage under free trade, each country is better off. The underlying assumption here is that countries can concentrate properly in a specified area, as a result efficiency in production will increase, product quality will increase while the price be lower. Countries will be able to market their products at a lower price. The surplus production will be sold outside of the country which known as export. By doing so countries will earn foreign currency. Again by spending those currencies they will buy the required goods from other countries for them that are known as import. The whole transaction is known as Foreign Trade and through the exchange of foreign currency the transaction ends up. Foreign trade is divided into import, export and remittance
FUNCTION OF FOREIGN EXCHANGE:
The bank actions as a media for the system of foreign exchange policy. For this reason, the employee who is related of the bank to foreign exchange, specially foreign business should have knowledge of these following functions: –
Rate of exchange.
How the rate of exchange works.
Forward and sport rate.
Methods of quoting exchange rate.
Premium and discount.
Ris of exchange rate.
Causes of exchange rate.
Exchange control.
Convertibility.
Exchange position.
Intervention money.
Foreign exchange transaction.
Foreign exchange trading.
Exprt and import letter of credit.
Non-commercial letter of credit.
Financing of foreign trade.
Nature and function of foreign exchange market.
Rules and regulation used in foreign trade.
xchange Arithmetic.
Foreign Exchange and Foreign Trade Operations:
Authorized Dealer or AD Holder Bank:
As per section 2 of Foreign Exchange Regulation Act 1947, Authorized Dealers means a person, for the time being authorized under section 3 to deal in Foreign exchange. In other words Authorized Dealers means a Bank, Authorized by Bangladesh Bank to deal in Foreign under FER Act 1947.
License for Authorized Dealer:
To get a License for Authorized Dealer, a Bank will apply the General Manager, Foreign Exchange Policy Department of Bangladesh Bank, Head Office, Dhaka complying following conditions-
The Bank must have adequate manpower trained in Foreign Exchange.
Prospect to attract reasonable volume of Foreign exchange business in the desire location.
The Bank meticulously complies with the instruction of Bangladesh Bank.
The Bank will commit to deal in Foreign exchange with in the limit and will submit periodical returns as instructed by Bangladesh Bank.
Functions of authorized Dealers:
Authorized dealer can handle all kinds of Foreign exchange instruction as per FER Act 1947 under the instruction of Bangladesh Bank. Following are the main function of an Authorized Dealer:
Exchange of Foreign Currencies.
To make arrangement with Foreign Correspondent.
Buying & Selling Foreign Currencies
Handling inward & outward Remittance.
Opening of L/C Settlement of payment.
Investment in Foreign Trade.
Opening and Maintenance of Accounts with foreign Banks under intimation of Bangladesh Bank.
Export documents handling.
Modes of the Foreign Exchange:
Various services regarding foreign exchange provided by BASIC Bank can be segregated into three broad categories:
Export
Import
Foreign Remittance
Issuing T/C & Endorsement of Dollar
EXPORTS:
Legal requirements:
Although payment aspects of exports are Bangladesh banks concern, the export policy order announced by the ministry of commerce controls physical aspects. Bangladesh bank has set ort elaborate procedure and laid down detailed rules and regulations concerning export and export payments. All exports, to which the requirement of declaration applies, must be declared on the exp. from. The branch should before certifying any export form, consider and take notice of the following:
The intended exporters shall have valid export registration certificate.
Payment for goods exported from Bangladesh should be received through the branch in freely convertible foreign currency or in Taka from a nonresident Taka account of a bank branch or correspondent abroad.
Commission, brokerage and other trade charge are admissible only up to a maximum of 5% of the value of goods. The charge beyond 5% may be admissible subject to prior approval of the Bangladesh ba
- In order to avoid any loss of foreign exchange to the country, the branch should see that
Arrangement has been made for realization of export proceeds within prescribed period of 04 months.
Arrangements have been made for receipt of title to goods like bill of Lading, Always Bill etc. by the branch in shipment of goods.
