Introduction:Bank is defined as a financial institution that collects deposits from various individual and organizations and provides loans to those who need it. But modern banks do not mean only the means of collecting and disbursing money to various entities. Rather it provides various services to various entities which facilitate their business operations. A foreign exchange operation of banks is one of those services that not only facilitates the business of businessmen but also contributes to the development of the economy as a whole. Foreign exchange is defined as the mechanisms by which the currency of one country is converted into the currency of another country. Foreign exchange is the means and methods by which rights to wealth in a countrys currency are converted into rights to wealth in another countrys currency. Foreign exchange department of banks plays significant roles through providing different services for the customers.1.1. Background of the Mercantile Bank Limited (MBL):Mercantile Bank Limited, incorporated on May 20, 1999 and commenced business on June 02, 1999, is now one of the most important entity in the banking industry of Bangladesh. With the passage of time it has expanded its number of branches and variety of services along with its core business of taking deposits and granting loans. Now MBL has emerged as a new commercial bank to provide efficient banking services and to contribute socio-economic development of the country. Rising trend of the banks profitability over the last 8 years is also materialized. The MBL is committed to the delivery of the superior shareholders value. Foreign Exchange Department of the bank is one of the most important departments. Now it has become the backbone of the bank. With the aim to be the Bank of choice, it is operating in the industry with a team of devoted personnel to excel both their own career and the banks future.1.2. Origin of the study:This report is originated as the course requirement of the BBA program under the business studies faculty of Stamford University Bangladesh. Under this program students of every department of this faculty must go through an internship program of 3(Three) months duration. As practical orientation is an integral part of the BBA degree requirement, I was sent by the department of Finance to take real life exposure of the activities of banking financial institutions from July 16, 2009 to October 18, 2009.1.3. Background of the Study:Mercantile Bank Limited (MBL) is one of the risen Banks in Bangladesh. This year they have declared 40% dividend to their shareholders. This Bank has already 42 branches located in different places and also going to establish more branches.The Internship program is an essential and mandatory of the BBA Program of Stamford University Bangladesh. After completion of four years theoretical training, I got the opportunity as a practical exposure to business horizon through internship program. Mercantile Bank Limited is one of the well- reputed private commercial bank of Bangladesh with paid up capital of BDT 1,798.68 (in million, 2008). Banks strong capital base allows it to make large chunk of advances to its corporate clients.My internship supervisor and respected teacher Md. Ifte Kharul Alam, Assistant Professor & HOD Finance, Department of Business Administration, Stamford University Bangladesh, assigned me the topic A study on the Foreign Exchange Operations of Mercantile Bank Limited. I hope this report would able to portray the real picture of the operation of foreign exchange department of Mercantile bank Ltd.1.4. Rationale of the Study:This report is broadly organized into two broad parts. The first part (first 3 chapters) is an overview of the organization itself. The second part concentrates on the assigned topic A study on the Foreign Exchange Operations of Mercantile Bank Limited. Finally it includes the evaluation of Foreign Exchange performance, findings, and recommendation to make understood the scope of overall Foreign Exchange with its constraints of MBL.1.5. Objective of the study:The objective of the study is to obtain an understanding of the practical banking activities and relate them with theoretical knowledge that I gained through the theoretical training in the university and from various documents of the bank. Beside this, the followings are the specific objectives which I will try to cover in my report:1.5.1. Primary objective:The primary objective of preparing this report is to represent the Mercantile Bank Limited and to have a clear conception about all of the essential parts of the internship program.1.5.2. Secondary objective:1. To give an idea about the evolution of the banking business.2. To give an idea about the evolution of banking in Bangladesh.3. To give an overview of the current Bangladesh economic scenario.4. To give an overview of the MBL.5. To give some idea about the international trade, different types of exchange rates, process of executing transactions relating international trade, accounting of these transactions, etc.1.6. Scope of the study:As I was sent to Mercantile Bank Limited, Main Branch, the scope of the study is only limited to this branch. The report covers its overall foreign exchange function. The report covers import, export and remittance activities about MBL. Besides it covers topic such as evolution of banking business, evolution banking business in BD, Bangladesh economy scenario, background of MBL has also been discussed.1.7. Internship at Mercantile Bank Limited:My Three months at the Mercantile Bank Limited as an internee had been the most enjoyable time of my life. Doing my internship at one of the leading private commercial banks in Bangladesh, I believe I have accumulated an experience unmatched to any other.I was assigned to the project of A study on the foreign exchange operations of Mercantile Bank Ltd. as my project report. I am extremely happy to work in such a project. Though as a student of finance it was a new situation to me.For the internship program the contact person of the head office sent me to the Main branch of the bank. My objective was to get a clear idea about the function of the foreign exchange of the branch. But my host supervisor sent me first to the Local Export department to have a preliminary idea and to be acquainted with various types of local export bills and related matters; I worked there for 60 days and learned the procedure of issuance of pay order, demand draft (DD), and method of maintaining books for the above mentioned activities. Then I was sent to the clearing section, of worked there for 20 days and learned how inward and outward checks are cleared, how transfer delivery from one branch to another branch is made. After that, I was sent to the IT department of this branch. I worked there for 5 days. Here I learn how to give bank statement, Tax purpose statement. After that I was sent to the export section of the foreign exchange department of this branch. I work there for the rest of the period of my internship program. In the export section I mainly observed the export procedures, files and documents of different exporters, export proceed collection procedures and compliance of export procedures with the set rules of export policy and Bangladesh bank rules. Actually this period was my area of concentration and activities of this period is mainly focused in my report. I extended my best effort to collect as much information as possible to prepare my report. The working environment of this division of the Mercantile Bank Limited is conductive and friendly. The staffs are specialized in their respective fields. Each of them works on their own and there is supervision from the top. The motivation of the staff, I believe comes from the very sense of responsibility for his or her work.1.8.Limitations of the study:On the way of the study, I have faced the problems that are given below that may be terms as the limitation or shortcoming of the study-Short Time Period:The first obstruct is time itself. Due to the time limit, the scope and dimension of the study has been curtailed. For an analytical purpose adequate time is required. But I got a short time period to prepare the report.Data Insufficiency:It was very difficult to collect data, because the branch of Mercantile Bank Limited is very large. But the data is very essential to prepare the report. All of the employees of this branch are very busy. For the time limitation they could not able to supply my topic related data.Lack of Records:Sufficient books, publications, facts and figures narrowed the scope of accurate analysis. If this limitation were not been there, the report would have been more useful and attractive.Poor Library Facility:Most of the commercial banks have its own modern, rich and wealthy collection of huge and various types of banking related books, journals, magazine, papers, case studies, term papers, assignment etc. But the library of Mercantile Bank Limited is not well ornamented and decorated.Lesser Experience:Experience makes a man efficient. I do such kind of research activity for the first time. Thats why inexperience creates obstacle to follow the systematic and logical research methodology.1.9. Methodology of the study:The study requires a systematic procedure from selection of the topic to final report preparation. To perform the study the data sources are to be identified and collected, they are to be classified, analyzed, interpreted and presented in a systematic manner and key points are to be found out. The over all process of methodology is given in the following page in a form of flow chart that has been followed in the study.A. Selection of the topic: The topic of the study was assigned by our supervisor. Before assigning the topic it was discussed with me so that a well organized internship report can be prepared.B. Identifying data sources: Essential data sources both primary and secondary are identified which will be needed to complete and work out the study. To meet up the need of data primary data are used and study also requires interviewing the official and staffs were necessary. The report also required secondary data. Information collected to furnish this report is both from primary and secondary sources.i) The primary sources are:Face to face conversation with the officers.Practical desk work.Relevant files study as provided by the concerned officers.ii) The Secondary sources are:Annual reports of MBL.Foreign exchange of MBL.Periodic reports of MBL.Annual Reports of Bangladesh Bank (BB).Publications of Bangladesh Bank (BB).Publications of BIBM.Office circulars of MBL.Publicly published documents.Relevant books, newspapers, journals, etc.MTO recruitment materials of MBL.Information kept by branch manager, operations manager in their own files.C. Collection of data: Primary data are collected by using interviewing technique. The reports are an exploratory research and for qualitative survey open ended question were ask to the Bank official.D. Sampling:Population: All the Branches of MBL located in everywhere in Bangladesh has been taken into consideration as population.Sample: MBL, Main Branch, is the vital sample.E. Classification, analysis, interpretations and presentation of data: some arithmetic and graphical tools are used in this report for analyzing the collected data and to classifying those to interpret them clearly.F. Findings of the study: The collected data were scrutinized very well and were pointed out and shown as findings. Few recommendations are also made for improvement of the current situation.G. Final report preparation: On the basis of the suggestions of our honorable faculty advisor some corrections were made to present the paper in this form.CHAPTER- 2Evolution of Banking Business2.1. Evolution of Banking Business:The word bank, which means a financial intermediary that collects deposits from savers and disburses loans to the fund seekers and acts as the principal medium of internal resources mobilization of an economy, is not the result of a short period. Instead, it has to pass through a very long period.In the ancient age, people had to satisfy all of their needs by themselves. At this stage, there was no surplus production. Hence the concept of transaction was yet to be introduced. But, as the division of work took place in the society, there was surplus as well as deficit production in each society. This lead to the introduction of BARTER SYSTEM in which commodities were exchanged for commodities directly. But this transaction system could not last for a long time for some problems such as,1) Double coincidence of needs: this means the needs of two persons must meet the surplus that they have. For example, one person has some surplus rice and another person has some surplus cloths. If they the person with rice has the need of cloths and the person with cloth needs rice, only then the transaction will take place. But it was difficult.2) Indivisibility of goods: all goods are not divisible and not of same worth. This caused a big problem for transaction. For example, a cow is not exchangeable for 1 meter cloth, neither it can be dividable in smaller units.As a result, people had to think for a mechanism that would solve these problems and facilitate the transaction process. This resulted in the introduction of money in the form of stone, metals, bones etc.After the introduction of money, the volume of transactions increased to a great extent. People with surplus money started to feel insecure about their money. At that stage, goldsmiths, priests, businessmen were the most honorable and trusted people in the society. People started to keep their surplus money and jewelry deposited with them. They lent this money without any charge to those who needed money. This was the transaction of utmost faith. From here, the history of bank counts.The previous discussion can be presented in the following diagram:

Figure 2.1: Diagram of evolution of banking businessAfter some time, businessmen started to charge some charges on those who took loan from them. It was the goldsmiths who introduced the deposit slips in the history. Day by day, volume and complexity of transactions kept increasing, so as the concept of bank.The banking systems of ancient age and the banking systems of modern age are two distinctively separate entities. The situations and flaws that resulted the banking systems in the present form are highlighted below:As early as 2000 B.C., Babylonians had developed a system of bank. In ancient Greece and Rome the practice of granting credit was widely prevailed. Traces of Credit by compensation and by transfer orders were found in Assyria, Phoenicia and Egypt before the system attained full development in Greece and Rome. The book of old Hindu saw giver, MANU, is full of regulations for governing credit. He speaks of judicial proceedings credit instruments were called for, interest on loans, on bankers, users and even of the renewals of commercial papers.In Rome, bankers were called Argentarii. Some banks carried business on their own account and others were appointed by the Government to receive the taxes. Loan banks which lent money to the poor without any interest on the security of land for a period of 3 of 4 years were also common in Rome.The Bank of Venice, established in 1157, is supposed to be the most ancient bank. It was not a bank in the modern sense being simply an office for the transfer of public debt.History shows the existence of a Monte in the Florence in 1336 the meaning of Monte is given in the Italian Dictionary 1959 as a standing bank or mount of money, as they have in diverse cities of Italy. Banbrigge, an English writer, speaks about the three banks of Venice meaning the three public loans of Monte.The beginning of the English banking may correctly be attributed to the London goldsmiths. They used to receive their customers valuables and funds for safety custody and issue receipts acknowledging the same. These notes, in the course of time, became payable to bearer on demand and hence enjoyed considerable circulation. In fact, the goldsmiths notes may be considered as the precursor of the bank note. The business of the goldsmiths got a rude shock by the ill treatment of the Government of Charles II, under the Cabal ministry. In the words of Bagehot; It had perpetrated one of those monstrous frauds which are likewise gross blunders. The goldsmiths used to deposit their reserve of treasure in the Exchequer with the sanction and under the care of government. But Charles II shut down the Exchequer and paid nothing to the goldsmiths. However, the ruin of goldsmiths marks a turning point in the history of the English banking. It led to the growth of private banking and the establishment of the Bank of England.In the India, as early as Vedic period, banking existed in the crudest form. The bloods of Manu contain references regarding deposits, pledges and policy of loans and rates of interest. Truly, banking in those days largely meant money lending and they did not know the complicated mechanisms modern banking. This is true not only in case of India but also in case of other countries. The evolution of banking institutions became more and more organized as the time passed. In various periods, different amendments were made in different countries throughout the world. So, different countries have different contributions to the banking institutions to appear in the present form.

Figure 2.2: At a glance-Evaluation in Banking Institutions in World According to Different Age2.1.1. List of some important Ancient Banks:Name of the BankPlace of EstablishmentYear of EstablishmentRemarks

Shansi BankChina600 B.C.1st Bank in the World

Bank of VeniceItaly11571st Government Bank

Bank of San GeorgioGeneva1178Jointly established by traders

Bank of BarcelonaItaly1401Established by Govt. incentive

Risk Bank of SwedenSweden16561st licensed Bank in World which issued notes

Bank of EnglandU.K.16941st Central Bank in the World

Hindustan BankCalcutta17001st commercial Bank in Indian subcontinent

Bank of PrussiaGermany17651st Bank in Germany

Bengal BankIndia1785Ancient Bank of Indian Continent

Central Bank of IndiaIndia1785Ancient Bank of Indian Continent

Bank of FranceFrance1800Central Bank of France

Bank of CalcuttaCalcutta18061st Precedence Bank of India

Bank of NetherlandsNetherlands1814Central Bank of Owned by private owners but controlled by Govt. members

Bank of NorwayNorway1817Central Bank of Owned by private owners but controlled by Govt. law.

National Bank of DenmarkDenmark1818Central Bank of Owned by private owners

Bank of BombayBombay18402nd Precedence Bank of India

Bank of MadrasMadras18433rd Precedence Bank of India

Reichs BankGermany1875Central Bank of Germany

Bank of JapanJapan1882Central Bank of Japan Owned by both private and Government owners.

Bank of ItalyItaly1893Bank of establish in private ownership, which gets right to issue note at 1926

Switch National BankSwitzerland1907Central Bank owned by both private and Government owners.

Federal Reserve SystemU.S.A1913Central Bank of U.S.A

Impreial Bank of IndiaIndia1920Largest commercial Bank of India in the period

Bank of ChinaChina1928Bank of establishment in private ownership, which was nationalized in 1949

Bank of CanadaCanada1934Central Bank of Canada, which was nationalized in 1949

Reserve Bank of IndiaIndia19351st central Bank in Indian Subcontinent.

Habib Bank Ltd.Bombay19411st Muslim Bank in Indian subcontinent.

The Ban coda BrazilBrazil1941Central Bank of Brazil owned by both private and Government owners.

State Bank of PakistanPakistan19481st Central Bank of Pakistan

National Bank of PakistanPakistan19491st Commercial and enlisted Bank of Pakistan

Eastern Mercantile BankChittagong19591st Bank established in Bengali Ownership.

Table 2.1: List of some important Ancient Banks2.2. Banking System in Bangladesh:Bangladesh has a mixed banking system comprises of nationalized, private and foreign commercial banks. Bangladesh Bank (BB) has working as the central bank of the country since the independence of the country. Its prime jobs include issuing currencies, maintaining foreign exchange reserve and providing transaction facilities of all public monetary mattes. BB is responsible for planning and implementing the governments monetary policy2.2.1. Banking Companies Ordinances:The Banking Companies Ordinance was promulgated on the 7th June 1962. This has been adopted in Bangladesh and is applicable to the banking companies only. Nothing of this ordinance shall apply to a co-operative bank registered under the co-operative Securities Act (1912).Main forms of business of Banking Companieso Borrowing, raising or taking up money.o The lending or advancing of money either upon or without security.o Dealing in securities and investment.o Other business as detailed in section 7.2.2.2. Negotiable Instrument Act:The Negotiable Instrument Act, 1881 is the legislative enactment of the Law relating to three classes of Negotiable Instruments namely: Promissory Notes, Bills of Exchange and Cheques, which are in common mercantile use in the monetary instructions. It came into force on 1st March 1882.The law relating to negotiable instruments is not the law of our country or of one nation. It is the law of the mercantile world in general. It consists of Certain principles of equity usages of trade, which general convenience and commonsense of justice had established to regulate the dealings in merchants and mariners in all the commercial countries of the civilized world.2.2.3. Categories of Banks:In our country, there are four types of banks exists. Such as:1. Central Bank.2. Commercial Banks.a. Nationalized Commercial Banks.b. Private Commercial Banks.c. Foreign Banks.3. Specialized Banks / Development Banks and credit agencies.4. Bangladesh Samabaya Bank.

Figure 2.3: Classification of Banks in Bangladesh2.3. Economic Overview of Bangladesh:During FY08 (July 2007 June 2008), the Bangladesh economy maintained a strong growth underpinned mainly by robust growth in services and notable expansion in manufacturing activities, despite facing high and volatile oil prices in the international market. With a view to achieving higher economic growth, the Government and the Bangladesh Bank continued to adopt policies to support economic activities to the highest sustainable level, while maintaining a moderate Consumer Price Index (CPI) inflation. These policies contributed toward a strong real GDP growth of 6.5 percent in FY07, slightly lower than 6.6 percent of FY06. Economic growth was also aided by increased inflow of workers remittances from abroad and reasonable growth in exports.In U.S. dollar terms, export earnings recorded a moderate growth of 15.8 percent, while the growth of import payments remained to a sustainable level at 16.6 percent. At the same time, remittances from non-resident Bangladesh nationals increased substantially by 24.5 percent. The countrys external current account balance continued to record a significant surplus with a substantial increase in remittances more than offsetting trade deficit and services deficit. A significant surplus in current account balance and a sharp rise in financial account surplus led to a sizeable surplus in the overall balance, which helped improve the international reserve position. Inflation was on uptrend during FY07 due mainly to rising import prices of fuel oil, metal, food grain and some other essentials in the international market coupled with problems in the domestic supply chains like political turmoil in the first half of FY07; dislocation of market structure created by anti-hoarding drive and crackdown on corrupt business houses; and lower growth of crop production. Increasing domestic demand induced by high monetary and credit growth added to the uptrend in consumer prices. The annual average inflation increased to 7.20 percent in June 2007 from 7.16 percent in June 2006, while 12-month consumer price inflation on point to point basis increased over the same period to 9.20 percent. Total domestic credit grew by 14.5 percent, while credit to private sector increased by 15.1 percent in FY07.In more recent period, the economic situation of Bangladesh is like this:The IMF expects that the real GDP growth of Bangladesh will be possible 5.5-6.0% in FY 08. The IMF has earlier projected the countrys GDP growth at 5.0-5.5% due to natural disasters and slowdown in economic activities due to factors like anti hording drive and negative growth in export during the first half of the fiscal year. Due to increase of export and strong Boro harvest, real GDP growth expected to be higher than anticipated earlier. IMF also suggested to improve the efficiency of the state owned commercial banks.2.3.1. Exports: during July February, 2007-08 export increase by US$ 908.72 million or 11.33% to US$ 8932.59 million against US$ 8023.87 million during the same period of the previous year.2.3.2. Import payments & Fresh opening of import LCs: During July-February, 2007-08, import payments increased by US$ 2327.20 or 21.04% to US$ 13387.90 million compared to US$ 11060.70 million during July-February, 2006-07.Fresh opening of import LCs during July-February, 2007-08 increased by US$ 3887.33 million or 34.70% to US$ 15089.56 million against US$ 11202.23 million during July-February, 2006-07.2.3.3. Remittances receipts: During July-March, 2007-08 remittances increase by US$ 1288057 million or 29.55% to US$ 5649.90 million against US$ 4361.33 million during July-March, 2006-07.2.3.4. Gross foreign exchange reserves: Gross foreign exchange reserves of Bangladesh Bank stood lower at US$ 5302.46 million as of end March, 2008, against US$ 5978.60 million as of end February, 2008 due o ACU payment of US$ 733017 million on 6th March, 2008. However, this was higher than the US$ 4199.52 million reserves as of end March, 2007.2.3.5. Inflation: The annual average rate of inflation increased to 9.79 in February, 2008 from 9.56% of January, 2008. The rate of inflation on point basis, however, decreased to 10.16% in February, 2008 from 11.43% of January, 2008.2.3.6. Macro-economic trend:This is a chart of trend of gross domestic product of Bangladesh at market prices estimated by the International Monetary Fund with figures in millions of Bangladeshi Taka. However, this reflects only the formal sector of the economy.YearGross Domestic ProductUS Dollar ExchangeInflation Index(2000=100)Per Capita Income(as% of USA)

19901,054,23435.79 Taka581.16

19951,594,21040.27 Taka781.12

20002,453,16052.14 Taka1000.97

20053,913,33463.92 Taka1260.95

20085,003,43868.65 Taka147-

Table2.2: Macro-economic trendFor purchasing power parity comparisons, the US Dollar is exchanged at 12.86 Taka only. Average wages in 2008 hover around $2-3 per day.2.3.7. Economic target:World Bank predicted economic growth of 6.5% for current year. Foreign aid has seen a decline of 10% over the last few months but economists see this as a good sign for self-reliance. There has been 18% growth in exports over the last 9 months and remittance inflow has increased at a remarkable 25% rate. Export was $10.5 billion in fiscal year 2005 exceeding the target export of $10.4 billion. Target export for current year is $11.5 billion. An estimated GDP growth of 6.7% was predicted for FY 2006.Fiscal YearTotal ExportTotal ImportForeign Remittance Earnings

2007-2008$14.11b$25.205b$8.9b

2008-2009$15.56b$22.00b+$9.68b

2009-2010(Set Target)$17.6bN/A$10.87b

Table 2.3: Economic targetCHAPTER- 3Overview of Mercantile Bank Limited 3.1. An Overview of Mercantile Bank Limited :Banking system occupies an important place in a nations economy. A banking institution is indispensable in modern society. It plays a liberalization of economic policies in Bangladesh. Mercantile Bank Limited emerged as a new commercial bank to provide efficient banking services with a view to improving the socio-economic development of the country.Mercantile Bank has been incorporated on May 20, 1999 in Dhaka, Bangladesh as a limited company with the permission of the Bangladesh Bank; MBL commenced formal commercial banking operation from the June 2, 1999. The bank stood 15 branches all over the country up to 2001. The Authorized Capital of the Bank is 3000.00 million taka and the Paid-Up Capital is 1498.90 million taka as on December 31, 2007.The Bank provides a broad range of financial services to its customers and corporate clients. The Board of Directors consists of eminent personalities from the realm of commerce and industries of the country.There are thirty Sponsors involved in creating MBL the Sponsors of the Bank have a long heritage of trade, commerce and industry. They are highly regarded for their entrepreneurial competence. The Sponsors happen to be members of different professional groups among whom are also renowned banking professionals having vast range of banking knowledge. There are also members who are associated with other financial institutions like insurance companies, leasing companys etc.Mercantile bank Limited continued its expansion program during the year ended as on December 31, 2007. Its core lending and deposit taking business have increased significantly. Rising trend of the banks profitability over the last 8 years is also materialized. The MBL is committed to the delivery of the superior shareholders value. With the aim to be the bank of choice, it is operating in the industry with a team of personnel devoted to excel both their own career and the banks future.3.2. Mission:Will become most caring, focused for equitable growth based on diversified deployment resources, and nevertheless would remain healthy and gainfully profitable Bank. Mercantile Bank Limited aims to become one of the leading banks in Bangladesh by prudence, flair and quality of operations in their banking sector. The bank has some mission to achieve the organizational goals. Some of them are as follows as:Mercantile Bank Limited provide high quality financial services to strengthen the well being and success of individual, industries and business communities.Its aim to ensure their competitive advantages by upgrading banking technology and information system.MBL intends to play more important role in economic development of Bangladesh and its financial relations with the rest of the world by interlining both modernistic and international operations.MBL encourages investors to boost up share market.The bank creates wealth for the shareholders.The bank believes in strong capitalization.It maintains high standard of corporate and business ethics.Mercantile Bank Limited extend highest quality of services, which attracts the customers to choose them first.The bank creates wealth for the shareholders.The bank maintains congenial atmosphere for which people are proud and eager to word with Mercantile Bank Limited.Mercantile Bank Limited intend to provide better benefits to their customers and good returns to their shareholders.The bank intends to meet the needs of their clients and enhance their profitability by creating corporate culture.3.2.1 Vision:Would make finest corporate citizen. is the main vision of MBL. MBL dreams to become the bank of choice of the general public that includes both the consumer and the corporate clients. It has created a cadre of young professionals in banking profession which has helped boosting productivity in the bank.3.2.2. Objectives:3.2.2.1. Strategic Objectives: To achieve positive Economic Value Added (EVA) each year. To be market leader in product innovation. To be one of the top three financial institutions in Bangladesh in terms of cost efficiency. To be one of the top five financial institutions in Bangladesh in terms of market share in all significant market segments we serve.3.2.2.2. Financial Objectives: To achieve a return on shareholders equity of 20% or more, on average.3.2.3. Core Values:3.2.3.1. For customers:Providing with caring services by being innovative in the development of new banking products and services.3.2.3.2. For Shareholders:Maximizing wealth of the bank.3.2.3.3. For the employees:Respecting worth and dignity of individual employees devoting their earnings for the progress of the bank.3.2.3.4. For the community:Strengthening the corporate values and taking environment and social risks and reward into account.3.2.4. Business Philosophy of MBL:The philosophy of MBL is not to Carry coal to the new castle.3.2.5. Nature of business:Mercantile Bank Limited offer services for all banking needs of the customers, which include deposits, making loans and advances, discounting bills, conducting money transfer and foreign exchange transactions and performing other related services such as safe keeping, collections, issuing guarantees, acceptances and letters of credit.3.2.6. Features of Mercantile Bank Limited:There are so many reasons behind the better performance of Mercantile Bank Limited than any other newly established banks:Mercantile Bank Limited has established a core Research & Planning Division comprising skilled person from the very inception of the bank.Highly qualified and efficient professionals manage the bank.The inner environments of the all branches of Mercantile Bank Limited are well decorated.Banking operations of the all branches of Mercantile Bank Limited have been computerized to provide the promptly & frequently customers service.The bank has established correspondent relationship with 102 of foreign banks.The bank has launched some financial products, which is not available in any other banks, like Ajebon Pension Scheme.Mercantile Bank Limited provides attractive interest rate than the other financial institutions.The bank provides loan to the customers at lower interest with easy & flexible condition than the other do.The bank frequent arranges customers meeting to achieve their valuable suggestions.Letter of Credit (L/C) commissions and other charges are very lower than the other banks.Profit earning is not the main aim of the MBL. The bank is responsible to maintain the social duties.The bank is committed to provide the cherub amount within 30 seconds of submission the cherub.3.2.7. Corporate information at a glance:Name of the BankMercantile Bank Limited

StatusPublic Limited Company

Date of IncorporationMay20, 1999

Date of CommencementJune 02, 1999.

