Different Modes of Investment at Islami Bank Bangladesh LTD.
1.1 Background of the study:
Banking is one of the most important sectors for a country’s wealth building activity. At present the modern business industrialization, foreign trade is almost dependent on banks. But now a day the Banking sector of Bangladesh is suffering the disease of default culture which is the consequence or result of bad performance of most of the banks in Bangladesh.
IBBL playing an important role towards the growth and economic development of Bangladesh.
This study is an attempt to produce a constructive report performance of IBBL with special reference to sources of foreign fund for industrial credits and its deployment as well as repayment.”
1.2 Objective of the study:
The main objective of education is to acquire knowledge. To acquired knowledge ultimately we must do some practical application in addition to theoretical knowledge. Through this report, I tried my level best to present my practical knowledge as well as to find out-
· Foreign fund for industrial credit.
· Deployment of those funds.
· Import Business
· Export Business
IBBL, the Islam based commercial bank is under general special guidelines of the central bank framed for the banking system as a whole and for bank of individual sectors. The concept of Private sector bank i.e. IBBL in our country is not so old. IBBL is now giving emphasis to create a constructive and meaningful competition with the private sector banking.
This study makes an attempt to cover within its scope all most all the significant aspects of foreign fund for industrial credits and foreign business.
1.4 Methodology of the study:
Mainly collected data from two sources.
These two sources are as follows.
The primary sources of my information are as below-
· Direct observation
· Export opinion
· Questioning the concerned persons.
The secondary sources of information are as below-
1. Annual report of IBBL
2. Desk report of the related department
3. Other manual information
4. Different reference books of the library
5. Some of my course elements as related to this report.
1.5 Limitation of the study:
There are some limitations in study. Faced some problems during the study which mentioning them as below-
i) Lack of time:
The time period of this study is very short. Had only 8 weeks in hand to complete this report, which was not enough. So could not go in depth of the study. Sometimes the officials were busy and were busy and were not able to give me much time.
ii) Insufficient data:
Some desired information could not be collected due to confidentially of business.
iii) Lake of support:
Few officers sometime felt disturbed, as they were busy in their job. Sometime they didn’t want to supervise me out of their official work.
iv) Other limitation:
As newcomer, there is a lack of previous experience in this concern. And many practical matters have been written from my own observation that may vary from person to person.
Banking constitutes an important segment of the financial infrastructure go hand in hand.
Generally, banking means deposit mobilization and deployment of those deposits into advantage or investment in different sectors. The element of interest has been for long used as main instruments for deposits mobilization and the deployment of funds thereof. This is the product of western civilization. Interest-based banking system has been developed along with industrial development in the European countries. And the political supremacy of the Europe all lovers the world had helped spreading the interest-based banking all lover the world. And the political subjugation helped the interest-based banking intrudes in the Muslim countries as well.
2.2. Definition: (Islamic bank)
An Islami Bank is a financial institution that operates with the objective to implement and materialize the economic and financial principles of Islam in the banking arena. The Organization of Islamic Conference (OIC) defined an Islamic Bank as a financial institution whose statutes, rules and procedures expressly state its commitment to the principles of Islamic Shariah and to the banking of the receipt and payment of interest on any of its operation.
According to Islamic banking Act 1983 of Malaysia, and Islamic Bank is a company which carries on Islamic Banking Business Islamic Banding business means banking business whole aims and operations do not involve any element which is not approved by the religion Islam.
2.3. Why Islami Bank?
The objective of Islamic banking is not only to earn profit, but also to do good and welfare to the people. Islam upholds the concept that money, income and property belong to Allah and this wealth is to be used for the good of the society.
Islamic banks operate on Islamic principles of profit and loss sharing, strictly avoiding interest, which is the root of all exploitation and is responsible for large-scale inflation and unemployment.
Islamic bank is committed to doing away with disparity and establish justice in the economy, trade, commerce and industry; build socio-economic infrastructure and create employment opportunities.
2.4. Islami Bank Bangladesh Limited at a glance:
1. Date of incorporation : 13.03.83
2. Date of receiving Banding license : 28.03.83
3. Date of incorporation of first branch (Local office Dhaka): 30.03.83.
4. Formal inauguration : 12.08.83
5. Zone : 6
6. Authorized capital : 3000 million,
7. Share of capital : a) Local-share holders : 42.12%
b) Foreign share holders: 57.88 %
8. Paid –up capital : 1920.00
9. Equity (31.12.2003) : 5266.47 million
10. Branches: 141
11. Reserve-69941.79 million
13. Foreign Exchange-8464300 million
14. Number of employee-3752
2.4.1 Board of Directors:
1. Shah Abdul Hannan-Chairman.
2. Yushuf Abdulah Al-raj-Vice Chairman.
Representative, Al-Razi company for industry and trade, Saudia Arabia.
