trust bank limited

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CHAPTER TWO

COMPANY PROFILE

Back Ground of Trust Bank Limited:

Trust Bank Limited is a scheduled commercial bank established under the BankCompanies Act, 1991 and incorporated as a Public Limited Company under Companies

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Act, 1994 in Bangladesh on June 1999 with the primary objective to carry on all kinds of

banking businesses in and outside Bangladesh. The Bank has now Forty Three (43)

branches operating in Bangladesh as of 1st March, 2010. There are also five SME Center

and one Merchant Banking division of the bank to serve the customers.

Initially the bank has started its operation in the name of The Trust Bank Limited but on

12 November 2006 it was renamed as Trust Bank Limited by the Register of Joint

Stock Companies. The new name of the bank was approved by Bangladesh Bank on 03

December 2006.

Trust Bank Limited offers full range of banking services that include deposit banking,

loans and advance, export, import and financing national and international remittances

etc. Presently the bank is owned by the Army Welfare Trust of the country. It holds

99.99% shares and the rest (i.e. .01%) is held by the Board members of the bank who are

senior army personal by virtue of Army Welfare trusts mandate. Therefore the

shareholding at present is highly concentrated. However with the flotation of the shares to

the public, the shareholding pattern has been diluted with public participation. Against the

present authorized capital of Tk. 2000 million the paid-up will be raised through ensuing

IPO Flotation. The bank has offered 70, 00, 00,000 taka primary shares with premium.

Recently the bank has launched its Islamic banking Operation in few of their big

branches.

Vision

We aim to provide financial services to meet customer expectations sothat customers feel we are always there when they need us, and can

refer us to their friends with confidence. We want to be a preferred

bank of choice with a distinctive identity.

Mission

Our mission is to make banking easy for our customers by

implementing one-stop service concept and provide innovative and

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attractive products and services through our technology and qualified

human resources. We always look out to benefit the local community

through supporting entrepreneurship, social responsibility and

economic development of the country.

Branch Network:

The Branch network of Trust Bank Limited is quite strong. With an age

of only eight years, the bank is now having a network of 43 branches,

five SME branches and one merchant banking branch across

Bangladesh as on March 24, 2010.These branches are situated at

various strategically important commercial and industrial locations in

the country. Among these braches

12 branches are in Dhaka,

7 branches in Chittagon

5 branches in Sylhet

3 branches in Gazipurz

2 branches in Narayangonj

1 branch in Sirajgongj

1 branch in Khulna

1 branch in Feni

1 branch in Narshingdi

1 branch in Ashuganj, Bramhanbaria

And one branch each at the cantonment areas of Chittagong, Sylhet,

Comilla, Bogra, Rangpur, Jessore, Momenshahi, Savar & Ghatail. The

above branch network is expected to be sufficient to maintain required

growth rate of the bank.

2.3 Function of the Bank:

2.3.1 Product and Services:

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Trust Bank Limited has been established with the objective of providing

efficient and innovative banking services to the people of all sections of

the society. Towards this end TBL offers full range of normal banking

service that include deposit banking, loans and advances, exportimport, inward worker remittances etc.

Deposit Schemes Includes:

1. Trust Smart Saver Scheme (TSS)

2. Trust Double Scheme (TMDS)

3. Trust Money Making Scheme (TMMS)

4. Trust Edu-care Scheme (TES)

5. Monthly Benefit Deposit Scheme (MBDS)

6. Lakho Pati Saving Scheme (LSS)

7. Interest First Fixed Deposit Scheme (IFFDS)

Retail Loan Products Includes (General):

1. Car Loan

2. Doctors Loan

3. Education Loan

4. Travel Loan

5. Hospitalization Loan

6. Any Purpose Loan

7. Apon Nibash Loan

8. CNG Conversion Loan

9. Marriage Loan

10. Advance Against Salary Loan

Retail Loan Products Includes (Defense)

1. HBL (Regd. Mortgage & Commutation Benefits)

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2. OD (Against Salary)

3. RRDH (Micro Credit)

4. Above General Loans

International Trade Related Services:

1. Private Foreign Currency Account

2. Non-Resident And Resident Foreign Currency Deposit Account

3. Travelers Endorsement (Case And Travelers Cheque)

4. Remittance Of Foreign Currency

5. Import And Export Transaction

6. Foreign Exchange Dealings

7. Purchase Of Foreign Currency Drafts

8. Cheques And Travelers Cheques

9. Wage Earners Development Bond.

Other Services Of TBL Includes:

1. Trust Locker Service

2. Trust Tele Banking

The bank is committed to ensure customized, qualitative and hassle

free services in its banking operations along with the focus to broaden

the clientele base.

Card Services (Debit, Credit & ATM):

Trust Bank holds the principle member License from VISA International

to issue & acquire the worlds most widely used Credit Card. It also

offering Debit Cards and ATM Cards. For account holders, TBL offering

ATM Cards without any costs.

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Services:

(1) TBL is operating Online Banking, which ensures

reliable any branch banking for customer through Real

Time Data Processes sing system.

(2) SWIFT facility ensures effective communication

between our bank & other local/ foreign banks.

Especially for the Foreign Exchange Departments.

CHAPTER THREE7


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FOREIGN EXCHANGE BUSINESS OF TBL

Foreign Exchange:

Foreign exchange means foreign currency and includes:-

All deposits, credits and balances payable in any foreign currency and

any drafts,

travelers cheques, letters of credit and bills of exchange, expressed or

drawn in Indian currency but payable in any foreign currency;

Any instrument payable, at the option of the drawer or holder thereof

or any other party thereto. Either in Indian currency or in foreign

currency or partly in one and partly in the other. Thus, foreign

exchange includes foreign currency; balances kept abroad andinstruments payable in foreign currency.

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Functions of Foreign Exchange Department:

Foreign Exchange Department performs many functions to facilitate the

foreign exchange transactions. These are:

Facilitating Import Trade

Facilitating Export Trade

Provide Funded and Non-funded Credit Facility.

