Remittance Management System (RMS) of Sonali Bank Limited
CHAPTER ONE
INTRODUCTION
1.1 INTRODUCTION
Sonali Bank Limited, the largest Commercial Bank in Bangladesh was established in 1972 under Presidential Order No. 26 of 1972. The bank is fully owned by the government of the People’s Republic of Bangladesh. The Bank had 1186 branches including two overseas branches(Kolkata and Siliguri in India) as on 31st December 2004. Out of total 1186 branches, 696 are operating in the rural areas and 488 in the urban areas. Besides, 25 booths under different branches are performing specialized functions at different locations.
Sonali Bank Limited discharge the treasury function as the agent of the Bangladesh bank. It collects tax, Stamp duty and registration fees, Operate special savings account, pay salaries to the teachers of Schools, madrashas and colleges and pension to the retired govt. employees. The bank provides funding to some income generating and economic development project namely, poverty alleviation credit programme, female special credit programme and agro based industrial programme in the rural areas. It has large participation in foreign Exchange business and off balance sheet activities.
Sonali Bank Limited performs all traditional banking functions including deposit mobilizations and lending under 3(three) main sections namely- General banking section, advanced banking section and Foreign Exchange section. Accounts Maintaining, Cash department and Remittance are the main section of general banking. All types of accounts like Current accounts, Saving accounts, Fixed Deposit Account, Short Term Deposit account, Deposit Pension Scheme Account, Call Deposit Account etc, their opening and closing procedure all this maintain in the Account Maintaining section. All types of cash receive and payment are done by the Cash Department and Inland and outland Remittance are done by the Remittance Section. Advanced banking section deals with different types of lending mainly Short-term loans; Mid and long-term loans and Industrial Credit. Short-term loans divided into various types of loans and advances, such as Overdrafts, Cash credit (Pledge, hypothecations), Small loans, Agriculture loans (crop hypothecations), Rural hosing, and Rural transportation etc. Mid and long term loans also divided several types of loans. Some of them are Agro based industries, Frozen food, Computer Software and Information Technology, Export oriented industries, CNG filling stations, Pharmaceutical industries, Chemical industries, Paper industries etc. Foreign Exchange section consists of three sections namely-Import Sections, Export Sections And Foreign Remittance Section.
1.2 Objective of the study
The specific objectives aimed for this study are:
- To highlight and evaluate General banking and Advance banking system.
- To discuss about foreign Exchange banking.
- To highlight about Remittance Management System (RMS).
1.3 Research methodology
Information used to prepare this report has been collected basically from secondary data source. The secondary sources of information were collected from Central Accounts Department, IT Division, (head office), Wage Earners Corporate Branch, Dhaka, annual reports ,materials from various newspapers and articles and web sites.
1.4 Sources of Secondary data
- Annual reports of the Sonali Bank Limited
- Consolidated Income Statements and Balance Sheets
- Official records of the bank
- Some published research report, books, journals, articles and policy matters.
- Web site
1.5 Limitations of the study
- Difficulty in collecting existing data because of company secrecy etc.
- The record system of the annual report is not efficient
- Lack of access to many sections of the organization
- Time is not sufficient to complete the study perfectly.
1.6 Coverage of the study
The report covered four major areas of Sonali Bank Limited, which are:
- General Banking Section
- Advanced Banking Section
- Foreign Exchange section
- Remittance Management System (RMS)
CHAPTER TWO
ANALYSIS AND FINDINGS
2.1 BACKGROUND
Sonali Bank, the largest Commercial Bank in Bangladesh was established in 1972 under Presidential Order No. 26 of 1972. The bank is fully owned by the government of the People’s Republic of Bangladesh. The Bank had 1186 branches including two overseas branches (Kolkata and Siliguri in India) as on 31st December 2004. Out of total 1186 branches, 696 are operating in the rural areas and 488 in the urban areas. Besides, 25 booths under different branches are performing specialized functions at different locations.
From 10 December 2002 Sonali Bank (UK) Ltd (a joint venture company of Sonali Bank And Govt. of Bangladesh) has been operating to channelise banking activities covering the whole Europe.
A subsidiary company named Sonali Exchange Co. Inc. was incorporated on 4 April 1994 under the laws of the State of New York; Department of State licensed on 17 October 1994 by the State of New York Banking Department and commenced operation as an International Money Transmitter from 12 December 1994 through which Bangladeshi citizens living in the USA are conveniently remitting money to Bangladesh. There are three representative offices of Sonali bank in Jeddah and Riyadh of KSA and another in Kuwait engaged in motivating Bangladeshi expatriates living there to remit money through banking channel.
In 15 november 2007 the bank started its new journey, changed its structure named Sonali Bank Limited. Now it is governed by a Board of Directors consisting of 09(nine) members headed by a Chairman. Mr. Ali Imam Majumder, who wasposted as the Principal Secretary of the Government of Bangladesh on 31-10-2006 and serving in this position till date and Assumed the current responsibility of the Cabinet Secretary in the afternoon of 06-12-2006 when Mr. Sirajuddin Ahmed Chowdhury is the Chief Executive Officer / Managing Director. Slogan of Sonali Bank Limited-
“ YOUR TRUSTED PARTNER IN INOVATIVE BANKING ”
2.2 Management of Sonali Bank
Sonali Bank is operated by a board of directors, which is composed of seven members. Of the seven members, one is the Chairman who is appointed by the Government. All the board members are given appointment for a term of three years.
List of Board Of Directors
| SLNo | Name | Designation |
| 1 | Mr. Ali Imam Majumder | Chairman |
| 2 | Mr. Sheikh Abdul Hafiz, FCA | Director |
| 3 | Mr. Md. Shafiqur Rahman Patwari | Director |
| 4 | Mr. Md. Humayun Kabir | Director |
| 5 | Brig. Gen. M. Zahirul Islam, PSC, G | Director |
| 6 | Dr. Md. Idris Ali Dewan | Director |
| 7 | Mr. Iqbal Mahmood | Director |
| 8 | Mr. A.K.M Nozmul Haque | Director |
| 9 | Mr. Abdul Waheed Khan | Director |
2.3 Mission Of Sonali Bank Limited
· To Provide all kind types of banking service at the doorsteps of the people.
· To establish a countrywide information network system to facilitate monitoring and to improve the quality of service of the bank.
· To provide general advances in different sectors to up-gearing the economic activities.
· To promote the economic development of the country as well as increase per capital income.
· To provide term loan to establish new industries to create opportunities for new employment.
2.4 Vision of Sonali Bank Limited
The vision of the bank is to poverty alleviation with the collaboration of government participating in various social and development programs and takes part in implementation of various policies and promises made by the government.
2.5 Objectives of Sonali Bank Limited
The main objective of the Bank is to provide all types of banking services at the doorsteps of the people of the nation. The bank also participates in various Social and development programs and implements policies and commitments of the Government.
2.6 Corporate Profile of Sonali Bank Limited
RANK :
Country Rank :1
Asian Rank (Asia week, 14 September, 2001) :282
World Bank (The Banker’s almanac, volume-3 July,1999) :925
CAPITAL STRUCTER :
Authorized Capital : Tk. 1000 crore
Paid up Capital : Tk. 327.10 crore
Par value : Tk. 100
BRANCHES AND SUBSIDIARIES :
Head Office :Motijheel, Dhaka.
Number of GM Office :7
Number of Principal Offices :30
Number of Regional Offices :32
Number of Corporate Offices :21
Number of Branches :1188
Branches in Urban areas :488
Branches in Rural areas :696
Overseas branches :2
Subsidiary branches/booths in UK & USA :15
Representative Office in KSA & Kuwait : 3
Correspondents/agents : 381
Employees : 24215
2.7 Organization Structure of Sonali Bank
2.8 Overview of the nature of business:
The principal activities of the bank are to provide all kinds of commercial banking services to its customers. It also performs Government Treasury functions as an agent of the Bangladesh Bank where there is no Bangladesh Bank. The export and import trade of Bangladesh with Socialist Countries under various barter agreements are mainly handled by the Bank. Summarizing below the activities taken up by the bank is:
To provide all kinds of commercial banking services to its customers authorized by Bangladesh Bank
To perform Government Treasury functions also as an agent of the Bangladesh Bank.
The export and import trade of Bangladesh with Socialist Countries under various barter agreements are mainly handled by the Bank.
International Banking.
2.8.1 Deposit and Other Accounts:
Total deposit of the Bank as on 31 December 2004 stood at Tk. 25,223 crore which shows an increase of Tk. 2,190 crore over that of the preceding year. The rate of increase in deposit was 9.50%. Total deposit-comprised demand deposit Tk. 6,644 crore and time deposit Tk. 18,579 crore . In terms of Govt., Public and Private Sector the deposits are Tk. 2,733 crore (10.84%), Tk. 4,432 crore (17.57%) and Tk. 18,058 crore (71.59%) respectively.
