Report on Prime Bank

Meaning of Foreign Exchange

Foreign Exchange means exchange foreign currency between two countries. If we consider ‘Foreign Exchange’ as a subject, then it means all kind of transactions related to foreign currency. In other wards foreign exchange deals with foreign financial transactions. H. E. Evitt defined “Foreign Exchange” as the means and methods by which rights to wealth expressed in terms of the currency of one country are converted into rights to wealth in terms of the currency of another country

Activities of foreign exchange

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There are three kinds of foreign exchange transactions:

• Import.
• Export.
• Remittance.

Local Regulations for foreign exchange

Foreign exchange transactions are being controlled by the following rules & regulations:

• Foreign Exchange regulation act 1947.
• Bangladesh Bank issues foreign exchange circular from time to time to control the export, import & remittance business.
• Ministries of commerce issues export & import policy giving basic formalities for import & export business.
• Sometime CCI&E issues public notice for any kind of change in foreign exchange transaction.

Bangladesh bank published two volumes in 1996. This is compilation of the instructions to be followed by the authorized dealers in transitions related to foreign exchange.

Parties involved in Documentary Credit

The parties are:

• The Issuing Bank
• The Confirming Bank, if any,
• The Beneficiary.
• The Applicant
• The Advising Bank
• The Nominated Paying/ Accepting Bank
• The Transferring Bank,

1. Importer – Buyer Who applies for opening the L/C.
2. Issuing Bank – It is the bank which opens/issues a L/C on behalf of the importer.
3. Confirming Bank – It is the bank, which adds its confirmation to the credit and it is done at the request of issuing bank. Confirming bank may or may not be advising bank.
4. Advising / Notifying Bank – is the bank through which the L/C is advised to the exporters. This bank is actually situated in exporters country. It may also assume the role of confirming and / or negotiating bank depending upon the condition of the credit.
5. Negotiating Bank – is the bank, which negotiates the bill and pays the amount of the beneficiary. The advising bank and the negotiating bank may or may not be the same. Sometimes it can also be confirming bank.
6. Paying / Accepting Bank – is the bank on which the bill will be drawn (as per condition of the credit). Usually it is the issuing bank.
7. Reimbursing bank – is the bank, which would reimburse the negotiating bank after getting payment – instructions from issuing bank.

IMPORT

Under the import policy of Bangladesh the Importer has get the valid Import Registration Certificate (IRC) from the Chief Control of Import & Export (CCI&E).

Letter of Credit means any arrangement whereby a Bank (the issuing Bank) is committed (on behalf of the buyer/applicant) to pay certain amount at the seller’s disposal under some agreed conditions.

Types of documentary credit

Documentary credit may be of three types.

1. Revocable credit.
2. Irrevocable credit.
3. Add confirmed credit.

• Revocable credit: This type of credit can be cancelled or amended at any time by the issuing Bank without prior notice to the seller. It is not now in use.
• Irrevocable credit: This type of credit can’t be cancelled or amended by the issuing Bank without the agreement of parties concerned thereto. All the credits issued in our country are of irrevocable nature.
• Add confirmed credit: When a third Bank provides guarantee to the beneficiary to make payment, if issuing Bank fail to make payment, the L/C is called confirmed L/C. In case of a confirmed L/C a third Bank adds their confirmation to the beneficiary, to make payment, in addition to that of issuing Bank. Confirmed L/C gives the beneficiary a double assurance of payment.

Special documentary credit

There are some other special documentary credits that are given below:

1. Revolving credit.
2. Transferable credit.
3. Back- to- Back credit.

• Revolving credit: Which provides for restoring the credit to the original amount after it has been utilized.
• Transferable credit: If the word ‘Transferable’ incorporated in an L/C, then the L/C is transferable. The first beneficiary can transfer transferable L/C to second beneficiary. But second beneficiary cannot transfer it further to another beneficiary.
• Back-To- Back credit: The Back To Back is a new credit opened on the bases of an original credit in favor of other beneficiary; under this concept the seller of the first credit offers it as security to the issuing Bank for the assurance of the second credit. The beneficiary of the back-to-back credit may be located inside or outside the original beneficiary’s country.

