Foreign Exchange Management of Ubl

CHAPTER 1

AN OVERVIEW OF UTTARA BANK LIMITED

Foreign Exchange Management of Uttara Bank Limited. 1

AN OVERVIEW OF UTTARA BANK LIMITED:

Uttara Bank formed in 1972 as a scheduled bank with assets and liabilities of the Eastern

Banking Corporation set up in East Pakistan on 28 January 1965. It started banking

business 22 June 1965 and became a member of the Dhaka Clearing House on 17

September 1965. At the time of establishment, Eastern Banking Corporation had a paid

up capital of Tk 1.42 million and deposit resources of about Tk 10 million. It was the

only scheduled bank formed with capital raised entirely from the small income group of

people of East Pakistan.

Eastern Banking Corporation was nationalized under the Bangladesh Banks

Nationalization Order 1972 and its name was changed to Uttara Bank. At that time, the

bank had 182 branches. The government retracted 95% of its share capital and allowed it

to operate as a private bank. It was transformed into a limited company on 15 September

1983. On 31 December 2000, the authorized capital of the bank was Tk 200 million

divided into 2 million ordinary shares of Tk 100 each. It’s issued and paid up capital was

Tk 100 million, of which Tk 5 million is subscribed by the government. The bank is

listed with both Dhaka and Chittagong Stock Exchanges.

The bank performs all traditional commercial banking functions. It renders agency

services to the government in food procurement and collection of government revenue

through the network of its branches all over the country. The total volume of foreign

exchange business handled by the bank during 1998-99 amounted to Tk 16,600 million

which comprised exports servicing Tk 4,450 million, imports financing Tk 10,560

million and remittances facilities Tk 1,590 million. The bank has correspondent

relationships with 300 foreign banks/bank offices and exchange houses in 72 countries.

With the objective of attracting the Bangladeshi wage earners abroad and the non-

resident foreigners to invest in Bangladesh, the bank offered them the opportunity to open

non-resident foreign currency deposit accounts and foreign currency current deposit

accounts with it. Further, the bank floated Wage Earners' Development Bond and


established Wage Earners Investment Cell. The bank has some other schemes to induce

the wage earners to invest their savings in the securities market of the country.

The volume of deposits at the bank in 1972 was Tk 4.43 million of which Tk 2.44 million

comprised demand deposits. Prior to privatization in 1983, the deposits were Tk 21.81

million and their volume increased to Tk 24,730 million in December 2000. Total loans

and advances including bills purchased and discounted amounted to Tk 2.34 million in

1972 and Tk 22,307 million in December 2000. The interest rate offered by the bank on

the savings deposits in both rural and urban areas is 7.25%, while the lending rates

charged by it on different sectors varied between 10% and 16.5%, the lowest being

charged on export credits. The broad economic areas in which the bank provided lending

and the total outstanding amount of advances to those areas unto June 1999 were (a)

agriculture and fisheries Tk 26 million, (b) small and cottage, large and medium sized

industry Tk 4,675 million, (c) retail/wholesale trade and hotels and restaurants Tk 2,202

million, (d) transport/communication and storage Tk 169 million, (e) special credit

programs including poverty alleviation Tk 134 million, (f) insurance, real estate and

business services Tk 5,523 million, and (g) others Tk 3,771 million.

In December 2008, the total assets including off-balance sheet items of the bank were

valued at Tk 31,296.5 million. The quality of assets was severely deteriorated due to

accumulation of a huge amount of non-performing loans. The bank's classified loans

amounted to Tk 7,372 million in December 2008. The bank's investments in government

securities, Treasury bills, debentures and shares and other approved securities were Tk

108.5 million in 1972 and Tk 2,564 million in 2007. Up to December 2007, its loans to

the government amounted to Tk 50 million. In addition, the bank lent Tk 115 million in

12007 in poverty alleviation projects and Tk 129 million in a special project called

Uttaran, the objective of which was to assist the customers with credit facility for buying

consumer goods.

In 2008, the total and net income of the bank was Tk 3,060 million and Tk 1,040 million

respectively. The bank's net interest income increased during the period from 1999 to

2008. But the increase in operating expenses arrested the growth of its net income. Also,


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the compulsory maintenance of provisions for classified loans from profit is responsible

for slow growth of its net income.

The management of the bank is vested in a 15-member board of directors consisting of a

chairman and 14 directors. The managing director is the chief executive assisted by a

deputy managing director and 2 assistant managing directors. In 2008, the bank had 207

branches (155 urban and 52 rural) and the number of employees in all its branches 2,822

including 84 executives, 1,756 officers, 326 assistant officers, and 656 employees of non-

officer grades. The bank's branch banking is supervised through its 12 zonal offices in

different parts of the country.


CHAPTER 2

INTRODUCTION


INTRODUCTION

2.1 Background of the study:

This report is prepared as the degree requirement of BBA, American International

University-Bangladesh. As practical orientation is integral part of BBA, I was sent to the

Uttara Bank Ltd, Rokeya Sarani Branch to have real life exposure on a 90 days internship

program (from February 08 to May 08, 2010).

The academic study has a great value when it has practical application in the real life.

Theoretical knowledge has little significance unless it is applicable in the practical life. In

order to consolidate the theoretical learning some practical exposure is need. With this

motive in view this intern report titled A Study on Foreign Exchange Management of

Uttara Bank Ltd. is prepared to show the reporting, analyzing and analytical ability of

the individual knowledge seeker.

2.2 Rationale of the Study:

As a student of BBA, Major in Accounting and Finance I always been fascinated to build

a carrier in a financial institution. Through this internship I have got a chance to work in a

financial institution like Uttara bank Ltd. While working in a country’s one of the largest

and oldest private-sector commercial bank, with years of experience, I realized how could

be a foreign exchange division so important for a bank and why banks always try to give

more emphasize on proper management of its foreign exchange divisions. We all know

that Bangladesh’s economy basically depends on its Agriculture, exporting Readymade

Garments and foreign remittance. Every year also she has to import products ranging

from capital machineries to daily life commodities to meet up her growing demand. To

day in open market world business firms are no more constrained in to their domestic

market. They are also letting them engage with their foreign counterparts through export


and import. With the help of state of the art technology like internet, hi-speed

transportation system doing millions of dollar transactions are no more science fiction has

become daily life chores in business world of Bangladesh. And financial institutions

mostly banks play very vital role in these sectors of export and import. Banks help

business firms to import goods from foreign countries and in exporting goods to other

countries through its foreign exchange wing and expertise. All this foreign deals are

being true through the bank; to be more specific through foreign exchange division of

bank. For these all reasons I do believe the knowledge and experience I will congregate

while working on this report titled ‘A Study on Foreign Exchange Management of Uttara

Bank Ltd.’ will give me a apparent idea about the mechanism of foreign exchange

management and also help me to conquer my ultimate goal. With this motive in view I

am proposing to do my intern report titled A Study on Foreign Exchange Management

of Uttara Bank Ltd.

2.3 Statements of the Problems:

What is the condition of the Economic and Banking sectors of

Bangladesh?

How Uttara Bank Ltd. has come to its present state?

How Foreign Exchange management system of Uttara Bank Ltd. is

running?

What are the problems of Uttara Bank Ltd. in foreign Exchange

management?

2.4 Scope of the Study:

The academic study has a great value when it has practical application in the real life.

Theoretical knowledge has little significance unless it is applicable in the practical life. In

order to consolidate the theoretical learning some practical exposure is need. With this

motive in view this intern report titled A Study on Foreign Exchange Management of


Uttar Bank Ltd. will enhance the analyzing and analytical ability of the individual

knowledge seeker.

