Report on Balance of Payment


Foreign exchange plays a very important role in the balance of payment of the country. Foreign exchange takes within its fold purchase (import), sale (export) of goods and services across the boarders. Although foreign remittance is a component of the Current Account Transaction and as such part of foreign trade, the area is being given special attention due to its immense contribution in national economy.

Bangladesh being one of the emerging economies, the import mix of the country is built of multifarious items from cookies to capital machinery. On the other hand the major items of export for more than a decade have been Readymade Garments which replaced the traditional items of jute, tea and leather in terms of value and volume. In this time of globalization, countries tend to export the items in which they have competitive advantage and import those items where they lack the advantage. Import meets the need of consumer goods, industrial inputs and other essentials causing outflow of foreign currency while Export business takes the role of minimizing the gap in balance of trade through inflow of foreign currency by remittance business.

Traditionally, import business of the country surpassed export business in terms of value. Same is the case for individual banks, which bridge the exporters and importers of the country with the rest of the world. The involvement of the bank in the industrial sector as well as in the commercial sector has raised the import business of the bank disproportionately with that export business. Foreign remittance and export business of the bank jointly maintains a precarious balance with import business. In this backdrop, in order to optimize the foreign trade business to maintain a good balance between the inflow and outflow of foreign currency, to extend the banks position in foreign trade of the country, to emerge as a major foreign exchange market player of the country and thereby ensuring the stability of foreign exchange market of the country, the need for a Further study of the bank is being felt very deeply. This study will help to focus the issue and may raise further steps of the same.

As an employee of IFIC I want to focus the convergence in managing Foreign  Exchange Business of IFIC in Bangladesh.

Origin of the Study:

This study on Foreign Exchange Activities of IFIC (International Finance Investment & Commerce) Bank Limited has been prepared and presented as obligatory requirement of the MBA program School of Business & Social Studies,International Islamic University Chittagong.

In fact, Foreign exchange department provide a descriptive framework of foreign exchange management under the regulation provided by Bangladesh Bank. This report treats foreign exchange policy & management system as an essential learning in Bank management. Foreign Exchange management focuses on decision making in an international context. It reveals different techniques that are offered by the foreign exchange related departments.

This report is real-life institutional experiences that demonstrate the use of foreign exchange and reasoning in solving foreign exchange related problems. These experiences have being amassed with the discussion to middle management at the time of three months internship program.

The educational trust of this report is greatly enhanced by the following learning & teaching aids:

1) The attitude of the central bank to the other commercial banks for monitoring and supervising.

2) The attitude of the employees towards the high official of BB.

3) Behind reasons for making policies for other financial institutions in Bangladesh.

This report is suitable for the people who are engaged in financial institutions or wants to be a banker or high official in the financial institutions that are engaged in foreign exchange related job. It is strongly believed that this study will be used as comprehensive & informative one.

Objective of the Study:

The prime objective of this report is to achieve practical exposure to organizational environment as well as to understand the system and methodology adopted in conducting day to day banking by IFIC Bank especially in the field of Foreign Exchange. Besides this report has been composed to obtain the following objectives:

  •  To achieve practical knowledge and overall understanding about IFIC Bank.
  • To get an overall idea about the Foreign exchange dealings of IFIC Bank.
  • To analyze the financing systems of the bank to find out any contributing field.
  • To examine the profitability and productivity of the bank.
  •  To get an overall idea of banking from banker’s point of view.
  •  To review the techniques used by the bank to make it lucrative.
  •  To assesses the decision undertaken by the top-level management to keep the rein with the competitiveness of the market.
  •   To describe the organizational structure, management, background, functions and objectives of the bank and its contribution to the national economy.
  • To determine the factors those influence the planning & implementation to boost up Foreign Exchange department.
  •  To find out the challenges associated with the activities concerned with Foreign Exchange department.
  • To gather knowledge & functions and transactions of Foreign Exchange department.
  •  To observe the working environment of Foreign Exchange department.
  • To determine the drawbacks of the exiting systems of Foreign Exchange department.
  •  To recommend some guidelines to improve the effectiveness of the operation of Foreign Exchange department.

 Methodology of the Study:

Correct and smooth completion of research work requires adherence to some rules and methodologies. Rules were followed to ease the data collection procedure. Accuracy of study depends on the information and data analysis.

Study Area:

The area of my study has been encompassed the operation area of IFIC Bank, pallabi Branch, Plot No 2 & 4, Avenue, 2  Sec 11, Mirpur, Dhaka-1216.

Target Group:

To accumulate the required data I have contacted with departmental head Mijanur Rahaman and Ramat Ulla along with other concerned officers of IFIC Bank. In case of Export -finance department have got in close with the responsible personnel’s of Foreign Exchange department to collect the information.

Types of Research:

In this study, exploratory research has been undertaken to gain insights and understanding of the overall Foreign Exchange related activities and also to determine some of the attributes of service quality in Banks. After that a more comprehensive & conclusive research has been pursued to fulfill the main purpose of the study.

Sources of Data:

Figure-1.4: Sources of Data 

Limitations of the Study:

This Internship Report is my first assignment outside our course curriculum in the practical life. I, the students of Department of Business Studies just have completed our formal education stage. After completing the institutional experience, practical performance in the formal stages becomes difficult. So in preparing this report, lack of proper knowledge greatly influenced me in this performance.

Besides above, I had to face some other limitations. These are as follows:

  1. Lack of availability of data.
  2. Improper combination among various departments.
  3. Up-to-date information was not available.
  4. Sufficient records, publications, facts, and figures are not available. These constraints narrowed the scope of the real analysis.
  5. For the reason of confidentiality, some useful information cannot be expressed in this report.
  6. Time frame for the research was very limited.
  7. Unwilling to give information by the concerned officials in many times in the name of extra harassment without their responsibility.
  8. Finally, this is my first job Experience. So my knowledge especially in such a research study is limited.

 In spite of all the drawbacks faced, everything has been managed well at the end. I believe that the report on Foreign Exchange Activities of IFIC (International Finance Investment & Commerce) Bank Limited will give a clear idea about the given topics.

Chapter Two:  Company Profile

International Finance Investment and Commerce Bank Limited (IFIC Bank) is a banking company incorporated in the People’s Republic of Bangladesh with limited liability. It was set up at the instance of the Government in 1976 as a joint venture between the Government of Bangladesh and sponsors in the private sector with the objective of working as a finance company within the country and setting up joint venture banks/financial institutions abroad. The Government held 49 per cent shares and the rest 51 per cent were held by the sponsors and general public. In 1983 when the Government allowed banks in the private sector, IFIC was converted into a full-fledged commercial bank. The Government of the People’s Republic of Bangladesh now holds 35% of the share capital of the Bank. Leading industrialists of the country having vast experience in the field of trade and commerce own 34% of the share capital and the rest is held by the general public.


Our Mission is to provide service to our clients with the help of a skilled and dedicated workforce whose creative talents, innovative actions, and competitive edge make our position unique in giving quality service to all institutions and individuals that we care for. We are committed to the welfare and economic prosperity of the people and the community, for we drive from them our inspiration and drive for onward progress to prosperity.

We want to be the leader among banks in Bangladesh and make our indelible mark as an active partner in regional banking operating beyond the national boundary.

In an intensely competitive and complex financial and business environment, we particularly focus on growth and profitability of all concerned.

Milestones in the development of IFIC Bank Ltd.

1976 –     Established as an Investment & Finance Company under arrangement of joint venture with the govt. of Bangladesh.

1980 – Commenced operation in Foreign Exchange Business in a limited scale.

1982 –   Obtained permission from the Govt. to operate as a commercial bank.

  Set up its first overseas joint venture (Bank of Maldives Limited) in the   Republic of Maldives (IFIC’s share in Bank of Maldives Limited was subsequently sold to Maldives Govt. in 1992)

1983- Commenced operation as a full-fledged commercial bank in    Bangladesh.

1985 –     Set up a joint venture Exchange Company in the Sultanate of Oman, titled Oman Bangladesh Exchange Company (subsequently renamed as Oman International Exchange, LLC).

1987 –     Set up its first overseas branch in Pakistan at Karachi.

1993 –     Set up its second overseas branch in Pakistan at Lahore.

1994 – Set up its first joint venture in Nepal for banking operation, titled Nepal    Bangladesh Bank Ltd.

1999 –     Set up its second joint venture in Nepal for lease financing, titled Nepal Bangladesh Finance & leasing Co. Ltd. (which was merged with NBBL in 2007)

2003 –     Overseas Branches in Pakistan amalgamated with NDLC, to establish a joint venture bank: NDLC-IFIC Bank Ltd., subsequently renamed as NIB Bank Ltd.

2005 –     Acquired MISYS solution for real time on-line banking application.

               Core Risk Management implemented.

2006 –     Corporate Branding introduced.

Visa Principal and Plus (Issuer and Require) Program Participant Membership obtained.

2008 –     Observing 25th Anniversary of Customer Satisfaction.

2010 –     68 Branches offering Real Time On-line banking facility.

Management Structure:

The thirteen members of the Board of Directors are responsible for the strategic planning and overall policy guidelines of the Bank. Further, there is an Executive Committee of the Board to dispose of urgent business proposals. Besides, there is an Audit Committee in the Board to oversee compliance of major regulatory and operational issues. The CEO and Managing Director, Deputy Managing Director and Head of Divisions are responsible for achieving business goals and overseeing the day to day operation. The CEO and Managing Director are assisted by a Senior Management Group consisting of Deputy Managing Director and Head of Divisions who supervise operation of various Divisions centrally and co-ordinates operation of branches. Key issues are managed by a Management Committee headed by the CEO and Managing Director. This facilitates rapid decisions. There is an Asset Liability Committee comprising member of the Senior Executives headed by CEO and Managing Director to look into all operational functions and Risk Management of the Bank.

Joint Ventures Abroad:

Bank of Maldives Limited

IFIC is the first among the banks in the private sector to have operations abroad. In 1983, the Bank set up a joint venture bank in Maldives known as ‘Bank of Maldives Limited’ (BML) at the request of the Government of the Republic of Maldives. This is the only national bank in that country having branches throughout that country. IFIC Bank managed the affairs of BML from 1983 to 1992. IFIC Bank sold its shares in 1992 to the Government of the Republic of Maldives and handed over the Management of BML to Maldives Government.

