Overview of Foreign Exchange Business of Shahajalal Islami Bank Ltd - Assignment Point
Overview of Foreign Exchange Business of Shahajalal Islami Bank Ltd
Subject: Economics | Topics:

Overview of Foreign Exchange Business of Shahajalal Islami Bank Ltd

 Foreign Exchange:

Foreign Exchange is a process which is converted one national currency into another and transferred money from one country to another country. 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 currency is converted into rights to wealth in terms of another country currency”. It involved the investigation of the method by which the currency of the country is exchanged for that of another, the causes which rented such exchange is necessary the forms which exchange may take and ratio or equivalent values at which such exchange are affected. Foreign Exchange Department (FED) is the international department Bangladesh Bank issues license to scheduled banks to deal with foreign exchange. These banks are known as Authorized Dealers.  If the branch is authorized dealer in foreign exchange market, it can remit foreign exchange from local country to foreign countries.  So, Shahjalal Islami Bank Ltd., Principal branch is an authorized dealer.

Foreign exchange means the exchange of currency in terms of goods from one country to another. This is the most well know and well-organized business uniform in world business. Foreign exchange mainly has two parties:

(a)   Exporter

(b)   Importer

Foreign Exchange means foreign currency and includes:

Traveler’s cheques, letter of credit and bills of exchange, expressed or drown in Indian currency but payable in any foreign currency.

All deposits, credits and balance payable in any foreign currency and any drafts.

Any instrument payable, at the option of the drawer or holder thereof or any other party thereto. Either in Indian currency or in foreign currency or partly in one and partly in the other. Thus the foreign exchange includes foreign currency.

 Foreign Exchange Business of SJIBL:

Total Foreign Exchange Business handled during the year 2010 was Tk. 47342.50 million as against

Tk.33951.60 million of 2009 registering an increase of Tk.13390.90 million, i.e. 39.44% growth. The particulars of Foreign Exchange Business are given below:

Particulars

Amount in Million             Taka

Percentage of Total

Import

25262.60

53.36%

Export

19144.30

40.44%

Foreign Remittance

2935.6

                6.20%

Total

47342.50

100.00%

 

Table: Composition of Foreign Exchange Business 20010 

During the year 2010 SJIBL opened 11,117 Import Letter of Credit as against 7,104 of 2009 and handled 12,746 Export bills in 2010 against 8,027 of 2009.

 Parties to the Documentary Credit Transaction:

Issuing Bank

The L/C issuing bank issues L/C at the request of their Customers. The L/C issuing bank undertakes absolute obligations to pay upon presentation of proper documents stipulated in the L/C.

Customer application

The L/C applicant is the party on which requests the L/C issuing bank issues L/C. The customer is normally obligated to reimburse the issuing bank for any payment made under the L/C & the customer often provides collateral to source the reimbursement authorization.

Beneficiary Exporter

The beneficiary is the party entitled to drawn to demand payment under the L/C. The beneficiary will have to present the required documents in compliance with the L/C terms when payment is demanded through the nominated bank.

Advising bank

After verification of authority of the L/C advising bank gives notification to the beneficiary that a L/C has been issued by the bank. The advising bank does not itself under take any obligation to know the beneficiaries claim. Its obligation is limited to accurately advising of the credit.

Confirming bank

At the request of the L/C issuing bank, confirming bank may add their confirmation to a L/C. The bank becomes directly obliged to honor the claims of the negotiating bank normally a bank in the beneficiary location.

Negotiating Bank

Negotiating means giving values of credit confirm documents to the beneficiaries. Negotiating bank means, the bank specially authorized in the credit to negotiate documents drawn under the credit. In the case of a freely negotiable credit any bank be negotiating bank if it is expressly consented to by such bank.

Reimbursing Bank

If the L/C issuing bank nomination a 3rd bank (The reimbursing Bank) in the L/C to honor the claim of the negotiating bank. The reimbursement bank may honor the claim accordingly. If the reimbursing fails to honor the claim of negotiating bank, L/C issuing bank is obliged to honor the claim of negotiating bank.

Notify party 

The notify party is the party to whom the notification shipment particulars is provided as per L/C stipulations.

