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PREPARED BY MD FAZLUL KARIM ID NO 136-41-52

Thesis

On

Performance of Foreign Trade Operation ofPrime Bank L td.-A study

For the parti al fulf il lment of the degree of MBA, in Southern Uni versity Bangladesh

Prepared For:

Dr .Shir ajul I slam

Associate Professor

Department of Business Admini stration

Prepared By:

MD.FAZLUL KARIM

ID No: 136-41-52

Semester:Fall-2014

Program: MBA

Major: Marketing

Date of Submission:

Southern University Bangladesh



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Letter of Submission

Date:

To

The Dean

Faculty of Business Administration


Sub: Submission of Thesis Report

Dear Sir,

With due respect & humble submission, I would like to submit herewith my thesis report

“Performance of foreign trade operation of Prime Bank Limited- A study” which has completed

under the prudent guidance of Associate Prof. Ishrat Jahan. I have carefully studied both the

theoretical & practical aspect of the topic Foreign Exchange Operation. I have tried my level best

to know about the Organization by observing its activities. This thesis report which I would like

to submit to you for your evaluation is an outcome of my own observation and contribution. I

believe and hope that you will find this study very interesting, informative and insightful.

I would therefore, like to request you to take steps for the evaluation of my thesis report and

oblige thereby.

Sincerely,

………………………………………

Md.Fazlul Karim

ID NO: 136-41-52

Program: MBA

Major: Marketing





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Student’s Declaration

This thesis report entitled “Performance of foreign trade operation of Prime Bank Limited- A

study” has been prepared by me. It is my original work performed through primary and

secondary data collected from Prime Bank Limited. This thesis report has been submitted to the

Southern University Bangladesh, as the partial fulfillment of the MBA program, with major in

Finance I would further like to declare that the thesis report has not been submitted to any other

university or institution to get any Degree or Diploma, also not submitted for publication or

fulfillment of any other purpose.

……………………………………………………………….

Md.Fazlul Karim

ID NO: 136-41-52

Program: MBA

Major: Finance





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Supervisor’s Approval

This thesis report entitled “Performance of foreign trade operation of Prime Bank Limited- A

study” is submitted for the partial fulfillment of the requirements for the degree of MBA from

the Southern University Bangladesh by Name Abul Kalam Azad Chowdhury ID No: 136-39-39

has been completed under my supervision and guidance. It is an original piece of work on the

basis of field investigation and also has made contributions to the existing store of knowledge. I

have gone through the report very carefully. In preparing this report, he has spared much time

and efforts. His thirst over seeking depth of every aspect is very much satisfactory. I suppose, the

thesis report may be considered for the award of MBA Degree.

………………………………………………………

Md.Shirajul Islam

Associate Professor

Business Administration




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Preface

Thesis Program is a most efficacious program on the part of every student of MBA because hegets practical experienced of the complexities and problems of the utilitarian life. Down-to-earth

knowledge as no alternative specially for a student of MBA. All the MBA students of the

Southern University must have to submit and thesis report for the partial fulfillment of their

MBA final examination. So, I have tried all through my thesis program in PBL Chittagong to

acquainted myself with the convoluted business world through an exchange of my theoretical

glimpses of the key points where found necessary and have tried to knit a relationship with my

observations , function with these theoretical glimpses. Each of the section in this report is

separate and definite as they are also related in the sense, that inferences have been drawn from

each of them act time and grossed up in my concluding remarks. I think, as I have tried to shape

this report in such away, so that it could practically benefit the bank and other interested

researcher as well as the serious students.

I may believe that this subject matter will prepare me with more practical about my future

profession. If my afford on this report can satisfied the demand of the reader at that moment will

be successful.



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Acknowledgements

First of all I would like to express my gratitude to almighty Allah for Keep me mentally and

physically sound to prepare this report. I would also like to express my heartiest gratitude &

thanks to those people, because without their dedication and contribution this project would

not have been possible and would not get the successful compellation.

I would like to give heartiest thanks to my supervisor Associate Professor Shirajul Islam. I am

grateful for his guidance, supervision and inspiration for the completion of that report.

I sincerely express my deepest gratitude to PBL administration and all the officials of PBL for

their relentless help and caring attitude.



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Executive Summary

Thesis report is a partial fulfillment requirement of one year MBA program by which a student

can gather theoretical knowledge. To fulfill the requirement of thesis, time is not sufficient to

prepare report on the overall performance of the banking sector, so I prepare report on

“Performance of Foreign Trade Operation of Prime Bank Ltd” That is one of the vital areas

of foreign exchange business in the bank.

The main objective of the study is to “Performance of Foreign Trade Operation of Prime Bank

Ltd”. To discuss the rules & regulations, Foreign exchange mechanisms are also in the way of

attaining the main goal. In this study primary data as well as secondary data has used. Primary

data collected by personal interview and observation. The secondary data collected by bank

annual report & web site, different training materials, articles etc.

This report has contained comprising with introductory chapter, organizational overview, and

foreign exchange business and performance evaluation. Organizational overview part includes

different information related with introduction Prime Bank, management, mission, vision,

product & services, rendered by the company for the customer,

Balance of the last two year. The foreign exchange business discusses the rules and regulations,

activities of import and export procedure, remittance, Foreign exchange operation mechanism.

The performance Analysis has presented regarding foreign exchange business which exists

import and export performance, remittance, LC opening, monetary value, major importing &

exporting country, imported items, exported items etc.



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Sl. No: Table of Contents Page No:

Title Page i

Letter of Submission ii

Student’s Declaration iii

Supervisor’s Approval iv

Preface v

Acknowledgements vi

Executive Summary vii

CHAPTER-01 INTRODUCTION

1.1 Prelude 15

1.2 Statement of the problem 15-16

1.3 Objectives of the study 16

1.4 Scope of the study 17

1.5 Methodology of the study 17

1.6 Limitations of the study 18

CHAPTER -02 : PRIME BANK LTD. – A

SNAPSHOT

2.1 Introduction 20

2.2 Company Vision 21

2.3 Company Mission 21

2.4 Core Values 21



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2.5 Expansion in the Global Arena 22

2.6 Organizational Structure 22-25

2.7 Classification of bank product 26

2.7.1 Products and Services of Prime Bank Ltd. 27-28

2.8 Islamic Mode of Operation 29

2.8.1 Shariah Council 30

2.9 Prime Line 31

2.9.1 Online Branch Banking 31

2.9.2 SWIFT 31

2.9.3 One Stop Utility Services Scheme 31-32

2.9.4 ATM Services 32

CHAPTER -3

FOREIGN EXCHANGE POLICIES, PROCEDURES &

ACTIVITIES OF PBL

3.1 Introduction 34-36

3.2 Operational Processes in Prime Bank’s Foreign

Exchange Department

37-38

3.3 Concept of Letter of Credit 38-39

3.4 Types of Letter of Credit 39-40

3.5 Some Special Letter of Credit 40-42

3.6 Parties Involved in L/C 43-44

3.7 Import Procedure through Letter Of Credit

Operation of Prime Bank Ltd.

44-45



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3.7.1 Legislation of Import Policy 46

3.7.2 General Conditions of Import of Goods 46-49

3.7.3 Instructions issued by Bangladesh Bank for Opening

and operation of L/C for import of goods

50-51

3.7.4 Documents Required for Opening of L/C 51-52

3.7.5 Margin and Other Charges 52

3.7.6 Issuing the Letter of Credit 53-54

3.7.7 Different Means of Payment 54-55

3.7.8 Transmission of Letter Credit Payment 55

3.7.9 Receipt of Documents 56

3.7.10 Scrutiny of Documents 56-57

3.7.11 Lodgment 57-58

3.7.12 Retirement of the Documents 59

3.7.13 Delivery of Shipping Documents 59

3.7.14 Payment of the Foreign Bank Import of Goods 60-61

3.8 Export Procedure Through L/C Operation of Prime

Bank Ltd.

62-63

3.8.1 Documents Required for Export Transaction 64

3.8.2 Registration of Exporters 64-65

3.8.3 Securing the Export Order 65

3.8.4 Signing the Contract & Receiving Letter of Credit 65-66

3.8.5 Export Financing 66-67



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3.8.6 Popular form of Pre Shipment Credit 67

3.8.6.1 Packing Credit 67

3.8.6.2 Charge Documents for P.C 68

3.8.6.3 Additional Documents for P.C. 68

3.8.6.4 Back to back Letter of Credit 68-69

3.8.6.5 Entitlement of BTB LC as per Import Policy Order

2010-2013

69-71

3.8.7 Certification of Exp Form by Authorized Dealer 71-72

3.8.8 Making our and Delivery of Shipping Documents 72

3.8.8.1 Submitting of Documents to the AD 73

3.8.8.2 Scouting of Documents 73-74

3.8.8.3 Deduction of Charges 74

3.8.9 Foreign Currency Exchange Retention Quota

(FCERQ)

74-75

3.8.10 Shipment on F.O.B. Terms 75

3.8.11 Short Shipment or over Shipments 75-76

3.8.12 Lodgment of EDBP 76

3.8.13 Verification of Proceed Realization Certificate 76-77

3.8.14 Export Portfolio of Prime Bank Ltd 77

3.9 Foreign Remittance Section of Prime Bank Ltd 78

3.9.1 Modes of Foreign Remittances 78-79

3.9.2 Scenario of Foreign Remittance of Prime Bank Ltd. 79-80



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3.9.2.1 Some Measures of Improving this Department

Performance

80

3.10 Activities of Foreign Exchange Department 80-81

CHAPTER -04

FOREIGN EXCHANGE PERFORMANCE OF PBL

4.1 Performance Evaluation Techniques of Export,

Import & Profitability ratio

83

4.1.1 Performance in Exports 83-84

4.1.2 Performance in Imports 84-85

4.1.3 Foreign Remittance 85-86

4.1.4 Net Profit after Tax 86-87

4.1.5 Number of Foreign Correspondents 87-88

4.1.6 Number of Branches 88-89

4.2 Performance in Profit & Loss 89-90

4.3 Performance in Authorized Capital & Paid-up

capital

90-91

4.4 Profitability ratios 91

4.4.1 Return on Assets 91-92

4.4.2 Return on Equity 92-93

4.4.3 Net Interest Margin 93-94

4.4.4 Net operating Margin 94-95

4.4.5 Earnings Per Share 95-96

4.5 Impact of Profitability ratios on Foreign Trade 97-98



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CHAPTER -05

Problem’s

5.1 Problems associated with Foreign Exchange

Operation at Prime Bank Ltd.

100-102

CHAPTER-6

Findings, Policy Implication & Conclusions

6.1 Summary of the study 104

6.2 Policy Implication 105-106

6.3 Conclusions 107

Appendix & Abbreviation

Appendix 109-112

Abbreviation 113-114



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CHAPTER-01

INTRODUCTION



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1.1 Prelude

Bangladesh is a developing country. The common scene of Bangladesh now is that its economic

condition is improving and it is taken forward by the Banks of Bangladesh. Commercial banking

industry is one of the most important financial intermediaries which are playing a great role to

generate savings and it makes sure the proper investment of this savings in different sectors of

our economy.

Commercial banks are cooperating different types of business in various ways which is ensuring

prosperity of business which ultimately means prosperity of the economy as a whole. By now, it

has been proved that literally bank is the heart of all commercial activities in Bangladesh and one

of the most flourishing sectors of our country. And, Foreign Exchange Business can help

expansion of our economy. That‟s why the banks are now giving the maximum importance in

financing Export, Import, and Remittance business enormously. Foreign trade can usually be

justified on the principle of comparative advantage. Accounting to this economic principle, it is

economical profitable for a company to specialize in the production of that commodity in which

the producer country has the greater comparative advantage and to allow the other country to

produce that commodity in which it has the lesser comparative advantage. It includes the

spectrum of goods, services, investment, technology transfer etc.

This report concentrates on the overall Performance of the Foreign Exchange & Foreign Trade inPrime Bank Limited.

From the very beginning of taking birth, this is playing an outstanding role for the betterment of

the Import & Export market in this country.

1.2 Statement of the Problem

A comprehensive learning comprises theoretical as well as practical knowledge. Getting degrees

without actual knowledge is useless in this world. So this thesis provides leadership through

skilled employment, entrepreneurship and applied research. This program is an opportunity for

the students to learn to face the real world and thus keeping its promise to produce world class

post-graduates. PBL is a place where researcher could learn the foreign trade dealings. This

organization has created a positive image to the customers mind by providing better service. This



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bank has introduced some modern banking scheme that has got high market demand. As it

maintain the pace with the competitive business world, its activities, culture, philosophy and

style leads a researcher to be the best at any field of working life. To write a report it is necessary

to select a topic. A well-define topic reflects what is going on to be discussed throughout the

report. The topic has been assigned by supervisor is “Performance of foreign trade operation of

Prime Bank Limited- A study”. The thesis has discussed how the bank can improve the

performance of foreign trade operation as well as reduces the L/C defaulting. PBL is one of the

well-known Banks in Bangladesh. This bank has already 117 branches located in different places

and also going to establish more branches. Foreign exchange division is the heart of the banking

system as it is in PBL. It is very much related with the corporate banking. Foreign exchange

division is responsible for allowing all the L/C facilities given to the potential customer/Buyer.

This bank has got many export import facilities for the customer. The PBL wants to know the

performance of foreign trade operation and to reduce the defaulting rate so that they can improve

their service.

1.3 Objective of the Study

The Principal objective of the Study is Performance of foreign trade operation of Prime

Bank Limited. To accomplish this principal objective following objectives have beencovered.

To highlight the evolution of foreign trade operation of Prime Bank Limited.

To examine the policies, procedures & activities of foreign trade operation of

Prime Bank Limited.

To evaluate the performance of foreign trade operation of Prime Bank

Limited.

To identify the problems associated with foreign trade operation of Prime

Bank Limited.

To suggest some important policy measures for improving the foreign trade

operation of Prime Bank Limited.



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1.4 Scope of the Study

This study covers the details of Prime Bank‟s practices about foreign exchange activities

emphasizing “Activities regarding Import and Export Procedure under Letter of Credit at

Prime Bank Ltd”. This study also emphasizes on the sequential activities involved and used by

Prime Bank Ltd for foreign exchange transaction. The study also focuses on the impact of the

foreign exchange activities upon the client (2009-2013).

1.5 Methodology of the Study

The information has been collected from the most credible sources. Researcher has categorized it

into two sections. The first one is Primary Source and the other is Secondary Source.

Quantitative and Qualitative judgments are also applied in this report which has made the study

more meaningful and presentable.

