Over view of BASIC Bank Limited (Uttara Branch)

1.1# Background Of The BASIC Bank:

The
BASIC Bank Limited (Bangladesh Small Industries & Commerce Limited)
registered under the Companies Act 1913 on the 2^nd of August 1988,
started its operations from the 21^st of January 1989. It is governed
by the Banking Companies Act 1991. In 2001 the bank has changed its earlier
name Bank of Small Industries and Commerce Bangladesh Limited and the changed
name has been registered with the Register of Joint Stock Companies.

At
the outset, the Bank started as a joint venture enterprise of the Bangladesh
Credit Commerce (BCC) foundation with 70 percent shares and Government of
Bangladesh (GOB) with the remaining 30 percent shares. The BCC Foundation being
non functional following the closure of the BCCI, the Government of Bangladesh
took over 100 percent ownership of the Bank on 4^th June 1992. Thus
the bank is state-owned. However, the Bank is not nationalized; it operates
like a private bank as before. The bank was established as the policy makers of
the country felt the urgency for a bank in the private sector for financing
Small scale Industries (SSI).

1.2 #
CAPITAL POSITION:

Authorized capital
:  Tk. 2,000 million

Paid up capital
: Tk. 945 million

Total Reserve and Surplus: Tk.
1,294.00 million

  Up
to 31.12.2006

The Bank is requested to transfer 20 percent of its net profit before tax
to Capital Fund as per the Banking Companies Act 1991.

1.3 # Functions:

The
Bank offers:

Term loans to industries especially to small-scale enterprise.

Full-fledged commercial banking services including collection of deposit,
short-term trade finance, working capital finance in processing and
manufacturing units and financing and
facilitating international trade.

. Technical support to Small Scale Industries (SSIs) order
to enable them to run their enterprise successfully.

In
order to perform the above tasks, BASIC works closely with the clients, the
regularly authorities the shareholders (GOB), banks and other financial
institution.

1.4 # Organizational Structure:

To
achieve its organizational goals, the Bank conducts its operations in
accordance with the major policy guidelines laid down by the Board of
Directors, the highest policy making body. The management looks after the
day-to-day operation of the Bank.

A. BOARD OF DIRECTORS:

As
stated earlier the government holds 100 percent ownership of the Bank. The
Government of Bangladesh appoints all the Directors of the Board. The secretary
of the Ministry of Industries is the Chairman of the Bank. Other Directors of
the Bank are high Government and central Bank executives. The Managing Director
is an ex-officio member of the Board of Directors. There are at present 7
Directors including the Managing Director.

B. MANAGEMENT:

The
management is headed by the Managing Director. He is assisted by the Deputy
Managing Director, General Managers and Departmental Heads in the Head office.
BASIC is different in respect of hierarchical structure from other banks in
that it is much more vertically integrated as far as reporting to the Chief
executive is concerned. The Branch Managers of the Bank report direct to the
Managing Director and, for functional purpose, to the Heads of Departments.
Consequently, quick decision making in disposal of assess is ensured.

At
a Glance of BASIC Bank Limited

Table: 1 At a Glance of BASIC Bank
Limited

1.5 # ORGANOGRAM:

CHAIRMAN

Figure:1

1.6 # Activities:

a. Industrial Credit:

The
industrial loan reflected a significant growth of 13.54 percent in the year
2007 over 2006. Total outstanding industrial loans including term and working
capital stood at Taka 13,901.40 million at the end of 2007 compared to Taka
12,243.56 million of 2006. Total outstanding term loan stood at Taka 5,055.58
million as on December 31, 2007 compared to Taka 3,897.12 million in 2006
reflecting a growth of 29.72 percent. The outstanding working capital finance
extended to industrial units stood at Taka 9,525.98 million at the end of the
reporting period compared to Taka 8,346.44 million in 2006. Growth rate here
was 14.13 percent. BASIC Bank’s exposure to small and medium industries sector
accounted for 56.73 percent of the total loans and advances. During the year, a
total of 187 projects were sanctioned term loan out of which 69 were new. As on
31 December 2007, 712 projects were in the portfolio of the bank. The textile
sector including garments being one of the major contributors to national
economy dominated the loan portfolio of the Bank. Other sectors financed
include engineering; food and allied industries; chemicals, pharmaceuticals and
allied industries; paper, board, printing and packaging; and other non-metallic
goods, leather and jute products. Recovery rate of project loan was 89 percent.

(source:
Annual Report 2007, BASIC Bank Ltd.)

Figure 2: Trend of Industrial Credit

b. Commercial Credit:

The bank also supports development of trade, business and other
commercial activities in the country. It covers the full range of services to the exporters and importers extending
various facilities such as cash credit, export cash credit, packing credit, short term
loans, local and foreign bills purchase facilities. As on December
31,
2007 total outstanding commercial loans stood at Taka
7,681.74 million compared to Taka 6,397.21 million in 2006.

(Source: Annual Report 2007, BASIC Bank Ltd.)

Figure 3: Trend of Commercial Credit

a. Micro Credit:

BASIC
bank launched a Micro Credit Scheme in 1994. Micro Credit Scheme provides for
the poor for generation of employment and income on a sustainable basis
particularly in urban and suburban areas. The Bank follows three systems of
credit delivery. These are:

2. Lending
direct to the target groups or ultimate borrowers under the Bank’s own
management.

Lending
direct to the member-borrowers and NGOs providing non-financial services like
group formation and monitoring and supervision on exchange for a supervision
fee.

At the end of 2007, total
amount of Taka 680.13 million remained
outstanding as against Taka 359.24 million in 2006. Recovery
rate during this period
remained at a satisfactory level of 100.00 percent.

(Source: Annual Report 2007, BASIC Bank Ltd.)