2.8.2 Advances:
The Bank has continued its lending operation in the productive and priority sectors covering Agriculture, Industry, Trade and Commerce. Total loans and advances of the bank as on 31 December 2004 stood at Tk. 16,828 crore which is 8.43% higher than that of the preceding year. Govt., Public and Private sector the total Loans and Advances are Tk. 346 crore (2.06%),Tk. 2,531 crore (15.04%) and 13,951 crore (82.90%) respectively. Loans and Advances in the preceding year was Tk. 15,520 crore.
2.8.5 Investment:
Besides sanctioning loans and advances the bank makes investment in various approved securities. Total amount of investment in Government, Public and Private sectors in 2004 was Tk. 6,758 crore that is 5,307 crore, 311 crore and 1140 crore respectively.
2.8.6 Foreign Exchange Business:
The bank with its 42 authorized branches including 2 wage earners branches and 381 foreign correspondents and agents located in different countries of the world is dealing in all types of foreign exchange business.
The total foreign exchange business of the bank for the year 2004 was Tk. 21,913 crore as against TK. 16,602 crore in 2003, which exceeds the previous year’s business by Tk. 1,454 crore.
2.8.7 RURAL BANKING & MICROCREDIT
Rural lending continues to be one of the core lending programs of Sonali Bank. Sonali Bank stepped into rural lending in 1973. Any comparative study would clearly depict Sonali Bank’s supremacy in the Rural Finance Market over other private or public sector commercial banks in Bangladesh. All the on-going rural and micro finance outlets of Sonali Bank aim at increasing agricultural output, promote agro-based Small and Micro Enterprises (SMEs), facilitate agro-based support services, create and sustain employment opportunities through linking the rural and urban poor to the various Income Generating Activitis (IGAs) and reduce poverty. Sonali Bank’s Rural / Microcredit has been channeled through a wide network of 1073 rural branches.
Broadly, Sonali Bank’s rural and micro credits are of following categories:
Program Credit:
These outfits aim at addressing the credit need of the mainstream agriculture ( viz. cereal crops, tubers, pulses, oilseeds, etc.) and agro-sub-sectors (viz. dairy, poultry, fisheries, hatchery, etc.) as well as agro-offshoots ranging from medium term as in small and medium agro-enterprises to long term as in agro-based industries.
The programs include Special Agricultural Credit Program (credit to subsistence and marginal farmers as well as share-croppers for raising seasonal crops)
· Financing the poor and subsistence farmers grouped under formal cooperative societies.
· Finance to agro-based Small and Micro Enterprises (SMEs) under a scheme named Special Investment
· Finance to Agrobased Industries.
· Finance to various farm and off-farm micro enterprises.
Credit to agro-support sectors (viz. various irrigation equipments, agricultural implements, tractors, powerteler etc.
Supervised Credit: These programs predominantly aim at reducing the level of poverty and generate self-employment opportunities with the core objective of improving the quality of life.
Linkage Credit: These credit outlets have been the collaborative efforts and eventually aim at reaching the targeted hardcore rural and urban poor, socially as well as technically mobilized and prepared by Partner Organizations (NGOs and
2.8.8 Computerization:
Sonali bank entered into the world of office automation system in order to keep pace with the rapid changing global market economy and to pave the way for materializing different policies adopted in internal banking activities. With a view to actualize these objectives Sonali Bank installed an IBM Mini computer at its Head Office in December 1989. Subsequently an IBM RISC System (RS/6000) and an OS/2 LAN System were added. Presently inter-branch reconciliation, loan classification, payroll of head office employees, treasury function, maintenance of provident fund accounts of bank’ staff and officers, maintenance of personal profile of all officers of the bank, preparation and sending of CIB information to Bangladesh Bank through diskettes, maintenance of data of Special recovery cell, preparation of Foreign exchange on daily basis, maintenance of credit information of big borrowers, clearing house operation etc. have been brought under the purview of computerization. Inter branch reconciliation, the biggest computerized job that had been run and processed in Mini Computer at Head office has been shifted to reconciliation Division in an IBM RISC based LAN there.
A total of 114 branches at home have been computerized of which 39 branches are providing ‘one stop service’. Sonali bank has joined the SWIFT network. At present 12 branches of the bank are connected with SWIFT network. Sonali bank recently launched ATM card also. All the employees of Sonali bank, head office now enjoy this facility.
2.8.9 IT PROJECT FINANCING
For growing international markets for software and data processing this scheme provides long term and short term credit facilities on easier terms to set up and run IT ased projects.
Eligibility: Entrepreneurs,of them at least two with recognized degree/diploma in Computer Science or Electrical Engineering / Telecommunication / Applied Physics & Electronics, forming a private limited company may apply. Experience in the related field will be preferred.
Loan Limit: Maximum Tk. 1.50 million. In deserving cases, upto Tk.10.00 million may be considered.
Debt-EquityRatio: 80:20.
Period: Maximum 6 years including 1 year grace
period.
Security: In case of Rented premises collateral of immovable at least covering prayed loan is needed. in case of project with own land & building no collateral security other than the personal guarantee of the loanees is required. Entrepreneurs offering collateral security will be preferred.Or Loan may be consider with personal guaranty of worthy person(s) (Third party) and in such case original certificates on academic achievements of the sponsor are required.
Interest Rate: 9% p.a.
2.8.10 IT EXPORT FINANCING
For export of software and processed data short term finance is extended to existing IT projects.
Eligibility : Feasibly implemented and properly staffed IT projects with export L/C or firm contract in hand may apply. Export through settlite, BTTB confirmation required.
Loan Limit : Tk. 1.00 million. For larger contract higher amount may be considered.
Debt-Equity Ratio: 90:10.
Period: L/C or Contract period plus 21 days but not exceeding 180 days from the date of disbursement.
Security: No collateral security other than the personal guarantee of the loanees is required.But for loan amount exceeding Tk. 1.00 million collateral will be required.
Interest Rate: 7% p.a.
2.8.11 UTILITY SERVICE
Sonali Bank offers multiple special services with its network of branches throughout the country in addition to its normal banking operations.
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CHAPTER THREE
GENERAL BANKING FUNCTIONS
SECTION ONE: GENERAL BANKING
3.1 DEFINITION OF BANK ACCOUNT
Bank account is a contractual agreement between a bank and its customer, allowing the customer to use bank services for a fee. Account may be established in the name of individuals or firms.
3.2 GENERAL BANKING
3.2.1 TYPES OF BANK ACCOUNT
There can be many types of accounts that can be maintained in a branch of Sonali Bank, they are: –
· Current Account
· Savings Account
· Fixed Deposit Account
· Short Term Deposit Account
· Deposit Pension Scheme Account
· Sonali Bank Special Deposit and Pension Scheme Account
· Call Deposit Account
· Sundry Deposit Account
3.2.2 Current Account
Current accounts mean any account from which the customer can withdraw money as many times as he wants in a working day. The customer also can deposit money to his account as many times as he wants in a working day. Generally businessman or business firm, who need frequent withdrawal of money, opens current account. Two types of current account are usual. One is personal current account and the other is institutional current account.
Features:
The important features of current account are as following:
- No interest is paid on this account.
- No passbook is given for this account.
3.2.3 Savings Account
A savings account is meant for the people of the lower and middle classes who wish to save a part of their current income to meet their future needs and also intend to earn an income from their savings.
Features:
- The important features of savings account are as following:
- The account holder can deposit money to his account as many times as he wants in a working day, but he cannot withdraw money from his account more than two times a week and he has to withdraw minimum Tk. 50 in cash withdrawal.
- Without notice, the account holder can withdraw 25% of his deposited amount minimum (but not more than Tk. 20,000). If the account holder withdraws more than 25% of his deposited amount or more than Tk. 20,000, he will have to give prior notice before 7 days of withdrawal. Otherwise no interest will be given to this account in that month.
- On the basis of minimum balance of each month, interest will be given to savings account in June and December in each year.
- If a savings account holder wants to close his account, then Tk. 25 will be deducted for his account as a cost of closing account.
3.2.4 Fixed deposit account
In this type of account, a certain amount of money is deposited for a fixed period of time. The bank repays the amount on the expiry of that specified period, or subject to a notice.
Features:
The important features of fixed deposit account are as following:
- Principle amount and interest is given after maturity.
- No interest is paid if one withdrawals his money before 3 months.
- The duration of fixed deposit account is 3 months to 5 years.
- According to Bangladesh Bank, 20% margin is required for taking loan against fixed deposit receipt (FDR).
- FDR may be renewed after maturity. If anybody does not renew his FDR after maturity, the bank will not pay any interest on that deposited amount after the maturity date.
3.2.5 Short term deposit account
By giving a special notice, depositors can withdraw money from short-term deposit account. Its interest rate is 3% per annum. It has less restriction than savings account regarding withdrawal of money.
