Foreign exchange operation in Farmers Bank (imamgonj Branch)

Chapter – 1

INTRODUCTION

TO

REPORT

Internship Report
1 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

INTRODUCTION

Bank is important financial organization to build the economy of a certain country.

Globalization or Free market economy is now the world‘s major challenge. Banks are key
financial institutions that play a vital role in the county‘s economy and core of the payment
system. The present economy of Bangladesh demands immediate development of financial
institutions with this capability. This report has been prepared in the light of practical as well as
theoretical knowledge that is shared by our honorable executives of The Farmers Bank ltd.

1.1. Origin of the Report:

As a pre-requisite for the Bachelor of Business Administration (BBA program) of Jagannath

University, Bangladesh I was required to complete an internship for a period of three months in a
suitable business organization and submit a report on my findings. I had selected to work as an
internee in The Farmers bank Limited, Imamgonj branch, for a period of three months from July
12th 2015 to October 15th 2015. And it is a 6 credit hour program.

In this internship report I have tried my best to focus on the functions and performance of
Foreign Exchange Operation of Farmers Bank which is a commercial Bank. Without the
practical exposure, theory can never be fruitful. For this BBA program has been designed in such
a way that a student gets practical knowledge. A student needs to go for practical orientation as
organization where his/her duty is to familiarize owns self with operations and activities of that
branch. This report is prepared under the supervision of Muhammad Zahirul Islam Assistant
professor, JAGANNATH University.

1.2. Background of the Report:

Banking sector is the driving force for an economic growth of a country. Every commercial bank
acts as financial intermediary whose main aim is to earn profit through borrowing and lending
funds in the profitable sectors and it also issues different types of credit instruments. Therefore
the banking system occupies an important place and plays significant role in a nation‘s economy
building process. Necessarily, banking sector also ensures commendable contribution in the
economic development of a country and forms the core of the money market in an advanced
country. This sort of financial intermediary accepting deposits and granting loans; offers the
widest menu of services for different business ventures. Commercial banks have significantly
expanded their financial services to the clients and governments around the world. The current
business environment is very dynamic and fast changing. That is why every professional has to
possess clear concept regarding these changes and he/she needs to conform to these changing
environments. In order to become a real professional candidate needs to enter into practical
business world. A professional is a person who is skilled in the theoretical, scientific and
practical aspect of an occupation and who performs with a high degree of competence &
integrity. This internship program assisted me to develop professional attitude towards banking
business & environment.
Internship Report
2 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Basically, this study will help to construct a skillful tenure in banking sector. This report has
been prepared in the light of practical as well as theoretical knowledge that is shared by
honorable management executives of The Farmers Bank Ltd.

1.3. Significance:

When associated with theory and practice, knowledge and learning become perfect. Theoretical
knowledge gets its perfection with practical application. That is why practical orientation is a
positive development in professional arena. In such state of affairs the present report aims at
analyzing the experience of practical orientation related to an appraisal of Farmers Bank LTD.

1.4. Scope of the report:

During this 3 months internship program in Imamgonj Branch, Farmers Bank Limited, almost all
the desks have been observed. There I had to work in Foreign Exchange department‘s Import
desks as a routine attendee. It was difficult to collect all the information relevant to my report
because the people of this Bank was so busy with their scheduled task that they could not be able
to provide me much time. Here I tried to cover the activities and rules and regulation related to
Foreign Exchange operations in a private commercial bank. Due to successful completion of
essential part of the report have the opportunity to discuss regarding following issues:

 To obtain practical experience about Foreign Exchange activities.

 Finding the bridge between academic study and real practices in organization.
 To build professional career in the banking sector as well as any Financial
Institution.
 How to maintain the organizational behavior & etiquette inside the organization.

1.5. Objective of the Report:

Internship Report is prepared as a requirement for the completion of the BBA program of Dept.
of AIS, Jagannath University, Bangladesh. The primary objective of internship is to provide an
on the job exposure to the student and an opportunity for translation of theoretical conceptions in
real life situation. The program covers a period of 3 months of organizational attachment.

1.5.1. General Objective:

The broad objective of the study is to prepare report on “Foreign Exchange Operation of
Farmers Bank Limited”.

Internship Report
3 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

1.5.2. Specific Objective:

 To know the foreign trade operations of a bank.

 To evaluate the performance of foreign exchange division.
 To evaluate the return on export, import and remittance.
 To find out the contributions of foreign exchange business of a bank in its overall
earnings.
 To get a brief idea about operational procedure, export & import business.
 To estimate the cost of export, import and remittance.
 Foreign exchange earnings as compared to total earnings interest income and non-
interest income.
 To familiarize different rules and regulations of export and import formalities.

1.6. Methodology:

The study requires a systematic procedure from selection of the topic to preparation of the final
report. To perform the study, the data sources were to be identified and collected, to be
classified, analyzed, interpreted and presented in a systematic manner and key points were to be
found out. The overall process of methodology has been given as below.

1.6.1. Research Design:

This is an “Exploratory Research”, which briefly reveals the “Foreign Exchange

Operations of Farmers Bank Ltd”. Data have been collected from both primary and
secondary sources.

1.6.2. Sources of Data:

1.6.2.1. Primary sources of data:

 Face to face conversation with the Bank officers & staffs.

 Conversation with the clients.

1.6.2.2. Secondary sources of data:

 Procedure manual published by the Farmers Bank Ltd.
 Annual report of Farmers Bank Limited, 2013.
 Annual report of Farmers Bank Limited, 2014
 Different text books.
 Different manuals of FARMERS Bank Limited.
 Different circulars of FARMERS Bank Limited.
 Different papers of FARMERS Bank.

Internship Report
4 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

1.6.3. –Duration:

Twelve weeks within the period of three months‘internship program.

1.6.4. Tools used for analysis:

Quantitative as Horizontal & Ratio analysis tools are used to analyze the data. After collecting all
the data, they have been coded and data have been preceded, analyzed and graphically
represented using MS Word & MS Excel.

1.7. Limitations of the Study:

In all respect some limitation and weakness remain within which I failed to escape by any
means. These are follows:
 To continue study in such a vast area requires a big deal in time. As an internee I had
only three month’s time, which was not enough.
 To collect information required, I faced difficulty because of the excessive nature of
confidentiality maintained by the officials of FARMERS Bank.
 Difficulty in gaining accesses to financial sector, bank software & confidential
documents.
 In most cases I simply did not have any option but to furnish data without
verification.
 Getting Relevant papers and documents were strictly prohibited.
 Non-availability of the most recent statistical data.
 Shortage of written materials.
 Since the bank personals were very busy, they could provide me very little time.
 In spite of all this limitations I have put the best effort as far as possible in developing the
study.

Internship Report
5 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Chapter – 2

ORGANIZATIONAL

DESCRIPTION

Internship Report
6 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

2.1. About Farmers Bank

The Farmers Bank Limited is a Bangladeshi commercial bank headquartered at Glushan-1,

Dhaka. The Farmers Bank Limited, a fourth generation bank commenced its banking operation
on June 3, 2013 licensed by Bangladesh Bank, the central bank of Bangladesh. The bank
emerged as a new commercial bank to meet up and provide efficient banking services to all level
of customers and to contribute socio-economic development of the country. The directors and
sponsors of the bank are esteemed and eminent personalities from the realm of commerce and
industries of the country.

