Asa University Bangladesh: Thesis Report On "Procedure of Foreign Trade Finance in AB Bank Limited"

Procedure of foreign trade finance
Thesis Report
on
“Procedure of foreign trade finance in AB Bank Limited”
ASA UNIVERSITY BANGLADESH
Prepared For-
Shah Md.Al Emran Sarker
Assistan professor
Faculty of Business
ASA University Bangladesh
Prepared By-
Nuruzzaman Sarker
Program:MBA
Batch:6th
ID: 091-14-0132
Major in Finance
Faculty of Business
Date of Submission 20.06.2011
1
Letter of Transmittal
Shah Md.Al Emran Sarker

Assistan professor
Faculty of Business
Subject:Thesis Report on Procedure of foreign trade finance in AB Bank Limited
Dear Sir:
I am very much pleased to express my heartiest thanks for delegating me this assignment
and glad to inform you that as a part of my MBA degree I have prepared the report on
Procedure of foreign trade finance in AB Bank Limited.
At every segment of making this report, I tried to enhance my knowledge about the
system or work flow of AB Bank Limited. This report will try to give the picture of my
efforts and ability.
It would be very kind of you to examine my thesis work and give me further suggestions
and enhanced my clarification due to future prospects.
Sincerely yours,
Nuruzzaman Sarker
MBA 6th Batch
ID: 091-14-0132
2
ACKNOWLEDGEMENT
I am grateful to many individuals for the completion of the report successfully. ASA
University Bangladesh and AB Bank Limited both provided me with enormous support and
guidance to make my thesis paper worth full.
First of all, I would gladly like to thank the faculty of Business of ASAUB and AB Bank
Limited for giving the opportunity of having a thesis program and allow me to submit my
report based on the Procedure of foreign trade finance AB Bank Limited. I have gathered
an enormous deal of experience while going through the thesis period and preparation of
this report.
I would like to thank to my Supervisor in ASAUB, Shah Md.Al Emran Sarker for his
excellent guidance and support during the preparation of the report. Special thanks go to
my thesis Organization Supervisor in AB Bank Limited, Mr. Md. Altaf Hossain for providing
me support and courage throughout my thesis program and helping me to accumulate
necessary information.
I also like to extend my gratitude to Mrs. Fariza Begum from CTB Department for helping
me by giving the valuable information and on behalf of their company and give me time
to understand the basic banking concept especially foreign trade financial concept of AB
Bank.
And special thanks go to Mr. Mushfiqur Rahman Head Transaction Banking of SCB, for his
support this thesis program became achievable for me. Lastly, my heartiest thanks go to
others who were involved and helped directly and indirectly in completion of thesis and
preparing this report. Without them all these wouldn’t be made possible.
3
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Executive Summary
The report focuses all relevant information that has been collected from AB Bank Limited
Motijheel Branch. This report will a clear idea a about activities and operational strategies
of ABBL, Especially this report focuses on “Procedure of foreign trade finance AB Bank
Limited”.
A service that is provided by the banking is a combination of front and back office. Front
office provides customer services of all kind of banking aspects which has a grate backup
from office where the processing really happens.
An account is a media of personal and companies banking transaction. In the case of an

account, the Bank offers an attractive interest rate. Under Consumer Transaction Banking
(CTB). There are various accounts for banking transaction such as personal account and
Business or company account. The personal accounts are Super-Savers and E-Savers,
Priority. The company accounts are Business plus, Business Premium and Business
Priority.
Basically Bank offers both accounts to the customer. They segment their market and
offers usual. The slogan of Standard Chartered Bank that “Here for good”. The attractive
dimension of Standard Chartered Bank that first friendly service, second, customer basis
solutions thirdly well communication. The bank also pays daily basis interest rate for any
amount. It is also mentionable that the alternative channel is very strong.
The alternative channel are 24 hour phone banking, Auto bills pay free @ 18 offer, Dial a
draft, Family link Add on Cards, Internet Banking, e-Statements, SMS Banking, Greater
Flexibility with Bills pay Machine, Evening Banking & Saturday Banking. Standard
Chartered Bank also has international debit card. The whole sector of Bangladesh is
facing a great challenges and competition due to continuous foreign investment in this
sector. AB Bank is facing sever competition from the other player like HSBC, Dhaka Bank,
DBBL by offering similar and better service ABBL is a promising commercial bank in
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Bangladesh, there are lots of local and foreign banks in Bangladesh. In this competitive
market ABBL has to compete not only with the other commercial banks but also with the
public banks.
The purpose of the study is to do an evaluation of the process and the performance of
the accounts unit of SCB. Consumer transaction banking (CTB) is one of the important
units of ABBL. What I tried to understand the different services rendered by this part and
try to describe the overall transaction banking and how they can improve their services.
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TABLE OF CONTENTS
Preface Page No
Acknowledgement
Chapter 1: Preamble
1.0 Introduction
1.1 Origin of the report
1.2 Objective of the report
1.3 Scope of the Study
1.4 Methodology
Chapter 2: Organization in Focus

2.0 History of AB Bank Limited
2.1 Organizational Structure of ABBL
2.2 A Brief History of Standard Chartered Bank
2.3 Capital Structure of ABBL
2.4 Change of Name and Logo of ABBL.
2.5 Corporate Information of ABBL
2.6 Organizational Hierarchy of ABBL
2.7 Rating Report on ABBL
2.8 Products and Services of ABBL
2.9 Five years at a Glance
2.10 Profitability
2.11 Retail Banking
2.12 SME Business
2.13 International Trade
2.13.1 Import Business
2.13.2 Export Business
2.13.3 Remittance Business
2.14 SWOT Analysis of ABBL
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Chapter 3: Foreign Trade Financing Overall Banking System In BD
3.1 Export Section
3.1.1 Export policy
3.1.2 Export Incentives
3.1.3 Export Procedures
3.1.4 Procedure of collection of Export bill
3.1.5 Export Financing
3.1.6 Export Documents Checking
3.2 Import Section
3.2.1 Import Mechanism
3.2.2 Procedure to Open an L/C
3.2.3 Letter of Credit
3.2.4 Types of Documentary Credits
3.2.5 Parties of Letter of Credit
3.2.6 Some Important Documents of L/C
3.2.7 Form – IMP
3.2.8 Lodgment of Documents
3.2.9 Retirements of Documents
3.3 Foreign Remittances Section (Inward & Outward)
3.3.1 Foreign Inward Remittance
3.3.2 Foreign Outward Remittance
3.3.3 Role of Different Institutes and Instrument Involved in Foreign Remittance
3.3.4 Remittance Transfer Process
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Chapter 4: Foreign Trade Financing By ABBL
4.1 Remittance
4.1.1 Inward Remittance
4.1.2 Miscellaneous Services Given by This Department
4.1.3 Outward Remittance
4.2 Export
4.2.1 Export Procedures
4.2.2 Export Document checking
4.3 Import
4.3.1 Procedure to open an L/C
4.3.2 A Rich Picture of Current L/C System
4.3.3 Lodgment of Documents
4.3.4 Retirement of Documents
4.1.11.(i) Saadiq Deposit Accounts
4.1.11.(ii) Saadiq Current Account
4.1.11.(iii) Saadiq Savings Account
4.1.11.(iv) Saadiq Term Deposits Account
4.1.12 SME Banking
4.1.13 Transaction Service
4.1.14 Business Priority Account
4.1.15 Business Premium Account
4.1.16 Business Plus Account
4.1.17 Straight 2 Bank
4.1.18 Door Step Banking
Chapter 5: Conclusion
5.1 Conclusion
5.2 Findings
5.3 Recommendations
Chapter 6: Bibliography
Chapter 7: Appendix
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Chapter One
Preamble
10
CHAPTER 1
Bank is a financial institution. The economy is mostly depended on the bank since the
bank facilitates the economic and financial transactions. Every industry large, medium &
small is absorbing the facilities provided by the bank relating to its production to export
and also to import the materials.
The Bank will put reliance on market forces and provide increased inducement to savers
to mobilize savings and hold fast to profitability potential to allocate funds to the users of
such sectors of trade, commerce and industries as may be consistent with the socio-
economic objectives of the nation. Bank is a financial intermediary whose prime function
is to move scarce resources in the form of credit from savers to those who borrow for
consumption and investment. In a modern society, banks are very much important to the
economy because of their ability to create money.
Economy of Bangladesh is in the group of world’s most underdeveloped economies. One
of the reasons may be its underdeveloped banking system. Since 1990, Bangladesh
government has taken a lot of financial sector reforming measures for making financial
sector as well as banking sector more sound and transparent, a formulation and
implementation of this reform activities have also been participated by different
international organization like World Bank, IMF etc.
The government of Bangladesh has been pursuing a liberal policy to attract foreign
exchange business because foreign exchange business is considered as a key to economic
development. Countries like Bangladesh are mostly depended on import of raw materials
to export quality goods.
1.1 Origin of the Report
This report is originated from my practical knowledge that I gather from my single
working day.
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The title of my internship report is “PROCEDURE OF FOREIGN TRADE FINANCE OF
AB BANK LTD”
1.2 Objective of the Report
In this report the objective is basically to find out all sorts of practical dealings that are
conducted in case of handling various type of banking activities in each department,
specially foreign exchange department, the theoretical aspects, that is what should be the
procedures and requirements maintained from first to last, and actual practices as well as
the ultimate gain for the bank in conducting financial activities are mainly discussed. So
the purpose and objective of this report can be summarized as follows-
 To depict the Trade service operations and its impact in the economic
development of Bangladesh from the perspective of AB Bank Ltd.
 To know deeply about Import, Export and remittance.
 To identify the role of Trade service operations.
 To identify some problem in foreign operation.
 To identify the factors that must be considered and analyzed in determining
Export and Import policy and procedure.
 To apprise Remittance Service with special emphasis on Remittance department.
 To analyze the Foreign Exchange performance of AB Bank Ltd.
 To identify the problems with Foreign Exchange system and suggest measures.
 To state practical Knowledge gathered in the customer service department about
account opening and others.
 To state practical knowledge about credit appraisal system and credit
management.
1.3 Scope of the Study
The report is highlighting the major functional area of foreign exchange department and
procedure of import, export and remittance.
1.4 Methodology
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Methodology of the study includes direct observations, face-to-face conversation with the
employees of different desk, study of files, circular and practical deskwork. In conducting
this report basically, there have been two types of data and information used. The name
of those two types and their sources to reveal the information for preparing this report
has been showed in a flow chart.
Data & Information
Primary Sources Secondary Sources
 Bangladesh Bank’s Circular  Interview of the employees

 Govt. Act and Order  Relevant books, Research
 Annual Report Of ABBL papers, Newspapers and
 AB Bank Operational Manual Journals.
 AB Bank Website  Personal observation
 Different guidelines of Head  Working experience as an
Office, ABBL internee.
1.5 Limitation of the Report  Internet and Study of selected
reports.
A wholehearted effort was applied to conduct the project paper and to bring a reliable
and fruitful result. In spite of having the wholehearted effort, there exist some limitations,
which acted as a barrier to conduct the conduct the project paper. As the report is
prepared in a short span of time, it could not be made comprehensive and conclusive.
Moreover, the accuracy of the report is largely depended upon the information obtained
from the relevant sources. Greater emphasis was given to collect information from
informal sources like discussion with clients and our officials, which may appear to be an
inherent limitation of the study. The limitations are:
 Sufficient data for prepare a report is not available.
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 The employees of the bank are so much busy so they cannot provide me to give
information about the foreign exchange such as import, export etc.
 As it’s a vast area of business that demands on hand experience for an in depth
analysis.
 Another limitation was the sensitivity of the data. As it is a highly competitive market,
in some cases management were reluctant to give some specific data.
 Limitations of bank’s policy of not disclosing some data and information for obvious
reasons, which could be very much useful. For the sake of confidentiality of the
organization, employees did not disclose much information.
 Lack of comprehension of the respondents was the major problem that created many
confusions regarding verification of conceptual question
 Confidentiality of data was another important barrier that was confronted during the
conduct of this study. All the concerned personnel of the bank have not been
interviewed.
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Chapter Two
Organization in Focus
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CHAPTER 2
2.1 HISTORY OF AB BANK LIMITED:
AB Bank Limited is one of the fasted growing banks among all the commercial banks in
Bangladesh. ABBL bears a unique history of its own. The aim of the company was to
mobilize resources from within and invest them in such way so as to develop country’s
industrial and Trade Sector and playing a catalyst role in the formation of capital market
as well. Its membership with the bourse helped the company to a great extent in this
regard.
AB Bank Limited, the first private sector bank was incorporated in Bangladesh on 31st
December 1981 as Arab Bangladesh Bank Limited and started its operation with effect
from April 12, 1982.
AB Bank is known as one of leading bank of the country since its commencement 28
years ago. It continues to remain updated with the latest products and services,
considering consumer and client perspectives. AB Bank has thus been able to keep their
consumer’s and client’s trust while upholding their reliability, across time.
During the last 28 years, AB Bank Limited has opened 77 Branches in different Business
Centers of the country, one foreign Branch in Mumbai, India and also established a wholly
owned Subsidiary Finance Company in Hong Kong in the name of AB International
Finance Limited. To facilitate cross border trade and payment related services, the Bank
has correspondent relationship with over 220 international banks of repute across 58
countries of the World.
In spite of adverse market conditions, AB Bank Limited which turned 28 this year,
concluded the 2009 financial year with good results. AB attained highest ever
profitability in the history of the Bank’s 28 years of existence. The Banks
consolidated profit after taxes amounted to Taka 336.20 crore which is 46.11% higher
than that of 2008.
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2.2 Organizational Structure of ABBL.
AB Bank Ltd. (ABBL) was incorporated on 31st December 1981, under the company’s act-
1913 as a pioneer commercial bank in the private sector in Bangladesh with its Head
Office in Dhaka. The bank started functioning from 12th April 1982 with the approval of
Bangladesh Bank under the guidelines, rules and regulations given for scheduled
commercial banks operating in Bangladesh. It was initially a joint venture commercial
bank between Bangladeshi sponsors and Dubai Bank Ltd. Dubai (U.A.E.) having
respective share holdings as under:
Bangladesh Sponsors 20%
Bangladeshi General Public 15%
Bangladesh Government 05%
Dubai Bank Ltd. 60%
Table 1: Organizational Structure of AB Bank Ltd
Subsequently, the Union Bank of Middle East Ltd. inherited the shares of Dubai Bank Ltd.
in 1986 and continued as its shareholder till early 1987, when they decided to offload
their investment in Bangladesh. As per provisions of the bank Articles of Associations,
with the approval of Bangladesh Bank and the controller of Capital issue Government of
Bangladesh, the shares (60%) held by the Union Bank of Middle East (UBME),
were purchase by the Bangladeshi Sponsored Directors, raising total shares of holding to
80% of total share capital. However, as desired by the government of Bangladesh the
sponsors. Directors, who acquired the 60% shareholdings of Union Bank of Middle East
(UBME), unclosed 50% of share, purchased by them from UBME to the general public of
Bangladesh raising the public share holdings to the 45% of total share capital of the bank.
The Objective of the bank is to undertake all kinds of banking and foreign exchange
business in Bangladesh as well as abroad through its brandies/correspondents.
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2.3 Capital Structure of ABBL.

The authorized capital of AB Bank Ltd. is taka 600.00 crore divided into 6.00 crore
ordinary shares of taka 100 each, from the existing Tk. 300.00 crore on 05 march,
2009. The total paid up capital rose to taka 2564.00 million at the end of 2009. At
present the composition of the existing shareholders of the bank is as under:
Bangladeshi sponsors/ Directors 50%
Bangladeshi General Public 49.43%
Govt. of Bangladesh 0.57%

Table 2: Capital Structure of ABBL
2.4 Change of Name and Logo of ABBL.
Arab Bangladesh Bank Ltd. was incorporated on 31st December 1981, under the
company’s act 1913. The bank started functioning from 12th April 1982. It is the first
private bank in Bangladesh. Motijheel Branch is the corporate branch of this bank. The
branch has enjoyed its 28th anniversary during this year.
Arab Bangladesh Bank Ltd. Changed its name to AB Bank Limited (ABBL) with effect from
14 November 2007 vides Bangladesh Bank BRPD Circular Letter No-10 dated 22
November 2007. Prior to that Shareholder of the Bank approved the change of name in
the Extra-Ordinary General Meeting held on 4 September 2007. Effective 1 January 2008,
ABBL changed its Logo as well.
Previous Name & Logo New Name & Logo
Arab Bangladesh Bank Ltd. AB Bank Ltd
Table : Name & Logo of ABBL
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2.5 Corporate Information of ABBL.

