Foreign remittance means remittance of foreign currencies from one place/person to another place/person. In broad sense, foreign remittance includes all sale and purchase of foreign currencies on account of Import, Export, Travel and other purposes. However, specifically foreign remittance means sale & purchase of foreign currencies for the purposes other than export and import. As such, this chapter will not cover purchase & sale of foreign currencies on account of Import & export of goods.
All foreign remittance transactions are grouped into two broad categories‑
- I. Outward remittance &
- II. Inward remittance
The term inward remittance includes not only purchase of foreign currency by TT, MT, Drafts etc. but also purchase of bills, purchase of traveler’s cheques.
Two forms are prescribed by Bangladesh Bank are used for purchase of foreign currencies such as:
EXP Form: Remittances received against exports of goods from Bangladesh are done by form EXP.
Form C: Inward remittances equivalent to US$ 2000/- and are above are done by Form “C”. However, declaration in Form C is not required in case of remittances by Bangladesh Nationals working abroad.
Utmost care should be taken while purchasing Currency Notes, Travelers cheque, Demand Draft & similar instrument for protecting the bank from probable loss as well as safety of the Bank officials concerned.
NAME OF THE EXCHANGE CO.
Name of the Foreign Bank dealing with ABBL.
|SL. NO||NAME OF BANK|
|01||STANDARD CHARTERED BANK NY|
|02||AMERICAN EXPRESS BANK NY|
|03||CITI BANK N.A.NY|
|04||HSBC BANK, USA, NY|
|06||HABIB AMERICAN BANK, NY|
|09||BANK MELLI , IRAN|
|10||BANK OF CELON,SRILANKA|
|11||MAYANMAR FOREIGN TRADE BANK LTD.|
|13||STANDARD CHATERED BANK,KARACHI|
|14||BANK OF BHUTAN,BHUTAN|
1. Foreign Currency (Bank) Notes
General Principles and Precautions
Branches may freely buy foreign currency notes from Bangladesh as well as foreign nationals.
Currency notes, especially notes of higher denominations, i.e. US $ notes of 50 and 100 denominations, should be checked carefully to ascertain their genuineness.
Foreign Exchange Department shall maintain currency wise F.C. in hand Control Ledger to record each day’s transactions.
On the last working day of each month the branch shall calculate the exchange gain or loss and carry out necessary adjustment in the control ledger.
Foreign currencies shall be purchased at the rates instructed by the Head Office,
For purchase of foreign currency notes
|FC in hand A/C for FC amount @ FC (Cash) Buying rate||Dr.|
|Cash A/C or Party’s A/C for payment to the customer at the same rate||Cr.|
For payment to the customer’s FC A/C
|FC in hand A/C for FC amount @ FC (Cash) Buying rate||Dr.|
|Customer’s FC A/C @ TT clean (buying) rate||Cr.|
|Income A/C (Difference between the two rates)||Cr.|
Month end adjustments
If there is gain on conversion of the FC in hand at TT clean buying rate, the vouchers to be passed are as follows:
|FC in Hand (Control Ledger) at TT clean buying rate||Dr.|
|Income A/C – Exchange Earnings||Cr.|
If, however, there is loss on conversion of FC balance, the vouchers will be as follows:
|Expenditure A/C—Exchange loss||Dr|
|FC in hand (Control Ledger)||Cr|
2. Travelers’ cheques:
Payment against TCs
The customer tendering the Travelers’ Cheques should be asked to sign the TCs at the designated places in front of the concerned bank official who would satisfy himself about its genuineness with reference to the customer’s signature already appearing on the TCs and his passport. Should there be any doubt; purchase contracts of the TCs may be asked for. The vouchers will be passed as follows:
|FBP Clean A/C for FC amount @ TC buying rate||Dr|
|Cash / Party’s A/C at the same rate minus charges||Cr|
Collection of Proceeds of Enchased TCs
Enchased TCs should be sent to the relevant foreign correspondent for collection and crediting the proceeds to the Head Office’s Nostro A/C. On receipt of the credit advice from the foreign correspondents the following vouchers are to be passed.
