Foreign Exchange Operations of Uttara Bank Limited
Subject: Economics | Topics:


The necessity of foreign Exchange activities cannot be ignored in any ways because of its dependency in the banking sector. It can be considered as the backbone of any bank as it shows the ways to do all the banking tasks and it is actually the starting point of all the banking operations. It provides the opportunity to its clients to deposit money and at the same time attractive services are ensured as per the customer needs, wants and close accounts, mail transfer, demand draft, receive Cheque for clearing etc. It also offers the customers to deposit money for FDR (Fixed Deposit Receipts) with attractive interest rate at maturity.

So, all the operations are started from the Foreign Exchange activities and all of these are based on the monetary transition. As a result, recording of all monetary transaction has become compulsory in the modern business sector. Not only recording, but also it includes the process of communicating, summarizing and explaining the economic events of a bank within a specific period of time. . I strongly believe that any business graduate thought to have the basic understanding about Foreign Exchange operations as it can show the ways to enter in the new business of its strong relation with all of the financial activities. In all of my internship report I have tried of my best to provide almost all of the basic idea of Foreign Exchange operation and basic accounting procures that’s practiced in all of the branches of UBL. I have also concerned about the performance evaluation from different perspective.

Uttara Bank Ltd is one of the largest and oldest private commercial bank in Bangladesh with years of experience. Adaptation of modern technology both in terms of equipment and banking practice ensures efficient service to clients. 212 branches at home and 200 affiliates worldwide create efficient networking and reach capability. Uttara is a bank that serves both clients and country. The bank has more than 600 foreign correspondents Worldwide. The bank’s branch banking is supervised through its 12 zonal offices in different parts of the country.

Origin of the Report:

No knowledge is fully complete unless it is fully supported by events on ground. Whatever may be the quality of theoretical knowledge, it is not complete without practical implication on ground. This realization is more pronounced in the study of Business Administration where experience on ground plays a dominant role.

Bachelor of Business Administration (BBA) is designed with an excellent combination of practical and theoretical aspects. After completing the BBA, it is required for every student to complete the internship or Project program with a minimum duration of three months. As a student of BBA to fulfill the requirement of this Degree, I was assigned to pursue Internship in UBL, Islampur Branch, Dhaka.

I have tried my best to use this opportunity to enrich my knowledge on banking system. After observing thoroughly, I have prepared this report on the basis of my findings and observation relating to the topic.

Objective of the Study:

The prime objective of this report is to achieve practical knowledge about the Foreign Exchange Operation of UTTARA BANK LIMITED and specific objectives are as follows-

Specific Objective:

  • To oversee the nature and relationship among different components of Foreign Exchange transaction Operation regarding the business of commercial Banks.
  • To acquire practical experience about work environment, to know relation among staff, discipline and behavior of an organization that will help me to buildup future working life.
  • To reveal the nature of foreign exchange transactions & Operation.
  • To Identify Foreign Exchange activities.
  • To distinguish Export- Import procedures.
  • To recognize the performance of UBL in Foreign Exchange aspect.
  • To know, if there is any relationship among UBL profit and foreign exchange operations.

Scope of the Study:

Now in this global arena the activities of commercial banking are very fast. This report is an attempt to analyze the every banking operation of the Uttara Bank Ltd. This study focuses on the Foreign Exchange Operation of Uttara Bank Ltd. This report has the crisp details of the procedure of the Foreign Exchange Operation. Along with that, a relevant stream of discussion has been made on the theory and policy issues relating to Foreign Exchange Operation. I had a great opportunity to have an in depth knowledge of all the banking activities practiced by the Uttara Bank Limited.

 Methodology of the Study:

To meet the objectives of the study, I realized that a single method would not be effective. Formal & oral discussion, direct observation and printed papers of the Bank were found useful. To collect the necessary and meaningful information, the following methods were applied. Both primary and secondary sources were used here.

Source of Information:

  • Primary Source:

The primary data were collected from Islampur Branch of UBL that was my working place for last two months. During that time, interviews of the manager & different officials of different departments were taken. Besides that various organizational procedures & structures were observed & communication directly wit the customers was helpful, Primary data were mostly gathered from the discussion with the employees & through surveys on customers of the organization.

  • Secondary Source:

Secondary sources of information have also been used for the research study that can be presented like the following:

1) Internal Sources:

  • Annual Report of UBL
  • Various publication of the bank
  • various circulars issued by head office
  • Any information regarding the Banking sector

2) External Sources:

  • Ø Different books and periodicals related to the banking sector
  • BangladeshIslamiUniversity library

 Limitation of the Study:

In preparing the Report, I have experienced some acute problems that have, to some extent, affected the presentation of the report. The acute problems were –

a) Lack of Information or Data:

Adequate and in-depth well-organized literature was not available because a few researchers endeavored to work on such project in the past. Though the officials tried to assist, sometimes their working pressure couldn’t give me proper assistance what I needed. There is some information which needed special permission from top level, is not always achievable.

 b) Time Constraint:

It is something like impossible to cover the entire Foreign Exchange banking and performance phenomena exploiting a three months time period while an employee or an officer is awarded with one or two year probationary period to do his or her particular job.

 c) Comparison Status:

I have had no opportunity to compare the Foreign Exchange banking system of the Uttara Bank Ltd. with that of other contemporary and common size banks. It was mainly because of the shortage of time and Internship nature.

Profile of the Uttara Bank Limited

History of Banking Organization in Bangladesh:

Bank system was practiced in the Indian subcontinent from the ancient period. In Indian subcontinent merchants, goldsmith moneylenders were the primary bankers. During the Moghal period banking and credit business was enchanted rapidly. Then the agency house of JagthSeth was similar to the merchant house of Lombardy Street. In 1700 AD “Hindustan Bank” was established as the first joint stock bank. In 1784 “Bengal Bank” and in 1786 General bank of India was lunched. Then both the bank absolved respectively in 1793 and 1832.

