The following procedures are taken for collection:
Banks have a wide range network of branches all over the country and offer various kinds of remittance facilities to the public. Telegraphic transfer, mail transfer travelers cheque, and drafts and cheque can do remittance. There are two steps of remittance:
When one banks sends these T.T., M.T., T.C. or cheque to another bank then it will be called inland remittance.
When a bank got this T.T, M.T, T.C and cheque from outside bank, which is not situated in the home country than it will be called foreign remittance.
Types of Remittance:
- Between banks and non banks customer.
- Between banks in the same country.
- Between banks in the different centers.
- Between banks and central bank in the same country.
- Between central bank of different customers.
The main instruments used my the EXIM Bank of remittance of funds are:
- Payment order (PO).
- Demand Draft (DD).
- Telegraphic Transfer (TT).
Payment Order (PO):
It is process of money transfer from payer to payee within a certain clearing area through banking channel. A person can purchase payment order in different modes such as pay order by cash, pay order by cheque.
EXIM Bank charges different amount of commission on the basis of payment order amount. The bank charges for pay order are given in the following chart:
Demand Draft (DD):
It is an instrument containing an unconditional order of one bank office to pay a certain amount of money to the named person or order the amount therein n demand. DD is very much popular instrument for remitting money from one corner of a money to another. Commission for DD is 0.15% of the principal amount.
Difference between pay order and demand draft:
There are some difference between pay order and demand draft, which are:
- in case of demand draft both the payer and payee need to have accounts. But there is no certain rule for pay order.
- PO is used for same clearing area. DD is used for all kinds. DD cannot be done in the same clearing area.
- DD is drawn on a certain bank office. But there is no certain rule for PO.
Telegraph Transfer (TT):
A telegraph transfer (TT) is an instruction for transfer of money by telegraph cable and telex from a bank in one center to another bank in a different center. Generally this is an instruction from the importers bank to the exporters bank or some other bank in the exporters country for transfer of money to a named person.
Here the remitter bears the additional charge of telex/telephone. Charge for TT is 0.15% of the principal amount and the additional charge for telex. Telephone is Tk. 50.00.
It is the safest way to carry money from one country to another. It can be change in any country of the world. Even if the travelers cheque (TC) is lost then the holder of the T.C. can inform it to the bank and the bank will inform it to the agencies so that no one can en-cash the TC while issuing a Traveler Cheque (TC) a signature is needed, so that no one can n-cash it except the holder and also another signature is needed in encashment in front of the banker. So TC is the safest way to carry out side the home country. Accounts Section:
This is very much crucial department for each bank of a commercial bank. Records of all the transactions of every department are kept here as well with order respective branches. Accounting department verifies all financial amounts and contents of transactions.
If any discrepancy arises regarding any transaction this department report to the concerned department.
Task of Account Department:
Account department plays a vital role in commercial banking. I private banking sector accounts department of EXIM Bank of Bangladesh Ltd. Performs its tasks properly. The activities of account section are as follows:
Record all transaction in the cash book.
Record all transaction in the subsidiary and general ledger.
Prepare daily fund function, weekly position, periodic statement of affairs etc.
Prepare necessary statement for reporting purpose.
Pay all expenditure on behalf of the bank.
Make salary statement and pay salary.
Branch to branch fund remittance and support for accounting treatment.
Budgeting for branch.
Make charges for different types of duties.
Advance banking is one of the significant schemes on the EXIM Bank limited. It contributes a huge portion of income in the EXIM Banks total revenue, provides different types of loan to its borrowers as a lender. The bank operates advance facilities through different branches but the entire loan sanction procedure is controlled and monitored by Head Office.
Certain terms and condition are followed when the loan is sanctioned to the borrowers. Now advance banking is discussed in detail as follows:
EXIM Bank is a new generation Bank. It is committed to provide high quality financial services /products to contribute to growth of GDP of the country through stimulating trade & commerce, accelerating the pace of industrialization, boosting up export, creating employment opportunity for the educated youth, poverty alleviation rising standard of living of limited income group and over all sustainable socio-economic development of the country.
To achieve the aforesaid objective of the bank, credit operation of the bank is of paramount importance as the greatest share of total revenue of the Bank is generated from it, maximum risk is centered in it and even the vary existence of Bank depends, on prudent management of its credit port-folio. The failure of a commercial batik is usually associated with the problem in credit portfolio and is less often the result of shrinkage in the value of other assets. As such credit portfolio is not only features dominants in the assets structure of the Bank also.
To provide a broad guide line for the credit operation towards achieving the objective of the ban, for efficient and profitable development of its mobilized resources and to administer the credit portfolio in the most efficient way, a clearly defined, well planned, comprehensive and appropriate credit policy and control guidelines of the bank is a prerequisite.
In view of the above, this credit policy and guidelines of the bank has been prepared subject to amendment, revision, re-adjustment and refinement as and when required by the bank.
The purpose of this policy statement, which replace all previous ones, is to set out the credit policies of the Board of Directors. The policies are described under.
Global credit portfolio limits.
Types of credit activities.
The following are the principles to be adopted for lending authority, approval, monitoring and control on a basis consistent with the global operational objectives and business strategies of the bank.
- General :
The bank will provide suitable credit services and products for the markets in which it operates.
Loans and advances shall be normally be financed from customer deposits and not out of temporary funds or borrowing from other Bank. Credit will be allowed in a manner, which will in no way compromise the bank’s standards of excellence and to customers who will complement such standards. All credit extension must comply with the requirements of the Bank’s Memorandum & Articles of Association, Banking Companies Act 1991 as amended from time to time, Bangladesh Bank’s instruction and other applicable rules and regulations.
The authority structure extension of credit should enable effective adaptation to changes in the economic, technological, regulatory and competitive environment within which the Bank operates.
- Performance :
The conduct and administration of the loan portfolio should contribute. Within define risk limitation, to the Bank’s achievement of portfolio growth and superior return on the hank’s capital.
Credit advancement shall focus on the development and enhancement of customer relationship and shall be measured on the basis of the total yield for each relationship with a customer (on a global basis), through individual transactions should also be profitable.ximize our profits as well as economic growth of the country. To ensure achievement of this objective it will base its leading decision mainly on the borrower’s ability to repay. If credit facilities are grantee on a transaction one-off basis the yield from the facility should be commensurate with the risk.
- Loan Pricing:
Interest on various lending categories will depend on the level of risk and type of security offered. It should be kept in mind that late of interest is the reflection of risk in the transaction. The higher is the risk the higher is the interest rate. Interest may be reviewed at least once in 6 (six) months and more often when appropriate. Fixed interest rate should be discouraged, preferably all rates should vary with cost of funds fluctuation based on a spread for profit.
Effective yield can be enhanced to the extent borrowers are required to maintain deposits to support borrowing activities. Commitment fee and service charges should further improve yield where possible. All pricing of loans should however have relevance with the market condition and be approved by the executive committee/Managing Director from time to time.
- Administration/Monitoring: The administration of the loan process shall ensure. Compliance with all laws and regulations at both local and global levels including bank policy as set out in this document and the Banks credit manual/circulars.
