1.1. Introduction:

Bank is a financial institution. The economy is mostly depended on the bank since the

bank facilitates the economic and financial transactions. Every industry large, medium &

small is absorbing the facilities provided by the bank relating to its production to export

and also to import the materials.

The Bank will put reliance on market forces and provide increased inducement to savers to

mobilize savings and hold fast to profitability potential to allocate funds to the users of

such sectors of trade, commerce and industries as may be consistent with the socio-

economic objectives of the nation. Bank is a financial intermediary whose prime function

is to move scarce resources in the form of credit from savers to those who borrow for

consumption and investment. In a modern society, banks are very much important to the

economy because of their ability to create money.

Economy of Bangladesh is in the group of world’s most underdeveloped economies. One

of the reasons may be its underdeveloped banking system. Since 1990, Bangladesh

government has taken a lot of financial sector reforming measures for making financial

sector as well as banking sector more sound and transparent, a formulation and

implementation of this reform activities have also been participated by different

international organization like World Bank, IMF etc.

The government of Bangladesh has been pursuing a liberal policy to attract foreign

exchange business because foreign exchange business is considered as a key to economic

development. Countries like Bangladesh are mostly depended on import of raw materials

to export quality goods.

1.3. Objective of the ReportIn this report the objective is basically to find out all sorts of practical dealings that are

conducted in case of handling various type of banking activities in each department,

specially foreign exchange department, the theoretical aspects, that is what should be the

procedures and requirements maintained from first to last, and actual practices as well as

the ultimate gain for the bank in conducting financial activities are mainly discussed. So

the purpose and objective of this report can be summarized as follows.

To depict the Trade service operations and its impact in the economic development

of Bangladesh from the perspective of AB Bank Ltd.

To know deeply about Import, Export and remittance.

To identify the role of Trade service operations.

To identify some problem in foreign operation.

To identify the factors that must be considered and analyzed in determining Export

and Import policy and procedure.

To apprise Remittance Service with special emphasis on Remittance department.

To analyze the Foreign Exchange performance of AB Bank Ltd.

To identify the problems with Foreign Exchange system and suggested measures.

To state practical Knowledge gathered in the customer service department about

account opening and others.

To state practical knowledge about credit appraisal system and credit management

1.4. Scope of the Study:The report is highlighting the major functional area of foreign exchange department and

procedure of import, export and remittance.

1.5. Methodology: Methodology of the study includes direct observations, face-to-face conversation with the

employees of different desk, study of files, circular and practical deskwork. In conducting

this report basically, there have been two types of data and information used. The name of

those two types and their sources to reveal the information for preparing this report has

been showed in a flow chart.

EXECUTIVE SUMMARY

As a requirement of BBA program from Department of Finance, Stamford University Bangladesh,

I have completed my internship from AB Bank Limited, Motijheel Branch. I have prepared my

report with the objective of finding out how the branch complies with the Bangladesh Bank’s

Foreign Exchange guide line in their policy, process and procedures. I have also analyzed the

export, import, remittance (inward and outward) situation of the branch. Some limitations such as

time constrain and unavailability of data is faced during this study.

AB Bank Limited is the first private sector bank in Bangladesh. At present the Bank operating its

business by 79 branches. The Bank is now providing online banking service to its customers to

have their better services.

This report “PROCEDURE OF FOREIGN TRADE FINANCE OF AB BANK LTD. is

prepared based on the foreign exchange operation of the AB Bank Limited.

There are Seven (7) chapters in this report.

In Chapter 1-Introduction: origin of the report, scope and objective of the study, methodology

and limitation are also discussed here.

In Chapter 2: this chapter includes Organization in focus such as history, organizational and

capital structure, Organizational hierarchy, Change of name and logo, Rating report, Product and

services, Five years performance and key financial indicators, Retail Banking, SME business,

International trade.

In Chapter 3: The overall Trade Financing is describing here. Foreign Exchange department has

three sub-sections. One is foreign remittance section, another is import section and the third one is

export section. Foreign remittance includes all sale and purchase of foreign currencies on account

of Import, Export, Travel and other purposes. However, specifically foreign remittance means sale

& purchase of foreign currencies for the purposes other than export and import. All foreign

remittance transactions are grouped into two broad categories- Outward remittance & Inward

remittance. in import section, import mechanism, source of finance, import procedure, procedures

of opening L/C to import etc are discussed. In export section, export policy, export incentives,

export procedures, export financing, Back to Back Letter of Credit etc are discussed.

In Chapter 4: The Trade Financing by AB Bank Ltd like Inward & Outward Remittance, export

& its procedure, Back to Back L/C, Import & its procedure , Lodgment & Retirement of

Document etc. is described here.

In Chapter 5: SWOT analysis of ABBL, Financial ratio analysis and Performance overview.

In Chapter 6: At the last section of the report includes Ending part- conclusion, findings, &

recommendation are highlighted.

In Chapter 7: Last but not the least in this chapter highlights Bibliography and Appendix part.

Analyzing the performance and operations of the AB Bank Limited I have found that the AB Bank

Limited has continued its growth. The profit of the bank has growth significantly. The deposit

growth concludes the customer satisfaction and their loyalty toward the operation and service of

the AB Bank Limited which turned out as a leading private commercial bank of the country-

Bangladesh. As a proud internee of this bank, I am very much pleased to work in such a reputed

organization like AB Bank Limited- “To be the trend setter for innovative banking with

excellence and perfection.”

1.6. Limitation of the Study: A wholehearted effort was applied to conduct the project paper and to bring a reliable and

fruitful result. In spite of having the wholehearted effort, there exist some limitations,

which acted as a barrier to conduct the conduct the project paper. As the report is prepared

in a short span of time, it could not be made comprehensive and conclusive. Moreover, the

accuracy of the report is largely depended upon the information obtained from the relevant

sources. Greater emphasis was given to collect information from informal sources like

discussion with clients and our officials, which may appear to be an inherent limitation of

the study.

Data & Information

Primary Sources

Bangladesh Bank’s Circular Govt. Act and Order Annual Report Of ABBL AB Bank Operational Manual AB Bank Website Different guidelines of Head

Office, ABBL

Secondary Sources

Interview of the employees Relevant books, Research

papers, Newspapers and Journals.

Personal observation Working experience as an

internee. Internet and Study of selected

reports.

The limitations are:

Sufficient data for prepare a report is not available.

The employees of the bank are so much busy so they cannot provide me to give

information about the foreign exchange such as import, export etc.

As it’s a vast area of business that demands on hand experience for an in depth analysis.

Another limitation was the sensitivity of the data. As it is a highly competitive market, in

some cases management were reluctant to give some specific data.

Limitations of bank’s policy of not disclosing some data and information for obvious

reasons, which could be very much useful. For the sake of confidentiality of the

organization, employees did not disclose much information.

Lack of comprehension of the respondents was the major problem that created many

confusions regarding verification of conceptual question

Confidentiality of data was another important barrier that was confronted during the

conduct of this study. All the concerned personnel of the bank have not been interviewed.

AB Bank Limited is one of the fasted growing banks among all the commercial banks in

Bangladesh. ABBL bears a unique history of its own. The aim of the company was to

mobilize resources from within and invest them in such way so as to develop country’s

industrial and Trade Sector and playing a catalyst role in the formation of capital market as

well. Its membership with the bourse helped the company to a great extent in this regard.

AB Bank Limited, the first private sector bank was incorporated in Bangladesh on 31st

December 1981 as Arab Bangladesh Bank Limited and started its operation with effect from

April 12, 1982.

AB Bank is known as one of leading bank of the country since its commencement 28 years

ago. It continues to remain updated with the latest products and services, considering

consumer and client perspectives. AB Bank has thus been able to keep their consumer’s and

client’s trust while upholding their reliability, across time.

During the last 28 years, AB Bank Limited has opened 77 Branches in different Business

Centers of the country, one foreign Branch in Mumbai, India and also established a wholly

owned Subsidiary Finance Company in Hong Kong in the name of AB International

Finance Limited. To facilitate cross border trade and payment related services, the Bank has

correspondent relationship with over 220 international banks of repute across 58 countries of

the World.

In spite of adverse market conditions, AB Bank Limited which turned 28 this year, concluded

the 2009 financial year with good results. AB attained highest ever profitability in the

history of the Bank’s 28 years of existence. The Banks consolidated profit after taxes

amounted to Taka 336.20 crore which is 46.11% higher than that of 2008. The asset base of

AB stood at taka 10691.20 crore (growth of 27 percent) while total capital crossed the

threshold and reached the level of taka 1079.0 crore at the year end

2.2 Organizational Structure of ABBL. AB Bank Ltd. (ABBL) was incorporated on 31st December 1981, under the company’s act-

1913 as a pioneer commercial bank in the private sector in Bangladesh with its Head Office

in Dhaka. The bank started functioning from 12th April 1982 with the approval of

Bangladesh Bank under the guidelines, rules and regulations given for scheduled commercial

banks operating in Bangladesh. It was initially a joint venture commercial bank between

Bangladeshi sponsors and Dubai Bank Ltd. Dubai (U.A.E.) having respective share holdings

as under:

Bangladesh Sponsors 20%

Bangladeshi General Public 15%

Bangladesh Government 05%

Dubai Bank Ltd. 60%

Table 1: Organizational Structure of AB Bank Ltd

Subsequently, the Union Bank of Middle East Ltd. inherited the shares of Dubai Bank Ltd. in

1986 and continued as its shareholder till early 1987, when they decided to offload their

investment in Bangladesh. As per provisions of the bank Articles of Associations, with the

approval of Bangladesh Bank and the controller of Capital issue Government of Bangladesh,

the shares (60%) held by the Union Bank of Middle East (UBME), were purchase by the

Bangladeshi Sponsored Directors, raising total shares of holding to 80% of total share

capital. However, as desired by the government of Bangladesh the sponsors. Directors, who

acquired the 60% shareholdings of Union Bank of Middle East (UBME), unclosed 50% of

share, purchased by them from UBME to the general public of Bangladesh raising the public

share holdings to the 45% of total share capital of the bank.

The Objective of the bank is to undertake all kinds of banking and foreign exchange business

in Bangladesh as well as abroad through its brandies/correspondents.

2.3 Capital Structure of ABBL. The authorized capital of AB Bank Ltd. is taka 600.00 crore divided into 6.00 crore

ordinary shares of taka 100 each, from the existing Tk. 300.00 crore on 05 march, 2009.

The total paid up capital rose to taka 2564.00 million at the end of 2009. At present the

composition of the existing shareholders of the bank is as under:

Bangladeshi sponsors/ Directors 50%

Bangladeshi General Public 49.43%

Govt. of Bangladesh 0.57%

Table 2: Capital Structure of ABBL

2.4 Change of Name and Logo of ABBL.

Arab Bangladesh Bank Ltd. was incorporated on 31st December 1981, under the company’s

act 1913. The bank started functioning from 12th April 1982. It is the first private bank in

Bangladesh. Motijheel Branch is the corporate branch of this bank. The branch has enjoyed

its 28th anniversary during this year.

Arab Bangladesh Bank Ltd. Changed its name to AB Bank Limited (ABBL) with effect from

14 November 2007 vides Bangladesh Bank BRPD Circular Letter No-10 dated 22

November 2007. Prior to that Shareholder of the Bank approved the change of name in the

Extra-Ordinary General Meeting held on 4 September 2007. Effective 1 January 2008, ABBL

changed its Logo as well.

Previous Name & Logo New Name & Logo

Arab Bangladesh Bank Ltd. AB Bank Ltd

Table: Name & Logo of ABBL

2.5 Corporate Information of ABBL.

Legal Form: A public limited company incorporated on 31st December, 1981 under the Companies Act, 1913 and listed in the Dhaka Stock Exchange Ltd and Chittagong Stock Exchange Ltd.

Objective“To exceed customer expectations through innovative financial products & services and

establish a strong presence to recognize shareholders' expectations and optimize their rewards

through dedicated workforce.”

Vision Statement"To be the trendsetter for innovative banking with excellence & perfection"

Mission Statement"To be the best performing bank in the country"

Commencement of Business27th February 1982Registered Office

BCIC Bhaban, 30-31, Dilkusha C/ADhaka 1000, Bangladesh.

Tel: +88-02-9560312Fax: +88-02-9564122, 23

SWIFT: ABBLBDDH E-mail: info@abbank.com.bd

Web: HYPERLINK "http://www.abbank.com.bd" www.abbank.com.bd

Name of the Branch where completed the Internship Program.

AB Bank Ltd.Corporate Office

Motijheel, Dhaka-1000, Bangladesh.

2.6ORGANIZATIONAL HIERERCHY OF ABBL:

2.7 Rating Report ON ABBL: AB Bank Limited was rate by Credit Rating Agency of Bangladesh Limited (CRAB). CRAB

has affirmed AA3 rating in the long term and ST-1 rating in the short term of AB Bank

Limited based on Audited Financials of 31 December 2009 and other relevant information.

MANAGING DIRECTOR

SENIOR EXE. VICE PRESIDENT

EXECUTIVE VICE PRESIDENT

SENIOR VICE PRESIDENT

VICE PRESIDENT

SENIOR ASST. VICE PRESIDENT

ASSTT. VICE PRESIDENT

SR. PRINCIPAL OFFICER

PRINCIPAL OFFICER

SENIOR OFFICER

OFFICER

The summery of their ratings is given below:

Entity Rating June 2009

Entity Rating December 2009

Definition

Long Term Long Term Commercial Bank rated AA3 in the long term belongs to “Very Strong Capacity & Very High Quality” cohort. Bank has very strong capacity to meet its financial commitments. Bank is judged to be of high quality and is subject to low credit risk.

AA3 AA3

Short Term Short Term Commercial Bank rated ST-1 in the short term is considered to have highest capacity for timely payments of obligations. Bank is characterized with excellent position in terms of liquidity, internal fund generation and access to alternative sources of funds. ST-1 ST-1

Date of Rating 15th June, 2010

Rating Report of AB Bank (Source: AB Bank Annual Report 2009)RATIONALE

Credit Rating Agency of Bangladesh Limited (CRAB) has assigned “AA3” (pronounced

Double A Three) rating in the Long Term and “ST-1” rating in the Short Term to the AB

Bank Limited (ABBL). The present ratings of ABBL based on audited financial statements

up to 31 December 2009 and other relevant information. The rating takes into account both

qualitative and quantitative indicators. Qualitative indicators considered include parameters

such as corporate governance practice, effective asset-liability management, good franchise

value, experienced top level management, diversified product line, risk management practice,

standard IT infrastructure of the Bank etc. However, the ratings are constrained by moderate

asset quality of the Bank. The quantitative analysis concentrated in financial positions like

sound profitability level, adequate capital adequacy, good liquidity position, moderate market

share etc. However, the rating has concern about increase of bank’s non-performing assets,

dependency on high cost fixed deposits, average loan to deposit ratio etc. Commercial bank

rated AA3 in the long term is adjudged to be very strong bank, characterized by good

financials, healthy and sustainable franchises, and a first rate operating environment. This

level of rating indicates very strong capacity for timely payment of financial commitments,

with low likeliness to be adversely affected by Foreseeable events. Bank rated ST-1 in the

short term is characterized by very satisfactory position in term of liquidity, internal fund

generation, and access to alternative sources of funds.

2.8 Products and Services Of ABBL:

2.9 FIVE YEARS AT A GLANCE:

2.9 FIVE YEARS AT A GLANCE:Figure in Million Taka

BUSINESS BANKING Term Loan Trade Finance Trust Receipt Facility Working Capital Financing Bill Discounting Letter of Guarantee Loan Syndication &

Structured Finance

TREASURY & FOREIGN EXCHANGE PRODUCT

Money Market: Overnight (Call) Repo SWAP Term Reverse Repo

FX Market: Spot Forward

RETAIL PRODUCTS Personal Loan (Unsecured) Personal Loan (Secured) Home and Office Renovation

Loan Education Loan Auto Loan Easy Loan for Executive Gold grace Credit Card Debit Card

ISLAMI BANKING Deposit Product:

Al-Wadia Current Deposit Mudaraba Term Deposit Mudaraba Saving Deposit Mudaraba Shot Notice Deposit Mudaraba Pension Deposit

Scheme Mudaraba Quarterly Profit Paying

Scheme Mudaraba Probable Millionaire

Scheme Mudaraba Hajj Deposit Scheme

Investment Product: Bai-Murabha Bai-Muajjal Hire-Purchase under Shirkatul

Melk(HPSM)

DEPOSIT ACCOUNTS Saving Account Current Account Short Term Deposit Fixed Term Deposit Foreign Currency Account NFCD RFCD School

ABBL FOUNDATION Brokerage Service

SERVICE PRODUCTS 24 Hour ATM access Online Banking Western Union SWIFT

SMALL & MEDIUM ENTERPRISE (SME) LOAN

Choto Puji Rin Proshar Digun Uddog Goti Awparajita Sati

Particulars 2005 2006 2007 2008 2009

Operating Profit (PBP & T)755.03 710.69 3325.29 4298.39 5802.35

Net Operating Profit (PBT)407.45 532.19 2817.99 3600.62 5270.61

Profit after Tax (PAT)162.45 532.19 1903.49 2300.62 3417.19

Authorized Capital 8000 2000 2000 3000 6000

Paid-up Capital 520 572 743 2230 2564

Statutory & Other Reserves 650 773 1357 2066 3101

Shareholders’ Equity1526.88 2582.76 4511.59 6722.51 10086.52

Deposits27361.44 42077.00 53375.35 68560.47 83082.63

Loans & Advances21384.63 31289.25 40915.35 56708.77 72063.26

Investments 4061 6281 8885 11396 16369

Fixed Assets 370 1148 2381 2445 2441

Total Assets33065.40 47989.34 63549.86 84053.61 106912.31

Import Business 23151 42860 48441 70041 65956

Export Business 12595 17876 20677 28937 30640

No. of Branches 67 68 71 72 77

No. of Employees 1525 1590 1725 1804 1952

KEY PERFORMANCE INDICATORS

Particulars 2005 2006 2007 2008 2009

Earnings per Share (Taka) 31.26 93.08 256.10 103.18 131.13

Price Earnings Ratio (Times) 57.41 43.02 34.50 9.16 8.97

Book Value per Share (Tk.) 269.62 240.96 251.22 293.76 451.74

Return on Equity-ROE (%) 10.64 20.61 42.19 40.96 40.01

Return on Assets-ROA (%) 00.50 01.11 03.41 3.12 3.52

Capital Adequacy Ratio 09.17 09.23 10.75 12.84 13.78

NPL as % of Advances 08.21 04.02 04.31 2.99 2.75

Advance Deposit Ratio (%) 78.16 74.36 76.66 82.71 84.32

Assets Utilization Ratio (%) 59.19 62.58 67.12 72.60 76.79

2.10 PROFITABILITY:

Key business areas registered growth, which was reflected in the bottom line growth of over

30 percent in Net Operating Profit. AB bank was also able to off-set “un-reconciled

entries” worth Tk.95.07 crore which would definitely contribute towards consolidation of

financial health of the institution besides bringing in transparency in deliverables in the

future. Bank could also add significantly towards shareholders value addition as the Earnings

per Share (EPS) stood at Tk.131.13 the year-end which is three times over the last year’s

figure at the same cut-off date.

Return on Assets (ROA) at 3.52 percent Return on Equity (ROE) at 40.01 percent and Asset

Utilization Ratio at 76.79 percent underlines the magnitude of ABBL performance for the

year 2009

In 2009 ABBL diluted some of its investment portfolio thereby generating capital gain worth

Tk.76.09 crore signifying the role and prospects of Portfolio / Investment Banking wing

towards meeting Bank’s strategic needs.

2.11 RETAIL BANKING:

AB Bank started its retail banking operations in the year 1997 (re-launched in the year

2002) with the setting up of the Consumer Credit Division. Consumer banking in AB Bank is

high volume personal banking and exclusive service to high net worth individuals,

professionals, businessmen among others. Over the years, this particular Division identified

and explored the various avenues of customer lending and developed several products suiting

to the need of the prevailing market. Today AB Bank’s clientele base comprises over 6700

customers having a portfolio size worth Tk.325.00 crore approximately. In the year 2009

consumer credit experienced nearly 26 percent growth over last year and contributed to the

bottom line of the Bank.