3. Mr. Kashem Ali-Representative Ibna Sina trust-Vice Chairman.
4. Mohammad Younus- Director
5. Abdul Ohab A. Al-Hoti
Representative. Kuait Aokaf public foundation kuait.
6. Hamad Al-Hajari
Representative. The public institution for social security. Kuait.
7. Prof. Md. Fazle Azim-Director.
8. Md. Abdul Haque-Director.
Representative, Investment Corporation of Bangladesh.
9. Abdur Raqib-Ex-offcial Director. Executive president.
2.4.2 Entrepreneurs of IBBL. (Bangladeshi)
-Late Md. Abdur Razzak Loskor.
-Late. Mofizur Rahman.
-Barister Tomijul Hoque.
-Md. Sfiuddin Deowan.
-Md. Bashir Uddin.
-Late. Mohammhod Hossain.
-Nasir Uddun Ahmed.
-Md. Mosharrof Hossain
-M.A. Rahshid Chowdhury.
-Enger. Md. Mostafa Anwar.
-Prof. Mohammahod Abdullah.
-Md. Mosharrof Hossain-Director,
-Maolana Mohammhod Kutubuddun-Director.
Representative-Baitus Sharof foundation Ltd. Director
-Prof. Md. Abdullah-Director
-Prof. Md. Sharif Hussain-Director.
Representative. Islamic Economic research Bureau.
Representative. Ibn Sina pharmaceuticals Ltd.
-Engr. Md. Mostafa Anwar-Director
-Md. Shahidul Islam-Director
-Engr. Md. Daud Khan-Director
-Prof. Korkut ral-Director.
-Prof. Korkut ral-Director
Representative IDB. Jeddha, Saudi Arab
-Enger. Md Fuad Al-Khatib-Director.
-Islamic Development Bank. Saudi Arab.
-Kuwait Finance House (KSC) Kuwait.
-Jordan Islamic Bank Jordan.
-Islamic Investment and exchange corporation-Doha Qatar.
-Bahrain Islamic Bank, Bahrain.
-Islamic Banking system International Holding S.A. Luxembourg.
-Al-Raj company for currency exchange and commerce. Saudi Arab
-Ahmed Salah Jamjum. Saudi Arab
-Late. Fuad Abdul hemi of Al Kafi-Saudi Arab
-Dubai Islamic Bank, U.A.E
-Public Institution for Social Security, Kuwait.
-Ministry of Aokaf and Islamic Affairs, Kuwait
-Ministry of justice-Dept. of Minor Aftains, Kuwait.
-Nur Mohammho Akon. Alternate director
-A latif A. Rahim Janahi, Director.
Representative-Dubai Islami Bank, Director
-Bodir Abdul Mohsin-Al-Mokaijim.
Representative-Kuait finace house.
-Shah Abdul Hannan. Representative Ibn Sina trust.
-A.K.M. Nazir Ahmed Representative, Bangladesh Islamic Centre.
-Prof. Mohd. Sharif Hussain. Representative, Bangladesh Economic Research Bureau.
-A.K. Fazlul Haque
-Enger. Md Daud Khan
-Late Maolana Md. Abdul Jabbar Representative, Bairus Sharof foundation.
2.4.5. Shariah council
-Maolana Obaidul haque, Chairman.
(Khatib-Baitul Mokarrom National Mosque)
-Mufti Said Ahmed-Vice Chairman.
Chief Mufti Al-Jamiatus Siddikia Darut Alam
Madrassa-E-Furfura sharif. Darus Salam. Mirpur, Dhaka.
-Principal Jamin Kashemia. Norshingdi.
-Principal Md. Serajul Islam
(Ex-principle madrasha-E-Mesbaul Ulum Mofijheel. Dhaka)
-Maolana Delowar hossain Saidi.
-Maolama A.B.M. Kamaluddin Khan
(Rector, Rajipur Alia Madrasha, Laxmipur)
-Mufit Shamsuddin (Zia)
-Mufti Muhaddis, Al islamia Jamiatw.
-Advocate Mujibur Rahman.
Senior Advocate, Bangladesh Supreme Court
-A.S.M Faqrul Ahsan.
Ex-Deputy government, Bangladesh Bank
-Prof. Shah. Md Habibur Rahman.
Prof. economic dept. Rajshahi University, Rajshahi.
Islami Bank Bangladesh limited: (IBBL)
Islami Bank Bangladesh limited was incorporation on 1.3.1983 and received its Banking License on 28.03.1983. IBBL started functioning on 30.03.1983. The authorized capital of the Bank is TK. 50.00 crores and paid up capital is TK 32.00 Crores.