During the early period of nineteenth century in 1806 “Bank of Bengal” in 1840 “Bank of Bombay” and in 1843 “Bank of Madras” was established. These Banks were called Presidency Bank. Then in 1920 these three banks merged to “Imperial Bank of India”. In 1947 after the separation bank business in our country faced a severe disaster as non Muslim Bankers left to India. Then “Reserve bank of India” acted as the “Central Bank of Pakistan” in 1948 to re-build the Bank Business “State Bank of Pakistan” was established as central bank of Pakistan.

In 1971 Bangladesh became independent. After liberation “Bangladesh Bank” was automated with the assets and liabilities of former “State Bank of Pakistan”. It is the central bank of Bangladesh. During Pakistan period in our country there were 1090 branches of 12 commercial banks. Three foreign banks were also active with 14 branch offices. Before liberation 80% of banking activities of our country was controlled by Pakistan. Consequently Bangladesh traders and industrialists didn’t get notable help from the .Commercial Banks. After liberation reformed the destroyed economy on 26th March 1972 the banking sector of Bangladesh was nationalized.  After nationalization government of Bangladesh changed the entire bank to six banks which are Sonali Bank, Rupali Bank, Janata bank, Agrani Bank, Pubali Bank & Uttara bank. But the last two banks have been handed over two private sectors. From 1983 lot of private banks are establish and they playing their role in development of trade and commerce of Bangladesh.

 Background of UBL:

Uttara bank Limited is one of the largest and oldest private-sector commercial bank in Bangladesh, with years of experience adaptation of modern technology both in terms of equipment and banking practice ensure efficient service to clients. 211 branches at home and 633 affiliates worldwide create networking and reach capability. Uttara bank Limited is a bank that serves both clients and country..

It operates through 215 fully computerized branches ensuring best possible and fastest services to its valued clients.

  • The bank has more than 600 foreign correspondents world wide.
  • Total numer of employess nearly 3,562
  • The Board of Directors consists of 13 members.

The bank is headed by the Managing Director who is the Chief Executive Officer.

Uttara bank Limited was initially introduced as eastern banking Corporation in the year of 1965. Its head office was situated in Dhaka. In the year of 1972 the bank was introduced as a nationalized bank (Order of 1972) named as Uttara Bank Limited. After that it was functioning its activities as a nationalized bank like other six nationalized bank of Bangladesh. As a part of government policy the bank was functioning its activities and contributes in the national economy. In the year of 1983-1984 the bank was privatized. In the regard Uttara Bank Limited was formed as a private bank in 1983. Since then the bank has been taking various steps that are very much effective in the context of the economy of Bangladesh. Than the bank has taken significant steps and contributed highly in the national economy.

Premises of Bank:

UBL has its own building of 18 stored that is using as head office located at Motijheel Commercial Area of Dhaka city. Bank has also its own building in the following locations-

  • Local office,
  • EasternPlaza branch,
  • Hotel Isakha branch,
  • Dar-us-salam road branch,
  • Lease financing unit in EasternTowerBuilding,
  • Training institute of the Bank at Eastern plus ( 145, shantinagar), Dhaka,

Nabagram branch in Manikgonj,

  • Zonal office and KDA branch in Khulna and Shaheb Bazar branch in Rajshahi,

Vision Statement:

  • To be leading commercial bank in the country & contribute maximum to the welfare for the people of the country.
  • Prime objective to deliver a quality that demonstrates a true reflection of our vision.
  • Excellence in Banking.

Mission Statement:

  • We shall be the forefront of national economic development by Maintaining the maximum ethical standards and community accountability praiseworthy of a leading corporate citizen.
  • Continuously improving productivity and profitability, and thereby enhancing shareholder value.
  • Creating and maintaining a set of efficient and hard working employees.


  • Short Term Goal: Increase financial services day by day. Earn satisfactory profit by giving services to the customer.
  • Long Term Goal: Maximize the wealth of shareholders and want to be a leading bank in the banking sector of Bangladesh.

 Structure of the Organization:

 Board of Directors:

The board of directors of the bank consists of 14 members who are reputed business personalities and leading industrialists of the country-




01Mr. Azharul Islam


02Mr. Iftekharul Islam

Vice- Chairman

03Mrs. Badrunnessa (Sharmin) Islam


04Mr. Syed A. N. M. Wahed


05Major General Prof. M. A. Mohaiemen (Retd)


06Engr. Tofazzal Hossain


07Col. Engr. M. S. Kamal (Retd)

Independent Director

08Mr. Muhammad Quamrul Ahsan

Depositor Director

09Mr. Asif Rahman


10Mr. Faruque Alamgir


11Mr.Md. Arif Rahman


12Dr.Md. Rezaul Karim Mazumder

Independent Director

13Mr. M. Tajul Islam

Depositor Director

14Mr. Shaikh Abdul Aziz

Managing Director

Table 1: Board of Directors.

Different Wings of UBL:

 Head Office:

  • Chairman’s Secretariat
  • Managing Director’s Secretariat
  • Board Department
  • Share Department
  • MIS & Computer Department

 Human Resources Division:

  • Personnel Department
  • Training Institute
  • Establishment Department
  • Stationary & Records Department
  • Transport Department
  • Test Key Department
  • Disciplinary Department

Marketing Division:

  • Business Development Department
  • Branches Department
  • Engineering Department
  • Public Relations Department

 Credit Division:

  • Credit operation Department
  • Recovery Department
  • Lease Financing Unit
  • C I B Unit

 Central Accounts Division:

  • Accounts Department
  • Statistics Department
  • Statistics Department
  • Reconciliation Department
  • Expenditure Control Department

 Audit and Inspection Division:

  • Internal Audit Department
  • External Audit Department

International Division:

  • Treasury Department
  • Dealing Room

Hierarchy of Position:

Chart 1: Hierarchy position

 Performance of UBL:

The Bank has made a significant progress in all sectors of business in 2012. Bank’s operation has achieved the confidence of its customers with sound fundamentals in respect of deposit accumulation, import and export business, remittances, loans and advances and profitability. As a result the bank has been able to earn remarkable profit in business.