NIB Bank Ltd., Pakistan

IFIC Bank had two branches in Pakistan, one in Karachi and the other in Lahore. Karachi Branch was opened on 26th April 1987, while Lahore Branch was opened on 23rd December 1993.To meet the Minimum Capital Requirement (MCR) of the State Bank of

Pakistan, the Overseas Branches in Pakistan have been amalgamated with a reputed leasing company in Pakistan named National Development Leasing Corporation Ltd. Therefore, the existence of our above Overseas Branches has ceased w.e.f. 2nd October 2003 and a new joint venture bank entitled NDLC – IFIC Bank Ltd. emerged in Pakistan w.e.f. 3rd October 2003. The Bank was subsequently renamed as NIB Bank Ltd. IFIC Bank presently holds 7.31% equity in the Bank.

Nepal Bangladesh Bank Ltd. (NB Bank)

Nepal Bangladesh Bank Ltd. (NB Bank), a joint venture commercial bank between IFIC Bank Ltd. and Nepal nationals, started operation with effect from June 06, 1994 in Nepal with 50% equity from IFIC Bank Ltd. The Bank has so far opened 17 (seventeen) branches at different important locations in Nepal. IFIC Bank presently holds 25% shares in NB Bank.

NepalBangladesh Finance & Leasing Limited (NB Finance)

NepalBangladesh Finance & Leasing Co. Ltd. (subsequently renamed as Nepal Bangladesh Finance & Leasing Ltd.), another joint venture leasing company between IFIC Bank Ltd. and Nepali Nationals, started its operation on April 18, 1999 in Nepal. IFIC Bank presently holds 15% share in the company.

Oman International Exchange LLC (OIE)

Oman International Exchange LLC (OIE), a joint venture between IFIC Bank Limited and Oman nationals, was established in 1985 to facilitate remittance by Bangladeshi wage earners in Oman. IFIC Bank holds 25% shares, and the balance 75% is held by the Omani sponsors. The exchange company has a network of 10 branches covering all the major cities/towns of Oman. The operations of the branches are fully computerized having online system. The affairs and business of the company is run and managed by the Bank under a Management Contract.

 Product and Services:

IFIC Bank LTD. launched several financial product and services since its inception. Corporate Banking, Retail Banking, SME Banking, Treasury, & Capital Market, Agriculture Credit All of these have received wide acceptance among the people.

 Human Resource Development (HRD):

Human Resources Development is focused on recruitment and in-house training for both on the job and off the job Bank staff members through the Bank’s Academy. IFIC Bank Academy – the oldest institution in the private sector – was conceived of as an in-house training center to take care of the training needs of the Bank internally.

Academy is fully equipped with a professional library, modern training aids, and professional faculty. Library has about 4941 books on banking, economics, accounting, management, marketing, and other related subjects.

Main training activities consist of in-depth foundation programmes for entry level Management Trainees. Specialized training programmes in the areas like general banking, advance, foreign exchange, marketing and accounts etc. are also organized by the Academy depending on need.

During its 23 years of existence, Academy not only conducted courses, workshops and seminars as required by the Bank, but it also organized training programmes for the Bank of Maldives, Nepal Bangladesh Bank Limited and Oman International Exchange LLC. In addition, Academy has also the credit of organizing system of Bank of Maldives.

In addition to conducting courses internally, The Academy also selects candidates for nomination to various courses conducted by distinguished training organizations in the country including BangladeshBankTrainingAcademy and Bangladesh Institute of Bank Management.

 Key Function of the IFIC Bank

Like other commercial Banks IFIC Bank performs all traditional Banking business including of wide range of credit products, retail Banking and professional management. But the IFIC Bank of Bangladesh Ltd emphasizes its functions in financing of Investment oriented industries will enhance wealth, quotes more employment’s opportunities, helps formation of capital, and reduce in the balance in the balance of payment of the country.

It has another function like Receiving Deposit, Granting Loan, and Creation of Deposit by Loan, Transfer of Money, Discounting of Bill of Exchange, Export, and Import, Bill Collection (Electric Bill, Telephone Bill, and Gas Bill etc).

Chapter Three

Overview of Foreign Exchange Activities in Bangladesh

Beginning of Banking in Bangladesh:

After independence the Government of Peoples Republic of Bangladesh was formally to cover the charge of the administration of the territory now constitute Bangladesh. In an attempt to rehabilitate the war-devastated banking of Bangladesh, the government promulgated a law called Bangladesh Bank (temporary) Order branches all over the country., 1971 (Acting President’s Order No.2 of 1971). By this Order, the State Bank of Pakistan was declared to be deemed as Bangladesh Bank and offices, branches and assets of said State Bank was declared to be deemed as offices, branches, and assets of Bangladesh Bank. On that date there existed 14 scheduled banks with about 3042

On the 16th December 1971, there existed the following 12 banks in Bangladesh, namely:

  1. National Bank of Pakistan
  2. Bank Bahawalpur Ltd.
  3. Premier Bank Ltd.
  4. Habib Bank Ltd.
  5. Commerce Bank Ltd.
  6. United Bank Ltd.
  7. Union Bank Ltd.
  8. Muslim Commercial Bank Ltd.
  9. Standard Bank Ltd.
  10. Australasia Bank Ltd.
  11. Eastern Mercantile Bank Ltd.
  12. Eastern Banking Corporation Ltd.

Nationalization of Banks in Bangladesh:

Immediately after the Government of Bangladesh consolidated its authority it decided to adopt socialist pattern of society as its goals. Hence in order to implement the above mentioned state policy; the Government of Bangladesh decides to nationalize all the banks of the country accordingly on the 26th March, 1972, Bangladesh Banks (Nationalization) Order, 1972(President Order No. 26 of 1972) was promulgated.

The undertakings of existing banks specified in the 1st column of the table below stands transferred to and vested in, the new banks mentioned in the 2nd column of the said table:-

Table 3.1: Nationalization of Banks

Existing Bank

New Bank

  1. National Bank.
  2. Bank of Bahawalpur Ltd
  3. Premier Bank Ltd.
Sonali Bank.
  1. Habib Bank Ltd.
  2. Commerce Bank Ltd
Agrani Bank.
  1. United Bank Ltd.
  2. Union Bank Ltd.
Janata Bank
  1. Muslim Commercial Bank Ltd.
  2. Standard Bank Ltd.
  3. Australasian Bank Ltd.
Rupali Bank.
  1. Eastern Mercantile Bank Ltd.
Pubali Bank.
  1. Eastern Banking Corporation Ltd.
Uttara Bank.

Banking System in Bangladesh:

Bangladesh inherited its banking structure from the British regime and had 44 banks and other financial institutions before the partition of India in 1947. Till liberation of Bangladesh all banks were privately owned and thus the benefits / facilities of banking were enjoyed by only a small elite group of persons and the banks in private sector played a traditional role without fulfilling socio-economic objectives of a welfare state.

The Dhaka bank established in 1806 was the first commercial bank in the Bangladesh region of British India. Bangal bank, the first british-partionized modern bank established in India in 1784, had opened its two branches in 1873 in Sirajganj and Chittagong of Bangladesh region. Later in 1862, the Bengal Bank purchased the Dhaka Bank and opened its first branch in Dhaka in the same year by reconstituting and merging the Dhaka Bank. Thereafter, another branch of Bengal Bank was opened in Chandpur in 1900. A number of

other branches of Bengal Bank were opened in this region and some branches had been closed in course of time. There were six other branches of Bengal Bank in operation in the territory of Bangladesh until the partition of British-India in 1947 and these branches were at Chittagong (1906), Mymensing (1922), Rangpur (1923), Chandpur (1924) and Narayanganj (1926).

Following the emergence of Pakistan in 1947, State Bank of Pakistan, the Central Bank of the country, came into being in July 1948. Later, the National Bank of Pakistan, a strong commercial bank was set up in 1949. In all, 36 scheduled commercial banks were in operation in the whole Pakistan until 1971.

Pakistanis owned most of these banks and only three of them namely, National Bank of Pakistan, Habib Bank Ltd. And the Australasian Bank Ltd. Had one branch of each in East Pakistan in 1949. During 1950-58, three other Pakistani-owned banks, Premier Bank Ltd., Bank of Bhowalpur Ltd. And Muslim Commercial Bank had opened their branch in East Pakistan. Four Pakistani-owned banks, the United Bank Ltd., Union Bank Ltd., Standard Bank Ltd. And the Commerce Bank Ltd.

Conducted banking business in the province during 1959-1965. But all of them had their headquarters in West Pakistan. East Pakistan had only two banks owned by local business groups with headquarters in Dhaka. These were the Eastern Mercantile Bank Ltd. (presently Pubali Bank Ltd.) and Easter Banking Corporation Ltd. (presently Uttara Bank Ltd.) established in 1959 and 1965 respectively.

In the decade of seventies, in an atmosphere of fully regulated banking, the nationalized Commercial banks played the active role in intermediation and allocation of credit along With the specialized financial institutions. In the beginning of 1971, there were 1130 branches of 12 banks in operation in East Pakistan. The foundation of independent banking system in Bangladesh was laid through the establishment of the Bangladesh Bank in 1972 by the Presidential Order No. 127 of 1972 (which took effect on 16th December, 1971).Through the Order, the eastern branch of the former State Bank of Pakistan at Dhaka was renamed as the Bangladesh Bank as a full-fledged office of the

Central Bank of Bangladesh and the entire undertaking of the State Bank of Pakistan in, and in relation to Bangladesh has been delivered to the bank The main objectives of nationalization of banks was to ensure that the banking system serves a much wider section of the community by dispensing credit to the poorest and the weaker section of the society and also to remove the regional disparities and help in development of backward areas and serve better the needs of development of the economy in conformity with national policy and objectives formulated by the Government

Table: –   Banking system structure (end of 2005)

Bank typeNumber of banksNumber of branchesNet assets (billion Taka)% of industry assetsDeposits (billion Taka)% of industry deposits
Total 496,2711453.06100.0%1023.53100.0%

 Privatization of Banks in Bangladesh:

Until the early 1980’s the Government owned, controlled, and directed Bangladesh’s financial systems with the objective of allocating funds to priority sectors. In 1983 the Government began to reform the financial sector interest rates on deposits were raised to provide a positive real return in deposits. Private Banks were allowed to enter, two NCBs were denationalized, and another nationalized bank was converted into a limited liability company and partially privatized

After the amendment in the nationalizing law, the Pubali Bank, the Uttara Bank, and the Rupali Bank have been transferred to the private sector. These banks have now been re-designated respectively as Pubali Bank Ltd, Uttara Bank Ltd, and the Rupali Bank Ltd. Further in order to accommodate private sector share in Bangladesh Shilpa Bank, suitable amendments have been made in the Bangladesh Shilpa Bank Order 1972 (Presidents Order No. 129 of 1972). It is expected that the bank will formally get listed in the private sector in the near future. Recognizing the need to reform the financial sector, the Bangladesh Government appointed a National Commission on Money, Banking and credit to undertake a major study of the financial sector in late 1984. The Commission made its recommendations for financial sector reform in 1986.

