An Evaluation of EXIM Bank Limited
1.1 An overview of EXIM Bank
EXIM Bank Ltd is the name of a newly formed commercial bank but is the first of its kind in Bangladesh. It has been incorporated in Dhaka, EXIM Bank Limited as a public limited company and its head office is located at Printers Building, 5, Rajuk Avenue, Motijheel Commercial Area Dhaka 1000.In the world of consumerism, the business organization of the world strive for the consumers satisfaction as a number one business strategy whatever may be the product of the organization, either service or non-service. Service is the product a bank. There is a saying that customer service starts right from the stairs of the bank building. The guard at the door is the first person represents of the bank, receives a customer with wishes in smiling face.
1.2 Background of the Bank
Export Import Bank of Bangladesh Limited (EXIM Bank) is a private commercial bank established in 1999 under the leadership of Late Mr. Shahjahan Kabir, founder Chairman who had a long dream of floating a commercial bank which would contribute to the socio-economic development of our country with the vision to stand out as a pioneer banking institution in Bangladesh. It was incorporated in 2nd June 1999 as a public Limited company under the companied act 1994 to carry out traditional banking business in Bangladesh and started its banking operation from 3rd August 1999 under the banking company Act 1991 with Mr. Alamgir Kabir, FCA as the advisor and Mr. Mohammad Lakiotullah as the Managing Director with the authorized capital of TK. 1000 million and initial Paid-up capital of TK. 225 million respectively. Both of them have long experience in the financial sector of our country. By their pragmatic decision and management directives in the operational activities, this bank has earned a secured and distinctive position in the banking industry in terms of performance, growth and excellent management .Export Import Bank of Bangladesh Limited (EXIM Bank Ltd) was named before as Bengal Export Import Bank Limited (BEXIM Bank Ltd.) being newly formed commercial Bank of the country with a distinctive identity. Export Import Bank of Bangladesh Limited is a 3rd generation bank in our country and has been rendering an important service thedevelopment of economy since its inception. As a commercial bank, the bank provides all traditional banking business including the wide range of savings and credit scheme products, retail banking and ancillary services with the support of modern technology and professional Excellency.
- To maintain Corporate and business ethics.
- To make stock superior and rewarding to the customers/ share holders.
- To display team spirit and professionalism.
- To provide high quality financial services in export and import trade.
- To provide excellent quality customer service.
- To be the pioneer bank in the banking arena of Bangladesh under the Shariah guidelines and contribute significantly to the national economy.
- To provide standard financial services.
- Wealth maximization.
1.5 Organization Structure:
In the organization structure of the bank chairman is the head of the board of directors. There is one managing director, also the president who controls and supervises the main division of the bank. There is one Deputy Managing director who reports to him. Four Executive Vice presidents (EVP) and one Senior Executive Vice President (SEVP) report to the Deputy Managing Director. Executive Vice Presidents controls the credit with the help of four vice presidents who work under Executive Vice Presidents. Senior Executive Vice President controls the human resources and marketing division. The organizational hierarchy of EXIM BANK almost horizontal, which can show by the following:
To receive, borrow or raise money through deposits, loan or otherwise and to give guarantees and indemnities in respect of al debts and contracts.
- To establish welfare oriented banking systems.
- To play a vital role in human development and employment generation to invest money in such manner as may vary from time to time.
- To carry on business of buying and selling currency, gold and other valuable assets.
- To extend counseling and advisory services to the borrowers/ entrepreneurs etc. in utilizing credit facilities of the bank.
- To earn a normal profit for meeting the operational expenses, building of reserve and expansion of activities to cover wider geographical area.
1.7 Management of EXIM Bank
Management is the process of planning, organizing, leading and controlling the work of organization members and of using all available organizational resources to reach stated organizational goals. The strength of a bank depends of the strength of its management team. EXIM Bank is proud to have a team of highly motivated, well-educated and experienced executives who have been contributing substantially to the continued progress of the bank.
Managerial effectiveness has been measured in EXIM Bank in terms of come selected criteria such deposit mobilization, loans and advances made, loan recovery, profitability and productivity. It has been found that EXIM bank is effective in respect of branch expansion, loan disbursement, loan recovery etc.
With a short spam of time, EXIM Bank has become one of the leading and most successful bank not only among the third generation banks but also it superseded many other banks and financial institutions belonging to second and even first generation banks fro the point of view of its excellent business performance, extraordinary corporate culture and strong team work under the dynamic leadership of its management. Management is trying to support and assist well-motivated and experienced affairs to run the day to day affairs of the bank smoothly For maintains quality management, it is required to train-up more official at head office and branch level in respect of sanctioning, disbursement and recovery of credit, project appraisals, customer services etc.
1.8 Human Resource Management of EXIM Bank
Hunan resource is the fundamental asset of the organization. Human resource approach is concerned with the growth and development of people toward higher level of competency, creativity and fulfillment. Therefore, human resources development has been given its due importance in an environment that values performance, teamwork, fairness and integrity, it has both qualitative and quantitative dimension. EXIM Bank recognizes that intellectual capital is the most important asset for a financial institution.
Without proper and efficient human resources, no organization can run its operations. The bank believes that the professional competence bank personnel and its commitment for accomplishing assigned responsibilities are a first line of defense to prevent irregularities.
The objectives of Human Resource management of EXIM Bank are as follows:
- Conducting job analysis
- Planning employee needs and recruiting job candidates
- Selecting ob candidates
- Orienting and training new employees
- Managing wages and salaries (Compensating Employees)
- Providing incentives and benefits
- Appraising performance
- Training and developing managers
- Building employee commitment
- The hierarchical position of human resources in EXIM Bank Ltd. is shown in
Profile of EXIM Bank
. EXIM Bank Ltd at a Glance
- Establish : 1991
- Incorporated : 2nd June, 1999
- Activity Starts : 3rd August, 1999
- Islamic Banking : 1st July, 2004
- Legal Status : Public Limited Company
- Authorized Capital : Tk.1000Million
- Paid up Capital : Tk.878.85 Million
- Reserve Fund : Tk.2179.81 Million
- No. Of Branches : 28 (Twenty eight)
- Proposed Branches : 08 (Eight)
- No. Of employees : 934
|2.7 Growth of the Bank|
|Figure in Crore|
Banking operation in various departments
2.1 GENERAL BANKING ACTIVITIES
General Banking is the starting point and main function of all the banking operations. It is the department, which provides day-to-day service to the customers. Everyday it collect deposit from the customers by allowing borrowing interest rate, meets their demand for cash by honoring cheques and lend it to the customers against lending interest rate. Lending interest rate is higher then borrowing interest rate, difference between borrowing interest rate and lending interest rate is the profit for the bank. It opens different types of accounts, remit funds, issue demand draft, telegraph transfer, pay order etc. since bank is confirmed to provide the services everyday general banking is also known as “Retail Banking’.
Divisions of General Banking in EXIM Bank Ltd:
Account Opening Section
Bank account is a contractual relationship between a bank and the customers. It is the best way for a customer to built relationship with the bank. Like interest-based conventional banks, the main function of EXIM Bank Ltd. is to mobilize saving and provide financial support to the entrepreneurs. Depositors receive interest in a predetermined rate for their deposits make with an interest based banks, where EXIM Bank Ltd. neither pay not receive interest and mobilizes saving of the common people in line with Islamic Shariah.
Deposit account can take on a various forms such as:
Al – Wadiah Current Deposit (AC)
Mudarabah Saving Deposit (MSD)
Short – Term Deposit (STD)
Mudaraba Term Deposit Receipt
Al – Wadiah Current Deposit (ACD)
EXIM Bank Ltd .received deposits in its Al – Wadiah Current Account. It has some similarity with the current account of conventional bank. The term Al – Wadiah Current Deposit means deposit of money allowing somebody to sue it. Banks being a trustee preserves and keeps or in safe custody of what is deposited. Depositors feel safe in keeping their money with the bank and take transaction facilities. Bank provides assurance of returning money to the depositors on demand. In the process of opening Al-Wadiah Deposit, the bank gets approval of the depositors regarding the use of the deposited money and earns profit out of their development. Any losses incurred by way of such investment are totally borne by the Bank. Thus, the depositors don’t take the risk of losses with Al-Wadiah Current Deposit, they also don’t expect any profit form it. Depositors are provided with cheque book. They can withdraw or deposit any amount as and when they like. Bank may charge a fee in the account. Al-Wadiah Deposits are short terms and very uncertain, thus banks have to be very useful in the investment of money from this account.
General Documentation requires for opening a (ACD):
a) For a Individual Customer:
Copy of the Passport, if available or Employer’s Certificate of Commissioner’s Certificate or Letter of Introduction by a person acceptable to the Bank.
TIN Certificate, if applicable.
Two recent passport size photographs duly attested by the Introducer.
b) For Sole Proprietorship:
Copy of Trade License.
Two recent passport size photographs of the Proprietor/Signatory duly attested by the Introducer.
Copy of the passport of the Proprietor/Signatory, if available or Commissioner’s/Chairman’s Certificate or Letter of Introduction by a person acceptable to the Bank.
c) For Partnership:
v Copy of the Partnership Deed of the Firm.
v List of Partners with their address and phone number.
v Copy of Trade license.
v Extract of Resolution of the Partners of the Firm for opening the account and authorization for its operation duly certified by the managing Partner of the Firm.
v For Registered Partnership, Certificate of Registration of the Firm along with duly certified copy of the Partnership Deed.
v Two recent passport size photographs of each Partner/Signatory duly attested by the Introducer.
v Copy of the Passport of each Partner/Signatory, if available or Commissioner’s/Chairman Certificate or Letter of Introduction by a person acceptable to the Bank.
v TIN Certificate.
d) Private & Public Limited Company:
v Certified true copy and Article of Association of the Company.
v Certified true copy of Certificate of Incorporation of the Company.
v Certified true copy of Certificate of Business of the Company, in case of Public Limited Company.
v Latest list of Directors with address and phone number along with Form XII.
v Extracts of the duly adopted Resolution of the Board of Directors of the Company for opening the Account and authorization for its operation duly certified by the Chairman/Managing Director of the Company.
v Copy of Trade License.
v Two recent passport size photographs of each signatory duly attested by the Introducer.
v Copy of the passport of each Signatory, if available or Commissioner’s/Chairman’s Certificate or
v Letter of Introduction by a person acceptable to the Bank.
v TIN Certificate.
Opening a Mudaraba saving Deposit (MSD):
Mudaraba Saving Deposit (MSD) is open by the lower and middle classer people who wish to save a part of their incomes to meet their future need intend to earn an income from their
savings. It aims at encouraging savings of non-trading person(s), institution(s), society, etc. by depositing small amount of money in the bank.
Restriction on withdrawals and deposit:
The number of withdrawals over a period of time is limited. Two withdrawals per week are permitted. But more than that no interest will be paid on rest amount for that montThe total amount of one or more withdrawal on any date should not exceed 25% of the balance in the account unless 7 (seven) days advance notice is given. The customer may deposit any amount in the savings bank account subject to a minimum of Taka. 2000/- in the account.
Payment of Profit:
EXIM Bank Ltd. is providing 8.5% profit on Mudaraba Saving Deposit.
Opening a saving account:
For Opening a Mudaraba Saving Deposit following documentation are required:
v Two copies of passport size photographs.
v Introductory reference.
v Commissioner’s/Chairman Certificate.
General Precautions of opening an MSD Account: After opening an account and before issuing a Chequebook the authorized officer should check the account opening form for the complete information, which is given by the customers:
v Name of the account holder.
v Photos of the account holder.
v Date of opening.
v Types of account
v Present & permanent address.
v Name of nominee and their address.
v Specimen signature in the form and in the “Specimen signature card”.
v Name, address, and the account number of the introducer
Mudaraba Short – Term Deposit (STD):
EXIM Bank Limited also receives short-term deposit from the clients. The SND account is different from the interest – based banks. It is also a Time Deposit account. The formalities for opening of this account are similar to those required for Al-Wadiah Current Account. The only difference is that seven (7) days notice is required minimum balance of tk. 50000. The rate of profit for this account is 6.50%. If the withdrawal on demand is desired, it may be paid subject to the forfeiture of profit for the period of notice or the expired of notice.
Mudaraba short term
It is like a fixed deposit in the conventional baking system but it does not receive or accept interest father, this account give profit and collect deposits. In this mode less that Tk. 1 crore or Tk. 1 crore and above can be deposited against client will get non-transferable instrument of equal amount. If a customer withdraw his/her money before one month than he/she will not get any kind of profit. On the other hand, after the matured if client don’t withdraw his/her money than it will be auto renewed with imposed profit for the next days. If a depositor would like to withdraw his profit after six months he/she will get the profit accordance with previous years profit rate. After the announced yearly profit or loss, if bank felt in loss positing then the depositor bound to incur the loss. In absence of account holder the selected nominee will get the money. Account holder bound to bear any kind of tax or excise duty according to government circular. The profit rates of this account are:
|Mudaraba Fixed Deposit (FDR)||Provisional Rate of Profit||Minimum Deposit Requirement|
|1 (One) month||11.50%||–|
|3 (Three) months||12.6%||–|
|6 (Six) months||12.75%||–|
|01 (One) Year||13.00%||–|
|02 (Two) Years||13.00%||–|
|03 (Three) Years||13.00%||–|
Mudaraba Super Savings Scheme (MSSS):
The EXIM Bank Ltd. gives the facility to the client by the Islamic Shariah Mudaraba rules and regulations. In this scheme depositors can deposit minimum than Tk. 5000/- for 6 years and after the maturity date accountholder will receive double than his/her deposited amount. Depositor will get 80% investment facility by deposit the deposit receipt. Bank can invest this amount any sector by the Islamic Shariah rules and regulations. Accountholder are bound to pay any government tax. For opening this account applicant need recent one copy photograph and one copy photograph of nominee. The profit rates of this account are:
|Super Savings Scheme (Double)||Minimum Requirement Tk.||Approximate Tk. After Maturity|
Mudaraba Multiplus Scheme (Triple)
Under this scheme the depositor’s money will be almost triple in 10 years period. Any individual, company, educational institution, government organization, NGO, trust, society etc can invest their saving under this scheme.
