3.

1 Introduction
Foreign Exchange Department is international department of Bank. It deals globally. It
facilitates international trade through its various modes of services. It bridges between
importers and exporters. If the branch is authorized dealer in foreign exchange market, it
can remit foreign exchange from foreign country to local country. This department mainly
deals in foreign currency. This is why this department is called foreign exchange
department.
Bangladesh Bank issues Authorized Dealer (AD) license by observing the banks
performance and also the customers associated with the bank for conducting foreign
dealings. Some national and international laws regulate functions of this department.
Among these, Foreign Exchange Act, 1947 is for dealing in foreign exchange business, and
Import and Export Control Act, 1950 is for Documentary Credits is also an important law
for settlement of terms and conditions between exporter and importer in international trade.
Governments Import & Export policy is another important factor for import and export
operation for banks.
3.2 Background Of Banks involvement:
Modern banks facilitate trade and commerce by rendering valuable services to the
business community. Apart from providing appropriate mechanism for making payments
arising out of trade transactions, the banks gear the machinery of commerce, specially in
case of international commerce, by acting as a useful link between two parties, namely
buyer and seller, who are often too far away from and too unfamiliar with each other.
Banks play a vital role by minimizing the risk of two parties. In fact without the help of
banks we cannot think about a congenial international trade environment. Now the
question comes how banks help international trade. We know that in a local trade there is
a chance to know about each other. But in international trade the involved parties stay two
distant places. For a buyer the following risks are involved-

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 Risk of non-delivery of goods.

Risk of receiving sub standard goods.
Risk of fraud in goods.
For the seller the following risk is involved Risk of non-payment.
To reduce the aforesaid risks an independent system is introduced which will safeguard
the buyer as well as seller in an international trade.
Foreign exchange business of PBL can be divided into following sections:
1. Import section
2. Export section
3. Foreign Remittance.
Function of Foreign exchange (An overview)

Foreign exchange

IMPORT

EXPORT

FOREIGN
REMITTANCE

The Import and Export Process would be easier to understand if we consider only two
banks for the two parties. That means issuing bank for importer and negotiating bank for
exporter. Even though there may be number of banks which play various roles.
3.3Letter Of Credit (L/C):
Letters of credit is the key player in the foreign exchange business. With the globalization
of economies, international trade has become quite competitive. Timely payment for
exports and quicker delivery of goods is, therefore, a pre-requisite for successful
international trade operations. Growing complexity of international trade, separation of
commercial parties across the globe and operating in a totally unknown environment
underlined the need for evolving a system that balances between the expectations of the
seller and the buyer.

13

Letter of Credit (L/C) is a payment guarantee to the seller by the buyers bank. It is
in fact, a Credit Contract whereby the buyers bank is committed (on behalf of the buyer)
to place an agreed amount of money at the sellers disposal under some agreed conditions.
If the conditions of the credit do not require for presentation of specified documents, it is
called Clean Credit. On the contrary, if the presentation of specified documents is
obligatory, the credit is called a Documentary Credit.
Buyers and sellers enter into contracts for buying and selling goods/ services and the
buyer instructs his bank to issue L/C in favour of the seller. Here bank assumes fiduciary
function between the buyer and seller
3.4 Types Of L/C:
L/C:
In general, L/C can be divided in to two types, they are :
1) Import L/C: The importer opens this L/C.
2) Back-To-Back L/C: The Exporter opens this L/C

It is simply issued to the clients against an import L/C. Back-to-Back

mechanism involves two separate L/Cs. One is master Export L/C and another
is Back-to-Back L/C. On the strength of Master Export L/C bank issues bank to
Back L/C

Back to back an Import L/C to procure goods /raw materials for further
processing.

It is opened based on Export L/C.

It is a kind of Export Finance.

Export L/C is at Sight but back to Back L/C is at Usance.

No margin is required to open Back to back L/C

L/C value shall not exceed the admissible percentage relative Master L/C (25%
of the master L/C)

Here L/C issued against the lien of export L/C.

Depending on the Revocability L/C can be divided in two types. These are a. Revocable credit

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A revocable credit is one where the issuing bank at liberty to revoke i. e. cancels the
credit at any time.
b. Irrevocable credit
An irrevocable L/C is one, which can not be revoked, amended or modified by
the issuing bank
Depending on the payment mode L/C can be divided in two types. These are a. Sight L/C: Incase of sight L/C the issuing bank has to pay or inform the
discrepancy (If any) with in 7 days of getting the document.
b. Deferred L/C: Incase of Deferred L/C the issuing bank has to pay after a particular
period after getting the document.
Depending on the place of the goods L/C can be divided in following typesa. Local L/C: When goods are imported from different places in the country then
Local L/C is issued.
b. Foreign L/C: When goods are imported from different country then Foreign L/C is
issued.
c. EPZ: the EPZ is treated as a foreign country and Foreign L/C is issued for that.
3.5 Parties To The L/C
Importer

Who applies for L/C

It is the bank which opens/issues a L/C on behalf of the importer.
The payment may be at sight if the credit provides for sight

Issuing Bank

payment, or at maturity, dates if the credit provides for deferred

payment. Especially the issuing bank should satisfy himself on the
credit worthiness of the applicant.
It is the bank, which adds its confirmation to the credit and it, is

Confirming Bank done at the request of issuing bank. Confirming bank may or may
not be advising bank.
It is the bank through which the L/C is advised to the exporters.
Advising or

This bank is actually situated in exporters country. It may also

Notifying Bank

assume the role of confirming and / or negotiating bank depending

upon the condition of the credit.

Negotiating Bank It is the bank, which negotiates the bill and pays the amount of the
beneficiary. The advising bank and the negotiating bank may or

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may not be the same. Sometimes it can also be confirming bank.

Paying or

It is the bank on which the bill will be drawn (as per condition of

Accepting Bank

the credit). Usually it is the issuing bank.

Reimbursing

It is the bank, which would reimburse the negotiating bank after

bank

getting payment instructions from issuing bank.

3.6 Import Operation

Import section helps business and other people to import goods. In international
environment, buyers and sellers are often unknown to each other. So seller always seek
guarantee for the payment for his goods exported. Here is the role of bank. Bank gives
guarantee to the exporter that it will pay for the goods on behalf of the buyer. This
guarantee is called Letter of Credit. Thus the contract between importer and exporter is
given a legal shape by the banker by its Letter of Credit.
3.6.1Procedure Involved in L/C Opening:
There are few steps involved in L/C opening process.
3.6.2 Requirements of for opening L/C:
The person has to be an account holder of the bank.
IRC (import registration form )
TIN (Tax identification no.)
VAT (Value Added Tax certificate)
Indent/Proforma Invoice

Indent : An indent stating the description of the goods

including quantity, unit price, etc. given by the
Supplier/Exporter.given by the Indenter.

Proforma Invoice: Proforma Invoice states the description of

the goods including quantity, unit price, etc. given by the
Supplier/Exporter.

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3.6.3 Documents from the bank side:

Importers request letter.
L/C application form.
LCA form (Letter of credit authorization).
Imp Form. (To send the report to BB)
LCA form (Letter of credit authorization).
Imp Form. (To send the report to BB)
Importers Acceptance.

3.6.4 Importers Application For L/C Limit

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

Full name and address of the applicant.

Date and place of expiry of the credit

Applicants A/C number

Amount (both in figure and word)

The mode of transmission of document (SWIFT/ Courier/ Telex)

Confirmation of credit to the beneficiary (requested or not requested)

Partial shipment is allowed or not

The type of loading (loading on board)

Brief description of the goods to be imported with HS code no.

Credit available with by sight payment/ by acceptance/ by negotiation/ by deferred

payment at against the documents detailed herein/ and beneficiaries draft at on.

The time bar within which the document should be presented.

Sales terms (FOB/ C &F/ CIF)

Shipping Mark

IRC Number and LCA Number

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Insurance cover note with money receipt

Country of origin

A credit Officer scrutinizes this application and accordingly prepares a proposal (CLP)
and forwards it to the Head Office Credit Committee. The Committee, if satisfied,
sanctions the limit and returns back to the branch. Thus the importer is entitled for the
limit. After approval Importers Acceptance has to be taken, that he agrees with the terms
& conditions.
3.6.5 L/C Application Form.
The L/C opener is required to fill the prescribed application form for requesting to open a
L/C for him. L/C Application Form is a sort of an agreement between customer and bank
based on which letter of credit is opened. Gulshan Branch provides a printed form for
opening of L/C to the importer. A special adhesive stamp of value of Tk.150 is affixed on
the form in accordance with Stamp Act in force. While opening, the stamp is cancelled.
Usually the importer expresses his decision to open the L/C quoting the amount of margin
in percentage. Usually the importer gives the following information

Full name and address of the importer;

Date and place of expiry of the credit;

The mode of the transmission of document (mail/courier/telex);

Whether the confirmation of the credit is requested by the beneficiary or not;

Whether the partial shipment is allowed or not;

The type of loading (loading on board;

Brief description of the goods to be imported;

Availability of the credit by sight payment acceptance /negotiation/ deferred

payment;

The time bar within which the document should be presented;

Sales terms (FOB/C &F/CIF);

Account number;

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L/C amount;

Shipping mark;

IRC Number;

LCA Number;

Insurance cover note;

Country of origin.

If all the documents along with the application are in order, the financial position and
credit worthiness of the importer, market demand of the good will be assessed. Margin for
letter of credit will also be determined. The rate of margin usually 25% or depends on the
financial condition of the banker, importers previous performance, status of relationship
with the importer, nature of goods etc. This margin is to be retained from the importer
either in cash or in debiting the importer current account with the bank. The importer is
also required to pay the other concerning charge like foreign corresponding charge, telex
charge if any, handling charge, and commission etc.
3.6.6 L/C Transmitting
After verifying all that, the respective officer opens an L/C. This L/C (SWIFT copy) has
to be sent to the Exporters bank. (Advising bank/negotiating bank). Letter of credit can
be transmitted to the advising bank through SWIFT (Society for Worldwide Interbank
Financial Telecommunication).

L/C opening/issuing
bank

Sending message by SWIFT

Advising
bank/negotiating bank

In the SWIFT following information are provided

Address of the L/C issuing bank;

Input message type (700 for the new L/C, 702 for amendment and some other
message number);
Name of the advising bank;
Form of documentary credit (Revocable /irrevocable);
L/C no;
Date and place of expiry;
Applicant/Importer;

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Beneficiary /Exporter;
USD;
Draft at (sight/usance);
Partial shipment allowed or not;
Trans-shipment;
Ships on board or deck;
Description of goods and services.

As a means of transmission SWIFT is chosen because of time saving. However the

importer might send it through mail if he does not have any time constraints. Since it is
cheaper than SWIFT. After that, L/C number and the above entries are given in the L/C
Register. L/C opening register has the following details

Date, L/C No., Name of the customer, Foreign currency amount, Exchange
rate, Taka equivalent and source of import;

Goods, Country of origin, Advising bank, Expiry date, Tenor and Margin;

Charges: commission, postage, SWIFT, FCC and total;

Initial with date and remarks.

3.6.7 Amendment Of L/C

Involved parties in a L/C, particularly the seller and the buyer cannot always satisfy the
terms and conditions in full as expected due to some obvious and genuine reason. In such a
situation, the credit should be amended. Branch transmits the amendment by SWIFT/ Telex
to the advising bank. In case of irrevocable letter of credit, it can not be revoked, amended
or cancelled without the agreement of the issuing bank, the confirming bank (if any) and
the beneficiary. On the other hand, revocable credit can be amended or cancelled by the
issuing bank at any moment and without prior notice to the beneficiary. According to
UCPDC 500 L/C must be an irrevocable one. For amended L/Cs, service charge and telex
charge is debited from the partys account accordingly.
3.6.8 Advising The Import L/C
Advising depicts the proof of authenticity of the credit to the seller/ beneficiary. The advising process
consists of forwarding the original credit to the beneficiary. Before forwarding the advising bank has to
verify the signature (s) of the L/C opening bank. In addition, it ensures that the terms and conditions of the
L/C are not inconsistent with the existing regulations. In such a case, advising bank does not undertake any
liability.

Importer

L/C Opening Bank

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L/C Beneficiary

L/C Advising Bank

L/C Advising Mechanism

21

3.6.9 Scrutiny Of The Documents

The seller being satisfied with the terms and the conditions of the credit proceeds to
dispatch the required goods to the buyer. Then he has to present the documents
evidencing dispatching of goods to the negotiating bank on or before the stipulated expiry
date of the credit. After receiving all the documents, the negotiating bank then checks the
documents against the credit. If the documents are found in order, the bank will pay. The
usual documents are

Commercial Invoice

Bill of lading

Certificate of origin

Packing list

Shipping advice

Non negotiable copy of bill of lading

Bill of exchange

Pre-shipment inspection report

Shipment certificate.

3.6.10 Handling of Discrepant Export Documents:

1.

In case of scrutiny of documents, if bank get any dissimilarity between

documents & L/Cs then the subject import document is treated as discrepant
document. (i.e., Late Shipment, Late Presentation & Expired documents etc.)

2.

In case of discrepant documents bank wait for waiver from the buyer.

3.6.11 Making the payment through the Reimbursing Bank

The L/C issuing bank after getting the document and check the document and if the terms
and condition meet the requirement, the issuing bank take initiative to make payment to
the exporter through from the Nostro account of reimbursing bank
L/C opening bank

Reimbursing Bank

Negotiating bank

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The issuing bank then inform the importer that his document has come to the Bank and by
giving the payment he can release the document and unloading his good from the ship or
any other place as per L/C terms and conditions.
After realizing the telex charge, service charge, interest (if any), the shipping
documents is then stamped with PAD Number & entered in the PAD Register.
Intimation is given to the customer calling on the banks counter requesting
retirement of the shipping documents. After passing the necessary vouchers,
endorsement is made on the back of the Bill Of Exchange as Received Payment
and the Bill of Lading is endorsed to the effect Please deliver to the order of
M/S---------, under two authorized signatures of the banks officers (P.A. Holder).
Then the documents are delivered to the Importer.
3.7 Export Operation

3.7.1 Introduction:
Bangladesh exports a large quantity of goods and services to foreign households.
Readymade textile garments (both knitted and woven), Jute, Jute-made products, frozen
shrimps, tea are the main goods that Bangladeshi exporters exports to foreign countries.
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Garments sector is the largest sector that exports the lion share of the country's export.
Bangladesh exports most of its readymade garments products to U.S.A and European
Community (EC) countries. Bangladesh exports about 40% of its readymade garments
products to U.S.A. Most of the exporters who export through Premier bank are
readymade garment exporters. They open export L/Cs here to export their goods, which
they open against the import L/Cs opened by their foreign importers.
Export L/C operation is just reverse of the import L/C operation. For exporting goods by
the exporter, bank may act as advising banks and collecting bank (negotiable bank) for the
exporter.
As an advising bank
It receives documents from the foreign importer and hands it over to the exporter.
Sometimes it adds confirmation on the L/C on request from the Opening Bank. By
adding confirmation, it assumes the responsibility to make payment to the exporter.

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As Negotiating Bank
It negotiates the bills and other shipping documents in favor of the exporter. That is,
it collects the proceeds of the export-bill from the drawee and credits the exporters
account after taking all the charges. Collection proceed from the export bill is
deposited in the banks NOSTRO account in the importers country. Sometimes the
bank purchases the bills at discount and waits till maturity of the bill. When the bill
matures, bank presents it to the drawee to encash it.

3.7.1 Formalities Required For export L/C

There are a number of formalities that an exporter has to fulfill before and after shipment
of goods. These formalities or procedures are enumerated as follows
a. EXPORT REGISTRATION CERTIFICATE (ERC): The exports from Bangladesh are
subject to export trade control exercised by the Ministry of Commerce through Chief
Controller of Imports & Exports (CCI&E). No exporter is allowed to export any
commodity permissible for export from Bangladesh unless he is registered with
CCI&E and holds valid ERC. The ERC is required to be renewed every year. The
ERC number is to be incorporated on EXP (Export) Forms and others documents
connected with exports.
b. THE EXP FORM: After having the registration, the exporter applies to Premier Bank
Bangladesh Ltd. with the Trade License, ERC and the Certificate from the concerned
Government Organization to get the EXP Form. If the branch is satisfied, an EXP
Form is issued to the exporter. An EXP Form usually contains the following
particulars

Name and address of the Authorized Dealer;

Particulars of the commodity to be exported with particulars and code no;

Country of destination;

Port of destination;

Quantity;

L/C value in foreign currency;

24

Terms of sale;

Name and address of Importer/ Consignee;

Bill of Lading/Railway Receipt/Airway Bill/Truck Receipt/Post Parcel Receipt

no. and date;

Port of Shipment/Post Office of Dispatch;

Land Custom Post;

Shipment Date;

Name of the Exporter with address;

CCI&Es registration number and date;

Sector (public or private) under which the exporter fails.

c. SECURING THE ORDER: Upon registration, the exporter may proceed to secure the
export order. That is, to contact the buyer by direct correspondence.
d. SIGNING OF THE CONTRACT : While making a contract, the following points are to
be mentioned: a) Description of the goods; b) Quantity of the commodity; c) Price
of the commodity; d) Shipment; e) Insurance and marks; f) Inspection, and g)
Arbitration.
e. PROCURING THE MATERIALS : After making the deal and on having the L/C opened
in his favor, the next step for the exporter is set about the task of procuring or
manufacturing the contracted merchandise.
f. SHIPMENT OF GOODS : The following documents are normally involved at the stage
of shipment: (a) EXP From, (b) photocopy of registration certificate, (c) photocopy of
contract, (d) photocopy of the L/C, (e) freight certificate from the bank in case of
payment of the freight if the port of lading is involved, (g) railway receipt, berg
receipt or truck receipt, (h) shipping instructions, and (i) insurance policy.
The following points should be looked carefully for

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

The L/C is an irrevocable one, preferably confirmed by the Advising Bank.

The L/C allows sufficient time for shipment and a reasonable time for
registration.

If the exporter wants the L/C to be transferable, advisable, he should ensure

those stipulations are specially mentioned in the L/C.
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At last, the exporter submits all these documents along with a Letter of Indemnity to the
branch for negotiation. An officer scrutinizes all the documents.
3.7.2 Check List For Export L/Cs:

If L/Cs advise/transfer by another Bank authentication of the L/Cs.

To know regarding the L/C Issuing Bank & its authentication.

Authentication of the Export L/Cs.

To check the SWIFT Message Type (700/710/720)

Check the date of issue.

Check the L/c issuing country

Check the commodity to be exported.

Check the amount of L/c & Currency In case of Transfer L/C transfer amount.

Check the destination of shipment.

Check the shipment date (lead time) of the L/Cs.

Check the expiry date & place of L/c.

Check regarding applicant of L/c (Credit Report).

Check regarding beneficiary of L/c.

Check regarding paying bank & paying terms & conditions.

Check other Terms & Conditions (B/L clause as per guideline of B.Bank).

Check charges or commission (if any).

3.7.3 Scrutiny Of Export Documents For Negotiation:

At first check the certified amount of EXP Forms with the Commercial
Invoice (Before certifying EXP Forms required scrutiny the commercial
invoice with the L/C Terms & conditions).

Check customs approved amount with the EXP Forms & authentication of the
seal & signature of the customs authority.

If found any difference between certified EXP Forms & export value
(commercial invoice) check the short shipment certificate / amendment
certificate.
26

Check the authenticity of the B/L, Airway Bill & Truck Receipt etc.(verify
signature & issuing company)

Check the shipment Date of the B/L with the L/C terms.

Scrutiny of the B/L, Airway Bill & Truck Receipt and check the similarity
between B/L & Terms of export L/Cs (That is, Check the Exp No., Invoice
No., Export L/C No., Name of the consignee (as per guideline for foreign
transactions of Bangladesh Bank & as per L/C), Name of the consignor,
Notify Party, Shipment Date, Port of Loading, Port of Destination,
Transshipment or not, In case of FCR master B/L required).

Check the Country of Origin (C.O.) / GSP (Form-A).

Check the client has submitted all requires papers/documents as per L/C
Terms.

Check all documents signed by the authorized persons of the exporters.

3.7.4 Handling Of Discrepant Export Documents:

In case of scrutiny of export documents, if any dissimilarity found between

export documents & export L/Cs then the subject export document has been
treated as discrepant document (i.e., Late Shipment, Late Presentation &
Expired documents etc.)

In case of discrepant documents bank wait for waiver from the paying bank &
the buyer.

If paying bank endorse the export documents & release goods in favour of
buyer they are bound to pay against export documents.

Bank always claims for the payment against export documents to paying bank.

In case of late payment bank collect information regarding status of goods

(release or not, if release, how?) from the shipping agent.

If release goods by the bank endorse bank claim full payment from the paying
Bank.

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If the documents are clean, the branch either purchases the documents or collects it on
behalf of the customer on the basis of banker-customer relationship. These are known as:
Foreign Documentary Bill Purchase (FDBP)
FOREIGN DOCUMENTARY BILLS FOR COLLECTION (FDBC)

Procedure For FDBP

If all the documents are in order than the bank purchase the documents. Several things
should be checked at the time of purchasing.

How much back-to-back facility the client has taken.

How much PC (packing Credit) facility the client has taken.

Other charges.

Foreign Documentary Bills For Collection (FDBC)

The bank forwards the documents for collection due to the following reasons a. If the documents have discrepancies.
b. If the exporter is a new client.
c. The banker is in doubt.
FDBC signifies that the exporter will receive payment only when the issuing bank gives
payment. The exporter submits duplicate EXP Form and Commercial Invoice. 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.
In our country, Export and Import operation of bank is very much related with one
another because of use of Back to Back and maturity of payment for Back-to-Back L/C is
set in such that it can be paid out of export proceeds. So export and import sections works
as one unit. These two operations can hardly be separated from one another in the branch.

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3.7.5 Export Financing

Financing of export credits is made of two stages:
1. Pre-shipment
2. Post-shipment
Packing credit (pre-shipment financing)
Packing is a short term advance granted by a bank to an exporter against valid
export L/C contract for the purpose of purchase of materials or finished goods
or manufacturing, processing, packing, transporting up to ware house/port of
shipment etc.
Documents Required for Opening a Back-to-back L/C
In TRUST Bank Principal Branch, following papers/ documents are required for opening
a back-to-back L/C

Master L/C

Valid Import Registration Certificate (IRC) and Export Registration

Certificate (ERC)

L/C Application and LCAF duly filled in and signed

Proforma Invoice or Indent

Insurance Cover Note with money receipt

IMP Form duly signed

In addition to the above documents, the followings are also required to export oriented
garment industries while requesting for opening a back-to-back L/C

Textile Permission

Valid Bonded Warehouse License

Quota Allocation Letter issued by the Export Promotion Bureau (EPB) in

favor of the applicant for 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. A checklist to open back-to-back L/C is as
follows
29

Applicant is registered with CCI&E and has bonded warehouse license;

The master L/C has adequate validity period and has no defective clause;

L/C value shall not exceed the admissible percentage of net FOB value of
relative Master L/C;

Usage Period will be up to 180 days.

Check Points Noted in Master L/C

Following defective points are usually found in the Master L/C. So, these points are so
much carefully checked by the bank officials. These are

Issuing bank is not reputed;

Advising credit by the advising bank without authentication;

Port of destination absent;

Inspection clause;

Nomination of specific shipping/Air line or nomination of specified vessel by

subsequent amendment;

Bill of lading endorses blank, endorses to 3rd bank, endorses to buyer or 3rd
party;

No specific reimbursing clause;

UCP clause not mentioned;

Shipment/ presentation period is not sufficient;

Original documents to be sent to buyer or nominated agent;

Shippers load and count is not acceptable clause;

L/C shall expire in the country of the issuing bank;

Negotiation is restricted.

Payment of Back-to-Back L/C

On 30/ 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. For Garments Sector,
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the duration can be maximum 180 days. In case of export failure or non realization/ short
realization of export proceeds, forced loan i.e. OAP has to be created in order to settle the
Back to Back L/C payment.

3.8 Foreign Remittance Department

This bank is authorized dealer to deal in foreign exchange business. As an authorized
dealer, a bank must provide some services to the clients regarding foreign exchange and
this department provides these services.
The basic function of this department is outward and inward remittance of foreign
exchange from one country to another country. In the process of providing this remittance
service, it sells and buys foreign currency. The conversion of one currency into another
takes place at an agreed rate of exchange, which the banker quotes, one for buying and
another for selling. In such transactions the foreign currencies are like any other
commodities offered for sales and purchase, the cost (convention value) being paid by the
buyer in home currency, the legal tender.
3.8.1 The Remittance Process Involves The Following Four Modes
Bank sell Dollar / Pound for using in abroad by the purchaser.
Cash

Sell

Remittance

Bangladesh Bank publication of Convertibility of Taka for

Currency Transactions in Bangladesh.

Dollar /
Pound

The maximum amount of such sell is mentioned in the

Bank can purchase dollar from resident and non resident

Purchase Bangladeshi and Foreigner. Most dollars purchased comes from
realization of Export Bill of Exchange.

Travelers
Cheque

Issue of
TC

(TC)

TC is useful to traveler abroad. Customers can encash the TC in

abroad from the drawee bank. TC is alternative to holding cash
and it provides better security than holding cash in hand.

Buying

If any unused leaf of TC is surrendered bank buys it from the

Of TC

customer. All payments are made in local currency. Banks

generally buy only those TC.

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TC for
collection

Telex
Transfer

This bank for collection receives unused leaves of travelers

cheque issued by another banks. Generally it takes 21 days for
collection and customer can draw cash after one month.

Outward

It remits fund by tested TT via its foreign correspondence bank

TT

in which it is maintaining its NOSTRO Account.

Incoming
TT

It also makes payment according to telegraphic message of its

foreign correspondence bank from the corresponding VOSTRO
Account.

Bank issue Demand Draft in favor of purchaser or any other according to

Foreign

instruction of purchaser. The payee can collect it for the drawee bank in

Demand

which the Issuing bank of Demand Draft holds its NOSTRO Account.

Draft

Bank also makes payment on DD drawn on this bank by its foreign

correspondence bank through the VOSTRO Account.

In these processes of remittance, bank must have to make profit as a business institution.
Profit is made in two ways
1. Commission charged
2. Difference in the buying and selling rate.

3.9 Miscellaneous Services By This Department

Students who are desirous to study abroad can open file in the bank. By
Student File opening this file, bank assures the remittance of funds in abroad for
study.
Non resident Investors Taka Account is account
NRIT

Non-resident Bangladeshi can deposit foreign currency for investment in

Account

security of stock exchanges. For such accountholders, 5% of primary

shares are reserved.
Foreign Currency accounts opened in the names of Bangladeshi

F.C. Account nationals or persons of Bangladeshi origin working or self-employed

abroad can now are maintained as long as the account holders desire.
NFCD

Stands for Non-resident Foreign Currency Deposit

Eligible persons may open such accounts even after their return to

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Bangladesh, within six months of their arrival.

Stands for Resident Foreign Currency Accounts
RFCD

Persons ordinarily resident in Bangladesh may maintain foreign

Accounts

currency accounts with foreign exchange brought in at the time of their

return to Bangladesh from visit abroad. Balance of such accounts is
freely remittable abroad.

3.10 Reporting to Bangladesh Bank

At the end of every month, the reporting to Bangladesh Bank regarding the following
information is mandatory
i)

Filling of E-2/P-2 Schedule of S-1 category that covers the entire months
amount of import, category of goods, currency, county etc.

ii)

Filling of E-3/P-3 Schedule of for all charges, commission with T/M Form.

iii) Disposal of IMP Form that includes:

a) Original IMP is forwarded to Bangladesh Bank with invoice and
indent;
iv) Duplicate IMP is kept with the branch along with the Bill of Entry/
Certified Invoice;
v)

Triplicate IMP is kept with the branch for office record;

vi) Quadruplicate is kept for submission to Bangladesh Bank in case of

imports where documents are retired.

3.11 My Observations:

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1. The Trust Bank Limited, Principal branch has SWIFT facilities. Very few bank in our
country offer this. By using this modern technology Principal branch, provide fastest
service on L/C operating to its client.
2. Pre-shipment inspection certificate should obtain from the exporter of back to back
L/C. Because it reduces fraud and forgery in case of import against master export L/C.
But all the time this Pre-shipment inspection certificate are not wanted by the bank.
3. On some cases, this branch takes different Margin and commission on L/Cs from
different customer. A customer is allowed to open a L/C even with 10% margin. I
think that the bank should review the customers' behavior for a period and should
develop a certain policy in this regard.
4. The Trust Bank Limited, Principal branch does not practice revocable L/C.
5. The bank should try to arrange more training programs for their officials. Quality
training will help the officials to enrich them with more recent knowledge of
International Trade Financing.
6. Principal branch does not have adequate number of skilled manpower in foreign
exchange department.
7. With the pressure of the top management the employees are some time bound to do
things, which is beyond the rules and regulations.
8.

In case of month end report, so many register has to be maintained which is time
consuming. Number of register can be lessening with the help of computers.

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