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, Audit & Inspection Department. All of its operations are done through 170 (one hundred and seventy) branches all over the country.
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. I am senior officer IBBL local office foreign exchang deptt. So I 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.
THE ORGANIZATION 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 ).
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.
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 invest on the basis of profit-sharing and risk-bearing system.
This Bank share 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 extend its co-operation to the poor, helpless and low income group of the people for their economic upliftment 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 2005 stood at Taka 8331.14 million.
IMPORT FINANCING 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.
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.
PROCEDURE FOR OBTAINING IRC ( Import Certificate) :
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.
- 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 authorised 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 2004-05 &2006 are as follows:-
Fees shall be paid in Bangladesh Bank or in the Government Treasury or in Shonali Bank under the Head “42 Trade & Commerce fees realised under Import and Export Control Act,1950”.
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 import 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.
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.
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 honoured on presentation.
As per UCPDC 500 a credit may be either :-
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
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.
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.
v The full particulars of bank account.
v Types of business ( Proprietorship, Partnership, Limited Co. ) in case of Ltd. Co. Balance sheet of last 3 (three) years and the names of directors.
v Historical back ground.
v Amount of limit required.
v Goods to be imported.
v Security to be offered.
v Re-payment schedule an source of fund.
v Other liabilities of the customer with the bank.
v Statements of Assets and liabilities.
v Account position (Balance).
v Trade License and import registration number with renewal date.
v 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.
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.
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.
Maintenance of Register:
The sanction must be recorded in the following register :
v Document execution register. All the charge documents must be recorded in this
v Limit register
v Liability ledger.
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 authorised 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.
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 have been furnished.
- 3. That the terms to e imported in eligible according to importer.
- 4. That 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.
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 Chamber of Commerce of different countries .
On receipt of C.R from any source the banker can accumulate the same in one master file.
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 machinaries.
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.
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.
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.
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…….. favouring …… ( 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.
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. Instruction 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.
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.
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. ………
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:
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 )
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.
Amendment of irrevocable latter of credit is not permissible without the joint consent of all the patron involved in documentary credit operation.
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 .
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.
Amendment commission is to be released from the party as pre instruction of Bangladesh Bank F.E. Circulars.
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.
EXPORT FINANCING 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 :
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.
Exporters will get this benefit only for export oriented local waving / knitting manufacturer. The rate of premium is 25% on FOB value.
Duty draw 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.
- 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.
PREPARATION OF EXPORT DOCUMENTS
Procedure for obtaining Export Registration certificate (ERC) form CCL & the following documents are required:
- Application form.
- Nationality certificate.
- Partnership deed (Registered)
- Memorandum & Articles of Association and incorporation certificate.
- Bank certificate
- Income Tax certificate
- Valid Trade License.
- Copy of Rent Receipt of the business firm.
- Fees paid treasury chilliness.
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 ).
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.
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 :
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.
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.
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 :-
Full particulars of Bank account.
2. Balance sheet.
3. Statement of Assets & liabilities.
4. Trade License.
Valid Bonded ware House License.
6. Membership Certificate.
Income tax declaration.
8. Memorandum of Articles.
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 .
Preparation of Export Documents:-
- Bill of Exchange or Draft.
2. Commercial Invoice.
3. Bill of Lading.
4. Inspection certificate.
5. Packing List.
- 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 :-
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 documents should be verified with the L/C.
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 .
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.
Flow Chart for Export:
Goods ready for shipment.
Inspection of the goods from the competent authority as per L/C.
Prepared invoice and packing list and vessel booking particulars.
Papers to be sent to C & F agent for shipment.
C & F agent will do the custom formalities i.e. noting / entry. Checking the goods as per invoice & packing list inspection report etc.
C & F agent will take permission for shipment / Hanover the goods to shipping co.
After completion of all customs formalities the nominating shipping co received the goods for sail/ load in the ship and issued a receipt which is known as mates receipt.
C & F Agent hand over the shipping receipt to the exporter or they can take the original B/L in payment of freight and other expenditure etc.
Exporter may dispatch the shipment advice to the importer directly as per L/C terms.
C & F Agent recipes the original B/L from the relative shipping co and dispatches he same to the bank for negation of receives the ( exporter ) from the shipping co directly.
Exporter spits the all original and duplicate sets of document to the bank for negotiation.
After negotiation bank should dispatch the documents to the opening bank for delivers of from the part.
Opining bank lodged the documents and make payment to the negotiation bank A/c terms.
4.12.A Musharaka pre-shipment Finance.
4.12.B BAI Muazzal Investment ( Forced Loan ).
4.12.C Mudaraba preshipment finance.
4.12.D BAI Salam.
4.12.E Quard Hasana ( Interest free loans ).
Musharaka pre-shipment Finance:-
Reshipment France is an advance granted by a Bank to an exporter to meet the cost up to the packing of goods for export to overseas buyer. this is done in reshipment stage. So it is also called reshipment advance. The purpose of the investment is for purchase of raw materials a finished goods or manufacturing , processing, packing , transporting up to warehousing / port of shipment etc. For export pre-shipment is an advance for procurement of finished goods.
Sanction of Pre-shipment:- The party is to apply the bank . On receipt of the application pre-shipment section will start scrutiny of the application .
Types of pre-shipment : Whether clean / pledge / Hypothecation of good.
Whether the investment is within Bangladesh Bank credit restriction.
Whether the security offered is acceptable.
What is the purpose of the investment.
Whether the goods specified for finance is eligible for export jnder export control rule.
How the PSI A/C will be adjusted.
Whether the item is traditional of non- traditional.
Execution of documents: –
Execution of the charge documents.
Lien Mark of the Master L/C.
