Letter of Credit or L/C :

L/C is a conditional undertaking to the exporter by the issuing bank on behalf of importer after
presentation of documents as per credit.
Classification of L/C:
1. Revocable L/C 5. Red clause L/C
2. Irrevocable L/C 6. Back to Back L/C
3. Revolving L/C 7. Green Clause L/C
4. Transferable L/C
As per UCP article No. 6(B) L/C types are:
1. Sight
2. Deferred
Revocable LC:
Which can be amendment/cancelled without prior approval of the exporter.
Irrevocable LC
Which can’t be amendment/cancelled without prior approval of the exporter
Revolving LC
Which provides for restoring the credit to the original amount after is has been unitized
Transferable LC
The LC which can be transferred to a 3rd party, that is transferable LC
Red clause LC
Advance finance by the importer against LC for finished goods
Green Clause LC
Advance received of the goods from the importer
Parties of L/C:
1. Importer
2. Exporter
3. Issuing bank
4. Advising bank
5. Negotiating Bank
6. Add-Confirming Bank
7. Reimbursing Bank
Add Confirming Bank
The bank adds its confirmation to a LC is known as add confirming Bank
Reimbursement bank
The bank that pays against a complying presentation is known as reimbursement Bank
Advising Bank
The bank that advice the credit at the request to the issuing bank is known a advising bank
Requirement of L/C opening:
1. Application
2. IRC
3. PI/Indent
4. Trade License
5. Tax and Vat certificate
6. uL/C Authorization form (06 copy)
7. IMP form (04 copy)
8. Printed application form duly stamped
9. Credit report of the exportergh
Four Main Documents of Import/Export L/C:
jnmjuiuuvvgh
 1. Commercial Invoice
2. Transport Document
3. Insurance Document
4. Other
Back to Back L/C
Which is open against lien on Master L/C received by the export oriented industrial unit
operating under bonded ware house system
BTB L/C must not exceed 80% of the master L/C
Required paper to open BTB LC
 LC application
 LCA form IMP form
 Valid Trade License
 IRC
 PI
 Insurance cove note
 Credit report
 Master LC duly lien marked
 Charge document duly stamped
Prime documents submitted to Bank by export for negotiation:
 Bill of Exchange
 Bill of Leading
 Commercial Invoice
 Certificate of origin
 Packing List
 Inspection report
 Insurance certificate
 Quality control certificate
Lodgement:
After receiving the documents from negotiating Bank, the issuing Bank examine the documents
and if found in order, the issuing bank make payment instruction to the reimbursing (paying)
bank is lodgement.

Bill of Entry:
A written statement prepared by CNF agent on behalf of importer on a prescribed form
describing nature, quantity and value of imported goods along with supported paper, they
submit the same to custom authority, custom authority assess the paper and impose duty, vat
and other charges and CNF agent make payment, finally custom authority issue a comprised
certificate which is Bill of Entry.
Bill of lading:
A bill of lading is an evidence of contract of carriage. This document is required by the
importer to take delivery of goods. It’s a quasi-negotiable instrument.
IRC :
Mean = Import Registration Certificate
Issued by Chief Controller of Import & Export
Contains of IRC:
1. Validity period and issue date mentioned
2. Name of the Importer/Exporter mentioned.
3. Sometime amount limited
4. Sometime item limited
Exempted person from registration as an Importer:
1. Govt. Department
jnmjuiuuvvgh
 2. Local Authority
3. Recognized Educational Institute
4. Hospital
5. Reading material or medicine imported for personal use
6. Capital machinery for new industry
ICC:
The International Chamber of Commerce
ICC is the world business organization who speaks with authority on behalf of enterprises in
every part of the world.
It is formed in 1919, member 130countries
ICC has three main activities:
1. Rule setting
2. Dispute regulation
3. Policy making
Publication of ICC
1. UCP-600
2. ISBP-681
3. URC-522
4. ISP-98
5. URDG-758
6. URR-725
7. INCOTERMS-2010
UCPDC
UCPDC means “Uniform Customs and Practice for Documentary Credits”.
The International Chamber of Commerce (ICC) in 1933 first published UCPDC. The latest
revised edition of UCPDC-600 came into force from 01.7.07.
There are 39 (thirty nine) articles in the UCPDC, ICC-600

