Foreign Exchange Operations and Performance Evaluation of Trust Bank Limited

Foreign Exchange Operations and Performance Evaluation of Trust Bank Limited
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CHAPTER-1
1.1 Introduction:
Financial institutions are investment intermediaries linking the savers and users of fund.
These intermediaries are interposed between the ultimate borrowers and lenders
permitting them efficient transfer of funds. ndividuals having surplus funds can lend
them for reasonable return to entrepreneurs who need funds to take the advantage of
economicall! and financiall! viable investment opportunities. The existence of financial
institutions facilitates such exchange of resources. "s a result# both the borrowers and
lenders are better off than the! would have been without financial institutions and market
intermediaries. Thus# these financial institutions# such as banks# have a positive role in
financing and investment which is a multidimensional process involving the complexit!
of man! interrelated and interdependent factors of diversified nature. t is difficult to
assess the contribution of each factor independentl!.
The ke! to successful banking la!s in the abilit! of balance man! activities
simultaneousl!. The bank must maintain a health! growth rate# while at the same time it
must take action to minimi$e the risks it faces. The bank must also maintain enough cash
on hand to meet obligations. "ll of these are related to sound performance of a bank.
Evaluating Bank Performance, examines the basic risk and return features of commercial
banks. The financial performance evaluation demonstrates the strengths and weaknesses
of bank performance over time. The Trust Bank Ltd. has a responsibilit! to ensure
efficient and effective banking operation in a sound manner. The stud! will look at the
amount of li%uidit! that TBL has available to meet an! reasonable demands that might
have to meet# how it manages asset&liabilit!# Foreign exchange Operation# what is the
position in terms of profitabilit! and how the bank manages its capital so that it has
sufficient funds to remain solvent. This stud! is an attempt to the in'depth anal!sis of the
Foreign Exchange performance of The Trust Bank Ltd.
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1.2 Origin of the report:
(ow a da!# education is not )ust limited to books and classrooms. n toda!*s world#
education is the tool to understand the real world and appl! knowledge for the betterment
of the societ! as well as business. From education the theoretical knowledge is obtained
from courses of stud!# which is onl! the half wa! of the sub)ect matter. Practical
knowledge has no alternative. The perfect coordination between theor! and practice is of
paramount importance in the context of the modern business world in order to resolve the
dichotom! between these two areas. Therefore# an opportunit! is offered b! (orth +outh
,niversit!# for its potential business graduates to get three months practical experience#
which is known is as -nternship Program.. For the competition of this internship
program# the author of the stud! was placed in a bank namel!# The Trut !"n#
$i%ited&. nternship Program brings a student closer to the real life situation and thereb!
helps to launch a career with some prior experience.
This paper is titled 'oreign E(ch"nge Oper"tion "nd Perfor%"nce E)"*u"tion of
the Trut !"n# $i%ited& originated from the fulfillment of the BB" program. For the
internship program# each student is attached with an organi$ation. /! internship was at
The Trust Bank Ltd.# Principal Branch# 0haka. 0uring m! internship# had to prepare a
report under the supervision of +r. ,o*"% -oh"%%"d. +irector. -!A / E-!A
Progr"%. 0orth 1outh 2ni)erit3.
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1.3 O45ecti)e of the 1tud3:
The main ob)ectives of this stud! is to familiari$e with overall activities of the Foreign
Exchange division 1 Transaction procedures maintained b! TBL# to anal!$e the Foreign
Exchange Transaction procedures and observe 1 evaluate Foreign Exchange activities 1
performance# identif! problems 1 recommend suggestions for the successful Foreign
Exchange Operations of the Trust Bank Ltd and lastl! to present an over view of The
Trust Bank Ltd.
1.6 -ethodo*og3:
For preparing this paper# used both +econdar! and Primar! data.
2ollection of Primar! 0ata3
/an! of the data and information were collected from m! practical experience and
%ueries from the executives while doing m! internship at The Trust Bank Ltd.
nformation and data regarding Overview of the TBL# interest rates 1 charges#
Foreign Exchange operations# performance measurement in mport 1 export# +4OT
"nal!sis# Foreign Exchange policies etc. were collected from this sources.
2ollection of +econdar! 0ata3
0ata regarding the Foreign exchange operations and Performance Evaluation of The
Trust Bank Ltd. were collected from secondar! sources like3 "nnual 5eports#
Brochures# /anuals and Publication of The Trust Bank Ltd.# Bangladesh Bank
Librar!# BB/ Librar!# 0+E Librar!# (ews paper etc. were the ma)or sources of
secondar! date.
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1.7 1cope of the 1tud3:
/! decision and anal!sis are done based on the practices applied at Trust Bank Limited.
The stud! was wide spread and has greater scope to focus on different aspect of foreign
exchange on banking sector but m! stud! probabl! will not reflect the practices in the
overall banking sector. /oreover# it does not include the foreign exchange practices done
b! the non'banking financial organi$ations.
1.6 $i%it"tion of the tud3:
The main problem faced in preparing the paper was the inade%uac! and lack of
availabilit! of re%uired data. This report is an overall view of Foreign Exchange
Operations of The Trust Bank Ltd. But there is some limitation for preparing this report.
These barriers# which hinder m! work# are as follows3
0ifficult! in accessing latest data of internal operations.
(on'availabilit! of some preceding and latest data.
+ome information was withheld to retain the confidentialit! of the bank.
was placed to this department for onl! 6 months of time and working like a
regular emplo!ee hindered the opportunit! to put the better effort for the stud!.
4ith all of this limitation tried m! best to make this report as best as possible. +o
readers are re%uested to consider these limitations while reading and )ustif!ing an! part
of m! stud!.
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1.8 THE !A09I0, 1:1TE- O' !A0,$A+E1H
This chapter provides an overview of the banking s!stem in Bangladesh and
developments 1 performance of the banking sector. Bangladesh has a mixed banking
s!stem comprising nationali$ed# private and foreign commercial banks. Bangladesh Bank
7BB8 has been working as the central bank since the countr!9s independence. ts prime
)obs include issuing of currenc!# maintaining foreign exchange reserve and providing
transaction facilities of all public monetar! matters. BB is also responsible for planning
the government9s monetar! polic! and implementing it thereb!.
T3pe of !"n#
The banking sector in Bangladesh comprises of four t!pes of scheduled banks# namel!#
state'owned commercial banks 7+2Bs8# government owned development finance
institutions 70Fs8# private commercial banks 7P2Bs8 and foreign commercial banks
7F2Bs8. "t present there are four state'owned commercial banks 7+2Bs8 operating in
Bangladesh. The second t!pe'development finance institutions that derive their funds
mainl! from the government# other financial institutions and supranational organi$ations.
0evelopment banks have taken a variet! of specific forms# but most of them are oriented
toward specific economic activit! or toward a region. There are five development finance
institution s 70Fs8 in Bangladesh. The third categor!# i.e. private banks financed the
development of the currentl! industriali$ed countries. Fre%uentl! the! were instrumental
in identif!ing investment possibilities3 arranging for the importation of skilled managers#
workers and raw materials: and taking initial steps toward assuring markets for output.
(one of this was done# needless to sa!# for eleemos!nar! purposes. The profit motive
stimulated lending to enterprises to promising sectors. n this categor! there are thirt!
local Private 2ommercial Banks 7P2Bs8 and nine Foreign 2ommercial Banks.
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!"n#ing 3te% of !"ng*"deh
Bank
T
!
p
e
s
0o. of
!"n#
0o. of
!r"nche
+2Bs ; 66<;
0Fs = >6=;
P2Bs 6? >@@A
F2Bs ?B ;<
Tot"* 72 6762
Source: Bangladesh Bank database
'r"%e;or# for An"*3i
The ma)or data sources for this stud! are Bangladesh Bank "nnual 5eport. n this regard
banks are categori$ed broadl! into four categories3 +tate'owned commercial banks
7+2Bs8# government owned 0evelopment Finance nstitutions 70Fs8# Private
2ommercial Banks 7P2Bs8 and Foreign 2ommercial Banks 7F2Bs8. The time period
covered is basicall! from C??A to C??@.
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Aet "nd +epoit of !"n#ing 1ector in !"ng*"deh
(billion Taka)
Bank
types
2006 2007
Number
of banks
Number of
branches
Total
assets
% of
industry
assets
Deposits % of
deposits
Number
of banks
Number of
branches
Total
assets
% of
industry
assets
Deposits % of
deposits
SBs ! ""#! 7#6$7 "2$7 6%!$& "%$2 ! ""#" '&7$' ""$& 6''$7 "2$6
D()s % &"%! &#7$2 7$# &00$2 %$! % &"%' 20&$7 7$" &&%$6 %$!
*Bs "0 &776 &&!7$# !7$7 '%%$% %&$" "0 &'22 &!26$6 %&$! &&%0$2 %"$%
(Bs 0' !# 2#!$' &&$# &%0$# #$& 0' %" 227$7 #$2 &#"$! #$%
Total 48 6562 2406.7 100.0 1860.6 100.0 48 6717 2773.9 100.0 2148.9 100.0
Source: Bangladesh Bank Annual Report
!"n#ing 1ector Perfor%"nce. Regu*"tion "nd !"n# 1uper)iion:
n C??@# the state'owned commercial banks 7+2Bs8 held 66.> percent of the total industr!
assets as against 6C.@ percent in C??A. P2Bs* share rose to =>.; percent in C??@ as against
;@.@ percent in C??A. The foreign commercial banks held <.C percent of the industr!
assets in C??@# showing a declining trend b! 6.A percentage point over the previous !ear.
The 0Fs9 share of assets was @.6 percent in C??@ against @.< percent in C??A
Total deposits of the banks in C??@ increased b! >=.= percent to Taka C>;<.B billion
from Taka ><A?.A billion in C??A. The +2Bs9 7comprising largest ; banks8 share in
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deposits decreased from 6=.C percent in C??A to 6C.A percent in C??@. On the other hand#
P2Bs* deposits in C??@ amounted to Taka >>=?.C billion or =6.= percent of the total
industr! deposit against Taka B==.= billion or =>.6 percent in C??A. F2Bs9
deposits in C??@ rose b! Taka 6C.A billion or C>.A percent over the previous !ear. The
0Fs9 deposits in C??@ were Taka >>=.A billion against Taka >??.C billion in C??A
showing an increase of >=.; percent over the !ear.
Aggreg"te !"*"nce 1heet
Aet: "ggregate industr! assets in C??@ registered an overall increase b! >=.6
percent over C??A. 0uring this period# +2Bs9 assets increased b! >A.@ percent and
those of the P2Bs rose b! C;.6 percent. Loans and advances pla!ed a ma)or role on
the uses of fund. Loans and advances amounting to Taka >@C;.6 billion out of aggregate
assets of Taka C@@6.B billion constituted significant portion 7AC.C percent8. 2ash in tills
were Taka CB.@billion 7>.> percent8: deposits with Bangladesh Bank were Taka >=B.;
billion or =.@ percent: other assets were Taka ;@B.A billion or >@.6 percent and investment
in Dovernment bills and bonds accounted for >6.@ percent 7Taka 6<>.? billion8 of the
assets.
$i"4i*itie: The aggregate liabilit! portfolio of the banking industr! in C??@ was Taka
C@@6.B billion of which deposits constituted Taka C>;<.B billion or @@.= percent and
continued to be the main sources of fund of banking industr!. 2apital and reserves
of the banks were Taka ><?.? billion or A.= percent of aggregate liabilities in C??@#
as against Taka >CC.B billion or =.> percent in C??A
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Perfor%"nce "nd R"ting of !"n#
Performance of the banking sector has been discussed in this chapter under 2"/EL
rating of banking. The five indicators used in the rating s!stem are 7i8 2apital ade%uac!#
7ii8 "sset %ualit! 7iii8 /anagement soundness 7iv8Earnings and 7v8 Li%uidit!.
C"pit"* Ade<u"c3
2apital ade%uac! focuses on the total risk weighted capital intended to protect the
depositors from the potential shocks of losses that a bank might incur. t helps absorbing
ma)or financial risks 7like credit risk# foreign exchange risk# interest rate risk and risk
involved in off'balance sheet operations8. Banks in Bangladesh have to maintain a
minimum 2apital "de%uac! 5atio 72"58 of not less than >?.? percent of their risk'
weighted assets 7with at least =.? percent in core capital8 or Taka C.? billion#
whichever is higher.

C"pit"* Ade<u"c3 R"tio =CAR>
!"n#
T3pe
2??? 2??1 2??2 2??3 2??6 2??7 2??6 2??8
+2Bs ;.; ;.C ;.> ;.6 ;.> '?.; >.> @.B
0Fs 6.C 6.B A.B @.@ B.> '@.= 'A.@ '=.=
P2Bs >?.B B.B B.@ >?.= >?.6 B.> B.< >?.A
F2Bs ><.; >A.< C>.; CC.B C;.@ CA.@ CC.@ CC.@
Tot"* 6.8 6.8 8.7 @.6 @.8 7.6 6.8 A.6
(*ercent)
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Table shows that as on 6> 0ecember C??@# the +2Bs# 0Fs# P2Bs 1 F2Bs maintained
2"5 of @.B# '=.=# >?.A and CC.@ percent respectivel!. The 2"5 of +2Bs showed @.B
percent in C??@ after transferring the cumulative loss for Taka <@.B billion b! creating
goodwill 7valuation ad)ustments account8 at the time of corporati$ation of 6 +2Bs. The
valuation ad)ustment account will be amorti$ed within >? !ears. /eanwhile# the 2"5
of 0Fs stood at'=.= percent in C??@ after ad)usting the cumulative losses of Taka C;.<
billion of BEB and 5"E,B. The ad)usted 2"5 of 0Fs in C??= and C??A also stood
at '@.= percent and 'A.@ percent considering their cumulative losses of Taka C>.B billion
and Taka C;.; billion respectivel!. = P2Bs 7including C problem banks8 also could not
maintain re%uired 2"5 in C??@. F2Bs maintained CC.@ percent 2"5 inC??@ though A
F2Bs out of B F2Bs could not maintain minimum capital for Taka C.? billion but the!
were permitted to ad)ust those shortfall within 6? Fune C??B. The 2"5 of the banking
industr! was B.A percent in C??@ as against A.@ percent in C??A. The 2"5 of the industr!
showed downturn in C??= due to the ad)ustment of cumulative losses b! the 0Fs and
thereafter it has increased further positivel!.
Aet Bu"*it3
The asset composition of all scheduled banks shows the concentration of loans and
advances 7AC.C percent as of 0ecember C??@8. The high concentration of loans and
advances indicates vulnerabilit! of assets to credit risk# especiall! since the portion
of non'performing assets is significant. " huge non'performing loan portfolio has
been the ma)or predicament of banks particularl! of the state'owned banks. n the
total assets the share of loans and advances is followed b! the investment
in Dovernment securities covering >6.@ percent.
The most important indicator intended to identif! problems with asset %ualit! in the loan
portfolio is the percentage of gross and net non'performing loans 7(PLs8 to total
advances. F2Bs have the lowest and +2Bs have the highest ratio of (PLs. +2Bs have
gross (PLs to total Loans of CB.B percent whereas in case of P2Bs# F2Bs and 0Fs# the
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ratios are =.?# >.; and C<.A percent respectivel!. +imilarl! (PLs net of provisions and
interest suspense to the total loans is >C.B# >.; and >B.? percent for +2Bs# P2Bs
and 0Fs respectivel!. F2Bs are having excess provision for loan losses.
R"tio of gro 0P$ to tot"* *o"n

!"n#
T3pe
2??? 2??1 2??2 2??3 2??6 2??7 2??6 2??8
(2Bs 6<.A 6@.? 66.@ CB.? C=.6 C>.; CC.B CB.B
0Fs AC.A A>.< =A.C ;@.; ;C.B 6;.B 66.@ C<.A
P2Bs CC.? >@.? >A.; >C.; <.= =.A =.= =.?
F2Bs 6.; 6.6 C.A C.@ >.= >.6 ?.< >.;
Tot"* 36.A 31.7 2@.? 22.1 18.6 13.6 13.2 13.2
The ratio of (PL to total loans of all the banks shows an encouraging trend since its
decline from the peak 7;>.> percent8 in >BBB# although the aggregate ratio was still as
high as >6.C percent in 0ecember C??@. The reason is being ver! high (PL of the +2Bs
and the 0Fs. The +2Bs and 0Fs continue to have ver! high (PLs mainl! due to
substantial loans provided b! them on considerations other than commercial and under
directed credit programmes during the @?s and <?s. Poor appraisal and inade%uate
follow'up and weak supervision of the loans disbursed b! the +2Bs and 0Fs in the past
eventuall! resulted in large amount of poor %ualit! assets which still continue to remain
significant in the portfolio of these banks. Furthermore# the banks were reluctant to write
off the historicall! bad loans because of poor %ualit! of underl!ing collaterals. 5ecover!
of (PLs however witnessed some signs of improvement: mainl! because of the steps
taken with regard to internal restructuring of these banks to strengthen their loan
recover! mechanism and recover! drive and write off measures initiated in recent !ears.
The net non performing loans to total loans after ad)ustment of actual provision and
interest suspense stands at >C.B percent 7+2Bs8# >B.? percent 70Fs8# >.; percent 7P2Bs8
(*ercent)
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and =.> percent 7banking sector8 in C??@. +2Bs9 and 0Fs9 non' performing portfolio
were still high after ad)usted of actual provision and interest suspense# whereas F2Bs
have excess provision on their classified loan.
$o"n $o Pro)iioning of the !"n#
The Table shows the aggregate amounts of (PLs of all banks from C??? to C??@#
amounts of provision re%uired to be maintained and the amounts actuall! provided b! the
banks.
Re<uired pro)iion "nd pro)iion %"int"ined
7billion taka8
A** !"n# 2??? 2??1 2??2 2??3 2??6 2??7 2??6 2??8
"mount of
(PLs
CC<.= C6A.? C6<.A C?6.C ><@.6 >@=.> C??.> CCA.C
5e%uired
Provision
B<.; >?>.A >?A.< BC.= <@.< <<.6 >?A.> >C@.C
Provision
maintained
=<.> A>.; =B.A 6@.6 6=.B ;C.A =C.B B@.>
Excess 7G8
+hortfall 7'8
';?.6 ';?.C ';@.C '==.6 '=>.B ';=.@ '=6.C '6?.>
Provision
maintenance
ratio
=B.>H A?.=H ==.<H ;?.6H ;?.BH ;<.CH ;B.BH @A.6H
The banks have been continuousl! failing to maintain the re%uired level of provisions
against their (PLs. 0uring the !ears provision maintenance ratio reached a high of A?.=
percent in C??>: which increased thereafter to @A.6 percent b! C??@. The main reasons for
the continuous shortfall in provision ade%uac! is the inabilit! of the (2Bs and some of
the P2Bs including those in problem bank categor! to make sufficient provisions due to
inade%uate profits and also failure to make transfer provision for write'off. "s expected
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the F2Bs are much better in that the! have been able to make ade%uate provisions in the
recent !ears. " comparative position as of end C??A and C??@ is shown in the next Table.
"lthough some individual P2Bs could make ade%uate provisions# the aggregate position
did not improve mainl! because of the huge provision shortfall of the banks in IProblem
BankI categor!.
Co%p"r"ti)e poition of pro)iion "de<u"c3
=4i**ion t"#">
:e"r Ite% 1C! +'I PC! 'C!
C??A
5e%uired Provision A>.A >;.< C@.= C.C
Provision maintained ><.C B.> CC.A 6.>
Provision maintenance
ratio
CB.=H A>.=H <C.CH >;?.BH
C??@
5e%uired Provision @>.; >@.6 6;.B 6.=
Provision maintained =A.= <.@ C<.C 6.<
Provision maintenance
ratio
@B.>H =?.6H <?.<H >?<.AH
-"n"ge%ent 1oundne
+ound management is a ke! most prere%uisite for the strength profitabilit! and
growth of an! financial institution. +ince indicators of management %ualit! are primaril!
specific to individual institution# these cannot be easil! aggregated across the sector. n
addition# it is difficult to draw an! conclusion regarding management soundness on the
basis of monetar! indicators# as characteristics of good management are generall!
%ualitative in nature. (evertheless# ratios such as total expenditure to total income#
operating expenses to total expenses# earnings and operating expenses per emplo!ee# and
interest rate spread are generall! used to gauge management soundness. n particular# a
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high and increasing expenditure to income ratio indicates the operating inefficienc! that
could be due to weaknesses in management.
E(penditure - inco%e r"tio 43 t3pe of 4"n#
7Percentage8
!"n#
T3pe
2??? 2??1 2??2 2??3 2??6 2??7 2??6 2??8
(2Bs BB.; BB.? B<.= B<.< >?C.6 >?>.B >??.? >??.@
0Fs >@=.6 <B.> B=.B >?>.> >?;.? >?6.B >?6.= >?@.@
P2Bs B?.< <<.> B>.B B6.> <@.> <B.6 B?.C <<.<
F2Bs @@.@ @=.@ @<.6 <?.6 @A.6 @?.< @>.> @C.B
Tot"* AA.A A1.2 A3.3 A3.A A?.A A2.1 A1.6 A?.6
t indicates from table that expenditure'income 7E8 ratio of the 0Fs was ver! high at
>@=.6 percent in C???. This was mainl! because the 0Fs made loan loss provisions b!
debiting 9loss9 in their books. The position however improved after C??? and the ratio
came down to <B.> percent and B=.B percent in C??> and C??C respectivel! but again
rose to >?>.> percent in C??6 and later on >?@.@ in C??@ due to operating loss incurred
b! BEB 1 5"E,B. The E ratio of the +2Bs exceeded >??.? percent in C??;: the
ratio stood at >??.? percent in C??@. Jer! high E ratio of +2Bs was mainl! attributable
to high administrative and overhead expenses: suspension of income against (PLs. E
ratio of P2Bs is substantiall! high due to deduction of provision for loans# other
assets and corporate tax from current income.
E"rning "nd Profit"4i*it3
+trong earnings and profitabilit! profile of a bank reflect Dood health and banks
its abilit! to support present and future operations. /ore specificall!# this determines the
capacit! to absorb losses b! building an ade%uate capital base# finance its expansion and
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pa! ade%uate dividends to its shareholders. "lthough there are various measures of
earning and profitabilit!# the best and widel! used indicator is returns on assets 75O"8#
which is supplemented b! return on e%uit! 75OE8 and net interest margin 7(/8.
Profit"4i*it3 r"tio 43 t3pe of 4"n# 7percentage8
!"n#
T3
pe
Return on Aet =ROA> Return on E<uit3 =ROE>

