FOREIGN EXCHANGE TRANSACTIONS OF JAMUNA BANK LTD

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FOREIGN EXCHANGE TRANSACTIONS OF JAMUNA BANK LTD

Chapter One

Introductory Part

1.1 Introduction

Internship report is the outcomes of perfect coordination between theoretical and practical experience throughout the session of weeks. This report is on the assessment of foreign exchange dealings of Jamuna Bank Ltd.. Generated based on another’s three month practical experience with this division of Jamuna Bank Ltd.. This report mainly consists of three parts which are; Organizational part, Literature part and Learning part. The organizational part consists of various aspects of Jamuna Bank Ltd. as mission, vision, historical review, financial condition, various departments and divisions, management aspect, branches, product and services, social responsibilities etc. The later part focuses the department author worked with and the learning experiences he gathered during the session as, functions of the department, policy and practices, objectives, mission, vision, SWOT analysis, structure, activities performed by the author etc.

1.3 Objectives of the Study

The main objective of the study was to know about the financing in bank products of the Jumana Bank Ltd. Besides this we have also following objectives: To have an exposure on the financial institutions such as banking environment of Bangladesh.

  • To gain experience on different functions of banking business in Bangladesh.
  • To know about the Jamuna Bank Ltd.
  • To know about the scopes of deposit collection of the bank.
  • To know about different kinds of loans and advances those are given by the Jamuna Bank Ltd.
  • To familiarize with practical job environment

1.4 Methodology

The first step of this project was problem identification and deciding on the topic. Tin’s was achieved through consulting with the faculty advisor and the supervisor in JBL. Next the particular objectives of the project were set. Based on these objectives, the necessary data for completion of the project were identification. Next, those internal sources were identified who would be able to provide the necessary information.

After this, the data collection process began. Both primary and secondary sources were used. The primary sources of information were the concerned officials of JBL. Data were collected from them through interview. The sources of secondary information were various publications, board interview. The sources of secondary information were various publications; the data was analyzed to find out their implications. Based on those findings, the final report was completed.

1.5 Limitations

The employees of JBL had been very supportive and helpful. I helpful a lot of knowledge from them which helped me prepare this report. But in spite of these I have faced some problems that may term as the limitation of the study. These are follows:

  • It should be certainly mentioned that time constraint is the first limitation of the study. Such as short period is not sufficient for a detailed report covering all the aspects of bank products.
  • I had no opportunity to deal with some of the banking activities deeply. I just observed what the bankers were doing and how.
  • For the lack of practical knowledge and experience.
  • To analysis SWOT of emerging market is a wide spread survey material. However, time constraint restricted the report to specific feature.

Chapter: 02

Organizational Part

2.1 Background of Jamuna Bank Ltd.

Jamuna Bank Limited (JBL) is a Banking Company registered under the Companies Act, 1994 with its Head Office at Printers Building (2nd & 8th Floor), 5, Rajuk Avenue, Dhaka-1000. The Bank started its operation from 3rd June 2001.

Jamuna Bank Limited is a highly capitalized new generation Bank started operation with an Authorized Capital and Paid-up Capital of Tk. 1600.00 million and Tk.390.00 million respectively as of December 2004 the paid up capital of the Bank stands at Tk.429.00 million the number of branches raised to nineteen : 10 in Dhaka, 4 in Chittagong, 3 in Sylhet and 2 in Naogaon (including five Rural Branches & two Islamic Banking Branches). More branches are planned to be opened soon.

JBL undertakes all types of Banking transactions to support the development of trade and commerce of the country. JBL’s services are also available for the entrepreneurs to set up new ventures and BMRE of industrial units.

2.2 VISION

To become a leading banking institution and to play a pivotal role in the development of the, country.

2.3 MISSION

The Bank is committed to satisfying diverse needs of its customers through an array of products at a competitive price by using appropriate technology and providing timely service so that a sustainable growth, reasonable return and contribution to the development of the country can be ensured with a motivated and professional workforce.

2.4 JBL CORPORATE CULTURE

Employees of JBL share certain common values, which help create a JBL culture:

• The client comes first.

• Search for professional excellence.

• Openness to new ideas and new methods to encourage creativity.

• Quick decision making.

• Flexibility and prompt response.

• A sense of professional ethics.

2.5 Values

  • Service Excellence
  • Openness
  • Trust
  • Commitment
  • Integrity
  • Responsible corporate citizen

Jamuna Bank Ltd. see their customers trust as the lifeline of their business, control and compliance as license to operate, dynamic and motivated people as their strength to multiply and technology as their weapon to service excellence.

2.6 OBJECTIVES

  • To maintain CAMEL Rating ‘Strong1.
  • To establish relationship banking and service quality through development of Strategic Marketing Plans.
  • To remain one of the best banks in Bangladesh in terms of profitability and Assets Quality
  • To introduce fully automated systems through integration of Information Technology.
  • To ensure an adequate rate of return on investment.
  • To keep risk position at an acceptable range (including any off balance sheet risks)
  • To maintain adequate liquidity to meet maturing obligations and commitments.
  • To maintain a healthy growth of business with desired image.
  • To maintain adequate control systems and transparency in procedures.
  • To develop and retain a quality work force through an effective Human Resources Management System.
  • To ensure optimum utilization of all available resources.
  • To pursue an effective system of management by ensuing compliance to ethical norms, transparency and accountability at all levels.