Figure 4: Trend of Micro Credit

d. Foreign
Trade:

The bank achieved substantial growth in both import
and export in 2007. The bank handled total import business of Taka 21,266.53
million and export business of Taka 16,794.96 million in 2007. The import and
export business grew by 19.45 percent and 8.61 percent respectively. Major
items of exports were ready made knit & woven garments, sweater, jute &
jute products, leather and leather goods, handicrafts etc. Items of import
included mainly industrial raw materials, garments accessories, capital
machinery, raw cotton, electronic consumer goods, chemicals, tires and tubes,
reconditioned vehicles, bicycle spare parts, food items such as rice, wheat,
garlic, onion, sugar, chilly and other essential commodities.   (source: Annual Report
2007, BASIC Bank Ltd.)

Figure 5: Growth of Import & Export

The
Bank become a proud member of SWIFT (Society for Worldwide Interbank Financial
Telecommunication) that would pave the way to achieving uninterrupted
communication related to banking for international trade business and fund
transfer.

e. Other Activities:

The
Bank provides services for remittance, underwriting, guarantee, public offering
of shares etc. Then also provides funds to investment and leasing companies.
Then Bank has recently created a venture capital fund for equity support to
innovative but risky projects.

1.7#
Performance at a Glance of UTTARA Branch:

Performance of UTTARA Branch at a glance as on January
31, 2000

Table: 2

Source: Uttara Branch, BASIC Bank Ltd.

Source: Uttara Branch, BASIC Bank Ltd.

Branch’s Foreign Exchange position as on January 31,
2008

Table: 4

Source: Uttara Branch, BASIC Bank Ltd.

1.8#
SWOT Analysis :

The
SWOT analysis comprises of the organization’s internal strengths and weaknesses
and external opportunities and threats. SWOT analysis helps to identify the
current position of the organization. A SWOT analysis of BASIC Bank Ltd. has
been done below:

Figure 6:
SWOT Analysis of BASIC Bank Ltd.

Figure:
7

2.1 # Foreign Exchange :

Foreign
Exchange means foreign currency and it includes any instrument drawn, accepted,
made or issued under clause (13), Article 16 of the Bangladesh Bank Order,
1972. All deposits, credits and balances payable in any foreign currency and
draft, travelers cheque, letter of credit and bill of exchange expressed or
drawn in Bangladeshi currency but payable in any foreign currencies.

Bangladesh
Bank issues Authorized Dealer (AD) license by observing the bank’s performance
and also the customers associated with the bank for conducting foreign
dealings.

Foreign
Exchange

Figure: 8 Foreign Exchange Market Operations

2.2 # Export Section:

Foreign
Exchange Regulation Act, 1947 nobody can export by post and otherwise than by
post any goods either directly or indirectly to any place outside Bangladesh,
unless a declaration is furnished by the exporter to the collector of customs
or to such other person as the Bangladesh Bank (BB) may specify in this behalf
that foreign exchange representing the full export value of the goods has been
or will be disposed of in a manner and within a period specified by BB.

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 garments products to U.S.A
and European Community (EC) countries.
Bangladesh exports about 40% of its readymade garments products to U.S.A. Most of the exporters who export
BASIC Bank 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.

SCRUTINY AND NEGOTIATION OF
EXPORT BILL

Bank
deals with documents not with goods. The bankers are to ascertain that the
documents are strictly as per terms of L/C. Before negotiation of the export
Bill the bankers are to scrutinize and examine each and every document’s with
care. Negligence on that part of the bankers may result in non repatriation or
delay in realization of export proceeds are incorrect documents may put the
importers abroad into unnecessary troubles.

The scrutiny of the Bill of Exchange
(Draft) and other related documents should ensure that.

v  The documents are presented for negotiation before the
expiry of the relative credit.

v  The amount does not exceed the amount available under
the credit.

v  All the documents stipulated in the L/C are submitted.

v  The corrections and alteration are properly
authenticated in all documents.

Export documents checking:

i.   General verification

a) L/C restricted or not

b) Exporter submitted documents
before expiry date of the credit.

c) Shortage of documents etc.

ii. Particular verification:

a) Each and every document should be
verified with the L/C.

iii. Cross verification:

a) Verified one documents to another.

While checking the export documents following things must be taken in
consideration.

L/C terms:

Each
and every clause in the L/C must be complied with meticulously and ensure the
following:

i. That the documents are not
state.

ii. That the documents are negotiated within the L/C validity, it a credit
expire on a recognized bank holiday its life is automatically become valid up
to the next works day.

iii. That the documents value does not exceeds the L/C value.

Draft
is too examined as under.

i. Draft must be dated

ii. It must be made out in the name of the beneficiary’s bank or to be
endorsed to the bank.

iii. The negotiating bank must verity the signature of the drawer.

iv. Amount must be tallied with the invoice amount. v. It must be marked as drawn under L/C No……. dated……. issued by…….Bank.

Presentation of export documents for
negotiation:

After
shipment, exporter submits the following documents to BASIC Bank for
negotiation.

Bill of Lading

Invoice

Insurance Policy/Certificate

Certificate of origin

Inspection Certificate

Consular Invoice

Packing List

Quality Control
Certificate

G.S.P certificate

2.3 # Import Section:

Imports
are foreign goods and services purchased by consumers, firms & Governments
in Bangladesh. To import, a person should be competent to be a ‘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.

BASIC Bank checks the documents. The
usual documents are,-

i. Invoice

ii. Bill of
lading

iii.
Certificate of origin

v. Weight
list

vi. Shipping
advice

viii. Bill of
exchange

ix. Pre-shipment
inspection report

Import Procedures:

1. 
   a.
   For engaging in
   international trade, every trader must be first registered with the Chief
   Controller of Import and Export.

b.
By paying
specified registration fees and submitting necessary papers to the CCI&E. the trader will get IRC (Import
Registration Certificate).After obtaining IRC, the person is eligible to import.