CONSUMER CREDIT PRODUCTS

- Personal Loan – Secured / Unsecured - Auto Loan

- Personal Overdraft – Secured - Easy Loan for Executives

- Jewelry Loan (Gold Grace) - House / Office Furnishing &

- Education Loan - Renovation Loan

- Home Loan

2.12 SME BUSINESS:

Small and Medium Enterprise has emerged as the cornerstone on economic development of

Bangladesh in terms of job creation, income generation, and development of forward and

backward industrial linkage besides catering to the local demand mitigation. AB Bank has

always been a SME focused institution as nearly 64 percent of the Loan portfolio are liked to

this particular Business segment. AB is actively present in the following segment of SME

Sector – Agri-Machinery, Animal Feed, Poultry, Dairy Products, Clinics & Hospitals,

Electric Appliances, Fruit Preservation, and Garment Accessories etc. The core strength

of AB in this segment is its widening reach and online Banking throughout. Judging the

potentialities of the Sector a separate SME Business Unit is being shaped to director banking

services at the door step of SME customers.

2.13 INTERNATIONAL TRADE:

International Trade is an important component of foreign exchange business of the Bank. In

2006, this particular wing of the Bank registered remarkable growth through strengthening

the trade finance areas and providing value added services in this area.

2.13.1 IMPORT BUSINESS:

Import business kept the growth momentum and reaped business worth Tk.65,956 crore at

2009 registering little decrease but at the end of the year it increased business level. Major

import finance were in the areas of capital machinery, industrial raw materials like edible oil,

crude edible oil, textiles, fabrics, milk powder, scrap vessels etc.

2.13.2 EXPORT BUSINESS:

Export business registered growth in 2009. Total Export business volume reached Tk.30640

crore showing an increase over the previous year. Concentrations of export business were in

the area of readymade garments, frozen fish and other products.

2.13.3 REMITTANCE BUSINESS:

Remittance business reached US$260 million registering growth over 2009. Bank has

drawing arrangements with the Exchange Houses situated at important locations of the globe

depending on the concentration of the expatriate Bangladeshis. AB Bank is exploring

possibility of expanding its network to augment the flow of inward remittance business

through dedicated personalized services to beneficiaries.

3.1 Export Section:

Foreign exchange department is international department of the bank. It deals with globally

and facilitates international trade through its various modes of services. It deals with globally

and facilitates international trade through its various modes of services. It bridges between

importers and exporters. These banks are known as authorized Dealers. If the branch is

authorized dealer in foreign exchange market, it can remit foreign exchange from local

country to foreign country. This department mainly deals with foreign currency. This is why

this department is called foreign exchange department.

Some national and international laws regulate functions of this department. Among these,

Foreign exchange Act, 1947 is for dealing in foreign exchange business, and import and

export control Act, 1950 is for documentary credits. Governments’ import & export policy is

another important factor for import and export operation of banks. Also UCPDC 600 and

URC 522 both of them are very important guideline.

Creation of wealth in any country depends on the expansion of production and increasing

participation in international trade. By increasing production in the export sector we can

improve the employment level of such a highly populated country like Bangladesh,

Bangladesh exports a large quantity of goods and services to foreign households. Readymade

textile garments (both knitted and woven), Jute, Jute-made products, frozen shrimps, tea are

the main goods that Bangladeshi exporters export to foreign countries. Garments sector is the

largest sector that exports the lion share of the country's export. Bangladesh exports most of

its readymade garments products to U.S.A and European Community (EC) countries.

Bangladesh exports about 40% of its readymade garments products to U.S.A. Most of the

exporters who export through ABBL are readymade garments exporters, They open export

L/Cs here to export their goods, which they open against the import L/C opened by their

foreign importers.

Export L/C operation is just reverse of the import L/C operation. For exporting goods by the

local exporter, bank may act as advising banks and collecting bank (negotiable bank) for the

exporter.

3.1.1Export policy:

Export policies formulated by the Ministry of Commerce, GOB provide the overall guideline

incentives for promotion of exports in Bangladesh. Export policies also set out commodity-

wise annual target. It has been decided to formulate these policies to cover a five-year period

to make them contemporaneous with the five-year plans and to provide the policy regime.

The export-oriented private sector, through their representative bodies and chambers a

consulted in the formulation of export policies and are also represented in the various export

promotion bodies set up by the government.

3.1.2 Export Incentives:

A. Financial Incentives:

Restructuring of Export Credit Guarantee Scheme

Convertibility of Taka in current account;

Exporters can deposit 40% of FOB value of their export earnings in own account

in dollar and pound sterling;

Export Development Fund;

Expansion of export credit period from 180 days to 270 days;

50% tax rebate on export earnings;

Duty draw back;

Bonded warehouse facilities to 100% export oriented firms

Duty free import of capital equipment for 100%export oriented firms

B. General incentives:

National Export Trophy to successful exporters

Training course on external trade;

Arrangement of international trade fairs, commodity-based exhibitions in the

country and participation in foreign trade fairs.

C. Other incentives:

Assistance in improvement of quality and packaging of exportable items;

Simplification of exports procedures.

3.1.3 Export Procedures:

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

Act, 1950.

Under the export policy of Bangladesh the exporter has to get 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 incorporate on EXP forms and other

papers connected with exports.

Registration of Exporters:

For obtaining ERC, intending Bangladeshi exporters are required to apply to the controller/

Joint Controller/ Deputy Controller/ Assistant Controller of Imports and Exports, Dhaka/

Chittagong/ Raishahi/ Mymensingh/ Sylhet/ Comilla/ Badshal/ Bogra/ Rangpur/ Dinajpur in

the prescribed form along with the following documents:

Nationality and Assets Certificate-

Memorandum and Article of Association and Certificate of Incorporation in case of

Limited Company-,

Bank Certificate

Income Tax Certificate

Trade License etc.

Securing the Order:

After getting ERC Certificate the exporter may proceed to secure the export order. He

can do this by contacting the buyers directly or through agent.

In this purpose the exporter may get help from:

License Officer

Buyers Local Agent

Export Promoting Organization

Bangladesh Mission Abroad

Chamber of Commerce (local & foreign)

Trade Fair etc

Signing the Contract:

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

exportable items from Bangladesh detailing commodity, quantity, price, shipment, insurance

and marks, inspection and arbitration etc.

Receiving Letter of Credit:

After getting contract for sale, exporter should ask the buyer for Letter of Credit (L/C) clearly

stating terms and conditions of export and payment.

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

by means of Documentary Credit-.

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

The L/C is an irrevocable one, preferably confirmed by the advising bank;

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

(Here the regulatory framework is UCPDC-600, ICC publication)

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

payment:

Cash in advance-,

Open account,

Collection basis (Documentary/ Clean)

(Here the regulatory framework is URC-522, ICC publication

Procuring the Materials:

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

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

Shipment Of Goods:

Then the exporter should take the preparation for export arrangement for delivery of goods as

per L/C, prepare and submit shipping documents for Payment/ Acceptance/ Negotiation in

due time.

Documents for shipment :

i. EXP form,

ii. ERC (valid),

iii. L/C copy,

iv. Customer Duty Certificate,

v. Shipping Instruction,

vi. Transport Documents,

vii. Insurance Documents,

viii. Invoice

ix. Other Documents,

x. Bills of Exchange (if required) Certificate of Origin,

xi. Inspection Certificate

Quality Control Certificate,

xii. G.S.P. Certificate,

xiii. Phyto-sanitary Certificate.

Final Step: Submission of the documents to the bank for negotiation.

3.1.4 Procedure of collection of Export bill:

3.1.5 Export Financing:

Financing exports constitutes an important part of a bank's activities. Exporters require

financial services at four different stages of their export operation. During each of these

phases exporters need different types of financial assistance depending on the nature of the

export contract.

Pre-shipment credit

Post-shipment credit

Pre-shipment credit:

Pre-shipment credit, as the name suggests, is given to finance the activities of an exporter

prior to the actual shipment of the goods for export. The purpose of such credit is to meet

working capital needs starting from the point of purchasing of raw materials to final shipment

of goods for export to foreign country. Before allowing such credit to the exporters the bank

takes into consideration about the credit worthiness, export performance of the exporters,

together with all other necessary information required for sanctioning the credit in accordance

with the existing rules and regulations. Pre-shipment credit is given for the following

purposes-

Cash for local procurement and meeting related expenses.

Procuring and processing of goods for export.

Packing and transporting of goods for export.

Payment of insurance premium.

Inspection fees.

Freight charges etc.

An exporter can obtain credit facilities against lien on the irrevocable, confirmed and

unrestricted export letter of credit in form of the followings-.

Export cash credit (Hypothecation)

Export cash credit (Pledge)

Export cash credit against trust receipt.

Packing credit.

Back to back letter of credit.

Credit against Red-clause letter of credit.

Export cash credit (Hypothecation):

Under this arrangement, a credit is sanctioned against hypothecation of the raw materials or

finished goods intended for export. Such facility is allowed to the first class exporters. As

the bank has got no security in this case, except charge documents and lien on exports UC or

contract, bank normally insists on the exporter in furnishing collateral security. The letter of

hypothecation creates a charge against merchandise in favor of the bank. But neither r the

ownership nor the possession is passed to it.

Export cash Credit (Pledge):

Such Credit facility is allowed against pledge of exportable goods or raw materials. In this

case cash credit facility are extended against pledge of goods to be stored in the god own

under bank's control by signing letter of pledge and other pledge documents. The exporter

surrenders the physical possession of the goods under banks effective control as security for

payment of bank. In the event of failure of the exporter to honor his commitment, the bank

can sell the pledged merchandise for recovery the advance.

Export Cash Credit against Trust Receipt:

In this case, credit limit is sanctioned against trust receipt (TR). Here also unlike pledge,

the Exportable goods remain in the custody of the exporter. It is required to execute a

stamped export trust receipt in favor of the bank, he holds wherein a declaration is made that

goods purchas4ed with financial assistance of bank in trust for the bank. This type of credit

is granted when the exporter wants to utilize the credit for processing, packing and rendering

the goods in exportable condition and when it seems that exportable goods cannot be taken

into bank's custody. This facility is allowed only to the first class party and collateral security

is generally obtained in this case.

Packing Credit:

Packing Credit is essentially a short-term advance granted by a Bank to an exporter for

assisting him to buy, process, manufacture, pack and shipment of the goods. Generally for

movement of goods from the hinterland areas to the pots of shipment the Banks provide

interim facilities by way of packing credit.

This type of credit is sanctioned for the transitional period starting from dispatch of goods till

the negotiation of the export documents. Practically except for single transaction, most of the

pre-shipment credits are allowed in the form of limits duly sanctioned by Bank in favor of

regular exporters for a particular period. The drawings are required to be adjusted fully once

within a period of 3 to 6 months. Suiting to the breed and nature of export, sometimes an

exporter may also be allowed to avail a combined Cash Credit and Packing Credit limit with

fixed ceiling on revolving basis. But in no case the borrower would be allowed to exceed

individual credit limit fixed for the purpose. The drawings under Export Cash Credit limits

are generally adjusted by the drawing in packing credit limit, which is, in turn liquidated by

the negotiation of export documents.

Charge Documents for P.C.

Banker should obtain the following charge documents duly stamped prior to disbursement:

Demand Promissory Note

Letter of Arrangement

Letter of Lien of Packing Credit (On special adhesive stamp)

Letter of Disbursement

Packing Credit Letter

Additional Document for P.C.

Letter of Partnership along with Registered Partnership Deed in case of Partnership

Accounts.

Resolution of the Board of Directors along with Memorandum & Articles of association

in case of Accounts of Limited Companies. In case of Corporation, Resolution of the

Board Meeting along with Charter.

Personal Guarantee of all the Partners in case of Partnership Accounts and a=of all the

Directors in case of Limited Companies.

An undertaking from the Directors of the Public Limited Company to obtain prior

clearance from the Bank before declaring any intend/final dividend.

Back to Back Letter of Credit (BTB):

Bangladesh is a developing country. After receiving order from the importer, very frequently

exporters face problems of scarcity of raw material. Because of some raw materials are not

available in the country. These have to be collected from abroad. In that case, exporter gives

lien of export L/C to bank as security and opens an L/C against it for importing raw materials.

This L/C is called Back To Back L/C. In back to back L/C, ABBL keeps no margin.

Sometimes there is provision in the export UC that the importer can use the certain portion of

the export L/C amount for importing accessories that are necessary for the making of the

product. Only in that case, BTB is opened.

Payment of Back to Back LC:

Client gives the payment of the BTB L/C after receiving the payment from the importers.

But in some cases, client sells the bills to the ABBL. But if there is discrepancy, the ABBL

sends it for collection.

In case of BTB L/C, ABBL gives the payment to the beneficiary after receiving the payment

from the UC of the finished product (i.e. exporter). Bank gives the payment from DFC

Account (Deposit Foreign Currency Account) where Dollar is deposited in national rate.

For BTB L/C, opener has to pay interest at LIBOR rate (London Inter Bank Offering

Rate). Generally LIBOR rate fluctuates from 3% to 5%.

A schedule named Payment Order; Forwarding Schedule is prepared while making the

payment. This schedule is prepared when the payment of UC is made. This schedule contains

the followings:

Reference number of the beneficiary's bank and date.

Beneficiary's name.

Bill value.

Payment order number and date.

Equivalent amount in Taka.

Advance against Red-clause Letter of Credit:

Under Red clause letter of credit, the opening bank authorizes the Advising Bank/Negotiating

Bank to make advance to the beneficiary prior to shipment to enable him to procure and store

the exportable goods in anticipation of his effecting the shipment and submitting a bill under

the L/C. as the clause containing such authority is printed in red ink, the L/C is called Red

clause and Green clause respectively. Though it is not prohibited, yet very rare in

Bangladesh.

Post Shipment Credit:

This type of credit refers to the credit facilities extended to the exporters by the banks after

shipment of the goods against export documents. Necessity for such credit arises as the

exporter cannot afford to wait for a long time for without paying manufacturers/suppliers.

Before extending such credit, it is necessary on the part of banks to look into carefully the

financial soundness of exporters and buyers as well as other relevant documents connected

with the export in accordance with the rules and regulations in force. Banks in our country

extend post shipment credit to the exporters through-.

Negotiation of documents under L/C

Foreign Documentary Bill Purchase (FDBC)

Advances against Export Bills surrendered for collection;

Negotiation of documents under L/C:

The exporter presents the relative documents to the negotiating bank after the shipment of the

goods; a slight deviation of the documents from those specified in the L/C may raise an

excuse to the issuing bank to refuse the reimbursement of the payment already made by the

negotiating bank. So the negotiating bank must be careful prompt, systematic and indifferent

while scrutinizing the documents relating to the export.

Foreign Documentary Bill Purchase (FDBC):

Sometimes the client submits the bill of export to bank for collection and payment of the

BTB L/C. In that case, bank purchases the bill and collects the money from the exporter.

ABBL subtracts the amount of bill from BTB and gives the rest amount to the client in cash

or by crediting his account or by the pay order.

For this purpose, ABBL maintains a separate register named FDBC Register. This register

contains the following information:

Date

Reference number (FDBC)

Name of the drawer

Name of the collecting bank

Conversion rate

Bill amount both in figure & in Taka.

Export form number

Export L/C number

Advances against Export Bills surrendered for collection:

Banks generally accept bills for collection of proceeds when they are not drawn under an L/C

or when the documents, even though drawn against an L/C contain some discrepancies. The

bank generally negotiates bills drawn under L/C, without any discrepancy in the documents,

and the exporter gets the money from the bank immediately. However, if the bill is not

eligible for negotiation, the exporter may obtain advance from the bank against the security

of export bill. In addition to the export bill, banks may ask for collateral security like a

guarantee by a third party and equitable/registered mortgage of property.

3.1.6 Export Documents Checking :

General verification: -

L/C restricted or not.

Exporter submitted documents before expiry date of the credit.

Shortage of documents etc.

Particular verification:

Each and every document should be verified with the L/C.

3.2 Import Section:

Imports of goods into Bangladesh is regulated by the ministry of commerce and industry in

terms of the Import and Export (Control) Act, 1950, with import policy orders issued by

annually, and Public Notices issued from time to time by the office of the Chief Controller of

Import and Export (CCI & E). Through the process of import some vital but which are

inadequate in our country products are imported to meet the local needs of the people.

3.2.1 Import Mechanism

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

(Control) Act, 1950, the officer of Chief Controller of Import and Export provides the

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

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

importer. His requests o instructs the opening bank to open an L/C.

Import may be allowed under the following sources of finance:

(a) Cash-

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

Bank;

ii. Foreign currency accounts maintained by Bangladeshi National working/living

abroad.

(b) External economic aid.

(c) Commodity exchange.

Procedures:-

An importer is required to have the following to import through ABBL-

i. Applicant has to apply for opening LC by a prescribed form.

ii. Applicant has to submit the Letter of Intent or Letter of Proforma Invoice.

Letter of Intent: Many sellers have their agent in seller’s country. If the

contract of buying is made between the buyers and the agent of the sellers then

Letter of Intent is required.

Letter of Performances Invoice: If the contract is made directly between the

buyer and the sellers then Letter of Performances Invoice is needed.

iii. Applicant has to submit IRC (Inventors Registration Certificate). It is a

certificate being renewed every year. This certificate is necessary if the

contract is made between the buyers and the agents of the sellers. IRC is of

two types - COM and IND. COM is given for commerce purpose and IND is

given for industrial purpose.

iv. Applicant has to submit LCAF (Letter of Credit Authorization Form).

v. Applicant has to submit insurance document.

vi. Applicant has to prepare FORM-IMP.

vii. Recently, there has been made a provision to give a certificate named TIN

(Tax Payers Identification Number).Taxation department issues this

certificate.

viii. Then after proper scrutiny bank will open an L/C. While opening L/C,

importer must keep certain percentage of the document value in the bank as

margin.

3.2.2 Procedure to Open an L/C:-

To open an L/C, the requirements of an importer are:

He must have an account in ABBL.

He must have Importers Registration Certificate (IRC).

Report on past performance with other bank. ABBL collects this report from Bangladesh

Bank.

CIB (Credit Information Bureau) report from Bangladesh Bank.

A proposal approved by the meeting of executive committee of the bank. It is necessary

only when the L/C amount is small or there is no limit.

If the L/C amount is large or there is a limit, then an approval from Bangladesh Bank is

needed. Usually this approval is needed for amount more than one crore.

3.2.3 Letter of Credit:

Foreign trade can be easily defined as a business activity, which crosses national boundaries.

These may be between parties or government ones. Trade among nations is a common

occurrence and normally benefits both the exporters and importers.

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

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

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

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

comparative advantage. It includes the spectrum of goods, services, investment, technology

transfer etc. These trades among various countries calls for lose linkage between the parties

dealing in trade. The banks, which provide such transactions, are referred to as rendering

international banking operations. International trade demands a flow of goods from seller to

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

through letter of credit (LC).

Letter of Credit:

Letter of credit (L/C) can be defined as a "Credit Contract" whereby the buyer’s bank is

committed (on behalf of the buyer) to place an agreed amount of money at the seller’s

disposal under some agreed conditions. Since the agreed conditions include, amongst other

things, the presentation of some specified documents, the letter of credit is called

Documentary Letter of Credit. The Uniform Customs & Practices for Documentary

Credit (UCPDC) published by international Chamber of Commerce (1993) Revision;

Publication No. 600 defines Documentary Credit:

Any arrangement however named or described whereby a bank (the "issuing bank") acting

at the request and on the instructions of a customer (the "Applicant") or on its own behalf.

To make a payment or to the order of a third party(the beneficiary) or is to accept

and pay bills of exchange(Drafts)drawn by the beneficiary, or

Authorizes another bank to effect such payment or to accept and pay such bills of

exchange (Drafts)

Authorizes another bank to negotiate against stipulated documents provide that

terms and conditions are complied with.

3.2.4 Types of Documentary Credits

Documentary Credits may be either:

(i) Revocable or, (ii) Irrevocable.

Revocable credit: A revocable credit is a credit that can be amended or cancelled by the

issuing bank at any time without prior notice to the seller.

In case of seller (beneficiary), revocable credit involves risk, as the credit may be amended or

cancelled while the goods are in transit and before the documents are presented, or although

presented before payments has been made. The seller would then face the problem of

obtaining payment on the other hand revocable credit gives the buyer maximum flexibility, as

it can be amended or cancelled without prior notice to the seller up to the moment of payment

buy the issuing bank at which the issuing bank has made the credit available, In the modern

banking the use of revocable credit is not widespread.

