Various functional areas in Department of Foreign Exchange, Local Office, Dhaka of Islami Bank Bangladesh Limited
Islami Bank Bangladesh Limited (IBBL) is established on the Base of Islamic Shariah. It can not receive or pay Interest in any of its operation and its all activities will be in accordance with the principle of Islamic Shariah. Islami Bank Bangladesh Limited (IBBL) was established on the 30th March, 1983, with the objectives of carrying in all types of banking business and services based strictly on Islamic Shariah and interest free basis. The Islami Bank Bangladesh Ltd. like all other commercial banks, carry on their operations through 170 branches (2006 ) in different parts of the country.
To a layman, the term ‘Foreign Exchange’ means foreign money or more precisely, foreign bank notes like those American green banks bearing the portraits of her celebrated presidents and personalities. Or the Bank of England notes adore by a charming queen, blissful of the toll the time has taken on the glory of a once mighty sterling. In the truest sense, these and the assortment of bank notes issued by monetary authorities around the world are not foreign exchange. The term foreign exchange covers a far wider spectrum, beginning from the means of transfers like Telegraphic Transfers and Bank drafts to the process of conversion of the currency into another and the activities centered around that process.
Foreign Exchange and Foreign Trade is performed at the grass root level through Authorised Dealer newly Foreign under supervision of currency Dollar International Division, Head Office of a commercial Bank. And all commercial banks and registered moneychangers are guided and regulated by Central Bank.
‘’Islami Banking Business” means banking business whose aims and operations do not involve any element which is not approved by the religion of Islam. Foreign Exchange, like foreign trade, is a part of economic science. It deals with the means and methods by which rights to wealth in one country’s currency are converted into those of another country. Banks have to apply same mechanism to generate Foreign Exchange Business. In this regard Islami Bank Bangladesh Limited’s mechanism is made under the framework of Islamic Shariah.
FOREIGN EXCHANGE TRANSACTION UNDER ISLAMIC FRAMEWORK
1) Foreign Exchange and Foreign Trade.
2) Foreign currency dealing.
3) Spot Transaction, Forward Transaction.
4) Import Financing-
(a) Opening of L/C
(b) Import financing.
(c) Ownership of goods.
(d) Mode of financing.
5) Back to back L/C-
(a) Problems of stock-lot.
(b) Payment settlement.
6) Export Financing-
(a) Pre-shipment Finance.
(b) Pre-shipment Norms.
(c) Mode of Pre-shipment finance.
7) Inward and Outward Foreign Remittance.
Foreign Exchange is a mechanism to settle International parents. Foreign Exchange operations are as follows:-
3) Remittance ( Inward & Outward )
Import means bringing merchandise to country from any place rest of the world. Two things mainly involve with import of merchandise; bringing of commodities physically into the country any making payment towards the cost of the merchandise and services connected with its dispatch to the importer. The import trade is mainly done by Trading Corporation of Bangladesh (TCB) and by the independent indent firms. Import trade is financed mainly by documentary bills. The bills are usually drawn on the importer of Bangladesh on the D/P term at 60 days after sight.
The D/P bills are not generally discounted. The bank holds them till maturity and they are sent to the importer of our country for collection through the agent of the bank. The bills are presented to the bank of the importer on due date. When the banks receives the bills along with the relevant shipping documents, it pays the bills. If an individual merchant wants to import goods from a foreign country, he is to open a Letter of Credit through his bank in favor of the exporter. The exporter does not agree to send goods without L/C. IBBL, import finance on (1) Murabaha L/C (2) Murabaha post Import (3) Bai-muazzal post Import (4) Hire purchase (5) Musharaka (6) Mudaraba (7) LTR (Latter of Trust Receipt) (8) Bai-Salam (9) Quard-E-Hasna (10) Islisna.
Export means our carrying of any thing from one country to another for sale with the stipulated period for to earn foreign exchange; make favorable balance of payment position & stabilize marketability. Export credit means any credit provided by an institution to an exporter in the form of packing credit or of post shipment credit. In this regard packing credit allowed by the way of loan or advance granted or any other credit provided by and institution to an exporter for financing the purchase, processing or packing of goods on the basis of L/C. Post shipment credit means any loan or advance granted or another credit provided by an institution to an exporter of goods from Bangladesh from the date of extending the credit after shipment of the goods to the date of realization of the export proceeds and includes any loan of advances granted to an exporter, in consideration of or on the security of any duty drawback of any payment by way of incentive such as (1) Export Finance – (a) interest rate (b) incremented incentive on interest for interest based bank (c) extend of export credit (d) credit to first time applicant (e) back to back L/C. (2) Substitute Benefit (3) Duty Draw Back.