2??3 2??6 2??7 2??6 2??8 2??3 2??6 2??7 2??6 2??8
(2Bs ?.> '?.> '?.> ?.? ?.? 6.? '=.6 'A.B ?.? ?.?
0Fs ?.? '?.C '?.> '?.C '?.6 '?.A 'C.> 'C.? 'C.? '6.;
P2Bs ?.@ >.C >.> >.> >.6 >>.; >B.= ><.> >=.C >A.@
F2Bs C.A 6.C 6.> C.C 6.> C?.; CC.= ><.; C>.= C?.;
Tot"* ?.7 ?.8 ?.6 ?.@ ?.A A.@ 13.? 12.6 16.1 13.@
Earnings as measured b! return on assets 75O"8 and return on e%uit! 75OE8 var! largel!
within the industr!. Table shows 5O" and 5OE b! t!pes of banks for all banks. "nal!sis
of these indicators reveals that the 5O" of the +2Bs have been almost $ero percent
considering huge provision shortfall and that of the 0Fs even worse. P2Bs had an
inconsistent trend but satisfactor! and F2Bs* return on assets ratio has been consistentl!
strong during last < !ears.
+2Bs return on e%uit! ratio was 6.? percent in C??6 but have been shown almost $ero
percent in C??@ considering provision shortfall. n case of 0Fs# the 5OE position
remained worse 7'6.; percent8 in C??@. The 5OE of P2Bs and F2Bs were satisfactor! in
C??@. BEB# 5"E,B and Bangladesh 2ommerce Bank Ltd. incurred loss onl! due to
their huge operating expenses.
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0et Interet Inco%e
"ggregate net interest income 7(8 of the industr! has been positive and consistentl!
increased from Taka <.; billion in C??? to Taka =;.< billion in C??@. Kowever# the ( of
the +2Bs sharpl! declined to a negative amount of Taka >.C billion in C???. The trend
continued and the +2Bs9 ( was '>.< billion 7C??>8# '>.=billion 7C??C8# '?.6 billion
7C??68# '>.> billion 7C??;8 but in C??= their positive ( was Taka @.@ billion and it was
Taka @.; billion in C??@. The 0Fs had a consistent positive trend since C??? and it was
Taka >.; billion in C??@.
0et interet inco%e 43 t3pe of 4"n#
!"n#
T3pe
2??? 2??1 2??2 2??3 2??6 2??7 2??6 2??8
(2Bs '>.C '>.< '>.= '?.6 '>.> @.@ B.? @.;
0Fs >.? C.@ >.; >.6 >.< >.? >.@ >.;
P2Bs A.> B.C >?.C >C.? >6.@ C>.? C=.; 6A.>
F2Bs C.= 6.6 6.; 6.A ;.C =.A <.C B.B
Tot"* @.6 13.6 13.7 16.6 1@.3 37.3 66.3 76.@
+ince C??=# +2Bs have been able to increase their net interest income 7(8 b! reducing
their cost of fund. The ( of the P2Bs and F2Bs has been ver! high over the period
from C??? through C??@. Overall industr! ( shows a consistentl! upward trend. The
trend of ( indicates that the P2Bs and the F2Bs are charging interests at ver! high
rates on their lending as compared to the interest the! are pa!ing to the depositors.
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$i<uidit3
"t present commercial banks deposits are present sub)ect to a statutor! li%uidit!
re%uirement 7+L58 of >< percent inclusive of average = percent 7at least ; percent in an!
da!8 cash reserve re%uirement 72558. The 255 is to be kept with the Bangladesh Bank
and the remainder as %ualif!ing secure assets under the +L5# either in cash or in
government securities. +L5 for the banks operating under the slamic +hariah is >?
percent and the speciali$ed banks are exempt from maintaining the +L5. Li%uidit!
indicators measured as percentage of demand and time liabilities 7excluding inter'bank
items8 of the banks indicate that all the banks had excess li%uidit!.
Refor% in the $eg"* 'r"%e;or#
The "rtha 5in "dalat "in 7/one! Loan 2ourt "ct C??68 was enacted in C??6 with a
view to improving the legal framework for recover! of overdue loans and advances b!
the banks and financial institutions. B! making further amendments in the law# the limit
for filing of certificate cases under the Public 0emand 5ecover! "ct# >B>6 b! the
Bangladesh Erishi Bank# 5a)shahi Erishi ,nna!an Bank and other government'owned
financial institutions was raised from Taka fift! thousand to Taka five hundred thousand.
Provisions have been made in this "ct enabling the banks to reali$e overdue loans b!
selling the properties held as securities# without prior order of the 2ourt.
Corpor"te ,o)ern"nce
+everal measures have been taken b! the Bangladesh Bank to put in place good corporate
governance in the banks. These include regulation limiting the tenure of Board of
0irectors: appointment of two independent directors in the boards of the banks b! the
Bangladesh Bank: limiting the number of 0irectors to >6 in the boards: fit and proper test
for appointment of Board /embers and 2hief Executive Officer of the P2Bs:
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constitution of audit committee of the Board and disclosure re%uirements. The role and
functions of the Board of 0irectors and the /anagement of the banks have been
redefined specif!ing the powers of the /anagement and the Board.
,uide*ine on -"n"ging Core Ri# in !"n#ing
0ue to deregulation and globali$ation of banking business# banks are now exposed to
diversified and complex nature of risks. "s a result# effective management of such risks
has been core aspects of establishing good governance in banking business in order to
ensure good performance. n recognition of the importance of an effective risk
management s!stem# Bangladesh Bank has issued guidelines on /anaging 2ore 5isks in
Banking in October C??6. The five core risks that have been advised to manage in these
guidelines are# 2redit 5isks# "sset and Liabilit!&Balance +heet 5isks# Foreign Exchange
5isks# nternal 2ontrol and 2ompliance 5isks and /one! Laundering 5isks. Banks have
been advised to put in place an effective risk management s!stem based on the above
guidelines b! Fune C??;. Bangladesh Bank also arranges program was to train the trainers
of the banks on each of these risk management manuals. Besides# the progress of
implementation of these guidelines is regularl! monitored b! the Bangladesh Bank.
Criting off !"d $o"n
To impede unnecessaril! and artificiall! inflated si$e of balance sheet# a uniform
guideline for write'off was introduced in C??6. "ccording to the polic! banks ma! at an!
time# write off loans classified as bad&loss. Loans# which have been classified as bad&loss
for = !ears or more against which full provisions have been kept# are to be written off b!
the banks to clean their books. banks have been able to write off an amount of Taka
>?.C billion during > Ful! C??@ to 6? Fune C??<
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Credit R"ting
"s per 2redit 5ating 2ompanies 5ules# >BBA issued b! the +ecurities and Exchange
2ommission# an! compan!'issuing share at premium# right share and other debt
instruments is re%uired to incorporate&include credit rating in right offer
document&prospectus# which is also applicable for bank companies. n order to bring
transparenc! in investment in the banking sector e%uities and safeguarding the interest of
the investors# it has been made mandator! for the banks to incorporate credit rating report
in their prospectus for floating of ordinar! shares through nitial Public offering 7PO8 or
issuing right shares.
Interet R"te Po*ic3
Banks are now free to charge&fix their deposit and lending rate other than export
credit. "t present# loans at reduced rates 7@ percent8 are provided for all sorts of
export credit since Fanuar! C??;. /oreover# with a view to controlling the price hike
and ensuring ade%uate suppl! of essential commodities# the rate of interest on loan for
import financing of rice# wheat# sugar# edible oil 7crude and refined8# chickpeas# beans#
lentils# onions# spices # dates and powder milk has been temporaril! fixed to a maximum
of >C percent.
"t present# banks can differentiate interest rate up to 6 percent considering comparative
risk elements involved among borrowers in same lending categor!. 4ith progressive
deregulation of interest rates# banks have been advised to announce the mid'rate of the
limit 7if an!8 for different sectors and the banks ma! change interest >.= percent more or
less than the announced mid'rate on the basis of the comparative credit risk.
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CHAPTER-2
2.1 A0 ODER DIEC O' THE TR21T !A09 $I-ITE+
The Trust Bank limited 7TBL8# a private commercial bank sponsored b! the Bangladesh
"rm! 4elfare Trust# started its operations in (ovember CB# >BBB. The! gained success
from the ver! beginning of their operation and were capable enough to hold the success
!ear after !ear. The! gained success ver! earl! because the! have a ver! strong backup to
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provide them financial support and the! are the "rm! 4elfare Trust. This bank is ver!
much popular within the arm! communit! because all the financial activities of the arm!
done b! this bank. n a recent da!s the Trust Bank Ltd also gaining popularit! in the
general people and also for the business people.
n addition to ensuring %ualit! customer services related to general banking the bank also
deals in Foreign Exchange transactions. n the mean time the bank has extended credit
facilities to almost all the sector of the countr!*s econom!. The bank has plans to invest
extensivel! in the countr!*s industrial and agricultural sectors in the coming da!s.
t has also plans to promote the agro'based industries of the countr!. The bank has
alread! participated in s!ndicated loan agreement with other banks to promote textile
sectors of the countr!. +uch participation would continue in the future for greater interest
of the overall econom!. Eeeping in mind the client*s financial and banking needs the
bank is engaged in constantl! improving its services to the clients and launching new and
innovative products to provide better services towards fulfillment of growing demands of
its customers.
The authori$ed capital of the bank is Tk. C??? million. The "rm! 4elfare Trust 7"4T8 is
the ma)or shareholder bearing =>H share. Total shareholders* e%uit! at the end of
0ecember C??@ stood at Tk. C#>=;.CB million# where Paid'up capital is Tk. >#>AA.A@
million# statutor! reserve is Tk 66?.A6 million and 5etained Earnings is Tk. 6AC.C=
million. The Paid' up capital is indicative of the face value of =# ??#??? ordinar! shares of
Tk. >#???&'each full! subscribed b! the shareholders.
2.2 Phi*ooph3 of the T!$
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"t present the bank has as man! as 6A branches across the countr! and it is committed to
become e%ual service providers compatible with the norms of commercial schedule bank.
t renders all t!pes of personal# commercial and corporate banking services to its
customers within the purview of the Bank 2ompanies "ct# >BB> and in line with the
directives and polic! guidelines la! down b! Bangladesh bank.
2.3 O45ecti)e of the !"n#
The Trust Bank Limited has been established with the ob)ective of providing efficient and
innovative banking services to the people of all sections of our societ!. One of the notable
strengths of this bank is that it is backed b! the disciplined and strongest nstitution of
Bangladesh i.e. Bangladesh "rm! and there is a s!nerg! of welfare and profits in the
d!namics of this institution. Bank is service'oriented industr! and we on our part are
committed to ensure customi$ed Lualitative and hassle free services in our banking
operations along with the focus to broaden the clientele base. The bank has extensivel! in
the countr!*s industrial and agricultural sectors in the coming da!s. The bank is
committed to contribute as such as possible within its limitations for the economic
growth and for ensuring value of its available resources.
2.4 Corpor"te Infor%"tion of T!$
The fo**o;ing T"4*e 1ho; the Corpor"te Infor%"tion of T!$:
Banking License received on Ful! >=# >BBB
2ertificate of 2ommencement of business Fune >@#>BBB
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received on
2ertificate of ncorporation 5eceived on Fune >@#>BBB
First Branch License received on "ugust B#>BBB
Formal inauguration on (ovember CB#>BBB
+ponsor shareholders "rm! 4elfare Trust
(umber of branch 6A
2.7 Perfor%"nce of the T!$
TBL a blend of expertise and technological excellence is in place to meet varied needs of
modern customers. The bank aims at mobili$ing untapped mone! of the countr! and
prudent deplo!ment for productive activities in the form of lending at a competitive
interest rates&loan pricing. Towards attainment of its goals and ob)ectives# the bank
pursues diversified credit policies and strategic planning in credit management. To name
a few# the bank has extended micro credit# consumers durable scheme loans# house
building loans etc. to cater to the needs of the individuals# which in turn has helped
thousands of families. The bank also extends loan in the form of trade finance# industrial
finance# and pro)ect finance# export 1 import finance etc. The bank*s credit polices aimed
at balanced growth and harmonious development of all the sectors of the countr!*s
econom! with top most priorit! to ensure %ualit! of lending b! averting growth of non'
performing assets.
2.7.1. C"pit"*:
The authori$ed capital of the bank is Taka C??? million. Total shareholders e%uit! at the
end of the 0ecember C??@ stood at Tk. C#>=;.CB million. Out of Taka C#>=;.CB million#
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paid'up capital is Taka >#>AA.A@ million# +tatutor! 5eserve is Taka 66?.A6 million and
5etained Earnings is Taka 6AC.C= million. The paid'up capital is indicative of the face
value of >>#AAA#@?? ordinar! shares of Taka >??&M each full! subscribed b! the
shareholders. "s at the close of business on 0ecember C??@ the capital ade%uac! ratio
was >C.6@H against the standard of <H. The core capital ratio was >C.BBH against the
standard of ;H.
*aid+up
apital
%!%
-etained
.arnin/
&7%
Statutory
-eser0e
&%%
1thers
&!%
Share holders .2uity is 2&%!$2' million in 2007
*aid+up apital
-etained .arnin/
Statutory -eser0e
1thers
2.7.2. Reer)e:
The bank raised +tatutor! from Taka >?.B< million in the !ear C??> to Taka 66?.A6
million in the !ear C??@. The following table shows !ear'wise reserve3
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2.7.3. Profit "nd oper"ting reu*t
The Profit and operating result are shown in the following table3 7Figures are in million
of taka8
:e"r Tot"* inco%e Tot"* e(pene Oper"ting profit 0et profit ="fter t"(>
2??1 C6=.?6 >A;.CB @?.@; C=.BA
2??2 6;@.>? ;AB.?6 7>C>.B68 7>;?.>A8
2??3 =6=.;B ;;@.?A <<.;6 A<.>;
2??6 >?;A.6A @<C.?B CA;.C@ C>A.6<
2??7 >;;;.A? >>;<.66 CA;.C@ >>;
2??6 <;;.>< CB@.C< =;A.<B CA6.>=
2??8 >6C<.?6 ;@;.6> <=6.@> C6B.?C

Near +tatutor! 5eserve
C??> >?.B<
C??C >?.B<
C??6 C;.A?
C??; A@.<<
C??= >>C
C??A C>;.A@
C??@ 66?.A6
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-200
0
200
400
600
800
1000
1200
1400
1600
Total
income
Total exp Net profit
2001
2002
2003
2004
2005
2006
2007
2.7.6. +epoit
n FN C??@# the deposits of TBL shot up to Tk. C@#>?>.=< million from Tk. ><#B=<.B=
million as recorded in FN C??A. 0uring this period# the deposit base was increased b!
;CH compared to the preceding !ear. The combination of competitive interest rates#
depositors* trust in the bank and mobili$ation efforts of the bank resulted in this growth of
deposits. Efforts are a foot being made to further increase deposit base of the bank
through promotion of business and exploring of potential scope.
2.7.7. $o"n / Ad)"nce
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Total loans 1 advances of the bank as on 0ecember 6># C??> was Tk. >#A?6.B= million as
against Tk. ><#A<C.>A million in FNC??@# showing an increase b! >?A;.@=H over the last
@ !ears. n FN C??A# the Total loans 1 advances of the bank as on 0ecember 6> was
>6><<.?B million and it increased to ><#A<C.>A million in FNC??@ that is about ;>.A=H
increase from previous !ear. The credit portfolio of the bank is a mix of scheme loans#
namel! /icro credit# 2onsumers durable scheme loan 720+8# /arriage Loan# 2ar Loan#
KBF Loan and 2ommercial Loans. 2ommercial Loans comprise Trade financing in the
form of working 2apital and industrial loans 7both large and medium scale industries8 in
the form of Term loans and other funded 1 non'funded credit facilities.
Term financing indicates the Bank*s participation in the industrial development of our
countr! while b! extending small loans the TBL has fulfilled the borrowing needs of the
low and medium income groups of our societ!. The bank as a matter of priorit! in its
polic! wants to ensure %ualit! of its Loan Portfolio b! strengthening post disbursement
recover! measures as well as b! prioriti$ing on Earl! 4arning +!stem 7E4+8 to check
the growth of non'performing assets.
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2.6 Hu%"n Reource +e)e*op%ent:
The bank*s work force is composed of personnel having rich academic background with
vast experience in banking. The human resources development means to create an
environment b! d!namic# enthusiastic and vigorous participation of all individuals. 4e
would like to be consistent and transparent in their decisions and actions. The total
number of executives and officers of the bank stood at >C?? and others number of
emplo!ees are >>? as on 0ecember C??<. To make their personnel knowledgeable and
trul! professional the! arrange training for them at Kead office of the bank# BB/ and
other institutions. The management of the bank sits with the branch managers and
departmental heads in regular meetings. The meetings provide scope for open discussion#
which help in formulating new strategies for achieving -targets. of the bank.
2.8 1oci"* Co%%it%ent "nd 'uture Propect:
t has been all most nine !ears since the stepped in to the banking arena. The! are not !et
past of their formative stage. t would be onl! a matter of time for them to testif! that
the! are e%uall! committed to the social up liftmen of the countr!. The! would stand b!
the people through philanthropic activities whenever an! crisis and disaster confront
them. The! will not keep their social welfare activities restricted to one area onl!. t will
be diversified in the da!s ahead of us as the! are planning to award students of
exceptional academic performance with scholarship in different educational institutions.
The! expect to launch soon school banking b! extending their services# which would
encourage parsimon! in the students. t would also help in the creation of savings# which
could be utili$ed for pursuing higher studies in future. Eeeping in mind their social
commitment would soon launch -Educational. and -Ka)). loans. "griculture# being the
onl! means of subsistence for innumerable people in rural areas of the countr!# needs
more attention. The! have plans to manufacturing agricultural e%uipments in the
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Bangladesh /achine Tools Factor! Ltd.# which would be distributed among their farmers
at an affordable price.
2.@ 1CI'T:
The bank is a member of +4FT "lliance "ccess# a sophisticated# fraud proof secured
financial messaging s!stem provided b! the +ociet! for 4orldwide nter'bank Financial
Telecommunication 7+4FT8# Belgium. 4ith the installation of the +4FT s!stem the
bank would ensure and reliable transmission of L&2# funds transfers# outgoing and
incoming massages and other financial services.
2.A Ce4 P"ge:
The introduction of nternet has change the traditional concept of world trade and
commerce. "s the time is progressing its necessit! is being felt more in the prevailing
competitive since no organi$ation can afford to remain in isolation with the rest of the
world for its survival. n order to provide up'to'date information on the bank at fingertips
to the trade and business communities of the world# their own T team has developed a
web page for the bank. t can be accessed to under the domain3
http:EE;;;.trut4"n#.co%.4dE
2.1? !r"nch E(p"nion
The TBL has taken up a program to expand its branches. The bank has alread! 6A
branches in man! different places in Bangladesh: most of them are inside the different
cantonments. The management is filling that the! need more branches all over the
Bangladesh. "s per Bangladesh Bank circular that if an! bank opens a branch in 0haka
then the! have to be open a branch in out side 0haka.
Branches of TBL3
1*F !r"nch
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> Kead Office
C Principal Branch
6 +EB Branch
; Bogra 2antt. Branch
= 2omilla 2antt. Branch
A 2hittagong 2antt. Branch
@ 5angpur 2antt. Branch
< Fessore 2antt. Branch
B /!mensing 2antt. Branch
>? +avar 2antt. Branch
>> Falalabad 2antt. Branch
>C "grabad Branch
>6 +haheed +alahuddin 2antt. Branch
>; 0hanmondi Branch
>= Ehatungan) Branch
>A Dulshan 2orporate Branch
>@ 0ilkusha 2orporate Branch
>< 5adision 4ater Darden Kotel Branch
>B Ehaw)a !unus "li /edical 2ollege 1 hospital Branch
C? 20" avenue Branch
C> +!lhet 2orporate Branch
CC ,ttara Branch
C6 /illennium 2orporate Branch
C; /irpur Branch
C= (aval Base Branch
CA Eawran Ba$ar Branch
C@ Kali +hahor Branch
C< Beani Ba$ar Branch
CB /oulviba$ar Branch
6? Doala Ba$ar Branch
6> Feni Branch
6C Fo!para Branch
66 Fo!debpur Branch
6; (arsingdi Branch
6= (ara!angong Branch
6A Fubilee 5oad Branch
2.11 Princip"* Acti)itie:
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" Banks main activit! is to collect deposit# because this deposit will use as loan mone!.
+o deposit is ver! much important for the bank. Denerall! a bank*s principal activit! is to
serve the customer or give service. There are different t!pes of deposit and the! are3
2urrent 0eposits "ccount 720"8
+avings 0eposit "ccount 7+B"8
Fixed 0eposit "ccount 7F058
+pecial (otice Time 0eposit "ccount 7+T08
Trust /axima +avings "ccount
Lockers +ervice
Trust Tele'Banking
Kere each account has different restriction and re%uirement. The! are3
1. Current +epoit Account / 1T+ Account:
The characteristics of the current account are different from the savings account but same
as +T0 account. n current account there is no interest on the current deposit account# but
in +T0 account there is interest on deposit amount and there is no restriction on
withdrawal. The depositor can withdraw the mone! from an! time when he needs mone!#
but withdrawal must be in transaction hour. The minimum limit of opening a current
account 1 +T0 account in The Trust Bank is Tk.=???. There are different t!pes of
current 1 +T0 account. The! are and their re%uirements are3
Indi)idu"* Current AccountE1T+ AEC:
"&2 Opening Form
+ignature 2ard
Photograph of "ccount Kolder
Proprietorhip Current AEC E1T+ AEC:
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"&2 Opening Form
+ignature 2ard
"greement Form&Proprietorship
Trade License
/andate "greement Form
P"rtnerhip Current AEC E1T+ AEC:
"&2 Opening Form
+ignature 2ard
Partnership "greement Form
Partnership 0eed
Pri)"te $T+ Co. E Current AECE1T+EAEC:
"&2 Opening Form
+ignature 2ard
2orporate "greement Form
/emorandum 1 "rticles of "++O(
2ertificate of ncorporation
5esolution
Pu4*ic $T+ Co. E AEC 1T+E AEC:
"&2 Opening Form
+ignature 2ard
2orporate "greement Form
/emorandum 1 "rticles of "++O(
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2ertificate of ncorporation
2ertificate of 2ommencement
5esolution
C*u4E1ocietie Current AECE1T+ AEC:
"&2 Opening Form
+ignature 2ard
"ccount "greement Form
2opies of 2onstitution&B!e Law
2. 1")ing +epoit Account:
+avings account is speciall! designed for the middle and low'income groups who are
generating limited income and have the tendenc! to save. " minimum initial deposit of
Tk. =?? shall be re%uired for opening savings account. There are different t!pes of
savings account and their opening re%uirements are also change. The! are3
Indi)idu"* 1")ing Account:
"&2 Opening Form
+ignature 2ard
C*u4E 1ocietieEAo. 1")ing AEC:
"&2 Opening Form
+ignature 2ard
5esolution
"ccount "greement Form
2opies of 2onstitution&B!e Law
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3. 'i(ed +epoit Account ='+R>:
There are various fixed deposit schemes in The Trust Bank. The interest rate of the
deposited amount depends on duration and volume of the amount. f duration is long the
interest rate is high# and at the same time if the volume of amount is large the interest rate
is also high and vice'versa. 0epositors have to withdraw the interest after the maturit!
date. f the depositors intend to withdraw the interest earning before expiring the maturit!
date then the bank is not bound to pa! the interest. But some times it depends on the part!
like if the part! is big then the bank will consider to that part! for getting the interest
amount. The re%uirements for the F05 are3
+ignature 2ard
"pplication for Fixed 0eposit
6. Trut -"(i%" 1")ing Account:
Trust /axima +avings "ccount that gives an extra facilit! to normal savings account.
,nder this new option of savings account one can get higher rate of interest than the
prevailing normal rate. Present rate in +avings "&2 is @.=?H# but in Trust /axima
+avings "ccount the additional interest rate are3
/inimum 0eposit "dditional nterest
?> lac to ?C lac ?.=?H
?C lac to ?6 lac ?.@=H
?6 lac and above >.??H
,ener"* !"n#ing:
2ash 0epartment
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5emittance 0epartment
C"h +ep"rt%ent:
"ll sorts of transaction considering the cash are taken into the care in the cash
department. 2ash is deposit in the name of concern bank and disbursed to the client b!
his&her department.