Subscription for SharesOctober 21-22, 2003

Listed in Dhaka Stock ExchangeFebruary 16, 2004

Listed in Citation Stock ExchangeFebruary 26, 2004

Head Office61, Dilute Commercial Area, Dhaka- 1000

Phone+880-2-9559333, 01711-535960

E-mailmbl@bol-online.com

Websitewww.mblbd.com

ChairmanMd. Abdul Jail

Managing DirectorDean Manipur Raman

Number of Employees1104

Number of Branches42

Table 3.1: General Information of MBLSOURCE: www.mblbd.com3.3. Ownership Structure:The Board of Directors consists of eminent personalities from commerce and industry of the country. Mr. Md. Abdul Jail, the founder Chairman of the Board of Directors, is a businessman besides being an eminent personality of the country. The last Government had been pleased to induct him as a Senior Cabinet Minister with the portfolio of Commerce.The Bank is manned and managed by highly qualified and efficient professionals. The chief Executive officer of the Bank is Mr. M. Taheruddin who has rich experience of managing both the nationalized and the private sector banks as Managing Director.Mr. Lutfar Rahman Sarkar who born in 1935, initiated his banking carrier from Habib Bank Limited as a provisionary officer. Then he served as Managing Director in Agrani Bank, Sonali Bank, Islami Bank Bangladesh Limited and Prime Bank Limited. The Chief Adviser of the Bank is the former Governor of the Central Bank of Bangladesh. He brings with him a wealth of experience of managing both the public and private sector banks.3.3.1. Board Committees of MBL:Board of Directors who also decides the composition of each committee determines the responsibilities of each committee.3.3.2. Executives Committees of MBL:All routine matters beyond delegated powers of management are decided by or routed through the Executives Committee, subject to rectification by the Board of Directors.3.4. Composition of the board:Board of Directors, the apex body of the Bank, formulates policy guidelines, provides strategic planning and supervises business and performance of management while the Board remains accountable to the company and its shareholders. The Board is assisted by the Executive Committee and Audit Committee.

Figure 3.1: Composition of the boardSOURCE: Adapted from MBLs Annual Report 20083.5. Capital & Reserves: 3.5.1. Capital:3.5.1.1. Authorized Capital: The authorized capital of the bank was BDT 3,000.00 million of 30,000,000 ordinary shares of BDT 100 each as of December 31, 2008.YearTaka(BDT in million)

20061200.00

20073000.00

20083000.00

Table 3.2: Authorized CapitalSource: Audited annual report of MBL, 2008.3.5.1.2. Paid up Capital:Paid-up Capital of the bank was BDT 1498.90 million of 14,988,983 ordinary shares of BDT 100 each as of December 31, 2008.YearTaka(BDT in million)

20061199.12

20071498.90

20081,798.68

Table3.3: Paid-up CapitalSource: Audited annual report of MBL, 2008.3.5.2. Reserve:YearTaka(BDT in million)

2007726,729,402

2008966,496,902

3.5.2.1 Statutory Reserve:Table 3.4: Statutory ReserveSource: Audited annual report of MBL, 2008.3.5.2.2. Other Reserve:YearTaka(BDT in million)

200724,864,349

2008161,038,249

Table3.5: Other ReserveSource: Audited annual report of MBL, 2008.3.6. Milestones in the development of the organization:

Figure 3.2: Milestones in the development of the organizationSOURCE: Adapted from MBLs Annual Report 20083.7. Management Structure of MBL:Organization Chart of Mercantile Bank Limited

Figure 3.3 : Management HierarchySOURCE: Adapted from MBLs Annual Report 20083.8. Risk Management:3.8.1. Credit Risk:Credit risk is the potential that the borrower may not repay or fails to repay his/her debt obligation. They are exposed to credit risk through traditional lending activities and transactions involving settlements between their counterparts. Objectives[[Maintain a well-diversified asset portfolio within approved risk tolerance levels and earn a return appropriate to the risk profile of the portfolio. ApproachSkill appraisal officers first evaluate credit transactions for commercial and corporate loans. Credit Management Committee provides and independent assessment of all significant transactions, and a concurrence form this function is usually required to make a lending commitment to a customer. Their Audit and Inspection Division also reviews management processes in order to ensure that establish credit policies are followed. In addition, Credit Management Committee performs periodic reviews of significant and higher risk transactions.3.8.2. Market Risk::Market risk is the potential for loss from changes in the value of financial instruments. The value of a financial instrument can be affected by changes in interest rates, foreign exchange rates and equity and commodity prices. They are exposed to market risk when they enter into the following transactions: Loans and Advances (LDOs) Deposit with other Banks- Investment- Treasury Bills- Bond- Shares Foreign Exchange Positioning ObjectiveIdentify, measure, monitor and report all market risk-taking activities, ensuring that exposures remain within approved risk tolerance levels and that the return from market risk activities is acceptable. ApproachThey have established Asset Liability Committee (ALCO) to monitor their market risk activities. The primary risk measurement methodology is Repricing Gap and its sensitivity to interest rate changes. Reprising Gap over 12-month period stood at positive BDT 4251.76 million as at Dec 31, 2008. Reprising Gap as percentage of total assets stood at 14.72%, which is within the international standard of 20%. In the position, the Net Interest Income (NII) of the Bank may increase by BDT 42.52 million in case of 100 basis point increase in interest rate. However, in case of 100 basis point decease in interest rate, the NII of the Bank will go down by BDT 42.52 million.ParticularsVolume

Rate Sensitive Assets (RSA)17656.56

Rate Sensitive Liabilities (RSL)13404.80

Repricing Gap (RSA-RSL)4251.76

Repricing Gap as % of Total Assets14.72%

For 100 basis point increase in interest rate42.52

For 100 basis point decrease in interest rate(42.52)

Table 3.6: Repricing Gap: 20083.8.2. Liquidity Risk:Liquidity risk is the risk that the Bank may fail to meet is obligation due to short of cash and/or cash equivalent assets. This situation may arise in the case of withdrawal of deposits, debt maturities and commitment to provide credit. ObjectiveMain sufficient liquid assets* and finding capacity to meet their financial commitments, under all circumstances, without having to raise funds at unreasonable prices or sell assets on forced basis. ApproachTheir approach to liquidity management is to project liquidity requirements based on expected and stressed economic, market, political and enterprise-specific event. This enables them to ensure that they have sufficient funds available to meet their financial commitments even in times of crisis. Funds encompass both liquid assets on hand and capability to raise additional funds.Their large based of scheme deposits form individuals and strong capital positions provide a long-term stable source of funding. The primary risk measurement methodology is to monitor liquid asset ratios, deposits mix, core deposits as percentage of total deposits and net liquidity gap.Figure 3.4: Liquidity RiskSource: Annual report 2008 Mercantile Bank Limited. Liquid Assets =Cash + Balance with Bangladesh Bank + Deposit with other Banks+ Money at Call and Short Notice + Investments.3.8.3. Operational Risk:Operational risk is the risk of loss resulting form inadequate or failed internal processes, people and systems or from external events. ObjectiveOperational risk is inherent in all business activities, and the management of these risks is important to the achievement of organizational goals. While operational risks can never be eliminated, these can be managed, mitigated and in some cases insured against to preserve and create value. ApproachOperational risk is managed through the establishment of effective infrastructure and controls. To this end, we have established a well-formulated framework that uses the strengths and specialized knowledge of our lines of business. Our strategy is to maximize our ability to manage and measure operational risk through implementation of a framework that takes advantages of the best practices in the industry.3.8.5. Credit Rating Report on MBL by CRISL:Mercantile Bank Limited has been rated by Credit Rating and Information Services Limited (CRISL) on the basis of Financial Statements as on December 31, 2007. The summary of the rating is presented below:Credit Rating and Information Services Limited (CRISL) has upgraded the rating of Mercantile Bank Limited to A (pronounced as single A) from A- (pronounced as single A minus) in the Long Term and ST-2 for the Short Term from ST-3. CRISL has disclosed the said rating on March 9, 2008. The up gradation has been done in consideration with its financials such as improvement in asset quality, capital adequacy, stable source of fund, diversified product lines etc. Financial institutions rated in this category are adjudged to offer adequate safety for timely repayment of financial obligations.The short-term rating indicates high certainty of timely payment, strong liquidity factors, good company fundamentals, easy access to capital market and risk factors are very minimal. The long-term rating is valid for only one year and short-term rating is for six months.3.9. Human Resources Development:In todays competitive business environment, the quality of human resources makes the difference. The Banks commitment to attract high quality persons to work for it is reflected in the efforts of the Bank. In the face of todays globalization, the Bank envisages to develop highly motivated workforce and equip them with latest skills and technologies. The Bank evolves human resources development strategy with a view to ensuring good working environment, a high level of loyalty and commitment, devotion and dedication on the part of the employees.3.9.1 Mercantile Bank Foundation:The Bank has set up Mercantile Bank Foundation for extending benevolent services to the society. The Bank contributes 1% of operating profit or Tk.4.00 million; whichever is higher, to Mercantile Bank Foundation every year. The Foundation has been established with following objectives: Mercantile Bank Prize to 8(eight) eminent personalities of the country for the outstanding contribution in the fields of Economics and Economic Research, Bengali Language and Literature, Science and Technology, Education and Culture, Journalism, Sports, Research on Liberation War and Industry and Commerce. Interest free education loan for the meritorious but poor students To conduct research on Bengali language and literature. Book purchase and Distribution Policy to encourage writers and publishers of the country. Interest free Loan to the unemployed educated people. Donation for handicapped artists, literature and distressed people. Project for the development of shelter-less children.3.10. Branch expansion:The Bank commenced its business on June 02, 1999. The First branch was opened at Dilkhusha Commercial Area in Dhaka on the inauguration day of the Bank. The Second Branch was opened at Dhanmondi Residential Area, Dhaka on August 04, 1999. The Third Branch was opened at Kawran Bazar, Dhaka on September 06, 1999. The Fourth Branch was opened at Agrabad, Citation on November 06, 1999. Now, the total number of branches stood at 42 at the end August of the year 2009.

Figure 3.5: Branch Network of Mercantile Bank Limited3.10.1. Head Office and Branch Network:Head Office61, Dilute Commercial AreaDhaka-1000, BangladeshTel: +880-2-9559333, 01711535960Fax: +880-2-9561213Telex: 642509 MBLID BJE-mail: mbl@bol-online.comWebsite: www.mblbd.comBranch NetworkNameAddress

01.Main BranchDhaka

02.Dhanmondi branchDhaka

03.Kawran Bazar BranchDhaka

04.Agrabad BranchCitation

05.Joypara BranchDhaka

06.Banani BranchDhaka

07.Rajshahi BranchRajshahi

08.Naogaon BranchNaogaon

09.Sylhet BranchSylhet

10.Board Bazar BranchGazipur

11.Nayabazar BranchDhaka

12.Khatungong BranchCitation

13.Mohakhali BranchDhaka

14.Mirpur BranchDhaka

15.Ashulia BranchSavar

16.Uttara BranchDhaka

17.Jubilee Road BranchCitation

18.Elephant Road BranchDhaka

19.Motijheel BranchDhaka

20.Madam Bibir Hat BranchCitation

21.Khulna BrachKhulna

22.Rangpur BranchRangpur

23.Satmasjid Road BranchDhaka

24.Jhilongja BrachCoxs Bazar

25.O R Nizam Road BranchCitation

26.Bogra BranchBogra

27.Chowmuhani BranchNoakhali

28.Konabari BranchGazipur

29.Gulshan BranchDhaka

30.Feny BranchFeny

31.Moulobhi BazarSylhet

32.BijoynagarDhaka

33.Mogbazar BranchDhaka

34.Sataharnagar BranchNaogaon

35.Hemayetpur BranchDhaka

36.Sapahar BranchNaogaon

37.Beanibazar BranchBeanibazar

38.Barisal BranchBarisal

39.Bhojeshwarbazar BranchShariatpur

40.Comilla BranchComilla

41.Green Road BranchDhaka

42.Sheikh Mujib Road BranchCitation

Table 3.7: Branch NetworkSOURCE: Adapted from MBLs Annual Report 20083.11. An Overview of Main branch:The main branch of Mercantile Bank Limited is located in the Motijheel commercial area. The total manpower of this branch is 118.The total number of the senior vice president is 10.As it is the main branch of the bank, the customer appearance in the bank is very high.In the Mercantile Bank Limited, Main Branch, the people are mostly courteous, friendly in nature and eager to help despite the tremendous workload. Manpower is sufficient in the branch but there is no information booth for customer information. So as a new private bank, Mercantile Bank Limited is running steadily.3.11.1. Department of Main Branch: General Banking Division Credit Division Foreign Exchange Division3.12. Divisions of MBL:1. General Banking & Deposit Management2. Credit Department3. Foreign Exchange DepartmentGeneral Banking & Deposit Management:1. Account opening and KYC procedures.2. Issuance of DD/TT/PO/FDR.3. Interbank Transaction, OBC/IBC.4. Account section.5. Clearing Section.6. IT Section.Credit Department:1. Credit Proposals Processing Procedures.2. Documentation and Loan Disbursement Procedures.3. Overview on all returns.Foreign Exchange Department:1. I. Cash L/C1. Opening of L/C.2. Lodgment of Import Bill.3. Payment against Import Bill.4. B/E Matching.5. IMP Reporting.1. II. BTB L/C1. Export L/C Checking.2. Opening of BTB L/C (Local/ Foreign/ EDF/ EPZ).3. Lodgment and confirmation of maturity date.4. Allowing of PC.5. Payment against realization of Export Proceeds/ Forced Loan.6. B/E Matching.7. Reporting.8. III. Export1. Scrutinizing/ Negotiation/ Send on Collection.2. Follow-up.3. Realization.4. Reporting.1. IV. Foreign RemittanceInwardFDD.1. FTT.2. Others.Outward1. Endorsement of Traveling.2. Education/ Treatment/ Others.3. Cash Rebate.4. FC issuing.5. FDD/ FTT etc.3.13. Services Offered by MBL:The Bank does believe that it has differentiated itself from other banks through its products and services. It is banking for the people to fulfill their needs conceptualizing product and services to meet their aspiration and expectations. The bank is proud to have exemplified the true concept as Banglar Bank. The Bank launched several financial products and services since its inception. Among them are:3.13.1. Deposit Schemesa) Family Maintenance Deposit (FMD):Objectives: Help the retired persons for investing their retirement benefits. Create investment opportunities for Non-Resident Bangladeshi. Explore investment opportunities for school, college, university etc. Give investment opportunities for Trust; Foundation etc.Mode: Deposit a fixed amount of money for 05 (Five) years. Depositor will get a certain sum of money in each month proportion to his/her deposit during the entire tenure.Benefits: Tenure of deposit is 05 (Five) years. Minimum amount of required deposit is TK.50, 000.00 or its multiple.DepositMonthly Benefit (Amount in TK.)

1,00,0001,000

2,00,0002,000

3,00,0003,000

Table3.8: Deposit under Family Maintenance Deposit (FMD) schemeB) Monthly Savings Scheme:Objectives: Build up habit of savings. Attract small savers. Saving for rainy days.Mode: Monthly installments of various sizes.Benefits:Amount in TKPeriodMonthly Installment

2505001,000

Benefits

5 Years20,62541,25082,500

8 Years40,37580,7501,61,500

10 Years57,5001,15,0002,30,000

PeriodMonthly Installment

150025005,000

Benefits

5 Years1,23,7502,06,2504,12,500

8 Years2,42,2504,03,7508,07,500

10 Years3,45,0005,75,00011,50,000

Table3.9: Deposit under Monthly savings schemec) Pension & Family Support Deposit (PFSD):Condition: Provides monthly income for retired person. Helps to meet monthly expenses after certain period of time. One person can deposit a certain sum in every month for certain tenure and after that period he/she can get monthly income.Monthly Installment10 Years15 Years

Pension per monthOne timePensionOne time

50062580,0001,1501,35,000

1,0001,2501,60,0002,3002,70,000

2,5003,1254,00,0005,7506,75,000

5,0006,2508,00,00011,50013,50,000

Table3.10: Monthly Installment of Pension & Family Support Deposit (PFSD)d) Monthly Benefit Scheme:Under this Scheme; customer has to deposit a fixed amount of money for five years and in return he will receive benefits on monthly basis. Benefits start right from the first month of opening an account under Scheme and will continue up to five years when the depositor will get refund of his deposit.e) Quarterly Benefit Deposit Scheme:The Quarterly Benefit Deposit Scheme will be maintained for a period of 3 (three) years and the minimum amount of deposit is BDT 50,000.00 (fifty thousand) or its multiples.ExampleInitial Deposit (BDT)TermQuarterly Benefit Payable (BDT)

50,0003 Years1,500

100,0003 Years3,000

200,0003 Years6,000

Table3.11: Initial Deposit under Quarterly Benefit Deposit Schemef) 1.5 Times Benefit Deposit Scheme:Under the 1.5 Times Benefit Deposit Scheme a deposit of minimum BDT 50,000.00 (fifty thousand) or its multiples will be received for a period of 42 months (3.5 years). On maturity after 42 months, 1.5 times of the deposited amount will be paid back to the account holder as per example given below:ExampleInitial Deposit (BDT)50,000.001,00,000.005,00,000.00

Return after 42 months (BDT) with benefits75,000.001,50,000.007,50,000.00

Table3.12: Deposit under 1.5 Times Benefit Deposit Schemeg) Double Benefit Deposit Scheme:Objectives: Give maximum benefit. Help in meeting specific needs like education, marriage etc. Deposit becomes double in six years.Mode: Tenure of the deposit is 06(Six) years.Amount of DepositPeriodAmount Payable

1,00,0006 Years2,00,000

Table 3.13: Deposit under Double Benefit Deposit Schemeh) Special Savings Scheme:Under this Scheme, depositors money will be more than three times in ten-year period. The main attraction of this Scheme is depositor can get his money back after one year and onwards with attractive benefits.Objectives: Help in meeting specific needs like education, marriage etc.Mode: Deposit a fixed amount of money for any period up to 15 (Fifteen) years.Benefits: Triple of the amount deposited after 15 years. Minimum deposit shall be Tk.50, 000.00 or its multiple.DepositPeriodAmount Payable at Maturity