Banking Operations in Bangladesh:

The development process of a country largely depends upon its economic activities. Banking is a powerful medium among other spheres of modern socio-economic activities for bringing about socio-economic changes in a developing country like Bangladesh. Three different sectors like Agriculture, commerce, and industry provide the bulk of a country’s wealth. The nourishment of these three is only possible through an adequate banking facility. The banking service facilitates these three to be integrated in a concerted way. For a rapid economic growth a fully developed banking system can provide the necessary boost. The whole economy of a country is linked up with its banking system. With the passage of time the functions of the bank has got a multi-dimensional configuration. Of all the functions of a modern bank, lending is by far the most important. They provide both short-term and long-term credit. The customers come from all walks of life, from a small business a multi-national corporation having its business activities all around the world. The banks have to satisfy the requirements of different customers belonging to different social groups. The banking business has, therefore, become complex and requires specialized skills. They function as catalytic agent for bringing about economic, industrial, and agricultural growth and prosperity of the country. The banking can, therefore, be conceived as “a sector of Economy on the one hand and as a lubricant for the whole economy on the other.” As a result different types of banks have come into existence to suit the specific requirements. Regardless of the numbers of banks and nature of their functions and activities, a central bank exists to regulate the activities of other banks. All the commercial private and/or nationalized, and specialized banks perform service related activities within the jurisdiction of the central bank. In our country, Bangladesh the role of the central bank is entitled to be executed by Bangladesh Bank

As different banks are in the field to satisfy the customers of different requirement, we can classify the banks using a diagram that is replicated in the following page.

Some words used in abbreviated form in the following diagram require explanation.

1. BKB = Bangladesh Krishi Bank

2. RAKUB = Rajshahi Krishi Unnayan Bank

3. BSB = Bangladesh Shilpa Bank

4. BSRS = Bangladesh Shilpa Rin Shangstha

5. BASIC = Bank of Small Industries and Commerce, Bangladesh Ltd

Banking in Bangladesh:

Banking is the backbone of national economy. All sorts of economic and financial activities revolve round the axis of the bank. As the industry produces goods and commodities, so does the bank creates and controls money-market and promotes formation of capital. From this point of view, banking-a technical profession- can be termed as industry. Services to its customers are the products of banking industry besides being a pivotal factor in promoting capital formation in the country. As all economic and fiscal activities revolve round this important ‘Industry’, the role of banking can hardly be over emphasized. Circumstances being such, it becomes imperative to find out the role that now playing in the country and analyze its operational aspects so as to ascertain the importance of this delicate financial sector and its over all impact on our national economy. To ascertain the role of banks and to analyze its operational aspects and its overall impact on our national economy a through study as to its distribution, expansion and contribution is essential to comprehend its past, present and future bearings for the growth and development of the banking sector of the country. In the global context, the role of banks is far – reaching and more penetrating in the economic and fiscal discipline, trade, commerce, industry, export and import- all carried through the bank. Banks are the only media through which international trade and commerce emanate and entire credit transactions, both national and international.

Concept about Foreign Exchange:

Foreign Exchange means all types of foreign currency, securities, foreign bill, foreign check, foreign documents etc. A hale reserve position of foreign exchange is important for smoothing business. Bangladesh is an import-based country i.e. the number of imports of amenities is higher than the number of exports. The payment must occur in foreign currency. Exporters exchange foreign currencies with taka from the Bangladesh Bank. Therefore, Bangladesh Bank has to enough money for paying the imported goods. If otherwise the exporters will not export amenities to the importers because they believe the importers are not capable for payment of their goods. As a result the country will face famine that has a great impact on the economy. The economy may dormant and the society will suffer disorder.

Today’s world economic is totally dependent on the exports or import and the volume of the international transaction has grown enormously. Similarly, annual capital flows occur among the nations worldwide. So the international trade and investment of this magnitude would be possible because of availability of foreign currencies. Foreign exchange market makes it easy to accumulate foreign currencies at requires. The trading of foreign currencies takes place in foreign exchange market whose primary function is to facilitate international trade and investment.

 Foreign Exchange Market:

Most of the currency transactions are channeled through the worldwide inter-bank market, in which major bank trade with each another. Trading is generally done by the SWIFT (Society for Worldwide Inter-bank Financial Telecommunication) system. It is software of communication network that electronically links all international banks. Foreign exchange traders in each bank usually operate out of a separate foreign exchange trading room. Reuters monitor displaying up to the minute information and a computer with Internet connection surrounds each trader. In April 1992 Reuters, the news company supplies the foreign exchange market with the screen quotations used in internet trading introduce a new service, Dealing 2000-Phase 2. These services add automatic execution to the package, there by creating a genuine screen based market.

These electronic trading systems offer automated matching. Trading can enter buy and sell orders directly into there terminals on an anonymous basis and that price will visible to all market participants anywhere in the world and can execute a trade by simply hitting buttons. The foreign exchange market is not a physical place; rather it is an electronically linked network of banks whose functions are to bring together the buyers and sellers of foreign currencies.

There are Three Types of Market

a) Spot Market in where currencies are traded for immediate delivery, which is actually with in two business days after the transaction has been concluded.

b) Forward Market in where contracts are made to buy or sell for future delivery.

c) Swap which involve a package of spot and forward contract.

Foreign Exchange any transaction in the foreign perspective needs foreign exchanges (currencies, bill, securities, check, draft etc). Foreign Exchange means convert the local currency into the foreign currencies for put an end to export essential goods and amenities or investment i.e.-local currency is exchanged with foreign currencies.

Determination of Exchange Rate:

The exchange rate is one of the most important prices in a country because it links the domestic economy and the rest of world economy. It affects relative national competitiveness. An exchange rate is simply the price of one national currency in term of another. Generally foreign currency is exchanged at a determined rate. Exchange rate determined by the market-clearing prices that equilibrate supplies and demand in foreign exchange market. The demand for the Taka, Bangladeshi currency, in the foreign exchange market derives from the American demands for Bangladeshi goods and services and taka denominated financial assets. Bangladeshi prices are set in taka, so in order for Americans to pay for their Bangladeshi purchases they must first exchange their dollars for taka. That is, they will demand taka.

An increase in the taka’s dollar value is equivalent to an increase in the dollar price of Bangladeshi’s products. This higher dollar price normally will reduce the US demand for Bangladeshi goods, services, and assets. Conversely, as the dollar value of the Taka’s falls, Americans will demand more taka to buy the less expensive Bangladeshi products, resulting in a downward-sloping demand curve for taka. As the dollar cost of the taka falls, Americans will tend to buy more Bangladeshi goods and so will demand more Taka.

Similarly, the supply of taka is based on Bangladeshi demand for US goods and services and dollar denominated financial assets. In order for Bangladesh took pay for their US purchases, they must first acquire dollars. As the dollar value of the taka increases, thereby lowering the taka cost of US goods, the increased Bangladeshi demand for US goods will cost an increase in the Bangladeshi demand for dollars and, hence, an increase in the amount of taka supplied.

Suppose that the supply of dollars increases relative to its demand. This excess growth in the money supply will cause inflation in the USA, which means that US prices will begin to rise relative to the prices of Bangladeshi goods and services. Bangladeshi consumers are likely to buy fewer US products and begin switching to Bangladeshi substitutes, leading to a decrease in the amount of taka supplied at every exchange rate.

 Foreign Exchange Reserve Functions:

Bangladesh Bank Foreign Exchange Departments make foreign exchange reserve from several sources, which are-

1. Commercial Banks have to deposit excess amount of foreign currency (above 2 millions) in the Bangladesh Bank.

2. Invest their foreign currencies in different accounts, foreign bill, and bonds etc.

      3. Export of domestic goods to the foreign buyers.

      4. Bangladesh by the tourist or other foreign visitors.

5. Received loan, investment, and grand from the foreign countries or international organizations.

These foreign exchange reserves are used in different purposes. These are –

      1. To settle several foreign claims arising from importing goods from that country.

2. To travel foreign countries for personal interest like wandering, education, medical treatment etc.

      3. To participate in the foreign trade fair, it requires foreign currencies.

Bangladesh Bank has more interest for receiving foreign currencies than paying. Bangladesh Bank encourage export our products, take education in the country, and take service in the local medical institutions. Bangladesh Bank takes some steps for controlling discharge of the foreign currencies from the country. Bangladesh Bank makes policies for receiving excess foreign currencies for traveling in the foreign countries with several purposes. Bangladesh Bank also monitors the exporters’ banks that they receive equivalent amount of foreign currencies from the foreign importers.

Bangladesh Bank takes some decisions of foreign currencies for stable our economy. Some central banks prefer an overvalued domestic currency whereas other will prefer an undervalued currency. But Bangladesh Bank feels rate set by the market supply and demand can be the better judge for exactly exchange rate. Though Bangladesh Bank has control over the exchange rate through control on the supply and demand in the market. Equipment for controlling foreign exchange market is Treasury Bills that is purchase from the government. Then the commercial banks invest their money in the Treasury bill from the auction held in the Bangladesh Bank for a short period of time. In such way BB excess money from the local market.

Regulatory Frame Works in Foreign Exchange in Bangladesh:

1. Foreign Exchange Regulation (FER) Act, 1947 (Act No. VII of 1947) enacted on 11th March, 1947 in the then British India provides the legal basis for regulating certain payments, dealings in foreign exchange and securities and the import and export of currency and bullion.

2. Basic regulations under the FER Act are issued by the Government as well as by the Bangladesh Bank in the form of Notifications, which are published in the Bangladesh

Gazette. Directions having general application are issued by the Bangladesh Bank in the form of notifications, foreign exchange circulars, and circular letters.

3. Authorized Dealers (A Ds) in foreign exchange are required to bring the foreign exchange regulations to the notice of their customers in their day-to-day dealings and to ensure compliance with the regulations by such customers. The A Ds should report to the Bangladesh Bank any attempt, direct or indirect, of evasion of the provisions of the Act, or any rules, orders or directions issued there under.

4. The A Ds must maintain adequate and proper records of all foreign exchange transactions and furnish such particulars in the prescribed returns for submission to the Bangladesh Bank.

5. All scheduled banks must publish their daily exchange rates prior to start of their daily operation and these rates must be visible in a common area for the customers.

 Foreign Exchange Products in Bangladesh:


Sale or purchase a specified currency at a fixed rate for delivery after 2 working days.

Tom (Tomorrow):

Sale or purchase of a specified currency at a fixed rate for delivery for delivery on the next working day

TDY (Today)

Sale or purchase of a specified currency at a fixed rate for delivery on the same day.

Fwd (Beyond Spot):

Sale or purchase a specified currency at a fixed rate for delivery beyond 02 working days.

This is the settlement date of a transaction

            -The date when actual placement of funds take place

            – Nostro account gets debited or credited on the value date

-Can be a different date than the transaction date whereas funds come into or go out of the Net Open Position (NOP) after the entry is passed in HUB, NOSTRO account does not get debited or credited until the value date.


Two simulations opposite transaction with different value date. This is mainly for funding purposes.




 Foreign Exchange Operation:

Foreign Exchange means all types of foreign currency, securities, foreign bill, foreign check, foreign documents etc. A hale reserve position of foreign exchange is important for smoothing business. Bangladesh is an imported based country i.e. the number of imports of amenities is higher than the number of exports. The payment must occur in foreign currency. Exporters exchange foreign currencies with taka from the BB. Therefore, Bangladesh Bank has enough money for paying the imported goods. If otherwise the exporters will not export amenities to the importers because they believe the importers are not capable for payment of their goods. As a result the country will face famine that has a great impact on the economy. The economy may dormant and the society will suffer disorder.

Today’s world economy is totally dependent on the exports or import and the volume of the international transaction has grown enormously. Similarly, annual capital flows occur among the nations worldwide. So the international trade and investment of this magnitude would be possible because of availability of foreign currencies. Foreign exchange market makes it easy to accumulate foreign currencies at requires. The trading of foreign currencies take place in foreign exchange market whose primary function is to facilitate international trade and investment. 

Some Basic Features of the Foreign Exchange Markets:

            – Global Markets

            – 24 hours market

            – No Geographical location

            – Trust and confidentiality

            – Perfect market

Documents used in Foreign Exchange:

Letter of Credit (L/C):

It is the most important and commonly used in connection with foreign trade. Letter of Credit is an undertaking by a banker of the importer to the exporter, to the effect that the amount of the L/C will be duly paid. The banker on behalf of the importer issues the L/C in favor of the exporter (beneficiary) and forwards the same to the exporter to the effect that the bill drawn by him shall be duly accepted and paid.  It creates confidence in the mind of the exporter so far as payment of the bill is concerned. It is also facilitate the exporter to get the benefit of discounting the bill before the date lf maturity.

Bill of Exchange:

 A Bill of Exchange is an instrument in writing, containing an unconditional order, signed by the maker, directing a certain person to pay on demand or on fixed or determinable future time a certain sum of money only to or to the order of a certain person or to the bearer of the instrument. From the definition – we get the features of bill of exchange. In generally there are three parties like- Drawer The person who prepares the bill Drawee The person who is ordered for the payment in future specified time; Payee: The person who is the amount of bill receiver as per the order of the drawer to the drawee.

Bill of Lading:

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

  • A description of the goods in general terms not inconsistent with that in the credit.
  • Identifying marks & numbers (if any).
  • The name of the carrying vessel.
  • Evidence that the goods have been loaded on broad.
  • The ports of shipment & discharge.
  • The names of shipper, consignee and name & address of notifying party.
  • The number of original bills of lading issued.
  • The date of issuance.
  • A bill of lading specifically stating that goods are loaded for ultimate destination specifically mentioned in the credit.

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

  • Date
  • Name & address of buyer & seller.
  • Order or contract number, quantity & description of the goods, unit price, and the total price.
  • Weight of the goods, number of packages and shipping marks, & number.
  • Terms of delivery & payment.
  • Shipment details.
  • Certificate of origin of goods:
  • A certificate of origin is a signed statement providing evidence of the origin of the goods.

 Inspection Certificate:

This is usually issued by an independent inspection company located in the exporting country certifying or describing the quality, specification or other aspects of the goods, as called for in the contract and / or the letter of credit. The buyer who also indicates the type of inspection usually nominates the inspection company he /she wish the company to undertake.

  • Insurance policy or Certificate.
  • The insurance certificate document must.
  • Be that specified in 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 shipment as evidenced by the shipping documents or establish that cover is effective at the latest from such date of shipment.
  • Be for an amount at least equal to the GIF value of the goods and in the currency of the credit.

 Proforma Invoice or Indent:

This is Seller’s Quotation or agreement between seller & buyer. In this-the seller declared the rate, quantity, quality, manufacturing, & other information about goods and that accepted by buyer.

 G.S.P. Certificate (Generalized System of Preference):

When tariff concession is sought from those developed countries providing preferential treatment to exporters of the developing countries, a GSP certificate should be obtained from the EPB. In GSP scheme the tariff providing country is payer country & tariff consumer or receiver country is receiver country. Up to the period there are 16 developing countries under this scheme facility. From Bangladesh export development burro the industrialists may get necessary information & practical procedure.

Other Documents are: Packing list; Master’s receipt.

Letter of Credit (L/C):

Letter of Credit is an undertaking by a banker of the importer to the exporter, to the effect that the amount of the L/C will be duly paid. The banker on behalf of the importer issues the L/C in favor of the exporter (beneficiary) and forwards the same to the exporter to the effect that the bill drawn by him shall be duly accepted and paid. It creates confidence in the mind of the exporter so far as payment of the bill is concerned. It is also facilitate the exporter to get the benefit of discounting the bill before the date lf maturity.

Parties of Letter of Credit Transaction:

  • Issuing Bank: It is the buyer’s bank. The bank that agrees to the request of the applicant and issues its letter of credit in terms of the instructions of the applicant.
  • Advising Bank: It is the seller’s or beneficiary’s Bank. The bank usually situated in the seller’s or beneficiary’s country (most of the time with which there exists corresponding relationship with the buyer or issuing bank), request to advice the credit to the beneficiary.
  • Confirming Bank: Sometimes issuing bank request advising bank or another bank to add confirmation to the letter of credit. When that bank do this then such bank is called confirming bank. So advising bank can be act as confirming bank.
  • Reimbursing Bank: This is the bank that is nominated by the issuing bank to pay (it is also known as paying bank) or to accept drafts. It can be situated in another country. In this connection it is to say that American Express Bank & Nat West Bank act as reimbursing bank in case of IFIC Bank. The account, which maintains IFIC Bank with Nat West Bank & American Express Bank, is called Nostro Account” and in rivers the account, which is maintained by Nat West Bank & American Express Bank with IFIC Bank, is called Vostro Account.
  • Negotiating Bank: The bank, which makes payment to the exporter after Inspection, the documents submitted by the exporter with the original letter of credit then it is called Negotiating Bank.
  • Nominated Bank: The bank that is nominated by the issuing bank to pay (nominated bank is known as paying bank) or to accept drafts (nominated bank is known as
  • accepting bank) or to negotiate (nominated bank is known as negotiating bank). Usually the advising bank is request & authorized to be the nominated bank unless the credit allows negotiation by any bank.
  • Seller: Beneficiary of the letter of credit is seller.

Classification of Letter of Credit:

The letter of credit can be either revocable or irrevocable. It needs to be clearly indicated whether the letter of credit Revocable or Irrevocable. When there is no indication then the letter of credit will be deemed to be a revocable L.C. The details are as follows:

  • Revocable letter of credit: A revocable credit is one, which can be amended or cancelled by the issuing bank. At any moment without “prior notice” to the beneficiary. So this is clear that revocable credit can be revoked any time without prior notice.
  • Irrevocable letter of credit: An irrevocable credit is one, which cannot be cancelled or amendment able any time without the consent of each party. Through this letter of credit the issuing bank gives a definite, absolute, and irrevocable undertaking to honor its obligations, provided the beneficiary complies with all the terms & conditions of the credit.
  • Government letter of credit: That letter of credits, which are done by the Defense Ministry and other Ministries of the government.
  • Master or mother letter of credit: The L.C. which come from out side the country to the exporter from importer that is mother or master letter of credit.

Other Classes of Letter Of Credit:

  • Revolving letter of credit: When the L.C. is used again & again in same amount for a specific period of time that is called revolving letter of credit.
  • Transferable letter of credit: Exporter can transfer his / her right of letter of credit in full or partly to a third party. In generally, the exporter is not the supplier but act as a middleman with in the supplier & importer.
  • Back-to-Back letter of credit: The letter of credit, which done by the security of mother letter of credit.
  • Clean or open letter of credit: The letter of credit, which provides assurance of payment bill of exchange without submission, of any export documents that is called clean letter of credit.
  • Confirmed letter of credit: When the Irrevocable letter of credit issued by issuing bank to the exporter as assurance of the L.C. then as per advice or documents the authorized representative or representative bank’s provide assurance or payment guarantee that is confirmed letter of credit.
  • At sight letter of credit: That letter of credit which expires ninety days i.e. with in this period the documents must be sending to the negotiating bank.
  • Deferred payment letter of credit: That letter of credit which expires one hundred & eighty days i.e. with in this period the documents must be send to the negotiating bank.
  • Contract letter of credit.
  • Refinance Letter of Credit.
  • Marginal Letter of Credit and Traveler’s Letter of Credit.

Classification of Letter of credit as per function:

  1. LC under cash
  2. LC under loan
  3. LC under grant
  4. LC under wage
  5. Back to back LC.

Commission Charges Procedure:

For first quarter:

In case of –            LC under cash: 0.5%

                                                LC under loan: 0.75%

                                                LC under grant: 0.75%

                                    LC under wage: 0.75%

                                    Back-to-back LC: –     Inland LC (ILC): 0.5%

                                                                        Deferred payment LC (DPLC): 0.75%

Second or any next quarter:

In case of         LC under cash: 0.25%

LC under loan: 0.50

LC under grant: 0.50%

LC under wage: 0.50%

Back to back LC: –             Inland LC (ILC): 0.25%

Deferred payment LC (DPLC): 0.50%

 Letter of Credit in Cash:

Introduction: After getting back the LCA (Letter of Credit Authorization) Form duly registered by Bangladesh Bank. IFIC Bank Foreign exchange Corporate Branch as letter of credit opening bank can open letter of credit at the request & on the instruction of the importer.