Function of Foreign Exchange:

The Bank works as a media for the system of foreign exchange policy. For this reason, the employee who is related of the Bank to foreign exchange, especially foreign business should have knowledge of these functions:

Rate of exchange.

How the rate of exchange forward and spot rate.

Methods of quoting exchange rate.

Premium and discount.

Risk of exchange rate.

Causes of exchange rate.

Exchange control.

Convertibility.

Exchange position.

Intervention money.

Foreign exchange transaction.

Foreign exchange trading.

Export and Import Letter of Credit.

Non-commercial letter of trade.

Financing for foreign trade.

Nature and function of foreign exchange market.

Rules and regulation used in foreign trade.

Exchange Arithmetic.

There are three kinds of foreign exchange transaction:

  1. Import
  2. Export
  3. Remittance.

Import:

To import, a person should be competent to be and 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. In an international business environment, buyers and sellers are generally unknown to each other. So seller of goods always seeks security for the payment of his exported goods. Bank gives export guarantee that it will pay for the goods on behalf of the buyer if the buyer does not pay. This guarantee is called Letter of Credit. Thus the contract between importer and exporter is given a legal shape by the banker by ‘Letter of Credit’.

 Letter of Credit (LC):

A conditional written undertaken issued by the importer’s (applicant) bank to the exporter (beneficiary) at the request of the importer to effect payment up to a stated amount within a stated time period against presentation of complaint documents.

The LC is governed by International Chamber of commerce (ICC) publication no.500.

Parties to the L/C:

ImporterWho applies for L/C
Issuing BankIt is the bank which opens/issues a L/C on behalf of the importer.
Confirming BankIt is the bank, which adds its confirmation to the credit and it, is done at the request of issuing bank. Confirming bank may or may not be advising bank.
Advising or Notifying BankIt is the bank through which the L/C is advised to the exporters. This bank is actually situated in exporter’s country. It may also assume the role of confirming and / or negotiating bank depending upon the condition of the credit.
Negotiating BankIt is the bank, which negotiates the bill and pays the amount of the beneficiary. The advising bank and the negotiating bank may or may not be the same. Sometimes it can also be confirming bank.
Accepting BankIt is the bank on which the bill will be drawn (as per condition of the credit). Usually it is the issuing bank.
Reimbursing BankIt is the bank, which would reimburse the negotiating bank after getting payment – instructions from issuing bank.

Steps for import L/C Operation – 8 steps operation    

Step 1 – Registration with CCI&E

For engaging in international, trade, every trader must be first registered with the Chief Controller of Import and Export,

By paying specified registration fees to the CCI&E. the trader will get [RC/ERC (Import/Export Registration Certificate), to open L/C with bank, this IRC is must.

Step 2 – Determination terms of credit

The terms of the letter of credit are depending upon the contract between the Importer and exporter. The terms of the credit specify the amount of credit, name and address of the beneficiary and opener, tenor of the bill of exchange, period and mode of shipment and of destination, nature of credit, expiry date, name and number of sets of shipping documents etc

Step 3 – Proposal for Opening of L/C

To have an import L/C limit an importer submits an application to department to Shahjalal Islami Bank Ltd. The proposal contains the following particulars:

Full particulars of the bank account

Nature of business

Required amount of limit

Payment terms and conditions

Goods to be imported

Offered security

1. L/C Application form 7. Authority to debit account
2. Filled up LCAF form8. Filled up amendment request Form
3. Demand Promissory Note9. IMP form
4. Proforma Invoice 10. Insurance cover note and money              receipt.
5. Tax Identification number 11. Membership certificate 
6.Import registration certificate12. Rate fluctuation undertaking

 

 

 

Repayment schedule

Step 4 –This step Includes this followings-

Step 5 – Opening of L/C by the bank for the opener:

Taking filled up application form from the importer.

Collects credit report of exporter from exporter’s country through his foreign correspondence there.

Opening bank then issues credit by air mail/TEL EX/SWIFT followed by L/C advice as asked by the opener through his foreign correspondent or branch as the case may be, at the place of beneficiary. The advising bank advises the L/C to the beneficiary on his own form where it is addressed to him or merely hand over the original L/C to the beneficiary if it is so addressed.

 Step 6 – Shipment of goods and lodgment of documents by exporter:

Then exporter ships the goods to the destination of the importer country.

