Chapter One
Introduction
1|Page
1.1 Background of the Study This Internship Program as well as this report is an indispensable of my courses of Business Administration. Administration. After completion of our courses in the different areas of studies, studen students ts are sent sent to differ different ent repute reputed d Busine Business ss organ organiza izatio tion n to acuir acuiree the real real life life e!perience. But with the bounty of Almighty I ha"e been appointed as officer# Assistant $!ecuti"e %fficer in The &anata ban' (td.
)o, according to the rules and the direction of my Branch *anager#A+*, most of the wor'ing days of ob I ha"e been performing the tas's supposed to be done at -Foreign Exchange” es'.
&agannath /ni"ersity one of the reputed reputed public uni"ersities in Bangladesh, has designed the curric curriculu ulum m of the *BA course course such a way that that the internat internation ional al standa standard rd pos postt graduates will be produced. After completing 0 credit hours, one student needs to go for further 2 credit hours internship program in a commercial organization.
As an empl employ oyee ee of &anata &anata Ban' (imit (imited ed.. I can learn learn the the ban'i ban'ing ng deal dealin ings gs..
As it
maintains the pace with the competiti"e ban'ing business world, its acti"ities culture, philosophy and style leads as a ban'er to be 'nowledge of my wor'ing life.
3|Page
1.1 Background of the Study This Internship Program as well as this report is an indispensable of my courses of Business Administration. Administration. After completion of our courses in the different areas of studies, studen students ts are sent sent to differ different ent repute reputed d Busine Business ss organ organiza izatio tion n to acuir acuiree the real real life life e!perience. But with the bounty of Almighty I ha"e been appointed as officer# Assistant $!ecuti"e %fficer in The &anata ban' (td.
)o, according to the rules and the direction of my Branch *anager#A+*, most of the wor'ing days of ob I ha"e been performing the tas's supposed to be done at -Foreign Exchange” es'.
&agannath /ni"ersity one of the reputed reputed public uni"ersities in Bangladesh, has designed the curric curriculu ulum m of the *BA course course such a way that that the internat internation ional al standa standard rd pos postt graduates will be produced. After completing 0 credit hours, one student needs to go for further 2 credit hours internship program in a commercial organization.
As an empl employ oyee ee of &anata &anata Ban' (imit (imited ed.. I can learn learn the the ban'i ban'ing ng deal dealin ings gs..
As it
maintains the pace with the competiti"e ban'ing business world, its acti"ities culture, philosophy and style leads as a ban'er to be 'nowledge of my wor'ing life.
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1.2 Objectie! of the Study The main obecti"e of this study is to 'now about the operation and acti"ities that are offered by the 4oreign $!change epartment of &anata Ban' (imited. In addition, the study see's to achie"e the obecti"es written below5
An analysis and discussion of foreign e!change ser"ices of the ban'.
To e"aluation of the present performance of the t he ban' regarding foreign e!change.
&anata Ban' (imited determining To search search the problems of this branch of &anata the drawbac's of the e!isting foreign e!change e!chan ge system.
6ecomm 6ecommendi ending ng som somee guidel guideline iness to impro impro"e "e the effec effecti" ti"enes enesss of foreig foreign n e!change ser"ices.
To re"iew the techniues used by the ban' to ma'e it lucrati"e.
1." #ethodo$ogy of the Study To prepare the report use both primary and secondary data. The primary data were colle collecte cted d thro throug ugh h my obs obs assi assign gned ed upo upon n me as an empl employ oyee ee of &anat &anataa Ban' Ban' ltd. ltd. regard regarding ing the procedu procedure re of operat operation ion of foreig foreign n e!chang e!changee dept.7 dept.7o or'ing r'ing with with other other departments as well as discussion with the staffs of those departments pro"ide a lot primary information. )econdary data were gathered from the annual reports, rele"ant published boo's. In specific sense, sources of information5 Primary )ources5
Personal e!periences through my obs with the different at my Branch.
iscuss with my colleagues.
)econdary )ources5 8|Page
6ele"ant publications of &anta ban' ltd.
Annual report of &anta ban' ltd. 93::;#3:1:<
Published documents of &anta ban' ltd.
1.% &i'itation! of the Study )ince I="e been appointed as an entry employee of &anata ban' ltd., there might be some le"el of inaccuracy with those collected information. (i'e e"ery other studies, I too faced some constraints during my proect period, otherwise, I=d ha"e enabled me in ma'ing my study more appropriate and logical. The limitations from both side the complication of foreign e!change dept. well as myself. The followings are some some of the shortcomings5 Time5 The allocated time three 9:8< months was not enough for getting a sound 'nowledge about the study.
7or'ing scope5 As I=m a newly recruited officer, so till now I=m not well introduced with the obs are performed in foreign e!change deptt. Therefore, it is difficult for me to learn more.
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Chapter ()o
Scenario of Foreign Exchange in Bang$ade!h
2.1 Introduction >|Page
The o"erall performance of the e!ternal sector witnessed a moderate growth during 4?1:. espite spillo"er effects of the turbulent e!ternal economic conditions as well as the global liuidity crunch, adeuate inflow of foreign e!change through e!port and remittance channels 'ept the foreign e!change mar'et stable. Besides, the bumper production in rice sector together with sluggish e!ternal demand for 6*+ ha"e lowered import of rice, fabrics, cotton, yarn etc.. In addition to that slowdown of new in"estment also lowered input demand, which all together are responsible for the lower demand for foreign e!change and helped Ta'a#ollar e!change rate almost stable. ouble#digit growth rate of remittances and moderate e!port receipts helped increase gross foreign e!change reser"e by /) 1.8 billion 9or 31.> percent< to /) @.> billion at the end of 4?:; which increased further and stood at 1:. billion at the end of &une 3:1: with a remar'able growth of 08.; percent compared to 4?:;. owe"er, Ta'a depreciated against /) ollar by a mild :.2 percent during the 4?1:.
2.2 Foreign Exchange and the Ba$ance of *ay'ent+the Oera$$ Situation The higher current account surplus and the lower financial flows led the balance of payments 9B%P< to a record high surplus of /) 32> million in 4?1:. *erchandise e!ports 9fob< increased by /) 28;.> million 9or 0.1 percent< in 4?1: to /) 123:0.@ million, though fertiliser, tea and frozen shrimps fish, which recorded a negati"e growth of about 20.1 percent, >8.@ percent and 0.: percent respecti"elyC all other maor e!ported items increased significantly. A substantial growth of e!port of ute goods 920.>D<, petroleum by#products 923.8D<, engineering products 9>0.2D<, raw ute 983.>D<, leather 932.;D<, footwear 911.2D<, wo"en garments 91.2D< and 'nitwear 9:.D<, contributed to increase the growth of merchandise e!ports in 4?1: o"er 4?:;. The e!port of miscellaneous products, subsumed under the -othersE category showed a negati"e growth of :.> percent in "alue terms during 4?1: . owe"er, as a percentage of +P, e!ports decreased by 1.3 percentage point from
[email protected] percent in 4?:; to 12.8 percent in 4?1:. *erchandise imports 9fob< increased by /) 1:;@.: million 9or >.0 2|Page
percent< in 4?1: to /) 318.: million. Import of spicesF sugar, pulses 9all sorts<, pharmaceutical products, edible oil, wheat, plastic and rubber articles thereof, capital machinery, raw cotton, tanning dying e!tracts, clin'er induced to increase o"erall import. %n the other hand, there is significant fall in import payments for rice 92.2 percent< because of bumper production, import restriction from India and increased price in International mar'et. ecreased import payments is showed for fertiliser 930.; percent<, oil seeds 91.3 percent<, yarn 9;.8 percent<, crude petroleum 9.0 percent<, te!tile articles thereof 9>.0 percent<, iron, steel other base metal 98.8 percent<. Imports 9cf< as a percentage of +P decreased by 1.0 percentage points from 3>.3 percent in 4?:; to 38. percent in 4?1:
The trade deficit widened by ;.0 percent in 4?1: owing to the relati"ely larger e!pansion in import payment compared to the increase in e!port earnings. Therefore, a higher increase in imports than e!port somewhat widened the trade deficit from /) 0@1:.: million in 4?:; to /) >1>3.: million in 4?1:. The deficit on the ser"ices account, howe"er, narrowed down to /) 138@.: million in 4?1: from /) 1212.: million in the pre"ious year. %n the contrary, the deficit on the income accounts rose slightly to /) 10@.: million in 4?1: from /) 100.: million in 4?:;. Gurrent transfers increased substantially from /) @|Page
1:332.: million in 4?:; to /) 1121:.: million in 4?1:, than's to a hefty 18.0 percent rise in wor'ers= remittances. The net outcome of all these de"elopments widened substantially the current account surplus from /) 3012.: million in 4?:; to /) 8@80.: million in 4?1:. Gurrent account balance as a percentage of +P stood at 8.@ in 4?1: against 3. in 4?:;.
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Chapter (hree
Oerie) of ,anata Bank &i'ited.
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".1 Background of ,anata Bank &i'ited &anata Ban' (imited, one of the state owned commercial ban's in Bangladesh, has an authorized capital of T'. ::: million 9appro!. /)H :@2.;2 million<, paid up capital of T'. 3>;8.;: million, reser"e of T'.013.>3 million and retained surplus T'. 33>.;0 million. The Ban' has a total asset of T'. 32@1>@.0> million as on 81 st ecember >::. Immediately after the emergence of Bangladesh in 1;@1, the erstwhile /nited Ban' (imited and /nion Ban' (imited were renamed as &anata Ban'. %n 1>th o"ember, 3::@ the ban' has been corporatised and renamed as &anata Ban' (imited. &anata Ban' (imited operates through @3 branches including 0 o"erseas branches at /nited Arab $mirates. It is lin'ed with :@:3 foreign correspondents all o"er the world.
The Ban' employs more than 189Thirteen< thousand persons. The corporate head office is located at ha'a with 1: i"isions comprising of 8@9thirty se"en< departments. It computerized more than 18; important branchesC non stop ser"ices introduced in more than branchesC %(I$ Ban'ing in more than 2: important branches under implementationC AT*, $4T facilities.
".2 Corporate Infor'ation -a'e
,anata Bank &i'ited
egi!tered addre!!
&anata Bhaban, :@:, *otiheel commercial area, ha'a#1:::.
&ega$ !tatu!
Bangladesh. Public limited
/ate of incorporation
31 may, 3::@.
*aid up capita$
3>;8 million
0eb!ite
wwwJanataban'ltd.#bd.com
S)ift code
&AB B
Fax
Pab! C ;>2::::
"." -u'ber of Branche!
1: | P a g e
&anata Ban' (imited is one of the largest nationalized ban's in Bangladesh. The ban' has 18 area offices and 3; regional offices all o"er the country. Gomputerized branches of the ban' are 802. Total numbers of branches are @3 including one (ocal office. Ban' has 0 o"erseas Branches it is lin'ed with 13:3 foreign correspondents all o"er the world. %"erseas branches are5
1. Abu habi
3. )harah
8. ubai 0. Al#Ain
".% -u'ber of e'p$oyee! The total number of employees of the ban' is 182;.
". -u'ber of e'p$oyee! oerning Body and #anage'ent
The Board of irectors is composed of :@ 9ele"en< members headed by a Ghairman. The irectors are representati"es from both public and pri"ate sectors. The Ban' is headed by the Ghief $!ecuti"e %fficer *anaging irector, who is a reputed ban'er. 3ierarchy of ,anata Bank #anage'ent
Ghairman
*anaging irector9G$%<
eputy *anaging irector
+eneral *anager
11 | P a g e
eputy +eneral *anager
Assistant +eneral *anager
4irst
Assistant
+eneral
*anager )enior $!ecuti"e %fficer
$!ecuti"e %fficer
Assistant
$!ecuti"e
%fficer
".4 *roduct! and Serice! of ,anata Bank &i'ited &anata Ban' (imited has not yet only gained enormous popularity but also been successful in mobilizing deposit and loan products since commencement of ban'ing operation. The ban' has made significant progress within a "ery short time period due to its dynamic management and introduction of "arious consumer#friendly loan and deposit products. All the products and ser"ices offered by the ban' can be classified under three maor heads as below5 A< eposit Products5 1. Gontributory )a"ings )cheme 2. *onthly Benefit eposit )cheme ". )pecial eposit )cheme %. $ducation )a"ings )cheme . 4i!ed eposit )cheme 4. )a"ings eposit Account
13 | P a g e
5. )T Account 6. *ulti Gurrency Account 7. 4oreign Gurrency eposit Account 18. on 6esident Ta'a Account 11. 4G 9on 6esident 4oreign Gurrency eposit Account< 12. ITA 9on 6esident In"estor=s Ta'a Account<
B< (oan Products5 1. Gonsumers= Gredit )chemes5 a.
ousehold urable (oan
b.
octors (oan
c.
Tra"el (oan
d.
Gar (oan
e.
Ad"ance Against )alary
f.
G+ Gon"ersion (oan
g.
$ducation (oan
h.
*arriage (oan
i.
ospitalization (oan
3. (ease 4inance 8. ire Purchase 0. )mall and *edium $nterprise Gredit )cheme >. (oan Against )hares and )ecurities 2. ouse Building 4inancing )cheme @. 4inancing )cheme for Gontractors . Gomputer )oftware 4inancing )cheme ;. 7or'ing Gapital 4inancing 1:. Industrial 4inancing
".5 *rincipa$ 9ctiitie! of ,anata Bank $i'ited The acti"ities of the ban's are di"ided into two categories5 1. Primary acti"ities, and 18 | P a g e
3. )econdary acti"ities including agency acti"ities.
*ri'ary 9ctiitie!
The primary acti"ities of &anata Ban' (imited include5 a< Accepting deposits and b< +ranting loans and ad"ances
a: 9ccepting depo!it!
The most important acti"ity of &anata Ban' (imited is to mobilize deposits from the public. People who ha"e surplus income and sa"ings find it con"enient to deposit the amounts with ban's. epending upon the nature of deposits, funds deposited with ban' also earn interest. Thus, deposits with the ban' grow along with the interest earned. If the rate of interest is higher, public are moti"ated to deposit more funds with the ban'. There is also safety of funds deposit with the ban'.
b: rant of $oan! and adance!
The second important acti"ities of a &anata Ban' (imited is to grant loans and ad"ances. )uch loans and ad"ances are gi"en to members of the public and to the business community at a higher rate of interest than allowed by ban's on "arious deposit accounts. The rate of interest charged on loans and ad"ances "aries depending upon the purpose, period and the mode of repayment. The difference between the rate of interest allowed on deposits and the rate charged on the (oans is the main source of a ban'=sincome.
Secondary 9ctiitie!
Besides the primary functions of accepting deposits and lending money, ban's perform a number of other functions which are called secondary functions. These are as follows K
1. Issuing letters of credit, tra"elers, cherubs, circular notes etc. 3. /nderta'ing safe custody of "aluables, important documents, and securities by pro"iding safe deposit "aults or loc'ersC 8. Pro"iding customers with facilities of foreign e!change. 10 | P a g e
0. Transferring money from one place to anotherC and from one branch to another branch of the ban'. >. )tanding guarantee on behalf of its customers, for ma'ing payments for purchase of goods, machinery, "ehicles etc. 2. Gollecting and supplying business informationC @. Issuing demand drafts and pay ordersC and, . Pro"iding reports on the credit worthiness of customers.
".6 S0O( 9na$y!i! of ,anata Bank &i'ited $"ery organization is composed of some internal strengths and wea'nesses and also has some e!ternal opportunities and threats in its whole life cycle.
Strength! 1. Strong corporate identity
According to the customers, &anata Ban' (imited is the leading pro"ider of financial ser"ices identity worldwide. 7ith its strong corporate image and identity, it has better positioned itself in the minds of the customers. This image has helped &anata Ban' (imited grab the personal ban'ing sector of Bangladesh "ery rapidly.
2. Strong e'p$oyee bonding and be$onging!
&anata Ban' (imited employees are one of the maor assets of the company. The employees of &anata Ban' (imited ha"e a strong sense of commitment towards organization and also feel proud and a sense of belonging towards &anata Ban' (imited. The strong organizational culture of &anata Ban' (imited is the main reason behind its strength.
". Efficient *erfor'ance
It has been seen from customers= opinion that &anata Ban' (imited pro"ides hassle#free customer ser"ices to its client comparing to other financial institutions of Bangladesh. Personalized approach to the needs of customers is its motto.
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%. ;oung enthu!ia!tic )orkforce
The selection recruitment of &anata Ban' (imited emphasizes on ha"ing the s'illed graduates postgraduates who ha"e little or no pre"ious wor' e!perience. The logic behind is that &anata Ban' (imited wants to a"oid the problem of Lgarbage in garbage outL. And this type of young fresh wor'force stimulates the whole wor'ing en"ironment of &anata Ban' (imited.
. E'po)ered 0ork force
The human resource of &anata Ban' (imited is e!tremely well thought perfectly managed. As from the "ery first, the top management belie"ed in empowering employees, where they refused to put their finger in e"ery part of the pie. This empowered en"ironment ma'es &anata Ban' (imited a better place for the employees. The employees are not suffocated with authority but are able to grow as the organization matures.
4. 3o!pitab$e 0orking Eniron'ent
All office walls in &anata Ban' (imited are only shoulder high partitions there is no e!ecuti"e dining room. Any of the e!ecuti"es is li'ely to plop down at a table in its cafeteria oin in a lunch, chat with whoe"er is there. %ne of the employees has said,
5. Strong Financia$ *o!ition
It has been seen that the net profit has been gradually rising o"er the years. 4urthermore, &anata Ban' (imited is not ust sitting on its pre"ious year=s success, but also ta'ing initiati"es to impro"e.
0eakne!!e! 1. 3igh charge! of &
Presently &anata Ban' (imited charges same rates for all types of import (JG. But for import (JG of e!ports#oriented industry, &anata Ban' (imited should reduce the charge of (JG. As a result, e!porter will be benefited and the country will earn more foreign e!change. The commission often e"en rises up to 8:D.
2. /i!couraging !'a$$ entrepreneur!
&anata Ban' (imited pro"ides clean Import (oan to most of its sol"ent clients. But they usually do not want to finance small entrepreneurs whose financial standing is not clean to them. ". 9b!ence of !trong 'arketing actiitie!
&anata Ban' (imited currently donLt ha"e any strong mar'eting acti"ities through mass media e.g. Tele"ision. TM ads play "ital role in awareness building. &anata Ban' (imited has no such TM ad campaign. Although they do a lot of G)6 acti"ities compared to other ban's.
% -ot enough innoatie product! .
In order to be more competiti"e in the mar'et, &anata Ban' (imited should come up with more new attracti"e and inno"ati"e products. This is one of the wea'nesses that &anata Ban' (imited is currently passing through but plans to get rid of by 3:1:. . /ier!ification
&anata Ban' (imited can pursue a di"ersification strategy in e!panding its current line of business. The management can consider options of starting merchant ban'ing or di"ersify it to leasing and insurance. As &anata Ban' (imited is one of the leading pro"iders of all financial ser"ices, in Bangladesh it can also offer these ser"ices.
2. &ack of *roper #otiation The salary at &anata Ban' (imited is "ery decent, but it lac's other sorts of moti"ation. Incenti"es such as bonuses are gi"en for acuiring a particular figure, but all in all these 1@ | P a g e
are the only moti"ational factors.
5. 3igh Co!t for 'aintaining account
The account maintenance cost for &anata Ban' (imited is comparati"ely high. %ther ban's "ery often highlight this. In the long run, this might turn out to be a negati"e issue for &anata Ban' (imited.
6. Outdated Soft)are and 3ard)are
)ome of the PGs in this branch ha"e "ery outdated hardware which is "ery slow and affects the customers and hence the performance of the ban' as a whole. The softwares themsel"es are pretty old K 4le!cube is from 3::8, *icrosoft %ffice NP is used. All of these pre"ent smooth operations.
Opportunitie! 1. /i!tinct operating procedure!
6epayment capacity as assessed by &anata Ban' (imited of indi"idual client helps to decide how much one can borrow. As the whole lending process is based on a clientLs repayment capacity, the reco"ery rate of &anata Ban' (imited is close to 1::D. This pro"ides &anata Ban' (imited financial stability gears up &anata Ban' (imited to be remaining in the business for the long run.
2. Country )ide net)ork
The ultimate goal of &anata Ban' (imited is to e!pand its operations to whole Bangladesh. urturing this type of "ision mission to act as reuired, will not only increase &anata Ban' (imitedLs profitability but also will secure its e!istence in the log run. ". Experienced #anager!
%ne of the 'ey opportunities for &anata Ban' (imited is its efficient managers. &anata 1 | P a g e
Ban' (imited has employed e!perienced managers to facilitate its operation. These managers ha"e already triggered the business for &anata Ban' (imited as being new in the mar'et. %. 3uge *opu$ation
Bangladesh is a de"eloping country to satisfy the needs of the huge population, a large amount of in"estment is reuired. %n the other hand, building $PO areas and some +o"t. policies easing foreign in"estment in our country made it attracti"e to the foreigners to in"est in our country. )o, &anata Ban' (imited has a large opportunity here.
4. Bigger #arket
Although the +P per head decreased a bit in 3:1: from 3::;, there is a huge untapped mar'et that reuires loans and intends to deposit also.
".7.% (hreat! 1. =pco'ing Bank!
The upcoming pri"ate, local, multinational ban's posse=s serious threats to the e!isting ban'ing networ' of &anata Ban' (imited it is e!pected that in the ne!t few years more commercial ban's will emerge. If that happens the intensity of competition will rise further and ban's will ha"e to de"elop strategies to compete against and win the battle of ban's.
2. Si'i$ar product! are offered by other bank!
ow#a#days different foreign and pri"ate ban's are also offering similar type of products with an almost similar profit margin. )o, if all competitors fight with the same weapon, the natural result is declining profit.
". /efau$t &oan!
The problem of non#performing loans or default loans is "ery minimum or insignificant. owe"er, this problem may rise in the future thusC efault (oans The problem of non# 1; | P a g e
performing loans or default loans is "ery minimum or insignificant. owe"er, this problem may rise in the future thusC &anata Ban' (imited has to remain "igilant about this problem so that proacti"e strategies are ta'en to minimize this problem.
%. Indu!tria$ /o)nturn
Bangladesh is economically and political unstable country. 4lood, draught, cyclone, and newly added terrorism ha"e become an identity of our country. Along with inflation, unemployment also creates industry wide recession. These caused downward pressure on the capital demand for in"estment.
. Financia$ Cri!i!
Although people ha"e reco"ered a bit from the shoc', it may still pose as a threat. People are still hesitant to ta'e loans or e"en deposit them has to remain "igilant about this problem so that proacti"e strategies are ta'en to minimize this problem.
4. Financia$ Cri!i!
Although people ha"e reco"ered a bit from the shoc', it may still pose as a threat. People are still hesitant to ta'e loans or e"en deposit them.
3: | P a g e
Chapter Four
*ractica$ Experience athered (hrough /oing ,ob
%.8 #y ,ob at ,anata Bank &i'ited
31 | P a g e
Through my obs at &anata ban' limited, I ha"e had gathered some rules of regulations of (JG. As I am a newly appointed employee that is why I did not ha"e to deal with the customers that much but there were a lot of responsibilities that I had. )uch as5 •
Processing a new (G 9 (etter of Gredit< -
4ill up the (GA4 4orms
-
Galculating the MAT, commission, margin etc
-
Printing the )7I4T message
-
4illing up the G4#@ 4orms
-
Putting seals
-
Ta'ing signatures
-
umbering the (Gs
-
(earned about The 4oreign 6egulation Act 1;0@
•
oing the similar things for BTB 9Bac'#to#Bac'< (Gs and (ocal (Gs
•
Preparing the (G for GPG 9Gontrol Processing Genter<
•
4illing up the I*P forms
•
Putting the (G and I*P into their following registers
•
(earning to put different types of seals
•
Printing Go"er (etters, letters etc
•
Pic'ing up the phone, calling up customers for missing information
•
Preparing T* 9Tra"el and *iscellaneous< for Bangladesh Ban'
•
Ta'ing necessary papers from customers such as ta'ing photocopy of ational I card, Passport, Trade (icense etc
•
Photocopying was a maor acti"ity in this departments
•
(earned how to recei"e mail and send out mail "ia courier
•
(earning the basics of these softwares K 4le!cube Gorporate, 7estern /nion, BGube, ha'a Ban' 4oreign trade 9for other remittancies other than 7estern /nion<
•
Gounting "ouchers
•
+i"ing out 7estern /nion forms to customers
33 | P a g e
Chapter Fie
Finding! and 9na$y!i! of Foreign Exchange of ,anata Bank $i'ited
.1 Introduction 38 | P a g e
4oreign e!change is the means and methods by which rights to wealth in a country=s currency are con"erted into rights to wealth in another country=s currency. In ban's when we tal' of foreign e!change, we refer to the general mechanism by which a ban' con"erts currency of one country into that of another. 4oreign $!change epartment 94$< is the international department Bangladesh Ban' issues license to scheduled ban's to deal with foreign e!change. These ban's are 'nown as Authorized ealers.
If the branch is
authorized dealer in foreign e!change mar'et, it can remit foreign e!change from local country to foreign countries. )o the ban' is an authorized dealer.
There are three 'inds of foreign e!change transaction5 1. Import 3. $!port 8. 6emittance.
.2 I'port To import, a person should be competent to be an importer=. According to Import and $!port Gontrol Act, 1;>:, the %ffice %f Ghief Gontroller %f Import and $!port pro"ides the registration 9I6G< to the importer. In an international business en"ironment, buyers and sellers are generally un'nown to each other. )o seller of goods always see's security for the payment of his e!ported goods. Ban' gi"es e!port guarantee that it will pay for the goods on behalf of the buyer if the buyer does not pay. This guarantee is called (etter of Gredit. Thus the contract between importer and e!porter is gi"en a legal shape by the ban'er by (etter of Gredit=.
." &etter of Credit A conditional written underta'en issued by the importer=s 9applicant< ban' to the e!porter 9beneficiary< at the reuest of the importer to effect payment up to a stated amount within a stated time period against presentation of complaint docu ments. The (G is go"erned by International Ghamber of commerce 9IGG< publication no.>::.
.% &oan again!t (ru!t eceipt! >&(: 30 | P a g e
Ad"ance against a Trust 6eceipt obtained from the Gustomers are allowed to only first class tested parties when the documents co"ering an import shipment or other goods pledged to the Ban' as security are gi"en without payment. owe"er, for such ad"ances prior permissionJsanction from ead %ffice must be obtained,
The customer holds the goods or their sale#proceeds in trust for the Ban', till such time, the loan allowed against the Trust 6eceipts is fully paid off.
The Trust 6eceipt is a document that creates the Ban'erLs lien on the goods and practically amounts to hypothecation of the proceeds of sale in discharge of the lien.
. &oan again!t I'ported #erchandi!e >&I#: Ad"ance 9(oan< against the security of merchandise imported through the Ban' may be allowed either on pledge or hypothecation of goods, retaining margin prescribed on their (anded Gost, depending on their categories and Gredit 6estriction imposed by the Bangladesh Ban', Ban' shall also obtain a letter of underta'ing and indemnity from the parties, before getting the goods cleared through (I* Account.
.4 *ay'ent *rocedure of I'port /ocu'ent! This is the most sensiti"e tas' of the Import epartment. The officials ha"e to be "ery much careful while ma'ing payment. This tas' constitutes the following5
/ate of *ay'ent
/sually payment is made within se"en days after the documents ha"e been recei"ed. If the payment is become deferred, the negotiating ban' may claim interest for ma'ing delay.
Preparing )ale *emo A sale memo is made at B.G rate to the customer. As the T.T %. rate is paid to the I, the difference between these two rates is e!change trading. 4inally, an Inter Branch $!change Trading Gredit Ad"ice is sent to I. 3> | P a g e
6euisition for the 4oreign Gurrency 4or arranging necessary fund for payment, a reuisition is sent to the International epartment.
Transmission of *essage *essage is transmitted to the correspondent ban' ensuring that payment is being made.
.5 Export The goods and ser"ices sold by Bangladesh to foreign households, businessmen and +o"ernment are called e!port. The e!port trade of the country is regulated by the Imports and $!ports 9control< Act, 1;>:. There are a number of formalities, which an e!porter has to fulfill before and after shipment of goods. The e!ports from Bangladesh are subect to e!port trade control e!ercised by the *inistry %f Gommerce through Ghief Gontroller of Imports and $!ports 9GGI $<. o e!porter is allowed to e!port any commodity permissible for e!port from Bangladesh unless he is registered with GGI $ and holds "alid $!port 6egistration Gertificate 9$6G<. The $6G is reuired to be renewed e"ery year, The $6G number is to be incorporated on $NP forms and other documents connected with e!ports. The formalities and procedure are enumerated as follows5
%btaining e!ports (G5 To get e!port (G form e!porter issued by the importer.
)ubmission of e!port documentsC $!porter has to submit all necessary documents to the collecting ban' after shipping of goods
Ghec'ing of e!port documentsC after getting the documents ban'er used to chec' the documents as per (G terms
egotiation of e!port documentsC If the ban' accepts the document and pays the "alue draft to the e!porter and forward the document to issuing ban' that is called a negotiating ban'. I4 the ban' does buy the (G then the ban' normally acts as collecting ban'.
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6ealization of proceeds5 This is the period when the issuing ban' has realized the payment.
6eporting to the Bangladesh ban'5 As per instruction by Bangladesh ban' the ban' has to report to respecti"e department of Bangladesh ban' by mentioning latest payment.
Issue to proceeds realization certificate 9P6G<5 Ban' has to issue precedee realization certificate of e!port (G to the supplierJ e!porter for getting cash assistant.
.6 Export Operation Bangladesh e!ports a large uantity of goods and ser"ices to foreign households. 6eadymade te!tile garments 9both 'nitted and wo"en<. &ute, &ute#made products frozen shrimps, tea are the main goods that Bangladeshi e!porters e!ports to foreign countries. +arments sector is the largest sector that e!ports the lion share of the countryLs e!port. Bangladesh e!ports most of its readymade garments products to /.).A and $uropean Gommunity 9$G< countries. Bangladesh e!ports about >>D of its readymade garments products to /.).A. *ost of the e!porters who e!port through $lephant 6oad Branch are readymade garment e!porters. They open e!port (JGs here to e!port their goods, which they open against the import (JGs opened by their foreign importers. $!port (JG operation is ust re"erse of the import (JG operation. 4or e!porting goods by the local e!porter, ban' may act as ad"ising ban's and collecting ban' 9negotiable ban'< for the e!porter,
As an ad"ising ban' It recei"es documents from the foreign importer and hands it o"er to the e!porter. )ometimes it adds confirmation on the (JG on reuest from the %pening Ban'. By adding confirmation, it assumes the responsibility to ma'e payment to the e!porter.
9! -egotiating Bank
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It negotiates the bills and other shipping documents in 4a"or of the e!porter. That is, it collects the proceeds of the e!port#bill from the drawer and credits the e!porterLs account for the same. Gollection proceed from the e!port bill is deposited in the ban'Ls %)T6% account in the importerLs country. )ometimes the ban' purchases the bills at discount and waits till maturity of the bill. 7hen the bill matures, ban' presents it to the drawer to en# cash it. In our country, $!port and Import operation of ban' is "ery much related with one another because of use of Bac' to Bac' and maturity of payment for Bac'#to#Bac' (JG is set in such that it can be paid out of e!port proceeds.
.7 Back+(o+Back &
*ay'ent of back to back &?C
In case bac' to bac' as 2:#;:#:@:#1: days of maturity period, deferred payment is made. Payment is gi"en after realizing e!port proceeds from the (JG issuing ban'.
.18 Check$i!t of export! &
ame of Issuing Ban' ocumentary Gredit o. and issuing date 3 | P a g e
ate of shipment
$!piry date and place
0. ApplicantJ for order ofJ %n Account. >. BeneficiaryJ 4a"oring 2. Amount @. A"ailability of Gredit . Partial shipmentJ Transshipment ;. Payment condition Jraft )ight 1:. Gategory. 11. escription of goods5
Item
Total Qty
/nit price
13. BJ( Glause 18. 6eimbursement clause. 10. /GPG Glause 1>. et 4%B "alue.
.11 Foreign e'ittance This ban' is authorized dealer to deal in foreign e!change business. But the $lephant 6oad branch is still not authorized dealerC normal procedure of the A branch is stated. As an authorized dealer, a ban' must pro"ide some ser"ices to the clients regarding foreign e!change and this department pro"ides these ser"ices. The basic function of this department are outward and inward remittance of foreign e!change from one country to another country. In the process of pro"iding this remittance ser"ice, it sells and buys foreign currency. The con"ersion of one currency into another ta'es place at an agreed rate of e!change, which the ban'er uotes, one for buying and another for selling. In such transactions the foreign currencies are li'e any other commodities offered for sales and purchase, the cost 9con"ention "alue< being paid by the buyer in home currency, the legal tender. 3; | P a g e
.12 e'ittance procedure! of Foreign Currency There are two types of remittance5 1. Inward remittance 3. %utward remittance.
a: In)ard Foreign e'ittance
Inward remittance co"ers purchase of foreign currency in the form of foreign T.T., ., and bills, T.G. etc. sent from abroad fa"oring a beneficiary in Bangladesh. Purchase of foreign e!change is to be reported to $!change control epartment of Bangladesh ban' on 4orm#G.
b: Out)ard Foreign e'ittance@
%utward remittance co"ers sales of foreign currency through issuing foreign T.T. rafts, Tra"elers Ghec' etc. as well as sell of foreign e!change under (JG and against import bills retired.
.1" 0orking of thi! depart'ent@
1. Issuance of TG, Gash ollar JPound 3. Issuance of 4, 4TT purchasing, Payment of the same. 8. Passport endorsement. 0. $ncashment certificate. >. 4JG Account opening filing. 2. %pening of $!port 4G retention Quota AJG maintain. @. *aintenance of ledger of Gash ollar, 4G eposit AJG TG. . *aintain 4BG register follow up 4BG. ;. %pening of )tudent file *aintain. 1:. Preparation of all related statement, Moucher posting.
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11. Preparation of 7ee'ly, *onthly, ?early )tatement for Bangladesh Ban' returns timely. 13. Attending all related correspondence to other Ban' or Institutions.
.1% Finding! of the eport $"ery ban' has its own credit procedure. Ban' under study possesses a standard credit procedure. As the obecti"e of my study is to ma'e a comment on the credit management of &anata Ban' (td., I try my best to collect data for the study and find out the reality. Based on the data generated during my study period I will sum up my findings here and I thin' this will help me to achie"e my obecti"es.
1. If we loo' at the historical bac'ground of &anata Ban' (td., we see that, the obecti"e of &B( is to earn profit as well as to impro"e the economic welfare of the people as a whole. 3. &anata Ban' (td. has a significant role in long term proect financing in both agriculture and industrial sectors. Again &B( has a deep concern for rural farmers. 8. Pri"ate sector usually concentrates in the urban areas where as public sector i.e. &B( spread their ban'ing networ' all o"er the world. 0. 7ith a "iew to implementing go"ernment policies, &B( has been maintaining its position in e!tending credit to go"ernment bodies, sector corporations and pri"ate enterprises. >. Though ban' reuired both uantitati"e and ualitati"e analysis but for big loans ban' emphasizes on the lending ris' analysis 9(6A<. But (6A is not a perfect measure of credit analysis. Because businessmen in our society are usually tempted to ta'e resort of window# dressing that means accounts are so manipulated that the "ital facts are concealed and facts presented are superficial. )o ban's ha"e to go through both uantitati"e and ualitati"e analysis. 2. According to the standard and ban'=s credit procedure, credit operation is started from the customer application to the branch for the loan. But in most cases, many customers go directly to the directors of the ban' and directors send them to the branch offices with hisJher reference. In these cases, proper appraisal is not 81 | P a g e
possible as directors the most powerful persons and ban' management must gi"e priority towards the decision of the directors. This phenomenon is "ery common in the ban' which hampers the spontaneous procedure of credit appraisal. @. Bangladesh Ban' monitors all the policies of all the pri"ate and nationalized ban's of the country. According to the Bangladesh Ban'=s strategy, all ban's must possess the standard policies which are designed by the central ban'. &anata Ban' (td. also possesses a standard credit proposal form. In that form all necessary information are reuired to fill up. But in practice credit officers do not fill up the proposal form properly. *ost of the cases, they use assumption rather than e!act figure. This practice might end up with bad or classified one. . A standard policy starts from the customer=s direct application for the loan in the branch office. But it=s a common phenomenon that most of the customers directly contact with ead office and ead office choose the branch offices to disburse the loan. It hampers the normal procedure. Branches always stay under pressure when they get order for disbursement from ead office. 7hen branches get order from the head office, then appraisal system loses its formal trac'. )o ead office should not send any order to the branch office without prior appraisal. ;. $"ery ban' has its own budget and plan regarding loan portfolio. This loan portfolio must be di"ersified so that ban' could di"ersify its ris'. A proper and preplanned portfolio can eliminate the ris' of huge classified loan or bad loans as this aspect is "ery much sensiti"e toward many e!ternal and internal factors. The ban' under study i.e. &anata Ban' (td. does not ha"e any proper guide line where to in"estC moreo"er they do not do any future plan to maintain a well structured portfolio to decrease the possibility of classified loan. This type of practice is wor'ing as an obstacle in smooth credit disbursement as well as in credit appraisal system. 1:. *ost of the loans that &B( distributes are as cash credit hypothecation and &B( emphasizes less on demand loan. 11. &B( distribute loans without sufficient security in some cases. This is "iolation of the Bangladesh ban' order.
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13. In many cases ban' face this problem because ban'=s credit officer fails to "alue collateral property. Proper "aluation means collateral will e!actly co"er the ris' of bad loan. %fficials must do it with due care. 18. The reco"ery performance of &B( is not in a satisfactory le"el at all and the position of those in that respect deteriorated hea"ily during last two phases. The reco"ery performance in agriculture is worse than in other sectors. %n the other hand, as pri"ate sector ban's distribute more loans on short term basis and relati"ely better than public sector. But if we compare it from the efficiency point, then it is clear that they are not still efficient in credit management as they are unable to reco"er half of their distributed loan in different sectors. 10. uring first phase 1>.@1D of the total loan of &B( became classified and this classified loan came down to 38D in the second phase. 1>. &B does not 'eep enough pro"isions against classified loans and ad"ances. 12. Pri"ate sector ban's are relati"ely efficient in processing and e!ecuting legal actions against defaulters for their nonpayment of loans and ad"ances in due time that of public sector ban'. 1@. The credit management of &B( are not fully conformity with the guidelines prescribed in the ban' companies Act 1;;1 and International Accounting )tanderd#0>9IA)#0><
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Chapter Six
Conc$u!ion and eco''endation
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4.1 Conc$u!ion I ha"e tried my best about the different aspects of Ban'ing in &anata Ban' (td. 4or my report, I ha"e selected &anata ban'. &B( plays an important role in the ban'ing sector as well as in our economy. The success of a ban' depends largely on the efficient credit management. A successful credit management is not only need for a ban'=s own performance but also it is needed for the smooth de"elopment of an economy. In any strategy of economic de"elopment, therefore, it is essential to emphasize the e"aluation of a sound and well integrated credit management system from the "iew point of both resources mobilization and efficient allocation of funds. In conclusion it can be suggested a number of recommendations in order to o"ercome the problems and how to remo"e the causes of problem in credit management.
4.2 eco''endation )ince this an e!ploratory research, hence the recommendation gi"en are not decisions rather they are only suggestions to impro"e the default rate. The recommendations are made on the basis of sur"ey findings.
1. Gentral Ban' should ta'e proper actions for ensuring eui"alent distribution of loans and ad"ances.
3. (ending policies in our country should be geared to growth potential rather than being determined by the pre#e!isting collateral.
8. Ghanges in lending policies will not suffice the purposes unless it is followed by a change in the attitude and out loo' of both the borrowers and the ban'ers.
0. Impro"ement of credit management depends on the de"elopment of rele"ant, adeuate, proper and reliable data base at the public sector ban's as well as pri"ate sector ban's in Bangladesh.
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>. 4or de"eloping a reliable credit management system for the commercial ban's specially &anata Ban', it should reuire to introduce as impro"ed information system within ban' as well as among the borrowers. Because ultimately it is what a borrower does with money that should guide the credit plan, the borrowers also ha"e to 'now e!actly where they are going, what their opportunities and how fast they can mo"e.
2. The security must be "alued properly by the independent "aluers and constantly watched so that the "alue of mortgage property becomes sufficient to reco"er the default loan.
@. Publishing the names of defaulter as well as good and regular payers in "arious dailies and granting "arious sorts of facilities to good borrowers will create a moral persuasion on the borrowers. This may decrease the number of defaulters and the "olume of large outstanding loan amounts as well.
. Pressure from outsider and influence e!torted by borrowers are also a great impediment in the smooth functioning of loan reco"ery process. The role of go"ernment in this case is the most important factor reuired to sol"e these sorts of problem.
;. *ore and more competent personnel must be recruited to reduce the wea'ness of credit management. Gompetent e!ecuti"es will ensure the reduction of wrong appraisal and e"aluation of proects.
1:. Prompt legal actions be ta'en against willful loan defaulters
11. The new entrepreneurs should be encouraged in disturbing loans and those who ha"e the records of regular payment, should be gi"en preference.
13. )teps should be ta'en so that guarantors cannot a"oid their responsibility.
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18. It is obser"ed that the defaulters generally get "arious sorts of e!emptions as declared by the go"ernment from time to time. +o"ernment must not show any 'ind of mercy to the defaulters in any way which may encourage the default culture. This type of action may discourse the borrowers to become willful defaulters.
10. The e!isting huge amount of classified loans demand for special and correcti"e attention for e!ample5 •
By obtaining suitable reduction on amount.
•
Additional security.
•
*ore complete financial data concerning the obligor=s condition or
•
%ther such action as the specific circumstances may reuire.
1>. The attempt to encourage ban's to reuire borrowers comply with ban'ing laws and regulations and clear up industrial properties prior to granting a loan.
12. &B( should follow some straight ward mechanical procedures in assessing the ris' of a borrower.
1@. The formulation of a sound credit policy in the possibility of default loans
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