2.7 STRATEGIES

  • To raise up capital up to Tk.1000.00 million
  • To manage and operate the Bank in the most – efficient manner to enhance financial performance and to control cost of fund.
  • To strive for customer satisfaction through quality and timely services.
  • To identify customers credit and other banking needs and monitor their perception towards our performance in meeting those requirements.
  • To review and update policies, procedures and practices to enhance the ability to extend better services to customers.
  • To train and develop all employees and provide them adequate resources so that customers’ needs can be responsibly addressed.
  • To promote organizational effectiveness by openly communicating company plans, policies, practices and procedures to all employees.
  • To cultivate a working environment that fosters positive motivation for improved performance.
  • To diversify portfolio both in the retail and wholesale markets.
  • To increase direct contact with customers in order to cultivate a closer relationship between the Bank and its customer.

2.8 Current Profile of Jamuna Bank Ltd.

Since beginning, the bank acquired confidence and trust of the public and business houses by rendering high quality services in different areas of banking operations, professional competence and employment of the state of art technology.

The bank has been restructured their five main business which are responsible for earning the revenues of the bank. These are:

  • Corporate Banking
  • Consumer Banking
  • SME Banking
  • Treasury and
  • Cards

All other department of the bank acts as support for these units and helps them in every possible way. Under this arrangement, the responsibilities and functions of those branches have been reduced dramatically. Many of the activities like credit evaluation and approval, monitoring of loans, trade services activities etc. are now centralized in the Head Office. The branches of the bank are now termed as the “sales and service Centers” which are solely concentrated on delivering services to the corporate and consumer clients and maintain relationship with them.

On account of Foreign Trade, the Bank made a significant headway in respect of import, export and inflow of foreign exchange remittances from abroad.

2.9 Management Aspects

The Jamuna Bank Ltd. Management Team comprises of a group of people and each them comes with an international working background and is committed in leveraging their experience to take JBL to greater heights by ensuring top line revenues with dynamic capabilities. This Management Team is unique in being able to envision the need of the business by bringing in admixture of advanced technology solutions know-how and revamping the organizational make-up for maximum profitability. Other than the President and Managing Director, the remaining Management Team Members each lead a functional Department.

This mix of people is persistent to provide unparallel services to its customers, come up with timely and innovative products and services and to enhance the capabilities of its people of its people while emphasizing on the latest technology. This they believe will take the bank to a foremost position in the country by the turn of the year 2008. This team is to drive the business to maximize the operational excellence and efficiency through acquisition of talent, developing systems, processes and people and through blending of these to let customers revel in with fulfillment and permanency.

Like any other business organization, all the major decisions in JBL are made by the top management committee. The board mainly establishes the objectives and policies of the bank. There are three committees of the board for different purpose:

2.10 Executive Committee

This committee is comprised of Chairman, four members of the bank and one member secretary. The functional and responsibilities of this committee is to establish and periodically review the bank’s overall credit and lending policies and procedures, development and implement uniform and minimum acceptable credit standards for the bank, new credit proposal assessment and approval etc.

2.11 Audit Committee

The main objective of this committee is to assist Board of Directors with regard to the audit of financial reports, management reports by the external auditors, internal controls and internal audits. JBL have four members in audit committee.

2.12 Management Committee

The main objective of this committee is to ensure business operations are in line with the Bank’s policies, strategies and objectives, the bank has set up. This committee consists of the Managing Director, Deputy Managing Director and different business unit heads.

2.13 Management Hierarchy of Jamuna Bank Ltd.

RISK MANAGEMENT

Bangladesh Bank as a regulatory body advised all banks to implement an effective risk management system focusing on five core risks such as I) Asset Liability Management II) Credit Risk Management III) Foreign Exchange Risk Management IV) Internal Control & Compliance V) Prevention of Money Laundering. These risks are termed as an integral part of business and such risk management and monitoring of loan portfolio was always treated with the highest priority in JBL. The bank is always trying to establish superior monitoring of its credit risks and returns, in maturity mismatch between Asset and liabilities has always been reviewed in the ALCO meeting to maintain acceptable risk. The banks credit policy guidelines and procedures as continuously reviewed and upgraded by the well-established internal credit committee. The bank also maintains an effective system of internal control, establishing systems and procedures to scrutinize the transactions, encompassing key back-up procedures and commissioning regular contingency plans. Through establishment of proper governance structure, risks and returns are evaluated with a goal of producing sustainable revenue, reducing earnings volatility and increasing shareholder’s value. JBL is always aware of classification of advances, which now stands at a negligible 0.04%.

EXPANSION OF BRANCH NETWORK

In 2004 JBL opened 4 (Four) new branches at the commercially important places of the country in Dhaka, Chittagong and Gazipur. The total number of branches stood at 19 (Nineteen) as on 31st December 2004. Out of the 4 (Four) branches 2 (Two) branches were opened at commercially important place of Chittagong and one of them at Bhatiary (Rural Branch) and the other at Jubilee Road (Islamic Banking Branch). The other 2 (Two) branches were opened at Konabari (Rural Branch), Gazipur another at DIT Avenue, Motijheel, Dhaka. The Bank has a plan to open another 4 (Four) branches at Gausia Market (Dhaka), Bogra, Hili (Dinajpur) and Narayangonj in the year 2005.

CORRESPONDENT RELATIONSHIP

Jamuna Bank established correspondent relationship with most leading international banks in 105 Countries through 316 correspondents to cover all-important financial sector of the world. JBL endeavors to increase its network of correspondent relationship with most international banks and financial institutions to cater for the expended needs of its customers globally. Drawing arrangements with the overseas exchange houses has already been established to bring home remittances into the country through the banking channel.

PRODUCT & SERVICE

The bank has an array of tailor made financial products and services. Such, products are Monthly Savings Scheme, Consumer Credit Scheme, Lease Finance, Personal Loan for Women, Shop Finance Scheme etc. JBL also introduced Q-cash ATM cards for its customers giving 24 hours banking services through Debit cards.

ON LINE BANKING

Banking sector has become very competitive and to provide more satisfaction and advantages to the customers at a very low cost, On-line banking system is the solution. The board of directors and management of Jamuna Bank Limited always aware of this fact and have eagerness for providing world class banking facilities to its valued customers. With this view a group of talented IT professionals under the excellent leadership of the Managing Director started the journey to reach the ultimate goal. JBL started its expedition at the middle of May 2004 for implementation of real time on line banking system and within a very few month and hard working of the team the bank reached the successful implementation of its on-line computerized project, which was possible due to the dedication by all the members of JBL computer team. Taking future vision for improvement of the project and minimize the cost from the very beginning JBL established centralized integrated on-line system between all of its nineteen branches. Flora Bank On-line Banking software, switching software, servers, ATM, data storage system and other hardware simultaneously set up to acquire a fully equipped data center at bank’s computer Division, Head Office. To get maximum speed for operating the On-line system, JBL contracted Square Informatics Limited and Metronet Bd. Ltd. Square Informatics Limited provides information/data through satellite and Metronet provides information/data via optical fibre. The Disaster Recovery Site (DRS) is going to be established very soon. Transfer of data from old system to on-line system started in phases and all the then existing branches were brought under the new centralized system within a short span of time. All branches were added in JBL’s On-line network at Chittagong, Gazipur and Dhaka from the first day of operation. The customer of JBL can now enjoy the world class banking service locally at a very reasonable cost through the fully automated On-line banking system. JBL is the only 3rd generation bank, going to introduce ON­LINE BANKING service.

ISLAMIC BANKING BRANCH

In the year 2004, Jamuna Bank Limited opened another Islamic banking branch at Jubilee Road, Chittagong on November 27, 2004. The already existing Nayabazar Islamic Banking Branch started its operations from October 25, 2003, the total Islamic banking branches stands at 02 (Two). The operational performance of the branches as on 31-12-2008 is shown through the Balance Sheet, Profit & Loss Account of the Islam! Banking Branches below :

31-12-2008
31-12-2008
31-12-2008
31-12-2008
For the Year ended 31st December 2008
As at 31st December 2008
As at 31st December 2008

JBL’s Shariah Council consists of 06 (Six) members, among them 02 (two) are Khatib, 01 (one) is Ex-Economic Advisor, 01 (One) is Vice chancellor, Islami University, 01 (One) is Principal and other one is Banker. During the year 2009, the Shariah council of JBL conducted 03 meetings to discuss all aspects of Islamic Branches operation.

2.15 Portfolio Management Service

Since inception, we have achieved an unparalleled reputation as a leading Merchant Banker through providing portfolio management services by maintaining a high level of professional expertise and integrity in client relationships. Keeping customer preferences as an investor in mind, Jamuna Bank Ltd. has designed Investors’ Discretionary Account (IDA) and Bank’s Discretionary Account (BDA). In these accounts the customers may enjoy loan facilities at a ratio 1:1 for investments in private placement, IPO, and secondary market operations.

Types of Accounts:

Investors’ Discretionary Account (IDA): This leveraged account is managed by the account holder through us. By this the investor bears the risk of investment and also its gain or loss.

Banks’ Discretionary Account (BDA): With this account the Bank, on behalf of the account holder, uses its discretion in managing the account. The investor lays down his/her investment objectives and the Bank designs a portfolio aligning the investors’ risk-return profile.

Operational Procedure:

Opening of the Account: Any two Bangladeshi nationals and NRB of sound mind having a minimum age of 18 years may open three IDA/BDA’s-one each in their single name and the other in their joint names.

Building of Portfolio: A diversified portfolio through investment in IPO, Private Placement and Secondary Market.

Appointment of an Operator: Account holder may appoint any existing account holder of MBW as an operator of his/her Account.

Services:

Application, Transfer and Collection of Shares and/ or Dividends: Arranged by Jamuna Bank Ltd. on behalf of the clients.

Safe Custody of Securities: Securities are kept in the Jamuna Bank Ltd. vault.

