Wage-earners and Foreign Exchange Operations of Dhaka Bank Limited

Executive Summery

This project “Analysis on Wage-earners’ Remittance, Maintenance and Foreign Exchange Operations of Dhaka Bank Limited.” is prepared based on the operation of the Dhaka Bank Limited, especially on Head office (reconciliation department), Dhaka”. This project is prepared as part of my course curriculum.

The objectives of the project are to know the foreign exchange operation, handling of inward remittance and maintenance of Dhaka Bank Limited. The report uses data both from primary and secondary sources. To get the primary information for this report I have discuss with people and face to face interaction with the senior bankers. Secondary information will be also acquired from annual report of the banks, their published brochures, and web sites of the Banks and relevant magazines, books. The project employs descriptive and analytical methods to achieve the objectives.

The project is basically divided into five major chapters. In the first chapter, I have focused on brief acquaintance of DBL, its mission, objectives activities, functions & operation of different department. It also contains the different products and services available in DBL and its brief orientation. In the second chapter is project part where I focused on origin, purpose, objective, scope, methodology, limitation of the report & why I was interested to doing my internship report in this field. Chapter three is fully made up of the detail foreign remittance of DBL which includes foreign exchange business, house, total amount, operations, distribution to its customers and some comparison with other banks. Finally, chapter four is a comprehensive study of performance of DBL. This chapter presents mainly some findings and recommendations.

Though the topic and concept was difficult to work on, maximum efforts have been put in to collect data and prepare the report successfully. According to the data interpretation and findings, some comments and recommendations were stated to develop and implement better service.

Introduction:  

Economy of Bangladesh is still surviving to get rid from the world’s most underdeveloped economies. One of the reasons may be its underdeveloped banking system. Since 1990, Bangladesh government has taken a lot of financial sector reforming measures for making financial sector as well as banking sector more sound and transparent, a formulation and implementation of this reform activities have also been participated by different international organization like World Bank, IMF etc.

People in a global world are trying to spread out their resources over the world. As one country is not self- sufficient, they need to think more to meet their demands. Though Bangladesh is an underdevelopment country, natural resources and labor are very cheaper than some of other countries. So, local and foreign investors are very interested to make a profitable investment in our economy.

Foreign direct investment (FDI) is increasing day by day. In the calendar year 2005, FDI was US$ 845million against US$ 460 million in the year 2004. In terms of Foreign Remittance, this is also a good position compared to previous year. Inward remittance grew by 28.8% (US$297 million) compared to 18.8% (US$ 160 million)

Commercial Banks are the vital sector by which the foreign exchange transactions are effected or settled. Now a day’s world is surviving in a commercial age. Banks are working as a media to help people doing businesses. On the other hand no country is self sufficient. One country can’t produce all the things they need for consumption. They have to depend upon other countries to meet these requirements. They import goods which they can’t produce and export those which are in abundance in their country. But there is uncertainty in these international transactions.

On the other side, the issues of remittances create increasing amount of attention in recent years for the significant contribution in our national economy by increasing our foreign currency reserve. Our government gives most emphasis on foreign remittance to keep macro economic balance. To increase the flow of foreign remittance govt. established Expatriate welfare ministry and take different incentive program through nationalized commercial bank. Influenced by this program, all the commercial banks try to attract expatriates with their offerings for remitting money. In the recent survey it has been found that some banks manage this in an efficient manner but some are not. Dhaka Bank Limited has taken up several strategic initiatives for growth of remittances from expatriate Bangladeshis by opening its own exchange company.

AN OVERVIEW OF DHAKA BANK LIMITED

BACKGROUND OF THE COMPANY

Bangladesh economy has been experiencing a rapid growth since the ’90s. Industrial and agricultural development, international trade, inflow of expatriate Bangladeshi workers’ remittance, local and foreign investments in construction, communication, power, food processing and service enterprises ushered in an era of economic activities. Urbanization and lifestyle changes concurrent with the economic development created a demand for banking products and services to support the new initiatives as well as to channelize consumer investments in a profitable manner. A group of highly acclaimed businessmen of the country grouped together to responded to this need and established Dhaka Bank Limited in the year 1995.