Inspired by the success of Islami Bank Bangladesh Limited 5 other Islamic Banks namely- Al-Baraka Bank, Social Investment Bank Al-Arafa Islami Bank, Faisal Bank and Exim Bank have been established in Bangladesh. Prime Bank has established Islamic Branches.
Islamic Banks and Financial Institutions around the world:
Until now; there are 267 Islamic Banks and financial institutions around the world.
Furthermore, one Islamic Investment Company was established in Bahamas in 1977 as a multi-national holding company. Its purpose was to establish Mudraba (Partnership companies) in various parts of Islamic countries. The company has established to Mudaraba subscribers is Sharjah and Pakistan.
The second example of Islamic banking in the west comes form Luxembourg, where Islamic Banking system International holding was established in 1978 as a joint stock company. Its purpose was to establish International Islamic banks in different parts of the western countries where there are communities of Muslim interest in participating investment project in Muslim and Non-Muslims countries.
The company’s investment operations spread over different part of world. As a holding company, it established a new affiliated company in London in June 1983 under the name of Islamic Finance House and another in Denmark in 1982 under the name of the Islamic Bank International of Denmark, Dar-al-mal-al-Islami (DMI) also emerged in 1981 as a major multi national company the activities banking operations (Ashker, 1987).
The above development, gaining momentum since the second half of the 1970s, took two phases. The first one was the attempt to establish Islamic financial institutions side by side with traditional banking. In such attempts, two types of institutions were evolved. Islami banks were established mostly in Muslim countries and Islamic investment and holding companies stared operating in some Muslim but mostly in non-Muslim countries. These institutions, claimed to be operating without interest in their transactions, compete with conventional banks of attract deposits and invest these funds wherever they fund profitable in investment opportunities. The majority of these institution were established though private imitative.
The second phase took the shape of restructuring the entire financial system in line with the teachings of Islam. this course had two directions; one in which the entire economy and institutions (including financial ones) were transformed into an Islamic one, as in Islamic Republic of Iran; and the other was illumination of banking sector only, as in Pakistan (Khan & Mirakhor, 1989; Mangla & Uppal 1990).
The constitution of Iran Was embodied as “The Planning of a correct and economic system in accordance with Islamic criteria, in order to create welfare criminate poverty and abolish all forms of deprivation with respect to food housing work health care…………”
Pakistan started its transition to Islamic banking to July 1979 and completed the board and quantitative with the board and quantitative perform in six years by June 1985, with effect from July 1985 the entire banking system of Pakistan stands reformed.
A summary of chronological development is annexed herewith.
Any branch of IBBL deals with the three parts of activities. Threes are:
A. GB. (General banking)
B. Investment And
C. Foreign Exchange.
My topics are performance on foreign exchange transaction of IBBL. Accordance to the topic, my discussion is only foreign exchange mechanism of IBBL.
Basically there is no difference of foreign exchange mechanism of he commercial there is no difference of foreign exchange mechanism of other commercial bank like IBBL. Because foreign exchanges acts, rules and regulations are maintained by the Bangladesh Bank according to the UCPDC 500 (Uniforms customs practices for documentary credit). But only difference the operations of IBBL. It will be discussed in Later.
IBBL deals with the customers/clients only by the three mechanisms. These are:
2. Export and
Before discussion on foreign mechanism, we need to define what foreign exchange is & how can they deal?
3.1. What is Foreign Exchange?
Foreign Exchange means currency & trade exchange say conversion of one to another. This is a part of economic & Science. This is a big deal divided into different currencies instrument such as Draft, Traveler Cheque, Bill of Exchange business including sell, purchasing of currency notes & TC etc.
Currency Exchange means the conversion of one Currency into another.
3.2. Foreign Exchange Market:
Foreign Exchange market means the places where foreign currency is bought & sold. In this more that supply, currency value & v.z.
Alternately following are the features of foreign exchange market:-
1. Bank & client.
2. Different Banks in the same foreign exchange market.
3. Different Bank & Schedule Bank of the same country.
4. Different Control Bank.
Islami a Bank follows the following the two craters in respect & payment of foreign exchange:-
- Local currency market value &
- Foreign currency market value.
EURO Dollar, Petro Dollar, Asian Dollar :
EURO Dollar is virtually no paper dollar, but mark in dollars, it’s a new name in the currency market in the world Similarly petro Dollar means the Dollar earn from sale of fuel. Particularly oil based midilists countries. Thirdly Asian Dollar means the dollar of Singapur, Hongkong, Tokyo, Baharin etc-Asian Dollar move or less control EURO & Petro dollars.
