Report on Internship program

 Internship program:

Internship program is the systematic process for gathering, recording and analyzing of data about the subject that a student goes to learn on the program. The aim of this Internship program is to connect practical knowledge with theoretical knowledge. Now the world is a competitive world. So everybody has to be expert in both practical knowledge and theoretical knowledge. By the grace of Almighty Allah  and by the help of some related person, I have  copleted my report successfully.

Now a day, education is not just limited to books and classrooms. In today’s world, education is the tool to understand the real world and apply knowledge for the betterment of the society as well as business. From education the theoretical knowledge is obtained from courses of study, which is only the half way of the subject matter. Practical knowledge has no alternative. The perfect coordination between theory and practice is of paramount importance in the context of the modern business world in order to resolve the dichotomy between these two areas. Therefore, an opportunity is offered by Dept. of Business, AsianUniversity of Bangladesh, for its potential business graduates to get three months practical experience, which is known, is as “Internship Program”.  For the competition of this internship program, the author of the study was placed in a bank namely, “The Trust Bank Limited”. Internship Program brings a student closer to the real life situation and thereby helps to launch a career with some prior experience.

This paper is entitled “General Banking & Foreign Exchange Operation “originated from the fulfillment of the internship program. For the internship program, each student is attached with an organization. My internship was at Trust Bank Ltd, Dhanmondi branch. During my internship, I had to prepare a report under the Lecturer ………………………

• To exercise a significant importance as it enables a student to be accustomed with the business activities practically.
• To ensure the opportunity to work closely with the organization and learn about their capabilities, functions and limitations.
• To develop the students analytical skills, scholastic aptitude in their practical field.
• To give a real life orientation of the academic knowledge.

Objective of the study acts as a bridge between the starting point and the goals of the study. To illustrate the objectives properly, presented into two parts:

General:

The main objective of the study is to obtain a clear idea about the General banking and Foreign Exchange business of TBL’s banking operation.

Specific:

To observe the major outline of General and Foreign business.

To observe the foreign correspondents of TBL.

To observe the post import financing operations.

To analysis the expansion of Foreign Trade business of the TBL.

To identify the problems of it’s financing.

To problems faced by TBL in general banking and Foreign exchange Business.

Suggested remedial measures.

The Trust Bank Limited is one of the new generation banks in Bangladesh. The scope of the study is limited to the one branch of Trust Bank Ltd only.  The Report has covered organizational structure; background, functions and the performance of the bank. Since I worked in general banking and in the foreign exchange division so my report covers all the activities of general banking and foreign exchange department of Trust Bank. While preparing this report I have taken information of the foreign exchange department and general banking department from employees and I have used both primary and secondary data which was available to me. But some information’s, which are confidential, I ignored in my report.

The study was not free of limitations. The limitations faced during the preparation of this report are given below:

There was lack of sufficient primary and secondary data.

The allotment of time for the study was limited i.e. Three months. Within this short period of time it was quite difficult for me to study properly about Trust Bank Ltd, Dhanmondi Branch and respective topic in details.

The data and information related with the topic was not easily available.

Another limitation of this report is Bank’s policy of not disclosing some date and information for obvious reason, which could be very much useful.

The Primary sources of Data:

Face to face conversation with the respective officer of the branch.

Face to face conversation with the clients.

Relevant file study as provided by the officers concerned.

Observation.

The Secondary sources of Data:

Annual Report  2007 of Trust Bank Limited.

Periodicals published by the Bangladesh Bank.

Different books, articles etc related with Foreign Exchange operations.

There are mainly three different types of researches. We should define my type from these three types of researches. The researches are:

Exploratory Research: The objective of exploratory research is to gather preliminary information that will help define the problem and suggest hypotheses.

Descriptive Research: In this type of research certain problem, operation and issue is analyzed in a descriptive manner and also fuscous on the finding and recommendations.

Causal Research: The objective of such type of research is to test hypotheses about cause and effect relationships.

After doing all the research work & analyze all those I can see that, I have done a descriptive type of research.

Report Design:

Descriptive Research:

I will try to identify the real problems and product categories for accurate description. Any source of information can be used in its strategy. More survey research and secondary source are needed.

The idea of setting up a Bank by Bangladesh Army was first conceived in 1987 and on November 29, 1999 the first branch of the Trust Bank Ltd came into operation. It was incorporated in June 1999 as a public limited company under the companies act 1994.

It started business operations in July 1999 with an authorized capital of Tk 1,000 million divided into 1 million ordinary shares of Tk 1,000 each. The bank’s initial paid up capital was Tk 200 million, 50% of which are held by Army Welfare Trust designated as group-A shareholder. The remaining 50% are held by the public designated as group-B shareholders.

The bank conducts all types of commercial banking activity. On 31 December 2000, total deposits of the bank amounted to Tk 1,111.2 million and the deposit-mix comprised savings deposit, current deposit and other accounts and fixed deposit. The bank introduced 3 deposit schemes namely Trust Target, Trust Double Deposit Scheme, and Trust Deposit Insurance Scheme. Total loans and advances of the bank stood at Tk 525.7 million in 2000. Trade finance was the main focus of lending. It had no classified loan up to the end of 2000. The foreign exchange business of the bank during the two years of its operations remained small and the estimated volume in 2000 was represented by imports financing Tk 150 million and foreign remittance Tk 150 million. The bank established correspondent relationships with 10 foreign banks.

In 2000, the value of all assets of the bank stood at Tk 1,949.3 million and the asset-mix included cash in hand, balance with other banks and financial institutions, money at call and short notice, investment in government treasury bills, loans and advances, premises and fixed assets and other assets. Assets sprung from off-balance-sheet items were valued at Tk 254.3 million. The total operating income of the bank in 2000 was Tk 107.7 million against a total operating expenditure of Tk 57 million resulting in a net profit of Tk 0.1 million.

The managing director is the chief executive of the bank. Although the bank was established under the sponsorship/auspices of the Army Welfare Trust and the members of the board of directors are from army, the bank is autonomous and it operates like other commercial banks working in Bangladesh.

The Trust Bank Limited is one of the leading private commercial Bank having a spread network of 31 branches across Bangladesh and plans to open few more branches to cover the important commercial areas of the country. In addition to ensuring quality customer services related to general banking the bank also deals in Foreign Exchange transactions. In the mean time the bank has extended credit facilities to almost all the sector of the country’s economy. The bank has plans to invest extensively in the country’s industrial and agricultural sectors in the coming days.

It has also plans to promote the agro-based industries of the country. The bank has already participated in syndicated loan agreement with other banks to promote textile sectors of the country. Such participation would continue in the future for greater interest of the overall economy. Keeping in mind the client’s financial and banking needs the bank is engaged in Islamic banking and constantly improving its services to the clients and launching new and innovative products to provide better services towards fulfillment of growing demands of its customers.

In this time the bank has already 31 branches in many different places in Bangladesh. Most of the branches are inside the cantonment area, because when they start their operation there main purpose was to serve the army. But with the current demand they try to go for vast banking. So for meeting up the demand they try to increase the number of brunches all over the Bangladesh.

Composition of the Board of TBL consists of Ex-officio Directors of in-service senior Army personnel, with the Chief of Army Staff as its Chairman and the Adjutant General as its Vice-Chairman

The management structure of the company has shown below through the organization structure diagram:

Bank Credit:

Outstanding bank credit (excluding foreign bills and inter-bank items) during FY2007 increased by Taka 211.63 billion or 14.7 percent as against an increase of 20.2 percent in FY2006. The rise was driven by both the growth in import & inland bills and increase in advances. Bill purchased and discounted increased by Tk. 21.57 billion or 15.1 percent in FY2007 due mainly to higher import price of crude petroleum and petroleum products. Advances increased by Tk.190.06 billion or 14.7 percent, as against an increase of 16.3 percent during FY2006.

Bank Deposits:

Bank deposits (excluding inter-bank items) increased by Tk.279.67 billion or 16.5 percent to Tk.1,969.57 billion during FY2007 against 18.5 percent increase in FY2006. The rise in total bank deposits is a result of increase in all types of deposits. The relatively higher growth rate of deposits may be attributed to upward revision of deposit rates.

 Credit/Deposit Ratio:

The credit/deposit ratio of the scheduled banks, excluding the specialized banks, declined to 0.85 in May 2007 as compared to that of end June 2006.

Cash Reserve Ratio (CRR):

Cash Reserve Ratio (CRR) for the scheduled Banks with Bangladesh Bank remained same at 5 percent of their total demand and time liabilities since 1 October 2005. It may be noted that the banks are required to maintain CRR daily at the rate of 5 percent on average on bi-weekly basis, provided that CRR would not be less than 4 percent in any day with effect from 1 October 2005.

Statutory Liquidity Requirement (SLR):

Statutory Liquidity Requirement (SLR) for the scheduled banks, except banks operating under Islamic Shariah and the specialized banks, remained same at 18 percent of their total demand and time liabilities, excluding inter-bank items, since 1 October 2005. SLR for the Islamic banks remained unchanged at 10 percent.

 Bank Rate:

The bank rate remained unchanged at 5.0 percent in FY2007.

 Interest Rate on Deposit and Advances:

Weighted average interest rates on deposits of scheduled banks increased to 6.9 percent during FY2007 as compared to 6.7 percent in FY2006. Weighted average interest rates on advances also increased from 12.1 percent 12.8 percent. Both the increase kept pace with the tightened monetary stance of Bangladesh Bank. Spread between advance and deposit also increased to 5.9 percent in FY2007 from 5.4 percent in FY2006.

 Consolidation of business and profit growth:

Bank’s overall businesses grew significantly in 2007 over that of 23006. Deposits of the Bank increased by around 42.75 percent and stood at Tk.27,102 million at the end of 2007. Loans and advances increased by 41.66 percent and stood at Tk.18,682 million at the end of the year. Import business increased by 54 percent, while export by 46 percent Both local and foreign remittances grew significantly. Increase in all the business parameters resulted in higher operating profit, which increased by 65.10 percent.

Achievement against business plan

(Figures in million taka)

Branch Expansion:

In line with our 5-year branch expansion plan, 5 new branches were opened in 2007, namely Mirpur and Karwan Bazar Branches at Dhaka. Naval Base Branch at Chittagong, Feni Branch and Joypara Branch at Dohar. The Board of Directors has planned to open 9 more branches in 2008. Since the Bank is passing through high-growth period, the Board of Directors has decided to open as many branches as possible during this high-growth period.  Increase in number of branches will increase our market share in terms of deposits and loans which will ultimately enhance our profit.

 Retail Banking Products:

Retail banking has enormous potential in Bangladesh. Visualizing a tremendous prospect, the Bank introduced 11 retail banking products, viz, home loan, car loan, any purpose loan, household durables loan, doctors’ loan, marriage loan, travel loan, CNG conversion loan, advance against salary, education loan and hospitalization loan. Out of the 11 products, home loan, car loan, any purpose loan and household durables loan comprise 35 percent, 30 percent, 20 percent and 11 percent respectively of the total retail loan portfolio. In order to give easy access to its products and provide best possible services at the customers’ doorsteps, our Bank introduced direct selling service by recruiting qualified and customer focused professionals. Retail loan portfolio at the end of the year stood at Tk.416 million.