The Bank was incorporated as a public limited company under the Companies Act. 1994. The Bank started its commercial operation on July 05, 1995 with an authorized capital of Tk. 1,000 million and paid up capital of Tk. 100 million. The paid up capital of the Bank stood at Tk 2,659,597,763 as on March 31, 2010. The total equity (capital and reserves) of the Bank as on March 31, 2010 stood at Tk 6,036,368,754 The Bank has 67 Branches, 3 SME Service Centers, 6 CMS Units, 2 Offshore Banking Unit across the country and a wide network of correspondents all over the world. The Bank has plans to open more Branches in the current fiscal year to expand the network. The Bank offers the full range of banking and investment services for personal and corporate customers, backed by the state–of–the-art technology and a team of highly motivated Professionals. As an integral part of our commitment to Excellence in Banking, Dhaka Bank now offers the full range of real-time online banking services through its all Branches, ATMs and Internet Banking Channels.

Dhaka Bank Ltd. is the preferred choice in banking for friendly and personalized services, cutting edge technology, tailored solutions for business needs, global reach in trade and commerce and high yield on investments.

THE MISSION

To be the premier financial institution in the country providing high quality products and services backed by latest technology and a team of highly motivated personnel to deliver Excellence in Banking.

THE VISION

At Dhaka Bank we draw our inspiration from the distant stars. Our team is committed to assure a standard that makes every banking transaction a pleasurable experience. Our endeavor is to offer you razor sharp sparkle through accuracy, reliability, timely delivery, cutting edge technology, and tailored solution for business needs, global reach in trade and commerce and high yield on your investment.

Our people, products and processes are aligned to meet the demand of our discerning customers. Our goal is to achieve a distinction like the luminaries in the sky. Our prime objective is to deliver a quality that demonstrates a true reflection of our vision- Excellence in Banking.

STRATEGIES

• Establish DBL as one of the top five successful Private Commercial Banks by 2008.
  • Build a strong deposit base.
• Introduce new products & services and upgrade existing products & services at comparatively low cost in order to assure quick respond to the changing demands in the market.
  • Strengthen corporate identity and values.
  • Bring the entire system under a very advanced IT platform.
• Socialize and present the bank to the community as a corporate partner.

GOALS

• Increase revenue 20% each year.
• Achieve cost synergy by 20%
• Reduce cost of funds to 7%
• Reduce dependence on Bank Deposits to ensure continuous flow of core funds through base deposit.
• Change deposit mix Time vs. Transaction accounts to 60:40.
• Reduce Non-Performing loan to less than 1% of total assets.

OBJECTIVES

The prime objective of DBL is to deliver a quality that demonstrates a true reflection of their vision-Excellence in Banking.

Improve the quality of lone and services, and diversify the sources of revenue.

• Focus on Current, Savings & Short Term Deposit Accounts to reverse the ratio (26:74) with Fixed Deposit Receipt.
• Take immediate action required to reverse the rise of Cost of Fund.
• Increase fee based income: increase volume & fee of Letter of Credit & Guarantee, increase export and exchange earnings.
• Reduce operating cost by at least 20%.

Products

• Corporate Banking
  • Securitization of Assets
  • Corporate Finance and Advisory Services
  • Syndication of Funds
• Retail BankingSME
  • Deposit Double
  • Deposit Pension Scheme
  • Income Unlimited
  • Excel Account
  • Salary Account
  • Smart Plant
  • Gift Cheque
  • Personal Loan
  • Car Loan
  • Vacation Loan
  • Home Loan
  • Any Purpose Loan

Services

• Corporate Banking
• Retail Banking
• Islamic Banking
• Capital Market Service
• SME
• Offshore Banking
• ATM Card
• Locker
• Online Banking
• Mobile Banking

INTRODUCTION OF THE PROJECT

Origin of the Project

This project is a part of my course curriculum .The topic of the project has been selected after consulting with my faculty advisor Noor Md. Rahmatullah.  With the approval of the faculty supervisor I will develop a project on: Analysis on Wage-earners’ Remittance, Maintenance and Foreign Exchange Operations of Dhaka bank limited.

Statement of the Problem:

Wage earners’ is the newly services provided by the banks in Bangladesh. They take it only as services for their customers only, not a profit oriented services the bank itself. But it would be a profitable portion of their operational profit. Banks wants to introduce the payment system both inward and out ward by their banking channel. They want to stop others system for money transactions. So for the topic has been design & my topic is: “Analysis on wage-earners’ remittance, maintenance and foreign exchange operations of Dhaka bank limited”.

Objectives of the Project:

The specific objectives of the project are as follows:

1. To show the foreign operations of  Dhaka bank limited
2. To know deeply about remittance and different foreign exchange house
3. To learn about the procedure of handling inward remittances
4. To make Analysis of inward wage-earners’ remittance management of Dhaka bank limited comparing with other local and multinational banks.

Scope of the Project:

The scope of the project is very limited since we are working with a particular Bank only – which is Dhaka Bank Limited. So, the results of the report may not be reflective of the total industry scenario. The study would focus on the following areas of Dhaka bank limited:

1. the way of managing their inward remittance
2. helping hand of different exchange house
3. comparative assessment on the management system of different local and multinational banks
4. Ultimate customer satisfaction on remittance management system of Dhaka bank limited.

Methodology

Selection of the study area

Selection of the study area is an important step for the analysis on wage earners remittance. The researcher himself conducted a preliminary survey in Head Office of Dhaka Bank Limited to achieve the objectives of the study.

Period of study

The data collection was conducted at 8^th July to14^th July 2012.

Selection of sample and sampling technique

It is not possible to make a survey covering all customers and officials of bank. For this reason, sampling was done to select representative respondent to minimize time and cost of the study. Achieving the ultimate objectives of the study, 42 respondents were selected randomly.

Preparation of survey schedule

Preparation of survey schedule is an important part of the study. A comprehensive survey schedules were set to collect necessary information from the respondents.

The questionnaires were designed with the following specific head

• General information about the customers on the perspective of bank
• Reason for chosen this bank
• Customers satisfaction
• Factors of satisfying

Sources of Data Collection

To make the Project more meaningful and presentable, two sources of data and information have been used widely such as…

Both primary and secondary data sources were used to generate this report.

The Primary sources are follows

Primary data are measurements observed and recorded as part of an original study. When the data required for a particular study can be found neither in the internal records of the enterprise, nor in published sources, may it become necessary to collect original data. For the completion of this report, the primary sources of data are-

*        Face-to-face conversation with the respective officers and staffs of The Dhaka Bank

*    Informal conversation with the clients.

*     Discussion with my supervising teacher.

The Secondary sources and data are follows

The data which has already been collected by others, such data are called Secondary data. For this internship report, the secondary data are collected from the below sources-

*        Annual reports of The Dhaka Bank

*        Various books articles,

*         Published of different brochures

*         Relevant magazines

Limitations

The basic scope of conducting this study is to “Analysis on Wage-earners’ Remittance, Maintenance and Foreign Exchange Operations of Dhaka bank limited.

But there are some lacks of information due to some limitations. It is very difficult to collect all the information within 2 weeks’ time. Information from Annual report regarding the topic Policy is not sufficient for in depth analysis. Secondary data are not very much available. Bankers spend very busy time during office hours and it is very hard for them to find time for me to give briefs about banking norms. But they have given me practical ideas whenever they free time. With all these limitations I tried my best to make this report authentic and worth reading.

Foreign Remittance

On March 24, 1994 Bangladesh Taka was declared convertible for Current account International Transaction. As a prelude to this wide‑ranging reforms were made in the country’s foreign exchange regime to lay the ground for a market friendly environment to induce investment, growth and productivity. Following liberalization under convertibility, most remittances are now approved by the Authorized Dealers themselves on behalf of the Central Bank. Only a few remittances of special nature require Bangladesh Bank’s prior approval.

Foreign remittance means remittance of foreign currencies from one place /persons to another place/person. In broad sense, foreign remittance includes all sale and purchase of foreign currencies on account of Import, Export, Travel and other purposes. However, specifically foreign remittance means sale & purchase of foreign currencies for the purposes other than export and import. As such, this chapter will not cover purchase & sale of foreign currencies on account of Import & export of goods.

Over the last decade, the Foreign Exchange Market has become more diverse as well as much larger. Although in the past, commercial banks dominated the market, today participants also include commercial as well as investment banks, Foreign exchange dealers and brokerage companies, multinational corporations, money managers, commodity trading advisors, insurance companies, governments, central banks, pension and hedge funds, investment companies, brokers/dealers, and other participants in the inter-dealer market. In addition, the size of the Foreign exchange market has grown as the economy has continued to globalize. The value of transactions that are settled globally each day has risen exponentially—from $1 billion in 1974 to $2.9 trillion in 2006. The increased complexity of the market and higher trade volumes have necessitated constant changes in trading procedures, trade capture systems, operational procedures, and risk management tools. This research report is an empirical study on foreign exchange practice at Dhaka Bank Limited.

All foreign remittance transactions are grouped into two broad categories‑

1. Outward remittance &
2. Inward remittance.

Inward Remittance

The term inward remittance includes not only purchase of foreign currency by TT, MT, Drafts etc. but also purchase of bills, purchase of traveler’s cheque. Two forms are prescribed by Bangladesh Bank are used for purchase of foreign currencies such as:

EXP Form: Remittances received against exports of goods from Bangladesh are done by form EXP.

Form C: Inward remittances equivalent to US$ 2000/- and are above are done by Form “C”. However, declaration in Form C is not required in case of remittances by Bangladesh Nationals working abroad.

Utmost care should be taken while purchasing Currency Notes, Travelers cheque, Demand Draft & similar instrument for protecting the bank from probable loss as well as safety of the Bank officials concerned.

Foreign Currency (Bank) Notes:

Branches may freely buy foreign currency notes from Bangladesh as well as foreign nationals. Currency notes, especially notes of higher denominations, i.e. US $ notes of 50 and 100 denominations, should be checked carefully to ascertain their genuineness. Foreign Exchange Department shall maintain currency wise F.C. in hand Control Ledger to   record each day’s transactions. On the last working day of each month the branch shall calculate the exchange gain or loss and carry out necessary adjustment in the control ledger. Foreign currencies purchase at the rates instructed by the Head Office.

Travelers’ Cheque

The customer tendering the Travelers’ Cheque should be asked to sign the TCs at the designated places in front of the concerned bank official who would satisfy himself about its genuineness with reference to the customer’s signature already appearing on the TCs and his passport. Should there be any doubt; purchase contracts of the TCs may be asked for.

Foreign Draft and Cheque

The branch should exercise due care and ordinary prudence for purchase of foreign currency denominated drafts, cheque and similar kinds of instruments. The instrument should not be purchased unless the customer is well known to the branch as a regular trustworthy client. An Indemnity Bond should be obtained for refund of the money along with interest in the event of dishonour of the instruments. Indemnity need not be obtained in case of instruments against which proceeds have already been credited to the bank’s Nostro account. If the instrument is drawn on the bank’s branch and the cover amount already paid by the issuing bank into the bank’s Nostro account the vouchers will be passed at TT (clean) rate.

Telegraphic Transfer (TT)

Test number appearing on the TT must be checked and authenticated by the concerned official. After receiving confirmation from the Head Office about the proceeds having been credited to their Nostro A/C and observing the usual formalities including declaration on Form ‘C’, if necessary, the vouchers are to be passed at the TT buying rate.