Maintaining Foreign Currency Accounts

Selling of Foreign Currency Bond etc

The above mentioned functions are done by three sections namely:

Import Section

Export Section

Foreign Remittance Section.

Import Section:

When a particular country brings some goods and services from

another country, then there must be trade and the trade occurring

between these two countries is called import trade. Import trade

means procurement and purchase of goods and services from anothercountry or countries.

The bank defines import as to bring in, from abroad, something in kind

of goods or services (to behave lawfully). It includes the following

services:

1. Letter of Credit (L/C) opening.

2. Presentation/Retirement of import documents.

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The import mechanism first involves the issuing of a L/C as an

instrument by a bank on behalf of one of its customers, authorizing an

individual or a firm to draw draft on the bank or on one of its

correspondents for its account under certain conditions which ispredetermined in the credit. Secondly the bank import mechanism

involves the retirement of import mechanism on receiving the payment

or under certain conditions against the security of payments made by

the importer in documents required an advance payment date.

Export Section:

Export means supply or delivery/ provides the goods or services from

our country to the other persons / companies who are residing outside

the country. Any person or company or organization can export who

have an ERC (Exporters Registration Certificate) or any special

permission for export competent authority.

Foreign Remittance Section:

Foreign remittance means sending or receiving an amount of money in

foreign currency through SWIFT/ FTT, Foreign Demand draft, TC etc. All

transactions in foreign currency (Inward & outward) are controlled byCentral Banks foreign regulation act.

Foreign Exchange Risk Management:

TBL has a foreign exchange risk manual and investment policy

incompliance with Bangladesh Bank set rules to provide a

comprehensive guideline for smooth foreign exchange operations.

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The foreign exchange risk is minimal in TBL as most of the transactions

are carried out on behalf of the customers against L/C commitments

and remittance requirements. To address the issue, all foreign

exchange activities have been segregated between front office andback office which are responsible for currency transactions, deal

verifications, limit monitoring and settlement of transactions

separately. The treasury department monitors the market scenario of

risks and manages the foreign exchange operations in such a way so

that earnings are not hampered against any adverse movement in

market prices. All NOSTRO accounts are reconciled on monthly basis

and outstanding entries are reviewed regularly for settlement. Dealing

room has been furnished with separate phone, fax, cable TAV, voice

recorder and Reuters System as per Bangladesh Bank guideline.

CHAPTER FOUR11


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IMPORT BUSINESS OF TBL

4.1 Import Operation:

Import is foreign goods and services purchased by consumers, firms &

Governments in Bangladesh.

An importer must have Import Registration Certificate (IRC) given by

Chief Controller of Import and Exports (CCI & E) to import any thing

from other country. To obtain IRC the following certificate are required

i. Trade License

ii. Income tax clearance certificate

iii. Nationality certificate

iv. Banks solvency certificate

v. Asset certificate

vi. Registration partnership deed (if any)

vii. Memorandum and article of association / certificate of

incorporation (if any)

viii. Rent receipt of the business premises

ix. Certificate of incorporation (if any)

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Import Procedure:

To import through TBL, a customer requires-

1. Bank account

2. Import Registration Certificate

3. Tax Paying Identification Number

4. Pro-forma Invoice Indent

5. Membership Certificate

6. LC Application form duly attested

7. One set of IMP Form8. Insurance Cover note with money receipt

9. Others.

Import Mechanism:

To import, a person should be competent to be an 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 the IRC, the person has to secure a letter of credit

authorization (LCA) from 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.

Importers Application for L/C Limit/Margin:

To have an import L/C limit, an importer submits an application to the

Department of credit furnishing the following information, -

1. full particulars of bank account

2. nature of business

3. required amount of limit

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4. payment terms and conditions

5. goods to be imported

6. offered security

7. repayment scheduleA credit Officer scrutinizes this application and accordingly prepares a

proposal (CLP) and forwards it to the Head Office Credit Committee

(HOCC). The Committee, if satisfied, sanctions the limit and returns

back to the branch. Thus the importer is entitled for the limit to open

Letter of Credit.

The L/C Application:

TBL provides a printed form for opening of L/C to the importer. A

special adhesive stamp is affixed on the form. While opening the L/C,

the stamp is cancelled. Usually the importer expresses his desire to

open the L/C quoting the amount of margin in percentage. The

importer gives the following information,-

a. Full name and address of the importer.b. Date and place of expiry of the credit

c. The mode of the transmission of document

(mail/courier/telex)

d. Whether the confirmation of the credit is requested by the

beneficiary or not

e. Whether partial shipment of goods is allowed or not

f. The type of loading (loading on board)g. Brief description of the goods to be imported.

h. Availability of the credit by sight payment acceptance

/negotiation/deferred payment.

i. The time bar within which the document should be presented.

j. Sales terms (FOB/CFR/CIF)

k. Account number

l. L/C amountm. shipping mark

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n. HS Code no of the goods to be imported.

o. IRC Number of the Importer.

p. LCA Number

q. Insurance cover noter. Country of origin

The above information is given along with the following documents, -

a. Pro-forma Invoice stating description of the goods including

quantity, unit price etc.

b. The insurance cover note, issuing company and the insurance

number.

c. Four set of IMP Form

Securitizations of L/C Application:

The TBL Official scrutinizes the application in the following manner,-

The terms and conditions of the L/C must be complied with

UCPDC 600 and Exchange Control & Import Trade Regulation.

Eligibility of the goods to import

The L/C must not be opened in favor of the importer.

Radioactivity report in case of food item.

Survey report or certificate in case of old machinery

Carrying vessel is not of Israel origin.

Certificate declaring that the item is in operation not more

than 5 years in case of car.

4.2 Transmission of L/C:

The transmission of L/C is done through tested telex or fax to advise

the L/C to the beneficiary.

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4.3 Advising a Letter of Credit:

The advising or notifying bank is the bank through which the L/C is

advised to the exporter. It is a bank situated in the exporting country

and it may be a branch of the opening bank. It becomes customary to

advise a credit to the beneficiary through an advising bank. Advising

depicts the proof of authenticity of the credit to the seller. The opening

bank has corresponding relationship or arrangement throughout the

world by which the L/C is advised. Actually the advising bank does not

take any liability if otherwise not requested.

Adding Confirmation:

Adding confirmation is done by the confirming bank. Confirming bank is

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

request of the issuing bank. The confirming bank may or may not be

the advising bank. The advising usually does not confirm it if there is

not a prior arrangement with the issuing bank. By being involved as a

confirming agent the advising bank undertakes to negotiatebeneficiarys bill without recourse to him.

a) Issue L/C and request to add confirmation

b) Review the L/C terms

c) Provide reimbursement

d) Drafts to be drawn on L/C opening bank

e) Availability of credit facilities

f) Line allocation from the business & ownership units in the

importers country

g) Confirm & advise L/C

Credit Report:

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If the amount of L/C exceeds a certain limit, TBL takes the credit report

of the beneficiary to ensure the worthiness of the seller of supplying

the stipulated goods.

Amendment of Letter Of Credit:

Parties involved in a L/C, particularly the seller and the buyer cannot

always satisfy the terms and conditions fully as expected due to some

obvious and genuine reason .In such a situation, the credit should be

amended. TBL transmits the amendment by tested telex to the

advising bank .In case of revocable credit; it can be amended or

cancelled by the issuing bank at any moment and without prior notice

to the beneficiary. But in case of irrevocable letter of credit, it can

neither be amended nor cancelled without the agreement of the

issuing bank, the confirming bank (if any) and the beneficiary. If the L/C

is amended, service charge and telex charge is debited from the party

account accordingly.

Presentation of the Documents:

The seller being satisfied with the terms and the conditions of the

credit proceeds to dispatch the required goods to the buyer and after

that, has to present the documents evidencing dispatching of goods to

the negotiating bank on or before the stipulated expiry date of the

credit. After receiving all the documents, the negotiating bank then

checks the documents against the credit. If the documents are found in

order, the bank will pay, accept or negotiate to TBL. TBL check the

documents. The usual documents are,-

1. Invoice

2. Bill of lading

3. Certificate of origin

4. Packing list

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5. weight list

6. Shipping advice

7. Non negotiable copy of bill of lading

8. Bill of exchange9. Pre-shipment inspection report

10. Shipment certificate

Examination of Documents:

The documents generally include the following and the basic points of

checking by TBL are, -

Letter Of Credit

i) Whether the documents have been negotiated

or presented before expiry of the credit

ii) whether the amount drawn exceeded the

amount available under the credit

The Invoice:

i. Is the invoice made out in the name currency as the

credit indicates?

ii. Is the invoice made out in the name of the buyer with

the same address specified in the credit

iii. Does the invoice agree exactly with the credit as

regards description of goods, value of goods, unit prices

& delivery terms?

iv. Any special notation, confirmation & attestation were

specified in the credit and those have been complied

with on the invoice and ifrequired duly signed.

v. Does the invoice evidence the following; shipping

marks/terms of delivery/weight data &import license

number etc.

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Bill of Exchange:

i. Is the Bill of Exchange drawn in the language of

the credit?

ii. Is the bill of exchange properly prepared

according to the credit conditions (on a sight or time

basis) and drawn on the specified bank?

iii. Is it properly dated and signed?

iv. Is the amount in figures corresponded exactly

with the amount in word?

v. Does it contain all the prescribed notations and

clauses?

vi. As a rule, the amount of Bill of Exchange must

agree with the invoice amount (drawn to cover only

90% or 80% of the invoicevalue.

D. The Bill Of Lading:

i. Have the credit stipulations regarding the parties to

be mentioned in the Bill Of Lading (shipper,

order/consignee, notify party) as well as special

notations and indications in agreement in the Bill Of

Lading?

ii. Have the provisions Of the UCPDC been observed? A

special authorization is required in the credit to

enable the banks to accept the following Bill O f

Lading:

iii. Charter party Bills Of Lading.

iv. Bills Of Lading issued by freight forwarder if the

forwarder does not act as carrier or as the agent of a

named carrier.

v. Received for shipment Bills Of Lading showing

storage on deck.

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vi. Bills Of Lading that are not clean i.e. those containing

a notation declaring a defective condition of the

packaging and/ or of the goods.

vii.Has the Bills Of Lading been made out in theprescribed form (order Bills Of Lading or Bills Of

Lading made out to a named party)? Is it endorsed (if

necessary)?

viii. Do the details of package units (cases, number,

marks, weight etc.) agree with the other documents?

ix. Is there no contradiction between the notation on

freight payment and the payment terms? (CFR &CIF:

Freight prepaid).

x. Is the Bill Of Lading properly signed?

xi. Have subsequent On Board notations and other

changes been initiated by the carrier or its agents?

E. The Insurance Cover Note:

i. Is the insurance documents specified in the credit

submitted?

ii. Does the insurance cover the risks mentioned in the

credit in the currency of the credit and for the

prescribed amount but not less than CIF value?

iii. Is the insurance documents dated not later than the

shipping documents?

iv. Does the insurance policy/Certificate agree with

other document as regards description, weight &

marks of the goods, mode of transport & the route?

v. Are all the copies issued by the insurance company

attached and so far as necessary, endorsed?

Certificate Of Origin:

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vi. Is the Certificate of Origin of merchandise is given as

stipulated?

Additional documents:

vii. Additional documents called for in the credit if any

such as packing list, weight certificate, consular

invoice, inspection certificate etc. to be checked

whether drawn and issued in accordance with the

terms of the credit.