Legal Form: A public limited company incorporated on 31st December, 1981 under the
Companies Act, 1913 and listed in the Dhaka Stock Exchange Ltd and Chittagong Stock
Exchange Ltd.
Commencement of Business
27th February 1982
Registered Office
BCIC Bhaban, 30-31, Dilkusha C/A
Dhaka 1000, Bangladesh.
Tel: +88-02-9560312
Fax: +88-02-9564122, 23
SWIFT: ABBLBDDH
E-mail: info@abbank.com.bd
Web:
HYPERLINK "http://www.abbank.com.bd" www.abb
ank.com.bd
Name of the Branch where completed the Internship

Program.
AB Bank Ltd.
Corporate Office
Motijheel, Dhaka-1000,
Bangladesh.
Objective
“To exceed customer expectations through innovative financial products & services and
establish a strong presence to recognize shareholders' expectations and optimize their
rewards through dedicated workforce.”
Vision Statement
"To be the trendsetter for innovative banking with excellence & perfection"
Mission Statement
"To be the best performing bank in the country"
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2.6 ORGANIZATIONAL HIERERCHY OF ABBL:
MANAGING DIRECTOR
SENIOR EXE. VICE PRESIDENT
EXECUTIVE VICE PRESIDENT
SENIOR VICE PRESIDENT
VICE PRESIDENT
SENIOR ASST. VICE PRESIDENT
ASSTT. VICE PRESIDENT
SR. PRINCIPAL OFFICER
PRINCIPAL OFFICER
SENIOR OFFICER
OFFICER
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2.7 Rating Report On ABBL:
AB Bank Limited was rate by Credit Rating Agency of Bangladesh Limited (CRAB). CRAB
has affirmed AA3 rating in the long term and ST-1 rating in the short term of AB Bank
Limited based on Audited Financials of 31 December 2009 and other relevant information.
The summery of their ratings is given below:
Entity Rating Entity Rating Definition

June 2009 December 2009
Long Term Long Term Commercial Bank rated AA3 in the long term
belongs to “Very Strong Capacity & Very High
Quality” cohort. Bank has very strong capacity
AA3 AA3 to meet its financial commitments. Bank is
judged to be of high quality and is subject to
low credit risk.
Short Term Short Term Commercial Bank rated ST-1 in the short term
is considered to have highest capacity for
ST-1 ST-1 timely payments of obligations. Bank is
characterized with excellent position in terms
of liquidity, internal fund generation and
access to alternative sources of funds.
Date of Rating 15th June, 2010
Rating Report of AB Bank (Source: AB Bank Annual Report 2009)
RATIONALE
Credit Rating Agency of Bangladesh Limited (CRAB) has assigned “AA3”

(pronounced Double A Three) rating in the Long Term and “ST-1” rating in the
Short Term to the AB Bank Limited (ABBL). The present ratings of ABBL based on
audited financial statements up to 31 December 2009 and other relevant
information. The rating takes into account both qualitative and quantitative
indicators. Qualitative indicators considered include parameters such as corporate
governance practice, effective asset-liability management, good franchise value,
experienced top level management, diversified product line, risk management
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practice, standard IT infrastructure of the Bank etc. However, the ratings are
constrained by moderate asset quality of the Bank. The quantitative analysis
concentrated in financial positions like sound profitability level, adequate capital
adequacy, good liquidity position, moderate market share etc. However, the rating
has concern about increase of bank’s non-performing assets, dependency on high
cost fixed deposits, average loan to deposit ratio etc. Commercial bank rated AA3
in the long term is adjudged to be very strong bank, characterized by good
financials, healthy and sustainable franchises, and a first rate operating
environment. This level of rating indicates very strong capacity for timely payment
of financial commitments, with low likeliness to be adversely affected by
Foreseeable events. Bank rated ST-1 in the short term is characterized by very
satisfactory position in term of liquidity, internal fund generation, and access to
alternative sources of funds.
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2.8 Products and Services Of ABBL:
BUSINESS BANKING TREASURY & FOREIGN

 Term Loan EXCHANGE PRODUCT
 Trade Finance Money Market:
 Trust Receipt Facility  Overnight (Call)
 Working Capital Financing  Repo
 Bill Discounting  SWAP
 Letter of Guarantee  Term
 Loan Syndication &  Reverse Repo
Structured Finance FX Market:
 Spot
 Forward
RETAIL PRODUCTS
 Personal Loan (Unsecured)
 Personal Loan (Secured)
 Home and Office Renovation ISLAMI BANKING
Loan Deposit Product:
 Education Loan  Al-Wadia Current Deposit
 Auto Loan  Mudaraba Term Deposit
 Easy Loan for Executive  Mudaraba Saving Deposit
 Gold grace  Mudaraba Shot Notice Deposit
 Credit Card  Mudaraba Pension Deposit
 Debit Card Scheme
 Mudaraba Quarterly Profit Paying
Scheme
DEPOSIT ACCOUNTS  Mudaraba Probable Millionaire
 Saving Account Scheme
 Current Account  Mudaraba Hajj Deposit Scheme
 Short Term Deposit
 Fixed Term Deposit Investment Product:
 Foreign Currency Account  Bai-Murabha
 NFCD  Bai-Muajjal
 RFCD  Hire-Purchase under Shirkatul
 School Melk(HPSM)
ABBL FOUNDATION SMALL & MEDIUM ENTERPRISE

 Brokerage Service (SME) LOAN
 Choto Puji Rin
 Proshar
SERVICE PRODUCTS  Digun
 24 Hour ATM access  Uddog
 Online Banking  Goti
 Western Union  Awparajita
 Sati 23
 SWIFT
2.9 FIVE YEARS AT A GLANCE: Figure in Million Taka
Particulars 2005 2006 2007 2008 2009
Operating Profit (PBP & T) 755.03 710.69 3325.29 4298.39 5802.35

Net Operating Profit (PBT) 407.45 532.19 2817.99 3600.62 5270.61
Profit after Tax (PAT) 162.45 532.19 1903.49 2300.62 3417.19
Authorized Capital 8000 2000 2000 3000 6000
Paid-up Capital 520 572 743 2230 2564
Statutory & Other Reserves 650 773 1357 2066 3101
Shareholders’ Equity 1526.88 2582.76 4511.59 6722.51 10086.52
Deposits 27361.4 42077.0 53375.3 68560.4
83082.63
4 0 5 7
Loans & Advances 21384.6 31289.2 40915.3 56708.7
72063.26
3 5 5 7
Investments 4061 6281 8885 11396 16369
Fixed Assets 370 1148 2381 2445 2441
Total Assets 33065.4 47989.3 63549.8 84053.6
106912.31
0 4 6 1
Import Business 23151 42860 48441 70041 65956
Export Business 12595 17876 20677 28937 30640
No. of Branches 67 68 71 72 77
No. of Employees 1525 1590 1725 1804 1952
KEY PERFORMANCE INDICATORS
Particulars 2005 2006 2007 2008 2009

Earnings per Share (Taka) 31.26 93.08 256.10 103.18 131.13
Price Earning Ratio (Times) 57.41 43.02 34.50 9.16 8.97
Book Value per Share (Tk.) 269.62 240.96 251.22 293.76 451.74
Return on Equity-ROE (%) 10.64 20.61 42.19 40.96 40.01
Return on Assets-ROA (%) 00.50 01.11 03.41 3.12 3.52
Capital Adequacy Ratio 09.17 09.23 10.75 12.84 13.78
NPL as % of Advances 08.21 04.02 04.31 2.99 2.75
Advance Deposit Ratio (%) 78.16 74.36 76.66 82.71 84.32
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Assets Utilization Ratio (%) 59.19 62.58 67.12 72.60 76.79
2.10 PROFITABILITY:
Key business areas registered growth, which was reflected in the bottom line growth of
over 30 percent in Net Operating Profit. AB bank was also able to off-set “un-
reconciled entries” worth Tk.95.07 crore which would definitely contribute towards
consolidation of financial health of the institution besides bringing in transparency in
deliverables in the future. Bank could also add significantly towards shareholders value
addition as the Earnings per Share (EPS) stood at Tk.131.13 the year-end which is three
times over the last year’s figure at the same cut-off date.
Return on Assets (ROA) at 3.52 percent Return on Equity (ROE) at 40.01 percent and
Asset Utilization Ratio at 76.79 percent underlines the magnitude of ABBL performance
for the year 2009.
In 2009 ABBL diluted some of its investment portfolio thereby generating capital gain
worth Tk.76.09 crore signifying the role and prospects of Portfolio / Investment Banking
wing towards meeting Bank’s strategic needs.
2.11 RETAIL BANKING:
AB Bank started its retail banking operations in the year 1997 (re-launched in the
year 2002) with the setting up of the Consumer Credit Division. Consumer banking in AB
Bank is high volume personal banking and exclusive service to high net worth individuals,
professionals, businessmen among others. Over the years, this particular Division
identified and explored the various avenues of customer lending and developed several
products suiting to the need of the prevailing market. Today AB Bank’s clientele base
comprises over 6700 customers having a portfolio size worth Tk.325.00 crore
approximately. In the year 2009 consumer credit experienced nearly 26 percent growth
over last year and contributed to the bottom line of the Bank.
2.12 SME BUSINESS:
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Small and Medium Enterprise has emerged as the cornerstone on economic development
of Bangladesh in terms of job creation, income generation, and development of forward
and backward industrial linkage besides catering to the local demand mitigation. AB Bank
has always been a SME focused institution as nearly 64 percent of the Loan portfolio are
liked to this particular Business segment. AB is actively present in the following segment
of SME Sector – Agri-Machinery, Animal Feed, Poultry, Dairy Products, Clinics &
Hospitals, Electric Appliances, Fruit Preservation, and Garment Accessories etc.
The core strength of AB in this segment is its widening reach and online Banking
throughout. Judging the potentialities of the Sector a separate SME Business Unit is being
shaped to director banking services at the door step of SME customers.
2.13 INTERNATIONAL TRADE:
International Trade is an important component of foreign exchange business of the Bank.

In 2006, this particular wing of the Bank registered remarkable growth through
strengthening the trade finance areas and providing value added services in this area.
2.13.1 IMPORT BUSINESS:
Import business kept the growth momentum and reaped business worth Tk.65,956
crore at 2009 registering little decrease but at the end of the year it increased business
level. Major import finance were in the areas of capital machinery, industrial raw materials
like edible oil, crude edible oil, textiles, fabrics, milk powder, scrap vessels etc.
Import
70041
65956
48441
42860
23151
2005 2006 2007 2008 2009
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2.13.2 EXPORT BUSINESS:
Export business registered growth in 2009. Total Export business volume reached
Tk.30640 crore showing an increase over the previous year. Concentrations of export
business were in the area of readymade garments, frozen fish and other products.
12595 Export
35000
30000
25000
20000
15000 12595
10000
5000
0
2.13.3 2005 2006 2007 2008 2009
REMITTANCE BUSINESS:
Remittance business reached US$260 million registering growth over 2009. Bank has
drawing arrangements with the Exchange Houses situated at important locations of the
globe depending on the concentration of the expatriate Bangladeshis. AB Bank is
exploring possibility of expanding its network to augment the flow of inward remittance
business through dedicated personalized services to beneficiaries.
27
260
86
63
55
36
2004 2005 2006 2007 2008
28
2.14 SWOT ANALYSIS OF ABBL:
From the SWOT Analysis, it would be easy to figure out the ongoing scenario of the ABBL.
It is possible to find out the strength, weakness, opportunities and threats of ABBL. To
have a better view of the present business practices of ABBL, SWOT Analysis has been
done.
SWOT ANALYSIS
EXTERNAL FACTORS
INTERNAL
FACTORS
STRENGTH WEAKNESSES OPPORTUNITIES THREATS
In SWOT Analysis, two factors act as prime movers.
Internal factors: Which are prevailing inside the concern, which include strength and
weaknesses.
External factors: Which act as opportunity and threat.
Strength
o Very good profit margin earn by the last few years.

o Strong capital back to bring available liquidity.
o Efficient and experienced management team.
o Directors of the bank are not over ruling the decisions made by the
management team.
o Several deposit schemes and financial products offered by the ABBL, so
clients have enough options to invest their money.
o Bank quickly expanding its business all over the country.
o Getting the membership of SWIFT.
29
Weaknesses:
o Performance of the marketing sector is not satisfactory

o Limited geographic coverage.
o Traditional banking system is followed.
o High employee turnover.
o Lack of technological improvement.
Opportunities:
o Client’s reliability on ABBL is growing day by day on the bank.

o ABBL has now the global market reputation.
o ABBL offers many popular schemes to the people and with these schemes
ABBL can raise its deposit promptly.
o Recently ABBL provides credit card facility to the customer.
o Good chance of expanding geographically within Bangladesh.
o Opportunity to take market share from rivals by offering new innovative
products or services.
o Taking advantage of emerging new technologies in banking especially
online ATM, Internet Banking etc.
Threats:
o Very competitive market.

o Political unsuitability affects the banking sector very often.
o In Bangladesh, economy now passing recession this also affects the bank.
o Central Bank’s policies sometimes are not in favor of the private bank’s
policies.
o Entry of new commercial banks, leasing companies and merchant bank etc.
they all are competitors.
o Competitors are offering innovative new products and services.
30
o Competitors are using several new marketing policies to attract the
customer.
Chapter Three
Foreign Trade Financing Overall

Banking System In BD
31
CHAPTER 3
Foreign exchange department is international department of the bank. It deals with

globally and facilitates international trade through its various modes of services. It deals
with globally and facilitates international trade through its various modes of services. It
bridges between importers and exporters. 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 country. This department mainly deals with
foreign currency. This is why this department is called foreign exchange department.
Some national and international laws regulate functions of this department. Among
these, Foreign exchange Act, 1947 is for dealing in foreign exchange business, and import
and export control Act, 1950 is for documentary credits. Governments’ import & export
policy is another important factor for import and export operation of banks. Also UCPDC
600 and URC 522 both of them are very important guideline.
3.1 Export Section:
Creation of wealth in any country depends on the expansion of production and increasing
participation in international trade. By increasing production in the export sector we can
improve the employment level of such a highly populated country like Bangladesh,
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 export 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 ABBL are readymade
garments exporters, They open export L/Cs here to export their goods, which they open
against the import L/C opened by their foreign importers.
32
3.1.1 Export policy:
Export policies formulated by the Ministry of Commerce, GOB provide the overall guideline
incentives for promotion of exports in Bangladesh. Export policies also set out
commodity-wise annual target. It has been decided to formulate these policies to cover a
five-year period to make them contemporaneous with the five-year plans and to provide
the policy regime.
The export-oriented private sector, through their representative bodies and chambers a
consulted in the formulation of export policies and are also represented in the various
export promotion bodies set up by the government.
3.1.2 Export Incentives:
A. Financial Incentives:
 Restructuring of Export Credit Guarantee Scheme

 Convertibility of Taka in current account;
 Exporters can deposit 40% of FOB value of their export earnings in own
account in dollar and pound sterling;
 Export Development Fund;
 Expansion of export credit period from 180 days to 270 days;
 50% tax rebate on export earnings;
 Duty draw back;
 Bonded warehouse facilities to 100% export oriented firms
 Duty free import of capital equipment for 100%export oriented firms;
B. General incentives:
 National Export Trophy to successful exporters

 Training course on external trade;
 Arrangement of international trade fairs, commodity-based exhibitions in the
country and participation in foreign trade fairs.
C. Other incentives:
 Assistance in improvement of quality and packaging of exportable items;

 Simplification of exports procedures.
33
3.1.3 Export Procedures:
The import and export trade in our country are regulated by the Import and Export
(Control) Act, 1950.
Under the export policy of Bangladesh the exporter has to get valid Export registration
Certificate (ERC) from Chief Controller of Import & Export (CCI&E). The ERC is
required to renew every year. The ERC number is to incorporate on EXP forms and other
papers connected with exports.
 Registration of Exporters:
For obtaining ERC, intending Bangladeshi exporters are required to apply to the
controller/ Joint Controller/ Deputy Controller/ Assistant Controller of Imports and
Exports, Dhaka/ Chittagong/ Raishahi/ Mymensingh/ Sylhet/ Comilla/ Badshal/ Bogra/
Rangpur/ Dinajpur in the prescribed form along with the following documents:
 Nationality and Assets Certificate-

 Memorandum and Article of Association and Certificate of Incorporation in case of
Limited Company-,
 Bank Certificate
 Income Tax Certificate
 Trade License etc.
 Securing the Order:
After getting ERC Certificate the exporter may proceed to secure the export order. He
can do this by contacting the buyers directly or through agent.
In this purpose the exporter may get help from:
 License Officer
 Buyers Local Agent
 Export Promoting Organization
 Bangladesh Mission Abroad
 Chamber of Commerce (local & foreign)
 Trade Fair etc
34
 Signing the Contract:
After communicating buyer, exporter has to get contracted (writing or oral) for exporting
exportable items from Bangladesh detailing commodity, quantity, price, shipment,
insurance and marks, inspection and arbitration etc.
 Receiving Letter of Credit:
After getting contract for sale, exporter should ask the buyer for Letter of Credit (L/C)
clearly stating terms and conditions of export and payment.
The following are the main points to be looked into for receiving/ collecting export
proceeds by means of Documentary Credit-.
 The terms of the L/C are in conformity with those of the contract"
 The L/C is an irrevocable one, preferably confirmed by the advising bank;
 The L/C allows sufficient time for shipment and negotiation.
(Here the regulatory framework is UCPDC-600, ICC publication)
Terms and conditions should be stated in the contract clearly in case of other mode of
payment:
 Cash in advance-,
 Open account,
 Collection basis (Documentary/ Clean)
(Here the regulatory framework is URC-522, ICC publication
 Procuring the Materials:
After making the deal and on having the L/C opened in his favor, the next step for the
exporter is to set about the task of procuring or manufacturing the contracted
merchandise.
35
 Shipment Of Goods:
Then the exporter should take the preparation for export arrangement for delivery of
goods as per L/C, prepare and submit shipping documents for Payment/ Acceptance/
Negotiation in due time.
Documents for shipment:
i. EXP form,
ii.ERC (valid),
iii. L/C copy,
iv. Customer Duty Certificate,
v.Shipping Instruction,
vi. Transport Documents,
vii. Insurance Documents,
viii. Invoice
ix. Other Documents,
x.Bills of Exchange (if required) Certificate of Origin,
xi. Inspection Certificate
xii. Quality Control Certificate,
xiii. G.S.P. Certificate,
xiv. Phyto-sanitary Certificate.
 Final Step: Submission of the documents to the bank for negotiation.
36
3.1.4 Procedure of collection of Export bill:
37
3.1.5 Export Financing:
Financing exports constitutes an important part of a bank's activities. Exporters require

financial services at four different stages of their export operation. During each of these
phases exporters need different types of financial assistance depending on the nature of
the export contract.
 Pre-shipment credit
 Post-shipment credit
Pre-shipment credit:
Pre-shipment credit, as the name suggests, is given to finance the activities of an

exporter prior to the actual shipment of the goods for export. The purpose of such credit
is to meet working capital needs starting from the point of purchasing of raw materials to
final shipment of goods for export to foreign country. Before allowing such credit to the
exporters the bank takes into consideration about the credit worthiness, export
performance of the exporters, together with all other necessary information required for
sanctioning the credit in accordance with the existing rules and regulations. Pre-shipment
credit is given for the following purposes-
 Cash for local procurement and meeting related expenses.

