Trust Bank Report

7/28/2019 Trust Bank Report

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Foreign Exchange Operations and Performance Evaluation of Trust Bank Limited. 1

CHAPTER-1

1.1 Introduction:Bank is an institution which creates money with money. These institutions are as

investment intermediaries who connect the fund of savers and users. They are making

relationship between the borrowers and lenders permitting them efficient transfer of

funds. Individuals having surplus funds can provide it as loan for reasonable return to

entrepreneurs who need funds. The existence of financial institutions like bank facilitates

such exchange of resources. As a result, both the borrowers and lenders can improve their

economical position. Banks have a positive role in financing and investment which have a

multidimensional effect on improvement of national productivity and economy.

Bank is a financial institution that collects societys surplus cash and gives a part of them

as loan to investitures for earning profit. As an intermediary institution, Bank creates an

environment between the owner of surplus saving and the investor of deficit capital. In

this process; bank earns profit by receiving interest from borrowers who want to take

short-term or loan-term loans and making relatively lower interest payment to the

depositors for providing their funds for use by bank. By honoring the demand of time,

Bank is using various types of product. Foreign exchange operation is one of them. In this

Globalization era, we can think our daily life based on our national product. We have to

go through foreign countries for different product, technology which is not available in

our country. And this type of demand creates the field of international trade. And these

international Business regulated by Bank. Bank will deal with all the activity likes import,

export, currency exchange or remittance etc.

As a private commercial bank, The Trust Bank Ltd. has a responsibility to ensure efficient

and effective banking operation in a sound manner. The study will look at the Foreign

exchange Operation and performance of Trust Bank Ltd. This study is an attempt to the

in-depth analysis of the Foreign Exchange performance of The Trust Bank Ltd.


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1.2 Origin of the report:

Foreign exchange transaction has a very important participation in the economic

development of a nation. Foreign exchange transaction comprises both international trade

& remittance. There are various rules and restrictions in international trade that means

import and export transactions. To export or import any items the exporters or importers

need financial support. The commercial banks of Bangladesh play an important role by

providing them financial support through loan, various incentives and advising letter of

credit. This paper empirically discuss with the rules, restrictions and procedures of

foreign exchange transactions comprising LC advise, negotiation of documentary bills,

repatriation of proceeds and its impact on profits. An easy and simple procedure of such

transactions may help the exporters and importers to increase their business in future.

1.3 Objectives of the Study:

To prepare the report I have aware with day-to-day foreign exchange functions of

Principle Branch on Trust Bank Ltd. My Objective is given below-

1.3.1 Broad Objective

To understand the overall activities of the Foreign Exchange division &

Performances of Trust Bank Ltd.

1.3.2 Specific Objective

To analyze the Foreign Exchange Transaction procedures and observe &

evaluate Foreign Exchange activities & performance.

To describe the rules, restrictions and procedures of foreign exchangetransactions comprising LC advise, Import, Export and Foreign remittance.

Operations of the TBL and lastly to present an over view of The Trust Bank

Ltd.

Identify problems & recommend suggestions for the successful Foreign

Exchange Operations of the Trust Bank Ltd and.


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1.4 Methodology:

This study includes both quantitative and qualitative data. However, this report is

basically qualitative in nature. In all the cases depending on the requirements data have

been collected from different sources. Methodology includes-

Direct observation

Face-to-face discussion with employees of different departments

Study of files, circulars and practical work.

Annual Report etc.

1.4.1 Source of Data

This report is based on both primary & secondary sources of information that has been

collected from the various sources like different publications, library sources, books,

articles, etc. For collecting primary data, I ask the respective officer(s). Others are like -

Exposure on different desk of the bank;

File study.

The secondary sources are -

Annual Report of Trust Bank Bangladesh Ltd,

Periodicals published by the Bangladesh Bank;

Different publications regarding banking functions, foreign exchange operation,

and export-import policies.

1.4.2 Data Processing and Analysis

Data processing has been done manually after checking and editing. For analyzing excel,

Ms PowerPoint, SPSS are used.

1.4.3 Time Preference

The time preference of the study relates to the period covering the years 2007 to 2010.

These five years has been taken for different analysis purposes.


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1.5 Scope of the Study:

My decision and analysis are done based on the practices applied at Trust Bank Limited.

The study was wide spread and has greater scope to focus on different aspect of foreign

exchange on banking sector but my study probably will not reflect the practices in the

overall banking sector. Moreover, it does not include the foreign exchange practices done

by the non-banking financial organizations.

1.6 Limitation of the study:

The main problem faced in preparing the paper was the insufficiency and lack of

availability of required data. This report is an overall view of Foreign Exchange

Operations of The Trust Bank Ltd. But there is some limitation for preparing this report.

These barriers, which hinder my work, are as follows:

Difficulty in accessing latest data of internal operations.

Non-availability of some preceding and latest data.

Some information was withheld to retain the confidentiality of the bank.

I was placed to this department for only 3 months of time and working like a

regular employee over-involved the opportunity to put the better effort for the

study.

.

1.7 The Banking system of Bangladesh and Trust Bank Ltd:

Bangladesh has a mixed banking system comprising nationalized, private and foreign

commercial banks. Bangladesh Bank (BB) has been working as the central bank since the

country's independence. Its prime jobs include issuing of currency, maintaining foreign

exchange reserve and providing transaction facilities of all public monetary matters. BB

is also responsible for planning the government's monetary policy and implementing it

thereby.

The banking sector in Bangladesh comprises of four types of scheduled banks, namely,

state-owned commercial banks (SCBs), government owned development finance


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institutions (DFIs), private commercial banks (PCBs) and foreign commercial banks

(FCBs). At present there are four state-owned commercial banks (SCBs) operating in

Bangladesh. The second type-development finance institutions that derive their funds

mainly from the government, other financial institutions and supranational organizations.

Development banks have taken a variety of specific forms, but most of them are oriented

toward specific economic activity or toward a region. There are five development finance

institution s (DFIs) in Bangladesh. The third category, i.e. private banks financed the

development of the currently industrialized countries. Frequently they were instrumental

in identifying investment possibilities: arranging for the importation of skilled managers,

workers and raw materials; and taking initial steps toward assuring markets for output.

None of this was done, needless to say, for eleemosynary purposes. The profit motive

stimulated lending to enterprises to promising sectors. In this category there are thirty

local Private Commercial Banks (PCBs) and nine Foreign Commercial Banks. Trust Bank

Ltd is one of them.

The Trust Bank limited (TBL), a private commercial bank sponsored by the Bangladesh

Army Welfare Trust, started its operations in November 29, 1999. They gained success

from the very beginning of their operation and were capable enough to hold the successyear after year. They gained success very early because they have a very strong backup to

provide them financial support and they are the Army Welfare Trust. This bank is very

much popular within the army community because all the financial activities of the army

done by this bank. In a recent days the Trust Bank Ltd also gaining popularity in the

general people and also for the business people.

CHAPTER-2


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2.1 An Overview of the Trust Bank Limited

Trust Bank Limited is one of the leading private commercial bank in Bangladesh

sponsored by the Bangladesh Army Welfare Trust(AWT), started its operations inNovember 29, 1999. From the very beginning of their operation they are achieving their

success gradually and were capable enough to hold the success year after year. They

gained success very early because they have a very good reputation and strong backup to

provide them financial support and they are the Army Welfare Trust. This bank is very

much popular within the army community because all the financial activities of the army

done by this bank. In a recent days the Trust Bank Ltd also gaining popularity in the

general people and also for the business people.

Trust Bank is a customer oriented financial institution. It remains dedicated to meet up

with the ever growing expectations of the customer because at Trust Bank, customer is

always at the center. In addition to ensuring quality customer services related to general

banking the bank also deals in Foreign Exchange transactions. In the mean time the bank

has extended credit facilities to almost all the sector of the countrys economy. The bank

has plans to invest extensively in the countrys industrial and agricultural sectors in the

coming days. Trust Bank has successfully introduced Visa Credit Cards and Visa

Electron (Debit Card) to serve its existing and potential valued customers. Credits cards

can now be used at shops & restaurants all around Bangladesh and even internationally.