Re%itt"nce +ep"rt%ent:
5emittance is another significant part of the general banking. The bank provides services
and various t!pes of bills through the remittance within the countr!. Obviousl!# the bank
charges commission on the basics of bills account. T!pes of remittance are as follow3
P"3 Order:
" Pa!'Order is issued onl! with in the members of Bangladesh Bank clearing house. t
can be issued in favor of a customer holding account b! debiting his&her account and
crediting bills pa!able account. n case of non'customer# cash e%uivalent of pa!ment plus
pa! order charges is received in cash and held in dail! expanses account until the
pa!ment is made through clearing.
P"3 1*ip:
Pa! +lip is issued when bank created expanses for his own purpose.
+e%"nd +r"ft =++>
0emand 0raft is as same as Pa! Order# but it can be drawn on other branches of The
Trust Bank and Bangladesh Bank. " 00 is drawn on the bank*s other branches when
pa!ment has to b made outside of 0haka. The bank has to have a branch over there and
pra!er should have an account with the bank
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Te*egr"ph Tr"nfer =TT>:
TT is one of the %uickest methods for remittance. "ll incoming telexes are kept in the
telex room and test agreed. One cop! of telex is kept in the file and other is worked on.
Pa!ments of incoming TT*s are made either issuing 00 or Po depending upon the
re%uirement of the customer.
Credit 1er)ice:
Credit:
-2redit. it is a ver! similar word for the bank. t contents a huge meaning. " bank*s main
earning source is credit. f bank*s credit management is not good then the bank will never
ever achieve its proper goals. Luestion ma! arise what are the proper goals for the bankO
The proper goals for the banks are profit maximi$ation and shareholder*s wealth
maximi$ation. The fundamental nature of credit is that an element of trust exists between
bu!er and seller whether of good or mone!. The main use of bank fund is to collect
mone! from surplus unit and lend it to deficit economic unit.
T3pe of Credit:
/odern banking operation touches almost ever! sphere of economic activit!. The
extension of bank credit is necessar! for expansion of business operations. Bank credit is
a catal!st bringing about economic about economic development. 4ithout ade%uate
finance there can be no growth or maintenance of a stable output. Bank lending is
important to the econom!# for it makes possible the financing of commercial and
industrial activities of a nation. The credit facilities are generall! allowed b! the bank
ma! be in two broad categories. The! are as follows3
A. 'unded '"ci*itie:
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Funded facilities can also be divided into the following categories
Ter% $o"n:
The term of loan is determined on the basis of gestation period of a pro)ect generation of
income b! the use of the loan. +uch loans are provided for Farm /achiner!# 0air!#
Poultr!# etc. t is categori$ed in three segments3
T3pe of Ter% $o"n Ti%e =Period>
+hort Term > to 6 !ears
/edium Term 6 to = tears
Long Term "bove = !ears
O)er +r"ft =O+>:
O0 is some kind of advance. n this case# the customer can over draw from his&her
current account. There is a limit of overdraw# which is set b! the bank. " customer can
with draw that much amount of mone! from their account. For this there is a interest
charge on the over draw amount. This facilit! does not provide for ever! one# the bank
will provide onl! those who will fulfill the re%uirement. t means that onl! real customer
can get this kind of facilit!.
C"h Credit =H3po>:
t allows to individuals or firm for trading as well as whole'sale purpose or to industries
to meet up the working capital re%uirements against h!pothecation of goods as primar!
securit! fall under this t!pe of lending. t is a continuous credit. t allowed under two
categories3
2ommercial Lending
4orking 2apital
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C"h Credit =P*edge>:
Financial accommodation to individual&firm for trading as well as whole sale purpose or
to industries as working capital against pledge of goods primar! securit! falls under this
head of advance. t also a continuous credit and like the above allowed under the
categories3
2ommercial Lending
4orking 2apital
1O+ =,ener"*>:
"dvance allowed to individual&firm against financial obligation 7i.e. lien of F05&P+&B+P
etc.8 and against assignment of work order for execution of contract works fall under this
head. This advance is generall! allowed for allowed for definite period and specific
purpose. t is not a continuous credit.
1O+ =I%port>:
"dvances allowed for purchasing foreign currenc! for opening L&2 for imports of goods
fall under this t!pe of leading. This is also an advance for a temporar! period# which is
known as preemptor finance and falls under the categor! P2ommercial Lending*.
PA+:
Pa!ment made b! the bank against lodgment of shipping documents of goods imported
through L&2 falls under this t!pe head. t is an interim t!pe of advance connected with
import and is generall! li%uidated shortl! against pa!ments usuall! made b! the part! for
retirements of documents for release of import goods from the customer authorit!. t falls
under the categor! P2ommercial Lending*.
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$TR:
"dvances allowed for retirement of shipping documents and release of goods imported
through L&2 without effective control over the goods delivered to the customer fall under
this head. The goods are handed over the importer under trust with arrangement that sales
proceed should be deposited to li%uidate the advances within a given period. This is also
temporar! advance connected with import that is known post'import finance under
categor! P2ommercial lending*.
I!P3
Pa!ment made through purchase of inlands bill to meet urgent re%uirements of customer
fall under this t!pe of credit facilit!. This temporar! advance is ad)usted from the
proceeds of bills purchased for collection. t falls under the categor! P2ommercial
Lending*.
'+!P:
Pa!ment made to a part! through purchase of foreign documentar! bills fall under this
head. This temporar! advance is ad)ustable from the proceeds of negotiable
shipping&export documents. t falls under categor! PExport 2redit*.
$+!P:
Pa!ment made to a part! through purchase of local documentar! bills fall under this
head. This temporar! liabilit! is ad)ustable from proceeds of the bill.
!"n# ,u"r"ntee:
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The exporters pa! of the imported goods on behalf of the importer through bank
guarantee. f the exporter fails to make the fulfill pa!ment at the moment the bank will
take the liabilit! and pa! to the exporter. This t!pe of guarantee is also needed to attend in
an! tender.
!. 0on 'unded '"ci*itie:
(on funded facilities are divided into the following categories3
,u"r"ntee:
2redit facilities in contingent liabilities from extended b! the banks to their clients for
participation in development work# like supplies goods and services.
$etter of Credit:
" credit facilit! in contingent liabilities from provided to the clients b! the banks for
import&procurement of goods and services.
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2.12 R"te of Interet of the Trut !"n#G for $ending
For all t!pes of loans there is a fixed rate# which is given b! Bangladesh Bank# base on
that rate bank set their own interest rate. /ost of the time bank*s interest rate varies from
part! to part!.
P"rticu*"r
R"te of Interet
Kouse Building Loan 75es8 >;H
Kouse Building Loan 72om.8 >;.=?H
2ar Loan >=H
/arriage Loan >;H
+taff Loan 72ar8 AH
2onsumer 0urable Loan >;.=?H
Over 0raft >;H
P"rticu*"r R"te of Interet
+O0 >6.=?H
/icro 2redit 7TL58 >6H
Term Loan 7ndustrial8 >;.=?H
Term Loan 72ommercial8 >;H
P"0 >;H
LT5 >6.=?H
2ash 2redit >;H
2ash 2ollateral 7F05&+P&4E0B8 >6H
Other Loan >;H
!i** +icounted / Purch"ed:
BP >;H
FBP >;H
F0BP >;H
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2.13 Techno*og3 =IT> / Auto%"tion Infor%"tion
"ll the branches of the TBL are full! computeri$ed. (ew software is now in use to
provide faster# accurate and efficient service to the clients. The bank is continuousl!
striving for better services through extensive automation of its branches. Trust bank has
launched -One !r"nch !"n#ing& through on'line connectivit!. The bank has set up a
full'fledged T division to keep abreast of the latest development of T for better service
in the da!s to come.
2.16 'oreign Correpondent
Foreign correspondent relationship facilities# foreign trade operation of the bank# mainl!
in respect of export# import and foreign remittance. The number of foreign
correspondents and agents of the bank in the !ear C??= stood at which covers important
business and trade centers of the world. The bank maintains excellent relationship with
the leading international banks# for handling all foreign correspondent and maintaining all
foreign business there is an Intern"tion"* +i)iion# which is called 0.
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2.17 Org"niH"tion"* Hier"rch3 of the Trut !"n# $td.
The Organi$ational hierarch! of the Trust Bank Ltd. can be shown b! the following
diagram3
Board of directors
/anaging 0irector 7/08
+enior Jice President 7+JP8
Jice President 7JP8
+enior "ssistant Jice President
7+"JP8
"ssistant Jice President 7"JP8
0eput! /anaging 0irector
70/08
+enior Executive Officer 7+EO8
Executive Officer 7EO8
+enior Officer 7+O8
Officer
Principal Officer 7PO8
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CHAPTER 3
'oreign E(ch"nge Oper"tion:
3.1 'oreign E(ch"nge- it %e"ning "nd definition:
Foreign exchange refers to the process or mechanism b! which the currenc! of one
countr! is converted into the currenc! of another countr!. Foreign exchange is the means
and methods b! which rights to wealth in a countr!*s currenc! are converted into rights to
wealth in another countr!*s currenc!. n banks when we talk of foreign exchange# we
refer to the general mechanism b! which a bank converts currenc! of one countr! into
that of another. Foreign trade gives rise to foreign exchange. /odern banks facilitate
trade and commerce b! rendering valuable services to the business communit!. "part
from providing appropriate mechanism for making pa!ments arising out of trade
transactions# the banks gear the machiner! of commerce# speciall! in case of international
commerce# b! acting as a useful link between the bu!er and the seller# who are often too
far awa! from and too unfamiliar with each other. "ccording to foreign exchange
regulation act >B;@# -"n! thing that conve!s the right to wealth in another countr! is
foreign exchange.. Foreign exchange department pla!s significant roles through
providing different services for the customers. Opening or issuing letters of credit is one
or the important services provided b! the banks.
3.2 Acti)itie Re*"ted to foreign e(ch"nge:
There are three kind of foreign exchange transaction3
a8 mport
Funior Officer 7FO8
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b8 Export
c8 Foreign 5emittance
3.3 Regu*"tion for foreign e(ch"nge
$oc"* regu*"tion: Our foreign exchange transactions are being controlled b! the
following local regulations3
'oreign E(ch"nge Regu*"tion Act: Foreign Exchange 5egulation 7FE5"8 "ct. >B;@
enacted on >>
th
/arch >B;@ in the then British ndia# provides the legal basis for
regulation the foreign exchange. This act was adapted in Pakistan and lastl! in
Bangladesh.
,uide*ine for 'oreign E(ch"nge Tr"n"ction: This publication issued b! Bangladesh
Bank in the !ear >BBA in two volumes. This is a compilation of the instructions to be
followed b! the "uthori$ed 0ealers in transactions relating to foreign exchange.
'.E. Circu*"r: Bangladesh Bank issues F.E. circular from time to time to control the
export import business and remittance that is to control the foreign exchange.
E(port-I%port Po*ic3: /inistr! of commerce issues Export Polic! and mport Polic!
giving basic formalities for mport and Export Business.
Pu4*ic 0otice: +ome times 22 1E issues public notice for an! kind of change in
Foreign Exchange Transaction.
Intruction fro% different %initr3: 0ifferent ministries of the Dovt. sometimes
instruct the authori$ed dealer directl! or through Bangladesh Bank to follow something
re%uired for the government.
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Intern"tion"* Regu*"tion: There are also some international organi$ations influencing
our Foreign Exchange transactions. Few of them are discussed bellow3
ICC: nternational 2hamber of 2ommerce is a world wide (on'Dovernmental
Organi$ation of thousands of companies. t was founded in >B>B. 22 (ational
committees throughout the world present 22 views to their Dovernments and alert Paris
Kead%uarters about national business concerns. 22 has issued some publications like
,2P02# ,52 and ,55 etc.# which are being followed b! all the member countries.
There is also an international 2ourt of "rbitration to solve the international business
disputes.
C.T.O.: 4orld Trade Organi$ation is another nternational Trade Organi$ation
established on >
st
Fanuar! >BB=. D"TT 7Deneral "greement on Tariff 1 Trade8 was
established on >
st
Fanuar! >B;<. "fter completion of it*s <
th
round# the organi$ation has
been abolished and replaced b! 4TO. This organi$ation has vital role in international
trade through its >C; member countries.
3.6 $etter of credit
" letter of credit is a letter issued b! a bank 7know as the opening or the issuing bank8 at
the instance of its customer 7known as the opener8 addressed to a person
7beneficiar!8 undertaking that the bills drawn b! the beneficiar! will be dul!
honored b! it 7opening bank8 provided certain conditions mentioned in the letter
gave been complied with.
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The following diagram brings out clearl! the operation of letter of credit3
2ontract of +ale
7>8
+hips Doods to
7=8
/&s. 2oncord nt*l
(ew Nork# ,+"
7Exporter&Beneficiar!8
Forwards
L&2 to
7;8
Presents 0octs. and
obtains pa!ment from
/&s. /ark +t!le
@6 /oti)heel 2&". 0haka
7"pplicant&mporter8
"pplies For
opening of L&2
5ecovers
"mount From
7<8
+2B# ,+"
"dvising&(egotiating
Bank
The Trust Bank Ltd.
0haka
7ssuing Bank8
Obtains 5eimbursement From
2itibank ("# ,+"
7@8
Opens L&2 and +ends it to
768
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Flowchart of Letter of 2redit Operation
C*"ific"tion of $etter of Credit:
n different considerations there are man! kinds of L&2s. +ome of them are discussed
bellow3
Irre)oc"4*e $EC: rrevocable L&2 cannot be amended or cancelled without the consent
of the beneficiar! or an! other interested parties. Banks commonl! open this t!pe of L&c.
Re)oc"4*e $EC: This kind of L&2 can be amended or cancelled b! the ssuing Bank#
without the consent of the beneficiar! or an! other interested parties.f it is not indicated
in the L&2# whether it is 5evocable or rrevocable# then the L&2 to be treated as
rrevocable.
Add-confir%ed $EC: 4hen a third bank provide guarantee to the beneficiar! to make
pa!ment# if ssuing Bank fail to make pa!ment# the L&2 is called "dd'2onfirmed L&2. n
case of a confirmed L&2 a third bank adds their confirmation to the beneficiar!# to make
pa!ment# in addition to that of ssuing Bank. 2onfirmed L&2 gives the beneficiar! a
double assurance of pa!ment.
C*e"n C*"ue: t is a normal clause L&2 without third bank*s confirmation.
Re)o*)ing $EC: t is an L&2 where the original amount restores after it has been utili$ed.
Kow man! times and how long# the amount will restore must be specified in the L&2. For
example# an L&2 opened for ,+0 >??? and shipment effected for ,+0 =??# now the L&2
restored for full value i.e. there is scope to effect further shipment of ,+0 >??? revolving
L&2 ma! be opened to avoid difficulties of opening new L&2. This L&2 is not allowed in
our present import polic!.
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Tr"nfer"4*e $Ec: f the word -Transferable. incorporated in an L&2# then the L&2 is
transferable. The >st beneficiar! can transfer transferable L&2 to the C
nd
beneficiar!. But
C
nd
beneficiar! cannot transfer it further to another beneficiar!. Transfer ma! be done to
more than one beneficiar!# partiall!# if not prohibited in the L&2.
Retricted $EC: f advising and&or negotiation of an L&2 are restricted to a particular
bank# the L&2 is called a restricted L&2.
Red C*"ue $EC: " red clause L&2 is an L&2# where a special clause is incorporated into
it that authori$es the confirming or an! other nominated bank to make advances to the
beneficiar!# before presentation of the documents. n other words this is an L&2# where
the ssuing Bank authori$es the negotiating bank to provide pre'shipment finance to the
beneficiar!. The L&2 is called red'clause because# the special clause was originall!
written in red'ink to draw attention to the uni%ue nature of this documentar! credit. 5ed
clause L&2 is not allowed in our present import polic!.
,reen C*"ue $EC: t is an L&2# where the ssuing Bank authori$es the (egotiating Bank
to grant storage facilities to the beneficiar!. The special clause was originall! written in
Dreen'ink# so the L&2 is called Dreen 2lause. n both the case of 5ed 2lause and Dreen
2lause L&2# if the exporter fails to ship the goods the financing bank has the right to
demand repa!ment from the ssuing Bank and that bank would have a similar right of
recourse against the applicant.
C*e"n $etter of Credit: This is a commercial letter of 2redit# wherein the ssuing Bank
does not ask an! documents as evidence of execution of the deal under the L&2. ,nder
the said L&2 onl! bill of exchange ma! be negotiated or ma! be paid without an!
supporting documents. 2lean Letter of &&2redit is not permissible in our import polic!.
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+ocu%ent"r3 $etter of Credit: "ll the commercial letter of credits# where export
related documents such as invoice# B&L etc. are re%uired to present with the bill of
exchange# is called 0ocumentar! 2redit. ,nder this L&2# bill of exchange will not be
honored without other re%uired documents.
1tr"ight +ocu%ent"r3 Credit: ,nder the irrevocable straight documentar! credit# the
obligation of the ssuing Bank is extended onl! to the beneficiar!# in honoring draft7s8&
documents and usuall! expires at the counter of the ssuing bank. This L&2. does not
authori$e an! bod! to negotiate# purchase the documents. This L&2. is available for
pa!ment onl! at the ssuing Bank*s counter# not available for negotiation.
Irre)oc"4*e 0egoti"tion +ocu%ent"r3 Credit: This L&2. is available for negotiation b!
a nominated bank&an! bank and expiring for presentation of document at the offices of
(egotiating bank. The ssuing Bank is bound to reimburse the (egotiating Bank# if it
negotiates the documents compl!ing with the credit terms.
Cith Recoure "nd Cithout Recoure to +r";er: These terms are related with bill of
exchange. f the L&2 allows a bill of exchange with recourse to the drawer# that means the
(egotiating Bank has the right to claim the amount back# from the drawer# if the B&E is
dishonored b! the drawee. "nd in case of without recourse# the (egotiating Bank has no
right to claim the amount back. From the drawer# if the B&E is dishonored b! the drawee.
+o in case of without recourse the negotiating Bank would be care'full to negotiate the
document.
L&2 can be classified according to source of fund3
!"c#-to-!"c# $EC: Back to Back import L&2 is backed b! another export L&2. where
import of the goods to be made to execute the export L&2 and pa!ment of Back to Back
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bills to be made normall! from related export process# the import L&2 is called Back to
Back L&2.
" Back'to'Back L&2 is opened against an irrevocable L&2. The L&2 is lien marked with
the back'to'back L&2 issuing branch. Back to Back L&2 ma! be opened up to @=H of
export L&2# 7FOB value8 and up to <?H where export price is more than ,+0 A?&' per
do$en in case of garments industries.
C"h $EC: 4here pa!ment of import bills under L&2 is being made from 7i8 Foreign
2urrenc! reserve in Bangladesh Bank or 7ii8 F.2. account with authori$ed 0ealer# the L&2
is called 2ash L&2.
!"rter $EC: 4here final settlements are being made through commodit! exchange
between the nations# the L&2 is called Barter L&2.
3.7 +ifferent p"rtie in)o*)ed 'oreign e(ch"nge tr"n"ction:
(ormall! the following parties are involved to a documentar! credit3
I%porter:
The bu!er or the importer is he who initiates the credit. Ke applies to bank for issue
foreign a documentar! credit. The obligations between the importer and the issuing bank
are governed b! the application'cum'agreement submitted b! the importer to the bank.
Ke is bound to reimburse the bank# which effects pa!ment or incurred a deferred pa!ment
undertaking or has accepted or negotiated under the credit as per terms# and to take up the
documents.
Opening !"n#:
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The issuing or opening bank is the importer*s bank and it issues a letter of credit normall!
pursuant to the terms of sales contract as set out in the application for the credit b! the
importer. The issuing bank should nominate the bank# which is authori$ed to pa! or to
accept drafts or to negotiate# unless the credit allows negotiation b! an! bank.
E(porter:
The seller or exporter is the beneficiar! of the credit. The letter of credit is opened in his
favor and addressed to him. The beneficiar! has the obligation to make export as per the
contract and produce the documents as re%uired b! the credit.
The Ad)iing !"n#:
t is the bank in the exporter*s countr! 7normall! the exporter*s bank8# which is usuall!
the foreign correspondent of importer*s bank through which the L&2 is advised to the
supplier. f the intermediar! bank simpl! advises&notifies the L&2 to the exporter part# it is
called -"dvising Bank..
The Confir%ing !"n#:
f the advising bank also adds its own undertaking to honor the credit while advising the
same to the beneficiar!# he becomes the confirming bank. n addition# becomes liable to
pa! for documents in conformit! with the L&2*s terms and conditions. The liabilit! of the
confirming bank is the primar! liabilit! and it is not contingent on the fulfillment of the
obligation b! the issuing bank.
The Accepting !"n#:
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"ccepting bank is the bank nominated in the letter of credit to accept bills drawn under
the credit. f the bank so nominated accepts the nomination# its responsibilit! to the
beneficiar! is not onl! to accept the drafts drawn but also to make pa!ment on their due
dates.
The P"3ing !"n#:
Pa!ing bank is a bank in the beneficiar!*s countr! nominated in the letter of credit to
make pa!ment against documents to be tendered under the credit. Pa!ing Bank must
examine all documents with reasonable care to ascertain that these are drawn in
accordance with the terms and conditions of the credit.
Rei%4uring !"n#:
The issuing bank ma! indicate in the credit the name of a bank. From whom the
pa!ing&negotiating bank can obtain reimbursement. The documents are sent to the issuing
bank. The negotiating&pa!ing bank simultaneousl! makes a claim with the reimbursing
bank for the pa!ment effected. (ormall! the reimbursing bank would be the bank with
which the issuing bank maintains an account.
The Tr"nferring !"n#:
f the L&2 is transferable# then the >
st
beneficiar! of the L&2 ma! transfer the L&2 to the
C
nd
beneficiar!# through a bank nominated b! the ssuing Bank. This bank is called the
Transferring Bank.
3.6 +ocu%ent re<uired for 'oreign E(ch"nge Tr"n"ction:
Export'mport transactions ask for the following documents3
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Transport 0ocuments
nsurance 0ocuments
2ommercial nvoice
Other 0ocuments
Tr"nport +ocu%ent:
Transport documents comprises of Bill of Lading# "irwa! Bills# Truck 5eceipts# 5ailwa!
5eceipts and nland 4aterwa! 5eceipts.
2hecking points of this document are3
The Bill of Lading is issued&endorsed to the order of (egotiating Bank.
Bill of Lading is clean# showing -+hipped on Board. notation# marked PFreight
Prepaid. QFor 2F5 BasisR and PFreight 2ollect. QFor FOB BasisR# not short form#
Blank back or pre dated.
The Bill of Lading appears the merchandise covers in 2ommercial nvoice.
The port of +hipment# 0estination# +hipment 0ate# (ame of consignee#
+hipping /ark Qif an!R appears on the Bill of Lading are as per L2 term.
Bill of Lading is signed b! the carrier compan! or his agent.
Co%%erci"* In)oice:
2hecking points of this document are3
The invoice dated and signed b! the beneficiar!.
The invoice is issued to the part! concerned as stated in the L2.
0escription of goods is as stated in the L2.
,nit price mentioned as stated in the L2.
Proper Trade'Term is mentioned.
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Inur"nce +ocu%ent:
2hecking points of this document are 7in case of 2F basis83
The nsurance Polic! is valid.
The polic! is issued in the name of L2 ssuing bank a&c3 importer.
The polic! is signed b! the authori$ed official of the nsurance 2ompan!.
The polic! is in negotiable form# dul! stamped and dated prior the BL date.
0escription of goods# name of carr!ing vessel shown in nsurance Polic! are
same as shown in BL.
The polic! covers Transshipment Qif allowed in L2R clause.
Polic! covers >?H above the value of consignment.
Polic! indicates where and in which currenc! the claim Qif an!R will be settled.
Other +ocu%ent:
"s per ,2P =??# other documents comprises of all other documents other than Transport
0ocuments# nsurance 0ocuments and 2ommercial nvoice.
Certific"te of Origin: 2hecking points of this document are3
The 2ertificate is issued b! the concerned authorit! of exporting countr! as stated
in the L2 Qusuall! such 2ertificates are issued b! the 2hamber of 2ommerce 1
ndustr! of exporting countr!R.
!enefici"r3G Certific"te: 2hecking points of this document are3
The certificate issued b! the beneficiar! stating the particulars as stated in the L2.
P"c#ing $it: 2hecking points of this document are3
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The 2ertificate is issued and prepared b! the beneficiar! as per instruction given
in the L2.
Inpection Certific"te: 2hecking points of this document are3
The 2ertificate is issued b! the competent authorit! as approved for that countr!.
The nspection 2ertificate can also be issued b! the beneficiar!&manufacturer if
allowed in the L2.
The 2ertificate is signed'sealed certificate the contents as re%uired and issued
prior to shipment of the goods.
!i** of e(ch"nge: 2hecking points of this document are3
The bill of exchange is drawn b! the beneficiar! as mentioned in the L2 dul!
signed and dated.
The amount is identical with the amount of 2ommercial nvoice.
The amount mentioned in figure and words are consistent.
The bill of exchange is in order and&or endorsed properl!.
3.8 I-PORT:
mport trade in Bangladesh is controlled under the mport and Export control "ct >B=?.
"uthori$ed 0ealer Banks will import the goods into Bangladesh following the import
polic!# public notice# F.E. circular and other instructions from competent authorities from
time to time. The whole import functions of the branch as far have understood are
discussed bellow3
Procedure of i%port
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mport of merchandise essentiall! involves two things3
>. Bringing of goods ph!sicall! into the countr!
C. 5emittance of foreign exchange towards the cost of the merchandise
The /inistr! of 2ommerce through the 2hief 2ontroller of mport regulates ph!sical
import and Exports being office at the important trade center while Bangladesh Bank
regulates the pa!ment for the imports through its various departments. The following are
the steps involved in import of merchandise into Bangladesh.
Regitr"tion of i%porter: n terms of the mporters# Exporters and ndentors
75egistration8 Order >B<># no person can import goods into Bangladesh unless he is
registered with the 2hief 2ontroller of mport and Export or exempted from the
provisions of the said order. +o the following documents are re%uired to be submitted to
the licensing authorit! for registration as importers3
i. Luestionnaire form dul! filled in and signed
ii. ncome tax registration certificate
iii. Trade License from the /unicipal or Local "uthorit!
iv. Bank certificate
v. (ationalit! certificate
vi. Partnership 0eed where applicable
vii. 2ertificate of 5egistration with the 5egistrar of Foint +tock 2ompanies
and /emorandum and "rticles of "ssociation in case of Private and
Public Ltd. 2o.
viii. 2ertificate from the 2hamber of 2ommerce&5egistered Trade "ssociation
ix. Ownership documents or rent receipts of the place of business
x. "n! other documents re%uired under the relevant import polic!.
"fter submission of the above documents and pa!ment of re%uisite fees# if the documents
are found in order and the 2.2. 1 E is satisfied# the mport 5egistration 2ertificate
7528 is issued to the applicant'importer.
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I%port Po*ic3:
The 2hief 2ontroller of mports and Exports announces the mport Polic! concerning
various aspects of imports. The main points covered b! the import polic! are the
following3
i. tems eligible for imports during the shipping period.
ii. Procedure for formation of groups.
iii. The dates for opening of L&2 and shipment.
iv. The rules for re'validation of the Licence&L2" and the L&2.
$icening for I%port:
/ost imports into Bangladesh re%uire a license from the Licensing "uthorit!. n recent
!ears# the task of licensing has been delegated to the commercial banks. t is done b!
L2" 7Letter of 2redit "uthori$ation Form8. Blank L2" forms can be obtained b! the
importer from their banker. The following documents are re%uired to be submitted b! the
import to his banker.
i. L2" Form propert! filled'in and signed.
ii. L2 "pplication.
iii. Purchase 2ontract in the shape of an ndent or Proforma nvoice.
iv. nsurance 2over (ote.
v. /embership 2ertificate from a chamber of 2ommerce and ndustr! or
5egistered Trade "ssociation.
vi. mport 5egistration 2ertificate 7528.
On receipt of L2" Form and the re%uired documents# the bank should carefull! scrutini$e
the documents.
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An Opening of $etter of Credit:
mporter applies to the bank to open L&c in favor of foreign supplier. The bank has its
printed application form and the importer should carefull! fill in this form. On receiving
this application# the bank scrutini$es it to ensure that3
4hether the customer fulfils all the re%uired conditions&criteria to be eligible as
an importer as per provisions of the mport Polic! Order and Duidelines for
Foreign exchange Transactions in force and the supporting documents&papers
re%uired are submitted.
4hether the items for import of which the documentar! credit need to be opened
is permissible i.e. not included in the negative&restrictive list as per mport Polic!
order in force.
4hether there is an! legal&technical defects&restrictions in opening the Letter of
2redit under the various sources as intended b! the customer.
4hether we are holding satisfactor! credit report on the beneficiar! to satisf! the
relevant provisions of the guidelines for Foreign Exchange transactions.
4hether credit facilit! has alread! been approved b! the Executive 2ommittee of
the Board of 0irectors.
On receipt of the L&2 application over the counter or through dispatch&mail
section# the receiving date and time to be recorded on the L&2 application.
+ignature of the customer on the L&2 application to be verified b! authori$ed&
designated officer.
L&2 application with all supporting papers to be checked to ensure that the
re%uired papers are as per re%uirement of Duidelines for Foreign Exchange
Transactions and are consistent to each other.
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L&2 application must show the following clearl!3
' Full name 1 address of the beneficiar!.
' The amount of the credit.
' The 2redit whether to be irrevocable or confirmed irrevocable.
' 4hether the credit is available b! pa!ment# acceptance or negotiation.
' On which part! the drafts are to be drawn and the tenure of such drafts.
' " brief description of the goods# including details of %uantit! and unit
price.
' 4hether freight is to be prepaid or not.
' The port of shipment and the destination.
' 4hether the transfer of the goods from one vessel to another# or from one
mode of transport to another# route# is prohibited.
' The last date for shipment.
' The date and place of expir! of the credit.
' (egotiation period.
' 0etails of the documents re%uired and how those are to be dispatched to
the issuing bank i.e. b! ordinar! mail&courier.
' 4hether the credit is to be a transferable one.
' Kow the credit is to be advised i.e. b! mail&telex.
Letter of 2redit authori$ation form dul! filled in and signed.
ndent or Proforma nvoice issued b! +eller or his agent 7ndenter8 dul! counter
signed b! the customer.
nsurance certificate or polic! 7/arine&"ir&/ail&Truck8 covering the goods at
>?H above L&2 value for the whole )ourne!&shipment together with unconditional
premium paid receipt.
Prior permission&registered L2" form# (o ob)ection&an! other certificates from
the concerned authorit! as re%uired as per provision of the mport Polic! Order.
./.P. form dul! filled in and signed.
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n case the L&2 application is not complete or in consistence or the re%uired
papers are not submitted# the customer should be promptl! contacted for
rectification of the defects.
4hen the L&2 application is found to be in order and the client has sufficient
approved credit line for opening L&2 a L&2 number is to be allotted b!
)ournali$ing&the particulars of the entr! i.e. L&2 and expir! date#
advising&confirming bank etc. in the L&2 register&data base.
n case the client does not have approved credit line for opening L&2 the /anager
of the Branch shall take necessar! arrangement to submit proposal to the 2redit
committee&Executive 2ommittee of the Board and keep pending of opening the
L&2 till its approval. On receipt of approval the /anager shall issue a sanction
letter to the client providing copies of the same to 2redit 0ivision.
f Foreign Exchange is intended to be bought from Bangladesh Bank against
L2"F# it has to be registered with Bangladesh Bank*s 5egistration ,nit located in
the concerned area office of the 221E.
To avoid loss due to fluctuation of exchange rates# hold a declaration of the client
that exchange fluctuations would be on account of the importer.
To set'up a file for the L&2.
To prepare the Letter of 2redit either in mail or telex format with all material
particulars including the other terms and conditions in accordance with the
customer*s instruction together with the related reimbursement instruction in
standard format 7/ail&Telex as the case ma! be8 for sight L&2 unless condition is
given in the L&2 that remittance will be effected b! the bank directl! on receipt of
shipping documents.
To prepare the vouchers to record the contingent liabilit! for the L&2 opened and
reali$e margin# commission# telex charges# postages etc. as per bank*s schedule of
charges&sanction letter.
To furnish all the L&2 related papers including cop! of the prepared letter of credit
and cop! of vouchers in the L&2 file.
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Before 0ispatching& Transmitting the L&23
2heck whether the opening of the Letter of 2redit is approved b! the competent
authorit!.
5eview all documents including the Letter of 2redit and vouchers.
f found in order# sign the letter of credit including the accounting vouchers.
The original L&2 must be signed )ointl! b! two authori$ed signatories.
A%end%ent to $EC :
(ot fre%uentl! the letter of credit opened b! a Bank# needs amendment either because the
term and condition incorporated in the L&c conflict with those of the underl!ing contract
between the bu!er and the seller or the bu!er and seller agree# at a later date. The bank
would need a written re%uest from the importer who generall! makes the re%uest after
obtaining consent of the supplier. +uch amendments will of course be effective if all the
parties to the L&c# namel! the L&2 Opening Bank# the advising bank and the beneficiar!
agree to it.
1crutin3 "nd $odg%ent of +ocu%ent:
Once beneficiar! sets about the task of collecting and preparing the documents
stipulated in the L&2. Ke collects Bill of Lading from the carrier compan!# prepares the
invoice# obtain certificate of origin# packing list# bill of exchange and so on and presents
these to his banker. "fter that# the negotiating bank forwards the supping documents to
the opening bank.
Derific"tion "nd $odg%ent of +ocu%ent 43 the $EC Opening !"n# :
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On receipt of the shipping documents from the negotiati<ng bank# the L&c Opening Bank
should carefull! examine these to ensure that the! confirm to the term of the credit3
a. The documents have been negotiated within the stipulated date.
b. The amount drawn does not exceed the amount authorised in to credit.
c. The merchandise is properl! invoiced.
d. The bill of Lading is clean# shipped on board# showing freight prepared and
endorsed to the order of the issuing bank shows the port of shipment# the port
of destination# the name of the consignee and the date of shipment are in
keeping with the term of the credit.
e. s properl! signed b! the shipping compan!.
f. The 2ertificate of Origin.
g. Other documents like weight list# packing list# pre'shipment nspection
2ertificate etc.
f thereb! an! discrepanc! in the documents# the bank should immediatel! advise the
importer to seek his acceptance of the document. f the importer refuses to accept the
documents the bank should advise the negotiating bank b! telex or +4FT within @
working da!s for instruction with regard to disposal of the goods and the documents.
On being satisfied that the documents are in order or in the event of discrepancies# these
are acceptable to the importer# the bank lodge the bill in P"0. "fter passing necessar!
accounting entries in the book of accounts# necessar! endorsement is made in the L&2"
indicating the amount of the remittances.
"fter the lodgment# the bank asks the importer to retire the bill. "fter retirement the
amount of remittance towards cost of the merchandise is reported to Bangladesh Bank on
Form -/P..
1hipping ,u"r"ntee3
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+hipping guarantee is a Letter of Duarantee&ndemnit! issued )ointl! b! importer
7consignee8 together with a bank 7L&2 opening Bank8 in favor of a commercial carrier or
their agent whereb! the! are authori$ed to release imported merchandise 7title being in
favor of the co'issuer Bank8 to a consignee in the absence of original shipping bill i.e. bill
of Lading&airwa! bill while the co'issuer furnish an assurance&undertaking to submit the
original Bill of Lading&airwa! Bill to the carrier as soon as the same is in their
possession. Kowever against the issuance of a letter of indemnit!# the bank should obtain
a counter indemnit! signed b! the importer in favor of the issuing bank whereb! the!
assume full responsibilit! for an! obligation the bank assume in issuing the shipping
guarantee and also undertake acceptance&pa!ment of documents&draft under the related
Letter of 2redit irrespective of whether those are discrepant or not.
!efore Iuing the 1hipping ,u"r"ntee:
. Kead Office approval is essential in cash where the customer has not ad)usted
the related import liabilities or do not have approved L/&LT5 facilit! limit.
. The Branch shall obtain counter indemnit! from the customer in favor of the
Bank.
. The customer shall submit an unconditional undertaking to accept the related
shipping documents even with an! discrepancies.
J. The +hipping Duarantee&Letter of indemnit! must be signed )ointl! b! two
authori$ed signatories.
Procedure:
On receipt of application from a customer to issue a shipping guarantee the following
procedure will be followed3
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i. +ignature of the customer on the counter ndemnit!&undertaking to be verified b!
the authori$ed officer.
ii. Jerit! the contents of the 2ustomer*s ndemnit! as regard L&2 (o.# name of
drawee# merchandise description# amount# Bill of Lading&"irwa! Bill (o.
shipping mark etc. with the copies of nvoice and bill of lading against the terms
of the L&2 to ascertain that those are identical and in line with L&2 terms.
iii. 2heck whether the Letter of guarantee is properl! stamped.
iv. f found alright )ournali$e&capture the particulars of the letter of indemnit! in the
shipping guarantee register&data'base after allo!ing an indemnit! number seriall!
in numerical order.
v. Jerif! signature of the customer on the letter of ndemnit! submitted for counter
signature b! the bank officers with their official seal.
I%port"nt point to prep"re "n $EC:
To prepare an L&2 the branch takes care on the following points3
$EC nu%4er: The branch will put a number for each L&2.# which is the serial number of
the L&2 for a particular !ear. First L&2 of /BL Elephant 5oad branch in C??C ma! be
numbered like/BL&Elephant 5oad&>@;C?>?;?>.
P*"ce "nd d"te of iue: L&2 must indicate the place and date of issue.
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+"te "nd p*"ce of e(pir3: L&2 must have an expir! date. This is the last date of
presentation of document under the L&2. Place of expir! of the L&2 also to be mentioned
in the L&2. (ormall! it should be the counter of the (egotiating Bank.
1hip%ent d"te: There should be a last shipment date after which shipment is not
allowed. Bank ma! also fix'up a first shipment date before which shipment will not be
allowed.
Preent"tion period: ssuing bank will allow a period within which exporter must
present the export documents to the negotiating bank or to an! other nominated bank.
This ma! be >= da!s from the date of shipment. /aximum ma! be allowed one month#
but within the expir! date of the credit.
App*ic"nt: (ame of the applicant with business address to be put in the L&2.
!enefici"r3: (ame of the beneficiar! with address also to the indicated in the L&2.
Ad)iing !"n#: (ame of the advising bank with address to be mentioned in the L&2.
A%ount3 Ever! L&2 must show the amount of the L&2. The word -"bout. ma! be used
with amount# which means >?H more or less of the said amount.
P"rt-hip%ent "nd Tr"n hip%ent: ssuing bank also clearl! indicate in the L&2
whether part'shipment and trans shipment are allowed or not.
A)"i*"4i*it3: L&2 must indicate whether the credit is available b! pa!ment# b!
negotiation or b! acceptance.
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Port of hip%ent "nd port of detin"tion: L&2 will also indicate from where shipment
to be made and where goods to be delivered.
Tenure of the dr"ft: 4hether the draft to be drawn at sight or usance# also to be cleared
in the L&2.
+ocu%ent re<uired: Bank will give the list of re%uired documents and data content
therein. Each and ever! term must be supported b! the documents# because an! term
without asking document is valueless.
P"3%ent: 4hen# where and b! whom pa!ment is to be made# also to be indicated in the
L&2.
2CP: Bank will incorporate the reference of ,2P =?? in the L&2 for its application in all
the operation of the L&2.
!i** of *"ding: B&L must be issued or endorsed to the order of the ssuing Bank. t should
be Pclean* and -freight prepaid. if L&2 is on 2F5 basis short form and charter part! B&L
to be avoided. "ll these terms to be incorporated in the B&L clause of the L&2.
!i** of E(ch"nge: Bill of Exchange to be drawn on the ssuing Bank.
Pre-hip%ent Inpection: Pre'shipment inspection certificate is compulsor! for both
government and private import except in few cases.
+"t" content: nvoice and other documents if re%uired should indicate the K.+. code
number. L2"F (o with description of the item and countr! of origin.
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1peci"* condition: +pecial conditions# such as in case of food# machineries# vehicles
and an! other items should be incorporated in the L&2 where re%uired.
Authenticit3 of the credit: L&2 to be authenticated b! putting a test number or signing
b! two authori$ed officers.
$EC "d)iing:
The L&2 dul! signed b! two authori$ed officers# whose specimen signatures are alread!
recorded with the correspondent banks# must be addressed to the beneficiar!. Bank
generall! does not enter into direct contact with the beneficiar!. nstead the! utili$e the
services of its own branch office 7if an!8 or correspondent bank at seller*s countr! for the
purpose of advising it to the seller 7beneficiar!8. Thus the correspondent bank becomes
the -"dvising Bank..
The process of advising a credit consists of forwarding the original credit to the
beneficiar! to whom it is addressed. Before forwarding&advising the credit to the seller
under appropriate forwarding coverage# the advising bank has to verif! the signatures of
the officers of the opening bank and ensure that the terms and conditions of the credit are
not in violation of regulations relating to export. 4hile advising# the advising bank does
not undertake an! liabilit!.
Ad)iing " *etter of credit
)3*1-T.- (45
6**4)6NT)
L/C OPENING BANK
APP$ICATIO I112E $EC
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E("%in"tion "nd crutin3 of i%port docu%ent:
"fter shipment of the goods# the exporter submits the export documents to the negotiating
bank. (egotiating bank checks and sends the documents to the issuing bank after
negotiation. ,pon receipt of the import documents issuing bank will examine the
documents carefull!. f there is an! discrepanc! in the documents# bank will decide
within @ banking da!s# following the da! of receipt of the documents# whether it will
accept the documents or will refuse. f the issuing bank fail to communicate the refusal to
the negotiating bank within @ da!s# the documents deems to be accepted.
"t time of scrutin! the following points to be checked speciall!3