Irrevocable credit: An irrevocable credit constitutes a definite undertaking of the issuing

bank (since it cannot be amended or cancelled without the agreement of all parties thereto),

provided that the stipulated documents are presented and the terms and conditions are

satisfied by the seller. This sort of credit is always preferred to revocable letter of credit.

Sometimes, Letter of Credits is marked as either 'with recourse to drawee@ or 'without

recourse to drawer'.

3.2.5 Parties for Letter of Credit:

The parties are:

The Issuing Bank,

The Confirming Bank, if any, and

The Beneficiary.

Other parties that facilitate the Documentary Credit are:

The Applicant,

The Advising Bank,

The Nominated Paying/ Accepting Bank, and

The Transferring Bank, if any.

1. Importer - Seller who applies for opening the L/C.

2. Issuing Bank - It is the bank which opens/issues a L/C on behalf of the importer.

3. Confirming Bank - It is the bank, which adds its confirmation to the credit and it is don

at the request of issuing bank. Confirming bank may or may not be advising bank.

4. Advising / Notifying Bank - is the bank through which the L/C is advised to the

exporters. This bank is actually situated in exporter’s country. It may also assume the

role of confirming and / or negotiating bank depending upon the condition of the credit

5. Negotiating Bank - is the bank, which negotiates the bill and pays the amount of the

beneficiary. The advising bank and the negotiating bank may or may not be the same.

Sometimes it can also be confirming bank.

6. Paying / Accepting Bank - is the bank on which the bill will be drawn (as per condition

of the credit). Usually it is the issuing bank.

7. Reimbursing bank - is the bank, which would reimburse the negotiating bank after

getting payment - instructions from issuing bank.

3.2.6 Some Important Documents of L/C:

Forwarding: Forwarding is the letter given by the advising bank to the issuing bank.

Several copies are sent to the issuing bank. All copies including original should be kept in

the bank.

Bill of Exchange: According to the section 05, Negotiable Instruments (NI) Act-1881, A

"bill of exchange" is an instrument in writing containing an unconditional order signed by

the maker, directing a certain person to pay [on demand or at 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. It may be either at sight or certain day sight. At sight means making

payment whenever documents will reach in the issuing bank.

Invoice: Invoice is the price list along with quantities. Several copies of invoice are given.

Two copies should be given to the client and the other copies should be kept in the bank. If

there is only one copy, then its photocopy should be kept in the bank and the original copy

should be given to the client. If any original invoice contains the custom's seal, then it

cannot be given to the client.

Packing List: It setter describing the number of packets and their size. If there are several

copies, then two copies should be given to the client and the remaining should be kept in the

bank. But if there is only one copy, then the photocopy should be kept in the bank and the

original copy should be given to the client.

Bill of Lading: Bill of Lading is the bill given by shipping company to the client. Only one

copy of Bill of Lading should be given to the client and the remaining copy should be kept

in the bank.

Certificate of Origin: Certificate of origin is a document describing the producing country

of the goods. One copy of the certificate of origin should be given to the client and the

remaining copy should be kept in the bank. But if there is only one copy, then the

photocopy should be kept in the bank and the original should be given to the client.

Shipment Advice: The copy mentioning the name of the insurance company should be

given to the client and the remaining copies should be kept in the bank. But if only one

copy is given, then the photocopy should be kept in the bank and the original copy should

be given to the bank.

3.2.7 Form - IMP

This form is prepared for maintaining account of the money, which goes out side the country

for the purpose of payment. This form is required by Bangladesh Bank. It is an application

for permission under 4/5 of the Foreign Exchange Regulation Act, 1947 to purchase

foreign currency for the payment of import.

IMP - FORM has four copies:

Original copy for Bangladesh Bank.

Duplicate copy for authorized dealers. It is issued for processing Exchange Control Copy of

bill of entry or certified invoice.

Triplicate copy for authorized dealers' record.

Quadruplicate copy for submission to the bank in case of imports where

documents are retired.

Following documents are sent with FORM-IMP:

Letter of Credit Authorization Form(LCAF),

One copy of invoice,

Indent copy / performances invoice.

The following Information is included in the FORM-IMP:

Name and address of the authorized dealer,

Amount of foreign currency in words and figures,

Names and address of the beneficiary,

L/C Authorization Form number and date,

Registration number of L/C Authorization Form with Bangladesh Bank, and

Description of the goods.

Accounting Treatment for Opening LIC.

For opening L/C, importer will apply to the issuing bank. In that case, importer is called

applicant or opener. After opening an L/C bank will create a contingent liability. In that

case, the accounting posting will be the following-.

Customers liability Dr.Contingent Liability Cr. Generally L/C is opened against some margin.

While paying the money by the issuing bank, issuing bank will reverse the above entry and the entry will be-

Contingent Liability Dr. Customers Liability Cr.

Then the issuing bank will give another entry-

Payment Against Document (PAD)

Dr.

AB General Account Cr.Exchange Gain Cr.

PAD will debit because the bank will pay the money against some documents’ General

Account is a miscellaneous account. It will be credited because by this entry ABBL creates a

liability. He has to pay the money to the advising bank. And the gain made by the

transaction is shown at Exchange Gain Account.

All these entries are made after receiving some documents from the exporters. The above

procedure is called Lodging.

After giving the above entry, ABBL will inform the clients for collecting the documents from

the bank.

Importers will pay the due to the bank and collects the documents. In that case, the entry

will be –

Party Account Dr.

PAD Account Cr.

After opening the L/C, ABBL (issuing bank) must receive the documents for any other proceedings. These documents are ---

i. Bill of Lading,

ii. Invoice,

iii. Packing List,

iv. Country of Origin.

3.2.8 Lodgment of documents:

After receiving the documents from the exporters, at first ABBL write it in the PAD

Registrar. PAD Register contains date, PAD number, L/C number, name of the drawer, name

of the drawee, amount, number of copies of various documents, name of the imported items.

This written procedure is called Lodgment.

Accounting Application:

While doing lodgment, ABBL makes the following entries-

Payment Against Document (PAD)

Dr.

AB General Account Cr.

Exchange Gain Cr.

ABBL makes the payment to the reimbursing bank against the documents. That's why, it

debts the PAD Account.

For payment, ABBL deposits the money at the miscellaneous account @69.35 (current rate).

And sends an Inter Branch Credit Advice (IBCA) to credit the amount to a nostro account

maintained in a bank of exporters' country from which payment will be made. By this

transaction, ABBL makes a profit @O. 1 5 per dollar.

3.2.9 Retirement of Documents:-

The process of collecting documents from bank by the importer is called retirement of the

documents. The importer gives necessary instructions to the bank for retirement of the

import bills or for the disposal of the shipping documents to clear the imported goods from

the customs authority. The importer may instruct the bank to retire the documents by

debiting his current A/C.

3.3 FOREIGN REMITTANCES SECTION (INWARD & OUTWARD)

Foreign remittance, in simple terms, means money remitted in foreign currency. More

precisely, it is termed as remittances in foreign currency that are received in & made out

abroad. Conceptual Issues International remittances are defined as the portion of migrant

workers’ earnings sent back from the country of employment to the country of origin (ILO,

2000). Remittance can also be sent in kind. Transfers that take place in kind is quite difficult

to measure.

Remittances can be individual and it can also be collective. When, individuals send

remittance to his/her household or kith and kin that can be termed as individual remittance.

When a group of migrants, their associations or professional bodies oblige resource together

and send for collective or community programs that can be termed as collective remittance.

Individual remittances are mostly geared towards the family whereas collective remittances

are generally used for community development.

Transfer of remittances takes place through different methods. 46% of the total volume of

remittance has been channeled through official sources, around 40% through hundi, 4.61%

through friends and relatives, and about 8 percent of the total was hand carried by migrant

workers themselves when they visited.

TYPES:-

Two types of Foreign remittance:-

1. Foreign Inward Remittance

2. Foreign Outward Remittance

Wage Earners Remittance Inflows (Monthly)

Year/MonthRemittances

In million US dollar In million Taka2008-2009   April 781.71 53609.70   March 808.72 55445.80   February 689.26 47269.50   January 710.74 48742.50   December 635.34 43571.60   November 617.39 42383.80   October 559.05 38406.70   September 590.67 40579.00   August 470.95 32307.20   July 567.11 38926.40

2007-2008   June 516.38 35599.40   May 557.02 38495.70   April 543.74 37485.40   March 537.29 37040.80   February 500.32 34532.10   January 462.55 32235.10   December 555.08 38555.90   November 598.73 41857.20   October 377.34 25315.70   September 466.00 30310.20   August 471.22 32806.30   July 412.80 28751.502006-2007   June 429.13 29888.90   May 487.24 33829.00  Source : Foreign Exchange Policy Department, Bangladesh Bank

From the trend analysis of wage earners remittance inflow we can see that the remittance is increasing day by day. In the month of July(FY’2006-07) the remittance inflow was 412.80 million dollar where as in the month of July(FY’2007-08) the inflow was 567.11 million dollar.

Wage Earners Remittance Inflows (Yearly)

Year/MonthRemittances

In million US dollar In million Taka  2007-08* 6430.94 441242.202006-07 5998.47 412985.292005-06 4802.41 322756.802004-05 3848.29 236469.702003-04 3371.97 198698.002002-03 3061.97 177288.202001-02 2501.13 143770.302000-01 1882.10 101700.10

1999-2000 1949.32 98070.301998-1999 1705.74 81977.801997-98 1525.43 69346.001996-97 1475.42 63000.401995-96 1217.06 49704.001994-95 1197.63 48144.701993-94 1088.72 43549.00

1992-93 944.57 36970.401991-92 849.66 32414.501990-91 763.91 27256.20

*: data up to month of April of financial year 2007-2008.  Source : Foreign Exchange Policy Department, Bangladesh Bank

WAGE EARNERS REMITTANCE INFLOW(IN DOLLAR)

01000200030004000500060007000

  200

7-08

2005

-06

2003

-04

2001

-02

1999

-200

0

1997

-98

1995

-96

1993

-94

1991

-92

YEAR

INCO

ME

3.3.1 Foreign Inward Remittance 3.1 FOREIGN INWARD REMITTANCE

DEFINITION:The remittance of freely convertible foreign currencies which we are 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 (Also Outward Remittance):The following are the mode of Inward/Outward Remittances.

i) TT = Telegraphic Transfer.

ii) MT = Mail Transfer.

iii) FD = Foreign Drafts.

iv) PO = Payment Order.

v) TC = Travelers’ Cheque.

vi) EFT = Electronic Fund Transfer

vii) FCN = Foreign Currency Notes.

viii) OLR = on line Remittances.

A remitter abroad simply has to approach a bank branch there with certain amount to be

deposited beneficiary in Bangladesh either in foreign currency or in equivalent Taka

currency. The Branch so approached abroad usually should have agency arrangement with

the paying banks in Bangladesh. However, in the absence of any such agency arrangement,

remittance may also be made by transferring cover value of the remittance to the paying

bank’s account abroad by the remitting bank.

SOURCE OF INWARD REMITTANCE:-

i) Expatriate Bangladeshis.

ii) Exporters.

iii) Visitors.

PURPOSE OF REMITTANCE:

In short, remittances are being sent from abroad for the following purposes:-

Family maintenance

Indenting Commission

Recruiting Agents Commission

Realization of Export Proceeds

Donation

Gift

Export broker’s Commission etc.

PURCHASE OF DRAFTS & CHEQUES:

Authorized Dealer may purchase Drafts & Cheques which are not drawn on AB Bank at the

request of the beneficiary.

COLLECTION PROCEDURES:

To make entry in foreign bills Collection Register

To prepare forwarding schedule.

To prepare vouchers on realization.

PAYMENT OF FOREIGN CURRENCY NOTES:

Authorized branches of the bank are to make payment of F.C. notes in equivalent Taka

currency at the prevailing rate (T.T. Clean buying rate).

Generally, three foreign currencies namely U.S. Dollar, Pound Sterling and Euro are being

bought and sold along with two other currencies like K.S.A. Riyal & Kuwaiti Dinar.

3.3.2 FOREIGN OUTWARD REMITTANCE

DEFINITION:

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

known as foreign outward remittance.

PURPOSE OF OUTWORD REMITTANCE:-

To settle Import Payment.

To meet Travel Expenses/Medical Expenses/Educational Expenses etc.

APPROVAL OF BANGLADESH BANK

Bangladesh is always in a scarcity of foreign exchange and foreign exchange business is

restricted and controlled by the Central Bank of the country. For this reason Bangladesh

Bank’s prior permission is required for any remittance to be made to outside the country.

Bangladesh Bank provides permission/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.

i) The IMP form (cover remittances for importers)

ii) Form T/M (Traveling & Miscellaneous)

Other than these two prescribed forms, Bangladesh Bank sometimes issue

permits know as Bangladesh Bank permit.

CANCELLATION OF FD:

For cancellation of any foreign draft which was issued earlier by the branch the following

formalities to be observed:

To receive an application from the purchaser.

To discharge on the reverse of the FD with Revenue Stamp by the purchaser.

“Received payment by cancellation”

The draft should be treated as a debit voucher & payment will be made by

debit to concern Foreign Bank

To advise drawee bank/reimbursing bank regarding cancellation of Draft.

REPORTING TO BANGLADESH BANK REGARDING CANCELLATION:

In the event of any remittance-which has already been reported to the Bangladesh Bank on

the prescribed return being subsequently cancelled either in full or in part, the authorized

dealer must report the cancellation of the remittance. The return in which the reversal of the

transaction is reported should be supported by a letter giving the following particulars:

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

The name and address of the beneficiary.

The amount of the purchase as effected originally.

The amount cancelled.

Reasons for cancellation.

Main Flow

Currently, Saudi Arabia, UAE, Kuwait, Qatar, Oman, Iraq, Libya, Bahrain, Iran, Malaysia,

South Korea, Singapore, Hong Kong and Brunei are some of the major countries of

destination. Saudi Arabia alone accounts for nearly one half of the total number of workers

who migrated from Bangladesh. Labour market of Bangladeshi workers is not static. During

the 1970s Saudi Arabia, Iraq, Iran and Libya were some of the major destination

countries. While the position of Saudi Arabia remains at the top, Malaysia and UAE became

important receivers. In mid-1990s, Malaysia became the second largest employer of

Bangladeshi workers. However, since the financial crisis of 1997, Bangladeshis migrating to

Malaysia dropped drastically. Now UAE has taken over its place.

Over the past 25 years labor migration from Bangladesh has registered a steady increase.

From 1990 onwards on an average 3,25,000 Bangladeshis are migrating on short-term

employment, mostly to 13 countries. In the past the bulk of the migrants consisted of

professional and skilled labor. However, the recent trend is more towards semi- and unskilled

labor migration. Due to increase in the flow of unskilled and semi- skilled labor, remittance is

increasing at a much lower rate than the labor flow. Remittance is crucial for Bangladesh’s

economy. It constitutes almost one-third of the foreign exchange earning. About 25 percent

of remittance senders were students when they went abroad and another 25 percent were

living off their own land. A large segment of them were working as construction laborers

overseas, another group worked as agricultural laborers. UAE, Saudi Arabia and Singapore

constituted the most of important destinations of these migrants.

One survey comments that if the migrant workers’ total income abroad and the present

family income from other sources is combined and then compared with the pre- migration

family income, it registers an increase in total income by 119 percent. On an average, the

interviewee households annually received about Tk.72,800 as remittance. This means that a

typical migrant remits 55.65 percent of his income. Remittance constitutes 51.12 percent of

the total income of these families. Transfer of remittances takes place through different

methods. 46 percent of the total volume of remittance has been channeled through official

sources, around 40% through hundi, 4.61 percent through friends and relatives, and about 8

percent of the total was hand carried by migrant workers themselves when they visited.

Contribution of Remittance to the national economy labour migration plays a vital role in the

economy of Bangladesh. Bangladesh has a very narrow export base. Readymade garments,

frozen fish, jute, leather and tea are the five groups of items that

Account for four-fifths of its export earnings. Currently, garments manufacturing is treated as

the highest foreign exchange earning sector of the country (US $ 4.583 billion in 2003).

However, if the cost of import of raw material is adjusted, then the net earning from migrant

workers’ remittances is higher than that of the garments sector. In 2 003, net export earning

from RMG should be between US$2.29-2.52 billion, whereas the earning from remittance is

net US$3.063 billion. In fact, since the 1980s, contrary to the popular belief, remittances sent

by the migrants played a much greater role in sustaining the economy of Bangladesh than the

garments sector.8 for the last two decades, remittances have been at levels of around 35% of

export earnings, making it the single largest source of foreign currency earner for the country.

This has been used in financing the import of capital goods and raw materials for industrial

development. In the year 1998-99, 22 percent of the official import bill was financed by

remittances (Afsar, 2000; Murshed, 2000 and Khan, 2003). The steady flow of remittances

has resolved the foreign exchange constraints, improved the balance of payments, and helped

increase the supply of national savings (Quibria 1986). Remittances also constituted a very

important source of the country’s development budget. In certain years in the 1990s

remittances’ contribution rose to more than 50 percent of the country’s development budget

Government of Bangladesh treats Foreign aid (confessional loan and grants) as an important

resource base of the country. However, remittances that Bangladesh received last year was

twice that of foreign aid. Remittances have played a major role in reducing the extent of the

country’s dependence on foreign aid.

The contribution of remittance to GDP has also grown from a meager 1 percent in 1977-

1978 to 5.2 percent in 1982-83. During the 1990s the ratio hovered around 4 percent.

However if one takes into account the unofficial flow of remittances, its contribution to GDP

would certainly be much higher. Murshed (2000) finds that an increase in remittance by

Taka 1 would result in an increase in national income by Tk 3.33. Following the expiry of

multi-fiber agreement (MFA), Bangladesh will face steep competition in export of RM.

The country will cease to enjoy any special quota. It is apprehended that Bangladesh’s RMG

export will decline sharply. This will result in loss of job of many workers and shortfall in

foreign exchange earnings. Potential of retaining employment and export earnings through

export of frozen fish, jute, leather and tea seems rather bleak.

It is in this context labor migration has become key sector for earning foreign exchange and

creating opportunities for employment. Therefore, the importance of migrant remittance to

the economy of Bangladesh can hardly be over emphasized. Methods of Transfer Migrants

use different methods in sending remittance involving both official and unofficial channels.

Officially, transfer of remittance takes place through

i) TT = Telegraphic Transfer.

ii) MT = Mail Transfer.

iii) FD = Foreign Drafts.

iv) PO = Payment Order.

v) TC = Travelers Cheque.

vi) EFT = Electronic Fund Transfer

ix) Foreign Currency Notes.

x) On line Remittances.

Hundi/ Money Courier is the most common among the unofficial channels of transfer. Hundi

refers to illegal transfer of resource outside the international or national legal foreign

currency transfer framework. Organized groups based in diverse cities such as London, New

York, Dubai, Kuala Lumpur and Singapore conducts hundi operation through their partners

in Bangladesh or From some countries remittances are sent by money gram. Besides this,

other unofficial methods are, sending remittance through departing friends and relatives;

personally hand carried by the senders themselves without declaration, and in the form of

visa/ work permit for sell or family use.

3.3.3 Role of different institutes and instruments involved in foreign remittance

Ministry of Finance

Ministry of Finance (MOF) is the prime policy making body regarding banking and

remittance. Macro-economic policies that affect exchange rate, monetary and fiscal

mechanisms, foreign exchange reserve etc. are regulated by this ministry. Bangladesh Bank

Bangladesh Bank (BB) is the central bank of Bangladesh. Among other powers and

functions, BB regulates scheduled bank activities, acts as a clearing-house, maintains foreign

exchange

Reserves and monitors floating exchange rate mechanism in the current accounts.

Bangladesh Bank encourages the nationalized and private banks to link up with foreign

banks and exchange houses in the destination countries. It has a separate department for

regulating and monitoring remittance entitled Foreign Exchange Policy Department

(FEPD). It also generates analyses, interprets and distributes data on inflow of remittance.

Nationalize Commercial Banks Nationalized Commercial Banks (NCBs) of Bangladesh

make direct banking facilities available at the doorsteps of Bangladeshi emigrants

especially in those countries where a large number of Bangladeshis are employed. Four

NCBs are deeply involved in remittance transfer. These are Sonali Bank, Janata Bank,

Agrani Bank and Bangladesh Krishi Bank (BKB). Among the NCBs, BKB is solely

targeted towards agricultural development in rural areas. Within Bangladesh these four

NCBs have 2945 branches.

