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Submitted To: Md. Ifte Kharul Alam Assistant Prof. (HOD Finance) Department of Business Administration Stamford University.
Submitted By: Mst. Acia Siddika ID No # 03509621 Batch # 35th Department of Business Administration Stamford University.
STAMFORD UNIVERSITY, BANGLADESH Business Administration Department Dhanmondi Campus Dhaka, Bangladesh. Date of Submission: 18th March2010
Letter of Transmittal
Date: MD Ifte kharul Alam Assistant Prof. ( HOD Finance ) Department of Business Administration, Stamford University Dhanmondi, Dhaka Subject: Submission the Internship Report on Southeast Bank Ltd.. Dear Sir, This is great gratification to submit the Internship Report on Foreign exchange Operation Of Southeast Bank Limited- A Case Study of Dhanmondi Branch, which has been assigned to me in December, 01. The report is based on primary and secondary observation data, personal experience and some other informal information sources. I believe that the knowledge and experience I have gathered during my internship period will enormously help me in my future professional life. Your kind acceptance and any type of appreciation would surely inspire me. I would always available and ready to explain any further clarification of the report whenever asked. . Sincerely yours.
Declaration
I am Mst. Acia Siddika, a student of Masters of Business Administration (MBA) Major in Finance of STAMFORD UNIVERSITY, BANGLADESH Dhanmondi Campus, Dhaka.
Do hereby declare that the Internship Report on Foreign Exchange Operation of Southeast Bank Ltd. I have not submitted it for any degree, Diploma, title and recognition before.
------------------------Mst. Acia Siddika ID No# MBA 03509621 Batch # 35th Stamford University, Bangladesh.
Supervisors Certificate
This is to certify that the internship Report on Banking Activities of SEBL: Focus on Foreign Exchange Operations is a bona fide record done by Acia Siddika as partial fulfillment of the requirement of MBA of Stamford University. The report has been prepared under my guidance and is a record of the bona fide work carried out successfully.
Acknowledgement
It becomes especially possible for me to make the report more effective and authentic for the constructive assistance of many individual of the bank and of the different organization. I like to express my profound thanks to my honorable Supervisor teacher Md Ifte kharul Alam, assistant professor Department of Business Administration Stamford University, whose direct supervision and guidance helped me a lot to write this report. We also want to provide thanks to Vice Chancellor, and Stamford University Because of his support to prepare the report. I also grateful to Mr. Abdul Hamid mia, EVP and manager of the branch whose active support inspired and helped me to work at the branch and to gather practical knowledge. I also express my thanks to the officers and stuffs for providing information and guidelines at the time of practical work and special thanks- to Mr Tanim Shakur. , Assistance Vice President, All of Senior principal officer, Senior Officer and Officer of SEBL for Their kind guidance. I would really grateful to all employees of SEBL Dhanmondi branch, for friendly cooperation. I would like to express thanks to all my teachers, friends and staffs of Stamford University for their cooperation and assistance.
EXECUTIVE SUMMARY
I joined the Southeast Bank Limited - Dhanmondi Branch on the 1st December , 2009 with an Office order issued by the Head office of the Southeast Bank Limited. Dhanmondi Branch is an active branch of The Southeast Bank Limited, full of ideal commercial activities through authentic performance. This branch performs the entire banking role as a result; one can easily get all the simple and intricate banking operations. In a word, this branch was appropriate for me as an intern. Dhanmondi Branch serves the people by the three sections, General Banking, Investment and Foreign Exchange. This Internship Report Entitled " Foreign exchange Operations Of Southeast Bank Limited- A Case Study of Dhanmondi Branch has focused on the general banking activities in Southeast Bank Limited. I have worked there three for months as an intern to fulfill the requirement of MBA program. Internship program in SEBL Dhanmondi Branch has given me practical orientations with the real professional life. During the internship period I worked with Foreign Exchange & General Banking Department and gathered practical experiences. This report will give a clear idea about Foreign Exchange Activities of SEBL Dhanmondi Branch. There have five chapters in this report. In the first chapter I discuss about Company at a Glance (introduction, vission, mission, corporate information, management team and so on.). In the second chapter I discuss about General Banking Activities of SEBL Dhanmondi Branch (introduction, activities, account opening department, cheque book and so on.). In the third chapter I discuss about Information about Dhanmondi Branch. In the fourth chapter I discuss about Work Area and Learning Experience & finally I discuss about SWOT Analysis, Recommendation and conclusion. So, considering the service sector of Bangladesh, SEBL Dhanmondi Branch should become more conscious to deal with its customers as the customers have now more choice to bank with and there are institutions that are intensifying competition by focusing more on online customer service.
Table of Contents
The Preparatory Parts: Title Fly Letter of Transmittal Declaration Supervisors Certificate Acknowledgement Executive Summary
Chapter -1
1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 Introduction Origin of the Study Background of the Study Objective of the Study Methodology Data Analysis Scope of the study Limitation of the study
Page No
01 02 02 03 04 05 05 05
2.9 Cash Department 2.9.1 Control Procedures of Cash Counter 2.9.2 Remittance of Cash
17 17 18
5.2.7.3 L/C Authorization form (L/CAF) 5.2.7.4 The L/C conforming process 5.2.7.5 Forwarding documentary credit by confirming bank 5.2.7.6 Submission of necessary documents by exporter to the Negotiating Bank 5.2.7.7 Lodgment and Retirement of shipping documents 5.2.8 Import financing 5.2.8.1 P.A.D 5.2.8.2 L.I.M 5.3 Export 5.3.1 Regulation of Export 5.3.2 Export Procedures 5.3.3.1 Registration of Exports 5.3.3.2 Securing the order 5.3.3.3 Processing and opening of Back to Back L/C 5.3.3.1 Features of Back to Back L/C 5.3.3.4 Preparation of Export Documents 5.3.3.5 Procuring the materials 5.3.3.6 Shipment of Goods 5.3.4 Export financing 5.3.5 Negotiation of Documents under L/C 5.3.6 Foreign Documentary bill for purchase 5.3.7 Payment of Back to Back L/C 5.3.8 Export document Chack list 5.4 Foreign Remittance 5.4.1 Inward foreign remittance 5.4.2 Outward foreign remittance 5.4.3 Export import procedure
39 41 41 42 42 43 44 45 47 47 47 47 48 48 48 49 49 50 50 52 52 52 52 54 54 55 55
1.1 Introduction
Banking system occupies an important place in a nations economy because of its intermediary role; it ensures allocation and reallocation of resources and keeps up the momentum of economic activities. A banking institution is indispensable in a modern society. It plays a pivotal role in the economic development of a country and forms the core at the money market of any country. In a developing country like Bangladesh the banking system as a whole has a vital role to play in the progress of economic development. The overall purpose of banking is to collect money from surplus unit and transfer it to the deficit unit. The Subject of my Report is Foreign exchange Operation Of Southeast Bank Limited- A Case Study of Dhanmondi Branch .So my focus is mainly on Foreign Exchange activities of SEBL for contributing total profit of the bank. Foreign trade plays an important role in economic development of a country. The economic development of a country is comprised with domestic production and foreign trade (especially the balance of export and import). It plays a vital role in the Balance of Payment (BOP) of a country. Surplus (export-import) is favorable for a country. Although Bangladesh usually exercise deficit BOP (import-export) it has to continue foreign trade.
