Project Appraisal Practice A Handy Experience from EXIM Bank
1.1 Origin of the report
The internship program is required course for the students who are completing BBA from the Department of Accounting and Information Systems in the faculty of business studies of Dhaka University. It is a 3 credit hour program with duration of 3 months. Students who have completed all the required courses are eligible for this program. In the internship program I was attached to the EXIM Bank Limited for 3 months. During this period I have learned how the organization works.
1.2 Objective and scope of the report
- To gain practical experiences and view the application of theoretical knowledge in the real life.
- To submit a report for the fulfillment of my BBA program
- Find out the overall branch banking
- To gather comprehensive knowledge on overall banking functions and the expectations of the customers regarding the service level of the bank.
- To present an overview of EXIM Bank Limited
- To study existing banker-customer relationship.
- To identify the problems of financing by EXIM Bank Limited.
This report has been prepared through extensive discussion with bank employees and with the customers. While preparing this report, I had a great opportunity to have an in depth knowledge of all the banking activities practiced by the EXIM Bank Limited.
1.3 Job rotation:
|General Banking||From 17 Dec. to 31 Jan.|
|Foreign Exchange||From 1 Feb. to 20 Feb.|
|Investment||From 21 Feb. to 17 Mar.|
1.4 Study methodology
The report was fully exploratory in nature. Data have been collected from both primary and secondary sources.
Primary sources of data
- Conversation with the bank officers and staffs.
- Informal conversation with the clients
- Different manuals of EXIM Bank Limited.
- Different circulars of EXIM Bank Limited
Secondary sources of data
- Annual report of EXIM Bank Limited
- Different papers of EXIM Bank
- Unpublished data
- Different text books
The present study was not out of limitations. But as an intern it was a great opportunity for me to know the banking activities of Bangladesh specially EXIM Bank. Some constraints are as follows:
- The main constraints of the study are inadequate access to information, which has hampered the scope of analysis required for the study.
- Due to time limitations many of the aspects could not be discussed in the present report.
- Every organization has their own secrecy that is not revealed to others. While collecting data they did not disclose much information for the sake of organizational confidentiality.
- Since banks personals were very busy they could provide me very little time.
- I carried out such a study for the first time so inexperience is one of the main constraints of the study.
1.6 Organization of the report
This is a short report covering all that I experienced while working at bank. The report has seven parts. The first part is the introductory chapter. The second part contains information about EXIM Bank. The third part gives information about Malibagh branch where I have worked. General Banking is described in forth part. In fifth and sixth part I discussed about Foreign Exchange and Advance Section respectively. The last part named ‘conclusions’ ends the report.
Historical background and current performance
2.1 Historical background of EXIM Bank Limited:
EXIM Bank Limited was established under the rules & regulations of Bangladesh bank & the Bank companies’ Act 1991, on the 3rd August 1999 with the leadership of Late Mr. Shahjahan Kabir, founder chairman who had a long dream of floating a commercial bank which would contribute to the social-economic development of our country. He had a long experience as a good banker. A group of highly qualified and successful entrepreneurs joined their hands with the founder chairman to materialize his dream. In deed, all of them proved themselves in their respective business as most successful star with their endeavor, intelligence, hard working and talent entrepreneurship. Among them, Mr. Nazrul Islam Mazumder became the honorable chairman after the demise of the honorable founder chairman.
Of its very beginning, EXIM Bank Bangladesh limited was known as BEXIM Bank, which stands for Bangladesh Export Import Bank Limited. But for some legal constraints the bank renamed as EXIM Bank, which means Export Import Bank Of Bangladesh Limited.
The bank starts its functioning from 3rd August 1999 with Mr. Alamgir Kabir, FCA as the advisor and Mr. Mohammad Lakiotullah as the Managing Director. Both of them have long experience in the financial sector of our country. By their pragmatic decision and management directives in the operational activities, this bank has earned a secured and distinctive position in the banking industry in terms of performance, growth, and excellent management.
2.2 Corporate mission
- To provide high quality financial services in export and import trade.
- To provide excellent quality service.
- To maintain corporate and business ethics.
- To become a trusted repository of customers money and their financial advisor.
- To make our stock superior and rewarding to the shareholder.
- To display team sprit and professionalism.
- To have a sound capital base.
2.3 Corporate culture
This bank is one of the most disciplined banks with a distinctive corporate culture. Here we believe in shared meaning, shared meaning and shared sense making. Our people can see and understand events, activities, objects and situation in a distinctive way. They mould their manners and etiquette, character individually to suit the purpose of the bank and the needs of the customers who are of paramount importance to us. The people in the bank see themselves as a tight knit team that believes in working together for growth. The corporate culture we belong has not been imposed; it has rather been achieved through our corporate conduct
2.4 Values of EXIM Bank Limited:
- To be one EXIM by holding and guiding the following values:
- To have a strong customer focus and to build relationship based on integrity, superior service and mutual benefit.
- To strive for private and sound growth.
- To work as a team to serve the best interests of the organization.
- To work for continues business innovation and improvements.
- To value and respect people and make decisions based on merit.
- To provide recognition and reward on performance.
- To value open and honest communication.
2.5 Performance of EXIM Bank:
EXIM Bank Ltd. was incorporated as a public Limited company on the 2nd June 1999 under Company Act 1994. The Bank started commercial banking operations effective from 3rd August 1999. During this short span of time the Bank has been successful to position itself as a progressive and dynamic financial institution in the country.
The Bank widely acclaimed by the business community, from small business/entrepreneurs to large traders and industrial conglomerates, including the top rated corporate borrowers from forward-looking business outlook and innovative financing solutions. In year 2005 EXIM Bank ltd. made commendable in all business arenas like Deposit, Credit, Fund Management, Investment and Foreign Exchange related business.
The bank started with an authorized capital of Tk.100 million in 1999 and as on 31st December 2000 paid up capital stood at Tk. 22.50 million. The paid up capital stood at Tk.31.39 million as on 31st December 2001.
126.96.36.199 Analysis of capital structure:
Capital structure of EXIM Bank has changed from year to year. The components of the capital structure are paid-up capital; proposed issue of dividend, share premium, statutory reserve, proposed cash dividend, retained earnings and other reserve.
Authorized and paid up capital of EXIM Bank:
|Authorized Capital (TK) In Million||Year||Paid Up Capital (Tk) In Million|
188.8.131.52 Capital position of EXIM Bank:
184.108.40.206 Components of capital structure and correspondent contributions:
Figures of different components of the capital structure for the year 2002, 2003 and 2004 2005 are shown below.
Figures in million TK
|Componentsof capital structure||2002||2003||2004||2005|
|Paid-up capital||253.13(75.82 %)||313.88(48.7 %)||627.75(45.91%)||878.85(41.94 %)|
|Proposed issue of bonus share||——-||28.125(6.09 %)||60.750(11.02 %)||——|
|Share premium||——-||15.750(3.41 %)||82.575(14.98 %)||82.575(11.03 %)|
|Statutory reserve||16.045(5.41 %)||64.896(14.05 %)||132.501(24.03 %)||228.202(30.5 %)|
|Other reserves||23.612(7.96 %)||54.718(11.84 %)||——-||——|
|Proposed cash dividend||*31.500(10.62 %)||56.250(12.18 %)||20.250(3.67 %)||——|
|Retained earnings||0.590(0.2 %)||17.227(3.73 %)||2.131(0.39 %)||123.622(16.53 %)|
|Total||296.747(100 %)||461.966(100 %)||551.332(100 %)||748.274(100 %)|
* In the annual report of the year 2000, capital structure did not contain any value for the component of proposed cash dividend, but in the annual report of the year 2001, it was mentioned that proposed cash dividend was 31.5 million taka for the year 2000.
1. Annual Reports-2002, 2003, 2004 and 2005
From the table in the last page, paid-up capital was the largest component of the bank’s capital structure for each year though contribution of this component in the capital structure was declining gradually. Two components of the capital structure; proposed issue of bonus share and share premium had no contribution in the capital structure in the year 2000. It is observed that in the year 2003, there is neither proposed issue of bonus share nor proposed cash dividend. Instead of these two things the amount of retained earnings became too large.
220.127.116.11 Capital structure:
Pie chart of capital structure for the base year 2000 and for the year 2005 have been shown below:
Fig: Capital structure Fig: Capital structure
for the base year 2000. for the year 2005.
The above figures are showing the comparison between different components of capital structure of the base year 2000 and the year 2005. In the base year 2000, there was no share premium and in the year 2005 there were no proposed issue of bonus share, proposed cash dividend or other reserves
The total deposit of the bank increased to Tk. 9945.23 million as on December 31, 2002 from Tk. 7255.02 million as at the end of the previous year indicating an increase of 37.08% than the previous year. The EXIM Bank remains committed to increasing deposit base by growing low cost personal and business accounts, and thereby lowering the banks over all cost of fund. As on December31, 2003 the banks deposit reached 15242.97 million, which is more than 5297.74 million than last year
18.104.22.168 Deposit Position of EXIM Bank:
|Year||Amount Of Deposit (Tk In Million)|
22.214.171.124 Deposit in EXIM Bank:
2.5.3 Loans and Advance:
During the year 2002, credit experienced vibrant activities with significant growth. Total loans and advances at the end of the year increased by tk.2823.01 million, 55.01% growth over the preceding period. This is due to increased commercial and trade financing term leading and working capital support. The classified loan Position is almost nil. This was achieved by rendering due attention and monitoring high-risks advance. As a result, classified advance is amounted to tk. 7.63 million, which is only 0.09% of total loans and advances. The bank is trying to operate its credit activities with the target of achieving Zero classified loans.
126.96.36.199 Loan and advance position of EXIM Bank:
|Year||Amount (TK in Million)|
188.8.131.52 Mode of Advances:
2.5.4 Profit and operating results:
In year 2001a growth in operating profit of the bank was Tk.273.80 million and in 2002 the profit reached to 386.80 million. In 2004 and 2005 profit after tax was 381.80 and 555.34 respectively.
On December 31, 2005 the total amount of investment is 2377.07 million taka, which was 1419.00 million taka last year. The amount has increased by 958.07 million taka. The notable investment represents deployment in Treasury bills and Shares, Prize bond & other.
|Year||Amount (TK In Million)|
184.108.40.206 Investment Activities of EXIM Bank:
2.5.6 Import Business:
The total import business handled by the bank during the year 2002 was Tk. 13152.50 million as compared to Tk. 8519.70 million in the previous year showing an increase rate of 54.37%. The significant items of imports were industrial raw materials, consumer goods, machinery, Fabrics and accessories etc. As on December, 2005 EXIM bank Imported Tk. 19260 million of goods.
220.127.116.11 Handling the amount of Import Business:
|Year||Amount (TK in Million)|
2.5.7 Export Business:
The total volume of export handled by the bank during 2002 was TK. 10088.30 million compared to TK. 7442.20 million in the previous year are showing an increased rate of 35.55%. As on December, 2003 the total volume of export was Tk. 151242 million.
18.104.22.168 Handling the amount of Export Business:
|Year||Amount (TK in Million)|
2.5.8 Launching of Islami Banking:
Considering the inherent desire of the religious Muslims, EXIM Bank has launched Islami Banking system and inaugurates two Islami Banking Branches in the year 2002. The Islami Banking branches perform their activities under the guidance and supervision of a body called “SHARIAH COUNCIL”.
2.5.9 SWIFT service:
The SWIFT services helped the bank in sending and receiving the messages and instructions related to our NOSTRO account operations and L/C related matters. We have brought 6 of our Branches under SWIFT network. Other Branches will come under the network hopefully by the year 2004. Besides we have BKE arrangements with 430 Bank Branches in 100 countries.
2.6 Functions of EXIM Bank limited:
- To maintain all types of deposit A/Cs.
- To make investment.
- To conduct foreign exchange business.
- To conduct other Banking services.
- To work for continues business innovation and improvements
2.7 Branch Network:
The number of branches as it stands now is 28 steps are taken to open few more branches at commercial important places by the year 2007. Out of which 9 branches are in Dhaka, 3 branches are in Chittagong, 2 branches are in N.Ganj, 1 branch in Noakhali, 1 branch in Sylhet, 1 branch in Laksham, 1 branch in Gazipur, 1 branch in Bogra, 1 branch in Jessore.
|SL No.||Branch Name||Branch Code|
2.8 Management of EXIM Bank
For any financial and non- financial organization, management is the most valuable and important resources of any kind of organization. And a well-organize management provides the organization to reach its ultimate goal. Management means planning, organizing, staffing, directing and controlling of all financial and non- financial resources of an organization. Different aspect of management practice in EXIM Bank is discussed below.
