Foreign Exchange BASIC Bank Ltd-

Foreign Exchange means foreign currency and it includes any instrument

drawn, accepted, made or issued under clause (13), Article 16 of the
Bangladesh Bank rder, 1!"#$ All deposits, credits and %alances paya%le in
any foreign currency and draft, tra&elers che'ue, letter of credit and %ill of
exchange expressed or drawn in Bangladeshi currency %ut paya%le in any
foreign currencies$
Bangladesh Bank issues Authori(ed )ealer (A)) license %y o%ser&ing the
%ank*s performance and also the customers associated with the %ank for
conducting foreign dealings$
Back Ground of Banks Involvement
Banks play a &ital role %y minimi(ing the risk of two parties, namely %uyer and
seller$ +n fact without the help of %anks we cannot think a%out a congenial
international trade en&ironment$ ,ow the 'uestion comes how %anks help
international trade$ -e know that in a local trade there is a chance to know
a%out each other$ But in international trade the in&ol&ed parties stay two distant
places$ .or a %uyer the following risks are in&ol&ed/
0isk of non/deli&ery of goods$
0isk of recei&ing su% standard goods$
0isk of fraud in goods$
.or the seller the following risk is in&ol&ed/
0isk of non/payment$
1o reduce the aforesaid risks an independent system is introduced which will
safeguard the %uyer as well as seller in an international trade$ Actually %anks
play due role %y getting into two parties and %ind them$
21
+ m p o r t 2 e c t i o n E x p o r t 2 e c t i o n 0 e m i t t a n c e 2 e c t i o n
. o r e i g n E x c h a g e

Foreign Exchange BASIC Bank Ltd-
3.1 IMPORT SETIO!
3.1.1 FOREIG! TR"#E #EP"RTME!T
.oreign trade deals with import and export %usiness. 1hat is why3 there are two parts
in foreign trade department in BA2+4 Bank 5imited$
a$ +mport )epartment
%$ Export )epartment
+mport department deals with the import oriented foreign trade while export department
deals with export oriented foreign trade
3. 1. $ I MPORT%
+ mport s are f orei gn goods and ser&i ces purchased %y consumers, f i rms
6 7o&ernment s i n Bangl adesh$ 1o i mport , a person shoul d %e compet ent
t o %e a 8 i mport er * $ Accordi ng t o + mport and Export 4ont rol Act , 1!9:, t he
ff i ce f 4hi ef 4ont rol l er f + mport and Export pro&i des t he regi st rat i on
(+ 04) t o t he i mport er$
3.1.3 IMPORT PROE#&RES%
1. Re'(strat(on )(t* I+E
a$ .or engaging in international trade, e&ery trader must %e first registered
with the 4hief 4ontroller of +mport and Export.
%$ By paying specified registration fees and su%mitting necessary papers to
the 44+6E. the trader will get +04 (+mport 0egistration 4ertificate)$After
o%taining +04, the person is eligi%le to import.
$. Purc*ase ontract ,et)een (m-orters and e.-orter%
a$ ,ow the importer has to contact with the seller outside the country to o%tain
the proforma in&oice ; indent which descri%es goods.
%$ +ndent is got through indenters a local agent of the sellers.
c$ After the importer accept the preformed in&oice, he makes a purchase
contract with the exporter declaring the terms and conditions of the import.
d$ +mport procedure differs with different means of payment. +n most cases
import payment is made %y the documentary letter of credit (5;4) in our
country.
3. ollect(on of /" form%
1hen the importer collects an 5etter of 4redit Authori(ation ( 54A) form BA2+4
Bank )haka E<= Branch$
22

Foreign Exchange BASIC Bank Ltd-
0. O-en(n' a /etter of red(t 1/23
+n international en&ironment, %uyers and sellers are often unknown to each other.
2o seller always seek guarantee for the payment for his goods exported. >ere is
the role of %ank. Bank gi&es export guarantee that it will pay for the goods on
%ehalf of the %uyer. 1his guarantee is called 5etter of 4redit. 1hus the contract
%etween importer and exporter is gi&en a legal shape %y the %anker %y its 85etter of
4redit*.

a. Part(es of /2
i$ Im-orter ? 2eller -ho applies for opening an 5;4.
ii$ Issu(n' Bank ? +t is the %ank which opens;issues a 5;4 on %ehalf of the
importer.
iii$ onf(rm(n' Bank ? +t is the %ank, which adds its confirmation to the credit
and it, is done at the re'uest of issuing %ank. 4onfirming %ank may or may
not %e ad&ising %ank.
i&$ "dv(s(n' 2 !ot(f4(n' Bank ? is the %ank through which the 5;4 is ad&ised
to the exporters. 1his %ank is actually situated in exporter*s country. +t may
also assume the role of confirming and ; or negotiating %ank depending
upon the condition of the credit.
&$ !e'ot(at(n' Bank ? is the %ank, which negotiates the %ill and pays the
amount of the %eneficiary. 1he ad&ising %ank and the negotiating %ank may
or may not %e the same. 2ometimes it can also %e confirming %ank.
&i$ Pa4(n' 2 "cce-t(n' Bank ? is the %ank on which the %ill will %e drawn (as
per condition of the credit). @sually it is the issuing %ank.
&ii$ Re(m,urs(n' ,ank ? is the %ank, which would reim%urse the negotiating
%ank after getting payment ? instructions from issuing %ank.
,. "--l(cat(on For /2 l(m(t%
Before opening 5;4, importer applies for 5;4 limit. 1o ha&e an import 5;4 limit,
an importer su%mits an application to the )epartment of BA2+4 Bank 5imited
furnishing the following information, /
i$ .ull particulars of %ank account maintained with BA2+4 )E<= %ranch.
ii$ ,ature of %usiness
iii$ 0e'uired amount of limit
i&$ <ayment terms and conditions
&$ 7oods to %e imported
23