2.5 Limitations of the study:

This study has been conducted with the motive to prepare a report on the Bank’s state of

affairs in foreign trade. On doing the study, I personally came across some problems that

may be cited as the limitations of the study, which are as follows-

Very inadequate time to make an in-depth inference about foreign exchange

business

Enough information was not available to make a comprehensive study

In many case, Up to date information was not available

Incomplete and obscure data

Relevant papers and documents were not available

2.6 Objectives of the Study:

Main Objective:

To be proverbial with Foreign Exchange Management of Uttara Bank Ltd. along with

observe the trend of Foreign Exchange Management of banking sector in Bangladesh.

Other Objectives:

To observe the Economic and Banking sectors of Bangladesh.

To overview Uttara Bank Ltd.

To show foreign Exchange management system of Uttara Bank Ltd.

To identify the problems of Uttara Bank Ltd. in foreign Exchange management.

To generate appropriate recommendations regarding the problems of Uttara

Bank Ltd. in foreign Exchange management.


2.7 Methodology of the study:

In order to make the report more meaningful and presentable, two sources of data and

information have been used widely.

Primary sources of information:

Face to face conversation with the respective officer of the branch

Face to face conversation with the clients

Relevant file study as provided by the officer of the concerned organization

Secondary sources of information:

Annual report of the Uttara Bank Ltd.

Periodicals published by the Bangladesh Bank

Different books, articles etc. regarding foreign exchange operation


CHAPTER 3

Overview of Economic and Banking sector in Bangladesh


3.1 Overview of Economic and Banking sector in Bangladesh

Financial institutions play an important role for the economic development of any

country. The main objective of these institutes is to accumulate the scattered deposits and

invest in a productive manner so that some sort of value is added.

Industry Statistics of the banking sector and the performances trends have been discussed

in this chapter. The banking sector of Bangladesh comprises four categories of

scheduled banks. These are state-owned commercial banks (SCBs), state-owned

development finance institutions (DFIs), private commercial banks (PCBs) and

foreign commercial banks (FCBs). The number of banks remained unchanged at

48 in 2008. These banks had a total number of 6886 branches as of December

2008. The number of bank branches increased from 6717 to 6886 owing mainly

to opening of new branches by the PCBs during the year. In 2008, the SCBs held

31.1 percent of the total industry assets as against 33.1 percent in 2007. PCBs’


share rose to 54.2 percent in 2008 as against 51.4 percent in 2007. The FCBs held

8.0 percent of the industry assets in 2008, showing a declining trend by 0.2

percentage points over the previous year. The DFIs' share of assets was 6.7

percent in 2008 against 7.3 percent in 2007. Total deposits of the banks in 2008

rose to Taka 2561.4 billion from Taka 2148.9 billion in 2007 showing an overall

increase by 19.2 percent. The SCBs' (comprising the largest 4 banks) share in

deposits decreased from 32.6 percent in 2007 to 29.7 percent in 2008. On the

other hand, PCBs' deposits in 2008 amounted to Taka 1450.7 billion or 56.6

percent of the total industry deposit against Taka 1150.2 billion or 53.5 percent in

2007. FCBs' deposits in 2008 rose by Taka 30.7 billion or 16.7 percent over the

year. The DFIs' deposits in 2008 were Taka 137.8 billion against Taka 115.6

billion in 2007 showing an increase of 19.2 percent over the year.

3.2 Aggregated Balance Sheet

3.2.1 Assets:

Aggregate industry assets in 2008 registered an overall increase by 19.5 percent over

2007. During this period, SCBs' assets increased by 12.3 percent and those of the PCBs’

increased by 25.8 percent. Loans and advances played a major role on the uses of fund.

Loans and advances amounting to Taka 2108.9 billion out of aggregate assets of Taka

3313.5 billion constituted significant portion (63.6 percent). Cash in tills were Taka 31.4

billion (0.9 percent); deposits with BB were Taka 193.8 billion (5.8 percent); other assets

were Taka 594.1 billion (17.9 percent) and investment in government bills and bonds

were Taka 385.3 billion (11.6 percent).

Aggregate Industry Asset (Dec, 2008) (billion Taka)

Loans & advances, 2108.9, 63.6%


Other assets, 594.1, 17.9%

Deposits with BB, 193.8, 5.8%

Cash in tills, 31.4, 0.9%

Govt. bills & bonds, 385.3, 11.6%

Aggregate industry assets (Dec, 1007) (billion Taka)

Loans & advances, 1724.3, 62.2%

Other assets, 479.6, 17.3%

Deposits with BB, 159.4, 5.7%

Cash in Tills, 29.7, 1.1%

Govt. bills & bonds, 381.0, 13.7%

3.2.2 Liabilities:

The aggregated liability portfolio of the banking industry in 2008 was Taka 3313.5

billion of which deposits constituted Taka 2561.4 billion (77.3 percent) continued to be

the main sources of fund of banking industry. Capital and reserves of the banks were

Taka 205.8 billion (6.2 percent) 2008, as against Taka 180.0 billion (6.5 percent) in 2007.

Aggregate industry liabilities (Dec, 2008) (billion Taka)

Deposits, 2561.4, 77.3%

Capital & Reserve, 205.8, 6.2%

Other liability, 546.3, 16.5%

Aggregate industry liabilities (Dec, 2007) (billion Taka)

Deposits, 2148.9, 77.5%

Capital & Reserve, 180.0, 6.5%

Other liability, 445.0, 16.0%


3.3 Performance and Rating of Banks:

Performance of the banking sector under CAMEL framework, which involves analysis,

and evaluation of the five crucial dimensions of banking operations, has been discussed

in this chapter. The five indicators used in the rating system are (I) Capital adequacy (ii)

Asset quality (iii) Management soundness (iv) Earnings and (v) Liquidity.

3.4 Capital Adequacy:

Capital adequacy focuses on the total position of bank capital and protects the depositors

from the potential shocks of losses that a bank might incur. It helps absorbing major

financial risks (like credit risk, market risk, foreign exchange risk, interest rate risk and

risk involved in off-balance sheet operations). Banks in Bangladesh have to maintain a

minimum Capital Adequacy Ratio (CAR) of not less than 9.0 percent of their risk

weighted assets (with at 30)

CHAPTER 4

FOREIGN EXCHENGE MANAGEMENT OF UTTARA

BANK LIMITED


FOREIGN EXCHENGE MANAGEMENT OF UTTARA BANK LTD.

4.1 Foreign Exchange Operation:

Foreign trade can be easily defined as a business activity, which transcends national

boundaries. These may be between parties or government ones. Trades among nations are

a common occurrence and normally benefit both the exporter and importer. In many

countries, international trade accounts for more than 20% of their national income.

Foreign trade can be justified on the principle of comparative advantage. According to

this economic principle, it is economically profitable for a country to specialize in the

production of that commodity in which the producer country has the greater comparative

advantage and to allow the other country to produce that commodity in which it has the

lesser comparative advantage. It includes the spectrum of goods, services, investments,


technology transfer etc. This trade among various countries causes for close linkage

between the parties dealing in trade. The Bank, which provides such transactions, is

referred to as rendering international Banking operations. International trade demands a

flow of goods from seller to buyer and of payment from buyer to seller. And this flow of

goods and payment are done through letter of credit (L/C).