 Steps of Opening Letter of Credit:

On receiving the documents or papers from the importer the letter of credit opening bank is to perform the following functions in connection with opening the letter of credit:

  • To scrutinize the documents thoroughly and to consult with import policy, Bangladesh Bank & International Division’s circular.
  • To prepare an “offering sheet”. This offering sheet is nothing but a prescribed office      note on which the branch manager will sanction the margin to be obtained from the importer.
  • Commission of letter of credit to be calculated as 50% of the total amount, equivalent to Bangladesh currency.
  • P&T charges to be realized for TK. 100 (fixed charge) if the letter of credit dispatched through Airmail. If it is a cable or telex letter of credit the P&T charges to be realized at actual.
  • Foreign correspondents adjusting charges (FCC) to be realized TK. 1500 (Fixed amount).
  • To make entry in “letter of credit opening register.”
  • Accounting treatment to prepare vouchers in prescribed forms:

Bank’s charges voucher –

            Importer’s Current Account…………………………………..Dr.

                        Foreign correspondents charges adjusting A/C…………….Cr.

                                    P & T charges recovered A/C……………………..……Cr.

                                    Commission Account……………………………………….Cr.

Margin Voucher—

Importer’s current Account………………………………………… Dr.

Marginal Deposit A/C (against import L/C)…………………….Cr.

Liability Voucher—(For opening letter of credit)

               Liability of constituents for acceptance A/C………………..Dr.

Acceptance for constituents A/C…………………………………..Cr.

To dispatch the letter of credit as follows:

Original Copy                         –           To the Exporter

First Copy                               –           Advising Bank, which in turn forward

Second Copy              –           Advising Bank, which in turn forward

Third copy                               –           Reimbursing Bank

Fourth Copy                            –           Importer

Fifth Copy                              –           Importer

Sixth Copy                              –           C.C.I. & E (Chief Controller of Import & Export)

Seventh to Ninth Copy           –           Letter of credit opening banks copy.

Required Documents for Opening Letter Of Credit:

  1. Proposal letter (in proposal letter it must be mentioned that – price of goods, CCI & E registration, pass book number, LCA form dully filled in signed & sealed, Import form  full set, insurance policy & addendum, P.I. number).
  2. Application and agreement for irrevocable LC with adhesive stamp of TK.150.
  3. Import license
  4. HS. Code.
  5. TIN.
  6. VAT registration.
  7. Indenting certificate.
  8. Performa invoice – two copies (with in this it indicate – Performa bill no. & date, item, particulars, quality, quantity, rate, and amount of goods, total invoice value (E &O.E.)
  9. LCA (Letter of Credit Authorization) form for industrial consumer – four copies. (With in this – IRC number, total amount)
  10. Signature of Director of the firm and manager of IFIC Bank.
  11. IMP form Four copies (by this the declaration of the firm’s directors)
  12. Money receipts of insurance policy.
  13. After preparing the procedure the bank provide offer in prescribed “offering sheet.”

Vouchers Issued When The Offer Letter Accepted By The Bank:

  • Commission & Other Charges Vouchers
  • Margin Voucher and
  • Liability Voucher

Approval Certificate of Bangladesh Bank on Behalf of the Importer:

  • Particulars involved in offering sheet:
  • Name of the party, Sanctioned limit, Facility applied for letter of credit (amount & previous outstanding).
  • Forward exchange
  • Foreign bills purchased.
  • Guarantees.
  • Trust receipts.
  • Clean packing credits.
  • Advance against imported goods.
  • Goods particulars
  • Import license
  • Margin already at credit.
  • Margin to be obtained.
  • Guaranteed by.
  • Balance of current account.
  • Average Balance of bank account.
  • Net worth of the firm.
  • Customs duty.
  • Country of export.

Procedure for Opening Letter of Credit:

After completion of the previous particulars, then the party take money and bank give letter of credit to the party by checking the declared particulars of the party. Then one copy sends to the Beneficiary / Negotiating bank. The beneficiary bank sends the document to exporter. The exporter & Beneficiary bank for shipment the goods. Then the beneficiary bank sends back to the letter of credit opening bank.

The LC opening bank scrutinizes the documents and sends to the importer. When the importer accepts the documents then LC opening bank do lodgment (it is the payment procedure in lodgment voucher).

Then the accounting treatment is:

PAD account ………………………………Dr.

Exchange account……………………………..Cr.

IFIC Bank General A/c………………………..Cr.

Then the importer applies for endorsement as well as retirement. For retirement accounting treatment in retirement voucher is:

Importer or party’s account……………Dr.

Marginal Account………………………….Dr.

                        PAD Account…………………………………….Cr.

                        P&T charges Account…………………………Cr.

                        Cost of Stationary Account…………………Cr.

           Interest Account…………………………………Cr.

Then the opening liability reversed by credit in liability voucher (FEF – 20 internal vouchers). Then the documents endorsed by the LC opening bank and send to the importer. The party goes for customs clearing. After clearing the importer submit the customs “Bill of entry” certificate with in four months to the LC opening bank. The LC opening bank matching the documents and report to the Bangladesh Bank within the month of retirement of LC. Then the letter of credit is fully closed.

Justification for Fitness of Opening Letter of Credit:

  • Application from importer.
  • Bio-data of the applicant.
  • Current account opened by the applicant in the branch.
  • Supplier’s acceptance & rate of goods.
  • Is it a brand item or not?
  • Contract on prescribed form of bank
  • Performa invoice from supplier.

 Export Finance:

Export Financing Sectors of IFIC Bank:

Export financing can play a vital role in the development process of Bangladesh. With earning on export we can meet our import bills. The export trade is always encouraged because the major portion of foreign exchange earning is derived from export. Because of shortage of adequate capital exporters have to come in contact with commercial bank and financial institution to get finance from them. IFIC bank as a commercial bank provides certain facilities to the exporters to boost up export earnings.

The Traditional & Non-Traditional Sectors in Which IFIC Bank Provides Export-Financing Facilities are as Follows:

  • Ready Made Garments In All Sorts.
  • Jute Manufactures.
  • Jute – Raw & Meshta.
  • Fish & Prawns.
  • Hides, Skins & Leather.
  • Tea
  • Fertilizer etc.

 Export Financing System of IFIC Bank:

Bangladesh as a developing country depends mainly on foreign exchange earning for its development activities. The major portion of foreign exchange earnings is derived from export obviously, to boost export, government provide certain incentives to the exporters namely:

  • Export Financing
  • Development Financing
  • Export Credit Guarantee Scheme
  • Export Performance Benefits
  • Duty Draw Back
  • Rebate on Duty & Tax
  • Income Tax Rebate
  • Insurance Premium Rebate etc.

Pre-Shipment & Post-Shipment:

In IFIC Bank export finance is required by the exports at two stages namely

Pre-shipment & Post-shipment stages:


It is required to purchase of raw materials, to meet cost of production, procurement of exportable goods, packing, transport, payment of insurance premium, inspection fee, freight charges, ware housing etc.


It is required by the exporters after actual shipment of goods in order to bridge the period between shipment of the goods and receipts of sales proceeds from abroad.

An exporter owns resource may not be adequate to meet all such expenses. So he / she have to come in contact with commercial bank and financial institutions to get finance from them. As a commercial bank IFIC Bank provides credits to exporters at a consideration rate of interest as an export promotion measure as per government directive.

Pre-Shipment Financing in Foreign Exchange:

The classes of pre-shipment financing extended to the exporters by the IFIC Bank are as follows:

Packing Credit:

This facility is generally extended when the goods become ready for shipment for a very short period usually from the date of dispatch of the stock from the godown (Store Room) up to the date of actual shipment of the goods that is for the transit period of shipment for further purchase of raw materials or procurement of exportable goods by exporter.

Back To Back Letter of Credit:

Pre-shipment facilities are also credited in the form of back- to-back letter of credit. When the beneficiary of an export letter of credit is not the actual manufacturer or producer of exportable goods mentioned in the relative export letter of credit as securities with his / her banker for procurement of exportable goods to enable him /her to execute the export letter of credit and such letter of credit is called inland back to back letter of credit.

 Precautions Used By IFIC Bank To Sanction Pre-Shipment Credit:

  • Before making lien on the original export letter of credit all the terms and conditions should be scrutinized so that no detrimental clauses including violation of foreign exchange regulation and UPCDC terms are included there in.
  • Expiry date of letter of credit should be properly recorded in the book and no drawing is to be allowed against expired letter of credit.
  • The credit worthiness or solvency of the foreign buyer as well as the exporters must be ascertained before hand.
  • In case of mortgage of properties as collateral securities, the bank by engaging lawyer together with valuation certificate from proper authority must scrutinize the relative documents.
  • The exporter should arrange forward sale of foreign exchange loss at the time of negotiation of export documents.
  • In case of packing credit, the export letter of credit and relative documents have to submit in, such a way that the bank may not face any problem in negotiation of shipping documents in due course.
  • To dispatch goods for shipment to post under packing credit the bank must verify the shipping mark on the each packet or cartoon and the relative invoice.

 Post Shipment Financing in Foreign Exchange:

Post shipment financing refers to the credit facilities extended to the exporters by IFIC Bank after actual shipment of the goods against export documents. IFIC Bank generally finance

the exporters at post shipment stage after verifying the credit worthiness and export performances of the exporters as well as the reputation and financial soundness of the foreign buyers provided the shipping documents are drawn strictly in accordance with letter of credit terms and in accordance with foreign exchange regulation in force. Post shipment financing is extended to the exporters by the following terms:

  • Negotiation of export documents under letter of credit.
  • Discounting of export bills.
  • Purchase of uses bills
  • port Documents under Letter Of Credit

Most important and widely used method of financing export at post-shipment stage is negotiation of export documents. After the shipment of the goods the exporter generally submits the following documents to the bank for negotiation:

  • Bill of exchange.
  • Bill of lading or air way bill.
  • Commercial invoice – eight copies within these four original copies.
  • Custom invoice of importer’s country.
  • Certificate of origin-original copy.
  • Packing list – eight copies within these four original copies.
  • Weight certificate.
  • Declaration of shipment to the insurance company.
  • Pre-shipment inspection certificate.
  • Quality control certificate when required.
  • Acknowledgement letter indicating received sample / approval letter.
  • Frightful letter.
  • Any other document if called for letter of credit.

