Professional Documents
Culture Documents
(AIUB)
INTERNSHIP RESEARCH REPORT ON
Foreign Exchange Transactions of First Security Islami Bank Ltd
Supervised By:
Farooque Hossain
Faculty of Business Administration
Accounting and Finance Department
Submitted By:
Sukran Al
ID # 08-11641-2
Accounting & Finance
ii
Letter of Transmittal
18th April, 2012
To
Farooque Hossain
Internship Supervisor
Faculty of Business Administration
Accounting and Finance Department
American International University-Bangladesh
Subject: Submission of Internship Report on Foreign Exchange Transactions of
First Security Islami Bank Ltd.
Sir,
It gives me enormous pleasure to submit the internship report on Foreign Exchange
Transactions of First Security Islami Bank Ltd as per the Advisors instruction. I
expect this report to be informative as well as comprehensive.
Working in First Security Islami Bank Ltd. was an inspiring experience for me. I feel the
immense knowledge and experience will facilitate me a lot in my future career life. With
my limited knowledge, I have tried my level best to prepare the report worthwhile.
Your acceptance and appreciation would surely inspire me. For any further
explanations about the report, I will be gladly available to clarify the ins and outs.
Sincerely Yours,
------------------------------------Sukran Al
08-11641-2
Department - BBA
Major - Accounting and Finance
iii
Letter of Endorsements
The Internship Research Report entitled Foreign Exchange Transactions in
First Security Islami Bank Ltd has been submitted to the Office of Placement
& Alumni, in partial fulfillment of the requirements for the degree of Bachelor of
Business Administration, Major in Accounting & Finance, Faculty of Business
Administration on Spring, 2012 by Mr. Sukran Al, ID # 08-11641-2. The report has
been accepted and may be presented to the Internship Defense Committee for
evaluation.
(Any opinions, suggestions made in this report are entirely that of the author of the
report. The University does not condone nor reject any of these opinions or
suggestions).
______________________
Farooque Hossain
Internship Supervisor
Acknowledgement
iv
Thanks to Almighty Allah for blessing to completing the report within the schedule
time. I am indebted to a whole lot of people for their kind recommendation,
submission, direction, Co-operation and their collaboration.
It is my pleasure to them and my grateful appreciation goes to FSIBLs authority for
rendering me their expertise, knowledge and giving me the opportunity of having a
practical experience through this internship program.
I would like to show my gratitude towards Sunjida Ahmed, Liakat Ali, Akter Hossain
of General Banking Department, Sabbir Mia of Foreign Exchange Department and
Robiul Hasan of Account Department and all the staff of First Security Islami Bank
Limited, Banani Branch who co-operate with me friendly. They have explained
everything I asked for in details. Throughout time they were never impatience. They
did not allow me to feel uncomfortable for even a single moment. I am really grateful
to all for their supportive and friendly behavior.
I would like to give Special thanks to my dear Friend Hashib, Shafquat, Farah and
other interns in First Security Islami Bank Limited, Banani Branch, who helped
me a lot and provided me useful information about the Foreign Exchange Transaction,
Remittance and General Banking.
Executive Summary
Todays business world is dynamic and competitive therefore organizations looking
for Talent, extrovert graduates who belong to high degree of adaptability quality.
Todays business graduates will be the core part of business organization. Therefore,
business graduates need to have both theoretical & practical knowledge to manage the
business activity properly. In order to be familiar with organizational culture and to
gain some practical knowledge about an organization our Department provides a (90
days) Ninety days internship program as a part of the BBA program.
First Security Islami Bank Ltd. is one of the best & secure private banks in
Bangladesh. It started its operation as a commercial bank on the 25th October, 1999
with a branch at Dilkusha. Now a day it has 84 branches all over the country. This
report is based on the Foreign Exchange Transactions in First Security Islami
Bank Ltd.
This report is divided in to two parts. The first part of the report describes
Organization Overview or Profile of the Organization.
The second part of the report is divided in few parts. Those are Introduction to the
Report/Study, and Methodology of the Study, Analysis and Interpretation of the Data,
Findings of Study, Recommendations, and Conclusions
In Introduction part of the report describes Rationale of the Study, Statement of the
Problems, Scope and Delimitation of the Study, Objectives of the Report/Study &
Review of Related Literature part of the report describes about where the other
information is collected to complete the report such as Book, Reports, Journals, and
Studies.