It has also plans to promote the agro-based industries of the country. The bank has

already participated in syndicated loan agreement with other banks to promote textile

sectors of the country. Such participation would continue in the future for greater interest

of the overall economy. Keeping in mind the clients financial and banking needs the

bank is engaged in constantly improving its services to the clients and launching new and

innovative products to provide better services towards fulfillment of growing demands of

its customers.

2.2 Objective of the Bank


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The Trust Bank Limited has been established with the objective of providing efficient and

innovative banking services to the people of all sections of our society. One of the

remarkable strengths of this bank is that it is backed by the disciplined and strongest

Institution of Bangladesh i.e. Bangladesh Army and there is a synergy of welfare and

profits in the dynamics of this institution. Bank is service-oriented industry and we on our

part are committed to ensure customized Qualitative and hassle free services in our

banking operations along with the focus to broaden the clientele base. The bank has

extensively in the countrys industrial and agricultural sectors in the coming days. The

bank is committed to contribute as such as possible within its limitations for the economic

growth and for ensuring value of its available resources.

2.3 Vision of Trust Bank Ltd

A vision statement is sometimes identifying a picture of a company in the future but its

so much more than that. Vision statement is one kind of inspiration; the framework for all

organizations strategic planning. From the vision, we can find out the overall

characteristics, policy and the main target of the institution. A vision statement may apply

to an entire company or to a single division of that company. Whether for all or part of an

organization, the vision statement answers the question, Where do we want to go? So

Vision is most important issue for every organization.

Trust Bank Ltd has its own and specific vision. The vision of Trust Bank Ltd is given

below.

Want To be a preferred bank of choice with a distinctive identity.

To provide financial services to meet customer expectations so that customers feel

we are always there when they need us, and can refer us to their friends with

confidence.

2.4 Mission of Trust Bank Ltd


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A mission statement is a brief description of a company's fundamental purpose. A

mission statement answers the question, "Why do we exist?" The mission statement

articulates the company's purpose both for those in the organization and for the public. A

mission statement focuses on a companys present state while a vision statement focuses

on a companys future. So Mission is also an important issue for every organization.

Trust Bank Ltd has its own and specific Mission. The Mission of Trust Bank Ltd is given

below.

To make banking easy for customers by implementing one-stop service concept

and provide innovative and attractive products & services through technology and

qualified human resources.

To look out to benefit the local community through supporting entrepreneurship,

social responsibility and economic development of the country.

2.5Trust Bank Limited at a GlanceTrust Bank Limited is one of the leading private commercial bank having a spread

network of 35 branches across Bangladesh and plans to open few more branches to cover

the important commercial areas in Dhaka, Chittagong, Sylhet and other areas in 2008.

The bank, sponsored by the Army Welfare Trust is first of its kind in the country. With a

wide range of modern corporate and consumer financial products Trust Bank has been

operating in Bangladesh since 1999 and has achieved public confidence as a sound and

stable bank.In 2001, the bank introduced automated branch banking system to increase

efficiency and improve customer service. In the year 2005, the bank moved one step

further and introduced ATM services for its customers.

Trust Bank Limited lunched Trust Islami Banking on March 06, 2011 and operates it

according to shariah. Now it has almost 3505 account holder which shows the efficiency

of this bank. Since banks business volume increased over the years and the demands of

the customers enlarged in manifold, our technology has been upgraded to manage the

growth of the bank and meet the demands of our customers.


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2.6 Corporate Information of TBL

Legal Form

The company was incorporated on 17 June 1999 under the Companies Act 1994 as a

public company limited by shares for carrying out all kinds of banking activities.

Explanation & Activities Date

Registration Number & Date C-37960 (2260)/99, 17 June 1999

Sponsor Shareholders Army Welfare Trust

Certificate of Incorporation Received on 17 June 1999

Certificate of Commencement of Business Receivedon

17 June 1999

Banking Licenses Received on 15 July 1999

First Branch Licenses Received on 9 August 1999

Formal Inauguration on 29 November 1999

Corporate Web Site Site www.trustbank.com.bd

Email [email protected]

Initial Public Offering

Explanation & Activities Date

Publication of Prospectus 17 May 2007

Subscription Opening 15 July 2007

Subscription Closing 19 July 2007

Listed With Dhaka Stock Exchange (DSE) on 25 September 2007

Listed with Chittagong Stock Exchange (CSE) on 24 September 2007

Commencement of Trading of Shares at DSE 01 October 2007

Commencement of Trading at CSE 01 October 2007

2.7 Management Hierarchy of Trust Bank Limited:
mailto:[email protected]:[email protected]


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Source: HRD, Head Office TBL.

Managing Director (MD)

Deputy Managing Director (DMD)

Executive Vice-President (EVP)

Senior Vice- President (SVP)

Vice-President (VP)

Senior Assistant Vice President (SAVP)

Assistant Vice-President (AVP)

Senior Executive Officer (SEO)

Senior Officer (SO)

Principal Officer (PO)

Training Officer (TO)

Executive Officer (EO)

Junior Officer (JO)

Chairman

Vice Chairman

Board of Directors

Company Secretary ToLevelManaement

ExecutiveLevelManae

ment

MidLevelManaement

LowerLevel


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2.8 Web Page of Trust Bank Ltd

The introduction of Internet has change the traditional concept of world trade and

commerce. As the time is progressing its necessity is being felt more in the prevailingcompetitive since no organization can afford to remain in isolation with the rest of the

world for its survival. In order to provide up-to-date information on the bank at fingertips

to the trade and business communities of the world, their own IT team has developed a

web page for the bank. It can be accessed to under the domain :

http://www.trustbank.com.bd/

2.9 Products and Schemes

As a private limited bank, Trust bank is also committed to its owner to return profit by

providing a good service to the customer. To providing efficient and innovative banking

services to the people of all sections of our society, Trust Bank Ltd has been offered

different products and schemes to its customer. They are given below-

Products and

Schemes of

Trust Bank Ltd

Online Service

Trust Locker

Service

Automated

BankingSME Finance

Credit Card

Retail Products

Deposit Products
http://www.trustbank.com.bd/http://www.trustbank.com.bd/http://www.trustbank.com.bd/


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House Hold Durable Loan

Doctors Loan

Education Loan

Advance against salary

Travel Loan

Any purpose Loan

CNG conversion Loan

Marriage Loan

Loan against TMDS

Apon Nibash Loan

Hospitalization Loan

2.9.3 Credit Card

In January 2007, Trust Bank successfully launched Online Banking Services which

facilitate Any Branch Banking, ATM Banking, Phone Banking, SMS Banking, & Internet

Banking to all customers. Customers can now deposit or withdraw money from any

Branch of Trust Bank nationwide without needing to open multiple accounts in multiple

Branches.

Via Online Services and Visa Electron (Debit Card), ATMs now allow customers to

retrieve 24x7 hours Account information such as account balance checkup through mini-

statements and cash withdrawals.

Trust Bank has successfully introduced Visa Credit Cards to serve its existing and

potential valued customers. Credits cards can now be used at shops & restaurants all

around Bangladesh and even internationally.


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Now a day, Bangladesh Army members including officer and soldier can collect their

money by using debit card. Trust Bank Ltd Provides 4 types of Card to collect their

money from their account. They are given below.

Visa Gold Local

Visa Classic Local

Visa Gold International

Visa Classic International

Visa Dual card

2.9.4 SME Finance

SME finance is the funding of small and medium sized enterprises, and represents a

major function of the general business finance market in which capital for different

types of firms are supplied, acquired, and coasted or priced. SME finance is the most

effective weapons to reduce poverty & unemployment and increase productivity, industry

and the growth of GDP. As a private limited bank, Trust Bank is concern to take part on

improvement of our nation. SME finance is of their activity to improve the income level

of poor people and newly initiated entrepreneur. Now a day, Trust Bank Ltd is more

interested to invest on SME financing tricks. As a result they are willing to endow among

this type of investment.