Foreign Exchange BASIC Bank Ltd-
&i$ ffered security
&ii$ 0epayment schedule
A credit fficer scrutini(es this application and accordingly prepares a proposal (45<)
and forwards it to the >ead ffice 4redit 4ommittee (>44). 1he 4ommittee, if
satisfied, sanctions the limit and returns %ack to the %ranch. 1hus the importer is
entitled for the limit.
c. T*e /2 "--l(cat(on%
After getting the importer applies to the %ank to open a letter of credit on %ehalf
of him with re'uired papers.
i$ #ocumentar4 red(t "--l(cat(on Form%
ii$ BA2+4 Bank pro&ides a printed form for opening of 5;4 to the importer. 1his
form is known as 4redit Application form. A special adhesi&e stamp is affixed
on the form. -hile opening, the stamp is cancelled. @sually the importer
expresses his desire to open the 5;4 'uoting the amount of margin in
percentage.
iii$ Proforma Invo(ce% +t states description of the goods including 'uantity, unit
price etc.
i&$ T*e (nsurance cover note% 1he name of issuing company and the insurance
num%er are to %e mentioned on it.
&$ T*e /etter of cred(t aut*or(5at(on 1/"3 form% 54A form should %e duly
attested$
&i$ 1he .orm/+A<$
&ii$ 1ax +nformation 4ertificate
&iii$ For)ard(n' for Pre6S*(-ment Ins-ect(on 1PSI3%
+mporter sends forwarding letter to exporter for <re/2hipment +nspection. But
all types of goods do not re'uire <2+.
7. Scrut(n(5at(on of /2 "--l(cat(on%
a. 1he BA2+4 Bank fficial scrutini(es the application in the following manner, /
,. 1he terms and conditions of the 5;4 must %e complied with @4<)4 9:: and
Exchange 4ontrol 6 +mport 1rade 0egulation.
c. Eligi%ility of the goods to %e imported.
d. 1he 5;4 must not %e opened in fa&or of the importer.
e. 0adioacti&ity report in case of food item.
f. 2ur&ey report or certificate in case of old machinery
'. 4arrying &essel is not of +srael or of 2er%ia/ Aontenegro
24

Foreign Exchange BASIC Bank Ltd-
*. 4ertificate declaring that the item is in operation not more than 9 years in case
of car.
Accounting 1reatment in 4ase f 5;4 peningB
,ow if the fficer thinks fit the application to open an 5;4, the following entries are
gi&en to reali(e the 5;4 commission, charges, postage, 5;4 margin etc., /
4lient*s Account////////////////////////////////////////////////////////////////)r.
2undry deposit margin on 5;4//////////////////////////////////////////////4r.
+ncome A;4 commission/////////////////////////////////////// /////////////4r.
2undry deposit margin foreign currency clearing (..4.4) A;4/////4r.
CA1 (19D of 4ommission) on 5;4////////////////////////////////////////4r.
+ncome A;4 (postage;telex)/////////////////////////////////// /////////////4r.
After that, 5;4 num%er and the a%o&e entries are gi&en in the 5;4 0egister. 1he contra
entries stating the lia%ility of the %ank and the client are as followB
4ustomerEs 5ia%ility////////////////////////////////////)r.
Banker*s 5ia%ility////////////////////////////////////////4r.
8. 1ransmission of 5;4 to Beneficiary through Ad&ising BankB
1hen the transmission of 5;4 is done through tested telex or fax to ad&ise the 5;4
to the ad&ising %ank$ 1he ad&ising %ank &erifies the authenticity of the 5;4$
BA2+4 Bank has corresponding relationship or arrangement throughout the world
%y which the 5;4 is ad&ised$ Actually the ad&ising %ank does not take any lia%ility if
otherwise not re'uested$
4redit 0eportB
+f the amount of 5;4 exceeds @2F1::::;G, BA2+4 Bank takes the credit report of
the %eneficiary to ensure the worthiness of the of supplying goods
9. "mendment of t*e /etter of red(t%
-hen the parties in&ol&ed in a 5;4, especially the seller want to change the terms
and conditions due to some o%&ious and genuine reasons the credit should %e
amended. BA2+4 Bank transmits the amendment %y tested telex to the ad&ising
%ank. +f the 5;4 is amended, ser&ice charge and telex charge is de%ited from the
25

Foreign Exchange BASIC Bank Ltd-
party account accordingly. According Articles 9 of @4<)49::. Amendments must
%e complete and precise.
:. Presentat(on of t*e #ocuments%
a. 1he seller %eing satisfied with the terms and the conditions of the credit makes
shipment of the goods as per 5;4 terms.
,. After making the shipment of the goods in fa&or of the importer the exporter
su%mits the documents to the negotiating %ank.
c. After recei&ing all the documents, the negotiating %ank then checks the
documents against the credit. +f the documents are found in order, the %ank will
pay, accept or negotiate to BA2+4 Bank
d. Branch 6 %ank recei&ed seal to %e affixed on the forwarding schedule
e. 1he Bill of Exchange 6 transport documents must immediately %e crossed to
protect loss or fraudulent.
B"SI Bank c*ecks t*e documents. T*e usual documents are;6
i$ +n&oice
ii$ Bill of lading
iii$ 4ertificate of origin
i&$ <acking list
&$ -eight list
&i$ 2hipping ad&ice
&ii$ ,on/negotia%le copy of %ill of lading
&iii$ Bill of exchange
ix$ <re/shipment inspection report
x$ 2hipment certificate
<. Examination of shipping documents
ne of the %asic principles of documentary credit is that all parties deal with
document and not with goods (Articles 6 of @4<)4/9::). 1hat is why the
documents should %e scrutini(ed properly. +f any discrepancy in the documents is
found, that is to %e informed to the party. A checklist may %e followed for examining
the documents.
1hen the following things can happen. 1hese are indicated in the followingB
26

Foreign Exchange BASIC Bank Ltd-
a. #(scre-anc4 found ,ut t*e (m-orter acce-ts / then the %ank will lodge the
documents
,. #(scre-anc4 found and (m-orter not a'reed to acce-t / +ssuing %ank would
intimate negotiating %ank for re&ised document or return the documents to the
negotiating %ank for necessary action. >ere issuing %ank is not %ound to pay
%ecause the documents send %y exporter is not in accordance with the terms of
5;4.
c. #ocuments are O= ,ut (m-orter (s not )(ll(n' to ret(re t*e documents / +n
this case %ank is o%ligated to pay the price of exported goods. 2ince importer
did not pay for %ill of exchange, this payment %y %ank is one kind of credit to
the importer and this credit in %anking is known as .04E) <A).
#. Ever4t*(n' (s O.=. ,ut (m-orter fa(ls to clear 'oods from t*e -ort and
re>uest ,ank to clear / +n this case %anks clear the goods and takes deli&ery
of the same %y paying customs duty and sales tax etc. 2o, this expenditure is
de%ited to the importer*s account and in %anking it is called 5+A.
1?. /od'ment of #ocuments%
5odgment means retirement of funds. @sually payment is made within se&en days
after the documents ha&e %een recei&ed. +f the payment is %ecome deferred, the
negotiating %ank may claim interest for making delay. 5odgment constitute the
followingsB
a. Re>u(s(t(on for t*e fore('n currenc4% .or arranging necessary fund for
payment, a re'uisition is sent to the +nternational )epartment.
,. Pre-ar(n' sale memo% A sale memo is made at B.4 rate to the customer. As
the 1.1 6 .) rate is paid to the +), the difference %etween these two rates is
exchange trading. .inally, an +nter Branch Exchange 1rading 4redit Ad&ice is
sent to +).
c. reat(on of P"# l(a,(l(t4% BA2+4 Bank lodges the con&erted the %ill amount at
B4 (Bills 4ollection) rate pre&ailing on the date of lodgment to <A) A;4 and an
+BE14A prepared at the con&erted %ill amount at 1.1 clear rate is sent to +).
<A) A;4 should %e adHusted within #1 days.
Accounting 1reatmentB
<A) A;4IIIIIIIIIIIIIII.IIIII.. )r.
(4on&erted the %ill amount at B4 rate)
>.. A;4 /////////////////////////////////////////////////////////////4r.
(4on&erted %ill amount at 1.1 clear rate)
27

Foreign Exchange BASIC Bank Ltd-
+ncome A;4 profit on exchange //////////////////////////////////4r.
()ifference %etween B.461.1 clear rate)
0e&ersal EntriesB
Banker*s 5ia%ility ////////////////////////////////////)r.
4ustomer*s 5ia%ility /////////////////////////////////4r.
(-hen lodgment is gi&en)
d. Pa4ment (nstruct(on% <ayment instruction is gi&en to the reim%ursement %ank
to de%it the issuing %anks. ,210 A;4 to make payment to the negotiating
%ank.
e. Pa4ment Int(mat(on to t*e !e'ot(at(n' Bank% A +ntimation is sent negotiating
%ank ensuring that payment has %een made.
"ccount(n' Treatment
1hen the telex charge, ser&ice charge, and interest (if any) are de%ited to the
<A) A;4.
<A) A;4////////////////////////////////////////////)r.
+ncome A;4/////////////////////////////////////////4r.
(2er&ice charge6 1elex charge)
2hipping documents is then stamped with <A) ,um%er 6 entered in the <A)
0egister
f. Int(mat(on to t*e a--l(cant
As soon as a%o&e formalities are completed the importers are ser&ed with <A)
%ill intimations for retirement of concerned import document.
A letter of intimation regarding receipt of the documents should %e sent to the
applicant with a re'uest to take deli&ery of the documents on settlement of all
dues against it.
11. Ret(rement of #ocuments%
n intimation the importer approaches with a letter for retirement of the document
against full payment with up to date interest and charges paya%le. Bank prepares
cost memo in printed form on account of the concerned party gi&ing details head of
charges paya%le.
Accounting 1reatmentB
2undry )eposit 5;4 Aargin A;4////////////////////////////////////)r.
<A) A;4//////////////////////////////////////////////////////////////4r.
(Aargin amount transferred to <A) A;4)
4ustomer A;4///////////////////////////////////////////////////////)r.
28

