Foreign Exchange Oriental bank

8/12/2019 Foreign Exchange Oriental bank

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5. FOREIGN EXCHANGE

The term foreign exchange has different connotations in different contexts. Sometimes it is

referred to as the process of conversion of one currency into another. In Bangladesh it has a

legal definition too. In terms of Section 2(d) of the F.E.. !ct" #$%&" as adapted in Bangladesh"'foreign exchange means foreign currency and includes instruments expressed in foreign

exchange" all deposits" credits and alances payale in foreign currency as *ell as foreign

currency instruments such as draft" T+" ills of exchange" promissory note and letter of credit

payale in any foreign currency.

Bangladesh earns foreign exchange mainly through export of goods and services. ,age earners

remittances are also important sources of foreign exchange. Foreign Exchange is also earned

from aids" grants and credits from donors. Foreign exchange is used for settlement of

international payments for import of goods" freight charges" insurance" an-ing" det servicing"travel and education etc.

Foreign exchange usiness has een identified as one of the -ey areas for development of

the an-s usiness. The recent lieraliation of exchange control has provided an ideal

opportunity to rea- into ne* fields of activities including dealings in the domestic inter/ an-

foreign exchange mar-et" provision of for*ard exchange and aritrage operation *ithin the

parameters of Bangladesh Ban- regulations.

5.1. Regulation of Operations of Foreign Exchange

The Foreign Exchange egulation !ct" #$%& empo*ers Bangladesh Ban- to oversee the

operation of foreign exchange usiness y an-s and money changers. To harmonie and control

the operational activities of foreign exchange usiness of an-s" Bangladesh Ban- issued a

01uidelines for Foreign Exchange Transactions"#$$. Beside this" Bangladesh Ban- issues F.E

circulars time to time as per the import policy" export policy or the industrial policy of the +ountry.

3peration in the mar-et is also overseen y an inter an- committee -no*n as B!FE4!. This has

prepared a code of conduct setting out elaorate rules and procedures governing 5uotations"

delivery" value dates" confirmations etc. 6oreover" the an- should follo* the rules and

procedures of I++ pulication of 7+84+ 9::" *hich is treated as the ile of letter of credit.

Bangladesh Ban- through its Foreign Exchange 8olicy 4epartment issues !uthoried 4ealer

(!4) license to the commercial an- ranches for the operation of foreign exchange

usiness. ;ast year Shah


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Foreign +urrency +urrents !ccount maintained *ith correspondents aroad are termed y us as

0?ostro !ccount@ meaning 03ur !ccount *ith you@. The foreign correspondents" ho*ever"

descrie our !ccount maintained y them as 0Aostro !ccount@ meaning 'our account *ith us.

Similarly our foreign correspondents may at times *ant to maintain ?on/resident Ta-a !ccounts*ith us. These are" from their point of vie*" their ?ostro !ccounts ut from our point of vie*

0Aostro !ccount@C'our account *ith us. These types of accounts *ould" ho*ever" e very far

and et*een.

Foreign +urrency !ccount" if any" maintained y us *ith our correspondents aroad in the name

of third party is termed y us as 0;oro !ccount@ meaning 'their !ccount *ith you. These types of

accounts *ill also e rare.

5.+. Foreign !ra%e ,epart"ent

In international trade the parties involved" the uyer D seller" in a usiness transaction stay

t*o distant places. For the uyer there are ris- of non/delivery of goods ris- of receiving su

standard goods and ris- of fraud in goods. 3n the contrary" for the seller there is a ris- of non/

payment. To reduce the aforesaid ris-s an independent system is introduced *hich *ill

safeguard the uyer as *ell as seller in an international trade. !ctually an-s play due role y

getting into t*o parties and ind them.