Trust Falan Agri-Business LoanEntrepreneurship Development Loan

Loan for Light Engineering

Loan for Poultry Farm

Loan for Shopkeepers

Women Entrepreneur Loan

2.9.5 Automated Banking
http://www.trustbank.com.bd/sme/sme_agri.phphttp://www.trustbank.com.bd/sme/sme_agri.phphttp://www.trustbank.com.bd/sme/sme_ed.phphttp://www.trustbank.com.bd/sme/sme_ed.phphttp://www.trustbank.com.bd/sme/sme_light_eng.phphttp://www.trustbank.com.bd/sme/sme_light_eng.phphttp://www.trustbank.com.bd/sme/sme_poultry.phphttp://www.trustbank.com.bd/sme/sme_poultry.phphttp://www.trustbank.com.bd/sme/sme_poultry.phphttp://www.trustbank.com.bd/sme/sme_shopkeepers.phphttp://www.trustbank.com.bd/sme/sme_shopkeepers.phphttp://www.trustbank.com.bd/sme/sme_women.phphttp://www.trustbank.com.bd/sme/sme_women.phphttp://www.trustbank.com.bd/sme/sme_women.phphttp://www.trustbank.com.bd/sme/sme_shopkeepers.phphttp://www.trustbank.com.bd/sme/sme_poultry.phphttp://www.trustbank.com.bd/sme/sme_light_eng.phphttp://www.trustbank.com.bd/sme/sme_ed.phphttp://www.trustbank.com.bd/sme/sme_agri.php


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As a private limited commercial Bank, Trust bank is concern to provide the best service

to the customer. As a part of this service, Trust bank is trying to make himself as an ideal

of completed automated banking system As a part, Trust Bank has easy way to serve your

banking needs using any phone, whether you are at home, office, or on the road. Trust

Banks phone banking is absolutely free. This service performs balance query and mini

statement of a customer via phone. Mini statement contains last five debit and credit

transactions including balances. This service will soon include utility bill and fund

transfer facilities. Phone Banking is available 24 hours a day, seven days a week. Now a

day, Trust bank ltd provides following services.

Internet Banking

Debit Card

Phone Banking

SMS Banking

2.9.6 Trust Locker Service

Only a Trust Bank account holder receives locker service. When a locker service is

opened, account holder should pay a one time key deposit (same as RENT), which is

refundable. For locker maintenance, a yearly charge is to be paid by account holder (as

rent.)

The following branches offer Locker Services

Principal Branch, Dhaka Cantonment, Dhaka (Bangladeshi Locker only)

Dhanmondi Branch, BDR Gate 4, Peelkhana, Dhanmondi, Dhaka 1209 (Godrej

Indian Locker only)

Gulshan Corporate Branch, 110 Gulshan Avenue, Gulshan-2, Dhaka 1212 (Godrej

Indian Locker only)

Chittagong Cantonment Branch, Chittagong Cantonment, Chittagong

2.9.7 Online Service


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The bank has set up a Wide Area Network across the country to provide online branch

banking facility to its valued clients. Under this scheme, clients of any branch shall be

able to do banking transaction at other branches of the bank.

Under this system a client will be able to do following type of transactions:

Cash withdrawal from his/her account at any branch of the bank.

Cash deposit in his/her account at any branch of the bank irrespective of the

location.

Cash deposit in others account at any branch of the bank irrespective of the

location.

Transfer of money from his/her account with any branch of the bank.

Transfer of account from one to other branch

2. 10 Performance of the TBL


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TBL a blend of expertise and technological excellence is in place to meet varied needs of

modern customers. The bank aims at mobilizing untapped money of the country and

prudent deployment for productive activities in the form of lending at a competitive

interest rates/loan pricing. Towards attainment of its goals and objectives, the bank

pursues diversified credit policies and strategic planning in credit management. To name

a few, the bank has extended micro credit, consumers durable scheme loans, house

building loans etc. to cater to the needs of the individuals, which in turn has helped

thousands of families. The bank also extends loan in the form of trade finance, industrial

finance, and project finance, export & import finance etc. The banks credit polices aimed

at balanced growth and harmonious development of all the sectors of the countrys

economy with top most priority to ensure quality of lending by averting growth of non-

performing assets.

2.10.1 Capital

The authorized capital of the bank is Taka 5000 million. Total shareholders equity at the

end of the December 2009 stood at Tk. 3,754.86 million. Out of Taka 3,754.86 million,

paid-up capital is Taka 1,848.00 million, Share Premium Account is Taka 182.00 million,

Statutory Reserve is Taka 1138.33 million and Retained Earnings is Taka 464.00 million

and other reserve is 122.56 million. The paid-up capital is indicative of the face value of

1848.00 ordinary shares of Taka 100/= each fully subscribed by the shareholders.

2.10.2 Profit and operating results

Paid-up Capital 49.22%

Statutory Reserve 30.31%

Share Premium Account 4.84%

Other Reserve 3.25% Retained Earnings 12.36%


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The Profit and operating result are shown in the following table: (Figures are in million of

taka)

In FY 2009, the Operating profit of TBL shot up to Tk. 1358.35million from Tk. 1252.44

million as recorded in FY 2008. During this period, the deposit base was increased by

8.46 % compared to the preceding year. In this way, everything is increasing day by day

on Trust Bank Ltd. It is a good and positive symbol for them. The Profit and operating

result are shown in the following graph: (Figures are in million of taka)

.

2.10.3 Deposits

Income & Expense and Net Profit of Trust Bank Ltd.

Total Income 47.35%

Total Expense 18.97%

Operating Profit 23.23%

Net Profit 10.44%


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In FY 2009, the deposits of TBL shot up to Tk. 48,464.64 million from Tk. 32,919.76

million as recorded in FY 2008. During this period, the deposit base was increased by

47% compared to the preceding year. The combination of competitive interest rates,

depositors trust in the bank and mobilization efforts of the bank resulted in this growth of

deposits. Efforts are a foot being made to further increase deposit base of the bank

through promotion of business and exploring of potential scope.

2.10.4Loans & Advances

In FY 2009, the Loan & advance of TBL shot up to Tk. 32,663.11 million from Tk.

27,528.08 million as recorded in FY 2008. During this period, the deposit base was

increased by 18.65% compared to the preceding year. The credit portfolio of the bank is amix of scheme loans, namely Micro credit, Consumers durable scheme loan (CDS),

Marriage Loan, Car Loan, HBF Loan and Commercial Loans. Commercial Loans

comprise Trade financing in the form of working Capital and industrial loans (both large

and medium scale industries) in the form of Term loans and other funded & non-funded

credit facilities.

Term financing indicates the Banks participation in the industrial development of our

country while by extending small loans the TBL has fulfilled the borrowing needs of the

low and medium income groups of our society. The bank as a matter of priority in its

policy wants to ensure quality of its Loan Portfolio by strengthening post disbursement

recovery measures as well as by prioritizing on Early Warning System (EWS) to check

the growth of non-performing assets.

2.10.5 Total Asset


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From the financial statement of trust bank ltd, we can see that the amount of total asset is

increasing day by day. In FY 2009, t he Asset of TBL shot up to Tk. 54,206.65 million

from Tk. 38,475.64million as recorded in FY 2008. During this period, the Asset base

was increased by 40.67% compared to the preceding year. The overall picture of asset of

trust bank is given below by graph.

2.10.6 Interest Income and Non Interest Income

From the financial statement of trust bank ltd, we can see that the amount of interest

income and non-interest income both are increasing day by day. But the non-interest

income growth is more rapid compare to interest income (according to FY 2008 and FY

2009)

2.11 Different types of Banking


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As a private limited commercial Bank, Trust Bank ltd is strong-minded to endow with the

appropriate service to the customer. For this reason they have to go with different banking

system. Though Trust Bank Ltd is an Army based banking system but they have lots ofcivil customer. By looking forward to the demand of customer (Especially civil

Customer), Trust Bank Ltd has to go with different Banking policy. They are given

below.

2.11.1 General Banking

Trust Bank Ltd has been a strong structured general banking system since 1999. This

Bank sponsored by the Bangladesh Army Welfare Trust (AWT). They have lots ofproduct and schemes and strong policy to control over whole general banking system.

Bay by day, they are increasing their growth.

2.11.2 Trust Islamic Banking

Islam is a complete code of life. The prime objective of Islamic life style is to conquer

success in life here and hereafter. Islamic way of life as enshrined in the Holy Qur'an and

the Sunnah should be followed. Islamic Banking trade and transaction is based on the

core rules & regulations affirmed in the Holy Qur'an and the Sunnah. Trust Islamic

Banking is solely committed to conduct and manage the banking system abiding the

Islamic law. Islam has given right to attain and own assets. At the same time Islam has

also provided the processes and responsibilities for this. Following these processes and

responsibilities absolutely will ensure the blessings in our life here and hereafter.

