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Internship Report

On

Foreign Exchange Operations of

Southeast Bank Limited

BRANDEN GOMES

DEPARTMENT OF MANAGEMENT OF INFORMATION SYSTEM

ASA UNIVERSITY BANGLADESH

Prepared For-

VHOKTO KUMAR BISWAS

Department of Business AdministrationASA University Bangladesh

Prepared By- BRANDEN GOMES

ID: 081-12-0327

Major in MIS

Bachelor of Business Administration

ASA University Bangladesh

SUBMISSION DATE: December 28, 2011


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LETTER OF TRANSMITTAL

December 28, 2011

To,Vhokto Kumar Biswas

Supervisor,

Internship Program,

Department of Business Administration,


Subject: Submission of Internship Report.

Sir,

As the Internship Program is an inseparable part of our BBA Program, I was

placed at the Southeast Bank Ltd, Shyamoli Branch to work in the Foreign

exchange section to be acquainted with its details. I am supposed to prepare a

report from my findings in the bank.

I have prepared this report on the Foreign Exchange Operations of Southeast

Bank Ltd and hereby I submit the report for your kind evaluation.

I shall try to answer any query.

Thanking you.

Sincerely yours,

Branden Gomes

ID: 081-12-0327

Batch: (BBA) 3rd



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STUDENTS DECLARATION

I hereby declare that the Internship Report titledForeign exchange

operation Southeast Bank Ltd, Shyamoli branch Dhaka, Bangladesh.

Submitted to ASA University Bangladesh in partial fulfillment of the

requirement for the degree ofBachelor of Business Administration

(B.B.A)

This study is original in nature. I have tried my level best to make this report

as informative as possible. I also assure that, this report has not been

submitted to any other person earlier and will not be submitted to anybody in

the future.

Branden Gomes

ID: 081-12-0327

Batch: 3rd

Major: Management Information System



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CERTIFICATE OF SUPERVISOR

This is to certify that the Internship Report on Foreign exchange

operations of Southeast Bank Ltd in the bona fide record at the report is

done by Branden Gomes as a partial fulfillment of the requirement of BBA

degree from the Department of Business Administration, Faculty of Business,

ASA University Bangladesh.

The report has been prepared under my guidance and is a record of the bona

fide work carried out successfully.

______________________

Vhokto Kumar Biswas

Department of Business Administration



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ACKNOWLEDGEMENT

First of all, I am grateful to an almighty GOD and express my gratitude to Himfor enabling me the strength and opportunity to complete the report

successfully in time.

I am deeply indebted to my internship Supervisor, honorable Sir Vhokto

Kumar Biswas Department of Business Administration, ASA University

Bangladesh. For his continued help and co-operation.

I am also grateful to Mr. Mojammel khan, Senior Officer, Southeast Bank

Limited, Shyamoli Branch, who provided me the supreme support for

preparing the report as my supervisor at host organization.

I would also like to take this opportunity to thank Mr. Ferdous hossain, junior

officer of GB. Mr. Md. Masum miah principal officer of FE, Manager Operations

Mrs. Mahmuda, and all others executives and officers of Southeast Bank

Limited, Shyamoli Branch for lending their helping hands whenever required.

Without their valuable advice and guidance my internship program would not

have come to successful fruition.

I am also grateful to my parents who inspired me all along.

Finally, I would like to convey my gratitude to all my teachers, classmates, and

many others who co-operated me during the last three months of my

internship Program.

Branden Gomes

ID: 081-12-0327


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Batch: (BBA) 3rd


List of Abbreviations

list Abbreviations

GB General banking

CCI & E Chief Controller of Import and Export

CIF Cost, Insurance and freight

FBP Foreign Bill Purchase

FCAP Foreign currency account pound

FCAD Foreign currency account dollar

IRC Import Registration Certificate Number.

LBP Local Bill Purchase

L/C Latter of Credit

LG Latter of Guarantee

LIM Loan Against Import Merchandise

LTR Loan Against Trust Receipt

FCAP Foreign currency account pound

PAD Payment Against Documents

PSI Pre Shipment Inspection

PI No Pro-forma invoice number.

CIF Cost, Insurance and freight

FBP Foreign Bill Purchase

FE Foreign exchange.

TT Telegraphic Transfer.

TC Travelers Cheque.

FE Foreign exchange

ERC Export registration certificate number


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Table of content

Title page Page no

Letter of Transmittal I

Students Declaration II

Internship Certificate III

Certificate of Supervisor IV

Acknowledgement V

List of Abbreviations VI

Chapter #01

1.1 Executive Summary 1

1.2 Rationality of the Study 3

1.3 Objective of the Study 3

1.4 Scope of the Study 3

1.5 Limitation of the Study 4

1.6 Methodology of the Study 4

Chapter #02

Profile of the Bank

2.1 Historical Background 5

2.2 Southeast Banks Future Outlook in 2011 7

2.3 SEBLs Vision 8

2.4 SEBLs Mission 8

2.5 SEBLs Core Values 8

2.6 SEBLs Core Strength 9

2.7 SEBLs Client Commitment 9

SEBLs Corporate Culture 9


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2.8 Business Objective of Southeast Bank 10

2.9 Performance Analysis and Findings 11

2.10 Physical and Technological Resources 13

2.11 Ten years at a Glance 21

2.12 SWOT Analysis for SEBL 28

Chapter #03

Foreign Exchange Operation

3.1 Activities of Foreign Exchange 29

3.2 Import 29

3.3 Export

3.4 Foreign Remittance

3.5 Export Finance 32

3.6 Import Finance 33

3.7 Remittance 34

3.8 Foreign Risk Management 36

3.9 Foreign Currencies Translator 38

Chapter #04

Findings 41

Chapter #05

Conclusion 43

Chapter #06

Recommendation

Bibliography


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Chapter #01

1.1 Executive Summary

Southeast bank limited, a second generation private bank, emerged in 1995 amid

liberalization of global economies. Currently, its authorized capital is Tk.10, 000.00

million and its capital and reserve reached 17,095.90 million as of December 31,

2010. Its vision is to stand out as a premier banking institution in Bangladesh and

contribute significantly to the national economy.

The Bank, in the meantime, successfully completed 16th year of banking operations

recording significant growth in all the performance indicators. In, 2010 the bank

earned an after tax profit of Tk. 2,763.13 million. The deposit of the bank grew by 11

percent to Tk 107,0729.59 million and advance by 19 percent to Tk. 92,452.62 million

compared to those of 2009.During the last five years (2006-2010), the bank achieved

an average annual growth of 23 percent in deposit, 23 percent in advances,37

percent in export and 30 percent in import and 76 percent in remittance. During the

last six years, the export volume increased by three times to Tk 58,158.06 million and

foreign remittance increased by eight times to Tk. 28,082.25 million.

Operational excellence coupled with qualitative improvements continued to be ofparamount importance to the bank. At present, the bank has 76 branches and 2 Off-

Shore units across the country. Plans have been drawn to raise another 10branches

and at least 10 more SME / Krishi branches in 2011.Our journey towards greater

operational success continues with increased energy and enthusiasm.

As we face the stiff challenges ahead on the way to further improving the profitability

of the bank, we rely on our skilled and experienced workforce. Our strengths are our

close and cordial partnership with customers, our firmly anchored presence in the

countrys strategic places of commercial and business importance and global reach

through our correspondent banks for expansion of foreign trade, foreign exchange

and remittance business. Our product-basket encompasses real time online branch

banking, Islamic banking, Merchant banking, Dual currency visa credit card, Visa

travel card, ATMs, Education loan scheme, Double benefit scheme, Consumer loan,


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Millionaire deposit scheme, SME banking, Corporate banking, Syndicate loan, Monthly

savings scheme, Monthly income scheme, Pension saving scheme, Wage earner

pension scheme, SMS banking etc. in addition to our traditional credit and foreign

trade related products and services.