Inspection of goods:
On receipt of the goods in the godown or ware House Banker should inspect the goods and process the proposal for making payment @ 9 % on FOB value of Master L/C for 180 days.
Dr. Musaraka pre-shipment A/c.
Cr. Party’s A/c.
Cr. Commission A/c.
Cr. P & T A/c.
Dr. Party’s A/c.
Cr. Income A/c ( Estimated profit after realization of the proceeds ).
Quota financed by Musharaka pre- shipment investment for purchase of Garments quota allocation under the following terms & conditions :-
Bank finance at the rate of 75% of cost price.
Profit sharing ratio.
a) Party 60% But be ensured minimum R/R as prescribed by H.O.
b) Bank 40%
Mode of disbursement:-
On completion of negotiation with the seller regarding price, quantity etc. The party will deposit their equity amount at the rate of 25% of the cost price to the Bank with request to make payment of the seller. Disburse Mint of the amount by creating investment under the Head Musaraka pre- shipment ( Quota ) after verifying the Market price and observing documentation formalities under Musaraka Agreement.
Before disbursement , the Quota allocation duly transferred by quota .Holder and duly authenticated by Export promotion Bureau in favor of the Buyer will be placed under band’s lien along with the party’s letter of undertaking to the effect the they will make necessary agreement for adjustment of the Bank’s Investment by export above special pre-shipment (Quota) from their other sources within due date.
Additional charge to be created on the value of collateral security already held if covered by value thereof . If the value of existing collateral security does not covet additional collateral security to be obtained.
Charge to be created on present and future assets of the Company in Bank’s favor with the Registrar of joint stock companies against the liabilities of the party with the Bank if not dove carolers.
Interim Adjustment :-
At the time of allowing pre-shipment Investment . If any on arrival of the Raw-materials proportionate amount of Special pre-shipment Investment (Quota) will be transferred to normal pre-shipment investment account. Pre-shipment Finance for Manufacturing the Garments will be allowed to such extent as the total liability of an account of Quota purchase, import payment and normal pre-shipment together coil not exceed 90 percent of FOB value of the Export L/C.
At the close of individual i.e. on negotiation of an export bill or receipt of export proceeds in case of collection Bill proportionate amount of Bank’s investment together with profit as per agreed ration will be recovered after obtaining a final account form the party.
It is a Musharaka Investment which needs round the close supervision. Bank will exercise utmost care to supervenes utilisation of the Quota allocation as early as possible invariably within the Quota year. Bank will participate in the and the export of the Readymade Garments. Bank will also inspect the party’s books of account in connection with the deals so as to ensure actualization of the estimated profit of maximization thereof.
- i. An unconditional and irrevocable undertaking to be obtained form the party to the effect that they shall arrange obtention of necessary export order through acceptable export L/C failing they shall arrange disposal of the Quota under Bank’s supervision and adjust the proceeds toward the financing to be allowed and in the even of shortfall, if any, the same shall be adjusted on or before due date(s) from party’s own sources.
- ii. Branch must verity market of the Quota & Quota be purchased at competitive price and market price verification certificate duly signed by Branch Incumbent / 2nd officer, Foreign Exchange In-charge & the Dealing Desk officer should be retained for record.
- iii. An affidavit in appropriate manner be obtained firm the party to the effect that entire Quota presently held by the party & will be performed & be purchased in future irrespective of Bank / own finance will be kept lien with the Branch and will be utilized by exporting Readymade Garments through the Branch.
Salient features of the existing provision of export credit:
- i. Bank may allow export credit to the extent of 90% of the value of confirmed irrevocable export L/C or firm sale contract.
- ii. Export Credit quarantine scheme:-
The guarantee covers 85% of loss caused by commercial risks and 95% of the loss
caused by political risks.
Dr. Musaraka pre-shipment (Quota).
Cr. Party’s A/c.
Estimated profit for 90 days must be calculated and marked in the ledger. When deal will close in that time Bank will realize the profit in full form their A/c.
Dr. Party’s A/c.
Cr. Income A/c (Pre-shipment).
It is a contract in which a client wishing to purchase raw-materials, finished goods, commodities, spares, Machinery, equipment or any other goods request the Bank to procure the items and sell them to him at a price payable at a future date in lumps of in installments.
. It is a credit sale. Ownership and possession of the goods is transferred by the Bank to the client before receipt of sale price.
Sale price of the goods is payable the client at a specified future date.
1. D. P. Note.
2. D. P. Note delivery latter.
- 3. Bai-muzzal Agreement.
- 4. Letter of Hypothecation.
- Accounting :-
Dr. BAIM Investment A/c.
Cr. Payment order A/c favoring seller of the goods .
Cr. Profit Receivable A/c.
Dr. Party’s A/c.
Cr. BAIM Investment A/c.
Cr. Profit Receivable A/C . (Monthly Product Basis).
- Insurance :-
Ask the client to obtain insurance policy equal to the sale price of the goods.
On behalf of the Readymade Garments Industries clients, open deferred payment L/C for import of fabrics and other accessories under Back arrangement of the understanding that the importers will arrange payment on or before the due date by repatriation of proceeds of exports of their products. In some cases they cannot execute exports in time exulting in their failure to repatriate exports in time resolution in their failure to repatriate export proceeds to make import payment on its maturity. But the bank in order to keep its commitments has to pay on due date irrespective of relative export proceeds released of not. Such overdue import payment is to be made by purchase of foreign currency form WES/SEM and the importers will have to arrange for the same.
On failure of the party to arrange import payment on of before the maturity date, the branch will effect the remittance by purchasing the required foreign currency at SEM rate by debit to Bai-Muazzal WES Bills A/c giving effect to the equivalent taka and due date for their repayment.