Islamic Bank can buy or sale foreign currency from the foreign exchange market for profit. This bank posses license from Bangladesh bank to deal foreign currency business in the currency exchange market in the world. Islami Bank maintains overseas inter A/C, with different a Banks in different countries. In the world for network system for Import, Export & Remittance purpose foreign exchange currency may be created a commodity for which Islamic Bank can sell or purchase the same to the party or other bank with some profit (exchange).
3.3. Why Exchange is being controlled?
- To stabilize the rate of exchange.
- To protect domestic industries.
- For proper implementation of plans.
- To increase the bargaining strength
- To check over invoicing & Under invoicing
- To check the Blank marketing and smuggling
- For regulating the international movements of goods
3.4. Authorized Dealer Branch:
Bangladesh bank in exercise of the power under section 3 of Foreign Exchange regulation Act. 1947 issues a license to schedule Bank where they have adequate trained Officer/Staff to deal in Foreign Exchange. The banks that are authorized to deal in foreign exchange are called authorized dealers.
License are granted by Bangladesh bank for hanged of Foreign Currency such as notes, coins and TC to a person or firm a corporation strictly maintains in accordance with exchange control regulation.
- Bangladesh Biman
- Parjatan Corporation etc.
3.5. Rate of Exchange:
The rate at which one currency is exchanged with another is known as rate of exchange.
Rate will be quoted in accordance with demand and supply. Bangladesh Bank Quote rate based on New York money market.
3.6. Exchange Position:
Relation between sale & purchase either in spot or forward purchase in a particular date in a particular currency. This relationship which in known as exchange position.
3.7. Arbitrage of Foreign Exchange:
Arbitrage can be defined as simultaneous buying and selling of foreign currencies for the purposes of making profit Arbitrage is carried out mostly by banks, They keep constant watch over the latest development in the financial market of the world.
3.8. Foreign Exchange Regulation Items:
- Bangladesh Bank Manual.
- Foreign Exchange Circular.
- Public Notice
- Import & Export Policy Gazette
- Ministry of Commerce Circular
- BCD circular.
- Guide lines for foreign exchange regulation.
- Other authorization (i.e. NBC Dept)
3.9. Statutory Control Forms:
- EXP Forms for Export
- IMP form for Import.
- C Form for Inward Remittance.
- TM Form for outward Remittance.
3.10. Multiple Exchange Rates:
Various rate quoted for one currency purchase and sale. Our country rate is multiple exchange rates.
The rate of exchange is the price of one currency in relation to others. Rates are three types.
- Currency rate
- Peens rate
- Cross rate.
Currency Rate: (Indirect Quotation):
Buy high sell low i.e. local currency fixed and foreign currency variable e.g. India & London quoted this rate.
In case of currency rates:
- Buy high
- Sell low
- Premium deducted P-
- Discount added D+
- Fore Buying in currency rate higher discount is added and lower premium is deducted.
- For selling lower discount is added and higher premium is deducted.
The following currency rates are given below:
- Currency rate (Indirect Quotation)
- Pense rate (Direct quotation)
- Cross rate.
Local currency fixed and foreign currency variable i.e. by & sell high. New York money market quoted this rate.
Foreign currency fixed and local currency variable i.e. buy low & sell high. New York money market quoted this rate.
Other currency rate to one another.
There are tow way quotation in exchange rate i.e. (a) Buying Rate & (b) Selling Rate.
It is the rate of exchange at which it would put through a purchase transaction i.e. export & inward Remittance and selling rate is the rate of exchange at which it would put throughout a sale transaction i.e. Import bills including outward Remittance.
Exchange Rate Rules:
a) In case of Pense Rate-
i) Buying low
ii) Selling High
iii) Premium Added: (p+)
iv) Discount deduction : (D (-D)
b) In case of currency rate:
i) Buy High
ii) Sell Low
iii) premium deduction (P (-)
iv) Discount added 😀 (+)
c) For Buying:
i) In currency rate higher discount is added and lower premium is deducted.
ii) In pense rate higher discount is deducted and lower premium is added.
d) For Selling:
i) In currency rate Lowe discount is added and higher premium is deduced.
iii) In Pense rate lower discount is deducted and higher premium is added.
Buy Sell Buy Sell
Low High High Low
LP (+) HP (+) (LP (+) HP (-)
HD (-) HD (-) HD (+) LD (+)
Basket of currency in our Country:
1) US Dollar
2) Pound Starling
3) DM (Deutch mark)
5) France Frank.
Our rate quoted based on US Dollar in the year 1986 January instead of pound sterling.