High quality customer service through the integration of the latest and state of the art

banking technology and products is our tool to achieve success. Customers are our

first priority. We are trying hard to provide a system of one-stop shopping for

customers by providing a spectrum of services. Our employees have mastered new

technology, enhanced their product knowledge and honed their skill to help

customers meet their financial goals. We want to be the best at helping customers

become financially better off by providing free advice, innovative leading-edge

financial solutions, choice and convenience. Whether our customers are individuals,small businessmen, or commercial clients, we aim to deliver the best customer

service by meeting their unique and different needs in a professional, ethical, friendly

and knowledgeable manner.

We are pledge-bound to turn southeast bank into a modern banking institution,

dynamic in actions, progressive in programs, honest in dealing, just in judgment,

futuristic in attitude, fair in approaches and devoted to high quality service to

customers. Our charted plans are aimed at boosting modern management, advance

technology, good profitability, sound financial strength and fair image of the bank. We

are firmly committed to transparent, responsible and accountable corporate

governance with the participation of our strong and most capable team of

professionals and under the prized policy directives and guidance of the board of

directors of the bank.

Southeast bank limited carries out business activities with due respect to its values

and norms and with an understanding of the importance a large financial institution

has for the society and the environment. It is moving fast to green banking. The bankwants to ensure its shareholders a competitive return in line with the best among

peer institutions.


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1.2 Rationality of the study:

Internship program is the practical aspect of our theoretical learning. It makes a

bridge between the gap of classroom learning and practical learning. In this view,

Internship plays a pivotal role for each professional degree like BBA. The study willhelp formulate suitable policies taking into consideration different ideas, suggestions

and feelings of the customers and bankers. Furthermore, it may note that Southeast

Bank executives who are really executing the policies undertaken by the top

management will have a chance to communicate their interaction and provide

necessary feedback.

1.3 Objective of the Study

1.3.1 Primary objective:

The primary objective of this report is to familiar with the working environment of

present institutions. And also fulfill the requirement of BBA theoretical knowledge

gained from the coursework of the BBA program in a specific field.

1.3.2 Secondary Objective:

To understand and analyze the overall activities of Southeast Bank Limited.

To evaluate the foreign exchange activities and techniques of Southeast Bank

Limited.

To relate the theoretical learning with the real life situation in practically.

To know the procedures, systems of the foreign exchange operations of South-

east Bank.

To know the banking system and banking job.


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1.4 Scope of the study:

The Report mainly focuses on the following areas:

The kinds of foreign exchange facilities extended by Southeast Bank Limited.

General procedures for getting those foreign exchange facilities.

What kinds of standard documents are required for getting those international

trade facilities

How different kinds of projects are appraised and financed at Southeast Bank

Limited.

Present scenario of recovery rate and classified transactions of Southeast

Bank.

1.5 Limitation of the Study:

All the time of preparing my report I tried to gather every details of process but

the major limitation is lack of adequate information,

Lack of opportunity to visit more than one branch

Sufficient records, publications were not available as per my requirement.

Time constraint.

Non-cooperative behavior of some officials of the bank.

3 months are very short time to prepare this.

1.6 Methodology of the study:

To make the Report more meaningful and presentable, two sources of data and

informations have been used widely.


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Both primary and secondary data sources were used to generate the report.

1.6.1 Primary Data sources:

Practical banking work.

Personal discussion with the officers and executives of Southeast Bank Limited.

Personal interview with the customers.

1.6.2 Secondary Data sources:

Annual Report, Publications, Training materials of Southeast Bank Limited.

Periodical statements of the Beak, Brochures, Booklets etc.

Office circular

Chapter #02

Profile of the Bank

2.1 Historical Background:

Southeast Bank Limited is a scheduled Bank under private sector established under

the ambit of bank Company Act, 1991 and Incorporated as a Public Limited Company

under Companies Act, 1994 on March 12, 1995. The Bank started commercial banking

operations effective from May 25, 1995 during this short span of time the Bank had

been successful to position itself as a progressive and dynamic financial institution in

the country. The Bank had been widely acclaimed by the business community, from

small entrepreneur or large traders and industrial conglomerates, including the top

rated corporate borrowers for forward-looking business outlook and innovativefinancing solutions Thus within this very short period of time it has been able to

create an image for itself and has earned significant reputation in the country's

banking sector as a Bank with vision. Presently it has sixty three branches in

operation.


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The emergence of Southeast Bank Limited at the function of liberation of global

economic activities, after URUGUAY ROUND has been an important event in the

financial sector of Bangladesh. The experience of the prosperous economies of Asian

Vision" has been preciously the essence of the legend of bank's success. Southeast

Bank Limited has been awarded license by the Government of Bangladesh as a

Scheduled Bank in the private sector in pursuance of the policy of liberalization of

banking and financial services and facilities in Bangladesh. In view of the above, the

up capital adequacy requirement of Bangladesh bank

Commercial Banks are one of the key contributors to die economy of Bangladesh. The

allocate die capital resources to the proper development agencies. People and the

government itself are very much dependent on the services provided by these banks

in the financial market for the process of economic development to function properly.Commercial banks act as financial intermediaries by performing the function of

mobilization the funds from one group and lending the same to another while making

a reasonable amount of profit after meeting the cost of funding. Lending is said to be

the clients. There are various types of loans and advances through which the bank

exercises the function of Lending.

It is well recognized that there IB an urgent need for better-qualified manage-

ment and better-trained staff in the dynamic global financial market

Bangladesh is no excepting of this trend Banking sector in Bangladesh is facing

challenges from different angles though its prospect is bright in the future Mon-

ey and Banking is the center around which all-economic science clusters. So

this report is carried on to find out the problems faced for by Southeast Bank

and recommend some measures to overcome these problems for economic de-

velopment of Bangladesh.

And carefully developed, disguised queries, trend and growth rate analysis, ratioanalysis, graphical presentation such as pie chart, bar, graphs have been used. Raw

data collected from various sources required to be processed, edited for the purpose

of the study.


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For this study mainly secondary source of data had been relied on, because

secondary data can be an immediate and cost effective means to gaining valuable

insight into research issues, provided that the information comes from reliable and

timely sources. Its sample was small and no representative. The research has been

started with secondary data and preceded to primary data only when the secondary

data sources have been exhausted or yield marginal returns. An analytical approach

has been followed to conclude the decisions.

2.2 Southeast Banks Future Outlook in 2010

1. Increase our market share both in the corporate and retail banking sector.

2. Strengthen our technology platform to install highly efficient and cost effectiveproducts solutions for the customers.

3. Enhance our corporate brand image through promotional campaigns and mar-

keting activities.

4. Expand our remittance mobilizing activities, design special scheme for wage

earners to give them highest level of benefit and convenience.

5. Maintain high standard for asset quality through disciplined credit risk manage-

ment and risk monitoring.

6. Participate in the viable projects under PPP (Public Private Participation) in pow-er and energy sector.

7. Strengthen our syndication and club financing operations.

2.3 SEBLs Vision:

The vision is to be a premier banking institution in Bangladesh and contribute

significantly to the national economy.

2.4 SEBLs mission:

High quality financial services with state of the art technology.

Fast & accurate customer service.

Sustainable growth strategy.

Follow ethical standards in business.


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Steady return on shareholders' equity.

Innovative banking at a competitive price.

Attract and retain quality human resource.

Commitment to corporate social responsibility.

2.5 SEBLs Core Values:

Integrity

Respect

Fairness

Harmony

Team spirit

Courtesy

Commitment

Service Excellence

Insight and Spirit

Enthusiasm for Work

Business Ethics

2.6 SEBL's Core Strengths:

Transparent and quick decision making;

Efficient team of performers

Satisfied customers

Internal control

Skilled risk management

Diversification


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2.7 SEBLs Client Commitments:

Our customer is focused modem banking institution in Bangladesh. Our businessmotives center on the emerging needs of the market our commitments to the clients

re the following:

Provide service with high degree of professionalism and use of modern technol-

ogy.

Create life-long relationship baaed on mutual trust and respect.

Response to customer needs with quickness and accuracy.

Sharing their values and beliefs

Grow as our customers grow.

Provide products and services at Competitive pricing

Ensure Safety and security of customers' valuables in Crust with us.