|HO (relevant Nostro A/C) at ready buying rate||Dr.|
|FBP for outstanding amount||Cr.|
|Income A/C (Exchange difference).||Cr.|
3. TCs and Foreign Drafts received on Collection Basis (FOBC)
After observing the usual formalities, the branch, on transmission of the instruments abroad for collection, will pass a contra liability voucher at the TT (clean) buying rate, as follows:
|Customer’s liability (FBC) at the TT (clean) buying rate||Dr.|
|Customer’s liability (FBC) at the TT (clean) buying rate||Cr.|
On receipt of credit advice from the correspondents, the branch will reverse the contra liability voucher as follows:
|Banker’s liability (FBC Lodged) at the TT (clean) buying rate||Dr.|
|Customer’s liability (FBC) at the TT (clean) buying rate||Cr.|
Simultaneously, the following vouchers are to be passed:
|AB General Account HO (ID)-Relevant Nostro Account (@ TT clean rate||Dr.|
|Cash / Party’s A/C / Cash (@ TT Doc rate)||Cr.|
|Income A/C Exchange earning (difference between TT (doc) & Ready buying rate)||Cr.|
|Income A/C Commission Postage, (if any)||Cr.|
4. Foreign Drafts and Cheques:
The branch should exercise due care and ordinary prudence for purchase of foreign currency denominated drafts, cheques and similar kinds of instruments. The instrument should not be purchased unless the customer is well known to the branch as a regular trustworthy client. An Indemnity Bond should be obtained for refund of the money along with interest in the event of dishonour of the instruments. Indemnity need not be obtained in case of instruments against which proceeds have already been credited to the bank’s Nostro account. The accounting vouchers will be as follows:
If the instrument is drawn on the bank’s branch and the cover amount already paid by the issuing bank into the bank’s Nostro account the vouchers will be passed at TT (clean) rate.
|AB General Account HO (ID) Relevant Nostro A/C) @ TT (clean) rate||Dr.|
|Party’s A/C / Cash||Cr.|
|Income Account–Commission as per schedule||Cr.|
For outright purchase of the instrument without cover fund having been credited to Nostro A/C, the vouchers to be passed as follows at OD (transfer) rate-
|FBP at OD (transfer) rate||Dr.|
|Cash /Party’s A/C||Cr.|
|Income A/C commissions, as per schedule||Cr.|
|Income A/C postage||Cr.|
On receipt of cover in Nostro A/C in due course of time at TT (clean) rate-
|AB General A/C: HO ID) (at ready buying rate) Nostro||Dr.|
|FBP for outstanding amount||Cr.|
|Income A/C Exchange gains on FC (difference between the two)||Cr.|
For collection of drafts/Cheques i.e. without payment of value to the customer at TT (doc) buying rate-
|Customer’s liability (FBC) at TT (doc) buying rate||Dr.|
|Banker’s liability ( FBC)||Cr.|
On receipt of proceeds to the bank’s Nostro A/C the vouchers shall be passed at the TT(clean) rate:
|AB General Accent HO (ID)- (Nostro A/C) at TT ready buying rate||Dr.|
|Party’s A/C / cash at TT (doc) buying rate||Cr.|
|Income A/C Exchange gains on FC (Difference between two rates)||Cr.|
|Commission, (if any)||Cr.|
Simultaneously, the branch will reverse the contra liability voucher as follows-
|Banker’s liability (FBC Lodged)||Dr.|
|Customers liability (FBC)||Cr.|
5. Telegraphic Transfer (T.T)
Test number appearing on the TT must be checked and authenticated by the concerned official. After receiving confirmation from the Head Office about the proceeds having been credited to their Nostro A/C and observing the usual formalities including declaration on Form ‘C’, if necessary, the vouchers are to be passed at the TT buying rate as follows;
For payment to customer’s A/C or cash-
|AB General A/C: HO ID) (Nostro A/C) at ready buying rate||Dr.|
|Party’s A/C / Cash or Payment Order at TT buying less commission and charges as per schedule||Cr.|
|Income A/C exchange on FC amount at difference between ready buying rate and TT clean buying amount||Cr.|
|Taxes / VAT, (if any)||Cr.|
|Income A/C-commission TT Foreign||Cr.|
For Credit to FC A/C-
|AB General A/C: HO ID for FC amount at TT (clean) buying rate||Dr.|
|Customers FC A/C (at the same rate)||Cr.|
Miscellaneous Services Given by This Department:
|Student file||Students who are desirous to study abroad can open file in the bank. By opening this file. Bank assures the remittance of funds in abroad for study.|
|NRIT Account||‘Non-resident Investor’s Taka Account is an account by which Non-resident Bangladeshi can deposit foreign currency for investment in security of stock exchanges. For such account holders, 5% of primary shares are reserved.|
|F.C. Account||Foreign Currency Accounts are opened in the names of Bangladeshi nationals or persons of Bangladeshi origin working or self-employed in abroad and are maintained as long as the account holder’s desire.|
|NFCD||Stands for Non-resident Foreign Currency Deposit|
Eligible persons may open such accounts even after their return to Bangladesh, within six months of their arrival.