Dhaka Bank limited has ended the year 2007 with total inward foreign remittance of Tk. 10609 million .it has commenced its operation with the view to serving the expatriate Bangladeshis through fast and efficient disbursement of remittances. Providing fast and efficient services to its expatriate’s clients has been the banks top priority, along with increasing the inflow of foreign currency to contribute to the country’s foreign reserve.

Outward Remittance

The term “Outward Remittances” include not only remittance i.e. sale of foreign currency by TT. MT, Drafts, Traveler’s cheque but also includes payment against imports into Bangladesh & Local currency credited to Non‑resident Taka Accounts of Foreign Banks or Convertible Taka Account.

Two forms are used for Outward Remittance of foreign Currency such as: ‑

IMP Form:  All outward remittance on account of Imports is done by this form
T.M Form:  For all other outward remittances form T.M is used.

 FOREIGN EXCHANGE OPERATIONS

Foreign exchange department is international department of the bank. It deals with globally and facilitates international trade through its various modes of services. It deals with globally and facilitates international trade through its various modes of services. It bridges between importers and exporters. These banks are known as authorized Dealers.  If the branch is authorized dealer in foreign exchange market, it can remit foreign exchange from local country to foreign country. This department mainly deals with foreign currency. This is why this department is called foreign exchange department. Some national and international laws regulate functions of this department. Among these, Foreign exchange Act, 1947 is for dealing in foreign exchange business, and import and export control Act, 1950 is for documentary credits. Governments’ import & export policy is another important factor for import and export operation of banks. In Dhaka Bank Limited, Local Office foreign department has three sub-sections. One is foreign remittance section, another is import section and the third one is export section. The VP is the in-charge of the foreign exchange

Exchange House Facilities:

Dhaka bank remitted with the help of 14 different exchange houses. These exchange houses helps banks to reach the remitted amount to its receiver account. For this purpose banks does not takes any charge. Every evening Dhaka bank set an exchange rate, by which they want to buy dollar or pound or so on. After getting the exchange rate different exchange house communicate with the bank and remitted money. The broker or exchange houses get money from sender who wants to send his or her money in the country. After getting the money, the broker informs the sender about the amount which receiver acquires. So exchange house in different countries helps Dhaka bank to hand out the money to the receiver and fill up the needs of some Bangladeshi people.

Comparative growth rates  

Wage earners remittance:

According to the international organization for migration (IOM, 2007) there are three million Bangladeshi migrants working abroad sending remittances more or less regularly to their families and friends at home. In addition, there are about one million Bangladeshi permanently residing abroad. They also send remittances for their families. In 2007, approximately three billion US dollars came in to Bangladesh only in official channels. It is estimated that an equal amount of remittance came in through informal channels. People who work out side the country and send money in this country is known as WAGE EARNERS REMITTANCES. There is a low percentage (15%) of professional and technical workers are sending money in banking channel and get the money in a very short time and fulfill their demand. For the increasing demand of the people different bank takes different steps or systems to manage remittance and get it touch with their customers.

FINDINGS

• DBL presently has 67 branches to operate its business. But it is quite hard for DBL to cover the whole Bangladesh with this small number of branches.

• The number of exchange house through which Dhaka Bank remitted money is only 13. DBL is known as one of the leading local bank of Bangladesh but they don’t have enough exchange houses to remit money.

• Longer processing is one of the prime factors for customer dissatisfaction. In this respect HSBC is far ahead than Dhaka Bank Ltd. It takes only 24 hours for HSBC to make the remitted amount available to the customers. On the other hand the processing turnaround time for the Dhaka Bank Ltd is 2 days for urban areas and 3 days for rural areas in working days.
• During the festival time DBL has to face manpower shortages which hamper the managing process of the remittance department.
• DBL has no separate marketing department for their marketing program. Recently the public relationship departments handle the marketing department. Marketing is one of the most important factors for an organization. So the absence of marketing department can cause a big loss for a company.
• According to the modern technology it is necessary to know about the new one to compete with other banks. In order to stay in the market every part of the organization has to be updated but SBL sometimes unable to cope with this.