Sends die documents to the L/C opening bank through his negotiating bank.

Generally the following documents are sent to the Opening Banker with L/C:

1. Bill of Exchange6. Packing List
2. Bill of Lading7. Advice Details of Shipment
3. Commercial Invoice8. Pre-shipment Inspection Certificate
4. Certification of Origin9. Vessel Particular
5. A certificate stating that each packet contains the description of goods over the packet.10.Shipment Certificate

Step 7 – Lodgment of Documents by the opening Bank from the negotiating bank

After receiving the documents, the opening banker scrutinizes the documents. If any discrepancy found, it informs the importer, if importer accepts the fault, then opening bankers call importer retiring the document. At this time many thing can happen. These are indicated in the following:

Discrepancy found but the importer accepts – no problem occurs in lodgment.

Discrepancy found and importer not agreed to accept – In this case, importer protest and send back all the documents to the exporter and request his to make in the specified manner. Here banker is not bound to pay because the documents send by exporter is not in accordance with the terms of L/C.

Documents are OK but importer is willing to retire the documents – In this case bank is obligated to pay the price of exported goods. Since importer did not pay for bill of exchange, this payment by bank is one kind of credit to the importer and this credit in banking is known as PAD.

Everything is O.K. but importer fails to clear goods from the port and request bank to clear – In this case banks clear the goods and takes delivery of the same by paying customs duty and sales tax etc. So, this expenditure is debited to the importer’s account and in banking it is called LIM.

Step 8 – Retirement

The importer receives the intimation and gives necessary instruction to the bank for retirement of the import bills or for the disposal of the shipping document to clear the imported goods from the customs authority. The importer may instruct the bank to retire the documents by debiting his account with the bank or may ask for LTR (Loan against Trust Receipt .When the officer thinks fit the application to open a L/C, giving the following entries creates the following charge.

Particulars

 

Debit/ Credit

 

Charges in Taka

 

Customer’s A/C

 

Debit

 

 

 

L/C Margin A/C

 

Credit

 

 

 

Commission A/C on L/C

 

Credit

 

50%

 

VAT

 

Credit

 

15% on commission

 

SWIFT Charge

 

Credit

 

3000/-

 

Datamax

 

Credit

 

1000/-

 

Stamp

 

Credit

 

150/-

 

Postage

 

Credit

 

300/-

 

DHL/Courier

 

Credit

 

1500/-

 

Table: Accounting Procedure in case of L/C Opening:                   

Letter of Credit Operation of SJIBL:

Today SJIBL is one of the leading and most successful Banking enterprises in the country. It plays great role in the economy of the country. By export-import business the bank play a great role to the economy of Bangladesh. SJIBL is one of the greatest banks in export-import business.

Foreign trade plays a vital role in the economy advancement process of a nation. So the trend of country’s foreign trade; i.e. import and export of a great concern to the government of a country. Fluctuation is the parameters of foreign trade immediately bring about some impact on the total economy. As such the nature, trend and volume of foreign trade are required to keep peace with the national economic needs and objective. There may be some areas where emphasis is to be given where there may be others which deserve restrictions and discouragement. Moreover the items of import and export value and volume of the same, the corresponding time period, sources of fund for payment and receipt, all these factors are to be considered very carefully for making necessary adjustment to match with the national economic policies as well as achieve balanced economic growth through the inter policy co-ordination.

Amendment of L/C:

After opening of L/C some time’s alteration to the original terms and conditions become necessary. These amendments involve changes in,

a. Unit price

b. Extension of validity o the L/C

c. Documentary requirements etc.

Such amendments can be affected only if all the concerned parties agree i.e. the beneficiary, the importer, the issuing bank and the advising bank.

For any amendment the importer must request the issuing bank in writing duly supported by revised indent/Proforma invoice. The issuing bank then advises the required amendment to the advising bank. L/C amendment commission including postage is charged to the clients A/C.

 Loan against Trust Receipts (LTR)

Advance against a Trust Receipt obtained from the Customers are allowed to only first class tested parties when the documents covering an import shipment or other goods pledged to the Bank as security are given without payment. However, for such advances prior permission/sanction from 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.

The Trust Receipt is a document that creates the Banker’s lien on the goods and practically amounts to hypothecation of the proceeds of sale in discharge of the lien.

 Loan against Imported Merchandise (LIM)

Advance (Loan) against the security of merchandise imported through the Bank may be allowed either on pledge or hypothecation of goods, retaining margin prescribed on their Landed Cost, depending on their categories and Credit Restriction imposed by the Bangladesh Bank, Bank shall also obtain a letter of undertaking and indemnity from the parties, before getting the goods cleared through LIM Account.

  Payment Procedure of Import Documents

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

Date of Payment

Usually payment is made within seven days after the documents have been received. If the payment is become deferred, the negotiating bank may claim interest for making delay.

Preparing Sale Memo

A sale memo is made at B.C rate to the customer. As the T.T & O.D rate is paid to the ID, the difference between these two rates is exchange trading. Finally, an Inter Branch Exchange Trading Credit Advice is sent to ID.

Requisition for the Foreign Currency

For arranging necessary fund for payment, a requisition is sent to the International Department.

Transmission of Message

Message is transmitted to the correspondent bank ensuring that payment is being made.

 Export:

The goods and services sold by Bangladesh to foreign households, businessmen and Government are called export. The export trade of the country is regulated by the Imports and Exports (control) Act, 1950. There are a number of formalities, which an exporter has to fulfill before and after shipment of goods. The exports from Bangladesh are subject to export trade control exercised by the Ministry Of Commerce through Chief Controller of Imports and Exports (CCI & E). No exporter is allowed to export any commodity permissible for export from Bangladesh unless he is registered with CCI & E and holds valid Export Registration Certificate (ERC). The ERC is required to be renewed every year, The ERC number is to be incorporated on EXP forms and other documents connected with exports. The formalities and procedure are enumerated as follows;

 Obtaining exports L/C: To get export L/C form exporter issued by the importer.

Submission of export documents; Exporter has to submit all necessary    documents to the collecting bank after shipping of goods Checking of export documents; after getting the documents banker used to check the documents as per L/C terms Negotiation of export documents; if the bank accepts the document and pays the value draft to the exporter and forward the document to issuing bank that is called a negotiating bank. IF the bank does buy the L/C then the bank normally acts as collecting bank. Realization of proceeds: This is the period when the issuing bank has realized the payment.

Reporting to the Bangladesh bank: As per instruction by Bangladesh bank the bank has to report to respective department of Bangladesh bank by mentioning latest payment.

Issue to proceeds realization certificate (PRC): Bank has to issue precede realization certificate of export LC to the supplier/ exporter for getting cash assistant.

 Export operation:

Bangladesh exports a large quantity of goods and services to foreign households. Readymade textile garments (both knitted and woven). Jute, Jute-made products frozen shrimps, tea are the main goods that Bangladeshi exporters exports to foreign countries. Garments sector is the largest sector that exports the lion share of the country’s export. Bangladesh exports most of its readymade garments products to U.S.A and European Community (EC) countries. Bangladesh exports about 40% of its readymade garments products to U.S.A. Most of the exporters who export through Shahjalal Islami Bank Ltd are readymade garment exporters. They open export L/Cs here to export their goods, which they open against the import L/Cs opened by their foreign importers.

Export L/C operation is just reverse of the import L/C operation. For exporting goods by the local exporter, bank may act as advising banks and collecting bank (negotiable bank) for the exporter,

As an advising bank

It receives documents from the foreign importer and hands it over to the exporter. Sometimes it adds confirmation on the L/C on request from the Opening Bank. By adding confirmation, it assumes the responsibility to make payment to the exporter.

As Negotiating Bank

It negotiates the bills and other shipping documents in Favor of the exporter. That is, it collects the proceeds of the export-bill from the drawer and credits the exporter’s account for the same. Collection proceed from the export bill is deposited in the bank’s NOSTRO account in the importer’s country. Sometimes the bank purchases the bills at discount and waits till maturity of the bill. When the bill matures, bank presents it to the drawer to en-cash it.

In our country, Export and Import operation of bank is very much related with one another because of use of Back to Back and maturity of payment for Back-to-Back L/C is set in such that it can be paid out of export proceeds.