 Purchase of Uses Bills Drawn on D.A. Basis:

Sometimes export letter of credit stipulates payment at 30 to 40 months; the period is called askance period. The bills drawn under this letter of credit is termed as askance bill. On presentation of documents foreign buyers give written acceptance on the bill of exchange to pay after the askance period. In dealing such documents the banker must take proper pre-caution to realize the proceeds in time.

Discounting Of Export Bills:

When the export bills are not drawn under letter of credit or the goods send on consignment basis, the exporter may approach the bank for discounting the export bills on commission basis. Bank generally does not accept such proposal excepting on exceptional cases. If the exporters have very good credit worthiness and previous good export performance and foreign buyers have also good report & good reputation for past transaction.

Export Form:

The customer, now issued by the authorized dealers, must declare all export of which the requirement of declaration of exchange control manual of Bangladesh Bank applies on the Export Forms.

Disposal of Export Forms:

Origin             :           From custom authority to Bangladesh Bank (ECD) after shipment goods.

Duplicate      :           From negotiating bank to Bangladesh Bank after        negotiation.

Triplicate      :           From negotiating bank to Bangladesh Bank after realization of the proceeds of the export bill.

Quadruplicate:          Retained by the negotiating bank as office copy.

Export Development Fund:

The main objective of creating an export development fund at the Bangladesh Bank is to assure a continued availability of foreign exchange to meet the import requirement of non-traditional manufactured items, this facility is available to the non-traditional exporters, particularly newer exporters, exporters diversify into higher value export, and exporters diversify into new markets. An exporter identified above is eligible on the basis of the conditionally stated below: –

  • One must be an exporter of non-traditional manufacturing items.
  • The value added of these products could be 20% except in the case of garments where it has to be 30% & above.
  • The loan should be utilized in the case of importing raw materials for manufacturing the exportable products.
  • The exporter must have an export letter of credit.
  • One must create a back-to-back for importing raw materials.
  • The period of loan is 180 days.

Inspection of Export Document:

After the shipment of goods the exporters submit export documents to authorized dealer for negotiation of the same. As bankers deal with documents only, not with commodity they are required to be very much careful about the genuineness and correctness of the documents evidencing shipment of the respective commodities. The bankers are to ascertain that the documents are strictly as per the terms of letter of credit. Before negotiation of the export bill, the bankers are to scrutinize and examine each & every document with great care. Negligence in the part of the bankers may result in non-repatriation or delay in realization of proceeds as incorrect documents may put the importers abroad into unnecessary troubles. The Inspection procedure is as follows:

Inspection of Draft:

  • The draft should be drawn by the party indicated as the beneficiary of the credit i.e. the exporter; drawee must be in accordance with the terms of the credit.
  • The tenor and amount of the draft be in conformity with the credit terms.
  • The bill of exchange should be properly stamped if necessary with the requisite value and the cost must be recovered from the drawers unless it is provided otherwise in the letter of credit.
  • The draft or bill must bear the correct date and must be drawn or endorsed to the order of the bank.
  • The drawer’s signature must be verified.

 Inspection of Invoice:

  • The physical description of the goods i.e. price, quantity, quality, markings etc. in the invoice must correspond with the specifications in the credit.
  • If the credit stipulates a consular invoice, the requisite invoice should be furnished.
  • All copies must be signed and certified as correct shipper.
  • If the credit stipulate for any other particulars to be stated in the   invoice these must complied with. It should not include charges such as postage; cable etc. unless specifically authorized under the credit.

Inspection of Shipping Bill:

  • The bill of lading should be a full set clean on board ocean bill of lading, unless the credit stipulates otherwise. ‘Received for shipment’ bills of lading must not be accepted unless permitted by the credit.
  • It must agree with the invoice as regards quantity and description of goods as well as in respect of ports of shipment and destination.
  • The bill of lading must also indicate where it is ‘freight paid’ (C & F, GIF) or freight payable at destination (FOB transaction).
  • Transshipment and port shipment clauses in the shipping bill should be in accordance with credit terms and the provisions of the uniform custom and practice.
  • Credit frequently stipulates for shipment not letter than a specified date. Bill of lading must be examined to ensure that these are dated not later than the date mentioned.
  • Must be properly signed by or behalf of the carries, must be properly stamped
    and must be endorsed, expect when the relative credit stipulate for bill of lading to order of a named firm.
  • Dock shipment not permitted unless specifically authorized and covers by insurance.
  • Bill of lading must not be a stale one.

 Inspection of Insurance:

  • Where insurance is to be effected by the beneficiary for GIF consignment, the policy   accompanying the documents should be examined to ensure:
  • That the insurance covers the merchandise for the value stipulated in the credit.
  • That the document is of the class stipulated in the credit.
  • That the insurance documents describe the merchandise covered and mention the name of the carrying steamer. In case where ‘on board’ bill of lading are not presented the following clause or words of similar indent must follow the name of the steamer’ and / or ‘following steamer’.
  • That all risk stipulate in the credit is properly covered in the insurance documents. When the credit stipulates that ‘all risk’ are be covered, it is not sufficient that various risks are mentioned but a clause to the credit that ‘all risk’ are covered, is required.
  • That the policy is in the name of the bank and the importer.
  • That the party designed in the documents to perform such act properly countersigns the insurance document.
  • That the insurance document complies with the conditions of the letter of credit is in negotiable form that it is endorsed by the party to when the loss payable, unless the credit stipulates that the insurance must be issued ‘loss payable to a specified party in the country of destination’.
  • That the date appearing on the Insurance document is not later than the date appearing on the bill of lading.
  • That the insurance document covers transshipment when the bill of lading indicates that transshipment would take place.
  • That the insurance claims are payable at the port of destination, that insurance certificate / policy acknowledges the payment of the premium.

Inspection of other Documents:

The other documents i.e. certificate of origin, packing list, weight / measurement certificate, inspection certificate, survey report, quality control certificate etc. should be issued or signed by the proper authorized and description of ‘export – order’ given in these documents not be in contradiction to the credit terms.

 Risk of Export Financing:

In the trade – there are so many risk factors involved. In banking sector – the bank face risk basically from loans & advances and foreign exchange. In this section I discuss the risk of Export Financing.

While there are many advantages to exporting it is not without risk. In deed there are often factors present in international market, which make foreign exchange substantially more risky than domestic ones, including the credit risk of non-payment or non-acceptance of the merchandise by the buyer. For international sales, these risks are far more pronounced than they are domestically.

For these reasons IFIC Bank also accompanied with elements of uncertainty some which are as follows:

 Commercial Risk:

  • Insolvency of overseas buyer, which result in non-realization of export proceeds.
  • Failure of the buyer to retire credit already accepted by him / her in case of askance   bill within stipulated period.
  • Willful negligence of the importer to accept of pay bill or to accept goods for no fault of the exporter.

Political Risk:

  • Sudden out break of war revolution or civil disobedience in buyer’s country.
  • Imposition of restrictions on remittance on any government action in the buyer’s country which may block or delay payment.
  • Imposition of trade embargo or blockade against any country.  
  • New import restriction on the buyer or cancellation of the license.
  • Additional handling transport or insurance charges due to interruption or
    diversion of voyage, which cannot be recovered from buyer.
  • Bankrupt or closure of a bank or stoppage of operation of a bank may hamper repatriation of exports proceeds of letters of credit opened by such a bank.
  • Any other cause of loss occurring outside the exporter’s country beyond the control of importer or exporter.

Informational Risk:

Often credit information on the importer is not available or at best sketchy because buyers and sellers live in different socio-economic & political environment. It is much harder to judge the financial strength, reputation, integrity of a buyer who is thousands of miles away and belongs to a different culture. Moreover, many importers may have good reputation in their own environment based on local value system; they may – never the less engage in some surprising business practices when judged by a different set of standard.

 Pre-Shipment Export Credit Risk:

  • Pre-shipment export credit risk involves the following additional risks:
  • There may be diversion of fund because of low interest rate.
  • Uncertainties   relating   to   non-availability   of new   materials   may   hamper processing of exportable products.
  • The exporter may not be able to make shipment within the stipulated time due to power failure, strike, natural calamites etc.
  • The materials under back-to-back letter of credit may not reach well in time to allow the exporter to process goods within the expiry date of original export letter of credit.

 Import Finance:

All over the world there is no country, which can meet its requirements from its own sources. Some imports raw materials, some finished goods & some food products or other commodities. As it is in export & import are invariably conducted through commercial banks. IFIC Bank is engaged to extend the facilities to the importers.

After getting the completed registration, application for opening letter of credit is made through a bank where applicant has a current account. An importer is required to fill up import application form & letter of credit authorization form & importer has to deposit margin money to the bank from 10% to 40% of the import value, depending on the credibility of the importer.

After the letter of credit is established the exporter after executing the export, submits the negotiable document through its bankers and in terms of exporter’s bank submit the documents to the corresponding bank of the importer’s bank in the country. If the documents are found correctly fulfilling all the terms & conditions stipulated in the letter of credit the corresponding bank of import’s bank will realize payment that will debited to the importer’s account. In banking term this is known as LATR and the importer has to pay the LATR amount in 90 days with the bank interest rate.

Import Financing Sectors of IFIC Bank:

  • IFIC Bank is the major financer of import business in our country. In extend credit, grant and other facilities SB finance to the following sectors:
  • Machinery & transport equipment.
  • Petroleum & petroleum products
  • Textile, yarn, fabrics, article & related products
  • Chemicals
  • Iron & steels
  • Cereal & cereal preparations
  • Dairy products & eggs
  • Other including loans & grants.

Import Financing System of IFIC Bank:

  • Registration of import
  • Income tax registration certificate
  • Partnership deed in the cases of partnership concern
  • Certificate of registration with the register of joint stock companies
  • Articles & Memorandum of association in the case of limited companies.
  • Nationality certificate & Bank certificate
  • Ownership documents in place of business
  • Trade license from the relevant authority.
  • Survey clearance from the relevant authority
  • Other documents prescribed in the import policy.

 Import Registration Certificate (IRC):

In case of import IRC is the first necessity for the importer. The IRC is not required for import goods by government departments, Local authorities, statutory bodies, recognized educational institutes, Hospitals. In addition registration is not required for import goods, which do not involved remittance of foreign exchange like -medicine, reading materials etc. can be imported without IRC by the users within monetary limit.

