1646937227196_Foreign-Exchange-pdf (1)

DAIBB
Foreign Exchange
Previous year’s important questions (2015-2020) solution for 5 set’s
Short Notes
International Trade:
International trade allows countries to expand their markets and access goods and services that
otherwise may not have been available domestically. As a result of international trade, the market is
more competitive. This ultimately results in more competitive pricing and brings a cheaper product
home to the consumer.
International trade is the exchange of goods and services between countries. Trading globally gives
consumers and countries the opportunity to be exposed to goods and services not available in their
own countries, or more expensive domestically. The importance of international trade was
recognized early on by political economists such as Adam Smith and David Ricardo. Still, some
argue that international trade can actually be bad for smaller nations, putting them at a greater
disadvantage on the world stage.
Packing Credit:
Packing credit is basically a loan provided to exporters or sellers to finance the goods’ procurement
before shipment. The bank will make the funds available to a letter of credit issued favoring the
seller and a confirmed order for selling the goods or services. The advance is provided to purchase
raw materials, process, manufacture, pack, market and transport the required goods and services.
At times, the packing credit is also used for financing the working capital and meet the
requirements of wages, travel expenses, utility payments, etc for companies listed as exporters.
Generally, importers are not ready to advance payments to exporters as it is not secure and full of
risk for them. In such scenarios, the facility of export packing credit supports the exporter’s supply
chain and provides the funds to bridge the gap until the final payment.
Bill of Lading:
A bill of lading (BL or BoL) is a legal document issued by a carrier to a shipper that details the type,
quantity and destination of the goods being carried. A bill of lading also serves as a shipment
receipt when the carrier delivers the goods at a predetermined destination. This document must
accompany the shipped products, no matter the form of transportation, and must be signed by an
authorized representative from the carrier, shipper and receiver. A bill of lading must be
transferrable and serves three main functions: a. it is a conclusive receipt ie. an acknowledgement
that the goods have been loaded b. it contains or evidences the terms of the contract of carriage c. it
serves as a document of title of goods.
Stale Bill of Lading :

A bill of lading is said to be ‘stale’ if it bears a date subsequent to the expiry date of the credit under
which the goods are shipped. It shows that the goods were put on board the vessel on a date later
than that authorized by the credit. A bill of lading may also be considered ‘stale’ if it is presented
1 Md.Tareq Bin Firoz, Senior Executive Officer (MTO 9th Batch), Mercantile Bank Limited
long after the sailing of the carrying vessel. The main problem that arises in such a case is that the
goods may reach the foreign destination long before the arrival of the relative documents and since
they cannot be cleared without the relative documents they will invariably be put to demurrage.
Charter Party Bill of Lading:

For the movement of bulk cargoes, it may be more advantageous for a shipper or group of shippers
to lease a vessel for a particular trip or a round of trips or for a specified period of time. When it is
leased it is said that the vessel is chartered. The document of contract which sets out the terms and
conditions of the lease of the whole or part of a vessel is known as the ‘Charter Party’. The person
whose goods are carried is called the ‘Charterer’. A bill of lading, however named, containing an
indication that it is subject to a charter party is called a charter party bill of lading.
Combined Bills of Lading: means a single contract for the carriage of goods by at least two
different modes of transport and the contractor as carrier called “Combined Transport Operator”
means the person/company named of the face hereof who concludes Multimodal/Combined
transport contract and assumes responsibility for the performance thereof as a carrier. This kind of
bill of lading cover more than one mode of transfers (for example, Ocean and rail or Ocean and
road) and covers all the mode of transfers. Carrier has the responsibility from place of receipt to
place of delivery of the cargo. Carrier can hire/sub contract to carry the cargo in one or more mode
of transfers
“Combined Transport Operator” in accordance with and to the extend of the provisions contained
in The Combined Bills of Lading, undertakes to perform and/or in its own name to procedure of the
Multimodal/Combined Transport and the delivery of the goods including all services from the place
and time of taking the goods in charge to the place and time of delivery and accept responsibility for
such services and all modes of transportation.
Clean Bill of Lading: (Article 27 Clean Transport Document)

A clean bill of lading is one bearing no clause or notation expressly declaring a defective condition
of the goods or their packaging.
Consular Invoice:
A consular invoice is a document certifying a shipment of goods and shows information such as the
consignor, consignee, and value of the shipment. Generally, a consular invoice can be obtained
through a consular representative of the destination country and must be certified by the consul of
the country of destination, who will stamp and authorize the invoice.
Countries requiring a consular invoice include Latin American countries, Kenya, Uganda, Tanzania,
Mauritius, New Zealand, Myanmar, Iraq, Australia, Fiji, Cyprus, Nigeria, Ghana, Guinea, and
Zanzibar.Customs officials use the invoice to confirm what's in the shipment, the number of goods,
and the cost—and thus determine the import duty.The export price is scrutinized relative to the
market price in the original country to make sure an unfair trade practice called "dumping" is not
taking place.With dumping, an exporter sells goods in a foreign market for less than what they cost
at home to have a competitive advantage over other suppliers.
Bill of Exchange:
A bill of exchange is a written order used primarily in international trade that binds one party to
pay a fixed sum of money to another party on demand or at a predetermined date. Bills of exchange
are similar to checks and promissory notes—they can be drawn by individuals or banks and are
generally transferable by endorsements.
 A bill of exchange is a written order binding one party to pay a fixed sum of money to
another party on demand or at some point in the future.
 A bill of exchange often includes three parties—the drawee is the party that pays the sum,
the payee receives that sum, and the drawer is the one that obliges the drawee to pay the
payee.
 A bill of exchange is used in international trade to help importers and exporters fulfill
transactions.
 While a bill of exchange is not a contract itself, the involved parties can use it to specify the
terms of a transaction, such as the credit terms and the rate of accrued interest.
Bill of Entry:
A Bill of Entry (BE) is a legal document that is filed by customs clearance agents or importers
on or before the arrival of the imported goods. It is submitted to the Customs department as a
part of the customs clearance procedure. Once this is completed, the importer will be able to
claim ITC on the goods. The bill of entry can be issued for either home consumption or bond
clearance. When it is issued for bond clearance, the bond number and date of issuance need to
be included. Bill of Entry becomes the proof for payment of import duty to the government and
lawful receipt of goods. Bill of Entry is a printed form containing columns for details particulars of
the imported goods. Bill of Entry is the proof that the goods for which payment is made in foreign
currency, entered in the country.
Value Date:
The ‘Value Date’ is the date on which delivery of currency under a foreign exchange deal is to take
place. In the event of funds not being forthcoming, the amount becomes subject to interest from the
value date to the actual date of payment. In Forex trading, the value date is regarded as the delivery
date on which counterparties to a transaction agree to settle their respective obligations by making
payments and transferring ownership. Due to differences in time zones and bank processing delays,
the value date for spot trades in foreign currencies is usually set two days after a transaction is
agreed on. The value date is the day that the currencies are traded, not the date on which the
traders agree to the exchange rate.
Red Clause (Advance Payment) L/C: It is documentary credit with a special clause incorporated
into it which authorizes the negotiating bank to make pre-shipment advances to the beneficiary of
the credit to enable him to manufacture or purchase goods from local suppliers. These pre-
shipment advances are made in anticipation of the exporter effecting shipment and submitting the
relative documents under the credit at a later date. The ‘Red Clause’ is called so because this is
printed or typed in red ink to draw attention to the peculiar nature of credit. The Red Clause is
incorporated only in irrevocable credit.
Green Clause L/C: This is another type of pre-shipment credit and used mainly in Australian wool
trade. The ‘Green Clause” (printed/types in green) is an improvement over the ‘Red Clause’ credit,
and permits not only pre-shipment advances but also authorizes negotiating bank to cover storage
of goods at the port in the name of the opening bank.
Open Position:
An open position in investing is any established or entered trade that has yet to close with an
opposing trade. An open position can exist following a buy, a long position, a sell, or
a short position. In any case, the position remains open until an opposing trade takes place.An open
position is a trade that has been established, but which has not yet been closed out with an
opposing trade.If an investor owns 300 shares of a stock, they have an open position in that stock
until it is sold. An open position represents market exposure for the investor, and the risk remains
until the position is closed.Day traders open and close their positions in a matter of seconds and
aim to have no open positions at the end of the day.
For example, an investor who owns 500 shares of a certain stock is said to have an open position in
that stock. When the investor sells those 500 shares, the position closes. Buy-and-hold investors
typically have one or more open positions at any given time. Short-term traders may execute
"round-trip" trades; a position opens and closes within a relatively short period. Day traders
and scalpers may even open and close a position within a few seconds, trying to catch minimal but
multiple price movements throughout the day.
Floating Exchange Rate:

A floating exchange rate is a regime where the currency price of a nation is set by the forex market
based on supply and demand relative to other currencies. This is in contrast to a fixed exchange
rate, in which the government entirely or predominantly determines the rate.A floating exchange
rate is one that is determined by supply and demand on the open market.A floating exchange rate
doesn't mean countries don't try to intervene and manipulate their currency's price, since
governments and central banks regularly attempt to keep their currency price favorable for
international trade. A fixed exchange is another currency model, and this is where a currency is
pegged or held at the same value relative to another currency.Floating exchange rates became more
popular after the failure of the gold standard and the Bretton Woods agreement.
WTO:
The World Trade Organization (WTO) is an intergovernmental organization that regulates and
facilitates international trade between nations. It officially commenced operations on 1 January
1995, pursuant to the 1994 Marrakesh Agreement, thus replacing the General Agreement on Tariffs
and Trade (GATT) that had been established in 1948. The WTO is the world's largest international
economic organization, with 164 member states representing over 96% of global trade and global
GDP.
The WTO facilitates trade in goods, services and intellectual property among participating countries
by providing a framework for negotiating trade agreements, which usually aim to reduce or
eliminate tariffs, quotas, and other restrictions; these agreements are signed by representatives of
member governments[9]:fol.9–10 and ratified by their legislatures.[10] The WTO also administers
independent dispute resolution for enforcing participants' adherence to trade agreements and
resolving trade-related disputes.[11] The organization prohibits discrimination between trading
partners, but provides exceptions for environmental protection, national security, and other
important goals.[11]
The WTO is headquartered in Geneva, Switzerland.[12] Its top decision making body is the
Ministerial Conference, which is composed of all member states and usually convenes biannually;
consensus is emphasized in all decisions.
What is L/C?
L/C is a definite conditional irrevocable undertaking given by the issuing bank to the seller on
behalf of the buyer, to pay a certain sum of money, under some agreed condition/fulfillment of
some condition. As per UCPDC, definition of LC (Credit): Credit means any arrangement, however
named or described, that is irrevocable and thereby constitutes a definite undertaking of the issuing
bank to honor a complying presentation.
Back to Back LC:

Back-to-back letters of credit consist of two letters of credit (LoCs) used together to finance a
transaction. A back-to-back letter of credit is usually used in a transaction involving an
intermediary between the buyer and seller, such as a broker, or when a seller must purchase the
goods it will sell from a supplier as part of the sale to his buyer. A back-to-back letter of credit
involves two letters of credit to secure financing for a single transaction. These are usually used in a
transactions involving an intermediary between the buyer and seller. Back-to-back letters of credit
are used primarily in international transactions.
For example, assume that Company A is in the U.S. and sells heavy machinery. Broker B, a trading
firm based in London, has learned that Company C, which is located in China, wants to purchase
heavy machinery and has managed to broker a deal between the two companies. Company A is
eager to sell but does not want to take on the risk of default of payment by Company C. Broker B
wants to ensure that the trade is made and that it receives its commission.
Back to back LCs can be used to make sure the transaction goes through. Company C will go to a
well-known financial institution in China and get it to issue an LC with Broker B as beneficiary. In
turn, Broker B will use that LC to go to its own well-known financial institution in Germany and
have it issue an LC to Company A.
Company A can now ship its heavy machinery knowing that once the transaction is complete, it will
be paid by the German bank. The broker is also assured of being paid. The credit risk has been
removed from the transaction.
EPZ:
Export Processing Zone (EPZ) special industrial park developed in response to international
market demand for cheaper goods. The manifest objectives of EPZs are to attract foreign capital
investment and mobilize investment for capital formation for rapid INDUSTRIALIZATION , to create
employment opportunities for the country's manpower, to induce transfer of technology, and to
earn foreign exchange by boosting exports. Formation of EPZs in Bangladesh also addresses
problems like growing trade gap, high UNEMPLOYMENT, dearth of capital investment, shortage of
foreign currency and lack of technical know-how. Following an Act of Parliament in 1980, the first
EPZ of the country was established in CHITTAGONG in 1983. The second one started operations in
1993 at SAVAR near Dhaka. Six more are now being developed and table 1 presents a summary
statistics of the EPZs with the number of industrial units already in operation and those under
implementation, the total investment in the operating and the new units, the exports from the EPZ
units and the manpower employed in these units. 8 EPZ (Mirsorai is 9th upcoming EPZ). Main
feature of EPZ:
 Attract foreign investment to create jobs
 Expand the industrial base
 Introduce technology
 Create backward linkages between the zones and the domestic economy
The EPZ will have some resources that can attract investment such as natural resources, cheap
skilled labor, or logistical advantages.
Balance of Trade (BOT):

Balance of trade (BOT) is the difference between the value of a country's exports and the value of a
country's imports for a given period. Balance of trade is the largest component of a
country's balance of payments (BOP). Sometimes the balance of trade between a country's goods
and the balance of trade between its services are distinguished as two separate figures.
The balance of trade is also referred to as the trade balance, the international trade balance,
commercial balance, or the net exports.
In 2019, Germany had the largest trade surplus followed by Japan and China while the United States
had the largest trade deficit, even with the ongoing trade war with China, beating out the United
Kingdom and Brazil.
Offshore Banking Unit (OBU):

An offshore banking unit (OBU) is a bank shell branch, located in another international financial
center. For instance, a London-based bank with a branch located in Delhi. Offshore banking units
make loans in the Eurocurrency market when they accept deposits from foreign banks and other
OBUs. Eurocurrency simply refers to money held in banks located outside of the country which
issues the currency.
Local monetary authorities and governments do not restrict OBUs' activities; however, they are not
allowed to accept domestic deposits or make loans to residents of the country, in which they are
physically situated. Overall OBUs can enjoy significantly more flexibility regarding national
regulations. Offshore banking units (OBUs) refer to bank branches located outside of its home
country, and handling transactions made in foreign currency (known generically as
"eurocurrency").OBUs make it easier for individuals and businesses to bank internationally and
establish offshore accounts. Individuals may choose to keep their money offshore if there is
instability in their own country, and they fear losing their investments. Offshore bank accounts
must be declared to the holder's home country for tax reasons; however, some countries allow
foreigners to earn capital gains tax-free.
Exchange Position:
The exchange position, or currency position of a bank is the position from its day's purchases
and sales, both ready and forward, of foreign currencies. ... When the purchases of a day exceed the
sales, the position is known as “overbought” or 'Long'. In either case, the position is generally
termed open.
SWIFT:
The Society for Worldwide Interbank Financial Telecommunication (SWIFT), legally S.W.I.F.T. SCRL,
provides a network that enables financial institutions worldwide to send and receive information
about financial transactions in a secure, standardized and reliable environment. SWIFT also sells
software and services to financial institutions, much of it for use on the SWIFT Net network, and ISO
9362 Business Identifier Codes (BICs, previously Bank Identifier Codes), popularly known as
"SWIFT codes".
As of 2018, around half of all high-value cross-border payments worldwide used the SWIFT
network. As of 2015, SWIFT linked more than 11,000 financial institutions in more than 200
countries and territories, who were exchanging an average of over 32 million messages per day
(compared to an average of 2.4 million daily messages in 1995). SWIFT transports financial
messages in a highly secure way but does not hold accounts for its members and does not perform
any form of clearing or settlement.
SWIFT does not facilitate funds transfer: rather, it sends payment orders, which must be settled
by correspondent accounts that the institutions have with each other. Each financial institution, to
exchange banking transactions, must have a banking relationship by either being a bank or
affiliating itself with one (or more) so as to enjoy those particular business features
Incoterms:
To facilitate commerce around the world, the International Chamber of Commerce (ICC) publishes a
set of Incoterms, officially known as international commercial terms. Globally recognized,
Incoterms prevent confusion in foreign trade contracts by clarifying the obligations of buyers
and sellers. Parties involved in domestic and international trade commonly use them as a kind of
shorthand to help understand one another and the exact terms of their business arrangements.
Some Incoterms apply to any means of transportation; others apply strictly to transportation across
water. The International Chamber of Commerce (ICC) developed Incoterms in 1936 and updates
them periodically to conform to changing trade practices.The Incoterms rules were amended in
1953,[4] 1967, 1976, 1980, 1990, 2000, and 2010, with the ninth version — Incoterms 2020 [5] —
having been published on September 10, 2019.Typical examples of Incoterms rules for any mode of
transportation include Delivered at Terminal (DAT), Delivered Duty Paid (DDP), and Ex Works
(EXW).
Financial Derivative:
A derivative is a financial security with a value that is reliant upon or derived from, an underlying
asset or group of assets—a benchmark. The derivative itself is a contract between two or more
parties, and the derivative derives its price from fluctuations in the underlying asset.
The most common underlying assets for derivatives are stocks, bonds, commodities, currencies,
interest rates, and market indexes. These assets are commonly purchased through brokerages.
Derivatives can trade over-the-counter (OTC) or on an exchange. OTC derivatives constitute a
greater proportion of the derivatives market. OTC-traded derivatives, generally have a greater
possibility of counterparty risk. Counterparty risk is the danger that one of the parties involved in
the transaction might default. These parties trade between two private parties and are unregulated.
Conversely, derivatives that are exchange-traded are standardized and more heavily regulated.
Cross Rate:
A cross rate is a foreign currency exchange transaction between two currencies that are both
valued against a third currency.1 In the foreign currency exchange markets, the U.S. dollar is the
currency that is usually used to establish the values of the pair being exchanged. 2
As the base currency, the U.S. dollar always has a value of one.
When a cross-currency pair is traded, two transactions are actually involved.3 The trader first
trades one currency for its equivalent in U.S. dollars. The U.S. dollars are then exchanged for
another currency.
For example, if you were calculating the cross rate of the British pound versus the euro, you would
first determine that the British pound, as of Dec. 18, 2020, was valued at 0.74 to one U.S. dollar,
while the euro was valued at 0.82 to one U.S. dollar.
Balance of Payments (BOP):

The balance of payments (BOP) is a statement of all transactions made between entities
in one country and the rest of the world over a defined period of time, such as a quarter or a year.
The balance of payments include both the current account and capital account. The current account
includes a nation's net trade in goods and services, its net earnings on cross-border investments,
and its net transfer payments. The capital account consists of a nation's transactions in financial
instruments and central bank reserves. The sum of all transactions recorded in the balance of
payments should be zero; however, exchange rate fluctuations and differences in accounting
practices may hinder this in practice.
European Common Market:

The European Economic Community (EEC) was a regional organization that aimed to bring
about economic integration among its member states. It was created by the Treaty of Rome of
1957.[note 1] Upon the formation of the European Union in 1993, the EEC was incorporated into the
EU and renamed the European Community (EC). In 2009, the EC formally ceased to exist and its
institutions were directly absorbed by the EU. This made the Union the formal successor institution
of the Community.
The Community's initial aim was to bring about economic integration, including a common
market and customs union, among its six founding members: Belgium, France, Italy, Luxembourg,
the Netherlands and West Germany. It gained a common set of institutions along with the European
Coal and Steel Community (ECSC) and the European Atomic Energy Community (EURATOM) as one
of the European Communities under the 1965 Merger Treaty (Treaty of Brussels). In 1993 a
complete single market was achieved, known as the internal market, which allowed for the free
movement of goods, capital, services, and people within the EEC. In 1994 the internal market was
formalized by the EEA agreement. This agreement also extended the internal market to include
most of the member states of the European Free Trade Association, forming the European
Economic Area, which encompasses 15 countries.
The main aim of the EEC, as stated in its preamble, was to "preserve peace and liberty and to lay the
foundations of an ever closer union among the peoples of Europe". Calling for balanced economic
growth, this was to be accomplished through:[17]
1. The establishment of a customs union with a common external tariff
2. Common policies for agriculture, transport and trade, including standardization (for
example, the CE marking designates standards compliance)
3. Enlargement of the EEC to the rest of Europe
For the customs union, the treaty provided for a 10% reduction in custom duties and up to 20% of
global import quotas. Progress on the customs union proceeded much faster than the twelve years
planned. However, France faced some setbacks due to their war with Algeria.
Brexit:
Brexit is a portmanteau of the words "British" and "exit" coined to refer to the U.K.'s decision in a
June 23, 2016 referendum to leave the European Union (EU). Brexit took place at 11 p.m.
Greenwich Mean Time, Jan. 31, 2020.
On Dec. 24, 2020, the U.K. and the EU struck a provisional free-trade agreement that ensures the
two sides can trade goods without tariffs or quotas. However, key details of the future relationship
remain uncertain, such as trade in services, which make up 80% of the U.K. economy. This
prevented a “no-deal” Brexit, which would have been significantly damaging to the U.K. economy.
A provisional agreement was approved by the U.K. parliament on Jan. 1, 2021. It was approved by
the European Parliament on April 28, 2021.2 While the deal, known as the Trade and Cooperation
Agreement (TCA) allows tariff- and quota-free trade in goods, U.K.-EU trade still faces customs
checks, meaning commerce is not as smooth as when the U.K. was a member of the EU.
Asian Development Bank:

Founded in 1966, the Asian Development Bank's (ADB) headquarters are in Manila, Philippines.
The Asian Development Bank's primary mission is to foster growth and cooperation among
countries in the Asia-Pacific Region.1 The ADB assists its members and partners by providing loans,
technical assistance, grants, and equity investments to promote social and economic development.
The ADB has been responsible for a number of major projects in the region and raises capital
regularly through the international bond markets. The ADB also relies on member contributions,
retained earnings from lending, and the repayment of loans for the funding of the organization.The
Asian Development Bank's (ADB) primary mission is to promote economic growth and cooperation
in the Asia-Pacific Region.The majority of the ADB’s members are from the Asia-Pacific region.The
ADB provides assistance to its developing member countries, the private sector, and public-private
partnerships through grants, loans, technical assistance, and equity investments to promote
development.
ACU:
Asian Clearing Union (ACU) is a payment arrangement whereby the participants settle payments
for intra-regional transactions among the participating central banks on a net multilateral basis.
The objectives of the ACU are:
(1) To provide a facility to settle payments, on a multilateral basis, for current international
transactions among the territories of participants;
(2) To promote the use of participants' currencies in current transactions between their respective
territories and thereby effect economies in the use of the participants' exchange reserves;
(3) To promote monetary cooperation among the participants and closer relations among the
banking systems in their territories and thereby contribute to the expansion of trade and economic
activity among the countries of the ESCAP region; and
(4) To provide for currency SWAP arrangement among the participants so as to make Asian
Monetary Units (AMUs) available to them temporarily.
IDA:
The International Development Association (IDA) is the part of the World Bank that helps the
world’s poorest countries. Overseen by 173 shareholder nations, IDA aims to reduce poverty by
providing zero to low-interest loans (called “credits”) and grants for programs that boost economic
growth, reduce inequalities, and improve people’s living conditions.
IDA complements the World Bank’s original lending arm—the International Bank for
Reconstruction and Development (IBRD). IBRD was established to function as a self-sustaining
business and provides loans and advice to middle-income and credit-worthy poor countries. IBRD
and IDA share the same staff and headquarters and evaluate projects with the same rigorous
standards.
IDA is a multi-issue institution, supporting a range of development activities that pave the way
toward equality, economic growth, job creation, higher incomes, and better living conditions. IDA's
work covers primary education, basic health services, clean water and sanitation, agriculture,
business climate improvements, infrastructure, and institutional reforms.
European Union (EU):

The European Union (EU) is a group of 27 countries that operates as a cohesive economic and
political block. Nineteen of the countries use the euro as their official currency.The EU grew out of a
desire to form a single European political entity to end the centuries of warfare among European
countries that culminated with World War II and decimated much of the continent. The European
Single Market was established by 12 countries in 1993 to ensure the so-called four freedoms: the
movement of goods, services, people, and money.The EU's gross domestic product (GDP) totaled
$15.6 trillion (nominal) in 2019, which was $5.8 trillion less than the United States' $21.4 trillion
GDP, according to figures available from the World Bank.
IMF:
The International Monetary Fund (IMF) is an international financial institution, headquartered
in Washington, D.C., consisting of 190 countries working to foster global monetary cooperation,
secure financial stability, facilitate international trade, promote high employment and sustainable
economic growth, and reduce poverty around the world while periodically depending on the World
Bank for its resources.[1] Formed in 1944, started in 27 December 1945, [7] at the Bretton Woods
Conference primarily by the ideas of Harry Dexter White and John Maynard Keynes,[8] it came into
formal existence in 1945 with 29 member countries and the goal of reconstructing the international
monetary system. It now plays a central role in the management of balance of payments difficulties
and international financial crises.[9] Countries contribute funds to a pool through a quota system
from which countries experiencing balance of payments problems can borrow money.
According to the IMF itself, it works to foster global growth and economic stability by providing
policy advice and financing the members by working with developing countries to help them
achieve macroeconomic stability and reduce poverty.[18] The rationale for this is that private
international capital markets function imperfectly and many countries have limited access to
financial markets. Such market imperfections, together with balance-of-payments financing,
provide the justification for official financing, without which many countries could only correct
large external payment imbalances through measures with adverse economic consequences. [19] The
IMF provides alternate sources of financing such as the Poverty Reduction and Growth Facility.
North American Free Trade Agreement (NAFTA):

The North American Free Trade Agreement (NAFTA) was implemented to promote trade between
the U.S., Canada, and Mexico. The agreement, which eliminated most tariffs on trade between the
three countries, went into effect on Jan. 1, 1994. Numerous tariffs—particularly those related to
agricultural products, textiles, and automobiles—were gradually phased out between Jan. 1, 1994,
and Jan. 1, 2008.
 NAFTA reduced or eliminated tariffs on imports and exports between the three
participating countries, creating a huge free-trade zone.
 Two side agreements to NAFTA aimed to establish high common standards in workplace
safety, labor rights, and environmental protection, to prevent businesses from relocating to
other countries to exploit lower wages or looser regulations.
 The United States-Mexico-Canada Agreement (USMCA), which was signed on Nov. 30, 2018,
and went into full force on July 1, 2020, replaced NAFTA.
 NAFTA was a controversial agreement: By some measures (trade growth and investment),
it improved the U.S. economy; by others (employment, balance of trade), it hurt the
economy.
What is LTR (Trust Receipt)?

LTR is a kind of Post Import Finance offered by the Bank to the Importer. A banker holding
documents of title is sometimes requested by his customer (an importer) to release them on the
customer accepting the bill, to enable the importer to release the goods from the customs authority,
sell the goods and pay off the bill out of proceeds. The banker may release the documents of title to
goods against acknowledgement what is known as a ‘Trust Receipt’.
LIM (Loan against imported merchandise):

LIM is the short-term loan to the Importer, if he fails to retire the bill within the stipulated time. In
LIM, after releasing the goods from the Customs authority, the possession of the goods remains
with the Bank i.e. under bank’s lock & key.
 Purpose: To release the imported merchandise from the Customs authority.
There are three types of LIM is used by the bank, such as:
 One off LIM
 Forced LIM
 Arranged LIM
Forced LIM:
The customers may default on the eve of retirement of LC documents due to financial constraints,
and may shows his inability of meeting his obligation. This situation may arise due to insolvency,
legal wrangling and other unavoidable circumstances on the domestic or international level. It may
also happen when the rate of merchandise falls to the level that may create further losses to the
customer if he clear the goods.
However, in this situation, the Bank has to clear the imported goods from the Customs Authority by
creating a LIM A/c in the name of an importer, which is known as Forced LIM. The Bank has to
calculate the “Landed cost” and determine the value of the imported goods.
Pro Forma Invoice:

A pro forma invoice is a preliminary bill of sale sent to buyers in advance of a shipment or delivery
of goods. The invoice will typically describe the purchased items and other important information,
such as the shipping weight and transport charges.
 Pro forma invoices are sent to buyers ahead of a shipment or delivery of goods or services.
 Most pro forma invoices provide the buyer with a precise sale price.
 There are no guidelines dictating the exact presentation or format of a pro forma invoice
 A pro forma invoice requires only enough information to allow customs to determine the
duties needed from a general examination of the included goods.
Nostro account and vostro account:

Nostro is Latin word means (Ours). Vostro is a Latin word means (yours). Nostro account and
vostro account refer to the same thing from a different perspective. An account maintained by a
bank with a bank in a foreign country. Nostro accounts are kept in foreign currencies of the country
which the money is held. For example, Bank X has an account with Bank Y in Bank Y's home
currency. To Bank X, that is a nostro, meaning "our account on your books," while to Bank Y, it is a
vostro, meaning "your account on our books." These accounts are used to facilitate international
transactions and to settle transactions that hedge exchange rate risk.
Reimbursing Bank:
Reimbursing bank is the bank that, at the request of the issuing bank, is authorized to pay, or accept
and pay time draft under a documentary credit in accordance with UCP 600 article 13 or if
incorporated, the ICC uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits
(URR 725).
London Interbank Offered Rate (LIBOR):

The London Interbank Offered Rate (LIBOR) is a benchmark interest rate at which major global
banks lend to one another in the international interbank market for short-term loans.
LIBOR, which stands for London Interbank Offered Rate, serves as a globally accepted key
benchmark interest rate that indicates borrowing costs between banks. The rate is calculated and
will continue to be published each day by the Intercontinental Exchange (ICE), but due to recent
scandals and questions around its validity as a benchmark rate, it is being phased out. According to
the Federal Reserve and regulators in the UK, LIBOR will be phased out by June 30, 2023, and will
be replaced by the Secured Overnight Financing Rate (SOFR). As part of this phase-out, LIBOR one-
week and two-month USD LIBOR rates will no longer be published after December 31, 2021. (See
updated rate)
DIBOR(Dhaka Inter Bank Offered Rate)-See latest rate.
Quasi Negotiable Instrument:

Quasi Negotiable Instruments are those Instruments which can be transferred by endorsement and
delivery but the transferee does not get a better title that of the transferor. Therefore they cannot be
classified as negotiable Instruments and hence the negotiable Instruments act is not applicable to them. It
includes government promissory notes, railway receipts, bills of lading, dividend warrants and share
warrants.
Covered Interest Arbitrage:

Covered interest arbitrage is a strategy in which an investor uses a forward contract to hedge
against exchange rate risk. Covered interest rate arbitrage is the practice of using favorable interest
rate differentials to invest in a higher-yielding currency, and hedging the exchange risk through
a forward currency contract.
Covered interest arbitrage is only possible if the cost of hedging the exchange risk is less than the
additional return generated by investing in a higher-yielding currency—hence, the
word arbitrage. It may be contrasted with uncovered interest arbitrage.
What is the difference between a fixed and a floating exchange rate?

A floating exchange rate is determined by the private market through supply and demand. A fixed,
or pegged, rate is a rate the government (central bank) sets and maintains as the official exchange
rate.
BACK TO BACK & TRANSFERABLE OF LC

Differences:
 Back to back LC involve 2 LC

 Transferable LC involves only one LC
 Back to back LC need not be designated transferable
 The issuing bank must designated Transferable LC as transferable.
 Back to back LC issued on the responsibility of the bank, which issue the second LC.
 Transferable LC is transferred without any responsibility of the bank, which transfers the
LC.
Transferable LC:
 A Transferable letter of credit is one, which specifically states that it is transferable.

 This will only occur if the applicant for the letter of credit (buyer) agrees.
 In a transferable letter of credit, the rights and obligations of the beneficiary are transferred
to another party, usually a middleman/manufacturer/wholesaler.
 Transfer may be either full or partial
Differences between BACK TO BACK & Master LC:
Difference between Documentary credit & Documentary collection:

Parameter Of
Comparison Letter of Credit Documentary Collection
A Letter of Credit is a document A Documentary Collection is the process

issued by the importer’s bank to the through which the exporter’s bank requests
exporter’s bank that guarantees the payment from the importer’s bank by
exporter full remission of the export sending documents detailing the transaction
Definition amount. amount and list of items.
The exporter’s bank is the issuing authority

for the Documentary Collection. The
The importer’s bank is the issuing exporter submits the relevant documents to
authority for the Letter of Credit. The a bank in his country. This bank then
Issuing importer requests a bank in his notifies the importer’s bank about the
Authority country to issue the letter. commercial aspects.
The charges incurred on the The charges incurred on the exporter while
Charges importer by the issuing bank are issuing Documentary Collection are
Incurred generally higher and measured as a generally lower and minimal in comparison
Parameter Of
Comparison Letter of Credit Documentary Collection
percentage of the Letter of Credit to Letter of Credit costs.

amount.
Preferred when the importer and

exporter belong to very distant Preferred when the importer and the
countries and have apprehensions exporter know each other very well, and
Preferable regarding the economic conditions there is greater confidence that there will
Usage each other. not be any breach of trust.
Provides a higher level of security in

international transactions as the Not considered a safe tool for international
responsibility of remittance lies on transactions as the importer is at a higher
Level of Security the importer’s bank. risk of fraud.
What is the difference between a euro and an Euro dollar?

These are quite different things. The euro is the currency of European Monetary Union. Euro dollar
refers to bonds that are issued by companies in US dollars outside the US. So a global company
wants to raise money from non-US investors and issues a bond traded in, say, Europe. The interest
and principal on the bond are paid in dollars. The name "Eurodollar" is because this market was
historically concentrated in Europe, but it is now global.
What is the difference between Spot and Forward exchange rates?

The spot exchange rate is the rate at which currency will be exchanged at this moment. It is used by
people who want to acquire or dispose of a currency right now.
The forward exchange rate is a promise to exchange money at a fixed date in the future. It is
typically used when someone has a fixed payment to make in a foreign currency in the future, and
wants to lock in the rate so the don’t get any nasty surprises because the exchange rates have
changed against them.
In commodities markets, the spot rate is the price for a product that will be traded immediately, or
"on the spot." A forward rate is a contracted price for a transaction that will be completed at an
agreed upon date in the future. In bond markets, forward rate refers to the future yield based on
interest rates and maturities.
Difference between documents against payment and documents against acceptance:
Documentary collection is method of trade finance in which an exporter's bank forwards
documents to an importer's bank and collects payment for shipped goods.
Two Types of Documentary Collection
Documentary collections falls into two basic categories, depending on when the payment is made to
the exporter:
1. Documents against payment require the importer to pay the face amount of the draft at
sight. In other words, the payment must be made to the bank when the buyer is presented
with the draft, and before any shipping documents are released. This is the most common
form of documentary collection because of the reduced risk for the seller.
2. Documents against acceptance require the importer to pay on a specified date. Once the
buyer accepts the time draft, the bank releases the documents to the buyer.
Difference between current account and capital account:

The capital account is a record of the inflows and outflows of capital that directly affect a nation’s
foreign assets and liabilities. It is concerned with all international trade transactions between
citizens of one country and those in other countries.
The current account deals with a country's short-term transactions or the difference between its
savings and investments. These are also referred to as actual transactions (as they have a real
impact on income), output and employment levels through the movement of goods and services in
the economy.
The current account represents a country's net income over a period of time, while the capital
account records the net change of assets and liabilities during a particular year.
Difference between FDBP and LDBP

FDBP facility is allowed to the customer to negotiate/purchase foreign documentary export bills
drawn under valid Export L/C. On the other hand, LDBP facility is allowed to negotiate/purchase
Inland/local Documentary bills duly accepted for payment by scheduled Banks in Bangladesh
FDBP:
 This is a demand loan.
 This is a mode of export finance.
 All specific FDBP and each FDBP created under a revolving limit are demand loan by nature.
 The documents/bills have to be in order as per export L/C terms.
 Cash drawing allowed under FDBP after adjustment of BTB L/C, PC, and other liabilities associated
to the particular export.
LDBP:
 This is a demand loan.
 This is usually a mode of (deemed) export finance.
 The acceptance must be communicated by the accepting Bank through SWIFT massage under valid
code upon request of the purchasing Bank.
 A customer may be allowed IDBP maximum up to 90% of accepted value of confirmed acceptance.
 The tenure of loan is as per the maturity date of the confirmed acceptance.
Difference between Balance of Trade and Balance of Payments:
Difference between air waybill and air consignment note:

Air Waybills make sure that goods have been received for shipment by air.
Every Air waybill has a tracking number that is used to check the status of a delivery and current
position of the shipment. A typical air waybill sample consists of three originals and nine copies.
The goods in the air consignment are consigned directly to the party (the consignee) named in
the letter of credit (L/C). Unless the goods are consigned to a third party like the issuing bank, the
importer can obtain the goods from the carrier at destination without paying the issuing bank or
the consignor. Therefore, unless a cash payment has been received by the exporter or the buyer’s
integrity is unquestionable, consigning goods directly to the importer is risky.
For air consignment to certain destinations, it is possible to arrange payment on a COD (cash on
delivery) basis and consign the goods directly to the importer. The goods are released to the
importer only after the importer makes the payment and complies with the instructions in the
AWB.
The AWB must indicate that the goods have been accepted for carriage, and it must be signed or
authenticated by the carrier or the named agent for or on behalf of the carrier.
Standby Letter of Credit (SLOC):
A standby letter of credit (SLOC) is a legal document that guarantees a bank's commitment of
payment to a seller in the event that the buyer–or the bank's client–defaults on the agreement. A
standby letter of credit helps facilitate international trade between companies that don't know each
other and have different laws and regulations. Although the buyer is certain to receive the goods
and the seller certain to receive payment, a SLOC doesn't guarantee the buyer will be happy with
the goods. A standby letter of credit can also be abbreviated SBLC.
A SLOC is most often sought by a business to help it obtain a contract. The contract is a "standby"
agreement because the bank will have to pay only in a worst-case scenario. Although an SBLC
guarantees payment to a seller, the agreement must be followed exactly. For example, a delay in
shipping or a misspelling a company's name can lead to the bank refusing to make the payment.
Revolving L/C:
Revolving documentary credits are generally used between an applicant and beneficiary who have
a longstanding trading relationship and experience in the shipment of the goods. The applicant and
beneficiary arrange for a documentary credit, which allows the amount thereof to be reinstated,
usually without amendment (ie on an automatic basis). Under this arrangement the continuing
availability of the documentary credit revolves upon shipment or presentation of documents or at a
specific time and not upon the issuance of a specific amendment.
Confirmed L/C :
UCP 600, article 2 defines a ‘confirming bank’ as ‘the bank that adds its confirmation to a credit
upon the issuing bank’s authorization or request’. This article also defines ‘confirmation’ as ‘a
definite undertaking of the confirming bank, in addition to that of the issuing bank, to honour or
negotiate a complying presentation’. Thus, when L/C is confirmed by a confirming bank, that L/C
becomes Confirmed L/C.
Discuss rights and responsibilities of the following types of banks under documentary L/C
(Parties involved in a documentary Credit):
01. Applicant-UCP 600, article 2 defines an ‘applicant’ as ‘the party on whose request the credit is
issued’. It should be noted that although an applicant is responsible for completing an application
form to issue, or to amend, a documentary credit, it is not a party to a documentary credit. In
general words, ‘applicant’ is known as the importer.
02. Beneficiary-UCP 600, article 2 defines a ‘beneficiary’ as ‘the party in whose favor a credit is
issued’. In general words, ‘applicant’ is known as the importer. Following shipment or dispatch of
the goods, the beneficiary will issue, collate and present the stipulated documents to the issuing
bank, a confirming bank (if any), or a nominated bank for honor or negotiation.
03. Issuing Bank- UCP 600, article 2 defines an ‘issuing bank’ as ‘the bank that issues a credit at the
request of an applicant or on its own behalf’. An issuing bank issues its documentary credit in favor
of a beneficiary and incorporates its irrevocable and independent undertaking to arrange payment
under complying presentation.
04. Advising Bank- UCP 600, article 2 defines an ‘advising bank’ as ‘the bank that advises the credit
at the request of the issuing bank’. For a cross-border transaction, an issuing bank will send, a
documentary credit to a bank in the beneficiary’s country with which it maintains a correspondent
banking relationship, requesting such bank to advise it to the beneficiary. This bank is known as the
‘advising bank’.
05. Nominated bank- UCP 600, article 2 defines a ‘nominated bank’ as ‘the bank with which the
credit is available or any bank in the case of a credit available with any bank’. This bank will usually
be located in the country of the beneficiary. Note that a documentary credit may be made available
with the issuing bank only. In this event, there is no nominated bank.
06. Confirming bank- UCP 600, article 2 defines a ‘confirming bank’ as ‘the bank that adds its
confirmation to a credit upon the issuing bank’s authorization or request’. This article also defines
‘confirmation’ as ‘a definite undertaking of the confirming bank, in addition to that of the issuing
bank, to honor or negotiate a complying presentation’. A confirming bank provides an additional
irrevocable and independent undertaking that is separate from that of the issuing bank. It is
common for a confirming bank to also be an advising and nominated bank.
07. Reimbursement Bank- The bank named in a letter of credit, in accordance with UCP 600
article 13, from which the negotiating bank may request cover under complying presentation. An
issuing bank must provide a reimbursing bank with a reimbursement authorization.
08. The Negotiating Bank- means the bank to which the beneficiary presents his documents for
negotiation or acceptance under the credit.
09. The Claiming Bank- means the bank to which the beneficiary presents his document for
negotiation or acceptance under the credit. Claiming bank is also the nominated bank which claims
the payment from the reimbursing bank.
10. The Transferring Bank Transferring bank means a nominated bank that transfers the credit
or, in a credit available with any bank, a bank that is specifically authorized by the issuing bank to
transfer and that transfers the credit. An issuing bank may also be a transferring bank.
Duties and Responsibilities of Issuing Bank and Advising in a Letter of Credit:

A. Issuing Bank
(i) The issuing bank is primarily responsible for payment under the credit to the beneficiary. This is
already dealt with in detail under ‘Revocable/Irrevocable Credits’.
(ii) Credits and any amendments thereto issued by the bank must be complete and clear. In order
to guard against confusion and misunderstanding, the issuing bank should discourage any attempt
to include excessive details in the credit or in any amendment thereto.
(iii) The issuing bank should nominate the bank which is authorized to pay or to accept drafts or to
negotiate, unless the credit allows negotiation by any bank
(B) Advising Bank:

(i) A credit may be advised to a beneficiary through another bank (the advising bank) without
engagement on the part of the advising bank but the bank shall take reasonable care to check the
apparent authenticity of the credit which it ad-vises. If the advising bank cannot establish such
apparent authenticity it must in-form, without delay, the bank from which the instructions appear
to have been received that it has been unable to establish the authenticity of the credit and if it
elects nonetheless to advise the credit it must inform the beneficiary that it has not been able to
establish the authenticity of the credit (Article 7).
(ii) If the bank elects not to advise the credit, it must inform the issuing bank without delay (Article
7).
(C) Negotiating Bank:

i)Under UCPDC-600, Article 13 provides: “Banks must examine all documents with reasonable care
to ascertain that they appear on their face to be in accordance with the terms and conditions of the
credit. Compliance of the stipulated documents on their face with the terms and conditions of
credit, shall be determined by international standard banking practice as reflected in these Articles.
Documents which appear on their face to be inconsistent with one another will be considered as
not appearing on their face to be in accordance with the terms and conditions of credit.
Therefore, the negotiating bank should accept documents tendered only if they conform to the
terms and conditions of the credit. In documentary credits all parties concerned deal in documents
and not in goods. Therefore, he cannot ensure correctness of the goods shipped but can only see
that the documents on their face appear to be as required by the credit.
(ii) If the negotiating bank finds any discrepancies in the documents tendered , but still negotiates,
it may require the beneficiary to execute an indemnity in favor of the bank. But such indemnity
cannot be transferred to the issuing bank without the consent of the beneficiary.
(iii) If the terms and conditions of the letter of credit appear to be ambiguous , the negotiating bank
has to decide about the interpretation and the documents to be accepted. It should act in good faith
and accept only reliable documents.
Transferable Letter of Credits:

A transferrable letter of credit can be described as a financial guarantee, that one of the parties, is
going to transfer all, or a part of the credit that they have to the other party. Letters of credits are
seen as protecting covenants that ensure that payment is made to the supplier of those particular
goods and services.
Transferable Letter of Credit includes the buyer (who applies for the Letter of Credit), the
middleman (or the First Beneficiary), and the seller (who is the final beneficiary). The Letter of
Credit is used between these parties in order to ensure that payment is guaranteed from one party
to another.
How do Transferable Letter of Credits work?

As mentioned earlier, it can be seen that the transferable letter of credit creates an exchangeable
provision between the parties involved. This works in the way that the buyer of the goods and
services goes to the bank, in order to ask it to be an intermediary in the process.
This means that the bank is taking guarantee to the seller of the goods and services that they are
going to be paid by the buyer.
This is important because the seller of goods needs to be ensured that they will eventually be paid
for the goods that they sell. They can only process the order once they have the guarantee, and that
is why they require the letter of credit.
In the case of transferable letter of credit, the bank that issues the letter of credit includes provision
the extension of the credit to the agreed upon second beneficiary.
In this case, the second beneficiary is bound to be entitled to payment of the loan, if it is required
that the time of payment. However, it must be noted that the first beneficiary is considered to be
liable for the payments in the case where they are disbursed by the bank.
World Bank & IMF , Objectives , history & role?:

The World Bank is an international financial institution that provides loans and grants to the
governments of low- and middle-income countries for the purpose of pursuing capital projects. It
comprises two institutions: the International Bank for Reconstruction and Development (IBRD),
and the International Development Association (IDA). The World Bank is a component of the World
Bank Group.
The World Bank's most recently stated goal is the reduction of poverty.
The World Bank was created at the 1944 Bretton Woods Conference, along with the International
Monetary Fund (IMF). The president of the World Bank is traditionally an American.[8] The World
Bank and the IMF are both based in Washington, D.C., and work closely with each other.
Objectives:
Eradicate Extreme Poverty and Hunger:, Achieve Universal Primary Education:, Promote Gender
Equality, Reduce Child Mortality, Improve Maternal Health, Combat HIV/AIDS, Malaria, and Other
Diseases, Ensure Environmental Sustainability, Develop a Global Partnership for Development.
What are the main incentives available for foreign investment in Bangladesh? Suggest to
improve investment climate in Bangladesh.
Main Incentives available for foreign investment in Bangladesh as per BB:
Bangladesh offers generous opportunities for investment under its liberalized Industrial Policy and
export-oriented, private sector-led growth strategy. All but four sectors (i.e. (1) arms and
ammunition and other defense equipment and machinery, (2) forest plantation and mechanized
extraction within the bounds of reserved forests, (3) production of nuclear energy, and (4) security
printing and mining) are open for private investment in Bangladesh. The government's role is that
of a facilitator which helps create an enabling environment for expanding private investment, both
domestic and foreign. The Board of Investment (BOI), established by the government for
accelerating private investment, provides institutional support services to intending investors.
General facilities/incentives
Tax holiday
Tax holiday facilities will be available for 5 or 7 years depending on the location of the industrial
enterprise. For industrial enterprises located in Dhaka and Chittagong Divisions ( excluding Hill
Tract districts of Chittagong Division) the tax holiday facility is for 5 years while it is 7 years for
locations in Khulna, Sylhet, Barisal, and Rajshahi, Divisions and the 3 Chittagong hill districts.
Tax exemptions:
Generally five to seven years' tax exemptions are available for many business investments.
However, for electric power generation tax exemptions are provided for up to 15 years.
Duty
No import duty is applicable for export oriented industry. For other industries it is 5% ad valorem.
Income tax
Double taxation can be avoided in most cases as the country (Bangladesh) benefits from many
bilateral investment agreements. Exemptions of income tax up to three years for the expatriate
employees in industries are specified in the relevant schedules of the income tax ordinance.
Remittances
Facilities for full repatriation of invested capital, profits and dividends are the norm in most
situations.
Exit
An investor can wind up an investment either through a decision of an annual or extraordinary
general meeting. Once a foreign investor completes the formalities to exit the country, he or she can
repatriate the net proceeds after securing proper authorization from the central bank (Bangladesh
Bank).
Ownership
Foreign investors can set up ventures, either wholly owned or in joint collaboration, with local
partners.
Investing in the stock market

Foreign investors are allowed to participate in initial primary offerings (IPOs) without any
regulatory restrictions. Also, incomes from dividends are tax-exempt for investors.
Other Incentives
1. Citizenship by investing a minimum of US $ 500,000 or by transferring US$ 1,000,000 to any
recognised financial institution ( Non-repatriable ).
2. Permanent residentship by investing a minimum of US$ 75,000 ( non-repatriable).
3. Special facilities and venture capital support will be provided to export-oriented
industries under "Thrust sectors" . Thrust Sectors include Agro-based industries, Artificial
flower-making, Computer software and information technology, Electronics, Frozen food,
Floriculture, Gift items, Infrastructure, Jute goods, Jewellery and diamond cutting and
polishing, leather, Oil and gas, Sericulture and silk industry, Stuffed toys, Textiles, Tourism.
To improve investment climate in BD (Protection of FI)

Legal Protection, International Agreements, Bilateral agreements, Investment treaty, RELAXATION
/ LIBERALISATION OF EXCHANGE CONTROL REGULATIONS, Political Stabilty, Economical
Stability, Country Security.
Recommendations to Improve Investment Climate in Bangladesh
1. Decreasing number of permissions/registrations/licenses with a predetermined time frame/one
stop investment requirement services.
2. Ensuring hassle free and in time delivery of industrial utilities like Electricity, Gas and water etc.
3. Restructuring investment promotion organization i.e. the Board of Investment with new
management.
4. Special investment attraction drive with specific project proposals to attract local and foreign
investment.
5. Activating entrepreneurship promoters like better business forum or regulatory reform
commission.
6. Developing infrastructure as per requirement of tomorrow’s business.
7. Developing sector specific demand driven skilled manpower with specific technical knowledge.
8. Establishing investment promotion agency.
Off shore banking (Earlier)? Discuss the instructions of BB to the banks last year to ensure
discipline for lending offshore funds through their offshore units.( How does it help the
entrepreneur in BD to meet their foreign exchange needs to operate industrial enterprise in
EPZ)
Latest Instructions about offshore banking facilities and its impact:
An offshore banking unit is a bank’s shell branch that conducts regular banking activities but in
foreign currency. The BB has revised the policy to allow local companies to take loans from OBUs at
LIBOR plus 3.5 percent, a much cheaper rate. LIBOR is the rate at what banks charge each other for
short-term loans in the London interbank market. It also serves as a global benchmark for short-
term interest rates. The LIBOR will be followed because the loans will be given in foreign currency.
Under the new policy, banks can provide all financial services to fully foreign owned companies
under the export processing zones (EPZs), economic zones and hi-tech parks as per the eligible
terms and conditions,” according to a BB circular issued on Monday.
But, in case of medium term and long term credit facilities, the existing terms and conditions will
remain unchanged.
Without prior permission of the central bank, banks can provide short term loan to the joint
venture companies of the EPZs, economic zones and hi-tech park from the offshore banking under
the eligible terms and conditions.
A bank, in its offshore banking operation, may discount or purchase accepted usance or deferred
bills against import from abroad on banker- customer relationship applying due diligence and
arrange payment to overseas suppliers.
A bank, in its offshore banking operation, may discount or purchase accepted usance or deferred
export bills against direct and deemed exports of products produced in Bangladesh subject to
compliance of applicable instructions.
With prior permission from the Bangladesh Bank, banks, as part of their offshore banking, may
make medium or long term loans or advances to the industrial enterprises resident in Bangladesh.
Different methods of payment settlement in International Trade:

Payment in advance: A buyer may make payment to a seller in advance before the goods are
shipped. The reasons behind, adopting this method, may be summarized as- seller is concerned
with the country risk of the buyer’s country or the buyer may wish to encourage the seller into a
long-term trade relationship or the seller may be in need of finance to prepare the goods for
shipment or the buyer feels comfortable with its relationship with the seller and with both the
credit and country risk of that seller.
Open account trading: When business is conducted on open account terms, the seller dispatches
goods to the buyer without any guarantee of payment. On dispatch, the seller sends the buyer an
invoice (together with other appropriate documents) for payment on an agreed date or at the end
of an agreed period. The buyer makes arrangements to pay on the relevant date according to the
terms of the sale contract. Open account trading is most commonly used when the two companies
concerned have a long-established trading relationship. Open account trading offers several
advantages; in particular, it is simple to administer and involves minimal banking fees or other
costs. The system is particularly attractive to buyers because it affords them the opportunity of
examining the goods before they have to make payment. Sellers using open account methods obtain
no security for payment and have to rely entirely on the creditworthiness and good faith of the
buyer. The only involvement by banks in open account trading is in the transfer of funds on behalf
of the buyer to the seller.
Consignment sales: are a trade agreement in which one party (the consignor) provides goods to
another party (the consignee) to sell. However, the consignee has the right to return unsold goods
back to the consigner. In other words, a consignment sale is an agreement in which a third party is
entrusted with selling goods on behalf of the owner. Consignment sales are also called goods on
consignment.
Bills for Collection is also a mode of payment used for the importation of visible goods.
A Bill for Collection is the handling of documents (financial and/or commercial) by banks in
accordance with instructions received from the exporter in order to:
 Obtain payment or acceptance or
 Deliver documents against payment and/or acceptance or
 Deliver documents on other terms and conditions.
The major participants of a Bill for Collection transaction are:
 The Buyer/Importer/Applicant/Drawee
 The Seller/Exporter/Beneficiary/Drawer
 Payee (in the case of domiciliation of proceeds)
 The importer's bank/Collecting bank
 The exporter's bank/Remitting bank
Discrepant documents: If the conditions are met, the documents (which the letter of credit will
pay against) are referred to as “compliant”. If the conditions are not met, the guarantee of
payment falls away (so the Issuing Bank will not pay automatically). In this situation, the
documents are referred to as “discrepant”.
Some conditions to be a discrepant document:
1. Incorrect Document
2. Late Shipment
3. Late presentation
4. Expired LC
5. Absence of document
6. Carrier not defined of bill of lading
7. Incorrect descriptions of goods
8. Incorrect Endorsement
L/C (Letter of Credit):

L/C is a definite conditional irrevocable undertaking given by the issuing bank to the seller on
behalf of the buyer, to pay a certain sum of money, under some agreed condition/fulfillment of
some condition. As per UCPDC, definition of LC (Credit): Credit means any arrangement, however
named or described, that is irrevocable and thereby constitutes a definite undertaking of the issuing
bank to honor a complying presentation.
Main features of documentary letter of credit . What are the discrepancies ordinarily found
in the bills of lading & commercial invoices submitted by the exporter to your bank for
negotiation?
Main features of documentary letter of credit:
Negotiability
The beneficiary of a letter of credit has right to payment because of the letter of credit. This
contractual relationship is independent of the relationship in trade that may have prompted the
need for the letter of credit. To be negotiable, the letter of credit must contain either an
unconditional promise to pay at any time the holder wishes or at a definite time. Negotiable notes
become transferable in a way comparable to money when they have this feature.
Revocability
A letter of credit may be revocable or irrevocable. In the case of a revocable letter of credit, it is
possible that the obligation to pay may be revoked or modified at any time or for any reason. An
irrevocable letter cannot be changed without agreement by all of the affected parties.
Transfer and Assignment

Domestic letters of credit, which are governed by the UCC, may be transferred as many times as
desired and will remain effective. This holds true even where the letter of credit says that it is
non-transferable to the extent that no one has yet performed actions pursuant to the letter of
credit when the transfer occurs.
Sight and Time Drafts
There are two possible features of a letter of credit that can trigger an obligation to pay: sight or
time. A sight draft must be paid when the letter is presented for payment. A time draft must be
paid after a certain period of time has elapsed. In both instances, the bank is allowed the
opportunity to review the letter of credit to assure its validity.
Discrepancies in Bill of lading
 Port of Loading Different Than Letter of Credit
 Port of Discharge Different Than Letter of Credit
 Late Shipment
 Gross Weight is Different in Bill of Lading from Gross Weight Stated in Packing List
 Partial Shipment Effected
 Unclean Bill of Lading Presented
 Carrier Not Identified and Bill of Lading not Signed as per UCP
 Costs Additional to Freight Shown on the Bill of Lading
 Bill of Lading Showing “Intended Vessel” Clause
Discrepancies in Commercial Invoice

 Incoterms Not Stated on the Commercial Invoice
 Description of Goods not per Letter of Credit
 Proforma Invoice Presented Instead of a Commercial Invoice
 Commercial Invoice Shows Merchandise not Called for in the Letter of Credit
 Commercial Invoice Not Issued by the Beneficiary
 Short Shipment
Reasons for declining trend of Remittances in BD. How to improve?

Reasons for declining trend of Remittances in BD:
There are four factors that can potentially account for the decline in remittances: the stock of
Bangladeshi migrants abroad, earnings per migrant worker, their average propensity to save, and
their average propensity to remit money home out of those savings.
How to improve:
Focusing economic diplomacy to resolve the legal problems Bangladeshi migrant workers are
facing abroad so as to prevent their premature return home, helping unemployed migrant workers
abroad find decent jobs, improving the skill composition of new migrants, ensuring the
competitiveness of the exchange rate, and ring fencing remittance transactions from the impact of
political turmoil will help stem the decline in remittances.
How Exchange rate of BDT is determined (The factors that affect the exchange rate of
currency)? While a devaluation of taka from its current level, promote or harm economy of
BD? (Discuss the factors that affect the exchange rate of a currency. What will happen if
Bangladeshi taka is depreciated from about Tk.85 to Tk.90 per USD?)
The taka exchange rate is set by the dealer banks and they change based on the current demand
and supply. The USD/BDT rates are based on inter-bank exchange rates in Dhaka. When exchanging
between BDT and other currencies, the rates will be based on New York and Dhaka closing
exchange rates.
Exchange rates are calculated based on:
 Inflation;
 Interest rates;
 The demand for the currency in other countries;
 Government debt behind the currencies;
 The import and export activity of both countries; and
 The stability of each country’s economy.
These factors affect the exchange rate at any given time.
Impact of devaluation of Taka on Bangladesh Economy:

Eminent economists and business leaders have strongly urged the policymakers and
Bangladesh Bank to devalue the Taka against the US dollar to remain competitive in the
export market and boost inward remittance.
They said most of the countries in Asia already depreciated their local currencies against
the US dollar in the last couple of years except but Bangladesh was yet to devalue. As a
result, Taka is now overvalued by around 5% against the currencies of other Asian
economies.
Economists, however, admit that taka devaluation will trigger a little inflationary pr essure,
which may not influence the commodity prices much as Taka is already stronger against
currencies of import-origin countries like China and India.
Devaluation will increase Bangladesh's competitiveness globally. Remittances will also go
up. All peer countries like India, Pakistan, Sri Lanka, Vietnam, Indonesia and Cambodia
already devalued their respective currencies over the last couple of years with a view to
remaining competitive in international markets, particularly to serve their own expor t
interests.
It is better to depreciate the taka by five percent in the next twelve months to help adjust
import costs and remain competitive. We import products worth at least $6.0 billion yearly
for textile sector. We need to enhance capacity to absorb the higher cost of import,
Economy would lie behind the race of boosting export and growing inward remittance if the
Taka was not devalued. The depreciation of Taka would have a little consequence in import
cost and inflation. The financial losses the country already incurred in export and
remittance fronts were irreparable due to overvaluation of Taka.
Cash incentives for remittance and export subsidy might not have been needed had the local
currency was devalued. Our trading partners and buyers will be encouraged to continue
sourcing products from our country if we devalue our currency. devaluation would assist
competitiveness of global trade, trade deficit reduction, higher employment and greater
domestic consumption.
Discuss the pre shipment credits the banks in Bangladesh provide to finance export from
the country? Discuss the underlying risks associated with these credits & how to mitigate
them?
Types of pre shipment finance available in Bangladesh, Risks in them & risk mitigation
The Pre Shipment finance is categorized broadly as per following:
1. Back to Back L/C (Inland and Foreign)
2. Export Cash Credit (ECC)
3. Packing Credit (PC)
1. Back to Back L/C:

Under this arrangement the Bank finance an exporter by way of opening L/C for procuring raw
material with a view to manufacture exportable goods as stated in the L/C received by the exporter
from an overseas buyer. When an L/C is opened for procuring raw material with the back of an
Export L/C or contract (an L/C/contract received from overseas buyer), the former on is termed as
Back to Back letter of credit. In other words, the payment of an Import L/C (for procuring raw
materials) is settled by the proceeds of Export L/C is called Back to Back L/C. Tenor Maximum 180
days.
2. Export Cash Credit:

This type of facility is allowed to exporter for procuring and processing of goods. For export of
traditional item like jute, tea and leather the facility can be extended up to 90% of the value of
export L/C as contract. For garments industry this can be allowed between 10% - 15% based on
the category of unit because the main raw material is procured through Back to Back L/C.
3. Packing Credit:
Packing Credit is allowed for making necessary preparation for shipment of goods. This finance
generally covers cost of packing, transportation from godown to the port for shipment ware
housing, insurance etc.
For traditional item like Jute, Tea, Leather etc. packing credit may be allowed up to 90% of invoice
value against rail receipt/steamer receipt/Barge receipt. This credit is thus extended against
submission of documents of title to goods showing loading of goods from the place of shipment to
port for ultimate shipment to abroad. Tenor is 90 to 120 days
For extra knowledge:
Pre shipment Facilities by banks:
Facilities Usual Tenor Purpose
Import / procurement of raw

Back to Back (BTB) L/C Maximum 180 days
materials
To meet pre-shipment fund

Packing Credit 90 to 120 days
requirement
To meet overhead expenses and to

Demand Loan Maximum 180 days
procure raw materials
Import Letter of Credit (Sight / Sight / DP (Maximum Import / procurement of raw

DP) other than BTB L/C 180 days) materials
Export Development Fund (EDF) As per Bangladesh Import / procurement of raw

Loan Bank Guidelines materials
Import / procurement of raw
UPAS L/C Maximum 180 days
materials
For retirement of documents
Loan against Trust Receipt (LTR) Maximum 180 days
against Sight L/C
To meet overhead expenses and to
Overdraft (OD) One year
procure raw materials
Procurement of raw materials and
Time Loan One year
financing receivables
RISKS AND RISK MITIGATION

The primary risk is the performance risk of the seller as repayment is dependent on the seller’s
performance ability and reputation. Specifically, the seller’s ability to perform against the purchase
contract, and the buyer’s ability and willingness to pay on delivery of the goods are the key risks.
Mitigation of risk is provided by the credentials of a creditworthy and reliable buyer and the proven
performance of the seller in a repeatable and predictable fashion. Security over assets prior to
shipment is an important control mechanism, but is not the primary source of risk mitigation.
Describe the sources and reasons of black money in BD and how it is transferred abroad.
Please offer your suggestions to curb the flow of the black money out of the country?
Reasons and sources of black money:
The causes and sources of black money are varied, including drug trafficking, smuggling, gambling,
illegal activities, legal but unreported activities and corruption. Illegally earned money is
obviously not reported to the tax authorities, and so it is black m oney. The second category
comprises income from legal activity that is not reported to the tax authorities.
For example, a flat owner sells a flat at Tk1 crore, of which he received Tk70 lakh by
cheque, and the rest in cash. In this transaction, Tk30 lakh becomes black money or
unrecorded money.
All economic activities that are hidden from official authorities for monetary, regulatory and
institutional reasons. The monetary reasons include evading tax payments and social security
contributions; the regulatory reasons include avoiding government officials or the weight of
regulatory framework; and the institutional reasons include laxity in enforcement of anti-
corruption law, poor quality of political institutions and fragility of rule of law. Black economy
results in tax distortions as well as erroneous measurement of macroeconomic variables, and
official policies based on these erroneous measurements do not bring desired results. It
exacerbates poverty cum inequality in a country, and the quality of public goods and services are
adversely affected.
How black money transferred from our country?:

In Bangladesh, money laundering is popularly known as Hundi or Hawala transactions. Hundi is an
alternative or parallel remittance system active all over the world. Hawala is an Arabic word for
transferring money or information between two people using a third person.But businesses,
especially exporters, do this in a "smarter" way.
Some exporters of readymade garments have set up a complex web of intermediaries with the sole
purpose of siphoning off revenue to offshore zones and Western banks. An RMG maker, for
instance, exports products first to its offshore affiliate or a buying house at a low price. Then it sells
the items to Western consumers at a higher price. The extra sum, earned through such under
invoicing, is then deposited in foreign banks.
Moneys are laundered in different ways. Most of the laundered moneys come from international
business. Although those business people are engaged in legal trades, they are applying corrupt
practices in their payments. The statistics recently disclosed by the Global Financial Integrity (GFI),
a Washington-based research organization, reveal that 87 per cent of illicit financial outflows from
Bangladesh from 2005 to 2014 came from fraudulent invoicing in international business.97 The
unscrupulous businesspersons employ this corrupt practice mainly in two ways: under invoicing
when importing goods and over invoicing when exporting goods. The balance between the actual
price and the invoiced price is kept overseas in a safe custody in collaboration with their overseas
counterparts – exporters and importers.
Mitigation of Black money transfer:

 Strengthening enforcement of existing laws
 Improving corruption investigations
 Operating proactive financial intelligence agencies
 Raising public resistance and social denounce
 Using public media for mass education
 Educating students at institutions
 Targeting both supply and demand sides:
 Ensuring transparency in official activities
 Introducing naming and shaming of offenders
 Increasing housing affordability for honest taxpayers
 Adopting voluntary self-governance code
that black money can be reduced by strengthening the tax system.
Explain the dictum: Banks Deal with Documents and Not with Goods, Services or
Performance to Which the Documents May Relate (UCP 600, Article 5)
The main purpose of the credit document is to create an ‘abstract payment’ commitment. Therefore,
the rights and obligations resulting from the DC do not depend on the relationship between the
seller and the buyer, with the former fulfilling his contractual obligations towards the latter.
Generally, not carrying out some or all of these obligations does not give the buyer the right to ask
the bank to withhold payment to the seller as long as the documents presented by the beneficiary
are compatible ‘on their face’ with the LC. Therefore, the commitments of both the confirming bank
and the issuing bank are considered in regards to the documents and not the goods.
To enforce the article UCPDC Article 14(h) states: If a credit contains a condition without
stipulating the document to indicate compliance with the condition, banks will deem such a
condition as not stated and will disregard it.
Describe various kind of credit windows through which commercial banks finance imports
into Bangladesh. Identify the risks and safety measures that can be taken to minimize the
risk associated with import finance?
Various kind of Import Financing in Bangladesh:
Pre-import finance: 01. Margin
Post-import finance: 02. PAD 03. LTR 04. LIM
PAD:
After receiving the concerned negotiated bill from the Negotiating Bank, the Issuing Bank has to
check the documents very carefully within a stipulated time (within 5 working days). If the bank
founds those without any discrepant, the bill has to be lodged and debit PAD A/C, which is the
direct liability of the Importer, for making payment against the import bill. Customarily, the tenor of
a PAD account is 21 days.
LTR (Trust Receipt):

LTR is a kind of Post Import Finance offered by the Bank to the Importer. A banker holding
documents of title is sometimes requested by his customer (an importer) to release them on the
customer accepting the bill, to enable the importer to release the goods from the customs authority,
sell the goods and pay off the bill out of proceeds. The banker may release the documents of title to
goods against acknowledgement what is known as a ‘Trust Receipt’.
LIM (Loan against imported merchandise):

LIM is the short-term loan to the Importer, if he fails to retire the bill within the stipulated time. In
LIM, after releasing the goods from the Customs authority, the possession of the goods remains
with the Bank i.e. under bank’s lock & key.
 Purpose: To release the imported merchandise from the Customs authority.
There are three types of LIM is used by the bank, such as:
 One off LIM
 Forced LIM
 Arranged LIM
Risks in Trade(Import) Finance:

 Counterparty risks: When a finance provider provides invoice financing to an importer, it
takes the counterparty risk of the importer for repayment on due date.
 Country risks: Inability of an exporter to fulfill export orders for which pre-shipment
finance has been provided, due to imposition of export restrictions or embargoes, which
then cuts off the source of repayment for the financing.
 FX risks: FX risk are primarily risks for the importer and exporter, a finance provider needs
to be aware of how it might affect its customers, and be cognisant of how exposure to FX
risk might impair a customer’s repayment ability.
 Insolvency risks: Insolvency risk refers to risk that a counterparty may be unable to pay its
debts and financial obligations. Insolvency could have been the result of losses and cashflow
issues arising from inability to collect on debts, inability to sell its inventory, and/or loss of
credit facilities.
 Fraud risks: Duplicative invoice financing, where the same invoices are used to obtain
financing from two or more finance providers. Use of forged or fake documents to obtain
financing. Collateral fraud involving inventory, such as false valuation and multiple pledges
of the same inventory to different finance providers.
 Compliance risks: Compliance risk refers to risks of legal or regulatory sanctions, financial
loss and reputational damage that a finance provider may suffer as a result of its failure to
comply with applicable laws and regulations.
 Dilution Risks: Dilution risk refers to risk that the amount that may be payable by the
debtor on a trade receivable will be less than the invoiced amount(s). Dilution may arise
due to a variety of reasons including return of goods, short-shipment, damaged goods,
warranty claims, billing error, rebates and commercial dispute
Mitigation/Safety measures against the risks in import finance:

 Corporate guarantee (e.g. from the customer’s parent company) where the guarantor is
a stronger risk counterparty.
 Guarantee from a multilateral development bank for confirmation of, and/or financing
under, a letter of credit
 Credit insurance that covers political risk, where available or feasible.
 the confirmation or irrevocable reimbursement undertaking from a bank in a lower risk
location.
 Mitigating FX risk is by way of hedging techniques, such as FX forward contracts with
banks (to fix the FX rate over a period of time), and FX options. The counterparty may
also have exports and imports in the same currency, which could provide a natural
hedge for its foreign currency requirements.
 Due diligence on the receivables to be performed prior to financing, to assess the
dilution percentage and to set the appropriate advance ratio for the financing. The
dilution rate may be monitored on ongoing basis, and adjustments to advance ratios
made accordingly on periodic basis.
 Assessment and continuous monitoring of the credit quality of the relevant
counterparties
 Availability of collateral
 Perfection of security arrangements
 Education and training of the finance provider’s staff on compliance requirements and
to instill a compliance culture, based on guidelines or guidance from its regulators.
 Effective Know-Your-Customer (“KYC”) practice to verify the customer and its owners
prior to onboarding (and periodic reviews subsequent to onboarding) and Customer
Due Diligence (“CDD”) to assess their level of AML/CFT risk.
How important are the remittances sent by BD nationals abroad on socio economic sectors
of the country? What are the likely impacts of the govt. decision to give Tk. 3per dollar in
addition to the official rate on the remittances?
Impact of remittances on socio economic sector of Bangladesh:
In Bangladesh, remittance is one of the most important economic variables in recent times as it
helps in balancing balance of payments, increasing foreign exchange reserves, enhancing national
savings and increasing velocity of money. For about two decades remittance has been contributing
around 35% of export earning. Moreover, it is greater than foreign aid and thus helps in lessening
dependence on foreign aid remittance gets momentum in recent time in Bangladesh and is the
second largest sector of foreign exchange earning after the garment; sector. If cost of imported raw
materials is deducted from the foreign exchange earning of the garments sector, remittance
becomes the sign: largest sector of foreign exchange earning. Remittance earning ; increasing day
by day but at a lower rate than the increase in emigration from Bangladesh due to the increasing
share of unskilled or semi-skilled labors than the professionals in international migration. The
share o remittance in GNI (Gross National Income) is increasing day by day. Remittance affects
almost all the macro-economic indicators of a country positively. Though there are also negative
sides of remittance earning e.g. brain drain, its overall contribution to Bangladesh economy is very
much effective. The major roadblocks of a smooth and efficient payment of foreign remittances are
poor infrastructure in rural and semi-urban economy, inadequate reach of private commercial
banks within the country, massive information asymmetry in the market, inefficiency of financial
institutions, poorly regulated exchange houses etc. Appropriate and timely government policies and
initiatives can boost up the amount of remittance and can rectify the problems related to it.
Remittance has created a new dimension in the economic development of Bangladesh. We have to
properly unlock the potentialities of remittances and utilize it properly to make it an indispensable
tool of the economic development of Bangladesh.
If we say briefly by point:
 Strengthening balance of payments by provision of provision of foreign exchange.
 Allow family to meet basic needs.
 Changing in lifestyles ( Enhancement in child education, health).
 Investing in local business and savings.
 Enhancement of emergency resources.
 Enhancement of social security resource base.
 Boost local economy.
 Financing local development projects.
What are the impacts of 2% incentives on Remittances in Bangladesh?

1. Increasing of remittances in legal way.
2. Decreasing of illegal money laundering like Hundi , Hawala and batta.
Then Follow previous para.
What is meant by generalized system of preference? Describe the reasons for which USA has
withheld this facility for BD?
GSP:
Generalized System of Preferences (GSP) provide opportunities for many of the world’s poorest
countries to use trade to grow their economies and climb out of poverty. GSP is the largest and
oldest U.S. trade preference program. Established by the Trade Act of 1974, GSP promotes
economic development by eliminating duties on thousands of products when imported from one of
119 designated beneficiary countries and territories.
Why United States withheld GSP facilities with Bangladesh?

After two industrial disasters – Tazreen Fashions fire and Rana Plaza building collapse, the US
suspended GSP for Bangladesh in June 2013, citing serious shortcomings in labor rights and
workplace safety. An interagency review led by the United States Trade Representative (USTR) had
earlier concluded that while Bangladesh made progress over the last year to address fire and
building safety issues in the garment sector. Further progress is needed to get back the generalized
system of preferences, the USTR said.
USTR chief Michael Froman said there is more work to do, building on the collaboration between
the government of Bangladesh, private sector stakeholders, and the International Labor
Organization, to address the concerns about factory safety in the apparel sector.
Froman also urged the Bangladesh government to accelerate its efforts to ensure workers’ rights
and to take measures to address continuing reports of harassment of and violence against labor
activists who are attempting to exercise their rights.
What is EDF? What are the criteria for lending money from this fund?
EDF:
The Export Development Fund is a pre-shipment incentive aimed at preparing, facilitating and
supporting exporters to penetrate the global market. The incentive is available to exporters at a
reasonably low rate of interest. It also provides support for product development and access to
international markets. The latest move, beside expanding the size of the EDF, has reduced the rate
of interest too. The central bank has increased the fund to $5 billion from $3 billion for maximum
360 days (for Covid-19, 720 days) .
Exporters of the manufacturing sector can now avail loans at 1.75 per cent instead of the previous
rate of 2.0 per cent, according to a central bank notice. Banks which are the operatives of the fund
will receive the fund from the Bangladesh Bank at 0.75 per cent interest rate and will be allowed to
charge a maximum of 1.75 per cent in interest from borrowers. In accordance with the decision,
ADs shall make interest payments to Bangladesh Bank at 0.75 percent pa; the remainder 1.00
percent pa as before will be retained by ADs as their interest income. Coverage of the fund now
extends to export enterprises in the Export Processing Zones (EPZs)--- to both hundred per cent
foreign owned as well as joint venture firms with the additional facility of availing foreign currency
loans from the fund.
Criteria to take EDF loan:

Businesses from various sectors, including garments, can take loans from this fund for a maximum
of 360 days. Members of the Bangladesh Garment Manufacturers and Exporters Association and the
Bangladesh Textile Mills Association can borrow up to $25 million from this fund. The ceiling is $20
million for knit fashion manufacturers and exporters.
The Bangladesh Bank circular said the loan ceiling for knitwear factories has been raised from $15
million to $20 million, which will be effective immediately.
Members of the Bangladesh Knitwear Manufacturers and Exporters Association will be eligible to
avail this loan, said the circular.
Criteria:
(i) He must be an exporter of non-traditional manufacturing items.
(ii)The value added of these products could be 20% except in the case of garments where it has to
be 30% and above.
(iii)The loan should be utilized in the case of importing raw-materials for manufacturing the
exportable products.
(iv) The exporter must have an Export L/C.
(v) He must create a Back to Back L/C for importing raw materials.
(vi) The period of loan is 180 days.
(vii) The exporter can borrow as many times in a year on revolving basis.
(viii) The interest rate of EDF is LIBOR + 1%.
(ix) An exporter can borrow an amount not exceeding US$5,00,000/- in a single case, but
outstanding should not be more than US$10,00,000/-
(x) He has to have an Export Credit Insurance through Export Credit Guarantee Scheme (ECGS).
Read: Main features of exchange control in Bangladesh. Offer your suggestion to the reform
that are needed to make the control compatible with the free market strategy of Govt. to
develop the economy.

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DAIBB

Previous year’s important questions (2015-2020) solution for 5 set’s

Stale Bill of Lading :

Charter Party Bill of Lading:

Clean Bill of Lading: (Article 27 Clean Transport Document)

Floating Exchange Rate:

Back to Back LC:

Balance of Trade (BOT):

Offshore Banking Unit (OBU):

Balance of Payments (BOP):

European Common Market:

1. The establishment of a customs union with a common external tariff

Asian Development Bank:

European Union (EU):

North American Free Trade Agreement (NAFTA):

What is LTR (Trust Receipt)?

LIM (Loan against imported merchandise):

Pro Forma Invoice:

Nostro account and vostro account:

London Interbank Offered Rate (LIBOR):

Quasi Negotiable Instrument:

Covered Interest Arbitrage:

What is the difference between a fixed and a floating exchange rate?

BACK TO BACK & TRANSFERABLE OF LC

 Back to back LC involve 2 LC

 A Transferable letter of credit is one, which specifically states that it is transferable.

Differences between BACK TO BACK & Master LC:

Difference between Documentary credit & Documentary collection:

A Letter of Credit is a document A Documentary Collection is the process

The exporter’s bank is the issuing authority

percentage of the Letter of Credit to Letter of Credit costs.

Preferred when the importer and

Provides a higher level of security in

What is the difference between a euro and an Euro dollar?

What is the difference between Spot and Forward exchange rates?

Difference between current account and capital account:

Difference between FDBP and LDBP

Difference between Balance of Trade and Balance of Payments:

Difference between air waybill and air consignment note:

Duties and Responsibilities of Issuing Bank and Advising in a Letter of Credit:

(B) Advising Bank:

(C) Negotiating Bank:

Transferable Letter of Credits:

How do Transferable Letter of Credits work?

World Bank & IMF , Objectives , history & role?:

Investing in the stock market

To improve investment climate in BD (Protection of FI)

Different methods of payment settlement in International Trade:

L/C (Letter of Credit):

Transfer and Assignment

Discrepancies in Bill of lading

 Port of Loading Different Than Letter of Credit

Discrepancies in Commercial Invoice

Reasons for declining trend of Remittances in BD. How to improve?

Impact of devaluation of Taka on Bangladesh Economy:

1. Back to Back L/C:

2. Export Cash Credit:

Import / procurement of raw

To meet pre-shipment fund

To meet overhead expenses and to

Import Letter of Credit (Sight / Sight / DP (Maximum Import / procurement of raw

Export Development Fund (EDF) As per Bangladesh Import / procurement of raw

RISKS AND RISK MITIGATION

How black money transferred from our country?: