mutual trust bank

ADVANCE WORKING REPORT ON FOREIGN EXCHANGE OPERATION AND

PERFORMANCE EVALUATION ON

MUTUAL TRUST BANK LIMITED

BY

FIROZA BEGUM

ID: 0920623

AN INTERNSHIP REPORT PRESENTED IN PARTIAL FULFILLMENT OF THE

REQUIREMENTS FOR THE DEGREE

BACHELOR OF BUSINESS ADMINISTRATION

INDEPENDENT UNIVERSITY, BANGLADESH

NOVEMBER, 2012

ADVANCE WORKING REPORT ON FOREIGN EXCHANGE OPERATION AND

PERFORMANCE EVALUATION ON

MUTUAL TRUST BANK LIMITED

BY

FIROZA BEGUM

ID: 0920623

has been approved

November, 2012

Hanif Mahtab

Lecturer,School of Business

Independent University,Bangladesh

TABLE OF CONTENTS LIST OF TOPICS: PAGE

EXECUTIVE SUMMARY 1

ORIGIN OF THE REPORT 2

PROBLEM STATEMENT 2

LITERATURE REVIEW 3

OBJECTIVES OF THE STUDY 3

METHODOLOGY OF THE STUDY 4

SOURCES OF DATA 4

DATA ANALYSIS AND INTERPRETATION 5

LIMITATIONS OF THE STUDY 5

COMPANY PROFILE 6

MTB MISSION 7

MTB VISION 7

MTB BOARD OF DIRECTORS 8

FFOORREEIIGGNN EEXXCCHHAANNGGEE 9

MMEEAANNIINNGG OOFF FFOORREEIIGGNN EEXXCCHHAANNGGEE 9

REGULATORY REQUIREMENTS OF FOREIGN EXCHANGE 9

FFUUNNCCTTIIOONNSS OOFF FFOORREEIIGGNN EEXXCCHHAANNGGEE DDEEPPAARRTTMMEENNTT 10

DOCUMENTS USED IN FOREIGN EXCHANGE 10

LETTER OF CREDIT (L/C) 14

PARTIES OF LETTER OF CREDIT TRANSACTION 14

BASIC FORMS OF DOCUMENTARY LETTER OF CREDIT 15

STEPS IN LETTER OF CREDIT OPENING 16

REQUIRED DOCUMENTS FOR LETTER OF CREDIT OPENING 17

OOPPEERRAATTIIOONN OOFF DDOOCCUUMMEENNTTAARRYY LLEETTTTEERR OOFF CCRREEDDIITT 17

SETTLEMENT 19

PPRREESSEENNTTIINNGG AA LLEETTTTEERR OOFF CCRREEDDIITT 21

IIMMPPOORRTT 23

MMEEAANNIINNGG OOFF IIMMPPOORRTT 23

GGEENNEERRAALL PPRROOVVIISSIIOONNSS FFOORR IIMMPPOORRTT 23

IIMMPPOORRTT PPRROOCCEEDDUURREE 24

DDOOCCUUMMEENNTTSS NNEEEEDD TTOO OOPPEENN AA CCAASSHH LL//CC 25

PPRROOCCEEDDUURREE TTOO BBEE FFOOLLLLOOWWEEDD BBYY BBAANNKKSS FFOORR AACCCCEEPPTTAANNCCEE//IISSSSUUAANNCCEE OOFF LLCCAA

FFOORRMMSS

25

IINNSSTTRRUUCCTTIIOONNSS IISSSSUUEEDD BBYY BBAANNGGLLAADDEESSHH BBAANNKK FFOORR OOPPEENNIINNGG AANNDD OOPPEERRAATTIIOONN OOFF

LLEETTTTEERR OOFF CCRREEDDIITT FFOORR IIMMPPOORRTT OOFF GGOOOODDSS

26

PPRREEPPAARRAATTIIOONN OOFF PPRROOPPOOSSAALL AANNDD SSUUBBMMIITTTTIINNGG IITT TTOO TTHHEE CCOOMMPPEETTEENNTT

AAUUTTHHOORRIITTYY FFOORR OOBBTTAAIINNIINNGG PPEERRMMIISSSSIIOONN OOFF OOPPEENNIINNGG LLEETTTTEERR OOFF CCRREEDDIITT

27

DDOOCCUUMMEENNTTSS RREECCEEIIPPTT AANNDD SSCCRRUUTTIINNYY 27

EEXXPPOORRTT 29

DDOOCCUUMMEENNTTSS UUSSEEDD IINN EEXXPPOORRTT 29

RREEGGIISSTTRRAATTIIOONN FFOORR TTHHEE EEXXPPOORRTTEERR 31

PPRROOCCEESSSSIINNGG OOFF EEXXPPOORRTT OORRDDEERR 32

MMAAKKIINNGG SSAALLEESS CCOONNTTRRAACCTT AANNDD RREECCEEIIVVIINNGG LL//CC 33

EEXXPPOORRTT FFIINNAANNCCEE 34

PRE SHIPMENT FINANCE IN EXPORT TRADE 34

PPOOSSTT SSHHIIPPMMEENNTT FFIINNAANNCCEE 34

FFOORREEIIGGNN DDOOCCUUMMEENNTTAARRYY BBIILLLL PPUURRCCHHAASSEE 34

PPRREEPPAARRIINNGG OOUUTT AANNDD DDEELLIIVVEERRYY OOFF SSHHIIPPPPIINNGG DDOOCCUUMMEENNTTSS 35

EENNDDOORRSSEEMMEENNTT OOFF SSHHIIPPPPIINNGG DDOOCCUUMMEENNTTSS BBYY AAUUTTHHOORRIIZZEEDD DDEEAALLEERRSS 35

FFOORREEIIGGNN RREEMMIITTTTAANNCCEE OOFF MMTTBB 37

MMEEAANNIINNGG OOFF RREEMMIITTTTAANNCCEE 37

RREEMMIITTTTAANNCCEE PPRROOCCEEDDUURREESS OOFF FFOORREEIIGGNN CCUURRRREENNCCYY 37

1. INWARD FOREIGN REMITTANCE 37

OUTWARD FOREIGN REMITTANCES 40

FINANCIAL PERFORMANCE ON MTB 42

PERFORMANCE ANALYSIS ON FOREIGN EXCHANGE 44

FINANCIAL PERFORMANCE OF MTB COMPARE TO COMMERCIAL BANK 46

FINDINGS 55

RECOMMENDATIONS 56

CONCLUSION 57

REFERENCES

Letter of Transmittal

November 28, 2012

Hanif Mahtab

Lecturer

School of Business

Independent University

Dear Sir,

This is to inform you that I have completed my internship report relating to Mutual Trust Bank

Ltd. on the topic ‘Foreign Exchange Operation and Performance’. I have prepared this report

as a requirement of the internship program BBA 499 under the BBA program of Independent

University, Bangladesh.

In writing this report, I have followed your instructions as well as those given by my

organization’s supervisor. I have also tried to apply relevant concepts that I have learnt during

the entire BBA program and my internship period at the Mutual Trust Bank Ltd.. However, I will

be glad to clarify any discrepancy that may arise.

Thank You

Yours Sincerely,

Firoza Begum

ID: 0920623

ACKNOWLEDGEMENT

First of all, I would like to express my heartiest gratitude to all those respondent employees who

attended the survey. Also, the co-operation of my internship supervisor, along with the other

members of the Mutual Trust Ltd., was truly unforgettable. In addition to that, I was blessed to

have an instructor like Hanif Mahtab who had the attitude and the substance to be a true mentor

as he guided me throughout the preparation of the report.

Finally, I would like to thank everyone at Mutual Trust Bank Ltd. who provided me with

ideas, data and invaluable experience of the corporate culture.

1 Foreign Exchange Operation and Performance Evaluation on MTB

Executive Summary:

This report focuses on the Foreign Exchange Operation and Performance evaluation on Mutual

Trust Bank.

In this report consist up with seven individual parts. In here the First part is the Introduction part

& here briefly describe Background of the Study, Origin, Objective, Scope, Methodology and

Limitations of the report. The Second part is Overview of Mutual Trust Bank Here describe the

Bank Profile, Vision, Mission, Board of Directors, Objectives, The part Third is Foreign

Exchange of Mutual Trust Bank(MTB). Here described about the Foreign Exchange department

of MTB. The Final part consists up with the Financial analysis, Foreign Exchange Operation

analysis, Summary Findings and Recommendations.

Foreign exchange is an important department of Mutual Trust Bank, which deals with import,

export and foreign remittances. It bridges between importers and exporters. This department is

playing an important role in enhancing export earnings, which aids economic growth and in turn

it helps for the economic development. On the other hand, it also helps to meet those goods and

service, which are most demandable and not adequate in our country.


ORIGIN OF THE REPORT

As a mandatory part the BBA Program, all the students of the faculty of Business Students have

to undergo a three month long internship program with an objective of gaining practical

knowledge about current business world. After this internship program each and every students

have to submit an internship report mentioning their activities during the internship program.

I‘ve started my internship at the Mutual Trust Bank (MTB),Gulshan Branch,under the foreign

exchange department. At the end of the program I am submitting my internship report focusing

on the contribution of Foreign Exchange operation to the overall performance of bank especially

on profitability perspective under the supervision of Hanif Mahtab, Lecturer , Management

school of business, Independent University, Bangladesh

Problem Statement

Bangladesh Bank performs all the functions that a central bank of any country is expected to

perform, and such functions include maintaining the price stability through economic and

monetary policy measures, managing the country‘s foreign exchange and the gold reserve and

regulating the banking sector of the country. Foreign exchange is an important department of

Mutual Trust Bank Ltd., which deals with import, export and foreign remittances. Foreign

Exchange is an International Department of the Bank. It facilitates international trade through its

various modes of services. It bridges between importers and exporters I hereby through the

internship program in Mutual Trust Bank, wanted to find out whether the process of their foreign

exchange operation is good enough to avoid any unwanted risk such as money

laundering,foreign remittance fluctuation, the future direction of foreign exchange and financial

performance compare to commercial bank in Bangladesh to identify the performance of Mutual

Trust Bank Ltd.


Literature Review:

Foreign exchange exposure is very crucial now a days as cross border trade is increasing day by

day at a very fast pace. But it is also regarded as very complex. One possible reason for the

absence of empirical evidence in the literature may be related to the difficulty in devising the

appropriate measures of a firm‘s ability to construct its hedging strategies. There is a dearth of

good literature on this subject, especially in India. Some of the studies identified in this area are

as follow; Bengt Pramborg, in this study, ―Foreign Exchange Risk Management by Swedish and

Korean Non Financial Firms: A Comparative Survey‖, 2002, makes a comparison of hedging

practices of Swedish and Korean Firms. The evidence suggests that Korean firms are more

concerned about fluctuations in their cash flows whereas Swedish firms focus on accounting

numbers. Derivatives usage is more popular for hedging among Swedish firms as compared to

Korean firms. It may be a result of relative immaturity of Korean derivative markets. In both of

the countries, majority of firms use a profit based approach to evaluate any risk management

strategy. The study depicts that the decision to hedge foreign exchange exposure is driven by the

level of exposure and size of a firm.

Bradford Cornell and Alan C. Shapiro, in their article, ―Managing Foreign Exchange Risks‖,

provide step by step guidance for the formulation of an effective strategy for managing currency

risk.

OBJECTIVES OF THE STUDY

The general objective of the study is to gather practical knowledge regarding banking system and

operation. The practical orientation gives us a chance to relate the four year long theoretical

learning of BBA Program with the practical experience. This consists the following:

To get an overall idea about the Foreign exchange Business procedure of Mutual Trust

Bank Ltd(MTB).

To describe the organizational structure, management, background, functions and

objectives of the bank.

To examine the profitability of the bank compare to the commercial bank.

To know the performance of foreign exchange department of MTB


METHODOLOGY OF THE STUDY

The report is prepared on the basic of foreign Exchange of Mutual Trust Bank. To conduct the

overall study, at first I explored the sources of Primary and Secondary information and data.

Different files of the department and statement prepared by Foreign exchange department( FED )

helped me to prepare this report. To present financial performance of MTB, I used the Annual

Report of 2009, 2010 & 2011 of Mutual Trust Bank.I also used Annual report of commercial

Bank of Bangladesh. For preparing this report I have used some graphical representation to find

out different types of analytical and interpretation.

SOURCES OF DATA

As mentioned earlier, mainly primary and secondary data has been used. Sometimes the

customers gave some important information regarding the services of the Bank:

PRIMARY DATA

Official records of Mutual Trust Bank(MTB).

Face to face conversation with the client.

Personal Interview – Face-to-face conversation and in depth interview with the respective

officers of the branch.

Personal observation – Observing the procedure of banking activities followed by each

department.

Practical work exposures on different areas of the branch

Informal conversation with the clients or customers.

SECONDARY DATA

Monthly Statement of MTB.

Annual Report of MTB.

Official Files.

Other manual information.

Websites.

Various publications on the Bangladesh Bank.


DATA ANALYSIS AND INTERPRETATION

Both quantitative and qualitative analysis will be performed on the findings. Qualitative

analysiss will be based on the foreign exchange policy provided by Bangladesh bank, the central

bank of Bangladesh. Different statistical tools will be used for the analysis of the findings.

LIMITATIONS OF THE STUDY

To provide current information and to make the report read-worthy, support from various sources

is essential. In spite of having my wholehearted effort, I could not collect some information

required at the time of the study. So this study is not free from the following limitation:

Due to unavailability of latest annual report (Annual report 2012), I have to prepare the

report on the basis of annual report 2010 & 2011. As a result, analysis, presentation of

data may not show the existing position/present condition of Mutual Trust Bank.

Lack of previous experience to prepare this type of report and it is totally new to me as an

intern.

Learning all the banking functions within just three months was really difficult.

Sometimes the officers of Mutual Trust Bank were very busy. For this reason they

personally did not co-operate me.

Another limitation of this report is Bank‘s policy of not disclosing some data and

information for obvious reason, which could be very much helpful.


COMPANY PROFILE:

The Company was incorporated on September 29, 1999 under the Companies Act 1994 as a

public company limited by shares for carrying out all kinds of banking activities with Authorized

Capital of Tk. 38,00,000,000 divided into 38,000,000 ordinary shares of Tk.100 each.

The Company was also issued Certificate for Commencement of Business on the same day and

was granted license on October 05, 1999 by Bangladesh Bank under the Banking Companies Act

1991 and started its banking operation on October 24, 1999. As envisaged in the Memorandum

of Association and as licensed by Bangladesh Bank under the provisions of the Banking

Companies Act 1991, the Company started its banking operation and entitled to carry out the

following types of banking business:

(i) All types of commercial banking activities including Money Market operations.

(ii) Investment in Merchant Banking activities.

(iii) Investment in Company activities.

(iv) Financiers, Promoters, Capitalists etc.

(v) Financial Intermediary Services.

(vii) Any related Financial Services.

The Company (Bank) operates through its Head Office at Dhaka and 77 branches. The

Company/ Bank carries out international business through a Global Network of Foreign

Correspondent Banks.

Registered Name of the Company

Mutual Trust Bank Limited

Legal Form

The Company was incorporated on September 29, 1999 under the Companies Act 1994 as a

public company limited by shares for carrying out all kinds of banking activities with Authorised

Capital of Tk. 38,00,000,000 divided into 38,000,000 ordinary shares of Tk.100 each.

http://www.mutualtrustbank.com/info_branch_list.php


Company Registration No.

c38707(665)/99 on September 29, 1999

Bangladesh Bank Permission No.

BRPD (P)744(78)/99-3081 on October 5, 1999

Registered Office:

MTB Centre, 26 Gulshan Avenue

Plot 5, Block SE(D), Gulshan 1, Dhaka 1212

SWIFT CODE

MTBL BD DH

Corporate Website

www.mutualtrustbank.com

MTB MISSION:

We aspire to be the most admired financial institution in the country, recognized as a dynamic,

innovative and client focused company, that offers an array of products and services in the search

for excellence and to create an impressive economic value.

MTB VISION:

Mutual Trust Bank‘s vision is based on a philosophy known as MTB3V. We envision MTB to

be:

One of the best performing banks in Bangladesh

The Bank of choice

A truly world-class Bank


MTB Board of Directors:

The following are members of the MTB Board of Directors. To view their brief biographies

please click on the names.

Dr. Arif Dowla, Chairman

Mr. Rashed Ahmed Chowdhury,Vice chairman

Mr. Sayeed Manzur Elahi

Mr. Md. Hedayetullah

Mr. Mohammed Abdur Rouf

Mr. Md. Abdul Malek

Mr. Md. Wakiluddin

Mrs. Khwaja Nargis Hossain

Mr. Anjan Chowdury

Mr. Q.A.F.M Serajul Islam

Mr. Anis A. Khan,Managing Director & CEO


FFOORREEIIGGNN EEXXCCHHAANNGGEE

MMEEAANNIINNGG OOFF FFOORREEIIGGNN EEXXCCHHAANNGGEE

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

REGULATORY REQUIREMENTS OF FOREIGN EXCHANGE

Any import and export of our country is regulated by different local and international laws and

regulatory bodies. The core guidelines under the preview of which import and export of our

country have to be performed are:

Import Policy

Export Policy

Guidelines for foreign exchange transaction of Bangladesh Bank (Vol.1 &2).

Circular issued by Bangladesh Bank

Circular issued by NBR

Circular issued by CCI&E

UCPDC (ICC publication no.600) & ISBP, URC, URR.

Public Notice

Ministry of Commerce Circular

Other Authorization (i.e. NBC Dept)

Among the regulatory bodies, Chief Controller of Import and Export, Bangladesh Bank play

major role in monitoring and ensuring compliance of various regulations


WWHHYY EEXXCCHHAANNGGEE IISS TTOO BBEE CCOONNTTRROOLLLLEEDD

Foreign Exchange is to be controlled for the following reason:

To stabilize the rate of exchange.

To protect domestic Industries.

For proper implementation of plans.

To increases the bargaining strength.

To check over invoicing & under invoicing.

To check the black marketing and smuggling.

For regulating the international movements of goods.

FFUUNNCCTTIIOONNSS OOFF FFOORREEIIGGNN EEXXCCHHAANNGGEE DDEEPPAARRTTMMEENNTT::

Foreign Exchange is mainly combination of three parts:

Foreign Remittance.

Export.

Import.

These three parts are most essential part of Foreign Exchange Operations of MTB at Foreign

Exchange Branch . Not only MTB but also all banks of Bangladesh have to play these roles in

Foreign Exchange Operation.

DOCUMENTS USED IN FOREIGN EXCHANGE

LETTER OF CREDIT (L/C):

It is the most important and commonly used in connection with foreign trade. Letter of Credit is

an undertaking by a banker of the importer to the exporter, to the effect that the amount of the

L/C will be duly paid. The banker on behalf of the importer issues the L/C in favor of the

exporter (beneficiary) and forwards the same to the exporter to the effect that the bill drawn by

him shall be duly accepted and paid. It creates confidence in the mind of the exporter so far as

payment of the bill is concerned. It is also facilitate the exporter to get the benefit of discounting

the bill before the date lf maturity.


BILL OF EXCHANGE

A Bill of Exchange is an instrument in writing, containing an unconditional order, signed by the

maker, directing a certain person to pay on demand or on fixed or determinable future time a

certain sum of money only to or to the order of a certain person or to the bearer of the instrument. From

the definition - we get the features of bill of exchange. In generally there are three parties like-

Drawer: The person who prepare the bill; Drawee: The person who is ordered for the payment in

future specified time; Payee: The person who is the amount of bill receiver as per the order of the

drawer to the drawee.

BILL OF LADING

A bill of lading is a document that is usually stipulated in a credit when the goods are dispatched

by sea. It is evidence of a contract of carriage, is a receipt for the goods, and is a document of

title to the goods. It also constitutes a document that is, or may be, needed to support an

insurance claim. The detail on the bill of lading should include:

A description of the goods in general terms not inconsistent with that in the credit.

Identifying marks & numbers (if any).

The name of the carrying vessel.

Evidence that the goods have been loaded on broad.

The ports of shipment & discharge.

The names of shipper, consignee and name & address of notifying party.

The number of original bills of lading issued.

The date of issuance.

A bill of lading specifically stating that goods are loaded for ultimate destination specifically

mentioned in the credit.


COMMERCIAL INVOICE

A commercial invoice is the accounting document by which the seller charges the goods

to the buyer. A commercial invoice normally including the following information:

Date

Name & address of buyer & seller.

Order or contract number, quantity & description of the goods, unit price and the total

price.

Weight of the goods, number of packages and shipping marks & number.

Terms of delivery & payment.

Shipment details.

CERTIFICATE OF ORIGIN OF GOODS

A certificate of origin is a signed statement providing evidence of the origin of the goods.

INSPECTION CERTIFICATE

This is usually issued by an independent inspection company located in the exporting country

certifying or describing the quality, specification or other aspects of the goods, as called for in

the contract and / or the letter of credit. The buyer who also indicates the type of inspection

usually nominates the inspection company he /she wish the company to undertake.

INSURANCE POLICY OR CERTIFICATE

The insurance certificate document must.

Be that specified in the credit.

Cover the risks specified in the credit.

Be consistent with the other documents in its identification of the voyage and description

of the goods.

Unless otherwise specified in the credit

Be a document issued and / or signed by an insurance company or its agent, or by

underwriters.

Be dated on or before the date of shipment as evidenced by the shipping documents or

establish that cover is effective at the latest from such date of shipment.


Be for an amount at least equal to the GIF value of the goods and in the currency of the

credit.

PROFORMA INVOICE OR INDENT

Seller's quotation or agreement between seller & buyer. In this-the seller declared the rate,

quantity, quality, manufacturing & other information about goods and that accepted by buyer.

.

G.S.P. CERTIFICATE (GENERALIZED SYSTEM OF PREFERENCE)

When tariff concession is sought from those developed countries providing preferential treatment

to exporters of the developing countries, a GSP certificate should be obtained from the EPB. In

GSP scheme the tariff providing country is payer country & tariff consumer or receiver country

is receiver country. Up to the period there are 16 developing countries under this scheme facility.

From Bangladesh export development burro the industrialists may get necessary information &

practical procedure.

PACKING LIST

Here the detailed descriptions of goods packed in cases are written. Such as total quantity in lot,

per packet, total weight of the shipment, per packet etc are written.

DOCUMENTARY CREDIT

In simple terms a documentary credit is conditional bank undertaking of payment. Expressed

more fully, it is written undertaking by a bank (Issuing Bank) given to the seller (Beneficiary) at

the request and in accordance with the instructions of the buyer (applicant) to effect payment (i.e.

by making a payment or by accepting or negotiating bills of exchange) up to a stated sum of

money, within a prescribed time limit & against stipulated documents.

These stipulated documents are likely to include those required those required for commercial

invoice, certificate of origin, insurance policy or certificate and bill of lading or combined

transport document.


LETTER OF CREDIT (L/C)

Letter of Credit is an undertaking by a banker of the importer to the exporter, to the effect that

the amount of the L/C will be duly paid. The banker on behalf of the importer issues the L/C in

favor of the exporter (beneficiary) and forwards the same to the exporter to the effect that the bill

drawn by him shall be duly accepted and paid. It creates confidence in the mind of the exporter

so far as payment of the bill is concerned. It is also facilitate the exporter to get the benefit of

discounting the bill before the date lf maturity.

PARTIES OF LETTER OF CREDIT TRANSACTION:

Issuing Bank: It is the buyer's bank. The bank that agrees to the request of the applicant

and issues its letter of credit in terms of the instructions of the applicant.

Advising Bank: It is the seller's or beneficiary's Bank. The bank usually situated in the

seller's or beneficiary's country (most of the time with which there exists corresponding

relationship with the buyer or issuing bank), request to advice the credit to the

beneficiary.

Confirming Bank: Sometimes issuing bank request advising bank or another bank to

add confirmation to the letter of credit. When that bank do this then such bank is called

confirming bank. So advising bank can be act as confirming bank.

Reimbursing Bank: This is the bank that is nominated by the issuing bank to pay (it is

also known as paying bank) or to accept drafts. It can be situated in another country

Negotiating Bank: The bank, which makes payment to the exporter after scrutiny, the

documents submitted by the exporter with the original letter of credit then it is called

Negotiating Bank.

Nominated Bank: The bank that is nominated by the issuing bank to pay (nominated

bank is known as paying bank) or to accept drafts (nominated bank is known as accepting

bank) or to negotiate (nominated bank is known as negotiating bank). Usually the

advising bank is request & authorized to be the nominated bank unless the credit allows

negotiation by any bank.

Seller: Beneficiary of the letter of credit is seller.


BASIC FORMS OF DOCUMENTARY LETTER OF CREDIT

The letter of credit can be either revocable or irrevocable. It needs to be clearly indicated

whether the letter of credit Revocable or Irrevocable. When there is no indication then the letter

of credit will be deemed to be a revocable L.C. The details are as follows:

Revocable letter of credit: A revocable credit is one, which can be amended or

cancelled by the issuing bank. At any moment without "prior notice" to the beneficiary.

So this is clear that revocable credit can be revoked any time without prior notice.

Irrevocable letter of credit: An irrevocable credit is one, which cannot be cancelled or

amendment able any time without the consent of each party. Through this letter of credit

the issuing bank gives a definite, absolute and irrevocable undertaking to honor its

obligations, provided the beneficiary complies with all the terms & conditions of the

credit.

Government letter of credit: That letter of credits, which are done by the Defense

Ministry and other Ministries of the government.

Master or mother letter of credit: The L.C. which come from outside the country to the

exporter from importer that is mother or master letter of credit.

Other classes of letter of credit:

Revolving letter of credit: When the L.C. is used again & again in same amount for a

specific period of time that is called revolving letter of credit.

Transferable letter of credit: Exporter can transfer his / her right of letter of credit in

full or partly to a third party. In generally, the exporter is not the supplier but act as a

middleman with in the supplier & importer.

Back-to-Back letter of credit: The letter of credit, which done by the security of mother

letter of credit.

Clean or open letter of credit: The letter of credit, which provides assurance of payment

bill of exchange without submission, of any export documents that is called clean letter of

credit.


Confirmed letter of credit: When the Irrevocable letter of credit issued by issuing bank

to the exporter as assurance of the L.C., then as per advice or documents the authorized

representative or representative bank's provide assurance or payment guarantee that is

confirmed letter of credit.

Deferred payment letter of credit: That letter of credit which expires one hundred &

eighty days i.e. within this period the documents must be send to the negotiating bank.

STEPS IN LETTER OF CREDIT OPENING:

On receiving the documents or papers from the importer the letter of credit opening bank is to

perform the following functions in connection with opening the letter of credit:

To scrutinize the documents thoroughly and to consult with import policy, Bangladesh

Bank & International Division's circular.

To prepare an "offering sheet". This offering sheet is nothing but a prescribed office

note on which the branch manager will sanction the margin to be obtained from the

importer.

Commission of letter of credit to be calculated as 50% of the total amount, equivalent to

Bangladesh currency.

P&T charges to be realized for TK. 100 (fixed charge) if the letter of credit dispatched

through Airmail. If it is a cable or telex letter of credit the P&T charges to be realized at

actual.

Foreign correspondents adjusting charges (FCC) to be realized TK. 1500 (Fixed amount).

To make entry in "letter of credit opening register".

To dispatch the letter of credit as follows:

1.First & second copy - Advising Bank, which in turn forward the original copy to the

exporter.

2.Third copy - Reimbursing Bank.

3.Fourth & Fifth copy—Importer

4.Sixth copy—C.C.I. & E.

5.Seventh to Ninth copy—Letter of credit opening bank's copy.


REQUIRED DOCUMENTS FOR LETTER OF CREDIT OPENING:

Proposal letter (in proposal letter it must be mentioned that - price of goods, CCI & E

registration, pass book number, LCA form dully filled in signed & sealed, Import form

full set, insurance policy & addendum, P.I. number).

Application and agreement for irrevocable LC with adhesive stamp of TK.150.

Import license

HS. Code.

TIN.

VAT registration.

Indenting certificate.

Performa invoice - two copies (with in this it indicate - Performa bill no. & date, item,

particulars, quality, quantity, rate, and amount of goods, total invoice value (E &O.E.)

LCA (Letter of Credit Authorization) form for industrial consumer - four copies. (Within

this - IRC number, total amount)

Signature of Director of the firm and manager of Mutual Trust Bank.

IMP form - Four copies (by this the declaration of the firm's directors)

Money receipts of insurance policy.

After preparing the procedure the bank provide offer in prescribed "offering sheet".

Approval certificate of Bangladesh Bank on behalf of the importer.

OOPPEERRAATTIIOONN OOFF DDOOCCUUMMEENNTTAARRYY LLEETTTTEERR OOFF CCRREEDDIITT

The following five (5) major steps are involved in the Operation of Documentary Letter of Credit

Issuing,

Advising,

Amendment(if necessary),

Presentation,

Settlement,


ISSUING A LETTER OF CREDIT

Before issuing a L/C, the buyer and seller located in different countries, concludes a ‗sales

contract‘ providing for payment by documentary credit. As per requirement of the seller, the

buyer then instruct the bank - the issuing bank – to issue a credit in favour of the

seller(beneficiary). The credit application which contains the full details of the proposed credit,

also serve as an agreement between the bank and the buyer. After being convinced about the

―necessary conditions‖ contained in the application form and ‗sufficient conditions‘ to be

fulfilled by a buyer for opening a credit, the opening bank then proceeds for opening the credit to

be addressed to the beneficiary.

ADVISING A LETTER OF CREDIT

Advising through a bank is a proof of apparent 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 has to verify the signature (s) of the officer (s)

of the opening bank and ensure that the terms and conditions of the credit are not in violation of

the existing exchange control regulations and other regulation relating to export.

AMENDMENT OF L/C

Parties involve in a 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. Amendment of L/C may be for:

Time Extension:The time duration of L/C can be extended by writing an application by

the opener of L/C and signature of the opener should be verified provided the LCA is

valid or the agreement is valid up to that period.

Change in L/C amount: Increase of L/C amount may be done provided that the LCA

covers the increase in amount. L/C amount can be decreased provided the relevant

contract or indent is amended accordingly and with the consent of beneficiary.

PRESENTATION OF DOCUMENTS

The seller being satisfied with the terms and conditions of the credit proceeds to dispatch the

required goods to 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 all documents, the negotiating bank then checks the documents against the credit. If the

documents are founded in order, the bank will pay, accept or negotiate to the issuing bank.

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 under three separate

arrangements as stipulated in the credit, these are

Settlement by payment

Here the seller presents the document to the paying bank and the bank then scrutinizes the

documents, if satisfied the paying bank makes payment to the beneficiary and in case this bank is

other than the issuing bank, then send the documents to the issuing bank. If the issuing bank is

satisfied with the requirements, payment is obtained by the paying bank from the issuing bank.

Settlement by Acceptance

Under this arrangement, the seller submits the documents evidencing the shipment to

the accepting bank accompanied by the draft drown on the bank at the specified tenor. After

being satisfied with the documents, the bank accepts the documents and the draft and if it is a

bank other than the issuing bank, then sends the documents to the issuing bank stating that it has

accepted the draft and at maturity the reimbursement will be obtained in the pre-agreed manner.

Settlement by Negotiation

This settlement procedure starts with the submission of document by the seller to the negotiating

bank accompanied by a draft drown on the buyer or any other drawee, at` sight or at a tenor, as

specified in the credit.

WWHHEENN UUSSIINNGG LLEETTTTEERRSS OOFF CCRREEDDIITT,, BBEE AAWWAARREE OOFF TTHHEE FFOOLLLLOOWWIINNGG

A letter of credit is about documents and not goods. It will not insure the quality of the

goods received.

It is important to understand all required documents before signing and it is also

important to be sure all stipulated conditions can be met.


Ensure time frames can be met since the inability to meet time schedules is the number

one reason letters of credit fail.

The failure to produce the required documentation on time can nullify the letter of credit.

Even minor errors in documentation such as spelling mistakes can render a letter of

credit invalid, so it is critical to be careful with the documentation.

A letter of credit is not an absolute guarantee the beneficiary will receive payment. The issuing

bank is obligated to pay under the letter of credit only when the stipulated documents are

presented, and all the terms and conditions of the letter of credit have been met to the bank's

satisfaction.

HHOOWW LLEETTTTEERRSS OOFF CCRREEDDIITT WWOORRKK

A letter of credit is a promise to pay. Banks issue letters of credit as a way to ensure sellers that

they will get paid as long as they do what they've agreed to do. Letters of credit are common in

international trade because the bank acts as an uninterested party between buyer and seller.

A documentary letter of credit is opened by the purchaser's local bank (the credit-opening

bank).

Via the credit-transmitting bank, the documentary letter of credit reaches the vendor. It

checks whether the terms of the documentary letter of credit match the terms of your

commercial contract. Only if the vendor is convinced can he send the goods to the

purchaser.

The necessary documents (invoice, transport document, insurance documents) are handed

over by the vendor to the credit-transmitting bank. After checking these documents, the

credit-transmitting bank pays the sum that the purchaser owes to the vendor directly.

The credit-transmitting bank sends the documents to the credit-opening bank that, after

checking the documents in turn, pays the amount due to the credit-transmitting bank.

Via the credit-opening bank, the documents finally reach the purchaser, who can use

these documents to collect the shipped goods.

Finally, the buyer pays the amount owed to the local bank.


The processing of Letter of Credit

PPRREESSEENNTTIINNGG AA LLEETTTTEERR OOFF CCRREEDDIITT

Once a letter of credit has been received, it needs to present to the bank for payment along with

other documents which may include:

Commercial invoice

Consular invoice

Insurance documents

Bill of lading

Certificate of origin

Packing list

Inspection certificates

Import permits

The bank will not pay if there are discrepancies and the documentation is not in order.

Importer or

Applicant

Issuing Bank

Advising Bank

or confirming

Bank

Exporter or

Beneficiary

2. Applicant

for LC issue

3. Issue of LC

4. Advising of

LC

8. Payment against

documents to

beneficiary

7. Send document to

issuing bank

6. Taking up

documents and

payment

5. Shipment of goods

and presenting

documents

9.

Receipt of

goods

1.

Internation

al sale

contract

http://www.pierobon.org/export/ch12/loc.htm


IIMMPPOORRTT

MMEEAANNIINNGG OOFF IIMMPPOORRTT

An import is any good or service brought into a country from another country in a fair and

acceptable fashion, typically for use in trade. Imported goods or services introduce domestic

consumers to newer things by foreign producers. Companies usually import goods and services

to supply to the domestic market at a cheaper price and provide goods that are superior compared

to goods manufactured in the domestic market.

WWHHOO IISS AANN IIMMPPOORRTTEERR??

The person who deals in import business obtaining import Registration Certificate (IRC) in terms

of importers, exporters and indenters (registration) order-1981 from the CCI&E submitting the

following papers is treated as importer.

Valid Trade Lice

National ID Card

Asset Certificat

VAT Registration Certificate

Bank solvency Certificate

Trade Association Certificate

Certificate of Incorporation

Memorandum and Articles of Association

GGEENNEERRAALL PPRROOVVIISSIIOONNSS FFOORR IIMMPPOORRTT

Bangladesh import policy order 2006-2009 places control on the importation of some specific

products. The import of a number of products is the sole reserve of nominated government

trading organizations. The import regime consists of:

A banned list: Unless otherwise specified the items banned for import in this list shall

not be importable

A restricted list: Items which are importable on fulfillment of certain conditions

specified in the list shall be importable on fulfillment of certain conditions.


Freely importable items: Unless otherwise specified, any item, which does not appear

either in the restricted list or which has been mentioned as importable subject to certain

condition shall be freely importable.

IIMMPPOORRTT PPRROOCCEEDDUURREE ((SSTTEEPPSS IINNVVOOLLVVEEDD IINN DDEEAALLIINNGG WWIITTHH LL//CC))

Procurement of IRC from the concerned authority.

Signing purchase contract with the seller

Requesting the concerned bank importer‘s bank/ issuing bank to open L/C on behalf of

importer favoring the exporter/ seller/ beneficiary.

The issuing bank open/ issue the L/C in accordance with the instruction/ request of the

importer and request other bank (advising Bank) located in seller‘s/ exporter to advise the

L/C to the beneficiary. The issuing bank may also request the advising Bank to confirm

the credit, if necessary.

The Advising Bank advises/ inform the seller that the L/C has been issued.

As soon as the exporter/ seller receive the L/C and is satisfied that he can meet the L/C

terms and conditions; he is in a position to make shipment of the goods.

After making shipment of goods in favor of the importer the exporter/ seller submit the

document to the negotiating bank for negotiation.

The negotiation Bank scrutinized the documents and if found ok negotiates the

documents and sends the documents to the L/C issuing Bank.

After receiving the documents the L/C issuing bank also examines the documents and if

found ok makes payment to the negotiating bank.

The L/C opening bank then requests the importer to receive the document on payments

The importer after paying all dues receives the documents from the L/C issuing bank and

then releases the importer goods from the port authority.


DDOOCCUUMMEENNTTSS NNEEEEDD TTOO OOPPEENN AA CCAASSHH LL//CC

To open cash LC MTB wants some documents from importer. These are given below

Valid IRC

Valid Trade license

TIN Certificate

VAT Certificate

Up to date income tax certificate

CIB (Credit Information Bureau) report

Pro-forma invoice

Application (in importer pad)

Credit report

Fill up IMP form

LC authorized form

Insurance cover etc.

PPRROOCCEEDDUURREE TTOO BBEE FFOOLLLLOOWWEEDD BBYY BBAANNKKSS FFOORR AACCCCEEPPTTAANNCCEE//IISSSSUUAANNCCEE OOFF

LLCCAA FFOORRMMSS

(1)Acceptance of LCA Forms by the nominated banks:

a. LCA Forms and other relevant papers shall be submitted by the recognized industrial

units to the private sector and registered commercial importers to their respective

nominated bank for the purpose of import by opening L/C.

b. While accepting LCA Forms from a private sector importer the nominated banks shall

ensure that the concerned importer has a valid Import Registration Certificate (IRC).

Unless a private sector importer specifically is exempted from IRC, LCA Forms shall not

be accepted from him/her, or L/C shall not be opened in his/her favor without valid and

legally renewed IRC.

c. L/C for import of capital machinery and initial spares for setting up a new industrial unit

may, however, is opened without any Import Registration Certificate (IRC) and without

obtaining exemption certificate from the Chief Controller.

(2) Compulsory recording of ITC Number


Bank shall not process any LCA Form or open L/C without properly recording the appropriate

ITC Number on the LCA Form or L/C. Bangladesh Bank shall monitor the compliance by the

banks of the above requirements.

(3) Registration of LCA Form and opening of L/C

In case of import under cash foreign commodity aid, grant, loan and other sources for which

registration with Bangladesh Bank is necessary, the nominated bank shall forward the L/C

Authorization Form in quintuplicate to the nominated bank concerned and third and the fourth

copies thereof to the nominated bank concerned and third and the fourth copies thereof to the

concerned Import Control Authority with in fifteen days for record.

(4) LCA Forms under cash foreign exchange

In case of import under cash foreign exchange L/C Authorization Forms shall be required to be

registered with the Bangladesh Bank duty in those instances where prior approval from the

Bangladesh Bank is required for buying foreign exchange.

(5) Transmission of the copy of L/C and copy of amendment if any for record of the Import

Control Authority within fifteen days.

IINNSSTTRRUUCCTTIIOONNSS IISSSSUUEEDD BBYY BBAANNGGLLAADDEESSHH BBAANNKK FFOORR OOPPEENNIINNGG AANNDD OOPPEERRAATTIIOONN

OOFF LLEETTTTEERR OOFF CCRREEDDIITT FFOORR IIMMPPOORRTT OOFF GGOOOODDSS

All Letter of Credits and similar undertakings covering imports into Bangladesh must be

documentary Letter of Credits and should provide for payment to be made against full sets

of onboard (shipped) transport documents (BL, AIB, TR etc.) showing dispatch of goods

covered by Credit to a destination in Bangladesh;

Authorized Dealer is allowed to open divisible, transferable Letter of Credits for import

into Bangladesh under cash LCAF (Letter of Authorization Form);

It is not permissible to open Letter of Credits in favor of beneficiaries in countries from

which import into are banned by the component authority;

The full description of goods to be imported along with unit price and quantity to be given

in the Letter of Credit;


Confidential report of the exporter to be obtained by the AD himself where the amount of

Letter of Credit exceeds TK. 2,00,000 in case of import against proforma invoices issued

direct by foreign supplier and TK. 5,00,000 against indent issued by local agents of the

suppliers;

PPRREEPPAARRAATTIIOONN OOFF PPRROOPPOOSSAALL AANNDD SSUUBBMMIITTTTIINNGG IITT TTOO TTHHEE CCOOMMPPEETTEENNTT

AAUUTTHHOORRIITTYY FFOORR OOBBTTAAIINNIINNGG PPEERRMMIISSSSIIOONN OOFF OOPPEENNIINNGG LLEETTTTEERR OOFF CCRREEDDIITT

Before opening Letter of Credit the applicant must take permission from the competent authority.

Whether the authority has to be taken form the Branch or from the Head Office of MTB depends

on the amount of Letter of Credit and the percentage of margin. A proposal for obtaining

permission for opening Letter of Credit generally contains the following points:

Name and address of the importer;

Name and address of the Guarantor if any;

Particular of Merchandise to be imported along with name of the item Harmonized System

(H.S.) Code, country of origin, quantity, unit price and purpose of import.

Particulars/ Terms of LC along with name and address of the beneficiary, tenor of payment,

port of loading and discharge, shipment validity and expiry date etc.;

Landed cost of the goods;

Market price of the goods at Dhaka and Chittagong (if applicable);

Name of the previous banker with outstanding liability (if any);

Number of CD accounts and transaction performance through this account;

Present liability position with the bank;


DDOOCCUUMMEENNTTSS RREECCEEIIPPTT AANNDD SSCCRRUUTTIINNYY

After opening the Letter of Credit the next step would be to await shipment followed by

negotiation of documents by a bank abroad. The beneficiary of the Letter of Credit (supplier), after

effecting shipment of the goods as per Letter of Credit terms, prepare or collect necessary

documents as required under the terms of Letter of Credit and presents the drafts to the negotiating

bank along with the supporting documents for negotiation.

However, generally the following documents are asked to send:

Bill of lading or Airway Bill or other evidence of shipment (e.g. Railway Receipt, Truck

Receipt, Barge Receipt)

Certificate of Origin;

Commercial Invoice;

Draft or bill of exchange;

Inspection of Survey Certificate;

Marine Insurance Policy;

Packing List;

Quality Control Certificate.


EEXXPPOORRTT A good or service that is produced in one country and then sold to and consumed in another

country. Because many companies are heavily dependent on exports for sales, any factors such

as government policies or exchange rates that affect exports can have significant impact on

corporate profits. A good produced in one country and sold to a customer in another country.

Exports bring money into the producing country; for that reason, many economists believe that a

nation's proper balance of trade means more exports are sold than imports bought. Exports may

be difficult to sell in some countries, as the importers may put up various protectionist measures

such as import quotas and tariffs. Most governments seek to promote exports, while they have

differing positions on imports.

DDOOCCUUMMEENNTTSS UUSSEEDD IINN EEXXPPOORRTT

When a firm sells its goods abroad, it must arrange for each export shipment to be accompanied

by various documents. Depending on the country to which the goods are being sent, these

documents will vary. But for exporting we can divide those documents in two types:

a. Substantive Documents

b. Auxiliary Documents

SSuubbssttaannttiivvee DDooccuummeenntt::

Draft or bill of exchange:

Bill of Exchange is an instrument in writing containing an unconditional order or at a fixed

determinable future time a certain sum of money only to, or to the order of a certain person or to

the bearer of the instrument.

Commercial Invoice:

Commercial Invoice is the export firm's invoice, addressed to the foreign importer describing the

goods shipped and the total price that it must pay. However, some countries require the

commercial invoice to be prepared on their own forms. Such forms are called customs invoices.

Bill of lading or Airway Bill:

Bill of Lading is a document supplied to the exporter by the shipping company that is

transporting the goods to their foreign destination, listing, item by item, the goods being shipped.

http://financial-dictionary.thefreedictionary.com/money

http://financial-dictionary.thefreedictionary.com/Balance+of+trade

http://financial-dictionary.thefreedictionary.com/import

http://financial-dictionary.thefreedictionary.com/Import+Quota

http://financial-dictionary.thefreedictionary.com/tariff

http://www.malaysiaexports.com/inex15.2.bill.of.lading.htm


AAuuxxiilliiaarryy DDooccuummeennttss::

Auxiliary Documents are given below-

Cargo manifest or packing list:

When quantities, weights or contents of the various packing cases in an export shipment

vary, it is usual to prepare a separate list for each case indicating its contents, weight and

measurements. It also often includes the outside dimension of each case and the total cubic

content and total weight of the shipment.

Usually, cargo manifests or packing lists are not specifically required by the Customs

authorities, from various importing countries. However, they serve as useful supplements to

the commercial invoice that accompanies the export shipment.

Certificate of Origin:

Certificate of Origin is a document, which indicates the country in which the goods were

produced, is required whenever preferential duties are claimed. Sometime, consular

legalization of the document is necessary. Also, certification of the document by a Chamber

of Commerce is required.

Quality control certificate:

While exporting products for which quality control certificate is obligatory, the exporter

will have to submit, to the Customs Authorities, a quality control certificate issued by the

appropriate authority.

Consular Invoice:

Some country required consular invoice. Countries that require a consular invoice also

require a commercial invoice as additional proof of the details of the export shipment.

Countries that do not require a consular invoice, uses the commercial invoice as the

document upon which the import duty is based.

Certificate of free sale:

This certificate required for pharmaceuticals and certain chemicals entering a number of

countries.

http://www.malaysiaexports.com/inex15.1.consular.invoice.htm#Commercial Invoice

http://www.malaysiaexports.com/cc.WCC.htm

http://www.malaysiaexports.com/cc.WCC.htm


Export Declaration Forms:

It is usually necessary for the exporter wishing to ship goods abroad, to fill out a form called

an Export Declaration. This form required by the government whenever the value of the

shipment exceeds a certain minimum amount or whenever a duty drawback is claimed; it is

available at local Customs offices.

The document is also used for statistical purposes so that government authorities know

exactly what has been exported from the country in each month and year and to which

country. The information required include a description of the goods, their quantity, value

and destination of the goods and whether the goods originated in the exporting country or are

the goods of foreign origin being re-exported.

RREEGGIISSTTRRAATTIIOONN FFOORR TTHHEE EEXXPPOORRTTEERR

In the export policy of Bangladesh any one can not export goods in abroad. To export goods an

exporter needs a valid Export Registration Certificate from the Chief Controller of Import and

Export (CCI&E). Exporters find an Export Registration Certificate (ERC) number which is

incorporate on Export form and papers connected for obtaining Export Registration Certificate.

A Bangladeshi exporter has to apply to the controller or joint controller or Deputy Controller or

Assistant Controller of Import and Export to get an ERC. The ERC have to renew every year. An

exporter can do this registration from Dhaka, Chittagong, Sylhet, Comilla, Barishal, Borga,

Rangpur, Dinajpur and from Mymensingh. The following documents are required for ERC-

National ID card

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

limited company

Trade license

Bank Certificate

Assets certificate

Income Tax certificate etc.


PPRROOCCEESSSSIINNGG OOFF EEXXPPOORRTT OORRDDEERR::

Setting up the deal:

First an exporter and importer have to establish sales contract, by either being in possession of an

international purchase order or a documentary credit stating exporter as the beneficiary. Now

exporter in a position to process the order.

Shipping the goods:

Once the deal has been set up, the following steps take place:

Read the purchase order/documentary credit very carefully and take note of the

requirements of the buyer. If there are any pre-shipment actions that must occur, these

activities must take place before book the freight and load the container. Pre-shipment

activities could include pre-shipment inspections, health inspections or product analyses,

all of which must be carried out before the goods have been packed for shipping.

A declaration is a commitment to the Bangladesh Bank that funds will be brought into

the country in exchange for goods.

Now get ready to pack and label the goods. At this point, exporter can contact freight

forwarder to make a booking on the next available carrier.

Freight forwarder will deliver the goods to the carrier and obtain a transport document as

proof of receipt. He is now in a position to arrange for customs clearance, which will

require the submission of a customs bill of entry and a transport document (in the case of

air, road and rail exports). Then hand over the transport and insurance documents to

Exporter.

Now exporter assemble all export documentation such as the commercial invoice,

packing list, transport document, insurance document, as well as the verification

documents issued by third parties.

Getting Paid:

Once all documents are ready and completed in accordance with the documentary credit,

exporter now in a position to present the documents for payment. In the case of documentary

credits submit the documents to the negotiating bank, which will check the documents, ensuring


that they are in accordance with the L/C, and make payment to Exporter. Of course, if selling on

an acceptance L/C, the bank will accept drafts, and give payment at maturity of the draft.

Follow-up and service:

The most important part is export market development process has now arrived. It is sometimes

more difficult to secure a follow-up order than it is to achieve the first order. It is vital, at this

point, to get feedback from the buyer as to whether exporter has met buyer needs. It might be

necessary, to plan a follow-up visit to secure exporter position with the buyer and check to see

whether his needs have changed.

MMAAKKIINNGG SSAALLEESS CCOONNTTRRAACCTT AANNDD RREECCEEIIVVIINNGG LL//CC::

To export goods an exporter and importer have to do a sale contract. They contract each other

and do a sales contract which may be written or oral contract. In this contract given details

description of exportable goods, quantity, price, shipment, insurance, inspection of goods etc.

After getting sales contract exporter want letter of credit from importer. All activities related to

letter of credit are done through Bank. In letter of credit clear stating about terms and condition

of export and method of payment. The following main point to be looked into for receiving or

collecting export proceeds –

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

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

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

Terms and condition of the mode of payment should be stated clearly in case of other mode

of payment –

Cash in advance

Open account

Collection basis (Documentary or clean)


EEXXPPOORRTT FFIINNAANNCCEE

PRE SHIPMENT FINANCE IN EXPORT TRADE

Pre Shipment Finance is issued by a financial institution when the seller wants the payment of

the goods before shipment. The main objectives behind pre shipment finance or pre export

finance are to enable exporter to:

Procure raw materials.

Carry out manufacturing process.

Provide a secure warehouse for goods and raw materials.

Process and pack the goods.

Ship the goods to the buyers.

Meet other financial cost of the business.

.

PPOOSSTT SSHHIIPPMMEENNTT FFIINNAANNCCEE

Post shipment finance is a kind of loan provided by a financial institution to an exporter or seller

against a shipment that has already been made. This type of export finance is granted from the

date of extending the credit after shipment of the goods to the realization date of the exporter

proceeds. Exporters don't wait for the importer to deposit the fun

FFOORREEIIGGNN DDOOCCUUMMEENNTTAARRYY BBIILLLL PPUURRCCHHAASSEE ((FFDDBBCC))

Bank gives the credit facilities against the export documents. Mutual Trust Bank also gives the credit

facilities to their clients against the export documents. Clients submit the bill of export to bank

for collection and payment of the back to back letter of credit. After that bank purchases the bill

and collects the money from the exporter.

MTB subtracts the amount of bill from back to back and gives the rest amount to the client in

cash or transfer his account or pay by the pay order. For this purpose, MTB maintains a separate

register called Foreign Documentary Bill Purchase (FDBC) register.


This register contains the following information-

Date

Reference number of FDBC

Name of the drawer

Name of the collecting bank

Conversion rate

Bill amount both in figure and in taka

EXP form number

Export L/C Number

PPRREEPPAARRIINNGG OOUUTT AANNDD DDEELLIIVVEERRYY OOFF SSHHIIPPPPIINNGG DDOOCCUUMMEENNTTSS

All carriers whether common or private (railway, steamship, and motor trucking or airline

companies) and their agents have been directed by the Bangladesh Bank as under:

a. In respect of export of goods from Bangladesh to foreign countries by land route or by

sea, the Railway Receipts, Bills of Lading, Truck Receipts or any other documents of title

to Cargo should be drawn only to the order of an Authorized Dealer designated for the

purpose by the exporter. This restriction will not apply if the exporter produces a

certificate to the carriers from the Authorized Dealer concerned in the prescribed form.

b. The certificate will be issued by the Authorized Dealers only if the shipment is being

made against an advance payment or against an irrevocable Letter of Credit which calls

for drawing of documents of title to cargo to the order of the opening bank, or the

importer, or the exporter or to order and blank endorsed.

c. In respect of export of goods to foreign countries by air, the airway bills and any other

documents of title to cargo should be drawn to the order of a bank in the country of

import nominated by the Authorized Dealer designated for this purpose by the exporter.

EENNDDOORRSSEEMMEENNTT OOFF SSHHIIPPPPIINNGG DDOOCCUUMMEENNTTSS BBYY AAUUTTHHOORRIIZZEEDD DDEEAALLEERRSS

The Authorized Dealers to whose order the relative railway receipts, bills of lading etc., are

drawn shall endorse the same to the order of their foreign correspondent but in no case shall they

make any blank endorsement thereon or endorse them to the order of the consignor unless they


have obtained specific or general approval of the Bangladesh Bank. However, in the case of

exports through third country intermediary i.e. under merchanting arrangements, it will be in

order for Authorized Dealers to make blank endorsement where advance payment has been

received or where documents are negotiated under letters of credit which call for such blank

endorsement.

SSUUBBMMIITTTTIINNGG OOFF EEXXPP FFOORRMM TTOO TTHHEE AAUUTTHHOORRIIZZEEDD DDEEAALLEERRSS

All exporters must be declared on the EXP Form. On EXP Form statutory declaration is

furnished by exporter before shipping goods to countries outside Bangladesh and certificate on it

is given by their banker (Authorized Dealer). The Foreign Exchange Regulation Act in force

prohibits export of goods outside Bangladesh unless a declaration is furnished on EXP Form that

foreign exchange representing the full export value of the goods has been or will be disposed of

in a manner and within a period specified by Bangladesh Bank. The period prescribed by

Bangladesh Bank is four months for receiving full foreign exchange proceed of export by the

exporter.

CChheecckk lliisstt ffoorr hhaannddlliinngg EEXXPP ffoorrmm::

On receipt of EXP Form the same shall have to be scrutinized to ensure the following-

All columns of EXP Form have been properly filled in.

The exporter is registered with CCI&E and the export registration number has been

quoted on the EXP Form correctly.

A Photostat copy of valid ERC is obtained for branch‘s record duly verified with the

original.

The export form has been duly signed by the exporter or his duly authorized agent as

recorded with us

Arrangement has been made with the branch for payment of customs duty on export

where applicable.

The exporter must submit all the exp documents to the authorized dealer. There are four types of

EXP documents.


Four types of EXP documents are –

a. Original copy- The Customs authorities will detach the original copy and after filling in

the portion relating to them and affixing their seal and signature thereon forward it to the

Bangladesh Bank.

b. Duplicate copy- Duplicate copy submits to Bangladesh Bank with 14 days of shipment

through bank with invoice.

c. Triplicate copy-Triplicate copy submit to Bangladesh Bank after realized the export

proceeds

d. Quadruplicate copy- Quadruplicate copy keeps by MTB for their own record.

OOVVEERRDDUUEE EEXXPPOORRTT BBIILLLLSS

Overdue Export Bill will be reviewed by the Manager, export periodically to protect the interest

of bank through appropriate action with due reference to the track of the goods dispatched

shipped. All export bills, overdue for 21 days in case of sight bill or after expiration, must be

monitored closely for realization.


FFOORREEIIGGNN RREEMMIITTTTAANNCCEE OOFF MMTTBB

MMEEAANNIINNGG OOFF RREEMMIITTTTAANNCCEE

The word remittance originates from the word ―remit‖ which means to transit money/fund. In

banking terminology, the word ―remittance‖ means transfer of fund from one place to another and

when money is transferred from one country to another then it is called ―Foreign Remittance‖.

Mutual Trust Bank is an authorized dealer to deal in foreign exchange business. As an authorized

dealer, a bank must provide some services to the client regarding foreign exchange and this branch

provides these services through foreign remittance department.

The basic function of this department is outward and inward remittance of foreign exchange from

one country to another country. In the process of providing this remittance service, it sells and buys

foreign currency. The conversion of one currency into another takes place at an agreed rate of

exchange, which the banker quotes, one for buying and another for selling. In such transactions the

foreign currencies are like any other commodities offered for sales and purchase.

RREEMMIITTTTAANNCCEE PPRROOCCEEDDUURREESS OOFF FFOORREEIIGGNN CCUURRRREENNCCYY

There are two types of remittance:

Inward remittance

Outward remittance

INWARD FOREIGN REMITTANCE

The remittance of freely convertible foreign currencies which Mutual Trust Bank Foreign

Exchange branch is receiving from abroad against which the authorized dealers making payment

in local currency to the beneficiaries may be termed as foreign inward remittance.

Mode of inward remittances

The term inward remittances includes not only remittances by TT., MT., Drafts etc. but also

purchases of bills, purchases of drafts under travelers letter of credit and purchases of travelers

cheques. Foreign currency notes against which payment is made to the beneficiary also a part of

inward remittances. Thus the following are the Mode of inward remittances:


TT: Telegraphic Transfer.

MT.: Mail Transfer.

FD: Foreign Drafts.

TC: Travelers Cheque.

Foreign currency notes.

Purpose of inward remittance

The purpose of remittance is of various reasons. Such as:

For family maintenance.

Realization of exports proceeds.

Gift.

Donation.

Export brokers commission.

About” Form-C"

The authorized dealer should obtain 'Form - C' from the beneficiary to know the purpose of the

remittances in all cases and they are to submit the "Form - C' to Bangladesh Bank along with the

monthly returns where the proceeds of the remittances is TK. 5000/= & above. 'Form - C' is a

prescribed declaration form & this 'Form -C' is to be filled up and signed by the beneficiary

himself.

Payment procedure of FD, MT, & PO Drawn on MTB

The above investments that are drawn on MTB Foreign Exchange Branch may be paid on the

spot before making payment the following procedures to be observed by the authorized dealer:

To obtain Form-C.

To verify the signatures of the instrument.

To convert the foreign currency into Bangladesh TK. with O.D. (On Demand Transfer)

Buying rate prevailing on the date.

To make entry in TTs, drafts & Mails received register.


Payment procedure of T.T.:

To verify the 'test number'.

To inform the beneficiary for submission of "Form - C".

To confirm from issuing bank or reimbursing bank.

To covert of foreign currency into Bangladesh currency with T.T.

To make entry in T.T.s, drafts, M.T.s, received registration.

To prepare vouchers.

To prepare FET schedule.

Payment of traveler's cheque (TC):

To checkup the custom declaration (if any).

To consult with purchase agreement (if any).

To obtain signature on TC and to verify the same with the previous signature of the

beneficiary of the TC.

To make entry in register for TC & drafts purchased.

To convert foreign currency into Bangladesh currency.


To send the TC for collection.

To prepare the vouchers.

Payment of foreign currency notes:

To check the custom declaration (if any).

To made entry in (kateha) raw register.

To convert foreign currency into Bangladesh currency.

To prepare vouchers.

No FET schedule is required to be prepared & sent to head office because in this case

there is no transaction with head office.


Cancellation of inward remittance:

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

being subsequently cancelled, either in full or in part because of non-availability of beneficiary.

Authorized dealers must report the cancellation of the inward remittance as an outward

remittance of "Form-T/M". Required documents are:

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

The name & address of the beneficiary.

The amount of the purchase as effected.

Reasons for cancellation.

Reporting to Bangladesh Bank:

On the last working day of each month the transaction during the month to be reported to

Bangladesh Bank through the following schedule:

Schedule -J-l / 0-3 for TK. 5000 & above.

Inward remittance voucher-1/04 for below TK. 5000.

FOREIGN OUTWARD REMITTANCES

The remittance in foreign currency which is being made from our country to abroad, is known as

foreign outward remittance.

Mode of outward remittance:

Thus the following are the Mode of outward remittances:

TT. Telegraphic Transfer

MT: Mail Transfer.

FD: Foreign Drafts.

PO: Payment Order

TC: Travelers Cheque.

Foreign currency notes.


Approval of Bangladesh Bank:

Bangladesh Bank provides permission or approval for outward remittances to the applicants who

are to lodge an application for the purpose on the following prescribed forms with an authorized

dealer who forwarded the same to Bangladesh Bank for approval:

The IMP form (cover remittances for imports).

Form T/M (Traveling & Miscellaneous).

Issuance procedure of FD, MT. & TT.:

To prepare the instrument.

To make entry in DD, MT, TT issued register.

To prepare draft advice in duplicate one for drawee bank & one for reimbursing bank.

To make entry in draft advice dispatched register.

To send reimbursement authority in case of MT & TT.


Issuance procedures of traveler cheque:

To verify the approved T / M form or Bangladesh Bank permit.

To issue TC by obtaining signature of the purchaser on the TC.

To endorse in the passport.


To make entry in the travelers cheque issue register.

The TC issuing slip of the issued TC to be sent to that bank (whose TC issued)

With reimbursement instruction.

Issuance procedure of foreign currency notes:

To verify the approved T.M form or Bangladesh Bank permit.

To issue foreign currency notes by endorsing in the passport.

Voucher preparing with accounting treatment.


Financial Performance at a Glance on MTB:

Earnings Per Share:

In 2009 to 2010 the banks Earning Per Share increases 3.2 to 3.89. But in 2011 EPS decreases

3.89 to 1.59 and it reflects that the growth decreases 58.88%. Its not a good sign for the bank and

the shareholder.

Information per Share 2009 2010 2011

Earnings Per Share(BDT)

(Share valueBDT10) 3.2 3.89 1.59

Figure: 1

Total Assets:

The banks total assets posted a 32.69% increase in 2011, rising from BDT 57,529 million to

BDT 76,331 million but in 2009 to 2010 total asset decreases. Otherwise total deposit 2009 to

2011 constantly increases. Shareholders fund step by step increases. It‘s a good sign for Mutual

Trust Bank Ltd.

At the Year End(BDT

in million)

2009 2010 2011

Shareholders Fund 3,685 4,379 4,815 Total Deposit 42,354 45,129 59,051

Total Loans &

Advances

33,884 39,676 47,005

Total Assets 52,775 57,529 76,331

2009 2010 2011

3.23.89 1.59

1 2 3

Earning Per Share

Series1 Series2


Figure: 2

Ratio Analysis:

In 2009 Return on average Equity 26.61% and 2010 was 24.52% so it shows decreasing

otherwise 2011 return on average equity fall by 8.84% .Ratio analysis also shows that

Return on average assets year to year also decreasing.

Ratios 2009 2010 2011

Return on average

Equity (%) 26.61% 24.52% 8.84%

Return on average

Assets (%) 1.79% 1.79% 0.61%

Capital Adequacy

Ratio (%) 9.20% 11.49% 11.96%

.

Figure: 3

2009 2010 2011

52775 5752976331

1 2 3

Total Asset

Series1 Series2

20092010

201126.61%

24.52%

8.84%

1 2 3

Return On Average Equity

Series1 Series2


Foreign Exchange Performance Analysis:

IMPORT:

Year 2009 2010 2011

Import(USD in millions) 362.45 333.15 440.56

Figure: 4

Import volume of MTB during the year 2011 was USD 440.56 million compared to USD 333.15

million in 2010, which showed increased by 32.24% but in 2009 import was USD 362.45 and

that shows a fall by 6.96%. The major import finance was in the areas of raw materials, fabrics

and accessories, chemicals, electronic goods and other consumer products, capital machinery,

food grains etc.

EEXXPPOORRTT::

YYEEAARR 22000099 22001100 22001111

Export (USD in

millions) 223399..9955 222200..1199 227700..2299

2009 2010 2011

362.45 333.15 440.56

1 2 3

IMPORT

Series1 Series2


Figure: 5

In 2011, the total export volume of MTB stood at USD 270.29 million compared to USD 220.19

million, which reflects an increase by 22.75% over the previous year. In 2009 total export was

USD 239.95 million compare to 2010 it shows in 2010 it falls by 14.40%.But in 2011 total

export increasing.

FFOORREEIIGGNN RREEMMIITTTTAANNCCEE::

YYEEAARR 22000099 22001100 22001111

FFOORREEIIGGNN RREEMMIITTTTAANNCCEE

(USD In millions)

111155..7766 112233..4455 113366..1111

Figure: 6

2009 2010 2011

115.76 123.45 136.11

1 2 3

Export

Series1 Series2

2009 2010 2011

115.76 123.45 136.11

1 2 3

Foreign Remittance

Series1 Series2


In 2011 MTB procured inward foreign remittance USD 136.11 million equivalent to BDT 10.04

billion. Otherwise in 2010 was inward foreign remittance USD 123.45 million and in 2009

inward foreign remittance was USD 115.76 million. This growth was possible due to

introduction of different instant payment products and technology including extending SWIFT,

Online, EFT etc. and further efforts are being made for more speedy payments.

Financial Performance Analysis of MTB compare to Commercial Bank:

Commercial Bank in Bangladesh:

AB Bank Ltd.

Bank Asia Ltd.

BRAC Bank Ltd.

Dutch-Bangla Bank Ltd.

Dhaka Bank Ltd.

Eastern Bank LTd.

IFIC Bank Ltd.

Jamuna Bank Ltd

Mercantile Bank Ltd.

Mutual Trust Bank Ltd.

National Bank Ltd.

NCC Bank Ltd.

ONE Bank Ltd.

Pubali Bank Ltd.

Prime Bank Ltd.

Southeast Bank Ltd.

Standard Bank Ltd.

The City Bank Ltd.

The Premier Bank Ltd.

Trust Bank Ltd.

United Commercial Bank Ltd.

Uttara Bank Ltd.

Rupali Bank Ltd.

Here, I want to find out the financial performance of MTB compare to the commercial bank in

Bangladesh. For financial performance evaluation I analyze earning per share, profit margin and

ratio.


Return on Asset:

ROA 2010 2011 Average

AB Bank Ltd. 2.79% 0.87% 1.83%

Bank Asia Ltd. 1.83% 1.63% 1.73%

BRAC Bank Ltd. 1.55% 1.36% 1.46%

Dutch-Bangla Bank Ltd. 1.99% 1.75% 1.87%

Dhaka Bank Ltd. 2.22% 2.00% 2.11%

Eastern Bank LTd. 3.19% 2.52% 2.86%

IFIC Bank Ltd. 2.37% 0.89% 1.63%

Jamuna Bank Ltd 1.80% 1.69% 1.75%

Mercantile Bank Ltd. 1.64% 1.49% 1.57%

Mutual Trust Bank Ltd. 1.79% 0.61% 1.20%

National Bank Ltd. 5.09% 3.60% 4.35%

NCC Bank Ltd. 2.84% 2.12% 2.48%

ONE Bank Ltd. 3.63% 2.29% 2.96%

Pubali Bank Ltd. 2.52% 2.00% 2.26%

Prime Bank Ltd. 2.01% 1.83% 1.92%

Southeast Bank Ltd. 2.09% 1.23% 1.66%

Standard Bank Ltd. 2.06% 1.73% 1.90%

The City Bank Ltd. 2.20% 2.00% 2.10%

The Premier Bank Ltd. 0.68% 2.60% 1.64%

Trust Bank Ltd. 2.19% 0.81% 1.50%

United Commercial Bank Ltd.

1.68% 1.74% 1.71%

Uttara Bank Ltd. 1.91% 1.69% 1.80%

Rupali Bank Ltd. 0.88% 0.41% 0.64%

Total ROA = 44.91%

Mean = 1.95%

Return on Assets(ROA)

Mutual Trust Bank Ltd. 1.20%

Commercial Bank Average 1.95%


Figure:5

The return on assets (ROA) percentage shows how profitable a company's assets are in

generating revenue.

ROA can be computed as:

ROA = Net Income

Total Asset

Here , the graph shows that Mutual Trust Bank return on assets 1.20% otherwise commercial

Bank average return on assets 1.95% .In commercial Bank, National Bank shows higher ROA

4.35% where MTB only 1.20%. MTB return on assets is less than 0.75% compare to

Commercial Banks. It shows that MTB return on asset is near to the average Commercial Bank,

but in 2010 to 2011 MTB return on assets ratio is decreasing which is not good for the Mutual

Trust Bank Ltd.