 SME Lending:

SME Sector has proved to be an effective vehicle for creating employment opportunity, reducing poverty and accelerating overall economic growth. With a view to ensuring balanced industrial development of the country,  Bangladesh Bank has instructed to allocate tem percent of the total funds of Small and Medium Enterprises (SMEs) for women entrepreneurs which will proved them the opportunity of easy access to the institutional credit facilities under the comfortable terms and conditions. Visualizing the prospect of SME, the Bank has introduced seven (07) SME products. viz., Woman Entrepreneur Loan, Loan for Shopkeepers, Agri-business Loan, Poultry Farm Loan, Loan for Light Engineering, Entrepreneur Development Loan for Retirees, and Peak Seasons Loan. SME loan portfolio at the end of the year stood at tk.500 million.

 Remittance Arrangement:

During the year the Bank signed money transfer agreement with 5 overseas exchange companies. As a result, remittance flow has increased significantly. Total remittance flow was Tk.2,612 million in 2007, as against Tk.765 million in 2006, registering as increase on 241.43 percent. But we have no room for complacency. We need more inward foreign remittance to bridge the gap between our import and export. Bank Management in continuously in touch with overseas exchange companies for remittance arrangement and getting good response.

 Online Banking:

Our Bank has achieved noteworthy progress in the field of information technology during the year under review. In January 2007, the Bank successfully launched online banking services which facilitate any branch banking, ATM banking, phone banking SMS banking and internet banking. All the branches are currently using centralized banking software for their daily transaction processing and routine reporting. The Bank has subscribed to ATM VISA Debit and Credit cards, which is an important milestone in automation of our banking services. Besides, services like phone banking, SMS banking and internet banking have considerably reduced the customers’ pressure on the cash counters.

ATM and Debit Card:

The Bank has subscribed to VISA Electron (debit card), which enables the customers to withdraw money from their accounts through ATMs without turning to cash counters. The Bank is a member of Q-Cash ATM network which is a consortium of 14 member banks. At present, Q-Cash has 84 ATMs and 250 POS terminals throughout the country, out of which 8 ATMs are attached with our branches.  Besides, the Bank has established itself as the settlement bank for the entire Q-Cash network.

 Interface with other ATM networks:

Being the settlement bank for Q-Cash network, our Bank has played a lead role for expansion and sharing of ATM network with different banks at a competitive rate. For instance, Q-Cash has recently signed as quadr-party agreement with Duch-Bangla, Trust and Mercantile Bank to create a common transaction routing platform. Duch-Bangla Bank has 151 ATMs and 700 POS terminals nationwide. Besides, in November 2007, Q-Cash signed a similar agreement with BRAC Bank, which has a network of 64 ATMs and 500 POS terminals. Signing of these agreements will make 24-hour banking transactions flexible for the customers of all banks involved in this expanded network. By sharing the networks, participant banks will be able to eliminate per transaction toll charged by VISA, since the shared network of Q-Cash, Dutch-Bangla and BRAC Bank will be considered as a big network and transactions within this network will be settled locally.

Introduction of VISA Credit Card:

Eyeing a bright prospect, your Bank has successfully launched VISA credit cards to serve its existing and potential customers, although a very stiff competition is prevailing in the market. Presently, we are marketing five types of credit cards, viz., VISA Classic Local, VISA Classic International, VISA Gold Local, VISA Gold International and VISA Dual Card. We expect that sizable revenue will flow from credit cards.

Deposits:

In the year 2007 the deposits of the Bank shot up to Taka 27,102 million from Taka 18,986 million as recorded in the year 2006. The increase in deposits during this period was recorded as 42.75 percent. The combination of competitive interest rates, depositors’ trust in the Bank and mobilization efforts of the Bank management resulted in this growth of deposits. But there is no room for complacency; we have still a long way to go.

 Loans & advance:

Total loans & advances of the Bank as on 31 December 2007 was Tk.18,682 million as against Tk.13,188 million in the year 2006, showing an increase by 41.66 percent over the preceding year. The credit portfolio of the bank is a mix of scheme loans, namely-Renovation and Reconstruction of Dwelling House (RRDH) Loan, Consumers Durable Scheme Loan (CDS), Marriage Loan, Car Loan, HBF Loan and Commercial Loan. Commercial Loans comprise Trade financing in the form of working capital and industrial loans (both large and medium scale industries) with both funded & non-funded credit facilities. The portfolio was further diversified to avoid risk of single industry concentration and remains in line with the Bank’s credit norms relating to risk quality. The classified loans & advances accounted for 2.71 percent of the total loans & advances against industry average of 5.50 percent (PCBs).

Total Assets:

Total assets of Bank stood at Tk.30,382 million in 2007 as against Tk.21,061 million in 2oo6 registering a growth of 44.26 percent . Increase in asset was

mainly driven by growth of customer deposits. The growth deposits were used for funding growth in credit and investment.

 Investments:

The Banks investments grew by Tk.662 million during the year and stood at Tk.3,785 million at the end of 2007 as against Tk.3,123 million in 2006. The bank purchased government treasury bills to cover the increased SLR requirement. Out of the total investments, Tk309 million was invested in listed and unlisted shares of different companies.

Borrowing from other Banks, financial institutions:

Consolidated balance stood at Tk.244 million at the end of year, which represents Tk.230 million call loans from other banks and tk14 million refinance loans from Bangladesh Bank. The consolidated balance is much lower than that of 2006, which was tk.426 million.

 Liabilities:

Consolidated liabilities of the Bank stood at Tk.28228 million at the end of 2007 as against Tk.19,906 million in 2006, registering a growth of 41.81 percent. Increase in liabilities was mainly due to about 42.75 percent increase in deposits over the corresponding year.

 Capital Maintenance:

The amount of minimum capital that should be maintained by the Bank against its risk weighted assets is measured by the capital adequacy ratio laid down by Basel capital accord. capital adequacy is measured by the ratio of banks capital to risk weighted assets, both on balance sheet and off balance sheet transactions. All assets have been assigned weights from 0-100 percent. Off balance sheet items are included in the computation by converting them into balance sheet equivalents before a risk weight is allocated Banks capital has two components, Tier l (core capital) and Tier ll Supplementary Capital.

Core Capital (Tier l):

The core capital ratio (Tier l) was 10.69 percent of total risk weighted assets against standard of 5 percent. Core capital represents the paid up ordinary share capital, Share premium, statutory reserve and retained earnings. As on 31 December 2007, our core capital stood at Tk.2,093 million against Tk.1,155 million in 2006

Supplementary Capital (Tier ll):

Supplementary Capital represents asset revaluation reserve, general provision for loans and advances, preference share capital and other subordinated debt. At the close of business on 31 December 2007, our Supplementary Capital stood at tk.328 million.

Total Capital:

Therefore, our total capital stood at Tk.2,421 million against Tk.1,311 in 2006 and maintained a ratio of 12.37 percent of total risk weighted assets against the standard of 10 present. At the end of 2007, statutory Reserve of the Bank stood at tk.331 million as against Tk.215 million in 2006.

 Shareholders Equity:

Total Shareholders equity increased by 86.49 percent and stood at tk 2,154 million at the end of 2007 as against Tk.1,155 million in 2006. The increase was due to conversion of sponsors  share money deposit into paid up capital amounting tk 200 million , issue of primary shares to the general public amounting tk 700 million (including premium) and increase in statutory reserve. statutory reserve increased by tk 116 million.

 Statutory reserve:

In accordance with the provision of bank companies Act, 20 percent of operating profit before tax is required to be transferred to statutory reserve . As such an amount of Tk. 116 million has been transferred to statutory reserve during the yeatr and the balance of the reserve stood at tk.331 million at the end of the year.

Profit and operating Result:

The bank earned operating profit of tk .854 million during 2007 as compared to tk 547 million in the immediate preceding year, registering a growth of 56.10 percent. After keeping tk.162 million as provision against calcified loans &  advances, tk.63 million as against unclassified loans (1-5%) and tk 5 million as provision against special mention account (SMA), pre-tax profit stood at Tk. 580 million. After keeping income tax provision of Tk.341 million, net profit stood at Tk. 239 million. Earning per share was Tk..28.28. Accumulated retained earnings stood at Tk.362 million at the end of 2007.

 Net Interest Income:

Net interest income registered a significant growth by 66.95 percent over the last year’s figure. Interest from loans and advances remained the principal component of interest income and interest pain on deposits was the main component of interest expenses.

Investment Income:

Investment income represents interest earned on treasury bills & bonds, interest on reverse repo, dividend income and capital gain from sale of listed securities. Income from investment grew significantly over that of the corresponding year; by 75.33 percent and the principal contribution came from capital gain of sale of shares.

 Total Operating Expenses:

Total operating expenses increased by 59.55 percent during the year mainly due to increase in number of employees and number of branches. Increase in number of branches resulted in increase in business volume and increase in profit. Additional human resources had to be hired to support business growth.

Board of Directors:

The Board approves budget and reviews the business plan on quarterly basis to give directions as per changing economic and market environment. The Board also reviews the policies and manuals of various segments of business in order to establish effective risk management mechanism in all the operational activities of the Bank.

The Board also reviews the policies and guidelines issued by Bangladesh Bank and gives directions for their due compliance. During the year 2007 the Board met 13 times. Frequent meeting s of Board ensure better supervision and policy guidance to support the growth of business.

 Executive Committee:

In order to discharge Board’s  functions more effectively. the Board has constituted an Executive Committee comprising 3 Board members including the Vice Chairman. The Executive Committee scrutinizes the proposals that are sent to Board for its decision. The Executive Committee met 12 times during the year and played an instrumental role for the Board in approving the strategic plans and policy guidelines.

Audit Committee:

For ensuring transparency & accountability in the operations of the Bank, to ensure that the activities of the Bank are conducted within the framework of policies, principles and plans as laid down by the Board, as well as the guidelines of the regulatory authorities issued time to time, and Audit Committee is in place in accordance with Bangladesh Bank BPPD Circular No. 12 dated 23.12.2002. The Committee is headed by a senior Director’s The Committee has unrestricted access to all accounts, books and records to ensure that its job is conducted properly The Committee had 3 meetings during the year, boxes on which the Committee submitted  its report to the Board regarding different aspects of the Bank.

Apart from the Audit Committee, the Board has appointed an independent auditor to assist both the Committee and the Board in discharging their supervisory function.

 Delegation of Power:

Management enjoys absolute power in respect of recruitment, posting and promotion of manpower in accordance with Bangladesh Bank’s guidelines. In edition. Board has delegated adequate administrative, business and financial powers to Management for quick and efficient discharge of the Bank’s activities.

 Compliance of Regulatory Guidelines:

Securities and Exchange Commission (SEC) issued corporate governance guidelines Notification dated 20 February 2006), on comply or explain basis, for the companies listed with stock exchanges. Through the said notification, SEC has asked the listed companies to report the compliance status of the said notification in the annual repot. Compliance report on the said corporate governance guidelines is given in annexure I, II & III.

CSR can be a key element and means for achieving greater business value in this competitive world. Trust Bank aims to be a socially responsible organization with an obligation to consider the interests of all the stakeholders in all aspects of its operation. This obligation is seen to extend beyond its statutory obligation to comply with legislation. Customers and public are very much aware of the CSR and demanding greater social accountability in these days. Recognizing this fact, business corporations, in greater number, are coming forward to perform CSR, where Trust Bank cannot lag behind.

 Special reserve Fund:

As part of our CSR, the Board of Directors decided to establish a special reserve fund with contribution not exceeding 10 percent of Bank’s total income every year, in accordance with sub-section v of section 29 of income tax Ordnance, 1984. Government has already accorded its approval of the fund and hence contribution to the fund will be considered as allowable expense by the income Tax authority for determination of Bank’s tax liability. However, government has accorded its approval subject to the following conditions.

i)        At least one Director from the public shareholders will have to be include in        the Trustee Board of the fund; and

ii)       Any contribution to the fund out of Bank’s profit, shall have to be approved        by the shareholders in each cases.

