The report covers organizational aspects of ibbl and a project titled “different modes of investment

Preface Practical knowledge has no alternatives especially for MBA/BBA students. Through: internship Program” student are given a chance to acquire practical knowledge through a little period of time. It helps the students to provide an on-the-job exposure and an opportunity for transaction of the theoretical canephor into real life situation. The internship program for MBA/BBA final year students of the MBA/BBA students of Dhaka University is a part of the MBA/BBA program. So like every year, the department has arranged this program in order to acquire practical knowledge kin the respective field. Through this time allowed by the department for working in IBBL was very insufficient, yet we tried our level best to achieve best those light objectives with in this short period (8 weeks). Under an “internship program” every student is assigned a topic level under which he/she has to be engaged in particular field work in different types of business organization. Each student is required to submit a report on the topic assigned to him/her. The report must be prepared by the student under the guidance of coordinator, which is one of the teaching staff of department and must be approved by examination committee before having the MBA/BBA certificate. We were assigned to study the “Foreign Exchange and foreign trade : problem &prospect “. IBBL Bank is commercial Bank, which is committed to run all its activities as per Government rules and regulations. Here we learnt a little about their Foreign Exchange mechanism of IBBL.

First of all we would like to express gratitude to omnipotent and almighty Allah, whose invisible guidance helped mew to complete this report. Although time was very limited for getting the sufficient knowledge about all of banking service, but the short experience that we gathered as a internee, in IBBL will remain as an assets for all the time to come in my life. We take the opportunity to express our deep sense of gratitude of our reverend cocoordinator Md. Habibur Rahman for his invaluable suggestions and guidance during the study period that has greatly inspired us in preparing this report successfully. We are very much grateful to the authority of IBBL to assign us as interns in this reputed bank and having the opportunity to learn theoretical as well as practical knowledge related to overall banking system and completes such an ambitions study for our internship program as well as for the preparation of this report. It couldn’t possible to thank all of those marvelous people who have contributed for preparation of this report. There are of course some very special people who can’t go without mention “we are also grateful to the Faculty of Business Administration, International Islamic University Chittagong for providing us such opportunity to come closer to real situation. Finally, we want to express our deep gratitude to all the employees of Modes of Investment branch whose enormous helps assist us to complete our report.

Executive Summary This internship report has been prepared to fulfill the requirement for getting BBA degree. As a part of our course it is mandatory to get involved with an organization for a certain period of time to acquire the practical knowledge following our completion of BBA Program. The report covers organizational aspects of IBBL and a project titled “Different Modes of Investment .” The functions are to receive deposit, lend money, discount bills and finance foreign trade, issue guarantee and transfer money. In industrial sector the highest disbursement of IBBL is in Textile and readymade garments sectors. In the organization part, focused on brief acquaintance of IBBL, it mission, objectives activities, functions and operation of different departments of Foreign Exchange Corporate Branch. We also tried to present the numerical data of different aspects related to the discussion. In the project part we were required to analyze the overall Export business, Import business and remittance of BANGLADESH. All the discussions are presented in detail in the project part of the report. Hope it will help the reader to have a distinct picture of the whole foreign exchange mechanism of the country. Any kind of criticism is welcome for the betterment of the project.

Introduction

chapter one

1.1 Background of the study: Banking is on of the most important sectors for a country’s wealth building activities. At present the modern business industrialization, foreign trade almost is dependent on banks. But now a day the Banking sector of Bangladesh is suffering the disease of default culture which is consequence or result of bad performance of most of the banks in Bangladesh. IBBL playing an important role towards the growth and economic development of Bangladesh. This study is an attempt to produce a constructive report performance of IBBL with special reference to sources of foreign fund for industrial credits and its deployment as well as repayment.” 1.2 Objective of the study: The main objective of education is to acquire knowledge. To acquired knowledge ultimately we must do some practical application in addition to theoretical knowledge. Through this report, I tried my level best to present my practical knowledge as well as to find out• • • • • 1.3 Scope: IBBL, the Islam based commercial bank is under general special guidelines of the central bank framed for the banking system as a whole and for bank of individual sectors. The concept of Private sector bank i.e. IBBL in our country is not so old. IBBL is now giving emphasis to cerate a constructive and meaningful competition with the private sector banking. This study makes attempt to cover with in its scope all most all the significant aspects of foreign fund for industrial credits and foreign business. 1.4 Methodology of the study: Mainly collected data from two sources. These two sources are as following. ●Primary source ●Secondary The primary sources of my information are as below• • Direct observation Export opinion Foreign fund for industrial credit. Deployment of those funds. Import Business Export Business Remittance

•

Questioning the concerned persons.

The secondary sources of information are as below1. 2. 3. 4. 5. Annual report of IBBL Desk report of the related department Other manual information Different reference books of the library Some of my course elements as related to this report.

1.5 Limitation of the study: There are some limitations in study. mentioning them as belowi) Lack of time: The time period of this study is very short. Had only 8 weeks in hand to complete this report, which was not enough. So could not go in depth of the study. Sometimes the officials were busy and were busy and were not able to give me much time. ii) Insufficient data: Some desired information could not be collected due to confidentially of business. iii) Lake of support: Few officers sometime felt disturbed, as they were busy in their job. Sometime they didn’t want to supervise me out of their official work. iv) Other limitation: As newcomer, there is a lack of previous experience in this concern. And many practical matters have been written from my own observation that may vary from person to person. Chapter Two Bank Profile 2.1. Introduction: Banking constitutes an important segment of the financial infrastructure go hand in hand. Generally, banking means deposit mobilization and deployment of those deposits into advantage or investment in different sectors. The element of interest has been for long used as main instruments for deposits mobilization and the deployment of funds thereof. This is the product of western civilization. Interest-based banking system has been developed along with industrial development in the European countries. And the political supremacy of the Europe all lovers the world had helped spreading the interest-based banking all lover the world. And the political subjugation helped the interest-based banking intrude in the Muslim countries as well. Faced some problems during the study which

2.2. Definition: (Islamic bank) An Islami Bank is a financial institution that operates with the objective to implement and materialize the economic and financial principles of Islam in the banking arena. The Organization of Islamic Conference (OIC) defined an Islamic Bank as a financial institution whose statutes, rules and procedures expressly state its commitment to the principles of Islamic Shariah and to the banking of the receipt and payment of interest on any of its operation. According to Islamic banking Act 1983 of Malaysia, and Islamic Bank is a company which carries on Islamic Banking Business Islamic Banding business means banking business whole aims and operations do not involve any element which is not approved by the religion Islam. 2.3. Why Islami Bank? The objective of Islamic banking is not only to earn profit, but also to do good and welfare to the people. Islam upholds the concept that money, income and property belong to Allah and this wealth is to be used for the good of the society. Islamic banks operate on Islamic principles of profit and loss sharing, strictly avoiding interest, which is the root of all exploitation and is responsible for large-scale inflation and unemployment. Islami bank is committed to do away with disparity and establish justice in the economy, trade, commerce and industry; build socio-economy infrastructure and create employment opportunities. 2.4. Islami Bank Bangladesh Limited at a glance: 1. Date of incorporation : 13.03.83 2. Date of receiving Banding license : 28.03.83 3. Date of incorporation of first branch (Local office Dhaka): 30.03.83. 4. Formal inauguration : 12.08.83 5. Zone :6 6. Authorized capital : 3000 million, 7. Share of capital : a) Local-share holders : 42.12% b) Foreign share holders: 57.88 % 8. Paid –up capital : 1920.00 9. Equity (31.12.2003) : 5266.47 million 10. Branches: 141 11. Reserve-69941.79 million 12. Invest-59007.49 13. Foreign Exchange-8464300 million 14. Number of employee-3752 15. Shareholder-14196 2.4.1 Board of Directors: 1. Shah Abdul Hannan-Chairman. 2. Yushuf Abdulah Al-raj-Vice Chairman. Representative, Al-Razi company for industry and trade, Saudia Arabia. 3. Mr. Kashem Ali-Representative Ibna Sina trust-Vice Chairman. 4. Mohammad Younus- Director

5. Abdul Ohab A. Al-Hoti Representative. Kuait Aokaf public foundation kuait. 6. Hamad Al-Hajari Representative. The public institution for social security. Kuait. 7. Prof. Md. Fazle Azim-Director. 8. Md. Abdul Haque-Director. Representative, Investment Corporation of Bangladesh. 9. Abdur Raqib-Ex-offcial Director. Executive president. 2.4.2 Entrepreneurs of IBBL. (Bangladeshi) -Late Md. Abdur Razzak Loskor. -Late. Mofizur Rahman. -Barister Tomijul Hoque. -Mohammhod yunus. -Md. Sfiuddin Deowan. -Md. Bashir Uddin. -Late. Mohammhod Hossain. -Nasir Uddun Ahmed. -Md. Mosharrof Hossain -Md.Malek Minar. -Zakiuddin Ahmed. -M.A. Rahshid Chowdhury. -Enger. Md. Mostafa Anwar. -Prof. Mohammahod Abdullah. -Sirajuddoula. -Md. Mosharrof Hossain-Director, -Maolana Mohammhod Kutubuddun-Director. Representative-Baitus Sharof foundation Ltd. Director -Prof. Md. Abdullah-Director -Prof. Md. Sharif Hussain-Director. Representative. Islamic Economic research Bureau. -A.N.M.A Jaher-Director Representative. Ibn Sina pharmaceuticals Ltd. -Engr. Md. Mostafa Anwar-Director -Nazir Ahmed-Director. -Md. Shahidul Islam-Director -Engr. Md. Daud Khan-Director -Prof. Korkut ral-Director. -Prof. Korkut ral-Director Representative IDB. Jeddha, Saudi Arab -Enger. Md Fuad Al-Khatib-Director. 2.4.3 Foreign: -Islamic Development Bank. Saudi Arab. -Kuwait Finance House (KSC) Kuwait. -Jordan Islamic Bank Jordan. -Islamic Investment and exchange corporation-Doha Qatar. -Bahrain Islamic Bank, Bahrain. -Islamic Banking system International Holding S.A. Luxembourg.

-Al-Raj company for currency exchange and commerce. Saudi Arab -Ahmed Salah Jamjum. Saudi Arab -Late. Fuad Abdul hemi of Al Kafi-Saudi Arab -Dubai Islamic Bank, U.A.E -Public Institution for Social Security, Kuwait. -Ministry of Aokaf and Islamic Affairs, Kuwait -Ministry of justice-Dept. of Minor Aftains, Kuwait. 2.4.4. Representatives: -Nur Mohammho Akon. Alternate director -A latif A. Rahim Janahi, Director. Representative-Dubai Islami Bank, Director -Bodir Abdul Mohsin-Al-Mokaijim. Representative-Kuait finace house. -Shah Abdul Hannan. Representative Ibn Sina trust. -A.K.M. Nazir Ahmed Representative, Bangladesh Islamic Centre. -Prof. Mohd. Sharif Hussain. Representative, Bangladesh Economic Research Bureau. -Md. Nuruzzaman. -A.K. Fazlul Haque -Enger. Md Daud Khan -Late Maolana Md. Abdul Jabbar Representative, Bairus Sharof foundation. 2.4.5. Shariah council -Maolana Obaidul haque, Chairman. (Khatib-Baitul Mokarrom National Mosque) -Mufti Said Ahmed-Vice Chairman. Chief Mufti Al-Jamiatus Siddikia Darut Alam Madrassa-E-Furfura sharif. Darus Salam. Mirpur, Dhaka. -Principal Jamin Kashemia. Norshingdi. -Principal Md. Serajul Islam (Ex-principle madrasha-E-Mesbaul Ulum Mofijheel. Dhaka) -Maolana Delowar hossain Saidi. -Maolama A.B.M. Kamaluddin Khan (Rector, Rajipur Alia Madrasha, Laxmipur) -Mufit Shamsuddin (Zia) -Mufti Muhaddis, Al islamia Jamiatw. Patia, Chitttagong. -Advocate Mujibur Rahman. Senior Advocate, Bangladesh Supreme Court -A.S.M Faqrul Ahsan. Ex-Deputy government, Bangladesh Bank -Prof. Shah. Md Habibur Rahman. Prof. economic dept. Rajshahi University, Rajshahi. Islami Bank Bangladesh limited: (IBBL) Islami Bank Bangladesh limited was incorporation on 1.3.1983 and received its Banking License on 28.03.1983. IBBL started functioning on 30.03.1983. The authorized capital of the Bank is TK. 50.00 crores and paid up capital is TK 32.00 Crores.

Inspired by the success of Islami Bank Bangladesh Limited 5 other Islamic Banks namelyAl-Baraka Bank, Social Investment Bank Al-Arafa Islami Bank, Faisal Bank and Exim Bank have been established in Bangladesh. Prime Bank has established Islamic Branches. Islamic Banks and Financial Institutions around the world: Until now; there are 267 Islamic Banks and financial institutions around the world. Furthermore, one Islamic Investment Company was established in Bahamas in 1977 as a multi-national holding company. Its purpose was to establish Mudraba (Partnership companies) in various parts of Islamic countries. The company has established to Mudaraba subscribers is Sharjah and Pakistan. The second example of Islamic banking in the west comes form Luxembourg, where Islamic Banking system International holding was established in 1978 as a joint stock company. Its purpose was to establish International Islamic banks in different parts of the western countries where there are communities of Muslim interest in participating investment project in Muslim and Non-Muslims countries. The company’s investment operations spread over different part of world. As a holding company, it established a new affiliated company in London in June 1983 under the name of Islamic Finance House and another in Denmark in 1982 under the name of the Islamic Bank International of Denmark, Dar-al-mal-al-Islami (DMI) also emerged in 1981 as a major multi national company the activities banking operations (Ashker, 1987). The above development, gaining momentum since the second half of the 1970s, took two phases. The first one was the attempt to establish Islamic financial institutions side by side with traditional banking. In such attempts, two types of institutions were evolved. Islami banks were established mostly in Muslim countries and Islamic investment and holding companies stared operating in some Muslim but mostly in non-Muslim countries. These institutions, claimed to be operating without interest in their transactions, compete with conventional banks of attract deposits and invest these funds wherever they fund profitable in investment opportunities. The majority of these institution were established though private imitative. The second phase took the shape of restructuring the entire financial system in line with the teachings of Islam. this course had two directions; one in which the entire economy and institutions (including financial ones) were transformed into an Islamic one, as in Islamic Republic of Iran; and the other was illumination of banking sector only, as in Pakistan (Khan & Mirakhor, 1989; Mangla & Uppal 1990). The constitution of Iran Was embodied as “The Planning of a correct and economic system in accordance with Islamic criteria, in order to create welfare criminate poverty and abolish all forms of deprivation with respect to food housing work health care............” Pakistan started its transition to Islamic banking to July 1979 and completed the board and quantitative with the board and quantitative perform in six years by June 1985, with effect from July 1985 the entire banking system of Pakistan stands reformed.

A summary of chronological development is annexed herewith. Chapter Three Foreign Exchange Any branch of IBBL deals with the three parts of activities. Threes are: A. B. C. GB. (General banking) Investment And Foreign Exchange.

My topics are performance on foreign exchange transaction of IBBL. Accordance to the topic, my discussion is only foreign exchange mechanism of IBBL. Basically there is no difference of foreign exchange mechanism of he commercial there is no difference of foreign exchange mechanism of other commercial bank like IBBL. Because foreign exchanges acts, rules and regulations are maintained by the Bangladesh Bank according to the UCPDC 500 (Uniforms customs practices for documentary credit). But only difference the operations of IBBL. It will be discussed in Later. IBBL deals with the customers/clients only by the three mechanisms. These are: 1. Import 2. Export and 3. Remittance. Before discussion on foreign mechanism, we need to define what foreign exchange is & how can they deal? 3.1. What is Foreign Exchange? Foreign Exchange means currency & trade exchange say conversion of one to another. This is a part of economic & Science. This is a big deal divided into different currencies instrument such as Draft, Traveler Cheque, Bill of Exchange business including sell, purchasing of currency notes & TC etc. Currency Exchange means the conversion of one Currency into another. 3.2. Foreign Exchange Market: Foreign Exchange market means the places where foreign currency is bought & sold. In this more that supply, currency value & v.z. Alternately following are the features of foreign exchange market:1. 2. 3. 4. Bank & client. Different Banks in the same foreign exchange market. Different Bank & Schedule Bank of the same country. Different Control Bank.

Islami a Bank follows the following the two craters in respect & payment of foreign exchange:1. Local currency market value & 2. Foreign currency market value. EURO Dollar, Petro Dollar, Asian Dollar : EURO Dollar is virtually no paper dollar, but mark in dollars, it’s a new name in the currency market in the world Similarly petro Dollar means the Dollar earn from sale of fuel. Particularly oil based midilists countries. Thirdly Asian Dollar means the dollar of Singapur, Hongkong, Tokyo, Baharin etc-Asian Dollar move or less control EURO & Petro dollars. Islamic Bank can buy or sale foreign currency from the foreign exchange market for profit. This bank posses license from Bangladesh bank to deal foreign currency business in the currency exchange market in the world. Islami Bank maintains overseas inter A/C, with different a Banks in different countries. In the world for network system for Import, Export & Remittance purpose foreign exchange currency may be created a commodity for which Islamic Bank can sell or purchase the same to the party or other bank with some profit (exchange). 3.3. Why Exchange is being controlled? 1. To stabilize the rate of exchange. 2. To protect domestic industries. 3. For proper implementation of plans. 4. To increase the bargaining strength 5. To check over invoicing & Under invoicing 6. To check the Blank marketing and smuggling 7. For regulating the international movements of goods 3.4. Authorized Dealer Branch: Bangladesh bank in exercise of the power under section 3 of Foreign Exchange regulation Act. 1947 issues a license to schedule Bank where they have adequate trained Officer/Staff to deal in Foreign Exchange. The banks that are authorized to deal in foreign exchange are called authorized dealers. Money Exchanger: License are granted by Bangladesh bank for hanged of Foreign Currency such as notes, coins and TC to a person or firm a corporation strictly maintains in accordance with exchange control regulation. 1. Hotel. 2. Bangladesh Biman 3. Parjatan Corporation etc. 3.5. Rate of Exchange: The rate at which one currency is exchanged with another is known as rate of exchange.