2.8 SEBL's corporate culture:

Southeast Bank is one of the most disciplined Banks with a distinctive corporate

culture. The people of bank can see and understand events, activities, objects and

situation in a distinctive way They mould their manners and etiquette, character

individually to suit the purpose of the Bank and the needs of the customers who are

of paramount importance to them The people in the Bank see themselves as a tight

knit team/family that believes in working together for growth. The corporate culture

they belong has not been imposed; it has rather been achieved through their

corporate culture.

2.9 Business Objectives of Southeast Bank:

Make sound investments.

Meet capital adequacy requirement at all the time.


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Ensure a satisfied work force.

Ensure 100% recovery of all advances.

Focus on fee-based income.

Adopt an appropriate management technology

2.10 Corporate Slogan:

.....A bank with vision

2.11 Performance analysis and Findings:

The capital and reserve of the bank as on 31st December,2010 are append

below:

2.11.1 Capital and reserves:

(a) Core Capital(tier-I Capital): Taka in million

Paid up capital 6930.84

Statutory reserve 3265.60

General reserve 337.65

Retained earnings 2078.87

Total capital 12612.96

(Supplementary capital was 17095.90)


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2.11.2 Resources and Capabilities

SOUTHEAST Bank Limited is well prepared to and capable of meeting the demand for

a broad range of banking services. It has got adequate resources, both human and

physical, to provide the customers with the best possible services.

2.11.3 Physical and Technological Resources

A great deal of investment for developing the physical resource base of the Bank hasbeen made. The Bank has its presence in all the major industrial and commercial

hubs of Bangladesh in order to cater to the needs of industry and trade. At present,

there are sixty-three conveniently located branches throughout Bangladesh. There

are most of the branches in the capital city of Dhaka, each and every division there

are one more branches and almost every district there have at least one branch.

Financial Stability (Taka in million)

Authorized Capital December, 2010 10,000.00

Paid - up Capital December, 2010 6930.84

Total Capital (Tier I + Tier II) December, 2010 17,095.90

Deposit December, 2010 107,729.58

Advances December, 2010 92,452.62

Investments December, 2010 18,327.65

Operating Profit December, 2010 6,754.94

* Initial public offering of shares of Tk. 150.00 million was completed in

1999


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Major features of these branches are:

Fully computerized accounts maintenance.

Well decorated air conditioned facilities.

A fully operational computer network which is currently being implemented.

The work of Local Area Network (LAN) and Wide Area Network (WAN) installation

having reliable and secured communication between the branches and the Head

Office is in progress to facilitate any Branch Banking and ATM Services.

Money counting machine for making cash transactions easy and prompt.

Forty six out of sixty three branches are authorized dealers of foreign ex-

change. This facilitates speedy disposal of transaction of export and import trade.

Like any other financial intermediaries, SOUTHEAST Bank Limited is no exception in

performing its core functions viz. Mobilization of fund and utilizing such mobilized

fund for profitable purposes.

212.1 Mobilization of fund

The main sources of fund for the Bank are:

I. Deposit, and

ii. Borrowing

2.12.2 Deposit:

2.12 Monetary/Financial Resources


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Deposit is the mainstay of the Bank's sources of funds. Following usual practices, it

collects deposit through:

a. Current Deposit

b. Savings Deposit

c. Term Deposit

2.12.3Borrowing:

Apart from deposit, SOUTHEAST Bank Limited received funds from:

Bangladesh Bank

Asian Development Bank (ADB)

A German development bank. All of these funding sources are for relatively

longer period. Receiving the credit lines from ADB has been a recognizing of the

Bank's highly satisfactory performance.


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Five years performance at a glance: (2006-2010) (million in taka)

Particulars 2009 2008 2007 2006 2010

Authorized Capital 10,000.00 3,500.00 3,500.00 3,500.00 10,000.00

Paid up Capital 3,422.64 2,852.20 2,281.76 2,112.74 6930.84

Reserve Fund / Others 6,504.62 4,804.81 4,186.60 2,828.18 10,165.06

Deposit 96,669.05 68,714.67 55,474.05 46,056.18 107,729.58

Advance 77,497.57 60,281.26 48,164.60 41,147.28 32,551.09

Investment 21,350.23 12,299.61 8,462.86 6,265.55 18,327.65

Import Business 69,582.92 58,019.77 38,470.34 35,125.12 103,726.70

Export Business 46,724.47 42,178.60 28,771.36 25,874.61 58,158.06

Guarantee Business 11,916.74 15,078.99 9,008.32 8,656.80 22,781.19

Remittance Business 23,800.00 15,221.87 11,040.17 13,479.83 28,082.25

Total Income 13,702.25 10,250.13 8,670.47 6,766.11 16,071.33

Total Expenditure 9,087.79 7,237.55 5,754.27 4,703.45 9,316.39

Operating Profit 4,614.66 3,012.58 2,916.20 2,062.66 6,754.94

Net Profit after Tax

and Provision1,870.19 887.24 1,222.97 909.88 2,763.13

Fixed Assets 4,338.35 2,685.56 1,708.11 1,300.39 4463.08

Total Assets 112,676.98 81,181.53 64,370.69 53,706.12 131,943.48


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Total Income:

Amount in Total Taka

Year 2006 2007 2008 2009 2010

Income 6766.11 8670.47 10250.13 13415.21 16071.33

Source: Annual Repot 2010


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Import business:

Figure2: Import business

Amount Million in Taka

Year 2006 2007 2008 2009 2010

Import 35125.12 38470.34 58019.77 69582.92 103726.70

Source: Annual Report 2010

Export business:


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Figure 3: Export Business


Year 2006 2007 2008 2009 2010

Export 25874.6

1

28770.3

6

42178.6

0

46724.4

7

56158.0

6

Foreign Remittance:


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Figure 4: Remittance:


Year 2006 2007 2008 2009 2010

Remittanc

e

11040.1

7

13579..8

3

15221.8

7

23779.2

0

28082.2

5

Source: Annual Repot 2010

Total Capital:


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Figure 5: Total Capital


Year 2006 2007 2008 2009 2010

Capital 4640.92 6468.36 7657.01 9927.16 17095.9

0

Source: Annual Report 2010

Operating Profit:


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Figure 6: Operating Profit


Year 2006 2007 2008 2009 2010

Operating

Profit

2662.66 2916.20 3812.58 4614.66 6754.94

2.12.4 SWOT ANALYSIS FOR SEBL:


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SWOT is a short form that is used to describe the particular strengths, weakness,

opportunities and threats that are strategies factors for a specific company. For the

Southeast Bank Limited I found it as follows:

Strengths:

Efficient management. Leading Retail loan providers Better employee relations. Better location of the branch. Better financial standing. Interesting consumer schemes. Quick delivery of foreign ex-

change.

On line Banking ATM facility Simultaneously Islamic Banking

Opportunities:

Market leadership. Growth of the banking sector. Different consumer service scheme

of the SEBL.

Make the goodwill. Perform more quickly services. Go beyond the national boundaries. SMS banking.

Weakness:

Inadequate work force. Conservative loan facility. Profit rate is less than others. Lack of sufficient own ATM

booths

Threats:

Political instability. Intense competition. Government rules and regulation. Economical variation. Policy of competitive banks.

CHAPTER # 03


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Foreign Exchange Operations

3.1 Activities of Foreign Exchange:

There are three kinds of foreign exchange transactions:

Import

Export

Remittance

Under the import policy of Bangladesh the Importer has get the valid Import Registra-

tion Certificate (IRC) from the Chief Controller of Import & Export (CCI&E).

Letter of credit (L/C)

Letter of credit means any arrangement whereby a Bank (the issuing Bank) is

committed (on behalf of the buyer/applicant) to pay certain amount at the sellers

disposal under some agreed conditions.

Types of documentary credit

Documentary credit may be of three types

Recoverable credit

Irrecoverable credit

Add confirmed credit

Recoverable credit:

3.1.1 Import


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This type of credit can be cancelled or amended at any time by the issuing Bank

without prior notice to the seller. It is not in use.

Irrecoverable credit:

This type of credit cant be cancelled or amended by the issuing Bank without

agreement of parties concerned thereto. All the credits issued in our country are of

recoverable nature.

Add confirmed credit:

When a third Bank provides guarantee to the beneficiary to make payment, if issuing

Bank fail to make payment, the L/C is called confirmed L/C. In case of a conformed

L/C a third Bank adds their confirmation to the beneficiary, to make payment, inaddition to that of issuing Bank. Confirmed L/C gives the beneficiary a double

assurance of payment.

Special documentary letters of credit:

The following five major steps are involved in the operation of a documentary letter of

credit:

Opening

Advising

Amendment

Presentation

Settlement

Import Financing:

The post import finance extends the import credit in the following forms:

PAD (Payment against documents)

LTR (Loan against trust receipt)

LIM (Loan against imported merchandise


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Under the export policy of Bangladesh, the exporter has to get the valid export

registration certificate (ERC) from chief controller of import & export (CCI&E). The ERC

is required to renew every year. The ERC number is to be incorporated on export

Form & other paper connected with exports.

Receiving the letter of credit:

After getting contract for sale, exporter should ask the buyer for L/C clearly startingterms & condition of export & payment.

Procuring the materials:

After knowing that the L/C has opened in his favor, the next step for the exporter is to

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

exporter has to procure the raw materials from another supplier (local or abroad) he

has to open Back-to-Back L/C.

Back-to-Back L/C:

Back-to-Back L/C is one type of L/C, which is opened against lien on a valid export L/C.

It is opened for inland & abroad as well. Bank will supply the following

papers/documents for opening a Back-to-Back L/C.

L/C application form

LCA form

IMP form

Charge document papers

3.2 Export


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The above papers must be completed, filled & signed by the party there to. The party

will submit the entire filled document along with application in printed form of the

designated Bank which is also an agreement between application & the Bank.

Export Financing:

An export is who exports the goods to another customer whether in domestic country

or in abroad. In exporting the stipulated goods he may require financing. So export

financing may be required at two stages.

Pre shipment credit

Post shipment credit

Pre shipment credit:

Pre shipment credit is the credit, which is given to finance the export activities of an

exporter for the actual shipment of goods. The purpose of each credit is to meet the

working capital needs from the procuring of raw materials to the transportation of

goods for the export the foreign country. Before sanctioning of that credit the Bank

takes into consideration the credit worthiness, export performance of the exporterstogether worthiness all other information required for sanctioning the credit in

accordance with the existing rules & regulations.

Post shipment credit:

There is a time gap between export of the goods and realization of the proceeds. So

exporter may require finance in that period to continue his business. So Bank may

finance against export documents ensuring the following:

Export documents comply with the credit terms

Partys past performance is satisfactory

Any other security in case of exporting under contract



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Foreign remittance means remittance of foreign currencies from one place/person to

another place/person. In broad sense, foreign remittance includes all sale and

purchase of foreign currencies on account of Import Export, Travel and otherpurposes. However, especially foreign remittance means sale & purpose of foreign

currencies for the purposes other than export and import. SOUTHEAST Bank Limited

performs the remittance function with different countries. It maintains the foreign

remittance in the following form:

Foreign Demand Draft

Inward Remittance

Outward Remittance

Foreign Demand Draft (FDD):

A foreign demand draft is a negotiable instrument issued by a Bank drawn on other

Bank with another country the instruction to pay a certain amount to the beneficiary

on demand. Remittance through demand draft may be inward or outward.

Inward Remittance:

Inward remittance refers to the extent where the bank makes payment to the client

against foreign demand draft. Bank will make payment to the client by verifying the,

test number, and signature of the authorized officer.

Outward Remittance:

It refers to the extent where by the bank issues foreign demand draft. The bank

charges TK.300 per Demand Draft.

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

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

TM Form: For all other outward remittance from TM is used.


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Western Union Money Transfer Services

Western Union, a global leader in money transfer service, helps to send money to

loved ones quickly and reliably with convenience and control through more than

245,000 Western Union Agent locations in over 200 countries and territories. Western

Union money transfer service is ideal for transferring money virtually at anytime,

anywhere, providing a high level of security, flexibility and reach with the fastest,

easiest money transfer solutions. With the signing of the Representation Agreementbetween Western Union Financial Services, Inc., U.S.A. and Southeast Bank Ltd.,

Bangladeshi Wage Earners abroad can now send their hard - earned money through

Western Union and their families and friends can receive the money in minutes by

visiting any of the 53 branches and 10 SME locations of Southeast Bank Ltd. all over

Bangladesh. The Beneficiary does not have to pay any fee to receive the money

transfer.

With Western Union and Southeast Bank Ltd., money transfer has never been so

easy; it is a 3 step process:

The sender will receive money receipt with Money Transfer Control Number(MTCN) from any of the Western Union agent location outside Bangladesh after

depositing money.

The sender will inform the money transfer detail (amount of money sent,sender's name, receiver's name, destination country, and MTCN) to the receiv-

er.

The receiver will receive the money from any of the 63 Branches of SoutheastBank Ltd. by showing a valid Identification and filling a form.

Money transfers can be received from 10:00 A.M. to 4:00 PM on Sunday through

Thursday and from 10:00 A.M. to 12:00 PM on Saturday in 17 Authorized Dealer

branches.


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From the above discussion we can detail the term foreign

exchange operations:

Foreign trade finance:

So far the bank has established correspondence relationships with as many as 22

foreign banks in order to facilitate foreign trade. The Bank handled total export

business of Taka 46,724.47 million and import business of Taka 69582.92 million in

2009.

The Banks export and import business grew by 8.61 percent and 19.45 percent

respectively. Major items of exports were ready made knit & woven garments,

sweater, jute products, leather and leather goods, handicrafts etc. Items of import

included mainly industrial raw materials, garments accessories, and capital

machinery, raw cotton, electronic consumer goods, chemicals, tires and tubes,

reconditioned vehicles, bicycle spare parts, food items such as rice, wheat, garlic,

onion, sugar, chilly and other essential commodities.

In case of export business finance is perceived as one of the important elements. It is

linked to nearly all the stages of conversion cycle- procurement of raw materials,

processing of goods, packing storage, transportation to the port, shipment to the buyer,

assembling of shipping documents & finally, collection of payments. The term Export

Finance should therefore mean moneys needed by an exporting farm at each stage of

the conversion cycles.

Export financing sectors of SOUTHEAST Bank Limited:

3.4 Export Finance


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Export financing can play a vital role in the development process of Bangladesh. With

earning on export we can meet our import bills. The export trade is always

encouraged because the major portion of foreign exchange earnings is derived from

export. Because of shortage of adequate capital exporters have to come in contact

with commercial bank and financial institution to get finance from them. SOUTHEAST

bank Limited as a state-owned scheduled bank provides certain facilities to the

exporters to boost up export earnings.

The traditional & non-traditional sectors in which SOUTHEAST Bank Limited provides

export-financing facilities are as follows:

Ready Made Garments in all sorts.

Jute manufactures

Jute - raw

Fish & Prawns.

Hides, Skins & Leather.

Tea

Fertilizer etc.

Export financing system of SOUTHEAST Bank Limited:

Bangladesh as a developing country depends mainly on foreign exchange earning for

its development activities. The major portion of foreign exchange earnings is derived

from export obviously, to boost export, government provide certain incentives to the

exporters namely:

Export Financing

Development Financing

Export Credit Guarantee Scheme

Export performance benefits

Duty draw back


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Rebate on duty & tax

Income tax rebate

Insurance premium rebate

Conditional cash subsidy to Garments Industry , vegetables, handicrafts etc

PRE-SHIPMENT & POST-SHIPMENT:

In Southeast Bank Limited export finance is required by the exports at two stages

namely

Pre-shipment & Post-shipment stages:

1. Pre-shipment: It is required to purchase of raw materials, to meet cost of

production, procurement of exportable goods, packing, transport, payment of

insurance premium, inspection fee, freight charges, ware housing etc.

2. Post-shipment: It is required by the exporters after actual shipment of

goods in order to bridge the period between shipment of the goods and receipts of

sales proceeds from abroad.

An exporter owns resource may not be adequate to meet all such expenses. So he / she

have to come in contact with commercial bank and financial institutions to get finance

from them. As a state owned scheduled bank Southeast Bank Limited provides credits to

exporters at a consideration rate of interest as an export promotion measure as per

government directive.

Export Form:

The customer, now issued by the authorized dealers, must declare all export of which

the requirement of declaration of exchange control manual of Bangladesh Bank applies on

the Export Forms.

Disposal of Export Forms:


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Original:From custom authority to Bangladesh Bank (ECD) after shipment goods.

DuplicateFrom negotiating bank to Bangladesh Bank after negotiation.

TriplicateFrom negotiating bank to Bangladesh Bank after realization of the proceed

of the exportbil l.

Quadruplicate Retained by the negotiating bank as office copy.

Export Development Fund:

The main objective of creating an export development fund at the Bangladesh Bank is to

assure a continued availability of foreign exchange to meet the import requirement

of non-traditional manufactured items, this facility is available to the non-traditional

exporters, particularly newer exporters, exporters diversify into higher value export

and exporters diversify into new markets. An exporter identified above is eligible on the

basis of the conditionally stated below: -

One must be an exporter of non-traditional manufacturing items.

The loan should be utilized in the case of importing raw materials for manu-

facturing the exportable products.

The exporter must have an export letter of credit.

One must create a back-to-back for importing raw

materials.

The period of loan is 180 days.

Scrutiny of Export Document:

After the shipment of goods the exporters submit export documents to authorized

dealer for negotiation of the same. As bankers deal with documents only, not with

commodity they are required to be very much careful about the genuineness and

correctness of the documents evidencing shipment of the respective commodities. The

bankers are to ascertain that the documents are strictly as per the terms of letter of credit.

Before negotiation of the export bill, the bankers are to scrutinize and examine each &


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every document with great care. Negligence in the part of the bankers may result in

non-repatriation or delay in realization of proceeds as incorrect documents may put the

importers abroad into unnecessary troubles. The scrutiny procedure is as follows:

I. Scrutiny of Draft or Draft of Exchange:

The draft should be drawn by the party indicated as the beneficiary of the

credit i.e. the exporter; drawer must be in accordance with the terms of the credit.

The tenor and amount of the draft be in conformity with the credit terms.

The bill of exchange should be properly stamped if necessary with the req-

uisite value and the cost must be recovered from the drawers unless it is pro-

vided otherwise in the letter of credit.

The draft or bill must bear the correct date and must be drawn or endorsedto the order of the bank.

The drawer's signature must be verified.

II. Scrutiny of invoice:

The physical description of the goods i.e. price, quantity, quality, markings

etc. in the invoice must correspond with the specifications in the credit.

If the credit stipulates a consular invoice, the requisite invoice should be

furnished.

All copies must be signed and certified as correct shipper.

If the credit stipulate for any other particulars to be stated in the invoice

these must complied with. It should not include charges such as postage; cable

etc. unless specifically authorized under the credit.

III. Scrutiny of shipping bill:

The bill of lading should be a full set clean on board ocean bill of lading, un-

less the credit stipulates otherwise. 'Received for shipment' bills of lading must

not be accepted unless permitted by the credit.

It must agree with the invoice as regards quantity and description of

goods as well as in respect of ports of shipment and destination.


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The bill of lading must also indicate where it is 'freight paid' (C & F, GIF)

or freight payable at destination (FOB transaction).

Transshipment and port shipment clauses in the shipping bill should

be in accordance with credit terms and the provisions of the uniform custom

and practice.

Credit frequently stipulates for shipment not letter than a specified date.

Bill of lading must be examined to ensure that these are dated not later than

the date mentioned.

Must be properly signed by or behalf of the carries, must be properly

stamped

and must be endorsed, expect when the relative credit stipulate for bill of lading

to order of a named firm.

Dock shipment not permitted unless specifically authorized and cov-

ers by insurance.

Bill of lading must not be a stale one.

IV. Scrutiny of Insurance:

Where insurance is to be effected by the beneficiary for GIF consignment, the policy

accompanying the documents should be examined to ensure:

That the insurance covers the merchandise for the value stipulated in the

credit.

That the document is of the class stipulated in the credit.

That the insurance documents describe the merchandise covered and men-

tion the name of the carrying steamer. In case where 'on board' bill of lading

are not presented the following clause or words of similar indent must follow the

name of the steamer' and / or 'following steamer'.

That all risk stipulate in the credit is properly covered in the insurance

documents. When the credit stipulates that 'all risk' are be covered, it is not

sufficient that various risks are mentioned but a clause to the credit that 'all risk'

are covered, is required.


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That the policy is in the name of the bank and the importer.

That the party designed in the documents to perform such act properly

countersigns the insurance document.

That the insurance document complies with the conditions of the letter ofcredit is in negotiable form that it is endorsed by the party to when the loss

payable, unless the credit stipulates that the insurance must be issued 'loss

payable to a specified party in the country of destination'.

That the date appearing on the insurance document is not later than the

date appearing on the bill of lading.

That the insurance document covers transshipment when the bill of lad-

ing indicates that transshipment would take place.

That the insurance claims are payable at the port of destination, that insur-

ance certificate / policy acknowledges the payment of the premium.

V. Scrutiny of other documents:

The other documents i.e. certificate of origin, packing list, weight / measurement

certificate, inspection certificate, survey report, quality control certificate etc. should be is-

sued or signed by the proper authorized and description of 'export - order' given in

these documents not be in contradiction to the credit terms.

RISK OF EXPORT FINANCING:

In the trade - there are so many risk factors involved. In banking sector - the bank face

risk basically from loans & advances and foreign exchange. In this section I discuss the risk

of Export Financing While there are many advantages to exporting it is not without risk.

In deed there are often factors present in international market, which make foreign

exchange substantially more risky than domestic ones, including the credit risk of non-payment or non-acceptance of the merchandise by the buyer. For international sales,

these risks are far more pronounced than they are domestically. For these reasons

Southeast Bank Ltd also accompanied with elements of uncertainty some which are as

follows:


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I. Commercial risk:

II. Political risk:

III. Informational risk:

IV. Pre-shipment export credit risk:

All over the world there is no country, which can meet its requirements from its own

sources. Some imports raw materials, some finished goods & some food products or

other commodities. As it is in export & import are invariably conducted through

commercial banks. BASIC Bank Limited is engaged to extend the facilities to the importers.

After getting the completed registration, application for opening letter of credit is made

through a bank where applicant has a current account. An importer is required to fill up

import application form & letter of credit authorization form (LCAF) & importer has to

deposit margin money to the bank from 5% to 40% of the import value, depending on the

credibility of the importer. After the letter of credit is established the exporter after

executing the export, submits the negotiable document through its bankers and in

terms of exporters bank submit the documents to the corresponding bank of the importer's

bank in the country. If the documents are found correctly fulfilling all the terms &

conditions stipulated in the letter of credit the corresponding bank of import's bank will

realize payment that will debited to the importer's account. In banking term this is known

as PAD and the importer has to pay the PAD amount in 30 days with the bank interest rate.

3.5. Import Finance


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After 30 days when importer is unable to pay the PAD amount, he can take documents but

the PAD turns into Loan against Trust Receipts (LTR)

Import financing sectors of SOUTHEAST Bank Ltd:

SOUTHEAST Bank Limited is one of the financers of import business in our country. In

extend credit, grant and other facilities SOUTHEAST Bank Ltd finance to the following

sectors:

Machinery & transport equipment.

Petroleum & petroleum products

Textile, yarn, fabrics, article & related products

Chemicals

Bicycle parts

Iron & steels

Cereal & cereal preparations

Dairy products & eggs

Other including loans & grants.

Import financing system of SOUTHEAST Bank Limited:

Registration of import

Income tax registration certificate

Partnership deed in the cases of partnership concern

Certificate of registration with the register of joint stock companies

Articles & Memorandum of association in the case of limited companies.

Nationality certificate & Bank certificate

Ownership documents in place of business

Trade license from the relevant authority.


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Survey clearance from the relevant authority

Other documents prescribed in the import policy.

Import Registration Certificate (IRC):

In case of import, IRC is the first necessity for the importer. The IRC is not required for

import goods by government departments, Local authorities, statutory bodies,

recognized educational institutes, Hospitals. In addition, registration is not required for

import goods, which do not involved remittance of foreign exchange like -medicine,

reading materials etc. can be imported without IRC by the users within monetary limit

Import Procedure:

Imports & Exports (control) Act 1950 regulates the import & export trade of the

country. There are a number of formalities, which on 'importer has to fulfill before

import goods. The importer follows the following steps:

The buyer & the seller conclude a sales contract provided for payment

by documentary credit.

The buyer instructs his / her bank i.e. issuing bank to issue a credit in favor of

the seller i.e. beneficiary.

The issuing bank asks another bank usually in the country of the seller,

the advice or confirms the credit.

The advising or confirming bank informs the seller that the credit has

been issued.

As soon as the seller receives the credit and is satisfied that he / she can

meet its terms & conditions, he/she are in a position to load the goods & dispatch

them.

The seller then sends the documents evidencing the shipment to the bank

where the credit is available i.e. the nominated bank. This may be the issuing


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bank, or the confirming bank, bank named in the credit as the paying, accept-

ing or negotiating bank.

The bank if other than the issuing bank, sends the documents to the issuing

bank,

The issuing bank checks the documents and if they meet the credit require-

ment either

Affect payment in accordance with the terms of the credit either to

the seller if s/he has sent the documents directly to the issuing bank or to the

bank that has made funds available to him/her in anticipation. Or

Reimburses in the pre-agreed manner the confirming bank or any

bank that has paid, accepted or negotiated under the credit.

The bank checks the documents against the credit. If the documents

meet the requirements of the credit, the bank then pay, accept or negotiate ac-

cordingly to terms of credit. In case of a credit available by negotiation, issuing

bank or the confirming bank will negotiate with recourse; another bank includ-

ing the advising bank has not confirmed the credit, which negotiates will with re-

course.

When the documents have been checked by the issuing bank and found tomeet the credit requirements, they are released to the buyer upon payment of

the amount due or upon other terms agreed between importer & the issuing bank.

The buyer sends transport documents to the carrier who will then pro-

ceed to deliver the goods.

IMPORT SCRUTINY:

The import bills consist of the following documents & the order of their scrutiny should beas below:

Forwarding schedule of negotiating bank.

Bill of exchange.

Commercial Invoice (Before shipment).


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Bill of lading

Insurance cover note

Certificate of origin

Packing List

PSI Report (CRF- Clean Report of findings)

Pro-forma Invoice (After shipment)

Any other documents.

Risk of Import Financing:

In the trade - there are so many risk factors involved. In banking sector - the bank face

risk basically from loans & advances and foreign exchange. In this section I discuss the risk

of import financing. In international trade transaction takes place between buyers and

sellers living in different socio-economic and political environments. There may be abrupt

changes in socio-economic or political situation in the buyer's country or in the seller's

country. Even the exchange value of currencies of the two countries had gone so much

down that they were not acceptable or exchangeable in international market. More

over the importer or the exporter may not be able to comply with the terms of credit for

some reasons. Therefore, risk inherent in all credits. The bank has to consider following

risk in financing the import procedure:-

A.Commercial risk:

I. Violation of the requirement of letter of credit authorization or letter of

credit:

Shipment effected before authentication of the letter of credit

authorization from by the nominated bank and registration with the

Bangladesh bank, whenever necessary and before opening of letter of credit

or after expiry of the validity of the letter of credit authorization or letter of

credit shall be treated as import in contravention of this order. Letter of

credit authorization obtained in the basis of false or incorrect particulars

or by adopting any fraudulent means shall be treated as invalid and void.


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II. Import against indent and Performa invoice: Letter of credit may be

opened against and indent issued by a local registered indenter or against a

Performa invoice issued by a foreign manufacturer or seller or supplier.

B. Political risk:

In addition to the credit and commercial risk we have outlined, international

transaction such as import financing take on the whole new dimensions of political risk.

They are as follows:

Sudden outbreak of war, revolution, coups or civil disobedience in the

seller's country.

Imposition of restriction on remittance.

Imposition of trade embargo or blockade.

New import restriction on the buyer or cancellation of the license. Additional handing transport or issuance charges due to interruption or di-

version of voyage, which can't be recovered from the buyer.

C. Informational risk:

There may be informational risk inherent in import financing on the importer because

of shortage of required information. So it is much harder to judge the financial strength,

reputation and integrity of a seller or buyer who is thousands of miles away and

belongs to a different culture.

Documents Used in Foreign Exchange:

a) Letter of Credit (L/C):

It is the most important and commonly used in connection with foreign trade.

Letter of Credit is an undertaking by a banker of the importer to the exporter, to the effect that

the amount of the L/C will be duly paid. The banker on behalf of the importer issues the L/C in

favor of the exporter (beneficiary) and forwards the same to the exporter to the effect that the

bill drawn by him shall be duly accepted and paid. It creates confidence in the mind of the

exporter so far as payment of the bill is concerned. It is also facilitate the exporter to get the

benefit of discounting the bill before the date lf maturity.

b) Bill of exchange:

A Bill of Exchange is an instrument in writing, containing an unconditional order, signed


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by the maker, directing a certain person to pay on demand or on fixed or determinable

future time a certain sum of money only to or to the order of a certain person or to the

bearer of the instrument. From the definition - we get the features of bill of exchange. In

generally there are three parties like- Drawer: The person who prepare the bill; Drawer:

The person who is ordered for the payment in future specified time; Payee: The person

who is the amount of bill receiver as per the order of the drawer to the drawer.

c) 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 detail on the bill of lading shouldinclude:

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

credit.

Identifying marks & numbers(if any).

The name of the carrying vessel.

Evidence that the goods have been loaded on broad.

The ports of shipment & dis-

charge.

The names of shipper, consignee and name & address of notifying party.

The number of original bills of lading issued.

The date of issuance.

A bi ll of lading specifically stating that goods are loaded for u ltimate destination specifically

mentioned in the credit.

d) Commercial invoice:

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

the buyer. A commercial invoice normally including the followinginformation:

Date

Name & address of buyer & seller.

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

the total price.

Weight of the goods, number of packages and shipping marks & number.


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Terms of delivery & payment.

Shipment details.

e) Certificate of origin of goods:

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

f) 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 letter of credit. The buyer who also indicates the

type of inspection usually nominates the inspection company he /she wish the company to

undertake.

g) Insurance policy or Certificate:

The insurance certificate document must:

Be

specified in the credit

Cover

the risks specified in the credit.

Be con-

sistent with the other documents in its identification of the voyage and descrip-

tion of the goods.

Unless

otherwise specified in the credit:

a) Be a document issued and / or signed by an insurance company or its agent,

or by underwriters.

b) Be dated on or before the date of shipment as evidenced by the shippingdocuments or establish that cover is effective at the latest from such date of

shipment.

c) Be for an amount at least equal to the GIF value of the goods and in the

currency of the credit.


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h) Pro-forma invoice or indent:

Simply speaking, it is a Seller's quotation or agreement between seller & buyer. In this-

the seller declared the rate, quantity, quality, manufacturing & other information about

goods and that accepted by buyer.

Other Documents are: Packing list; Master's receipt.

Letter Of Credit (L/C):

Letter of Credit is an undertaking by a banker of the importer to the exporter, to the effect that

the amount of the L/C will be duly paid. The banker on behalf of the importer issues the L/C in

favor of the exporter (beneficiary) and forwards the same to the exporter to the effect that the

bill drawn by him shall be duly accepted and paid. It creates confidence in the mind of the

exporter so far as payment of the bill is concerned. It is also facilitate the exporter to get thebenefit of discounting the bill before the date lf maturity.

Parties of Letter of Credit transaction:

Issuing Bank: It is the buyer's bank. The bank that agrees to the request

of the applicant and issues its letter of credit in terms of the instructions of the ap-

plicant.

Advising Bank: It is the seller's or beneficiary's Bank. The bank usually

situated in the seller's or beneficiary's country (most of the time with which

there exists corresponding relationship with the buyer or issuing bank), request to

advice the credit to the beneficiary.

Confirming Bank: Sometimes issuing bank request advising bank or anoth-

er bank to add confirmation to the letter of credit. When that bank do this then

such bank is called confirming bank. So advising bank can be act as confirming

bank.

Reimbursing Bank: This is the bank that is nominated by the issuing bankto pay (it is also known as paying bank) or to accept drafts. It can be situated

in another country. In this connection it is to say that American Express Bank &

HSBC act as reimbursing bank in case of Southeast Bank Ltd. The account, which

maintains Southeast Bank Ltd with HSBC & American Express Bank, is called

"Nostro Account" and in rivers the account, which is maintained by HSBC &


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American Express Bank with Southeast Bank Ltd, is called "Vostro Account"

Negotiating Bank: The bank, which makes payment to the exporter after

scrutiny, the documents submitted by the exporter with the original letter of

credit then it is called Negotiating Bank.

Nominated Bank: The bank that is nominated by the issuing bank to pay

(nominated bank is known as paying bank) or to accept drafts (nominated bank is

known as accepting bank) or to negotiate (nominated bank is known as negotiat-

ing bank). Usually the advising bank is request & authorized to be the nominated

bank unless the credit allows negotiation by any bank.

Seller: Beneficiary of the letter of credit is seller.

Classification of Letter of Credit or Basic forms letter of credit:

The letter of credit can be either revocable or irrevocable. It needs to be clearly

indicated whether the letter of credit Revocable or Irrevocable. When there is no

indication then the letter of credit will be deemed to be a revocable L.C. The details are as

follows:

Revocable letter of credit: A revocable credit is one, which can be

amended or cancelled by the issuing bank. At any moment without "prior notice" to

the beneficiary. So this is clear that revocable credit can be revoked any time with-

out prior notice.

Irrevocable letter of credit: An irrevocable credit is one, which cannot

be cancelled or amendment able any time without the consent of each party.

Through this letter of credit the issuing bank gives a definite, absolute and irrevo-

cable undertaking to honor its obligations, provided the beneficiary complies with

all the terms & conditions of the credit.

Government letter of credit: That letter of credits, which are done by the

Defense Ministry and other Ministries of the government. Master or mother letter of credit: The L.C. which come from out side the

country to the exporter from importer that is mother or master letter of credit.

Other classes of letter of credit:

Revolving letter of credit: When the L.C. is used again & again in

same amount for a specific period of time that is called revolving letter of


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credit.

Transferable letter of credit: Exporter can transfer his / her

right of letter of credit in full or partly to a third party. In generally, the

exporter is not the supplier but act as a middleman with in the supplier &

importer.

Back-to-Back letter of credit: The letter of credit, which done by

the security of mother letter of credit.

Clean or open letter of credit: The letter of credit, which pro-

vides assurance of payment bill of exchange without submission, of any

export documents that is called clean letter of credit.

Confirmed letter of credit: When the Irrevocable letter of credit is-

sued by issuing bank to the exporter as assurance of the L.C., then as per

advice or documents the authorized representative or representative

bank's provide assurance or payment guarantee that is confirmed letter of

credit.

At sight letter of credit: That letter of credit which expires ninety

days i.e. within this period the documents must be sending to the negotiat-

ing bank.

Deferred payment letter of credit: That letter of credit which ex-

pires one hundred & eighty days i.e. with in this period the documents

must be send to the negotiating bank.

Contract letter of

credit.

Refinance Letter of

Credit.

Marginal Letter of

Credit.

Traveler's Letter ofCredit.



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Remittance is the sending of money etc. to a distance. Foreign remittance is the sums

of foreign currency to a distance from one place another place i.e. country to country.

The person who is the receiver of the remittance is remitted. The person who is the

sender of the remittance is remitter. There are two types of foreign remittance, which are

as below:

Foreign inward remittance

Foreign outward remittance

Foreign Inward Remittances:

The remittance of freely convertible foreign currencies which Southeast Bank Ltd Foreign

Exchange Section is receiving from abroad against which the authorized dealers making

payment in local currency to the beneficiaries may be termed as foreign inward remittance.

Mode of inward remittances:

The term inward remittances includes not only remittances by TT., MT., Drafts etc.

but also purchases of bil ls, purchases of drafts under travelers letter of credit and

purchases of travelers cheques. Foreign currency notes against which payment is made

to the beneficiary also a part of inward remittances. Thus the following are the Mode ofinward remittances:

TT: Telegraphic Transfer.

MT.: Mail Transfer.

FD: Foreign Drafts.

TC:

Travelers Cheque.

For-

eign currency notes.

Purpose of inward remittance:


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The purpose of remittance is of various reasons. Such as:

For family maintenance.

Realization of exports proceeds.

Gift.

Donation.

Export brokers commission.

About Form-C":

The authorized dealer should obtain 'Form - C' from the beneficiary to know the

purpose of the remittances in all cases and they are to submit the "Form - C' to

Bangladesh Bank along with the monthly returns where the proceeds of the

remittances is TK. 5000/= & above. Form - C' is a prescribed declaration form & this

'Form -C' is to be filled up and signed by the beneficiary himself.

Payment procedures of FD. MT. & PO. Drawn on Southeast Bank

Ltd:

The above investments that are drawn on Southeast Bank Ltd Foreign Exchange

Corporate Branch may be paid on the spot before making payment the following

procedures to be observed by the authorized dealer:

To obtain Form-C.

To verify the signatures of the instrument.

To convert the foreign currency into Bangladesh TK. with O.D. (On Demand

Transfer)

Buying rate prevailing on the date.

To make entry in TTs, drafts & Mails received register.

To prepare FET schedule and to send first five copies of FET along with

vouchers to international division, Head Office, Dhaka.


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Payment procedure of T.T.:

To verify the 'test number'.

To inform the beneficiary for submission of "Form - C".

To confirm from issuing bank or reimbursing bank.

To covert of foreign currency into Bangladesh currency with T.T.

To make entry in T.T.s, drafts, M.T.s, received registration.

To prepare vouchers.

To prepare FET schedule.

Purchase of Drafts & Cheques:

Authorized dealer may purchase drafts & cheques which are not drawing onSOUTHEAST Bank Ltd at the request of the beneficiary. Procedures of purchase

are as below:

To obtain an application or undertaking from the beneficiary with 'Form C

To verify the signature of the drafts (if possible).

To make entry in the register for drafts & T.C. purchased.

To

convert foreign currency into Bangladesh currency. To

prepare voucher.


To send the instrument for collection.

Collection procedure of drafts & cheques:

To make entry in foreign Bills Collection Register.

To prepare forwarding schedule in quadruplicate.

To prepare vouchers on realization of proceeds i.e. on receipt of

advice from the collecting bank.


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Payment of traveler's cheque (TC):

To checkup the custom declaration (if any).

To consult with purchase agreement (i f any).

To obtain signature on TC and to verify the same with the previous signature of

the beneficiary of the TC.

To make entry in register for TC & drafts purchased.

To convert foreign currency into Bangladesh currency.


To send the TC for collection.

To prepare the vouchers.

Payment of foreign currency notes:

To check the custom declaration (if any).

To made entry in (kateha) raw register.

To convert foreign currency into Bangladesh currency.

To prepare vouchers.

No FET schedule is required to be prepared & sent to head office be-

cause in this case there is no transaction with head office.

Cancellation of inward remittance:

In the event of any inward remittance which has already been reported to the

Bangladesh Bank being subsequently cancelled, either in full or in part because of non-

availability of beneficiary. Authorized dealers must report the cancellation of the inward

remittance as an outward remittance of "Form-T/M". Required documents are:

The date of return in which the inward remittance was reported.

The name & address of the beneficiary.

The amount of the purchase as effected.


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Reasons for cancellation.

Reporting to Bangladesh Bank:

On the last working day of each month the transaction during the month to be

reported to Bangladesh Bank through the following schedule:

Schedule -J-l / 0-3 for TK. 5000 & above.

Inward remittance voucher-1/04 for below TK. 5000.

FOREIGN OUTWARD REMITTANCES:

The remittance in foreign currency which is being made from our country to abroad is

known as foreign outward remittance.

Mode of outward remittance:

Thus the following are the Mode of outward remittances:

TT. Telegraphic Transfer.

MT: Mail Transfer.