Then the branch will approach the Bangladesh Bank for then post fecto approval along with the following documents/papers.
1. Party’s letter addressed to NBR.
2. Bill of entry ( exchange control copy).
3. Export L/C copy.
4. Back to Back L/C copy.
5. Proforma Invoice.
6. Position of the goods.
The branches will need vigorous follow-up for recovery of the Bank’s dues within due date of the agreement positively. In case of the party’s failure to repay the Bank dues as per agreement the branch will arrange for disposal of the stock after obtaining necessary clearance from the competent Govt. Agencies and Head Office also
The branch will submit a monthly statement of outstanding Bai-Muazzal WES Bill as per Head Office proforma.
Accounting procedure of the Bai-Muazzal WES Bill Investment.
Dr. FC. Deposit ( WES Fund held ) A/C. F.C. Voueher.
Cr. GB General A/C Head Office. I.D.
Dr. Bai-Muazzal WES (Bills) A/C. Tk. Voucher.
Cr. WES Fund Purchased A/C. ,,
Cr. F.C.A/C. ,,
Cr. Telex Recovery A/C. ,,
Cr. Commission A/C. ,,
Cr. Investment Income A/C. ,,
- Charge document
- Undertaking to arrange foreign currency for payment.
- Agreement for sale of goods under Bai-Muazzal.
Post -Shipment Export Financing under L/C.
Export credit means any credit provided by an institution to an export in the form of packing credit or post shipment credit.
Packing credit means any loan or advance granted or any other credit provided by an 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 any other 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 or advance granted to an exporter, in consideration of, or on the security of, any duty draw-back or any cash payment by way of incentive.
The following incentives are provided to the exporters:
a) Interest rate:
The concessional interest rate of export credit for traditional & non traditional items.
b) Extent of export credit:
Commercial banks provide export credit to the extent of 90%of the value of confirmed and irrevocable L/C or of the firm’s
c) Credit to first time applicants: Commercial bank will not refuse any application for
export credit received for the first time.
d) Back to Back L/C:
All authorised dealers ( commercial Banks) can establish L/C on a back to back basis against lien valid export L/C for the importation of raw materials and other accessories from abroad or from inland for readymade garments, specialized textiles and hosiery products etc
From 31st March 1990.the arrangement for cash premium to the exporters under substitute benefit scheme has been replaced by export performance benefit (XPB), a system under which Bangladesh Bank shall reimbursed a premium in cash to the exporters Bank disfavor of the party.
This scheme has been introduced against customs duty or Duty drawback, exporters will get this benefit only for export oriented local weaving/knitting manufacturer. The rate of cash premium is 25% on for value.
The following manufacturers will get the benefit against export as prescribed by Bangladesh Bank:
a) Weaving cloth, knit cloth, Hosiery fabrics, Gray cloth, Printed cloth, Drying cloth, Gramin cheeck, Handloom fabrics and Reshmi silk cloth and exported readymade garments which have been made by local fabrics (Fabrics producer and garment exporter are to be same).
b) Local manufacturing Toel, Bed Sheet, Bed Cover, other related items, Terrybag and Shocks etc.
c) Fabrics producer and garments exporter must be same industry, and exported the garments by the use of own produced fabrics.
Duty Draw 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.
There are three method :-
(a) Draw back at actual,
(b) National payment of duty,
(c) Draw back at flat rate for realising drawbacks.
Export Credit Guarantee Scheme (E.C.G.) :
The export credit guarantee wing of the Sadharan Bima Corporation ( SBC ) provides guarantee to Importers and Exporters the overseas commercial and political risks respectively, currently three types of guarantee e. g.
(a) The Export Finance Guarantee (Pre-shipment),
(b) The Export Finance Guarantee (Post-shipment),
(c) The comprehensive Guarantee.
Concessional Rate of Import Duty :-
(a) Capital Machinery : Capital Machinery for export oriented Industries is allowed to the imported at a concessional rate of 2 ½ % import duty.
(b) Spare Parts : Drawback of import duties and sales tax paid in excess of 2 ½ % on the importation export oriented industries, provided that such part are not produced within the country.
Income Tax Rebate :-
Exporters of various categories are entitled to an income tax rebate, varying in percentage, depending on their export performance, as fixed by the NBR from time to time.
Rebate on Insurance Premium :-
Special rates are allowed to export oriented industries ( Non traditional items ) in respect of their premium payments for fire and marine Insurance.
Freight Rebate :-
Special inducement and promotional freight rates are provided to exporters by the Bangladesh Biman Airlines and the Bangladesh Shipping Corporation.
Retention Quota :-
Retention quota for merchandise exporters readymade garments is 7.5% of repatriate FOB value of their exports in F.C. A/C.
Mudaraba is a deed on the basis of which an agreement is signed between a Bank and a person ( Real person or a legal entity ) in order to enter into a Commercial ( Purchase and / or sale of goods ) investment and jobbing transaction. In this kind of agreement, the bank, as the owner, acts as the supplier of the necessary cash and the other party as the modareb or amel. Capital owner is the Saheb E-Mmal and capital user is called Mudareb.
All profits, earned through the relevant transactions, shall be divided between the bank and the amel. On the winding up of the Job, the ratios for this dividend shall be those initially agreed upon.
BAI SALAM OR BAI SALAF :
This is deferred delivery transaction under which banks may finance purchases on a client’s behalf. These is a distinction drawn between such purchases and future trading which is regarded as speculative and therefore, prohibited. Under a forward purchase the bank pays for the commodity being trade on behalf of the import agent or whole seller who will repay the bank when he resells the merchandise to the retailer or final customer. The banks can pre-purchase the future output of the firms at agreed price with specifications of the goods and stipulated time / date of delivery. They, however, cannot sell the product until they have taken physical possession of goods. This mode is prescribed many other banks.
QUARD-E-HASANA (Interest Free Loan) :
Most Islamic Banks also provide interest-free loans (Qard-E-Hassan) to their customers. However, practice differs in this respect. Some Banks provide the privilege of interest-free loans to the holder of investment accounts at the bank. Other banks provide interest-free loans to needy students and their economically weaker sections of society. Yet others provide interest-free loans to small producers, farmers and entrepreneurs who are not qualified to receive financing from other sources. The purpose of these interest-free loans is to help them to become independent or to raise their incomes and standard of xx living.
Second helping to increase production with due emphasis on Agricultural, livestock, and industrial production.
The word” Istishna” has derived from Sana-AA. Which means manufacturing and construction.
- Value/Price is to be paid before delivery of goods.
- Both delivery and price may be differed as per Hanafi School of thought.
- Risk and conversion both are permitted. Goods may be fungible or non-fungible.
Remittance means transfer of fund . If we pronunciate of 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 herself . Bangladesh are rich enough in respect of human resources. So Inward Remittance has great importance in our country.
OPENING OF FOREIGN CURRENCY A/C.
Accounts are phenomena through which transaction is routed. All banking transactions are settled through Accounts . So A/C. is essential for setting our day transactions Foreign Currency A/C. has a great important on overall Foreign Exchange. Only the Authorised Dealer Branches can open F.C. A/C .without prior permission of Bangladesh Bank F.C. A/C. is opened by Bangladeshi nationals serving and earning abroad i.e. having Income from sources other than Bangladesh . To open an FCAD/FCAP A/C the formalities mentioned below are to be observed :-
1. Opening forms i.e. Application, Signature Card, nomination form if any, to be duly filled in and signed by the applicant and the nominee.
2. Original passport to be submitted for verification and Photocopy of 1st seven pages to be submitted for preservation.
3. Passport photographs of both A/C holder and the nominee are to be submitted Photo graphs of Nominee to be attested by the A/C holder & A/C holder’s photo be attested by the authored by the authorised office of the Band.
4. Service contract in English or Bengali person to be submitted with the A/C Opening form.
5. If the intending person desire to open A/C from abroad the necessary papers are to be sent duly att6ested by the authorized official of Bangladesh Embassy working there. All signatures are by same as that of Passport.
It may be mentioned that no initial fund is required at the time of opening of the Foreign Currency account.
FCAD ( FXP ) A/C:
FACD A/C Export is opened by the exports only 7.5% FOB value? Realised amount is deposited in this account and the fund is used for the promotion of business. Establish of business, Payment of credit card bill, Export fair, To attend the seminar and of purchase of Machinery and Spare parts.
Private Foreign Currency ( PFC) A/C :
Private Foreign Currency A/C is opened by the Alien who serve in Bangladesh Foreign mission, Foreign NGO and Foreign consultation firm. Photograph, photocopy of passport, work permit, NGO permission etc, are to be submitted to open the A/C.
CONVERTIBLE TAKA (CT) A/C :
The private Foreign Currency Account holders are to open Convertible taka Account. The entire funds of the PFC A/C are to be routed through the related convertible taka Account.
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. Very few remittances in miscellaneous currencies are also received.
MODE OF INWARD REMITTANCE :
1. T.T ———- Telegraphic Transfer.
2. M.T ——— Mail Transfer.
3. D.D ——— Demand Draft .
4. P.O ———- Payment Order.
5. I.M.O ——– International Money Order.
5. T.C ———- Traveler’s Cheque.
The Remittance in Foreign Currency which are effected from our country to abroad is called outward remittance. Form remitter’s point of view is called outward Remittance and from payee’s point of view is called Inward Remittance.
MODE OF 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.
PROCEDURE OF PAYMENT:
To make payment the points mentioned below are to be observed.
- The D.D must be in original
- The name of bank, name of Branch, Date, name and A/C number of the payee, amount in word and figures must be mentioned.
- The D.D must be as per prescribed format or specimen copy supplied earlier.
- The amount is protectographed.
- Payment is not stopped.
- Draft is not reported lost.
- Verification of drawer’s signature.
- Telex confirmation from the issuing Bank, if the amount exceeds the limit as per agreement made earlier.
The message must be in original 2. It must be authenticated under test, Test must be decoded and found correct. 3. T.T. must contain the name of Bank, name of Branch, name and A/C number of the beneficiary . It the above points are Okay, payment made to the beneficiary as soon as possible. Incase of Express Remittance Scheme with Al-Rajhi Banking and Investment Corporation. K.S.A Local Office ensures the payment to our Branches within the following time frame as per H.O., ID circular No. d.dt.22.5.95.
1. Capital Area 24 hours.
2. Major Cities 48 hours.
3. Other Towns 72 hours
4. Remote Areas 120 hours.
At present twelve Exchange House / Bank are maintaining their NRD & NRD Accounts with us. As per agreement made with them they provide us sufficient fund to honor their drawing. On receipts of their fund Local Office prepare vouchers as under:-
1. Dr. IBG A/C HO-IK (FET-59)
(Respective Ex. House / Bank)
Dr. NRD A/C
Cr. NRD A/C (Respective Ex. House / Bank)
Cr. W.F.H. A/C.
2. Dr. W.F.P/ A/C
Cr. NRD a/c (respective ex. House/bank)
Cr. W.F.H. A/C.
Exchange House can issue DD and TT against their fund in the form of US Dollar or Taka Currency . In case of taka Currency the following vouchers are to be prepared:-
Dr. NRT A/C.
Cr. Party A/C.
In case of US Dollar the vouchers ore to as under:-
Dr. NRD A/C ( National Rate).
Cr. Party A/ C.
Dr. W.F.P. A/C ( TT Clean rate).
Cr. W.F.H A/C.
Beneficiaries maintain their A/C with different Banishes of IBBL of any other Banks . In these case Local Office issues IBCA to other Branches of IBBL .If Beneficiary’s A/C is maintained with other Banks , Local Office issues P.O. within the area of clearing house and DD beyond the area of clearing House.
1. If Beneficiary maintains A/C with Local Office and DD is drown of LO, the same will be received in the counter and payment will made directly .
2. If Beneficiary maintains A/C with any other Branches of IBBL and DD is drawn on that Br. In that case Beneficiary. Bank /Br. will make payment debiting Local Office and the IBDA will be responded by the LO.
3. If Beneficiary, maintain A/C with any other Br. of IBBL and FDD is drawn on LO in that case payment will be made through Transfer Delivery A/C within city Area. If the Branches are beyond the city Area payment will be made by OBC i.e. on collection Basis.
In the city Area, If there is any discrepancy in the draft if should be sent to LO on collection basis and LO will make payment after confirmation from the issuing Bank .
If Beneficiary maintains A/C with other bank within the clearing Area and draft drawn on IBBL draft will be paid through clearing. But beyond the Chittagong Area it will be paid on collection basis.
Draft of Chittagong TDA A/C can’t be held. Either kit will be paid or returned mentioning the cause of dishonor.
On receipt of Dollar Draft through collection basis the same will be sent for collection to the respective bank and payment will be make on receipt of proceeds. In this case the following vouchers are to be prepared:-
Dr. Outward Bills for lodged A/C.
Cr. Outward Bill for collection A/C .
After payment :
Dr. Outward Bills for collection A/c
Cr. Outward Bills for lodged A/C
SETTLEMENT OF CLAIMS:
As the remittance is received from abroad or Remote places, some claim, may occur for non receipts of fund. These claims may arise by the Beneficiary. or remittance through issuing/Remitting Bank. As such the claims are to the settled.
If the TT is lost or stolen, remitter will report to the remitting bank. R/B will ask / advise the Beneficiary. Bank to mark stop payment or not to make payment. Beneficiary bank
will confirm the stop payment to the Rem. Bank if the DD is not paid earlier . If the DD is paid earlier the mode of payment is to be confirmed to the Rem, Bank . If necessary a duplicate DD is to be issued to make payment to the beneficiary for settlement of the claim.
If the TT contains any wrong information Beneficiary. Bank is to contact with the issuing / Remitting Bank for correct information. On getting the correct information payment is to be made accordingly.
INCASE OF PURCHASE OF CHEQUE & DRAFT:
Dr. FCDP A/C
Cr. W.F.P A/C.
Dr. W.F.P A/C.
Cr. Party A/C.
Cr. Commission A/C.
(TK. 25 per Dollar.
TK.. 35 per Pound Sterling.)
Dr. IBG A/C HO-ID (FET – 59)
Cr. FCDP A/C
Foreign Remittance of IBBL Performance and Recent Developments.
Remittance of expatriate customers has always been contributing towards continued success of the Bank in deposit mobilization which, in turn, helped accelerate its investment operations. Besides, Foreign Exchange portfolio of the Bank has been quite phenomenal due to substantial inflow of Foreign Currency against remittance of Bangladeshi expatriates. In fine, Foreign Remittance helped consolidate the Bank’s deposit base, expand investment operation, finance import business and earn huge income from ancillary business and exchange gain.
Since its inception, IBBL has been maintaining a predominant position among contemporary Banks in this field. Over the last few years, IBBL is holding the 1st position among Private Commercial Banks in respect of remittance handling while it maintained 2nd position among all the banks (both NCBs & PCBs) in the year 2005.
To facilitate remittance of Bangladeshi expatriates around the globe, Islami Bank Bangladesh Limited has so far established Taka Drawing/Remittance Arrangement with 43 Exchange Houses/Banks in different countries. Besides, we have signed Agreement with 5 institutions and obtained Bangladesh Bank approval for establishing such arrangement with 6 Exchange Houses while 3 other proposal have been sent to Bangladesh Bank and 22 more are under process and correspondence. Apart from the Taka Drawing system, Bangladeshis living abroad may send money in Foreign Currency through our NOSTRO correspondents.
Due to widening the network and coverage, strengthening marketing drives and restructuring IBW with formation of new Divisions for Remittance as per Remittance Policy of the Bank, the overall growth of foreign Remittances has been increased quite satisfactorily.
A.. Volume and growth in foreign remittance from 2001 to June 2006 are furnished bellow
It is seen that half yearly total remittance up to June 06 stood at Tk. 23189 million which is almost equivalent to the yearly remittance of 2004 (Tk. 23669 million). The growth as on 30th June, 2006 is 40% over a higher amount of base figure in corresponding period of 2005.
It may be mentioned that usually we receive highest amount of remittance during the Eid ul Fitr and Eid ul Azha each year. Since both the occasions will be observed during the 2nd half of the year, we hope that volume and growth of remittance will be higher in remaining months. Moreover, we have established Taka Drawing arrangement with some new Exchange Houses which are expected to go in operation in next few months and would contribute in the remittance flow of the year.
E. Country wise position of IBBL compared with national remittance in 2005 is shown below
F. The total remittances of the country & IBBL from major remittance source countries showing our position/share in last few years are furnished in Annexure:
G. Comparative position of Remittance received through Banks / Exchange Houses as on June 30, 2006 is attached in separate sheet.
POSITION OF DRAWING ARRANGEMENT
IBBL so far obtained Bangladesh Bank approval for establishing Remittance arrangement with 54 Exchange Houses/ Banks out of which Taka Drawing has been started with 43 Exchange Houses in 12 countries as shown in Annexure A. Year wise position is summarized below:
Status of Drawing Arrangement yet to be completed are furnished below:
i . Agreement signed & operation will be started soon
01. Alfalah Exchange Company (Dhabi Group) UAE
02. T N S Money transfer, UK
03. Global Financial Exchange, USA
04. Hadi Express Exchange, UAE
05. Bank Islam Malaysia Berhad, Malaysia
ii. Bangladesh Bank permission Obtained & Agreement will be signed soon
01. Federal Exchange, Dubai, UAE
02. Emirates India International Exchange, UAE
03. ARY Forex Ltd, UAE
04. Milfa Sterling Exchange, UK
05.Bank Muamalat Malaysia Berhad, Malaysia (Agreed for Establishment of Drawing
06. United Exchange (2023224 ONTARIO INCORPORATED), Canada
iii. Proposal sent to Bangladesh Bank for approval
01. Worldlink Money Transfers S.A., Greece
02. Omnex Group, USA
03. Saajan Travel Services Ltd, UK
iv. Agreed to establish arrangement, proposal being processed to send for Bangladesh Bank approval
DolEx Dollar Express Inc, USA
- Al Ansari& Behbehani Exchange Co. WLL, Kuwait
- Jalalabad Financial Services Ltd, UK
- Alukkas Exchange, UAE
- Romana Money Services, UK
- Tele Money Transfer Limited, UK
- Trust Exchange Company, Doha, Qatar
v. Negotiations are going on for establishing arrangement
01. Western Union Financial Services
02. Malayan Banking Berhad (Maybank), Malaysia
03. Am Bank, Malaysia
04. Bumiputra Commerce Bank Berhad, Malaysia.
05. RHB Bank Berhad, Malaysia
06. Arab National Bank, KSA
07. Riyadh Bank, KSA
08. National Commercial Bank, KSA
09. Al Dar For Exchange Works, Qatar
10. Mostafa Sultan Exchange, Sultanat of Oman
11. Sonali Money Exchange (UK) Ltd., UK
12. Al Muzaini Exchange Company, Kuwait
13. Gulf Exchange Company, Qatar
14. Ameer Tech Remittance & Exchange Services, Singapore.
15.Mostafa Air Travel Tec Limited
Recent Developments in Remittance handling activities
Adopted Remittance Policy
With a view to utilizing the available strengths and deriving the benefits out of opportunities, IBBL has formulated a Remittance Policy containing strategies, action plan & a perspective plan for mobilizing/handling remittance which has been approved by the Board.
Strengthened Customer Service Deptt
Customer Service Cell at IBW has been upgraded to a Deptt. for meeting queries/complaints of expatriates & Exchange Houses. Besides, all Branches have been instructed through a circular to form a Customer Service Cell/Desk/Deptt & designate specific officials for handling expatriate customers.
Offering Competitive Exchange Rate
Exchange Houses have always been requesting for market competitive rate for cover fund against their Drawings. Upon establishment of Dealing Room at IBW, we update the rate daily while those Exchange Houses are funding through direct dealing and receive best rate prevailing in the inter bank market.
Observance of Customer Service Month
During “The Service Month” 06 observed by the Bank , IBW issued a separate circular giving detailed guidelines as to ensure better services to Expatriate customers and taking steps for mobilization of foreign remittance specially during the month.
Utilizing RDS officials for remittance mobilization
In order to increase the expatriate customer base and mobilize deposit through foreign remittance, RDS officials have been engaged recently. We hope to widen our remittance base in remote areas with the participators of grass root level employees of RDS.
Introduction of Instant Cash Payment Arrangement
We have recently made arrangement for Instant Cash Payment with some renowned Exchange Houses which will be in full operation from our Branches very soon. Officials from different Branches have already been trained by IBW in co-operation with UAE Exchange Centre Dhaka Office.
Automation of Remittance operation
IBW has taken steps to automate remittance of IBBL within shortest possible time. In this process, payment orders are electronically printed from eibs program and similar developments are under process of completion.
Strengthening Remittance Distribution Hub
IBW with the help of ICTD has taken various steps for capacity building of remittance handling officials working at Remittance Distribution Hub in Local Office through updating eibs and providing necessary logistics and support.
Shifting of Remittance Service Operation from Local Office to Head Office
IBW is actively working on the different aspects of shifting remittance handling service from Local Office to Head Office. We have chalked out a layout for manpower, logistics, space and the other requirement for shifting the operation.
New Coverage Countries under Remittance Arrangement
Besides, KSA and other Gulf countries, there are some other countries where Bangladeshis live and work, in good numbers. To fetch remittance from those countries we have recently made arrangement in new areas namely Canada, Italy, Korea, Greece, Malaysia. Moreover, we are trying to establish such arrangement in countries like South Africa, France, Singapore, etc.
Arrangement in Malaysia
A good number of Bangladeshis have been working in Malaysia. As there is no Exchange House in that country, we could not make any drawing arrangement for easy remittance of Bangladeshi expatriates in Malaysia. However, while attending a training program, the EVP, IBW visited 5 (five) reputed Banks in Malaysia and had fruitful discussion on establishment of remittance arrangement. Consequently, we signed an Agreement with Bank Islam Malaysia Berhad on 19th April 2006. Besides, Bank Muamalat has agreed to have similar arrangement with our Bank. We are also corresponding with May Bank, Bumiputra-Commerce Bank Berhad, RHB Bank Berhad and Am Bank in Malaysia and hope to receive positive results soon.
Visit for Mobilization of Remittance
A detailed memo on “Visit Plan 2006 for mobilizing foreign remittance” containing the importance of countries in terms of remittance receipt and number of Bangladeshi expatriates was placed before the EC and the Board.
As part of remittance mobilization, our honorable Directors and Executives have been visiting remittance source countries. IBW arranged appointments with Exchange Houses, gathering of Tellers and Expatriates and sent different gift items, Account Opening Form , Publicity Materials on the occasion of delegates visits abroad.
Single Country Trade Fair
IBBL has participated in Bangladesh Single Country Trade Fair organized jointly by Embassy of Bangladesh in KSA and Bangladesh Business Committee held in Riyadh on May 25 to 28, 2006. IBBL stall in the Fair attracted a good number of visitors and there was a huge response and impact on the expatriates in KSA. We sent different brochures, leaflets, festoons and promotional materials for distribution among Bangladeshis.
Placement of New Representatives in UAE
IBBL made special arrangement with UAE Exchange under which they have offered to take 3 (three) Representatives from our bank at their cost to be stationed at Dubai, Abu Dhabi and Sharjah. The nominated officials are expected to proceed to UAE very shortly and we hope that there will be a break through in remittance from UAE upon their deputation.
IBBL arranged wide coverage in print media on the establishment of remittance arrangement with different Banks and Exchange houses which definitely helped increase bank’s image among people in general.
Conference and Workshops
IBBL arranged 4 Training / conferences for Foreign Exchange and Remittance handling officials of our bank. Such programs have been very much beneficial for desk officials in getting a wide picture of Foreign Remittance of the Bank. Besides, we have received some valuable suggestion from the participants for improving our Services in remittance handling.
Remittances of the country & IBBL from major source countries showing our position/share
Fig in Million Taka
Fig in Million Taka
Fig in Million Taka
Singapore Fig in Million Taka
Foreign Exchange performance of IBBL
Foreign Exchange Business of the Bank has been maintaining a steady growth (about 37.66%) despite numerous difficulties the bank had to face in different fields.
Import: Import business achieved 87% of target with Tk. 70702 million at the end of September 2006 as against Tk. 54,900 million in 2005. Growth in amount was Tk. 15802 million (highest in last five years) with a percentage growth of 28.78%
Although import business made a very promising start in the 1st quarter of the year with about 57% growth, the business declined in the 2nd quarter which continued upto July 2006 due to some obvious reasons like restrictions imposed on investments due to asset liability management and also restrictions imposed by Indian Government on export of food items to Bangladesh. Import Business has a gained picked up and by now has reached 29% growth level as against 13% national growth in the last quarter. The performance of the Bank in import business in the last five years from January to September has been shown in different charts enclosed.
Export: Export Business stood at Tk. 36.682 million achieving 100% of proportionate target as against TAKA 25,680 million in September 2005 registering a growth in amount Tk.11, 002 million and growth percentage of 43.1%, both highest in the last five years. The growth in export business is attributable to inclusion of new export oriented projects, increase in export of textile and RMG outputs & other non-traditional items. The National growth in export of last quarter was 31%. The performance of the Bank in export business in the last five years from January to September has been shown in different charts enclosed.
Remittance: Remittance Business stood at TAKA 37852 million achieving 86% of target as against 26786 million in 2005 registering a growth in amount of Tk 11096 million, highest in last five years with a growth percentage of 41.47%.
Remittance Business of the Bank made a great leap in 2005 with 61% growth over 2004 and on that base figure, in 2006, Remittance Performance has registered 41.47% growth, which is quite encouraging while the national growth is 24%. The performance of the Bank in remittance business in the last five years from January to September has been shown in different charts enclosed.
F. Ex Business trends: September 2001 to September 2006
Growth of Foreign Exchange Business
Since inception, IBBL is leading with a pioneering role in handling Foreign Exchange business. Classified under 3 (three) distinct categories viz., Import, Export & Remittance, the achievement of IBBL in the area of foreign exchange business is quite phenomenal and epoch making.
In 2005, Import, Export and Remittance business position of IBBL among all the private commercial Banks was first while among all Banks including NCBs its position in Import & Remittance was 2nd. The total foreign exchange business stood at Taka 147,642 million as on 31.12.2005 as against Taka 112,624.00 million in preceding year registering an increase of 31.09%.
Table: Foreign Exchange Business
To handle foreign exchange business effectively and efficiently, the Bank has, over the years, developed a wide network of correspondent relationship with 245 foreign Banks and Exchange houses.
In respect of remittance business, IBBL has been playing vital role since inception 1983 and has made tremendous success in facilitating expatriate Bangladeshis through establishment of drawing agreement or special remittance arrangement with as many as 55 Renowned Banks / Exchange houses in major remittance source countries including KSA, GCC countries, USA, Canada, UK, Italy, Greece, Malaysia, Singapore etc. IBBL puts utmost emphasis on excellent / highest customer services to the wage earners by competitive exchange rate & ensuring fastest delivery of remittances.
IBBL is using state of the art of technology, viz., SWIFT, online banking in expediting hard earned money to the door steps of the beneficiaries of remittances. IBBL has opened separate expatriate services desk/cell/department in all of its branches. Besides for expeditious delivery of remittances it has introduce instant money transfer system through which beneficiaries are getting instant cash.
It is seen that every two years, our remittance gets doubled in volume which shows IBBL has gained solid ground of confidence of the expatriates.
From July 2005, the treasury activities are managed by International Banking Wing of Head Office. IBBL is now actively participating in the inter Bank Foreign Exchange Market through the Dealing room in order to meet internal requirements as well as to contribute in the Inter-bank Market through sale and buy of Foreign currencies. The Contribution of IBBL to the Inter-Bank Market is 7.51%.
The Bank has made special arrangement with Al-Rajhi Banking and Investment Corporation for “Express Remittance” of money from Saudi Arabia within the shortest period of time. Islami Bank Bangladesh Limited has money drawing arrangement with the following 55 exchange houses:
Besides that the Bank has remittance arrangement with Barclays Bank PLC, London, U.K.; Standard Chartered Bank, U.K.; American Express Bank Ltd.; New York, U.S.A.; Citibank N.A., New York, U.S.A, Placid N.K. Corporation, U.S.A, Bank of Tokyo Mitsubishi Ltd.; Japan; Commerz Bank A.G., Frankfurt, Germany.
It is one of the top three thousand international banks of the world and its world –rank is 1620 in 2006.
At present some of banks operate their banking system by computer as well as automation. Easy banking system leads to flexibility of transaction between the bank and the clients. But still these days towards the millenium the banking system is not so appropriate in solving fast money, especially with knocking every desk for a cheque to be drawn from the counter which is a very annoying and stained at the present moments.
In IBBL, when a client want to withdrawn his or her deposit firstly he or she deposits cheque and receives a scroll number usually called “Token’. Then his or her specimen signature verified by a responsible officer and go to the computer section. After completing all formalities he or she get his/her currency. This system is very slow and annoying.
If the above banking system have done by automated banking, the process would be easier than before. In this automated system every client would firstly submitted his/her chaque to the computer section for verifying his or her Account’s code number, Name and Signature because every client’s detailed information is stored previously in the computer when he/she open a Account at an automated banking system. For this way, the computers verify all necessities and give the issuing cheque clearance then the cheque received officer give money to the Account holder. Hence automated banking system is much easier than traditional system for clients and bankers because its save time each of other.
If a server and Wide Area Network ( WIN ) connect the banking system, a client could easily transact his or her Account from any IBBL’s branch of a city. Beside this Automatic Trailer Machine (ATM ) is also a possibility of automated banking.
If all these above recommendations are implements by the IBBL, then IBBL will be the most undated bank in the next Millenium.
¨ A HAND BOOK OF FOREIGN EXCHANGE & FOREIGN TRADE
— Haider Ali Miah
¨ FOREIGN EXCHANGE AND FINANCING OF FOREIGN TRADE
— Syed Ashraf Ali
¨ ACCOUNTING PRACTICES OF ITEREST-FREE BANKING-A CASE STUDY OF ISLAMI BANK BANGLADESH LIMITED.
— K. M. Golam Muhiuddin*
¨ ISLAMI BANK ANNUAL REPORT
¨ BANLADESH BANK ANNUAL REPORT
IMPORT POLICY ORDER:
Based on the needs of commodity and availability of finance, Government declines policy for import of goods for a particular period having approval from the National Assembly can be defined as import policy order.
Import policy is a guide line or a set of rules envisaged by Govt. Authority i.e. the Ministry of Trade and commerce for the registered importers for import of goods inside the country.
Earlier import policy have been formulated for 2 (two) years. But present import policy order has been formulated for 5 (five) years, effect from the valid till announce of new import policy order. If require Govt. can revise the policy in each &every years.
General Rules in Connection With Import:
(1) Restriction of import.:
a) Negative list of Merchandise.
b) Restricted list.
c) Foot Note under Restricted list.
d) Freely importable items
(2) ITC Number is compulsory (H.S. Code 6 digit) to be mentioned in the L/C and
LCFA to identification the item to be imported. H.S. Code seven digit as mentioned
by Bangladesh statistical Bureau to be used.
(3) Requirement of Right of Refusal (ROR) for public sector Agency from Ministry of
Industry or respective Ministry/dept of both to import under restricted list.
(4) Import can’t be made from Israel, Serbia, & Montenegro.
(5) Pre-shipment inspection (PSI) for private sector normally; PSI is not mandatory.
(6) Shipment to be made through Bangladeshi Ship. Some exceptions.
(7) Import to be made on competitive rate.
(8) CFR and FOB basis import; Normally import under CFR basis.
(9) Country of Origin: Mandatory should be clearly indicated at the body of
packing/container/ box/ packet etc. It is not applicable in case of export oriented
SOURCE OF FINANCE:
Import may be allowed under the following sources of finance:
i)Foreign Currency Reserve in Bangladesh Bank.
ii)Wage Earner’s F.C. balance.
b) External economic aid
(Commodity Aid, Loan, Credit, or Grant).
c) Commodity Exchange:
ii)Special Trading Arrangement (STA).
FOREIGN EXCHANGE REGULATION:
(1) Exchange Control Manual.
(2) F.E. Circular.
(3) Public Notice.
(4) Import & Export Policy.
(5) Ministry of Commerce Circular.
IMPORT RELATED FEES:
Four categories of importer registration renewal fees are as under:
¨ Group Import Allowed.
¨ Non-resident Bangladeshi Importer for there own profession that is Doctor/ Scientist.
¨ Sample Import.
¨ Temporary Import for re-export within 1 (one) year re-export to made.
¨ Import at EPZ and Export there from out of this policy order.
¨ Human Consumable item Import: Milk, Product item, Edible Oil etc.
* Radiation Test, Amount of cesium-137 per Kg cited in the Document.
* Fit for Human consumption, certificate,
* For Milk cesium -137 i.e. maximum 95 BQ per Kg. Others 50 BQ/Kg.
IMPORT IN THE INDUSTRIAL SECTOR:
¨ Three times of import entitlement is allowable, which is restricted for commercial
¨ Capital Machinery- LCA/ IP free exempted permission required.
¨ MS sheet, GP sheet, BR sheet, Tim plate, Secondary quality as per entitlement for
¨ Black list to be approved by Director, Drag Administration for importation of raw