) Back-To-Back L/C:

It is simply issued to the clients against an import L/C. Back-to-Back mechanism involves two separate L/C. One is master Export L/C and another is Back-to-Back L/C. On the strength of Master Export L/C bank issues bank to Back L/C. Back-to-Back L/C is commonly known as Buying L/C. On the contrary, Master Export L/C is known as Selling L/C.

  Features of Back to Back L/C

       An Import L/C to procure goods /raw materials for further processing.

       It is opened based on Export L/C.

       It is a kind of Export Finance.

       Export L/C is at Sight but back to Back L/C is at Usance.

       No margin is required to open Back to back L/C

       Application is registered with CCI&E

       Applicant has bonded warehouse license.

       L/C value shall not exceed the admissible percentage of net FOB value of relative Master L/C.

       Use period will be up to 180 days.

       The import L/C is opened for 75% of the value of Export L/C.

       Here L/C issued against the lien of export L/C.

       Arrangements are such that export L/C matures first then out of this export profit, import L/C is paid out.

 Documents Required for Opening a Back-to-back L/C

In Shahjalal Islami Bank Ltd Principal Branch, following papers/ documents are required for opening a back-to-back L/C-

1. Master L/C

2. Valid Import Registration Certificate (IRC) and Export Registration Certificate (ERC)

3. L/C Application and LCAF duly filled in and signed

     4. Proforma Invoice or Indent

5. Insurance Cover Note with money receipt

6. IMP Form duly signed

In addition to the above documents, the followings are also required to export oriented garment industries while requesting for opening a back-to-back L/C –

1. Textile Permission

2. Valid Bonded Warehouse License

3. Quota Allocation Letter issued by the Export Promotion Bureau (EPB) in favor of the applicant for quota items.

 Checklist of Export L/C

Following defective points are usually found in the Master L/C. So, the bank officials so much carefully check these points. These are:

  1. Name of the Advising Bank.
  2. Name of Transferring Bank
  3. Form of Doc. credit:
  • § Name of Issuing Bank
  • § Documentary Credit No. and issuing date
  • § Date of shipment
  • § Expiry date and place
  1. Applicant/ for order of/ On Account.
  2. Beneficiary/ Favoring
  3. Amount
  4. Availability of Credit
  5. Partial shipment/ Transshipment
  6. Payment condition /Draft Sight
  7.  Category.
  8.  Description of goods:
  • Item
  • Total Qty
  • Unit price
  1.  B/L Clause
  2.  Reimbursement clause.
  3.  UCPDC Clause
  4.  Net FOB value.

   Payment of back to back L\C

In case back to back as 60-90-120-180 days of maturity period, deferred payment is made. Payment is given after realizing export proceeds from the L/C issuing bank.

 L/C under EDF:

Exporter development Fund is created by Bangladesh Bank to give encourages to the exporter in Bangladesh.

Generally Back-to-Back L/C is Usance L/C that is here bill of exchange is payable after some maturity date say 90 or 120 days after the date of acceptance/negotiation. But some foreign seller may require sight payment. Here import L/C matures first. In that case Bangladesh Bank gives me fund to the bank to pay the price of imported goods in favor of the local purchaser of raw materials. When export proceeds come, first Bangladesh Bank loan to the importer is adjusted and remaining part goes to the importer of raw materials.

Negotiation of exports documents:

The most common method of financing exporters is negotiation of documents under L/C. It is a post-shipment credit. Here the bank acts as a negotiating bank. After the shipment of the goods, the exporter submits the relative documents to the branch for negotiation.  The documents are to submit within the period mentioned in the L/C. after approval of negotiation of the bill the full particulars of the documents are entered into the Foreign bill Purchased (F.B.P) register. The documents are sent to the L/C opening branch with a forwarding letter. The branch claim reimbursement from the issuing bank or from the reimbursing bank, giving clear instructions to credit the proceeds of the bill to the Shahjalal Islami Bank Ltd. head office NOSTRO A/C maintained with the named correspondent bank abroad under telex intimation to the Principal branch and Head Office (International Division).

Negotiation stands for payment of value to the exporter against the documents stipulated in the L\C. If documents are in order, Shahjalal Islami Bank Ltd. purchases (negotiates) the same on the basis of banker- customer relationship. This is known as Foreign Documentary Bill Purchase (FDBP).

