INTRODUCTION

Today’s fast growing companies need business banking services that fully meet their expectations for speed, convenience, efficiency and security. To ensure their optimum level of satisfaction, regarding their necessity for this type of affluent banking services different types of local as well as multinational banks are coming up with diverse and dynamic corporate banking services.

The term “Bank” originally referred to an individual or organization, which acted as a moneychanger and exchanged one currency for another. According to

Prof. Sayers – “Banks are institution whose debt usually referred to as ‘Bank Deposit’- are commonly accepted in final settlement of other peoples debts”.

According to the Banking Regulation Act, 1949 – “ Banking means the accepting money for the purpose of lending or investment of deposit of money from the public repayable on demand or otherwise and withdraw able by cheques, drafts order or otherwise”.

Banks are playing a vital role in the economic progress of our country. Now-a-days, the banks try to give priority in the perspective of our national interest.  The Banking Industry in Bangladesh is one characterized by strict regulations and monitoring from the central governing body, the Bangladesh Bank. The chief concern is that currently there are far too many banks for the market to sustain. As a result, the market will only accommodate only those banks that can transpires the most competitive and profitable ones in the future.

Bank perform the in dispensable task of intermediating between the two groups and offering convenient financial service to surplus-spending individuals and institutions in order to attract fund and these loaning those funds to deficit- spending individuals and institutions. Another contribution of bank make their willingness to accept risky loan from borrower, while issuing low risk securities to their depositors. Bank also satisfies the strong needs of much customer’s liquidity. It is true thus clear that the underlying principle of a business of banking is that the resources mobilized through the acceptance of deposit must contribute the main stream of funds, which are to be utilized for lending or investment purpose.

OBJECTIVE OF THE STUDY

The main objective of the study is to gain practical knowledge and to acquire knowledge about the practice banking business. In addition, the prime objective of the study is to know the existing banking business in JANATA Bank Ltd.. The other objectives are given below:

As a part of the B.B.A program:

• To have an exposure on the banking environment of Bangladesh.
• To define the strategies regarding the strength and weakness of the bank.
• To Identifying the difference between theory and practice overall  Management
• To know the general banking function, it’s procedures, rules and regulation
• To know the activities of the foreign exchange department
• To provide information about the BBL to the future researcher and readers who want to know about this bank.

METHODOLOGY OF THE STUDY

The data needed for conducting the study has been collected from the primary sources as well as secondary sources. In collecting the necessary data, care has been taken so that all the variables that in some way can’t affect the objectives of the study. The information that I used in this study is collected by the following way:

Primary Data Sources:

v Direct working with officials of JANATA Bank Ltd.

v Face to face conversation with client.

v Practical deskwork.

v Observation for the total internship period

Secondary Data Sources:

v Manual of JANATA Bank Ltd.

v Bank’s other published information.

v Previous research books and journals.

v JANATA bank website Browsing

The major portion of data sources has been collected from secondary data sources. Information required formulating suggestions and recommendation have been availed from related text and research papers.

IMPORTANCE OF THE STUDY

Modern Banking system does not execute the normal Banking activities. As a service oriented organization the management should keep an eye on their retail products and tout on these for sale. The Bank should design their products in such a way that can cater to the needs of people of different classes. In fact Banks offer its various products (loans and other services). Thus this study focuses on these products base marketing of financial products as how they are designed for which segment of customers they are offered, what are their usual benefit, what are the profits and changes to the customers, what type of promotion measures the Banks take for marketing these services smoothly and they like.

Basically, this study is conducted to unearth The Performance of General Baking & Foreign Exchange related activities taken by the Bank and degree of customer satisfaction. The management should take new faces with innovative features touting diversified benefits to attract the customers. As a result at that, the practice of General Baking& Foreign Exchange at the Public Limited Bank have been the concern this study with analysis of the Janata Bank Ltd. could help the management to think about their performance whether the present design of the General Baking & Foreign Exchange practices are effective or they require to be re-furnished. The management of this Bank can identify the major bottlenecks of general Banking services and Foreign Exchange can attention, conviction and purchase by using this report effectively.

LIMITATION OF THE STUDY

Objective of the practical orientation program is to have practical exposure for the students. Our tenure was for two months only, which was somehow not sufficient. After working whole day in the office it was very much difficult, if not impossible to study again the theoretical aspects of banking.

Other limitations are as follows:

q  For the lack of our practical knowledge, some shortcoming may be available in the paper.

q  The bank has naturally shown us some indifference connecting its most confidential information.

q  The executives of Janata Bank Limited were too busy to spare time for the internee.

q  The duration of our internship program is only 2 months. The allocated time is not sufficient for us to gather knowledge and to make the study a complete and fruitful one.

q  The study also suffered from inadequacy of data provided by Janata Bank Limited.

PURPOSE OF THE REPORT

ü To identify the historical background of the Janata Bank

ü To know the objectives behind their establishment.

ü To know General Banking and Foreign Exchange of Janata Bank

ü To know the objectives at present condition if they differ from the origin

ü To identify the major policies by which they are operating now.

ü To identify the facilities offered by the Janata  Bank

ü To know whether Janata Bank adopted & coped with modern technological advancement in the banking system.

ü To identify the social responsibilities of the bank as a social entity.

ABOUT JANATA BANK LIMITED

JANATA Bank has already made significant progress. The bank has been graded as a top class bank in the country through internationally accepted CAMEL rating. The bank has already occupied an enviable position among its competitors after achieving success in all areas of business operation.

JANATA Bank will promote broad-based participation in the Bangladesh economy through the provision of high quality banking services JANATA Bank will do this by increasing access to economic opportunities for all individuals and business in Bangladesh with a special focus on currently under-served enterprises and households across the rural – urban spectrum. It believes that the pursuit of profit and developmental goals is mutually reinforcing. Increasing the ability of under – served individuals and enterprises to build their asset base and access market opportunities will increase the economic well being for all Bangladeshis at the same time, this will contribute significantly to the profitability of the Bank.

JANATA Bank intends to set standards as the Market leader in Bangladesh. It will demonstrate that a locally owned institution can provide efficient, friendly and Modern full- service banking on a profitable basis. It will produce earnings and pay out dividends that can support the JANATA activities of JANATA, the Bank’s major shareholder. Development and poverty alleviation on a countrywide basis needs mass production, mass consumption and mass financing. Bank goal is to provide mass financing to enable mass production and mass consumption, and thereby contribute to the development of Bangladesh.

JANATA Bank has been striving to provide “best-in-the-class” services to its diverse range of customers spread across the country under its many branches all over the country both in rural and urban area.

JANATA Bank is currently looking for ambitious, goal oriented, enthusiastic, individuals for various business operations

VISION OF JANATA BANK

JANATA Bank will be a unique organization in Bangladesh. It will be a knowledge-based organization where the JANATA Bank professionals will learn continuously from their customers and colleagues worldwide to add value. They will work as a team, stretch themselves, innovate and break barriers to serve customers and create customer loyalty through a value chain of responsive and professional service delivery. Continuous improvement, problem solution, excellence in service, business prudence, efficiency and adding value will be the operative words of the organization.

JANATA Bank will serve its customers with respect and will work very hard to instill a strong customer service culture throughout the bank. It will treat its employees with dignity and will build a company of highly qualified professionals who have integrity and believe in the Bank’s vision and who are committed to its success.

JANATA Bank will be a socially responsible institution that will not lend to businesses that have a detrimental impact on the environment and people.

MISSION OF JANATA BANK

JANATA Bank will adhere to highly professional and ethical business principles and internationally acceptable banking and accounting standards.

Every JANATA Bank professional will need first of all a commitment to excellence in all that he/she does, a keen desire for success, a determination to excel and a drive to be the best. They will individually and jointly learn continuously from customers and professional colleagues around the globe to improve the way they do business so that they are the best. They will walk that extra mile with enthusiasm and empathy to serve our customers and to solve problems together so that their customers succeed in their business and remain loyal to the Bank. They will set up goals for ourselves and then exceed the goals that we set up. They shall not accept failure.

OBJECTIVES OF JANATA BANK

JANATA Bank will be the absolute market leader in the number of loans given to small and medium sized enterprises through out Bangladesh. It will be a world – class organization in terms of service quality and establishing relationships that help its customers to develop and grow successfully

VALUES OF JANATA BANK

JANATA BANK LTD. holds the following values and will be guided by them as they do their jobs.

2  Creating an honest, open and enabling environment.

2  Have a strong customer focus and relationships based on integrity, superior service and mutual benefit.

2  Strive for profit & sound growth.

2  Work as a team to serve the best interest of their owners.

2  Relentless in pursuit of business innovation and improvement.

2  Value and respect people and make decisions based on merit.

2  Base recognition and reward on performance.

2  Responsible, trustworthy and law-abiding in all that they do.

BUSINESS PHILOSOPHY OF JANATABANK LTD.

JANATA Bank Ltd, a full service commercial bank with Local and International Institutional shareholding, is primarily driven by creating opportunities and pursuing market niches not traditionally met by conventional banks.

Today JANATA Bank is one of the fastest growing banks in the country to support the planned growth of its distribution, network and for its various business segments.

The reason JANATA Bank is in business is to build a profitable and socially responsible financial institution focused on markets and businesses with growth potential, thereby assisting JANATA and stakeholders build a “just, enlightened, healthy, democratic and poverty free Bangladesh”. Which mean to help make communities and economy of the country stronger and to help people achieve their dreams. They fulfill the purpose by reaching for high standards in everything we do. For their customers, their shareholders, their associates and their communities upon, which the future prosperity of their company rests

 

THEIR LONG TERM STRATEGY

Summed up in a single sentence, their long-term strategy is to go where the market is. The SME market in Bangladesh is large. The report produced by the Shore Bank team, (Ronald Grzywinsky, Mary Houghton and Lynn Pikholz) and the independent consultant, Kaiser Zaman, indicates that the market size would be over hundreds of billions of takes. They quote:

“As a result of the achievements of the micro-credit providers, Bangladesh now has an hour glass shaped banking market in which credit and other limited financial services are valuable to both very large and very large and very small businesses and very wealthy and very poor individuals. While there is well – known informal system that provides credit to businesses, virtually nothing is available from either banks or micro finance provider to the million the middle – businesses and individual- who are severely constrained in their ability to produce and save for lack of access to financial resources and services. Until modern, competitive financial services are readily available – including credit in amounts, terms and conditions that small can access, Bangladesh will not be able to create the large middle class that is a prerequisite to social stability.”

BUSINESS AREAS OF JANATA BANK LTD.

There are mainly three major business areas where the BRAC Bank Ltd. is performing with high reputation. These areas are:

v  General Banking

v  Foreign Exchange

v  Small & Medium Scale Enterprise (SME)

v  Large Scale Industries

v  Agriculture Sector

v  Transport Sector

v Financing In Housing Sector& Land Developing

v Finance in Home Appliance

Since I completed my internship on General Banking & foreign exchange, it would be convenient for me to focus General Banking & Foreign Exchange of Janata Bank.

ORGANIZATIONAL STRUCTURE OF JANATA BANK

Board of Directors

↓

Managing Directors (MD)

↓

Deputy Managing Directors (DMD)

↓

General Manager (GM)

↓

Deputy General Manager (DGM)

↓

Assistant General Manager (AGM)

↓

Senior Principal Officer (SPO)

↓

Principal Officer (PO)

↓

Senior Officer (SO)

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Officer

History of the Bank

Janata Bank Limited, one of the state owned commercial banks in Bangladesh, has an authorized capital of Tk. 800 crore (approx. US$ 116.79 million), paid up capital of Tk. 259.39 crore (approx. US$ 37.87 million) and reserve of Tk.292.67 crore (approx. US$ 42.73 million). The Bank has a total asset of Tk. 24406.11 crore (approx. US$ 3562.94 million) as on 31^st December 2008. Immediately after the emergence of Bangladesh in 1971, the erstwhile United Bank Limited and Union Bank Limited were nationalized and renamed as Janata Bank Limited.

Janata Bank Limited operates through 848 branches including 4 overseas branches at United Arab Emirates. It is linked with 1198 foreign correspondents all over the world.

The Bank employs more than 13(Thirteen) thousand persons.

The mission of the bank is to actively participate in the socio- economic development of the nation by operating a commercially sound banking organization,  providing credit to viable borrowers, efficiently delivered and competitively priced, simultaneously protecting depositors funds and providing a satisfactory return on equity to the owners.

