bank asia-03

Letter of Submission

Date:

To

The Head

Department of Business Administration

University Of Science And Technology Chittagong

Subject: Submission of Internship Report.

Dear Sir,

It is my pleasure to submit my Internship Report on “An Overview of General Banking

and Foreign Exchange Mechanism of Bank Asia Limited, Khatungonj Branch,

Chittagong” to you after completion of three months internship program with Bank Asia

Ltd.

I tried my best to gather relevant information for preparing a complete report. Without the

sincere co-operation and proper guidance of you, it is not possible for me to prepare the

report. For this act of kindness I am grateful to you. This report is not free from mistakes

due to some limitations. I hope you accept it with gracious consideration.

Sincerely Yours,

----------------------------

Signature

KEYA DEBI

ROLL NO 347

(Major in Finance)

Department of Business Administration

University Of Science And Technology Chittagong.

Bank AsiaLimited

TABLE OF CONTENTS

Content----------------------------------------------------------------------------------Page

Acknowledgement ------------------------------------------------------------------- 1

Executive Summery -----------------------------------------------------------------2

Chapter 1 ------------------------------------------------------------------------------4

Introduction ---------------------------------------------------------------------------4

Organization Overview-------------------------------------------------------4

Origin of the Report -----------------------------------------------------------4

Background of the Study ------------------------------------------------------5

Objectives -----------------------------------------------------------------------5

Scope of the Study -------------------------------------------------------------6

Methodology ------------------------------------------------------------------- 6

Limitations --------------------------------------------------------------------- 7

Chapter 2 -------------------------------------------------------------------------------- 8

Organization Briefing ----------------------------------------------------------------- 8

Corporate Information---------------------------------------------------------- 8

Organizational Hierarchy ------------------------------------------------------ 9

Management Hierarchy -------------------------------------------------------- 10

Khatungonj Branch ------------------------------------------------------------- 11

Mission statement & corporate objectives -----------------------------------11

Corporate Objectives ------------------------------------------------------------ 12

Values that are considered to be the Guiding Factors ---------------------- 12

A Brief Overview of the Principles Businesses of Bank Asia ------------- 13

Performance of Khatungonj Branch ------------------------------------------- 15

Major Findings & Analysis ------------------------------------------------------ 16

Chapter 3 ------------------------------------------------------------------------------------- 20

General Banking ---------------------------------------------------------------------------- 20

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“An Overview of General Banking & Foreign Exchange Mechanism of Bank Asia Ltd, Khatungonj Branch.

Bank AsiaLimited

Customer Service -------------------------------------------------------------------- 20

Accepting Deposits ------------------------------------------------------------------- 21

Procedure of Opening Accounts ------------------------------------------------------- 21

Types of Deposits accounts & their Formalities ------------------------------------ 21

Cheque Book Prepare ------------------------------------------------------------------- 25

Other Tasks ------------------------------------------------------------------------------- 25

Accounts Department -------------------------------------------------------------------- 26

Daily Tasks -------------------------------------------------------------------------------- 26

Periodical Tasks --------------------------------------------------------------------------27

Annual Closing -------------------------------------------------------------------------- 27

Local Remittance ---------------------------------------------------------------------- 28

Pay order -------------------------------------------------------------------------------- 28

Demand Draft --------------------------------------------------------------------------- 29

Telegraphic Transfer ------------------------------------------------------------------- 30

Collection -------------------------------------------------------------------------------- 31

Outward Bill Collection ---------------------------------------------------------------- 32

Clearing ----------------------------------------------------------------------------------- 32

Chapter 4 ------------------------------------------------------------------------------------------34

Foreign Exchange Mechanism --------------------------------------------------------------- 34

The meaning of Foreign Exchange --------------------------------------------------- 34

Objectives of Foreign Exchange ----------------------------------------------------- 35

Foreign exchange dept. of Bank Asia, Khatungonj Branch ---------------------- 35

Foreign Exchange Mechanism -------------------------------------------------------- 36

Import Dept. ----------------------------------------------------------------------------- 37

Major Tools in Foreign Exchange: Letter of Credit ------------------------------ 40

Lodgment of Documents procedure ------------------------------------------------ 44

Parties Involved in L/C -------------------------------------------------------------- 44

Different Types of L/C provided by Khatungonj Branch ----------------------- 47

Advantages & Disadvantages of L/C ----------------------------------------------- 50

Types of Contacted price for L/C --------------------------------------------------- 51

Nature of Credit ------------------------------------------------------------------------52

Foreign Remittance -------------------------------------------------------------------- 54

Documents Needed for Import & Export Procedure ------------------------------ 55

Export Department ----------------------------------------------------------------------56

Post shipment Credit ------------------------------------------------------------------- 59

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Bank AsiaLimited

Back to Back L/C ------------------------------------------------------------------------ 60

Reporting to Bangladesh Bank -------------------------------------------------------- 61

Export L/C --------------------------------------------------------------------------------62

Procedure for FDBP -------------------------------------------------------------------- 65

Foreign documentary Bills for Collection ------------------------------------------- 65

Export Bill Scrutiny Sheet ------------------------------------------------------------ 66

Settlement of Local Bills -------------------------------------------------------------- 66

Accounting Treatment for Purchasing of Local Bill ------------------------------ 66

Mode of payment of Export bills Under L/C -------------------------------------- 67

Advising L/C --------------------------------------------------------------------------- 68

Test Key Arrangement ---------------------------------------------------------------- 68

Chapter 5 ---------------------------------------------------------------------------------------- 69

Conclusion and Recommendation ------------------------------------------------------------ 69

Bibliography -------------------------------------------------------------------------------------72.

Acknowledgement

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Bank AsiaLimited

All praise to be the creator and sustainer who has given me strength and opportunity to

complete this report. It is indeed a great pleasure and honour on my part to have the

opportunity to submit this report after three months of practical orientation in Bank Asia

Limited. This practical orientation was meant to familiarize me with the real life banking.

No report is fulfilled without the help of others. Some people spread their hands to me for

preparing this report. Here I remember the gentlemen and specify those. I cannot forget to

mention their name.

At first, I would like to thank to our honorable teacher Dr. Md. Solaiman Dean, Faculty of

Business Administration (USTC) and Mr. Shaidul Queder Lecturer. Department of

Business Administration who have requested Bank Asia Limited for my internship

program. In this connection I would also like to thank Mr. Surajit Sarbabidya Assistant

Professor, Department of Business Administration (USTC) of our internship program for

all of the possible help.

I would like to express my gratitude and heartfelt thanks to my internship supervisor Mr.

Shaidul Queder Lecturer, Department of Business Administration for his kind guidance,

generous co-operation and valuable suggestions pursuing internship and this report.

I would like to pass thanks from the core of my heart to Mr. Swapan Das Gupta, Senior

Vice- President & Manager, Bank Asia, Khatungonj Branch, Ctg for his unconditional

support, which facilitated me to complete my internship in the bank successfully.

I also wish to render my grateful thanks to all senior and junior officers of Bank Asia Ltd.,

Khatungonj Branch, who helped me during the time of my internship program at the bank.

I must mention the excellent working environment and the positive group behavior of this

bank, which helped me tremendously to observe the banking activities, work with the

staffs and stay for three months without any hesitation.

Keya Debi

……………, 2007

CHAPTER 1

INTRODUCTION

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Bank AsiaLimited

Organization OverviewOrganization Overview

Bank Asia began its journey on the 27th of November 1999 with the inauguration

of the bank’s Corporate Office at the Rang’s Bhaban. The overwhelming public

response has enabled the Bank to keep up the plan of expanding its network. The

opening of the Principal Office was the big leap forward and successively the

opening of Gulshan and Chittagong Branch expanded the horizon of Bank Asia to

bring its services to the valued clients more effectively.

Bank Asia conducts all types of commercial banking activities. The core business

of the bank comprises of import, export, working capital finance and corporate

finance. The bank is also rendering personal credit, services related to local and

foreign remittances. The “Personal Credit” scheme of the bank, which is designed

to help the fixed income group in raising standard of living is competitively priced

and has been widely appreciated by the customers. The bank’s strategy is to

gradually cover the total arena of banking. The objectives of Bank Asia are to

provide high quality service to its customers, to participate in the growth and

expansion of our national economy, to set high standards of integrity, to bring total

satisfaction to our clients, shareholders and employees, and to become the most

sought after bank in the country, rendering technology driven innovative services

by the dedicated team of professionals.

Bank Asia came into the headlines and attention of everyone when it acquired the

operation of Bank of Nova Scotia, a Canadian Bank. This is the first time that a

local private bank acquired any operation of a foreign bank in Bangladesh. The

breakthrough was possible for some visionary decision-makers and also

dedicated team of professionals who are constantly putting all their best efforts to

establish the bank as one of the leading concern in the industry.

Origin of the report

Present world is changing rapidly to face the challenge of the competitive free

market economy. To keep pace with the trend banks need executive with modern

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Bank AsiaLimited

knowledge. After complete the BBA course, I am assigned to write a report (which

is known as internship) on the experience that I gain three months long orientation

in the different departments of khatungonj branch of Bank Asia Limited.

Background of the study

I have tried to prepare the report in such a way that it reflects what I learn during

the orientation period. I tried to clarify my experience with practical knowledge on

overall banking activities.

ObjectivesObjectives

1. The primary objective in this research paper is to fulfill the partial requirement

in the Bachelor of Business Administration (BBA) degree.

2. Besides fulfilling the degree requirement, this internship report intends to cover

a comprehensive analysis of banking activities of khatungonj Branch of Bank

Asia.

3. The report is aimed at studying and understanding the various products

offered by the Bank’s each Department to its clients as well as the several

activities carried out to achieve the departmental objectives.

4. In addition, the report also studies how Bank Asia, khatungonj branch is

maintaining growth in overall banking activities.

5. To comply with the entire branch banking procedure.

6. Finally, this internship report also aims to analyze the performance of the

branch as well as Bank Asia Limited as a whole.

Scope of the studyScope of the study

Bank Asia limited is one of the leading banks in Bangladesh. The scope of the

study is limited to the khatungonj Branch only. The report covers the

organizational structure, background, banking activities, functions and the

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Bank AsiaLimited

performance of the branch. I mentioned about the government rules and

regulations on different banking activities.

MethodologyMethodology

Certain methods and techniques were utilized to collect data for this report. Both

primary and secondary sources were chosen as effective means of collecting data

relevant for this report.

Interview was the basic technique that was employed to collect primary data from

people within the organization. For the procedure of different banking operations, I

had observed the operations and worked with the officers at the same time. I had

interviewed the Bank Asia Officials for getting more information.

On the other hand, secondary sources were used to collect data regarding the

company’s performance since its inception. Publications and database within the

organization helped me to gather data not only about the organization. In addition,

further more the secondary sources of information are the different annual report

kept in the banks.

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Bank AsiaLimited

LimitationsLimitations

This report may have some incompleteness due to some of the limitations I

encountered while completing it, that are mentioned below:

1. One major limitation was the time constraint as every department has many

activities. This report could have been prepared in a much broader and

extensive manner with more time and space availability.

2. Some essential data could not be gathered because of confidentiality

concerns.

3. I was not able to visit the different branches of Bank Asia and had to depend

on the Khatungonj Branch for all the information regarding overall banking.

4. Another limitation was that the information gathered could not be verified for

accuracy.