|Multiplus Savings Scheme (Triple)||Minimum Requirement Tk.||Approximate Tk. After Maturity|
Mudaraba Hajj Scheme:
In order to smooth arrangement of fund for performing Hajj, the bank has introduced this scheme for 5, 8, 10, 15, &20 years periodfacility by transfer funds from one place to another. Some of the instrument that EXIM Bank Ltd., Foreign Exchange Branch provides are immense beneficial to the client.
Facility by transfer funds from one place to another. Some of the instrument that EXIM Bank Ltd., Foreign Exchange Branch provides are immense beneficial to the clients. These are:
Demand Draft (DD)
Pay Order (PO)
Telegraphic Transfer (TT)
Demand Draft (DD):
Demand Draft is an order of issuing bank in another branch of the same bank to pay specified sum of money to the payee on demand. It is generally issued when customer wants to remit money in any place which is out side of the clearinghouse area of issuing branch payee can be purchaser himself or another. Bearing money may be risky. It is anegotiable instrument and it can be crossed or not. For payment of DD, paying branch first has to be confirmed that the DD is not forged one.First bank Cheques the “Test Code” mentioned on the draft. If “Taste Code” agrees then believe that DD is not forged and makes payments. For further confirmation, the issuing bank sends an advice about the DD to the paying branch. For DD, commission is taken in the following way:
|Commission||@ 0.1% Minimum Tk. 25.00|
|VAT||@ 15 % of commission|
Pay Order (PO):
This is very important instrument of the Bank. Pay Order gives the payee the right to claim payment from the issuing bank. It can be en-cashed from issuing bank only. Unlike Cheque, there is no possibility of dishonoring pay order because before issuing pay order bank takes out the money of the pay order in advance. Pay order cannot be endorsed or crossed and so it is not negotiable instrument. Pay Order commission is like this:
Telegraphic Transfer (TT):
Telegraphic Transfer is the quick service system than others. By this method money is transfer to another place by telegraphic message. The sender branch will request another branch to pay required money to the required payee on demand. Generally for such kind of transaction payees should have account with the paying bank. Otherwise it is very difficult for the paying bank to recognize the exact payee. Test code is also furnished on the TT message for the protection of it. When sending money is urgent then bank use telephone for remittance. This service is only provided for valued customers. Who is very reliable and have long-standing relationship with bank, TT commissions are:
|Commission||@ 0.15% or Minimum Tk. 25.00|
|Telephone Charge||Tk. 50|
Most outward remittance is approved by the Add on behalf of the Bangladesh Bank following declaration of Taka as convertible for current account payments from March, 1994. Only a few remittances of special nature require Bangladesh Bank’s prior approval.All remittances from Bangladesh to a foreign country or local currency credited to on resident Taka accounts of foreign banks or convertible Taka account constitutes out ward remittances of foreign exchange. Add must exercise greatest caution to ensure that foreign currencies remitted or released by them are used only for the purpose for which they are released; they should also maintain proper records for submission of returns to Bangladesh Bank as also for the letters inspection from time to time. It is most important that, once forms have been approved by or on behalf of the Bangladesh Bank, the Add carry out the transactions only on behalf of the original applications for which the forms were approved. Permits issued (where applicable) by the Bangladesh Bank must be utilized within the period of its validity indicated in the permits. The amount released must not exceed the Authorized limit. Also instructions, if any given in the permits with regard to he amounts to be released periodically e.g. monthly or quarterly must be strictly adhered.
The term inward remittance includes not only remittances by T.T, draft, etc. but also purchase of bills, purchase of Travelers cheque. Inward remittance covers purchase of foreign currency sent from abroad favoring a beneficiary bank in Bangladesh. Remittance receives against export should be certified and reported on EXP forms. In case of remittance received in advance for exports the AD should obtain a signed declaration from the beneficiary on the back of the “Advance Receipt Voucher” certifying the purpose of remittance.
Activities of Clearing Department
On behalf of the customer bank receives their proceeds of instruments such as Drafts, Cheques, Pay Order and sends for collection through these methods:
Outward Bills for Collection (OBC) and Inward Bills for Collection (IBC) (within the clearinghouses area)
Clearing Department works can be classified in two ways:
Send Return memo, showing cause, to Local Office for dishonored instrument The instruments drawn on other banks, within the clearinghouse area, are deposited through our clients are sent for collection is called outward clearing.
Procedure for Outward Clearing:
Instrument received Check these items in the instrument: a) date b) branch c) amount in words and figure d) signature Special crossing seal, clearing seal, endorsement seal as “Payees A/C Entry in the Outward Clearing Register.
When we receive cheque drawn on our branches within the clearinghouse area presented by other banks is known as inward clearing
Procedure for Inward Clearing:
v Instrument (DD/Cheque/PO) comes from principal office
v Entry in “Inward Register”
v Cheque – in computer
v DD – DD payable
v Pay Order respective register
v Sign in the register by authorized officer
v Cancellation of instrument
v Send IBCA to Local Office for honored instrument
Transfer Delivery is of two types:
Outward Transfer Delivery:
Instrument send for collection to other branches is outward transfer delivery. Its procedure is like this:
v Receive instrument
v Special crossing seal, transfer delivery seal, endorsement as “payees A/C will be credited”
v Entry in “Outward transfer delivery” register
v Schedule enclosed.
v Receive IBCA and credit the party A/C
Inward Transfer Delivery:
When instrument come to our branch for collection then it is called inward transfer delivery. Its procedure is as follows:
v Receive instruments
v Verification of following items is taken.
v Amount in words and figure
v Serial number
v Entry in “Inward transfer Delivery” register
v IBCA issue
Activities of Cash Department
Cash department is the most vital department of a bank and it is call blood of a bank. It is a platform to communicate with customers. Cash department receives & pays cash directly.
In the cash department there are following register:
v Vault register
v Cash received register
v Cash payment register
v Cash balance register
v Rough cash Balance book.
v Cash remittance register
v Key register
v Cash position memo.
There is a procedure of cash-in & cash-out from the vault. Also a systematic procedure is maintained for receiving cash through different vouchers and payment against different cheques & vouchers.
The Vault opened with two different keys of two respective authorized officers. The officers are:
Manager of the Branch
Cash – in – charge Officer
Strong room has two keyholes opened by two officers respectively by two keys of cash. Generally sub-manager of the Branch bears authority absence of manager. Grill door one keyhole opened by – two keys of two officers and bring out following thing: Cash, Vault register, Receive register, Payment register, Balance Book, Security stationary. Enter the amount of cash withdrawal from the vault register.
Cash Receiving Procedure:
Cash is the life of a bank. Different types of form are used for cash deposits for different types of accounts. Cash may be received by the following ways:
v Current of Savings account pay-in-slip
v Credit voucher
v Different types of instrument remittances (TT, DD, PO etc.) are received by respective forms.
v Bills like National Life Insurance co. ltd
v Share collection
v Different types of scheme
v Cash Payment:
Cash is paid in payment counter against the following instruction;
v Cash debit voucher
v Pay Order, DD etc.
v Bank’s expense also paid to outsider through cash debit voucher.
v Receive of the cheques with a signature behind it.
v Scrutinize it by an authorized officer.
v Submit to computer section for checking the available balance.
v Cancelled & seal up “Pay in Cash” and cancellation through sign up.
v Again submitted to computer section for debiting the partly A/C and seal up “Posted”
v Send to cash counter – payment officer.
Ø Cash officer checks the cancellation, seal and seal up “Cash Payment”
Ø Entry the payments register.
Ø Take another signature of payee behind the cheque and pay cash.
Requisition letter, which must be authorized by the Manager, is sent to Principal Officer for Cash Remittance.
Counting the cash.
Prepare simple credit voucher
Entry in the cash receipt register
Car requisition (Call through phone)
Taking counter part of forwarding (Including name & specimen) signature of authorized officer and Guard. Remit the cash Prepare simple debit voucher
At the end of the transaction:
v Sum of total received
v Sum up total payment
Total receiving + Opening balance – Total payment = Closing balance for that day & opening balance for the next day.
Check it with computer sheet.
Entry the cash balance register Write cash position memo with denomination.
Position of the Cash Department:
The position of the cash department is very important. The cash department should be at a safe place. It should be at the middle position of the branch. The cash position of the Foreign Exchange Branch is in the front side of the branch and its safe and vault is at the behind.
