Over view of BASIC Bank Limited (Uttara Branch)
1.1# Background Of The BASIC Bank:
The BASIC Bank Limited (Bangladesh Small Industries & Commerce Limited) registered under the Companies Act 1913 on the 2nd of August 1988, started its operations from the 21st of January 1989. It is governed by the Banking Companies Act 1991. In 2001 the bank has changed its earlier name Bank of Small Industries and Commerce Bangladesh Limited and the changed name has been registered with the Register of Joint Stock Companies.
At the outset, the Bank started as a joint venture enterprise of the Bangladesh Credit Commerce (BCC) foundation with 70 percent shares and Government of Bangladesh (GOB) with the remaining 30 percent shares. The BCC Foundation being non functional following the closure of the BCCI, the Government of Bangladesh took over 100 percent ownership of the Bank on 4th June 1992. Thus the bank is state-owned. However, the Bank is not nationalized; it operates like a private bank as before. The bank was established as the policy makers of the country felt the urgency for a bank in the private sector for financing Small scale Industries (SSI).
BASIC is unique in its objectives. It is a blend of development and Commercial Banks. The memorandum and Articles of Association of the Band stipulate that 50% of Loan able funds shall be invested in Small and Cottage industries Sector.
1.2 # CAPITAL POSITION:
Authorized capital : Tk. 2,000 million
Paid up capital : Tk. 945 million
Total Reserve and Surplus: Tk. 1,294.00 million
Up to 31.12.2006
The Bank is requested to transfer 20 percent of its net profit before tax to Capital Fund as per the Banking Companies Act 1991.
1.3 # Functions:
The Bank offers:
a. Term loans to industries especially to small-scale enterprise.
b. Full-fledged commercial banking services including collection of deposit, short-term trade finance, working capital finance in processing and manufacturing units and financing and facilitating international trade.
c. Technical support to Small Scale Industries (SSIs) order to enable them to run their enterprise successfully.
d. Micro-credit to the urban poor linkage with Non-Government Organizations (NGOs) with view facilitating their access to the formal financial market for mobilization of funds.
In order to perform the above tasks, BASIC works closely with the clients, the regularly authorities the shareholders (GOB), banks and other financial institution.
1.4 # Organizational Structure:
To achieve its organizational goals, the Bank conducts its operations in accordance with the major policy guidelines laid down by the Board of Directors, the highest policy making body. The management looks after the day-to-day operation of the Bank.
A. BOARD OF DIRECTORS:
As stated earlier the government holds 100 percent ownership of the Bank. The Government of Bangladesh appoints all the Directors of the Board. The secretary of the Ministry of Industries is the Chairman of the Bank. Other Directors of the Bank are high Government and central Bank executives. The Managing Director is an ex-officio member of the Board of Directors. There are at present 7 Directors including the Managing Director.
The management is headed by the Managing Director. He is assisted by the Deputy Managing Director, General Managers and Departmental Heads in the Head office. BASIC is different in respect of hierarchical structure from other banks in that it is much more vertically integrated as far as reporting to the Chief executive is concerned. The Branch Managers of the Bank report direct to the Managing Director and, for functional purpose, to the Heads of Departments. Consequently, quick decision making in disposal of assess is ensured.
At a Glance of BASIC Bank Limited
|Name||BASIC Bank Limited|
|Date of incorporation||August 2, 1988|
|Date of inauguration of operation||January 21, 1989|
|Registered office||Bana Shilpa Bhaban
73, Motijeel Commercial Area
|Head Office||Sena Kalyan Bhaban(6th floor)
195, , Motijeel Commercial Area
|Name of the chairman of the Board||Mr.Dewan Zakir Hussain|
|Name of Managing Director||Mr. AKM. Sajedur Rahman|
|Number of Branches||015|
|Services provided||Deposit scheme, Credit facility and Foreign exchange services|
|Paid up capital||Taka 1247.40 million|
|Profit after tax and provision||Taka 282.96 million|
|Ownership||Government of Bangladesh|
|Banking software used||CASTLETM|
|Technology used||Member of SWIFT|
|Earnings per share||22.68(2007)|
|Number of Authorized Dealer||15|
Table: 1 At a Glance of BASIC Bank Limited
1.5 # ORGANOGRAM:
1.6 # Activities:
a. Industrial Credit:
The industrial loan reflected a significant growth of 13.54 percent in the year 2007 over 2006. Total outstanding industrial loans including term and working capital stood at Taka 13,901.40 million at the end of 2007 compared to Taka 12,243.56 million of 2006. Total outstanding term loan stood at Taka 5,055.58 million as on December 31, 2007 compared to Taka 3,897.12 million in 2006 reflecting a growth of 29.72 percent. The outstanding working capital finance extended to industrial units stood at Taka 9,525.98 million at the end of the reporting period compared to Taka 8,346.44 million in 2006. Growth rate here was 14.13 percent. BASIC Bank’s exposure to small and medium industries sector accounted for 56.73 percent of the total loans and advances. During the year, a total of 187 projects were sanctioned term loan out of which 69 were new. As on 31 December 2007, 712 projects were in the portfolio of the bank. The textile sector including garments being one of the major contributors to national economy dominated the loan portfolio of the Bank. Other sectors financed include engineering; food and allied industries; chemicals, pharmaceuticals and allied industries; paper, board, printing and packaging; and other non-metallic goods, leather and jute products. Recovery rate of project loan was 89 percent.
