Chapter One

Orientation of the Report.

Introduction

The word Bank refers to the financial institution deals with money. Commercial banks
are the primary contributor to the economy of the country. They are borrowing money from the locals and lending the same to the business as loans and advances. So the people and the government are very much dependent on these banks as the financial intermediary. Moreover, banks are profit -earning concern, as they collect deposits at the lowest possible cost and provide loans and advances at higher cost. The differences between two are the profit for the bank. Involvement of the banking sector in different financial events is increasing day by day. At the same time the banking process is becoming faster, easier and the banking arena is becoming wider. As the demand for better service increases, the banking organizations are coming with innovative ideas. In order to survive in the competitive field of the banking sector, all banking organizations are looking for better services and opportunities providing to their clients. As a result, it has become essential for every person to have some ideas on the bank and banking procedure.

Origin of the report

Reporting means the written presentation of the evidence and findings of a research. After completion of the internship program report submission is essential. The report is based on a topic that can satisfy both organization and my academic institution. Internship is the last part of my BBA course. Being a BBA student internship and report of internship submission is essential for me. Without completion of internship and report of internship, I cant be able to complete my BBA course. This report is submitted to Prof. Md. Ashraf Hossain, Dean, School of Business. The University of Development Alternative after completion of the three months internship program in the SOCIAL ISLAMI Bank Limited (New Eskaton Brunch)

I have assigned a topic Foreign Exchange Operation of SOCIAL ISLAMI Bank Limited and the authority of SOCIAL ISLAMI Bank gave me the opportunity to work at the principal Branch for three months on the topic. The main objective of practical orientation is to get a clear-cut idea about the foreign exchange operation of SOCIAL ISLAMI Bank. Along with the main objective other objectives of report are: 1. To apply theoretical knowledge with practical situation. 2. To understand the real management situation and to gather practical knowledge. 3. To familiar with banking environment, clients, working hours, values, conditions and other things related to bank. 4. To analyze the financing system of the bank and to have greater contribution towards countrys economy. 5. To identify problems faced by the customers and the bankers. 6. To evaluate whether the customer service provided by SOCIAL ISLAMI Bank is good enough for its congenial existence and growth. 7. To find out the growth rate of import and export.

Scope of the report

There are certain boundaries to cover this report. To achieve the objectives of the report, i.e. through knowledge about the organizational functions and its management, it is not possible to cover each and every activities performed in the organization. The report has covered only the Foreign Exchange Operation performed by SOCIAL ISLAMI Bank.

Methodology
In this report both primary and secondary data are collected. Primary data are collected through face-to-face conversation with the bank officer and staff. And secondary data are collected from the published materials like Internet, annual report, branch report and foreign exchange related books.

Limitations of the report

This report has some limitations. These are given below: 1. Time constraint was a major drawback in this study. Three months time is not sufficient to cover such a wide area. 2. Another limitation of this report is the banking policy is not to disclose any information earlier, which will publish in future. For this reason I could not collect any data of 2008. 3. Foreign exchange related with currency exchange and foreign trade business, as currency exchange does not performed in this branch so I emphasis only on foreign trade. 4. Personnel of the bank are very busy.

Chapter Two
About Social Islami Bank.

CHAPTER-II:
OVERVIEW OF SOCIAL ISLAMI BANK LTD.

2.1 An Overview of Social Islami Bank Ltd.

Targeting poverty, Social Islami Bank Limited is indeed a concept of 21st Century participatory three sector banking model in one: in the formal sector, it works as an Islamic Participatory Commercial Bank with human face approach to credit and banking on the basis of profit and loss sharing; it is a Non-Formal Banking with the poor in non-corporate sector dealing with informal finance and credit package that empowers and humanizes real poor family and creates local income opportunities and discourage internal migration; it is a Development Bank intended to monetize the voluntary sector, committed basically to financing development and management of over 1,55,000 Waqf, Mosque properties in Bangladesh as well as Non-Muslim Trust properties.

History

Social Islami Bank Ltd. (SIBL) was incorporated on 5th July 1995 as a result of dedicated efforts of a group of established Bangladeshi entrepreneurs and internationally important personalities. Social Islami Bank Ltd. (SIBL) become operational on 22 November, 1995 with a clear manifesto to demonstrate the operational meanings of participatory economy, banking and financial activities as an integrated part of an Islamic code of life. It is an attractive concept of Islamic Banking with a unique human face approach to credit and banking based on interest free economic and financial transactions and income generating program for the millions of the urban and rural poor and a profitable investment option for the rich to invest, earn and live in a better society with greater security and peace at the operational level, SIBL is operating three-sector banking, such as, formal, Non-formal and Voluntary sector. SIBL is beginning a new era of Islamic Banking having social, ethical and moral dimension in each of its activities ranging from credit to construction, trading to transport, framing to fishing, and manufacturing to mining and so on. Some renowned personalities and institutions are sponsors and directors of this bank, specially the founder Chairman P. who is an internationally reputed, Islamic thinker and professional Economist.

2.2 Mission of Social Islami Bank Ltd. (SIBL):

High quality financial services with the latest technology. Fast, accurate and satisfactory customer services. Balance and sustainable growth strategy. Optimum return on shareholders equity. Introducing innovative Islamic Banking products. Attract and retain high quality Human Resources. Empowering real poor families and create local income opportunities. Providing support for social benefit organizations-by way of mobilizing funds and social services.

2.3 Vision of Social Islami Bank Ltd. (SIBL):

Social Islami Bank Ltd. (SIBL) started its journey with a concept of 21st century Islamic Participatory three sector banking model: Formal sector-commercial banking with latest technology, Non-formal sector-Family Empowerment Micro-Credit & Micro-Enterprise program and Voluntary sector-Social Capital mobilization through CASH WAQF and others. Finally, Reduction of poverty level is our vision, which is a prime object as started in Memorandum of Association of the bank with the commitment Working Together for a Caring Society.