Islamic Banking is Trade based banking system. Trade is mainly of two kinds- buy/sell

and investment and both segment avoid the Interest completely. According to Islamic

Shariah, buy/sell is process of purchasing of goods in a certain price with the buyer and

sellers consent. Shariah has the explanations for different kinds of purchasing contracts.

On the other hand, investment is a business based on profit-loss sharing. There are

Shariah compliant explanations for it and Islamic banking is managed complying all the

Shariah commandments.


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Success of Islamic Banking mostly depends on the commitment and knowledge of all the

participators (bank and customer). Trust Bank is committed to offer the finest and

modernized Islamic Banking system by means of its administrative professionalism and

dedication.

2.11.3 Trust Merchant Banking

As per Merchant Banking Regulations, Trust Bank Ltd mainly performs three activities

which are:

Issue Management

Issue Management function of merchant Banking helps capital market to increase the

supply of securities. Being a Issue Manager we provides assistance to the Private

Limited Companies intended to be converted into Public Limited Companies by way

of obtaining necessary permission from the relevant authorities, preparing prospectus

for public issue of shares and debentures, involving itself in the collection of

application money, scrutiny of applications, arranging for lottery relating to allotment,

if required, allotment of shares and debentures, refund of application money etc.

Underwriting

Underwriting Operation is one of the important functions of a Merchant Banker by

which it can increase the supply of stock/shares and debentures in the market. It is an

arrangement whereby the underwriter undertakes to subscribe the unsubscribed

portion of shares/debentures offered by any Public Limited Company. PortfolioInvestment Management Services

Portfolio Investment Management Services

One of the most important functions of merchant banking is to provide Portfolio

Management service to the customer. Basically, Portfolio Management Services

program has four different wings to provide portfolio investment management

services.


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2.12 Branch Expansion & ATM Expansion

The TBL has taken up a program to expand its branches. The bank has already 53

branches and 7 SME center and 1 merchant Banking division in many different places in

Bangladesh; most of them are inside the different cantonments. 2 more Branch is under

construction. The management is filling that they need more branches all over the

Bangladesh. The TBL has also taken up a program to expand its ATM location. As per

Bangladesh Bank circular that if any bank opens a branch and ATM Location in Dhaka

then they have to be open a branch and ATM Location in out side Dhaka.

2.12.1 Branches of TBL:

Branch

ID

Branch Name Branch

ID

Branch Name

0001 Head Office 0028 Mirpur Branch

0002 Principal Branch 0029 Naval Base

0003 Sena Kalyan Bhaban 0030 Kawran Bazar

0004 Bogra Cantonment Branch 0031 Feni

0005 Comilla Cantonment Branch 0032 Joypara Branch

0006 CTG Cantonment Branch 0033 Joydebpur Branch

0007 Rangpur Cantonment Branch 0034 Narsingdi Branch

0008 Jessore Cantonment Branch 0035 Narayangonj Branch

0009 Mymensingh Cantonment Bh 0036 Jublee Road Branch

0010 Savar Cantonment Branch 0037 Sahjalal Upo Shahar

0011 Jalalabad Cantonment Branch 0038 Amirabad Lohagara Branch

0012 Agrabad Branch 0039 Ashugong Branch

0013 Shaheed Salauddin Cant Bh 0040 Khulna Branch

0014 Dhanmondhi Branch 0041 Kafrul Branch

0015 Khatungonj Branch 0042 Tongi Branch Centre

0016 Gulshan Corporate Branch 0043 Chowmohoni Branch

0017 Dilkusha Corporate Branch 0044 Progati Sarani Branch

0018 Raddisson Branch 0045 Coxs Bazar Branch

0019 Khaja Yunnis Ali MC&H Bh 0046 Ashulia Branch (NEW)

0020 CDA Avenue Branch 0047 Comilla Branch

0021 Sylhet Corporate Branch 0048 Rangamati Branch

0022 Millenium Branch 0049 Rajshahi Branch

0023 Uttara Branch 0050 Kadamtali Branch

0024 Halishahar Branch 0051 Barisal Branch

0025 Biani Bazar Branch 0052 Rajendrapur Cantt.

0026 Moulovibazar Branch 0053 Elephant Road Branch

0027 Goala Bazar Branch


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2.12.4 ATM Location of TBL:

Branch

Name

ATM Location Branch

Name

ATM Location

GulshanAve

Opposite to Agora JoydebpurBranch

Rajendrapur Cantonment

Dhanmondi

Branch

Rifles Squire Market,Sat Masjid Road,Dhanmondi, Dhaka

AshugonjBranch

Ground Floor of NoorMedical CentreStation Road, AshugonjBazarm, Bhahamanbaria

Mirpur

Branch

Mirpur Cantonment Branch MPcheck post

CDABranch

1827 (New)Elite House

Swapnapuri Tower, MainRoad-3, Plot-24,Mipur 11

Hali Shahar 230/A, Block-G, Road-4,Barapool

Principal

Branch

Cantonment Branch AgrabadBranch

K N Tower, Ground FloorBadamtoly MoreBadamtoli

CMH Hospital, DhakaCantonment

CSD Bangladesh Tea BoardBhaban,Ground Floor. 171-172Baijidbostami Road,

Nasirabad

11 S08ignal Battalion at DhakaCantonment

Naval BaseBranch

BNS ISSA Khan, Patenga,Chittagong

RadissonHotel

Radisson Hotel, AirportRoad, Cantontment

CorporateBranchSylhet

Sylhet Corporate BranchBMA Bhaban,Chowhatta

Savar

Cantonment

Branch

Dhaka-Aricha highway, Entrypoint of Rouf Gate

Jessore Ground Floor of ArabpurMosjid Market, Jessore

Progati

Sarani

Branch

Ground Floor, Progati SaraniBranchKa-74, Progati SaraniDhaka

Khulna Ground Floor, 59 LowerJessore Road (Opposite ofBangladesh Bank)Khulna

DGFI Kafrul Branch,

28 North Kafrul, Dhaka1206

Enayetpur KYAMCH, Enayetpur

ASPTS

ATM Booth

Adjacent to Kabab GharDhaka Cantonment

BograCantonmentBranch

Block-BBogra Cantonment Bogra

Comilla

Cant

Branch

Comilla Cantonment BranchMoina Moti Super MarketComilla Cantonment

RangamatiBranch

1st Floor of SR Tower107 Shahid Abdur RashidSarakBanarupa, Ramgamati

Banani South Gate Naval Headquarter


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2.13 SWIFT

The bank is a member of SWIFT Alliance Access, a sophisticated; fraud proof secured

financial messaging system provided by the Society for Worldwide Inter-bank FinancialTelecommunication (SWIFT), Belgium. With the installation of the SWIFT system the

bank would ensure and reliable transmission of L/C, funds transfers, outgoing and

incoming massages and other financial services.

2.14 Technology (IT) & Automation Information

All the branches of the TBL are fully computerized. New software is now in use to

provide faster, accurate and efficient service to the clients. The bank is continuously

striving for better services through extensive automation of its branches. Trust bank has

launched One Branch Banking through on-line connectivity. The bank has set up a

full-fledged IT division to keep abreast of the latest development of IT for better service

in the days to come.

2.15 Foreign Correspondents

Foreign correspondent relationship facilities, foreign trade operation of the bank, mainly

in respect of export, import and foreign remittance. The number of foreign correspondents

and agents of the bank in the year 2005 stood at which covers important business and

trade centers of the world. The bank maintains excellent relationship with the leading

international banks, for handling all foreign correspondent and maintaining all foreign

business there is an International Division, which is called ID.