2.2 Foreign Exchange
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 Exchange Department (FED) is the international department Bangladesh Bank issues license to scheduled banks to deal with foreign exchange. These banks are known as Authorized Dealers. If the branch is authorized dealer in foreign exchange market, it can remit foreign exchange from local country to foreign countries. So EXIM Bank, Principal branch is an authorized dealer
There are three kinds of foreign exchange transaction:
To import, a person should be competent to be and 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. In an international business environment, buyers and sellers are generally unknown to each other. So seller of goods always seeks security for the payment of his exported goods. Bank gives export guarantee that it will pay for the goods on behalf of the buyer if the buyer does not pay.
Letter of Credit ; A conditional written undertaken issued by the importer’s (applicant) bank to the exporter (beneficiary) at the request of the importer to effect payment up to a stated amount within a stated time period against presentation of complaint documents.
The LC is governed by International Chamber of commerce (ICC)publication no.500.
Steps for import L/C Operation – 8 steps operation
Step 1 – Registration with CCI&E
• For engaging in international, trade, every trader must be first registered with the Chief Controller of Import and Export,
• By paying specified registration fees to the CCI&E. the trader will get [RC/ERC (Import/Export Registration Certificate), to open L/C with bank, this IRC is must
Step 2 – Determination terms of credit
• The terms of the letter of credit are depending upon the contract between the
Importer and exporter. The terms of the credit specify the amount of credit, name and address of the beneficiary and opener, tenor of the bill of exchange, period and mode of shipment and of destination, nature of credit, expiry date, name and number of sets of ship documents etc
Step 3 – Proposal for Opening of L/C
To have an import LC limit an importer submits an application to department to EXIM Bank. The proposal contains the following particular
• Full particulars of the bank account
• Nature of business
• Required amount of limit
• Payment terms and conditions
• Goods to be imported
• Offered security
• Repayment schedule
Step 4 – Application by importer to the banker to open letter of credit
• For opening L/C, the importer is required to fill up a prescribed application form provided by the banker along with the following documents:
Step 5 – Opening of L/C by the bank for the opener:
• Taking filled up application form from the importer.
• Collects credit report of exporter from exporter’s country through his foreign correspondence there.
• Opening bank then issues credit by air mail/TEL EX/SWIFT followed by L/C advice as asked by the opener through his foreign correspondent or branch as the case may be, at the place of beneficiary. The advising bank advises the L/C to the beneficiary on his own form where it is addressed to him or merely hand over the original L/C to the beneficiary if it is so addressed.
Step 6 – Shipment of goods and lodgment of documents by exporter:
• Then exporter ships the goods to the destination of the importer country.
• Sends die documents to the L/C opening bank through his negotiating bank. Generally the following documents are sent to the Opening Banker with L/C:
|1. Bill of Exchange||6. Packing List|
|2. Bill of Lading||7. Advice Details of Shipment|
|3. Commercial Invoice||8. Pre-shipment Inspection Certificate|
|4. Certification of Origin||9. Vessel Particular|
|5. A certificate stating that each packet contains the description of goods over the packet.||10.Shipment Certificate|
Step 7 – Lodgment of Documents by the opening Bank from the negotiating bank
After receiving the documents, the opening banker scrutinizes the documents. If any discrepancy found, it informs the importer, If importer accepts the fault, then opening bankers call importer retiring the document. At this time many thing can happen. These are indicated in the following:
• Discrepancy found but the importer accepts – no problem occurs in lodgment.
• Discrepancy found and importer not agreed to accept – In this case, importer protest and send back all the documents to the exporter and request his to make in the specified manner. Here banker is not bound to pay because the documents send by exporter is not in accordance with the terms of L/C.
• Documents are OK but importer is willing to retire the documents – In this case bank is obligated to pay the price of exported goods. Since importer did not pay for bill of exchange, this payment by bank is one kind of credit to the importer and this credit in banking is known as PAD.
• Everything is O.K. but importer fails to clear goods from the port and request bank to clear – In this case banks clear the goods and takes delivery of the same by paying customs duty and sales tax etc. So, this expenditure is debited to the importer’s account and in banking it is called LIM.
The goods and services sold by Bangladesh to foreign households, businessmen and Government are called export. The export trade of the country is regulated by the Imports and Exports (control) Act, 1950. There are a number of formalities, which an exporter has to fulfill before and after shipment of goods. The exports from Bangladesh are subject to export trade control exercised by the Ministry Of Commerce through Chief Controller of Imports and Exports (CCI & E). No exporter is allowed to export any commodity permissible for export from Bangladesh unless he is registered with CCI & E and holds valid Export Registration Certificate (ERC). The ERC is required to be renewed every year, The ERC number is to be incorporated on EXP forms and other documents connected with exports. The formalities and procedure are enumerated as follows;
1. Obtaining exports LC: To get export LC form exporter issued by the importer.
2. Submission of export documents; Exporter has to submit all necessary documents to the collecting bank after shipping of goods
3. Checking of export documents; after getting the documents banker used to
Check the documents as per LC terms
4. Negotiation of export documents; If the bank accepts the document and pays the value draft to the exporter and forward the document to issuing bank that is called a negotiating bank. IF the bank does buy the LC then the bank normally acts as collecting bank.