3.2.6 Deposit pension scheme (DPS) account
Deposit pension scheme was introduced in 1983. New account opening of deposit pension scheme has been stopped by Bangladesh Bank from February 28, 1999.
The important features of DPS are as follows:
- The monthly installment of DPS may be in the denomination of Tk 100, Tk 200, Tk 300, Tk 400 or Tk 500. This should be deposited in by the first week of each month.
- Its interest rate is 5% (compounding).
- The term of DPS is either 10 years or 20 years.
Amount payable at the time of maturity is given in the following table.
| Monthly Installment
( Taka) |
Maturity Period (years) | Amount Payable at the time of maturity (Taka) |
| 100 | 10 | 26,344 |
| 200 | 10 | 52,688 |
| 300 | 10 | 79,032 |
| 400 | 10 | 1,05,376 |
| 500 | 10 | 1,31,720 |
3.2.7 Sonali Bank special deposit pension scheme (SDPS) account
Special deposit pension scheme was introduced in 1996. The important features of this account are as follows:
Its interest rate is 10% (compound interest) for 5 years term and 12% (compound interest) for 10 years term. From Octaber/2005 the interest rate is 10%( compound interest).
The monthly installment may be Tk 100, Tk 200, Tk 300, Tk 400 or Tk 500. This should be deposited from 11th to 20th day each month.
3.2.8 Call deposit account
As a security, earnest money for various tender is deposited in this type of account. Earnest money remains in this account until tender is opened. After opening of tender, the tender giving institution can withdraw the deposited fund from that account. No interest is paid on this account.
3.2.9 Sundry deposit account
The following types of deposits are maintained in sundry deposit accounts:
- Margin on letters of credit
- Margin on letters of guarantee
- Hajj deposits
- Employees contribution provident fund
- Employees general provident fund
- Sonali bank employees pension fund
- Sonali bank employees pension and death cum retirement benefit fund
- Miscellaneous
Interest rates of various types of deposits:
Interest rates of various types of deposits are shown in the following table:
| Types of deposit | Interest Rate |
| Savings deposit | 4.50 % |
| Short term deposit | 3.00 % |
| Fixed deposit:
i. 3 months or more but less than 6 months ii. 6 months or more but less than 1 year iii.1 year or more but less than 2 years iv.2 years or more but less than 5 years |
6.25 %
6.50 % 7.00 % 7.25% |
| Deposit pension scheme (DPS) | 15.00% |
| Sonali bank special deposit and pension scheme:
i. 5 years term ii. 10 years term |
10.00 %
12.00 % |
Source: Central account and fund management department.
3.3 SECTION TWO: ADVANCED BANKING
3.3.1 ADVANCES
Sonali bank like most other commercial banks generally lends money on short or long-term basis, as advances of different types, are repayable on demand. The advances may be clean i.e., without any security or secured primarily or collaterally by authorized securities.
3.3.2 Types of advances or loans:
Sonali bank deals with different types of lending, such as –
3.3.3 Short-term loans:
- Overdrafts
- Cash credit (pledge, hypothecation)
- Small loans
- Agriculture loans (crop hypothecation)
- Rural housing
- Rural transportation etc.
3.3.4 Mid and long term loans
- Agro based industries
- Frozen food
- Computer Software and information technology
- Export oriented finished leather and jute goods
- Export oriented spinning, textile and garments industries
- CNG (compressed natural gas) filling stations
- Pharmaceutical industries
- Chemical industries
- Commercial house building loans
- Paper Industries etc.
Bankers ascertain the loan proposal of above sectors/sub sectors and screening/ scrutiny the proposals with the norms of its internal and government policies. If the manager of a branch finds the proposal in order then he processes for sanctioning and disbursement with the consent of the management. After disbursement of loan, the banker takes necessary steps to recover the loan in time.
3.4 SECTION THERR FOREIGN EXCHANGE BUSINESS
Sonali bank like other commercial banks also deals with the following foreign exchange activities through its branches having authorized dealer license:
3.4.1 Foreign Exchange activities
- Foreign trade and foreign currency
- Payment against documents
- Remittance
- Advance Against Merchandise
- Foreign Currency Accounts and Wage Earners Scheme
- Packing Credit
- Foreign exchange: Imports
- Foreign bill collection
- Bank guarantee
- Non residence accounts
- Travelers’ cheques etc.
3.4.2 Foreign Trade and Foreign Exchange
- Foreign trade and foreign exchange deals with the following:
- Foreign trade and foreign exchange
- Licensing authority
- Function of Bangladesh Bank
- Function of custom authority
- Authorized dealers
- Agency agreement
- Types of accounts
3.4.3 Sonali Bank’s authorized branches
- 39 branches in Bangladesh including Local Office
- 2 outside (foreign) branches.
3.4.4 Foreign Currency Accounts and Wage Earners Scheme
Foreign currency accounts are those accounts, which are allowed to be maintained in foreign currency with authorized dealers in Bangladesh. Such accounts cannot, however, be maintained in any foreign currency but is to be opened and maintained either in Pound Sterling or U.S. Dollar at the option of the prospective account holder. Such accounts can be opened under normal program or under “Wage Earner’s Scheme”. When opened under Wage Earner’s Scheme such accounts enjoy some special facilities and benefits.
SECTION FOUR: PERFORMANCE ANALYSIS OF GENERAL BANKING
3.5.1 Deposit Collection : The amount of deposit position of Sonali bank for the last five years is given in the following:
Table 1: Yearly deposit of Sonali Bank Limited
| Year | Amount (core taka) |
| 2003 | 23,034 |
| 2004 | 25,223 |
| 2005 | 27,708 |
| 2006 | 30,230 |
| 2007 | 32,045 |
Source: Central account and fund management department.
3.5.2 loan Disbursement:
Table 1: Yearly Loan Disbursement of Sonali Bank Limited
| Year | Amount (core taka) |
| 2003 | 23,034 |
| 2004 | 25,223 |
| 2005 | 27,708 |
| 2006 | 30,230 |
| 2007 | 32,045 |
Source: Central account and fund management department.
3.5.3 Analysis between deposit and loan:
| Year | Amount (core taka) | Amount (core taka) |
| 2003 | 15,520 | 23,034 |
| 2004 | 16,828 | 25,223 |
| 2005 | 22,701 | 27,708 |
| 2006 | 24,103 | 30,230 |
| 2007 | 20,490 | 32,045 |
Source: Central account and fund management department.
3.5.4 FOREIGN REMITTANCE OF SONALI BANK LIMITED:
| Year | Amount in US dollar |
| 2003 | 944 |
| 2004 | 1,142 |
| 2005 | 1,190 |
| 2006 | 1,255 |
| 2007 | 1,260 |
Source: Central account and fund management department.
3.5.5 Operating Profit of Sonali Bank Limited
| Year | Amount (creore taka) |
| 2003 | 54 |
| 2004 | 95 |
| 2005 | 396 |
| 2006 | 301 |
| 2007 | 602 |
Source: Central account and fund management department.
3.5.6 Loan & Advance mix as on 31.12.2007
| YEAR | 2003 | 2004 | 2005 | 2006 | 2007 |
| ADVANCE | 23034 | 25223 | 27708 | 30230 | 32045 |
| LOAN | 15520 | 16828 | 22701 | 24103 | 20490 |
| % | 67 | 67 | 82 | 80 | 64 |
Source: Central account and fund management department.
CHAPTER FOUR
REMITTANCE MANAGEMENT SYSTEM (RMS)
SECTION ONE: FOREIGN REMITTANCE
4.1 INTRODUCTION
Foreign remittance, in simple terms, means money remitted in foreign currency. More precisely, it is termed as remittances in foreign currency that are received in & made out abroad. Conceptual Issues International remittances are defined as the portion of migrant workers’ arnings sent back from the country of employment to the country of origin (ILO, 2000). Remittance can also be sent in kind. Transfers that take place in kind is quite difficult to measure. Remittances can be individual and it can also be collective. When individuals send remittance to his/her household or kith and kin that can be termed as individual remittance. When a group of migrants, their associations or professional bodies mobilize resource together and send for collective or community programmes, that can be termed as collective remittance. Individual remittances are mostly geared towards the family whereas collective remittances are generally used for community development.
Transfer of remittances takes place through different methods. 46% of the total volume of remittance has been channeled through official sources, around 40% through hundi, 4.61% through friends and relatives, and about 8 percent of the total was hand carried by migrant workers themselves when they visited
4.1.1 TYPES
Two types of Foreign remittance:-
- Foreign Inward Remittance.
- Foreign Outward Remittance.
4.1.2 FOREIGN INWARD REMITTANCE
4.1.3 DEFINITION
The remittance of freely convertible foreign currencies which we are receiving from abroad against which the Authorized Dealers making payment in local currency to the beneficiaries may be termed as Foreign Inward Remittance.