|RFCD Accounts||Stands for Resident Foreign Currency Accounts|
Persons ordinarily resident in Bangladesh may maintain foreign currency accounts with foreign exchange brought in at the time of their return to Bangladesh from visiting abroad. Balance of such accounts is freely remittable to abroad.
FOREIGN INWARD REMITTANCE:
One of the strategic links of international trade financing of the bank is the inward remittance. Towards the end AB bank strengthened the existing remittance relationships with various exchange house. Besides AB signed an agreement with RIA an exchange house having extensive presence world-wide to enhance the remittance network.
AB bank is also focusing on enhancing the customer service windows through the existing 70 branches network. Besides an ATM based remittance network, predominantly on card base, is being worked upon through the proposed IT joint venture with few other banks of the country.
Corporate clients of AB remain another major source of foreign currency. Bank is also trying to broaden its base through solicitation of indigenous export clients.
Total remittance at the end of the year stood at USD million 156.36 registering a growth of nearly 19 percent over last year.
Year wise Foreign inward remittance target & achievement there againstk.
Up to April. 08.
$50 . 21
BAHRAIN, IRAN, IRAQ & QATAR
Branch wise Yearly Remittance Position of SECI
|Year /Name of Branch||Manh-attan||JacksonHeights||Brooklyn||Astoria||Los Angeles||Atlanta||DetroitMichigan opened on 2002||Paterson|
N.J opened on 2003
|Total achiev-ement|| |
NOTE: Official Remittance of Manhattan branch for 2000 was 106.01 million Dollar and 2001 was 11.80 million Dollar
Branch wise Monthly Remittance Position of SECI, USA for the year-2008.
Figures in Million U.S.
|Month/ Branch Name||Manha-ttan||JacksonHeights||Brooklyn||Astoria||Los- Angeles||Atlanta||Detroit||Paterson||Total|
The term “Outward Remittances” include not only remittance i.e. sale of foreign currency by TT. MT, Drafts, Traveler’s cheque but also includes payment against imports into Bangladesh & Local currency credited to Non‑resident Taka Accounts of Foreign Banks or Convertible Taka Account.
Two forms are used for Outward Remittance of foreign Currency such as: ‑
IMP Form: All outward remittance on account of Imports is done by this form
T.M Form : For all other outward remittances form T.M is used.
A. Private Remittance:
1. Family remittance facility:
a) Foreign Nationals working in Bangladesh with approval of the Government may remit through an Authorized Dealer 50% of Salary and 100% of leave salary as also actual savings and admissible person benefits. No prior approval of Bank is necessary for such remittance,
b) Remittance of moderate amounts of foreign exchange for maintenance abroad of family members (spouse, children, parents) of Bangladesh Nationals are allowed by Bangladesh Bank on written request supported by certificate from the Bangladesh Mission in the concerned country.
2. Remittance of Membership fees/registration fees etc.
Authorized Dealer may remit without prior approval of Bangladesh Bank, membership fees of foreign professional and scientific institutions and fees for application registration, admission, examination JOEFL, SAT etc.) in connection with admission into foreign educational institutions on the basis of written application supported by demand notice/letter of the concerned institution.
Prior permission of Bangladesh Bank is not required for releasing foreign exchange in favor/on behalf of Bangladesh students studying abroad or willing to proceeds abroad for studies. Authorized Dealers shall allow exchange facilities for this purpose according to the following drill:
n Application duly filled in by the student as per prescribed format of Bangladesh Bank.
n Original and photocopy of admission letter issued by the concerned institution in favor of the student.
n Original and photocopy of estimate relating to annual tuition fee, board and lodging
n Incidental expenses etc. issued by the concerned institutions.
n Attested copies of educational certificates of the applicant and
n Valid passport.