 Procuring and processing of goods for export.
 Packing and transporting of goods for export.
 Payment of insurance premium.
 Inspection fees.
 Freight charges etc.
An exporter can obtain credit facilities against lien on the irrevocable, confirmed and
unrestricted export letter of credit in form of the followings-.
 Export cash credit (Hypothecation)

 Export cash credit (Pledge)
 Export cash credit against trust receipt.
 Packing credit.
 Back to back letter of credit.
 Credit against Red-clause letter of credit.
38
Export cash credit (Hypothecation):
Under this arrangement, a credit is sanctioned against hypothecation of the raw

materials or finished goods intended for export. Such facility is allowed to the first class
exporters. As the bank has got no security in this case, except charge documents and
lien on exports UC or contract, bank normally insists on the exporter in furnishing
collateral security. The letter of hypothecation creates a charge against merchandise in
favor of the bank. But neither r the ownership nor the possession is passed to it.
Export cash Credit (Pledge):
Such Credit facility is allowed against pledge of exportable goods or raw materials. In this
case cash credit facility are extended against pledge of goods to be stored in the god own
under bank's control by signing letter of pledge and other pledge documents. The
exporter surrenders the physical possession of the goods under banks effective control as
security for payment of bank. In the event of failure of the exporter to honor his
commitment, the bank can sell the pledged merchandise for recovery the advance.
Export Cash Credit against Trust Receipt:
In this case, credit limit is sanctioned against trust receipt (TR). Here also unlike
pledge, the Exportable goods remain in the custody of the exporter. It is required to
execute a stamped export trust receipt in favor of the bank, he holds wherein a
declaration is made that goods purchas4ed with financial assistance of bank in trust for
the bank. This type of credit is granted when the exporter wants to utilize the credit for
processing, packing and rendering the goods in exportable condition and when it seems
that exportable goods cannot be taken into bank's custody. This facility is allowed only to
the first class party and collateral security is generally obtained in this case.
Packing Credit:
Packing Credit is essentially a short-term advance granted by a Bank to an exporter for

assisting him to buy, process, manufacture, pack and shipment of the goods. Generally
for movement of goods from the hinterland areas to the pots of shipment the Banks
provide interim facilities by way of packing credit.
39
This type of credit is sanctioned for the transitional period starting from dispatch of goods
till the negotiation of the export documents. Practically except for single transaction,
most of the pre-shipment credits are allowed in the form of limits duly sanctioned by Bank
in favor of regular exporters for a particular period. The drawings are required to be
adjusted fully once within a period of 3 to 6 months. Suiting to the breed and nature
of export, sometimes an exporter may also be allowed to avail a combined Cash Credit
and Packing Credit limit with fixed ceiling on revolving basis. But in no case the borrower
would be allowed to exceed individual credit limit fixed for the purpose. The drawings
under Export Cash Credit limits are generally adjusted by the drawing in packing credit
limit, which is, in turn liquidated by the negotiation of export documents.
Charge Documents for P.C.
Banker should obtain the following charge documents duly stamped prior to
disbursement:
 Demand Promissory Note

 Letter of Arrangement
 Letter of Lien of Packing Credit (On special adhesive stamp)
 Letter of Disbursement
 Packing Credit Letter
Additional Document for P.C.
 Letter of Partnership along with Registered Partnership Deed in case of Partnership

Accounts.
 Resolution of the Board of Directors along with Memorandum & Articles of
association in case of Accounts of Limited Companies. In case of Corporation,
Resolution of the Board Meeting along with Charter.
 Personal Guarantee of all the Partners in case of Partnership Accounts and a=of all
the Directors in case of Limited Companies.
 An undertaking from the Directors of the Public Limited Company to obtain prior
clearance from the Bank before declaring any intend/final dividend.
40
Back to Back Letter of Credit (BTB):
Bangladesh is a developing country. After receiving order from the importer, very
frequently exporters face problems of scarcity of raw material. Because of some raw
materials are not available in the country. These have to be collected from abroad. In
that case, exporter gives lien of export L/C to bank as security and opens an L/C against
it for importing raw materials. This L/C is called Back To Back L/C. In back to back L/C,
ABBL keeps no margin.
Sometimes there is provision in the export UC that the importer can use the certain
portion of the export L/C amount for importing accessories that are necessary for the
making of the product. Only in that case, BTB is opened.
Payment of Back to Back LC:
Client gives the payment of the BTB L/C after receiving the payment from the importers.
But in some cases, client sells the bills to the ABBL. But if there is discrepancy, the ABBL
sends it for collection.
In case of BTB L/C, ABBL gives the payment to the beneficiary after receiving the
payment from the UC of the finished product (i.e. exporter). Bank gives the payment
from DFC Account (Deposit Foreign Currency Account) where Dollar is deposited in
national rate.
For BTB L/C, opener has to pay interest at LIBOR rate (London Inter Bank Offering
Rate). Generally LIBOR rate fluctuates from 3% to 5%.
A schedule named Payment Order; Forwarding Schedule is prepared while making the
payment. This schedule is prepared when the payment of UC is made. This schedule
contains the followings:
 Reference number of the beneficiary's bank and date.

 Beneficiary's name.
 Bill value.
 Payment order number and date.
 Equivalent amount in Taka.
41
Advance against Red-clause Letter of Credit:
Under Red clause letter of credit, the opening bank authorizes the Advising
Bank/Negotiating Bank to make advance to the beneficiary prior to shipment to enable
him to procure and store the exportable goods in anticipation of his effecting the
shipment and submitting a bill under the L/C. as the clause containing such authority is
printed in red ink, the L/C is called Red clause and Green clause respectively. Though it is
not prohibited, yet very rare in Bangladesh.
Post Shipment Credit:
This type of credit refers to the credit facilities extended to the exporters by the banks
after shipment of the goods against export documents. Necessity for such credit arises as
the exporter cannot afford to wait for a long time for without paying
manufacturers/suppliers. Before extending such credit, it is necessary on the part of
banks to look into carefully the financial soundness of exporters and buyers as well as
other relevant documents connected with the export in accordance with the rules and
regulations in force. Banks in our country extend post shipment credit to the exporters
through-.
 Negotiation of documents under L/C

 Foreign Documentary Bill Purchase (FDBC)
 Advances against Export Bills surrendered for collection;
Negotiation of documents under L/C:
The exporter presents the relative documents to the negotiating bank after the shipment
of the goods; a slight deviation of the documents from those specified in the L/C may
raise an excuse to the issuing bank to refuse the reimbursement of the payment already
made by the negotiating bank. So the negotiating bank must be careful prompt,
systematic and indifferent while scrutinizing the documents relating to the export.
Foreign Documentary Bill Purchase (FDBC):
Sometimes the client submits the bill of export to bank for collection and payment of the
BTB L/C. In that case, bank purchases the bill and collects the money from the exporter.
42
ABBL subtracts the amount of bill from BTB and gives the rest amount to the client in
cash or by crediting his account or by the pay order.
For this purpose, ABBL maintains a separate register named FDBC Register. This register
contains the following information:
 Date
 Reference number (FDBC)
 Name of the drawer
 Name of the collecting bank
 Conversion rate
 Bill amount both in figure & in Taka.
 Export form number
 Export L/C number
Advances against Export Bills surrendered for collection:
Banks generally accept bills for collection of proceeds when they are not drawn under an
L/C or when the documents, even though drawn against an L/C contain some
discrepancies. The bank generally negotiates bills drawn under L/C, without any
discrepancy in the documents, and the exporter gets the money from the bank
immediately. However, if the bill is not eligible for negotiation, the exporter may obtain
advance from the bank against the security of export bill. In addition to the export bill,
banks may ask for collateral security like a guarantee by a third party and
equitable/registered mortgage of property.
3.1.6 Export Documents Checking:
General verification: -
 L/C restricted or not.

 Exporter submitted documents before expiry date of the credit.
 Shortage of documents etc.
Particular verification:
 Each and every document should be verified with the L/C.
43
3.2 Import Section:
Imports of goods into Bangladesh is regulated by the ministry of commerce and industry
in terms of the Import and Export (Control) Act, 1950, with import policy orders
issued by annually, and Public Notices issued from time to time by the office of the Chief
Controller of Import and Export (CCI & E). Through the process of import some vital but
which are inadequate in our country products are imported to meet the local needs of the
people.
3.2.1 Import Mechanism
To import, a person should be competent to be an 'importer. According to Import and

Export (Control) Act, 1950, the officer of Chief Controller of Import and Export provides
the registration (IRC) to the importer. After obtaining this, the person has to secure a
letter of credit authorization (LCA) from Bangladesh Bank. And then a person becomes a
qualified importer. His requests o instructs the opening bank to open an L/C.
Import may be allowed under the following sources of finance:
(a) Cash-
i. Cash foreign exchange (balance of the foreign exchange reserve of

Bangladesh Bank;
ii. Foreign currency accounts maintained by Bangladeshi National working/living

abroad.
(b) External economic aid.
(c) Commodity exchange.
Procedures:-
An importer is required to have the following to import through ABBL-
i. Applicant has to apply for opening LC by a prescribed form.

ii. Applicant has to submit the Letter of Indent or Letter of Proforma Invoice.
44
Letter of Indent: Many sellers have their agent in seller’s country. If the
contract of buying is made between the buyers and the agent of the sellers
then Letter of Indent is required.
Letter of Proforma Invoice: If the contract is made directly between the
buyer and the sellers then Letter of Proforma Invoice is needed.
iii. Applicant has to submit IRC (Inventors Registration Certificate). It is a
certificate being renewed every year. This certificate is necessary if the
contract is made between the buyers and the agents of the sellers. IRC is
of two types - COM and IND. COM is given for commerce purpose and
IND is given for industrial purpose.
iv. Applicant has to submit LCAF (Letter of Credit Authorization Form).
v. Applicant has to submit insurance document.
vi. Applicant has to prepare FORM-IMP.
vii. Recently, there has been made a provision to give a certificate named TIN
(Tax Payers Identification Number).Taxation department issues this
certificate.
viii. Then after proper scrutiny bank will open an L/C.
While opening L/C, importer must keep certain percentage of the document value in the
bank as margin.
3.2.2 Procedure to Open an L/C:-
To open an L/C, the requirements of an importer are:
 He must have an account in ABBL.

 He must have Importers Registration Certificate (IRC).
 Report on past performance with other bank. ABBL collects this report from
Bangladesh Bank.
 CIB (Credit Information Bureau) report from Bangladesh Bank.
 A proposal approved by the meeting of executive committee of the bank. It is
necessary only when the L/C amount is small or there is no limit.
 If the L/C amount is large or there is a limit, then an approval from Bangladesh Bank
is needed. Usually this approval is needed for amount more than one crore.
45
3.2.3 Letter of Credit:
Foreign trade can be easily defined as a business activity, which crosses national
boundaries. These may be between parties or government ones. Trade among nations is
a common occurrence and normally benefits both the exporters and importers.
Foreign trade can usually be justified on the principle of comparative advantage.

According to this economic principle, it is economically profitable for the country to
specialize in production of that commodity in which the producer country has the grater
comparative advantage and to allow the other country to produce that commodity in
which it has the lesser comparative advantage. It includes the spectrum of goods,
services, investment, technology transfer etc. These trades among various countries calls
for lose linkage between the parties dealing in trade. The banks, which provide such
transactions, are referred to as rendering international banking operations. International
trade demands a flow of goods from seller to buyer and of payment from buyer to seller.
And this flow of goods and payment are done through letter of credit (LC).
 Letter of Credit:
Letter of credit (L/C) can be defined as a "Credit Contract" whereby the buyer’s bank
is committed (on behalf of the buyer) to place an agreed amount of money at the
seller’s disposal under some agreed conditions. Since the agreed conditions include,
amongst other things, the presentation of some specified documents, the letter of credit
is called Documentary Letter of Credit. The Uniform Customs & Practices for
Documentary Credit (UCPDC) published by international Chamber of Commerce
(1993) Revision; Publication No. 600 defines Documentary Credit:
Any arrangement however named or described whereby a bank (the "issuing bank")
acting at the request and on the instructions of a customer (the "Applicant") or on its
own behalf.
 To make a payment or to the order of a third party(the beneficiary) or is

to accept and pay bills of exchange(Drafts)drawn by the beneficiary, or
 Authorizes another bank to effect such payment or to accept and pay such
bills of exchange (Drafts)
46
3.2.4 Types of Documentary Credits
Documentary Credits may be either:
(i) Revocable or, (ii) Irrevocable.
Revocable credit: A revocable credit is a credit that can be amended or cancelled by

the issuing bank at any time without prior notice to the seller.
In case of seller (beneficiary), revocable credit involves risk, as the credit may be
amended or cancelled while the goods are in transit and before the documents are
presented, or although presented before payments has been made. The seller would
then face the problem of obtaining payment on the other hand revocable credit gives the
buyer maximum flexibility, as it can be amended or cancelled without prior notice to the
seller up to the moment of payment buy the issuing bank at which the issuing bank has
made the credit available, In the modern banking the use of revocable credit is not
widespread.
Irrevocable credit: An irrevocable credit constitutes a definite undertaking of the

issuing bank (since it can not be amended or cancelled without the agreement of all
parties thereto), provided that the stipulated documents are presented and the terms and
conditions are satisfied by the seller. This sort of credit is always preferred to revocable
letter of credit.
Sometimes, Letter of Credits is marked as either 'with recourse to drawee@ or 'without

recourse to drawer'.
3.2.5 Parties for Letter of Credit:
The parties are:
 The Issuing Bank,

 The Confirming Bank, if any, and
 The Beneficiary.
47
Other parties that facilitate the Documentary Credit are:
 The Applicant,
 The Advising Bank,
 The Nominated Paying/ Accepting Bank, and
 The Transferring Bank, if any.
1. Importer - Seller who applies for opening the L/C.

2. Issuing Bank - It is the bank which opens/issues a L/C on behalf of the importer.
3. Confirming Bank - It is the bank, which adds its confirmation to the credit and it is
don at the request of issuing bank. Confirming bank may or may not be advising
bank.
4. Advising / Notifying Bank - is the bank through which the L/C is advised to the
exporters. This bank is actually situated in exporter’s country. It may also assume
the role of confirming and / or negotiating bank depending upon the condition of the
credit
5. Negotiating Bank - is the bank, which negotiates the bill and pays the amount of
the beneficiary. The advising bank and the negotiating bank may or may not be the
same. Sometimes it can also be confirming bank.
6. Paying / Accepting Bank - is the bank on which the bill will be drawn (as per
condition of the credit). Usually it is the issuing bank.
7. Reimbursing bank - is the bank, which would reimburse the negotiating bank after
getting payment - instructions from issuing bank.
3.2.6 Some Important Documents of L/C:
Forwarding: Forwarding is the letter given by the advising bank to the issuing bank.
Several copies are sent to the issuing bank. All copies including original should be kept
in the bank.
Bill of Exchange: According to the section 05, Negotiable Instruments (NI) Act-
1881, A "bill of exchange" is an instrument in writing containing an unconditional order
signed by the maker, directing a certain person to pay [on demand or at fixed or
determinable future time] a certain sum of money only to or to the order of a certain
48
person or to the bearer of the instrument. It may be either at sight or certain day sight.
At sight means making payment whenever documents will reach in the issuing bank.
Invoice: Invoice is the price list along with quantities. Several copies of invoice are
given. Two copies should be given to the client and the other copies should be kept in
the bank. If there is only one copy, then its photocopy should be kept in the bank and
the original copy should be given to the client. If any original invoice contains the
custom's seal, then it cannot be given to the client.
Packing List: It setter describing the number of packets and there size. If there are
several copies, then two copies should be given to the client and the remaining should
be kept in the bank. But if there is only one copy, then the photocopy should be kept in
the bank and the original copy should be given to the client.
Bill of Lading: Bill of Lading is the bill given by shipping company to the client. Only
one copy of Bill of Lading should be given to the client and the remaining copy should
be kept in the bank.
Certificate of Origin: Certificate of origin is a document describing the producing

country of the goods. One copy of the certificate of origin should be given to the client
and the remaining copy should be kept in the bank. But if there is only one copy, then
the photocopy should be kept in the bank and the original should be given to the client.
Shipment Advice: The copy mentioning the name of the insurance company should be
given to the client and the remaining copies should be kept in the bank. But if only one
copy is given, then the photocopy should be kept in the bank and the original copy
should be given to the bank.
3.2.7 Form - IMP
This form is prepared for maintaining account of the money, which goes out side the
country for the purpose of payment. This form is required by Bangladesh Bank. It is an
application for permission under 4/5 of the Foreign Exchange Regulation Act,
1947 to purchase foreign currency for the payment of import.
49
IMP - FORM has four copies:
 Original copy for Bangladesh Bank.