Shah


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5..1.1. etter of Cre%it /0C

! ;etter of +redit (;G+) is a *ritten instrument for payment of international trade. 3n the

re5uest of the customer (Importer) a an- (Issuing Ban-) *ill issue a ;G+ in *hich it oligates

itself to pay the seller (Exporter) against presentation of a draft and certain documents. Those

documents are evidences of shipment and include all of the terms and conditions stipulated in

the ;G+. If the conditions of the credit do not re5uire for presentation of specified documents" it

is called +lean +redit. 3n the contrary" if the presentation of specified documents is

oligatory" the credit is called a 4ocumentary +redit.

5..1.1.1. !2pes of etter of Cre%it /0C

! letter of credit may e either revocale or irrevocale. ! revocale ;G+ is one" *hich can e

cancelled or amended y the issuing an- at any time *ithout prior notice to the eneficiary.

3n the other hand" an irrevocale credit can neither e amended no cancelled *ithout the

agreement of all parties concerned.

Shah


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5..1.1.3. !ransaction Flos of a etter of Cre%it /0C

/A At Issuance an% A%6ising -tage

/7 At 'resentation # Repa2"ent -tage

Figure/.# Transaction Flo* of ;G+.

F.EXCHANGE 'AGE( 141

Exporter (#) Sales +ontract Importer

(2) !pplication

Issuing(3pening) Ban-() 3pens ;etter of

+redit

!dvising(+onfirming) Ban-

(%) For*ards;etter of +redit

Exporter Importer

!dvising G?egotiating

(8aying) Ban-

() 4ocs (&) 6oney

Issuing(3pening)

Ban-

($) 6oney

(J) 4ocs

(9) 1oods

(#:) 4ocs(##) 6oney


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5..1.1.. Opening of a etter of Cre%it /0C

To import" a person should e competent to e an 'Importer. !ccording to Import and Export

+ontrol !ct" #$9: the 3ffice of +hief +ontroller of Import and Export provides the registration

(I+) to the importer. The importer is re5uired to apply for opening of ;+ in the prescriedprinted ;+ application form availale *ith the an- *ith (three) Ta-a special adhesive

stamp affixed on it The Importer must also sumit the ;etter of +redit !uthoriation (;+!)

from Bangladesh Ban- along *ith the follo*ing documents/

Indents issued y Indenting !gent or proforma invoice issued y foreign supplier

6arine Insurance +over note issued y an approved Insurance +ompany in

Bangladesh" in favor of the Ban-" covering the usual marine ris-s

I68 Form duly signed

I+ duly rene*ed.

The ;G+ application must e completed and signed y the importer or authoried person of

the importer giving the follo*ing particulars

Full name and address of the supplier and the applicant.

Brief description of goods

4ate and place of expiry of the credit

!pplicants !G+ numer

;G+ Aalue in 7SK" 8ound Starling etc.

The mode of transmission of document (S,IFTG +ourierG Telex)

+onfirmation of credit to the eneficiary (re5uested or not re5uested)

8artial shipment is allo*ed or not

The type of loading (loading on oard)

Brief description of the goods to e imported *ith >S code no.

+redit availale *ith y sight paymentG y acceptanceG y negotiationG y deferred

payment at against the documents detailed hereinG and eneficiaries draft at on.

The time ar *ithin *hich the document should e presented.

Sales terms (F3BG + DFG +IF)

Shipping 6ar-

I+ ?umer and ;+! ?umer

Insurance cover note *ith money receipt

+ountry of origin

In the letter of credit application form" the importer signs an agreement to the effect that" in

consideration of the an-s opening the credit he agrees"

That the Ban- *ill have the pledge of document and goods covered y the credit

F.EXCHANGE 'AGE( 143


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To accept andGor pay on maturity the drafts" if any" dra*n under the credit

The 8rovisions of the !rticles of the 7niform +ustoms and 8ractice for documentary

credit #$$9 edition / I++ Brochure ?o.9:: shall govern the letter of credit unless

other*ise specified y him in the application.

The Shah


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+onsular Invoice

+ertificate of 3rigin

Inspection or Survey +ertificate

Nuality +ontrol +ertificate

8hyto/sanitary +ertificate

1S8 +ertificate.

