Foreign Exchange Report Shankar

Foreign exchange operations Of BASIC Bank Limited
Chapter 1
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Introduction
1.1: Authorization of the study:

Banking is one of the most important sectors for countrys wealth building activities.
Commercial banks are certainly profit making Financial Institutions. These
institutions play great role in the money market of every economy.
Due to recent financial crisis (Particularly in U.S.A, G.B, EU, Japan), globalization,
technological innovation and deregulation in the banking system all over the world
has been changing rapidly. Now a days banks have to compete in the market place
not only with local institutions but also with foreign financial institutions.
The course under BBA program is designed with an excellent combination of
theoretical and practical aspects. The whole course is divided into eight semesters of 6
months each. After completion of 8th semester consisting of theoretical exposure, the
students are sent to different organizations to obtain some practical exposure in
different sectors which would help them in taking up more professional courses in
MBA. As a student of BBA, I have assigned to BASIC Bank Limited, Bangshal
Branch for my practical orientation.
As our program director directed us to present the report in a way that would be
based on the personal observations from the department I worked in. I have
described the department by the following way:
1.1.1 Understanding:
In this part I have tried to be acquainted with every nook and cranny of foreign
exchange section of BASIC bank Limited, Bangshal Branch.
1.1.2 Things are done here:
In this part I have tried to see the things which are being done in each section, i.e.;
Loans and advance section, General banking section and foreign exchange
section.
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1.1.3 Personal observations:
In this part I have tried to present my personal observations from foreign
exchange section. I had an opportunity to be acquainted with the practical
banking prevail in the Bangshal branch, BASIC Bank Limited. I have tried my
best to show the knowledge which have been acquired in my practical orientation
period.
1.2: Objectives of the study:
The Prime objectives of the study are to gather practical knowledge regarding
banking systems and operation. This practical orientation gives us a chance to coordinate the theoretical knowledge with the practical experience. The following are
the objectives for this practical orientation in bank:
To get an overall idea about the Foreign exchange Business of BASIC Bank
Limited.
To apply theoretical knowledge in the practical field.
To help the students in taking up professional courses in the MBA program.
To describe the organizational structure, management, background, functions

and objectives of the bank and its contribution to the national economy.
To achieve overall understanding of BASIC Bank Limited.
To analyze the financing systems of the bank to find out any contributing
field.
To examine the profitability and productivity of the bank.
To acquire knowledge about the every day banking operation of BASIC

Bank Limited.
To understand the real management situation and try to recommend for

improving existing problems.
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1.3: Schedule of internship:

Following schedules of the internship program were fixed by Manager of Bangshal
Branch of BASIC Bank Limited.
nd
12 January to 20th January 2009
Loans and Advances Section
21th January to 28th February 2009
Foreign Exchange Section
st
th
1 March to 09 March 2009
Loans and Advances Section
th
th
10 March to 14 March 2009
Foreign Exchange Section
1.4: Coverage of the study:

The report covers the following areas.
Overview of BASIC Bank Limited
Terms used in foreign exchange operations
Foreign exchange operations of BASIC Bank Limited
1.5: Methodology of the study:

From my educational background I have learnt different methodology to collect
data from different sources and analyze them. With the objective to make my
report sound one, I have the opportunity to implicate my educational knowledge
in practical field. I have collected data from many sources. Such as:
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Sources of Data
5.0.1.1 Primary Sources
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5.0.1
Personal Interview Face-to-face conversation and in depth interview

with the respective officers of the branch.
Personal observation Observing the procedure of banking activities
followed by each department.
Daily diary
Practical work exposures on different areas of the branch.
Informal conversation with the clients or customers.
5.3.1.2 Secondary Sources
Annual report (2005, 2006& 2007) of BASIC Bank Ltd.
Periodicals Published by Bangladesh Bank.
Different publications regarding Banking functions and foreign exchange

operation
Internet will also be used as a theoretical source of information.
Use of different theories to make the report more relevant.
Printed Materials: This study is mostly dependent on the printed

materials which may include the books, newspapers, magazines, journals,
directories, annual reports, Bangladesh bank publications, BASIC Bank
Ltds Annual Report etc
Internet: Internet was another major secondary source that we have used
to collect related information to conduct the study.
Newspapers: We have collected some information from the various

dailies and business articles.
1.5.2: Data analysis and Interpretation:

Both quantitative and qualitative analysis will be performed on the findings.
The quantitative analysis will be done on the trend of export- import, growth
pattern of export-import, pre and post facilities provided for easing the
export-import operations. Qualitative analyses will be based on the
macroeconomic variables and foreign exchange policy provided by
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Bangladesh bank, the central bank of Bangladesh. Different statistical tools
will be used for the analysis of the findings.
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1.6: Limitations of the study:
To provide current information and to make the report read-worthy, support from
various sources is essential. In spite of having my wholehearted effort, I could not
collect some information required at the time of the study. So this study is not free
from the following limitation:
Due to unavailability of latest annual report (Annual report 2008), I have to
prepare the report on the basis of annual report 2007.As a result, analysis,
presentation of data may not show the existing position/present condition of
BASIC Bank Limited.
For the whole internship I had only 90 days, out of which I get 61 days because of
late commencement of internship program, which were totally insufficient. So I
faced time shortage extremely.
Lack of previous experience to prepare this type of report and it is totally new to
me as an intern.
Foreign exchange division follows Uniform Customs and Practice for
Documentary Credits (UCPDC), but within this short period, I was totally
stunned to understand.
Learning all the banking functions within just two months was really difficult.
Another limitation of this report is Banks policy of not disclosing some data and
information for obvious reason, which could be very much helpful.
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Chapter 2
Overview of BASIC Bank Limited
2.1: Background of the bank
The Bank of Bangladesh Small Industries & Commerce Limited (BASIC)
established as Banking Company under the Companies Act 1993 on the 2nd of
August, 1988, started its operations from the 21 st of January, 1989. The Banking
companies Act 1991 govern it.
At the outset, the Bank started as a joint venture enterprise of the Bangladesh Credit
Commerce (Bcc) foundation with 70 percent shares and Government of Bangladesh
(GOB) with the remaining 30 percent shares. The BCC Foundation being non
functional following the closure of the BCCI, the Government of Bangladesh took
over 100 percent ownership of the Bank on 4th June 1992. The bank was established
as the policy makers of the country felt the urgency for a bank in the private sector
for financing Small scale Industries (SSI).
BASIC is unique in its objectives. It is a blend of development and Commercial
Banks. The memorandum and Articles of Association of the Band stipulate that 50%
of Loan able funds shall be invested in Small and Cottage industries Sector.
Table 1: Banks Capital Position
Authorized capital
(million taka)
2000
Paid up capital
(million taka)
1247.40
Total reserve & surplus

up to 2007(million taka)
1349.17
*The Bank is required to transfer 20 percent of its net profit before Tax to Capital Fund as
per the Banking Companies Act 1991
2.2 Functions
The Bank offers Term Loans to industries especially to Small-Scale enterprise.
Full fledged commercial banking Service including collection of deposit, short
term trade finance, Working capital finance in processing an manufacturing units
and facilitating international trade.
Financing & Technical support to Small Scale Industries (SSI) in order to enable
them to run their enterprises successfully.
Micro Credit to the urban poor trough Linkage with NGOs with a view to
facilitating their access to the formal financial market for the mobilization of
resources.
Financing in import and export business like other commercial Banks.
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General banking facility like Certificate of Deposits, Fixed Deposits Receipts,
Savings account, Short Term Deposits, Foreign Currency Account etc are
available here.
NAME
Date of incorporation
Date of inauguration of operation
Registered office
Head Office
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At a Glance of BASIC Bank Limited

BASIC BANK LIMITED
August 2, 1988
January 21, 1989
Bana Shilpa Bhaban
73, Motijeel Commercial Area
Dhaka-1000, Bangladesh.
Sena Kalyan Bhaban(6th floor)
195, , Motijeel Commercial Area
Dhaka-1000, Bangladesh.
Logo
Name of the chairman of the Board
Name of Managing Director
Number of Branches
Services provided
Paid up capital
Profit after tax and provision
Ownership
Banking software used
Technology used
Earnings per share
E-Mail
Website
SWIFT
Number of Authorized Dealer
Table 2: At a Glance of BASIC Bank Limited
Mr.Dewan Zakir Hussain

Mr. AKM. Sajedur Rahman
32
Deposit scheme, Credit facility and foreign
exchange services
Taka 1247.40 million
Taka 282.96 million
Government of Bangladesh
CASTLETM
Member of SWIFT
22.68(2007)
[email protected]
www.basicbanklimited.com
BKSIBDDH
15
2.3 Corporate Strategy

Financing establishment of Small units of industries and business and facilitate
their growth.
Small Balance sheet size composed of quality assets.
Steady and sustainable growth.
Investment in a cautions way.
Adoption of new banking technology
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2.4 Organizational Goal

To employ funds for profitable purposes in various fields with special emphasis
on small-scale industries.
To undertake project promotion to identify profitable areas of investment.
To search for newer avenues for investment and develop new products to suit
such needs.
To establish linkage with other institutions which are engaged in financing micro
enterprises?
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2.5 Lending Criteria

2.5.1Entrepreneur
Entrepreneur/Promoter has to be creditworthy and competent enough to run the
proposed project efficiently.
2.5.2 Viability of the Project
The project should be viable in line with organizational, technical, commercial,
financial and economical points of view.
2.5.2.1 Technical Viability
Technical process proposed should preferably be a proven one.
The project should be technically sound and environment friendly.
Technology transfer in case of borrowed know how ought to be ensured.
Building should be well planned and well constructed at a suitable location.
2.5.2.2 Commercial Viability
Market prospect and potential for the product has to be fully assured at
competitive prices.
Marketing channels existing for the product should be accessible to the
entrepreneurs.
2.5.2.3 Financial Viability
There should be reasonable debt equity ratio as determined by the Bank on
individual case basis.
Debt service coverage ratio should be at least 2.5 times at the optimum level of
production.
IRR should preferably be not less than 20 percent
2.5.2.4 Economic Viability
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The project should benefit the national economy by creating employment and
increasing income.
Savings/Earnings of foreign currency may give an additional dimension.
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2.6 Organizational Structure
To achieve its organizational goals, the bank conducts its operation in accordance
with the major policy guidelines laid down by the Board of Directors, the highest
policy making body. The management looks after the day-to-day operation of the
bank.
2.6.1 Board of Directors
The Government holds 100% ownership of the bank. The Government of
Bangladesh appoints all the directors of the Board. The Secretary of the Ministry of
Industries is the chairman of the bank. Other directors of the bank are high
government and central Bank executives. The Managing Director is an ex.-officio
member of the Board of Directors. There are at present 7 directors including the
Managing Directors of the Board. The present Board of Directors of the Bank
consists of the following members.
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NAME OF BOARD OF DIRECTORS

As on March 31, 2008
Name & Designation of Board of Directors
[1]
[2]
[3]
Mr.Dewan Zakir Hussain
Mr. Mohammad
Dr. Mahbub Ahmed
Chairman
Mahmubur
Director
BASIC Bank Limited
Rahman
BASIC Bank Limited
&
&
Director
Joint Secretary
Secretary
BASIC Bank Limited
Ministry of Finance
Ministry of Industries
&
Govt. Of the Peoples
Govt. of the Peoples
Chairman
republic of Bangladesh.
Republic of Bangladesh
Bangladesh Small and
Cottage Industries
Corporation(BSCIC)
[4]
[5]
[6]
Mr. Md.Ehsanul
Mr. Mostofa
Mr. Asaduzzaman
Hoque
Mohiuddin
Khan
Director
Director
Executive Director
BASIC Bank Limited
BASIC Bank Limited
BASIC Bank Limited
&
Director General
Chief Advisers Office
&
Joint Secretary
Ministry of Commerce
Govt. of the People
Republic
of Bangladesh
&
Executive Director
Bangladesh Bank.
[6]
Mr. AKM. Sajedur Rahman.
Managing Director
BASIC Bank Limited.
Head Office
Dhaka.
Company Secretary
Mr.Md.Mesbaul Haque
Company Auditor
ACNABIN
Chartered Accountants
Table 3: Board of Directors
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2.6.2 Management
The management is headed by the Managing Director. He is assisted by the General
Manager and Departmental heads in the head office. BASIC is different in respect to
hierarchical structure from other bank in that it is much more vertically integrated as for as
reporting to the chief Executive is concerned. The Branches in charge of the Bank report
directly to the Managing Director and for functional purposes, to the Head of Department
consequently, quick decision making in disposal of cases is ensured.
[ORGANOGRAM OF BASIC BANK]
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CHAIRMAN
CHAIRMAN
BOARD OF DIRECTORS
MANAGING DIRECTOR
GM
GM
(Admin)
International
Division
Credit
Division
GM
(Operation)
Establishment
DEVELOPMENT
&
(Audit & Inspection)
Central
Accounts
Industrial
Credit
Division
Personal
Division
Branch Control
Deputy General Manager

Assistant General Manager.
Manager
Deputy Manager
Assistant Manager
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Senior Officer
Assistant Officer
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Officer
Clerical Staff:
Non-Clerical Staff:
Messenger Staff
BASIC is well
prepared
for aStaff
broad range of
Go-down
Staff to and capable of meeting thedemand
Security
banking services. It has got adequate resources, both human and physical, to provide
the customers with best possible services.
2.7 Resource
& Capabilities
Banking
Staff
2.7.1 Physical and Technological Resources

A great deal of investment for devolving the physical resource base of the bank has
been made. BASIC has its presence in all the major industrial and commercial hubs
of Bangladesh in order to cater the needs of industry and trade. At present, there are
Thirty two conveniently located branches throughout Bangladesh. There are 11
branches in the capital city of Dhaka, 7 in Chittagong and one each in Narayangonj,
Narshingdi, Rajshahi, Saidpur, Bogra, Khulna, Jessore, Sylhet, Moulivibazar,
Barisal, Comilla, Gazipur, Sirajgonj and Dewanghat.
Major features of these branches:
Fully computerized accounts maintenance.

Well-decorated and air-conditioned facilities.
A fully operational computer network, which is currently being implemented.
The work of LAN and WAN installation to facilitate fast communication between
the branches and the head Office is in progress to facilitate any Branch Banking
and ATM Services.
Money counting machine for making cash transaction easy and prompt.
Fifteen out of thirty two branches are authorized dealers of foreign exchange.
This facilitates speedy disposal of transaction of export and import trade.
2.7.2 Human Resources

BASIC has a well-diversified pool of human resource, which is
composed of personnel with high academic background. Also, there
is a positive demographic characteristic. Most employees are
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comparatively young in age yet mature in experience. As at end
2007 the total employee strength was 721. The Bank follows a
strict recruitment policy in order to ensure that only the best
people are recruited. The Bank, so far, has recruited four batches of
entry-level management staff, all of whom have got excellent
academic background. The number of employees has increased gradually to
523, 578, 601, 651, and 721 at the end of 2003, 2004, 2005, 2006, and 2007
respectively.
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Table 4: Employee progress of BASIC Bank Limited

YEAR
2003
2004
2005
Number of
523
578
601
Employees
2006
651
2007
721
Figure 1: Employee position of BASIC Bank limited

2.7.2.1: Recruitment
The Bank follows a strict recruitment policy in order to ensure that only the best
people are recruited. The bank, so far, has recruited four batches of entry-level
management staff, all of who have got excellent academic Background.
2.7.2.2: Training
Intensive training program, on a regular basis, is being imparted to employees of
both management and non-management levels to meet the challenges in the banking
industry and to help employees to adapt the changes and new working conditions.
Human resource is the main driving force and quality human resources are the key
sources for the success of today's banking business. Keeping this view in mind and
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recognizing the importance of training for professional excellence BASIC Bank Ltd.
has established its own training cell in 2005 with modern facilities. In 2007 the cell
arranged 22 training courses and provided training to as many as 360 employees of
the bank. To cater the needs of the employees and to keep pace with demand of the
time it will continue to arrange regular training courses in the days ahead. The bank
also sends its employees to BIBM and other local and foreign institutions with a
view to sharpening their knowledge base. During the year 2007, a total of 379
employees of the Bank were provided with training in various fields. Out of them 16
employees participated in training courses held abroad.
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2.7.3 Financial Resources

Like any other financial intermediaries, BASIC is no exception in performing its
core function viz. Mobilization of fund and utilizing such mobilized fund for
profitable purposes.
2.7.3.1 Mobilization of Funds
The main sources of fund for BASIC are:
1) Deposit
2) Borrowing
(1) Deposit: Deposit is the mainstay of BASICs sources of fund. Following usual
practices, it collects deposit through:
Current Deposit
Saving Deposit
Fixed Deposit
Others (Margin A/c, Retention quota A/c etc.)
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Figure 2: Deposits mix of BASIC Bank Limited in 2007

(2) Borrowing for Development Finance: Apart from deposit BASIC received funds
from the following sources:
Bangladesh Bank.
Asian Development Bank.
KfW (Kreditanstalt fur Wieder-aufbau- Credit Institution for Reconstruction), a
German Development Bank.
All of these funding sources fund are for relatively longer period. Receiving the credit
lines from ADB and KfW has been recognition of BASICs highly satisfactory
performance.
Table 5: Borrowing for Development Finance (Taka In million)
Year
2004
2005
2006
Amount
839.61
937.52
830.06
2007
1385.81
2.7.3.2 Utilization of Funds

Utilization of banks fund was more of less satisfactory during the year 2007. Given
the difficult economic situation, the management of bank focused on the
consolidation and quality of assert rather than in growth. The total assets of the Bank
increased to Taka 38,773.91 million at end 2007 from Taka 29,417.09 million in the
previous year. The growth rate was 31.81 percent. Deposit rose from Taka 31,947.98
million (82.40% of total liabilities) in 2007 to Taka 24,084.65 million (81.87% of
Total liabilities) in 2006 showing a growth rate of 32.65 percent.
2.7.3.2.1: Banks Assets
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During the year 2007, total assets of the bank increased by 31.81 percent to Taka
38,773.91 million from Taka 29,417.09 million in 2006.As expected for a bank,
loans and advances comprised the largest share in the assets portfolio of the Bank
constituting 57.51 percent. Balances with other banks and financial institutions and
investment were the second and the third largest constituents being 17.89 percent and
13.67 percent of the assets portfolio respectively. Cash & money at call and short
notice came next in size with 5.48 percent and 3.40 percent of the total assets
portfolio.
Balance sheet of BASIC Bank Limited as on December, 31, 2007
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BASIC Bank Limited

Balance Sheet (Partial)
As on 31.12.2007
Particulars
Property and Assets
Cash
Balance with other Banks and financial institutions
Money at call and short notice
Investments
Loans And Advances:
Fixed Assets including premises:
Other Assets:
Deferred Tax Assets
Non-Banking Assets
Total assets
Amount (BDT)
2,125,018,037.00
6,937,531,606.00
1,320,000,000.00
5,303,391,104.00
22,263,349,608.00
196,107,160.00
579,144,820.00
49,363,500.00
38,773,905,835.00
%
5.48%
17.89%
3.40%
13.68%
57.51%
0.51%
1.49%
0.13%
0%
100%
Table 6: Balance sheet as on December, 31, 2007

2.8 Performance of Bank
The performance of BASIC has been satisfactory since its inception in respect to all
the measurement parameters, a good year for the Bank again. It performed fairly in
2007 in spite of severe competition in the banking sector of the country. The Board
of Directors was happy with the overall performance of the Bank, particularly for
maintaining quality of assets and improving shareholders value.
During the year 2007, total assets of the Bank increased by 31.81 percent to BDT
38,773.91 million from BDT 29,417.09 million in 2006. As expected for a bank, loan
and advances comprised the largest share in the assets portfolio of the Bank
constituting 57.51 percent. Total deposits of the bank at the end of 2007 stood at
Taka 31,947.98 million (82.40% of total liabilities) compared to taka 24,084.65
million (81.87% of total liabilities) in 2006. Performance and position of BASIC
Bank Limited are shown in the next page.
2.8.1 Dividend
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In the year 2007 the Bank declared (1:20) bonus share amounting to BDT 62.37
million (6.237 crore). And 5% cash dividend amounting to BDT 62.37 million
(6.237 crore). All of these have gone to the sole shareholder, the Ministry of
Finance.
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BASIC Bank Limited

Head Office, Dhaka
BUSINESS POSITION OF BASIC BANK LTD AT A GLANCE
Table 7:
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Table 8
SI.
#
1
01.
Particulars
2
Paid Up Capital
Position as on
2007
3
1,247,400,000
Position as on
2006
4
945,000,000
Position as on
2005
5
810,000,000
Position as on
2004
6
675,000,000
2,947,858,896
2,489,523,909
1,952,002,043
1,623,732,250
663,726,896
619,126,000
445,474,000
38,773,905,836 29,417,094,939 27,136,370,676
31,947,979,101 24,084,659,391 22,325,581,340
22,263,349,608 19,000,004,688 15,339,350,847
453,632,080
19,436,566,270
15,509,176,960
12,000,145,123
02.
Total capital
03
04
05
06
Capital surplus/(deficit)
Total Assets
Total Deposits
Total loans & Advances
07
Total contingent
10,189,525,373
liabilities & commitments
Credit-deposit ratio
69.69%
08
09
17
18
19
Percentage of classified
loans against total loans
and advances
Profit after tax and
provision
Amount of classified
loans and advances
Provision kept against
classified loan
Provision surplus /
(deficit)
Cost of funds
Interest earning assets
Noninterest bearing
assets
Return on investment
Return on Assets
Incomes on Investment
20
10
11
12
13
14
15
16
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BASIC BANK LIMITED

GROWTH AT A GLANCE
8,579,394,196
6,102,505,592
5,580,954,700
78.89%
68.71%
77.37%
3.25%
3.70%
4.55%
3.70%
282,965,086
554,138,494
285,494,792
291,484,207
723,233,815
703,269,923
698,443,122
443,854,593
436,543,180
323,218,141
274,845,923
179,798,406
734,147
8,050,949
8.31%
6.77%
7.34%
35,046,030,900 26,469,275,536 24,437,566,814
3,727,874,936 2,947,819,403 2,698,803,862
6.86%
17,449,378,068
1,987,188,202
7.89 %
.83 %
206,480,219
5.78 %
1.94 %
225,733,106
6.59%
1.23%
162,531,619
6.50%
1.68%
132,356,456
Earnings per share
22.68
58.64
25.25
35.99
21
Net income per share
22.68
58.64
25.25
35.99
22
Price earning ratio
N/A
N/A
N/A
N/A
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(Taka in million)
Continued..
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(Taka in actual value)

SL.
Particulars
SL. Particulars
6.
1. Commission,
exchange and
(a) Sub-standard
brokerage
commission
(b) Doubtful
2. Exchange
Gain
(c) Bad/Loss
Profit
7. on exchange trading
3. Profit/Loss
Position:
a) Import
b) Export
a)Gross
c) Income from
b)Gross
expenditure
Remittance
Profit
before tax
8. Number
of
Branches
Profit
after taxof
9. Number
4. Tax paid
(cumulative)
employees
5. Existing Capital:
Position as on Position as on Position as on Position as on

Position as 2006
Position as
Position
as Position
2007
2005
2004 as
on
2007
2006
on 2005
on 2004
Total
ClassifiedonLoan
191.23
157.65
123.28
102.58
25,738,415
27,157,947
12,285,090
27,060,600
88,173,184
33,957,068
20,458,450
3,081,500
609,322,215
642,155,358
242,102,384
141,626,000
222.84 Business149.64
114.61
129.98
Foreign Exchange
Position:
21,266,570,000 17,804,270,000 14,094,960,000 12,507,80,000
16,794,960,000 15,463,740,000 11,097,230,000
79,080,000
3,549.51
2,870.325,766,150,000
2,228.21 4,055,380,000
1,768.85
6,069,670,000
4,231,450,000
2,741.37
1,858.69
1,599.77
1,241.63
808.14
1011.62
628.44
527.2227
30
28
27
282.96
721
318.84
554.14
651
228.08
(A) Core Capital(Tier I):

a) Paid Up Capital
1247.40
945.00
b) Statutory Reserve
1045.08
883.45
c) Other Reserve & Surplus
196.48
410.54
Total of Tier I capital
2,461.96
2,239.00
(B) Supplementary Capital (Tier II) :
i) 1 % General Provision
300.65
250.53
ii) Provision for off-balance
43.70
0
sheet items
iii) Exchange equalization
6.93
0
Reserve
iv) Revaluation of HTM
134.62
0
securities
Total of Tier II capital
485.90
250.53
Total Capital (A+B)
2947.86
2489.53
Risk weighted assets
22,841.32
20,782.19
Capital ratios to risk weighted assets
Tier I capital
10.78%
10.78%
Tier II capital
2.13%
1.20%
Total capital
12.91%
11.98%
285.49
601
151.08
291.48
578
104.81
810.00
681.13
235.00
1,726.13
675.00
555.45
260.82
1,491.27
218.98
0
125.58
0
6.88
6.88
225.86
1951.99
16,739.20
132.46
1623.73
13,001.11
10.31%
1.35%
11.66%
11.47%
1.01%
12.48%
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2.9: Orientation of BASIC Bank Limited, Bangshal Branch:

BASIC Bank Limited, Bangshal Branch is located in 230, North south road,
Bangshal, Dhaka-1000. The branch consists three divisions (General banking, Loans
and Advances and Foreign Exchange) and I worked in Foreign Exchange division.
The In-charge of the branch is Assistant General Manager and the lower rank is
assistant officer. The positional hierarchy of BASIC Bank Limited, Bangshal Branch
is given bellow:
Assistant General Manger (1)
Manager (3)
Assistant Manager (7)
Officer (6)
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Assistant Officer (1)
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Staff (5)
Graphical Presentation
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Figure 3: Combination of Deposits & loans and Advances
Figure 4:
Gross
income &
Expenditure
Figure 5: Amount of profit before & after tax
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Figure 6: Amount of Tax paid (Cumulative)
Figure 7:Year-wise Loan portfolio
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Figure 8: Core capital position of BASIC Bank Limited.
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Figure 9: Classified loan during 2007

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Chapter 3
Terms used in foreign exchange operations
Foreign exchange, like foreign trade, is a part of economic science. It deals with the
means and methods by which rights to wealth in one countrys currency are
converted into those of another country. By the same token, it covers the methods
used for conversion, the forms in which such conversions take place and the causes
which render this conversion necessary. Foreign Exchange means exchange foreign
currency between two countries. If we consider Foreign Exchange as a subject,
then it means all kind of transactions related to foreign currency. In other words
foreign exchange deals with foreign financial transactions.
Activities of Foreign Exchange:
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3.1 Import:
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There are three kinds of foreign exchange transactions:

Import
Export
Remittance
Under the import policy of Bangladesh the Importer has get the valid Import
Registration Certificate (IRC) from the Chief Controller of Import & Export
(CCI&E).
3.1.1 Letter of credit:
Letter of credit means any arrangement whereby a Bank (the issuing Bank) is
committed (on behalf of the buyer/applicant) to pay certain amount at the sellers
disposal under some agreed conditions.
Types of documentary credit:
Documentary credit may be of three types Recoverable credit
Irrecoverable credit
Add confirmed credit
3.1.2 Recoverable credit:

This type of credit can be cancelled or amended at any time by the issuing Bank
without prior notice to the seller. It is not in use.
3.1.3 Irrecoverable credit:
This type of credit cant be cancelled or amended by the issuing Bank without
agreement of parties concerned thereto. All the credits issued in our country are of
recoverable nature.
3.1.4 Add confirmed credit:
When a third Bank provides guarantee to the beneficiary to make payment, if issuing
Bank fail to make payment, the L/C is called confirmed L/C. In case of a conformed
L/C a third Bank adds their confirmation to the4 beneficiary, to make payment, in
addition to that of issuing Bank. Confirmed L/C gives the beneficiary a double
assurance of payment.
3.1.5 Special documentary letters of credit:
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The following five major steps are involved in the operation of a documentary letter of
credit:
Opening
Advising
Amendment
Presentation
Settlement
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3.1.6 Import Financing:

The post import finance extends the import credit in the following forms:
PAD (Payment against documents)
LTR (Loan against trust receipt)
LIM (Loan against imported merchandise
3.2 Export:
Under the export policy of Bangladesh, the exporter has to get the valid export
registration certificate (ERC) from chief controller of export & import (CCI&E). The
ERC is required to renew every year. The ERC number is to be incorporated on
export Form & other paper connected with exports.
3.2.1 Receiving the letter of credit:

After getting contract for sale, exporter should ask the buyer for L/C clearly starting
terms & condition of export & payment.
3.2.2 Procuring the materials:
After knowing that the L/C has opened in his favor, the next step for the exporter is
to set about the task of procuring or manufacturing the contracted merchandise. If the
exporter has to procure the raw materials from another supplier (local or abroad) he
has to open Back-to-Back L/C.
3.2.3 Back-to-Back L/C:
Back-to-Back L/C is one type of L/C, which is opened against lien on a valid export
L/C. It is opened for inland & abroad as well. Bank will supply the following
papers/documents for opening a Back-to-Back L/C.
L/C application form
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LCA form
IMP form
Charge document papers
The above papers must be completed, filled & signed by the party thereto. The party
will submit the entire filled document along with application in printed form of the
designated Bank which is also an agreement between application & the Bank.
3.2.4 Export Financing:
An export is who exports the goods to another customer whether in domestic country
or in abroad. In exporting the stipulated goods he may require financing. So export
financing may be required at two stages.
Pre shipment credit

Post shipment credit
3.2.4.1 Pre shipment credit:

Pre shipment credit is the credit, which is given to finance the export activities of an
exporter for the actual shipment of goods. The purpose of each credit is to meet the
working capital needs from the procuring of raw materials to the transportation of
goods for the export the foreign country. Before sanctioning of that credit the Bank
takes into consideration the credit worthiness, export performance of the exporters
together worthiness all other information required for sanctioning the credit in
accordance with the existing rules & regulations.
3.2.4.2 Post shipment credit:
There is a time gap between export of the goods and realization of the proceeds. So
exporter may require finance in that period to continue his business. So Bank may
finance against export documents ensuring the following:
Export documents comply with the credit terms
Partys past performance is satisfactory
Any other security in case of exporting under contract
3.3 Foreign Remittance:

Foreign remittance means remittance of foreign currencies from one place/person to
another place/person. In broad sense, foreign remittance includes all sale and purchase of
foreign currencies on account of Import Export, Travel and other purposes. However,
especially foreign remittance means sale & purpose of foreign currencies for the
purposes other than export and import. BASIC Bank Limited performs the remittance
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function with different countries. It maintains the foreign remittance in the following
form:
Foreign Demand Draft
Inward
Outward
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3.3.1 Foreign Demand Draft (FDD):

A foreign demand draft is a negotiable instrument issued by a Bank drawn on other
Bank with another country the instruction to pay a certain amount to the beneficiary
on demand. Remittance through demand draft may be inward or outward.
3.3.2 Inward Remittance:
Inward remittance refers to the extent where the bank makes payment to the client
against foreign demand draft. Bank will make payment to the client by verifying the,
test number, and signature of the authorized officer.
3.3.3 Outward Remittance:
It refers to the extent where by the bank issues foreign demand draft. The bank
charges TK.300 per Demand Draft.
Two forms are used for Outward Remittance of foreign currency such as:
IMP Form: All outward remittance on account of Imports is done by from IMP.
TM Form: For all other outward remittance from TM is used.
Chapter 4
Foreign exchange Operations
4.1: Introduction:
The foreign exchange has played a vital role in the last decade or so in guiding the
purchase and Sale of goods, services and raw materials globally. Every country has
certain natural advantages and disadvantages in producing certain commodities while
they have some natural disadvantage as well in other areas .As a result, we find that
some countries need to import certain commodities while others need to export their
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surpluses .Foreign trade brings the fruits of the earth to the homes of the humblest
among the countries .These transactions are the basis upon which international trade
is made.
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As more than one currency is involved in foreign trade, it gives rise to exchange of
currencies, which is known as Foreign Exchange .The term Foreign exchange has
three principal meanings .Firstly, it is a term used referring to the currencies of other
countries on terms of any single one currency .To a Bangladeshi, Dollar, Pound
Sterling, etc. are foreign currencies and as such foreign exchanges. Secondly, the
term also commonly refers to some instruments used in international trade, such as
bill of exchanges, drafts, travelers cheques and other means of international
remittance. Thirdly, the term foreign exchange is also quite often referred to the
balance is foreign currencies held by a country. In the fiscal year 2007-2008,
Bangladesh economy was confronted with serious challenge, among others, the
impact of divesting floods, the excessive price hike of oil, global financial crisis and
some other importable in the international market, in addition to the termination of
the multi fiber arrangement (MFA). To cope with these challenges, the government
and the Bangladesh Bank adopted a series of policies to enhance the resilience of the
economy, while maintaining macro economic stability. These polices significantly
contributed toward maintaining real Growth Rate of Bank 5 percent in the fiscal year
2007-2008.
Again, Foreign Exchange deals with the means & methods by which rights to wealth in
one country's currency are converted into those of another currency. It is a part of
economic science of foreign trade. By the same view, it covers the methods used for
conversion, the forms in which such conversions take place and causes which render
these conversions necessary.
In Bangladesh, we have the unit of money is 'Taka' for domestic transaction; also
have other obligations by exchanging foreign currencies. To meet-up the obligation that
arise import of goods & services from other countries, other foreign necessity, that part of
the economic science, which deals with the conversion of domestic currency into
foreign currency for the purpose of setting international obligations, is called Foreign
Exchange.
There are three types of modes of foreign exchange market, which are as follows:
Export Finance
Import Finance
Foreign Remittance
Foreign trade finance:
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So far the bank has established correspondence relationships with as many as 22

foreign banks in order to facilitate foreign trade. The Bank handled total export
business of Taka 16,794.96 million and import business of Taka 21,266.53 million in
2007.
The Banks export and import business grew by 8.61 percent and 19.45 percent
respectively. Major items of exports were ready made knit & woven garments,
sweater, jute products, leather and leather goods, handicrafts etc. Items of import
included mainly industrial raw materials, garments accessories, and capital
machinery, raw cotton, electronic consumer goods, chemicals, tyres and tubes,
reconditioned vehicles, bicycle spare parts, food items such as rice, wheat, garlic,
onion, sugar, chilly and other essential commodities.
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4.1.1: EXPORT FINANCE:

In case of export business finance is perceived as one of the important elements. It is
linked to nearly all the stages of conversion cycle- procurement of raw materials,
processing of goods, packing storage, transportation to the port, shipment to the buyer,
assembling of shipping documents & finally, collection of payments. The term Export
Finance should therefore mean moneys needed by an exporting farm at each stage of
the conversion cycles.
4.1.1.1: Export financing sectors of BASIC Bank Limited:

Export financing can play a vital role in the development process of Bangladesh.
With earning on export we can meet our import bills. The export trade is always
encouraged because the major portion of foreign exchange earning is derived from
export. Because of shortage of adequate capital exporters have to come in contact
with commercial bank and financial institution to get finance from them. BASIC
bank Limited as a state-owned scheduled bank provides certain facilities to the
exporters to boost up export earnings.
The traditional & non-traditional sectors in which BASIC Bank Limited provides
export-financing facilities are as follows:
Ready Made Garments in all sorts.
Jute manufactures
Jute - raw & meshta
Fish & Prawns.
Hides, Skins & Leather.
Tea
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Fertilizer etc.
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4.1.1.2: Export financing system of BASIC Bank Limited:
Bangladesh as a developing country depends mainly on foreign exchange earning for

its development activities. The major portion of foreign exchange earnings is derived
from export obviously, to boost export, government provide certain incentives to the
exporters namely:
Export Financing
Development Financing
Export Credit Guarantee Scheme
Export performance benefits
Duty draw back
Rebate on duty & tax
Income tax rebate
Insurance premium rebate
Conditional cash subsidy to Garments Industry , vegetables, handicrafts etc
4.1.1.3: PRE-SHIPMENT & POST-SHIPMENT:

In BASIC Bank Limited export finance is required by the exports at two stages namely
Pre-shipment & Post-shipment stages:
1.
Pre-shipment: It is required to purchase of raw materials, to meet cost of
production, procurement of exportable goods, packing, transport, payment of
insurance premium, inspection fee, freight charges, ware housing etc.
2.
Post-shipment: It is required by the exporters after actual shipment of goods in
order to bridge the period between shipment of the goods and receipts of sales
proceeds from abroad.
An exporter owns resource may not be adequate to meet all such expenses. So he / she has
to come in contact with commercial bank and financial institutions to get finance
from them. As a state owned scheduled bank BASIC Bank Limited provides credits to
exporters at a consideration rate of interest as an export promotion measure as per
government directive.
4.1.1.4: PRE-SHIPMENT FINANCING OF FOREIGN EXCHANGE:

The classes of pre-shipment financing extended to the exporters by the BASIC Bank Limited
are as follows:
4.1.1.4.1: Export Cash Credit - Pledge:
This facility is allowed for a short period. Under this credit the exportable goods are kept under
the effective control of bank either at exporter's go down or bank own go down. In either of the
cases, the bank engage full time security (chowkider) to observe over the goods & the
movement the goods are done under the supervision of the bank who maintain its proper
records through go down storage, challan, delivery order, go down register etc.
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4.1.1.4.2: Export Cash Credit - Hypothecation:
This advance is allowed for a short period or 3 to 6 months mainly to purchase raw
materials or for procurement of exportable goods. So virtually the goods are kept under
the control of the exporter but by creating charge on the goods at the time of disbursing
credit. The bank has the right to take possession of the goods. The exporter will submit
stock report to the bank usually on monthly basis & the bank will verify them.
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Documents & Security to be obtained:

Export registration certificates (ERC)
Bank usually charge documents to be signed by exporter or his / her duly authorized
agent.
Confirmed irrevocable export letter of credit or firm contract made by the buyer with the
exporter.
Insurance coverage
Collateral securities.
4.1.1.4.3: Packing Credit:
This facility is generally extended when the goods become ready for shipment for a
very short period usually from the date of dispatch of the stock from the go down up
to the date of actual shipment of the goods that is for the transit period of shipment
for further purchase of raw materials or procurement of exportable goods by exporter.
4.1.1.4.4: Back to back letter of credit:

Pre-shipment facilities are also credited in the form of back- to-back letter of credit. When
the beneficiary of an export letter of credit is not the actual manufacturer or producer of
exportable goods mentioned in the relative export letter of credit as securities with his /
her banker for procurement of exportable goods to enable him /her to execute the export
letter of credit and such letter of credit is called inland back to back letter of credit.
Precautions used by BASIC Bank Ltd to sanction pre-shipment credit:

Before making lien on the original export letter of credit all the terms and conditions should
be scrutinized so that no detrimental clauses including violation of foreign exchange
regulation and UPCDC terms are included there in.
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Expiry date of letter of credit should be properly recorded in the book and no drawing is to
be allowed against expired letter of credit.
The credit worthiness or solvency of the foreign buyer as well as the exporters must be
ascertained before hand.
In case of mortgage of properties as collateral securities, the bank by engaging lawyer
together with valuation certificate from proper authority must scrutinize the relative
documents.
The exporter should arrange forward sale of foreign exchange loss at the time of
negotiation of export documents.
In case of packing credit, the export letter of credit and relative documents have to submit
in, such a way that the bank may not face any problem in negotiation of shipping
documents in due course.
To dispatch goods for shipment to post under packing credit the bank must verify the
shipping mark on the each packet or cartoon and the relative invoice.
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4.1.1.5: POST-SHIPMENT FINANCING OF FOREIGN EXCHANGE:

Post shipment financing refers to the credit facilities extended to the exporters by BASIC
Bank Ltd after actual shipment of the goods against export documents. BASIC Bank Ltd
generally finance the exporters at post shipment stage after verifying the credit worthiness and
export performances of the exporters as well as the reputation and financial soundness of
the foreign buyers provided the shipping documents are drawn strictly in accordance
with letter of credit terms and in accordance with foreign exchange regulation in force.
Post shipment financing is extended to the exporters by the following terms:

Negotiation of export documents under letter of credit.
Purchase of askance bills drawn on D. A. basis.
Providing loan against export bills tendered collection.
Discounting of export bills.
A. Negotiation of export documents under letter of credit:
Most important and widely used method of financing export at post-shipment stage is
negotiation of export documents. After the shipment of the goods the exporter generally
submits the following documents to the bank for negotiation:
Bill of exchange.
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Bill of lading or air way bill.

Commercial invoice - eight copies within these four original copies.
Custom invoice of importer's country.
Certificate of origin-original copy.
Packing list - eight copies within these four original copies.
Weight certificate.
Declaration of shipment to the insurance company.
Pre-shipment inspection certificate.(CFR-Clean Reports of Findings)
Quality control certificate when required.
Acknowledgement letter indicating received sample / approval letter.
Frightful letter.
Any other document if called for letter of credit.
B. Purchase of uses bills drawn on D.A. basis:

Sometimes export letter of credit stipulates payment at 30 to 40 months; the period is called
askance period. The bills drawn under this letter of credit is termed as askance bill. On
presentation of documents foreign buyers give written acceptance on the bill of exchange to
pay after the askance period. In dealing such documents the banker must take proper precaution to realize the proceeds in time.
C. Providing loan against export bills tendered for collection:

Export bills are sending abroad generally by banks on collection basis in the following cases:
Export bills not drawn under letter of credit.

Bills drawn under letter of credit but contains.
Against the above collection documents bank may allow loans keeping substantial margin
on the basis of banker customer relationship with the exporter. While handling such documents
the banker must remain vigilant to refer the exporter proceed with a view to adjust the credit so
extended.
D. Discounting of export bills:

When the export bills are not drawn under letter of credit or the goods send on consignment
basis, the exporter may approach the bank for discounting the export bills on commission
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basis. Bank generally does not accept such proposal excepting on exceptional cases. If the
exporters have very good credit worthiness and previous good export performance and
foreign buyers have also good report & good reputation for past transaction.
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4.1.1.6: Export Form:
The customer, now issued by the authorized dealers, must declare all export of which
the requirement of declaration of exchange control manual of Bangladesh Bank applies on
the Export Forms.
Disposal of Export Forms:
Origin: From custom authority to Bangladesh Bank (ECD) after shipment goods.
Duplicate: From negotiating bank to Bangladesh Bank after negotiation.
Triplicate: From negotiating bank to Bangladesh Bank after realization of the proceeds of
the export bill.
Quadruplicate: Retained by the negotiating bank as office copy.
4.1.1.7: Export Development Fund:

The main objective of creating an export development fund at the Bangladesh Bank is to
assure a continued availability of foreign exchange to meet the import requirement of
non-traditional manufactured items, this facility is available to the non-traditional exporters,
particularly newer exporters, exporters diversify into higher value export and exporters
diversify into new markets. An exporter identified above is eligible on the basis of the
conditionally stated below: One must be an exporter of non-traditional manufacturing items.
The value added of these products could be 20% except in the case of garments where it
has to be 30% & above.
The loan should be utilized in the case of importing raw materials for manufacturing the
exportable products.
The exporter must have an export letter of credit.
One must create a back-to-back for importing raw materials.

The period of loan is 180 days.
4.1.1.8: Scrutiny of Export Document:
After the shipment of goods the exporters submit export documents to authorized dealer
for negotiation of the same. As bankers deal with documents only, not with commodity
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they are required to be very much careful about the genuineness and correctness of the
documents evidencing shipment of the respective commodities. The bankers are to ascertain
that the documents are strictly as per the terms of letter of credit. Before negotiation of the
export bill, the bankers are to scrutinize and examine each & every document with great
care. Negligence in the part of the bankers may result in non-repatriation or delay in
realization of proceeds as incorrect documents may put the importers abroad into unnecessary
troubles. The scrutiny procedure is as follows:
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I.
Scrutiny of Draft or Draft of Exchange:
The draft should be drawn by the party indicated as the beneficiary of the credit i.e. the
exporter; drawee must be in accordance with the terms of the credit.
The tenor and amount of the draft be in conformity with the credit terms.
The bill of exchange should be properly stamped if necessary with the requisite value
and the cost must be recovered from the drawers unless it is provided otherwise in
the letter of credit.
The draft or bill must bear the correct date and must be drawn or endorsed to
the
order of the bank.
The drawer's signature must be verified.
II.
Scrutiny of invoice:
The physical description of the goods i.e. price, quantity, quality, markings etc. in the
invoice must correspond with the specifications in the credit.
If the credit stipulates a consular invoice, the requisite invoice should be furnished.
All copies must be signed and certified as correct shipper.

If the credit stipulate for any other particulars to be stated in the invoice these must
complied with. It should not include charges such as postage; cable etc. unless
specifically authorized under the credit.
III.
Scrutiny of shipping bill:
The bill of lading should be a full set clean on board ocean bill of lading, unless the
credit stipulates otherwise. 'Received for shipment' bills of lading must not be accepted
unless permitted by the credit.
It must agree with the invoice as regards quantity and description of goods as well as in
respect of ports of shipment and destination.
The bill of lading must also indicate where it is 'freight paid' (C & F, GIF) or freight
payable at destination (FOB transaction).
Transshipment and port shipment clauses in the shipping bill should be in
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accordance with credit terms and the provisions of the uniform custom and practice.
Credit frequently stipulates for shipment not letter than a specified date. Bill of lading
must be examined to ensure that these are dated not later than the date mentioned.
Must be properly signed by or behalf of the carries, must be properly stamped
and must be endorsed, expect when the relative credit stipulate for bill of lading to order
of a named firm.
Dock shipment not permitted unless specifically authorized and covers by insurance.
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Bill of lading must not be a stale one.

IV.
Scrutiny of Insurance:
Where insurance is to be effected by the beneficiary for GIF consignment, the policy
accompanying the documents should be examined to ensure:
That the insurance covers the merchandise for the value stipulated in the credit.
That the document is of the class stipulated in the credit.

That the insurance documents describe the merchandise covered and mention the name of
the carrying steamer. In case where 'on board' bill of lading are not presented the
following clause or words of similar indent must follow the name of the steamer' and / or
'following steamer'.
That all risk stipulate in the credit is properly covered in the insurance documents.
When the credit stipulates that 'all risk' are be covered, it is not sufficient that various
risks are mentioned but a clause to the credit that 'all risk' are covered, is required.
That the policy is in the name of the bank and the importer.
That the party designed in the documents to perform such act properly countersigns
the insurance document.
That the insurance document complies with the conditions of the letter of credit is in
negotiable form that it is endorsed by the party to when the loss payable, unless the
credit stipulates that the insurance must be issued 'loss payable to a specified party in
the country of destination'.
That the date appearing on the insurance document is not later than the date appearing
on the bill of lading.
That the insurance document covers transshipment when the bill of lading indicates
that transshipment would take place.
That the insurance claims are payable at the port of destination, that insurance certificate /
policy acknowledges the payment of the premium.
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V.
Scrutiny of other documents:
The other documents i.e. certificate of origin, packing list, weight / measurement
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certificate, inspection certificate, survey report, quality control certificate etc. should be
issued or signed by the proper authorized and description of 'export - order' given in
these documents not be in contradiction to the credit terms.
4.1.1.9: RISK OF EXPORT FINANCING:

In the trade - there are so many risk factors involved. In banking sector - the bank face risk
basically from loans & advances and foreign exchange. In this section I discuss the risk of
Export Financing.
While there are many advantages to exporting it is not without risk. In deed there are often
factors present in international market, which make foreign exchange substantially
more risky than domestic ones, including the credit risk of non-payment or non-acceptance
of the merchandise by the buyer. For international sales, these risks are far more
pronounced than they are domestically. For these reasons BASIC Bank Ltd also
accompanied with elements of uncertainty some which are as follows:
I.
Commercial risk:
Insolvency of overseas buyer, which result in non-realization of export proceeds.

Failure of the buyer to retire credit already accepted by him / her in case of askance
bill within stipulated period.
Willful negligence of the importer to accept of pay bill or to accept goods for no fault of the
exporter.
II.
Political risk:
Sudden out break of war revolution or civil disobedience in buyer's country.

Imposition of restrictions on remittance on any government action in the buyer's
country which may block or delay payment.
Imposition of trade embargo or blockade against any country.
New import restriction on the buyer or cancellation of the license.
Additional handling transport or insurance charges due to interruption or
diversion of voyage, which cannot be recovered from buyer.
Bankrupt or closure of a bank or stoppage of operation of a bank may hamper repatriation
of exports proceeds of letters of credit opened by such a bank.
Any other cause of loss occurring outside the exporter's country beyond the control of
importer or exporter.
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Informational risk:
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III.
Often credit information on the importer is not available or at best sketchy because buyers
and sellers live in different socio-economic & political environment. It is much harder
to judge the financial strength, reputation, integrity of a buyer who is thousands of miles
away and belongs to a different culture. Moreover, many importers may have good
reputation in their own environment based on local value system; they may - never the less
engage in some surprising business practices when judged by a different set of standard.
IV.
Pre-shipment export credit risk:
Pre-shipment export credit risk involves the following additional risks:

There may be diversion of fund because of low interest rate.
Uncertainties relating to non-availability of new materials may hamper processing of
exportable products.
The exporter may not be able to make shipment within the stipulated time due to power failure,
strike, natural calamites etc.
The materials under back-to-back letter of credit may not reach well in time to allow the
exporter to process goods within the expiry date of original export letter of credit.
---------------------------------------------------
4.1.2: IMPORT FINANCE:

All over the world there is no country, which can meet its requirements from its own
sources. Some imports raw materials, some finished goods & some food products or other
commodities. As it is in export & import are invariably conducted through commercial
banks. BASIC Bank Limited is engaged to extend the facilities to the importers.
After getting the completed registration, application for opening letter of credit is made through
a bank where applicant has a current account. An importer is required to fill up import
application form & letter of credit authorization form (LCAF) & importer has to deposit margin
money to the bank from 5% to 40% of the import value, depending on the credibility of the
importer. After the letter of credit is established the exporter after executing the export,
submits the negotiable document through its bankers and in terms of exporters bank submit the
documents to the corresponding bank of the importer's bank in the country. If the documents are
found correctly fulfilling all the terms & conditions stipulated in the letter of credit the
corresponding bank of import's bank will realize payment that will debited to the importer's
account. In banking term this is known as PAD and the importer has to pay the PAD amount in 30
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days with the bank interest rate. After 30 days when importer is unable to pay the PAD amount, he
can take documents but the PAD turns into Loan against Trust Receipts (LTR)
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4. 2.1.1: Import financing sectors of BASIC Bank Ltd:
BASIC Bank Limited is one of the financers of import business in our country. In extend
credit, grant and other facilities BASIC Bank Ltd finance to the following sectors:
Machinery & transport equipment.
Petroleum & petroleum products

Textile, yarn, fabrics, article & related products
Chemicals
Bicycle parts
Iron & steels
Cereal & cereal preparations
Dairy products & eggs
Other including loans & grants.
4.2.1.2: Import financing system of BASIC Bank Limited:
Registration of import
Income tax registration certificate
Partnership deed in the cases of partnership concern
Certificate of registration with the register of joint stock companies
Articles & Memorandum of association in the case of limited companies.
Nationality certificate & Bank certificate
Ownership documents in place of business
Trade license from the relevant authority.
Survey clearance from the relevant authority
Other documents prescribed in the import policy.
4.2.1.3: Import Registration Certificate (IRC):
In case of import, IRC is the first necessity for the importer. The IRC is not required
for import goods by government departments, Local authorities, statutory bodies,
recognized educational institutes, Hospitals. In addition, registration is not required for
import goods, which do not involved remittance of foreign exchange like -medicine,
reading materials etc. can be imported without IRC by the users within monetary limit.
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Procedure for obtaining IRC:

For IRC the interested person / firm's submit the application along with the following
documents directly to the Chief controller of Import & Export respective zonal office (CCI&E):
Income tax registration certificate.
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Nationality certificate.
Certificate from chamber of commerce & industry registered trade association.
Bank solvency certificate.
.
Copy of trade license.
Any other document if required by CCI&E.
On receiving application the respective CCI&E office will scrutinize the documents,
conduct physical verification, and issue demand note to the prospective importers to furnish
the following documents through their nominated bank:
Original copy of treasury deposited as IRC fees.
Assets certificate.
Affidavit from 1s'class magistrate.
Rent receipts.
Two passport size photograph.
Partnership deed in case of partnership firms.
Certificate of registration
Memorandum & Articles of association in case of limited company.
After securitization and verification the nominated bank will forward the same to the
respective CCI&E office with forwarding schedule in duplicate through banks
representative. CCI & E then issues import registration certificate to the applicant.
4.2.1.4: IMPORT PROCEDURE:

Imports & Exports (control) Act 1950 regulates the import & export trade of the
country. There are a number of formalities, which on 'importer has to fulfill before
import goods. The importer follows the following steps:
The buyer & the seller conclude a sales contract provided for payment by
documentary credit.
The buyer instructs his / her bank i.e. issuing bank to issue a credit in favor of the seller i.e.
beneficiary.
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The issuing bank asks another bank usually in the country of the seller, the advice or
confirms the credit.
The advising or confirming bank informs the seller that the credit has been issued.
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As soon as the seller receives the credit and is satisfied that he / she can meet its terms &
conditions, he/she are in a position to load the goods & dispatch them.
The seller then sends the documents evidencing the shipment to the bank where the
credit is available i.e. the nominated bank. This may be the issuing bank, or the
confirming bank, bank named in the credit as the paying, accepting or negotiating
bank.
The bank if other than the issuing bank, sends the documents to the issuing bank,
The issuing bank checks the documents and if they meet the credit requirement either
Affect payment in accordance with the terms of the credit either to the seller if
s/he has sent the documents directly to the issuing bank or to the bank that has
made funds available to him/her in anticipation. Or
Reimburses in the pre-agreed manner the confirming bank or any bank that has paid,
accepted or negotiated under the credit.
The bank checks the documents against the credit. If the documents meet the
requirements of the credit, the bank then pay, accept or negotiate accordingly to terms of
credit. In case of a credit available by negotiation, issuing bank or the confirming bank
will negotiate with recourse; another bank including the advising bank has not
confirmed the credit, which negotiates will with recourse.
When the documents have been checked by the issuing bank and found to meet the
credit requirements, they are released to the buyer upon payment of the amount due
or upon other terms agreed between importer & the issuing bank.
The buyer sends transport documents to the carrier who will then proceed to deliver
the goods.
4.2.1.5: IMPORT SCRUTINY:

The import bills consist of the following documents & the order of their scrutiny should be as
below:
Forwarding schedule of negotiating bank.
Bill of exchange.
Commercial Invoice (Before shipment).
Bill of lading
Insurance cover note
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Certificate of origin
Packing List
PSI Report (CRF- Clean Report of findings)
Pro-forma Invoice (After shipment)
Any other documents.
Lodgment:
a) Intimation should be given to the party in time.

b) Conversion of foreign currency in to Bangladesh Currency.
c) Entry in PAD (payment against document) register
d) Entry in Letter of Credit opening register by rounding the letter of credit number with
date.
e) Scrutinize the shipping documents meticulously.
f) Inform the importer to deposit balance amount of letter of credit and to release the
necessary documents.
g) Enter the shipping documents in inward foreign bills register.
4.2.1.6: Import Bills Retirement:

a) Banker will prepare & pass retirement vouchers.
b) Importer will deposit the claim amount.
c) Certifying Invoices.
d) Passing & prepare the vouchers.
e) Entry in the register.
f) Endorsement in the Bill of Exchange and Transport documents i.e. Bill of
Lading; T.R. etc.
g) Accounting treatment of voucher passing:
Party's A/C ..............................Dr.
Margin on import A/C. ................Dr.
PAD A/C.Cr.
Interest & other charges A/C.................Cr.
h) At the end of the total procedure, taking the retirement of import bills or clearing
certificate from the bank, the importer will clear the goods from the port through the
clearing & forwarding agent.
i) On the other hand, completing the above all steps the issuing bank will prepare "foreign
exchange transaction schedule" and send one copy to international division of Head
Office and another one copy to reconciliation.
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4.2.1.7: RISK OF IMPORT FINANCING:
In the trade - there are so many risk factors involved. In banking sector - the bank face risk
basically from loans & advances and foreign exchange. In this section I discuss the risk of
import financing.
In international trade transaction takes place between buyers and sellers living in different
socio-economic and political environments. There may be abrupt changes in socio-economic
or political situation in the buyer's country or in the seller's country. Even the exchange value
of currencies of the two countries had gone so much down that they were not acceptable
or exchangeable in international market. More over the importer or the exporter may not
be able to comply with the terms of credit for some reasons. Therefore, risk inherent in all
credits. The bank has to consider following risk in financing the import procedure:(A) Commercial risk:
I. Violation of the requirement of letter of credit authorization or letter of credit:
Shipment effected before authentication of the letter of credit authorization
from by the nominated bank and registration with the Bangladesh bank,
whenever necessary and before opening of letter of credit or after expiry of the
validity of the letter of credit authorization or letter of credit shall be treated as
import in contravention of this order. Letter of credit authorization obtained in
the basis of false or incorrect particulars or by adopting any fraudulent means
shall be treated as invalid and void.
II. Import against indent and Performa invoice: Letter of credit may be opened
against and indent issued by a local registered indenter or against a Performa invoice
issued by a foreign manufacturer or seller or supplier.
(b)Political risk:
In addition to the credit and commercial risk we have outlined, international transaction
such as import financing take on the whole new dimensions of political risk. They are as
follows:
Sudden outbreak of war, revolution, coups or civil disobedience in the seller's country.
Imposition of restriction on remittance.
Imposition of trade embargo or blockade.
New import restriction on the buyer or cancellation of the license.
Additional handing transport or issuance charges due to interruption or diversion of
voyage, which can't be recovered from the buyer.
(c)Informational risk:
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There may be informational risk inherent in import financing on the importer because of
shortage of required information. So it is much harder to judge the financial strength,
reputation and integrity of a seller or buyer who is thousands of miles away and belongs
to a different culture.
4.2.1.8: DOCUMENTS USED IN FOREIGN EXCHANGE:
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Letter of Credit (L/C):

It is the most important and commonly used in connection with foreign trade.
Letter of Credit is an undertaking by a banker of the importer to the exporter, to the effect that the
amount of the L/C will be duly paid. The banker on behalf of the importer issues the L/C in favor
of the exporter (beneficiary) and forwards the same to the exporter to the effect that the bill drawn
by him shall be duly accepted and paid. It creates confidence in the mind of the exporter so far as
payment of the bill is concerned. It is also facilitate the exporter to get the benefit of discounting the
bill before the date lf maturity.
Bill of Exchange:
A Bill of Exchange is an instrument in writing, containing an unconditional order, signed by
the maker, directing a certain person to pay on demand or on fixed or determinable future time
a certain sum of money only to or to the order of a certain person or to the bearer of the
instrument. From the definition - we get the features of bill of exchange. In generally there are
three parties like- Drawer: The person who prepare the bill; Drawee: The person who is
ordered for the payment in future specified time; Payee: The person who is the amount of
bill receiver as per the order of the drawer to the drawee.
Bill of Lading:
A bill of lading is a document that is usually stipulated in a credit when the goods are
dispatched by sea. It is evidence of a contract of carriage, is a receipt for the goods, and is
a document of title to the goods. It also constitutes a document that is, or may be, needed to
support an insurance claim. The detail on the bill of lading should include:
A description of the goods in general terms not inconsistent with that in the credit.
Identifying marks & numbers (if any).
The name of the carrying vessel.
Evidence that the goods have been loaded on broad.
The ports of shipment & discharge.
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The names of shipper, consignee and name & address of notifying party.
The number of original bills of lading issued.
The date of issuance.
A bill of lading specifically stating that goods are loaded for ultimate destination specifically
mentioned in the credit.
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Commercial invoice:
A commercial invoice is the accounting document by which the seller charges the goods to the
buyer. A commercial invoice normally including the following information:
Date
Name & address of buyer & seller.
Order or contract number, quantity & description of the goods, unit price and the total price.
Weight of the goods, number of packages and shipping marks & number.
Terms of delivery & payment.
Shipment details.
Certificate of origin of goods:

A certificate of origin is a signed statement providing evidence of the origin of the goods.
Inspection certificate:
This is usually issued by an independent inspection company located in the exporting country
certifying or describing the quality, specification or other aspects of the goods, as called
for in the contract and / or the letter of credit. The buyer who also indicates the type of
inspection usually nominates the inspection company he /she wish the company to undertake.
Insurance policy or Certificate:

The insurance certificate document must:
Be specified in the credit
Cover the risks specified in the credit.
Be consistent with the other documents in its identification of the voyage and
description of the goods.
Unless otherwise specified in the credit:
a) Be a document issued and / or signed by an insurance company or its agent, or by
underwriters.
b) Be dated on or before the date of shipment as evidenced by the shipping
documents or establish that cover is effective at the latest from such date of shipment.
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c) Be for an amount at least equal to the GIF value of the goods and in the
currency of the credit.
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Pro-forma invoice or indent:

Simply speaking, it is a Seller's quotation or agreement between seller & buyer. In this-the
seller declared the rate, quantity, quality, manufacturing & other information about goods and
that accepted by buyer.
.
Other Documents are: Packing list; Master's receipt.
1. DOCUMENTARY CREDIT:
In simple terms a documentary credit is conditional bank undertaking of payment.
Expressed more fully, it is written undertaking by a bank (Issuing Bank) given to the
seller (Beneficiary) at the request and in accordance with the instructions of the
buyer (applicant) to effect payment (i.e. by making a payment or by accepting or
negotiating bills of exchange) up to a stated sum of money, within a prescribed time
limit & against stipulated documents.
These stipulated documents are likely to include those required those required for
commercial invoice, certificate of origin, insurance policy or certificate and bill of
lading or combined transport document.
There are various types of documentary credits.
A revocable credit can be amended or cancelled at any time without prior warning or
notification to the seller.
An irrevocable credit can be amended or cancelled only with the agreement of all
parties. As there are often two banks involved the issuing bank & the advising bank,
the buyer can ask or an irrevocable credit to be confirmed by the advising bank. If
the advising bank agrees, the irrevocable credit becomes a confirmed irrevocable
credit.
There are four types of documentary credits according to payment methods:
1. Sight credit
2. Acceptance credit
3. Cash credit
4. Deferred payment credit
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2. DOCUMENTARY LETTER OF CREDIT:

The documentary Letter of Credit is an arrangement where by a bank (issuing bank)
acting at the request of a customer (applicant of the Letter of Credit):
a) To make payment to or to the order of other person (the beneficiary) or to pay accept
or negotiate Bill of Exchange (Drafts) drawn by the beneficiary.
b) Authorizes such payment to be made or such drafts to be paid, accepted or negotiated
by another bank against stipulated documents, provided the terms & conditions of
the Letter of Credit are complied with.
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Procedure of documentary credit:
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Seller
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Advising / Confirming Bank
Issuing Bank
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Details of the diagram:

a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
k)
The buyer & the seller conclude a sales contract providing for payment by
documentary credit.
The buyer instructs his / her bank i.e. issuing bank to issue a credit in favor of the seller
i.e. beneficiary.
The issuing bank asks another bank, usually in the country of the seller, to advice
or confirms the credit.
The advising or confirming bank informs the seller that the credit has been issued.
As earl as possible the seller receives the credit & is satisfied that he / she can meet its
terms and conditions, he / she is in a position to load the goods and dispatch them.
The seller then sends the documents evidencing the shipment to the bank where the
credit is available in bank. This may be the issuing bank, or the confirming bank, or any
bank named in the credit as the paying, accepting or negotiating bank, or it may be the
advising bank or any bank willing to negotiate under the credit.
The bank checks the documents against the credit. If the documents met the
requirements of the credit, the bank will pay, accept, or negotiate according to the terms of
the credit. In case of a credit available by negotiation, the issuing bank or the confirming
bank will negotiate without recourse. Any other bank including the advising bank if it
has not confirmed the credit, may negotiate, same for payment.
The bank if other than the issuing bank sends the documents to the issuing bank
The issuing bank checks the documents and if they meet the credit requirements,
either
Effects payment in according with the terms of the credit, either to the seller if
he / she have sent the documents directly to the issuing bank or to the bank
that has made funds available to him in anticipation. Or
Reimburses in the pre-agreed manner the confirming bank or any bank that has
paid, accepted or negotiated under the credit.
When the documents have been checked by the issuing bank and found to meet the
credit requirements, they are released to the buyer upon payment of the amount due, or
upon other terms agreed between him / her & the issuing bank.
The buyer sends the transport document to the carrier who will then proceed to deliver
the goods.
4.2.1.9: LETTER OF CREDIT (L/C):

Letter of Credit is an undertaking by a banker of the importer to the exporter, to the effect that the
amount of the L/C will be duly paid. The banker on behalf of the importer issues the L/C in favor of
the exporter (beneficiary) and forwards the same to the exporter to the effect that the bill drawn by
him shall be duly accepted and paid. It creates confidence in the mind of the exporter so far as
payment of the bill is concerned. It is also facilitate the exporter to get the benefit of discounting the
bill before the date lf maturity.
4.2.1.9.1: Parties of Letter of Credit transaction:

Issuing Bank: It is the buyer's bank. The bank that agrees to the request of the
applicant and issues its letter of credit in terms of the instructions of the applicant.
Advising Bank: It is the seller's or beneficiary's Bank. The bank usually situated
in the seller's or beneficiary's country (most of the time with which there exists
corresponding relationship with the buyer or issuing bank), request to advice the credit to
the beneficiary.
Confirming Bank: Sometimes issuing bank request advising bank or another bank to
add confirmation to the letter of credit. When that bank do this then such bank is
called confirming bank. So advising bank can be act as confirming bank.
Reimbursing Bank: This is the bank that is nominated by the issuing bank to pay (it is
also known as paying bank) or to accept drafts. It can be situated in another country.
In this connection it is to say that American Express Bank & HSBC act as reimbursing
bank in case of BASIC Bank Ltd. The account, which maintains BASIC Bank Ltd
with HSBC & American Express Bank, is called "Nostro Account" and in rivers the
account, which is maintained by HSBC & American Express Bank with BASIC Bank
Ltd, is called "Vostro Account"
Negotiating Bank: The bank, which makes payment to the exporter after scrutiny,
the documents submitted by the exporter with the original letter of credit then it is
called Negotiating Bank.
Nominated Bank: The bank that is nominated by the issuing bank to pay (nominated
bank is known as paying bank) or to accept drafts (nominated bank is known as
accepting bank) or to negotiate (nominated bank is known as negotiating bank). Usually
the advising bank is request & authorized to be the nominated bank unless the credit
allows negotiation by any bank.
Seller: Beneficiary of the letter of credit is seller.
4.2.1.9.2: Classification of Letter of Credit or Basic forms of

documentary letter of credit:
The letter of credit can be either revocable or irrevocable. It needs to be clearly indicated
whether the letter of credit Revocable or Irrevocable. When there is no indication then the
letter of credit will be deemed to be a revocable L.C. The details are as follows:
Revocable letter of credit: A revocable credit is one, which can be amended or
cancelled by the issuing bank. At any moment without "prior notice" to the beneficiary. So
this is clear that revocable credit can be revoked any time without prior notice.
Irrevocable letter of credit: An irrevocable credit is one, which cannot be cancelled
or amendment able any time without the consent of each party. Through this letter of
credit the issuing bank gives a definite, absolute and irrevocable undertaking to honor its
obligations, provided the beneficiary complies with all the terms & conditions of the credit.
Government letter of credit: That letter of credits, which are done by the Defense Ministry
and other Ministries of the government.
Master or mother letter of credit: The L.C. which come from out side the country to the
exporter from importer that is mother or master letter of credit.
Other classes of letter of credit:
Revolving letter of credit: When the L.C. is used again & again in same amount
for a specific period of time that is called revolving letter of credit.
Transferable letter of credit: Exporter can transfer his / her right of letter of
credit in full or partly to a third party. In generally, the exporter is not the
supplier but act as a middleman with in the supplier & importer.
Back-to-Back latter of credit: The letter of credit, which done by the security
of mother letter of credit.
Clean or open letter of credit: The letter of credit, which provides assurance of
payment bill of exchange without submission, of any export documents that is
called clean letter of credit.
Confirmed letter of credit: When the Irrevocable letter of credit issued by
issuing bank to the exporter as assurance of the L.C., then as per advice or
documents the authorized representative or representative bank's provide
assurance or payment guarantee that is confirmed letter of credit.
At sight letter of credit: That letter of credit which expires ninety days i.e. with in
this period the documents must be sending to the negotiating bank.
Deferred payment letter of credit: That letter of credit which expires one
hundred & eighty days i.e. with in this period the documents must be send to
the negotiating bank.
Contract letter of credit.
Refinance Letter of Credit.
Marginal Letter of Credit.
Traveler's Letter of Credit.
4.2.1.9.3: Classification of Letter of credit as per function:

A) L/C under cash
B) Back to back L/C
LETTER OF CREDIT IN CASH:
Introduction: After getting back the LCA (Letter of Credit Authorization) Form duly
registered by Bangladesh Bank, BASIC Bank Limited Foreign exchange Section Branch
as letter of credit opening bank can open letter of credit at the request & on the instruction
of the importer.
Justification for fitness of letter of credit opening:

Application from importer.
Bio-data of the applicant.
Current account opened by the applicant in the branch.
Supplier's acceptance & rate of goods.
Is it a banned item or not?
Contract on prescribed form of bank (stamp TK. 150).
Performa invoice from supplier.
Steps in letter of credit opening:
On receiving the documents or papers from the importer the letter of credit opening
bank is to perform the following functions in connection with opening the letter of credit:
A.
B.
C.
D.
E.
F.
G.
H.
I.
J.
K.
To scrutinize the documents thoroughly and to consult with import policy,

Bangladesh Bank & International Division's circular.
To prepare an "offering sheet". This offering sheet is nothing but a prescribed
office note on which the branch manager will sanction the margin to be obtained from the
importer.
Commission against opening of the L/C is determined on the basis of tenure
of the L/C i.e. for how long the bank is going to take the liability on behalf of the
importer
If the L/C transmitted through SWFIT/TELEX the related charges should be
picked up from the respective charges schedule.
Exchange rates for the respective currency should be picked up
automatically form the treasury module.
Margin is the amount and the percentage of the total L/c value that the
applicant has agreed to provide before opening of L/C as his equity participation.
The margin should be in local currency.
If there is any FCC on applicant account which should be deducted as per
charges schedule.
To make entry in "letter of credit opening register".
Accounting treatment to prepare vouchers in prescribed forms:
For creating contingent liability
Customers Liability A/c.Dr
Bankers Liability A/c..Cr
Margin Voucher
Clients A/CDr.
Commission on LC value ...Cr
VAT on L/C commission @15%...................................Cr.
F.C.C Charge...Cr
Recovery SWIFT (For L/C).Cr

Recovery SWIFT (For R/A)Cr
Stock of StampCr
Miscellaneous (For LCA)Cr
H. To dispatch the letter of credit as follows:
First & second copy - Advising Bank, which in turn forward
The original copy to the exporter
Third copy - Reimbursing Bank.
Fourth & Fifth copyImporter
Sixth copyC.C.I. & E.
Seventh to Ninth copyLetter of credit opening bank's copy.
Required documents for letter of credit opening:

Proposal letter (in proposal letter it must be mentioned that - price of goods, CCI & E
registration, pass book number, LCA form dully filled in signed & sealed, Import form full
set, insurance policy & addendum, P.I. number).
Application and agreement for irrevocable LC with adhesive stamp of TK.150.
Import license
HS. Code.
TIN.
VAT registration.
Indenting certificate.
Performa invoice - two copies (with in this it indicate - Performa bill no. & date,
item, particulars, quality, quantity, rate, and amount of goods, total invoice value (E &O.E.)
LCA (Letter of Credit Authorization) form for industrial consumer - four copies. (With
in this - IRC number, total amount)
Signature of Director of the firm and manager of BASIC Bank Ltd.
IMP form - Four copies (by this the declaration of the firm's directors)
Money receipts of insurance policy.
After preparing the procedure the bank provide offer in prescribed "offering sheet".
Approval certificate of Bangladesh Bank on behalf of the importer.
Particulars involved in offering sheet:

Name of the party, Sanctioned limit, Facility applied for letter of credit (amount &
previous outstanding).
Forward exchange
Foreign bills purchased.
Guarantees.
Trust receipts.
Clean packing credits.
Advance against imported goods.

Goods particulars
Import license
Margin already at credit.
Margin to be obtained.
Guaranteed by.
Balance of current account.
Average Balance of bank account.
Net worth of the firm.
Customs duty.
Country of export.
Other conditions.
Vouchers issued when the offer letter accepted by the bank:

Margin voucher.
Liability voucher.
Procedure for letter of credit opening:

After completion of the previous particulars, then the party take money and bank give
letter of credit to the party by checking the declared particulars of the party. Then one
copy sends to the Beneficiary / Negotiating bank. The beneficiary bank sends the
document to exporter. The exporter & Beneficiary bank for shipment the goods. Then
the beneficiary bank sends back to the letter of credit opening bank.
The LC opening bank scrutinizes the documents and sends to the importer. When the
importer accepts the documents then LC opening bank do lodgment (it is the payment
procedure in lodgment voucher).
Then the accounting treatment is:
PAD account ..................... .....Dr.
Exchange account ............... .....Cr.
BASIC Bank Ltd General A 1C... ... .....Cr.
Then the importer apply for endorsement as well as retirement. For retirement accounting
treatment in retirement voucher is:
Importer or party's account. ........... .Dr.
Marginal account... ................... ....Dr
PAD account...... ..................... ...Cr.
P&T charges account... .................. Cr.
Cost of stationary account... ........... ...Cr.
Interest account. .......................... .Cr.
Then the opening liability reversed by credit in liability voucher (FEF - 20 internal vouchers).
Then the documents endorsed by the LC opening bank and send to the importer. The party
goes for customs clearing. After clearing the importer submit the customs "Bill of
entry" certificate with in four months to the LC opening bank. The LC opening bank
matching the documents and report to the Bangladesh Bank within the month of retirement
of LC. Then the letter of credit is fully closed.
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4.3.1: FOREIGN REMITTANCE

Remittance is the sending of money etc. to a distance. Foreign remittance is the sums
of foreign currency to a distance from one place another place i.e. country to country.
The person who is the receiver of the remittance is remittee. The person who is the
sender of the remittance is remitter or remiitor. There are two types of foreign remittance,
which are as below:
Foreign inward remittance

Foreign outward remittance
4.3.1.1: Foreign Inward Remittances:
The remittance of freely convertible foreign currencies which BASIC Bank Ltd Foreign
Exchange Section is receiving from abroad against which the authorized dealers making
payment in local currency to the beneficiaries may be termed as foreign inward remittance.
4.3.1.1.1: Mode of inward remittances:

The term inward remittances includes not only remittances by TT., MT., Drafts etc. but
also purchases of bills, purchases of drafts under travelers letter of credit and purchases
of travelers cheques. Foreign currency notes against which payment is made to the
beneficiary also a part of inward remittances. Thus the following are the Mode of inward
remittances:
TT: Telegraphic Transfer.
MT.: Mail Transfer.
FD: Foreign Drafts.
TC: Travelers Cheque.
Foreign currency notes.
4.3.1.1.2: Purpose of inward remittance:

The purpose of remittance is of various reasons. Such as:
For family maintenance.
Realization of exports proceeds.
Gift.
Donation.
Export brokers commission.
4.3.1.1.3: About Form-C":

The authorized dealer should obtain 'Form - C' from the beneficiary to know the
purpose of the remittances in all cases and they are to submit the "Form - C' to
Bangladesh Bank along with the monthly returns where the proceeds of the
remittances is TK. 5000/= & above. 'Form - C' is a prescribed declaration form & this
'Form -C' is to be filled up and signed by the beneficiary himself.
4.3.1.1.4: Payment procedures of FD. MT. & PO. Drawn on BASIC Bank Ltd:
The above investments that are drawn on BASIC Bank Ltd Foreign Exchange Corporate
Branch may be paid on the spot before making payment the following procedures to be
observed by the authorized dealer:
To obtain Form-C.
To verify the signatures of the instrument.
To convert the foreign currency into Bangladesh TK. with O.D. (On Demand Transfer)
Buying rate prevailing on the date.
To make entry in TTs, drafts & Mails received register.
To prepare FET schedule and to send first five copies of FET along with vouchers to
international division, Head Office, Dhaka.
Payment procedure of T.T.:
To verify the 'test number'.

To inform the beneficiary for submission of "Form - C".
To confirm from issuing bank or reimbursing bank.
To covert of foreign currency into Bangladesh currency with T.T.
To make entry in T.T.s, drafts, M.T.s, received registration.
To prepare vouchers.
To prepare FET schedule.
Purchase of Drafts & Cheques:

Authorized dealer may purchase drafts & cheques which are not drawing on BASIC Bank
Ltd at the request of the beneficiary. Procedures of purchase are as below:
To obtain an application or undertaking from the beneficiary with 'Form C
To verify the signature of the drafts (if possible).
To make entry in the register for drafts & T.C. purchased.
To convert foreign currency into Bangladesh currency.
To prepare voucher.
To send the instrument for collection.
Collection procedure of drafts & cheques:
To make entry in foreign Bills Collection Register.

To prepare forwarding schedule in quadruplicate.
To prepare vouchers on realization of proceeds i.e. on receipt of advice
from the collecting bank.
Payment of traveler's cheque (TC):
To checkup the custom declaration (if any).

To consult with purchase agreement (if any).
To obtain signature on TC and to verify the same with the previous signature of the
beneficiary of the TC.
To make entry in register for TC & drafts purchased.
To send the TC for collection.
To prepare the vouchers.
Payment of foreign currency notes:
To check the custom declaration (if any).

To made entry in (kateha) raw register.
To prepare vouchers.
No FET schedule is required to be prepared & sent to head office because
in this case there is no transaction with head office.
4.3.1.1.5: Cancellation of inward remittance:

In the event of any inward remittance which has already been reported to the
Bangladesh Bank being subsequently cancelled, either in full or in part because of nonavailability of beneficiary. Authorized dealers must report the cancellation of the inward
remittance as an outward remittance of "Form-T/M". Required documents are:
The date of return in which the inward remittance was reported.
The name & address of the beneficiary.
The amount of the purchase as effected.
Reasons for cancellation.
Reporting to Bangladesh Bank:
On the last working day of each month the transaction during the month to be reported
to Bangladesh Bank through the following schedule:
Schedule -J-l / 0-3 for TK. 5000 & above.
Inward remittance voucher-1/04 for below TK. 5000.
4.3.1.2: FOREIGN OUTWARD REMITTANCES:

The remittance in foreign currency which is being made from our country to abroad is
known as foreign outward remittance.
4.3.1.2.1: Mode of outward remittance:

Thus the following are the Mode of outward remittances:
TT. Telegraphic Transfer.
MT: Mail Transfer.
FD: Foreign Drafts.
PO: Payment Order
TC: Travelers Cheque.
Foreign currency notes.
4.3.1.2.2: Approval of Bangladesh Bank:

Bangladesh Bank provides permission or approval for outward remittances to the applicants
who are to lodge an application for the purpose on the following prescribed forms with an
authorized dealer who forwarded the same to Bangladesh Bank for approval:
The IMP form (cover remittances for imports).
Form T/M (Traveling & Miscellaneous).
4.3.1.2.3: Issuance procedure of FD, MT. & TT.:
To prepare the instrument.

To make entry in DD, MT, TT issued register.
To prepare draft advice in duplicate one for drawee
bank & one for reimbursing bank.
To make entry in draft advice dispatched register.

To send reimbursement authority in case of MT & TT.
T o prepare FET schedule.
4.3.1.2.4: Issuance procedures of traveler cheque:
To verify the approved T / M form or Bangladesh Bank permit.

To issue TC by obtaining signature of the purchaser on the TC.
To endorse in the passport.
To make entry in the travelers cheque issue register.
The TC issuing slip of the issued TC to be sent to that bank (whose TC issued)
With reimbursement instruction.
4.3.1.2.5: Issuance procedure of foreign currency notes:

To verify the approved T.M form or Bangladesh Bank
permit.
To issue foreign currency notes by endorsing in the
passport.
Voucher preparing with accounting treatment:
Party's
account.......................................Dr.
Foreign Currency Notes
on Hand A/C Cr.
4.3.1.2.6: Facilities for wages Earners:
Bangladeshi national/Bangladesh origin dual citizen working abroad may open Foreign
Currency account (F.C. A/C) in US Dollar and Pound Sterling without initial deposit.
Nominee can operate the account

Interest is paid on F.C. A/C
Balance in F.C. A/C can be utilized for import of goods
Balance available in the F.C. account may wholly or partially be sent abroad.
Foreign currency brought in by Wage Earners can be deposited in the F.C. A/C
Wage earners Development Bond in Taka can be purchased from the balance of F.C. A/C
Non-Resident Foreign Currency A/C (NFCD A/C) can also be opened by Wage Earners.
F.C. A/C & NFCD A/C may be maintained as long as the account holder desires.
These accounts can be opened from abroad on submission of required papers duly attested by
our Embassy/ Branch/ Representative office abroad.
4.3.1.2.7: Monthly statement to Bangladesh Bank:

On the last working day of each month, the transactions of outward remittance during the month are
reported to Bangladesh Bank.
----------------------------------------
4.4.1: FOREIGN EXCHANGE BUSINESS POSITION:
Export & import business of BASIC Bank Limited:

BASIC Bank's expertise in International Banking has a record of in-house growth over
more than one decade. With limited network of branches at home and also a few
correspondent banks worldwide it is handling the export-import business including
homebound remittances.
The following graph shows year-wise export-import business of BASIC Bank Limited.
Though both export and import are increasing day-by-day, imports exceed exports
which ultimately drastically hit the countrys negative Balance of Trade.
Figure 10: Export & Import position
4.4.1.1: Performance of Foreign exchange business of BASIC Bank Limited

The following table shows year-wise performance of foreign exchange
operations consisting item-wised income generating avenues. All the figures
show positive growth which generally signals foreign exchange business as a
profitable business in Bangladesh. Within all the income avenues, income
from exchange gain shows highest figure in taka value. Growth rate here was
48.92%. Income from Letter of Credit and Letter of Guarantee were the
second and the third largest among the income avenues respectively.
Table 9: Income from foreign exchange business of BASIC Bank limited
Particulars
2004
2005
2006
Foreign bill Purchased
460,581
360,461
654,329
Local bill Purchased
3,833,860
4,485,557
8,646,784
Remittance
7,730,748
7,702,293
7,968,002
Letter of Guarantee
14,160,897
21,397,445
23,360,370
Letter of Credit
66,555,289
75,284,688
96,433,989
Bills for Collection
2,846,448
4,078,047
8,747,327
Acceptance
5,195,369
7,048,898
8,747,327
Export bill
442,527
538,912
599,694
Miscellaneous(includes
1,353,563
2,387,148
3,312,449
commission on sale of
PSP,TC
(A) Total
102,579,282
123,283,450
157,649,764
2007
628,965
9,041,451
8,280,081
39,869,621
106,869,561
10,792,897
10,792,897
570,415
6,491,052
191,235,959
(B) Exchange gain

(Profit on
exchange trading)
Total (A)+(B)
129,977,023
114,610,826
149,640,436
222,845,221
232,556,305
237,894,276
307,290,200
414,081,179
Revenues earnings from foreign exchange section are now graphically presented.
Figure 11: Income from Foreign bill purchased shown
Figure 12: Income from Local bill purchased shown
Figure 13: Income fromRemittance shown
Figure 14: Growth of income from remittance shown
Figure 15: Income from Letter of Guarantee
Figure16: Income from Letter of Credit
Figure 17: Income from Bills for collection
Figure 18: Income from acceptance
Figure 19: Income from Export bill shown
Figure 20: Income from Exchange gain (Profit on exchange trading)
Figure 22 shows the growth of income from exchange gain consisting profit on exchange
trading only. In 2005 growth was negative, but in 2006 & 2007, exchange gain shows
positive trend.
Figure 21: Growth of Income from Exchange gain
Chapter 5
Foreign Exchange management
5.1: Foreign Exchange risk management
Foreign exchange risk is defined as the potential change in earnings arising in market prices.
The market directly affects each countrys bond, equities, private property, manufacturing,
and all assets that are available to foreign investors. Foreign exchange rate also play a vital
role in determining who finances government deficits, which buys equities in companies and
literally affects and influences the economic scenario. Due to high risk market the role of
treasury operations is crucial. As per Bangladesh Banks guidelines the bank has segregated
the Front and back office of treasury operations. Front office independently conducts the
transactions and the Back office is responsible for verification of the deals and passing of
their entries in the books of accounts. All NOSTRO accounts are reconciled on monthly
basis and all foreign exchange transactions are revalued at market to market rate as
determined by Bangladesh Bank.
5.2: Foreign currencies translation:
Foreign currencies translations are converted into equivalent taka using the ruling exchange
rate on the date of transactions. Foreign currencies balances held in US dollar at the year
end are translated into taka currency at the weighted average rate of inter bank market as
determined by Bangladesh Bank. Balances held in foreign currencies other than US dollar
are converted into mid value of the selling and buying rate of the last transaction date of the
year of the bank.
Chapter 6
Findings of the study
6.1: The findings obtained from the study on overall banking sector are
follows:
At present, Bank rate is 5%.

At present, statutory liquidity ratio (SLR) is 18% and Cash reserve ratio (CRR) is
4.5%.
At the end of 2008, Bangladesh Bank (BB) instructed the commercial banks for
doubling their paid-up capital and reserves to BDT 4 billion from the existing BDT
2 billion by August 11, 2011.
At the end of 2008, Bangladesh Bank (BB) allowed the commercial banks to show a
maximum of 50% of the revaluation reserves of the government securities held by
them to meet their capital adequacy requirement.
At the end of 2008, Bangladesh Bank (BB) slashed interest rates on its housing
sector refinancing scheme to 9% from existing 10%. BB increased the amount of
monthly income of an applicant up to BDT 0.05 million from BDT 0.03 million to
qualify for loan of maximum BDT 2 million for housing purpose.
At the end of 2008, Bangladesh Bank (BB) set new definition for SMEs. In the
manufacturing sector and in the service and trading sector, total fixed asset
excluding land and building has been set at BDT 0.05 million BDT 15 million and
BDT 0.05 million BDT 5 million, respectively, for the small enterprises. In the
manufacturing sector and in the service and trading sector, total fixed asset
excluding land and building has been set at BDT 15 million BDT 200 million and
BDT 5 million BDT 100 million, respectively, for medium enterprise.
At the end of 2008, Bangladesh Bank (BB) raised the allocation for the re-financing
scheme aimed at facilitating development of Small and Medium Enterprises (SMEs)
to BDT 5 billion from BDT 3 billion.
At the end of 2008, Bangladesh Bank (BB) issued BDT 1000-denomination bank
note for the first time in the country from October 27, 2008.
At the end of 2008, Bangladesh Bank suspended issuing two monetary tools 28day T-bill and 91-day BB bill from July 1, 2008.
At the end of 2008, Government has approved tax exemption at the rate of 10% on a
part of the corporate income to be spent on discharging corporate social
responsibility (CSR).
BoP situation continues to maintain surplus in Q1

At the end of 2008, the country's overall balance of payments (BoP)
continued to maintain a surplus position during the first quarter (Q1) of the
current fiscal mainly due to higher surplus in current account balance.
"Despite deficit in the trade balance current account balance recorded a
larger surplus of USD 366 million during July-September, 2008 compared to
the surplus of USD 99 million in the same period of 2007 due mainly to
larger current transfers of USD 2.517 billion," BB said in its Major
Economic Indicators: Monthly Update - November, 2008. The overall
balance also showed a surplus of USD 64 million during the period
compared to the surplus of USD 203 million of the corresponding period of
the previous fiscal.
Local banks market share up, foreign banks down
The market share of private commercial banks (PCBs) increased by 3.7

percentage points while that of the foreign commercial banks (FCBs)
dropped by 3.6 percentage points in 2007, according to Bangladesh Banks
(BB) annual report2007-2008.The PCBs' share in terms of the total industry
assets rose to 51.4% in 2007 from 47.7% in 2006 while the FCBs held 8.2%
of the industry assets in 2007 against 11.8% in 2006.
Spread between bank lending, deposit rates falls marginally
The weighted average spread between lending and deposit rates in the
country's banking sector came down to 5.18% as on September 30, 2008
from 5.34% of June 2008, according to Bangladesh Bank (BB) statistics.
The weighted average rates on lending stood at 12.35% in September, while
the banks paid interests on deposit at 7.17%. BB will keep continuing its
persuasion until the spread come down to 5%.
6.2: The findings obtained from the study on of BASIC Bank Limited
(Overall) are follows:
As a state-owned scheduled bank, BASIC Bank Ltd. is playing an important role
toward the growth and economic development of Bangladesh.
BASIC Bank Limited is a blend of development and commercial banking functions.
Cash reserve ratio (CRR) and statutory liquidity ratio (SLR) with Bangladesh bank
have been maintained as per rule.
At the end of the year 2007, Banks capitalization stood at 10.78% for Tier-I and
12.91% for total capital against the total risk weighted assets exceeding the required
minimum level of 5% and 10% respectively. Thus the bank was able to maintain the
confidence of investors and depositors while providing a lucrative return to the
Government, the sole shareholder of the bank.
One of the prime features/objectives of BASIC Bank Limited is 50% of Loan able
funds shall be invested in Small and Cottage industries Sector. During the year 2007,
it has disbursed 60% loans to Small and medium industries (SMI) and 91% loans to
Small and Medium enterprise (SME).
Recovery rate of loans and advances is 97% which indicates sound performance of
the bank management.
Total assets of the bank increased by 31.81% to Taka 38,773.91 million from taka
29,417.09 million in 2006.
Loans and advances comprised the largest share in the asset portfolio of the bank
constituting 57.41%.
Deposit rose from Taka 31,947.98 million (82.40% of total liabilities) in 2007 to
Taka 24,084.65 million (81.87% of Total liabilities) in 2006 showing a growth rate
of 32.65 percent.
The total Loans and Advance of the Bank for the year 2007 was Tk. 22,263.35
against Tk. 19,000 million in 2006.
The loan to deposits liabilities stood 69.69% in 2007 as against 78.89% in 2006.
SMI/SSI loan and micro credit to total loan stood 56.73% in 2007 as against 53.43%
in 2006.
The Net Profit after tax and provision of the Bank for the year 2007 was Tk. 282.96
million as against Tk.554.14 million in 2006 which is Tk.271.18 million lower than
the previous year.
BASIC Bank Ltd. Training cell provides training facilities to its medium and junior
level officers of the bank and also provides executive development and internship
program.
Computers are being used in the Bank for day-to-day operation since its inception.
Local area network (LAN) has been installed in the head office and all the Branches.
A number of branches are also connected with each other, the head office and the
Data Center through Wide Area Network (WAN). Already several branches have
started online operation. The online system, which includes integrated core banking,
trade finance, treasury and internet banking solutions along with ATM, POST etc.,
SWIFT interfaces, will allow the bank offer its customers new products and better
services, paper-based works are still in existence.
In order to measure corporate performance, the bank presents Economic Value
Added (EVA) statement in its annual report every year which is an estimate of the
amount by which earnings exceed or fall short of the required minimum return for
shareholders or lenders at comparable risk. It is also the best measure of a firms
intrinsic value and the best tool of aligning management and owners interest. At the
end of year 2007, monetary value of EVA is Taka 132,615,352 as against Taka
280,931,657 in 2006 which is positive that adds value to the Bank.
BASIC Bank Limited provides value added statement in its annual reports which
indicates how the value is created and distributed among different stakeholders of the
bank.
There are mainly three types of audit conducted in the BASIC Bank Limited. They
are as follows
Internal Audit
Bangladesh Bank Audit
External Audit
In order to indicate best corporate governance practices, BASIC Bank provides
following information in its Annual reports (A questionnaire is given as annexureA) :
Analysis reveals that 82% of the total respondents have positive (Yes) answers
regarding the following issues:
Details about the Board members
Responsibility of the Board.
Authority and accountability of the board.
Activities of the Board.
Appointment and rotation of the Board members.
Share Holdings by the Board members.
Chairmans statement
Company prospect details
Executive Directors
Non-executive Directors
Audit Committee
Details about the Management Team
Shareholders right and Control
Relationship with the shareholder
Maintenance of Corporate affairs division
Voting Power of the Shareholder
Notice of AGM in due time
Agenda of the AGM
Appointment of Auditors
Internal Control System
Compliance with different Legal Requirements

Risk Perception
Detail Activities of the Company
CEO serves on no more than two additional Boards of other public Company.
The CEO and Chairman duties are separated or a lead director
Size of Board of Directors is at least six but not more than 15 members.
Composition Committee is comprised solely of independent outside
Directors.
Shareholders vote on Directors selected to fill vacancies.
Board Members are elected annually.
Shareholders approval is required to change Board size.
Shareholders have cumulative voting rights to elect Directors.
Policy exists requiring outside directors to serve on no more than five
additional boards.
Shareholders are allowed to call special meetings.
A majority vote is required to amend charter/by laws.
Performance of the Board is reviewed regularly.
A Board approved CEO succession plan is in place
Board has outside advisors.
Directors are required to submit their resignation upon a change in job status.
Outside Directors meet without the CEO and disclose the number of times
they meet.
Directors term limits exist.
Fairness of financial statements.
Maintenance of proper books of accounts.
Consistent application of accounting policies in preparation of financial
statements.
Observance of Bangladesh Accounting standards(BAS)
Soundness and efficiency of Internal control.
Ability to continue as a going concern.
Significant deviations in operating results from last years.
Presentation of key operating and financial data for at least last three years.
Constitution of audit committee
Audit committee consists of independent outside Directors.
Qualification of the chairman of Audit committee.
Corporate social Responsibility.
Dividend declaration.
Shareholders pattern.
Number of Boards meeting held during the years attendance by each
Director.
Numbers of member Audit Committee.
Appointment of independent Directors.
Any other Matters.
Credit rating
6.3: The findings obtained from the study on Foreign Exchange Business of
BASIC Bank Limited are follows:
There are three types of modes of foreign exchange market, which are: Export Finance,
Import Finance & Foreign Remittance. Foreign Exchange section of BASIC Bank Limited
Branch does import operations out of above-mentioned foreign exchange activities
vastly.
With limited network of branches at home, volume of export-import business
including homebound remittances is increased day-by-day.
The Banks financing of import business increased from taka 17,804 million
in 2006 to Taka 21,266.5 million in 2007 registering growth of 19.45
percent. On the other hand, banks export finance increased to Taka 16,795
million in 2007 compared to Taka 15,464 million in 2006- a growth of
8.61%.
During first half of FY08, exports, import payments and remittances receipts
increased by 4.43% to US$6,495.92 million, 15.90% to US$9,599.80
million and 26.24% toUS$4,827.31 million against US$6,220.61 million,
US$8,282.50 million, and US$3,824.04 million respectively during the
same period of the previous year. Total official foreign aid disbursement
increased by 3.6% to USD 1,625.0 million in FY07 from USD 1,568.0
million received in FY06.
Besides, SWIFT is being used in the AD Branches and the head office of the bank
for trade finance-related operations like documentary credit, documentary
collections, fund transfer, guarantee, etc. with optimum security.
Reuters services are being used at the head office for offering the best exchange
rates to its customers as well as for other treasury functions.
For Bangladesh Banks exchange control purpose, online L/C monitoring systems is
performed daily by inputting details of L/C information with the following
Applicant name & address
Beneficiarys name & address
Foreign currency amount
Date of issue of L/C
Date of expiry and place of L/C
H.S code (Harmonized system code)
Description of goods (Quantity, per unit price, total amount)
Letter of Credit Authorization form (LCAF) number and date
Origin of the goods
Name of the Pre Shipment Inspection (PSI) company
The liquidity & profitability condition of this branch is standard.
It is a leading bank of Bangladesh but it has limited marketing strategy in its

management policy. It is a leader in call money market in Bangladesh as well.
Most of the employees are loyal to the organization, so they are focused on the
customer satisfaction, where customers are the life of the banks.
Chapter 7
Recommendations
As an internee of BASIC Bank Ltd I have some recommendations. These are:

Banks should establish a review process to examine the changing circumstances of
borrowers to determine the position of loans. Attention devoted to these loans is more likely
to result in proper action to safeguarded the Banks position and to assist the borrower to take
appropriate steps in their business to bring back loan performing. Here some
recommendations are made to enrich the foreign exchange policy, credit policy and practices
of the bank:
1.
Customer Services should be enhanced:
Every banks prime objective is to satisfy its client. Increased customer services are
must for it. In Bangladesh all foreign banks and some private commercial banks are
now providing excellent services like: ATM, Credit card, phone banking, and super
saving facilities and other fast service facilities to its client. But in that area BASIC
has taken limited steps. As such they are loosing its valuable client to those which
are providing these services. So BASIC should improve its service portfolio and
should introduce more technology-oriented services to its customer.
2.
Marketing for selling the services should be encouraged:
Most of the employees of BASIC or the top management of it is not very much
interested for marketing for BASIC Bank. Door to door or business to client
relationship is not maintained in this respect. The reason behind this may be that, no
incentives are given for this job. So, special incentive schemes should be introduced
for mass marketing of services.
3. The Bank should develop an effective database needed for analyzing Foreign
Exchange Business.
4. More specifically, the Bank should develop sectors wise export-financing facilities.
5. Letter of Credit (L/C) opening system for the importer should be easier.
6. For customer's convenience, BASIC Bank Ltd. should provide more personnel to
deliver faster services to the customers.
7. Proper communication system and maintenance of files & machineries like phone,
computer, fax, and photocopier need to be ensured in all branches. Though some
branches have these kinds of facilities.
8. To ensure error free faster services, the bank should be fully computerized and
internet- based.
9. Research & Development activities should be taken into consideration.
10. Effective strategies must be undertaken against defaulters.
11. Office should be fully decorated to attract clients to take its services.
12. More employees are to recruit. For the better service, training is must and according
to the skill and education background of employee needs to be positioned.
13. The Bank should absolutely maintain on its own rules and procedures.
14. The Bank should introduce reward system for good borrowers as well as punishment
for bad borrowers.
15. The Bank should apply modernized Marketing Information System.
16. The Bank should act without any kind of political influence.
17. The time to reach Permanent Position from probation period takes almost two years,
which is a very long time process as I considered and it should be less than two year.
18. Some Officers of the bank are not self-motivated. They should be self-motivated by
training. BASIC Bank Limited has only 32 branches, which are not so satisfactory to
serve the country widely. It requires more branches throughout the country.
19. Some banking operations are still operated in manual basis rather than computer
system that take more time.
20. Computer should be used in all their activities.DD, TT takes more time to operate. It
should minimize time. On line banking may be encouraged.
21. Management should be careful about high liquidity ratio:
As per Bangladesh Bank inspection report it has been revealed that, most of the
branches are keeping more funds in their hand, which are affecting the profitability.
Also the conservative approach of the bank is affecting its profitability. As such the
bank now should involve more of its strength to find new investment area and let its
idle funds to be used.
22. We require some valuable information for the purpose of making Internship report
but these kinds of information is not available. We strongly suggest helping us in this
matter.
-----------------------------------------------
Chapter 8
Conclusion
From the practical implementation of customer dealing procedure during the whole period
of my practical orientation in BASIC Bank Limited I have reached a firm and concrete
conclusion in a very confident way. I believe that my realization will be in harmony with
most of the banking thinkers. It is quite evident that to build up an effective and efficient
banking system to the highest desire level computerized transaction is necessary condition
but not the sufficient condition. For proper functioning of the banking systems, corporate
governance is desired at highest level.
Reviewing the report and from the experience of the two months with the bank under
internship program, I can say that BASIC Bank Limited is a potential and promising bank
in the banking sector in Bangladesh. As desired,
its functions and activities in the
economy are being aligned with the objectives set by the Government of Bangladesh since
its inception.
After getting Authorized Dealers license from the authority of Government of Bangladesh,
BASIC Bank Limited finds foreign exchange business as a profitable and challenging
business. Though, income from loans and advance shows the highest amount/percentage of
total income, some loans and advances are indirectly created from foreign exchange
section, such as PAD, LTR, LIM, Local Documentary Bills Purchased (LDBP), Foreign
Documentary bills Purchased (FDBP) which shows high level of income generating
avenues from BASIC Bank Limited.
The effective and efficient Foreign Exchange Business of the Bank helps in the continuous
growth and progress of national economy.
Through the foreign exchange operations and all other banking activities, BASIC Bank
Limited is, no doubt, playing a vital role not only in the micro economic sector but also in
macro economic sector of Bangladesh. We hope, the successful walkway of BASIC Bank
Limited will remain continuous for a long time and become an example in the banking
sector in our country.
-----------------------------------------------------
REFERENCES
Ali Syed Ashraf,Foreign Exchange & Risk Management, First Mowla Brothers
Edition, May 2005,Mowla Brothers,Dhaka.
A Dictionary of Business (2003), 3nd edition, Oxford University Press.
Annual Report of BASIC Bank Limited(Published-2007)

Hossain ,Dewan Mahboob & Khan ,Arifur Rahman (2006), Disclosure on

Corporate Governance Issues in Bangladesh: A survey of the Annual
Reports The Bangladesh Accountant,January-March,2006,pp 95-99
Guidelines for foreign exchange transaction of Bangladesh Bank (Volume 1 & 2).
Monthly Statement of BASIC Bank Limited, December, 2008
Various Official Records of BASIC Bank Limited.
The Daily Prothom Alo-January 14, 2009.
Monthly Business review published by IDLC finance Ltd. Vol. 4 Issue 12,
December 2008.
Foreign Exchange and Financing of Foreign trade

Import Policy2006-2009
Export Policy2006-2009
Export-Import (Control) Act1950
http://www.basicbankbd.com
http://www.bangladeshbank.com
http://www.idlc.com
Consultation with the Following Persons

o Md. Ghulam Sayeed Khan (Manager)
o Md. Saifullah (Manager)
o A.K.M. Shamsuddin (Assistant Manager)
o A.B.M. Nazmus Sayadat Mondol (Officer)
o Md. Mahedi Hasan
Annexure-A
Questionnaire
A questionnaire was given to the high officials of BASIC Bank Limited with an
objective how well the company follows corporate governance as a system

mechanism.
Table 7: Issues considered developing corporate governance disclosure index
Particulars
Answers
Yes
Details about the Board members.

Responsibility of the Board.
Authority and accountability of the board.
No
Activities of the Board.

Appointment and rotation of the Board
members.
Share Holdings by the Board members.
Chairmans statement
Company prospect details
Executive Directors
Non-executive Directors
Audit Committee
Remuneration Committee
Any other Committee for proper functioning of
the Board
Details about the Management Team
Shareholders right and Control
Relationship with the shareholder
Maintenance of Corporate affairs division
Voting Power of the Shareholder
Notice of AGM in due time
Agenda of the AGM
Appointment of Auditors
Internal Control System
Compliance with different Legal Requirements
Risk Perception
Detail Activities of the Company
Audit committee consists solely of independent
outside Directors
Consulting fees paid to auditors are less than
audit fees paid to auditors
CEO serves on no more than two additional
Boards of other public Company.
The CEO and Chairman duties are separated or a
lead director
All directors attended at least 75% of board
meetings or had a valid excuse
Size of Board of Directors is at least six but not
more than 15 members.
Board is controlled by more than 50%
independent outside Directors
Composition Committee is comprised solely of
independent outside Directors.
Shareholders vote on Directors selected to fill

vacancies.
Board Members are elected annually.
Shareholders approval is required to change
Board size.
Governance committee meets at least once
during the year.
Shareholders have cumulative voting rights to
elect Directors.
Board guidelines are in each proxy statement
Policy exists requiring outside directors to serve
on no more than five additional boards.
Shareholders are allowed to call special
meetings.
A majority vote is required to amend charter/by
laws.
Executives are subject to stock ownership
guidelines.
Mandatory requirement age for directors exist.
Performance of the Board is reviewed regularly.
A Board approved CEO succession plan is in
place.
Board has outside advisors.
Directors are required to submit their
resignation upon a change in job status.
Outside Directors meet without the CEO and
disclose the number of times they meet.
Directors term limits exist.
Fairness of financial statements.
Maintenance of proper books of accounts.
Consistent application of Accounting policies in
preparation of financial statements.
Observance of Bangladesh Accounting
standards(BAS)
Soundness and efficiency of Internal control.
Ability to continue as a going concern.
Significant deviations in operating results from
last years.
Presentation of key operating and financial data
for at least last three years.
Constitution of audit committee

Audit committee consists of independent
outside Directors.
Qualification of the chairman of Audit
committee.
Corporate social Responsibility.
Dividend declaration.
Shareholders pattern.
Number of Boards meeting held during the
years attendance by each Director.
Numbers of member Audit Committee.
Appointment of independent Directors.
Any other Matters.
Annexure-B
The commodities which required mandatory PSI are set by the circulars issued by the
customs. There are at present four zones to conduct the PSI over the world for
Bangladesh. These are following.
Table 9:
SL no.
(1)
Name of PSI Agency

(2)
Block
(3)
01
02
03
04
SGS Societe Generale Surveillance

S.A
Switzerland.
Bureau Veritas (BIVAC)
International S.A, France
OMIC Overseas Merchandise
Inspection Co. Ltd, Japan
Intertek International Limited, UK
A and C
B
D
E
Block-wise name of the countries:

Block A: India
Block B: China, Thailand, Korea (N & S), Philippines, Cambodia.
Block C: Pakistan, Nepal, Bhutan, Sri Lanka, Maldives, Myanmar, Afghanistan, Indonesia,
Malaysia, Singapore, Iraq, Iran, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia,
Syria, U.A.E., Egypt, Ethiopia, Nigeria, Kenya, Ghana, Bahrain, Uzbekistan, Azerbaijan,
Tajikistan, Tunisia, Morocco, Sudan, Algeria, Libya, Yemen, Turkmenistan, Brunei,
Tanzania, Albania.
Block D: Japan, Hong Kong, Vietnam, Taiwan, Australia, New Zealand, Solomon Islands,
Fiji, Kiribati, Vanuatu, Papua N. G.
Block E: Canada, U.S.A., South Africa, Seychelles, Zimbabwe, Norway, Turkey, UK, Italy,
Netherlands, Belgium, Switzerland, Germany, Denmark, Spain, France, Ireland, Sweden,
Other European Countries, Czech Republic, Estonia, Lithuania, Latvia, Poland, Romania,
Russia, Slovenia, Ukraine, Argentina, Brazil, Chile, Mexico, Peru, Uruguay, Venezuela, and
countries, rest of the world which is/are not included in the other Blocks.
Annexure-C
Documents are submitted to the customs by importer/ C& F agents

(Attached in the next page):
Bill of exchange
Commercial invoice
PSI Report (CFR- Clean Report of findings)
Packing List
Certificate of origin
Bill of lading
Pro-forma invoice
Insurance cover note
LCAF (For custom purpose copy)

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Foreign exchange operations Of BASIC Bank Limited

1.1: Authorization of the study:

Foreign exchange operations Of BASIC Bank Limited

To apply theoretical knowledge in the practical field.

To help the students in taking up professional courses in the MBA program.

To describe the organizational structure, management, background, functions

To achieve overall understanding of BASIC Bank Limited.

To examine the profitability and productivity of the bank.

To acquire knowledge about the every day banking operation of BASIC

To understand the real management situation and try to recommend for

1.3: Schedule of internship:

1.4: Coverage of the study:

1.5: Methodology of the study:

Foreign exchange operations Of BASIC Bank Limited

5.0.1.1 Primary Sources

Personal Interview Face-to-face conversation and in depth interview

5.3.1.2 Secondary Sources

Annual report (2005, 2006& 2007) of BASIC Bank Ltd.

Periodicals Published by Bangladesh Bank.

Different publications regarding Banking functions and foreign exchange

Internet will also be used as a theoretical source of information.

Use of different theories to make the report more relevant.

Printed Materials: This study is mostly dependent on the printed

Newspapers: We have collected some information from the various

1.5.2: Data analysis and Interpretation:

Foreign exchange operations Of BASIC Bank Limited

1.6: Limitations of the study:

Foreign exchange operations Of BASIC Bank Limited

Total reserve & surplus

Foreign exchange operations Of BASIC Bank Limited

At a Glance of BASIC Bank Limited

Mr.Dewan Zakir Hussain

2.3 Corporate Strategy

Foreign exchange operations Of BASIC Bank Limited

2.4 Organizational Goal

2.5 Lending Criteria

Foreign exchange operations Of BASIC Bank Limited

2.6 Organizational Structure

Foreign exchange operations Of BASIC Bank Limited

NAME OF BOARD OF DIRECTORS

BASIC Bank Limited

BASIC Bank Limited

BASIC Bank Limited

Foreign exchange operations Of BASIC Bank Limited

(Audit & Inspection)

Deputy General Manager

Foreign exchange operations Of BASIC Bank Limited

2.7.1 Physical and Technological Resources

Fully computerized accounts maintenance.

2.7.2 Human Resources

Foreign exchange operations Of BASIC Bank Limited

Table 4: Employee progress of BASIC Bank Limited

Figure 1: Employee position of BASIC Bank limited

Foreign exchange operations Of BASIC Bank Limited

2.7.3 Financial Resources

Others (Margin A/c, Retention quota A/c etc.)

Foreign exchange operations Of BASIC Bank Limited

Figure 2: Deposits mix of BASIC Bank Limited in 2007

2.7.3.2 Utilization of Funds