In Methodology of the Study part of the report describes the methods used in data
collection, sources of data (primary or secondary), number and type of respondents,
observation, if any, statistical application, use of graphics, tables, etc.
vi
In Analysis and Interpretation of the Data part of the report describes the basis of
the data and information collected which are usually presented in tables, matrices and
graphs, analysis and interpretation can be made. Some implications, explanations or
justification should be made why this obtaining situation exist. The sequence of the
analysis should be made based on the statement of the Problems or Objectives of the
study. Some Issues and Problems can be an offshoot of the analysis and interpretation.
In Findings of Study part of the report specific significant findings of the study after
the analysis and interpretation of the Data have been made.
In Recommendations of the report are suggestions based on the findings of the study
for improvement or sustainability of the organization, strengthening of the systems
and procedures, possible revision of policies, and other relevant suggestions. All
suggestions must be based on the study and not just personal perception, hypothetical
or arbitrary)
The last part is Conclusions of the report are specific and direct answers to the
questions in the statement of the problems or objectives of the study.
vii
Table of Contents
Cover Page
Title Page
ii
Letter of Transmittal
iii
Letter of Endorsements
iv
Acknowledgment
Executive Summary
vi
Table of Contents
viii
Body of the Report
Part I
01
02
02
Vision
03
Mission
03
Strategy Statement
03
04
Company Information
04
05
06
07
Financial Highlight
09
Part II
10
Chapter 1: Introduction
11
11
11
12
12
13
14
14
14
viii
15
15
16
16
16
17
17
18
18
19
25
28
3.02 Import
29
29
29
3.02.03 Importer
30
31
31
32
33
34
3.03 Export
35
35
3.03.02Export Incentives
35
36
37
38
39
41
43
44
44
ix
46
46
47
47
48
48
49
49
50
50
51
51
51
52
Chapter 5: Recommendations
53
Chapter 6: Conclusion
54
References
55
Appendix
56
Part - I
Vision
FSBL mission is to provide banking services to our valued clientele with utmost
proficiency & sincerity reinforced by an efficient workforce and the latest state of the
art technology.
Mission
The Mission of FSBL is to always strive to achieve superior financial performance, be
considered a leading Islamic Bank by reputation and performance.
Strategy statement
To review & updated policies, procedures & practices to enhance the ability to
extend better customer services.
To train & develop all employees & provide them adequate resources so that
the customers needs reasonably addressed.
Company Information
Name of the Company
Chairman
Vice Chairman
Managing Director
A.A.M. Zakaria
Company Secretary
Legal Status
Date of Incorporation
Registered Office
Line of Business
Banking
Authorized Capital
Tk.4,600 Million
Paid up Capital
Tk. 3,400Million
04 June 2008
Phone
88-02-9888446 (Hunting),
9565594/9554208 (IT Division)
Fax
880-02-9891915
E-mail
Website
bcs@fsiblbd.com , info@fsiblbd.com
www.fsiblbd.com
SWIFT
FSEBBDDH
Auditors
Board of
Directors
Executive
Committee of
the Board
Policy
Committee of
the Board
Board
Secretariat
Board Audit
Cell
Managing
Director
Senior
Executive Vice
President
D.M.D
Corporate
Affairs
Division
Research &
Development
H.R.D
Marketing
Division
Investment
Division
International
Division
Treasury Unit
Public Relation
Division
F.A.D
Credit
Committee
General
Service
Division
Monitoring &
Inspection
Division
Computer
Division
Figure 1: Organ gram First Security Islami Bank Limited
Bank also emphasizing on non-fund business and fee based income. Bid bond/ bid
security can be issued at our customer's request.
FSIBL is posed to extend L/C facilities to its importers / exporters through
establishment of correspondent relations and Nostro Accounts with leading banks all
over the world.