Rate will be quoted in accordance with demand and supply. Bangladesh Bank Quote rate based on New York money market. 3.6. Exchange Position: Relation between sale & purchase either in spot or forward purchase in a particular date in a particular currency. This relationship which in known as exchange position. 3.7. Arbitrage of Foreign Exchange: Arbitrage can be defined as simultaneous buying and selling of foreign currencies for the purposes of making profit Arbitrage is carried out mostly by banks, They keep constant watch over the latest development in the financial market of the world. 3.8. Foreign Exchange Regulation Items: 1. Bangladesh Bank Manual. 2. Foreign Exchange Circular. 3. Public Notice 4. Import & Export Policy Gazette 5. Ministry of Commerce Circular 6. BCD circular. 7. Guide lines for foreign exchange regulation. 8. Other authorization (i.e. NBC Dept) 3.9. Statutory Control Forms: 1. EXP Forms for Export 2. IMP form for Import. 3. C Form for Inward Remittance. 4. TM Form for outward Remittance. 3.10. Multiple Exchange Rates: Various rate quoted for one currency purchase and sale. Our country rate is multiple exchange rates. The rate of exchange is the price of one currency in relation to others. Rates are three types. 1. Currency rate 2. Peens rate 3. Cross rate. Currency Rate: (Indirect Quotation): Buy high sell low i.e. local currency fixed and foreign currency variable e.g. India & London quoted this rate. In case of currency rates: 1. Buy high 2. Sell low 3. Premium deducted P4. Discount added D+ 5. Fore Buying in currency rate higher discount is added and lower premium is deducted. 6. For selling lower discount is added and higher premium is deducted.

The following currency rates are given below: 1. Currency rate (Indirect Quotation) 2. Pense rate (Direct quotation) 3. Cross rate. Currency rate: Local currency fixed and foreign currency variable i.e. by & sell high. New York money market quoted this rate. Pense rate: Foreign currency fixed and local currency variable i.e. buy low & sell high. New York money market quoted this rate. Cross Rate: Other currency rate to one another. There are tow way quotation in exchange rate i.e. (a) Buying Rate & (b) Selling Rate. Buying Rate: It is the rate of exchange at which it would put through a purchase transaction i.e. export & inward Remittance and selling rate is the rate of exchange at which it would put throughout a sale transaction i.e. Import bills including outward Remittance.

Exchange Rate

Fixed

Floating

Independent Floating

Managed Floating

Packing Composite Packing

Single Currency Packing SDR Exchange Rate Rules: a) In case of Pense Ratei) Buying low ii) Selling High iii) Premium Added: (p+) iv) Discount deduction : (D (-D) b) In case of currency rate: i) Buy High Other Basket

ii) iii) iv) c) For Buying:

Sell Low premium deduction (P (-) Discount added :D (+)

i) In currency rate higher discount is added and lower premium is deducted. ii) In pense rate higher discount is deducted and lower premium is added. d) For Selling: i) In currency rate Lowe discount is added and higher premium is deduced. iii) In Pense rate lower discount is deducted and higher premium is added. Buy Sell Buy Sell Low High High Low LP (+) HP (+) (LP (+) HP (-) HD (-) HD (-) HD (+) LD (+) Basket of currency in our Country: 1) US Dollar 2) Pound Starling 3) DM (Deutch mark) 4) Yen 5) France Frank. Our rate quoted based on US Dollar in the year 1986 January instead of pound sterling. Now the rate in our country is unification from January 1992. Exchange rate Particulars Mechanics m/Exchange & its Fixation. Date Say Import Bill 14.6.98 “ “ Export Export Buying Selling

Buying

Selling

B>S S>B B=S

Long or over brought position. Short or over sold position. Square position i. e open position

* Buying- Selling = Exchange Position. Apply of Rate: TT (Telegraphic Transfer) & OD (on demand) rate: TT & OD rate should be applied for foreigners & Govt. people i.e. other than import. BC (Bills for Collection) Selling Rate: This rate should be applied for Import Bills only.

IT Clean Rate : This rate should be applied for other that foreigners i.e. the A/C holders and for purchasing Cheque, Draft, TT, MT, P.O, TT. Clean rate also will get foreign currency Account holder and purchasing of foreign currency note. O.D Sight Expert: When we will purchase the export document in that case rate will apply O.D sight export O.D Transfer Rate: This rate should be applied for official people & foreign only. Cheque, Drafts, MT, TT. P.OCoupons etc. will be purchased applying OD Transfer rate. Selling Purchase: TT, OD Tate: TT, OD rate will be applied for official people who lived abroad as Bangladeshi Embassy official foreigners, foreign firms people etc. BBC Rate: This rate will be applied to all people of foreign currency account holder and import bills i.e. selling of fund other than government official and also service holder of Embassy and foreign firm officials. TT Doc. Buying Rate: This rate will apply export process realized after collection bills Islamic Bank introduced this rate is 1994. Methods of effecting payment of IBBL: Islami Bank follows the following methods to make payments between countries. 1. Telegraphic Transfer (TT): This is an instruction for transfer of money by Telegram, Cable or telex from a bank in one country to another Bank in different center. This is an instruction form the Importers Bank to the exporters Bank. The TT charge is realized by us from the partly as per Bank circular. 2. Mail Transfer (M.T): This transfer is the order to pay cash to a 3 rd party. This Transfer is sent by mail & the charge must be realized as per Bank circular. 3. Drafts & Cheque: A draft is pay order issued by one Bank to another Bank or its branch. Over Bought: This position known as long position. Over Sold: This position known as short position. Libor: London inter Bank offer rate.

SWIFT: Society for world wide Inter Bank financial Tale Communication. CHIPS: Clearing House Inter Bank payment system NOSTRO A/C: Our A/C with you i.e. out A/C with American Express NOSTRO A/C: Our A/C with you, Al- Raji A/C with IBBL

LOROD A/C: This A/C i.e. third Bank Relationship ACU: Asian clearing Union ACU member countries are Iran, India, 3.11. Growth of foreign Exchange Business: TOTAL FOREIGN EXCHANGE

100000 80000 60000 40000 20000 0 1 2 1999

Taka(Million) Year

3

2000

4

2001

5

2002

2003

3.12. Foreign Correspondents: The Bank ha made special arrangement with Al-Rajhi Banking and investment Corporation for “Express Remittance” of money from Saudi Arabia within the shorts period of time. Islami Bank Bangladesh limited has Taka drawing arrangement with Al-Rajhi and investment Corporation, K.S.A. Al -Rajhi Commercial Foreign Exchange, K.S.A City Bank N.A Dubi islami Bank, Dubai U.A.U Al –Asari Exchange Establishment, ULE Al- Mona Exchange, UAE Abu Dhabi Islamic Bank, UAE Kuwait Finance House, Safat, Kuwait, Kuwait Bahrain International, kuwait, Kuwait Overseas exchange Co. Kuwait National Money Exchange, Kuwait, Qatar Islamic Bank, Doha Qatar. Union Exchange, Doha, Qatar, Bohran Islami Bank Manama, Bahrai, Dalil Exchange, Manna, Bahrain, Zenj Exchange Co. W...L L Mannama, Bahrai, modern Exchange, Oman Besides that the Bank has also remittance arrangement with Barclays Bank PLC, London UK Standard Chartered Bank UK American Express bank Ltd. New your USA Citibank NA, New Yourk, USA Placid N.K Corporation USA Bank of Tokyo mitsubishi ltd. Japan Comers Bank A.G Frankfur, Germany:

Chapter Four Dealing Department 4.1. How can they deal? Banks are intermediary organization in the money system accept deposes from the customers and use this deposits to makes loan/investments or deposits with other Banks. At the same time bank are also intermediary in International Trade since they are enable to finance their customers to buy & sell foreign exchange which require. 4.2. Objectives of Dealing Dealing department is composed of 2 types of interrelated businessi) ii) Money market & Foreign Exchange

Objectives dealing Department isi) ii) iii) To control liquidity & Foreign Exchange exposure of the Bank To provide a service to satisfy a customer’s need & To produce a profit to the Bank receives deposits from varying sources fro varying periods. it is the responsibility of the Dealing department to ensure that any excess funds are invested where from higher rate of return will come of the Bank. however prudence, Management should be applied as to how and where such excess foods are to invest since it is inoperative that the solvency & Currency which is required.

Commercial Banks have customers who a) buy Foreign Currency from them& b) Sell Foreign Currency to them. To facilitate such transaction, commercial bank maintain NOSTRO A/C with overseas or with other Banks, Balances will be left in this account which represents an exposure of Foreign Currency such position comprises a) Surplus of Foreign Currency balance. b) Difference between outstanding Foreign Exchange of contracts for both spot& forward delivery. c) Difference between profit earned & profit paid in the same foreign currency d) Possible Foreign Currency capital exposure if it is not covered y Foreign currency borrowing of a forward exchange contract.

e) Other payable & receivables in Foreign currency such as taxes, fees dividends etc Dealing Department has to monitor all the functions noted above to ensure that total foreign currency position is known. It will then, in association of the Management determine, what will be a prudent level of such exposure taking into consideration the size of the Bank, validity of the exchange market, profit and loss exposure and whether or not local exchange control regulation of the central Bank will permit such exposure. The largest source of income of a Bank is difference between the rates of profit paid for deposits and rates of profit earned from investments. This difference is called “This profit differential between assets and liabilities managed by the dealing room. So, Dealing Department is a primary source of profit. Bank Management Foreign Exchange & Money Market Manager

Chief Foreign Foreign Exchange Dealer

Chief Money Market Money Market Dealer

Position Keepers

Fig - ORGANIZATION CHART In the dealing Department number of people is involved and there are subdivisions. This depends upon the size of the Bank & country where it is located. 1. Management of the Bank looks o after the Foreign Exchange and 2. The Money Market Manager ensures the deals are successfully implemented. 3. Within the dealing department there are a number of specialists but this depends on size of the Bank. 4. In the dealing department keepers are there they actually records the position of currency exposure. This position in vital. Operations of Dealing: 1. The manager of Senior dealer in consultation with the management determine that what is the level/ position of the bank hold 2. Dealing Team will more what is happening other dealing centers around the world 3. At this stage the rates of Exchange and rates of deposits be fixed 4. Political & geological position to be ascertained which might affect Deal 5. With the progression of day rates will move depending upon the position of the business. 6. If the Bank has a major participant in the foreign & treasury market the day will be active. 7. If the bank is not with major customer there will be not satisfactory.

How Deal may be effected through? a) Telephone b) Telex c) Booker d) Cable e) Written instruction. Upon receipt of the ordersA dealer will make a quotation. If the quotation is accepted by the counter party, a deal is made. 4.5. Which Process Deal may be recorded? Deal must be recorded. To initiate the recording of the transaction, dealer will usually complete a pre-printed form known as a deal ticket of voucher. In case of a Foreign Exchange deal the followings are to be recorded. a) Name of the counter party of customer. b) Location of the counter party. e) Date of Transaction- Contract date f) Currency & amount sold. g) Rate of exchange at which transaction has been consummated. i) Settlement: Where the money sold is too paid. How the money bought is to receive j) Name of Booker if applicable. k) Signature & initial of dealer to confirm Transaction. Further- To complete the operation department willa) Complete the dealing ticket or preprinted form or voucher where the transaction is recorded. b) Ascertain the method of settlement. c) See a confirmation is prepared and send it to the customer which is called a contract. d) Prepare the entries called book keeping e) See that telexes sent to effect payment are correct. f) If the deal is a forward transaction, ensure that a duplicate contract is sent as a reminder nearer to the value. g) Checking of incoming confirmation from customer and or booker to see all party agrees as to the terms of the transaction. h) To maintain duplicate position sheet. i) Ensure that foreign currency NOSTRO account have sufficient fund to effect payment. j) Maintain files of all transaction in the event of queries or audit. k) Produce such management reports as are necessary. In the deal occur at the money market then the following ticket should include: 1. 2. 3. 4. Name of the counter party Local of the counter party Date of transaction Start-date of deposit-value date

5. 6. 7. 8.

Maturity date of deposit. Currency and amount lent/ borrowed Rate of profit at which transaction has been consummated Settlement instruction-

a) To where & now founds are to be paid at the be giving and at the period of maturity . 9. Designation if the deal is an investment or deposit. 10. Name of the booker if applicable. 11. Signature and initial of the dealer to confirm the transaction and to use positioning Department & Operation department with maintain an accurate accounting system of transaction, such system must be capable of a) Listing of all contracts with a particular customer, b) Listing of all contracts for a particular day. c) Producing accurate position records both spot & forward for dealers & management. d) Producing profit & loss figure for dealing Dept. both foreign exchange & profit. e) Producing statuary record that the bank at all times complies with the local exchange regulations. g) Daily projections of movement in NOSTRO A/Cs. 4.6. Payments system of Dealing: Payments & receipts for the dealing department are made in accordance with Normal Blanking practice that is by telex, direct debits or credits, transmission of computer date, Cheques or Banker’s payment. It is essential for the dealing department to be informed of any errors or fails as they will affect money position So, copies of all payment & telex is normally sent to the servicing department or operation Dept. for verification. 4.7. Dealing room Operations: The dealing room must find low cost resources and forfeitable fund as well as minimize the market risks. a) b) c) d) e) f) Hedging & servicing the Bank Corporate service Issuing (Intermediary) Trading/ Positioning/ Arbitrage Market maker service (ensure market liquidity) Asset & liability Management.

4.8. Types of Dealing Room: 1. For corporate services 2. For own profit goals 4.9. Risk of Dealing Room/Department: 3 types of risks are involved in the dealing department. These ares-

a) Market Risk b) Counter party risk & c) Operating Risk 4.10. Market Risk: 1. 2. 3. 4. Consequences of Foreign Exchange rate variation on bank’s & loss Profit rate Risk Volatility Risk Liquidity Risk

Liquidity of a market: This is the ability of a market to absorb sudden shifts in supply & without excessive exchange fluctuation. A market is said to be liquid when every Trader can find counter party to trade with without consign important change in the price level. B. Counter party Risks: a) Credit Risk & b) Delivery Risk C. Operation Risks: a) Errors in the front & bank office. Chapter Five Import 5.1. What is import? Import means lawfully carrying out of anything from one country to county for Buying. It will be occurred according to the Government law. 5.2. Important policy order: Based on the needs of commodity and availability of finance, Government declares policy. For import of goods for a particular period having approval from the National Assembly is defined as Import policy order. Import policy is a guideline of a set of rules envisaged by Government Authority i.e. the Ministry of Trade and commerce for the registered importer for import of goods inside the country. 5.3. Duration: Earlier import policy has been formulated for two years. But present import policy order have been formulated for 5 (five) years, Effect from the 14 th June 1999 to 30th June 2003 and valid till announce of new import policy order. If require Government can revise the policy in each every years. 5.4. General Rules in connection with import: 1. Restriction of Import.

a) b) c) d)

Negative list of Merchandises. Restricted list. Footnote under Restricted List Freely importable items

2. ITC number is compulsory (H.S code 6 digit) to be mentioned in the L/C and LCAF to identification the item to be imported. H.S code of seven digits as mentioned by Bangladesh statistical Bureau to be used. 3. Requirement Right of Refusal (ROR) for public sector agency from Ministry of Industry or respective Ministry/department of both to Import item under Restricted List. 4. Import cannot be Israel, Serbia Montenegro 5. Pre-shipment inspection (PSI) for private sector normally PSI is not mandatory. 6. Shipment to be made through Bangladeshi ship some exemption a) Single importer maximum 20 MT grow importer highest 100 MT b) General waiver from department of shipping otherwise certificate of waive is to be obtained to ship through Foreign Cargo c) Import of Raw materials export oriented Industries 7. Import to be made on competitive rate 8. CFR & FOB Basis Import a) Normally import under CFR basis b) FOB basis import can be made complying Bangladesh Bank relative instruction 9. Country of origin: Mandatory should be clearly indicated at the body of packing / container / box / packet etc. 5.5. Sources of Finance: 1. Casha) Foreign Currency b) Wage earners FC balance 2. Foreign loan grant or commodity assistance 3. Barter and STA 5.6. Import procedure and classification of importer: Classification of importer: a) Commercial import b) Industrial import c) Import under wage earners scheme d) Actual user 1. No import permit / license required 2. LCAF required 3. Import can be made duly through irrevocable L/C 5.7. Import through LCAF but without L/C: 1. Books, Journals, Magazines and Periodical again sight draft or issuance bills.