". !i** of E(ch"nge:
a8 s the bill drawn in terns of the L&2 and does it bear L&2 no. and dateO
b8 0oes the amount of the BOE in words and figures agree and is it in the same
currenc! of the L&2O
c8 4hether the draft is drawn on the issuing bank or notO
B. In)oice:
a8 0oes the invoice value agree with the amount of the BOEO
L/C
BENEFICIAR
$EC A+DICI0,
!A09ECO0'IR-I0, !A09
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b8 0oes the invoice value clearl! state the unit price i.e.# FOB&21E&2F as
mentioned in the L&2O
c8 0oes the description of goods declared in the invoice agree with that of the
L&2O
d8 0oes the shipping mark on invoice agree with those on B.L &"4B & T5& 55O
e8 0oes the gross weight and net weight if shown on invoice agree with those on
B&LO
f8 2ustom invoice and &or consular invoice to be presented as per credit terms.
2. Tr"nport docu%ent:
a8 Kas the full set of original transport documents have been submittedO
b8 s the B&L marked PO( BO"50*O
c8 s the B&L cleanO
d8 P2ombined* P2harter part!*# P+hort form* B&L is not acceptable if not allowed
in the L&2.
e8 Transshipped B&L not to be acceptable unless allowed b! L&2
f8 s PFreight prepaid* or PFreight pa!able* at destination in accordance with L&2
termsO
g8 "re shipping documents properl! endorsedO
h8 "re the name7s8 and address of the notif!ing part!7s8 identical with those in
the L&2O
i8 The date of shipment on the transport documents must not later than the date
stipulated in the L&2.
)8 B&L must be issued in order of the issuing bank.
k8 The port of shipment and destination must be as per credit terms.
l8 B&L must bear the name of carr!ing vessel and the flag.
0. Pre-hip%ent inpection report:
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a8 nspection done b! the authori$ed person called b! the L&2
b8 nspection done at named place
c8 nspection certificate must confirm the specification called for in the L&2
d8 2ertificate must confirm that the! have inspected the goods related to the L&2
under reference
e8 nspection certificate must confirm the %ualit! of the goods the! inspected as
called b! the credit.
Beside the above# the bank examines and scrutini$es the following3
a8 4hether all the documents re%uired b! the credit are submitted
b8 0ocuments to be consistent with one another
c8 0ocuments to be presented within the stipulated time
d8 0ocuments to be issued b! the authori$ed person as stipulated in the credit
e8 0ocuments to be examined as per credit terms and international standard
banking practice
$odg%ent:
f import documents are found in order# the! are to be made entr! in the bill register and
necessar! vouchers to be passed# putting Bill number on the documents. This process is
called Lodgment of the bill. The word -Lodgment* means temporar! sta!. +ince the
documents sta!s at this stage for a temporar! period i.e. up to retirement of the
documents# the process is called lodgment. Bank must lodge the documents immediatel!
after receipt of the same# not exceeding @ banking da!s# following the da! of receipt of
the documents# 7"rticle >;# ,2P02'=??8.
Procedure for *odg%ent:
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Bill register: Bank entr! the documents in the bill register. Bill register must
include date of lodgment# bill no# bill of exchange no# amount# name of the
negotiating bank# B&L no and date# merchandise# retirement date and other
particulars.
Application of rate: Foreign currenc! would be converted at Bangladeshi
currenc! selling rate ruling on the date of lodgment.
Exchange control form: /P 1 T/ form must be filled in and signed b! the
importer at the time of lodgment.
Endorsement of LCA: L2" form must be endorsed showing utili$ation of
shipment.
!oting on the file: ,tili$ed amount showing bill number to be noted on the
printed format of L&2 file.
Accounting procedure:
0r. Liabilit! as per contra 7BB L&2 or 2ash L&28
2r. "sset as per contra 7BB L&2 or 2ash L&28
0r. Bill of exchange
0r. F22 "&2 For sight bills
2r. TBL Den. "&2 KO# 0
0r. "sset as per contra 7BB Bills&0" Bills8
2r. Liabilit! as per contra 7BB Bills&0" Bills8
Retire%ent:
4hen the importer release the import documents from the bank b! acceptance&cash
pa!ment or under post import bank finance# it is known as retirement of the import
document.
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1tep for retire%ent:
"ntimation to the importer: Bank will intimate the importer with full particulars
of the shipment to retire the import documents on receipt of the same as per
terms of the credit.
Acceptance: ,sance bill for collection is to be presented to the importer for
acceptance. +ight bills need no acceptance if not discrepant. The maturit! to be
calculated from the date of acceptance or negotiation as per credit terms. " due
date diar! to be maintained for maturit! date.
Accounting procedure: "t the time of endorsement of the documents for custom
clearance# bank passes the voucher as under3
0r. Part!*s "&2
2r. ncome "&2 7commission on clearance of imported consignment8.
'or c"h $EC retire%ent:
0r. F.2. deposit 74FK8 "&2
2r. F.2. deposit 7cash L&2 cover8 "&2
0r. F.2. deposit 7cash L&2 cover8 "&2
2r. Bill of Exchange&TBL Den. "&2 KO 0
0r. Part!*s "&2&/P "&2
2r. 4E+ fund purchase "&2
2r. F22 "&2
2r. +tationar! "&2
2r. TLS charge&P1T recover! "&2
2r. Others
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or Back to Back Bills:
0r. F.2. deposit "&2 7F.2. held against BB Bills8
2r. TBL DE(. "&2 KO 0
0r. Part!*s current account&marginal deposit account
2r. F22 "&2
2r. 2ommission "&2 7"cceptance8
2r. TLS charge& P1T recover! "&2
2r. +tationar! "&2
2r. Others
0r. Liabilit! as per contra 7BB Bills8
2r. "sset as per contra 7BB Bills8
P"3%ent of i%port 4i**: n case of back'to'back usance bills pa!ment to be made on or
before maturit! date of the bill out of the reali$ed export proceeds. n case of cash sight
import bills bank makes pa!ment from its F.2 deposit account and will reali$e the value
of foreign currenc! from the client account.
!"c#-to-!"c# $EC:
The benefit of a L&2 7the /aster L&28 ma! be made available to a third part! where the
primar! beneficiar! uses the master L&2 as securit! collateral to obtain another L&2 7the
secondar! credit8 in favor of the actual supplier. The secondar! credit is known as back'
to'back L&2.
" Back'to'Back L&2 involves two separate L&2s.
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One opened in favor of the first or primar! beneficiar!# and
One opened for the account of the first beneficiar! in favor of a second beneficiar!
who is suppl!ing the goods.
The first beneficiar! of the /aster L&2 becomes the applicant for the back'to back L&2.
Back'to'Back L&2 is commonl! known as Bu!ing L&2# whereas /aster Export L&2 is
known as +elling L&2. 4hat percent of export L&2*s value is permitted to open a back'to'
back L&2 its depend upon the nature of the goods and getting information from the
commerce ministr!.
Chec#*it to open !"c#-to-!"c# $EC:
"pplicant is registered with 22 1 E and has bonded warehouse license.
The master L&2 has ade%uate validit! period and has no defective clause.
L&2 value shall not exceed the admissible percentage of net FOB Jalue of
relative /aster L&2.
J Essence period will be up to ><? da!s.
P"per re<uired opening !"c#-to-!"c# $EC:
i. mport 5egistration 2ertificate 1 Export 5egistration 2ertificate.
ii. L&2 application 1 L2" form.
iii. Proforma nvoice & ndent.
iv. nsurance Polic!.
v. /P form.
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n addition to above following papers are re%uired for 5ead!made Darments ndustr!3
i. Bonded 4arehouse license.
ii. Luota allocation letter from EPB 7where applicable8
iii. Letter of disclaimer from landlord if rented premises.
1tep of Opening !"c#-to-!"c# $EC:
i. mporters* application to open a BTB L&2 against specific /aster L&2.
ii. Export dept. marks lien of the export L&2 and forwards it to the
import dept.
iii. L&2 opening desk then enters all particulars of the master L&the part!
registers and maintains account of such master L&2. "n! amendment brought in
the master L&2 is also recorded in the register.
iv. Obtain credit report of the beneficiar! 7where applicable8.
v. Examination of L&2 application formTwhether within the credit Limit# dull!
signed b! the concerned person and also signed b! the "pplicant.
vi. (ecessar! entries into the B.B. L&2 opening register
'*o; ch"rt for iuing 4"c#-to-4"c# $EC:
Obtain credit report
Preparing offering sheet if regular credit line is not available
/ark lien on the master L&2
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Pot i%port fin"nce:
4hen the importer does not come forward to retire the import documents# or re%uests the
bank for finance against the imported consignment# then arises the necessit! of post
import investment. f the consignment is not cleared within ;= da!s# from the date of
arrival# custom authorit! ma! auction the consignment under section >A@ 7<8 and
amended section <C of the 2ustom "ct >BAB. ,nder such a situation bank becomes
compelled for forced clearance of the consignments under /urabaha post import
investment. f the documents are discrepant# part!*s acceptance is re%uired for clearance
of the goods.
Bank issues notice to the client# to retire the documents immediatel! after receipt of the
documents and it will scrutini$e the documents within @ working da!s# from the date of
receipt of the documents. f the documents are correct in all respect# the final notice is to
be issued to the client before forced clearance of the goods under /P.
3.@ E(port:
Export means outflow of goods and services produced in one countr!# which purchase b!
Dovernment# Firms and individuals of other countries. 0evelopment of a countr!
depends on its participation in the international trade b! increasing production and export
of commodities and service sector. B! wa! of this a countr! can improve Emplo!ment
Deneration'ncome level'+avings'Drowth'Economic 0evelopment.
ssuance of letter of credit
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The imports and exports trade in Bangladesh is regulated b! the mport 1 Exports
2ontrol "ct >B=?. There are number of formalities an exporter has to fulfill before and
after execution of export# some of are as under3
!enefit of E(port:
0evelopment of a countr! depends on its participation in the international trade b!
increasing production and export of commodities and service sector. B! wa! of this a
countr! can improve Emplo!ment Deneration'ncome level'+avings'Drowth'Economic
0evelopment.
E(port Receipt 1t"titic of !"ng*"deh:
Co%%oditie 2??7-2??6 2??6-2??8
Figure in ,+0 /illion
5aw Fute A> <C
Fute Doods Qexcluding carpetsR C;C C=@
Tea >@ >=
Leather C?@ >B>
Fro$en +hrimps and Fish C@A 6CC
5ead!made Darments 6>C= 6C=<
Koshier! Products >;=B >A=;
(aptha and Furnace Oil >? 6>
Fertili$er ;< @B
Others =;> A=B
TOTA$
7A@6 676@
Source: Statistics #epartment, Bangladesh Bank $ EPB%
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E(port T"rget of !"ng*"deh3
2ommodities
Figure in /illion ,+0
2??7-2??6 2??6-2??8 2??8-2??@
5ead!made Darment 6<>?.?? ;C??.?? ;A??.??
Enitwear ><=?.?? C>??.?? C6=?.??
Fro$en Food 6<?.?? ;;?.?? =>?.??
Leather C<?.?? 6C=.?? 6<?.??
Fute Doods 6>?.?? 6=?.?? 6@=.??
5aw Fute @?.?? @=.=? <C.??
2hemical Products B?.?? B;.=? BB.CC
Tea C?.=? C>.=? CC.??
"gricultural Products 6A.?? ;>.;? ;@.A>
Kandicrafts @.@? @.<< <.>C
Electronic Doods <.=? >?.?? >>.=?
Engineering Products ;.?? =.?? A.??
Petroleum Products >>.?? >>.=? >>.=?
2omputer +oftware @?.?? >??.?? >=?.??
+peciali$ed Fabrics B<.?? >?=.?? >>=.=?
Textile Fabrics @=.?? <C.=? B?.??
2eramic Table ware CA.=? C<.=? 6?.??
Bic!cle @?.?? B>.?? >>6.@=
+hoe A>.?? A=.?? A<.??
Other Primar! Products >B.?? C?.?? CC.??
Other ndustrial Products 66?.=? 6B>.=? =?@.??
TOTA$
8628.8? @767.8@ A7AA.2?
Source: Export Polic& '())*+()),-%
Ce"#ne "nd Pro4*e% in E(port 1ector of !"ng*"deh:
Co%%odit3 Are": Jer! small numbers of commodities are occup!ing maximum share
of our export. Fute# Fute and Fute goods# fro$en fish leather occupied more than B?H of
our total exports.
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,eogr"phic"* Are": Our export market is ver! small in number i.e. ,+" and EE2
countries are the purchasers of <?H of our total exports.