4.1.4 MODE OF INWARD REMITTANCES (Also Outward Remittance):
The following are the mode of Inward/Outward Remittances.
i) TT = Telegraphic Transfer.
ii) MT = Mail Transfer.
iii) FD = Foreign Drafts.
iv) PO = Payment Order.
v) TC = Travellers Cheque.
vi) EFT = Electronic Fund Transfer
4.1.5 Foreign Currency Notes (On line Remittances)
A remitter abroad simply has to approach a bank branch there with certain amount to be deposited beneficiary in Bangladesh either in foreign currency or in equivalent Taka currency. The Branch so approached abroad usually should have agency arrangement with the paying banks in Bangladesh. However, in the absence of any such agency arrangement, remittance may also be made by transferring cover value of the remittance to the paying bank’s account abroad by the remitting bank.
4.1.6 SOURCE OF INWARD REMITTANCE
- Expatriate Bangladeshis.
- Exporters.
- Visitors.
4.1.7 PURPOSE OF REMITTANCE
In short, remittances are being sent from abroad for the following purposes:-
- Family maintenance
- Indenting Commission
- Recruiting Agents Commission
- Realization of Export Proceeds
- Donation
- Gift
- Export broker’s Commission etc.
4.1.8 FOREIGN OUTWARD REMITTANCE
4.1.9 DEFINITION
The remittances in foreign currency which are being made from our country to abroad is known as foreign outward remittance.
4.1.10 PURPOSE OF OUTWORD REMITTANCE
- To settle Import Payment.
- To meet Travel Expenses/Medical Expenses/Educational Expenses etc.
4.1.11 APPROVAL OF BANGLADESH BANK
Bangladesh is always in a scarcity of foreign exchange and foreign exchange business is restricted and controlled by the Central Bank of the country. For this reason Bangladesh Bank’s prior permission is required for any remittance to be made to outside the country.
Bangladesh Bank provides permission/approval for outward remittances to the applicants who are to lodge an application for the purpose on the following prescribed forms with an Authorized Dealer who forwarded the same to Bangladesh Bank for approval.
4.1.12 MAIN FLOW OF FOREIGN REMITTANCE
- Saudi Arabia
- UAE
- Kuwait
- Qatar
- Oman
- Iraq
- Libya
- Bahrain,
- Iran
- Malaysia
- South Korea
- Singapore
- Hong Kong
- Brunei
These are some ofthe major countries of destination. Saudi Arabia alone accounts for nearly onehalf of the total number of workers who migrated from Bangladesh. Labour market of Bangladeshi workers is not static. During the 1970s Saudi Arabia, Iraq, Iran and Libya were some of the major destination countries. While theposition of Saudi Arabia remains at the top, Malaysia and UAE became important receivers. In mid-1990s, Malaysia became the second largestemployer of Bangladeshi workers. However, since the financial crisis of 1997,Bangladeshis migrating to Malaysia dropped drastically . Now UAE has taken over its place.
Over the past 25 years labour migration from Bangladesh has registered a steady increase. From 1990 onwards on an average 3,25,000 Bangladeshis are migrating on short-term employment, mostly to 13 countries. In the past the bulk of the migrants consisted of professional and skilled labour. However, the recent trend is more towards semi- and unskilled labour migration. Due to increase in the flow of unskilled and semi- skilled labour, remittance is increasing at a much lower rate than the labour flow. Remittance is crucial for Bangladesh’s economy. It constitutes almost one-third of the foreign exchange earning. About 25 percent of remittance senders were students when they went abroad and another 25 percent were living off their own land. A large segment of them were working as construction labourers overseas, another group worked as agricultural labourers. UAE, Saudi Arabia and Singapore constituted the most of important destinations of these migrants.
One survey comments that if the migrant workers’ total income abroad and the present family income from other sources is combined and then compared with the pre- migration family income, it registers an increase in total income by 119 percent. On an average, the interviewee households annually received about Tk.72,800 as remittance. This means that a typical migrant remits 55.65 percent of his income. Remittance constitutes 51.12% of the total income of these families. Transfer of remittances takes place through different methods. 46% of the total volume of remittance has been channeled through official sources, around 40% through hundi, 4.61% through friends and relatives, and about 8 percent of the totalwas hand carried by migrant workers themselves when they visited
4.1.13 Contribution of Remittance to the National Economy
Labour migration plays a vital role in the economy of Bangladesh. Bangladesh has a very narrow export base. Readymade garments, frozen fish, jute, leather and tea are the five groups of items that account for four-fifths of its export earnings. Currently, garments manufacturing is treated as the highest foreign exchange earning sector of the country (US $ 4.583 billion in 2003). However, if the cost of import of raw material is adjusted, then the net earning from migrant workers’ remittances is higher than that of the garments sector. In 2003, net export earning from RMG should be between US$2.29-2.52 billion, whereas the earning from remittance is net US$3.063 billion. In fact, since the 1980s, contrary to the popular belief, remittances sent by the migrants played a much greater role in sustaining the economy of Bangladesh than the garments sector.8 For the last two decades, remittances have been at levels of around 35% of export earnings, making it the single largest source of foreign currency earner for the country. This has been used in financing the import of capital goods and raw materials for industrial development. In the year 1998-99, 22 percent of the official import bill was financed by remittances (Afsar, 2000; Murshed, 2000 and Khan, 2003). The steady flow of remittances has resolved the foreign exchange constraints, improved the balance of payments, and helped increase the supply of national savings (Quibria 1986). Remittances also constituted a very important source of the country’s development budget. In certain years in the 1990s remittances’ contribution rose to more than 50 percent of the country’s development budget. Government of Bangladesh treats Foreign aid (concessional loan and grants) as an important resource base of the country. However, remittances that Bangladesh received last year was twice that of foreign aid. Remittances have played a major role in reducing the extent of the country’s dependence on foreign aid. The contribution of remittance to GDP has also grown from a meagre 1 percent in 1977-1978 to 5.2 percent in 1982-83. During the 1990s the ratio hovered around 4 percent. However if one takes into account the unofficial flow of remittances, its contribution to GDP would certainly be much higher. Murshed (2000) finds that an increase in remittance by Taka 1 would result in an increase in national income by Tk 3.33. Following the expiry of multi-fiber agreement (MFA), Bangladesh will face steep competition in export of RMG. The country will cease to enjoy any special quota. It is apprehended that Bangladesh’s RMG export will decline sharply. This will result in loss of job of many workers and shortfall in foreign exchange earning. Potential of retaining employment and export earning through export of frozen fish, jute, leather and tea seems rather bleak. It is in this context labour migration has become key sector for earning foreign exchange and creating opportunities for employment. Therefore, the importance of migrant remittance to the economy of Bangladesh can hardly be over emphasized.
4.1.14 ROLE OF DIFFERENT INSTITUTES CONSIDERING FOREIGN REMITTNCE
4.1.15 Ministry of Finance
Ministry of Finance (MoF) is the prime policy making body regarding banking and remittance. Macro-economic policies that affect exchange rate, monetary and fiscal mechanisms, foreign exchange reserve etc. are regulated by this ministry.
4.1.16 Bangladesh Bank
Bangladesh Bank (BB) is the central bank of Bangladesh. Among other powers and functions, BB regulates scheduled bank activities, acts as a clearing-house, maintains foreign exchange reserves and monitors floating exchange rate mechanism in the current accounts. Bangladesh Bank encourages the nationalised and private banks to link up with foreign banks and exchange houses in the destination countries. It has a separate department for regulating and monitoring remittance entitled Foreign
4.1.17 Exchange Policy Department (FEPD).
It also generates, analyses, interprets and distributes data on inflow of remittance.
4.1.18 Nationalised Commercial Banks
Nationalised Commercial Banks (NCBs) of Bangladesh make direct banking facilities available at the doorsteps of Bangladeshi emigrants specially in those countries where a large number of Bangladeshis are employed. Five NCBs are deeply involved in remittance transfer. These are Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank Ltd. and Bangladesh Krishi Bank (BKB). Among the NCBs, BKB is solely targeted towards agricultural development in rural areas. Within Bangladesh these five NCBs have 2945 branches. Through them they can disburse remittances even in distant areas. Besides their own branches, NCBs have opened exchange houses in joint collaboration with different banks and financial institutions in different countries of the world.
4.1.19 Private Commercial Banks
Private Commercial Banks (PCBs) are also involved in remittance transfer. Of the PCBs, Islami Bank of Bangladesh Ltd. has been found to be most proactive in the area of migrants’ remittace. National Bank, International Finance and Investment Corporation (IFIC), Prime Bank and Uttara Bank are other private banks involved in remittance transfer. Most of their activities are in the Middle East. Saudi Arabia is the major working area of Islami Bank along with Qatar, Bahrain and UAE. National Bank is operating in Oman, Kuwait, UAE, Qatar, Bahrain and Saudi Arabia. IFIC has curved out a major niche in Bangladeshi community in Oman and has its largest share with 41% of the market. It also has brances and exchange offices in Nepal and someother Middle Eastern countries. Uttara Bank runs exchange house in Qatar in collaboration with a local financial institution. Corresponding Relationships In almost all countries of the world, both NCBs and PCBs have corresponding relationships with banks through which Bangladeshi migrants may easily send their money to their beneficiaries’ accounts with any branch of any bank in Bangladesh.