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CHAPTER-3

Foreign Exchange Operations:

3.1 Foreign Exchange- its meaning and definition:Foreign exchange means the exchange of one currency for another or the conversion of

one currency into another currency. Foreign exchange also refers to the global market

where currencies are traded virtually around-the-clock. The term foreign exchange is

usually abbreviated as "forex" and occasionally as "FX." Foreign exchange refers to the

process or mechanism by which the currency of one country is converted into the

currency of another country. Foreign exchange is the means and methods by which rights

to wealth in a countrys currency are converted into rights to wealth in another countrys

currency. In banks when we talk of foreign exchange, we refer to the general mechanism

by which a bank converts currency of one country into that of another. Foreign trade

gives rise to foreign exchange. Modern banks facilitate trade and commerce by rendering

valuable services to the business community. Apart from providing appropriate

mechanism for making payments arising out of trade transactions, the banks gear the

machinery of commerce, specially in case of international commerce, by acting as a

useful link between the buyer and the seller, who are often too far away from and toounfamiliar with each other. According to foreign exchange regulation act 1947, Any

thing that conveys the right to wealth in another country is foreign exchange. Foreign

exchange department plays significant roles through providing different services for the

customers. Opening or issuing letters of credit is one or the important services provided

by the banks.

3.2 Activities Related to foreign exchange:

There are three kind of foreign exchange transaction:

3.2.1 Import

3.2.2 Export

3.2.3 Foreign Remittance


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3.3 Regulations for foreign exchange

3.3.1 Local regulations: Our foreign exchange transactions are being controlled by

the following local regulations:

Foreign Exchange Regulation Act: Foreign Exchange Regulation (FERA) Act.

1947 enacted on 11th March 1947 in the then British India, provides the legal basis

for regulation the foreign exchange. This act was adapted in Pakistan and lastly in

Bangladesh.

Guidelines for Foreign Exchange Transaction: This publication issued by

Bangladesh Bank in the year 1996 in two volumes. This is a compilation of the

instructions to be followed by the Authorized Dealers in transactions relating to

foreign exchange.

Foreign Exchange Circular: Bangladesh Bank issues Foreign Exchange circular

from time to time to control the export import business and remittance that is to

control the foreign exchange.

Export-Import Policy: Ministry of commerce issues Export Policy and Import

Policy giving basic formalities for Import and Export Business.

Public Notice: Some times CCI &E issues public notice for any kind of change in

Foreign Exchange Transaction.

Instructions from different ministry: Different ministries of the Govt.

sometimes instruct the authorized dealer directly or through Bangladesh Bank to

follow something required for the government.

3.3.2 International Regulations: There are also some international organizations

influencing our Foreign Exchange transactions. Few of them are discussed bellow:


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ICC: International Chamber of Commerce is a world wide Non-Governmental

Organization of thousands of companies. It was founded in 1919. ICC National

committees throughout the world present ICC views to their Governments and

alert Paris Headquarters about national business concerns. ICC has issued somepublications like UCPDC, URC and URR etc., which are being followed by all the

member countries. There is also an international Court of Arbitration to solve the

international business disputes.

W.T.O.: World Trade Organization is another International Trade Organization

established on 1st January 1995. GATT (General Agreement on Tariff & Trade)

was established on 1st January 1948. After completion of its 8th round, the

organization has been abolished and replaced by WTO. This organization has vital

role in international trade through its 124 member countries.

3.4 Letter of credit

Letter of Credit or L/C, A compulsory document that a buyercan request from his bankin

orderto promises that the payment forgoods will be transferred to the seller. Basically, a

letter ofcredit gives the seller guarantee that he will receive the payment for the goods. In

order for the payment to occur, the seller has to present the bank with the necessary

shipping documents confirming the shipment of goods within a given time frame. It is

often used in international trade to eliminate risks such as unfamiliarity with the foreign

country, customs, or political instability.

A letter of credit is a letter issued by a bank (know as the opening or the issuing bank) at

the instance of its customer (known as the opener) addressed to a person (beneficiary)

undertaking that the bills drawn by the beneficiary will be duly honored by it (opening

bank) provided certain conditions mentioned in the letter gave been complied with. As a

result, we can say that Letter of Credit (LC) is a document issued by your bank that

essentially acts as an irrevocable guarantee of payment to a beneficiary.

This means that if you do not perform your obligations, your bank pays. The letter of

credit can also be the source of repayment of the transaction meaning that the exporter

will get paid with the redemption of the letter of credit.3.4.1 Flowchart of Letter of Credit
http://www.investorwords.com/12803/buyer.htmlhttp://www.investorwords.com/401/bank.htmlhttp://www.investorwords.com/3495/order.htmlhttp://www.investorwords.com/3634/payment.htmlhttp://www.investorwords.com/2209/goods.htmlhttp://www.investorwords.com/13835/seller.htmlhttp://www.investorwords.com/1193/credit.htmlhttp://www.investorwords.com/10683/present.htmlhttp://www.investorwords.com/14223/documents.htmlhttp://www.investorwords.com/5904/international_trade.htmlhttp://www.investorwords.com/9563/eliminate.htmlhttp://www.investorwords.com/4292/risk.htmlhttp://www.investorwords.com/9750/foreign.htmlhttp://www.investorwords.com/1268/customs.htmlhttp://www.investorwords.com/1268/customs.htmlhttp://www.investorwords.com/9750/foreign.htmlhttp://www.investorwords.com/4292/risk.htmlhttp://www.investorwords.com/9563/eliminate.htmlhttp://www.investorwords.com/5904/international_trade.htmlhttp://www.investorwords.com/14223/documents.htmlhttp://www.investorwords.com/10683/present.htmlhttp://www.investorwords.com/1193/credit.htmlhttp://www.investorwords.com/13835/seller.htmlhttp://www.investorwords.com/2209/goods.htmlhttp://www.investorwords.com/3634/payment.htmlhttp://www.investorwords.com/3495/order.htmlhttp://www.investorwords.com/401/bank.htmlhttp://www.investorwords.com/12803/buyer.html


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The following diagram brings out clearly the operation of letter of credit:

Flowchart of Letter of Credit Operation

2. Applying

for L/C

4.

Forwarding

of L/C to

3. Opening L/C &


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3.4.2 Classification of Letter of Credit

Letter of credit is most important issue for any kind of import and export activities. Based

on time, condition, contract; Letter of credit can be classified in different parts. In

different considerations there are many kinds of L/Cs. Some of them are discussed

bellow:

Irrevocable L/C: Irrevocable L/C cannot be amended or cancelled without the

consent of the beneficiary or any other interested parties. Banks commonly open

this type of L/C.

Revocable L/C: This kind of L/C can be amended or cancelled by the IssuingBank, without the consent of the beneficiary or any other interested parties.If it is

not indicated in the L/C, whether it is Revocable or Irrevocable, then the L/C to be

treated as Irrevocable.

Add-confirmed L/C: When a third bank provide guarantee to the beneficiary to

make payment, if Issuing Bank fail to make payment, the L/C is called Add-

Confirmed L/C. In case of a confirmed L/C a third bank adds their confirmation to

the beneficiary, to make payment, in addition to that of Issuing Bank. Confirmed

L/C gives the beneficiary a double assurance of payment.

Revolving L/C: It is an L/C where the original amount restores after it has been

utilized. How many times and how long, the amount will restore must be specified

in the L/C. For example, an L/C opened for USD 1000 and shipment effected for

USD 500, now the L/C restored for full value i.e. there is scope to effect further

shipment of USD 1000 revolving L/C may be opened to avoid difficulties of

opening new L/C. This L/C is not allowed in our present import policy.

Transferable L/C: If the word Transferable incorporated in an L/C, then the

L/C is transferable. The 1st beneficiary can transfer transferable L/C to the 2 nd

beneficiary. But 2nd beneficiary cannot transfer it further to another beneficiary.

Clean Clause: It is a normal clause L/C without third banks confirmation.


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Restricted L/C: If advising and/or negotiation of an L/C are restricted to a

particular bank, the L/C is called a restricted L/C.

Red Clause L/C: A red clause L/C is an L/C, where a special clause is

incorporated into it that authorizes the confirming or any other nominated bank to

make advances to the beneficiary, before presentation of the documents. In other

words this is an L/C, where the Issuing Bank authorizes the negotiating bank to

provide pre-shipment finance to the beneficiary.

Green Clause L/C: It is an L/C, where the Issuing Bank authorizes the

Negotiating Bank to grant storage facilities to the beneficiary. The special clause

was originally written in Green-ink, so the L/C is called Green Clause. In both the

case of Red Clause and Green Clause L/C, if the exporter fails to ship the goods

the financing bank has the right to demand repayment from the Issuing Bank and

that bank would have a similar right of recourse against the applicant.