2. Purchase Contract between importers and exporter:

a.
Now the importer
has to contact with the seller outside the country to obtain the proforma
invoice / indent which describes goods.

b.
Indent is got
through indenters a local agent of the sellers.

c.
After the importer
accept the preformed invoice, he makes a purchase contract with the exporter
declaring the terms and conditions of the import.

d.
Import procedure
differs with different means of payment.
In most cases import payment is made by the documentary letter of credit (L/C)
in our country.

3. Collection of LCA form:

Then the importer collects an Letter
of Credit Authorization ( LCA) form BASIC

In
international environment, buyers and sellers are often unknown to each other. So seller always seek guarantee for
the payment for his goods exported.
Here is the role of bank. Bank gives
export guarantee that it will pay for the goods on behalf of the buyer. This guarantee is called Letter of
Credit. Thus the contract between
importer and exporter is given a legal shape by the banker by its ‘Letter of
Credit’.

• Parties of L/C

i.
Importer –
Seller who applies for opening an L/C.

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

iii.
Confirming Bank
– It is the bank, which adds its confirmation to the credit and it, is done at
the request of issuing bank.
Confirming bank may or may not be advising bank.

iv.
Advising / Notifying Bank – is the bank through which the L/C is advised to the
exporters. This bank is actually
situated in exporter’s country. It
may also assume the role of confirming and / or negotiating bank depending upon
the condition of the credit.

v.
Negotiating Bank – is the bank, which negotiates the bill and pays the amount of the
beneficiary. The advising bank and
the negotiating bank may or may not be the same. Sometimes it can also be confirming bank.

vi.
Paying / Accepting Bank – is the bank on which the bill will be drawn (as per
condition of the credit). Usually it
is the issuing bank.

vii.
Reimbursing bank – is the bank, which would reimburse the negotiating bank after getting
payment – instructions from issuing bank.

b.
Application For L/C limit:

Before opening L/C, importer applies for L/C limit. To have an import L/C limit, an importer
submits an application to the Department of BASIC Bank Limited furnishing the
following information, –

i.
Full particulars
of bank account maintained with BASIC Mirpur branch.

ii.
Nature of
business

iii.
Required amount
of limit

iv.
Payment terms and
conditions

v.
Goods to be
imported

A
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.

3. The L/C Application:

After getting the importer applies to the bank to open
a letter of credit on behalf of him with required papers.

1. Documentary Credit Application Form:

BASIC Bank provides a printed form for opening of L/C
to the importer. This form is known
as Credit Application form. A
special adhesive stamp is affixed on the form.  While opening, the stamp
is cancelled. Usually the importer
expresses his desire to open the L/C quoting the amount of margin in percentage.

2. Proforma Invoice: It states description of the goods including
   quantity, unit price etc.

3. The insurance cover note: The name of issuing company and the insurance
   number are to be mentioned on it.

4. The Letter of credit authorization (LCA) form: LCA form should be duly attested.

5. The Form-IMP.

6. Tax Information
   Certificate

7. Forwarding for Pre-Shipment Inspection
   (PSI):

Importer sends forwarding letter to exporter for
Pre-Shipment Inspection. But all
types of goods do not require PSI.

5. Securitization of L/C Application:

The BASIC Bank Official scrutinizes the
application in the following manner, –

1. 1. The terms and
      conditions of the L/C must be complied with UCPDC 500 and Exchange Control
      & Import Trade Regulation.
   2. Eligibility of the
      goods to be imported.
   3. The L/C must not be
      opened in favor of the importer.
   4. Radioactivity report
      in case of food item.
   5. Survey report or
      certificate in case of old machinery
   6. Carrying vessel is not
      of Israel or of Serbia- Montenegro
   7. Certificate declaring that the item is in
      operation not more than 5 years in case of car.

One
of the basic principles of documentary credit is that all parties deal with
document and not with goods (Articles 6 of UCPDC-600). That is why the documents should be scrutinized properly. If any discrepancy in the documents
is found, that is to be informed to the party. A checklist may be followed for examining the documents.

2.4#
Major Discrepancies:

GENERAL

1. Late shipment
2. Late presentation
3. L/C expired
4. L/C over-drawn
5. Partial shipment or
   transshipment beyond L/C terms.

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 (C/I)

Not issued by the Beneficiary.

Not signed by the Beneficiary.

Not made out in the name of the Applicant.

Description, Price, quantity, seals terms of the goods
not corresponds to the Credit.

Not marked one fold as Original.

PACKING LIST

Not market one fold as Original.

Not signed by the Beneficiary.

BILL OF
LADING/ AIRWAY BILL ETC (TRANSPORT DOCUMENTS)

Full set of B/L not submitted.

B/L is not drawn or endorsed to the Order of BASIC
BANK LTD.

“Shipped on Board”, “Freight Prepaid” or “Freight
Collect” etc. notations are not marked on the B/L.

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.

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 loading.)

Short Form B/L

Charter party B/L

Description of goods in B/L not agree 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

N.N. Documents not forwarded to buyers or forwarded
beyond L/C terms.

Short shipment Certificate not submitted.

 INVOICE

It is to be scrutinized to ensure the
following:

The Invoice is addressed to the Importer.

The full description of merchandise must be given in
the invoice strictly as per L/C.

The price, quality, quantity, etc. must be as per L/C.

The Invoice must be language in the language of L/C.

No other charges are permissible in the Invoice beyond
the stipulation on the L/C.

The amount of draft and Invoice must be same and
within the L/C value.

If L/C calls for consular invoice, then the
beneficiary’s invoice is not sufficient.

Number of Invoice will be submitted as per L/C.

The shipping mark and number of packing list shown in
the B/L must be identical with those given in the Invoice and other documents.

  The Invoice value must not be less than the value
declared in EXP Forms.

  Invoice amount must be correct on the basis of price,
quantity as per L/C.

  Invoice amount, indicate sale terms/ Income terms VIZ
FOB, CFR, CIF etc.

  Consular Invoice must be stamped by the local
consulate/embassy of the country to which the goods are imported.  