(source: Annual Report 2007, BASIC Bank Ltd.)
Figure 2: Trend of Industrial Credit
b. Commercial Credit:
The bank also supports development of trade, business and other commercial activities in the country. It covers the full range of services to the exporters and importers extending various facilities such as cash credit, export cash credit, packing credit, short term loans, local and foreign bills purchase facilities. As on December 31, 2007 total outstanding commercial loans stood at Taka 7,681.74 million compared to Taka 6,397.21 million in 2006.
(Source: Annual Report 2007, BASIC Bank Ltd.)
Figure 3: Trend of Commercial Credit
a. Micro Credit:
BASIC bank launched a Micro Credit Scheme in 1994. Micro Credit Scheme provides for the poor for generation of employment and income on a sustainable basis particularly in urban and suburban areas. The Bank follows three systems of credit delivery. These are:
1. Lending to the NGOs who lend to their members. At present there are 15 such NGOs.
2. Lending direct to the target groups or ultimate borrowers under the Bank’s own management.
3. Lending direct to the member-borrowers and NGOs providing non-financial services like group formation and monitoring and supervision on exchange for a supervision fee.
At the end of 2007, total amount of Taka 680.13 million remained outstanding as against Taka 359.24 million in 2006. Recovery rate during this period remained at a satisfactory level of 100.00 percent.
(Source: Annual Report 2007, BASIC Bank Ltd.)
Figure 4: Trend of Micro Credit
d. Foreign Trade:
The bank achieved substantial growth in both import and export in 2007. The bank handled total import business of Taka 21,266.53 million and export business of Taka 16,794.96 million in 2007. The import and export business grew by 19.45 percent and 8.61 percent respectively. Major items of exports were ready made knit & woven garments, sweater, jute & jute products, leather and leather goods, handicrafts etc. Items of import included mainly industrial raw materials, garments accessories, capital machinery, raw cotton, electronic consumer goods, chemicals, tires and tubes, reconditioned vehicles, bicycle spare parts, food items such as rice, wheat, garlic, onion, sugar, chilly and other essential commodities. (source: Annual Report 2007, BASIC Bank Ltd.)
Figure 5: Growth of Import & Export
The Bank become a proud member of SWIFT (Society for Worldwide Interbank Financial Telecommunication) that would pave the way to achieving uninterrupted communication related to banking for international trade business and fund transfer.
e. Other Activities:
The Bank provides services for remittance, underwriting, guarantee, public offering of shares etc. Then also provides funds to investment and leasing companies. Then Bank has recently created a venture capital fund for equity support to innovative but risky projects.
1.7# Performance at a Glance of UTTARA Branch:
i) Performance of UTTARA Branch at a glance as on January 31, 2000
|Key Areas||Amount in Lac Tk.|
Source: Uttara Branch, BASIC Bank Ltd.
ii) Deposit of UTTARA Branch as on January 31, 2008 Table: 3
|Type of Accounts||Amount in LacTk.||% of Total Deposits|
|Short Term Deposit (STD)||11.40||0.26%|
|Savings Bank Deposits||200.29||4.60%|
Source: Uttara Branch, BASIC Bank Ltd.
ii) Branch’s Foreign Exchange position as on January 31, 2008
|Amount in Lac Tk.||% of total Business|
Source: Uttara Branch, BASIC Bank Ltd.