The Board of Directors is composed of 11 (eleven) members headed by a Chairman. The Directors are representatives from both public and private sectors.

The Bank is headed by the Chief Executive Officer & Managing Director, who is a reputed banker.

The corporate head office is located at Dhaka with 35 (thirty five) Divisions

 

Functions of the Bank

Janata Bank provides complete range of services to its customers both domestic and foreign. Rendering of General Banking Facilities & Utility Services, Deposit Mobilization, providing various Credit Facilities including Working Capital to Industries, Investment, Outward & Inward Remittances, Financing Import & Export etc. are the major functions performed by Janata Bank. In order to provide better services to its Customers and Correspondents Janata Bank is now more organized to handle sophisticated operations through a well-trained and efficient Manpower. Recently Janata Bank has entered into computer operations to provide prompt and efficient services to the Customers.

Janata Bank has been involved in Micro financing since 1973 through its vast branch network spread all over the country. Bank has launched these micro credit programs/projects on its own initiative and also in collaboration with local and foreign agencies.

 

Branch network

Janata Bank is one of the largest Nationalized Commercial Bank of Bangladesh. Presently the bank has been functioning with a network of total 904 branches. The Bank has been functioning with a net work of Total 897 Branches including 4 Overseas Branches in U.A.E. Besides Janata Bank, has, at present 780 Foreign Correspondents abroad. It has 44 Authorized Dealer Branches and 29 Branches to deal with Wage Earners’ Remittances

 

Management system

The Bank’s present Board of Directors comprises of One Chairman and Six Directors appointed by the Government.

 

Products and Services

^ü   Financing IT sector

ü Financing of industry

ü Ready cash

ü Windows for SMEs

ü Loan to travel agencies

ü Loan to diagnostic center

ü NRB escrow account

ü NRB gift cheque

Introduction:

Out of three major sections General Banking is important one. General banking is the heart of total banking system. Through this section bank has to receive and disburse money, to develop banker customer relationship by opening different types of account and providing prompt services to the customers. This department collects money from the depositor and uses these deposits to earn profit.

FUNCTIONS OF GENERAL BANKING:

The functions of general banking department of JANATA Bank Bangladesh Ltd. are as follows:

1. Maintenance of Deposit A/Cs:

Saving accounts./ Current accounts./cash credit deposits/Fixed deposits/short term deposits/margin deposits/Bond deposits/F.C. Bond deposits.

2. Receipts & payment of cash.

3. Handling transfer transactions.

4. Operations of clearing house.

5. Maintenance of accounts with Bangladesh Bank & other banks.

6. Collection of Cheques & Bills.

7. Issue and payment of Demand Drafts, Telegraphic Transfers

and payment  orders.

8. Executing customers standing Instructions.

9. Maintenance of safe Deposit Lockers.

10. Maintenance of Internal Accounts of the banks.

11. Reporting to head office about daily position.

12. Saving all transaction record in computer.

13. Closing and transfer of different types of accounts.

14. Keeping good relation with valued customer.

15. Providing necessary support to the customers

SECTIONS OF GENERAL BANKING:

During my practical orientation in JANATA Bank, D.U Branch, Dhaka, it came to the observation that general banking section is divided with four areas. These are:

Account opening section

Remittance section

Bills and clearing section

Cash section

Mail receive and dispatch section

Accounts Section

Account Opening Section:

One of the vital sections under general Banking is the account opening section. Banker customer relationship begins through this section. Various tasks are performed in this section. Such as:

Opening of different types of account.

Issue of checkbook.

Transfer and closing of account.

Enquiry of account.

Various types of account offered by JANATA Bank:

JANATA Bank offers various types of account to its different types of customer. These are as follows:

Current deposit (CD) account

Savings bank (SB) account

Short-term deposit (STD)

Fixed deposit (FDR)

JBDS (Janata Bank Deposit Scheme)

MDS (Medical Deposit Scheme)

EDS (Education Deposit Scheme)& SPS

Current Deposit (CD) Account:

A current account is an account, which is generally opened by business people for their convenience. A current account is a running and active account, which may be operated upon any number of times during a working day. There is no restriction on the number & amount withdrawals from current a/c. It does not allow any interest on this account

Opening Amount/ Initial Deposit                               Tk. 500

Service Charge (yearly)                                              Tk. 100

Minimum Balance Requirement                               Tk. 5000

Current a/c may be individual, joint / partnership or can be formed any name. It provides the following facilities:

Overdraft facility.

Other facilities like collection of checks, transfer of money, rendering agency and general utility services.

Savings Bank (SB) Account:

This deposit is intended primarily for small-scale savers. The main object of this account is promotion of thrift. Savings account is meant for those who want to save a certain amount of their income and earn interest on that for future needs. All features are more or less like that of CD a/c except for some restriction that is imposed by the bank. Number of withdrawals over a period of time is limited. The withdrawing amount is not to exceed 25% of the total balance. This A/C mainly open a person name

Initial deposit requires to open a savings account is TK.200.

Minimum balance of TK. 200 should maintain in this account.

Interest rate is5.5%

One cannot withdraw money not  more than two times in a week.

To withdraw more than Tk 20000 seven days notice is required.

Service charge is not fixed.

Restrictions:

Customer can not withdraws money more than twice in a week ..

If customers draw money more then 25% of the balance at a time then no interest is given for that n month.

If interest accrued less than TK. 200/- for six month then no interest is given to customer.

Fixed deposit receipt (FDR) account:

In this category are included the deposit with the bank for a fixed period which is specified at the time of making the deposit. Such deposits are therefore called fixed deposits or term deposits.

A fixed deposit is repayable on the expiry of a specified period, chosen by the depositor to suit his purpose and to enable him to get back money as and when he needs it. The fixed deposit may be made for 3,6,12,24 or 36 months. As the date of repayment of fixed deposit is determined in advance. The banker need not keep more cash reserves against it and can utilize such amount more profitably. The banker therefore offers higher rate of interest on such deposits the depositor parts with liquidity for a definite period. Fixed deposits have grown in importance and popularity in our country during recent years.  When a matured FDR is withdrawn, the principle amount along with the interest amount  (deducting 10% tax from the total) is paid to the client.

Minimum TK. 5, ooo require to open a fixed deposit account.

Service charge TK. 200 realized half yearly on customer’s account.

Various types of Savings Schemes offered by Janata Bank:

Janata Bank Deposit Scheme (JBDS)

Special advantage with this scheme is that after the scheduled period the client can withdraw the full amount or can draw pension on monthly basis. Besides the client can open account in his name in any branch.

Procedure for operation of Janata Bank Deposit Scheme (JBDS)  :

• The applicant should be of minimum 18 years age and Bangladeshi national.
• The account holder can appoint one or more nominees.
• On the death of the account holder his / her nominee can withdraw the whole amount of money.
• The account holder can change or cancel his nominee through a written notice.
• On the death of the account holder, the nominees will be entitled to withdraw the deposit according to the instruction of the account holder.
• The account becomes inoperable on the death of the account holder.
• The account under this scheme should be opened within the 10^th day of any month against deposit of the first installment in cash.

Monthly installment:   TK.500, 1000,2000,5000,10000,20000

Tenure:                        10 Years.

The monthly installment must be paid by the 10^th day of every month.

In case of delay a fine @TK. 2 per day of defaulted installment will be charged and the fine must be paid with the installment.

Features of the Janata Bank Deposit Scheme (JBDS):

Monthly Installment QuantumTK.	Money at the end of 10 years TK.
500	94609
1000	188218
2000	375435
5000	937088
10000	1873176
20000	3745352

Total Amount=Principal amount+Interest+Bonus amount

The money will be paid out on maturity according to the table above, but Tax / Duty and other charges may be adjusted from the amount in the account.

Education Saving Scheme (ESS):

Client can nominate their children and open not more than three accounts.

Procedure for operation of Education Saving Scheme (PSS):

The applicant should be of minimum 18 years age and Bangladeshi national.

Monthly installment:         TK.500, 1000,2000,3000,4000,5000,6000,7000,8000,9000&10000.

The monthly installment must be paid by the 10^th day of every month.

In case of delay a fine @ TK. 2 per day of defaulted installment will be charged and the fine must be paid with the installment.

The account under this scheme should be opened within the 10^th day of any month against deposit of the first installment in cash.

Features of the Education Saving Scheme (ESS) account:

It may be 4 years, 6 years,8 years& 10years.

Installments are   TK.1000, 2000,3000,4000&5000

The maturity amount varies its time & installment.

The money will be paid out on maturity, but Tax / Duty and other charges may be adjusted from the amount in the account.

Medical Deposit Scheme (MDS):

The applicants / depositors should be of minimum 18 years age, being of sound mind, and a Bangladeshi national.

Features of the MDS  Account:

The deposit under SBDS will be affected after expiry of each period as per the chart provided below:

Monthly Installment Quantum (MIQ) TK.	Money at the end of 5 years period. TK.
500	38225
1000	75425
2000	149900
3000	224350
4000	298799
5000	373249
6000	447700
7000	522149
8000	596599
9000	671089
10000	745898

The money will be paid out on maturity according to the table above, but Tax / Levy/ Excise and other charges as applicable will be adjusted from the amount.

SPS Account:

Now a days it is obsolete

Documents to be obtained for different types of account:

When anyone comes to open an account he has to submit some documents to the banker. Different types of document need for different customers. Some common documents require for all types of account are:

ü  Introduction recommendation.

ü  Specimen signature card.

ü  Account opening agreement form.

ü  Two copies of Photograph of account holder and two copies of nominee (if any).

ü  Deposit slips book.

ü  Cheque-book requisition slip.

ü  Letter of mandate authorizing another person to operate the account on behalf of the account holder.

ü Special instruction “either or survivor” for joint account

Certain types of documents are needed for special customers. These are:

Proprietorship Account:

Document requires for proprietorship business to open an account are:

v  Introducers with account number.

v  Valid trade license from Dhaka City Corporation, Attested copy should be submitted.

v  Receipt of Tax revenue copy from Dhaka City Corporation.

Partnership Account:

Documents to be obtained for opening an account of partnership firm are:

v  Trades license or board resolution.

v  Deeds of partnership signed by all partners.

v  Signature of at least two witnesses.

v  Two copies photograph of each partner.

v  Partnership resolution signed by all partners to open account.

v  Resolution must indicate authorized person who operates the account.

Limited Company Account:

Document required for Limited Company account to open an account are:

v  Memorandum and Articles of Association of Company.

v  Power of Attorney

v  Resolution of Board of Director.

v  Certificate of incorporation.

v  Certificate of commencement of business in case of public limited company.

v  List of director.

v  Two copies of passport size photograph of account operators.

v  Others: name director s with signature, minutes of board of director.

The major function of commercial Banks is mobilization of fund. Other than this, banks provide ancillary services to its clients. Clients need to remit money from one place to another for their business or other purposes. Banks fulfill this need of customers by means of remittance service. Money can be remitted domestically or internationally, which known as local remittance and foreign remittance.

There are three ways of transferring fund domestically. The modes of transferring funds are:

Pay- Order (PO).

Demand Draft (DD).

Telegraphic Transfer (TT).

Mail Transfer (MT)

SDR

Pay Slip

Payment Order / Pay Order (P.O)

This is an instrument issued by the branch of a bank for enabling the Customer/Purchaser to pay certain amount of money to the order of a certain person/firm/organization/office within the same clearinghouse area of the pay order-issuing branch.
Characteristics of P.O

r The issuing branch and paying branch are same.

r Application for payment within the clearinghouse area of the issuing branch.

r This may be open or can be crossed.

r Charge

Demand Draft (D.D)

This is an instrument through which customer’s money is remitted to another person/firm/organization in outside the clearinghouse area from a branch of one bank to an outstation branch of the same bank or to a branch of another bank (with prior arrangement between that bank with the issuing branch). This is an order instrument in which the issuing branch gives instruction to the payee/drawer branch to pay certain amount of money to the order of certain person/firm/organization. Commission, vat and postage is charged on issue of DD entries for issuing DD.

Telegraphic/ Telephonic Transfer (T.T)

This is a mode of transfer of customer’s money from a branch of one bank to another branch of the same bank through telegraphic/telephonic message. The issuing branch used to send the message of such remittance through telegraph/telephone adding certain code number or test number on the basis of test key apparatus developed by the concerned bank for its different branches. The drawer and the payee is required to have account with the bank in order for this transaction to take place. TT is issued against cash, check, letter of instruction etc.

Characteristics of T.T

Issued by one branch to other branch and message is tale-communicated.

Remittance/ transfer of money is done through tested tale-messages.

Remittance is affected on the basis of tested message.

Test key apparatus is required.

Charge is Tk.50

Security Deposit Receipt (SDR)

It is used only for tender, auction etc.

Pay Slip:

Used internally

Accounts division is the nerve center of a bank. As all transactions carried by a bank is being legalized as far as accounting is concerned. If transactions were not recorded properly there would be dis-equilibrium in state of the bank. There can be imbalance in the cashbook thus the whole mechanism will collapse. The regular tasks of department are:

2  To record all transactions in the cash book.

2  To prepare daily fund position, weekly position, periodic statement of affairs.

2  Prepare necessary statements for reporting purpose.

2  To pay all expenditures on behalf of the branch.

2  Make salary statements and pay salary.

2  Branch to branch fund remittance and supporting accounting treatment.

2  Prepare statements for customer.

2  Publishing basic data of the branch etc.

General practices of an Accounts Department:

BASIC maintains slip system of accounting.

Scrutinizing Vouchers:

At the day end all vouchers are sent to the accounts department by the respective department from where vouchers are originated. On the next day an `activity report’ is received from computer department. The activity report is the detail statement of all the transactions carried by the branch of a particular date. It is the summary of all account position. It also displays cash, clearing, transfer position, individual deposit account position etc.

Provisioning:

Accounts department make provision for different deposit accounts. Provisioning means keeping the record of expense, which has occurred by non-cash way. This department also made depreciation of assets that is one kind of non-cash expense

Statement Prepared in Account Section:

The following weekly/ monthly/ quarterly and half-yearly statements should be submitted to Central Accounts Division of Head Office:

		Particulars of Statement	Period	Last date of submission to HO.
01		Weekly Position	Weekly	By every Saturday
02		S.B.S.—1	Monthly	10th next month
03		Sector Corp.	Monthly	10th next month
04		S.B.S.—2	Quarterly	5th next month
05		Quarterly Statement of Scheduled Bank	Quarterly	7th next month
06		Statement of Bearer Certificate of Deposit	Quarterly	5th next month
07		Statement of Deposit Landing and Borrowing	Half Yearly	7th next month
08		Business Performance report	Monthly	1st next month
09		SLR Statement	Monthly	1st next month

Introduction:

The two main functions of a bank are borrowing money from public by accepting deposit and lending to the public for the development of trade, commerce, industry and agriculture. Banks give some interest to depositors for deposit and take higher interest for lending. The margin is the banks profit. So, lending is by far the most important function of modern bank. The strength of a bank is, thus, primarily judged by the soundness of its advances. A wise and prudent policy in regard to advances is considered an important factor inspiring confidence in the depositors and prospective customers of a bank.

Advances not only play an important part in gross earnings of bank, but also promote the economic development of the country. All types of business activity includes trade, industry and agriculture have to depend on bank finance in one form to offer. Bank by channeling accumulate savings of the nation into productive uses, help both the depositors and the borrowers. JANATA BANK disburses advances in two broad areas. These are industrial credit and commercial credit scheme.

Industrial credit:

Industrial credits are given for industrial purpose. The sector where some process involves is called industry, such as shape of material. Industry can be two types:

1. Manufacturing industry- Cement, steel factory etc.

2. Service industry- Hotel, transport etc.

Industrial credit is given for two purposes:

Term loan – fixed assets financing.

Working capital – current assets financing sport, etc

Commercial Credit:

Commercial credits are given for trading purpose. Where no process involved. JANATA Bank lends support towards development of trade, business and other commercial activators of Loans and Advances:

Overdraft

Cash credit

Term loan

Bills Portfolio

Packing Credit

Bank Guarantee

Commercial Loan

Overdraft (OD):

The overdraft is a kind of advances always on a current account operated upon by cheque. The customer may be sanctioned a certain limit upon which he can overdraw his current account within a stipulated period. Here, withdrawal or deposits can be made any number of times of the convenience of the borrower provided the total amount withdrawn does not, at any time exceed the agreed limit. Interest is calculated and charged only on the actual debit balance on daily (produced) basis. While in a current account cheques are honored if the balance is in credit, the OD arrangement enables a customer to draw over and above his own balance up to the extent of the limit stipulated.

For example, if there is a credit balance of TK. 10,000/= in a customer’s current account and an OD limit of TK. 10, 000/- is sanction to the customer, then he can draw cheques up to TK. 20,000/-. There is no restriction unlike in case of loan, on drawing more then once. OD facilities are generally granted to businessman for expansion of their business.

It is essential that a letter of continuity must be obtained in case of OD account. The letter makes the customer liable to the final balance of his account by confirming the intervening debits and credits in his account.
JANATA Bank  has the following types of  OD:

• SOD against financial obligation
• SOD against FDR
• SOD general
• Others

Year wise Overdraft Position of the

JANATA Bank,48, Motijheel Corp. Branch.

(Amount in Million Tk.)

Year	2008	2007	2006
SOD against financial obligation			–
SOD against FDR
SOD general
Total

Cash Credit (C.C):

A Cash Credit is an arrangement by which the customer is allowed to borrow up to a certain limit. This is a permanent arrangement and the customer need not borrow the sanctioned amount at once, but draw the amount as when required. He can put back any surplus amount, which he may find with him. Thus cash credit is an active and running account to which deposit and withdraws may be elected frequently. Interest is charged only for the amount withdrawn and not for the limit amount. If customer does not use the cash credit limit to fulfill extent, the bank makes a commitment charge. Cash Credit provides elastic form of borrowing since the limit fluctuates according to the needs of businessman. Cash Credit is favorite mode of borrowing by large commercial and industrialists for meeting their working capital requirements. The limit of cash credit is allowed generally for one year.

Interest rates for Cash Credit:

Cash Credit	Interest Rates
C.C.(Industrial) Working capital requirement	13%
C.C. Commercial/ Trade	13%

JANATA BANK provides three types of Cash Credit (CC) facilities. These are —-

Cash Credit (Hypothecation)

Cash Credit (Pledge)

Cash Credit(Export)

Year Wise Cash Credit Position of the

JANATA Bank, 48, Motijheel Corp. Branch (Amount in Million Tk.)

Year	2008	2007	2006
Cash Credit (Hypothecation)	423	336	207
Cash Credit (Pledge)	–	–	–
Cash Credit(Export)	1	0.60	–
Total	424	336.60	207

The loan which, is repayable in fixed fixture date, is called term loan. This loan is made to large well-established business enterprise for financing capital expenditure. Businessman requires this loan for purchase or renovation of funds, buildings, and factory sheds, and machinery etc. the loan is to be repaid for according to a scheme of repayment by installments. Installments may be monthly, quarterly, semiannually, annually depending on type of loan. This type of is given for long term, mid term, short term and requires large investment. Market study and environment is necessary before allowing such loan. SOUTHEAST charges 13% interest for such loan.

Year Wise Loans (General) Position of the

JANATA Bank,48, Motijheel Corp. Branch

(Amount in Million Tk.)

Year	2008	2007	2006
Loans General	238	211	66

JANATA Bank provides loan facilities to its employees. Interest rates vary on the nature and objective of loan. Basically staff loan is disbursed for staff house building purpose and household consumption. In case of staff loan repayment procedure is followed on monthly basis.

Year Wise Staff Loan Position

JANATA Bank, 48, Motijheel Corp. Branch

(Amount in lac Tk.)

Year	2008	2007	2006
Staff Loan	56	40	9

Bank can allow credit to customers in the way of purchasing and discounting bills. When client submit bills, a margin (covering also the interest on the loan) amount is deducted from the face value of the bill and the rest is provided to the client .Bills can be local or foreign. This may be clean or documentary. Documentary bill is supported by various documents such as —

Local Bill Purchase supported by Documents [LBP (D)]

Foreign Bill Purchase supported by Documents [LBP (D)]

Year Wise Bills Portfolio Position of the

JANATA Bank, 48, Motijheel Corp. Branch

(Amount in Million Tk.)

Year	2008	2007	2006
Local Document Bills Purchase	15	8	5
Foreign Document Bills Purchase	5	4	3
Total	20	12	8

Bank Guarantee:

Bank Guarantee is also a non-funded facility provided to the client. Bank on behalf of the client undertakes to pay agreed amount of money at certain time if client fails in due performance. Bank Guarantee is generally provided in Lieu of earnest money for bidding in tender by the client (Bid Bond) or as guarantee for due performance of contracted work (Performance Guarantee). Janata Bank generally provides guarantee facility for maximum one year. Usually 10% – 25% margin is obtained from the client against the guarantee amount

Commercial Loan:

This type of credit facilities is mainly related to post import financing. It is given for short period. PAD, LIM, LTR are fall in this category. A detail about these credits has been discussed in foreign trade par

PAD:

This means payment against documents. After getting documents from negotiating bank-opening bank informs importer for clear the documents and bank creates a loan account. 30 days are allowed for this type of loan. Bank charge interest @ 13% in this credit facility. The Bank that establishes the letter of credit is bound to honor its commitment to pay for import bills when these are presented for payment, if drawn strictly in terms of the letter of credit. The foreign correspondent, which negotiates the documents, gets payment as per stipulated reimbursement terms of the L/C to the debit of the account of the L./C opening bank’s F. C account. The opening bank lodge the shipping documents in their books and responds to the debit advice originated by foreign correspondent to the debit of payment against documents (PAD) account. In fact, the amount stands as advance to the importer, which is adjusted by delivery of documents against payment, or by allowing post import finance such as LIM or LTR.

LIM:

Loan against Imported Merchandise (LIM) is connected with import facilities. As per pre-arrangement or under forced situation when the client is unable torture the LC documents, bank then clear the imported goods from the customs and store it in banks warehouse. LIM is given for maximum 60days within which customer has to adjust liability and take delivery of the imported goods from the banks custody. Bank charges interest @ 13% on this credit facility. Loan against imported merchandise is allowed against imported merchandise storing the same in bank’s custody. The bank through its approved clearing agent clears the merchandise. The advance is adjusted by delivering the goods against payment by the importer. The documents remain with the Bank.

LTR:

Loan against Trust Receipts (LTR) is also post-import finance facility. This type of facility is given to creditworthy and selective customer. In LTR goods are sent to the customers’ godown after clear from Port. Customer has to adjust liability within 30,60,90 days or the days determine by the client and banker of taking such facility. Bank charge interest @ 13% for this credit facility.

Year Wise Commercial Loan Position of the

JANATA Bank, 48, Motijheel Corp. Branch

(Amount in Million Tk.)

Year	2008	2007	2006
Payment Against Documents (PAD)	128	225	40
Loan against Trust Receipts (LTR)	312	166	71
Total	440	391	111

Year Wise Loans Position of the

JANATA Bank 48, Motijheel Corp. Branch

(Amount in Miillion)

Different Typesof Loan	2008	DistributionIn %	2007	DistributionIn %	2006	DistributionIn %
Overdraft	210	16%	242	23%	123	24%
Cash Credit	424	32%	335	32%	207	41%
Loans General	211	16%	69	7%	56	12%
Staff Loan	4	0.30%	1	–	1	–
Packing Credit	2	0.20%	1	–	1	–
Bills Portfolio	20	1.5%	11	1%	7	1%
Commercial Loan	440	34%	391	37%	111	22%
Total	1311	100%	1050	100%	506	100%

Documents required for procuring Loan Proposal:

Following are the client should supply the documents:

r TIN certificate of the client.

r Bank statement for last two years.

r Up to date trade license.

r Present liability position of the company and owners.

r Name and Address of the Sister concern

r Export and Import performance.

r Personal information in a prescribed from.

r Balance sheet for the last three years

r Memorandum & Article of association signed by the Managing Direct

r Profile of directors or partners

Procedures of Loan Sanction and Disbursement:

Bank follows some necessary steps to sanction loan to borrower. This procedure mainly applicable for sanctioning and disbursing term loan although other advancing procedures are also follows nearly the same procedure

Credit Investigation and Loan Appraisal:

After getting Loan application from the customer, bank started appraisal of the loan.

For this bank

First collect necessary information about the client.

And then with help of this information bank appraisal the loan application.