4. Remittance of Consular Fees:
Consular fees collected by foreign embassies in Bangladesh Taka and deposited in a Taka Account maintained with an AD solely for this purpose may be remitted abroad without prior approval of Bangladesh Bank.
5. Remittance of evaluation fee:
Authorized Dealer’s without prior approval of Bangladesh Bank may remit evaluation fee on behalf of Bangladeshis desiring immigration to foreign countries for getting educational certificates of the person concerned evaluated by a foreign institution. A demand note of the foreign immigration authority is required for this purpose.
Private travel quota entitlement of Bangladesh Nationals is set at US$3000/‑ per year for visit to countries other than SAARC member countries and Myanmar, Quota for SAARC member countries and Myanmar is US$1000/‑ for travel by air and US$500/‑for travel by overland route. Authorized Dealers may release this travel quota in the form of foreign currency notes up to US$500/‑ or equivalent and balance exchange in the form of TCs or total quota in the form of TCs the annual quotas mentioned above are for adult passengers. Fore minors (Below 12 year in age) the applicable quota will be half the amount allowable to adults.
Authorized Dealers may release above travel quota without prior approval of Bangladesh Bank subject to observation and satisfaction of following points:
- The intending traveler is a customer of the AD bank or is sufficiently well known to the AD Bank or the intending traveler has paid relevant Travel Tax. The intending traveler has a valid passport.
- The AD should verify and satisfy itself that any foreign exchange released for an earlier travel was utilized with he journey being actually undertaken or was duly enchased unutilized.
- The intending traveler is in possession of confirmed air ticket for journey to be undertaken and that the intended journey to be undertaken not later than two weeks after the date on which exchange is issued.
- The amount releases is endorsed on the passport and air ticket of the traveller with indelible ink, with the signature and the name of the AD branch embossed in the passport and ticket. However, while issuing foreign exchange to the Diplomats/ privileged persons/ UN personnel, Govt. Officials travelling on officials’ duties, such endorsement in the passports need not be made.
- In each case of release of foreign exchange for travel abroad, photocopies of first six pages of the passport s and the page recording endorsement of foreign exchange and photocopies of the pages of ticket showing name of the passenger, route and date of journey and endorsement of foreign exchange along with the relative T.M. form should be sent to Bangladesh Bank along with monthly returns.
7. Health & Medical:
Authorized Dealers without prior approval of Bangladesh Bank may release foreign exchange up to US$10,000/‑ for medical treatment abroad on the basis of the recommendation of the medical Board set up the Head Directorate and the cost estimate of the foreign medical institution.
Applications for release of exchange exceeding US$10,000/‑ should be forwarded along with supporting documents to Bangladesh Bank for prior approval.
8. Seminars & workshops:
Without prior approval of Bangladesh Bank AD may release US$200/‑ per them and US$250/‑ per them to the private sector participants for attending seminars, conferences and workshops organized by recognized International bodies in SAARC member countries or Myanmar and in other countries respectively for the actual period of the seminar/workshop/conference to be held on this basis of invitation letters received in the names of the application or their employer institutional.
9. Foreign Nationals:
- The Authorized Dealers may issue foreign currency TCs to foreign nationals without any limit and foreign currency notes up to US$300/‑ or equivalent per person against surrender of equivalents amounts in foreign currencies. The TCs and foreign currency notes should however, be delivered only on production of ticket for a destination outside Bangladesh and the amount issued should be endorsed on the relative passports.
- Authorized Dealers may allow recon version of unspent Taka funds of foreign tourists into foreign exchange on production of the encashment certificate of foreign currency. Recon version shall be allowed by the same AD with which the foreign currency was encashed earlier. AD should retain the original encashment certificate and relative forms where reconversion exceeds US$5000/‑.
10. Remittance for Haji:
Authorized Dealers may release foreign exchange to the intending pilgrims for performing Hajj as per instructions/circulars to be issued by the Bangladesh Bank each year.
11. Other Private remittance:
Applications for remittances by private individuals for purposes other than those mentioned above should be forwarded to Bangladesh Bank for consideration & approval after assessing the bonafide of the purpose of remittance on the basis of documentary evidence submitted by the applicant.