The Exp form is signed either by the exporter or one holding valid legal power of attorney from exporter an the terms of the power of attorney are such that both the exporter and the attorney may be held responsible jointly and severally for realization of export proceeds.
Bonfires of the buyers/ consignees abroad and their credentials.
- The branch and its officials certifying the export forms as well as the exporter render themselves liable to punitive action under the FER Act for delay in repatriation or non-realization of export proceeds.
- In respect of export of goods by land route or by sea. The bill of leading. Railway receipts and other documents of title to cargo should be drawn only to the order of Mercantile Bank limited.
Exceptions:
s of goods against advance payment, the Bill of Lading, Airway Bill and other transport documents may be endorse by the branch in favor of foreign importers of the branch may allow the carrier company to draw the coc documents in favor of the foreign importers abroad by the branch.
Export of fresh fish, vegetables, fruits, poultry and other goods of perishable nature is also exempted from this directed.
Type ‘A’ industries in the EPZ may also draw the documents of title to cargo in favor of the consignee/LC opening ban.
The branch to whose order the relative railway receipt, bills of lading etc. are drawn shall endorsed the same to the order of their foreign correspondents but in no case they shall make any blank endorsement or endorsed it to the order of the consignee unless they have obtained specific or general approval of Bangladesh bank.
Import legal requirements:
Import of merchandise into in Bangladesh is related by the import policy order (IPO) announced by the ministry of commerce and / or notifications/ public notices issued by the ministry of commerce and /or C.C.I & E and Bangladesh bank.
Before entering into an import transaction country’s legal and economic framework to be considered. These include:
Restrictive governmental policies
Exchange regulations
Tariffs and transaction
Reporting to the controlling authorities.
It is important to have a general understanding of some of the basic legal bad economic terminology internationally, within which such trade takes places. Following ICC publications framework of such terminology and rules governing international trade.
UCPDC, ICCPUB-500
URR, ICC PUB-525
URC, ICC PUB-522
Inciters 2000 ICC PUB-460 (revised)
L/C (Letter of Credit):
DEFINITION OF L/C:
On behalf of the importer if the bank undertakes to make payment to the foreign bank is known as documentary credit or letter of credit.
A letter of credit is an instrument issued by a bank to a customer placing at the letters disposal such agreed sums in foreign currency as stipulated. An importer is a country request his bank to open a credit in foreign currency in favor of his exporter at a bank in the letters country, the letter of credit is issued against payment of amount by the importer or against satisfactory security. The L/C authorized the exporter to draw a draft under is terms and sell to a specified bank in his country. He has to hand over to the bank, will the bill of exchange, shipping documents and such other papers as may be agree upon between the exporter and the importer, the exporter is assured of his payment because of the credit while the importer is protected because documents in respect of export of goods have to be delivered by the exporter to the paying bank before the payment is made.
Revocable L/C:
If any letter or credit can be amendment or change of any clause on canceled by consent of the exporter and importer is known as revocable letter of credit.
A revocable letter of credit can be amended or canceled by the issuing bank at any time without prior notice to the bank to make payment. Revocation is possible only until the issuing bank or its correspondent has honored the documents. Thus a revocable credit does not usually provide adequate security for the beneficiary.
Irrevocable L/C:
If any letter of credit cannot be changed or amendment without the consent of the importer and expediter is known as Irrevocable letter of credit.An irrevocable credit constitution a firm undertaking by the issuing bank to make payment. It the fore, gives the beneficiary a high degree of assurance the he will pay to his goods or services provide he complies with terms of the credit.
TYPES OF LETTER OF CREDIT:
Letter of credit is classified into various types according to the method of settlement employed. All credits must clearly indicate in major categories.
Sign payment credit
Deferred payment credit
Acceptance credit
Negotiation credit
Red close credit
Revolving credit
Stand by credit
DOCUMENTARY REQUIREMENTS FOR OPENING L/C:
Import shall submit following documents for opening L/C:
Valid import registration certificate (commercial/industrial)
Tax identification number certificate
Vat registration certificate
Membership certificate of a recognized trade association as per IPO
A declaration, in triplicate, that the importer has paid income-tax or submitted income tax returns for the preceding year.