FD: Foreign Drafts.

PO: Payment Order

TC: Travelers Cheque.

Foreign currency notes.

Approval of Bangladesh Bank:

Bangladesh Bank provides permission or approval for outward remittances to the

applicants who are to lodge an application for the purpose on the following prescribed

forms with an authorized dealer who forwarded the same to Bangladesh Bank for approval:

The IMP form (cover remittances for imports).


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Form T/M (Traveling & Miscellaneous).

Issuance procedure of FD, MT. & TT.:

To prepare the instrument.

To make entry in DD, MT, TT issued register.

To prepare draft advice in duplicate one for

drawer bank & one for reimbursing bank.

To make entry in draft advice dispatched register.

To send reimbursement authority in case of MT & TT.

T o prepare FET schedule.

Issuance procedures of traveler cheque:

To verify the approved T / M form or Bangladesh Bank permit.

To issue TC by obtaining signature of the purchaser on the TC.

To endorse in the passport.


To make entry in the travelers cheque issue register.

The TC issuing slip of the issued TC to be sent to that bank (whose TC issued)

With reimbursement instruction.

Issuance procedure of foreign currency notes:

To verify the approved T.M form or Bangladesh Bank permit.

To issue foreign currency notes by endorsing in the passport.

Voucher preparing with accounting treatment:

Party's account.......................................Dr.


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Foreign Currency Notes on Hand A/C Cr.

Facilities for wages Earners:

Bangladeshi national/Bangladesh origin dual citizen working abroad may open

Foreign Currency account (F.C. A/C) in US Dollar and Pound Sterling without initial de-

posit.

Nominee can operate the account

Interest is paid on F.C. A/C

Balance in F.C. A/C can be utilized for import of goods

Balance available in the F.C. account may wholly or partially be sent abroad.

Foreign currency brought in by Wage Earners can be deposited in the F.C. A/C

Wage earners Development Bond in Taka can be purchased from the balance of

F.C. A/C

Non-Resident Foreign Currency A/C (NFCD A/C) can also be opened by Wage

Earners.

F.C. A/C & NFCD A/C may be maintained as long as the account holder desires.

These accounts can be opened from abroad on submission of required papers

duly attested by our Embassy/ Branch/ Representative office abroad.


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Monthly statement to Bangladesh Bank:

On the last working day of each month, the transactions of outward remittance during the

month are reported to Bangladesh Bank.

Foreign exchange risk is defined as the potential change in earnings arising in market

prices. The market directly affects each countrys bond, equities, private property,

manufacturing, and all assets that are available to foreign investors. Foreign

exchange rate also play a vital role in determining who finances government deficits,

which buys equities in companies and literally affects and influences the economic

scenario. Due to high risk market the role of treasury operations is crucial. As per

Bangladesh Banks guidelines the bank has segregated the Front and back office of

treasury operations. Front office independently conducts the transactions and the

Back office is responsible for verification of the deals and passing of their entries in

the books of accounts. All NOSTRO accounts are reconciled on monthly basis and all

foreign exchange transactions are revalued at market to market rate as determined

by Bangladesh Bank.

Foreign Exchange Risk

Foreign exchange risk is defined as the potential change in earnings due to change in

market prices. The bank has a functional instruction manual covering foreign

exchange risk polices and investment police. The bank has also developed differentstrategies to handle foreign exchange risk by setting limits on Net Open positions by

currencies, mismatch limits by currency and time buckets of Forward Foreign

Exchange transactions, overall gross limits for FWD transaction, Maximum loss limits

per day and per month, as well as value at risk limits which are measured and

monitored.

3.7 Foreign Exchange Risk Management


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Foreign currencies translations are converted into equivalent taka using the ruling

exchange rate on the date of transactions. Foreign currencies balances held in US

dollar at the yearend are translated into taka currency at the weighted average rate

of interbank market as determined by Bangladesh Bank. Balances held in foreign

currencies other than US dollar are converted into mid value of the selling and buying

rate of the last transaction date of the year of the bank.

CHAPTER # 04

Findings

4.0 Findings

While working at Southeast Bank. Shyamoli Branch, I have attained to the newer kind

of experience. After the collecting and analyzing of data I have got some findings.

These findings are completely from my personal point of view. Those are given below.

Based on my experience, ii can be said that Southeast Bank should reconsider

its services that better satisfy customer needs and requirements Bank should

be more tactful in dealing with the customers and launch new products that

fully meet customer expectations.

Southeast Bank Limited has already established a favorable reputation in the

banking industry of the country. It is one of the leading private sector commer-

cial banks in Bangladesh. The bank has already shown a tremendous growth

the profits and deposits sectors.

The bank successfully stepped in to the 15th year of operations having enjoyed

the complete confidence of the depositors and achieving significant growth in

3.8 Foreign currencies translation


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the entire areas of banking operations

The bank is following the online banking system to provide the customer better

services; but all the branches of South East bank are not follow the online

banking system

The Bank has a deposit base of Tk.38, 258.00 million and loan portfolio of taka

32,551.00 million in the year 2005, which posted a growth of 37% and 48% re-

spectively

During the last 6 years (1999-2005) the average growth of deposits and ad-

vance were 33% and 37% respectively, which was 20% in the case of import

business. 72% in export business and 36% in guarantee business during the

period, shareholders equity grew at the rate of 40%. The bank always fulfills

Die provisioning requirements as set by Bangladesh Bank reflecting sound fi-

nancial health and discipline

The consistent and increasing growth trend of the above mentioned perfor-

mance indicators has increased depositors' confidence as well as good will/rep-

utation of the bank to a great extent and these have contributed to increase

the shareholders value.

The bank focused on building high-quality human resources with expertise and

professional skills adopting the Human Resources Re-engineering and Develop-

ment Plan with a view to creating an excellent clientele service environment

for ultimate achievement of sustained profit growth making no comprises with

the quality asset creation

The Banks Human resources Development strategy is to build up quality man-

power with conceptual/managerial Knowledge, skills through designing/arrang-

ing of continuous in-house and outside training programs

The bank focuses on customer-friendly marketing approaches by offering vari-

ous efficient delivery of personalized banking services at the clients door steps

and caters to the ever-growing financing needs of clientele at a competitiveprice

The company philosophy to workout best solutions for customers and clients as

a business and customer friendly Bank

South East bank has an interactive corporate culture the working environment

is very friendly, interactive and informal. And there are no hidden barriers or


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boundaries while communication between die superior and the subordinate.

This corporate culture provides as a great motivation factor to the employees.

CHAPTER #05

Conclusion

5.0 Conclusion:

In todays world of business without bank's co-operation, it is almost impossible to run

any business or production unit of business. Exports and import need finance in

various stages of their activities. Southeast Bank Limited is playing a vital role in

financing import and exports of the country and helping the businesses by providing

funds to run.

There are lots of local and foreign banks competing in banking industry in Bangladesh

and the Southeast Bank Limited is keeping its promises for about fifteen years among

them very successfully. In this competitive market Southeast Bankhas to compete


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not only the others commercial banks but also the public banks and other financial

institution also. In near future I think bank and mobile companies will come together

to foster the banking service and make it available to peoples hand. To survive in

this dynamic market and lead it from the front the bank must take every initiative

very wisely and so far they have successfully utilized their human resource efficiently

compare to other private and public banks.

Before internship I had idea about banking but that was only bookish. Now after

completing my internship period and preparing term paper on it I got practical aspect

of banking. It will definitely help me to see the things from banking perspective also.

CHAPTER #06

Recommendation

6.0 Recommendation:

To take necessary steps to improve the quality of service. They should open

the on-line banking system all the branches.

The competition of banking sector is increasing day by day, so the bankers

have to high ability to serve the client.

Southeast bank uses ultimus software which is common and old. To sustain in

the banking sector the bank should use new software which is related to the

modern banking sector.


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The bank sometimes uses manual system to prepare par order, which can be

the cause of damage. To avoid this type of damage they should use digital

system.

Now forty countries can easily send remittance in this bank. This number is notenough to serve smoothly and need to increase this number.

The bank uses software in opening letter of credit but other bank use manual

system.

Southeast Bank should try to build a st