1.5.1 Collection of Data

A) Primary Sources

Major sources of information were done through the discussion with the officers of

Foreign Exchange Dept.

B) Secondary Sour ces

“Annual Reports” of Prime Bank Limited.

Foreign Exchange Guidelines

Periodicals Published by Bangladesh Bank.

Various books. Articles, regarding Foreign Exchange operations.

Articles written on Banking

Websites on Banking and international trade.

Bank Website.

Relevant documents related to the study provided by the officials.



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1.6 Limitation of the Study

Every study has its distinct limitations. Preparing this report I have also faced some certain

limitations which are summarized below:

The main hindrance behind preparing this study was time. The span of the Thesis

program is only three months. But I have got only two months due to some unavoidable

circumstances. Since Foreign Exchange is a vast area, it is not possible to cover or go

through within this short span of time.

There is also insufficiency of current information, relevant to the study.

Consolidated data related to the study were not available for the current year. So the most

of the information is used from the previous years.

Inaccurate or Contradictory information created huge confusion during preparation of this

study.

Bank secrecy posed a major problem since disclosure of some information has been

restricted.

Relevant documents were not available as it is a technical issue.



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CHAPTER -02

PRIME BANK LTD. – A

SNAPSHOT



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2.1 Introduction

Prime Bank Ltd is one of the leading private sector commercial bank in Bangladesh. It is a

scheduled commercial bank in the private sector established under the Banking Company Act

1991 and incorporated in Bangladesh as a public limited company under the Companies Act

1994 to carry out banking business in Bangladesh. It has been launched by a group of successful

entrepreneurs with recognized standing in the society. The paid up capital of the Bank is 1116

million. The management of the Bank consists of a team led by senior bankers with decades of

experience in national and international markets. The senior management team is ably supported

by a group of professionals many of whom have exposure in the international market.

Within a short span of time Prime Bank ltd. has established itself as one of the fast growing local

private banks. It has at present a network of Twenty three branches serving many of the leading

corporate houses and is gradually moving towards retail banking. Another significant delivery

channel is its own as well as shared ATM Network. Prime bank has a network of 151 ATMs out

of which 70 it owns. The other 81 ATMs are shared through ETN with eleven other banks. Since

its humble beginning in 1999, it set milestone by acquiring the business operations of the Bank

of Nova Scotia in Dhaka, first in the banking history of Bangladesh. It again repeated the

performance by acquiring the Bangladesh operations of Muslim Commercial Bank Ltd. (MCB),

a Pakistani bank.

In the year 2003 the Bank again came to the limelight with over subscription of the Initial Public

Offering of the shares of the Bank, which was a record (55 times) in our capital market‟s history

and its shares commands respectable premium. The asset and liability growth has been

remarkable. Prime bank has been actively participating in the local money market as well as

foreign currency market without exposing the Bank to vulnerable positions. The Bank's

investment in Treasury Bills and other securities went up noticeably opening up opportunities for

enhancing income in the context of a regime of gradual interest rate decline. Prime bank Limited

started its service with a vision to serve people with modern and innovative banking products

and services at affordable charge. Being parallel to the cutting edge technology the Bank is

offering online banking with added delivery channels like ATM, Tele-banking, SMS and Net

Banking.



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2.2 Company Vision

To become a leading banking institution and to play a pivotal role in the development of the

country.

2.3 Company Mission

Prime Bank Limited aims to become setting a new standard in banking in Bangladesh by

prudence, flair and quality of operations in their banking sector. The bank has a mission to

achieve the organizational goals. The mission is-

The bank is committed to satisfying diverse needs of its customers through an array of products

at a competitive price by using appropriate technology and providing timely service so that a

sustainable growth, reasonable return and contribution to the development of the country can beensured with a motivated and professional work force.

2.4 Core Values

Prime Bank nurtures a very profile value to all its stakeholders. Basically they maintain four

kinds of core values to its different stakeholders. They are as follows:

For our Customers

To become most caring Bank - by providing the most courteous and efficient service inevery area of our business.

For our Employees

By promoting well - being of the members of the staff.

For our Shareholders By ensuring fair return on their investment through generating

stable profit.

For our Community

By assuming its role as socially responsible corporate entity in a tangible manner through

close adherence to national policies and objectives. and

Upholding ethical values and best practices



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2.5 Expansion in the Global Arena

The Bank has successfully expanded its services beyond cross border to provide and establish an

efficient banking system globally. It has opened a fully owned subsidiary at Singapore. Prime

Exchange Co. Pvt. Ltd., a fully owned subsidiary company of Prime Bank Limited was

incorporated in Singapore on January 06, 2006 and commenced its remittance business with

effect from July 08, 2006 under the remittance license issued by the Monetary Authority of

Singapore (MAS) under section 7A(3) of the Money Changing and Remittance Business Act

(Chapter 187), Singapore.

2.6 Organizational Structure

Prime Bank Limited is being managed by highly skilled professionals with long experience in

banking. They constantly focus in understanding and anticipating in customer needs and operate

according to it to survive in the changing market condition of the country.

In the Branch Based Approach, each individual branch is treated as separate identity and is

headed by a branch manager. The branch manager is liable to the top management for that particular branch. Before starting a fiscal year it is the duty of branch manager to see that targets

are being fulfilled. Profit Targets, deposit targets, and other targets alike are all delegated to these

individual branches.



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Given below is an organ gram of an individual branch of Prime Bank for better

understanding

Fig: 1 Organizational hierarchy of an Ideal Branch

The Department Based Approach is similar to that of the branch based approach, where each

dept. operates as a separate unit but sometimes collaborates in order operate more efficiently or

solve a common problem. Such department is also treated as separate entity but is much more

specialized in one particular area of business unlike a branch which has to be involved in

multiple tasks. Examples of few other department of Prime Bank Ltd are given below:

Human Resource Department

Financial and Administrative Department

Monitoring And Inspection Department

Marketing

Personal Relation Department

Merchant Banking and Investment Department

Treasury division

International division

General Service Division

Information Technology Department

Credit Division

Head of Branch

Manager in Operation

Foreign Exchange In-

Charge AVP

Credit In Charge FAVPCash in ChargeGB In-Charge SAVP



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At a glance Prime Bank Limited

F igure-1: Company prof il e of Prime Bank L imi ted.

Sour ce: Website of PBL

PRIME BANK LIMITED (PBL)

Type Private

Industry Banking

Date of Inauguration of Operation 17th April, 1995

Registered Office Adamjee Court Annex Building-2, 119-120

Mothijheel C/A, Dhaka-1000, Bangladesh.

Products Banking services, Consumer Banking,

Corporate Banking, Investment Banking

Chairman Md. Shirajul Islam Mollah

Managing Director Md. Ehsan Khasru

Number of Branches 117

Logo

E-mail [email protected]

Website www.prime-bank.com



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Organizational structure

Figure-2:

Organizational structure of Prime Bank Limited.

Chairman

Board Of Directors

Executive Committee

Managing Director

Additional Managing Director

Senior Executive Vice President

Executive Vice President

Senior Vice President

Vice President

Senior Assistant Vice President

Assistant Vice President

First Assistant Vice President

Senior Executive Officer

Executive Officer

Senior Officer

Management Trainee Officer

Officer

Junior Officer



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2.7 Classification of Bank Product

In chart given bellow we find different products / services generally made available by a bank: -

F igure-3: Classif ication of bank product of Prime Bank L imi ted

Product

Non – fund orientedFund oriented

Self – custodyCredit cards,Travelers‟ Cheques,sale ofdrafts,standingInstruction,

L/C, Foreign

Currency

Time

demand

MiscellaneousConsultancyInter Prime

bankin

AdvanceDeposit

Tax,ConsultancyMar centBanking projectCounselingInvestment

Counseling

Guarantees

Letter of credit.

Term, loans, clean loans,

BillsDiscounting, Pre-shipment. Postshipment, lines, of credits –

Secured, unsecured, Overdraft,



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2.7.1 Products and Services of Prime Bank Ltd.

Prime Bank Limited offers various kinds of deposit products and loan schemes. The bank also

has highly qualified professional staff members who have the capability to manage and meet all

the requirements of the bank. Every account is assigned to an account manager who personally

takes care of it and is available for discussion and -inquiries, whether one writes, telephones or

calls.

Deposit Schemes

Monthly Contributory Savings Schemes (CSS): Under this scheme Minimum size of

the monthly installment is Tk.500.00 and multiples of Tk.1000.00. Maximum installment

size shall be 25000.00 for live year period. Lump sum amount shall be paid after maturity

or monthly pension shall be paid for the next 5 years according to size of deposit.

Lackhopati Deposit Scheme: Under this scheme size of the monthly installments are

Tk.250.00, Tk.500.00, Tkl285.00, Tk.2400.00 depositor will receive Tk. 1,00,000.00

after a number of period depending on installment size .Higher the installment size lower

will be the maturity period .

Prime Millionaire Scheme: This scheme is similar as Lackhopati deposit scheme only

the installment amounts is larger and at maturity depositor will get 10, 00,000.00.

Education Savings Scheme (ESS): Under this scheme parents can save for their

children's education by paying a certain amount of monthly installment and Lump sum

amount shall be paid after maturity.

Monthly Benefit Deposit Scheme (MBDS): Under this scheme customer can deposit a

fixed amount of money for five years the amount has to be 100,000 or multiple of

100,000 he / she will receive 900 per month as interest on every lac during those five

years.

Double Benefit Deposit Scheme (DBS): Under this scheme a customer can keep a fixed

amount of money for six year end of the maturity period the amount will become double

.The amount has to be multiple of 25000.



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Fixed Deposit Receipt Scheme (FDR): Under this scheme customer can devote a fixed

amount of money for one month, three months, six months or twelve months for interest

rate of 7.5%, 11 % or 11.5%.

Current Account: Current Account is a non interest bearing checkable deposit (Demand

Deposit) which allows the owner of the bank accounts to write checks to third parties.

Savings account: Savings Account is an interest bearing checkable deposit (Negotiable

order of withdrawal) which allows the owner of the bank accounts to write checks to

third parties. Interest rate of Savings Deposit Account is 8.00% for the year 2013.

Card Division Service

ATM Card: Automated Teller Machine (ATM) card is new concept in modem banking,

has already been introduced to facilitate subscribers 24 hour cash access through a plastic

card. Prime Bank Limited has started their ATM card services from 15th March 2008 by

opening a ATM booth at Motijheel Branch. After that Prime Bank Limited made an

agreement with Dutch Bangla Bank to use their ATM Booth.

Credit Card: Very stiff competition prevails in credit card market. Many players have

entered the market and competition is growing. Prime Bank Ltd started its credit card

operation in 1999 by introducing Master Card and is now principal member of both

worldwide accepted plastic money network i.e MasterCard and VISA, thus positioned itself

with strong footing within the industry, the risk of loss to credit card customers. Call center

of the Bank provides 24 hours service to the credit card customers.



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2.8 Islamic Mode of Operation

Prime Bank Limited has started its operation as a Conventional Bank in April 1995. But pretty

soon afterwards, within few months, the Bank has taken up the Challenge to start Islamic

Banking Operations. The Challenge is not so much as in operating Islamic Banking but in

maintaining both the forms in Parallel. From its inception as an Islami Bank the bank has proven

itself to be worthy of its slogan of „Bank with a Difference‟, through successful operation of

Islami Banking.

Prime Bank has started its Islami Banking operation through its first Branch being inaugurated

at19, Dilkusha C/A, Dhaka on 18 December 1995. Since then it has so far has established five

more branches at different locations in the Country. Because of its popularity and management‟s

commitment toward social well being gradual expansion of Prime Bank‟s Islami Banking

operations is assured. Following are the salient features of Islamic Banking, as is practiced in

Prime Bank Limited:

01. All activities are conducted according to Islamic Shariah.

02. Interest free monetary operations.

03. Building partnership relation between the Bank and its customers.

04. Following Islamic principles in its investment portfolio.

05. While investing special consideration to social needs is given.

06. Through small and long term deposit schemes providing hope to the poor income group of

the society.

07. Client service centric banking, through which making the clients feel special.

08. Conduct welfare activates etc.

Service Portfolio

Prime Bank Limited provides following services under Islamic Banking:

01. Deposit

02. Investment

03. Foreign Trade

04. Remittance and Fund Transfer



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2.8.1 Shari’ah Council

Shari‟ah Council We established a Shari‟ah Council to advice and provides guidance on Islamic

Banking Operations. The following Islamic scholars having vast knowledge and ideas in Islamic

Shari‟ah relating to banking operations sit on the Board:

Name Status in the Shari’ah Council

Maulana Mohammad Salahuddin

Ex-Principal Madrasha-e-Alia, Bakshi Bazar, Dhaka

Chairman

Mr. Shah Abdul Hannan

Ex-Chairman, Islami Bank Bangladesh Ltd.

Vice Chairman

Maulana Abul Kalam Azad

Chairman, Bangladesh Masjid Council, Uttara, Dhaka.

Member

Maulana Mohammad Shahidul Islam Member

Professor Dr. Shamsher Ali

Vice Chancellor, Southeast University,Dhaka.

Member

A.S.M Fakhrul Ahsan

Former Deputy Governor, Bangladesh Bank

Member

Azam J Chowdhury

Chairman, Prime Bank Ltd.

Member

Capt. Imam Anwar Hossain

Director, Prime Bank Ltd.

Member

Mohammad Ehsanul Haque

Managing Director, Prime Bank Limited

Member

Mahbubul Alam

Additional Managing Director, Prime Bank Limited

Member Secretary

F igure-4: Shari ah Council of Prime Bank Limited.



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2.9 Prime Line

2.9.1 Online Branch Banking

The Bank has set up a Wide Area Network (WAN) across the country to provide online branch

banking facility to its valued clients. Under the Scheme, clients of any branch shall be able to do

banking transaction at other branches of the bank. Under this system a client will to be able to do

following type of transactions: Cash withdrawal from his/her account at any branch of the Bank

irrespective of location.

Cash deposit in his/her account at any branch of the Bank irrespective of location.

Cash deposit in other's account at any branch of the Bank irrespective of location. Transfer of

money from his/her account with any branch of the Bank. Any amount can be deposited or

transferred under Prime Line. In the system, however, at present there is a limit for cash

withdrawal through bearer or by account holder himself.

2.9.2 SWIFT

Prime Bank Limited is one of the first few Bangladeshi Banks who have become member of

SWIFT (Society for Worldwide Inter-bank Financial Telecommunication) in 1999. SWIFT is a

member owned co-operative, which provides a fast and accurate communication network for

financial transactions such as Letters of Credit, Fund transfer etc. By becoming a member of

SWIFT, the bank has opened up possibilities for uninterrupted connectivity with over 5,700 user

institutions in 150 countries around the world.