R-, 1ector:
+hortage of backward linkage industries# inade%uate infrastructure# Lualit! 2ontrol and
design# withdrawal of Luota and D+P facilities# Bu!ers market 0iversion towards
"frican nations# ntroduction of microelectronics in apparel industries in developed
countries.
Furthermore# burden of Tk about <.<? crore are carr!ing b! the (2Bs which is 6?H of
total loan amount provided b! them in 5/D sector. The such huge amount of mone!
mostl! remained unpaid for a long time because of non reali$ation of export proceeds due
to failure in shipment in time# failure in maintaining %ualit!# failure in production in
scheduled time. But the banks compelled to make pa!ment of import bills under BBL2
from their own fund instead of export proceeds against the respective export L2s.
Iute "nd Iute ,ood 1ector:
Failure in promoting export market# lack of publicit! regarding the use of Fute and Fute
products as environment friendl! goods. 5eduction in %ualit! Fute and Fute goods. Price
competition in world market etc.
$e"ther "nd $e"ther ,ood:
+hortage of forward linkage industr!# shortage of skill manpower# shortage of training
institute for this sector# etc. For the past few !ears amount of default loan in this sector
increasing alarmingl!. "n amount of Tk <.>A 2rore has become defaulted about of total
loan amount of Tk >;?? 2rore in this sector.
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'roHen 'ood:
This sector is suffering since E, ban in >BB@ and devastating flood of>BB<. Traditional
production method# lack of modern e%uipment and skilled man power in this sector and
management of international standard.
Te":
ncrease of domestic demand# 0ecrease in production rate QBangladesh3 >>=? Egs&Kect.
ndia3 >@?? Egs&Kect. +ome other countries3 6???'=??? Egs&KectR. Lac of government
initiatives# lack of capital investment# obsolete production method# reduction in
productivit! of tea plants etc.
n the context of increasing competitiveness and openness of the world econom!#
Bangladesh should exploit the opportunities offered b! the world communit! to expand
the export base and explore new markets b! diversif!ing its exportable goods and
services and diversified new markets.
E(port Po*ic3 J2??6-2??8K of !"ng*"deh:
Export Polic! of Bangladesh has formulated b! the /inistr! of 2ommerce to provide the
overall guideline and incentives for promotion of export from Bangladesh. This Export
Polic! will continue till Fune C??@. Kowever# this Polic! will be valid until the next
Export Polic! is announced.
O45ecti)e of E(port Po*ic3 J2??6-2??8K:
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' 5estructuring and capacit! building of Export Promotion Bureau# +eaport# and
port# "irport# 2ustoms and Jat# B+T# Tea Board and other export activit! related
bodies.
' To implement strategic plan and maximum utili$ation of computer technolog!# E'
commerce and other modern technolog! to expand export markets.
' To increase value addition of exportable items b! development of Forward and
Back ward linkage industr! to increase maximum exportable products.
' To diversif! and improve the %ualit! of exportable items to exploit new
opportunities and protect existing market.
' To develop the export trade infrastructure and well trained manpower.
' To simplif! the export procedures and rationali$e the incentives structures to
exports.
E(port Incenti)e: To achieve the ob)ectives of Export Polic! man! incentives and
facilities have been extended to the exporters. +ome of those incentives and facilities are
as under3
Con)erti4i*it3 of T"#": Taka has been made convertible in the current account from
/arch CA# >BB; in line with the polic! of export'led growth in the world market. ,nder
this s!stem# exporters are getting the following facilities3
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E(porter Retention Buot": /erchandise exporters can retain upto >?H of reali$ed
FOB value of their exports in Foreign 2urrenc! "ccount for 5/D# (aptha#
Furnace Oil# Bitumen and other Petroleum Products and other goods having
high import contents and up to =?H of reali$ed FOB value of their exports for
non traditional item and service exports such as data entr!# software etc.
'ic"* Incenti)e:
Duty Draw Back
Export Credit
Export Develope!t "u!d #ED"$
0ut!'Free mport of 2apital /achiner!
Duty%"ree Iport o& 'aw (aterial)
Bonded 4arehouse Facilit!
+ale of 5e)ected Doods
ncome Tax 5ebate on Export Earnings
Ca)* I!ce!tive)
Export Credit Guara!tee +c*ee #ECG+$
Other 1o%e Incenti)e:
5educed airfreight for export of all items under crush program including fruits and
vegetables and +pecial Premium 5ebates are allowed on fire and marine insurance covers
to export oriented industries.
Local raw materials used as direct input for export products are regarded as Pdeemed
export* and %ualif! for all export incentives and benefits.
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(ational Trophies are awarded to outstanding exporters ever! !ear and Troph! winners
are treated as 2P.
ProcedureE'or%"*itie for E(port:
The imports and exports trade is regulated b! the mport 1 Exports 2ontrol "ct >B=?.
There are number of formalities an exporter has to fulfill before and after execution of
export# some of are as under3
The intending exporter has to register with 221E and obtained Export 5egistration
certificate QE52R. The E52 number is to be used in all places relating to exports.
1ecuring E(port Order:
To secure export order the exporters ma! contact local chamber commerce of potential
bu!ers# the export promotion bureau# Bangladesh mission abroad and b! direct contact
with foreign bu!er through correspondences.
Recei)ing $etter of Credit:
"fter making contact with foreign bu!ers and reaching on agreed price and terms#
conditions the exporters receive Letter of 2redit.
Procure%ent "nd 1hip%ent of ,ood:
"fter receipt of L2 the exporter has to procure or manufacture the contracted goods and
ship the same.
Prep"r"tion "nd procure%ent of E(port +ocu%ent:
"fter making shipment the exporter has to prepare documents i.e. Bill of Exchange#
2ommercial nvoice# Beneficiar!*s certificates and procure some documents i.e.
Transport 0ocuments# 2ertificate of Origin# nsurance certificate# nspection certificate
and other documents as re%uired as per L2 terms.
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1u4%iion of docu%ent to the 4"n# for 0egoti"tion:
"fter preparation and collection of all documents as per L2 terms the exporter has to
submit the documents to the bank for (egotiation&Pa!ment&Purchase.
Ro*e of !"n# in the E(port 1ector of !"ng*"deh:
"ll the financial re%uirements of an exporter# from the time he enters into a sale contract
and start working on it and till he receives final pa!ment from abroad# are met b!
commercial banks. n that case banks pla! an important role in the export sector of
Bangladesh and contribute b! financing in the export sector b! following categories3
Pre-1hip%ent Credit: Pre'shipment credit is given to the exporters# for the activities
prior to shipment of goods for export. +ome example of Pre'shipment credit3 2ash for
local procurement of raw materials and its related expenses# Procuring 1 Processing of
goods for export# Packing and transportation of goods for export# Pa!ment of insurance
premium# nspection fees# Freight charges etc.
Pre-1hip%ent Credit "re in fo**o;ing 'or%:
>. E(port C"h Credit JH3pothec"tion$: This for of credit is allowed to exporter
against h!pothecation of raw materials or finished goods intended for export. +ince
the bank has got no securit! against this credit except charge documents and lien on
export L2# bank obtain letter of h!pothecation creating charge against the goods in
favor of the bank onl! but neither the ownership nor the possession on it.
C. E(port C"h Credit JP*edgeK: ,nder this arrangement bank provide finance to the
exporter against pledge of goods to be stored in the go down under bank*s control
against letter of pledge and other charge documents. n this case the goods remain as
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securit! under banks control and possession. n the event of failure of the exporter to
honor commitment# the bank can sell the goods for recover! of bank dues.
6. E(port C"h Credit "g"int Trut Receipt: This t!pe of credit facilit! is allowed to
exporter when the exporter wants to utili$e the credit for processing# packing and
rendering the goods in exportable condition and when it seems that the exportable
goods can not be taken in the banks custod!. n this case exporter has to execute a
stamped in favor of bank and a declaration stating that the goods purchased with
financial assistance of bank are held b! him in trust for the bank. 2ollateral securit! is
obtained against this credit also.
;. P"c#ing Credit: This t!pe of credit is allowed for a transitional period from dispatch
of goods till negotiation of export bills. The purpose of this credit is to pa! the
transportation cost of goods to be exported. The amount disbursed under export cash
credit Qh!po&pledgeR are to be ad)usted from the drawings of packing credit which is#
in turn to be ad)usted b! negotiation of export bills.
=. !"c# to !"c# $etter of Credit: ,nder this arrangement bank finance exporters b!
wa! of issuing back to back letter credit on behalf of exporter for procurement of raw
materials and accessories favoring the manufacturer&supplier home and abroad
against lien of export L2 and collateral securit!.
Po)t%+*ipe!t "i!a!ce: ,suall! the exporter can not afford to wait for a long time for
pa!ment to local manufacturer&supplier and other financial obligations. 5esulting which
the exporters need post'shipment credit facilit!. 2onsidering the genuine need# and
worthiness of export and other securit! measures bank allow credit facilit! to exporters.
1o%e 'or% of Pot-1hip%ent Credit '"ci*it3:
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>. 0egoti"tion of +ocu%ent under $C: (egotiation means pa!ment of the value of
the drafts drawn under the L2. ,nder this arrangement# upon receipt of credit
conform documents from the exporter# banks pa! the value of the drafts to exporter.
C. Purch"e of +P / +A !i**: n this case bank purchase&discount the 0P and 0" bills
at rate published b! the bank. Before allowing such credit bank should check all the
documents presented are strictl! as per terms and conditions of the L2 and there is
clear pa!ment instruction in the L2 from the L2 issuing bank.
6. Ad)"nce "g"int !i** for Co**ection: Exporters can submit the export document to
a bank after execution of export for collection of the proceeds but the deal was not
under an! L2# documents drawn under L2 but some discrepancies are there. To meet
the exporters need bank can make advance to exporter from =? to <?H of the bill
value considering the relationship# past track record# and obtaining collateral securit!
from exporter.
+ifferent -ethod of Intern"tion"* Tr"de P"3%ent:
>. C"h in Ad)"nce: ,nder this arrangement# bu!er pa!s the value to exporter against
the goods to be shipped and services to be provided in some future date. "fter receipt
of pa!ment exporter ship the goods and provides services to bu!ers. But the s!stem is
disadvantageous for bu!er because bu!er blocking his fund in advances having no
assurance of receipt of goods and service in time as per contract. +o such t!pe of
pa!ment is considered as risk! and expensive for bu!ers but favorable for seller.
C. Open Account: ,nder this method# the sellers are in risk! situation because he has to
deliver the goods and service to bu!er before receiving pa!ment. Bu!er makes
pa!ment onl! after receipt of goods and services as per contract terms. +o before
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going such transaction sellers should check the past record# worthiness and business
histor! of the bu!er and if it is found satisfactor! onl! seller can proceed further.
6. Co**ection "g"int P"3%ent J+EPK: ,nder this method# exporter ship the goods and
draw bill of exchange on the bu!er and submit the documents to a bank with
instruction to collect the proceeds through its correspondent bank located in the
bu!ers countr!. n this case documents delivered onl! against pa!ment.
;. Co**ection "g"int Accept"nce J+EAK: ,nder this method# exporter ship the goods
and draw bill of exchange on the bu!er and submit the documents to a bank with
instruction to collect the proceeds through its correspondent bank located in the
bu!ers countr!. n this case documents delivered against acceptance of 0rafts b! the
bu!er.
=. +ocu%ent"r3 Credit: 0ocumentar! credit is the classic method. This method
reduced pa!ment related risks for both exporter and importer substantiall!. Because
documentar! credit is conditional pa!ment undertaking of issuing bank to the
exporter against compliance of certain terms and conditions and submission of
re%uired documents as per credit terms. +o under this pa!ment method both exporter
and importers feel safe to deal.
E("%in"tion "nd 0egoti"tion of E(port +ocu%ent:
There are man! instances where exporters involve themselves in committing fraud so
while exporters tendered export documents for negotiation# special care should be taken
in checking the said documents to avoid fraud forger! and protect the interest of the bank.
Following are some important checking points3
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>. 9no; 3our e(porter: Nou should know !our customer considering his relationship
with the bank# previous track record and worthiness.
C. Proper chec#ing of E(port $C: Export L2 is authenticated# irrevocable# valid# Free
(egotiable in Bangladesh# Pa!ment instruction is clear# issued under ,2P02.
6. Proper chec#ing of E(port +ocu%ent: Bill of Exchange# 2ommercial invoice#
Transport documents and other documents are prepared and presented as per L2 terms.
Proceing of '+!P: Enter in F0BP 5egister and dispatch the documents as per L2
terms# +end 0uplicate cop! of ESP Form to Bangladesh Bank within >; da!s.
For F0BP 0r. F0BP Bill amount S O0 +ight 5ate Qin case of sight billR
2r. Exporters "ccount
+r. E(porter Account
2r. 2ourier 2harge
On 5eali$ation 0r. TBL Den "ccount Q5eali$ed "mount S O0 +ight G
Exchange gain.R
2r. F0BP "ccount
2r. Exchange Dain.
/ark F0BP 5egister and report to Bangladesh Bank and submit Triplicate 2op! of Exp
Form along with /onthl! Foreign Exchange 5eturn.
Proceing of '+!C:
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Enter in F0B2 5egister and dispatch the documents as per L2 terms# +end 0uplicate
cop! of ESP Form to Bangladesh Bank within >; da!s.
For F0B2 0r. 2ustomers Liab. on F0B2
2r. Bankers Liab. on F0B2
On reali$ation 0r. Bankers Liab. on F0B2
2r. 2ustomers Liab. on F0B2
0r. TBL Den. "ccount Q5eali$ed "mount S O0 +ight G
Exchange gain.R
2r. Exporters "ccount O0 Q+ight 5ateR
2r. Exchange gain.
Dr, Exporter) Accou!t
2r. 2ourier 2harge
2r. 2ollection 2ommission
/ark F0B2 5egister and report to Bangladesh Bank and submit Triplicate 2op! of ESP
Form along with /onthl! Foreign Exchange 5eturn.
E(port *etter of credit:
The export is normall! executed against letters of credit opened b! overseas bu!ers.
+ometimes shipments are made on 2"0# 0P# 0" or consignment basis without cover of
L&2. 4hen export is made against L&2# the exporter should examine the following terms
of L&2 to avoid an! future complicit! to execute the order3
i. The terms and conditions of L&2 are definite# clear and explicit and also are in
conformit! with those of the contract.
ii. The L&2 should be an irrevocable one and be confirmed b! the advising bank.
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iii. f the import of the goods is under control in bu!er*s countr!# the bu!er holds
a valid import license.
iv. f the L&2 is transferable or otherwise# it should be clearl! mentioned in the
L&2.
v. The L&2 should provide sufficient time for shipment and a reasonable time for
negotiation. f nothing were mentioned# the shipper would be allowed C> da!s
to negotiate the documents.
f an! of the terms of the L&2 appears to be vague# ambiguous or too difficult for the
banker to ensure compliance# the banker should immediatel! refer to the concerned
correspondent b! letter or cable and get the vagueness removed before advising he L&2 to
the beneficiar! 7exporter8. On the other hand# if the exporter finds an! provisions
inconsistent with the underl!ing contract# he should immediatel! ask the bu!er to carr!
out necessar! amendments though the L&2 opening bank.
1hip%ent:

"fter the contract the exporter takes all necessar! steps to ship the goods. Ke ma!
procure or manufacture the goods. Failure to maintain the deliver! schedule will expose
the exporter to claim from the bu!ers for damages on account of non'shipment or late
shipment# and in addition the exporter ma! also loose the patronage of the bu!er for
future export orders. 4hile shipment and after shipment the exporter should obtain or
prepare the following documents3
ESP Form
Photocop! of registration certificate
Photocop! of the contract
Photocop! of the L&2
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2ustoms cop! of E5F Form for shipment of )ute goods and EP2 Form for raw
)ute
Freight certificate from the bank in case of pa!ment of the freight at the port of
lading is involved
Bill of Lading# 5ailwa! receipt# Postal receipt# "ir wa! bill or Truck receipt
Packing list
2ertificate of origin
+hipping instructions
nsurance polic!.
Iu"nce of ELP 'or%:
"ll exports must be declared on ESP Form. "0 branches suppl! these forms. The bank
certifies ESP form onl! after confirming the following3
i. "rrangements have been made for reali$ation of export proceeds.
ii. Bonfires of the importer&consignees abroad
iii. "rrangements have been made for receipt b! authori$ed dealer of documents
of title to goods#
iv. The exporter has signed the ESP.
E.P number should be as under:
"0s 2ode 5egister +erial (o Near
+ipo"* of ELP for%:
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a8 The ESP forms are %uadruplicate. Exporter will complete and singe the ESP.
b8 "fter completing the ESP forms# exporter should submit all copies to the "0
for certification. "fter bank*s certification it to be submitted along with the
shipping bill to the custom authorities. 2ustom authorities affixing their seal
and signature will return the duplicate# triplicate and %uadruplicate copies to
the exporter. The original cop! to be forwarded to Bangladesh bank b! custom
authorit!.
c8 Exporter will submit the remaining copies of ESP forms along with invoice to
the "0# through whom pa!ment to be revived.
d8 "0 should submit the certified duplicate cop! of ESP form to the BB within
>; da!s from the date of shipment.
e8 ,pon receipt of pa!ment# the "0 should also submit the triplicate cop! of
ESP form to BB at the end of the month certif!ing on the reverse of the form#
with monthl! summar! statement.
1u4%iion of docu%ent:
"fter the shipment# the exporter submits all these documents to bank for negotiation. The
exporter remains in constant touch with the negotiating bank for earl! negotiation of
export bills. f an! minor mistake is detected or an! document is found missing the same
should immediatel! be corrected or supplied for earl! settlement of the matter.
E(port docu%ent chec#ing:
"fter submission of exports documents b! the exporter# bank must check# whether all the
re%uired documents submitted or not. Bank must examine all documents stipulated in the
credit with reasonable care to ascertain whether or not the! appear# on their face to be in
compliance with the terms and conditions of the credit. 0ocuments not stipulated in the
credit will not be examined b! the bank. The following points of documents should be
carefull! scrutini$ed3
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!i** of E(ch"nge:
>. "mount of bill differs with invoice
C. (ot drawn on L&2 issuing branch
6. (ot signed
;. Tenor of 2&E not identical with L&2
=. Full set not submitted
In)oice:
>. (ot issued b! the beneficiar!
C. (ot signed b! the beneficiar!
6. (ot made out in the name of the applicant
;. 0escription# price# %uantit!# sales terms of the goods not correspond to the
credit
=. (ot marked one fold as original
A. +hipping marks differs with B&L and packing list
P"c#ing $it:
>. Dross weight# net weight and measurement# number of cartoons& packages
differs with B&L.
C. (ot marked one fold as original
6. (ot signed b! the beneficiar!
;. +hipping marks differs with B&L
!i** of $"dingEAir C"3 !i**:
>. Full set of bill not submitted
C. B&L is not drawn or endorsed to the order of BBL
6. -+hipping on Board.# -Fright Prepaid. or -Freight collect. etc. notations are
not marked on the B&L.
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;. B&L not indicate the name and capacit! of the part! i.e. carrier or master# on
whose behalf the agent is signing the B&L.
=. +hipped on board notation not showing name of pre'carriage vessel& intended
vessel
A. +hipped on board notation not showing port of loading and vessel name 7in
case B&L. indicated a place of receipt or taking in charge different from the
port of lading8
@. +hort form B&L.
<. 2harter part! B&L.
B. 0escription of goods in B&L. not agrees with that of invoice# B&E.
>?. "lterations in B&L. not authenticated
>>. Loaded on deck
>C. B&L bearing clauses or notations expressl! declaring defective condition of the
goods and &or the packages.
Other:
>. (on'negotiable documents not forwarded to bu!ers or forwarded be!ond L&2
terms
C. nade%uate number of invoice# packing list and others submitted
6. +hort shipment certificate not submitted
1o%e co%%on dicrep"ncie in e(port docu%ent:
Late shipment
Late presentation
Part shipment effected
2onsignee& notif! part! differ
F25 presented instead of B&L.
Kouse air wa! bill presented instead of "4B
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B&L. shows -freight collect. instead of -freight prepaid..
P+hipped on board* not marked on the B&L.
B&L. is claused
0escription of he goods differ
,nit price differ
"mount overdrawn
Pre'shipment inspection certificate absent
2ertificate does not cover credit terms
2ertificate not signed b! authori$ed person
(ot showing inspection of the goofs at named place
Telex acknowledging receipt and giving acceptance on sample# not presented etc.
E(port $EC "d)iing:
"dvising bank shall take reasonable care to check the apparent authenticit! of the credit#
which it advises. f the bank elects not to advise or cannot establish apparent authenticit!#
it must inform to the issuing bank without dela!. The bank also ma! advise
unauthenticated credit# informing the beneficiar! that it has not been able to establish the
authenticit! of the credit 7,2P "rticle'@8.
Bank will make entr! of the L&2 in the L&2 advising register with its full particulars
putting separate serial number under different issuing bank. +ubse%uent amendment also
to be recorded under the correspondent L&2.
Tet #e3 "rr"nge%ent:
Test Ee! "rrangement is a secret code maintained b! the banks for the authentication for
their telex messages. t is a s!stematic procedure b! which a test number is given and the
person to whom this number is given can easil! authenticate the same test number b!
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maintaining that same procedure. TBL# Local Office has test ke! arrangements with so
man! banks for the authentication of L&2 messages and for the transfer of funds.
-ode of p"3%ent:
The most common methods of pa!ment under a L&2 are as follows3

1ight or P"3%ent credit: 4hen the credit stipulates that drafts 7Bill of Exchange8
should be drawn under it on 0P terms involving pa!ment to the beneficiar! on
presentation of documents# it is known as a -+ight or Pa!ment 2redit.. n this credit the
issuing bank nominates a bank in the exporter*s countr! as the pa!ing bank. f the pa!ing
bank accepts its nomination# its position is that of an agent of the issuing bank. 4hen the
documents under the credit are presenter to it# it pa!s the beneficiar! provided all the
terms and conditions of credit have been complied with. t gets reimbursement from the
issuing bank for the amount paid.
+eferred P"3%ent Credit: The term -0eferred. means postponed to a future period or
date. 4hen a credit does not re%uire the pa!ment to the beneficiar! immediatel! on
Pa!ment methods
under L&2
+ight or Pa!ment credit
0eferred Pa!ment 2redit
"cceptance 2redit
(egotiation 2redit
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presentation of the documents but after a specified period has elapsed# it is known as
-0eferred Pa!ment 2redit.. "ccording to this t!pe of credit# the pa!ment is hot made in
full on the tender of documents but b! installments at pre'determined future dates.
0eferred pa!ment credit ma! be used where the beneficiar! wishes to allow the importer
time to pa! for the document.
Accept"nce Credit: 4hen under the terms of a letter of credit drafts are drawn on 0"
terms involving pa!ment to the beneficiar! on the maturit! of the accepted Bill of
Exchange drawn under it# the letter or credit is referred to as an -"cceptance 2redit. or a
-Term 2redit.. n this form of credit the beneficiar! draws a draft for particular usance
7e.g. 6?# A?# B? da!s sight or even longer8# pa!able upon either the correspondent bank or
the issuing bank.
0egoti"tion Credit: n a negotiation credit the documents are accompanied b! a sight
draft 7bill of exchange8. The bill of exchange ma! be drawn on the issuing bank or the
importer or an! other bank stipulated in the credit. The bank# which negotiates documents
under the credit# purchases the bill of exchange and pa!s the amount to the beneficiar!
who tenders the documents. The issuing bank reimburses the negotiating bank.
1ett*e%ent of c*"i%:
Exporter ver! often claims of various natures from the foreign bu!ers against their
exports. t should be ensured that genuine claims of the foreign bu!ers are settled
expeditiousl! b! the exporters concerned so that the reputation of the countr! is not
)eopardi$ed in the international market.
,nder the Exchange 2ontrol instructions in force# Bangladesh bank*s prior approval in
individual case is necessar! for making remittances against export claims.
Deneral permission has# however# been accorded to the "0s to make remittances in
foreign exchange towards claims against exports of non'traditional items# provided the
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exporters are willing to make such remittance from the exchange market. +ettlement of
claims against cash foreign exchange resources of the countr! will# however# re%uire
Bangladesh Bank*s prior approval.
3.A 'oreign Re%itt"nce:
1. Out;"rd re%itt"nce:
On /arch C;# >BB; Bangladesh Taka was declared convertible for current
international transaction. "s a result remittances become more liberali$ed. Outward
remittance include sale of Foreign 2urrenc! b! TT# /T# 0raft# T2 or in cash for
private# official and commercial purpose.