As a well accomplished commercial bank, The Farmers Bank Limited is being allocated by a
highly professional and devoted team with long experience in banking. They continuously focus
on understanding and prognosticating customer needs.

The Farmers Bank offers all kinds of corporate, institutional and retail banking services covering
all segments of society within the framework of Banking Company Act and rules and regulations
imposed by our central bank and other regulatory authorities. The Farmers Bank, since its
inception has emphasized in technology integration. In order to keep hold of competitive
periphery, investment in technology is always a top agenda and under constant focus. Keeping
this mind the Famers bank limited always responsive for changing technology effectively.

2.2. Farmers Bank Logo:

2.3. Farmers Bank Vision:

To emerge as a dynamic, progressive, excellent, financial institution of the country by
providing premium products and services to the customers and supporting the attainment of
the national goals for socio-economic development.

2.4. Mission:
To stimulate economic growth of the country through consistent expansion by providing
diversified products and services to all clients and to create a sound vibrant financial system
with effective, efficient, and transparent operation and socially acceptable rate of profit for
the shareholders.

2.5. Strategic objectives:

Internship Report
7 Jagannath University
 L
F
P
A
V
S
IO
R
M
T
X
Y
C
N
E
G
D
U Foreign exchange operation in Farmers Bank (imamgonj Branch)

Strategic objectives of The Farmers Bank Limited are to strive for achieving financial strength
and growth, to improve of its capacity to meet the customer's increasing and dynamic banking
needs in a demanding business environment and to generate reasonable income for its
shareholders, through increasing profitability, continuing international expansion, and hiring and
retaining of qualified personnel. All these are encapsulated into national objective of attainment
of prosperity in freedom for all citizens.

Long term fundamentals of the Bank's strategy for achieving its set objectives take account of :

 Strengthening and maintain the safety and efficiency of the banking system.
 Continuous investment in network expansion and thus bringing quality banking services

2.6.

2.7.
closer to citizens.
 Strengthening trust of and partnerships with customers by focusing on the Bank's core
values of quality customer service, professionalism, teamwork and integrity.
 Hiring professionals with a strong knowledge of banking business and developing skills
and expertise of its employees.
 Continuous investment and development of up to date and state of the art technology to
increase operational efficiency and promote implementation of the best practices in the
industry.

Corporate philosophy of Farmers Bank:

FBL Values:

8 Internship Report
Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Being a Commercial bank means that FBL have a close relationship with customers and the
sectors in which they operate.FBL make it their business to understand the particular issues
that they face on a day-to-day basis. FBL Values include:

 FBL espouse open communication, diversity, integrity and teamwork.

 FBL think about each other’s Welfare.
 FBL appraise high performance impact and excellence.
 FBL provide products and services that do what they say they will and are
relevant to our customers' needs.
 FBL admit when FBL have made a mistake and strive hard to put it right.
 FBL are customer centered.
 FBL are close to and understand our customers' needs.
 FBL focus on solutions and deliver on our promises.
 FBL will deliver value for money products and services.
 FBL will delight our customers.

2.8. FBL IS NOT ONLY A BANK, IT IS DEDICATED CORPORATE

CITIZEN

Corporate Social Responsibility (CSR) holds one of the very important aspects of FBL.
Being one of the corporate citizens of the country, FBL has always promoted social
activities. Many activities that do a common good to the society have been undertaken by
FBL in the past and this happens as FBL on an ongoing basis.

2.9. Organizational Structure of FBL:

Internship Report
9 JagannathBoard
University
of director - -Advisor

Additional Managing Director

 Deputy managing Director

Senior
Foreignexecutive vice president
exchange operation in Farmers Bank (imamgonj Branch)

Executive vice president

Senior Vice president

Vice president

First Vice president

Assistant Vice president

First Assistant vice president

Principal Officer

Senior executive officer

Executive officer

Officer

Assistant officer

Trainee assistant officer

2.10. Key feature of banking services:

Internship Report
10 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

a. Computerized Banking system

The head office and the other branches have been provided with the State-of-the-art computer
hardware as well as software to carry on day-to-day accounting and routine work efficiently and
quickly. The FBL currently uses most updated T24 banking software.
b. SWIFT services
 Quick transmittal of documentary credit and other financial messages
 Fully automation
 Transfer the found instantly
 Quick remittance
 Manage risks
c. ATM Banking
FBL is now working on ATM banking. Within few months FBL will introduce ATM.

d. Branch Networks and Inter Division and Branch Coordination

At present, the bank has 34 branches of which 21 branches are in Dhaka, 08 branches are in
Chittagong, 01 branch is in Rajshahi, 01 branch is in Khulna and 03 branch is in Barishal.
All the 34 branches are computerized under distributed server environment. FBL has already
started their on-line and work on SMS banking facilities for their clients.

e. Others

  Online Banking
  SMS Banking (upcoming)
  Lockers
  Utility Bills
Ready cash card
 

Internship Report
11 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Chapter – 3

Theoretical Aspect of
Foreign exchange operation

3.1. Literature Review:

Internship Report
12 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

The international monetary systems refer primarily to the set policies, institutions, practices,
regulations and mechanisms that determine the rate at which each currency is exchanged for
another (Shapiro, 2001) in the trading of currencies & settlement & facilitation of international
trade and investment. If there was a single international currency, there would be no need for a
foreign exchange market. The purpose of foreign exchange market is to enhance transfer of
purchasing power dominated in one currency for another currency. The foreign exchange market
is not a physical place rather it is an electronically linked network of banks, foreign exchange
brokers and dealers whose function is to bring together buyers and sellers of foreign exchange. It
is not confined to any one country, but is dispersed throughout the leading financial centers of
the world (Shapiro, 2001).
Foreign exchange market consists, of two tiers, the Interbank market in which major banks &
financial institutions trade with each other and the Retail market in which banks deal with their
commercial customers (Redhead and Hughesis, 1998). The major participants in the foreign
exchange market are the large commercial banks, foreign exchange brokers in the interbank
market, commercial customers-primarily multi-national corporations and Central Banks which
intervene from time to time in the market to smooth exchange rate fluctuations or to maintain
target exchange rates. Exchange rates represent the number of units of a given currency of one
country that can be exchanged for unit of another currency (Van Horne, 1996). Today foreign
exchange has been the talk of the town, and this is because foreign exchange plays a very crucial
role in the overall performance of the national economy. The practice of managing foreign
exchange resources has therefore evolved broadly in line with the globalization and liberalization
of economies and financial market. This has played over such areas as risk management and
active portfolio management. Broadly speaking foreign exchange is held and managed to
facilitate international transactions (Anifowoshe, 1997).

Consequently, some of the objectives which management of foreign reserve seeks to achieve
include security, liquidity, profitability and adequacy of the reserves. Nwakwo, 2001, was of the
opinion that foreign exchange major tasks is to ensure that the reserves are maintained at an
adequate level to serve as cushion or buffer at times of temporary foreign short falls in foreign
exchange receipt. In fact such a respite enables country to put its house in order and adopt
necessary measures to deal with the external shock destabilizing the Economy (Nwakwo, 2001).