EXIM Bank has done its planning within the preview of the corporate plan. The overall planning approach in EXIM Bank is top down. Each branch can plan according to the goal imposed by the corporate level. It doesn’t plan independently. And EXIM Bank has a planning division. This department is mainly responsible for the overall planning.
EXIM Bank is organized as per the existing business locations. It has twenty-four branches each of which is a separate entity. Each unit is responsible for own performance and a senior vice president (SVP) followed by Manager Heads each. He is responsible for the performance of their unit.
The recruitment in EXIM Bank is done in two ways. One as a ‘probationary officer’ for the management program and it has a probation period of one year. Another one is non-management level as ‘Trainee Officers’. Probationary officer’ is recruited in officer category and their career path is headed towards different managerial jobs.
4. Directing and controlling
The management approach in EXIM Bank is top down. Information just seeks through lower management layer. Works are designed in such a way that one cannot leave without clearing the tasks as he is assigned for a day. Sitting arrangement in all office is done in a way that the superior can monitor the subordinate all time. Budgeting, rewarding, punishing, etc. are also practiced as control mechanism.
2.9 Human Resource practices in EXIM Bank
Employees are the core resource of any organization. Without them, one cannot run their organization. And human resources approach is concerned with the growth and development of people toward higher level of competency, creativity and fulfillment. It helps employees become better, more responsible person, and then it tries to create a climate in which they may contribute to the limits of their improved abilities. It assumes that expanded capabilities and opportunities for people will lead directly to
improvements in operating effectiveness. Essentially, the human resources approach means that better people achieve better results.
The set-vice rule of EXIM Bank states the recruitment policy of the bank. In general the board of directors determines the recruitment policy of the bank from time to time. The minimum entry-level qualification for any official position other than supportive management is a Bachelors degree.
2.11 EXIM Bank at a Glance:
Name: Export Import Bank of Bangladesh Limited
Essence: Local Bank Global Network
Nature of Business: Banking service and Profit oriented
Registered office: Printers building (5th Floor)
5, Rajuk Avenue
Phone # 9566764, 9566418, 9553872, 9561604
Telex: 642527 EXIMHO BJ
E-mail: [email protected]
Date of Incorporate: June 02,1999
Inauguration of first branch: August 03,1999.
Chairman: Md. Nazrul Islam Mazumder
Secretary: Muhammad Mubrak Hussaein
Advisor: Alamgir Kabir, FCA
Managing Director: Mohammed Lakiotullah
Number of Branches: 28
Total Manpower: 934
Authorized Capital: Taka 1000 million
Paid up Capital: Taka 313.80 million (Up to June 2005)
Reserve Fund: Taka 353.10 million (Up to June 2005)
EXIM Bank at a Glance
Table no- 10
|06.||Investment(Shares & Bonds)||141.90||237.70||154.30||163.30|
|07.||Foreign Exchange Business||2351.83||3461.96||4931.24||7271.70|
|a) Import Business||1315.25||1926.00||2678.10||4143.20|
|b) Export Business||1008.82||1512.46||2241.84||3128.50|
|09.||Loan as a % of total Deposit||79.98%||80.62%||101.33%||91.97%|
|10.||No. of Foreign Correspondent||180||185||200||212|
|11.||Number of Employees||500||627||768||934|
|12.||Number of Branches||16||19||28||28|
|13.||Return on Assets||3.40%||3.15%||3.44%||1.65%|
Banking Activities of EXIM Bank
3.1 General Banking
General banking department is the heart of all banking activities. This is the busiest and important department of a branch, because funds are mobilized, cash transactions are made; clearing, remittance and accounting activities are done here.
Since bank is confined to provide the services everyday, general banking is also known as ‘retail banking’. In EXIM Bank LTD Malibagh Branch, the following departments are under general banking section:
1) Account opening section
2) Deposit section
3) Cash section
4) Remittance section
5) Clearing section
6) Accounts section
3.1.1 Accounts opening Section:
Account opening is the gateway for clients to enter into business with bank. It is the foundation of banker customer relationship. This is one of the most important sections of a branch, because by opening accounts bank mobilizes funds for investment. Various rules and regulations are maintained and various documents are taken while opening an account. A customer can open different types of accounts through this department. Such as:
Al –Wadia (Current) account.
Mudaraba Savings (SB) account.
Mudaraba Short Term Deposit (MSTD)
22.214.171.124 Types of Accounts with Terms and Conditions
Al- Wadia (Current) Account:
Current account is purely a demand deposit account. There is no restriction on withdrawing money from the account. It is basically justified when funds are to be collected and money is to be paid at frequent interval.
Some Important Points are as follows-
- Minimum opening deposit of TK.1000/- is required;
- There is no withdrawal limit.
- No interest is given upon the deposited money;
- Minimum Tk.1000/= balance must always maintain all the time;
Mudaraba Savings (SB) Account:
This deposit is primarily for small-scale savers. Hence, there is a restriction on withdrawals in a month. Heavy withdrawals are permitted only against prior notice. Some Important Points are as follows-
- Minimum opening deposit of Tk.5000/= is required;
- Minimum Tk. 1000/= balance must always maintain all the time;
- Withdrawal amount should not be more than 1/4th of the total balance at a time and limit twice in a month.
- If withdrawal amount exceed 1/4th of the total balance at a time no interest is given upon the deposited money for that month.
Mudaraba Short Term Deposit (MSTD) Account:
Normally various big companies, organizations, Government Departments keep money in MSTD account. Frequent withdrawal is discouraged and requires prior notice. The deposit should be kept for at least seven days to get interest. The interest offered for MSTD is less than that of savings deposit. Interest is calculated based on daily minimum product and paid two times in a year. Interest rate is 4.50%.
126.96.36.199 Account Opening procedure:
|Step 1||The account should be properly introduced by Any one of the following:
|Step 2||Receiving filled up application in bank’s prescribed form mentioning what type of account is desired to be opened|
|Step 4||Authorized Officer accepts the application|
|Step 5||Minimum balance is deposited – only cash is accepted|
|Step 6||Account is opened and a Cheque book and pay-in-slip book is given|
188.8.131.52 Documents required for opening account
- Individual / Joint Account:
- Introduction of the account.
- Two photographs of the signatories duly attested by the introducer.
- Identity (copy of passport).
- Joint Declaration Form (For joint a/c only).
- Employee’s Certificate (in case of service holder).
- Partnership account:
- Introduction of the account.
- Two photographs of the signatories duly attested by the introducer.
- Partnership letter duly signed by all partners (Sign should be similar as stated in Partnership Deed).
- Partnership Deed duly certified by Notary public.
- Registration (If any).
- Updated Trade license.
- Proprietorship account:
- Introduction of the account.
- Two photographs of the signatories duly attested by the introducer.
- Valid copy of Trade License.
- Rubber stamp.
- TIN number certificate.
- Identity (Copy of passport).
- Permission letter from DC/ Magistrate (in case of newspaper)
- Limited company:
- Introduction of the account.
- Two photographs of the signatories duly attested by the Introducer.
- Valid copy of Trade License.
- Board resolution of opening A/C duly certified by the Chairman/Managing Director.
- Certificate of Incorporation.
- Certificate of Commencement (In case of Public limited company).
- Certified (joint stock) true copy of the Memorandum and Article of Association of the Company duly attested by Chairman or Managing Director.
- List of directors along with designation & specimen signature.
- Latest certified copy of Form – xii (to be certified by register of joint stock companies) (In case of Directorship change).
- Rubber Stamp (Seal with designation of each person)
- Certificate of registration (In case of Insurance Company – Obtained from department of Insurance from the Peoples Republic of BD)
- Club / societies account:
- Introduction of the account.
- Two photographs of the Signatories duly attested by the introducer.
- Board Resolution for Opening A/C duly certified by President/ Secretary.
- List of Existing Managing Committee.
- Registration (if any).
- Rubber Stamp.
- Permission letter from Bureau of N.G.O.(In case of N.G.O. A/C).
184.108.40.206 Product Information of EXIM Bank:
|We emphasize on non-fund business and fee based income. Bid bond/ bid security can be issued at customer’s request.Our Bank is posed to extend L/C facilities to its importers / exporters through establishment of correspondent relations and Nostro Accounts with leading banks all over the world.Moreover, Consumers can deposit their Telephone bill of Grameen Phone in all the branches except Motijheel and the consumers of Palli Buddut somity of Gazipur can deposit their electricity bill to Gazipur branch.|
a) Super Savings Scheme:
Savings helps to build up capital and capital is the prime source of business investment in a country. Investment takes the country towards industrialization, which eventually creates wealth. That is why savings is treated as the very foundation of development. To create more awareness and motivate people to save, Exim Bank offers SUPER SAVINGS Scheme.
Terms and conditions of the scheme:
- Any individual, company, educational institution, government organization, NGO, trust, society etc may invest their savings under this scheme.
- The deposit can be made in multiples of Tk 10,000.
- The period of deposit is for six years.
- Any customer can open more than one account in a branch in his name or in joint names.
- If the deposit is withdrawn before six years term, then savings interest rate +1% will be applied before payment is made.
- A depositor can avail loan up to 80% of the deposited amount under this scheme.
- In case of death of the depositor, before the term, the deposit (with interest5 at savings rate +1%) will be given to the nominee.
In case of issuing a duplicate deposit receipt the rules of issuing duplicate receipt of Term Deposit will be applicable.
b) Monthly Saving Scheme:
Savings period and monthly installment rate:
The savings period is for 5, 8, 10 or 12 years. Monthly installment rate is Tk. 500/-, 1,000/-, 2,000/- or 5,000/-
Monthly installment deposit:
- The savings amount is to be deposited within the 10th of every month. In case of holidays the deposit amount is to be made on the following day.
- The deposits may also be made in advance.
- The depositor can have a separate account in the bank from which a standing instruction can be given to transfer the monthly deposit in the scheme’s account.
- In case the depositor fails to make the monthly installment in time, then 5% on overdue installment amount will be charged. The charge will be added with the following month(s) installment and the lowest charge will be Tk. 10/-
- Generally, withdrawal is not advised before a 5-year term, but if it is withdrawn before the above term, then interest will be paid at savings rate. However, no interest will be paid if the deposit is withdrawn within 1 year of opening the account.
- In case the depositor wishes to withdraw between the 5, 8, 10 or 12-year period then full interest will be paid for a completed term and savings rate will applicable for the fractional period.
After three years of savings in this scheme the depositor (if an adult) is eligible for a loan up to 80% of his deposited amount. In that case, interest rates on the loan will be applicable as per prevailing rate at that time.
Reasons for disqualification from this scheme:
- If the depositor fails to pay 3 installments in a row, then he will be disqualified from this scheme and interest will be applicable as mentioned in withdrawal clause.
- If a depositor fails to pay 5 installments in a row after completion of 5-year term, then the Bank reserves the right to close the account and interest will be paid as, mentioned in withdrawal clause.
- In case of death of the depositor the scheme will cease to function. The amount will be handed over to the nominee of the deceased depositor. In case of absence of the nominee the bank will handover the accumulated amount to the successor of the deceased
|Profit rate %||1,000/-||2,000/-||5,000/-|
- A form has to be filled at the time of opening the account. No introduction is needed but attested photographs are advised.
- The depositor can select any of the installment amounts, which cannot be subsequently changed.
- In case of minors the guardians may open and supervise the account in his favor.
- A single person can open more than one account for saving under several installment rates.
- The accumulated deposit with interest will be returned within one month of completion of a term.
- The depositor should notify the bank immediately on any change of address.
- The government tax will be deducted from the interest accumulated in this scheme.
- If necessary, at the request of the depositor, the scheme can be transferred to a different branch of the same Bank. The Bank reserves the right to change the rules and regulations of the scheme as and when deemed necessary.
c) Monthly Income Scheme:
Highlights of the Scheme:
- Minimum deposit Tk. 25,000/-
- Higher monthly income for higher deposit.
- The scheme is for a 5-year period.