B. Official & Business Travel:
1. Official Visit:
For official or semi officials visits abroad by the officials of govt., Autonomous/Semiautonomous institutions etc., Authorized Dealers may release foreign exchange as per entitlements fixed by the Ministry of Finance from time to time, In such cases, the applicant for foreign exchange shall be required to submit the sanction letter and the competent authority’s Order/Notification/Circular authorizing the travel.
2. Business Travel Quota for Now Exporters:
Up to US $6,000/‑ or equivalent may be issued by an AD without prior approval of Bangladesh Bank to a new exporter for business travel abroad, against recommendation letter from Export Promotion Bureau, Bonafide requirement beyond US$6000/‑ is accommodated by Bangladesh Bank upon written request through an AD with supporting documents.
3. Business Travel Quota for Importers and Non‑exporting producers:
- I. Subject to annual upper limit of US$5000/‑ importers are entitled to a business travel quota @ 1 % of their imports settled during the previous financial year.
- Subject to annual upper limit of US$5000/‑ non exporting producers for the local markets are entitled to a business travel quota @1 % of their turnover of the proceeding financial year as declared in their tax return.
The same business organization engaged in imports as well as production shall however; draw business travel quota entitlement only on one count.
4. Exporters’ Retention Quota:
i) Merchandise exporters may retain up to 40% of realized FOB value of their exports in foreign currency accounts. However, for export of goods having account. However, for exports of goods having high import content (such as readymade garments, POL products including furnace oil bitumen, electronic goods etc.,) the retention quota is 7.5% of the repatriated FOB value.
Funds from these accounts can be used to meet bonafide business expenditure, such as business visits abroad, participation in export fairs and seminars, establishment and maintenance of office abroad, import of raw materials, machinery and spares etc. without prior approval of Bangladesh Bank.
Exporters may at their option, retain the foreign currency in interest bearing renewable term deposit accounts with Authorized Dealers in US Dollar, Pound Sterling DM or Japanese Yen with a minimum account of US$2000 or Pound 1500.
ii) Service exporters (excluding indenting commission or agency commission of indenting house of buying house respectively) may retain 5% of their repatriated income in foreign currency accounts or as renewable time deposits with Authorized Dealers, Funds from these accounts can be used to meet expenses for bonafide business travel abroad.
C. Commercial Remittances:
1. Opening of branches or subsidiary companies abroad:
Remittance of up to US$30,000/‑ or equivalent per annum may be released by the Authorized Dealers without prior approval of Bangladesh Bank to meet current expenses of offices/branches opened abroad by resident in Bangladesh or Commercial/Industrial concern incorporated in Bangladesh.
Such remittance may only be made in the names of concerned offices/subsidiary companies abroad subject top examination of following papers:
- I. Approval letter of the competent authority of the country concerned for opening the office in that country
- II. Copy of report submitted to Bangladesh bank.
2. Remittance by shipping companies airlines & courier service:
Foreign Shipping Companies, airlines and courier service companies may send, through an AD, funds collected in Bangladesh towards freight and passage after adjustment of The Authorized Dealers may remit such royalty and other local cost & Taxes, if any without prior approval of Bangladesh Bank.
3. Remittance of royalty and technical fees:
No prior permission of the Bangladesh Bank of BOI is required by the enterprises for entering into agreement involving remittance of royalty, technical know‑how or technical assistance fees, operational services fees, marketing commission etc., if the total fees and other expenses connected with technology transfer do not exceed.
a) 6% of the cost of imported machinery in case of new projects
b) 6% of the previous year’s sales as declared in the income tax returns of the ongoing concerns.
The authorized dealers may remit such royalty and other fees without prior approval of Bangladesh Bank.
Royalty and other fees beyond the rate mentioned above may be remitted by the Authorized Dealers without prior approval of Bangladesh bank provided specific approval of BOI has been obtained by the applicant company.
4. Remittance on account of training & consultancy
Industrial enterprises producing for local market may remit through Authorized Dealers up to 1% of their annual sales as declared in their previous years’ tax return for the purpose of training and consultancy services as per relevant contract with the foreign trainer/consultant, without prior approval of Bangladesh Bank.
5. Remittance of profits of foreign firms/branches:
Authorized Dealers may without prior Bangladesh Bank approval remit abroad the post tax profits of branches of foreign firms and companies including foreign banks & other financial institutions subject to submission of relevant documents/information along with the application.
6. Remittance of Dividend:
Prior permission of Bangladesh Bank is not required for
- Remittance of dividend income to non‑resident shareholders on receipt of application in the prescribe form from the companies concerned.