INCOTERMS
International Commercial Terms
INCOTERMS-2010 describe delivery risk and cost involve in the delivery goods from seller to
buyer
Latest version INCOTERMS 2010 consists 11 rules and it effect from 1 st January 2011

Divided the INCOTERMS according to transport mode

Transport Mode
1. EXW – EX works
2. FCA – Free Carrier
3. CIP – Carrige and Insurance Paid
4. CPT – Carrige paid to
5. DAT – Delivered At Terminal
6. DAP – Delivered At Place
7. DDP – Delivered Duty Paid
Maritime & Inland waterway
8. FOB – Free on Board
9. FAS – Free Alongside Ship
10. CFR – Cost & Freight
11. CIF – Cost, Insurance and Freight

jnmjuiuuvvgh
URC
means Uniform Rules for Collection.
Firstly the International Chamber of Commerce (ICC) published URC in 1956 and latest
revised URC, ICC publication No. 522 came into force from 01.1.1996.
URR
Uniform Rules for Reimbursements. In a broader sense URR means Uniform Rules for Bank to
Bank Reimbursements under Documentary Credit.
The International Chamber of Commerce (ICC) published Uniform Rules for Bank to Bank
Reimbursement under Documentary Credit as ICC publication no. 725 in 2008 and came into
force on 01.10.2008.
ACU
ACU means Asian Clearing Union. It was established at the initiative of United Nations
‘Economic and Social Commission for Asia and the Pacific (ESCAP).
There are 09 (nine) member countries setting their respective import & export payments
through ACU currencies:
(i) India, (ii) Iran, (iii) Mayanmar (Burma), (iv) Sree Lanka, (v) Nepal, (vi)
Pakistan, (vii) Bangladesh, (viii) Bhutan and (ix) Maldives.
The head quarter of Asian Clearing Union situated at Tehran, Iran.
ACU currency?
The name of the ACU currency is Asian Monetary Unit (AMU). The Asian Monetary Unit
(AMU) shall be denominated as ‘ACU Dollar’ and ‘ACU Euro’ which shall be equivalent in
value to one US Dollar and one Euro respectively. Euro as AMU has introduced from 01.1.2009.
Foreign Exchange & Foreign Trade?
Foreign exchange means the exchange or convertibility of one currency into another currency.
Foreign Trade means imports of merchandises of a country from other countries and also
exports of merchandises to other countries under contract.
What are the strategies to increase our export to a maximum level?
1. Simplifying export procedures.
2. Providing facilities for technological development.
3. Ensuring maximum use of local raw materials in the production of export items.
4. Encouraging establishment of backward linkage industries.
5. Participation in international trade fair.
6. Encouraging export of new categories of high value added readymade garments.
7. For promotion of high value added leather goods export.
8. For promotion of export of shrimp.
9. For promotion of export of jute & jute goods.
10. For promotion of export of tea.
11. For promotion of export of electrical products.
12. For promotion of export of electronic goods including computer software & data entry.
What is Transport document?
Goods are carried from the Exporter (seller) to Importer (buyer) through various modes of
transport, viz: Truck, Rail, Air, Ship etc. All these modes are separately at a glance is called
Transport document.
Articles 19-27 of UCPDC-600 clearly mentioned about transport documents of various types
and modes.

jnmjuiuuvvgh
Multimodal Transport Document
When a transport documents covering at least two different modes of transport with
transshipment
Types of Transport Documents
 Marine/Ocean Bill of Leading for carriage by sea
 Air transport documents
 Road, Rail or inland waterway transport documents
 Courier receipt and postal receipt
Contains of Transport Documents:
 Name of the carrier or agent
 Description of the goods
 Shipping marks
 Name of the carrying vessel
 Place of final destination
 Freight has been paid or to paid
 Issue date

Write the modes of Import financing by Islami Bank.

1. Import of goods by Letter of Credit
2. Murabaha Import Bill (MIB)
3. Mudaraba Post Import (MPI)
4. Murabaha Trust Receipt (MTR):

What is MIB?
Payment made by the bank against lodgement of transport documents of goods imported
through L/C is called MIB.