Now the rate in our country is unification from January 1992.
|Exchange rate Mechanics m/Exchange & its Fixation. Date||Particulars||Buying||Selling|
|Import Bill||–||Selling||B>S||Long or over brought position.|
|“||Export||Buying||S>B||Short or over sold position.|
|“||Export||B=S||Square position i. e open position|
* Buying- Selling = Exchange Position.
Apply of Rate:
TT (Telegraphic Transfer) & OD (on demand) rate:
TT & OD rate should be applied for foreigners & Govt. people i.e. other than import. BC (Bills for Collection) Selling Rate: This rate should be applied for Import Bills only.
IT Clean Rate :
This rate should be applied for other that foreigners i.e. the A/C holders and for purchasing Cheque, Draft, TT, MT, P.O, TT. Clean rate also will get foreign currency Account holder and purchasing of foreign currency note.
O.D Sight Expert:
When we will purchase the export document in that case rate will apply O.D sight export
O.D Transfer Rate:
This rate should be applied for official people & foreign only. Cheque, Drafts, MT, TT. P.O- Coupons etc. will be purchased applying OD Transfer rate.
TT, OD Tate:
TT, OD rate will be applied for official people who lived abroad as Bangladeshi Embassy official foreigners, foreign firms people etc.
This rate will be applied to all people of foreign currency account holder and import bills i.e. selling of fund other than government official and also service holder of Embassy and foreign firm officials.
TT Doc. Buying Rate:
This rate will apply export process realized after collection bills Islamic Bank introduced this rate is 1994.
Methods of effecting payment of IBBL:
Islami Bank follows the following methods to make payments between countries.
- Telegraphic Transfer (TT): This is an instruction for transfer of money by Telegram, Cable or telex from a bank in one country to another Bank in different center. This is an instruction form the Importers Bank to the exporters Bank. The TT charge is realized by us from the partly as per Bank circular.
- Mail Transfer (M.T): This transfer is the order to pay cash to a 3rd party. This Transfer is sent by mail & the charge must be realized as per Bank circular.
- Drafts & Cheque: A draft is pay order issued by one Bank to another Bank or its branch.
Over Bought: This position known as long position.
Over Sold: This position known as short position.
Libor: London inter Bank offer rate.
SWIFT: Society for world wide Inter Bank financial Tale Communication.
CHIPS: Clearing House Inter Bank payment system
NOSTRO A/C: Our A/C with you i.e. out A/C with American Express
NOSTRO A/C: Our A/C with you, Al- Raji A/C with IBBL
LOROD A/C: This A/C i.e. third Bank Relationship
ACU: Asian clearing Union ACU member countries are Iran, India,
3.11. Growth of foreign Exchange Business:
TOTAL FOREIGN EXCHANGE
3.12. Foreign Correspondents:
The Bank ha made special arrangement with Al-Rajhi Banking and investment Corporation for “Express Remittance” of money from Saudi Arabia within the shorts period of time. Islami Bank Bangladesh limited has Taka drawing arrangement with Al-Rajhi and investment Corporation, K.S.A. Al -Rajhi Commercial Foreign Exchange, K.S.A City Bank N.A Dubi islami Bank, Dubai U.A.U Al –Asari Exchange Establishment, ULE Al- Mona Exchange, UAE Abu Dhabi Islamic Bank, UAE Kuwait Finance House, Safat, Kuwait, Kuwait Bahrain International, kuwait, Kuwait Overseas exchange Co. Kuwait National Money Exchange, Kuwait, Qatar Islamic Bank, Doha Qatar. Union Exchange, Doha, Qatar, Bohran Islami Bank Manama, Bahrai, Dalil Exchange, Manna, Bahrain, Zenj Exchange Co. W…L L Mannama, Bahrai, modern Exchange, Oman Besides that the Bank has also remittance arrangement with Barclays Bank PLC, London UK Standard Chartered Bank UK American Express bank Ltd. New your USA Citibank NA, New Yourk, USA Placid N.K Corporation USA Bank of Tokyo mitsubishi ltd. Japan Comers Bank A.G Frankfur, Germany:
4.1. How can they deal?
Banks are intermediary organization in the money system accept deposes from the customers and use this deposits to makes loan/investments or deposits with other Banks. At the same time bank are also intermediary in International Trade since they are enable to finance their customers to buy & sell foreign exchange which require.
4.2. Objectives of Dealing
Dealing department is composed of 2 types of interrelated business-
i) Money market &
ii) Foreign Exchange
Objectives dealing Department is-
i) To control liquidity & Foreign Exchange exposure of the Bank
ii) To provide a service to satisfy a customer’s need &
iii) To produce a profit to the Bank receives deposits from varying sources fro varying periods. it is the responsibility of the Dealing department to ensure that any excess funds are invested where from higher rate of return will come of the Bank. however prudence, Management should be applied as to how and where such excess foods are to invest since it is inoperative that the solvency & Currency which is required.