Procedure for Obtaining IRC:

For IRC the interested person / firm’s submit the application along with the following documents directly to the Chief controller of Import & Export respective zonal office (CCI&E):

  • Income tax registration certificate.
  • Nationality certificate.
  • Certificate from chamber of commerce & industry registered trade association.
  • Bank solvency certificate. .
  • Copy of trade license.
  • Any other document if required by CCI&E.

On receiving application the respective CCI&E office will scrutinize the documents, conduct physical verification, and issue demand note to the prospective importers to furnish the following documents through their nominated bank:

  • Original copy of treasury deposited as IRC fees.
  • Assets certificate.
  • Affidavit from 1s‘class magistrate.
  • Rent Receipts.
  • Two passport size photograph.
  • Partnership deed in case of partnership firms.
  • Certificate of registration
  • Memorandum & Articles of association in case of limited company.

After securitization and verification the nominated bank will forward the same to the respective CCI&E office with forwarding schedule in duplicate through banks representative. CCI & E then issues import registration certificate to the applicant.

Import Procedure:

  1. Imports & Exports (control) Act 1950 regulates the import & export trade of the country. There are a number of formalities, which on ‘importer has to fulfill before import goods. The importer follows the following steps:
  2. The buyer & the seller conclude a sales contract provided for payment by documentary credit.
  3. The buyer instructs his / her bank i.e. issuing bank to issue a credit in favor of the seller i.e. beneficiary.
  4. The issuing bank asks another bank usually in the country of the seller, the advice or confirms the credit.
  5. The advising or confirming bank informs the seller that the credit has been issued.
  6. As soon as the seller receives the credit and is satisfied that he / she can meet its terms & conditions, he, / she are in a position to load the goods & dispatch them.
  7. The seller then sends the documents evidencing the shipment to the bank   where the credit is available i.e. the nominated bank. This may be the issuing bank, or the confirming bank, bank named in the credit as the paying, accepting or negotiating bank.
  8. The bank if other than the issuing bank, sends the documents to the issuing bank,
  9. The issuing bank checks the documents and if they meet the credit requirement either
  10. Affect payment in accordance with the terms of the credit either to the seller if s/he has sent the documents directly to the issuing bank or to the bank that has made funds available to him/her in anticipation. Or
  11. Reimburses in the pre-agreed manner the confirming bank or any bank that has paid, accepted, or negotiated under the credit.
  12. The bank checks the documents against the credit. If the documents meet the requirements of the credit, the bank then pay, accept or negotiate accordingly to,    terms of credit. In case of a credit available by negotiation, issuing bank or the confirming bank will negotiate with recourse; another bank including the advising bank has not confirmed the credit, which negotiates will with recourse.
  13. When the documents have been checked by the issuing bank and found to meet the credit requirements, they are released to the buyer upon payment of the amount due or upon other terms agreed between importer & the issuing bank.
  14. The buyer sends transport documents to the carrier who will then proceed to deliver the goods.

Import Inspection:

The import bills consist of the following documents & the order of their Inspection should be as below:

  • Forwarding Schedule of Negotiating Bank.
  • Bill of Exchange.
  • Invoice.
  • Bill of Lading
  • Insurance Documents
  • Certificate of Origin
  • Any other Documents.
  • Lodgment:
  • Intimation should be given to the party in time.
  • Conversion of foreign currency in to Bangladesh Currency.
  • Entry in PAD (payment against document) register
  • Entry in Letter of Credit opening register by rounding the letter of credit number with date.
  • Scrutinize the shipping documents meticulously.
  • Inform the importer to deposit balance amount of letter of credit and to release the necessary documents.
  • Enter the shipping documents in inward foreign bills register.

Import Bills Retirement:

a)   Banker will prepare & pass retirement vouchers.

b)    Importer will deposit the claim amount.

c)    Certifying Invoices.

d)    Passing & prepare the vouchers.

e)    Entry in the register.

  • Endorsement in the Bill of Exchange and Transport documents i.e. Bill of              Lading; A. W.B.; T.R. etc.
  • Accounting treatment of voucher passing:

            Parry’s A/C …………………………Dr.

             Margin on import A/C. …………….Dr.

                              PAD A/C…………………………….Cr.

                           I.A. Interest & other charges A/C… … .Cr.

  • At the end of the total procedure, taking the retirement of import bills or clearing certificate from the bank, the importer will clear the goods from the port through the    clearing & forwarding agent.
  • On the other hand, completing the above all steps the issuing bank will prepare “foreign exchange transaction schedule” and send one copy to international division of Head Office and another one copy to reconciliation.

In the trade – there are so many risk factors involved. In banking sector – the bank face risk basically from loans & advances and foreign exchange. In this section I discuss the risk of import financing.

In international trade transaction takes place between buyers and sellers living in different socio-economic and political environments. There may be abrupt changes in socio-economic or political situation in the buyer’s country or in the seller’s country. Even the exchange value of currencies of the two countries had gone so much down that they were not acceptable or exchangeable in international market. More over the importer or the exporter may not be able to comply with the terms of credit for some reasons. Therefore, risk inherent in all credits. The bank has to consider following risk in financing the import procedure:-

Commercial Risk:

Violation of the requirement of letter of credit authorization or letter of credit:

  • Shipment effected before authentication of the letter of credit authorization from by the nominated bank and registration with the Bangladesh bank, whenever necessary and before opening of letter of credit or after expiry of the validity of the letter of credit authorization or letter of credit shall be treated as import in contravention of this order. Letter of credit authorization obtained in the basis of false or incorrect particulars or by adopting any fraudulent means shall be treated as invalid and void.
  • Import against indent and Performa invoice: Letter of credit may be opened against and indent issued by a local registered indenter or against a Performa invoice issued by a foreign manufacturer or seller or supplier.

Political Risk:

In addition to the credit and commercial risk we have outlined, international transaction such as import financing take on the whole new dimensions of political risk. They are as follows:

  • Sudden outbreak of war, revolution, coups, or civil disobedience in the seller’s country.
  • Imposition of restriction on remittance.
  • Imposition of trade embargo or blockade.
  • New import restriction on the buyer or cancellation of the license.
  • Additional handing transport or issuance charges due to interruption or diversion of voyage, which can’t be recovered from the buyer.

Informational Risk:

There may be informational risk inherent in import financing on the importer because of shortage of required information. So it is much harder to judge the financial strength, reputation, and integrity of a seller or buyer who is thousands of miles away and belongs to a different culture.

 Foreign Remittance:

Remittance is the sending of money etc. to a distance. Foreign remittance is the sums of foreign currency to a distance from one place another place i.e. country to country. The person who is the receiver of the remittance is remittee. The person who is the sender of the remittance is remitter or remiitor. There are two types of foreign remittance, which are as below:

  • Foreign Inward Remittance
  • Foreign Outward Remittance

Foreign Inward Remittances:

The remittance of freely convertible foreign currencies which IFIC Bank Foreign Exchange Corporate branch is receiving from abroad against which the authorized dealers making payment in local currency to the beneficiaries may be termed as foreign inward remittance.

Mode of Inward Remittances

The term inward remittances includes not only remittances by TT., MT., Drafts etc. but also purchases of bills, purchases of drafts under travelers letter of credit and purchases of travelers cheques. Foreign currency notes against which payment is made to the beneficiary also a part of inward remittances. Thus the following are the Mode of inward remittances:

  • TT: Telegraphic Transfer.
  • MT.: Mail Transfer.
  • FD: Foreign Drafts.
  • TC: Travelers Cheque.
  • Foreign currency notes.

Purpose of Inward Remittance:

The purpose of remittance is of various reasons. Such as:

  • For family maintenance.
  • Realization of exports proceeds.
  • Gift.
  • Donation.
  • Export brokers commission.

Payment Procedure of Telegraphic Transfer:

  • To verify the ‘test number’.
  • To inform the beneficiary for submission of “Form – C”.
  • To confirm from issuing bank or reimbursing bank.
  • To covert of foreign currency into Bangladesh currency with T.T.
  • To make entry in T.T.s, drafts, M.T.s, received registration.
  • To prepare vouchers.
  • To prepare FET schedule.

Purchase of Drafts & Cheques:

Authorized dealer may purchase drafts & cheques which are not drawing on IFIC Bank at the request of the beneficiary. Procedures of purchase are as below:

  • To obtain an application or undertaking from the beneficiary with ‘Form – C’
  • To verify the signature of the drafts (if possible).
  • To make entry in the register for drafts & T.C. purchased.
  • To convert foreign currency into Bangladesh currency.
  • To prepare voucher.
  • To prepare FET schedule.
  • To send the instrument for collection.

Collection Procedure of Drafts & Cheques:

  • To make entry in foreign Bills Collection Register.
  • To prepare forwarding schedule in quadruplicate.
  • To prepare vouchers on realization of proceeds i.e. on receipt of advice from the collecting bank.

Payment of Foreign Currency Notes:

  • To check the custom declaration (if any).
  • To made entry in (kateha) raw register.
  • To convert foreign currency into Bangladesh currency.
  • To prepare vouchers.
  • No FET schedule is required to be prepared & sent to head office because in this case there is no transaction with head office.

Cancellation of Inward Remittance

In the event of any inward remittance which has already been reported to the Bangladesh Bank being subsequently cancelled, either in full or in part because of non-availability of beneficiary. Authorized dealers must report the cancellation of the inward remittance as an outward remittance of “Form-T/M”. Required documents are:

  • The date of return in which the inward remittance was reported.
  • The name & address of the beneficiary.
  • The amount of the purchase as effected.
  • Reasons for cancellation.

Reporting to Bangladesh Bank:

On the last working day of each month the transaction during the month to be reported to Bangladesh Bank through the following schedule:

  • Schedule -J-l / 0-3 for TK. 5000 & above.
  • Inward remittance voucher-1/04 for below TK. 5000.

Foreign Outward Remittances:

The remittance in foreign currency that is being made from our country to abroad is known as foreign outward remittance.

Mode of Outward Remittance:

TT        :           Telegraphic Transfer.  MT      :           Mail Transfer.

FD          :               Foreign Drafts.                    PO          :               Payment Order

FC          :               Foreign currency notes.      TC       :           Travelers Cheque.