Foreign Exchange BASIC Bank Ltd-
<A) A;4 ///////////////////////////////////////////////////////////4r.
+ncome A;4 ? interest on <A)/////////////////////////////////4r.
(customer*s account de%ited for the remaining amount)
As far the &ouchers are passed and necessary entries are gi&en in <A) 5edger
endorsements are made under two authori(ed signature of the %anks officers (<.A.
>older). 1hen the documents are deli&ered to the importer.
T*e ,ank )(ll endorse t*e documents (n follo)(n' manner%
#ocument Endorsement
Bill of Exchange 0ecei&es payment for BA2+4 Bank 5imited
4ommercial +n&oices +n&oice &alue certifies 6 remitted for BA2+4 Bank 5imited
Bill of 5ading, Airway
Bill, 1ruck 4halan
)eli&er ; <ay to the order of A;2 ///,for BA2+4 Bank
5imited
54A .or BA2+4 Bank
1hen importer releases the importers goods from the port authority with the
help of the clearing and forwarding agents 46. agent clears the goods from
the port and hands o&er the goods to the importers.
After completion of all official re'uirements 46. agent su%mits the %ill of entry
of the %anks. 1he Bill of Entry is wanted from the party for maintaining the
e&idence as the goods has %een arri&ed.
1$ S*(--(n' Guarantee%
@*en 'oods arr(ve -r(or to arr(val of documents
1his happens mostly in cases of air shipment, shipment %y truck from 5and or
shipment %y post parcel. +n such cases %ank endorses non/negotia%le shipping
documents for clearance of the goods su%Hect to scrutiny and the documents
%eing in order and settlement of the %ank dues against the relati&e %ills.
3.$ EAPORT SETIO!
29

Foreign Exchange BASIC Bank Ltd-
.oreign Exchange 0egulation Act, 1!J" no%ody can export %y post and otherwise than
%y post any goods either directly or indirectly to any place outside Bangladesh, unless
a declaration is furnished %y the exporter to the collector of customs or to such other
person as the Bangladesh Bank (BB) may specify in this %ehalf that foreign exchange
representing the full export &alue of the goods has %een or will %e disposed of in a
manner and within a period specified %y BB$
Bangladesh exports a large 'uantity of goods and ser&ices to foreign households.
0eadymade textile garments (%oth knitted and wo&en), Kute, Kute/made products,
fro(en shrimps, tea are the main goods that Bangladeshi exporters exports to foreign
countries. 7arments sector is the largest sector that exports the lion share of the
countryEs export. Bangladesh exports most of its readymade garments products to
@.2.A and European 4ommunity (E4) countries. Bangladesh exports a%out J:D of its
readymade garments products to @.2.A. Aost of the exporters who export BA2+4
Bank are readymade garment exporters. 1hey open export 5;4s here to export their
goods, which they open against the import 5;4s opened %y their foreign importers.
3.$.1 FORM"/ITIES FOR EAPORT /2%
1here are a num%er of formalities, which an exporter has to fulfill %efore and after
shipment of goods. 1hese formalities or procedures are enumerated as follows, /
1. O,ta(n(n' E.-ort Re'(strat(on ert(f(cate ER%
,o exporter is allowed to export any commodity permissi%le for export from
Bangladesh unless he is registered with 4hief 4ontroller of +mports and Exports
(44+ 6 E) and holds &alid Export 0egistration 4ertificate (E04). After applying to
the 44+6E in the prescri%ed from along with the necessary papers, concerned
offices of the 4hief 4ontroller of +mports and Exports issues E04. nce registered,
exporters are to make renewal of E04 e&ery year.
$. Secur(n' t*e order%
After getting E04, the exporter may proceed to secure the export order. >e can do
this %y contracting the %uyers directly through correspondence.
3. O,ta(n(n' EAP%
After ha&ing the registration, the exporter applies to BA2+4 Bank with the trade
license, E04 and the 4ertificate from the concerned 7o&ernment rgani(ation to
get EL<. +f the %ank is satisfied, an EL< is issued to the exporter.
30

Foreign Exchange BASIC Bank Ltd-
0. S('n(n' of t*e contract%
After communicating with %uyer the exporter has to get contracted for exporting
exporta%le items from Bangladesh detailing commodity, 'uantity, price, shipment,
insurance and mark, inspection, ar%itration etc.
7. Rece(v(n' t*e /etter of red(t%
After getting contract for sale, exporter should ask the %uyer for 5etter of 4redit
clearly stating terms and conditions of export and payment.
"fter rece(v(n' /2; t*e follo)(n' -o(nts are to ,e looked for%
a. 1he terms of the 5;4 are in conformity with those of the contract.
b. 1he 5;4 is an irre&oca%le one, prefera%ly confirmed %y the ad&ising %ank.
c. 1he 5;4 allows sufficient time for shipment and a reasona%le time for
registration.
d. +f the exporter wants the 5;4 to %e transfera%le, di&isi%le and ad&isa%le, he
should ensure those stipulations are specially mentioned in the 5;4.
8. Procur(n' t*e mater(als%
After making the deal and on ha&ing the 5;4 opened in his fa&or, the next step for
the exporter is to set a%out the task of procuring or manufacturing the contracted
merchandise.
9. Endorsement on EAP
Before the export forms are lodged %y the exporters with the customs;postal
authorities, they should get all the copies endorsed %y BA2+4 Bank. Before
shipment, exporter su%mits exp. form with commercial in&oice. 1hen BA2+4 Bank
officer checks it properly, if satisfied, certifies the exp. -ithout it exporter he cannot
make shipment. 1he customer must declare all exports goods on the EL< issued
%y the authori(ed dealers
#(s-osal of E.-ort Forms%
a. Or('(nalB customs authority reports first copy of EL< to Bangladesh Bank
after shipment of the goods.
,. #u-l(cate% ,egotiating %ank reports the )uplicate to Bangladesh Bank in
or after negotiation date %ut not later than 1J days from the date of
shipment..
c. Tr(-l(cate% n reali(ation of export proceeds 1riplicate is reported %y the
same %ank to the same authority.
d. Buadru-l(cate% .inally, the negotiating %ank as their office copy retains
Muadruplicate
31