Letter of Guarantee
8
Tender Guarantee
Performance Guarantee
Guarantee for Sub-Contracts
Shipping guarantee
Advance Payment guarantee
Guarantee in lieu of Security Deposits
Guarantee for exemption of Customs Duties
Others
Service
Online Banking
SMS Banking
Lockers
Utility Bills
ATM Banking
Financial Highlight
First Security Islami Bank Limited
Financial Highlight
For the year ended 31 December 2010
(Amount in Million TK)
Sl. No
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
30
31
Particulars
Authorized Capital
Paid-up Capital
Shareholders Equity
Total Capital
Total Assets
Total Liabilities
Deposits
Total Investment & Advances
Total Contingent Liabilities
Total Risk Weight Asset
Total Fixed Asset
Operating Income
Operating Expenditure
Profit before provision & Tax
Profit Before Tax
Net Profit After Provision & Tax
Foreign Exchange Business
a. Import Business
b. Export Business
c. Remittance
No. of Foreign Correspondent
Profit Earning Asset
Non Profit Earning Asset
Investment as a % of total Deposit
Capital Adequacy Ratio
Dividend :
Cash
Bonus
Right Share
Cost of fund
Earning Per Share (EPS)
Price Earning Ration (time)
Return On Assets (ROA)
No. of Shareholders
Number of Employees
Number of Branches
2008
4,600.00
2,300.00
2,538.57
2,862.19
31,239.00
28,700.82
42,423.09
25,094.65
4,611.28
17,356.54
184.36
572.78
383.17
189.60
189.60
104.28
14,017.84
9,287.00
4,145.00
585.84
235
28,529.06
2,710.32
96.39%
9.15%
2009
4,600.00
2,300.00
2,865.41
3,379.03
47,978.55
45,113.14
42,423.09
38,725.87
5,971.67
31,113.43
376.47
1,327.63
576.79
750.88
646.83
326.83
20,208.92
16,101.17
3,549.00
558.75
240.00
41,371.52
6,607.02
91.28%
10.91%
2010
4,600.00
3,036.00
3,920.01
4,582.21
63,619.79
59,699.78
56,344.95
52,123.90
8,859.66
50,423.90
573.61
2,085.20
881.60
1,203.60
983.60
548.60
35,103.57
28,391.20
5,868.90
843.47
240.00
56,040.95
7,578.84
92.51%
9.09%
Nil
Nil
Nil
Nil
10%
12%
Nil
Nil
20%
11.37%
9.28%
8.90%
7.35
1.42
2.33
23.74
15.39
17.49
0.61%
1.56%
1.89%
1,29,174.00 54,400.00 82,230.00
458.00
775.00
929.00
29.00
52.00
66.00
10
Part - II
11
Chapter 1
1.0 Introduction
1.01 Rationale of the Study:
Foreign Exchange Transaction is very important for business. Most of the Foreign
Exchange Transaction is done by Bank. So it is very important for banking business
also. In banking business there are lots of tasks in Foreign Exchange Transaction
those are Export, Import, and Remittances etc.
To know the Foreign Exchange Transaction of First Security Islami Bank Ltd.
And Finally I have maked this report because it was an academic requirement of my
BBA program.
Without these, many important things will also expect to come over through this
report.
12
13
export , Usages Export bills selling rates, Forward rates to public, Cash &
Travelers Cheques buying & selling rate ,cross rates &Libor rates etc.
14
Chapter 2
2.0 Methodology of the Study
This report is basically based on the topic named Foreign Exchange Transactions
of First Security Islami Bank Ltd (In case of Commercial Bank). Since I did my
internship program on this particular department, therefore, in preparing the report I
concentrated on the issues exclusively focused by FSIBL in this project. The report is
based on both Primary & Secondary data that means on the support documents related
to Foreign Exchange Transactions of FSIBL Banani Branch. Moreover my
three months practical orientation in FSIBL Banani branch and visit to FSIBL exhead office in Dilkhusha & (Gulshan Branch New Head Office) also helping me to
have a very concrete idea regarding the procedures and the related issues as well.
Personal observation
Personal Interview
File inspection
Internal Records
Audit Reports
15
Website
Chapter 3
3.0 Analysis and Interpretation of the Data
3.01 Foreign Exchange
The term Foreign Exchange has different connotations in different contexts. Foreign
Exchange is a process which is converted one national currency into another and
transferred money from one country to other countries.
According to Mr. H. E. Evitt. Foreign Exchange is that section of economic science
which deals with the means and method by which right to wealth in one country's
currency are converted into rights to wealth in terms of another country's currency.
In terms of section 2(d) of the foreign Exchange Regulation (FER) Act 1947, as
adopted in Bangladesh, foreign exchange means foreign currency and includes any
instrument drawn, accepted, made or issued under clause 13 of article 16 of the
Bangladesh Bank Order, 1972, all deposits, credits and balances payable in any
foreign currency and draft, travelers cheques, letter of credit and bill of exchange
expressed or drawn in Bangladesh currency and payable in any foreign currencies.
The business of foreign exchange is getting increasingly complex and intensely
competitive. However, in the backdrop of phenomenal growth of Bangladeshs
external sector, foreign exchange business provides a challenge as well as an excellent
opportunity to accelerate growth of banks own business. This is the Institution that
facilitates international trade payment as banking channel is the way of settlements.
Besides, banks meet the other need of foreign exchange transactions of the people of
the country as they are authorized to deal in foreign exchange upon receipt of
permission from Central Bank under Foreign Exchange Regulation Act. All exports
16
and imports are executed through the intervention of banks. Side by side, they provide
funded and non funded credit facility in execution of International Trade.
Customs Act-1969
17
Rate of Exchange
18
refers the difference between the monetary value of exports and imports of output in
an economy over a certain period of time. It is the relationship between a nations
imports and exports. A favorable balance of trade is known as a trade surplus and
consists of exporting more than is imported; an unfavorable balance of trade is known
as a trade deficit or informally, a trade gap.
The payment term shows where & how payment will be effected. It has five principal:
1. Cash in advance
2. Letter of credit
3. Drafts
4. Consignment
5. Open account
Cash in advance
The buyer places the funds at the disposal of the seller prior to shipment of the goods
or provision of services. It involves maximum risk to exporter used where there are
political unrest goods made to order new unfamiliar customer.
Letter of credit
The documentary credit or letter of credit is an undertaking issued by a bank on
account of buyer (the applicant) or for its own behalf to pay the beneficiary the value
of the draft and/or documents provided that the terms and conditions of the
documentary credit are compiled with.
Drafts are unconditional order in writing showing exporters order for importer to pay
at once (sight draft) or in future (time draft) including three functions are clear
evidence of financial instrument (i.e. may be converted to a bankers acceptance)
Open account is an arrangement between the buyer and the seller whereby the goods
are manufactured and delivered before payments is required. The benefits of open
accounts are greater flexibility in making a trade and lower transactions costs. On the
other hand, the major disadvantage is highly vulnerable to government currency
controls.
20
to seller and goods to buyer. By opening a Letter of Credit on behalf of buyer in favor
of seller, commercial banks undertake to make payments to a seller subject to
submission of documents drawn on in strictly compliance with Letter of Credit terms
giving title of goods to the buyer. It is a conditional guarantee. The Letter of Credit
thus constitutes one of the most important methods of financing foreign trade.
Advising/Notifying
importer
It is the bank through which the L/C is advised to the
Bank
Seller/Beneficiary
Confirming Bank
L/C is opened
It is the bank which adds its confirmation to the credit and it is
done at the request of issuing bank. Confirming bank may or
Negotiating Bank
Accepting Bank
confirming bank.
It is the bank on which the bill will be drawn (as per condition
Paying/Reimbursing
Bank
21
Revocable Letter of Credit - If any letter of credit can be amendment or charge of any
clause or canceled without the consent of the exporter and importer is known as
revocable letter of credit. It can be amended or canceled by the issuing bank at any
time without prior notice to the beneficiary. It does not constitute a legally binding
undertaking by the bank to make payment. Revocable is possible only until the
documents have been honored by the issuing bank or its correspondent. Thus a
revocable credit does not usually provide adequate security for the beneficiary.
Irrevocable Letter of Credit - If any letter of credit cannot be changed or amendment
without the consent of the importer and exporter is known as irrevocable letter of
credit. It constitutes a firm undertaking by the issuing bank to make payment. It
therefore, gives the beneficiary a high degree of assurance that he will be paid to his
goods or services provide he complies with terms of the credit.
In the issuance of Irrevocable Letter of Credit both the Issuing and Conforming Bank
have some liability, mentioned bellow, as per UCPDC -500.
The following types of Letter of Credits are used in the FSIBL, Banani Branch:
Sight L/C
Sight L/C means payment is immediately made to the beneficiary on
presentation of the stipulated documents and on condition that all the terms of the
credit have been compiled with. It is advantageous to the exporter as he can get the
payment quickly.
Deferred L/C
Under a deferred L/C the beneficiary does not receive payment when his
presents the documents but at a later date specified in the credit. On presenting the
required documents, he received the authorized banks written undertaking to make
payment of maturity. In this way the importer gains possession of the documents
before being debited for the amount involved.
22
exporter does not have the required raw materials. To execute the order he is to import
raw materials from Korea. Then the Bangladeshi exporter will have to open an import
L/C favoring Korean supplier for import of fabrics and accessories. The L/C is opened
by the Bangladeshi bank lien against the American Banks L/C. under bonded
warehouse system.
Prescribed L/C Application and Agreement form duly stamped and signed
Marine Insurance Cover Note along with original Money Receipt in case of
import under CFR/FOB
IRC evidencing payment of fee for current year i.e. duly renewed
The importer and exporter have made a contract before opening a L/C.
The importer applies for a L/C from his banker known as the issuing bank. He
may have to use his credit lines.
The issuing bank opens the L/C that is channeled through its overseas
correspondent bank, known as advising bank.
The advising bank informs the exporter of the arrival of the L/C.
23
Exporter ships the goods to the importer or other designated place as stipulated
in the L/C.
Meanwhile the exporter also prepares his own documents and collects
transport documents or other documents from relevant parties. All these
documents will be sent to the banker, which is acting as the negotiating bank.
Negotiation of export bills happens when the banker agrees to provide him
with finance. In such case he obtains payment immediately upon presentation
of documents. If not the documents will be sent to the issuing bank for
payment or on an approval basis as in the next step.
Issuing bank honor its undertaking to pay the negotiating bank on condition
that the documents comply with the L/C terms and conditions.
Issuing bank releases documents to the importer when the letter makes
payment to the former or against the letter of trust receipt.
The importer takes delivery of goods upon presentation of the transport documents.
Charges
Name and address of beneficiary, advising bank, the applicant & issuing bank
and branch
Payment term-sight/Deferred
24
Other clauses as required as per Import Policy Order and as per contract
executed in between buyer and seller
Bills of Lading
Bills of Lading are showing shipped on board and it has to be properly endorsed to
the bank. A bill of lading specified states that goods are loading for ultimate
destination specifically mentioned in the credit. It also constitutes a document that is,
or may be, needed to support an insurance claim.
Commercial Invoices
It has to be verified that the commercial invoice has been properly drawn and signed
by the beneficiary according to the terms and conditions of L/C.
Bills of Exchange
The most important instrument in international trade by which seller can obtain the
payment from the buyers for the invoice value of goods is bill of exchange.
25
Inspection Certificate
This is usually issued by an independent inspection company located in the exporting
country certifying or describing the quality, specification or other aspects of the
goods, as called for in the contract and/or the L/C. the buyer who also indicates the
type of inspection he wishes the company to undertake usually nominates the
inspection company
Packing List
This is unique documents and not combined with other documents. This is a listing of
the contents of each package, cartoon etc. and other relevant information.
Insurance Document:
Insurance is a contract whereby the insurer is undertaking to indemnify the assured to
the agreed manner and extent against fortuitous losses.
Proforma Invoice
Proforma Invoice (PI)/indent are the sale contract between seller and buyer in exportimport business. There is slight difference between indent and PI. The sales contract,
which direct correspondence between importer and exporter, is called Proforma
Invoice (PI). On the other hand, there may be an agent of exporter in importers
country. In this regard, if the sale contract is occurred between the agent of at importer
and exporter then it is called indent.
Certificate of Origin
A certificate of origin is a signed statement providing evidence of the origin of the
goods. The chamber of commerce of the importing country usually issues this
certificate.
26
For import purpose, use of ITC Number (H.S. Code) with at least six digits
corresponding to the classification of goods as given in the Import Trade Control
Schedule 1988, based on the
Harmonized Commodity Description and Coding System shall be mandatory. The
seven Digit H.S. Code published by Bangladesh Bureau of Statistics may also be
mentioned in the Letter of Credit. Form, Letter of Credit and other relevant paper
within a bracket in addition to normal H. S. Code as mentioned above. No bank shall
issue Letter of Credit Authorization form or open Letter of Credit without properly
mentioning I. T. C. number (H. S. Code) thereon.
NOC (No Objection Certificate) On the basis of ROR (Right of Refusal)
a. No Objection Certificate on the basis of Right of Refusal (ROR) form any authority
shall not be required for import of any freely importable item by any Public Sector
agency.
b. In case of import of banned/restricted items for approval projects financed under
foreign aid the concerned Government Department/Agency will approach the Chief
Controller of the Import and Export directly for necessary permission together with a
list of items duly certified under proper seal and signature giving description,
quantity/number, price and H.S. Code Number against each item required to be
imported. The details about the aided project and specific provision of the relevant
contract and other necessary information shall also have to be furnished along with
the list of the items. The Chief Controller shall issue permission /permit on the basis
of above documents.
Restriction regarding source of procurement of goods
a. Goods form Israel or goods originating from that country shall not be importable.
Goods also not are importable in the flag vessels of that country.
b. All kinds of import form and export to Serbia and Montenegro, fragments of
former Socialist Republic of Yugoslavia, shall be banned.
Pre-shipment inspection
Unless otherwise specified, pre-shipment inspection of imported goods shall not be
obligatory in case of import by private sector importers.
Shipment of Bangladesh Flag Vessels
27
28
Issue L/C
ISSUING BANK
SELLER/
EXPORTER/
BENEFICIARY
Makes payment
ADVISING BANK/
NEGOTIATING
BANK
Forward
Pays or Reimburse
Present document
BUYER/
IMPORTER
Submit document
INDENTOR
Instruction to pay or
reimburse
Markets
Or
REIMBURSING
BANK
29
3.02 Import
Import is the purchase of foreign goods and services from abroad by Consumer,
Firms, Companies Government, and Semi-Government organization in Bangladesh. It
is an international Trade. It is also called Cross-Border Transaction.
30
3.02.03 Importer
The person who deals in import business obtaining Import Registration Certificate
(IRC) in terms of Importers, Exporters and Indentors (Registration) Order-1981 from
the CCI & E is treated as Importer.
Types of Importer
There are mainly two types of importer on which FSIBL deals with. They are:
1. Commercial importer
It means an importer registered under the importer, exporters and Indenters
registration under 1981 that import goods for sale. When issued to a commercial
importer, gives the category held by him ITC classification and public notice
against which they are admitted into import trade.
2. Industrial Importer
When issued to an industrial customer gives the items of import raw materials and
packing materials and spare parts, the value of entitlement and ITC classification.
31
32
Government Department
Hospitals
This registration number is invariable required to mention in IMP form, LCAF, L/C
etc. Importers must be known to AD (Authorized Dealer).
The buyer and seller conclude a sale of contract provided for payment by
documentary credit.
The buyer gives an instruction to his bank (the issuing bank) to issue a credit
in favor of the seller----
The issuing bank then send message to another bank (advising bank) usually
situated in the country of seller, advice or confirm the credit issue.
33
The advising bank then informs the seller through his bank that the credit has
been issued.
As soon as the seller receives the credit, if the credit satisfies him then he can
reply that, he can meet his terms and conditions, he is in position to load the
goods and dispatch them.
The seller then sends the documents evidencing the shipment to the bank
where the credit is available; this can be the issuing bank or confirming bank.
Bank named in the credit as the paying, accepting and negotiating bank.
The bank then checks the documents against the credit. If the documents meet
the requirements of the credit, the bank then pay accept or negotiating
according to the terms of credit.
34
Parties who are not in position to retire the documents, they maybe allowed to retire
the PADs through LIM Account on retaining sufficient margin n the landed cost of the
goods or as prescribed by Bangladesh Bank. Even if they are reluctant to provide
aforesaid margin, goods may be allowed to be cleared through LIM account under
forced circumstances to same the consignment form incurring demurrage, pilferage,
and auction and to protect the interest of the Bank.
Advances against a Trust Receipt obtained from the Customer are allowed to only
first class tested parties when documents covering an import shipment of other goods
pledged to the
Bank as scrutiny are given without payment. However, for such advances prior
permission/sanction form Head Office must be obtained. The customer holds the
goods or their sale proceeds in trust for the Bank, till such time, the loan allowed
against the Trust Receipts is fully paid off.
Collateral Security
35
3.03 Export
Export means goods and services that are produced domestically and sold to buyers in
another country. Export brings foreign currency in the economy. Higher the export
higher the reserved of foreign currency, the exports department of FSIBL, Banani
branch engage with various export-related activities for encouraging the exporter. The
major function of this section is comprises with purchase, collection and negotiate the
export bill, provide the exporter export financing and helps the exporter in different
issues.
3.03.02Export Incentives
Financial Incentives
o Restructuring of export credit guarantee scheme
o Convertibility of Taka in current account
o Exporters can deposits 40% of FOB value of their export earning in
own accounts in dollar and pound sterling
36
Other Incentives:
o Assistance in improvement of quality and packing of exportable items.
o Simplification of exports procedures.
Registration of exporters:
For obtaining ERC intending Bangladeshi exporters are required to
order. He can do this by contracting the buyer and directly or through agent. In this
purpose the exporter may get help from:
License officer
37
Letter of Credit clearly starting terms and conditions of export and conditions of
export and payment (here the regulatory framework is foreign exchange regulation of
B. Bank & UCPDC 600 published by ICC):
The terms of the L/C are in conformity with those of the contract
The L/C is an irrevocable one preferably confirmed bye the advising
bank
The L/C allows sufficient time for shipment and negotiation.
Terms and conditions should be stated the contract in case of other mode of payment:
Cash in advance
Open account
Collection basis
v.
next step for the exporter is to set about the task of procuring or manufacturing the
contracted merchandise.
vi.
Shipment of Goods
Then the exporter should take the preparation for exporting
arrangement for delivery of goods as per L/C and in terms prepare and submit
shipping documents for payment/acceptance/negotiation in due time.
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L/C document
Certificate of origin
Shipping documents
Inspection certificate
Invoice
Transport documents
Bill of Exchange
2) Particular Verification
3) Cross Verification
Parties involved in L/C, particularly the seller and the buyer cannot always satisfy the
terms and conditions in full as expected due to the some obvious and genuine reasons.
In such a situation the credit should be amended. The seller being satisfied with the
terms and conditions of the credit proceed to dispatch the required goods to the buyer
and after that have to present the documents evidencing dispatching goods to the
negotiating bank on or before the stipulated expiry date of the credit. After receiving
all the documents the negotiating bank then checks the documents against the credit.
If the documents are found in order the bank will pay, accept or negotiate to the
39
issuing bank. The issuing bank also checks the documents and if they are found as per
credit requirement, either effects payment or reimburse in the pre-agreed manner.
Settlement means fulfill the commitment of issuing bank in regard to effecting
payment subject to satisfying the credit terms fully. This settlement may be done
under three separate agreements as stipulated in the credit. These are:
Settlement by payment
Settlement by acceptance
Settlement by negotiation
with importer to act as an agent of the exporter. As in this method generally no bill of
exchange is drawn on the importer, the seller (exporter) is exposed to possible default
on the part of the importer.
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Credit payment
1. Documents against Acceptance (D.A. Bill)
Sometimes drawee may take possession of the goods against "Trust Receipt"
and in this case responsibility for repatriation of export proceeds lies with the foreign
bank that allows release of the goods to the importers against Trust Receipt. In this
method exporter retains the title to the goods till the importer finally pays the bill.
1.
Pre-shipment credit
Pre-shipment credit is given to finance the activities of an exporter prior to the
actual shipment of the goods for export. The purpose of such credit is to meet
working capital needs starting from the point of purchasing of raw materials to final
shipment of goods for foreign country. Pre-shipment credit is given for the
following purposes:
Inspection fees.
An exporter can obtain credit facilities against lien on the irrevocable, confirmed and
unrestricted export letter of credit in form of the following:
42
2.
Post-shipment credit
43
The need for post-shipment finance arises because exports that sell goods
abroad
have to wait for a long time before payment is received from the overseas
buyers. The actual period of waiting depends on the payment terms. In the
meantime, the exporter needs funds to carry on his normal export activities. Banks
are the main source for the exporters to seek the finance.
Bank generally finances the exporters at post-shipment stage on verifying of the
credit-worthiness and financial soundness of both the buyers and sellers. Postshipment credit ordinarily takes the following shape.
Booking of freight
Procurement of goods
Shipment of goods
Advice of shipment
Securing payment
Close of transaction
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ii)
Inward Remittance
Inward remittance covers remittance on account of export and private remittance on
sundry items, purchase of travelers cheques, foreign currency notes and coins.
Actually inward remittance means remittance received in form abroad through normal
45
banking channel in the form of foreign TT, MT, DD, Cheques, Bills and Drafts, TCs
etc. favoring a beneficiary in Bangladesh.
Outward Remittance
The term outward remittance includes not only remittance i.e. sale of foreign
currency by TT, MT, Drafts, Travelers Cheque but also includes payment against
imports into Bangladesh and local currency credited to non-resident Taka account of
foreign banks or convertible taka account.
46
Years
Total Assets
2008
31,239.00
2009
47,978.55
2010
63,619.79
47
From the above figure it is clear that the volume of Total Assets is increasing
gradually and mentionable that 2008-2010 is noteworthy. In 2008 Total Assets of
FSIBL was 31,239.00 million TK, 2009 Total Assets of FSIBL was 47,978.55 million
TK and in 2010 Total Assets of FSIBL was 63,619.79 million TK.
Years
Total Capital
2008
2,862.19
2009
3,379.03
2010
4,582.21
From the above figure it is clear that the volume of Total Capital is increasing
gradually and mentionable that 2008-2010 is noteworthy. In 2008 Total Capital of
FSIBL was 2,862.19 million TK, 2009 Total Capital of FSIBL was 3,379.03 million
TK and in 2010 Total Capital of FSIBL was 4,582.21 million TK.
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Years
Shareholders Equity
2008
2,538.57
2009
2,865.41
2010
3,920.01
From the above figure it is clear that the volume of Shareholders Equity is increasing
gradually and mentionable that 2008-2010 is noteworthy. In 2008 Shareholders
Equity of FSIBL was 2,538.57 million TK, 2009 Shareholders Equity of FSIBL was
2,865.41 million TK and in 2010 Shareholders Equity of FSIBL was 3,920.01 million
TK.
Years
Liabilities
2008
28,700.82
2009
45,113.14
2010
59,699.78
From the above figure it is clear that the volume of Liabilities is increasing gradually
and mentionable that 2008-2010 is noteworthy. In 2008 Liabilities of FSIBL was
28,700.82 million TK, 2009 Liabilities of FSIBL was 45,113.14 million TK and in
2010 Liabilities of FSIBL was 59,699.78 million TK.
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Years
Import
2008
9,287.00
2009
16,101.17
2010
28,391.20
From the above figure it is clear that the volume of Import is increasing gradually and
mentionable that 2008-2010 is noteworthy. In 2008 Import of FSIBL was 9,287.00
million TK, 2009 Import of FSIBL was 16,101.17 million TK and in 2010 Import of
FSIBL was 28,391.20 million TK.