The objects of the fund will be, among other things:

i)        To provide stipend to the meritorious but poor students of different         educational institutions;

ii)       To provide medical and other assistance to the disadvantaged section of the       society.

iii) To establish schools and health care centers for the underprivileged section of the society.

iv) To contribute during natural calamities.

Board of Directors proposes that 10 percent of Bank’s total income (as defined in the income Tax Ordinance) of the year 2008 may be contributed to the fund. In accordance with the conditions set by government the matter has been included on the agenda of 9th AGM for deliberation.

Humanitarian Assistance:

You are aware that two floods and one devastating cyclone (SIDR) in 2007 causes serious havoc to the country. National economy was badly affected and poor people suffered inhumanly. We had to respond to people’s call for humanitarian assistance. During the year Trust Bank contributed Tk. 2 million for the flood affected people and Tk.3 million for the SIDR affected people to Chief Adviser’s Relief Fund. Besides, employees of the Bank contributed Tk. 0.5 million to Army Relief Fund for SIDR affected people.

 Promoting Sports:

In order to promote sports, Board of Directors has decided to sponsor a national sports event. Necessary fund will be allocated out of budget of 2008 after selecting the sports event.

 Passport Application Processing:

In order to mitigate people’s sufferings in getting passport, the Government has decided to receive passport applications and deliver passports through banks. Trust Bank welcomed the government decision and offered to render the service at a subsidized fee, as part of its social responsibility. Initially four braces to Trust Bank were selected for the service under a pilot project. Later in nine more braces were added. People of the designated area are now getting passport without any hassle.

Credit Rating information and Services Limited (CRISL) upgraded its rating of the Bank for long term to A (pronounced as single A) in 2007 from A- (pronounced as A minus) in 2006. CRISL also upgraded short term rating of the Bank to ST-2 in 2007 from ST-3 in 2006. The up gradation was done due to Bank’s good fundamental and improvement in the areas of capital adequacy, market share, liquidity, leverage and loan loss provisioning. Financial institutions rated in this category, are adjudged to offer adequate safety for timely repayment of financial obligations. This level of safety indicates a bank entity with adequate credit profile. Risk factors are more variable and grater in periods of economic stress than those rated in the higher categories. The short term rating indicates high certainty of timely repayment. Liquidity factors a4re strong and supported by good fundamental protection factors. Risk factors are very small.

The accompanying profit and loss account depicts the operating result of the Bank for the year 2007. You are already aware that the Government has, in the mean time, amended the Bank Companies Act, 1991 requiring, among  other things minimum capital plus statutory reserve to Tk.2,000 million for the Banks. Bangladesh Bank issued a circular on 5 November 2007 asking the banks to raise 50 percent of the shortfall within June 2008 and the reaming 50 percent by June 2009. Besides, Bangladesh Bank has imposed restriction on payment of cash dividend until the required capital with statutory reserve is met. Paid up capital along with statutory reserve of the Bank stood at Tk. 1,497 million as on 31 December 2007 and hence there remains a gap of Tk.503 million.

In order to bridge this gap, the Board of Directors has recommended or issuance of 10 percent bonus shares (i.e. one bonus share for every ten shares held) form the profit of 2007. The Board of Directors has also recommended for issuance of 20 percent right shares (i.e. one right share for every five shares held), subject to approval of Securities and Exchange Commission.

Figure 2: Frame of general Banking

Accepting Deposit:

Accepting deposits is one of the two classic functions of commercial banks. Most of the commercial banks view with one another to tapping the savings of the public by means of different kinds of deposits. Almost everyday a new kind of deposits is being introduced. Incase of TBL the deposits that are accepted may be classified into-

Procedures for Opening of Accounts:

Before opening of a current account or savings account, the following formalities must be completed by the customer,

Application on the prescribed form

Furnishing photographs

Introduction by an account holder

Putting specific signature in the specimen card

Mandate, if necessary.

After fulfilling the above formalities, TBL provides the customer a pay -in-slip book and cheque book.

In case of Joint account (two or more person):

• Operational instruction of the account.
• Signature(s).

In case of Partnership Firm:

• Partner’s signature.
• Partner’s name.

The following formalities along with the documents are to be completed before opening an account

• Two copies of photograph of the Account Holder(s) duly attested by the introducer.

• Account to be introduced properly.

• Introducer’s signature on Account Opening Form to be verified by an officer under full signature.

• Letter of thanks to account Holder(s) and introducer to be sent under registered post,

• In case of joint account, operational instructions are to be signed by the joint account holders.

In case of proprietorship firm:

• Declaration of proprietorship.
• Trade license from municipality.
• Account Agreement Form.
• Mandate if Operation by third party is to be allowed.

In case of limited company:

• Certified true copy of the memorandum & Article of Association of the company.

• Certificate of Incorporation of the company for inspection and return with a duly certified photocopy for bank’s record.

• Certificate from the Register of the Joint Stock Companies that the company is entitle to commence business (in case of Public Limited Co. for inspection and return) along with a duly certified photocopy for Bank’s records,

• Latest copy of company’s Income Statement.
• Extract of Resolution of the Board, General Meeting of the company for opening the account and authorization for its operation duly certified by the Chairman/Managing Director of the company.

• List of Directors with addresses (a latest photocopy of the form-xii)
• Authorized signature,
• Name.

General conditions of governing Current/Savings Account:

• Minimum Balance of to be maintained in current account TK.1000/- and in Savings account tk.5000/-

• A suitable instruction by an introducer acceptable to the Bank is required prior to opening an account.

• Recent photographs of the Account openers duly attested by the Introducer must be produced.

Issue of Duplicate Cheque Book:

Duplicate cheque book in lieu of lost one should issued only when an A/C holder personally approaches the bank with an application in the prescribed Proforma agreeing to indemnify the bank for the lost cheque book. Fresh cheque book in lieu of lost one should be issued after verification of the signature of the A/C holder from the specimen signature card and on realization of required excise duty only with prior approval of manager of the Branch. Cheque series number of the new cheque book should be recorded in ledger card and signature card as usual. Series number of lost cheque book should be recorded in the stop payment register and caution should be exercised to guard against fraudulent payment.

Closing of an Account:

The closing of an account may happen

It the customer is desirous to close the account.

If bank finds that the account is inoperative for a long duration.

If Garnishee Order is issued by the court on Bank TBL.

To close the account, the cheque book is to be returned to the bank, TBL take all charges by debiting the account and the remaining balance is then paid to the customer, necessary entries are given to the account closing register and computer.

Interest rate on deposit:

 Loan & Advance Department:

Credit policy and lending criteria:

The credit policy is a statement of basic principles that governs the extension of credit policy has two tears as follows:

Macro level:               Government & Bangladesh Bank.

Micro level:                Individual bank and institution.

Micro level policy is designed by the individual credit institution keeping macro level policy in mind, but looks into the greater interest of the organization.

When we talk about credit policy of TBL it provides a framework how to conduct business and also enables TBL to have long-term business plan. It is a document through which board of directors communicate the lending strategy of TBL and duties and authorities of management of lending officers.

Mission:

TBL credit mission is to actively participate in the growth and expansion of our national economy by providing credit to viable borrower, efficiently delivered and competitively priced.

Client based:

Private individual-firms,

Companies corporate and

Industrial enterprises

Product and Service:

Trade finance

Short term credit

Retail banking loan

Syndication

Corresponding banking and

Treasury services

Legal consideration:

TBL complies with the all the laws and act of the country including central banks instruction relating to banks.

General Policy Guideline:

TBL makes loan to reputed clients.

Encourages lending to socially desirable, nationally important and financially viable sector.

Satisfactory security and collateral is required including source of repayment both primary and secondary source.

TBL may consider term loans with maturity up to five year.

TBL extends credit facilities to the area, which the branch located and size and ability of its stuff to supervise and monitor the same also considered.

Maximum size of the loan port folio.

The banking corporation act 1991 restricts lending to any single obligator or a group of companies up to 15% of the capital funds of bank without having approval from Bangladesh bank. With the Bangladesh bank the maximum limit can go up to 100% of the capital of the bank.

Profitability:

The business concerns must generate profit so that they can repay the principal amount along with the interest and their charges are also recoverable by the bank.

Sources of Repayment:

It should be ensured a reliable source of repayment exists and the advance will be paid within the agreed period. May be primary sources directly relates to the relative business concern secondary source may be from others secondary concerns or from liquidation of other asset

•      Character ability of borrower.
•      Customer integrity honesty and personal capacity.
•      Customer experience, managerial capacity.
•      Past success history of the borrower.
•      Borrower should have business acumen initiative and drive.

Purpose of the facility:

Purpose of the facility should be allowable sector identified by the corporate office and keeping conformity with Bangladesh bank rules and regulation.

Terms of the facility:

1. Nature of the loans and advance.
2. Interest rate.
3. Period of the advance.
4. Security agreement.

Credit Approval procedures:

Credit process and structure:

The organization structure has two levels

Branch and

Corporate office.

The credit line proposal move through various management approval levels according to its amount. There are three approval levels:-

Branch manager.

Credit committee at corporate office.

Board of directors of the bank.

Credit approval process:

In all cases the banks basic lending criteria must be satisfied and its policy of know your customer implemented in full.

While compiling credit line proposal, the following guidelines must be followed:

All required information/papers are to be obtained along with loan application form duly filled in from the client.

1. Visiting the client.
2. CIB report.
3. Credit appraisal.
4. Credit risk analysis.
5. Preparation of credit line proposal with supporting documents.
6. Sanction/approval by competent authority.

Documentation & Disbursement of Credit:

Loan and credit facilities must be supported by proper documentation. Documentation should be obtained prior to disbursement of any loan.

The minimum requirement for documentation of Loan or other facilities is as under

Copies of the relative office note/sanction letter indicating that the transaction has been approved by properly authorized officers of the bank.

A copy of sanction advice addressed to the customer and his acceptance there of.

All necessary documentation required meeting the terms and conditions of the facility in the manner it was approved.

Apparently there are three parts of documentation, namely-

Obtaining instrument/documents charge documents standard documentation & other specified document as specified documents as specified by bank lawyer.

• Stamping
• Execution & Registration.

Documents to be executed signed by the parties concerned competent to do so either in official or in personal capacity as the case may be in some case such documents are required to be executed in presence of witness.

Control of Credit Operation:

The credit control operation falls into two main parts-

Regular monitoring of all accounts and review all excess over limits.

Monitoring of delinquent accounts.

Delinquent advances:

Delinquent advances may be described as any advance which may have entered the doubtful category and there of requires special monitoring at branch and at corporate office.

Signals that either confirms that the borrower is in the doubtful category or indicate that he may over trading

All fall in turnover indicating that business is in decline.

Defaulting in loan repayment or in payment of bills payable at maturity date indicating that a business may be in financial difficulties.

Loan Classification & Provisioning:

Bangladesh Bank has introduced a system covering loan classification the suspension of interest due, and the making of provisions against potential loan loss, which is to be followed by all scheduled banks operating in Bangladesh. All loans and advances have been classified into four categories as under

Continuous Loan (overdraft cash credit etc)

Demand Loan (PAD,LIM FBP etc)

Fixed term Loan.

Short Agriculture and micro credit.