4.1.20 Performance analysis of Foreign Exchange:
Performance of Foreign Exchange on the basis of L/C. Services:
The amount of letter of credit (L/C.) position of Sonali Bank for the last five years is given in the following table:
Table5.2.1: Yearly L/C. of Sonali Bank
| Year | L/C. Amount (in thousand taka) |
| 2000 | 26439844 |
| 2001 | 29409705 |
| 2002 | 41214268 |
| 2003 | 41175733 |
| 2004 | 65007841 |
Comment: The amount of L/C. of Sonali bank is Tk. 2643, 2940, 4121, 4117 and 6500 crores for the years 2000, 2001, 2002, 2003 and 2004 respectively. Among the last five years, the L/C. increased quite drastically in five years specially 2004, it increased to a sharp 6500 crore which is pretty good.
SECTION TWO: REMITTANCE MANAGEMENT SYSTEM (RMS)
4.2 INTRODUCTION:
Remittance Management System is a customized process of sonali Bank Limited. This is totally bank’s own system where foreign remittance were processed. Basically bank collects the remittance from the 41 exchange houses of different foreign countries. This exchange house collect money from the customers and then send information about the customers to the bank. There are two processes for sending the information to the bank.
- EFT(Electronic Fund Transfer)
- SWIFT(Society for worldwide inter bank fund telecommunication)
After receiving this data bank process this data with the help of a customized software which is prepared for process this data. This software is called Remittance Management System (RMS) software. Some high quality, energetic, IT specialist and dynamic young group are engage to ensure the faster and swift service to the customers.
The exchange house collect information from the customer’s regarding their –
- PON (Payment Order No) No
- Date
- Beneficiary Name
- Account Name
- Amount
- Remitter Name
- Beneficiary Branch Name etc.
The bank has installed RMS at Wage Earner’s Corporate Branch (WECB), Dahka. The incoming remittances are downloaded and processed at WECB using RMS.
RMS captures various structured remittances from various exchange company and converts it into a unique structure and imposes a security. After capturing the remittances RMS receives an administrative password, a part-1 test key holder password, a part-2 test key holder password and two signatures activation password daily. In RMS there are 20 (Twenty) parameterized signature. We can change the signatory dynamically per day. RMS has automated secured test key module. So RMS generates test key automatically for every amount. Then we accumulate the TRA data of various exchange company and impose three types of security and validate using RMS Data Center for live outlets.
The RMS module of outlets receives incoming remittance data packet & validate it. After validation the TRA prints automatically with two signatures and a test number. An authorized signatory of outlets sign on TRA as third signature and distribute it. The TRA of distance location is distributed over phone initially and put a seal on TRA as “ credit over phone”.
The outlet collect the credit date of TRA from branches and sends a feedback file to WECB. This feedback is used for Reconciliation and overseas exchange company/Bank.
4.2.1 Features of RMS (Remittance Management System) for Middle East Remittance
- Credit beneficiary Account within 8-24 Hours.
- Auto TRA issue
- Auto Test Number for any amount (Parameterized)
- Auto Signature (Parameterized)
- Highly secured data transmission
- Auto Feed Back
- Data Ready for Reconciliation
- Unique platform for all exchange company
- Consolidated Data packet for all overseas exchange/Bank
- Missing data packet traceable by outlet software
- Single Copy instrument print
- Additional instrument copy prints with “Care Duplicate”.
- Generate all types of required statements
- 100% parameterized Software
- Only local TRA prints at WECB (Wage Earner’s Corp Br)
4.2.2 A short over view of RMS is shown below:
4.2.3 OPENING CEREMONY OF REMITTANCE MANAGEMENT SYSTEM SOFTWARE
4.2.4 LIST OF DIFFERENT EXCHANGE COMPANY:
| SL | NAME OF EXCHANGE COMPANY | DAY BOOK | A/C NO. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 1 | A. Aziz A. Al-Zamil Co. K.S.A | 72 | 33030012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2 | Al Amoudi Ex. Co. K.S.A | 63 | 33027066 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 3 | Al Ansari Exchange, U.A.E | 62 | 33025342 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 4 | Al Mulla International Ex. Co, Kuwait | 58 | 33024955 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 5 |
|
Monthly Installment ( Taka) |
Maturity Period (years) |
Amount Payable at the time of maturity (Taka) |
|
100 |
10 |
26,344 |
|
200 |
10 |
52,688 |
|
300 |
10 |
79,032 |
|
400 |
10 |
1,05,376 |
|
500 |
10 |
1,31,720 |
3.2.7 Sonali Bank special deposit pension scheme (SDPS) account
Special deposit pension scheme was introduced in 1996. The important features of this account are as follows:
Its interest rate is 10% (compound interest) for 5 years term and 12% (compound interest) for 10 years term. From Octaber/2005 the interest rate is 10%( compound interest).
The monthly installment may be Tk 100, Tk 200, Tk 300, Tk 400 or Tk 500. This should be deposited from 11th to 20th day each month.
3.2.8 Call deposit account
3.3 SECTION TWO: ADVANCED BANKING
3.3.1 ADVANCES
Sonali bank like most other commercial banks generally lends money on short or long-term basis, as advances of different types, are repayable on demand. The advances may be clean i.e., without any security or secured primarily or collaterally by authorized securities.
3.3.2 Types of advances or loans:
Sonali bank deals with different types of lending, such as –
3.3.3 Short-term loans:
ü Overdrafts
ü Cash credit (pledge, hypothecation)
ü Small loans
ü Agriculture loans (crop hypothecation)
ü Rural housing
ü Rural transportation etc.
3.3.4 Mid and long term loans
ü Agro based industries
ü Frozen food
ü Computer Software and information technology
ü Export oriented finished leather and jute goods
ü Export oriented spinning, textile and garments industries
ü CNG (compressed natural gas) filling stations
ü Pharmaceutical industries
ü Chemical industries
ü Commercial house building loans
ü Paper Industries etc.
Bankers ascertain the loan proposal of above sectors/sub sectors and screening/ scrutiny the proposals with the norms of its internal and government policies. If the manager of a branch finds the proposal in order then he processes for sanctioning and disbursement with the consent of the management. After disbursement of loan, the banker takes necessary steps to recover the loan in time.
3.4 SECTION THERR FOREIGN EXCHANGE BUSINESS
Sonali bank like other commercial banks also deals with the following foreign exchange activities through its branches having authorized dealer license:
3.4.1 Foreign Exchange activities
ü Foreign trade and foreign currency
ü Payment against documents
ü Remittance
ü Advance Against Merchandise
ü Foreign Currency Accounts and Wage Earners Scheme
ü Packing Credit
ü Foreign exchange: Imports
ü Foreign bill collection
ü Bank guarantee
ü Non residence accounts
ü Travelers’ cheques etc.
3.4.2 Foreign Trade and Foreign Exchange
ü Foreign trade and foreign exchange deals with the following:
ü Foreign trade and foreign exchange
ü Licensing authority
ü Function of Bangladesh Bank
ü Function of custom authority
ü Authorized dealers
ü Agency agreement
ü Types of accounts
3.4.3 Sonali Bank’s authorized branches
ü 39 branches in Bangladesh including Local Office
ü 2 outside (foreign) branches.
3.4.4 Foreign Currency Accounts and Wage Earners Scheme
Foreign currency accounts are those accounts, which are allowed to be maintained in foreign currency with authorized dealers in Bangladesh. Such accounts cannot, however, be maintained in any foreign currency but is to be opened and maintained either in Pound Sterling or U.S. Dollar at the option of the prospective account holder. Such accounts can be opened under normal program or under “Wage Earner’s Scheme”. When opened under Wage Earner’s Scheme such accounts enjoy some special facilities and benefits.
SECTION FOUR: PERFORMANCE ANALYSIS OF GENERAL BANKING
3.5.1 Deposit Collection: The amount of deposit position of Sonali bank for the last five years is given in the following:
Table 1: Yearly deposit of Sonali Bank Limited
|
Year |
Amount (core taka) |
|
2003 |
23,034 |
|
2004 |
25,223 |
|
2005 |
27,708 |
|
2006 |
30,230 |
|
2007 |
32,045 |
3.5.4 FOREIGN REMITTANCE OF SONALI BANK LIMITED:
|
Year |
Amount in US dollar |
|
2003 |
944 |
|
2004 |
1,142 |
|
2005 |
1,190 |
|
2006 |
1,255 |
|
2007 |
1,260 |
4.1.4 MODE OF INWARD REMITTANCES (Also Outward Remittance):
The following are the mode of Inward/Outward Remittances.