IPO and Private Placement: Jamuna Bank Ltd. furnishes the account holders, information about forthcoming IPO’s and Private Placement through FAX, e-mail and letters upon request.

Statement of Accounts: MBW of Jamuna Bank Ltd. sends portfolio information to the account holders every 6 months. Besides, the account holders may also obtain information on their portfolios any time upon request. Investors can access their portfolio any time from any part of the country through SMS and Phone Service.

Additional Services: Interest on Client’s Credit Balance: MBW pays interest @ 6.5% on client’s credit balance, if minimum Tk. 25,000 is kept with the account from the beginning to the end of a month.

Phone Service: Phone services are available.

SMS Service:Sms servicesare also provided.

2.16 Departments and Divisions of Jamuna Bank Ltd.

These are the main divisions the structures and functions of each of these divisions are described below:

2.16.1 Internal Control and Compliance

The main function of this division is to provide legal assistance to the branches and implement recovery strategy for stuck-up loan and to ensure strict adherence of rules and policies by all connected of the bank through routine and surprise inspection and audit. The functions of this division are as follows:

  • Monitor the individual cases with respect to their securities, value of securities and finally review of possibility of recovery of banks stuck-up classified loan.
  • Investigate suspicious or irregular matters being directed by higher management.
  • Time to time follow-up of advance to keep the branch under constant pressure.
  • Carryout instant audit as felt necessary.

2.16.2 Financial Institutions and Treasury

Treasury unit is a core banking unit with its leading-edge technology and steadily growing volume of activity in the markets, Jamuna Bank Limited treasury unit and currency dealing desks have consolidated its position as a well-known and well establish counterpart in the newly transformed Free Floating rate, dealing daily with a wide circle of both bank and non-bank customers all over Bangladesh. Our everyday business evolves around participation in Money Market and Foreign Exchange Market in a substantial volume.

2.16.3 Share Division

The Customer authorizes Jamuna Bank Ltd. to exchange, share, part with all information related to the details and transaction history of the Customers to its Affiliates / banks / financial institutions / credit bureaus / agencies/participation in any telecommunication or electronic clearing network as may be required by law, customary practice, credit reporting, statistical analysis and credit scoring, verification or risk management and shall not hold Jamuna Bank Ltd. liable for use or disclosure of this information.

2.17 A Finance Division

Finance division is very significant division for any Bank, the main objectives of Finance Division are:

  • Maintain daily liquidity positions, treasury bills, call money, debentures, placement of fund etc.
  • Monthly-accrued interest assessment of all interest bearing accounts, inter-branch assessment, and amortization of all fixed and other assets.
  • Preparation of statement of accounts and profit and loss account for the Bank.
  • Cost of fund analysis.
  • Fulfilling reporting requirements of Bangladesh Bank.
  • Maintenance of accounts, income and expenditure posting, salaries, Provident Fund etc.

2.17.1 Credits

The Credit Risk Management Department is assisted by the Credit Division which is mainly concern with the post-approval functions of the division. Duties and responsibilities of Credit Division are too focused on documentation, sitting the limit of system, monitoring and disbursement of credit products. Credit Division censures that no transactions are booked under expired limits or lines of credit accounts where security documentation or collateral have not been perfected.

2.17.2 Retail Banking

Under retail banking JBL provide two types of loan, these are:

  • Unsecured Loan
  • Secured Loan

The Unsecured loans are:

  • Personal Loan
  • Auto Loan
  • Easy Loan (For Executives)
  • Gold Grace – Jewellery Loan
  • House/Office Furnishing/Renovation Loan
  • Staff Loan
  • Education Loan

The Secured Loans are:

  • Personal Loan
  • Personal Overdraft

2.17.3 Business Banking Division

Alongside providing the best service to the client, patronizing and taking part in social development activities as well as making due contribution to growth of the national economy.

2.17.4 Corporate Affairs

At Jamuna Bank Ltd. provides complete range of solutions to meet Corporate Customers requirement. JBL Corporate Banking solutions include a board spectrum of products and services backed by proven, modern technologies. JBL specialist terms offer a comprehensive service providing finance to large and medium-sized businesses based in Bangladesh.

2.17.5 Investment Banking Division

Jamuna Bank Ltd. generally does four types of Investment Banking Services. They are:

  • Merchant Banking Wing
  • Custodial Service
  • Brokerage Service
  • Future Products.

2.17.6 Jamuna Bank Ltd. Foundation

Jamuna Bank Ltd. Foundation (JBL) is a subsidiary company of Jamuna Bank Ltd. having holding 99.60% shares of the JBF. The company was first established under the trust deed constituted and registered on the 14th day of May 2002. Subsequently the trust by a resolution of its Board of trustee in its 3rd meeting held on 29.12.2002 resolved to cancel the Trust Deed and utilize the trust fund for the foundation of a company limited by guarantee primarily for charitable purpose. Then the company was incorporated on 3rd day of November 2003 under section 28 of Companies Act 1994, a company limited by guarantee. The certificate of incorporation is C-558(10)/2003.