Retirement of the Shipping Documents:

At the time of retiring the shipping documents, bank have to clear

different charges. (Accounting treatment of these charges are shown in

theAppendix III)

After realizing the telex charge, service charge, interest (if any), the

shipping documents is then stamped with PAD Number & entered in

the PAD Register. Intimation is given to the customer calling on the

banks counter requesting retirement of the shipping documents. After

passing the necessary vouchers, endorsements is made on the back of

the Bill Of Exchange as Received Payment and the Bill Of Lading is

endorsed to the effect Please deliver to the order of M/S---------, under

two authorized signatures of the banks officers (P.A. Holder). Then the

documents are delivered to the Importer.

Payment Procedure of the Import Documents:

This is the most sensitive task of the Import Department. The Officials

have to be very much careful while making payment. This task

constitutes the following,-

A. Date of payment: Usually payment is made within sevendays after the documents have been received. If the payment is

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become deferred, the negotiating bank may claim interest for

making delay.

B. Preparing sale memo: A sale memo is made at B.C rate to

the customer. As the T.T & O.D rate is paid to the ID, thedifference between this two rates is exchange trading. Finally, an

Inter Branch Exchange Trading Credit Advice is sent to ID.

C. Requisition for the foreign currency: For arranging

necessary fund for payment, a requisition is sent to the

International Department.

D. Transmission of SWIFT: A SWIFT message is transmitted to

the correspondent bank ensuring that payment is being made.

Compare the documentary credit process with the other

international trade payment systems.

In international trade there may come across a number of modes of

payment that are being used for receiving trade proceeds. These are

as follows:

1. Cash in Advance: In this method of payment, the buyer

places the funds at the disposal of seller prior to shipment of

goods in accordance with the sales / purchase contract, which

is certainly to be concluded between exporter and importer

before the trade transaction.

2. Open Account: This is an arrangement between the buyer

and seller whereby the goods are manufactured and delivered

before payment is required. Open account provides for

payment at some stated specific future date and without

requiring the buyer to issue any negotiable instrument

evidencing his legal commitment.

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3. Documentary Collection: This is an arrangement whereby

the goods are shipped and the relevant bill of exchange / draft

is drawn by the seller on the buyer and documents are sent to

the sellers bank with clear instructions for collection throughone of its correspondent bank located in the buyers domicile.

4. Documentary Credit : The documentary credit is an

undertaking issued by a bank on behalf of the buyer to pay

the beneficiary the value of the draft and / or documents

provided that the terms and conditions of the credit are

complied with.

From the above-mentioned descriptions about the four modes of

payment in international trade, we can state the superiority of

Documentary Credit.

The prime thing is the risk affiliated with the parties. At the time of

all international trade both the exporter and importer try to go for a

safer position during the payment takes place. Except the

Documentary Credit, not all other modes can provide equal benefits

to both the parties. In Cash in Advance, process risk goes to the

importer while the importer makes the payment before arrival of the

goods and on the other hand in Open Account, system the exporter

occupying the riskier placer by manufacturing the goods before the

payment has made. When we talk about the Documentary Collection,

system where there is no undertakings about the settlement by any

third party (Except exporter and importer).

All of the lacking that we have discovered from discussion can be only

be fulfilled by the fourth modes of payment, that is Documentary

Credit. Here all the parties are equally risk averse and the undertaking

of a third party has properly backed international settlement.

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Import Analysis:

Year to Year Import

Year Import (mil Tk.) Growth Rate

2004 8542 -

2005 9746 14.10%

2006 11483 17.82%

2007 13816.16 20.32%

2008 16660 20.58%

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Comparison of Industry and TBL Growth rate

In million Taka

Year Industry Growth TBL Growth Share

2004 722440 19.07% 8542 1.18%

2005 890220 23.22% 9746 14.10% 1.09%

2006 1108170 24.48% 11483 17.82% 1.04%

2007 1272210 14.80% 13816.16 20.32% 1.09%

2008 1745698 37.22% 16660 20.58% .0095%

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CHAPTER FIVE

EXPORT BUSINESS OF TBL

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Export means supply or delivery/ provides the goods or services from

our country to the other persons / companies who are residing outside

the country. Any person or company or organization can export who

have an ERC (Exporters Registration Certificate) or any specialpermission for export competent authority.

Export Incentives:

Government provides so many incentives to the exporter. Such as-

A. Financial Incentives:

Restructuring of Export Credit Guarantee Scheme (ECGS): ECGS

mean convertibility of Taka in current account. Exporters can

deposit 40% of FOB value of their export earnings in own dollar

and pound sterling.

Export Development Fund (EDF).

Expansion of export credit period from 180 days to 270 days;

50% tax rebate on export earnings; duty draw back;

Bonded warehouse facilities to 100% export oriented firms.

Duty free import of capital equipment for 100% export oriented

firms.

B. General Incentives:

National Export Trophy to successful exporters;

Training course on external trade;

Arrangement of international trade fairs, commodity-based

exhibitions in the country and participation in foreign trade.

C. Other Incentives:

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Assistance in improvement of quality and packing of exportable

items;

Simplification of exports procedures

Export Procedures:

A lot of formalities to be done by the exporter for export their goods

with the help of different Government or Non Government organization

and Banks.

Duties & Responsibilities of Exporter:

An exporter has to obtain a general permission from the office of

chief Controller of Import & Export (CCI & E). This permission is

known as Exporters Registration Certificate (ERC).

If any exporter wants to export any band item or restricted item,

(list of band items or restricted items are available in the Export

Policy published by the Govt.) then has to obtain specialpermission from CCI & E and Export Promotion Bureau (EPB).

To obtain a ERC , he /she has to submit a valid trade license ,

bank solvency certificate, membership certificate of any trade

association etc to CCT & E office.

For service exporter ( Data entry , Soft ware export etc )

permission from CCI & E is not mandatory ).

He/ she have to obtain a general permission from the office of

Export Promotion /bureau (EPB). This permission is known as

Membership certificate of EPB. It is not mandatory.

He / she have to a member of Chamber of Commerce or

respective business area and it is not mandatory.

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Then he / she will collect export order through a Letter of credit

(LC) or contact. In case of LC, it should be authenticated and

advised by a bank.

After that he / she can export the goods against LC / contract for

a payment term as Sight / Usage basis. Even they export the

goods on consignment basis.

He / she checks all terms and conditions of LC / contract

carefully. If it is possible to comply with, he / she takes the

necessary steps to export the goods.

He / she apply to his/her bank along with the original LC/ contract

% a copy of commercial invoice for issuance of EXP Form. (EXP

form known as export form).

Exporter signs & fills up their portion of EXP form and then they

collect banks seal and signature on the same EXP form.

Exporters make range the goods for shipment by sea/air through

your nominated Clearings and Forwarding Agent (C&F Agent).

C&F Agent takes necessary approval from port custom authority

on behalf of the exporter before shipment the goods.

To take the approval of customs authority .he/she has to

submit the required papers like full set of EXP form, copy of

commercial invoice, copy of packing list, Copy of ERC etc.

After Approval of customs authority, C&F agent directly

sends the Original Copy of EXP form to the central bank,

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Bangladesh bank and rest of three EXP form ( Duplicate,

Triplicate and Quadruplicate Copy) returns to the exporter.

Then exporter prepares or collects all related documents orpapers from different authorities as per LC or Contract

Terms.

He/ She submits the documents to their bank for

negotiation or collection the proceeds against their export.

Duties & Responsibilities of Exporters Bank:

Bank advises the LC to the exporter. Here bank acts as an

advising bank of the customer. Proper authentication of the LC is

a primary duty of an advising bank.

After receipt a request from the exporter for issuance of EXP form:

Bank takes the original LC or contract form from the

exporter

They checks all terms & conditions of the LC or contract

and the title of the goods must be checked carefully.

Bank ensures that the exporters has the ERC

Bank will ensure that the credentials of the buyers or

consignees abroad and in this regard bank may wants to

know the creditworthiness of the buyer through their

foreign correspondent like greater care to be taken by

the bank for ensure the repatriate the proceeds

After fulfillment the above processing, Bank

certifies the full set of WXP form but before

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certification EXP form will be filled up and

signed by the exporter.

Then Bank received the shipping documentsfrom the exporter:

Bank examines the documents carefully as per as LC or

contract.

If any discrepancy found, they informs the exporters for

their rectification or disposal instructions from their

end. Then bank sends the documents to the LC issuing bank

or paying bank as per instruction of the LC or contract

with the covering letter mentioning payment

instructions properly.

Bank instruct the buyers bank to deliver the

documents against payment or acceptance and it

depends on the tenor of document drawn ( Sight orUsance basis)

In case of the document drawn on usance basis, bank

request the LC issuing bank or paying bank for the

confirmation of their acceptance.

Some other common instructions to be mentioned on

the forwarding schedule of the documents

Bank mentions the discrepancies on the covering letterif any containing in the documents.

Before sending the documents, bank endorses the Bill of lading (BL)

or Track Receipt (TR) or Air way Bill (AWB), transport documents in

favor of the LC issuing or Paying Bank. Bank may endorse the BL in

favor of buyer if full proceeds against the said bill are received in

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advance. Bill of Exchange also may require for endorsement in favor

of the bank.

Bank will take decision whether they will negotiate the documentsor send for collection basis.

Bank will send EXPs duplicate copy to the central bank

for their record. However before sending them EXP

form must be filled up and signed by the banker

properly.

After sending the documents, bank waits for receivethe payment as per LC. Bank takes proper care and

follow-up for repatriate the proceeds.

After credit intimation or confirmation received from

the NOSTRO A/C bank realizes the proceeds and credit

the same to the exporters A/C and necessary charges

or dues to be realized if there is any pending has

created with the customers.

Finally, Bank reports all the export proceeds which are received during

the month to the central bank under :

Foreign currency transaction reporting (Central Banks

monthly return) along with the following supporting

papers or documents. EXPs Triplicate copy or EXP Non Attached Voucher if

WXP form is not available at the time of reporting but

proceeds realized.

Advanced Received Voucher if export proceeds

received in advance before issuance of EXP form or

export proceeds received in advance through FTT

(Fund Telephonic Transfer).

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Important Key Terms of Foreign Trade:

Bill Of Exchange (B/E)

1. Amount of B/E differ with Invoice.

2. Not drawn on L/C issuing Bank.

3. Not signed

4. Tenor of B/E not identical with L/C

5. Full set not submitted.

Commercial Invoice

1. Not issued by the Beneficiary.

2. Not signed by the Beneficiary.

3. Not made out in the name of the Applicant

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

correspond to the Credit.

5. Not marked one fold as Original.

6. Shipping Mark differs with B/L & Packing List.

Packing List

1. Gross Wt., Net Wt. & Measurement, Number of

Cartoons/Packages differs with B/L.

2. Not market one fold as Original.3. Not signed by the Beneficiary.

4. Shipping marks differ with B/L.

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Bill of Leading:

1. Full set of B/L not submitted.

2. B/L is not drawn or endorsed to the Order of TBL Ltd.

3. Shipped on Board, Freight Prepaid or Freight Collect etc.

notations are not marked on the B/L.

4. B/L not indicate the name and the capacity of the party i.e.

carrier or master, on whose behalf the agent is signing the B/L.

5. Shipped on Board Notation not showing name of Pre-carriage

vessel/intended vessel.

6. Shipped on Board Notation not showing port of loading and

vessel name (Incase B/L indicates a place of receipt or taking in

charge different from the port of loading).

7. Short Form B/L

8. Charter party B/L

9. Description of goods in B/L not agree with that of Invoice, B/E &

P/L

10. Alterations in B/L not authenticated.

11. Loaded on Deck.

12. B/L bearing clauses or notations expressly declaring

defective condition of the goods and/or the packages.

Others:

1. N.N. Documents not forwarded to buyers or forwarded beyond

L/C terms.

2. Inadequate number of Invoice, Packing List, B /L & Others

submitted.