Assets quality ratings break down into two main categories:

1. Satisfactory
2. Delinquent/classified.

Delinquent/classified assets comprise:

1.       Sub standard
2.       Doubtful
3.       Bad and loss
4.       Provisions:
5.       Sin standard 20%
6.       Doubtful 50%
7.       Bad & loss 100%
8.       General provision 1%

INTEREST RATES ON LOANS AND ADVANCES OF THE BANK :

Clearing Department:

TBL is a scheduled Bank. According to the Article 37(2) of Bangladesh Bank Order, 1972, the banks which are the member of the “Clearing House” are called as Scheduled Banks. The scheduled banks clear the cheque drawn upon one another through the clearing house. This is an arrangement the central bank where everyday the representative of the member banks gathers to clear the cheque. The place where the banks meet and settle their dues is called the Clearing-House sits for two times a working day.

 Performance at a Glance:

The Trust Bank Limited has diversified activities in retail banking, corporate banking and international trade. From the very beginning it has obtained a solid foundation in respect of foreign trade. The bank is now moving forward for the better future position in the field of foreign exchange and in the money market of the Bangladesh.

The performance of the Trust Bank Limited for last three years depicted a true success story of the bank. The deposits indicated the increase of its performance and reliability of the bank to the customer. It has controlled its loans and advances with a significant way of banking. The amount of investment shows the higher upscale line through the year.  The final figure has projected when we look at the profit amount of those three years. The amount sharply goes double in these three years.

3 years at a glance

Particulars

2005

2006

2007

Income Statement                                                              (Taka in Million)Net Interest Income

167.07

400.00

667.80

Net Non-interest Income

129.19

146.90

185.91

Profit before provision and tax

296.26

546.90

853.71

Provision for loans and assets

69.98

39.20

273.94

Profit after provision before tax

226.29

507.70

579.77

Tax including deferred tax

105.00

244.54

340.74

Profit after tax

121.29

263.16

239.03

Balance SheetAuthorized Capital

2,000.00

2,000.00

2,000.00

Paid-up Capital

500.00

500.00

1,166.67

Total Shareholder’s equity

991.97

1,155.00

2,154.29

Deposits

12,704.90

18,985.95

27,101.59

Long-term liabilities

2,664.12

7,135.03

3,335.77

Loans and advances

9,738.32

13,188.09

18,682.16

Investments

2,447.95

3,122.81

3,785.45

Property, Plant and Equipment

110.62

146.05

194.22

Earning Assets

13,708.73

18,608.06

27,636.29

Total assets

14,782.15

21,060.77

30,382.22

Debt equity ratio

18.48%

17.23%

13.10%

Other BusinessImport

9,746.00

11,483.00

17,683.17

Export

2,911.00

2,884.00

4,224.55

Remittance

279.00

765.00

2,612.00

Guarantee Business

1,627.29

726.51

1,114.84

Capital MeasuresTotal risk weighted assets

8,925.76

14,075.99

19,573.21

Core capital (Tier-I)

991.97

1,155.00

2,092.89

Core capital (Tier-II)

123.10

155.95

328.43

Total Capital

1,115.07

1,310.95

2,421.32

Tier-I capital ratio

11.11%

8.21%

10.69%

Tier-II capital ratio

1.38%

1.11%

1.68%

Total capital ratio

12.49%

9.32%

12.37%

Credit QualityNon performing loans (NPLs)

128.97

174.37

506.65

% of NPLs to total loans and advance

1.32%

1.32%

2.71%

General Provision

118.88

152.95

264.03

Specific Provision

56.90

63.68

225.84

Share InformationMarket price per share (Taka)

–

–

929.25

Earning per share (Taka)

24.26

52.63

28.28

Net assets per share (Taka)

198.39

231.00

184.64

Price earning ratio (times)

–

–

3.04%

Operating Performance RatioNet interest margin on average earning assets

1.33%

2.48%

2.89%

Net non-interest margin on average earning assets

1.03%

0.91%

0.80%

Cost income ratio

79.49%

75.32%

73.93%

Return on average equity

13.02%

24.51%

14.45%

Other informationNo of Branches

18

26

31

No of employees

359

508

842

No of foreign correspondents

15

19

19

Average earning assets

12,559.49

16,158.39

23,122.18

Average total assets

13,420.93

1,921.46

25,721.50

Average deposits

11,009.93

15,845.43

23,043.77

Average equity

931.33

1,073.49

1,564.65

Net Interest Income:

Bar Presentation of the corresponding three years’

Net Interest Income

Foreign Remittance:

Foreign Remittance handled by the bank stood at taka 567,714 during the year 2002. Countries from which inward foreign remittances were received included USA, UK, China, Singapore etc.

      Foreign Exchange Business – Remittance:

Bar Presentation of the corresponding three years’

Foreign remittance Handling

Net Profit after Tax:

Bar Presentation of the corresponding three years’

Net Profit after Tax

Earning Per Share (EPS):

Bar Presentation of the corresponding three years’

Earning per Share (EPS)

HIGHLIGHTS ON THE OVERALL ACTIVITIES OF THE BANK

Foreign trade can be easily defined as a business activity, which transcends national boundaries. These may be between parties or government ones. Trades among nations are a common occurrence and normally benefit both the exporter and importer. In many countries, international trade accounts for more than 20% of their national incomes.

Foreign trade can usually be justified on the principle of comparative advantage. According to this economic principle, it is economical profitable for a country to specialize in the production of that commodity in which the producer country has the greater comparative advantage and to allow the other country to produce that commodity in which it has the lesser comparative advantage. It includes the spectrum of goods, services, investment, technology transfer etc.

This trade among various countries causes for close linkage between the parties dealing in trade. The bank which provides such transactions is referred to as rendering international banking operations. International trade demands a flow of goods from seller to buyer and of payment from buyer to seller. And this flow of goods and payment are done through letter of credit (L/C).

 Foreign Exchange transactions are being controlled by the following rules & regulation:

Local Regulation

Foreign Exchange Act 1947

Bangladesh Bank issues Foreign Exchange circular from time to time to control the export, import and remittance business

Ministries of Commerce issues export & import policy giving basic formalities for import & export business

Sometimes CCI & E issues public notice for any kind of change in foreign exchange transaction.

Bangladesh Bank published two volumes in 1996. This is compilation of the instructions to be followed by the authorized dealers in transactions related to foreign exchange.

International Regulation for Foreign Exchange

There is some international organization influencing our foreign exchange transactions. There are-

International chamber of commerce (ICC) is a world wide non-governmental organization of thousands of companies. It was founded in 1919. ICC has issued some publication like UCPDC, URC and URR etc, which are being followed by all the member countries. There is also an international court of arbitration to solve the international business disputes.

World trade organization (WTO) is another international trade organization established in 1995. General Agreement on Tariff & Trade (GATT) was established in 1948, after completion of its 8^th round the origination has been abolished and replaced by WTO. This organization has role in international trade, through its 124 member countries.

 Foreign Exchange Mechanism:

Foreign Exchange department plays significant roles through providing different services for the customer. Facilitating the trade with foreign country is the most important among those services the key instrument which facilitates this trade is L/C (Letter of Credit).

Letter of credit:

Letter of Credit may be defined as an arrangement or guarantee issued by a bank at the request of the customer to make payment to or order of the beneficiary or authorized another bank to effect such payment or to pay, accept or negotiate such bill of exchange against stipulated documents, provided that the terms and conditions of the L/C are complied with (UCPD-500, 1993).

The Advising Bank:

It is the bank in the Exporter’s (Normally the exporter’s bank), which is usually the foreign correspondent of Importer’s bank through which the L/C is advised to the supplier. If the intermediary bank simply advises/notifies the L/C to the exporter without any obligation on its part, it is called “Advising Bank”.

The Confirming Bank:

If the Advising Bank also adds its own undertaking to honor the credit while advising the same to the beneficiary, he becomes the Confirming Bank, in addition, becomes liable to pay for documents in conformity with the L/C’s terms and conditions.

The Negotiating Bank:

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

The Accepting Bank:

A Bank that accepts time or unasked drafts on behalf of the importer is called an Accepting Bank. The issuing bank can also be the Accepting Bank.

The Paying Bank & the Reimbursing Bank:

If the Issuing Bank does not maintain any account with a bank that a bank will be negotiating the documents under a L/C, then arrangement is made to reimburse the negotiating bank for the amount to be paid under from some other bank with which the Issuing Bank maintains his account. The letter bank is know as Reimburse Bank.

Figure 3: Foreign Exchange Mechanism

As more than one currency is involved in foreign trade, it gives rise to exchange of currencies which is known as foreign exchange. The term “Foreign Exchange” has three principal meanings Firstly it is a term used referring to the currencies of the other countries in terms of any single one currency. To a Bangladeshi, Dollar, Pound sterling etc. are foreign currencies and as such foreign exchange. Secondly, the term also commonly refer to some interments used in international trade, such as bill of exchange, Drafts, Travel cheque and other means of international remittance thirdly, the terms foreign exchange is also quite of ten referred to the balance in foreign currencies held by a country.

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

In exercise of the power conferred by section 3 of the foreign exchange regulation, 1947, Bangladesh Bank issues license to schedule bank to deal with exchange. These banks are known a Authorized Dealers. Licensees are also issued by Bangladesh Bank to persons or firms to exchange foreign currency instruments such as T.C, currency notes and coins. They are known as Authorized money changers.

Functions of Foreign Exchange Department:

Exports:

•      Pre-shipment advances.
•      Purchase of foreign bills.
•      Negotiating of foreign bills.
•      Export guarantees.
•      Advising/Confirming letters – letter of credit.
•      Advance for deferred payments exports.
•      Advance against bills for collection

Imports:

•      Opening of letter of credit (L/C)
•      Advance bills.
•      Bills for collection.
•      Import loan and guarantees

Remittances:

•      Issue of DD, MT, TT etc.
•      Payment of DD, MT, TT etc.
•      Issue and enhancement of traveler’s cheque.
•      Sale and enhancement of foreign currency notes.
•      Non-resident accounts.

 The most commonly used documents in Foreign Exchange:

•      Documentary Letter of Credit.
•      Bill of exchange.
•      Bill of Leading.
•      Commercial Invoice.
•      Certificate of origin of goods.
•      Inspection certificate.
•      Packing List.
•      Insurance Policy.
•      Proforma Invoice / Indent.
•      Master receipt.
•      GSP Certificate.

Documentary Credit:

In simple terms a documentary credit is a conditional bank undertaking a payment. Expressed more fully, it is a written undertaking by a bank (issuing bank) given to seller (beneficiary) at the request, and in accordance with the instructions of the buyer (applicant) to effect payment (that is, by making a payment, or accepting or negotiating bill of exchange) up to a stated sum of money, with in a prescribed time limit and against stipulated documents. The customary clauses contain in a L/C are the followings:

A clause authorizing the beneficiary to draw bills of exchange up to certain on the opener.

List of shipping documents, which are to accompany the bills.

Description of the goods to be shipped.

An undertaking by the opening bank that bills drawn in accordance with the conditions will be dully honored.

Instructs to the negotiating banks for obtaining reimbursement of payments under the credit.

The parties to a Letter of Credit are:

•       Importer / Buyer.
•       Opening Bank/Issuing Bank.
•       Exporter/Seller/Beneficiary.
•       Advising Bank/Notifying Bank.
•       Negotiating Bank.
•       Confirming Bank.
•       Paying/Reimbursing Bank.

Bill of Leading:

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

The Details on the bill of Leading should include:

•       A description of the goods in general terms not inconsistent with in the credit.
•       Identify marks and numbers, if any.
•       The name of the carrying vessel.
•       Evidence that the goods have been loaded on board.
•       The ports of shipment and discharge.
•       The names of shipper, consignee, and name and address of the notifying party.
•       Whether freight has been [paid or is payable at destination.
•       The number of original bills of lading issued.
•       The date of issuance.
• A bill of lading specifically states that goods are loaded for ultimate destination specifically mentioned in the credit.