2.4 Organogram

CHAIRMAN BOARD OF DIRECTORS MANAGING DIRETOR ADDITIONAL MANAGING DIRECTOR DEPUTY MANAGING DIRECTOR EXECUTIVE VICE PRESIDENT SENIOR VICE PRESIDENT VICE PRESIDENT SENIOR ASST. VICE PRESIDENT ASSISTANT VICE PRESIDENT SENIOR PRINCIPAL OFFICER SENIOR EXV. OFFICER EXECUTIVE OFFICER OFFICER TRAINEE OFFICER JUNIOR OFFICER ASSISTANT OFFICER TRAINEE ASSISTANT OFFICER Diagram: Organizational Structure of SIBL

2.5 Functions of SIBL

Information & Communication Technology Department

Financial Administration Department International Department General Services Department Managing Director's Secretariat Business Development & Marketing Department Audit & Inspection Department Chairman's Secretariat Share Department Board Secretariat Human Resources Department Shariah Board Secretariat SIBL Training Institute Non Formal & Voluntary Banking Department Law & Recovery Department Board Audit Cell MIS, Planning & Research Department Internal Control & Compliance Division Investment Risk Management Department

2.6 Exchange of views In view to enhance Islamic Banking activities a delegation of the Board is visiting the member banks for two years and exchanging views with the higher authorities of banks. The delegation offered then different advice and indications. 2.7 Approval of Inter-Islamic Bank Money Market regulation To solve the liquidity scarcity no Islamic bank can borrow money from call Money Market became of Interest connection. So the board approved "Inter-Islamic Bank Money Market regulation" so that Islamic Banks can deal each other to solve the scarcity of liquidity and excess liquidity accordingly of Shariah.

2.8

Key functions of the SOCIAL ISLAMI Bank Ltd

Like other commercial Banks SOCIAL ISLAMI Bank performs all traditional Banking business including introduction of a wide range of caving and credit products, retail banking and professional management. But the SOCIAL ISLAMI Bank emphasizes its functions in export and import trade handling and financing of export oriented industries will enhance wealth, quotes more employments opportunities, helps formation of capital and reduces in the balance of payment of the country.

The other functions are as follows: Receiving deposit Granting investment Creation of deposit by investment Transfer of money Discounting of bill of exchange Investment in profitable sectors Export and Import.

2.9 Performance of the Bank at a Glance

10

Sl. No 01. 02. 03. 04. 05. 06. 07.

Particulars Authorized Capital Paid-up Capital Reserve Fund Deposits Investment (General) Investment (Shares & Bonds) Foreign Exchange Business a) Import Business b) Export Business c) Remittance

2007 350.00 171.38 81.09 3503.20 3264.13 223.33 9617.51 4949.67 4623.46 34.38 137.87 93.18% 246 1020 32 1.73%

2008 100.00 62.78 35.73 1907.82 1933.20 154.30 4931.24 2678.10 2241.84 11.31 83.58 101.97% 200 768 28 3.44%

2009 100.00 87.90 57.00 2831.90 2604.60 163.30 7294.00 4143.20 3128.50 22.30 117.58 91.97% 222 934 28 1.65%

2010 350.00 2691 81.09 3503.20 3264.13 223.33 9617.51 4949.67 4623.46 34.38 137.87 93.18% 246 1020 32 1.73%

08. 09. 10. 11. 12. 13.

Operating Profit Loan as a % of total Deposit No. of Foreign Correspondent Number of Employees Number of Branches Return on Assets

2.11

Customer Service and Automation

To err is human and forgiveness divine is a Proverb, the bank believes, the customers will not accept. Because for a service the pay for, they want it 100% defect free. So improvement

11

of the customer service should always be their motto. Altered expectoration of the customers has shifted the focus from resource base productivity to value base productivity. To operate in the globalize environment, the Banks future plan is to equity all the units of the Bank with modern technology, they already started online service, Telex, Fax, E-mail and soon they will start centralized online computer network. For the service of its Customers round the clock; it has a plan to install ATM at Suitable place in Dhaka and other cities of the country.

2.12 Product & Services:

Deposit
Al-Wadia Current Deposit Sorborno Rekha term Deposit Mudaraba Term Deposit Scheme Mudaraba Mellinor Deposit Mudaraba Pension Deposit

Sonali Din Deposit Scheme Mudaraba Savings Scheme

Super Savings

Steady Money Multiplus Savings

12

Investment / Finance

Corporate Finance

Industrial Finance

Project Finance

Syndicate Investment

Mode of Investment

Murabaha

Bai Muazzal

Izara Bil Baia

Wazirat Bil Wakala

Quard

Local Documentary Bill Purchased

Foreign Documentary Bill Purchased

Foreign Exchange Business: International trade constitutes the main stream of business activities of SOCIAL ISLAMI Bank. It offers a full range of trade financial services namely, issue, advice and confirmation of documentary credit; arranging forward exchange coverage; pre-shipment and postshipment finance; negotiation and purchase of export bills; discounting bill of exchange; collection of bills, and outward remittance etc.

Import Business: Import business is considered as an important segment of Foreign exchange business. During the year of 2007 bank open 16339-import letter of credit and the import value stood at 26781.80 million with a growth of 39.05% comparison with previous year. Year 2010 2009 2008 2007 2006 Amount (Million) 26781.80 19260.10 13152.50 8519.70 4199.70

13

Figure: import business

Figure Import
30000

Figure in Million

25000 20000 15000 10000 5000 4199.7 0 2006 2007 2008 2009

26781.8 19260.1 13152.5 8519.7 East

2010

Year

Growth rate of import Here the formula is Pt = Po (1 + r )

n

Here Pt = Current Year. Now,

Po = Base Year.

R = Growth rate.

Current Year = 26781.80, Base Year = 4199.70 26781.80 = 4199.70 (1 + r) 5

14

(1 + r ) 5 = 26781.80 (1 + r )
5

4199.70 = 6.38
1

(1 + r ) = ( 6.38) 5 (1 + r ) = 1.44
r = 1.45 1 r = .45 r = 45%

Export Business: The growth of export business has significantly been increased by 48.22%. It stood at 22418.40 millions as of December 31, 2007 against Tk.15124.60 million of the previous year.