1,00,00015 Years3,00,000

Table 3.14: Deposit under Special Savings Scheme3.13.2. Credit Schemes:a) Consumer Credit Scheme:Consumer Credit is a relatively new field of collateral-free finance of the Bank. People with limited income can avail this credit facility to buy household goods including car, computer and other consumer durable.Objectives: Help fixed-income people for buying household durable. For the amount up to Tk. 1,00,000 the period is two years. Interest rate will be charged quarterly rest.Terms & Conditions: Interest Rate 16.00% Risk Fund 1.00% Supervision Charge (per year on outstanding balances) 0.25% Application FeeBDT 200.00Special Feature: The loan amount is directly credited to the customers account.b) Small Loan Scheme:This Scheme has been evolved especially for small shopkeepers who need credit facility for their business and cannot provide tangible securities. The present maximum range of loan under the Scheme is Tk. 2,00,000.Objectives: Extend credit facility to small shopkeepers. Give collateral-free credit.Mode: Maximum amount of loan Tk. 2,00,000. Interest Rate 16.00% Risk Fund 1.00% Service Charge 0.25% per year on outstanding balances Application Fee BDT 200.00 Loan Limit BDT 2.50 Lac Repayment period 3 years Interest rate will be charged at quarterly ratec) Lease Finance:This has been designed to assist and encourage the genuine and capable entrepreneurs and professionals for acquiring capital machinery, medical equipment, computers and other items, which may help them to be economically self-reliant. Terms and conditions of this credit have been made easier than before in order to help the potential entrepreneurs to acquire equipment of production and services and repay the liability gradually from earnings on the basis of Pay as you earn.Objectives:Assist and encourage entrepreneurs for acquiring capital machinery, medical equipment, automobiles etc.Terms & Conditions: Lease period 3 to 7 years Lease rent @ 16.00% Risk Fund 1.00% Service Charge 0.25% per year on outstanding balances.Security: Primary: Ownership of fixed items. Collateral: Landed property, Bank Guarantee, ICB Unit Certificate etc.d) Doctors Credit Scheme:Doctors Credit Scheme is designed to provide financing facilities to doctors, clinics and hospitals on easy terms.Objectives: Help new F.C.P.S. or post-graduate doctors for setting up chambers and buying medical equipment. Help experienced doctors for refurbishing chambers and buying medical equipment. Assist private clinics for acquiring modern medical equipment. Interest rate will be charged quarterly rest.Terms & Conditions: Equity1. For new doctor10%2. For experience ddoctor15%3. For Hospital, Clinic and Diagnostic Center 20% Interest Rate 16.00% Risk Fund Tk. 1.00% Repayment period 5 years..e) Rural Development Scheme:Rural Development Scheme has been evolved for the rural people of the country to make them self-employed through various incomes generating activities. This Scheme is operated through the rural branches of the Bank.Objectives: Raise the standard of living of rural people. Initiative to break the vicious cycle of poverty. Enhance the purchasing power of rural people. Terms & Conditions: Group Formation1. 30 people in a group2. 1 group leader3. 6 sub-groups consisting 5 person each in a group4. 1 sub-group leader in each sub-groupf) Women Entrepreneurs Development Scheme:Women Entrepreneurs Development Scheme has been introduced to encourage women in doing business. Under this Scheme, the Bank finances the small and cottage industry projects sponsored by women.g) Ajibon Pension Scheme:Ajibon Pension Scheme has been designed mainly for providing income after retirement Under this Scheme one can get life long benefit if he deposits specific amount per month for a period of 10,15,20 or 25 years. The Scheme can also be opened in the name of minors.h) SME Financing Scheme:Small and Medium Enterprise (SME) Financing Scheme has been introduced to assist new or experienced entrepreneurs to invest in small and medium scale industries.I) Car Loan Scheme:Car Loan Scheme has been introduced to enable middle-income people to purchase Cars/SUVs/Jeeps.Objectives: Help fixed-income people for buying car Interest rate will be charged quarterly rest.Terms & Conditions: Maximum loan amount is BDT 25,00,000 Tenure of loan is 05 (Five) years Interest Rate 16.00% Risk Fund 1.00% Supervision Charge (per year on outstanding balances) 0.25% Application FeeBDT 200.00 Tenure of loan is 05 (Five) yearsj) Personal Loan Scheme:Objectives: Help fixed-income people for buying house hold Durable For the amount up to Tk. 3,00,000 the period is 03 (Three) years Interest rate will be charged quarterly rest.Mode: Interest Rate 16.00% Risk Fund 1.00% Supervision Charge (per year on outstanding balances)1.00% Application Fee BDT 200.003.14. Functions of Mercantile Bank Limited:The functions of commercial banks are now wide and varied. However, the functions of Commercial Banks may broadly be classified under the following two categories:A. Primary Functions:The primary functions of MBL are same as other Commercial Banks. These functions include: Accept Deposit. Lends Money. Create Credit. Creates medium of exchange.B. Secondary Functions:Modern Commercial Banks like MBL, besides performing the primary functions, cover a wide range of financial and on financial services to meet the growing needs of the time. Some of these services are available only to the customers while others are available to the public in general. The subsidiary services provided by a modern banker may be classified into the following three groups:1. Agency Service.2. Generally Utility Services.3. Foreign Exchange Business. Operations of MBL: Deposit:The Bank mobilized total deposits of BDT 49,538.36 million as of December 31, 2008 as compared to BDT 39,348.00 million in 2007. Competitive interest rates, attractive deposit products, deposit mobilization efforts of the Bank and confidence reposed by the customers in the Bank contributed to the notable growth in deposits. The Bank introduced a number of attractive deposit schemes to cater to the requirement of small and medium savers. This improved not only the quantum of deposits; it also brought about qualitative changes in the deposits structure.Figure 3.8: Trend of Deposits in MBL3.15.2. Advances:The Bank has formulated its policy to give priority to small and medium enterprises while financing large-scale enterprises through consortium of banks. Total loans and advances of the Bank stood at BDT 41,993.95 million as of December 31, 2008 as compared to BDT 31,877.86 million in 2007.The Bank has formulated its policy to give priority to small and medium businessmen while financing large-scale enterprises through consortium of banks. Total loans and advances of the Bank stood at BDT 31,877.86 million as of December 31, 2008 as compared to BDT 26,842.14 million in 2007. Trade and commerce, garments industry, large and medium scale industries and construction are major sectors in which the Bank extended credit.3.15.4. Import Trade:Mercantile Bank Limited opted quality financing while facilitating import trade in 2008. This year the Bank executed a total of 20,321 letters of credits amounting to BDT 56,528.80 million. The principal items were capital machineries, garments & accessories, rice, wheat, sugar, CDSO, vegetable oil, cement clinkers, hot roll steel, raw cotton, ships-breaking etc.The Bank is very much supportive in export financing since its inception. As an outcome of its positive attitude in export performance it is holding the top position among leading banks of new generation. A total of 17,581 export bills were handled worth BDT 43,108.50 million in 2008. the main export items of the bank were readymade garments, jute & jute goods, leather, handicrafts, tea frozen food, fish products etc.3.15.6. Syndication and Structured Finance:The Bank sanctioned BDT 6986.99 million as funded and non-funded facilities in Syndication and Structured Finance. The Bank worked as lead arranger in syndication financing as well as the participating financial institution. The project in which the Bank participated in Syndication and Structured Finance included: Grameen Phone Bangladesh Limited, TM International Limited, Pacific Bangladesh Telecom Limited, Nasir Glass Industries Limited, Partex Sugar Mills Limited, United Sugar Mills Limited, PHP Float Glass Industries Limited, AM Energy Limited, Dhaka Telephone Limited, Rising Spinning Mills Limited, Karim Spinning Mills Limited, BRAC, Rural Power Company Limited and KYCR Coil Industries Limited.3.15.7. Card Business:MBL cardholder can enjoy the following benefits and much more:No Cash Withdrawal Fee: For withdrawals of cash from MBL ATM by MBL cardholders no cash advance fee is necessary and from any other Q-cash ATM the fee is Tk.10 only. MBL is the only bank offering such unique facility. Moreover, our VISA Cardholders can also withdraw cash from any Visa logo ATM locally and internationally.Acceptability: International/Dual card is accepted all over the world at millions of outlets and ATMs. A Dual card is also accepted in most of the big cities like Dhaka, Citation, Khulna, Rajshahi, and Sylhet at more than 10,000 outlets including 4500 POS. It covers various kinds of merchants like hospital, hotel, restaurant, department store and the card has accessibility to any outlet having VISA logo.Credit Facility: Mercantile Bank Ltd. Visa Credit card offers maximum 45 days credit facilities free of interest and minimum payment is 5% of outstanding billing payment for easy repayment and convenience of the customers.Supplementary Card: A Principal cardholder (local) may apply for more than one supplementary card where one supplementary card is free. Expenses made by supplementary card will be charged to the principle card.Advance against Credit card: MBL cardholder can take advance as term loan up to 50% of the card limit to be repaid on the monthly installment basis. Any POS transaction over TK. 20000 but not exceeding 50% of the credit limit is convertible to Personal loan/CCS and to be repaid on monthly installment basis. Repayment period of such loan may be from 6 months to 36 months.Overdraft Facilities: Overdraft facilities up to 80% of the credit card limit may also be allowed for payment of the installment of scheme deposit with our Bank.Payment of Utility Bill: Payment of utility bills like telephone bills, gas bills, electric bills, water bills, may be settled by card.Dual Card (two in one): Single Card with double benefits. No hassle to carry two cards (local and international). A single credit card can be used both locally and internationally to withdraw cash from ATM for POS transaction. This is the special feature of MBL Visa card.Debit Card: Visa debit card is mainly tagged with deposit account (CD/SB/STD) that is automatically debited from the A/C having available balance. Debit card can also be used for purchasing goods, services, payment of utility bills etc as well as withdrawal of cash from ATM.Pre-Paid Card: Those who have no account with MBL may avail Pre-Paid card facilities. The Pre-Paid cardholders pay first buy later. Pre-Paid card offers the convenience and security of electronic payment in situations where one might otherwise use cash, such as birthday gift or a monthly allowance for a young adult. Examples include gift cards and salary payment etc.Cash advance fee:a) MBL card to MBL ATM: No fee.b) MBL card to other Q-Cash ATM: Tk.10 per transaction.c) MBL card to other ATM: 2% of transaction amount or Tk.125 whichever is higher.d) For international card: USD 3 or 2% of transaction amount whichever is higher.3.15.8. Foreign Exchange Business:From the very beginning a Commercial Bank like MBL is involved in financing foreign trade apart from financing internal credit requirements in the economy. This involves handling of import business through opening Letter of Credit and Handling of export business. As banking has become very keenly competitive, banks find it convenient to involve in foreign exchange business as lucrative sources of earning income and profit.Apart from financing foreign trade, Commercial Banks also provide guarantees of various types to their clients. While these facilities clients to undertake jobs assigned to them by various Corporations and Organizations, this enables the Bank to earn commission, which is becoming gradually major source of earning of Commercial Bank.3.15.9. Online Banking:Online Banking has so far been activated with 41 Branches of the Bank from January 01, 2006. Online service is now available for all customers Both Cash depositand withdrawals, Cherub Deposits and Transfer in CD, SB, STD, Loan accounts (Cherub Bearing within limit) and Monthly Savings Scheme (MSS).3.16. Financial Performance:CHAPTER- 4Introduction to Foreign Exchange4.1. Foreign Exchange- its meaning and definition:Foreign exchange refers to the process or mechanism by which the currency of one country is converted into the currency of another country. Foreign exchange is the means and methods by which rights to wealth in a countrys currency are converted into rights to wealth in another countrys currency. In banks when we talk of foreign exchange, we refer to the general mechanism by which a bank converts currency of one country into that of another. Foreign Trade gives rise to foreign exchange. Modern banks facilitate trade and commerce by rendering valuable services to the business community. Apart from providing appropriate mechanism for making payments arising out of trade transactions, the banks gear the machinery of commerce, specially in case of international commerce, by acting as a useful link between the buyer and the seller, who are often too far away from and too unfamiliar with each other.According to Foreign Exchange Regulation Act (FERA) 1947, Any thing that conveys the right to wealth in another country is foreign exchange. Foreign exchange means and includes all deposits, credits and balances payable in foreign currency as well as foreign currency instruments such as drafts, TCs. Bill of Exchange, promissory Notes and Letters of Credit payable in any foreign currency. .This definition implies that all business activities relating to Import, Export, Outward & Inward Remittances, buying & selling of foreign commissions, etc. come under the purview of foreign exchange business. Foreign exchange department of banks plays significant roles through providing different services for the customers.4.2. Foreign Exchange Market and BangladeshForeign Exchange Market allows currencies to be exchanged to facilitate international trade and financial transactions. Evolution of the market in Bangladesh is closely linked with the exchange rate regime of the country. It had virtually no foreign exchange market up to 1993. BANGLADESH BANK, as agent of the government, was the sole purveyor of foreign currency among users. It tried to equilibrate the demand for and supply of foreign exchange at an officially determined exchange rate, which, however, ceased to exist with introduction of current account convertibility. Immediately after liberation, the Bangladesh currency taka was pegged with pound sterling but was brought at par with the Indian rupee. Within a short time, the value of taka experienced a rapid decline against foreign currencies and in May 1975, it was substantially devalued. In 1976, Bangladesh adopted a regime of managed float, which continued up to August 1979, when a currency-weighted basket method of exchange rate was introduced. The exchange rate management policy was again replaced in 1983 by the trade-weighted basket method and US the dollar was chosen as intervention currency. By this time a secondary exchange market (SEM) was allowed to grow parallel to the official exchange rate.Up to 1990, multiple exchange rates were allowed under different names of export benefit schemes such as, Export Bonus Scheme, XPL, XPB, EFAS, IECS, and Home Remittances Scheme. This led to a wide divergence between the official rate and the SEM rate. The situation also gradually gave rise to a number of conflicting regulations, poor risk management, and various types of implicit or explicit government guarantees to the users of foreign exchange. This resulted in a number of macro-economic imbalances prompting the government to adjust the official rate in phases.4.3 Functions of Foreign exchange department:Following are the functions that Foreign exchange department performs to facilitate the transaction of foreign exchange: Facilitating import and export trades. Providing funded and non-funded credit facility. Providing non-commercial remittance. Maintaining foreign currency accounts. Selling foreign currency bond. Preparing and submitting statements relating to foreign currency.4.4. Exchange Rate Policy:The exchange rate policy of Bangladesh Bank aims at maintaining the competitiveness of Bangladeshi products in the international markets, encouraging inflow of wage earners remittances, maintaining internal price stability, and maintaining a viable external account position. Prior to the inception of floating exchange rate regime, adjustments in exchange rates were made while keeping in view the trends of Real Effective Exchange Rate (REER) index based on a trade weighted basket of currencies of major trading partners of Bangladesh and the trends of other important internal and external sector indicators. However, the interbank foreign exchange market sets the exchange rates for customer transactions and interbank transactions based on demand-supply interplay; while the exchange rates for the Bangladesh Banks spot purchase and sales transactions of US Dollars with ADs is decided on a case to case basis. Bangladesh Bank does not undertake any forward transaction with ADs. The ADs are free to quote their own spot and forward exchange rates for interbank transactions and for transactions with non-bank customers.4.5. Different Foreign Exchange rates in Bangladesh:The exchange rates of Taka for inter-bank and customer transactions are set by the dealer banks themselves, based on demand-supply interaction. The Bangladesh Bank is not present in the market on a day-to-day basis and undertakes purchase or sale transactions with the dealer banks only as needed to maintain orderly market conditions. The exchange rates are used as reference rates to purchase or sale transactions for Bangladesh Bank with Government or different International Organization. But USD/BDT buying and selling rates represent previous day interbank markets highest and lowest exchange rates.Recent Reference Exchange Rates:CurrencyBuyingSelling

15th October, 2009

A. USD/BDT Rates (based on interbank transaction)

USD69.0869.09

B. Cross Rate

SEK10.0010.00

JPY0.770.77

GBP110.35110.39

EUR103.07103.12

CAD67.3367.38

AUD63.1563.19

Table 4.1: Recent Reference Exchange RatesSOURCE: www.exchangerates.org.The graph below shows historical exchange rates between the Bangladeshi Taka (BDT) and the US Dollar (USD) between 4/20/2009 and 10/16/2009.\Figure 4.1 Different Exchange rates in BangladeshSOURCE: www.exchangerates.org.4.6. Movements of monthly averages of USD/BDT Exchange Rate:Figure 4.2 charts the monthly average nominal exchange rates against the US Dollar for the currencies of Bangladesh and some of its major Asian trading partners over a 12-month period beginning January 2008, taking that month as the base. Bangladesh Taka has remained fairly steady over 2008 without any major fluctuations. However, that cannot be said for other currencies in Asia which have experienced sharp fluctuations, partly as a result of the ongoing global economic crisis. The Indian Rupee depreciated by about 25 percent over the year as inflows of foreign capital to India fell sharply along with withdrawals of foreign portfolio investments, also resulting in a sharp decline in the stock market. A similar pattern of events occurred in Thailand, though to a lesser extent. As Bangladesh imports a considerable amount of food items from both India and Thailand, the cost of these imports should be considerably cheaper as a result of the depreciation of their currencies. This, along with the sharp fall in global food, oil and commodity prices, has resulted in a significant fall in average inflation rates in Bangladesh. However, such a stable exchange rate of the Taka against the US$ might have some important negative implications for export competitiveness.Figure 4.2: Monthly Average Nominal Exchange Rates vs. US$ in 2008SOURCE: Reserve Bank of respective countries4.7. Recent Forex outlook of Bangladesh:Fiscal year 2008 has so far been marked by robust growth in Bangladeshs exports. During July-November 2008, total exports receipts were about US$ 6.54 billion as compared to $5.18 billion over the same period of FY2007, an increase of over 23.36 percent. A sharp upturn occurred after October. Export receipts in October were $867.69 million, while in November they amounted to$1297.47 million, a rise of over 49.5 percent in one month. This brought November 08 export earnings to a level higher (about 13.4 percent) than the same month of the previous year, as seen in Figure 4.3.Figure 4.3: Exports Jul-Nov 07 vs. 08SOURCE: Bangladesh Bank, December 2008Further, from Figure 4.4 and 4.5 we see that robust remittance inflow and satisfactory export performance and a reasonably stable trade balance in recent years have contributed much to maintain a stable exchange rate against US$.Figure 4.4: Remittance Inflow in BangladeshSOURCE: Bangladesh BankFigure 4.5: Export and Import for BangladeshSOURCE: Bangladesh BankIt is also observed in Figure 4.6 that Bangladesh maintained much lower ratio of international reserves to imports compared to other Asian countries which gave Bangladesh Bank enough flexibility to inject sufficient amount of dollar into the foreign exchange market over the periods under consideration.Figure 4.6: Ratio of International Reserves to Imports: The case of Some Asian CountriesSOURCE: World Development Indicators, 2008 (World Bank)4.8. Types of Foreign Trades:There are mainly three types of transactions which lead to foreign exchange. These are:a) Importb) Exportc) Foreign RemittanceFigure 4.7: Types of Foreign TradesSOURCE: www.mblbd.com4.9. Regulations for Foreign Exchange:4.9.1. Local regulations: our foreign exchange transactions are being controlled by the following local regulations:4.9.2. Foreign Exchange Regulation Act: Foreign Exchange Regulation (FERA) Act. 1947 enacted on 11th March 1947 in the then British India, provides the legal basis for regulation the foreign exchange. This act was adapted in Pakistan and lastly in Bangladesh.4.9.3. Guidelines for Foreign Exchange Transaction: This publication issued by Bangladesh Bank in the year 1996 in two volumes. This is a compilation of the instructions to be followed by the Authorized Dealers in transactions relating to foreign exchange.4.9.4. F.E. Circular: Bangladesh Bank issues F.E. circular from time to time to control the export import business and remittance that is to control the foreign exchange.,4.9.5. Export-Import Policy: Ministry of commerce issues Export Policy and Import Policy giving basic formalities for Import and Export Business.4.9.6. Public Notice: Some times CCI &E issues public notice for any kind of change in Foreign Exchange Transaction.4.9.7. Instructions from different ministry: Different ministries of the Govt. sometimes instruct the authorized dealer directly or through Bangladesh Bank to follow something required for the government.4.9.8. International Regulations: There are also some international organizations influencing our Foreign Exchange transactions. Few of them are discussed bellow:4.9.8.1. ICC: International Chamber of Commerce is a world wide Non-governmental Organization of thousands of companies. It was founded in 1919. ICC National committees throughout the world present ICC views to their Governments and alert Paris Headquarters about national business concerns. ICC has issued some publications like UCPDC, URC and URR etc., which are being followed by all the member countries. There is also an international Court of Arbitration to solve the international business disputes.4.9.8.2. WTO: World Trade Organization is another International Trade Organization established on 1st January 1995. GATT (General Agreement on Tariff & Trade) was established on 1st January 1948. After completion of its 8th round, the organization has been abolished and replaced by WTO. This organization has vital role in international trade through its 124 member countries.4.10. Letter of credit:A Letter of credit is a letter issued by a bank (know as the opening or the issuing bank) at the instance of its customer (known as the opener) addressed to a person (known as beneficiary) undertaking that the bills drawn by the beneficiary will be duly honored by it (opening bank) provided certain conditions mentioned in the letter gave been complied with.4.10.1. Classification of Letter of Credit:In different considerations there are many kinds of L/Cs. Some of them are discussed bellow:4.10.1.1. Irrevocable L/C: Irrevocable L/C cannot be amended or cancelled without the consent of the beneficiary or any other interested parties. Banks commonly open this type of L/C.4.10.1.2. Revocable L/C: This kind of L/C can be amended or cancelled by the Issuing Bank, without the consent of the beneficiary or any other interested parties. If it is not indicated in the L/C, whether it is Revocable or Irrevocable, then the L/C to be treated as Irrevocable.4.10.1.3. Add-confirmed L/C: When a third bank provide guarantee to the beneficiary to make payment, if Issuing Bank fail to make payment, the L/C is called Add-Confirmed L/C. In case of a confirmed L/C a third bank adds their confirmation to the beneficiary, to make payment, in addition to that of Issuing Bank. Confirmed L/C gives the beneficiary a double assurance of payment.4.10.1.4. Clean Claused: It is a normal claused L/C without third banks confirmation.4.10.1.5. Revolving L/C: It is an L/C where the original amount restores after it has been utilized. How many times and how long, the amount will restore must be specified in the L/C. For example, an L/C opened for USD 1000 and shipment effected for USD 500, now the L/C restored for full value i.e. There is scope to effect further shipment of USD 1000 revolving L/C may be opened to avoid difficulties of opening new L/C. This L/C is not allowed in our present import policy.4.10.1.6. Transferable L/C: If the word Transferable incorporated in an L/C, then the L/C is transferable. The 1st beneficiary can transfer transferable L/C to the 2nd beneficiary. But 2nd beneficiary cannot transfer it further to another beneficiary. Transfer may be done to more than one beneficiary, partially, if not prohibited in the L/C.4.10.1.7. Restricted L/C: If advising and/or negotiation of an L/C are restricted to a particular bank, the L/C is called a restricted L/C.4.10.1.8. Green Clause L/C: It is an L/C, where the Issuing Bank authorizes the Negotiating Bank to grant storage facilities to the beneficiary. The special clause was originally written in Green-ink, so the L/C is called Green Clause. In both the case of Red Clause and Green Clause L/C, if the exporter fails to ship the goods the financing bank has the right to demand repayment from the Issuing Bank and that bank would have a similar right of recourse against the applicant.4.10.1.9. Clean Letter of Credit: This is a commercial letter of Credit, wherein the Issuing Bank does not ask any documents as evidence of execution of the deal under the L/C. Under the said L/C only bill of exchange may be negotiated or may be paid without any supporting documents. Clean Letter of //Credit is not permissible in our import policy.4.10.1.10. Documentary Letter of Credit: All the commercial letter of credits, where export related documents such as invoice, B/L etc. are required to present with the bill of exchange, is called Documentary Credit. Under this L/C, Bill of Exchange will not be honored without other required documents.4.10.1.11. Straight Documentary Credit: Under the irrevocable straight documentary credit, the obligation of the Issuing Bank is extended only to the beneficiary, in honoring draft(s)/ documents and usually expires at the counter of the Issuing bank. This L/C. does not authorize any body to negotiate, purchase the documents. This L/C. is available for payment only at the Issuing Banks counter, not available for negotiation.4.10.1.12. Irrevocable Negotiation Documentary Credit: This L/C. is available for negotiation by a nominated bank/any bank and expiring for presentation of document at the offices of Negotiating bank. The Issuing Bank is bound to reimburse the Negotiating Bank, if it negotiates the documents complying with the credit terms.4.10.1.13. With Recourse and Without Recourse to Drawers: These terms are related with Bill of Exchange. If the L/C allow a Bill of Exchange with recourse to the drawer, that means the Negotiating Bank has the right to claim the amount back, from the drawer, if the B/E is dishonored by, the drawee. And in case of without recourse, the Negotiating Bank has no right to claim the amount back.L/C can be classified according to source of fund:A) Back-to-Back L/C: Back to Back import L/C is backed by another export L/C. where import of the goods to be made to execute the export L/C and payment of Back to Back bills to be made normally from related export process, the import L/C is called Back to Back L/C. A Back-to-Back L/C is opened against an irrevocable L/C. The L/C is lien marked with the back-to-back L/C issuing branch. Back to Back L/C may be opened up to 75% of export L/C, (FOB value) and up to 80% where export price is more than USD 60/- per dozen in case of garments industries.B) Cash L/C: Where payment of import bills under L/C is being made from (i) Foreign Currency reserve in Bangladesh Bank or (ii) F.C. account with authorized Dealer, the L/C is called Cash L/C.C) Barter L/C: Where final settlements are being made through commodity exchange between the nations, the L/C is called Barter L/C.According to Payment terms, there are mainly three types of L/Cs such as:a) Sight Credit:b) Accepted Credit:c) Deferred Payment Credit:4.11. Documents used in LC operation:The most commonly used documents in foreign exchange are4.11.1. Bill of Exchange4.11.2. Bill of Lading4.11.3. Commercial of invoice4.11.4. Certificate of origin4.11.5. Inspection certificate4.11.6. Packing list4.11.7. Insurance document4.11.8. Pro Forma Invoice (PI)/Indent4.11.1. Bill of Exchange:Bill of Exchange is one of the important negotiable instruments in the mercantile world and used as a vital document facilitating settlement of payments between buyer/importer and seller/exporter at home and abroad. A bill who accepted by the drawer, gives evidence of the claim as made by the drawer as well as testimony to the acceptance the debt by drawer. The payment is done either in accordance with the terms of sale contract or under a L/C opened by the buyer/importer in favor of the seller/exporter.4.11.2. Bill of Lading:A bill of lading is a document that is usually stipulated in a credit when the goods are dispatched by sea. It evidence of a contract of carriage, is a receipt for the goods, and is a document of title to the goods. It also constitutes a document that is, or may be, needed to support an insurance claim. The details on the bill of lading include: A description of the goods in general terms not inconsistent with that in the credit. Identifying marks and numbers. The name of the carrying vessel. Evidence that the goods have been loaded on board. The ports of shipment and discharge. The names of shipper, consignee and name ad address of notifying party. Whether freight has been paid or is payable at destination. The number of original bills of lading issued. The date of issuance A bill of lading specifically stating that goods are loaded for ultimate destination specifically mentioned in the credit.4.11.3. Commercial of invoice:A Commercial invoice is the accounting document by which the seller charges the goods to the buyer. A commercial invoice normally includes the following information. Date Name and address of buyer and seller Order or contract number, quantity and description of the goods, unit price and the total Price Weight of the goods, number of packages, and shipping marks and numbers Terms of delivery and payment Shipment details4.11.4. Certificate of origin:A certificate of origin is a singed statement providing evidence of the origin of the goods.4.11.5. Inspection certificate:This is usually issued by an independent inspection company located in the exporting country certifying describing the quality, specification or other aspects of the goods, as called for in the contract and/or the L/C. The buyer who also indicates the type of inspection he wishes the company to undertake usually nominates the inspection company.4.11.6. Packing list :This is unique document and not combined with other document. This is a listing of the contents of each package cartoon etc. and other relevant information.4.11.7. Insurance document:Insurance is a contract whereby the insurer is undertaking to indemnify the assured to the agreed manner and extend against fortuitous losses. Insurance document generally contains the following information: The name of the insurer or his agent The name of the ship/carrier The name of assured The subject matter of insurance The peril(s) insured against The date and subscription The valuation4.11.8. Pro Forma Invoice (PI)/Indent:Pro Forma Invoice / Indent is the sale contract between seller and buyer in import-export business. There is slight difference between indent and Pro forma invoice. The sales contract, which is direct correspondence between importer and exporter, is called Pro forma invoice. There is no intermediary between them. On the other hand, the may be an agent of exporter in importers country. In this regard, if the sale contract is occurred between the agent of exporter and importer then it is called indent. Pro Forma Invoice is a form of quotation to a potential buyer, inviting him to buy the goods on stated terms. The should be clearly stated that it is pro forma and if it is accepted the details are normally transferred to a commercial invoice.4.12. Different accounts related to foreign exchange transaction:In L/C operation different accounts are maintained which are needed for foreign exchange transaction. These are:4.12.1. Nostro account:Nostro account means our account with you. A Nostro account is a foreign currency account of a bank maintained its foreign correspondents abroad. For example, US Dollar Account of MBL maintained with Citibank, N.A, New York, USA is a Nostro account of MBL.4.12.2. Vostro account:Vostro account means your account with us. The account maintained with foreign c