4.1.5 Foreign Currency Notes (On line Remittances)
A remitter abroad simply has to approach a bank branch there with certain amount to be deposited beneficiary in Bangladesh either in foreign currency or in equivalent Taka currency. The Branch so approached abroad usually should have agency arrangement with the paying banks in Bangladesh. However, in the absence of any such agency arrangement, remittance may also be made by transferring cover value of the remittance to the paying bank’s account abroad by the remitting bank.
4.1.6 SOURCE OF INWARD REMITTANCE
ü Expatriate Bangladeshis.
ü Exporters.
ü Visitors.
4.1.7 PURPOSE OF REMITTANCE
In short, remittances are being sent from abroad for the following purposes:-
ü Family maintenance
ü Indenting Commission
ü Recruiting Agents Commission
ü Realization of Export Proceeds
ü Donation
ü Gift
ü Export broker’s Commission etc.
4.1.8 FOREIGN OUTWARD REMITTANCE
4.1.9 DEFINITION
The remittances in foreign currency which are being made from our country to abroad is known as foreign outward remittance.
4.1.10 PURPOSE OF OUTWORD REMITTANCE
ü To settle Import Payment.
ü To meet Travel Expenses/Medical Expenses/Educational Expenses etc.
4.1.11 APPROVAL OF BANGLADESH BANK
Bangladesh is always in a scarcity of foreign exchange and foreign exchange business is restricted and controlled by the Central Bank of the country. For this reason Bangladesh Bank’s prior permission is required for any remittance to be made to outside the country.
Bangladesh Bank provides permission/approval for outward remittances to the applicants who are to lodge an application for the purpose on the following prescribed forms with an Authorized Dealer who forwarded the same to Bangladesh Bank for approval.
4.1.12 MAIN FLOW OF FOREIGN REMITTANCE
ü Saudi Arabia
ü UAE
ü Kuwait
ü Qatar
ü Oman
ü Iraq
ü Libya
ü Bahrain,
ü Iran
ü Malaysia
ü South Korea
ü Singapore
ü Hong Kong
ü Brunei
These are some ofthe major countries of destination. Saudi Arabia alone accounts for nearly onehalf of the total number of workers who migrated from Bangladesh. Labour market of Bangladeshi workers is not static. During the 1970s Saudi Arabia, Iraq, Iran and Libya were some of the major destination countries. While theposition of Saudi Arabia remains at the top, Malaysia and UAE became important receivers. In mid-1990s, Malaysia became the second largestemployer of Bangladeshi workers. However, since the financial crisis of 1997,Bangladeshis migrating to Malaysia dropped drastically . Now UAE has taken over its place.
Over the past 25 years labour migration from Bangladesh has registered a steady increase. From 1990 onwards on an average 3,25,000 Bangladeshis are migrating on short-term employment, mostly to 13 countries. In the past the bulk of the migrants consisted of professional and skilled labour. However, the recent trend is more towards semi- and unskilled labour migration. Due to increase in the flow of unskilled and semi- skilled labour, remittance is increasing at a much lower rate than the labour flow. Remittance is crucial for Bangladesh’s economy. It constitutes almost one-third of the foreign exchange earning. About 25 percent of remittance senders were students when they went abroad and another 25 percent were living off their own land. A large segment of them were working as construction labourers overseas, another group worked as agricultural labourers. UAE, Saudi Arabia and Singapore constituted the most of important destinations of these migrants.
One survey comments that if the migrant workers’ total income abroad and the present family income from other sources is combined and then compared with the pre- migration family income, it registers an increase in total income by 119 percent. On an average, the interviewee households annually received about Tk.72,800 as remittance. This means that a typical migrant remits 55.65 percent of his income. Remittance constitutes 51.12% of the total income of these families. Transfer of remittances takes place through different methods. 46% of the total volume of remittance has been channeled through official sources, around 40% through hundi, 4.61% through friends and relatives, and about 8 percent of the total was hand carried by migrant workers themselves when they visited
4.1.13 Contribution of Remittance to the National Economy
Labour migration plays a vital role in the economy of Bangladesh. Bangladesh has a very narrow export base. Readymade garments, frozen fish, jute, leather and tea are the five groups of items that account for four-fifths of its export earnings. Currently, garments manufacturing is treated as the highest foreign exchange earning sector of the country (US $ 4.583 billion in 2003). However, if the cost of import of raw material is adjusted, then the net earning from migrant workers’ remittances is higher than that of the garments sector. In 2003, net export earning from RMG should be between US$2.29-2.52 billion, whereas the earning from remittance is net US$3.063 billion. In fact, since the 1980s, contrary to the popular belief, remittances sent by the migrants played a much greater role in sustaining the economy of Bangladesh than the garments sector.8 For the last two decades, remittances have been at levels of around 35% of export earnings, making it the single largest source of foreign currency earner for the country. This has been used in financing the import of capital goods and raw materials for industrial development. In the year 1998-99, 22 percent of the official import bill was financed by remittances (Afsar, 2000; Murshed, 2000 and Khan, 2003). The steady flow of remittances has resolved the foreign exchange constraints, improved the balance of payments, and helped increase the supply of national savings (Quibria 1986). Remittances also constituted a very important source of the country’s development budget. In certain years in the 1990s remittances’ contribution rose to more than 50 percent of the country’s development budget. Government of Bangladesh treats Foreign aid (concessional loan and grants) as an important resource base of the country. However, remittances that Bangladesh received last year was twice that of foreign aid. Remittances have played a major role in reducing the extent of the country’s dependence on foreign aid. The contribution of remittance to GDP has also grown from a meagre 1 percent in 1977-1978 to 5.2 percent in 1982-83. During the 1990s the ratio hovered around 4 percent. However if one takes into account the unofficial flow of remittances, its contribution to GDP would certainly be much higher. Murshed (2000) finds that an increase in remittance by Taka 1 would result in an increase in national income by Tk 3.33. Following the expiry of multi-fiber agreement (MFA), Bangladesh will face steep competition in export of RMG. The country will cease to enjoy any special quota. It is apprehended that Bangladesh’s RMG export will decline sharply. This will result in loss of job of many workers and shortfall in foreign exchange earning. Potential of retaining employment and export earning through export of frozen fish, jute, leather and tea seems rather bleak. It is in this context labour migration has become key sector for earning foreign exchange and creating opportunities for employment. Therefore, the importance of migrant remittance to the economy of Bangladesh can hardly be over emphasized.
4.1.14 ROLE OF DIFFERENT INSTITUTES CONSIDERING FOREIGN REMITTNCE
4.1.15 Ministry of Finance
Ministry of Finance (MoF) is the prime policy making body regarding banking and remittance. Macro-economic policies that affect exchange rate, monetary and fiscal mechanisms, foreign exchange reserve etc. are regulated by this ministry.
4.1.16 Bangladesh Bank
Bangladesh Bank (BB) is the central bank of Bangladesh. Among other powers and functions, BB regulates scheduled bank activities, acts as a clearing-house, maintains foreign exchange reserves and monitors floating exchange rate mechanism in the current accounts. Bangladesh Bank encourages the nationalised and private banks to link up with foreign banks and exchange houses in the destination countries. It has a separate department for regulating and monitoring remittance entitled Foreign
4.1.17 Exchange Policy Department (FEPD).
It also generates, analyses, interpretsand distributes data on inflow of remittance.
4.1.18 Nationalized Commercial Banks
Nationalized Commercial Banks (NCBs) of Bangladesh make direct banking facilities available at the doorsteps of Bangladeshi emigrants specially in those countries where a large number of Bangladeshis are employed. Five NCBs are deeply involved in remittance transfer. These are Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank Ltd. and Bangladesh Krishi Bank (BKB). Among the NCBs, BKB is solely targeted towards agricultural development in rural areas. Within Bangladesh these five NCBs have 2945 branches. Through them they can disburse remittances even in distant areas. Besides their own branches, NCBs have opened exchange houses in joint collaboration with different banks and financial institutions in different countries of the world.
4.1.19 Private Commercial Banks
Private Commercial Banks (PCBs) are also involved in remittance transfer. Of the PCBs, Islami Bank of Bangladesh Ltd. has been found to be most proactive in the area of migrants’ remittace. National Bank, International Finance and Investment Corporation (IFIC), Prime Bank and Uttara Bank are other private banks involved in remittance transfer. Most of their activities are in the Middle East. Saudi Arabia is the major working area of Islami Bank along with Qatar, Bahrain and UAE. National Bank is operating in Oman, Kuwait, UAE, Qatar, Bahrain and Saudi Arabia. IFIC has curved out a major niche in Bangladeshi community in Oman and has its largest share with 41% of the market. It also has brances and exchange offices in Nepal and someother Middle Eastern countries. Uttara Bank runs exchange house in Qatar in collaboration with a local financial institution. Corresponding Relationships In almost all countries of the world, both NCBs and PCBs have corresponding relationships with banks through which Bangladeshi migrants may easily send their money to their beneficiaries’ accounts with any branch of any bank in Bangladesh.
4.1.20 Performance analysis of Foreign Exchange:
Performance of Foreign Exchange on the basis of L/C. Services:
The amount of letter of credit (L/C.) position of Sonali Bank for the last five years is given in the following table:
Table5.2.1: Yearly L/C. of Sonali Bank
|
Year |
L/C. Amount (in thousand taka) |
|
2000 |
26439844 |
|
2001 |
29409705 |
|
2002 |
41214268 |
|
2003 |
41175733 |
|
2004 |
65007841 |
Comment: The amount of L/C. of Sonali bank is Tk. 2643, 2940, 4121, 4117 and 6500 crores for the years 2000, 2001, 2002, 2003 and 2004 respectively. Among the last five years, the L/C. increased quite drastically in five years specially 2004, it increased to a sharp 6500 crore which is pretty good.
SECTION TWO: REMITTANCE MANAGEMENT SYSTEM (RMS)
4.2 INTRODUCTION:
Remittance Management System is a customized process of sonali Bank Limited. This is totally bank’s own system where foreign remittance were processed. Basically bank collects the remittance from the 41 exchange houses of different foreign countries. This exchange house collect money from the customers and then send information about the customers to the bank. There are two processes for sending the information to the bank.
- EFT(Electronic Fund Transfer)
- SWIFT(Society for worldwide inter bank fund telecommunication)
After receiving this data bank process this data with the help of a customized software which is prepared for process this data. This software is called Remittance Management System (RMS) software. Some high quality, energetic, IT specialist and dynamic young group are engage to ensure the faster and swift service to the customers.
The exchange house collect information from the customer’s regarding their –
ü PON (Payment Order No) No
ü Date
ü Beneficiary Name
ü Account Name
ü Amount
ü Remitter Name
ü Beneficiary Branch Name etc.
The bank has installed RMS at Wage Earner’s Corporate Branch (WECB), Dahka. The incoming remittances are downloaded and processed at WECB using RMS.
RMS captures various structured remittances from various exchange company and converts it into a unique structure and imposes a security. After capturing the remittances RMS receives an administrative password, a part-1 test key holder password, a part-2 test key holder password and two signatures activation password daily. In RMS there are 20 (Twenty) parameterized signature. We can change the signatory dynamically per day. RMS has automated secured test key module. So RMS generates test key automatically for every amount. Then we accumulate the TRA data of various exchange company and impose three types of security and validate using RMS Data Center for live outlets.
The RMS module of outlets receives incoming remittance data packet & validate it. After validation the TRA prints automatically with two signatures and a test number. An authorized signatory of outlets sign on TRA as third signature and distribute it. The TRA of distance location is distributed over phone initially and put a seal on TRA as “credit over phone”.
The outlet collects the credit date of TRA from branches and sends a feedback file to WECB. This feedback is used for Reconciliation and overseas exchange company/Bank.
4.2.1 Features of RMS (Remittance Management System) for Middle East Remittance
- Credit beneficiary Account within 8-24 Hours.
- Auto TRA issue
- Auto Test Number for any amount (Parameterized)
- Auto Signature (Parameterized)
- Highly secured data transmission
- Auto Feed Back
- Data Ready for Reconciliation
- Unique platform for all exchange company
- Consolidated Data packet for all overseas exchange/Bank
- Missing data packet traceable by outlet software
- Single Copy instrument print
- Additional instrument copy prints with “Care Duplicate”.
- Generate all types of required statements
- 100% parameterized Software
- Only local TRA prints at WECB (Wage Earner’s Corp Br)
4.2.4 LIST OF DIFFERENT EXCHANGE COMPANY:
|
SL |
NAME OF EXCHANGE COMPANY |
DAY BOOK |
A/C NO. |
|
1 |
A. Aziz A. Al-Zamil Co. K.S.A |
72 |
33030012 |
|
2 |
Al Amoudi Ex. Co. K.S.A |
63 |
33027066 |
|
3 |
Al Ansari Exchange, U.A.E |
62 |
33025342 |
|
4 |
Al Mulla International Ex. Co, Kuwait |
58 |
33024955 |
|
5 |
Al Muzaini Exchange Co, Kuwait |
47 |
33016498 |
|
6 |
Al Omary Est. K.S.A (Closed) |
56 |
33024732 |
|
7 |
Al-Moosa Exchange Company. W.L.L, Kuwait |
69 |
33028683 |
|
8 |
Alrajhi Bank Riyadh, K.S.A |
30 |
A-693 |
|
9 |
Alrajhi Commercial Foreign Ex. Co, Jeddah, K.S.A |
49 |
33017587 |
|
10 |
Al Rostamani Ex. Co. U.A.E |
52 |
33020855 |
|
11 |
Arab National Bank, K.S.A |
65 |
33028873 |
|
12 |
Bahrain Exchange Company, Kuwait |
33 |
B-110 |
|
13 |
Bahrain Financing Co. Bahrain |
32 |
B-109 |
|
14 |
Bank Al Bilad, K.S.A |
64 |
33028808 |
|
15 |
Citi Bank NA, U.S.A |
59 |
33024872 |
|
16 |
City International Exchange, Kuwait |
19 |
C-25 |
|
17 |
Commercial Bank of Oman/Bank Muscat, Oman |
23 |
C-26 |
|
18 |
Dalil Exchange Co. Bahrain |
55 |
33023214 |
|
19 |
Daulat Enterprise, Canada |
61 |
33025813 |
|
20 |
Dollarco Exchange Co. Ltd. Kuwait |
36 |
D-103 |
|
21 |
Eastern Exchange Establishment, Qatar |
11 |
E-13 |
|
22 |
Eastern Union Remittance & Exchange Ltd, UK |
67 |
33029475 |
|
23 |
Gulf Overseas Exchange Co. Oman |
26 |
G-49 |
|
24 |
Habib Exchange Co. U.A.E |
53 |
3302268 |
|
25 |
Indian Bank, Singapur |
66 |
33029293 |
|
26 |
Injaz Money Exchange, K.S.A (Closed) |
60 |
33025846 |
|
27 |
Kuwait Bahrain International Exchange Co, Kuwait |
27 |
K-121 |
|
28 |
Kuwait Overseas Ex. Co. (Closed), Kuwait |
45 |
33012803 |
|
29 |
Lari Exchange Establishment UAE |
71 |
33029252 |
|
30 |
Mashreq Bank, U. A. E |
13 |
B-16 |
|
31 |
National Bank of Oman, Oman. |
17 |
N-99 |
|
32 |
National Money Exchange, Kuwait |
46 |
33016176 |
|
33 |
Oman & UAE Exchange Centre Oman |
70 |
33029632 |
|
34 |
Oman Exchange Co. Kuwait |
10 |
O-6 |
|
35 |
Oman International Exchange, Oman |
22 |
O-11 |
|
36 |
Redha Al Ansari Exchange |
73 |
33031919 |
|
37 |
Trust Exchange Company W.L.L, Doha, Qatar |
68 |
33029244 |
|
38 |
U.A.E Exchange Co, Kuwait |
57 |
33024897 |
|
39 |
U.A.E Exchange Co. U.A.E |
50 |
33017975 |
|
40 |
Wall Street Exchange, Dubai, U.A.E |
41 |
33011326 |
|
41 |
Zenj Exchange, Bahrain |
42 |
33012828 |
|
No. of |
US Dollar |
No. of |
US Dollar |
No. of |
US Dollar |
No. of |
US Dollar |
|
|
Month |
Remittance |
(Million) |
Remittance |
(Million) |
Remittance |
(Million) |
Remittance |
(Million) |
|
January |
68214 |
118.75 |
54301 |
95.92 |
51656 |
93.03 |
46428 |
87.29 |
|
February |
41656 |
80.45 |
47085 |
96.53 |
49057 |
98.50 |
48562 |
96.87 |
|
March |
51670 |
103.44 |
54677 |
116.72 |
55669 |
115.10 |
54930 |
91.27 |
|
April |
48441 |
87.80 |
52845 |
111.03 |
50513 |
93.93 |
59061 |
94.21 |
|
May |
51917 |
81.06 |
48902 |
88.12 |
55032 |
119.10 |
58278 |
99.25 |
|
June |
53452 |
101.20 |
51800 |
85.66 |
51550 |
102.68 |
55165 |
94.61 |
|
July |
53316 |
91.70 |
49339 |
90.83 |
50933 |
101.73 |
64898 |
111.09 |
|
August |
52047 |
89.85 |
53744 |
107.90 |
58379 |
90.68 |
60755 |
90.16 |
|
September |
51394 |
93.10 |
55022 |
98.04 |
59229 |
114.43 |
88227 |
111.48 |
|
October |
66015 |
92.72 |
75577 |
88.08 |
61564 |
91.17 |
60792 |
97.66 |
|
November |
52825 |
84.27 |
43904 |
78.49 |
57587 |
108.13 |
66747 |
96.17 |
|
December |
51105 |
114.00 |
61038 |
111.49 |
66255 |
123.32 |
65122 |
108.88 |
|
Total: |
642052 |
1138.34 |
648234 |
1168.81 |
667424 |
1251.80 |
728965 |
1178.94 |
Country
NO OF REMITTANCE
Saudi Arabia
18390
22640
19734
25314
23989
28734
21344
31418
Kuwait
1229
1288
1305
1142
1317
1096
1135
1325
Qatar
8
10
13
10
9
9
11
7
U.A.E.