- Remittance of dividend declared out of previous years’ accumulated reserves.
7. Subscriptions to foreign media services:
On application from the local newspapers, Authorized Dealers may remit foreign exchange towards cost of subscription of news items, features, articles of foreign news agencies subject to submission of (1) contracts entered into between the applicant and the foreign news agency and (ii) NOC of the Ministry of Information.
8. Costs/ for Router monitors:
Authorized Dealers may remit abroad costs/fees on account of their own subscription to foreign media services such as Reuter monitor service, without prior approval of Bangladesh Bank.
9. Advertisement of Bangladeshi Products In mass media abroad:
Prior permission of Bangladesh is not required by the Authorized Dealers for remittance of charges for advertisement of Bangladeshi commodities in mass media abroad subject to submission of Invoice from the concerned foreign mass media along with the applications of the remitter. The applicant will have to submit copy of the advertisement to the Ad within one month of this issuance.
1. Bank Charges:
The Authorized Dealers may affect remittances towards settlement of dues to foreign banks of bank charges, cost of cables and other incidental charges arising in their normal course of the business without prior approval of Bangladesh Bank.
The following would be the procedure for Accounting-
1. Foreign Currency Notes
|Party’s A/C / Cash at FC selling rate||Dr.|
|Foreign currency in hand||Cr.|
|Income A/C-Commission, (if any)||Cr.|
2. TC, Draft and TT
|Party’s A/C / Cash from party@ TC/ OD selling rate Plus charges||Dr.|
|AB General A/C: HO ID) @ ready selling rate||Cr.|
|Income A/C for the difference between the two rates||Cr.|
|Income A/C for Commission as per schedule of charges||Cr.|
3. TC draft and TT issued from FC A/C of customer
(General as well as retention quota of exporter)
|Customer’s FC A/C @ current holding rate of FC balance||Dr.|
|AB General A/C: HO ID) @ current holding rate of FC balance||Cr.|
|Customers A/C or cash from the customer for charges||Cr.|
|Income A/C as per schedule of charges||Cr.|
4. Issue of Foreign Currency Notes to the debit of the customer’s FC A/C (General or retention quota)
|Party’s FC A/C at prevailing cash selling rate plus commission and charges as per schedule||Dr.|
|FC in hand A/C at cash selling rate||Cr.|
|Income A/C for Commission, as per schedule.||Cr.|
5. Settlement of TC on weekly basis
|AB General A/C HO ID||Cr.|
Year wise WES Remittance Position.
Figures in Million U.S. Dollar
Month wise WES Remittance Position
Figures in Million U.S. Dollar
Year wise target & achievement their against.
Figures in Million U.S. Dollar
AB Banks Export volume growth was 15.67 percent as the total export reached tk. 2067.66 crore at the end of the year. Export business concentration was in the area of frozen fish, readymade garments, knitwear and other indigenous products.
MAJOR EXPORT BY AB BANK (FIG. IN CRORE)
AB Banks foreign correspondence relationship is spread across the world covering important financial centers including important financial houses. This network of over 300 correspondents has helped bank in expanding its international trade.
The import and export trade in our country are regulated by the Import and Export (Control) Act, 1950.
Under the export policy of Bangladesh the exporter has to get 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 incorporate on EXP forms and other papers connected with exports.
- Ø Registration of Exporters:
For obtaining ERC, intending Bangladeshi exporters are required to apply to the controller/ Joint Controller/ Deputy Controller/ Assistant Controller of Imports and Exports, Dhaka/ Chittagong/ Raishahi/ Mymensingh/ Sylhet/ Comilla/ Badshal/ Bogra/ Rangpur/ Dinajpur in the prescribed form along with the following documents:
Nationality and Assets Certificate-
Memorandum and Article of Association and Certificate of Incorporation in case of Limited Company-,
Income Tax Certificate
Trade License etc.
Securing the Order:
After getting ERC Certificate the exporter may proceed to secure the export order. He can do this by contacting the buyers directly or through agent.
In this purpose the exporter may get help from:
Buyers Local Agent
Export Promoting Organization
Chamber of Commerce (local & foreign)
Trade Fair etc
Signing the Contract:
After communicating buyer, exporter has to get contracted (writing or oral) for exporting exportable items from Bangladesh detailing commodity, quantity, price, shipment, insurance and marks, inspection and arbitration etc.
