Submitted By: Foreign Exchange Business of Sonali Bank

ForeignExchangeBusinessofSonaliBank
Submittedby
WWW.ASSIGNMENTPOINT.COM
www.AssignmentPoint.com
Bankingisoneofthemostimportantsectorsforcountryswealthbuildingactivities.
Commercial banks are certainly profit making Financial Institutions. These
institutionsplaygreatroleinthemoneymarketofeveryeconomy.
Duetoglobalization,technologicalinnovationandderegulationthebankingsystem
allovertheworldhasbeenchangingrapidly.Nowadaysbankshavetocompetein
the market place not only with local institutions but also with foreign financial
institutions.
SonalibankisoneoftheleadingnationalizedcommercialbankinBangladesh.Its
pioneerroleinhandlingforeigntradeandforeignexchangetransactionseverbefore
independence of the country still remains unchallenged. With wide network of
branches at home and also a large number of correspondent banks worldwide it is
singularly handling the largest volume of exportimport business including
homeboundremittances.
ForthisreasonForeignExchangeofSonaliBankisverymuchessential.Butnowa
daythebankingsectorofBangladeshissufferingfromthediseaseofdefaultculture
whichistheconsequenceorresultofbadperformanceofmostofthebanks.
Sonali Bank is playing an important role toward the growth and economic
developmentofBangladesh.
This study is attempted to produce a constructive report on Foreign Exchange of
SonaliBank.
1.2:OBJECTIVESOFTHESTUDY:
ThePrimeobjectivesofthestudyare:
TogetanoverallideaabouttheForeignexchangeBusinessofSonaliBank.
Toapplytheoreticalknowledgeinthepracticalfield.
Todescribetheorganizationalstructure,management,background,functions
andobjectivesofthebankanditscontributiontothenationaleconomy.
ToachieveoverallunderstandingofSonaliBank.
To analyze the financing systems of the bank to find out any contributing
field.
Toexaminetheprofitabilityandproductivityofthebank.
ToacquireknowledgeabouttheeverydaybankingoperationofSonaliBank.
To understand the real management situation and try to recommend for
improvingexistingproblems.
1.3:ScheduleofInternship:
FollowingschedulesoftheinternshipprogramwerefixedbySonaliBankStaff
College(SBSC)tocompletetheprogramunderSonaliBankForeignexchange
CorporateBranch.
26thOctoberto15thNovember2005
GeneralBankingSection
16thNovemberto30thNovember2005
GeneralLoansandAdvances
Section
1stDecemberto14thDecember2005
Industrialcreditsection
15thDecemberto28thDecember2005
ForeignexchangeSection
1.4:METHODOLOGYOFTHESTUDY:
ThereportispreparedonthebasicofforeignExchangeofSonaliBank.Toconduct
the overall study, at first I explored the sources of primary and Secondary
information and data. Different files of the department and statement prepared by
FEDhelpedmetopreparethisreport.IhaveinterviewedtheSBofficialsforgetting
moreinformation.Topresentnumericaldata,IusedtheAnnualReportof2003and
monthly statement of November 2005 of Sonali Bank of Foreign Exchange
Corporatebranch.ForpreparingthisreportIhaveusedsomegraphicalrepresentation
tofindoutdifferenttypesofanalyticalandinterpretation.
1.5:SOURCESOFDATA:
Asmentionedearlier,mainlyprimarydatahasbeenused.Sometimesthecustomers
gavesomeimportantinformationregardingtheservicesoftheBank:
PrimaryData:
7daysTrainingClassinSonaliBankStaffCollege(SBSC).
OfficialrecordsofSonaliBank(SB).
Facetofaceconversation
Expertopinion.
SecondaryData:
MonthlyStatementofSB.
AnnualReportofSB
WorkingPapers
OfficialFiles
Selectedbooks
Othermanualinformation
Newspaperreportsinthisconcern.
1.6:LIMITATIONSOFTHESTUDY:
To provide current information and to make the report readworthy, support from
various sources is a must. In spite of my best effort, I could not collect some
information required at the time of the study. So this study is not free from the
followinglimitation:
ForthewholeinternshipIhadonly90days,whichwerenotsufficient.SoI
facedtimeshortageextremely.
Sometimes the officers of Sonali Bank were very busy. For this reason the
personaldidnotcooperateme.
Lackofpreviousexperiencetopreparethistypeofreportanditistotallynew
tomeasanintern.
SonaliBankdidnotgivemeanykindofmonetarysupportforthisinternship
program.
2.1:HISTORICALBACKGROUNDOF
SONALIBANK:
SonaliBank,thelargestcommercialbankinBangladesh,wasestablishedunderthe
BangladeshBanks(Nationalization)Order1972(PresidentsOrderNo.26of1972)
by taking over branches of former National Bank of Pakistan, Bank of Bhawalpur
Limited and Premier Bank of Pakistan. After the independence of Bangladesh in
1971, the then Government, for the preannounce commitment, nationalized all the
banks(excepttheforeignownedbanks)operatinginthecountry.
As a fully stateowned enterprise, Sonali Bank has discharged its responsibility by
undertaking government entrusted different socioeconomic scheme as well as
money market activities of its own volition, covering all spheres of the economy.
SonaliBanksingularlyenjoystheprestigeofbeingtheagentoftheCentralBank.
BankofBhawalpurLimitedandPremierBankofPakistanLimitedweretwoprivate
banks performing class banking over the country (then East Pakistan) and National
BankofPakistanwasaGovernmentsupportedbankwith51%sharesbeingowned
bytheGovernmentofPakistanthatwasmainlyestablishedtofinancethejutesector
inEastPakistan.
From a modest beginning with an increase of responsibility and by virtue of
performance, Sonali Bank has, within a few years, emerged as the largest
NationalizedCommercialBank(NCB)inthecountry.Theprincipalactivitiesofthe
bankareprovidingallkindsofcommercialbankingservicestothecustomers.Italso
performs Government Treasury functions as an agent of the Bangladesh Bank. The
bank mainly handled the Export and Import Trade of Bangladesh with the socialist
countriesundervariousBarterAgreements.
2.2:OBJECTIVESOFSONALIBANK:
ThemainobjectiveoftheBankistoprovideallofbankingservicesatthedoorsteps
of the people. The Bank also participates in various Social and Development
programs and also takes part in implementation of various policies and promises
madebytheGovernment.
SonaliBankhasthefollowingspecificobjectives:
Tocollectscatteredsavingsofthepeople.
Tomaintainasatisfactorydepositmix.
To extend credit facilities to agriculture, rural development, commercial and
industrialsectors.
Toincreaseloanportfoliodiversificationandgeographicalcoverage.
Todevelophumanresourcesthroughcontinuoustraining.
ToprovideExportFinance
ToprovideImportFinance
ToprovideForeignRemittance
Tocreatenewemployment.
2.3:MANAGEMENT:
The Board of Directors is the top management and apex policymaking body of
Sonali Bank, which is constituted in terms of the Bangladesh Banks of
(Nationalization) Order, 1972. The Board of Directors has autonomy to organize,
operateandmanageitsaffairsoncommercialconsiderationsubjecttobroadpolicyof
the government. Presently, the Board consists of a Chairman a Managing Director
and five Directors. It is to be noted that the Chairman and MD, appointed by the
Government.TheDirectorsareappointedfromamongstpeoplewho,intheopinion
oftheGovernment,havehadexperienceandshowncapacityinthefieldoffinance&
banking,trade,commerce,industryoragriculture.
TheManagingDirector(MD)istheChiefExecutiveoftheBank.Heexecutesallthe
activities under the direction of the Board. The banking officers of the Bank are
selected by the Bankers Recruitment Committee (BRC) and the other line and
staffspersonnelareappointedbytheBanksownRecruitmentCommittee.
SonaliBank:ManagementHierarchy
BoardofDirectors
ManagingDirectors(MD)
DeputyManagingDirector(DMD)
GeneralManager(GM)
DeputyGeneralManager(DGM)
AssistantGeneralManager(AGM)
SeniorPrincipalOfficer(SPO)
PrincipalOfficer(PO)
SeniorOfficer(SO)
Officer
2.4:OPERATIONALNETWORK
The Bank through its 1186 branches 1184 domestic and 2 overseas (Kolkata and
SiliguriinIndia)havebeenprovidingbankingservicestoitscustomers.Outoftotal
1186branches,696areoperatinginruralareasand490intheurbanareas.Besides,
26boothsunderdifferentbranchesareperformingspecializedfunctionsatdifferent
locations.Itisnoteworthythatduring2003,37brancheshavebeenclosed/merged
forrationalizationofhebrancheswithinthecountry.
The Head office of the Bank is located at the Motijheel Commercial Area, Dhaka
consisting of 41 Divisions and 59 Departments. The Divisions are headed by the
DGMsandtheDepartmentsarebyAGMs.TherearealsomanySectionsundereach
Department in the Head Office. The Sections are run by Senior Principal Officers
(SPOs).
TheBankhaseight(08)GMOfficesinsixDivisionalHeadquartersand27Principal
Officesand62(27+35)RegionalOffices.ADGMisthechiefofthePrincipalOffice
andanAGMusuallyrunaRegionalOffice.PrincipalOfficeshavejurisdictionover
the entire area of a district, i.e., Principal Offices are the local points of the banks
administrative zone in the districts. The Regional Offices, under the control and
supervision of the Principal Offices, are responsible for their performance and
activitiestothedistrictlevelPrincipalOffices.TheRegionalHeadsexercisecontrol
andsupervisionoverallthebrancheswithintheirjurisdictionsandkeeptheHeadof
thePrincipalOfficeinformedaboutthedevelopmentsoftheirrespectiveareasfrom
timetotime.
Therearealso21CorporateBranchesexistingindifferentimportantplacesoverthe
countryand11ofthemareinDhaka.TheCorporateBranchesarenearlyequivalent
totheGMofficeandusuallyheadedbyDGMs.TheyarecalledCorporateBranch
as they provide all the banking services, e.g., general banking, foreign exchange,
creditservicesetc.,inoneplaceandtheyhavetheirowndiscretionarypower.
From10December,2002SonaliBank(UK)Ltd.(ajointventureCompanyofsonali
Bank&Govt.ofBangladish)isoperatingtochannelisebankingactivitiescovering
thewholeEurope.
Besides, the Bank established a wholly owned subsidiary company in New York,
USAinthenameofsonaliExchangeCompanyInc.toactasaninternationalmoney
remitter through which Bangladeshi citizens living in the USA are conveniently
remittingmoneytoBangladesh.TherearethreerepresentativeofficesofSonaliBank
in Jeddah and Riyadh of KSA and another in Kuwait of middleast engaged in
motivating Bangladeshi expatriates living there to remit money through banking
channel.
FUNCTIONALHIERARCHY:
HeadOffice
GMOffice(8)
PrincipalOffice(27)
RegionalOffice(62)
Branches(1186)
CorporateBranches(21)
Department(59)
10
OrganizationalStructureofSonaliBank:
HeadOffice:
FieldOffice:
Division
Department
Section
Table
GeneralManagerOffice
CorporateBranch
PrincipalOffice
BranchOffice
BoothOffice
RegionalOffice
Branch
Booth
11
2.5:OrientationofSonaliBankForeign
ExchangeCorporateBranch:
SonaliBankForeignExchangeCorporateBranchislocatedin11/2ToynbeeCircular
Road, Dhaka1000. The corporate branch does all the banking functions and I
worked in Foreign Exchange Corporate Branch of Sonali Bank. It is a big branch
becauseitstotalemployeesareabout147anditperformsallthefourbasicfunctions.
Positionas
Positionas
Target
Position
SI.TheheadofthedepartmentisDeputyGeneralManagerandthelowerrankisofficer.
Particulars
onJune,
on
2005 Bank
asonJune,
# The positional hierarchy of Foreign exchange
Corporate Branch
of Sonali
is
2004
Dec.31,2004
2005
1 givenbellow:
2
3
4
5
6
01. DEPOSIT
23396.46
24581.89 26300.00
25760.17
02.
LOAN&ADVANCES
03
06
CLASSIFIEDLOANS&
5832.14
4765.36
ADVANCES
AssistantGeneralManager(2)
%OFCLASSIFIEDLOANSTO
34.06%
28.33%
TOTALADVANCES
RECOVERYOFCLASSIFIED
394.88
832.57
LOANS
SeniorPrincipalOfficer(6)
CAPITALREQUIRED
1244.76
1359.03
07
CAPITALMAINTAINED
08
CAPITALSHORTFOLL
09
15%OFCAPITAL
04
05
19
16320.35
16819.11 17660.00
DeputyGeneralManager(1)
18514.58
4871.67
26.31%
1906.00
388.16
1317.11
656.36
656.14
681.14
588.40
702.89
635.97
99.77
99.77
PrincipalOfficer(9)
SeniorOfficer(12)
99.75
10
PROVISIONREQUIRED
2911.79
PROFIT/LOSS
()22.18
107.24
Officer(30)
11
PROVISIONMAINTAINED
133.20
2650.66
150.00
116.63
129.33
2682.54
2778.59
2534.03
2526.87
155.67
12
PROVISIONSHORTFALL
13
IMPORT
3614.99
8523.85 11507.00
5456.05
14
EXPORT
2809.80
5721.31
6580.00
3099.17
15
FOREIGNREMITTANCE
3574.56
7037.97
8394.10