2.17.7 Merchant Bank Wing

Jamuna Bank launched its Merchant Banking Wing (MBW) operations in the year 2003. Financial statements of Merchant Banking Wing have been audited by a separately appointed independent auditor. Assets-liabilities and income-expenditures of that Wing are incorporated in similar heads of account of the Bank’s financial statements. As a fully fledged merchant banker, JBL provide the following services:

· Portfolio Management

· Issue Management

· Underwriting

· Corporate Advisory

· Bankers to the Issue

· Private Placement

2.18.1 Corporate Banking

At Jamuna Bank we provide complete range of solutions to meet Corporate Customers’ requirement. Our Corporate Banking solutions include a broad spectrum of products and services backed by proven, modern technologies.

Corporate Lending

Our specialist teams offer a comprehensive service providing finance to large and medium-sized businesses based in Bangladesh. For more information as to how we might best meet your corporate debt needs, please contact us at our Corporate Head Office.

Structured Finance

We have a specialist Structured Finance Team who arrange and underwrite finance solutions including Debt and Equity Syndication for financial sponsors, management teams and corporate. Also we provide corporate advisory services. We aim to provide tailored financing solutions with a dedicated team who can rapidly respond to client needs.

Following are some of the products and financial tools of Corporate Banking:

  • Project Finance
  • Working Capital Finance
  • Trade Finance
  • Cash Management
  • Syndicated Finance, both onshore & off-shore
  • Equity Finance, both onshore & off-shore
  • Corporate Advisory Services

2.18.2 SME Banking

Considering the volume, role and contribution of the SMEs, in the last two decades Jamuna Bank has been patronizing this sector by extending credit facilities of different types and tenor. As of now 54% of the bank’s total loan portfolio is segmented to the SMEs which deserve all out attention in our plans, projections and forecasting.

As such the bank has emphasized on the following issues:

  • To provide the best services to the SME sector
  • To increase the SME portfolio of JBL significantly
  • To improve the quality of JBl’s portfolio

2.18.3 Large Loan & Project Finance

  • In order to cater the demand of client Jamuna Bank has segmented its portfolio in terms of loan size. As per this segmentation any loan over Tk. 10.00 Crore falls under the purview of Large Loan Unit.
  • In Jamuna Bank, there is also a separate Project Finance unit who evaluate the business. The unit is entrusted to handle the portfolio in a focused manner. Jamuna Bank is always in fore front to support establishment of new projects of diverse nature which will help to broaden the manufacturing arena vis-a-vis to generate to employment.

2.18.4 Islami Banking

To provide the Islamic banking services in accordance with the principles of Islamic Shariah, Jamuna Bank has established Islamic Banking Wing and started it’s functioning by opening full-fledged Islamic banking branch on27.11.2004.

The goals and objectives of Islamic banking Wing are as under:

  • To facilitate the Islamic banking system in the country
  • To create new entrepreneurs and to arrange required finance for them
  • To play effective role for socio economic development of the country
  • To give assistance in launching welfare oriented economic system under Islamic values

Under this wing Jamuna Bank extends the following Islamic banking services:

  • Deposit services
  • Investment services

2.18.5 Cards

In the present context of banking business in the world, Card is the future of any bank. Electronic payment system is now ruling the world and some days from now cash transactions system will turn into a history found only in the text book.

Jamuna Bank Limited is one of the leading first generation private sector commercial banks with Branch Network all over the country. The Bank started issuing VISA Credit Cards from the end of year 2004 as a principal member of VISA International.

2.19 Corporate Social Responsibiiities of the Jamuna Bank Limited

In this 21st century, the social responsibility of an organization is unavoidable. The societal marketing concept holds that the organization should the needs wants and interest of the target markets. It should then deliver superior to customers in a way that maintains or improves the consumer’s and the society’s well-being.

In every year JBL contribute their in various types of social activities. These are; awarding the talent student, monetary contribution in the disable fund, contribute increasing public awareness and they also invest for beatification. JBL contribute for the Sidor affected people. No one in society can avoid the due responsibilities, JBL position is positive in this regard and they wish to find a suitable segment to work with the future to meet the corporate social responsibility.

Chapter-3

Foreign Exchange

3.1 Introduction of Foreign Exchange

Foreign Exchange means foreign currency. H.E. Evitt define “Foreign Exchange” as the means and methods by which right to wealth expressed in terms of the currency of one country are converted into right to wealth in terms of the currency of other country. International trades are a common occurrence and normally benefit both the exporter and importer. In many countries, international trade account for more than 20%of their national income.

Foreign Exchange department is the international department of a bank. It deals with globally and facilities internationally trade through its various services. It bridge between importers and exporters.

The trade among various countries causes for close linkage between the parties involved. In Bangladesh, the bank that facilities such transaction is referred to as Authorized Dealer certified by Bangladesh Bank.

International trade demands a flow of both goods from seller to buyer and payment from buyer to seller. This flow of goods and payments is done through credit instrument, for example, Letter credit, Bill-of exchange etc.

3.2 Meaning of Foreign Exchange

As more than one currency is involved in foreign trade, conversation of one country into other country is necessary. This is why; foreign exchange refers to the process or mechanism by which the currency of one country is converted into currency of other Country.