-crutin2 of ,ocu"ents

3n receipt of the import documents the ranch shall immediately set itself to the tas- of

scrutiniing the documents. ,hat they *ould ensure is that the documents received from the

negotiating an- are dra*n strictly in conformity *ith the terms of the ;+ and respond to the

re5uirement of the underlying letter of credit in every respect. Examination of the documents

generally include the follo*ing points

+ompleteness of the documents

+onsistency of the documents *ith each other

+ompliance *ith the 7niform +ustoms and 8ractices for 4ocumentary +redits issued

y the International +hamer of +ommerce" 8aris

5..1.1.5. o%ge"ent8 Retire"ent an% ,eli6er2 of ,ocu"ents

o%ge"ent

!fter the scrutiny there should follo* a step/y/step process of lodgement as follo*s

Enter full particulars of the documents in the prescried 8!4 egister allotting a

consecutive serial numer in the egister.

uer stamp all the shipping documents *ith the 8!4 stamp and put the 8!4 serial

numer in each of the documents.

+onvert the foreign currency amount of the ill and the foreign an- charges

separately into Ta-a y applying the B.+. selling rate ruling on the date of lodgement.

If any for*ard exchange *as oo-ed" the oo-ed rate should e applied.

Send an 0Inter/Branch credit advice@ (IB+!) to the >ead 3ffice along *ith a

prescried statement to provide them credit for the payment from their overseas

account through SB; 1eneral !ccount

The >ead 3ffice (International 4ivision) on receipt of the IB+! and the statement *ill

respond the entry y deit to ranch account (through SB; 1eneral !ccount) and

contra credit to ?ostro !ccount of the negotiating an- aroad.

Retire"ent of %ocu"ents

F.EXCHANGE 'AGE( 14+


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original documents" *hen received. The !ccounting vouchers *ill e passed as

follo*s at B+ (selling) rate

4r. 8artys !G+

+r. 6argin on SG1

+r. +ommission on shipp ing guarantee

+r. 3thers if any

,. Retire"ent of ,ocu"ents

The party must e advised to retire the documents against 8!4 if" ho*ever the

an- agrees to provide post shipment finance the 8!4 !G+ *ill e ad


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otained to cover the enhanced amount of ;+. Insurance cover should also e otained for

enhanced amount.

5..1.1.). A%%ing Confir"ation

The confirming an- does adding confirmation. +onfirming an- is a an-" *hich adds its

confirmation to the credit" and it is done at the re5uest of the issuing an-. The confirming

an- may or may not e the advising an-. The advising usually does not it if there is not a

prior arrangement *ith the issuing an-. By eing involved as a confirming agent the advising

an- underta-es to negotiate eneficiarys ill *ithout recourse to him.

5..1.1.14. In6est"ent Against !rust Receipt

Sometimes documents are also handed over to the importer against T.. for clearance of the

goods on the clear underta-ing that the importer *ill hold the goods or the sale proceeds

thereof in trust *ith him at the disposal of the an- till the entire loan is li5uidated. ! specimen

of the underta-ing in respect of imports under ac-/to/ac- arrangement is appended.

Investment against T is called 68I. From an-s point of vie*" it is ris-y ecause usually no

security is ta-en. ,hen customers commitment is as good as cash" T is then issued. It isallo*ed for retirement of shipping documents and release of goods imported through ;G+.

5..1.3. !op !en I"porters of the 7ranch

Rarim Spinning 6ills ;td.

8artex 4enim ;td

6ale- Spinning 6ills ;td.

Shohagpur Textile 6ills ;td.

Echo +otton 6ills ;td.

6c4onald Still Building 8roducts ;td.

!gro +are ;td.

!hmed Expo !id ;td.

F.EXCHANGE 'AGE( 14*


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8eoples ;easing D Financial Services ;td.

8hoenix ;easing +o. ;td.

5..1.. ;a=or I"porte% Ite"s

6achineries

Still (a* 6aterials)

+otton

8esticide

Fish Feed

Food Items

5..3. Export -ection

Foreign Exchange egulation !ct" #$%& noody can export y post and other*ise than y

post any goods either directly or indirectly to any place outside Bangladesh" unless a

declaration is furnished y the exporter to the collector of customs or to such other person as

the Bangladesh Ban- (BB) may specify in this ehalf that foreign exchange representing the

full export value of the goods has een or *ill e disposed of in a manner and *ithin a period

specified y BB.

Export section deals *ith t*o types of ;G+ that are as follo*s/

(#) Export ;G+

(2) Bac- to Bac- ;G+

F.EXCHANGE 'AGE( 14)


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xiii. ?ame of the Exporter *ith address

xiv. ++IDEs registration numer and date

xv. Sector (pulic or private) under *hich the exporter fails.

+. -ecuring !he Or%er $7pon registration" the exporter may proceed to secure the exportorder. This can e done y contracting the uyers directly through correspondence.

4. -igning Of !he Contract $ ,hile ma-ing a contract" the follo*ing points are to e

mentioned a) 4escription of the goods ) Nuantity of the commodity c) 8rice of the

commodity d) Shipment e) Insurance and mar-s f) Inspection" and g) !ritration.

E. 'rocuring !he ;aterials $!fter ma-ing the deal and on having the ;G+ opened in his

favor" the next step for the exporter is set aout the tas- of procuring or manufacturing the

contracted merchandise.

F. Registration Of -ale $This is needed *hen the proposed items to e exported are ra*


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5..3.1.3. 'roce%ure For F,7'

This *ould involve purchase or negotiation of documents dra*n under an ;+ +are should e

exercised to ensure that the documents the ;+ strictly confirm to the ;+ terms.

Aouchers to e passed

4r. F4B8 Q 34 sight (export) In case of discounting usance ills long ill rate

+r. 8artys !G+ at the same rateConly the +6 portion

+r. Income/!G+C+harges as per schedule.

&ouchers to 9e passe% on reali?ation of procee%s

4r. >3 H I4 (relevant ?ostro !G+) at eady Buying rate

+r. F4B8

+r. Exchange earning difference et*een t*o rates

! F4B8 egister is maintained for recording all the particulars. The F4B8 register includes

the follo*ing contents/

i. F4B8 ef. no.

ii. 4ate

iii. 4ra*erG Beneficiaryiv. 4ra*eeG !pplicant

v. Foreign +urrency

vi. ate

vii. ;ocal +urrency

viii. 6argin ( of amount)

ix. 6odes of Transport

x. 6erchandise

xi. 4ocuments

xii. ;G+ no. and name of opening an-

xiii. ?ame of collecting Ban-

xiv. Initial" due date" date realied" an- charges recovered *ith remar-s.

5..3.1.. ,ocu"ents -ent on Collection 7asis

Shah


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Bill of exchange produced y the customer must contain acceptance from the ;+

issuing an- indicating the maturity date.

4r. ;4B8 appropriate usance uying rate

+r. 6argin on ;4B8

+r. 8artys !G+

&ouchers to 9e passe% on reali?ation of procee%s

4r. +learing !G+

4r. 6argin on ;4B8

+r. Interest on ;4B8

+r. 8artys !G+

+r. 3thers" if any

If the purchase of local F+ ill involves realiation of F+ from the ;+ issuing an- in

due course the ranch must report to the I4 at oth the stages of the transaction.

5..3.1.5. ;o%es Of 'a2"ent For Export 7ills @n%er 0C

Broadly payment methods under a ;G+ are as follo*s/

8ayment 6ethod

Sight 8ayment 4eferred 8ayment

A. -ight 'a2"ent Cre%it $ In a Sight 8ayment +redit" the an- pays the stipulated sum

immediately against the exporters presentation of the documents.

7. ,eferre% 'a2"ent Cre%it $In deferred payment" the an- agrees to pay on a specified

future date or event" after presentation of the export documents. ?o ill of exchange is

involved. In Shahead office is paid at T.T clean rate. The

difference et*een the t*o rates us the exchange trading for the ranch.

5..3.1.:. A%6ising 0C

,hen export ;G+ is transmitted to the an- for advising" the an- sends an !dvising ;etter to

the eneficiary depicting that ;G+ has een issued.

F.EXCHANGE 'AGE( 11+


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5..3.1.


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8roforma Invoice or Indent

Insurance +over ?ote *ith money receipt

I68 Form duly signed

In addition to the aove documents" the follo*ings are also re5uired to export oriented

garment industries *hile re5uesting for opening a ac-/to/ac- ;G+ H

Textile 8ermission

Aalid Bonded ,arehouse ;icense

Nuota !llocation ;etter issued y the Export 8romotion Bureau (E8B) in favor of the

applicant for 5uota items

In case the factory premises is a rented one" ;etter of 4isclaimer duly executed y the o*ner

of the houseGpremises to e sumitted.

! chec-list to open ac-/to/ac- ;G+ is as follo*s H

#. !pplicant is registered *ith ++IDE and has onded *arehouse license

2. The master ;G+ has ade5uate validity period and has no defective clause

. ;G+ value shall not exceed the admissile percentage of net F3B value of relative

6aster ;G+

%. 7sage 8eriod *ill e up to #J: days.

5..3.3.3. ChecB 'oints Note% In ;aster 0C

Follo*ing defective points are usually found in the 6aster ;G+. So" the an- officials so much

carefully chec- these points. These are /

i. Issuing an- is not reputed

ii. !dvising credit y the advising an- *ithout authentication

iii. 8ort of destination asent

iv. Inspection clause

v. ?omination of specific shippingG!ir line or nomination of specified vessel y

suse5uent amendment

vi. Bill of lading endorses lan-" endorses to rdan-" endorses to uyer or rdparty

vii. ?o specific reimursing clause

viii. 7+8 clause not mentioned

ix. ShipmentG presentation period is not sufficient

x. 3riginal documents to e sent to uyer or nominated agent

xi. F+ or >!,B consigned to applicant or uyer

xii. 0Shippers load and count is not acceptale@ clause

xiii. ;G+ shall expire in the country of the issuing an-

xiv. ?egotiation is restricted.

F.EXCHANGE 'AGE( 11:


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5..3.3.. 'a2"ent Of 7acB!o7acB 0C

3n :G :G $:G #2:G #J: days of maturity period" deferred payment is made. 8ayment is given

after realiing export proceeds from the ;G+ Issuing Ban-. For 1arments Sector" the duration

can e maximum #J: days. In case of export failure or non/realiationG short realiation of

export proceeds" forced Investment i.e. 3!8 has to e created in order to settle the Bac- to

Bac- ;G+ payment.

Accounting !reat"ent Of 7acB!o7acB 0C

Dhile opening the C

;i-e ordinary ;+ there *ould e contra liaility vouchers *ith distinctive *ords to

distinguish them from ordinary ;+s

4r. +ustomers liaility for ;+ (BTB) Q B+ selling rate

+r. Ban-ers liaility for ;+ (BTB) at the same rate

Reali?ation of charges

4r. 8artys !G+

+r. +ommission

+r. Telex

+r. 8ostage+r. +ourier

+r. 3thers" if any

Acceptance of @sance Export 7ill

&ouchers to 9e passe% are as follos$

Re6ersal of C lia9ilit2

4r. Ban-s liaility for ;+ (Bac-/to/ac-)

+r. +ustomers liaility for ;+

F.EXCHANGE 'AGE( 11


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Creation of Acceptance lia9ilit2

4r. +ustomers liaility (BB ;+ !cceptance)

+r. Ban-s liaility (BB ;+ !cceptance) Q B+ selling rate

&ouchers for charges

4r. partys !G+

+r. +ommission as per schedule of charges"

'a2"ent of 7acBto9acB C

&ouchers to 9e passe%

In case of foreign pa2"ent

4r. F+ held against BB ;+

+r. SB; 1eneral !G+ >3 (I4)

In case of local pa2"ent

4r. F+ held against BTB ;+

+r. SB; 1eneral !G+ >3 (I4)

4r. SB; 1eneral !G+ >3 (I4)

+r. 83G44G 8artys !G+

+r. Income !G+ exchange gain on F+

+r. Income !G+ commission on 44G83

5..3.. !op 5 Exporters of the 7anB

Rarim Spinning 6ills ;td.

8artex 4enim ;td.

6ale- Spinning 6ills ;td.

Shohagpur Textile 6ills ;td.

Echo +otton 6ills ;td.

5..3.+. ;a=or Exporte% Ite"s

F.EXCHANGE 'AGE( 11*


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arn

Farics

5... Foreign Re"ittance

3n 6arch 2%" #$$% Bangladesh Ta-a *as declared convertile for current account

international transaction. !s a result remittance ecame more lieralied.

3ut*ard remittance include sale of foreign currency y T.T." 6.T." 4raft" T.+. or in case for

private" official and commercial purpose.

5...1. 'resent i"it for Outar% Re"ittance

5...1.1. 'ri6ate Re"ittance

1. Fa"il2 ;aintenance$

a) Foreign nationals *or-ing in Bangladesh may remit 9: of salary and #:: of leave

salary as also actual savings and admissile pension enefits for their family

maintenance.

) 6oderate amount of foreign currency for maintenance aroad of family memers

(spouse" children" parents) of Bangladesh nationals are allo*ed.

3. ;e"9ership0registration Fees Etc $!4s are allo*ed to remit memership fees

of foreign professionals and scientific institutions and fees for application" registration"

admission" examinations in connection *ith admission into foreign educational

institutions" supported y demand notice or letter of the concerned institution.

. E%ucation$!4s may release foreign exchange favoring Bangladeshi students staying

aroad or *illing to proceed aroad for study. !ccording to the follo*ing drill

i. !pplication y the student as per prescried format

ii. !dmission letter issued y the concerned institution

iii. Estimate relating to tuition fee lodging and incidental expense issued y the

concerned institution

iv. !ttested copies of educational certificates

v. Aalid passport

+. !ra6el $8rivate travel 5uota entitlement of Bangladeshi national is set at 7SK "::: per

year for visit to countries other than S!!+ memer countries and 6yanmar. Nuota for

F.EXCHANGE 'AGE( 11)


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S!!+ memer countries and 6yanmar is 7SK #"::: for travel y air and 7SK 9:: for

travel y overland route.

5. Health an% ;e%ical $ The !4s may release up to 7SK #:"::: for medical treatment

aroad on the asis of the recommendation of the medical oard.

:. Foreign Nationals

a) The !4s may issue T.+. to foreign nationals *ithout any limit and currency notes up

to 7SD :: against surrender of e5uivalent foreign currency.

) !4s may allo* re/conversion of unspent ta-a fund of foreign tourist exchange on

production of Encashment +ertificate of Foreign +urrency.


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a. 3riginal I68 is for*arded to Bangladesh Ban- *ith invoice and indent

. 4uplicate I68 is -ept *ith the ranch along *ith the Bill of EntryG +ertified

Invoice

c. Triplicate I68 is -ept *ith the ranch for office record

Nuadruplicate is -ept for sumission to Bangladesh Ban- in case of imports *here

documents are retired.

5.5. Foreign Exchange 7usiness 'erfor"ance

I"port (as on :JG##G2::)

Total ?o. of ;G+ 3pened 2&&

Total !mount 2:J: millions

Target 2::: million (decG2::)

Export(as on :JG##G2::)

Total ?o. of Bills #::%

Total !mount #%9: millions

Target $:: million (decG2::)

Foreign Exchange Oriental bank

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