4055.38
1187
1186
1186
4.75%
4.62%
12
Staff(87)
(INWARD)INCLUDDINGNONWES
16
TOTALNO.OFBRANCHES
17
COSTOFDEPOSIT(%)
5.16%
SonaliBanK
HeadOffice,Dhaka
BUSINESSPOSITIONOFSONALIBANKATAGLANCE
(TAKAINCRORE)
SonaliBanK
HeadOffice,Dhaka
ManagingDirectorsSecretariat
SONALIBANKSGROWTHATAGLANCE
SL.
01.
02.
03.
04.
05
06
07
08
09.
Particulars
Deposit
Advances
Investment
Borrowing
Costofdeposit(%)
OperatingCost(%)
CostofFund(%)
RateofEarning(%)
(A)IncomefromTreasuryFunction
Dec.2002
21632.51
15604.72
4356.01
1022.13
5.92%
1.72%
7.64%
8.12%
Dec.2003
22456.48
15511.22
4847.78
41.23
5.49%
1.72%
7.21%
7.52%
Dec.2004
24581.89
16819.11
6424.83
40.03
4.75%
1.72%
6.47%
6.95%
June2005
25760.17
18514.58
5991.12
39.42
4.62%
1.71%
6.33%
7.39%
10.
a)CallLoan
b)TreasuryBills+R.R.
c)Bonds
d)Debentures/Shares/Bridge
Loan/Others
e)FDR
(B)Exchange,Fees&Commission
Profit/LossPosition:
16.79
124.48
84.46
7.96
14.60
196.41
84.00
10.95
15.06
193.24
88.57
7.93
20.37
109.19
44.76
3.39
16.09
416.04
12.71
278.94
33.38
361.22
26.34
247.32
a)Earnings
b)Expenses
Profit/Loss(ab)
(Beforeappropriation)
CapitalRequirement
1662.83
1559.83
103.00
1608.55
1542.60
65.95
1576.64
1469.40
107.24
903.03
773.70
129.33
11.
(9%ofTotalRiskWeightedAssets)
1035.02
1163.18
1359.03
1317.11
327.22
260.00
23.40
327.22
48.28
12.24
656.14
702.89
58.28
12.24
13
681.14
635.97
12. ExistingCapital:
(A)CoreCapital:
a)PaidUpCapital
327.22
327.22
b)Reserve
220.00
245.00
c)GeneralReserve
23.40
23.40
(B)SupplementaryCapital:
a)1%GeneralProvision
40.28
48.28
b)ExchangeEqualization
14.40
12.16
TotalCapital(A+B)
625.30
656.06
CapitalShortfall(1112)
409.72
507.12
23.40
(Tk.inCrore)
Page2
(Tk.inCrore)
SL.
Particulars
GraphicalPresentation
Dec.2002
Dec.2003
*Dec.2004
June2005
5150.65
4947.09
4765.36
4871.67
(38.69%)
(32.42%)
(28.33%)
(26.31%)
(a)Substandard
338.76
409.39
176.38
343.57
(b)Doubtful
339.90
331.37
212.92
204.95
(c)Bad/Loss
4544.67
4206.33
4376.06
4323.15
14. ClassifiedLoanRecovered
998.95
312.12
832.57
388.16
15. ProvisionRequired
2974.92
2696.20
2650.66
2682.54
16. ProvisionMaintained
757.49
241.58
116.63
155.67
17. ProvisionShortfall(1516)
2217.43
2454.62
2534.03
2526.87
18. InterestSuspense
1183.00
1212.04
1464.97
1502.02
13. TotalClassifiedLoan
19. ForeignExchangeBusinessPosition:
a)Import
5294.00
3995.81
8523.85
5456.05
b)Export
4150.31
3557.44
5721.31
3099.17
c)Remittance
6069.67
4231.45
5766.15
4055.38
Urban=
411
489
488
488
Rural=
808
696
696
696
1221
1187
1186
1186
a)ProfitBranch
955
835
794
794
b)LossBranch
266
350
390
390
Officer=
12380
12334
12732
12603
Staff=
12857
12536
11718
11612
Total=
25237
24870
24450
24215
(IncludingNonWES)
20. NumberofBranches:
Foreign=
Total=
21. TotalOperatingBranch:
22. StaffPossition:
14
TotalDeposit&TotalAdvance
TakainCrore
25000
20000
15000
TotalDeposits
10000
TotalAdvances
5000
0
1999 2000 2001 2002 2003
TotalIncome,Expenditure&
NetProfit
2000
TakainCrore
1500
TotalIncome
1000
TotalExpenditure
NetProfit
500
0
1999 2000 2001 2002 2003
TotalNo.ofEmployees
30000
15
OfficerandStaff
13000
12500
12000
Officer
11500
Staff
11000
10500
2002
1250
2003
2004
Totalno.ofBranches
1200
2005
16
Rural&UrbanBranches
900
800
700
600
500
400
300
200
100
0
RuralBranch
UrbanBranch
2002
2003
2004
2005
Takain www.AssignmentPoint.com
cccCrore
17
TakainCrore
15519
90810
SonaliBank's
Advance
OtherSchedule
Bank'sAdvance
FOREIGNEXCHANGEBUSINESS
18
Introduction:
Commerciallybanksdealswithbothinternalandforeigncorrespondence.Theforeign
correspondences are conducted through foreign currency and the department dealing
withthesebusinessesiscalledforeignexchangedepartment.
SonaliBank'sexpertiseinInternationalBankinghasarecordofinhousegrowthover
more than half a century. Its pioneer role in handling foreign trade and foreign
exchange transactions ever before independence of the country still remains
unchallenged. With wide network of branches at home and also a large number of
correspondentbanksworldwideitissingularlyhandlingthelargestvolumeofexport
importbusinessincludinghomeboundremittances.
ForeignExchangedealswiththemeans&methodsbywhichrightstowealthinone
country'scurrencyareconvertedintothoseofanothercurrency.Itisapartofeconomic
scienceofforeigntrade.Bythesameview,itcoversthemethodsusedforconversion,
theformsinwhichsuchconversionstakeplaceandcauseswhichrendertheseconversions
necessary.
In Bangladesh, we have the unit of money is 'Taka' for domestic transaction also
haveotherobligationsbyexchangingforeigncurrencies.Tomeetuptheobligationthat
ariseimportofgoods&servicesfromothercountries,otherforeignnecessity,thatpartof
the economic science, which deals with the conversion of domestic currency into
foreign currency for the purpose of setting international obligations, is called Foreign
Exchange.
Everycountryhascertainnaturaladvantagesinproducingcertaincommoditieswhile
they have some natural disadvantages as well as in other. As a result we find that
somecountriesneedtoimportcertaincommoditieswhileothersnecessitytoexport
theirsurpluses.Therearethreetypesofmodesofforeignexchangemarket,whichareas
follows:
ExportFinance
ImportFinance
ForeignRemittance
ForeignTradeFinance:
19
ThetotalforeignexchangebusinessoftheBankfortheyear2003wasTk.
1660.92croreasagainstTk.16054.18crorein2002showinganincrease
of3.41%.
Comparative Position of foreign exchange business for the year 2002&
2003arestatedbelow:
(Tk.inCrore)
SI.No. Particulars
2002
2003
1.
TotalImport
5294.04
5257.74
2.
TotalExport
4150.31
4790.65
3.
InwardRemittance(Including
6069.67
WES)
Outward Remittance (Including 540.16
WES)
5766.15
Total
16601.92
4.
787.38
16054.18
TakainCrore
TotalForeignExchangeBusiness
18000
16000
14000
12000
10000
8000
6000
16054.18
16601.92
Year2002
Year2003
3.1:EXPORTFINANCE:
20
Incaseofexportbusinessfinanceisperceivedasoneoftheimportantelements.Itis
linked to nearly all the stages of conversion cycle procurement of raw materials,
processingofgoods,packingstorage,transportationtotheport,shipmenttothebuyer,
assemblingofshippingdocuments&finally,collectionofpayments.ThetermExport
Financeshouldthereforemeanmoneysneededbyanexportingfarmateachstageof
theconversioncycles.
3.1.1.ExportFinancingsectorsofSonaliBank:
Export financing can play a vital role in the development process of Bangladesh.
With earning on export we can meet our import bills. The export trade is always
encouragedbecausethemajorportionofforeignexchangeearningisderivedfrom
export. Because of shortage of adequate capital exporters have to come in contact
with commercial bank and financial institution to get finance from them. Sonali
bank as a commercial bank provides certain facilities to the exporters to boost up
exportearnings.
The traditional & nontraditional sectors in which Sonali Bank provides export
financingfacilitiesareasfollows:
ReadyMadeGarmentsinallsorts.
Jutemanufactures
Juteraw&meshta
Fish&Prawns.
Hides,Skins&Leather.
Tea
Fertilizeretc.
21
3.1.2:ExportfinancingsystemofSonaliBank:
Bangladeshasadevelopingcountrydependsmainlyonforeignexchangeearningfor
itsdevelopmentactivities.Themajorportionofforeignexchangeearningsisderived
from export obviously, to boost export, government provide certain incentives to the
exportersnamely:
ExportFinancing
DevelopmentFinancing
ExportCreditGuaranteeScheme
Exportperformancebenefits
Dutydrawback
Rebateonduty&tax
Incometaxrebate
Insurancepremiumrebate
ConditionalcashsubsidytoGarmentsIndustryetc.
3.1.3:PRESHIPMENT&POSTSHIPMENT:
InSonaliBankexportfinanceisrequiredbytheexportsattwostagesnamely
Preshipment&Postshipmentstages:
1.
Preshipment:Itisrequiredtopurchaseofrawmaterials,tomeetcostof
production,procurementofexportablegoods,packing,transport,paymentof
insurancepremium,inspectionfee,freightcharges,warehousingetc.
2.Postshipment:Itisrequiredbytheexportersafteractualshipmentofgoods
inordertobridgetheperiodbetweenshipmentofthegoodsandreceipts
ofsalesproceedsfromabroad.
Anexporterownsresourcemaynotbeadequatetomeetallsuchexpenses.Sohe/shehas
to come in contact with commercial bank and financial institutions to get finance
from them. As a commercial bank Sonali Bank provides credits to exporters at a
considerationrateofinterestasanexportpromotionmeasureaspergovernmentdirective.
22
3.1.4:PRESHIPMENTFINANCINGOFFOREIGNEXCHANGE:
TheclassesofpreshipmentfinancingextendedtotheexportersbytheSonaliBankareas
follows:
Export Cash Credit Pledge: This facility is allowed for a short period. Under this
credit the exportable goods are kept under the effective control of bank either at
exporter'sgodownorbankowngodown.Ineitherofthecases,thebankengagefull
timesecurity(chowkider)toobserveoverthegoods&themovementthegoodsare
done under the supervision of the bank who maintain its proper records through
godownstorage,challan,deliveryorder,godownregisteretc.
ExportCashCreditHypothecation:Thisadvanceisallowedforashortperiodor3to6
monthsmainlytopurchaserawmaterialsorforprocurementofexportablegoods.
Sovirtuallythegoodsarekeptunderthecontroloftheexporterbutbycreatingcharge
on the goods at the time of disbursing credit. The bank has the right to take
possessionofthegoods.Theexporterwillsubmitstockreporttothebankusually
onmonthlybasis&thebankwillverifythem.
Documents&Securitytobeobtained:
1) Exportregistrationcertificates
2) Bank usually charge documents to be signed by exporter or his / her duly
authorizedagent.
3) Confirmedirrevocableexportletterofcreditorfirmcontractmadebythebuyerwith
theexporter.
4) Insurancecoverage
5) Collateralsecurities.
PackingCredit:
Thisfacilityisgenerallyextendedwhenthegoodsbecomereadyforshipment
foraveryshortperiodusuallyfromthedateofdispatchofthestockfromthe
godownuptothedateofactualshipmentofthegoodsthatisforthetransit
period of shipment for further purchase of raw materials or procurement of
exportablegoodsbyexporter.
23
Backtobackletterofcredit:
Preshipmentfacilitiesarealsocreditedintheformofbacktobackletterofcredit.
Whenthebeneficiaryofanexportletterofcreditisnottheactualmanufactureror
producerofexportablegoodsmentionedintherelativeexportletterofcreditas
securitieswithhis/herbankerforprocurementofexportablegoodstoenablehim
/hertoexecutetheexportletterofcreditandsuchletterofcreditiscalledinland
backtobackletterofcredit.
PrecautionsusedbySonaliBanktosanctionpreshipmentcredit:
a) Before making lien on the original export letter of credit all the terms and
conditions should be scrutinized so that no detrimental clauses including
violationofforeignexchangeregulationandUPCDCtermsareincludedtherein.
b) Expiry date of letter of credit should be properly recorded in the book and no
drawingistobeallowedagainstexpiredletterofcredit.
c) Thecreditworthinessorsolvencyoftheforeignbuyeraswellastheexporters
mustbeascertainedbeforehand.
d) Incaseofmortgageofpropertiesascollateralsecurities,thebankbyengaging
lawyer together with valuation certificate from proper authority must
scrutinizetherelativedocuments.
e) Theexportershouldarrangeforwardsaleofforeignexchangelossatthetimeof
negotiationofexportdocuments.
f) Incaseofpackingcredit,theexportletterofcreditandrelativedocumentshaveto
submit in, such a way that the bank may not face any problem in negotiation of
shippingdocumentsinduecourse.
g) To dispatch goods for shipment to post under packing credit the bank must
verifytheshippingmarkontheeachpacketorcartoonandtherelativeinvoice.
24
3.1.5:POSTSHIPMENTFINANCINGOFFOREIGNEXCHANGE:
PostshipmentfinancingreferstothecreditfacilitiesextendedtotheexportersbySonali
Bankafteractualshipmentofthegoodsagainstexportdocuments.SonaliBankgenerally
financetheexportersatpostshipmentstageafterverifyingthecreditworthinessandexport
performancesoftheexportersaswellasthereputationandfinancialsoundnessofthe
foreign buyers provided the shipping documents are drawn strictly in accordance
withletterofcredittermsandinaccordancewithforeignexchangeregulationinforce.
Post shipment financing is extended to the exporters by the following

terms:
Negotiationofexportdocumentsunderletterofcredit.
PurchaseofaskancebillsdrawnonD.A.basis.
Providingloanagainstexportbillstenderedcollection.
Discountingofexportbills.
Negotiationofexportdocumentsunderletterofcredit:
Most important and widely used method of financing export at postshipment stage is
negotiationofexportdocuments.Aftertheshipmentofthegoodstheexportergenerally
submitsthefollowingdocumentstothebankfornegotiation:
Billofexchange.
Billofladingorairwaybill.
Commercialinvoiceeightcopieswithinthesefouroriginalcopies.
Custominvoiceofimporter'scountry.
Certificateoforiginoriginalcopy.
Packinglisteightcopieswithinthesefouroriginalcopies.
Weightcertificate.
Declarationofshipmenttotheinsurancecompany.
Preshipmentinspectioncertificate.
Qualitycontrolcertificatewhenrequired.
25
Acknowledgementletterindicatingreceivedsample/approvalletter.
Frightfulletter.
Anyotherdocumentifcalledforletterofcredit.
PurchaseofusesbillsdrawnonD.A.basis:
Sometimesexportletterofcreditstipulatespaymentat30to40monthstheperiodiscalled
askanceperiod.Thebillsdrawnunderthisletterofcreditistermedasaskancebill.
On presentation of documents foreign buyers give written acceptance on the bill of
exchangetopayaftertheaskanceperiod.Indealingsuchdocumentsthebankermusttake
properprecautiontorealizetheproceedsintime.
Providingloanagainstexportbillstenderedforcollection:
Export bills are sending abroad generally by banks on collection basis in the following
cases:
a.Exportbillsnotdrawnunderletterofcredit.
b.Billsdrawnunderletterofcreditbutcontains.
Against the above collection documents bank may allow loans keeping substantial
marginonthebasisofbankercustomerrelationshipwiththeexporter.Whilehandlingsuch
documents the banker must remain vigilant to refer the exporter proceed with a view to
adjustthecreditsoextended.
Discountingofexportbills:
When the export bills are not drawn under letter of credit or the goods send on
consignmentbasis,theexportermayapproachthebankfordiscountingtheexportbills
on commission basis. Bank generally does not accept such proposal excepting on
exceptionalcases.Iftheexportershaveverygoodcreditworthinessandpreviousgood
exportperformanceandforeignbuyershavealsogoodreport&goodreputationforpast
transaction.
26
3.1.6:ExportForm:
Thecustomer,nowissuedbytheauthorizeddealers,mustdeclareallexportofwhich
therequirementofdeclarationofexchangecontrolmanualofBangladeshBankapplieson
theExportForms.
DisposalofExportForms:
Origin:FromcustomauthoritytoBangladeshBank(ECD)aftershipmentgoods.
Duplicate:FromnegotiatingbanktoBangladeshBankafternegotiation.
Triplicate: From negotiating bank to Bangladesh Bank after realization of the
proceedsoftheexportbill.
Quadruplicate:Retainedbythenegotiatingbankasofficecopy.
3.1.7:ExportDevelopmentFund:
ThemainobjectiveofcreatinganexportdevelopmentfundattheBangladeshBankisto
assureacontinuedavailabilityofforeignexchangetomeettheimportrequirement
of nontraditional manufactured items, this facility is available to the nontraditional
exporters, particularly newer exporters, exporters diversify into higher value export
andexportersdiversifyintonewmarkets.Anexporteridentifiedaboveiseligibleonthe
basisoftheconditionallystatedbelow:
a) Onemustbeanexporterofnontraditionalmanufacturingitems.
b) The value added of these products could be 20% except in the case of garments
whereithastobe30%&above.
c) The loan should be utilized in the case of importing raw materials for
manufacturingtheexportableproducts.
d) Theexportermusthaveanexportletterofcredit.
e) One must create a backtoback for importing raw
materials.
f) Theperiodofloanis180days.
27
3.1.8:ScrutinyofExportDocument:
After the shipment of goods the exporters submit export documents to authorized
dealerfornegotiationofthesame.Asbankersdealwithdocumentsonly,notwith
commodity they are required to be very much careful about the genuineness and
correctness of the documents evidencingshipmentoftherespectivecommodities.The
bankersaretoascertainthatthedocumentsarestrictlyasperthetermsofletterofcredit.
Beforenegotiationoftheexportbill,thebankersaretoscrutinizeandexamineeach&
every document with great care. Negligence in the part of the bankers may result in
nonrepatriationordelayinrealizationofproceedsasincorrectdocumentsmayputthe
importersabroadintounnecessarytroubles.Thescrutinyprocedureisasfollows:
1)ScrutinyofDraftorDraftofExchange:
a) Thedraftshouldbedrawnbythepartyindicatedasthebeneficiaryofthecredit
i.e.theexporterdraweemustbeinaccordancewiththetermsofthecredit.
b) Thetenorandamountofthedraftbeinconformitywiththecreditterms.
c) Thebillofexchangeshouldbeproperlystampedifnecessarywiththerequisite
value and the cost must be recovered from the drawers unless it is provided
otherwiseintheletterofcredit.
d) The draft or bill must bear the correct date and must be drawn or endorsed to
theorderofthebank.
e) Thedrawer'ssignaturemustbeverified.
2)Scrutinyofinvoice:
a) Thephysicaldescriptionofthegoodsi.e.price,quantity,quality,markingsetc.in
theinvoicemustcorrespondwiththespecificationsinthecredit.
b) If the credit stipulates a consular invoice, the requisite invoice should be
furnished.
c) Allcopiesmustbesignedandcertifiedascorrectshipper.
d) (e) If the credit stipulate for any other particulars to be stated in the invoice
thesemustcompliedwith.Itshouldnotincludechargessuchaspostagecable
etc.unlessspecificallyauthorizedunderthecredit.
28
3)Scrutinyofshippingbill:
a) Thebillofladingshouldbeafullsetcleanonboardoceanbilloflading,unless
thecreditstipulatesotherwise.'Receivedforshipment'billsofladingmustnotbe
acceptedunlesspermittedbythecredit.
b) Itmustagreewiththeinvoiceasregardsquantityanddescriptionofgoodsas
wellasinrespectofportsofshipmentanddestination.
c) Thebillofladingmustalsoindicatewhereitis'freightpaid'(C&F,GIF)or
freightpayableatdestination(FOBtransaction).
d) Transshipment and port shipment clauses in the shipping bill should be in
accordance with credit terms and the provisions of the uniform custom and
practice.
e) Creditfrequentlystipulatesforshipmentnotletterthanaspecifieddate.Billof
ladingmustbeexaminedtoensurethatthesearedatednotlaterthanthedate
mentioned.
f) Mustbeproperlysignedbyorbehalfofthecarries,mustbeproperlystamped
andmustbeendorsed,expectwhentherelativecreditstipulateforbillofladingto
orderofanamedfirm.
g) Dock shipment not permitted unless specifically authorized and covers by
insurance.
h) Billofladingmustnotbeastaleone.
4)ScrutinyofInsurance:
Where insurance is to be effected by the beneficiary for GIF consignment, the policy
accompanyingthedocumentsshouldbeexaminedtoensure:
a) Thattheinsurancecoversthemerchandiseforthevaluestipulatedinthecredit.
b) Thatthedocumentisoftheclassstipulatedinthecredit.
c) Thattheinsurancedocumentsdescribethemerchandisecoveredandmentionthe
nameofthecarryingsteamer.Incasewhere'onboard'billofladingarenot
presentedthefollowingclauseorwordsofsimilarindentmustfollowthenameof
thesteamer'and/or'followingsteamer'.
29
d) That all risk stipulate in the credit are properly covered in the insurance
documents. When the credit stipulates that 'all risk' are be covered, it is not
sufficientthatvariousrisksarementionedbutaclausetothecreditthat'allrisk'are
covered,isrequired.
e) Thatthepolicyisinthenameofthebankandtheimporter.
f) That the party designed in the documents to perform such act properly
countersignstheinsurancedocument.
g) Thattheinsurancedocumentcomplieswiththeconditionsoftheletterofcreditis
in negotiable form that it is endorsed by the party to when the loss payable,
unlessthecreditstipulatesthattheinsurancemustbeissued'losspayabletoa
specifiedpartyinthecountryofdestination'.
h) Thatthedateappearingontheinsurancedocumentisnotlaterthanthedate
appearingonthebilloflading.
i) That the insurance document covers transshipment when the bill of lading
indicatesthattransshipmentwouldtakeplace.
j) That the insurance claims are payable at the port of destination, That insurance
certificate/policyacknowledgesthepaymentofthepremium.
5)Scrutinyofotherdocuments:
a) Theotherdocumentsi.e.certificateoforigin,packinglist,weight/measurement
certificate,inspectioncertificate,surveyreport,qualitycontrolcertificateetc.should
beissuedorsignedbytheproperauthorizedanddescriptionof'exportorder'
giveninthesedocumentsnotbeincontradictiontothecreditterms.
30
3.1.9:RISKOFEXPORTFINANCING:
Inthetradetherearesomanyriskfactorsinvolved.Inbankingsectorthebankface
riskbasicallyfromloans&advancesandforeignexchange.InthissectionIdiscusstherisk
ofExportFinancing.
Whiletherearemanyadvantagestoexportingitisnotwithoutrisk.Indeedthereareoften
factors present in international market, which make foreign exchange substantially
more risky than domestic ones, including the credit risk of nonpayment or non
acceptance of the merchandise by the buyer. For international sales, these risks are far
more pronounced than they are domestically. For these reasons Sonali Bank also
accompaniedwithelementsofuncertaintysomewhichareasfollows:
(a)Commercialrisk:
Insolvencyofoverseasbuyer,whichresultinnonrealizationofexportproceeds.
Failureofthebuyertoretirecreditalreadyacceptedbyhim/herincaseof
askancebillwithinstipulatedperiod.
Willfulnegligenceoftheimportertoacceptofpaybillortoacceptgoodsforno
faultoftheexporter.
(b)Politicalrisk:
Suddenoutbreakofwarrevolutionorcivildisobedienceinbuyer'scountry.
Impositionofrestrictionsonremittanceonanygovernmentactioninthebuyer's
countrywhichmayblockordelaypayment.
Impositionoftradeembargoorblockadeagainstanycountry.
Newimportrestrictiononthebuyerorcancellationofthelicense.
Additionalhandlingtransportorinsurancechargesduetointerruptionor
diversionofvoyage,whichcannotberecoveredfrombuyer.
Bankrupt or closure of a bank or stoppage of operation of a bank may hamper
repatriationofexportsproceedsoflettersofcreditopenedbysuchabank.
Any other cause of loss occurring outside the exporter's country beyond the
controlofimporterorexporter.
31
(c)Informationalrisk:
Often credit information on the importer is not available or at best sketchy because
buyersandsellersliveindifferentsocioeconomic&politicalenvironment.Itismuch
hardertojudgethefinancialstrength,reputation,integrityofabuyerwhoisthousands
ofmilesawayandbelongstoadifferentculture.Moreover,manyimportersmayhave
goodreputationintheirownenvironmentbasedonlocalvaluesystemtheymaynever
the less engage in some surprising business practices when judged by a different set of
standard.
(d)Preshipmentexportcreditrisk:
Preshipmentexportcreditriskinvolvesthefollowingadditionalrisks:
Theremaybediversionoffundbecauseoflowinterestrate.
Uncertaintiesrelatingtononavailabilityofnewmaterialsmayhamper
processingofexportableproducts.
Theexportermaynotbeabletomakeshipmentwithinthestipulatedtimeduetopower
failure,strike,naturalcalamitesetc.
The materials under backtoback letter of credit may not reach well in time to
allowtheexportertoprocessgoodswithintheexpirydateoforiginalexportletter
ofcredit.
32
3.2:IMPORTFINANCE
Allovertheworldthereisnocountry,whichcanmeetitsrequirementsfromitsown
sources. Some imports raw materials, some finished goods & some food products or
other commodities. As it is in export & import are invariably conducted through
commercialbanks.SonaliBankisengagedtoextendthefacilitiestotheimporters.
Aftergettingthecompletedregistration,applicationforopeningletterofcreditismade
throughabankwhereapplicanthasacurrentaccount.Animporterisrequiredtofillup
import application form & letter of credit authorization form & importer has to deposit
margin money to the bank from 10% to 40% of the import value, depending on the
credibility of the importer. After the letter of credit is established the exporter after
executingtheexport,submitsthenegotiabledocumentthroughitsbankersandinterms
ofexportersbanksubmitthedocumentstothecorrespondingbankoftheimporter'sbankin
the country. If the documents are found correctly fulfilling all the terms & conditions
stipulated in the letter of credit the corresponding bank of import's bank will realize
paymentthatwilldebitedtotheimporter'saccount.InbankingtermthisisknownasLATR
andtheimporterhastopaytheLATRamountin90dayswiththebankinterestrate.
3.2.1:ImportfinancingsectorsofSonaliBank:
SonaliBankisthemajorfinancerofimportbusinessinourcountry.Inextendcredit,
grantandotherfacilitiesSBfinancetothefollowingsectors:
Machinery&transportequipment.
Petroleum&petroleumproducts
Textile,yarn,fabrics,article&relatedproducts
Chemicals
Iron&steels
Cereal&cerealpreparations
Dairyproducts&eggs
Otherincludingloans&grants.
33
3.2.2:IMPORTFINANCINGSYSTEMOFSONALIBANK:
Registrationofimport
Incometaxregistrationcertificate
Partnershipdeedinthecasesofpartnershipconcern
Certificateofregistrationwiththeregisterofjointstockcompanies
Articles&Memorandumofassociationinthecaseoflimitedcompanies.
Nationalitycertificate&Bankcertificate
Ownershipdocumentsinplaceofbusiness
Tradelicensefromtherelevantauthority.
Surveyclearancefromtherelevantauthority
Otherdocumentsprescribedintheimportpolicy.
3.2.3:ImportRegistrationCertificate(IRC):
IncaseofimportIRCisthefirstnecessityfortheimporter.TheIRCisnotrequired
for import goods by government departments, Local authorities, statutory bodies,
recognized educational institutes, Hospitals. In addition registration is not required for
importgoods,whichdonotinvolvedremittanceofforeignexchangelikemedicine,
readingmaterialsetc.canbeimportedwithoutIRCbytheuserswithinmonetarylimit.
ProcedureforobtainingIRC:
ForIRCtheinterestedperson/firm'ssubmittheapplicationalongwiththefollowing
documents directly to the Chief controller of Import & Export respective zonal office
(CCI&E):
Incometaxregistrationcertificate.
Nationalitycertificate.
Certificatefromchamberofcommerce&industryregisteredtradeassociation.
Banksolvencycertificate. .
Copyoftradelicense.
34
AnyotherdocumentifrequiredbyCCI&E.
OnreceivingapplicationtherespectiveCCI&Eofficewillscrutinizethedocuments,
conduct physical verification, and issue demand note to the prospective importers to
furnishthefollowingdocumentsthroughtheirnominatedbank:
OriginalcopyoftreasurydepositedasIRCfees.
Assetscertificate.
Affidavitfrom1s'classmagistrate.
Rentreceipts.
Twopassportsizephotograph.
Partnershipdeedincaseofpartnershipfirms.
Certificateofregistration
Memorandum&Articlesofassociationincaseoflimitedcompany.
After securitization and verification the nominated bank will forward the same to the
respective CCI&E office with forwarding schedule in duplicate through banks
representative.CCI&Ethenissuesimportregistrationcertificatetotheapplicant.
3.2.4:IMPORTPROCEDURE:
Imports & Exports (control) Act 1950 regulates the import & export trade of the
country. There are a number of formalities, which on 'importer has to fulfill before
importgoods.Theimporterfollowsthefollowingsteps:
I. The buyer & the seller conclude a sales contract provided for payment by
documentarycredit.
II.
Thebuyerinstructshis/herbanki.e.issuingbanktoissueacreditinfavor
oftheselleri.e.beneficiary.
III.
Theissuingbankasksanotherbankusuallyinthecountryoftheseller,
theadviceorconfirmsthecredit.
IV.
Theadvisingorconfirmingbankinformsthesellerthatthecredithas
35
beenissued.
V.
Assoonasthesellerreceivesthecreditandissatisfiedthathe/shecan
meetitsterms&conditions,he/sheisinapositiontoloadthegoods&dispatch
them.
VI.
Thesellerthensendsthedocumentsevidencingtheshipmenttothebank
wherethecreditisavailablei.e.thenominatedbank.Thismaybetheissuingbank,
ortheconfirmingbank,banknamedinthecreditasthepaying,acceptingor
negotiatingbank.
VII.
Thebankifotherthantheissuingbank,sendsthedocumentstotheissuing
bank,
VIII.
The issuing bank checks the documents and if they meet the credit
requirementeither
Affect payment in accordance with the terms of the credit either to the
seller if s/he has sent the documents directly to the issuing bank or to the
bankthathasmadefundsavailabletohim/herinanticipation.Or
Reimbursesinthepreagreedmannertheconfirmingbankoranybankthathas
paid,acceptedornegotiatedunderthecredit.
IX.
Thebankchecksthedocumentsagainstthecredit.Ifthedocumentsmeet
therequirementsofthecredit,thebankthenpay,acceptornegotiateaccordingly
to,termsofcredit.Incaseofacreditavailablebynegotiation,issuingbankor
theconfirmingbankwillnegotiatewithrecourseanotherbankincludingthe
advisingbankhasnotconfirmedthecredit,whichnegotiateswillwithrecourse.
X.
Whenthedocumentshavebeencheckedbytheissuingbankandfoundto
meetthecreditrequirements,theyarereleasedtothebuyeruponpaymentof
theamountdueoruponothertermsagreedbetweenimporter&theissuingbank.
XI.
The buyer sends transport documents to the carrier who will then
proceedtodeliverthegoods.
36
3.2.5:IMPORTSCRUTINY:
Theimportbillsconsistofthefollowingdocuments&theorderoftheirscrutinyshouldbe
asbelow:
Forwardingscheduleofnegotiatingbank.
Billofexchange.
Invoice.
Billoflading
Insurancedocuments
Certificateoforigin
Anyotherdocuments.
Lodgment:
a) Intimationshouldbegiventothepartyintime.
b) ConversionofforeigncurrencyintoBangladeshCurrency.
c) EntryinPAD(paymentagainstdocument)register
d) EntryinLetterofCreditopeningregisterbyroundingtheletterofcreditnumber
withdate.
e) Scrutinizetheshippingdocumentsmeticulously.
f) Informtheimportertodepositbalanceamountofletterofcreditandtoreleasethe
necessarydocuments.
g) Entertheshippingdocumentsininwardforeignbillsregister.
3.2.6:ImportBillsRetirement:
37
a) Bankerwillprepare&passretirementvouchers.
b) Importerwilldeposittheclaimamount.
c) CertifyingInvoices.
d) Passing&preparethevouchers.
e) Entryintheregister.
f) Endorsement in the Bill of Exchange and Transport documents i.e. Bill of
LadingA.W.B.T.R.etc.
g) Accountingtreatmentofvoucherpassing:
i. Parry'sA/C..............................Dr.
ii.MarginonimportA/C.................Dr.
iii.
PADA/C.Cr.
iv.
I.A.Interest&otherchargesA/C.......Cr.
h) Attheendofthetotalprocedure,takingtheretirementofimportbillsorclearing
certificatefromthebank,theimporterwillclearthegoodsfromtheportthroughthe
clearing&forwardingagent.
i) Ontheotherhand,completingtheaboveall stepstheissuingbankwillprepare
"foreign exchange transaction schedule" and send one copy to international
divisionofHeadOfficeandanotheronecopytoreconciliation.
3.2.7:RISKOFIMPORTFINANCING:
Inthetradetherearesomanyriskfactorsinvolved.Inbankingsectorthebankface
riskbasicallyfromloans&advancesandforeignexchange.InthissectionIdiscusstherisk
ofimportfinancing.
In international trade transaction takes place between buyers and sellers living in
different socioeconomic and political environments. There may be abrupt changes in
socioeconomicorpoliticalsituationinthebuyer'scountryorintheseller'scountry.Even
theexchangevalueofcurrenciesofthetwocountrieshadgonesomuchdownthatthey
38
werenotacceptableorexchangeableininternationalmarket.Moreovertheimporteror
the exporter may not be able to comply with the terms of credit for some reasons.
Therefore, risk inherent in all credits. The bank have to consider following risk in
financingtheimportprocedure:
(a)commercialrisk:
I. Violation of the requirement of letter of credit authorization or letter of
credit:
Shipment effected before authentication of the letter of credit
authorization from by the nominated bank and registration with the
Bangladeshbank,whenevernecessaryandbeforeopeningofletterofcredit
orafterexpiryofthevalidityoftheletterofcreditauthorizationorletterof
creditshallbetreatedasimportincontraventionofthisorder.Letterof
creditauthorizationobtainedinthebasisoffalseorincorrectparticulars
orbyadoptinganyfraudulentmeansshallbetreatedasinvalidandvoid.
II. Import against indent and Performa invoice: Letter of credit may be
opened against and indent issued by a local registered indenter or against a
Performainvoiceissuedbyaforeignmanufacturerorsellerorsupplier.
(b)Politicalrisk:
In addition to the credit and commercial risk we have outlined, international
transactionsuchasimportfinancingtakeonthewholenewdimensionsofpoliticalrisk.
Theyareasfollows:
Sudden outbreak of war, revolution, coups or civil disobedience in the seller's
country.
Impositionofrestrictiononremittance.
Impositionoftradeembargoorblockade.
Newimportrestrictiononthebuyerorcancellationofthelicense.
Additionalhandingtransportorissuancechargesduetointerruptionordiversionof
voyage,whichcan'tberecoveredfromthebuyer.
(c)Informationalrisk:
39
There may be informational risk inherent in import financing on the importer