Year 2010 2009 2008 2007 2006 Table: Export Business

Amount (Million) 22418.40 15124.60 10088.30 7442.20 2797.30

15

25000 20000

22418.4 15124.6 10088.3 7442.2 2797.3 2003 2004 2005 2006 2007 East

Figure in Million

15000 10000 5000 0

Year

Growth rate of export: Here the formula is Pt = Po (1 + r )

n

Here Pt = Current Year. Now,

Po = Base Year.

R = Growth rate.

Current Year = 22418.4, Base Year = 2797.3 22418.4= 2797.3 (1 + r) 5

(1 + r ) 5 = 22418.4 (1 + r )
5

2797.3 = 8.01
1

(1 + r ) = ( 8.01) 5 (1 + r ) = 1.52
r = 1.52 1 r = .52 r = 52%

16

 Finance/Loans Offered by SOCIAL ISLAMI Bank Corporate Finance Industrial Finance Lease Finance Hire Purchase Finance Commercial Loans Project Finance Syndicate Loans Retail Loans Mortgage Loans Loan against Share and Securities

Savings Scheme Offered by SOCIAL ISLAMI Bank Monthly Savings Scheme (Money Grower) Monthly Income Scheme (Steady Money) Double the deposit in 6 years (Super Savings) 10 years deposit-more than triple (Multi plus Savings) Education Savings Scheme Smart Saver. Hajj Deposit.

About Principal Branch:

Principal Branch is the 1st Branch the cooperation of head Office Management the business and other activities are growing gradually. Performance at a glance of SOCIAL ISLAMI Bank (Pricipal Branch) 17

(Amount in TK.) Particulars Total Deposits Bills payable Total Advance/Investment Profit/Loss Cash in Hand Balance Held with Sonali Bank Balance Held with Sonali Bank Prize Bond Total Import Total Export Total Remittance (Local) 2009 587793753 1939679 379057627 8114302 5214408 23955593 10499479 9000 696109000 113154000 869427433 2010 382406420 3391637 197376922 3760132 2572846 1857752 18057372 Nil 509776000 39020000 1066164318

18

Chapter Three
Foreign Exchange Operation of Social Islami Bank

19

3.1 Definition of Foreign Exchange Foreign exchange means foreign currency and includes all deposits, credits and balance of payable in foreign currency as well as Draft, TC, L/C bill of exchange drawn in local currency but payable in foreign currency. Foreign Exchange Regulation Act, 47 sec-2 Foreign exchange means foreign currency and includes any instrument drawn, accept made or issued under clause 13 of section 16 of the Bangladesh bank order 1972 all deposits and credits and balances travelers cheque letter of credit and bill of exchange expressed or drawn in Bangladesh currency but payable in the foreign currency. Bangladesh Bank order 1972. Foreign Exchange Regulation Act, 1994 This act regulates the exchange of foreign currencies, remittances and opening of foreign currency account under various classifications. According to this law, FC accounts can be opened without initial deposits, and bears no interest and both the account holder and the nominee can operate the account. The entire remittance from abroad is free from income tax. It also states the documents required for the opening of such account. Bangladesh bank has stopped sales and purchases with authorized dealers of any currency other than US dollar, to encourage the authorized dealers to buy and sell other currencies in the inter bank market.Bangladesh Foreign Exchange Dealers Association has been formed and a Code of Conduct for treasure operations and inter bank foreign exchange market has been formulated. L/c opening and operational procedure Import 1. Introduction: Import of goods into Bangladesh is regulated by the ministry of commerce in terms of the Import & Export control Act 1950; with import policy orders & public notice issued from time to time by CCI & E. It also follows the guidance of Foreign Exchange circular of Bangladesh Bank. Controls the financial aspects, such as payments for imports, rates of exchange, methods of remittances against imports, under the provision of F.E.R. Act 1947.

20

Uniform Customs & Practice for Documentary Credit (UCPDC) issued by International Chamber of Commerce is another Guideline for Import. All AD Branches shall have to comply the instructions of Head Office and principle of Islamic Shariah for importation of goods into Bangladesh. a. Sources of finance and items permissible for import against: i. Cash foreign exchange; ii. Foreign aids/Credits/grants/barter and under 2. Definition of Import: Import may be defined as bringing of visible item to the country from abroad through letter of credit or the Authorization form (LCAF) paying foreign Currency to that of exporting country. 3. Classification of Importers: a. Personal Importer (User): - They need no registration from CCI & E. For import up to USD 5000/- needs no permission. For above USD 5000/- permission has to be taken from CCI & E. b. Commercial Importer: - Those who import the goods to sell-out the same to the market for earning profit is called commercial importer. c. Industrial Importer: - Those who Import the goods for their Industrial Consumption is called Industrial Importer. 3. Registration of Importer: In terms of the Importers, Exporters and Indenter (Registration order 1981) no person can import goods into Bangladesh unless registered with the CCI & E or exempted from the provision of the said order. Personal user needs no registration. They may import beyond USD 5000/- with the permission from CCI & E.

21

Persons Exempted from Registration: a) Government Departments. b) Local Authorities and Statutory bodies. c) Recognized Educational Institutions. d) Hospitals. e) Imports of goods, which does not involve remittance of foreign exchange. f) Reading materials or medicine imported for personal use within permissible limit given in the policy in force. g. Capital machineries & spare parts for new industry. The interested persons/institutions submit application to the CCI & E along-with the following papers for registration as Importer. i. Nationality Certificate ii. Certificates from the Chamber of Commerce & Industry/Registered Trade Association iii. Bank Solvency Certificate iv. Trade License v. Income tax paid certificate vi. Any other documents required by CCI & E 4. Import Formalities & Procedures: Letter of credit: Credit means any arrangement, however named or described, that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honour a complying presentation. Import may be done without Letter of Credit (L/C) against LCAF up to a certain amount, fixed by the CCI & E from time to time. But in general import must be done through L/C to be issued by an AD Bank.

a) The AD branches should open L/C only on behalf of their own customers who maintain A/Cs with them and are known to be participating in Trade.

22

b) It is not permissible to open L/C for imports in favour of a beneficiary in countries from where imports are banned. c) L/Cs covering imports against valid LCA form are required to be opened within the period prescribed by the CCI & E in the Import Policy order or through Public Notice issued from time to time. d) Under the existing instructions issued by Board of Investment (BOI), L/Cs for import of merchandise by the Investors are required to be opened within Six months from the date of receipt of permission letter issued by the Director General, BOI (Industries), Govt. of Bangladesh. 5. Letter of Credit & its Classification: A Letter of Credit is a conditional undertaking of payment by the issuing bank to the beneficiary. In consideration of source of payment there are mainly two types of L/C, Sight L/C and usance or deferred L/C. If a third bank adds their undertaking for payment in addition to the undertaking of issuing bank then the L/C is called Add Confirmed L/C. Types of L/Cs are: i) ii) iii) iv) v) Irrevocable Revocable Confirmed Transferable Back to Back

6. Concern partys to an L/C i) ii) iii) iv) Importer / Applicant / Buyer Exporter / Beneficiary / Supplier Issuing Bank / Opening Bank Advising Bank / Notifying Bank 23

v) vi) vii)

Negotiating Bank Reimbursement Bank Confirming Bank

7. Application for Import: a) A valid importer will submit the following paper/documents to his bank for opening L/C. i) ii) iii) iv) v) vi) vii) viii) ix) x) xi) xii) xiii) xiv) xv) xvi) i) ii) iii) iv) v) vi) L/C Application form duly signed by the importer; with adhesive Stamp for Tk. 150/Indent / proforma invoice Insurance cover note with money receipt LCAF duly filled in & Signed by the importer Membership Certificate from Chamber of Commerce/Trade Association TIN Certificate and up to date Tax payment declaration Charge documents, including Musharaka / Murabaha agreement IMP IRC VAT Certificate Trade license Memorandum & Articles of Association Partnership Deed Resolution of the Board Photograph Others, if any. Checking of L/C application and verification of the signature of the importer. Checking of IMP Form and verification of signature of the Importer. Checking of the renewal of IRC and its permissible limit. Goods must be importable and permissible by the import policy against Proforma Invoice/Indent. Proforma Invoice/Indent must be accepted by the Importer. In case of Indent, Bangladesh Bank permission for indenting should be obtained. 24

b) The following issues are to be checked carefully:

vii) viii) ix) x) xi)

Proper H.S.Code No. should be incorporated in LCAF. Insurance Policy should cover all the required clauses and premium paid certificate/money receipt should be submitted along with the policy. Business experience of the Importer should be counted. Price and market demand of the goods must be verified. Credit report of the supplier should be obtained prior to opening L/C for Indent Tk.5.00 lac & above and for Proforma Invoice Tk.2.00 lac and above.

c) Authentication/Registration of LCAF: When the importer submits LCAF (Letter of Credit Authorisation Form) with other papers to the bank to open L/C, Bank will Authenticate the LCAF, confirming the following:i) IRC is valid, renewal fee paid (if required) ii) Item to be imported is eligible as per import policy/Pass Book. iii) LCAF is duly filled in & signed by the importer. iv) H.S. Code to be inserted into LCAF The LCA forms are required to be properly filled in and duly signed by the importer in presence of concerned official of the branch. The branch is required to keep proper records of the stocks and issuance of each set of LCA form. LCAFs remain valid for remittance for 09 (Nine) months in case of commercial items and 17 (Seventeen) months in case of capital machineries & spares. d) Distribution of LCAF: Original Duplicate Triplicate Quadruplicate Quintuplicate Last copy Exchange Control copy Custom purpose copy CCI & Es office Statistical copy Registration Unit of Bangladesh Bank Office copy of the Bank

e) Sanctioning for opening L/C: Upon receipt of the application dealing officer will issue office note stating the following: 25

a. Whether the client has valid Head Office Sanctioned limit b. Whether the proposal is within the limit or within the power of Branch incumbent c. The item to be imported is permissible d. Whether credit report of the supplier obtained if the value of the credit exceeds Tk. 200,000/- against proforma invoices issued directly by foreign suppliers and Tk. 500,000/- against indents issued by the local agents of the suppliers. e. Market Report of the goods to be obtained. f. Permission from Ministry of Commerce in case of CIF value. g. Competitive price of goods to be taken. h. The indent bears the IRC number & registration number of Indenter. i. The indent bears the signature of Agent & Importer. If the bank satisfies then it will issue a letter of credit on behalf of the importer, to the beneficiary, through an Agent/Correspondent bank in suppliers country. L/C may be sent by Airmail duly signed by Authorised officials or by Telex authenticated by test number or SWIFT. The following necessary clauses should be incorporated in the L/C at the time of issuance of L/C: i) ii) iii) iv) v) vi) vii) viii) ix) x) xi) Name & address of the applicant & Beneficiary. TIN of applicant. Tenor (sight/deferred) Shipment date. Validity of the L/C with place of expiry ( presentation /Negotiation period) Negotiation (restricted/freely). Amount of L/C in word & figure. Reimbursement/Payment clause. Description of goods with quantity & unit price must be quoted in the L/C. Bill of Lading /AWB/TR must be consigned to the order of L/C issuing Bank. Insurance clause.