Operations of Documentary Letters of Credit

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

1. Opening.
2. Advising.
3. Amendment.
4. Presentation.
5. Settlement.

• Opening of Letter of Credit: Opening of letter of credit means, at the request of the applicant (importer) issuance of a L/C in favour of the beneficiary (exporter) by a Bank. The Bank, which open or issue L/C opening Bank or issuing Bank.
• Advising: Advising through a Bank is a proof of evident authenticity of the credit to the seller. The process of advising a credit consists of forwarding the original credit to the beneficiary to whom it is addressed. Before forwarding the advising Bank verify the signature (s) of the officer (s) of the issuing Bank & ensure that the terms & condition are not in violation of existing exchange control regulation & the other regulation relating to export. If credit is transmitted via telex, advising Bank will match the test used in the telex.
• Amendment of Credit: Parties involved in a L/C, particularly the seller and the buyer, cannot always satisfy the terms and conditions in full as expected due to some obvious and genuine reasons. In such a situation, the credit should be amended.
• Presentation of Document: The seller being satisfied with the terms and conditions of the credit proceeds to dispatch the required goods the buyer and after that, has to present the documents evidencing dispatching of goods to the negotiating bank on or before the stipulated expiry date of the credit. After receiving the entire document, the negotiating bank then checks the documents against the credit. If the documents are found in order, the bank will pay, accept or negotiate to the issuing bank. The issuing bank also checks the documents and if they are found as per credit requirements, either effects payment, or reimburse in the pre-agreed manner.
• Lodgment: If import documents found in order, it to be made entry in the bill register and necessary voucher to be passed, putting bill number on the documents, these processes is called lodgment of the bill. Since the documents stay at this stage for a temporary period i. up to retirement of the documents, the process is called lodgment.

Bank must lodge the documents immediate after receipt of the dame, not exceeding seven (7) Banking days, following the day of receipt of the documents. Retirement of Import documents: When the importer releases the import document from the Bank by acceptance/cash payment or under post import Bank finance it is known as retirement of the import document.

• Refusal Notice: After examination, if the documents become discrepant, issuing Bank will through the refusal notice to the negotiating Bank with seven Banking days.
• Settlement: Settlement means fulfilling the commitment of issuing Bank in regard to effecting payment subject to satisfying the credit terms fully. This settlement may be done three separate arrangements as stipulated in the credit.

Import Financing

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

1. PAD (Payment against documents).
2. LTR (Loan against trust receipt).
3. LIM (Loan against import merchandise)

Payment Against Document (PAD)

PAD Loan is created upon lodgment of import documents. This Loan is created for 21 days -the time being the tolerance for taking documents for the importer. If after 21 days the documents are not taken by the importer, the Bank may sell the imported goods to recover the given amount. 5. 6. 2 Loan Against Trust Receipt (L. T. R): Under this, Loan is allowed only to first class importers. Here only on the basis of trust without paying the Bank anything or a partial amount, the importer takes the documents. Then importer is allowed 60-90 days time to make payment.

Loan Against Imported Merchandise (LIM)

Advance (Loan) against the security of merchandise imported through the Bank may be allowed either on pledge or hypothecation of goods, retaining margin prescribed on their Landed Cost, depending on their categories and Credit Restriction imposed by the Bangladesh Bank. Bank shall also obtain a letter of undertaking and indemnity from the parties, before getting the goods cleared through LIM Account.

Export

Under the export policy of Bangladesh, the exporter has to get the valid export registration certificate (ERC) from chief controller of export & import (CCI&E). The ERC is required to renew every year. The ERC number is to be incorporated on export Form & other paper connected with exports.

Foreign Remittance

Foreign remittance means remittance of foreign currencies from one place/person to another place/person. In broad sense, foreign remittance includes all sale and purchase of foreign currencies on account of Import, Export, Travel and other purposes. However, specifically foreign remittance means sale & purchase of foreign currencies for the purposes other than export and import. PBL performs the remittance function with different countries. It maintains the foreign remittance in the following form: Foreign Demand Draft. Inward Outward.

• Foreign Demand Draft (FDD): A foreign demand draft is a negotiable instrument issued by a Bank drawn on ther Bank with another country the instruction to pay a certain amount to the beneficiary on demand. Remittance through demand draft may be inward or outward.

Inward Remittance

Inward remittance refers to the extent where the Bank makes payment to the client against foreign demand draft. Bank will make payment to the client by verifying the, test number, and signature of the authorized officer. Two forms as prescribed by Bangladesh Bank are used for purchase of Foreign Currencies such as. EXP Form: Remittances received against exports of goods from Bangladesh are done by form EXP.

CONCLUSION & RECOMMENDATION

Conclusion

Bank is the largest organization of mobilizing surplus domestic savings. Attractive Savings Schemes are offered by PBL such as Contributory Savings Scheme, Monthly Benefit Deposit Scheme, Special Deposit Scheme, Education Savings Scheme, Fixed Deposit Scheme, Prime Bank Money Scheme, Prime Bank Insured Fixed Deposit Scheme as well as different accounts to save money.

Schemes are designed concentrating in different purposes to help the fixed income group people to help in need. Bank-Officials are also whole-hearted and dedicated to serve their customer with utmost care. Credit Management policies and techniques used in PBL at present no doubt is comparable to international standards. The officials follow the policy very strictly. They are choosy and conservative in sanctioning loan. The proposal is thoroughly scrutinized by the loan sanctioning authority. The total function of the credit division is monitored periodically.