293
392
223
404
225
457
245
504
Oman
40
37
28
36
52
42
35
39
Bahrain
184
103
151
96
170
120
135
145
U.K.
15990
8570
13378
8431
12948
8771
11157
8870
U.S.A.
14378
12560
13236
12272
15843
14743
15455
15582
Japan
47
39
49
52
48
48
56
68
Singapore
4
–
–
10
–
Germany
133
139
171
130
185
162
169
187
Malaysia
626
293
468
355
557
367
394
417
Other
334
357
301
320
326
381
367
499
Total:
51656
46428
24
48562
55669
54930
50513
59061
Bar Chart of Alrajhi Bank Riyadh, K.S.A
4.2.8.2 Bank Al Bilad, K.S.A:
|
YEAR-2006 |
NO OF INCOMING REMITTANCE |
YEAR-2007 |
NO OF INCOMING REMITTANCE |
|
JANUARY |
7431 |
JANUARY |
8392 |
|
FEBRUARY |
7645 |
FEBRUARY |
9281 |
|
MARCH |
7767 |
MARCH |
9762 |
|
APRIL |
7790 |
APRIL |
10515 |
|
MAY |
6940 |
MAY |
10814 |
|
JUNE |
7214 |
JUNE |
10781 |
|
JULY |
7140 |
JULY |
11901 |
|
AUGUST |
7230 |
AUGUST |
12076 |
|
SEPTEMBER |
7421 |
SEPTEMBER |
15624 |
|
OCTOBER |
7520 |
OCTOBER |
11136 |
|
NOVEMBER |
7418 |
NOVEMBER |
13726 |
|
DECEMBER |
7216 |
DECEMBER |
12095 |
Bar Chart of Arab National Bank
4.2.8.4 Al Mulla International Ex. Co, Kuwait
|
YEAR-2006 |
NO OF INCOMING REMITTANCE |
YEAR-2007 |
NO OF INCOMING REMITTANCE |
|
JANUARY |
907 |
JANUARY |
1468 |
|
FEBRUARY |
1108 |
FEBRUARY |
1497 |
|
MARCH |
1221 |
MARCH |
1557 |
|
APRIL |
1265 |
APRIL |
1375 |
|
MAY |
1285 |
MAY |
1409 |
|
JUNE |
1208 |
JUNE |
1462 |
|
JULY |
1370 |
JULY |
1500 |
|
AUGUST |
1382 |
AUGUST |
1202 |
|
SEPTEMBER |
1397 |
SEPTEMBER |
1316 |
|
OCTOBER |
1402 |
OCTOBER |
1645 |
|
NOVEMBER |
1458 |
NOVEMBER |
1581 |
|
DECEMBER |
1421 |
DECEMBER |
1908 |
Bar Chart of Al Gulf Overseas Exchange Co. Oman
4.2.8.6 City International Exchange, Kuwait
|
YEAR-2006 |
NO OF INCOMING REMITTANCE |
YEAR-2007 |
NO OF INCOMING REMITTANCE |
|
JANUARY |
1805 |
JANUARY |
2062 |
|
FEBRUARY |
1888 |
FEBRUARY |
2130 |
|
MARCH |
1902 |
MARCH |
2247 |
|
APRIL |
1856 |
APRIL |
2018 |
|
MAY |
1938 |
MAY |
2177 |
|
JUNE |
1958 |
JUNE |
2285 |
|
JULY |
1968 |
JULY |
2307 |
|
AUGUST |
1975 |
AUGUST |
2040 |
|
SEPTEMBER |
1968 |
SEPTEMBER |
2403 |
|
OCTOBER |
2010 |
OCTOBER |
2160 |
|
NOVEMBER |
1998 |
NOVEMBER |
2075 |
|
DECEMBER |
1987 |
DECEMBER |
2550 |
Bar Chart of Oman Exchange Co. Kuwait
4.2.8.8 Oman International Exchange, Oman
|
YEAR-2006 |
NO OF INCOMING REMITTANCE |
YEAR-2007 |
NO OF INCOMING REMITTANCE |
|
JANUARY |
1740 |
JANUARY |
2142 |
|
FEBRUARY |
1865 |
FEBRUARY |
2268 |
|
MARCH |
1902 |
MARCH |
2358 |
|
APRIL |
1967 |
APRIL |
2218 |
|
MAY |
1985 |
MAY |
2123 |
|
JUNE |
2087 |
JUNE |
2095 |
|
JULY |
2137 |
JULY |
2020 |
|
AUGUST |
2204 |
AUGUST |
2205 |
|
SEPTEMBER |
2185 |
SEPTEMBER |
2106 |
|
OCTOBER |
2019 |
OCTOBER |
2430 |
|
NOVEMBER |
2120 |
NOVEMBER |
2600 |
|
DECEMBER |
2254 |
DECEMBER |
2900 |
Problems in RMS are given below:
Lack of skilled manpower
Lack of Internet facility
Lack of management
Lack of data processing system
Lack of networking
Lack of monitoring
Lack of reporting
Problems in software (it is now in the ongoing process)
Suggestions:
Manpower should be trained
High speed internet facility should be implemented
Proper computerization should be implemented
Networking should be improved
Established a proper monitoring cell to control the queries of the customers
Reporting system should be developed
Problems of software should be managed soon.
8. Loan Default:
<span style="We have already considered data where we have found the recovery of Sonali Bank’s credit is very poor. There are many reasons behind it and discussed in the ‘Advances section’. The culture of loan default has to be overcome taking appropriate measures.
Sonali bank has to follow the above suggestive measures, so that its performance, deposit disbursement, recovery, investors, importer, goodwill etc. will be increased.
5.2 SWOT ANALYSIS:
Strength:
ü Largest commercial bank in Bangladesh.
ü Widely recognized and strong brand name.
ü Agent of Bangladesh bank.
ü Qualified and experienced workforce.
ü Strong liquidity and financial condition.
ü Strong networks all over in Bangladesh.
Weakness:
ü Huge amount of bad/debt loan.
ü Lack motivation of workers.
ü Service is not up to the mark.
ü Online banking is not strong.
ü Absence of teamwork.
ü Weak branch controlling and monitoring system.
Opportunity:
ü Investment potentiality in Bangladesh.
ü Increasing demand of customer finance.
ü Enormous opportunity in foreign remittance section.
ü By implementing e-commerce and online banking remarkable
opportunities are created.
Threats:
ü High standard Commercial/Foreign bank as well as private bank.
ü Illegal interference of CBA in banking activities.
ü Highly qualified and experienced bankers leave the bank a very high percentage.
ü Cannot take proper action against bad debtor due to political interference.
ü Increasing percentage of shifting customer loyalty.
ü Low Interest rate compare to private /Foreign banks.
5.3 CONCLUSION:
Sonali bank is by far the biggest bank as well as financial organization of Bangladesh. It has some advantages and disadvantages too. Since it inception in the early 1972 after the independence of Bangladesh it has played a vital role towards the progress of the nation in almost all spheres. The ratio analysis and CAMEL ratings do not reflect good impression of the bank to anybody. But all these analysis do not actually show the true story of the bank. The bank is still not facing losses year after year. But there are some problems with the bank’s performance. Poor government policies regarding financial organizations, poor credit culture in our country and lack of vision by top management, interference of CBA in all banking activities etc. is giving raise to the problems of the bank day after day. Recently, the government has appointed foreign management who would work independently and by taking appropriate measures will try to improve things. The decision is still refuted by many and the results are yet to be proved in near future. So, for the time being we may hope that the private body of top management might take appropriate measures regarding the problems identified and discussed so far and thereby eliminating the problems to take the bank to a more profitable and good service rendering organization to the people of the government republic of Bangladesh.
5.4 BIBLIOGRAPHY:
ü Annual Conferrance-2008
ü Annual report of Sonali Bank – 2006
ü Annual report of Sonali Bank – 2004
ü Annual report of Sonali Bank – 2003
ü Annual report of Sonali Bank – 2002
ü Annual report of Sonali Bank – 2001
ü Web site of Sonali Bank- www.sonalibank.com.bd
ü Foundations of Financial Management by Stanly B. Block and Geoffrey A. Hirt. 11th edition
ü International Banking, Banking Theory, and Banking System:
By – A. N. Sachdeva and M. P. Sundaram, Prokashan Kendra, Lucknow
ü Internet
ü Banglapedia