Remittance means transfer of fund. If we pronunciate the word “Remittance” we under- stand transfer of fund through a Bank from one place to another place which may be executed the country or between two countries. Remittance, which is effected within the country, is called Local Remittance and which is effected between two countries is called Foreign Remittance. Remittance plays a vital role in the development of the country. Without effect of remittance no country can develop her self. Bangladesh are rich enough in respect of human resources. Two types of remittance, one is inward remittance and another is outward remittance. The remittances, which are received from abroad and paid to the beneficiary, are Inward Remittance. In ward remittance are mainly received in US Dollar, pound sterling and Taka Currency. Modes of inward remittance are T.T, M.T, D.D, P.O, I.M.O, T.C, etc. The Remittance in Foreign Currency, which is effected from our country to abroad, is called outward remittance. The Remittance may be made by means of T.T, D.D& T.C, etc. Ideation to these the sale of Foreign Currency under latter of credit against retirement of bill is include as outward remittance.
Islami Bank is a financial institution whose status, rules and procedures expressly state its commitment to the principles of Islami Shariah and to the banning of the receipt and payment of interest on any of its operations. This definition is adapted by O.I.C. later on it has become the standard definition of Islami Bank. To run smoothly an Islami Bank is to handle its operations through its management.
By the term management is meant to execute a plan properly and fruitfully through some laid down priceless by a group of responsible peoples, appointed in an institution. It is meant acting according to rules to attain the object in a disciplined way, In the context of if Islamic Banking, it can be expressed to establish socio-economic justice in every sphere of economic transactions. A well-disciplined prudent group of people shall work and bring a developmental change rapidly withstanding the attacks of all types of “ Jahiliat” i.e. exploitations, usury, oppression & suppression etc. Islami Bank Bangladesh Ltd. from its inauguration in the year 1983 is playing a vital role for the achievement of the above mentioned object efficiently. In a nut shall IBBL is in the field of struggle to establish” Islamic Economics.”
The management of IBBL is constituted of 4 (Four) wings viz. ( a) Board of Directors (b) Shariah council (c) Executive committee (d) Management committee.
a) Board of Directors: The board of directors approves all the basic decisions and it is the highest authority of the bank. It can be compared to a legislative assembly of a country.
Shariah council: Shariah council is the organization of the qualified wise and intellectual’s whose function is to analysis all the operations of the bank whether strictly abiding by the Shariah or nor and to advise with effective suggestions to follow the Shariah. In a word it can be expressed by the word “Darul Ifta”.
b) Executive committee: Executive committee is the highest powerful authority to execute the decisions of the board of directors. It can be termed as the council of Ministers a country.
c) Management committee: Management committee is the committee to run the banks operations following the adopted principles by the board of directors. It may be compared to the secretariat of a country.
To attain the objective of bank, operations are urn through recurring deposits from the people and disbursing investment to the qualified entrepreneurs abiding by Islami Shariah through different modes to run the operations. The bank also controls and immense manpower through an administration which is known as the Personnel Department. Simultaneously for qualitative developmental change of its manpower an institution is urn which is known as the Islami Bank Training and Research Academy (IBTRA). There are different divisions and departments relating to the banking purposes viz. Investment Division, International Division, Operation Division, Central Accounts Department, Branches Control Department, Establishment Department, Share Department, and Audit & Inspection Department. All of its operations are done through 170 (one hundred and seventy) branches all over the country.
1.2 OBJECTIVE OF THE STUDY
The main objective of the study is to evaluate or examine the Foreign Exchange Transaction followed in the Islami Bank Bangladesh Limited in our country. The specific objectives of the study are as follows:
a) To study the financing procedures of the Import by the client of Islami
Bank Bangladesh Limited.
b) To study Export financing procedure follow by Islami Bank Bangladesh
c) To evaluate the handling of Remittance (Both Inward and Outward)
Procedure follow by Islami Bank Bangladesh Limited.
d) To identify the loopholes if any, in the Import, Export and Remittance
e) To suggest some remedial measure to improve the above procedure.
The information to be presented in this report has been collected from both primary and secondary sources. The senior officer IBBL local office foreign exchang deptt. So Collected Primary Data is very easily and secondary data has been collected from Islami Bank Training & Research Academy, Islami Bank Central Library, Islami Bank Annual Report, Bangladesh Bank Annual Report, Journals and Foreign Exchange related papers.
The focus of this report will be on various functional areas in Department of Foreign Exchange, Local Office, Dhaka of Islami Bank Bangladesh Limited. Attempts will be made particularly on the performance in each area. Specific emphasis will be given on the Import & Export financing and Remittance (Inward and Outward) areas.
2.1 BRIEF HISTORY OF ISLAMI BANK BLD. LIMITED :
Bangladesh, from its very birth ( 1971 ) inherited an interest based banking system which was introduced earlier when the country was a part of British Colony. At that time, ownership of and employment in banks were limited, with rare exception to non-Muslims. During 1947 to 1991, Banking of course, came under Muslim control but the system was not changed.
During the seventies, Islamic Development Bank and a number of Islamic Banks at national levels were established in the Islamic world. At home, the Islamic groups were vigorously working for adoption of Islam as the complete code of life. They found Islamic Banking in ready form for immediate introduction. Two professional bodies-Islamic Economics Research Bureau (IERB) & Bangladesh Islamic Bankers Association
(BIBA) were taking practical steps for the introduction of Islamic Banking.
Moreover, the attitude of Bangladesh Government towards Islamic Banking has been although positive. The attitude has been reflected from the following policy statements:-
(a) Founder member of Islamic Development Bank (1947).
(b) Participated in the Islamic Foreign Ministers’ conference held in Dakar, Senegal and subscribed the recommendation of taking effort to establish Islamic Bank.
(c) Proposed to establish an Islamic International Banking System with branches in all the Islamic countries, in Islamic Foreign Ministers’ Conference held in Islamabad, Pakistan (1980).
(d) Participated and supported in establishments of a separate banking system in Islamic countries in order to facilitate their trade and commerce, at the 3rd Islamic Summit Conference held in Makkah and Taif (1981).
In line with the above policy and due to continuous and dedicated workings of the above mentioned professional groups and individuals, Bangladesh Government has permitted the establishment of two Islamic Banks i.e. Islamic Bank Bangladesh Limited ( 1983 ).
2.2 ESTABLISHMENT OF IBBL:
Islami Bank Bangladesh Limited was incorporated on 13.03.1983 as a Public Company with limited liability under the Companies Act, 1993.
The Bank started functioning with effect from 30.03.1983. This Bank is the first interest-free Bank in South- East Asia. The establishment of this Bank ushered a new era in Bangladesh, the third largest Muslim Country of the world. The Bank is committed to run all its activities as per Islami Shariah. This Bank through its steady progress and continued success has, by now earned the reputation of being one of the leading Banks in the sector of the country.
2.3 Features of IBBL:
· All activities are conducted on interest-free system according to Islamic Shariah.
· The Bank-Client relationship in this Bank is participatory instead of the debtor-creditor relationship of the conventional system.
· It invests on the basis of profit-sharing and risk-bearing system.
· This Bank shares its investment-income with the Profit-Loss Sharing depositors according to a ratio to ensure equity and justice.
· Its aims are to introduce a welfare oriented banking system and also to establish equity and justice in the field of all economic activities.
· It extends its co-operation to the poor, helpless and low income group of the people for their economic up liftment particularly in the rural areas.
· To contribute towards balanced growth & development of the country through its investment operations particularly in the less developed areas.
The authorized capital of the Bank is Taka 500 million. The paid-up capital is Taka 2764.80 million. Total Number of Share holder 17,201
The Reserve Fund of the Bank stood at Taka 1011.84 million as on 31st December 1998.
Total equity of the Bank as on 31st December 2008 stood at Taka 8331.14 million.
|Sl No.||PARTICULAR||Taka in Million|
BY ISLAMI BANK BLD LIMITED
Import means bringing merchandise to country from any place rest of the world. Two things mainly involves with import of merchandise; bringing of commodities physically into the country any making payment towards the cost of the merchandise and services connected with its dispatch to the importer.
3.2 RELATED ACTS:
As per Import and export Control Act, 1950 person can indent, import or export any goods into Bangladesh except in case of exemption issued by the Government of the peoples Republic of Bangladesh. Violation of this order is punishable with fine under the provisions of Sea customs Act, 1878 as applied by sub section (3) of section 3 of this Act.
3.3 PROCEDURE FOR OBTAINING IRC ( Import Registration
To perform the import business registration with the licensing authority of the area is an urgent. Through public notice the chief controller of Imports and Exports invites applications usually for registration of importers. For getting this registration the following papers/ documents are required for submission to CCI&E or area office of CCI &E for import registration certificate: –
1. Application form
2. Nationality certificate
3. Income tax registration certificate
4. Trade License from the municipal or the local authority
5. Membership Certificate
6. partnership Certificate (for partnership concern)
7. Certificate of Registration with the registrar of joint Stock Company.
8. Memorandum of Association in case of limited Company.
9. Bank Certificate.
10. Ownership documents or rent receipts of the place of business.
11. Original Copy of Treasury Challan being payment of registration fees.
12. Other documents prescribed in the import policy.
The nominated bank of the applicant will examine the papers/ documents and verify the signature of the applicant and forward the same to the concerned office of the CCI&E with a forwarding schedule through Bank’ s representative. The duplication copy of the same bearing the acknowledgment of CCI&E office of the receipt of the documents is received back by the bank and is preserved.