5. Realization of proceeds: This is the period when the issuing bank has realized the payment.
6. Reporting to the Bangladesh bank: As per instruction by Bangladesh bank the bank has to report to respective department of Bangladesh bank by mentioning latest payment.
7. Issue to proceeds realization certificate (PRC): Bank has to issue precedent realization certificate of export LC to the supplier/ exporter for getting cash assistant.
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 through EXIM 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. Export L/C operation is just reverse of the import L/C operation. For exporting goods by the local exporter, bank may act as advising banks and collecting bank (negotiable bank) for the exporter,
As an advising bank
It receives documents from the foreign importer and hands it over to the exporter. Sometimes it adds confirmation on the L/C on request from the Opening Bank. By adding confirmation, it assumes the responsibility to make payment to the exporter.
As Negotiating Bank
It negotiates the bills and other shipping documents in Favor of the exporter. That is, it collects the proceeds of the export-bill from the drawer and credits the exporter’s account for the same. Collection proceed from the export bill is deposited in the bank’saccount in the importer’s country. Sometimes the bank purchases the bills at discount and waits till maturity of the bill. When the bill matures, bank presents it to the drawer to incash it.In our country, Export and Import operation of bank is very much related with one another because of use of Back to Back and maturity of payment for Back-to-Back L/C is set in such that it can be paid out of export.
Back-To- Back L/C
It is simply issued to the clients against an import L/C. Back-to-Back mechanism involves two separate L/C. One is master Export L/C and another is Back-to-Back L/C. On the strength of Master Export L/C bank issues bank to Back L/C. Back-to-Back L/C is commonly known as Buying L/C. On the contrary, Master Export L/C is known as Selling L/C.
Features of Back to Back L/C
• An Import L/C to procure goods /raw materials for further processing.
• It is opened based on Export L/C.
• It is a kind of Export Finance.
• Export L/C is at Sight but back to Back L/C is at Usance.
• No margin is required to open Back to back L/C
• Application is registered with CCI&E
• Applicant has bonded warehouse license.
• L/C value shall not exceed the admissible percentage of net FOB value of relative Master L/C.
• Usance period will be up to 180 days.
• The import L/C is opened for 75% of the value of Export L/C.
• Here L/C issued against the lien of export L/C.
• Arrangements are such that export L/C matures first then out of this export profit, import L/C is paid out.
Documents Required for Opening a Back-to-back L/C
In EXTM Bank Principal Branch, following papers/ documents are required for opening a back-to-back L/C-
1. Master L/C
2. Valid Import Registration Certificate (IRC) and Export Registration Certificate (ERC)
3. L/C Application and LCAF duly filled in and signed.
4. Perform Invoice or Indent
5. Insurance Cover Note with money receipt
6. IMP Form duly signed
In addition to the above documents, the followings are also required to export oriented garment industries while requesting for opening a back-to-back L/C –
1. Textile Permission
2. Valid Bonded Warehouse License
3. Quota Allocation Letter issued by the Export Promotion Bureau (EPB) in favor of the applicant for quota items.
Checklist of exports L/C:
Following defective points are usually found in the Master L/C. So, the bank officials so much carefully check these points. These are:
Name of the Advising Bank.
Name of Transferring Bank
Form of Doc. credit:
Name of Issuing Bank
Documentary Credit No. and issuing date
Date of shipment
Expiry date and place
Applicant/ for order of/ On Account.
Availability of Credit
Partial shipment/ Transshipment
Payment condition /Draft Sight
Description of goods:
Net FOB value.
Payment of back to back L\C
In case back to back as 60-90-120-180 days of maturity period, deferred payment is
made. Payment is given after realizing export proceeds from the L/C issuing bank.
L/C under EDfF.
• Exporter development Fund is created by Bangladesh Bank to give encourages to the exporter in Bangladesh.
• Generally Back-to-Back L/C is Usance L/C that is here bill of exchange is payable after some maturity date say 90 or 120 days after the date of acceptance/negotiation. But some foreign seller may require sight payment. Here import L/C matures first. In that case Bangladesh Bank gives me fund to the bank to pay the price of imported goods in favor of the local purchaser of raw materials. When export proceeds come, first Bangladesh Bank loan to the importer is adjusted and remaining part goes to the importer of raw materials.
Negotiation of exports documents:
The most common method of financing exporters is negotiation of documents under L/C. It is a post-shipment credit. Here the bank acts as a negotiating bank. After the shipment of the goods, the exporter submits the relative documents to the branch for negotiation. The documents are to submit within the period mentioned in the L/C. after approval of negotiation of the bill the full particulars of the documents are entered into the Foreign bill Purchased (F.B.P) register. The documents are sent to the L/C opening branch with a forwarding letter. The branch claim reimbursement from the issuing bank or from the reimbursing bank, giving clear instructions to credit the proceeds of the bill to the EXIM Bank head office NOSTRO A/C maintained with the named correspondent bank abroad under telex intimation to the Principal branch and Head Office (International Division). Negotiation stands for payment of value to the exporter against the documents stipulated in the L\C. If documents are in order, EXIM Bank purchases (negotiates) on the basis of banker- customer relationship. This is known as Foreign Documentary Bill Purchase (FDBP).If the bank is not satisfied with the documents submitted to EXIM Bank gives the exporter reasonable time to remove the discrepancies or sends the opening bank for collection. This is known as Foreign Documentary Bil for Collection (FDBC)
Mode of payment of export bill under L/C:
As per UCPDC 500, 1993 revision there are four types of credit. These are as follows:
Sight Payment Credit:In a Sight Payment Credit, the bank pays the stipulated sum immediately against the exporter’s presentation of the documents.
Deferred payment Credit:
In deferred payment, the bank agrees to pay on a specified future date or event, after presentation of the export documents. No bill of exchange is involved. Payment is given
to the party at the rate of D.A 60-90-120-180 as the case may be. But the Head office is paid at T.T clean rate. The difference between the two rates us the exchange trading for the branch.
In acceptance credit, the exporter presents a bill of exchange payable to himself and drawn at the agreed tenor (that is, on a specified future date or event) on the bank that is to accept it. The bank signs its acceptance on the bill and returns it to the exporter. The exporter can then represent it for payment on maturity. Alternatively he can discount it in order to obtain immediate payment.
In Negotiation credit, the exporter has to present a bill of exchange payable to him in addition to other documents that the bank negotiates.
EXIM BANK LC nature of code
· Cash LC (sight) Foreign – 01
· Cash LC (usance) Foreign – 02
· Inland back to back LC (sight) – 03
· Inland back to back LC (usance) – 04
· Foreign back to back LC (sight) – 05
· Foreign back to back LC (usance) – 06
· LC under AID/Loan ED – 07
· LC under STA – 08
· Import from EPZ (cash LC) (sight) – 09
· Import from EPZ (cash LC) (usance) – 10
· Import form EPZ (B/B LC) (sight) – 11
· Import from EPZ (B/B LC) (usance) – 12
· Others (LC) cash LC Local sight or usance – 99
EXIM BANK BACK-TO-BACK LC COMMISSION
· Back to Back (Foreign):
1st quarter- 0.50%
(LC issue date to asperity date with in 90 days than 90 days (0.50%+0.30% = 80%)
Back to Back (foreign) other charge
Data max charge – 1000
Swift – 3000
· Back to Back (Local):
1st quarter- 0.50%
(LC issue date to expiry date with in 90 days than 90 days (0.50%+0.30% = 80%
· Back to Back (Sight Local) :
1st quarter- 0.50%
(LC issue date to expiry date with in 90 days than 90 days (0.50%+0.30% = 80%).
· Export Development fund:
1st quarter- 0.50%
(LC issue date to expiry date with in 90 days than 90 days (0.50%+0.30% = 80%)
· Export processing Zone:
1st quarter- 0.50%
(LC issue date to expiry date with in 90 days than 90 days (0.50%+0.30% = 80%).
· Export processing Zone other charge:
Data max charge – 1000
Courier charge – 200
2.3 Loan & advances
EXIM/ NJ/FR/2002/ Internal Memo
Date : 28/01/2002
The Managing Director,
EXIM Bank, Head office, Dhaka.
FM : The Vice President, Narayanganj Branch, Narayanganj.
Sub: Proposal for CC (Pledge) limit of Tk. 50.00 lac A/C M/S Banijya Bitan
a customer Of Our Branch.
We enclose herewith an application since received from the above party along with other necessary papers for your kind perusal and consideration.
The particulars of the party are as follows:
1. Name of the firm : M/S Banijya Bitan
2. Name of the proprietor : Md. Safiqul Islam
3. Business address : I) 40, S.M. Maleh Road, Tanbazar, Narayanganj.
ii) Sutapatti, Narsingdi Sadar, Narsingdi.