Through them they can disburse remittances even in distant areas. Besides their own

branches, NCBs have opened exchange houses in joint collaboration with different banks and

financial institutions in different countries of the world. Private Commercial Banks Private

Commercial Banks (PCBs) is also involved in remittance transfer. Of the PCBs, Islami

Bank of Bangladesh Ltd. has been found to be most proactive in the area of migrants’

remittance. National Bank, International Finance and Investment Corporation (IFIC), Prime

Bank and Uttara Bank are other private banks involved in remittance transfer. Most of their

activities are in the Middle East. Saudi Arabia is the major working area of Islami Bank along

with Qatar, Bahrain and UAE. National Bank is operating in Oman, Kuwait, UAE, Qatar,

Bahrain and Saudi Arabia. IFIC has curved out a major niche in Bangladeshi community in

Oman and has its largest share with 41 percent of the market. It also has branches and

exchange offices in Nepal and some other Middle Eastern countries. Uttara Bank runs

exchange house in Qatar in collaboration with a local financial institution. Corresponding

Relationships In almost all countries of the world, both NCBs and PCBs have corresponding

relationships with banks through which Bangladeshi migrants may easily send their money to

their beneficiaries’ accounts with any branch of any bank in Bangladesh.

Exchange Rate Regimes in Bangladesh

The rate at which one currency is exchanged for another currency in the foreign exchange

market is called exchange rate. Until recent past, fixed exchange rate system was prevailing

in Bangladesh in which case the central bank of the country could devalue the local currency.

To better protect the external competitiveness of Taka and to enhance the resilience of the

economy in responding to shocks, Bangladesh formally stepped over to market based

exchange rate for the Taka from 31st May 2003 (Annual Report, BB, 2002-03). In this new

system, the nominal exchange rate is set by the market forces but keeps discretion for the

central bank to intervene in the foreign exchange market to keep the rate within certain limit

of appreciation or depreciation. This is known as ‘managed float’ system. In this system,

demand and supply primarily determine the exchange rate on a particular day. But

Bangladesh Bank comes forward to keep the exchange rate within a certain limit of

appreciation or depreciation by selling or buying the foreign currencies or by adopting some

other measures.

Floating Exchange Rate in Current Account

In the year 2000, BB relaxed foreign currency dealing, allowing authorized dealers to transact

dollars with Bangladeshi Bank. Earlier the banks were obliged to transact at certain fixed

rates. In 2002, MOF has reformed exchange rate policy further. Foreign exchange in current

account has been made free floating. The Bank officials believe that a decision of allowing

market to decide exchange rate in current account has help curb hundi business in a

significant scale.

Remittance Data and Monitoring

BB maintains data on remittance transfer since 1972. Recently, it has introduced a method of

weekly (provisional) data collection for understanding the trend of remittance. Currently,

datasheets are prepared on bank and country wise. BB analyses and interprets the reports to

identify remittance trends like increase or decrease. Comparative statement on performance

of various NCBs is then distributed among banks; BB is now actively considering exchange

house wise analysis and interpretation of remittance data. According to bank officials, this

would lead to competitiveness among the NCBs and their exchange houses. BB has also

determined annual minimum target for the exchange houses. The NCB’s have to ensure that

their exchange houses meet those targets. Each exchange houses situated in USA should

transact at least US $3 million. For UK exchange house, the target is 2 million GBP and for

Canada, the target is US $2.5 million (BB, 2004). Complaint if a client face problem in

transferring remittance or feel harassed, a system of lodging complaint to higher authorities

has been established. Remitters may contact directly to the Secretary, Finance Division,

Ministry of Finance or the Managing Director or Executives of concerned NCB to express

their opinions or lodge complaints. Telephone and fax numbers and email addresses of

relevant persons are provided in the website of BB, and also in the directory published by the

five NCBs (Sonali, Janata, Agrani and BKB) engaged in remittance transfer.

Investment Instruments

Investment instruments are another effective mechanism for encouraging remittance through

official channel. BB, NCBs and PCBs have developed different packages in this respect.

From the government side, few packages were already there before 2001. Nonetheless, two

new investment instruments have been launched at the end of 2002. In the following, some

of the packages developed by all the three actors mentioned above are presented.

Non-resident Foreign Currency Deposit (NFCD)

Migrants can have a NFCD account in any branch of Bangladeshi and foreign banks that

holds an authorized dealership license. The account can be opened for different periods: one

month, three months, six months or one year in US dollar, pound sterling (PS), Canadian

dollar (CD), German Mark (DM), Japanese Yen (Y) or Euro-currency (Euro). The minimum

necessary balance must be US$1000 or PS 500 or their equivalent amount in currencies

stated above. The accounts are renewable and can be maintained for an indefinite period even

after the return of the wage earner (migrants). One is also eligible to open an NFCD account

with his/her savings within six months of one’s return to Bangladesh. The interest is

determined in terms of interest accounted on the value of Eurocurrency. The interest accrued

is tax-free. The capital and interest of NFCD account is also transferable in Bangladeshi taka

to the current exchange rate. There is also the provision to withdraw the capital money before

the expiry of the period specified but in that case one will not receive the interest.

The central bank also allows investment of NFCD funds in remunerative business projects to

allow payment of competitive interest rates to account holders. NFCD forms are available in

Bangladeshi missions abroad. In order to make the schemes popular among the migrants, BB

has gradually simplified the formalities with regard to NFCD. Only photocopy of passport,

signature or a certification from a notary public is sufficient to open such an account. As far

as the campaign to market these instruments is concerned, Bangladesh Bank is engaged in

regular contacts with the missions abroad.

Wage Earners’ Development Bond

The remittance of Bangladeshi migrants abroad can be invested in Bangladeshi currency in

five-year Wage Earners’ Development Bond. The bonds are available in different

denominations: Tk. 1000, Tk. 5000, Tk. 10,000, Tk. 25,000 and Tk. 50,000. The Bonds are

issued for specific periods. The profits are invested in Bangladesh and the bonds accrue an

annual interest of 12% (as of 28.11.2000). If a bondholder wants to enc ash them before the

expiry of the term s/he would be entitled to get interest at a reduced rate. The capital money

of the investment is freely transferable abroad in foreign currency. The interest is tax free.

The Bond is available at National Savings Bureau offices, branches of Bangladeshi banks

abroad and Bangladesh missions abroad.

Non resident Taka Account (NRTA)

One can open a NRTA by the money remitted from abroad for investment in the share and

securities of the capital market of Bangladesh. Such an account may be opened in any dealer

branch of an authorized bank. The current balance of NRTA is transferable in foreign

currency to any country any time. One can buy share and securities from stock exchange with

the balance of NRTA and the money earned as dividend and shares and securities sold may

be saved in NRTA. The capital and profit money is tax exempt and the bank directing the

account can work as nominee.

US Dollar Investment Bond

2002 The IRD of the MOF introduced the US Dollar Investment Bond, 2002 in 16 October

2002 as an investment instrument in foreign currency for Bangladeshi emigrants (GOB,

2002). Eligibility for the bond: It provisions for issuing US Dollar Bond in the name of a

holder of a non-resident account against remittances from abroad to the account. Maturities,

denomination etc. The US Dollar Investment Bond(s) shall be matured for payment after

completion of three years form the date of its issue.

The Bond holder will be entitled to draw interest on half-yearly basis at 6.5 percent fixed

rate per annum in US Dollar. However, the Bond holder may surrender the Bond(s) before

maturity and encash the same at the paying office in which case interest will be paid as under:

a. No interest for encashment within 1 year of issue; b. 5.5 percent interest for encashment

after completion of 1 year but within 2years; c. 6 percent interest for encashment after

completion of 2 years but within 3 years; and d. 6.5percent interest for encashment after

completion of 3 years. The Bond(s) shall be issued in the denominations of US $500, $1000,

$5000, $10000 and $50000 and in such other nominations as the government may decide.

The principal and interest will be payable in US Dollar to the holder or his/her nominee. The

money invested in the purchase of Bond(s) shall be exempt from tax payable under the

Income Tax Act, 1922. Nominee after death: If the Bond holder dies, the nominee will be

able to draw the principal and the interest in US Dollar if he/she is non-resident. If the

nominee is resident, the principal and the interest is payable in Bangladesh currency.

Method of payment for the bond: Payment for the purchase of a Bond can be made either by

cheque or draft in foreign currency received against inward foreign exchange remittance, or

by funds heeled in non-resident foreign currency account of the applicant. Additional benefit

for substantial investment: If a purchaser buys bonds totaling US $ 1,000,000 (one million) or

above in value, he/she will be treated Commercially Important Person (CIP) and will be

entitled to all the facilities accordingly. The CIP facilities will cease to apply if the

purchaser’s investment in this bond goes below US $ 1,000,000 (one million) because of

subsequent encashment and on his/her failure to retain the limit of US $ 1,000,000 (one

million) through further investment in the Bond within 3 months of encashment.

US Dollar Premium Bond

2002 The US Dollar Premium Bond is the most recent investment instrument in foreign

currency introduced for Bangladeshi emigrants by the IRD, MOF. It was announced in

October, 2002 and became applicable from the next month (GOB, 2002a). Maturity,

denomination, etc.: The US Dollar Premium Bond(s) shall be matured for payment after

completion of 3 years from the date of its issue. The Bond holder will be entitled to draw

interest on half-yearly basis at 7.5 percent fixed rate per annum in Bangladesh currency at

the USD/BDT rate. However, the Bond holder may surrender the Bond(s) before maturity

and encash the same at the paying office in which case interest will be paid as under: a. No

interest for encashment within 1 year form the date of issue; b. 6.5 percent interest for

encashment after completion of 1 year but within 2 years; c. 7 percent interest for

encashment after completion of 2 years but within 3 years; and, d. 7.5 percent interest after

completion of 3 years. The Bond(s) shall be issued in the denominations of US $500, $1000,

$5000, $10000 and $50000 and in such other denominations as the government may decide.

The principal amount will be payable in US Dollar to the holder of his/her non-resident

nominee, where applicable. The principal amount due to the holder or his/her nominee may

also be paid in Bangladesh currency as per option of the holder/nominee. However, interest

amount shall be paid only in Bangladesh currency. Eligibility: The Bond can be issued to a

‘Non-resident account holder’ that means an FC account holder who is a Bangladeshi

national residing abroad or a Person of Bangladeshi Origin (PBO) who has assumed

foreign nationality and is residing abroad. Issuing authority: The ‘Issuing Authority’ of the

Bond is the BB and the scheduled bank branches/authorized dealers in Bangladesh and their

authorized offices abroad and shall include any such authority as the government may, from

time to time determines. A foreign correspondent of an Authorized Dealer Bank may also act

as an office of issue.

Regulatory Instruments

There are two regulatory instruments that apply to remittance. These are Foreign Exchange

regulation Act, 1947and Money Laundering Prevention Act, 2002. Foreign exchange

regulation act is operational for a long time, whereas Money Laundering Prevention Act is a

recent creation.

Authorized foreign exchange dealers: The act provisions authorized dealers in foreign

exchange. It restricts foreign exchange dealings like buying, borrowing, selling, lending,

conversion etc. by any person other than an authorized dealer. Penalty, prosecution and

tribunal: The act provides for jail sentence of maximum 2 years and/or fine equal to the

amount decided by court as punishment for violation of the act.

Power to call information: The act entitles government or BB to call for any kind of

information with regard to any matter of foreign exchange by any person.

Power of inspection: The act entitles government or BB to inspect books of accounts and

other documents of any person, firm or business organization over foreign exchange. Export

of foreign currency: The Notification No. FE 1/94-BB dated 12 November 1994 permits any

person, at the time of departure, take out Bangladeshi currency of Tk.500/- value. Import of

foreign currency: The Notification No. FE 2/94-BB dated 12 November 1994 permits any

person to bring into Bangladesh from any place outside US $5000 or

equivalent in foreign exchange and/or Tk.500/- in Bangladeshi currency without declaration.

If the amount of money brought is more than the said amount, the concerned person has to

make a written declaration to the Customs Authority at the time of arrival, in the form

prescribed by BB. Implementing agency: Bangladesh Bank is the implementing agency of the

act. It has a specific department entitled ‘Foreign Exchange Policy Department’ for

supervising all kinds of foreign exchange matters including foreign remittance.

Evaluation: Foreign Exchange Regulation Act, 1947 is an all encompassing legislation that

over’s all kinds of foreign exchange transfer. This act was does not have any specific section

on migrant remittance. Under the broad umbrella of the act, the Foreign Exchange Policy

Department has framed guidelines to manage remittance movement. Currently there are 16

cases under this act. But none of them are related to migrant remittance.

Money Laundering Prevention Act, 2002

The Money Laundering Prevention Act, 2002 received the consent of President to became

a law on 5 April 2002. The act was amended in 2003(BB, 2003). The act understands

'Money Laundering' as illegally earning or gaining resources directly or indirectly and as

perpetrating or assisting in illegal transfer, conversion or concealing position of legal or

illegal resources earned or gained directly or indirectly. Responsibilities and powers of BB in

prevention: The BB is entrusted with the responsibility of suppressing and preventing money

laundering crimes by implementing the act. Bangladesh Bank has an Anti-Money Laundering

Department who has the following responsibilities:

Investigating money laundering crimes;

Supervise and observe activities of banks, financial institutions and other bodies

involved in financial activities;

Calling up report on money laundering from banks, financial institutions and other

bodies involved in financial activities;

Reviewing the aforementioned reports and act accordingly;

Train officers and staffs of banks, financial institutions and other bodies involved in

financial activities; and

Conducting other activities required for fulfilling the objectives of the act.

Power of investigation: BB or a person empowered by BB can investigate money laundering

crime(s). All money laundering investigations are initiated by BB. If a case concerns a bank

official, BB conducts the whole investigation. But if the alleged perpetrators are general

people, BB gives power to police/CID/Bureau of Anti-corruption etc. to investigate the case.

It often happens that police or other law enforcement agency comes across a money

laundering crime. Then they request BB to empower them to investigate and she obliges.

Reasons of launching money laundering investigation: Money laundering investigation can

be launched for a number of reasons: absence of source or destination of money in a bank

transaction; imbalance of a transaction with the known earning of the account holder;

suspicious TT; hundi; money recovered from public place like road, rail station, port or

airport; complaint from bank(s), other financial institution(s) or law enforcement

agency/agencies. Money laundering court: Trial of money laundering cases will take place in

a session court. Any session court will be considered as money laundering court while trial of

a money laundering case is underway in the court and the judge hearing the case will be

called money laundering court judge at that point of time. Punishment for money laundering:

A person can be given a minimum of 6 months to a maximum of 7 years jail sentence along

with fine worth double the amount of money involved for money laundering.

International agreements: The act provides scope for entering into agreements with foreign

governments to fulfill its objectives. After it came into being, Bangladesh was approached by

Thailand last year for an agreement to prevent inter-state money laundering. But that

agreement stipulated for existence of Financial Intelligence Unit (FIU) which Bangladesh is

yet to have.

Formation of FIU is currently under active consideration of government. Evaluation:

Bangladesh is the first South Asian nation to have specific law for prevention of money

laundering and money laundering court for trial of such cases. Pakistan and Sri Lanka is yet

to establish such specialized laws and courts to deal with money laundering. India has framed

money laundering law in 2003. Since introduction of the act, BB received around 300

complaints of money laundering. After investigation, 17 of them turned out to be criminal

offences. All 17 cases are currently under trial. However, in general, prosecution process in

Bangladesh is extremely slow paced. In many instances, cases remain unresolved for

decades. For effective implementation, prosecution process has to be streamlined, of course,

maintaining due course of law.

3.3.4 REMITTANCE TRANSFER PROCESS :

The modes of transfer of remittance are as follows:

01) Instant draft sent by expatriates

02) EFT i.e. Electronic Fund Transfer

a. Through SWIFT

b. Modem to modem fund transfer

c. Through E-Mail

The expatriates sent instant draft through courier or any friend or family member who will

visit to the home country. The expatriate sent money through electronic fund transfer

process. It may be through swift or it may be through E-Mail. The contracted exchange house

or bank help the expatriate to sent the remittance to the country by taking some service

charge.

SWIFT: Wage earners branch of AB Bank Ltd. get the message file from remittance sending

country. The message file is then decrypted and process through swift.

MODEM TO MODEM: Specially SECI of AB Bank Ltd send the remittance through their

host modem and the other modem of SECI section of Head Office, AB Bank Ltd trace the

remittances send by the SECI, New York, USA.

E-MAIL: After receiving the mail from foreign country from where the contracted exchange

houses or banks send the remittance through E-Mail to wage earners corporate branches or

concerned branch of AB Bank Ltd. Then the responsible officer process the encrypted file

and the remittance file send to the Concerned principal offices or corporate branches and

they process the file through RMS program by taking print out of transfer responding

advice/voucher and the responsible officer credited the remittance to the beneficiaries

account.

4.1 REMITTANCE:

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 other purposes. However, specifically

foreign remittance means sale & purchase of foreign currencies for the purposes other than

export and import. As such, this chapter will not cover purchase & sale of foreign currencies

on account of Import & export of goods.

All foreign remittance transactions are grouped into two broad categories-

II. Outward remittance &

III. Inward remittance

4.1.1 Inward Remittance :

The term inward remittance includes not only purchase of foreign currency by TT, MT,

Drafts etc. but also purchase of bills, purchase of traveler’s cheques.

Two forms are prescribed by Bangladesh Bank are used for purchase of foreign currencies

such as:

EXP Form: Remittances received against exports of goods from Bangladesh are done by

form EXP.

Form C: Inward remittances equivalent to US$ 2000/- and are above are done by Form “C”.

However, declaration in Form C is not required in case of remittances by Bangladesh

Nationals working abroad.

SL NONAME OF THE EXCHANGE CO.

Bank/exchanage

Balance Tk Foad Nrat A/C

1 AL Amodi Exchange Co., K.S.A 042 330270662 AL Ansari Exchange Co. U.A.E 039 330253423 AL Musa Exchange Co. Kuwait 043 330286834 AL Mullah Exchange Co.Kuwait 038 330249555 AL Omari Exchange Co. K.S.A 027 330164986 AL Muzaini Exchange Co.,Kuwait 036 330247327 AL Raji Exchange Co.,K.S.A 015 A-6938 AL Commercial Bank,K.S.A 029 330175879 Arab National Bank , K.S.A 045 33028873

10 Bahrain Exchange Co. Kuwait 017 B-11011 Bahrain Exchange Co.Bahrain 016 B-10912 Bank AL Bilad,K.S.A 044 3302880813 Bank of Muscat 011 C-2514 City Bank NA NIL 33024872

15City International Exchange Co.,Kuwait

008 C-25

16 Dalil Exchange Co.Kuwait 034 3302321417 Daulat Interprise,Canada 040 3302581318 Dollar Co Exchange Co.,Kuwait 019 D-10319 Eastern Exchange Co.,Qatar EE-1 E-1320 Eastern Union & Ex Co. Oman 049 3302947521 Gulf Overseas Exchange Co.Oman 013 G-4922 Habib Exchange Co.,U.A.E 028 3301745523 Indian Bank Baharaj,Singapore 048 3302929324 Injaz Money Exchange,K.S.A 041 33025846

25Kuwait Bahrain Int. Exchange Co.,Kuwait

014 K-121

26 Kuwait Overseas 023 3301280327 Mashreq Bank, U.A.E NIL B1628 National Bank of Oman 007 N-9929 National Money Exchange,Kuwait 026 3301617630 Oman Int. Exchange 050 33029632

31Thomas Kook Al Rostamani Exchange Co.U.A.E

003 O-06

32 Trust Exchange Co.Qatar 009 329133 U.A.E Exchange Co.,Kuwait 032 3302085534 U.A.E Exchange Co.Dubai 046 3302924435 Wall Street Exchange Co.U.A.E 037 3301797536 Zenj Exchange Co.Bahrain 030 33017975

Utmost care should be taken while purchasing Currency Notes, Travelers cheque, Demand

Draft & similar instrument for protecting the bank from probable loss as well as safety of the

Bank officials concerned.

Name of the Foreign Bank dealing with ABBL.

SL. NO

NAME OF BANK

01 STANDARD CHARTERED BANK NY02 AMERICAN EXPRESS BANK NY03 CITI BANK N.A.NY04 HSBC BANK, USA, NY0506 HABIB AMERICAN BANK, NY07 ACU DOLLAR09 BANK MELLI , IRAN10 BANK OF CELON,SRILANKA11 MAYANMAR FOREIGN TRADE BANK LTD.1213 STANDARD CHATERED BANK,KARACHI14 BANK OF BHUTAN,BHUTAN

1. Foreign Currency (Bank) Notes

General Principles and Precautions

Branches may freely buy foreign currency notes from Bangladesh as well as

foreign nationals.