1.8# SWOT Analysis :
The SWOT analysis comprises of the organization’s internal strengths and weaknesses and external opportunities and threats. SWOT analysis helps to identify the current position of the organization. A SWOT analysis of BASIC Bank Ltd. has been done below:
|§ First-class management
§ Initially being a specialized bank, it caters to the needs of an entire target market
§ Low customer base ensures dedicated attention to each customer
§ Low service charges with no hidden cost
§ Strong internal co-ordination
§ Friendly environment
|§ Heavily dependent on head office for decision making
§ No foreign branches
§ Most of the branches are situated in urban areas
§ Low rate of interest on deposits
§ Very few ATM Booths
§ Small range of offerings
§ Not enough promotional activities
|§ Enlarging business by opening new branches in rural areas
§ Innovation of new services
§ Increasing demand for import, export and L/C through proper promotional activities
§ Fully utilizing incentives provided to government banks
|§ Increased competition by foreign and local banks
§ Political involvement in decision making
§ Forecast of low growth in national economy due to adverse world economic situation and recession
Figure 6: SWOT Analysis of BASIC Bank Ltd.
2.1 # Foreign Exchange :
Foreign Exchange means foreign currency and it includes any instrument drawn, accepted, made or issued under clause (13), Article 16 of the Bangladesh Bank Order, 1972. All deposits, credits and balances payable in any foreign currency and draft, travelers cheque, letter of credit and bill of exchange expressed or drawn in Bangladeshi currency but payable in any foreign currencies.
Bangladesh Bank issues Authorized Dealer (AD) license by observing the bank’s performance and also the customers associated with the bank for conducting foreign dealings.
||1. L/C Opening
2. Document checking
3. L/C Payment (Lodgment and retirement)
4. Statement, Returns related to Import
|1. Inward & Outward Remittance
2. Statement, Correspondence & Returns related to Remittance
Figure: 8 Foreign Exchange Market Operation
2.2 # Export Section :
Foreign Exchange Regulation Act, 1947 nobody can export by post and otherwise than by post any goods either directly or indirectly to any place outside Bangladesh, unless a declaration is furnished by the exporter to the collector of customs or to such other person as the Bangladesh Bank (BB) may specify in this behalf that foreign exchange representing the full export value of the goods has been or will be disposed of in a manner and within a period specified by BB.
Bangladesh exports a large quantity of goods and services to foreign households. Readymade textile garments (both knitted and woven), Jute, Jute-made products, frozen shrimps, tea are the main goods that Bangladeshi exporters exports to foreign countries. Garments sector is the largest sector that exports the lion share of the country’s export. Bangladesh exports most of its readymade garments products to U.S.A and European Community (EC) countries. Bangladesh exports about 40% of its readymade garments products to U.S.A. Most of the exporters who export BASIC Bank are readymade garment exporters. They open export L/Cs here to export their goods, which they open against the import L/Cs opened by their foreign importers.
SCRUTINY AND NEGOTIATION OF EXPORT BILL
Bank deals with documents not with goods. The bankers are to ascertain that the documents are strictly as per terms of L/C. Before negotiation of the export Bill the bankers are to scrutinize and examine each and every document’s with care. Negligence on that part of the bankers may result in non repatriation or delay in realization of export proceeds are incorrect documents may put the importers abroad into unnecessary troubles.
The scrutiny of the Bill of Exchange (Draft) and other related documents should ensure that.
v The documents are presented for negotiation before the expiry of the relative credit.
v The amount does not exceed the amount available under the credit.
v All the documents stipulated in the L/C are submitted.
v The corrections and alteration are properly authenticated in all documents.
Export documents checking:
i. General verification
a) L/C restricted or not
b) Exporter submitted documents before expiry date of the credit.
c) Shortage of documents etc.
ii. Particular verification:
a) Each and every document should be verified with the L/C.
iii. Cross verification:
a) Verified one documents to another.
While checking the export documents following things must be taken in consideration.
Each and every clause in the L/C must be complied with meticulously and ensure the following:
i. That the documents are not state.
ii. That the documents are negotiated within the L/C validity, it a credit expire on a recognized bank holiday its life is automatically become valid up to the next works day.
iii. That the documents value does not exceeds the L/C value.
Draft/Bill of Exchange
Draft is too examined as under.
i. Draft must be dated
ii. It must be made out in the name of the beneficiary’s bank or to be endorsed to the bank.
iii. The negotiating bank must verity the signature of the drawer.
iv. Amount must be tallied with the invoice amount. v. It must be marked as drawn under L/C No……. dated……. issued by…….Bank.
