Foreign Exchange Practice in Uttara Bank

The main objective of this report is to obtain a clear idea and reveal the true picture about the Foreign Exchange Business of Uttara Bank Limited. Report also focus on how the L/C is opened and how the Export and Import operation is done. Finally draw SWOT analysis and find out problems related on Foreign Exchange and suggest some recommendation to over come this situation.

Objective of the Study:

The objective of the report is to have a real live exposure in the banking Sector. It will help to develop my knowledge in sector. This practical Orientation gives us a change to Co-ordinate of theoretical knowledge with the practical experience. The following are of Objective for this practical orientation in bank.

The main objective of the study is to obtain a clear idea and reveal the true picture about the Foreign Exchange Business of UBL. i.e To examine how the L/e is opened and how the Export & Import operation is done.


Scope of the Report:

My Internship report is basically based on the Foreign Exchange. Foreign Exchange is a huge sector of our banking. While working closely with the Uttara Bank Limited (Jatrabari Branch) for three months I found the activities of the Foreign Exchange Business.

Rational of the study:

With the rapid growing competition (due to free market economy) among nationalized, foreign and private commercial banks as to how the banks operates its banking operation and how customer service can be made more attractive, the expectation of the customers has immensely increased. Reciprocating the sentiment, commercial/private banks are trying to elevate their traditional banking service to a better standard, to meet the challenging needs, demands. Side by side these banks have now concentrated their attention towards diversification of their products for better performances and existence. For the above circumstances, it has become necessary for Uttara Bank Ltd, one of the leading commercial banks, to focus its attention towards the improvement of the customer service. That’s why it is quite justified to make an in-depth study about its operation and evaluate the service provided by this bank and scope for its improvement. The study may help formulating policy regarding the ideas relating to the feelings of the customers and bankers.

Further more, Uttara Bank Ltd executives who are actually executing the policies undertaken by the top management will have a chance to communicate their feelings and will have the feedback about their dealing from the customers.

Research Methodology:

Both descriptive and exploratory researches have been selected to analyze this paper. Here the researcher discussed the credit appraisal procedure of UBL and critically analyze the appraisal procedure with the standard one. Comparison analysis has also been taken part in this study.

Data Collection Procedures

There are two main sources of collecting data. To complete this report data has been collected from both primary and secondary sources. The primary data has been gathered by formal discussion with the foreign officials and borrowers. Some secondary data has also been collected to make the report more concrete. These data has been collected from different financial statements & annual report.

Primary sources:

  • Oral and informal interview of officers, employees and loans borrowers in UBL.

Secondary sources:

  • Annual report of UBL.
  • Printed forms & Documents Supplied by UBL.
  • Relevant books, journals etc.

Data Processing:

  • Collected information is processed by the use of computer system. Detailed analysis, working variables, working definitions and evaluations embodied in this report.


Overview of Uttara Bank Ltd.:

Uttara Bank Ltd. Is one of the front ranking first generation private sector commercial bank in Bangladesh. The bank has been carrying out business through its 211 branches spreading all over the country. The management of the bank consists of a team led by senior bankers with vast experience in national and international markets. The bank made significant progress in all sectors of business in 2009.

Performance of Uttara Bank Ltd.:

Uttara Bank’s operation has achieved the confidence of it’s customer with sound fundamentals in respect of deposit accumulation, loans and advances, import and export business, remittance business and profitability.

As a result the bank has been able to earn remarkable profit in business. Overall performance of Uttara Bank Ltd. has been improved for maintaining effective and constructive principals of Bangladesh bank.

Background of Uttara Bank Ltd.:

Uttara bank ltd. had been a nationalized bank in the name of Uttara bank under the Bangladesh bank (Nationalization) order 1972, formerly known as the Eastern banking Corporation Limited which was started functioning on and from 28.01.1965. Consequent upon the amendment of Bangladesh Bank (Nationalization) order 1972, the Uttara Bank was converted into Uttara Bank Ltd. as a public Ltd. Company in the year 1983. The Uttara Bank Ltd. was incorporated as a banking company on 29.06.7983 and obtained business commencement certificate on 21.08.1983. The Bank floated its shares in the year 1984. It has 211 branches all over Bangladesh through which it carries out all its banking activities. The Bank is listed in the Dhaka Stock Exchange Ltd. and Chittagong Stock Exchange Ltd. as a publicly quoted company for trading of its shares.

Financial Results of the Bank:

Uttara Bank financial highlights are growing year to year due to mainly operational efficiency and an increasing customer base.

Assets: The increase in asset was mainly driven by significant growth of customer deposits. The growth of deposits was used for funding in loans and advance and holding of securities for SLR. As of 31st December 2009 total asset of the Bank stood at TK. 71,946.0 million with an increase of 23.10 percent as against 2008. The increase of asset is determined by investments, loans and advances and money at call and short notice.

Cash: Cash in hand stood at TK. 1,341.4 million in 2009 which is lower than that of the previous year and the same amounted to TK. 1,585.5 million in 2008.

Mission Statement of UBL:

To be the premier financial institution in the country providing high quality products and services backed by modern technology and a team of highly motivated personnel to deliver excellence in banking.

Slogan of UBL:

The slogan of Uttara Bank Ltd. is “Abohman Banglar Oitijje Lalito”.

Motto of UBL:

The Bank will be a confluence of the following three interests:-

Of the Bank       : Profit maximization and sustained growth.

Of the Customer: Maximum benefit and satisfaction.

Of the Society    : Maximization of welfare.


Objectives of UBL:

  • Be one of the best banks of Bangladesh.
  • Achieve excellence in customer service next to none and superior to all competitors.
  • Cater to all differentiated segments of retail and whole sale customers.
  • Be a high quality distributor of product and services.
  • Use state-of art technology in all spheres of banking.

Values of UBL:

  • Customer focus
  • Integrity
  • Team work
  • Respect for individual
  • Quality
  • Responsible citizenship


CAMELS Ratings:

Banks are been rated on various parameters, based on financial and non financial performance. Regulators, analysts and also investors wants to know the financial position of banks and one of the method by which they analyze the position of banks position is called CAMELS, and here in Camels each and every word refers to specific category of performance.

C – Capital Adequacy: This parameter indicates the bank’s capacity to maintain capital commensurate with the nature and extent of all types of risks, as also the ability of the manager of the bank to identify, monitor, measure and control such types of risks

A – Asset Quality: This parameter is very helpful in measuring the magnitude of credit risk prevailing in the bank due to its composition and quality of loans, advances, investments and off balance sheet activities

M – Management Quality: This parameter signals the ability of the board of directors, senior managers including top management to identify, measure, monitor and control risks associated with banking, this qualitative measure uses risk management policies and processes as indicators of sound management.

E – Earnings: This parameter indicates not only the amount of and the trend in earnings, but it also analyzes the robustness of expected earnings growth in future.

L – Liquidity: This parameter takes into a/c the adequacy of the bank’s current and potential sources of liquidity, including the strength of its funds management practices.

S – Sensitivity to Market Risk: This is a recent addition to the ratings parameters and it reflects the degree to which changes in interest rates, exchange rates, commodity prices and equity prices can affect earnings and hence the bank’s capital.

The components of CAMELS rating system comprise of both objective and subjective parameters. Some illustrative components are as follows:-

Capital Adequacy:

  • Size of the bank
  • Quality of capital
  • Volume of interior quality assets
  • Retained earnings
  • Access to capital markets

Asset Quality:

  • Volume of classifications
  • Volume of concentrations
  • Special mention loans ratio and trends
  • Volume and character of insider transactions

Management Factors:

  • Compliance with banking laws and regulations
  • Tendencies towards self dealing
  • Technical competence, leadership of middle and senior management
  • Adequacy and compliance with internal policies
  • Ability to plan and respond to changing circumstances
  • Adequacy of directors
  • Existence and adequacy of quality staff and programmers.


  • Return of assets compared to peer group averages and bank’s own trends
  • Adequacy of provisions for loan losses
  • Quality of earnings
  • Dividend payout ratio in relation to the adequacy of bank capital
  • Material components and income and expenses compared to peers and bank’s own trends


  • Availability of assets readily convertible to cash without undue loss
  • Adequacy of liquidity sources compared to present and future needs
  • Access to money markets
  • Ability to make safe and sell certain pools of assets
  • Level of diversification of funding sources ( on and off balance sheet )
  • Trends and stability of deposits
  • Management competence to identify, measure, monitor and control liquidity position
  • Degree of reliance of short term volatiles sources of funds.

Sensitivity to market risk:

  • Ability of management to identify, measure, monitor and control interest rate risk as well as price and foreign exchange risk where applicable and material to an institution Sensitivity of the financial institution’s net earnings or the economic value of its capital to changes in interest rates under various scenarios and stress environments
  • Volume, Composition and volatility of any foreign exchange or other trading positions taken by the financial institution
  • Actual or management to identify, measure, monitor and control interest rate risk as well as price and foreign exchange risk where applicable and material to an institution

Performance Ratings:

The ability of management to identify, measure, monitor and control the risks of its operations is also taken into account when assigning each component rating. It is important to determine whither the institution is following the percepts of the Core Risk Management Guidelines and adhering to Bangladesh Bank legislation and regulations. All banking companies are expected to properly manage their risks. The following is a description of the gradations to be utilized in assigning performance ratings for the six components:

Table: Utilized Gradation in Assessing Performance Ratings

Rating “1”Strong performance
Rating “2”Above average performance that adequately provides for the safe and sound operations and banking company
Rating “3”Performance that is flawed to some degree
Rating “4”Unsatisfactory performance. If left unchecked such performance could threaten the solvency of the banking company
Rating “5”Very unsatisfactory performance in need of immediate remedial attention for the sake of the baking company’s survival.


Foreign Exchange Operation in Uttara Bank Ltd


Foreign trade can be easily defined as a business activity, which transudes national boundaries. These may be between parties or government ones. Trades among nations are a common occurrence and normally benefit both the Exporter and Importer.

Foreign trade can usually be justified on the principle of comparative advantage. According to this economic principle it is economical profitable for a country to specialize in the production of that commodity in which the producer country has the greater comparative advantage ant to allow the other country to produce that commodity in which it has the lesser comparative advantage. It includes the spectrum of goods, services, investment, technology transfer etc.

This trade among various countries causes for close linkage between the parties dealing  in trade. The bank, which provides such transactions, is referred to as rendering international banking operations/ International trade demands a flow of goods from seller to buyer and of payment from to seller. And this flow of goods and payments are done through letter of credit (L/C.)

Foreign Exchange:

As more than me currency is involved in foreign trade it gives rise to exchange of currencies which is known as foreign exchange. The term: Foreign Exchange” has three principal meanings. Firstly, it is a term used referring to the currencies of the other countries in terms of any single currency. To a Bangladeshi, Dollar, Pound Sterling etc, are foreign exchange. Secondly, the term also commonly refer to some interments used in international trade Such as bill of exchange, Drafts, Travel Cheque and other means of international remittance. Thirdly, the terms foreign exchange is also quite often referred to the balance in foreign currencies held by a country.

In exercise of the power conferred by section 3rd of the foreign exchange regulation, 1947. Bangladesh Bank issues license to schedule bank to deal with exchange. These banks are known as Authorized Dealers. Licenses are also issued by Bangladesh Bank to person or firms to exchange foreign currency instruments such as TC currency notes and coins. They are known as Authorized money changers.

Functions of foreign exchange department:


  • Pre-Shipment Advances.
  • Purchase of foreign bills.
  • Negotiating of foreign bills.
  • Advising/Confirming letters-Letters of credit.
  • Advance for deferred payments exports.
  • Advance Against bills for collection.


  • Opening of letter of credit (L/C).
  • Advance Import through LCAF.
  • Import Loan.



  • Issue of Demand Draft (DD), TT etc.
  • Payment of DD, Telegraphic Transfer (TT).
  • Issue and enhancement of traveler’s cheque.
  • Sale and enhancement of foreign currency notes.

The Most Commonly Used Documents in Foreign Exchange:

  • Documentary/Letter of Credit.
  • Bill of Leading
  • Commercial Invoice.
  • Certificate of Origin of Goods Inspection Certificate.
  • Inspection Certificate
  • Packing List.
  • Insurance Policy.
  • Pro-forma Invoice/Indent.
  • Documentary Letter of Credit.

Documentary Credit:

In Simple terms  a documentary credit is a conditional bank undertaking a payment. Expressed more fully, it is a written undertaking by a bank (issuing bank) gives to seller (beneficiary) at the request and in accordance with the instruction of the buyer (applicant) to effect payment (that is by making a payment or accepting or negotiating bill of exchange) up to a staled sum of money, with in a prescribed time limit against stipulated documents. The customary clauses contain in L/C are the following:

  • A clause authorizing the beneficiary to draw bills of exchange up to certain on the opener.
  • List of shipping documents, which are to accompany the bills.
  • Description of the goods to be shipped.
  • An undertaking by the opening bank that bills drawn in accordance with the conditions will be dully honored.
  • Instructs to the negotiating banks for obtaining reimbursement of payments under the credit.
  • Parties to a Letter of Credit (L/C).

Importer/Buyer: Importer/buyer is the person who request/instructs the opening bank to open a L/C. He is also called opener or applicant of the credit

Opening/Issuing Bank: It is the bank which opens/issues a L/C on behalf of the importer. It is also called Importers/buyers bank.

Exporter/Seller/Beneficiary is the party in whose favor the L/C is established.

Confirming Bank: It is the bank which adds its confirming to the credit and it is done at request of issuing bank Confirming bank may or may not be the advising bank.

Advising/Notifying Bank: It is the bank through which the L/C is advised to the exporters. This bank is actually situated in exporters country. It may also assume the role of confirming and or negotiating bank depending upon the condition of the credit.

Negotiating Bank: It is the bank that negotiates the bills and pays the amount of the beneficiary. It has to carefully scrutinize the documentary credit before negotiation in order to see whether the documents apparently are in order or not. The advising bank and the negotiating bank may or may not be the same. Sometimes it can also be confirming bank.

Paying/Accepting Bank: It is the bank on which the bill will be drawn (as per condition of the credit). It is nominated in the credit to make payments against stipulated documents complying with the terms of the credit. If may or may not be the issuing bank.


Bill of Leading:

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

The details on the bill of leading should include:   

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

A bilk of leading specifically status that goods are loaded for ultimate destination specifically mentioned in the credit.

Commercial Invoice:

A commercial document is the accounting document by which the sellers change the goods to the buyer. Its main purpose is to check whether the appropriate goods have been shipped and their unit price total value, marking on the packages etc are consistent with those given in other documents. A  commercial invoice normally includes the following information:

  • Date
  • Name and address of the buyer and seller.
  • Weight of the goods, number of the package, shipping marks and numbers.
  • Complete reference of the letter of credit number, the relevant import license number.
  • Terms of delivery and payment.
  • Shipment details.

Certificate of Origin:

A certificate of origin is a signed statement providing evidence of the origin of the goods and it is required in compliance with exchange control/regulation in the importing Country. It is issued by chamber of commerce. Trade Associations or any other authority authorized by the government to issue the certificate.

Inspection Certificate:

This is a certificate declaring that the goods have been examined and found to be in accordance with the contract of sale. This is signed by the manufacturer or supplier, but the contract of sale may require it is to be issued by a recognized independent inspection body. It is also called survey report.

Packing List:

The Exporter must prepare a packing list showing, item by item, the contains of them containers or cases to enable the importer of the goods check the shipment, If should give description of the goods, net weight and grows weight, specific packages and thus may facilitate assessment by the customs.

Insurance Certificate:

  • The Insurance Certificate documents must
  • Be that specified n the credit
  • Cover the risks specified in the credit.
  • Be consistent with the other documents in its identification of the voyage and description of the goods.
  • Unless otherwise specified in the credit.
  • Be a document issued and/or signed by an insurance company or its agent, or by underwriters.
  • Be dated on or before the date of the date shipment as evidenced by the shipping documents.
  • Be for an amount at least equal to the CIF value of the goods and in the currency of credit.

Pro-Forma Invoice/Indent: 

Pro-Forma Invoice is a memorandum of the term of contract of sale wherein the seller gives the quotation to a potential buyer. If the buyer approves its terms he sends definite order for supply.

Export Practices in UBL:

Practically by the term Export we mean out carrying of anything from one country to another. As banker we define export as sending of visible things outside the country for sale. Export trade plays a vital role in the development process of an economy with the caring we meet out import bills.

Although export trades is always encouraged, any body cannot export anything to any place. Line importer the exporters are also required to get them registered before entering into export trade Export Registration certificate (ERC) given by ECI & E is required for this purpose. The required documents to obtain ERC are also same as Import Registration Certificate (IRC). When a bank (authorized dealer) receives a L/C (Cable or original) it ascertains the correctness of the lest number and the authorized signature. Then the bank sends the original copy of the L/C to the beneficiary.

The export presents the relative documents to the negotiating bank  after the shipment of the goods. The L/C issuing bank undertakes to honor is obligation only if the beneficiary fulfills the conditions stipulated time. Even a slide deviation of the documents from these specified in the L/C may give an excuse to the negotiating bank. So the negotiating bank must be careful, promote, systematic and bias-free while scrutinizing the tender document after careful and thorough examination of the document, the banker has to list out the discrepancies.

Export Procedure:

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

Registration of Exporters: 

For Obtaining ERC indenting Bangladeshi exporters are ruired to apply to the controller of import & export in the Prescribed form along with the following documents:

National and assets certificate.

  • Memorandum and articles of Association and certificate of Incorporation in care of limited Company.
  • Bank certificate.
  • Income tax certificate.
  • Trade License etc .

Securing the Order:  

After getting the ERC (Export Registration Certificate) the exporter may proceed to secure the export order. He/She can do this by containing the buyers directly or through agent. In this purpose exporter can get help from:

  • Liaison Office.
  • Buyer’s Local Agent .
  • Export Promotion Organizations.
  • Bangladesh mission & Abroad.
  • Chamber of Commerce (local & Foreign).
  • Trade fair etc.

Signing The Contract:

After communicating with the buyer exporter has to get contracted (writing or oral) for exporting exportable items from Bangladesh detailing insurance and marks, inspection, arbitration etc.

Receiving the Letter of Credit

After getting contract for sale, exporter should ask the buyer for litter of credit 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 preferable by the advising bank.

The L/C allows sufficient time for shipment and negotiation.

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

  • Cash in advance.
  • Open Account.
  • Collection basis (documentary/etc) in URC-525. ICC publication.

Procuring The Materials:

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

Shipment of Goods:

Then the exporter should take the preparation for export arrange for delivery of goods as per L/C and INCO-terms, prepare and submit shipping documents for payment/Acceptance/Negotiation in due time. Documents for shipment are:

  • EXP Form.
  • ERC (Valid).
  • L/C Copy.
  • Customer Duty Certificate.
  • Shipping Instructions.
  • Transport document.
  • Insurance Documents.
  • Other Documents.
  • Bill of Exchange (if required).
  • Certificate of Origin.
  • Inspection Certificate.

Final Steep:

After those, exporter submits all these documents along with a letter of Indemnity to Uttara Bank Limited (Jatrabari Branch)  for negotiation. An officer scrutinizes all the documents. If the documents are clean, Uttara Bank Limited (Jatrabari Branch) purchased the documents on the banker-customer relationship. This is known as Foreign Documentary Bill purchases (FDBP).


The negotiating bank much be careful promote and bias free will scrutinizing the lender documents. After careful and thorough examination of the documents the banker has to list out the discrepancies.

The Following types of Discrepancies may be noted while the negotiating Bank Examines the Documents:

  • L/C Expired.
  • Late shipment.
  • Amount drawn in excess of the L/C.
  • Bill of exchange not properly drawn.
  • Description of goods differs.
  • Bill of lading or Airway Bill state.
  • Bill of lading closed.
  • Insurance cover note as per terms L/C.
  • Insurance Cover obtained after the Bill of lading or Airway Bill date.
  • Enough number of copies not submitted as required by L/C/
  • Negotiation under L/C restricted.
  • Packing list and certificate of analysis not as per the L/C.
  • Document not properly endorsed in favor the Bank.
  • Full shipment not effective and part shipment prohibited.
  • Gross weigh and net weight shown in different documents differ.
  • Same of the documents required by L/C not submitted and.
  • Document inadequately stamped.

Documents with major discrepancies, which could not be negotiated, should be sent on collection basis with the permission of the exporter.

Procedure For Foreign Documentary Bills for Purchase (FDBP):

After Purchasing the documents UBL (Jatrabari Branch) gives the following entries

  1. FDBP A/C——————————————Dr.

Customer A/C ——————————— Cr.

(Before realization of proceeds)

2 Head office A/C———————————–Dr

FDBP A/C——————————————Cr

(Adjustment after realization of proceeds)

A FDBP Registered is maintained for recording all the particulars.

Foreign Documentary Bills for Collection:

  • Uttara Bank Limited (Jatrabari Branch) forwards the documents for collection due to the following reasons:-
  • If the documents have discrepancies.
  • If the exporter is new client.
  • It the bankers is in doubt.
  • Foreign Documentary Bills of collection Signifies that the exporter will receive payment only when the issuing bank gives payment.

Export Bill Serutinty sheet:

Bank Scrutinizes the export bill on they following points:


  • Late shipment
  • Late Presentation.
  • L/C Expired.
  • L/C Over drawn.
  • Partial shipment or Tran’s Shipment beyond L/C terms

Bill of Exchange:

  • Amount of bill differs with invoice.
  • Not drawn on L/C issuing bank.
  • Not Signed.
  • Tenor or B/E not identical with L/C.
  • Full —— not submitted.
  • Not issued by the beneficiary.
  • Not issued by the beneficiary.
  • Not made out 1 name of the applicant.
  • Description, price, quantity sales terms of the goods not correspond to the credit.
  • Not marked one fold as original.
  • Shipping marks different will B/A & Packing list.

Packing List:

  • Gross weight, net weight & measurement number of cartoons/packages differ with bill of lading (B/L).
  • Not marked me fold as original.
  • Not signed by the beneficiary.
  • Shipping marks differs with B/L .

Bill of Lading:

  • Full set of bill not submitted.
  • Bill of lading is not drawn or endorsed.
  • “Bill of lading (B/L) Shipping on Board”, “Freight Prepaid” or “Freight collect” etc. notations are not marks on the B/L.
  • B/L not indicate the name and capacity of the party i,e, carrier or master on whose behalf the agent is signing the B/L.
  • Shipped on board notation not showing name of pre-carriage. vessel/intended vessel.
  • Shipped on Board nation not showing part of loading and vessel name (Incase B/L indicates a place of receipt or taking in charge different from the port of loading).
  • Sort form B/L.
  • Charter Party B/L.


  • Non-negotiable documents not forwarded to buyers or forwarded beyond L/C terms.
  • Inadequate number of Invoice, Packing List & others submitted.


Settlement of Local Bill:

The settlement of Local Bill is done in the following ways:

  • The customer submits the L/C to Uttara Bank Limited (Jatrabari Branch) along with the documents to negotiate.
  • Uttara Bank Limited (Jatrabari Branch) official scrutinize the documents to ensure the conformity with the terms and conditions.
  • The documents are then forwarded.
  • The L/C issuing bank gives the acceptance and forwards on acceptance letter.
  • Payment is given the customers on either by collection basis or by purchasing the documents.

Accounting Treatment of or Purchase of Local Bill:

Local Bill Purchase Documentary————-Dr

Party A/C ——————————————–Cr.



A LBPD (Local Bill Purchase Documentary) register is maintained to record the acceptance of the issuing Bank until the acceptance is obtained; the record is kept in collection register.


Modes of Payment of Export bills under L/C:

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

Sight Payment Credit: In at sight Payment credits the bank pays the stipulated sum immediately against the exporter’s presentation of the documents.

Negotiation credit In negotiation credit, the exporter has to present a bill of exchange payable to his in addition to other documents that he bank negotiation.