because of shortage of required information. So it is much harder to judge the
financialstrength,reputationandintegrityofasellerorbuyerwhoisthousandsof
milesawayandbelongstoadifferentculture.
3.2.8:DOCUMENTSUSEDINFOREIGNEXCHANGE:
LetterofCredit(L/C):
Itisthemostimportantandcommonlyusedinconnectionwithforeigntrade.
LetterofCreditisanundertakingbyabankeroftheimportertotheexporter,totheeffectthat
theamountoftheL/Cwillbedulypaid.ThebankeronbehalfoftheimporterissuestheL/Cin
favoroftheexporter(beneficiary)andforwardsthesametotheexportertotheeffectthatthe
billdrawnbyhimshallbedulyacceptedandpaid.Itcreatesconfidenceinthemindofthe
exportersofaraspaymentofthebillisconcerned.Itisalsofacilitatetheexportertogetthe
benefitofdiscountingthebillbeforethedatelfmaturity.
BillofExchange:
ABillofExchangeisaninstrumentinwriting,containinganunconditionalorder,signed
by the maker, directing a certain person to pay on demand or on fixed or determinable
futuretimeacertainsumofmoneyonlytoortotheorderofacertainpersonortothe
beareroftheinstrument.Fromthedefinitionwegetthefeaturesofbillofexchange.In
generallytherearethreepartieslikeDrawer:Thepersonwhopreparethebill Drawee:
ThepersonwhoisorderedforthepaymentinfuturespecifiedtimePayee:Theperson
whoistheamountofbillreceiveraspertheorderofthedrawertothedrawee.
BillofLading:
A bill of lading is a document that is usually stipulated in a credit when the goods are
dispatchedbysea.Itisevidenceofacontractofcarriage,isareceiptforthegoods,and
40
is a document of title to the goods. It also constitutes a document that is, or may be,
neededtosupportaninsuranceclaim.Thedetailonthebillofladingshouldinclude:
A description of the goods in general terms not inconsistent with that in the
credit.
Identifyingmarks&numbers(ifany).
Thenameofthecarryingvessel.
Evidencethatthegoodshavebeenloadedonbroad.
Theportsofshipment&discharge.
Thenamesofshipper,consigneeandname&addressofnotifyingparty.
Thenumberoforiginalbillsofladingissued.
Thedateofissuance.
A bill of lading specifically stating that goods are loaded for ultimate destination
specificallymentionedinthecredit.
Commercialinvoice:
A commercial invoice is the accounting document by which the seller charges the
goods to the buyer. A commercial invoice normally including the following
information:
Date
Name&addressofbuyer&seller.
Orderorcontractnumber,quantity&descriptionofthegoods,unitpriceand
thetotalprice.
Weightofthegoods,numberofpackagesandshippingmarks&number.
Termsofdelivery&payment.
Shipmentdetails.
Certificateoforiginofgoods:
Acertificateoforiginisasignedstatementprovidingevidenceoftheoriginofthegoods.
41
Inspectioncertificate:
This is usually issued by an independent inspection company located in the exporting
country certifying or describing the quality, specification or other aspects of the
goods,ascalledforinthecontractand/ortheletterofcredit.Thebuyerwhoalsoindicates
thetypeofinspectionusuallynominatestheinspectioncompanyhe/shewishesthecompany
toundertake.
InsurancepolicyorCertificate:
Theinsurancecertificatedocumentmust:
Bethatspecifiedinthecredit.
Covertherisksspecifiedinthecredit.
Be consistent with the other documents in its identification of the voyage and
descriptionofthegoods.
Unlessotherwisespecifiedinthecredit:
a)Beadocumentissuedand/orsignedbyaninsurancecompanyoritsagent,
orbyunderwriters.
b)Bedatedonorbeforethedateofshipmentasevidencedbytheshipping
documents or establish that cover is effective at the latest from such date of
shipment.
c)BeforanamountatleastequaltotheGIFvalueofthegoodsandinthe
currencyofthecredit.
Proformainvoiceorindent:
Seller's quotation or agreement between seller & buyer. In thisthe seller declared the
rate,quantity,quality,manufacturing&otherinformationaboutgoodsandthataccepted
bybuyer..
G.S.P.certificate(Generalizedsystemofpreference):
When tariff concession is sought from those developed countries providing preferential
treatmenttoexportersofthedevelopingcountries,aGSPcertificateshouldbeobtained
42
from the EPB. In GSP scheme the tariff providing country is payer country & tariff
consumerorreceivercountryisreceivercountry.Uptotheperiodthereare16developing
countries under this scheme facility. From Bangladesh export development burro the
industrialistsmaygetnecessaryinformation&practicalprocedure.
OtherDocumentsare:PackinglistMaster'sreceipt.
1.DOCUMENTARYCREDIT:
In simple terms a documentary credit is conditional bank undertaking of payment.
Expressedmorefully,itiswrittenundertakingbyabank(IssuingBank)giventothe
seller(Beneficiary)attherequestandinaccordancewiththeinstructionsofthebuyer
(applicant) to effect payment (i.e. by making a payment or by accepting or
negotiatingbillsofexchange)uptoastatedsumofmoney,withinaprescribedtime
limit&againststipulateddocuments.
These stipulated documents are likely to include those required those required for
commercial invoice, certificate of origin, insurance policy or certificate and bill of
ladingorcombinedtransportdocument.
Therearevarioustypesofdocumentarycredits.
Arevocablecreditcanbeamendedorcancelledatanytimewithoutpriorwarningor
notificationtotheseller.
An irrevocable credit can be amended or cancelled only with the agreement of all
parties.Asthereareoftentwobanksinvolvedtheissuingbank&theadvisingbank,
thebuyercanaskoranirrevocablecredittobeconfirmedbytheadvisingbank.Ifthe
advisingbankagrees,theirrevocablecreditbecomesaconfirmedirrevocablecredit.
Therearefourtypesofdocumentarycreditsaccordingtopaymentmethods:
a) Sightcredit
b) Acceptancecredit
c) Cashcredit
43
d) Deferredpaymentcredit
2. DOCUMENTARYLETTEROFCREDIT:
ThedocumentaryLetterofCreditisanarrangementwherebyabank(issuingbank)
actingattherequestofacustomer(applicantoftheLetterofCredit):
a) Tomakepaymenttoortotheorderofotherperson(thebeneficiary)ortopay
acceptornegotiateBillofExchange(Drafts)drawnbythebeneficiary.
b) Authorizes such payment to be made or such drafts to be paid, accepted or
negotiated by another bank against stipulated documents, provided the terms
&conditionsoftheLetterofCreditarecompliedwith.
Procedureofdocumentarycredit:
44
Seller
Advising/ConfirmingBank
IssuingBank
45
Detailsofthediagram:
a) The buyer & the seller conclude a sales contract providing for payment by
documentarycredit.
b) Thebuyerinstructshis/herbanki.e.issuingbanktoissueacreditinfavorofthe
selleri.e.beneficiary.
c) The issuing bank asks another bank, usually in the country of the seller, to
adviceorconfirmsthecredit.
d) Theadvisingorconfirmingbankinformsthesellerthatthecredithasbeenissued.
e) Asearlaspossiblethesellerreceivesthecredit&issatisfiedthathe/shecanmeet
itstermsandconditions,he/sheisinapositiontoloadthegoodsanddispatchthem.
f) Thesellerthensendsthedocumentsevidencingtheshipmenttothebankwherethe
creditisavailableinbank.Thismaybetheissuingbank,ortheconfirmingbank,or
any bank named in the credit as the paying, accepting or negotiating bank, or it
maybetheadvisingbankoranybankwillingtonegotiateunderthecredit.
g) The bank checks the documents against the credit. If the documents met the
requirementsofthecredit,thebankwillpay,accept,ornegotiateaccordingtothe
termsofthecredit.Incaseofacreditavailablebynegotiation,theissuingbankor
theconfirmingbankwill negotiatewithoutrecourse.Anyotherbankincluding
the advising bank if it has not confirmed the credit, may negotiate, same for
payment.
h) Thebankifotherthantheissuingbanksendsthedocumentstotheissuingbank
i) The issuing bank checks the documents and if they meet the credit
requirements,either
Effects payment in according with the terms of the credit, either to the
sellerifhe/shehassentthedocumentsdirectlytotheissuingbankorto
thebankthathasmadefundsavailabletohiminanticipation.Or
Reimbursesinthepreagreedmannertheconfirmingbankoranybankthat
haspaid,acceptedornegotiatedunderthecredit.
j) Whenthedocumentshavebeencheckedbytheissuingbankandfoundtomeet
thecreditrequirements,theyarereleasedtothebuyeruponpaymentoftheamount
due,oruponothertermsagreedbetweenhim/her&theissuingbank.
k) Thebuyersendsthetransportdocumenttothecarrierwhowillthenproceedto
deliverthegoods.
46
3.2.9:LETTEROFCREDIT(L/C):
LetterofCreditisanundertakingbyabankeroftheimportertotheexporter,tothe
effectthattheamountoftheL/Cwillbedulypaid.Thebankeronbehalfoftheimporter
issues the L/C in favor of the exporter (beneficiary) and forwards the same to the
exportertotheeffectthatthebilldrawnbyhimshallbedulyacceptedandpaid.It
createsconfidenceinthemindoftheexportersofaraspaymentofthebillisconcerned.
Itisalsofacilitatetheexportertogetthebenefitofdiscountingthebillbeforethedatelf
maturity.
PartiesofLetterofCredittransaction:
IssuingBank:Itisthebuyer'sbank.Thebankthatagreestotherequestofthe
applicantandissuesitsletterofcreditintermsoftheinstructionsoftheapplicant.
Advising Bank: It is the seller's or beneficiary's Bank. The bank usually
situated in the seller's or beneficiary's country (most of the time with which
thereexistscorrespondingrelationshipwiththebuyerorissuingbank),requestto
advicethecredittothebeneficiary.
ConfirmingBank:Sometimesissuingbankrequestadvisingbankoranotherbank
toaddconfirmation to the letter of credit. When that bank do this then such
bankiscalledconfirmingbank.Soadvisingbankcanbeactasconfirmingbank.
ReimbursingBank:Thisisthebankthatisnominatedbytheissuingbanktopay
(it is also known as paying bank) or to accept drafts. It can be situated in
anothercountry.InthisconnectionitistosaythatAmericanExpressBank&Nat
WestBankactasreimbursingbankincaseofSonaliBank.Theaccount,which
maintains Sonali Bank with Nat West Bank & American Express Bank, is
called"NostroAccount"andinriverstheaccount,whichismaintainedbyNat
West Bank & American Express Bank with Sonali Bank, is called "Vostro
Account"
47
Negotiating Bank: The bank, which makes payment to the exporter after
scrutiny, the documents submitted by the exporter with the original letter of
creditthenitiscalledNegotiatingBank.
Nominated Bank: The bank that is nominated by the issuing bank to pay
(nominatedbankisknownaspayingbank)ortoacceptdrafts(nominatedbankis
knownasacceptingbank)ortonegotiate(nominatedbankisknownasnegotiating
bank).Usuallytheadvisingbankisrequest&authorizedtobethenominatedbank
unlessthecreditallowsnegotiationbyanybank.
Seller:Beneficiaryoftheletterofcreditisseller.
Classification of Letter of Credit or Basic forms of