Monthly income will be credited to the depositor’s account on the 5th of each month.
|Tk. 25,000/-||Tk. 250|
|Tk. 50,000/-||Tk. 500|
|Tk. 1,00,000/-||Tk. 1000|
|Tk. 2,00,000/-||Tk. 2000|
|Tk. 5,00,000/-||Tk. 5000|
|Tk. 10,00,000/-||Tk. 10,000|
Objectives of the Scheme:
- An account is to be opened by filling up a form.
- The Bank will provide to the customer a deposit receipt after opening the account. This receipt is non-transferable.
- If the deposit is withdrawn before a 5-year term, then saving interest rate will be applicable and paid to the depositor. However, no interest will be paid if the deposit is withdrawn within 1 year of opening the account and Monthly Income paid to the customer will be adjusted from the principal amount.
A depositor can avail loan up to 80% of the deposit amount under this scheme. In this case, interest will be charged against the loan as per Bank’s prevailing rate.
d) Smart Saver:
Smart Saver is a high return investment plan, which helps a customer build up sizeable amount in a period of 5 years. This scheme offers a customer to buy Smart Saver Term Deposit 5 times the invested amount. Smart Saver is a 5-year term deposit scheme.
Terms and conditions:
- One unit of Smart Saver Term Deposit is Tk. 25,000.
- During the tenure of the loan the Term Deposit will be kept in the Bank as security.
- The customer will have to open an account and monthly installment of loan will be debited from the account commencing from 30 days after opening loan account.
- Within the 1st year if the customer fails to repay 3 consecutive installments then only the principal amount of Smart Saver Term Deposit will be encased and the loan will be liquidated inclusive of accrued interest and balance paid to the customer. After completion of 1 year, Savings rate will be added to the principal amount of Smart Saver Term Deposit. In both cases closing charge will be Tk. 500.
- For missed installments on due date customer will be charged Tk. 25 per unit per month.
- In the event of death of the customer, the bank shall be entitled to encash the Term Deposit and adjust the dues first before any refund is made to the nominees/ successors.
The bank reserves the right to amend the rules and rates as and when deemed necessary.
e) Hajj Deposit:
In order to made smooth arrangement of fund for performing Hajj, the bank has introduced this scheme for 5, 8, 10, 15, &20 year’s period.
f) Multiplus Savings:
Savings helps to build up capital and capital is the prime source of business investment in a country. Investment takes the country towards industrialization, which eventually creates wealth. That is why savings is treated as the very foundation of development.
To create more awareness and motivate people to save, Exim Bank offers MULTIPLUS SAVINGS Scheme.
Terms and conditions of the scheme:
- Any individual, company, educational institution, government organization, NGO, trust, society etc may invest their savings under this scheme.
- The deposit can be made in multiples of Tk. 10,000.00
- The period of deposit is 10 years. But the deposit can be withdrawn at any year with interest. As an example, if deposit is withdrawn after completion of 1 year but before 2 years then deposit with interest will be paid for 1 year only. The same rule will apply for other years. If deposit is withdrawn before 1st year then no interest will be paid. Any customer can open more than one account in a branch in his name or in joint names. A deposit receipt will be issued at the time of opening the account.
- The depositor can avail loan up to 80% of the deposit under this scheme.
- In case of issuing duplicate receipt the rules of issuing a duplicate receipt of Term Deposit will be applicable.
- In case of death of depositor before the term, the deposit (with interest at savings rate) will be given to the nominee. In the absence of nominee, the heirs/ successors will be paid on production of succession certificate.
- The nominee may, at his option continue the scheme for the full term.
Some examples are given in the table below. Any amount can be deposited in multiples of Tk. 10,000
3.1.2 Deposit Section
Deposit is the lifeblood of a bank. From the history and origin of the banking system we know that deposit collection is the main function of a bank is accepting deposit. The deposits that are accepted by EXIM Bank like other banks may be classified in to:
1. Demand Deposits
2. Time Deposits
220.127.116.11 Demand deposits:
These deposits are withdrawn able without notice, e.g. current deposits. EXIM Bank accepts demand deposits through the opening of,
a) current account
b) Savings account
c) Call deposits from the fellow bankers
18.104.22.168 Time deposits:
A deposit which is payable at a fixed date or after a period of notice is a time deposit. EXIM Bank accepts time deposits through Fixed Deposit Receipt (FDR), Short Term Deposit (STD) and Bearer Certificate Deposit (BCD) etc.
While accepting these deposits, a contract is done between the bank and the customer. When the banker opens an account in the name of a customer, there arises a contract between the two. This contract will be valid one only when both the parties are competent to enter into contracts. As account opening initiates the fundamental relationship & since the banker has to deal with different kinds of persons with different legal status, EXIM Bank officials remain very much careful about the competency of the customers.
3.1.3 Cash section
Banks, as a financial institution, accept surplus money from the people as deposit and give them opportunity to withdraw the same by cheque, etc. But among the banking activities, cash department play an important role. It does the main function of a commercial bank i.e. receiving the deposit and paying the cash on demand. As this department deals directly with the customers, the reputation of the bank depends much on it. The functions of a cash department are described bellow:
22.214.171.124 Functions of Cash Department:
After the banking hour cash is packed according to the denomination. Notes are counted and packed in bundles and stamped with initial.
Allocation of currency:
Before starting the banking hour all tellers give requisition of money through “Teller cash proof sheet”. The head teller writes the number of the packet denomination wise in “Reserve sheet” at the end of the day, all the notes remained are recorded in the sheet.
3.1.4 Local Remittance
Carrying cash money is troublesome and risky. That’s why money can be transferred from one place to another through banking channel. This is called remittance. Remittances of funds are one of the most important aspects of the Commercial Banks in rendering services to its customers.
126.96.36.199 Types of remittance:
- Between banks and non banks customer
- Between banks in the same country
- Between banks in the different centers.
- Between banks and central bank in the same country
- Between central bank of different customers.
The main ways used by EXIM Bank for remitting funds are
- Payment order ( PO)
- Demand Draft ( DD)
- Telegraphic Transfer (TT)
So the basic three types of local remittances are discussed below
|Points||Pay Order||Demand Draft||TT|
|Explanation||Pay Order gives the payee the right to claim payment from the issuing bank||Demand Draft is an order of issuing bank on another branch of the same bank to pay specified sum of money to payee on demand.||Issuing branch requests another branch to pay specified money to the specific payee on demand by Telegraph /Telephone|
|Payment from||Payment from issuing branch only||Payment from ordered branch||Payment from ordered branch|
|Generally used to Remit fund||Within the clearinghouse area of issuing branch.||Outside the clearinghouse area of issuing branch. Payee can also be the purchaser.||Anywhere in the country|
|Payment Process of the paying bank||Payment is made through clearing||1. Confirm that the DD is not forged one.2.Confirm with sent advice3.Check the ‘Test Code’4.Make payment||1.Confirm issuing branch2.Confirm Payee A/C3.Confirm amount4.Make payment
|Charge||Only commission||Commission + telex charge||Commission +telephone|
188.8.131.52 Test – key Arrangement:
Test key arrangement is a secret code maintained by the banks for the authentication for their telex messages. It is a systematic procedure by which a test number is and the person to whom this number is given can easily authenticate the same test number by maintaining that same procedure.EXIM Bank has test key arrangement with so many banks for the authentication of LC message and for making payment.
184.108.40.206 Commission for PO:
EXIM Bank charges different amount of commission on the basis of Payment order amount. The bank charges for pay order are given in the following chart:
|Total amount of PO||Commission||VAT|
|Up to TK. 10,000.00||TK. 15.00||Tk.3|
|TK. 10,001.00 – TK .1,00,000.00||TK. 25.00||Tk 4|
|TK. 1,00,001.00 – TK. 5,00,000.00||TK. 50.00||Tk 8|
|TK. 5,00,001.00 and above||TK. 100.00||Tk 15|
The Local Remittance section of EXIM Bank Malibagh Branch also issues FDR. They are also known as time deposit or time liabilities. These are deposits, which are made with the bank for a fixed period, specified in advance. The bank need not maintain cash reserves against these deposits and therefore, the bank offers higher of interest on such deposits.
Opening of fixed Deposit Account: The depositor has to fill an account form where in the mentions the amount of deposit, the period for which deposit is to be made and name/names is which the fixed deposit receipt is to be issued. In case of a Joint name EXIM Bank also takes the instructions regarding payment of money on maturity of the deposit. The banker also takes specimen signatures of the depositors. A fixed deposit account is then issued to the depositor acknowledging receipt of the sum of money mentioned there. It also contains the rate of interest and the date on which the deposit will fall due for payment.
Term Deposits: These rates are not negotiable. In this table we can find out the percentage that is given by the bank for specific period of time to the customer.
MTDR for 3 (three) month
|SL no.||Range of amount||Rate of Interest|
MTDR for: 6 (six) month
|SL no.||Range of amount||Rate of Interest|
MTDR for: 12 (twelve) month and above
|SL no.||Range of amount||Rate of Interest|
Payment of interest: It is usually paid on maturity of the fixed deposit. EXIM Bank calculates interest at each maturity date and provision is made on that “miscellaneous creditor expenditure payable accounts” is debited for the accrued interest.
Encashment of FDR: In case of premature FDR< EXIM Bank is not bound to accept surrender of the deposit before its maturity date. In order to deter such a tendency the interest on such a fixed deposit is made cut a certain percentage less the agreed rate. Normally savings bank deposit is allowed.
Loss of FDR: In case of lost of FDR the customer is asked to record a GD (general diary) in the nearest police station. After that the customer has to furnish an Indemnity Bond to EXIM Bank a duplicate FDR is then issued to the customer by the bank.
Renewal of FDR: In EXIM Bank, the instrument is automatically renewed within seven days after the date of its maturity if the customer does not come to encash the FDR. The period for renewal is determined as the previous one.
3.1.5 Clearing Section
Cheques, Pay Order (P.O), Demand Draft (D.D.) Collection of amount of other banks on behalf of its customer are a basic function of a Clearing Department.
Clearing is a system by which a bank can collect customers fund from one bank to another through clearing house.
220.127.116.11 Clearing House:
Clearing House is a place where the representatives of different banks get together to receive and deliver cheque with another banks.
Normally, Bangladesh Bank performs the Clearing House in Dhaka, Chittagong, Rajshahi, and Khulna & Bogra. Where there is no branch of Bangladesh Bank, Sonali bank arranges this function.
18.104.22.168 Member of Clearing House:
EXIM Bank LTD. is a scheduled Bank. According to the Article 37(2) of Bangladesh Bank Order, 1972, the banks, which are the member of the clearinghouse, are called as Scheduled Banks. The scheduled banks clear the cheque drawn upon one another through the clearinghouse.
22.214.171.124 Types of Clearing:
A) Outward Clearing: When the Branches of a Bank receive cheque from its customers drawn on the other Banks within the local clearing zone for collection through Clearing House, it is Outward Clearing.
B) Inward Clearing: When the Banks receive cheque drawn on them from other Banks in the Clearing House, it is Inward Clearing.
126.96.36.199 Types of Clearing House: There are two type of clearing house.Those are:
A) Normal clearing house
B) Same day clearing house
188.8.131.52.1 Normal clearing house:
1) 1st house: 1st house normally stands at 10 a.m. to 11a.m
2) 2nd house: 2nd house normally stands after 3 p.m. and it is known as return house.
184.108.40.206.2 Same day clearing house:
1) 1st house: 1st house normally stands at 11 a.m. to 12 p.m
2) 2nd house: 2nd house normally stands after 2 p.m. and it is known as return house.
- Who will deposit cheque for Clearing: Only the regular customers i.e. who have Savings, Current, STD & Loan Account in the bank can deposit cheque for collection of fund through clearing house.
- Precaution at the time of cheque receiving for Clearing, Collection of LBC, OBC & Transfer:
1) Name of the account holder same in the cheque & deposit slip.
2) Amount in The cheque & deposit slip must be same in words & in figure
3) Date in the cheque may be on or before (but not more than six months back)
clearing house date.
4) Bank & Branch name of the cheque, its number & date in the Deposit slip.
5) Cheque must be signed.
6) Signature for confirmation of date, amount in words / in figure Cutting &
Mutilation of cheque.
7) Cheque should be crossed (not for bearer cheque).
8) Account number in the deposit slip must be clear.
9) Depositor’s signature in the deposit slip.
220.127.116.11 Return house:
Return House means 2nd house where the representatives of the Bank meet after 3 p.m. to receive and deliver dishonored cheque, which placed in the 1st Clearing House.
Cheque may be dishonored for any one of the following reasons:
1) Insufficient fund.
2) Amount in figure and word differs.
3) Cheque out of date/ post- dated.
4) Payment stopped by the drawer/ Payee’s endorsement irregular / illegible / required.
5) Drawer’s signature differs / required.
6) Crossed cheque to be presented through a bank.
7) Other specific reasons not mentioned above.
The dishonor cheque entry in the Return Register & the party is informed about it. Party‘s signature required in the return register to deliver the dishonor cheque. After duration, the return cheque is sent to the party’s mailing address with Return Memo.
If the cheque is dishonored due to insufficiency of funds than EXIM Bank charges. 25/=as penalty.
Responsibility of the concerned officer for the Clearing Cheque:
1) Crossing of the cheque.
2) (Computer) posting of the cheque.
3) Clearing seal & proper endorsement of the cheque.
4) Separation of cheque from deposit slip.
5) Sorting of cheque 1st bank wise and then on branch wise.
6) Computer print 1st branch wise & then bank wise.
7) Preparation of 1st Clearing House computer validation sheet.
8) Examine computer validation sheet with the deposit slip to justify the computer posting
9) Copy of computer posting in the floppy disk.
18.104.22.168 Bills Collection:
In modern banking the mechanism has become complex as far as smooth transaction and safety is concerned. Customer does pay and receive bill from their counterpart as a result of transaction. Commercial bank’s duty is to collect bills on behalf of their customer.
22.214.171.124.1 Types of Bills for Collection
- Outward Bills for Collection (OBC).
- Inward Bills for Collection (IBC).
a) Outward Bills for Collection (OBC)
OBC means Outward Bills for Collection .OBC exists with different branches of different banks outside the local clearing house. Normally two types of OBC:
1) OBC with different branches of other banks
2) OBC with different branches of the same bank
Procedure of OBC:
1) Entry in the OBC register.
2) Put OBC number in the cheque.
3) “Crossing seal” on the left corner of the cheque & “ payees account will be credited on realization “ seal on the back of the cheque with signature of the concerned officer.
4) Despatch the OBC cheque with forwarding.
5) Reserve the photocopy of the cheque, carbon copy of the forwarding and deposit slip of the cheque in the OBC file.
Commission for collection:
|Up to 1 lac ———————————————- 0.15%|
|Above 1 lac———————————————- 0.10%|
|Above 5lac ———————————————- 0.05%|
b) Inward bills for collection (IBC)
When the banks collect bills as an agent of the collecting branch, the system is known as IBC. In this case the bank will work as an agent of the collection bank. The branch receives a forwarding letter and the bill.
Procedure of IBC:
- IBC against OBC: To receive the OBC cheque first we have to give entry in the IBC Register .The IBC number should put on the forwarding of the OBC with date.
- Deposit of OBC amount: OBC cheque amount is put into the “sundry deposit-sundry Creditors account”, prepare debit & credit voucher of it . If the OBC cheque is honored, send credit advice (IBCA) with signature & advice number of the concern branch for the OBC amount.
- If the OBC cheque is dishonored, the concerned branch is informed about it .
- Again place in the clearing house or send the OBC cheque with Return Memo to the issuing branch according to their information.
3.1.6 Accounts Section
Accounts Department is called as the nerve Centre of the bank. In banking business, transactions are done every day and these transactions are to be recorded properly and systematically as the banks deal with the depositors’ money. . Improper recording of transactions will lead to the mismatch in the debit side and in the credit side. To avoid these mishaps, the bank provides a separate department; whose function is to check the mistakes in passing vouchers or wrong entries or fraud or forgery. This department is called as Accounts Department. If any discrepancy arises regarding any transaction this department report to the concerned department.
Besides these, the branch has to prepare some internal statements as well as some statutory statements, which are to be submitted to the Central Bank and the Head Office. This department prepares all these statements.
126.96.36.199 Workings of this department:
- Recording the transactions in the cashbook.
- Recording the transactions in general and subsidiary ledger.
- Preparing the daily position of the branch comprising of deposit and cash.
- Preparing the daily Statement of Affairs showing all the assets and liability of the branch as per General Ledger and Subsidiary Ledger separately.
- Making payment of all the expenses of the branch.
- Recording inters branch fund transfer and providing accounting treatment in this regard.
- Preparing the monthly salary statements for the employees.
- Preparing the weekly position for the branch which is sent to the Head Office to maintain Cash Reserve Requirement (C.R.R)
- Preparing the monthly position for the branch which is sent to the Head Office to maintain Statutory Liquidity Requirement (S.L.R)
- Make charges for different types of duties
- Preparing the budget for the branch by fixing the target regarding profit and deposit so as to take necessary steps to generate and mobilize deposit.
- Checking of Transaction List
- Recording of the vouchers in the Voucher Register.
- Packing of the correct vouchers according to the debit voucher and the credit voucher
3.2 Foreign Exchange
Foreign exchange is the means and methods by which rights to wealth in a country’s currency are converted into rights to wealth in another country’s currency. In banks when we talk of foreign exchange, we refer to the general mechanism by which a bank converts currency of one country into that of another. Foreign Exchange Department (FED) is the international department Bangladesh Bank issues license to scheduled banks to deal with foreign exchange. These banks are known as Authorized Dealers. If the branch is authorized dealer in foreign exchange market, it can remit foreign exchange from local country to foreign countries. So EXIM Bank, Principal branch is an authorized dealer.
There are three kinds of foreign exchange transaction:
To import, a person should be competent to be and importer’. According to Import and Export Control Act, 1950, the Office Of Chief Controller Of Import and Export provides the registration (IRC) to the importer. In an international business environment, buyers and sellers are generally unknown to each other. So seller of goods always seeks security for the payment of his exported goods. Bank gives export guarantee that it will pay for the goods on behalf of the buyer if the buyer does not pay. This guarantee is called Letter of Credit. Thus the contract between importer and exporter is given a legal shape by the banker by ‘Letter of Credit’.
188.8.131.52 Letter of Credit:
A conditional written undertaken issued by the importer’s (applicant) bank to the exporter (beneficiary) at the request of the importer to effect payment up to a stated amount within a stated time period against presentation of complaint documents.
The LC is governed by International Chamber of commerce (ICC) publication no.500.
Parties to the L/C:
|Importer||Who applies for L/C|
|Issuing Bank||It is the bank which opens/issues a L/C on behalf of the importer.|
|Confirming Bank||It is the bank, which adds its confirmation to the credit and it, is done at the request of issuing bank. Confirming bank may or may not be advising bank.|
|Advising or Notifying Bank||It is the bank through which the L/C is advised to the exporters. This bank is actually situated in exporter’s country. It may also assume the role of confirming and / or negotiating bank depending upon the condition of the credit.|
|Negotiating Bank||It is the bank, which negotiates the bill and pays the amount of the beneficiary. The advising bank and the negotiating bank may or may not be the same. Sometimes it can also be confirming bank.|
|Accepting Bank||It is the bank on which the bill will be drawn (as per condition of the credit). Usually it is the issuing bank.|
|Reimbursing Bank||It is the bank, which would reimburse the negotiating bank after getting payment – instructions from issuing bank.|
Steps for import L/C Operation – 8 steps operation
Step 1 – Registration with CCI&E
- For engaging in international, trade, every trader must be first registered with the Chief Controller of Import and Export,
- By paying specified registration fees to the CCI&E. the trader will get [RC/ERC (Import/Export Registration Certificate), to open L/C with bank, this IRC is must.
Step 2 – Determination terms of credit
- The terms of the letter of credit are depending upon the contract between the Importer and exporter. The terms of the credit specify the amount of credit, name and address of the beneficiary and opener, tenor of the bill of exchange, period and mode of shipment and of destination, nature of credit, expiry date, name and number of sets of shipping documents etc
Step 3 – Proposal for Opening of L/C
To have an import LC limit an importer submits an application to department to EXIM Bank. The proposal contains the following particulars:
- Full particulars of the bank account
- Nature of business
- Required amount of limit
- Payment terms and conditions
- Goods to be imported
- Offered security
- Repayment schedule
Step 4 – Application by importer to the banker to open letter of credit
For opening L/C, the importer is required to fill up a prescribed application form provided by the banker along with the following documents:
|1. L/C Application form||7. Authority to debit account|
|2. Filled up LCA form||8. Filled up amendment request Form|
|3. Demand Promissory Note||9. IMP form|
|4. pro-forma invoice||10. Insurance cover note and money receipt.|
|5. Tax Identification number||11. Membership certificate|
|6.Import registration certificate||12. Rate fluctuation undertaking|
Step 5 – Opening of L/C by the bank for the opener:
- Taking filled up application form from the importer.
- Collects credit report of exporter from exporter’s country through his foreign correspondence there.
- Opening bank then issues credit by air mail/TEL EX/SWIFT followed by L/C advice as asked by the opener through his foreign correspondent or branch as the case may be, at the place of beneficiary. The advising bank advises the L/C to the beneficiary on his own form where it is addressed to him or merely hand over the original L/C to the beneficiary if it is so addressed.
Step 6 – Shipment of goods and lodgment of documents by exporter:
- Then exporter ships the goods to the destination of the importer country.
- Sends die documents to the L/C opening bank through his negotiating bank.
Generally the following documents are sent to the Opening Banker with L/C:
|1. Bill of Exchange||6. Packing List|
|2. Bill of Lading||7. Advice Details of Shipment|
|3. Commercial Invoice||8. Pre-shipment Inspection Certificate|
|4. Certification of Origin||9. Vessel Particular|
|5. A certificate stating that each packet contains the description of goods over the packet.||10.Shipment Certificate|
Step 7 – Lodgment of Documents by the opening Bank from the negotiating bank
After receiving the documents, the opening banker scrutinizes the documents. If any discrepancy found, it informs the importer, If importer accepts the fault, then opening bankers call importer retiring the document. At this time many thing can happen. These are indicated in the following:
- Discrepancy found but the importer accepts – no problem occurs in lodgment.
- Discrepancy found and importer not agreed to accept – In this case, importer protest and send back ali the documents to the exporter and request his to make in the specified manner. Here banker is not bound to pay because the documents send by exporter is not in accordance with the terms of L/C.
- Documents are OK but importer is willing to retire the documents – In this case bank is obligated to pay the price of exported goods. Since importer did not pay for bill of exchange, this payment by bank is one kind of credit to the importer and this credit in banking is known as PAD.
- Everything is O.K. but importer fails to clear goods from the port and request bank to clear – In this case banks clear the goods and takes delivery of the same by paying customs duty and sales tax etc. So, this expenditure is debited to the importer’s account and in banking it is called LIM.
Step 8 – Retirement
The importer receives the intimation and gives necessary instruction to the bank for retirement of the import bills or for the disposal of the shipping document to clear the imported goods from the customs authority. The importer may instruct the bank to retire the documents by debiting his account with the bank or may ask for LTR (Loan against Trust Receipt .When the officer thinks fit the application to open a L/C, giving the following entries creates the following charge
184.108.40.206.1 Accounting Procedure in case of L/C Opening:
|Particulars||Debit/ Credit||Charges in Taka|
|L/C Margin A/C||Credit|
|Commission A/C on L/C||Credit||50%|
|VAT||Credit||15% on commission|
220.127.116.11.2 Amendment of L/C:
After opening of L/C some time’s alteration to the original terms and conditions become necessary. These amendments involve changes in,
a. Unit price
b. Extension of validity o the L/C
c. Documentary requirements etc.
Such amendments can be affected only if all the concerned parties agree i.e. the beneficiary, the importer, the issuing bank and the advising bank.
For any amendment the importer must request the issuing bank in writing duly supported by revised indent/Proforma invoice. The issuing bank then advises the required amendment to the advising bank. L/C amendment commission including postage is charged to the clients A/C.
18.104.22.168 Loan against Trust Receipts (LTR)
- Advance against a Trust Receipt obtained from the Customers are allowed to only first class tested parties when the documents covering an import shipment or other goods pledged to the Bank as security are given without payment. However, for such advances prior permission/sanction from Head Office must be obtained,
- The customer holds the goods or their sale-proceeds in trust for the Bank, till such time, the loan allowed against the Trust Receipts is fully paid off.
- The Trust Receipt is a document that creates the Banker’s lien on the goods and practically amounts to hypothecation of the proceeds of sale in discharge of the lien.
22.214.171.124 Loan against Imported Merchandise (LIM)
Advance (Loan) against the security of merchandise imported through the Bank may be allowed either on pledge or hypothecation of goods, retaining margin prescribed on their Landed Cost, depending on their categories and Credit Restriction imposed by the Bangladesh Bank, Bank shall also obtain a letter of undertaking and indemnity from the parties, before getting the goods cleared through LIM Account.
126.96.36.199 Payment Procedure of Import Documents
This is the most sensitive task of the Import Department. The officials have to be very much careful while making payment. This task constitutes the following:
Date of Payment
Usually payment is made within seven days after the documents have been received. If the payment is become deferred, the negotiating bank may claim interest for making delay.
Preparing Sale Memo
A sale memo is made at B.C rate to the customer. As the T.T & O.D rate is paid to the ID, the difference between these two rates is exchange trading. Finally, an Inter Branch Exchange Trading Credit Advice is sent to ID.
Requisition for the Foreign Currency
For arranging necessary fund for payment, a requisition is sent to the International Department.
188.8.131.52.4 Transmission of Message
Message is transmitted to the correspondent bank ensuring that payment is being made.
The goods and services sold by Bangladesh to foreign households, businessmen and Government are called export. The export trade of the country is regulated by the Imports and Exports (control) Act, 1950. There are a number of formalities, which an exporter has to fulfill before and after shipment of goods. The exports from Bangladesh are subject to export trade control exercised by the Ministry Of Commerce through Chief Controller of Imports and Exports (CCI & E). No exporter is allowed to export any commodity permissible for export from Bangladesh unless he is registered with CCI & E and holds valid Export Registration Certificate (ERC). The ERC is required to be renewed every year, The ERC number is to be incorporated on EXP forms and other documents connected with exports. The formalities and procedure are enumerated as follows;
- Obtaining exports LC: To get export LC form exporter issued by the importer.
- Submission of export documents; Exporter has to submit all necessary documents to the collecting bank after shipping of goods
- Checking of export documents; after getting the documents banker used to check the documents as per LC terms
- Negotiation of export documents; If the bank accepts the document and pays the value draft to the exporter and forward the document to issuing bank that is called a negotiating bank. IF the bank does buy the LC then the bank normally acts as collecting bank.
- Realization of proceeds: This is the period when the issuing bank has realized the payment.
- Reporting to the Bangladesh bank: As per instruction by Bangladesh bank the bank has to report to respective department of Bangladesh bank by mentioning latest payment.
- Issue to proceeds realization certificate (PRC): Bank has to issue precedee realization certificate of export LC to the supplier/ exporter for getting cash assistant.
184.108.40.206. Export operation
Bangladesh exports a large quantity of goods and services to foreign households. Readymade textile garments (both knitted and woven). Jute, Jute-made products frozen shrimps, tea are the main goods that Bangladeshi exporters exports to foreign countries. Garments sector is the largest sector that exports the lion share of the country’s export. Bangladesh exports most of its readymade garments products to U.S.A and European Community (EC) countries. Bangladesh exports about 40% of its readymade garments products to U.S.A. Most of the exporters who export through EXIM BANK are readymade garment exporters. They open export L/Cs here to export their goods, which they open against the import L/Cs opened by their foreign importers.
Export L/C operation is just reverse of the import L/C operation. For exporting goods by the local exporter, bank may act as advising banks and collecting bank (negotiable bank) for the exporter,
220.127.116.11.1 As an advising bank
It receives documents from the foreign importer and hands it over to the exporter. Sometimes it adds confirmation on the L/C on request from the Opening Bank. By adding confirmation, it assumes the responsibility to make payment to the exporter.
18.104.22.168.2 As Negotiating Bank
It negotiates the bills and other shipping documents in Favor of the exporter. That is, it collects the proceeds of the export-bill from the drawer and credits the exporter’s account for the same. Collection proceed from the export bill is deposited in the bank’s NOSTRO account in the importer’s country. Sometimes the bank purchases the bills at discount and waits till maturity of the bill. When the bill matures, bank presents it to the drawer to en-cash it.
In our country, Export and Import operation of bank is very much related with one another because of use of Back to Back and maturity of payment for Back-to-Back L/C is set in such that it can be paid out of export proceeds.
22.214.171.124 Back-To-Back L/C
It is simply issued to the clients against an import L/C. Back-to-Back mechanism involves two separate L/C. One is master Export L/C and another is Back-to-Back L/C. On the strength of Master Export L/C bank issues bank to Back L/C. Back-to-Back L/C is commonly known as Buying L/C. On the contrary, Master Export L/C is known as Selling L/C.
126.96.36.199.1 Features of Back to Back L/C
- An Import L/C to procure goods /raw materials for further processing.
- It is opened based on Export L/C.
- It is a kind of Export Finance.
- Export L/C is at Sight but back to Back L/C is at Usance.
- No margin is required to open Back to back L/C
- Application is registered with CCI&E
- Applicant has bonded warehouse license.
- L/C value shall not exceed the admissible percentage of net FOB value of relative Master L/C.
- Use period will be up to 180 days.
- The import L/C is opened for 75% of the value of Export L/C.
- Here L/C issued against the lien of export L/C.
- Arrangements are such that export L/C matures first then out of this export profit, import L/C is paid out.
188.8.131.52.2 Documents Required for Opening a Back-to-back L/C
In EXTM Bank Principal Branch, following papers/ documents are required for opening a back-to-back L/C-
1. Master L/C
2. Valid Import Registration Certificate (IRC) and Export Registration Certificate (ERC)
3. L/C Application and LCAF duly filled in and signed
4. Proforma Invoice or Indent
5. Insurance Cover Note with money receipt
6. IMP Form duly signed
In addition to the above documents, the followings are also required to export oriented garment industries while requesting for opening a back-to-back L/C –
1. Textile Permission
2. Valid Bonded Warehouse License
3. Quota Allocation Letter issued by the Export Promotion Bureau (EPB) in favor of the applicant for quota items.
Checklist of exports L/C:
Following defective points are usually found in the Master L/C. So, the bank officials so much carefully check these points. These are:
- Name of the Advising Bank.
- Name of Transferring Bank
- Form of Doc. credit:
- § Name of Issuing Bank
- § Documentary Credit No. and issuing date
- § Date of shipment
- § Expiry date and place
- Applicant/ for order of/ On Account.
- Beneficiary/ Favoring
- Availability of Credit
- Partial shipment/ Transshipment
- Payment condition /Draft Sight
11. Description of goods:
- Total Qty
- Unit price
12. B/L Clause
13. Reimbursement clause.
14. UCPDC Clause
15. Net FOB value.
184.108.40.206.3 Payment of back to back LC
In case back to back as 60-90-120-180 days of maturity period, deferred payment is made. Payment is given after realizing export proceeds from the L/C issuing bank.
L/C under EDF:
- Exporter development Fund is created by Bangladesh Bank to give encourages to the exporter in Bangladesh.
- Generally Back-to-Back L/C is Usance L/C that is here bill of exchange is payable after some maturity date say 90 or 120 days after the date of acceptance/negotiation. But some foreign seller may require sight payment. Here import L/C matures first. In that case Bangladesh Bank gives me fund to the bank to pay the price of imported goods in favor of the local purchaser of raw materials. When export proceeds come, first Bangladesh Bank loan to the importer is adjusted and remaining part goes to the importer of raw materials.
220.127.116.11 Negotiation of exports documents:
The most common method of financing exporters is negotiation of documents under L/C. It is a post-shipment credit. Here the bank acts as a negotiating bank. After the shipment of the goods, the exporter submits the relative documents to the branch for negotiation. The documents are to submit within the period mentioned in the L/C. after approval of negotiation of the bill the full particulars of the documents are entered into the Foreign bill Purchased (F.B.P) register. The documents are sent to the L/C opening branch with a forwarding letter. The branch claim reimbursement from the issuing bank or from the reimbursing bank, giving clear instructions to credit the proceeds of the bill to the EXIM Bank head office NOSTRO A/C maintained with the named correspondent bank abroad under telex intimation to the Principal branch and Head Office (International Division).
Negotiation stands for payment of value to the exporter against the documents stipulated in the LC. If documents are in order, EXIM Bank purchases (negotiates) the same on the basis of banker- customer relationship. This is known as Foreign Documentary Bill Purchase (FDBP).
If the bank is not satisfied with the documents submitted to EXIM Bank gives the exporter reasonable time to remove the discrepancies or sends the documents to L/C opening bank for collection. This is known as Foreign Documentary Bill for Collection (FDBC)
18.104.22.168 Presentation of export documents for negotiation/Purchase:
After shipment, exporter submits the following documents to EXIM Bank for negotiation.
- Bill of exchange
- Bill of Lading
- Insurance Policy/Certificate
- Certificate of Origin
- Inspection Certificate
- Consular Invoice
- Packing List
- Quality Control Certificate
- G.S.P. certificate.
22.214.171.124 Payment Procedure for FDBP:
(i) After purchasing the documents, EXIM Bank gives the following entries:
FDBP A/C —————————————————- Dr. (at OD sight rate)
Customer A/C ———————————————– Cr.
(Before realization of proceeds)
Bank would realize only postage charges from the exporter.
Subsequently, Bank will send the documents to the L/C opening Bank for payment with a forwarding letter detailing the enclosures. Upon realization of proceeds the Negotiating Bank would pass the following vouchers:
Head Office A/C ——————————————– Dr. (at T.T Clean rate)
FDBP A/C —————————————————- Cr.
Income A/C Profit on Exchange Trading ————- Cr.
(Adjustment after realization of proceeds)
A FDBP Register is maintained for recording all the particulars.
Foreign documentary bills for collection (FDBC):
EXIM Bank forwards the documents for collection due to the following reasons,
- If the documents have discrepancies.
- If the exporter is a new client.
FDBC signifies that the exporter will receive payment only when the issuing bank gives payment. EXIM Bank make regular follow-up with the L/C opening Bank in case of any delay in getting payment.
126.96.36.199 Settlement of Local Bills:
The settlement of local bills is done in the following ways,
- The customer submits the L/C to EXIM Bank along with the documents to negotiate
- EXIM Bank official scrutinizes the documents to ensure the conformity with the terms and conditions.
- The documents are then forwarded to the L/C opening bank.
- The L/C issuing bank gives the acceptance and forwards an acceptance letter.
- Payment is given to the customer on either by collection basis or by purchasing the document.
188.8.131.52 Mode of payment of export bill under L/C:
As per UCPDC 500, 1993 revision there are four types of credit. These are as follows:
1. Sight Payment Credit:
In a Sight Payment Credit, the bank pays the stipulated sum immediately against the exporter’s presentation of the documents.
2. Deferred payment Credit:
In deferred payment, the bank agrees to pay on a specified future date or event, after presentation of the export documents. No bill of exchange is involved. Payment is given to the party at the rate of D.A 60-90-120-180 as the case may be. But the Head office is paid at T.T clean rate. The difference between the two rates us the exchange trading for the branch.
3. Acceptance credit:
In acceptance credit, the exporter presents a bill of exchange payable to himself and drawn at the agreed tenor (that is, on a specified future date or event) on the bank that is to accept it. The bank signs its acceptance on the bill and returns it to the exporter. The exporter can then represent it for payment on maturity. Alternatively he can discount it in order to obtain immediate payment.
4. Negotiation Credit:
In Negotiation credit, the exporter has to present a bill of exchange payable to him in addition to other documents that the bank negotiates.
184.108.40.206 EXIM BANK L/C nature of code:
- Cash LC (sight) Foreign – 01
- Cash LC (usance) Foreign – 02
- Inland back to back LC (sight) – 03
- Inland back to back LC (usance) – 04
- Foreign back to back LC (sight) – 05
- Foreign back to back LC (usance) – 06
- LC under AID/Loan ED – 07
- LC under STA – 08
- Import from EPZ (cash LC) (sight) – 09
- Import from EPZ (cash LC) (usance) – 10
- Import form EPZ (B/B LC) (sight) – 11
- Import from EPZ (B/B LC) (usance) – 12
- Others (LC) cash LC Local sight or usance – 99
220.127.116.11 EXIM Bank back to back LC commission
- Back to Back (Foreign):
1st quarter- 0.50%
(LC issue date to asperity date with in 90 days than 90 days (0.50%+0.30% = 80%)
Back to Back (foreign) other charge:
Data max charge – 1000
Swift – 3000
Stamp – 150
- Back to Back (Local):
1st quarter- 0.50%
(LC issue date to expiry date with in 90 days than 90 days (0.50%+0.30% = 80%).