Clean Letter of Credit: This is a commercial letter of Credit, wherein the Issuing

Bank does not ask any documents as evidence of execution of the deal under the

L/C. Under the said L/C only bill of exchange may be negotiated or may be paid

without any supporting documents. Clean Letter of //Credit is not permissible in

our import policy.

Documentary Letter of Credit: All the commercial letter of credits, where

export related documents such as invoice, B/L etc. are required to present with the

bill of exchange, is called Documentary Credit. Under this L/C, bill of exchange

will not be honored without other required documents.

Straight Documentary Credit: Under the irrevocable straight documentary

credit, the obligation of the Issuing Bank is extended only to the beneficiary, in

honoring draft(s)/ documents and usually expires at the counter of the Issuing

bank. This L/C. does not authorize any body to negotiate, purchase the documents.

This L/C. is available for payment only at the Issuing Banks counter, not

available for negotiation.


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Irrevocable Negotiation Documentary Credit: This L/C. is available for

negotiation by a nominated bank/any bank and expiring for presentation of

document at the offices of negotiating bank. The Issuing Bank is bound to

reimburse the Negotiating Bank, if it negotiates the documents complying with thecredit terms.

With Recourse and Without Recourse to Drawers: These terms are related

with bill of exchange. If the L/C allows a bill of exchange with recourse to the

drawer, that means the Negotiating Bank has the right to claim the amount back,

from the drawer, if the B/E is dishonored by the drawee. And in case of without

recourse, the Negotiating Bank has no right to claim the amount back. From the

drawer, if the B/E is dishonored by the drawee..

L/C can be classified according to source of fund:

Back-to-Back L/C: Back to Back import L/C is backed by another export L/C.

where import of the goods to be made to execute the export L/C and payment of

Back to Back bills to be made normally from related export process, the import

L/C is called Back to Back L/C. A Back-to-Back L/C is opened against anirrevocable L/C.

Cash L/C: Where payment of import bills under L/C is being made from (i)

Foreign Currency reserve in Bangladesh Bank or (ii) F.C. account with authorized

Dealer, the L/C is called Cash L/C.

Barter L/C: Where final settlements are being made through commodity

exchange between the nations, the L/C is called Barter L/C.


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3.5.8 Reimburse Bank:

The issuing bank may indicate in the credit the name of a bank. From whom the

paying/negotiating bank can obtain reimbursement. The documents are sent to the issuing

bank. The negotiating/paying bank simultaneously makes a claim with the reimbursingbank for the payment effected. Normally the reimbursing bank would be the bank with

which the issuing bank maintains an account.

3.5.9 The Transferring Bank:

If the L/C is transferable, then the 1st beneficiary of the L/C may transfer the L/C to the

2nd beneficiary, through a bank nominated by the Issuing Bank. This bank is called the

Transferring Bank.

3.6 Document required for Foreign Exchange Transactions:

Document is the main concern on Foreign Exchange. Bank never deals with person to

person on Foreign Exchange, Bank only deals with documents. If Bank comes across the

necessary documents then bank provide all material for clearing goods from port to the

importer and also provide money to the exporter. Bank run his activities based on

documents and law of foreign exchange. Export-Import transactions ask for the following

documents


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3.6.1 Transport Documents:Transport documents comprises of Bill of Lading, Airway Bills, Truck Receipts, Railway

Receipts and Inland Waterway Receipts.

Checking points of this document are:

The Bill of Lading is issued/endorsed to the order of Negotiating Bank.

Bill of Lading is clean, showing Shipped on Board notation, marked Freight

Prepaid [For CFR Basis] and Freight Collect [For FOB Basis], not short form,

Blank back or pre dated.

The Bill of Lading appears the merchandise covers in Commercial Invoice.

The port of Shipment, Destination, Shipment Date, Name of consignee,

Bill of Lading is signed by the carrier company or his agent.

3.6.2 Commercial Invoice:

Checking points of this document are:

The invoice dated and signed by the beneficiary.

The invoice is issued to the party concerned as stated in the LC.

Description of goods is as stated in the LC.

Unit price mentioned as stated in the LC & Proper Trade-Term is mentioned.

3.6.3 Insurance Documents:

Checking points of this document are (in case of CIF basis):

The Insurance Policy is valid.

The policy is issued in the name of LC Issuing bank a/c: importer.

The policy is signed by the authorized official of the Insurance Company.

The policy is in negotiable form, duly stamped and dated prior the BL date.

Description of goods, name of carrying vessel shown in Insurance Policy are same

as shown in BL.

The policy covers Transshipment [if allowed in LC] clause.

Policy covers 10% above the value of consignment.

Policy indicates where and in which currency the claim [if any] will be settled.


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3.6.4 Other Documents:

As per UCP 500, other documents comprises of all other documents other than Transport

Documents, Insurance Documents and Commercial Invoice.

Certificate of Origin:Checking points of this document are:

The Certificate is issued by the concerned authority of exporting country as stated

in the LC [usually such Certificates are issued by the Chamber of Commerce &

Industry of exporting country].

Beneficiarys Certificate:Checking points of this document are:

The certificate issued by the beneficiary stating the particulars as stated in the LC.

Packing List: Checking points of this document are:

The Certificate is issued and prepared by the beneficiary as per instruction given

in the LC.

Inspection Certificate:Checking points of this document are:

The Certificate is issued by the competent authority as approved for that country.

The Inspection Certificate can also be issued by the beneficiary/manufacturer if

allowed in the LC.

The Certificate is signed-sealed certificate the contents as required and issued

prior to shipment of the goods.

Bill of exchange:Checking points of this document are:

The bill of exchange is drawn by the beneficiary as mentioned in the LC duly

signed and dated.

The amount is identical with the amount of Commercial Invoice.

The amount mentioned in figure and words are consistent.

The bill of exchange is in order and/or endorsed properly.


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3.7 Import:

Import trade in Bangladesh is controlled under the Import and Export control Act 1950.

Authorized Dealer Banks will import the goods into Bangladesh following the import

policy, public notice, F.E. circular and other instructions from competent authorities from

time to time. The whole import functions of the branch as far I have understood are

discussed bellow:

3.7.1 Procedure of import

Import of products essentially involves two things:

1. Bringing of goods physically into the country

2. Remittance of foreign exchange towards the cost of the products

The Ministry of Commerce through the Chief Controller of Import regulates physical

import and Exports being office at the important trade center while Bangladesh Bank

regulates the payment for the imports through its various departments. The following are

the steps involved in import of merchandise into Bangladesh.

3.7.2 Registration of importer

In terms of the Importers, Exporters and Inventors (Registration) Order 1981, no person

can import goods into Bangladesh unless he is registered with the Chief Controller of

Import and Export or exempted from the provisions of the said order. So the following

documents are required to be submitted to the licensing authority for registration as

importers:

Questionnaire form duly filled in and signed

Income tax registration certificate

Trade License from the Municipal or Local Authority

Bank certificate & Nationality certificate.

Certificate of Registration with the Registrar of Joint Stock Companies and

Memorandum and Articles of Association in case of Private and Public

Ltd. Co. or Partnership Deed where applicable.

Certificate from the Chamber of Commerce/Registered Trade Association


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Ownership documents or rent receipts of the place of business

Any other documents required under the relevant import policy.

After submission of the above documents and payment of requisite fees, if the documents

are found in order and the C.C.I & E is satisfied, the Import Registration Certificate (IRC)

is issued to the applicant-importer.

3.7.3 Import Policy:

The Chief Controller of Imports and Exports announces the Import Policy concerning

various aspects of imports. The main points covered by the import policy are the

following:

Items eligible for imports during the shipping period.

Procedure for formation of groups.

The dates for opening of L/C and shipment.

The rules for re-validation of the License/LCA and the L/C.

3.7.4 Licensing for Imports:Most imports into Bangladesh require a license from the Licensing Authority. In recent

years, the task of licensing has been delegated to the commercial banks. It is done by

LCA (Letter of Credit Authorization Form). Blank LCA forms can be obtained by the

importer from their banker. The following documents are required to be submitted by the

import to his banker.