If the documents are found in order and the CCI&E is satisfied the IRC is issued to the applicant and sent direct to the nominated bank. The pass book is also issued by the CCI & E simultaneously to the importer and sent direct to the nominated bank.
The IRC and pass book are security documents issued under embossing seal of the CCI & E and duly signed by the authorized official of CCI & E.
The IRC is to be renewed every year on payment of usual fees through Bangladesh Bank challan or cash payment in their bank’s A/C directly.
The schedule of registration fees/renewal fees in the financial year 2007-05 &2009 are as follows:-
Fees Yearly Renewal
Fees ATK. 5.00 LacTK. 500.00 TK. 500.00 BTK. 15.00 LacTK. 1500.00TK. 1500.00CTK. 50.00 LacTK. 3000.00TK. 3000.00DTK. 50.00 LacAnd above TK. 5000.00TK. 500.000
Fees shall be paid in Bangladesh Bank or in the Government Treasury or in Shonali Bank under the Head “42 Trade & Commerce fees realized under Import and Export Control Act,1950”.
3.4 Classification of Importer:
Importers are those who are authorized by the import Trade Control Authority that is CCI& E for import of goods essential for consumption or for production purposes.
There are mainly three types of Importer, viz:-
1. Commercial Importer
2. Industrial Importer.
3. Importer under Wage Earner Scheme.(WES)
(1) Commercial Importer:
It means an importer registered under the importers, exporters and indenture registration order 1981 who import goods for sale.
(2) Industrial Importers:
When issued to an industrial consumer, gives the items of import as raw materials and packing materials and spare parts, the value of entitlement and ITC classification.
(3)Importers under WES:
It means registered importers who import only under the WES. WES importers can be importing all permissible items as declared by the import policy and notification. Besides all registered commercial and industrial importer also can import under WES.
Another Importers are as follows:
· Lease Financing Import.
· Govt. Sector Importer.
· Import under Bonded Ware-House System.
· Import by Actual Users.
· Import by E.P.Z.
3.5 Import Formalities/Procedures:
For conducting world trade documentary credit or letter of credit is an essential implement. It is important for the beneficiary of a documentary credit to know that payment will be made only if the documents are in absolute conformity with the required terms and that the bank has to decide on the basis of the documents alone.
An importer desires to have an import L/C limit must have apply to the designated bank in prescribed forms for sanction of margin, L/C limit etc.
3.6 Definition Of Letter of Credit :
L/C means Letter of Credit or Documentary credit. As per Uniform Customs and Practice for Documentary Credits (UCPDC) meaning of credit as under:
Article No. 2 of UCPDC. For purpose of these articles the expressions “Documentary Credit” and “stand by Letter of Credit” (hereinafter referred to as credit (S) ) mean any arrangement however named or described, whereby a bank (the “Issuing Bank” ) acting at the request and on the instructions of a customer (the “Applicant” ) or on its won behalf.
i) Is to make a payment to or to the order of a third party ( the “Beneficiary” ) or is to accept and pay bills of exchange [Draft) (s)] drawn by the Beneficiary.
ii) Authorizes another bank to effect such payment or to accept and pay such bills of exchange [Draft (s)]
iii) Authorizes another bank to negotiate, against stipulated document (s) provide that the terms and conditions of the Credit are complied with.
Generally, a Letter of Credit is a conditional Bank undertaking of payment. In other words L/C is a letter from the Importer Bankers to the exporter that the bills if drawn as per terms and conditions are complied with will be honored on presentation.
As per UCPDC 500 a credit may be either:-
3.6.1 Classification Of L/C:
Various types of Letter of Credit are as follows :
1. Irrevocable L/C.
2. Confirmed L/C.
3. Transferable L/C..
4. Divisible L/C..
5. Back to Back L/C..
6. Revolving L/C.
7. Restricted L/C
8. Red clause L/C.
9. Green Clause L/C
10. With Recourse
11. Without Recourse
3.6.2 Parties To A Letter of Credit :
As per terms and conditions of the L/C, the seller is required to be routed through some intermediary banks in order to get his claim. So, we see that there are a number of parties involved in a L/C. The involved parties to a L/C are as under:–
Importer / Buyer.
Exporter / Seller / Beneficiary.
Opening / issuing Bank.
Advising / notifying Bank.
Confirming Bank (for Add confirming L/C )
Exporter’s Bank i.e. negotiating Bank.
Reimbursing Bank or paying Bank.
3.6.3 Procedure For Opening L/C :
An importer desirous to have an import L/C limit must have apply to the designated bank in prescribed forms for sanction of margin, L/C limit etc.
For Letter of Credit limit following informations are to be furnished by the applicant.
· The full particulars of bank account.
· Types of business ( Proprietorship, Partnership, Limited Co. ) in case of Ltd. Co. Balance sheet of last 3 (three) years and the names of directors.