Performa Invoice or indent duly accepted by the importer.
Insurance cover note with money paid receipt covering value goods to the imported plus 10 percent above.
L/C application form (MF-fx 13) duly signed by the importer.
Letter of credit authorization form (LCAF) commercial or industrial as the case may be, duly signed by the importer and incorporating New ITC number of at least 6 digits under the Harmonized systems as given in the import trade control schedule 1998.
IMP form duly signed by the importer.
Precautionary steps:
The Branch must ensure that they deal only with know customers having a place of business in Bangladesh and can be traced easily should any occasion for this purpose.
The Branch shall assess the financial standing and credibility of the customers.
[The Branch should also obtain confident report on the exporter in all cases where the amount of L/C exceeds Tk. 200000/- P/Invoice and Tk. 500000/-against indents.]
The Branch shall verify price so as to ascertain competitiveness of the commodities to be imported.
The Branch shall verify signature of the importer on L/C Application Forms (LCAF & IMP Form.
The Branch will not open L/Cs for import of goods through the customs stations/routes like Sonamashjid, Hili, Burimary, Birol, etc. unless the importers pay 100% margin or prior Head Office approval is obtained.
1 Sanctioning Documentation & Legal formalities:
Approval of Head Office or Branch Manager (where L/C are to be opened under his delegation) to be obtained before opening L/C(s).
Security documentation to be completed as per sanction/approval terms prior opening L/C change form such as demand promissory note, letter of undertaking, letter of debit authority and letter of guarantee (where applicable) to be obtained with due stamps as per prevailing stamps act.
OPENING L/C:
The branch may now proceeds for opening the credit in behalf of the own customers who maintain accounts with them except government organizations. Necessary entries to be given in the l/c. opening register (MB/FX-03) by allocating an l/c number and following vouchers are to be passed for completion of opening transactions at BC selling rate (spot).
Creation of L/C liability (register MBFX-12)
Dr. customers liability on L/C cash
Cr. Bankers liability on L/C cash
MARGIN/COMMISSION AND CHARGES:
DR customers A/C: margin commission + FFC+POSTAL/ TELEX +STAMP+MISC.
CR. Sundry deposit a/c: margin on L/C (cash).
CR. Income A/C: postal/recoveries.
CR. Income A/C: miscellaneous earnings (handling charge, stationary charges, etc.)
CR. Sundry A/C: miscellaneous earnings (handling charge, stationary charges, etc.)
CR. Sundry Deposit a/c: F.C.C.
CR. Other Asset A/C: Stamp in hand.
TIME LIMIT FOR OPENING OF L/C:
LC’s shall be opened with in 150 days from the date of issuance of LCAF or from the date of registration of LCAF with Bangladesh bank.
BACK-TO-BACK L/C s:
The branch may open back to back import L/C s against export L/C s received by export oriented industrial units opening under the bonded warehouse systems, subject to observance of domestic value addition requirement prescribed by the NBR/Ministry of commerce from time to time.
The following instructions should be complied with while opening back import L/C s:
The unit requesting for the facility should possess valid IRC, ERC and Valid bonded warehouse license
The branch shall hold the Muster Export L/C affixing banks line stamp thereon and be kept in safe for security purpose.
The master export L/C should have validity period adequate to cover the time needed for importation of inputs, manufacture of merchandise, and shipment to consignee.
The back-to-back L/C value shall not exceed the admissible percentage of net FOB value of the relative mater export L/C (as per prescribed value addition requirement). For computation of net FOB value of a master exports L/C, the freight charge, insurance cost and commission if payable by the exporter shall be deducted from the L/C value. If the freight element is shown separately a freight certificate from the shipping company or agent should be asked for.
The back to back import L/C shall be opened on up the 180 days issuance (DA) basis except in cases of those opened against export development fund administered by Bangladesh bank in which case the back to back L/C will be opened on sight (DP) basis.