Commercial Invoice:

A Commercial Document is the accounting document by which the sellers change the goods to the buyer. A commercial invoice normally includes the following information:

Date.

Name and address of the buyer and seller.

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

Weight of the goods, number of the package, shipping marks and numbers.

Terms of delivery and payment.

Shipment details.

Certificate of Origin:

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

Inspection Certificate:

This is usually issued by an independent inspection company located in the exporting country certifying or describing the quality, specification or other aspects of the goods, as called for in the contract and the L/C. the inspection company is usually nominated by the buyer who also indicates the types of inspection he wishes the company to undertake.

Insurance Certificate:

• The Insurance Certificate documents must –
•      Be that specified in the credit.
•      Cover the risks specified in the credit.
•      Be consistent with the other documents in its identification of the voyage and description of the goods.
•      Unless otherwise specified in the credit.
•      Be a document issued and / or signed by an insurance company or its agent, or by underwriters.
•      Be dated on or before the date of the date of shipment as evidenced by the shipping documents.
•      Be for an amount at least equal to the CIF value of the goods and in the currency of credit.

Importation is foreign goods and services purchased by customer, firms and Governments in Bangladesh.

An importer must have import registration certificate (IRC) given by chief controller of import and exports (CCI & E) to import any thing from other country. To obtain import registration certificate (IRC) the following certificates are required:

•      Trade License.
•      Income Tax clearance certificate.
•      Nationality certificate.
•      Banks solvency certificate.
•      Asset certificate.
•      Registration partnership deed (if any).
•      Memorandum and Article of association.
•      Certificate of incorporation (if any)
•      Rent receipt of the business premises.

To import through The Trust Bank Limited a customer/client requires :

•      Bank Account.
•      Import registration certificate.
•      Tax paying identification number.
•      Proforma Invoice/Indent.
•      Membership Certificate.
•      L/C application form duly attested.
•      One set of IMP Form.
•      Insurance Cover Note with money receipt.
•      Others.

To import, a person should be competent to be an importer. According to import and Export control Act, 1950, the office of chief controller of Import and Export provides the registration certificate (IRC) to the importer. After obtaining this person has to secure a letter of credit authorization (LCA) from Bangladesh Bank and then a person becomes a qualified importer.

He is the person who requests or instructs the opening bank to open an L/C. He is also called opener or applicant or the credit.

Importer’s application for L/C limit / margin:

To have an import L/C limit, an importer submits an application to the department of (TBL) furnishing the following importation:

•       Full particulars of bank account.
•       Nature of business.
•       Required amount of limit.
•       Payment terms and conditions.
•       Goods to be imported.
•       Offered security.
•       Repayment schedule.

A credit officer scrutinizes this application and accordingly prepares a proposal (CLP) and forwards it to the head office credit committee (HOCC). The committee, if satisfied, sanctions the limit and returns back to the branch. Thus the importer is entitled for the limit.

 Opening of Letter of Credit (L/C) by Bank:

Opening of L/C means, at the request of the applicant (importer) issuance of a L/C in favor of the beneficiary (Exporter) by a bank. the bank which open or issue L/C is called L/C opening bank or issuing bank.

On receipt of the importer’s L/C application supported by the firm contract (Indent / Proforma Invoice) and Insurance Cover Note the bank scrutinize the same thoroughly and fix up a margin on the basic of banker – customer relationship.

Before opening a L/C, the issuing bank must check the following:

L/C application properly stamped, signature verified and margin approved and properly retained.

Indent / Proforma Invoice signed by the importer and Indenter / supplier.

Ensure that the relevant particulars of L/C application correspond with those stipulated in Indenter/Proforma Invoice.

Validity of LCA entitlement of goods, amount etc. conforms to the L/C application.

Conversion and rate of exchange correctly applied.

Charges like commission, FCC, Postage, Telex charge, SWIFT charge, if any recovered.

Insurance Cover Note – in the name of issuing bank – A/c importer covering required risks and voyage route.

Incorporation of instruction for Negotiating Bank as per banks existing arrangement.

Reimbursement instructions for reimbursing bank.

If foreign bank confirmation is required, necessary permission should be obtained and accordingly advising bank is advised as per banks existing arrangement.

If add confirmation is required on account of the applicant charges should be recovered from the applicant.

In case of usance L/C, mention rate of interest clearly in the letter of credit.

Liability of Issuing Bank:

As per Article 9(a) of UCPDC 500, An Irrevocable Credit constitutes a definite undertaking of the issuing Bank, provided that the stipulated documents ——— comply with the terms and conditions of the credit.

 Advising of Letter of Credit:

Advising means forwarding of a Documentary Letter of Credit received from the issuing bank to the beneficiary (Exporter).

Before advising a L/C the advising Bank must see the following:

Signature of Issuing Bank officials on the L/C verified with the specimen signatures book of the said bank when L/C received.

If the export L/C is intended to be an operative cable L/C Test Code on the L/C invariably be agreed and authenticated by two authorized officers.

L/C scrutinized thoroughly complying with the requisites of concerned UCPDC provisions.

Entry made in the L/C Advising Register.

L/C advised to the Beneficiary (Exporter) promptly and advising charges recovered.

 Advising Bank’s Liability:

Advising bank’s liability is fixed up in uniform customs and practice for documentary credits, publication 500.

Article 7(a): A credit may be advised to a beneficiary through another bank (the “Advising Bank”) without engagement on the part of the advising bank, but that bank, if it elects to advise the credit shall take reasonable care to check the apparent authenticity of the credit which it advises. If the bank elects not to advise the credit, it must inform the issuing bank without delay.

Article 7(b): If the advising bank cannot establish such apparent authenticity it must inform, without delay, the bank from which the instructions appear to have been received that it has been unable to establish the authenticity of the credit and if it elects nonetheless to advise the credit it must inform the beneficiary that it has not been able to establish the authenticity of the credit.

 Adding Confirmation:

Adding Confirmation is done by the confirming bank confirming bank is a bank which adds its confirmation to the credit and it is done at the request of the issuing bank the advising usually does not do it if there is not a prior arrangement with the issuing bank. By being involved as a confirming agent the advising bank undertakes to negotiate beneficiary’s bill without recourse to him.

•      Issue L/C and request to add confirmation.
•      Review the L/C terms.
•      Provide reimbursement.
•      Drafts to be drawn on L/C opening bank.
•      Availability of credit facilities.
•      Line allocation from the business and ownership units in the importer’s country.
•      Confirm and advise L/C.

Amendments to Letter of Credit:

After issuance and advising of a L/C, it may be felt necessary to delete, add or alter some of the clauses of the credit. All these modifications are communicated to the beneficiary through the same advising bank of the credit. Such modifications to a credit are termed as amendment to a letter of credit.

There may be some of the conditions in a credit are not acceptable by the beneficiary. In that cases beneficiary contact applicant and request for amendment of the clauses. On receipt of such request applicant approaches his bank that is issuing bank with a written request for amendment to the credit. The issuing bank scrutinizes the proposal for the amendment and if the same is not in contravention with the exchange control regulation and bank’s interest, the bank may then process for amendment there can be more than one amendment to a credit. All the amendment forms an integral part of the original credit.

L/C amendments are to be communicated by SWIFT or mail. If there are more than one amendment to a credit, all the amendment must bear the consecutive serial number so that the missing the any amendment can be identified by the advising bank or by the beneficiary.

What is to be done by the issuing bank before advising amendments?

The issuing bank has to –

Obtain written application from the applicant of the credit duly signed and verified by the bank.

In case of increase of value, applications for amendment are to be supported by revised Indent/Proforma Invoice evidencing consent of the beneficiary.

In case of extension of shipment period, it should be ensured that relative LCA is valid/revalidated/increased up to the period of proposed extension.

Amendments an increase of credit amount and extension of shipment period both the cases amendment of Insurance Cover Note also be submitted.

Proper recording and filing of amendment is to be maintained.

Amendment charges (if an account of applicant) will be recovered and necessary voucher is to be passed.

The following clauses of L/C are generally amended:

•       Increase/decrease value of L/C and increase/decrease of quality of goods.
•       Extension of shipment/negotiated period.
•       Terms of delivery i.e. FOB, CFR, CIF etc.
•       Mode of shipment.
•       Inspection clause.
•       Name and address of the supplier.
•       Name of the reimbursing bank.
•       Name of the shipping line etc.

Settlement of Letter of Credit:

Settlement means fulfillment of issuing bank in regard to affecting payment subject to satisfying the credit terms. Settlement to may be done under three separate arrangements as stipulated in the credit.

Settlement by Payment:

Here the seller presents the documents to the nominated bank and the bank scrutinizes the documents. If satisfied, the nominated bank makes payment to the beneficiary and in case this bank is other than the issuing bank, then sends the documents to the issuing bank and claim reimbursement as per arrangement.

Settlement by Acceptance:

Under this arrangement, the seller submits the documents evidencing the shipment to the accepting bank (nominated by the issuing bank for acceptance) accompanied by draft down on the bank at the specified tenor. After being satisfied with the documents, the bank accepts the documents and the draft and if it is a bank other than issuing bank, then sends the documents to the issuing bank stating that it has accepted the draft and at maturity the reimbursement will be obtained in the pre-agreed manner.

Settlement by Negotiation:

This settlement procedure starts with the submission of documents by the seller to the negotiating bank. in a freely negotiate documents and if negotiation restricted by the issuing bank, only nominated bank can negotiate the documents. After scrutinizing that the documents meet the credit requirement, the bank may negotiate the documents and give value to the beneficiary. The negotiating bank then sends the documents to the issuing bank as usual; reimbursement will be obtained in the pre-agreed manner.

Accounting Treatment:

Sundry Deposit L/C Margin A/C                                          Dr.

PAD A/C                                                                                    Cr.

(Margin amount transferred to PAD A/C)

Customer A/C                                                                            Dr.

PAD A/C                                                                                    Cr.

(Customer A/c debited for the remaining Amount)

PAD A/C                                                                          Dr.

Head Office A/C + Exchange Trading A/C                                      Cr.

Income A/c interests on PAD                                                       Cr.

(Amount given to Head Office ID and interest credit)

Reversal Entries:

Banker’s Liability                                                               Dr.

Customer’s Liability                                                           Cr.

(When lodgment is given)

After realizing the telex charge, service charge, interest (if any), and the shipping documents is then stamped with PAD number & entered in the PAD Register. Intimation is given to the customer calling on the bank’s counter requesting retirement of the shipping documents. After passing the necessary vouchers, endorsements is made on the back of the bill of Exchange as “Receipt Payment” and the Bill of Lading is endorsed to the effect “Please deliver to the order of M/s……………………….  under two authorized signatures bank’s officer’s (P.A. holder). Then the documents are delivered to importer.

Payment procedure of the Import Documents:

This is the most sensitive task of the import department. The officials have to be very much careful while making payment.

Date of Payment: Usually payment is made within 7 days after the documents have been received. If the payment is become deferred, the negotiating bank may claim interest for making delay.

Preparing Sale Memo: A sale memo is made at BC rate to the customer. As the TT & DD rate is paid to the ID, the difference between these two rates is exchange trading. Finally, an Inter Branch Exchange Trading Credit Advice is sent to ID.

Requisition for the foreign Currency:  For arranging necessary fund for payment, a requisition is sent to the International Department.

Transmission of Telex: A telex is transmitted to the correspondent bank ensuring that payment is being made.

Practically by the term Export we mean out carrying of anything from one country to another. As banker we define export as sending of visible things outside the country for sale. Export Trade plays a vital note in the development process of an economy. With the caring we meet out import bills.

Although export trade is always encouraged, any body cannot export anything to any place. Like importer the exporters are also required to get them registered before entering into export trade. Export registration certificate (ERC) given by CCI & E is required for this purpose. The required documents to obtain ERC are also same as IRC.

When a bank (Authorized dealer) receives a L/C (cable or original) it ascertains the correctness of the test number and the authorized signature. Then the bank sends the original copy of the L/C to the beneficiary.

The exporter presents the relative documents to the negotiating bank after the shipment of the goods. The L/C issuing bank undertakes to honor is obligation only if the beneficiary fulfills the conditions stipulated in the L/C, may namely, the submission of stipulated documents with in the stipulated time. Even a slide deviation of the documents from these specified in the L/C may give an excuse to the negating bank. so the negotiating bank must be careful, promote, systematic and bias-free while scrutinizing the tender documents after careful and through examination of the documents, the banker has to list out the discrepancies which may be classified as major or minor, irremovable or removable. The removable discrepancies can be corrected by the tendered or future losses, which may arise due to non-repatriation of proceeds.

The following types of discrepancies may be noted while the negotiating bank examines the documents:

•       L/C expired.
•       Late shipment.
•       Amount drawn in excess of the L/C.
•       Bill of exchange not properly drawn.
•       Descriptions of goods differ.
•       Bill of Lading or Airway Bill state.
•       Bill of Lading classed.
•       Insurance Cover Note as per terms L/C.
•       Insurance Cover obtained after the Bill of Lading or Airway Bill date.
•       Enough number of copies not submitted as required by L/C.
•       Negotiation under L/C restricted.
•       Packing List and certificate of analysis not as per the L/C.
•       Documents not properly endorsed in favor of the bank.
•       Full shipment not effective and part shipment prohibited.
•       Gross Weight and Net Weight shown in different documents differ.
•       Same of the documents required by L/C not submitted and
•       Documents inadequately stamped.

Documents with major discrepancies, which could not be negotiated, should be sent on collection basis with the permission of the exporter.

Export Procedure:

The Export and Importer trade in our country are regulated by imports and exports (control) Act, 1950. Under the Export Policy of Bangladesh the exporter has to get the valid Export Registration Certificate (ERC) from chief controller of Import & Export (CCI & E). The ERC is required to renew every year. The ERC number is to be incorporated on EXP Forms and other papers connected with exports.

6.1.2. Registration of Exporters:

For obtaining ERC indenting Bangladeshi exporters are required to apply to the Controller / Joint Controller / Deputy Controller / Assistant Controller of Imports and Exports, Dhaka / Chittagong / Khulna / Mymensing / Sylhet / Comilla / Barishal / Bogra / Rongpur / Dinajpur in the prescribed Form along with the following documents:

1. Nationality and assets certificate.
2. Memorandum and Articles of Association and certificate of Incorporation in case of limited company.
3. Bank certificate.
4. Income tax certificate.
5. Trade license etc.

Securing the Order:

After getting the ERC (Export Registration Certificate) the exporter may proceed to secure the export order. He/she can do this by containing the buyers directly or through agent. In this purpose exporter can get help from:

•       Liaison Office.
•       Buyer’s local agent.
•       Export Promotion organization.
•       Bangladesh mission abroad.
•       Chamber of Commerce (Local & Foreign)
•       Trade fair etc.

 Signing the contract:

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

Receiving the Letter of Credit:

After getting contract for sale, exporter should ask the buyer for letter of credit clearly stating terms and conditions of export and payment.

The following are the main points to be looked into for receiving (collecting export proceeds by means of documentary credit:

•       The terms of the L/C are in conformity with those of the contract;
•       The L/C is an irrevocable one, preferable confirmed by the advising bank;
•       The L/C allows sufficient time for shipment and negotiation;

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

Cash in advance;

Open A/C

Collection basis (documentary / clean).

(Here the regulatory frame work is URC-525, ICC Publication).

 Procuring the Materials:

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

 Shipment of goods:

Then the exporter should take the preparation for export arrange for delivery of goods as per L/C and INCO-terms, prepare and submit shipping documents for Payment/ Acceptance/ Negotiation in due time. Documents for shipments –

•      EXP Form,
•      ERC (Valid),
•      L/C Copy,
•      Customer Duty Certificate,
•      Shipping Instruction,’
•      Transport Documents,
•      Insurance Documents,
•      Invoice,
•      Other documents,
•      Bill of Exchange (if required),
•      Certificate of Origin,
•      Inspection Certificate,
•      Quality Control Certificate,
•      G.S.P. Certificate,
•      Phyto-sanitary certificate,

 Final Step:

After those, exporter submits all these documents along with a letter of Indemnity to NCCBL for negotiation. An officer scrutinizes all the documents. If the document is a clean one, NCCBL purchases the documents on the bank’s of banker – customer relationship. This is known as Foreign Documentary Bill purchases (FDBP).

Procedure for FDBP:

After purchasing the documents, NCCBL gives the following entries:

FDBP A/c                                                                         Dr.

Customer A/c                                                Cr.

(Before realization of proceeds)

Head Office A/c                                                                 Dr.

FDBP A/c                                                                Cr.

(Adjustment after realization of proceeds).

A FDBP Registered is maintained for recording all the particulars.

Foreign documentary Bills for Collection:

The Trust Bank Limited forwards the documents for collection due to the following reasons –

If the documents have discrepancies.

If the exporter is a new client.

The banker is in doubt.

Foreign documentary bills for collection signify that the exporter will receive payment only when the issuing bank gives payment. The exporter submits duplicate EXP Form & Commercial Invoice. Subsequently, the value of the bill is calculated and the following accounting entries are given:

Head Office A/C                                             Dr. @ TT Clean.

Client’s A/c                                          Cr. (@ OD sight)

Govt. Tax A/c                                      Cr. (@ of Invoice Value)

Postage A/C                                         Cr.

Income A/c profit on Exchange              Cr.

After passing the above vouchers, an Inter Branch Exchange Trading Debit Advice is sent for debiting the NOSTRO account. The Trust Bank Limited has NOSTRO account with its reimbursing bank. An FDBP register is maintained, where first entry is given when the documents are forwarded to the issuing bank for collection and the second one is done after realization of the proceeds.

Export Bill Scrutiny Sheet:

Bank scrutinizes the export bill on they following points –

General:

1. Late shipment.
2. Late presentation.
3. L/C expired.
4. L/C overdrawn.
5. Partial shipment or Trans shipment beyond L/C terms.

Bill of Exchange:

1. Amount of bill differs with invoice.
2. Not drawn on L/C issuing bank.
3. Not signed.
4. Tenor or B/E not identical with L/C.
5. Full set not submitted.
6. Invoice.
7. Not issued by the beneficiary.
8. Not signed by the beneficiary.
9. Not made out 1 name of the applicant.

10. Description, price, quantity, sales terms of the goods not correspond to the credit.

11. Not marked one fold as original.

12. Shipping marks differs will B/A & Packing List.

Packing List :

1. Gross weight, Net weight & Measurement, number of cartoons / packages differs with B/L.
2. Not marked one fold as original.
3. Not signed by the beneficiary.
4. Shipping marks differs with B/L.

Bill of Lading / Airway Bill :

1. Full set of bill not submitted.
2. B/L is not drawn or endorsed.
3. “B/L shipping on Board” “Freight Prepaid” or “Freight Collect” etc. notations are not marked on the B/L.

1. B/L not indicate the name and capacity of the party i.e. carrier or master, on whose behalf the agent is signing the B/L.

1. Shipped on Board notation not showing name of pre-carriage vessel/intended vessel.

1. Shipping on Board notation not showing port of loading and vessel name (Incase B/L indicates a place of receipt or taking in charge different from the port of loading).

1. Short form B/L.
2. Charter party B/L.
3. Description of goods in B/L not agree with that of Invoice/E & P/L.

10. Alternations in B/L not authenticated.

11. Loaded on deck

12. B/L bearing clauses or notations expressly declaring defective condition of the goods and/or the packages.

Others :

1. Non-negotiable documents not forwarded to buyers or forwarded beyond L/C terms.

1. Inadequate number of Invoice, Packing List & others submitted.
2. Short shipment certificate not submitted.

 Settlement of Local Bill:

The settlement of Local Bill is done in the following ways:

The customer submits the L/C to The Trust Bank Limited along with the documents to negotiate.

Trust Bank Limited official scrutinizes the documents to ensure the conformity with the terms and conditions.

The documents are then forwarded.

The L/c issuing bank gives the acceptance and forward an acceptance letter.

Payment is given the customer on either by collection basis or by purchasing the documents.

 Accounting treatment of or purchase of Local Bill:

Local Bill purchase documentary                      Dr.

Party A/c                                                                Cr.

Commission                                                            Cr.

Interest A/c                                                  Dr.

A LBPD (Local Bill purchase documentary) register is maintained to record the acceptance of the issuing bank until the acceptance is obtained, the record is kept in a collection register.

6.1.13. Mode of payment of export bills under L/C:

The most common methods of payment under a L/C are as follows:

1. Sight Payment Credit:  In a Sigh payment credit, the bank pays the stipulated sum immediately against the exporter’s presentation of the documents.

1. Negotiation Credit :   In negotiation Credit, the exporter has to present a bill of exchange payable to him in addition to other documents that the bank negotiation.

1. Deferred Payment Credit:  In deferred payment, the bank agrees to pay on a specified future date or event, after presentation of the export document. No bill of exchange is involved. In TBL, payment is given to the party at the rate of D.A 60-90-120-180 as the case may be. But the Head Office is paid at T.T clean rate. The difference between the two rates is the exchange trading for the branch.

1. Acceptance Credit:   In acceptance credit, the exporter presents a bill of exchange payable to himself and drawn at the agreed tenor (that is, on a specified future date event) on the bank that is to accept it. The bank signs its acceptance on the bill returns it to the exporter. The exporter can then represent it for payment on maturity. Alternatively he can discount it in order to obtain immediate payment.

 Advising L/C:

When exporter L/C is transmitted to the bank for advising, the bank sends an advising letter to the beneficiary depicting that L/C has been issued.

 Test Key Arrangement:

Test Key arrangement is a secret code maintained by the banks for the authentication for their telex message. It is a systematic procedure by which a test number is given and the person to when this number is given can easily authenticate the same test number by maintaining that same procedure. The Trust Bank Limited has test key arrangements with so many banks for the authentication of L/C messages and for making payment.

Back to Back Letter of Credit :

A Back to Back letter of credit is a new credit. It is different from the original credit based on which the bank undertakes the risk under the back to back credit. In this case, the bank’s main security is original credit. The original credit (selling credit) are separate instruments independent of each other and in no way legally connected – although they both from part of the same business operation.

The supplier (beneficiary of the back to back credit) ships goods to the importer and presents documents to the bank as is specified in the credit. It is intended that the exporter would substitute his own documents for negotiation under the original credit, his liability under the back to back letter of credit would be adjusted out of these proceeds. The exporter L/C is marked lien and no margin is taken.

In TBL, papers/documents required for submission for opening of back to back L/C:

A)   Master L/C

B)   Valid Import Registration Certificate (IRC) & Export Registration Certificate (ERC).

C)   L/C application & LCA Form duly filled in signed.

D)   Proforma Invoice or Indent.

E)   Insurance Cover Note with money receipt.

F)    IMP Form duly signed.

In addition to the above the following papers/documents are also required for export oriented garments industries while requesting for opening back to back letter of credit –

Textile permission.

Valid bonded warehouse license.

Quota allocation letter issued by Export Promotion Bureau (EPB) in favor of the applicant in case of quota items.