· Historical back ground.
· Amount of limit required.
· Goods to be imported.
· Security to be offered.
· Re-payment schedule an source of fund.
· Other liabilities of the customer with the bank.
· Statements of Assets and liabilities.
· Account position (Balance).
· Trade License and import registration number with renewal date.
· Terms of payment: – Whether the import documents would be retired against payment on receipt or against acceptance or whether post import finance is required in the form of MPI / LTR etc.
On receipt of above particulars the import section of the bank will prepare credit report of the concerned importer The report should be collected from the previous banker of the party also.
3.7 Preparation of Credit Report:
Bank prepared credit report in prescribed forms. Character, capacity and capital which are known as the three C’s of credit. Instead of the three C’s some mention the three R’s i.e. reliability, responsibility and resources. To these three C’s may add two more C’s i.e. collateral and condition.
How a banker should obtain the necessary information regarding these fundamentals of credit, No doubt, bankers have to make inquires from those of their customers and other people and inquired the report by the banker. Sometimes informations are gathered by deputing marketing officer or credit officer.
3.8 Position of the A /C:
Import section will see whether there is sufficient fund available in the account to cover the margin to be sanctioned, commission, postage, cable or telex charge etc. If it is found O.K., L/C will be sanctioned.
In all case the sanction must be informed to the importer for acceptance. On receiving confirmation from the client then the terms and conditions of the sanctioned are acceptable, the subsequent documentation / charge document are taken up.
Following papers/documents submitted by the importer before opening of the L/C.
a) Trade License (Valid).
b) Import Registration Certificate (Must be kept in the bank custody).
c) Pass book import
d) Income tax declaration.
e) Membership certificate.
f) Memorandum of Articles (In case of Ltd. Co.)
g) Registered deed (In case of partnership firm)
i) Photo one copy.
Bank will supply the following paper/documents before opening of the L/C.
(a) L/C. application form
(b) ICA form.
(c) IMP from.
(d) Murabaha Agreement.
(e) Chargo documents paper.
The above paper must be completed duly filled and signed by the party and verified the signature.
3.9 Maintenance of Register:
The sanction must be recorded in the following register :
· Document execution register. All the charge documents must be recorded in this
· Limit register
· Liability ledger.
3.10 L/C Applications:
For opening L/C the client in to submit to the bank application in the printed format of the designated bank. This is called L/C application form which is also an agreement between the importer and the bank. The form is to be stamped under stamp Act. in force in Bangladesh. The importer must submit the LCA & IMP and Indent or contract / purchase order / proforma invoice (duly accepted by the importer) along with L/C application.
The L/C. application must be completed / filled in and signed the authorized person of the importer giving the following particulars:-
i. Full name and address of the supplier or beneficiary and importer.
ii. Brief description of the goods
iii. L/C. value for US$, £ etc. (CFR value) which must not exceed the LCA value.
iv. The unit price, quantity, quality of the goods.
v. Origin of the goods, port of loading and port of destination must be mentioned.
vi. Mode of shipment ( Sea, Air, Truck or Rail etc.).
vii. Last date of shipment and negotiation time (must not be beyond 30 days from the shipment date.)
viii. Insurance cover note number and name of the Company.
ix. Tenor of draft (i.e. sight /usance /deferred etc.)
x. Mode of advising L/C. ( i.e. Airmail / Full Telex / Short Cable etc.)
xi. Opening of L/C. under UCPDE Publication No. 500 ICC affection / Rev. 19993.
xii. Whether shipment / Transshipments in allowed.
xiii. Instruction to add confirmation if required.
xiv. ICA Number.
xv. Any other relevant information and instruction in any, must be mentioned in the L/C. application.
3.10.1 Examination of L/C. Application:
On receipt of L/C. application it must be checked by an officer of L/C section very carefully in the following manner:
1. That the terms and conditions as stipulated in the L/c. application are consistent with the exchange control and import trade regulation and UCPDE.
2. That all the information mentioned in above column has been furnished.
3. That the terms to e imported in eligible according to importer.
4. Those goods are not being imported or originated from South Africa or Israel.
5. If the goods are imported form any member countries of ACU.
6. That all the outing/erasing/alternation if any are authenticated by the authorized person.
7. LCA/License Permit etc.
8. That the validity of the L/C. must not exceed the validity of LCA.
9. L/C. is opened within the validity period permitted in the license.
3.10.2 Confidential Report of Beneficiary of L/C:
According to exchange control regulations bankers are required to obtain confidential report of the beneficiary of L/C before opening the same, if the amount of L/C exceeds Tk.5.00 lac. bank can open L/C below Tk.5.00 lac without obtaining C.R.