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

Mutual Trust Bank Ltd. Commercial Bank Average



http://en.wikipedia.org/wiki/Profit_(accounting)

http://en.wikipedia.org/wiki/Asset

http://en.wikipedia.org/wiki/Revenue


Return on Equity:

ROE 2010 2011 Avarage

AB Bank Ltd. 26.65% 8.94% 17.80%

Bank Asia Ltd. 27.33% 15.36% 21.34%

BRAC Bank Ltd. 18.95% 17.90% 18.43%


Dhaka Bank Ltd. 23.49% 25.52% 24.51%

Eastern Bank Ltd. 23.64% 19.03% 21.34%

IFIC Bank Ltd. 33.12% 11.60% 22.36%

Jamuna Bank Ltd. 20.52% 19.43% 19.98%




NCC Bank Ltd. 25.35% 18.98% 22.17%

ONE Bank Ltd. 38.80% 22.83% 30.81%

Pubali Bank Ltd. 22.48% 18.17% 20.33%

Prime Bank Ltd. 18.34% 19.13% 18.74%



The City Bank Ltd. 21.30% 13.70% 17.50%


Trust Bank Ltd. 25.37% 11.15% 18.26%

United Commercial Bank Ltd. 27.92% 18.45% 23.18%

Uttara Bank Ltd. 18.02% 17.13% 17.58%

Rupali Bank Ltd. 7.71% 3.94% 5.82%

Total ROE = 469.45%

Mean = 20.41%

Return on Equity (ROE)




Figure: 6

Return on equity (ROE): ROE measures the rate of return on the ownership interest

(shareholders' equity) of the common stock owners. It measures a firm's efficiency at generating

profits from every unit of shareholders' equity (also known as net assets or assets minus

liabilities). ROE shows how well a company uses investment funds to generate earnings growth.

ROE =

Net Income

Stockholder

Equity

Here , the graph shows that MTB average return on equity 16.68% otherwise commercial bank

average return on equity 20.41%.In 2010 to 2011 MTB return on equity fall by 15.68% which

does not show good indicator for shareholder and bank performance.

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%




http://en.wikipedia.org/wiki/Shareholders%27_equity


Profit Margin:

Profit Margin

2010 2011 Avarage

AB Bank Ltd. 33.91% 17.15% 25.53%

Bank Asia Ltd. 29.33% 28.72% 29.03%

BRAC Bank Ltd. 17.53% 16.80% 17.16%


Dhaka Bank Ltd. 30.22% 34.77% 32.50%

Eastern Bank Ltd. 37.53% 32.35% 34.94%

IFIC Bank Ltd. 25.91% 12.86% 19.39%

Jamuna Bank Ltd. 28.46% 27.35% 27.90%




NCC Bank Ltd. 41.80% 37.17% 39.48%

ONE Bank Ltd. 42.25% 31.42% 36.83%

Pubali Bank Ltd. 35.77% 33.19% 34.48%

Prime Bank Ltd. 31.66% 31.45% 31.56%



The City Bank Ltd. 25.33% 26.02% 25.68%


Trust Bank Ltd. 34.99% 20.13% 27.56%

United Commercial Bank Ltd. 27.79% 31.69% 29.74%

Uttara Bank Ltd. 26.72% 25.31% 26.01%

Rupali Bank Ltd. 22.78% 8.23% 15.50%

Total PM = 670.87%

Mean = 29.17%

Profit Margin (PM)




Figure: 7

Profit Margin:

A ratio of profitability calculated as net income divided by revenues or net profits divided by

sales. It measures the dollar amount of the sales that a company actually retains in earnings.

Profit margin is very useful in comparing companies in similar industries. A higher profit margin

indicates a more profitable company.

Profit

Margin =

Net Income

Sales

Here, the graph shows that profit margin of MTB is less than Commercial Bank by 6.08%.

Otherwise MTB profit margin 2010 to 2011 is decreasing by 4.10% which is not favorable for

Mutual Trust Bank.

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%


Profit Margin (PM)

Profit Margin (PM)


Earnings per share:

Earnings Per Share (EPS) 2010 2011 Avarage

AB Bank Ltd. 10.03 3.60 6.82

Bank Asia Ltd. 6.43 3.65 5.04

BRAC Bank Ltd. 5.05 5.15 5.10

Dutch-Bangla Bank Ltd. 10.01 10.80 10.41

Dhaka Bank Ltd. 6.03 4.68 5.36

Eastern Bank Ltd. 5.36 5.57 5.47

IFIC Bank Ltd. 5.95 2.58 4.27

Jamuna Bank Ltd. 2.92 3.65 3.29

Mercantile Bank Ltd. 4.10 3.49 3.80

Mutual Trust Bank Ltd. 3.89 1.59 2.74

National Bank Ltd. 7.97 7.07 7.52

NCC Bank Ltd. 5.33 3.70 4.52

ONE Bank Ltd. 5.92 4.54 5.23

Pubali Bank Ltd. 4.82 4.68 4.75

Prime Bank Ltd. 3.98 4.70 4.34

Southeast Bank Ltd. 2.34 3.77 3.06

Standard Bank Ltd. 3.39 3.36 3.38

The City Bank Ltd. 3.70 4.00 3.85

The Premier Bank Ltd. 6.08 1.34 3.71

Trust Bank Ltd. 4.79 2.32 3.56

United Commercial Bank Ltd. 4.20 3.49 3.85

Uttara Bank Ltd. 5.40 5.74 5.57

Rupali Bank Ltd. 4.37 7.94 6.16

Total EPS = 111.74

Mean = 4.86

Earnign Per Share (EPS)

Mutual Trust Bank Ltd. 2.74

Commercial Bank Average 4.86


Figure: 8

Earnings per share:

Earnings per share (EPS) are the earnings returned on the initial investment amount. The term

earnings per share (EPS) represents the portion of a company's earnings, net of taxes and

preferred stock dividends, that is allocated to each share of common stock. The figure can be

calculated simply by dividing net income earned in a given reporting period by the total number

of shares outstanding .

Earnings

per Share =

Profit

Weighted Average

common shares

Earnings per share of Mutual Trust Bank are 2.74 otherwise Commercial Bank average EPS 4.86

In 2010 to 2011 MTB EPS is decreasing and compare to commercial bank EPS is lower by 2.12

which is not good for MTB.

0.00

1.00

2.00

3.00

4.00

5.00

6.00




http://en.wikipedia.org/wiki/Earnings_per_share

http://www.investinganswers.com/financial-dictionary/financial-statement-analysis/earnings-1514

http://www.investinganswers.com/financial-dictionary/tax-center/taxes-4567

http://www.investinganswers.com/financial-dictionary/stock-market/preferred-stock-1297

http://www.investinganswers.com/financial-dictionary/financial-statement-analysis/net-income-808

http://www.investinganswers.com/financial-dictionary/stock-market/shares-outstanding-3594


MMAAJJOORR FFIINNDDIINNGGSS

Banking sector being a vital sector of Bangladesh continues to a great deal in the economy of

Bangladesh. Lot of new commercial bank has been established in last few years and these banks

have made the banking sector very competitive. So now, banks have to organize their operation

and do their business according to the need of the market. Banking sectors no more depends on a

traditional method of banking. In this competitive world, this sector has trenched its wings wide

enough to cover any kind of financial services anywhere in this world. The major task for banks,

to survive in this competitive environment is by managing its assets and liabilities in an efficient

way. The Mutual Trust Bank is one of the leading banks in the private sector, and it gives a vast

service to its customer. I observed the foreign exchange department, general banking area and

also loans and advance department very carefully. With a keen attention and observation, the

study has been tried to complete. The following are some extract of the major findings:

MTB financial growth rate is not good in 2011 compare to 2010 and 2009.

MTB earning per share is decreasing and EPS is lower than average commercial Bank

EPS.

MTB foreign exchange department is doing well and it shows the growth compare to

previous year.

Ratio analysis shows that MTB‘s ROA,ROE,CAR is not good in 2011

Export, Import, Foreign Remittance growth rate increasing in 2011 compare to previous

year.

For the effectiveness of the foreign exchange department, MTB has divided the whole

department into three major parts, which are Export, Import, and Remittance.

The monitoring system of the foreign exchange department of MTB is excellent. The

chain of command is strictly maintained here. The executives now and then visit the

department, which keeps all the officers alert about their duty.

It may be strictly observed that loan procedure is not influenced by the various factors.

Some rules and regulations of government work as barrier for the free flow of remittance,

export and import of profitable goods.


RREECCOOMMMMEENNDDAATTIIOONNSS

As per earnest observation some suggestions for the improvement of the situation are given

below:

To attract more clients MTB has to create a new marketing strategy, which will increase

the total export import business.

Attractive incentive packages for the exporter will help to increase the export and

accordingly it will diminish the balance of payment gap of MTB.

Long term training very much required for the foreign exchange officers.

In our country financial problem is a great constrain in foreign trade. MTB is very

conservative for post shipment finance. If it stays in liberal position the exporters can

easily overcome their financial constrains.

Bank can provide foreign market reports, which will enable the exporter to evaluate the

demand for their products in foreign countries.

Segregation of International Trade transaction from the existing situation i.e. Credit

aspects to be looked after by credit analysis department.

The department shall only remain engaged with the documentary aspects of International

Trade like opening L/C‘s for all types of import and negotiation of export bills.

New investment sector is booming rapidly. MTB should identified those untapped areas

of business and invest in those sector such as Gas plant, condensed milk project, ship

breaking etc.

Efforts may be initiated to bring in the fold of MTB more short term deposits particularly

cost free current deposits.

It is noted that ―delay in service‖ is one of the problems faced by the clients. Attempts

should be made to straighten the banking procedure.

Effective Management Information System must be evolved by MTB so that correct

decisions may be taken at correct time at policymaking level.

Proper communication needs to establish with clients.

Arrangement of monthly /quarterly training courses /workshops for the selected by the

authority in order to promote employee to their desired level.


CONCLUSION

This report is prepared to fulfill one of the requirements of BBA program to submit internship

report under Business students. It is an effort to cover the foreign exchange activities in general

which has been observed during the internship period in the Mutual Trust Bank Ltd. The main

objective of the report is to know the overall operations of the Foreign Exchange Department and

to measure actual performance of foreign trade of MTB. This report tries to identify the major

tasks of different section of foreign exchange department of MTB and tries to find out the overall

financial performance through ratio analysis, profit margin,earning per share compare to

commercial Bank.


References:

1. Annual Report 2011 & 2010 On Mutual Trust Bank

2. http:// www.mutualtrustbank.com

3. http://www.facebook.com/Mutual.Trust.Bank

4. http://www.wikipedia.com

5. http://en.wikipedia.org.com

6. http://bangladesh-bank.org

http://www.mutualtrustbank.com/

http://www.facebook.com/Mutual.Trust.Bank

http://www.wikipedia.com/

http://en.wikipedia.org.com/

mutual trust bank

Documents

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