Chapter-1

INTRODUCTION
2
Introduction
1.1 Background of the study :
Knowledge and learning become perfect when it is associated with theory and practice.
Theoretical knowledge gets perfection with practical application.It establishes contacts and
networking contracts.Contracts may help to get a job .Recognizing the importance of
practical application of theory school of management and b!siness administration of Kh!lna
!ni"ersity has introd!ced a three months practical e#pos!re as a mandatory re$!irement of
the c!rric!l!m of %achelor of %!siness &dministration program.In s!ch a state of affairs the
present aiming at analyzing the e#perience of practical orientation related to foreign
e#change performance in the 'irst (ec!rity %ank )td*ilk!sha %ranch *haka.
1.2 Back ground of the First Security Bank Ltd.
The bank was incorporated on 2+ &!g!st ,+++ !nder the company-s act ,++. with the object
of pro"iding all kinds of commercial banking ser"ices to the c!stomers and obtained the
certificate of commencement of %!siness from the Register of /oint stock companies.
%angladesh with effect from the same date. 0owe"er it recei"ed permission from
%angladesh %ank to establish the bank on 22 (eptember ,+++ "ides %R1* 213 4..24536++7
2+5, and it went into operation from 28 9ctober ,+++ effecti"ely. Till to 5, *ecember 2::,
the bank has eight branches at *ilk!sha ;ohakhali %angshal and *hanmondi at *haka
and &grabad Khat!ngong and /!bileRoad at Chittagong and %iswanath at (ylhet
1.3 Corporate Information of First Security Bank
Ltd. Registered 0ead 9ffice
'irst (ec!rity %ank )td.
25 *ilk!sha Commercial
&reas *haka %angladesh
Tel: +8<:22++8<.455+84:+4++84:22.
'a#: ==:727+8<,+54
Tele#: <.2855 '(%*) %/
>7mail: fsbl ? bd. com.com
*ate of incorporation 2+th &!g!st ,+++
*ate of commencement of %!siness 2+
th
&!g!st ,+++
*ate of opening of first branch 25 *ilk!sha C6& area *haka 28th
9ctober ,+++ 1aid !p capital tk 2::::::::
&!thorized capital tk,:: :::::::
5
Board of directors of First security Bank Ltd.
Chairperson Alternate irector
;r.;d.0ar!n!r Rashid (iddi$!i
;s.@asim (ikder ;r.&b! 0ena ;ostafa Kamal
Aice Chairperson ;r.;d *idar!l &lam
;s.(arwer /ahan ;ale$!e ;s.Rokeya %eg!m
irectors
;s.B!rrat!l &nn (iddi$!i
!r.!ahmudul "a#ue$%ick&
Alternate irector
!anaging irector
;r.(yed &sraf &li
;r.&.K.; >nam!l 0a$!e Sponsor Shareholders
;s.'atema 0$!e2)isa3 ;r.;ohtasim %illah Khan
;r.&.K.; >nam!l 0a$!e
;s.;onowara (ikder
Alternate irector
;rCahid!l 0a$!e2@ick3 Ad'isor
;r.;ahb!b!l0a$!e (ikder ;r.R.& 0owlader
;r.(ala!ddin Khan
Board and Company Secretary ;r.;.& Rasid
;r.;oyn!l 0a$!e (iddi$!i ;r.;ohammed 0!may!n Kbir
;s.Israt /ahan
;r.;d.&bd!llah 0asan
;r.;d.9sman Dani
;s.(harmin 'atema
&lhaj; ;ortoza (iddi$!i
.
1.( First Security Bank) ilkusha Branch) haka*
Keeping the "ision in mind of pro"iding highest standard of ser"ices to its honorable
clientit was the initiation of 'irst (ec!rity %ank )td.&fter getting the commencement of
b!siness at 2+
T0
&!g!st ,+++ it started its operation thro!gh the opening of first branch
25 *ilk!sha C6& *haka &T28T0 9ctober,+++.Conse$!ently *ilk!sha %ranch is the
corporate branch of 'irst (ec!rity %ank )td.The general manager of this branch is
;d.'eroz 0oshen.Thro!gh this branch the bank has earned confidence of its c!stomers
beca!se of competent managementaggressi"e marketing and o"erall of its o!tstanding
$!ality of c!stomer ser"ices.The officials of this branch maintain a good relationship with
their c!stomers.9n the de"elopment of this corporate branch now the 'irst (ec!rity
%ank is consist of ,: branch at ,: commercial ind!strial area in %angladesh.
1.+ ,-.ecti'e of the study*
The prime objecti"e of this st!dy on foreign e#change is to meas!re the foreign
e#change performance of the concerned organization. To achie"e this prime
objecti"e there are some other objecti"es which are en!merated below: 7
(1)To describe the total proced!re of importing prod!cts from foreign co!ntries to the
home co!ntry.
(2) To describe the total proced!re of e#porting prod!cts from home co!ntry to the
foreign co!ntries.
(3) To analyze the foreign e#change performance of 'irst (ec!rity %ank )td.
*ilk!sha %ranch *haka.
1./ Scope of the report*
The scope of the organizational part co"ers the organizational str!ct!re back gro!nd
objecti"es f!nction and departmentation and b!siness performance of 'irst sec!rity
bank as a whole. This refers that how the bank help the c!stomers in e#porting and
importing the goods how it remits the money of the foreign clients what are its
performances in the last three years etc all are in the project part of the report.
1.0 Limitation of the report*
'oreign e#change f!nction is not a so m!ch easy and small concept. It is somehow diffic!lt
and large concept. (o to learn properly e"ery ins and o!t of foreign e#change f!nctions
within one month is some how impossible. (o for this shortage time it wo!ld not eno!gh for
me to learn e"erything properly of foreign e#change acti"es of this branch. ;ore o"er the
officials of the organization remain e#tremely b!sy thro!gh o!t the day .(o inspite of their
keen interest they are not able to g!ide and s!ppressi"e me properly.
1.1 "ypothesis*
>"erything has to analyze or j!dge critically. Eitho!t critical analysis proper s!ccess of any
project or any research anything important is impossible. If something is good then the
$!estion is why it is goodF &nd if bad then why badF Conse$!ently act!al res!lt comes. 'or
getting the act!al position of foreign e#change acti"ities of 'irst (ec!rity %ank )td. *ilk!sha
8
%ranch its hypothesis is selected as G'oreign >#change 1erformance of 'irst
(ec!rity %ank )td *ilk!sha %ranch is good.H
1.2 !ethodology*
The prime objecti"es of the st!dy are to in$!ire how the 'irst sec!rity bank *ilk!sha branch
is operating its foreign e#change acti"ities and to e"al!ate the c!rrent performance of the
bank in foreign e#change section thro!gh analyzing the pre"io!s years performances. These
objecti"es are achie"ed on the basis of papers and doc!ments e"al!ation and personal
obser"ation. In this st!dy both primary and secondary so!rces are !sed.
1rimary so!rces are cons!ltation with rele"ant personnel and secondary so!rces of
data is gathered by going thro!gh "ario!s statements of ann!al reports of that bank.
<
CHAPTER
2
Conceptual
Framework
4
Concept is a primary and theoretical idea abo!t an important aspect which help the
concerned people to !nderstand the practical or act!al things. &s the foreign
e#change f!nction of a bank is not an easy and small task so for the better
!nderstanding a concept!al frame work is described here:7
2.1 efinition of foreign e3change*
In general 'oreign >#change is percei"ed as foreign money. %!t the term foreign e#change
is !sed in a broader sense. It is simply defined as the process of con"ersion of one co!ntry
c!rrency into another co!ntry c!rrency.*r.1a!l >inzig tells thatI 'oreign >#change means a
system or process of con"ersion of one c!rrency into another.H The foreign e#change
reg!lation &ct refers that foreign e#change means foreign c!rrency and incl!des any
instr!ment drawn accepted made or iss!ed !nder cla!se 2,53 of &rticle ,< of the
%angladesh %ank 9rder,+42all deposit credits and balances payable in any foreign
c!rrency and any draft tra"eler-s che$!e letter of credit and bill of e#change e#pressed or
drawn in %angladesh c!rrency b!t payable in any foreign c!rrency.
2.2 Foreign e3change and foreign trade:
(ince the early days of ci"ilization nations of the world are engaged in the b!siness of
trading with each other. &t the same time each nation has de"eloped a c!rrency of his
ownas a meas!re of satisfying nationalistic go or display of so"ereign e#istence.These two
phenomena are precisely the reasons which gi"e rise to dealing in foreign e#change.It deals
with the means and methods by which rights to wealth in one co!ntry-s c!rrency are
con"erted into those of another co!ntry.International trade and mo"ement of money and
capital will contin!e to remain the mainspring of foreign e#change.
2.3 4ole of -ank*
The %anks and financial instit!tions which maintain foreign e#change di"isions are the
channels thro!gh which international payments are made. (!ch banks ha"e branches in
different co!ntries and at e"ery branch they ha"e s!bstantial balance in the c!rrency of
that co!ntry. Ehen a bank has no branch at a partic!lar co!ntry it keeps a balance with
some other bank which act as its agent in e#change dealings. %ank acting as agent of
other banks are called correspondents. Thro!gh their branches and correspondents the
ser"ices of s!ch banks are a"ailable at all important place of the world.
&n indi"id!al who has recei"ed a payment from a resident of another co!ntry by a credit
instr!ment can sell the instr!ment to an e#change dealer. If the instr!ment is in the term of
foreign c!rrency he recei"es from the bank an amo!nt in home c!rrency calc!lated at the
c!rrent rate depending !pon the nat!re of credit instr!ment concerned. (imilarly a debtor
can b!y from a bank dealing in e#change an instr!ment in terms of another c!rrency for
making his payment abroad.The %anks make a profit by keeping a small difference between
their b!ying and selling rates.Th!s as a mechanism banking system pro"ide assistance for
getting c!stomersd!es collected in foreign conte#t and also ass!res that once the d!ces are
collected the proceeds will be passed on to the owner of the f!nds.
=
2.( ocumentary re#uirements of foreign e3change*
$a&Letter of Credit $L5C&*
In foreign e#change the letter of credit is the ,
st
re$!irement thro!gh which a bank performs
all the acti"ities of the foreign e#change on behalf of the importer and promise to pay the
"al!e of the goods to the e#porter. In the international trade the e#porters conf!se to e#port
goods and ser"ices to the !nknown importers. Thro!gh s!ch a letter the bank e#presses
s!ch a promise that it wo!ld pay the "al!e of goods and ser"ices on behalf of the importer.
$-&6roforma In'oice*
1roforma In"oice is a doc!ment pro"iding description of the goods price of the
goods$!antity shepted$!alitymarksn!mber of packagesnat!re of the b!yer)6C
and contract n!mbersgradessizename of the "esselsthe date of shipmentn!mber
of billof lading etc.
$c&Bill of lading*
The bill of lading 2%6)3 is the most important doc!ment in connection with the e#port
of goods..It is a doc!ment of the title to the e#porting co!ntry. The shipping company
iss!es a bill of lading.It is important for the e#porter to ens!re that it is correctly
iss!ed to a"oid delay in connection with the negotiation of doc!ments.
$d&Certificate of ,rigin*
This is a doc!ment certifying the co!ntry of origin of the goods and !s!ally iss!ed by
an appro"ed chamber of commerce. Ehen it is not mentioned in )6C the e#porter
may himself do so.
$e&6re7shipment Inspection Certificate $6SIC&*
1re7(hipment Inspection Certificate is a doc!ment which has to send to the iss!ing
bank before shipment of goods. %efore shipment of goods it is inspected by generally
three a!thorized %locks s!ch as %lock7& %lock7% and %lock7 C.Jnder each block a
certain n!mber of co!ntry is fi#ed for the inspection of that co!ntries goods.
$f&Import 4egistration Certificate $I4C&*
&s per import and e#port &ct ,+8: b!siness concerns engaged in foreign e#change sho!ld
obtain registration certificate from the office of the Chief controller of Import and >#port 2CCI
K >3.The importers ha"e to collect Import Registration Certificate 2IRC3 from the aforesaid
office. The office by stating the )6C limit and renewal fee gi"es the certificate.
+
$g&83port 4egistration Certificate $84C&*
Certificate that gi"es permission the e#porter to e#port goods from abroad. The Chief
Controller of Import and >#port office gi"es this certificate to the e#porter and the
e#porter has to s!bmit it to the iss!ing bank while opening letter of credit.
$h&Bills of 83change $B58&*
The bill of e#change is an instr!ment ha"ing an international recognition and s!pported
by law known as negotiable Instr!ments &ct. The %ill of >#change is drawn either on
demand or at sight basis. In at sight basis the drawee has to make the payment of the
instr!ment on presentation and not later than 2. ho!rs thereafter. This makes the claim
payable immediately. In demand basis the instr!ment is drawn made payable after sight
and in s!ch bill of e#change the n!mber of days is specified after which the payment will
be made by the drawee.Denerally it is specified as +: days,=: days and so on.
2.+ !eans and !ethods of International payment*
International payments are made by means of credit instr!ment of "ario!s kinds. &
credit instr!ment is doc!mentary e"idence of a debt and entitles its holder to recei"e
a specified amo!nt of money on a specified date or after a specified period from an
indi"id!al or instit!tion mentioned in the instr!ment. These types of payment is made
by a che$!ea bank draft or some other credit instr!ment. The instr!ment has no !se
!ntil it is con"erted into real money or a acceptable form of p!rchasing power.
2./ Issuing Bank) Ad'ising Bank) %egotiating Bank and 4eim-ursement
Bank*
In performing foreign e#change acti"ities different banks in different manner. Issuing
-ank is the bank which iss!e or open letter of credit on the application and
necessary doc!ments of the importer for importing goods from abroad.
The Ad'ising -ank is the bank to which the iss!ing bank creates an ad"ice to ad"ice the
beneficiary abo!t the letter of credit. &fter opening the letter of credit the iss!ing bank
transmit it to the ad"ising bank for ad"ising it to the beneficiary. The iss!ing bank transmits
the letter of credit to the beneficiary generally by three methods that are as follows:7
$i&Co!rier6(EI'T 2(ec!rity for Eorldwide International 'inancial
Transmission3 $ii&Tele#
$iii&'a#
%egotiating -ank is the bank thro!gh which the beneficiary performs all of its f!nctions
regarding e#port of goods to the importer. Denerally after getting the letter of credit from the
ad"ising bank on be half of the iss!ing bank the beneficiary makes a negotiation with the
ad"ising bank or other any third bank for e#porting goods to the importer thro!gh the negotiating
and iss!ing bank. If the beneficiary makes the negotiation with the ad"ising bank
,:
then the ad"ising bank is con"erted into negotiation bank. Thro!gh negotiating bank
the beneficiary done all of its acti"ities regarding e#ports of goods and sending
re$!ired doc!ments to the importers thro!gh iss!ing bank.
4eim-ursement -ank is the bank thro!gh which the foreign e#change payment is made
from importer to e#porter in a banking media. It is generally the )6C iss!ing bank branch or
correspondent bank of the )6C iss!ing bank. The iss!ing bank ad"ice the reimb!rsement
bank to make payment to the beneficiary thro!gh the negotiation bank. The iss!ing bank
then adj!sts its acco!nts with reimb!rsement bank-s acco!nt afterward.
2.0 6ayments against ocuments $6A&*
&fter shipment of goods the e#porter sends the re$!ired doc!ments to the iss!ing bank
thro!gh the negotiating bank and claim for the payment. The negotiating bank then makes
the payment to the e#porter and makes claim for payment to the iss!ing bank. The iss!ing
bank then makes the payment to the negotiating bank thro!gh reimb!rsement bank.
2.1 ue date diary*
&gainst master )6C the e#porter has to open a %ack to %ack )6C with the negotiation
bank for ac$!iring raw materialsaccessoriesfabrics etc to make finish prod!ct.
@egotiation bank or e#porter bank has to pay for those back7to7back accessories. 0ere
the bank maintains a date when the back7to7back payment will be made. Denerally it is
fi#ed after some daysL they get payment from the importer. *ate maintained by the
negotiation or e#porter bank for back7to7back payment is called d!e date diary.
2.2 isposal of documents*
*isposal of doc!ments is adj!stment of doc!ments. In foreign e#change acti"ities
different home and foreign banks are in"ol"ed and play different role in recei"ing and
paying payment. 1ayment is then adj!sted with different banks acco!nt with others
bank acco!nt. 'or this three special term is !sed which are as follows:
%ostro:70a"ing one homes bank acco!nt with others foreign bank acco!nt is called
@ostro. 9osto:70a"ing one foreign bank acco!nt with others home bank acco!nt is
called Aosto. Loro:7&dj!stment of @ostro and Aosto bank acco!nt thro!gh a third
bank acco!nt is called )oro.This is occ!rred generally where a specified bank has no
branch in some specified place.
2.1: 4etirement of documents*
&fter the accomplishment of all the foreign e#change acti"ities s!ch as shipment of goods
and payments against goods the re$!ired doc!ments is send to the %angladesh %ank as
the role of the %angladesh %ank and with this the gi"en contract is finished. This process of
the breach of the e#port7import contract is called retirement of doc!ments.
,,
Chapter 3
Operations and
Performance of
Foreign Excange at
First !ecurit" #ank
$td% Dilkusa
#ranc
,2
'oreign e#change b!siness is one of the largest b!sinesses carried o!t by the commercial
banks. The banks play an important role relating to this field. %angladesh %ank strictly
controls foreign trading.Thherefore while performing these tasks banks sho!ld be "ery
m!ch ca!tio!s as m!ch of comple#ities are there. %eca!se any de"iation or mistake will cost
the bank a lot. The 'oreign >#change *epartment of 'irst (ec!rity %ank )td *ilk!sha
%ranch plays a significant role thro!gh pro"iding different ser"ices for the c!stomers.
'oreign e#change department of 'irst (ec!rity %ank )td. *ilk!sha %ranch is consist of two
sectionone is Import section and another is >#port section.Tho!gh Import and >#port
section are complementary to each other there are some specific tasks of each other. The
foreign e#change acti"ities are started in Import section by opening )etter of Credit in this
section. In Import section the bank acts as a iss!ing bank. %!t in e#port section the bank act
as an ad"ising bank or negotiating bank or reimb!rsement bank. 'irst (ec!rity %ank )td
*ilk!sha %ranch performs both Import and >#port acti"ities of foreign e#change. 'oreign
>#change proced!re is a total proced!re and >#port and Import formalities are its
complementary part. The total proced!re of foreign e#change acti"ities of 'irst (ec!rity %ank
)td*ilk!sha %ranch are disc!ssed below:7
3.1 ,pening of Letter of Credit $L5C&*
& letter of credit is an instr!ment iss!ed by a bank on behalf of its c!stomers
a!thorizing an indi"id!al or a firm to draw draft on the bank or on one of its
correspondents for its acco!nt !nder certain conditions stip!lated in the credit. The
parties in"ol"ed in the letter of credit are en!merated below:
; Importer5Buyer5,pener*
The applicant at whose re$!est and on whose behalf the letter of credit is iss!ed.
The bank at the written instr!ment and co!nter !ndertaking iss!es the letter of credit
by the Importers or the %!yers. They remain liable for any payment made by the
iss!ing bank !nder the credit as per arrangement.
;Issuing5,pening -ank*
The bank that open or iss!e the letter of credit in fa"or of the e#porters or his
agents6correspondents and sim!ltaneo!sly g!arantee payment6acceptance of
doc!ments if letter of credit terms are complied with. Ehile opening the letter of
credit the iss!ing bank has to act in accordance with the instr!ction of the applicant
Ehile the iss!ing bank !ndertakes the responsibility of making payment against the
letter of credit it is nat!ral that the importer has to gi"e a separate !ndertaking to his
bank to make payment of the doc!ments to be presented in d!e co!rses.
,5
;Ad'ising -ank*7
& letter of credit !s!ally ad"ised to the beneficiary or the e#porter thro!gh another bank
in the e#porter co!ntry which is called ad"ising bank. It !ndertakes the transmission of
the credit and by also doing implies the a!thenticity of the signat!re of the iss!ing bank.
;%egotiating Bank*7
&d"ising bank may also act as a negotiating bank of the doc!ments presented for
payment. & third bank may also be a negotiating bank on the con"enience of the
seller6b!yer and banker. &fter negotiation the doc!ments presented by the
beneficiary will be sent to the iss!ing bank for the deli"ery to the importer.
;4eim-ursement Bank*7
*!ring opening the letter of credit an instr!ment is incorporated to the negotiating
bank to obtain reimb!rsement of the credit "al!e from the named bank with acco!nt
n!mber after certifying that the doc!ments presented for negotiation has complied
the terms of the credit. The reimb!rsing bank also to be ad"ised separately with a
copy of the letter of credit specific instr!ction to honor reimb!rsement claim.
;Seller583porter5Beneficiary*7
Jnder the re$!est of the opening bank the ad"ising bank ad"ise the letter of credit
to the beneficiary6e#porter6seller. Ehen the beneficiary is in the possession of the
credit his work of f!lfillment of the contract has started. 0e will prod!ce the goods
pack the goods ship the goods as per terms and made o!t the following doc!ments
for presentation to negotiating bank for payment.
$i& %ill of e#change
$ii&%ill of )ading
$iii&In"oice
$i'& 1acking )ist
$'&Certificate of 9rigin
$'i& Certificate of 1re7(hipment
Inspection $'ii&&ny other doc!ments
,.
)etter of credit can be opened against proforma in"oice or Indent.1roforma in"oice
refers Importing directly from foreign co!ntries. Indenting refers Importing by the
agent sit!ating in the importer-s co!ntry. @onetheless the total foreign e#change
proced!re is en!merated below step by step:7
Step 01: Importers Application or !etter o Cre"it #!$C%:-
'or opening a )etter of Credit the Importer has to apply to the Import (ection of the
foreign e#change department. The application m!st be in the own pad of the Importer-s
organization. The Importer has to pro"ide the following information in the application:7
Full name and address of the -eneficiary5e3porter:7
The name and address from whom the importer will b!y the goods to be imported by
the 'irst (ec!rity %ank )td *ilk!sha %ranch.
<ypes of Business:7
This is to certify that the importer is doing a legal b!siness according to the r!les and
reg!lation of the co!ntry.
Amount of limit re#uired:7
>"ery b!siness has a limit of his own to do b!siness. The importer m!st state the
limit of the amo!nt of tk he6she wants to deal in a year in his6her application to the
bank to open a letter of credit.
=oods to -e imported:7
The importer also pro"ides information regarding in which co!ntry the goods be prod!ced.
This is beca!seL there are a few co!ntries from where importing of goods is restricted. 'or
e#ample the go"ernment of %angladesh does not appro"e importing goods from Israel.
!odes of <ransport:7
The importer m!st mention the name of the "ehicle in the letter by which he or she
will import the goods.
,8
Step 02: Scr&tini'in( o the Importers !$C application )* the +irst
Sec&rit* ,an- !t". /il-&sha ,ranch:-
'or opening letter of credit the client has to s!bmit the application prepared by the
aforesaid way to the 'irst (ec!rity %ank )td *ilk!sha %ranch. This )6C application is
also an agreement between the bank and the importer. The 'irst (ec!rity %ank )td
*ilk!sha %ranch detects the followings along with the application:7
Import 4egistration Certificate $I4C&* 7
&s per Import K >#port &ct,+8:b!siness concerns engaged in foreign e#change sho!ld
obtain registration certificate from the office of the Chief Controller of Import K >#port2CCI K
>3.The importer ha"e to collect Import Registration Certificate2IRC3 from the aforesaid office.
The office by stating the )6C limit and renewal fee gi"es the certificate.
6roforma In'oice:7
The foreign e#change department of 'irst (ec!rity %ank )td *ilk!sha %ranch
notices that whether the client is importing goods thro!gh proforma in"oice or
thro!gh indenting. Ehen the importer imports goods directly from foreign co!ntries
he or she imports thro!gh proforma in"oices. &nd when the importer imports by the
agents sit!ated in the home co!ntry he6she imports thro!gh indenting.
9at 4egistration Certificate*7
&long with the )6C application the importer has to s!bmit the "at registration. The
*i"isional office of the c!stom certifies this certificate. There is a distincti"e n!mber
and area code in the certificate.
Certificate of the Cham-er of Commerce*7
Ehile opening the )6C the importer has to s!bmit the certificate of the chamber of commerce
along with the )6C application. The certificate of the chamber of commerce shows that
he6she is a member of the local chamber of commerce which is m!st in foreign e#change.
<a3 Identification $<I%& Certificate:7
The importer has to s!bmit the Ta# Identification Certificate along with the )6C application
while opening )6C in the 'irst (ec!rity %ank )td *ilk!sha %ranch. The TI@ Certificate
pro"ed that the partic!lar importer is doing the b!siness according to the law of the co!ntry.
C Account >ith the -ank*7
The foreign e#change department of 'irst
(ec!rity %ank )td*ilk!sha %ranch
scr!tinize whether the importer has any
C* &cco!nt in the bank or not. To open a
)6C the importer m!st ha"e a minim!m
C* &cco!nt in this bank branch.
,<
Step 03: Proposal to the Hea" oice:-
'or "erifying all the papers certificate and signat!re regarding letter of credit the
'irst (ec!rity %ank )td *ilk!sha %ranch makes and sends a proposal to the head
office along with the re$!ired doc!ments. If the head office then this branch accepts
the proposal open the letter of credit in fa"or of the importer.
Step 00: Transmittin( the letter o cre"it to the A"1isin( )an- )*
the +irst Sec&rit* ,an- !t". /il-&sha ,ranch:-
&fter opening letter of credit in fa"or of the importer the 'irst (ec!rity %ank )td *ilk!sha
%ranch transmits it to the ad"ising bank for ad"ising it to the beneficiary. The main copy is
transmitted b!t a d!plicate one is reser"ed at the *ilk!sha branch for their own record. This
branch generally transmits letter of credit thro!gh three methods which are as follows:7
$i& Co!rier6(EI'T 2(ec!rity for Eorldwide International 'inancial
Transmission3 $ii&Tele#
$iii&'a#
Step 02: 3a-in( 4e(otiation )* the )eneiciar* or importer 5ith a )an-:-
&fter getting letter of credit from the ad"ising bank on behalf of the iss!ing bank the
beneficiary makes a negotiation with the ad"ising bank or other third banks for e#porting
goods to the importer thro!gh negotiation bank and iss!ing bank. If the beneficiary makes
the negotiation with the ad"ising bank then the ad"ising bank is con"erted into negotiation
bank. Thro!gh negotiating bank the beneficiary done all of its acti"ities regarding e#port of
goods and sending re$!ired doc!ments to the importer thro!gh iss!ing bank.
Step 06:-Amen"ment o letter o cre"it in times o nee":-
The amendment of )6C is done based on the agreement between the importer and
e#porter if needed. &ny amendments they want to bring in the letter of credit ha"e to
be informed to the 'irst (ec!rity %ank )td *ilk!sha %ranch. The *ilk!sha %ranch
then transmits the amendment to the negotiating bank with test. 'or this ser"ice
charges and tele# charges are debited from the importer-s acco!nt. Denerally the
letter of credit is amended for the following inferences: 7
2i3>#tension of the "alidity of the credit
2ii3Increasing of )6C "al!e d!e to change of price or !nit
price. 2iii3Change of doc!mentary re$!irement.
,4
Step 07: Inormin( the E8porter a)o&t the !$C )* the ne(otiatin( )an-:-
&fter getting the ad"ice the negotiating bank ad"ice the e#porter in e#porting his6her goods.
The negotiating bank tells the e#porter that it is ready to negotiate the b!siness dealings
between the importer and the e#porter. The e#porter being ad"ised by the ad"ising bank
make e"erything ready for shipment and sends all the doc!ments to the related a!thority for
pre7shipment inspection. &ct of negotiating and ad"ising is the act of e#port section of the
foreign e#change department of 'irst (ec!rity %ank )td *ilk!sha %ranch.
Step 09: Pre-Shipment Inspection #PSI% )eore e8portin( the (oo"s:-
The go"ernment of %angladesh has decided from 'ebr!ary ,82:::that
? Importing goods m!st ha"e the pre7shipment report by the related instit!tion.
? In"oice and packing list m!st be certified by the pre7shipment inspection company
along with date and serial n!mber.
? 1re7shipment Inspection company will iss!e a certificate stating that they ha"e
certificated the In"oice "al!e of the goods and that certificate m!st be enclosed with
original shipping doc!ments.
Step 0:: Shipment o (oo"s )* the e8porter:-
If the pre7shipment inspection is "alidated the e#porter then e#ports his6her goods to
the importer. The >#porter !ses the con"enient "ehicle to e#port the goods. It may
be ship tr!ck etc. %!t the importer m!st be informed abo!t it.
Step 10: Presentation o /oc&ments to the 4e(otiatin( ,an- )* the E8porter:
The e#porter keeps all the doc!ments of shipment for s!bmitting these to the
negotiating bank to get payment.
Step 11: +or5ar"in( the "oc&ments to the +irst Sec&rit* ,an- !t".
/il-&sha ,ranch )* the ne(otiatin( )an-:-
The negotiating bank scr!tinizes all these doc!ments and if it identifies these
doc!ments legitimate forward the information to the import section 2iss!ing section3
of the foreign e#change department of the 'irst (ec!rity %ank )td *ilk!sha %ranch.
The negotiating bank prepares all the d!plicates of these to keep it at the bank for
their own record and forward all the doc!ments with a sched!le to the iss!ing bank.
The most common doc!ments are as follows:7
,=
$i&Commercial In"oice
$ii&%ill of e#change 2%6>3
$iii&%ill of )ading 2%6)3
$i'&&irway %ill
$'&Tr!ck Receipt
2TR3 $'i&1acking )ist
$'ii&Radioacti"ity Report:7 This report clarifies that whether the goods items are fresh
or not. If there is any defect in the goods items it will be !nco"ered by the
radioacti"ity report. $'iii&Certificate of origin
$i3&Ins!rance Certificate
$3&(hipment Certificate by the >#porter.
Step 12: Recei1in( an" e8aminin( the "oc&ments )* the +irst
Sec&rit* ,an- !t". /il-&sha ,ranch: -
9n receipt of the doc!ments the 'irst (ec!rity %ank )td *ilk!sha %ranch e#amines all
the doc!ments. The checklist for e#amining some of these doc!ments are as follows:7
;83amination of Letter of Credit*7
MThe 'irst (ec!rity %ank )td *ilk!sha %ranch ens!res that the doc!ments are
presented before the date of e#piry of the )6C.
MThat the amo!nt of the bill does not e#ceed the stated amo!nt in the letter
of credit. M&ll the doc!ments mentioned in the letter of credit are s!bmitted.
M&ll the doc!ments are presented for negotiating.
MThe negotiation is not restricted to another bank.
;83amination of -ill of e3change*7
MThe amo!nt is identical with that stated in the in"oice.
MThe amo!nt e#pressed in fig!re and words agree.
MCorrections ha"e been properly a!thenticated.
MIt is marked as drawn !nder the proper letter of credit.
;83amination of commercial In'oice*7
MIt is dated s!bmitted and signed in re$!ired
n!mber. MIt is addressed to the importer.
M1rice $!ality $!antity etc correspondents to the letter of
credit. M(ame lang!age of the letter of credit.
;83amination of Bill of lading*7
M
;
a
r
k
e
d
o
n
b
o
ar
d.
M
C
le
ar
a
n
d

n
o
t

c
l
o
s
e
d
.
M*ated prior to the last date of shipment
mentioned in the letter of credit.
,+
M;ade to the order of the bank.
M(!bmitted within the date stip!lated in the letter of credit.
MIn agreement with the port of shipment destination consignee etc stip!lated in the
letter of credit.
;83amination of Insurance 6olicy*7
MIt is dated earlier than the date of the bill of
lading. MIt is endorsed in fa"or of the bank.
MIt is stamped according to the law of %angladesh.
MThe Ins!rance policy is in negotiable form.
MIt is signed by the agent or !nderwriter of the ins!rance company.
MIt contains the name of the transportation mode description of goods packing
marks etc indicated in the in"oice.
MCo"ers all the risks en!merated in the )6C.
Step 13: Pa*ment to the E8porter )* the +irst Sec&rit* ,an- !t".
/il-&sha ,ranch:
'oreign e#change payment to the e#porter is made either thro!gh ad"ising bank or
reimb!rsement bank. If there is a direct gi"e and take relationship with that of ad"ising bank
'irst (ec!rity %ank )td *ilk!sha %ranch re$!est the ad"ising bank to pay the e#porter for
the partic!lar shipment. 9therwise thro!gh a third party 2reimb!rsement bank3 the payment
is made. The reimb!rsementment bank also to be ad"ised separately with a copy of the
letter of credit specific instr!ction to honor reimb!rsement claim. The 'irst (ec!rity %ank )td
*ilk!sha %ranch pays the ad"ising or reimb!rsement bank afterwards.
Js!ally payment is gi"en within se"en days of doc!ment recei"ed. %!t if the importer is
!nable to make payment then the doc!ment is p!rchased by the negotiation bank or
loan is created against import merchandise to make payment to the e#porter. 0owe"er
for either case the 'irst (ec!rity %ank )td *ilk!sha %ranch claims interest.
Step 10: S&)mission o Ret&rns:-
'oreign e#change f!nction is performed by different partic!lars bank b!t %angladesh
%ank controls all of these acti"ities. 'or this according to the law of %angladesh
%ank all foreign e#change doc!ments are to s!bmit to the %angladesh %ank after the
foreign e#change trading ends. In this way the foreign e#change acti"ities of 'irst
(ec!rity %ank )td *ilk!sha %ranch comes to an end.
2:
C H A P T E R - 0
Findings
2,
(.1 Findings*7
The twel"e 2,23 weeks period internship program in 'irst (ec!rity %ank )td *ilk!sha %ranch will
s!rely enrich the knowledge and e#perience of general banking and foreign e#change acti"ities
of a b!siness grad!ate like me. To follow the internship system of this bank I had to pass time in
all sections of this bank namely &cco!nts 9pening *eposits 'oreign >#change Import 'oreign
>#change >#port &cco!nts and )oans K &d"ance. %!t to prepare a formal Internship Report on
'oreign >#change &cti"ities I ha"e passed more days in foreign e#change department than other
sections of this bank. To ha"e a clear pict!re abo!t the foreign e#change acti"ities personal
obser"ation of foreign e#change doc!ments related papers and con"ersation with the employees
of the bank were cond!cted. &nd after an in depth obser"ation of the total acti"ities the findings
of the st!dy ha"e come as follows: 7
1. &fter getting the commencement of b!siness at 2+
th
&!g!st ,+++ this bank
started its operation thro!gh the opening of 'irst %ranch at 25 *ilk!sha C6&
*haka7,::: at 28
th
9ctober ,+++.Conse$!ently the *ilk!sha %ranch that is
my concerned %ranch is the corporate %ranch of 'irst (ec!rity %ank )td.
2. The %ranch started its 'oreign >#change acti"ities from the "ery first day year
2:::.&t the beginning year it has opened 8.< letter of credit2incl!ding local and
foreign )6C3amo!nt in J(* N,+,.82.8..: amo!nt in %*T ++4=58=2=.::.'rom
that year this branch- Dross income from import section was ,,448++,.::
3. In the year 2::,the branch has opened 8,2 foreign )6C amo!nt in J(*
N,254,5+<.28 amo!nt in %*T 4,52,:++..:: and local )6C no is 2,amo!nt in
J(* N,58,=.8.4= amo!nt in %*T 44+55+:+.::.from that year this branch-s
Dross income from import section was 2<2+,,<<.<: and from >#port
section was2/an!ary to /!ne3 N,:<+5558.48.
.. *!ring the year 2::2 the branch has opened 82+ foreign )6C amo!nt in %*T
4<2<.4+=+.:: and 8: local )6C amo!nt in %*T ,5<:8:++2.::.Th!s the total )6C
opened d!ring that period was 84+ amo!nts in %*T =+=<+=+=,.::
5. In the year 2::5 the branch earned from Import (ection amo!nt in %*T
,4,.85<=.::2/an!ary to /!ne3 and earned from >#port (ection amo!nt in
J(* N,:4.+=2=.,52/an!ary to /!ne3
(.2 6erformance 8'aluation of Foreign 83change
Acti'ities of First Security Bank Ltd) ilkusha Branch*7
&ct!ally the foreign e#change performance of banking section of a co!ntry depends mainly
on the economical performance of the co!ntry r!les and reg!lation regarding foreign
e#change acti"ities and finally on the political instability of the co!ntry. If e"erything is all
right then the performance of foreign e#change acti"ities depends on the $!ality of ser"ices
pro"ided by a bank and locational condition of the bank. %y considering all these things it
can be said that 'irst (ec!rity %ank )td*ilk!sha %ranch is able to win all of those
characteristics highly re$!ired for operating foreign e#change acti"ities properly. Tho!gh it is
a new bank it has already been able to earn a better position in banking acti"ities especially
in foreign e#change department. *!ring my three 253 months Internship program in this
branch I ha"e seen that its e"ery section-s banking operation is r!nning well and it has
already been able to earn a great position of the market of the total banking b!siness. It has
22
been possible d!e to better ser"ice e#cellent personality of the bank-s employee and better
locational position of the bank. Its e"ery section is de"eloping day by day. &s the capital city
its foreign e#change performance is e#ceptional from that of all banking section. Its foreign
e#change performance is better from the "ery beginning of the bank opening its foreign
e#change department. 'or the e"al!ation of the foreign e#change performance of the branch
its last three years n!merical fig!re is presented and analysis below:7
25
'rom the abo"e information we can compare the last three years foreign e#change
performance in the following s!mmarize form: 7
83port Section
@ear Aanuary Fe-ruary !arch April !ay Aune <otal
2::1 1)+1():20.1 1)111)2:3.0 1)0(/)12/.1 1)/+0)313)1 2):32):(:.1 1)001)(13.3 B1:)/23)33+.0
2::2 1)1:2)121.3 1)(21)0//.3 1)/:/)11/.3 2)033)1++.1 1)(2/)(//.+ 1)/0+)(2+.( B1:)0(2)121.1
2::3 1)011)12+./ 1)/22)3(/.2 1)+21)2+2./ 1)021)2+0.+ 1)230):11.0 2)120)21/.3 B1:)1:1)210.2
Import Section
@ear L5C %, C S B <
2::: +(/ B12)1(+)2(+.(: 220)13+)121.::
2::1 +33 B13)023)2(2.,3 021)1(()2:3.::
2::2 +02 B1+)312)((:./1 1/(0)2(1)(1:.::
'rom the abo"e three years sched!le of e#port information it can be said that then
performance trend is increasing in a better position. &nd from the abo"e Import
sched!le of the last three years we ha"e seen that the performance position of the
middle years was not good eno!gh than the pre"io!s years b!t it is o"ercame with
that of the last year. The trend is positi"e. (o it is e#pected to be increased.
'rom the abo"e Import and >#port (ection-s information and analysis it can be said
that tho!gh 'irst (ec!rity %ank )td*ilk!sha %ranch is a newly established banking
organization it is de"eloping day by day in a better progress thro!gh its better
performance of banking operation especially in foreign e#change acti"ities in its
*ilk!sha Corporate %ranch. Therefore we can concl!de here that the performance
of foreign e#change acti"ities of 'irst (ec!rity %ank )td *ilk!sha %ranch is good
and so my hypothesis regarding my Internship Report is right.