Currency notes, especially notes of higher denominations, i.e. US $ notes of 50

and 100 denominations, should be checked carefully to ascertain their

genuineness.

Foreign Exchange Department shall maintain currency wise F.C. in hand Control

Ledger to record each day’s transactions.

On the last working day of each month the branch shall calculate the exchange

gain or loss and carry out necessary adjustment in the control ledger.

Foreign currencies shall be purchased at the rates instructed by the Head Office,

Accounting Entries:

For purchase of foreign currency notes

FC in hand A/C for FC amount @ FC (Cash) Buying rate Dr.Cash A/C or Party’s A/C for payment to the customer at the same rate Cr. For payment to the customer’s FC A/C

FC in hand A/C for FC amount @ FC (Cash) Buying rate Dr.Customer’s FC A/C @ TT clean (buying) rate Cr.Income A/C (Difference between the two rates) Cr.Month end adjustments

If there is gain on conversion of the FC in hand at TT clean buying rate, the vouchers to be passed are as follows:

FC in Hand (Control Ledger) at TT clean buying rate Dr.Income A/C - Exchange Earnings Cr.If, however, there is loss on conversion of FC balance, the vouchers will be as follows:

Expenditure A/C—Exchange loss DrFC in hand (Control Ledger) Cr2. Travelers’ cheques:

Payment against TCs

The customer tendering the Travelers’ Cheques should be asked to sign the TCs at the designated places in front of the concerned bank official who would satisfy himself about its genuineness with reference to the customer’s signature already appearing on the TCs and his passport. Should there be any doubt; purchase contracts of the TCs may be asked for. The vouchers will be passed as follows:

FBP Clean A/C for FC amount @ TC buying rate Dr

Cash / Party’s A/C at the same rate minus charges Cr

Collection of Proceeds of Enchased TCs

Enchased TCs should be sent to the relevant foreign correspondent for collection and

crediting the proceeds to the Head Office’s Nostro A/C. On receipt of the credit advice from

the foreign correspondents the following vouchers are to be passed.

HO (relevant Nostro A/C) at ready buying rate Dr.

FBP for outstanding amount Cr.

Income A/C (Exchange difference). Cr.

3. TCs and Foreign Drafts received on Collection Basis (FOBC)

After observing the usual formalities, the branch, on transmission of the instruments abroad

for collection, will pass a contra liability voucher at the TT (clean) buying rate, as follows:

Customer’s liability (FBC) at the TT (clean) buying rate Dr.

Customer’s liability (FBC) at the TT (clean) buying rate Cr.

On receipt of credit advice from the correspondents, the branch will reverse the contra

liability voucher as follows:

Banker’s liability (FBC Lodged) at the TT (clean) buying rate Dr.

Customer’s liability (FBC) at the TT (clean) buying rate Cr.

Simultaneously, the following vouchers are to be passed:

AB General Account HO (ID)-Relevant Nostro Account (@ TT clean rate Dr.

Cash / Party’s A/C / Cash (@ TT Doc rate) Cr.

Income A/C Exchange earning (difference between TT (doc) &

Ready buying rate)

Cr.

Income A/C Commission Postage, (if any) Cr.

4. Foreign Drafts and Cheques:

The branch should exercise due care and ordinary prudence for purchase of foreign currency

denominated drafts, cheques and similar kinds of instruments. The instrument should not be

purchased unless the customer is well known to the branch as a regular trustworthy client. An

Indemnity Bond should be obtained for refund of the money along with interest in the event of

dishonour of the instruments. Indemnity need not be obtained in case of instruments against which

proceeds have already been credited to the bank’s Nostro account. The accounting vouchers will be as

follows:

If the instrument is drawn on the bank’s branch and the cover amount already paid by the

issuing bank into the bank’s Nostro account the vouchers will be passed at TT (clean)

rate.

AB General Account HO (ID) Relevant Nostro A/C) @ TT

(clean) rate

Dr.

Party’s A/C / Cash Cr.

Income Account--Commission as per schedule Cr.

For outright purchase of the instrument without cover fund having been credited to

Nostro A/C, the vouchers to be passed as follows at OD (transfer) rate-

FBP at OD (transfer) rate Dr.

Cash /Party’s A/C Cr.

Income A/C commissions, as per schedule Cr.

Income A/C postage Cr.

On receipt of cover in Nostro A/C in due course of time at TT (clean) rate-

AB General A/C: HO ID) (at ready buying rate) Nostro Dr.

FBP for outstanding amount Cr.

Income A/C Exchange gains on FC (difference between the two) Cr.

For collection of drafts/Cheques i.e. without payment of value to the customer at TT (doc)

buying rate-

Customer’s liability (FBC) at TT (doc) buying rate Dr.

Banker’s liability ( FBC) Cr.

On receipt of proceeds to the bank’s Nostro A/C the vouchers shall be passed at the

TT(clean) rate:

AB General Accent HO (ID)- (Nostro A/C) at TT ready

buying rate

Dr.

Party’s A/C / cash at TT (doc) buying rate Cr.

Income A/C Exchange gains on FC (Difference between two

rates)

Cr.

Commission, (if any) Cr.

Simultaneously, the branch will reverse the contra liability voucher as follows-

Banker’s liability (FBC Lodged) Dr.

Customers liability (FBC) Cr.

5. Telegraphic Transfer (T.T)

Test number appearing on the TT must be checked and authenticated by the concerned

official. After receiving confirmation from the Head Office about the proceeds having been

credited to their Nostro A/C and observing the usual formalities including declaration on

Form ‘C’, if necessary, the vouchers are to be passed at the TT buying rate as follows;

For payment to customer’s A/C or cash-

AB General A/C: HO ID) (Nostro A/C) at ready buying rate Dr.

Party’s A/C / Cash or Payment Order at TT buying less

commission and charges as per schedule

Cr.

Income A/C exchange on FC amount at difference between

ready buying rate and TT clean buying amount

Cr.

Taxes / VAT, (if any) Cr.

Income A/C-commission TT Foreign Cr.

For Credit to FC A/C-

AB General A/C: HO ID for FC amount at TT (clean)

buying rate

Dr.

Customers FC A/C (at the same rate) Cr.

4.1.2 Miscellaneous Services Given by This Department:

Student file Students who are desirous to study abroad can open file in the bank. By opening this file. Bank assures the remittance of funds in abroad for study.

NRIT Account ‘Non-resident Investor’s Taka Account is an account by which Non-resident Bangladeshi can deposit foreign currency for investment in security of stock exchanges. For such account holders, 5% of primary shares are reserved.

F.C. Account Foreign Currency Accounts are opened in the names of Bangladeshi nationals or persons of Bangladeshi origin working or self-employed in abroad and are maintained as long as the account holder’s desire.

NFCD Stands for Non-resident Foreign Currency Deposit

Eligible persons may open such accounts even after their return to Bangladesh, within six months of their arrival.

RFCD Accounts Stands for Resident Foreign Currency Accounts

Persons ordinarily resident in Bangladesh may maintain foreign currency accounts with foreign exchange brought in at the time of their return to Bangladesh from visiting abroad. Balance of such accounts is freely remittable to abroad.

FOREIGN INWARD REMITTANCE:

One of the strategic links of international trade financing of the bank is the inward remittance.

Towards the end AB bank strengthened the existing remittance relationships with various

exchange house. Besides AB signed an agreement with RIA an exchange house having

extensive presence world-wide to enhance the remittance network.

AB bank is also focusing on enhancing the customer service windows through the existing 70

branches network. Besides an ATM based remittance network, predominantly on card base,

is being worked upon through the proposed IT joint venture with few other banks of the

country.

Corporate clients of AB remain another major source of foreign currency. Bank is also trying

to broaden its base through solicitation of indigenous export clients.

Total remittance at the end of the year stood at USD million 156.36 registering a growth of

nearly 19 percent over last year.

YEARINWARD

REMITTANCE2003 73.652004 83.472005 115.412006 131.642007 156.36

INWARD REMITTANCE

0

50

100

150

200

2003 2004 2005 2006 2007

YEAR

VALU

ES INWARDREMITTANCE

Year wise Foreign inward remittance target & achievement there againstk.

2008 2007Target Achievement

Up to April. 08.

% Target Achievement .

USA $72. 59498.40

$ 215 $199.651366.48

UK $50 . 21344.69

$ 184 $243..081663.82

Middle East

KSA $232.401595.71

$ 694 $453.463103.81

KUWAIT $67.14460.86

$ 174 $174.761196.18

UAE $19.12131.29

$ 42 $48.22330.05

OMAN $6.1242.29

$ 28 $24.68168.93

BAHRAIN, IRAN,

IRAQ & QATAR

$7.2449.67

$ 23 $22.98157.29

TOTAL $332.022279.52

$ 961 $724.104956.26

Others $8.6058.64

$ 20 $20.31139.02

Total Tk 9038.00

$1321.00

$463.423181.65

$ 1380 $1187.148125.65

Branch wise Yearly Remittance Position of SECI

Figures in Million U.S. Dollar.

Year /Name of Branch

Manh-attan

Jackson Heights

Brooklyn

Astoria

Los Angeles

Atlanta

Detroit Michigan opened on 2002

PatersonN.J opened on 2003

Total achiev-ement

Target

2000 131.47

32.14 16.82 9.88 7.00 1.25 - - 198.56

150.00

2001 38.15 38.34 23.40 11.84 9.53 3.35 - - 124.61

160.00

2002 41.94 64.62 32.67 23.07 18.58 7.38 0.13 - 188.39

189.00

2003 29.76 51.94 19.87 20.20 16.76 11.03 4.78 1.12 155.46

209.00

2004 20.39 53.04 19.26 20.45 16.31 12.35 6.99 3.40 152.19

200.00

2005 23.38 58.20 21.17 21.13 18.62 12.96 9.09 5.11 169.66

175.00

2006 22.49 58.99 17.78 21.36 18.62 12.62 9.18 5.01 166.05

180.00

2007 22.78 61.20 15.79 23.05 21.18 13.34 7.12 5.75 170.21

178.00

NOTE: Official Remittance of Manhattan branch for 2000 was 106.01 million Dollar and 2001 was 11.80 million Dollar

Branch wise Monthly Remittance Position of SECI, USA for the year-2008.

Figures in Million U.S.

DollarMonth/ Branch Name

Manha-ttan

Jackson Heights

Brooklyn

Astoria

Los- Angeles

Atlanta Detroit Paterson

Total

Jan.08 2.35 4.63 1.36 1.76 1.98 1.13 0.87 0.38 14.46

Feb.08 2.06 4.76 1.07 2.26 1.67 1.09 0.84 0.48 14.23

Mar.08 2.62 5.76 1.24 2.19 2.31 1.51 0.89 0.62 17.14

Apr.08 2.09 5.14 1.23 2.21 1.92 1.40 0.85 0.51 15.35

May.08 2.44 5.68 1.31 2.45 2.08 1.61 0.78 0.55 16.90

June,08 2.00 4.57 1.32 1.86 1.63 1.18 0.59 0.47 13.62

July,08 1.97 4.67 1.19 1.97 1.91 1.34 0.64 0.44 14.13

4.1.3 Outward Remittance:The term “Outward Remittances" include not only remittance i.e. sale of foreign currency by

TT. MT, Drafts, Traveler’s cheque but also includes payment against imports into

Bangladesh & Local currency credited to Non-resident Taka Accounts of Foreign Banks or

Convertible Taka Account.

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

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

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

A. Private Remittance:

1. Family remittance facility:

a) Foreign Nationals working in Bangladesh with approval of the Government may

remit through an Authorized Dealer 50% of Salary and 100% of leave salary as also actual

savings and admissible person benefits. No prior approval of Bank is necessary for such

remittance,

b) Remittance of moderate amounts of foreign exchange for maintenance abroad of

family members (spouse, children, parents) of Bangladesh Nationals are allowed by

Bangladesh Bank on written request supported by certificate from the Bangladesh Mission in

the concerned country.

2. Remittance of Membership fees/registration fees etc.

Authorized Dealer may remit without prior approval of Bangladesh Bank, membership fees

of foreign professional and scientific institutions and fees for application registration,

admission, examination JOEFL, SAT etc.) in connection with admission into foreign

educational institutions on the basis of written application supported by demand notice/letter

of the concerned institution.

3. Education:

Prior permission of Bangladesh Bank is not required for releasing foreign exchange in

favor/on behalf of Bangladesh students studying abroad or willing to proceeds abroad for

studies. Authorized Dealers shall allow exchange facilities for this purpose according to the

following drill:

Application duly filled in by the student as per prescribed format of Bangladesh

Bank.

Original and photocopy of admission letter issued by the concerned institution in

favor of the student.

Original and photocopy of estimate relating to annual tuition fee, board and

lodging

Incidental expenses etc. issued by the concerned institutions.

Attested copies of educational certificates of the applicant and

Valid passport.

4. Remittance of Consular Fees:

Consular fees collected by foreign embassies in Bangladesh Taka and deposited in a Taka

Account maintained with an AD solely for this purpose may be remitted abroad without prior

approval of Bangladesh Bank.

5. Remittance of evaluation fee:

Authorized Dealer's without prior approval of Bangladesh Bank may remit evaluation fee on

behalf of Bangladeshis desiring immigration to foreign countries for getting educational

certificates of the person concerned evaluated by a foreign institution. A demand note of the

foreign immigration authority is required for this purpose.

6. Travel:

Private travel quota entitlement of Bangladesh Nationals is set at US$3000/- per year for visit

to countries other than SAARC member countries and Myanmar, Quota for SAARC member

countries and Myanmar is US$1000/- for travel by air and US$500/-for travel by overland

route. Authorized Dealers may release this travel quota in the form of foreign currency notes

up to US$500/- or equivalent and balance exchange in the form of TCs or total quota in the

form of TCs the annual quotas mentioned above are for adult passengers. Fore minors (Below

12 year in age) the applicable quota will be half the amount allowable to adults.

Authorized Dealers may release above travel quota without prior approval of Bangladesh

Bank subject to observation and satisfaction of following points:

The intending traveler is a customer of the AD bank or is sufficiently well known to the

AD Bank or the intending traveler has paid relevant Travel Tax. The intending traveler

has a valid passport.

The AD should verify and satisfy itself that any foreign exchange released for an earlier

travel was utilized with the journey being actually undertaken or was duly enchased

unutilized.

The intending traveler is in possession of confirmed air ticket for journey to be

undertaken and that the intended journey to be undertaken not later than two weeks after

the date on which exchange is issued.

The amount releases is endorsed on the passport and air ticket of the traveller with

indelible ink, with the signature and the name of the AD branch embossed in the passport

and ticket. However, while issuing foreign exchange to the Diplomats/ privileged

persons/ UN personnel, Govt. Officials travelling on officials' duties, such endorsement in

the passports need not be made.

In each case of release of foreign exchange for travel abroad, photocopies of first six

pages of the passport s and the page recording endorsement of foreign exchange and

photocopies of the pages of ticket showing name of the passenger, route and date of

journey and endorsement of foreign exchange along with the relative T.M. form should

be sent to Bangladesh Bank along with monthly returns.

7. Health & Medical:

Authorized Dealers without prior approval of Bangladesh Bank may release foreign exchange

up to US$10,000/- for medical treatment abroad on the basis of the recommendation of the

medical Board set up the Head Directorate and the cost estimate of the foreign medical

institution.

Applications for release of exchange exceeding US$10,000/- should be forwarded along with

supporting documents to Bangladesh Bank for prior approval.

8. Seminars & workshops:

Without prior approval of Bangladesh Bank AD may release US$200/- per them and

US$250/- per them to the private sector participants for attending seminars, conferences and

workshops organized by recognized International bodies in SAARC member countries or

Myanmar and in other countries respectively for the actual period of the

seminar/workshop/conference to be held on this basis of invitation letters received in the

names of the application or their employer institutional.

9. Foreign Nationals:

The Authorized Dealers may issue foreign currency TCs to foreign nationals without any

limit and foreign currency notes up to US$300/- or equivalent per person against

surrender of equivalents amounts in foreign currencies. The TCs and foreign currency

notes should however, be delivered only on production of ticket for a destination outside

Bangladesh and the amount issued should be endorsed on the relative passports.

Authorized Dealers may allow recon version of unspent Taka funds of foreign tourists

into foreign exchange on production of the encashment certificate of foreign currency.

Recon version shall be allowed by the same AD with which the foreign currency was

encashed earlier. AD should retain the original encashment certificate and relative forms

where reconversion exceeds US$5000/-.

10. Remittance for Haji:

Authorized Dealers may release foreign exchange to the intending pilgrims for performing

Hajj as per instructions/circulars to be issued by the Bangladesh Bank each year.

11. Other Private remittance:

Applications for remittances by private individuals for purposes other than those mentioned

above should be forwarded to Bangladesh Bank for consideration & approval after assessing

the bonafide of the purpose of remittance on the basis of documentary evidence submitted by

the applicant.

B. Official & Business Travel:

1. Official Visit:

For official or semi officials visits abroad by the officials of govt.,

Autonomous/Semiautonomous institutions etc., Authorized Dealers may release foreign

exchange as per entitlements fixed by the Ministry of Finance from time to time, In such

cases, the applicant for foreign exchange shall be required to submit the sanction letter and

the competent authority's Order/Notification/Circular authorizing the travel.

2. Business Travel Quota for Now Exporters:

Up to US $6,000/- or equivalent may be issued by an AD without prior approval of

Bangladesh Bank to a new exporter for business travel abroad, against recommendation letter

from Export Promotion Bureau, Bonafide requirement beyond US$6000/- is accommodated

by Bangladesh Bank upon written request through an AD with supporting documents.

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

I. Subject to annual upper limit of US$5000/- importers are entitled to a business travel

quota @ 1 % of their imports settled during the previous financial year.

II. Subject to annual upper limit of US$5000/- non exporting producers for the local

markets are entitled to a business travel quota @1 % of their turnover of the proceeding

financial year as declared in their tax return.

The same business organization engaged in imports as well as production shall however;

draw business travel quota entitlement only on one count.

4. Exporters' Retention Quota:

i) Merchandise exporters may retain up to 40% of realized FOB value of their exports in

foreign currency accounts. However, for export of goods having account. However, for

exports of goods having high import content (such as readymade garments, POL products

including furnace oil bitumen, electronic goods etc.,) the retention quota is 7.5% of the

repatriated FOB value.

Funds from these accounts can be used to meet bonafide business expenditure, such as

business visits abroad, participation in export fairs and seminars, establishment and

maintenance of office abroad, import of raw materials, machinery and spares etc. without

prior approval of Bangladesh Bank.

Exporters may at their option, retain the foreign currency in interest bearing renewable term

deposit accounts with Authorized Dealers in US Dollar, Pound Sterling DM or Japanese Yen

with a minimum account of US$2000 or Pound 1500.

ii) Service exporters (excluding indenting commission or agency commission of indenting

house of buying house respectively) may retain 5% of their repatriated income in foreign

currency accounts or as renewable time deposits with Authorized Dealers, Funds from these

accounts can be used to meet expenses for bonafide business travel abroad.

C. Commercial Remittances:

1. Opening of branches or subsidiary companies abroad:

Remittance of up to US$30,000/- or equivalent per annum may be released by the Authorized

Dealers without prior approval of Bangladesh Bank to meet current expenses of

offices/branches opened abroad by resident in Bangladesh or Commercial/Industrial concern

incorporated in Bangladesh.

Such remittance may only be made in the names of concerned offices/subsidiary companies

abroad subject top examination of following papers:

I. Approval letter of the competent authority of the country concerned for opening

the office in that country

II. Copy of report submitted to Bangladesh bank.

2. Remittance by shipping companies airlines & courier service:

Foreign Shipping Companies, airlines and courier service companies may send, through an

AD, funds collected in Bangladesh towards freight and passage after adjustment of The

Authorized Dealers may remit such royalty and other local cost & Taxes, if any without prior

approval of Bangladesh Bank.

3. Remittance of royalty and technical fees:

No prior permission of the Bangladesh Bank of BOI is required by the enterprises for

entering into agreement involving remittance of royalty, technical know-how or technical

assistance fees, operational services fees, marketing commission etc., if the total fees and

other expenses connected with technology transfer do not exceed.

a) 6% of the cost of imported machinery in case of new projects

b) 6% of the previous year's sales as declared in the income tax returns of the ongoing

concerns.

The authorized dealers may remit such royalty and other fees without prior approval of

Bangladesh Bank.

Royalty and other fees beyond the rate mentioned above may be remitted by the Authorized

Dealers without prior approval of Bangladesh bank provided specific approval of BOI has

been obtained by the applicant company.

4. Remittance on account of training & consultancy

Industrial enterprises producing for local market may remit through Authorized Dealers up to

1% of their annual sales as declared in their previous years' tax return for the purpose of

training and consultancy services as per relevant contract with the foreign trainer/consultant,

without prior approval of Bangladesh Bank.

5. Remittance of profits of foreign firms/branches:

Authorized Dealers may without prior Bangladesh Bank approval remit abroad the post tax

profits of branches of foreign firms and companies including foreign banks & other financial

institutions subject to submission of relevant documents/information along with the

application.

6. Remittance of Dividend:

Prior permission of Bangladesh Bank is not required for

Remittance of dividend income to non-resident shareholders on receipt of application

in the prescribe form from the companies concerned.

Remittance of dividend declared out of previous years' accumulated reserves.

7. Subscriptions to foreign media services:

On application from the local newspapers, Authorized Dealers may remit foreign exchange

towards cost of subscription of news items, features, articles of foreign news agencies subject

to submission of (1) contracts entered into between the applicant and the foreign news agency

and (ii) NOC of the Ministry of Information.

8. Costs/ for Router monitors:

Authorized Dealers may remit abroad costs/fees on account of their own subscription to

foreign media services such as Reuter monitor service, without prior approval of Bangladesh

Bank.

9. Advertisement of Bangladeshi Products In mass media abroad:

Prior permission of Bangladesh is not required by the Authorized Dealers for remittance of

charges for advertisement of Bangladeshi commodities in mass media abroad subject to

submission of Invoice from the concerned foreign mass media along with the applications of

the remitter. The applicant will have to submit copy of the advertisement to the Ad within

one month of this issuance.

8. Bank Charges:

The Authorized Dealers may affect remittances towards settlement of dues to foreign banks

of bank charges, cost of cables and other incidental charges arising in their normal course of

the business without prior approval of Bangladesh Bank.

The following would be the procedure for Accounting-

4. Foreign Currency Notes

Party’s A/C / Cash at FC selling rate Dr.Foreign currency in hand Cr.Income A/C-Commission, (if any) Cr.

5. TC, Draft and TT

Party’s A/C / Cash from party@ TC/ OD selling rate Plus charges

Dr.

AB General A/C: HO ID) @ ready selling rate Cr.Income A/C for the difference between the two rates Cr.Income A/C for Commission as per schedule of charges Cr.

6. TC draft and TT issued from FC A/C of customer

(General as well as retention quota of exporter)

Customer’s FC A/C @ current holding rate of FC balance Dr.AB General A/C: HO ID) @ current holding rate of FC balance

Cr.

Customers A/C or cash from the customer for charges Cr.Income A/C as per schedule of charges Cr.

4. Issue of Foreign Currency Notes to the debit of the customer’s FC A/C (General or retention quota)

Party’s FC A/C at prevailing cash selling rate plus commission and charges as per schedule

Dr.

FC in hand A/C at cash selling rate Cr.Income A/C for Commission, as per schedule. Cr.

5. Settlement of TC on weekly basis

TC issued Dr.

AB General A/C HO ID Cr.

Year wise WES Remittance Position.

Figures in Million U.S. DollarK.S.A. Middle East

except KSAU.S.A. U.K. OTHERS TOTAL

2000 335.88 173.43 100.88 54.11 16.23 680.532001 340.30 183.47 134.71 48.47 12.17 719.122002 417.82 207.99 206.05 153.02 19.62 1004.502003 329.49 206.14 181.87 206.55 19.48 943.532004 497.99 219.83 173.70 228.68 21.35 1141.552005 558.99 231.44 193.44 187.93 18.22 1190.022006 630.98 242.91 194.96 167.68 18.03 1254.562007 453.46 270.67 199.65 243.08 20.28 1187.14

2008(July) 398.51 180.73 128.31 85.82 13.88 805.85

Month wise WES Remittance Position

Figures in Million U.S. Dollar

Month K.S.A Middle Eastexcept KSA

U.S.A. U.K. OTHERS TOTAL

Jan.0856.63 21.16 17.20 12.80 2.23 110.02

Feb’0854.63 22.00 16.33 10.92 2.24 105.52

March’0859.08 27.80 20.71 15.24 1.94 124.77

April’08 62.70 28.62 18.35 11.25 2.19 123.11

May, 0854.69 27.38 18.72 8.95 1.84 111.58

June’0862.01 31.31 18.63 12.80 1.40 126.15

July’08749.37 24.42 16.37 12.46 2.08 104.70

Total 398.51 180.73 128.31 85.82 13.88 805.85

Year wise target & achievement their against .

Figures in Million U.S. Dollar

Year Target Achievement %

2003 $1106.00 $ 943.53 85.31

2004 $1191.05 $1141.55 95.84

2005 $1430.00 $1190.02 83.22

2006 $1309.00 $1254.56 95.84

2007 $1380.00 $1187.14 86.022008(June) Tk90380

$1321.00$805.85 61%

4.2 EXPORT: AB Banks Export volume growth was 15.67 percent as the total export reached tk. 2067.66

crore at the end of the year. Export business concentration was in the area of frozen fish,

readymade garments, knitwear and other indigenous products.

MAJOR EXPORT BY AB BANK (FIG. IN CRORE)YEAR 2003 2004 2005 2006 2007READYMADE GARMENTS 500 700 1000 1200 1300KNITWEAR 250 200 150 400 500FROZEN FISH 100 80 80 100 100INDIGENOUS PRODUCTS 100 50 50 100 168

0

500

1000

1500

VALUES

2003 2005 2007

YEAR

MAJOR EXPORT BY AB BANK

READYMADEGARMENTSKNITWEAR

FROZEN FISH

INDIGENOUSPRODUCTS

AB Banks foreign correspondence relationship is spread across the world covering important

financial centers including important financial houses. This network of over 300

correspondents has helped bank in expanding its international trade.

YEAREXPORT(Million tk)

2003 97432004 101002005 125952006 178762007 20677

4.2.1 Export Procedures:

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

Act, 1950.

Under the export policy of Bangladesh the exporter has to get 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 incorporate on EXP forms and other papers

connected with exports.

Registration of Exporters:

For obtaining ERC, intending Bangladeshi exporters are required to apply to the controller/

Joint Controller/ Deputy Controller/ Assistant Controller of Imports and Exports, Dhaka/

Chittagong/ Raishahi/ Mymensingh/ Sylhet/ Comilla/ Badshal/ Bogra/ Rangpur/ Dinajpur in

the prescribed form along with the following documents:

Nationality and Assets Certificate-

Memorandum and Article of Association and Certificate of Incorporation in case of

Limited Company-,

Bank Certificate

Income Tax Certificate

Trade License etc.

05000

10000150002000025000

2003 2004 2005 2006 2007

YEAR

EXPORT

EXPORT

Securing the Order:

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

this by contacting the buyers directly or through agent.

In this purpose the exporter may get help from:

License Officer

Buyers Local Agent

Export Promoting Organization

Bangladesh Mission Abroad

Chamber of Commerce (local & foreign)

Trade Fair etc

Signing the Contract:

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

exportable items from Bangladesh detailing commodity, quantity, price, shipment, insurance

and marks, inspection and arbitration etc.

Receiving Letter of Credit:

After getting contract for sale, exporter should ask the buyer for Letter of Credit (L/C)

clearly stating terms and conditions of export and payment.

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

by means of Documentary Credit-.

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

The L/C is an irrevocable one, preferably confirmed by the advising bank;

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

(Here the regulatory framework is UCPDC-600, ICC publication)

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

payment:

Cash in advance-,

Open account,

Collection basis (Documentary/ Clean)

(Here the regulatory framework is URC-522, ICC publication

Procuring the Materials:

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

exporter is to set about the task of procuring or manufacturing the contracted

merchandise.

Shipment Of Goods:

Then the exporter should take the preparation for export arrangement for delivery of goods as

per L/C, prepare and submit shipping documents for Payment/ Acceptance/ Negotiation in

due time.

Documents for shipment:

i. EXP form,

ii. ERC (valid),

iii. L/C copy,

iv. Customer Duty Certificate,

v. Shipping Instruction,

vi. Transport Documents,

vii. Insurance Documents,

viii. Invoice

ix. Other Documents,

x. Bills of Exchange (if required) Certificate of Origin,

xi. Inspection Certificate

xii. Quality Control Certificate,

xiii. G.S.P. Certificate,

xiv. Phyto-sanitary Certificate.

Final Step: Submission of the documents to the Bank for negotiation.

Back to Back Letter of Credit (BTB):

Bangladesh is a developing country. After receiving order from the importer, very

frequently exporters face problems of scarcity of raw material. Because some raw materials

are not available in the country. These have to be collected from abroad. In that case,

exporter gives lien of export L/C to bank as security and opens an L/C against it for

importing raw materials. This L/C is called Back To Back L/C. In back to back L/C, PBL

keeps no margin.

Sometimes there is provision in the export UC that the importer can use the certain portion

of the export L/C amount for importing accessories that are necessary for the making of the

product. Only in that case, BTB is opened.

Payment of Back to Back LC:

Client gives the payment of the BTB L/C after receiving the payment from the importers.

But in some cases, client sells the bills to the ABBL. But if there is discrepancy, the ABBL

sends it for collection.

In case of BTB L/C, ABBL gives the payment to the beneficiary after receiving the payment

from the UC of the finished product (i.e. exporter). Bank gives the payment from DFC

Account (Deposit Foreign Currency Account) where Dollar is deposited in national rate.

For BTB L/C, opener has to pay interest at LIBOR rate (London Inter Bank Offering Rate).

Generally LIBOR rate fluctuates from 3% to 5%.

A schedule named Payment Order; Forwarding Schedule is prepared while making the

payment. This schedule is prepared when the payment of UC is made. This schedule contains

the followings:

Reference number of the beneficiary's bank and date.

Beneficiary's name.

Bill value.

Payment order number and date.

Equivalent amount in Taka

Negotiation of documents under L/C:

The exporter presents the relative documents to the negotiating bank after the shipment of the

goods, A slight deviation of the documents from those specified in the L/C may rise an

excuse to the issuing bank to refuse the reimbursement of the payment already made by the

negotiating bank. So the negotiating bank must be careful prompt, systematic and indifferent

while scrutinizing the documents relating to the export.

Foreign Documentary Bill Purchase (FDBC):

Sometimes the client submits the bill of export to bank for collection and payment of the

BTB UC. In that case, bank purchases the bill and collects the money from the exporter.

ABBL subtracts the amount of bill from BTB and gives the rest amount to the client in cash

or by crediting his account or by the pay order.

For this purpose, ABBL maintains a separate register named FDBC Register. This register

contains the following information:

Date

Reference number (FDBC)

Name of the drawer

Name of the collecting bank

Conversion rate

Bill amount both in figure & in Taka.

Export form number

Export L/C number

Advances against Export Bills surrendered for collection:

Banks generally accept bills for collection of proceeds when they are not drawn under an L/C

or when the documents, even though drawn against an L/C contain some discrepancies. The

bank generally negotiates bills drawn under L/C, without any discrepancy in the documents,

and the exporter gets the money from the bank immediately. However, if the bill is not

eligible for negotiation, the exporter may obtain advance from the bank against the security

of export bill. In addition to the export bill, banks may ask for collateral security like a

guarantee by a third party and equitable/registered mortgage of property.

4.2.2 Export Documents Checking:

General verification: -

L/C restricted or not.

Exporter submitted documents before expiry date of the credit.

Shortage of documents etc.

Particular verification:

Each and every document should be verified with the L/C.

4.3 IMPORT:

International trade is one of the important components of the AB Banks foreign exchange

business. In 2007, both Import and Exports experienced double digit growth keeping in pace

with the overall business growth. Imports at the end of the year stood at Tk. 4844.14 crore.

Major Import finance was in the areas of food items, textiles, and scrap vessels among others.

YEAR 2003 2004 2005 2006 2007FOOD ITEMS 1300 1200 1700 2500 3000TEXTILE 500 400 500 900 1000SCRAP VESSELS 200 350 200 880 845

MAJOR IMPORT BY AB BANK

0

1000

2000

3000

4000

2003 2004 2005 2006 2007

YEAR

VALU

ES FOOD ITEMS

TEXTILE

SCRAPVESSELS

Procedures:-

An importer is required to have the following to import through ABBL---

Applicant has to apply for opening LC by a prescribed form.

a. Applicant has to submit the Letter of Indent or Letter of Proforma Invoice.

b. Letter of Indent: Many sellers have their agent in seller’s country. If the contract

of buying is made between the buyers and the agent of the sellers then Letter o

Indent is required.

c. Letter of Proforma Invoice: If the contract is made directly between the buyer

and the sellers then Letter of Proforma Invoice is needed.

d. Applicant has to submit IRC (Inventors Registration Certificate). It is a certificate

being renewed every year. This certificate is necessary if the contract is made

between the buyers and the agents of the sellers. IRC is of two types - COM and

IND. COM is given for commerce purpose and IND is given for industrial

purpose.

e. Applicant has to submit LCAF (Letter of Credit Authorization Form).

f. Applicant has to submit insurance document.

g. Applicant has to prepare FORM-IMP.

h. Recently, there has been made a provision to give a certificate named TIN (Tax

Payers Identification Number).Taxation department issues this certificate.

i. Then after proper scrutiny bank will open an L/C.

While openingL/C, importer must keep certain percentage of the document value in the bank

as margin.

4.3.1 Procedure to Open an L/C:-

To open an L/C, the requirements of an importer are:

He must have an account in ABBL.

He must have Importers Registration Certificate (IRC).

Report on past performance with other bank. ABBL collects this report from Bangladesh

Bank.

CIB (Credit Information Bureau) report from Bangladesh Bank.

A proposal approved by the meeting of executive committee of the bank. It is necessary

only when the L/C amount is small or there is no limit.

If the L/C amount is large or there is a limit, then an approval from Bangladesh Bank is

needed. Usually this approval is needed for amount more than one crore

Accounting Treatment for Opening LIC.

For opening L/C, importer will apply to the issuing bank. In that case, importer is called

applicant or opener. After opening an L/C bank will create a contingent liability. In that

case, the accounting posting will be the following-

Customers Liability Dr.

Contingent Liability Cr.

Generally L/C is opened against some margin.

While paying the money by the issuing bank, issuing bank will reverse the above entry

and the entry will be-

Contingent Liability Dr.

Customers Liability Cr.

Then the issuing bank will give another entry---

Payment Against Document (PAD) Dr.

AB General Account Cr.

Exchange Gain Cr.

PAD will debit because the bank will pay the money against some documents’ General

Account is a miscellaneous account. It will be credited because by this entry ABBL creates a

liability. He has to pay the money to the advising bank. And the gain made by the

transaction is shown at Exchange Gain Account.

All these entries are made after receiving some documents from the exporters. The above

procedure is called Lodging. After giving the above entry, ABBL will inform the clients for

collecting the documents from the bank.

4.3.2 A Rich picture of current L/C system

Figure: Mechanism of LC

Importers will pay the due to the bank and collects the documents. In that case, the entry will be –

Party Account Dr.

PAD Account Cr.

After opening the L/C, ABBL (issuing bank) must receive the documents for any other proceedings. These documents are ---

i. Bill of Lading,

ii. Invoice,

iii. Packing List,

iv. Country of Origin.

4.3.3 Lodgment of documents:

After receiving the documents from the exporters, at first ABBL write it in the PAD

Registrar. PAD Register contains date, PAD number, L/C number, name of the drawer, name

of the drawee, amount, number of copies of various documents, name of the imported items.

This written procedure is called Lodgment.

Accounting Application:

While doing lodgment, ABBL makes the following entries-

Payment Against Document (PAD) Dr. AB General Account Cr. Exchange Gain Cr.ABBL makes the payment to the reimbursing bank against the documents. That's why, it

debts the PAD Account.

For payment, ABBL deposits the money at the miscellaneous account @69.35 (current rate).

And sends an Inter Branch Credit Advice (IBCA) to credit the amount to a Nostro account

maintained in a bank of exporters' country from which payment will be made. By this

transaction, ABBL makes a profit @O. 1 5 per dollar.

4.3.4 Retirement of Documents

The process of collecting documents from bank by the importer is called retirement of the

documents. The importer gives necessary instructions to the bank for retirement of the

import bills or for the disposal of the shipping documents to clear the imported goods from

the customs authority. The importer may instruct the bank to retire the documents by

debiting his current A/C.

From 2003 to 2007 AB Bank Import is as follows:

YEAR IMPORT

2003 19281

2004 19266

2005 23151

2006 42860

2007 48441

0

10000

20000

30000

40000

50000

2003 2004 2005 2006 2007

YEAR

IMPORT

IMPORT

EXPORT TKABBL

1 L.C ADVICE CHARGE 10002 L.C AMMENDMENT CHARGE 8003 L.C CORRECTION CHARGE 5004 DOCUMENT HANDLING COMMISSION .20-.405 L.C TRANSFER COMMISSION .30-.456 DOCUMENT HANDLING POSTAGE 5007 CURRIER CHARGE 15008 EXP CHARGE 5009 EXP CANCELLASION CHARGE 500

10 DISCREPENCY CHARGE 30011 TRANSFER L.C OTHER BANK 120012 ADD CONFIRMATION CHARGE 100013 ISSUANCE OF PRC 500

IMPORT & BACK TO BACKABBL

1 L.C OPEN COMMISSION .30-.45

2L.C AMMENDMENT COMMISSION .30-.45

FOREIGN REMITTANCE TK

3 L.C OPEN SWIFT CHARGE 500 ABBL

4 L.C OPEN POSTAGE 300

HANDLING CHARGE FOR STUDENT EDUCATION FOR ABROAD 3000

5 L.C OPEN PROCESS 2000ENCASHMENT OF ANY T.T 150-350

6SHIPPING GURRENTE CHARGE 2000 OTHER CHARGES 200-1000

7 ACCEPTANCE COMMISSION .20-.558 ACCEPTANCE POSTAGE 3009 ACCEPTANCE SWIFT 750

10 ACCEPTANCE IMP CHARGE 50

11AMMANDMENT PROCESSING CHARGE 1000

5.1 SWOT ANALYSIS OF ABBL:

From the SWOT Analysis, it would be easy to figure out the ongoing scenario of the

ABBL. It is possible to find out the strength, weakness, opportunities and threats of

ABBL. To have a better view of the present business practices of ABBL, SWOT Analysis

has been done.

In SWOT Analysis, two factors act as prime movers.

Internal factors: Which are prevailing inside the concern, which include strength

and weaknesses

External factors: Which act as opportunity and threat

Strength

Very good profit margin earn by the last few years.

Strong capital back to bring available liquidity.

Efficient and experienced management team.

Directors of the bank are not over ruling the decisions made by the

management team.

STRENGTH

SWOT ANALYSIS

INTERNAL

FACTORSEXTERNAL FACTORS

WEAKNESSES OPPORTUNITIES THREATS

Several deposit schemes and financial products offered by the ABBL, so

clients have enough options to invest their money.

Bank quickly expanding its business all over the country.

Getting the membership of SWIFT.

Weaknesses

Performance of the marketing sector is not satisfactory

Limited geographic coverage.

Traditional banking system is followed.

High employee turnover.

Lack of technological improvement.

Opportunities

Client’s reliability on ABBL is growing day by day on the bank.

ABBL has now the global market reputation.

ABBL offers many popular schemes to the people and with these schemes

ABBL can raise its deposit promptly.

Recently ABBL provides credit card facility to the customer.

Good chance of expanding geographically within Bangladesh.

Opportunity to take market share from rivals by offering new innovative

products or services.

Taking advantage of emerging new technologies in banking especially online

ATM, Internet Banking etc.

Threats

Very competitive market.

Political unsuitability affects the banking sector very often.

In Bangladesh, economy now passing recession this also

Affects the bank.

Central Bank’s policies sometimes are not in favor of the private bank’s

policies.

Entry of new commercial banks, leasing companies and merchant bank etc.

they all are competitors.

Competitors are offering innovative new products and services.

Competitors are using several new marketing policies to attract the customer.

5.2 RATIO ANALYSIS OF AB BANK LIMITED:

Ratio Analysis: Ratio Analysis is a diagnostic tool that helps to identify problem areas and opportunities within a company. The most frequently used ratios by financial analysis provide insights in a firm’s

Liquidity Degree of financial leverage or debt Profitability Efficiency Value

Importance of Financial Ratio:

Ratio Analysis is very important for every business, because by calculating ratio analysis we can understand the business position, business strength and weakness. By knowing this information, management can take its necessary steps to achieve their organization goal.5.2.1 Bank Profitability Ratio: Profitability refers to the ability of a firm to generate revenues in excess of expenses. When making compression across firms it is useful to control for different in their resource base. There are some basic formulas for probability ratio: Return on Assets (ROA): Return on Assets (ROA) = Net Income / Total assets Calculation:

million tk. Year Net Income (Amount) Total Assets (Amount) Ratio %

2005 162 33065 .049%2006 532 47989 1.11%2007 1903 63550 2.99%2008 2301 84054 2.74%2009 3363 106912 3.14%

Graphical Presentation:

Decision: The above figure represents the Return on Assets (ROA) ratio of AB Bank Limited and we see that in the year 2009 AB Bank was in most profitable position. In year 2005the bank was in lowest profitable position.Return on Equity (ROE): Return on Equity (ROE) = Net Income / Total Shareholder equityCalculation:

million tk. Year Net Income (Amount) Total Shareholder equity

(Amount) Ratio %

2005 162 1527 10.61%2006 532 2583 20.60%2007 1903 4512 42.17%2008 2301 6723 34.22%2009 3363 10087 33.34%

Graphical Presentation:

Decision: The above figure represents the Return on Equity (ROE) ratio of AB Bank Limited and we see that in the year 2007 AB Bank was in most profitable position. In year 2005 the bank was in lowest profitable position.

ROA Ratio (%)

0.05%1.11%

2.99%2.74%

3.14%

0.00%0.50%1.00%1.50%2.00%2.50%3.00%3.50%

1 2 3 4 5

year

Ratio %

ROE Ratio %

10.61%

20.60%

42.17%34.22%

33.34%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

1 2 3 4 5

Year

Ratio %

Profit Margin (PM): Profit Margin (PM) = Net Income / Operating Income Calculation:

Year Net Income (Amount) Operating Income (Amount) Ratio %

2005 162 1577 10.27%2006 532 2650 20.07%2007 1903 4657 40.86%2008 2301 6153 37.40%2009 3363 8269 40.67%

Graphical Presentation:

Decision: The above figure represents the Profit Margin (PM) ratio of AB Bank Limited and we see that in the year 2007 AB Bank was in most profitable position. In year 2005 the bank was in lowest profitable position.Return on Deposits (ROD):Return on Deposits (ROD) = Net Income / Total customer deposits Calculation:

Million Tk.Year Net Income (Amount) Total customer deposits

(Amount) Ratio %

2005 162 27361 .59%

2006 532 42077 1.26%

2007 1903 53375 3.56%2008 2301 68560 3.36%2009 3363 83087 4.05%

PM Ratio %

10.27%

20.07%

40.86%37.40%

40.67%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

1 2 3 4 5

Year

Ratio %

Graphical Presentation:ROD Ratio %

0.59%1.26%

3.56% 3.36%4.05%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

1 2 3 4 5

Year

Ratio %

Decision: The above figure represents the Return on Deposits (ROD) ratio of AB Bank Limited and we see that in the year 2009 AB Bank was in most profitable position. In year the 2005 bank was in lowest profitable position.Return on shareholder capital (ROSC): Return on Shareholder capital (ROSC) = Net Income / Shareholder contribution capitalCalculation:

million tk. Year Net Income (Amount) Total Shareholder equity

(Amount) Ratio %

2005 162 1527 10.61%2006 532 2583 20.60%2007 1903 4512 42.17%2008 2301 6723 34.22%2009 3363 10087 33.34%

Graphical Presentation:

ROSC Ratio %

10.61%

20.60%

42.17%34.22% 33.34%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

1 2 3 4 5

Year

Ratio %

Decision: The above figure represents the Return on Shareholder capital (ROSC) ratio of AB Bank Limited and we see that in the year 2007 AB Bank was in most profitable position. In year 2005 the bank was in lowest profitable position.

Net operating margin (NOM): Net operating margin (NOM) = Operating profit or Income / interest income Calculation:

million Tk.Year Operating profit or

Income (Amount)interest income (Amount) Ratio %

2005 1577 2263 69.69%2006 2650 3378 78.45%2007 4657 5269 88.38%2008 6153 7366 83.53%2009 8269 9047 91.40%

Graphical Presentation:

NOM Ratio %

69.69%78.45%

88.38% 83.53%91.40%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

1 2 3 4 5

Year

Ratio %

Decision: The above figure represents the Net operating margin (NOM) ratio of AB Bank Limited and we see that in the year 2009 AB Bank was in most profitable position. In year 2005 the bank was in lowest profitable position.5.2.2 Bank Efficiency Ratio:Interest income to Expenses (IEE) = (Interest income – Interest expenses) / total loans and advancesCalculation:

million Tk. Year Interest income – Interest

expenses (Amount)total loans and advances

(Amount)Ratio %

2005 691 21385 3.23%2006 616 31289 1.97%2007 1439 40915 3.52%2008 2034 56709 4.06%2009 2908 70880 4.10%

Graphical Presentation:

IEE Ratio (%)

3.23%

1.97%

3.52%4.06% 4.10%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

1 2 3 4 5

Year

Ratio %

Decision: The above figure represents the Interest income to Expenses (IEE) ratio of AB Bank Limited and we see that in the year 2009AB Bank was in most highest position. In year 2006 the bank was in lowest profitable position.Operating expense to Assets (OEA): Operating expense to Assets (OEA) = Operating expense / Total assets Calculation:

million Tk.Year Operating expense

(Amount)Total Assets (Amount) Ratio %

2005 822 33065 2.49%2006 1939 47989 4.04%2007 1331 63550 2.09%2008 1854 84054 2.21%2009 2466 106912 2.31%

Graphical Presentation:

Decision: The above figure represents the Operating expense to Assets (OEA) ratio of AB Bank Limited and we see that in the year 2006 AB Bank was in highest position. In year 2007 the bank was in lowest position.

OEA Ratio (%)

2.49%

4.04%

2.09% 2.21%

2.31%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

1 2 3 4 5

Year

Ratio %

Operating income to Assets (OIA):Operating income to Assets (OIA) = Operating Income / Total assets Calculation:

million Tk.Year Operating Income

(Amount)Total Assets (Amount) Ratio %

2005 1577 33065 4.77%2006 2650 47989 5.52%2007 4657 63550 7.33%2008 6153 84054 7.32%2009 8269 106912 7.73%

Graphical Presentation:

OIA Ratio (%)

4.77%5.52%

7.33% 7.32% 7.73%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

1 2 3 4 5

Year

Ratio %

Decision: The above figure represents the Operating income to Assets (OIA) ratio of AB Bank Limited and we see that in the year 2009 AB Bank was in most profitable position. In year 2005 the bank was in lowest profitable position.Operating expenses to revenue (OER): Operating expenses to revenue (OER) = Operating expenses / Operating Income Calculation:

million Tk.Year Operating expenses

(Amount)Operating Income

(Amount) Ratio %

2005 822 1577 52.12%2006 1939 2650 73.17%2007 1331 4657 28.58%2008 1854 6153 30.13%2009 2466 8269 29.82%

Graphical Presentation:

Decision: The above figure represents the Operating expenses to revenue (OER) ratio of AB Bank Limited and we see that in the year 2006 AB Bank was in highest position. In year 2007 the bank was in lowest profitable position.Asset Turnover (ATO): Asset Turnover (ATO) = Interest Income / Total assets Calculation:

million Tk.Year Interest Income

(Amount)Total Assets (Amount) Ratio %

2005 2263 33065 6.84%2006 3378 47989 7.04%2007 5269 63550 8.29%2008 7366 84054 8.76%2009 9047 106912 8.46%

Graphical Presentation:

Decision: The above figure represents the Asset Turnover (ATO) ratio of AB Bank Limited and we see that in the year 2008 AB Bank was in most profitable position. In year 2005 the bank was in lowest profitable position.

OER Ratio (%)

52.12%

73.17%

28.58% 30.13% 29.82%

0.00%10.00%20.00%30.00%40.00%50.00%60.00%70.00%80.00%

1 2 3 4 5

Year

Ratio %

ATO Ratio ( %)

6.84% 7.04%8.29%

8.76%8.46%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

1 2 3 4 5

Year

Ratio %

Net interest margin (NIM):Net interest margin (NIM) = (Net Interest Income – Net non-interest expenses) / Total assets

Calculation: million Tk Year Net Interest Income – Net

non-interest expense (Amount)

Total Assets (Amount) Ratio %

2005 691 33065 2.09%2006 616 47989 1.28%2007 1439 63550 2.26%2008 2034 84054 2.42%2009 2908 106912 2.72%

Graphical Presentation:

NIM Ratio( %)

2.09%

1.28%

2.26% 2.42%2.72%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

1 2 3 4 5

Year

Ratio %

Decision: The above figure represents the Net interest margin (NIM) ratio of AB Bank Limited and we see that in the year 2009 AB Bank was in most highest position. In year 2006 the bank was in lowest profitable position.Net non- interest margin (NNIM):

Net non- interest margin (NNIM) = (Net non Interest Income – Net non-interest expenses) / Total Assets Calculation:

million Tk.Year Net non Interest Income

– Net non-interest expenses (Amount)

Total Assets (Amount) Ratio %

2005 886-822 33065 0.1935%2006 2034-1939 47989 0.1980%2007 3217-1331 63550 2.97%2008 4118-1854 84054 2.69%2009 5360-2466 106912 2.71%

Graphical Presentation:

Decision: The above figure represents the Net non- interest margin (NNIM) ratio of AB Bank Limited and we see that in the year 2007 AB Bank was in most highest position. In year 2005 the bank was in lowest profitable position5.3 Financial Performance Overview:Financial Highlights

AB Bank Limited Consolidated

2009 2008 %Growth 2009 2008 %Growth

Equity 10,087 6,723 50% 10,221 6,817 50%

Total deposits 83,087 68,560 21% 83,083 68,559 21%

Loans &

advances

70,880 56,709 25% 72,063 57,661 25%

Investments 16,369 11,396 44% 16,369 11,396 44%

Fixed assets 2,441 2,445 -0.2% 2,441 2,445 -0.2%

Total assets 106,912 84,054 27% 107,093 84,191 27%

Performance During the year

2009 2008 %Growth 2009 2008 %Growth

Interest income 9,047 7,367 23% 9,111 7,368 24%

Operating profit 5,802 4,298 35% 5,870 4,330 36%[

Provision for

loans and others

598 698 -14% 599 698 -14%

Profit before tax 5,205 3,601 45% 5,271 3,632 45%

Provision for tax 1,842 1,300 42% 1,853 1,300 43%

Profit after tax 3,363 2,301 46% 3,417 2,332 47%

NNIM Ratio ( %)

0.19% 0.20%

2.97% 2.69% 2.71%

0.00%0.50%1.00%1.50%2.00%2.50%3.00%3.50%

1 2 3 4 5

Year

Ratio %

Statutory Ratios

2009 2008 %Growth 2009 2008 %Growth

Liquid assets 2144% 24,06% 20.31% 19.41%

Capital adequacy

ratio

13.78% 12.84%

Share information

2009 2008 %Growth 2009 2008 %Growth

Earnings per

share (Taka)

131.13 8972 46% 133.26 90.96 47%

Dividend - % *45 30 *45 30

Net asset value

per share (Taka)

393 301 30% 399 306 30%

Ratios

2009 2008 %Growth 2009 2008 %Growth

Non performing loan

2.75% 2.99% 2.70% 2.94°h

Return on assets (ROA)

3.52% 3.12% 3.57% 2.77%

Return on equity (ROE)

40.01% 40.96% 40.11% 34.21%

Financial Performance at a glance Financial position 2009 2008 2007 2006 2005Cash & bank balances 8,849 6,396 6,160 4,520 2,476Investment 16,369 11,396 8,885 6,281 4.061Money at call and short notice 600 1,191 574 517 390Loans & advances 70,880 56,709 40,915 31,289 21,385Fixed assets 2,441 2,445 2,381 1,148 370 Other assets 7,773 5,918 4,635 4,233 4,384 Total assets 106,912 84,054 63,550 47,989 33,065Borrowings 6,125 3,193 1,872 1,297 1,911Total deposits 83,087 68,560 53,375 42,077 27,361 Other liabilities 7,613 5,577 3,791 2,032 2,267Equity 10,087 6,723 4,512 2,583 1,527Total liability & SH’s equity 106,912 84,054 63,550 47,989 33,065Total contingent liabilities & commitments 28,996 26,074 27,288 21,112 14.663Loan deposit ratio 85.31% 82.71% 76.66% 74.36% 78.16%Interest earning assets 87,068 68,580 49,208 36,648 24,007Non-Interest earning assets 19,844 15,473 14,342 11,341 9,059ProfitabilityNet interest margin 2,908 2,034 1,439 616 691Operating income 8,269 6,153 4,657 2,650 1,577Operating expenses 2,466 1,854 1,331 1,939 822Operating profit 5,802 4,298 3,325 711 755Provision for loans and others 598 698 507 178 348Profit before tax 5,205 3,601 2,818 532 407Provision for tax 1,842 1,300 915 --- 245Profit after tax 3,363 2,301 1,903 532 162Cost income ratio 29.83% 30.14% 28.59% 73.18% 52.14%Return on investment (ROl) 21.06% 23.89% 22.87% 18.81% 5.88%Return on assets (ROA) 3.52% 3.12% 3.41% 1.31%

0.50%Return on equity (ROE) 40.01% 40.96% 42.19% 20.61% 11.73%Cost of fund 10.31% 11.09% 10.54% 10.04% 8.60%Earnings per Share (Taka) 131.13 89.72 74.23 20.75 6.34Net income per share 131.13 89.72 74.23 20.75 6.34

Other business Import 65,956 70,041 48,441 42,860 23,151Export 30,640 28,937 20,677 17,876 12,595Remittance (Million USD) 182 164 156 132 115

Equity measures

Authorized capita 6000 3000 2,000 2,000 800Paid-up capital 2,564 2,230 743 572 520Capital - Core (Tier I) 9,250 6,128 3,838 1,941 1,400Capital - Supplementary (Tier II) 1,541 1,312 947 723 327Total capital 10,790 7,440 4,785 2,664 1,727Capital surplus! (deficit) 2,957 1,644 331 67 33Statutory reserve 3,101 2,066 1,357 773 650Retained earnings 3,542 1,790 1,696 555 181Capital adequacy ratio 13.78% 12.84% 10.75% 9.23% 9.17%

Asset quality

Total loans & advances 70,880 56,709 40,915 31,289 21,385Classified loans (CL) 1,949 1,695 1,763 1,259 1,756% CL to total loans & advances 2.75% 2.99% 4.31% 4.02% 8.21%Provision for unclassified loan 826 691 487 358 216Provision for classified loan 427 658 660 416 375Share information

Market price per share (DSE) 1,177 822 2,561 893 364Dividend - % *45 30 200 30 10Price earning ratio (Times) 8.97 9.16 34.50 43.02 57.41Net Asset Value per share (Taka) 393 301 607 452 294

Distribution networkNumber of branches 77 72 71 68 67Number of SME service center 10 - - -Employee number 1,952 1,804 1,725 1,590 1,525Sources & Distribution of Income

2009 % of Total 2008 % of Total

Source of Income 1,452 100% 1,157 100%

Interest income 911 63% 737 64%

Investment income 292 20% 215 19%

Commission, exchange

and brokerage 228 16% 182 16%

Other operating income 20 1% 22 2%

Distribution of Income 1,452 100% 1,157 100%

Interest paid on deposits

and borrowing etc. 615 42% 535 46%

Salaries and allowances 122 8% 103 9%

To Suppliers for providing

goods and services 108 7% 70 6%

Depreciation set aside 20 1% 16 1%

Provision for Loan &

Advances, and Others 60 4% 70 6%

To Government as Income

Tax 185 13% 130 11%

To Statutory Reserve 103 7% 73 6%

To Retain Earnings 239 6% 161 14%

Management (validation) system in order to ensure sustainable value addition to

stakeholders. It has not been a case of bottom line enhancement alone but creation of value

conducive to socio- economic development.

Maintaining adequate capital:

Capital adequacy is the measure of the financial strength and sustainability of a bank.

Capital Adequacy Ratio (CAR) determines the capacity of the Bank in terms of meeting

the time liabilities and other risks such as credit risks, market risks etc. It is the policy of

AB to maintain adequate capital as a cushion for potential losses to absorb unforeseen

eventualities/shocks, to ensure long term sustainability and growth of the Bank to endure

and enhance shareholders value.

At the end of 2009, Bank’s total capital reached at Taka 1,079.02 Crore as against Taka

743.98 Crore on 31 December 2008.

Summary of total capital and capital adequacy ratio of the Bank under Basel I is as

follows:

(Taka in Crore)

2009 2008

Core Capital - Tier I 924.96 612.78

Supplementary Capital—TierII 154.06 131.19

Total Capital 1,079.02 743.97

Risk weighted assets 7,833.13 5,795.44

CAR against Core Capital ll. 8l% 10.57%

Supplementary Capital 1.97% 2.27%

Total Capital 13.78% 12.84%

Sustainable Dividend policy

AB’s dividend policy aims at ensuring long term sustainable growth maintaining capital

adequacy requirements which ultimately leads to shareholders value creation. AB Bank

paid 15% Stock Dividend and 15% Cash Dividend in 2008 while for 2009 the proposition

is Stock Dividend 25% and Cash Dividend 20%respectively.

Economic Value Added Statement

Economic Value Added (EVA) is a key performance indicator to measure profitability of a

Bank as compared to cost of equity capital. It indicates how much excess value has been

created by the Bank for its shareholders after deducting the minimum rate of return

required by the shareholders i.e. cost of equity. AB has been consistently able to deliver

higher EVA to its shareholders:

(In Crore Taka)

2009 2008 2007

Shareholder’s equity 1,009 672 451

Add: Cumulative provision for loans & Off-balance sheet items 135 155 123

Total Invested fund by shareholders 1,144 827 574

Average Shareholder’s equity (A] 986 700 455

Earnings for the year

Profit after taxation 336 230

190

Add: Provision for loans & Off-balance sheet items 54 48 45

Earning for the year [B] 390 278 235

Average Cost of Equity (based on highest rate of Shanchay

Patra issued by the Government of Bangladesh) plus 2% risk

premium [C] 14.50% 14.00% 14.00%

Cost nof average equity [D=AXC] 143 98 64

Economic Value Added [B-D] 247 180 171

Growth over last year 37% 5% 368%

5.4 Financial Performance in 2009

Amid a challenging economic environment, which prevailed throughout 2009, financial

results of the Bank stood for the strength and resilience of the Institution in achieving its

desired path. Business and functional strategies and activities were successfully driven

towards the achievements as AB attained highest ever profitability in the history of the

Bank’s 28 years of existence.

Total Assets of the Bank stood at Taka 10,691.20 crore (growth of 27 percent) while Total

Capital crossed the threshold and reached the level of Taka 1,079.0 crore at the year end.

Key business areas registered significant growth which ultimately resulted in a bottom line

(PAT) growth of over 46 percent compared to last year.

EPS stood at Taka 131.13 showing a growth of 46 percent over last year as well.

Business Results(Taka in Crore)

2009 2008 %change

Deposits 8,309 6,856 21%

Loans and Advances 7,088 5,671 25%

Investments 1,637 1,140 44%

Import Business 6,596 7,004 -6%

Export Business 3,064 2,894 6%

Guarantee Business 826 658 26%

Operating Profit 580 430 35%

Net Operating Profit 521 360 45%

Profit after Tax 336 230 46%

Earnings per Share (TK) 131.13 89.72 46%

Return on Equity-% 40.01 40.96

Return on Assets-% 352 3.12

Asset Utilization Ratio-% 81.44 81.61

Loans and Advances reached Taka 7,088.0 crore while Deposits was Taka 8,308.7 crore

representing growth of 25 percent and 21 percent respectively. Trading business

experienced relatively mixed results in 2009 amply showing the effects of the economic

situation in the overall. Bank’s Investment in portfolio and regulatory instruments had

significant growth of 44 percent.