To conduct foreign trade of a country, bank plays an important role; usually this duty is played by commercial banks. As a commercial bank, Southeast Bank Limited (SEBL) also engaged in the dealing of foreign trade in Bangladesh. Foreign trade operations play a significant role in the overall business of SEBL in order to strengthen its position. SEBL has further consolidated its relationship with the existing network of international correspondents. The revenue earning sources of banks are mainly loans and advances. The credit facility can be of two types: funded & non-funded. Funded credit can be expensive as the bank
has to pay interests. Non-funded credit includes LC, which is the main source of income for the Foreign Exchange business.
If a bank can increase its import and export transactions, its profit will obviously reach a higher level, as the costs are negligible.
In order to conduct a worthwhile report preparation of SEBL, it is necessary to go through the profiles of the banks understudy. .
commercial Banks viz. reduction, exchange rates and so on. To acquire practical experience about work environment, to know relation among staff, discipline and behavior of an organization that will help me to buildup future working life. To reveal the nature of foreign exchange transactions & Operation. To Identify Foreign Exchange activities. To distinguish Export- Import procedures. To acquire practical knowledge about foreign exchange activities of SEBL. To recognize the performance of SEBL in Foreign Exchange aspect. To know, if there is any relationship among SEBL profit and foreign exchange operations.
Try to find out the growth rate of Export-Import operation & Credit Procedure of SEBL. To know how a credit proposal is treated in this branch. To learn about the credit analysis process of the branch. To point out the problems in fund utilization and recovery thereon. To analyze classified loan and advances.
1.5 METHODOLOGY
The report is prepared on the extensive use of secondary data available in different text, reports, journals etc. as well as primary data collected from the bank personnel by means of informal interview. I consulted banks Annual report (Income Statement) and made discussion with the officials of Dhanmondi Branch, international division and other department about methods and procedures of export-import business, problems related to foreign exchange transactions I also had to talk to the exporters and importers for getting impression about SEBL. The methodology that was followed through out the study may be summarized below: For this study I have relied on both primary and secondary source of Data. The sources are as follows:
Primary sources:
Officials records of Southeast Bank Limited. Oral and informal interview of officers and employees in SEBL Informal interview with the exporters and importers.
Secondary Sources:
Annual report of NBL. Printed forms and documents supplier by SEBL. Booklets of international Division of SEBL. Relevant Books, Journals, Booklets etc. Study of old & current files and vouchers.
comprehensive and conclusive. Mainly the report could be made descriptive. Some usual constraints I did face during the course of my investigation. These are as follows:
The main limitation of the study is availability of literature and data and in many cases the up-to date information is not yet published. Time constraints impede me to make in depth study. Entrance to every corner of the bank was not possible to me. Relevant paper and documents were not available sufficiently which can my writing this paper. I had to base on secondary data for preparing this report. This Bank has some policy for not disclosing some date and information for obvious reasons that could be very much essential. Only 12 weeks were not sufficient to visit all the desks of the division. I may be impaired by resource constraint and limited experience and exposure in the field of foreign exchange Operation.
2.1 Introduction:
General banking is one of the major areas of formal sector. Through this section bank receive and disburse money to develop banker-customer relationship by opening different types of accounts and providing prompt services to the customers. It is called the nerve center of a bank. The officers staffs engaged in this department not merely deal with cash but also take important role rendering the better customer services. So cash offers should have well experienced and well behaved towards the valued customers by offering prompt services in receipt and payment of cash with always presenting smiling face. Since bank make profit by investing peoples money, so it need to collect money from customer by various way and need to make sure best services for attracting customers.
2.1.1 Activities:
Commercial Based Banking Activities of this Bank are as following: I. FORMAL SECTOR: A. Deposit : 1. Current Deposit Account 2. Term Deposit Account 3. Foreign currency Account 4. Fixed Deposit Account
Different Schemes Accounts: I. II. III. IV. V. VI. VII. Monthly Profit Deposit Account Education Saving Deposit Account Special Savings (Pension) Scheme Account Millionaire Scheme Account Monthly Savings Based Term Deposit Account Lakhopoti Deposit Scheme Account Double Benefit Deposit Scheme Account
VIII.
IX. Marriage Savings Scheme Account B. Remittance: The bank remits clients money both at home and aboard and completes all formalities of remittance in respect of Bangladeshi living abroad and other customers.