Foreign exchange is a subset of external reserves but typically it constitutes the bulk of the
reserves. In fact it is the component that issued on daily basis for settlement of international
transactions hence foreign exchange management refers to the technique of efficient and optimal
holding and deployment of the nation‘s foreign exchange reserves to meet its external
obligations and other economic objectives; as assigned by the Central Bank. Indeed the
consolidation of the external reserves holding has foisted on the banks the challenges of adoptive
and sharpening management skills that would ensure that the reserves are not only conserve but
also optimally deployed for essential needs. This has over the years entailed designing ways of
effectively monitoring the use of foreign exchange resources.

The use of trade and exchange controls as tools of reserve management involved comprehensive
restrictions on trade and other inter-national transactions. The main objectives here are to ensure
that foreign exchange reserve, are conserved and adequate to guarantee external stability and that
Internship Report
13 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

the available resources are optimally used to promote domestic production (Anifowoshe, 1997).

3.2. Foreign exchange definition:

An ordinary citizen usually perceives foreign exchange simply as foreign money. When we talk
of foreign exchange or foreign currency the one that really comes to our mind is American dollar
which literally rules the world. American dollar referred as green back usually accepted in all
over the world including foreign trade. Other like British pound, euro, and yen also accepted and
play pivotal role.
But the term foreign exchange is used broader sense. It can simply define as a process of
conversion of one currency into another.
“Foreign exchange is a system or process of conversion of one currency into another and of
transferring money from one country to another” - DR. PAUL EINZIG

“Foreign exchange is that section of economic science which deals with means and methods by
which rights to wealth in country’s currency are converted into rights to wealth in terms of
another country’s currency. It involves the investigation of the methods by which the currency of
one country is exchanged for that of another. The causes which render such exchanges
necessary, the forms in which exchange may take and the ratios and equivalent values at which
such exchanges are affected.”
-H. E. EVITT

Foreign exchange broadly includes the following activities:

1. Deposits, credits and balances payable in a foreign currency.
2. Drafts, traveler’s cheque, letter of credit, bills of exchange or hundi expressed or drawn
in local currency but payable in foreign currency.
3. Drafts, traveler’s cheque, letter of credit, bills of exchange or hundi drawn by banks ,
institution, or persons from abroad , but payable in local currency.

3.3. Foreign exchange market and Bangladesh:

Internship Report
14 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Foreign Exchange Market allows currencies to be exchanged to facilitate international trade and
financial transactions. Evolution of the market in Bangladesh is closely linked with the exchange
rate regime of the country. It had virtually no foreign exchange market up to 1993.
BANGLADESH BANK, as agent of the government, was the sole purveyor of foreign currency
among users. It tried to equilibrate the demand for and supply of foreign exchange at an
officially determined exchange rate, which, however, ceased to exist with introduction of current
account convertibility. Immediately after liberation, the Bangladesh currency taka was pegged
with pound sterling but was brought at par with the Indian rupee. Within a short time, the value
of taka experienced a rapid decline against foreign currencies and in May 1975, it was
substantially devalued. In 1976, Bangladesh adopted a regime of managed float, which continued
up to August 1979, when a currency-weighted basket method of exchange rate was introduced.
The exchange rate management policy was again replaced in 1983 by the trade-weighted basket
method and US the dollar was chosen as intervention currency. By this time a secondary
exchange market (SEM) was allowed to grow parallel to the official exchange rate.

Up to 1990, multiple exchange rates were allowed under different names of export benefit
schemes such as, Export Bonus Scheme, XPL, XPB, EFAS, IECS, and Home Remittances
Scheme. This led to a wide divergence between the official rate and the SEM rate. The situation
also gradually gave rise to a number of conflicting regulations, poor risk management, and
various types of implicit or explicit government guarantees to the users of foreign exchange. This
resulted in a number of macro-economic imbalances prompting the government to adjust the
official rate in phases.

3.4. Authorized dealer:

The foreign exchange activity can only be dealt by getting authorized dealer license from
Bangladesh bank. If Bangladesh bank give authorized dealer license to any bank’s branch by
meeting all requirement like the specific branch have sufficient future foreign dealing prosperity
or meeting special restriction. The farmer’s bank ltd imamgonj branch got AD license in 2014
and its AD code is 3304.

According to foreign exchange act:-

 An authorized dealer shall in all his dealings, in foreign exchange, comply with such
general or special directions or instructions as the Bangladesh Bank may from time to
time think fit to give, and, except with the previous permission of the Bangladesh Bank,
an authorized dealer shall not engage in any transaction involving any foreign exchange
which is not in conformity with the terms of his authorization.

 An authorized dealer shall, before undertaking any transaction in foreign exchange on

behalf of any person, require that person to make such declarations and to give such
information as will reasonably satisfy him that the transaction will not involve, and is not
designed for the purpose of, any contravention or evasion of the provisions of this Act or
of any rules, directions or orders made there under, and where the said person refuses to
Internship Report
15 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

comply with any such requirement or makes only unsatisfactory compliance therewith,
the authorized dealer shall refuse to undertake the transaction and shall, if he has reason
to believe that any such contravention or evasion as aforesaid is contemplated by the
person, report the matter to the Bangladesh Bank.

3.5. Foreign Exchange Regulatory Framework

Foreign Exchange Business is a crucial and complex business all over the world. Fraud and
forgery may arise in every sphere of this business. To overcome those miss happening and to
settle international disputes, a legal framework is a must. An apex body is doing these functions
named International Chambers of Commerce (ICC) through different central bank. In
Bangladesh, central bank named as Bangladesh bank give guideline on time to time basis.

Foreign exchange regulations items are given below:

 THE FOREIGN EXCHANGE REGULATION ACT, 1947

 Bangladesh Bank Manual
 Foreign Exchange Circular
 Public notice
 Import and export policy gazette
 Ministry of commerce circular
 Guise line for foreign exchange regulation

3.6. SWIFT operations by the Farmers Bank ltd.

SWIFT-Society for Worldwide Inter-bank Financial Telecommunication established in 1973 by

239 Banks of 15 European countries with Head Quarter in Belgium – is the industry-owned co-
operative supplying secure, standardized messaging services and interface software to nearly
8000 Financial Institutions in 206 countries & territories.
SWIFT provides complete solutions covering every aspect of financial service processing which
include – payments & cash management, treasury & derivatives, trade services, securities pre-
trade/trade, pre-settlement, clearing & settlement, custody services and reporting.
Bangladesh entered into the era of SWIFT Connectivity in 1999 with membership of 35 Banks.
Farmers bank introduced SWIFT operation since its inception.

Internship Report
16 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

SWIFT code of Farmers bank - FRMSBDDH

Different Category of SWIFT Message
1) System Messages.
2) Customer Payments & Cheques.
3) Collections & Cash Letters
4) Documentary Credits & Guarantee
5) Cash Management & Customer Status

3.6.1. Nostro Account:

A bank who maintains the account with foreign bank is called the nostro
account. Nostro account means “our account with you”. A Nostro account is a foreign currency
account of a bank maintained by its foreign correspondents abroad. For example, US Dollar
Account of Farmers Bank Limited is maintained with Citibank, N.A, New York, USA is a
Nostro account of Farmers Bank Limited i.e. from the point of view of Farmers Bank Limited,
and it is their Nostro Account.
3.6.2. Vostro Account:

Vostro Account means “your account with us”. The account maintained by a foreign bank is
known as vostro account. We can term nostro account when referred to its account holder
(foreign bank) by home bank as vostro account. For example, State Bank of India’s Taka account
maintained with Farmers Bank Limited Dhaka is the vostro a/c i.e. from the point of view of
Farmers Bank Limited it is a vostro account held for state bank of India.
What is the Nostro account for a bank in a particular country is a Vostro account for the bank
abroad maintaining the account thus the account of Farmers Bank Limited with Standard Charted
Bank, London regarded as it’s Nostro account held with Standard Charted Bank, while Standard
Charted Bank, London regards it as it’s Vostro account held for Farmers Bank Limited.

3.6.3. Loro Account:

Loro account means “their account with you”. Account maintained by third party is known as
Loro account; suppose Farmers Bank Limited is maintaining an account with Citi Bank N.A
New York and at the same time Janata Bank is also maintaining a nostro account with Citi Bank
N.A New York. From the point of view of Farmers Bank Limited Janata Bank’s account
maintained with Citi Bank N.A New York is the Loro account.

3.7. INCO TERMS:

Internship Report
17 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

EXW (EX-Works)
One of the simplest and most basic shipment arrangements places the minimum responsibility on
the seller with greater responsibility on the buyer. In an EX-Works transaction, goods are
basically made available for pickup at the shipper/seller's factory or warehouse and "delivery" is
accomplished when the merchandise is released to the consignee's freight forwarder. The buyer
is responsible for making arrangements with their forwarder for insurance, export clearance and
handling all other paperwork.

FOB (Free On Board)

One of the most commonly used-and misused-terms, FOB means that the shipper/seller uses his
freight forwarder to move the merchandise to the port or designated point of origin. Though
frequently used to describe inland movement of cargo, FOB specifically refers to ocean or inland
waterway transportation of goods. "Delivery" is accomplished when the shipper/seller releases
the goods to the buyer's forwarder. The buyer's responsibility for insurance and transportation
begins at the same moment.

FCA (Free Carrier)

In this type of transaction, the seller is responsible for arranging transportation, but he is acting at
the risk and the expense of the buyer. Where in FOB the freight forwarder or carrier is the choice
of the buyer, in FCA the seller chooses and works with the freight forwarder or the carrier.
"Delivery" is accomplished at a predetermined port or destination point and the buyer is
responsible for Insurance.

FAS (Free Alongside Ship)

In these transactions, the buyer bears all the transportation costs and the risk of loss of goods.
FAS requires the shipper/seller to clear goods for export, which is a reversal from past practices.
Companies selling on these terms will ordinarily use their freight forwarder to clear the goods for
export. "Delivery" is accomplished when the goods are turned over to the Buyers Forwarder for
insurance and transportation.

CFR (Cost and Freight)

This term formerly known as CNF (C&F) defines two distinct and separate responsibilities-one
is dealing with the actual cost of merchandise "C" and the other "F" refers to the freight charges
to a predetermined destination point. It is the shipper/seller's responsibility to get goods from
their door to the port of destination. "Delivery" is accomplished at this time. It is the buyer's
responsibility to cover insurance from the port of origin or port of shipment to buyer's door.
Given that the shipper is responsible for transportation, the shipper also chooses the forwarder.

CIF (Cost, Insurance and Freight)

This arrangement similar to CFR, but instead of the buyer insuring the goods for the maritime
phase of the voyage, the shipper/seller will insure the merchandise. In this arrangement, the
seller usually chooses the forwarder. "Delivery" as above, is accomplished at the port of
destination.

CPT (Carriage Paid To)

In CPT transactions the shipper/seller has the same obligations found with CIF, with the addition
Internship Report
18 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

that the seller has to buy cargo insurance, naming the buyer as the insured while the goods are in
transit.

CIP (Carriage and Insurance Paid To)

This term is primarily used for multimodal transport. Because it relies on the carrier's insurance,
the shipper/seller is only required to purchase minimum coverage. When this particular
agreement is in force, Freight Forwarders often act in effect, as carriers. The buyer's insurance is
effective when the goods are turned over to the Forwarder.

DAT (Delivered At Terminal)

This term is used for any type of shipments. The shipper/seller pays for carriage to the terminal,
except for costs related to import clearance, and assumes all risks up to the point that the goods
are unloaded at the terminal.

DAP (Delivered At Place)

DAP term is used for any type of shipments. The shipper/seller pays for carriage to the named
place, except for costs related to import clearance, and assumes all risks prior to the point that the
goods are ready for unloading by the buyer.

DDP (Delivered Duty Paid)

DDP term tend to be used in intermodal or courier-type shipments. Whereby, the shipper/seller is
responsible for dealing with all the tasks involved in moving goods from the manufacturing plant
to the buyer/consignee's door. It is the shipper/seller's responsibility to insure the goods and
absorb all costs and risks including the payment of duty and fees.

3.8. Documents Related to Foreign exchange:

3.8.1. 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.

3.8.2. Bill of exchange

Internship Report
19 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

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 prepares 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.

3.8.3. 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.

3.8.4. 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.

Internship Report
20 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

3.8.5. 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.

3.8.6. Pro-forma Invoice or Indent

This is 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.

3.8.7. 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.

Internship Report
21 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

3.8.8. Certificate of Origin:

A certificate of origin is a signed statement providing evidence of the origin of the goods and it is
required in compliance with exchange control/regulation in the importing Country. It is issued by
chamber of commerce. Trade Associations or any other authority authorized by the government
to issue the certificate.

3.8.9. Packing List:

The Exporter must prepare a packing list showing, item by item, the contains of them containers
or cases to enable the importer of the goods check the shipment, If should give description of the
goods, net weight and grows weight, specific packages and thus may facilitate assessment by the
customs.

3.8.10. Insurance Certificate:

 The Insurance Certificate documents must

 Be that specified n 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 the date shipment as evidenced by the shipping
documents.
 Be for an amount at least equal to the CIF value of the goods and in the currency of
credit.

Internship Report
22 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Chapter – 4
Foreign Exchange Operation
(observational Aspect)

4.1. Foreign Exchange activities in Farmers Bank:

The foreign exchange activities of FBL are divided into three parts: The bank has established
correspondent relationship with over 10 foreign correspondents all over the world viz., USA

Internship Report
23 Jagannath University
 I
p
x
E
m
R
t
e
c
n
a
r
o
itt Foreign exchange operation in Farmers Bank (imamgonj Branch)

Mashreq Bank Psc, CHINA Kookmin bank, India Axies bank, National bank of Pakistan etc to
cater to the needs of the bank’s customers engaged in international trade. FBL is maintaining
adequate number of Nostro accounts in important currencies of the world to facilitate payments
and transfer of funds. The Bank is providing excellent services to the clientele in foreign
exchange and foreign trade operations through the above foreign correspondents. Foreign
exchange is mainly combination of three parts. Those are given below:

1. Import
2. Export
3. Remittance

These three parts are most essential parts of Foreign Exchange Operations of FBL at
IMAMGONJ Branch. Not only FBL but also all banks of Bangladesh have maintained these
rules for foreign exchange operations.

24
4.2.
Fig: Foreign Exchange activities in Farmers Bank

Import

Internship Report
Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

4.2.1. procedure From Customer Perspective:

Step 1- Getting the Loan Limit from the Farmers Bank

If the trader wants to open cash L/C then no need for loan or L/C limit. But if trader wants to
open L/C other than cash L/C like LTR he needs to get loan limit from the Farmers Bank. This
section deals by credit division of Farmers Bank. It must be approved by head office. The trader
needs to show mortgage against such loan limit or L/C limit.
To have an import LC limit an importer submits an application to credit department of Farmers
Bank imamgonj branch.

The proposal contains the following particulars:

 Full particulars of the bank account
 Nature of business
 Required amount of limit
 Payment terms and conditions
 Goods to be imported
 Offered security
 Repayment schedule

Then Farmers bank Imamgonj branch forward the proposals to head office. After satisfying with
mortgage, nature, payment schedule head office sanction the limit. Most of the case party applies
for composite loan such as (CC, Term loan, SOD, LTR Limit) and party got LTR limit from such
application. Farmers bank will give particular trader a certificate indicating that the particular
branch is ready to proceed with this client.

Step 2 – Getting IRC and Registration with Chief Controller of Import and Export
(CCI&E)

By paying specified registration fees (3000 taka) to the CCI&E. the trader will get [RC/ERC
(Import/Export Registration Certificate), to open L/C with bank, this IRC is must. In IRC
specific bank name will be written by which importer can open L/C. IRC is a type of license
which restrict trader to limit import amount as well as restrict specific type of goods that is
prohibited to import.

Procedure for obtaining Import Registration Certificate (IRC) :

Through public notice or import policy the chief controller of import and exports invites
application usually for registration of importers. The following documents are required to submit
for getting Import Registration Certificate (IRC).

Internship Report
25 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

 Application form
 National Certificate
 Income tax registration certificate with TIN
 Trade license
 Membership Certificate
 Certificate of registration with the register of joint Co. & Articles and
Memorandum of Association in case of limited company
 Bank Certificate

The nominated of the applicant will examine the documents and verify the signature of the
applicant and forward the same to the concerned office of the CCI&E in duplicate through bank
representative. The duplicate copy of the same bearing the acknowledgement of CCI & E office
of the receipt of the document is received by the bank and is preserved.

If the trader already import goods previously and open L/C with other bank in that case NOC
from that bank is compulsory with IRC and in some cases previous bill of entry.

Step 3 - Determination terms of credit

The terms of the letter of credit are depending upon the contract between the Importer and
exporter. The terms of the credit includes the amount of credit, name and address of the
beneficiary and opener, tenor of the bill of exchange, period and mode of shipment and of
destination, nature of credit, expiry date, name and number of sets of shipping documents etc.

Step 4 - Application by importer to the banker to open letter of credit

For opening L/C, the importer is required to fill up a prescribed application form provided by the
Banker along with the following documents:

1. L/C application form duly signed by 6. authority to debit account

proprietor or partner
2. Filled up LCA Form (LCAF) 7 . Pro-forma Invoice (PI)
3. Filled up IMP Form 8 . Insurance cover note and money receipt.
4. Filled up TM form 9. filled up amendment request form
5. Tax identification number 10. Import registration certificate (IRC)

Internship Report
26 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Step 5 - Opening of L/C by the bank for the opener:

 Taking filled up application form from the importer.

 Collects credit report of exporter from exporter‘s country through his foreign
correspondence there.
 Opening bank then issues letter of credit by air mail/TEL EX/SWIFT followed by L/C
advice as asked by the opener through his foreign correspondent or branch as the case
may be, at the place of beneficiary. Most of the case letter of credit opened through Swift.
 In Farmers bank Letter of credit opened through Alliance Message service according to
pro-forma invoice and LCA Form. The advising bank advises the L/C to the beneficiary
on his own/forms where it is addressed to him or merely hand over the original L/C to the
beneficiary if it is so addressed.
 LC in alliance message service cheeked and re cheeked before final disbursement.

Step 6 - Shipment of goods and lodgment of documents by exporter:

Then exporter ships the goods to the destination of the importer country and Send documents to
the L/C opening bank through his negotiating bank.

1. Bill of exchange
2. Commercial invoice
3. Packing list
4. Psycho-sanitary certificate
5. Health certificate
6. Radioactivity certificate
7. Bill of lading
8. Certificate of origin
9. A certificate stating that each packet contains the description of goods over the
packet.
10. Advice Details of Shipment
11. Pre inspection certificate
12. Vessel particular
13. Shipment certificate

Step 7 - Lodgment of Documents by the Farmers Bank from the negotiating bank

After receiving the documents, the opening banker scrutinizes the documents. If any discrepancy
found, it informs the importer, if importer accepts the fault, then opening bankers call importer
retiring the document. At this time many thing can happen. These are indicated in the following:

Internship Report
27 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

 Discrepancy found but the importer accepts - no problem occurs in lodgment.

 Discrepancy found and importer not agreed to accept - In this case, importer protest and
send back all the documents to the exporter and request his to make in the specified
manner. Here banker is not bound to pay because the documents send by exporter is not
in accordance with the terms of L/C.
 Documents are OK but importer is willing to retire the documents - In this case bank is
obligated to pay the price of exported goods. Since importer did not pay for bill of
exchange, this payment by bank is one kind of credit to the importer and this credit in
banking is known as PAD.
 Everything is O.K. but importer fails to clear goods from the port and request bank to
clear - In this case banks clear the goods and takes delivery of the same by paying
customs duty and sales tax etc. So, this expenditure is debited to the importer's account
and in banking it is called LIM.

Step 8- Retirement

The importer receives the intimation and gives necessary instruction to the bank for retirement of
the import bills or for the disposal of the shipping document to clear the imported goods from the
customs authority. The importer may instruct the bank to retire the documents by debiting his
account with the bank or may ask for LTR (Loan against Trust Receipt).

4.2.2. Import procedure from Farmers Bank perspective:

Internship Report
28 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Step 1 Margin cheek or Cash LC

Farmers bank will asked its client whether client will open cash LC or Margin LC. If it’s a
Margin LC then client need to deposit at least 10 percent of total LC amount. This deposited
amount treated as security and if it’s a cash LC then client will need o deposit full amount of LC.

Step 2 providing LCA Form

After getting LTR limit the importer with IRC and NOC (if applicable) apply for opening letter
of credit on his or her business pad addressing manager of the specified branch. If foreign
exchange in charge satisfies, he/she will ask importer for Pro-forma invoice and insurance cover
note with money receipt. Then foreign exchange division of Farmers bank will give LCAF
form.

LCAF Form has two categories.

 Industrial importer LCAF: Importer who import goods for further procurement. Either
importer process goods for next stage or sell it to others for further process.
 Commercial Importer LCAF: the goods imported by importer are ready for sell or
consumption is called commercial importer.

Step 3 Opening LC file and getting LC number

Farmers bank employee open a LC File on behalf of its client after getting LCAF where all kinds
of document related to that LC will keep. LC client name with opening date, maturity and LC
amount will posted in LC opening register where a number will obtain which start with branch
AD code 3304. This number will use for all kinds of reference related with this LC.

Step 4 opening L/C

Farmers bank employee will open L/C after getting LCAF filled and pro-forma invoice. LC will
open in Alliance message service. L/C is basically a document which contains the following:

1. LC number ( which is according to entry register serial and start with Bangladesh bank
AD license number)
2. Importer name with address
3. Beneficiary or exporter name and address
4. Date of opening LC
5. Expired date of LC
6. Last date of shipment
7. LC amount

The list of document that exporter need to send. If listed document is not sent by exporter
Internship Report
29 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

according to LC then farmer’s bank will qualify it as a discrepancy where exporter need to

8. Pay 50 dollar. (Listed document are- bill of exchange, commercial invoice, certificate of
origin, packing list, bill of lading etc.)
9. Proper instruction given by importer ( transshipment or partial shipment is allowed or
not )

Step 5 posting entry in Bangladesh bank import monitoring system

Bangladesh bank is the central bank which regulates all commercial bank activities. Bangladesh
bank scrutinizes the foreign exchange activity. For import purpose Bangladesh bank has import
monitoring system which is fully online. As LC is open Farmers bank need to report to
Bangladesh bank that a letter of credit has been issued.

FBL employee will go o http://www.bb.org.bd/eservices.php then will open the online import
management system systems. Then employee will post initially in following two sections:

1. LCAF information
2. LC information entry

LCAF information section will contain the following:

1. LCA no
2. IMP reg no
3. Import commodity type
4. Currency code
5. LCAF Type
6. LCA Value
7. Importer address
8. Import type
9. Commodity code
10. Unit code
11. Quantity and etc

Internship Report
30 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

LC information entry will contain the following:

1. LCAF ID 2. LC type
3. LC no 4. LC Rule
5. Country of origin 6. LC Expiry date
7. Destination country 8. LC AMOUNT
9. INCO term used 10. Last shipment date etc.

Step 6 Documents received

Farmers bank will received documents from exporter that specified in letter of credit. The time
span between the documents receives and LC opening may be 5 days to 1 month or even more.
After receiving documents, Farmers bank will inform to importer that documents received. The
importer will need to disburse the documents within five working days of documents
received.

Upon receiving documents Farmers bank will give entry in documents received register with
counting five working days disbursement date.

Step 7 Payments against Document

Within five working days of documents received importer must need to collect documents from
Farmers bank by paying against documents. If its cash LC then the rest of unpaid amount paying
or if its margin LC then the rest of unpaid amount (total LC value- Margin) paying in cash or
making LTR (loan against trust receipt). LTR is a kind of loan which will be payable with
interest after a specific period. The interest rate for LTR is basically 15-18 %. This stage has
following activity:

1. Documents Disburse: After LTR or cash receive farmers bank employee will give the
Following document that is needed to dispatch goods from custom:

1. Bill of exchange
2. Commercial invoice
3. Packing list
4. Psycho-sanitary certificate
5. Health certificate
6. Radioactivity certificate
7. Bill of lading
8. Certificate of origin
9. LCAF form (custom purpose)
10. L/C copy

Internship Report
31 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

11. Pro-forma invoice

12. Insurance policy
13. Import permission
2. Bangladesh bank IMP and TM Posting:
If IMP and TM posting is not given in Bangladesh bank import monitoring management
system then importer will not able to dispatch goods from customs. As import monitoring
system is online, custom authority get IMP and TM update and dispatch the goods
depending on such posting. IMP and TM form is given with LCAF form to fill by
importer.

IMP posting has the following blocks:

1. IMP serial 2. IMP year

3. LC ID 4. Payment category
5. IMP Amount 6. Port Export
7. Invoice number 8. Invoice Amount etc.

3. LC Amount paid BY International division:

Now Farmers bank will pay the LC amount money to exporter which is earlier received
from cash payment or LTR Loan. Imamgonj Branch will forward it to international
division of Farmers bank. International division will pay the amount through nostro
account with the exporter countries RMA bank. If RMA bank and exporter’s bank is
same then nothing to do else RMA bank will pay the beneficiary’s advisory bank.

4. LC account close:
LC account will close at this stage. The following entry is given:

Margin……DR
LTR………….DR
PAD…………………….CR

Step 8 Bill of entry posting

When importer pays all govt. fees like VAT, duty, customs fee etc then custom office will give
document called bill of entry. The formal proceeding of import ended with issuing bill of entry.
Importer must have to submit bill of entry to Farmers bank. After receiving bill of entry Farmers
bank will give posting to Bangladesh bank import management monitoring system.

Internship Report
32 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Step 9 sending Hard copy of import related documents to Bangladesh bank.

The last step of Farmers bank import procedure is sending IMP, TM and other hardcopy to
Bangladesh bank.

4.2.3. Schedule of charges of Import activities of Farmers Bank:

1 Import
Maximum 0.40% (Below 100% Margin)
1st Quarter
Commissions for opening and 0.25% (100% Margin)
1.1.(i) of L/C under Each Subsequent 0.40% (Below 100% Margin) and
Cash/AID/Loan/Barter etc. Quarter or part
thereof 0.25% (100% Margin)
1st Quarter 0.40%
Commissions for opening Each Subsequent
1.1.(ii) of Back to Back L/C Quarter or part 0.20%
including EDF L/C thereof
Minimum BDT 500.00
1st Quarter 0.40% for 1st Quarter
Accepted Commission Each Subsequent
1.1.(iii) 0.20% for each Subsequent Quarter or
(BTB L/Cs) Quarter or part
part thereof
thereof
Commissions for opening Per Quarter / Part
Maximum 0.50% for per quarter or part
1.1.(iv) of L/C under deferred thereof
thereof But minimum BDT 1000.00
payment Minimum
Accepted Commission
1.1.(v) For each quarter 0.40% per quarter
(Except BTB L/Cs)
If L/Cs are sent by mail (This shall
cover cost of registered mail of Local
2. to Advising Bank)
At actual minimum BDT 300
1
 
If L/C transferred by Telex/SWIFT
Foreign At actual or BDT 2,900.00
2.2(i) L/C transferred by SWIFT
Local At actual or BDT 1,050.00
2.
2 Short form or free format
Foreign At actual or BDT 300.00
message
2.2(ii)
In-operative L/C transmitted by
Local At actual or BDT 300.00
SWIFT
Amendment of local L/C by mail (This i) Amendment charge BDT
2.
shall cover cost of registered mail of 500.00
3
amendment of Advising Bank) ii) Mailing Charge at actual

Internship Report
33 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

4.2.4. Accounting procedure for Import operation:

 During LC opening:

Date Particular Dr. (TK) Cr. (TK)

Customer’s liability on L/C Dr. XXXX

Bankers Liability On L/C Cr. XXXX

Date Dr. (TK) Cr.(TK)

Customer A/C Dr. XXXXX
XXXXX
S. Deposit margin On LC (10%) Cr.
Commission on LC Cr. XXXXX
VAT on LC commission Cr. XXXXX
XXXXX
SWIFT Charge Cr. XXXXX
Income A/C Postage Cr. XXXXX
Income A/C courier charge Cr. XXXXX
Income A/C Miscellaneous Cr. XXXXX

 For Cash LC:

Date Particular Dr. (TK) Cr. (TK)

PAD A/C Dr. XXXX

Pay voucher RMA Bank Cr. XXXX
Handling or discrepancy Cr XXXX

Internship Report
34 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

 For LC on margin:

Date Particular Dr. (TK) Cr. (TK)

Margin Dr. XXXX

LTR Dr. XXXX
PAD Cr. XXXX

 For closing LC:

Date Particular Dr. (TK) Cr. (TK)

Bankers Liability Dr. XXXX

Customers liability Cr. XXXX

4.2.5. Register maintain by Farmers bank for import activities:

1. L/C opening register

2. Liability and margin register
3. Payment against document register

Internship Report
35 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

4.3. Export:

4.3.1. Export from client perspective:

1. Application For Export permission and obtaining Export registration certificate

(ERC):

For obtaining Export Registration Certificate (ERC), Bangladeshi exporters are required to apply
to the Chief Controller of Import & Export (CCI & E) in prescribe from along with the following
documents:

 Nationality and assets Certificates

 Memorandum and Articles of Association and Certificate of incorporation in
case of limited company.
 Bank Certificate.
 Income Tax Certificate.
 Trade License etc.

The person applied for ERC must pay the fee and must mention the bank name in application
along with other necessary data like product type that are going to be export. If Chief Controller
of Import & Export (CCI & E) satisfies with all documents then he will issue Export Registration
certificate.

2. Contacting With Importer:

Exporter will contact with importer. Give importer Sample goods. The communication between
importer and exporter take place either directly or agent. Importer satisfying with goods urges to
make contract. In this purpose Exporter may get help from:

 Liaisons Offices
 Buyers Local Agent
 Export Processing Organization
 Bangladesh Mission Abroad
 Chamber of Commerce
 Trade Fair etc

3. Contract between Exporter and importer and sending pro forma invoice:
Internship Report
36 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

After communicating with buyer the exporter has to get contracted for exporting exportable
items from Bangladesh detailing commodity, quality, price, shipment, insurance and mark,
inspection, and arbitration etc. then based on the contract exporter send Pro-forma invoice to
importer.

4. Getting Export or EXP Form from Farmers Bank:

After getting ERC the exporter applies to Farmers Bank Ltd. with trade license and if the bank is
satisfied, an EXP issued to the exporter. Before the Export Forms are lodged by the exporter with
the customers’ authorities, they should get all the copies endorsed by Farmers Bank. Before
shipment exporter submit EXP form with commercial invoice. Then Farmers Bank officer
checks it properly if satisfied certifies the EXP. Without it, exporter cannot make shipment. The
customer has to declare all exports goods on the EXP issued by the authorized dealers.

Disposal of Export Form (EXP):

Original From Custom Authority to Bangladesh Bank after shipment goods.

Duplicate From Negotiating Bank to Bangladesh Bank after Negotiation.

Triplicate From Negotiating Bank to Bangladesh Bank after realization of the

proceeds of the Export

Quadruplicat Retained by the Negotiating Bank as Office Copy.

e

5. LC receiving and preparing documents:

When get contract for sale, exporter should ask the buyer for Letter of Credit clearly stating
terms and conditions of export and payment.
After receiving L/C, the following points are to be looked for:
 The terms of the L/C are in conformity with those of the contract.
 The L/C is an irrevocable one, preferably confirmed by the advising bank (Farmers bank)
 The L/C allows sufficient time for shipment and a reasonable time for registration.
After making the deal and on having the L/C opened in his favor, the next step for the exporter is
to set about the task of procuring or manufacturing the contracted merchandise.

These documents are needed for Shipment of goods:

Internship Report
37 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

 Bill of exchange or Draft

 Export Form (EXP)
 Export Registration Certificate (ERC)(valid)
 Letter of Credit (L/C) copy
 Bill of exchange
 Bill of Draft
 Custom Invoice of Importer's Country
 Insurance policy or certificate
 Certificate of Origin
 Inspection Certificate by the Agent of Importer
 Consular invoice
 Packing List 8 copies (including 4 original)
 Quality Control Certificate
 G.S.P certificate
 Photo
6. Shipping the goods:
The next stage exporter will ship the goods to the destination port that mentioned in letter of
credit. After the goods ready for loading in vessel the shipping company will issue bill of lading.
In some cases bill of lading issued and mentioned the ship loading date.

7. Submission of Documents To Farmers Bank:

After getting the documents from clients, banker will check the documents as per LC terms. If
anything found that is not according to LC then suggests the client to prepare as per LC term. If
the banker found no mistakes then precede the documents with initial and required seal. Finally
banker sends the documents to importer with forwarding letter.

8. Procedure for collection:

 Foreign documentary bills for collection:

Exporter can collect the bill through Farmers bank (advising or negotiating bank) on the basis of
collection. Exporter in this case, will submit all the documents to the Farmers bank for collection
of bill from importer. The exporter will get money only when the issuing bank gives payment. In
this connection bank will scrutinize all the documents as per terms and conditions mentioned in
L/C.

 Foreign documentary Bills purchased:

When exporter sale all the export documents to the Farmers bank (advising bank) is known as
Internship Report
38 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Foreign Documentary Bill Purchase (FDBP). In this case, the exporter will submit all the
documents to the Farmers bank. The Farmers bank gives 60-80% amount to the exporter against
total L/C value. After the maturity of bills Farmers bank collect full amount of outstanding
money from issuing bank.
4.3.2. Export from Farmers bank Perspective:
1. Application of exporter:
Export L/C is issued by a Farmers bank having correspondent relationship with clients.
FBL provides different services to the exporter of Bangladesh. To get export facility the party
must have following requirements:-
1. Current deposit (CD)
2. ERC (Export registration certificate)
3. Mortgage
4. TIN Number.
5. Insurance policy
the exporter submit application for export by providing details of export business like importers
country, export volume, goods type etc.

2. Providing EXP Form:

The second stage , banker satisfies with exporter’s application provide EXP form to exporter.
Exporter will fill the EXP form wih necessary data.

3. Receiving LC from importer:

On next stage importer’s bank (issuing bank) will send LC in SWIFT. Farmers bank will get the
LC from swift and inform it to Exporter.

4. Submission of Documents by exporter:

After receiving LC, exporter will prepare and collect documents as per terms and condition
provided in LC. After preparation of Documents, exporter will submit all documents to Farmers
bank. Then Farmers bank employee will scrutiny cheek and re cheek the documents and put seal
as well as necessary initials.