Operating Profit of the Bank was Taka 580.0 crore. Net Interest Income growth of 42.90

percent and nearly 36 percent growth in Investment Income during the year led to the

record Operating Profit. Non-funded income also registered a growth of 28.82 percent.

After providing for requisite Tax and Provisions as per Bangladesh Bank guidelines, Profit

after Tax (PAT) was Taka 336.20 crore for the year. During the year, Bank also provided

for Taka 184.23 crore as provision for Tax and Deferred Tax.

5.5 Operational Performance

(Taka in Crore)

2009 2008 % change

Interest income 905 737 22.80

Interest expenses 614 533 15.14

Net interest income 291 203 42.90

Investment income 292 215 35.76

Comm. exchange

& brokerage 227 176 28.82

Other income 17 21 (16.99)

Operating Revenue 827 615 34.37

Operating expenses 247 185 33.01

Profit before Prov. & Tax 580 430 34.96

Provision & Tax 244 200 22.12

Profit after Tax 336 230 46.11

Capital Management

Bank has a detailed capital plan in place developed in line with the annual Business Plan.

Quarterly review of the Capital Plan is done by the Board. Bank also adjusts its capital

plan as and when required judging on the business eventualities. Bank maintained

adequate capital throughout. At the end of the year 2009, Capital Adequacy Ratio (CAR)

stood at 13.78 percent under Basel I.

CAR Position under Basel I(Taka in crore)

2009 % Growth 2008

Paid-up- Capital 256 5% 223

Statutory Reserve 310 0% 207

General Reserve 4 - 4

Retained Earnings 354 8% 179

a. Total Tier I Capital 925 1% 613

General Provision on

Unclassified Loans 83 19% 69

General Provision on

Off Balance Sheet Items 38 36% 28

Exchange Equalization 5 - 5

Assets Revaluation Reserve 29 -2% 29

b. Total Tier II Capital 154 17% 131

c. Total Capital (a+b) 1,079 45% 744

d. Total Risk Weighted Assets 7,833 35% 5,795

Capital Adequacy Ratio to Tier I (a/d)11.81% - 10.57%

Capital Adequacy Ratio to Tier Ii (b/d)1.97% - 2.27%

Capital Adequacy Ratio (CAR) (c/d) 13.78% - 12.84%

International Trade

International Trade remains the most important component of AB’s business profile. In

2009, Exports experienced growth although Imports was slightly lower than last year.

Imports at the end of the year stood at USD 746.64 million. Major import finance was in

the areas of food items, chemicals, medicines, textiles, scrap vessels among, others.

Total export reached USD 331.53 million at the end of the year. Export business

concentration was in the area of frozen fish, readymade garments, knitwear and other

indigenous products.

Financial Performance Review

Operating Profit of the Bank reached Taka 580.24 crore resulting in a volume growth of

Taka 150.00 crore. Net Profit after Tax in 2009 was Taka 336 crore registering a growth

46.16 percent compared to last year. Inspire of difficult market conditions in 2009, Bank

could generate income from the available business composition resulting in a growth of 35

percent at the Operating Profit level.Taka in Crore

2009 2008 Growth

Net Interest Income 290.81 203.44 42.94%

Income from Investment 292.35 215.29 35.80%

Other Operating Income 24370 196.54 23.99%

Operating Expenses 246.62 185.44 32.99%

Operating Profit 580.24 429.84 35.00%

Loan Loss Provision 4366 28.13 55.22%

Other Provisions 16.09 41.65 -61.37%

Net Profit before Taxes 520.49 360.06 44.56%

Provision for Taxes 184.23 130.00 41.72%

Net Profit after Tax 336 .26 230.06 46.16%

Interest income grew by 22.81 percent during 2009 which is consistent with the increase

of Loans and Advances of 25 percent during the year. Bank had to mobilize funds to

finance the growth of business. Deposits experienced a growth of 21.19 percent also

resulting in increase of interest expense by 15.14 percent.

Net interest income of the Bank was Taka 291 crore and was also having a growth of

42.94 percent, a testimony of Banks ability to maintain reasonable yield on Loans and

Advances which is remarkable in the back drop of recent interventions by Bangladesh

Bank in the interest fixation arena. In the overall Cost of Deposit of the Bank also came

down as the Deposit mix showed considerable improvement in terms of low cost deposits.

Total non-funded or non-interest income including Income from Investments stood at

Taka 536 crore at the end of the year which compares with the last year level of Taka 412

crore.

Operating expenses during the year increased by Taka 61.18 crore an increase of 33

percent over last year. Bank had to sustain the growth momentum through investment in

infrastructure and human capital. Moreover, inflationary effects and increase of business

inputs including utilities contributed towards this upward move. Salary and allowances

which accounts for 54 percent of Operating expenses increased by 18.83 percent as the

Bank went for recruitments to support business volume and expansion.

One of the key operational indicators ‘productivity of the employee” showed remarkable

improvement in 2009: Taka in Crore

2009 2008 GrowthOperating Profit per employee 0.30 0.24 25%

Net Profit after Tax per employee 0.17 0.13 35%

Total Assets per employee 5.48 4.66 18%

Bank made progress in all areas of business in 2009. Total Asset growth of 27 percent,

Deposit growth of 21 percent, Loans and Advances growth of 25 percent, Investment

growth of 44 percent, among others signifies the claim of a high performing Bank. Only,

Import growth was down by 6 percent reflecting the trend of overall Import business of the

country. Taka in Crore

2009 2008 Growth

Total Assets 10,691.20 8,405.40 27%

Deposits 8,308.70 6,856.00 21%

Loans & Advances 7,088.00 5,670.90 25%

Investments 1,636.90 1,139.60 44%

Import 6,596.00 7,004.10 -6%

Export 3,060.00 2,893.70 6%

Remittance ($) 18.22 16.40 11%

Guarantee 826.00 657.80 26%

Provision against Loans and Advances has increased during the year due to volume

growth and also to cover the classified loans and advances which increased by Taka 25

crore. Bank gave constant emphasis on quality credit portfolio and could also keep the

NPL Ratio at a manageable level due to the prudent risk management strategies. A

committed recovery team and adequate monitoring and control systems are in place for

asset quality assurance.Taka in Crore

2009 2008 Growth

Net Profit after Tax 336.26 230.06 46.16%

Total Income 1,440.77 1,148.51 25.45%

Interest Income 904.72 736.68 22.81%

Non Performing

Advances (NPA) 194.92 169.54 14.97%

NPL Ratio 2.75% 2.99%

NPL Provisions 42.69 65.82

Total Assets of the Bank stood at Taka 10,691 crore in 2009 from Taka 8,405 crore in

2008 registering a growth 27.19 percent. Increases of total assets were mainly driven by

business assets like Investments, Loans & Advances.Taka in Crore

2009 2008 Growth

Cash 535.49 409.60 0.13%

Balance with other banks

and financial institutions 349.41 230.01 51.91%

Money at call and short notice 60.00 119.06 49.61%

Investments 1,636.93 1,139.59 43.64%

Loans and Advances 7,087.99 5,670.88 24.99%

Fixed Assets 244. 10 244.47 -0.15%

Other Assets 777.31 591.75 31.36%

Total 10,691.23 8,405.36 27.20%

Loans and advances of the Bank grew by 25 percent and stood at Taka 7,088 crore during

the year 2009. This is a result of continued growth in ending business and solid growth in

banking activities reflecting a continued focus on customers and profitable growth.

Total liabilities in 2009 increased by 25 percent to Taka 9,683 crore from Taka 7,731 crore

in 2008. Significant increases were in the area of Deposits and Other Liabilities. AB’s

total Deposit stood at Taka 8,309 crore at the end of year 2009.The volume of deposits,

therefore, grew by 21 percent in 2009 over the previous year. The growth was supported

by Branch network and along with liability campaign carried out for mobilization of

deposits.

Shareholders’ fund grew from Taka 672 crore to Taka 1,008.65 crore. Paid- up capital of

AB stood at Taka 256 crore during 2009 increased by Taka 33.44 crore (Bonus Share of

2008). Statutory Reserve increased by Taka 103.51 crore during the year while

Distributable profit stood at Taka 354.2 crore indicating 97.88 percent growth over the

previous year.Taka in Crore

2009 2008 Change(%)

Paid up capital 256.42 222.98 15.00%

Statutory Reserve 310.12 206.61 50.10%

Total Capital 566.54 429.59 31.88%

5.6 Cash flow statement Overview

During the year 2009, Bank had a net cash flow ofTaka 186.10 crore as’given below:Taka in Crore

2009 2008

Net cash flow from operating activities 723.45 316.40

Net cash flow from investment activities (506.54) (250.35)

Net cash flow from fanning activities (30.81) 19.20

Net increase and decrease in cash 186.10 85.25

Capital Adequacy

Bank maintained adequate capital throughout and at the end of the year CAR was 13.78

percent. In 2009 the Banks Core capital and Total Capital were 11.81 percent and 13.78

percent respectively.

Capital Adequacy (Basel I)Taka in Crore

2006 2007 2008 2009

Capital requirement 206 446 580 783

Capital maintained 266 479 744 1,079

Surplus / (Deficit) 7 33 164 296

RWA 2,885 4,455 5,795 7,833

CAR% requirement 9.00% 10.00% 10.00% 10.00%

CAR% maintained 9.23% 10.75% 12.84% 13.78%

Return on Equity (ROE) stood at 40.02 percent during the year and over the years trend of

ROE has been showing consistent improvement. Earnings per Share stood at Taka 131.13

during the year 2009 compared to Taka 89.72 last year.

Overall business performance indicators shows improvement in terms of profitability,

capital maintenance and Shareholders value addition for AB in 2009.

LD Ratio (%) 85.31 82.71 76.66 74.36

CL (%) 2.75 2.99 4.31 4.02

Capital Adequacy Ratio (%) 13.78 12.84 10.75 9.23

Cost Income Ratio (%) 59.73 62.57 60.82 86.87

Earning Per Share (Taka)-Diluted 131.13 89.72 74.23 20.75

Return on Equity (%) 40.01 40.96 42.19 20.61

Return on Assets (%) 3.52 3.12 3.41 1.31

Assets utilization Ratio (%) 81.44 81.61 77.43 76.37

5.7 Growth Performance – Export and Import

Remittance

Inward Remittance from Bangladeshi Nationals working abroad marked an important

milestone in Bangladesh Economy in 2009. Receipts from this sector increased by 22.4

percent to USD 9689.3 million in FY09 from USD 7914.8 million in FY08.

Exports

Exports increased by USD 1432 million (or 10.1 percent) in FY09 to USD 15583 million.

2009 2008 2007 2006

Though raw jute, jute goods, tea, leather and frozen shrimps and fish recorded a negative

growth, however, all other major exportable items significantly increased. A substantial

growth of export of knitwear products (16.2 percent) and woven garments (14.5 percent)

continued to increase the growth of merchandise exports in FY09.

Imports

Merchandise Imports increased by USD 810.0 million (or 4.2 percent) in FY09 to USD

20291.0 million. Decreased international prices resulted in falling of import payments for

rice, pulses, crude, petroleum, edible oil, capital machinery, POL and clinkers. On the

other hand, import of fertilizer, pharmaceutical products, iron, steel & other base metal,

wheat, dying & tanning materials, etc induced to increase overall import. Imports as a

percentage of GDP decreased by 1.8 percentage points to 22.7 percent in FY09 from 24.5

percent in FY08.

As a potential source of foreign exchange reserves, Foreign Direct Investment (FDI) has

been emphasized by the Government. Despite global financial turmoil, as per primary

estimate, net FDI flows in Bangladesh increased by 25.8 percent to USD 941.0 million in

FY09 from USD 748.0 million in FY08.

The overall balance of payments recorded a significant surplus of USD 2,058 million in

FY09, which was much higher than the surplus of USD 331 million of FY08. Foreign

Exchange Reserve has crossed the $10 billion mark for the first time in the history of the

country piggybacking on remittance, export growth and lower import. Double-digit

growth rate of remittances and moderate export receipts helped increase gross foreign

exchange reserve.

6.1 Conclusion

Banks play a very vital role in the economic development of the country. The popularity

of banks is increasing day by day which leads to increase competition as well. Currently

52 Banks are operating in Bangladesh. All the Commercial banks are offering almost the

same products and services and almost same their operation system. But the ways they

provide the services are different from each other. So people choose their Bank according

to their satisfaction and need. And they will prefer the bank of which service is easily

accessible and understandable. One the other hand, Bank innovate new products and

services to attract their desired customers. ABBL is one of the most potential banks in the

banking sector. It has a large portfolio with huge assets to meet up its liabilities and the

management of this bank is equipped with the expert bankers and managers in all level of

management. So it is not an easy job to find out the drawbacks of this bank.

6.2 FINDINGS

Both export and import seem to be increasing every year for all the concerned banks. This shows the rising effect of globalization and accelerating foreign trade in Bangladesh. Every year the banks seem to have increasing facilitating international trade. Import has always been greater than export for every bank every year. The increase important from 2003 to 2008 for each bank has been approximately BDT 30,000 million for every concerned bank. Whereas the rise in export has been approximately BDT25,000 million. This shows our dependency on foreign goods hence foreign trade. This is also the cause of negative balance of trade of Bangladesh.

Excess import over export during the years means increasing outflow than inflow of foreign currency for the country. This results in negative balance of payment for Bangladesh. Rising demand for foreign currency creates rising trend in their price or value hence making our local currency weaker than before.

Foreign remittance inward has also increased over the years for each bank but it is much lower than the increase in import. Thus this low inflow of foreign currency into the country cannot cover up the balance of payment deficit.

6.3 RECOMMENDATIONS

For the improvement of the service the following measures should be taken:

Providing More Industrial Loans :

It seemed to me that the bank having a large amount of deposit is not encouraging the

large scale producers that much of long term industrial loans to accelerate the economy as

well as to help the economy to solve unemployment problem.

Ensure Proper Division of Labor In The Desk:

There is lack of division of labor in the branch. This decreases the level of performance of

the personnel, though it reduces monotonousness. But lack of division of labor hampers

the discipline of working environment. So customers are to wait for some time for the

desired service, which is contrary to the AB Bank’s objective.

Ensure Sufficient Manpower :

The number of human resources in the Computer section is really insufficient to give

services to huge number of customers. So, number of staff should be increased in this

section.

Development of Human Resources :

Human resource is another sector for the branch to be developed urgently. Human

resources, in the branch, need to be equipped with adequate banking knowledge. Majority

of the human resources must have basic knowledge regarding money, banking, finance

and accounting. Without proper knowledge in these subjects, efficiency cannot be

optimized. Bank can arrange training program on these subjects.

Ensure Sufficient Forms and Brochures :

There are always shortages of application forms, brochures, etc. in the branch. These

forms and brochures must be maintained in sufficient quantity. Otherwise customer

service will be hampered.

More Gifts and Discounts for the Premium Customers :

Premium Customers should be offered occasional gifts and discounts, which can make the

Premium service more attractive and make customer delight. The interest rates on several

loan and deposit schemes should be differentiated for the premium customers.

Offer Some Loan and Deposit Scheme Exclusively for the Premium Customers :

All the lending and savings packages offered to the premium customers are same as

offered to the general customers, excepting the waiver of service charges for premium

ones.

The bank can pay more attention to this segment of customers, as it is the most solvent

group from which income can be generated if the package is designed properly. The bank

can pay more attention to this segment of customers, as it is the most solvent group from

which income can be generated if the package is designed properly.

AB Bank limited is a leading Private commercial bank in Bangladesh with superior

customer bases that are loyal, faithful, worthy towards the bank. The service provided by

the young energetic officials of the AB Bank Limited is very satisfactory. As a

commercial bank ABBL has to follow the rules of Bangladesh bank despite the fact that

These rules sometime restrict the foreign business to some extent. As a proud member of

this bank I have found its foreign exchange department to be very efficient; therefore this

department plays a major role in the overall profitability of the bank.

BIBLIOGRAPHY

Guidelines for foreign exchange transaction.

Import and Export policy order.

Exchange rate policy.

Importers , Exporters and Indenters ( Registration ) order , 1981

Uniform rules for collection, international Chamber of commerce, publication

no.522 widely expressed as URC, ICC- 522.

Uniform rules for Bank- to Bank Reimbursement , International Chamber of

Commerce, publication no. 525 widely expressed as URR, ICC- 525

International Standard Banking practice (ISBP).

Inco terms – 2000

Import & Export ( control) act, 1950

Foreign Exchange Regulation Act ( FFRA ), 1947

UCPDC, ICC – 600, Revision, 2007.

Operational manual

Various Circulars sent by Head Office and Bangladesh Bank, broachers,

publications on Bank

Daily diary (containing my activities of practical orientation in AB Bank Ltd)

maintained by me,

Websites,

Annual Report of the bank,

Personal investigation with bankers,

APPENDIX

Year export import profit after tax

2005 12595 23151 162 2006 17876 42860 5322007 20677 48441 1903 2008 28937 70041 23012009 30640 65956 3363

Regression

Descriptive Statistics

Mean Std. Deviation N

PAT 1682.2000 1270.5474 5 EXPORT 22145.00 7580.87 5 IMPORT 50089.80 18910.80 5

Correlations

PAT EXPORT IMPORT Pearson

CorrelationPAT 1.000 .938 .873

EXPORT .938 1.000 .978IMPORT .873 .978 1.000

Sig. (1-tailed)

PAT . .009 .027

EXPORT .009 . .002IMPORT .027 .002 .

N PAT 5 5 5EXPORT 5 5 5IMPORT 5 5 5

Descriptive StatisticsMean Std.

DeviationN

PAT 1682.2000 1270.5474 5 EXPORT 22145.00 7580.87 5 IMPORT 50089.80 18910.80 5

Variables Entered/RemovedModel Variables

EnteredVariables Removed

Method

1 IMPORT, EXPORT

. Enter

a All requested variables entered.

b Dependent Variable: PATModel Summary

R R Square Adjusted R Square

Std. Error of the

Estimate

Change Statistics

Model R Square Change

F Change df1 df2 Sig. F Change

1 .963 .927 .854 484.9652 .927 12.727 2 2 .073 a Predictors: (Constant), IMPORT, EXPORT ANOVA

Model Sum of Squares

df Mean Square

F Sig.

1 Regression 5986780.381

2 2993390.191

12.727 .073

Residual 470382.419 2 235191.209 Total 6457162.80

04

a Predictors: (Constant), IMPORT, EXPORTb Dependent Variable: PATCoefficient Correlations

Model IMPORT EXPORT 1Correlations IMPORT 1.000 -.978

EXPORT -.978 1.000Covariances IMPORT 3.783E-03 -9.230E-03

EXPORT -9.230E-03 2.354E-02 a Dependent Variable: PAT

ABBL –AB Bank LTD ST-1 - Short Term

CRAB - Credit Rating Agency of

Bangladesh Limited

AA3 - Double A

Three

FX – Foreign Exchange SWIFT-

SME - Small & Medium

Enterprise

EPS- Earnings per

Share

ROA- Return on Assets ROE- Return on

Equity

ATM- Automatic teller machine L/C- Letter of

Credit

SECI- FOB-Free on board

CCI&E- Chief Controller of

Import & Export

ERC- Export

registration

Certificate

EXP-Export IMP-Import

TR- Trust receipt BTB- Back to Back

Letter of Credit

DFC- Deposit Foreign Currency

Account

LIBOR- London

Inter Bank Offering

Rate

FDBC- Foreign Documentary Bill

Purchase

TT-Telegraphic

Transfer

LCAF- Letter of Credit

Authorization Form

TIN- Tax Payers

Identification

Number

IRC- Inventors Registration

Certificate

CIB- Credit

Information Bureau

UCPDC- Uniform Customs &

Practices for Documentary Credit

NI- Negotiable

Instruments

PAD- Payment Against

Document

IBCA- Inter Branch

Credit Advice

FD-Foreign Deposit $=US dollar

MOF-Ministry of Finance BB-Bangladesh

Bank

NCB- Nationalized Commercial

Banks

PCB- Private

Commercial Banks

GBP-Great Britain Pound NFCD Non-resident

Foreign Currency

Deposit

PS- Pound sterling CD- Canadian

dollar

Y- Japanese Yen NRTA -Non

resident Taka

Account

UBME-Union Bank of Middle

East

FIU- Financial

Intelligence Unit

EFT-Electronic Fund Transfer FC- Foreign

Currency

IBCA- Inter Branch Credit

Advice

DM- German Mark

`