2.9.3 One Stop Utility Services Scheme

Like any other country of the world, the people living in the urban areas of our country lead a

very busy life. Time is very valuable to them. Despite this, they are to waste their valuable time

at the counter of different Banks and other Institutions for payment of their monthly bills of

different utility services like Electricity, Telephone, Water, and Gas etc. They, as such, face

enormous difficulties for payment of their monthly bills in time. Such inconveniences of the

urban people can be removed by making an arrangement to collect all the bills of various utility

services at One Point.



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2.9.3.1 Scope of Services

With this end in view, Prime Bank Limited has introduced a Scheme entitled "ONE STOP

UTILITY SERVICES SCHEME". The scheme is designed to provide all the required services to

the customer in making payment of their following bills on their behalf from the counter of the

Bank:

To pay Electricity Bills

Cash deposit in his/her account at any branch of the Bank irrespective of location.

Cash deposit in other's account at any branch of the Bank irrespective of location. Transfer of

money from his/her account with any branch of the Bank. Any amount can be deposited or

transferred under Prime Line. In the system, however, at present there is a limit for cashwithdrawal through bearer or by account holder himself.

2.9.4 ATM Services

To deliver 24 hours cash withdrawal services, Prime Bank has launched its ATM Operation

since March 11, 2008. Presently the bank has been providing this service to their customers

through 29 ATM Booths. Moreover the bank has made agreement with Dutch-Bangla Bank

Limited to use their ATM booths by Prime Bank customers.



33


CHAPTER -3

FOREIGN EXCHANGE

POLICES AND PROCEDURES

OF PRIME BANK LIMITED



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3.1 Foreign Exchange Trend at Prime Bank Ltd.

The export and import business is now are executed through the intervention of commercial

banks. Banks make the way through which the exporter can get payment from importer. Foreign

exchange is the department of commercial banks which facilitates importers and exporters in

their trades. It is very significant department in the financial sector of the country especially in

the developing countries. Bangladesh bank has some regulations regarding the foreign exchange

to maintain for the authorized dealer. Authorized dealer is the dealer of the foreign currency who

is authorized by the Bangladesh Bank to exchange foreign currency. Prime Bank Ltd has 37

branches which are authorized by the Bangladesh Bank to exchange foreign currency.

The Basic functions of foreign exchange department are:

Facilitating Import Trade

Facilitating Export Trade

Provided funded and non funded credit facility

Providing non commercial remittances

Maintaining foreign currency accounts

Selling of foreign currency.

The above functions are done by three sections:

Import Section

Export Section

The Foreign Remittance Section



35


Now the division of foreign exchange department is stated below in a pictorial format:

Figure-5: Foreign Exchange Department of Prime Bank Ltd.

Import Section Export Section Foreign RemittanceSection

Foreign ExportLocal Export

Direct Export

Foreign Exchange

Export through

Back to Back



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The study is based on the current Foreign Exchange Trend for Prime Bank Ltd. It deals with

Export, Import and Remittance services that the bank provides, giving us the current trend of

business in each of this area's. In addition in-depth analysis of statistical data covering the types

of commodities, amount of foreign currency that is being traded has also been covered in this

report. But first let us take a look at the role of foreign trade in Bangladesh.

Foreign Trade plays an important role in the economic advancement of every nation. So the

government of almost all developing countries including Bangladesh focuses on the import and

export relations of foreign countries. In our country, the foreign trade is controlled by

Bangladesh Bank under the Import and Export Control Act, 1950. Here any importer and

exporter who are not registered with CCI &E are not allowed to import the goods in the country

or export goods to other countries. While the foreign Exchange Business was becoming more

complex and hounded by more rules and regulations, the L/C is one type of undertaking that

could reduce the risk and legalize the contract between buyer and seller. And through the L/C,

the contract between the importer and exporter is given a legal shape by the Authorized Dealer-

the bank .As the banks are included in the process, the contract becomes more reliable for both

the importer and exporter to both the parties. While through the L/C a reputed bank guarantees

the payments for imported goods on the behalf of the importer, the exporter gets the security for

payment .Therefore; the Letter of Credit constitutes one of the most important methods of

foreign trade. All documentary credit covering imports into Bangladesh are subjected to the

provisions of UCPDC500 (Union Customs and practices for documentary credit 1993 revision

ICC Publication 500).



37


3.2 Operational Processes in Prime Bank’s Foreign Exchange Department

The International Division placed at the Prime Bank's head office at Motijheel is the backbone of

all international transaction that is conducted through the various branches of the bank. A total of

42 branches of Prime Bank have the license to carry "• out international trade functions. Each of

these AD branches have foreign exchange department whose sole purpose is to carry out cross

border transaction demanded by the customers.

The functions of such Foreign Exchange Department can be divided into three sections:

(a) Import Section

(b) Export Section, and

(c) The Foreign Remittance Section

The following is a brief description of each of these sections.

Import Section

This section deals with the import of foreign commodities into Bangladesh. It starts with

the opening of an L/C till the payments arc made to the foreign exporters. The import

section is in turn is divided into two divisions. One division looks after Sight L/C and

another one looks after Back to Back L/C. The Basic difference between these two types

of L/C is that, sight L/C requires at sight payment for the imported items, the buyer

should pay within three days of documents arrival. And on the other hand, (the issuance

period for Back to Back credit can range from two months to even a year depending on

the L/C terms.

Export Section

All Export departments of Prime Bank's branches are equipped with facilities that would

help an exporter ship their good beyond the nation's boundary, thus earning foreign

currency for the country. And majority of such customers for Prime Bank Ltd are

involved in the Ready Made Garment sector with only a few exporting other different

commodities.



38


Foreign Remittance Section

Foreign remittance can be stated as the purchase and sale of freely convertible foreign

currency as admissible under Exchange Control Regulations of the country. Inward

remittance is the purchase and outward remittance is the sale of foreign currency. Later

this section will be discussed.

3.3 Concept of Letter Of Credit

A letter of credit is an instrument issued by a bank to a customer placing at the letters disposal

such agreed sums in foreign currency as stipulated. An importer is a country requests his bank to

open a credit in foreign currency in favor of his exporter at a bank in the letters country. The

letter of credit is issued against payment of amount by the importer or against satisfactory

security.

The L/C authorizes the exporter to draw a draft under is terms and sell to a specified bank in his

country. He has to hand over to the bank, will the Bill of exchange, shipping documents and such

other papers as may be agreed upon between the exporter and the importer. The exporter is

assured of his payment because of the credit while the importer is protected because documents

in respect of export of goods have to be delivered by the exporter to the paying bank before the

payment is made.

In the Import Policy Order 2003-2006 Letter of Credit denoted as - '"Letter of Credit" means a

letter of credit opened for the purpose of import under this Order' The expression

"Documentary Credit^)" and "Standby Letter(s)” means any arrangements, however

named or described, whereby a bank ("the issuing bank") acting at (he request and on me

instruction of ;i customer (the "Applicant") or on its own behalf.

Is to make a payment to or the order of a third party ("the Beneficiary"), or is to accept

and pay bills of exchange (Draft's) drawn by the Beneficiary, Or

authorizes another bank to effect such payment, or to accept and pay such bills of

exchange Draft(s),Or

authorizes another bank to negotiate,



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Against stipulated document(s), provided that the terms and conditions of the Credit arc

complied with.

The uniform customs and practices for documentary Credit (UCPDC) published by

International! Chamber of Commerce (2007) revision, publication no, 600 define

Documentary Credit:

Any arrangement however named or described whereby a bank (the issuing bank) acting

at the request and on the instructions of a customs (the Applicant) or on it's own behalf,

Is to make a payment to or to the order of a third party (the beneficiary) or is to accept

and pay bills of exchange (Drafts) drawn by the beneficiary or

Authorize another bank to effect such payment or to accept and pay such bills of

exchange (Drafts)

Authorize another bank to negotiate against stipulated documents provide that terms and

conditions are complied with.

3.4 Types of Letter Of Credit

There are many types of Letter of Credits that are used in different countries of the world. But

International Chamber of Commerce (ICC) vides their UCPDC- 600, which denotes only two

types of LETTER OF Credits; mentioned:

Revocable Letter of Credit

A revocable credit may be amended or cancelled by the issuing bank at any moment and without

prior notice to the beneficiary. This type of letter of credit can be revoked or cancelled at anytime without consent of, or notice to the beneficiary. The buyer maximum flexibility, as it can he

amended or cancelled without prior notice to the seller up lo the moment of payment but the

issuing bank at which the issuing bank has made the credit available. In the modern banking the

use of revocable credit is not widespread.



40


Irrevocable Letter of Credit

An irrevocable credit is a documentary credit, which cannot he revoked, varied or

changed/amended or cancelled without the consent of all parties- buyer (Applicant), seller

(Beneficiary), Issuing Bank, and Confirming Bank (in case of confirmed Letter of Credit).

Irrevocable Credit gives the seller greater assurance of payments, but he/she remains dependent

on an undertaking of a foreign bank. In the issuance of Irrevocable Letter of Credit both the

Issuing and Conforming Bank have some liability.

3.5 Some Special Letter of Credit

Revolving Letter Of Credit

Revolving L/C can be used when goods are to be delivered in installment at specified intervals.

The amount available at any one time is equivalent to the value of one partial delivery. A

revolving credit can be cumulative or non-cumulative means that amount from unused or

incompletely used portions can be carried forward to subsequent period.

Standby Letter of Credit

Standby credit is encountered principally in the US. Under the laws of most US states, banks are

prohibited from issuing regular quarantines, so credits are used instead. In Europe, too the use of

this type of credit is increasing by virtue of their documentary credit, stand-by credit are

governed by the UCP. However, their function is that of a grantee.

Back to Back Letter of credit:

The Back to Back letter of Credit is a wing of Export department at the advising bank on behalf

of beneficiary. If the beneficiary exports readymade garments products then he may have to open

this letter of credit for import of raw materials. It is a sort of Pre-shipment finance before export

of products.

Transferable Letter of Credit:

Transferable credit is particularly well adapted to the requirements of international trade. A

trader who receives payment from a buyer in the form of a transferable documentary credit can



41


use that credit to pay his own supplier. This enables him to carry out the transaction with only a

limited and lay of his own funds. The costs of the transfer are usually charged to the trader and

the transferring bank is entitled to delete them in advance.

Red Clause

In the case of a red clauses credit, the seller can obtain an advance for an agreed amount from the

correspondent bank, goods that are going to be delivered under the documentary credit. On

receiving the advances, the beneficiary must give a receipt and provide a written undertaking to

present the required documents before the credit expires. The advance is paid by the

correspondent bank, but it is the issuing bank that assumes liability. If the sellers does not present

the required documents in time and fails to refund the advance, the correspondent bank debits the

issuing bank with the amount of the advance plus interest. The issuing bank, in turn, has reveres

to the applicant, who therefore bears the risk for the advance and the interest accrued.

Green Clause

The clause which is printed /typed in green is an extension of Red “Red Clause”. This clause

authorizes the negotiating bank to grant advance to the beneficiary for storage facilities at the

port in addition to the earlier stated reshipment advances.

The following types of Letter of Credits arc used in the Prime Bank.

Cash or Sight Letter of Credit:

The most commonly used credits are Cash Letter of Credit or sight payment credits. These

provide for payment to be made to the beneficiary immodestly after presentation of the stipulated

documents on the condition that the terms of the credit have been complied with. The banks are

allowed reasonable time to examine the documents.

Deferred Letter of Credit:

A deferred letter of credit is a credit in which the seller will be paid on a fixed or determinable

future time. The buyer is obligated to pay the face amount at maturity.



42


The only difference between cash Letter of Credit and deferred letter of Credit lied in the terms

of payment. Payment under deferred Letter of Credit is made after certain days of presentation of

the export bill.

Deferred Letter of Credit may be opened for the following cases:

Items Period

Industrial Raw Materials (For own use) Maximum 180 Days

Back to Back Imports Maximum 180 Days

Agricultural Implements & Chemical Fertilizer Maximum 180 Days

Capital Machinery Maximum 360 Days

Coastal Vessel Maximum 360 Days

Life Saving Drugs Maximum 360 Days.

Acceptance Payment at Maturity:

With an acceptance credit payment is made in the form of a tern bill of exchange drawn on the

buyer, the issuing Banker the pendent bank. Once he has fulfilled the credit requirements, the beneficiary can demand that the bill of exchange be accepted and returned to him. Thus the

accepted bill takes the place of a cash payment. Bill of exchange drawn under acceptances credit

usually has a term of 60-180 days.

The purpose of an acceptance is to give the importer time to make payment. It he sells the goods

before payments fall due, he can use the proceeds to meet the bill of Exchange in this way, he

does not have to borrow money to finance the transaction.



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3.6 Parties Involved in Letter of Credit

MAIN PARTIES

I. The issuing Bank:

Issuing Bank is the bank which opens / issues a L/C on behalf of the importer. It is also called

importer‟s/ buyer‟s bank.

II. The Confirming Bank:

Confirming is a bank which adds its confirmation to the credit and it is done at the request of

issuing bank. The confirming bank may or may not be the advising bank.

III. The Beneficiary

The exporter in whose favor the credit is opened and to whom the letter of credit is addressed is

known as the beneficiary. As the seller of goods he is entitled to receive payment which he does

by drawing bills under the letter of credit (L/C). As soon as he has shipped the goods and has

collected the required documents, he draws a set of papers and presents it with the documents to

the opening bank or some other bank mentioned in the L/C.

OTHER PARTIES

I. The Applicant:

The importer at whose request a letter of credit is issued is known as the applicant or buyer. On

the strength of the contract he makes with the exporter for the purchase of some goods that the

letter of credit is opened by the opening bank.

II. The Advising Bank:

Advising Bank is the bank through which L/C is advised to the exporter. It is a bank situated in

the exporter‟s country and it may be a branch of the opening bank or a correspondent bank. It

may also assume the role of confirming bank and /or negotiating bank depending upon the

conditions of the credit.



44


III. The Negotiating/Paying Accepting Bank:

The bank which negotiates the bill and pays the amount to the beneficiary is referred to the

Negotiating Bank. It has to carefully scrutinize the documentary credit before negotiation in

order to see whether the documents apparently and in order to see whether the documents

apparently and in order. The advising bank and negotiating bank may or may not be one and

same. Sometimes it can be the confirming bank.

IV. Reimbursing Bank:

The Reimbursing or paying bank only pays the drafts drawn under the credit but undertakes no

opening bank, by debating the latter‟s accounts with it if there is such an account or by any other

measured up, between the two bankers. As soon as the beneficiary has received payment for the

draft, he is out of the picture and the rest of the operation concerns only the paying bank and the

opening bank.

3.7 Import Procedure through Letter of Credit Operation of Prime Bank Ltd.

Import is the process of purchasing goods and services from foreign countries into Bangladesh. It

is the flow of goods and services purchased by economic agents staying in the country from

economic agents staying abroad. Individuals, firms and Government of Bangladesh import

foreign goods to meet their various necessities.

In ease of international trade, buyers and sellers are mostly unknown to each other. Therefore,

seller always seeks guarantee for that is payment of his goods exported and bank plays the role

exactly at this phase. Bank gives export guarantee that it will pay for the goods on behalf of the

buyer. This guarantee is called Letter of Credit. Thus, the contract between importer and exporter

is given a legal shape by the banker through 'Letter of Credit'. When a buyer goes to import some

goods from a foreign buyer, he requests his bank to make payments to the exporter of goods, and

the bank recovers the amount from the importer. The import procedure under L/C is discussed

below:



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47


bracket in addition to normal H. S. Code as mentioned above. No bank shall issue Letter of

Credit Authorization form or open Letter of Credit without properly mentioning I. T. C. number

(H. S. Code) thereon.

NOC (No Objection Certificate) On the basis of ROR (Right of Refusal)

A. No Objection Certificate on the basis of Right of Refusal (ROR) form any authority shall not

be required for import of any freely importable item by any Public Sector agency. However, in

case where a public sector agency is required to import banned/restricted items included in the

Control List, prior permission of the Ministry of Commerce .shall have to be obtained on the

basis of ROR issued the Ministry of Industries or by Sponsoring Ministry/Division, or by both as

the case may be.

B. In case of import of banned/restricted items for approval projects financed under foreign aid

the concerned Government Department/Agency will approach the Chief Controller of the Import

and Export directly for necessary permission together with a list of items duly certified under

proper seal and signature giving "description, quantity/number, price and H.S. Code Number

against each item required to be imported. The details about the aided project and specific

provision of the relevant contract and other necessary information shall also have to be furnished

along with the list of the items. The Chief Controller shall issue permission/permit on the basis

of above documents.

Restriction regarding source of procurement of goods

a. Goods from Israel or goods originating from that country shall not be importable. Goods are

not also importable in the flag vessels of that country.

b. All kinds of import from and export to Serbia and Montenegro, fragments of former Socialist

Republic of Yugoslavia, shall be banned.

Pre-shipment inspection

Unless otherwise specified, pre-shipment inspection of imported goods shall not be obligatory in

case of import by private sector importers.



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Shipment of Bangladesh Flag Vessels

Subject to waiver specified below shipment of goods shall not be made on Bangladesh

Hug vessels:

a. Imports of goods up to maximum twenty metric tons in case of single individual consignee or

up to maximum 100 (one hundred) metric tons in case of group import may be made in non

Bangladeshi flag vessels. However the Director General of Shipping may notify general waivers

in the following cases, such as (1) shipment of goods from foreign ports which are not visited by

Bangladeshi Vessels, and (2) import of goods on the basis of specific agreement which provides

C & F (Cost & Freight) contract. In all other eases a certificate of waiver shall be obtained from

the Director General of Shipping of Importation of goods in non-Bangladeshi flag vessels, [f

there appears to be possibility of any Bangladeshi Hag vessels, visiting a port with in next seven

days, waiver shall be given within twenty-four hours of application for waiver. Otherwise, it will

be considered that waiver has been given. However, the specific condition of compulsory

shipment of goods on Bangladeshi flag vessels, or the condition of obtaining certificates of

waiver from the Director-General of Shipping shall not apply in cases of import under such

foreign aids, loans or grants which contain specific provisions regarding shipment of goods.

b. In case of import and export of goods by export oriented industries shipment may be made innon-Bangladeshi Flag vessels.

Import at competitive rate

a. Import shall be made at the most competitive rate and importers may be recruited, at any time,

to submit documents regarding the price paid or to be paid by them.

b. In case of import under United Commodity Aid in the Private sector, goods shall be imported

at the most competitive rate by obtaining quotations from a minimum of three suppliers indenters

representing at least two countries abroad. This condition shall however not apply for opening of

I .Letter of Credit up TK. One Lac. For import at most competitive rate by the Public Sectors the

condition mentioned at Para 27(8) of this order shall apply.



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3.7.3 Instructions Issued By Bangladesh Bank For Opening and

Operation of L/C For Import Of Goods

All Letter of Credits and similar undertakings covering imports into Bangladesh must be

documentary Letter of Credits and should provide for payment to be 'made against full

sets of onboard (shipped) transport documents (BL, AIB, TR etc.) showing dispatch of

goods covered by Credit to a destination in Bangladesh;

They must ensure that they deal only with known customers having a place of business in

Bangladesh and can be traced easily if any occasion arise for this purpose;

They should establish Letter of Credit against specific authorization on behalf of their

own customers who maintain accounts with them with and know to be participated in the

trade;

It is not permissible to open to clean or revolving credits;

They are allowed to open divisible, transferable Letter of Credits for import into

Bangladesh under cash LCAF (Letter of Authorization Form);

It is not permissible to open Letter of Credits in favor of beneficiaries in countries from

which import into arc banned by the component authority;

Letter of Credits to be opened only against firm contract between the Applicant and

beneficiary. Bankers should second documentary evidence, before opening Letter of

Credit, that a firm order for the goods to be imported has been placed and

Accepted;

The full description of goods to be imported along with unit price and quantity to be

given in the Letter of Credit;

Confidential report of the exporter to be obtained by the bank, where the amount of Letter

of Credit exceeds TK. 2,00,000 in case of import against pro forma invoices issued direct

by foreign supplier and TK. 5,00,000 against indent issued by local agents of the

suppliers;



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Payments against discrepant documents may be made after the goods have been cleared

from the customs on the basis of the locative LCAF;

Advanced remittance against import may be made after getting prior permission from

Bangladesh Bank where the goods arc of specialized or capital nature.

3.7.4 Documents Required For Opening of L/C

L/C application and agreement Form (Bank's prescribed application form) with adhesivestamp of Tk. 150 (Flexible) [From June 3rd 1998]

Letter of Credit authorized Form (LCAF)

CIB.

Proforma Invoice (Approved by BRTC in case of Mobile Set)

Import Registration certificate. Tax Identification Number, VAT (IRC renew)

Membership Certificate.

Last tear income tax assessment.

Harmonized System Code (HS Code)

Charged Documents.

Under Charged Documents the following letters are required:

o Demand Promissory Note.

o Letter of Disbursement

o Letter of Agreement

o Letter of Authority.

o Letter of Undertaking

o

Letter of Continuity.

o Letter of Revival

o Letter of Guarantee. (Signature without Seal)

Some Exemption:



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3.7.6 Issuing the Letter of Credit

In this stage, the issuing bank fills the bank-specified-form for issuing Letter of Credit. Generally

a Letter of Credit contains the following information and terms and conditions:

Charges;

Country of origin of goods;

Currency and amount;

Date and place of the expiry of the Documentary Credits ;

Description of goods and quantity ;

Documents required for negotiation;

Instruction for negotiating bank;

Last date of shipment;

Letter of Credit Authorization Form (LCAF) number, IRC (Import Registration

Certificate) number and Harmonized System (HS) code;

Mode of Carrying -Air/Ship/Truck;

Name and address of beneficiary ;

Name and address of the advising bank;

Name and address of the applicant;

Name of the issuing Bank and Branch;

Negotiating bank preferably freely negotiable in any bank;

Number of Letter of Credit and date of opening ;

Payment Term-Sight

Period of Negotiation ;

Period of presentation ;

Port of Loading and port of Discharge;

Reimbursing Bank and payment mode;

Terms and conditions regarding Transshipment and Partial Shipment;



54


Depending on the specific provision in the underlying sales-contract (mentioned below), it may

be necessary to incorporate one or more of the following additional terms in the Letter of Credit-

Whether the pay of the bank charges is on account of the opener or seller

Whether short form of Bill of Lading (B/L) is acceptable

Whether, in case of bulk import, charter-party Bill of Lading (B/L) is acceptable or not

Whether shipment by chartered vessel is allowed, the following causes must be stipulated

in the Letter of Credit.

Shipping documents must include copies of Charter-party agreements.

Bill of Lading must be signed by named carrier or his authorized agent.

3.7.7 Different Means of Payment

Importer settles the means of payment with the seller after making the purchase contract. Import

procedure differs with relation to different means of payment. In our country in most cases, the

Documentary/Letter of Credit makes import payment. Purchase Contract contains which

payment procedure has to be applied.

a) Cash in Advance: Importer pays lull, partial or progressive payment by a foreign DD, MT or

TT. After receiving payment, exporter will send the goods and the transport receipt to the

importer. Importer will take delivery of the goods from the transport company.

b) Open Account: Exporter ships the goods and sends transport receipt to the importer. Importer

will take delivery of the goods and makes payment by foreign DD, MT, or IT at some specified

date.

c) Collection Method: Collection methods are either clean collection or documentary collection.

Again, Documentary Collection may be Document against Payment (D/P) or Document against

Acceptance (D/A). The collection procedure is that the exporter ships the goods and draws a

draft/ bill on the buyer. The exporter submits the draft/bill (only or with documents) to the



55


remitting bank for collection and the bank acknowledges this. Then the remitting bank sends the

draft/bill (with or without documents) and a collection instruction letter to the collecting bank.

Acting as an agent of the remitting bank, the collecting bank notifies the importer upon receipt of

the draft. The title of goods is released to the importer upon full payment or acceptance of the

draft/bill.

d) Letter of Credit: Letter of credit is the well-accepted and most commonly used means of

payment. It is an undertaking for payment by the issuing bank to the beneficiary, upon

submission of some stipulated documents and fulfilling the terms and conditions mentioned in

the letter of credit.

3.7.8 Transmission of Letter of Credit PaymentThe Letter of Credit duly signed by the authorized persons of the bank is then sent to the

advising bank. There are three modes of sending the Letter of Credits which are as follows:

A. By Mail/Courier

Letter of credit can be sent to the advising bank by mail /courier.

B. By TELEX:

It was practiced earlier in the other branches, but from the very beginning of the it did not

transmit Letter of Credit though Telex.

C. By SWIFT:

SWIFT Stands for Society of World Wide Interbank Financial Telecommunication. This is

special format maintained round the world. Through this facility party can communicate within

few minutes with other party staying any part of the world. Prime Bank Limited, provides thisfacility to the clients. The advising bank verifies the authenticity of the Letter of Credit.

Prime Bank has corresponding relationship or arrangement throughout the world by which the

Letter of Credit is advised. Actually the advising bank does not take any liability if otherwise not

requested.



56


3.7.9 Receipt of Documents

After opening the Letter of Credit the next step would be to await shipment followed by

negotiation of documents by a bank abroad. The beneficiary of the Letter of Credit (supplier),

after effecting shipment of the goods as per Letter of Credit terms, prepare or collect necessary

documents as required under the terms of Letter of Credit and presents the drafts to the

negotiating bank along with the supporting documents for negotiation.

The negotiating bank negotiates the draft if the documents are found in order as per terms of the

Letter of Credit, pays the beneficiary. The negotiating bank will reimburse itself either by

debiting Prime Bank's Account, if any, maintained with them (the NOSTRO Account) or will

seek reimbursing bank mentioned in Letter of Credit, if there is no account. Simultaneously, the

bank will send the documents to Prime Bank. The nature of documents has to be sent by the

negotiating bank will depend primarily on the terms of the Letter of Credit and secondly the sales

contact between the buyer and seller. However, generally the following documents are asked to

send: Bill of Lading or Airway Bill or other evidence of shipment (e.g. Railway Receipt, Truck

Receipt, and Barge Receipt)

Certificate of Origin;

Commercial Invoice;Draft or Bill of Exchange;

Inspection of Survey Certificate;

Marine Insurance Policy;

Packing List;

Quality Control Certificate.

3.7.10 Scrutiny of Documents

On receipt of the documents, the branch shall immediately set itself to the task of .scrutinizing

the documents, What they would ensure is that the documents received from the negotiating

bank are drawn strictly in conformity with the terms of the Letter of Credit and respond to the

requirement of the underlying Letter of Credit in every respect, examination of the documents

generally includes the following points:



57


Completeness of the documents;

Consistency of the documents with each other;

Compliance with the Uniform Customs and Practices for Documentary Credits (UCPDC)

issued by the International Chamber of Commerce, Paris.

One of the basic principles of documentary credit is that all parties deal with document and not

with goods (Articles 6 of UCPDC-600). That is why the documents should be scrutinized

properly. If any discrepancy in the documents is found, that is to be informed to the party. A

checklist may be followed for examining the documents.

In the UCPDC the Standard for Examining of Documents is mentioned as follows:

a) Banks must examine all documents stipulated in the Credit with reasonable care, to ascertain

whether or not they appear, on their face, to be in compliance with the terms and conditions of

the Credit. Compliance of the stipulated documents on their face with the same terms and

conditions on the Credit shall be determined by international PRIME banking practice as

reflected in these Articles. Documents which appear in their face to be inconsistent with one

another will be considered as not appearing on their face to be in compliance with (he terms and

conditions of the credit. Documents not stipulated in the credit will not be examined by banks. If

they receive such documents, they shall return them to the presenter.

b) The Issuing Bank, the Confirming Bank, if any or a Nominated bank acting on their behalf,

shall each have a responsible time, not to exceed five banking days following the day of receipt

of the documents, to examine the documents and determine whether to take up documents and

inform the party from which it received the documents accordingly.

c) If a credit contains conditions without stating the document(s) to be presented in compliance

there with, bank will deem such conditions as not stated and will disregard them.

3.7.11 Lodgment

After the scrutiny the following steps are taken step-by-step to process for lodgment of import

documents received from the negotiation bank. Lodgment means retirement of funds. Usually

payment is made within five days after the documents have been received. If the payment is



58


become deferred, the negotiating bank may claim interest (LIBOR) for making delay. However,

after receiving the documents authority contacts with an importer, in which procedure they want

to collect the documents. If requested PAD is facilitated for twenty one days only.