C. Tr")e*erG che<ue:
Travelers 2he%ue 7T28 is an instrument for a specific amount of widel! accepted
foreign currencies# issued in favor of Travelers& Jisitors to carr! foreign exchange for
meeting heir expenses in abroad. Traveler*s che%ue ma! be in different currencies#
such as ,+ 0ollar# Pound +tarling# Fapanese Nen# +audi 5i!al# 2anadian 0ollar#
French Frank# Derman /arks# and +wiss Frank etc. But traveler*s che%ue is not
issued in this branch.
3. Iu"nce of out;"rd ++ "nd TT:
"0s ma! also issue 00# TT on their foreign correspondent favoring Bangladesh
nationals or foreign nationals as per their entitlement. But foreign TT and 00 are not
issued in this branch.
;. In;"rd re%itt"nce:
The term inward remittance includes not onl! purchase of foreign currenc! b! TT#
/T# 0raft etc. but also purchase of bills# purchase of T2. ,tmost care should be taken
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while purchasing notes# T2# 00 and similar instrument for protecting the bank from
probable loss as well as safet! of the bank officials concerned. But this t!pe of
purchase is not done in this branch.
=. Co**ection of foreign currenc3 intru%ent:
The Trust Bank Ltd. collects F.2. instruments on behalf of their customer. To collect
proceed of Foreign nstrument following procedures to be maintained3
>. 5eceive instrument with deposit slip
C. "ffix crossing stamp of the bank
6. Entr! in the register putting OFB2 number
;. "ffix endorsement -pa! to the order of an! bank or trust compan!# prior
endorsement guaranteed..
=. nstrument to be sent to ad)acent correspondents.
3.1? 'OREI,0 C2RRE0C: ACCO20T1:
The Trust Bank Ltd opens the following accounts for dealing remittances

0'C+ Account3
(on'resident Foreign 2urrenc! 0eposit 7(F208 accounts ma! now be maintained as
long as the account holders desire. "mounts brought in b! non'resident Bangladeshis can
be deposited in foreign currenc! account an! time after return to Bangladesh
'.C Account of non-reident !"ng*"dehi:
Foreign currenc! accounts opened in Bangladesh in the names of Bangladesh nationals or
persons of Bangladesh origin working or self emplo!ed abroad can now be maintained
as long as the account holders9 desire.
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R'C+ Account:
Persons ordinaril! resident in Bangladesh ma! maintain foreign currenc! accounts with
foreign exchange brought in at the time of their return to Bangladesh from visits abroad.
These accounts are termed as 5esident Foreign 2urrenc! 0eposit 75F208 accounts. The
amount brought in with declaration to customs authorities on form F/F and up to ,+ U
=??? brought in without declaration ma! be credited to this account. Kowever# proceeds
of export of goods or services from Bangladesh and commission earnings arising from
business deals in Bangladesh cannot be credited to such accounts. Balances of such
accounts are freel! remittable abroad. Balances of 5F20 accounts ma! also be used b!
the accounts holders for their travel abroad in the usual manner. 5F20 accounts ma! be
opened in ,+ 0ollar# Euro# Pound +terling# 0eutsche /ark or Fapanese Nen and ma! be
maintained as long as the account holders desire. nterest ma! be paid on these deposits if
these are for a term of not less than one month and the balance is not less than ,+ U >???
or Pound +terling =?? e%uivalent.
'.C Account of other entitie:
"0s do not re%uire prior permission of Bangladesh Bank for opening of foreign currenc!
accounts of3
' (on'resident foreign persons&firms:
' 0iplomatic missions in Bangladesh and their expatriates:
' 0iplomatic bonded warehouses 7dut! free shops8:
' Local and )oint venture contracting firms emplo!ed to execute pro)ects financed b!
foreign donors&international donor agencies:
' Bangladesh nationals working in the international bodies in Bangladesh and
drawing pa! and allowances in foreign currenc!.
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'oreign Re%itt"nce occur for the fo**o;ing re"on:
nvestment in shares&securities b! non'residents
5emittance of profits
5emittance of dividend&capital gain
5emittance of salaries and savings b! expatriates
5emittance on account of training and consultanc!
5emittance b! shipping lines# airlines# courier service companies
DI1IT1 A!ROA+:
Booking of Passage
Private Travel
Business travel %uota for importers and manufacturers producing for domestic
markets
Education
/edical treatment
Taking out&bringing in of Bangladesh Taka
Taking out&bringing in of personal )eweler!
-I1CE$$A0EO21 RE-ITTA0CE13
5emittance of membership fees
Evaluation and Jisa Processing Fee
Jisa fee3
Famil! maintenance
CO--ERCIA$ RE-ITTA0CE1
Prior permission of Bangladesh Bank is not re%uired b! the "0s for3
' Opening back'to'back import L2s on account of manufacture'exporters for their
input imports as per prescribed input'output coefficients:
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' ssue of bank guarantee&performance bond on account of the merchandise
exporters of Bangladesh in favor of foreign bu!ers:
' 5emittance on account of short weight# %ualit! claim# partial shipment etc. up to
>?H of reali$ed export proceeds.
' pa!ment of discount not exceeding >?H of the invoice value at the re%uest of the
exporter where foreign importers refuse to clear goods due to discrepant
documents etc.#
' 5emittance of premier on foreign currenc! policies taken b! Bangladesh nationals
while residing abroad#
' 5emittance of premier on account of re'insurance#
' 5emittance of -Deneral "verage. collected from consignees in Bangladesh#
' 5emittance of pre'shipment inspection fees#
' 5emittance of bonafide expenses incurred b! Bangladesh Biman and Bangladesh
+hipping 2orporation in foreign ports&stations#
' 5emittance on account of charter hire of foreign ships#
' 5emittance of purchase price of ships ac%uired b! private firms&companies#
' 5emittance of ro!alt!&honoraria&fees to non'residents including foreign news
agencies for features# articles etc. subscribed b! local newspapers&maga$ines#
' "dvertising of Bangladeshi commodities in mass media abroad.
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CHAPTER-6
Perfor%"nce E)"*u"tion of Trut !"n# $td:
Based on the 2nifor% !"n# Perfor%"nce Report =,BP58 framework# this chapter is
an attempt to evaluate the performance of The Trust Bank Ltd. +ome general
observations of the performance of last five !ears 7C??>'C??@8 of the bank are as follows3
6.1 ,ro;th in +ifferent !uinee of T!$:
The Trust Bank has performed well in last seven !ears where there has been significant
growth in different segments of the Bank. The overall performance of the Bank is
discussed along with graphical presentation in the data anal!sis part of this report. Kere
growth for some of the different business of TBL is shown.
,ro;th in Aet:
Total assets of the bank 7excluding contingent liabilities8 have increased from
TE.6>=6.?; million in C??> to TE 6?#6<C.CC million in C??@.
Aet ,ro;th
C??@ C??A C??= C??; C??6 C??C C??>
"sset 6?#6<C.CC C>?A?.@@ >;<?@.B? >C?A? @<=<.<6 6;C;.66 6>=6.?;
+ource3 "nnual 5eport of TBL# C??>'C??@
((i/ure in 3illion Taka)
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Aet ,ro;th
,ro;th in +epoit:
Over the last seven !ears the deposit of the bank is increasing at a large rate. n the last
seven !ears data we can see that the bank has collected deposits in different savings
criteria. "mong those the high cost fund that is in Fixed 0eposits is larger than an! other
savings criteria.
+epoit
Near 2urrent 0eposits
& Other "&c
+avings
0eposits
Fixed 0eposits 0eposits under
+chemes
Total
C??> C;?.<> >?=.@C >6>A.@C >?.6< >A@6.A6
C??C ;@6.?6 >>C.BC C@?@.6@ A;.= 66=@.<C
C??6 B>@.A< CC<.A 6B>?.A> >?>.CC =>=<.>>
C??; >C>B.>; 6A=.6B =>66.<< ;;=.CA @>A6.A@
C??= >A6?.6C =B@.6> BB=B.@C B@A.@< >6>A;.>6
C??A CC?@.@C >;=A.=B >=>B<.B= >?B<.=C >BBA>.@<
C??@ 6==?.@B CC=<.=B C?B;@.6; >@=;.C= C<=>?.B@
+ource3 "nnual 5eport of TBL# C??>'C??=
+epoit ,ro;th
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+epoit -i(
Deposit Mix
urrent 65
Sa0in/s 65
(i7ed Deposits
Schemes
,ro;th in $o"n "nd Ad)"nce3
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Loans and advances have increased to Tk. ><#A<C.>A million in C??@ than that of >A?6.B=
million in C??>. mport# export trade finance and working capital for industrial units were
the ma)or lending areas of the bank.
Loans and "dvances
C"tegor3 2??1 2??2 2??3 2??6 2??7 2??6 2??8
Total
Loans 1
"dvances
>A?6.B= ><B@.A6 ;6=<.6> A<?;.;= B@6<.6C >6><<.?B ><A<C.>A
$o"n / Ad)"nce
,ro;th in 0et Profit:
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TBL*s increased operating efficienc! and increased revenue both are the reason behind
the growth in net profit.
(et Profits
Near C??> C??C C??6 C??; C??= C??A C??@
(et
Profit
C=.BA 7>;?.>A8 A<.>; >@=.B< >C>.CB CA6.>A C6B.?6

0et Profit
6.2 R"tio An"*3i:
n this section anal!sis has been made through ,BP5. The following ratios indicate the
profitabilit!# efficienc! or risks measures for the bank.
((i/ure in 3illion Taka)
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PRO'ITA!I$IT: RATIO
Return On Aet =ROA>:
5eturn on assets 75O"8 is measured b! the ratio of net income and total assets. B! the
returning assets# if the bank*s net income increases the profitable ratios of the bank
increases. "lso b! measuring the 5O"# it can be determined that what percentage of the
total asset is the net income i.e. how much return are the! getting over the assets. TBL is
giving continued emphasis on %ualit! assets# which resulted in providing a sound asset
base for the bank.
Return on Aet
2??8 2??6 2??7 2??6 2??3 2??2 2??1
5eturn on
"sset
?.@BH >.C;H C.C;H '6.=AH >.>6H >.@BH ?.<CH
Return on Aet
Return On E<uit3 =ROE>:
5eturn on E%uit! 75OE8 represents earning after tax over e%uit!. The 5OE 7net income
divided b! e%uit! capital8 is the most important measurement of banking returns as well
as a compan!9s returns because it is influenced b! how well the bank has performed on
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all other categories and indicates whether a bank can compete for private sources of
capital in the econom!. The higher the 5OE# the better for the bank# as the! are getting
higher amount of net income over the e%uit!. The Trust Bank Ltd. has maintained
significantl! high 5OE throughout the !ears of its operations. n C??@ the 5OE dropped
to >;.;=H from C;.=>H in C??A due to increase in no. of shares.
Return on E<uit3
2??8 2??6 2??7 2??6 2??3 2??2 2??1
5eturn on
E%uit!
>;.;=H C;.=>H C?.6?H >B.ACH 6?.@BH >B.?6H ;.?6H
5eturn on E%uit!
E(port:
The export earning of the TBL from the export related services has increased to ;CC;
million in C??@ from Tk CC.A? million in C??>.
E(port
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2??1 2??2 2??3 2??6 2??7 2??6 2??8
Export in
million Taka
CC.A? @>.>? C@A> CA6A CB>> C<<; ;CC;
ESPO5T
The following graph shows the growth in export earning.
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I-PORT:
The import earning of the TBL from the import related services has increased to Tk
>@#A<6.>@ million in C??@ from Tk AC=.B? million in C??>.
/PO5T
2??1 2??2 2??3 2??6 2??7 2??6 2??8
/PO5T AC=.B? >6;B.C? 6C@ <=;C B@;A >>;<6 >@A<6.>@
/PO5T
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'OREI,0 RE-ITTA0CE
The foreign remittance of the TBL is increased to TE. CA>C million in C??@ from Tk @A=
million in C??A. This indicates a C;>H increase in foreign exchange performance from
the previous !ear. The following graph shows the growth in the foreign remittance3
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'oreign re%itt"nce
2??1 2??2 2??3 2??6 2??7 2??6 2??8
foreign
remittance
CC ;A >=>.6? BA C@B @A= CA>C
'oreign re%itt"nce
Credit +epoit R"tio
2redit 0eposit ratio is used to examine to what extent distributive efficienc! effects good
profitabilit!. f advance increase and if it can be deplo!ed in profitable ends it will
increase the profitabilit!.
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2redit 0eposit 5atio
2??8 2??6 2??7 2??6 2??3 2??2 2??1
2redit 0eposit
5atio
A<.B6H AB.;AH @A.A=H @6.?;H A@.C>H A6.;;H AC.<>H
Credit +epoit R"tio
$o"n R"tio:
The loan ratio indicates the extent to which assets are devoted to loans as opposed to
other assets# including cash# securities and plant and e%uipment.
The higher (et loan ratio is a better indicator for an! bank. Over the last seven !ears the
bank*s loan ratio has increased at a significant rate. t indicates all the assets of the banks
are performing well.
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Loan ratio
2??1 2??2 2??3 2??6 2??7 2??6 2??8
Loan 5atio ;6.=6H =<.B6H ==.;=H =A.;CH A=.<@H @?.<@H A>.;BH
6.3 Perfor%"nce "t " ,*"nce
T"#" in -i**ion
P"rticu*"r 2??1 2??2 2??3 2??6 2??7 2??6 2??8
"uthori$ed capital >??? >??? >??? C??? C??? C??? C???
Paid up 2apital C=? 6=? 6=? =?? =?? =?? >AAA.A@
+hare mone! 0eposit ' ' >=? C?? C?? C?? '
+tatutor! 5eserve >?.B< >?.B< C;.A? A@.<< >>C C>;.A@ 66?.A6
5etained Earnings >=.6; '>C;.<C '@?.6? >?C.<> >@6 C;?.6C 6AC.C=
Total +hareholders
E%uit!
C@A.6C C6A.>A ;=;.6? <@?.AB BB>.B@ >>=;.BB C>=;.CB
0eposit C==6.@C CBB>.>B ;;<6.CA B6>=.>< >C@?= ><B<=.B= C@>?>.=B
Loans and "dvances >A?6.B= ><B@.A6 ;6=<.6> A<?;.;= B@6<.6C >6><<.?B ><A<C.>A
mport AC=.B? >6;B.C? C@A>.?? =AC<.C? @=BC.=? >>;<6 >@A<6.>@
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Export CC.A? @>.>? 6CA.A? B6?.C? C?@C.;? C<<; ;CC;.==
Foreign 5emittance CC ;A >=>.6? >B@.B? C@B @A= CA>C
nvestment 6A6.>> ;B6.>B ><BA.BC 6CC?.@< C;;< 6>CC.<> 6@<=.;=
Total "ssets 6>=6.?; 6;C;.66 @<=<.<6 >C?A? >;<?@.B? C>?A?.@@ 6?6<C.CC
Total ncome C6=.?6 6;@.>? =6=.;B >?;A.6A >;;;.A? <;;.>< >6C<.?6
Total Expenses >A;.CB ;AB.?6 ;;@.?A @<C.?B >>;<.66 CB@.C< ;@;.6>
Operating Profit @?.@; '>C>.B6 <<.;6 CA;.C@ C<< =;A.<B <=6.@>
Total provision >A.;< ><.C6 C?.CB ;@.<B >@< 6B.C C@6.B;
Profit Before Tax =;.CA '>;?.>; A<.>; C>A.6< CCA.CB =?@.AB =@B.@@
Provision for Tax C<.6? ' ' ' >?= C;;.=; 6;?.@;
(et Profit 7"fter Tax8 C=.BA '>;?.>A A<.>; C>A.6< >>; CA6.>= C6B.?C
5eturn on E%uit! C=.A?H C?.=;H >B.;@H CA.=AH >6.?CH C;.=>H >;.;=H
5eturn on "ssets C.C;H '6.=AH >.>6H >.@BH .<CH >.C;H ?.@BH
2redit'0eposit 5atio AC.<>H A6.;;H B@.C>H @6.?;H @6.A=H AB.;AH A<.B6H
Earning per +hare >?6.<A '=6C.A6 >B;.@? ;;.>< C;.CA =C.=; C<.C<
(o. of Emplo!ees >C; >6< C?B C@6 6=B =?< <;C
(umber of Branches >? >> >6 >= >< CA 6>
2ost of Fund H ' ' ' B.6? B.C6 <.C< <.;6
6.6 1COT An"*3i
+4OT anal!sis pla!s a significant part in an! compan!. "n! compan! has some internal
strengths and weaknesses# with some external opportunities and threats. nternal factors
can be better controlled than external factor as companies do not have an! control over it.
To survive in the changing environment an! compan! needs to know or be aware of what
are its strengths# weaknesses# opportunities and threats so that it take advantages of its
strengths and opportunities to eliminate or decrease its weaknesses and threats. n short#
+4OT anal!sis helps to identif! what are the capabilities and capacities of a compan!$
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!"T Matrix
1trength: " compan! should be aware of its core capabilities and sources of
competitive advantages. 2ore capabilities are the critical skills and processes that an
organi$ation executes so well that its reputation builds around it.
Ce"#nee: n addition to knowing its strengths# an organi$ation must recogni$e its
limitations. 4hether limited b! a poorl! e%uipped production facilit! or a sales force that
merel! %uotes prices and deliver! dates# a business that acknowledge its weaknesses
forces mangers to assess their processes and s!stems.
.n0ironment
)nternal
6nalysis
.7ternal
6nalysis
1pportunity Stren/th 8eakness Threats
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Opportunitie: External and internal environments present both driving and
restraining forces. Opportunities ma! occur suddenl!. 4ith the past pace of globali$ation
and technolog! changes# what ma! initiall! present itself as an opportunit! ma! become a
threat if organi$ational responsiveness is too slow or not well planned.
Thre"t: Threats are negative external environmental factors which influences an
organi$ation*s decision. External factors are not controlled b! the organi$ation and to
survive ever! organi$ation needs to be ver! alert about its threats and how the! can
overcome this problem. Organi$ations should be proactive rather than reactive and should
be aware of what are the competitors* moves and should take necessar! action in advance
to face those moves.
Strengths
>. Top -"n"ge%ent:
The top management of the bank# the ke! strength for The Trust Bank has contributed
heavil! towards the growth and development of the bank. The top management officials
are arm!*s highest position holder# so the! have a good idea about the current situation.
C. Co%p"n3 Reput"tion:
The Trust Bank has created a good reputation in the banking industr! of the countr!.
Their main customers are arm! persons. The popularit! of this bank is increase da! b!
da! also in the general public area.
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6. 1ponor:
The Trust Bank has founded b! The "rm! 4elfare Trust. The main sponsors for this bank
is +ena Eal!an +angstha. The chairperson of this bank is 2hief of "rm! +taff and
directors are also appointed b! the sangstha# that*s wh! the sponsor does not have an!
problem for the fund.
;. -odern '"ci*itie "nd Co%puter:
From the ver! beginning The Trust Bank tries to furnish their work surroundings with
modern e%uipment and facilities. For speed! service to the customer# The Trust Bank had
installed mone!'counting machine in the teller counter. The bank has computeri$ed
banking operation under software called P2 banking. /ore over computer printed
statements are available to internal use and occasionall! for the customers. The Trust
Bank is e%uipped with telex and fax facilities.
=. 1tirring !r"nche:
From the formative stage of The Trust Bank tried to furnish their branches b! the
impressive st!le. Their well'decorated branches gets attention of the potential customer#
this is one kind of positioning strateg!. The +ena Eal!an Bhaban Branch is also
impressive and is comparable of foreign banks
A. Inter"cti)e Corpor"te Cu*ture:
The corporate culture of The Trust Bank is ver! much interactive compare to other local
organi$ation. This interactive environment encourages the emplo!ee to work attentivel!.
+cience the banking )obs is ver! much routine work oriented and lovel! environment
boots up the work capabilit! of the emplo!ees.
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Weaknesses
>. $i%it"tion of Infor%"tion 13te% ='*or" !"n#>:
Flora bank is not comprehensive banking software. t is desirable that a more
comprehensive banking s!stem should replace P2 bank s!stem.
C. Hier"rch3 Pro4*e%:
The hierarch! problem treated as a weakness for The Trust Bank# because the emplo!ee
will not sta! for a long. +o there will be a chance of brain drain from this bank to other
bank.
6. Ad)ertie%ent Pro4*e%:
There is another weakness for The Trust Bank is advertisement. Their media coverage is
so much low that people do not know the bank thoroughl!.
Opportunities
>. +i)erific"tion:
The Trust Bank can pursue diversification strateg! in expanding its current line of
business. The! do not serve not onl! the arm! but also the general people.
C. !uine !"n#ing
The investment potential of Bangladesh is foreign investors. +o EBL has opportunit! to
expand in business banking.
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Threats
>. Conte%por"r3 !"n#:
The contemporar! banks of The Trust Bank like3 0haka Bank# 0utch Bangla Bank#
(ational Bank# /utual Trust Bank# /ercantile Bank are its ma)or rivals. The! are
carr!ing out aggressive campaign to attract lucrative clients as well as big time
depositors. The Trust Bank should remain vigilant about the steps taken b! these banks#
as these will in turn affect The Trust Bank strategies.
C. -u*tin"tion"* !"n#:
The 5apid expansion of multinational bank poses a potential threat to new P2B*s. 0ue to
the booming energ! sector# more foreign banks are expected to operate in Bangladesh.
/oreover# the existing foreign banks such as K+B2# "/ES# 2T (."# and +tandard
2hattered Drindla!s are now pursing an aggressive branch expansion strateg!. +ince the
foreign banks have tremendous financial strength# it will pose a threat to local bank to a
certain extant in terms of grabbing the lucrative clients.
6. +ef"u*t Cu*ture:
0efault culture is ver! much familiar in our countr!. For a bank# it is ver! harmful. "s
The Trust Bank is new# it has not faced it seriousl! !et. Kowever as the bank grows older
it might become big problems
;. Reco)er3 Perfor%"nce:
The recover! percentage of the bank is ver! good. The recover! percentage of the bank is
all'most BB.B=H because the credit administration and monitoring of this bank is ver!
good. This bank is monitoring and all the loans are sanction b! the high authorit! whose
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are high officials of Bangladesh "rm!# so when the! sanction the loan the! do in%uire on
the part!. There is another thing of high recover! that this bank is financed b! the arm!
welfare trust# so people whose are taking loan from this bank alwa!s think that this is an
arm! bank so if failed to pa! then it will be a ver! big problem for me.
CHAPTER-7
'I0+I0,1 O' THE 1T2+::
n the middle of twent! first centur! here we are facing a heav! competition with each
other. Kere ever!one is competing with each and ever! single point. +o toda!*s business
institution are moving forward to remember this concept. f an! one has a week point
than the rival part! will take the opportunit! and make a problem for the week intuition.
"fter complete m! internship in The Trust Bank reali$ed that there are man! problems
and this ma! be a cause of huge loss or create a barrier for the future prospect. +o the
bank should taken care it ver! seriousl!.
7.1 Pro4*e%:
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The Problems for the Trust Bank*s are3
Ad)ertie%ent Pro4*e%: Toda!*s world is ver! much depend on the media# so if the
intuitions are not think about the advertisement or an! kind of activities which is related
some kind of advertisement then it will not earn so much popularit!. " media can rise or
fall an institution within ver! short time. +o if we see to other developed countr! then we
can find that ever! business intuition has a huge budget for the advertisement purpose.
The! do not take this expanse as an expanse: the! alwa!s take it as a huge investment#
because if the people do not know about m! organi$ation then how the! will do business
with us 7it dose not matter which t!pe of organi$ation is this8# it ma! be big
manufacturing compan! or a bank. Kere reali$ed for The Trust Bank that the! do not
have an! kind of vast advertisement or an! kind of social activities# so most of the people
do not have an! idea about The Trust Bank. n this case when an! one asks that -where
are !ou workingO. Then if an! one sa!s that in The Trust Bank then people repl! at first
that -is this /utual Trust.. +o for his or her kind information the! have to sa! no there is
a bank called The Trust Bank and it is a bank for the arm!. This bank is also serving the
general people but it is not so much popular# because of advertisement. People thought
that this bank*s purpose is to serve onl! arm! people. That*s wh! the bank is not go for a
vast banking.
Hier"rch3 Pro4*e%: This is another big problem for The Trust Bank# because in the
beginning level there are so man! ranks to become a principal officer that it ma! be the
cause of brain drain from this bank to other bank. The hierarch! of this bank is
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f an! one )oin as a F.O than it will take A'< !ears to become a P.O# because promotion is
after ever! C !ears or more than C !ears. +o for this reason the !oung emplo!ees who are
)oin here as a F.O the! will leave this bank after getting an experience. The! will take this
bank as a tanning center# because after provision period the! will look for another bank#
which the! can get higher position than this bank.
A4ence of On*ine !"n#ing: Toda!*s world is modern world# so here ever! one wants
that the! will do banking from their own house. The Trust Bank does not have this kind
of facilities. +o if the! implement online banking than the! will gain huge popularit!.
$i%ited 0u%4er Of !r"nche: The Trust Bank has onl! >C branches allover the
Bangladesh. +o if the! want to do a vast business then the! have to increase the number
of branches.
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$i%ited Po;er to the -"n"ger: The managers and other high officials have no power
for decision'making. The branch managers have no power to sanction loans. n ever!
bank there is a certain amount that a branch manager can sanction# but in this bank if
an!one wants to take a single Taka for loan then the manager has to for the head office
approval. +ome times it ma! be the cause of losing customer# because it will take time to
sanction a loan.
6.2 Other 'inding:
7i8 n a developing countr! like Bangladesh the need for domestic resource mobili$ation
is of special importance. 0eposit held b! the financial intermediaries constitutes the
ma)or part of domestic financial resources of the countr!. The other activities of the
bank are chiefl! dependent upon the deposits. The higher the amount of deposits# the
better is the position banks in financing investment pro)ects# especiall! large'scale
pro)ects. The si$e of deposit shows that TBL*s growth in deposit is notable over the
!ears indicating a growth rate of A@.;@H.
7ii8 Loan and advance are vital to finance the pro)ects. "n appropriate credit distribution
s!stem and monitoring will ultimatel! lead to the profit maximi$ation of banks. t is
evident from that the si$e of TBL*s loans and advances are increasing over the !ears.
t indicates more earning for the bank. t shows a positive growth rate.
7iii8 Profit is the simplest and most convenient measuring rod for appraising the
performance of the banks as the! deal with finance. The survival and sustained
growth are possible when there is a regular flow of profit. "bove all# the service value
being intangible profit ma! be the )ustification of the banks from the financial aspect.
(et profit figures show the absolute amount of profits. Trust Bank Ltd. has a positive
growth rate in (et Profit. t also indicates a positive trend.
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7iv85eturn on "sset 75O"8 shows that the bank has maintained a positive 5O" through
C??; to C??@. The profitabilit! of the bank graduall! increased and attained highest
5O" of >.@BH in C??;. The 5O" of C??@ is lower than C??A# this is because of lower
growth in net income compare to asset growth. The trend of 5O" is positive and the
compound growth rate shows that ever! >?? taka utili$ed results a positive growth of
5O" of Tk. ?.;A>C.
7v8 5eturn on E%uit ! 75OE8 measures the efficienc! with which common
shareholder*s e%uit! is being emplo!ed within the firm. The higher the 5OE# the
better for the compan!# as the! are getting higher amount of net income over the
e%uit!. Trust Bank Ltd. has maintained significantl! high 5OE throughout the !ears
of its operations# which indicates a positive trend. "lthough it is seen that in C??@
5OE dropped to >;.;=H from C;.=>H in C??A. This is because of no. of shares
increased in C??@.
7vi8Productivit! has been measured in terms of the ratio of operating revenue to operating
expenditure. f income substantiall! outweighs expenditure# the productivit! of the
bank is good. The bank shows a positive trend in terms of productivit!. "lthough the
ratio in C??; is slightl! declined because of more operating expenditure compare to
operating revenue# it portra!s a positive compound growth rate of C6.<>H.
7vii8 0eposit per emplo!ee measures the amount of long'term fund per emplo!ee.
0eposit per emplo!ee consistentl! increased over the !ears with a positive trend
indicating overall efficienc! of the bank.
7viii8 "dvance per Branch measures the loans and advances per emplo!ee of the bank.
"dvance per emplo!ee consistentl! increased over the !ears showing a positive trend.
we can see that no. of emplo!ees increased over the !ears as well as volume of
advance.
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7ix8(et profit per emplo!ee shows that profit per emplo!ee is Tk. ;<=C=?.@;# Tk.
AB6<>B.<B# Tk. <6;<?B.;; and Tk. <CB=?;.?< for the !ear C??;# C??=# C??A and C??@
respectivel!. t consistentl! increased over the !ears. "lthough a slight decrease in
C??; because of increase in no. of emplo!ees at the end of the !ear. f manpower
increases# manpower expenses will also increase and the profitabilit! will decrease b!
the manpower expenses.
7x8 "0 ratio measures the distributive efficienc! for the bank. t indicates the li%uidit!
position of the bank. "s the bank started its operation in the last %uarter of >BBB so the
"0 ratio in first !ear and the next two !ears is ver! low. 0uring these periods the
bank maintained conservative approach in lending. n C??6 the "0 ratio moved to
more than <?H and maintained an increasing trend up to C??@. The bank is operating
efficientl! in lending against its deposits# which indicates an increasing trend. The
bank is maintaining its "0 ratio within a tolerance limit# which indicates an ideal
scenario for the bank. t can be inferred that the bank is managing its funds
maintaining sound li%uidit!. t can be said that their funds is used in profitable ends.
But the risk will also increase with the increased "0 ratio. The trend of "0 ratio is
positive.
7xi8Bangladesh Bank# the central bank# has instructed all banks to keep >H as provision
against of outstanding of total loans. This provision has been made to meet an! kind
of future losses. "lthough Trust Bank Ltd. does not have an! classified loans it is
maintaining >H provision for future. The bank is prepared to meet an! unwanted
situation in future.
7xii8 The loan ratio indicates the extent to which assets are devoted to loans. The higher
net loan ratio shows the higher earning assets# which is one of the most important
policies for the bank. "s the net loan ratio increases# the interest earning of the bank
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increases. Over the last five !ears the net loan ratio of the bank increased in a
significant manner. t shows a positive increase in loan portfolio of the bank.
7xiii8 From the anal!sis the most important factor revealed is that the bank does not
have an! classified loans. That is all the loans disbursed b! the bank are performing
well. n a countr! like Bangladesh# 0I$ classified loans is a ma)or indicator for the
superior performance for a bank and /utual Trust Bank Ltd. falls into this categor!.
CHAPTER-6
6.1 RECO--E0+ATIO0:
For improve their performance and remove the problem The Trust Bank has to do some
thing and these are3
D"t Ad)ertiing: Firstl! the bank has to increase their advertisement and also increase
their social activities. The! have to go with the people*s needs and demands. The! have
to explore their name to the people that ever! one can know about The Trust Bank.
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Hier"rch3 Pro4*e%: Kierarch! Problem is the second one: it means the bank has to
make the duration small from F.O to P.O. Ever! one has a desire to achieve a good
position# so if it takes a long time then the emplo!ee ma! lose their efficienc! and the!
will not provide >??H effort for doing )ob. +o for the bank*s good future the! can cut off
some level which makes the long hierarch!.
Incre"e 0u%4er of !r"nche: n this time there is so much competition between each
other that a single step can change the all direction. Toda!*s people are ver! much willing
to do banking# which one is near to them. +o if the number of branches will not increases
than it can lose the customer.
,i)e 1o%e Po;er To the -"n"ger: f the authorit! gives some power to the managers
like3 for the purpose of loan sanction then it will be good for the bank. Because when a
penitential customer will want to taka a loan in emergenc! basics then the manger can
sanction to a certain limit. t can earn of that customer*s satisfaction and in future he or
she ma! be do vast business with the bank.
Tr"de dipute "nd ett*e%ent: Export trade as it takes place in between the seller and
bu!ers who live apart in different countries under different situation# 5ules# regulations
and culture is thus highl! technical. The exporters re%uire knowing the global market
environment ac%uainted with regulations and customs.
+ipute in the e(port tr"de %"3 "rie due to the fo**o;ing re"on:
/isunderstanding of the contractual obligation of the either part! on the
stipulated terms for interpreting differentl!.
Jiolation of contractual terms b! the either part!.
Bu!er9s inabilit! to pa!.
+udden change in the government import and tariff polic!.
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Bu!er9s refusal for an! discrepanc! in the export documents.
,nwillingness of the bu!er to pa! the export bill on the flims! ground.
mposition of %uota# tarif etc.
1ett*e%ent of +ipute:
n matter of dispute on export trade the exporter ma! solicit assistance of the following
agencies3
2ommercial 4ing of Bangladesh Embass! at that countr!.
Export Promotion Bureau 7EPB8.
Federation of 2hambers of 2ommerce and ndustr!.
nternational "rbitrar! "genc!.
Poi4*e ;"3-out ;here ett*e%ent i not "t "** poi4*e:
+ale of goods to new bu!er at the port of destination.
For finding out a new bu!er the exporter ma! personall! visit the port of
destination or take help from Bangladesh Embass!.
Lodge notice of refusal of pa!ment b! the drawee to the Exchange control
0epartment of
Bangladesh Bank.
+ubmit cop! of new bu!er'seller agreement to Bangladesh Bank and obtain
permission of sale.
2onve! Bangladesh Bank9s approval to negotiating&collecting bank for handling
over documents to the title of the goods after reali$ing the value thereof.
For Export trade possibilit! of dispute cannot be illuminated. To get rid of the possible
dispute best wa! is to keep excellent personal relationship with the bu!er based on trust.
2onclude contract on the terms and conditions# which can be complied with as per
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schedule. For this purpose it is necessar! for the exporter to abide b! the terms and
conditions of the banking technicalities together with nternational 5ules and 5egulations
such as ,2PP2# 52 1 other related 22 Publications# +hipping# nsurance etc.
CHAPTER-8
8.1 CO0C$21IO0: 8.1 CO0C$21IO0:
Banks and financial institutions pla! an important role in the process of economic growth
of a countr!. Diven their considerable economic potential# these institutions have a far V
reaching impact on the development and welfare process of the surrounding societies.
These financial institutions depend# in accumulating their financial resources# basicall!
on the inflow of deposits. n order to survive and achieve success# these banks endeavor
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to attract clients in search of loans to finance their different activities according to the
banks established terms and conditions. These banks# which are called commercial banks#
depend in their transactions on the interest rate# as the driving factor# which stimulates all
their dealings.
n a developing countr! like Bangladesh# banking business is ver! much competitive.
"lmost fift! banks are operating at this moment and competing to hold maximum market
share. For a smoothen operation ever! bank must have the capabilit! of managing
asset&liabilit!# li%uidit! and credit.
Li%uidit! is one of the essential re%uirements for the effective functioning of the banking
s!stem. 4ithout ade%uate li%uidit!# banks are not able to perform some of their core
functions# including the settlement of their inter'bank obligations. From the anal!sis we
can also observe that TBL is managing li%uidit! ver! well and in a sound li%uidit!
position.
The financial performance evaluation demonstrates that the profitabilit! of the bank has a
positive trend. Profitabilit! is an indicator of a bank9s capacit! to carr! risk and & or to
increase its capital. The income statement# a ke! source of information on a bank9s
profitabilit!# as well as the anal!sis reveals that Trust Bank Ltd. has ' attained significant
amount of profitabilit! over the !ears. 4ith a limited number of branch network it has
recorded positive growth in net profit because of proper management and right selection
of investment criteria.The bank has strong core deposit signif!ing sound li%uidit!
position and mainataining an ideal scenario in advance'deposit ratio. Overall financial
picture of Trust Bank Ltd. for the five'!ear period shows that it has positivel! set its root
in the financial arena of Bangladesh. The figures do not tell the stor! of failure. The trend
is in favor of Trust Bank Ltd. and the management should take initiative to keep the
bank*s wa! to the success. Dlobali$ation of national economies has given a boost to
international trade. The seller and the bu!er in an international trading transaction must
agree for a product or its %ualit!# price etc. enter into a sales contract# spelling out
precisel! shipping and deliver! details# terms of pa!ment# re%uired documentation and
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other related issues including dispute settlement procedure and legal framework
available. The impact on trade transactions currenc! policies of the importing and
exporting countries and risks associated with them# fraud possibilities in the transaction
or in documents are also necessar!.
" countr! cannot long continue to have a deficit on foreign current account but a
favorable balance of pa!ments on current account ma! conceal a heav! adverse balance
of pa!ments with one individual countr! or group of countries.
"s developing countr!# Bangladesh is striving to reduce its trade gap. Dovernment is
taking necessar! steps to enhance its Export sector through the help of market mechanism
as well as different financial and institutional incentives to the exporters. "t the same
time it is taking necessar! steps to attract foreign investments and creating efficient
human resource to fight the edge of competition. n the line of liberali$ation of our
economic sector# our current account has alread! been made convertible along with
floating exchange rate. 4ith the help of continuous increase in wage earners remittance
and inclusion of non'traditional items in export list Bangladesh emerging towards a more
stable econom!.
Ac#no;*edge%ent
t was a great pleasure to prepare nternship report on the various aspects of Foreign
Exchange activities and operations b! The Trust Bank Limited. would like to thank and
conve! m! gratitude to honorable +upervisor# +r. ,o*"% -oh"%%"d. +irector. -!A
/ E-!A Progr"%. 0orth 1outh 2ni)erit3# for letting me to prepare this report and
would also like to express m! sincere appreciation to him for his wholehearted support
and guidance.
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am also grateful to the management of The Trust Bank Limited for offering me the
nternship training. /! special thanks to -d. A4du* -ot"*e4 P"t;"r3. Jice President
1 /anager 7PB Branch8# -. H"n" Hen" Cho;dhur3# +enior "ssistant Jice President
7Operations /anager# PB8# and -r. -+. 9"%"* Ho"in 1"r#er. Jice President 72redit
and Foreign Exchange8# of The Trust Bank Limited# and the staffs who have given me the
practical knowledge about the Banking operations.
am also owed to each person who bothered inside and outside of TBL# PB Branch# in
carr!ing out this report.

ELEC2TIDE 12--AR:
mportance of banking s!stem in a countr! is increasing da! b! da!. t is %uite impossible
for an! countr! to develop in industrial and commercial sector without sound banking
s!stem in modern economic era. Foreign exchange operation is one of the significant
functions of the bank. t pla!s a vital role in overall econom! of the countr!. Bank
collects information from numerous sources relating to cost and revenue from foreign
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exchange operation. Through export# import# and foreign remittances Foreign Exchange
department of the banks earns their profit. Banks is the intermediar! of all export# import#
and remittance activities.
Dlobali$ation of national economies has given a boost to international trade. The seller
and the bu!er in an international trading transaction must agree for a product or its
%ualit!# price etc. enter into a sales contract# spelling out precisel! shipping and deliver!
details# terms of pa!ment# re%uired documentation and other related issues including
dispute settlement procedure and legal framework available. The impact on trade
transactions currenc! policies of the importing and exporting countries and risks
associated with them# fraud possibilities in the transaction or in documents are also
necessar!. " countr! cannot long continue to have a deficit on foreign current account but
a favorable balance of pa!ments on current account ma! conceal a heav! adverse balance
of pa!ments with one individual countr! or group of countries.
Fanuar! CA# C??B
0r. Dolam /ohammad
0irector#
/B" 1 E/B" Program#
(orth +outh ,niversit!.
1u45ect3 +ubmission of internship report on -Foreign Exchange Operations and
Performance Evaluation of the Trust Bank Limited.
+e"r 1ir.
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4ith best respect and honor# would like to inform !ou that have completed m!
internship report on I'oreign E(ch"nge Oper"tion "nd Perfor%"nce E)"*u"tion of
the Trut !"n# $i%itedI t is immense pleasure for me to place the same before !ou.
made ever! endeavor to prepare this dissertation and tried m! level best to accumulate
relevant and insightful information. Foreign Exchange Operations is the one of the most
important sector of a bank as it generates a lot of profit and has less risk. t is a great
experience for me to work on this topic. have tried to make the report vivid and
comprehensive within the scheduled time and limited resources.
sincerel! hope that this report will help !ou to evaluate me. shall be obliged to clarif!
an! matter or to provide an! further information regarding this report.
+incerel! !ours#
shtia%ue "hmed /ustafi
d3 ?;C ><B ?6?
BB"
+chool of Business
(orth +outh ,niversit!

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