The Foreign Exchange Activities of Mercantile Bank Limited

Introduction:

Mercantile Bank Limited is a third generation bank in Bangladesh. Mercantile Bank has been incorporated on May 20th, 1999 in Head office at 61 Dilkhusha C/A, Dhaka, Bangladesh as a public limited company under the rules & regulations of Bangladesh Bank & the Bank companies’ Act 1991. Mercantile Bank Limited commenced formal commercial banking operation from the June 02, 1999 with the leadership of M.P Md. Abdul Jalil. The founder chairman who had long dream of floating a commercial bank which would performs most of the standard banking services and investment activities on the basis not only profit sharing but also contribute socio-economic development of the country. The opening of the Principal Office was the big leaf forward and successively the opening of the Mothijil Branch expanded the horizon of Mercantile Bank Limited to bring its services to the valued clients more effectively. The Mirpur Branch opened at Rokeya Sarani, RaziaPlaza (1st Floor) 184, Senpara Parbata, Mirpur-10, Dhaka on 3 July 2002. The bank stood 65 branches all over the country up to 30 December 2010. With a firm commitment to achieve an excellence in service, Mercantile Bank Limited has always tried for creating wide array of banking solution and offer supervision value proposition.

The Authorized Capital of the Bank is BDT 8,000 million and the Paid -up Capital is BDT 4,072.21 million. MBL make it most efficient to meet the needs of 21st century with assets of BDT 87,140.11 million and 1605 employees. The Bank provides a broad range of financial services to its customers and corporate clients in retail banking, corporate banking and international trade. The total amount of deposit is BDT 75,629.14 million and the total loans and advances are BDT 66,377.70 million at the end of the year 2010 that shows a great performance of MBL. The credit deposit ratio is 83.22%. The net profit after tax at the end of the year 2010 is BDT 1,425.34 million.

Mercantile Bank Ltd. (MBL) is a specialized financial institution. Vision of MBL would make finest corporate citizen. Mission of MBL will become most caring, focused for equitable growth based on diversified deployment of resources, and nevertheless would remain healthy and gainfully profitable Bank. There are two types objectives of MBL-First is Strategic objectives- to achieve positive Economic Value Added (EVA) each year, to be market leader in product innovation, to be one of the top three Financial Institutions in Bangladesh in terms of cost efficiency, to be one of the top five Financial Institutions in Bangladesh in terms of market share in all significant market segments we serve. Second is Financial objectives- to achieve 20% return on shareholders’ equity or more, on average. Core values- The MBL are providing with caring services by being innovative in the development of new banking products and services for the customers, maximizing wealth of the Bank for shareholders, respecting worth and dignity of individual employees devoting their energies for the progress of the Bank for the employees, strengthening the corporate values and taking environment and social risks and reward into account for the community. The MBL is adopting the new technology such as state-of-the art technology in banking operations.

The MBL provides a broad range of financial services to its customers and corporate clients. The main branch has 10 section namely 1) HRD Department, 2)Credit Department, 3) Development and Marketing Department, 4) Research and Planning Department, 5) Information Technology Department, 6) General Banking Department, 7) Treasury and Money Market Department, 8) Central Account Department, 9) International Department, 10) Audit & Inspection division. The Mirpur branch has six section 1) Accounts Department, 2) Clearing Department, 3) General Banking Department, 4) Credit Department, 5) SME Financing Department, and 6) Foreign Exchange Department. This departments are provides various utility product & services to the customers such as NRB Banking, SME Banking, SMS Banking, Online Banking, Loan Scheme, Deposit Scheme, Credit & Debit Cards, Locker Service, Capital Market Service, SWIFT, Remittance, Western Union & Bill Payment. Basic accounting system of the bank has been fully computerized to minimize cost and risks and to optimize benefits and increase overall efficiency for improved services. The bank is capable of generating the relevant the financial statements at the end of the day. The Bank has also hosted a web page of its own to take a place in the World Wide Web. On-line Banking has been introduced by the Bank to provide better services to the customer. The Bank has already introduces ATM ‘Q-Cash’.

Excellence in banking operation depends largely on a well equipped and efficient Research and Development Divisions. Such activities require the investment of substantial money and a set of highly qualified personnel with multidisciplinary background. Although it is mot possible at this stage to undertake Research and Development activities similar to those a bank on the developed countries, MBL established a core Research and planning Division comprising skilled persons from the very inception of the bank.