Presentation of export documents for negotiation:
After shipment, exporter submits the following documents to BASIC Bank for negotiation.
a. Bill of Exchange or Draft;
b. Bill of Lading
d. Insurance Policy/Certificate
e. Certificate of origin
f. Inspection Certificate
g. Consular Invoice
h. Packing List
i. Quality Control Certificate
j. G.S.P certificate
2.3 # Import Section :
Imports are foreign goods and services purchased by consumers, firms & Governments in Bangladesh. To import, a person should be competent to be a ‘importer’. According to Import and Export Control Act, 1950, the Office of Chief Controller of Import and Export provides the registration (IRC) to the importer.
BASIC Bank checks the documents. The usual documents are,-
ii. Bill of lading
iii. Certificate of origin
iv. Packing list
v. Weight list
vi. Shipping advice
vii. Non-negotiable copy of bill of lading
viii. Bill of exchange
ix. Pre-shipment inspection report
x. Shipment certificate
- Registration with CCI&E
a. For engaging in international trade, every trader must be first registered with the Chief Controller of Import and Export.
b. By paying specified registration fees and submitting necessary papers to the CCI&E. the trader will get IRC (Import Registration Certificate).After obtaining IRC, the person is eligible to import.
- Purchase Contract between importers and exporter:
a. Now the importer has to contact with the seller outside the country to obtain the proforma invoice / indent which describes goods.
b. Indent is got through indenters a local agent of the sellers.
c. After the importer accept the preformed invoice, he makes a purchase contract with the exporter declaring the terms and conditions of the import.
d. Import procedure differs with different means of payment. In most cases import payment is made by the documentary letter of credit (L/C) in our country.
- Collection of LCA form:
Then the importer collects an Letter of Credit Authorization ( LCA) form BASIC
Bank UTTARA Branch.
4. Opening a Letter of Credit (L/C)
In international environment, buyers and sellers are often unknown to each other. So seller always seek guarantee for the payment for his goods exported. Here is the role of bank. Bank gives export guarantee that it will pay for the goods on behalf of the buyer. This guarantee is called Letter of Credit. Thus the contract between importer and exporter is given a legal shape by the banker by its ‘Letter of Credit’.
- Parties of L/C
i. Importer – Seller who applies for opening an L/C.
ii. Issuing Bank – It is the bank which opens/issues a L/C on behalf of the importer.
iii. Confirming Bank – It is the bank, which adds its confirmation to the credit and it, is done at the request of issuing bank. Confirming bank may or may not be advising bank.
iv. Advising / Notifying Bank – is the bank through which the L/C is advised to the exporters. This bank is actually situated in exporter’s country. It may also assume the role of confirming and / or negotiating bank depending upon the condition of the credit.
v. Negotiating Bank – is the bank, which negotiates the bill and pays the amount of the beneficiary. The advising bank and the negotiating bank may or may not be the same. Sometimes it can also be confirming bank.
vi. Paying / Accepting Bank – is the bank on which the bill will be drawn (as per condition of the credit). Usually it is the issuing bank.
vii. Reimbursing bank – is the bank, which would reimburse the negotiating bank after getting payment – instructions from issuing bank.
b. Application For L/C limit:
Before opening L/C, importer applies for L/C limit. To have an import L/C limit, an importer submits an application to the Department of BASIC Bank Limited furnishing the following information, –
i. Full particulars of bank account maintained with BASIC Mirpur branch.
ii. Nature of business
iii. Required amount of limit
iv. Payment terms and conditions
v. Goods to be imported
vi. Offered security
vii. Repayment schedule
A credit Officer scrutinizes this application and accordingly prepares a proposal (CLP) and forwards it to the Head Office Credit Committee (HOCC). The Committee, if satisfied, sanctions the limit and returns back to the branch. Thus the importer is entitled for the limit.
- The L/C Application:
After getting the importer applies to the bank to open a letter of credit on behalf of him with required papers.
- Documentary Credit Application Form:
BASIC Bank provides a printed form for opening of L/C to the importer. This form is known as Credit Application form. A special adhesive stamp is affixed on the form. While opening, the stamp is cancelled. Usually the importer expresses his desire to open the L/C quoting the amount of margin in percentage.
- Proforma Invoice: It states description of the goods including quantity, unit price etc.