Proper analysis of credit proposal is complex and requires a high level of numerical as well as analytical ability and common sense to ensure effective understanding of the concepts and thus common sense. To ensure effective understanding of the concepts and thus to make the overall credit portfolio of the bank healthy proper staffing of the credit departments shall be done through placement of qualified officials who have got the right aptitude, formal training in finance, credit risk analysis, bank credit procedures as well its required experience. Where repayment and interest servicing performance of a credit deteriorates shall be identifies at an early state and closely monitored to avoid low losses.
Loans/facilities, where appropriate and related security shall be monitored and reviewed by a separate unit unconnected with the credit approval process on a regular basis in order to assess the collect ability of the loan and effectiveness of the security. This unit will report to the Managing Director or his designated officer.
- Exception of Loan Policy:
It is recognized that there will be exception to the state policy, which can be justified. However, the board should approved these by the Executive Committee or and the circumstance must be fully documented in the credit file.
- Global Credit Portfolio Limits:
The nature of credit portfolio shall be governed within guidelines set down by Head Office and regulatory requirement. These guidelines will however be consistent with the global limits identified below for the banks credit portfolio in aggregate. Criteria for exposure to customers are set as under. Total Facilities :
The aggregate of all cash facilities shall not exceed 80% of customer deposit. It is further government by the statutory and liquidity reserve requirement of Bangladesh Bank.
- Term Facilities:
Aggregate long-term facilities shall not exceed 20% of the total credit portfolio. Facilities shall not be allowed for a period exceeding 5 (five) years. Any exceptions will require the approval of the board of directors.
- Country /Cross Border Exposure:
Limits to be established by the board for individual country as well as for aggregate bank credit exposures to different countries. These times are to be reviewed from time to time with due regard to the political and economic environment in each country. The country exposure limits may be utilized up to maximum amounts for different mature, as follows:
- For maturity up to one year: 100%
- For maturity up to two year: Maximum 50% of the limit.
- For maturity up to three year: Maximum 25% of the limit.
- For maturity beyond three year: Maximum 10% of the limit.
- For exceptions, approval is required from the Board of Director.
Exposure to Customer Groups:
Credit facilities in aggregate extended to any one customer group shall not normally exceed 15% of the capital fund or Tk. 10 (ten) crore which ever is lower. However, Board of Directors may relax these limits in deserving cases. All proposals submitted to Head Office will also be required to indicate the extent of Banks global exposure to that customer group.
Sector Wise Allocation:
Sector wise allocation of credit shall be made annually with the approval of Executive Committee/Board of Directors. This will be reviewed from time to time.
Security accepted against credit facilities shall be properly valued and affected in accordance with the laws of the country in which the security is held. An appropriate margin of security will tic taken to reflect such factors as the disposal costs or potential price movements of the underlying assets.
Only one factual study has been made of the extent to which term loans be divided among more than one banks. That study was part of the Federal Reserve business loan survey of 1955. At that time about 30 percent of outstanding term loans conceited of individual loan contract under which the credit had been extended by more than one Bank. The use of multiple participation may arise in either of three kinds of Circumstances.
First, a small Bank may be faced with a credit demand that is in excess of its legal lending limit, in which case it may seek in dispose of the ‘over line’ credit to its city correspondent. This form of ‘over line’ lending is way of accommodating large local customers while at the same time avoiding, the commutative risk of losing them to some other city lender. It is generally understood implicitly that a city correspondent will not solicit the business customers of its country correspondents without their permission.
Second, Large Banks, hared pressed for reserve funds, often sell portions of their term and, other loans to country correspondents. The extent to which this practice is followed varies with the tightness of money markets. In recent years New York has often been hard pressed for funds while country financial institutions have still had unused lending capacity.
Third, some financial institutions prefer participation in lending in order to improved their credit diversification. This, circumstance has arisen particularly during those periods in which, the demand for special kinds of loans in some areas of the country has been so large that the local institutions have become overburdened with this one type of credit. For example-Banks in the southwestern state sometimes have encountered heavy demands, for petroleum industry loans. Large scale syndicates or pools were often formed for the granting of such loans.
Types of Credit Activities:
Depending on the various nature of financing all the lending activities has been brought under the following major heads.
Short term and long term loans allowed to individual/firm/industries for a specific purpose but a definite period and generally repayable by the installments fall under this head. This type of lending are mainly allowed to accommodate financing under the categories.
a) Large and medium scale industries.
b) Small and cottage industries, very often term financing for agriculture and others are also included here.
House Building Loan (General):
Loans allowed to individual /enterprise construction of house (residential or commercial ) fall under this of advance. The amount is repayable by monthly installment within a specified period, advances are known as loan (HBL-GEN).
House building loans is one of the common credit policies of Banking sector. There was only one institution in our country, which is specified in HBFC, Bangladesh House Building Finance Corporation. Now a days, besides this bank many commercial bank and leasing company provides house building loan to the customers.
- Interest Rate:
Currently the interest rate is 15%. But it may changes from time to time depending on the market interest rate. From the customer point of view this change have an adverse impact on the customers. Some times if they have to bear a higher interest on the principal amount which causes a great burden on them.
But from the bank’s point of view this is very good to maintain the mark-up. Because when the market interest rate raises 1% than they are getting 1% less mark-up. So for, these clauses of increasing interest rate they can have the same markup by increasing the interest rate changing on the clients. So this is very effective for the Bank to maintain markup.
The disbursement procedure or timing of disbursement depends on the client or the progress of work of the construction. The disbursement can be made two or three stages or more depending on the above conditions.
Made of Repayment:
The loan shall be adjustment by monthly installment basis. The repayment will stall from 6 (six) months, of the date of first disbursement (it may change according to the terms and conditions or the agreement).
The land and the construction o the land are normally given as collateral. It may changes:-
The documents to be obtained:
a) DP note.
b) Letter of disbursement.
c) Letter of installment.
d) Letter of guarantee.
Cash Credit (Pledge):
Financial accommodations to individual /Firms for trading as well as for wholesaler to industries as working capital against pledge of goods as primary security fall under this head of advance. It is also a continuous credit and like the above allowed under the categories.
a) ‘Commercial Lending’
b) ‘Working Capital’.
The formalities for opening cash credit:
The intending cash credit holder should submit the following documents and being fulfill properly.
stock report, rent receipt.
up to date income tax clearing certificate
letter of continuity
letter of arrangement
DP (demand promissory ) note
letter of guarantee
limit sanction advice
Observing the documents the bank authority prepare a CC proposal from that contains the following information.
Transaction with CD account by the client.
Allied deposit with SB/STD account.
Number of adjustment (S) (applicable only for renewal of CC).
Recycling: it is the ratio of total credit summation to the limit. If the ratio is higher it is better from bankers point of view.
Turn over in the account.
Based on the above mentioned information the dealing officer of the loans and advances department prepare recommendation about the prospect of granting the CC loan to the client.