Foreign exchange has three principal meanings. These are as follows:

First: It is a team popularly used to denote a foreign currency. For example, dollar, pound. Derham etc, are foreign exchange.

Second: It means credit instruments, which arc capable of being used as currency and/ or

convey to holder a right to wealth.

Third: It means Bank balances and deposits in foreign currency.

In terms of section 2(d) of the foreign exchange regulations 1947. as adopted in Bangladesh, Foreign Exchange means foreign currency and includes any instrument drawn, accepted, made or issued under clause (13) of article 16 of Bangladesh Bank order, 1972 all the deposits, credits and balances payable in any foreign currency and draft cheque, letter of credit and bill of exchange expressed or drawn in Bangladesh currency but payable in any foreign country.

In exercise of the power conferred by section 3 of the foreign exchange regulation, 1947 Bangladesh Bank issue license to schedule bank to deal with exchange. These banks are known as Authorized Dealers. Licenses are also issued to persons or farms to exchange foreign currency instrument. They are known as Authorized Money Changer.

3.3 Foreign Exchange Regulation Item

3.3.1 Local regulation for foreign exchange

Our foreign exchange transaction is being controlled by the following rules and regulations:

Foreign exchange regulation act 1947.

  • To regulate foreign exchange, Bangladesh bank has published a book namely “Guideline for foreign exchange transaction” volume I & 2. it is amended after every five years.
  • Bangladesh Bank issues foreign exchange circular from time to time to control the export, import and remittance business.
  • Ministries of commerce issues export and import policy giving basic formalities for export and import business.
  • Some CCI & E issues public notice for any kind of change in foreign transaction.
  • Bangladesh Bank published two volumes in 1996. This is compilation of the instructions related to foreign exchange.

L/C commission and other charges are realized from the party before L/C is opened. Notion amount may he realized as FCC (Foreign Correspondent’s Charges). FCC is kept separately in an account and this entry may be reversed as and when the debit advice is received from the foreign correspondent by passing voucher for actual amount. If there is any shortfall, the same is to be realized from the party.

3.3.2 International regulation of foreign exchange

There are also some international organizations influencing our foreign exchange transaction. Few of them are discussed below:

  • International chamber of commerce (ICC) is a world wide nongovernmental organization of thousands of companies. It was founded in 1919. ICC has issued some publications like UCPDC, URR & URC etc. which are being followed by all the member countries. There is also an international court of arbitration to solve the international business disputes.

3.4 Function of Foreign Exchange Department of Jamuna Bank Limited

  • Remittance

i. Insurance of DD, MT, TT etc.

ii. Payment of DD, MT, TT etc

iii. Insurance and enliarl4ment of travel’s Cheque.

iv. Sale and enfiariement of foreign currency notes.

v. Maintaining on non – resident account.

  • Import

i. Opening of letter of credit

ii. Advance bills

iii. Bills for collection

iv. Import loan and guarantees

v. Dollar endorsement.

  • Export

i. Pre – shipment advances

ii. Purchase offoreign bills

iii. Negotiation of foreign bills

iv. Export guaranties

v. Advising/ confirming later of credit

vi. Advance against bill for collection

3.5 Foreign Remittance

Foreign Remittance means remittance of foreign currencies from one place/ person to another place/ person. In broad sense, Foreign Remittance includes all sale and purchase foreign currencies on account of import, export, travel acid other purpose. However, specifically foreign remittance means sale and purchase of foreign currencies for the purpose other than export and import.

3.5.1 Types of Remittance

All foreign remittance transactions are grouped into two broad categories –

1. Foreign inward remittance.

2. Foreign outward remittance

3.5.1.1 Foreign Inward Remittance

Inward remittance covers remittance on account of export and private remittance on sundry items, purchase of traveler’s cheque, foreign currency note and coins. Actually, inward foreign remittance received in from abroad through normal banking channel in the form of foreign TT, MT, DD, Cheque, Bills, and Draft TCs etc. favoring a beneficiary in Bangladesh.

Two forms as prescribed by Bangladesh Bank are used for purchase of foreign currencies such as-

  1. EXP From: remittancesved against exporters of goods fro
  2. Bangladesh are done by from EXP. b. Form C: Inward remittance equivalent – to US$2000 and above are done by form C. however declaration in form C is not required in case of remittance by Bangladesh nations working abroad.

3.5.1.2 Purpose of Inward Remittance

    • Family maintenance
    • Indenting commission
    • Donation
    • Gift
    • Foreign investment
    • Others

3.5.1.3 Mode of inward remittance

  • Telegraphic Transfer (TT)
  • Mail Transfer (MT)
  • Foreign demand draft (FDD)
  • Payment Order (PO)
  • Traveler’s Cheque (TC)
  • Foreign Currency Note

3.5.2.1. Foreign outward remittance

The term outward remittance include not only remittance i.e. sale of foreign currency by 17, MT, Draft, traveler Cheque but also includes payment against imports into Bangladesh and local currency credited to non-resident Taka account of foreign banks or convertible Take account. Two forms are used for outward remittance of foreign currency such as:

a. IMP Form: All outward remittance on account of imports is done by form IMP.

1). TM Form: For all other outward remittances form tin is used.