- Back to Back (Sight Local) :
1st quarter- 0.50%
(LC issue date to expiry date with in 90 days than 90 days (0.50%+0.30% = 80%).
- Export Development fund:
1st quarter- 0.50%
(LC issue date to expiry date with in 90 days than 90 days (0.50%+0.30% = 80%).
- Export processing Zone:
1st quarter- 0.50%
(LC issue date to expiry date with in 90 days than 90 days (0.50%+0.30% = 80%).
- Export processing Zone other charge:
Data max charge – 1000
Courier charge – 200
(LC issue date to asperity date with in 90 days than 90 days (0.50%+0.30% = 80%)
Back to Back (foreign) other charge:
Data max charge – 1000
Swift – 3000
Stamp – 150
3.2.3 Foreign Remittance
This bank is authorized dealer to deal in foreign exchange business. But the Malibagh branch is still not authorized dealer, normal procedure of the AD branch is stated.
As an authorized dealer, a bank must provide some services to the clients regarding foreign exchange and this department provides these services.
The basic function of this department are outward and inward remittance of foreign exchange from one country to another country. In the process of providing this remittance service, it sells and buys foreign currency. The conversion of one currency into another takes place at an agreed rate of exchange, which the banker quotes, one for buying and another for selling. In such transactions the foreign currencies are like any other commodities offered for sales and purchase, the cost (convention value) being paid by the buyer in home currency, the legal tender.
18.104.22.168 Remittance procedures of foreign currency:
There are two types of remittance:
- Inward remittance
- Outward remittance.
a) Inward Foreign Remittance
Inward remittance covers purchase of foreign currency in the form of foreign T.T., D.D, and bills, T.C. etc. sent from abroad favoring a beneficiary in Bangladesh. Purchase of foreign exchange is to be reported to Exchange control Department of Bangladesh bank on Form-C.
b) Outward Foreign Remittance:
Outward remittance covers sales of foreign currency through issuing foreign T.T. Drafts, Travelers Check etc. as well as sell of foreign exchange under L/C and against import bills retired.
22.214.171.124 Working of this department:
- Issuance of TC, Cash Dollar /Pound
- Issuance of FDD, FTT & purchasing, Payment of the same.
- Passport endorsement.
- Encashment certificate.
- F/C Account opening & filing.
- Opening of Export FC retention Quota A/C& maintain.
- Maintenance of ledger of Cash Dollar, FC Deposit A/C & TC.
- Maintain FBC register &follow up FBC.
- Opening of Student file &Maintain.
- Preparation of all related statement, Voucher & posting.
- Preparation of Weekly, Monthly, Yearly Statement for Bangladesh Bank returns timely.
- Attending all related correspondence to other Bank or Institutions.
The remittance process involves the following four modes
|Cash RemittanceDollar/ Pound||Sell||Bank sells Dollar / Pound for using in abroad by the purchaser. The maximum amount of such sell is mentioned in the Bangladesh Bank publication of ‘Convertibility of Taka for Currency Transactions in Bangladesh’.|
|Purchase||Bank can purchase dollar from resident and non – resident Bangladeshi and Foreigner. Most dollars purchased comes from realization of Export Bill of Exchange.|
|Traveler’s Cheque(TC)||Issue of TC||TC is useful to traveler abroad. Customers can encash the TC in abroad from the drawee bank. TC is alternative to holding cash and it provides better security than holding cash in hand.|
|BuyingOf TC||If any unused leaf of TC is surrendered bank buys it from the customer. All payments are made in local currency. Banks generally buy only those TC.|
|Telex Transfer||Outward TT||It remits fund by tested TT via its foreign correspondence bank in which it is maintaining its NOSTRO Account.|
|Incoming TT||It also makes payment according to telegraphic message of its foreign correspondence bank from the corresponding VOSTRO Account.|
|Foreign Demand Draft||Bank issue Demand Draft in favor of purchaser or any other according to instruction of purchaser. The payee can collect it for the drawee bank in which the Issuing bank of Demand Draft holds its NOSTRO Account. Bank also makes payment on DD drawn on this bank by its foreign correspondence bank through the VOSTRO Account.|
In these processes of remittance, bank must have to make profit as a business institution. Profit is made in two ways:
- Commission charged
- Difference in the buying and selling rate.
126.96.36.199 Miscellaneous Services by this Department:
Student File: Students who are desirous to study abroad can open file in the Bank. By opening this file, bank assures the remittance of funds in abroad for study.
F.C Accounts: Foreign Currency Accounts opened in the names of Bangladeshi nationals or persons of Bangladeshi origin working or self – employed abroad can now are maintained as long as the account holders desires.
RFCD: Stands for Resident Foreign Currency Accounts. Persons ordinary resident in Bangladesh may maintain foreign currency accounts with foreign exchange brought in at abroad. Balance of such accounts is freely remittable abroad.
This is the survival unit of the bank because until and unless the success of this department is attained, the survival is a question to every bank. If this section does not properly work the bank it may become bankrupt. This is important because this is the earning unit of the bank. Banks are accepting deposits from the depositors in condition of providing profit to them as well as safe keeping their interest. Now the question may gradually arise how the bank will provide profit to the clients and the simple answer is – Loans & Advance.
Why the bank provides Advances to the Borrowers?
- To earn profit from the borrowers and give the depositors profit.
- To accelerate economic development by providing different industrial as well as agricultural advances.
- To create employment by providing industrial loans.
- To pay the employees as well as meeting the profit groups.
Credit is continuous process. Recovery of one credit gives rise to another credit. Then this process of revolving of funds, bank earns income in the form of profit. A bank can invest its fund in many ways. Bank makes loans and advances to traders, businessmen, and industrialists, Moreover nature of credit may differ in terms of security requirement, disbursement provision, terms and conditions etc
3.3.1 Lending Principle:
The Principle of lending is a collection of certain accepted time tested standards, which ensure the proper use of loan fund in a profitable way and its timely recovery. Different authors describe different principles for sound lending.
- Adequate yield
Safety should get the prior importance in the time of sanctioning the loan. At the time of maturity the borrower may not will or may unable to pay the loan amount. Therefore, in the time of sanctioning the loan adequate securities should be taken from the borrowers to recover the loan. Banker should not sacrifice safety for profitability.
EXIM Bank Ltd- exercises the lending function only when it is safe and that the risk factor is adequately mitigated and covered. Safety depends upon:
- The security offered by the borrower; and
- The repaying capacity and willingness of the debtor to repay the loan with interest.
Banker should consider the liquidity of the loan in time of sanctioning it. Liquidity is necessary to meet the consumer need.
Banker should be careful in the selection of security to maintain the safety of the loan. Banker should properly evaluate the proper value of the security. If the estimated value is less than or equal to loan amount, the loan should be given against such securities. The more the cash near item the good the security, In the time of valuing the security, the Banker should be more conservative.
As a commercial origination, banker should consider the profitability. So banker should consider the interest rate when go for lending. Always Banker should fix such an interest rate for its lending which should be higher than its savings deposits interest rate. To ensure this profitability Banker should consider the prospect of the project
Banker should minimize the portfolio risk by putting its fund in the different fields. If Bank put its entire loan able fund in one sector it will increase the risk. Banker should distribute its loan able fund in different sectors. So if it faces any problem in any sector it can be covered by the profit of another sector.
3.3.2 Reasons for Loan Default
There are many reasons for loan default. The principle reasons are
|Sick managementIntegrity Cooperation|
Financial/Marketing knowledge/ Technical knowledge/Experience Endurance and Judgment
Freedom Openness Growth Stability
Competitiveness Demand Durability
|Sick operationEfficient machinery’s skilled labor/supervision Good labor relation Utilities of raw materials|
Working capital Repayment period Flexible rate of interest Assets matching to liabilities Collateral’s Capital market
Analysis of balance sheet
Lenin risk analysis
3.3.3 Process of Loan
|Application||Applicant applies for the loan in the prescribed form of the bank describing the types and purpose of loan.|
|Sanction||1. Collecting credit information about the applicant to determine the credit worthiness other borrower. Sources of information 2. Personal Investigation, Confidential Report from other bank. Head Office/Branch/Chamber of Commerce. 3. CIB (Central Information Bureau) report from Central Bank. i. Evaluation of compliance with its lending policy. ii. Evaluating the proposed security. 4. LRA is must for the loan exceeding one crore — as ordered by Bangladesh Bank. 5. If everything is in accordance the loan is sanctioned|
|Documentation||Then bank prepare a loan proposal which contains terms and conditions of loan for approval of 11.0- or Manager. Takes the necessary papers and signatures from borrower|
|A loan Account is opened. Where customer A/C———Dr.|
|Respective Loan A/C ————————————-——Cr.|
3.3.4 Types of Loans and Advances
The different types of loans and advances that EXIM Bank offers are as follows:
- Secured Overdraft (SOD)
- Loan against Imported Merchandise (LIM)
- Loan against Trust Receipt (LTR)
- Payment against Document (PAD)
- House Building Loan (general)
- House Building Loan (staff)
- Term Loan
- Loan (general)
- Bank Guarantee
- Export Cash Credit
- Cash Credit (Hypo)
- Cash Credit (Pledge)
- Foreign Documentary Bill Purchase (FDBP)
- Local Documentary Bill Purchase (LDBP)
188.8.131.52 Secured Overdraft (SOD)
It is a continuous advance facility. By this agreement, the banker allows his customer to overdraft his current account up to his credit limits sanctioned by the bank. The interest is charged on the amount, which he withdraws, not on the sanctioned amount. EX1M Bank sanctions SOD against different security.
Advance allowed to individual/ firms against financial obligation (i.e. lien on FDR/DR/PSP/BSP/ insurance policy share etc.) This may or may not be a continuous Credit.
Advances allowed against assignment of work order or execution of contractual works falls under this head. This advance is generally allowed for a definite period and specific purpose i.e. it is not a continuous credit. It falls under the category “others”
Advance allowed for purchasing foreign currency for payment against L/Cs (Back to Back) where the exports do not materialize before the import payment. This is also an advance for temporary period, which is known as export finance and under the category “commercial lending”.
184.108.40.206 LIM (Loan against Imported Merchandise)
Advances allowed for retirement of shipping documents and release of goods imported through L/C taking effective control over the goods by pledge in go downs under Banks lock & key fall under this type of advance. This is also a temporary advance connected with import, which is known as post-import financing, falls under the category “commercial lending”.
220.127.116.11 LTR (Loan against trust receipt)
Advance allowed for retirement of shipping documents, release of goods imported through L/C falls under trust with the arrangement that sale proceed should be deposited to liquidate within a given period- This is also a temporary advance connected with import, which is known as post-import financing, falls under the category “commercial lending”.
18.104.22.168 PAD (payment against document)
Payment made by the Bank against lodgment of shipping documents of goods imported through L/C falls under this head. It is an interim advance connected with import and is generally liquidated against payments usually made by the party for retirement of the documents for release of imported goods from the customer’s authority. It falls under the category “commercial Bank”.
22.214.171.124 House building Loan (General)
Loans allowed to individual/ enterprise construction of house (residential or commercial) fall under this of advance. The amount is repayable by monthly installment within a specified period, advances are known as Loan (HBL-GEN).
House building loan is one of the common credit policies of banking sector. There was only one institution in our country, which is specified in HBFC, Bangladesh House Building Finance Corporation- Now a day, besides this bank many commercial bank and Leasing Company provides house-building loan to the customers.
Interest rate may changes from time to time depending on the market interest rate. From the customer point of view this changes have an adverse impact on the customers. Some times if they have to bear a higher interest on the principal amount which causes a great burden on them.
The Disbursement Procedure or timing of disbursement depends on the client or the progress of work of the construction. The disbursement can be made two or three stages or more depending on the above conditions.
Made of repayment
The loan shall be adjusted by monthly installment basis. The repayment will start from 6 (six) months, of the date of first disbursement (it may change according to the terms and conditions of the agreement).