Bankers can write to their foreign correspondents to supply the C.R. But from practical experiences foreign correspondents of different country are not supply timely.
To over come the above situation bankers can consult reference books i.e. MUWN / DUNN / BRADSTREET / Trade directory of various Chambers of Commerce of different countries.
On receipt of C.R from any source the banker can accumulate the same in one master file.
3.10.3 LCA Registration
LC authorization forms consisting of six copies. 1st copy for exchange control purpose, 2nd copies for the licensing authority, 5th copy for the registration unit and 6th is the office copy of the bank.
The procedure for registration LCA form with the Bangladesh Bank is as under:
a) All LCA forms should be registered with Bangladesh Bank, Registration Unit, Exchange Control Department, Bangladesh Bank, Dhaka.
b) After filling up the relevant portions of the LCAFs and duly signed by the importer there are forwarded to the registration unit of the Bangladesh Bank by the authorised dealers duly authenticated. The LCAFs are registered by the Bangladesh Bank registration unit subject to observation of usual drill. The officer in charge of the Bangladesh Bank Registration until will give the registration number on all the copies of LCA forms under his signature. Thereafter, the same will be opened unless an LCA form which has been registered with the Bangladesh Bank.
c) After registration the original and duplicate copies of the LC authorisation forms will be delivered to the authorised representative of the banks from whom the same received by the registration unit.3th & 4th copies of the form will be passed on to the concerned licensing office, 5th copy of the form will be retained in the record of the registration unit of the Bangladesh Bank.
d) The authorised dealers will not issue blank L/C authorisation forms to their clients. The importer should sign the L/C authorisation form in presence of Bank’s officer. the A. D. should sign the LCA form and verify the importers signature. Authorised dealer shall keep it careful.
e) All authorised dealer will arrange to have with them specimen signatures and photo of the authenticated officers of the Bangladesh Bank registration unit.
f) The registration will remain valid for 11 months or 17 months. As the case may be depending on the commercial and industrial machineries.
g) When letter of credits have been opened against the exchange control copy of LCA form, full particulars must be endorsed on the bank of the copy under the stamp and signature of the authorised dealer.
3.10.4 L/C Numbering in the L/C Register :
If the L/C application and other all formalities are found in order then put the serial number in the L/C opening register. This L/C number put the L/C application form on the appropriate blank space. Enter in the L/C opening register the following particulars:
Date, SL No. (L.C No.) Name of the Importer with address, Beneficiary’s name and address , L/C value (Foreign Currency ) and B. Tk. rate of convention, LCA No. CCI & E Registration No. Shipment date, expiry date of the L/C commission postage recovered etc. to be recovered.
3.10.5 L/C Advising :
L/C must be typed in the printed format of a bank. After typing, L/C should
again be checked up by two authorized signatories and would be dispatched under their
full signature, gearing their signature number.
3.10.6 Telex L/C:
If any importer desires L/C to be transmitted by Telex. In that case the whole of the L/C is to be transmitted by telex to the advising bank by the opening bank.
In the last para of the above telex L/C must be mentioned that the telex message is an operative and no airmail confirmation will follow. In that case reimbursement authority is to be sent to the reimbursing bank separately.
If the importer desires that the L/C is to be advised by a short cable, short cable be sent incorporation the principal terms of the L/C as under:–
a. Advice our irrevocable L/C No………. date…….. favoring …… ( beneficiary’s name and address )
b. Amount (foreign currency).
c. Merchandise to be imported.
d. Last date of shipment.
e. Negotiation days.
f. Name of the importer with address.
g. Test number.
h. Air mailing details.
The air mail L/C must state as under ” This is in confirmation of our cable dated”……………….This is necessary to eliminate the possibility of issuing two advises of deputing the same L/C to the beneficiary by the foreign correspondent.
3.11 Add Confirmation:
Sometimes the beneficiary of the L/C may ask for add conformation to a L/C by an internationally, reputed bank in the beneficiary’s country. The importer is to request his bank i.e. opening bank to do no in writing.
The opening bank advised the L/C through their correspondent with whose they have prior arrangement of credit line. Instructions are issued in the following language. “Please add your confirmation of the credit at Beneficiary’s cost”. Adding confirmation L/C in the negotiation to the bank who has added their confirmation to the credit.
Such undertakings own neither be amended nor cancelled without the agreement of the issuing bank the confirming bank and the beneficiary.
3..12 Disposal of L/C Copies and Filing:
L/Cs are normally typed in respective banks printed format in many folds (8 copies). The original L/C in sent to the advising bank for beneficiary’s and 2nd copy sent to the above bank at the same time for their own purpose 3rd copy for importer, 4th copy for reimbursing bank 5th & 6th copy office copy of the bank, 7th for I.D. 8th copy for CCI & E and 9th copy for Bangladesh Bank.