 Performance of Uttara Bank Ltd. for last four years:

                                                                                                   (Figure in million Tk)






Authorized Capital





Paid-up Capital





Reserve fund










Loans and advance










Gross Income





Gross Expenditure





Net profit/loss





Foreign Exchange business

  1. Export


  1. Import









No. of Share holders





 Table 2: Performance of UBL for Last four years

Financial Highlights for the year 2011

Cash Flow Statement

For the year ended December 31, 2011


Amount in Taka



Cash flows from operating activities

Interest Receipts


Prepaid expenses


Other liability decreases


Payment for the other activities


Deferred revenue expenditure paid


Net cash used in operating activities



Cash flows from financing activities

Increase in share capital


Net cash provided form financing activities


(Net decrease)/ increase in cash & cash equivalents



Cash & cash equivalents at the beings of the period


Cash & cash equivalents at the end of the period



 Table 3: Financial Highlights for the year 2011

Profitability position of Uttara Bank:

Uttara bank profitable position in 2011 is more than 2010, that are very much effective for the Uttara bank and this profit is increased day by day from 2007 to present that is a good sign for the bank. Now we provide 2007 to 2011 post tax profit and pre tax profit basis on table and figure also, which are exhibited below:

Post tax Profit8509004001083.61075
Pre tax Profit100200110021002250

 Table 4: Profitability position of Uttara Bank

Now I also provide profit position of five years at glance and if we see the figure then we can easily understand that profit positions are increase day by day. So I provide line chart for better understand of the five years gross profit position of Uttara Bank Limited.

Function of the Organization:

General Banking:

A commercial bank consists of a few departments which perform diverse operations, namely, foreign exchange division, General banking division and Credit division. The foreign exchange division deals with the inflow and outflow of foreign currencies in the bank. Again, the credit section deals with the loan and other facilities. Last but not least, General Banking department is considered to be the core function of Bank which operates the day to day transactions. it takes the deposit from the customers and their demand for cash honoring their cheque The department is very rush and the employee here are too upgrade too their duty. They pass entry of every transaction within the day. It opens new accounts, remit funds, issue bank draft and pay order, etc. Since Bank is confined to provide these services everyday, general Banking is known as ‘Retail Banking’.

Different Departments of General Banking:

As mentioned earlier, general banking department revolves around several operations which could be classified and put into several parts. The five major parts in the general banking department in different branches are as follows:

  • Account opening & Dispatch section
  • Clearing section
  • Cash section
  • Q-Cash section
  • Remittance
  • Accounts section

Types of Accounts Maintained by UTTARA BANK LTD.:

Accounts based on operations as under:

  • Current Account (CD A/C)
  • Short Term Deposit Account (STD A/C)
  • Savings Bank Account (SB A/C)
  • Fixed Deposit Receipt Account (FDR A/C)

Accounts based on Nature of Customers as under:

  • Single/Individual Account
  • Joint individual Account
  • Sole Trader/ Proprietorship Account
  • Partnership Account
  • Company Account etc.

Monthly Saving Scheme:

It is said that small savings can build up prosperous future. MDS (Monthly Deposit Scheme) provides the customers an opportunity to build up savings over time. Depositors can take the advantage of this deposit scheme by depositing certain amount on monthly basis in 5 or 10 year’s time.  The monthly savings scheme boasts of certain terms and conditions:

  • Monthly installment may be Tk. 500, 1000, 1500, 2000, 3000, 5000 and 10000.
  • This deposit shall be for the period of 5 years and 10 years.
  • On maturity profit with principal shall be withdrawn.
  • The depositor will earn profit with principal against specific installment as follows.
  • Specific form to be filled up to open this account. No introducer of photographs of the deposit shall be required to open such account. Only picture of nominee shall be attached with form.
  • The depositor can choose any of the monthly installments. Once the account is opened the depositor cannot change the installment amount. Depositor may use online facility to deposit his installment at any branch.
  • Any customer can open more than one account in the same branch with different installment.
  • Minor can open accounts under this scheme. But minors account will operate his legal guardian.
  • Payment at maturity will be made after one month of the last installment payment date.
  • If the depositor wants to encash his deposit before maturity normal savings rate will be paid. But no interest shall be paid if such encashment is made before 6 months.
  • Ø Installment amount shall be deposited within 10-th day of each month.

 Double Deposit Benefit Scheme:

A client can avail the facility of making his/her deposit double and triple keeping deposit in 8. The double growth deposit scheme boasts of certain terms and conditions:

  • Minimum Tk. 100000 or any multiple of this amount may be deposited to open this scheme A/C.
  • This deposit shall be accepted only for the period of 8 years. The depositors must maintain a savings or current account with any of the branches of UTARA BANK LTD..
  • Deposit receipt will be issued to the customer while receiving deposit.
  • Any Bangladeshi above 18 years of age can open this account. A minor can also open this account by his own name. In this case his legal guardian will operate this account.

 Monthly Deposit Scheme:

A client can have the advantage of drawing monthly benefit/profit by keeping fixed deposit in the bank for a certain period ranging from 5 years. Utara Bank Ltd. Limited has introduced monthly Deposit Scheme (MDS) for the prudent persons having ready cash and desiring to have fixed income on monthly basis out of it without taking risk of loss and without encashing the principal amount. This scheme offers highest return with zero risk.