The Year 2010 had been challenging one for the financial sector too. The incessant fall-out of international credit market due to world economic meltdown resulting in sluggish growth has put significant pressure on financial performance of banks and financial institutions worldwide. MBL achieved continuous growth almost all arenas of its business amid this economic crisis, facing intensified competition of the industry. The Bank remained financially strong by dint of its continued focus on the vision of becoming country’s finest corporate body providing excellent and need-based customer service.

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 deposits, credits and balances payable in any foreign currency and draft, travelers cheques, letter of credit and bill of exchange expressed or drawn in Bangladesh currency but payable in any foreign currencies.

Foreign Exchange Department is an international department of the bank. It deals                                                                                                                    with globally and facilitates international trade through its various modes of services. It bridges between importers and exporters. In exercise of the powers conferred by section 3 of the Foreign Exchange Regulations-1947, Bangladesh Bank issues license to scheduled banks to deal with foreign exchange. These banks are known as AuthorizedDealers (AD). If the branch is authorized dealer in foreign exchange market, it can remit foreign exchange from local country to foreign country and mainly deals with foreign currency. This is why this department is called foreign exchange department. Foreign Exchange Department of MBL, Mirpur Branch is divided into two sections such as 1) L/C Operation and 2) Foreign Remittance. Mirpur branch is one of the Authorized Dealers Branches of Mercantile Bank Ltd. There are six peoples are working continuously with great effort and teamwork. The Bangladesh Bank and the respected VP of this section control them. There are more than 65 clients and 24 countries they are dealing with.

The Bank has established correspondent relationship across the world with a number of foreign banks namely Citibank N.A., The bank of Tokyo Mitsubishi Ltd., Standard Chartered Bank, American Express Bank, HSBC, ICICI Bank, ING Bank, United Bank of India, Commonwealth Bank of Australia, Toronto Dominion Bank, Wachovia Bank, N.A., Hutton National Bank, Sumitomoto Mitsui Banking Corp., etc. The number of foreign correspondents is 589 as of December 31, 2010. Efforts are being continued to further expand the Correspondent Relationship to facilitate Bank’s growing foreign trade transactions. The number of foreign correspondents established by the bank is 70 on December 31, 1999. Efforts are being continued to further expand the correspondent relationship to facilitate bank’ growing foreign trade transaction. International Trade forms the major business actively undertaken by Mercantile Bank Limited. The Bank with its worldwide network of correspondents and close relationship with key financial institutions provides an extensive trade services network to handle the transactions efficiently. International trade is an important constituent of the business portfolio of the Bank. The Bank has installed SWIFT to facilitate quick international trade and payments arrangements. The Bank is connected to REUTERS also for up-to-date information on the foreign exchange markets.

In 2010, the Bank has made a noteworthy growth in terms of foreign business. The Import business of the Bank grew by 47.75% whereas The Export Business grew By 28.31% during the year 2010. The Bank recorded BDT 89,524.10 million import business at the end of the year 2010 against BDT 60,592.50 million in December 2009. Export business stood at BDT 59,404.20 million till December 2010 against BDT 46,298.60 million at the end of the year 2009. During the year under review, the Bank also handled remittance business of BDT 5,108.10 million.

MBL has stamped its 12th Founding Anniversary on June 02, 2011 expecting to keep up outstanding performance in the coming days. From a single branch beginning, now it has become a top-tier banking organization providing state-of-art technology based customer service. In the first half of 2010, MBL achieved continuous growth in almost all business areas, focusing on capital adequacy, growth of quality assets, sound earnings and strong liquidity management. In the 11th quarterly issue of MBL Insight, have endeavored to cover topics related to World and Bangladesh economy, current issue focuses on the Banking sector and events of  MBL.

“The Foreign Exchange Activities of Mercantile Bank Limited: A Study on Mirpur Branch” is topic of study. This study is to become familiar with the practical business world and to attain practical knowledge about the Banking sector specially foreign exchange activities, which is so much essential for each and every student to meet the extreme growing challenges in job market. It is also known, there is no alternative of practical knowledge and the practical knowledge is much more durable and useful than the theoretical knowledge. This study will help to get a true picture of the practical foreign exchange activities. So this study is of paramount importance for each and every student regardless to study area or discipline.

Background of the Study:

“The Foreign Exchange Activities of Mercantile Bank Limited: A Study on Mirpur Branch” is topic of study. This study attempts to analyze the nature of modern foreign exchange activities and performance of MBL. This study is made by all through the internship program; close observation was made on different banking activities of MBL. Its performance was reviewed and analyzed through the annual reports, and internal records of the bank. This study is divided into three parts: Chapter-1: Orientation of the Study, Chapter-2: Learning Part, Chapter-3: Recommendation and Conclusion.

 Scope of the Study:

The scope of the study is limited to Mercantile Bank Limited, Mirpur Branch. The study focuses on the foreign exchange activities of MBL, Mirpur Branch. This report has the details of the procedures of the foreign exchange department of MBL, Mirpur Branch along with that, a relevant stream of discussion has been made on the theory and policy issues relating to foreign exchange. This study covers the pieces of jobs done in these sections. It also highlights:

1)      An Overview on foreign exchange operations of MBL

2)      Financial Performance of the bank

3)      Export and Import Performance.

4)      Services offered by the bank

5)      The origin and social activities of the bank. Etc.

Objective of the The Study:

Broad Statement:

The main objective of the study is to know the overall foreign exchange activities of MBL.

Specific Objective:

Furthermore, the specific objective of this study is:

1. To know different types of foreign exchange activities of MBL.
2. To evaluate these foreign exchange activities of MBL.
3. To identify the problem of foreign exchange activities of MBL.
4. To recommend some suggestion.

Methodology of the Study:

Types of Research:

This is a “Descriptive Research”, which briefly reveals the overall activities of the Bank. This study has been conducted based on the information extracted from different sources collected by using a specific methodology. All the necessary information to conduct the study is collected from both primary and secondary source of data.

Secondary Sources:

Secondary data have been used to conduct the study, the following secondary sources are mentioned below:

      Annual Reports of MBL 2010

      Published Documents- UCPDC 500 published by International Chamber of Commerce (1993); The Import and Export Control Act-1950; Chief Controller of Import And Export (CCI&E); The Foreign Exchange Act-1947;

      Office Records

      General Banking Manual

      Website: http://www.bangladesh-bank.org & http://www.mblbd.com

      Journals.

Since primary data have been used to conduct the study, the following are clearly mentioned as:

Target Population:

Employee and client (L/C opener or applicant) of Mercantile Bank Limited are target population of the study.

Sample Size:

• No. of Employees: 5 were selected from foreign exchange department.
• No. of Clients: 10 were selected from foreign exchange clients.

Sampling Techniques:

The method of choosing sample would be “Judgmental Sampling”. The reason behind here each and every item of the population are selected based on understanding and judgment.

 # Measures: Sampling measures have taken to reduce bias/error.

       # Sample element: Employee and clients of MBL Mirpur Branch.

       # Sample Unit: Employee- 5, Clients: 10.

       # Time: 1 May to 31 July, 2011.

Method of Data Collection:

To collect primary data “Interview, informal discussion & observation method” have been used.

 Data Analysis:

To analyze the gathered data charts, tables and graphs are used and different types of computer software like Microsoft Excel, Microsoft Word are used to conduct the study

Limitation of the Study:

Although whole hearted co-operation have been obtained from employee of MBL, Mirpur Branch and Head Office in Dhaka but on the way of the study, the following problems are being faced, which may be termed as the limitations of the study. These are:

1. Since it is a service oriented organization, the probability of the accurate data is always low.
2. The duration that is for internship program is not enough to learn about an organization as well as its customer perception towards the organization like Mercantile Bank Limited.
3. It’s also fail to focus on sector wise function of foreign trade department.
4. Since the bank personnel are very busy with their activities, as a result they can not fully co-operate me to complete the study.

Types of Foreign Exchange Activities of MBL:

Foreign exchange department of MBL gives different services their clients and take commission or charge in their schedule rate this services is foreign exchange activities of MBL.