The land and the construction on the land arc normally given as collateral. It may changes;
The documents to be obtained:
1. DP note
2. Letter of disbursement
3. Letter of installment
4. Letter of guarantee
5. Letter of under taking
6. Letter of agreement
7. Irrevocable general power of attorney
8. Memorandum of deposit of title deed
9. Any other documents if considered
126.96.36.199 House building loan (staff)
Loans allowed to the Bank employees for purchase/construction of house shall be known as Staff Loan (HBFC-STAFP).
188.8.131.52 Term Loan:
EXIM Bank considers the loans, which are sanctioned for more than one year as term loan. Under this facility, an enterprise is financed from the starting to its finishing, i.e. from installation to its production.
184.108.40.206 Loan (general)
Short term and long term loans allowed to individual/ firms / industries for a specific purpose but a definite period and generally repayable by the installments fall under this head. These types of lending are mainly allowed to accommodate financing under the categories.
a) Large and Medium Scale Industries
b) Small and Cottage Industries, Very often term financing for agriculture and others are also included here.
220.127.116.11 Bank guarantee
The bank is very often requested by his customer to issue guarantees on their behalf to a third party – committing to make an unconditional payment of certain amount of money to the third party, if the customer (on whose behalf it gives guarantee) becomes liable, or creates any loss or damage to the third party.
18.104.22.168 Export cash credit (ECC)
Financial accommodation allowed to customer for exports of goods falls under this head is categorized as “Export Credit “. The advances must be liquidated out of export proceeds within 180 days.
22.214.171.124 Cash Credit (Hypothecation)
The mortgage of movable property for securing loan is called hypothecation. Hypothecation is a legal transaction whereby goods are made available to the lending banker as security for a debt without transferring either the property in the goods or either possession. The banker has only equitable charge on stocks, which practically means nothing. Since the goods always remain in the physical possession of the borrower, there is much risk to the bank. So, it is granted to parties of undoubted means with the highest integrity.
126.96.36.199 Cash Credit (Pledge)
Bailer in this case is called the “Pawnor” and the bailee is called the “Pawnee”. In a contract of pledge, Pawnor must deliver the goods pledged to the Pawnee either actually or constructively. Transfer of possession in the judicial sense is essential in the valid pledge. In case of pledge, the bank acquire the possession of the goods or a right to hold goods until the repayment for credit with a special right to sell after due notice to the borrower in the event of non-repayment.
The formalities for Opening cash credit
The intending cash credit holder should submit the following documents and being fulfill properly:
1. Stock report. Rent receipt.
2. Trade license.
3. Up-to-date income tax clearing certificate.
4. Charge documents
5. Letter of continuity
6. Letter of arrangement
7. DP (Demand promissory) note.
8. Letter of guarantee.
9. Letter lien.
10. Limit sanctions advice.
11. Non-encumbrance certificate.
Observing the documents the bank authority prepares a CC proposal from that contains the following information.
• Nature of business.
• Banking with EXIM.
• Transaction with CD account by the client.
• Allied deposit with SB/STD account.
• Number of adjustment(S)(applicable only for renewal of CC)
3.3.5 Lending Authority
As sure proper and orderly conduct of the business of the Bank, the Board of Directors’ will empower the Managing Director and other Executives of the Bank to lend up certain amount under certain terms and conditions at their discretion. The lending officer is broadly categorized as follows:
- Managing Director
- Deputy Managing Director
- Executive vice President asst.
- Senior vice President
- Vice President
- Senior asst. Vice President
- Asst. vice President.
The amount and scope of each Officer lending authority is a function of the amount and extent of authority required by the officer to carry out his/her responsibilities to the Bank and its clients may prudent, effective manner. It must be emphasized that an Officer will not be delegated lending authority only on the basis of his position. In other words, an officer does not automatically get lending authority by virtue of his corporate and/ or functional title. Specified lending authority will be delegated by the Managing Director to various Executives after taking into consideration his proven credit judgment, knowledge and experience. The amount of lending authority approved by the Board for various Executives form the upper limits of the authority that may be delegated to an officer holding corporate title. Each individual lending authority will be delegated to him in writing. The managing Director with the Executive Committee/ Board will review all lending authorities periodically.
CIB: Bangladesh Bank has established within itself a Credit Information Bureau (CIB), which collects credit information from the banks. Banks are required to furnish such information in respect of credit limit of TK. 50,000 and over. They mention the Name of facility, security and charge along with outstanding balance. After consolidating such information in respect of each customer, the central bank supplies to the total limits sanctioned to and the number of banks dealing with a party. Thus the banks can find out if any of their customers is having excessive borrowings from the banking system at any particular time.
3.3.6 Investment classification
Investment classification is a process by which the risk or loss potential associated with the Investment accounts of a bank on a particular date is identified and quantified to measure accurately the level of reserves to be maintained by the bank to provide for the probable loss on account those risky Investment.
Like other banks, all types of Investments of EXIM Bank fall into following four scales:
Unclassified: Repayment is regular.
Substandar: Repayment is stopped or irregular but has reasonable prospect of improvement.
Doubtful debt: Unlikely to be repaid but special collection efforts may result in partial recovery.
Bad/ Loss: Very little chance of recovery.
3.3.7 Creation of a charge for securing Investment
For the safety of Investment, bank requires security from the Investment so that it can recover the Investment by selling security if borrower fails to repay. Creation of a charge means making it available as a cover for an advance. The method of charging should be legal, perfect, and complete. Importance of charging security:
- Protection of profit
- Ensuring the recovery of the money lent
- Provision against unexpected change
- Commitment of the borrower
To make the Investment secured, charging sufficient security on the credit facilities is very important. The banker cannot afford to take the risk of non-recovery of the money lent. EXIM Bank charges the following two types of security, –
Primary security: These are the security taken by the ownership of the items for which bank provides the facility.
Collateral security: Collateral securities refer to the securities deposited by the third party to secure the advance for the borrower in narrow sense. In wider sense, it denotes any type of security on which the bank has a personal right of action on the debtor in respect of the advance.
3.3.9 Modes of charging security
There are different modes of charging the bank exercises security:
Pledge is the bailment of the goods as security for payment of a debt or performance of a promise. A pledge may be in respect of goods including stocks and share as well as documents of title to goods such as railway receipt, bills of lading, dock warrants etc. duly endorsed in bank’s favor.
In case of hypothecation the possession and the ownership of the goods both rest the borrower. The borrower to the banker creates an equitable charge on the security. The borrower does this by executing a document known as Agreement of Hypothecation in favor of the lending bank.
Lien is the right of the banker to retain the goods of the borrower until the Investment is repaid. The bankers’ lien is general lien. A banker can retain all securities in his possession till all claims against the concern person are satisfied.
According to section (58) of the Transfer of Property Act,1882 mortgage is the ‘’transfer of an profit in specific immovable property for the purpose of securing the payment of money advanced or to be advanced by way of Investment, existing or future debt or the performance of an engagement which may give rise to a pecuniary liability”. In this case the mortgagor dose not transfer the ownership of the specific immovable property to the mortgagee only transfers some of his rights as an owner. The banker exercises the equitable mortgage.
Documentation can be described as the process or technique of obtaining the relevant documents. In spite of the fact that banker lends credit to a borrower after inquiring about the character, capacity and capital of the borrower, he must obtain proper documents executed from the borrower to protect him against willful defaults. Moreover, when money is lent against some security of some assets, the document must be executed in order to give the banker a legal and binding charge against those assets. Documents contain the precise terms of granting Investments and they serve as important evidence in the law courts if the circumstances so desire. That’s why all approval procedure and proper documentation shall be completed prior to the disbursement of the facilities.
3.3.11 Credit Disbursement
Having completely and accurately prepared the necessary Investment documents, the Investment officer ready to disburse the Investment to the borrower’s Investment account. After disbursement, the Investment needs to be monitored to ensure whether the terms and conditions of the Investment fulfilled by both bank and client or not.
The administration of the Investment process shall ensure. Compliance with all laws and regulations at both local and global levels including bank policy as set out in this document and the Banks credit manual/ circulars.
Proper analysis of credit proposal is complex and requires a high level of numerical as well as analytical ability and common sense to ensure effective understanding of the concepts and thus common sense. To ensure effective understanding of the concepts and thus to make the overall credit portfolio of the Bank healthy proper staffing of the credit departments shall be done through placement of qualified officials who have got the right aptitude, formal training in finance, credit risk analysis, Bank credit procedures as well its required experience. Where repayment and profit servicing performance of a credit deteriorates shall be identifies at an early state and closely monitored to avoid low losses.
Investment facilities, where appropriate and related security shall be monitored and reviewed by a separate unit unconnected with the credit approval process on a regular basis in order to assess the collect ability of the Investment and effectiveness of the security. This Unit will report to the Managing Director or his designated officer.
Performance of Malibagh Branch
The 23rd branch of the EXIM Bank is the Malibagh, this branch is situated in 484, DIT Road, Malibagh Rail Crossing, Dhaka – 1217.This branch is inaugurated at 27th December 2004.