documentaryletterofcredit:
The letter of credit can be either revocable or irrevocable. It needs to be clearly
indicated whether the letter of credit Revocable or Irrevocable. When there is no
indicationthentheletterofcreditwillbedeemedtobearevocableL.C.Thedetailsareas
follows:
Revocableletterofcredit:Arevocablecreditisone,whichcanbeamendedor
cancelled by the issuing bank. At any moment without "prior notice" to the
beneficiary.Sothisisclearthatrevocablecreditcanberevokedanytimewithout
priornotice.
Irrevocable letter of credit: An irrevocable credit is one, which cannot be
cancelledoramendmentableanytimewithouttheconsentofeachparty.Through
this letter of credit the issuing bank gives a definite, absolute and irrevocable
undertakingtohonoritsobligations,providedthebeneficiarycomplieswithallthe
terms&conditionsofthecredit.
48
Governmentletterofcredit:Thatletterofcredits,whicharedonebytheDefense
MinistryandotherMinistriesofthegovernment.
Master or mother letter of credit: The L.C. which come from out side the
countrytotheexporterfromimporterthatismotherormasterletterofcredit.
Otherclassesofletterofcredit:
Revolvingletterofcredit:WhentheL.C.isusedagain&againinsame
amountforaspecificperiodoftimethatiscalledrevolvingletterofcredit.
Transferable letter of credit: Exporter can transfer his / her right of
letterofcreditinfullorpartlytoathirdparty.Ingenerally,theexporter
isnotthesupplierbutactasamiddlemanwithinthesupplier&importer.
BacktoBack latter of credit: The letter of credit, which done by the
securityofmotherletterofcredit.
Clean or open letter of credit: The letter of credit, which provides
assuranceofpaymentbillofexchangewithoutsubmission,ofanyexport
documentsthatiscalledcleanletterofcredit.
Confirmedletterofcredit:WhentheIrrevocableletterofcreditissuedby
issuingbanktotheexporterasassuranceoftheL.C.,thenasperadviceor
documents the authorized representative or representative bank's provide
assuranceorpaymentguaranteethatisconfirmedletterofcredit.
Atsightletterofcredit:Thatletterofcreditwhichexpiresninetydaysi.e.
withinthisperiodthedocumentsmustbesendingtothenegotiatingbank.
Deferredpaymentletterofcredit:Thatletterofcreditwhichexpireone
hundred& eighty days i.e. with in this period the documents must be
sendtothenegotiatingbank.
Contractletterofcredit.
RefinanceLetterofCredit.
MarginalLetterofCredit.
Traveler'sLetterofCredit.
49
ClassificationofLetterofcreditasperfunction:
a.LCundercash
b.LCunderloan
c.LCundergrant
dLCunderwage
eBacktobackLC.
Commissionchargesprocedure:
F orfirstquarter:Incaseof
LCundercash:0.5%
LCunderloan:0.75%
LCundergrant:0.75%
LCunderwage:0.75%
BacktobackLC:
InlandLC(ILC):0.5%
DeferredpaymentLC(DPLC):0.75%
orsecondoranynextquarter:Incaseof
LCundercash:0.25%
LCunderloan:0.50
LCundergrant:0.50%
LCunderwage:0.50%
BacktobackLC:InlandLC(ILC):0.25%
DeferredpaymentLC(DPLC):0.50%
50
LETTEROFCREDITINCASH:
Introduction: After getting back the LCA (Letter of Credit Authorization) Form duly
registered by Bangladesh Bank. Sonali Bank Foreign exchange Corporate Branch as
letterofcreditopeningbankcanopenletterofcreditattherequest&ontheinstructionof
theimporter.
Stepsinletterofcreditopening:
On receiving the documents or papers from the importer the letter of credit opening
bankistoperformthefollowingfunctionsinconnectionwithopeningtheletterofcredit:
A. To scrutinize the documents thoroughly and to consult with import policy,
BangladeshBank&InternationalDivision'scircular.
B. Topreparean"offeringsheet".Thisofferingsheetisnothingbutaprescribedoffice
noteonwhichthebranchmanagerwillsanctionthemargintobeobtainedfromthe
importer.
C. Commission of letter of credit to be calculated as 50% of the total amount,
equivalenttoBangladeshcurrency.
D. P&T charges to be realized for TK. 100 (fixed charge) if the letter of credit
dispatchedthroughAirmail.IfitisacableortelexletterofcredittheP&Tcharges
toberealizedatactual.
E. Foreign correspondents adjusting charges (FCC) to be realized TK. 1500 (Fixed
amount).
F. Tomakeentryin"letterofcreditopeningregister".
G. Accountingtreatmenttopreparevouchersinprescribedforms:
Bank'schargesvoucher
Importer'sCurrentAccount..........................Dr.
ForeigncorrespondentschargesadjustingA/C....Cr.
P & T charges recovered A/C... ..................... Cr.
CommissionAccount..................................Cr.
Marginvoucher
Importer'scurrentAccount...........................Dr.
MarginalDepositA/C(againstimportL/C)............Cr.
Liabilityvoucher
LiabilityofconstituentsforacceptanceA/C........Dr.
(Foropeningletterofcredit)
AcceptanceforconstituentsA/C.....................Cr.
(Foropeningletterofcredit)
51
H.Todispatchtheletterofcreditasfollows:
First&secondcopyAdvisingBank,whichinturnforward
theoriginalcopytotheexporter.
ThirdcopyReimbursingBank.
Fourth&FifthcopyImporter
SixthcopyC.C.I.&E.
SeventhtoNinthcopyLetterofcreditopeningbank'scopy.
Requireddocumentsforletterofcreditopening:
Proposalletter(inproposalletteritmustbementionedthatpriceofgoods,CCI&E
registration,passbooknumber,LCAformdully filledinsigned&sealed,Import
formfullset,insurancepolicy&addendum,P.I.number).
ApplicationandagreementforirrevocableLCwithadhesivestampofTK.150.
Importlicense
HS.Code.
TIN.
VATregistration.
Indentingcertificate.
Performa invoice two copies (with in this it indicate Performa bill no. &
date,item,particulars,quality,quantity,rate,amountofgoods,totalinvoicevalue(E
&O.E.)
LCA(LetterofCreditAuthorization)formforindustrialconsumerfourcopies.
(WithinthisIRCnumber,totalamount)
SignatureofDirectorofthefirmandmanagerofSonaliBank.
IMPformFourcopies(bythisthedeclarationofthefirm'sdirectors)
Moneyreceiptsofinsurancepolicy.
Afterpreparingtheprocedurethebankprovideofferinprescribed"offeringsheet".
52
ApprovalcertificateofBangladeshBankonbehalfoftheimporter.
Particularsinvolvedinofferingsheet:
Name of the party, Sanctioned limit, Facility applied for letter of credit
(amount&previousoutstanding).
Forwardexchange
Foreignbillspurchased.
Guarantees.
Trustreceipts.
Cleanpackingcredits.
Advanceagainstimportedgoods.
Goodsparticulars
Importlicense
Marginalreadyatcredit.
Margintobeobtained.
Guaranteedby.
Balanceofcurrentaccount.
AverageBalanceofbankaccount.
Networthofthefirm.
Customsduty.
Countryofexport.
Otherconditions.
Vouchersissuedwhentheofferletteracceptedbythebank:
Commission&otherchargesvouchers.
Marginvoucher.
Liabilityvoucher.
53
Procedureforletterofcreditopening:
Aftercompletionofthepreviousparticulars,thenthepartytakemoneyandbankgive
letterofcredittothepartybycheckingthedeclaredparticularsoftheparty.Thenone
copy sends to the Beneficiary / Negotiating bank. The beneficiary bank sends the
documenttoexporter.Theexporter&Beneficiarybankforshipmentthegoods.Then
thebeneficiarybanksendsbacktotheletterofcreditopeningbank.
TheLCopeningbankscrutinizesthedocumentsandsendstotheimporter.Whenthe
importer accepts the documents then LC opening bank do lodgment (it is the payment
procedureinlodgmentvoucher).
Thentheaccountingtreatmentis:
PADaccount..........................Dr.
Exchangeaccount....................Cr.
SonaliBankGeneralA1C...........Cr.
Thentheimporterapplyforendorsementaswellasretirement.Forretirementaccounting
treatmentinretirementvoucheris:
Importerorparty'saccount.............Dr.
Marginalaccount..........................Dr
PADaccount..............................Cr.
P&Tchargesaccount.....................Cr.
Costofstationaryaccount...............Cr.
Interestaccount...........................Cr.
Thentheopeningliabilityreversedbycreditinliabilityvoucher(FEF20internalvoucher).
ThenthedocumentsendorsedbytheLCopeningbankandsendtotheimporter.Theparty
goes for customs clearing. After clearing the importer submit the customs "Bill of
entry"certificatewithinfourmonthstotheLCopeningbank.TheLCopeningbank
matching the documents and report to the Bangladesh Bank within the month of
retirementofLC.Thentheletterofcreditisfullyclosed.
54
Justificationforfitnessofletterofcreditopening:
Applicationfromimporter.
Biodataoftheapplicant.
Currentaccountopenedbytheapplicantinthebranch.
Supplier'sacceptance&rateofgoods.
Isitabranditemornot.
Contractonprescribedformofbank(stampTK.150).
Performainvoicefromsupplier.
55
3.3:FOREIGNREMITTANCE
Remittance is the sending of money etc. to a distance. Foreign remittance is the
sumsofforeigncurrencytoadistancefromoneplaceanotherplacei.e.countryto
country. The person who is the receiver of the remittance is remittee. The person
who is the sender of the remittance is remitter or remiitor. There are two types of
foreignremittance,whichareasbelow:
Foreigninwardremittance
Foreignoutwardremittance
3.3.1:ForeignInwardRemittances:
The remittance of freely convertible foreign currencies which Sonali Bank Foreign
ExchangeCorporatebranchisreceivingfromabroadagainstwhichtheauthorizeddealers
making payment in local currency to the beneficiaries may be termed as foreign inward
remittance.
Modeofinwardremittances:
TheterminwardremittancesincludesnotonlyremittancesbyTT.,MT.,Draftsetc.
but also purchases of bills, purchases of drafts under travelers letter of credit and
purchasesoftravelerscheques.Foreigncurrencynotesagainstwhichpaymentismade
tothebeneficiaryalsoapartofinwardremittances.ThusthefollowingaretheModeof
inwardremittances:
TT:TelegraphicTransfer.
MT.:MailTransfer.
FD:ForeignDrafts.
TC:TravelersCheque.
56
Foreigncurrencynotes.
Purposeofinwardremittance:
Thepurposeofremittanceisofvariousreasons.Suchas:
Forfamilymaintenance.
Realizationofexportsproceeds.
Gift.
Donation.
Exportbrokerscommission.
AboutFormC":
The authorized dealer should obtain 'Form C' from the beneficiary to know the
purpose of the remittances in all cases and they are to submit the "Form C' to
Bangladesh Bank along with the monthly returns where the proceeds of the
remittances is TK. 5000/= & above. 'Form C' is a prescribed declaration form &
this'FormC'istobefilledupandsignedbythebeneficiaryhimself.
PaymentproceduresofFD.MT.&PO.DrawnonSonaliBank:
The above investments that are drawn on Sonali Bank Foreign Exchange Corporate
Branchmaybepaidonthespotbeforemakingpaymentthefollowingprocedurestobe
observedbytheauthorizeddealer:
ToobtainFormC.
Toverifythesignaturesoftheinstrument.
ToconverttheforeigncurrencyintoBangladeshTK.withO.D.(OnDemand
Transfer)
buyingrateprevailingonthedate.
TomakeentryinTTs,drafts&Mailsreceivedregister.
57
ToprepareFETscheduleandtosendfirstfivecopiesofFETalongwith
voucherstointernationaldivision,HeadOffice,Dhaka.
PaymentprocedureofT.T.:
Toverifythe'testnumber'.
Toinformthebeneficiaryforsubmissionof"FormC".
Toconfirmfromissuingbankorreimbursingbank.
TocovertofforeigncurrencyintoBangladeshcurrencywithT.T.
TomakeentryinT.T.s,drafts,M.T.s,receivedregistration.
Topreparevouchers.
ToprepareFETschedule.
PurchaseofDrafts&Cheques:
Authorizeddealermaypurchasedrafts&chequeswhicharenotdrawingonSonali
Bankattherequestofthebeneficiary.Proceduresofpurchaseareasbelow:
Toobtainanapplicationorundertakingfromthebeneficiarywith'FormC
Toverifythesignatureofthedrafts(ifpossible).
Tomakeentryintheregisterfordrafts&T.C.purchased.
ToconvertforeigncurrencyintoBangladeshcurrency.
Topreparevoucher.
Tosendtheinstrumentforcollection.
Collectionprocedureofdrafts&cheques:
TomakeentryinforeignBillsCollectionRegister.
Toprepareforwardingscheduleinquadruplicate.
Topreparevouchersonrealizationofproceedsi.e.onreceiptofadvice
fromthecollectingbank.
58
Paymentoftraveler'scheque(TC):
Tocheckupthecustomdeclaration(ifany).
Toconsultwithpurchaseagreement(ifany).
ToobtainsignatureonTCandtoverifythesamewiththeprevioussignatureof
thebeneficiaryoftheTC.
TomakeentryinregisterforTC&draftspurchased.
TosendtheTCforcollection.
Topreparethevouchers.
Paymentofforeigncurrencynotes:
Tocheckthecustomdeclaration(ifany).
Tomadeentryin(kateha)rawregister.
Topreparevouchers.
NoFETscheduleisrequiredtobeprepared&senttoheadofficebecausein
thiscasethereisnotransactionwithheadoffice.
Cancellationofinwardremittance:
Intheeventofanyinwardremittancewhichhasalreadybeenreportedtothe
BangladeshBankbeingsubsequentlycancelled,eitherinfullorinpartbecauseofnon
availabilityofbeneficiary.Authorizeddealersmustreportthecancellationoftheinward
remittanceasanoutwardremittanceof"FormT/M".Requireddocumentsare:
Thedateofreturninwhichtheinwardremittancewasreported.
59
Thename&addressofthebeneficiary.
Theamountofthepurchaseaseffected.
Reasonsforcancellation.
ReportingtoBangladeshBank:
Onthelastworkingdayofeachmonththetransactionduringthemonthtobe
reportedtoBangladeshBankthroughthefollowingschedule:
ScheduleJl/03forTK.5000&above.
Inwardremittancevoucher1/04forbelowTK.5000.
3.3.2:FOREIGNOUTWARDREMITTANCES:
Theremittanceinforeigncurrencywhichisbeingmadefromourcountrytoabroad,
isknownasforeignoutwardremittance.
Modeofoutwardremittance:
ThusthefollowingaretheModeofoutwardremittances:
TT.TelegraphicTransfer.
MT:MailTransfer.
FD:ForeignDrafts.
PO:PaymentOrder
TC:TravelersCheque.
Foreigncurrencynotes.
ApprovalofBangladeshBank:
Bangladesh Bank provides permission or approval for outward remittances to the
applicants who are to lodge an application for the purpose on the following prescribed
formswithanauthorizeddealerwhoforwardedthesametoBangladeshBankforapproval:
60
TheIMPform(coverremittancesforimports).
FormT/M(Traveling&Miscellaneous).
IssuanceprocedureofFD,MT.&TT.:
Topreparetheinstrument.
TomakeentryinDD,MT,TTissuedregister.
Topreparedraftadviceinduplicateonefor
draweebank&oneforreimbursingbank.
Tomakeentryindraftadvicedispatchedregister.
TosendreimbursementauthorityincaseofMT&TT.
T o prepareFETschedule.
Issuanceproceduresoftravelercheque:
ToverifytheapprovedT/MformorBangladeshBankpermit.
ToissueTCbyobtainingsignatureofthepurchaserontheTC.
Toendorseinthepassport.
Tomakeentryinthetravelerschequeissueregister.
TheTCissuingslipoftheissuedTCtobesenttothatbank(whoseTCissued)
Withreimbursementinstruction.
Issuanceprocedureofforeigncurrencynotes:
ToverifytheapprovedT.MformorBangladeshBankpermit.
Toissueforeigncurrencynotesbyendorsinginthepassport.
Voucherpreparingwithaccountingtreatment:
61
Party'saccount.........................................Dr.
ForeignCurrencyNotesonHandA/C..................Cr.
3.3.3:Homeboundremittance:
More than 40% of home bound remittances are routed through Sonali Bank for its
excellent personalized services and wide network of foreign inlets and domestic outlets.
Remittancecanbesenttoallthe1186localbranchesoftheBankspreadingovertheurban
andremoteruralareasofBangladesh.TofacilitatehomeboundremittancetheBankhastwo
subsidiary companies, one in the USA and another in the UK. Besides, it has one
representative office in Saudi Arabia and 23 agency offices in other Middle Eastern
Countries.
Sonali Bank has made arrangements to deposit/pay remitted money to the beneficiaries
within48hoursonreceiptoftheremittancefromabroad.
FacilitiesforwagesEarners:
Bangladeshinational/BangladeshorigindualcitizenworkingabroadmayopenForeign
Currencyaccount(F.C.A/C)inUSDollarandPoundSterlingwithoutinitialdeposit.
Nomineecanoperatetheaccount
InterestispaidonF.C.A/C
BalanceinF.C.A/Ccanbeutilizedforimportofgoods
BalanceavailableintheF.C.accountmaywhollyorpartiallybesentabroad.
ForeigncurrencybroughtinbyWageEarnerscanbedepositedintheF.C.A/C
WageearnersDevelopmentBondinTakacanbepurchasedfromthebalanceofF.C.
A/C
NonResident Foreign Currency A/C (NFCD A/C) can also be opened by Wage
62
Earners.
F.C.A/C&NFCDA/Cmaybemaintainedaslongastheaccountholderdesires.
These accounts can be opened from abroad on submission of required papers duly
attestedbyourEmbassy/Branch/Representativeofficeabroad.
InterestRatesforWageEarners:
Particulars
Interestrates(P.A)
WageEarnersDevelopmentBondissuedfor5years
(Floating)
12%
NonResidentForeignCurrencyDeposit(NFCD)A/C
posit(NFCD)A/C
NatureofCustomer
Currency
Period(Month)
Rates
PrivateIndividual
USD
1Month
3Months
6Months&above
1.75%
GBP
1Month
3.60%
3Months
3.58%
6Months&above
3.55%
AllForeignBanks/
USD
1Month
1.90%
FinancialInstitutions
ExchangeHouses&
ExchangeHouse&
3Months
1.85%
6Months&above 1.80%
AllForeignBanks/
GBP
1Month
3.60%
ExchangeHouses&
ExchangeHouse&
3Months
3.58%
Financial
FinancialInstitution
6Months&above
3.55%
ResidentForeignCurrencyDeposit(RFCD)A/C
ForeignCurrencyAccountDollar(FCAD)
ForeignCurrencyAccountPound(FCAP)
4.82%
4.00%
5.00%
MonthlystatementtoBangladeshBank:
Onthelastworkingdayofeachmonth,thetransactionofoutwardremittanceduringthe
monthtobereportedtoBangladeshBank.
ObservationofSonaliBankForeignExchangeCorporateBranchofF.E.D.:
63
ForeignExchangedivisionisveryefficientmarginofletterofcredit.Thebranchachieved
thetargetonexport&import.
3.4:FOREIGNEXCHANGEBUSINESSPOSITION:
(Tk.inCrore)
Particulars
a)Export
Dec.2002
4150.31
Dec.2003
3557.44
Dec.2004
5721.31
June2005
3099.17
b)Import
c)Remittance(Including
NonWES)
5294.00
6069.67
3995.81
4231.45
8523.85
5766.15
5456.05
4055.38
ForeignExchangeBusinessPosition
10000
8000
TotalExport
6000
TotalImport
4000
2000
TotalRemittance
(IncludingWES)
0
2002
2003
2004
2005
64
4.1:Introduction
OverallMarketingStrategyandMarketinginformationsystemofSonaliBankisnot
so much developed. But Sonali Bank Foreign Exchange Branch have already
developed and used marketing strategy to attract and retain clients from its
establishingperiod,thoughthemanagementofthebranchhasnoenoughacademic
marketingknowledge.
4.2:StrategicPlanning
Strategic planning helps to guide the directions Sonali Bank management takes for
thefuture.Thefirststepinstrategicplanningisanassessmentofthebanksstrengths
and weaknesses. Some common criteria to assess strengths and weaknesses are as
follows:
(1)
Profitability
(2)
Competitiveness
(3)
Efficiency
(4)
Flexibility
(5)
Risk.
Subsequent to evaluating strengths and weaknesses, SB management can consider