 Import Activities of MBL:

1. There are given below import activities of MBL with rate of commission/charges and period/value:
2. Opening of L/C under Cash/AID/Loan/Barter etc and commission maximum 0.40%(Below 100% Margin) and 0.25% (100% Margin) for 1st quarter and each subsequent quarter or part thereof.
3. Opening of Back to Back L/C including EDF L/C and commission 0.40% for 1st quarter and 0.20% for each subsequent quarter or part thereof but minimum BDT 500.00.
4. Acceptance Commission (BTB L/Cs) and commission 0.40% for 1st quarter and 0.20% for each subsequent quarter or part thereof.
5. Opening of L/C under Deferred Payment and commission maximum 0.50% for per quarter or part thereof but minimum BDT 1,000.00.
6. Acceptance Commission (except BTB L/Cs) and commission 0.40% for each quarter.

If L/Cs are sent by mail (This shall cover cost of registered mail of local L/C to Advising Bank) and service charge at actual minimum BDT300.00.
If transmitted by Telex/SWIFT :

1.                                 i.            Service charge at actual minimum BDT 3000.00 for full tested Telex/SWIFT.
2.                               ii.            Service charge at actual minimum BDT 1000.00 for short and non-operative Telex/SWIFT.

1. Amendment of local L/C by mail (This shall cover cost of registered mail of amendments to Advising Bank):

1.                                 i.            Service charge BDT 500.00 for Amendment.
2.                               ii.            Service charge at actual minimum BDT 50.00 for Mailing.
3. Amendment of L/C by Telex/SWIFT and commission 0.40% but minimum BDT 1,000.00.
4. If amendment includes increase of value or extension of time, then L/C opening commission for additional time or value shall be recovered as prescribed in the opening stage etc are rate of commission/charges for period/value as like point 1, 2 and 3.
5. Any amendment of L/C after expiry (excluding Back-to Back L/C); fresh L/C opening charges should be realized as per schedule are rate of commission/ charges for period/value as like point 1, 2 and 3.

Arranging Add Confirmation from third Bank:

1.                                 i.            Sight L/C on Opener’s A/C and service charge at actual minimum BDT 2,000.00.
2.                               ii.            Sight L/C on Beneficiary’s A/C and service charge at actual minimum BDT 2,000.00.
3.                             iii.            DP L/C up o 180 days on Opener’s A/C and service charge at actual minimum BDT 2,000.00.
4.                             iv.            DP L/C up to 180 days on Beneficiary’s A/C and service charge at actual minimum BDT 2,000.00.
5. Confirmation of DP L/Cs over 180 days and for sight L/Cs of big amounts and commission is to be quoted by International Division, Head Office by arrangement with the Confirming Bank.
6. Foreign correspondence charge for all types of L/Cs (Mail as well as Telex/SWIFT) to be paid by openers (if applicable) and service charge is free.
7. Foreign correspondence charge for amendments of L/C to be paid by openers (if applicable) and service charge BDT 500.

L/C Cancellation Charges or Expired Unutilized:

1.                                 i.            Service charge at actual minimum BDT 500.00 by Telex/SWIFT.
2.                               ii.            Service charge at actual minimum BDT 300.00 by Air Mail.

1. Interest on PAD (Payment against Documents) is as per lending rate fixed by
   Bank from time to time.

1. Collection of credit report of the beneficiary of the L/C and service charge at actual plus
   USD 20.00 per case and maximum USD 100.00.

1. L/C dispatched by Courier (For all L/C irrespective of original or amendment) and service charge at actual plus USD 20.00 per case and maximum USD 100.00.

1. LCAF issuance and service charge BDT 200.00 per LCAF.

1. Pre- shipment Inspection Processing and service charge BDT 500.00 per instance.

1. C & F Certificate Issue and service charge BDT 500.00 per instance.

1. For settlement of documents of import bills (to be realized from the bill value when applicable) and handling charge is USD 50.00.

1. All other charges not mentioned above in connection with opening and advising of L/Cs service charge at actual plus BDT 1,000.00.

 Export Activities of MBL:

1. There are given below export activities of MBL with rate of commission/charges and period/value:
2. Bill (Sight/Usance) Negotiating charges for export bills in foreign currency have not taken any charges.
3. Bill (Sight/Usance) Negotiating charges for export bills in foreign currency but proceeds realized in equivalent BDT have not taken handling charge.
4. Documentary collection bills under all types of L/Cs and commission BDT
5. 500 plus postal/cable/SWIFT Charges at actual.
6. Mailing of Export Bill by Courier and service charge at actual minimum BDT 2000.00.
7. Advising of Foreign Bank L/C to the local Beneficiary and service charge BDT 750.
8. Advising of amendment of Foreign Bank L/C to the local Beneficiary and service charge BDT 750.
9. Transfer of L/Cs and service charge BDT 750.00 per instance.
10. Adding of confirmation by MBL and commission 0.20% per quarter or part thereof but minimum USD 50.00.
11. Foreign Bank’s Guarantee commission against discrepant bills and service charge BDT 750 plus Telex/SWIFT charges.
12. Advising of guarantees to the Beneficiary in original without any engagement on part of MBL and service charge BDT 750.00.
13. Advising of guarantees in original by adding confirmation of MBL against 100% counter guarantee of Foreign Bank and commission 0.40% per quarter or part thereof plus cost of Stamp, Tax etc but minimum BDT 2000.00.
14. Advising of guarantee in own format of MBL or on the format supplied by the opening bank with full engagement of MBL against 100% counter guarantee of Foreign Bank and commission 0.40% per quarter or part thereof plus cost of Stamp, Tax etc but minimum BDT 2000.00.
15. Issuance of Bid Bond/ Performance Bond favoring overseas beneficiary through foreign correspondents at the customer’s request and commission 0.20% per quarter or part thereof plus Telex/SWIFT/Mail charges but minimum BDT 2000.00.
16. Indemnity for shipping guarantees in absence of original documents provided full value of documents is deposited by the customer and commission/service charge is free.
17. Endorsement of N/N copy for Custom Assessment Purpose and commission/service charge is free.
18. PRC issue and service charge BDT 500 per instance.
19. EXP issue and service charge BDT 100.00 per instance.

Issue of Certificate:

1.                                 i.            Service charge BDT 500 per instance for BTB L/Cs
2.                               ii.            Service charge BDT 500 per instance for Bond License, Forced Loan and others

Foreign Remittances Activities of MBL:

1. There are given below Foreign Remittances Activities by MBL with rate of commission/charges and period/value:
2. Purchase of Foreign Bank drafts drawn abroad and commission 0.25% per USD, 0.35% per GBP and per Euro plus Actual Telex / Postal/SWIFT charges but minimum BDT 500.00.
3. Encashment charges for encashment of foreign TT at our counter (For wage earners remittance) and charge is FREE (Branch will debit Head Office @ TT clean  plus 0.10 paisa per Foreign Currency).
4. Encashment charges for encashment of foreign TT at our counter (For other remittance)
5. Collection of clean items (inward) and commission 0.15% but minimum BDT 300.00 plus postage /cable charges.
6. Issuance of TC and Endorsement in passport and commission 0.75% plus BDT 200.00 Endorsement Charge.
7. Issuance of FC (cash) and Endorsement in passport and commission 0.50% plus BDT 200.00 Endorsement Charge.
8. Transaction in FC A/c by Nominee/Account holder and charge is FREE.
9. Remittance by TT (FC) through foreign correspondents and service charge BDT 500.00 and SWIFT charge BDT 500.00.
10. Cancellation of drafts in foreign currencies and service charge BDT 300.00 plus postage, telex/SWIFT charges at actual

Issuance of FC Drafts on foreign/local correspondents :

1.                                 i.            Service charge BDT 1,000.00 for each instrument against local currency.
2.                               ii.            Service charge BDT 500.00 for issuing each instrument by debiting FC a/c with MBL.

Opening of student file for study abroad:

1.                                 i.            Service charge BDT 5,000.00 at the time of opening and BDT 500.00 for each subsequent transaction.
2.                               ii.            Service charge BDT 6,000.00 (if prior approval / communication with Bangladesh Bank is needed).

Seeking Buying House/Indenting Firm permission from Bangladesh Bank:

1.                                 i.            Correspondence charge BDT 6,000.00.
2.                               ii.            Correspondence charge BDT 3,000.00 as yearly for renew.

Cash incentive handling charge:

1.                                 i.            Traditional items (Jute, Jute goods etc) and service charge BDT 1,000.00 per case.
2.                               ii.            Non-traditional items (Garments etc.) and service charge BDT 3,000.00 per case.

Others not mentioned above (Cash incentive handling charge) and service charge BDT 3,000.00 per case.