Receiving Letter of Credit:
After getting contract for sale, exporter should ask the buyer for Letter of Credit (L/C) clearly stating terms and conditions of export and payment.
The following 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, preferably confirmed by the advising bank;
The L/C allows sufficient time for shipment and negotiation.
(Here the regulatory framework is UCPDC-600, ICC publication)
Terms and conditions should be stated in the contract clearly in case of other mode of payment:
- Cash in advance-,
- Open account,
- Collection basis (Documentary/ Clean)
(Here the regulatory framework is URC-522, ICC publication
Procuring the Materials:
After making the deal and on having 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:
Then the exporter should take the preparation for export arrangement for delivery of goods as per L/C, prepare and submit shipping documents for Payment/ Acceptance/ Negotiation in due time.
Documents for shipment:
- EXP form,
- ERC (valid),
- L/C copy,
- Customer Duty Certificate,
- Shipping Instruction,
- Transport Documents,
- Insurance Documents,
- Other Documents,
- Bills of Exchange (if required) Certificate of Origin,
- Inspection Certificate
- Quality Control Certificate,
- G.S.P. Certificate,
- Phyto-sanitary Certificate.
Final Step: Submission of the documents to the Bank for negotiation.
Back to Back Letter of Credit (BTB):
Bangladesh is a developing country. After receiving order from the importer, very frequently exporters face problems of scarcity of raw material.Because some raw materials are not available in the country. These have to be collected from abroad. In that case, exporter gives lien of export L/C to bank as security and opens an L/C against it for importing raw materials. This L/C is called Back To Back L/C. In back to back L/C, PBL keeps no margin.
Sometimes there is provision in the export UC that the importer can use the certain portion of the export L/C amount for importing accessories that are necessary for the making of the product. Only in that case, BTB is opened.
Payment of Back to Back LC:
Client gives the payment of the BTB L/C after receiving the payment from the importers. But in some cases, client sells the bills to the ABBL. But if there is discrepancy, the ABBL sends it for collection.
In case of BTB L/C, ABBL gives the payment to the beneficiary after receiving the payment from the UC of the finished product (i.e. exporter). Bank gives the payment from DFC Account (Deposit Foreign Currency Account) where Dollar is deposited in national rate.
For BTB L/C, opener has to pay interest at LIBOR rate (London Inter Bank Offering Rate). Generally LIBOR rate fluctuates from 3% to 5%.
A schedule named Payment Order; Forwarding Schedule is prepared while making the payment. This schedule is prepared when the payment of UC is made. This schedule contains the followings:
- Reference number of the beneficiary’s bank and date.
- Beneficiary’s name.
- Bill value.
- Payment order number and date.
- Equivalent amount in Taka
Negotiation of documents under L/C:
The exporter presents the relative documents to the negotiating bank after the shipment of the goods, A slight deviation of the documents from those specified in the L/C may rise an excuse to the issuing bank to refuse the reimbursement of the payment already made by the negotiating bank. So the negotiating bank must be careful prompt, systematic and indifferent while scrutinizing the documents relating to the export.
Foreign Documentary Bill Purchase (FDBC):
Sometimes the client submits the bill of export to bank for collection and payment of the BTB UC. In that case, bank purchases the bill and collects the money from the exporter. ABBL subtracts the amount of bill from BTB and gives the rest amount to the client in cash or by crediting his account or by the pay order.
For this purpose, ABBL maintains a separate register named FDBC Register. This register contains the following information:
- Reference number (FDBC)
- Name of the drawer
- Name of the collecting bank
- Conversion rate
- Bill amount both in figure & in Taka.
- Export form number
- Export L/C number
Advances against Export Bills surrendered for collection:
Banks generally accept bills for collection of proceeds when they are not drawn under an L/C or when the documents, even though drawn against an L/C contain some discrepancies. The bank generally negotiates bills drawn under L/C, without any discrepancy in the documents, and the exporter gets the money from the bank immediately. However, if the bill is not eligible for negotiation, the exporter may obtain advance from the bank against the security of export bill. In addition to the export bill, banks may ask for collateral security like a guarantee by a third party and equitable/registered mortgage of property.
Export Documents Checking:
General verification: –
L/C restricted or not.
Exporter submitted documents before expiry date of the credit.