The bank’s classified loan to the total Advance is very low. Management and others related to Prime Bank are trying to formulate new services and products. PBL always try to increase foreign exchange through import, export and remittance. This bank always conceives amicable behaviour with exporters and helps them in their business activities as a trustee friend. It encourage importer to import goods in legal procedure and provide financial assistance for doing business smoothly. This bank contribute to our economy in a great deal by transacting remittance from different countries.

Keeping this thought in the management’s mind they made different deed with several foreign banks in abroad to collect money from our service holders and remit it to our country through this bank. In Singapore bank open a “PRIME EXCHANGE HOUSE” to help our people who employed in that country. Recommendation: Prime Bank Ltd. is one of the most potential Banks in the banking sector. It has a large portfolio with huge assets to meet up its liabilities and the management of this bank is equipped with the expert bankers and managers in all level of management. So it is not an easy job to find out the drawbacks of this branch.

I would rather feel like producing my personal opinion about the ongoing practices in Motijheel Branch. For the improvement of the service the following measures should be taken:

• Providing more industrial loans: It seemed to me that the bank having a large amount of deposit is not encouraging the large scale producers that much of long term industrial loans to accelerate the economy as well as to help the economy to solve unemployment problem.
• Ensure Proper Division of manpower In The Desk: There is lack of division of manpower in the branch. Therefore every body has to handle every type of banking services.
• This decreases the level of performance of the personnel, though it reduces monotonousness. But lack of division of manpower hampers the discipline of working environment. So customers are to wait for some time for the desired service, which is contrary to the Baking’s objective.
• Development of Human Resources: Human resource is another sector for the branch to be developed urgently. Human resources, in the branch, need to be equipped with adequate banking knowledge. Majority of the human resources must be having basic knowledge regarding money, banking, finance and accounting. Without proper knowledge in these subjects, efficiency cannot be optimised. Bank can arrange training program on these subjects.
• Ensure Proper Maintenance of Files: Prime Bank Ltd. gives personalized services. All the officers have to give concentration to the customers, while doing this they cannot properly maintain the customer files. In many cases, application forms are not properly filled up and documents are not properly filed. Every staff should try to reduce these irregularities.
• Ensure Proper Maintenance of Office Premises: Motijheel Br. is supposed to be very neat and clean and well decorated. But sometimes it loses its glamour. The facility staffs are not regular in their duties and files and papers are kept here and there by the officers during the busy hour. This habit must be changed. Moreover, the sitting arrangement is very insufficient comparing with the number of customers. So Motijheel Br. Of PBL must pay attention to this issue.
• Ensure Proper Communication System and Maintenance of Machineries: Most of the time the branch’s computers remain out of order and it is also true for the photocopiers. Attention should be given on proper maintenance of phone, computer, fax machine and photocopier.
• Ensure Sufficient Forms and Brochures: There are always shortages of application forms, brochures, etc. in the branch. These Forms and Brochures must be maintained in sufficient quantity. Otherwise, customer service will be hampered
• Offer Some Loan and Deposit Scheme Exclusively for The Premium Customers: All the lending and savings packages offered to the Premium customers are same as offered to the general customers, excepting the waiver of service charges for Premium Ones. Prime Bank Limited should try to introduce more attractive lending and savings scheme to its Premium customers to create more business for the Bank.
• The Bank can pay more attention to this segment of customers, as it is the most solvent group from which income can be generated if the package is designed properly.
• Implement T24 software more quickly: Bank’s implementation of T24 software and data migration activities should continue more quickly because day to day overhead cost increases for that purpose.
• More Gifts and Discounts for The Marginal Customers: Premium Customer should be offered occasional gifts and discounts, which can make the Premium Service more attractive and keep consumer delight.

References

1. Peter Rose. By: L. R. Chowdhury. Consultation with the Following Persons
2. Iftekher Uddin, SAVP and In-Charge of General Banking Division Motijheel Br. PBL.
3. Mohammad Faruq, SAVP and In-Charge of Foreign Exchange Division. Motijheel Br. PBL.
4. A. K. M. Jan-e ALAM,AVP; and In-Charge of Credit Division Motijheel Br. PBL.
5. Hafizur Rahman Mollik, FAVP; Supervisor of L/C opening. Motijheel Br. PBL.
6. Afzalun-Nnhar,FAVP. General Banking Division,Motijheel Br. PBL. Arif Hasan Khan, EO, Credit Division, motijheel Br. PBL.
7. Mohammad Abdul Matin; Principal Officer, Credit division, Head office ,PBL.
8. Masum Mahmud Baqui, Principal Officer, Corporate Banking, Head Office, PBL.
9. Fahmida Sultana, Officer; General Banking Division, Motijheel Br. PBL.
10. MD. Rashedul Hasan Khan, Joiner Officer, General Banking Division. Motijheel Br. PBL
11. Khaleda Farhana, Jonier Officer, General Banking Division; Motijheel Br. PBL.
12. Zahid Hasan; Junior Officer; Accounts Section; Motijheel Branch; PBL.

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