- The insurance cover note: The name of issuing company and the insurance number are to be mentioned on it.
- The Letter of credit authorization (LCA) form: LCA form should be duly attested.
- The Form-IMP.
- Tax Information Certificate
- Forwarding for Pre-Shipment Inspection (PSI):
Importer sends forwarding letter to exporter for Pre-Shipment Inspection. But all types of goods do not require PSI.
5. Securitization of L/C Application:
The BASIC Bank Official scrutinizes the application in the following manner, –
- The terms and conditions of the L/C must be complied with UCPDC 500 and Exchange Control & Import Trade Regulation.
- Eligibility of the goods to be imported.
- The L/C must not be opened in favor of the importer.
- Radioactivity report in case of food item.
- Survey report or certificate in case of old machinery
- Carrying vessel is not of Israel or of Serbia- Montenegro
- Certificate declaring that the item is in operation not more than 5 years in case of car.
Examination of shipping documents:
One of the basic principles of documentary credit is that all parties deal with document and not with goods (Articles 6 of UCPDC-600). That is why the documents should be scrutinized properly. If any discrepancy in the documents is found, that is to be informed to the party. A checklist may be followed for examining the documents.
2.4# Major Discrepancies:
- Late shipment
- Late presentation
- L/C expired
- L/C over-drawn
- Partial shipment or transshipment beyond L/C terms.
BILL OF EXCHANGE (B/E)
- Amount of B/E differ with invoice.
- Not drawn on L/C issuing Bank.
- Not signed
- Tenor of B/E not identical with L/C.
- Full set not submitted.
COMMERCIAL INVOICE (C/I)
1. Not issued by the Beneficiary.
2. Not signed by the Beneficiary.
3. Not made out in the name of the Applicant.
4. Description, Price, quantity, seals terms of the goods not corresponds to the Credit.
5. Not marked one fold as Original.
6. Shipping Mark differs with B/L & Packing List.
1. Gross Wt., Net Wt. & Measurement, Number of Cartoons/ Packages differs with B/L.
2. Not market one fold as Original.
3. Not signed by the Beneficiary.
4. Shipping marks differ with B/L.
BILL OF LADING/ AIRWAY BILL ETC (TRANSPORT DOCUMENTS)
1. Full set of B/L not submitted.
2. B/L is not drawn or endorsed to the Order of BASIC BANK LTD.
3. “Shipped on Board”, “Freight Prepaid” or “Freight Collect” etc. notations are not marked on the B/L.
4. B/L not indicate the name and the capacity of the party i.e. carrier or master, on whose behalf the agent is signing the B/L.
5. Shipped on Board Notation not showing name of Pre-carriage vessel/intended vessel.
6. Shipped on Board Notation not showing port of loading and vessel name (In case B/L indicates a place of receipt or taking in charge different from the port of loading.)
7. Short Form B/L
8. Charter party B/L
9. Description of goods in B/L not agree with that of Invoice, B/E & P/L
10. Alterations in B/L not authenticated.
11. Loaded on Deck.
12. B/L bearing clauses or notations expressly declaring defective condition of the goods and / or the packages.
1. N.N. Documents not forwarded to buyers or forwarded beyond L/C terms.
2. Inadequate number of Invoice, Packing List, B/L & Others submitted.
3. Short shipment Certificate not submitted.
It is to be scrutinized to ensure the following:
1. The Invoice is addressed to the Importer.
2. The full description of merchandise must be given in the invoice strictly as per L/C.
3. The price, quality, quantity, etc. must be as per L/C.
4. The Invoice must be language in the language of L/C.
5. No other charges are permissible in the Invoice beyond the stipulation on the L/C.
6. The amount of draft and Invoice must be same and within the L/C value.
7. If L/C calls for consular invoice, then the beneficiary’s invoice is not sufficient.
8. Number of Invoice will be submitted as per L/C.
9. The shipping mark and number of packing list shown in the B/L must be identical with those given in the Invoice and other documents.
10. The Invoice value must not be less than the value declared in EXP Forms.
11. Invoice amount must be correct on the basis of price, quantity as per L/C.
12. Invoice amount, indicate sale terms/ Income terms VIZ FOB, CFR, CIF etc.
13. Consular Invoice must be stamped by the local consulate/embassy of the country to which the goods are imported.
Beneficiary statement, VISA/Export License issued by EPB, Certificate of Origin, Weight Certificate, Packing List, Inspection Certificate.