Shortage of documents etc.
Each and every document should be verified with the L/C.
International trade is one of the important components of the AB Banks foreign exchange business. In 2007, both Import and Exports experienced double digit growth keeping in pace with the overall business growth. Imports at the end of the year stood at Tk. 4844.14 crore. Major Import finance was in the areas of food items, textiles, and scrap vessels among others.
An importer is required to have the following to import through ABBL—
Applicant has to apply for opening LC by a prescribed form.
- Applicant has to submit the Letter of Indent or Letter of Proforma Invoice.
- Letter of Indent: Many sellers have their agent in seller’s country. If the contract of buying is made between the buyers and the agent of the sellers then Letter o Indent is required.
- Letter of Proforma Invoice: If the contract is made directly between the buyer and the sellers then Letter of Proforma Invoice is needed.
- Applicant has to submit IRC (Inventors Registration Certificate). It is a certificate being renewed every year. This certificate is necessary if the contract is made between the buyers and the agents of the sellers. IRC is of two types – COM and IND. COM is given for commerce purpose and IND is given for industrial purpose.
- Applicant has to submit LCAF (Letter of Credit Authorization Form).
- Applicant has to submit insurance document.
- Applicant has to prepare FORM-IMP.
- Recently, there has been made a provision to give a certificate named TIN (Tax Payers Identification Number).Taxation department issues this certificate.
- Then after proper scrutiny bank will open an L/C.
While opening L/C, importer must keep certain percentage of the document value in the bank as margin.
Procedure to Open an L/C:-
To open an L/C, the requirements of an importer are:
He must have an account in ABBL.
He must have Importers Registration Certificate (IRC).
Report on past performance with other bank. ABBL collects this report from Bangladesh Bank.
CIB (Credit Information Bureau) report from Bangladesh Bank.
A proposal approved by the meeting of executive committee of the bank. It is necessary only when the L/C amount is small or there is no limit.
If the L/C amount is large or there is a limit, then an approval from Bangladesh Bank is needed. Usually this approval is needed for amount more than one crore
Accounting Treatment for Opening LIC.
For opening L/C, importer will apply to the issuing bank. In that case, importer is called applicant or opener. After opening an L/C bank will create a contingent liability. In that case, the accounting posting will be the following-
Generally L/C is opened against some margin.
- While paying the money by the issuing bank, issuing bank will reverse the above entry and the entry will be-
- Then the issuing bank will give another entry—
|Payment Against Document (PAD)||Dr.|
|AB General Account||Cr.|
PAD will debit because the bank will pay the money against some documents’ General Account is a miscellaneous account. It will be credited because by this entry ABBL creates a liability. He has to pay the money to the advising bank. And the gain made by the transaction is shown at Exchange Gain Account.
All these entries are made after receiving some documents from the exporters. The above procedure is called Lodging. After giving the above entry, ABBL will inform the clients for collecting the documents from the bank.
A Rich picture of current L/C system
- Importers will pay the due to the bank and collects the documents. In that case, the entry will be –
After opening the L/C, ABBL (issuing bank) must receive the documents for any other proceedings. These documents are —
i. Bill of Lading,
iii. Packing List,
iv. Country of Origin.
Lodgment of documents:
After receiving the documents from the exporters, at first ABBL write it in the PAD Registrar. PAD Register contains date, PAD number, L/C number, name of the drawer, name of the drawee, amount, number of copies of various documents, name of the imported items. This written procedure is called Lodgment.
While doing lodgment, ABBL makes the following entries-
|Payment Against Document (PAD)||Dr.|
|AB General Account||Cr.|
ABBL makes the payment to the reimbursing bank against the documents. That’s why, it debts the PAD Account.
For payment, ABBL deposits the money at the miscellaneous account @69.35 (current rate). And sends an Inter Branch Credit Advice (IBCA) to credit the amount to a Nostro account maintained in a bank of exporters’ country from which payment will be made. By this transaction, ABBL makes a profit @O. 1 5 per dollar.
Retirement of Documents
The process of collecting documents from bank by the importer is called retirement of the documents. The importer gives necessary instructions to the bank for retirement of the import bills or for the disposal of the shipping documents to clear the imported goods from the customs authority. The importer may instruct the bank to retire the documents by debiting his current A/C.
From 2003 to 2007 AB Bank Import is as follows: