Internship about foreign exchange activities on janata bank ltd

Chapter 1

Background of the Study:

The internship program is most crucial part of the BBA students. The entire program duration is 8 weeks ( 2 months) which carrying out a best learning way and to know about the  organizational proceedings as well as cope up with those environment as manner of professional employees. These learning could be made the student professional, sincere, well communicator, punctual and also be a smart in various aspect. In order to internship purpose I was appointed to Janata Bank ltd. Aamin Bazar Branch . The Organization attachment Started on 24^th November 2013 and ended on 31 December 2014. The internship report is based on “Foreign Trade activities in Janata Bank Ltd.”. Aamin Bazar Branch. Liza khanum  assistant professor department of Management studies  assign this project to me.

Methodology:

This report has been prepared on the basis of experience gathered during the period of internship and my own learn and understanding. The entire process has been made by collecting primary data which played a vital role and easy to write down the report and secondary data was needed for supportive structured build up to the report. Primary Data:

Direct conversation with the bank officers. Daily activity conducted by me at the bank.

Secondary data:

• Annual report of Janata Bank
• Web browsing
• Journals and Books

Scope of learning:

With the whole internship period it was a splendid experience to know and got chance to work in the foreign exchange department. It’s a great achievement for me to learn and implement by practically the entire procedure of export and import trade. To be trained about the L/C opening, required document checking, payment moods register entry and also got to know regarding Bangladesh Bank reporting. One of the most crucial parts is foreign remittance it also a part of better understand to inward and outward remittance. All of these opportunities I had captured in that practical field and also to expand knowledge.

Limitations of the report:

· The organization maintains confidentiality about certain information so they are

reluctant to disclose to all. Hence, the report does not have many important

information and data.

· Sometimes the concerned personnel may not provide enough time due to rush

banking hours.

· As a matter of fact three months is too short after that I had tried to give best

effort to my learning purpose.

Literature Review

Trade, also called goods exchange economy, is to transfer the ownership of goods from one person or entity to another by getting something in exchange from the buyer. Trade is sometimes loosely called commerce or financial transaction or barter. A network that allows trade is called a market. The original form of trade was barter, the direct exchange of goods and services. Later one side of the barter were the metals, precious metals (poles coins), bill, paper money. Modern traders instead generally negotiate through a medium of exchange, such as money. As a result, buying can be separated from selling, or earning. The invention of money (and later credit, paper money and non-physical money) greatly simplified and promoted trade. Trade between two traders is called bilateral trade, while trade between more than two traders is called multilateral trade.

Literature Review has vital relevance with any research work due to literature review the possibility of repetition of study can be eliminated and another dimension can be selected for the study. The literature review helps researcher have been conducted to analyze the Foreign Exchange operation of Banks in Bangladesh and abroad. But there are very few research and literature available on the subject related to Foreign Exchange operation Banks.

Bangladesh launched a deep and wide-ranging trade reform strategy in the early 1990s. This included substantial reduction and rationalization of tariffs, removal of quantitative restrictions, move from multiple to a unified exchange rate system, convertible current account and an overall outward orientation of trade policy regime. As a result, the country’s trade integration, measured by the trade-GDP ratio, rose from 18% in 1990 to 43% in 2008.

The Bangkok Agreement was established in 1975. Member countries are Bangladesh, India, Sri Lanka, China, the Republic of Korea and Lao People’s Democratic Republic. The Bangkok Agreement has recently been revised and renamed as the Asia Pacific Trade Agreement (APTA). The APTA has come into force from 1 July 2006. The APTA contains consolidated list of tariff concessions granted by member countries to each other. Under this agreement, China has provided 100% tariff concessions to 83 items of Bangladesh at 8-digit level and Republic of Korea has provided 100% tariff concessions to 139 items at 10-digit level.

The BIMSTEC Framework Agreement was signed in June 1997 and Agreement on FTA concluded in February 2004. Member countries are Bangladesh, India, Myanmar, Sri Lanka, Thailand, Nepal and Bhutan. Under the Agreement, in case of First Track products, non-LDCs will open up their markets for the products of LDCs in 1 year and LDCs will do the same for non-LDCs in 5 years. On the other hand, for Normal Track products, non-LDCs will open up their market for the products of LDCs in 3 years and the LDCs will follow 10 year schedule in order to open up their markets for the products of non-LDCs. Least Developed Member Countries of BIMSTEC FTA will enjoy special and differential treatment. 

History of Janata Bank:

Janata Bank Limited is the 2nd largest state owned commercial bank in Bangladesh. Immediately after the liberation of Bangladesh in 1971, the erstwhile United Bank Limited and Union Bank Limited were renamed as Janata Bank. The established of Janata Bank was happened under the Bangladesh Bank order 1972. It was incorporated as a public Limited Company on 21, May 07 vide certificate of incorporation No-C66933(4425)07 in the early era of privatization. The Bank has taken over the business of Janata Bank at a purchase consideration of Tk. 2593.90 million as a going concern through a vendor agreement signed between the Ministry of Finance of the Peoples’ Republic of Bangladesh and the Board of Directors on behalf of Janata Bank Limited on 15^th, November 2007. The operation of Janata Bank Limited works through 851 branches and including 4 overseas branches at United Arab Emirates and a subsidiary company named Janata Exchange Company Srl in Italy. It is linked 1202 foreign correspondents all over the world.

Mission Statement of the Janata Bank:

As it is recognized as the leading commercial bank in the aspect of Bangladesh market and it is providing retail and corporate banking services, it is trusted and respected as a partner in the social and economic development program in our country and among our nation.

To become the most sought after bank in the country, rendering technology

driven innovative service by the dedicated team of professionals

Vision of the Janata Bank:

To have a poverty free Bangladesh in course of a generation in the new millennium, reflecting the national dream. To build a society where human dignity and human right receive the highest consideration along with reduction of poverty.

Product of Janata Bank:

• DPS+ (deposit pension Scheme plus) is a 3, 5, 7, 10 and 12 years term. Monthly
• installment raising from BDT 1000/- to BDT 10000/-
• MB+ (monthly benefit plus) is 3 and 5 years scheme that lets you earn monthly benefit
• of BDT 1000/-(before tax) for deposit of BDT 1, 00,000/- or it’s multiple.
• DB+ (double benefit plus) is a six year scheme. The deposit will be double in 6 year.
• Minimum initial deposit for the scheme is BDT 1, 00,000/- or it’s multiple, maximum is
• BDT 25, 00,000/- under single name. & BDT 40, 00,000/- under joint name.
• TB+ (triple benefit plus) is a 9 years 6 month scheme. The deposit will be tripled in 9
• years 6 months. Minimum deposit for the scheme initially BDT 10, 00,000/- or it’s
• multiple, maximum is 25, 00,000/- under single name. & BDT 40, 00,000/- under joint
• name.
• FDR (fixed deposit rate) 1 months and 2 months tenure below 2 crore 10% per annum. 2
• crore & above 12% per annum. 3 months, 6 months, and 1 year any amount will get12%.

Objective of the report:

Broad Objectives:

· To examine and analysis overall foreign exchange activities system.

Specific Objectives:

To get a practical knowledge about Export procedure and the system of foreign

To learn about foreign trade activities i.e. Export & Import

To know about how to issuing L/C, Advising L/C etc.

To be acquainted with the Export & Import required documents

The consequence process of Transmitting L/C, L/C amendment, & Lodgment

remittance.

Chapter – 4

Introduction:

The Janata Bank is one of the recognized private commercial bank in Bangladesh, within a short period of time it has been created a renowned image in the banking sector in spite of existing numerous rivals. From the beginning to till now Janata Bank is strongly committed to provide a better quality service to the customer and at a time the authority is providing an excellent facility to the employees. The Bank contains three departments at a time.

• General banking
• Credit & Marketing department
• Foreign exchange

OPENING LETTER OF CREDIT (L/C)

In global business environment, buyers and sellers are often unknown to each other. So seller generally demands guarantee of payment for his exported goods. In this situation bank has an important role. Bank gives export guarantee that it will pay for the goods on behalf of the buyer. This guarantee is called “Letter of Credit” or LC. Thus by letter of credit the contract between importer and exporter find a legal sphere.

PROCEDURE OF OPENING THE LETTER OF CREDIT

(L/C)

After receiving the preform invoices from the exporter, by applying for the issue of documentary credit, the importer requests his/her bank to make a promise of payment to the supplier. Obviously, the bank will only agree to this request if bank can rely fully on reimbursement by the applicant. According to the accepted custom as the sole security for the credit, particularly if they are not the sorts of commodity that can be traded on an organized market, such an agreement would make the bank to bear excessive risk outside its specialized field. The applicant must therefore have adequate fund in the bank account or a credit line sufficient to cover the required amount. Banks deals with documents and not with goods. Once the bank has issued the credit its obligation to pay is conditional on the presentation of the stipulated documents within the prescribed time limit. The applicant cannot prevent a bank from honouring the documents on the grounds that the beneficiary has not delivered goods.

The importer submit the following documents with the application for

opening the L/C

• Tax Identification Number (TIN)
• Valid trade license
• Import registration certificate (IRC)
• The bank will supply the following documents before opening the L/C
• LCA form
• IMP form
• Necessary charger documents for documentation

The above documents/papers must be completed duly signed and filled by the parties according to the instruction of the concern banker. After scrutinizing above-mentioned documents carefully, bank delivers the following forms to be filled up by importer and banker then check it carefully:

• Whether the goods to be imported is permissible or not.
• Whether the goods to be imported is demanding or not.

L/C APPLICATION FORM (L/CAF)

L/C Application Form is a sort of an agreement between customer and bank on the basis of which letter of credit is opened. Bank provides a printed form for opening of L/C to the importer. A special adhesive stamp of value Tk.200 is affixed on the form in accordance with Stamp Act currently in force. While opening, the stamps are cancelled. Usually the importer expresses his decision to open the L/C quoting the amount of margin in percentage. Usually the importer gives the following information –

1) Full name and address of the importer

2) Full name and address of the beneficiary

3) Draft amount

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

5) Time bar within which the documents should be presented

6) Sales type (CIF/FOB/C&F)

7) Brief specification of commodities, price, quantity, indent no. etc.

8) Country of origin

9) Bangladesh Bank registration no.

10) Import License/LCAF no.

11) IRC no.

12) Account no.

13) Documents no.

14) Insurance Cover Note/Policy no., date, amount

15) Name and address of Insurance Company

16) Whether the partial shipment is allowed or not

17) Whether the transhipment is allowed or not

18) Last date of shipment

19) Last date of negotiation

20) Other terms and conditions (if any)

21) Whether the confirmation of the credit is requested by the beneficiary or not.

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

L/C AUTHORIZATION FORM (L/CAF)

The Letter of Credit Authorization Form (LCAF) is the form prescribed for the authorization of opening letter of credit/payment against import and used in lieu of import license. The authorized dealers are empowered to issue LCA Forms to the importers as per basis of licensing of the Import Policy Order in force to allow import into Bangladesh. If foreign exchange is intended to be bought from the Bangladesh Bank against an LCAF, it has to be registered with Bangladesh Bank’s Registration Unit located in the concerned area office of the CCI&E. The LCA Forms available with authorized dealers are issued in set of five (05) copies each. First Copy is exchange control copy, which is used for opening of LC and effecting remittance. Second Copy is the custom purpose copy, which is used for clearance of imported goods from custom authority. Triplicate and Quadruplicate Copy of LCAF are to be sent to concerned area of CCI&E office by authorized dealer/Registration Unit of Bangladesh Bank. Quintuplicate Copy is kept as office copy by authorized dealer/Registration Unit. The Letter of Credit Authorization Form (LCAF) contains the followings –