  • Minimum deposit Tk 1 (one) lac.
  • Maximum deposit any amount multiple of Tk 1 (one) lac.


Remittance means sending money for one place to another place without physical transfer of cash. If such transfer takes place between the two regions of a country it is, then ‘Inland Remittance’. If the transfer involves two sovereign countries it is, then ‘Foreign Remittance’.

Remittance through a bank is done in any of the following manner:

  • By issuing demand draft,
  • By issuing mail transfer,
  • By issuing telegraphic transfer.

Issue of t. T.:

The basic difference between the other types of remittance and T. T. is that; in other types of remittance the ‘Message of remittance is either sent by ordinary mail or registered mail but in this type of remittance the message, duly tested coded is sent by urgent Telegram / Telephone or Telex.’

The message, in other words, the telegraphic order upon the drawer branch, is given along with test number at the beginning to prove that the same is genuine.

Pay Order:

Pay order is one type of remittance, which is also one of the popular in business circle of the country.

A payment can be made to one person to another person through pay order. Which is made authenticated & assured than the cheque. Moreover, it is more safe for payment rather carrying the cash from one place to another place.

Clearing (Department):

In the clearing department the work is to clear and pay order through Bangladesh Bank that is submitted for cash collection. Everyday clearinghouse takes a place in Bangladesh Bank, once in the morning called house (1st house) another in the evening called return house (2nd house). In the house all the banks representative sit together and change their money receive instrument of the particular banks to clear and transfer the money to their particular accounts.

Conceptual frame work


The definition of a bank varies from country to country Under English common law, a banker is defined as a person who carries on the business of banking, which is specified as:

  • Conducting current accounts for his customers.
  • Paying cheques drawn on him and
  • Collecting cheque for his customer.

Section  5(b)  of  the  Banking  Regulation  Act,  1949  defines  banking  as –

‘the accepting,   for   the   purpose   of   lending or investment, of   deposits   of money from the public, repayable on demand or otherwise, and   withdrawal   by   cheque, draft, order or otherwise.”

According to Oxford English Dictionary, Bank is,

“An establishment for custody of money received from or on behalf of, its customers. Its essential duty is the payment of the orders given on it by the customers, its profit mainly from the investment of money left unused by them.”

Bank, according to the Harburt Hurt

“A banker is one who in the ordinary course of business honors cheques drawn upon him by persons for whom he receives money on current account”

Banking business” means the business of either or both of the following:

  1. Receiving from the general public money on current, deposit, savings or other similar account repayable on demand or within less than [3 months] … or with a period of call or notice of less than that period.
  2. Paying or collecting checks drawn by or paid in by customers.

Foreign Exchange Operation:

Every country has certain natural advantages and disadvantages in producing certain commodities while they have some natural disadvantages as well as in other areas. As a result we find that some countries need to import certain commodities while other needs to export their surpluses. Foreign trade brings the fruits of the earth to the homes of the humblest among the countries. These transactions are on the basis upon which international trade is made. As one currency is involved in foreign    trade, it gives rise to exchange of currencies which is known as foreign exchange. In exercise of the powers conferred by sec-3 of the foreign exchange regulation-1947, Bangladesh bank issues license to scheduled banks to deal with foreign exchange.

Foreign Exchange means Foreign Currency. If consider Foreign Exchange as a subject then it means all kind of transaction related to foreign currency, as well as currency instruments such as draft MT, TT, TC, Payment order & Foreign Trade, In other words foreign Exchange deals with Financial Transactions.

Foreign Exchange refers to the process mechanism by which the currency of one country is converted into the currency of another currency and, herby, involves the international transfer to money. It is the means of method by which rights to wealth in a country’s currency are converted into rights to wealth in another currency. In banks where we talk foreign exchange, we refer to the general mechanism by which a bank converts currency of one country into that of another’s.

Dr. Paul Einzing (2006 L.R. Chowdhury) defines Foreign Exchange as the system or process of converting on national currency into another and transferring the ownership of money from one country to another.

In the words of Mr. H.E Evit (2006 L.R. Chowdhury) Foreign Exchange is that section of Economic Science which deals with the means and method by which rights to wealth on one country’s currency.

Edna Carew (1979) in his The Language of Money define Investment Bank as “A financial intermediary which operates at the ‘wholesale end’ of the financial markets; the ‘middleman’ between companies issuing securities to raise funds and the investors who buy the paper. Investment banks derive their income chiefly from fee-based activities or profits from trading securities rather than from a margin between borrow.

In terms of Foreign Exchange Regulations act 1947 as adapted in Bangladesh, Foreign Exchange means Foreign Currency and includes all deposits credits and balances payable in foreign currency as well as foreign currency instruments. Such as drafts, Travelers Cheques, Bill Exchange, Hindi and Promissory Notes payable in any foreign country Foreign exchange operation is divided into three sections.

Chart 2- Foreign Exchange operation


Import may be defined as bringing of visible items to the country from abroad through letter of credit or LCA Form paying foreign Currency to the exporting country.

The following requirements are to be met for import of goods.

Classification of Importers-

i.    Personal Import (User). They need no registration from CCI&E for import up to a certain amount as per IPO in force.

ii.   Commercial Import – Those who import the goods to sell-out the same to the market directly without any other processing is called commercial importer.

iii.  Industrial Consumer – Those who Import the goods for Industrial Consumption are called Industrial Importer.


By export we generally mean selling of visible and invisible goods and services outside the country against letter of credit, firm contract or Advance payment. Besides, local supplies against Letter of Credit /contract through banking channel are also deemed as export. However the local export does not need to be reported to Bangladesh Bank in the schedules.