CHAPTER 2

ORGANIZATION BRIEFING

Bank AsiaBank Asia

Corporate Information

Letter of intent received on 24/02/1999

First meeting of the promoters held on 15/04/1999

Certificate of incorporation received on 28/09/1999

Certificate of commencement of business received on 27/09/1999

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Bank AsiaLimited

First meeting of the board of director held on 01/10/1999

Banking license received on 06/10/1999

Branch license received on 31/10/1999

Inauguration held on 27/11/1999

Authorized capital :800 million

Paid up capital:218 million

Total number of promoters:22

Total number of director :13

Auditor :S.F.Ahmed &Co(SFACO)chartered accountants

Legal advisor: Lee, Khan ,&Associates

Registered office:113-116 old airport road (8th floor)

Tejgaon Dhaka -1215, Bangladesh

ORGANIZATIONAL HIRARCHY

OF BANK ASIA LIMITED

CHAIRMAN

VICE CHAIRMAN

MANAGING DIRECTOR

SENIOR EXECUTIVE VICE PRESIDENT

EXECUTIVE VICE PRESIDENT

SENIOR VICE PRESIDENT

VICE PRESIDENT

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Bank AsiaLimited

FIRST EXECUTIVE VICE PRESIDENT

SENIOR EXECUTIVE OFFICER

EXECUTIVE OFFICER

SENIOR OFFICER

OFFICER

MANAGEMENT TRAINEE OFFICER

JUNIER OFFICER

ASSISTANT OFFICER

BANKING OFFICER

TELLER

MANAGEMENT HIRARCHY OF

BANK ASIA LIMITEDKHATUNGONJ BRANCH

SENIOR VICE -PRESIDENT & MANAGER

SENIOR EXECUTIVE OFFICER

EXECUTIVE OFFICER

SENIOR OFFICER

OFFICER

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Bank AsiaLimited

MANAGEMENT TRAINEE OFFICER

ASSISTANT OFFICER

BANKING OFFICER

TELLER

KhatungonjKhatungonj Branch Branch

On 24th September, 2002 Khatungonj branch (17th Branch of Bank Asia) started

their business activities in khatungonj area. Khatungonj Branch is the chartered

member of SWIFT (Society for Worldwide Inter-bank Financial

Telecommunication) among Bank Asia’s other branches. SWIFT is widely used for

purposes like fund transfers, L/C and guarantee issuance that can be made

instantly.

Khatungonj branch is operated with 15 employees, three of whom were

previously engaged with MCB (Muslim Commercial Bank), two were previously

engaged with FSBL (First Security Bank Limited), and rests were brought from

different branches of Bank Asia. Currently, the Khatungonj Branch offers

corporate banking, correspondent banking, and treasury services to its

customers including local corporations, multinational companies, multinational

agencies, domestic missions and other donor agencies, NGOs, and financial

institutions. It also offers a limited range of retail banking products to provide

for individual banking needs as well.

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Bank AsiaLimited

Mission Statement and Corporate ObjectivesMission Statement and Corporate Objectives

MISSIONMISSION

To assist in bringing high quality service to our customers and to participate in the

growth and expansion of our national economy.

To set high standards of integrity and bring total satisfaction tour clients,

shareholders and employees.

To become the most sought after bank in the country, rendering technology driven

innovative services by our dedicated team of professionals.

Corporate ObjectivesCorporate Objectives

Bank Asia’s objectives are reflected in the following areas.

Highly personalized service.

Customer-driven focus.

Total commitment to quality.

Outstanding products.

Contribute in the economy

Quality of human resources

Commitment to its clients at each level

The company believes that communication with, and feedback from, its clients

help it achieve its goal of providing world-class products and services. Bank Asia

regularly conducts client satisfaction surveys and make immediate

accommodations and adjustments where needed. It also constantly monitors its

standards, and strives to meet clients’ requirements.

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Bank AsiaLimited

Values that are considered to be the guidingValues that are considered to be the guiding factor factor

All the activities and decisions of Bank Asia are based on, and guided by, these

values.

1. Placing the interests of clients and customers first.

2. A continuous quest for quality in everything the company does.

3. Treating everyone with respect and dignity.

4. Conduct that reflects the highest standards of integrity.

5. Teamwork – from the smallest unit to the enterprise as a whole.

6. Being good citizens in the communities, in which they live and work.

A Brief Overview of the Principal Businesses ofA Brief Overview of the Principal Businesses of

Bank Asia, Bank Asia, KhatungonjKhatungonj Branch Branch

Trade FinancingTrade Financing

The acquisition of Khatungonj Branch gave Bank Asia new strength in its trade

financing activities. Previously Bank Asia was not facilitated with “SWIFT” which is

very crucial in efficient modern banking correspondence. Now the Khatungonj

Branch has correspondence with over 800 financial institutions worldwide.

Khatungonj Branch provides L/C payment, L/C advising, negotiation,

reimbursement, shipping guarantee, export bill collection services to its valued

clients. Khatungonj Branch becomes, in effect, Bank Asia’s one of the strongest

international banking arms, helping to serve their clients through its global

network.

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Bank AsiaLimited

Corporate Banking Corporate Banking

Bank Asia, Khatungonj Branch’s corporate banking arm provides a range of

products and services that address the financing needs and transaction

structuring requirements of large and mid-sized corporate customers. Services

provided include loan syndication and asset sales, corporate advisory, trade

finance, and working capital and term financing. Working closely with the Bank’s

trading professionals; Corporate Banking also provides a range of foreign

exchange, interest rate management and risk management products.

Private Banking Private Banking

The Private Bank at Bank Asia, Khatungonj Branch meets client needs with a line

of discretionary portfolio management, custodial services, foreign exchange,

deposit services, credit facilities, and personal banking services.

Retail BankingRetail Banking

Retail Banking at Bank Asia, Khatungonj Branch provides all types of clients with

typical banking services such as, savings accounts, current accounts, call and

short-term deposit accounts, fixed deposit accounts, time deposits, foreign

currency accounts and secure locker services.

Treasury ServicesTreasury Services

The treasury department of Bank Asia, Khatungonj Branch, equipped with

Reuters dealing system, provides the following services:

Competitive foreign exchange rates in all major currencies.

Attractive rates for foreign currency deposits.

Forward covers to hedge trade transactions.

Dealing rooms in all major financial centers.

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Bank AsiaLimited

PERFORMANCE OF KHATUNGONJ BRANCH

Bank Asia Limited, Khatungonj Branch starting their banking activities only two and half

years, which I think is not a enough time for a branch to show their full capabilities in the

banking activities because there are more then 20 bank’s branch compete also in

khatungonj area. However, Bank Asia khatungonj branch already establish good image in

the area’s banking activities by providing faster customer service then other banks. In the

short time of starting banking activities, Khatungonj branch giving good contribution in

profit then other branches of bank Asia Limited. During internship period the performance

of the khatungonj branch are given below:

May, 2006 Jun,2006 July,2006

Total Deposit 83,91,58,872.36 81,43,16,282.67 76,82,01,414.28

Total Advance 1,00,87,15,136.00 1,07,18,12,365.92 1,24,18,42,735.78

Interest Income 1,08,54,285.83 1,14,73,981.63 1,39,01,474.33

Other Income 16,57,039.88 22,37,875.63 24,23,087.22

Total Income 1,25,11,325.71 1,37,11,857.26 1,63,24,561.55

Interest Expenses 61,08,303.19 69,64,736.12 81,04,786.43

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Bank AsiaLimited

Other Expenses 12,93,144.81 11,88,115.83 9,99,496.23

Total Expenses 74,01,458.00 81,52,851.95 91,04,282.66

Net Provisional

Profit/Loss

51,09,867.71 55,59,005.31 72,20,287.89

Import 19,26,78,921.50 54,46,25,528.28 61,97,81,342.65

Export 1,75,58,765.00 25,68,675.97 29,29,410.00

From the above data, it observed that Bank Asia, Khatungonj Branch try to contribute

every month in profit or loss then other branch. In the month of July, Khatungonj branch

earn more profit then zonal head office as well as rest of other branch in Chittagong city.

Major Findings and Analysis Major Findings and Analysis

Every organization is composed of some internal strengths and weaknesses and

also has some external opportunities and threats in its whole life cycle. The

following will briefly introduce the audience to the Bank Asia’s internal strengths

and weaknesses, and external opportunities and threats as I have explored in the

past ten weeks.

StrengthsStrengths

Superior quality

Bank Asia provides its customers excellent and consistent quality in every service.

It is of highest priority that customer is totally satisfied.

Dynamic

Bank Asia draws its strength from the adaptability and dynamism it possesses. It

has quickly adapted to world class standard in terms banking services. Bank Asia

has also adapted state of the art technology to connect with the world for better

communication to integrate facilities.

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Bank AsiaLimited

Financial strength

Bank Asia is a financially sound company backed by the enormous resource base

of the mother concern RANGS group. As a result customers feel comfortable in

dealing with the company.

Efficient management

All the levels of the management are solely directed to maintain a culture for the

betterment of the quality of the service and development a corporate brand image

in the market through organization wide team approach and open communication

system.

State of the art technology

Bank Asia utilizes state-of-the-art technology to ensure consistent quality and

operation. The proof of that can be found in one of its branches, Scotia that is

equipped with Reuters and SWIFT. All these facilities will be introduced in every

branch very shortly.

Expertise

One of the key-contributing factors behind the success of Bank Asia is its

employees who are highly trained and most competent in their own field. Bank

Asia provides their employees training both in-house and out side job.

In-house utility

Bank Asia is free from dependence from the ever-disruptive power supply of our

public sources. The required power is generated by the company through

generator fed on diesel. Water generation at present is also done by deep tube

wells on site and is abundant in quantity.

Excellent working environment

Bank Asia provides its workforce an excellent place to work in. Total complex has

been centrally conditioned. The interior decoration was done exquisitely with the

choice of soothing colors and blend of artiste that is comparable to any

multinational bank.

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Bank AsiaLimited

WeaknessesWeaknesses

Limited workforce:

Bank Asia has very limited human resources compared to its financial activities.

There are not many people to perform most of the tasks. As a result many of the

employees are burdened with extra work loads and works late hours without any

overtime facilities. This might cause high employee turnover that will prove to be

too costly to avoid.

Problem in delivery

Few of the Bank Asia’s products offered to its clients like “Money++” and

“Personal Credit (PC)” are lying idle due to proper marketing initiative from the

management. These products can easily be made available in attractive way to

increase its client base as well as its deposit status.

OpportunitiesOpportunities

Government support

Government of Bangladesh has rendered its full support to the banking sector for

a sound financial status of the country, as it is becoming one of the vital sources

of employment in the country now. Such government concern will facilitate and

support the long-term vision for Bank Asia.

Evolution of e-banking

Emergence of e-banking will open more scope for Bank Asia to reach the clients

not only in Bangladesh but also in the global arena. It will also facilitate wide area

network in between the buyer and the production unit of Bank Asia to smooth

operation to meet the desired need with least deviation.

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Bank AsiaLimited

ThreatsThreats

Mergers and acquisitions

The worldwide trend of mergers and acquisition in financial institutions is causing

concentration the industry and competitors are increasing in power in their

respective areas.

Poor telecommunication infrastructure

As previously mentioned, the world is advancing towards e-technology very fast.

Though Bank Asia has taken effort to join the stream, it is not possible to

complete the mission due to the poor technological infrastructure of our country.