2. Any importable item value up to USD 5,000 per year. Except for Myanmer each chalan USD 5000 and no yearly amount restriction. 5.8. Import permit and clearance permit: 1. Importation of books, Journals, Magazines and periodical and scientific lab equipment surrendering UNESCO coupon. 2. Pay as you earn basis Bangladesh Bank permission needed a) Machineries new and 12 years old plan b) Motor vehicles new and 5 years old c) Refrigerator ship new and 15 years old d) Cargo passenger ship for ocean ship maximum 20 years old importable. e) Export oriented Industrial plant & machinery f) Fishing Troller (sea) New or highest 20 years. 3. Excess goods imported by passenger baggage rule. 4. Simple, advertising item more than allowable quantity. Deferred payment basis import complying Bangladesh Bank terms and conditions. Direct payment basis at aboard by wage earners: Time limit for opening L/Normally 150 days from issuance or registration of LCAF 4. Machinery and Parts-17 months 5. All other items item 09 months. 5.9. Restriction of L/C after declaration of Negative Restricted: 1. No amendment for value increases of extension of shipment validity. Required documents to submit with LCAF for both govt. & non Govt. (private) importer: 1. L/C application form duly filled in and signed 2. Indent or pro-forma invoice 3. insurance cover note 4. Attested copy of the related Ministry/Departed Authority For private sector importer following documents required: 1. 2. 3. 4. Membership Certificate Valid IRC duly renewed Tin Certificate Insurance Cover-note Insurance Policy (stamped)

5.10. Working procedure of Banking of Banks in Case of LCAF: 1. LCAF receive by the nominated Bank 2. Importer has valid IRC & duly renewed 3. For importation of capital machinery & primary party’s no need IRC 4. IRC code number to be mentioned 5. ICAF registration where need 6. L/C copy to be sent to CCI & 15 days

7. Income tax declaration two copies (one for Bank for rest to be sent to NBR) 5.11. Import related fees: 1. Four categories of importer registration renewal fees are as under: Categories A B C D Yearly heights import 5.00 15.00 50.00 Above 50.00 Registration Fees (Taka) 500/1500/3000/5000/Renewal 500/1500/3000/5000/-

2. Surcharges for different years are as under: 1 year late TK 50/2 year late TK 100/3 year late TK 200/5.12. Regulation of Import: Import of goods under this policy shall be regulated as under: 1. Control list: Unless otherwise specified items which have been indicated as banned in this list shall no be permissible for import. An items included in this list with specific conditions for import shall be importable only on fulfillment of the conditions specified. 2. Freely Importable Items: Unless otherwise specified an items the name of which does not appear in the control list shall be freely importable. 3. Notwithstanding anything mentioned else where, all imports into Bangladesh shall be subject to such general or specific conditions as many have been prescribed in this order. 4. In addition to the conditions mentioned in the control list the conditions. Restrictions and procedures for import of various items mentioned in the test portion of this order, shall as usual, apply in case of import of those items. 5. If, while determining the import status of an items mentioned in the control list the description of goods does not conform to the H.S.C Code mentioned against item, or any discrepancy arises between the H.S Code and the description of goods, in that case the description of goods shall prevail, In other words, if the import of a particular item is shown as banned in the control list, or is shown as importable as subject to fulfillment of conditions in the list, the said ban or restriction as the case may be, shall equally apply to the import of that item , even if such ban or restriction is mentioned else where and not against the appropriate H.S Code, if any importer, taking , advantage of such discrepancy, import any

banned items or restricted items or restricted item without fulfilling the respective conditions, such import shall be treated to have been made as in contravention of the provisions of this order. 5.13. Provision Regarding Export: All provisions rereading export as mentioned in this order shall apply in case of export of goods. 5.14. Source of Finance: Import may be allowed under the following source of finance: a) b) c) i) Foreign Currency Reserve in Bangladesh Bank. ii) F.C. A/C (under WES) External economic and (Commodity Aid, Loan, Credit or Grant.) Commodity Exchange. 1. Barter 2. Special Trading arrangement (STA).

5.15. Import Trade Control Schedule Numbers: For import purpose, use of new ITC Number (H.C. Code) with at least 6 (Six) digits corresponding to the classification of goods as given in the Import Trade Control Schedule 1988, based on the Harmonized commodity Description & coding system, shall be mandatory, But in case where a particular items has classified under an H.S. Code Number with more than 6 (six) digits, in those cases it shall e mandatory to use that specific code number (having more than six digits.) No bank shall process any LCA Form. Or open any L/C without properly recording the corresponding ITC Number (s) for the item’s to be imported. 5.16. Restriction Regarding Source of Procurement of Goods: Goods from south Africa & Israel or goods originating from these two countries shall not be importable goods shall also no be importable in the flag vessel of these two countries. Import at Competitive Rate: Import shall be made at the most competitive rate & the importers may be required, at any time, to submit documents regarding the price paid or to be paid by them. This order shall be exempted up to TK. 1.00 (One) Lac fro opening of the L/C. Pre-shipment Inspection: Unless otherwise specified reshipment inspection of imported goods shall not be obligatory in case of import by the private sector importers.

Import on CER basis: All imports by Sea, Air & Land route shall be made on cost and freight basis, Import on free on board basis may be made strictly observing Bangladesh Bank’s Circular, Before opening If L/C necessary insurance cover note should have to be purchased form the insure ace Co. No import shall be allowed on CIF basis without prior approval from the Ministry of Commerce. Shipment by Bangladesh Flag Vessels: Shipment of goods shall normally be made on Bangladesh Flag Vessels. 5.17. Import authorization: 1. Import License not Required: No import License will be necessary import of any item. 2. Imports Against LCA Form: Unless otherwise specified no import irrespective of the source of finance, shall be allowed exchange through submission of LCA Form, duly filled in, to the concerned nominated bank. 3. Import against L/C: Unless otherwise specified import shall be made only by opening irrevocable L/C. Import against L/CA Form But without Opening. Import against LCA Form may be allowed without opening of letter of credit tin the following cases: a) Import of books, Journals, magazines and periodicals on sight draft or essence bill basis. b) Import of any permissible item for an amount not exceeding US$ 2500/- only during calendar year against remittance made from Bangladesh at WES rate. 5.18. Deferred Payment: L/C: may be open under deferred payment basis. Direct Payment in Abroad: Only for Bangladeshi National who live in abroad for service. Those who are entitled to purchases the importable goods for direct payment to the beneficiary from his own service without opening any L/C, The goods must be sent to the Bangladesh. Nationals who lived in Bangladesh. In that case no approval is required from CCI & E. Time Limit Opening of L/C: Letter of Credit shall be opened by all importers within 120 days from the date of registration of LCAF with the Bangladesh Bank unless otherwise notified. Validity of LACA for Shipment:

Unless otherwise specified, shipment of goods shall take place within 17 month in the case of machinery and spare parts and 11 months in the case of all other items form the date of issuance of LCA from by Bank or registration of LCA form within Bangladesh Bank registration unit as the case may be. Document required to be submitted along with LCA Form: Importers in both public sector and private sector shall submit to their nominated banks the following documents along with the L/C authorization Form for opening letter of credit. a) L/C application form duly signed by the importer. b) Indent for goods issued by indenture or pro-forma invoice obtained from the foreign supplier, as the case may be and c) Insurance cover note. 5.19. Procedure to be followed by Banks for Acceptance Issuance of LCA Forms: Acceptance of LCA Forms by the nominated banks: a) The nominated bank shall keep in its safe custody the passbook issued by the Import control authority n favor of recognized industrial units and registered commercial importers in the private sector. LCA Forms and other relevant papers shall be submitted by the importers to their respective nominated bank only for the purpose of import by opening L/C. While accepting LCA Forms from a private sector import the nominated banks shall ensure that the concerned importer has a valid Import Registration certificate that the requisite renewal fees have been duly recorded in the passbook of the said importer. L/C for import of capital machineries and initial spares or setting up a new industrial unit, however, be opened without any import registration certificate (IRC) or Passbook after obtaining exemption shall be necessary from the sponsoring authority for such import at WES rate against own finance in respect of industrial units i the free sector.

b)

c)

Transfer of Passbook: The passbook of the importer shall remain in the safe custody of their nominated Bank. An importer may change his Bank on the basis no objection certificate from his present Bank. Import on joint basis (Under Leadership Arrangement): The importers all over Bangladesh may for more or more groups for import permissible items valued up to US$ 2000/- for their own use without any permission from the Import control authority.

Additional Conditions for Import of Food Items: In case of import of milk, milk food, milk products, edible oil And other food items produced in any Country, Test of radioactivity Levels present in those items is mandatory. Import of Capital Machinery for Commercial Purpos Any commercial importer may import permissible items of industrial capital machinery for any amount for commercial purposes. Pre-shipment Inspection: Where the value of a single item authorized for import is Tk. 5.0 Lac or above, the importing agency shall arrange pre-shipment inspection. Finished Drugs & Medicines: Importable only with clearance form the director Drugs administration. Items of Import by Export Oriented Industries: Recognized units under readymade garments industry operating under bonded ware hour system shall be permitted to import their permissible raw & packing materials on the basis of confirmed and irrevocable letter of credit for export of readymade garments against back to back letter of credit. 5.20. Miscellaneous Rules: 1. Group Import allowed. 2. Actual user import. a) Without permission up to USD = 2000/b) Permission up to Y above USD = 5000/3. None-resident Bangladesh importer for their own profession i.e. doctor/scientist 4. Sample import. 5. Temporary import re-export be made. 6. Import at EPZ and Export there from out of this policy order. 7. Human consumable item import: Milk produced item, edible oil etc. a) Radiation Test amount of cesium –137 per kg cited in the document. b) Fit for human consumption certificate. c) For milk cesium 137 i.e. maximum 97 BQ per kg other 50 Bag/kg 5.21. Import in the Industrial Sector: 1. 2. 3. Three items of import entitlement is allowable which is restricted for commercial importer Capital machinery LCA/IP Frees expected permission required. Ms sheet GP sheet Stainless sheet, CRC sheet, Yin plate sheet MS and silicon sheet, secondary Quality as a per entailment for recognize.

4. 5. 6. 7.

Black list approve to be approve by director, Drug Administration for important of raw material materials for pharmaceutical Industry. Readymade Garments through BBL/C 75% irrevocable FOB export L/C value is entitle to import (Oven Knit Garments) presently 100% allowed for local BB L/C. In Case of FOB value USD 60 or above per Sozen for Quot Items 80% non quota 85% import is allowed. Babies wear 80% of value import is allowed

5.22. Import L/C (Letter of Credit): A letter of credit is a conditional Bank undertaking of payment. In other words letters of credit is a letter form the importer Bankers to the exporter that the bills if drawn as per terms & conditions complied with will be honored on presentation. 5.23. Classification of L/C: Definition of L/C: A letter of Credit is a conditional bank undertaking of payment. In other words letters of credit is a letter form the importer bankers to the exporter that the bills if drawn as per terms and conditions are compiled with will be honored on presentation As per UCPDC 500 a credit may be either: i) ii) Revocable. Irrevocable.

The Credit, therefore, should clearly indicate whether it is revocable or irrevocable. In the absence or such indication the credit shall be deemed to be irrevocable. Classification of L/C: 1. Revocable L/C 2. Irrevocable L/C 3. Confirmed L/C 4. Transferable L/C 5. Divisible L/C 6. Revolving L/C 7. Restricted L/C 8. Red Clause L/C 9. Green Clause L/C 10. Bank to Bank L/C 11. With Recourse 12. Without Recourse 13. Stated by letter of credit. Definition of Types of L/Cs: 1. Revocable Credit:

As per Article Bo. 8(a) A revocable credit is a credit which can be amended or canceled by the issuing bank at any time without prior notification to the seller since to offers little security to the seller. 2. Irrevocable Credit : As per Article no 9 An irrevocable credit constitutes a definite undertaking of the issuing Bank. A credit cannot be amended or cancelled without the agreement of all parties. It gives the seller grater assurance of payment. An irrevocable credit can be either confirms or unconfirmed dependant on the desire of the seller. 5.24. Classification of importer: Importers are those who ate authorized by the import Trade authority i.e. & CCI & E for import of goods essential for consumption or for production purposes. There are mainly three types of importers. 1. Commercial Importer 2. Industrial Importer 3. Importers under wage Earner Scheme 1. Commercial Importer: It means an importer registered under the importers, exporters and indention registration order 1981 who import goods from sale, when issued to commercial importers, given the category held by him with ITC classification and public notice against which they are admitted into import trade. 2. Industrial importers: When issued to an industrial consumer, gives the items of import as raw materials and packing materials and spare parts, the value of entitlement and ITC classification. 3. Importers under WES: It means registration importers who import only under the WES. In this scheme, the foreign exchange required for import of goods is met out of the remittance made. By Bangladesh national earning wage abroad. WES importers can be importing all permissible items a declared by the importer also can import under WES. 5.25. Registration of Importer: As per import & Export control Act. 1950 no person can indent, import or export any goods into Bangladesh except kin case of exemption issued by the Government of the peoples Republic of Bangladesh. Violation of this order is punishable with fine under the provisions of Sea Customs Act 1878 as applied by sub section (3) of Section 3 of this Act. Procedure for obtaining, IRC (Import Registration Certificate): Through public notice or import policy the chief controller of imports & Exports invites applications usually for registration of importers. The following papers/ documents are required for submission to CCI & E or area office of CCI & for import registration certificate: 1. Application form. 2. Nationality Certificate. 3. Income Tax registration Certificate with GIR.

4. Trade License from the municipal or local Authority. 5. Membership Certificate. 6. Partnership deed (for partnership firm) 7. Certificate of Registration with the register of joint Stock Co. & Articles and Memorandum of Association in case of Limited Co. 8. Bank Certificate. 9. Documentary evidence for business existence. 10. Original copy of Treasury Challan being payment of registration fees. 11. Original copy challan for passbook. 12. Other documents if any required by the CCI & E. 13. Ownership’s documents or Rent receipts of the place of Business. 14. Survey clearance from the relevant Authority. The nominated bank of the application will examine the papers/documents s& verity the signature of the applicant and forward the same to the concerned office of the CCI & E with a forwarding schedule in duplicate through bank’s representative. The duplicate copy of the same bearing the acknowledgement of CCI & E office of the receipt of the documents is back by the bank and is preserved. If the documents are found in order and the CCI & E is satisfied the IRC is issued to the applicant and sent direct to the nominated bank. The passbook is also issued by the CCI & E simultaneously to the importer and sent direct to the nominated bank. 5.26. Parties to a letter of credits: As per terms and conditions of the L/C, the seller is required to be routed through some intermediary bank in other order to get his claim. So, we see hat there are a number of parties involved in a L/C involved parties to a L/C ar4e under 1. Importer/Buyer. 2. Exporter/Seller/Beneficiary 3. Opening/issuing Bank 4. Advising/ notifying Bank 5. Confirming bank (for add confirming L/C) 6. Exporter’s bank i.e. negotiating bank 7. Reimbursing bank or paying bank. 5.27. Preparation of credit report: Bank prepared credit report in prescribed forms Character, capacity and capital which are known as the three C’s of credit. Instead of the three C’s some mention the three R’s i.e. reliability, responsibility and resources. To these three C’s we may add two more C’s i.e. collateral and conditions. How a banker should obtain the necessary information regarding these fundamental of credit, No. doubt, bankers have to make inquires from those of their customers and other peoples and inquired the report by the banker. Sometimes information are gathered by deputing marketing officer or credit officer. 5.28. Position of the A/C: Import Section will see whether there is sufficient fund available in account to cover the margin to be sanctioned, commission, postage, cable or Telex charge etc. If it is found O.K., L/C will be sanctioned.

In all cases the sanction must be informed to the importer for acceptance. On receiving confirmation from the client then the terms and conditions of the sanctioned are acceptable, the subsequent documentation/ charge document are taken up. 5.29. Which papers/documents submitted by the importer before opening of the L/C: a. b. c. d. e. f. g. h. i. Trade License (Valid). Import Registration certificate (Must be kept in the bank custody). Passbook import. Income Tax declaration. Membership certificate. Memorandum of Articles (In case of Ltd. Co.) Registrar deed (In case of partnership firm) Resolution. Photo one copy.

Bank will supply the following papers/documents before opening of the L/C. i. ii. iii. iv. v. L/C application form. LCA Form. IMP Form Murabaha agreement. Charge documents paper.

The above paper must be completed duly filled and signed by the party and verified the signature. 5.30. Maintenance of register: The sanction must be recorded in the following registers: Document execution register. All the charge documents must be recorded in this register. Âť Limit register. Âť Liability ledger. 5.31. L/C application & Procedure for Opening L/C: For opening L/C the client is to submit to the bank an application in the printed format of the designated bank. This is called L/C application form which is also an agreement between the importer and the bank. The form is to be stamped under stamp Act. In force in Bangladesh. The importer must submit the LCA & IMP and indent or contract. Purchase order/pro-forma invoice (duly accepted by the importer) along with L/C application. The L/C application must be completed/filled in and signed by the authorize person of the importer giving the following particulars: a. b. c. d. Full name and address of the supplier of beneficiary and importer. Brief description of the goods. L/C value for US$, etc. (CFR value) which must not exceed the LCA value. The unit price, quantity quality of the goods.

e. Origin of the goods, port of loading and port of destination must be mentioned. f. Model of shipment (Sea, Air, Truck or Rail etc.) g. List date of shipment and negotiation time (must not be beyond 30 days from the shipment date). h. Insurance cover note number and name or the company. i. Tenor of draft (1.e, sight/ issuance/ deferred etc. j. Mode of advising L/C (i.e. airmail/ full telex short cable etc.) k. Opening of L/C under UCPDC publication No. 500/- ICC revision 1993. l. Whether shipment/ transshipment is allowed. m. Instruction to add confirmation if required. n. LCA Number. o. Any other relevant information and instruction if any must be mentioned in the L/C application form. 5.32. Examination of L/C application: On receipt of L/C application it must be checked by an officer of L/C section very carefully in the following manner: 1. 2. 3. 4. 5. 6. 7. 8. That the terms and conditions as stipulated in the L/C application area consistent with the exchange control and import trade regulation and UCPDC. That all the information mentioned in above column has been furnished. That the terms to be imported are eligible according to importers entitlement. The goods are not being imported or originated from South Africa or Israel. If the goods are imported from any member counters of ACU. That all the cutting/permit etc are endorsed. That the validity of the L/C must not exceed the validity of LCA. L/C is opened within the validity period permitted in the License.

5.33. Confidential Report of beneficiary of L/C: According to exchange control regulations bankers are required to obtain confidential report of the beneficiary of L/C Before opening the same, if the amount of L/C exceeds Tk. 5.00 Lac Bank can open L/C below Tk. 500 Lac without obtaining C.R. Bankers can write to their foreign correspondents to supply the Credit Report. But from practical experience foreign correspondents of different country are not supply timely. On receipt of F.R from any source the bender can accumulate the same in one master file. 5.34. LCA Registration & Procedure: L/C authorization forms consisting of six copies. 1 st copy for exchange control purposes, 2 nd copy for the licensing authority 3rd & 4th copies for the CCI & E 5 th copy for the registration unit and 6th copies is the office copy of the bank. The procedure for registration of LCA form with the Bangladesh Bank is as under: a. All LCA forms should be registered with Bangladesh Bank, Registration Unit, Exchange control department, Bangladesh Bank, Dhaka.

b. After filling up the relevant portions of the LCAF and duly signed by the importer there are forwarded to the area registration unit of the Bangladesh Bank by the authorized dealers duly authenticated. The LCAF are registered by the Bangladesh Bank registration unit subject to observation of usual drill. The officer kin-charge of the Bangladesh Bank Registration unit will give the restoration number on all the copies of LCA forms under his signature. Thereafter, the same will be opened unless a LCA forms which has been registered with the Bangladesh Bank. c. After registrati8on the original and duplicate copies of the LC authorization forms will be delivered to the authorize representation of the banks from whom the same received by the registration unit of the Bangladesh Bank. d. The authorized dealers will not issue blank L/C authorization forms to their clients; the importer should sign the L/C authorization for in presence of Banks officer. The A.D should sign the LCA form and verify the importer signature. Authorized dealer shall keep it carefully. e. All Authorized dealers will remain to have with them specimen signature and photo and authenticating officers of the Bangladesh Bank registration Unit f. The registration will remain valid for 11 months or 17 months As the Case may be depending on the commercial and Industrial machineries. g. When letters of credit have been opened against the Exchange control copy of the copy under the stamp and signature of the authorized dealer. 5.35. L/C numbering in the L/C register: If the L/C application and other all formalities are found in order then put the serial number in the L/C opening register. This L/C number put the L/C following particulars: Date, SL, No. (L/C No.) Name the importer with address Beneficiary’s name and address, L/C value (F. Currency) and B Taka rate of conversion, LCA, No-CCI & E Registration No, Shipment date expiry date of the L/C, Commission, postage etc. recovered. 5.36. L/C advising: L/C must be typed in the printed the format of a bank. After typing, L/C should again be checked up by two authorized signatories and would be dispatched under their full signature, bearing their signature number. Telex/ L/C: If any importer desire L/C to be transmitted by Telex. In the case the Whole of the L/C is to be transmitted by telex to the advising bank by the opening bank. In the last Para of the above telex L/C must be mentioned that the telex message is operative and no airmail confirmation will follow. In that case reimbursing bank separately. If the importer desires that the L/C is to be advised by short cable, short cable be sent \n corporation principal term of the L/C as under:a. Advice irrevocable L/C No.........date............favoring....... (beneficiary’s name and address) b. Amount (foreign currency) c. Merchandise to be imported. d. Negotiation days e. Name of the importer with address. f. Test number. g. Air mailing details.

The airmail L/C must state as under “This is a confirmation of our cable dated”.................This is necessary to eliminate the possibility or issuing two advised of dispatching the same L/C to the beneficiary by the foreign correspondent. Add confirmation: Sometimes the beneficiary of the L/C may ask for add confirmation to all L/C by an internationally, reputed bank in the beneficiary’s country. The import is requesting his bank i.e. opening to do so in writing. The opening bank advised the L/C through their correspondent with whose have prior arrangement of credit line. Instructions are issued in the following language. “Please adding your confirmation of the credit at beneficiary’s cost” Adding confirmation L/C is negotiation restrict to the bank who has added their confirmation the credit. Such undertaking can neither be amender nor cancelled without the agreement of the issuing bank, the confirming bank and the beneficiary. Disposal of L/C copies and fillings: L/Cs is normal typed in respective banks printed format in manifolds (9 copies). The original L/C is sent to the advising bank for beneficiary and 2 nd copy sent to the above bank at the same time for their own purposes, 3 rd copy for importer, 4th copy for reimbursing bank 5th & 6th copy office copy of the bank, 7th copy for I.D. 8th copy for CCI & E and 9th copy for Bangladesh Bank. One copy for importer be sent to them alone with the memo of changes incurred by the opening bank for the L/S stating their account has been so debited for the amount of Memo including that amount of margin. Partial utilization of LCA: When several L/Cs are opened against a single LCA endorsement must be given according to the L/C opened and aggregate of all the L/Cs must not exceed the value of LCA. Particulars of all the L/Cs should be noted on the back of LCA under “opened L/C no ............dtd ...............for F Currency .............@............... equiv. Tk..............balance is Tk.................... 5.37. Accounting procedure for opening L/C: The following accounting system is followed in documentary credits. The register shall be posted immediately on receipt of approval from the manager to open L/C. this register shall control the numbers of L/C. Following entries are to be passed: Currency Voucher: Dr. Assets as per Contra (L/C WES) at notional rate Cr. Liability as per contra (L/C WES) Dr. F. C. Deposit (WES fund held A/C) Cr. F. C. Deposit A/C (WES L/C cover) ” ” ”

Taka voucher: Dr. Party’s A/C (Current A/C) Cr. Sunday Deposit (Security dep. L/C WES A/C) Cr. Telex recovery A/C (at the L/C is transmit by telex or cable). Cr. Commission (As per Bangladesh Bank Circular). Cr. P & T A/C. Cr. Murabha Import L/C @ B.C. selling rate. Cr. WES fund purchase A/C. Dr. Profit receivable A/C WES Dr. Profit receivable A/C (monthly creditable by daily product basis). Cr. Investment Income A/C. 5.38. L/C Amendment: Amendment of irrevocable letter of credit is not permissible without the joint consent of all the parties involved in documentary credit operation. Time Extension: A written application from opener is verified a relevant license/ LCA/ permit of the loan/ Barter must remain valid up to that period the extension is sought. Increase of L/C amount may be done provided the LCA covers the increase in amount. L/C amount can be decreased provided the relevant Indent is amending accordingly and with the consent of beneficiary. Each of clauses of the L/C can be amended provided the parties involve the L/C consent to it. Procedure or preparation and dispatch: Amendment is to be typed in the Banks printed format. The copies of the amendment must be dispatched to all concerned as done in dispatching the L/C. Amendment be kept in the L/C file chronologically date wise. Bank charge: Amendment commission is to be realized form the party as per instruction of Bangladesh Bank F. E. Circulars. Accounting procedure. Dr. Party’s A/C. Cr. Commission A/C. Cr. P & T A A/C. Liability: If the amount of L/C increased the liability voucher is to be passed as under: Dr. Liability as per contra (WES L/C).

Cr. Asset as per contra (WES L/C). Dr. Asset as per contra (WES L/C). Cr. Liability as per contra (WES L/C). A fresh Liability is to be passed including amount of increase on the date of amendment. 5.39. What is Back to Back L/C? Back to Back L/C is a type of import L/C either in inland or in abroad, which open against lien on valid expert L/C. In our country in export garment this method of finance is widely used and very well known to the manufacturers of garments. Bangladesh exporter received an irrevocable L/C. for supply readymade shirts from an American Bank. For manufacture of the ordered shirts the exporter. Dose not has required raw materials and cloths. To execute the order he is to import materials and cloths from Korea. Then the Bangladesh exporter does not have the required raw materials and clothes. To excite the order he is to import materials and cloths from Korea. Then the Bangladeshi exporter will have to open an import L/C favoring Korean suppler for import of cloths and accessories. The L/C is opened by the Bangladeshi bank keeping the American Bank L/C in the ‘back’ (i.e. to fulfill the requirement) of the export L/C is called back to back L/C. While opening such import L/C the Bangladeshi exporter is to pledge to manufacture the shirt by the Korean in imported cloths under boded ware house system. 5.40. Problems of Back to back L/C. 1. Shipment time gap: Sometime time is shorted for exporting against import L/C, kit may be caused. 2. 3. 4. 5. Terms and rules violations: IBBL cannot violate the rules & term of shariah council. Selling violation: Out of agreement IBBL cannot receive excess wanted. Payment of back to back L/C bill: No stock bills are supported against shariah. Gaps of International rules & regulations.

5.41. Prospects of back L/C: 1. It is Garment oriented readily. 2. 3. 4. 5. Backward lender (must have) To continuous quality improvement. To exchange customer facilities. To be continuous of our authorized.

5.42. L/C Opening functions: The following functions are maintained for opening L/C. 1. 2. 3. Opening the L/C. L/C Lodgment. L/C Retirement.

5.43. Lodgment of L/C: When the documents received from the foreign correspondent and checked with L/C file by two persons to ascertain the correctness it is found in order at that time make entry in the bill register and pass the necessary voucher (reverse the liability entry). The process is known as lodgment. Document must be lodged within 3 (three) days. In three ways the documents may be transferred to the parties. a) Cash Payment. b) MPI (Murabaha post imported). c) Murabaha WES bill. 5.44. Retirement of L/C: When the parties retire the documents by cash payment or by MPI/LIM arrangement is known as retirement. Kinds of Bill: I) II) III) Check up the document: Before lodgment, documents must be checked with L/C file. Check up as under: 1. Invoice 2. Bill of Lading 3. Draft 4. Bank forwarding date. INVOICE: a) The invoiced amount tallied with draft amount. b) The invoice is shown by the beneficiary ad s signed by him. c) Description of goods in the invoice and bill of Lading are identical. Bill of Lading: a) Full set of on board and freight prepaid incase of CFR value duly the shipping company. b) Correct description of goods is given as per invoice and bill of Lading. c) Shipment date is given as per L/C. d) Bill of Lading not closed or closed or dirty, if so, the acceptance of is required. signed by At sight Collection (30 cash/ Loan? Barter) Issuance/Deferred.

Other Document: Certificate of origin, packing list inspection, Health Certificate, Shipment advice etc. must be relevant to the L/C. Maintenance of Register: Give serial number to the document accordion to the entry in the relevant bill register. Full particulars of all the documents are recorded including the details of shipment merchandise, amount etc. Banks reference number, serial number is noted in the shipping documents by purring a rubber stamp of the Bank reference number of exchange forms must be noted in the relevant column of the registered. The import Bill Register must be marked of with the total on ‘Paid’ showing the date of payment when the documents are retired by the importer against payment. Application of rate: The foreign currency would be converted at rate ruling on the date lodgment (B. C. Selling rate) or at the rate if forward exchange booked or at the rate prescribed by Bangladesh Bank. The rate and the equivalent Bangladesh Taka should be recorded on the Bill Register. The conversion must be checking by two persons. Exchange control forms: IMP/TM (Import Form & traveling Miscellaneous form) must be duly filled in and signed by the importer in all respect at the time of lodgment. 5.45. Endorsement of LC/ License: LC form must be endorsed showing the utilization of shipment as under: “Utilized (F.C..........) equivalent L/C No. Balance Tk..................... Tk..........@............under Bill No......... Against

Signature of the official noting on the L/C file: As soon as documents are lodged the utilized amount is to be noted on the Back of the L/C copy or on the printed format of the L/C file. Security Documents: Documents must be kept under & Key of the Bank under the custody of a responsible officer. Intimation to the Importer: Importer is to be advised on the date of lodgment of documents with full particulars of shipment to retire the documents against payment or to dispose the import documents as per pre-arrangement, if any. Documents must not be handed over to the importer without payment of without making any arrangement for disposal.

5.46. Lodgment of deferred/ Issuance Bill: After scrutiny of documents, if it is found in order, the documents are presented to the importer for acceptance. The draft is presented under a covering schedule as follows: “We have received a original documents for US$..................Drawn on you which present for your acceptance on the 1st of exchange duly signed by you under robber stamp. Please return us the draft within one day of your receipt”. Dishonor of Documents: If a documents if found discrepant by the Bank on checking a telex/cable message is to be sent to the negotiating Bank/ Collecting Bank on the date of receipt of documents in the following language. Your Ref. No.......... Under out L/C No.................for US$............Bears discrepancy (i.e.) 1..................2........................3.............etc. Referred to draw shall revert on hearing. Meantime documents held at your risk and responsibility” Regards : In the meantime the discrepancies are also to be referred to the draw for their acceptance. The reply of importer is to reach to the Bank within 72 hours in case of non-acceptance. The dishonor is to be communicated to the negotiating bank within reasonable time. Unusual delay in communication of dishonor is not acceptable to the negotiating Bank and the issuing Bank forfeit its right to claim refund. 5.47. Retirement Procedure for Deferred Payment of issuance Bills B/B Bills: When the draft is returned by the draw (importer) after duly accepted by him the following procedure to be maintained. 1. The maturity date is to be worked out and noted in the bill Register and also in due date diary. The due date diary may be maintained by the dealing officer ad the Manager in-charge of foreign Exchange Determent. The Foreign Correspondent should be advised the due date maturity and be authorized to debit the NOSTRO account or to claim reimbursement on due date as per L/C terms. All the documents delivered to the importer except accepted bill of exchange/ draft.

2.

3.

For liability of issuance bill reversed the following vouchers are to the assed be the Bank. Dr. Liability as per contra, When retired the documents, the as Cr. Assets as per contra. Voucher under : Dr. Party’s A/C. Cr. H.I., I.D A/C. Cr. R & T A/C.

Cr. F.C.C. A/C. Cr. Commission A/C. 5.48. Bill negotiated under reserve or on Indemnity: When there is discrepancy in the documents the bank negotiated documents under reserve. On receipt of such documents the bill will be lodged and retired after acceptance from the importer and such case must be disposed of within maximum period of 7 days. Bills on collection basis documents are to be dispensed of within 7 days from the date of receipt. Before acceptance no remittance is to be made and no voucher is to be passed. Unpaid Bills not retired by the Importer (Forced Clearance): Although the document was found correct in all respect, it is observed that the importers some times do not come forward to retire the bills. If the bill is not paid within 3 days of receipt written notice is to be sent. The item is to be diaries in the diary of the dealing officer & Manager within 7 (Seven) days a reminder is sent to the importer and to the Guarantor if any. Final written notice is issued to the importer to retire the bill within 221 days. The competent authority of the Bank would be appraised of the matter. Information sis to be taken from the port Branch regarding arrival of goods & ship. Ensure that the insurance policy is kept alive. Fresh insurance will be required if the policy expired. Clearance of goods is done through Bank’s approved C & F agent and instructs them to ensure ad store the goods in trust for the Bank. After clearance of goods: Dr. Murabaha post Import, Cr. Murabaha Import L/C Bills A/C. When the bill is paid, the following vouchers are to be passed: Dr. Party’s A/c Cr. MPI A/c. Cr. Income A/c. 5.49. Consequences of Goods are not cleared: Consignments not cleared within 45 days from the date of arrival of the vessel are liable to be confiscated/auctioned by the custom authority under section 167 (8) and amended section 82 of the custom Act 1969 without further intimation cargoes. Post Import Finance: After shipment of goods the importer to requests the Bank in respective Banks printed format for clearance of goods from the port. Before clearance Bank charge further margin to cover the duty/ sale tax etc. A definite repayment schedule is given to the importer for retirement of documents or to take delivery of goods from the Banks custody against payment.

After clearance, C & F Agent is to send the following papers to the Bank: 1. R. R/ Truck Receipt or S. R 2. Bill of the clearing agent showing the details of charges incurred and paid along with supporting vouchers/papers. 3. Bill of Entry. 4. Custom purposes copy of license LC. LTR (Loan against Trust Receipt): Like LIM/MPI, while applying for LTR facilities the importer is to offer sufficient tangible securities as acceptable to the Bank equivalent to loan amount. If the party purchase fumed at the time of opening L/C. Fund will be purchase by debiting Murabha Import (MPI) A/c. Bills/ L/C. If the party do not agree to purchase the fund at the time of opening of L/C, in that case fund will not purchase. Security money may be realized @ 10% or 20% as per agreed rate on CFR, value @ WES Rate. If the party has agreed to allow MPI in Bills stage, then the rest amount at 30% cash security must be realized on total landed cost including duty and sale tax etc. If the party will purchase the fund at the time of opening L/C, then the security money will be realize on total landed cost. File should be maintained in separate way: Murabaha MPI application other charges documents, sanctioned advice dept in this file. File number should be same as per L/C number: Sanctioned advice may be issue when the duty figure will receive from the port branch. All other expenditure will be debited from Murabaha Import (MPI) A/c. Profit must be calculated on total landed cost after deduction sash security money. Dr. Murbaha Import (MPI) A/C. Bills/ LC. Cr. Profit receivable A/c. Now monthly realize the profit as per daily product basis i.e. Dr. Profit receivable A/c. Cr. Income A/c. If the importer take delivery of consignments on payment of banks dues before due date, in that case rebate may be allowed. 5.50. Checking & Advising of Export L/C Processing of Opening of Back of Back L/C: Books, Register and forms required:

1. Export L/C advising register. 2. Test key. 3. Signature Book-lets of foreign correspondence. 4. L/C advising and amendment advising letter forms. 5. Inward received register. International transfer of goods are made through the letter of which issued by the Foreign Bank at the request of Importers in favor of Exporter. Such export L/Cs. is enrolled through the Bangladesh Banks by the Foreign Banks who have correspondent relationship. The foreign issuing banks may advice a credit in the following manner: 1. By short cable/telex followed by airmail. 2. By full telex (no airmail confirmation). 3. Airmail letter of credit. 4. Advising of L/C after adding confirmation. a. When a telex L/C is received by the bank it should be recorded first in the Bank inward cable/telex received register. Then it would be passed on to test section for decoding and to verify the test number. When the rest verified then the full telex L/C message will be passed on the beneficiary in the printed format of the advising bank. b. When a L/C is received by short cable authenticate the test number and advised it to the beneficiary. The item is to be diaries to follow up the airmail. If within a reasonable time the airmail is not received from the foreign correspondent a telex inquiry is to be sent to them and is to be followed till the airmail is received. If there is usual delay the matter should also be referred to the beneficiary. On receipt of the mail confirmation the same is to be sent to the beneficiary under a printed format and non-negotiable copy should be retained in advising bank’s record for reference. c. Airmail L/C: On receipt of such L/C it is to be record in the Bank’s inward register and then the signature on the L/C is to be verified by authorized officer of a bank and finally is to be forwarded to the beneficiary under forwarding schedule, it found in order in all respects. All the necessary particulars of the L/C both cable or airmail original export L/C are to be enter in the L/C advising register. Adding confirmation to Export L/C: Add confirmation in an undertaking to the Exporter by the advising bank on behalf of the L/C opening Bank regarding payment of documents value to be submitted against the L/C. Add confirmation is to be given at the request of L/C opening Bank. Therefore, their must have an agency arrangement between both the bank i. e. L/C opening bank and advising bank, First it is to be checked whether the issuing bank is a corresponding bank, if so whether there is any credit limit has been fixed. In case of foreign Banks of good understanding adding confirmation to the export L/C is done without any limit. The sanction of appropriate authority (H.O) is required before confirming a L/C. No confirmation should be added in

respect of V issued by unknown banks. Revocable L/C of L/C of banned countries must not be confirmed. While adding confirmation commission must be realized as per instruction of the correspondent. While on L/C is confirmed its negotiation is done by the confirming bank usually. Accounting Procedure for confirmation of L/C : Dr. Customer Liability (Confirming L/C.) Cr. Bankers liability (Confirming L/C.) Amendments: 1. On receipt of amendment, must be authenticate the test or verify the signature. If the test number is incorrect or signature differs, cable confirmation must be obtained from the L/C opening bank. Meanwhile, amendment may be advised as unauthenticated. Make entry of the amendment particular in the L/C advising register under amendment column corresponding to the other particulars of the relative L/C. Make photocopy of the amendment. Use the forwarding letter, enclose the original amendment and acknowledgement with forwarding letter and retain it with the office copy for record. Dispatch under register mail or by special messenger. Realize the advising commission Tk. 200/- per L/C and Tk. 200/- per amendment from the beneficiary as per rules of the bank.

2. 3.

4.

Before advising any L/C the following steps must be ensured (Checking of export L/C.) Before advising the export L/C to the beneficiary advising bank should check the terms and conditions of export to ensure the following points : 1. 2. 3. 4. 5. That the exportable commodity is not banded by our export policy. That the terms and conditions stipulated in the L/C is not contrary to the exchange control regulations of the country. That the payment terms stipulated in the L/C is clear. That the document which mentioned in the L/C are easily available. That all the L/Cs are subject to uniform custom and practice for documentary credit ICC publication No. 500, 1993 revision.

5.51. How many banks may be involved for opening L/C? And Single Deal System of IBBL: Five banks may be involved for opening L/C. These are given below1. Negotiating Bank- On behalf of exporter. 2. Issuing Bank- On behalf of importer. 3. Advising Bank- Advice to the exporter. 4. Confirming Bank- Who confirms the L/C on behalf of exporter. 5. Reimbursement Bank- Exporters (specify)

Example is given blow-

Advising Bank L/C

Tokyo Mr. Y IBBL Mr. X importer Deposits Issuing Bank exporter Confirming bank

Payment (Exim Bank) Reimbursement Bank Single deal system: Bank

Negotiating

Islami Bank certify the CRF (clear Report finding) and all agreements are made before opening L/C, as a result its goods are not sold again raising the products price or reducing the products price. It is the single deal system. Because IBBL deals with the business of selling any buying, not loaning. 5.52. Requirement for PSI (per-shipment inspection) : Duties are imposed on item; the following papers are needed1. L/C Copy. 2. Performa invoice.

3. Insurance photo copy (cover note). 4. Tin (Tax identification Number). 5. VAT certificate (Registration Number) 6. Pre-shipment Inspection information form. 5.53. Which companies are involved to inspect the goodsThe following agencies are involved to inspect the goods for shipment in worldwide1. Inspectorate Griffith Ltd- Zone: - Votan. India, Phiphine, Island, Vietnam etc. 2. Intertaktesting Service: Zone :- China, Ho9ng Kong, Russia, Italy, Austria etc. 3. Bureau Verities: Zone :- Australia, America, Japan etc. 5.54. Charges for L/C opening: 1. L/C commission: - L/C commission 50% within 90 days, first Quarter and Subsequently increase 30% and upon on 15% vat. 2. FCE- (Foreign correspondent charge) :- Below $25 up to $ 2500. if applicant want to bear the application charge them addition $ 75 will be charged. 3. Telex- per Telex 300 Tk. But if amendment is consider then per amendment 500 Tk. and of Courier Telex, then it will be 1500 Tk. 4. Handling charge- Tk 200 fixed. 5. Stamp change :- Per L/C 360 Tk. Murabaha gain 150 Tk. L/C application 150 Tk. Other 60 Tk. 360 Tk. 6. L/C Margin- that mean cash security ordered by Bangladesh Bank. For industrial items it is liberal & for luxurious items it is highly cost. 5.55. How many parties are involved of L/C? 1. Importer 2. Exporter 3. Opening/ Issuing bank 4. Advising Bank 5. Negotiating Bank 6. Confirming bank 7. Reimbursement bank. 5.56. Which documents are given to the parties for opening L/C, by the bank? 1. IMPO form. 2. L/C EXP form. 3. Charge document (for, D.P. notes, disbursement, Murabaha agreement, Sanction advice, TR (Trust receipt), letter of authority

4. Letter of pledge 5. Letter of Hypothecation. 6. L/C application. 7. Letter of guarantee. 5.57. How many copies are needed of import form? According to import act 4 copies are needed:1. Original for Bangladesh Bank. 2. Duplicate for authorized dealer. 3. Triplicate for authorized record 4. Quadruplicate for submission to the Bangladesh Bank. 5.58. L/C authorization form: It is made for 1. Commercial Sectors. 2. Industrial Sectors. It contains 6 page. 1. Original for exchanged Control purpose. 2. Duplicate for custom purpose. 3. Triplicate for listening authority. 4. Quadruplicate for listening authority. 5. Quadruplicate for the registration unit of Bangladesh Bank. 6. Office copy for authorized Bank 5.59. What contains of L/C form: 1. L/C Number 2. Shipping period 3. Importer name & address 4. IRC (Import Registration Certificate) 5. Years of renewal 6. L/C value (It is mentioned transferring currency and Tk.) 7. source of financing] 8. Description of goods 9. HSC (Harmonious system code.) 5.60. What composite facilities are justified by the Bank for opening L/C? (To the importer): Bank qualified following1. Behavior of imports 2. Past experience

3. Reputation 4. Transaction 5. Bank solvency etc. 5.61. What is Stock Lot: If ship is reached but parties are not agreed to take the goods for bad quality, delay delivered, in these case action will be published, that goods will be sealed, because market price is gradually reducing, it is to be informed to the parties. This is the stock lot of IBBL in concept of shariah. 5.62. Procedure for Transferable L/C: The original beneficiary when request the banker in writing to effect transfer the L/C to the second beneficiary on the letter of request must be verified by his banker. The L/C can be transferred only on the terms and condition specified in the original credit. A transferable credit can be transferred once only. Fractions of transferable credit can be transferred separately. The aggregate of transfers will be treated as only one transfer; the aggregate of such transfers must not exceed the original value of L/C. When transfers are made in part it should be verified that the original L/C permit part shipment. While transferring a credit bank may hold the original at their custody. Each and every transfer must be noted on the back of the original one. All the transfers are to be noted in the L/C register. Bang charges/ commission are to be realized from the 1 st beneficiary unless otherwise specified. Each transferable L/C is subject to UCPDC, ICC publication No. 500, 2000 revision. 5.63. Processing and Opening of Back to Back L/C Procedure: An exporter serious to have an import L/C limit under back to back arrangement, must have apply to the designated bank in prescribed forms for sanction for opening of Back L/C. In that case the followings information is to be furnished by the applicant: 1. Full particulars of Bank account. 2. Types of business (Proprietorship, partnership, Ltd. Co.) In case of Ltd. Co. Balance Sheet of last 3 years and the name of directors. 3. Historical Back ground. 4. Amount of limit required/ 5. Terms of payment. 6. Goods to be imported. 7. Security to be offered. 8. Repayment schedule and source of fund. 9. Other liabilities of the customer with the bank. 10. Statement of Assets and liabilities. 11. Trade License.

12. Valid bonded war house license. 13. Membership Certificate. 14. Income Tax declaration. 15. Memorandum of Articles. 16. Registered partnership deed (if partnership firm.) 17. Resolution. 18. Photo9graphs (all directors). On receipt of above particulars and papers, the back to back L/C opening section of the bank will prepare a credit report of the concerned importer/ exporter. On receipt of above information, the designated branch must be obtained a sanction from Head Office for opening back to back L/C. In all cases the sanction must be informed to the importer for acceptance. On security confirmation form the client that the terms and conditions of the sanctioned are acceptable, the subsequent documentation/charge document is taken up. 5.64. Confidential Report of Foreign Suppliers: According to exchange control regulations bankers are required to obtaining confidential report of the beneficiary of L/C before opening the same, if the amount of L/C exceeds Tk. 5.00 lac. Bank cans L/C below Tk. 5.00 Lax without obtaining confidential report. Bankers can write to their Foreign correspondents to supply the confidential report. But from practical experience foreign correspondents of different countries are not supply timely. To overcome the above situation bankers can consult reference books i.e. MUNN/DUNN/BRADSTREET/ Trade Directory of various chambers of commerce of different countries. On receipt of confidential report from any source the bender can accumulate the same in one master file. 5.65. Negotiation of Export Documents of Back to Back L/C: On receipt of documents it must be checked properly and then a proposal sheet would be prepared as per banks format indicating the full particulars of shipment and discrepancies under the signature of authorized person and should be placed to the manager/ appropriate authorized for disposal instruction or sanction. L/C Terms : Each and entry chaise in the L/C must be complied with meticulously and ensure the following: 1. That the documents are not stale. 2. That the documents are negotiated within the L/C validity. If a credit expires on a recognized bank holiday its life is automatically become valid up to the next working day. This is to be stipulated in the documentary schedule quoting the relevant article of UCRDC. 3. That the document value does not exceed the L/C value. DRAFT:

Draft is too examined an under: 1. Draft must be dated. 2. It must be made out in the name of the beneficiary’s bank or to be endorsed to the order of the bank. 3. It must be draw by the opening bank instead of beneficiary of the credit as Per UNPDC 500. 4. The signature of the drawer must be verified by the bank. 5. In case of issuance bill the bill the requisite foreign bill stamp has been affixed as per stamp act. in the country. 6. Amount must be dallied with the invoice amount. 7. It must be marked as drawn under L/C no..........dated.........issued by ........... bank. INVOICE: It is to be scrutinized to ensure the following: 1. The invoice is addressed to the importer. 2. The full description of merchandise must be given in the invoice strictly as per L/C. 3. The price, quality, quantity etc. must be as per L/C. 4. The invoice must be Language in the language of L/C. 5. No other charges is permissible in the invoice beyond the stipulation on the L/C. 6. The amount of draft and invoice must be same and within the L/C value. 7. If L/C calls for consular invoice, then the beneficiary’s invoice in not sufficient. 8. Required number of invoice is submitted. 9. The shipping mark and number of packing list shown in the B/L. must be identical with those given in the invoice and documents. 10. The invoice value must not be less than the value declared in EXP form. 11. Invoice amount must be correct on the basis of price, quantity as per L/C. 12. Invoice amount must be correct on the basis of price, quantity as per L/C. 13. Consular invoice must be steamed by the local consulate/ embassy of the country to which the goods are imported. Other Documents: Certificate of origin, weight certificate, phytosanitary certificate, packing list, Inspection certificate, certificate of analysis, quality certificate of analysis, quality certificate etc. each of these certificates must conform to the goods invoiced and are relevant to L/C. Recording in the Register: After checking and disposal instruction/sanction of the competent authority the full details of the shipment and all the relevant documents are recorded in the prescribed FBP/FBN register. The following particulars are to be noted:

Date end FBP number. Name of the shipper/exporter. Name of the Export goods. Name of the vessel. Name and address of the importer. Master L/C number and the name of issuing bank. EXP No. date of report, disposal of EXP-Duplicate and Triplicate and disposal date of EPC (Export price committee) export of raw jute/DRF (Registration form for export of jute goods). Discrepancy if any (reference of indemnity. reserve if any). Amount in F.C. and taka, rate, exchange earned etc. Date of reminder issued. Date of realization and P.R.C (Proceeds realization certificate). Whether issued or not. Date of reporting of transaction to Bangladesh Bank (Vides- 1,2,3 etc.) 5.66. Bai-Muazzal WES (Bill) Investment: On behalf of the Ready-made Garment Industries clients, open deferred payment L/C for import of fabrics and other accessories under Back to Back arrangement on the understanding the at the importers will arrange payment on or before the due date by repatriation of proceeds of exports of their products. In some cases they cannot execute exports in time resulting in their failure to repatriate export proceeds to make import payment on its maturity. But the bank in order to keep its commitments has to pay on due date irrespective of relative export proceeds realized or not. Such overdue import payment is to be made by purchase of foreign currency from WES/SEM and the importers will have to arrange for the same. On failure of the party to arrange import payment on or before the maturity date, the branch will effect the remittance by purchasing the required foreign currency at SEM rate by debit to Bai-Muazzal WES Bills A/c giving effect to the relevant agreement under intimation to the clients of the equivalent take and due date for the repayment . Then the branch will approach the Bangladesh Bank for their post facto approval along with the following documents/papers: 1. 2. 3. 4. 5. 6. Party`s letter addressed to NBR. Bill of entry exchange control copy. Export L/C Copy. Back to Back L/C copy. Pro-forma Invoice Position of the Goods.

The branches will need vigorous follow-up for recovery of the Bank`s dues within due date of the Agreement positively. In case of the party`s failure to repay the Bank dues as per agreement the branch will arrange for disposal of the stock after obtaining necessary clearance from the competent Govt. Agencies and Head office also.

Documents Require: 1. 2. Charge documents Undertaking to arrange foreign currency for payment.

Agreement for sale of goods under Bai-Muazal. 5.67. 5 years growth of import: IMPORT 50000 40000 30000 20000 10000 0 1 2 Taka (Million) Year

1999 3 2000 4 2001 5 2002 2003

Chapter Six EXPORT 6.1. What is Export? Export means lawful carrying out of anything from one country to another country for sale 6.2. Who is Exporter? The importers and exports trade of the country is regulated by the Imports Exports Control Act 1950. No person /firm is allowed to export any thing from Bangladesh unless he is registered with CCI and E under the registration order (Importer and Exporter) 1952. To become an exporter an ERC (export Registration Certificate) must be obtained from the office of CCI & E. 6.3. Procedure for obtaining Export Registration Certificate (ERC): For obtaining Export Registration Certificate (ERC), intending Bangladesh Exporters are required to apply to the CCI & E authority in the prescribed from along with the following documents: a) Nationality Certificate. b) Copy of valid Trade License.

case

c) Income Tax Certificate. d) Bank Certificate. e) Copy of rent receipt of the business firm. f) Registered Partnership Deed in case of partnership concerns. g) Memorandum of Articles & Association and Incorporation of Limited Company.

certificate in

On satisfaction of the CCI & E the potential exporter is advised to deposit export registration fee of Tk. 1,000/- through Treasury Challan to Bangladesh Bank/ Sonali Bank for enabling them to issue ERC. The ERC may be renewed every year on payment of renewal fee of Tk. 1,000/- through Treasury Challan as started. 6.4. Get the name of the Importer/buyer. The following authorities/ organizations will be able to furnish the names of foreign buyers a) The export Promotion Bureau. b) Trading Corporation of Bangladesh. c) The Commercial Representatives locater in our Embassies/ High Commissions abroad. d) Commercial Representatives of Foreign Governments located in our country. e) Commercial Banks, chamber of commerce and Trade Association. f) International Chamber of Commerce, Paris and other organizations through their Directories, Periodicals and Publications. g) Direct Trade Deals of the Government. h) World Directory of Industry and Trade Association. i) Export Service Organizations i.e. shipping lines, airlines, marine insurance firms etc. j) Trade Fairs. k) Trade Directories of the world. 6.5. Different types of Export: a. Export under L/C Exporters are allowed to export the commodity under irrevocable letter of credit. Under this type of export, exporter will ship the goods as pr terms of the credit and will get payment as per arrangement of the credit. b. Consignment basis export: Exports are allowed against firm contract. As per contract, importer will ship the goods and the buyer will make payment after selling the consignment. c. Export against advancement payment: Sometimes exporter receives payment in advance. In that case Authorized Dealer should obtain a declaration from the exporter on the “Advance receipt voucher� certifying the purpose of the remittance. Then the exporter will export the goods against the advance payment. 6.6. General Rules for Export: There are some rules, which are mandatory for export of any goods form Bangladesh. The rules are as under:

(1) No Person can export any goods from Bangladesh, unless he is duly registered as an exporter with the CCI & E. (2) All export must be declared on the EXP form, which is consisting of 4 copies. (3) Export mush is against any of the following: a) Export L/C. b) Firm Contract. c) Advance Payment. (4) Transport documents related to land route or sea and any other Author8ized Dealer. The Airway Bill and any other documents of title to car4go may be drawn to the order of a Bank in the country of import. However in case of advance payment, transport document may be drawn to the order of Foreign Importer Bank endorsement of transport documents is prohibited. Directions under Sl. No. shall not apply in the following cases: a) Export of Trade sample. b) Personal Effects. c) Goods shipped under the order of Govt. d) Export of fresh fish, vegetable and fruits. e) Gift package for less than Tk. 50/-. (5) ‘EXP’ must be submitted to the Bank by the exported and Bank will submit the Duplicate Copy to the Bangladesh Bank within 14 days from the date of shipment. (6) Payment for goods exported should be received through an authorized dealer in freely convertible currency. (7) Export proceeds must be received by the exporters within 4 months. (8) Overdue export bills statement to Bangladesh Bank should be submitted by the 15th of the month, following quarter to which it relates. (9) In case of short shipment, exporter should give a notice of short shipment of\n the prescribed from in duplicate, the prescribed from in duplicate, the customs, who will forward a Certified copy of the notice, to the Bangladesh Bank. 6.7. Issuance of EXP Forms and Numbering: Bank will certify EXP Form only after confirming the following: a) Arrangements have been made for realization of Export proceeds. b) Bonafides of the importer/ consignees abroad. c) Arrangements have been made for receipt by Authorized dealer of documents of title to goods. d) The EXP has been signed by the exporter. EXP number should be as under: ADs Code Register Serial No Year

6.8. Disposal of EXP Form: I) The EXP Forms are quadruplicate. Exporter will complete and sign the EXP Forms. II) After completing he EXP Forms, exporter should submit all copies to the AD for certification. After Bank’s certification it to be submitted along with the shipping bill to the custom authorities. Custom authorities affixing their seal & signature will return the duplicate, triplicate and quadruplicate copies to the exporter. The original copy to be forwarded to Bangladesh Bank by custom authority. III) Exporter will submit the remaining copies EXP forms along with invoice to the AD through whom payment to be received. IV) AD should submit the certified duplicate copy of EXP forms to the Bangladesh Bank within 14 days from the date of shipment. V) Upon receipt of payment, the AD should also submit the triplicate copy of EXP form to Bangladesh Bank at the end of the month certifying on the reverse of the form, with monthly summary statement. 6.9. Stages & Mechanism of Export: (1) Exporter will make the goods ready for shipment. (2) Arrangements have to be taken for inspection of the goods by the competent authority as per credit terms. (3) Exporter will declare on EXP form against export L/C/Firm Contract/ Advance payment. (4) Exporter have to arrange approval for export from custom authority on EXP from by submitting Export L/C, Export permission from CCI & E, Quota clearance from EPB, U.D. in case of garments, invoice, packing list along with shipping bill prepared by C&F agent. (5) After completion of custom formalities, shipping company will receive the goods and will issue B.L. (6) Exporter will collect visa/ license and certificate of origin for final documentation. (7) Exporter will submit the full set of documents to the negotiating bank for negotiation. (8) Negotiation bank will dispatch the documents to the issuing bank for clearance of the goods from destination against payment as per credit terms. 6.10. Export Documents Checking: After submission of export documents by the exporter, Bank must check, whether the entire required document submitted or not. Bank must examine all documents stipulated in the credit with reasonable care to ascertain whether or not they appear, on their face to be in compliance with the terms and conditions of the credit. Documents not stipulated in the credit will not be examined by the Banks. To examine documents Bank must follow the L.C terms and international standard banking practice. Automated or computerized carbon copies to be treated as original documents if it is marked ‘original’ Copy documents need not be signed. Multiple documents means one original and remaining copies, Signature, Mark, Stamp or label is sufficient for authentication of document. Bank will accept a prohibited in the L/C. 6.11. Some common discrepancies in Export Documents: 1) Late shipment. 2) Late presentation.

3) Part shipment effected. 4) Consignee/Notify party differs. 5) F.CR presented instead of B/L. 6) House Airway Bill presented instead of AWB 7) B/L shows “ freight collect” instead of “freight prepaid” 8) Shopped on Board not marked on the B/L 9) B/L is classed 10) Description of the goods differs 11) Unit price differs 12) Amount overdrawn 13) Pre-shipment inspection certificate absent 14) Certificate does not cover credit terms 15) Certificate not signed by authorized person 16) Not showing inspection of the gods at named place. 17) Telex acknowledging receipt and giving acceptance on sample, not presented etc. 6.12. Export Financing: To meet up the cost of the goods to be exported, the exporter, the exporter may require Bank finance. Besides, he may require finance for go down rent, freight etc. Event after shipment of the goods, exporter may require Bank finance to meet-up his current expenditure up to repatriation of the export proceeds. There are two types of export finance: (i) Pre-shipment finance. (ii) Post shipment finance. Pre-shipment finance: Pre-shipment investment is finance, allowed by a Bank to an exporter, to meet the cost up to the shipment of the goods t overseas buyer. The purpose of the investment is to purchase raw materials or finished goods or manufacturing processing, packing and transporting the goods. Post shipment finance: There is a time gap between export of the goods and realization of the proceeds. So exporter may require finance in that period to continue his business. So Bank may finance against export documents ensuring the following: 1) Export documents comply the credit terms. 2) Buyer is bonafide. 3) Party’s past performance is satisfactory. 4) Any other security in case of export under contract. 6.13. Security of Pre-shipment Investment: 1) Bank will mark loin on the related export L/C. 2) Bank will finance against a L/C having sufficient time to procure the goods for export. 3) Finance to be done after arrival of the imported raw materials under back to back L/C.

4) Bank will supervise the production from time to time to ensure export of the goods in time. 5) If finance is applied for a particular purpose Bank will ensure the proper use of the money for the purpose only. 6) Change documents to be signed by the exporter before disbursement of the PSI. 7) In case of Quota finance, Quota allocation letters to be kept lien with the Bank. 8) Bank will adjust the liability proportionately from related export documents. 6.14. Types of Pre-shipment finance: 1) Cash finance for purchase of raw materials/finish goods. 2) Cash finance for factory rent, wages & salaries and all other factory expenses. 3) Finance for payment of freight. 4) Purchase of Quota to export the goods to Quota countries. 6.15. Limit of Pre-shipment finance: 1. As. per existing rule Banks can extend pre-shipment facility up to 90% of Export L/C value (FOB value) 2. Bank will finance with in the Head Office sanction limit for the concerned client. 3. Other liabilities of the client with the Bank also to be considered for extending pre-shipment facility. 6.16. Issuance PRC: Sometimes exporters are required to submit to the various Govt. Agency evidence of goods and realization of their proceeds. In such cases proceeds realization certificate (PRC) may be issued. 6.17. Negotiation / Purchase of Bill without L/C: In our country exports are also made on the basis of contract between the buyer and the seller with out the cover of L/C. In such case document are delivered to the buyer through the intermediary of foreign correspondent of the A.D against payment. Limit (post shipment finance) is usually sanctioned from Head Office to such exporters to boost up export of the Country. Document sent on Collection Basis: When the bank refuses to negotiate the document due to major discrepancies, the bill is sent by bank on collection basis under written instruction from the beneficiary. To handle such transaction as per ICC Publication No. 322 named “Uniform Rules for Collection� 6.18. EXP Requirement: All export from Bangladesh must be declared by the shipper on EXP form to the Bank enabling them to submit the duplicate within 14 days from the date of shipment. The shipper is required to repatriate the export proceeds within 4 months from the date of shipment otherwise penalty is imposed upon them. A careful watch is to be dept to ensure that the sale proceeds are received on due date. A due date diary must be maintained to pursue the individual case. 6.19. Shipping & Customs Formalities: International transfer of goods are made through the Letter of Credit which issued by the foreign bank at he request of Importers in favor of exporter. Such Export L/Cs is enrooted through the Bangladeshi Banks by the foreign banks who have correspondent relationship. The foreign issuing banks may advise a credit in the following manner:

1. 2. 3. 4.

By short cable/ Telex followed by Airmail. By full telex (No airmail confirmation). Airmail L/C. Advising of L/C after adding confirmation.

Keep the goods ready for dispatch (shipment): On receipt of the order from the importer, the exporter is to take immediate steps to manufacture the goods if they are not already in stock according to the specifications desired and keep them ready for dispatch. 6.20. Inspection of Goods: The goods should be kept ready for inspection of the competent authorities and issue a certificate of quality control required under regulation: for example: 1. Export promotion Bureau. 2. Custom Authorities who will inspect the goods under Sea Customs Act. 3. Chamber of Commerce and Industry. 4. Other agencies authorized to inspect the goods before shipment. Get in touch with the customs and other competent Authorities: Getting shipping space: In order to export the goods, the shipping companies or their agent must be approached by the exporter for booking space, to know the freight etc. So that shipment may be made conveniently. In this regard, the services of clearing and forwarding agents may be taken conveniently for actual shipment of goods; commission etc. is also to be paid to the agents for this works. Get in touch with port Authorities: Who will have to allow the goods to move into the port and make arrangements for loading and unloading and keeping the goods in godowns? Shipment of Goods and other documents to C & F Agents: To handle the goods for export in the port of shipment banks nominate clearing agents to handle the goods to pass on custom formalities. Clearing agents are appointer by the bank from amongst the C & F agents of custom authority. The clearing agent on behalf of the bank arrange shipping space in the overseas vessel as per shippers instructions and also pays all the relevant dudes payable to the custom authority shipping company as freight. Bank or the shipper is to reimburse these to the C & F agent to the debit of party account. 6.21. Mate’s Receipt: When gods are hand over to the against of the shipping company for shipment and he issued a receipt known as mate’s receipt signed by the master of the ship when the goods are actually shipped the mate’s receipt is exchange for the regular B/L. The bank is to forward the following shipping papers to the C & F agent under their forwarding schedule: 1. One copy of invoice prepared by the shipper.

2. One copy of shipping instruction to be prepared by the shipper complying the terms of relevant L/C or contract so that the B/L is made out in the name of an Authorized Dealer strictly in terms of L/C and become free from all defects. The resultant B/L (Original) must be sent to the bank along with other relevant paper. On receipt of the original B/L, the bank will ask the exporter to submit the relevant papers for negotiation and documentation. Send Shipping Advice: On shipment of goods and receipt of Bill of Lading and other documents from the clearing and forwarding agents send a shipping advice to the importer abroad so that the latter may stand making arrangement for taking delivery of the consignment. Shipping Requirement of an Exporter in the context of Export: Every exporter under foes certain sequential formalities when he takes up the venture of exporting goods. First of all the exporter comes into contact with the buyer and negotiate the commodity contract, while negotiating the commodity contract and exporter takes into consideration three resects: 1. Cost of the commodity i.e. CFR, CIF or FOB 2. Insurance. 3. Freight component. The commodity contract between the seller and the buyer may be concluded either on FOB basis or on CFR basis, the shipper has the option to pay the freight and nominate vessel of his own choice. In case the export contract is on FOB basis, the buyer pays freight and has the option to nominate vessel of his own choice. CRF contracts are favorable for the exporting countries because the shipper can apply his option to nominate the vessel belonging to save foreign exchange. 6.22. Which documents/ papers are requirement in regard to export of goods subject to L/C stipulation: 1. Commercial Invoice. 2. Certificate of origin. 3. Negotiable bill of lading. 4. Pre-shipment inspection certificate. 5. Quantity & quality certificate. 6. Fumigation certificate depending o the nature of cargo. 7. Phytosanitary certificate depending on the nature of cargo. 8. Gross revenue proceeds (GFP), export price check (EPC)/ Incase of jute shipment etc. All the above documents prepared by the exporters are an essential Prerequisite for shipment of export to various countries. In completion of documentary formalities cargo is firmly booked by the shippers. The shipping documentary formalities cargo is firmly booked by the

shippers. The shipping agents issue shipping order. The shippers/C&F agent then forward the shipping order along with shipping bill to customs authorities. Customs authorities check up the shipping bills/ in voices/ packing list/ shipment order. GRP/EPC Pre-shipment inspection certificate etc. When they are satisfied with export documents and find jetty and charges have been pad by the shippers, they pass the shipping bill and order for shipment. The export cargo is then weighed by the LMD and shipment is effected in the presence of preventive officer. Immediately when the cargo has been lifted on board on the basis of LMD. Mate receipt are issued by the master/chief officer of ship, and finally bills of lading are prepared on the basis of each mate receipt which is an acknowledgement of receipt by ship owners against shipment of cargo on board. On completion of shipments when shipping documents are presented to bank for necessary settlement of bill of exchange, the bankers should a\carefully scrutinize/ check that the documents have been prepared as per the terms of L/C. 6.23. General rate Structure: The freight raters are usually of two types: a. Tramp rates b. Liner rates. Tramp rates: The tramp rates are usually arrived at by shippers and ship owners through negotiation and it fluctuates considerable. The tramp vessels do not maintain fixed schedule to any particular route or destination. Liner rates: The liner rates are usually applied by the liner operators various liner arrangement around the globe. The vessels engaged in liner operation having fixed sailing schedules to a particular destination operates through fixed freight rates. The liner rates usually remain stable and fixed unless otherwise it is revised or changed by the conference through proper notifications to trade. 6.24. Some Bad Terms in Export L/C: Generally the following bad terms are found in the export L/C: 1. Negotiation restricted : It should be freely negotiable. 2. Expiry out-side Bangladesh : It should be in Bangladesh. 3. Document to be present for Negotiation outside Bangladesh : It should be in Bangladesh. 4. Bill of lading to the order of opening Bank or Buyer : It should be to the order of negotiating Bank and endorsed favoring opening bank or named bank as per L/C terms. 5. Blank endorsement in B/L. : In no circumstance blank endorsement is acceptable in exchange control Bangladesh. 6. Airway Bill to the order of applicant : It should be to the order of a bank. 7. Payment will be made after of proceed from a name bank or buyer. : Payment terms should be clear & specific. 8. G.S.P from requires : G.S.P form ‘A’ is to be issued by the authority. Only in case of the merchandise to be exported is made by using Bangladesh Raw materials.

6.25. Negotiation of Export Document: If the export document complies the credit terms Bank may negotiate the Document. Negotiation means the giving of value for Draft and/or documents by the Bank authorized to negotiate. For negotiation, Bank will issue and office note taking decision of purchase the documents and disbursement of fund. If it is decided to purchase the document then it to be recorded in the FBP register putting a serial number for the documents and the following voucher to be passed. Dr. FBN A/C @ OD sight Export Bill. Cr. F.C held against BB L/C (79% or as required). Cr. Marginal deposit A/C against FBN (2% or as required). Cr. Pre-shipment finance. Cr. Investment income A/C (PSI). Cr. Baim WES Bill A/C (For regular 10% & for overdue A/c 20% of generated found or as required) Cr. Hire Purchase A/C (For regular 10% & for overdue A/c 25% of generated found or as required) Cr. P&T Recovery A/c Cr. Local Agents Commission Cr. FCAD Export A/c (Maximum 7.5% of FOB value as per retention Quota) Cr. Party’s A/c It is notable that the above accounting procedure is applicable only for 100% export oriented garments industries. Other wise funds to be credited to party’s current account and other liability accounts, if any. FBN accounts to be adjusted within 21 days by debiting IBG A/c, Ho, and IBW after realization of the export proceeds in NOSTRO A/c. 6.26. Repatriation of Export Proceeds: Negotiating Bank will maintain regular correspondence with the L/C issuing/ paying Bank for realization of the export proceeds in time. And will follow –up the correspondence related to the discrepancies, discount clear by the buyer to avoid distressed cargo/no realization. Payment must be repatriate within 4 months. Overdue statement to be submitted to Bangladesh Bank quarterly. 6.27. Sending Export Documents on Collection: If the documents are discrepant exporter’s Bank will send the documents to the Issuing Bank on collection, at the request a risk of the exporter. At the time of sending documents on collection the following voucher to be passed. Dr. out-ward foreign bill Lodged A/c Cr. out-ward foreign bill for Collection A/c After realization of the proceeds, above entries to reserved and the following voucher to be passed. Dr. IBG A/c HO, IBW @ Mid rate (Bangladesh Bank’s buying rate +TT documentary ÷2) Cr. Party’s Current Account Cr. Party’s Investment Account Cr. Investment Income A/c Cr. Income A/c (Commission) Cr. P&T A/c

Cr. Telex charge Cr. F.C held against Back to Back L/C 6.28. Export claim & Discount claim settlement: If the buyer becomes reluctant to accept discrepant documents without discount, banks may allow discount on the request of the exporter, if discount is less than 10% of the export values, subject to post facto approval from Bangladesh Bank. If the discount is more than 10%, prior approval is required. Foreign commission, brokerage or other trade charges related to export may be allowed up to 5% without Bangladesh Bank permission, but for more than 5%, permission is required. In case of export of books, journals and magazines, 33% discount is allowable. Export claim may be deducted from the bill vale or may be remitted against claim after full realization of the export proceeds. 6.29. Export Incentives: To promote the export business, Government has declared some incentives for exporter. Following are the main incentives as per export policy 1997-2002 declared by the Ministry of Commerce. Retention Quota: Exports dared allowed to deep 40% of their export proceeds to their F.C A/c. It is 7.5% in case of export against switch import is higher, proportionately. Investment period: Normally export finance, as working capital is allowed for 180 days. Now it has been extended up to 270 days for frozen foods, tea and leather. Credit Card: Exporters are allowed to get credit cards for business tour. Investment Facility: Commercial Banks may finance for export, up to 90% of FOB value of the export L/C. No compensation: Commercial Banks will not impose compensation on overdue sight export bill under irrevocable export L/C. Duty Draw Back: Those exporters, who are not available Bonded Warehouse facility, are entitled to get duty draw back facility. They will pay the duty to the custom authority at the time of importing the raw materials and after realization of the export proceeds. They will apply for draw back duty paid earlier Authority will pay back the duty. Bonded ware House Facility: 100% export oriented industries are allowed to import duty free goods for ultimate export. The goods to be stored at the Bonded Warehouse.

Duty Free Capital Machinery: 100% export oriented industries outside EPZ are also allowed to import capital machinery’s free of duty. Cash Incentives: Deemed exporters are allowed 25% Cash Incentive by Bangladesh Bank. Stock Lot Disposal: Rejected Garments & Leather may be sold to local market paying 20% duty on the imported raw materials. Freight Rebate: Bangladesh Biman charging freight at a reduced rate for fruit & vegetable export. 6.30. 5 years growth of Export:

EXPORT

25000 20000 15000 10000 5000 0 1 2 3 2000 4 2001 5 2002 2003 1999 Taka (Million Year

Chapter Seven REMITTANCE 7.1. What is Remittance? The word “Remittance” originates from the word “remit” which means to transmit money/ fund. In banking terminology, the work “remittance means transfer of fund one place to another. When money transferred from one country to another this is called “Foreign Remittance”

7.2. Types of Remittance: Foreign remittance may be classified into. • • Inward Foreign Remittance. Outward Foreign Remittance.

Inward Foreign Remittance: Inward Foreign Remittance means Remittance received from foreign countries from abroad. In other words remittance coming into our country from other countries by the remitter by way of permissible banking channel through freely convertible Foreign Currencies is called ‘Inward Foreign Remittance’ i.e. payless point of view it is inward foreign remittance. On the other hand remitter’s point of view it is called outward Foreign Remittance. During The year 1995-1996 Bangladesh received and amount of US$ 1217.062 Mil as Foreign remittance. The above process of Remittance may be presented diagrammatically as under:

Remitter Personal confirmation

Remitta’s Bank Banking confirmation

PAYEE Outward Remittance:

Payees Bank

Outward remittance of funds be made by means of T.T. D.D. T.T. etc. the remitter has to deposit money along with the application contains name and address of the payee name of the currency etc. All outward remittances must cover the transactions approved by the Bangladesh Bank. Which are usually for importers travel & educational expenses? Direct/ Indirect Remitter: Wage Earners: Bangladeshi nationals working abroad both in private sector & in Govt. Sector. Indenture: Indenting commission & Agency commission received from suppliers from abroad. Bangladeshi Nationals working in Bangladesh Embassy abroad. Foreign Govt./ Govt. organization (UNO & others) who have their own activities in Bangladesh say business, Embassy etc. can also remit to Bangladesh for meting their expenses, salary etc., Doners: Foreign Doners can only remit to Bangladesh through the Govt. Register Organization & institution etc. Exporters: Export proceeds also remitted to Bangladesh against exporting of goods.