 Types of Export:

Export must be executed under the following payment/settlement system-

i.    Export against L/C or firm Contract

ii.   Export against Advance Payment

Export under consignment basis


This bank is authorized dealer to deal in foreign exchange business. As an authorized dealer, a bank must provide some services to the clients regarding foreign exchange and this department provides these services.

The basic function of this department are outward and inward remittance of foreign exchange from one country to another country. In this process of providing this remittance service, it sells and buys foreign currency. The conversion of one currency into another takes place an agreed rate of exchange, which the banker quotes, one for buying and another for selling. In such transactions the foreign currencies are like, other commodities offered for sales and purchase, the cost (convention value) being paid by the buyer in home currency, the legal tender. Remittance procedures of foreign currency.

Types-of Remittance:

a)   Inward Remittance

b)   Outward Remittance

a) Inward Foreign Remittance:

Normally, Inward foreign remittance comprises all incoming foreign currencies. Remittance issued by the correspondents banks situated in the foreign countries and thereby drawn on UBL, Islampur branch are considered to be its Inward foreign remittances. Following are the Inward foreign remittances of UBL, Islampur branch.

  • FDD Payable
  • FTT Payable
  • TC Payable
  • Encashment of Foreign currencies
  • Purchase of Foreign currencies

b) Outward Foreign Remittance:

Remittances issued by the Uttara bank, Islampur branch to there foreign correspondents to fulfill their customers needs are considered to be the Outward foreign remittances. It comprises the following-

  • FDD Issued
  • FTT Issued
  • TC Issued
  • Endorsement of foreign currencies in the passport

Analysis and Findings

The most commonly used documents in Foreign Exchange:

  • Documentary letter of credit
  • Bill of Exchange
  • Bill of lading
  • Commercial invoice
  • Certificate of origin of goods
  • Inspection certificate
  • Packing list
  • Insurance policy
  • Proforma invoice/indent
  • Master receipt
  • G.S.P certificate

Documentary Credit:

In simple term, a documentary credit is a conditional Bank undertaking of payment.  Expressed more fully, it is a written undertaking by a Bank (issuing Bank) given to seller (beneficiary) at the request, and in accordance with the instructions, of the buyer (applicant) to effect payment (that is, by making a payment, or accepting or negotiating bill of exchange) up to a stated sum of money, with in a prescribe time limit and against stipulated documents.

The customary clauses contain in a L/C are the followings:

  • A clause authorizing the beneficiary to draw bills of exchange up to a certain on the opener.
  • List of shipping documents, which are to accompany the bills
  • Description of the goods to be shipped
  • An undertaking by the opening Bank that bills drawn in accordance with the conditions will be dully honored.

 Parties to a Letter of Credit:

  • Importer/buyer
  • Opening Bank/ Issuing Bank
  • Exporter/Seller/Beneficiary
  • Advising Bank
  • Negotiating Bank
  • Confirming Bank
  • Paying/ Reimbursing Bank

Bill of Lading:

A bill of lading is a document that is usually stipulated in a credit when the goods are dispatched by sea. It is a evidence of contract of carriage, is a receipt for the goods, and is a document of title to the goods. It also constituted a document that is, or may be, needed to support an insurance claim.

The details on the bill of lading should include-

  • A description of the goods in general terms not inconsistent with in the credit
  • Identify marks and numbers, if any
  • The name of the carrying vessel
  • Evidence that the goods have been loaded on board
  • The ports of shipment and discharge
  • The names of shipper, consignee and address of the notifying party
  • Whether freight has been paid or is payable at destination
  • The number of original bills of lading issued
  • The date of issuance

Commercial Invoice:

A commercial invoice is the accounting document by which the seller charges the goods to the buyer. A commercial invoice normally includes the following information:

  1. Date
  2. Name and address of the buyer and seller
  3. Order of contract number, quantity and description of the goods, unit price and the total price
    1. Weight of the goods, number of the package, shipping marks and numbers
    2. Terms of delivery and payment
    3. Shipment details

 Certificate of Origin:

A certificate of origin is a signed statement providing evidence of the origin of the goods.

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 the contract and the L/C. The inspection company is usually nominated by the buyer who also indicates the types of inspection he wishes the company to undertake.


Import is foreign goods and services purchased by consumers, firms & Governments in Bangladesh. An importer must have import registration certificate (IRC) given by chief controller of import and exports (CCI & E) to import any thing from other country. To obtain IRC the following certificates are required-

  • Trade License
  • Income tax clearance certificate
  • Nationality certificate
  • Bank solvency certificate
  • Asset certificate
  • Registration partnership deed (if any)
  • Memorandum and Article of Association
  • Certificate of Incorporation (if any)
  • Rent receipt of the business premises

Import Procedure:

To import Uttara Bank Ltd., a customer requires-

  • Bank account
  • Import registration certificate
  • Tax paying identification number
  • Proforma invoice/indent
  • Membership certificate
  • L/C application form duly attested
  • One set of form
  • Insurance cover note with money receipt
  • Others

 Import Mechanism:

To import, a person should be competent to be an importer. According to import and Export control Act 1950, the office of chief controller of Import and Export provides the registration (IRC) to the importer. After obtaining this, person has to secure a letter of credit authorization (LCA) from Bangladesh Bank. And then the person becomes a qualified importer. He is the person who requests or instructs the Bank to open an L/C. He is also called opener or applicant or the credit.

 Importer’s application for L/C Limit/Margin:  

To have an import L/C limit, an importer submits an application to the Bank furnishing the following information-

  1. Full particulars of Bank account
  2. Nature of business
  3. Required amount of limit
  4. Payment terms and conditions
  5. Goods to be imported
  6. Official security
  7. Repayment schedule

A credit officer scrutinizes this application and accordingly prepares a proposal (CLP) and forwarded it to the head office credit committee (HOCC). The committee, if satisfied, sanctions the limit and return back to the branch. Thus, the importer is entitled for the limit.

Opening of Letter of Credit by Uttara Bank:

Opening of letter of credit means, at the request of the applicant (importer) issuance of a L/C in favor of the beneficiary (exporter) by a Bank. The Bank, which opens or issue L/C is called L/C opening Bank or issuing Bank.

On receipt of the Importer’s L/C application supported by the firm contract (indent/proforma invoice) and insurance cover note the Bank scrutinize the same thoroughly and fix-up a margin on the basic of Bank customer relationship.

Before Opening a L/C, the Issuing Bank must check the following:

  • L/C application properly stamped, signature verified and margin approved and properly retained.
  • Indent/proforma invoice signed by the importer and indentor/supplier.
  • Ensure that the relevant particulars of L/C application correspond with those stipulated in indentor/proforma invoices.
  • Validity of L/C entitlement of goods, amount etc. conforms to the L/C application.
  • Conversion and rate of exchange currently applied.
  • Charges like commission, F.C.C, postage, telex charge, if any recovered.
  • Insurance cover note – in the name of issuing Bank A/C, Importer covering required risks and voyage route.
  • Incorporation of instruction for negotiating Bank as per Banks existing arrangement.
  • Reimbursement instructions for reimbursing Bank.

 Liability of Issuing Bank:

As per article 9a of UCPDC 500, an irrevocable credit constitutes a definite undertaking of the issuing Bank, provided that the stipulated documents comply with the terms and conditions of the credit.

Advising of Letter of Credit:

Advising means forwarding of a documentary letter of credit received from the issuing Bank to the beneficiary (exporter).

Before advising a L/C the advising Bank must see the following-

  • Signature of issuing Bank officials on the L/C, verified with the specimen signature book of the said Bank when L/C received by airmail.
  • If the export L/C is intended to be an operative cable L/C test code on the L/C invariably be agreed and authenticated by two authorized officers.
  • L/C scrutinized thoroughly complying with the requisites of concerned UPPDC provisions.
  • Entry made in the L/C advising register.
  • L/C advised to the beneficiary (exporter) promptly and advising charges recovered.

 Adding Confirmation:

Adding confirmation is done by the confirming Bank. Confirming Bank is a Bank which adds its confirmation to the credit and it is done at the request of the issuing Bank. The confirming Bank may or may not be the advising Bank. The advising Bank usually does not do it if there is not a prior arrangement with the issuing Bank. By being involved as a confirming agent the advising Bank undertakes to negotiate beneficiary’s bill without recourse to him.

  • Issue L/C and request to add confirmation
  • Review the L/C terms
  • Provide reimbursement
  • Drafts to be drawn on L/C opening Bank
  • Availability of credit facilities
  • Line allocation from the business and ownership units in the importer’s country
  • Confirm and advise L/C

Amendments to Letter of Credit:

After issuance and advising of a L/C, it may be felt necessary to delete, add or alter some of the clauses of the credit. All these modifications are communicated to the beneficiary through the same advising Bank of the credit. Such modifications to a credit are termed as amendment to a letter of credit. There may be some of the conditions in a credit are not acceptable by the beneficiary. In that cases beneficiary contact applicant and request applicant approaches his Banker with a written request for amendment to the credit. The issuing Bank scrutinizes the proposal for the amendment and if the same is not in contravention with the Exchange Control Regulation and Bank’s interest, the Bank may then process for amendment. There can be more than one amendment to a credit. All these amendment forms integral part of the original credit.

The following clauses of L/C are generally amended:

  • Increase/decrease value of L/C and increase/decrease of quality of goods.
  • Extension of shipment/negotiated period.
  • Terms of delivery i.e. FOR, CFR, CIF etc.
  • Mode of shipment.
  • Inspection clause.
  • Name and address of the supplier.
  • Name of the reimbursing Bank.
  • Name of the shipping line etc.

 Settlement of Letter of Credit:

Settlement means fulfillment of issuing Bank in regard to affecting payment subject to satisfying the credit terms. Settlement may be done under three separate arrangements as stipulated in the credit.

Settlement by Payment:

Here the seller presents the documents to the nominated Bank and the Bank scrutinizes the documents. If satisfied, the nominated Bank makes

payment to the beneficiary and in case this Bank is other than the issuing Bank, then sends the documents to the issuing Bank and claim reimbursement as per arrangement.

Settlement by Acceptance:

Under this arrangement, the seller submits the documents evidencing the shipment to the accepting Bank (nominated by the issuing Bank for acceptance) accompanied by draft down on the Bank at the specified tenor. After being satisfied with the documents, the accepts the documents and the draft and if it is a Bank other than issuing Bank, then sends the documents to the issuing Bank stating that it has accepted the draft and maturity the reimbursement will be obtained in the pre-agreed manner.

Settlement by Negotiation:

This settlement procedure starts with the submission of documents by the seller to the negotiating Bank. In a freely negotiable credit any Bank can negotiate documents and if negotiation restricted by the issuing Bank, only nominated Bank can negotiate the documents. After scrutinizing that the documents meet the credit requirement, the Bank may negotiate the documents and give value to the beneficiary. The negotiating Bank then sends the documents to the issuing Bank. As usual, reimbursement will be obtained in the pre-agreed manner.

Payment Procedure of the Import Documents:

This is the most sensitive task of the Import Department. The officials have to be very much careful while making payment. This tasks constitutes the following –

  • Date of payment: Usually payment is made within 7 days after the documents have been received.
  • Preparing sale memo: A sale memo is made at BC rate to the customer. As the T.T & OD rate is paid to the ID, the difference between these two rates is trading. Finally, an Inter Branch Exchange Trading Credit Advice is sent to ID.
  • Requisition of the foreign currency: For arranging necessary fund for payment, a requisition is sent to the International Department.
  • Transmission of telex: A telex is transmitted to the correspondent Bank ensuring that payment is being made.