Frequent currency devaluation

Frequent Taka Devaluation and foreign exchange rate fluctuations and particularly

South-East Asian currency crisis adversely affects the business globally.

Emergence of competitors

Due to existence of unserved demand in financial sector, it is expected that more

financial institutions will be introduced in the industry very shortly. And we have

already seen such cases in our country that lots of new banks are coming in the

scenario with new services. Bank Asia should always be prepared for the

competition in the coming years.

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Bank AsiaLimited

CHAPTER 3

GENERAL BANKING

General banking is the starting point of all the banking operations. It is the department

which provides day-to-day services to the customers. Everyday it receives deposits from

the customers and meets their demand for cash by honoring cheques. It opens new

accounts, remit funds, issues bank drafts and pay orders etc. Since bank is confined to

provide the services everyday, general is also known as ‘retail banking.’

Customer Service

Bank Asia Ltd. is providing modern banking facilities to the customer. It is committed to

fulfill every possible customer need with high efficiency and satisfaction. Its team of

dedicated professionals is committed to provide an unparalleled service and to bring

maximum benefits for the customers, the shareholders and the society at large. It’s a great

pleasure of Bank Asia to introduce following services:

1. Deposit Growth plus (DG+): In this scheme, customer deposit monthly installments ranging from Tk. 1,000 to Tk. 5,000 and after 3 or 5 years receives a handsome amount of money.

2. Monthly Benefit plus (MB+): It is a 5 Year scheme that lets customer to earn monthly benefit of Tk. 1,000 its multiple by minimum initial deposit of TK. 1,00,000 or its multiple.

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Bank AsiaLimited

3. Double benefit plus (DB+): Its 6 or 10 Years scheme. Customers deposit double in 6 Years and treble in 10 years. Minimum initial deposit for the scheme is Tk. 10,00,000 or its multiple.

4. Bonus saving scheme: A savings account held by subscribers with minimum balance of Tk. 50,000 will attract not only the usual savings interest but a father 10% bonus on interest.

5. Customized Loan: This loan is for those customers who possessed Bangladesh Sanchay Patra. Which will mature the next 5 years but he needs money.

6. Personal Credit Scheme: Customer can borrow from Tk. 50,000 to Tk. 3,00,000 to meet their personal needs.

7. Corporate Credit: This scheme removes customers form fiscal obligation. The terms and conditions are simple and easier. To get only of these products, customer needs to open his/her account. Bank has some rules and procedures to open an account. The customer must observe proper documentation formalities before opening with bank.

Accepting Deposits

Bank Asia Limited accepts the deposits like other banks may be classified into :

1. Demand Deposits : These deposits are withdrawn able without notification e.g. current deposits bank Asia Limited accepts demand through the opening of a) Current account b) Savings accountc) Call deposits the fellow bankers.

2. Time Deposits: Time deposits are payable at a fixed date of after period of notice. Bank Asia Limited accepts time deposits through fixed deposits receipt (FRD), short term deposit (STD) and bearer certificate deposit (BCD) etc. While accepting these deposits a contract is made between the bank and the customer.

Procedure for opening of accounts

Before opening of a current or savings account the following formalities must be

completed by the customers:

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Bank AsiaLimited

1. Application on the prescribed form. 2. Furnishing photographs 3. Introduction by an account holder4. Putting specimen signatures in the specimen card 5. Mandate if necessary 6. After fulfilling the above formalities Bank Asia Limited provides the customer a

cheque book.

Types of deposits accounts and their formalities

Bank Asia Limited offers following types of accounts and the formalities in addition to

then previous are as follows:

Current Account: Every business men must have this type of account, because without

this account a business men could not operate his daily financial activities and here client

is very valuable for bank because client are high richer. So, Bank Asia Limited officers

their client not interest or no restriction on this account. Current account can easily modify

on loan a/c such as secured over draft (SOD) or over draft (OD) a/c. Following are the

condition of current open:

In the name of individual : The client has to fill up a light green account opening form

terms and condition are printed on the back of the form The form contains the declaration

clause special instruction etc Two copies of passport size photograph duly attested by the

introducer are affixed with the form.

In the joint name: In this type, the formality is the same as individual account but in

the special instruction clause either or survivor or former clause is marked.

Proprietorship: In addition customer has to submit the valid trade license and tax

paying identification number (TIN) along with application.

Partnership: In case of partnership account the bank asks for:

A Copy of the partnership agreement.

A letter having signature of all the partners containing the following particulars.

The name and address of all the partners.

The nature of the firm’s business,

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Bank AsiaLimited

The name of the partners authorized to operate the account in the name of the firm.

Including authority to draw, endorse and accepting the bills and mortgage and sell the

properties belonging to the firm.

Limited Company: To open an account for a limited company, bank asks for the

following document:

Registration certificate from the registrar of joint stock of companies.

Certificate of Commencement of business.

Memorandum of Association.

Articles of Association.

Copies of annual account.

Copy of the Board’s resolution which contains-

1. The Name of the persons who have been authorized to operate the bank account on

behalf of the company.

2. The name of the persons who have been authorized to execute documents with the

bank on company’s behalf.

Societies Clubs associations: In these cases, Bank Asia Limited requires the followings

documents:

1. Registration certificate under the society’s registration Act 1962.2. Copies of Memorandum articles of association. 3. Resolution of the managing committee.4. Power of attorney to borrow.

Savings Account: To encourage savings habit among the general public banks allow

deposits to open savings account. Here rate of interest is 6% and customer must keep

minimum balance of Tk. 15,000 if below not given interest and weekly cheque given only

two. Also from year 2004, bank Asia Limited offers their Clients if they keep above

balance Tk. 50,000 per month then they will earn bonus 10% on interest. The number of

withdrawals is generally restricted. Requirements to be open an account are as follows:

Account opening from to be filled up by the applicant.

Two passport size photograph attested by the introducer is needed.

Introductory reference to be obtained from account holder acceptable to the bank.

Specimen signature of the application is taken on the signature card.

In savings account minimum Tk. 500 is taken as deposit.

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Bank AsiaLimited

For opening every type of account a signature card and different register for different

types of account is maintained in the bank. An Account number is given for each account

and the description of the account is entered in the computer. According to the rules of the

bank a letter of thanks should be given to the account holder and to the introducer but in

practice it is not done.

Call Deposit: these deposits are raised from fellow bankers. They can be recalled by

the lending bank or repaid by the borrowing bank anytime. The rate of interest is usually

low, except when money market is tight.

Short Term Deposit: In term deposits the deposit should be kept for at least seven

days to get interest. The interest offered for STD is less than that of savings deposit. Here

interest rate is 5%. In bank Asia Limited various big companies, organizations. Govt.

departments keep money is STD accounts. Frequent withdrawal i discouraged and requires

prior notice.

Fixed Deposit Receipt: It also known as time deposits of time liabilities. There are the

deposits, which are made with the bank for a fixed period specified in advance. The bank

and need not maintain cash reserve against these deposits and therefore.

Fixed Deposit Receipt: It also known as time deposit for time liabilities. These are the

deposits, which are made with the bank for a fixed period specified in advance. The bank

need not maintain cash reserve against these deposits and therefore, the bank offers high

rate on such deposits. In bank Asia Limited FDR account is opened in three term basis-3

months, 6 months, 1 year and rate of interest based on amount i.e. within Tk. 1,00,00,000

(one corer) for 3 months interest is 8% for 6 months interest is 8.50% and for 1 year

interest is 9%. Again, above Tk. 1,00,00,000 (one corer) for 3 months interest is 8.25% for

6 months interest is 9.50%. No cheque book required for this given customer FDR

instruments.

Now Bank Asia Limited also provides customer SMS banking service. Internet banking

service and ATM banking service.

Through SMS facility customer can access his/her account using his/her mobile phone

anywhere, anytime at their convenience to know the account position. Subscribers also can

access their accounts with Bank Asia to know:

Balance and transaction information

Alert message

Promotional messages

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Bank AsiaLimited

Wish messages

Through internet banking customer can access his/her account to view and print the

balance and account statement for any transaction date (s).

How to use: www.Bankasia.net> Internet banking>Account No>Password.

Through ATM banking customer allotted with initial secret passwords by the Bank Asia

Ltd. The customer may change the password assigned by Bank Asia Ltd. As frequently

thereafter as possible through their website/ATM booth. By ATM card client can collect

money not over Taka 20,000 above per day.

Cheque Book Prepare

According to section 6 of negotiable instrument act, 1881, a cheque is “A bill of exchange

drawn on a specified banker and not expressed to be payable otherwise than on demand.”

To facilitate withdrawals and payment to third parties by the customers, Bank Asia

Limited provides a cheque book to the customer. Cheque Book contains 10 leaves for

savings account, for current account or short term deposit account; it is 25 or 50 leaves. A

cheque book issuing register is maintained in this regard. This register contains the cheque

book number, leaf number, issuing date. After giving these entries to this register,

information is sending to the computer department for taking necessary steps to pass the

cheques during withdrawal. The cheque book also contains requisition slip, which is used

by the customer to obtain new cheque book. When all the leaves are used, the customer

submits slip to the bank. A senior official then issues a new cheque book and subsequent

entries and given in the register and computer.

If the cheque book is lost, the customer has to furnish a guarantee indemnifying the bank.

After fulfilling this. a now cheque book is issued.

Other task:

Pay order issuing procedure

Pay order payment procedure

T T issuing procedure

OBC & IBC procedure

Responsibility by the officer:

Describe his product and services to the client

Give quick service to the client

Handling them to the smiling face

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Bank AsiaLimited

Maintaining a good customer relationship

Take each customer with greater importance

Checking account no, balance no, cheque serial and date carefully

Thus Bank Asia Limited committed to provide high quality of service to their customer,

bring total satisfaction to their clients, shareholders and employees as they believe that

marketing starts after the sale is over, not when the sale is completed.

Accounts Department:

Account department is called as the nerve center of the bank. In banking business, many

transactions are everyday and these transactions are to be recorded properly and

systematically as the banks deal with the depositors’ money. Any deviation in proper

recording may hamper public confidence and the bank has to suffer a lot otherwise.

Improper recording of transactions will lead to the mismatch in the debit side and in the

credit side. To avoid these mishaps, the bank provides a separate department; whose

function is to check the mistakes in assign vouchers or wrong entries or fraud or forgery.

This department is called as Account Department.

Besides the above, the bank has to prepare some internal statements as well as some

statutory statements which to be submitted to the central bank. Account Department

prepares these statements also. The department has to submit some statements to the head

office, which is also consolidated by the head office later on. The tasks of the department

may be seen in two different angles.

Daily Tasks:

The routine daily tasks of the account department are as follows:

First task of accounts department is to open the server.

Positing the transaction in the cashbook.

Properly party account interest checking and follow up.

Preparing the daily position of the branch comparing of the deposit and cash.

Preparing the daily statement of affairs showing all the assets and liability of the

branch as per.

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Bank AsiaLimited

Making payment of all the expenses of the branch.

General ledger and subsidiary ledger separately.

daily voucher properly recorded, maintained, checking and also register recorded.

Daily cash position must match will computer entries and checking authorized

signature.

Different deposit account interest, payment account, closing account charges realize

and interest calculation etc.

Recording inter-branch fund transfer and providing accounting treatment in this

regard.

Preparation of statement or weekly financial statement.

Bank Asia general account calculation.

One of the important task of Accounts department is daily end and day open in the

computer.

Periodical Tasks :

The routine periodical task performed by the department are as follows-

Preparing bill of month house rent, electric bill, telephone bill, interior decorator bill

and security guard bill etc.

Monthly profit & loss account prepare.

Preparing the monthly salary statements for the employees.

Publishing the basis data of the branch.

Monthly SBS-1 (Schedule Bank Statistics) and quarterly SBS-2 statement prepare.

Preparing the weekly position for the branch, which is send to the Corporate Office to

maintain Cash Reserve Requirement (CRR).

Annual Closing :

Bank Asia Limited has done their closing activities two times in a yer i.e. June closing &

December closing. I have an opportunity to see and observe khatungonj branch closing

from near. The balancing of all books and register shall to be done before begging annual

closing work. The figures should be reported on the statement of the branch, if these are

tailed with those of computer generated statement, books and registers of the branch.

Before starting the work, day-end report of the previous day should be checked and

verified. Following statement should be sent to the corporate office on the closing day.

Business performance- deposit, loans & advance and profit or loss

Statements of affairs-before closing

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Bank AsiaLimited

Statements of affairs-after closing

Statement of income and expenses

SBS-1, SBS-2 and SBS-3

Statements of Furniture and fixture.

After calculating the branch total deposits, total advance, interest income, other income,

total income, interest expenses, other expenses, total expenses, net provisional profit or

loss, import and export and export etc. one copy with authorized officers signature sent to

zonal head office and corporate office.

Local Remittance

In banking languages money transmitted domestically are known as local remittance.

Sending money from one place to another place for the customer is another important

service of banks. And this service is an important part of country’s payment system. For

this service people especially businessmen can transfer fund from one place to another

place very quickly. For local remittance purpose Bank Asia Limited purchase and sells

some instruments for its customers. The instruments are Pay Order, Demand Draft, and

Telegraphic Transfer etc.

Pay Order (P.O.) :-

Pay Order is an instrument which is used to remit money within a city through banking

channel. The instruments are generally safe as most of them are crossed. P.O. gives the

payee the right to claim payment from the issuing bank. Payment from issuing branch only

generally used to remit fund within the clearing house area of issuing branch. Payment

process of the paying bank is made through clearing and charge only commission and vat

i.e. if amount is below Tk. 2,00,000 then commission is tk. 50 and vat is tk. 1 again if

amount is above tk. 2,00,000 then commission is tk. 75 and vat is tk. 12. The bank

payment order is in the from of receipt and issued by joint signature of two officials. It

ensure payment to the payee as the money deposited by the purchaser of PO is kept in the

banks own A/c named “Payment Order A/C”. Payment of the instrument to be made from

the branch it has been issued. It is not transferred and therefore it can only be paid to :

The payee in identification.

The payee’s banker, who should certify that the amount would be credited to payee

A/c.

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Bank AsiaLimited

The purpose by cancellation provides the original PO is surrendered by him to the

bank.

PAY ORDER ISSUE PROCEDURE:

Step 1 Filing of P.O. application form by the client with officers charges

commission and other charges in the application form.

Step 2 By Transfer Cheque or By Cash Payment.

Step 3 If by transfer cheque, receive the cheque and confirm the acceptability

of the cheque i.e. whether the cheque should be honored or not.

If by cash payment, cash received by the officer and signed and sealed

by him in the application.

Step 4 By transfer Cheque, if honored debit the amount in the client’s personal

A/C and signed & sealed by the officer in the application form.

Step 5 By transfer Cheque or cash payment, preparation of the pay order

signed by two officers and issue to the client.

Step 6 Posting in the pay order issue module and pas entries in the general

ledger.

Demand Draft (D.D.) :

Demand draft is an order to pay money, drawn by the one officer of bank upon another

office of the same bank for a sum of money payable to order demand. A draft cannot be

drawn payable to bearer of a named payee. A draft cannot be payable to bearer.

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Bank AsiaLimited

Issuance of demand draft : While issuing DD an official must be confirmed about the

branch where the DD is to be issued or drawn as asked for by the application. Application

on prescribed form for DD is obtained from the applicant duty filled and signed by them.

Transfer, application will be asked to deposit the amount of DD and exchange/commission

computed correctly at prescribed rate. On receipt of cash voucher will be passed and

scrolled by the offices, DD will be issued or record to DD issue register filling the

appropriate columns. Test number if required is affixed on both DD and advice as

instructions given by the head office. It is mentioned here that DD application is treated as

credit voucher showing credit entry against contra branch (paying branch). For any

amount of DD advice of IBCA should be issued and sent to drawee branch.

Payment procedure : Proceeds by DD received by the paying bank as and when it responds

the relative advice on receipt of DD advice from different branched the paying banker will

verity genuineness of the advice by the way of verifying test and signature. Total amount

of advice will be debited of SB A/C and credited to drafts payable A/C. On production of

DD by the beneficiary payment will be made by debited to the A/C credited earlier. If

payment is to be made before receipt of the advice, DD is paid being recorded in EX-

Advice register by debit to drafts payable A/C (suspense’s A/C DD paid without advice).

Before making payment of the DD the branch will be as certain the genuineness of its

insurance as well as the genuineness of the payee open drafts may be paid proper

identification of the payee and crossed drafts can never be paid in cash over the counter.

DEMAND DRAFT ISSUE PROCEDURE :

Step 1 Filing of P.O. application form by the client with officers charges

commission and other charges in the application form.

Step 2 Receive cash or transfer cheque from the cline.

Step 3 Preparation of DD by the officer carefully

Step 4 Preparation of IBCA form by crediting the responding branch.

Step5 DD and IBCA singed by the authorized officers and DD is given to the

customer.

Step6 Posting in the general ledger and IBCA sent to the responding branch.

Telegraphic Transfer (T.T) :

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Bank AsiaLimited

Telegraphic transfers are by far the quickest method of transferring fund from one place to

another. The remitting branch sends a telegraph messages to the other end, to pay a certain

sum of money to a named payee. Such a messages is usually sent in code languages.

Prefixing or suffixing a check cipher authenticated the messages. a check cipher for a

remittance is worked out on a test key table, access to which is allowed only To authorize

officers. Ali TT are followed by written confirmations under the signature of authorized

officer of the remitting branch. The receiving branch, after thoroughly checking the

telegraphic messages, acts on it

TELEGRAPHIC TRANSFER ISSUE PROCEDURE:

STEP 1 FILLING OF P.O. APPLICATION FORM BY THE CLIENT WITH

OFFICERS CHARGES COMMISSION AND OTHER CHARGES IN

THE APPLICATION FORM.

Step 2 Receive cash for transfer cheque from the client.

Step 3 Message sent to responding branch through test number.

Step 4 Preparation of IBCA form by crediting the responding branch.

Step 5 Posting in the general ledger and IBCA sent to the responding branch.

Cancellation of PO/DD/IT :

STEP 1 APPLICATION IN WRITTEN TO THE MANAGER OF THE

ACCOUNT MAINTAINING BRANCH.

Step 2 Verification of the specimen signature.

Step 3

IncomingBills Payable DD Payable ------------------ Dr.

Bank Asia General A/C --------------------- Dr.

OutgoingBank Asia General A/C --------------------- Dr.

Party A/C --------------------------------------- Dr.

Step 4 Send letter to the paying Bank.

Collection

For safety and security people use financial instruments like DD, PO, Cheque etc. for

financial instruments (bills) on their customers. the techniques that the Bank uses for this

purpose are clearing sent for collection (SC) and Local Short Credit (LSC). when the bill

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Bank AsiaLimited

is within the range of local clearing house it is sent for collection through clearing house.

But if the bill is out of the clearing house range then it is collected by SC

[Commonly known as Outward Bill for collection (OBC)] and when the bank collects bill,

as an agent of the collection bank the system in known as LSC [Commonly known as

inward Bill for Collection (IBC)].

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Bank AsiaLimited

OUTWARD BILL COLLECTION

Clearing

36


Client for collection deposits

Cheque of different clearing Zone.

Receive the cheque and the deposit

slip is duly signed and

Send the cheque to principal office

for collection (let the) collection is

of Dhaka Zone)

Customer’s Liability ------ Dr.

Bankers Liability ----------- Cr.

The Principal Office collects the

bill and informs through IBCA

Responding of the IBCA

Posting Banker’s Liability ----------Dr.

Customer’s Liability ------- Cr.

Sealed the cheque (by OBC seal)

and recorded in OBC register.

Endorsement of the cheque

Bank AsiaLimited

As a cheque, payment order of bill comes from a bank within the range of local clearing

house then it is sent for collection through clearing house. The cheque may be crossed or

not. If a customer of Bank Asia Limited deposits a cheque another bank. Which is within

clearing area, than Bank Asia Limited will credit his amount and collect it (cheque).

Thought the amount is credited in the customer’s account but he will not the money until

the cheque is honored.

Collection procedure for clearing

The Cheque is first deposited through a received seal with the help of a slip.

The collection bank gives a crossing with Bank Asia Limited. It indicates that the

mentioned bank is the collection bank.

Entry for outward clearing register is given with clearing seal and giving the cheque a

subsidiary seal.

The Cheque is then sent to Bank Asia Limited, local office along with other cheque (if

any). Three sets of voucher are prepared for purpose. ]

If the chque is on other branch of Bank Asia Limited with in some clearing area then it is

collected through clearing house of Bank Asia Limited.

CHAPTER 4

FOREIGN EXCHANGE MECHANISM

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Bank AsiaLimited

Foreign Exchange Department is international department of Bank. It deals globally. It

facilitates international trade through its various modes of services. It bridges between

imports and exports. If the branch is authorized dealer in foreign exchange market, it can

remit foreign exchange from local country to foreign country. This department mainly

deals in foreign currency. This is why this department is called foreign exchange

department.

Some national and international laws regulate functions of this department. Among these,

Foreign Exchange Act, 1947 is for dealing in foreign exchange business, and import and

export control act, 1950 is for Documentary Credits (UCPDC – 1993 revision &

international Chamber of Commerce Publication no- 500) is also an important law for

settlement of terms and conditions between exporter and importer and export operation for

banks.

Foreign trade department plays an important role for bank Asia as well as it contributes in

the growth of our national economy. Like other departments of Bank Asia Limited also

gives emphasis on smooth and quick service for this particular department.

The Meaning of Foreign Exchange:

Foreign Exchange means foreign currency. It includes all deposits, credits and balances

payable in foreign currency as well as foreign instrument such as drafts bill of exchange,

promissory note in any foreign currency.

According to Foreign Exchange Regulation Act 1947, “Any thing that conveys a right to

wealth in another country is foreign exchange”.

Foreign exchange department plays significant roles through providing different services

for the customer. Facilitating the trade with foreign country is the most important among

those services the key instrument which facilitates this trade is L/C (Letter of Credit).

Objective of foreign exchange:

38


Su

bm

it Docu

men

ts Mak

es P

aym

ent

Ap

plication

for Op

enin

g l/CA

pp

lication for O

pen

ing l/C

Mak

es Paym

ent again

st

Docu

men

t

Issue L/CForward DocumentMakes Payment

Instru

ction to P

ay or Reim

bu

rse

Pay

s or

Rei

mb

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esP

ays

or R

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bu

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Bank AsiaLimited

To settle the transaction related in export and import.

To help the own people in abroad to send their money.

Encourage foreign investment in the home country.

To enhance the foreign investment.

To help the own people to go in abroad.

To facilitate the foreigner to visit in our country.