Short shipment Certificate not submitte

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Financial Incentives given by TBL Ltd.:

An exporter needs either Pre shipment or Post shipment or both types

of financial help. TBL Ltd finances their client as they required undersome conditions. Bank finance their clients through-

Lien of Export L/C: An exporter can obtain credit facilities against lien

on the irrevocable, confirmed and unrestricted export letter of credit in

form of the followings:

Export cash credit (Hypothecation):

Under this arrangement, credit is sanctioned against hypothecation of

raw materials or finished goods intended for export. Such facility is

allowed to the first class exporters. As the bank has got no security in

this case, except charge documents and lien on exporters L/C or

contract, bank normally insists on the exporter in furnishing collateral

security. The letter of hypothecation creates a charge against

merchandise in favor of the bank. But neither the ownership nor the

possession is passed to it.

Export Cash Credit (Pledge):

Such Credit facility is allowed against pledge of exportable goods or

raw materials. In this case cash credit facilities are extended against

pledge of goods to be stored in the warehouse under banks control by

signing letter pledge documents. The exporter surrenders the physical

possession of failure of the export to honor his commitment; the bank

can sell the pledged merchandise for recovery the advance.

Export Cash Credit against Trust Receipt:

In this case, credit limit is sanctioned against trust receipt (TR). Here

also unlike pledge, the Exportable goods remain in the custody of the

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exporter. He is required to execute a stamped export trust receipt in

favor of the bank, he holds wherein a declaration is made that goods

purchased with financial assistance of in trust for the bank. This type of

credit is granted when the exporter wants to utilize the credit forprocessing, packing and rendering the goods in exportable conditions

and when it seems that exportable goods cannot be taken into banks

custody. This facility is allowed only to the first class party and

collateral security is generally obtained in this case.

Export Credit Guarantee Scheme (ECGS):

Export credit insurance was seen primarily as a tool in the hands of the

Government for promoting export. This is to assist the exporters to get

bank finance without any difficulty and to realize the proceeds of the

exports immediately after shipment. Shadharan Bima Corporation has

been entrusted with the responsibility of administering the scheme by

the government of Bangladesh.

Objectives of the Scheme:

To enable the exporters to obtain easily better

loan facilities from financial institutions

To cover the credit risk against losses resulting from both

commercial and non-commercial risk

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Existing Schemes:

A. Export Finance (Pre-shipment) Guarantee:

To assist exporters, particularly medium and small exporters to obtain

a liberal flow of pre-shipment bank credit i.e. loans or advances for the

purpose of manufacturing, processing or purchasing goods for export.

B. Export Finance (Post-shipment) Guarantee:

To make easy flow of post-shipment credit, particularly to the exporters

of non- traditional items, the post- shipment credit guarantee has been

designed to protect commercial banks in Bangladesh from losses that

may be sustained by them in respect of advances to exporters by way

of discount/ purchase/ negotiation of export bills or advances against

export bills sent for collection.

C. Pre-shipment Finance Guarantee:

It is a contract between the export credit guarantee department and

the bank to whom the guarantee is issued and it protects the insuredbank in respect of the losses that it may incur while giving pre-

shipment credits to its exporters clients.

D. Export Payment Risks Policy:

The export credit guarantee department seeks to strengthen the

confidence of the exporters from the consequences of the payment

risks, both political and commercial and to enable them to expand

their overseas business without fear of loss by issuing Export

Payment Risks Policy (Formerly known as Comprehensive

Guarantee). The guarantee covers both the commercial and political

risks connected with exports from the date of shipment.

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Pre-shipment credit:

Pre-shipment credit, as the name suggests, is given to finance the

activities of an exporter prior to the actual shipment of the goods for

export. The purpose of such credit is to meet working capital needs

starting from the point of purchasing of raw materials to final

shipment of goods for export to foreign country. Before allowing

such credit to the exporters the bank takes into consideration about

the credit worthiness, export performance of the exporters, together

with all other necessary information required for sanctioning the

credit in accordance with the existing rules and regulations. Pre-

shipment credit is given for the following purposes:

Cash for local procurement and meeting related expenses.

Procuring and processing of goods for export.

Packing and transporting of goods for export.

Payment of insurance premium.

Inspection fees.

Freight charges etc

Packing Credit:

Packing Credit is essentially a short-term advance granted by a

Bank to an exporter for assisting him to buy, process, manufacture,

and pack and ships the goods. Generally for movement of goods

from the hinterland areas to the ports of shipment the Banks

provide interim facilities by way of Packing Credit. This type of credit

is sanctioned for the transitional period starting from dispatch of

goods till the negotiation of the export documents. Practically

except for single transaction, most of the pre-shipment credits are

allowed in the form of limits duly sanctioned by Bank in favor of

regular exporters for a particular period. The drawings are required

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to be adjusted fully once within a period of 3 to 6 months. Suiting to

the breed and nature of export, sometimes an exporter may also be

allowed to avail a combined Cash Credit and Packing Credit limit

with fixed ceiling on revolving basis. But in no case the borrowerwould be allowed to exceed individual credit limit fixed for the

purpose. The drawings under Export Cash Credit limits are generally

adjusted by the drawing in packing credit limit, which is, in turn

liquidated by the negotiation of export documents.

The Documents for PC:

Letter of Partnership along with Registered Partnership

Deed in case of Partnership Accounts.

Resolution of the Board of Directors along with

Memorandum & Articles of association in case of Accounts of

Limited Companies. Incase of Corporation, Resolution of the

Board Meeting along with Charter.

Personal Guarantee of all the Partners in case of Partnership

Accounts and all the Directors in case of Limited Companies.

An undertaking from the Directors of the Public Limited Company

to obtain prior clearance from the Bank before declaring any

interim/final dividend.

Red-clause Letter of Credit:

Under Red clause letter of credit, the opening bank authorizes the

Advising Bank/Negotiating Bank to make advance to the beneficiary

prior to shipment to enable him to procure and store the exportable

goods in anticipation of his effecting the shipment and submitting a bill

under the L/C. As the clause containing such authority is printed in red

ink, the L/C is called Red clause and Green clause respectively.