Interest for the issuance period shall not exceed LIBOR or the equivalent interest rate in the currency of settlement.
All amendments of the master export L/C should be noted down carefully to rule out chances of excess obligation under the back-to-back import L/C.
Back to back L/C can either be local or foreign. Inland BTB L/C s denominated in foreign exchange may be opened in favor of local supplier manufacturer of inputs against master export l/c and BTB L/CS may in turn be opened for import of inputs against inland BTB L/C in favor of local supplier/manufacturer under bonded warehouse system up to value limits applicable as per prescribed value addition requirement.
Checking of Back to Back L/C documents:
The relevant documents of Back-to-Back L/C send by negotiating bank will have to be properly checked.
Bills of Register:
After the arrival of documents related with Back to Back L/C, an entry should have to be given in the Bills of Registers are listed below:
Date received
B/E no.
L/C no.
L/A no.
Received from
Drawn on
Amount (Foreign currency / Rate)
Taka equivalent
Draft (Tenor- due date)
No. Of documents (Draft-invoice-B/Ls–Others)
Steamer
Date goods cleared
Special instruction from sender
Remarks-further recoveries etc.
Date realized
Remarks- Disposal
Initials
Remarks
Acceptance of Back to Back L/C:
After receiving of the documents from the negotiating the issuing Bank send an acceptance of B/B L/C specifying the date when they will pay the amount of the related L/C.
Negotiation of Export Documents:
If the documents are found strictly as per the terms of L/C. i.e. if the documents are free from discrepancy or if the discrepancies are covered by indemnity of the part, Bank may negotiate the export documents.
Either purchase or sending for collection Export documents:
If the documents are discrepant, then the Bank will not purchase them; they will send it for collection. On the other hand documents are as per the terms of the L/C, and if the importer is not interested to wait a long period for the fund, then the issuing bank make arrangement for purchasing the documents at a discount.
The Bank’s strength and competitive capabilities can be shown by the SWOT analysis. The SWOT analysis is grounded in the basic principle that strategy-making efforts must aim at producing a good fit between a company’s resource capability and its external situation. The SWOT analysis of BASIC Bank Limited is as follows:
S- Strength
i) Reputation of the Bank: Since the inauguration the bank has managed their activity with their own images to serve their customers. They have provided services successfully and have achieved goodwill among the Shariah Based Banks. The Bank is opening with its efficiency and integrity.
ii) Sponsor: BASIC bank has sponsors from various sectors of Bangladesh. The most successful entrepreneurs from various sectors started this company. As a result there was a combination of different thoughts and skills in the management of the bank, which is very much essential for success in today’s competitive market.
iii) Top Management: BASIC bank has a very competent and experienced top Management. The current Managing Director Mr. A.H. Iqbal Hossain has banking experience for a long time period. He had the experience of marketing and customer relationship management in his long career. This has helped the bank to achieve its goal.
iv) Shariah Based Banking: BASIC Bank is operating based on Islamic Shariah. As Bangladesh is a Muslim country, the Shariah banking has been able to attract customers and achieved a great success in the private banking sector.
v) Branches: BASIC bank is operating their business all over the country with 30 branches and still planning to expand their business by opening new branches in the country. It has strengthened the distribution of the bank’s services.
vi) Government Bank: The 100% Share of BASIC Bank is Government. So it is a very Good Strength for any Company.
W- Weakness:
Promotion: The bank does not any formal promotional activity. They do not give any sort of advertisement or do not have any marketing activity. They do not even too many billboards. This is why they are far behind the competitive in the private banking. Even some people do not know that BASIC Bank is operated according to Shariah.
Remuneration: The remuneration of the officers of BASIC bank is lower compared to other private banks. Even the internship students are paid nothing. This is why high skilled human resources are discouraged to join here.
Online Banking: At Present Every bank try to converted them to the Online banking. BASIC bank has no Online Banking System. So it is a great weakness for the Bank. I hope that BASIC Bank also introduce the Online banking System & serve his Client very Smoothly.