26

xii) xiii) xiv)

PSI clause should be incorporated in the L/C for Taxable items and as per Import Policy/SRO. Proper Income term should be incorporated in the L/C. Requirement of the Invoice, Packing list, CO, and other Necessary papers/documents/certificate as per import policy/customers requirement should be incorporated in the L/C.

xv) xvi) xvii)

Charges on account of beneficiary/applicant should be mentioned. Without/with confirmation of ad confirming bank. The L/C should be advised /Transmitted through the Correspondent bank of the L/C issuing Bank or to beneficiarys bank subject to UCPDC-600 ICC Publication-2007.

f) Issuing Bank will pass the following voucher at the time of opening Cash L/C: a) Passing of Contra Liability Voucher: Dr. Customers liability for L/C (Cash) (Foreign/Local) Cr Bankers Liability for L/C (Cash) (Foreign/Local) b) Realisation of Margin & Charges Dr. Partys A/C Cr. Sundry Deposit A/C Margin on L/C (Cash) Cr. Income A/C Commission on L/C (Cash) Cr. Income A/C SWIFT/Telex/Courier Service etc. Tk. Cr. Others, Stamp if any Tk. g) Receiving, scrutiny, Lodgment & Retirement of import document: Advising Bank will advise the L/C to the beneficiary. Then beneficiary will export the goods and submit the Export documents to the negotiating Bank. Negotiating Bank then will send the Export document to the issuing Bank. Upon receipt of Import documents issuing Bank will scrutinize import documents with reasonable care to ascertain whether or not they appear on their face to be in compliance in terms and conditions of the L/C & inform to the importer to release the documents if it is OK. Tk. Tk. Tk. Tk. Tk.

27

In case of discrepant documents, discrepancy notice must be intimated to the negotiating bank within stipulated time (5 banking days) and as well as to the importer for waiver of the discrepancy. Bank will hold the documents at negotiating banks risk asking their disposal instruction mentioning UCPDC article reference. In case of clean documents or after acceptance/waiver of the discrepancy by the importer, documents should be lodged and for of issuance bill maturity date to be conveyed to the Negotiating Bank .The payment should be made on due time to the negotiating bank as per their instruction by debiting PAD/MBE and PAD/MBE to be adjusted within stipulated time by debiting importers CD A/C or LIM(MPI) A/C or TR A/C g) Detailed scrutiny of document: The AD Branch will carefully look into the following main points of each of the documents keeping in view the terms of L/C and it is observed that the following are the common discrepancies of the documents: General: i) ii) iii) iv) v) vi) i) ii) iii) iv) v) i) ii) iii) iv) Late shipment effected. Late presentation of documents. Shipment made prior to issuance of L/C or time stipulated in the L/C. L/C expired. L/C over drawn. Partial or transshipment effected in the contrary to the L/C terms. Not Properly drawn and signed by the beneficiary as per L/C term Amount of bill of exchange differs with that of Invoice. The amount drawn does exceed the amount available under the credit. Not drawn on L/C issuing Bank Tenor of bill of exchange not identical with L/C. Not issued by the beneficiary. Not signed by the beneficiary. Not made out in the name of the applicant. Description of goods, price, and quantity not correspond with the L/C. 28

Bill of Exchange:

Invoice:

v) vi)

Required number of invoice is not submitted the relevant LCA form number, IRC number of importer along-with the Registration number of Indenter with Bangladesh Bank, are correctly incorporated in the invoice.

Packing List: i) ii) iii) i) ii) iii) iv) v) vi) vii) viii) ix) Gross wt.,Net wt & measurement, number of cartons/packages differ with those of B/L. Not marked Original. Not signed by the beneficiary. Full set of B/L not submitted. B/L not drawn or endorsed to the order of issuing bank/Negotiating bank. Shipped on Board, Freight Prepaid, etc notifications are not marked. Name and address of the notify party not mentioned. B/L does not indicate the name of carrier or master or on whose behalf the agent is signing the B/L. Short Form, Charter party B/L. Description of goods in B/L does not agree with that of invoice. Loaded on deck. The bill of lading is stale..

Bill of Lading/AWB:

Other Documents: i) ii) iii) iv) Weight list Certificate of Origin. Pre-shipment inspection certificate Certificate to the effect that shipment/Transshipment has not been made on the port of a country expressly prohibited in the L/C.

29

Opening of BB L/C & Acceptance of import documents Submission & Negotiation of Export Documents EXPORT & BBL/C 1. Introduction: There is an un-favourable Trade Balance in our economy due to higher import & lower export. To overcome the situation government has taken various steps to promote the export. In handling export business we must follow the Export Trade Control regulation and Export policy issued by Ministry of Commerce from time to time. Uniform Customs & Practice for Documentary Credit (UCPDC) issued by International Chamber of Commerce is another Guideline for Import. All AD Branches shall have to comply the instructions of Head Office and principle of Islamic Shariah for importation of goods into Bangladesh. 2. Definition of Export: As a banker we may define export as sending of visible and invisible things outside the country for sale through letter of credit or against firm contract in exchange of Foreign Exchange. 3. Types of Export: Export must be done as under: a. Export against L/C or firm contract b. Export against advance payment c. Export under consignment basis The exporter must obtain Export Registration Certificate (ERC) from the CCI & E except the following institutions: i. Government Departments;

30

ii. Recognized educational institutions; iii. Hospitals; iv. Statutory bodies or local authorities.

4. Opening of BBL/C: a) A valid importer will submit the following paper/documents to his bank for opening L/C. i) L/C Application form duly signed by the importer; with adhesive Stamp for Tk. 150/ii) Indent / proforma invoice iii) Insurance cover note with money receipt iv) LCAF duly filled in & Signed by the importer v) TIN Certificate and up to date Tax payment declaration vi) Charge documents, including Musharaka / Murabaha agreement vii) Membership Certificate of BGMEA/BKMEA/BTMA /related others viii) IMP ix) IRC x) Trade license xi) CIB xii) BOI Registration xiii) ERC xiv) EPB enrolment xv) Bond License xvi) Balance sheet xvii) License from Inspectorate of factories xviii)Fire License xix) Factory Insurance (Fire Insurance with Bank Clause) xx) Disclaimer Agreement (Incase of Rented House) xxi) List of Machinery xxii) Memorandum & Articles of Association xxiii)Partnership Deed

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xxiv) Resolution of the Board xxv) Photograph xxvi) Export L/C xxvii) NOC from previous Bankers and others, if any.