Deferred Payment Credit:      

In deferred pay payment, the bank agrees to pay on a specified future date or went after presentation of the export document. In UBL, payment is given to the party at the rate of A.A 60-90-120-180 as the case may be.

Acceptance Credit:

In acceptance credit, the exporter presents a bill of exchange payable to himself and drawn at the agreed tenor (that is, on a specified future date event) on the bank that is to accept it.

Advising Letter of Credit (L/C):

When exporter L/C is transmitted to the bank for advising the bank sends an advising letter to the beneficiary depicting that L/C has been issued.

Valued Export Customer of UBL (Jatrabari Branch).

  • Florence Fashion Ltd.
  • Generation Next Fashion Ltd.
  • Chaity Composite Ltd.
  • MP Sweater.
  • Niponika Garments Ltd.
  • Atlantis Garments and Buying Ltd.
  • Claxton Apparels Limited.
  • Keya Composite Limited.
  • Repon Knitwear Limited.
  • Gold Land International Limited.


Import Practices of UBL:

Import is the flow of goods and services purchased by economic agents located in one country from economic agents located in another country.

Imports in the private sector under united foreign aid must be made on most competitive basis by procuring at least three quotations from two eligible countries. This restriction does not, however apply to import of goods worth up to Taka one lack.

Import policy:

Under the Imports and Exports (control) Act, 1950 the Government of Bangladesh formulates the Import Policy through Ministry of Commerce. The existing Import Policy (1997-2002) has come into effect from June 14, 1998 to June 30, 2002.

Main Features of Import Policy (1997-2002).

  1. Import Facility through import permit and clearance permit.
  2. Import facility through indent and pro-forma invoice;
  3. Import facility for specimen, advertisement related goods and gifts without permission in a limited amount;
  4. Temporary import facility for re-export;
  5. Import facility through barter;
  6. Joint Import facility (group of industrial consumers and commercial imports);
  7. Import facility on the basis of deferred payment and against suppliers credit;
  1. Import on the basis of deferred payment subject to the clearance of Bangladesh Bank (BB);
  2. Import of Export Processing Zone (EPZ) and export from it beyond the purview of this policy. It will be regulated by respective BB and PBR orders;
  3. Import facility up to $ 2,000 for actual user without permission;
  4. Import facility on the basis of direct payment in foreign countries;
  5. The number of banned and conditional items has been reduced to 121 from 703;
  6. DEPZA, BSC/C and BOI have been treated as patron organization in the case of industrial capital machinery import.
  7. Maximum customs duty has been reduced from 45% to 42.5% (now-from 42.5% to 40%): nominal rate has been reduced to 20.3%, 1991/91-54.5%)
  8. Import under L/C-L/C must be irrevocable. But in case of perishable items like food from $ 5,000 to $ 7,500 transported by road L/C is not required;
  9. Import through LCA (Letter of credit Authorization) form without opening of L/C: Books, Magazines, Publication (on the basis of sight draft/usance bill);
  10. Industrial raw materials and capital goods can be imported without opening L/C;
  11. Government sector bodies can import without any license, permit and ICR;
  12. Special import facility for non-resident Bangladeshi Scientists, doctors, engineers, etc, to import instruments and appliances without any permission;
  13. Facility of imports for export oriented industries by government, foreign exchange rate.
  14. Letter of credit (L/C) on imports for capital machinery and spare parts for new industrial units can be opened without IRC (Import Registration Certificate);
  15. Commercial Import by cash payment only.

Import Procedure:

Imports are purchase of foreign goods and services by consumers, firms and government in Bangladesh.

The Importer must obtain Import Registration Certificate (IRC) from the chief controller of Import & Export (CCI&E) Submitting the following papers:

  • Up to date trade License.
  • Nationality and Asset Certificate.
  • Income tax certificate.
  • Bank solvency Certificate,
  • In case of a Company, Memorandum & Article of Association and Certificate of Incorporation.

Than the importer has to Contact with the seller outside the country to obtain the pro-forma invoice.

Usually a local agent of the seller or foreign agent of the buyer makes this communication other sources are:

  1. Trade fair.
  2. Chamber of commerce.
  3. Foreign mission in Bangladesh.
  4. Journals etc.

After the importer accepts the pro-forma invoice, he makes a purchase contract with the exporter detailing the terms and conditions of the import.

After making the purchase contract, import procedure differs with different means of payment. In most cases import payment is made by the documentary letter of credit in our

country. The other means are cash in advance, open account, nostro and vostro account, loro account and collection methods. It is mentioned in the purchase contract, which payment procedure has to be applied.


Different Payment Procedures Are:

Cash in advance:

Importer pays full, partial or progressive payment by a foreign DD, TT. After receiving payment, exporter will send the goods and the transport receipt to the importer. Importer will take delivery from the transport company.

Open account:

Exporter ships the goods and sends transport receipt to the importer. Importer will take delivery and makes payment by foreign DD, TT, at some specified date.