Certificate of analysis, quality certificate, MCD duly signed and any other documents required 3….by L/C each of these certificates/documents conform to the goods invoice and are relevant to L/C.Negotiating Bank will check the above documents whether it is as per L/C or not. If Negotiating Bank find everything in order or as per export L/C, bank will negotiate the document and will disburse the generated fund as per Banks norms.
If the Negotiating Bank will find any discrepancies in the documents they will send the documents on collection or they can negotiate under reserve by the request of the exporter or they can seek permission/Negotiation authority from issuing Bank to allow Negotiating Bank to negotiate the documents despite the discrepancies. L/C issuing Bank will inform the matter to buyer, if the buyer accepts the discrepancies mentioned by Negotiating Bank, issuing bank will authorize the Negotiating bank to negotiate the discrepant documents.
Normally negotiating Bank will send the documents on collection basis mainly for the following discrepancies:
1. L/C expired;
2. Late shipment;
3. Late presentation;
4. L/C overdrawn;
5. Unit price differ between L/C and Commercial Invoice;
6. Consignee Name and address differ between L/C and other documents;
7. Discrepancies in B/L;
8. Any other Major discrepancies.
2.5# Foreign Remittance Section:
The basic function of this department are outward and inward remittance of foreign exchange from one country to another country. In the process of providing this remittance service, it sells and buys foreign currency. The conversion of one currency into another takes place at an agreed rate of exchange, in where the banker quotes, one for buying and another for selling. In such transactions the foreign currencies are like any other commodities offered for sales and purchase, the cost (convention value) being paid by the buyer in home currency, the legal tender.
Workings of this department:
Overall supervision of Foreign Remit. Dept.
Foreign TT payment & Purchase of F. Drafts, preparations of F.B.P. (Foreign Bill Purchased).
Issuance of outward TT & FDR
Issuance of proceed responding certificate (PRC).
Foreign Collection, Bangladesh Bank Clearing Check Collection, which comes from all branch of BASIC Bank Limited.
Withdrawal from F.C. A/C.
Encashment of T.C. & Cash Dollar and Sterling Pound.
Deduction of Tax and VAT. On behalf of Bangladesh Bank.
Preparation of related statements including convertible Taka Accounts.
Preparation of IBCA & IBDA and Balancing of Collection and other special assignment as desired by Department in charge.
Balancing of Account Statements.
Compliance of audit & inspection.
Statement of all related works submitted to Bangladesh Bank.
Inward Foreign Remittance:
Inward remittance covers purchase of foreign currency in the form of foreign T.T., D.D, T.C. and bills etc. sent from abroad favoring a beneficiary in Bangladesh. Purchase of foreign exchange is to be reported to Exchange control Department of Bangladesh bank on Form-C.
Outward Foreign Remittance:
Outward remittance covers sales of foreign currency through issuing foreign T.T. Drafts, Travelers Check etc. as well as sell of foreign exchange under L/C and against import bills retired. Sale of foreign exchange is reported to Exchange control Department of Bangladesh Bank on form T/M.
Foreign exchange means foreign currency and includes all deposits, credits and balances payable in foreign currency as well as foreign currency instruments such as Drafts, T.C.s, bill of exchange, and Letters of Credit Payable in any Foreign Currency. All foreign exchange transactions in Bangladesh are subject to exchange control regulation of Bangladesh Bank.
Foreign Remittance Department deals with the following instruments:
(Dollar / Pound)
|Sell||Bank sells Dollar/Pound for using in abroad by the purchaser. The maximum amount of such sell is mentioned in the Bangladesh Bank publication of ‘Convertibility of Taka for Currency Transactions in Bangladesh.|
|Purchase||Bank can purchase dollar from resident and non – resident Bangladeshi and Foreigner. Most dollars purchased comes from realization of Export Bill of Exchange.|
|Telex Transfer||Outward TT||It remits fund by tested TT via its foreign correspondence bank in which it is maintaining its NOSTRO Account.|
|Incoming TT||It also makes payment according to telegraphic message of its foreign correspondence bank from the corresponding VOSTRO Account.|
Foreign Demand Draft
|Bank issue Demand Draft in favor of purchaser or any other according to instruction of purchaser. The payee can collect it for the drawee bank in which the Issuing bank of Demand Draft holds its NOSTRO Account. Bank also makes payment on DD drawn on this bank by its foreign correspondence bank through the VOSTRO Account. The procedure concerning issue of FDD is same as issue of Travelers check except that the customer is not required to submit his passport.
