1.

1 Introduction of the study:

No knowledge is fully complete unless it is fully supported by events on ground. Whatever

may be the quality of theoretical knowledge, it is not complete without practical implication
on ground. This realization is more pronounced in the study of Business Administration
where experience on ground plays a dominant role.
Master of Business Administration (MBA) is designed with an excellent combination of
practical and theoretical aspects. After completing the MBA, it is required for every student
to complete the internship or dissertation program with a minimum duration of two months.
As a student of MBA to fulfill the requirement of this Degree, I was assigned to pursue
Internship in MBL, Uttara Branch, and Dhaka. I have tried my best to use this opportunity to
enrich my knowledge on banking system. After observing thoroughly, I have prepared this
report on the basis of my findings and observation relating to the topic.

1.2 Origin of study:

Master of Business Administration (MBA) Program requires a three months attachment with
an organization followed by a study assigned by the supervisor of the university. I was
attached with Uttara branch of MBL as an internee. My supervisor has asked me to make a
study on General Banking Activities of Uttara branch of MBL as part of the fulfillment of
MBA degree.

1.3 Objectives of the study:

The prime objective of the report is to get practical exposure to organizational environment as
well as to understand the system and methodology adopted in conducting day to day banking
by Mercantile Bank Ltd. Besides this report has been composed to obtain the following
objectives:

Determining the drawbacks of the existing Foreign Exchange system.

Evaluation of the present performance of the Bank regarding Foreign exchange.

To search the problems of this Branch of Mercantile Bank Ltd.

Recommending some guidelines to improve the effectiveness and effectiveness of

1
 Foreign Exchange services.

1.4 Scope of the study:

This internship report mainly focus on the activities of Foreign Exchange Department of
Mercantile Bank Ltd In this report, I discussed the things those I have observed at the time of
my internship in that department. I have reviewed the overall Foreign Exchange activities of
Mercantile Bank Ltd and at the end I give a recommendation for Foreign Exchange
Activities of Mercantile Bank Ltd. All of my report focuses all those activities that I had
observed at that time.

1.5 Significance of the study:

The study will have both practical & academic values. It will help to get a clear idea about
the foreign exchange practice of Mercantile Bank Ltd on the other hand, the findings and the
proposed solutions of the report will help management to take appropriate actions & steps for
the betterment of the existing practice which basically help the operational activities of
foreign exchange department and hopefully can strengthen the relationship with the business
environment as well as with the clients.

1.6 Methodology of the study:

To meet the objectives of the study, I realized that a single method would not be effective.
Formal & oral discussion, direct observation, questioning clients & printed papers of the
Bank were found useful. To collect the necessary and meaningful information, the following
methods were applied. Both primary and secondary sources were used here.

1.6.1 Source of information:

I have collected data from the two unique sources; one is primary sources and another is
secondary sources.

1.6.2 Data Collecting method:

This internship report has been prepared on the basis of on the job experience with the
Mercantile Bank Ltd., Uttara Branch. In spite of the scarcity of published data, it has been
tried to make the report informative and handle.

2
1.6.3 Reliability of collecting data:

The data collected are highly reliable in the sense that all data generated in the report are used
exclusively by the Mercantile Bank Ltd. The auditors report on the financial statements and
the correspondence with different desks generate the reliable information to compose the
report successfully.

1.6.4 Model used:

The performance evaluation of the Mercantile Bank Ltd. has been conducted based on the
SWOT Analysis and Ratio Analysis.

1.7 Limitations of the study:

In preparing the Report, I have experienced some acute problems that have, to some extent,
affected the presentation of the report. The acute problems were

Lack of information or data:

Adequate and in-depth well-organized literature was not available because a few researchers
endeavored to work on such project in the past. Though the officials tried to assist, sometimes
their working pressure couldn't give me proper assistance what I needed. There is some
information which needed special permission from top level, is not always achievable.

Comparison status:

I have had no opportunity to compare the Foreign Exchange banking system of the
Mercantile Bank Ltd. with that of other contemporary and common size banks. It was mainly
because of the shortage of time and Internship nature.

In spite of all the drawbacks faced, everything has been managed well at the end. I believe
the report is a quality report on Foreign Exchange Banking of Mercantile Bank Ltd.

3
 2.1 Historical Background of MBL:

At last the pangs of birth are now over and a new commercial bank, Mercantile Bank Limited
is born today the 2nd June, 1999. Numerically it is no doubt just another commercial bank,
one of the many now operating in Bangladesh, but the founders are committed to make it a
little more different and a bit special qualitatively. This bank will have a new vision to fulfill
and a new goal to achieve. It will try to teach new heights for realizing its dream.

Mercantile Bank Limited, a bank for 21st century, is not a mere slogan. The bank has been
manned with talented and brilliant personnel, equipped with most modern technology so as to
make it most efficient to meet the challenges of 21st century.

As regards the second slogan of the bank Efficiency is our strength is not mere
pronouncement but a part of our belief that will inspire and guide us in our long and arduous
journey ahead.

Mercantile Bank Limited has been licensed by the Government of Bangladesh as a scheduled
bank in the private sector in the process of the policy of liberalization of banking and
financial services of Bangladesh. In view of the above, the bank has, within a period of nine
years of its operation, achieved a remarkable success and has always met up capital adequacy
requirement set by Bangladesh Bank. The Authorized Capital of the Bank as of 2014 is Tk.
8,000 million and the Paid-up Capital is Tk. 4,968.10 million.

The Bank provides a broad range of financial services to its customers and corporate clients.
The Board of Directors consists of eminent personalities from the realm of commerce and
industries of the country. The bank has set up a new standard in financing in the industrial
trade and foreign exchange business. Its various deposits and credit products have also
attracted the clients both corporate and individuals who feel comfort in doing business with
the bank.

4
2.2 Vision, Mission, Objectives & Core Values:

Vision statement:

Would make finest corporate citizen.

Mission statement:

Will become most caring, focused for equitable growth based on diversified development of
resources, and nevertheless would remain healthy and gainfully profitable Bank.
Objectives:

Strategic objectives:

to achieve positive Economic Value Added (EVA) each year.

to be market leader in product innovation.

to be one of the top three Financial Institutions in Bangladesh in terms of cost efficiency.

to be one of the top five Financial Institutions in Bangladesh in terms of market share in
all significant market segments they serve.

Financial objectives:

To achieve 20% return on shareholders equity or more, on average.

CORE OBJECTIVES:

For the customers:

Providing with caring services by being innovative in the development of new banking
products and services.

For the shareholders:

Maximizing wealth of the Bank.

For the employees:

5
 Respecting worth and dignity of individual employees devoting their energies for the
progress of the Bank.
2.3 Corporate Information of MBL at a glance:

Corporate Slogan Efficiency is our strength

Date of Incorporation 20th May, 1999
Inauguration of the first branch 2nd June, 1999

Head Office 61, Dilkusha Commercial Area,

Dhaka-1000, Bangladesh
Tel: 880-2-9559333, 01711-535960
Fax: 880-2-9561213
Telex: 642509 MBLID BJ
Telex: 642509 MBLID
Official Logo

Chairman Md.Abdul Jalil,M.P

Managing Director
Number of Branches
Number of Employees
Authorized Capital
Paid up Capital
Services provided
Banking operating system
Technology used
A.K.M. Shahidul Haque
79
7605
TK. 8000 million
TK. 4968.10 million
Deposit Scheme, Credit Facility and
Foreign Exchange Services
Both conventional and Foreign Exchange System
Member of SWIFT, online Banking, UNIX based
computer system.

E-mail Mbl@bol-online.com

Website www.mblbd.com

6
2.4 MBL Timeline:

MBL Timeline
May 20, 1999 Incorporation of the Bank
June 02, 1999 Commencement of Business
October 29, 2000 Opening of 10th Branch
July 03, 2002 Opening of 15th Branch
June 30, 2003 Publication of Prospectus for IPO
October 21-22, 2003 Subscription for Shares
December 24, 2003 Opening of 15th Branch
February 16, 2004 Listed in Dhaka Stock Exchange
February 26, 2004 Listed in Chittagong Stock Exchange
December 29, 2004 Opening of 25th Branch
December 05, 2006 Opening of 30th Branch
December 17, 2007 Opening of 40th Branch
November 24, 2008 Opening of 42nd Branch
June 06, 2009 MBL Brokerage House Operation
October 22, 2009 Opening of 45th Branch
December 30, 2009 Opening of 50th Branch
August 02, 2010 Opening of 55th Branch
December 30, 2010 Opening of 65th Branch
September 14, 2011 Separate Operation of MBSL
December 06, 2011 Mercantile Exchange House (UK) Ltd.
December 29, 2011 Opening of 75th Branch

7
2.5 Organization Structure of MBL:
Mercantile Bank Limited

Board Directors
Chairmans Sect. (Chairman, Vice Chairman, Members) Board Division

Public Relations
MDs Sect. Managing Director

Additional Managing Director

Deputy Managing Director

Executive Committee
M.S.Ahsan,Chairman
Golam Faruk Ahmed, Member
Human Resource Division Training Institute
Bilkis Begum, Member Area Office
A.S.M. Feroz Alam,MIS Member
Marketing & Branch Division
M. Amanullah, Member
Central Accounts DivisionA.K.M. Shaheed Reza, Member
Branches
Shabuddin Alam,Member
Recovery/ Law
ICC (i) Audit (ii) Marketing
(iii) Compliance
Audit Committee
Debt. Collection Unit
Alhaj Akram Hossain (Humayun), Chairman
Estt. Division Transport Pool
Md. Anwarul Haque, Member
Mohd. Intl
Selim,Member
Division Correspondent Banking
Share Dept.
Md. Nasiruddin Choudhury, Member
Operations Mrs. Israt Jahan,Div
Treasury Member
. Dealing Room

Brokerage House Managing Director & CEO Returns/Report

A.K.M. Shahidul Haque
Credit Admin. (RM) Dept. Treasury Admn.

Chief Financial
Credit Div.
Officer Remitt. Dept.
Card Division
Monindra Kumar Nath
IT Division Operations
Company Secretary Gen. Credit & Trade Finance
S.Q.LAN/
Bazlur
WANRashid
etc.

Security
Auditors Small Loan Unit
Ahmed Zaker &Branches
Co. Chartered
Support
Accountants
K.M. Hasan & Co. Chartered Accountants Housing Loan Unit

Tax Advisor
K.M. Hasan & Co. Chartered Accountants

8
 Chairman

Managing Director (MD)

Additional Managing Director (AMD)

Deputy Managing Director (DMD)

Senior Executive Vice President (SEVP)

Executive Vice President (EVP)

Senior Vice President (SVP)

Vice President (VP)

2.6 Management Hierarchy of Vice

First MBL: President (FVP)

Assistant Vice President (AVP)

First Assistant Vice President (FAVP)

Principal Officer ()

Senior Executive Officer (SEO)

Trainee Assistant Officer (TAO)

Assistant Officer (AO)
Officer (O)
Officer (O)
Executive Officer (EO)
Senior Executive Officer (SEO)
Executive (EO)
Assistant Officer (AO)

Trainee Assistant Officer (TAO)

9
2.7 Different Departments:
Mercantile Bank divided its branch into 3 departments. Those are:

General Foreign Exchange Credit

Banking Department

2.7.1 General Banking Section:

General Banking is the starting point of all the banking operations. This department assists in
taking deposits and simultaneously provides some ancillaries services. Every day it receives
deposits from the customers, meets their demand for cash by honoring cheques, opens bank

10
account etc. Under general Banking section in MBL Uttara Branch, there are several
divisions.

Account opening (Current & Savings account) and Lockers services

Cash Department

Remittance Department

Account Opening (FDR & other schemes )

Pay Order

Demand Draft

Telegraph Transfer (TT)

Financial Control & Accounts Department (FCAD)

Telegraph Transfer (TT)

Clearing Section

2.7.2 Foreign Exchange Department:

Foreign Exchange Department deals with import, export, and foreign remittance and post
import financing. This department is playing an important role in enhancing export earnings,
which aids economic growth and, in turn, will be helpful for economic development. On the
other hand, it also helps to meet those goods and services, which are more demandable and
not adequate in our country. In MBL foreign exchange department is doing following
activities on a regular basis:
Export & Import
Foreign currency endorsement
Wage Earner Development Bonds (WEDB)
Foreign Currency Account
Private Foreign Currency Account

11
 Non-residential Foreign Currency Deposit Account
Residential Foreign Currency Deposit Account

2.7.3 Credit Department:

One of the core functions of commercial banks is to create and disburse of loan-able funds for
commercial & industrial activities. Bank distributes its funds among various sectors to derive
sufficient income. The credit department of MBL Uttara Branch provides 3 category loans.
Corporate loan

Retail banking unit

Small Medium Enterprise (SME)

2.8 Performance of MBL:

MBL has a blend of expertise and technological excellence is in place to meet varied needs of
modern customers. The Bank aims at mobilizing untapped money of the country and prudent
deployment for productive activities in the form of lending at a competitive rates/loan
pricing. Towards attainment of its goals and objectives, the Bank pursues diversified credit
policies and strategic planning in credit management.

2.8.1 Treasury Operation & Fund Management:

Treasury operation of MBL is involved in fund management and foreign exchange dealings.
The duty of treasurer also includes maintaining Cash Reserve Requirement (CRR) and
Statutory Liquidity Requirement (SLR) with the Bangladesh Bank. Treasury Division of
MBL actively participates in money market operation and investment activities. Their
Treasury Division reflected healthy performance during the last few years. In 2014, the Bank
generated revenue of BDT 729.12 million from money market operations and BDT 21.98
million from secondary capital market.

2.8.2 Earning Base in Asset:

Earning base in assets of the Bank was 90.57% in 2014 as compared to 90.31% in 2013. The
ratio indicates efficient utilization of resources to earn revenues.

12
Earning Base in Asset
(BDT in million)
Type 2014 2013
Total Assets 1,16,553.01 87,140.11
Earning Assets 1,05,563.50 78,694.47
Non-earning Asset 10,989.51 8,445.64
% of Earning Asset in Toal 90.57% 90.31%
% of Non-earning Asset in Total Asset 9.43% 9.69%

2.8.3 Asset Portfolio:

The Banks total assets outstanding as of December 31, 2014 amounted to BDT 1, 16,533.01
million as compared to BDT 87,140.11million at the end of December 2013. Of the total
assets outstanding in 2014, loans and advances constituted 68.64%, investments 21.15%, cash
5.96%, balances with other banks 0.55%, and other assets 3.70%.

Asset Portfolio
(BDT in million)
Particulars Amount % of Total
Loans & Advances 77,999.80 68.64%
Investments 24,645.38 21.15%
Cash 6,946.10 5.96%
Balance with other banks .55%
643.86
Others Assets 4,317.88 3.70%
Total 1,16,533.01 100.00%

13
 Asset Portfolio

Loans & Advances Investments

Cash Balance with other
banks
Others Assets

2.8.4 Information Technology:

Banking operations of the branches have been computerized to minimize costs and risks and
to optimize benefits and overall efficiency for improved services. The Bank generates the
relevant Financial Statements at the end of the day. The Bank has installed Reuters Screen for
smooth operation of foreign currency dealings. The Bank has also hosted a web page of its
own. On-line Banking has been introduced by the Bank to provide better services to the
customer. The Bank has introduced ATM Q-cash. The Bank has installed SWIFT to
facilitate quick international trade and payments arrangements. The Bank has already
introduced VISA Debit and Credit Cards.

2.9 Resources & Facilities of MBL:

Deposit Schemes:

1. Monthly Savings Scheme:

The prime objective of this scheme is to encourage people to develop their habit of
saving. Under this scheme, one can save a fixed amount of return every month and get a
lucrative amount of return after five, eight or ten years.

2. Family Maintenance Deposit Scheme:

Under this scheme, one can deposit certain amount of money for five years and in return
he/she will receive benefits on monthly basis. Benefit start right from the first month of
opening an account under the scheme and continue up to five years. On maturity the principal
amount will be paid back.

14
3. Double Benefit Deposit Scheme:

Under this scheme, one can deposit a certain amount of money for a six year period. After six
years, the deposit amount will be doubled.

4. Quarterly Benefit Deposit Scheme:

Under the Quarterly Benefit Deposit Scheme, one can deposit for a period of three years and
in return depositor will receive benefits on quarterly basis. Benefits starts right from the first
quarter of opening an account under the scheme and continues up to three years. On maturity
the principal amount will be paid back.

5. Times Benefit Deposit Scheme:

Under the 1.5 Times Benefit Deposit Scheme, one can deposit a certain amount of money for
42 months or three and half years. On maturity, the depositor will receive 1.5 times of the
deposited amount.

6. Advance Benefit Deposit Scheme:

Under this Scheme, one can deposit a certain amount of money for two years. The depositor
will receive the benefit on yearly basis. The benefit amount of first year will be received in
advance at the time of deposit. On maturity, the depositor will get back the principal amount
with the benefit amount of second year.

Loan Products:

1. Consumer Credit Scheme:

Consumers Credit Scheme is one of the popular areas of collateral-free finance of the Bank.
People with limited income can avail of credit facility to buy household goods including
computer and other consumer durables.

2. Small Loan Scheme:

This scheme has been designed especially for the businessman who need credit facility for
their business and cant provide tangible securities.

3. Lease Finance:

15
This scheme has been designed to assist and encourage the genuine and capable
entrepreneurs and professionals for acquiring capital machineries, medical equipments,
computers, vehicle and other items. Flexibility and easier terms and conditions of this scheme
have attracted the potential entrepreneurs to acquire equipments of production and services
and repay gradually from earnings on the basis of Pay as you earn.

4. Doctors Credit Scheme:

Doctors Credit Scheme is designed to facilitate financing to fresh medical graduates and
established physicians to acquire medical equipments and set up clinics and hospitals.

5. Rural Development Scheme:

Rural Development Scheme targeted for the rural people of the country to make them self-
employed through financing various income-generating projects. This scheme is operated on
group basis.

6. Women Entrepreneurs Development Scheme:

Women Entrepreneurs Development Scheme has been introduced to encourage women in

doing business. Under this scheme, the bank finances the small and cottage industry projects
sponsored by women.

7. SME Loan Scheme:

Small and Medium Enterprise (SME) Loan Scheme has been introduced to provide financial
assistance to new or experienced entrepreneurs to invest in small and medium scale industries
with a comparatively low rate of interest as the same is assisted by the Bangladesh Bank with
refinancing facilities.

8. Personal Loan Scheme:

Personal Loan Scheme has been introduced to extend credit facilities to cater the needs of
low and middle income group for any purpose. Government and semi-government officials,
employees of autonomous bodies, banks and other financial organizations, multinational

16
companies, reputed private organizations and teachers of recognized public and private
schools, colleges and universities are eligible for this loan.

9. Car Loan Scheme:

Car Loan Scheme has been introduced to enable middle-income people to purchase
Cars/SUVs/Jeeps. Government and semi-government officials, employees of autonomous
bodies, banks and other financial organizations, multinational companies, reputed private
organizations, teachers of recognized public and private universities and businessmen are
eligible for this loan.

10. Home Loan Scheme:

To meet the growing need of housing for middle and lower-middle income people, MBL has
introduced Home Loan Scheme. They also support the Bangladesh Banks Home Loan
Refinance Scheme. The Scheme boosts up the growth housing sector. Such loan shall be
available for purchase or construction of new apartments for self-residing purpose.

11. Overseas Employment Loan Scheme:

Overseas Employment Loan Scheme is designed to facilitate the Bangladeshi youths seeking
employment abroad but who are unable to meet the expenses to reach the workplace from
their own sources. The ultimate objective of the scheme is to promote skilled/semi-skilled
manpower to different countries across the world as well as to provide support to
Government Policy considering priority of this sector. By availing loan under this scheme,
the active youths of middle and lower-middle class can get overseas employment by avoiding
borrowing from the illustrious class or village mohajon at a very high cost or selling their
paternal properties. The scheme helps fetching foreign currency for the country as well as
fulfills the Banks commitment to encourage micro-lending for poverty alleviation, improve
the quality of life and thereby contribute to socio-economic development of the country.

2.10 Financial Highlights of MBL:

Highlights on the overall financial activities
for the year 2014 and 2013

17
Particulars 31.12.2014 31.12.2013
Paid-up Capital 4,968.09 4,072.21
Total Capital Fund 10,700.93 8,684.32
Capital Surplus/deficit 605.66 120.06
Total Assets 116,655.28 87,140.11
Total Deposits 94,054.16 75,629.14
Total Loans and Advance 79,728.02 66,377.70
Total Contingent Liabilities and Commitments 41,948.37 37,989.54
Credit Deposit Ratio (in %) 81.68 87.77
Percentage of Classified Loans against Total Loans and
2.61 1.78
Advances (in %)
Profit after Tax and Provision 1,755.73 1,425.34
Amount of Classified Loans during the year 896.81 (72.50)
Provision kept against classified Loans 718.16 617.53
Provision Surplus 7.52 8.30
Cost of Fund (in %) 9.63 7.94
Interest Earning Assets 103,076.87 78,694.47
Non-interest Earning Assets 13,578.41 9,252.96
Return on Investment (ROI) (in %) 9.33 8.41
Return on Assets (ROA) (in %) 1.72 1.64
Income from Investment 1,671.29 919.45
Earning Per Share (Tk.) 3.53 2.87(Restated)
Net Income Per Share (Tk.) 3.53 2.87(Restated)
Price Earning Ratio (approximate) 9.97 Times 14 Times

2.11 Head Office, Branch Network & SME Centers of MBL:

Head Office

61, Dilkusha Commercial Area

18
 Dhaka-1000, Bangladesh
PABX : 9559333, 9553892, 9561140
Fax : 88-02-9561213
Swift : MBLBBDDH
E-mail : it@mblbd.com
Website: www.mblbd.com
Zonal office Training Institute

Hotel Hawai Building MBL Training Institute39,

Agrabad C/A, Chittagong Swadesh Tower, Level-6
Phn: +88-031-716421, 723181 41/6,Purana Paltan
Lane721772, 01711-722925 Motijheel,Dhaka-1000
Fax: +88-031-716421 Phn:044-7635-1111

Branch Network :

Area wise branches

Division area Number of branches

Dhaka Division 29

Chittagong Division 26

Rajshahi Division 02

Khulna Division 01

Sylhet Division 02

Barisal Division 15

SME Service Centers:

Nabigonj SME Service Amishapara SME Service Patia SME Service

Center Center Center
Sky Light Tower, 476 Ajij Supar Market, Rahman Menson,
Sherpur Road Amishapara Bazar, 1284/1 Club Road

19
Shibpasha, Nobigonj, Amishapara, Shonaimuri, Gobindokhal, Patia,
Hobigonj. Noakhali. Chittagong.

2.12 MBL Uttara Branch, Dhaka (At a Glance):

As a branch of Mercantile Bank Limited, Uttara Branch started its function in 2008 as an
investment company. From that time, this branch of MBL carries out their banking activities.

YEAR
SECTORS
2014 2015
Deposit 4,852.27 5,686.85
Advance 2,359.82 3,205.24
Import 5,719.66 7,578.79
Export 370.24 367.05
Profit/Loss 80.85 101.10
No. of Depositor A/C 6,173 6,603
No. of Borrower A/C 390 489
Average daily voucher 717 858
Manpower 19 20

From the above table, we can see that there is increase from year to year, but the rate of
change is not same in every year. So, to have a clear idea, a graph is presented.

2.13 SWOT Analysis of MBL:

Both manufacturing and service oriented business organizations start to possess some
weakness as time elapse. The weaknesses of an organization can be turned into opportunities
if recognized on time. Moreover, overlooking any threat may result in loosing valuable
business opportunities. For this reason, an assessment of every business organization is
required to judge the performance from the aspects of its Strength, Weaknesses,
Opportunities and Threat (SWOT).

20
SWOT Analysis of Mercantile Bank Ltd. is stated below:
2.13.1 Strength:

1. Superior Service Quality:

MBL provides excellent and consistent quality service in each and every sector of its
operations to the customers. It makes the customers satisfied.

2. Top Management:

The top management of MBL is very experienced and well-known in the Banking sector of
Bangladesh. They are contributing heavily towards the growth and development of the Bank.
Experienced bankers and corporate personnel have formed the management.

3. Company Reputation:

MBL has already created a good reputation in the Banking Industry of Bangladesh. Credit
Rating and Information Services Limited (CRISL) rated MBL as A in the long term and
ST-2 rating in the short term.

4. Modern Facilities and Computer:

From the very beginning, MBL tries to furnish its work surrounding with modern equipment
and furnitures. For speedy service to the customer, MBL already installed money-counting
machine in the teller counter. The bank has computerized banking operation under software
called PC Bank. Moreover, computer printed statements are available to internal use and
occasionally for the customers.
5. Interactive Corporate Culture:

The Corporate Culture of MBL is much more interactive compare to other local
organizations. This interactive environment encourages the employee to work attentively.

6. Customer Satisfaction:

Customer Satisfaction level of MBL is quite good. Informal conversation with customers
about the service quality helps the management to provide services according to their choice
which makes customers satisfied.

21
7. Good Number of Branches:

MBL already has 42 branches all over Bangladesh to provide quality service to every level of
customer.

8. ATM Service:

Some services of the bank are automated which attract large number of clients. For instance,
the bank provides Automated Teller Machine (ATM) services in several locations.

9. Online Banking:

The bank recently introduced online banking which enabled it to automate all of its
operations. At present, several banking functions are performed by computers. The bank is
also a member of SWIFT (Society for Worldwide Interbank Financial Telecommunication)
alliance access which enables the bank to exchange critical financial messages swiftly and
cost effectively.

2.13.2 Weaknesses:

1. Limited Workforce:

MBL, Uttara Branch has limited workforce. There is shortage of people. As a result, many of
the employees are burdened with extra workloads and work late hours without any overtime
facilities. This might cause high employee turnover which is not good for the organization.

2. Lengthy Loan Granting Process:

The credit sanction and disbursement procedure is quite lengthy, because the loan granting
process of the Uttara Branch of MBL is very strict that sometimes effects negatively on
customers mind.

3. Centralized Authority:

Delegation of authority is centralized which makes the employee to realize less responsibility.
Thus, the employee morale is deteriorated.

22
4. Lengthy Evaluation Process:

The credit proposal evaluation process is lengthy. Therefore, sometimes valuable clients are
lost and the bank becomes unable to meet targets.

5. Less Use of Annual Confidential Report:

No substantive use of Annual Confidential Report (performance evaluation form of the

employee) to reward or to punish the employee. Hence the employee becomes ineffective.

6. Less Promotional Initiative:

The bank lacks aggressive advertising and promotional activities to get a broad geographical
coverage.

7. Few ATM Booths:

The bank has only a few ATM booths and not in proper places. So, the scope of using ATM
card is limited.

8. Few Computer Facilities:

Computer facility for all the officers is not available.

9. No R&D:

The bank hasnt any research and development division

2.13.3 Opportunities:

1. Support from Bangladesh Bank:

Bangladesh Bank has rendered its full support to the Banking sector for a sound financial
status of the country as a representative of Government, as it has become one of the vital
sources of employment in the country now. Such government concern will facilitate and
support the long-term vision of MBL.

2. Diversified Investment Opportunity:

23
There is a great opportunity to take new dimension of Banking such as Specialized Banking
and also there are many sectors where MBL can give special privileges.

3. Evolution of E-Banking:

Emergence of E-Banking will open more scope for MBL to reach the clients not only in
Bangladesh but also in the Global Banking Arena. Although the Bank has already entered the
world of E-Banking but yet to provide full electronic Banking facilities to its customer.

4. Innovative Products:

The bank can introduce more innovative and modern products and services for their
customers.

5. Micro Credit:

The bank can offer micro credit business for individuals and small businesses.

6. Diversified Portfolio:

It can diversity its portfolio by taking new sector.

7. New Branches in Remote Areas:

Many branches can be opened to reach the banks services to the remote areas.

8. Efficient Recruitment:

It can recruit more efficient and experienced persons to give fast and efficient service to the
customers.

2.13.4 Threats:

1. Contemporary Banks:

The Contemporary Banks like, Dhaka Bank, Dutch Bangla Bank, Mutual Trust Bank are its
major rivals. They are carrying out aggressive campaign to attract lucrative clients as well as

24
big time depositors. The MBL should remain vigilant about the steps taken by these Banks, as
these will in turn affect the Bank strategies.

2. Multinational Banks:

Due to the booming energy sector, more foreign Banks are expected to operate in
Bangladesh. Multinational as well as the fast growing local banks with modern products and
services are capturing huge market within short period a resulting to switch over the existing
customers of the bank.

3. Restriction from Bangladesh Bank:

Bangladesh Bank exercises strict control over all Banking activities. Sometimes the
restrictions imposed by Bangladesh Bank, can create barrier in the normal operations and
policies of the Bank.

3.1 Foreign Exchange Department:

Foreign Exchange refers to the process or mechanism by which the currency of one country
is converted into the currency of another country. Foreign exchange is the means and
methods by which rights to wealth in a countrys currency are converted into rights to wealth
in another countrys currency. Foreign trade financing is an integral part of banking business.
MBL offers two types of credit facilities to its customers. Such as-

a) Funded credit:

25
The credit facility in which the fund of the bank is directly invested is known as funded
credit. Such as, Cash Credit, Secured Overdraft etc.

b) Non Funded credit:

The credit facilities in which banks funds are not directly invested are known as non-funded
credit. Such as, Letter of Credit (L/C), Guarantee etc.

Letter of Credit / Documentary Credit (L/C) is the key player in the foreign exchange
business. With the globalization of economy, International trade has become quite
competitive. Timely payment for exporters and quicker delivery of goods is, therefore, a pre-
requisite for successful international trade operation. Growing complexity of international
trade, separation of commercial parties across the globe underlined the need for evolving a
system that balances between the expectations of the seller and the buyer. Documentary
Credit has emerged as a vital system of trade payment, and fulfilled the requisite commercial
need. This system substantially reduces payment-related risks for both exporter and importer.
Thus the letter of credit is the classical form of international export payment, especially in
trade between distant partners. Payment, acceptance or negotiation of the credit is made by
the bank upon presentation by the seller of stipulated documents (e.g., bill of lading, invoice,
inspection certificate).

3.2 Documentary Credit / Letter of Credit (L/CS):

Documentary Credit or Letter of Credit is nothing but a letter of assurance of payment. This
assurance of payment is made by the bank. It is an arrangement under which the bank the
request of the buyer undertakes to make payment to the seller provided specified documents
are submitted.

Documentary Credit is an arrangement whereby a bank (issuing bank) acting at the request
and on the instruction of a customer (the applicant) or on its own behalf undertakes to make
payment to or to the order of a third party (the beneficiary) or to accept and pay bills of

26
exchange (draft) drawn by the beneficiary, or authorize another bank to negotiate against
stipulated documents provided the terms and conditions to the credit are compiled. Thus,
Documentary Credits are similar to bank guarantees. In popular language, they are known as
Letters of credit (L/Cs). Bank guarantees are however, issued to cover situation of non-
performance whereas documentary credits are issued on behalf of the buyer to cover situation
of performance, i.e., the issuing bank agrees to make payment to the beneficiary once he
surrenders the requisite complying documents. Thus, Documentary Credit offers a unique and
universally used method of achieving a commercially acceptable arrangement by providing
for payment to be made against complying documents that represent the goods and making
possible the transfer of those goods. The Uniform Customs and Practices for Documentary
Credit (UCPDC) published by International Chamber of Commerce (1993) revision,
publication no. 500 define Documentary Credit.

The Buyer Sales Contract The Seller

The Buyer The Issuing Bank

Reimbursing Agreement
The Issuing Bank The Beneficiary

Fig: Documentary Credit Agreement

3.3 Legal Framework:

Foreign Exchange Business is a crucial and complex business all over the world. Fraud and
forgery may arise in every sphere of this business. To overcome those problems and to settle
international disputes, a legal framework is a must. An apex body is doing these functions
named International Chambers of Commerce (ICC). The publication made by the ICC is
treated as compulsory law for each and every country. Among many publications,
publications no. 500 is related to L/C opening and such other purposes.

27
3.4 Forms of Documentary Credit:

1) Revocable credit:

A revocable credit is one where the issuing bank at liberty to revokes i.e. cancels the credit at
any time. According to UCPDC, a revocable credit may amend or cancelled by the issuing
bank at any moment and without prior notice to the beneficiary before shipment of
consignment against the L/C.

2) Irrevocable credit:

An irrevocable credit is one, which cannot be revoked, amended or modified by the bank
with the concurrence of the interested parties.

3.5 Documents Used in L/C Operation:

The most commonly used documents in foreign exchange are

1. Bill of Exchange

2. Bill of Lading

3. Commercial invoice

4. Certificate of origin

5. Inspection certificate

6. Packing list

7. Insurance document

8. Pro Forma Invoice (PI)/Indent

1. Bill of exchange:

28
Bill of exchange is one of the important negotiable instruments in the mercantile world and
used as a vital document facilitating settlement of payments between buyer/importer and
seller/exporter at home and abroad.

A bill when accepted by the drawee, gives evidence of the claim as made by the drawer as
well as testimony to the acceptance of the debt by the drawee. The payment is done either in
accordance with the terms of sale contract or under a L/C opened by the buyer/importer in
favor of the seller/exporter.

2. Bill of lading:

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

The details on the bill of lading should include

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

Identifying marks and numbers.

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 name and address of 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.

29
3. Commercial 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:

Date

Name and address of buyer and seller

Order or contract number, quantity and description of the goods, unit price and the total
price

Weight of the goods, number of packages, and shipping marks and numbers

Terms of delivery and payment

Shipment details

Certificate of origin:

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

4. Inspection certificate:

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

SGS (Societe Generale de Surveillance S.A.)

Bureau Veritas (BIVAC) International S.A.

OMIC overseas Merchandise Inspection Co. Ltd.

30
 Intertek International Ltd.

5. Packing list:

This is a unique document and not combined with other document. This is a listing of the
contents of each package, cartoon etc. and other relevant information.

6. Insurance document:

Insurance is a contract whereby the insurer is undertaking to indemnify the assured to the
agreed manner and extent against fortuitous losses. Insurance document generally contains
the following information:

The name of the insurer or his agent

The name of the ship/carrier

The name of assured

The subject matter of insurance

The time and/or voyage insured

The peril(s) insured against

The date and subscription

The valuation

The stamp etc.

7. Pro Forma Invoice (PI)/Indent:

Pro-forma Invoice/indent is the sale contract between seller and buyer in import- export
business. There is slight difference between Indent and Pro-forma invoice. The sales contract,

31
which is direct correspondence between importer and exporter, is called Pro-forma invoice.
There is no intermediary between them. On the other hand, there may be an agent of exporter
in importers country. In this regard, if the sale contract is occurred between the agent of
exporter and importer then it is called Indent.

Pro-forma Invoice is a form of quotation to a potential buyer, inviting him to buy the goods
on stated terms. It should be clearly stated that it is pro forma and if it is accepted the details
are normally transferred to a commercial invoice.

3.6 Different Accounts Related to Foreign Exchange Transaction:

In L/C operation different accounts are maintained which are needed for foreign exchange
transaction. These are:

a) Nostro account:

Nostro account means our account with you. A Nostro account is a foreign currency
account of a bank maintained its foreign correspondents abroad. For example, US Dollar
Account of MBL maintained with Citibank, N.A, New York, USA is a Nostro account of
MBL.

b) Vostro account:

Vostro account means your account with us. The account maintained with foreign
correspondent in a bank of a particular country is known as Vostro account.

What is the nostro account for a bank in a particular country is a vostro account for the bank
abroad maintaining the account thus the account of MBL with Citi Bank N.A, New York is
regarded as its nostro account held with Citi Bank, while Citi Bank N.A, New York regards it
as a its vostro account held for MBL.

c) Loro account:

32
Loro account means their account with you. Account maintained by third party is known as
loro account; suppose MBL is maintaining an account with Citi Bank N.A, New York and at
the same time Janata Bank is also maintaining a nostro account with Citi Bank N.A, New
York. From the point of view of MBL Janata Banks account maintained with Citi Bank N.A
New York is the loro account.

3.7 Parties Involved in the process of Letter of Credit:

Importer (Buyer)/Applicant

The Issuing Bank (Opening Bank)

The Advising Bank/Notifying Bank

Exporter/Seller (Beneficiary)

Confirming Bank

Negotiating Bank

The Paying/Reimbursing/Accepting/Remitting Bank.

a) Applicant/buyer:

The person/body (customer of the bank) who requests the bank (opening bank) to issue letter
of credit. As per instruction and on behalf of the applicant, bank opens L/C in line with the
terms and conditions of the sales contract between the buyer and seller.

b) Beneficiary:

Beneficiary of the L/C is the party in whose favor the letter of credit is issued. Usually they
are the seller or exporter.

33
 3.8 Bank as a Party of Documentary Credit:

Parties to the documentary credit are an issuing bank, an advising bank, a confirming bank, a

Reimbursing Bank

Issuing Bank (Bangladesh)

Negotiating Bank
Advising Bank (Singapore)

Confirming Bank

reimbursing bank or a negotiating bank.

Opening bank/issuing bank:

The Issuing Bank or the Opening Bank is one which opens/issues the credit, i.e., undertakes,
independent of the undertaking of the applicant, to make payment provided the terms and
conditions of the credit have been complied with. The payment may be at sight if the credit
provides for sight 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.

34
The credit application must be in accordance with the Uniform Customs and Practices for
Documentary Credit (UCPDC)- ICC publication no. 500 edition of 1993.

a) Advising/notifying bank:

The bank through which the L/C is advised/forwarded to the beneficiary (exporter). The
responsibility of advising bank is to communicate the L/C to the beneficiary after checking
the authenticity of the credit. The advising bank acts only as agent of the issuing bank without
having any engagement on their part.

b) Confirming bank:

A Confirming Bank is one which adds its guarantee to the credit opened by another bank,
thereby undertaking the responsibility of payment / negotiation / acceptance under the credit
in addition to that of the issuing bank. A confirming bank normally does so if requested by
the issuing bank. When the creditworthiness of the issuing bank is in doubt, beneficiarys
bank may request the issuing bank to give additional confirmation by another bank. It is said,
Add Confirmation in practice.

c) Negotiating bank:

The Bank, which negotiate documents and pays the amount to the beneficiary when presented
complying credit terms. If the negotiation of documents is not restricted to a particular bank
in the L/C, normally negotiating bank is the banker of the beneficiary.

d) Reimbursing/paying bank:

A Reimbursing Bank is the bank authorized to honor the reimbursement claims in settlement
of negotiation / acceptance / payment lodged with it by the negotiating bank or accepting
bank. It is normally the bank with which the issuing bank has account from which payment is
to be made. Reimbursement claims in foreign exchange business is settled by the Uniform
Rules for Reimbursement (URR) - ICC publication no. 525.

3.9 Authorized dealer:

35
In administering exchange control and foreign trade, Central Bank of the country
(Bangladesh Bank) authorizes few branches of commercial banks to deal in foreign
exchange. These branches are known as Authorized Dealers. They act as an agent of the
Central Bank and work under the Foreign Exchange Regulations Act-1947 and Guidelines
for Foreign Exchange Transactions-Volume 1 & 2 prescribed by Bangladesh Bank.

3.10 MBL Uttara Branch as an Authorized Dealer:

Mercantile Bank Limited, Uttara Branch is permitted to work as an Authorized Dealer

(AD) for the financing of foreign trade and dealing with foreign currency. This branch
directly involves with L/C opening and in some cases, they need to take permission from the
Head Office. Per day this branch opens at least three or four L/C for its customer and the
amount not less than USD-80,000 100,000 per day.

The Foreign Exchange Department is mainly divided into three sections. Such as-

1. Import Section

2. Export Section

3. Remittance Section

The Import Section deals with L/C in the perspective of the importers and the Export Section
deals with L/C in the perspective of the exporters.

Foreign Exchange Department

Foreign Remittance
L/C
Operation

Import Operation Foreign Currency A/C Inward Remittance

36
 Fig : Foreign Exchange Department of Mercantile Bank Limited

Foreign exchange department of MBL, Uttara branch, Dhaka:

MBL

Foreign Exchange Department

Import Section Export Section Remittance Section

Foreign Exchange Department of MBL, Uttara Branch, Dhaka has been divided into two
sections:

1. L/C Operation

2. Foreign Remittance

3.11 Import Section:

Import is the flow of goods and services purchased

Import from one country to another. Here, import

of merchandise essentially involves two things: bringing of goods physically into the country
and remittance of foreign exchange towards the cost of the merchandise and services
connected with this to the importer.
Public Sector (Govt. Organs. & Corporations) Private Sector

Commercial (finished Industrial

products) (raw materials, machinery)
Actual Users

37
Import Mechanism:

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

Export (Control) Act, 1950, the officer of Chief Controller of Import and Export provides the
registration (IRC) to the importer. After obtaining this, the person has to secure a letter of
credit authorization (LCA) from Bangladesh Bank. And then a person becomes a qualified
importer. He requests or instructs the opening bank to open an L/C.

Source of Finance:

Import may be allowed under the following sources of finance:

Cash foreign exchange (balance of the foreign exchange reserve of Bangladesh

Bank);

Foreign currency accounts maintained by Bangladeshi Nationals working/living

abroad.

External economic aid.

Commodity exchange.

3.11.1 Top 10 L/C Opener:

From the very beginning, MBL, Uttara Branch has embarked on extensive Foreign Exchange
business with a view to facilitate international trade of the country. The following table shows
the Top 10 L/C opener in MBLs Uttara Branch upto 30th June, 2015.

38
 NAME OF THE PARTY
TRZ Garments Ind. Ltd.

Hotapara Garments Ltd.

HN Garments Ltd.

Nowsin Garments Ltd.

Target Fine Knit Ind. Ltd.

Table : Top 10 Importer in

Divine Fashion (Pvt.) Ltd.
MBL,Uttara Branch

Unitex Knitwear Ltd.

3.11.2 List Target Fine Wear Ind. Ltd. of the Major

Countries of Foreign
S.B. Knitting Ltd
exchange Business of
MBL: J.S. Knitting & Garments Ltd.

From this chart, we can get the name of countries where most of the foreign exchange
business of MBL, Uttara branch happened in the last two years:

RANK IMPORT
1 China
2 India
3 Taiwan
4 Hong Kong
5 South Korea
6 Singapore
7 Japan

Table : Top Importing countries of MBL, Uttara Branch

39
3.11.3 L/c Position of MBL Uttara Branch at a Glance:

Yearly L/C position:

YEAR NUMBER OF L/C L/C AMOUNT (TK.) INCOME (TK.)

2013 887 137,13,18,588.32 65,92,877.82
2014 1047 288,16,54,861.34 1,38,54,109.91

2015 (June) 1102 80,86,51,499.83 38,87,747.60

Table : L/C position from 2013 to 2015(June)

Number of L/C

1200

1000

800 Number of L/C

600

400

200

0
2013 2014 2015 (June)

Graph: L/C position from 2013 to 2015 (June)

40
Monthly L/C position of 2015(June):

MONTH NUMBER OF L/C AMOUNT (TK.) INCOME (TK.)

January 60 8,98,70,828.33 455,483.31

February 72 14,78,44,443.52 706,577.77
March 69 12,17,90,226.54 597,560.91
April 114 18,71,58,221.65 899,799.14
May 83 13,88,31,548.21 667,459.36
June 84 12,31,56,231.58 592,097.28

Table : L/C position from 01.01.2015 to 30.06.2015

Number of L/C
120
100
80 Number of L/C
60
40
20
0
JanuaryFebruary March April May June

Graph : L/C position of 2015

41
 200000000
150000000
100000000
50000000 Amount (Tk.)
0

Registration with
Graph : L/C Amount (Tk.) from 2013 to 2015(June)
Purchase Contract
3.11.4 Import Procedure in Flow Chart:
Registratio

Opening/Issuance of Letter of Credit (L/C) by th

Dispatch/Transmit the L/C to the Benefi

Receipt of Imp

Scrutiny of Import Do

Are the Documents Di

No

Lodgment of Import
Dr. PAD (Payment a
Cr. H.O. A/C Reimbu

Ask the Opener to Take Delivery of Imp

Retire the Bill by Creation of Forced LIM with H.O. Approval Dr. S/D. A/C Margin on L/C,
HaveDr.they
Forced LIM, Cr
responded

Have they approached for Post Im

If you agree Recover Further Margin from the opener & retire the Documents by Creation of LIM., Dr. Opening A/C, Dr. LIM, Dr. Sund

Retire the Import Bill

Dr. Opener A/C Dr. S/D A/
Cr. PAD - Deliver the Doc
42 Opener for Release o
the
3.11.4.1 Import registration:

At first, the importer must obtain Import Registration Certificate (IRC) from the Chief
Controller of Imports & Exports (CCI&E) submitting the following papers:

Up to date Trade License.

Nationality and Asset Certificate.

Tax Identification Number (TIN).

VAT registration number

In case of company, Memorandum & Articles of Association and Certificate of

Incorporation.

Bank Solvency Certificate etc.

3.11.4.2 Desire to Import:

Then the importer has to contract with the seller outside the country to obtain the Pro-forma
Invoice. Usually an indentor, local agent of the seller or foreign agent of the buyer makes this
communication. Other sources are:

Trade Fair

Chamber of Commerce & Industry

Foreign Missions in Bangladesh

43
 Journals etc.

3.11.4.3 Purchase Contract:

When the importer accepts the Pro-forma Invoice, he makes a purchase contract with the
exporter detailing the terms and conditions of the import.

3.11.4.4 Settlement of the means of payment:

After making the purchase contract, importer settles the means of payment with the seller.
And importer differs with different means of payment. The possible means are Cash in
Advance, Open Account, Collection Method and Documentary Letter of Credit. In most cases
documentary letters of credit in our country makes payment.

3.11.4.5 Proposal of Opening L/C:

In case of an L/C of a small amount only the prescribed application form, i.e., the LCA Form
is enough to open an L/C. But when the L/C amount is reasonably high or where the party
intends to avail a credit facility, then the importer needs to submit an application to the
Foreign Exchange Department for getting a limit of the L/C amount.

The Salient Features of the application are

Full particulars of the bank account

Nature of business

Required amount of limit

44
 Payment terms and conditions

Goods to be imported

Offered security

Repayment schedule

3.11.4.6 Application for L/C Limit:

Before opening L/C, importer applies for L/C limit. To have an import L/C limit, an importer
submits an application to the Department of MBL furnishing the following information

Full particulars of Bank account maintained with MBL

Nature of business

Required amount of limit

Payment terms and conditions

Goods to be imported

A credit officer scrutinizes this application and accordingly prepares a proposal Credit Line
Proposal (CLP) and forwards it to the Head Office Credit Committee (HOCC). The
Committee, if satisfied, sanctions the limit and returns back to the branch. Thus the importer
is entitled for the limit.

3.11.4.7 Application for Opening L/C:

At first, an Importer will request Banker to open L/C along with the following
documents:

An application.

A CD account with the branch.

45
 Import Registration Certificate (IRC).

Taxpayers Identification Number (TIN).

Indent or Pro-forma Invoice.

Insurance Cover Note with money receipt.

Membership certificate from a recognized Chamber of Commerce & Industry or Town

Association or registered Trade Association.

VAT Registration Certificate (for Commercial Importers).

In case of Public Sector, attested photocopy of allocation letter issued by the allocation
authority. Administrative Ministry or Division specifying the source, amount, purpose,
validity and other terms and conditions against the imports.

If Bank management is satisfied then the authority may permit to open the letter of credit.
When the importer is opening L/C, then some procedures are also maintained. For this
reason, bank provides forms. These forms are discussed below.

3.11.4.7.1 L/C Application form:

L/C Application form is a sort of an agreement between customer and bank on the basis of
which letter of credit is opened. MBL, Uttara Branch provides a printed from for opening of
L/C to the importer. A special adhesive stamp of value 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.
Here, I noticed they give normally 20% to 30% margin.

Usually the Importer Gives the Following Information

Full name and address of the importer or opener

Full name and address of the beneficiary or exporter

Draft amount

46
 Availability of the credit by sight payment/acceptance/negotiation/deferred payment

Time bar within which the documents should be presented

Sales type (CIF/FOB/CRF)

Brief specification of commodities, price, quantity, indent number etc.

HS Code No.

Port of shipment, destination and via

Country of origin

Bangladesh Bank registration no.

Import License/LCAF no.

IRC no.

Account no.

Documents no.

Insurance Cover Note/Policy no., date, amount

Name and address of Insurance Company

Whether the partial shipment is allowed or not

Last date of shipment

Last date of negotiation

Other terms and condition (if any)

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

Whether it will be SWIFT or Mail.

47
The L/C application must be completed/filled in properly and signed by the authorized person
of the importer before it is submitted to the issuing bank.

3.11.4.7.2 The Letter of Credit Authorization Form (LCAF):

The Letter of Credit Authorization Form (LCAF) is the form prescribed for the authorization
of opening letter of credit/payment against importer and used in lieu of import license. The
authorized dealers are empowered to issue LCA Forms to the importers as per basis of
licensing of the import Policy Order in force to allow import into Bangladesh. If foreign
exchange is intended to be bought from the Bangladesh Bank against an LCAF, it has to be
registered with Bangladesh Banks Registration Unit located in the concerned area office of
CCI&E. The LCA Forms available with authorized dealers are issued in set of five (05)
copies each. First copy (Original) is For Exchange Control Purposes, which is used for
opening L/C and effecting remittance. Second copy (Duplicate) is For Customs Purposes,
which is used for clearance of imported goods from custom authority. Third copy (Triplicate)
is For Statistical Purposes. Fourth copy (Quadruplicate) is For CCI&Es Purposes. Fifth copy
(Quintuplicate) is For The Registration Unit of Bangladesh Bank.

The L/C Authorization form (LCAF) contains the following details

Name and address of the importer or opener.

IRC no. and Year of Renewal.

Amount of L/C applied for (both in figure and in word).

Description of item(s) to be imported.

Import Trade Certificate (ITC) Number / Harmonized System of Code (HS Code) Number.

3.11.4.7.3 The Import Permits (IMP) Form:

The IMP Form contains the followings

Name and address of the Authorized Dealer.

Amount of remittance to be permitted (i.e., L/C amount).

48
 LCA Form number, date, value in Tk.

Description of goods, quantity.

Invoice value in foreign currency (i.e., L/C amount).

Country of origin.

Port of shipment.

Name of steamer/airline (i.e., by road/by ship/by air etc.)

Port of importation.

Indentors name and address.

Indentors registration number with CCI&E and Bangladesh Bank.

Full name and address of the applicant.

3.11.4.8 Preparation of L/C by Banker:

Banks officer prepares L/C when above-mentioned forms are to be submitted by customer or
importer. Before preparing L/C, MBL officer scrutinizes the application giving emphasis to
the following points-

1. L/C application is stamped (as per Govt. Stamp Rule) as it is a guarantee of payment;

2. All information mentioned in different columns have been furnished;

3. The items to be imported are eligible according to import entitlement;

4. If L/C is opened against indent, Bangladesh Banks permission, valid registration,

authority to issue indent by are to be checked;

5. The terms and conditions stipulated in the L/C application are consistent with the
Bangladesh Bank Foreign Exchange Guidelines, UCPDC 500 and Exchange Control &
Import Trade Regulation etc;

49
6. The amount and description of merchandise are relevant to LCAF and Pro-forma
Invoice/Indent/Purchase Order;

7. Survey Report or Certificate in case of old machinery;

8. Carrying vessel is not of Israel or Serbia, Montenegro, Iraq & Afghanistan;

9. Certificate declaring that the item is in operation not more than 5 years in case of car;

10. Radioactivity report in case of food item.

Bank of the importer is called L/C Issuing Bank. Then issuing bank informs its
corresponding bank, called Advising Bank or Confirming Bank located in exporters
country to advise and the credit forward to the exporter and simultaneously officer makes L/C
opening vouchers.

3.11.4.9 Accounting Treatment in case of L/C Opening:

After sanctioning the L/C proposal by the branch incumbent/competent authority, the
respective officer will pass the following vouchers

L/C Applicants A/C or Customers A/C --------------------Dr.

Margin on L/C ------------------------------------------Cr.

Commission on L/C ------------------------------------Cr.

VAT (15% of Commission) on L/C -----------------Cr.

FCC (Foreign Correspondent Charge) A/C---------Cr.

Telex/Postage Charges A/C ---------------------------Cr.

A liability voucher is also passed. Such as

Customers Liability against L/C ------------------------------Dr.

Bankers Liability against L/C------------------------Cr.

After that, L/C number and the above entries are given in the L/C Register. Then the
transmission of L/C is done through Airmail/Courier Services/SWIFT/Telex to the Advising

50
 Bank. Tested telex is required where SWIFT is not available. If the amount of L/C exceeds
US$ 5,000, the branch takes the credit report of the beneficiary to ensure the worthiness of
the supplying gods. Reimbursement authority is sent to the Reimbursing Bank.

The following is mentionable regarding the above vouchers

Rate of margin: Most cases it is 20% on the actual amount. It may vary from condition to
condition or party to party based on the L/C amount and their performance and importance.

i. Commission: 0.50% for 45 days tenor on the actual amount.

ii. VAT on commission @ 15%

iii. Handling charge Tk. 500

iv. Service charge Tk. 1,000

v. VAT on Service Charge @ 15%

L/C Issuing Bank Exporter or L/C Beneficiary
vi. Stamp Tk. 150 L/C Confirming Bank

vii. LCA Form - Tk. 100

Issue L/C & request to Add Confirm
viii. Postage/Telex - Tk. 3,000 (if SWIFT); Tk. 1,300 (if Mail)

ix. Handling Charge Tk. 500. It is applicable only if the L/C is prepared for Mail (not
SWIFT); then the importer has to pay more VAT @ 15% on this Handling Charge.
Negotiating Bank L/C Issuing Bank

x. Liability margin same amountSending

of L/C amount but in round figure.
L/C Documents

3.11.4.10 Amendment of L/C:

Parties involved 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 reasons. In such a
situation, the credit should be amended. These amendments involve changes in (i) unit price
(ii) extension of validity of the L/C (iii) documentary requirements etc. Such amendments can

51
 be affected only if all the concerned parties agree i.e. the beneficiary, the importer, the issuing
bank and the advising bank. For any amendment the importer must request the issuing bank
in writing duly supported by revised indent/pro-forma invoice. The issuing bank then advises
the required amendment to the advising bank.

MBL, Uttara Branch transmits the amendment by tested telex, airmail or courier service to
the advising bank. In case of Revocable Letter of Credit, it can be amended or cancelled by
the issuing bank at any moment and without prior notice to the beneficiary. But in case of
Irrevocable Letter of Credit, it can never be amended nor cancelled without the agreement of
the issuing bank, the confirming bank (if any) and the beneficiary. If the L/C is amended,
amendment charge and telex charge, as per HO circular, are debited from the partys A/C
accordingly. No Revocable L/C is opened now days.

3.11.4.11 Adding Confirmation:

Sometimes beneficiary or supplier of the goods insists the importer for adding confirmation
to L/Cs or to issue L/C with add confirmation. In that case, at the request of the importer, the
issuing bank requests the advising bank or any third bank to add their confirmation to the
L/C. Normally, add confirmation charge is borne by the beneficiary and the confirmation
charge differs from bank to bank

The L/C Confirming process:

L/C Issuing Bank Exporter or L/C Beneficiary

L/C Confirming Bank
Issue L/C & request to Add Confirm

Sending L/C Documents

Negotiating Bank L/C Issuing Bank
52
 Fig 21: L/C confirming process

3.11.4.12 Submission of Necessary Documents by Exporter to the

Negotiating Bank:

As soon as the seller/exporter receives the credit and is satisfied that he can meet its terms
and conditions, he is in position to load the goods and dispatch them. The seller then sends
the documents evidencing the shipment to the bank.

Exporter will submit those documents in accordance with the terms and conditions as
mentioned in L/C. Generally the documents observed by me in the foreign exchange
department are

i. Bill of Exchange

ii. Commercial Invoice

iii. Bill of Lading

iv. Certificate of Origin

v. Packing List

vi. Shipping Advice

vii. Non-negotiable copy of Bill of Lading

viii. Clean Report of Finding (CRF)

ix. Weight List

x. Insurance Cover Note

xi. Pre-Shipment Certificate.

3.11.4.12.1 The negotiation Process of Import L/C:

53
 After Shipment Process Document
Examine Document
Exporter (L/C Beneficiary)
If no discrepancy is found then HSBC
pay to beneficiary (Negotiating Bank)

d. Forward
Documents

e. Examine Documents Bangladeshi Importer g. Pay MBL

Negotiating Bank
(L/C Issuing Bank)

f.Debit L/C applicants A/C in settlement

Fig 22: Negotiation process of Import L/C

3.11.4.12.2 The Documents Sent to the Issuing Bank through the

Negotiating Bank:

The negotiating bank carefully checks the documents provides by the exporter against the
credit, and if the documents meet all the requirement of the credit, the bank will pay, accept,
or negotiate in accordance with the terms and conditions of the credit. Then the bank sends
the documents to the L/C opening.

Sending L/C Documents

Negotiating L/C Issuing

Bank Bank

54
 Fig : Sending of documents

3.11.4.13 Making the Payment of Foreign Bill through the Reimbursing

Bank:

The L/C issuing bank getting the documents checks immediately and if they are in order and
meet the credit requirements; it will arrange to make payment against L/C through
reimbursement bank and will send the importer the document arrival notice.

Fig : The Letter of Credit Cycle

3.11.4.14 Scrutiny of the Documents:

One of the basic principles of documentary credit is that all parties deal with document and
not with goods (Articles 6 of UCPDC-500). That is why, the documents should be scrutinized

55
properly. Respective officials check whether these documents have any discrepancy or not.
Here, Discrepancy means the dissimilarity of any of the documents with the terms and
conditions of L/C. In case of discrepant documents, the branch advices the discrepancy /
discrepancies to the negotiating bank within seven (07) working days after receiving the
documents. A checklist may be followed for examining the documents.

Then the following things can happen. These are indicated in the following

a) Discrepancy found but the importer accepts:

The Bank will lodge the documents.

b) Discrepancy found but the importer not agreed to accept:

Issuing Bank would intimate negotiating Bank for revised document or return the documents
to the negotiating Bank for necessary action. Here issuing Bank is not bound to pay because
the documents send by exporter is not in accordance with the terms of L/C.

c) Documents are ok but importer is willing to retire the documents:

In this case Bank is obliged to pay the price of exported goods. Since importer did not pay for
bill of exchange, this payment by Bank is one kind of credit to the importer and this credit in
Banking is known as FORCED PAD.

d) LTR (Loan Against trust Receipts):

Advance allowed for retirement of shipping documents and release of goods imported
through L/C falls under this head. The goods are handed over to the importer under trust with
the arrangement that sale proceeds should be deposited to liquidate the advances within a
given period. This is post import finance by MBL.

A. Bill of exchange:

Is the bill drawn in terms of the L/C and does it bear L/C no. and date?

56
 Does the amount of the BOE in words and figures agree and is it in the same currency of
the L/C?

Whether the draft is drawn on the issuing bank or not?

B. Invoice:

Does the invoice value agree with the amount of the BOE?

Does the invoice value clearly state the unit price i.e., FOB/C&E/CIF as mentioned in
the L/C?

Does the description of goods declared in the invoice agree with that of the L/C?

Does the shipping mark on invoice agree with those on B.L/AWB/TR/RR?

Does the gross weight and net weight if shown on invoice agree with those on B/L?

Custom invoice and for consular to be presented as per credit terms.

C. Transport documents:

Has the full set of original transport documents have been submitted?

Is the B/L marked ON BOARD?

Is the B/L clean?

Combined Charter party, Short form B/L is not acceptable if not allowed in the
L/C?

Transshipped B/L not to be acceptable unless allowed by L/C?

Is Freight prepaid or Freight payable at destination in accordance with L/C terms?

Are shipping documents properly endorsed?

Are the name(s) and address of the notifying party(s) identical with those in the L/C?

57
 The date of shipment on the transport documents must not later than the date
stipulated in the L/C?

B/L must be issued in order of the issuing bank.

The port of shipment and destination must be as per credit terms.

B/L must bear the name of carrying vessel and the flag.

D. Pre-shipment inspection report:

Inspection done by the authorized person called by the L/C

Inspection done at named place

Inspection certificate must confirm the specification called for in the L/C

Certificate must confirm that they have inspected the goods related to the L/C under
reference

Inspection certificate must confirm the quality of the goods they inspected as called by
the credit

Beside the above, the bank examines and scrutinizes the followings

Whether all the documents required by the credit are submitted

Documents to be consistent with one another

Documents to be presented within the stipulated time

Documents to be issued by the authorized person as stipulated in the credit

3.11.4.15 Lodgment:

If import documents are found in order, they are to be made entry in bill register and
necessary vouchers to be passed, putting Bill number on the documents. This process is
called Lodgment of the bill. The word Lodgment means temporary stay. Since the

58
documents stays at this stage for a temporary period i.e. up to retirement of the documents,
the process is called lodgment. Bank must lodge the documents immediately after receipt of
the same, not exceeding 7 banking days, following the day of receipt of the documents,
(Article 14, UCPDC-500).

Procedures for lodgment:

A. Bill register:

Bank entry the documents in the bill register. Bill register must include date of lodgment, bill
no, bill of exchange no, amount, name of the negotiating bank, Bill no and date, merchandise,
retirement date and other particulars.

B. Application of rate:

Foreign currency would be converted at Bangladeshi currency selling rate ruling on the date
of lodgment.

C. Exchange control form:

IMP & TM form must be filled in and signed by the importer at the time of lodgment.

D. Endorsement of LCAF:

LCA Form must be endorsed showing utilization of shipment.

E. Noting on the file:

Utilized amount showing bill number to be noted on the printed format of L/C file.

If the documents are in order, this Branch lodges the documents in PAD (Payment against
Documents) and the following accounting treatments are given-

PAD A/C ---------------------------------------------------------Dr.

MBL General A/C (at HO prescribed rate) ---------Cr.

Exchange A/C-------------------------------------------Cr.

The reversal entries are as follows

59
Bankers Liability A/C -----------------------------------------Dr.

Customers Liability A/C -----------------------------Cr.

(When lodgment is passed)

3.11.4.16 Retirement:

When the importer release the import documents from the bank by acceptance/cash payment
or under post import bank finance, it is known as retirement of the import documents.

Steps for Retirement:

Intimation to the importer:

Bank will intimate the importer with full particulars of the shipment to retire the import
documents on receipt of the same as per terms of the credit.

Acceptance:

Usance bill for collection is to be presented to the importer for acceptance. Sight bills need no
acceptance if not discrepant. The maturity to be calculated from the date of acceptance or
negotiation as per credit terms. A due date diary to be maintained for maturity date.

After passing the lodgment vouchers, the shipping documents are then stamped with PAD
Number and entered in the PAD Register. The retirement vouchers are as follows

L/C Margin A/C -------------------------------------------------Dr.

Partys A/C-------------------------------------------------------Dr.

PAD A/C ------------------------------------------------Cr.

Income A/C interest on PAD -------------------------Cr.

Commission on PAD ----------------------------------Cr.

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 Miscellaneous earning ---------------------------------Cr.

After the vouchers are passed, endorsement is made on the back of the bill of exchange as
Received Payment & bill of leading is endorsed to the effect that Please deliver to the order
of M/S under two authorized signatures of the bank officials of MBL. Then the documents
are delivered to the L/C applicant (importer).

But if there is any discrepancy in the documents, the L/C issuing bank send message to the
negotiating bank to rectify it under its risks and responsibilities.

3.11.4.17 Payment of Imports:

Letter of Credit is a legal instrument, which binds all relevant parties according to terms and
conditions incorporated therein.

According to payment terms, there are mainly two types of L/Cs such as:

i. Sight Credit

ii. Usance Credit

L/C on deferred payment basis:

L/Cs may be opened on deferred payment basis in the following cases subject to
approval of Head Office:

i. Capital machinery imports on up to 360 days usance basis,

ii. Industrial raw material imports for own use of industrial importers on up to 180 days
usance basis,

iii. Import of coastal vessels including oil tankers and ocean going vessels including those
procured for scrapping on up to 360 days usance basis,

iv. Import of agricultural implements and chemical fertilizer on up to 180 days basis,

v. Import of life saving drugs on up to 90 days usance basis.

61
 For such deferred payment imports, the prices must be internationally competitive and usance
interest, if any, should not be at rate higher than the LIBOR for the relative period or the
equivalent rate prevailing in the currency of the country of the supplier.

Payment of Deferred bill:

The branch, on maturity or at the instruction of the drawee before maturity, will make
payment of the deferred bill.

Vouchers to be passed

i. Reversal of Acceptance liability -

Dr. Bankers liability on PAD (Deferred)

Cr. Customers liability on PAD (Deferred)

ii. Dr. Sundry Deposit A/C. Margin on L/C (Deferred)

Dr. Partys Account: Balance Amount

Cr. MBL General A/C: CAD, ID on respective Nostro A/C for bill value with interest (if
any) at Ready Selling rate in case of USD & ACUD or TTOD rate for all other currencies.

Cr. Income A/C: Exchange Gain on

3.11.4.18 PostImport Financing:

If there is no available cash in importers hand, he can request the bank to grant loan against
the documents for the purpose of post import finance. There is one form of post import
finance available in MBL, Uttara Branch.

LTR (Loan against Trust Receipt):

On the arrival of goods and lodgment of import documents, importer may request the bank
for clearance of goods from the port (custom). Proper sanction from the competent authority
is to be obtained before clearance of consignment.

For giving these types of loan, officer makes loan proposal and sends it to H/O for approval.
After getting approval from H/O, bank grants loan in the form of LTR. It is needless to say

62
that bank only deals with the documents, not with goods & services in case of foreign
exchange business.

3.12 Export Section:

MBL is running exciting as well lively export to deliver the surplus products to other
countries and thereby earns huge amount of foreign currency. Payment for goods exported
from Bangladesh should be received through an Authorized Dealer in freely convertible
foreign currency or in Bangladeshi Taka from a Non Resident Account.

MBLs Uttara Branch as well as few of other branches work in Export Section. In the
Export Section, two types of L/C are handled

1. Back-to-Back L/C; and

2. Export L/C

Export financing can be done in two ways. These are:

1. Pre-shipment Financing;

2. Post-shipment Financing.

Pre-shipment financing can be done by opening of back-to-back L/C and Packing Cash
Credit (PCC). In case of pre-shipment financing, about 90% is financed by the bank. Of that
portion, about 75% is for back-to-back L/C and 10% is for packing cash credit. Financing in
back-to-back L/C changes according to the products i.e., Normal fabric, Flannel fabric,
woven fabric etc. Example of post-shipment financing by bank is Foreign Documentary Bills
for Purchase (FDBP).

Parties to export transactions

1. L/C Issuing Bank

2. Importer

3. L/C Advising Bank

63
4. Exporter

5. Confirming Bank

6. Negotiating Bank

7. The Paying/Reimbursing Bank

3.12.1 Back-To-Back L/C:

In case of a Back-to-Back letter of credit, a new L/C (an import L/C) is opened on the basis
of an original L/C (an export L/C). Under the Back-to-Back concept, the seller as the
beneficiary is as a security to the Advising Bank. The beneficiary of the back-to-back L/C
may be located inside or outside the original beneficiarys country. In case of a back-to-back
L/C, no cash security (no margin) is taken by the bank; bank liens the first L/C (the master
L/C). In case of a back-to-back L/C, the drawn bill is usage/time bill.

Papers / documents Required for opening of BACK-TO-BACK L/C are as follows

Master L/C

Valid Import Registration Certificate (IRC) and Export Registration Certificate (ERC)

L/C Application and LCAF duly filled in and signed

Pro-forma Invoice or Indent

Insurance Cover Note with money receipt

Check the credit limit

Prepare offering sheet if regular credit line is not available

Mark lien on the Master L/C

Issue the L/C

64
 Fig : Flow Chart for back-to-back L/C

3.12.1.1 Payment for Back- To- Back L/C:

In case of back-to-back L/C for 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, the duration can be maximum 180 days. For importing
machinery items or capital goods for 360 days Back-to-Back L/C can be opened.

3.12.1.2 Reporting to Bangladesh Bank:

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

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

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

Disposal of IMP Form; they includes: (a) original IMP is forwarded to Bangladesh Bank with
invoice and indent, (b) duplicate IMP is kept with the branch along with the Bill of
Entry/Certified Invoice, (c) triplicate IMP is kept with the branch for office record, (d)
quadruplicate is kept for submission to Bangladesh Bank in case of imports where documents
are retired.

3.12.2 Export L/C:

The other type of L/C facility offered by MBLs Uttara branch is Export L/C. Bangladesh
exports a large quantity of goods and services to other countries. Readymade garments (both
knitted and woven), jute, jute-made products, frozen shrimps, tea are the main goods that
Bangladeshi exporters export to foreign countries. Garments Sector is the largest sector that
exports the utmost share of the countrys export. Bangladesh exports most of its readymade
garments products to USA and European Community (EC) countries. Bangladesh exports
about 40% of its readymade garments products to USA. Most of the exporters who export
through MBL are readymade garments exporter.

65
3.12.3 Test Key Arrangement:

Test Key Arrangement is a secret code maintained by the banks for the authentication for
their telex messages. It is a systematic procedure by which a test number is given and the
person to whom this number is given can easily authenticate the same test number by
maintaining that same procedure. MBL Uttara Branch has test key arrangements with so
many banks for the authentication of L/C messages and for the transfer of funds.

3.13 Foreign remittance:

Foreign remittance refers to the transfer of funds from one country to another which may be
within the country or between two countries through banking channel post office or the
informal channel.

Foreign Remittance means purchase and sale of freely convertible foreign currencies as
admissible Foreign Exchange Regulation Act 1947 and Guidelines For Foreign Exchange
Transaction-VOL, 1 & 2 of the country. Purchase of foreign currencies constitutes inward
foreign remittance and sale of foreign currencies constitutes outward foreign remittance.

We can see it by following figure:

66
Fig :
Foreign Remittance Section of MBL

So we see that, there are two types of Foreign Remittance:

Foreign Outward Remittance

Foreign Inward Remittance

3.13.1 Remittance Position of MBL, Uttara Branch At a Glance:

Present situation of Inward Remittance of MBL, Uttara branch (with number, & currency) is
given below:

NO. OF
YEAR USD
REMITTANCE
2013 5 635,350.70
2014 8 656,250.00

2015 6 643,209.87

Table : Yearly Remittance Position

67
 No. of Remittance

8
7
6
5 No. of Remittance
4
3
2
1
0
2013 2014 2015

Graph : Yearly Remittance Position

NO. OF
YEAR USD EUR JPY
REMITTANCE

2013 5 1 3 1

2014 8 5 2 1

2015 6 3 1 2

Table : Yearly Remittance position proportionately

68
3.13.2 Foreign Inward Remittance:

Foreign Inward Remittance refers to the currency / remittance in foreign currency that is
received from abroad to our country. In case of foreign inward remittance, TT, MT, Draft etc
are drawn in local bank by the foreign banks of exchange houses. When a local bank
purchases foreign bills, TCs and cash foreign currency is also known as inward remittance. A
local bank also receives indenting commission of local firm, trademarks, patent fee etc.

3.13.2.1 Telegraphic Transfer (TT):

Telegraphic Transfer refers to the payment instruction by tested telex/cable or authenticated

fax by bank in abroad on an inland bank (local/foreign bank). Normally foreign banks with
which corresponding banking relationship / drawing prevails, send T.T.

Payment Procedure of TT (Inward):

To verify the test number.

To inform the beneficiary for submission of form C.

To confirm from Issuing Bank / Reimbursing Bank.

To convert of Foreign Currency into Bangladeshi Tk. with TT (CLEAN).

To make entry in TTs Drafts, MTs received register.

Following vouchers are passed:

For crediting a SB/CD A/C:

MBL General A/C H.O., ID @ OD Transfer rate------Dr.

Party A/C--------------------------------------------Cr.

(TT Handling charge)

3.13.2.2 Foreign Demand Draft (FDD):

69
The foreign bank/exchange company on local bank usually issues Foreign Demand Draft. It
is an order to pay a certain sum to a certain person or as his instruction, issued by the bank on
its overseas branch or on its correspondent bank. The demand draft is handed over to the
purchaser who sends it to the beneficiary. The beneficiary obtains payment on presentation to
the bank on which the draft is drawn.

Encashment of FDD may take place in two ways

Purchase,

Sending for collection.

3.13.2.2.1 Purchase:

The following criteria must be fulfilled

Firstly, the party applies for a Foreign Bill Purchase (FBP) to limit the facility, which is
approved by the Head Office authority for a certain period.

The local banks will entertain valued clients with this facility.

The party will give an undertaking regarding adjustment of FBP liabilities which is
offered to him in case of non-realization of proceeds (FDD).

It is necessary that all relevant charge documents (D.P. Note, Personal Guarantee etc.) be
collected from the party.

3.13.2.2.2 Sending for Collection:

It is posted in the Foreign Documentary Bills for Collection. The following functional
activities are undertaken for a FDBC

It is posted in the FDBC register. FDBC No. is assigned to the FDD.

After receiving credit advice, the following vouchers are passed

MBL Bank, General A/C, ID (at spot buying TT clean rate)-----Dr.

Party A/C--------------------------------------------------------Cr.

70
 Income A/C Postage (Tk. 50/-)-------------------------------Cr.

Income A/C Commission (Tk. 50/- as handling charge) -Cr.

3.13.2.3 Endorsement of US$ in Passport:

MBL endorses US Dollars (USD), Great Britain Pound (GBP) in passports. To endorse US
Dollar, the client has to apply in the prescribed form (TM Form). The following entries are
given in this regard

Cash or Custom A/C-------------------------------------------Dr.

Foreign Currency on Hand---------------------------Cr.

(Dollar Special)

3.13.3 Foreign Outward Remittance:

The term Outward remittances include not only remittance i.e. sale of foreign currency by
TT. MT, Drafts, Travelers cheque but also includes payment against imports into Bangladesh
& Local currency credited to Non-resident Taka Accounts of Foreign Banks or Convertible
Taka Account.

Two forms are used for Outward Remittance of foreign Currency such as: -

IMP Form: All outward remittance on account of Imports is done by form IMP.

T.M. Form: For all other outward remittances form T.M. is used.

A. Private Remittance:

1. Family remittance facility

2. Education

71
3. Travel

4. Health & Medical

5. Foreign Nationals

6. Remittance for Hajji

7. Other Private remittance

B. Official & Business Travel:

1. Official Visit

2. Business Travel Quota for New Exporters

3. Business Travel Quota for Importers and Non-exporting producers

4. Exporters Retention Quota

C. Commercial Remittances:

1. Remittance by shipping companies airlines & courier service

2. Remittance of Royalty and technical fees

3. Remittance of profits of foreign firms/branches

4. Remittance of Dividend

5. Subscriptions to foreign media services

72
6. Costs/ for Reuter monitors

7. Bank Charges

4.1 Findings:

Although Mercantile Bank Limited is a reputed Organization it is not out problems. During
my survey a realized some limitation it is suffering from its beginning. Some problems are
identified. These are discussed in details:

1. One problem relates to technology, the bank must try to adopt new technologies.
Otherwise the profitability of the bank may hamper.

2. To meet the challenges in the banking industry and to help employees to adapt to the
changes and new working condition, training is essential but no such training center has

73
 yet been established in Mercantile Bank Limited. Moreover, training given to employees
is not adequate.

3. Besides, SWIFT is being used in some branches and the head office of the bank for trade
finance related operations like documentary credit, documentary collections, fund
transfer, guarantee, etc. with optimum security, but not in all branches.

4. Letter of credit (L/C) opening system for the importer is easy. it consumes time and
money as well.

5. Modern technical equipment like computer, ups, modem etc. is not sufficient in foreign
exchange department, which results in the delay of exchange process.

4.2 Recommendations:

Mercantile Bank Limited has been able to operate its all issues proficiently and more
competently in the operations of foreign Exchange and other related perspective around the
Bank. To improve the management culture and foreign exchange departments performance
in future, MBL should adopt some of the industry best practices currently. This are- Moreover
for prompt & safe delivery of this hard earned money to their near and dear ones in every
corner of the country, the bank can established agency arrangements with some big banks.

74
 1. The branch need to set up well designed IT section by using more updated technology
and information.

2. Adequate on the job training is required for the newly employed personnel.

3. SWIFT service should be introduced in each and every branch of the bank, which will
help to smoothen the foreign exchange operations of the bank.

4. Letter of credit L/C opening system for the exporter should be easier.

5. Bank needs sufficient computer, modem for foreign exchange department.

5.1 Conclusion:

Banking is becoming more and more vital for economic development of Bangladesh in
mobilizing capital and other resources. Mercantile Bank, being a third generation bank, is
also extending such contributions as to the advancement of the socioeconomic condition of
the country.
The popularity of banks is increasing day by day which leads to increase competition as well.
All the Commercial Banks are offering almost the same products and services and almost
same their operation system. But the ways they provide the services are different from each
other. So people choose their bank according to their satisfaction and need. They believe in
developing strong interpersonal relationship with each other.
It is not possible to get 100% from anywhere especially for those organizations which with

75
mass people. MBL has some problems but it is encouraging that they are trying to overcome
these obstacles.
The overall performance of MBL despite some criticism is above the average of present
banking industry. Solid revenue growth together with strict discipline on expenses and a
culture of sound risk management have upgraded the Bank to a level of excellence. In its
pursuit of excellence, the Bank constantly reviews its systems, policies, process and prices of
its products and services in line with the changing market reality. Thus, MBL intends to pave
the way for a new era in banking operation.

Bibliography:

Books:
Rose Peter. "Commercial Bank Management", Third Edition, Irwin McGraw-Hill
PMBLisher, 1996.
P.N. Varsheny. Banking Law and Practice.

Study's:
1. Prospectus of MBL.
2. Manual of General Banking (MBL).
3. Annual Study 2014 of MBL.
4. Half yearly Annual Study 2014 of MBL.

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 5. Quarter Annual Study 2014 of MBL.

Websites:

MBL, Official Site: www.mblbd.com.com.

http://www.scribd.com/doc/2179I869/General-bank-activities-Mercantile-bank-ltd,
retrieved on 24/05/2015 at 05.00 pm

http://www.assignmentpoint.com/General-bank-activities-Mercantile-bank-
ltd,retrieved,on 30/07/2015 at 10 am

77