Commercial Banks have customers who
a) buy Foreign Currency from them&
b) Sell Foreign Currency to them.
To facilitate such transaction, commercial bank maintain NOSTRO A/C with overseas or with other Banks, Balances will be left in this account which represents an exposure of Foreign Currency such position comprises
a) Surplus of Foreign Currency balance.
b) Difference between outstanding Foreign Exchange of contracts for both spot& forward delivery.
c) Difference between profit earned & profit paid in the same foreign currency
d) Possible Foreign Currency capital exposure if it is not covered y Foreign currency borrowing of a forward exchange contract.
e) Other payable & receivables in Foreign currency such as taxes, fees dividends etc
Dealing Department has to monitor all the functions noted above to ensure that total foreign currency position is known. It will then, in association of the Management determine, what will be a prudent level of such exposure taking into consideration the size of the Bank, validity of the exchange market, profit and loss exposure and whether or not local exchange control regulation of the central Bank will permit such exposure.
The largest source of income of a Bank is difference between the rates of profit paid for deposits and rates of profit earned from investments. This difference is called “This profit differential between assets and liabilities managed by the dealing room. So, Dealing Department is a primary source of profit.
Fig – ORGANIZATION CHART
In the dealing Department number of people is involved and there are subdivisions. This depends upon the size of the Bank & country where it is located.
1. Management of the Bank looks o after the Foreign Exchange and
2. The Money Market Manager ensures the deals are successfully implemented.
3. Within the dealing department there are a number of specialists but this depends on size of the Bank.
4. In the dealing department keepers are there they actually records the position of currency exposure. This position in vital.
Operations of Dealing:
- The manager of Senior dealer in consultation with the management determine that what is the level/ position of the bank hold
- Dealing Team will more what is happening other dealing centers around the world
- At this stage the rates of Exchange and rates of deposits be fixed
- Political & geological position to be ascertained which might affect Deal
- With the progression of day rates will move depending upon the position of the business.
- If the Bank has a major participant in the foreign & treasury market the day will be active.
- If the bank is not with major customer there will be not satisfactory.
How Deal may be effected through?
e) Written instruction.
Upon receipt of the orders-
A dealer will make a quotation. If the quotation is accepted by the counter party, a deal is made.
4.5. Which Process Deal may be recorded?
Deal must be recorded. To initiate the recording of the transaction, dealer will usually complete a pre-printed form known as a deal ticket of voucher. In case of a Foreign Exchange deal the followings are to be recorded.
a) Name of the counter party of customer.
b) Location of the counter party.
e) Date of Transaction- Contract date
f) Currency & amount sold.
g) Rate of exchange at which transaction has been consummated.
i) Settlement: Where the money sold is too paid. How the money bought is to receive
j) Name of Booker if applicable.
k) Signature & initial of dealer to confirm Transaction.
Further- To complete the operation department will-
a) Complete the dealing ticket or preprinted form or voucher where the transaction is recorded.
b) Ascertain the method of settlement.
c) See a confirmation is prepared and send it to the customer which is called a contract.
d) Prepare the entries called book keeping
e) See that telexes sent to effect payment are correct.
f) If the deal is a forward transaction, ensure that a duplicate contract is sent as a reminder nearer to the value.
g) Checking of incoming confirmation from customer and or booker to see all party agrees as to the terms of the transaction.
h) To maintain duplicate position sheet.
i) Ensure that foreign currency NOSTRO account have sufficient fund to effect payment.
j) Maintain files of all transaction in the event of queries or audit.
k) Produce such management reports as are necessary.
In the deal occur at the money market then the following ticket should include:
1. Name of the counter party
2. Local of the counter party
3. Date of transaction
4. Start-date of deposit-value date
5. Maturity date of deposit.
6. Currency and amount lent/ borrowed
7. Rate of profit at which transaction has been consummated
8. Settlement instruction-
a) To where & now founds are to be paid at the be giving and at the period of maturity.
9. Designation if the deal is an investment or deposit.
10. Name of the booker if applicable.
11. Signature and initial of the dealer to confirm the transaction and to use positioning Department & Operation department with maintain an accurate accounting system of transaction, such system must be capable of
a) Listing of all contracts with a particular customer,
b) Listing of all contracts for a particular day.
c) Producing accurate position records both spot & forward for dealers & management.
d) Producing profit & loss figure for dealing Dept. both foreign exchange & profit.
e) Producing statuary record that the bank at all times complies with the local exchange regulations.
g) Daily projections of movement in NOSTRO A/Cs.