Beneficiary
statement, VISA/Export License issued by EPB, Certificate of Origin, Weight
Certificate, Packing List, Inspection Certificate.

Certificate
of analysis, quality certificate, MCD duly signed and any other documents
required 3….by L/C each of these certificates/documents conform to the goods
invoice and are relevant to L/C.Negotiating Bank will check the above documents
whether it is as per L/C or not.  If
Negotiating Bank find everything in order or as per export L/C, bank will
negotiate the document and will disburse the generated fund as per Banks norms.

If
the Negotiating Bank will find any discrepancies in the documents they will
send the documents on collection or they can negotiate under reserve by the
request of the exporter or they can seek permission/Negotiation authority from
issuing Bank to allow Negotiating Bank to negotiate the documents despite the
discrepancies.  L/C issuing Bank will
inform the matter to buyer, if the buyer accepts the discrepancies mentioned by
Negotiating Bank, issuing bank will authorize the Negotiating bank to negotiate
the discrepant documents.

COLLECTION
DOCUMENTS  

Normally
negotiating Bank will send the documents on collection basis mainly for the
following discrepancies:

Consignee Name and address differ between L/C and
other documents;

Any other Major discrepancies.

2.5# Foreign Remittance Section:

The basic function of this department are outward and
inward remittance of foreign exchange from one country to another country. In
the process of providing this remittance service, it sells and buys foreign
currency. The conversion of one currency into another takes place at an agreed
rate of exchange, in where the banker quotes, one for buying and another for
selling. In such transactions the foreign currencies are like any other
commodities offered for sales and purchase, the cost (convention value) being
paid by the buyer in home currency, the legal tender.

Workings of
this department:

Overall
supervision of Foreign Remit. Dept.

Foreign TT
payment & Purchase of F. Drafts, preparations of F.B.P. (Foreign Bill Purchased).

Issuance of
outward TT & FDR

Foreign
Collection, Bangladesh Bank Clearing
Check Collection, which comes from
all branch of BASIC Bank Limited.

Withdrawal from F.C.
A/C.

Encashment of
T.C. & Cash Dollar and Sterling Pound.

Deduction of Tax
and VAT. On behalf of Bangladesh Bank.

Preparation of
related statements including convertible Taka Accounts.

Preparation of
IBCA & IBDA and Balancing of Collection and other special assignment as
desired by Department in charge.

Balancing of
Account Statements.

Compliance of audit
& inspection.

Statement of all
related works submitted to Bangladesh Bank.

Inward Foreign Remittance:

Inward
remittance covers purchase of foreign currency in the form of foreign T.T.,
D.D, T.C. and bills etc. sent from abroad favoring a beneficiary in Bangladesh. Purchase of foreign exchange is to be
reported to Exchange control Department of Bangladesh bank on Form-C.

Outward Foreign Remittance:

Outward
remittance covers sales of foreign currency through issuing foreign T.T.
Drafts, Travelers Check etc. as well as sell of foreign exchange
under L/C and against import bills retired.
Sale of foreign exchange is reported to Exchange control Department of
Bangladesh Bank on form T/M.

Foreign
exchange means foreign currency and includes all deposits, credits and balances payable in foreign currency as well as
foreign currency instruments such as Drafts,
T.C.s, bill of exchange,
and Letters of Credit Payable in any Foreign Currency. All foreign exchange transactions in Bangladesh are subject to
exchange control regulation of Bangladesh Bank.

Foreign Remittance Department deals with
the following instruments:

From the above discussion we may conclude the Foreign
Exchange Procedures as following:

(11) Document Placement

Offers Proforma
Invoice (1)

Offers
Indent (1)

Request
for Forward Document

L/C
opening (2) (8)

Present
Inform about L/C

After
Shipment

(4)

Present Document

Figure: 9 Foreign Exchange Procedures

  #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 Main Functions of general banking department are the followings:

Accounts Opening
Section

Accounts Section.

Local Remittance
Section

Collection And
Clearing

Cash Section

3.1.1
# ACCOUNTS OPENING SECTION

Accepting deposit

Bank is a financial intermediary, which mobilizes fund
from surplus unit and allocates it to deficit unit. Surplus unit means the people who have surplus money and
willingness to save. Deficit unit
means the people who need money for industry, trade, business, or for personal
use but don’t have sufficient money of their own for such purposes. Bank mobilizes the fund by accepting
deposits from depositors and allocates the fund by providing loan to borrower.

Banker-customer relationship begins with
the opening of an account by the customer. Opening of an account binds the same
into a contractual relationship. But the selection of customer is very crucial.
In fact, fraud and forgery of all kinds start by opening of an account by the
customer (s). So, the bank takes extra care in its selection. One of the basic
functions of commercial banks is to accept deposits. For accepting deposits
both demand and time, BASIC Bank Uttara branch offers the following types of
accounts-

Types of Accounts with
Terms and Conditions

This part covers only following types of accounts-

Savings Bank
Account

Current Account

Short Term Deposit (STD) Account

SAVINGS BANK ACCOUNT

This deposit is primarily for small-scale
savers. Hence, there is a restriction on withdrawals in a week. Heavy
withdrawals are permitted only against prior notice. Some Important Points are
as follows-

GENERAL
CHARACTERISTICS

As per BB instruction 90% of SB deposits are
treated as time liability and 10% of it as demand liability

1. Minimum
   opening deposit of Tk.5000/= is required;
2. Interest
   is paid on this account. BASIC
   offers a reasonable rate of interest for SB A/C.
3. Generally,
   banks require a 7-day prior notice if the total amount of one or more
   withdrawals on any date exceeds 25% of the balance of the account unless
   is given.
4. The
   number of withdrawals over period of time is limited. Only two withdrawals are permitted per week. If there are more than two
   withdrawals are made in a week, no interest will be paid on rest amount
   for that month.
5. Generally
   householders, individuals and other small-scale savers are the clients of
   this account

CURRENT ACCOUNT

Current account is purely a demand deposit account.
There is no restriction on withdrawing money from the account. It is basically
justified when funds are to be collected and money is to be paid at frequent
interval. It is most suitable for private individuals, traders, merchants,
importers and exporters, mill and factory owners, limited company’s etc. Some Important
Characteristics are as follows-

1. A
   minimum balance of TK.5000 has
   to be maintained.
2. CD
   accounts are unproductive in nature as banks loanable fund is concerned. Sufficient fund has to be kept
   in liquid form, as current deposits are demand liability.
3. Thus
   huge portion of this fund become non-performing. For this reason banks do not pay any interest to CD
   Accountholders.
4. There
   is no restriction on the number and the amount of withdrawals from a
   current account.