 Evaluation of Foreign Exchange Activities:

Foreign Exchange is one of the most attractive departments for both clients and bank. Because of the continuous improvement of the country, foreign transaction is also increasing day by day.  For this reason all of the banks are trying to improve their performance in foreign exchange activities. Foreign exchange division of MBL has some strong and weak points that affect their performance to the customers. MBL has high reputation as a bank that practices customer oriented banking among the local banks of Bangladesh. MBL has already launched every service available under foreign exchange activities.  This characteristic of foreign exchange division of MBL is positively considered by customers while taking decision of using MBL foreign exchange division.

MBL has a large number of branches all over the country. It already has 65 branches all over the country and the number is increasing day by day. As a result of these it has a large customer base. This huge customer base is very helpful for foreign exchange division because every customer can be a possible customer of foreign exchange.

To evaluate the foreign exchange activities of MBL trend analysis is used in the report. Because of trend analysis is the most common techniques of data analysis for the performance evaluation of a financial institution. So trend analysis can explain the flow of activities in foreign exchange of MBL The trend can represent the growth or turn down of a bank over a period of time. Here it has been analyzed the trend of total import, export, remittance, L/C issued performance etc as given below:

   Trend Analysis of Total Import:

                                          Table-1: Import Performance of MBL

 Comment: From the graph found that the highest import was in the year of 2010 and it increased slightly in the start of year 2007.However MBL always tried to raise their import performances.

Trend Analysis of Total Export:

                                               Table-2: Export Performance of MBL

Comment: From the graph found that the Export level increased over year 2007, 2008, 2009 and highest Export was in the year of 2010 which was BDT 59,404.20 million and it decreased slightly in the end of year 2007. However MBL always try to raise their present condition better than past.

Trend Analysis of  Total Foreign Remittance:

Comment: From the above graph can easily clarify that amount of remittance increased over year to year. It is a positive sign for the Bank.

Trend Analysis of Month Wise Import Cost:

Month wise import cost over 2008 to 2010 from source of Annual Report 2010 of MBL are showing by graph as:

Comment:  Import payment during 2010 amounted to USD 27.79 billion compared to USD 21.85 billion in 2009 showing 27.18% growth in import cost in 2010 over 2009. In case of monthly comparison, Import cost was always higher in 2010 over 2009 except January.

Trend Analysis of Month Wise Export Earning:

Month wise export earning during 2008 to 2010 from source of Annual Report 2010 of MBL are showing by graph as:

Comment:  Total export earning during 2010 amounted to USD 19.18 billion compared to USD 15.08 billion in 2009, indicating an increase of 27.22% export growth in 2010 over 2009. This double digit export growth is mainly attributes to the RMG sector which, contributes almost 75% of our total export earning.

 Trend Analysis of Month Wise Remittance Inflow:

Remittance inflow crossed USD 10.00 billion land mark for the first time in Bangladesh history in the year 2009. Since then pace of remittance inflow slowed down and it became evident during the last quarter of 2010 when month wise remittance inflow fall below than that of 2009.  Month wise remittance inflow over 2008 to 2010 from source of Annual Report 2010, MBL are showing by graph as:

Comment: At the end of 2010, remittance inflow 2.63% growth over 2009 and reached to almost USD 11.00 billion compared to USD 10.72 billion over 2009 and at the end of 2009, remittance inflow 19.36% growth over 2008.

 Trend Analysis of Total L/C Issued:

                              Table-4: Import L/C Issued of MBL

Comment: The performance on L/C issued was better in year 2010 and it increased slightly in the start of year 2007. However MBL always tried to raise their L/C issued performances.

Exchange Gain in Foreign Trade Operations (Including Dealings):

                             Table-5: Exchange Gain in Foreign Trade Operations

Comment: The performance on exchange gain in foreign trade operations was better in year 2010 compare to year 2007, 2008 and 2009. It was relatively in good condition in 2010.

Findings:

The study mainly focuses on the “Foreign Exchange Activities” of MBL. All the findings that are originated from Foreign Exchange Activities Analysis of MBL:

1) General Foreign Exchange Service Portfolio: 

Foreign Exchange operations mainly include L/C, Import and export procedures. As an Authorized Dealer, MBL, Mirpur Branch is always committed to facilitate import of different goods into Bangladesh from the foreign countries. Import Section, which is under Foreign Exchange Department of the branch.

2) Different Means of Payment:

The bank provided different means of payment for the importers and exporters whereas they prefer. The clients make their payment by Cash in advance, Open Account, Collection Method, Letter of credit.