Years
Export
2008
4,145.00
2009
3,549.00
2010
5,868.90
From the above figure it is clear that the volume of Export is Different and
mentionable that 2008-2010 is noteworthy. In 2008 Export of FSIBL was 4,145.00
million TK, 2009 Export of FSIBL was 3,549.00 million TK and in 2010 Export of
FSIBL was 5,868.90 million TK.
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Years
Remittance
2008
558.75
2009
843.47
2010
1,011.80
From the above figure it is clear that the volume of Remittance is increasing and
mentionable that 2008-2010 is noteworthy. In 2008 Remittance of FSIBL was 558.75
million TK, 2009 Remittance of FSIBL was 843.47 million TK and in 2010
Remittance of FSIBL was 1,011.80 million TK.
Years
Total Foreign Exchange
2008
14,017.84
2009
20,208.92
2010
35,103.57
From the above figure it is clear that the volume of Total Foreign Exchange is
increasing gradually and mentionable that 2008-2010 is noteworthy. In 2008 Total
Foreign Exchange of FSIBL was 14,017.84 million TK, 2009 Total Foreign Exchange
of FSIBL was 20,208.92 million TK and in 2010 Total Foreign Exchange of FSIBL
was 35,103.57 million TK.
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2008
235
2009
240
2010
240
From the above figure it is clear that the volume of Foreign Correspondent is different
and mentionable that 2008-2010 is noteworthy. In 2008 No. of Foreign Correspondent
of FSIBL was 235, In 2009 No. of Foreign Correspondent of FSIBL was 240 and In
2010 No. of Foreign Correspondent of FSIBL was 240.
Identifying Risks
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c. Market risk- There is two types of market risk as and when investment is
made in foreign currency i.e. (i) currency exchange rate risk and (ii) interest
rate risk.
d. Operational risk- operational risk can arise out of many situations i.e. on
account human error or faulty systems and procedures.
e. Other risks viz., country risk, legal risk etc.
Chapter 4
Findings of Study
From the practical implementation of customer dealing procedure during the whole
period of my practical scope in FSIBL, Banani Branch, I have reached a firm and
concrete conclusion in a very confident way.
The foreign exchange of FSIBL, Banani Branch is facing the following problems
which are barrier to improve their performance and distinguish from others:
Want of modern technical equipment such as good software & computer the
mechanism of L/C process sometimes makes complication.
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Chapter 5
Recommendations
Here are the following recommendations embedded with:
Bank will have to arrange more training program for the FOREX officers to
improve their analytical ability, communication skill & professional standard
regarding the customer dealing & different foreign exchange operation.
For better profit than others we have to create good relationship with renewed
corporate client who have huge amount of Import & Export & remittance
business.
Bank should make more relationship with the foreign exchange house &
special strategies will have to take for increasing non resident account,
indenting & shipping line account.
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The bank needs to create new marketing strategy which will attract more
clients including priority customer and thereby increase the total export import
business.
Payments for L/Cs could also made through pre arranged credit facilities that
the customer may have with the bank. Usually the rates of interest on these
credits are excessively high which actually discourages the customers.
Reducing interest on such credit facilities would induce the clients to do more
global trade thus increasing banks profit as well as the well being of the
countrys economy
Bank should consider exchange rate at the time of big payment & L/C margin
& commission should be uniform.
Chapter 6
Conclusion
Now a day the world is called global village. Because business does not have national
boundaries, it reaches around the world. First Security Islami Bank Limited wants
to cross the nation boundaries. Already they develop a global network. FSIBL plays
an important role in our national economy. The employees of the FSIBL are well
organized. They maintain a good employee relation policy.
It was huge gratification for me to do my internship program in a venerated
organization like FSIBL, Banani Branch. It presents me sufficient opportunity to
scrutinize the functions of bank through the superior assistance of its members.
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FSIBL is a company which has so far shown good performance and holds the
strongest position in the banking market. Overall the bank must make a positive
attempt to be more outward looking in their goals and aware of what is happening.
I hope in spite of my all limitations this experience of sharing works with such
working environment will help me a lot in professional life.
References:
Guidelines for Foreign Exchange Transaction & Documentary CreditsPublication of Bangladesh Bank
Prospects of FSIBL
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Appendix
List of Tables
Table 1: Company Information
04
09
20
46
47
47
48
48
49
57
49
50
50
List of Figures
Figure 1: Organ gram First Security Islami Bank Limited
05
06
28
43
46
47
47
48
48
49
49
50
50
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