 Duplicate copy for authorized dealers. It is issued for processing Exchange Control
Copy of bill of entry or certified invoice.
 Triplicate copy for authorized dealers' record.
 Quadruplicate copy for submission to the bank in case of imports where
documents are retired.
Following documents are sent with FORM-IMP:
 Letter of Credit Authorization Form(LCAF),

 One copy of invoice,
 Indent copy / proforma invoice.
The following Information is included in the FORM-IMP:
 Name and address of the authorized dealer,

 Amount of foreign currency in words and figures,
 Names and address of the beneficiary,
 L/C Authorization Form number and date,
 Registration number of L/C Authorization Form with Bangladesh Bank, and
 Description of the goods.
Accounting Treatment for Opening LIC.
For opening L/C, importer will apply to the issuing bank. In that case, importer is called
applicant or opener. After opening an L/C bank will create a contingent liability. In that
case, the accounting posting will be the following-.
Customers liability D
r.
Contingent Liability
Cr.
Generally L/C is opened against some margin.
50
 While paying the money by the issuing bank, issuing bank will reverse the above entry
and the entry will be-
Contingent Liability D
r.
Customers Liability C
r.
 Then the issuing bank will give another entry-
Payment Against Document

(PAD) Dr.
AB General Account C
r.
Exchange Gain C
r.
PAD will debit because the bank will pay the money against some documents’ General
Account is a miscellaneous account. It will be credited because by this entry ABBL
creates a liability. He has to pay the money to the advising bank. And the gain made by
the transaction is shown at Exchange Gain Account.
All these entries are made after receiving some documents from the exporters. The
above procedure is called Lodging.
After giving the above entry, ABBL will inform the clients for collecting the documents
from the bank.
 Importers will pay the due to the bank and collects the documents. In that case, the
entry will be –
Party Account Dr.

PAD Account Cr.
After opening the L/C, ABBL (issuing bank) must receive the documents for any other
proceedings. These documents are ---
i. Bill of Lading,
51
ii. Invoice,
iii. Packing List,
iv. Country of Origin.
3.2.8 Lodgment of documents:
After receiving the documents from the exporters, at first ABBL write it in the PAD
Registrar. PAD Register contains date, PAD number, L/C number, name of the drawer,
name of the drawee, amount, number of copies of various documents, name of the
imported items. This written procedure is called Lodgment.
Accounting Application:
While doing lodgment, ABBL makes the following entries-
Payment Against Document Dr.

(PAD)
AB General Account C
r.
Exchange Gain C
r.
ABBL makes the payment to the reimbursing bank against the documents. That's why, it
debts the PAD Account.
For payment, ABBL deposits the money at the miscellaneous account @69.35 (current
rate). And sends an Inter Branch Credit Advice (IBCA) to credit the amount to a nostro
account maintained in a bank of exporters' country from which payment will be made. By
this transaction, ABBL makes a profit @O. 1 5 per dollar.
3.2.9 Retirement of Documents:-
The process of collecting documents from bank by the importer is called retirement of the
documents. The importer gives necessary instructions to the bank for retirement of the
import bills or for the disposal of the shipping documents to clear the imported goods
52
from the customs authority. The importer may instruct the bank to retire the documents
by debiting his current A/C.
3.3 FOREIGN REMITTANCES SECTION

(INWARD & OUTWARD)
Foreign remittance, in simple terms, means money remitted in foreign

currency. More precisely, it is termed as remittances in foreign currency that
are received in & made out abroad. Conceptual Issues International remittances are
defined as the portion of migrant workers’ earnings sent back from the country of
employment to the country of origin (ILO, 2000). Remittance can also be sent in kind.
Transfers that take place in kind is quite difficult to measure.
Remittances can be individual and it can also be collective. When, individuals send
remittance to his/her household or kith and kin that can be termed as individual
remittance. When a group of migrants, their associations or professional bodies oblige
resource together and send for collective or community programmes that can be termed
as collective remittance. Individual remittances are mostly geared towards the family
whereas collective remittances are generally used for community development.
Transfer of remittances takes place through different methods. 46% of the total volume
of remittance has been channeled through official sources, around 40% through hundi,
4.61% through friends and relatives, and about 8 percent of the total was hand carried by
migrant workers themselves when they visited.
TYPES:-
Two types of Foreign remittance:-
(1)Foreign Inward Remittance.
(2) Foreign Outward Remittance.
53
Wage Earners Remittance Inflows (Monthly)

Remittances
Year/Month
In million US dollar In million Taka
2008-2009
April 781.71 53609.70
March 808.72 55445.80
February 689.26 47269.50
January 710.74 48742.50
December 635.34 43571.60
November 617.39 42383.80
October 559.05 38406.70
September 590.67 40579.00
August 470.95 32307.20
July 567.11 38926.40
2007-2008
June 516.38 35599.40
May 557.02 38495.70
April 543.74 37485.40
March 537.29 37040.80
February 500.32 34532.10
January 462.55 32235.10
December 555.08 38555.90
November 598.73 41857.20
October 377.34 25315.70
September 466.00 30310.20
August 471.22 32806.30
July 412.80 28751.50
2006-2007
June 429.13 29888.90
May 487.24 33829.00
Source : Foreign Exchange Policy Department, Bangladesh Bank
From the trend analysis of wage earners remittance inflow we can see that the
remittance is increasing day by day. In the month of July(FY’2006-07) the remittance
inflow was 412.80 million dollar where as in the month of July(FY’2007-08) the inflow
was 567.11 million dollar.
54
Wage Earners Remittance Inflows (Yearly)

Remittances
Year/Month
In million US dollar In million Taka
2007-08* 6430.94 441242.20
2006-07 5998.47 412985.29
2005-06 4802.41 322756.80
2004-05 3848.29 236469.70
2003-04 3371.97 198698.00
2002-03 3061.97 177288.20
2001-02 2501.13 143770.30
2000-01 1882.10 101700.10
1999-2000 1949.32 98070.30
1998-1999 1705.74 81977.80
1997-98 1525.43 69346.00
1996-97 1475.42 63000.40
1995-96 1217.06 49704.00
1994-95 1197.63 48144.70
1993-94 1088.72 43549.00
1992-93 944.57 36970.40
1991-92 849.66 32414.50
1990-91 763.91 27256.20
*: data upto month of April of financial year 2007-2008.
Source : Foreign Exchange Policy Department, Bangladesh Bank
55
WAGE EARNERS REMITTANCE INFLOW

(IN DOLLAR)
7000
6000
5000
INCOME
4000
3000
2000
1000
0
08 06 04 02 00 98 96 94 92
07- 05- 03- 01- -20 97- 95- 93- 91-
0 20 20 20 99 19 19 19 19
2 19
YEAR
3.3.1 Foreign Inward Remittance 3.1 FOREIGN INWARD

REMITTANCE
DEFINITION:-
The remittance of freely convertible foreign currencies which we are receiving from
abroad against which the Authorized Dealers making payment in local currency to the
beneficiaries may be termed as Foreign Inward Remittance.
MODE OF INWARD REMITTANCES (Also Outward Remittance):

The following are the mode of Inward/Outward Remittances.
i) TT = Telegraphic Transfer.
ii) MT = Mail Transfer.
iii) FD = Foreign Drafts.
iv) PO = Payment Order.
v) TC = Travelers’ Cheque.
vi) EFT = Electronic Fund Transfer
vii) FCN = Foreign Currency Notes.
viii) OLR = on line Remittances.
A remitter abroad simply has to approach a bank branch there with certain amount to be
deposited beneficiary in Bangladesh either in foreign currency or in equivalent Taka
currency. The Branch so approached abroad usually should have agency arrangement
56
with the paying banks in Bangladesh. However, in the absence of any such agency
arrangement, remittance may also be made by transferring cover value of the remittance
to the paying bank’s account abroad by the remitting bank.
SOURCE OF INWARD REMITTANCE:-

i) Expatriate Bangladeshis.
ii) Exporters.
iii) Visitors.
PURPOSE OF REMITTANCE:
In short, remittances are being sent from abroad for the following purposes:-
 Family maintenance
 Indenting Commission
 Recruiting Agents Commission
 Realization of Export Proceeds
 Donation
 Gift
 Export broker’s Commission etc.
PURCHASE OF DRAFTS & CHEQUES:

Authorized Dealer may purchase Drafts & Cheques which are not drawn on AB Bank at
the request of the beneficiary.
COLLECTION PROCEDURES:
 To make entry in foreign bills Collection Register
 To prepare forwarding schedule.
 To prepare vouchers on realization.
PAYMENT OF FOREIGN CURRENCY NOTES:
Authorized branches of the bank are to make payment of F.C. notes in equivalent Taka
currency at the prevailing rate (T.T. Clean buying rate).
Generally, three foreign currencies namely U.S. Dollar, Pound Sterling and Euro are being
bought and sold along with two other currencies like K.S.A. Riyal & Kuwaiti Dinar.
3.3.2 FOREIGN OUTWARD REMITTANCE

DEFINITION:
The remittances in foreign currency which are being made from our country to abroad is
known as foreign outward remittance.
PURPOSE OF OUTWORD REMITTANCE:-
57
 To settle Import Payment.
 To meet Travel Expenses/Medical Expenses/Educational Expenses etc.
APPROVAL OF BANGLADESH BANK

Bangladesh is always in a scarcity of foreign exchange and foreign exchange business is
restricted and controlled by the Central Bank of the country. For this reason Bangladesh
Bank’s prior permission is required for any remittance to be made to outside the country.
Bangladesh Bank provides permission/approval for outward remittances to the applicants

who are to lodge an application for the purpose on the following prescribed forms with an
Authorized Dealer who forwarded the same to Bangladesh Bank for approval.
i) The IMP form (cover remittances for importers)

ii) Form T/M (Traveling & Miscellaneous)
Other than these two prescribed forms, Bangladesh Bank
sometimes issue permits know as Bangladesh Bank permit.
CANCELLATION OF FD:
For cancellation of any foreign draft which was issued earlier by the branch the following
formalities to be observed:
 To receive an application from the purchaser.
 To discharge on the reverse of the FD with Revenue Stamp by the
purchaser.
 “Received payment by cancellation”
 The draft should be treated as a debit voucher & payment will be
made by debit to concern Foreign Bank
 To advise drawee bank/reimbursing bank regarding cancellation of
Draft.
REPORTING TO BANGLADESH BANK REGARDING CANCELLATION:

In the event of any remittance-which has already been reported to the Bangladesh Bank
on the prescribed return being subsequently cancelled either in full or in part, the
authorized dealer must report the cancellation of the remittance. The return in which the
reversal of the transaction is reported should be supported by a letter giving the following
particulars:
58
 The date of the return in which the inward remittance was reported.
 The name and address of the beneficiary.
 The amount of the purchase as effected originally.
 The amount cancelled.
 Reasons for cancellation.
Main Flow
Currently, Saudi Arabia, UAE, Kuwait, Qatar, Oman, Iraq, Libya, Bahrain, Iran, Malaysia,
South Korea, Singapore, Hong Kong and Brunei are some of the major countries of
destination. Saudi Arabia alone accounts for nearly one half of the total number of
workers who migrated from Bangladesh. Labour market of Bangladeshi workers is not
static. During the 1970s Saudi Arabia, Iraq, Iran and Libya were some of the major
destination countries. While the position of Saudi Arabia remains at the top, Malaysia and
UAE became important receivers. In mid-1990s, Malaysia became the second largest
employer of Bangladeshi workers. However, since the financial crisis of 1997,
Bangladeshis migrating to Malaysia dropped drastically. Now UAE has taken over its place.
Over the past 25 years labor migration from Bangladesh has registered a steady increase.
From 1990 onwards on an average 3,25,000 Bangladeshis are migrating on short-term
employment, mostly to 13 countries. In the past the bulk of the migrants consisted of
professional and skilled labor. However, the recent trend is more towards semi- and
unskilled labor migration. Due to increase in the flow of unskilled and semi- skilled labor,
remittance is increasing at a much lower rate than the labor flow. Remittance is crucial for
Bangladesh’s economy. It constitutes almost one-third of the foreign exchange earning.
About 25 percent of remittance senders were students when they went abroad and
another 25 percent were living off their own land. A large segment of them were working
as construction laborers overseas, another group worked as agricultural laborers. UAE,
Saudi Arabia and Singapore constituted the most of important destinations of these
migrants.
One survey comments that if the migrant workers’ total income abroad and the present
family income from other sources is combined and then compared with the pre- migration
family income, it registers an increase in total income by 119 percent. On an average,
the interviewee households annually received about Tk.72,800 as remittance. This
means that a typical migrant remits 55.65 percent of his income. Remittance constitutes
59
51.12 percent of the total income of these families. Transfer of remittances takes place
through different methods. 46 percent of the total volume of remittance has been
channeled through official sources, around 40% through hundi, 4.61 percent through
friends and relatives, and about 8 percent of the total was hand carried by migrant
workers themselves when they visited. Contribution of Remittance to the national
economy labour migration plays a vital role in the economy of Bangladesh. Bangladesh
has a very narrow export base. Readymade garments, frozen fish, jute, leather and tea
are the five groups of items that
Account for four-fifths of its export earnings. Currently, garments manufacturing is
treated as the highest foreign exchange earning sector of the country (US $ 4.583
billion in 2003). However, if the cost of import of raw material is adjusted, then the net
earning from migrant workers’ remittances is higher than that of the garments sector. In
2 003, net export earning from RMG should be between US$2.29-2.52 billion, whereas
the earning from remittance is net US$3.063 billion. In fact, since the 1980s, contrary
to the popular belief, remittances sent by the migrants played a much greater role in
sustaining the economy of Bangladesh than the garments sector.8 for the last two
decades, remittances have been at levels of around 35% of export earnings, making it
the single largest source of foreign currency earner for the country. This has been used in
financing the import of capital goods and raw materials for industrial development. In the
year 1998-99, 22 percent of the official import bill was financed by remittances (Afsar,
2000; Murshed, 2000 and Khan, 2003). The steady flow of remittances has resolved the
foreign exchange constraints, improved the balance of payments, and helped increase the
supply of national savings (Quibria 1986). Remittances also constituted a very important
source of the country’s development budget. In certain years in the 1990s remittances’
contribution rose to more than 50 percent of the country’s development budget
Government of Bangladesh treats Foreign aid (confessional loan and grants) as an
important resource base of the country. However, remittances that Bangladesh received
last year was twice that of foreign aid. Remittances have played a major role in reducing
the extent of the country’s dependence on foreign aid.
The contribution of remittance to GDP has also grown from a meager 1 percent in
1977-1978 to 5.2 percent in 1982-83. During the 1990s the ratio hovered around 4
percent. However if one takes into account the unofficial flow of remittances, its
60
contribution to GDP would certainly be much higher. Murshed (2000) finds that an
increase in remittance by Taka 1 would result in an increase in national income by Tk
3.33. Following the expiry of multi-fiber agreement (MFA), Bangladesh will face
steep competition in export of RM
The country will cease to enjoy any special quota. It is apprehended that Bangladesh’s
RMG export will decline sharply. This will result in loss of job of many workers and
shortfall in foreign exchange earning. Potential of retaining employment and export
earning through export of frozen fish, jute, leather and tea seems rather bleak.
It is in this context labour migration has become key sector for earning foreign exchange
and creating opportunities for employment. Therefore, the importance of migrant
remittance to the economy of Bangladesh can hardly be over emphasized. Methods of
Transfer Migrants use different methods in sending remittance involving both official and
unofficial channels. Officially, transfer of remittance takes place through
i) TT = Telegraphic Transfer.
ii) MT = Mail Transfer.
iii) FD = Foreign Drafts.
iv) PO = Payment Order.
v) TC = Travelers Cheque.
vi) EFT = Electronic Fund Transfer
ix) Foreign Currency Notes.
x) On line Remittances.
Hundi/ Money Courier is the most common among the unofficial channels of transfer.
Hundi refers to illegal transfer of resource outside the international or national legal
foreign currency transfer framework. Organised groups based in diverse cities such as
London, New York, Dubai, Kuala Lumpur and Singapore conducts hundi operation through
their partners in Bangladesh or From some countries remittances are sent by moneygram.
Besides this, other unofficial methods are, sending remittance through departing friends
and relatives; personally hand carried by the senders themselves without declaration, and
in the form of visa/ work permit for sell or family use.
3.3.3 Role of different institutes and instruments involved in foreign

remittance
61
Ministry of Finance
Ministry of Finance (MOF) is the prime policy making body regarding banking and
remittance. Macro-economic policies that affect exchange rate, monetary and fiscal
mechanisms, foreign exchange reserve etc. are regulated by this ministry. Bangladesh
Bank Bangladesh Bank (BB) is the central bank of Bangladesh. Among other powers and
functions, BB regulates scheduled bank activities, acts as a clearing-house, maintains
foreign exchange
Reserves and monitors floating exchange rate mechanism in the current accounts.
 Bangladesh Bank encourages the nationalized and private banks to link up with
foreign banks and exchange houses in the destination countries. It has a separate
department for regulating and monitoring remittance entitled Foreign Exchange Policy
Department (FEPD). It also generates analyses, interprets and distributes data on
inflow of remittance.
 Nationalize Commercial Banks Nationalized Commercial Banks (NCBs) of
Bangladesh make direct banking facilities available at the doorsteps of Bangladeshi
emigrants especially in those countries where a large number of Bangladeshis are
employed. Four NCBs are deeply involved in remittance transfer. These are Sonali
Bank, Janata Bank, Agrani Bank and Bangladesh Krishi Bank (BKB). Among the NCBs,
BKB is solely targeted towards agricultural development in rural areas. Within
Bangladesh these four NCBs have 2945 branches.
Through them they can disburse remittances even in distant areas. Besides their own
branches, NCBs have opened exchange houses in joint collaboration with different banks
and financial institutions in different countries of the world. Private Commercial Banks
Private Commercial Banks (PCBs) is also involved in remittance transfer. Of the PCBs,
Islami Bank of Bangladesh Ltd. has been found to be most proactive in the area of
migrants’ remittance. National Bank, International Finance and Investment Corporation
(IFIC), Prime Bank and
Uttara Bank is other private banks involved in remittance transfer. Most of their activities
are in the Middle East. Saudi Arabia is the major working area of Islami Bank along with
Qatar, Bahrain and UAE. National Bank is operating in Oman, Kuwait, UAE, Qatar, Bahrain
and Saudi Arabia. IFIC has curved out a major niche in Bangladeshi community in Oman
and has its largest share with 41 percent of the market. It also has branches and
62
exchange offices in Nepal and some other Middle Eastern countries. Uttara Bank runs
exchange house in Qatar in collaboration with a local financial institution. Corresponding
Relationships In almost all countries of the world, both NCBs and PCBs have
corresponding relationships with banks through which Bangladeshi migrants may easily
send their money to their beneficiaries’ accounts with any branch of any bank in
Bangladesh.
Exchange Rate Regimes in Bangladesh
The rate at which one currency is exchanged for another currency in the foreign
exchange market is called exchange rate. Until recent past, fixed exchange rate system
was prevailing in Bangladesh in which case the central bank of the country could devalue
the local currency. To better protect the external competitiveness of Taka and to enhance
the resilience of the economy in responding to shocks, Bangladesh formally stepped over
to market based exchange rate for the Taka from 31st May 2003 (Annual Report, BB,
2002-03). In this new system, the nominal exchange rate is set by the market forces but
keeps discretion for the central bank to intervene in the foreign exchange market to keep
the rate within certain limit of appreciation or depreciation. This is known as ‘managed
float’ system. In this system, demand and supply primarily determine the exchange rate
on a particular day. But Bangladesh Bank comes forward to keep the exchange rate
within a certain limit of appreciation or depreciation by selling or buying the foreign
currencies or by adopting some other measures.
Floating Exchange Rate in Current Account