Lodgment Constitutes the Followings: Conversion of foreign currency amount of the bill and

the foreign bank charges separately into Taka by applying Bills Collection (B.C.) selling rate

ruling on the date of lodgment is done. If forward exchange was, the booked rate is applied.T24

Payment against Documents (PAD) is created by Debiting PAD Account and Crediting I lead

Office Account Full particulars of the documents are entered in the prescribed PAD Register

allotting a consecutive serial number in the register. If the forward exchange rate is booked then

the booked rate is applied. Payment against Documents (PAD) is created by Debiting PAD

Account and Crediting Head Office Account. Full particulars of the documents are entered in

the prescribed PAD Register allotting a consecutive serial number in the register.

Documents are endorsed by putting seal and signature.

ETCA "Exchange Transaction Credit Advice" is sent to the Head Office along with a

prescribed statement to provide them credit for the payment from their overseas account

through Prime Bank Limited General Account.

Head Office (International Division) in receipt of the IIJCA and the statement willrespond the entry by debit to branch account (through Prime Bank Limited General

Account) and contra credit to NOSTRO Account of the negotiating bank abroad.

To arrange necessary fund for payment, a requisition is sent to the International

Department.

As the T.T & O.D rate is paid to the ID, the difference between these two rates remains

as exchange gain for the Branch.

As soon as above formalities are completed the importers are served with PAD billintimations for retirement of concerned import document. A letter of intimation

(P.A.D. intimation) regarding receipt of the documents should be sent to the applicant

with a request to lake delivery of the documents on settlement of all dues against it and

mentioning the maturity date of P.A.D.



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3.7.12 Retirement of the Documents

On receipt of cost memo/lodgment voucher the importer pays the necessary amount. This stage

of the documentary credit operation is known as “Retirement of Import Bills”. The branch will

prepare the retirement voucher to reflect the amount of cost and other charges to be collected

from the importer, adjustments of margin and PAD Account. Thereafter the documents may be

handed over to the importer against proper acknowledgement after certification and

endorsement. The certifications by authorized personnel of the bank are as follows:

The invoice is certified by the authorized officer of the bank with the exchange rate as

applied in lodgment;

The Bill of Exchange received from negotiating bank on issuing bank by the beneficiary;

The Transport Documents evidencing the carrying of goods as per Letter of Credit term

has to the endorsed by the AD branch.

On receipt of intimation, the importer is given necessary instructions with regard to retirement of

the bill, disposal of the shipping documents and clearance of the goods from the

Customs -authorities. The importer may ask the bank to retire the bill by debiting his account or

may request for the providing LIM or LTR facility, if arranged earlier.

On intimation the importer approaches with a letter for retirement of the document against full

payment with up to dale interest and charges payable. Hank prepares cost memo in printed form

on account of the concerned party giving details head of charges payable.

As the vouchers are passed and necessary entries are given in PAD Ledger endorsements arc

made fewer than two authorized signature of the Bank‟s officers (P.A. Holder). Then the

documents are delivered to the importer.

3.7.13 Delivery of Shipping Documents

If the bill is to be realized by debit to (he importer's account, the documents are handed over lo

the importer to his duly authorized clearing und forwarding agent for clearance of the goods

form customs at his own account.



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3.7.14 Payment to the Foreign Bank Import of Goods

Negotiating Bank is authorized to Debit Head Office Account (PBL) directly, if the account is

maintained with them. Negotiating Bank is authorized to obtain reimbursement claim form

foreign correspondent with which account is maintained by Head Office (PBL)

Where reimbursement is provided subsequent to the receipt of documents, an authority Letter is

to send to correspondent abroad with whom account is maintained by Head Office to make

payment to the Negotiating Bank to debit of PBL account maintained with them for the amount

of the documents.

Import portfolio consists of the goods or items are being imported through the bank, total letter

of credit opened by the bank, volume of goods etc.

In Our Country fast moving consumer goods to Capital machinery are imported. There are

basically two types of importer. They are as follows:

Industrial Importer: Industrial importer basically imports raw materials for further

processing. They sell the finished goods to the abroad or in Bangladesh. Other than

raw materials they imports “Capital Machinery” for different industrial purpose.

Commercial Importer: Commercial importers import finished goods. They import

those goods directly for selling into the market. But they are very limited in number.

Through this branch the majority of the goods imported are raw materials by the

industrial users.

Now we can see from the following table that how many commodities are imported by

this bank



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As the most numbers of Importers are Industrial Importers. The percentage of imported raw

materials is the maximum volume of imports all over the year. We can easily trace the

percentage of total L/C opened at this branch at 2006& 2007 through the following two Pie

Charts, where Industrial Raw Materials secured almost half of the L/C, and the remaining

secured different percentages according to the demands of those years. In the branch I have also

observed the frequency of imported goods. The Industrial Raw Materials Always stayed at the

top position. But the most interested thing is that the next frequent item of imported good is

“Mobile Phone”. The importation of mobile phones through this branch is done only by one

company which is Electra Telecom BD Ltd. Electra is the authorized dealer of Samsung Mobile

Phone. The frequency of imported capital machinery is very low, but the value of import of

capital machinery through each L/C is very high compared to all other imported goods.

Name of the Commodities

Industrial Import Commercial Import

Industrial Raw Materials

Yarn

Dyes

Aluminum Ingot

Chemicals

Pharmaceutical Raw Materials

Pharmaceuticals Packing materials

Capital Machinery

Mobile Phone

Diesel generator

Laboratory Reagents

Spare Parts Gas Pressure Regulator

Air Cooler

Toiletries

Passenger Elevator

Lighting Fixture

Food Products

Reconditioned Vehicle.

Printing Ink.



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3.8 Export Procedure through Letter of Credit Operation of Prime Bank Ltd.

Creation of wealth in any country depends on the expansion of production and increasing

participation in international trade. By increasing production in the export sector we can

improve the employment level of such a highly populated country like Bangladesh. Bangladeshexports a large quantity of goods and services to foreign households. Readymade textile

garments (both knitted and woven), Jute, Jute-made products, frozen shrimps, tea are the main

goods that Bangladeshi exporters export to foreign countries. Garments sector is the largest

sector that exports the lion share of the country's export. Bangladesh exports most of its

readymade garments products to U.S.A and European Community (EC) countries. Bangladesh

exports about 40% of its readymade garments products to U.S.A. Most of the exporters who

export through PBL are readymade garments exporters, They open export L/Cs here to export

their goods, which they open against the import L/C opened by their foreign importers.Export

L/C operation is just reverse of the import L/C operation. For exporting goods by the local

exporter, bank may act as advising banks and collecting bank (negotiable bank) for the exporter.

Prime Bank Ltd as an authorized dealer (AD) deals a lot of letter of credit on behalf of

beneficiary. Here Prime Bank Ltd acts as an advising or negotiating bank which advice the L/Cs.

Now the whole process of export in pictorial format is given below



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Figure-6: Export procedure in pictorial format

No

Negotiate documents Yes

N

o

Send the docs for collection

Dispatch the docs and claim Reimbursement

Are the discrepancies removed?Inform opening Bank

of the discrepancies

Do they allow Negotiation?

Check whether the Nostrum A/C is

credited or not

Y

e

Lodgment of FDBP

N

o

Send Reminder to L/C issuing Bank

Receiving L/C from buyer’s Bank through an advising Bank in Bangladesh

Pre-shipment finance (Back to Back L/C, PC)

Certification of EXP form by Authorized Dealer

Shipment of goods by Exporter and submission of export docs to negotiating Bank

Scrutinizing Export Document by negotiating Bank

Are the document in order?Ask the customer to remove discrepanciesNo

Registration with CCI&E

Y

e

s



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3.8.1 Documents Required For Export Transaction

There are two types of document for export transaction. They are Substantive Document and

auxiliary document. The name of the documents under these two categories is given below:

Substantive Document:

o Draft or bill of exchange.

o Commercial Invoice.

o Bill of Lading or Airway Bill.

o Marine Insurance Policy.

Auxiliary Document:

o Packing List.

o

Consular Invoice.

o

Certificate of Origin

o

Quality Control Certificate.

o GSP Certificate.

o Inspection Certificate.

Other documents and formalities:

For Export of jute, jute goods, tea and tobacco, an exporter, in addition to Export

Registration Certificate, needs a separate license to be issued by the concerned agencies.

Sanitary certificate is required for all livestock and plants and plant products (except fruit

and vegetable) certifying that they are free of injurious insects, pests and diseases.

3.8.2 Registration of Exporters

Under the export policy of Bangladesh the exporter has to get valid Export registration

Certificate (ERC) from Chief Controller of Import & Export (CCI&E). The ERC is required to

renew every year. The ERC number is to incorporate on EXP forms and other papers connected

For obtaining ERC, intending Bangladeshi exporters are required to apply to the controller/ Joint

Controller/ Deputy Controller/ Assistant Controller of Imports and Exports, Dhaka/ Chittagong/

Raishahi/ Mymensingh/ Sylhet/ Comilla/ Badshal/ Bogra/ Rangpur/ Dinajpur in the prescribed

form along with the following documents:



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a. Nationality and Assets Certificate-

b. Memorandum and Article of Association and Certificate of Incorporation in case of

Limited Company-,

c. Bank Certificate

d. Income Tax Certificate

e. Trade License etc. with exports.

3.8.3 Securing the Export Order

After getting ERC Certificate the exporter may proceed to secure the export order. He can do

this by contacting the buyers directly or through agent. In this purpose the exporter may get help

from:

a. License Officer

b. Buyers Local Agent

c. Export Promoting Organization

d. Bangladesh Mission Abroad

e. Chamber of Commerce (local & foreign)

f. Trade Fair etc.

3.8.4 Signing the Contract & Receiving Letter of CreditAfter communicating buyer, exporter has to get contracted (writing or oral) for exporting

exportable items from Bangladesh detailing commodity, quantity, price, shipment, insurance and

marks, inspection and arbitration etc. After getting contract for sale, exporter should ask the

buyer for Letter of Credit (L/C) clearly stating terms and conditions of export and payment.

The following are the main points to be looked into for receiving/ collecting export proceeds by

means of Documentary Credit-.

The terms of the L/C are in conformity with those of the contract"

The L/C is an irrevocable one, preferably confirmed by the advising bank;

The L/C allows sufficient time for shipment and negotiation.

(Here the regulatory framework is UCPDC-500, ICC publication)



66


Terms and conditions should be stated in the contract clearly in case of other mode of payment:

(a) Cash in advance-,

(b) Open account,

(c)

Collection basis (Documentary/ Clean)

(Here the regulatory framework is URC-525, ICC publication)

3.8.5 Export Financing

Financing exports constitutes an important part of a bank's activities. Exporters require financial

services at four different stages of their export operation. During each of these phases exporters

need different types of financial assistance depending on the nature of the export contract.

1. Pre-shipment credit

2. Post-shipment credit

1. Pre-shipment credit:

Pre-shipment credit, as the name suggests, is given to finance the activities of an exporter prior to

the actual shipment of the goods for export. The purpose of such credit is to meet working

capital needs starting from the point of purchasing of raw materials to final shipment of goodsfor export to foreign country. Before allowing such credit to the exporters the bank takes into

consideration about the credit worthiness, export performance of the exporters, together with all

other necessary information required for sanctioning the credit in accordance with the existing

rules and regulations. Pre-shipment credit is given for the following purposes-

a.

Cash for local procurement and meeting related expenses.

b. Procuring and processing of goods for export.

c.

Packing and transporting of goods for export.

d. Payment of insurance premium.

e. Inspection fees.

f. Freight charges etc.



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An exporter can obtain credit facilities against lien on the irrevocable, confirmed and unrestricted

export letter of credit in form of the followings-.

a. Export cash credit (Hypothecation)

b.

Export cash credit (Pledge)

c. Export cash credit against trust receipt.

d. Packing credit.

e. Back to back letter of credit.

f. Credit against Red-clause letter of credit.

3.8.6 Popular Form of Pre Shipment Credit

3.8.6.1 Packing Credit:

Packing Credit is essentially a short-term advance granted by a Bank to an exporter for assisting

him to buy, process, manufacture, packs and ships the goods. Generally for movement of goods

from the hinterland areas to the pots of shipment the Banks provide interim facilities by way of

packing credit.

This type of credit is sanctioned for the transitional period starting from dispatch of goods till the

negotiation of the export documents. Practically except for single transaction, most of the pre-

shipment credits are allowed in the form of limits duly sanctioned by Bank in favor of regular

exporters for a particular period. The drawings are required to be adjusted fully once within a

period of 3 to 6 months. Suiting to the breed and nature of export, sometimes an exporter may

also be allowed to avail a combined Cash Credit and Packing Credit limit with fixed ceiling on

revolving basis. But in no case the borrower would be allowed to exceed individual credit limit

fixed for the purpose. The drawings under Export Cash Credit limits are generally adjusted by

the drawing in packing credit limit, which is, in turn liquidated by the negotiation of export

documents.



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3.8.6.2 Charge Documents for P.C:

Banker should obtain the following charge documents duly stamped prior to disbursement:

Demand Promissory Note

Letter of Arrangement

Letter of Lien of Packing Credit (On special adhesive stamp)

Letter of Disbursement

Packing Credit Letter

3.8.6.3 Additional Documents for P.C.

Letter of Partnership along with Registered Partnership Deed in case of Partnership

Accounts.

Resolution of the Board of Directors along with Memorandum & Articles of association in

case of Accounts of Limited Companies. In case of Corporation, Resolution of the Board

Meeting along with Charter.

Personal Guarantee of all the Partners in case of Partnership Accounts and all the Directors

in case of Limited Companies.

An undertaking from the Directors of the Public Limited Company to obtain prior clearance

from the Bank before declaring any intend/final dividend.

3.8.6.4 Back to Back Letter of Credit (BTBL/C)

Bangladesh is a developing country. After receiving order from the importer, very frequently

exporters face problems of scarcity of raw material. Because, some raw materials are not

available in the country. These have to be collected from abroad. In that case, exporter gives lienof export L/C to bank as security and opens an L/C against it for importing raw materials. This

L/C is called Back To Back L/C. In back to back L/C, PBL keeps no margin.



69


Sometimes there is provision in the export L/C that the importer can use the certain portion of

the export L/C amount for importing accessories that are necessary for the making of the

product. Only in that case, BTB is opened.

Payment of Back to Back LC:

Client gives the payment of the BTB L/C after receiving the payment from the importers. But in

some cases, client sells the bills to the PBL. But if there is discrepancy, the PBL sends it for

collection.

In case of BTB L/C, PBL gives the payment to the beneficiary after receiving the payment from

the finished product (i.e. exporter). Bank gives the payment from DFC Account (Deposit

Foreign Currency Account) where Dollar is deposited in national rate.