Following steps to be followed in payment of FDD:
At first the FDD is to be crossed.
Serial number is given.
Forwarding letter to the bank with which the bank has agreement.
Party is given the cash or his account is credited.
From the above discussion we may conclude the Foreign Exchange Procedures as following:
(11) Document Placement
Offers Proforma Invoice (1)
Offers Indent (1)
Request for Forward Document
L/C opening (2) (8)
Present Inform about L/C
Documents (6) (5)
Order Claim for (9) (10)
Of (3) Payment Payment Payment
Figure: 9 Foreign Exchange Procedures
3.1 #GENERAL BANKING
General banking is the starting point of all the banking operations. It is the department, which provides day-to-day services to the customers Main Functions of general banking department are the followings:
1. Accounts Opening Section
2. Accounts Section.
3. Local Remittance Section
4. Collection And Clearing
5. Cash Section
3.1.1 # ACCOUNTS OPENING SECTION
Bank is a financial intermediary, which mobilizes fund from surplus unit and allocates it to deficit unit. Surplus unit means the people who have surplus money and willingness to save. Deficit unit means the people who need money for industry, trade, business, or for personal use but don’t have sufficient money of their own for such purposes. Bank mobilizes the fund by accepting deposits from depositors and allocates the fund by providing loan to borrower.
Banker-customer relationship begins with the opening of an account by the customer. Opening of an account binds the same into a contractual relationship. But the selection of customer is very crucial. In fact, fraud and forgery of all kinds start by opening of an account by the customer (s). So, the bank takes extra care in its selection. One of the basic functions of commercial banks is to accept deposits. For accepting deposits both demand and time, BASIC Bank Uttara branch offers the following types of accounts-
Types of Accounts with Terms and Conditions
This part covers only following types of accounts-
1. Savings Bank Account
2. Current Account
3. Short Term Deposit (STD) Account
SAVINGS BANK ACCOUNT
This deposit is primarily for small-scale savers. Hence, there is a restriction on withdrawals in a week. Heavy withdrawals are permitted only against prior notice. Some Important Points are as follows-
As per BB instruction 90% of SB deposits are treated as time liability and 10% of it as demand liability
- Minimum opening deposit of Tk.5000/= is required;
- Interest is paid on this account. BASIC offers a reasonable rate of interest for SB A/C.
- Generally, banks require a 7-day prior notice if the total amount of one or more withdrawals on any date exceeds 25% of the balance of the account unless is given.
- The number of withdrawals over period of time is limited. Only two withdrawals are permitted per week. If there are more than two withdrawals are made in a week, no interest will be paid on rest amount for that month.
- Generally householders, individuals and other small-scale savers are the clients of this account
Current account is purely a demand deposit account. There is no restriction on withdrawing money from the account. It is basically justified when funds are to be collected and money is to be paid at frequent interval. It is most suitable for private individuals, traders, merchants, importers and exporters, mill and factory owners, limited company’s etc. Some Important Characteristics are as follows-
- A minimum balance of TK.5000 has to be maintained.
- CD accounts are unproductive in nature as banks loanable fund is concerned. Sufficient fund has to be kept in liquid form, as current deposits are demand liability.
- Thus huge portion of this fund become non-performing. For this reason banks do not pay any interest to CD Accountholders.
- There is no restriction on the number and the amount of withdrawals from a current account.
STD (SHORT TERM DEPOSIT) ACCOUNT
Normally various big companies, organizations, Government Departments keep money in STD account. Frequent withdrawal is discouraged and requires prior notice. In BASIC, customers usually give an instruction that their current account will be debited whenever its deposited amount crosses a certain limit and this amount will be transferred to the STD account
COMMON FORMALITIES REQUIRED FOR EVERY ACCOUNT
Ø Duly filled up Account Opening Form.
Ø Introducer’s signature on Account Opening Form to be verified by Manager under full signature.
Ø Two copies of passport size photograph of account opener(s) duly attested by the introducer.
3.1.2# ACCOUNTS SECTION
Accounts department maintains all records of transactions and all types of statement. At the end of transaction hour all concerned section sends vouchers of transactions to this department. Accounts department compares all figures/ amount, contents of transactions with supplementary statement prepared by computer. If any discrepancy arises regarding any transaction then this department reports to the concerned department. Following are the activities of accounts department:
To record all transaction in the cash book.