3.5.2.2 Mode of outward remittance

  • Foreign Telegraphic Transfer (FTT)
  • Foreign Mail Transfer (FMT)
  • Traveler Cheque (TC)
  • Foreign Currency Note

3.6 Import Operation

Import means to bring in goods from abroad that may be in the form of goods or service. Import of goods takes in a country when the country is in a storage of that product or of purchasing it from abroad is cheaper. An importer must have import registration certificate (IRC) issued by chief controller of import and export (CCI and E) to import goods from other country. To obtain import registration certificate, the document required are discuss as follows:

  • Trade license
  • Income tax clearance Certificate
  • Nationality certificate
  • Asset certificate
  • Bank solvency certificate
  • Registration partnership deed (if any)
  • Memorandum and Article of association
  • Certificate of incorporation (if any)
  • Rent receipt of the business premises
  • Certificate from Chamber of Commerce and Industry

3.6.10bjective of import policy

Government of Bangladesh is sincerely committed to fostering a gradual development of free market economy in the light of WTO agreement. In the interest of export promotion and investment in the country it is necessary to have a long term, stable, facilitative and liberal import policy. The main objects of the current import policy are:

  • To make the import policy compatible with the changes in the world market that has occurred as are suit of the introduction of market economy and singing of the WTO agreement.
  • To simplify the procedures for import of capital machinery and industrial raw materials with a view to promoting export.
  • To ensure growth of the indigenous industry and availability ol’bigh quality goods to the consumers at a reasonable price.

3.6.2 Import procedure

To import through Jamuna Bank Limited a Customer / Client require a set of documents which arc to be produced before the concerned official of the foreign department. The following are the required documents:

  • Bank Account
  • Import Registration certificate
  • Tax paying identification number (TIN)
  • Pro-forma Invoice / Indent
  • Membership Certificate
  • L/C application form dully attested
  • One set of IMP Form
  • Insurance Cover None with money receipt
  • Others

IMP Form

This form is prepared for maintaining account of the money, which goes out side the country for the purpose of payment. This form is required by Bangladesh bank. It is an application for permission under 4/5 of the foreign exchange regulation act 1947 to purchase foreign currency for the payment of import.

IMP form has four copies

1. Original copy of Bangladesh Bank

2. Duplicate copy for authorized dealers. It is issued for processing exchange control copy of bill entry or certified invoice

3. Triplicate copy for authorized dealer’s record

4. Quadruplicate copy for submission to the bank in case of import where documents are retired.

Following documents are sent with form-IMP

1. letter of credit Authorized Dealer

2. One copy of invoice

3. Indent copy / performs invoice

The folio-,vino information is including in the Form-IMP

  1. Name and address of the authorized dealer
  2. Amount of foreign currency in words and figures
  3. Name and address of the beneficiary
  4. L/C authorized form number and date
  5. Registration of L/C authorized form with Bangladesh Bank and description of goods

3.6.3 Import Mechanism

According to Import and Export control Act 1950, a person should be competent Importer to import. The chief controller of import and Export office provides the registration certificate to the importer. After the importer has to secure a Credit Authorization from Bangladesh Bank and then the importer will be a qualified importer.

After that the importer is the person who request or instructs Arab Bangladesh Bank Limited, the opening bank, to open L/C. therefore the importer is also called opener or applicant of the credit.

3.6.4 Importer Application for L/C Limit

An importer submits an application to the department of Arab Bangladesh Bank limited furnishing the following information. A sample of the application appears the index of this report…

I. Full particulars of bank account

2. Nature of business

3. Required term and conditions

4. Goods to be imported

5. Offered security

6. Repayment schedule

A credit officer scrutinizes this application and accordin8ly prepares a proposal called credit limit Proposal (CLP) and forwards it to be the head office credit committee (HOCC). If the committee satisfied, the limit proposal sanctioned and returned back to the branch. Thus the importer is entitled for the limit.

3.6.5 Procedures of Opening L/C to Import

To open an L/C the requirements of an importer are:

• He must have an account in JBL

• He must have Importer Registration Certificate (IRC)

• Report on past performance with other bank. JBL collects this report from Bangladesh Bank

order, 1972 all the deposits, credits and balances payable in any foreign currency and draft cheque, letter of credit and bill of exchange expressed or drawn in Bangladesh currency but payable in any foreign country.

In exercise of the power conferred by section 3 of the foreign exchange regulation, 1947 Bangladesh Bank issue license to schedule bank to deal with exchange. These banks are known as Authorized Dealers. Licenses are also issued to persons or farms to exchange foreign currency instrument. They are known as Authorized Money Changer.

3.7 Foreign Exchange Regulation Item

3.7.1 Local regulation for foreign exchange

Our foreign exchange transaction is being controlled by the following rules and regulations:

Foreign exchange regulation act 1947.

  • To regulate foreign exchange, Bangladesh bank has published a book namely “Guideline for foreign exchange transaction” volume I & 2. it is amended after every five years.
  • Bangladesh Bank issues foreign exchange circular from time to time to control the export, import and remittance business.
  • Ministries of commerce issues export and import policy giving basic formalities for export and import business.
  • Some CCI & E issues public notice for any kind of change in foreign transaction.
  • Bangladesh Bank published two volumes in 1996. This is compilation of the instructions related to foreign exchange.