C. Special Banking Services: In Addition, the bank: Issues Guarantees, Provides Safe Deposit Locker service for safe custody Discharges responsibility as investment trustee Carries on transactions on clients behalf Acts as Banker to the issue on behalf of the companies Provides consultancy service to the customers Also provides all other banking services D. Information Technology Services: As regards to information technology, SEBL Dhanmondi Branch has uploaded its website, which makes easy access in the world of communication technology. Introduction of Bank Ultimuse software at SEBL Dhanmondi Branch enables to provide better service to valued clients. I. NON-FORMAL SECTOR: Southeast Bank Limited Dhanmondi Branch has been successfully operating Family Empowerment Micro-Credit & Micro-Enterprise program under Non-Formal Banking Sector since the inception of the Bank in 2002. Meanwhile SEBL has become able to create job opportunities among significant numbers of Micro-credit & Micro-enterprise clients under SME(s) financing. Many of those clients manage to establish them as successful entrepreneurs and graduated them from Micro-Credit to Micro-Enterprise Program.
principles of the savings policy are: To encourage people to save for so if and for the country as a whole. To develop a sustained savings habit among the people.
Request the customer carefully read the printed form / cards supplied to him or her and fill-up the same properly according to the type of account wishes to open and get each of these forms signed at the appropriate place / columns of the forms. The responsible personnel should obtain signature of the customers on the reserve of the signature card.
Any special instruction with regard to operation of the account should be noted on the relevant signature card duly authenticated by the A/C holder, obtained A/C number for the new account, from the opening register. III. Obtained the signature and A/C number of the introducer on the advice of new account and signature card at the placement for the purpose and get the signature properly verified by an authorized official of the bank.
Under this scheme any person can deposit a fixed amount monthly and after maturity the depositor will get a handsome amount with increased profit. The depositor may in cash the total amount at a time or can take as monthly pension until a stipulated time. Intentions and Goal of the scheme: 1. To create awareness to deposit among average income people. 2. To create a chance for attractive deposit scheme. 3. To create an interest free investment.
2.2.3.2 EDUCATION SAVINGS SCHEME Education expenditure especially for higher studies is increasing day by day. In many cases children loses the chance of education as their guardians become unable to adjust with the expenditure. But if proper financial planning is adopted earlier then it is easier for the parents to bear the expenses. For these reasons SEBL has introduced "Education Savings Scheme". This scheme would enable the parents to Dear child's educational expenses in a planned manner.
2.2.3.3 OPENING OF DIFFERENT TYPES OF CURRENT DEPOSIT Drawings are allowed from such an account without any restriction within the -ends available in its credit, no interest is paid on this deposit. If someone open CD (Current Deposit), he fill up form and enclosed this type of paper shown as below: 1. For Sole Proprietorship Trade License 2. For Partnership Trade License Partnership Deed
A Certificate Copy of the Memorandum and articles of Association duly attested by the signatory of the amount. Certificate of Incorporation Certificate of Commencement of Business Copy of the Last Balance Sheet List with Name Designation and Specimen signature of Person authorized to operate the account duly certified of the chairman Minutes of Board of Directors Meeting Authorizing the opening of accounts with us duly certified by the chairman / managing Director List of Directors with address.
Bank prescribed account opening form. Introduction of account to the bank (in all cases except limited company,). 2 (Two) passport size photographs duly attested by introducer of A/C in Signature card. Valid trade license (in case of proprietorship partnership & limited company account). Cheque requisition form. Memorandum of articles & Articles of Association, Resolution of the company, certificate of In-corporation, Registration of RJSC, Letter of Commencement, List of Directors in case of limited company account.
Prescribed nominee form with photograph of nominee except limited company account. Declaration of anti money laundering in the account (as per Bangladesh Bank prescribed form) in all cases. Rubber stamp of the firm in case of proprietorship, partnership & limited company. Transaction profile in case of all account. Partnership deed in case of partnership A/C.
A cheque is a bill of exchange. A cheque is always drawn upon a banker. A cheque is always payable on demand.
There are three parties to a cheque: a. Drawer i.e., a person who draws customer of the bank. b. Drawee of a cheque i.e., a bank on which a cheque is drawn by the drawer (Customer). c. Payee i.e., a person to whom the payment is to be made by the bank on whom the cheque is drawn. the cheque on a bank, such a person is usually a
2.4. Remittance:
Remittance means sending money for one place to another place without physical transfer of cash. If such transfer takes place between the two regions of a country it is, then 'Inland Remittance'. If the transfer involves two sovereign countries it is, then 'Foreign Remittance'. Remittance through a bank is done in any of the following manner:
2.6 Issue of T. T.
The basic difference between the other types of remittance and T. T. is that; in other types of remittance the 'Message of remittance is either sent by ordinary mail or registered mail but in this type of remittance the message, duly tested coded is sent by urgent Telegram / Telephone or Telex.' The message, in other words, the telegraphic order upon the drawer branch, is given along with test number at the beginning to prove that the same is genuine.
Bank, once in the morning called house (1st house) another in the evening called return house (2nd house). In the house all the banks representative sit together and change their money receive instrument of the particular banks to clear and transfer the money to their particular accounts. There are two types of clearing: Inward Clearing: The cheques or instruments of Southeast Bank Limited that are submitted to another Bank for collections are called Inward clearing. Outward Clearing: The cheques of other banks that are submitted to the Southeast Bank Limited, for collection are called outward clearing. Clearing house is a place that provides an arrangement by which various representative of each clearing banks assemble there act business day to exchange local cheques, drafts, bill of exchange etc. which are received by them for collection from their customers. Its object is to settle balances between the bank of the city, town or a region with minimum of inconvenience and labor. Before the establishment of clearinghouse, the bank had to send their bill of clerks to other banks for getting cash against those cheques. Obviously this was a laborious and time consuming process and waste full procedure. A. INWARD CLEARING BILLS: It refers the instrument drawn on Southeast Bank Limited Foreign Exchange Branch Limited, received from other banks in the clearing house by their representative(s). Settlement process is shown under belowSETTLEMENT PROCESS OF INWARD CLEARING BILLS
Bills collected from other Banks through clearing house By Main Branch Drawn on SIBL Forex. Br. BB debits the A/C of SIBL Maintained with BB. Main Branch sends The bills to SIBL Forex. Branch with an IBDA
b) Cheques drawn on another Bank which is situated within clearing house area. Forex. Branch collects cheques
IBDA along with bills are sent to Forex. Branch These bills are sent to clearing house from Forex. Br. through main branch
department merely deal with cash but they also take important role rendering the better customer services. So cash officers should have well experienced and well behaved towards the valued customers by offering prompt services in receipt and payment of cash with always presenting smiling face. Service should be the motto of all bankers. Briefly summarize the functions of the Cash Department as under:
2.9.1 CONTROL PROCEDURES OF CASH COUNTER Opening: Before the bank opens for business, each morning, each payment cash officer has to obtain his / her cash box directly from the vault with the acknowledge receipt in respective register. Cash Drawers: Cashiers / Officers working in each counter and maintain all their cash inside their respective drawers -as soon as received from the vault. During office hours drawing cash to be kept under the sole responsibility and single custody of the concerned officers with lock and key arrangement and payment should be made from the cash over the counter. Additional cash obtained from the Cash In-Charge during the day: Whenever additional working supply of cash is required by the payment officer in counter that has to be obtained from the chief Cashier / Cash In-Charge by signing cash transfer / respective register whenever cash surplus is found to be deposited to the Chief Cashier / Cash In-Charge with acknowledge receipt in case of receipt counter.