To record all transaction in the cash book.
To prepare daily, weekly, monthly, half-yearly and yearly fund position.
To prepare all kinds of statements related to Bangladesh Bank, Head office and National Board of Revenue (NBR).
To prepare monthly salary statement, provident fund statement and administrative expenditure statement.
To make charges for different types of duty.
3.1.3# LOCAL REMITTANCE SECTION
Cash remitting from one place to another is risky. So, Banks remit funds on behalf of the customer (s) to save them from any awkward happening through network of their branches. There are three modes of remitting funds. These are–
v Pay Order (PO)
v Demand draft (DD)
v Telegraphic Transfer (TT)
v Call Deposit Receipt (CDR).
PAY ORDER (PO)
Pay order is an instrument, used to remit fund within a clearing zone. Unlike cheque, there is no possibility of dishonoring PO. The PO can only be encashed through the branch that has issued the instrument.
PAY ORDER ISSUING PROCESS
For issuing a PO, following formalities are to be maintained. These are-
· Duly filled up the application form by the customer.
· Deposit money either in cash or by cheque with necessary charges.
· Prepare the instrument and make necessary entries in the Bills Payable Register where payee’s name, date, PO no. etc are noted.
· Deliver the instrument to the customer after scrutinized and approved by authority by taking signature of the customer on the counterpart.
DEMAND DRAFT (DD)
DD is called ‘Banker’s Draft’. It is an instrument, issued by a particular branch, drawn on another branch of the same bank, instructing to pay a certain sum of money. It is very popular instrument for remitting fund from one corner of a country to another.
. If DD amount is more than Tk.50000/=, a test code is given on IBCA. The a/c treatments will be-
When DD is issued:
H/O A/C ‘X’ branch…………………………Credit
Income A/c commission………………..……Credit.
TELEGRAPHIC TRANSFER (TT)
Sometimes the remitter of the funds requires fund immediately. In that case, the banker is requested to remit the funds telegraphically. Different modes are Telegram, Telephone, Telex, Fax. Telegraphic Transfer is the most rapid and convenient but expensive method. The drawer and the payee should have accounts with BASIC bank. TT is issued against cash, cheque, and letter of instruction
3.1.4# COLLECTION AND CLEARING SECTION
Customers do pay and receives bill from their counter party as a result of transaction. BASIC Bank Limited collects the bills on behalf of their customers.Collection mechanisms in BASIC Bank are clearing, Outward Bill For Collection, Inward Bills for Collection.
When the bill is within the range of the clearinghouse it is sent for collection through clearing section. As far as safety is concerned customers get crossed cheque for the transaction Crossed check can’t be encashed from the counter; rather it has to be collected through banking channel i.e., clearing. If a client of BASIC Bank received a check of another bank which is located within the clearing range and deposit the instrument in his account at BASIC Bank. Then BASIC Bank will collect the money through clearing house. After received the check BASIC Bank will credit client account. However, the amount is credited in the customer a/c but he will not get the money until the check is honored.
3.1.5 # CASH SECTION
Cash is the lifeblood of all financial activities. Cash section is a very sensitive point of the branch. This section deals with all types of negotiable instruments and it includes vault, used as the store of cash, instruments. The vault is insured up to Tk.20 lac. Insured amount yet to be enhanced to Tk. 40 lac. Operation of this section begins when the banking hour starts. Cash officer begins his/her transaction with taking money from the vault, known as the opening cash balance. Vault is kept in a more secured place. The amount of opening cash balance is entered into a register. After whole days’ transaction, the surplus money remains in the cash counter is put back in the vault and known as the closing balance. If the cash stock goes beyond this limit, the excess cash is then transferred to BASIC bank main branch. The main functions of this section are-
1. Cash Receipt
2. Cash Payment
Cash receipt procedure is given below-
i. The depositor first fills up the Deposit-in-Slip.
ii. Depositor deposits the money.
iii. Officer receives the money, counts and then enters in the Cash Receipt Register, and finally signs with seal and dates the deposit-in-slip.
Some important check points for making the payment are as follows-
Endorsement is done by putting signature of the drawer on the back of the negotiable instrument for the purpose of negotiation. By ‘blank endorsement’, an order instrument is made as ‘bearer’
Generally two types of crossing are practiced, namely- General Crossing and Special Crossing. Basically it gives a di