LCA Form property filled-in and signed.

LC Application & Insurance Cover Note.

Purchase Contract in the shape of an Indent or Proforma Invoice.

Membership Certificate from a chamber of Commerce and Industry or

Registered Trade Association.

Import Registration Certificate (IRC).

On receipt of LCA Form and the required documents, the bank should carefully scrutinize

the documents.


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3.7.5 An Opening of Letter of Credit:

Importer applies to the bank to open L/c in favor of foreign supplier. The bank has its

printed application form and the importer should carefully fill in this form. On receivingthis application, the bank scrutinizes it to ensure that:

Whether the customer fulfils all the required conditions/criteria to be eligible as an

importer as per provisions of the Import Policy Order and Guidelines for Foreign

exchange Transactions in force and the supporting documents/papers required are

submitted.

Whether the items for import of which the documentary credit need to be openedis permissible i.e. not included in the negative/restrictive list as per Import Policy

order in force.

Whether there are any legal/technical defects/restrictions in opening the Letter of

Credit under the various sources as intended by the customer.

Whether we are holding satisfactory credit report on the beneficiary to satisfy the

relevant provisions of the guidelines for Foreign Exchange transactions.

Whether credit facility has already been approved by the Executive Committee of

the Board of Directors.

On receipt of the L/C application over the counter or through dispatch/mail

section, the receiving date and time to be recorded on the L/C application. And

Signature of the customer on the L/C application to be verified by authorized/designated officer.

L/C application with all supporting papers to be checked to ensure that the

required papers are as per requirement of Guidelines for Foreign Exchange

Transactions and are consistent to each other. L/C application must show the

following clearly:

Full name & address of the beneficiary.

The amount of the credit.


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The Credit whether to be irrevocable or confirmed irrevocable.

Whether the credit is available by payment, acceptance or negotiation.

On which party the drafts are to be drawn and the tenure of such drafts.

A brief description of the goods, including details of quantity and unit

price.

Whether freight is to be prepaid or not.

The port of shipment and the destination and whether the transfer of the

goods from one vessel to another, or from one mode of transport to

another, route, is prohibited.

The last date for shipment, the date and place of expiry of the credit and

Negotiation period.

Details of the documents required and how those are to be dispatched to

the issuing bank i.e. by ordinary mail/courier. Whether the credit is to be a

transferable one and how the credit is to be advised i.e. by mail/telex.

Letter of Credit authorization form duly filled in and signed.

Indent or Proforma Invoice issued by Seller or his agent (Indenter) duly counter

signed by the customer.

Insurance certificate or policy (Marine/Air/Mail/Truck) covering the goods at

10% above L/C value for the whole journey/shipment together with unconditional

premium paid receipt.

Prior permission/registered LCA form, No objection/any other certificates from

the concerned authority as required as per provision of the Import Policy Order.

I.M.P. form duly filled in and signed.

In case the L/C application is not complete or in consistence or the required papers

are not submitted, the customer should be promptly contacted for rectification of

the defects.


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In case the client does not have approved credit line for opening L/C the Manager

of the Branch shall take necessary arrangement to submit proposal to the Credit

committee/Executive Committee of the Board and keep pending of opening the

L/C till its approval. On receipt of approval the Manager shall issue a sanctionletter to the client providing copies of the same to Credit Division.

To avoid loss due to fluctuation of exchange rates, hold a declaration of the client

that exchange fluctuations would be on account of the importer.

To set-up a file for the L/C.

To prepare the vouchers to record the contingent liability for the L/C opened and

realize margin, commission, telex charges, postages etc. as per banks schedule of

charges/sanction letter.

To furnish all the L/C related papers including copy of the prepared letter of credit

and copy of vouchers in the L/C file.

3.7.6 Amendment to L/C:

Not frequently the letter of credit opened by a Bank, needs amendment either because the

term and condition incorporated in the L/c conflict with those of the underlying contract

between the buyer and the seller or the buyer and seller agree, at a later date. The bank

would need a written request from the importer who generally makes the request after

obtaining consent of the supplier. Such amendments will of course be effective if all the

parties to the L/c, namely the L/C Opening Bank, the advising bank and the beneficiary

agree to it.

3.7.7 Scrutiny and Lodgment of Documents:

Once beneficiary sets about the task of collecting and preparing the documents

stipulated in the L/C. He collects Bill of Lading from the carrier company, prepares the

invoice, obtain certificate of origin, packing list, bill of exchange and so on and presents

these to his banker. After that, the negotiating bank forwards the supping documents to

the opening bank.


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Bill of lading: B/L must be issued or endorsed to the order of the Issuing Bank. It

should be clean and freight prepaid if L/C is on CFR basis short form and

charter party B/L to be avoided.

Bill of exchange: bill of exchange to be drawn on the Issuing Bank.

Special conditions: Authenticity of the credit: L/C to be authenticated by

putting a test number or signing by two authorized officers.

3.7.11 Letter of Credit advising:

The L/C duly signed by two authorized officers, whose specimen signatures are already

recorded with the correspondent banks, must be addressed to the beneficiary. Bank

generally does not enter into direct contact with the beneficiary. Instead they utilize the

services of its own branch office (if any) or correspondent bank at sellers country for the

purpose of advising it to the seller (beneficiary). Thus the correspondent bank becomes

the Advising Bank.

The process of advising a credit consists of forwarding the original credit to the

beneficiary to whom it is addressed. Before forwarding/advising the credit to the seller

under appropriate forwarding coverage, the advising bank has to verify the signatures of

the officers of the opening bank and ensure that the terms and conditions of the credit are

not in violation of regulations relating to export. While advising, the advising bank does

not undertake any liability.

3.7.12 Examination and scrutiny of import documents:

After shipment of the goods, the exporter submits the export documents to the negotiating

bank. Negotiating bank checks and sends the documents to the issuing bank after

negotiation. Upon receipt of the import documents issuing bank will examine the

documents carefully. If there is any discrepancy in the documents, bank will decide

within 7 banking days, following the day of receipt of the documents, whether it will

accept the documents or will refuse. If the issuing bank fail to communicate the refusal to

the negotiating bank within 7 days, the documents deems to be accepted.

At time of scrutiny the following points to be checked specially:


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3.7.15 Payment of import bills:

In case of back-to-back since bills payment to be made on or before maturity date of the

bill out of the realized export proceeds. In case of cash sight import bills bank makes

payment from its F.C deposit account and will realize the value of foreign currency from

the client account.

3.7.16 Back-to-Back L/C:

The benefit of a L/C (the Master L/C) may be made available to a third party where the

primary beneficiary uses the master L/C as security collateral to obtain another L/C (the

secondary credit) in favor of the actual supplier. The secondary credit is known as back-

to-back L/C.

A Back-to-Back L/C involves two separate L/Cs.

One opened in favor of the first or primary beneficiary, and

One opened for the account of the first beneficiary in favor of a second beneficiary

who is supplying the goods.

The first beneficiary of the Master L/C becomes the applicant for the back-to back L/C.

Back-to-Back L/C is commonly known as Buying L/C, whereas Master Export L/C is

known as Selling L/C. What percent of export L/Cs value is permitted to open a back-to-

back L/C its depend upon the nature of the goods and getting information from the

commerce ministry.

Papers required opening Back-to-Back L/C:

Import Registration Certificate & Export Registration Certificate.

L/C application & LCA form.

Proforma Invoice / Indent.

Insurance Policy.

IMP form.

Steps of Opening Back-to-Back L/C:


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Importers application to open a BTB L/C against specific Master L/C.

Export dept. marks lien of the export L/C and forwards it to the import dept.

Obtain credit report of the beneficiary (where applicable).

Examination of L/C application formwhether within the credit Limit, dully

signed by the concerned person and also signed by the Applicant.

3.7.17 Post import finance:

When the importer does not come forward to retire the import documents, or requests the

bank for finance against the imported consignment, then arises the necessity of post

import investment. If the consignment is not cleared within 45 days, from the date of

arrival, custom authority may auction the consignment under section 167 (8) and

amended section 82 of the Custom Act 1969. Under such a situation bank becomes

compelled for forced clearance of the consignments under Murabaha post import

investment. If the documents are discrepant, partys acceptance is required for clearance

of the goods. Bank issues notice to the client, to retire the documents immediately after

receipt of the documents and it will scrutinize the documents within 7 working days, from

the date of receipt of the documents. If the documents are correct in all respect, the finalnotice is to be issued to the client before forced clearance of the goods under MPI.