3) Concentrate on Export Incentives:

The bank is currently concentrated on different types of export incentives to attract the actual and potential customers. They are Financial Incentives, General Incentives, and Other Incentives. Most of them are already implemented.

4) Growing Fastest Correspondent Relationship:

The number of foreign correspondents is 589 as of December 31, 2010. Efforts are being continued to further expand the Correspondent Relationship to facilitate Bank’s growing foreign trade transactions. The Bank is using SWIFT communication system for fast and accurate handling for foreign trade. The Bank is connected to REUTERS also for up-to-date information.

5) Different Accounts Related to Foreign Exchange Transaction:

The bank provides different accounts facilities to maintain Foreign Exchange Transaction. The clients can choose their suitable accounts facility to make foreign transaction which is more preferable. There as follows:

a)      Nostro Account

b)      Vostro account

c)      Loro Account :

6) Performance of Foreign Exchange Department :

Export and import performance (Figure: 1 and 2) of foreign exchange department of MBL is higher in year 2010. In 2009, it was slightly decreased. Amount of Foreign remittance is upward but L/C Commission was relatively lower in 2009 rather than in 2010.

Different Problems Identification of MBL:

In the basis of internee and study, MBL have different problems such as:

 The bank should give close attention on its interest expense. This cost is rising over   year to year. It has an affect on interest income.Amount of import and export was turn down last year but it is a concerning issue to   have direct monitoring system. Foreign Exchange department’s main function is to  handle export and import procedures and there is a direct relationship between amount of Export & Import and Exchange gain which is charged to customers on letter of credit and letter of guarantee are credited to income at the time of effecting the transactions.The bank remained selective in export trade financing in 2010. Total export     business was handled worth BDT 59.404.20 million in 2010. The main focal point of the bank in export financing was garments industry. The lone driving force of the economy of Bangladesh in single biggest source of foreign exchange.Total foreign remittance in a single year, in 2010 made a record high to the tune of    BDT 5,108.10 million. So that, its affects on remittance arrangements.Moreover for prompt & safe delivery of this hard earned money to their near anddear ones in every corner of the country. Shortage of skilled human resource in foreign exchange department is a  major problem in MBL. The procedure related with Export and Import and other formalities of Foreign  Exchange is so lengthy that it would take more time to finalize one transaction.  Currently MBL have PC Bank 2000 bank for documentation and keeping the        record which is not enough for documentation and keeping the record.  At present the ATM, debit card, credit card etc services are so much popular. But their ATM booth and other services facilities are not available.

 Recommendation:

Mercantile Bank Limited has been able to operate its all issues proficiently and more competently in the operations of foreign Exchange and other related perspective around the Bank. To improve the management culture and foreign exchange department’s performance in future, MBL should adopt some of the industry best practices currently. This are:

 MBL should try to handle it on strictly and close monitoring system have been maintained.

The direct monitoring and supervision process should develop where branch manager and head in charge of the related department are hold responsible.

 MBL should provide different incentive facilities more attractively to attract actual and potential clients.

MBL has deepened its step on the foreign soils further by establishing more and more remittance arrangements with overseas exchange companies where Bangladeshi expatriates are working.

MBL can establish agency arrangements with some big banks.

Vacancies should fill up with qualified and experienced personnel by offering attractive incentives. The bank should provide training facility for its existing employer for their betterment.

 MBL and Foreign Exchange department should take initiative to trim down the official formalities as possible.

For proper documentation and keeping the record, it is essential to update Management Information System (MIS).

MBL try to make this service available for each and every client although MBL is broadening its card service facilities, increasing the number of ATM network and widening the card benefits to the customer.

Conclusion:

Banking is becoming more and more vital for economic development of Bangladesh in mobilizing capital and other resources. Mercantile Bank, being a third generation bank, is also extending such contributions as to the advancement of the socioeconomic condition of the country. It is not possible to get 100% from anywhere especially for those organizations which with mass people. MBL has some problems but it is encouraging that they are trying to overcome these obstacles. The overall performance of MBL despite some criticism is above the average of present banking industry. Solid revenue growth together with strict discipline on expenses and a culture of sound risk management have upgraded the Bank to a level of excellence. In its pursuit of excellence, the Bank constantly reviews its systems, policies, process and prices of its products and services in line with the changing market reality. Thus, MBL intends to pave the way for a new era in banking.