To help the people to remit money who are working in abroad or the foreigner who

are working in the home country.

To maintain the international trade.

Our study on foreign exchange mechanism covers, Export, Import and remittance

business, which are sequentially discussed hereafter.

Foreign Exchange Department of Bank Asia, Foreign Exchange Department of Bank Asia, KhatungonjKhatungonj Branch Branch

Correspondent Banking is one of the major banking activities of The Khatungonj

branch of Bank Asia.

Khatungonj Branch is expected to be the leader in Correspondent Banking among

Bank Asia’s other branches. Khatungonj Branch provides trade finance related

and international payment products to valued clients through its international

network, and as a provider of international payment services, it allows its clients to

leverage the most advanced payment services offered today and provide the

highest quality services to the clients.

The Trade Finance Department of Khatungonj Branch is well equipped with senior

level officers with blend of both young and old and matured with years of

experience in this area. They serve the needs of the client banks and also the

corporate clients and try their best to maintain and enhance the relationships with

them.

1.1. Foreign Exchange Mechanism:

39


BUYER/

IMPORTER

INDENTOR SELLER

EXPORTER

BENEFICIARYISSUING BANK

ADVISING

BANK/

NEGOTIATING

BANK.

Ad

vise

s an

d/o

r co

nfi

rms

l/c

ORREIMBURSING

BANKFIG: FOREIGN EXCHANGE MECHANISM

Pre

sen

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ocu

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Bank AsiaLimited

Foreign Exchange Department

IMPORT DEPARTMENT

1.1. Understanding:

Imports are foreign goods and services purchased by consumers, firms, & Governments in

Bangladesh. The importers are asked by their exporters to open letter of credits so that their

payment against goods is ensured.

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Bank AsiaLimited

1.2. IMPORT PROCEDURE:

To import through BA, a customer requires-

(i) Bank account

(ii) Import Registration Certificate (IRC)

(iii) Tax Paying Identification Number

(iv) Proforma Invoice Indent

(v) Membership Certificate

(vi) LCA (Letter of Credit Authorization) form duly attested

(vii) One set of IMP Form

(viii) Insurance Cover note with money receipt

Other import procedure can be shown by the following flow chart,

1.3. IMPORT MECHANISM:

To import, a person should be competent to be ‘Importer’. According to Import and Export Control

Act, 1950, the Office Of Chief Controller Of Import and Export provides the registration (IRC) to the

importer. After obtaining this person has to secure a letter of credit authorization (LCA) from

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Bank AsiaLimited

Bangladesh Bank. And then a person becomes a qualified importer. He is the person who requests

or instructs the opening bank to open an L/C. He is also called opener or applicant of the credit.

THINGS WHICH ARE DONE HERE:

The following things are done in this department:

Total supervision of Import Department (Cash/Back to Back L/C).

Foreign Correspondence related to above.

Payment of Back-to-Back L/C and endorsement of Export L/C against payment.

Follow-up of Back-to-Back overdue bills.

Correspondence regarding Back-to-Back L/C and Cash L/C.

Maintenance of Due Date Diary.

Maintenance & record of related L/C Documents.

Audit Compliance.

Matching of Bill of Entry with IMP, follow-up of pending Bill of Entry Quarterly Statement.

Batch Checking.

L/C opening/ Amendment (Back to Back L/C).

Endorsement of Export L/C when opening.

Batch checking.

Balancing of L/C Contingent Liability 9Back to Back L/C).

Follow-up of Sub-judice bills and maintaining liaison with Head Office and Foreign

Correspondent.

All correspondence related to Back-to-Back L/C with Head Office and Foreign

Correspondent.

Supervision of checking, Lodgment and retirement of Import documents under Back-to-

Back L/C.

Issuance of Certificate and attestation of papers/documents of garments clients as required

by BGME, EPB & other regulatory bodies.

Checking, lodgment, retirement of Import documents under Back-to-Back L/C.

Issuance of Shipping Guarantee (Back to Back L/C).

IMP Form Fill-up (Cash L/C).

Inform negotiating Bank about maturity date of Back-to-Back L/C.

Quarterly statements for Bonded ware House.

Balancing of Accepted Liability.

Statement of outstanding accepted import bills under Back-to-Back L/C.

L/C opening and Amendment of Cash L/C (and Inland L/C).

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Bank AsiaLimited

Maintenance and record of Passbook and IRC.

Maintenance & Record of related L/C (s) & Documents.

Credit Report.

Statement of IRC Renewal fees to CCI&E.

Preparation of monthly foreign exchange business position.

L/C Lodgment (Cash).

Checking of Cash L/C documents.

L/C Retirement.

LCA Issue.

BLC Statement.

Differed Payment (Cash).

Follow-up of outstanding BLC.

Correspondent (Cash L/C).

Proof Sheet of LC Margin and Contingent Liability (Cash L/C).

Issuance of shipping guarantees (cash) IMP forms fill-up (cash).

Major Tool in Foreign Exchange: Letter ofMajor Tool in Foreign Exchange: Letter of

CreditCredit

The letter of credit is one of the oldest forms of trade finance still in existence. In

its simplest definition, a letter of credit (L/C) is an instrument issued by a bank on

behalf of the importer (buyer) promising to pay the exporter (seller/beneficiary)

upon presentation of shipping documents in compliance with the terms stipulated

therein. In effect, the bank is substituting its credit for that of the buyer. Broadly,

we can define letter of credit as a written undertaking given by a bank (issuing

bank) to a seller (beneficiary/exporter) at the request and on the instructions of the

buyer (applicant/importer) to pay either at sight or at a determinable future date, a

stated sum of money against stipulated documents and fulfilment of all the terms

and conditions in the L/C.

A letter of credit is most suitable under the following circumstances:

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Bank AsiaLimited

When the importer is not well known, the exporter selling on credit terms may

wish to have the importer’s promise of payment backed by a buyer’s banker.

When the importer does not want to pay the exporter until it is reasonably

certain that the merchandise has been shipped in good condition.

Importance of Letter of CreditImportance of Letter of Credit

In international trade, since the buyer and seller are quite distant from each other,

a problem often arises as to when to make the delivery of the goods and when to

make the payment for the delivery. This problem is absent in trading within the

national boundary as both the buyer and seller can meet each other and settle the

deal. However, in international trade neither the exporter nor the importer can rely

completely upon the other. A letter of credit is an effective instrument that not only

solves this problem but also acts as a means of finance for the buyer. This

method is a compromise between the buyer and the seller because it affords

certain advantages to both the parties. The exporter is assured of receiving

payment from the issuing bank as long as it presents documents in accordance

with the letter of credit. It is important to point out that the issuing bank is obligated

to honor drawings under the L/C regardless of the buyer’s ability or willingness to

pay. On the other hand, the importer does not have to pay for the goods until

shipment has been made and the documents are presented in good order.

However, the importer still must rely upon the exporter to ship the goods as

described in the documents, since the letter of credit does not guarantee that the

goods purchased will be those invoiced and shipped. So, the usual time of

payment under a letter of credit is when shipment has been made, while the

goods are available to the buyers after payment. The risk to the exporter is very

little or none, depending on credit terms, while the risk to the importer is that he

has to rely on the exporter to ship goods described in the documents. Because of

all the protection and benefits it accords to both the exporter and importer, letter of

credit is a critical component of many international trade transactions.

The Letter of Credit (L/C) ProcessThe Letter of Credit (L/C) Process

The various steps involved in the operation of a letter of credit are described as

follows. Please refer to Figure below for an elaborate illustration.

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Bank AsiaLimited

1. The importer and exporter have made a contract before a letter of credit has

been issued.

2. The importer applies for a letter of credit from his banker known as the issuing

bank. He may have to use his credit lines.

3. The issuing bank opens the letter of credit that is channeled through its

overseas correspondent bank, known as the advising bank.

4. The advising bank informs the exporter (the beneficiary) of the arrival of the

letter of credit.

5. Exporter ships the goods to the importer or other designated place as

stipulated in the letter of credit.

6. Meanwhile, the exporter also prepares his own documents and collects

transport documents or other documents from relevant parties. All these

documents will be sent to his banker, which is acting as the negotiating bank.

7. Negotiation of export bills happens when the banker agrees to provide him

with finance. In such case, he obtains payment immediately upon presentation

of documents. If not, the documents will be sent to the issuing bank for

payment or on an approval basis as in the next step.

8. Documents are sent to the issuing bank (or reimbursing bank, which is a bank

nominated by the issuing bank to honor reimbursement from negotiating bank)

for reimbursement or payment.

9. Issuing bank honors its undertaking to pay the negotiating bank on condition

that the documents comply with the letter of credit terms and conditions.

10. Issuing bank releases documents to the importer when the latter makes

payment to the former or against the latter’s trust receipt facility.

11.The importer takes delivery of goods upon presentation of the transport

(usually shipping) documents.

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Bank AsiaLimited

Figure: Diagrammatic explanation of the various steps in the operation

of a L/C.

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Bank AsiaLimited

47


ContractContract

ShipGoods

ShipGoods

Exporter,Seller,

Beneficiary

Exporter,Seller,

Beneficiary

Importer,Buyer,

Applicant

Importer,Buyer,

Applicant

Take DeliveryOf Goods


Apply

For L/C

Apply

For L/C

Release

Documents

Against Cash

or T/R

Release

Documents

Against Cash

or T/R

IssuingBank

IssuingBank

Make Paymen

t

Make Paymen

t

SendDocument

s

SendDocument

s

L/CL/C

Advising Bank/Confirming Bank/Negotiating Bank

Advising Bank/Confirming Bank/Negotiating Bank

Negotiation of Export

Bills


Bills

Prepare and Pass

Documents

Prepare and Pass

DocumentsAdvis

e

L/C

Advis

e

L/C

Bank Asia

Limited

Lodgment of Documents Procedure

It is an also another important procedure of Letter of Credit. It’s simply means in

what condition bank will make payment. After receiving the documents, the

opening banker scrutinizes the documents. If any discrepancy found, it informs

the importer. If importer accepts the fault, then opening bankers call importer

retiring the documents. All this time many things can happen. These are

indicated in the following:

Discrepancy found but the importer accepts – no problem occurs in lodgment.

Discrepancy found and importer not agreed to accepts – In this case, importer protest and send back all the documents to the exporter and request him to make in the specified manner. Here banker is not bound to pay because the documents send by exporter is not in accordance with the terms of L/C.

Documents are OK but importer is willing to retire the documents – In this case bank is obligated to pay the price of exported goods. Since importer did not pay for bill of exchange, this payment by bank is one kind of credit to the importer and this credit in banking is known as FORCED PAD.

Everything is OK but importer fails to clear goods from the port and request bank to clear - In this case banks clear the goods and takes delivery of the same by paying customers duty and sales tax etc. So, this expenditure is debited to the importers account and in banking it is called LIM.

Parties Involved in Letter Of Credit (L/C)Parties Involved in Letter Of Credit (L/C)

The Applicant: The applicant is the party who approaches a bank in order to

issue the letter of credit. Generally, the applicant is an importer who reaches

an agreement with the exporter before approaching the bank to issue the

48

“An Overview of General Banking & Foreign Exchange Mechanism of Bank Asia Ltd, Khatungonj Branch.”

Bank Asia

Limited

letter of credit. The applicant is also normally obligated to reimburse the

issuing bank for any payments made under the letter of credit.