In the year 2000, BB relaxed foreign currency dealing, allowing authorized dealers to
transact dollars with Bangladeshi Bank. Earlier the banks were obliged to transact at
certain fixed rates. In 2002, MOF has reformed exchange rate policy further. Foreign
exchange in current account has been made free floating. The Bank officials believe that
a decision of allowing market to decide exchange rate in current account has help curb
hundi business in a significant scale.
Remittance Data and Monitoring

BB maintains data on remittance transfer since 1972. Recently, it has introduced a
method of weekly (provisional) data collection for understanding the trend of remittance.
63
Currently, datasheets are prepared on bank and country wise. BB analyses and interprets
the reports to identify remittance trends like increase or decrease. Comparative statement
on performance of various NCBs is then distributed among banks; BB is now actively
considering exchange house wise analysis and interpretation of remittance data.
According to bank officials, this would lead to competitiveness among the NCBs and their
exchange houses. BB has also determined annual minimum target for the exchange
houses. The NCB’s have to ensure that their exchange houses meet those targets. Each
exchange houses situated in USA should transact at least US $3 million. For UK
exchange house, the target is 2 million GBP and for Canada, the target is US $2.5
million (BB, 2004). Complaint if a client face problem in transferring remittance or feel
harassed, a system of lodging complaint to higher authorities has been established.
Remitters may contact directly to the Secretary, Finance Division, Ministry of Finance or
the Managing Director or Executives of concerned NCB to express their opinions or lodge
complaints. Telephone and fax numbers and email addresses of relevant persons are
provided in the website of BB, and also in the directory published by the five NCBs
(Sonali, Janata, Agrani and BKB) engaged in remittance transfer.
Investment Instruments
Investment instruments are another effective mechanism for encouraging remittance
through official channel. BB, NCBs and PCBs have developed different packages in this
respect. From the government side, few packages were already there before 2001.
Nonetheless, two new investment instruments have been launched at the end of 2002.
In the following, some of the packages developed by all the three actors mentioned
above is presented.
Non-resident Foreign Currency Deposit (NFCD)

Migrants can have a NFCD account in any branch of Bangladeshi and foreign banks that
holds an authorized dealership license. The account can be opened for different periods:
one month, three months, six months or one year in US dollar, pound sterling (PS),
Canadian dollar (CD), German Mark (DM), Japanese Yen (Y) or Euro-currency (Euro). The
minimum necessary balance must be US$1000 or PS 500 or their equivalent amount in
currencies stated above. The accounts are renewable and can be maintained for an
indefinite period even after the return of the wage earner (migrants). One is also eligible
64
to open an NFCD account with his/her savings within six months of one’s return to
Bangladesh. The interest is determined in terms of interest accounted on the value of
Eurocurrency. The interest accrued is tax-free. The capital and interest of NFCD account
is also transferable in Bangladeshi taka to the current exchange rate. There is also the
provision to withdraw the capital money before the expiry of the period specified but in
that case one will not receive the interest.
The central bank also allows investment of NFCD funds in remunerative business projects
to allow payment of competitive interest rates to account holders. NFCD forms are
available in Bangladeshi missions abroad. In order to make the schemes popular among
the migrants, BB has gradually simplified the formalities with regard to NFCD. Only
photocopy of passport, signature or a certification from a notary public is sufficient to
open such an account. As far as the campaign to market these instruments is concerned,
Bangladesh Bank is engaged in regular contacts with the missions abroad.
Wage Earners’ Development Bond
The remittance of Bangladeshi migrants abroad can be invested in Bangladeshi currency

in five-year Wage Earners’ Development Bond. The bonds are available in different
denominations: Tk. 1000, Tk. 5000, Tk. 10,000, Tk. 25,000 and Tk. 50,000. The
Bonds are issued for specific periods. The profits are invested in Bangladesh and the
bonds accrue an annual interest of 12% (as of 28.11.2000). If a bondholder wants to enc
ash them before the expiry of the term s/he would be entitled to get interest at a reduced
rate. The capital money of the investment is freely transferable abroad in foreign
currency. The interest is tax free. The Bond is available at National Savings Bureau
offices, branches of Bangladeshi banks abroad and Bangladesh missions abroad.
Non resident Taka Account (NRTA)
One can open a NRTA by the money remitted from abroad for investment in the share
and securities of the capital market of Bangladesh. Such an account may be opened in
any dealer branch of an authorized bank. The current balance of NRTA is transferable in
foreign currency to any country any time. One can buy share and securities from stock
exchange with the balance of NRTA and the money earned as dividend and shares and
65
securities sold may be saved in NRTA. The capital and profit money is tax exempt and the
bank directing the account can work as nominee.
US Dollar Investment Bond
2002 The IRD of the MOF introduced the US Dollar Investment Bond, 2002 in 16
October 2002 as an investment instrument in foreign currency for Bangladeshi emigrants
(GOB, 2002). Eligibility for the bond: It provisions for issuing US Dollar Bond in the name
of a holder of a non-resident account against remittances from abroad to the account.
Maturities, denomination etc. The US Dollar Investment Bond(s) shall be matured for
payment after completion of three years form the date of its issue.
The Bond holder will be entitled to draw interest on half-yearly basis at 6.5 percent fixed
rate per annum in US Dollar. However, the Bond holder may surrender the Bond(s) before
maturity and encash the same at the paying office in which case interest will be paid as
under: a. No interest for encashment within 1 year of issue; b. 5.5 percent interest
for encashment after completion of 1 year but within 2years; c. 6 percent interest for
encashment after completion of 2 years but within 3 years; and d. 6.5percent
interest for encashment after completion of 3 years. The Bond(s) shall be issued in the
denominations of US $500, $1000, $5000, $10000 and $50000 and in such other
nominations as the government may decide. The principal and interest will be payable in
US Dollar to the holder or his/her nominee. The money invested in the purchase of
Bond(s) shall be exempt from tax payable under the Income Tax Act, 1922. Nominee
after death: If the Bond holder dies, the nominee will be able to draw the principal and
the interest in US Dollar if he/she is non-resident. If the nominee is resident, the principal
and the interest is payable in Bangladesh currency.
Method of payment for the bond: Payment for the purchase of a Bond can be made
either by cheque or draft in foreign currency received against inward foreign exchange
remittance, or by funds heeled in non-resident foreign currency account of the applicant.
Additional benefit for substantial investment: If a purchaser buys bonds totaling US $
1,000,000 (one million) or above in value, he/she will be treated Commercially
Important Person (CIP) and will be entitled to all the facilities accordingly. The CIP
facilities will cease to apply if the purchaser’s investment in this bond goes below US $
1,000,000 (one million) because of subsequent encashment and on his/her failure to
66
retain the limit of US $ 1,000,000 (one million) through further investment in the
Bond within 3 months of encashment.
US Dollar Premium Bond
2002 The US Dollar Premium Bond is the most recent investment instrument in foreign
currency introduced for Bangladeshi emigrants by the IRD, MOF. It was announced in
October, 2002 and became applicable from the next month (GOB, 2002a). Maturity,
denomination, etc.: The US Dollar Premium Bond(s) shall be matured for payment after
completion of 3 years from the date of its issue. The Bond holder will be entitled to draw
interest on half-yearly basis at 7.5 percent fixed rate per annum in Bangladesh currency
at the USD/BDT rate. However, the Bond holder may surrender the Bond(s) before
maturity and encash the same at the paying office in which case interest will be paid as
under: a. No interest for encashment within 1 year form the date of issue; b. 6.5
percent interest for encashment after completion of 1 year but within 2 years; c. 7
percent interest for encashment after completion of 2 years but within 3 years; and,
d. 7.5 percent interest after completion of 3 years. The Bond(s) shall be issued in the
denominations of US $500, $1000, $5000, $10000 and $50000 and in such other
denominations as the government may decide. The principal amount will be payable in US
Dollar to the holder of his/her non-resident nominee, where applicable. The principal
amount due to the holder or his/her nominee may also be paid in Bangladesh currency as
per option of the holder/nominee. However, interest amount shall be paid only in
Bangladesh currency. Eligibility: The Bond can be issued to a ‘Non-resident account
holder’ that means an FC account holder who is a Bangladeshi national residing abroad
or a Person of Bangladeshi Origin (PBO) who has assumed foreign nationality and is
residing abroad. Issuing authority: The ‘Issuing Authority’ of the Bond is the BB and the
scheduled bank branches/authorized dealers in Bangladesh and their authorized offices
abroad and shall include any such authority as the government may, from time to time
determines. A foreign correspondent of an Authorized Dealer Bank may also act as an
office of issue.
Regulatory Instruments
There are two regulatory instruments that apply to remittance. These are Foreign
Exchange regulation Act, 1947and Money Laundering Prevention Act, 2002.
67
Foreign exchange regulation act is operational for a long time, whereas Money
Laundering Prevention Act is a recent creation.
Authorized foreign exchange dealers: The act provisions authorized dealers in foreign
exchange. It restricts foreign exchange dealings like buying, borrowing, selling, lending,
conversion etc. by any person other than an authorized dealer. Penalty, prosecution and
tribunal: The act provides for jail sentence of maximum 2 years and/or fine equal to the
amount decided by court as punishment for violation of the act.
Power to call information: The act entitles government or BB to call for any kind of
information with regard to any matter of foreign exchange by any person.
Power of inspection: The act entitles government or BB to inspect books of accounts
and other documents of any person, firm or business organization over foreign exchange.
Export of foreign currency: The Notification No. FE 1/94-BB dated 12 November 1994
permits any person, at the time of departure, take out Bangladeshi currency of Tk.500/-
value. Import of foreign currency: The Notification No. FE 2/94-BB dated 12 November
1994 permits any person to bring into Bangladesh from any place outside US $5000 or
equivalent in foreign exchange and/or Tk.500/- in Bangladeshi currency without
declaration. If the amount of money brought is more than the said amount, the
concerned person has to make a written declaration to the Customs Authority at the time
of arrival, in the form prescribed by BB. Implementing agency: Bangladesh Bank is the
implementing agency of the act. It has a specific department entitled ‘Foreign Exchange
Policy Department’ for supervising all kinds of foreign exchange matters including foreign
remittance.
Evaluation: Foreign Exchange Regulation Act, 1947 is an all encompassing legislation

that over’s all kinds of foreign exchange transfer. This act was does not have any specific
section on migrant remittance. Under the broad umbrella of the act, the Foreign
Exchange Policy Department has framed guidelines to manage remittance movement.
Currently there are 16 cases under this act. But none of them are related to migrant
remittance.
Money Laundering Prevention Act, 2002: The Money Laundering Prevention Act,
2002 received the consent of President to became a law on 5 April 2002. The act was
68
amended in 2003(BB, 2003). The act understands 'Money Laundering' as illegally
earning or gaining resources directly or indirectly and as perpetrating or assisting in illegal
transfer, conversion or concealing position of legal or illegal resources earned or gained
directly or indirectly. Responsibilities and powers of BB in prevention: The BB is entrusted
with the responsibility of suppressing and preventing money laundering crimes by
implementing the act. Bangladesh Bank has an Anti-Money Laundering Department who
has the following responsibilities:
 Investigating money laundering crimes;
 Supervise and observe activities of banks, financial institutions and other bodies
involved in financial activities;
 Calling up report on money laundering from banks, financial institutions and other
bodies involved in financial activities;
 Reviewing the aforementioned reports and act accordingly;
 Train officers and staffs of banks, financial institutions and other bodies involved in
financial activities; and
 Conducting other activities required for fulfilling the objectives of the act.
Power of investigation: BB or a person empowered by BB can investigate money

laundering crime(s). All money laundering investigations are initiated by BB. If a case
concerns a bank official, BB conducts the whole investigation. But if the alleged
perpetrators are general people, BB gives power to police/CID/Bureau of Anti-corruption
etc. to investigate the case. It often happens that police or other law enforcement agency
comes across a money laundering crime. Then they request BB to empower them to
investigate and she obliges. Reasons of launching money laundering investigation: Money
laundering investigation can be launched for a number of reasons: absence of source or
destination of money in a bank transaction; imbalance of a transaction with the known
earning of the account holder; suspicious TT; hundi; money recovered from public place
like road, rail station, port or airport; complaint from bank(s), other financial institution(s)
or law enforcement agency/agencies. Money laundering court: Trial of money laundering
cases will take place in a session court. Any session court will be considered as money
laundering court while trial of a money laundering case is underway in the court and the
judge hearing the case will be called money laundering court judge at that point of time.
Punishment for money laundering: A person can be given a minimum of 6 months to a
maximum of 7 years jail sentence along with fine worth double the amount of money
involved for money laundering.
69
International agreements: The act provides scope for entering into agreements with
foreign governments to fulfill its objectives. After it came into being, Bangladesh was
approached by Thailand last year for an agreement to prevent inter-state money
laundering. But that agreement stipulated for existence of Financial Intelligence Unit
(FIU) which Bangladesh is yet to have.
Formation of FIU is currently under active consideration of government. Evaluation:
Bangladesh is the first South Asian nation to have specific law for prevention of money
laundering and money laundering court for trial of such cases. Pakistan and Sri Lanka is
yet to establish such specialized laws and courts to deal with money laundering. India has
framed money laundering law in 2003. Since introduction of the act, BB received around
300 complaints of money laundering. After investigation, 17 of them turned out to be
criminal offences. All 17 cases are currently under trial. However, in general, prosecution
process in Bangladesh is extremely slow paced.
3.3.4 REMITTANCE TRANSFER PROCESS:

The modes of transfer of remittance are as follows:
1) Instant draft sent by expatriates
2) EFT i.e. Electronic Fund Transfer
a. Through SWIFT
b. Modem to modem fund transfer
c. Through E-Mail
The expatriates sent instant draft through courier or any friend or family member who
will visit to the home country. The expatriate sent money through electronic fund
transfer process. It may be through swift or it may be through E-Mail. The contracted
exchange house or bank help the expatriate to sent the remittance to the country by
taking some service charge.
SWIFT: Wage earners branch of AB Bank Ltd. get the message file from remittance
sending country. The message file is then decrypted and process through swift.
70
MODEM TO MODEM: Specially SECI of AB Bank Ltd send the remittance through their
host modem and the other modem of SECI section of Head Office, AB Bank Ltd trace the
remittances send by the SECI, New York, USA.
E-MAIL: After receiving the mail from foreign country from where the contracted
exchange houses or banks send the remittance through E-Mail to wage earners corporate
branches or concerned branch of AB Bank Ltd. Then the responsible officer process the
encrypted file and the remittance file send to the
Concerned principal offices or corporate branches and they process the file through RMS
program by taking print out of transfer responding advice/voucher and the responsible
officer credited the remittance to the beneficiaries account.
It is strictly ordered that the remittances should credit to the beneficiaries account by 24
hours in any where in Bangladesh. Bank Ltd. is doing this job efficiently and sends the
remittance as quickest as possible.
Chapter Four
Foreign Trade Financing By

71
ABBL
72
CHAPTER 4
TRADE FINANCING
BY
ABBL
4.1 REMITTANCE:
Foreign remittance means remittance of foreign currencies from one place/person to

another place/person. In broad sense, foreign remittance includes all sale and purchase
of foreign currencies on account of Import, Export, Travel and other purposes. However,
specifically foreign remittance means sale & purchase of foreign currencies for the
purposes other than export and import. As such, this chapter will not cover purchase &
sale of foreign currencies on account of Import & export of goods.
All foreign remittance transactions are grouped into two broad categories-
II. Outward remittance &

III. Inward remittance
4.1.1 Inward Remittance:
The term inward remittance includes not only purchase of foreign currency by TT, MT,
Drafts etc. but also purchase of bills, purchase of traveler’s cheques. Two forms are
prescribed by Bangladesh Bank are used for purchase of foreign currencies such as:
EXP Form: Remittances received against exports of goods from Bangladesh are done by
form EXP.
Form C: Inward remittances equivalent to US$ 2000/- and are above are done by Form
“C”. However, declaration in Form C is not required in case of remittances by Bangladesh
Nationals working abroad.
Utmost care should be taken while purchasing Currency Notes, Travelers cheque,
Demand Draft & similar instrument for protecting the bank from probable loss as well as
safety of the Bank officials concerned.
SL NO
73
NAME OF THE EXCHANGE CO.
Bank/ Balance Tk Foad Nrat A/C

excha
nage
1 AL Amodi Exchange Co., K.S.A 042 33027066
2 AL Ansari Exchange Co. U.A.E 039 33025342
3 AL Musa Exchange Co. Kuwait 043 33028683
4 AL Mullah Exchange Co.Kuwait 038 33024955
5 AL Omari Exchange Co. K.S.A 027 33016498
6 AL Muzaini Exchange Co.,Kuwait 036 33024732
7 AL Raji Exchange Co.,K.S.A 015 A-693
8 AL Commercial Bank,K.S.A 029 33017587
9 Arab National Bank , K.S.A 045 33028873
10 Bahrain Exchange Co. Kuwait 017 B-110
11 Bahrain Exchange Co.Bahrain 016 B-109
12 Bank AL Bilad,K.S.A 044 33028808
13 Bank of Muscat 011 C-25
14 City Bank NA NIL 33024872
City International Exchange 008 C-25
15 Co.,Kuwait
16 Dalil Exchange Co.Kuwait 034 33023214
17 Daulat Interprise,Canada 040 33025813
18 Dollar Co Exchange Co.,Kuwait 019 D-103
19 Eastern Exchange Co.,Qatar EE-1 E-13
20 Eastern Union & Ex Co. Oman 049 33029475
21 Gulf Overseas Exchange Co.Oman 013 G-49
22 Habib Exchange Co.,U.A.E 028 33017455
23 Indian Bank Baharaj,Singapore 048 33029293
24 Injaz Money Exchange,K.S.A 041 33025846
Kuwait Bahrain Int. Exchange 014 K-121
25 Co.,Kuwait
26 Kuwait Overseas 023 33012803
27 Mashreq Bank, U.A.E NIL B16
28 National Bank of Oman 007 N-99
29 National Money Exchange,Kuwait 026 33016176
30 Oman Int. Exchange 050 33029632
Thomas Kook Al Rostamani 003 O-06
31 Exchange Co.U.A.E
32 Trust Exchange Co.Qatar 009 3291
33 U.A.E Exchange Co.,Kuwait 032 33020855
74
34 U.A.E Exchange Co.Dubai 046 33029244
35 Wall Street Exchange Co.U.A.E 037 33017975
36 Zenj Exchange Co.Bahrain 030 33017975
75
Name of the Foreign Bank dealing with ABBL.
SL. NAME OF BANK

NO
01 STANDARD CHARTERED BANK NY
02 AMERICAN EXPRESS BANK NY
03 CITI BANK N.A.NY
04 HSBC BANK, USA, NY
05 HABIB AMERICAN BANK, NY
07 ACU DOLLAR
08 BANK MELLI , IRAN
09 BANK OF CELON,SRILANKA
10 MAYANMAR FOREIGN TRADE BANK LTD.
11 STANDARD CHATERED BANK,KARACHI
12 BANK OF BHUTAN,BHUTAN
1. Foreign Currency (Bank) Notes
General Principles and Precautions
 Branches may freely buy foreign currency notes from Bangladesh as well as
foreign nationals.
 Currency notes, especially notes of higher denominations, i.e. US $ notes of 50
and 100 denominations, should be checked carefully to ascertain their
genuineness.
 Foreign Exchange Department shall maintain currency wise F.C. in hand
Control Ledger to record each day’s transactions.
 On the last working day of each month the branch shall calculate the exchange
gain or loss and carry out necessary adjustment in the control ledger.
 Foreign currencies shall be purchased at the rates instructed by the Head
Office,
Accounting Entries:
For purchase of foreign currency notes
FC in hand A/C for FC amount @ FC (Cash) Buying rate Dr.

Cash A/C or Party’s A/C for payment to the customer at the same Cr.
rate
For payment to the customer’s FC A/C
FC in hand A/C for FC amount @ FC (Cash) Buying rate Dr.

Customer’s FC A/C @ TT clean (buying) rate Cr.
Income A/C (Difference between the two rates) Cr.
76
Month end adjustments
If there is gain on conversion of the FC in hand at TT clean buying rate, the vouchers to be
passed are as follows:
FC in Hand (Control Ledger) at TT clean buying rate Dr.

Income A/C - Exchange Earnings Cr.
If, however, there is loss on conversion of FC balance, the vouchers will be as follows:
Expenditure A/C—Exchange loss Dr

FC in hand (Control Ledger) Cr
2. Travellers’ cheques:
Payment against TCs
The customer tendering the Travelers’ Cheques should be asked to sign the TCs at the
designated places in front of the concerned bank official who would satisfy himself about
its genuineness with reference to the customer’s signature already appearing on the TCs
and his passport. Should there be any doubt, purchase contracts of the TCs may be asked
for. The vouchers will be passed as follows:
FBP Clean A/C for FC amount @ TC buying rate Dr

Cash / Party’s A/C at the same rate minus charges Cr
Collection of Proceeds of Encashed TCs
Enchased TCs should be sent to the relevant foreign correspondent for collection and crediting the proceeds to the Head Office’s Nostro
A/C. On receipt of the credit advice from the foreign correspondents the following vouchers are to be passed.
HO (relevant Nostro A/C) at ready buying rate Dr.

FBP for outstanding amount Cr.
Income A/C (Exchange difference). Cr.
3. TCs and Foreign Drafts received on Collection Basis (FOBC)
After observing the usual formalities, the branch, on transmission of the instruments abroad for collection, will pass a contra liability
voucher at the TT (clean) buying rate, as follows:
77
Customer’s liability (FBC) at the TT (clean) buying rate Dr.

Customer’s liability (FBC) at the TT (clean) buying rate Cr.
On receipt of credit advice from the correspondents, the branch will reverse the contra
liability voucher as follows:
Banker’s liability (FBC Lodged) at the TT (clean) buying rate Dr.

Customer’s liability (FBC) at the TT (clean) buying rate Cr.
 Simultaneously, the following vouchers are to be passed:
AB General Account HO (ID)-Relevant Nostro Account (@ TT clean Dr.

rate
Cash / Party’s A/C / Cash (@ TT Doc rate) Cr.
Income A/C Exchange earning (difference between TT (doc) & Cr.
Ready buying rate)
Income A/C Commission Postage, (if any) Cr.
4. Foreign Drafts and Cheques:
The branch should exercise due care and ordinary prudence for purchase of foreign
currency denominated drafts, cheques and similar kinds of instruments. The instrument
should not be purchased unless the customer is well known to the branch as a regular
trustworthy client. An Indemnity Bond should be obtained for refund of the money along
with interest in the event of dishonour of the instruments. Indemnity need not be
obtained in case of instruments against which proceeds have already been credited to the
bank’s Nostro account. The accounting vouchers will be as follows:
 If the instrument is drawn on the bank’s branch and the cover amount already paid by
the issuing bank into the bank’s Nostro account the vouchers will be passed at TT
(clean) rate.
AB General Account HO (ID) Relevant Nostro A/C) @ TT (clean) Dr.

rate
Party’s A/C / Cash Cr.
Income Account--Commission as per schedule Cr.
78
 For outright purchase of the instrument without cover fund having been credited to
Nostro A/C, the vouchers to be passed as follows at OD (transfer) rate-
FBP at OD (transfer) rate Dr.

Cash /Party’s A/C Cr.
Income A/C commissions, as per schedule Cr.
Income A/C postage Cr.
 On receipt of cover in Nostro A/C in due course of time at TT (clean) rate-
AB General A/C: HO ID) (at ready buying rate) Nostro Dr.

FBP for outstanding amount Cr.
Income A/C Exchange gains on FC (difference between the two) Cr.
 For collection of drafts/Cheques i.e. without payment of value to the customer at TT

(doc) buying rate-
Customer’s liability (FBC) at TT (doc) buying rate Dr.

Banker’s liability ( FBC) Cr.
 On receipt of proceeds to the bank’s Nostro A/C the vouchers shall be passed at the
TT(clean) rate:
AB General Accent HO (ID)- (Nostro A/C) at TT ready buying Dr.

rate
Party’s A/C / cash at TT (doc) buying rate Cr.
Income A/C Exchange gains on FC (Difference between two Cr.
rates)
Commission, (if any) Cr.
 Simultaneously, the branch will reverse the contra liability voucher as follows-
Banker’s liability (FBC Lodged) Dr.

Customers liability (FBC) Cr.
79
5. Telegraphic Transfer (T.T)
Test number appearing on the TT must be checked and authenticated by the concerned
official. After receiving confirmation from the Head Office about the proceeds having been
credited to their Nostro A/C and observing the usual formalities including declaration on
Form ‘C’, if necessary, the vouchers are to be passed at the TT buying rate as follows;
 For payment to customer’s A/C or cash-
AB General A/C: HO ID) (Nostro A/C) at ready buying rate Dr.

Party’s A/C / Cash or Payment Order at TT buying less Cr.
commission and charges as per schedule
Income A/C exchange on FC amount at difference between Cr.
ready buying rate and TT clean buying amount
Taxes / VAT, (if any) Cr.
Income A/C-commission TT Foreign Cr.
 For Credit to FC A/C-
AB General A/C: HO ID for FC amount at TT (clean) buying rate Dr.

Customers FC A/C (at the same rate) Cr.
4.1.2 Miscellaneous Services Given 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.
NRIT Account ‘Non-resident Investor’s Taka Account is an account by which Non-
resident Bangladeshi can deposit foreign currency for investment in
security of stock exchanges. For such account holders, 5% of
primary shares are reserved.
F.C. Account Foreign Currency Accounts are opened in the names of
Bangladeshi nationals or persons of Bangladeshi origin working or
self-employed in abroad and are maintained as long as the account
holder’s desire.
NFCD Stands for Non-resident Foreign Currency Deposit
Eligible persons may open such accounts even after their return to
Bangladesh, within six months of their arrival.
RFCD Accounts Stands for Resident Foreign Currency Accounts
Persons ordinarily resident in Bangladesh may maintain foreign
80
currency accounts with foreign exchange brought in at the time of

their return to Bangladesh from visiting abroad. Balance of such
accounts is freely remittable to abroad.
FOREIGN INWARD REMITTANCE:
One of the strategic links of international trade financing of the bank is the inward
remittance. Towards the end AB bank strengthened the existing remittance relationships
with various exchange house. Besides AB signed an agreement with RIA an exchange
house having extensive presence world-wide to enhance the remittance network.
AB bank is also focusing on enhancing the customer service windows through the existing
70 branches network. Besides an ATM based remittance network, predominantly on card
base, is being worked upon through the proposed IT joint venture with few other banks
of the country.
Corporate clients of AB remain another major source of foreign currency. Bank is also
trying to broaden its base through solicitation of indigenous export clients.
Total remittance at the end of the year stood at USD million 156.36 registering a growth
of nearly 19 percent over last year.
INWARD
YEAR REMITTANCE
2003 73.65
2004 83.47
2005 115.41
2006 131.64
2007 156.36
INWARD REMITTANCE
200
150
VALUES
INWARD
100
REMITTANCE
50
0
2003 2004 2005 2006 2007
YEAR
Year wise Foreign inward remittance target & achievement there against
k.
2008 2007
81
Target Achievement % Target Achievement

Up to April. .
08.
USA $72. 59 $ 215 $199.65
498.40 1366.48
UK $50 . 21 $ 184 $243..08
344.69 1663.82
Middle KSA $232.40 $ 694 $453.46
East 1595.71 3103.81
KUWAIT $67.14 $ 174 $174.76
460.86 1196.18
UAE $19.12 $ 42 $48.22
131.29 330.05
OMAN $6.12 $ 28 $24.68
42.29 168.93
BAHRAIN, $7.24 $ 23 $22.98
IRAN, IRAQ 49.67 157.29
& QATAR
TOTAL $332.02 $ 961 $724.10
2279.52 4956.26
Others $8.60 $ 20 $20.31
58.64 139.02
Total Tk $463.42 $ 1380 $1187.14
9038.00 3181.65 8125.65
$1321.00
Branch wise Yearly Remittance Position of SECI
Figures in Million U.S. Dollar.
Year / Manh Jackso Brookly Astoria Los Atlant Detroit Paters Total
Name -attan n n Angele a Michig on achie Targe
of Height s an N.J v- t
Branc s opene opene emen
h d on d on t
2002 2003
2000 131.4 32.14 16.82 9.88 7.00 1.25 - - 198.5 150.0
7 6 0
2001 38.15 38.34 23.40 11.84 9.53 3.35 - - 124.6 160.0

1 0
2002 41.94 64.62 32.67 23.07 18.58 7.38 0.13 - 188.3 189.0
82
9 0
2003 29.76 51.94 19.87 20.20 16.76 11.03 4.78 1.12 155.4 209.0
6 0
2004 20.39 53.04 19.26 20.45 16.31 12.35 6.99 3.40 152.1 200.0
9 0
2005 23.38 58.20 21.17 21.13 18.62 12.96 9.09 5.11 169.6 175.0
6 0
2006 22.49 58.99 17.78 21.36 18.62 12.62 9.18 5.01 166.0 180.0
5 0
2007 22.78 61.20 15.79 23.05 21.18 13.34 7.12 5.75 170.2 178.0
1 0
NOTE: Official Remittance of Manhattan branch for 2000 was 106.01 million Dollar and
2001 was 11.80 million Dollar
83
Branch wise Monthly Remittance Position of SECI, USA for the year-2008.
Figures in Million U.S.
Dollar
Month/ Manh Jackson Brookly Astoria Los- Atlanta Detroit Pater Total
Branch a-ttan Heights n Angeles son
Name
Jan.08 2.35 4.63 1.36 1.76 1.98 1.13 0.87 0.38 14.46
Feb.08 2.06 4.76 1.07 2.26 1.67 1.09 0.84 0.48 14.23
Mar.08 2.62 5.76 1.24 2.19 2.31 1.51 0.89 0.62 17.14
Apr.08 2.09 5.14 1.23 2.21 1.92 1.40 0.85 0.51 15.35
May.08 2.44 5.68 1.31 2.45 2.08 1.61 0.78 0.55 16.90
June,08 2.00 4.57 1.32 1.86 1.63 1.18 0.59 0.47 13.62
July,08 1.97 4.67 1.19 1.97 1.91 1.34 0.64 0.44 14.13
4.1.3 Outward Remittance:

The term “Outward Remittances" include not only remittance i.e. sale of foreign currency
by TT. MT, Drafts, Traveler’s cheque but also includes payment against imports into
Bangladesh & Local currency credited to Non-resident Taka Accounts of Foreign Banks or
Convertible Taka Account. Two forms are used for Outward Remittance of foreign
Currency such as: -
IMP Form: All outward remittance on account of Imports is done by this form
T.M Form : For all other outward remittances form T.M is used.
A. Private Remittance:
1. Family remittance facility:
a) Foreign Nationals working in Bangladesh with approval of the Government may

remit through an Authorized Dealer 50% of Salary and 100% of leave salary as also
actual savings and admissible person benefits. No prior approval of Bank is necessary for
such remittance,
84
b) Remittance of moderate amounts of foreign exchange for maintenance abroad

of family members (spouse, children, parents) of Bangladesh Nationals are allowed by
Bangladesh Bank on written request supported by certificate from the Bangladesh Mission
in the concerned country.
2. Remittance of Membership fees/registration fees etc.
Authorized Dealer may remit without prior approval of Bangladesh Bank, membership fees
of foreign professional and scientific institutions and fees for application registration,
admission, examination JOEFL, SAT etc.) in connection with admission into foreign
educational institutions on the basis of written application supported by demand
notice/letter of the concerned institution.
3. Education:
Prior permission of Bangladesh Bank is not required for releasing foreign exchange in
favor/on behalf of Bangladesh students studying abroad or willing to proceeds abroad for
studies. Authorized Dealers shall allow exchange facilities for this purpose according to
the following drill:
 Application duly filled in by the student as per prescribed format of Bangladesh

Bank.
 Original and photocopy of admission letter issued by the concerned institution
in favor of the student.
 Original and photocopy of estimate relating to annual tuition fee, board and
lodging
 Incidental expenses etc. issued by the concerned institutions.
 Attested copies of educational certificates of the applicant and
 Valid passport.
4. Remittance of Consular Fees:
Consular fees collected by foreign embassies in Bangladesh Taka and deposited in a Taka
Account maintained with an AD solely for this purpose may be remitted abroad without
prior approval of Bangladesh Bank.
85
5. Remittance of evaluation fee:
Authorized Dealer's without prior approval of Bangladesh Bank may remit evaluation fee
on behalf of Bangladeshis desiring immigration to foreign countries for getting educational
certificates of the person concerned evaluated by a foreign institution. A demand note of
the foreign immigration authority is required for this purpose.
6. Travel:
Private travel quota entitlement of Bangladesh Nationals is set at US$3000/- per year for
visit to countries other than SAARC member countries and Myanmar, Quota for SAARC
member countries and Myanmar is US$1000/- for travel by air and US$500/-for travel by
overland route. Authorized Dealers may release this travel quota in the form of foreign
currency notes up to US$500/- or equivalent and balance exchange in the form of TCs or
total quota in the form of TCs the annual quotas mentioned above are for adult
passengers. Fore minors (Below 12 year in age) the applicable quota will be half the
amount allowable to adults.
Authorized Dealers may release above travel quota without prior approval of Bangladesh
Bank subject to observation and satisfaction of following points:
 The intending traveler is a customer of the AD bank or is sufficiently well known to

the AD Bank or the intending traveler has paid relevant Travel Tax. The intending
traveler has a valid passport.
 The AD should verify and satisfy itself that any foreign exchange released for an
earlier travel was utilized with he journey being actually undertaken or was duly
enchased unutilized.
 The intending traveler is in possession of confirmed air ticket for journey to be
undertaken and that the intended journey to be undertaken not later than two weeks
after the date on which exchange is issued.
 The amount releases is endorsed on the passport and air ticket of the traveller with
indelible ink, with the signature and the name of the AD branch embossed in the
passport and ticket. However, while issuing foreign exchange to the Diplomats/
privileged persons/ UN personnel, Govt. Officials travelling on officials' duties, such
endorsement in the passports need not be made.
 In each case of release of foreign exchange for travel abroad, photocopies of first six
pages of the passport s and the page recording endorsement of foreign exchange and
photocopies of the pages of ticket showing name of the passenger, route and date of
journey and endorsement of foreign exchange along with the relative T.M. form
should be sent to Bangladesh Bank along with monthly returns.
86
7. Health & Medical:
Authorized Dealers without prior approval of Bangladesh Bank may release foreign
exchange up to US$10,000/- for medical treatment abroad on the basis of the
recommendation of the medical Board set up the Head Directorate and the cost estimate
of the foreign medical institution.
Applications for release of exchange exceeding US$10,000/- should be forwarded along

with supporting documents to Bangladesh Bank for prior approval.
8. Seminars & workshops:
Without prior approval of Bangladesh Bank AD may release US$200/- per them and
US$250/- per them to the private sector participants for attending seminars, conferences
and workshops organized by recognized International bodies in SAARC member countries
or Myanmar and in other countries respectively for the actual period of the
seminar/workshop/conference to be held on this basis of invitation letters received in the
names of the application or their employer institutional.
9. Foreign Nationals:
 The Authorized Dealers may issue foreign currency TCs to foreign nationals without
any limit and foreign currency notes up to US$300/- or equivalent per person against
surrender of equivalents amounts in foreign currencies. The TCs and foreign currency
notes should however, be delivered only on production of ticket for a destination
outside Bangladesh and the amount issued should be endorsed on the relative
passports.
 Authorized Dealers may allow recon version of unspent Taka funds of foreign tourists
into foreign exchange on production of the encashment certificate of foreign currency.
Recon version shall be allowed by the same AD with which the foreign currency was
encashed earlier. AD should retain the original encashment certificate and relative
forms where reconversion exceeds US$5000/-.
10. Remittance for Haji:
Authorized Dealers may release foreign exchange to the intending pilgrims for performing
Hajj as per instructions/circulars to be issued by the Bangladesh Bank each year.
87
11. Other Private remittance:
Applications for remittances by private individuals for purposes other than those
mentioned above should be forwarded to Bangladesh Bank for consideration & approval
after assessing the bonafide of the purpose of remittance on the basis of documentary
evidence submitted by the applicant.
B. Official & Business Travel:
1. Official Visit:
For official or semi officials visits abroad by the officials of govt.,

Autonomous/Semiautonomous institutions etc., Authorized Dealers may release foreign
exchange as per entitlements fixed by the Ministry of Finance from time to time, In such
cases, the applicant for foreign exchange shall be required to submit the sanction letter
and the competent authority's Order/Notification/Circular authorizing the travel.
2. Business Travel Quota for Now Exporters:
Up to US $6,000/- or equivalent may be issued by an AD without prior approval of

Bangladesh Bank to a new exporter for business travel abroad, against recommendation
letter from Export Promotion Bureau, Bonafide requirement beyond US$6000/- is
accommodated by Bangladesh Bank upon written request through an AD with supporting
documents.
3. Business Travel Quota for Importers and Non-exporting producers:
I. Subject to annual upper limit of US$5000/- importers are entitled to a business

travel quota @ 1 % of their imports settled during the previous financial year.
II. Subject to annual upper limit of US$5000/- non exporting producers for the local
markets are entitled to a business travel quota @1 % of their turnover of the
proceeding financial year as declared in their tax return.
The same business organization engaged in imports as well as production shall

however; draw business travel quota entitlement only on one count.
88
4. Exporters' Retention Quota:
i) Merchandise exporters may retain up to 40% of realized FOB value of their exports in
foreign currency accounts. However, for export of goods having account. However, for
exports of goods having high import content (such as readymade garments, POL products
including furnace oil bitumen, electronic goods etc.,) the retention quota is 7.5% of the
repatriated FOB value.
Funds from these accounts can be used to meet bonafide business expenditure, such as
business visits abroad, participation in export fairs and seminars, establishment and
maintenance of office abroad, import of raw materials, machinery and spares etc. without
prior approval of Bangladesh Bank.
Exporters may at their option, retain the foreign currency in interest bearing renewable
term deposit accounts with Authorized Dealers in US Dollar, Pound Sterling DM or
Japanese Yen with a minimum account of US$2000 or Pound 1500/
ii) Service exporters (excluding indenting commission or agency commission of indenting

house of buying house respectively) may retain 5% of their repatriated income in foreign
currency accounts or as renewable time deposits with Authorized Dealers, Funds from
these accounts can be used to meet expenses for bonafide business travel abroad.
C. Commercial Remittances:
1. Opening of branches or subsidiary companies abroad:
Remittance of up to US$30,000/- or equivalent per annum may be released by the

Authorized Dealers without prior approval of Bangladesh Bank to meet current expenses
of offices/branches opened abroad by resident in Bangladesh or Commercial/Industrial
concern incorporated in Bangladesh. Such remittance may only be made in the names of
concerned offices/subsidiary companies abroad subject top examination of following
papers:
I. Approval letter of the competent authority of the country concerned for

opening the office in that country
II. Copy of report submitted to Bangladesh bank.
89
2. Remittance by shipping companies airlines & courier service:
Foreign Shipping Companies, airlines and courier service companies may send, through
an AD, funds collected in Bangladesh towards freight and passage after adjustment of
The Authorized Dealers may remit such royalty and other local cost & Taxes, if any
without prior approval of Bangladesh Bank.
3. Remittance of royalty and technical fees:
No prior permission of the Bangladesh Bank of BOI is required by the enterprises for
entering into agreement involving remittance of royalty, technical know-how or technical
assistance fees, operational services fees, marketing commission etc., if the total fees and
other expenses connected with technology transfer do not exceed.
a) 6% of the cost of imported machinery in case of new projects
b) 6% of the previous year's sales as declared in the income tax returns of the ongoing
concerns.
The authorized dealers may remit such royalty and other fees without prior approval of
Bangladesh Bank. Royalty and other fees beyond the rate mentioned above may be
remitted by the Authorized Dealers without prior approval of Bangladesh bank provided
specific approval of BOI has been obtained by the applicant company.
4. Remittance on account of training & consultancy
Industrial enterprises producing for local market may remit through Authorized Dealers up
to 1% of their annual sales as declared in their previous years' tax return for the purpose
of training and consultancy services as per relevant contract with the foreign
trainer/consultant, without prior approval of Bangladesh Bank.
5. Remittance of profits of foreign firms/branches:
Authorized Dealers may without prior Bangladesh Bank approval remit abroad the post
tax profits of branches of foreign firms and companies including foreign banks & other
financial institutions subject to submission of relevant documents/information along with
the application.
90
6. Remittance of Dividend:
Prior permission of Bangladesh Bank is not required for
 Remittance of dividend income to non-resident shareholders on receipt of

application in the prescribe form from the companies concerned.
 Remittance of dividend declared out of previous years' accumulated reserves.
7. Subscriptions to foreign media services:
On application from the local newspapers, Authorized Dealers may remit foreign exchange
towards cost of subscription of news items, features, articles of foreign news agencies
subject to submission of (1) contracts entered into between the applicant and the foreign
news agency and (ii) NOC of the Ministry of Information.
8. Costs/ for Router monitors:
Authorized Dealers may remit abroad costs/fees on account of their own subscription to
foreign media services such as Reuter monitor service, without prior approval of
Bangladesh Bank.
9. Advertisement of Bangladeshi Products In mass media abroad:
Prior permission of Bangladesh is not required by the Authorized Dealers for remittance of
charges for advertisement of Bangladeshi commodities in mass media abroad subject to
submission of Invoice from the concerned foreign mass media along with the applications
of the remitter. The applicant will have to submit copy of the advertisement to the Ad
within one month of this issuance.
8. Bank Charges:
The Authorized Dealers may affect remittances towards settlement of dues to foreign
banks of bank charges, cost of cables and other incidental charges arising in their normal
course of the business without prior approval of Bangladesh Bank.
91
The following would be the procedure for Accounting-
1. Foreign Currency Notes
Party’s A/C / Cash at FC selling rate Dr.

Foreign currency in hand Cr.
Income A/C-Commission, (if any) Cr.
2. TC, Draft and TT
Party’s A/C / Cash from party@ TC/ OD selling rate Plus Dr.
charges
AB General A/C: HO ID) @ ready selling rate Cr.
Income A/C for the difference between the two rates Cr.
Income A/C for Commission as per schedule of charges Cr.
3. TC draft and TT issued from FC A/C of customer
(General as well as retention quota of exporter)
Customer’s FC A/C @ current holding rate of FC balance Dr.

AB General A/C: HO ID) @ current holding rate of FC balance Cr.
Customers A/C or cash from the customer for charges Cr.
Income A/C as per schedule of charges Cr.
4. Issue of Foreign Currency Notes to the debit of the customer’s FC A/C (General or
retention quota)
Party’s FC A/C at prevailing cash selling rate plus commission Dr.

and charges as per schedule
FC in hand A/C at cash selling rate Cr.
Income A/C for Commission, as per schedule. Cr.
5. Settlement of TC on weekly basis
TC issued Dr.
AB General A/C HO ID Cr.
92
Year wise WES Remittance Position.
Figures in Million U.S. Dollar

K.S.A. Middle East U.S.A. U.K. OTHERS TOTAL
except KSA
2000 335.88 173.43 100.88 54.11 16.23 680.53

2001 340.30 183.47 134.71 48.47 12.17 719.12
2002 417.82 207.99 206.05 153.02 19.62 1004.50
2003 329.49 206.14 181.87 206.55 19.48 943.53
2004 497.99 219.83 173.70 228.68 21.35 1141.55
2005 558.99 231.44 193.44 187.93 18.22 1190.02
2006 630.98 242.91 194.96 167.68 18.03 1254.56
2007 453.46 270.67 199.65 243.08 20.28 1187.14
2008(July) 398.51 180.73 128.31 85.82 13.88 805.85
Month wise WES Remittance Position.

Month K.S.A Middle East U.S.A. U.K. OTHERS TOTAL

except KSA
56.63 21.16 17.20 12.80 2.23 110.02

Jan.08
54.63 22.00 16.33 10.92 2.24 105.52
Feb’08
59.08 27.80 20.71 15.24 1.94 124.77
March’08
April’08 62.70 28.62 18.35 11.25 2.19 123.11
54.69 27.38 18.72 8.95 1.84 111.58
May,08
62.01 31.31 18.63 12.80 1.40 126.15
June’08
49.37 24.42 16.37 12.46 2.08 104.70
July’087
398.51 180.73 128.31 85.82 13.88 805.85
Total
93
Year wise target & achievement theiragainst.
Year Target Achievement %
2003 $1106.00 $ 943.53 85.31
2004 $1191.05 $1141.55 95.84
2005 $1430.00 $1190.02 83.22
2006 $1309.00 $1254.56 95.84
2007 $1380.00 $1187.14 86.02

2008(June) Tk90380 $805.85 61%
$1321.00
4.2 EXPORT:
AB Banks Export volume growth was 15.67 percent as the total export reached tk.
2067.66 crore at the end of the year. Export business concentration was in the area of
frozen fish, readymade garments, knitwear and other indigenous products.
MAJOR EXPORT BY AB BANK (FIG. IN CRORE)

YEAR 2003 2004 2005 2006 2007
READYMADE
GARMENTS 500 700 1000 1200 1300
KNITWEAR 250 200 150 400 500
FROZEN FISH 100 80 80 100 100
INDIGENOUS
PRODUCTS 100 50 50 100 168
MAJOR EXPORT BY AB BANK
1500 READYMADE
GARMENTS
1000
VALUES KNITWEAR
500
FROZEN FISH
0
2003 2005 2007
INDIGENOUS
YEAR PRODUCTS
94
AB Banks foreign correspondence relationship is spread across the world covering

important financial centers including important financial houses. This network of over 300
correspondents has helped bank in expanding its international trade.
YEAR EXPORT(Million tk)

2003 9743
2004 10100
2005 12595
2006 17876
2007 20677
EXPORT
25000
20000
15000
10000
EXPORT
5000
0
2003 2004 2005 2006 2007
YEAR
4.2.1 Export Procedures:
The import and export trade in our country are regulated by the Import and Export
(Control) Act, 1950.
Under the export policy of Bangladesh the exporter has to get valid Export registration
Certificate (ERC) from Chief Controller of Import & Export (CCI&E). The ERC is required
to renew every year. The ERC number is to incorporate on EXP forms and other papers
connected with exports.
 Registration of Exporters:
For obtaining ERC, intending Bangladeshi exporters are required to apply to the
controller/ Joint Controller/ Deputy Controller/ Assistant Controller of Imports and
Exports, Dhaka/ Chittagong/ Raishahi/ Mymensingh/ Sylhet/ Comilla/ Badshal/ Bogra/
Rangpur/ Dinajpur in the prescribed form along with the following documents:
95
 Nationality and Assets Certificate-

 Memorandum and Article of Association and Certificate of Incorporation in case of
Limited Company-,
 Bank Certificate
 Income Tax Certificate
 Trade License etc.
 Securing the Order:
After getting ERC Certificate the exporter may proceed to secure the export order. He
can do this by contacting the buyers directly or through agent.
In this purpose the exporter may get help from:
 License Officer
 Buyers Local Agent
 Export Promoting Organization
 Bangladesh Mission Abroad
 Chamber of Commerce (local & foreign)
 Trade Fair etc
 Signing the Contract:
After communicating buyer, exporter has to get contracted (writing or oral) for exporting
exportable items from Bangladesh detailing commodity, quantity, price, shipment,
insurance and marks, inspection and arbitration etc.
 Receiving Letter of Credit:
After getting contract for sale, exporter should ask the buyer for Letter of Credit (L/C)
clearly stating terms and conditions of export and payment.
The following are the main points to be looked into for receiving/ collecting export
proceeds by means of Documentary Credit-.
 The terms of the L/C are in conformity with those of the contract"
 The L/C is an irrevocable one, preferably confirmed by the advising bank;
 The L/C allows sufficient time for shipment and negotiation.
(Here the regulatory framework is UCPDC-600, ICC publication)
96
Terms and conditions should be stated in the contract clearly in case of other mode of
payment:
 Cash in advance-,
 Open account,
 Collection basis (Documentary/ Clean)
(Here the regulatory framework is URC-522, ICC publication
 Procuring the Materials:
After making the deal and on having the L/C opened in his favor, the next step for
the exporter is to set about the task of procuring or manufacturing the contracted
merchandise.
 Shipment Of Goods:
Then the exporter should take the preparation for export arrangement for delivery of
goods as per L/C, prepare and submit shipping documents for Payment/ Acceptance/
Negotiation in due time.
Documents for shipment:
i. EXP form,
ii.ERC (valid),
iii. L/C copy,
iv. Customer Duty Certificate,
v.Shipping Instruction,
vi. Transport Documents,
vii. Insurance Documents,
viii. Invoice
ix. Other Documents,
x.Bills of Exchange (if required) Certificate of Origin,
xi. Inspection Certificate
xii. Quality Control Certificate,
xiii. G.S.P. Certificate,
xiv. Phyto-sanitary Certificate.
 Final Step: Submission of the documents to the Bank for negotiation.
97
Back to Back Letter of Credit (BTB):
Bangladesh is a developing country. After receiving order from the importer, very
frequently exporters face problems of scarcity of raw material.Because some raw
materials are not available in the country. These have to be collected from abroad. In
that case, exporter gives lien of export L/C to bank as security and opens an L/C against
it for importing raw materials. This L/C is called Back To Back L/C. In back to back L/C,
PBL keeps no margin.
Sometimes there is provision in the export UC that the importer can use the certain
portion of the export L/C amount for importing accessories that are necessary for the
making of the product. Only in that case, BTB is opened.
Payment of Back to Back LC:
Client gives the payment of the BTB L/C after receiving the payment from the importers.
But in some cases, client sells the bills to the ABBL. But if there is discrepancy, the ABBL
sends it for collection.
In case of BTB L/C, ABBL gives the payment to the beneficiary after receiving the
payment from the UC of the finished product (i.e. exporter). Bank gives the payment
from DFC Account (Deposit Foreign Currency Account) where Dollar is deposited in
national rate.
For BTB L/C, opener has to pay interest at LIBOR rate (London Inter Bank Offering Rate).
Generally LIBOR rate fluctuates from 3% to 5%.
A schedule named Payment Order; Forwarding Schedule is prepared while making the
payment. This schedule is prepared when the payment of UC is made. This schedule
contains the followings:
 Reference number of the beneficiary's bank and date.

 Beneficiary's name.
 Bill value.
 Payment order number and date.
 Equivalent amount in Taka
98
Negotiation of documents under L/C:
The exporter presents the relative documents to the negotiating bank after the shipment
of the goods, A slight deviation of the documents from those specified in the L/C may rise
an excuse to the issuing bank to refuse the reimbursement of the payment already made
by the negotiating bank. So the negotiating bank must be careful prompt, systematic and
indifferent while scrutinizing the documents relating to the export.
Foreign Documentary Bill Purchase (FDBC):
Sometimes the client submits the bill of export to bank for collection and payment of the
BTB UC. In that case, bank purchases the bill and collects the money from the exporter.
ABBL subtracts the amount of bill from BTB and gives the rest amount to the client in
cash or by crediting his account or by the pay order.
For this purpose, ABBL maintains a separate register named FDBC Register. This register
contains the following information:
 Date
 Reference number (FDBC)
 Name of the drawer
 Name of the collecting bank
 Conversion rate
 Bill amount both in figure & in Taka.
 Export form number
 Export L/C number
Advances against Export Bills surrendered for collection:
Banks generally accept bills for collection of proceeds when they are not drawn under an
L/C or when the documents, even though drawn against an L/C contain some
discrepancies. The bank generally negotiates bills drawn under L/C, without any
discrepancy in the documents, and the exporter gets the money from the bank
immediately. However, if the bill is not eligible for negotiation, the exporter may obtain
advance from the bank against the security of export bill. In addition to the export bill,
banks may ask for collateral security like a guarantee by a third party and
equitable/registered mortgage of property.
99
4.2.2 Export Documents Checking:
General verification: -
 L/C restricted or not.

 Exporter submitted documents before expiry date of the credit.
 Shortage of documents etc.
Particular verification:
 Each and every document should be verified with the L/C.
4.3 IMPORT:
International trade is one of the important components of the AB Banks foreign exchange
business. In 2007, both Import and Exports experienced double digit growth keeping in
pace with the overall business growth. Imports at the end of the year stood at Tk.
4844.14 crore . Major Import finance was in the areas of food items, textiles, and scrap
vessels among others.
YEAR 2003 2004 2005 2006 2007

FOOD ITEMS 1300 1200 1700 2500 3000
TEXTILE 500 400 500 900 1000
SCRAP VESSELS 200 350 200 880 845
MAJOR IMPORT BY AB BANK
4000
3000 FOOD ITEMS
VALUES
2000
TEXTILE
1000
0 SCRAP
2003 2004 2005 2006 2007 VESSELS
YEAR
Procedures:-
An importer is required to have the following to import through ABBL---
Applicant has to apply for opening LC by a prescribed form.
100
a. Applicant has to submit the Letter of Indent or Letter of Proforma Invoice.

b. Letter of Indent: Many sellers have their agent in seller’s country. If the
contract of buying is made between the buyers and the agent of the sellers
then Letter o Indent is required.
c. Letter of Proforma Invoice: If the contract is made directly between the
buyer and the sellers then Letter of Proforma Invoice is needed.
d. Applicant has to submit IRC (Inventors Registration Certificate). It is a
certificate being renewed every year. This certificate is necessary if the
contract is made between the buyers and the agents of the sellers. IRC is of
two types - COM and IND. COM is given for commerce purpose and IND is
given for industrial purpose.
e. Applicant has to submit LCAF (Letter of Credit Authorization Form).
f. Applicant has to submit insurance document.
g. Applicant has to prepare FORM-IMP.
h. Recently, there has been made a provision to give a certificate named TIN
(Tax Payers Identification Number).Taxation department issues this certificate.
i. Then after proper scrutiny bank will open an L/C.
While opening L/C, importer must keep certain percentage of the document value in the
bank as margin.
4.3.1 Procedure to Open an L/C:-
To open an L/C, the requirements of an importer are:
 He must have an account in ABBL.

 He must have Importers Registration Certificate (IRC).
 Report on past performance with other bank. ABBL collects this report from
Bangladesh Bank.
 CIB (Credit Information Bureau) report from Bangladesh Bank.
 A proposal approved by the meeting of executive committee of the bank. It is
necessary only when the L/C amount is small or there is no limit.
If the L/C amount is large or there is a limit, then an approval from Bangladesh Bank is
needed. Usually this approval is needed for amount more than one crore.
101
Accounting Treatment For Opening LIC.
For opening L/C, importer will apply to the issuing bank. In that case, importer is called
applicant or opener. After opening an L/C bank will create a contingent liability. In that
case, the accounting posting will be the following-.
Customers Liability Dr.

Contingent Liability Cr.
Generally L/C is opened against some margin.
 While paying the money by the issuing bank, issuing bank will reverse the above entry
and the entry will be-
Contingent Liability Dr.
Customers Liability Cr.
 Then the issuing bank will give another entry---
Payment Against Document (PAD) Dr.

AB General Account Cr.
Exchange Gain Cr.
PAD will debit because the bank will pay the money against some documents’ General
Account is a miscellaneous account. It will be credited because by this entry ABBL
creates a liability. He has to pay the money to the advising bank. And the gain made by
the transaction is shown at Exchange Gain Account.
102
4.3.2 A Rich picture of current L/C system
103
Figure: Mechanism of LC
 Importers will pay the due to the bank and collects the documents. In that case, the
entry will be –
Party Account Dr.

PAD Account Cr.
After opening the L/C, ABBL (issuing bank) must receive the documents for any other
proceedings. These documents are ---
i. Bill of Lading,
ii. Invoice,
iii. Packing List,
iv. Country of Origin.
4.3.3 Lodgment of documents:
After receiving the documents from the exporters, at first ABBL write it in the PAD
Registrar. PAD Register contains date, PAD number, L/C number, name of the drawer,
name of the drawee, amount, number of copies of various documents, name of the
imported items. This written procedure is called Lodgment.
Accounting Application:
While doing lodgment, ABBL makes the following entries-
Payment Against Document (PAD) Dr.

AB General Account Cr.
Exchange Gain Cr.
ABBL makes the payment to the reimbursing bank against the documents. That's why, it
debts the PAD Account. For payment, ABBL deposits the money at the miscellaneous
account @69.35 (current rate). And sends an Inter Branch Credit Advice (IBCA) to credit
the amount to a Nostro account maintained in a bank of exporters' country from which
payment will be made. By this transaction, ABBL makes a profit @O. 1 5 per dollar.
4.3.4 Retirement of Documents:-
104
The process of collecting documents from bank by the importer is called retirement of
the documents. The importer gives necessary instructions to the bank for retirement of
the import bills or for the disposal of the shipping documents to clear the imported goods
from the customs authority. The importer may instruct the bank to retire the documents
by debiting his current A/C.
From 2003 to 2007 AB Bank Import is as follows:
YEAR IMPORT
2003 19281
2004 19266
2005 23151
2006 42860
2007 48441
IMPORT
50000
40000
30000
20000
IMPORT
10000
0
2003 2004 2005 2006 2007
YEAR
105
EXPORT TK
ABBL
1 L.C ADVICE CHARGE 1000
2 L.C AMMENDMENT CHARGE 800
3 L.C CORRECTION CHARGE 500
DOCUMENT HANDLING
4 COMMISSION .20-.40
5 L.C TRANSFER COMMISSION .30-.45
DOCUMENT HANDLING
6 POSTAGE 500
7 CURRIER CHARGE 1500
8 EXP CHARGE 500
9 EXP CANCELLASION CHARGE 500
10 DISCREPENCY CHARGE 300
11 TRANSFER L.C OTHER BANK 1200
12 ADD CONFIRMATION CHARGE 1000
13 ISSUANCE OF PRC 500
IMPORT & BACK TO BACK
ABBL
1 L.C OPEN COMMISSION .30-.45
L.C AMMENDMENT FOREIGN
2 COMMISSION .30-.45 REMITTANCE TK
3 L.C OPEN SWIFT CHARGE 500 ABBL
HANDLING
CHARGE FOR
STUDENT
EDUCATION
4 L.C OPEN POSTAGE 300 FOR ABROAD 3000
ENCASHMENT
5 L.C OPEN PROCESS 2000 OF ANY T.T 150-350
SHIPPING GURRENTE OTHER
6 CHARGE 2000 CHARGES 200-1000
ACCEPTANCE
7 COMMISSION .20-.55
8 ACCEPTANCE POSTAGE 300
9 ACCEPTANCE SWIFT 750
ACCEPTANCE IMP
10 CHARGE 50
AMMANDMENT
11 PROCESSING CHARGE 1000
106
Chapter Five
Conclusion
107
This is the most crucial chapter for the

report. In the chapter, valuable findings
from the report and some evaluative
recommendations on the basis of those
findings are going to present.
CHAPTER 5
5.1 Conclusion
Banks play a very vital role in the economic development of the country. The popularity
of banks is increasing day by day which leads to increase competition as well. Currently
52 Banks are operating in Bangladesh. All the Commercial banks are offering almost the
same products and services and almost same their operation system. But the ways they
provide the services are different from each other. So people choose their Bank according
to their satisfaction and need. And they will prefer the bank of which service is easily
accessible and understandable. One the other hand, Bank innovate new products and
services to attract their desired customers.
ABBL is one of the most potential banks in the banking sector. It has a large portfolio
with huge assets to meet up its liabilities and the management of this bank is equipped
with the expert bankers and managers in all level of management. So it is not an easy job
to find out the drawbacks of this bank.
108
5.2 FINDINGS
Both export and import seem to be increasing every year for all the concerned banks. This
shows the rising effect of globalization and accelerating foreign trade in Bangladesh. Every year
the banks seem to have increasing facilitating international trade.
Import has always been greater than export for every bank every year. The increase in import
from 2003 to 2008 for each bank has been approximately BDT 30,000 million for every
concerned bank. Whereas the rise in export has been approximately BDT25,000 million. This
shows our dependency on foreign goods hence foreign trade. This is also the cause of negative
balance of trade of Bangladesh.
Excess import over export during the years means increasing outflow than inflow of foreign
currency for the country. This results in negative balance of payment for Bangladesh. Rising
demand for foreign currency creates rising trend in their price or value hence making our local
currency weaker than before.
Foreign remittance inward has also increased over the years for each bank but it is much lower
than the increase in import. Thus this low inflow of foreign currency into the country cannot
cover up the balance of payment deficit.
109
5.3 RECOMMENDATIONS
For the improvement of the service the following measures should be taken:
 Providing More Industrial Loans:
It seemed to me that the bank having a large amount of deposit is not encouraging the
large scale producers that much of long term industrial loans to accelerate the economy
as well as to help the economy to solve unemployment problem.
 Ensure Proper Division of Labor In The Desk:
There is lack of division of labor in the branch. This decreases the level of performance of
the personnel, though it reduces monotonousness. But lack of division of labour hampers
the discipline of working environment. So customers are to wait for some time for the
desired service, which is contrary to the AB Bank’s objective.
 Ensure Sufficient Manpower:
The number of human resources in the Computer section is really insufficient to give
services to huge number of customers. So, number of staff should be increased in this
section.
 Development of Human Resources:
Human resource is another sector for the branch to be developed urgently. Human
resources, in the branch, need to be equipped with adequate banking knowledge.
Majority of the human resources must have basic knowledge regarding money, banking,
finance and accounting. Without proper knowledge in these subjects, efficiency cannot be
optimized. Bank can arrange training program on these subjects.
 Ensure Sufficient Forms and Brochures:
There are always shortages of application forms, brochures, etc. in the branch. These
forms and brochures must be maintained in sufficient quantity. Otherwise customer
service will be hampered.
110
 More Gifts and Discounts for the Premium Customers:
Premium Customers should be offered occasional gifts and discounts, which can make
the Premium service more attractive and make customer delight. The interest rates on
several loan and deposit schemes should be differentiated for the premium customers.
 Offer Some Loan and Deposit Scheme Exclusively for the Premium Customers:
All the lending and savings packages offered to the premium customers are same as
offered to the general customers, excepting the waiver of service charges for premium
ones.
The bank can pay more attention to this segment of customers, as it is the most solvent
group from which income can be generated if the package is designed properly. The
bank can pay more attention to this segment of customers, as it is the most solvent group
from which income can be generated if the package is designed properly.
AB Bank limited is a leading Private commercial bank in Bangladesh with superior

customer bases that are loyal, faithful, worthy towards the bank. The service provided by
the young energetic officials of the AB Bank Limited is very satisfactory. As a commercial
bank ABBL has to follow the rules of Bangladesh bank despite the fact that these rules
sometime restrict the foreign business to some extent. As a proud member of this bank I
have found its foreign exchange department to be very efficient; therefore this
department plays a major role in the overall profitability of the bank.
111
Chapter Six
Bibliography
112
CHAPTER 6
BIBLIOGRAPHY
Guidelines for foreign exchange transaction.

Import and Export policy order.
Exchange rate policy.
Importers , Exporters and Indenters ( Registration ) order , 1981
Uniform rules for collection, international Chamber of commerce, publication
no.522 widely expressed as URC, ICC- 522.
Uniform rules for Bank- to Bank Reimbursement , International Chamber of
Commerce, publication no. 525 widely expressed as URR, ICC- 525
International Standard Banking practice (ISBP).
Inco terms – 2000
Import & Export ( control) act, 1950
Foreign Exchange Regulation Act ( FFRA ), 1947
UCPDC, ICC – 600, Revision, 2007.
Operational manual
Various Circulars sent by Head Office and Bangladesh Bank, broachers,
publications on Bank
Daily diary (containing my activities of practical orientation in AB Bank Ltd)
maintained by me,
Websites,
Annual Report of the bank,
Personal investigation with bankers,
113
Chapter:7 APPENDIX
Year export import profit after tax
2005 12595 23151 162

2006 17876 42860 532
2007 20677 48441 1903
2008 28937 70041 2301
2009 30640 65956 3363
Regression
Descriptive Statistics
Mean Std. N
Deviation
PAT 1682.2000 1270.5474 5
EXPORT 22145.00 7580.87 5
IMPORT 50089.80 18910.80 5
Correlations
PAT EXPORT IMPORT

Pearson PAT 1.000 .938 .873
Correlation
EXPORT .938 1.000 .978
IMPORT .873 .978 1.000
Sig. (1- PAT . .009 .027
tailed)
EXPORT .009 . .002
IMPORT .027 .002 .
N PAT 5 5 5
EXPORT 5 5 5
IMPORT 5 5 5
Descriptive Statistics
Mean Std. N
Deviation
PAT 1682.2000 1270.5474 5
EXPORT 22145.00 7580.87 5
IMPORT 50089.80 18910.80 5
114
Variables Entered/Removed
Model Variables Variables Method
Entered Removed
1 IMPORT, . Enter
EXPORT
a All requested variables entered.
b Dependent Variable: PAT
Model Summary
R R Square Adjusted Std. Error Change
R Square of the Statistics
Estimate
Model R Square F Change df1 df2 Sig. F

Change Change
1 .963 .927 .854 484.9652 .927 12.727 2 2 .073
a Predictors: (Constant), IMPORT, EXPORT
ANOVA
Model Sum of df Mean Square F Sig.
Squares
1 Regression 5986780.381 2 2993390.191 12.727 .073
Residual 470382.419 2 235191.209
Total 6457162.800 4
a Predictors: (Constant), IMPORT, EXPORT

b Dependent Variable: PAT
Coefficient Correlations
Model IMPORT EXPORT
1 Correlations IMPORT 1.000 -.978
EXPORT -.978 1.000
Covariances IMPORT 3.783E-03 -9.230E-03
EXPORT -9.230E-03 2.354E-02

a Dependent Variable: PAT
Unstandardized Standardized t Sig.95% Confidence Correlati

Coefficients Coefficients Interval for B ons
Model B Std. Error Beta Lower Bound Upper Zero- Partial
Bound order
1 (Constant -2074.581 779.388 -2.662 .117 -5428.0541278.89
) 3
EXPORT .327 .153 1.951 2.132 .167 -.333 .987 .938 .833
IMPORT -6.959E-02 .062 -1.036 -1.131 .375 -.334 .195 .873 -.625
Coefficients
a Dependent Variable: PAT
115

Asa University Bangladesh: Thesis Report On "Procedure of Foreign Trade Finance in AB Bank Limited"

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Asa University Bangladesh: Thesis Report On "Procedure of Foreign Trade Finance in AB Bank Limited"

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Procedure of foreign trade finance

ASA UNIVERSITY BANGLADESH

Date of Submission 20.06.2011

Shah Md.Al Emran Sarker

Subject:Thesis Report on Procedure of foreign trade finance in AB Bank Limited

An account is a media of personal and companies banking transaction. In the case of an

Chapter 2: Organization in Focus

3.1.1 Export policy

3.1.2 Export Incentives

3.1.3 Export Procedures

3.1.4 Procedure of collection of Export bill

3.1.5 Export Financing

3.1.6 Export Documents Checking

3.2 Import Section

3.2.1 Import Mechanism

3.2.2 Procedure to Open an L/C

3.2.3 Letter of Credit

3.2.4 Types of Documentary Credits

3.2.5 Parties of Letter of Credit

3.2.6 Some Important Documents of L/C

3.2.7 Form – IMP

3.2.8 Lodgment of Documents

3.2.9 Retirements of Documents

3.3 Foreign Remittances Section (Inward & Outward)

3.3.1 Foreign Inward Remittance

3.3.2 Foreign Outward Remittance

3.3.3 Role of Different Institutes and Instrument Involved in Foreign Remittance

3.3.4 Remittance Transfer Process

1.1 Origin of the Report

1.2 Objective of the Report

1.3 Scope of the Study

Data & Information

Primary Sources Secondary Sources

 Bangladesh Bank’s Circular  Interview of the employees

 Sufficient data for prepare a report is not available.

2.1 HISTORY OF AB BANK LIMITED:

2.2 Organizational Structure of ABBL.

Bangladesh Sponsors 20%

Bangladeshi General Public 15%

Bangladesh Government 05%

Dubai Bank Ltd. 60%

Table 1: Organizational Structure of AB Bank Ltd

2.3 Capital Structure of ABBL.

Bangladeshi General Public 49.43%

Govt. of Bangladesh 0.57%

2.4 Change of Name and Logo of ABBL.

Previous Name & Logo New Name & Logo

Arab Bangladesh Bank Ltd. AB Bank Ltd

Table : Name & Logo of ABBL

2.5 Corporate Information of ABBL.

Name of the Branch where completed the Internship

2.6 ORGANIZATIONAL HIERERCHY OF ABBL:

SENIOR EXE. VICE PRESIDENT

EXECUTIVE VICE PRESIDENT

SENIOR VICE PRESIDENT

SENIOR ASST. VICE PRESIDENT

ASSTT. VICE PRESIDENT

SR. PRINCIPAL OFFICER

Entity Rating Entity Rating Definition

Date of Rating 15th June, 2010

Rating Report of AB Bank (Source: AB Bank Annual Report 2009)

Credit Rating Agency of Bangladesh Limited (CRAB) has assigned “AA3”