7.3. Activities (Task) of Remittance: Only three activities are executed these are-

Renitence IFBC

OFBC

(Inward foreign bill collection) (Outward foreign bill collection)

FCC (Foreign currency clearing)

1. OFBC – Draft, cheque etc. are drawn outward / abroad: Two types of collection-

Collection

RL (Special type of cheque that are paid to be ensured)

Forwarding (Incase of disfavor)

2. IFBC: Two types -

IFBC

Drawn on other bank except Islami Bank that are coming from out ward

Local Bank Issuing from other bank drawn on Bangladesh Bank

3. FCC- FC clearing is a place where met to the agents place, from many banks, branches that is drawn on the Bangladesh Bank. 7.4. Mechanism of Remittance: FCAD- Foreign currency A/C Dollar. FCAP- Foreign currency A/C Dollar. MFCD- Mudaraba foreign currency deposits. PFC- Private foreign currency. FCAD- Exp.- Foreign currency A/C dollar export. NRO- Non residence doller. NRT- No residence Taka. PDAP- properly development A/C dollar. PDAP- properly development A/C pound.

Two types of DD1) With advice 2) Without advice. 1) When the advice is received then it is already received to the inter branch. 2) There is no advice. 7.5. Instruments of Foreign Remittances: Cash for : Dollar, Pound, France Fr. Riyal or any other currency. T.C. : Travelers Cheque. F.D.D : Foreign Demand Draft. T.T : Telegraphic Transfer, Cable transfer or swift transfer. M.T : Mail Transfer. I. MO : International Money Order. Cheque : By any person & institution.. P.O : Payment Order. 7.6. Different types of F.C A/C: Foreign Currency A/c. Under wage Earners Scheme FCAD, FCAP & other. P.F.C A/c Private Foreign Currency A/c. N.F.C.D : Non resident Foreign currency Deposit A/c. Exporters Retention Quota A/c. Education Foreign Currency A/c. C.T A/c. Convertible Taka A/c. & Non- Convertible Taka A/c. 7.7. Procedure of Opening F.C. A/C.’S: Any Bangladeshi National or any person of Bangladesh Origin who are serving and working abroad (outside Bangladesh) and whose incomes are not derived from Bangladesh sources are called wage Earners. Following formalities to be obtained before opening a F.C A/c. Opening Form fill up: Account opening form prescribed for Foreign Currency account should be properly filled in. Signature verity: The signature of the account holder on the account opening form and specimen signature card must be verified with the signature recorded in the passport. Nominees’ signatures verify: The Signature of the nominee, if the account holder desires to authorize to operate the account in absence of him, nominee’s signature must be varied by the account holder. Photo: Photograph of the nominee and account holder must be obtained. Attestation of Nominee’s photo: The photograph of the nominee must be attested by the account holder.

Photo state copy of Passport: First three page and the page where responsible person. 7.8. Required Documents for Different Types of Remittance: 1. Declaration form signed by the remitted for getting the WES benefit. 2. ‘C’ Form to be filled in regarding purpose of remittance is required by the remittance from the remitter (for remitting exceeding US$ 20,000/-) 3. For export-EXP Form duly signed by exporter & other ERC, Invoice, AWB/BL & other documents. 4. Indenting commission-Photo copy of valid RC turn over/VAT, Tax Registration certificate form mist be submitted. Copy of previous month (paid VAT/Tax) treasure challan also) 5. Donation-NGO Bureau’s permission & NGO registration Certificate to be obtained. 6. If the remittance in the Form of Cash/TC is more than US$ 5,000/- then the same to be declared in the Form of FMJ supplied by the custom Authority which is required to produce the bank at the time of encasement. 7.9. Accounting Procedure on Foreign Exchange Transaction: (Inward Remittance) For T.T. 1st verify the test Number any entry in the T.T payment register. Dr. IBG A/c. D.D.ID. Cr. F.C. Deposit (W.F.H) A/c. (at National rate) Dr. WES Fund purchase A/c. Tk. @ T.T. Clean Cr. Party’s A/c. Cr. Commission A/c. Cr. Govt. Tax A/c.(If the remittance relates with indenting commission 5% & 15% Vat to be deducted). 2. If the party deposit draft to the bank for collection of the proceeds. In that case the following voucher should be passed: Dr. Outward foreign bills lodged A/C. Cr. Outward foreign bills for collecting. After clearance the proceeds of the draft the voucher as under: Dr. outward foreign bill for collecting. Cr. outward foreign bill lodged A/C. Dr. IBG A/C. H.O.ID (at notional Rate)> Cr. Commission A/C. Dr. W.F. purchase @ T.T. clean rate. Cr. P & T A/C. Cr. Pay’s A/C. Cr. Govt. Tax A/C. (for indenting commission). 3. When a Taka draft presented for payment those who are maintain NRD & Account with us. Dr. IB General A/c. L.O. (Mentioning related NRT A/c) Cr. Party’s A/c. 7.10. Accounting Procedure for outward Remittance for Issuance FDD/TT (Tested MSG to be given): Dr. F.C. Deposit (W.F. Held A/c.) @ 40 Cr. IB. General A/c. H.O.I.D,@40Dr. Party’s A/c/ Cash @ B.C. selling. Cr. W.F. Purchase A/c.

Cr. Commission A/c. Cr. P & T A/c. b) When issued T.C. Dr. F.C. Deposit (W.F.H) A/c. Cr. IB General A/c. H.O. ID. Dr. Partys A/c. Cr. Commission. 7.11. How can we know that the Remittance will be High authentic 2 (this is draft F.T.T. etc)? 1. Swift (Society for worldwide international financial Telecommunication) 2. MAC(-massage authentication code) it will be high authentic. For justification authority scrutiny the A/C. & signature etc. And then book ill inform to the party. 7.12. Preparation of Bangladesh Bank Returns n Foreign Exchange Transaction: Submission of foreign exchange returns to Bangladesh Bank is a statutory obligation of the banks according to the foreign exchange regulation Act 1974. Exchange control Dept. of Bangladesh Bank is responsible for ensuring the submission of returns by the AD Banks. All foreign exchange returns are to be submitted by the authorized dealers to their respect area office. The preparation of returns prescribed Pro-forma as given in the exchange control manual (1977 edition) and Foreign Exchange circular as issued by Bangladesh Bank from time to time are to be followed strictly. Moreover, in preparing these returns revised code list is to be consulted. 1. SCHEDULE A-1 and A-2: Schedule A-1 is used for reporting purchase of foreign currency of for debit to non resident taka account of correspondents against ‘EXP’ form certified by the authorized dealers. In case of advance receipts for the goods to be exported the transaction should be reported on schedule A-2 and an advance payment voucher should be attached therewith. 2. SCHEDULE B-1 and B-2: B-2 schedules are to be prepared separately for each foreign currency sold which B-1 will contain a summary of the relative amounts entered the summary statement S-1 3. SCHEDULE-C: Currencies purchased form A.D. maintaining separate currency position are reported on this schedule and be attached to the relative S01, S-2, of S-6 statement. 4. SCHEDULE-D: Foreign currency purchased from and sold to Bangladesh Bank must be entered on schedule ‘D’ and totals entered on the relative summary statement. 5. SCHEDULE-G Currencies sold to A.D. maintaining separate currency position are to be reported on this schedule. 6. SCHEDULE-H. Currency bought against credits to non resident taka accounts are entered on schedule-H. 7. SCHEDULE-O & P. Branches who do not maintain independent currency positions but operate on the foreign currency accounts of their Head office are another branch are required to submit the summary

statements to the area office of Bangladesh Bank. The transaction on account of Branches booked n the currency account are reported on schedules O & P. 8. SCHEDULE –e/-e-3/e-4. All sales of foreign currencies to the public for imports, travels and miscellaneous purposes are reported on these schedules. IMP formonE-2 and TM form on E-3/E-4. 9. SCHEDULE-J Inward remittances for amounts Tk. 5,000/- and above are listed on this schedule supported by form –C. Amounts below Tk. 5,000/- are reported on Inward remittance (IRV). 10. SCHEDULE-L. The schedule ‘K’ is not related to the summary statement S-1, S-2, S-3 or S-4. 11. SCHEDULE-L. Debits to non resident bank taka accounts covering transfers to other on resident bank taka accounts must be listed schedule ‘L’ and the total amount of taka must agree with the total on S-4 statement. The schedule should be submitted to the Bangladesh Bank in duplicate with there relative summary statements. 12. SCHEDULE-M. Debits to non resident bank taka A/cs against sales of foreign currencies must be listed on schedule ‘M’ and the total must be agree with the amount entered on S-4 statement. 13. SCHEDULE-N. The closing balance of the non-resident bank Taka accounts must be listed on schedule ‘N’. They should be grouped according to courtiers or currency groups. The final total amount must be agreed with the amount entered for closing balance on the S-4 statement. 14. Schedule-o The branches that do not maintain in dependent currency positions but operate on foreign currency A/Cs of their Head office are required to submit to the area office of the Bangladesh Bank unbalanced summary statements S-1, S-2 etc. Their transactions essentially reflect in the relative currency A/Cs. Although not in the currency account are reported don schedule O & P. 15. SCHEDULE-R: Credits to non resident bank Taka A/c. covering transfer from other non resident bank Taka A/c. must be listed on schedule-R and the total on S-4 statement. The schedule should be submitted to the Bangladesh Bank in duplicate with the relative summary statement. All the above noted schedules are to be completed by the authorized dealers in a coded form. For this purpose, the revised code list containing, commodity purpose and country codes issue by the Bangladesh Bank is to be consulted carefully. This code numbers are desired from the standard International Trade classification (SITC) approved by the Nations. 7.13. Statement and Return of Foreign Exchange Department: 1. Daily Statement of the L/C opening position and foreign currency position.

Weekly: 2. Weekly statement for onion, Garlic & spices etc. Fortnightly: 3. Fortnightly statement of IRC. renewal to CCI&E. 4. Fortnightly statement of LCAF copy to CCI&E. Monthly: 5. Murabaha WES Bills statement. 6. Performance report of foreign Exchange Business. 7. Statement of FBN (Regular). 8. Statement of Foreign Exchange Income Analysis. 9. Statement of Outstanding Export Bills. 10. Statement of Commodity wise. 11. Statement of outstanding commitment. 12. Statement of WES-7. 13. Statement of Inward Remittance. 14. Statement of Bangladesh Bank Return. 15. Statement of Customer liability. 16. BCD Circular-31 statement. 17. Statement of AID, Loan, Grant for L/C. 18. Statement of L/C. opening for NBR and Bangladesh Bank to ID, Head Office. Quarterly: 19. Bill of Entry outstanding statement. 20. SBS-3 Statement. Half Yearly: 21. Statement of AID, Grant activating by NGO in Bangladesh. 7.14. 5 years growth of Remittance: REMITTANCE

20000 15000 10000 5000 0 Taka (Million) Year

1

2

1999 2000 2001 2002 2003 3 4 5

Chapter Eight Problems of IBBL ■ lack of legal Islamic framework: There is no difference between IBBL and conventional bank in operation of foreign exchange and foreign trade. Islami bank has to deal in the same legal framework of Bangladesh bank. ■ In conventional banking system foreign currency is considered as goods not as currency and its value fluctuates continuously which is not in conformity with Islamic shariah. ■ Due to absent of government shariah board many aspects of Islamic banking techniques remain unsolved. For example, in case of Murabaha post import, if the client fails to repay the borrowed money in due time, bank takes compensation. But this compensation money is not treated as income for the depositor though the money is lent from the depositors account. That means this compensation is not the income of the bank. ■ According to UCPDC banks deal with documents not with goods. But according to Islam, banks should deal with goods. so today’s banking system is contradictory to Islami Shariah. ■ Due to absence of legal framework of IBBL the bank is facing problems in its transactions to handle shariah based contract regarding foreign exchange business. Because all other sections of IBBL; investment section and general banking section have manual of their own and they conduct their operation according to the manual. But foreign exchange section has no manual and due to this reason it has to face some problems. ■ The tax structure of the country is not conducive more conducive to the spirit of Islam in Bangladesh, tax structure is maintained in such a way, people are always trying to avoid tax . On the other hand the person who’s tax amount only is Tk 200 he has to paid minimum requirement Tk 1200. So the rich people are always trying to show profit less than actual and poor people are bound to pay minimum requirement.

■ Lack of using modern technology: In the new age of modern technology such as internet , robot islami bank is yet to be computerized . here maximum tasks are done by manually . some of the private bank has started E- cash , E- banking system that brings bank at customers drawing room . so to compete with others bank IBBL must has to move with modern technology. ■ Problem of backward linkage : Backward linkage is a problem for foreign exchange which is related to back to back L\C. backward linkage refers to those small industries that support the large industry . for example , for the production of a shitrt , cloth, button and other accessories are required . any problem of this small industries have effect on the large industry . ■ Islami bank does not participate in SWAP , as it does not consider currency as good . ■ In case of back to back L\C for deferred payment bank is bound to pay additional interest which is not consistence with Islamic banking system . ■ Lack of Islamic call money market: As the feature of call money market is not consistence with Islamic banking system, IBBL has to keep sufficient reserve to tackle future uncertainty. ■ IBBL does not consider the interest earned from Nostro account as income, as most of the bank is operated on the basis of interest. For this reason IBBL always keeps reserved currency in those accounts. ■ Misconception about IBBL: At present the numbers of branches of IBBL are 167 . But yet it could not recover the misconception about its banking system. Still rich people and some educated people of this country possess bad idea about IBBL. Because of poor advertisement and promotion, IBBL could not captivate those people. Recommendations 1) As there is limited number of Islamic banks in Bangladesh IBBL has to face many problems for banking operation. So IBBL can arrange seminars for directors of other banks about importance of Islamic Banking so that they can realize the fact and convert their conventional system. It will bring bright banking future for Bangladesh as a Muslim oriented country. 2) Islamic Banking Fair may be arranged for the people to let then know about IBBL’s banking system, facilities and special products such as Mudaraba Mohor Savings A/C, Mudaraba Hajj Savings A/C etc. 3) Foreign Exchange section should be well accommodation and furnish able to operate the transaction smoothly. 4) Islamic call money market should be introduced to meet the oversight fuind crisis in Islamic way.

5) Modern technology adaption should be done quickly for future success. Prospects of IBBL 1. As Islamic Bank is trying to do banking business following Islamic rules, it has a bright future to capture the banking field because most of the people of Bangladesh are Muslim. 2. Conventional banking system is based on fixed interest. Here client is bound to pay the borrowed amount whether the client earn profit or not. But in IBBL, there is not fixed rate. Sometimes bank removes the client from paying the loan amount and sometimes increases the installment number genuine problem. As a result bank is achieving faith to the people. 3. Islamic Bank Foundation which is an associate institution of bank does welfare work for the society. Compensation taken from defaulter is given to the foundation’s fund. This step is making a positive image of bank to the people. 4. IBBL is trying to establish Islamic call money market which will be a great facility of operation for the bank. 5. Integrity, honesty of the officials of the bank is praiseworthy. 6. Financial strength is increasing day by day. 7. People are becoming used to for Islamic banking operation. 8. Day to day number of full Islamic banks and Islamic banking branches of m,any banks are increasing in Bangladesh and abroad. 9. IBBL through still is a tiny bank, handles more than 10% of country’s export and import trade. 10. The bank has developed a wide network of correspondents for conducting foreign exchange business effectively and efficiently throughout the world. 11. At the initiatives and drive of IBBL, several universities in Bangladesh have introduced course of “Islamic Banking Finance”. 12. Every year IBBL gives scholarship to the 1st , 2nd and 3rd placed students of Finance Department of Dhaka University. This makes a new dimension of IBBL to the student society. 13. IBBL maintains relationship with 775 branches of 21 foreign banks and exchange houses which will be helpful for program of IBBL. Performance of IBBL FOREIGN EXCHANGE BUSINESS PERFORMANCE OF IBBL The IBBL handled Import Business for Tk.59,804 Million during the year 2004 as against Tk.46,237 Million in the year 2003 demonstrating a growth of 29.34%. The amount of Export Business handled during the year 2004 is Tk.29,151 Million as against Tk.21,738 Million in the year 2003 including a growth of 34.10%. The IBBL received Wage Earners Remittance of Tk.23,669 Million in the year 2004 as against Tk.16,668 Million in the year 2003 demonstrating growth rate of 42.00%.

Total amount of Foreign Exchange Business handled by IBBL during the year 2004 stands at Tk.1,12,624 Million as against Tk.84,643 Million in the year 2003 showing increase by 33.06%. The comparative figures are given below: (Amount in Million Taka) Sl. Nature Achiveme Target N of nt during for O. Business 2003 2004 Achieve Percentag d during e of 2004 Achieved over Target 2004 67,044 59,804 89.20% 30,433 29,151 25,002 23,669 122,47 112,624 9 95.79% 94.67% 91.95% Percent Target age of for growth 2005 over 2003 29.34% 86,08 5 34.10% 40,81 1 42.00% 34,39 1 33.06% 161,2 87 Project ed growth rate 44% 40% 45% 43%

01 02 03 Total

Import Export Remittan ce

46,237 21,738 16,668 84,643

The Executive Committee have fixed-up the target for 2005 with 40% increase in Import & Export and 45% in Remittance over that achieved in 2004. Import of some of IBBL AD branches is below average. The minimum target for any AD branch is fixed at Tk.500.00 Million. As such the aggregated Import target for 2005 stands at 44%. IBBL has 33 Authorized Dealer Branches to deal in foreign Exchange Transactions directly and 53 Forwarding Branches who are routing their Foreign Exchange Business through IBBL Authorized Dealer Branches. In order to handle Foreign Exchange Business smoothly & efficiently, IBBL has at present correspondent relationship with 235 Banks covering 850 branches/offices in 72 countries of the world having 37 Nostro Accounts with 24 Banks. Presently IBBL has Taka Drawing arrangement with 35 Banks/Exchange Houses for easy remittance of Wage Earners Income. FOREIGN EXCHANGE BUSINESS PERFORMANCE NATIONAL POSITION (Amount in Million Taka) Period Import Export %of National IBBL IBBL National IBBL 1991 127,986 6,204 4.85 68,235 3,967 1992 146,930 8,778 5.97 81,600 4,949 1993 163,500 8,612 5.27 92,985 5,842 1994 201,105 14,62 7.27 114,645 7,790 3 1995 257,765 21,21 8.23 134,935 11,016 8 1996 293,190 17,87 6.10 152,105 11,764 4 OF IBBL COMPARED THAT OF Remittance %of IBBL 5.81 6.06 6.28 6.79 8.16 7.73 National 29,835 34,692 40,260 45,847 55,573 56,352 IBBL 1,814 2,029 2,403 2,943 2,447 3,328 %of IBBL 6.08 5.85 5.97 6.42 4.40 5.91

17,37 5.37 184,785 14,469 7.83 0 1998 363,335 20,23 5.57 206,220 14,894 7.22 8 1999 403,790 20,39 5.05 228,870 14,798 6.47 6 2000 463,990 25,32 5.46 286,710 16,889 5.89 7 2001 492,140 25,90 5.26 319,115 16,082 5.04 7 2002 495,210 33,78 6.82 314,550 16,673 5.30 8 2003 599,250 46,23 7.72 361,870 21,738 6.01 7 2004 303,510 59,80 466,200 29,151 (Jan to 4 (Jan to ( Jan Aug) (Jan to Dec) to Dec) Dec) Source: Economic Trends , Published by Bangladesh Bank.

1997

323,625

66,173 75,662 90,024 98,481 115,785 164,844

4,806 6,361 8,415 7,644 9,879

7.26 8.41 9.35 7.76 8.53

14,67 8.90 0 184,913 16,66 9.01 8 139,964 23,66 (Jan to 9 Aug) (Jan to Dec)

FOREIGN EXCHANGE BUSINESS PERFORMANCE OF IBBL COMPARED THAT OF NATIONAL POSITION (Amount in Million Taka) Period Import IB %of Nationa BL IBB l L 134,520 7,11 5.29 4 159,340 8,82 5.54 6 167,660 1009 6.02 9 234,550 1927 8.22 9 280,980 1894 6.74 4 305,400 1869 6.12 8 341,850 1773 5.19 6 384,820 1974 5.13 5 422,760 2286 5.41 2 505,220 2658 5.26 9 490,490 2575 5.25 Export Nationa l 75,220 87,980 97,990 131,300 138,570 165,640 203,930 208,510 249,230 324,190 309,340 IBBL 45,28 52,55 64,09 10,447 10,583 13,005 14,790 14,662 15,844 17,249 15,517 Remittance %of IBB Nation L al 6.02 32,415 5.97 6.54 7.96 7.64 7.85 7.25 7.03 6.36 5.32 5.02 36,970 43,549 48,145 49,704 63,000 69,346 81,978 98,070 101,70 0 143,77 I BBL 1,921 2,052 2,793 2,716 2,648 4,291 5,270 7,404 8,029 7,475 12,92 %of IBBL 5.93 5.55 6.41 5.64 5.33 6.81 7360 9.03 8.19 7.35 8.99

199192 199293 199394 199495 199596 199697 199798 199899 199900 200001 2001-

02 7 2002558,740 4152 7.43 332,420 19,368 5.83 03 5 2003642,570 5139 8.00 405,810 25,104 6.19 04 7 Source: Economic Trends , Published by Bangladesh Bank.

0 177,28 8 198,69 8

4 15,95 4 19,07 8

9.00 9.60

World Rank of IBBL among Top 3,000 International Banks Sl.No 01 02 03 04 05 06 07 08 09 10 11 12 Year 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Rank 2447 2314 2303 2262 2119 2100 1999 1902 1771 1755 1581 1658

2314 2303 2262 2119 2100 1999 1902 1771 1755 1658 1581

Source: Bankers Almanac : World Ranking, Reed Businees Information, U.K.

Rank of IBBL among Top 500 Banks of Asia Sl.No 1 2 3 4 Year 1998 1999 2000 2001 Rank 465 443 437 414

480 460 440 420 400 380

465 443 437 414

Source: The ASIAWEEK FINANCIAL 500 Asiaweek Limited, Hong Kong

Exchange Rates (Office Rate) From PY-1971-42 to till Dare No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Period/ FinancialYear 1971-72 1972-73 1973-74 1974-75 1975-76 1976-77 1977-78 1978-79 1979-80 1980-81 1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 July, 2004 August, 2004 U.S Dollar Period Average 7.30 7.88 7.97 8.88 15.05 15.43 15.12 15.22 15.49 16.26 20.07 23.80 24.94 25.96 29.89 30.63 31.24 32.14 32.92 35.68 38.15 39.14 40.00 40.20 40.84 42.70 45.46 48.06 50.31 53.96 57.43 57.90 58.94 59.72 59.39 End Period 7.76 7.35 7.93 13.65 14.95 15.52 15.06 15.12 14.73 18.10 22.11 24.50 25.20 28.00 30.30 31.00 31.50 32.27 34.90 35.79 39.00 39.80 40.25 40.10 41.75 43.65 46.30 48.50 51.00 57.00 57.90 57.95 60.43 59.69 59.37 U.K. Pound Sterling Period Average End Period 18.97 18.97 18.80 18.80 18.80 18.80 20.81 30.00 29.36 26.70 26.51 26.70 27.61 28.03 30.50 33.00 34.51 34.71 37.55 34.92 36.76 38.42 38.27 37.39 36.23 34.21 31.76 36.62 43.03 46.42 46.71 49.62 54.71 54.00 55.03 50.28 53.64 61.04 66.44 58.05 67.17 74.23 63.17 60.20 59.91 62.49 63.46 63.18 63.08 64.84 69.02 72.62 74.88 77.16 78.92 76.28 80.04 77.46 74.32 80.70 82.86 88.73 91.75 95.49 104.07 109.21 110.11 108.74 108.15 106.64

Chapter Nine Prospects of Foreign Trade in Bangladesh Highly plausible future of Bangladesh Inspire of having various obstacles as a third world country, Bangladesh is not in a critical situation. The prospects of foreign trade of Bangladesh can be discussed step by step.

Ready made garments: Many scholars though that the future of export of RMG will be severe in the post MFA phase out. But it is trying to overcome the situation with the help of subsidy and infrastructure change from the Government. Industrialization: While the majority of large enterprises remain under state control, Bangladesh has been moving towards a market-oriented economy since the mid-1970s. In an attempt to diversify its economy away from agriculture, industrial development has been made a priority. Bangladesh is attempting to attract foreign investment, and has established export processing zones (EPZs) in Chittagong (the country's major port), Dhaka and Comilla. Exports of natural gas could provide an additional revenue source, but the issue remains controversial, and no final decision has been made. Supplier of Gas: Bangladesh's Ministry of Energy and Mineral Resources (MEMR) has overall responsibility for the country’s energy sector, controlling both policy formulation and investment decisions. Within MEMR, the "Power Cell" acts as a single point of contact to facilitate the electricity reform and restructuring process, including the development of Independent Power Projects (IPPs). There is much uncertainty and debate about the size of Bangladesh's natural gas reserves. Natural gas reserves at 10.6 trillion cubic feet (Tcf), mid-2004 estimates from Petrobangla put net proven reserves at 15.3 Tcf. The US Geological Survey has estimated that Bangladesh contains 32.1 Tcf of additional "undiscovered reserves." Bangladesh may have the potential to become a major gas producer, as well as supplier to the vast potential market in neighboring India. Regional co-operation: An opportunity for accelerated growth and farther energizing the economies of south Asia does exist by increasing investment through regional co-operation. Therefore enhancing investment co-operation and facilitating investment among the countries in the region will be crucial for the development of the economies in the region. Regional Investment co-operation helps lower transport costs, generate more complementarities by expanding and diversifying the production base and trade structure, diversify comparative advantage, introduce appropriate technologies and encourage competition.

Foreign direct investment: More recently there is a proposal from the Tata group to invest 2 billion dollars in Bangladesh in three projects: a steel mill, a fertilizer plant and a power plant. A substantial part of the production from all the three projects will be exported back to India. Both the governments of India and Bangladesh have welcomed this investment at the highest level. However much will depend on an agreement being reached between the Tata’s and the Govt. of Bangladesh regarding the terms and conditions for the supply of gas for the three projects. Currency from shrimp export: Few days ago, the four member team from the European commission’s food and veterinary office met the high officials at the Ministry of Fisheries and live stock to share the findings of filed trips to different shrimp establishments during their ten day stay in Bangladesh. The report drafted by the EC team, noted that the condition of the shrimp factories of the country has improved and the record keeping and monitoring at fisheries inspection and quality control department was also good. The factories, hatcheries and firms are following Hazard Analysis Critical control Point (HACCP) at all the stages. This is obviously good record for Bangladesh. It will facilitate the country to earn more foreign currency. Prospects of tea sector: Bangladesh is preparing to launch a concerted moves to boost its tea industry . it is a matter of hope that with productivity level higher than that in India and lower cost of production Bangladesh could give India a run for the money vis-à-vis tea in the near future . Information & communication technology : Bill Gets , the richest man of this world visited Bangladesh just few days ago . He is very much interested to help to boost our ICT sector. Already the Microsoft Corporation owned by him has launched a branch in Bangladesh. By developing our ICT sector we can smooth our foreign trade formalities and can earn foreign currency. Some commentators feel that if SAFTA is implemented true spirit, it can be critical for a South Asian Economic Union, with the region having a common currency, zero tariffs for internal trade, and open borders for intra- regional travel Overview on Foreign Exchange & Foreign Trade in Bangladesh BANGLADESH FOREIGN TRADE : AN OVERVIEW 2.1 Balance Of Trade Bangladesh is a developing country and balance of import and export trade plays a vital role in achieving rapid economic development. The trade balance is unfavorable because each year Bangladesh has to spend more for importing capital goods and raw materials for capital goods as well as industrial raw materials. Also consumption of petroleum products of the country depends almost on import. The current gap in visible trade of Bangladesh is significant and volatile and seems to be widening. Government is trying to boost exports by providing various forms of incentives to the private sector exporters. 2.2 Unit Price Index Of Selected Imported Commodities Table below shows the unit price(taka) index (UPI) of selected imported items

during 1996-97 to 2000-01

Table 2.2 Unit Price Index Of Imports ( Base: 1988-89=100) Commodity General index Wheat Rice Milk and Cream Pulses Spices Edible oil Sugar Crude oil (Petrol) Petroleum products Raw cotton Cement Fertilizers Iron and steel Unit kg kg kg kg kg kg kg MT MT MT MT MT MT 1996-97 151.53 147.40 174.37 168.16 192.17 152.17 117.13 108.13 121.00 132.30 181.33 92.53 98.48 198.28 1997-98 1998-99 162.99 154.76 182.65 175.35 178.50 167.41 225.28 210.16 1999-00 180.07 165.72 226.69 244.69 212.23 168.50 135.60 125.91 133.56 139.93 208.41 145.57 108.68 241.79 2000-01 193.62 165.79 243.55 245.63 201.64 191.11 146.00 125.95 136.57 198.61 236.13 149.58 112.47 213.37

202.73 212.08 162.85 170.89 124.56 130.87 113.51 119.28 127.04 133.38 141.05 148.05 189.71 199.79 97.14 131.50

103.15 107.13 267.63 288.92

2.3 Unit Price Index Of Exports Table below presents unit (taka) price index of export of selected principal goods during 1996-97 to 2000-01 Table 2.3 Unit Price Index Of Exports (Base: 1988-89=100) Commodity Unit 1996-97 1997-98 1998-99 1999- 00 2000-01

General index 182.75

-

153.24

168.04

178.54

178.46

Shrimp & prawn 233.72 Tea 137.67 Naptha 238.82 Fertilizers 153.76 Leather, hides and Skins 181.27 Raw jute 121.08 Jute goods 171.52

Kg Kg Liter M.T Kg M.T M.T

149.06 121.94 109.60 176.87 176.14 110.08 141.10

222.70 164.89 126.80 164.77 173.54 119.18 141.98

211.54 172.49 147.87 155.94 165.32 98.28 153.63

221.90 132.73 193.16 146.48 182.95 120.77 140.98

It is revealed that the average unit price of various exported commodities has increased by 4.29% only in 2000-01 over the previous year. 2.4 Summary Foreign Trade Statistics Item IMPORT 1. Total imports (million Tk.) 436949 2. Total imports (million US $) 8092.3 3. Growth rate of imports (%) 17.5 4. Imports as percent of GDP 15.7 17.2 5. Imports as percent of revenue receipts 174.3 180.8 290187 6795.9 14.0 16.1 318916 7029.2 9.9 15.9 341017 7095.0 6.9 372022 7294.5 9.1 15.5 1996-1997 1997-1998 1998-1999 1999-2000 2000-2001

168.0 2335

168.8 2527

166.6 2662

6. Per capita import (Tk.) 2866 3382

7. Imports of consumer goods as percent of total consumpt 7.6 7.9 8. Composition Of Major Imported Commodities(%) Consumer goods 37.4 Material for consumer goods 27.2 Capital goods 15.9 Material for capital goods 19.5 Total 100.0 100 9. Imports By Accounts (Million Tk.) Private 99813 107468 Government 229045 3474 Semi -government 7971 209385 Nationalized industries 31495 1607 Others 3682 115009 Total 372022 436949 28.4 35.2 15.5 20.9

5.4

7.3

7.4

37.7 28.4 13.8 20.1 100.0 100.0

39.1 29.2 13.3 18.4

40.0 28.2 11.9 19.9 100.0

79674 31163 22037 157313 290187

204884 17403 12218 84409 318916

78100 177096 15 1 85803 341017

10 Imports By Routes (Million Tk.) Sea 314337 Air 41555 Land 16130 Total 372022 210029 375950 29447 36968 50711 24031 290187 436949 318916 341017 31749 40260 16202 14560 270965 286197

11. Imports Of Selected Principal Commodities (Million Tk.)

Rice and wheat 15897 16771 Milk and milk products 4068 4608 Petroleum products 21626 17612 Fertilizer 5913 6269 Cement 9125 9768 Iron and steel 16443 18442 Machinery and equip incld electrical appliances 42810 69003 Textile yarn (cotton & synthetic.) 5845 6763 Textile fabrics (cotton & ynthetic) 35028 34634 12. Exports (million Tk.) 247415 306476 13 Exports (million US $) 4851.3 5675.92 ] 14 Growth rate of exports (%) 0.7 23.9 15 Exports as percent of GDP 13.2 12.1 16 Per capita exports (Tk.) 1906 2372

10575 2904 16705 5549 8941 16820 41485 28670 10224

18008 2564 15282 5053 10947 17621 41964 17889 41541

42962 2809 17326 5161 9184 17842 39826 12482 37120

171554 4017.7 18.7 12.2 1380

229408 5056.4 33.7 14.8 1818

245620 5110.2 7.0 14.1 1917

17. Composition Of Major Exported Commodities (%)

Consumer goods 92.3 90.7 Material for consumer goods 6.3 8.4 Capital goods 0.5 Material for capital goods 0.4

87.8 10.1 1.5 0.6 0.7 0.6

91.9 6.8 0.4 0.6

91.7 7.3 0.7 0.7

Total 100.0

100.0 100

100.0

100.0

18 Exports By Accounts (Million Tk.) Private 246983 306063 TCB 3 3 Government 39 25 Semi –government 16 67 Nationalized industries 374 318 Other Total 247415 306476

170774 20 14 198 548 171554 19553

209304 20 26 213 292 5 229408

244895 5 12 22 681 245620

19 Exports By Routes (Million Tk.) Sea 243169 Air 4246 Land Total 247415 169366 278596 2188 27880 171554 306476 229408 245620 5500 3404 223908 242216

20 Exports Of Selected Principal Commodities (Million Tk.) Readymade garments (RMG) 190197 68940 Fish 16209 19206 Raw Jute 3531 2735 Jute goods(Except carpet) 11381 12151 Carpet 209 116 100 78 35 Raw hides, skins & leather 5248 13447 114793 12680 4344 13249 5369 147620 12933 3766 12126 4810 190146 13507 3527 13649 6794

Tea 830 1193 Naptha & furnance oil 571 545 21 Balance Of Trade (Tk. Million) -124607 -130473 Note: Balance of trade is negative. References 1. 2. 3.

1380 449

2150 421

1885 279

-118633

-89508

-95397

Islami Bank Bangladesh Ltd. Parichiti-2001 Pages (8-11) Islami Bank 18 years of progress: July 2003 Pages (4-7), (34-35) Review of Islami Economics -M. Umar Chapra Pages (5-20) Islami Banking -A.A.M. Habibur Rahman Annual Report 2003 Islami Bank Bangladesh Ltd. Daily data Collection from Banks.

4. 5. 6.

7. Islamic Banking. Mohamed Ariff, University of Malaya, Asian-Pacific Economic Literature. Vol.2. No. 2. (September 1988), PP. 48-64. 8. Towards a Just Monetary System, M Umer Chapra, The Islamic Foundation, Leicester UK. 9. WWW.Google.com 10. Business Bangladesh (Magazine, Dec’04) 11. Branch Manager Conference Report 12. Report of Remittance

Conclusion Bangladesh is developing country. Without developing banking sectors this country business sector is not possible to progress rapidly. In such conditions IBBL is trying to develop banking sector through welfare and servicing to the people. Islami economy and banking are bound together. This economy and Banking is not possible to establish without Tauhid, Reshalat and trust of Akhirat. This economy and banking are suitable to operate as a Muslims country (Majority of Muslims). But our Government is not aware to establish such system. Islami Bank Bangladesh Ltd. (IBBL) has emerged facing the many obstacles yet. This bank is trying to operate their activities according to Islami Shariah.

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