Cash returned to Chief Cashier / Cash In-Charge at the end of the business hour: Branch or Bangladesh at the end of the business hours both payment (Surplus Cash) and receipt cash to be handed over to the cash In-Charge through obtaining acknowledge receipt or having signed in the cashier receipt books if balanced with computer scroll.
Functions of Chief Cashier / Cash In-Charge: The Chief Cashier / Cash InCharge should always look after the over all functions of Cash Department as Cash Manager. He will supervise the Cashier / Cash Officers working in the counters whether the counter insurance limit has exceeded, if so, the excess cash to be shifted in Value / Safe immediately.
2.9.2 Remittance of Cash/Vault maintenance Branches have regular vault / safe limit holding of cash in UK-II custody as advised / approved by Head Office with the insurance cover. In cash of surplus cash branch has to remit to Principal Bank it is called only and renitence. On the other hand, whenever cash found shortage do to smooth withdrawal of cash by the clients the remittance is made from the principal branch / Bangladesh Bank is called inward remittance.
Southeast bank is one of the few banks permitted by the Bangladesh Bank in the early 90s and fortunate to remain immune from the bad loan culture. Its performance is being reflected in its good loan being the 3.5 percent as against the national average of 33 percent in the private banking sector.
Southeast bank has been licensed by the government of the Bangladesh as a schedule commercial bank in the private sector in pursuance of the policy of liberalization of banking and financial services and facilitates in Bangladesh. within a period of 14 years of its operation Southeast bank achieved remarkable successfully meeting capital adequacy requirement of Bangladesh Bank.
As evident from the financial statement for the last 10 years, it has been growing rapidly as one of the leaders of the new generation banks in the private sector in term of business and profitability. The Bank philosophy A Bank with Vision has been preciously the essence of the legend of banks success.
It has been growing faster as one of the leaders of the new generation banks in the private sector in respect of business and profitability as it is evident from the financial statement for the last 4 years.
3.4. Strategy
SEBL has executed a consistent strategy over the past decade by focusing on highly scalable, fee based security servicing. The bank is following low cost saving strategy by increasing their selling. their strategies are as follows:
1. Partnership 2. on-line banking 3. new service offering 4. integration between service channels 5. market focus 6. customer based expand and diversity.
A perfect organization must be supported with its structure. SEBL consists of Head office, principal branch and other branches throughout the country. The management style mostly resembles bureaucratic and authoritarian style. It imposes strict control and monitor over the activities of its employees. Head office is considered as a cost center in a whole and branch is known as investment and profit center. branch operates under the control of head office. All business functional activities are supervised by head office and the branches are executing the decisions made by the Head office.
December 21810
January 10808
21810
10808
Net profit(Tk. in"000")
Dec
Jan
Table1: Net profit earned by Dhanmondi Branch for last 3 months of the year2009.
This graph shows that Dhanmondi branch contributes a lot to the total profit of the bank
Assistant Vice President Senior Principal Officer Principal Officer Senior Officer Officer
Probationary Officer
Executive Committee
Chairman
Alamgir Kabir, FCA
Vice Chairmain
Ragib Ali
Directors
M. A. Kashem Azim Uddin Ahmed Jusna Ara Kashem Duluma Ahmed Bangla Capital Limited represented by Tahnoun A. Harun Syed Shahid Ali Sirat Monira Karnafuli Tea Co. Limited represented by Abdul Hye Dr. Zaidi Sattar A. H. M. Moazzem Hossain
Members
Ragib Ali M. A. Kashem Azim Uddin Ahmed Tahnoun A. Harun Dr. Zaidi Sattar M. A. Muhith
Audit Committe
Chairman
Azim Uddin Ahmed
Managing Director
(Current Charge) M. A. Muhith
Members
M. A. Kashem Dr. Zaidi Sattar
Coompany Secretary
Muhammad Shahjahan
Shariah Council
Chairman
Professor Moulana Mohammad Salah- Uddin
3.10.
3,500.00
3,500.00
3,500.00
2,500.00
2,500.00
2,852.20 4,804.81
2,281.76 4,186.60
2,112.74 2,828.18
1,056.37 1,180.47
880.31 769.13
15,078.99
9,008.32
8,656.80
7,975.00
4,717.82
31.11
53.60
67.16
42.51
43.52
Cash
15%-
15%-
20%-
20% (5:1)
25% (4:1)
30% (10:3)
12.06%
19.90%
19.62%
17.64%
17.87%
1.09%
1.90%
1.66%
0.86%
1.00%
Loans as % of 4.12% Total Loans Capital Adequacy Ratio Number Correspondent Banks Number Foreign Correspondents Number of Shareholders Number Employees Number Branches of of of 587 of 145
3.77%
3.97%
4.37%
4.96%
11.12%
13.02%
11.05%
6.90%
7.83%
140
138
130
122
598
536
507
463
12,536
9,636
8,855
5750
4704
1231
1116
998
913
835
46
38
31
31
27
General Banking Division (15 Days) Accounts Division (15 Days) Foreign exchange (60 Days)
To open DPS account, customers first needed to fill up a DPS application form. I usually help them to fill up the form.
At the same time opened this kind of account and posted them in the banks internal server named Bank Ultimus.
Voucher checking IBCA positioning IBDA poisoning OBC registrar maintaining IBC registrar maintaining Matching clean cash Online forwarding transaction to inter branches
exchange of currencies which is known as foreign exchange. In exercise of the powers conferred by sec-3 of the foreign exchange regulation-1947, Bangladesh bank issues license to scheduled banks to deal with foreign exchange.
Foreign Exchage
Import Section
Export Section
Remittance Section
rates to the extent of loss of interest for the period the bank remains out of funds i.e from the time the bank pays out cash at home.
Import Section
5.2. Import:
Import means purchase of goods or services from abroad. Normally consumers, firms and government organization import foreign goods or services to meet their necessities. So, in brief, we can say that import is the flow goods and services purchased by economic agent staying in the country from economic agent staying abroad.
1. At first, the Importer must obtain Import registration certificate (IRC) from the CCI & E submitting the following papers: Up to date trade license. Nationality and Asset Certificate Income tax certificate In case of company, Memorandum & Articles of Association and certificate of Incorporation. Bank solvency certificate
2. Then the Importer has to contact with the seller outside the country to obtain the Proforma Invoice. Usually an indenter, local agent of the seller or foreign agent of the buyer makes the communication. Other sources are: Trade Fair Chamber of Commerce Foreign Missions in Bangladesh Journals etc
3.
4.
After making the purchase contract, importer settles the means of payment with the seller. An Import procedure differs with different means of payment. The possible mean are in cash in advance, open account, collection method and Documentary letter of Credit. In most cases Documentary letter of Credit in our country makes the import payment. Purchase contract contains following which payment procedure has to be applied.
exporter ships the good and draws a draft/bill on the buyer. The exporter submits draft/bill to the remitting bank for collection and the bank acknowledges this. Then the remitting bank sends the draft/bill and a
collection instruction letter to the collecting bank. The title of goods is released to the importer upon full payment or acceptance of the bill/draft. d. Letter of Credit (L/C): The method by which a commercial bank undertakes to make payment on behalf of the importer to the Exporter is known as Letter of Credit (L/C). on the other hand it is a credit contract whereby, the buyers bank is committed to place an agreed amount of money at the sellers disposal under some agreed conditions. Since the agreed conditions include amongst other things, the presentation of some specified documents. The letter of credit is called documentary.
An Importer of a country requesters his banks to open a Credit in foreign currency in favor of the exporter at a bank in the letters country. The Letter of Credit (L/C) is issued against payment of the amount by the by the Importer. The Letter of Credit (L/C) authorized the exporter
Revocable L/C: if any L/C can be amendment or changed of any clause or cancelled by consent of the exporter and importer, it is known as revocable L/C.
Irrevocable L/C: if any L/C can not be amendment or changed of any clause without any consent of all concern parties importer, exporter, issuing bank, and confirming bank is known as irrevocable L/C.
The Issuing Bank(Opening Bank): The opening bank is one that issues the letter of credit at the request of the buyer. By issuing a letter of credit it takes upon itself the liability to pay the bills drawn under the credit.
The Advising Bank: The letter of credit is transmitted to the beneficiary through a bank in the letters country. The bank may be a branch or a correspondent of the opening bank. The credit is sometimes advised to this bank by a cable and then transmitted by it to the beneficiary on own its specified form
The Negotiating Bank: This the bank that honored the documents presented as per letter of credit. The negotiating bank has to be careful scrutinize that the draft and the documents attached there to are in conformity with the condition laid down in the letter of credit. Any discrepancies may result in refused in the part of the opening bank to honor the instrument is such an eventually the negotiating bank has to look back to the beneficiary for refund of the amount paid to the beneficiary.
The Reimbursing Bank: It is the bank in which the issuing bank maintains a Nostro account and this will make the payment to the beneficiary.
writing , addressed the buyer to seller by which the seller can obtain payment from the buyer for the invoiced value of the goods. Bill of Lading: It is the list of goods being shipped which the captain gives to the person sending the goods to show that the goods have been loaded. Airway Bill: Sometimes goods are transported through small bulk or those are perishable in nature then the mode of transport other that shipping may be resorted to far carriage of the goods, Airway Bill receipt take place of loading depending on the nature of the carrier. Commercial Invoice: It is the sellers bill for the merchandise. It contains a description of goods, the price per unit, total value of the goods, packing specifications etc. the seller under his own form and signature in the name of the buyer issues the invoice. Certificate of Origin: This is the certificate issued by a recognized authority. In the exporting country certifying the country of origin of the goods. It is usually made by the chamber of commerce. Packing list: The exporter prepares an accurate packing list showing item by item. The content of the consignment to enable the receiver of the shipment to check the contents of the goods and marks of the packages, quantity, weight etc. of the goods exported. Bill of Entry: It is a document, which contains the particulars of the imported goods as well as the amount of customer duty payable. Clean Report of Findings: The certificate is provided by the Pre shipment Inspection concerns. The entire world has been brought under the three supervision of the three pre shipment inspection concerns based on different territory.
5.2.7.1. The importer submit the following documents with the application for
opening the L/C: Tax Identification Number (TIN) Valid trade license Import registration Certificate (IRC)
5.2.7.2. The bank will provide the following documents before opening the L/C:
LCA form IMP form
Accounting Treatment:
APPLICANT Appollo Ispat Complex LTD. 134410010020 At Sight/ Defer Payment 14/01/2010 FCY AMOUNT @ TAKA USD 45,600.00 69.60 3,173,760
Particulars Margin Commission Vat ADD Conf.com Courier/Post Telex/Swift PSI Handing Charge Handing Charge Stamp In Hand L/C Application Set
Vat on Swift,PSI,Handing Charge
APPLICANT ACCOUNT
A/C No 9030315040 2 9040201000 3 9030637032 9 9040201000 3 9040207000 9 9040207006 2 9040207000 9 9040207000 9 9010721050 2 9040207000 9 9030637032 9 1110000994 7
TOTAL
DEBIT Tk
3,000
177,452
CREDIT Tk 3,174,000
If the advising bank is confirming the credit, this mention that the confirming bank, regardless of another consideration, must pay accept or negotiate without recourse to seller. Then bank is also called a confirming bank.
accepted and the opening bank must bound to pay against the bill and no complain against the bill will be accepted more than 4 banking days following the date of receipt of the documents. The local office oases the following vouchers after negotiation:
Accounting treatment:
BLC (Payment against document) A/C H.O. International A/C Dr. Cr.
Reverse Entry is given: Bankers liability A/C Customers liability A/C Dr. Cr.
Then shipping document then stamped with PAD number and entered in the PAD register. As soon as the above formalities are completed, the importer is served with PAD bill information for retirement of concerned import documents.
PRE SHIPMENT FINANCE: This types of finance refers to the facilities extended to the importers in the form of Letter of Credit.
Actually Banks do not invest any fund at this stage of financing. But from the definitions of Letter of Credit we understand that by Opening L/C on behalf of the customer, Bank undertakes to make payments to the supplier of goods against the L/C subject to submission of certain documents. Normally bank allows the customer to open L/C against certain margin i.e, without having full coverage of the L/C value. As such Letter of credit is a sort of direct finance of the customer. Before allowing Pre shipment finance, a bank normally considers: Credit worthiness Import performance Import Regulation Marketability of goods.
POST SHIPMENT FINANCE: This types of finance refers to the credit facility refers to the credit facility refers to the importer after shipment of goods. Post shipment finance is allowed in the following forms: Payment against Documents (PAD) Loan against Imported Merchandise (LIM) Loan against Trust Receipt (LTR)
5.2.8.1. PAD:
The bank who established Letter of Credit is bound to honor the suppliers claim when these are presented in strict conformity to the terms and conditions of the Letter of Credit. Upon receipt of documents, the duty of opening bank is to carefully examine the same. If everything is all right, bank arranges payment against the bills to the debit of PAD A/C.
In most of the cases documents are received with comments that Negotiating Bank has already claimed reimbursement if the bill is drawn in restrict conformity to the L/C. In that situation Opening Bank responds the debit entry of their Nostro account to the Debit of PAD A/C. Soon after lodgment of documents in, PAD, opening bank inform the customer regarding receipt of the bill and request them to retire the documents by depositing the value of the documents with interest of any.
5.2.8.2. LIM:
Loan again Imported Merchandise (LIM) is a facility provided by the bank provided by the bank to the importer who are in short in fund to retire the import bills and thus to clear the goods from the authority. On the arrival of goods and lodgment of import documents, importer may request the bank of a clearance of goods from the port(custom) and keep the same to bank warehouse. proper sanction from the competent authority is to be obtained before clearance of consignment. For giving this types of loan, officer makes loan proposal and sends it to H/O for approval. After getting approval from H/O, bank grants loan in the form of either LTR or LIM.
ACCOUNTING TREATMENT:
LIM/LTR creation:
Dr. Cr.
Party;s A/C
Dr.
Cr. Cr.
January 322742
3774590
3448891
3774590
35125.12 29079.3
TK.(in million)
29079.3 20229.62
2008
2007
2006
2005
2004
Here we clearly see that both graph indicates the increment of Import business of Southeast bank ltd. along with Dhanmondi Branch.
Export Section
5.3. Export:
Export is the process of selling goods and services to the to other countries. Export L/C operation is just reverse of the import L/C operation. For exporting goods by the local exporter, bank may act as advising Banks and collecting bank (negotiating bank) for the exporter.
valid export registration Certificate (ERC) from chief controller of Import & Export(CCI&E). the ERC is required to renew every year. The ERC number is to incorporate on EXP forms and other papers connected with exporters.
commonly known as Buying L/C, on the country Master Export L/C is known as selling L/C.
phases exporters need different types of financial assistance depending on the nature of the export contract. Export financing can be divided into two types: Pre shipment finance Post shipment finance
PRE SHIPMENT FINANCE: This types of finance refers to the credit facility extended to the exporter prior to the shipment of goods for export. Pre shipment finance is allowed in the following forms: For procurement of Raw materials For processing the raw materials For packing of finished goods For payment of transportation cost. Before allowing Pre shipment finance, a bank normally considers: Credit worthiness Import performance Import Regulation Marketability of goods. Pre shipment finance can be allowed in the following forms: Export cash credit Back to Back Letter of Credit Export credit against Trust receipt Packing Credit Back to Back Letter of Credit under EDF
POST SHIPMENT FINANCE: This type finance refers to the credit facilities extended to the exporter against export documents after shipment of goods. Post shipment finance is allows in the following forms
Negotiation of documents under L/C Foreign Documentary bill for purchase Advanced against Export Documents sent for collection
Month Tk.
January 117147
TK.
1293967
1394750
25874.61 13511.1
TK.(in million)
42178.6 28771.36
2008
2007
2006
2005
2004
Here we clearly see that both graph indicates the increment of Export business of Southeast bank ltd. along with Dhanmondi Branch.
But first two Inward and Outward foreign remittance are the main functions.
thereby drawn on SEBL, dhanmondi branch are considered to be its Inward foreign remittances. Following are the Inward foreign remittances of SEBL, Dhanmondi branch. FDD Payable FTT Payable TC Payable Encashment of foreign currencies Purchase of foreign currencies
5 If credit terms and conditions conform to sales contract, Seller prepares goods and documentation, and arranges delivery of goods to carrier. 6 Seller presents documents evidencing the shipment and draft (bill of exchange) to paying, accepting or negotiating bank named in the credit (the advising bank usually), or any bank willing to negotiate under the terms of credit. 7 Bank examines the documents and draft for compliance with credit terms. If complied with, bank will pay, accept or negotiate. 8 Bank, if other than the issuing bank, sends the documents and draft to the issuing bank. 9 Bank examines the documents and draft for compliance with credit terms. If complied with, Seller's draft is honored. 10 Documents release to Buyer after payment or on other terms agreed between the bank and Buyer. 11 Buyer surrenders bill of lading to carrier (in case of ocean freight) in exchange for the goods or the delivery order.
SWOT:
Swot analysis enables an organization to have a comprehensive insight about its current position in the industry compared to the competitors. It provides the organization a scope to strategically improve its position in the market. Here, the internal strength of Southeast Bank limited is discussed as below:
6.1. Strengths:
Company reputation: SEBL has created a good reputation in the banking industry of the country among the new comers. It is created a strong grip in the banking sector in terms of deposit and profit within its sixth operation year.
Capital adequacy ratio: Southeast Bank Ltd. Is maintaining a strong capital base. By the end of the end of December 2008,capital adequacy ratio of the bank was 11.12% that is well above the stipulated requirements of 9%. Positioning the Bank as one of the strong capital based Bank of Bangladesh.
Customer service: The Bank has a strong relationship with its customer. The Bank believes in maintaining personal relationship with the clients. One of the major goals of the Bank is to build long term relationship with the customer and to create value for them. For this, SEBL waiver high charges for the valued clients who are linked with the Bank for long period of time.
Top management: Top management is the key strength to contribute heavily towards growth and development for any Bank. SEBL top management officials have the reputation of experienced banking skills, efficiency and proficiency.
Corporate culture: Corporate culture of SEBL is an interactive compare to other commercial Banks. This interactive environment encourages employee to work attentively. As the job is very much routine oriented, its friendly environment encourage the working capability of the employee in their respective field.
6.2. Weaknesses:
Advertising and Promotion: Advertising and Promotion is one of the weak point of SEBL. It doesnt have effective work force in marketing activities. This lacking pushes the Bank far behind from the competitive environment.
Reference employment: Reference employment is very much effective in SEBL. For this reason a lot of people drawing salaries at the end of the month with minimum contribution to the organization. It creates problem with other employees who work hard but they are not appreciated accordingly.
Limitation of Information System(Bank Ultimus): Bank Ultimus is not comprehensive software. It is desirable to set more comprehensive and effective software for online banking for providing instant service to its clients.
Recovery system: The recovery system is not very much effective. For this a huge amount money of the Bank is being defaulted.
6.3. Opportunities:
Diversification: It is a system of expansion strategy. By doing this SEBL can expand its current line of its business. With the help of top management SEBL can start merchant bnking.
Credit Card & Tele banking: By expanding services through Credit Card and Tele Banking SEBL can enter into new form of retail banking, which will create another earning source.
Branch expansion: SEBL is growing quickly all over the country. Besides expanding in the urban areas, SEBL has prospects to open more branches in sub-urban areas, which will eventually enhance the government effort at receiving rural economy as well as reaching more people by providing better service.
6.4. Threats:
Level of competition: Competition is always a major threat for any organization. In recent years. The number of private bank is increasing . these bank is always pose a threat for others by coming up with new product line, innovative technology, quality technology etc. thus the level of competition rises and create threat for SEBL.
Technological Advancement:
With time, technology is getting advanced and most of the private banks are upgrading their operating system to survive in the industry. SEBL is lagging behind in this department and still mostly dependent on manual work rather than technology. Advancement technology is posing great threat of SEBL.
Contemporary Banks: Contemporary Banks like SEBL others are its major rivals. They are carrying out aggressive campaign to attract lucrative corporate clients and big depositors. The bank should have to take some steps to compete for its growth as well as its expansion.
Multinational Bank: Rapid expansion of multinational Bank poses potential threats to the new comers. Since foreign banks are financially healthy and this will be a threat for SEBL to sustain in the long run if it does not take any strategy.
7.1. Conclusion:
From the practical implementation of customer dealing procedure during the whole period of my practical orientation in SEBL, I have reached a firm and concrete conclusion in a very confident way. I believe that my realization will be in harmony with most of the banking thinkers. It is quite evident that to build up an effective and efficient banking system to the highest desire level computerized transaction is a must.
Success in the banking business largely depends on Effective lending Good customer service A good management A good training program Effective implementation of plans and
Southeast is an emerging Bank. To achieve the confidence of the customers, the Bank must execute some improvements in its marketing and operational areas-SEBL should try to win customers faith by providing them efficient and dependable services, credit facility
and updating with user friendly modern technologies. The Bank should redesign all sorts of banking procedures to be more user friendly, attractive and impressive.
Southeast Bank Ltd. Started with a vision to be the most efficient financial intermediary in the country and it believes that the day is not far off when it will reach its desired goal. SEBL looks forward to a new horizon with a distinctive mission to become a highly competitive modern and transparent institution comparable to any of its kind at home and abroad. In the branch where Ive worked for three months are all the procedures are positive order in spite of this some prances are not properly done which is very effective an all respect it will increase profit and the strength of working capacity in all the departments in the branch.
7.2. Recommendation:
From findings and analysis of the report, the following recommendations are formulated for the SEBL management.
In foreign exchange department it is required to communicate with foreign banks frequently and quickly. They should used the modern communication media. Database networking is one of the most recent technologies to transfer from branch to branch . They should use this technology in Foreign Exchange Division. Against master L/C SEBL should not provide percent margin. The follow the BBs rules and regulation. The Bank should increase its ATM booth in different locations and improve its facility throughout the country. It should emphasize more on customer relationship management to retain the existing customer and attract the potential customer. The Bank should apply to transform the branch as in AD branch to facilitate the foreign transaction or trade as the Foreign Exchange is the most profitable department of each branch.
The Bank should take realistic and effective step to recover default loan.
References:
1. Annual Report of Southeast bank ltd., 2003-2008. 2. Jeff madura, Financial market & Institution, 8th edition. 3. Report from southeast bank ltd. 4. State of Affairs of the bank. 5. The brochure of Southeast Bank Ltd. 6. Website of Bangladesh Bank. 7. Website: www.southeastbank.com.bd
119,900,000
310,000,000
Loans and advances: Loans, cash credits, overdrafts, etc. Bills discounted and purchased 56,223,855,904 4,057,404,485 60,281,260,388 Fixed assets Other assets Non-banking assets 2,685,557,650 1,264,537,446 45,531,630,718 2,632,973,432 48,164,604,150 1,708,110,172 770,752,643 -
Total assets
LIABILITIES AND CAPITAL Liabilities: Borrowing and other banks, finincial institutionbs agents Deposites and other accounts: Current deposits and other accounts Bills payble Savings Bank/Mudaraba Savings deposits Fixed deposits/Mudaraba fixed deposits 1,561,993,125 6,509,000
Capital/shareholder's equity: Paid up capital Share Premium Statutory reserve General reserves Other reserves Retained earnings Total shareholders' equity Total liabilities and shareholders' equity
OFF BALANCE SHEET ITEMS Contingent liabilities: Acceptances and endorsements Letters of Guarantee Irrevocable Letters of Credit Bills for Collection
Other contingent liabilities: Value of travelers' cheques on hand Value of Bangladesh Sanchaya Patra on hand
Other Commitments: Documentary credits and short term trade related transactions Forward assets purchased and forward deposites placed Undrawn note issuance and revolving facilities Undrawn formal standby facilities credit lines and other commitments Claims against the bank acknowledged as debt
31,579,703,610
21,670,608,579
SIGNATURE OF
SPECIMEN SIGNATURE
Cheque Book issued: From _________________ To ____________ Initial Signature of the Introducer: Approved By: Name: _____________________________ Account No: ________________________
: : :
Tk. Tk.
Manager
Applicant:
Advising Bank:
Amount:
Credit available with: Any bank in Bangladesh. By: Acceptance. Drafts At:
Loading on board/dispatch/taking in charge at/from Suppliers Factory Not later than For transportation to :
Description of goods and/or Services: Chemicals for 100% export oriented readymade garments industry: Description, quantity, quality, unit price and all other details of the merchandise are as per beneficiarys pro-forma invoice No. . CFR Buyers Factory. Authenticated copy of the P/I is enclosed herewith, which constitutes an integral part of the credit but the terms and conditions of P/I not stipulated in this Credit are void. Documents Required: (X) Signed Invoices in Fold certifying merchandise to be of Bangladesh origin. (X) Signed Delivery Challan in copies marked Freight Prepaid evidencing shipment by made out to the order of Southeast Bank Limited, . Notify Applicant and us. (X) Detailed packing list in Fold. (X) Beneficiarys certificate confirming the goods shipped are strictly in accordance with pro-forma invoice as stated above in good order & condition. (X) Satisfactory Credit Report of the Beneficiary must accompany the original documents. (X) Certificate of Origin issued by the beneficiary of the L/C. Additional conditions Marked (X) Below: (X) All documents are to be dispatched in lot by any courier service to us. (X) Prior acceptance of Bill of Exchange is not acceptable. (X) No documents should be dated earlier than the date of this L/C. (X) All documents must bear this LC number. (X) T/R to indicate the gross and net weight of the goods. (X) All Bank Charges outside our counter are on beneficiarys Account. (X) If the credit is available by negotiation, maturity date to be counted from the date of acceptance by issuing bank. (X) Delivery Challan and Truck receipt to be jointly signed by the Managing Director of . and Banks representative with date and stamp acknowledging receipt of goods in good order and condition. (X) All documents must indicate that the import is being made under Export L/C #. (X) A Discrepancy Fee of will be deducted from bill amount for presentation of each set of discrepant documents. (X) No interest will be paid for the usance period. Documents to be presented within days after shipment date but within the validity of the credit. Instructions for Negotiating Bank : Upon receipt of documents complied with credit terms we will inform you maturity date and at maturity we shall arrange payment of draft as per instruction of Negotiating bank . Documents presented with discrepancy (ies) must not be negotiated against guarantee or under reserve. Your advising, negotiating including the reimbursement bank charges will be on account of beneficiary. Amount of the draft negotiated/received for collection should be endorsed on the reverse of the credit which should be certified in the Documents Forwarding Schedule. Except so far as otherwise expressly stated herein this credit is subject to the Uniform Customs and Practice for Documentary Credits (2007 Revision) ICC Publication No. 600. Reimbursement under this Letter of Credit are subject to URR-525.
Authorised Signature
Authorised Signature
Glossary
AD A/C ACH ADV ATM BARE CC CD CDBL CEO CL CRR DD DMD DPS ADD DD FDR HO L/C AIM LO LR LTR MT Ti-FCD P--\D PD PL S PO PS RFCD SHBL STD : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : Authorize Dealer Account Automated Clearing House Automated accounting advice Automated Taller Machine Balancing Modernizing Rehabilitation and Expansion Consumer Credit Current Deposit Central Depositary Bangladesh Limited Chief Executive Officer Consumer Credit Cash Reserve Rate Demand Deposit Deputy Managing Director Deposit Pension Scheme Foreign Demand Deposit Foreign Demand Draft Fixed Deposit receipt Head Office Letter of Credit Loan against Imported Merchandise Local Office Local Remittance Loan against Trust Receipt MD Managing Director Mail Transfer Non-Resident Foreign Currency Deposit Payment against Documents Primary Dealer Personal Loan scheme Pay Order Pay Slip Resident Foreign Currency Deposit Account Staff House Building Loan Short Term Deposit
: : : : : : : : : :
Senior Vice President Travelers Cheque Large and Medium Scale Industry (Term Loan) Telephonic Transfer National Bank- Limited Uttaran Small Business Loan Credit Management Department Credit Risk Management Product Promotion Guide Credit Administration Department