Investment and Foreign Exchange operation of Islami Bank Bangladesh Limited (ibbl) Table of Contents

After communicating with buyer, has to get contracted (writing) for exporting exportable items form Bangladesh detailing commodity, quantity, price, shipment, insurance and marks, inspection arbitration etc.

After contract for sale, exporter should ask his buyer for letter of credit clearly stating terms and conditions of export and payment.

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  The terms of the L/C are in conformity with those of the contract
  
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  The L/C is an irrevocable one, preferably confirmed by the advising bank.
  
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  The L/C allows sufficient time for shipment and negotiation.
  

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  Cash in advance
  
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  Open account
  
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  Collection basis (documentary /clean)
  

Then the exporter should take the preparation for making arrangement for delivery of goods as per L/C and INCO- terms, prepare and submit shipping documents for payment/ acceptance/negotiation in due time:

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  EXP form
  
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  ERC (valid)
  
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  L/C copy
  
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  Customers duty certificate
  
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  Shipping instruction
  
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  Transport documents
  
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  Insurance document
  
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  Invoice
  
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  Bills of exchange (if required)
  
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  Certificate of origin
  
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  Inspection of certificate
  
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  Quality control certificate
  
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  Quality control certificate
  
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  G.S.P certificate
  
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  Photo sanitary certificate
  

After those exporter submits all these documents along with a letter of indemnity to RBL for negotiation. An officer scrutinizes all the documents. If the documents are a clear one RBI will purchase the documents on the basis of banker customer relationship. This is knows as foreign document bill purchase (FDBP).

Scrutinizes the export bill on the following points:

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  Late shipment
  
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  Late presentation
  
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  L/C expired
  
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  L/C overdrawn
  
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  Partial shipment or trans shipment
  

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  Amount of bill differs with invoice
  
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  Not draw on L/C issuing bank
  
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  Not signed
  
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  Tenor of B/E not submitted
  
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  Full set not submitted
  
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  Invoice
  
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  Not issue by the beneficiary
  
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  Not made out the name of the applicant
  
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  Description, price, quality, sales terms of the goods not correspond to the original.
  
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  Not market one fold as original
  
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  Shipping marks differs with B/L and packing first
  

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  Gross weight, net weight and measurement, number of cartoons/ packages differs with B/L
  
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  Not marked one fold as original
  
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  Not signed by the beneficiary
  
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  Shipping marks differs with B/L
  

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  Full set of bill not submitted
  
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  B/L is not drawn or endorsed
  
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  Shipment board, fright prepaid, freight collect, etc notations are not marked on the B/L
  
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  B/L not indicated the name and capacity of the party, i.e. carrier or master, on whose behalf the agent is signing the B/L
  
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  Shipped on board notion not showing port of loading and vessel name
  
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  Shipping on board notation not showing port of loading and vessel name
  
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  Short form B/L
  
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  Chapter party B/L
  
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  Description of goods in B/L not agree with that of invoice, B/L and P/L
  
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  Alternative in B/L not authenticated
  
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  Loaded on deck
  
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  B/L bearing clauses or notations expressly declaring defective condition of the goods and packages.
  

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  Non negotiable documents not forwarded to buying or forwarded beyond L/C terms
  
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  Inadequate number of invoice, packing list and others submitted
  
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  Short shipment certificate not submitted.
  

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  The customer submits the L/C to Islami Bank Bangladesh Ltd. Along with the documents to negotiate.
  
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  Islami Bank Bangladesh Ltd. Official scrutinizes the documents to ensure the conformity with the terms and conditions.
  
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  The documents are then forwarded to the L/C opening bank.
  
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  The L/C issuing bank gives the acceptance and forward an acceptance letter
  
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  Payment is given to the customer on either by collection basis on by purchasing the document.
  

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  Local bill purchase documentary Dr.
  

To commission account

To interest account
A LBPD register is maintained to record the acceptance of the issue bank, limit the acceptance is obtained, and the record is kept in a collection register.
Mode of payment of exports bills under L/C:

The most common methods of payment under a L/C are as follows:

1. 
   Sight payment credit: In a sight payment credit, the pays the stipulated sum immediately against the exporter’s presentation of the documents.
   
2. 
   Negotiation credit : In negotiation credit, the exporter has to present a bill of exchange payable to him in addition to other documents, i.e. the bank negotiation
   
3. 
   Deferred payment credit: In deferred payment, the parties agree to pay on a specified future date or event, after presentation of the export documents. No bill of exchange is involved. In MBI, payment is given to party at the rate of D.A. But the head office is paid at T.T clear rate. The difference between the two rates is the exchange trading for the branch.
   
4. 
   Acceptance credit: In acceptance credit, the exporter presents hall of exchange payable to him and drawn at the agreed tenor (that is on a specified future date event) on the bank that is to accept it. Bank signs it’s accepted on the bill returns to the exporter.
   

7. 
   Back to back letter of credit:
   

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  Master L/C
  
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  Valid import registration and export registration
  
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  L/C application and LCA firm duly signed it
  
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  Pro forma invoice or indent
  
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  Insurance cover note with money receipt
  
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  IMP duly signed
  

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  Textile permission
  
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  Valid bonded warehouse license
  
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  Quota allocation letter issued by export promotion bureau (EPB) in favor of the applicant in case of quota items.
  
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  In case the factory premises is a rented one, letter of disclaimer duly executed by owner of the house / premises to be submitted.
  

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  Issuing back is not reputed
  
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  Advising credit by the advising bank without authentication
  
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  Port of destination absent
  
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  Inspection clause
  
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  Nomination of specific of specified vessel by subsequent amendment
  
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  B/L to blank endorse, to buyer or third party
  
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  No specific reimbursing clause
  
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  UCP clause not mentioned
  
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  Shipment / presentation period is not sufficient
  
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  Original document to be sent to buyer or nominated agent
  
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  FCR or HAWB consigned to applicant or buyer
  
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  Shippers load and count is acceptable
  
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  L/C shall expire in the country of the issuing bank
  
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  Negotiation is restricted
  

Payment of back to back as 60-90-102-180 days of maturity period, deferred payment, are made, payment is given after realizing export proceeds from the L/C issuing bank.

Customer A/C Dr.

To commission on acceptance

While payment, if the fund is at hand, the accounting entry is –

To customer’s A/C

Outstanding against payment …………. Dr.

To customer’s A/C

It may happen that the credit in favors of the seller is not transferable, or although transferable, cannot meet commercial requirement by transfer in accordance with article 46 (UCP) conditions. The sillier himself however is unable to supply the goods and needs to purchase them from, and make payable to supply the goods and needs and needs to purchase them from and make payable to another supplier.

(A COMPARATIVE ANALYSIS OF IBBL)

Remittance means sending of funds from the abroad. The word remittance indicates sending or transferring of funds through a bank from one place to another that occurs between the countries. When it is occurred between the countries is called foreign remittances.

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  Family maintenance
  
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  Donation
  
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  Gift
  
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  Export proceeds
  
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  Foreign Direct Investment (FDI)
  
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  Others.
  

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  Inward Remittances
  
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  Outward Remittances.
  

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  Inward remittances:
  

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  Outward remittances:
  

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  D.D
  
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  T.T
  
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  M.T
  
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  T.C.
  
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  Import bills etc.
  

Only the authorized institution can exchange foreign currency. IBBL is one largest private bank, which conduct foreign exchange business. For the purpose of getting and maintaining authorization institution must be followed Bangladesh Bank guidelines.

Fig: Remittance share of IBBL compare with national.

At present about 40 banks, (private, nationalized, and foreign banks) are receiving foreign remittance from abroad in various mode. Among them 8 banks received 98% in the year 2002 and IBBL’s share is 9%. The detailed position is given below:

Fig: Share of remittance received by diferent bank

Fig: IBBL,s share within the private commercial banks.

Islami bank Bangladesh limited has obtained a solid foundation in respect of foreign trade within a long period of time. It’s total import, export and remittances for the year 2006 was Tk.201822.00 million Islami Bank Bangladesh Limited has 176 branches all over the country, some of them to deal with foreign transaction including many representing branch in the world.

Fig: 1.1: Performance of Foreign exchange business up to 2006

Fig: 1.2 Performance of Import Business.

The total export business handled by the business amounted taka. 51,133.00 million as at December 2006. Export goods handled by the bank as per rules of export policy without haram goods.

Growth of Foreign Exchange business: The total foreign exchange business handled by the Bank stood at taka 2,01,822.00 million as on 31.12.2006 showing a growth rate 37% from the preceding year the table below shows the picture of foreign exchange business of the IBBL in the last 10 years with growth trend: (Taka in Million)
Year	Import	Export	Remittance	Total Foreign Exchange Business	Growth rate (%)
1997	17,370.00	14,469.40	4,806.00	36,645.40	11
1998	20,238.30	14,894.30	6,360.00	41,493.20	13
1999	20,396.00	14,798.00	8,415.00	43,609.00	5
2000	25,327.00	16,889.00	7,644.00	49,860.00	14
2001	25,907.00	16,082.00	9,879.00	51,868.00	4
2002	33,788.00	16,673.00	14,670.00	65,131.00	26
2003	46,237.00	21,738.00	16,668.00	84,643.00	30
2004	59,804.00	29,151.00	23,669.00	112,624.00	33
2005	74,525.00	36,169.00	36,948.00	147,642.00	31
2006	96,870.00	51,133.00	53,819.00	201,822.00	37

Table: Foreign Exchange Business of IBBL