For BTB L/C, opener has to pay interest at LIBOR rate (London Inter Bank Offering Rate).

Generally LIBOR rate fluctuates from 5% to 7%.

A schedule named Payment Order; Forwarding Schedule is prepared while making the payment.

This schedule contains the followings:

Reference number of the beneficiary's bank and date.

Beneficiary's name.

Bill value.

Payment order number and date.

Equivalent amount in Taka.

3.8.6.5 Entitlement of BTB LC as per Import Policy Order 2010 – 2013

BTB LC entitlement of garments items are assessed on the basis of value addition to be madedepending on the category of garments in line with the import policy in order, which are as

under:

Knit Garments : Value addition at least 20%

Woven Garments ( Non Quota) : Value addition at least 20%



70


Woven Garments (Quota) : Value addition at least 20% for FOB value of

exportable goods up to US$.40/Dz

High value Garments ( Non Quota) : Value addition at least 10% for FOB value of

exportable goods at least US$.60/Dz

High value Garments (Quota) : Value addition at least 15% for FOB value of

exportable goods at least US$.60/Dz

2. Post Shipment Credit:

This type of credit refers to the credit facilities extended to the exporters by the banks after

shipment of the goods against export documents. Necessity for such credit arises as the exporter

cannot afford to wait for a long time for without paying manufacturers/suppliers. Before

extending such credit, it is necessary on the part of banks to look into carefully the financial

soundness of exporters and buyers as well as other relevant documents connected with the export

in accordance with the rules and regulations in force. Banks in our country extend post shipment

credit to the exporters through-.

Negotiation of documents under L/C

Foreign Documentary Bill Purchase (FDBP)-.

Advances against Export Bills surrendered for collection;

Negotiation of documents under L/C:

The exporter presents the relative documents to the negotiating bank after the shipment of the

goods; a slight deviation of the documents from those specified in the L/C may raise an excuse to

the issuing bank to refuse the reimbursement of the payment already made by the negotiating

bank. So the negotiating bank must be careful prompt, systematic and indifferent while

scrutinizing the documents relating to the export.

Foreign Documentary Bill Purchase (FDBP):

Some clients of the bank always enjoy credit facilities against their export documents. They

submit the bill of export to bank for collection and payment of the BTB UC. In that case, bank

purchases the bill and collects the money from the exporter. PBL subtracts the amount of bill



71


from BTB and gives the rest amount to the client in cash or by crediting his account or by the

pay order.

For this purpose, PBL maintains a separate register named FDBP Register. This register

contains the following information:

Date

Reference number (FDBP)

Name of the drawer

Name of the collecting bank

Conversion rate

Bill amount both in figure & in Taka.

Export form number

Export L/C number

Advances against Export Bills surrendered for collection:

Banks generally accept bills for collection of proceeds when they are not drawn under an L/C or

when the documents, even though drawn against an L/C contain some discrepancies. The bank

generally negotiates bills drawn under L/C, without any discrepancy in the documents, and the

exporter gets the money from the bank immediately. However, if the bill is not eligible for

negotiation, the exporter may obtain advance from the bank against the security of export bill. In

addition to the export bill, banks may ask for collateral security like a guarantee by a third party

and equitable/registered mortgage of property.

3.8.7 Certification of Exp Form by Authorized Dealer

Before lodging the EXP Forms with the customs/ Postal authorities, the exporter should getcopies of forms certified by an AD. Now the AD will see and ensure that each set of the forms is

duly filled in. Thereafter, they will record full particulars of the in the Export Register. In order

to avoid any loss of foreign exchange to the country, AD shall not certify any EXP form unless

they have satisfied the following:



72


I. Arrangements made for realization of export proceeds within the prescribed period.

II. The Exp form is either signed either by the exporter or one holding valid legal power

of attorney from the exporter.

III. For delay in repatriation of export proceeds the exporter as well as the AD and its

officials certifying the export form render themselves liable to punitive action under

the FER act. Therefore in their own interest both exporters and the Ads should be alert

and active in ensuring timely repatriation of export proceeds.

3.8.8 Making Out and Delivery of Shipping Documents

In case of export of goods, full payment for which the value has been received by the

exporter in advance through the AD, the bill of lading and other documents may beendorsed by the AD in favor of foreign importers and the same may be sent directly to the

importers abroad by the AD

Sometimes the shipping documents may reach after the arrival of the exported goods to the

importer‟s country. This cause inconveniences and involves payment of demurrage. at the

port of destination due to delay in receipt of the shipping documents. To overcome this

problem, shipping company may at the request of negotiating bank in Bangladesh issue

Telegraphic Delivery Order on their agents. A copy of this document duly authenticated by

the shipping company or agents should be passed on to the relevant AD. The AD then

sends his instruction of telegraphic transfer to hid overseas correspondence to hand over it

to the consignee and stating the amount of the consignee before the delivery order is

released. The usual shipping documents are Bill of Lading, Invoice etc which can be

dispatched to the correspondent bank as well.



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3.8.8.1 Submitting of Documents to the AD

The exporter must submit all the exp documents to the AD. The EXP documents are four in

number. Bank only works with the three copies. The copies are:

1. Original : Retained by customs and forward to Bangladesh bank.

2. Duplicate : Submit to Bangladesh bank with 14 days of shipment through AD along

with invoice.

3. Triplicate: Submit to the Bangladesh bank after realize the export proceeds with the

usual monthly returns.

4. Quadruplicate: Copy retained by AD for record.

3.8.8.2 SCRUTINY OF DOCUMENTS:

The authorized dealer scrutinizes the documents very carefully. Because, they have to report it to

the Bangladesh Bank at the interval of every fifteen days in a month. The following process is

done by the authorized dealer for scrutiny of the documents.

On receipt of the EXP form and documents covering exports the AD compares the

authorized signature with the specimen signature of the duly authorized officer of theshipping company to ensure the genuineness of the documents.

The AD should also compare the relative bill and /or documents with the relative form and

satisfy itself that the declaration made on the form is correct and the amount for which the

bill is drawn or the invoice is written is not less than the invoice value stated on the form.

If the difference between the value stated on the form and the amount of the bill is small

the AD may accept bill /documents for collection. The details of such adjustment must be

given on the relative form and must be authenticated by the AD under its stamp and

signature.

After negotiation of the bill or acceptance of the documents for collection, the ADs

should complete the certificates in this behalf on the space provided on the duplicate

copies of the EXP form.



74


If the payment is received in foreign currency or nonresident taka account of a bank

branch correspondent abroad the Ads shall certify on the reverse of the triplicate copy of

the form retained with them and forward it to Bangladesh Bank with the usual return. The

quadruplicate will be retained by the AD for record.

3.8.8.3 DEDUCTION OF CHARGES:

Commissions, brokerage or other trade charges due to be paid to foreign importers or agents by

the exporters in Bangladesh relating to the particular shipment may be deducted from the

relative bill or the amount of the sale proceeds or remitted from Bangladesh after the full

proceeds have been realized only up to a maximum of 5% by deduction from the invoice value

of the goods. If the rate exceeds then special order must have to be granted from Bangladesh

Bank with some condition.

3.8.9

Foreign Currency Exchange Retention Quota: (FCERQ)

Foreign Exchange retention quota is a system where authorized dealer retained a certain

percentages of the total exported or billed amount for meeting up the emergency need of the

customers.

Merchandise exporters are entitled to a foreign exchange retention quota of 40% of

repatriated value F.O.B value of their exports.

Foreign exchange out of the retention quota may be maintained in FC accounts with the

concerned Ads in US Dollar, Pound Sterling, Deutschemark or Japanese Yen upon the

realization of the export proceeds. Balances in these accounts may be used by the

exporters for bonafide purposes. The purpose may be the following:

o Business Visits Abroad.

o

Participation in Export Fairs and Seminars,

o Establishment and maintenance of offices abroad.

o Import of raw materials.

o Machineries & Spares etc.



75


But Foreign Exchange from the exporter‟s retention quota cannot be used for investment abroad

by the exporter.

Foreign Exchange out of exporter‟s retention quota may also be kept as interest bearing

renewable term deposits with the concerned Ads in Bangladesh in US dollar, Pound

Sterling, DM or Japanese Yen, with minimum balances of US$ 2000, or1500 Pound or

equivalent.

TREATMENT OF FCERQ AT PRIME BANK LTD:

Prime Bank Ltd., maintains different amount in export retention quota based on the negotiation

with the customers or sometimes the department head assumed a particular amount or the full

amount that are transferred to the export retention quota.

The bank maintains its record regarding the bill amount and the realized amount in the

Master L/C file. In that file a separate column is created named FCERQ. After realization of

export proceeds a particular amount is transferred, which may be stated in Export Proceed

Realization Sheet or may be negotiated by the customers later.

3.8.10

Shipment On F.O.B. Terms

Generally goods are exported on F.O.B terms to the exporter‟s country. It means that buyers pay

the carriage when goods pass the ship. The AD should verify that the bills of lading freight has

not been prepaid in Bangladesh. All cases where fright or insurance has been paid in Bangladesh

but export documents are made out on FOB basis should be reported to the Bangladesh Bank.

3.8.11

Short Shipments or Over Shipments

If the amount of bill value and Invoice value differs, at that time short/over

shipment arises. If the invoice value is greater than bill value then over shipment

arises and if it reverses then Short shipment arises. The reason may be:

They differ of quantity shipped than original amount but the rate may be same.

The total price of the goods may be increased or decreased.



76


In all cases of short shipments, the exporters should give notice of short shipment on the

prescribed form in duplicate to the Customs who will forward a certified copy of the notice to the

Bangladesh Bank. The notice should bear the number and date of the relative EXP form in

respect of which goods have been short shipped.

TREATMENT OF SHORT SHIPMENT AT PRIME BANK LTD:

Prime Bank at first checks the difference between Bill Value and Invoice value. If

difference arises then the bank attaches the certificate with duplicate as well as at

triplicate after proceeds realization and then reports it to the Bangladesh Bank.

3.8.12 Lodgment of FDBP

Lodgment of FDBP (Foreign Documentary Bill Purchase) is nothing but purchase of L/C taking

the loan facility provided by the advising or other bank to the exporter against the document and

L/C keeping them as mortgage. The loan facility is given up to a certain percentages of the L/C

Value. In case of Purchase of the L/C by the advising bank or other negotiating bank the bank

will keep a signed copy of guarantee paper named “Set of Charged Documents.” This provides

guarantee that the signed person on that will be liable for amount mentioned in L/C with

maturity with due care and diligence. This is only requirement for the valued client in certain

case. For safety the bank may seek for other necessary documents which must be supported by

the exporter. In this case different collateral has also been taken as for security.

Prime Bank Ltd in case of all the application of regarding FDBP uses Tremendous

Globes‟ (T24), which, purchases and receives the bill at fully automatic system.

3.8.13 Verification of Proceeds Realization Certificate: (PRC)

Sometimes exporters are required to submit to the various Government agencies evidence of

export and of realization of export proceeds. In such cases, Proceeds Realization Certificate may

be issued by the ADs in the prescribed form after getting them authenticated by the Bangladesh

Bank.



77


Prime Bank Ltd at the last phase of its documentary work, Check the PRC from its

record of Quadruplicate EXP form very carefully and make necessary amendment. After

that necessary amendment it submits the certificate to the Bangladesh Bank. In this way

all the documentary work related Letter of Credit is completed

3.8.14 Export Portfolio of Prime Bank Ltd.

Export Portfolio consists of the items exported, the value of export bills that Prime Bank gets

from issuing banks from foreign countries as well as Bangladesh. Various sorts of commodities

are exported abroad through Prime Bank Ltd. But Readymade Garments consist of most of the

foreign exports. Other exported items are shrimp, jute and jute goods, leather tobacco, ceramic

tiles, fresh vegetables, tempered coated glass, bone crust, betel- nut etc.

There are two modes of export payments that are practiced in foreign trade worldwide. They are

1. Sight Bill: In this bill the exporters are paid at sight for the products they just exported.

2. Usance Bill: In this bill the exporter gets payment after a certain period of time

depending on the L/C terms and condition. This bill is usually for raw materials or semi

finished products that are exported from Bangladesh and once the goods reach in final

destination they are employed for further processing.

Foreign Export: In the bank foreign export activities play a vital role in the export division.

About 75% of the total export comes from this section. At this bank majority of the foreign

exports are “Readymade garments.”

Local Export: Local export indicates that goods are exported within the boundaries of

Bangladesh. Local exports consist 25% of the total export as it is not very common practice

in Bangladesh. “Yarn and Accessories” are the main commodities of the local export at this

branch.



78


3.9 Foreign Remittance Section of Prime Bank Ltd.

The functions of this department are outward and inward remittances of foreign exchange from

one country to another country. In this process of providing this remittance service, it sells and

buys foreign currency.

3.9.1 Modes of Foreign Remittances

The remittance process involves the following four modes:

Cash Remittance:

The bank sells dollar/pound for using the abroad by purchaser. The maximum amount of

such sell is mentioned in the Bangladesh bank publication of "Convertibility of Taka for

current transactions In Bangladesh". They can purchase dollar from resident and nonresident

Bangladeshi or foreigner. Most dollars purchased cones from realization of Export Bill of

Exchange.

Traveler's Cheque:

Traveler's cheques are useful to persons, who frequently traveled abroad this bank issue

Traveler's cheque of AMEX. Customers can en-cash the TC in abroad from t he drawer‟s

bank. Customers buy TC for use in abroad. But some leave may be remained unused. The

customer can surrender these unused leaves against payment of equivalent amount. Generally

it takes 21 days for collection of TC and customers can draw cash after one month.

Telex Transfer:

Bank also remit fund by tested telegraphic massage via its foreign correspondence bank in

which it is maintaining its NOSTRO account. In the same manner, it makes paymentaccording to telegraphic massages of its foreign correspondence bank from the corresponding

VOSTRO account.



79


Foreign Demand Draft:

Bank issues demand draft in favor of purchaser or any other according to instruction of

purchaser. The payee can collect it for- the drawer bank is which the issuing bank of demand

draft holds it NOSTRO account. Bank also makes payment on DD drawn on this bank by its

foreign correspondence bank through the VOSTRO account.

3.9.2 Scenario of Foreign Remittance of Prime Bank Ltd.

Prime Bank Ltd maintains strategic initiative to handle this department. The bank has already

added a good number rural and semi urban branches with the existing network to ensure wider

reach and coverage.