- Hire Purchase:
Hire purchase is a type of installment credit under which the higher purchaser agrees to take the goods on hire at a stated rental. Which is inclusive of the repayment of principal as well as interest for adjustment of the loan within a specified period.
- Lease Financing :
Lease financing is one of the most convenient sources of acquiring capital machinery and equipment whereby a client is given the opportunity to have an exclusive right to use an asset usually for an agreed period of the time against payment or rent. It is a term financing repayable by installment.
- Lease Finance of RYJM Bank Ltd. :
The lease financing is major financial instrument in banking sector. As the bank is a leading financial institution in the financial sector in our country.
Consumers Credit Scheme of EXIM Bank Ltd.:
Consumer’s Credit Scheme is a major program of EXIM Bank Ltd. In CCS the bank engage an agent who works on behalf of the Bank. This agent performs all the works prior to the sanction of the CCS. They do the inspection and make all the documents necessary for CCS. For this purpose they get commission.
The clients are service holders and businessmen. Service holders can be Govt. and private. In case of govt. officer, the main client must be an officer in rank.
Electronic goods, cars jeeps, microbus, mobile telephone, T & T telephone etc.
Interest rate is 16%, 2% risk fund and 2% service charge.
Down payment is 20% of the CCS amount. It is considered as equity. The payment is 50% for vehicles.
Maturity and Loan Limit:
1-2 Years for electronic goods. Here limit is 1,00,000/-, 3 years for vehicles. Here limit is 3700.000/-.
The documents, which is demands by the bank:
- Two letters of guarantee.
- Bank statements the assets and liabilities of the clients.
- Assurance letter from the organization where lie is currently working.
- Trade license for the businessman or Articles of Association.
- Non judicial stamp amounting Tk. 300/-.
2% penal interest is charged in the residual amount.
Recovery rate is 93%.
It is a special credit scheme of the purchase of consumers’ durable to the fixed income group to raise standard of living. The customers allow the loans on soft terms against personal guarantee and deposit of specified percentage of equity. The loan is repayable by monthly installment within a fixed period.
SOD (Secured Overdraft) General:
Advance allowed to individual/firms against financial obligation (i.e. lien on FDR/PSP/BSP/insurance policy share etc.). This may or may not be a continuous credit.
SOD (Secured Overdraft) Others:
Advance allowed against assignment of work order or execution of contractual works falls under this head. This advance is generally allowed for a definite period and specific purpose i.e. it is not a continuous credit. It falls under the category ‘others’.
SOD (Secured Overdraft) Export:
Advance allowed for purchasing foreign currency for payment against L/Cs (Back to Back) where the exports do not materialize before the import payment. This is also an advance for temporary period, which is known as export finance and under the category ‘commercial lending’.
PAD (Payment Against Document):
Payment made by the bank against lodgment of shipping documents of goods imported through L/C falls under this head. It is an interim advance connected with import and is generally liquidated against payments usually made by the party for retirement of the documents for release of imported goods from the customer’s authority. It falls under the category ‘commercial bank’.
LIM (Loan Against Imported Merchandise):
Advances allowed for retirement of shipping documents and release of goods imported through LIC taking effective control over the goods by pledge in go downs under banks lock & key fall under this type of advance. This is also a temporary advance connected with import, which is known as post-import financing, falls under the category ‘commercial lending’.
LTR (Loan Against Trust Receipt):
Advance allowed for retirement of shipping documents, release of goods imported through LIC falls under trust with the arrangement that sale proceed should be deposited to liquidate within a given period. This is also a temporary advance connected with import, which is known as post-import financing, falls under the category ‘commercial lending’.
IBP (Inland Bill Purchased):
Payment made through purchase of inland bills/checks to meet urgent requirement of the customer falls under this type of credit facility.
This temporary advance is adjustable from the proceeds of bill/checks purchased for collection. It falls under the category ‘commercial lending’.
Export Cash Credit (ECC):
Financial accommodation allowed to customer for exports of goods falls under this head is categorized as ‘Export Credit’. The advance must be liquidated out of export proceeds within 180 days.
Foreign Documentary Bill Purchased (FDBP) (Foreign):
Payment made to a customer through purchase/negotiation of a foreign documentary bills falls under this head. This temporary advance is adjustable from the proceeds of the shipping /export documents. Its falls under the category ‘Export Credit’.
FDBP (Foreign Documentary Bill Purchase ) (Local):
Payment made against documents representing sells of gods industries, which are deemed as export, and which is currency/foreign currency falls under this head. This temporary liability is adjustable from proceeds of the bill.
LDBP: Payment made to a customer through purchase of inland documentary bills. This temporary liability is adjustable from proceeds of the bill.
The principle elements of bank credit administration are as follows:
a) Credit approval.
b) Credit file maintenance.
c) Facility evidence maintenance.
d) Credit monitoring and review.
- Credit Approval:
The primary factor determining the quality of the Bank’s credit portfolio is the ability of each borrower to honor, in a timely basis, all credit commitments made to the bank. The authorizing credit personnel period to credit approval must accurately determine this.
The credit approval process shall be governed by the bank credit policy framework, which can be summarized under the following:
- Credit Evaluation Principles:
To have the optimum returns from the deployed funds in different kinds of lending, more emphasis shall be given on refund of loans and advances out of funds generated by the borrowers from their business activities (cash flow) in read of realization of money by disposing of the securities held against the advance which is very much uncertain and time consuming.
Accordingly the credit evaluation principles must be adhered to at every level of approval.
The lending risk analysis tool containing analysis of both the business risk and security risk provides overall rating of risk in a particular to in under the following lending process:
Assess risk of failure to repay.
Decide whether to accept or reject a loan proposal.
Set price and items.
Obtain sanctioning documents and disburse loan.
Monitor performance and ensure repayment /recovery.
The most prominent and part or the process is assessment of risk of failure to repay which deals with the overall lending risk combining the business risk and the security risk in a matrix derived out or six segments of the business risk.
Management competence risk.
Management integrity risk.
The overall matrix provides four kinds of lending risk for decision makers:
Which are detailed in the lending risk analysis circular/credit manual. Bank shall not approve any lending having an overall risk as ‘managerial’ and ‘poor’ without proper justifications-except for renewal of existing facilities under compelling circumstance or for other reason such as salvage, which shall also contain convenience future improvement of the position. All credit applications rated ‘Poor’ shall require approval of the board regardless of purpose, tenor or amount. Credit Risk Evaluation:
The importance of a detailed and complete credit risk assessment for each facility and customer relationship cannot be over emphasized. The steps that should be followed in carrying out such an assessment are set out in the bank credit manual and in Head Office circulars issued from time to time. All proposals of credit facilities must be supported by a complete analysis of the proposal credit. A comprehensive and accurate appraisal of risk in every credit exposure of the bank is mandatory. No proposal can put up for approval unless there has been a complete written analysis. It is the absolute responsibility of the proposal officer to ensure that all necessary proposal documentation is collected before the facility request is sent to the sanctioning officer.
Assure proper and orderly conduct of the business of the Bank, the Board of Directors’ will empower the Managing Director and other Executives of the Bank to lend up certain amount under certain terms and conditions at their discretion. The lending officer is broadly categorized as follows:
Deputy Managing Director
Executive Vice-President Asstt.
Senior Asstt. Vice-President
The amount and scope of each officers lending authority is a function of the amount and extent of authority required by the officer to carry out his/her responsibilities to the Bank and its clients ma prudent, effective manner. It must be emphasized that an officer will not be delegated lending authority only on the basis of his position. In other words, an officer does not automatically get lending authority by virtue of his corporate and /or functional title. Specified lending authority will be delegated by the Managing Director to various Executives after taking into consideration his proven credit judgement, knowledge and experience. The amount of lending authority approved by the board for various executives form the upper limits of the authority that may be delegated to an officer holding corporate title. Each individuals lending authority will be delegated to him in writing. The Managing Director with the Executive Committee/Board will review all lending authorities periodically.
Approval under Dual Signature:
All approval of credit facilities must be conveyed under dual signature, and ideally both the signatures must have the lending authority. If however, two lending officers of the required lending authority are not available, one of the signatories must have the lending authority.
New Product Development
The new product can be developed in new market or existing market. New product can also be launched in improved market or in the new market. Innovation a product essentially means developing a product resulting in an increase in the product line. These enable diversifying business risks, continuing life cycle of a product and also ensures profits.
Foeign Exchange Department:
One of the largest businesses carried out by the commercial bank is foreign trading. The trade among various countries falls for close link between the parties dealing in trade. The situation calls for expertise in the field of foreign operations. The bank, which provides such operation, is referred to as rending international banking operation. Mainly transactions with overseas countries are respects of import, export and foreign remittance come under the preview of foreign exchange transactions. International trade demands a flow of goods from seller to buyer and of payment from buyer to seller. In this case the bank plays a vital role to bridge between the buyer and seller.
Foreign exchange department of EXIM Bank is one of the most important department of all departments. This department handles various types of activities by three separate sections:
- Import section.
- Export section.
- Foreign remittance section.
The function of this section is mainly to deal with various components such as :
Letter of credit
Payment against document (PAD)
Payment against trust receipt (PTR)
Loan against imported merchandise (LIM).
- Formalities for opening foreign currency (FC) account:
The AD may without prior approval of the Bangladesh Bank open Foreign Currency (FC) account in the name of:
- Bangladesh national residing abroad.
- Foreign nationals residing abroad/in Bangladesh and also foreign firms. Registered abroad and operating in Bangladesh and abstract.
- Foreign missions and their expatriate employees.
- Resident of Bangladesh nationals working with the foreign/international organization operating in Bangladesh provided their salary in paid in foreign currency.
- Papers Required:
Application duly billed in and signed.
Photograph (two copies)
Work permit from board investment (in case of foreign nationals).
Foreign exchange earned through business done or service rendered in Bangladesh cannot be put into these accounts.
No payment in foreign currency (FC) may be made to any resident in Bangladesh out of the foreign currency (FC) account.
All citizens of Bangladesh and other persons are residing to Bangladesh who became the owner of any foreign currency (FC).
- Formalities for Cash Assistance:
- The party , which is engaged making fabrics locally from, threads and used in the readymade garments, which are finally, exported abroad.
- The party which are engaged making fabrics locally from, thread and to supply the fabrics to the manufacturers of readymade garments.
- Application (as per format provided of Bangladesh bank).
- Cash memo/delivery challan/letter of credit through which the party procure thread. Up to 3.00 (three) lack party can purchase thread by cash. Other cases thread will be procured by cheque/ draft/P.O. or L/C.
- Delivery challan
- Copy of L/C for providing fabrics to garments
- Copy of commercial invoice /truck receipt /delivery challan
- Copy of exporters L/C
- Certified invoice
- Certificate bill of lading or air way bill
- Certified of back to back L/Cs open against master L/C.
- Rate of Exchange:
It means the price of one currency expressed in terms of another currency. Rate of exchange is the rate by which the relation among different foreign currencies is established in terms of local currency of that country. Value at which one countries currency can be converted into another’s country.
In exercise of the power conferred by section three of exchange regulation ACT 1947, Bangladesh has issued license to certain bank to deal in foreign exchange is called authorized dealer.
- Spot rate: it is quoted for transaction where the foreign currency bought or sold is to be received or delivered immediately. The current rate of exchange quoted in the foreign exchange market.
- Forward rate: when a rate is applied to a future date it is called forward rate at which foreign exchange can be sold or bought for delivery at a future time.
- Cross rate: the rate of exchange quoted expressing the quotation for any two currencies in term of a third.
- SWAO: sport rate against forward purchased or a spot purchase against forward rate.
- Pence rate/direct quotation: rates are quoted in term’s foreign currency per one unit of foreign currency.
- Currency rate/indirect quotation: rates are quoted in terms of foreign currency per one unit of home currency.
- Buying rate: authorized dealer applies this at the time of purchasing/negotiation of export document and payment against TT.MT, check and drafts required from abroad.
- Selling rate: authorized dealer applies this at the time of lodgment of import documents, realization of LC margin from importer and other foreign exchanges transaction on overseas bank.
- Telquel rate: This is the rate when rate of foreign currency is quoted according to the since of the bill.
- Forward rate at a discount: when forward rate is higher than that of spot rate.
- Forward rate at a premium: when for ward rate is lower than that of spot rate.
- Import Procedure:
To import a person should be competent to be an ‘importer’ according to import an 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 from Bangladesh Bank. And then a person becomes a qualified importer. He is the person who requests or instructs to open an LC he is also called opener or applicant of the credit.
- Importers applications for LC limit margin:
To have an import LC limit an importer submits an application to department of EXIM Bank. Furnishing the following information:
full particulars of bank account.
nature of business
required amount of limit
payment terms and condition
goods to be imported
Now if the officer things the application to open an LC is not fit, the following entries are given to realize the LC, charges postage and LC margin.
- Presentation of the documents:
The seller being satisfied with the terms and the condition of the credit proceeds to dispatch the required goods to the buyer and after that has to presents the documents evidencing dispatching of goods to negotiation bank. After receiving all the documents the negotiation bank when checks the documents against the credit. If the documents are found in order the bank will pay and accept are negotiated to EXIM Bank checks the documents and the documents are stated below:
Bill of lading
Certificate of deposit
Non negotiable copy of bill of lading
Bill of exchange
Per shipment inspection report
Following paper required for new imported while opening on LC:
The following papers are required when opening a new LC:
- Valid import registration certificate (IRC)
- Trade license
- TIN certificate
- VAT certificate
- Three (3) copies declaration by the importer that they have paid /submitted return of income tax of processing last year.
- Membership certificate of chamber of commerce industry.
- According to be maintained with the bank.
- Membership certificate BGMEA (in case of garment Ind.)
- Banded ware house license (in case of export oriented industry)
- LCA form
- Insurance cover note
- Proforma invoice /indent.
- Application for opening of LC duly billed in and signed
- IMP form duly signed
- Memorandum articles of association of the company
- Certificate of incorporation with RJSC
- Certificate of board of directors.
- Resolution of commencement
- Resolution of board of directors
- Confidential report to be obtained from their previous bank
- Report/inquiry to be obtained from CIB of bank
- Credit reports to be obtained from correspondent bank, internationally reputed agency introspect to the supplier.
- LRA to be maid in case of big liability.
Payment procedure of the import documents:
This is the most sensitive tusk of import department. The officials have to be very much careful while making payment. This tusk constitutes the following:
- Date of payment: Usually the payment is made within seven days after the documents have been received. If the payment is become deferred the negotiation bank may claim interest for making delay.
- Preparing sell memo: A sell is made at Bangladesh currency to the customer. As TT and OD is paid to the international department (I.D.) the deference between these two rates in exchange trading. Finally an inter branch exchange trading credit advice is sent to ID.
- Transmission of telex: A telex is transmitted to the correspondent bank insuring that payment is being made.
- Advising a LC:
It is customary to advice a credit to the seller through an advising bank. Advising through a bank is a proof of apparent authenticity of the credit the beneficiary to whom it is addressed. Before forwarding /advising the credit to the seller under appropriate forwarding coverage the advising have to verify the signature of the opening bank and ensure that the terms and conditions of the credit are not violation of the existing exchange controlled regulation and other regulations. Relating to export. Very often advising bank receives request from issuing bank to add their confirmation while advising credit to the beneficiary. The advising can do it if there is prior arrangement between advising and issuing bank or if it feels that the issuing is a reputed a reliable institution and good enough to discharge its obligation. It is also seen that some times’ banks receive credit addressed to them containing the name of the beneficiary in the body of the credit. In such case the advising bank prepares fresh letter of credit to the beneficiary containing all the terms and conditions of the original credit and signature by themselves.
Amendment of LC:
The buyer and seller the terms and conditions of a credit mutually before opening the same and the involved parties are expected to comply with the settle terms and conditions in course of performing their respective roles in the operations of a credit. But in real situation parties involve to a LC, particularly the seller and the buyer can not always satisfy the terms and condition in full as expected the time of setting the terms and conditions due to some obvious and genuine reasons. The roll of establishing a credit might gate frustrated. So in order to avoid such situation the credit should be emendate. In case of revocable credit it can be amended and cancelled be the issuing bank at any moment and without prior notice to the beneficiary. But the case of the issuing bank confirming bank (if any) and the beneficiary. Partial expectance of amendment is not also effective without the agreement of all the above named parties. If a bank issues the services of another bank to give the credit advice to the beneficiary it missed also use the services of the same bank what any amendments must be completed and accurate. If unclear or incomplete instructions are even to emend a credit, the requested to act on such instructions will give preliminary notification to the beneficiary.
Letter of Credit (LC) Facility
Letter of Credit (LC) Facilities:
Bank in favor of exporter on behalf of the importer issue LC. LC is issued through import goods for trading and manufacturing process.
LIM:Loan against import merchandise (LIM) is post import finance which is granted in favor of the importer to retire shipping documents against import of goods. This is generally repaid within thirty days.
LTR:Loan against trust receipt (LTR) is post import finance extended to the importer of goods. Importer issues a trust receipt favor of bank and takes possession of the goods markets and sells the products and repay within the stipulated period.
The export form Bangladesh is subject to export trade control exercise by the ministry of commerce through chief controller of export and imports (CCI & E) no exporter is allowed to a export any commodity permissible for export from Bangladesh unless he is registered with CCI & E and holds valid export registration certificate (ERC). The export registration certificate is required to be renewed every year. The export registration certificate (ERCO is to be incorporated on EXP forms and other documents connected with export).
The formalities and procedure are enumerated as follows:
- Obtaining exports LC: To get export LC 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 LC terms.
- Negotiation of export documents: If the bank accept the document and pay the value draft to the exporter and forward the document to issuing bank that is called a negotiation bank. If the bank does buy the LC then the bank normally act 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 proceed realization certificate of export LC to the supplier/exporter for getting cash assistance.
Following papers to be obtained from the new export while they desire to make export through EXIM Bank:
- Trade license
- Membership certificate from chamber /EPB
- Account to be maintained with bank
- Export LC contract
- EXP form to be certified
- Memorandum and article of association of the company
- Confident credit report to be obtained of the importer
- Registered partnership deed (In case of partnership concern).
The following are the documents normally involved at stage of shipment:
Photocopy of the registration certificate
Photocopy of the contract
Photocopy of the LC
Customs copy of ERF form for shipment of jute goods and EPC form of raw jute.
Freight certificate from the bank incase payment of the fraught at the port of lading is involved
Railway receipts, barge receipt or truck receipt
Preparation of export documents:
Bill of exchange or draft
Bill of lading
Certificate of origin
Quality control certificate
Photocopy sanitary certificate
Export cash credit (ECC)
Packing credit (PC)
Back to back credit facility (BTB)
Foreign documentary bills purchase (FDBP)
Export cash credit (ECC) is extended to the companies who are involved in exporting goods and services. Export cash credit (ECC) is provided to procure raw materials, packing list, wages, salary, utility etc. the quantum of export cash credit (ECC) is usually 75% of export LC.
Packing credit (PC) is granted to export oriented industry usually garment industry to finance their expenses for utility, salary, wages etc. the quantum of packing credit is usually 10% to 155% of the value of the export LC.
Back to back credit facility (BTB) is issued to import raw materials for export oriented industry usually of garments. The primary security of back to back credit (BTB) is export LC usually the quantum of BTB LC is 75% of the value of master LC.
Banks purchases exports bills to the working capital needs to the customer.
The documentary letter of credit (LC):
The letter of credit is a credit compact where by the buyers bank on behalf of the buyer is committed to place and agreed amount if money at sellers disposal under some agreed terms and conditions.
Since the agreed conditions include amongst other things the presentation of some specified documents the letter of credit is called documentary letter of credit. The UCPDC published by international chamber of commerce (1993) revision, publication no: 500 defines documentary credit.
‘Any agreement however named of described where by a bank (The insuring bank) acting at the request and on the instruction of the customer (The applicant) or on its own behalf’.
Parties to a letter of credit (LC):
- Import /buyer/applicant
- Issuing bank /operating bank
- Advising bank/notifying bank
- Confirming bank
- Negotiating bank
- Paying bank/reimbursing bank.
- Importer: The persons who request the issuing bank open a LC.
- Exporter: The party in whose favor LC is established
- Issuing bank: The opens issue LC.
- Advising bank: The bank advice for LC.
- Confirming bank: The bank, which acts confirmation to the credit.
- Negotiation bank: The bank, which negotiates the bill.
- Paying bank: The bank, which effects reimbursements.
All the instructions of the opening bank, advising may confirm negotiates the documents and also be the reimbursing bank under the credit. The reimbursing may be different and even may be located in the third country. Intermediary bank is usually the foreign correspondent of the importers bank through which the LC is advice to the suppliers if the intermediary of the importers bank simply advises/ notifies the LC to the exporter without any obligation on its part, it is called as advising bank. If it adds undertaking to honor the credit while advising the same to the beneficiary, it became the confirming bank.
Different type letter of credit (LC):
1. Revocable credit:
A documentary credit can be revoked at any time with out prior notice to the beneficiary.
2. Irrevocable Credit:
A credit can not be revoked/amended /canceled without consent all parties their to.
3. Confirmed Irrevocable Credit:
At the request seller, the buyer can ask for an irrevocable to be confirmed.
4. Unconfirmed Credit:
A confirmed credit is one in which no confirmation of advising bank or another bank is added.
5. Transferable Credit:
Letter of credit LC under which beneficiary has the right to request the negotiating bank to make the credit available in whole or in part to one or more parties. The bank can transfer a transferable credit only if it is expressly designated as ‘transferable’.
6. Non Transferable Credit:
A credit which not transferable by the first beneficiary to the subsequent beneficiary. That means transfer of credit is restricted.
7. Restricted Letter of Credit:
Negotiations of documents are restricted to particular bank.
8. Open Credit:
The beneficiary may present the documents for negotiation to any bank.
9. Documentary Credit:
The cells for submissions/presentation of some documents.
10. Clear Credit:
The credit does not cell for any presentation of documents.
11. Sight Letter of Credit:
A credit in which the issuing bank commits to pay the beneficiary on the presentation of documents.
12. Usance Letter of Credit:
A documentary credit in which the bank commits to pay the beneficiary at a future specified date.
13. Anticipatory Credit:
The anticipatory credit makes provisions for pre shipment finance to the beneficiary in anticipation of effecting the shipment as per letter of credit LC terms (red clause and green clause credit).
14. Red Clause Credit:
When the credit authorizing the negotiating bank to provide pre-shipment advance/finance to the beneficiary is printed/typed in red ink the credit is called red clause credit.
15. Green Clause Credit:
It is printed/typed in green ink is extension of red clause which authorizes the negotiating bank to grand finance to the beneficiary for storage facility at the port in addition to the pre-shipment finance.
16. Bank to Back Letter of Credit:
A new credit is opened on the basis of an existing credit in favor of the new beneficiary one credit backs another.
It is a guarantee in the form of letter of credit. An instrument payable against presentation of documents.
Documents required in letter of credit operation:
Bill of exchange (Drawer, drawee and payee)
Certificate of origin
Marine insurance policy
Three types of marine policy:
1) ICC (A): Covers maximum risk
2) ICC (B): Covers moderate risk
3) ICC (C): Covers minimum risk.
1) ICC (A):
It covers all risk of loss or damage, but it does not stay any specific list as B & C.
2) ICC (B):
Same as ICC (C) and its additions.
Earthquake volcanic corruption or heightening
Jettison or washing over board
Enter of sea lake or river water into vessel craft hold conveyance container lift-van or place of storage.
Total loss of any package, over board or dropped whilst loading on to or unloading from vessel or craft.
3) ICC (C):
Loss or damage to the subject matter insured reasonably attributes.
Fire or explosion.
Vessel or credit being stranded grounded sunk or capsized
Over turning or derailment of land conveyance.
Collision or contract of vessel craft.
Discharged of cargo at a port of distress
Back to Back Letter of Credit:
A back to back letter of credit is a new credit. It is different from the original credit based on which the bank undertakes the risk under the back to back credit. In this case the banks security is the original credit. The original credit (selling credit) and the back to back credit (buying credit) are separate instruments independent of each other and in no way legally connected, although they both form part of the same business operation. The supplier ships goods to the importer or supplies goods to the exporter and presents document to the bank as is specified in the credit. It is intended that the exporter would substitute his one documents and ships the goods to the importer, if necessary and present documents for negotiation under the original credit, his liability under the back to back credit would be adjusted out of these proceeds. The export L/C is marked lien and no margin is taken.
- In EXIM Bank, papers/documents required for submission for opening of back to back L/C:
Master letter of credit
Valid import registration certificate (IRC) & export registration
Letter of credit application & LCA from duty filled in signed
Perform invoice or indent
Insurance cover note with money receipt
IMP form duty signed.
Payments of back to back letter of credit:
In case back to back as 60 days, 90 days, 120 days and 180 days of maturity period different payment is made. Payment is given after realizing export proceeds from the LC issuing bank.
Test key arrangement:
Test key arrangement is a secret code maintained by the banks for the authentication for their telex messages. It is a systematic procedure by which a test number is given and the person to whom this number is given can easily authenticate the same test number by maintaining that same procedure. EXIM Bank has test key arrangement with so many banks for the authentication of LC message and for making payment.
Different fund are mobilized from foreign country to our country through the foreign remittance section. Purchase of foreign currencies institutes inward foreign remittance and sale of foreign currencies constitutes outward foreign remittance. EXIM Bank has a rich environment where funds flow from different countries.
The transaction of the authorized dealer in foreign exchange involves either inward or outward remittance of foreign exchange between the two countries.
EXIM Bank has authorized dealership. Different branches of EXIM Bank such as Motijheel Branch, Panthapath Branch etc. are providing the foreign remittance services to its customers. EXIM Banks foreign remittance facilities include FBC, LFBC purchase and sale of FCY, FTT, travelers check, FBP.
Remittance procedures of foreign currency:
There are two types of remittance.
- Inward remittance
- Outward remittance
Inward remittance can be divided into different types. Those are as follows.
Foreign Demand Draft (FDD):
If any draft is sent to the name of any organization from abroad then the draft holder is to fill-up form ‘C’ where the draft holder is to fill-up who has send this draft, from where this draft has been sent etc. whether family purpose or not, if the draft has been family purpose then no VAT is required against the draft.
During the year, the bank opened 25,817 import letter of credit and import volume stood at Tk. 49,596.73 million while it was Tk. 41,432.10 million in 2005. The growth is 19.73% in comparison with previous year.
During the year, the banks export volume stood at Tk. 46,234.59 million while it was Tk. 31,285.37 million in 2005. The growth is 47.78% in comparison with previous year.
Foreign Remittance of the bank stood at Tk. 343.78 million as of December 31, 2006 against Tk. 222.97 million in 2005.
In year 2005 to 2006, the Foreign Remittance increased by 54.18%.
Performance Evaluation in 2006 of Export Import Bank of Bangladesh Limited with the Islami Bank Limited and Shahjalal Islami Bank Limited
Capital and Reserve Fund:
Capital and reserve fund for Export Import Bank of Bangladesh Limited is Tk. 3,111 million, Islami Bank is Tk. 3456 million and Shahjalal Islami Bank is Tk. 1362.68 million in 2006.
Above chart shows that Exim Bank not much far behind from the Islami Bank but compare to shahjalal islami bank Export Import Bank of Bangladesh Limited has huge amount of capital and resave fund.
Growth rate of capital and reserve fund is 62.70% for Export Import Bank of Bangladesh Limited, 25.00% for Islami Bank and 60.61% for Shahjalal Islami Bank Limited in 2006.
Assets for Export Import Bank of Bangladesh Limited is Tk. 41,793.5 million, Islami Bank Limited is Tk. 15025.2 million and Shahjalal Islami Bank Limited is Tk. 21342.5 million in 2006.
Assets position of Export Import Bank of Bangladesh Limited is good compare to other Banks.
Growth rate of assets is 23.95% for Export Import Bank of Bangladesh Limited, 22.27% for Islami Bank Limited and 47.72% for Shahjalal Islami Bank Limited in 2006.
Investment for Export Import Bank of Bangladesh Limited is Tk. 32,641 million, Islami Bank Limited is Tk. 113575 million and Shahjalal islami Bank Limited is Tk. 15515.79 million in 2006.
Growth rate of investments is 25.31% for Export Import Bank of Bangladesh Limited, 21.22% for Islami Bank Limited and 46.50% for Shahjalal islami Bank Limited in 2006. Their growth rate is steady because they are now in the pick position on investment.
Import Business for Export Import Bank of Bangladesh Limited is Tk. 49,596 million, Islami Bank Limited is Tk.96870 million and Shahjalal islami Bank Limited is Tk.18684 million in 2006. Import sector the Bank is mordarate compare to other two banks.
Growth rate of import business is 19.70% for Export Import Bank of Bangladesh Limited, 29.98% for Islami Bank Limited and 42.47% for Shahjalal islami Bank Limited in 2006.
Export Business for Export Import Bank of Bangladesh Limited is Tk. 46,234 million, Islami Bank Limited is Tk. 51133 million and Shahjalal islami Bank Limited is Tk.11282 million in 2006. In export business the Bank is doing well compare to other two banks.
Growth rate of export business is 48.07% for Export Import Bank of Bangladesh Limited, 41.37% for Islami Bank Limited and 79.22% for Shahjalal islami Bank Limited in 2006. Here the bank position is middle compare to other two banks.
Foreign Remittance for Export Import Bank of Bangladesh Limited is Tk. 343 million, Islami Bank Limited is Tk.53819 million and Shahjalal Islami Bank Limited is Tk.3535 million in 2006. In foreign remittance sector the Bank is in very bad position compare to other two banks.
Growth rate of foreign remittance is 53.03% for Export Import Bank of Bangladesh Limited, 45.66% for the Islami Bank Limited and 412.31 for Shahjalal Islami Bank Limited in 2006.
Ratio analysis of Exim Bank
In 2006 the current ratio of Export Import Bank of Bangladesh Limited is 0.76 and in 2005 the ratio is 1.16. As we know in current ratio less than 1.00 is bad liquidity condition. That means Export Import Bank of Bangladesh Limited liquidity condition is not good in 2006 compare to 2005. It decreased by 34.49%.
Debt to Equity:
In 2006 debt to equity of Export Import Bank of Bangladesh Limited is Tk. 12.43 and in 2005 it is Tk. 16.63.
Debt to equity is decreased by 25.26% in 2006.
Debt to Total Asset:
In 2006 debt to total asset of Export Import Bank of Bangladesh Limited is 0.93 and in 2005 it is 0.94.
Debt to equity is decreased by 1.06% in 2006.
In 2006 the current capital of Export Import Bank of Bangladesh Limited is Tk. (2,230.68) million and in 2005 it is Tk. 882.32 million.
Compare with last year this year their current capital position is very bad.
Return on Assets:
In 2006 the return on assets of Export Import Bank of Bangladesh Limited is 1.73% and in 2005 it is 1.65%.
In 2006 return on assets is good compare to 2005. It increased by 4.85%.
Return on Equity:
In 2006 the return on equity of Export Import Bank of Bangladesh Limited is 25.88% and in 2005 it is 33.53%.
In 2006 return on equity is not good compare to 2005. It decreased by 22.81%.
Net Income per Share:
In 2006 the net income per share of Export Import Bank of Bangladesh Limited is Tk. 37.95 and in 2005 it is Tk. 48.61.
In 2006 net income per share is not good compare to 2005. It decreased by 21.93%.
Earning per Share:
In 2006 the earning per share of Export Import Bank of Bangladesh Limited is Tk. 43.48 and in 2005 it is Tk. 48.61.
In 2006 earning per share is bad compare to 2005. It decreased by 10.55%.
Price earning ratio:
In 2006 the price earning ratio of Export Import Bank of Bangladesh Limited is 7.74 times and in 2005 it is 10.53 times.
In 2006 price earning ratio is bad compare to 2005. It decreased by 16.49%.
In 2006 the overall performance of Export Import Bank of Bangladesh Limited is in satisfactory level. Because, in 2006 Banks performance is better compare to 2005 performance, in almost every aspect. Their Return on Equity, earning per share and price earning ratio decreased during the year. On the other hand their capital & reserve fund, deposit, assets, investments, Return on Assets etc increased during the year.
Highlights on the overall activities of Export Import Bank of Bangladesh Limited
|Amount in million (Taka)|
|1||Paid up capital||1713.75||878.85|
|3||Surplus of capital||551.24||(131.52)|
|7||Total contingent liabilities and commitments||18994.08||15941.52|
|8||Ratio on investment and deposits||93.18%||91.97%|
|9||Ratio on classified and total investment||1.8%||1.89%|
|10||Profit after tax and provision||650.29||555.33|
|11||Classified investment for the year||588.17||490.99|
|12||Provision held against classified investments||90.88||32.54|
|13||Debt to Equity||12.43||16.63|
|14||Debt to Total Asset||0.93||0.94|
|15||Profit earning assets||35161.47||28743.43|
|16||Non-profit bearing assets||6632.06||4973.26|
|17||Return on investment||6.55%||6.63%|
|18||Return on assets||1.73%||1.65%|
|19||Income on investment||121.46||108.22|
|20||Earning per share (Taka)||43.48||48.61|
|21||Net income per share (Taka)||37.95||48.61|
|22||Price earning ratio (Times)||7.74||10.53|
Finding and Analysis
FINDINGS OF THE STUDY
This study is focused on the various schemes of EXIM Bank, some of which are not now in force and others, are carrying on well. We will now discuss in brief, what we have found after this research under the strength, weakness and success status of various schemes.
- EXIM Bank is the largest of the state-owned commercial banks that come into being in the year of 1999 through the merger of branches of some banks EXIM Bank has total of 15 branches as of 31st December 2002.
- The operation of EXIM Bank is decentralized and the authority for loan sanctioning is delegated in order to make its operations more flexible and responsive to the growing needs of the economy.
- EXIM Bank’s management information system and financial information system have been restructured over the recent years to keep pace with the process of development.
- EXIM Bank is now carrying on their 6 of their schemes successfully.
- Continuous group training facilities are there for the area managers to delve into the different scheme.
- The applicants for loans must be prospective and prone his or her eligibility according to the requirements of the bank and the process of facilities test.
- The rate of interest and the terms and conditions are pointed out clearly in the agreement between the creditor and the debtor.
- The projects must be productive so as to maintain the streams of the yield that would ascertain the effectiveness and the velocity of the credit.
- Before the sanction of the loans, eligible borrowers are to undergo an intensive training regarding the roles, philosophies, procedures and regulations of EXIM Bank, which takes them to a test of recognition. During this test, the borrower must satisfy the authority of the bank about their integrity, sincerity an understanding to the principles of the bank.
- The repayment record of the area, represented by the borrower, will be considered to be basis for the disbursement of loans.
- The transparency of all transactions are to be ensured by the respective DGM and MD of various departments or schemes in the meeting of board of directors in brief manner of accounts.
Finding in different sections of the bank:
General Banking department:
In general banking department they follow he traditional banking system. The entire general banking procedure is not fully computerized. As a result some processing for example collecting money from the deposit take a long time to perform.
The cash counter I think is congested and the procedure is also traditional.
There is no computer in accounts opening section and remittance section. That’s why the service is not as prompt as the customers demand.
Lack of variety of service is also drawback of the general banking area of the EXIM Bank Bangladesh Limited. The bank provides only some traditional limited services to its client. As a result the bank is falling behind in competition.
They are not using Data Base Networking in Information Technology (IT) department. So they have to transfer data from branch to branch to head office by using floppy disk and sure it is not a good system.
In case of opening an account some big parties are come to open accounts if reference with the high officials of the bank. They do not submit all papers that required to open an account and in future they do not feel any urge to submit those papers, but already they become accounts holders. I think in this case the authority is violating the rule.
Accounting to some clients opinion introducer is one of the problems to open an account. If a person who is new of the city wants to open account, it is a problem for him/her to arrange an introducer of SB or CD accounts holder.
Loan and Advances Department:
Political influence is one of the major problems in Bangladesh. Due to political intervention the bank becomes obliged to provide loans in most of the cases, which are rarely recovered. Bank has to face this inconvenience situation almost every year.
The loans and advance department takes a long time process a loan because the process of sanctioning loan is done manually.
Sometimes the securities taken against the loan are deliberately overvalued by the employee to unlawfully help the client. As a result if the client fails to repay the loan the bank authority cannot collect even the principal money invested by the selling those assets. It is also a very important factor that leads to loan default.
CIB report is not readily available from Bangladesh Bank.
Foreign Exchange Department:
In foreign exchange department it is required to communicate with foreign banks frequently and quickly. To make the process easily modern communication media for example e-mail, fax and win fax, Internet etc. should be used. But the bank has not much practice of using these media.
Modern technical equipment such as computer is not sufficient in foreign exchange department. As a result the exchange process make delay and it is also complicated.
In order to improve the service quality customers expressed different opinion in their point of view. I can summarize their opinion, which is the gist of their suggestions. They have to take some more steps to improve the service quality. Each department of the bank should be computerized. The cash transaction process would be easier and very prompt that it would take a very short time. More branches should be opened in Dhaka city and other the other cities of the country. They will have to start consumer credit scheme and other scheme that will help the consumer. It is badly needed to provide modern banking services such as credit card, ATM card, visa care etc. EXIM Bank is providing better service comparing to other private banks. But there are almost fifty two banks in our country. In the near future some new banks are going to be opened. So in order to complete in the market EXIM Bank should be very careful about their service. They will have to improve their service quality and provided more facility.
Recommendation and Conclusions
- The interest rate and other charges may be competitive in orders to compete with competitions and attract customers as well as keeps the old ones.
- Once a person becomes an expert in each department he/she should not be switch to another department as standardization is extremely important to increase workers efficiency.
- Sitting arrangement should be adequate.
- To provide quality service to the customers it is necessary to have a trained teem of an organization or an institution. For this reason the bank should recruit more fresh, bright and energetic persons as M.B.A., B.B.A., B.B.M. etc.
- Bank should offer more facilities to the customers as credit card, visa card, ATM machine etc.
- Branch expansion in Dhaka city as well as other cities i.e. Khulna is also a key factor to serve more people better service and earn more profit.
- The bank should attempt to enter the share market by issuing shares to capitalize more money and invest thereafter by expanding the number of branches around the city.
- One of the business strategies is promotion. So to improve the business status bank should introduce more promotional programs.
- IN general banking department it is necessary to implement modern banking process instead of traditional system. It should be more computerized.
- The loan sanction process should be easier that the client can feel convenient to take loan from the bank.
- Foreign exchange department should be fully computerized that the exchange would be convenient for both bankers and the clients.
- Salary structures may be revised in comparison with other commercial bank which will motivate employee to show more performance for bank which is essential for the bank’s prosperity.
- Business power to be delegated gradually to the Branch Manager for business development.
- Online services should be added to get more satisfaction and popularity from customer.
- The management should organize more training for the employees so that they can develop their knowledge and skill.
- The bank has a provision for internship program but it is not will organized. Although the officials are very careful and cooperative with the interns, the authority should be more structured. If they can properly make them trained it will be very fruitful to recruit them because they learn overall banking in the internship period, so in the beginning of the job they can work as experienced persons. It is also very important that they should give honoree to the intern.
From the practical implementation of customer dealing procedures during the whole period of my practical orientation in EXIM Bank Bangladesh Limited I have reached a firm and concrete conclusion in a confident way. I believe that my realization will be in harmony with most of the banking thinkers.
EXIM Bank is one of the newest banks in Bangladesh. For that point of view, this bank is not highly experienced about the banking industry in this country. The more aggressive the bank will become the more intense the competition will be. In coming days they are to face various key challenges such as:
To satisfy the existing customers.
To continue increasing penetration in the target market
To face the more aggressively net bank
To turn satisfied customer into fully satisfied customer.
It is quite a evident to build up an effective and efficient banking system to the highest desired level computerized transaction is a must. So this issue should be considered as soon as possible. Besides every bank has to survive a midst of a large number of banks including local and foreign banks. That’s why to keep pace with expected profit margin of the time being and for the future every bank should try heart and soul to please the customers in a smart and trusty way.
But quite regretful to mention that most our bank face decreasing profit trend due to switch over of their presents customers to those foreign with higher customer service facilities. So timely decision for introducing sophisticated banking instruments should be taken as early as possible.
After taking effective and defeating measures regarding efficient employees and instruments will help the local office of EXIM Bank to reach the pinnacle of success with high profit and productivity.
- Annual Report of EXIM Bank Limited, 2007.
- Different types of brochures of EXIM Bank.
- Articles of EXIM Bank.
- Business Communication …… John. V. Lesiker.
- Principals of Management (Eight Edition) ….. Terry and Franklin.
- Principles of Marketing (Millennium Edition) … Philip Kotler.
- Design and operation of Customer Service System …. Paul S. Bender.
- Foreign Exchange and Financing of Foreign Trade …. Syed Asraf Ali.
- Half yearly Report 2005 and 2006
- Several Booklets from EXIM Bank.
- Several Newsletter s from EXIM Bank.
- EXIM Bank web site.
- Credit Operational Manual of EXIM Bank Limited
- GENERAL Banking Md. Mosarof Hossain.
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