Collection Of Credit Information:

For the purpose of assessing the creditworthiness of a borrower a banker has to collect the above-mentioned information from a number of sources. Every bank maintains a Credit investigation department at its head office and main offices in larger cities to collect information regarding the financial position of its borrowers. At other centers, branch mangers perform credit investigation. The credit information is collected through the following sources:

Borrower: Most of the information may be secured from the borrower directly. The loan application form seeks basic information about the borrower and his business. The banker may examines his accounts books and note his past dealings with other banks or parties  :

n Market Reports: Banks try to find out the creditworthiness of the party by making enquiries from the brokers, traders and businessmen in the same trade or industry. Their individual opinions may differ but a balanced opinion may be formed about the borrower on the basis of the feelings expressed by a number of such persons.

n Exchange of Credit Information amongst Banks: It is the practice and customary usage amongst banks to exchange credit information relating to the constituents in their mutual interest. But the credit reports exchanged by banks are brief and superficial. They are in general and guarded terms. Banks are reluctant to exchange meaningful credit information because they apprehend that legal protection available to them will be lost if more facts are divulged to the enquiring banks. A study Group appointed by the Reserve Bank concluded “the existing legal protection is adequate to permit banks to exchange meaningful credit information on their constituents.” The study Group, therefore, suggested that:

i) There should be free and frank exchange of credit information amongst the banks; and

ii) There should be qualitative change in the contents of credit reports, which should highlight the management practices of the customers, their behavioral pattern with their buyers, sellers and with the bank instead of concentrating entirely on the worth of assets and financial strength. Similarly, the customer’s ability, business acumen and integrity and willingness to honor commitments should also be covered in the Credit Reports.

iii) A central agency, to be called ‘Credit Information Trust”, i.e., ‘CREDIT’ be established for organized collection, collation, storage and exchange of credit information amongst the banks.

Loan appraisal:

With the help of the above information the bank appraise the loan proposal by the following points:

2  Credit Worthiness of the client on the basis of 5 C’s.

i) Capital, ii) Character, iii) Capacity, iv) Control and v) Collateral

2  Background of the Client’s family.

2  Nature and scope of the business of client.

2  Market reputation of the client.

2  Turnover of the business of client.

2  Dealings of client with the bank and turnover in client’s bank account.

2  Client’s business experience.

2  Worth & property of the client.

2  Location of business/firm/industry.

2  Amount and Purpose of the loan.

2 Turn over of the sister concern ( if any).

Risk Factors:

Before Loan settlement the Banker must carefully remember the Risk Factor. The following situation and circumstances may tell upon the company’s performance.

a) Unforeseen situations and circumstances leading to bad investment.

b) Sudden change in social economic environment.

c) Continued political unrests leading to disruption in banking business.

d) Loans provided to the parties may turn bad to some extent leading to reduction  of profit, which may require the Bank to make higher provision. This will result in lower profits.

e) If contingent liability then net profit will be adversely affected. It will also adversely affect the cash flow of the Bank.

f) Banking sector particularly nationalized commercial Bank have 40% Bad Loan but in private sector Bank, this rate comparatively lower at present. In this event if investment turns bad this percentage to up therefore bear risk.

g) In the event of introduction of any new laws/regulations by any regulatory body of the country may lead to risk.

h) Potential changes in global or national policy may impose risk

Preparation of Loan Proposal and Sanction:

Branch if satisfied with the client and want to sanction credit to the client then it prepare a loan proposal with all details as discussed above and send to the higher authority for approval.

Credit proposal is include with the following:

Application of the borrower

Stock Report

Undertaking from the borrower

Valuation report of Collateral

If higher authority approved then branch will sanction credit to the client.

Necessary documents for Loan Settlement:

For SOD against F.D.R/P.S.P./Saving Scheme/General Loan:

a) Demand promissory (D.P.) note.

b) Letter of Arrangement.

c) Letter of Lien.

d) Letter of C

For SOD General, Cash Credit (C.C.) Hypothecation:

a) Demand promissory (D.P.) note.                b) Letter of Arrangement.

c) Letter of Hypothecation.                            d) Letter of continuity.

Supplementary Arrangement.

For Staff Loan:

a) Demand promissory (D.P.) note.                b) Letter of Undertaking.

c) Letter of Authority.                                                d) Letter of installment.

e) Letter of Disbursement.                              f) Letter of Arrangement.

g) Letter of Hypothecation.                h) Supplementary letter of                           Hypothecation/pledge

For Public Limited Company:

With the above documents “Personal Guarantee” of all directors is

Loan Disbursement

Loan is allowed for a single purpose where the entire amount may be required at a time or in a number of installments within a period of short span. After disbursement of the entire loan amount, there will be only repayment by the borrower. A loan once repaid in full or in part, cannot be drawn again by the borrower. Entire amount of loan is debited to the loan A/C in the name of the customer and is paid to him through his STD/CD Account. Some times loan amounts are disbursed in dash.

Follow up and recovery of the Loan:

After disbursement of lone to a client it is the sole duty of the disbursing branch to follow up loan, whether it is properly utilized or not. So report on development and submit the same to the manager/sanctioning authority. If loans properly follow up by the disbursing branch, then the risk of default will minimize.

Foreign Exchange

Introduction:

Commercial bank collects the ideal saving from the people and supplies them into productive channels. The success of a commercial bank depends on how successfully it can be mobilizing saving and advance short and long term credit to business community. In addition to deposit mobilization and credit management, commercial bank as well as Janata Bank Limiteddeal in foreign exchange, which includes remittance of currency and financing, exports and imports. Foreign exchange dealing is one of the main functions of the bank and it generates a significant portions a bank’s income.

Foreign Trade is one of the most important segments of Bank Business. With the changes of time international trade is diversifying gradually. Modern banks (like JANATA BANK) are playing significant role in foreign trade. Foreign trade Comprises of Import & Export business. A lot of work relating to export and import are done by banks. While performing those tasks bank should be very much cautious as lot of complexities are there. Foreign trading is strictly controlled by the Bangladesh Bank. Therefore an deviation or mistake will cost bank a more. Dealing in foreign trading needs a lot of concentration, accuracy and technical know how as any mistake or malpractice may lead to disaster for a Bank’s Business. Personnel should posses the above qualities to work in this arena.

r   The buyer and the seller conclude a sales contract providing for payment by documentary credit.

r   The buyer instructs his bank-the issuing bank to issue a credit in favor of the seller (beneficiary).

r   The issuing bank asks another bank, usually in the country of the seller, to advise or confirm the credit.

r   The advising or confirming bank informs the seller that the credit has been issued.

r   As soon as the seller receives the credit and is satisfied that he can meet its terms and conditions, he is in a position to load the goods and dispatch them.

r   The seller then sends the documents evidencing the shipment to the bank where the credit is available (the nominated bank). This may be the issuing bank, or the confirming bank or a bank named in the credit as the paying, accepting or the negotiating bank. If the credit allows for negotiation by any bank there will not be negotiates bank and documents be sent to any bank willing to negotiate.

r   The bank checks the documents against the credit. If the documents meet the requirements of the credit, the bank will pay, accept or negotiate according to the terms of the credit. In the case of a credit available by negotiation, the issuing bank or the confirming bank will negotiate without recourse. Any other bank including the advising bank if it has not confirmed the credit, which negotiates, will do so with recourse.

r   The bank, if other than the issuing bank, sends the documents to the issuing bank.

r The issuing banks checks the documents and if they meet the credit requirements, either

• Effects payment in accordance with the terms of the credit, either to the seller if he sends the documents directly to the issuing bank or to the bank that has made funds available to him in anticipation, or
• Reimburses in the pre-agreed manner the confirming bank or any bank that has paid accepted or negotiated under the credit.

r   When the documents have been checked by the issuing bank and found to meet the credit requirements, they are released to the buyer upon payment of the amount due or upon other terms agreed between him and the issuing bank.

r  The buyer sends the transport document to the carrier who will then proceed to deliver the good

Foreign Exchange Mechanism

Forwards Documents

Makes payment

BUYER/ IMPORTER

Sales/ purchase Contract

ADVISING BANK CONFIRMING BANK NEGOTIATING BANK

ISSUING BANK L/C OPENNING BANK

Issuing L/C

INDENTOR

SELLER/ EXPORTER/ BENEFICIARY

O  R

	PAYING / REIMBURSING BANK

Sources: International Trade Finance – Journal, (Page – 30)

Bangladesh Institute of Bank Manage Management

Types of Foreign Exchange Limit Sanctioned by Commercial Banks

Foreign Exchange Limits can be broadly into these categories:

r  Letter of Guarantee.

r  Export Business.

r  Import Business.

r  Foreign Exchange Remittance.

I shall discuss the above mentioned in detail next.

Guarantee

Introduction:

A guarantee is an irrevocable undertaking to pay in case of a certain eventuality. Guarantee serves as a protection against losses, which may occur if anyone of the party fails to fulfill his/her contractual obligations. Coverage is also required if one partner make advance performance of some kind i.e.; a down payment before he/she has obtained the relevant counter performance form his/her partner. According to contract act-1872 under section 126 guarantees can be defined as a contract to perform the promise or discharge the liability of third person in case of his default. The promise to pay is usually unconditional and must be honored by the guarantees on first demand. A guarantee is usually for a specified time period.

Letter of Guarantee: Inland and Foreign

¨  Export Performance bonds

ð Backed by Counter Guarantee of party

ð Backed by ECGS cover

¨  Fully secured (backed by 100% cash margin)

¨  Fully secured by approved securities.

¨  Partly secured (with minimum cash margin of say 25%)

¨  Unsecured guarantees (with a margin less than 25%)

¨  Deferred Payment Guarantees (DPG) (Fully secures by collateral)

Tender guarantee/bid bond/Tender bond

The tender guarantee assures the tender that tenders shall uphold the conditions of his tender during the period of the offer as binding and that he/she will also sign the contract in the event of the order being granted. A demand can be made under a tender guarantee if the beneficiary provides a written statement that the tendered failed to comply with one of the above conditions.

The bank-issuing guarantee has to pay the amount guaranteed when first claimed by the beneficiary. The tendered should try to make the implementation of the guarantee conditional on a statement by the beneficiary to the effect that the tender is in breach of the tendering conditions.

The amount of guarantee depends on the value of the contract for the respective project, varying from 1% to 5% of the contract value.

Performance Guarantee:

A performance guarantee expires on completion of the delivery or performance. Beneficiaries find that as a guarantee, the contract will be fulfilled in every respect and can retain the guarantee as per provision for long time. Including a clause stating that the supplier can claim under the guarantee, by presenting an acceptance certificate signed by the buyer can counteract this.

The seller normally make the delivery or perform the service when he has some security that payment will also be made e.g. in the form of a documentary credit opened in his favor. In such a case, one is recommended to add a clause to the performance guarantee stating that no claims can be made under the guarantee until the documentary credit has been issued or accepted by the seller as being in compliance with the contract.

Other sort of guarantees:

1  Down payment guarantee:

Down payment guarantee assures to the importer that his down payment or advance payment will be refunded if the exporter fails to comply in full or in part with his contractual obligations.

1  Warranty guarantee:

In most cases, it is not possible for the importer to check immediately the quality of the goods he has ordered and received. A warranty guarantee provides a security that within the specified period he will receive a certain amount if the goods are not the agreed quality specifications and the exporter does not honor his obligations to remove discrepancies, defects or repair damage.

1  Payment guarantee:

Through the payment guarantee, the buyer’s bank undertakes to pay the seller if the buyer defaults, the seller ensures compliance with the terms of payment and thus the purchase price will be paid.

Bank guarantee is a contractual relationship between the account party (client) and the beneficiary. The account party request to the bank to issue the guarantee with the terms and conditions specified by him. The bank’s resource is the counter guarantee. The terms and conditions of the guarantee should be covered by the terms and conditions of counter guarantee. Normally banks prepare the format of the counter Guarantee by the banks approved lawyer. At the request of the account party the bank issues the guarantee in favor of the beneficiary.

In foreign trade, guarantee is demanded by the buyer to ensure secured performance to the seller’s ability. When the exporter’s bank assumes a direct obligation vis-à-vis beneficiary then it is a direct guarantee. If a bank in the importer’s country gives the relevant undertaking to the beneficiary at the request of the exporter’s bank, whereby the latter bank bears full liability is an indirect guarantee.

In the Bank guarantee following particulars are normally mentioned.

■ Beneficiary (Name and Address)

■ Amount

■ Expiry (with claim period­)

■ Delivery object

■ Information relating to a guarantee issued under a documentary credit (In case of  foreign guarantee)

■ Special conditions

■ Handing over to principal/beneficiary/representative/third party.

Bank guarantee is normally issued on non-judicial stamp while in the format of counter guarantee adhesive stamp is affixed.

Precaution for issuing Bank guarantee

For issuing bank guarantee following measures should be carefully observed:

2 Authenticity of the client who approaches to issue Bank Guarantee. As such credit worthiness of the client should be judged.

2 Clauses in the bank guarantee should not hamper the banking business. It should be precise and clear.

2 Claim amount should be restricted within the amount stipulated in the guarantee. As such if possible higher cash margin should be taken.

2 Guarantee should be issued with the approval form the competent authority.

2 Guarantee should specify expiry period along with claim period.

2 Proper entry of Bank Guarantee should be given in the register and voucher should be passed.

2 Particulars of guarantee should not be changed.

2 In case of foreign guarantee authentication of message, counter guarantee, terms & conditions of the foreign correspondences should be carefully examined.

 

Bank’s liability:

Within the stipulated time period, if beneficiary claimed the amount after fulfillment of the terms and conditions payment can be made. After the expiry date (claim period) no claim should be honored. When the time period of the guarantee is over, the signed guarantee should be called back duly after cancellation from the beneficiary

Export Business (Financing) and Procedures

Introduction:

Export brings the foreign currency in the economy. Higher the export higher the reserve of foreign currency. The export section of JANATA BANK is engaged with various export-related activities for the encouraging the exporter. The major function of this section is comprises with purchase, collection and negotiate the export bill, provide the exporter in export financing and helps the exporter in different issues.

A person desired to export should make application to obtain ERC (Export Registration Certificate) from CCI&E. Then the person should step in to a bank along with ERC to obtain EXP from the bank. He must submit:

2  Trade license.

2  ERC.

2  Membership Certificate from chamber of commerce.

Pre – Shipment Finance  8  Advance against duty drawbacks (DDs)8  Advance against cash incentives. 8  Advance against Recluses. 8  Shipping Loan (with ECGS cover) 8  Shipping Credits (with ECGS cover)   Post – Shipment Finance   8Foreign bills purchased (FOBP sight bills DP under LCs of Prime bank) 8FOBP (sight/ DP bill without LC) 8FOUBP (usance) without LC but with ECGS cover 8Advance against DDS 8Advance against cash incentives 8Advance under IPRS (International Price Reimbursement Scheme)   8Foreign Clean bills purchased (Say DD, Cheque Tcetc)

Expansion of the country’s supply base is important to any export strategy. Removal of constraints to supplies and improvement in the incentive structure will enhance the export performance of the country. At the same time expansion of production across the industries along with adaptation and development of products to complete in the overseas market constitutes a medium to long-term priority. The strategy thus intends to turn the drive for export-led growth into an economic development

In the line with the above objectives and strategies of an incentive package has been worked out in Fifth Five-year plan. Main incentives in this package may be summarized as follows:

a)   Fiscal incentives

b)   Financial incentives

Fiscal incentives:

1 Duty on import of capital machinery for cent percent export-oriented industries outside Export Processing Zones (EPZs) has been withdrawn;

1 Provision for bonded warehouse to facilitate duty-free import of raw materials for export production;

1  Provision for duty drawback, if the bonded warehouse facilities is not          availed of:

1  Provision for sale of 20% of the products by the cent percent export oriented industries in the local market on payment of duties and taxes;

1  Exemption to the extent of 50% of income arising out of export business from income tax;

1  Provision for tax holidays; and

1  Provision for duty-free import of samples.

Financial incentives:

1  Provision for local currency export credit at a concession rate of interest within a band

1 Provision for foreign currency export credit under Export Development Fund (EDF) at a concession rate of interest (rate of interest applicable is LIBOR +1%);

1  Provision for back-to-back letter of credit for import of raw materials for export production on deferred payments basis;

1 Retention of export earnings by the exporters in their own foreign currency accounts.

Financing at Pre-shipment stage:

Pre-shipment credit covers credit facilities extended to the exporters by the commercial banks at the pre-shipment stage i.e. prior to the actual shipment of goods for export.

Credit can be allowed for the following purposes: –

• Cash for local procurements and meeting related expenses
• Procuring and processing raw materials
• Packing and transporting of goods for export
• Payment of Insurance premium
• Inspection fees
• Freight charges etc.

Pre-shipment credit facilities are essentially a short-term credit, which is to be liquidated by negotiation/purchase of export bills covering the particular shipment. Pre-shipment credit facilities can be allowed against irrecoverable letter of credit of a good foreign Bank considering the credit worthiness of the exporters. Pre-shipment credit is allowed in the following forms: –

1. Export Cash Credit (Hypothecation)
2. Export Cash Credit (Pledge)
3. Export credit against trust receipt
4. Packing credit
5. Back to Back letter of Credit

• Back to Back letter of Credit (Inland)
• Back to Back letter of Credit (Import)

1. Export Cash Credit (Hypothecation):

Such credit facility is allowed to the credit worthy exporters for procuring and processing of goods or raw materials into finished goods for export against hypothecation of stock of raw materials into finished goods for export against hypothecation of stock of raw materials/goods-in-process/finished goods meant for export. Normally collateral securities are obtained in case of such facilit

 

2. Export Cash Credit (Pledge):

Such a credit facility is allowed against pledge of exportable goods or raw materials. Sometimes collateral securities may be obtained which may depend on the quality of goods pledged generally.

3. Export Credit against Trust receipts:

Such a credit is allowed to a credit worthy exporters against exportable goods where retaining the goods under bank’s pledge. The exporter by signing the stamped trust receipt holds the goods in trust on behalf of the bank. Collateral security is generally obtained.

4. Packing Credit:

Such advance is provided to the exporter against: –

• Lien on the Export L/C
• Copy of Invoice

• The security of Railway Receipt/Steamer Receipt/Barge Receipt/Truck Receipt evidencing transportation of the goods to the port.
• Undertaking of the C&F agent entrusted with the task of arranging shipment to the effect that they shall hold the goods under the lien of the Bank.
• Insurance Coverage.

5. Back to back letter of Credit:

Operation of BBLC:

Before opening B.B.L.C credit report on the applicant, the supplier / beneficiary and on the buyer of R.M.G. to be prepared (Credit report on the beneficiary of the B.B.L.C. is not a must if the L/C limit does not exceed TK. 5 Lac). Report from CIB of BB is to be obtained and LRA is to be prepared. If necessary B.B.L.C may be opened up to the extent of 75% of F.O.B value of export L/C in case of both woven and knit garments. Where FOB value exceeds US$ 60/ dozen and cutting and making

• Charges not less than US$ 12 per dozen, back to back L/C may be opened up to 80% and 85 % of FOB value of export L/C for quota and non quota category (of woven ready made garments respectively). B.B.L.C up to 805 of F.O.B value for all children items may be opened.
• B.B.L.C may be opened on usance basis covering usance period of not more than 120 days and interest for usance period shall not exceed L.I.B.O.R.
• The production capacity of the factory and the time gap available between the shipment date (of export L/C) and expected arrival date of raw materials must be examined carefully to ascertain whether the garment products can be exported within the shipment validity to avoid stock lot.
• Branch will obtain pre and post shipment Export credit guarantee from Shadharan Bima Corporation to safe guards the bank’s interest.
• Adequate insurance policy covering the risk of fire, R.S.D. (Riot, Strike and Damage), flood, cyclone and burglary should be obtained from the bonded warehouse and the factory.
• On receipt of import bills drawn under B.B.L.C, the branch will examine the documents very carefully and must inform the negotiating bank over telex about the discrepancy if found within 7 banking days following the day of receipt of the documents. The importer must also be notified as to discrepancies if the documents comply all the terms and conditions of B.B.L.C. acceptance is communicated to negotiating bank fixing up the maturity date for payment of import bills without delay.

• Branch will arrange clearance of imported consignment by deputing suitable bank’s representative to escort the consignment from the port up to the factory premises.
• Goods to be cleared through a C&F agent nominated by the garments industry and approved by the bank.
• During the course of production, the branch will exercise close supervision and control over manufacturing process.
• If the goods become stock lot the matter should be advised to National Board of Revenue (N.B.R) and Bangladesh Bank immediately.

Paper / Documents Required For Opening BBLC

1  Master L/C

1  Valid Import Registration Certificate (IRC) and Export Registration Certificate    (ERC) issued by C.C.I & E.

1  L/C application form and L.C.A. form duly filled in and signed.

1  Performa Invoice and Indent.

1  Insurance cover note with money receipt.

1  Duly signed IMP form

Back-to-Back Letter of Credit (Inland):

Such facility is allowed to the exporter who received export letter of credit from overseas buyer but is not the actual producer/manufacturer of the goods for export. In such a case, the bank at the request of the exporter opens Inland letter of credit in favor of the actual producer within the country. The inland letter of credit on the strength of export letter of credit must confirm to the terms and conditions of the export letter of credit with the following exceptions: –

2  Name of the beneficiary will be actual supplier.

2  L/C value will be less than that of the export letter of credit i.e. less margin of profit of the exporter.

2  Period of validity will be earlier than the expiry of the export

Back-to-Back Letter of Credit (Import):

Where permitted by CCI & E and Bangladesh Bank, Back-to-Back L/C can be opened in favor of foreign supplier for import of raw materials for manufacture of exportable items.

Documentation for pre-shipment Credit:

¤ Lien on confirmed irrevocable and unrestricted Letter of Credit from a   good foreign bank (ascertain about world ranking and country ranking from the Banker’s Alamance, Polack Directory etc.)

¤ Letter of Hypothecation duty stamped (in case of facility allowed under hypothecation)

¤  Letter of Pledge duly stamped (in case of facility allowed under pledge)

¤  Detailed stock statement duly verified by Bank officials.

¤  Insurance Coverage under Bank mortgage clause.

¤ Letter of disclaimer to be signed by the owner of the go down in case of   rented go down.

¤  Documents of title to goods.

¤  Trust receipt

¤  Export credit Guarantee Scheme Insurance where applicable

¤ Export form duly signed by the exporter.

¤  Charge, and other documents, if any.

Financing at Post Shipment Stage:

Banks in this country generally extend post-shipment credit to the exporters through:

2  Negotiation of documents under letter of credit

2  Purchase of DP and DA bills

2  Advances against Export bills surrendered for collection.

1. Negotiation of Document under letter of Credit:

Under this arrangement, after the goods are shipped, the exporter submits the concerned documents to the negotiating bank for negotiation. The documents should be negotiated strictly in accordance with the terms and conditions and within the period mentioned in the letter of credit.

 

2. Purchase of DP and DA Bills

In such a case, the banks purchase/discount the DP (Documents against payment) and DA (Documents against acceptance) bills at a rate published by the International Division of the Bank. While doing so, the banks should scrutinize all the export documents carefully and clear instructions have to be obtained from the drawer of the bill in regard to all-important issues related to the negotiation of the bills.

In case of purchase of export bills, the bank requires to obtain clear instructions from the drawers of the bills regarding the course of action to be taken in respect of the following issues relating to the collection of the proceeds of the documents:

2  Protest clause

2  Notice of dishonor

2  Collection charges and interest

2  Protection clause

2  Presentation clause

3. Advances against Bills for collection:

 

If an exporter fails to get the documents negotiated by the bank, he has to take resort to alternative course of obtaining advance from the banks against the security of export bills surrendered for collection. In such a case, banks may give advance to the extent of certain percentage of the value of goods depending upon the standing of the exporter and importer, nature of the good etc.

r Some Defective Point / Clause Appeared In the Export L/C:

• Issuing bank is not reputed.
• Credit advised by the advising bank without authentication.
• Port of destination absent.
• Nomination of specific shipping / air line.
• No specific reimbursement clause.
• UCP clause not mentioned.
• Shipment or presentation period is not sufficient.
• Original documents to be sent to buyer or nominated agents.
• Part shipment is restricted.
• Negotiation is restricted.
• Shipper’s load and count is not acceptable.

Import Business (Financing) and Types and Procedures

Introduction:

Bangladesh is one of the poorest countries of the world. Import of goods into Bangladesh is regulated by the Ministry of commerce in terms of the Import and Export (Control) act, 1950, various import policy orders and also public notices issued from time to time by the office of the CCI & E.

In Bangladesh now emphasis is giving on export led growth strategy. Further for liberalizing the trade sector following measures have been taken:

2 Import lubrication through removal of significant reduction of tariff & non-tariff barriers.

2 Rationalization of tariff structure.

2 To promote export through simplification of the procedure

The import section comprising with the function of opening LC, pre-import and post-import financing and other function of doing the import business.

Import can be two types:

2 Cash Import (usually):

In this case margin should deposit in issuing bank for import.

2 Back to back Import:

In this case import can be done on the basis of Master LC

Sources of Financing Imports

The sources of financing imports available to us are as under: –

2 Cash Foreign Exchange Resources of the country.

2 External Economic Aid (Commodity Aid, Loan or Credit & Grant)

2 Commodity Exchange:

• Barter
• Special Trading Arrangement (STA)

Types of Importer’s:

1   Actual users

1  Commercial Importers

1  Industrial Consumers

1  Import by Ministers, Govt. Departments & other Public Sector Agencies.

1  Lease Financing Importers

Financing of importers by commercial banks:

Commercial Banks play an important role in financing imports of the country. A substantial portion of the total bank credit is deployed for financing import trade. Major import items receiving bank finance are iron, steel, engineering & other Textiles, fuel & lubricants, Food grains, oil seeds, consumer goods and miscellaneous important merchandise.

Imports into our country are allowed only against opening of Irrevocable Letter of Credit except a few exceptional cases. The financing of imports are made by the bankers at various stages starting from the opening of letter of credit to the arrival and storied of the imported merchandise. Financing of imports by the banks may broadly be classified as under: –

• Pre-Import finance
• Post-Import finance

• Pre-import business (finance):

The finance, which is extended poorer to the arrival of the imported merchandise, is termed as “Pre-Imp’’

Letter of Credit:

Letter of credit (L/C) can be defined as ‘ Credit Contract’ whereby the buyer’s bank is committed (on behalf of the buyer) to place an agreed amount of money at the seller’s disposal under some agreed conditions. Since the agreed conditions include, amongst other things, the presentation of some specified documents, the letter of credit is called Documentary Letter of Credit. The Uniform Customs & practices for Documentary Credit (UCPDC) published by International Chamber of Commerce (1993) Revision; Publication No. 500 defines Documentary credit.

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 own behalf,

1  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 (Drafts) drawn by the Beneficiary, or

1  Authorizes another bank to effect such payment, or to accept and pay such bills of exchange (Drafts)

1 Authorizes another bank to negotiate, against stipulated document(s), provided that the terms and conditions are compiled with.

Banks open letter of credits only on behalf of their own customers who maintain accounts with them and are known to be participating in the trade. By opening letter of credit on behalf of the importer, the bank undertakes liability to pay the L/C amount to the foreign seller subject to submission of documents drawn in strict compliance with the credit terms. With the negotiation of import documents “NOSTRO A/C” of the L/C opening bank is debited.

Types:

Documentary Credits may be either:

1  Revocable

1  Irrevocable

1  Revocable credit:

Revocable credit is a credit, which can be amended or canceled by the issuing bank at any time without prior notice to the seller.

 

1 Irrevocable Credit:

An irrevocable credit constitutes a definite undertaking of the issuing bank (since it can not be amended or canceled without the agreement of all parties thereto), provided that the Stipulated documents are presented and the terms and conditions are satisfied by the seller. An irrevocable credit can be either confirmed depending on the desire of the seller. This sort of credit is always preferred to revocable letter or credit.

Special Documentary Credit:

(1) Revolving Credit:

The revolving credit is one which provides for restoring the to the original amount after it has been utilized. How may times it will be taking place must be specifically mentioned in the credit. The involving credit may be either cumulative or non-cumulative.

(2) Transferable Credit:

A transferable credit is one that can be transferred by the original beneficiary in full or in part to one or more subsequent beneficiaries. Such credit can be transferred separately, provided partial shipments are not prohibited.

(3) Back to Back Credit:

The back to back credit is a new credit opened on the basis of an original credit in favor or another beneficiary. Under the back to back concept, the seller as the beneficiary of the first credit offers it as ‘security’ to the advising bank for the issuance of the second credit. The beneficiary of the back to back credit may be located inside or outside the original beneficiary’s country.

(4) Anticipatory Credits:

The anticipatory credits make provision for pre-shipment payment, to the beneficiary in anticipation of his effecting the shipment as per L / C conditions.

Red Clause:

When the clause of the credit authorizing the negotiating bank to provide pre-shipment advance to the beneficiary is printed / typed in red, the credit is called ‘Red Clause Letter of Credit’. Under the above mentioned clauses, the opening bank is liable for the pre-shipment advances made by the negotiated bank, in case the beneficiary fails to repay or deliver the documents for negotiation.

Parties to a Letter of Credit:

There are a number of parties involved in a L/C and the rights & obligations of the different involve parties also differ from each other.

The involved parties can be named below:

1  Importer / Buyer

1  Opening / Issuing Bank

1  Exporter / Seller / Beneficiary

1  Advising / Notifying Bank

1  Confirming Bank

1  Negotiating Bank

1  Paying / Reimbursing Bank.

Importer / Buyer is the person who requests/ instructs the opening bank to open a L / C. He is also called Opener or Applicant of the credit.

Opening / Issuing Bank is the bank which opens / issues an L/C on behalf of the importer. It is also called the importer’s / buyer’s bank.

Exporter / Seller / Beneficiary is the party in whose favour the L / C is advised to the exporter. It is bank situated in the exporting country and it may be branch of the opening bank or a correspondent bank. It may also assume the role of confirming and / or negotiating bank depending upon the conditions of the credit.

Confirming Bank is a bank, which adds its confirmation to the credit, and it is done at the request of the issuing bank. The confirming bank may or may not be the advising bank.

Negotiating Bank is the bank, which negotiates the bill and pays the amount to the beneficiary. It has to carefully scrutinize the documentary credit before negotiation in order to see whether the documents apparently are in order or not. The advising bank and the negotiating bank may not or may not be one and the same. Sometimes it can also be the confirming bank.

Paying / Reimbursing Bank is the bank or whom the bill will be drawn ( as per conditions of the credit ). It is nominated in the credit to make payments against stipulated documents complying with the terms of the credit. It may or may not be the issuing bank.

Details regarding the rights and obligations of the different parties involved in the documentary credit operations may be had from UCPDC.

Operations of Documentary Letters of Credit:

The following five major steps are involved in the operation of a documentary letter of credit:

1  Issuing

1  Advising

1  Amendment (if necessary)

1  Presentation

1  Settlement

Issuing a Letter of Credit:

Before issuing an L / C, the buyer and seller located in different countries, concludes a sales contract providing for payment by documentary credit. As per requirement of the seller, the buyer then instructs the bank – the issuing bank – to issue a credit in favor of the seller (beneficiary). Instruction / Application for issuing a credit should be made by the buyer (importer) in the issuing bank’s standard form. The credit application which contains the full details or the proposed credit Also serves as an agreement between the bank and the buyer. After being convinced about the necessary conditions contained in the application form and ‘sufficient conditions’ to be fulfilled by the buyer for opening a credit, the opening bank then proceeds for opening the credit to be addressed to the beneficiary.

Advising a Letter of Credit:

Advising through a bank is a proof of apparent authenticity of the credit to the seller. The process of advising a credit consists of forwarding the original credit to the beneficiary to whom it is addressed. Before forwarding, the advising bank has to verify the signature (s) of the officer (s) of the opening bank and ensure that the terms and conditions of the credit are not in violation of the existing exchange control regulations and other regulations relating to export. In such act of advising, the advising, the advising bank does not undertake any liability.

Amendment of Credit:

Parties involved in a L / C, particularly the seller and the buyer, can not always satisfy the terms and conditions in full as expected due to some obvious and genuine reasons. In such a situation, the credit should be amended.

In case of revocable credit, it can be amended or canceled by the issuing bank at any moment and without prior notice to the beneficiary. But in case of irrevocable credit, it can neither be amended nor canceled without the agreement of the issuing bank, the confirming bank (if any) and the beneficiary.

Amendment of Credit:

Parties involved in a L / C, particularly the seller and the buyer, can not always satisfy the terms and conditions in full as expected due to some obvious and genuine reasons. In such a situation, the credit should be amended.

In case of revocable credit, it can be amended or canceled by the issuing bank at any moment and without prior notice to the beneficiary. But in case of irrevocable credit, it can neither be amended nor canceled without the agreement of the issuing bank, the confirming bank (if any) and the beneficiary.

1 Effects payment, or

1 Reimburses in the pre-agreed manner.

Settlement:

Settlement means fulfilling the commitment of issuing bank in regard to effecting payment subject to satisfying the credit terms fully. This settlement may be done under three separate arrangements as stipulated in the credit. These are

a)    Settlement by Payment:

b)   

Here the seller presents the documents to the paying and the bank then scrutinizes the documents. If satisfied, the paying bank makes payment to the beneficiary and in case this bank is other then the issuing bank is satisfied with the requirements, is obtained by the paying bank from the issuing bank.

c)     Settlement by Acceptance:

d)    Settlement by Negotiation:

Under this arrangement, the seller submits the documents evidencing the shipment to the accepting bank accompanied by a draft drawn on the bank (where credit is available) at the specified tenor. After being satisfied with the documents, the bank accepts the documents and the draft and if it is a bank other than the issuing bank, then sends the documents to the issuing bank stating that it has accepted the draft and at maturity the reimbursement will be obtained in the pre-agreed manners

• Post-Import Finance:

The finance extended after arrival of the goods is termed as “Post-Import” finance, which may be in the form of

1 Loan against Imported Merchandise (LIM)

1 Cash Credit (CC) &

1 Loan against Trust Receipt (LTR).

Loan Against Imported Merchandise (LIM)

LIM is created under two circumstances. Firstly, if there is an arrangement with the importer the commercial bank will provide finance against imported merchandise with usual margin, Secondly, when the importer fails to retire the documents the bank is compelled to create LIM to avoid demurrage/pilferage/damage etc. also to safeguard the interest of the bank, which is called “Forced LIM”. The sets of documents usually obtained are: –

1  DP Note

1  Letter of Arrangement

1  Letter of disbursement

1  Letter of pledge

1  Insurance policy covers.

Cash Credit (CC) Account

In some cases of Industrial importers with prior arrangement with the import documents are retired through financing from cash credit account of the party.

The following charge documents are to be obtained: –

1  D.P. Notes

1  Letter of Arrangement

1  Letter of Continuity

1  Letter from the borrower handling over physical possession of the goods.

1  Letter of Pledge

1  Letter of Disclaimer from the landlord in case of rented godown.

1 Letter of owner of rented godown acknowledging banks prior lien on the      goods stored.

1 Letter of authority from the borrower to debit godown staff salary, inspection & other incidental charges.

If cash credit is allowed against hypothecation of goods, letter of hypothecation is to be obtained instead of Letter of Pledge. Other documents as above are to be taken as usual.

Loan Against Trust Receipt (LTR)

The bank handover the shipping documents to the importer for taking delivery of the goods from the port without receiving payment there-against by taking a trust receipt from him. In the trust receipt the importer specifies the goods and agrees that he is holding the goods not as their owner but as an agent for the bank. Thus, the bank continues to have the rights of the pledge. However, in practices, trust receipt does not secure the position of the bank to a significant extent. As such, the loan is usually allowed only to corporate bodies and first class parties. It is allowed for a period of 30 days to 90 days. In addition to the Trust Receipt the following documents are also to be obtained: –

1  DP Note

1  Letter of Arrangement

1  Letter of Disbursement

1  Import letter of Credit (L/C) limit – on DP/DA basis.

1  Inland L/C limits – on DP/DA basis

1  Loan against merchandises (Pledge).

1  Trust Receipt facility.

1  Revolving inland L/C including back-to-back L/Cs / Transferable L/Cs.

Comparative Position on overall Import Performance for the last 3 Years (HEAD OFFICE)

(Amount in Million)

Comparative Position on overall Import Performance for the last 3 Years (48, Motijheel Branch)                     (Amount in Million)

Remittance

Introduction:

Foreign remittance refers to the transfer of fund from one country to another either through the office channel i.e. banking channel, Post office or the informal channel. In Bangladesh still informal market is playing a significant role. However, we shall limit our discussion within the official channel.

BASIC places an important role to transfer money from other countries to Bangladesh and Bangladesh to other countries. Inward and outward T.T, M.T and draft are the main components of foreign exchange remittance.

Foreign exchange earnings are very low as export earnings are very limited while import spending are huge which makes the balance of trade position in a chronic deficit situation. Foreign remittance is very important for the country as valuable foreign exchange is involved in the transfer mechanism. From the year 1990, financial liberalization has been started which is still going on. Due to liberalization, restrictions on foreign remittance become ease. Bangladeshi Taka. is convertible for current account transactions on March 24, 1994 with the view to achieve better exchange rate management system. And from April 1994 Bangladesh Government has accepted the status of Article VIII of international monetary fund.

Foreign remittance has two wings i.e. inward and outward remittance. This can be shown below:

	Foreign Inward Remittance			Foreign Outward Remittance

 Before discussing foreign inward remittance & outward remittance, I may discuss following relevant topics in brief:

AD Branch:

Authorized dealer branches of the bank are those who are permitted by the Bangladesh Bank to deal in foreign exchange business subject to the fulfillment of foreign exchange rules & regulations of the country.

Agency Arrangement:

To facilitate foreign exchange business throughout the world, agency arrangement may be made between local bank and foreign bank. However, in case of agency arrangement accounting relationship may or may not be made.

Drawing Arrangement:

Drawing arrangement is made to facilitate remittances through concluding accounting relationship between a bank & corresponding bank or exchange house.

NOSTRO Account:

When a local bank maintains account in another bank in abroad.

VOSTRO Account:

When a foreign bank maintains account in local bank.

LORO Account:

When the third party maintains account is known as LORO account.

Foreign inward remittance

Foreign inward remittance refers to the currency remitted from abroad to

our   country. Now I shall describe inward remittance

The remittance in foreign currency that receives from outside the country to our country is known as foreign inward remittance. In case of inward remittance, TT/MT/Drafts etc. are drawn in local bank by the foreign banks of exchange houses. When a local bank purchases foreign bills, TCs & cash foreign currency is also known as inward remittance. A local bank also receives indenting commission of local firm, trademarks, patent fee etc.

Inward remittance can be classified into two groups:

1  Visible inward remittance such as export proceeds,

1 Invisible inward remittance such as family maintenance, constancy fee       etc.

In the following manner inward remittance can be sent:

TT:

Telegraphic Transfer refers to the payment instruction by tested telex/cable or authentically faxes in foreign bank on local bank. Normally foreign banks with whom drawing arrangement or correspondent banking relationship prevail send Telegraphic Transfer.

MT:

Mail transfer refers to payment in cash to the third party or for a credit to be used to the account of the payee in the books of the agent.

FDD:

Foreign Demand drafts normally issued by the foreign bank/exchange company in local bank.

Foreign Currency Notes:

Authorized dealers are permitted to purchase foreign currency, not

TC:

Issued Travelers cheques may be purchased by local bank.

Cover of Export:

Local banks receive export cover from foreign banks after negotiation of bill or in advance.

Problem faces in inward remittance:

1  Required particulars of the beneficiary such as name of the beneficiary A/C No. Or correct branch name may not be given in the TT.

1  Further geniuses or signature of drafts may be forged.

In case of payment, sometimes branches of the bank may create certain problem: –

1 Delay in making payment against remittance against remittance to the   beneficiary.

1  Without ascertaining genuinely, drafts may be paid.

1 Lack of timely response/communication against the queries of remitter/beneficiary.

1 Credit TRV’s may not be timely sent to head office. Moreover particulars may not be given in the TRV’s

Inward remittance may be cancelled if beneficiary is not available. If an inward remittance already reported to B.B is cancelled either in full or in part become of non-availability of beneficiary, the AD must report the cancellation of the remittance as an outward remittance on TM form.

Foreign Outward Remittance

Foreign outward remittance refers to the remittances in foreign currency made from this country to abroad. Foreign outward remittance includes issuance of TT, MT, FDD issued by local banks on foreign banks. Further it includes rate of foreign currency, notes, TC’S, reimbursement against import, bills retired etc. Forward outward remittance can be divided into two groups:

2 Visible outward remittance such as payment against import.

2 Invisible outward remittance such as membership fee, subscription fee etc.

Outward remittance can be made for traveling purpose, educational purpose, attending seminar & workshop, medical treatment, business travel quota, evaluation fee, membership fee, visa fee, pre-shipment fee, advertising of Bangladesh commodities etc. In case of purchase of foreign currency, an applicant must be made to an AD and if necessary requires to Bangladesh Bank. For payment against imports the prescribed application form is IMP form & for other types of remittance TM form.

In the following manner outward remittance is made:

TT: Local banks can draw telegraphic transfer to those banks with which they have accounting relationship & message should contain test & brief description of the beneficiary.

FDD: Any authorized dealer branches can issue foreign drafts draw on the bank with which they have an accounting relationship.

Foreign Currency, Notes: Authorized dealer branches are permitted to safe foreign currency notes as per ceiling fixed by Bangladesh Bank.

TC: AD branches can sale Travelers cheques as per the ceiling fixed by Bangladesh Bank.

Reimbursement against Import: Local banks can reimburse funds against import through their account.

In following outward remittance, authorized dealer branches do not require prior permission of Bangladesh Bank:

2  Profits: Foreign organization can freely remit their past tax profit to their head office.

2 Dividend/Capital gain: Dividend income to non residents dividend declared out of previous years accumulated reserve & dividend & sales proceeds including capital gain can be remitted.

2 Salaries & Savings by expatriates: Approved expatriates working in Bangladesh can remit 50% of salary & 100% of their salary.

2  Technical/royalty fee: In the total fees & other expenses connected with technology should not exceed,  I) 6% of the previous years sales of the

enterprises as declared in their tax returns or II) 6% of cost of import machinery in case of new projects subject to the BOI registration or approval.

2 Training & Consultancy:For the purpose of training & consultancy services, industrial enterprises may remit 1% of their sales as declared in their previous year’s tax return.

2 Shipping lines, airlines, courier services: They can remit their funds locally collected towards freight & postage after the adjustment of local costs & taxes.

When quota is exhausted, special permission is required from Bangladesh Bank. On the basis of sanction, AD branches will send outward remittance subject to the within valid time period. When the authorization is signed by an official of Bangladesh Bank whose specimen signature may not be available then such authorization should be presented to the nearest office of the Foreign Exchange Policy Dept. of B.B the Ads should carry out the transactions on behalf of the original applicant for whom the forms were approved.

Cancellation of MT/DD:

Foreign remittance can be cancelled such as unutilized foreign currency against passport endorsement or cancellation of locally issued foreign demand drafts etc. MT/DD may be cancelled and payment against therein may be executed to the applicant only after observing all the existing formalities. In this case Bangladesh Bank must be reported and the cancellation of outward remittance will be considered as inward remittance.

Outward remittance can be reported in the following form:

Invisible payment schedule should be reported in schedule E-3/P-3 or schedule E-4/P-4 depending on Code No, from 0001 to 5999 & 6000 to 9999 respectively along with TM form.

When bank sales foreign currency to other banks then report should be done in schedule “G”. In case of foreign currency sale reporting should be done in the schedule S-6 along with TM form.

In case of import, reporting should be done in the schedule E-2/P-2 along with IMP form.

All AD branches must sent statement of L/C commitment to their respective Head Office & after consolidating all the figures by the Head Office; they must submit the figure to the Bangladesh Bank.

For a country like Bangladesh, foreign remittance are valuable for which proper utilization is needed & bank should act as a check & balance so that misappropriation of foreign remittance do not happen.

An overview of the functions catered to by a foreign exchange branch of  JANATA BANK

Dealing Section	Imports	Exports	Remittances

1.Quoting Rates of Exchange

2. Forward Cover

(Banking of contracts)

3. Reconciliation

(Foreign Bank Accounts)

1.Opening of L/C

2. Payments against

Documents

3.Loan against

Merchandise

(Pledge)

4. Loan against

Trust Receipts

(LTR)

5. In ward Bill

(for collection)

6.Guarantees Inland and Foreign

1.Exprot L/C Advising

2. Pre-shipment Finance

3. Post-shipment Finance

4. Foreign Bills

for collection

5..Export Certificates

6.Realization

1.Inward

2.Outward

– Demand Draft

– Mail Transfer

– Telegraphic Transfer

3.Foreign Inward

Remittance Payment System

(FIRPS)

Summery and Suggestion

Foreign Exchange Department

Customer’s business involves the management of risk, from the ordering of goods or raw materials to the receipt of payments after production and sale of goods – each stage of customer trade cycle puts different demands on customer’s cash flow. By working with customer and understanding customer’s business, JANATA BANK is able to help customer and customer’s trade cycle.

JANATA BANK’s business solution teams can assist in providing technology-based solutions.

In My investigation I have seen the various problems faced by the JANATA BANK personnel and business community at the time of dealing in foreign exchange. On the basis of the above discussion and findings we may draw some conclusions that are as follows:

2  Proper decentralization of power is necessary for promoting such dealings. This may be done on the basis of examination by delegating more powers to a few branches.

2  Officers to be posted in Foreign Exchange Department should be efficient.

2  More training facilities should be extended in this area of banking.

2  Facilities of modern equipment like computer, telephone, telex, fax and SWIFT should be given to the clients by the Bank of Small Industries and Commerce Bangladesh Limited

2 International Foreign Exchange Rules, Internal foreign Exchange Rules, Manuals, Foreign Exchange Regulations Act etc. should be given to all officers and clients involved in this dealing.

Graphical Analysis

(DEPOSIT)

Comparative Figure of Deposit as on 31.12.2008

Export Import Bank Of Bangladesh Ltd.

( Motijheel Corp Branch)

Name of Account

Amount Tk. in crore

Increase in PercentageAmount Tk. in l crore

Increase in Percentage2006200720072008Current151301100%301109-64%Savings16128476%284156-45%FDR2253305035%3050511867%STD53658710%587469-20%Saving Scheme4142695650%2695320519%BCD-95-95–Others—-451-Total Deposit35157012100%7012950835%

Source: Statement of Affairs

2006                                2007                            2008

From the above analysis it is found that the Deposit mobilization of the bank is increasing steadily. In the year 2002 Deposit is increased 100% as compared with the year 2001. And in the year 2003 Deposit is increased 35% as compared with the year 2002

Due to the increased of Account in the Branch, which means the branch shows greater performance in this area

Comparative Figure of Interest Paid on Deposit as on 31.12.2007

Export Import Bank Of Bangladesh Ltd. (Motijheel Branch)

(Amount Tk. in crore)

Year	2005	2006	2007
Interest on Deposit	208	480	850

Source: Statement of Income &Expenditure

2006                  2007                 2008

From the above analysis it is found that the Interest paid on deposit by the branch is increased quite steadily. In the year 2006 it is increased by 131% as compared with the year 2005. And in the year 2007 it is increased by77% as compared with the year 2002. Due to the increased of Account in the Branch, which means the branch shows greater performance in this area.

Year Wise No. Of Account of the Branch

Name of Account	2006	2007	2008
Current	246	386	450
Savings	150	275	372
FDR	133	138	247
STD	53	85	99
Deposit under Scheme	654	1441	1932
Loan	126	236	257
BCD		10
FC		1	1
Total Account	1362	2572	3338

 

In the above graph it is shown that the no. of Account of the branch is increased year by year. Which means the branch shows greater performance in this area.

In the Above analysis it is found that: In the year 2005the Bank makes major Deposit as FDR, which is 64%, and after that as STD which is 15% of the total Deposit of

In the year 2005the Bank makes major Deposit as FDR, which is 64%, and after that as STD, which is 15% of the total Deposit of that Year,

In the Above analysis it is found that:

• In the year 2007the Bank makes major Deposit as FDR which is 53% and after that as Saving Scheme which is 34% of the total Deposit of that Year.

LOANS AND ADVANCES:

Comparative Position of the Loans of Motijheel Branch

(Amount in million)

Different Types

of Loan20062007Increase in %20072008Increase in %Overdraft12324297%242210(13%)Cash Credit20733562%33542427%Loans General566923%69211206%Staff Loan11-14300%Packing Credit11-12100%Bills Portfolio71157%112082%Commercial Loan111391252%39144013%Total5061050108%1050131125%

Source: Statement of Affairs

From the above analysis it is found that the loan and advance is increased gradually. in 2006 it is increased 108% as compared with 2005.and in 2007 it is increased 25% as compared with 2006.

Interest received from Loan for the last 3 years

(Amount in million)

Year	2006	2007	Increase in %	2007	2008	Increase in %
Interest from loan	60	132	120%	132	162	23%

Source: Statement of Income and Expenditure

From the above analysis it is found that the income from loan and advance is increased gradually. In 2006 it is increased 108% as compared with 2005.and in 2007 it is increased 25% as compared with 2006

Year Wise Advances Position of the 48, Motijheel Branch

(Amount in Miillion)

Different Types

o

In the Above analysis it is found that:

In the year 2005 the Bank makes its major advance as Cash Credit which is 41% and after that as Over Draft which is 24% of the total advance of that Year.

In the Above analysis it is found that:

In the year 2006 the Bank makes its major advance as Commercial Loan which is 37% and after that as Cash Credit which is 32% of the total advance of that Year

In the Above analysis it is found that:

In the year 2007 the Bank makes its major advance as Commercial Loan which is 41% and after that as Cash Credit which is 32% of the total advance of that Year

(Figure in Million Tk)

Item	2006	2007	% of Growth	2007	2008	% of Growth
Export	107.05	458.36	328%	458.36	500.46	9%

Source: Statement of Affairs

2006                                   2007                                  2008

From the above graph it is observed that the export is increased steadily.In the year 2007 is increased 328% as compared with 2006.And in the year 2008 t is increased 9% as compared with 2007.

Comparative Position onOverall Import Performance

for the last 3 Years

( Janata Bank 48, Motijheel  Corp. Branch)

(Figure in Million Tk)

Item	2006	2007	% of Growth	2007	2008	% of Growth
Import	991.12	2056.79	108%	2056.79	2282.53	11%

Source: Statement of Affairs

2006                                   2007                                  2008

From the above graph it is observed that the Import is increased steadily. In the year 2007 is increased 108% as compared with 2006.And in the year 2008 it is increased 11% as compared with 2007. Operating Profit

Comparative Position onOverall Profit Performance

for the last 3 Years)

(Janata Bank,48, Motijheel Corp. Branch)

(Figure in crore Tk)

Item	2006	2007	% of Growth	2007	2008	% of Growth
Profit	255	600	135%	600	522	-13%

Source: Statement of Income & Expenditures

2006                      2007                2008

In the above graph it is shown that the Operating Profit is increased steadily. In the year 2006 is increased by 135% as compared with 2005.And in the year 2007 it is decreased by 13% as compared with 2006.

CALCULATION FOR THE RATIOS

PROFITABILITY RATIOS: (Figures in million)

1. Calculation for ROA:

2006                             2007                             2008

Net Profit After Tax                         253.56                          256.06                            294.69

Total Assets                                    18,882.4                                    23,135.7                                    33,744.96

ROA                                =1.34%                           =1.10%                        =0.87%

2. Calculation for ROI:

2006                             2007                             2008

Net Profit After Tax                        253.56                           256.06                            294.69

Total Investment:                2282.08                           2581.61                       3190.15

ROI                                    =11.11%                       =9.91%                         =9.23%

3. Calculation for Return on Fixed Assets:

2006                             2007                             2008

Net Profit After Tax                        253.56                           256.06                            294.69

Fixed Assets                                    48.81                            288.02                           313.73

Return on Fixed Assets        =519.48%                     =88.90%                       =93.94

4. Calculation for Earning Per Share:

2006                             2007                             2008

Net Profit After Tax                          253.56                         256.06                            294.69

No. of shares                      1666                             2912                             4704

Earning Per Share                =0.152                          =0..879                         =0.062

PRODUCTIVITY RATIOS:

1. Calculation for Deposit Per Employee: (Figures in million)

2006                             2007                            2008

Deposit                              15343.45                                   19618.82                       27,930.84

No. of employees                                       488                             586                            685

Deposit Per Employee                              =31.44                                   =33.47

2. Calculation for operating profit per employee: (Figures in crore)

2006                             2007                             2008

Operating Profit                    @                               1043.1                            1293.54

No. of employees                    488                              586                            685

Operating Profit per employee =                              =1.78                            =1.88

3. Calculation for advance per employee: (Figures in crore)

2006                             2007                             2008

Advance                             13027                           15541.5                         22001.7

No. of employees                    488                              586                            685

Advance per employee         =26.69                          =26.52                          =32.11

4. Calculation for deposit per branch: (Figures in million)

2006                             2007                             2008

Deposit                              15343.45                      19618.82                       27,930.84

No. of branches                       19                                23                                 27

Deposit per branch                         =807.55                                    =852.99                                    =1034.47

5. Calculation for net profit after tax per branch: (Figures in million)

2006                             2007                             2008

Net Profit After Tax                         253.56                         256.06                             294.69

No. of branches                  19                                 23                                    27

NPAT per branch                                             =13.34                          =11.13                          =10.91              =40.77

 

 ACRONYMS:

CD                  Current Deposit

SB                   Savings Bank

STD                 Short Term Deposit

PO                   Pay-Order

TT                    Telegraphic Transfer

MT                  Mail Transfer

DD                  Demand Draft

IBC                 Inward Bills for Collection

OBC                Outward Bills for Collection

SOD                Secured Overdraft

CC (H)            Cash Credit (Hypo)

CC (P)             Cash Credit (Pledge)

ECC                Export Cash Credit

DA                  Documents Against Acceptance

DP                   Demand Promissory Note

PAD                Payment Against Document

LIM                 Loan Against Imported Merchandise

LTR                 Loan Against Trust Receipts

LBP (D)          Local Bill Purchase by Documents

LBP(C)           Local Bill Purchase by Clean

LBP (F)           Local Bill Purchase by Foreign

PC                   Packing Credit

LG                   Letter of Guarantee

IRC                 Import Registration Certificate

ERC                Export Registration Certificate

STA        Special Trading Arrangement

 

BIBLIOGRAPHY

q  The Annual Report of Janata Bank Ltd.

q  Official Web site of JanataBank Ltd.

q  Previous Reports.

q  Statement of affairs and statement of income & expenditures.

q  Lecture Sheets of BIBM.

q  Research Methodology – C R Kothari.

q  Business Research Method – William G Zikmund.

 

Findings

During my two months internship in the  Janata Bank Ltd, 48, Motijheel,Corporate Branch, Motijheel, Dhaka following positive things are found from my observation:

• There are a number of banks are operating in the  Motijheel Commercial Area But  the  Janata Bank Ltd, 48, Motijheel,Corporate Branch from these, Branch is successfully operating its activities.
• Recently , this Bank has come into competition with the other commercial Bank in  Motijheel, Dhaka
• Janata Bank Ltd, 48, Motijheel, Corporate Branch has earned exemplary profit in 2007and 2008 in comparison with other banks in Motijheel Area..
• The bank has marginal bad debt in 48, Motijheel Branch. Because the credit analysts have a strong background in accounting financial statement analysis, business law and economics along with good negotiating skills.
• Branch Manager puts Conscious efforts to achieve the targets and knows how to motivate employees and how to represent the Bank well in the local community.
• As the bank uses some modern technology such as: Fax, Telex & other electronic devices, hence its service is better than other banks.
• The controlling officers are effective in providing necessary guidance and support to the branch.
• The strategy and policy of Branch Manager are effective. So in spite of cut throat competition, the bank has a sound position in the competitive environment
• The Bank Introduce NBR (Non Bangladeshi  Resident) branch, which is new idea in Bangladesh.

Areas need to be improved

However the satisfaction level of JANATA BANK LTD is good enough. But some customers have expressed their dissatisfaction about the JANATA BANK LTD in various aspects. It has a profound effect on the overall satisfaction level of JANATA BANK LTD. Following are the problems found which Janata Bank Ltd faces:

• Label of adoption to the modern technology is poor. Like The great problem of JANATA BANK LTD is the absence of Credit Card, ATM Card, Debit Card, on line banking service. On line banking service means any one can deposit or draw money in any branch of JANATA BANK LTD.
• JANATA BANK LTD is giving the lowest interest rate to its saving account holders. Lowest interest rate makes them demoralize and consequently they are shifting their accounts to other banks to make more money.
• Lack of promotional activity is another problem that is responsible for the decline of the customers’ satisfaction of JANATA BANK LTD. It has been found that people could hardly recall any advertisement of JANATA BANK LTD.
• Some customers said that the services Time of JANATA BANK LTD are comparatively higher than other bank.
• As the bank is moving towards semi-multinational culture, some employees are resisting the change, as they are accustomed to traditional banking system and do not want to change.
• nother important problem is most of the officials who are working in the Foreign Exchange, General Banking and Credit Department are not commerce background.
• Most of the people of the Bangladesh are poor. But JANATA Bank Ltd does not provide any special facility to them. They do not have any short-term scheme
• like Micro credit for poor people. Moreover they do not have merged Some rural area.
• Interest rate is same for both high-risk borrowers and low risk borrowers. It is another problem of JANATA Bank Ltd

• There is lack of Training program which necessary for the officials to update themselves.
• Maximum Employee are older so they do not serve quickly.
• Most Of the C.B.A leader are not done his duty, The CBA hamper the job in time.
• The facilities both financial and non-financial are poor.

Possible Measures

I have to make some recommendations based on the findings that I have got from my research. The recommendation will help the bank to take necessary steps in order to increase the satisfaction level of customers of JANATA BANK LTD. The following are some recommendations for the company

• JANATA ANK LTD must be introducing credit card and ATM. Now a day’s most of the banks are providing various service facilities like as 24 hours service, credit card, ATM etc. If S JANATA BANK LTD does not introduce those facilities immediately then customers will shift to other banks that provide these services. Online banking is very much in practice in today’s modern world. I highly recommend launching of such services.
• JANATA BANK LTD should give the competitive interest rate, so that the clients are not shifting their accounts to other bank.
• JANATA BANK LTD should develop advertisement that promotes the service attributes and benefits with the models reflecting the target segments they are approaching. To promote the image promotional activity can play an important role. Preparing a television advertisement that would reflect the benefits and attributes of the service to the target market. Allotting a handsome amount for the making and broadcasting of new advertisement.
• The serving time of JANATA BANK LTD should be reasonable
• As it has been found that the present products can no longer satisfy the customers so new products should be introduced. The institution should completely change its current product positioning and positioning strategies to establish their products in the appropriate target market segments.
• Officials to be posted in Foreign Exchange, General Banking and credit Department should be commerce background.
• JANATA BANK LTD should provide short-term scheme like Micro credit for poor people. They should spread their service to the rural area by introducing branch in that area.
• It may be a fair deal if the high-risk borrowers and the low risk borrowers should not have to pay the same interest rate. Interest rate could be arranged according to the sum they borrow.
• The bank should send the Relationship Managers and CRM employees to various training programs for increasing the efficiency of employees to provide better service to customers.
• The institution should conduct some primary research to get a better understanding of the target market. They should also conduct surveys to find the extent to which their services are meeting the needs and wants of target market.

Proper decentralization of power is necessary for promoting such dealings. This may be done on the basis of examination by delegating more powers to a few branches.

 

Conclusion:

There are a number of nationalized and foreign banks operating their activities in Bangladesh. Among them Janata Bank Limited is one of the leading commercial bank.

Janata Bank Ltd has introduced a new dimension in the field of innovative and benevolent banking in our country. The bank has successfully made a positive contribution to the economy of Bangladesh. Its profit is gradually increasing. It plays a great role in collecting scattered Deposit, Loan settlement and International Trade etc.  The Bank ensures quality services to the customers. For better growth and healthy economic position, it should introduce new and lucrative long-term credit schemes especially for new investors and schemes for poverty alleviation like micro credit.

I hope Janata Bank Ltd will do more work for socio-economic development besides their banking business. To keep pace with ever-changing uncertain domestic business environment and face the challenges of revised global economic scenario, the bank should be more   pro-active and responsive to introduce new marketing strategy to hold the strong position in home and abroad.

For the future planning and the successful operation in its prime goal in this current competitive environment I hope this report can provide a good guideline. I wish continuous success and healthy business portfolio of Janata Bank Limited.