Practically by the term export we mean carrying out of anything from one country to another. From the Banker’s point of view- export means sending of visible things outside the country for sale. Export trade plays a vital role in the development process of an economy. With the earning, the country meets the import bill.

Although export trade is always encouraged, anybody cannot export anything to any place. Like importer, the exporters are also required to get them registered before entering into export trade. Export Registration Certificate (ERC) given by CCI & E is required for this purpose. The required documents to be obtained ERC are almost same as IRC.

When Uttra Bank (authorized dealer) receives a L/C (cable or original) it ascertains the correctness of the test number and the authorized signature. Then the Bank sends the original copy of the L/C to the beneficiary.

The export presents the relative documents to the negotiation Bank after the shipment of the goods. The L/C issuing Bank undertakes to honor is obligation only if the beneficiary fulfills the conditions stipulated in the L/C, May namely, the submission of stipulated documents within the stipulated time. Even a slight deviation of the documents from these specified in the L/C may give an excuse to the negotiating Bank. So the negotiating Bank must be careful, promote, systematic and bias-free while scrutinizing the tender documents after careful and thorough examination of the documents,The Banker has to list out the discrepancies which may be classified as major or minor, irremovable or removable. The removable discrepancies can be corrected by the tendered or future losses, which may arise due to non-interpretation of proceeds.

The following types of discrepancies may be noted while the negotiating Bank examines the documents:

  • L/C expired
  • Late shipment
  • Amount drawn in excess of the L/C
  • Bill of Exchange not properly drawn
  • Descriptions of the goods differ
  • Bill of lading or Airway bill state
  • Bill of lading classed
  • Insurance cover note as per terms L/C
  • Insurance cover obtained after the bill of lading or Air bill date
  • Enough number of copies not submitted as required by L/C
  • Negotiation under L/C restricted
  • Packing list and certificate of analysis not as per L/C
  • Documents not properly endorsed
  • Full shipment not effective and part shipment prohibited
  • Gross weight and net weight shown in different documents differ
  • Same documents required by L/C not submitted and
  • Documents inadequately stamped
  • Document with major discrepancies, which could not be negotiated, should be sent on collection basis with the permission of the exporter.

Export Procedure:

The import and export trade in our country are regulated by Import and Export (Control) Act, 1950. Under the export policy of Bangladesh the exporter has to get the valid Export Registration Certificate (ERC) from Chief Controller of Import & Export (CCI & E). The ERC is required to renew every year. The ERC number is to be incorporated on EXP forms and other papers connected with exports.

 Registration of Exporters:

For obtaining ERC indenting Bangladeshi exporters are required to apply to the Controller/Joint Controller/Deputy Controller/Assistant Controller of Import and Exports, Dhaka/Chittagong/Khulna/Mymensing/Sylhet/Comilla/Barisal/Bogra/Rangpur/Dinajpur in the prescribed form along with the following documents:

  • Nationality and Assets Certificate
  • Memorandum and Articles of Association and Certificate of Incorporation in case of Limited Company
  • Bank Certificate
  • Income Tax Certificate
  • Trade License etc.

Securing the Order:

After getting the ERC the exporter may proceed to secure the export order. He can do this by contacting the buyers directly or through agent. In this purpose exporter can get help from:

  • Liaison Office
  • Buyer’s local agent
  • Export Promotion Organization
  • BangladeshMission Abroad
  • Chamber of Commerce (local & foreign)
  • Trade fair etc.

 Signing the Contract:

After communicating with buyer, buyer has to get contracted (writing or oral) for exporting exportable item (s) from Bangladesh detailing commodity, quantity, prices, shipment, insurance and marks, inspection, arbitration etc.

After getting contract for sale, exporter should ask the buyer for letter of credit clearly stating terms and conditions of export and payment.

The followings are the main points to be looked into for receiving/collecting export proceeds by means of documentary credit:

  • The terms of the L/C are in conformity with those of the contract;
  • The L/C is an irrevocable one, preferable confirmed by the advising Bank;
  • The L/C allows sufficient time for shipment and negotiation;

Terms and conditions should be stated in contract clearly in case of other modes of payment:

  • Cash in advance
  • Open an account
  • Collection basis (documentary / clean)

(Here the regulatory framework is URC – 525, ICC publication)

Procuring the Materials:

After making the deal and on the L/C opened in his favor, the next step for the exporter is to set about the task of procuring or manufacturing the contracted merchandise.

Shipment of Goods:

After that the exporter should take the preparation for export arrange for delivery of goods as per L/C and INCO-terms, prepare and submit shipping documents for payment/acceptance/negotiation in due time:

  • EXP form
  • ERC (valid)
  • L/C copy
  • Customs duty certificate
  • Shipping instruction
  • Transport documents
  • Invoice
  • Other documents
  • Bill of Exchange (if required)
  • Certificate of origin
  • Inspection Certificate
  • Quality Control Certificate
  • G.S.P Certificate
  • Phyto-sanitary Certificate

 Final Step:

After those, exporter submits all these documents along with a letter of indemnity to Uttara Bank Ltd. for negotiation. An officer scrutinizes all the documents. If the document is a clean one, Uttara Bank Ltd. purchases the documents on the basis of Banker-customer relationship. This is known as Foreign Documentary Bill Purchases (FDBP).

 Mode of Payment of Export bill under L/C:

The most common methods of payment under a L/C are as follows:

1) Sight payment credit: In a sight payment credit, the Bank pays the stipulated sum immediately against the exporter’s presentation of the documents.

2) Negotiation credit: In negotiation credit, the exporter has to present a bill of exchange payable to him in addition to other documents that the Bank negotiated.

3) Deferred payment credit: In deferred payment, the Bank agrees to pay on a specified future date or event, after presentation of the export documents. No Bill of Exchange is involved. In Uttara Bank Ltd. (UBL), payment is given to the party at the date of D.A 60-90-120-180 as the case may be. But the Head Office is paid at T.T clean rate. The difference between the two rates is the exchange trading for the branch.

 4) Acceptance credit: In acceptance credit, the exporter presents a bill of exchange payable to himself and drawn at the agreed tenor (that is, on a specified future date event) on the Bank that is accept it. The Bank signs its acceptance on the bill returns it to the exporter. The exporter can then represent it for payment on maturity. Alternatively, he can discount it in order to obtain immediate payment.

6) Advising L/C: When exporter transmits L/C to the Bank for advising than Bank sends an advising letter to the beneficiary depicting that L/C has been issued.

7) Test Key Arrangement: Test Key Arrangement is a secret code maintained by the Banks for the authentication for their massage. It is a systematic procedure by which a test number is given can easily authenticate the same test number by maintaining that same procedure. RBL has test key arrangements with so many Banks for the authentication of L/C messages and for making payment.

Import Business:

The Bank helps in import business. Items of import financed by the Bank included electronic equipment, sports goods, rice, wheat, seeds, soybean, palm-oil, chemicals, accessories etc.

The year wise imports are as follows-

UBL Import business from 2008 to 2011-                

SL No.


Amount (Figure in Million)













 Table 5: UBL Import business from 2008 to 2011

Export Business:

The Bank played a huge role in export business. It remits huge foreign exchange through helping in export business. Export items handled by the Bank include jute goods, ready made garments, handy crafts, tea etc.

The year wise export is as follows-

UBL Export business from 2008 to 2011-

SL No.



(Figure in Million)













 Table 6: UBL Export business from 2008 to 2011

Import Export Position Of Uttara Bank Limited, Islmapur Branch for the year 2012 in Graphical Format:


Uttara Bank Ltd. Rendering, a stable support to foreign business and contributing a lot to the national foreign exchequer. Though the foreign business is increasing day by day, so is the role of Bank which is engaged in financing these businesses. In order to smoothing the foreign exchange business of the Bank following points need to handle with-

  • Insufficient usage of modern facility like communication technology
  • Little application of modern technology such as computer and Internet
  • Poor condition of balance of payment
  • Lack of enthusiastic scheme for exporter and importer
  • Improper allocation of employees
  • Lack of skilled employee
  • Absence of attractive remuneration package
  • Proper location should be selected for establishing a branch
  • Network of corresponded Banks is poor
  • Lack of fair entrepreneur class Knowledge of entrepreneur regarding foreign trade policy is very poor.


In accordance with my practical experience & knowledge gained from working in Foreign Exchange Operations of UBL, I would like to recommend the followings:

  • To attract more clients Uttara Bank Ltd. should sought new marketing strategy, which will increase the total export and import business
  • Introduction of various incentives to increase remittance
  • Attractive incentive package for the exporter will help to increase the export and accordingly it will diminish the balance of payment gap of Uttara Bank Ltd.
  • Effective training is very much essential for the foreign exchange officials
  • Computerized Banking system and latest communication devices are the most important elements for the coming year. So for a sound and stable foreign exchange operation, Uttara Bank Ltd. has no alternative but to modernize.
  • Foreign exchange operation of other Bank is more dynamic and less time consuming. Uttara Bank Ltd. should be armed with modern facility to face the challenge
  • In our country, financial problem is a great constraint to foreign trade and UBL is very mush conservative to post shipment finance. If the Bank took a bit liberal position the exporter could easily come out from financial constraint.
  • Bank can provide foreign market reports, which will enable the exporter to evaluate the demand for their product in foreign countries.
  • Segregation of international trade transaction from the existing situation i.e. credits aspect to be looked after by credit analyst to that department.
  • Ø This department shall only remain engaged with the documentary aspect of international trade like opening L/C for all types of import and negotiation of export bills.


Foreign Exchange business is an important part for commercial banks and so commercial banks treats this section carefully. Uttara Bank Ltd- has some facilities and can provide Foreign Exchange services efficiently and quickly. No country is sufficient enough to meet its need and to Import and Export foreign exchange/remittance is very important. Delay in opening LC suffers a country’s consumers most. And Inward Foreign Remittance has great contribution in our economy and in people’s livelihood. UBL plays a vital role in all this three sectors. As a Commercial Bank, UBL meeting the present day International business need of the customers in a competitive environment has been and is still a challenge for Uttara Bank Ltd. From the very inception in the early eighties, UBL bank has covered good grounds. And, foreign exchange business has now become one of the most important portfolio of the bank in respect of volume of fund deployed, generation of return for the bank as well as maintaining the high image of the bank at home and abroad.



  • Ø Choudhury, Dr. T.A, Modes of Payment in International Trade, Reading Materials on International Trade & Finance (E-102), Bangladesh Institute of Bank Management (BIBM)
  • Andley, K.K & Mattoo, V.J, Foreign Exchange Principles & Practices, Sultan Chand & Sons, New Delhi, 1996.
  • Guide lines for Foreign Exchange Transaction, Bangladesh Bank. Vaish M.C, Money, Banking and International Tr.

Journals & Magazines:

  • Annual report of Uttara Bank Ltd. for the year 2008.
  • Annual report of Uttara Bank Ltd. for the year 2009.
  • Annual report of Uttara Bank Ltd. for the year 2010.
  • Annual report of Uttara Bank Ltd. for the year 2011.
  • General Banking manual- Uttara Bank Ltd.


  • Ø

Foreign Exchange

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