• Name and address of the importer
• IRC no. and year of renewal
• Amount of L/C applied for (both in figure and in word)
• Description of item(s) to be imported
• Signature of the importer with seal
• List of goods to be imported

Forwarding Documentary Credit by Advising or Confirming Bank:

There are usually two banks involved in a documentary credit operation. The issuing bank and the 2^nd bank, the advising bank, is usually a bank in the seller’s country. The issuing bank asks another bank to advise or confirm the credit. If the 2nd bank is simply “advising the credit”, it will mention that when it forwards the credit to seller, such a bank is under no commitment or obligation to pay the seller. If the advising bank is also “confirming the credit”, this mention that the confirming bank, regardless of any other consideration, must pay accept or negotiate without recourse to seller. Then the bank is called confirming bank also.

Submission of Necessary Documents by Exporter to the Negotiating Bank:

As soon as the seller/exporter receives the credit and is satisfied that he can meet its terms and conditions, he is in a position to load the goods and dispatch them. The seller then sends the documents evidencing the shipment to the bank. Exporter will submit those documents in accordance with the terms and conditions as mentioned in L/C. Generally the documents observed by the foreign exchange department are:

• Bill of exchange
• Commercial invoice
• Bill of lading / Air way bill / Truck receipt
• Certificate of origin
• Packing list
• Clean Report of Finding (CRF)
• Insurance cover note
• Pre-shipment certificate

The Documents Sent To The Issuing Bank Through The Negotiating Bank:

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

Making the Payment of Foreign Bill through the Reimbursing Bank:

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

SECURITIES OF L/C

Janata Bank Limited respective officials scrutinize the application in the following manner)

The terms and conditions of the L/C must be complied with UCPDC 500 and Exchange Control & Import Trade Regulation Act.1947.

b) Eligibility of the goods to be imported.

c) The L/C must not be opened in favour of the importer.

d) Radioactivity report in case of food item.

e) Survey report or certificate in case of old machinery

f) Carrying vessel is not of Israel.

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

EXPORT

Janata Bank Limited exports a large quantity of goods and services to many countries. Readymade textile garments (both knitted and woven), Jute, Jute-made products, frozen shrimps, tea, hide and skin, vegetables are the main goods that Bangladeshi exporters exports 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 Janata Bank Limited foreign exchange Branch are readymade garment exporters. They open export L/Cs here to export their goods, which they open against the import L/Cs opened by their foreign importers

FORMALITIES OF EXPORT PROCEDURE

There are a number of formalities, which an exporter has to fulfil before and after shipment of goods. These formalities or procedures are enumerated in brief as follows:

Obtaining Export Registration Certificate ERC: No exporter is allowed to export any commodity for export from Bangladesh unless he is registered with Chief Controller of Imports and Exports (CCI & E) and holds valid Export Registration Certificate (ERC). After applying to the CCI&E in the prescribed from along with the necessary papers, concerned offices of the Chief Controller of Imports and Exports issues ERC. Once registered, exporters are to make renewal of ERC every year.

Securing the order: After getting ERC, the exporter may proceed to secure the export order. He can do this by contracting the buyers directly through correspondence.

Obtaining EXP: After having the registration, the exporter applies to Janata Bank Limited with the trade license, ERC and the Certificate from the concerned Government Organization to get EXP. If the bank is satisfied, an EXP is issued to the exporter.

Signing of the contract: After communicating with buyer the exporter has to get contracted for exporting exportable items from Bangladesh detailing commodity, quantity, price, shipment, insurance and mark, inspection, arbitration etc.

Receiving the Letter of Credit: After getting contract for sale, exporter should ask the buyer for Letter of Credit clearly stating terms and conditions of export and payment.

Procuring the materials: After making the deal and on having the L/C opened in his favour, the next step for the exporter is to set about the task of procuring or manufacturing the contracted merchandise.