Centralization Decision Making: The decision making of the bank is too many centralized. No decision is made without the authorization of the head office. Sometime some quick decision is needed to be taken, but from the branch, no one can make decision. It is one of the major draws back of the bank.
Lacings of some officer: Some of the officer of the BASIC Bank LTD are not sincere their work. They do not come regularly; if they come they do not work properly. They just talk & pass the time. Some of the officers are not suitable for his position.
Opportunity:
i) Consumer Banking: BASIC bank is operating corporate banking. In our country there is a huge opportunity of consumer banking. So BASIC bank can reposition their branding and introduce consumer banking with corporate banking.
ii) ATM: The banking sector of the country is becoming modernized in the country. People like to draw money any time from anywhere. So ATM card is getting popularized in the country. BASIC bank can introduce ATM system in their bank. More Over, Shariah Based banks are not providing ATM cards. So those who want ATM card but do not like interest, they can be attracted by ATM card issued by a Shariah Based Bank.
iii) More Branches: The economy of the country is expanding. The business outside Dhaka is also expanding. As a result, the demand for banking service is increasing day by day. So BASIC bank can open more banks in the country and can expand their business.
iv) Shariah Based Banking: In our country people are religious. Most of the people are Muslim. They are becoming educated and know the bad impact of interest. So they are moving towards Shariah based banking. BASIC bank takes this opportunity.
v) Government Bank: BASIC Bank is Govt. Bank. So it has a great opportunity to expand itself.
i) Competitions: In Bangladesh, after economic reform, more private bank has started their operation in the country. They are coming with different types of attracting products. This has increased the completion among the private banks.
ii) Devaluation of local Currency: The value of local currency is decreasing. So investment in local banking is decreasing. More over the inflation is increasing in the country. So people want to save money but in many cases they cannot. As a result, the banks are getting less deposit.
iii) Bank Default: There is a tendency of the people of the country to become bankrupt. Few days ago Oriental bank has a great suffering. In our country, the receivable from top 20 bankrupt companies stood 88.36 billion. This is discouraging banks to make new investment.
Basic Bank is one of the top class banks in our country. When I was placed at Motijheel Brach I didn’t have serious problems regarding the operation, customer service, management, human resource department or anything else.
In spite of this I found few problems as follows:
The time to reach Permanent Position from probation period takes almost two years, which is a very long time process as I considered and it should be less than two year.
Some Officers of the bank are not self-motivated. They should be self-motivated by training.
Basic Bank has only 27 branches, which are not so satisfactory to serve the country widely. It requires more branches throughout the country.
Some banking operations are still operated in manual basis rather than computer system that take more time. Computer should be used in all their activities.
DD, TT takes more time to operat. It should minimize time.
We require some valuable information for the purpose of making Internship report but these kinds of information is not available. We strongly suggest helping us in this matter.
The BASIC Bank Limited has been trying to operate its business successfully in Bangladesh since 1994. Basic Bank has already developed goodwill among its clientele by offering its excellent services through General banking, Credit division and Foreign Exchange divisions. This success has resulted from the dedication, commitment and dynamic leadership among its management over the periods. The working atmosphere of the BASIC Bank Limited is very simulating. During the short span of time of its operation, the bank has been successfully to the position itself as a progressive and dynamic financial institution in the country due to the following reasons:
Although there was huge loss in the establishment period of the bank due to huge sunk cost and operating cost, from the second year the bank was gradually able to reduce cost proportionately through an effective management.
Interest expanses of the bank are reducing proportionately compared to interest income due to huge accumulation deposits as a result of increasing number of depositors. The number of depositors and the amount of deposits lie in the upward trend due to offering attractive services to the customers.
Other income of the bank is also going up every year due to the increase of commission, exchange and brokerage fees in the foreign exchange section. Foreign exchange of the bank is operating effectively.
Operating expenses of the bank increasing every year compared to the growth in deposits.
All this together with its adoption of modern trend of Banking system has enable it to turn out as potential profiteering financial Institution. My course of internship in this Bank has been very valuable.