Foreign Exchange BASIC Bank Ltd-
:. S*(-ment of 'oods% Exporter makes shipment according to the terms and
condition of 5;4$
<. Presentat(on of e.-ort documents for ne'ot(at(on%
After shipment, exporter su%mits the following documents to BA2+4 Bank for
negotiation.
a. Bill of Exchange or )raft3
,. Bill of 5ading
c. +n&oice
d. +nsurance <olicy;4ertificate
e. 4ertificate of origin
f. +nspection 4ertificate
'. 4onsular +n&oice
*. <acking 5ist
(. Muality 4ontrol 4ertificate
C. 7.2.<. certificate
k. <hoto ? 2anitary 4ertificate.
1?. as* a'a(nst #ocument 1"#3 ontract
+n lieu of export 54 export can also %e made against execution of contract of sale
and purchase %etween the %uyer and seller. @sually a 4A) contract is made in
case of exporting Kute goods.
1here are some Bangladesh Kute Aills 4orporation (BKA4) enlisted intermediary
firms. 1hey make 4A) contract with the importer. 2ome intermediary firms the
client of BA2+4 Bank 5mted$ After making contract, the intermediary firm (original
exporter) purchases Hute from a Hute mill. 1hen, the Hute mill*s %ank usually an ,4B
sends forwarding with the following documents to BA2+4 Bank.
a. 4ommercial in&oice made %y the Hute mill
,. Bill of exchange drawn on exporter paya%le to Hute mills %ank (authori(ed
that %ank as N pay to the order of BA2+4 BankO)
c. Aills specification
d. EAP form ? triplicate and 'uadruplicate on which seal and signature of
authori(ed officer of the Hute mill*s %ank is gi&en.
Along with these Hute mill documents exporter presents his own documents, which
were re'uired %y the 4A) contract$
Exporter presents the documents for negotiation to BA2+4 Bank and re'uest to
remit the amount at which he purchased Hute from Hute mill to the Hute mill*s %ank
and credit the rest to his account in BA2+4 Bank$
32

Foreign Exchange BASIC Bank Ltd-
11. E.am(nat(on of #ocument %
Banks deal with documents only, not with commodity. As the negotiating %ank is
gi&ing the &alue %efore repatriation of the export proceeds it is ad&isa%le to
scrutini(e and examine each and e&ery document with great care whether any
discrepancy(s) is o%ser&ed in the documents. 1he %ankers are to ascertain that the
documents are strictly as per the terms of 5;4 Before negotiation of the export %ill.
Bank officers assigned for examining the export documents may use a checklist for
their con&enience.
1$. !e'ot(at(on of e.-ort documents %
,egotiation stands for payment of &alue to the exporter against the documents
stipulated in the 5P4. +f documents are in order, BA2+4 Bank purchases
(negotiates) the same on the %asis of %anker/ customer relationship. 1his is known
as .oreign )ocumentary Bill <urchase (.)B<).
+f the %ank is not satisfied with the documents su%mitted to BA2+4 Bank gi&es the
exporter reasona%le time to remo&e the discrepancies or sends the documents to
5;4 opening %ank for collection. 1his is known as .oreign )ocumentary Bill for
4ollection (.)B4)
a. Procedure for F#BP%
i$ After purchasing the documents, )B5 gi&es the following entries, /
.)B< A;4 //////////////////////////////////////////////////)r.
( at ) sight rate)
4ustomer A;4 /////////////////////////////////////////////////////4r.
(Before reali(ation of proceeds)
Bank would reali(e only postage charges from the exporter.
ii$ 2u%se'uently, Bank will send the documents to the 5;4 opening Bank
for payment with a forwarding letter detailing the enclosures. @pon
reali(ation of proceeds the ,egotiating Bank would pass the following
&ouchersB
>ead ffice A;4/////////////////////////////////////////)r.
( at 1.1 4lean rate)
.)B< A;4/////////////////////////////////////////////////////4r.
+ncome A;4 <rofit on Exchange 1rading///////////////4r.
(AdHustment after reali(ation of proceeds)
33

Foreign Exchange BASIC Bank Ltd-
iii$ A .)B< 0egister is maintained for recording all the particulars.
,. Fore('n documentar4 ,(lls for collect(on 1F#B3%
BA2+4 Bank forwards the documents for collection due to the following
reasons,/
+f the documents ha&e discrepancies.
+f the exporter is a new client.
1he %anker is in dou%t.
.)B4 signifies that the exporter will recei&e payment only when the issuing
%ank gi&es payment. BA2+4 Bank make regular follow/up with the 5;4 opening
Bank in case of any delay in getting payment.
1he exporter su%mits duplicate EL< .orm and 4ommercial +n&oice.
2u%se'uently, the &alue of the %ill is calculated and the following accounting
entries are gi&en, /
>ead ffice A;4///////////////////////////////////////////////////)r. Q 1.1 4lean
4lient*s A;4///////////////////////////////////////////////////////4r. Q ) sight
7o&ernment 1ax A;4//////////////////////////4r. Q :.1: D of +n&oice &alue
<ostage A;4////////////////////////////////////////////////4r.
+ncome A;4 profit on Exchange////////////////////////4r.
After passing the a%o&e &ouchers, an +nter Branch Exchange 1rading )e%it
Ad&ice is sent for de%iting the ,210 account. An .)B4 0egister is
maintained, where first entry is gi&en when the documents are forwarded to the
issuing %ank for collection and the second one is done after reali(ation of the
proceeds.
In case of d(scre-anc(es of m(nor nature, Bank may negotiate the
documents depending on their confidence on the customer against execution
of the 5etter of +ndemnity.
Settlement of /ocal B(lls%
1he settlement of local %ills is done in the following ways, /
34

Foreign Exchange BASIC Bank Ltd-
a. 1he customer su%mits the 5;4 to BA2+4 Bank along with the documents to
negotiate
,. BA2+4 Bank official scrutini(es the documents to ensure the conformity with
the terms and conditions.
c. 1he documents is then forwarded to the 5;4 opening %ank.
d. 1he 5;4 issuing %ank gi&es the acceptance and forward an acceptance letter.
e. <ayment is gi&en to the customer on either %y collection %asis or %y purchasing
the document.
Accounting treatment for purchase of local %illsB
5ocal Bill <urchase )ocumentary ///////////////////////////////////////)r.
<arty A;4////////////////////////////////////////////////////////////////////////////4r.
4ommission/////////////////////////////////////////////////////////////////////////4r.
+nterest A;4//////////////////////////////////////////////////////////////////////////4r.
A 5B<) 0egister is maintained to record the acceptance of the issuing %ank. @ntil the
acceptance is o%tained, the record is kept in a collection register.
3.$.$ MO#E OF P"DME!T OF EAPORT BI// &!#ER /2%
As per @4< 9::, 1!!3 re&ision there are four types of credit. 1hese are as followsB
a. 2ight payment
,. )eferred payment
c. By acceptance
d. ,egotiation
a. S('*t Pa4ment red(t%
+n a 2ight <ayment 4redit, the %ank pays the stipulated sum immediately against
the exporter*s presentation of the documents.
%$ #eferred -a4ment red(tB
+n deferred payment, the %ank agrees to pay on a specified future date or e&ent,
after presentation of the export documents. ,o %ill of exchange is in&ol&ed. +n
BA2+4 Bank, payment is gi&en to the party at the rate of ).A 6:/!:/1#:/1R: as the
case may %e. But the >ead office is paid at 1.1 clean rate. 1he difference %etween
the two rates us the exchange trading for the %ranch.
c$ "cce-tance cred(t%
35

Foreign Exchange BASIC Bank Ltd-
+n acceptance credit, the exporter presents a %ill of exchange paya%le to himself
and drawn at the agreed tenor (that is, on a specified future date or e&ent) on the
%ank that is to accept it. 1he %ank signs its acceptance on the %ill and returns it to
the exporter. 1he exporter can then represent it for payment on maturity.
Alternati&ely he can discount it in order to o%tain immediate payment.
d$ !e'ot(at(on red(tB
+n ,egotiation credit, the exporter has to present a %ill of exchange paya%le to
himself in addition to other documents, that the %ank negotiates.
3.$.3 "#EISI!G /2%
-hen export 5;4 is transmitted to the %ank for ad&ising, the %ank sends an Ad&ising
5etter to the %eneficiary depicting that 5;4 has %een issued.
Test ke4 arran'ement%
1est key arrangement is a secret code maintained %y the %anks for the authentication
for their telex messages. +t is a systematic procedure %y which a test num%er is gi&en
and the person to whom this num%er is gi&en can easily authenticate the same test
num%er %y maintaining that same procedure. BA2+4 Bank has test key arrangements
with so many %anks for the authentication of 5;4 messages and for making payment.
3.$.0 B"=6TO6B"= /2%
A Back/to/Back mechanism in&ol&es two separate 5;4s. ne is master Export 5;4 and
another is Back/to/Back 5;4. n the strength of Aaster Export 5;4 %ank issues %ank
to Back 5;4. Back/to/Back 5;4 is commonly known as Buying 5;4. n the contrary,
Aaster Export 5;4 is known as 2elling 5;4.
Features of ,ack6to6,ack /2%
a. /+s an +mport 5;4 to procure goods ;raw materials for further processingF
,. /+s opened %ased on Export 5;4.
c. /+s a kind of Export .inanceS
d. /Export 5;4 is at 2ight %ut %ack to Back 5;4 is at @sance.
e. /,o margin is re'uired to open Back to %ack 5;4
*eckl(st to o-en ,ack6to6,ack /2$
a. Application is registered with 44+6E and has %onded warehouse license.
,. 1he master 5;4 has ade'uate &alidity period and has not defecti&e clause.
36

Foreign Exchange BASIC Bank Ltd-
c. 5;4 &alue shall not exceed the admissi%le percentage of net .B &alue of
relati&e Aaster 5;4.
d. @sance period will %e up to 1R: days.
Flow Diagram of Back-to-Back L/C:
Scrut(n(5at(on of master /2%
a. )efecti&e <oints or 4lauses appears in the Aaster 5;4B
,. +ssuing %ank is not reputed
c. Ad&ising credit %y the ad&ising %ank without authentication.
d. <ort of destination a%sent.
e. +nspection clause.
f. ,omination of specific shipping;Air line or nomination of specified &essel %y
su%se'uent amendment.
g. B;5 to %lank endorses, to endorse to 3
rd
%ank, to %e endorsed to %uyer or 3
rd
party.
h. ,o specific reim%ursing clause.
i. @4< clause not mentioned.
j. 2hipment ;presentation period is not sufficient.
k. riginal documents to %e sent to %uyer or nominated agent.
l. .40 or >A-B consigned to applicant or %uyer.
m. N2hippers* load and count is not accepta%le N clause.
n. 5;4 shall expire in the country of the issuing %ank.
o. ,egotiation is restricted.
Pa-ers re>u(red to o-en ,ack6to6,ack /2%
a. +mport registration certificate 6 export registration certificate
37
Buyer, @2A instructs his %ank to
issue an +mport 5;4 in fa&our of
5enny .ashions 5td, Bangladesh$
@2A %ank issues a 5;4 and forwards the
same to 5enny .ashions 5td$ through a
B*deshi Bank (e$g$ BA2+4 Bank, )E<=
Branch$)$
5enny .ashions 5td$ su%mits his Export 5;4 with
a re'uest to BA2+4 Bank )E<= Br$ to create lien
against 5;4 and issue Back to Back 5;4 in
fa&our of ELE 1extile 5td$
BA2+4 issues a Back to Back 5;4
and forwards the same to ETE
1extile 5td$ through another
Exporter Bank$

Foreign Exchange BASIC Bank Ltd-
,. 5;4 application and 54A form
c. <roforma in&oice or indent
d. +nsurance policy
e. +A< form
In add(t(on to a,ove follo)(n' -a-ers are re>u(red for e.-ort or(ented 'arments (ndustr(es
a. Bonded warehouse license
,. Muota allocation letter from export processing Bureau (E<B)
Ste-s to (ssue ,ack6to6,ack /2%
a. %tain all re'uired papers
b. 4heck the credit limit.
c. <repare offering sheet if regular credit line is a&aila%le.
d. Aark lien on the master 5;4.
e. +ssue the 5;4.
Pa4ment under ,ack6to6,ack /2%
a. <ayment at maturity out of exports proceeds.
b. +n case of export failure or non/reali(ation;short reali(ation of export proceeds,
forced loan i.e. A< has to %e created in order to settle the Back/to/Back 5;4
payment.
Precaut(on measures%
a. +nclusion the clause for <re/2hipment +nspection 4ertificate.
b. 2hipping guarantee under no circumstances.
c. )iscrepant documents shall not %e accepted.
d. <roper care regarding amendments of master 5;4.
" s(m-le mec*an(sm of ,ack6to6,ack /2%
1. Buyer @2A 5td. instructs his %ank to issue the Export 5;4 in fa&or of Bangladeshi
7arments 5td.
2. An @2A %ank issues the 5;4 and forwards the same to Bangladeshi 7arments
through a Bangladeshi %ank.
3. Bangladeshi 7arments 5td. su%mits his Export 5;4 with a re'uest to his %ank, say
BA2+4 Bank for lien of the Export 5;4 and to issue Back/to/Back 5;4 in fa&or of
1aiwan 1extile 5td.
38

Foreign Exchange BASIC Bank Ltd-
4. BA2+4 Bank issue Back/to/Back 5;4 and forwards the same to 1aiwan 1extile 5td.
through a 1aiwanese %ank.
"ccount(n' Treatment for Back to Back /2%
@*en t*e document (s arr(ved; t*e follo)(n' vouc*ers are -assed;6
4ustomer*s A;4 //////////////////////////////////////////////////)r.
4ommission on acceptance///////////////////////////////////4r.
@*(le -a4ment; (f t*e fund (s at *and; t*e account(n' entr(es are;6
2undry )eposit Aargin on Acceptance/////////////////////)r.
4ustomer*s A;4 ////////////////////////////////////////////////4r.
+f the party is paid in foreign currency, B.4. rate is applied in this regard. +nternational
)epartment takes the 1.1. .). rate. +f the payment is made to +) in local currency in
notional rate, 1.1. 4lean 0ate is followed %y +). -hen the party is %e paid, ) 2ight
rate is followed.
+f the fund is not a&aila%le to make the payment, the following &ouchers are to %e
passed,/
A< /////////////////////////////////////////////////////////////////////)r.
4ustomer*s A;4 ///////////////////////////////////////////////////////4r.
Re-ort(n' to Ban'lades* Bank%
At the end of e&ery month, the reporting regarding the following information is
mandatory, /
a. .illing of E/#;</# schedule of 2/1 category3 which co&ers the entire month
amount of import, category of goods, currency, country etc.
b. .illing of E/3;</3 schedule for all charges, commission with 1;A form.
#(s-osal of IMP form
riginal +A< is forwarded to Bangladesh Bank with in&oice.
)uplicate +A< is kept with the %ank along with the %ill of entry.
1riplicate +A< is kept for office record.
Muadruplicate is kept for Bangladesh Bank.
39

Foreign Exchange BASIC Bank Ltd-
3.3 FOREIG! REMITT"!E SETIO!
The %asic function of this department are outward and inward remittance of foreign
exchange from one country to another country$ +n the process of pro&iding this
remittance ser&ice, it sells and %uys foreign currency$ 1he con&ersion of one currency
into another takes place at an agreed rate of exchange, in where the %anker 'uotes,
one for %uying and another for selling$ +n such transactions the foreign currencies are
like any other commodities offered for sales and purchase, the cost (con&ention &alue)
%eing paid %y the %uyer in home currency, the legal tender$
@ork(n's of t*(s de-artment%
&erall super&ision of .oreign 0emit. )ept.
.oreign 11 payment 6 <urchase of .. )rafts; preparations of ..B.<. (.oreign Bill
<urchased).
+ssuance of outward 11 6 .)).
+ssuance of proceed responding certificate (<04).
.oreign 4ollection; Bangladesh Bank 4learing 4heck 4ollection; which comes
from all %ranch of BA2+4 Bank 5imited.
-ithdrawal from ..4. A;4.
Encashment of 1$4$ 6 4ash )ollar and 2terling <ound.
)eduction of 1ax and CA1$ n %ehalf of Bangladesh Bank$
<reparation of related statements including con&erti%le 1aka Accounts.
<reparation of +B4A 6 +B)A and Balancing of 4ollection and other special
assignment as desired %y )epartment in charge.
Balancing of Account 2tatements.
4ompliance of audit 6 inspection.
2tatement of all related works su%mitted to Bangladesh Bank.
In)ard Fore('n Rem(ttance%
+nward remittance co&ers purchase of foreign currency in the form of foreign 1.1.; ).);
1.4. and %ills etc. sent from a%road fa&oring a %eneficiary in Bangladesh. <urchase of
foreign exchange is to %e reported to Exchange control )epartment of Bangladesh
%ank on .orm/4.
Out)ard Fore('n Rem(ttance%
40

Foreign Exchange BASIC Bank Ltd-
utward remittance co&ers sales of foreign currency through issuing foreign 1.1.
)rafts; 1ra&elers 4heck etc. as well as sell of foreign exchange under 5;4 and against
import %ills retired. 2ale of foreign exchange is reported to Exchange control
)epartment of Bangladesh Bank on form 1;A.
.oreign exchange means foreign currency and includes all deposits; credits and
%alances paya%le in foreign currency as well as foreign currency instruments such as
)rafts; 1.4.s; %ill of exchange, and 5etters of 4redit <aya%le in any .oreign 4urrency.
All foreign exchange transactions in Bangladesh are su%Hect to exchange control
regulation of Bangladesh Bank.
Fore('n Rem(ttance #e-artment deals )(t* t*e follo)(n' (nstruments%
as*
Rem(ttance
1#ollar 2
Pound3
Sell
Bank sells )ollar;<ound for using in a%road %y the
purchaser$ 1he maximum amount of such sell is
mentioned in the Bangladesh Bank pu%lication of
84on&erti%ility of 1aka for 4urrency 1ransactions in
Bangladesh$
Purc*ase
Bank can purchase dollar from resident and non ?
resident Bangladeshi and .oreigner$ Aost dollars
purchased comes from reali(ation of Export Bill of
Exchange$
Tele.
Transfer Out)ard TT
+t remits fund %y tested 11 &ia its foreign
correspondence %ank in which it is maintaining its
,210 Account$
Incom(n' TT
+t also makes payment according to telegraphic
message of its foreign correspondence %ank from
the corresponding C210 Account$
Fore('n
#emand
#raft
Bank issue )emand )raft in fa&or of purchaser or any other
according to instruction of purchaser$ 1he payee can collect it for
the drawee %ank in which the +ssuing %ank of )emand )raft holds
its ,210 Account$ Bank also makes payment on )) drawn on
this %ank %y its foreign correspondence %ank through the C210
Account$ 1he procedure concerning issue of .)) is same as issue
of 1ra&elers check except that the customer is not re'uired to
41

Foreign Exchange BASIC Bank Ltd-
su%mit his passport.
.ollowing steps to %e followed in payment of .))B
At first the .)) is to %e crossed.
2erial num%er is gi&en.
.orwarding letter to the %ank with which the %ank has
agreement.
<arty is gi&en the cash or his account is credited.
"ccount(n' entr(es%
For T.T (ncom(n'%
BA2+4 7en$ A;4 ///////////////////////////////////////////////////////)r$
4lients* A;4 ///////////////////////////////////////////////////////////// 4r$
For (ssuance of F##%
4ash;customers* A;4 //////////////////////////////////////////////)r$
BA2+4 7en$ A;4 /////////////////////////////////////////////////////////4r$
4ommission //////////////////////////////////////////////////////////////4r$
For out)ard T.T.%
4lients* A;4 /////////////////////////////////////////////////////////// )r$
BA2+4 7en$ A;4 //////////////////////////////////////////////////////// 4r$
4ommission ///////////////////////////////////////////////////////////// 4r$
42