alternativemarketingstrategies.
65
4.3:MarketingPlanning
Withstrategicplaninhandbankmanagementcanproceedwiththedevelopmentof
a marketing plan. The marketing plan should be compatible with and contribute to
the strategic plan. From this perspective, two aspects of marketing planning are
productportfolioanalysisandintangibleservices.
Productportfolioanalysisisaprocessofevaluatingtheroleofeachproductonboth
sides of the balance sheet. By doing so, products can be classified by their
contributiontothebanksobjectivesandacohesivemarketingplanfortheproducts
can be drifted. To assess the role of a product the competitive strength of the bank
compared to other banks in the market, the market attractiveness of the product in
termsofgrowthandtheabilitytocrosssellwithotherbankproductsareconsidered.
Intangible services relate to the fact that financial products are services rather than
goods.Theintangiblenatureofservicespresentsdifficultiesintheirpromotionand
sale. One way to overcome this dilemma is to associate the service with a tangible
object.Anotherapproachistodivertattentionawayfromtheintangibleserviceand
towardtherelationshipbetweenthebanksemployeesandthecustomer.Thebank
personnel are tangible and customers become their personal clients. You are not
receiving a nameless, faceless service but a friendly, helpful salesperson. Thus,
intangibleservicescanbemoreeasilypromotedandsoldbytransformingtheminto
physicalgoodsasperceivedbycustomers.
4.4:OrganizationalStructure
Organizations typically either have a functionaloriented or marketoriented
managementstructure.AsafunctionorientedSonaliBanksstructureisdesignedon
the basis of traditional lines of banking business, such as loans, investments, trust,
66
andoperations.Itisaformalstructurethatishighlyspecializedandcentralizedand
hasalengthychainofcommand.Bycontrast,amarketorientedstructureismarket
drivenandtherefore,evolvessubjecttotheneedsofcustomers.
Itisessentialthatmarketstrategyprecedeorganizationalstructureissues.Reversing
thisorderofdecisionmakingwouldunnecessarilyconstrainmanagementactivities.
Organizational structure should be adapted to fit the competitive needs of the bank
andnottheotherwayaround.Asthestrategyandstructureofanorganizationchange
over time the reward system in terms of play promotion, benefits, etc., should be
adaptedtobeconsistentwiththenewdirectionofthebank.
4.5:MarketSegmentation
Market segmentation is an essential part of bank marketing strategy. Customer
demandsinretailmarketsusuallyvarywithdemographics(e.g.,age,sex,familysize,
occupation, education, race, religion and income), but other characteristics such as
social class, lifestyle, and attitudes can also be important. In a corporate market,
companysize,products,location,extentofcreditneeded.Andotherfinancialservice
supportrequirementswillaffectcustomerdemands.
SonaliBank,ForeignExchangeBranchsegmentsitsmarketontwocriteria:
(1)
Occupation(BusinessmanorHighIncomeOccupation)
(2)
Institution(BusinessInstitution)
Another important set of decisions related to market segmentation is market

positioning. So you want to be an international, national, regional, or community
bank.Otherquestionsarisewithregardtopricingpersonneldistributionordelivery,
and profitability. Donnelly, Berry, and Thompson propose the following minimal
levelofinstitutionalpositioning.
67
RelationshipBank
InvestmentBank
EverywhereBank
SellingBank.
4.6:POSITIONINGSTRATEGY
TheForeignExchangeBranchofSonaliBankistryingtotakepositioninthemind
ofthetargetmarketthroughusingmarketingtoolsappropriately.
MarketTarget
PositioningStragety
Product
Strategy
Promotion
Strategy
Distribution
Strategy
Price
Strategy
Exhibit:PositioningDevelopment
68
4.6.1:TargetMarketoftheBranch
Thebranchhastosellbothliabilities(suchasvariousdeposits)andassets(creditand
advance).Soithastwosidedtargetmarketwhataregivenbelow.
TargetMarket
LiabilitiesMarket
AssetsMarket
Individualperson
BusinessMan
Soleproprietorshipfirm
BusinessInstitution
Partnershipfirm
ExporterandImporter
PrivateLimitedCompany
ProjectInvestor
PublicLimitedCompany
Others
BankEmployeeetc.
BankEmployeeetc.
69
4.6.2:Product
TheForeignExchangeBranchofSonalibankplayswithanumberofproductswhich
areassets,liabilities,pureserviceoriented.
ProductoftheBranch
Assetsoriented
Pureservices
Liabilitiesoriented
i. Businessloan
ii. Consumerloan
iii. Advance
iv. Carloan
v. Housingloan
vi. Variousprojectetc.
AccountsofDeposit
i. CurrentAccount
ii. SavingAccount
iii. FixedAccount
VariousSchemes
i. MonthlySavingScheme
ii. MonthlyBenefitSaving
Scheme
iii. EducationRemittance
Scheme
iv. ConsumerCreditScheme
v. DoubleBenefitSaving
Scheme
vi. HirePurchaseScheme
i. Collection
Cheques/bills/docume
ntaryoutstation
ii. Issuanceduplicate
DD,PO
iii. Purchase
Cheques/Inland
Bills
iv. ProcessingCredit
proposal
v. L/COpening
vi. L/CAdvising
vii.Others
1
70
4.6.3:Developingnewservices
SonaliBankdevelopsitsnewservicesbyfollowingway:
Tangibles
Newserviceideas
Intangibles
4.7:Price
Screening
Employee
Rewards
Service
Innovation
Work
Environment
IntensiveAnalysis
Marketing
Strategy
Riskcontrol
Marketing
Plan
Prototype
Target
Markets
TestMarketing
Customer
Reaction
Modification
Competitors
Introductionof
NewService
Changing
Demand
Evaluation
71
The total pricing strategy of Sonsli Bank is a combination of convenience, service

charges, minimum balances to avoid service charges or earn interest (or both), and
otheruniquecharacteristicsoftheparticularaccount.
4.8:Promotion
Two necessary conditions for customers to purchase a financial service is that they
must know it exists and they must understand it. Promotion of financial services
deals with informing and persuading customers to help create customer demand.
Although SB is not so efficient to promote financial service it also employs some
toolsofpromotion.
4.8.1:Advertising
Advertising informs customers of the existence of a financial service Sonali Bank
giveslittleattentiontoadvertisingbygivingsomebillboard.
4.8.2:PersonalSelling
Personalsellingisneededtofurtherexplaintheservice,answercustomerquestions,
and close the sale of the service. Personal selling is consistent with relationship
banking discussed earlier and is the first step toward establishing a client
relationship.Theclientpurchasesabanker,ratherthanaservice.Nowadays,mostSB
loan officers try to make a certain number of cold calls to potential clients every
weekinanefforttoarrangeameetingforthepurposeofpersonalselling.
4.8.3:SellsPromotion
ThebranchalsoprovidesCalendar,Diary,Eidcard,WatchwithsymbolofSBtoits
bigclients.Itsometimegivescreatedandadvancewithoutadequatedocuments.
4.9:Distribution/place
SonaliBankisthelargestbankinpablicsectorthroughitsbranchnetworkallover
thecountry.Ithas1186branches.
4.10:ServiceandQuality
72
InrecentlySonaliBankhighlightstheneedforqualityinbankserviceproduction.To
assess bank service quality, the Quality Focus Institute recommends constructing a
twodimensional plot, as to score difference areas of service quality. For example,
ImprovementPotentialgaugestheabilityofthequalityareatoincreasecustomer
satisfaction,whereasSatisfactionImpactrelatestotheeffectofeachqualityareon
customersatisfaction.
73
MAJORFINDINGS
ThefindingsobtainedfromthestudyonForeignExchangeBusinessofSonaliBank
arefollows:
Sonali Bank is playing an important role toward the growth and economic
developmentofBangladesh.
Therearethreetypesofmodesofforeignexchangemarket,whichare:Export
Finance, Import Finance & Foreign Remittance. Foreign Exchange Corporate
Branchdoestheseforeignexchangeactivitiesvastly.
With wide network of branches at home and also a large number of
correspondentbanksworldwideitissingularlyhandlingthelargestvolumeof
exportimportbusinessincludinghomeboundremittances.
The total foreign exchange business of the Bank for the year 2004
wasTk.20011.31croreasagainstTk.16601.92crorein2003showing
anincreaseof17.03%.
The total Deposit of the Bank for the year 2004 was Tk. 24581.89
croreasagainstTk.22456.48crorein2003.
The total Advance of the Bank for the year 2004 was Tk.
16819.11croreasagainstTk.15511.22crorein2003.
TheNetProfitoftheBankfortheyear2004wasTk.107.24croreas
againstTk.65.95crorein2003.
SonalibankStaffCollegeprovidestrainingfacilitiestoitsmediumandjunior
level officers of the bank and also provides executive development and
internshipprogram.
Onlythecashsectionofthebranchiscomputerized.Hopefully,management
has decided to provide computerized system for each of its departments
soon,whichwillbolsterservicesofthebank.Paperbasedworksarestillin
existence.
The liquidity & profitability condition of the Foreign Exchange Corporate
branchisstandard.
ItisaleadingbankofBangladeshbutithasnoattractiveappearanceinits
officialenvironment.
Alltheemployeesarenotloyaltotheorganization,sotheyarenotfocused
onthecustomersatisfaction,wherecustomersarethelifeofthebanks.
74
RECOMMENDATIONS
AsaninterneeofSonaliBankIhavesomerecommendations.Theseare:
The Bank should develop an effective database needed for analyzing

ForeignExchangeBusiness.
TheBankshoulddevelopsectorswiseexportfinancingfacilities.
LetterofCredit(L/C)openingsystemfortheimportershouldbeeasier.
For customer's convenience, Sonali Bank should provide more

personneltodeliverfasterservicestothecustomers.
Propercommunicationsystemandmaintenanceoffiles&machineries
likephone,computer,fax,andphotocopierneedtobeensured.
To ensure error free faster services, the bank should be fully

computerized.
Research&Developmentactivitiesshouldbetakenintoconsideration
Effectivestrategiesmustbeundertakenagainstdefaulters.
Officeshouldbefullydecoratedtoattractclientstotakeitsservices.
Moreemployeesaretorecruit.Forthebetterservice,trainingismust
and according to the skill and education background of employee
needstobepositioned.
TheBankshouldabsolutelymaintainonitsownrulesandprocedures.
TheBankshouldintroducerewardsystemforgoodborrowersaswell
aspunishmentforbadborrowers.
TheBankshouldapplymodernizedMarketingInformationSystem.
TheBankshouldactwithoutanykindofpoliticalinfluence.
CONCLUSION
75
TheBankingarenainrecenttimeisoneofthemostcompetitivebusinessfieldsin
Bangladesh. As Bangladesh is a developing country, a strong banking sector can
change the socio economic structure of the country. So we can say, the whole
economyofthecountryinlinkedupwithitsbankingsystem.Thereare54banksin
Bangladesh in which 38 are indigenous commercial Banks. Sonali Bank is the
largestnationalizedcommercialBankofBangladesh.Thisbankperformshundreds
ofimportantactivitiesbothforthepublicandforthegovernmentasawhole.Ithas
anoutstandingbearingtothriveourbusinesssector.Ithasstrongperformanceon
GeneralBanking,Loans&Advances,IndustrialcreditandforeignExchange.Ihad
the privilege to learn many things from the Foreign exchange Corporate Branch
throughmyactiveinvolvementinthisbranch.
InthispaperIhavetriedtohighlightForeignExchangeBusinessofSonaliBank.Its
pioneerroleinhandlingforeigntradeandforeignexchangetransactionseverbefore
independence of the country still remains unchallenged. With wide network of
branches at home and also a large number of correspondent banks worldwide it is
singularly handling the largest volume of exportimport business including
homeboundremittances.
The effective and efficient Foreign Exchange Business of the Bank helps in the
continuousgrowthandprogressofnationaleconomy.
76

Submitted By: Foreign Exchange Business of Sonali Bank

Enviado por

Dados do documento

Título original

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

Submitted By: Foreign Exchange Business of Sonali Bank

Enviado por

Direitos autorais:

Formatos disponíveis

ForeignExchangeBusinessofSonaliBank

Post shipment financing is extended to the exporters by the following

There may be informational risk inherent in import financing on the importer

Classification of Letter of Credit or Basic forms of

Subsequent to evaluating strengths and weaknesses, SB management can consider

Another important set of decisions related to market segmentation is market

The total pricing strategy of Sonsli Bank is a combination of convenience, service

The Bank should develop an effective database needed for analyzing

For customer's convenience, Sonali Bank should provide more

To ensure error free faster services, the bank should be fully

Você também pode gostar