• DBL arrange training program only in Bangladesh but it is not possible to know about the new and modern technology fully in Bangladesh without watching and handling that. For this reason they have to think other options so that employees can be more benefited.
• DBL has to give more emphasize in their remittance process. It needs 2-3 days for reaching the remitted amount to the customer account. But customer may need the amount in one day but at that time DBL can not provide the service to this particular customer. As a result the customer has to suffer.
• As one of the leading bank of Bangladesh Dhaka Bank has to increase their distribution channel to satisfy the increasing no of customer in Wage Earners’ Remittance.

RECOMMENDATIONS

 Dhaka Bank Limited needs to increase their branches immediately. For a well reputed bank like them, their numbers of branches are surprisingly low. This limits them to getting customers even if the customers are interested. In order to increase the number of branches DBL has to increase their manpower to handle and manage to branch.

 Dhaka Bank Limited needs to increase their Exchange house so that much people from outside Bangladesh can remit their money through Dhaka Bank. For this purpose DBL has to go for agreements with other exchange house.

 Dhaka Bank Limited needs to have prompted their service processing. Due to dissatisfaction of many customers it is evident that the bank needs to develop methods of quicker services. One solution may be to increase the no of employees so that customers don’t have to wait much for their turn or introduce token system to avoid long queues. The service quality such as speaking in a fielder manner t customers. Not taking much time from each employee, not letting customers wait much for their turn etc should always be improved.

 Cash transaction should be faster and cash counter needs to be more spacious so that there would be no gathering in the bank. Pay order should be computerized because writing pay order by hand takes longer time and fir that customers have to keep waiting. Computers, desks, equipments etc should be state of the art. They are already using modern technology in all of their services along with internal and external facilities inside and outside the branch. However, they always need to be upgrade.

The bank should have a clear, focused and detailed marketing plan for its targeted market to create more brand awareness. Dhaka Bank Limited needs to be more promotional campaign so that people can more recognize the bank. They need to focus mass marketing to promote their service and to attract new markets and expand.

 Dhaka Bank Limited should create a fully operating marketing team and department. Currently the public relation department handles all the marketing and advertisement responsibilities of the bank. However, in today’ world a bank also need to have a fully operating marketing department to succeed.

They have to use new and preferable modern service for their customers. Because most of the time a family depend on the money that come from other countries. If the receiver can not able to take the money in perfect time then they have to face problem. So DBL has to take care of that.

 DBL require strengthening at the level of management processes and technology, if they are to fully realize their potential as value creating end points of remittances. There is a general lack of automation and technical capacity.

 In order to work with modern technology and new ways of handling banking services, DBL arrange training program in SARATower. But technologies are much more improved in out side Bangladesh. If DBL arrange training program in outside Bangladesh then that would be more effective for their banking and management system.

 DBL can make their distribution channel so that bank facilities get faster. If the number of distribution channel increase bank can operate their business much faster than the present time. For this reason DBL has to increase their distribution channel. Increasing of distribution channel is a positive sign both for bank and customers for manage their service from long distance. On the other hand DBL customers can collect their money from near places.

CONCLUSION

In the financial world banking sector is the heart of a developing country. In order to develop a country’s economy, a good banking plays a very important role through their modern products and services. Among a large number of services, remittance management is one of the most important factors that directly hit a country’s economy. The remittance market is expanded all over the world as an important source of fee revenue for the commercial banking sector. Dhaka Bank Limited is one of the leading banks in Bangladesh, which works for customer satisfaction through quality services. Dhaka Bank Limited remits a huge amount of money outside of Bangladesh. For this remitted amount they do not claim any service charge and try to provide this service with in a very short time, where the international banks claim a higher charge for their services. It can be seen that Dhaka Bank Limited is not much different from other commercial banks in Bangladesh. Most of the time it follows the same practice and procedure is followed by its competitors. But with in a very short time the satisfaction level of the customers are much higher than any other local commercial banks in Bangladesh.