4.6. Payments system of Dealing:
Payments & receipts for the dealing department are made in accordance with Normal Blanking practice that is by telex, direct debits or credits, transmission of computer date, Cheques or Banker’s payment. It is essential for the dealing department to be informed of any errors or fails as they will affect money position So, copies of all payment & telex is normally sent to the servicing department or operation Dept. for verification.
4.7. Dealing room Operations:
The dealing room must find low cost resources and forfeitable fund as well as minimize the market risks.
a) Hedging & servicing the Bank
b) Corporate service
c) Issuing (Intermediary)
d) Trading/ Positioning/ Arbitrage
e) Market maker service (ensure market liquidity)
f) Asset & liability Management.
4.8. Types of Dealing Room:
- For corporate services
- For own profit goals
4.9. Risk of Dealing Room/Department:
3 types of risks are involved in the dealing department. These ares-
a) Market Risk
b) Counter party risk &
c) Operating Risk
4.10. Market Risk:
1. Consequences of Foreign Exchange rate variation on bank’s & loss
2. Profit rate Risk
3. Volatility Risk
4. Liquidity Risk
Liquidity of a market:
This is the ability of a market to absorb sudden shifts in supply & without excessive exchange fluctuation. A market is said to be liquid when every Trader can find counter party to trade with without consign important change in the price level.
B. Counter party Risks:
a) Credit Risk &
b) Delivery Risk
C. Operation Risks:
a) Errors in the front & bank office.
5.1. What is import?
Import means lawfully carrying out of anything from one country to county for Buying. It will be occurred according to the Government law.
5.2. Important policy order:
Based on the needs of commodity and availability of finance, Government declares policy. For import of goods for a particular period having approval from the National Assembly is defined as Import policy order. Import policy is a guideline of a set of rules envisaged by Government Authority i.e. the Ministry of Trade and commerce for the registered importer for import of goods inside the country.
Earlier import policy has been formulated for two years. But present import policy order have been formulated for 5 (five) years, Effect from the 14th June 1999 to 30th June 2003 and valid till announce of new import policy order. If require Government can revise the policy in each every years.
5.4. General Rules in connection with import:
1. Restriction of Import.
a) Negative list of Merchandises.
b) Restricted list.
c) Footnote under Restricted List
d) Freely importable items
2. ITC number is compulsory (H.S code 6 digit) to be mentioned in the L/C and LCAF to identification the item to be imported. H.S code of seven digits as mentioned by Bangladesh statistical Bureau to be used.
- Requirement Right of Refusal (ROR) for public sector agency from Ministry of Industry or respective Ministry/department of both to Import item under Restricted List.
- Import cannot be Israel, Serbia Montenegro
- Pre-shipment inspection (PSI) for private sector normally PSI is not mandatory.
- Shipment to be made through Bangladeshi ship some exemption
a) Single importer maximum 20 MT grow importer highest 100 MT
b) General waiver from department of shipping otherwise certificate of waive is to be obtained to ship through Foreign Cargo
c) Import of Raw materials export oriented Industries
7. Import to be made on competitive rate
8. CFR & FOB Basis Import
a) Normally import under CFR basis
b) FOB basis import can be made complying Bangladesh Bank relative instruction
9. Country of origin: Mandatory should be clearly indicated at the body of packing / container / box / packet etc.
5.5. Sources of Finance:
a) Foreign Currency
b) Wage earners FC balance
2. Foreign loan grant or commodity assistance
3. Barter and STA
5.6. Import procedure and classification of importer:
Classification of importer:
a) Commercial import
b) Industrial import
c) Import under wage earners scheme
d) Actual user
1. No import permit / license required
2. LCAF required
3. Import can be made duly through irrevocable L/C
5.7. Import through LCAF but without L/C:
1. Books, Journals, Magazines and Periodical again sight draft or issuance bills.
2. Any importable item value up to USD 5,000 per year. Except for Myanmer each chalan USD 5000 and no yearly amount restriction.
5.8. Import permit and clearance permit:
1. Importation of books, Journals, Magazines and periodical and scientific lab equipment surrendering UNESCO coupon.
2. Pay as you earn basis Bangladesh Bank permission needed
a) Machineries new and 12 years old plan
b) Motor vehicles new and 5 years old
c) Refrigerator ship new and 15 years old
d) Cargo passenger ship for ocean ship maximum 20 years old importable.
e) Export oriented Industrial plant & machinery
f) Fishing Troller (sea) New or highest 20 years.
3. Excess goods imported by passenger baggage rule.
4. Simple, advertising item more than allowable quantity.
Deferred payment basis import complying Bangladesh Bank terms and conditions.