For purchase of foreign currency through Prime Bank Limited, an application must be made to a

specific AD branch and Bangladesh Bank. The application form is called IMP () form if the

purpose is import payments or for other purposes, the TM Form is used such as request for

foreign currency in case of dollar. T.C (Traveler cheques) Foreign Demand Draft (F.D.D),

Telegraphic Transfer (T.T).etc, If the bank is empowered to approve the application, it affects the

sale of foreign exchange. And if the transaction requires prior Approval from Bangladesh Bank,

the T.M form is forwarded to Bangladesh bank. In Prime Bank, (the mode of remittances are

bank draft, mail transfer and taka remittances.

I nward Remittances: Inward Remittances include the TT, FDD, purchase of bills and

drafts under L/C, purchase of foreign currency, etc. But the most significant amount in

the inward remittances of Prime Bank Limited is the remittances from wage earners. The

bank maintains proper records of ail inward remittances and provides particulars asrequired by the Exchange Policy Department of Bangladesh Bank in Returns.

Outward Remittances: The outward remittances include M.T, Draft, sale of Foreign

Exchange under L/C and against Import Bills, etc .To facilitate foreign exchange

transaction, and each bank maintains accounts with foreign banks in principal financial



81


Foreign Remittance:

“Foreign Remittance" means purchase and sale of freely convertible foreign currencies as

admissible "Foreign Exchange Regulations Act- 1947" and "Guidelines for Foreign Exchange

transaction -VOL. 172 of the country. Purchase of foreign currencies constitutes inward foreign

remittance and sale of foreign currencies constitutes outward foreign remittance26

Functions:

Exports:

1. Pre-shipment advanced.

2.

Purchase of foreign bills.

3. Negotiating of foreign bills.

4. Export guarantees.

5.

Advising or confirming letters- letter of credit.

6. Advance for deferred payments exports.

7. Advance against bills for collection.

Imports:

1. Opening of letter of credit.

2. Advance bills.

3. Bills for collection.

4. Import loan and guarantees.

Remittances:

1. Issue of DD, TT, MT etc.

2. Payment of DD, TT, MT etc.

3. Issue and enhancement of travelers check.

4. Sale and enhancement of foreign notes.



82


CHAPTER -04

FOREIGN EXCHANGE

PERFORMANCE OF PRIME

BANK LIMITED



83


4.1 Performance Evaluation Techniques between Export, Import &

Profitability ratio

Generally there are some techniques, which are used in evaluating financial performance of a

firm. Basically this study is going to try the evaluation of the financial performance of PBL

through ratio. So in this chapter, we will discuss the various financial ratio, those are used in

evaluating the performance.

Now, performance evaluation techniques between Export, Import & Profitability ratios are

discussed briefly:-

4.1.1 Exports: The goods and services sold by Bangladesh to foreign households, businessman and government called export. The export trade of the country is regulated by the

import and export (control) Act 1950.

Table-1

Export of PBL for the period (2009-2013)

Year Export(in million taka)

Growth (%)

2009 76,097 100

2010 106,943 140.53

2011 133,396 175.29

2012 143,612 188.72

2013 127,091 167.01

Source: Annual Report of PBL



84


Chart-1

Analysis: From the chart, it is clear that the amount of export is greater than the amount of

import i.e. it indicates a good sign. In table & graph we see that, from 2009-2012 export &

growth rate will be increases but from 2012-2013 export & growth rate will be decreases.

4.1.2 Imports: Import of goods into Bangladesh is regulated by Ministry of commerce and

industry in terms of the Import and Export and (control) Act 1910, with import policy ordersissued by annually and public notice issued from time to time by the office of the chief controller

of import and export.

Table: 2

Imports of PBL for the period (2009-2013)

Year Import

(in million taka)

Growth (%)

2009 96,452 100

2010 147,704 153.132011 174,384 180.79

2012 168,532 174.73

2013 133,219 138.11


76,097

106,943

133,396143,612

127,091

2009 2010 2011 2012 2013

Export

Export



85


Chart: 2 Imports

Analysis : In this table and graph we see that from 2009-2011 import will be increases but from

2011-2013 import will be decreases. On the other hand growth rate will be the as import up &

down.

4.1.3 Foreign Remittance:

Table-3

Foreign Remittance of PBL for the period (2009-2013)


96,452

147,704

174,384168,532

133,219

2009 2010 2011 2012 2013

Column1

Year Foreign Remittance

(in million taka)

Growth

(%)

2009 26447 100.00

2010 28433 107.50

2011 36890 139.48

2012 42443 160.48

2013 32628 123.37



86


Analysis : Foreign remittance of PBL for the period (2009-2013) we see from 2009-2012 its

growth rate increases & from 2012-2013 its growth rate decreases.

Chart: 3

Foreign Remittances

Analysis: From the chart, it is clear that the amounts of foreign remittance are increased from

2009-2012 but from 2012-2013 foreign remittance are decreased.

4.1.4 Net Profit after Tax: Table: 4

Net Profit after Tax of PBL of PBL for the period (2009-2013)

Sources: Annual Report of PBL

26,447 28,433

36,89042,443

32,628

100%107.50%

139.48%

160.48%

123.37%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2009 2010 2011 2012 2013

Chart Title

Growth

Foreign Remittance

Year Net profit after tax

Million Taka

Growth

(%)

2009 2784 100.00

2010 3102 111.42

2011 3634 130.53

2012 2699 96.94

2013 1829 65.69



87


Analysis: From NPAT table we see, 2009-2011 NPAT growth will be increases but 2012-2013

its growth will be decreases.

Chart: 4

Net profits after Tax

Analysis: From the chart it is clear that the amounts of net profit after tax are increased every

year. It indicates a good sign. But from in 2012-2013 NPAT are decreased.

4.1.5 Number of Foreign Correspondents:

Table: 5

Number of Foreign Correspondents of PBL for the period (2009-2013)

Year No of Foreign

Correspondent

Growth (%)

2009 602 100%

2010 621 103.15

2011 644 106.97

2012 660 109.63

2013 661 109.80


100%

111.42%

130.53%

96.94%

65.69%

0

500

1000

1500

2000

2500

3000

3500

4000

2009 2010 2011 2012 2013

Net Profit after Tax

Growth



88


Chart: 5

Number of Foreign Correspondents

Analysis: In the chart, we can see that the no. of foreign correspondent is increased gradually.

4.1.6 Number of Branches:

Table -6

No of branches of PBL for the period (2009-2013)

Year No. of Branches Growth (%)

2009 84 100%

2010 94 111.90

2011 102 121.42

2012 113 134.52

2013 117 139.28


602

621

644

660

661

No of Foreign Correspondent

2009 2010 2011 2012 2013



90


111.38%

65.69%

100%130.53%

96.94%

0

1000

2000

3000

4000

2009 2010 2011 2012 2013

Chart Title

Series 5

Series 4

Series 3

Series 2

Series 1

Analysis: The above table confirms that import rise overtime duly. From 2011-2012,Profit of the

PBL rise from BDT 3634.00 million to BDT 2699.00 million, because the businessman was

divert there investment into PBL highly day by day so gradually profit of the bank rises and

stood at 2699.00 million in year 2012. But in the year 2013 profit of the bank decreases and

stood at 1,829.00 million.

Chart-7

Perf ormance in Profi t And L oss

Chart: Perf ormance in Profi t And Loss

4.3 Performance in Authorized capital & paid Up Capital

Table-8

Performance in Authorized capital & paid up CapitalIn million

Year Authorized Capital Paid Up Capital Growth of

Paid Up

Capital (%)

2009 10000 3555 100.00

2010 10000 5776 162.47

2011 10000 7798 219.35

2012 25000 9358 263.23

2013 25000 10,293 289.53

Source: Annual report of PBL .

Note: The calcul ations have been made by the researcher.



91


0

10000

20000

30000

40000

2009 2010 2011 2012 2013

100%162.47%

219.35%

263.23% 289.53%

Authorized capital

Paid up capital

Analysis: The above table confirms that authorized capital in 2009-2011 was 10000 million,

after that in 2013 it stood at 25000; the Paid up capital of PBL was 3555 million in 2009 and

5776 million in 2010. From 2011-2012, Paid up Capital rise from BDT 7798 million to BDT

9358 million, the growth was continued till 2013, stood at BDT 10,293 million in value.

Chart: 8

Chart: Perf ormance in Authorized capital & paid Up Capital

4.4 Profitability ratios

Profitability is the net result of a number of policies and decisions. Profitability ratios show thecombined effects of liquidity, asset management and debt on operating results. This ratio

includes.

4.4.1 Return on Assets

This number tells how effective the business has been at putting its assets to work. The ROA is a

test of capital utilization - how much profit (before interest and income tax) a business earned on

the total capital used to make that profit. This ratio is most useful when compared with the

interest rate paid on the company's debt.

Return on Assets (ROA) = Net income after tax /Total assets



92


Table-9

Return on Assets (ROA)

Amount in Million

Particulars 2009 2010 2011 2012 2013

Net income after

tax

2784 3102 3634 2699 1829

Total Assets 124806 154342 199950 236833 243869

Return on Asset 2.23% 2.00% 1.81% 1.13% 0.74%

Growth 100% 89.68% 81.16% 50.67% 33.18%


Note: The calculations have been made by the researcher.

Analysis: Return on asset follows a cyclic trend. It was 2.23% in 2009. In 2010 it decreased to

2.00%. After the decrease in 2010 it started drastically decreasing and turns into 0.74% in 2013.

Chart-9

Char t: Retur n on Assets

4.4.2 Return on Equity

ROE measures banks profitability by revealing how much profit a bank generates with the

shareholders investment. The formula is

Return on Equity (ROE) = Net income after tax/Total equity capital

0.00% 0.50% 1.00% 1.50% 2.00% 2.50%

2009

2010

2011

2012

2013

Return on Assets

ROA



93


Table-10

Return on Equity (ROE):

Amount in Million

Particulars 2009 2010 2011 2012 2013

Net income after tax 2784 3102 3634 2699 1829

Total equity capital 11745 16908 19095 20787 23030

Return on Equity 23.70% 18.34% 19.03% 12.98% 7.94%

Growth 100% 77.38% 80.29% 54.76% 33.50%



Analysis: The return on equity was 23.70% in 2009. After that it started to decrease and became

12.98% in 2012.Then the situation went worst and it turns into 7.94% in 2013.

Chart-10

Chart: Return on Equity

4.4.3 Net interest margin: - is a measurement of the difference between the interest

incomes generated by banks and the amount of interest paid out to their lenders .it examines how

successfully a firm‟s investment decision is compared to its debt situations. A negative value

denotes that the firm did not make an optimal decision. The equation is

NIM= Interest income from loan – Interest expense on deposit /Total asset

0.00%

10.00%

20.00%

30.00%

2009 2010 2011 2012 2013

Return on Equity

ROE



94


Table-11

Net Interest Margin (NIM %)

Year 2009 2010 2011 2012 2013

NIM 2.95% 4.21% 3.19% 3.61% 2.75%

Growth 100% 141.71% 108.13% 122.37% 93.22%



Analysis: In this table we see that from 2009 to 2010 net interest margin is decreased that is

4.21%. But now in 2011 to2013net interest margin will be decreased year after year.

Chart-11

Chart: Net I nterest Margin

4.4.4 Net Operating Margin: - is a measurement of the difference between the interest

incomes generated by banks and the amount of interest paid out to their lenders .it examines how

successfully a firm‟s investment decision is compared to its debt situations. A negative value

denotes that the firm did not make an optimal decision. The equation is

NIM= Interest Income from Loan – Interest Expense on Deposit /Total Asset

0.00%

2.00%

4.00%

6.00%

2009 2010 2011 2012 2013

Net Interest Margin

NIM



95


Table-12

Net Operating Margin (NOM %)

Year 2009 2010 2011 2012 2013

NOM 4.75 4.37 4.04 4.04 3.40

Growth 100% 92% 85.05% 85.05% 71.57%



Analysis: In this table we see that from 2009 to 2013 net operating margin is decreased.

Chart-12

Chart: Net Operating Margin

4.4.5 Earnings per Share (EPS): The portion of a company‟s profit allocated to each

outstanding share of common stock. EPS serve as an indicator of company profitability. It tells

an investor how much of the company‟s profit belongs to each share of stock.

EPS= Net Income after Taxes /No of Shares Outstanding

0.00%

2.00%

4.00%

6.00%

2009 2010 2011 2012 2013

Net Operating Margin

NOM



96


Table-13

Earnings per Share (EPS)

Year 2009 2010 2011 2012 2013

EPS 7.83 5.69 4.70 2.88 1.78

Growth 100% 72.66% 60.02% 36.78% 22.73%



Analysis: In this table we see that from 2009-2013 Earnings per Share will be decrease year after

year.

Chart-13

Chart: Earn ing per Share

0.00%

5.00%

10.00%

2009 2010 2011 2012 2013

Earning Per Share

EPS



97


4.5 Impact of Profitability Ratios on Foreign Trade:

Impact between Export & ROE:

Amount in Million Particulars 2009 2010 2011 2012 2013

Export 76,097 106,943 133,396 143,612 127,091

Return on Equity 23.70% 18.34% 19.03% 12.98% 7.94%

Year Export(X) ROE%(Y) XY Y² X²

2009 76097 23.7 1803498.9 561.69 5790753409

2010 106943 18.34 1961334.62 336.3556 11436805249

2011 133396 19.03 2538525.88 362.1409 177944928162012 143612 12.98 1864083.76 168.4804 20624406544

2013 127091 7.94 1009102.54 63.0436 16152122281

Total ∑X=587139 ∑Y =81.99 ∑XY=9176545.7 ∑Y²=1491.7105 ∑X²=71798580299

Assume: Export=X, ROE=Y

∑xy - ∑x.∑y÷n

Coefficient of Correlation: r= ---------------------------------------------------------

√

9176545.7 -587139*81.99÷5

r=-----------------------------------------------------------------------------------------------

√

-451359.622

r=-------------------------------------------------------------------

648031.36164873

r=−0.6965089171

or, r = −0.70

Analysis: From this calculation we found that, in 2009-2012 export will be increases but in

2012-2013 export will be decreases. On the other hand, in 2009-2013 return on equity will be

decreases. In that case coefficient of correlation (r) will be negative.