Collection Methods:

Collection methods are either clean collection or documentary collection. Again collection methods may be document against payment or document against acceptance. Another is direct collection in which the exporter obtains his banks pre-numbered direct collection letter.


Letter of credit:

Letter of credit is the well accepted and most commonly used means of payment. It is an undertaking for payment by the issuing bank to the beneficiary upon submission of some stipulated documents and fulfilling the terms and conditions mentioned in the letter of credit.

L/C Opening Process:

In foreign exchange banking letter of credit (L/C) opening is an important part. L/C opening is a set of procedure which every imported needs to follow to import their product. At first importer need to contact with Exporter and with their mutual understanding exporter prepare pro-forma Invoice and sent it to the importer. After received the pro-forma invoice importer present it to their bank that is known as issuing bank that prepare L/C on behalf of importer. After preparing L/C proposal need to send Head Office of issuing bank for approval. After approval issuing bank open L/C on behalf of Importer, Signed it by proper authority of bank officer, and send it their authorized exporter country bank for authentication. The process is done through SWIFT. The bank that provides authentication then it called advising bank. After given the authentication seal-advising bank send it to the exporter bank as per requirement of invoice.

Papers required at the time of opening on L/C:

  • Import Registration Certificate.
  • Trade License.
  • IMP From.
  • Letter of Credit Authorization (LCA Form).
  • I dent in case of indenture.
  • Credit Report of the Importer.
  • Credit Report of the Seller should be collected from correspondent bank
  • In case of F.O.B/C&F. insurance cover note.
  • In case of quota item, quota allocation paper.


Importer’s application for L/C limit/margin:

To have an import L/C limit, an importer submits an application to the department of (UBL) furnishing the following information:

  • Full particulars of Bank account.
  • Nature of Business.
  • Required amount of limit.
  • Payment terms and conditions.
  • Goods to be imported.
  • Offered Security.
  • Repayment Schedule.

A credit officer scrutinizes this application and accordingly prepares a proposal and forwards it to the Head Office Credit Committee (HOCC). The committee,if satisfied, sanctions the limit and return back the branch. Thus the importer is entailed for the limit.

Before opening a L/C the issuing bank must check the following:

  • L/C application properly stamped, signature verified and margin approved and properly retained.
  • Indent/Pro-forma Invoice singed by the Importer and Indenter/Supplier.
  • Ensure that the relevant particulars of L/C application correspond with those stipulated in Indenter y/pro-forma invoice.
  • Validity of LCA entitlement of goods, amount etc, confirms to the L/C application.
  • Charges like commission, Postage, Teller charge, SWIFT charge, if any recovered.
  • Insurance Cover Note-in the name of issuing bank-A/\C importer covering required risks and Voyage role.
  • Incorporation of instruction for Negotiating Bank as per banks existing arrangement.
  • Reimbursement instruction for reimbursing bank.
  • If foreign bank confirmation is required, necessary permission should be obtained and according advising bank is existing arrangement.
  • If add confirmation is required on account of the applicant charge should be recovered from the applicant.
  • In case of askance L/C mention interest rate clearly n the letter of credit.


Back-to-Back Letter of Credit:

A Back-to-Back letter of credit is a now 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 bank main security is original credit. The original credit (Selling Credit) are separate instrument independent of each other and in no way legally connected though they both from part of the same business operation.

The supplier (beneficiary) of the back-to-back credit) ships goods to the importer and presents documents to the bank as is specified in the credit. It is intended the exporter would substitute his our documents for negotiating under the original credit, his liability under the back to back letter of credit would be adjusted out of these proceeds The exporters L/C is market lien and no margin is taken.

In UBL (Jatrabari Branch), Papers/documents required for submission for opening of back to back L/C.

  • Master L/C
  • Valid Import Registration Certificate (IRC) & Export Registration Certificate (IRC).
  • L/C application & LCA form duty filled in Signed.
  • Performa invoice or Indent
  • Insurance cover note with money receipt.
  • IMD form duly Signed.

Deflective Points of Clauses Appear in the Master L/C:

  • Issuing Bank is not reputed.
  • Advising Credit by the advising bank without authentication.
  • Port of destination absent.
  • Inspection Clause.
  • B/L to blank endorse, to third bank to be endorsed to buyer or thirty party

Payment of back-to-back letter of credit:

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

Accounting treatment for back to back L/C

  1. When the document is arrived, the following vouchers are passed:

Customer’s A/C—————————Dr

Commission on Acceptance————-Cr

  1. While payment, if the fund is at hand, the accounting entry is-

Sundry deposit margin on acceptance———-Dr

Customers A/C——————————-Cr

Under the back to back concept, the seller as beneficiary of the credit, offer it as security to the advising bank fool the issuance of the second credit. As application for this second credit the seller is responsible for reimbursing the bank for payment made under it regardless of whether or not be he is paid under the first credit. There is, however no. compulsion for the bank to issue the second credit, and in fact many banks will not do so.