3.8 Export:


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Export means outflow of goods and services produced in one country, which purchase by

Government, Firms and individuals of other countries. Development of a country depends

on its participation in the international trade by increasing production and export of

commodities and service sector. By way of this a country can improve Employment

Generation-Income level-Savings-Growth-Economic Development.

The imports and exports trade in Bangladesh is regulated by the Import & Exports

Control Act 1950. There are number of formalities an exporter has to fulfill before and

after execution of export, some of are as under:

3.8.1 Benefit of Export:

Development of a country depends on its contribution in the international trade byincreasing production and export of commodities and service sector. To earn foreign

currency; export is one of the main line of attack. To make a developed nation in the

world, we need to earn money. And this money can be achieved by increasing production

and selling it to other country. So export is the main weapons to us to make a complete

and developed nation. By way of this a country can improve Employment Generation-

Income level-Savings-Growth-Economic Development.

3.8.2 Export Policy of Bangladesh:

Export Policy of Bangladesh has formulated by the Ministry of Commerce to provide the

overall guideline and incentives for promotion of export from Bangladesh.. However, this

Policy will be valid until the next Export Policy is announced.

Objectives of Export Policy:

Restructuring and capacity building of Export Promotion Bureau, Seaport, and

port, Airport, Customs and Vat, BSTI, Tea Board and other export activity relatedbodies.

To implement strategic plan and maximum utilization of computer technology, E-

commerce and other modern technology to expand export markets.

To increase value addition of exportable items by development of Forward and

Back ward linkage industry to increase maximum exportable products.

To diversify and improve the quality of exportable items to exploit new

opportunities and protect existing market.


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To develop the export trade infrastructure and well trained manpower.

To simplify the export procedures and rationalize the incentives structures to

exports.

3.8.3 Export Incentives: To achieve the objectives of Export Policy many incentives

and facilities have been extended to the exporters. Some of those incentives and facilities

are as under:

Convertibility of Taka: Taka has been made convertible in the current account

from March 26, 1994 in line with the policy of export-led growth in the world

market. Under this system, exporters are getting the following facilities:

Exporters Retention Quota: Merchandise exporters can retain up to 10% of

realized FOB value of their exports in Foreign Currency Account for RMG,

Naptha, Furnace Oil, Bitumen and other Petroleum Products and other goods

having high import contents and up to 50% of realized FOB value of their exports

for non traditional item and service exports such as data entry, software etc.

Fiscal Incentives:

Export Credit

Export Development Fund [EDF]

Duty-Free Import of Capital Machinery

Duty-Free Import of Raw Materials

Income Tax Rebate on Export Earnings & Sale of Rejected Goods

Other Some Incentives:

Reduced airfreight for export of all items under crush program including fruits and

vegetables and Special Premium Rebates are allowed on fire and marine insurance

covers to export oriented industries. Local raw materials used as direct input for

export products are regarded as deemed export and qualify for all export incentives

and benefits. National Trophies are awarded to outstanding exporters every year and

Trophy winners are treated as CIP.

3.8.4 Procedure/Formalities for Export:


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The imports and exports trade is regulated by the Import & Exports Control Act 1950.

There are number of formalities an exporter has to fulfill before and after execution of

export, some of are as under:

The intending exporter has to register with CCI&E and obtained Export Registration

certificate [ERC]. The ERC number is to be used in all places relating to exports

Securing Export Order:

To secure export order the exporters may contact local chamber commerce of

potential buyers, the export promotion bureau, Bangladesh mission abroad and by

direct contact with foreign buyer through correspondences.

Receiving Letter of Credit:

After making contact with foreign buyers and reaching on agreed price and terms,

conditions the exporters receive Letter of Credit.

Procurement and Shipment of Goods:

After receipt of LC the exporter has to procure or manufacture the contracted goods

and ship the same.

Preparation and procurement of Export Documents:

After making shipment the exporter has to prepare documents i.e. Bill of Exchange,

Commercial Invoice, Beneficiarys certificates and procure some documents i.e.

Transport Documents, Certificate of Origin, Insurance certificate, Inspection

certificate and other documents as required as per LC terms.

Submission of documents to the bank for Negotiation:

After preparation and collection of all documents as per LC terms the exporter has to

submit the documents to the bank for Negotiation/Payment/Purchase.

3.8.5 Role of Banks in the Export Sector of Bangladesh:


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All the financial requirements of an exporter, from the time he enters into a sale contract

and start working on it and till he receives final payment from abroad, are met by

commercial banks. In that case banks play an important role in the export sector of

Bangladesh and contribute by financing in the export sector by following categories:

Pre-Shipment Credit: Pre-shipment credit is given to the exporters, for the

activities prior to shipment of goods for export. Some example of Pre-shipment

credit: Cash for local procurement of raw materials and its related expenses,

Procuring & Processing of goods for export, Packing and transportation of goods

for export, Payment of insurance premium, Inspection fees, Freight charges etc.

Pre-Shipment Credits are in following Forms:

Export Cash Credit [Hypothecation]:This for of credit is allowed to exporter

against hypothecation of raw materials or finished goods intended for export.

Since the bank has got no security against this credit except charge documents and

lien on export LC, bank obtain letter of hypothecation creating charge against the

goods in favor of the bank only but neither the ownership nor the possession on it.

Export Cash Credit [Pledge]: Under this arrangement bank provide finance to

the exporter against pledge of goods to be stored in the go down under banks

control against letter of pledge and other charge documents. In this case the goods

remain as security under banks control and possession. In the event of failure of

the exporter to honor commitment, the bank can sell the goods for recovery of

bank dues.

Export Cash Credit against Trust Receipt: This type of credit facility is

allowed to exporter when the exporter wants to utilize the credit for processing,

packing and rendering the goods in exportable condition and when it seems that

the exportable goods can not be taken in the banks custody. In this case exporter

has to execute a stamped in favor of bank and a declaration stating that the goods

purchased with financial assistance of bank are held by him in trust for the bank.

Collateral security is obtained against this credit also.


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3.8.6 Different Methods of International Trade Payment:

Cash in Advance:Under this arrangement, buyer pays the value to exporter

against the goods to be shipped and services to be provided in some future date.

After receipt of payment exporter ship the goods and provides services to buyers.

But the system is disadvantageous for buyer because buyer blocking his fund in

advances having no assurance of receipt of goods and service in time as per

contract. So such type of payment is considered as risky and expensive for buyers

but favorable for seller.

Open Account: Under this method, the sellers are in risky situation because he

has to deliver the goods and service to buyer before receiving payment. Buyer

makes payment only after receipt of goods and services as per contract terms. So

before going such transaction sellers should check the past record, worthiness and

business history of the buyer and if it is found satisfactory only seller can proceed

further.

Collection against Payment [D/P]: Under this method, exporter ship the goods

and draw bill of exchange on the buyer and submit the documents to a bank with

instruction to collect the proceeds through its correspondent bank located in the

buyers country. In this case documents delivered only against payment.

Collection against Acceptance [D/A]: Under this method, exporter ship the

goods and draw bill of exchange on the buyer and submit the documents to a bank

with instruction to collect the proceeds through its correspondent bank located in

the buyers country. In this case documents delivered against acceptance of Drafts

by the buyer.

Documentary Credit: This method reduced payment related risks for both

exporter and importer substantially. Because documentary credit is conditional

payment undertaking of issuing bank to the exporter against compliance of certain

terms and conditions and submission of required documents as per credit terms.

So under this payment method both exporter and importers feel safe to deal.

3.8.7 Examination and Negotiation of Export Documents:


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There are many instances where exporters involve themselves in committing fraud so

while exporters tendered export documents for negotiation, special care should be taken

in checking the said documents to avoid fraud forgery and protect the interest of the bank.

Following are some important checking points:

Know your exporter:

Proper checking of Export LC.

Proper checking of Export Documents:

3.8.8 Export letter of credit:

The export is normally executed against letters of credit opened by overs