4.2 Foreign exchange:

As more than one currency is involved in foreign trade, it gives rise to exchange of

currencies which is known as foreign exchange. The term “Foreign Exchange” has three

principal meanings. First it is a term used referring to the currencies of the other countries

in terms of any single one currency. To a Bangladeshi, dollar, pound sterling etc. are

foreign currencies and as such foreign exchange. Secondly, the term also commonly refer

to some instruments used in international trade, such as bill of exchange, Drafts, Travel

cheques and other means of international remittance. Thirdly, the term foreign exchange

is also quite often referred to the balance in foreign currencies held by a country.

In terms of section 2(d) of the foreign exchange regulations 1947, as adopted in

Bangladesh, Foreign Exchange means foreign currency and includes any instrument

drawn, accepted made or issued under clause (13) of article 16 of the Bangladesh Bank

order, 1972, all the deposits, credits and balance

payable in any foreign currency and draft cheques, letter of credit and bill of exchange

expressed or drawn in Bangladesh currency but payable in any foreign countries.

In exercise of the power conferred by section 3 of the foreign exchange regulation, 1947

Bangladesh Bank issues license to schedule Bank to deal with exchange. These Banks are

known as Authorized Dealers. Licenses are also issued by Bangladesh Bank to persons or

firms to exchange foreign currency instruments such as T.C, currency notes and coins.

They are known as Authorized Money Changers.

4.3 Functions of foreign exchange department of Uttara Bank Ltd:


4.3.1 Exports:

1. Pre-shipment advances

2. Purchase of foreign bills

3. Negotiations of Foreign Bills

4. Export guarantees

5. Advising/confirming letters – letters of credit

6. Advance for deferred payments exports

7. Advance against bills for collection

4.3.2 Imports:

1. Opening of letter of credit

2. Advance bills

3. Bills for collection

4. Import loans and guarantees

4.3.3 Remittances:

1. Issue of DD, MT, TT etc.

2. Payment of DD, MT, TT etc.

3. Issue and enhancement of travelers cheques

4. Sale and enhancement of foreign currency notes

5. Non-resident accounts

4.4 The most commonly used documents in foreign exchange:

Documentary letter of credit

Bill of Exchange

Bill of lading

Commercial invoice


Certificate of origin of goods

Inspection certificate

Packing list

Insurance policy

Proforma invoice/indent

Master receipt

G.S.P certificate

4.4.1 Documentary Credit:

In simple term a documentary credit is a conditional Bank under taking of payment.

Expressed more fully, it is a written undertaking by a Bank (issuing Bank) given to seller

(beneficiary) at the request, and in accordance with the instructions, of the buyer

(applicant) to effect payment (that is, by making a payment, or accepting or negotiating

bill of exchange) up to a stated sum of money, with in a prescribe time limit and against

stipulated documents.

The customary clauses contain in a L/C are the followings:

A clause authorizing the beneficiary to draw bills of exchange up to a certain on

the opener.

List of shipping documents, which are to accompany the bills

Description of the goods to be shipped

An undertaking by the opening Bank that bills drawn in accordance with the

conditions will be dully honored.

Instructions to the negotiating Bank for obtaining reimbursement of payments

under the credit.

4.4.2 Parties to a letter of credit:

1. Importer/buyer

2. Opening Bank/ Issuing Bank

3. Exporter/Seller/Beneficiary

5. Advising Bank

6. Negotiating Bank


7. Confirming Bank

8. Paying/ Reimbursing Bank

4.4.3 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 a evidence of contract of carriage, is a receipt for the goods, and is

a document of title to the goods. It also constituted a document that is, or may be, needed

to support an insurance claim.

The details on the bill of lading should include-

A description of the goods in general terms not inconsistent with in the credit

Identify marks and numbers, if any

The name of the carrying vessel

Evidence that the goods have been loaded on board

The ports of shipment and discharge

The names of shipper, consignee and address of the notifying party

Whether freight has been paid or is payable at destination

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.

4.4.4Commercial Invoice:

A commercial invoice is the accounting document by which the seller charges the goods

to the buyer. A commercial invoice normally includes the following information:

1. Date

2. Name and address of the buyer and seller

3. Order of contract number, quantity and description of the goods, unit price

and the total price


4. Weight of the goods, number of the package, shipping marks and numbers

5. Terms of delivery and payment

6. Shipment details

4.4.5 Certificate of Origin:

A certificate of origin is a signed statement providing evidence of the origin of the goods.

4.4.6 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 the contract and the L/C. The inspection company is usually nominated by the

buyer who also indicates the types of inspection he wishes the company to undertake.

4.4.7 Insurance 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

a. be a document issued and/or signed by an insurance company or its

agent, or by underwriters

b. be dated on or before the date of the date shipment as evidenced by

the shipping documents or establish that cover is effective at the

latest from such date of shipment

c. Be for an amount at least equal to the CIF value of the goods and

in the currency of credit.


4.5 Import:

Import is foreign goods and services purchased by consumers, firms & Governments in

Bangladesh.

An importer must have import registration certificate (IRC) given by chief controller of

import and exports (CCI & E) to import any thing from other country. To obtain IRC the

following certificates are required-

1. Trade License

2. Income tax clearance certificate

3. Nationality certificate

4. Bank solvency certificate

5. Asset certificate

6. Registration partnership deed (if any)

7. Memorandum and Article of Association

8. Certificate of Incorporation (if any)

9. Rent receipt of the business premises

4.5.1 Import procedure:

To import Uttara Bank Ltd., a customer requires-

1. Bank account

2. Import registration certificate

3. Tax paying identification number

4. Proforma invoice/indent

5. Membership certificate

6. L/C application form duly attested

7. One set of form

8. Insurance cover note with money receipt

9. Others

4.5.2 Import Mechanism:


To import, a person should be competent to be an importer. According to import and

Export control Act 1950, the office of chief controller of Import and Export provides the

registration (IRC) to the importer. After obtaining this, person has to secure a letter of

credit authorization (LCA) from Bangladesh Bank. And then the person becomes a

qualified importer. He is the person who requests or instructs the Bank to open an L/C.

He is also called opener or applicant or the credit.

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

To have an import L/C limit, an importer submits an application to the Bank furnishing

the following information-

1. Full particulars of Bank account

2. Nature of business

3. Required amount of limit

4. Payment terms and conditions

5. Goods to be imported

6. Official security

7. Repayment schedule

A credit officer scrutinizes this application and accordingly prepares a proposal (CLP)

and forwarded it to the head office credit committee (HOCC). The committee, if satisfied,

sanctions the limit and return back to the branch. Thus, the importer is entitled for the

limit.

4.5.4 Opening of letter of credit by Uttara Bank:

Opening of letter of credit means, at the request of the applicant (importer) issuance of a

L/C in favor of the beneficiary (exporter) by a Bank. The Bank, which opens or issue L/C

is called L/C opening Bank or issuing Bank.


On receipt of the Importer’s L/C application supported by the firm contract

(indent/proforma invoice) and insurance cover note the Bank scrutinize the same

thoroughly and fix-up a margin on the basic of Bank customer relationship.

4.5.5 Before opening a L/C, the issuing Bank must check the following:

L/C application properly stamped, signature verified and margin approved and

properly retained.

Indent/proforma invoice signed by the importer and indentor/supplier.

Ensure that the relevant particulars of L/C application correspond with those

stipulated in indentor/proforma invoices.

Validity of L/C entitlement of goods, amount etc. conforms to the L/C

application.

Conversion and rate of exchange currently applied.

Charges like commission, F.C.C, postage, telex charge, if any recovered.

Insurance cover note – in the name of issuing Bank A/C, Importer covering

required risks and voyage route.

Incorporation of instruction for negotiating Bank as per Banks existing

arrangement.