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Post Shipment Finance:

This type of credit refers to the credit facilities extended to the

exporters by the banks after shipment of the goods against export

documents. Necessity for such credit arises as the exporter cannot

afford to wait for a long time for without pay manufacturers/suppliers.

Before extending such credit, it is necessary on the part of banks to

look into carefully the financial soundness of exporters and buyers as

well as other relevant document connected with the export in

accordance with the rules and regulations in force. Banks in our

country extend post shipment credit to the exporters through:

Negotiation of documents under L/C

Advances against Export Bills surrendered for

collection (FDBC)

Negotiation of Export Document:

According to the Article #02 (under UCP600, ICC Pub., 2007

revision.),Negotiation means the purchase by the nominated bank of

drafts (drawn on a bank other than the nominated bank) and or

documents under a complying presentation, by advancing or agreeing

to advance funds to the beneficiary on or before the banking day on

which reimbursement is due to the nominated bank. If documents are

in order, TBL purchases (negotiates) the same on the basis of banker-

customer relationship. This is known as Foreign Documentary Bill of

Purchase (FDBP). In this case, exporter gets their export bill before

realization of their bill.

Foreign Documentary Bill Of Collection (FDBC):

If the bank is not satisfied with the documents submitted to TBL gives

the exporter reasonable time to remove the discrepancies or sends the

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documents to Letter of Credit opening bank for collection. This is

known as Foreign Documentary Bill for Collection (FDBC)

Normally negotiating Bank will send the documents on collection basis

mainly for the following discrepancies:

1. L/C expired;

2. Late shipment;

3. Late presentation;

4. L/C overdrawn;

5. Unit price differ between L/C and Commercial Invoice;

6. Consignee Name and address differ between L/C and otherdocuments.

7. Discrepancies in B/L;

8. Any other Major discrepancies.

FDBC signifies that the exporter will receive payment only when the

issuing bank gives payment. TBL make regular follow-up with the L/C

issuing Bank in case of any delay in getting payment.

BTB (Back to Back) L/C:

This is one of the facilities that an exporter gets for production of the

exported goods. After the advising of the L/C if the exporter is a

finished goods producer like RMG then he give the advised L/C at theBTB section for advising second L/C favoring his raw materials

suppliers.

It may so happen that the beneficiary of an L/C is unable to supply the

goods direct as specified in the credit as a result of which he/she needs

to purchase the same and make payment to another supplied byopening a second letter of credit, in this case, the second credit is

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called Back to Back Credit. This concept involves opening of second

credit on the strength of first credit, i.e. master L/C opened foreign

importers. In this case the master L/C stands as security for opening of

second credit, i.e. Back to Back Letter of Credit. Back to Back Letter ofCredits are opened in conformity to the terms and conditions stipulated

in master L/C except the price of the goods, shipment period and

validity of L/C The shipment period and validity of Back to Back Letter

of Credits are given earlier than the original validity as stipulated in the

master L/C which helps the seller of the first credit to substitute his

drafts, commercial invoices and other documents, if any, with that

drawn by the seller of Back to Back Letter of Credit. According to the

Bangladesh Bank rule the maturity date of the BTB L/C should be two

month later of the master L/C maturity date.

There are two types of Back to Back letter of credit:

1. Inland Back to Back L/C:

Inland Back to Back L/C is opened on account of intermediary

local buyers who procures the goods from local mills ortraders for ultimate export. Incase of this type of L/C bank

give them an IDBP (Inland documentary Bill Purchase) No

which indicate the reference no of particular the branch of

TBL.

2. Foreign Back to Back L/C:

Foreign Back to Back L/C is established in the field of

garments industry against or on the basis of a foreign export

L/C for import of raw materials from foreign countries for

execution of the relative export order. Here as applicant for

the second line of credit the seller is responsible for

reimbursing the bank for payments made under it, regardless

of whether or not he himself is paid and the first credit.

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Eligible for opening BTB L/C:

The AD (Authorized Dealer e.g. bank) may open back to back import

L/Cs against export L/C received by export oriented industrial units

operating under the bonded warehouse system, subject to

observance of domestic value addition requirement (stated in terms

of permissible limit of c & f value of imported inputs as percentage

of fob export value of output) prescribed by the Ministry of

Commerce from time to time.

The following instructions should be complied with while opening BTB

Export L/C:

Only recognized export oriented industrial units operating

under bonded warehouse system will be allowed the back to

back facility. The unit requesting for this facility should possess

valid registration with the CCI&E and valid bonded warehouse

license.

The master export L/C should have validity period adequate to

cover the time needed for importation of input manufacture of

merchandise and shipment to consignee.

The back to back L/C value shall not exceed the admissible

percentage of net FOB value of the relative master export L/C

value and the price of goods to be imported must be

competitive.

Net FOB Value = Master L/C Value (Freight Charge +

Insurance Cost + LAC/FCC)

The back to back import L/Cs shall be opened on up to 180

days nuisance (DA) basis except in case of those opened

against Export Development Fund (EDF) on sight basis. Interest

for the nuisance period shall not exceed LIBOR or the

equivalent interest rate in the currency of settlement.

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All amendments of the master export L/C should be noted

down carefully to rule out chances of excess obligation under

the BTB import L/C.

BTB import L/C should not be opened against L/Cs received for

export under Barter/STA, without prior approval of Bangladesh

Bank.

The BTB import L/C shall contain condition of PSI (Pre Shipment

Insurance) by an internationally reputed inspection firm

regarding quality and quantity of the merchandise.

BTB L/C (Back To Back Letter of Credit):

Back to Back L/C entitlement of garments items are assessed on the

basis of value addition to be made depending on the category of

garments in line with the Export policy in order, which are following

(Entitlement of Back-to-Back (BTB) L/C as per Export Policy Order

2006-2009):

1. Value addition for knit garments shall not be less than 20%.

2. Value addition for woven garments shall not be less than 20%.

3. In case of export of higher price garments (FOB US$60 or more

per dozen), value addition shall not be less than 10%.