L/C commission and other charges are realized from the party before L/C is opened. Notion amount may he realized as FCC (Foreign Correspondent’s Charges). FCC is kept separately in an account and this entry may be reversed as and when the debit advice is received from the foreign correspondent by passing voucher for actual amount. If there is any shortfall, the same is to be realized from the party.

3.7.2 International regulation of foreign exchange

There are also some international organizations influencing our foreign exchange transaction. Few of them are discussed below:

  • International chamber of commerce (ICC) is a world wide nongovernmental organization of thousands of companies. It was founded in 1919. ICC has issued some publications like UCPDC, URR & URC etc. which are being followed by all the member countries. There is also an international court of arbitration to solve the international business disputes.

3.8 Procedures of Opening L/C to Import

To open an L/C the requirements of an importer are:

• He must have an account in JBL

• He must have Importer Registration Certificate (IRC)

• Report on past performance with other bank. JBL collects this report from Bangladesh Bank

  • CIB (credit information bureau) report from Bangladesh Bank
  • A proposal approved by the meeting of executive of the bank. It is necessary only when the L/C amount is smaller or there is no limit
  • If the L/C amount is large or there is a limit, then an approval from Bangladesh Bank is needed. Usually this approval is needed for amount more than one crore.

Opening of L/C means, at the request of the applicant (importer), issuance of an L/C in favor of the beneficiary (exporter) by a Bank. The bank, which opens or issue L/C called

L/C opening bank. Throughout this report the term “opening bank” conveys the same meaning.

3.9 Accounting Treatment for Opening L/C

For opening L/C, importer will apply to the issuing bank. In that case , importer is called applicant or opener. After opening an L/C bank will create a contingent liability. In that case, the accounting posting will be the following:

Contingent liability Dr.

Customer liability Cr.

Then the issuing bank will give another entry:

Payment against document (PAD) Dr.

Al 3131, general A/C Cr.

Exchange gains Cr.

JBL general account is a miscellaneous account. It will be credited by this entry JBL creates a liability. Fie has to pay the money to the advising bank. And the gain made by the transaction is shown at exchange gain account.

All these entries are made after receiving some documents from the exporter. The above producer is called lodging.

After giving the entry, importers pay the money and collect the document.

Party account Dr.

PAD account

r. Margin & Bank charges:

Party account Dr.

Margin account Cr.

Commission Cr.

Postage__________ Cr.

3.10 Liability of Issuing Bank

As per article 9(a) of UCPDC 500, all Irrevocable Credit constitutes a definite undertaking of the issuing Bank, provided the stipulated comply with the terms and conditions of the credit.

3.10.1 Advising of Letter of Credit

Advising through a bank is a proof of evident authority of the credit to the seller (Exporter). The process of advising a credit consists of forwarding the original credit to the beneficiary to whom it is address. Before advising L/C, the advising Bank must see the following points:

  • Signature of the Issuing Bank officials on the L/C verified with the specimen signature
  • L/C test code is invariably be agreed and authenticated by two authorized officers.
  • L/C is scrutinized thoroughly complying with requisites of concerned UCPDC provisions.
  • Entry made in the I,/C Advising Register.
  • L/C is advised to the beneficiary (Exporter) promptly and advising charges recovered.

3.10.2Advising Bank Liability

Advising liability is fixed up in uniform customer and practice for documentary credit, publication 500.

Article 7(a): Credit may be advised to a beneficiary through another bank (the advising) without engagement oil the part of the advising bank, but the bank, if selects to advise the credit, shall take reasonable care to check the apparent authentically of the credit which it advises. If the bank elects not to advise the credit, it must uniform the issuing bank without delay.

Article 7(b): If the advising bank cannot established such apparent authentically it must inform delay, the bank which the instructions appear to have been advised that it has been unable to established the authentically of the credit and if it elects to advised the credit it must inform the beneficiary that it has not been able established the authentically of the bank.

3.10.3 The Conforming Bank

If the advising bank also add its own undertaking to honor the credit while advising the same to the beneficiary, he becomes the Conforming Bank, in addition becomes liable to pay for documents in conformity with the L/C terms and conditions.

3.10.4 The Beneficiary Varies the Letter of Credit

  • The letter of credit terms arc in conformity with terms of the original contract of sale.
  • That no derogatory terms are added to the letter of credit.
  • That lie is in a position to ship the consignment within the shipment date stipulated in the letter of credit.
  • That letter of credit ensures him payment upon tending of export document.

The beneficiary sees any change to contract of sale or if he feels any amendment, lie will inform the advising bank thereof.

3.10.5 L/C Amendment

After opening of L/C, the importer may feel necessary to delete, add or alter some of the clause of the credit. All there changes are communicated to the beneficiary through same advising bank of the credit.

Parties involve in an L/C, particularly the seller and buyer cannot always satisfy the terms and conditions in full as expected due to some obvious mid genuine reasons. In such a situation, the credit should be amended. BA transmits the amended by tested telex to the advising bank. In case of revocable credit it can be a