If the bank is not satisfied with the documents submitted to Shahjalal Islami Bank Ltd. gives the exporter reasonable time to remove the discrepancies or sends the documents to L/C opening bank for collection. This is known as Foreign Documentary Bill for Collection (FDBC)

 Presentation of export documents for negotiation/Purchase:

After shipment, exporter submits the following documents to Shahjalal Islami Bank for negotiation.

       Bill of exchange 

       Bill of Lading

       Invoice

       Insurance Policy/Certificate

       Certificate of Origin

       Inspection Certificate

       Consular Invoice

       Packing List

       Quality Control Certificate

       G.S.P. certificate.

Payment Procedure for FDBP

(i)           After purchasing the documents, Shahjalal Islami Bank Ltd. gives the following entries:

FDBP A/C —————————————————- Dr. (at OD sight rate)

Customer A/C ———————————————– Cr.

(Before realization of proceeds)

Bank would realize only postage charges from the exporter.

Subsequently, Bank will send the documents to the L/C opening Bank for payment with a forwarding letter detailing the enclosures. Upon realization of proceeds the Negotiating Bank would pass the following vouchers:

Head Office A/C ——————————————– Dr. (at T.T Clean rate)

FDBP A/C —————————————————- Cr.

Income A/C Profit on Exchange Trading ————- Cr.

              (Adjustment after realization of proceeds)

A FDBP Register is maintained for recording all the particulars

Foreign documentary bills for collection (FDBC):

Shahjalal Islami Bank Ltd. forwards the documents for collection due to the following reasons,

       If the documents have discrepancies.

       If the exporter is a new client.

FDBC signifies that the exporter will receive payment only when the issuing bank gives payment. Shahjalal Islami Bank Ltd. make regular follow-up with the L/C opening Bank in case of any delay in getting payment.

Settlement of Local Bills:

The settlement of local bills is done in the following ways,

  1. The customer submits the L/C to Shahjalal Islami Bank Ltd. along with the documents to negotiate
  2. Shahjalal Islami Bank Ltd. official scrutinizes the documents to ensure the conformity with the terms and conditions.
  3. The documents are then forwarded to the L/C opening bank.
  4. The L/C issuing bank gives the acceptance and forwards an acceptance letter.
  5. Payment is given to the customer on either by collection basis or by purchasing the document.

Mode of Payment of Export Bill Under L/C:

As per UCPDC 500, 1993 revision there are four types of credit. These 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. 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. Payment is given to the party at the rate 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 us the exchange trading for the branch.

3. 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 or event) on the bank that is to accept it. The bank signs its acceptance on the bill and 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.

4. 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 negotiates.

 Shahjalal Islami Bank Ltd. L/C Nature of Code:

       Cash LC (sight) Foreign                                                     –  01

       Cash LC (usance) Foreign                                                  – 02

       Inland back to back LC (sight)                                           – 03

       Inland back to back  LC (usance)                                      – 04

       Foreign back to back LC (sight)                                         – 05

       Foreign back to back LC (usance)                                     – 06

       LC under AID/Loan  ED                                                    – 07

       LC under STA                                                                   – 08

       Import from EPZ (cash LC) (sight)                                    – 09

       Import from EPZ (cash LC) (usance)                                 – 10

       Import form EPZ (B/B LC) (sight)                                     – 11

       Import from EPZ (B/B LC) (usance)                                  – 12

       Others (LC) cash LC Local sight or usance                         – 99

 Shahjalal Islami Bank Ltd. Back to Back L/C Commission:

       Back to Back (Foreign):

1st quarter- 0.50%

(LC issue date to asperity date with in 90 days than 90 days (0.50%+0.30% = 80%)

 Back to Back (foreign) other charge:

Data max charge    – 1000

Swift                                – 3000

Stamp                              – 150

Back to Back  (Local):

  1st quarter- 0.50%

(LC issue date to expiry date with in 90 days than 90 days (0.50%+0.30% = 80%).

 Back to Back (Sight Local) :

1st quarter- 0.50%

(LC issue date to expiry date with in 90 days than 90 days (0.50%+0.30% = 80%).

Export Development fund:

1st quarter- 0.50%

(LC issue date to expiry date with in 90 days than 90 days (0.50%+0.30% = 80%).