b) The following issues are to be checked carefully: xii) xiii) xiv) xv) xvi) xvii) xix) xx) xxi) xxii) Checking of L/C application and verification of the signature of the importer. Checking of IMP Form and verification of signature of the Importer. Checking of the renewal of IRC and its permissible limit. Goods must be importable and permissible by the import policy against Proforma Invoice/Indent. Proforma Invoice/Indent must be accepted by the Importer. In case of Indent, Bangladesh Bank permission for indenting should be obtained. Insurance Policy should cover all the required clauses and premium paid certificate/money receipt should be submitted along with the policy. Business experience of the Importer should be counted. Price and market demand of the goods must be verified. Credit report of the supplier should be obtained prior to opening L/C for Indent Tk.5.00 lac & above and for Proforma Invoice Tk.2.00 lac and above. c) Upon receipt of an Export L/C from the exporter the Bankers should check the following before permission of execution of export order or to open BBL/C xxiii) Status of the issuing Bank of the Export L/C. xxiv) L/C must be subject to UCPDC-600, ICC Publication-2007. xxv) Whether the L/C is advised, authenticated properly. presentation period and validity of the export L/C with place of expiry. xxvii) Reimbursement/Payment clause. xxviii) Amount of L/C in word & figure. xxvi) Tenor (sight/deferred),shipment date, Negotiation(restricted/freely),

xviii) Proper H.S.Code No. should be incorporated in LCAF.

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xxix) Description of goods with quantity & unit price must be quoted in the L/C. xxx) Bill of Lading must be consigned to the order of Negotiating Bank in Bangladesh and AWB consigned to the L/C issuing Bank. xxxi) Insurance clause must be in L/C. xxxii) Incoterm. xxxiii) Foreign commission ,if any within 5% xxxiv) Export L/C should have validity period adequate to cover the time needed for importation of raw material. xxxv) BB L/C must not exceed the admissible percentage of net FOB value of the relative Export L/c (Net FOB=Total L/C value-freight charge-insurance costforeign commission). xxxvi) BBL/C shall be opened on up to 180 days deferred basis and interest shall not exceed LIBOR or equivalent to the rate of the currency of the country. xxxvii) No BBL/C will be opened under Proceeds Realization Clause without prior approval from Bangladesh Bank. xxxviii) No BBL/C will be opened against Export L/c received under Barter/STA without prior approval from Bangladesh Bank. xxxix) Other clause & condition of the L/C whether can be complied or not as per rule of the state of the country. If the bank satisfies then it will issue a letter of credit on behalf of the importer, to the beneficiary, through an Agent/Correspondent bank in suppliers country. L/C may be sent by Airmail duly signed by Authorised officials or by Telex authenticated by test number or SWIFT. d. The following necessary clauses should be incorporated in the L/c at the time of issuance of L/C: i) ii) iii) Name & address of the applicant & Beneficiary Tenor (sight/deferred), Shipment date

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iv) v) vi) vii) viii) ix) x) xi) xii) xiii)

Validity of the L/C with place of expiry ( presentation /Negotiation period) Negotiation(restricted/freely), Amount of L/C in word & figure. Reimbursement/Payment clause. Description of goods with quantity & unit price must be quoted in the L/C. Bill of Lading /AWB/TR must be consigned to the order of L/C issuing Bank. Insurance clause. A clause containing The L/C is issued under bonded warehouse license system should be incorporated in the L/C. Proper Incoterm should be incorporated in the L/C. Requirement of the Invoice, Packing list, CO, and other Necessary papers/documents/certificate as per import policy/customers requirement should be incorporated in the L/C.

xiv) xv) xvi)

Charges on account of beneficiary/applicant should be mentioned. Without/with confirmation of ad confirming bank. The L/C should be advised /Transmitted through the Correspondent bank of the L/C issuing Bank or to beneficiarys bank subject to UCPDC-600 ICC Publication-2007.

e. Issuing Bank will pass the following voucher at the time of opening BBL/C: a) Passing of Contra Liability Voucher: Dr. Customers liability for L/C (Cash) (Foreign/Local) Cr. Bankers Liability for L/C (Cash) (Foreign/Local) b) Realisation of Margin & Charges Dr. Partys A/C Cr. Sundry Deposit A/C Margin on L/C (Cash) Cr. Income A/C Commission on L/C (Cash) Cr. Income A/C SWIFT/Telex/Courier Service etc. Tk. Tk. Tk. Tk. Tk Tk

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Cr. Others, Stamp if any Tk.

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f) Receiving, scrutiny, Lodgment & Retirement of import document: Advising Bank will advise the L/C to the beneficiary. Then beneficiary will export the goods and submit the Export documents to the negotiating Bank. Negotiating Bank then will send the Export document to the issuing Bank. Upon receipt of Import documents issuing Bank will scrutinize import documents with reasonable care to ascertain whether or not they appear on their face to be in compliance in terms and conditions of the L/C & inform to the importer to release the documents if it is OK. In case of discrepant documents, discrepancy notice must be intimated to the negotiating bank within stipulated time (5 banking days) and as well as to the importer for waiver of the discrepancy. Bank will hold the documents at negotiating banks risk asking their disposal instruction mentioning UCPDC article reference. In case of clean documents or after acceptance/waiver of the discrepancy by the importer, documents should be lodged and for of issuance bill maturity date to be conveyed to the Negotiating Bank .The payment should be made on due time to the negotiating bank as per their instruction by debiting FC held A/C (Export proceeds) or by debiting Forced Loan A/C 5. General Formalities of Export: i. No person can export any goods from Bangladesh unless he is duly registered as an exporter with the CCI & E. ii. All export must be declared on the EXP form which consists of 4(four) copies, except in the following cases such as: a. Bona fide trade samples up to the value prescribed in the Export Policy in force. b. Personal effects, whether accompanied or unaccompanied of travelers. c. Gift packets valued less than Tk.50/-

a. Advising of Export L/C: The bank may issue a credit through SWIFT or by airmail. Upon receipt of an Export L/C the banker should advise the same to the beneficiary or Beneficiarys bank on satisfaction of the apparent authenticity of the export L/C.

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An Exporter can receive an Export L/C from any bank and submit the same to the Negotiating Bank b. Issuance of EXP: Full particulars of the EXP form should be entered in the Export Register Bank will certify EXP form only after confirming:i) Arrangements made for realization of Export proceeds. ii) Bona fides of the importer/consignees abroad. iii) Arrangements have been made for receipt by Authorised Dealers of documents of title to goods. iv)The EXP have been signed by the exporter

c. Distribution of EXP form:

Original: Duplicate: Triplicate:

From custom Authority to Bangladesh Bank (FEPD) after shipment of the goods. From Negotiating Bank to Bangladesh Bank after negotiation along-with one copy of invoice within 14 days from the date of shipment. From Negotiation Bank to Bangladesh Bank after realization of the proceeds of the export bill (with monthly return supported by schedule A).

Quadruplicate:

Retained by the negotiating Bank as an office copy.

d. Negotiation/Collection of Documents After shipment of the goods the exporter shall submit export documents to Authorized Dealer for negotiation of the same or to send the same on collection basis. There is a time gap between export of the goods and realization of the proceeds. So exporter may require finance in that period to continue his business. Confirming the following, bank may purchase/negotiate the export documents.

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1.

Export documents comply the credit terms.

2. Buyer is bonafide. 3. Partys past performance is satisfactory. 4. Any other security in case of export under contract e. Scrutiny of Export Documents: The AD Branch will carefully look into the following main points of each of the documents keeping in view the terms of L/C and it is observed that the following are the common discrepancies of the documents: General: vii) viii) ix) x) xi) xii) vi) vii) viii) ix) x) Late shipment effected. Late presentation of documents. Shipment made prior to issuance of L/C or time stipulated in the L/C. L/C expired. L/C over drawn. Partial or transshipment effected in the contrary to the L/C terms. Not Properly drawn and signed by the beneficiary as per L/C term Amount of bill of exchange differs with that of Invoice. The amount drawn does exceed the amount available under the credit. Not drawn on L/C issuing Bank Tenor of bill of exchange not identical with L/C.

Bill of Exchange:

Invoice: vii) viii) ix) x) xi) xii) Not issued by the beneficiary. Not signed by the beneficiary. Not made out in the name of the applicant. Description of goods, price, and quantity not correspond with the L/C. Required number of invoice is not submitted the relevant LCA form number, IRC number of importer along-with the Registration number of Indenter with Bangladesh Bank, are correctly incorporated in the invoice. 38

Packing List: v) vi) vii) x) xi) xii) xiii) xiv) xv) xvi) xvii) Gross wt ,Net wt & measurement, number of cartons/packages differ with those of B/L. Not marked Original. Not signed by the beneficiary. Full set of B/L not submitted. B/L not drawn or endorsed to the order of issuing bank/Negotiating bank. Shipped on Board, Freight Prepaid, etc notifications are not marked. Name and address of the notify party not mentioned. B/L does not indicate the name of carrier or master or on whose behalf the agent is signing the B/L. Short Form, Charter party B/L. Description of goods in B/L does not agree with that of invoice. Loaded on deck.

Bill of Lading/AWB:

xviii) The bill of lading is stale.. Other Documents: i) ii) iii) viii) Weight list Certificate of Origin. Pre-shipment inspection certificate Certificate to the effect that shipment/Transshipment has not been made on the port of a country Expressly prohibited in the L/C. 1) Payment is given to the customer on either by collection basis or by purchasing the documents.

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Chapter Four
Remittance

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4.1 OUTWARD REMITTANCES

Most outward remittance is approved by the Ads, on behalf of the Bangladesh Bank following declaration of Taka as convertible for current account payments from March, 1997. Only a few remittances of special nature require Bangladesh Banks prior approval. All remittances from Bangladesh to a foreign country or local currency credited to on resident Taka accounts of foreign banks or convertible Taka account constitutes out ward remittances of foreign exchange. ADs must exercise greatest caution to ensure that foreign currencies remitted or released by them are used only for the purpose for which they are released; they should also maintain proper records for submission of returns to Bangladesh Bank as also for the letters inspection from time to time. It is most important that, once forms have been approved by or on behalf of the Bangladesh Bank, the ADs carry out the transactions only on behalf of the original applications for which the forms were approved. Permits issued (where applicable) by the Bangladesh Bank must be utilized within the period of its validity indicated in the permits. The amount released must not exceed the Authorized limit. Also, the instructions, if any given in the permits with regard to the amounts to be released periodically e.g. monthly or quarterly must be strictly adhered.

4.2 Inward remittance

The term inward remittance includes not only remittances by T.T, draft, etc. but also purchase of bills, purchase of Travelers cheque. Inward remittance covers purchase of foreign currency sent from abroad favouring a beneficiary bank in Bangladesh. Remittance receives against export should be certified and reported on EXP forms. In case of remittance received in advance for exports the AD should obtain a signed declaration from the beneficiary on the back of the Advance Receipt Voucher certifying the purpose of remittance.

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Chapter Five
S W O T Analysis of SOCIAL ISLAMI Bank Ltd

5.1 S W O T Analysis of SOCIAL ISLAMI Bank Ltd.

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SWOT analysis is the detailed study of an organizations exposure and potential analysis is the detailed study of an organizations exposure and potential in perspective of its strength, weakness, opportunities and threats. This facilitates the organization to make their existing line of performance and also foresee the future to improve their performance in competition to their competitors.

5.2 Strength
SOCIAL ISLAMI bank ltd has already established a favorable reputation in the banking industry of the country. The bank has already shown a tremendous growth in the profit and deposits sector. SOCIAL ISLAMI bank ltd has provided its banking service with a top leadership and management position. The board of directors headed by its chairman Mr. Md. Nazrul Islam is a skilled person in the business world. Alamgir Kabir, the advisor of the bank is a reputed senior chartered accountant 30 years vast experience in accounts, audits, finance and banking at home & abroad. Mr. Md. Lakiotullah work as the managing director of bank management team. SOCIAL ISLAMI bank has already achieved a high growth rate accompanied by an impressive profit growth rate in 2001. The number of deposits and the loans and advances are also increasing rapidly. SOCIAL ISLAMI bank has an interactive corporate culture. The working environment is very friendly, interactive and informal. And there are no hidden barriers or boundaries while, communicate between the superior and the employees. This corporate culture provided as a great motivation factor among the employees.

5.3 Weakness
The important weakness is that the bank has no clear mission statement and strategic plan. The bank actually not has any long term strategies whether it wants to focus on retail banking or become a corporate bank. The path of the future should be determined with a strong feasible strategic plan.

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The bank failed to provide a strong quality-recruitment in the lower and some mid level position. As a result the services of the bank seem to be dues in the present days. The poor service quality has become a major problem for the bank. The quality of the service at SOCIAL ISLAMI bank is higher than the NCC bank, Prime bank or Dutch Bangla bank etc. But the bank has to compete with the Multinational Bank located here.

5.4 Opportunity
In order to reduce the business risk, SOCIAL ISLAMI bank has to expand their business portfolio. The management can consider options of starting merchant banking or diversify into leasing and insurance sector. Opportunity in the retail banking lies in the fact that the countrys increased population is gradually learning to adopt consumer finance. The bulk of our population is middle class. Different types of retail lending products have great appeal to this class. So a wide variety of retail lending products has a very large and easily pregnable market. A large of number of private banks are coming into the market in the recent time. In this competitive market SOCIAL ISLAMI bank must expand its product line to enhance its sustainable competitive advantage. In the product line, they can introduce the ATM to compete with the local and the foreign bank. They can introduce Credit card and Debit card system for their potential customer. In addition to these things, SOCIAL ISLAMI bank can introduce special corporate scheme for the corporate customer or officer who have an income level higher from the service holder. At the same time, they can introduce scheme or loan for various service holders. And the scheme should be separate according to the professions, such as engineers, lawyers, doctors etc.

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5.5

Threats

All sustain multinational banks and upcoming foreign, private banks posses enormous threats to SOCIAL ISLAMI bank ltd. If that happens the intensity of competition will rise further and banks will have to develop strategies to compete against at on slough of foreign banks. The default risks of all terms of loan have to be minimizing in order to sustain in the financial market. Because of defaulter risk leads the organization towards to bankruptcy. SOCIAL ISLAMI bank has to remain vigilant about this problem so that proactive strategies are taken to minimize this problem if not elimination. The low compensation packages of the employees from the mid level to lower level to position threats the employee motivation. As a result good quality employees leave the organization as a whole.

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Chapter Six
Findings and Recommendations of SOCIAL ISLAMI Bank ltd.

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Conclusion
The success of the Bank Depends on the Utilization of its fund. For this reason Bank should select customer very carefully. Bank does not consider the highest rate of interest in the time of sanction loan only. SOCIAL ISLAMI Bank considers about the repayment by the customers as a result bad debt for loan and advances of SOCIAL ISLAMI Bank is very few compare to others. Recovery of loan and advances of the SOCIAL ISLAMI Bank is good. During the three months Practical orientation program at Principal Branch, almost all the desks have been observed more or less. This practical orientation program, in first, has been arranged for gaining knowledge of practical banking and to compare this practical knowledge with theoretical knowledge. Comparing practical knowledge with theoretical involves identification of weakness identified. Though all departments and sections are covered in the internship program, it is not possible to go to the depth of each activities of branch because of time limitation. However, highest effort has been given to achieve the objectives the internship program. In the conclusion, I want to give thinks to the SOCIAL ISLAMI Bank Head office authority, especially Md. Aktaruzzaman vice president of the Human Resources Division. I give special thanks to all the officials of SOCIAL ISLAMI Bank Pricipal Branch who helped me a lot amount my practical exposure in the Bank. I want to express my deepest respect and thanks to my Guide teacher, Kamrul Hassan Senior Lecturer who guided me with his kind help in completing my internship program in SOCIAL ISLAMI BANK.

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 BIBLIOGRAPHY & REFERENCES

Annual Report of SOCIAL ISLAMI Bank Limited Different type of brochures of SOCIAL ISLAMI Bank. Articles of SOCIAL ISLAMI Bank. Prospectus of SOCIAL ISLAMI Bank Several Newsletters From SOCIAL ISLAMI Bank. Bangladesh bank exchange control manual, Dhaka Web site (www.Social Islami -bd.com). Web site (www.google.com). Web site (www.Social Islami bankbd.com). Principles of Marketing (Millennium Editor) Philip Kottler.

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 ACRONYMS
A/C B/L BB BIC BR C&F CC CFR CRF DD EDF EPB EPZ ERC EXP FC FDD FDR FOB IBCT IMP IRC L/C LCAF LIM LTR Account Bill of Lading Bangladesh Bank Bank Identifier Code Branch Clearing & Forwarding Cash Credit Cost & Freight Clean Report Findings Demand Draft Export Development Fund Export Promotion Bureau Export Processing Zone Export Registration Certificate Export Form Foreign Currency Foreign Demand Draft Fixed Deposit Receipt Free On Board Inter Branch Credit Transaction Import Form Import Registration Certificate Letter of Credit Letter of Credit Authorization Form Loan against Imported Merchandise Loan against Trust Receipt 49

CCI & E Chief Controller of Import & Export

 OBC PAD PO PSI STD SOD SWIFT TC TIN TR

Outward bills for collection Payment against Document Payment Order Pre Shipment Inspection Short Term Deposit Secured Overdraft Society for Worldwide Inter Bank Financial Telecommunication Travelers Cheque Trade Identification Number

Trust Receipt
Documentary Credit

UCPDC Uniform Custom & Practice for

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