STD (SHORT
TERM DEPOSIT) ACCOUNT

Normally various big companies, organizations,
Government Departments keep money in STD account. Frequent withdrawal is
discouraged and requires prior notice. In BASIC, customers usually give an
instruction that their current account will be debited whenever its deposited
amount crosses a certain limit and this amount will be transferred to the STD
account

COMMON FORMALITIES REQUIRED FOR EVERY ACCOUNT

Ø  Duly filled up Account Opening Form.

Ø  Introducer’s signature on Account Opening Form to be
verified by Manager under full signature.

Ø
Two
copies of passport size photograph of account opener(s) duly attested by the
introducer.

3.1.2# ACCOUNTS
SECTION

Accounts department maintains all records of
transactions and all types of statement. At the end of transaction hour all
concerned section sends vouchers of transactions to this department. Accounts
department compares all figures/ amount, contents of transactions with
supplementary statement prepared by computer. If any discrepancy arises
regarding any transaction then this department reports to the concerned
department. Following are the activities of accounts department:

To record all transaction in the cash book.

  To record all transaction in the cash book.

  To prepare daily, weekly, monthly, half-yearly and
yearly fund position.

  To prepare all kinds of statements related to
Bangladesh Bank, Head office and National Board of Revenue (NBR).

  To prepare monthly salary statement, provident fund
statement and administrative expenditure statement.

  To make charges for different types of duty.

3.1.3# LOCAL REMITTANCE SECTION

Cash remitting from one place to another is risky. So,
Banks remit funds on behalf of the customer (s) to save them from any awkward
happening through network of their branches. There are three modes of remitting
funds. These are–

v
Pay Order (PO)

v
Demand draft (DD)

v
Telegraphic
Transfer (TT)

v
Call Deposit
Receipt (CDR).

PAY ORDER
(PO)

Pay order is an instrument, used to remit fund within
a clearing zone. Unlike cheque, there is no possibility of dishonoring PO. The
PO can only be encashed through the branch that has issued the instrument.

PAY ORDER ISSUING PROCESS

For issuing
a PO, following formalities are to be maintained. These are-

·
Duly filled up
the application form by the customer.

·
Deposit money
either in cash or by cheque with necessary charges.

·
Prepare the
instrument and make necessary entries in the Bills Payable Register where
payee’s name, date, PO no. etc are noted.

·
Deliver the
instrument to the customer after scrutinized and approved by authority by taking
signature of the customer on the counterpart.

DEMAND DRAFT
(DD)

DD is
called ‘Banker’s Draft’. It is an instrument, issued by a particular branch,
drawn on another branch of the same bank, instructing to pay a certain sum of
money. It is very popular instrument for remitting fund from one corner of a
country to another.

. If DD amount is more than Tk.50000/=, a test code is
given on IBCA. The a/c treatments will be-

When DD is issued:

Cash/Customer A/C……………………Debit

H/O A/C ‘X’
branch…………………………Credit

Income A/c
commission………………..……Credit.

TELEGRAPHIC
TRANSFER (TT)

Sometimes
the remitter of the funds requires fund immediately. In that case, the banker
is requested to remit the funds telegraphically. Different modes are Telegram,
Telephone, Telex, Fax. Telegraphic Transfer is the most rapid and convenient
but expensive method. The drawer and the payee should have accounts with BASIC
bank. TT is issued against cash, cheque, and letter of instruction

3.1.4# COLLECTION AND CLEARING SECTION

Customers do pay and receives bill from their counter
party as a result of transaction.
BASIC Bank Limited collects the bills on behalf of their customers.Collection mechanisms in BASIC Bank
are clearing, Outward Bill For Collection, Inward Bills for Collection.

Clearing 

When the bill is within the range of the clearinghouse
it is sent for collection through clearing section. As far as safety is concerned customers get crossed cheque for
the transaction Crossed check can’t be encashed from the counter; rather it has
to be collected through banking channel i.e., clearing. If a client of BASIC Bank received a check of another bank which
is located within the clearing range and deposit the instrument in his account
at BASIC Bank. Then BASIC Bank will collect the money through clearing house. After received the check BASIC Bank
will credit client account. However,
the amount is credited in the customer a/c but he will not get the money until
the check is honored.

3.1.5 # CASH
SECTION

Cash is the lifeblood of all financial activities.
Cash section is a very sensitive point of the branch. This section deals with
all types of negotiable instruments and it includes vault, used as the store of
cash, instruments. The vault is insured up to Tk.20 lac. Insured amount yet to
be enhanced to Tk. 40 lac. Operation of this section begins when the banking
hour starts. Cash officer begins his/her transaction with taking money from the
vault, known as the opening cash balance. Vault is kept in a more secured
place. The amount of opening cash balance is entered into a register. After
whole days’ transaction, the surplus money remains in the cash counter is put
back in the vault and known as the closing balance. If the cash stock goes beyond this limit, the excess cash is
then transferred to BASIC bank main branch. The main functions of this
section are-

Cash Receipt

Cash Payment

Cash Receipt

Cash receipt procedure is given
below-

The depositor
first fills up the Deposit-in-Slip.

Depositor
deposits the money.

Cash Payment

Some important check points for
making the payment are as follows-

1. Endorsement

Endorsement
is done by putting signature of the drawer on the back of the negotiable
instrument for the purpose of negotiation. By ‘blank endorsement’, an order
instrument is made as ‘bearer’

Crossing

Generally
two types of crossing are practiced, namely- General Crossing and Special
Crossing. Basically it gives a direction to the paying bank not to pay the
check amount over the counter. General crossing includes ‘A/C payee’ crossing
only. Drawing two parallel and transverse lines do it. On the other hand,
special crossing is like general crossing but in addition bank name is also
mentioned. This gives the direction to the same to pay the check only to the
banker, whose name appears in the crossing or to his agent.

Foreign
exchange refers to the process or mechanism by which the currency of one
country is converted into the currency of another country. Foreign exchange is
the means and methods by which rights to wealth in a country’s currency are
converted into rights to wealth in another country’s currency. In banks when we
talk of foreign exchange, we refer to the general mechanism by which a bank
converts currency of one country into that of another. Foreign trade gives rise
to foreign exchange. Modern banks facilitate trade and commerce by rendering
valuable services to the business community. Apart from providing appropriate
mechanism for making payments arising out of trade transactions, the banks gear
the machinery of commerce, specially in case of international commerce, by
acting as a useful link between the buyer and the seller, who are often too far
away from and too unfamiliar with each other. According to foreign exchange
regulation act 1947, “Any thing that conveys the right to wealth in another
country is foreign exchange”. Foreign exchange department plays significant
roles through providing different services for the customers. Opening or
issuing letters of credit is one or the important services provided by the
banks.

4.1 # Corporate Social responsibility
(CSR)

Today,
Corporate Social Responsibility (CSR) is a fundamental part of business. The
notion of CSR is gaining fast acceptance globally as every business should have
its contribution voluntarily to the society, to its customers, to employee, to
the communities and to the environment. CSR is an obligation beyond statutory
obligation and BASIC Bank Ltd. Believes that such obligation paves the
opportunity to build better relationship with all stakeholders. BASIC Bank
Limited a state owned scheduled bank, adjudged as one of the soundest banks in
Bangladesh is running on slogan “Serving People for Progress”. The slogan
manifests the commitment of the bank to comply its social responsibility.
Recognizing the importance of CSR and being a socially responsible organization
BASIC Ban took some initiatives stated below:

4.1.1 # FINANCING SMI

The
bank is unique in its object. It is statutorily obligated towards the promotion
and development of small and medium industrial sector. As per mandate of
memorandam.50% of loan able fund of the bank also put emphasis on the interests
of stakeholders, give due consideration to sustainable development of
communities and environment issues in all aspect of its operation.

4.1.2# SPORTS AND CULTURE

As
part of corporate social responsibility the bank engage itself in sponsoring
sports. The bank sponsored “26^th and 27^th National Junior
Chess Championship” and “ Inter-district National Women Handball
Tournament-2007”.

4.1.3# DISASTER RELIEF

BASIC
Bank provide donation to people affected by natural calamities. In 2007 the
bank contributed Tk.25.00 lac as donation to the Chief Adviser’s Relief &
welfare fund for the flood affected people. Another Tk.25.00 lac of donation
was made to the Chief Adviser’s relief & welfare fund for SIDR affected
people.

4.1.4# EDUCATION

BASIC Bank patronizes meritorious students. “BASIC
Bank gold Medal” was introduced by the bank for the meritorious students of the
department of banking, University of Dhaka. Besides BASIC Bank has been
accommodating internship facility for the fresh and meritorious graduates from
public and private universities and different business school to give them on
job and practical experience about banking. Such program helps the participants
to choice and plan their carried more confidently. In 2008 a total of 144
students were given same facility.

4.1.5# ENVIRONMENT PROTECTION

As a
part of CSR contribution BASIC Bank is adopting environmentally responsible
practice in its operation. In its business operation BASIC Bank always consider
the effects of bank’s financed projects on environment. This issue is included
as a part project appraisal.

Fuel
driven vehicles are a major cause of air pollution and fuel procurement is a
major source of expenditure of foreign currencies. Keeping these dual issues in
mind we have been financing 23 CNG refueling projects of which 09 in 2008.
These projects are environment friendly, pollution free and saving foreign
currencies.

4.2# PROFESSIONAL DEVELOPMENT AND ACHIEVING EMPLOYEE SATISFACTION

Efficient
human resources are real capital of an institution and professional development
is a must for banking career. Banking environment is changing regularly,
employees have to face new challenges and compliance issues are getting
momentum. To attain sustaince issues are getting momentum. To attain
sustainable growth employees must gain regular training and education. To
strengthen the capacity and sharpen the skills and productivity of our
employees to face these changing situation and new challenges, we regularly
arrange training on professional and contemporary banking issue. The bank
recognizes the valuable contribution of its employees made to the bank. BASIC
Bank invests substantial amount in training and its training institute arrange regular
training program and seminar to strengthen the knowledge, competence and
expertise of the employee to face challenges in this steeply competitive
market. Besides a good number of employees were also attended training,
workshop and seminar organize by different organization at home and abroad on
various issues. In 2008 we trained total 556 employees of our bank of which 11
was trained abroad.

4.2.1# STAFF WELFARE

Staff
welfare is an issue that receives topmost importance in BASIC Bank Ltd. Has a
benevolent fund. Among with giving retirement benefit another objective of the
fund is contributing for humanitarian works. The bank sanction grant from this
fund for treatment of its employees and their dependents. BASIC Bank has
introduced a Superannuation fund instead of attractive retirement benefit for
the employees. Deserving candidates are also given promotion and increment
regular. We are also contemplating to introduce performance awards.

Employee
satisfaction is a key indicator of the attitude of the employee towards their
work environment. So the bank always tries to give its employees healthy, clean
and congenial atmosphere in the work place.

4.2.2# OTHER ACTIVITIES:

Apart
from above the bank sponsored Baishakhi Fair-1415  to encourage development of small and Cottage
Industries by contributing Tk.3,00,000.00. The bank also sponsored th alumni
get together of English department Alumni Association, University of Dhaka by
contributing Tk.50, 000.00 only. The 10^th anniversary program of
American Alumni Association was also sponsored by the bank by contributing
Tk.50, 000.00 only.ss  . The bank is also
committed to perform the following activities in the coming days as a part of
its responsibility to the society.

• Important product
  and service that promote sustainability and reduce adverse environmental
  impact.

·
Offer high value added products and service

·
Forest unrestricted work working atmosphere showing equal respect for
all casts and creeds and irrespective of gender.

• Arranging
  vocational training for the unemployed
• Ensure
  that all of our projects have Effluent Treatment plant(ETP)

5.1# RESEARCH METHODOLOGY:

5.1.1#TYPE OF RESEARCH

Data for this study collected using two pair of
questionnaire instruments. One for bank officials, and other drawn on bank
clients. Both set of questionnaires contained respectively the issues related
bankers and customers concern with BASIC Bank to start Foreign Exchange
banking. The bank official’s questionnaires equipped with their perception of
strategic, operational, customer relationship, technology related, corporate,
and service development issues, the literature was reviewed extensively. Other
hand, questions designed for customers includes customers approach, customers
expectations, performance of service dimensions, positioning strength and banks
role in service delivery.

 5.1.2#
SCALING TECHNIQUE

This study focuses on perception foreign exchange
transaction both by bankers and customers, urgency of foreign exchange banking
for BASIC bank, banks relation with customers, technology development, scope of
service delivery, satisfaction with present service, and organizational
weakness.

5.1.3#
FIELD WORK

Data for this research was gathered by approaching
bank officials, and clients apparent at Uttara branch of BASIC Bank ltd. Among
the respondents of bank included: Deputy General Manager (DGM), Assistant
general manager (AGM), Manager, deputy manager, assistant manager, officer, and
junior officers. Several of the customers were industrial and commercial
clients including: commercials, entrepreneurs, and executives.

A total number of 47 questionnaires provided to bank officials
and 65 questionnaires to customers for participation as well. Eighty percent of
the bankers participated in the research, and customers were more prompt to
answer questions delivered to them, 75% customers returned question papers in
response to 65 questionnaires.

5.2# Research Intend:

Research designs are the determination and statement
of the general research approach or strategy adopted for the particular
project.A research design is purely and simply the framework or plan for a
study the guides, the collection in completing a study. A central part of the
research activity is to develop an effective research strategy as design. This
will detail the most suitable method of investigation, the sampling plan and
the types of data i.e. quantitative as well as qualitative. A research design
forms the framework of the entire research process.

5.2.1#Research
design at a glance:

Keeping in the
view the above stated design decisions; one may split the over all research
design in to the following parts:

The sampling
design, which deals with the method of selecting items to be observed from the
given study.

The observation design,
which concerns with the questions of how many items are to be observed and how
the intermission and data are to be analyzed.

The observation
design, which relates to the three conditions under which the observation are
to be made.

The operational
design, which with the techniques by which the procedures specified in the
sampling statistical and observational design, can be carried out.

5.2.2# Different
Research Design:

We can categorize research design, in to three
different dimensions:

1. Research design in case of exploratory research studies.
2. Research design in case of descriptive and diagnostic research
   studies.
3. Research design in case of hypothesis-testing studies.

Research design in case of exploratory research
studies:

Research design in case of descriptive and diagnostic
research studies:

Descriptive research studies are those studies that
are concerned with describing the characteristic of a particular individual, or
of a group., where as diagnostic research studies  determine the frequency with which something
occurs or its association with something also.

Research design in case of hypothesis-testing studies:

Hypothesis-testing studies are those studies where the
researcher tests the hypothesis of casual relationship between variables. Such studies
require procedures that will not only reduce bias and increase reliability, but
will permit drawing inferences about causality.

The research design that is adopted for this
particular study is descriptive research that includes survey and fact-finding
enquiries of different kinds. The major purpose of descriptive research is the
minimization of bias and maximization of reliability of the evidence collected.

6.1# Identification of Documents Used
in Foreign Exchange Banking:

The following Documents are used in
Export:

· · Bill of Lading

· Invoice

· Insurance Policy/Certificate

· Certificate of origin

· Inspection Certificate

· Consular Invoice

· Packing List

· Quality Control Certificate

· G.S.P. certificates

The
following Documents are used in Import:

·

· Bill of lading

· Certificate of origin

· Packing list

· Weight list

· Shipping advice

· Non-negotiable copy of bill of lading

· Bill of lading

· Certificate of origin

The following documents are used in
Foreign Remittance:

· Certificate of origin

· Remittance application

· ID card

6.2#
Appraisal of Export & import business of BASIC Bank Limited:

BASIC Bank’s expertise in
International Banking has a record of in-house growth over more than one
decade. With limited network of branches at home and also a few correspondent
banks worldwide it is handling the export-import business including homebound
remittances.

The following graph shows
year-wise export-import business of BASIC Bank Limited. Though both export and
import are increasing day-by-day, imports exceed exports which ultimately
drastically hit the country’s negative Balance of Trade.

Figure 10: Export & Import position

6.3#
Performance of Foreign exchange business of BASIC Bank Limited

The
following table shows year-wise performance of foreign exchange operations
consisting item-wised income generating avenues. All the figures show positive
growth which generally signals foreign exchange business as a profitable
business in Bangladesh. Within all the income avenues, income from exchange
gain shows highest figure in taka value. Growth rate here was 48.92%. Income
from Letter of Credit and Letter of Guarantee were the second and the third
largest among the income avenues respectively.

Table 5:
Income from foreign exchange business of BASIC Bank limited

Revenues earnings from foreign exchange
section are now graphically presented.

Figure 11: Income from Foreign bill purchased shown

Figure 12: Income from Local bill purchased shown

Figure 13:
Income from Remittance shown

Figure
14: Growth of income from remittance shown

Figure
15: Income from Letter of Guarantee

Figure16: Income from Letter of Credit

Figure 17:
Income from Bills for collection

Figure 18:
Income from acceptance Figure 19: Income from Export bill
shown

Figure 20: Income from Exchange gain (Profit on
exchange trading)

Figure 22 shows the growth of income from exchange gain consisting profit
on exchange trading only. In 2005
growth was negative, but in 2006 & 2007, exchange gain shows positive
trend.

Figure 21: Growth of Income from Exchange gain

7.4
ANALYSI

v  BASIC Bank Ltd.
Focuses its attention on Industrial sector for small and medium enterprise but
recently its attention increases on commercial sector and foreign exchange
business.

v  In foreign
exchange business BASIC Bank Ltd. used the procedures that are usually used by
other banks. In addition they use some safety material such as; they do foreign
business only for their valued clients.

v  They give some
special facilities to their valued clients such as, margin facilities on loan
against documentary bill purchase and charge 14% interest.

v  After shipment,
every exporter submits the following documents to the BASIC Bank Ltd. for
negotiation (Bill of Exchange or Draft; Bill of Lading, Invoice, Insurance
Policy/Certificate, Certificate of origin, Inspection Certificate, Consular
Invoice, Packing List, Quality Control Certificate, G.S.P. certificate)

v  BASIC Bank
checks Invoice, Bill of lading, Certificate of origin, Packing list, Weight
list, Shipping advice, Non-negotiable copy of bill of lading, Bill of exchange,
Pre-shipment inspection report, Shipment certificate the usual documents for
Import business.

v  BASIC Bank deals
telegraphic transfer, demand draft & money transfer for transfer of money.

v  Though BASIC
Bank Ltd. (Uttara Branch) is not an AD bank but they are doing foreign exchange
frequently and earning almost a big portion of their total income.

v  To attract
foreign customers, BASIC Bank Ltd. always observes the market and always tries
to realize what the market’s demand. For that they can fulfill the valued clients’
desires.

v  They also buy
the L/C on 10% reduced rate from their clients when their clients need money.
By giving this facility to their clients they also earn for their banks and
make a profit.

v  BASIC Bank Ltd.
also contributes in the country’s GDP by facilitating our small and medium
industrialists to export and import their goods to abroad and trying to keep
pace with the increasing GDP of Bangladesh. Economic progress is being
maintained by them properly.

CONCLUSION

A very working
environment was remaining in the BASIC Bank Ltd., it is found that the Branches
provides all kinds of commercial banking services to its customers. Foreign
Exchange department rendering all the services related to international trade
and remittance.

It is well
established that theory without practice is blind. We have observed the
function of General Banking, Foreign Exchange, and Credit department of BASIC
Bank which will help me a lot to understand the overall banking.

Out of the above
discussion a conclusion can be drawn after saying that, the present customer
dealing procedure is quite well at this moment. The computerized transaction
makes the system efficient and effective.

RECOMMENDATIONS

We have observed some
shortcomings regarding operational and other aspects of their banking. On the
basis of my observation we would like to recommend the following
recommendations-

1. Document discrepancy charge varies form customer
   to customer. They don’t charge to prime customer. We think that the bank
   should review the customers’ behavior for a period of time and should
   develop a certain policy in this regard.

2. When they calculate loan against documentary
   bill, they provide dollar rate $65.Which is lower than other bank. We
   think they should increase the dollar rate.

3. In case of Export L/Cs, the Government encourages
   the exporters by giving different facilities like tax-cuts. We think the
   bank should also think about such type of facilities to be given to the
   Exporters because Bangladeshi Exporters like Readymae garments Exporters are
   going to face a tuff situation in coming years from the exporters of other
   countries.

4. In case of Export L/Cs, sometimes customers
   insist to give their payments though their documents are found discrepant.
   In some cases, Bank has to give payment to these customers for different
   reasons. But it lessens the credibility of the Bank. We think the Bank
   should be as stricter as possible about giving payments against discrepant
   documents without hurting the customers.

5. Over burden of work and ill defined assignment
   unable the employee to discharge their duties in cool manner. It is also
   creates a hazardous situation in the work process. So all the employee
   should be assigned with proper and specific assignment.

6. They should expand their business more balancing way
   which means they should not focus on a particular industry like readymade
   garments industries.

7. To communicate with the Negotiating Bank,
   Advising Bank. Reimbursing Bank the branch uses SWIFT. As well as these
   media the Bank could use the E-mail, which is cheaper and faster than
   those media.

8. BASIC Bank Ltd. now using software and that is
   Kastle. It is very dedicated software. It has real time online banking,
   ATM facilities and E-banking and lot of more. So we think it will be a
   great progress for the bank.

Bibliography

Reading
Materials for Foreign Exchange and Financing in International Trade Course
————— BASIC Bank Limited.

·
A Dictionary of
Banking and Finance ———- L. R. Chowdhury.

·
Annual Report of
BASIC Bank Limited.

·
Foreign Trade and
International Market ——— C. L. Gupta.

·

·
Monthly Statement of BASIC Bank Limited, December,
2008

·
Various Official Records of BASIC Bank Limited.

·
Foreign Exchange
and Financing of Foreign Trade

·
·
A Dictionary of
Business (2003), 3nd edition, Oxford University Pre

·
Hossain ,Dewan
Mahboob & Khan ,Arifur Rahman (2006),” Disclosure on Corporate Governance
Issues in Bangladesh: A survey of the Annual Reports” The Bangladesh
Accountant,January-March,2006,pp 95-99

·
Marketing
Research for Business Students by Mark