The Issuing Bank: The bank issuing the letter of credit is known as the issuing

bank and it is usually the bank with which the importer maintains an account.

The issuing bank undertakes an absolute obligation to pay upon presentation

of documents drawn in strict conformity with the terms and conditions of the

letter of credit.

The Advising Bank: The correspondent bank in the beneficiary’s country to

which the issuing bank sends the letter of credit is commonly referred to as

the advising bank. The advising bank simply advises the letter of credit

without any obligation on its part. However, the advising bank shall take

reasonable care to check the apparent authenticity of the credit that it

advises.

The Beneficiary: The beneficiary or exporter is the party entitled to draw

payment under the letter of credit. The beneficiary will have to present the

required documents to avail payment under the letter of credit.

The Confirming Bank: The confirming bank confirms that the issuing bank has

issued a letter of credit. The confirming bank becomes directly obligated on

the credit to the extent of its confirmation and by confirming, it acquires the

rights and obligations of an issuer. Letter of credit confirmation is usually done

by the advising bank or a third bank in the beneficiary’s locate.

The Negotiating Bank: The bank that agrees to examine the documents under

the letter of credit and pay the beneficiary is called the negotiating bank.

Typically, the advising bank is nominated as the negotiating bank.

Reimbursing Bank: The bank nominated by the issuing bank to provide

reimbursement to the negotiating bank or the payee bank is referred to as the

reimbursing bank.

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Different Types of Letter of Credit provided byDifferent Types of Letter of Credit provided by

Khatungonj BranchKhatungonj Branch

1. Revolving Credit1. Revolving Credit

A revolving credit is a credit, which provides for the amount of the credit to be

renewed automatically after use without the need to renew the credit every time.

It can be revolved with respect to either:

a) Time

b) Amount (i.e. total value of the credit)

a) A revolving credit with respect to time can be cumulative or non-cumulative.

i) A cumulative credit allows any unused credit amount of a previous

month to be carried forward to the next month.

ii) A non-cumulative revolving credit, on the other hand, provides for a

maximum amount of credit to be drawn each month. If the exporter

fails to draw for the month, the amount in that month (full amount or

any utilized balance) will be forfeited automatically.

b) A revolving credit with respect to amount allows the credit amount to be

renewed as soon as the exporter presents his shipping documents and uses

up the credit amount. As the issuing bank theoretically may incur unlimited

liability, this type of revolving credit is very rare.

Circumstances for issuing a revolving credit:

If an importer is trading with an overseas exporter and purchasing the same

goods on a regular basis, with the same terms and conditions and at the same

unit price, he can issue a revolving credit to his exporter instead of having to

issue a letter of credit with the same terms and conditions every time. This will

save him time and trouble of having to apply for many credits.

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2. Transferable Credit2. Transferable Credit

A transferable credit is a credit, which can be transferred in whole or in part by

the original beneficiary to one or more “second beneficiaries”. It is normally used

when the first beneficiary does not supply the goods himself, but acts as an

intermediary between the supplier and the ultimate buyer.

Characteristics of transferable credit

a) A transferable credit must be an irrevocable credit, that is, it cannot be

cancelled or amended without the beneficiary’s consent.

b) A transferable credit can only be transferred once. It cannot be transferred

from the second beneficiary to a third beneficiary/beneficiaries. However,

it can be transferred to more than one; second beneficiary.

c) The bank charges in respect of the transfer are payable by the first

beneficiary.

d) The transfer must be in accordance with the terms and conditions of the

original credit, except that:

i) The name and address of the first beneficiary may be substituted for

the name and address of the applicant for the credit.

ii) The amount of the credit and the unit price may be reduced, to allow

the first beneficiary to take his/her profit.

iii) The expiry date of the credit and the shipment date may be shortened.

Risks to the applicant in transferable credit

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a) He has to deal with an unknown supplier – the integrity of the second

beneficiary is not known.

b) Quality of merchandise is not assured.

c) Amendments may not be advised to this ultimate supplier, so documents

will never comply with the letter of credit terms even though the second

beneficiary presents documents in compliance with the transferable credit.

3. Back to Back Credit3. Back to Back Credit

Back to back credit is one of the most common letter of credit issued in

Bangladesh. When a beneficiary receives a letter of credit which is not

transferable and he cannot furnish the goods himself, he may arrange with his

banker to issue a second credit (which is known as a Back to Back L/C) to a

supplier to supply the goods.

As both the letters of credit cover the same goods, the Back to Back Credit must be

issued with identical terms to the master credit except that the credit amount, unit price if

any, are smaller. The expiry date under the Back to Back Credit is earlier while the latest

shipment date may have to be advanced. The bank issuing the Back to Back Credit will

obtain repayment through the master credit, which is deposited to the issuing bank of the

Back to Back Credit. The bank must try to maintain control of the documents and hold

them after payment to the supplier, pending receipt of its customer’s invoices, and then

present the documents itself for payment under the master credit in favor of his customer.

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Advantages & Disadvantages of Letter of Credit Advantages & Disadvantages of Letter of Credit

ADVANTAGES DISADVANTAGES

Importer

An importer can be assured that the

exporter has complied with certain

terms and conditions as specified in

the L/C before payment.

He can insist on shipment of goods

within a certain time by stipulating

a latest shipment date.

He can have expert advice from the

banker as to the L/C terms.

He can ask for financial assistance

from his banker.

Protection offered by Uniform

Customs and Practice for Letter of

Credit (UCP 500).

Since banks deal in documents only,

goods may not be the same as those

specified in the credit.

Issuing banks are obliged to pay

even though the conditions of goods

may be poor.

L/C commissions are relatively

costly. (1/4% on first US $50,000)

Line of credit or application is

necessary before an importer can

open an L/C, and this may cause

extra inconvenience and is time-

consuming.

Exporter

The risk of non-payment is lower

provided he complies with L/C

terms and conditions.

It is safe method through which to

obtain prompt payment after

shipment.

The exporter can have expert

advice from his banker.

The exporter can also seek

financial assistance from his banker

before the buyer makes payment,

such as negotiation of export bills,

export bills etc.

It is comparatively costly.

Sometimes, the terms and conditions

cannot be fulfilled, such as

unreasonable shipment date and

expiry date, adding on L/C the

clause of “restriction of a designated

vessel to be informed by L/C

amendment”.

The goods are shipped before

receiving payment, and so it is not

100 percent safe.

Types of Contracted Price for L / C

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FOB price ( Free

on Board)

a. Under FOB basis, the exporter quotes the price covering all his

expenses until the goods duly packed are delivered ‘on board’.

b.The carrying vessel named and arranged by the buyer with the

freight and the insurance being paid by the buyer along with any cost

and all risks from the time the goods are placed on board inclusive of

those arising out of the ship’s failure on berth.

C&F/CFR ( cost

and Freight)

a. In this case, the exporter quotes the FOB price plus freight and also

makes all arrangements for the shipment of goods.

b. Importer bears insurance cost.

CIF ( Cost,

insurance &

freight)

a. Under CIF, the exporter quotes C&F price plus insurance cost. The

responsibility of carrying out all formalities for shipment of the goods

devolve upon the seller.

FAS ( Free

Alongside ship)

a. Under FAS, the seller quotes the price covering all his charges until

such tie as good are loaded on train at the specified railway station.

The buyer is responsible for all further necessary arrangements and

charges.

FOR ( Free on

Rail)

a. Under this type of contract the seller quotes the price covering all

his charges until such time as the goods are loaded on train the

specified railway station. The buyer is responsible for all further

necessary arrangements and charges.

Ex-Factory a. The seller quotes the price of the goods ex-factory on the date

agreed. The importer is responsible for all charges from the time he

takes delivery of the goods from the exporter’s yard.

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Nature of Credit

Document & clean

credit.

a. All import credit is generally documentary credit that is bill of

exchange must contain documents to the title of goods. Mere

presentation of B/E by exporter is not sufficient for honoring the

bill in case of Documentary credit.

b. Clean credit requires no document with B/E for its honoring.

Clean L/C is not allowed in Bangladesh except with the prior

approval of the Exchange Control of the country.

Revocable &

Irrevocable.

a. In revocable L/C, the opener of L/c can anytime withdraw his

commitment to honor the bill of exchange of the Exporter.

b. In case of irrevocable L/C, banker cannot withdraw his

obligation. Here his commitment is legal obligation. In

international trade, only irrevocable L/C is used.

Adding

confirmation

a. sometimes the exporter may not rely on the L/c of our bank.

Exporter requires the L/C to be confirmed by another bank situated

in his country. Then on request of issuing Bank, any bank in

exporter’s country gives guarantee about the payment. This is

called confirming Bank. Generally this confirming bank is

Advising bank.

b. By adding such confirmation, confirming banks undertakes the

liability to honor the bill of Exchange of exporter and for this it

debit the account of issuing Bank with it.

a. Sometimes, the importer may require amendment to be made in

L/C.

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Amendment of

credit. b. But this amendment must be made with the consent of exporter

otherwise amendment will have no validity.

Validity and

Expiry of credit

a. All L/C must mention the expiry date of L/C within which

documents for payment/acceptance/negotiation must be presented.

b. This date must exceed the last date of shipment.

c. L/C must also stipulate a specified time period after the date of

issuance of the bill of lading or other shipping documents, during

which presentation of documents for payment / acceptance /

negotiation must be made.

d. In the absence of a specified period of time being stipulated the

Period will be assumed to be 21 days from the date of the bill of

lading.

Foreign RemittanceNow a day’s financial authority of the country is giving more importance on foreign remittance. Remittance can be divided into two parts:

Outward Remittance: All remittance from Bangladesh to a foreign currency or local currency credited to non-resident Taka accounts of foreign banks or convertible Taka accounts of foreign banks or convertible Taka account constitute outward remittances of foreign exchange.

Inward Remittance: The term “ Inward Remittance” includes not only remittance by T.T. M.T, drafts etc. but also purchases of bills, purchases of drafts under traveler’s letters of credit and purchases of Traveler’s cheques.

Bangladesh Bank has to provide some rules and regulation concerning on remittance flow. For example, most outward remittances approval is to be taken from the authorized Dealers (AD). Only a few remittances of special nature require Bangladesh Bank’s prior approval.

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► Purchases of foreign currency require an application to the AD or Bangladesh Bank whenever necessary.► There is no restriction in cape of inward remittances.► Everybody cannot deal in foreign currency. According to FER act only Ads and authorized moneychangers are permitted to deal in foreign currency etc. It should be mentioned that the bank branch has to send its daily FX (Foreign Exchange) position to Bangladesh Bank. FX position shows branch’s liability’s (Deposit in FC, RAD, TC sold etc), Assets (FC cash in hand, Bills purchased), Debit entries (IBDA) passed in Nostro A/C (for payment received for export, TT received etc.) and credit entries (IBCA) passed in the Nostro A/C(for TT issue, import payment etc).

Thus Foreign Trade division is a very important department of every branch as it provides services for the activities of import, export and remittance. As such this department is an important earning source of the Bank.

Documents Needed For Import & Export Procedure

For Import

1. Import registration certificates, (IRC) from the chief controller and export (CC&E).2. Letter of credit authorization (LCA) Form.3. LC application form duly signed by importer.4. Pro-forma invoice.5. Insurance cover note with money receipt.6. IMP form duly signed by importer.7. Proof of having TIN in all cases of importers, excepting personal use.8. Proof of having VAT registration certificate.9. Valid membership certificate from registered local chambers of trade association.10. Charge documents etc.

For Export

1. Export Registration Certificate (ERC) from CCI & E.2. L C Documents.3. E X P from duly signed by the exporter.4. Certificate of origin.

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5. Shipping documents.6. Inspection Certificate.7. Packing List & Bill of Loading. 8. Invoice & Certificate of export form by authorized dealer (Bank).

After submitting the documents, exporters send the goods to importer. Then beneficiary prepares export documents for submission to negotiation Bank. The Bank scrutinizes the export documents. To narrow down the gap between the country’s export and import payment, Bank Asia is providing services to exporters by following export policy 1997-2002. The schemes for covering risk on export credit:

Export credit guarantee (Pre-shipment) Export credit guarantee (post-shipment) Export payment risk policy (comprehensive guarantee) Whole Turnover pre-shipment finance guarantee.

EXPORT DEPARTMENT

UNDERSTANDING :

In the Export section, two types of L/C s are opened-

Back to Back L/C

Export L/C

Things done here:

The following things are done in this department:

Scrutiny of Export Shipping Documents.

Follow-up for realization of Export Proceeds.

All Correspondence relating to Export Department.

Compliance of Audit & Inspection.

Advising of Export L/Cs to the beneficiary.

Authentication of L/C and Amendments from other Correspondent Bank.

Transfer of Export L/C to the 2nd Beneficiary & issuance of notice of transfer to L/C issuing

Bank.

Recording of Export L/C particulars in Export L/C Transfer Register.

Realization of transfer changes.

Issuance of proceeds realization certificates.

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And other works as & when directed by the manager and Sub-Manager.

Certificate of EXP Forms.

Posting of Tickets.

Lodgment of Export Bills (FBP, FDBC, IBP & IBC).

Preparation of tickets elating to negotiation of documents.

Negotiation of Inland Bills.

Maintenance of all records related to FBP, FDBC and Inland Bills.

Balancing of FBP, FDBC, and IPB & A/R Export A/Cs.

Preparation of statement and all returns to Bangladesh Bank and Head Office (Weekly/

Monthly/ quarterly).

EXPORT BILL SCRUTINY:

Scrutinizes the export bill on the following points,

A. General:

Late shipment.

Late presentation.

L/C expired.

L/C overdrawn.

Partial shipment or transshipment beyond L/C terms.

Bill Of Exchange:

Amount of bill differs with Invoice.

Not drawn on L/C issuing bank not signed.

Tenor of B/E not identical with L/C

Full set not submitted Invoice:

Not issued by the beneficiary

Not signed by the beneficiary

Not made out in the name of the Applicant

Description, Price, quantity, sales terms of the goods not

corresponds to the credit.

Not marked one fold as original Shipping marks differs with B/L &

packing list.

Packing List:

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Gross weight, net weight, & measurement, number of cartoons/ packages

differs with B/L.

Not marked one fold as original.

Not signed by the beneficiary.

Shipping marks differs with B/L.

Bill of Lading/Air Way Bill :

Full set of bill not submitted.

B/L is not drawn or endorsed to the Order Of BA.

“Shipping on Board”, “Freight Prepaid” or “Freight Collect” etc. notations

are not marked on the B/L.

B/L not indicate the name and capacity of the party i.e. carrier or master,

on whose behalf the agent is signing the B/L.

Shipped on Board Notation not showing name of pre-carriage vessel/

intended vessel.

Shipped on Board Notation not showing port of loading and vessel name

(In case B/L indicates a place of receipt or taking in charge different from

the port of lading).

Short Form B/L.

Charter party B/L.

Description of goods in B/L not agrees with that of Invoice, B/E & P/L.

Alterations in B/L not authenticated.

Loaded on deck.

B/L bearing clauses or notations expressly declaring defective condition of

the goods and / or the packages.

Others:

Non-Negotiable documents not forwarded to buyers or forwarded beyond L/C

terms.

Inadequate number of Invoice, Packing List, & others submitted.

Short shipment certificate not submitted.

EXPORT FINANCE:

Pre-shipment credit:

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Pre-shipment credit usually takes the following forms:

Overdraft against hypothecation of exportable commodities.

Overdraft against Trust Receipt (T.R.)

Packing Credit (P.C.)

Post shipment Credit:

Post shipment credit refers to credit facilities extended to export after actual shipment of goods

against shipping documents. It is usually provided in the following ways.

Bill negotiation / purchase.

Bill for collection.

(I) Bill Negotiation / Purchase:

The most usual method of financing exporters at the post-shipment stage is negotiation of

documents under L/C. Here the bank acts as negotiating bank. After the shipment of the goods, the

exporter submits the relative documents to the branch for negotiation. The documents generally

include a) Bill of Exchange b) Bill of lading c) Insurance policy d) Invoice e) Certificate of origin,

ETC. The documents are to submit within the period mentioned in the L/C. The documents are

sent to the L/C opening branch with a forwarding letter. Then the branch claim reimbursement from

the issuing bank or from the reimbursing bank.

On negotiation/ Purchase of the export bills, the exporter is paid the value of the bill (converted into

Bangladesh Taka at the ruling bill buying rates).

(ii) Documents on Collection Basis:

The documents, which are not negotiable by the branch due to some discrepancies, are sent to

L/C opening bank on collection basis. The bank mentions the discrepancies on their forwarding

schedule. On receiving the documents, the L/C opening bank will further scrutinize the document

with the L/C and inform the importer regarding discrepancies found in the documents. If these are

acceptable to the importer and or permissible with the exiting Exchange control regulation, the

documents will be lodged and L/C opening bank will send the payment instruction to the collection

bank.

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BACK-TO-BACK L/C:

In case of a Back to back letter of credit, a new L/C (an Import L/C) is opened on the basis of an

original L/C (an Export L/C). Under the 'Back to Back' concept, the seller as the Beneficiary of the

first L/C offers it as a 'security' to the advising Bank for the issuance of the second L/C. The

Beneficiary of the Back-to-Back L/C may be located inside or outside the original Beneficiary's

country. In case of a Back-to-Back L/C, no cash security (no margin) is taken by the Bank; Bank

liens the first L/C. In case of a Back-to-Back L/C, the drawn bill is an Issuance/ Time bill.

In BA, papers/documents required for submission for opening of back-to-back L/C:

a) Master L/C

b) Valid Import Registration Certificate (IRC) & Export Registration

Certificate (ERC)

c) L/C application & LCA form duly filled in signed.

d) Proforma Invoice or Indent.

e) Insurance Cover Note with money Receipt

f) IMP- form duly signed

In addition to the above the following papers/documents are also required for export oriented

garment industries while requesting for opening of back-to-back letter of credit,

1) Textile permission

2) Valid Bonded Warehouse License

3) Quota allocation letter issued by Export Promotion Bureau (EPB) in

favor of the applicant in case of quota items.

In case the Factory premises is a rented one, Letter of Disclaimer duly executed by the owner of

the house/premises to be submitted.

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PAYMENT OF BACK-TO-BACK L/C:

In case back to back as 60-90-120-180 days of maturity period, deferred payment is made.

Payment is given after realizing export proceeds from the L/C issuing bank.

ACCOUNTING TREATMENT FOR BACK-TO-BACK L/C:

When the document is arrived, the following vouchers are passed

Customer’s A/C Debit

Commission on acceptance Credit

In case of payment, if the fund is at hand, the accounting entries are-

Sundry Deposit Margin on Acceptance Debit

Customer’s A/C Credit

If the party is paid in foreign currency, B/C. rate is applied in this regard. International Department

takes the T.T. O/D. rate. If the payment is made to ID in local currency in notional rate, ID follows

T.T. Clean Rate. When the party is to be paid, OD Sight rate is followed.

If the fund is not available to make the payment, the following vouchers are to be passed,

OAP Debit

Customer’s A/C Credit

REPORTING TO BANGLADESH BANK:

At the end of every month, the reporting regarding the following information is mandatory,

A. Filling of E-2/P-2 schedule of S-1 category; which covers the entire month amount of

import, category of goods, currency, country etc.

B. Filling of E-3/P-3 schedule for all charges, commission with T/M form.

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C. Disposal of IMP form, which includes,

Original IMP is forwarded to Bangladesh Bank with invoice and Indent.

Duplicate IMP is kept with the Bank along with the bill of entry/ Certified Invoice.

Triplicate IMP is kept with the Bank for office record.

Quadruplicate is kept for submission to Bangladesh Bank in case of imports where

documents are retired.

EXPORT L/C:

The other type of L/C facility offered by BA is Export L/C. Bangladesh exports 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

exports 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 garment products to U.S.A and

European Community (EC) countries. Bangladesh exports about 40% of its readymade garment

products to U.S.A. Most of the exporters who export through BA are readymade garment

exporters. They open export L/Cs here to export their goods, which they open against the import

L/Cs opened by their foreign importers.

FORMALITIES FOR EXPORT L/C:

The export trade of the country is regulated by the Imports and Exports (control) Act, 1950. There

are a number of formalities, which an exporter has to fulfil before and after shipment of goods.

These formalities or procedures are enumerated as follows,

1. ERC : The exports from Bangladesh are subject to export trade control exercised by the

Ministry Of Commerce through Chief Controller of Imports and Exports (CCIE). No exporter is

allowed to export any commodity permissible for export from Bangladesh unless he is

registered with CCI & E and holds valid Export Registration Certificate (ERC). The ERC is to

be renewed every year. The ERC number is to be incorporated on EXP forms and other

documents connected with exports.

Obtaining EXP : After having the registration, the exporter applies to BA with the

trade license, ERC, and the Certificate from the concerned Government Organization

to get EXP. If the bank is satisfied, an EXP is issued to the exporter.

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2. Securing the Order : Upon registration, the exporter may proceed to secure the export

order. Contracting the buyers directly through correspondence can do this.

3. Signing of the Contract : While making a contract, the following points are to be

mentioned,

Description of the goods

Quantity of the commodity

Price of the commodity

Shipment

Insurance and marks

Inspection

Arbitration

The following points are to be looked for,

i) The terms of the L/C are in conformity with those of the contract.

ii) The L/C is an irrevocable one, preferably confirmed by the

advising bank.

iii) The L/C allows sufficient time for shipment and a reasonable time

for registration.

iv) If the exporter wants the L/C to be transferable, divisible and

advisable, he should ensure those stipulations are specially mentioned in

the L/C.

4. Procuring the Materials : After making the deal and on having the L/C opened in

his favor, the next step for the exporter is to set about the task of procuring or

manufacturing the contracted merchandise.

5. Registration of Sale : This is needed when the items proposed to be exported are

raw jute and jute goods.

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6. Shipment of Goods : The following are the documents normally involved at the

stage of shipment,

EXP Form

Photocopy of registration certificate

Photocopy of the contract

Photocopy of the L/C

Customs copy of ERF Form for shipment of jute goods and EPC Form for

raw jute.

Freight certificate from the bank in case of payment of the freight at the

port of lading is involved.

Railway receipt, Berg Receipt or Truck Receipt.

Shipping instructions.

Insurance policy.

After those, exporter submits all these documents along with a Letter of Indemnity to BA for

negotiation. An officer scrutinizes all the documents. If the document is a clean one, BA purchases

the documents on the basis of banker- customer relationship. This is known as Foreign

Documentary Bill Purchase (FDBP).

PROCEDURE FOR FDBP:

After purchasing the documents, BA gives the following entries, -

FDBP A/C Debit

Customer A/C Credit

(Before realization of proceeds)

Head Office A/C Debit

FDBP A/C Credit

(Adjustment after realization of proceeds)

A FDBP Register is maintained for recording all the particulars. The salient contents of a FDBP

register are Date, Ref. No. (FDBP), Name of the Party (Drawer), Drawee, Name of collecting Bank,

EXP Form no., Export L/C no., and etc.

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FOREIGN DOCUMENTARY BILLS FOR COLLECTION:

BA forwards the documents for collection due to the following reasons,

i) If the documents have discrepancies.

ii) If the exporter is a new client.

iii) The banker is in doubt.

Foreign documentary bills for collection signify that the exporter will receive payment only when the

issuing bank gives payment. The exporter submits duplicate EXP Form and Commercial Invoice.

Subsequently, the value of the bill is calculated and the following accounting entries are given,

Head Office A/C Debit @ T.T. Clean

Client’s A/C Credit @ O/D sight

Government Tax A/C Credit @ 0.25% of Invoice value

Postage A/C Credit

Income A/C profit on Exchange Credit

After passing the above vouchers, an Inter Branch Exchange Trading Debit Advice is sent for

debiting the NOSTRO account. BA has 11 NOSTRO accounts with its reimbursing bank. An FDBC

Register is maintained, where first entry is given when the documents are forwarded to the issuing

bank for collection and the second one is done after realization of the proceeds.

EXPORT BILL SCRUTINY SHEET:

By the Export Bill Scrutiny Sheet the bankers scrutinize the details of a L/C before make the

payment. Here the details refer as Exporter's name, Presentation date of documents, L/C no.,

Expiry date, L/C amount available. Moreover the banker also look after the date within which the

documents to be presented, Bill of lading, Shipment date in the L/C, Invoice number and date,

Export L/C no, date, issued by, Liability position, Discrepancies, and Calculation of Bill amount

(Exporter's Retention Quota, Commission, and Margin).

SETTLEMENT OF LOCAL BILL:

The settlement of local bills is done in the following ways,

1. The customer submits the L/C to BA along with the documents to negotiate.

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2. BA official scrutinizes the documents to ensure the conformity with the terms and

conditions.

3. The documents are then forwarded to the L/C opening bank.

4. The L/C issuing bank gives the acceptance and forwards an acceptance letter.

5. Payment is given to the customer on either by collection basis or by purchasing the

document.

ACCOUNTING TREATMENT FOR PURCHASE OF LOCAL BILL:

Local Bill Purchase Documentary Debit

Party A/C Credit

Commission Credit

Interest A/C Credit

A LBPD Register is maintained to record the acceptance of the issuing bank. Until the acceptance

is obtained, the record is kept in a collection register.

MODE OF PAYMENT OF EXPORT BILLS UNDER L/C:

The most common methods of payment under a L/C are as follows, -

1. Sight Payment Credit : In a Sight Payment Credit, the bank pays the stipulated sum

immediately against the exporter’s presentation of the documents.

2. Negotiation Credit : In Negotiation credit, the exporter has to present a bill of exchange

payable to himself in addition to other documents, that the bank negotiates.

3. Deferred Payment Credit : In deferred payment, the bank agrees to pay on a specified

future date or event, after presentation of the export documents. No Bill of Exchange is

involved. In BA, payment is given to the party at the rate of D.A 60-90-120-180 as the case

may be. But the Head office is paid at T.T. clean rate. The difference between the two rates is

the exchange trading for the branch.

4. Acceptance Credit : In acceptance credit, the exporter presents a bill of exchange payable

to him and drawn at the agreed tenor (that is, on a specified future date or event) on the bank

that is to accept it. The bank signs its acceptance on the bill and returns it to the exporter. The

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exporter can then represent it for payment on maturity. Alternatively he can discount it in order

to obtain immediate payment.

ADVISING L/C:

When export L/C is transmitted to the bank for advising, the bank sends an Advising Letter to the

beneficiary depicting that L/C has been issued.

TEST KEY ARRANGEMENT:

Test key arrangement is a secret code maintained by the banks for the authentication for their telex

messages. It is a systematic procedure by which a test number is given and the person to whom

this number is given can easily authenticate the same test number by maintaining that same

procedure. BA has test key arrangements with so many banks for the authentication of L/C

messages and for the transfer of funds.

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CHAPTER 5

CONCLUSION AND RECOMMENDATION

During the three months internship program at Khatungonj Branch, almost all the desks

have been observed more or less. This internship program, in first, has been arranged for

gaining knowledge of practical banking and to compare this practical knowledge with

theoretical knowledge. Comparing practical knowledge with theoretical involves

identification of weakness in the branch activities and making recommendations for

solving the weakness identified. Through all departments and sections are covered in the

internship program, it is not possible to go to the depth of each activities of branch

because of time limitation. However, highest effort has been given to achieve the

objectives the internship program.

During the internship, it is found that the branch provides all the conventional banking

services as well as some specialized financing activities to the economy. Now, I would

like to present my observations and give my opinion to improve the banking service and

make the customer more satisfied. The following few paragraphs will give us an idea of

how this can be achieved.

Organized Training for Employees

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A well-educated, skilled and enterprising workforce with wide experience in banking is a

precondition for the growth and progress of any bank. Sustaining growth and leadership

require trustworthy and dedicated workforce. And for this purpose proper training has no

alternatives to create more efficient employees for any organization.

Renovation of Customer Service

Since a number of new banks are coming to existence with their extended customer

service pattern in a completely competitive manner. Customer services must be made

dynamic and prompt. Now a days, people especially business people have very little time

to waste. So the bank should make its service prompt so that people need not give more

time in the banking activities.

Speed up Processing of Loan Application

If loan-processing time is lengthy, it will not get good borrower. Most of this is spent for

correspondence between Head Office and Branch. So the branch should speed up its loan

processing time. For reducing loan-processing time, branch manager should be given ore

power to sanction loan. This power can eliminate the time. Branch should have

independent appraiser for appraising term loan proposal.

Introduce Modern Technology

Without using modern technology no bank can even think of remaining in the business in

near future. So the bank must decide right now hoe can equip its branches with modern

technology. Use of modern technology in one sense can increase cost but another sense it

increases productivity highly and it attract big clients. It can introduce ATM services its

branch. Use of automatic machine like cash counter machine, ATM brings speed in

banking services.

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Providing More Industrial Loans

It seemed to me that the bank having a large amount of deposit is not simply encouraging

the large scale of producers that is this bank is not providing that much of long term

industrial loans to accelerate the economy as well as to help the economy to solve

unemployment problem of our country.

Bank should be Innovative and Diversified in its Services

This branch provides only conventional services. Modern banking today is introducing

various kinds of deposit account with different attractive features each of which may

attract different groups of people. This bank does not offer any consumer credit schemes

like other bank which is one of the vital sources of deposit mobilization.

Bank should diversify its banking services and add new features in its services so that it

can attract customers from all groups of people. Financial Engineers of Bank Asia should

be innovative in developing new banking services, which will attract customers and

reduce costs. It can introduce customer loan scheme, provide bridge loan, or can engage

in lease financing. It can also underwrite shares of newly incorporated public companies.

Bank should immediately enter into the credit card market

This bank does not have any plan to enter into the credit card market. It is well versed

that tomorrow’s payment will be consisted of only plastic money (Credit Card). A large

part of business transaction will be done by credit card in near future. In western word,

more than 50% of transactions are in credit card. If this bank does not prepare from now

on, it cannot compete in the future market. So, the branch should give special attention to

the introduction of Credit Card.

Therefore Khatungonj Branch has to think of new ways to not only retain clients but also

to gradually develop its customer base in order to maintain its significant contribution in

Bank Asia and become the leader among its other branches. To combat this threat,

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Khatungonj branch has to reengineer its plans and pursue a continuous service

improvement strategy to retain as well as enhance business relationship with clients.

Thus by providing this various services, Khatungonj Branch, Bank Asia Limited is

playing an important role in the banking system and in the payment system of

Bangladesh.

BIBLIOGRAPHY

Bank Asia Limited. Management Trainee Report.

Jeff Madura. International Financial Management. (West Publishing

company, 4th edition, 1995).

Documentary Credits, Uniform Customs & Practice. International Chamber

& Commerce (ICC) Publication, 1996.

Uniform Rules for Bank Reimbursements. International Chamber &

Commerce (ICC) Publications, 1696.

Uniform Rules for Collection. International Chamber & Commerce (ICC)

Publications. Revision 1996.

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EXECUTIVE SUMMARY

This report is prepared as a requirement of the Internship phase of RMBA Program of

International Islamic University Chittagong (IIUC). The report contains four main

sections:

Introduction

The Bank’s Profile

General Banking Activities of Bank Asia Limited

Foreign Exchange Activities of Bank Asia Limited

First part focuses on the organization overview, origin, background of study, objectives

of the report, its scope, methodology & limitations of the report.

Second part focuses on the different aspects of Bank Asia Limited such as background,

mission statement, objective, services offer, organizational structure, values, strengths,

opportunities, weaknesses, threats, financial statement of Bank Asia Ltd. This section

describes Corporate Information of Bank Asia Ltd, various product and services offers

for their target market and financial position of the Bank.

Third part discusses about the General Banking operation of Bank Asia, which provide

the foundation of banker customer relationship through opening account. This is the

busiest department and the daily transactions is concerned to the customers for drawing

or deposition money, selling of instruments to them for remittance purpose, collection of

their instruments providing other ancillary services to them and keep customer section

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busy. Officers of this department should possess the required behaviors for optimum

satisfaction of the customers. They make every endeavor to ensure their client’s

satisfaction. Officer’s cooperative & friendly professionals working in the branches will

make customers visit an enjoyable experience. Bank Asia offers wide-ranging products

and services matching the requirement of every customer. Transactional accounts saving

schemes or loan facilities from Bank Asia Ltd. make available their customers a unique

mixture of easy and consummate service quality.

Fourth and final part of the report is foreign Exchange activities of Bank Asia Ltd. This

section contains Import, Export, Foreign Remittance and other Release of Foreign

Exchange. Without any Banks co-operation, it is not possible to run any business or

production actively in financing imports and exports of a country. Imports and Exports

need financial helps from a financial institution in various stages of their activities. For

the purpose, Bank Asia Ltd. undertaken the Trade Finance Services. Their branches in

Dhaka & Chittagong are staffed by personnel experienced in International Trade Finance.

These offices are the focal point for processing Import and Export transactions for both

small and large corporate customers. They offer a complete range of Trade Finance

Services. Bank Asia Ltd. consider the borrowers business standing, integrity, liability

with the bank, terms and conditions of the L/C, securities offered etc.

Remittance services are available at all branches of Bank Asia Ltd. and foreign

remittances may be sent to any branch by the remitters favoring their beneficiaries.

Remittances are credited to the account of beneficiaries instantly through Electronic Fund

Transfer (EFT) mechanism or within shortest possible time.

There are many risks involved in Foreign Trade, therefore, Bank Asia Ltd. clearly justify

the customers from a neutral point and gather the current Information about the Market.

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77


ContractShip

GoodsExporter,

Seller,Beneficiary

Importer,Buyer,

Applicant


ApplyFor L/CRelease

Documents

Against Cash

or T/R

IssuingBankMake

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DocumentsL/CAdvising

Bank/Confirming

Bank/Negotiating


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Prepare and Pass

Documents

Advise

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