Foreign Exchange Remittance:

Foreign Remittance means sending of fund. The word Remittance we understand sending or transferring of fund through bank from one place to another place, which may be within the country or between tow countries, one in aborted is called foreign Remittance.

So we see that there two types of Foreign Remittance:

  1. Foreign Inward Remittance
  2. Foreign Outward

Inward Remittance

The remittances that are received from abroad are called inward remittance.

Purpose of inward 

  • Family maintenance.
  • Gift
  • Foreign investment.
  • Export Proceeds.
  • Mode inward remittance.
  • Foreign Telegraphic Transfer (FTT)
  • Foreign Demand Draft (FDD).
  • Foreign Currency Encasement.

Outward Remittance:

Remittances that are made from our country to abroad are called outward Remittance.

Purpose of Outward Remittance:

  • Import Proceeds.
  • Mode of outward remittance.
  • Foreign Telegraphic Transfer.
  • Foreign Demand Draft.
  • Foreign Currency Endorsement.



Major Drawbacks of Uttara Bank Limited in Foreign Exchange Business:

In this era of globalization completion among the bank is increase intensively. So to compete in this competition UBL should gain more efficiency in this banking sector. As the world is changing every second they need to upgrade their service and taka the chatting to provide service likes modern international banks.

As I have an opportunity to work with this bank in the light of my practical experience, I would like to discuses if major lacking:

As UBL is one of the second generation banks, it operation and management system is not modernized. There is absence use of modern banking services like electronic banking system, Interment banking system. Phone banking system.

The bank use banking software named “Bank Ultimus” which is not user friendly and complicatedly to use as well as lengthy in processing.

Customers have to wait long time to get banking service, as they don’t have fully computerized service. As the whole process is so lengthy it increase banks hidden cost, and time,

In recent years, the foreign exchange business of Uttara Bank Ltd. is increasing of at faster rate. Now a day, is rendering a stable support to the national foreign exchange business. Although the foreign exchange business loading day by day there are also some obstacles around it they are as per observations:

  • Insufficient presence of modern communication equipment.
  • Inadequate ATM booth.
  • Application of modern technology such as computerization is not sufficient.
  • I think most profitable sector of bank is its foreign exchange department and advance department. But there officer space is congested and they fail to give customer good entertainment.
  • Lack of enthusiastic scheme for exporter & importer.
  • Less attractive remuneration package and motivation for the employees.




One the basis of overall analysis, I would like to briefly say a few words on the overall policy and performance of the Bank. If following step can take it will help develop responsive sales and service culture within the Bank.

Strengthen Growth:      

The Bank continues to maintain its leading role to strengthen growth initiative in the private sector. These being the age of competition, the bank have to bring in gradually in gradually the use of more modern technology in their operations so as to introduce innovative practices and improved operational skill into management of the Bank’s affairs. This is very much necessary n the interest of the expanding client and to ensure them full range of banking services.

Strength Relationship :

Despite many constrains, the Bank continues to move ahead with steady growth of business. If gives top priority to strengthen relationship with the members of trade, commerce and industry.  So as to expand the arena of business as well as to earn greater confidence of the customers. To this end, greater public elation activities are being channeled from both Head Office and branch level to further enhance the image of the bank to the members of public.

Customer satisfaction:

Customer satisfaction will continue to remain first priority in our professional perception. In all of their business activities, they should recognize their operation to establish an even greater benefit to their customers by providing quality banking services.

Innovative Services:

The financial services markets around the world are being reshaped due to change of policy measures of the bigger economies of developed countries and globalization. In consideration of all these factors they have to evolve new Policy and action plans to further strengthening the working methodology suiting the need of new times and to adjust with prevailing situation.

Foreign Exchange Banking:

Effective and efficient initiative is necessary to recover the default loans.

Attractive incentive package for the exporter will help to increase the export Introduction of Internet Banking.

For a sound and state foreign operation, Uttara Bank Ltd.

Foreign Exchange operation of other renowned commercial banks is more dynamic and less time consuming. Uttara Bank Ltd. should take some initiative to compete with those banks.





Uttara Bank Ltd. being a leading number of private sector banks in the country endeavored to adjust itself to this new situation by adopting pragmatic policies and strategies. The Bank faced the challenge as new banks are arising and many foreign banks start their journey, continued efforts have been made to enhance the growth and development through the realistic policy pursued by the Board of Directors and Management. In addition to that determined and dedicated professional efforts of the Executive, Officers, and Employees helped the bank to go ahead to fulfill the commitment.

The declaration symbolized a turning point in the country’s exchange management and exchange rate system. The period preceding this declaration saw an intensification of reforms undertaken by Bangladesh Bank to case control on foreign payments and exchange rate arrangement. Bangladesh now contributes 76% of the country’s total foreign exchange earnings.

In recent years of banking business, Uttara Bank Ltd. (Jatrabari Branch) has shown better performance companring with other second generation bank

I expect the Uttara Bank Ltd. may hold its prospect in future and can contribute a vital role in the socio-economic development of Bangladesh.