98


Impact between Import & ROA:

Amount in Million

Particulars 2009 2010 2011 2012 2013

Import 96,452 147,704 174,384 168,532 133,219

Return on Asset 2.23% 2.00% 1.81% 1.13% 0.74%

Year IMPORT(X) ROA%(Y) XY Y² X²

2009 96452 2.23 215087.96 4.9729 9302988304

2010 147704 2 295408 4 21816471616

2011 174384 1.81 315635.04 3.2761 30409779456

2012 168532 1.13 190441.16 1.2769 28403035024

2013 133219 0.74 98582.06 0.5476 17747301961

Total ∑X =720291 ∑Y=7.91 ∑XY=1115154.22 ∑Y²=14.0735 ∑X²=107679576361

Assume: Import=X, ROA=Y

∑ xy - ∑x. ∑y ÷n

Coefficient of Correlation: r= ---------------------------------------------------------

√

1115154.22−720291*7.91÷5 r=-----------------------------------------------------------------------------------------

√

−24346.142

r=----------------------------------------

6108102332.517

r= −0.0000039859

Analysis: From this calculation we found that, in 2009-2011 import will be increases but in

2011-2013 import will be decreases. On the other hand, in 2009-2013 return on asset will be

decreases. In that case coefficient of correlation (r) will be negative.



100


5. Problems

When I will prepare this report then i will face some problems which are given below:

Problems Descriptions

Unsatisfied

Demographic

segments

The bank should concentrate on the various demographic segments that

are currently not very satisfied with the bank services. Product services

should be tailored for these segments. Appropriate research and surveys

should be designed to find out the requirements of these dissatisfied

segments. On the other hand, the bank should capitalize on the segments

that are currently very satisfied with the services.

Lack of

performance The bank is constantly can‟t expend its performance.

Lack of

evidence

The empirical evidence of the product suggests that it is performing not

well and contributes a good portion to the overall profitability of the

bank.

Customer

preferences

Existing products have been gradually improved according to the choices

of the customers and for their satisfaction.

Not Suitable

Market rate

This is the responsibility of the treasury back-office to check for whether

all deals have been dealt at market rates on daily basis. But it was found

that they sometimes do the deals slight below the market rate basing on

the relationship with the customers.

Lack of

Guarantee

In several cases, for opening L/C, the Corporate Guarantee is not

obtained.

Guilty of loan

process

Although the current offering for the personal loan is not lucrative one,

there is still scope for further improvement which would not be

beneficial for the bank as well as the customers.



102


Lack of

Marketing

Activities:

PBL does not promote itself for catering its services to the public or the

Business organization.

Lack of

favorable

market

image:

PBL has a higher book value per share but market value per share is very

low corresponding to its book value.

Insincerity

by employee

Bank should protect its interest by collateral securities of immovable

assets. However in two cases the researcher found that Prime Bank ‟s

interest is not protected by collateral securities of immovable assets.

Notarized Power of Attorney empowering the Bank to sell hypothecatedgoods was not obtained.

Though Prime Bank is providing a very efficient Foreign Exchange services, there is also room

for improvement to provide their services even better and of international standards. Some

recommendations that the Bank may benefit from are given next chapter.



103


CHAPTER -06

Findings, Policy Implication &

Conclusions



104


6.1 Summary of the Study

Prime Bank Limited is one of the leading private banks in the country. The findings of

the report are-

In this report Researcher found that from 2009-2013 Export and its growth rate trend

will be up & down and also Import and its growth rate trend will be up & down.

Researcher found that Foreign remittance will be increases from 2009-2012 and next year

it will be down.

In this report Net Profit after Tax will be increases from 2009-2011. But it will be

decreases from 2012-2013.

In this report, Number of Foreign Correspondent is increased gradually.

Researcher found that Number of Branch is increased gradually.

In 2009-2013 Performance in Profit & Loss will be Up & Down. Also Performance in

Authorized & Paid up capital will be increases year by year.

In PBL Return on Assets will be decreased gradually year by year and Return on Equity

will be down year after year.

The bank use online technology, as a result, the customer can get the fastest service from

the bank.

Net Interest Margin will be Up & Down from 2009-2013. But from 2009-2013 Net

Operating Margin will be decreases and EPS will be decreases year after year.

In this report, Researcher found that Coefficient of Correlation (r) between Export &

ROE and Import & ROA will be negative results. That‟s why Export & Import trend will

be negative in recent year.



105


6.2 Policy Implication

Satisfied

Demographic

segments

The bank should capitalize on the demographic segments that are

currently very satisfied with the services.

Improvingperformance

The bank is constantly expanding and improving its performance.

Existing products come with new attractive features to their customers.

Availability

of evidence

The empirical evidence of the product suggests that it is performing quite

well and contributes a good portion to the overall profitability of the

bank.

Customer

preferences

New products have been gradually improved according to the choices of

the customers and for their satisfaction.

Guarantee In several cases, for opening L/C, the Corporate Guarantee is obtained.

Clear of loan

process

Although the current offering for the personal loan is a lucrative one,

there is still scope for further improvement which would be beneficial

for the bank as well as the customers.

Customer

selection

Though bank takes protective measures so that proper customer selection

is made but in reality often adverse selection is made.

Political

Stability

Political Stability is favorable for Bank Business in Bangladesh.

Positive

Banking

Market:

All kinds of commercial Bank are serving in our commercial Banking

Market. So, all banks should follow the rules and regulation of

Bangladesh bank.



106


Low rate of

Government

security:

Practically, the Government security likes Bond, Security, Debenture;

Savings certificate etc. gives low rate of interest than commercial Bank.

Suitable

Market rate

This is the responsibility of the treasury back-office to check for whether

all deals have been dealt at market rates on daily basis.

modern tools

andtechniques:

PBL performing activities by using updated tools and techniques. It is

fully far from information technology.

Proper

training:

PBL should be arranging adequate training. Though PBL has its own

training center, it is adequate for its employees. Because, it is well

furnished to with this modern world.

Marketing

Activities:

PBL does promote itself for catering its services to the public or the

Business organization.

Favorable

market

image:

PBL has a higher book value per share but market value per share is very

high corresponding to its book value.

Sincerity by

employee

Bank should protect its interest by collateral securities of immovable

assets. However in two cases the researcher found that Prime Bank‟s

interest is protected by collateral securities of immovable assets.

Notarized Power of Attorney empowering the Bank to sell hypothecatedgoods was obtained.



107


6.3 CONCLUSIONS

Bank is a very important and vital for economic development in mobilizing capital and other

resources. PBL is also contributing to the advancement of the socioeconomic condition of the

country. To keep pace with the current market and demand, PBL is following several strategies

and taking new initiatives, offering new products and services to the customers. The bank should

maintain well-structured communication from upper level to lower level. PBL have a strong

position in the competitive market. It is among one of the fastest growing Bank. As the economy

of Bangladesh is increasing so is the foreign trade and PBL Bank like always have played its role

in making sure that things go smoothly. The bank is doing its best to provide better Import,

Export and Remittance services to the customers. Export, Import and Remittance are all showing

positive trends even after the global challenges that we are facing today. But the foreign trade

handled by bank decreased in recent year, this may be because of opening of new branches in

different business centers and the instability in the economy of the world. . According to the

economic cycle, the more export finance, the more employment, the more income, the more

saving and the more investment again. Prime Bank Limited is doing the needful according to the

earlier mentioned economic cycle. Not only PBL but all banking industry should be come

forward to develop and enriched foreign trade procedure and its finance and then it is possible to

demark in the banking industry.



108


Appendix & Abbreviation



109


Appendix

Reports and Brochures

Annual Report of Prime Bank Ltd 2009





Training book of Prime Bank Ltd

Textbooks

David A. & Stephen P. (2000) Human Resource Management; 17th Ed.

Hemple, George H. Bank Management, 2nd edition, 1986, John Wiley & Sons

Hemple, George H; (2008) Bank Management; Publisher, Mirpur, Dhaka.

Websites

www.primebank.com.bd

www.bangladeshbank.org.bd

www.google.com.bd

http://www.primebank.com.bd/

http://www.bangladeshbank.org.bd/

http://www.google.com.bd/

http://www.google.com.bd/

http://www.bangladeshbank.org.bd/

http://www.primebank.com.bd/



110


Five Years Performance of Prime Bank Ltd.

Key Financial Data & Key Ratios - PBL

Particulars 2009 2010 2011 2012 2013

Interest income 10,856 12,147 16,709 22,822 22,011

Interest expenses 8,426 7,824 12,648 17,410 17,678

Net interest income 2,430 4,323 4,061 5,411 4,332

Investment income 3,372 2,632 4,157 4,633 5,583

Commission, exchange and brokerage 1,749 2,262 2,689 2,429 2,155

Other Operating Income 644 579 652 1,018 813

Operating Income 8,196 9,795 11,559 13,492 12,883

Operating expenses 2,907 3,618 4,132 4,941 5,409

Earning before interest, depreciationand tax 13,175 13,643 19,666 23,024 21,422

Profit before provision and tax 5,289 6,177 7,427 8,551 7,474

Provision for loans and assets 700 540 661 3,216 4,029

Profit after provision before tax 4,029 5,637 6,766 5,335 3,445

Tax including deferred tax 1,805 2,535 3,132 2,636 1,616

Profit after tax 2,784 3,102 3,634 2,699 1,829

Balance Sheet

Authorized capital 10,000 10,000 10,000 25,000 25,000

Paid-up capital 3,555 5,776 7,798 9,358 10,293

Total shareholders' equity 11,745 16,908 19,095 20,787 23,030

Deposits 106,956 124,574 159,816 182,053 201,907

Long-term liabilities 38,209 47,918 63,379 84,827 91,424

Loans and advances 89,252 116,057 138,848 160,890 153,589

Investments 19,934 20,484 39,172 49,670 56,940

Property, Plant and Equipment 1,573 1,695 3,975 4,363 6,407

Earning assets 109,905 137,577 179,537 212,204 211,399

Net current assets 3,435 7,349 2,262 2,735 15,023

Total assets 124,806 154,342 199,950 236,833 243,869

Total liabilities 113,061 137,434 180,856 216,046 220,839

Current ratio 1.05 1.09 1.02 1.02 1.12

Gearing ratio 80.56 76.98 77.88 80.97 80.67

Quick ratio 1.05 1.09 1.01 1.01 1.12

Cash Reserve Ratio 6.04 6.70 6.22 6.06 6.97

Staturory liquidity Ratio 28.50 26.00 32.96 34.02 38.39



111


Equity debt ratio (%) 10.39 12.30 10.56 9.62 10.43

Other Business

Import 96,452 147,704 174,384 168,532 133,219

Export 76,097 106,943 133,396 143,612 127,091

Remittance 26,447 28,433 36,890 42,443 32,628Guarantee Business 13,673 29,000 27,844 29,391 31,170

Capital Measures (Consolidated)

Total risk weighted assets 82,710 183,747 194,380 205,103 222,791

Core capital (Tier-I) 9,057 15,791 18,744 20,664 21,708

Supplementary capital (Tier-II) 3,112 5,692 5,485 5,252 5,104

Total capital 12,168 21,483 24,229 25,916 26,812

Tier-I capital ratio 10.95 8.60 9.64 10.08 9.74

Tier-II capital ratio 3.76 3.09 2.82 2.56 2.29

Total capital ratio 14.71 11.69 12.46 12.64 12.03 Credit Quality

Non-performing loans (NPLs) 1,149 1,368 1,908 6,168 7,815

NPLs to total loans and advances (%) 1.29 1.18 1.37 3.83 5.09

Provision for unclassified loans 1,303 1,463 1,725 2,025 1,691

Provision for classified loans 631 642 778 1,949 3,733

Share Information

Market price per share (Taka) 65.30 94.45 44.50 37.00 25.90

No. of shares outstanding (Million) 355.47 577.64 779.81 935.77 1029.35

No. of shareholders (actual) 10,339 19,748 26,030 23,964 25,632

Earnings per share (Taka) 7.83 5.69 4.70 2.88 1.78

Dividend: 40% 40% 30% 20% 12.50%

Cash 10% 5% 10% 10% 12.50%

Bonus 30% 35% 20% 10% -

Effective dividend ratio (%) 44.44 49.52 40.21 21.82 13.10

Dividend cover ratio (times) 1.96 1.42 1.57 1.44 1.42

Dividend yield (%) 6.13 4.23 6.74 5.41 4.83

Market capitalization (Million) 23,212 54,572 34,702 34,624 26,660

Net asset value per share (Taka) 33.04 29.27 24.49 22.21 22.37

Price earning ratio (times) 8.34 16.60 9.47 12.85 14.57

Operating Performance Ratio (%)

Net Interest Margin (NIM) 2.95 4.21 3.19 3.61 2.75

Net non-interest margin on averageearning assets

2.72 1.50 2.12 1.60 1.48

Earning base in assets (average) 89.34 88.66 89.51 89.69 88.12



112


Gross profit ratio 49.31 55.60 47.75 43.66 42.15

Net interest income as a percentage ofworking funds

2.07 3.10 2.29 2.48 1.80

Profit per employee 2.87 2.89 3.24 3.36 2.76

Operating profit as a percentage ofworking funds 4.50 4.43 4.19 3.92 3.11

Cost-income ratio 35.47 36.94 35.75 36.62 41.98

Credit-deposit ratio 83.45 93.16 86.88 88.38 76.07

Cost of funds on average deposits 8.41 6.39 8.15 8.75 8.80

Yield on average advance 13.16 11.76 13.09 15.17 13.85

Return on assets 2.23 2.00 1.81 1.13 0.74

Return on equity 23.70 18.34 19.03 12.98 7.94

Return on Capital Employed 10.59 9.53 9.01 8.10 6.53

Other information

No. of branches 84 94 102 113 117

No. of SME branches/centers 5 14 17 17 17

Number of ATM 39 43 81 134 151

No. of employees 1,844 2,139 2,292 2,544 2,710

No. of foreign correspondents 602 621 644 660 661

Average earning assets 105,083 123,741 158,557 195,871 211,802

Average total assets 117,622 139,574 177,146 218,392 240,351

Average deposits 97,488 115,765 142,195 170,934 191,980

Average loans & advances 82,204 102,654 127,452 149,869 157,239

Average equity 9,221 14,327 18,002 19,941 21,908



IRC: Import Registration Certificate

L/C: Letter of Credit

LCAF: Letter of Credit Authorization Form

LIM: Loan against Imported Merchandise

LTR: Loan against Trust Receipt

PAD: Payment against Document

PO: Payment Order

PSI: Pre Shipment Inspection

SOD: Security Overdraft

STD: Short Term Deposit

SWIFT: Society for Worldwide Inter-bank Financial

TC: Travelers Cheque

TIN: Tax Identification Number

TR: Truck Receipt

TT: Telegraphic Transfer

UCPDC: Uniform Custom & Practice for Documentary Credit.