Export processing Zone:

 1st quarter- 0.50%

(LC issue date to expiry date with in 90 days than 90 days (0.50%+0.30% = 80%).

Export processing Zone other charge:

Data max charge    – 1000

Courier charge       – 200

 – 0.50%

(LC issue date to asperity date with in 90 days than 90 days (0.50%+0.30% = 80%)

Back to Back (foreign) other charge:

Data max charge    – 1000

 Swift                               – 3000

Stamp                             – 150

Foreign Remittance:

 Shahjalal Islami Bank Ltd bank is authorized dealer to deal in foreign exchange business. And the Keraniganj Branch is authorized dealer; normal procedure of the AD branch is stated.

 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 the process of providing this remittance service, it sells and buys foreign currency. The conversion of one currency into another takes places at an agreed rate of exchange, which the banker quotes, one for buying and another for selling. In such transactions the foreign currencies are like any 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:

There are two types of remittance:

  1. Inward remittance
  2. Outward remittance.

 Inward Foreign Remittance

Inward remittance covers purchase of foreign currency in the form of foreign T.T., D.D, and bills, T.C. etc. sent from abroad favoring a beneficiary in Bangladesh. Purchase of foreign exchange is to be reported to Exchange control Department of Bangladesh bank on Form-C.

Outward Foreign Remittance:

Outward remittance covers sales of foreign currency through issuing foreign T.T. Drafts, Travelers Check etc. as well as sell of foreign exchange under L/C and against import bills retired.

Working of this Department:

  1. Issuance of TC, Cash Dollar /Pound
  2. Issuance of FDD, FTT & purchasing, Payment of the same.
    1. Passport endorsement.
    2. Encashment certificate.
    3. F/C Account opening & filing.
    4. Opening of Export FC retention Quota A/C& maintain.
    5. Maintenance of ledger of Cash Dollar, FC Deposit A/C & TC.
    6. Maintain FBC register &follow up FBC.
    7. Opening of Student file &Maintain.
    8. Preparation of all related statement, Voucher & posting.
    9. Preparation of Weekly, Monthly, Yearly Statement for Bangladesh Bank returns timely.
    10. Attending all related correspondence to other Bank or Institutions.

Remittance Process Modes:

The remittance process involves the following four modes

Cash Remittance

Dollar/ Pound

SellBank sells Dollar / Pound for using in abroad by the purchaser. The maximum amount of such sell is mentioned in the Bangladesh Bank publication of ‘Convertibility of Taka for Currency Transactions in Bangladesh’.
PurchaseBank can purchase dollar from resident and non – resident Bangladeshi and Foreigner. Most dollars purchased comes from realization of Export Bill of Exchange.
Traveler’s Cheque

(TC)

Issue of TCTC is useful to traveler abroad. Customers can encash the TC in abroad from the drawee bank. TC is alternative to holding cash and it provides better security than holding cash in hand.
Buying

Of TC

If any unused leaf of TC is surrendered bank buys it from the customer. All payments are made in local currency. Banks generally buy only those TC.
Telex TransferOutward TTIt remits fund by tested TT via its foreign correspondence bank in which it is maintaining its NOSTRO Account.
Incoming TTIt also makes payment according to telegraphic message of its foreign correspondence bank from the corresponding VOSTRO Account.
Foreign Demand DraftBank issue Demand Draft in favor of purchaser or any other according to instruction of purchaser. The payee can collect it for the drawee bank in which the Issuing bank of Demand Draft holds its NOSTRO Account. Bank also makes payment on DD drawn on this bank by its foreign correspondence bank through the VOSTRO Account.

 In these processes of remittance, bank must have to make profit as a business institution. Profit is made in two ways:

 1.      Commission charged

2.      Difference in the buying and selling rate.

Conclusion:

From the practical implementation of customer dealing producers during the whole period of my practical orientation in Shahjalal Islami Bank Limited, I have reached a firm and concrete conclusion in a very confident way. I believe that my realization will be in harmony with most of the banking thinkers. It is quite evident that to build up an effective and efficient considered as soon as possible. Besides, every bank has to survive amidst of a large number of banks including local and foreign.

Foreign Exchange

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