4. Value addition for all types of sweater shall not be less than 20%

and

5. Value addition for all types of baby garments shall not be less

than 15%.

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Required documents before opening BTB L/C:

Period of BTB L/Cs to be calc on receipt of authenticated Export L/C

the exporter will submit the same to their bank along with the

following papers and documents with a request to open Back-to-Back

letter of credit there against for procurement of yarn, fabrics and

accessories.

1. BGMEA / BKMEA / BTMA / BTTMEA Membership Certificate

2. L/C Application Form

3. Master L/C

4. Invoice or Indent

5. Insurance Cover Note with Money Receipt

6. EXP Form

7. Valid Bonded Warehouse License / BOI certificate

8. LCAF duly filled in

9. Valid IRC & ERC

10. Tax Identification Number

Umlauted taking in to consideration the shipment date of the relative

export L/C so that, the export proceeds is repatriated before maturity

date of the BTB L/C.

Scrutinize documents receipt agt. BTB L/C:

Letter of Credits:

a) Each and every clause in the L/C must be complied with the

documents submitted meticulously.

b) The documents are not stale

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c) The documents are negotiated within letter of credit validity

d) The documents do not exceed the L/C value.

e) It is subject to uniform Customs and Practices for

Documentary Credit (UCP 600, ICC Pub. Rev.2007) of

International Chamber of Commerce.

Drafts:

a) Draft is not dated earlier than the date of B/L & L/C issuing

date.

b) Amount in words & figure is correctly mentioned and is

identical with the amount mentioned in the invoices.

c) It must be made out in the name of the beneficiarys Bank or

to be endorsed to the order of the Bank.

d) Draft is signed by the beneficiary or an authorized person on

their behalf and their signatures are verified by the bank.

e) It must be correctly drawn on the party as indicated in the L/C.

f) Draft bears the number and date of the L/C.

g) In case of usage bill, the requisite foreign bills stamp has been

affixed as per Stamp Act enforce in the country.

h) No irrelevant clause has been mentioned in the draft.

i) It must have interest clause wherever necessary.

Invoices:

a) The invoices are addressed to the importer.

b) Invoices are dated not later than the date of B/L and not

earlier than issuing date.

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c) Description of goods given in the invoices is exactly in

accordance with the letter of credit or firm contract.

d) The price, quantity, quality etc must be as per L/C and

correctness of calculation should also be examined.

e) The invoices must be Language in the Language of L/C

f) Invoices are signed by the beneficiaries themselves or by an

authorized person on their behalf.

g) The number of B/L, its name and name of the vessel is

correctly mentioned in the invoices.

h) Terms of delivery of goods whether CFR, CIF, CPT and/or FOB,

Ex-Works etc. have been correctly mentioned in the

documents in conformity with the Letter of Credit.

i) If the Letter of Credit calls for Consular Invoices then the

Beneficiarys invoices are not satisfactory.

j) The invoice value must not be less than the value declared inEXP form.

k) Invoices must bear the H.S.Code number, P.O., Style Number

etc. exactly as Letter of Credit stipulates.

l) Pre-shipment Inspection certificate number to be mentioned in

all invoices. One invoice must be marked as original.

Insurance Policy:

a) Description of the goods given in the insurance Policy is in

accordance with the terms of the L/C

b) Name of the carrying vessel has been correctly mentioned.

c) Insurance Policy is dated and signed by an authorized person

d) The merchandise is insured for the actual invoice value unless

otherwise specified the L/C.

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e) Insurance policy is in negotiable form and is properly

endorsed in Blank.

f) The date appearing on the Insurance Policy is not later than

the date appearing upon the Bills of Lading.

g) Insurance Policy is drawn in the currency of the credit or as

required in the relative L/C. The name of the claim paying

agent is given in the Insurance Policy.

h) All the risks have been covered as required in the relative L/C.

i) It covers transshipment if indicated in the Bills of Lading.

Other Documents:

a) Check that other documents like certificate of Origin, Weight

List, Packing List, Inspection Certificate and Certificate of

Analysis, if required by the Letter of Credit, accompany the

main documents.

b) See also, that the description of the goods and other

particulars given in these documents are identical with the

particulars given in the relative L/C.

c) Check the Inspection Certificate, particularly to ensure that it

does not bear clauses tating that the goods are not in good

order and/or in accordance with the specifications of the

relative L/C.

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Certificate of Origin:

Issued by recognized authority (such as Chamber Of Commerce and

Industry) according the L/C terms and condition. It certifies the country

of origin of goods. Generally it is called for by importers in certaincountries to comply with their customs requirements and to enable

rate of duty to be determined, special type of origin in G.S.P. form is

also issued.

Payment of Back-to-back L/C on maturity and Adjustment

Credit:

Upon repatriation of export proceeds the negotiating bank will utilize

the proceeds towards adjustment of liabilities with them and the

amount due for BTB L/C payment to be retained in the sundry deposit

(FC Held) A/C for their payment. The exporter may also retain 10% of

the repatriated export proceed in a account namely Exporters

Retention Quota (ERQ) A/C. Balances of this A/C may be used by the

exporter for bonfire business purpose, such as business visit abroad,

participation in export fair and seminars, establishment and

maintenance of office abroad, import of raw materials, machineries and

spares etc.

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Year by Year Export of TBL

Year Export (mil. Tk) Growth Rate

2004 2636

2005 299110.43%

2006 2884 -.93%

2007 3980.87 38.03%

2008 6078 45.42%

Comparison of Industry and TBL Growth Rate:

In million taka

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Year Industry Growth TBL Growth Share

2004

461530 27.55%

2636 0.57%

2005

547550 18.64%

2991 10.43% 0.53%

2006

733720 34.00%

2884 -0.93% 0.39%

2007

811520 10.60%

3980.87 38.03% 0.49%

2008

929270 14.51%

6078 45.42% 0.62%

Comparison of National and TBLs Export Growth