In case the factory premises is a rented one, letter of disclaimer duly executed by the owner of the house/premises to be submitted.

Detective points or clauses appear in the Master L/C:

•       Issuing bank is not reputed.
•       Advising Credit by the advising bank without authentication.
•       Port of destination absent.
•       Inspection clause.
•       Nomination of specific Shipping/Airline or nomination of specified vessel by subsequent amendment.
•       B/L to blank endorse, to third bank, to be endorsed to buyer or third party.
•       No specific reimbursing clause.
•       UCP clause not mentioned.
•       Shipment / presentation period is not sufficient.
•       Original document to be sent to buyer or nominated agent.
•       FCR or HAWB consigned to applicant or buyer.
•       “shippers’ Load and Count is acceptable”.
•       L/C shall expire in the country of the issuing bank.
•       Negotiation is restricted
• Payment of back to back Letter of Credit:

• In case of back to back as 60-90-120-180 days of maturity period, deferred payment is made. Payment is given after realizing export proceeds from the L/C issuing bank.

Accounting treatment for back to back L/C:

When the document is arrived, the following vouchers are passed:

Customer’s A/c                                              Dr.

Commission on Acceptance                                      Cr.

While payment, if the fund is at hand, the accounting entry is –

Sundry deposit margin on acceptance               Dr.

Customer’s A/c                                                        Cr.

If the party is paid in foreign currency, B.C. rate is applied in this regard. International department takes the T.T. OD. Rate. If the payment is made to ID in local currency in national rate, T.t. clean rate is followed by ID. When the party is paid O.D sight rate is followed.

If the fund is not available to make the payment, the following vouchers are to passed –

OAP                                                             Dr.

Customer’s A/c                                              Cr.

Under the back to back concept, the seller, as beneficiary of the credit, offer it as security to the advising bank for the issuance of the second credit. As application for this second credit the seller is responsible for reimbursing the bank for payment made under it regardless of whether or not be himself is paid under the first credit. There is, however, no compulsion for the bank to issue the second credit, and in fact, many banks will not do so.

Remittance means sending of fund. The word remittance we understand sending/ transferring of fund through a bank from one place to another place which may be within the country or between two countries, one in abroad is called Foreign Remittance.

“Foreign Remittance” means purchase and sale of freely convertible foreign currencies as admissible “Foreign Exchange Regulations Act-1947” and “Guidelines for Foreign Exchange Transaction – VOL. 1&2 of the country. Purchase of foreign currencies constitutes inward foreign remittance and sale of foreign currencies constitutes out ward foreign remittance.

So we see that there are two types of Foreign Remittance:

1. Foreign inward remittance.
2. Foreign outward remittance.

7.1.1. Inward Remittance:

The remittances which are received from abroad are called inward remittance.

Purpose of inward remittance:

Family maintenance.

Indenting commission.

Donation.

Gift.

Foreign investment.

Export proceeds.

Others.

Mode of inward remittance:

Telegraphic Transfer (TT)

Mail transfer (MT)

Foreign Demand Draft (FDD)

Payment order (PO)

Travelers cheque (TC)

Foreign Currency Notes.

7.1.2. Outward Remittance:

Remittances which are made from our country to abroad is called outward remittance.

Mode of outward remittance:

Foreign Telegraphic Transfer (FTT)

Foreign Mail Transfer (FMT)

Foreign Demand Draft (FDD)

Travelers Cheque (TC)

Foreign Currency Notes.

Present limit of outward remittance fixed by Bangladesh Bank:

Travel:

For Private Travel : Private travel quota entitlement of Bangladesh national total US$3000 per calendar year for visit to countries other than SAARC (India, Pakistan, Nepal, Bhutan, Srilanka, Maldives) and Myanmar.

Quota for SAARC countries and Myanmar is US$1000 for travel by Air and US$500 for travel by land. At a time bank can issue full amount of above quota if required. Case dollar may be issued maximum US$600 per passport per travel. The amount of travel quota mentioned above are prescribed for adults only. The minors are eligible for 50% of the annual ceilings of adults.

Business Travel:

(1) Subject to an annual upper limit of US$5000 importers are entitled to business travel quotas 1% of their imports settled during the previous financial year.

(2) Subject to an annual upper limit of US$5000 non exporting producers are entitled to business travel quotas 1% of their turnover of the preceding financial year as declared in their tax return.

For Exporters: New exporters are entitled to a quota for US$ 6000 annually and old exporters can use FCAD expanse retention quota A/c as per their requirement.

For Foreign Nationals : The Authorized Dealers may issue foreign currency TCS to foreigners without any limit and foreign currency notes up to US$300 or equivalent per person against surrender of equivalent amounts in foreign currencies.

Education:

Foreign exchange may be remitted for studies abroad by Bangladesh National in all regular courses (Subject to being consistent with the education policy of the Bangladesh Govt.) in recognized institutions. Authorized dealer has to open file for the individual student. Application and papers required for this purpose as follows:

Application duly filled in.

Original and photocopy of admission letter issued by the educational institution in favor of the student.

Original and photocopy of estimate relating to annual tuition fee, board and lodging incidental expenses etc. issued by concerned institution.

Attested copies of educational certificates of the applicant.

Valid passport.

Seminar/Workshop/Conferences:

Up to US$250 per dicer and US$200 per days receptively may be issued by Authorized Dealers to private sector participants for attending seminars, conferences and works hops arranged by recognized international bodies in SAARC member countries or Myanmar and in other countries without prior approval of the Bangladesh Bank. Foreign exchange may be released only for the actual period of the seminar, workshop and conference to be held.

Medical Treatment:

Foreign currency up to US$10000 our equivalent may be released by the ADS on the basis of the recommendation of the medical Board set up by the health directorate and the cost estimate of the foreign medical institution. Application for release of exchange exceeding US$10000 should be forwarded along with supporting documents to Bangladesh Bank for prior approval.

Fees:

The Ads may release foreign exchange towards remittance of membership fees of foreign professional and scientific institutions and fees for application, registration, admission, examination (TOEFL, SAT, etc). In connection with admission into foreign educational institutions on the basis of written application supported by demand notice/letter from the concerned foreign institution showing the amount to be –

Family Maintenance:

a)    Bangladesh National: Outward remittance may be made to family members/dependent parents, spouses and children living abroad with the permission from Bangladesh Bank. a certificate issued by relevant Bangladesh embassy regarding residency of the beneficiary extend of income abroad along with the embassies recommendation as required for this purposes.

b)   Foreign Nationals: Foreign Nationals who are resident in Bangladesh and who have an income in Bangladesh are permitted to make monthly remittances to the country of their domicile out of their current savings up to 50% of their income to cover their commitments abroad.

Foreign Shipping Lines/Air Lines/courier Services Company:

These companies may remit their income after adjustment of the amount shipment for local disbursement and tax payable.

Dividend/Gain of Foreign Companies/Shareholders:

Dividend, Profits, Gains may be remitted abroad to the owner, shareholders without prior approval of Bangladesh Bank.

Hajj:

The Govt. of Bangladesh announces each year the scale at which foreign exchange may be issued to intending pilgrims for performing Hajj. Release of foreign exchange for this package should be made as per instruction, to be issued for this purpose by Bangladesh Bank each year.

Remittance of Salaries and Savings by Expatriates:

Expatriates working in Bangladesh with the approval of the Govt. may remit through an Authorized Dealer 50% of salary and 100% of leave salary as also actual savings and admissible pension benefits. No prior Bangladesh Bank approval is necessary for such remittance.

Expenses of office opened abroad:

Remittance of up to US$3000 or equivalent may be made annually meet current expenses of such offices opened abroad by a commercial or industrial concern. Such remittance may only be made in the names of concerned offices, subsidiary companies abroad.

Remittance of Royalty and Technical Fees:

No prior permission of Bangladesh Bank or BOI is required by the enterprises for entering into agreement involving remittance of royalty, technical know how or technical assistance fees. Operational services fees, marketing commission etc. if the total fees and other expenses connected with technology transfer do not exceed the following limit:

• For new projects, not exceeding 6% of the cost of imported Machinery.

• For ongoing concerns not exceeding 6% of the previous years sales as declared in the income tax return.

Operating Expense of Bangladesh Shipping Corporation & Bangladesh Biman:

Bangladesh shipping corporation and Bangladesh Biman are allowed to make remittances to meet bonafide disbursements in foreign ports, foreign station without approval of Bangladesh Bank.

Remittance against Export Claims:

The Authorized Dealers may remit export claims not exceeding 10% of the repatriated export proceeds on the following counts:

a)    Short weight claims.

b)   Quality claim.

c)    Part shipment.

Subscriptions to Foreign Media Services:

On application from the local news papers, Ads may remit foreign exchange towards cost of subscriptions of news items features articles of foreign news agencies. Remittance should be made on the basis of contracts entered into between the applicant and the foreign agency and NOC of the Ministry of information Ads may remit abroad costs, fees on account of their own subscription of foreign media services such as Router monitor service without prior Bangladesh Bank approval.

Advertisement of Bangladeshi Products in Mass Media Abroad:

Ads may without prior Bangladesh Bank approval effect remittance towards cost of advertisement of Bangladeshi products on mass media abroad.

Bank charges and sundries:

The Authorized Dealers may affect remittances toward settlement of dues to foreign banks of bank charges. Cost of cables and other incidental charges arising in their normal curse of the business without prior Bangladesh Bank approval. All such remittances should be reported to the Bangladesh on forms TM along with appropriate return.

Taking out/Bringing in of Bangladeshi Taka:

Incoming, outgoing passengers may bring in/take out up to taka 500 per person in   Bangladesh currency.

In all above cases for outward remittance TM form to be obtained and this will have to be reported to Bangladesh Bank Monthly basis.

Submission of Returns to Bangladesh Bank:

The Ads must maintain adequate and proper records of all foreign exchange transactions including transaction on non-resident Taka A/C in their book and furnish such particular in the prescribed statements/returns for submission to the Bangladesh Bank.

The purpose of submission of return & statements to Bangladesh Bank for keeping systematic and proper records of all dealings in foreign exchange including transactions on non-resident Taka A/Cs. Submission of the returns/statements to Bangladesh Bank is very much important. Total picture of foreign exchange transaction of the country such as reserve of FC, FCs earned through export, wage earners & other reference and FCs paid through import, treatment, education, traveling etc can be ascertained after compilation of these returns/statements submitted to Bangladesh Bank by the ADs.

Procedures for reporting transactions:

A)  Export :

Export bills drawn under confirmed and/or irrevocable L/Cs:

Transactions in respect of export bills negotiated by the Ads should be reported as purchase only at the time entries are made in the currency account duly supported by EXP form and schedule:

a)    EXP Original reported by Custom Authority to Bangladesh Bank at the time of shipment/export.

b)   EXP. duplicate: To be reported by the Ads to Bangladesh Bank within 14 days of shipment.

c)    Exp. Triplicate: To be reported after repatriation of the export proceeds.

Export bills drawn on Collection basis:

Sometimes ADs also purchase export bills drawn on collection/CAD basis. Transactions relating to such export bills should be reported as outright purchases against “export” in the summary statement on receipt of advice of realization of the export proceeds.

Export bills pertaining to Head Office or branch maintaining independent currency account:

When export bills are re-discounted with the Bangladesh Bank the transactions should be reported as purchase in the Summary statement supported by Schedule A and Exp Form and the contra entries should be reported on schedule D as sales to Bangladesh Bank.

Export bills pertaining to branch not maintaining its own currency account:

As and when the exports are re-discounted with the Bangladesh Bank the branch concerned will report the transactions as purchase in the summary statement supported by Schedule A-1/0-1 and Exp. Form.