Highlights of the Branch:
Following are the important statistics of the branch – Malibagh
01. Date of Opening : 27.12.2004
02. Name of previous in charge : Mr.Khorshed Alam
03. Name of present in charge : Mr. Md. Shahjahan
04. Year wise budget & achievement there against:
(TK. Figure in lac) Table 14
|Particulars||2006||As on 15.01.07|
05. Year wise comparative position of the Branch
(TK. Figure in lac & %) Table 15
|SL. No.||Particulars||2006||As on 15.01.07|
|i)||Yield on Investment||13.81%||2.54%|
|ii)||Cost of fund||10.87%||8.24%|
|iii)||Cost of fund with establishment||12.85%||18.77%|
|iv)||Return on asset||1.84%||-0.05%|
|vi)||Number of average voucher||596||428|
|vii)||Number of employees||22||22|
06. Size wise deposit position as on 15.01.07:
(TK. Figure in Lac) Table 16
|Size of Deposit||No. of A/C||Amount of Deposit||Percentage to total deposit|
|Up to Tk. 25,000/-||1424||105.93||2%|
|Tk. 25,000/- to Tk. 1,00,000/-||564||338.72||5%|
|Tk. 1,00,000/- to Tk. 10,00,000/-||809||2831.41||44%|
|Tk.10,00,001/- to Tk. 50,00,000/-||107||2319.54||36%|
|Tk. 50,00,001/- to Tk. 1,00,00,000/-||10||689.57||11%|
|Above Tk. 1,00,00,000/-||1||118.20||2%|
07. Year wise deposit mix of the branch:
(TK. Figure in Lac) Table 17
|Particulars||2005||2006||As on 15.01.07|
|Amount TK. In Lac||% of Total deposit||Amount TK. In Lac||% of Total deposit||Amount TK. In Lac||% of Total deposit|
|Al-Wadia Current deposit||149.51||3%||137.39||2%||203.10||3%|
|Mudaraba Savings Deposit||254.6||6%||461.96||8%||461.76||7%|
|Mudaraba Term Deposit||30602.23||74%||4732.58||77%||4844.10||76%|
|Mudaraba Short Term Deposit||24.93||1%||41.46||1%||39.10||0.50%|
|Deposit Under schemes||624.46||15%||658.02||10%||681.64||11%|
08. Year wise profit position of the Branch:
(TK. Figure in Lac) Table 18
|Income / Expense||2006||As on 15.01.07|
|a) Income- Profit received from Investment||490.57||0.48|
|b) Income from other sources||203.27||0.19|
|a) Profit paid||498.46||1.81|
|c) Other expenditure||31.78||2.31|
09. Size wise Investment position as on 15.01.07:
(TK. Figure in Lac) Table 19
|Size of Investment||No. of A/C||Amount of Deposit||Percentage to total deposit|
|Up to Tk. 25,000/-||8||1.27||0.06%|
|Tk. 25,000/- to Tk. 1,00,000/-||15||8.54||0.40%|
|Tk. 1,00,000/- to Tk. 10,00,000/-||238||1255.21||59%|
|Tk.10,00,001/- to Tk. 50,00,000/-||70||500.13||24%|
|Tk. 50,00,001/- to Tk. 1,00,00,000/-||–||–||–|
|Above Tk. 1,00,00,000/-||2||347.04||16.54%|
10. Human resource position of Malibagh Branch:
|01||Mr. Md. Shahjahan||VP & Manager|
|02||Mr. Md. Shah Alam||SPO|
|03||Mr. Abdus Samad Bhuiyan||Principal Officer|
|04||Mr. Md. Anisur Rahman||Principal Officer|
|05||Mr. Abul Kashem Md. Fazlul Hoque||Principal Officer|
|06||Mrs. A.K.M. Saifullah||Executive Officer|
|07||Mr. Md. Sohrab Hossain||Officer|
|08||Mr. Mohammed Toufiqur Rahman||Officer|
|09||Ms. Israt Jahan Chowdhury||Officer|
|10||Mr. Md. Mahmudul Haque||Officer|
|11||Ms. Morshada Akter||Jr. Officer|
|12||Ms. Sharmin Jahan||Jr. Officer|
|13||Mr. Mohammed Asraful Islam||Jr. Officer|
|14||Ms. Mahbuba Begum||Asst. Officer|
|15||Mr. Md. Mahbubur Rahman||Jr. Officer (Cash)|
|16||Mr. Mohammad Munirul Islam||Asst. Officer (Cash)|
|17||Mr. Mohammad Taslim Uddin||Asst. Officer (Cash)|
|18||Mr. Md. Amin AL Mamun||Trainee Officer (IT)|
|19||Mr. Md. Abdul Mazid Miah||Bank Guard|
|20||Mr. Md. Khorshed Alam||Peon (Casual)|
|21||Mr. Jamilur Rahman||Peon (Casual)|
|22||Mr. Md. Helal Uddin||Tea Boy (Casual)|
Export Import Bank of Bangladesh Limited
Malibagh Branch (15.01.07)
|Al- Wadia Current Deposit||20,310,042.28||Cash in Hanf||7,164,279.00|
|Mudaraba Savings Deposit||46,176,319.38||Murabah Post import||1,680,714.41|
|Mudaraba Short Term Deposit||3910263.39||Murabaha Import Bills||318,750.00|
|Mudaraba Term Deposit||484,410,348.60||Bai Muazzal||90,634,273.51|
|Mudaraba Sundry Deposit||10,603,642.61||Bai Muazzal (WO)||13,402,963.42|
|Mudaraba Dep.Under Scheme||68,164,486.57||Bai Muazzal (Export)||4,031,000.00|
|Bai Muazzal Spl. Deposit (CCH)||6,762,204.66||Wazirat Bill Wakala(ECC)||4,055,000.00|
|DD Payable||1,269,408.00||Izara Bill Baia (LG/HP)||22,591,780.89|
|Pay Order Issued||2,260,760.00||Izara Bill Baia (HB)||14,113,982.97|
|Adjusting A/C credit||28,319.00||Izara Bill Baia (Staff HB)||7,277,600.42|
|Profit payable on Investmen||15,408,212.31||Izara Bill Baia (EIS)||794,094.67|
|Profit payable on Deposit||12,690,682.06||Quard Against MTDR||547,000.00|
|Outward Bills for collection||765,453.00||Quard General (Staff Car)||363,326.00|
|LDBC (Local)||19,980,000.00||Quard (General)||56,261.67|
|Letter of Guarantee ( Local)||25,320,609.90||TR (MIB/MURA/MPI)||6,388,222.28|
|Furniture & Fixture||1,737,518.00|
|Equipment & Machineries||1,914,073.00|
|Stamp in Hand||2,961.00|
|Outward Bills Lodge||765,453.00|
|Letter of Guarantee ( Local)||25,320,609.90|
|EXIM Bank General A/C||448,668,276.79|
|Total Income||66,789.42||Total Expenditure||413,433.94|
|Total Liabilities||718,127,523.18||Total Assets||718,127,523.18|
Findings and conclusion
5.1 SWOT Analysis
SWOT analysis is the detailed study of an organization’s exposure and potential in perspective of its strength, weakness, opportunity and threat. This facilitates the organization to make their existing line of performance and also foresee the future to improve their performance in comparison to their competitors. As though this tool, an organization can also study its current position, it can also be considered as an important tool for making changes in the strategic management of the organization.
- EXIM Bank Limited has already established a favorable reputation in the banking industry of the country. It is one of the leading private sector commercial banks in Bangladesh. The bank has already shown a tremendous growth in the profits and deposits sector.
- EXIM Bank has provided its banking service with a top leadership and management position. The Board of Directors headed by its Chairman Mr. Md. Nazrul Islam is a skilled person in business world. Alamgir Kabir, the Advisor of the bank is a reputed senior chartered accountant having 30 years vast experience in accounts, audit, finance and banking at home and abroad. Mr. Mohammed Lakiotullah as the Managing Director of the bank management team. The top management officials have all worked in reputed banks and their years of banking experience, skill, expertise will continue to contribute towards further expansion of the bank.
- EXIM Bank Limited has already achieved a high growth rate accompanied by an impressive profit growth rate in 2001. The number of deposits and the loans and advances are also increasing rapidly.
- EXIM Bank has an interactive corporate culture. The working environment is very friendly, interactive and informal. And, there are no hidden barriers or boundaries while communicate between the superior and the employees. This corporate culture provides as a great motivation factor among the employees.
- EXIM Bank has the reputation of being the provider of good quality services too its, potential customers.
- The main important thing is that the bank has no clear mission statement and strategic plan. The banks not have any long-term strategies of whether it wants to focus on retail banking or become a corporate bank. The path of the future should be determined now with a strong feasible strategic plan.
- The bank failed to provide a strong quality-recruitment policy in the lower and some mid level position. As a result the services of the bank seem to be Deus in the present days.
- The poor service quality has become a major problem for the bank. The quality of the service at EXIM Bank is higher than the Dhaka Bank, Prime Bank or Dutch Bangla Bank etc. But the bank has to compete with the Multinational Bank located here.
- Some of the job in EXIM Bank has no growth or advancement path. So lack of motivation exists in persons filling those positions. This is a weakness of EXIM Bank that it is having a group of unsatisfied employees.
- In terms of promotional sector, EXIM Bank has to more emphasized on that. They have to follow aggressive marketing campaign.
- All of the branches of EXIM bank are not authorized dealer. But some of the important branches should get the authorized dealership.
- In order to reduce the business risk, EXIM Bank has to expand their business portfolio. The management can consider options of starting merchant banking or diversify into leasing and insurance sector.
- The activity in the secondary financial market has direct impact on the primary financial market. Banks operate in the primary financial market. Investment in the secondary market governs the national economic activity. Activity in the national economy controls the business of the bank.
- Opportunity in retail banking lies in the fact that the country’s increased population is gradually learning to adopt consumer finance. The bulk of our population is middle class. Different types of retail lending products have great appeal to this class. So a wide variety of retail lending products has a very large and easily pregnable market.
- A large number of private banks coming into the market in the recent time. In this competitive environment EXIM Bank must expand its product line to enhance its sustainable competitive advantage. In that product line, they can introduce the ATM to compete with the local and the foreign bank. They can introduce credit card and debit card system for their potential customer.
- In addition of those things, EXIM Bank can introduce special corporate scheme for the corporate customer or officer who have an income level higher from the service holder. At the same time, they can introduce scheme or loan for various service holders. And the scheme should be separate according to the professions, such as engineers, lawyers, doctors etc.
- All sustain multinational banks and upcoming foreign, private banks posse’s enormous threats to EXIM Bank Limited. If that happens the intensity of competition will rise further and banks will have to develop strategies to compete against an on slough of foreign the banks.
- The default risks of all terms of loan have to be minimizing in order to sustain in the financial market. Because default risk leads the organization towards to bankrupt. EXIM Bank has to remain vigilant about this problem so that proactive strategies are taken to minimize this problem if not elimination.
- The low compensation package of the employees from mid level to lower level position threats the employee motivation. As a result, good quality employees leave the organization and it effects the organization as a whole.
5.2 Problems of EXIM Bank
5.2.1 General Banking department
- In general banking department they follow the traditional banking system. The entire general banking procedure is not fully computerized.
- The cash counter I think is congested and the procedure is also traditional
- Lack of variety of services is also a back of the general banking department. The bank provides only some traditional limited services to its clients.
- They are not using data base networking in the Information Technology (IT) Department.
- According to some clients opinion introducer is one of the problems to open an account. If a person, who is new in the city, wants to open account, it is a problem for her/his to arrange an introducer of SB or CD account holder.
5.2.2 Loans and Advances Department
- Political influence is one of the major problems in Bangladesh. Due to political intervention the bank becomes obligated to provide loans in most of the cases, which are rarely recovered. Bank has to face this in convenience situation almost every year.
- The Loans and Advances Department takes a long time to process a loan because the process of sanctioning loan is done manually.
- Sometimes the securities taken against the loan are deliberately overruled by the employees to unlawfully help the client. As a result if the clients fails to repay the bank authority cannot collect even the principal money invested by the selling those assets. It is also a very important factor that leads to loan default.
- CIB report is not readily available from Bangladesh Bank.
5.2.3 Foreign Exchange Department
- In Foreign Exchange Department it is required to communicate with foreign banks frequently and quickly. To make the process easily modern communication media for example e-mail, fax, Internet etc. should be used. But the bank has not so much practice of using these media.
- Modern technical equipment such as computer is not sufficient in Foreign Exchange Department. As a result the exchange process makes delay and it is also complicated.
5.2.4 Other Problem:
- EXIM Bank does not give their attention on advertisement. As a competition market it is too much important for any organization to increasing their advertisements procedure.
As an internee of EXIM Bank Ltd., I have truly enjoyed my internship from the learning and experience viewpoint. I am confident that this three months internship program at EXIM Bank will definitely help me to realize my further carrier in the job market. EXIM bank has converted all of their system and policy of traditional banking to Islamic Banking. I think which a very practical and bold decision is. As there are lots of local and foreign banks in Bangladesh the EXIM Bank Ltd. is promising commercial Bank among them. In this competitive market EXIM Bank has to compete not only the others commercial banks but also with the public Bank. EXIM Bank Ltd. is more capable of contributing towards economic development as compared with other bank. EXIM Bank Ltd. invested more funds in export and import business. It is obvious that the right thinking of this bank including establishing a successful network over the country and increasing resources will be able to play a considerable role in the portfolio of development. Success in the banking business largely depends on effective lending. Less the amount of loan losses, the more the income will be from Credit operations the
more will be the profit of the EXIM Bank Limited and here lays the success of Credit Financing. During the course of my practical orientation I have tried to learn the practical banking activities to realize it with my theoretical knowledge, which I have greathearted and going to acquire from various courses of my BBA program.
- Annual Report of EXIM Bank Bangladesh Ltd. – 2005
- Different types of Brochures of EXIM Bank Ltd.
- Training Material and Book lets from IBTRA [Islami Bank Training and Research Academy]
- A Hand Book of Islami Banking & Foreign Exchange Operation: By Al – Haj Mohammed Haider Ali Miah.
- Annual Report of Islami Bank Bangladesh Ltd. – 2003
- Economic Trends: Statistics Department of BD Bank – Jan 2004
- Articles :
a) Thoughts on Economics : Vo15 No. 3&4 Islamic Banking : Concept, Features and Operational Methodology by Muhammad Mahasin Ali & Md Abdul Awwal Sarker
b) Bank Parikrama : Volume XX1V, No 2 Banking in Bangladesh – Evolu on and the present status by Faruquddin Ahmed
c) Bank Parikrama : Islami Banking in Bangladesh with a brief overview of Operational problems. By M. Azizul Haq
d) Thoughts on Economics Vol. 10 No 3&4. Islamic Banking in Bangladesh : Impact & Prospect by Shah Abdul Hannan
- International Journal of Islamic Financial Services : Vol. 1 No 3
Islamic Banking in Bangladesh : Performance, Problems & Prospects. By Md. Abdul Awwal Sarker.
- Internet edition of Annual Report 2003 of Bangladesh Bank.
AD Authorized Dealer
B/L Bill of Lading
BB Bangladesh Bank
BOE Bill Of Exchange
CCI & E Chief Controller of Import & Export
CFR Cost & Freight
CIB Credit Information Bureau
CIF Cost Insurance & Freight
DD Demand Draft
DP Note Demand Promissory Note
EPB Export Promotion Bureau
EXP Export Form
FC Foreign Currency
FDD Foreign Demand Draft
FOB Free On Board
HS Code Harmonized system of coding
IBC Inward Bills for Collection
IBCA Inter Branch Credit Advice
IBDA Inter Branch Debit Advice
IMP Import Form