One copy for importer be sent to them along with the memo of charges incurred by the opening bank for the L/C stating the their amount has been so debited for the amount of Memo including that amount of margin.
3.13 Partial Utilization of LCA :
When several L/Cs are opened against a single LCA endorsement must be given according to L/C opened and the aggregate of all the L/Cs must not exceed the value of LCA. Particulars of all the L/Cs should be noted on the back of LCA as under “opened L/C No. ………….. dtd. ………… for F. Currency …………… @ …….. Equv. Tk. …..balance is Tk. ………
3.14 Accounting procedure for opening L/C.
The following accounting system is followed in documentary creditors. The register shall be posted immediately on receipt or approval form the Manager to open a L/C. This register shall control the numbers of the L/C.
Entries are to be passed:
3..14.1 Currency vouchers:
Dr. Assets as per Contra (L/C WES ) at B.C. Selling
Cr. Liability as per contra ( L/C WES ) ,,
Dr. F.C. Deposit ( WES fund held A/c ) at national rate
Cr. F.C. Deposit A/c (WES L/C cover) ,,
( If is purchased Fund at the time of opening L/C )
3.14.2 Taka Voucher :
Dr. Party’s A/c (Current A/c ).
Cr. Sundry Deposit ( Security dep. L/C WES A/c ).
Cr. Telex recovery A/c ( at the L/C is transmitted by telex or cable).
Cr. Commission ( As per Bangladesh Bank Circular ).
Cr. P & T A/c.
Dr. Murabaha Import L/C @ B.C selling.
Cr. WES Find purchase A/c.
Cr. Profit Receivable A/c WES.
Dr. Profit Receivable A/c (monthly credited by daily product basis).
Cr. Investment Income A/c.
3.14. 3 L/C Amendment:
Amendment of irrevocable latter of credit is not permissible without the joint consent of the entire patron involved in documentary credit operation.
3.15 Time Extension:
A written application from the opener of L/C and signature of the opener be verified. A relevant license / LCA / Permanent of the loan / Barter must remain valid unto that period the extension is sought. Increase of L/C amount may be done provided the LCA covers the increase in amount.
L/C amount can be decreased provided the relevant indent is amended accordingly and with the consent of the beneficiary .
3.16 Procedure of Preparation and Dispatch:
Amendment is to be typed also like L/C in the printed format the copies of the amendment must be dispatched to all concerned as cone in dispatching the L/C. Amendment can be done either by cable / telex of airmail.
Each and every amendment of L/C must be noted in the L/C file and copies of each amendment be kept in the L/C file chronologically date wise.
3.17 Bank Charge:
Amendment commission is to be released from the party as pre instruction of Bangladesh Bank F.E. Circulars.
3.18 Account’s Procedure:
Dr. Party’s A/c.
Cr. Commission A/c.
Cr. P & T A/c.
If the amount of L/C increased the liability voucher is to be passed as under:
Dr. Liability as per contra (WES L/C ).
Cr. Assets as per contra ( WES L/C ).
This is for old entry reversal made at the time of opening the L/C.
Dr. . Assets as per contra ( WES L/C ).
Cr. Liability as per contra (WES L/C ).
A fresh liability is to be passed including the amount of increase on the date of amendment.
BY ISLAMI BANK BLD. LIMITED
Exporter means any person law fully exporting goods form Bangladesh to any other country. After shipment the exporter has to tender the documents to the bank within the stipulated prior for the negotiation of the documents are drawn compensatory support claims of the exporter.
Post shipment credit means any loan or advance granted or another credit provided by an institution to an exporter of goods from Bangladesh from the date of extending the credit after shipment of the goods to the date of realization of the export proceeds and includes any loan of advances granted to an exporter, in consideration of or on the security of any duty drawback of any payment by way if incentive.
Incentives are as under:
4.1.1 Export Finance.
a) Incremental incentive on interest for interest based bank.
b) Incremental incentive on interest for interest based bank.
c) Extent of export credit.
d) Credit to first time applicants.
e) Bank to Back L/C.
4.1.2 Substitute Benefit:
Exporters will get this benefit only for export oriented local waving / knitting manufacturer. The rate of premium is 25% on FOB value.
4.1.3 Duty draws back:
An exporter of manufactured products is entitled to draw back the value of the customs duties; sales tax etc. already paid on the importation of raw materials used in the production or manufacture of the export products.
4.1.4 Export credit Guarantee Scheme.
4.1.5 Confessional rate of import Duty.
4.1.6 Income tax rate of import Duty.
4.1.7 Retention Quota.
4.1.8 Travailing facilities.
4.2 EXPORT FORMALITIES
1. Procedure for Registration of Exporter.
2. Books and Register/Ledger required for export.
3. Export L/C. checking and advising.
4. Formalities of back to back L/C. opening.
5. Accounting of B/B LC.
6. B.B. Bill checking / Lodgment.
7. Mechanism of acceptance.
8. Pre-shipment financing.
9. Export document checking and negotiation / negotiation under reserve / collection basis.
10. Calculation of offering sheet for fund disbursement system.
11. Proceeds realization correspondence.
12. Formalities of back to back payment system.
13. Payment form Bai-Muajjal investment Bill A/c (if export fails.)
14. Substitute benefit realization/collection system.
15. EXP form reporting to Bangladesh Bank.
16. Disposal of EXP forms.
17. Export incentives.
18. Disputes and settlement of export claim.
4.3 PREPARATION OF EXPORT DOCUMENTS
Procedure for obtaining Export Registration certificate (ERC) form CCL & the following documents are required:
1. Application form.
2. Nationality certificate.
3. Partnership deed (Registered)
4. Memorandum & Articles of Association and incorporation certificate.
5. Bank certificate
6. Income Tax certificate
7. Valid Trade License.
8. Copy of Rent Receipt of the business firm.
9. Fees paid treasury chilliness.
4.4 What IS L/ C
The L/C is an undertaking of a Bank to make payment or to accept, and pay bills of exchange of the beneficiary or authorizes another bank to effect such payment or to accept and pay a draft or authorizes another bank to negotiate against stipulated documents, provided that the terms & conditions of the Credit complied with (Article-2 of UCPDC – 500).
4.5 WhatI Is Export L/ C
The L/C against which the goods and services are exported is called export L/C. The foreign L/Cs are export L/Cs.
4.6 Checking of Export L/Cs for Advising.
Upon receipt of the Export L/C the same must be checked by the receiving Bank carefully before advising the same. The following points to be carefully checked:
1. Authenticity of the L/C – The receiving Bank must ensure about the authenticity of the L/C. If it is tested massage the test No. must be verified and agreed by an Authorized Bank official, Known to the receiving / advising Bank or identified / confirmed by the advising Bank.
2. After authentication the receiving Bank to check the L/C & confirm on the following points :
(a) That the Exportable Commodity is not banned item as per rule of land ;
(b) That the terms and conditions stipulated in the L/C is not contrary to the
Exchange Control regulation of the country.
4.7 Processing and Opening of Back to Back L/C :
An export desired to have an import L/C limit under Back to Back arrangement. In that case the following papers & documents are required:–
1. Full particulars of Bank account.
2. Balance sheet.
3. Statement of Assets & liabilities.
4. Trade License.
5. Valid Bonded ware House License.
6. Membership Certificate.
7. Income tax declaration.
8. Memorandum of Articles.
9. 9. Partnership deed.
On receipt of above documents and papers the back L/C opening section will prepare a credit report. Brach must obtain sanction from Head Office for opening of Back to Back L/C. Exporters prepare the documents and submit the same to the Bank for negotiation .
4.8 Preparation of Export Documents:-
1. Bill of exchange or Draft.
2. Commercial Invoice.
3. Bill of Lading.
4. Inspection certificate.
5. Packing List.
6. Export License.
7. Shipment advice.
8. Certificate of origin.
9. Weight certificate.
10. Photo-sanitary certificate.
11. Certificate of Analysis.
12. Quality certificate.
13. EXP Form.
14. DHL Courier receipt
4.9 Export Documents Checking :-
4.9.1 General verification:
a) L/C restricted or not.
b) Exporter us to submit documents before expire expiry date of the credit.
c) Shortage of documents etc.
4.9.2 Particulars examination:
a) Each and every document should be verified with the L/C.
4.9.3 Cross examination:
a) Verified on documents to another.
On receipt of documents it must be checked properly and then a proposal sheet would be prepared as per Bank’s format indicating the full particulars of shipment and discrepancies under the signature of authorized person and should be placed to the Manager for disposal instruction of sanction.
4.10 Disposal of FBN Documents :-
—- Rubber stamp must be affixed of all the documents mentioning the FBN
—- Endorse of draft, B/L Insurance policy unfavorable of foreign correspondent as
Per L/C terms.
—- Prepare the forwarding schedule in five copies. The documents are to be
dispatched as under:-
i. 1st mail original documents under the original bank forwarding schedule by courser service.
ii. 2nd mail Duplicate sheet of document under the duplicate bank forwarding schedule by courier service as per L/C terms.
iii. 3rd copy of schedule is forehanded to the Head Office, I.D.,
iv. 4th copy is for record in the FBN file.
vi. 5th copy is used if necessary as a tracer or reminder.
4.11 Flow Chart for Export:
1. Goods ready for shipment.
2. Inspection of the goods from the competent authority as per L/C.
3. Prepared invoice and packing list and vessel booking particulars.
4. Papers to be sent to C & F agen