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Thesis Paper

on
“Foreign Exchange Operations of Commercial
Banks in Bangladesh”

Prepared For
Jhumi Azad
Lecturer
Department of Business Administration
Stamford University Bangladesh

Prepared By
Sirajul Islam
ID No: BBA 05216342
BBA Program
Major: Finance
Department of Business Administration

Date of Submission: 03 February, 2018

Stamford University Bangladesh.


Letter of Transmittal
Date: 03 February, 2018

Jhumi Azad
Lecturer
Dept. of Business Administration
Stamford University Bangladesh.

Subject: Submission of Thesis Paper on “Foreign Exchange Operations of


Commercial Banks in Bangladesh”
Dear Madam,
I am proud to be a student of BBA of Stamford University Bangladesh. I have completed
the thesis paper on “Foreign Exchange Operations of Commercial Banks in
Bangladesh” that has been prepared as an integral part of my degree requirement. I have
tried my best to follow the instructions in preparing this report and submitted it to you
for further action.

I hope you would find this report up to your expectation. I would be grateful to receive
your suggestions and comments regarding this.

It will be my pleasure to clarify any matter regarding this thesis. I thank to you for
allowing me the opportunity to undertake the task and for your sincere guidance and
cooperation.

Sincerely Yours,

----------------------------
Sirajul Islam
ID No: BBA 05216342
BBA Program
Major: Finance
Department of Business Administration

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Student’s Declaration

Thesis Paper

I here announce that the extensive study entitled


“Foreign Exchange Operations of Commercial Banks in Bangladesh”
Prepared in partial accomplishment of the Requirement for the award of the
degree

Bachelor of Business Administration


From
STAMFORD UNIVERSITY BANGLADESH

Is my original work and not put forward for


The award of any other degree / diploma / fellowship
Or other similar term or honor

Sirajul Islam
ID No: BBA 05216342

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STAMFORD UNIVERSITY BANGLADESH

To Whom It May Concern

This is to certify that the Thesis paper on “Foreign Exchange Operations of


Commercial Banks in Bangladesh” for the degree of Bachelor of Business
Administration (BBA) major in Finance from Stamford University Bangladesh carried
out by Sirajul Islam, ID No: BBA 05216342 under my supervision. As far as I am
concern, no part of the thesis report has been submitted for any degree diploma, title, or
recognition before.

-----------------------------------------------------------------------

Jhumi Azad
Lecturer
Dept. of Business Administration
Stamford University Bangladesh

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Acknowledgement

First of all I express my gratitude and praiseworthy to all mighty Allah for giving me
every assistance in the way of my life. It is an honor for me to express my gratitude to the
Stamford University Bangladesh for providing me all the facilities in every possible way
to prepare this thesis paper. The successful completion of this thesis might never be
possible in time without the help of some persons whose inspiration and suggestion made
it happen.

At the very outset, I would like to take the opportunity to express my heartiest gratitude
to my supervisor Jhumi Azad, Lecturer, Dept. of Business Administration, Stamford
University Bangladesh without his guidance and support it would be very difficult for the
successful completion of my report.

Finally, I would like to express my profound gratitude to my family members who have
given me the opportunity to accomplish the BBA program and making this report in turn.
However, the responsibility of errors and omissions in this report, if any, lies in my
account.

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Executive Summery

Main objective of this report is to analyze the “Foreign Exchange Operations of


Commercial Banks in Bangladesh” This is descriptive in nature that has been
administrated by collecting secondary data. Source of data were collected from annual
report of Selected Bank and reading material published by Selected etc. for analyzing
data M.S Office and M.S Excel software were used.

Lack of latest or improved technologies and skilled manpower for operating Foreign
Exchange business. IFIC does not open L/C for the product like energy drinks, CD,
VCD, and DVD. However other banks make high profit by opening these types of L/C
recently. The number of exporter and Importer who operate through this banks in not
enough to achieve the goal. The transfer and promotion process is fair but the promotion
is not faster. Loan facilities are very attractive to the employees of IFIC Bank Limited.
Most of the policies are backdated. Only the authority amends the policy but preserve the
old policy. There is no policy to build up harmonious relationship among the employees.
The employees cannot protest the injustice of the authority because the pure trade union
is absent there. The record keeping system is also backdated, not followed computerized
system properly.

From the analysis we have seen that among the bank’s ROE ratio gradually decreasing.
So they should take steps to raise current assets for increasing liquidation. From the
analysis we have seen ROA of Exim Bank Ltd. is fluctuating. Dhaka Bank Ltd. and
IFIC Bank’s ROA also is fluctuating. So they should try improving this and should take
necessary steps to increase net profit. From the analysis we have seen that in 2012 to
2013 Dhaka Bank’s Earning per Share is better than other two banks, but in 2014 to 2015
it decreases. So Dhaka Bank should take necessary steps to increase common stock.
Exim Bank Ltd. and IFIC bank’s EPS is decreased in 2014 to 2016. They also should
increase their common stock. From the analysis we have seen that export and remittance
flow of Exim bank is higher than other two banks. Dhaka Bank Ltd. and IFIC bank
should increase export and remittance trading as like Exim Bank Ltd. They should
improved latest technologies and skilled manpower for operating foreign exchange
Business.

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TABLE OF CONTENTS
SL. No Chapters & Contents Page No
Cover Page
Inside top page
Letter of Transmittal ii
Student’s declaration iii
Supervisor’s certificate iv
Acknowledgment v
Executive Summery vi
Table of Contents vi-ix
List of Figures x
List of Tables xi
Chapter:1 Introduction 01-05
1.1 Background of the Report 02
1.2 Rationale of the Report 02-03
1.3 Objectives of the Report 03
1.4 Scope of the Report 04
1.5 Limitations of the Report 04
1.6 Methodology 04-05
Chapter: 2 Industry Analysis 06-22
2.1 Definition of Bank 07
2.2 Origin of the Word “Bank” 07
2.3 Economic Functions of Bank 08
2.4 Working Process of Bank 09
2.5 Objectives of Banking Business 09
2.5.1 Objectives from Owner’s Point of Views 09
2.5.2 Objectives from Government’s Point of Views 10
2.5.3 Objectives from the Bank Client’s Perspective 10
2.6 Basic Functions of Bank 11
2.7 Basic Principles of Banking Business 11-13
2.8 History of Banking Sector in World 13
2.9 History of Banking Sector in Bangladesh 14-16
2.10 Overview of Banking Environment in Bangladesh 16-17
2.11 Banks Operated in Bangladesh 17
2.11.1 Central Bank: 17
2.11.2 Objectives of Central Bank 17
2.11.3 Functions of Central Bank 18
2.11.4 Rules and Regulations Imposed by Central Bank: 18-19

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2.12 Scheduled Banks: 19
2.12.1 State Owned Commercial Banks 19
2.12.2 Private commercial Banks 20-21
2.13 Specialized Banks 21
2.14 Non Scheduled Banks 21
2.15 Future Prospect of Banking Sector in Bangladesh 22
Chapter:3 Background of the Organizations 23-54
3.1 An Overview of EXIM Bank Limited 24-25
3.1.2 Mission, Vision, Corporate Culture of EBL 25-26
3.1.3 Ownership Structure of EBL 26
3.1.4 Composition of the Board of EBL 27
3.15 Capital and Reserves of EBL 28
3.1.6 Milestones in the Development of the EXIM Bank 28
3.1.7 Management Structure of EBL 29
3.1.8 Risk Management of EBL 30-31
3.1.9 Key Figures of EXIM Bank 31
3.1.10 Human Resource Division of EBL 32
3.1.11 Division-Wise Branch Distribution of EBL 32
3.2 An Overview of Dhaka Bank Limited 33
3.2.1 Mission, Vision, Strategy Statement 34-35
3.2.2 Ownership structure 36
3.2.3 Capital and Reserves 36
3.2.4 Milestones in the development of the Dhaka Bank ltd. 37-38
3.2.5 Management Structure 39
3.2.6 Risk Management 40
3.2.7 Joint Venture Abroad 40-41
3.2.8 Division – wise Branch Distribution 41
3.3 An Overview of IFIC Bank 42
3.3.1 Mission, Vision, Strategy Statement of IFIC Bank 42-43
3.3.2 Ownership Structure of IFIC Bank 44
3.3.3 Composition of the Board of IFIC Bank 44
3.3.4 Capital and Reserve of IFIC Bank 45
3.3.5 Milestones in the Development of the IFIC bank 45-46
3.3.6 Management Structure of IFIC Bank 47
3.3.7 Risk Management of IFIC Bank 48-50
3.3.8 Joint Ventures Abroad of IFIC Bank 50-51
3.3.9 Key Figures of IFIC Bank 52
3.3.10 Human Resources Division (HRD) of IFIC Bank 53-54
3.3.11 Division –Wise Branch Distribution 54

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Chapter: 4 Foreign Exchange Operation of 55-63
Commercial Bank
4.1 Foreign exchange 56
4.2 Foreign exchange market and Bangladesh 57
4.3 Foreign Exchange Products in Bangladesh 57-58
4.4 Different Foreign Exchange Rate in Bangladesh 58-59
4.5 History of Exchange Rate System in Bangladesh 59
4.6 Interbank Transaction in Foreign Exchange in Bangladesh 60
4.7 Movement of Monthly average of USD/BDT Exchange Rate 60
4.8 Category Wise Position of Interbank FX Transaction: 61
4.9 Foreign Exchange Department 61-62
4.10 Import Section 62
4.11 Export section 63
Chapter:5 Analysis and Findings 64-83
5.1 Trend Analysis 65-70
5.2 Ratio analysis 71-75
5.3 SWOT Analysis for Exim Bank Ltd. 76-78
5.4 SWOT Analysis of Dhaka Bank Ltd. 79-80
5.5 SWOT Analysis of IFIC Bank Ltd. 81-82
5.6 Findings 83
Chapter: 6 Recommendations & Conclusion 84-100
6.1 Recommendations 85
6.2 Conclusion 86
Bibliography 87
Abbreviation 88
Appendices 89-100

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List of Figures

Sl. No. Name of Figures Page No.


1 Figure 2.1: Basic Functions of Bank. 11
2 Figure 2.2: Banks operated in Bangladesh 19
3 Figure-3.1: Management Structure of EXIM Bank 29
4 Figure-3.2: Management Structure of Dhaka Bank Ltd. 39
5 Figure-3.3: Management Structure of IFIC Bank 47
6 Figure-3.4: Joining Status 2014 53
7 Figure-3.5: Aging Analysis 53
8 Figure-4.1: Foreign Exchange Operation of a Bank 56
9 Figure-4.2: Foreign Exchange format 62
10 Figure: 5.1 Foreign exchange business of Exim Bank Ltd. 65
11 Figure: 5.2 Foreign exchange business of DBL 66
12 Figure: 5.3 Foreign exchange business of IFIC Bank Ltd. 67
13 Figure 5.4: Import Performance graph (Exim Bank Ltd., Dhaka 68
Bank Ltd., and IFIC Bank Ltd.)
14 Figure 5.5: Export performance graph (Exim Bank Ltd., Dhaka 69
Bank Ltd., and IFIC Bank Ltd.)
15 Figure 5. 6: Remittance performance graph (Exim Bank Ltd., 70
Dhaka Bank Ltd., and IFIC Bank Ltd.)
16 Figure 5.7: ROA ,year 2012-2016 (Exim Bank Ltd., Dhaka Bank 71
Ltd., and IFIC Bank Ltd.)
17 Figure 5.8: ROE , year 2012-2016 (Exim Bank Ltd., Dhaka Bank 72
Ltd., and IFIC Bank Ltd.)
18 Figure 5.9: EPS ,year 2012-2016 (Exim Bank Ltd., Dhaka Bank 73
Ltd., and IFIC Bank Ltd.)
19 Figure 5.10: Net interest margin ,year 2012-2016 (Exim Bank 74
Ltd., Dhaka Bank Ltd., and IFIC Bank Ltd.)
20 Figure 5.11: Capital adequacy ratio, year 2012-2016 (Exim Bank 75
Ltd., Dhaka Bank Ltd., and IFIC Bank Ltd.)

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List of Tables

Sl. No. Name of Tables Page No.


1 Table 2.1: Rules and Regulation 19
2 Table-3.1: Composition of the board of EXIM Bank 27
3 Table-3.2: Capital and Reserves of EXIM Bank 28
4 Table-3.3 Key Figures of EXIM Bank 31
5 Table-3.4: District-wise Branch distribution of EXIM Bank 32
6 Table 3.5 : Ownership Structure 36
7 Table-3.6: Capital and Reserve of Dhaka Bank Ltd. 36
8 Table-3.7: Division – wise Branch distribution of Dhaka 41
Bank
9 Table-3.8: Composition of the board of IFIC Bank 44
10 Table-3.9: Capital and Reserve of IFIC Bank 45
11 Table-3.10: Milestones in the development of the IFIC bank 46
12 Table-3.11: Key Figures of IFIC Bank 52
13 Table-3.12: District – wise Branch distribution of IFIC Bank 65
14 Table: 5.1 Foreign exchange business of EBL 66
15 Table: 5.2 Foreign exchange business of DBL 67
16 Table: 5.3 Foreign exchange business of IFIC Bank Ltd. 67
17 Table: 5.4 Import performance Comparison 68
18 Table: 5.5 Export Performance Comparison 69
19 Table: 5.6 Remittance performance Comparison 70
20 Table: 5.7 Return on Asset 71
21 Table: 5.8 Return on Equity 72
22 Table: 5.9 Earnings per share 73
23 Table: 5.10 Net Interest margin 74
24 Table: 5.11 Capital adequacy ratio 75

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