Approval of Bangladesh Bank:

Bangladesh Bank provides permission or approval for outward remittances to the applicants who are to lodge an application for the purpose on the following prescribed forms with an authorized dealer who forwarded the same to Bangladesh Bank for approval:

  • The IMP form (cover remittances for imports).
  • Form T/M (Traveling & Miscellaneous).
  • Issuance procedure of FD, MT. & TT.:
  • To prepare the instrument.
  • To make entry in DD, MT, TT issued register.
  • To prepare draft advice in duplicate one for drawee bank & one for reimbursing bank.
  • To make entry in draft advice dispatched register.
  • To send reimbursement authority in case of MT & TT.
  • To prepare FET schedule.

Issuance Procedures of Traveler Cheque:

  • To verify the approved T / M form or Bangladesh Bank permit.
  • To issue TC by obtaining signature of the purchaser on the TC.
  • To endorse in the passport.
  • To prepare FET schedule.
  • To make entry in the travelers cheque issue register.
  • The TC issuing slip of the issued TC to be sent to that bank (whose TC issued)
  • With reimbursement  inspection

Issuance Procedure of Foreign Currency Notes:

  • To verify the approved T.M form or Bangladesh Bank permit.
  • To issue foreign currency notes by endorsing in the passport.
  • Voucher preparing with accounting treatment:

              Party’s account……………………………..Dr.

                                Foreign Currency Notes on Hand A/C…………….. Cr.

Facilities for Wages Earners:

  • Bangladeshi national/Bangladesh origin dual citizen working abroad may open Foreign Currency account (F.C. A/C) in US Dollar and Pound Sterling without initial deposit.
  • Nominee can operate the account
  • Interest is paid on F.C. A/C
  • Balance in F.C. A/C can be utilized for import of goods
  • Balance available in the F.C. account may wholly or partially be sent abroad.
  • Foreign currency brought in by Wage Earners can be deposited in the F.C. A/C
  • Wage earners Development Bond in Taka can be purchased from the balance of F.C. A/C
  • Non-Resident Foreign Currency A/C (NFCD A/C) can also be opened by Wage Earners.
  • F.C. A/C & NFCD A/C may be maintained as long as the account holder desires.
  • These accounts can be opened from abroad on submission of required papers duly attested by our Embassy/ Branch/ Representative office abroad.

Position of the Foreign Exchange Department:

Foreign Exchange Business:

The total Foreign Exchange Business handled during the year 2009 was for BDT. 12,917.00 Crore as compared against BDT 10,599.60 crore in the previous year.

Comparison Foreign Exchange Business with Previous Years


Amount in BDT


12,917.00 crore


10,599.60 crore


9,235.22 Crore


6,602.26 Crore


5,862.21 crore


5,296.95 crore

Table-4.7.1: Foreign Exchange Business of IFIC Bank

Source: Annual Report of the year of 2005 to 2010.

Figure-4.7.1: Diagram of the Foreign Exchange Business of IFIC Bank 2005 to 2010

In case of Foreign Exchange Business of IFIC Bank ltd, they just showed that their market position is increasing as we see from the above diagram – in 2005 its figure was BDT 5296.95 Crore as 2010 it seems like BDT 12,917.00 Crore
4.7.2 Import Business

The total Import Business handled during the year 2009 was for BDT 5033.70 crore as compared against BDT 4435.3 crore in the previous year.

Comparison Import Business with Previous Years     


Amount in BDT


5033.70 crore


4435.30 crore


3676.06 Crore


2662.94 Crore


2478.52 crore


2562.21 crore

Table-4.7.2: Import Business of IFIC Bank

Source: Annual Report of the year of 2005 to 2010.

Figure-4.7.2: Diagram of the Import Business of IFIC Bank 2005 to 2010

In case of Import Business of IFIC Bank ltd, they just showed that their market position is increasing as we see from the above diagram – in 2005 its figure was BDT 2562.21 crore as 2010 it seems like BDT 5033.70 Crore.

Export Business:

The total Export Business handled during the year 2009 was for BDT 6655.70 Crore as compared against BDT 5486.60 Crore in the previous year.

Comparison Export Business with Previous Years:




6655.70 crore


5486.60 crore


4900.87 Crore


3944.32 Crore


3383.69 crore


2755.74 crore

Comparison Export Business with Previous Years

Source: Annual Report of the year of 2005 to 2010

Figure-4.7.3: Diagram of the Export Business of IFIC Bank 2005 to 2010

In case of Export Business of IFIC Bank ltd, they just showed that their market position is increasing as we see from the above diagram – in 2004 its figure was BDT 2755.74 crore as 2009 it seems like BDT 6655.70 crore


The total Remittance Business handled during the year 2010 was BDT 1227.70 crore as compared against BDT 677.70 crore in the previous year.

Comparison Remittance Business with Previous Years


Amount in BDT


1227.70 crore


677.70 crore


658.29 Crore


5.00 Crore

Table-4.7.4: Comparison Remittance Business with Previous Years

Source: Annual Report of the year of 2007 to 2010

Figure-4.7.4: Diagram of the Remittance Business of IFIC Bank 2008 to 2010

In case of Remittance Business of IFIC Bank ltd, they just showed that their market position is increasing as we see from the above diagram – in 2008 its figure was BDT 658.29 crore as 2010 it seems like BDT 1227.70 crore.



The findings obtained from the study on Foreign Exchange Business of IFIC Bank are follows:

  1. Toward the growth and economic development of Bangladesh IFIC Bank is playing an important role.
  2. There are three types of modes of foreign exchange market, which are: Export Finance, Import Finance & Foreign Remittance. Out of 82 branches 22 branches are directly related to the foreign exchange activities and 56 branches provide online facilities to the customer.
  3. With wide network of branches at home and also a large number of correspondent banks worldwide it is singularly handling the largest volume of export-import business including remittances.
  4. The total foreign exchange business of the Bank for the year 2010 was Tk. 12,917.00 crore as against Tk. 10,599.60 Crore in 2009 showing an increase of 21.86%. (Annual Report 2008, Page19)
  5. The foreign exchange department is semi computerized. Paper-based works are still in existence.
  6. The liquidity & profitability condition of the Foreign Exchange Corporate branch is standard.
  7. Employees are loyal to the organization but they need training for providing better service.


Foreign exchange Activities department play a vital role in any banking institutions. On the basis of some analysis of this topic I have got some suggestions .These are given below-

  1. The Bank should develop sectors wise export-financing facilities.
  2. Letter of Credit (L/C) opening system for the importer should be easier.
  3. For customer’s convenience, IFIC Bank should provide more personnel to deliver faster services to the customers in case of foreign exchange dealings.
  4. The Bank should develop an effective database needed for analyzing Foreign Exchange Business.
  5. Proper communication system and maintenance of files & machineries like phone, computer, fax, and photocopier need to be ensured.
  6. To ensure error free faster services, the bank should be fully computerized.
  7. Effective strategies must be undertaken against defaulters.
  8. More employees are to recruit. For the better service, training is must and according to the skill and education background of employee needs to be positioned.
  9. The Bank should apply modernized Marketing Information System


The Banking arena in recent time is one of the most competitive business fields in Bangladesh. As Bangladesh is a developing country, a strong banking sector can change the socio economic structure of the country. So we can say, the whole economy of the country in linked up with its banking system. IFIC Bank is the bank which is highly potential commercial Bank of Bangladesh. This bank performs hundreds of important activities both for the public and for the government as a whole. It has an outstanding bearing to thrive our business sector. It has strong performance on General Banking, Loans & Advances, Industrial credit, and foreign Exchange. I had the privilege to learn many things from the Foreign exchange Corporate Branch through my active involvement in this branch. In this paper I have tried to highlight Foreign Exchange Business of IFIC Bank. With wide network of branches at home and also a large number of correspondent banks worldwide it is singularly handling the large volume of export-import business including homebound remittances. The effective and efficient Foreign Exchange Business of the Bank helps in the continuous growth and progress of national economy.


  1. Annual Report of IFIC Bank (Published-2008)
  2. Annual Report of IFIC Bank (Published-2006)
  3. Annual Report of IFIC Bank (Published-2005)
  4. Various Official Records of IFIC Bank.
  5. Syed Ashraf Ali (1995) Foreign Exchange and Financing of Foreign trade.
  6. A Text book on Foreign Exchange 1st edition-L.R.Chowdhury (2000)
  7. A Hand Book of Bank Management-S.A.Sakoor
  8. Chowdhury, Dr. T.A., an Overview of Banks and Their Services. Reading Materials on Theory & Practice of Banking (B-101),     Bangladesh Institute of Bank Management (BIBM), 2000.
  9. Foreign Exchange Act 1947.
  10. Website of IFIC Bank (

IFIC Bank Ltd. at a Glance

SI. No.Particulars

Taka in Million

  1. 1.        
Paid-up Capital1341.43670.72406.09406.39
  1. 2.        
Total Capital3793.043045.092028.391754.41
  1. 3.        
Capital Surplus733.30644.64172.33217.25
  1. 4.        
Total Assets45729.4739914.1536080.4830201.05
  1. 5.        
Total Deposit36092.1729900.0528620.9122505.17
  1. 6.        
Total Loan & Advances33018.3928361.4625490.6621694.90
  1. 7.        
Total Contingent Liabilities & Commitments20536.2619422.5916521.4113101.84
  1. 8.        
Credit Deposit Ratio91.48%94.85%89.06%96.40%
  1. 9.        
Percentage of classified Loan Against total Loans & Advances5.92%8.11%5.64%9.66%
  1. 10.     
Profit after Tax & Provision657.31964.93253.8382.25
  1. 11.     
Amount of classified Loans During the year1953.072299.901437.392094.72
  1. 12.     
Provision kept against classified Loans651.85984.02970.771195.08
  1. 13.     
Provision Surplus / Deficit30.201.59678.03232.66
  1. 14.     
Cost of Fund6.12%6.58%6.35%6.12%
  1. 15.     
Interest Earning Assets39806.2935520.2330940.5725656.36
  1. 16.     
Non-interest Earning Assets5931.204393.925139.914544.69
  1. 17.     
Return on Investment (ROI)13.59%13.56%9.11%6.83%
  1. 18.     
Return on Assets (ROA)1.44%2.42%0.70%0.27%
  1. 19.     
Income from Investment691.44569.53301.93202.83
  1. 20.     
Earning Per Share49.0071.9362.4620.24
  1. 21.     
Income Per Share411.98774.77149.5636.80
  1. 22.     
Price Earning Ratio (Times)24.2616.1315.2328.30

Table-4.3: Performance of IFIC Bank Limited

Source: Annual Report, IFIC Bank Ltd. 2010