Endorsement on EXP: Before the exporter with the customs or postal authorities lodges the export forms, they should get all the copies endorsed by Janata Bank Limited. Before shipment, exporter submits EXP. form with commercial invoice. Then Janata Bank’s respective officers check it properly, if satisfied, certified the EXP. Without EXP exporter cannot make shipment. The customer must declare all export goods on the EXP issued by the authorized dealers

4.8 DISPOSAL OF EXPORT PROCEDURE

Original: Customs authority reports first copy of EXP to Bangladesh Bank after shipment of the goods.

Duplicate: Negotiating bank reports the Duplicate to Bangladesh Bank in or after negotiation date but not later than 14 days from the date of shipment.

Triplicate: On realization of export proceeds the same bank to the same authority reports Triplicate.

Quadruplicate: Finally, the negotiating bank as their office copy retains Quadruplicate.

Shipment of goods : Exporter makes shipment according to the terms and condition of L/C.

Presentation of export documents for negotiation: After shipment, exporter submits the following documents to Janata bank Limited for negotiation.

• Bill of Exchange or Draft
• Bill of Lading
• Invoice
• Insurance Policy/Certificate
• Certificate of origin
• Inspection Certificate
• Consular Invoice
• Packing List
• Quality Control Certificate
• G.S.P. certificate
• Photo

Examination of Document: Banks deal with documents only, not with commodity. As the negotiating bank is giving the value before repatriation of the export proceeds it is advisable to scrutinize and examine each and every document with great care whether any discrepancy(s) is observed in the documents. The bankers are to ascertain that the documents are strictly as per the terms of L/C Before negotiation of the export bill. Bank officers assigned for examining the export documents may use a checklist for their convenience.

Negotiation of export documents: Negotiation stands for payment of value to the exporter against the documents stipulated in the L\C. If documents are in order, Janata Bank Limited purchases (negotiates) the same on the basis of banker- customer relationship. This is known as Foreign Documentary Bill Purchase (FDBP).If the bank is not satisfied with the documents submitted to Janata Bank Limited and gives the exporter reasonable time to remove the discrepancies or sends the documents to L/C opening bank for collection. This is known as Foreign Documentary Bill for Collection (FDBC).

Settlement of Local Bills:

• The settlement of local bills is done in the following ways, -
• The customer submits the L/C to Janata Bank Limited along with the documents to negotiate
• Janata Bank Limited officials scrutinize the documents to ensure the conformity with the terms and conditions.
• The documents are then forwarded to the L/C opening bank.
• The L/C issuing banks gives the acceptance and forwards an acceptance letter.
• Payment is given to the customer on either by collection basis or by purchasing the document.

IMPORT

Import means purchase of goods or services from abroad. Normally consumers, firms

and Government organizations import foreign goods or services to meet their various

necessities. Main import items are food item, edible oil, fertilizer, petroleum,

machineries, chemicals, raw materials of industry, cement clinkers etc. So, in brief,

we can say that import is the flow of goods and services purchased by local agent

staying in the country from foreign agent staying abroad.

IMPORT PROCEDURE

Authorized Dealer, banks are always committed to facilitate import of different

goods into Bangladesh from the foreign countries. Import Section, which is under

Foreign Exchange Department of a bank, is assigned to perform this job. And to serve

its parties demand to import goods, it always maintains required formalities that are

collectively termed as “Import Procedure”.

i) At first, the importer must obtain Import Registration Certificate (IRC) from

the CCI&E submitting the following papers:

• Up to date Trade License.
• Nationality and Asset Certificate.
• Income Tax Certificate.
• In case of company, Memorandum & Articles of Association and Certificate of Incorporation.
• Bank Solvency Certificate etc.
• Required amount of registration fee

ii) Then the importer has to contact with the seller outside the country to obtain the Performa Invoice. Usually an indenter, local agent of the seller or foreign agent of the buyer makes this communication. Beside these other sources are:

• Trade fair.
• Chamber of Commerce.
• Journals etc.

iii) When the importer accepts the Proforma Invoice, he/she makes a purchase contract with the exporter detailing the terms and conditions of the import.

iv) After making the purchase contract, importer settles the means of payment with the seller. An import procedure differs with different means of payment. The possible means are Cash in Advance, Open Account, Collection Method and Documentary Letter of Credit. In most cases, the Documentary Letter of Credit in our country makes import payment. Purchase Contract contains which payment procedure has to be applied.

PAYMENT MODES

Cash in advance: Importer pays full, partial or progressive payment by a foreign DD, MT or TT. After receiving payment, exporter will send the goods and the transport receipt to the importer. Importer will take delivery of the goods from the transport company.

Open Account: Exporter ships the goods and sends transport receipt to the importer. Importer will take delivery of the goods and makes payment by foreign DD, MT, or TT at some specified date.

Collection Method: Collection methods are either clean collection or documentary collection. Again, Documentary Collection may be Document against Payment (D/P) or Document against Acceptance (D/A). The collection procedure is that the exporter ships the goods and draws a draft/ bill on the buyer. The exporter submits the draft/bill (only or with documents) to the remitting bank for collection and the bank acknowledges this. Then the remitting bank sends the draft/bill (with or without documents) and a collection instruction letter to the collecting bank. Acting as an agent of the remitting bank, the collecting bank notifies the importer upon receipt of the draft. The title of goods is released to the importer upon full payment or acceptance of the draft/bill.

Letter of credit: Letter of credit is the well-accepted and most commonly used means of payment. It is an undertaking for payment by the issuing bank to the beneficiary, upon submission of some stipulated documents and fulfilling the terms and conditions mentioned in the letter of credit.

EXPORT FINANCE

Export through Janata Bank Ltd. for the year 2008 and 2009 is Tk.85418.00 million and Tk. 87500.00 million respectively. In spite of Global Financial Crisis the growth chart in export through Janata Bank Ltd. remains upwards due to our timely steps regarding credit facilities and services packages. We have already re-fixed our schedule of exchange at a reduced rate the loan pricing is more competitive. With the credit lines our experts have introduce the following new products:

Cash Credit: Working capital facility to dyeing unit and packaging unit.

Mid term Loan: For procurement of machinery, space parts, boiler, generator, vehicles etc. to export oriented industrial unit.

LTR, FC: Short term credit for procurement of capital machinery from abroad.

Term Loan: For (Export oriented) Ship Building.

Export Project BMRE: Loan for factory building construction. Expansion, development and Maintenance, construction of factory go down, purchase of machineries from local and foreign markets, covered van, generator and establish ETP.

Export target  and world economic crisis

For global economic recession and political instability inside the country contribution to national export of Janata Bank limited was lowest in the fiscal year 209-2010 among last four fiscal years. And in fiscal year 20011-2012it turned up warding. Because to increase export business providing the exporter more foreign currency, to strengthen their production capacity, to facilitate the in every maximum scope, the bank has took four incentives. These have been proved to be fruitful adding Tk.2.00cr (approx.) more to the bank’s annual income through only export business. These new four incentives are as follows in brief:

In addition with the existing working capital it provides exporters emergence need to execute their foreign order.

For importing bulk quantity of dies, chemical it is a great support for the exporter.

Loan for importing generator, small machines, vehicles for emergency need.

For importing capital machinery.

IMPORT FINANCE

Traditionally Janata Bank Ltd. is pioneer in handling major portion of country’s import business. The total volume of import as on 30-11-2012 is 107168 million. Major import items are industrial raw materials, chemicals, capital machineries, scraped vessels and petroleum etc. employment in abroad etc. We are moving forward in slow rate. For this reason import in 2010 sharply down

compare with 2011. Again in 2012 import of Janata Bank Limited reached higher than 2011. And in 2013 import is dropped little bit.