Direct payment basis at aboard by wage earners:
Time limit for opening L/Normally 150 days from issuance or registration of LCAF
4. Machinery and Parts-17 months
5. All other items item 09 months.
5.9. Restriction of L/C after declaration of Negative Restricted:
1. No amendment for value increases of extension of shipment validity.
Required documents to submit with LCAF for both govt. & non Govt. (private) importer:
- L/C application form duly filled in and signed
- Indent or pro-forma invoice
- insurance cover note
- Attested copy of the related Ministry/Departed Authority
For private sector importer following documents required:
- Membership Certificate
- Valid IRC duly renewed
- Tin Certificate
- Insurance Cover-note Insurance Policy (stamped)
5.10. Working procedure of Banking of Banks in Case of LCAF:
- LCAF receive by the nominated Bank
- Importer has valid IRC & duly renewed
- For importation of capital machinery & primary party’s no need IRC
- IRC code number to be mentioned
- ICAF registration where need
- L/C copy to be sent to CCI & 15 days
- Income tax declaration two copies (one for Bank for rest to be sent to NBR)
5.11. Import related fees:
1. Four categories of importer registration renewal fees are as under:
|Categories||Yearly heights import||Registration
2. Surcharges for different years are as under:
1 year late TK 50/-
2 year late TK 100/-
3 year late TK 200/-
5.12. Regulation of Import:
Import of goods under this policy shall be regulated as under:
- Control list:
Unless otherwise specified items which have been indicated as banned in this list shall no be permissible for import. An items included in this list with specific conditions for import shall be importable only on fulfillment of the conditions specified.
- Freely Importable Items:
Unless otherwise specified an items the name of which does not appear in the control list shall be freely importable.
3. Notwithstanding anything mentioned else where, all imports into Bangladesh shall be subject to such general or specific conditions as many have been prescribed in this order.
4. In addition to the conditions mentioned in the control list the conditions. Restrictions and procedures for import of various items mentioned in the test portion of this order, shall as usual, apply in case of import of those items.
5. If, while determining the import status of an items mentioned in the control list the description of goods does not conform to the H.S.C Code mentioned against item, or any discrepancy arises between the H.S Code and the description of goods, in that case the description of goods shall prevail, In other words, if the import of a particular item is shown as banned in the control list, or is shown as importable as subject to fulfillment of conditions in the list, the said ban or restriction as the case may be, shall equally apply to the import of that item , even if such ban or restriction is mentioned else where and not against the appropriate H.S Code, if any importer, taking , advantage of such discrepancy, import any banned items or restricted items or restricted item without fulfilling the respective conditions, such import shall be treated to have been made as in contravention of the provisions of this order.
5.13. Provision Regarding Export:
All provisions rereading export as mentioned in this order shall apply in case of export of goods.
5.14. Source of Finance:
Import may be allowed under the following source of finance:
a) i) Foreign Currency Reserve in Bangladesh Bank.
ii) F.C. A/C (under WES)
b) External economic and (Commodity Aid, Loan, Credit or Grant.)
c) Commodity Exchange.
2. Special Trading arrangement (STA).
5.15. Import Trade Control Schedule Numbers:
For import purpose, use of new ITC Number (H.C. Code) with at least 6 (Six) digits corresponding to the classification of goods as given in the Import Trade Control Schedule 1988, based on the Harmonized commodity Description & coding system, shall be mandatory, But in case where a particular items has classified under an H.S. Code Number with more than 6 (six) digits, in those cases it shall e mandatory to use that specific code number (having more than six digits.) No bank shall process any LCA Form. Or open any L/C without properly recording the corresponding ITC Number (s) for the item’s to be imported.
5.16. Restriction Regarding Source of Procurement of Goods:
Goods from south Africa & Israel or goods originating from these two countries shall not be importable goods shall also no be importable in the flag vessel of these two countries.
Import at Competitive Rate:
Import shall be made at the most competitive rate & the importers may be required, at any time, to submit documents regarding the price paid or to be paid by them. This order shall be exempted up to TK. 1.00 (One) Lac fro opening of the L/C.
Unless otherwise specified reshipment inspection of imported goods shall not be obligatory in case of import by the private sector importers.
Import on CER basis:
All imports by Sea, Air & Land route shall be made on cost and freight basis, Import on free on board basis may be made strictly observing Bangladesh Bank’s Circular, Before opening If L/C necessary insurance cover note should have to be purchased form the insure ace Co. No import shall be allowed on CIF basis without prior approval from the Ministry of Commerce.
Shipment by Bangladesh Flag Vessels:
Shipment of goods shall normally be made on Bangladesh Flag Vessels.
5.17. Import authorization:
- Import License not Required:
No import License will be necessary import of any item.
2. Imports Against LCA Form:
Unless otherwise specified no import irrespective of the source of fi