What is MPI?
Normally importer pay the duty & sales tax of the imported goods after arrival at the port. Due
to shortage of fund or some other reasons, L/C opener bank to assist him for retirement of the
imported goods. As pledge on Bank’s/Parties godown under Bank’s control. This type of
payment is MPI.

What is MTR?
It is a type of investment allowed by a bank on trust to his experienced, reliable & reputed
importer for retirement of shipping documents towards release the imported goods.

What is Indent?
Some Firms or Companies are registered with the Regulatory bodies (CCI & E and Bangladesh
Bank) to act as an agent of foreign buyers or sellers. These agents are called Indentor.

What is Proforma Invoice?

After negotiation over phone/fax/letter/e-mail or any other mode between exporter and
importer, offer directly issued by the exporter to importer is called Proforma Invoice.

What is Commercial Invoice?

Commercial Invoice means a list of articles containing particulars and prices. There is no
prescribed form of Commercial invoice.

What is LIBOR?
LIBOR means London Inter Bank Offered Rate. LIBOR is the base rate of interest in London
market from which the Bank fixed its own rate of interest to charge on their lending to other
banks for a given period of time. LIBOR is considered a true reflection of the cost of funds to
the banks which thus use it as a base rate of interest.

jnmjuiuuvvgh
What is Consular Invoice?
A consular invoice may also contain a declaration about the place of origin of the goods. The
consul of the importing country then certifies the invoice.

What are the kinds of B/L?

There are eleven kinds of Bill of Lading (B/L):
(i) Clean Bill of Lading
(ii) Combined Transport Bill of Lading
(iii) Stale Bill of Lading
(iv) Short Form Bill of Lading
(v) Through Bill of Lading
(vi) Straight Bill of Lading
(vii) Chartered party Bill of Lading
(viii) Port or Custody Bill of Lading
(ix) Claused Bill of Lading
(x) On Deck Bill of Lading
(xi) Clean on Board Ocean Bill of Lading.

Export L/C?
The arrangement whereby on behalf of the applicant a bank (issuing bank) undertakes the
beneficiary to make payment or accept the Bill of Exchange or authorizes another bank to effect
payment or to negotiate against stipulated documents in compliance of certain terms and
conditions”. Such confirmed and certain undertaking to seller or exporter is called Export L/C.

Types of export finance

 Bai-Muajjal (Export)
 Musharaka Pre-Shipment (ECC) (PC)
 Foreign Documentary Bill Purchase (FDBP)
 Musharaka Documentary Bill (MDB)
 Back to Back LC

ECC:
Facility for purchasing raw material for production finished goods against specific LC is ECC
 ECC invest adjusted within 180 days
 ECC secured by collateral

MDB:
Musharaka Documentary Bill payment is made against local document (who is Deem Export)
to the 100% export oriented factories

FDBP
Payment made to a customer through purchase a foreign documentary bill is FDBP. Temporary
investment is adjustable from the proceeds of export documents.

Bai-Muajjal (Export)
Facility against hypothecation of raw material or finished goods for export order
 This investment adjusted within 360 days
 Secured by collateral

jnmjuiuuvvgh
Time Bill/Usance Bill
A bill is said to be time bill which is payable at determinable future time.
Clean Bill
A bill which has no documents attached is called clean bill
Documentary Bill
A bill which has documents attached is called documentary bill
Domicile Bill
A domicile bill is one which is payable at a place other than the acceptors usual residence or
business place.
Nostro Account
Account maintained by home bank with bank abroad. Nostro is latin word meaning “our”. For
example a bank of Bangladesh is maintaining its Nostro account with a bank in HongKong.
Vostro account:
The nostro account refereed to its account holder (foreign bank) by the home bank relating to
any credit or debit is then termed a vostro account.
Foreign Banks accounts maintain with home bank relating to any credit or debit is then termed
a vostro account
Loro account
The latin term loro means “their”. These are the account of third parties maintained in domestic
or foreign currency.

Swap: Purchasing a foreign currency or securities on the spot for selling forward or selling a
foreign currency on the spot for purchasing forward.
Types of FC account
 Foreign currency (FC) account
 Non-Resident Foreign Currency Deposit Account (NFCD)
 Resident Foreign Currency Deposit Account RFCD)
 Exporters Retention Quota Account (ERQ)
Who can open FC account?
 Bangladeshi nationals residing abroad,
 Foreign nationals residing abroad or in Bangladesh,
 Foreign Firms registered abroad and operating in Bangladesh or abroad,
 Foreign mission, International development Organizations and their expatriate
employees,
 Bangladeshi nationals working with the foreign/International organizations operating
in Bangladesh provided their salary is paid in Foreign Currency,
 International NGOs, Donor agencies,
 Diplomatic Bonded Warehouse (Duty free shops) licensed by the Custom Authorities,
 Exporter to keep his foreign exchange retention quota,
 Industrial units operating in Export Processing Zones (EPZs),
 Bangladeshi nationals those visited abroad.
What is RFCD Account ? Who can open the account ?
RFCD mean Resident Foreign Currency Deposit Account. Persons ordinarily resident is
Bangladesh may open RFCD account with foreign exchange bought in at the time of their
return from travel abroad.

jnmjuiuuvvgh
Paper required for opening a RFCD account
 Copy of valid passport
 Copy of travel documents
 Photograph of the account holder
 declaration of the account holder mentioning date of return from abroad

Who can open Non-Resident Taka Account

 Foreign Nationals
 Foreign organization
 Diplomatic mission
 UN organization
 Non-profit international bodies
 Foreign consular
 Foreign airlines and shipping lines

Off sore banking

It usually means international banking business involving foreign currency documented assets
and liabilities and is kept separate from domestic banking business. It was started in 1985.

What is Off Shore Banking Unit (OBU)

OBU is a branch located in an international financial center. OBU deploys funds in foreign
currency when they accept deposits from foreign banks and other OBUs.

Features of OBU
 OBU is an independent unit of bank with separate books of ledger.
 Freedom from the central bank control on interest rates and other credit control features
 Profit rate may be LIBOR + 2.5%
 Exemption from the minimum reserves requirements
 Free or concessional rates of taxes including holding taxes on internal income

Source of funds of OBU

 Borrowing from the foreign banks or Central Bank
 Deposits of banks as well as other OBUs
 Inward remittances (FC ac holders)

Write the scope of Off Shore Islami Banking

Deposits : Al Wadeah Demand Call Account, International Mudaraba Investment
Financing: Wakalah Bills for Collection (WBC, Letter of credit, Murabaha Trust Receipt, Bank
Guarantee

SWAP
Purchasing a foreign currency or securities on the spot for selling forward or selling a foreign
currency on the spot for purchasing forward. This transaction may be performed by central
bank, commercial bank or by the major international companies.

LCA form:
LC authorization forms consisting of 06 copies.
 1st copy for exchange control purpose
 2nd copies for the customs purpose
 3rd & 4th copies will be sent to the concerns licensing authorities
 5th copy for the Bangladesh bank
 6th copy is the office copy of issuing bank

jnmjuiuuvvgh
EXP form:
EXP forms consisting of four copies and submitted to customs authority who make seal and
signature on it.
 1st copy would be sent to BB by custom authority
 2nd copy would be sent to BB by AD with necessary papers within 14 days of shipment
 3rd copy will be reported to BB with export proceeds value mentioned in the back side
 4th is the office copy of the bank

What is Travelers’ cheque (TC)? What is the procedure of issue & payment of TC?
A traveler's check is a medium of exchange utilized as an alternative to hard currency. The
product typically is used by people on vacation in foreign countries. They offer a safe way to
travel overseas without cash. The issuing party, usually a bank, provides security against lost
or stolen checks.

Dealing Room
Dealing room is a center of all activities where both local and foreign currency transaction are
covered or originated.

What are objectives of Dealing Room?

 To fulfill the requirement of Bangladesh Bank
 To work as profit center
 To prepare exchange rate
 To Maintain the liquidity and Foreign exchange exposure of the bank
 To cover exchange risk
 To assign job responsibilities for ADs, Dealers, Mid office and Back office personnel.
 To prepare a flowchart for dealing room and AD’s jobs.
 To prepare a reporting channel and control mechanism for dealing room.

What are the duties performed by Front – Mid and Back office of Dealing room?
Duties of Front office:
 Prepare & send the daily exchange rate sheet to the concerned branches.
 Cover the short position while concluding the deal with the customers.
 Watch the movement of currencies in the local and international market.
 Manage the daily liquidity of the bank.
 Manage diversification of foreign currencies in different accounts.
Duties of Mid office:
 Monitoring individual dealers’ performance.
 Analysis the use of approved risk limits
 Analysis the risk of new instruments & products
 Maintenance of Asset Liability Management (ALM) model.
Duties of Back office:
 To keep an eye on all dealing/trading activities of Front office.
 All currency deal must be within dealers authorized limit.
 Any anomaly in the deals should be immediately notified to Senior Management.
 Every morning the Back office will check and verify the exchange position, Money
market funding position, Bangladesh Bank balance position and forward it to Front
office.

jnmjuiuuvvgh
Define Money market.
The Money market is better known as a place for large institutions and Gov’t to manage their
short term cash needs. However, individual investors have access to the market through a variety
of different securities.
Define Forexy market
Forex market: Meeting or systematic communications by telephone or telex or authenticated
communication system like Reuter’s 3000Xtra, SWIFT between Forex dealers and brokers
What is outward foreign remittance?
Foreign currency being made out of the country through official channel as per rule is called
Outward foreign remittance.
What are the types of outward foreign remittance?
(i) Import proceeds
(ii) Private remittance
(iii) Commercial remittance.

What are the checking points of Outward Foreign remittance?

 Application for outward remittance to be obtained.
 TM from duly filled in and signed by the applicant.
 Permission from Bangladesh Bank to be obtained in the cases if exceeded the limit.
 Approved Agreement clause for outward remittance in case of foreign investors
 Validity of permission must be seen if approved by Foreign Exchange policy department
of Bangladesh Bank.
What procedure and precautions to be taken before issue/sale of Foreign currency?
 Foreign currency will be issued in favour of a traveler who should be our account
holder
 Confirm Air ticket must seen and the date of departure must not be later than 15 days
 Gov’t order (GO) is to be obtained in case Gov’t employees
 Before giving endorsement on the passport & ticket, entitlement of foreign currency to
be checked up.
 Persons below 12 years will get half quota of the entitlement of an adult.
 TM Form to be obtained duly signed by the traveler.

What is inward Foreign remittance?

Remittance of Foreign currency being received in the country from abroad through Official
channel is called Inward Foreign remittance.

UPAS LC (Usance Payable At Sight)

It same as sight LC where as after complying presentation of documents bank must release
payment on immediate basis.

Benefits for enterprises

 Have a good price in the sales contracts because the exporters receive money
immediately from the discounting bank;
 Foreign currency funding at attractive interest rates in the form of UPAS
 L/C without having to pay high interest rates
 Payment can be deferred  up to 360 days
 Buy foreign currency at preferential price
 Quickly process sets of documents
 Simple and convenient procedures

jnmjuiuuvvgh
EDF – Export Development Fund :
 Established in 1989, the EDF is intended to facilitate access to financing in foreign exchange
for import procurement by manufacturer/exporters.
 Authorized dealer (AD) bank’s can borrow US dollar funds from the EDF against their
foreign currency loans to manufacturer/exporter for import procurements.
 EDF is manage by the Forex Reserve and Treasury Management Department (FRTMD) at
the Head Office of Bangladesh Bank.
 In Islami Bank they may enter deal to deal Restricted Mudaraba Agreement with FRTMD
for Shariah compliance against their EDF investment.
 EDF loan disbursement to AD’s in USD will be charged profit @ six month LIBOR + 2.5%
on their USD loan disbursement to manufacturer or exporter.
 EDF loans are repayable within 180 days from the disbursement and it will be extended 270
days by the approval of Bangladesh bank.
 BGMEA, BKMEA, C type EPZ factory will get the EDF loan by approval of Bangladesh.
 EDF loan amount may not upto 20 million depends on the business nature.
 EDF loan amount may not up to 2 million on RMG sector
 EDF can help our growing manufacturer and exporter to build their future and expand our
economy under the proper supervision of AD’s and Bangladesh Banks

jnmjuiuuvvgh