B)  Other Receipts :

Purchase of DD, TT and MT etc. should be reported to Bangladesh Bank only when the transactions are put through the currency accounts.

C)  Imports :

Foreign currency A/Cs of ADs are debited at the time of negotiation of import documents by their foreign correspondent drawn under the L/Cs established by the ADs. Sale of this F.C. should be reported on receipt of negotiated import documents and not on the basis of retirement of bills by the importer.

All sales on account of imports are required to be supported by the original copy of the   IMP form.

Import bills received on collection/CAD basis, the transactions will be reported on Schedule E-2 supported by original IMP Form.

D)  Other payment :

Transactions relating to DD, TT, MT etc issued by the Ads should be reported only at the time of entries are made in the currency accounts.

Transactions in non-resident Taka accounts of foreign banks should also be reported by the ADs.

Coding of Transactions:

AD will give code numbers for all receipts and payments transactions on the relevant forms and schedules as per code list provided by Foreign Exchange Policy Dept. Bangladesh Bank (2000 edition) and. AD will use the HS Code number form the HS Code Guide titled “The Harmonized commodity Description and Coding System” exports and imports in the relevant schedules.

Reporting Procedure for cash transaction:

Ads shall report to the Bangladesh Bank particulars of all their foreign exchange transactions i.e. all outward and inward remittances effected. Whether through their accounts in foreign currencies or through the Taka accounts of  non-resident banks. The original copies of statement / schedules to be sent directly to the Statistics Dept. Bangladesh Bank Head Office, Dhaka the duplicate copies along with the relevant forms should be endorsed to the concerned area office of Bangladesh Bank. these monthly statement / schedules to be sent to Bangladesh Bank by the 5^th day of the following month.

Compilation of summary statement:

Each summary statement will be an abstract of the Ads ledger A/c and will consist of totals under specified heads. Opening and closing balances should be added making each summary a complete and balance statement.

Supporting schedules and forms of the summary statement:

Every summary statement must be accompanied by schedules and the relative forms as indicated in the summary statements.

Preparation of schedules:

Schedule A-1 :

When EXP form is certified against purchase of FCS the transaction must be listed in schedule A-1 in triplicate showing the number of EXP form and the amount.

Schedule A-2:

a)    Advance receipt for goods to be exported this is to be reported through “Advance Receipt Voucher” (A[ppendix-19 Vol-2)

b)   Where the duplicate EXP form has already been lodged with the Bangladesh Bank and the triplicate is not available at the time when proceeds are received. This is to be reported through “EXP form not attached voucher” (Appendix 20-Vol-2).

Schedule A-3:

Schedule A-3/0-3 is used to report purchase of F.C. against export to Myanmar under Bangladesh – Myanmar Border Trade Arrangement.

Schedule –C :

Currencies purchased from other Ads or branches in Bangladesh to be reported in schedule – C to be attached with relative S-1, S-2 and S-6 statement.

Schedule – G:

Currencies sold to other Ads or branches in Bangladesh to be reported in schedule-G to be attached with S-1, S-2, and S-6.

Schedule – D:

FCs purchased from and sold to Bangladesh Bank to be reported as Schedule-D.

Schedule – E-2/P-2, E-3/P-3 and EL 1/2/3:

All import transactions to be reported schedule E=2/P-2 and the charges (interest reimburse etc.) there against and other sales other than import Traveling, Treatment, Service/Technical charges etc in schedule E-3/P-3. Transactions relating to Loans/Grants will be reported through EL-1/2/3.

Reporting of Inland L/C settlements:

Payment against inland L/Cs in foreign exchange will be reported in summary statement S-1 or sales side as “Payment against Inland L/C” and the recipient AD will report the receipt on the purchase side of S-1 as “Receipt in settlement of Inland L/C”.

Date of submission of statements to Bangladesh Bank:

Schedule Time:

Currency wise daily position statements should be kept ready for immediate submission to Bangladesh Bank as and when called for.

SWOT Analysis is an important tool for evaluating the companies Strengths, Weaknesses, Opportunities and Threats. It helps the organization to identify hoe to evaluate its performance and can scan the macro environment, which is turn would help the organization to navigate in the TurbulenceOcean of competition. Following is given the SWOT analysis of The Trust Bank:

STRENGTHS:

Sponsors:

The Trust Bank has founded by The Army Welfare Trust. The main sponsors for this bank is Sena Kalyan Sangstha. The chairperson of this bank is Chief of Army Staff and directors are also appointed by the sangstha, that’s why the sponsor does not have any problem for the fund.

Top Management:

The top management of the bank, the key strength for The Trust Bank has contributed heavily towards the growth and development of the bank. The top management officials are army’s highest position holder, so they have a good idea about the current situation.

Company goodwill:

The Trust Bank has created a good reputation in the banking industry of the country. Their main customers are army persons. The popularity of this bank is increase day by day also in the general public area.

Retail Banking:

The bank has already lunched retail-banking division to sell their products as well as increase customers or clients

Modern Facilities and Computer:

From the very beginning The Trust Bank tries to furnish their work surroundings with modern equipment and facilities. For speedy service to the customer, The Trust Bank had installed money-counting machine in the teller counter. The bank has computerized banking operation under software called PC banking. More over computer printed statements are available to internal use and occasionally for the customers. The Trust Bank is equipped with telex and fax facilities.

Rousing Branches:

From the formative stage of The Trust Bank tried to furnish their branches by the impressive style. Their well-decorated branches gets attention of the potential customer, this is one kind of positioning strategy. The Millennium Branch is also impressive and is comparable of foreign banks.

Interactive Corporate Culture:

The corporate culture of The Trust Bank is very much interactive compare to other local organization. This interactive environment encourages the employee to work attentively. Science the banking jobs is very much routine work oriented and lovely environment boots up the work capability of the employees.

Online Banking:

It is so important for every bank because today’s world is very much dependent on computer which means E-banking. By offering such kinds of facilities TBL increase clients and maximize customer’s satisfaction.

Attractive location:

TBL branches location are attractive that most of branches are located near the army cantonments and also charming location, which convey historical evidence.

Infrastructure facilities:

TBL’s   maintains good infrastructure inside and outside at the office that brings positive feelings about the banks in the minds of the customers. EX-separate room for manager and others senior officers which keep the individual personality.

Micro credit:

There is a micro credit division, which is strength of TBL.

Islamic banking

Introduction of islami banking

WEAKNESSES:

Limitation of Information System (PC Bank):

PC bank is not comprehensive banking software. It is desirable that a more comprehensive banking system should replace PC bank system.

Hierarchy Problem:

The hierarchy problem treated as a weakness for The Trust Bank, because the employee will not stay for a long. So there will be a chance of brain drain from this bank to other bank.

Advertisement Problem:

There is another weakness for The Trust Bank is advertisement. Their media coverage is so much low that people do not know the bank thoroughly.

Limited Branches:

Limited branches are another weakness of TBL among most other commercial bank.

OPPORTUNITIES:

Diversification:

The Trust Bank can pursue diversification strategy in expanding its current line of business. They do not serve not only the army but also the general people.

Business Banking:

The investment potential of Bangladesh is foreign investors. So EBL has opportunity to expand in business banking.

Credit Card:

There is an opportunity to launch Credit Card in Bangladesh by EBL. Beside this, EBL can acquire services for cards like VISA, MASTER CARD etc. So that they can enhance the market based card service.

New Branches:

TBL has great opportunity to expand branches in different EPZ and other commercial areas.

Expand Micro Credit Programme:

This is the possible way to earn more profit by limited investment. If TBL emphasize in this division it has huge opportunities to maximize their profit among other divisions.

THREATS:

Contemporary Banks:

The contemporary banks of The Trust Bank like: Dhaka Bank, Dutch Bangla Bank, National Bank, Mutual Trust Bank, Mercantile Bank are its major rivals. They are carrying out aggressive campaign to attract lucrative clients as well as big time depositors. The Trust Bank should remain vigilant about the steps taken by these banks, as these will in turn affect The Trust Bank strategies.

Multinational Bank:

The Rapid expansion of multinational bank poses a potential threat to new PCB’s. Due to the booming energy sector, more foreign banks are expected to operate in Bangladesh. Moreover, the existing foreign banks such as HSBC, AMEX, CITI N.A, and Standard Chattered Grindlays are now pursing an aggressive branch expansion strategy. Since the foreign banks have tremendous financial strength, it will pose a threat to local bank to a certain extant in terms of grabbing the lucrative clients.

Default Culture:

Default culture is very much familiar in our country. For a bank, it is very harmful. As The Trust Bank is new, it has not faced it seriously yet. However as the bank grows older it might become big problems.

Others:

•       Poor economical condition of our country.
•       Entrance of new private commercial banks
•       Different attractive service offered by some foreign banks.
•       Daily basis interest on deposit offered by some Multinational banks.
•       Existing cards service of different banks.

Recommendations:

Through conducting this study I have acquired some practical knowledge about export import business in Bangladesh & and other relevant matters. Now I would like to provide some recommendation which may be helpful to promote the export import business of The Trust Bank Limited as well as Bangladesh. As per earnest observation some suggestions for improvement of the situation are given below:

For attracting more clients The Trust Bank Limited has to create a new marketing strategy which will increase the total export import business.

Effective and efficient initiative is necessary to recover the default loans.

Attractive incentive package for the exporter will help to increase the export and accordingly it will diminish the balance of payment gap of The Trust Bank Limited.

Introduction of attractive WES which will increase the remittance.

For the foreign exchange officials long terms training very much essential.

For a sound and stale foreign exchange operation, The Trust bank Limited should give more emphasis on the foreign exchange department.

Foreign exchange operation of other renowned commercial banks is more dynamic and less time consuming. The Trust Bank Limited should take some initiative to compete with those banks.

Bank can provide foreign market reports which will enable the exporter to evaluate the demand for their products in foreign countries.

Conclusion:

Proper financial system of a country can contribute towards the development of that country’s economy. In our country Bangladesh, banks have a leading power to its financial system. For this reason, the banks should have a potential role to make our financial system. In this arena, private commercial banks are playing a vital role in the development of our economy. But Govt. and Bangladesh Bank play a crucial role to the private commercial banks through imposition of deposit restriction, lending role and other banking operations. In recent years of banking business, The Trust Bank Limited has shown better performance comparing with other first generation banks.

We expect the Trust Bank Limited may hold its prospect in future and can play a vital role in the socio-economic development of our country.

Bibliography:

Annual Report 2000, 2001 & 2002 of The Trust Bank Limited.

Course Booklet on International Trade and Foreign Exchange, BIBM

“Banks and Banking” Published by Bangladesh Bank statistics Department.

“Foreign Exchange Mechanism – Import”

By Md. Kabir Hossain.

“Foreign Exchange Mechanisms – Export “

By Sk. M. Mahbub-ul-Alam.

“Foreign Exchange Mechanism  –  Remittance”

By Hajee Kamrul Islam.

“Modes of payment in International Trade”

By Chowdhury Dr. T. A.

“A Text Book on Foreign Exchange”

Chowdhury  L. R.

Banking Theory & Practice

T. T. Shetti

http://www.google.com/

http://www.trustbankbd.com/

tbl@global-bd.net 

Dhanmondi Branch:

BDR Gate #04 Peelkhana

Satmosjid Road, Dhaka.

Head Office:

PeoplesInsuranceBuilding.

17th, 16th & 2nd floor, 36 Dilkusha C/A,
Dhaka-1000.
Tel: 9570261, 9570263, and 9572012-3
Fax: 880-2-9572315