Reimbursement instructions for reimbursing Bank

If foreign Bank confirmation is required, necessary permission should be obtained

and accordingly advising Bank is advised as per Banks existing arrangement.

If added information is required on account of the applicant charges should be

recovered from the applicant.

In case of issuance L/C, mention rate of interest clearly in the letter of credit.

4.5.6 Liability of Issuing Bank:

As per article 9a of UCPDC 500, an irrevocable credit constitutes a definite undertaking

of the issuing Bank, provided that the stipulated documents comply with the terms and

conditions of the credit.


4.5.7 Advising of Letter of Credit:

Advising means forwarding of a documentary letter of credit received from the issuing

Bank to the beneficiary (exporter).

Before advising a L/C the advising Bank must see the following-

Signature of issuing Bank officials on the L/C, verified with the specimen

signature book of the said Bank when L/C received by airmail.

If the export L/C is intended to be an operative cable L/C test code on the L/C

invariably be agreed and authenticated by two authorized officers.

L/C scrutinized thoroughly complying with the requisites of concerned UPPDC

provisions.

Entry made in the L/C advising register.

L/C advised to the beneficiary (exporter) promptly and advising charges

recovered.

4.5.8 Advising Bank’s Liability:

Advising Bank’s liability is fixed up in Uniform Customs and Practice for Documentary

Credits (UCPDC), publication 500.

I. Article 7(a): A credit may be advised to a beneficiary through another Bank (the

“advising Bank”) without engagement on the part of the advising Bank, but that Bank, if

it elects to advise the credit, shall take reasonable care to check the apparent authenticity

of the credit which it advises. If the Bank elects not to advise the credit, it must so inform

the issuing Bank without delay.

II. Article 7(b): If the advising Bank cannot establish such apparent authenticity it

must inform, without delay, the Bank from which the instructions appear to have been

received that it has been unable to establish the authenticity of the credit and if it elects

nonetheless to advise the credit it must inform the beneficiary that it has not been able to

establish the authenticity of the credit.


4.5.9 Adding confirmation:

Adding confirmation is done by the confirming Bank. Confirming Bank is a Bank which

adds its confirmation to the credit and it is done at the request of the issuing Bank. The

confirming Bank may or may not be the advising Bank. The advising Bank usually does

not do it if there is not a prior arrangement with the issuing Bank. By being involved as a

confirming agent the advising Bank undertakes to negotiate beneficiary’s bill without

recourse to him.

Issue L/C and request to add confirmation

Review the L/C terms

Provide reimbursement

Drafts to be drawn on L/C opening Bank

Availability of credit facilities

Line allocation from the business and ownership units in the importer’s country

Confirm and advise L/C

4.5.10 Amendments to Letter of Credit:

After issuance and advising of a L/C, it may be felt necessary to delete, add or alter some

of the clauses of the credit. All these modifications are communicated to the beneficiary

through the same advising Bank of the credit. Such modifications to a credit are termed

as amendment to a letter of credit. There may be some of the conditions in a credit are

not acceptable by the beneficiary. In that cases beneficiary contact applicant and request

applicant approaches his Banker with a written request for amendment to the credit. The

issuing Bank scrutinizes the proposal for the amendment and if the same is not in

contravention with the Exchange Control Regulation and Bank’s interest, the Bank may

then process for amendment. There can be more than one amendment to a credit. All

these amendment forms integral part of the original credit.


4.5.11 What is to be done by the Issuing Bank before advising

amendments?

The issuing Bank has to –

Obtain written application from the applicant of the credit duly signed and

verified by the Bank.

In case of increase of value, application for amendment is to be supported by

revised indent/proforma invoice evidencing consent of the beneficiary.

In case of extension of shipment period, it should be ensured that relative LCA is

valid/invalidated/increased up to the period of proposed extension.

Amendments on increase of credit amount and extension of shipment period both

the cases amendment of insurance cover note also to be submitted.

Proper recording and filling of amendment is to be maintained.

Amendment charges (if on account of applicant) will be recovered and necessary

voucher is to be passed.

4.5.12 The following clauses of L/C are generally amended:

1. Increase/decrease value of L/C and increase/decrease of quality of goods.

2. Extension of shipment/negotiated period.

3. Terms of delivery i.e. FOR, CFR, CIF etc.

4. Mode of shipment.

5. Inspection clause.

6. Name and address of the supplier.

7. Name of the reimbursing Bank.

8. Name of the shipping line etc.

4.5.13 Settlement of Letter of Credit:


Settlement means fulfillment of issuing Bank in regard to affecting payment subject to

satisfying the credit terms. Settlement may be done under three separate arrangements as

stipulated in the credit.

4.5.14 Settlement by payment:

Here the seller presents the documents to the nominated Bank and the Bank scrutinizes

the documents. If satisfied, the nominated Bank makes

payment to the beneficiary and in case this Bank is other than the issuing Bank,

then sends the documents to the issuing Bank and claim reimbursement as per

arrangement.

4.5.15 Settlement by acceptance:

Under this arrangement, the seller submits the documents evidencing the shipment to the

accepting Bank (nominated by the issuing Bank for acceptance) accompanied by draft

down on the Bank at the specified tenor. After being satisfied with the documents, the

accepts the documents and the draft and if it is a Bank other than issuing Bank, then

sends the documents to the issuing Bank stating that it has accepted the draft and maturity

the reimbursement will be obtained in the pre-agreed manner.

4.5.16 Settlement by negotiation:

This settlement procedure starts with the submission of documents by the seller to the

negotiating Bank. In a freely negotiable credit any Bank can negotiate documents and if

negotiation restricted by the issuing Bank, only nominated Bank can negotiate the

documents. After scrutinizing that the documents meet the credit requirement, the Bank

may negotiate the documents and give value to the beneficiary. The negotiating Bank

then sends the documents to the issuing Bank. As usual, reimbursement will be obtained

in the pre-agreed manner.

After realizing the telex charge, service charge, interest (if any), and the shipping

documents is then stamped with PAD number and entered in the PAD register. Intimation


is given to the customer calling on the Bank’s counter requesting retirement of the

shipping documents. After passing the necessary vouchers, endorsements are made on the

back of the bill of exchange as “receipt payment” and the bill of lading is endorsed to the

effect “please deliver to the order of M/S…” Under two authorized signatures (Bank

officer’s P.A holder). Then the documents are delivered to the importer.

4.5.17 Payment procedure of the import documents:

This is the most sensitive task of the Import Department. The officials have to be very

much careful while making payment. This tasks constitutes the following –

Date of payment: Usually payment is made within 7 days after the documents

have been received.

Preparing sale memo: A sale memo is made at BC rate to the customer. As the

T.T & OD rate is paid to the ID, the difference between these two rates is trading.

Finally, an Inter Branch Exchange Trading Credit Advice is sent to ID.

Requisition of the foreign currency: For arranging necessary fund for payment, a

requisition is sent to the International Department.

Transmission of telex: A telex is transmitted to the correspondent Bank ensuring

that payment is being made.

4.6 Export:

Practically by the term export we mean carrying out of anything from one country to

another. From the Banker’s point of view- export means sending of visible things outside

the country for sale. Export trade plays a vital role in the development process of an

economy. With the earning, the country meets the import bill.

Although export trade is always encouraged, anybody cannot export anything to any

place. Like importer, the exporters are also required to get them registered before

entering into export trade. Export Registration Certificate (ERC) given by CCI & E is

required for this purpose. The required documents to be obtained ERC are almost same as

IRC.


When Uttra Bank (authorized dealer) receives a L/C (cable or original) it ascertains the

correctness of the test number and the authorized signature. Then the Bank sends the

original copy of the L/C to the beneficiary.

The export presents the relative documents to the negotiation Bank after the shipment of

the goods. The L/C issuing Bank undertakes to honor is obligation only if the beneficiary

fulfills the conditions stipulated in the L/C, May namely, the submission of stipulated

documents within the stipulated time. Even a slight deviation of the documents from

these specified in the L/C may give an excuse to the negotiating Bank. So the negotiating

Bank must be careful, promote, systematic and bias-free while scrutinizing the tender

documents after careful and thorough examination of the documents,

The Banker has to list out the discrepancies which may be classified as major or minor,

irremovable or removable. The removable discrepancies can be corrected by the tendered

or future losses, which may arise due to non-interpretation of proceeds.

The following types of discrepancies may be noted while the negotiating Bank examines

the documents:

L/C expired

Late shipment

Amount drawn in excess of the L/C

Bill of Exchange not properly drawn

Descriptions of the goods differ

Bill of lading or Airway bill state

Bill of lading classed

Insurance cover note as per terms L/C

Insurance cover obtained after the bill of lading or Air bill date

Enough number of copies not submitted as required by L/C

Negotiation under L/C restricted


Packing list and certificate of analysis not as per L/C

Documents not properly endorsed

Full shipment not effective and part shipment prohibited

Gross weight and net weight shown in different documents differ

Same documents required by L/C not submitted and

Documents inadequately stamped

Document with major discrepancies, which could not be negotiated, should be

sent on collection basis with the permission of the exporter.

4.6.1 Export Procedure:

The import and export trade in our country are regulated by Import and Export (Control)

Act, 1950. Under the export policy of Bangladesh the exporter has to get the 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 be incorporated on EXP

forms and other papers connected with exports.

4.6.2 Registration of Exporters:

For obtaining ERC indenting Bangladeshi exporters are required to apply to the

Controller/Joint Controller/Deputy Controller/Assistant Controller of Import and Exports,

Dhaka/Chittagong/Khulna/Mymensing/Sylhet/Comilla/Barisal/Bogra/Rangpur/Dinajpur

in the prescribed form along with the following documents:

Nationality and Assets Certificate

Memorandum and Articles of Association and Certificate of Incorporation in case

of Limited Company

Bank Certificate

Income Tax Certificate

Trade License etc.


4.6.3 Securing the Order:

After getting the ERC the exporter may proceed to secure the export order. He can do this

by contacting the buyers directly or through agent. In this purpose exporter can get help

from:

Liaison Office

Buyer’s local agent

Export Promotion Organization

Bangladesh Mission Abroad

Chamber of Commerce (local & foreign)

Trade fair etc.

4.6.4 Signing the contract:

After communicating with buyer, buyer has to get contracted (writing or oral) for

exporting exportable item (s) from Bangladesh detailing commodity, quantity, prices,

shipment, insurance and marks, inspection, arbitration etc.

After getting contract for sale, exporter should ask the buyer for letter of credit clearly

stating terms and conditions of export and payment.

The followings are the main points to be looked into for receiving/collecting export

proceeds by means of documentary credit:

The terms of the L/C are in conformity with those of the contract;

The L/C is an irrevocable one, preferable confirmed by the advising Bank;

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

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

payment:


Cash in advance

Open an account

Collection basis (documentary / clean)

(Here the regulatory framework is URC – 525, ICC publication)

4.6.5 Procuring the materials:

After making the deal and on the L/C opened in his favor, the next step for the exporter is

to set about the task of procuring or manufacturing the contracted merchandise.

4.6.6 Shipment of goods:

After that the exporter should take the preparation for export arrange for delivery of

goods as per L/C and INCO-terms, prepare and submit shipping documents for

payment/acceptance/negotiation in due time:

EXP form

ERC (valid)

L/C copy

Customs duty certificate

Shipping instruction

Transport documents

Invoice

Other documents

Bill of Exchange (if required)

Certificate of origin

Inspection Certificate

Quality Control Certificate

G.S.P Certificate

Phyto-sanitary Certificate

4.6.7 Final step:


After those, exporter submits all these documents along with a letter of indemnity to

Uttara Bank Ltd. for negotiation. An officer scrutinizes all the documents. If the

document is a clean one, Uttara Bank Ltd. purchases the documents on the basis of

Banker-customer relationship. This is known as Foreign Documentary Bill Purchases

(FDBP).

4.6.8 Foreign documentary bills for collection:

Uttara Bank Ltd. for wards the documents for collection due to the following reasons:

If the documents have discrepancies

If the exporter is a new client

If the Banker is in doubt

After passing the above vouchers, an inter branch exchange trading debit advice is sent

for debiting the NOSTRO account. Uttara Bank Ltd. has NOSTRO account with its

reimbursing Bank (American Express Bank in New York). An FDBC register is

maintained, where first entry is given when the documents are forwarded to the issuing

Bank for collection and the second one is done after realization of the proceeds.

4.6.9 Export Bill Security Sheet:

Scrutinize the export bill on the following points:

I. General

Late shipment

Late presentation

L/C expired

L/C overdrawn

Partial shipment or transshipment beyond L/C terms

II. Bill of exchange

Amount of bill differs with Invoice

Not drawn on L/C issuing Bank

Not signed


Tenor or B/E not identical with L/C

Full set not submitted

Invoice

Not issued by the beneficiary

Not signed by the beneficiary

Not made out by the name of the applicant

Description, price, Quantity, Sales terms of the goods not correspond to the credit

Not marked one fold as original

Shipping marks differ with B/L & Packing list

III. Packing List

Gross weight, Net weight & measurement, number of cartoons/packages differ

with B/L

Not marked one fold as original

Not signed by the beneficiary

Shipping marks differ with B/L

IV. Bill of Lading/ Airway Bill

Full set of bill not submitted

B/L is not drawn or endorsed

“Shipping on Board”, “Freight prepaid” or “Freight collect” etc. notations are not

marked on the B/L

B/L not indicate the name and capacity of the party i.e. carrier or master, on

whose behalf the agent is signing the B/L

Shipped on board notation not showing name of pre-carriage vessel/intended

vessel

Shipping on board notation not port of loading and vessel name (incase bill

indicate a place of receipt or taking in charge different from the port of loading)

Short form B/L

Charter party B/L


Description of goods in B/L not agree with that of invoice, B/E & P/L

Alteration in B/L not authenticated

Loaded on deck

B/L bearing clauses or notations expressly declaring defective condition of the

goods and /or the packages

V. Others:

Non-negotiable documents not forwarded to buyers or forwarded to L/C terms

Inadequate number of invoice, Packing list & others submitted

Short shipment certificate not submitted

4.6.10 Settlement of local bill:

The settlement of local bill is done in the following ways:

The customer submits the L/C to the Uttara Bank Ltd. along with the documents

to negotiate

Uttara Bank ltd. officials scrutinize the documents to ensure the conformity with

the terms and conditions

The documents are then forwarded to the L/C opening Bank

The L/C issuing Bank gives the acceptance and forwards an acceptance letter

Payment is given to the customer on either by collection basis or by purchasing

the documents

A LBPD register is maintained to record the acceptance of the issuing Bank. Until

the acceptance is obtained, the record is kept in a collection register.

4.6.11 Mode of payment of export bill under L/C:

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

I. Sight payment credit: In a sight payment credit, the Bank pays the stipulated sum

immediately against the exporter’s presentation of the documents.


II. Negotiation credit: In negotiation credit, the exporter has to present a bill of

exchange payable to him in addition to other documents that the Bank negotiated.

III. Deferred payment credit: In deferred payment, the Bank agrees to pay on a

specified future date or event, after presentation of the export documents. No Bill of

Exchange is involved. In Uttara Bank Ltd. (UBL), payment is given to the party at the

date of D.A 60-90-120-180 as the case may be. But the Head Office is paid at T.T clean

rate. The difference between the two rates is the exchange trading for the branch.

IV. Acceptance credit: In acceptance credit, the exporter presents a bill of exchange

payable to himself and drawn at the agreed tenor (that is, on a specified future date event)

on the Bank that is accept it. The Bank signs its acceptance on the bill returns it to the

exporter. The exporter can then represent it for payment on maturity. Alternatively, he

can discount it in order to obtain immediate payment.

V. Advising L/C: When exporter transmits L/C to the Bank for advising than Bank sends

an advising letter to the beneficiary depicting that L/C has been issued.

VI. Test Key Arrangement: Test Key Arrangement is a secret code maintained by the

Banks for the authentication for their massage. It is a systematic procedure by which a

test number is given can easily authenticate the same test number by maintaining that

same procedure. RBL has test key arrangements with so many Banks for the

authentication of L/C messages and for making payment.

4.7 Back to back Letter of Credit:

A back to back letter of credit is a new credit. It is different from the original credit based

on which the Bank undertakes the risk under the back to back credit. In this case, the

Bank’s main surety/security is original credit. The original credit (selling credit) and the

back to back credit (buying credit) are separate instruments independent of each other

and in no way legally connected, although they both from part of the same business

operation. The supplier (beneficiary of the back to back credit) ships goods to the


importer or supplies goods to the exporter and presents documents to the Bank as is

specified in the credit. It is intended that the exporter would substitute his own documents

for negotiation under the original credit; his liability under the back to back credit would

be adjusted out of these proceeds. The exporter L/C is marked lien and no margin is

taken.

In RBL paper/documents required for submission for opening of back to back

L/C:

Master L/C

Valid Import Registration Certificate (IRC) & Export Registration Certificate

(ERC)

L/C application & LCA form duly filled in and signed

Performa invoice and Indent

Insurance cover note with money receipt

IMP form duly signed

In addition to the above the following papers/documents are also required for

export oriented garment industries while requesting for opening of back to back

letter of credit-

Textile permission.

Valid Boded Warehouse License.

Quota allocation letter issued by Export Promotion Bureau (EPB) in favor of the

applicant in case of quota items.

In case the factory premises is a rented one, letter of disclaimer duly executed by

the owner of the house/premises to be submitted.

4.7.1 Defective points or clauses appear in the master L/C:

Issuing Bank is not reputed

Advising credit by the advising Bank without authentication

Port of destination is absent

Inspection clause


Nomination of specific shipping/Airline or nomination of specified vessel by

subsequent amendment

B/L blank endorse, to third Bank, to be endorsed to buyer or to third party

No subsequent reimbursing clause

UCP clause not mentioned

Shipment/presentation period is not sufficient

Original document to be sent to buyer or nominated agent

FCR or HAWB consigned to applicant or buyer

“Shippers load and count is acceptable”

L/C shall expire in the country of the issuing Bank

Negotiation is restricted

4.7.2 Payment of back to back Letter of Credit:

In case back to back as 60-90-120-180 days of maturity period, deferred payment

is made. Payment is given after realizing export proceeds from the L/C issuing

Bank.

It may happen that the credit in favor of the seller is not transferable, or although

transferable, cannot meet commercial requirement by transfer in accordance with article

46 (UCP) conditions. The seller himself, however, is unable to supply the goods and

needs to purchase them from, and make payable to, another supplier. In this case, it may

some time be possible to use either a back to back credit or a counter credit. Both these

concepts involved the issue if a second credit by the seller in favor of his supplier.

Under the back to back concept, the seller, as beneficiary of the credit, offers it as

security to the advising Bank for the issuance of the second credit. As application for this

second credit the seller is responsible for reimbursing the Bank for payment made under

it, regardless of whether or not he himself is paid under the first credit. There is, however,

no compulsion for the Bank to issue the second credit, and in fact, many Banks will no do

so.


CHAPTER 5


PERFORMANCE OF UTTARA

BANK LTD. IN FOREIGN

EXCHANGE BUSINESS

PERFORMANCE OF UTTARA BANK LTD. IN FOREIGN EXCHANGE MANAGEMENT

Uttara Bank Ltd. has created a solid position in the financial sector of Bangladesh. Its role in the foreign exchange business cannot be put away rather its role is noteworthy in this case. Like other Bank in the country it continues to play a significant role in the economic development of the country through various activities.

5.1 Uttara Bank Ltd. (at a glance)

(Figure in million Tk)

Particulars 2005 2006 2007 2008


Authorized Capital 200.0 1000.0 1000.0 1600.0Paid-up Capital 99.8 199.7 399.3 798.6

Reserve fund 1765.2 1885.8 2054.2 2890.2

Deposits 36891.9 39360.2 43586.4 50817.0

Loans and advance 42062.2 45217.0 52860.3 58444.3

Investments 10062.1 9564.5 14455.8 11181.3

Gross Income 4265.0 4435.1 5020.2 6313.5

Gross Expenditure 2650.4 3153.2 3554.0 4007.9

Net profit/loss 142.6 248.8 409.5 1138.5Foreign Exchange business

a. Export

b. Import

18191.8 18133.9 14784.5 15039.6

23092.4 22630.7 25407.9 31146.9

No. of Share holders 5351 5390 12467 27228

5.2 Import business:

The Bank helps in import business. Items of import financed by the Bank included

electronic equipment, sports goods, rice, wheat, seeds, soybean, palm-oil, chemicals,

accessories etc.

The year wise imports are as follows-


Year Import20052006

23092.422630.7


20072008

25407.931146.9

5.3 Export Business:

The Bank played a huge role in export business. It remits huge foreign exchange through

helping in export business. Export items handled by the Bank include jute goods, ready

made garments, handy crafts, tea etc.

The year wise export is as follows


5.4 Export and Import side by side (Figure in million Tk)

Year Import Export2005200620072008

23092.422630.725407.931146.9

18191.818133.914784.515039.6

5.5 Sources of fund: Bank collects its fund in four ways and this are-

Foreign Exchange Management of Uttara Bank Limited.

Year Export2005200620072008

18191.818133.914784.515039.6

42

Deposit

Loan

Bills payable

Equity and others

5.6 Uses of funds: Bank uses its fund in the following way-

Cash and Bank balance

Loans and advances

Investment and called-up loan

Fixed assets and others

From the above facts and figure an inference is reached that Uttara Bank Ltd didn’t

perform well as it should be. Because being a first generation it should establish

precedence to its follower by which they may be encouraged to follow.

CHAPTER 6

FINDINGS AND ANALYSIS


6.1 FINDINGS AND ANALYSIS

Uttara Bank Ltd. rendering a stable support to foreign business and contributing a lot

to the national foreign exchequer. Though the foreign business is increasing day by

day, so is the role of Bank which is engaged in financing these businesses. In order to

smoothening the foreign exchange business of the Bank following points need to

handle with-

Insufficient usage of modern facility like communication technology


Little application of modern technology such as computer and Internet

Poor condition of balance of payment

Lack of enthusiastic scheme for exporter and importer

Improper allocation of employees

Lack of skilled employee

Absence of attractive remuneration package

Proper location should be selected for establishing a branch

Network of corresponded Banks is poor

Non-cooperation of government bodies

Lack of fair entrepreneur class

Knowledge of entrepreneur regarding foreign trade policy is very poor

6.2 Recommendation

Through this study I myself gained some practical knowledge about Import & Export

business in Bangladesh and other related matter. I want to put some suggestion here

which I think if followed would definitely help Uttara Bank Ltd. to promote is import and

export business and there-by its contribution in the whole economy.

Suggestions are-

To attract more clients Uttara Bank Ltd. should sought new marketing strategy,

which will increase the total export and import business


Introduction of various incentives to increase remittance

Effective and efficient initiative is necessary to recover the default loans

Attractive incentive package for the exporter will help to increase the export and

accordingly it will diminish the balance of payment gap of Uttara Bank Ltd.

Effective training is very much essential for the foreign exchange officials

Computerized Banking system and latest communication devices are the most

important elements for the coming year. So for a sound and stable foreign

exchange operation, Uttara Bank Ltd. has no alternative but to modernize.

Foreign exchange operation of other Bank is more dynamic and less time

consuming. Uttara Bank Ltd. should be armed with modern facility to face the

challenge

In our country, financial problem is a great constraint to foreign trade and UBL is

very mush conservative to post shipment finance. If the Bank took a bit liberal

position the exporter could easily come out from financial constraint.

Bank can provide foreign market reports, which will enable the exporter to

evaluate the demand for their product in foreign countries.

Segregation of international trade transaction from the existing situation i.e.

credits aspect to be looked after by credit analyst to that department.


This department shall only remain engaged with the documentary aspect of

international trade like opening L/C for all types of import and negotiation of

export bills.

The request of credit facilities in the form of L/Cs, PADs shall be assessed by

separate department for approval of the competent authority of the Bank. This

department, after approval of credit lines in the accounting, shall convey to the

foreign exchange department the operational condition of the facilities to them for

execution.

Foreign trade department will not create any additional credit in any account beyond the extent conveyed to them by the credit department.

CHAPTER 7

CONCLUSION


CONCLUSION:

High fuel cost and relatively lowers technological use made us competitive in the world

economy. On an average five (05%) percent of GDP growth made us consistent in

economic sector. Banking sector ensures the growth. It results in high-tech introduction

and positive competitive environment in financial sector especially within financial

intermediaries (Banks). Introduction of high-tech services can ensure growth towards

first generation Bank like Uttara Bank Ltd.

Uttara Bank Limited (UBL) has achieved outstanding operational performance in 2008

by posting laudable growth in Capital, Assets, Deposits, Loans and Advances and Profit.


Classified loan of the Bank is also reduced significantly to 8.78% from 10.03% (Period

2008).

The top management of UBL is always trying their best to improve their service quality

to the customers and enhance the reputation in the Banking business in our country as

well as abroad. UBL recruits a good number of fresh talents every year and invests

handsome money for necessary training purposes to ensure the fulfillment of better

service.

The volume of foreign exchange business has been increasing day by day compared to

previous years and the Bank is earnings more from foreign trade at low cost of fund and

the earnings of foreign trade contributes significantly much more to the total earnings of

Uttara Bank Limited. In 2008 the volume of import business has stood at Tk. 3114.69

crore which was Tk. 2540.79 crore in the preceding year. On the other hand, export of

RMG as well as tannery industry, one of the main sectors of export business of Uttara

Bank, increased to Tk. 1503.86 crore from 1478.45 crore in 2008 as compared to the

preceding year.

Uttara Bank has potential to play more significant role in the arena of financial sector. To

increase the in foreign exchange business the management of Uttara Bank Ltd. should

take appropriate measures to eliminate the drawbacks regarding foreign exchange

business.


APPENDIX


Highlights on the overall activities of the Uttara bank for the year 2009 and 2008

SINo

Particulars 2009Taka

2008 Taka

Change%


1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

Paid-up-Capital

Total Capital

Capital surplus/(Deficit)

Total Assets

Total Deposits

Total Loans & Advances

Total Contingent Liabilities

Advance/ Deposit Ratio (%)

Profit after tax & provision

Amount of classified loan during the current yearProvision kept against classified loansProvision surplus /(deficit)

Cost of Fund (%)

Interest earning Assets

Interest non-earning Assets

Return on Investment (ROI) %

Return on Assets (ROA)%

Income from Investment

Earning per Share (Taka)

Net income per Share (Taka)

Price Earning Ratio (Times)

Net Assets value per share

1,597,318,400

5,829,047,757

2,140,806,757

71,945,998,489

59,387,263,182

39,451,355,571

8,560,482,934

66.43%

1,105,226,569

1,038,900,000

475,526,169

20,443,169

4.94%

59,765,413,539

20,741,067,883

8.18%

1.54%

1,840,039,983

69.19

69.19

20.96

388.58

798,659,200

4,048,371,732

627,909,732

58,444,332,118

50,816,975,020

37,141,342,619

8,806,887,103

73.09% 1,138,518,1

72

618,600,000 388,219,720

108,051,720

4.96%

45,673,440,549

12,770,891,569

7.02%

1.95%

784,896,516

142.55

142.55

23.81

230.94

100

44

241

23

17

6

-3

-9

-3

68

22

-81

-.0002

31

62

17

-21

134

-51

-51

-12

68


List of foreign banks where Uttara Bank’s accounts are being maintained for making any kind of Trade Settlements and Remittances quickly & safely

USD

1.STANDARD CHARTERED BANK N.Y.One madison avenue, new yorkNew york 10010 3603 Phone: + 1 212 667 0700Swift: scblus33

2.WACHOVIA BANK, NY.180, Maiden ln,18th floorNew york,n.y. 10038u.s.a.Fax no.212-837-7557Swift:pnbpus3nnyc

3.MASHREQ BANK PSCNew york branch50 broadwaySuite 1500 fl 15New york, ny-10004Tel: 212-545-8200Swift:mshqus33

4.HSBC BANK USATrade services deptt.140,broadway(7th floor)New york,u.s.a.Tlx no.62822Swift:mrmdus33

5.COMMERZBANK AG60261 Frankfurt am main Germany.business premise: KaiserplatzFrankfurt am maintelephone #: (069)136-24858Swift: cobadeff.

6.CITIBANK N.A. NEW YORKEmerging markets Fi ceemea & latam111 wall street5th floor/zone-9New york, ny 10043Swift: citius33

7.JP MORGAN CHASE BANK N.A.Head office270 park avenueNew york, ny 10017Usa.Swift bic: chasus33

8.HABIB AMERICAN BANK Madison avenueNew york, ny 10016Usa.Tel: (212) 532 4444Swift bic: hanyus33

GBP


1.STANDARD CHARTERED BANK1st floor1 Aldermanbury squareLondon.swift:scblgb2l

2.BARCLAYS BANK PLCCorrespondent banking branchP.o.box 834St.swithins houseSt.swithins laneLondon ec4n 8jaU.k.Telex no.418139Swift:barckgb22

AUD

1. HSBC BANK AUSTRALIA LTD.Abn 48006 434 162580 george streetSydney nsw 2001Tel. No. (02) 9255 2888

YEN

1.BANK OF TOKYO MITSUBISHI UFJ LTD.NihombashiP.o.box no.191Tokyo 103-91-japanFax no.81393244197Swift:botkjpjt

2.STANDARD CHARTERED BANK 30-16, 4-Chome OgikuboSuginami-kuTokyo 167-8530Japan.Fax # 881332206919Swift: scbljpjt.

SINGAPUR DOLLAR

STANDARD CHARTERED BANKFinancial institutionsWholesale banking6 battery road # 23-00Level 22Singapore – 049909Tel: +65-6530 3201Swift bic: scblsgsg

EURO


1.NATIXIS (EX Natexis Banques Populaires) 21,Boulevard HaussmannBp 265-0975427 parisCedex 09 franceTelex no.660370Swift:ccbpfrpp

2.COMMEZBANK AGKaiser platz,frankfurt am main60261,frankfurtGermanyFax no.4969285389Swift:cobadeff

3.BAYERISCHE HYPO-UND VEREINSBANK AGAm eisbaich 4D-80538 munchPhone: 49-89-378-26497Swift bic: hyvedemm

4.UNICREDIT SPA MILANO ITVia san protaso 320121 milanItalyFax no.390288623524Swift code: crititmmdir

5.STANDARD CHARTERED BANK (GERMANY) GMBHFranklinstrasse 46-4860486 frankfurt/mainGermany.Tel: +4969770750-0Swift/bic: aeibdefx

6. BANCA NAZIONALE DEL LAVORO SPACorporate divisionFinancial institutions-asiaVia lombardia,3100187-rome, italyTel:+39-06-47025976Swift:bnliitrr

7.ALPHA BANK AEFinancial institutions division 15 charilaou trikoupi streetGr - 10678 athensGreece.Tel : (210) 326 5782 - 3Swift : crbagraa

CAD

1.ROYAL BANK OF CANADAFinancial institutionsClients service centre(5th floor)180,wellington street westToronto canada m5j 1j1Fax no.14169718603Swift:roycca2a

ACU DOLLAR


1.SONALI BANKApeejay house15,part streetCalcutta-700016,west bengalIndiaTelex no.021-2727Swift:bsoninic

2.BANK OF CEYLONP.o.box 241No.4,bank of ceylon mawathaColombo-1,sri-lankaTelex no.21126 Swift:bceylklx

3.NEPAL BANK LTD.Head officeP.o.box no.36DharamapathKathmundu nepalFax no.9771222383Swift:meblnpk1

4.MYANMA FOREIGN TRADE BANK80/86 Maha Bandoola Garden StreetP.o.box no.203Yangon,myanmarTelex no.21300Swift:fotmmmm1

5.AB BANK LTD.Mumbai branchLiberty building41-42 sir vithaldasThackiersey margNew marine linesMumbai-400-020,indiaTel no: 0091222005392-5

6.BANK OF BHUTANMain branchPhuentsholing, bhutanP.o. Box # 75Telephone: 009755252127.Swift:bhubbtb1

7.STATE BANK OF INDIAOveseas branch, kolkataBlock-aSamriddni bhavan11 strand rd.Kolkata-700001Tel: 2436712Swift:bsininbr106

8. THE HSBC LTD.Payments & cash management department52-60 mahatma gandhi roadFort, mumbai- 400 001India Tel: 91-22-268 1115(exports)/1719Swift:hsbcinbb

9.ICICI BANK LTD.Nariman point branch215, free press houseMumbai 400021IndiaTel:(+91) (22) 2653 8035Swift: icicinbbcts

10.HABIB METROPOLITAN BANK LTD.Head office, international division14th floor, saima trade towers (block a)Karachi 74200PakistanTel: (+92-21) 2271935-49Swift bic: mpblpkka

Settlement by Negotiation


Journal Entries:

Sundry deposit L/C margin A/C Dr.PAD A/C Cr.(Margin amount transferred to PAD A/C)

Customer A/C Dr.PAD A/C Cr.(Customer account debited for the remaining amount)

PAD A/C Dr.Head office A/C + Exchange trading A/C Cr.Income A/C interests on PAD Cr.(Amount given to Head Office ID and interest credit)

Reversal Entries:

Banker’s Liability Dr. Customer’s Liability Cr. (When lodgment is given)

Procedure for FDBP:

After purchasing the documents, Uttara Bank gives the following entries:

FDBP A/C Dr.Customer A/C Cr.(Before realization of proceeds)

Head office A/C Dr.FDBP A/C Cr.(Adjustment after realization of proceeds)

A FDBP registered is maintained for recording all the particulars.

Journal Entries for back to back L/C:


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

Customer’s A/C Dr.Commission on acceptance Cr.

While payment, If the fund is at hand, the accounting entry is-

Sundry deposit margin on acceptance A Dr.Customer’s A/C Cr.

If the party is paid in foreign currency, B.C rate is applied in this regard. International department takes the T.T, O.D rate. If the payment is made to ID in local currency in notional rate, T.T clean rate is followed by ID. When the party is paid O.D sight rate is followed.

If the fund is not available to make the payment, the following vouchers are to be passed-

OAP Dr.Customer’s A/C Cr.

Journal Entries for purchase of Local bills:

Local bill purchase documentary Dr.Party A/C Cr.Commission Cr.Interest A/C Cr.

List of Banks operated in Bangladesh:


Nationalized commercial Banks:

1. Sonali Bank2. Janata Bank3. Agrani Bank4. Rupali Bank Ltd.5. Bank of Small Industries & Commerce Bangladesh Ltd.

Private Commercial Banks:

1. Pubali Bank2. Uttara Bank3. Arab Bangladesh Bank4. National Bank Ltd.5. The City Bank Ltd.6. International Finance Investment Corporation Bank Ltd.7. United Commercial Bank Ltd.8. Eastern Bank Ltd.9. National Credit & Commerce Bank Ltd.10. Prime Bank Ltd.11. South East Bank Ltd.12. Dhaka Bank Ltd.13. Dutch-Bangla Bank Ltd.14. Mercantile Bank Ltd. 15. Standard Bank Ltd.16. One Bank Ltd.17. Mutual Trust Bank.18. First Security Bank Ltd.19. The Trust Bank.20. Premier Bank Ltd.21. Bank Asia Ltd.22. Bangladesh Commerce Bank Ltd.23. Export & Import Bank Ltd.24. Shahjalal Bank Ltd.25. Jamuna Bank Ltd.26. Brac Bank Ltd.27. Islami Bank Bangladesh Ltd.28. Oriental Bank Ltd.29. Al-Arafah Islami Bank Bangladesh Ltd.30. Social Investment Bank Ltd.

Foreign Commercial Banks:


1. American Express Bank2. Standard Chartered Bank3. Habib Bank4. State Bank of India5. Credit Agricole Indosuez6. National Bank of Pakistan7. Muslim Commercial Bank8. Citi N.A9. Hanvit Bank10. The Hong Kong & Shanghai Banking Corporation (HSBC) 11. Shamil Bank of Bahrain E.C.

Specialized Bank

1. Bangladesh Shilpa Bank2. Bangladesh Shilpa Rin Shangshtha3. Bank of Small Industries and Commerce4. Bangladesh Krishi Bank5. Rajshahi Krishi Unnayan Bank (RAKUB)

Bibliography:


1. Annual report of Uttara Bank Ltd. for the year 2008, 2007, 2006, 2005.

2. Website: www.uttarabank.com

3. Choudhury, Dr. T.A, Modes of Payment in International Trade, Reading Materials on International Trade & Finance (E-102), Bangladesh Institute of Bank Management (BIBM)

4. Andley, K.K & Mattoo, V.J, Foreign Exchange Principles & Practices, Sultan Chand & Sons, New Delhi, 1996.

5. Guide lines for Foreign Exchange Transaction, Bangladesh Bank.Vaish M.C, Money, Banking and International Tr.


http://www.uttarabank.com/

Foreign Exchange Management of Ubl

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