5. Inspection of Documents:
Farmers bank employee will cheek the following and concerned following points:

Bill of exchange:

Internship Report
39 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

 Matching amount with commercial and pro-forma invoice

 Not drawn on L/C issuing bank (importer bank)
 Not duly signed by concerned exporter.
 Tenor or B/E not identical with L/C.
 Cheek weather it’s full or partial.
 Bills not issued by the beneficiary.
 Description, price, quantity sales terms of the goods not correspond to the credit.
 Shipping marks different will B/A & Packing list.
 Issuing bank name, address and branch etc.

COMMERCIAL INVOICE (C/I)

 Not issued by the Beneficiary.

 Not signed by the Beneficiary.
 Not made out in the name of the Applicant.
 Description, Price, quantity, seals terms of the goods not corresponds to the
Credit.
 Not marked one fold as Original.
 Shipping Mark differs with B/L & Packing List.

Packing List:

 Gross weight, net weight & measurement number of cartoons/packages differ with
bill of lading (B/L).
 Not marked me fold as original. (not mandatory)
 Not signed by the beneficiary.
 Shipping marks differs with B/L.
 Cheek the invoice no.

Internship Report
40 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Bill of Lading:

 Full set of bill not submitted.

 Bill of lading is not drawn or endorsed.
 “Bill of lading (B/L) Shipping on Board”, “Freight Prepaid” or “Freight collect” etc.
notations are not marks on the B/L.
 B/L not indicate the name and capacity of the party i,e, carrier or master on whose
behalf the agent is signing the B/L.
 Shipped on board notation not showing name of pre-carriage. Vessel/intended vessel.
 Shipped on Board nation not showing part of loading and vessel name (Incase B/L
indicates a place of receipt or taking in charge different from the port of loading).
 Watermark as original

Health Certificate:

 Name and address of importer and exporter

 Temperature during storage
 Quantity and weight cheeked with commercial invoice

Others:

 Non-negotiable documents not forwarded to buyers or forwarded beyond L/C terms.

 Inadequate number of Invoice, Packing List & others submitted which are not
complying with letter of credit.

6. Putting seal and sending to importer:

After inspection of documents Farmers bank employee will give necessary seal and
initials as well as send the documents to importer.

7. Posting in Bangladesh bank online export Monitoring management system:

 Issue of EXP:
Banker will create Online EXP which has following field:
Internship Report
41 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

1. EXP serial 2. EXP year

3. HS Code 4. country

5. Destination port 6. Currency

7. Invoice amount 8. FOB

9. Terms of Sale 10. Port of shipment etc.

 Export acknowledgement by bank

 Export proceed realization
 Advance receipt voucher

8. Buying bills of exchange from exporter:

If exporter needs money immediately he can able to sell the bills of exchange to Farmers
bank at discounted rate. After the maturity of bills Farmers bank will get the money from
importer’s bank. Difference between the discounted rate and bills value is the income of
Farmers bank.
9. Payment from Importer Through RMA:
If Farmers bank has the relationship management agreement with the issuing bank then
Farmers bank will get the payment directly by relationship agreement through NOSTRO
and VOSTRO account operation. But if the Farmers bank have no RMA with issuing
bank, then issuing bank will pay money to that countries bank which they have RMA.
Then RMA will pay the money to Farmers bank.

Internship Report
42 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

4.3.3. Schedule of charges for Export activities:

Nature of Revised/Existing rate of

Service
Charge Commission/ Charge
Export
Bill (Sight/Usance) Negotiating charges for export
1.1(i)   No Charges
bills in foreign currency
Bill (Sight/Usance) Negotiating charges for export
1.2(ii) bills in foreign currency but proceeds realized in   No Handling Charges
equivalent BDT
Collection charges BDT 500
Documentary collection bills under all types of
1.3(iii)   plus postal / cable / SWIFT
L/Cs
Charges at Actual
1 1.4(iv) Mailing of Export Bill by Courier   At Actual
Advising of Foreign Back L/C to the local
1.5(v)   BDT 750
Beneficiary
Advising of amendment of Foreign Bank L/C of
1.6 (vi)   BDT 750
the local Beneficiary
1.7(vii) Transfer of L/Cs   BDT 750 per instances
1.8 0.20% per quarter or part
Adding to confirmation to our Bank  
(viii) thereof but minimum USD 50
Foreign Bank’s Guarantee commission against At Actual plus Telex/SWIFT
1.9 (ix)  
discrepant bills charges
Advising of guarantees to the beneficiary in
2.1(i)   BDT 750.00
original without any engagement on our part
0.40% per quarter or Part
Advising of guarantees in original against 100%
2.2(ii)   thereof plus cost of stamp, tax,
counter guarantee of Foreign Bank
etc
2
    Minimum BDT 2000.00
Advising of guarantee in our own format or on the 0.40% per quarter or Part
format supplied by the opening bank with our full   thereof plus cost of stamp, tax,
2.3(iii) etc
engagement against 100% counter guarantee of
Foreign Bank Minimum BDT 3,000.00

Internship Report
43 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

4.4. Purchasing Bills of back to back letter of credit:

OPENS
MR. X L/C MR. Y
Masters
L/C
Importer 2. Exporter
[MR. X is a USA citizen, [Mr Y is a Bangladeshi
citizen
he wants to import 1000 pcs shirt] he has to supply 1000 pcs of
shirt]

Back to back L/C

For producing 1000 T- B2B L/C
shirt mr. y collect MR. Z
material through locally
or internationally

3. [To collect money mr z will present

The B2B L/C to his advising bank then

The bank will give money against this
document.]

Inland document bill

purchase
IDBP
Fig: Inland Document Bills purchase

Internship Report
44 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

4.5. Foreign Remittance:

Farmers Bank has 34 branches throughout the entire country and therefore, they serve as best
medium for remittance of funds from one place to another. This service is available to both
customers as well as non-customers of the Bank. The following are some of the important modes
of transferring funds from one to another through a bank.

4.5.1. Functions of the Remittance Section

 Handling of all incoming and outgoing foreign and local remittance is the major function
for this department.
 Handling of incoming and outgoing T.T.
 Outstation Cheque collection/purchase.
 Demand Draft Handling.
 Other assorted work.

4.5.2. Foreign Remittance Process

Fund transfer from one country to another country goes through a process which is known as
remitting process. For Example Farmers bank has 34 domestic branches. The bank has
corresponding relationship with a foreign bank say-―Mashreq Bank and maintaining
―NOSTRO Account in US $ with the bank. Bangladeshi expatriates are sending foreign
remittances to their local beneficiary, through that account. Now, when the Bangladeshi
expatriates through other banks of different countries remit the fund to their ―NOSTRO
Account with ―Mashreq bank, then the Farmers bank‘s Head Office international division will
receive telex message and the remittance section will record the advice and generate the advice
letter to the respective branch of the bank. The branch will first decode the test, verify signature
and check the account number and name of the beneficiary. After full satisfaction, the branches
transfer the amount to the account of the beneficiary and intimate the beneficiary accordingly.
But sometimes the complexity arises, if the respective local bank has no branch where the
beneficiary maintains his account. Then the Farmers bank has to take help of a third bank who
has branch there.

Internship Report
45 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Fig: Foreign Remittance in Graph

4.5.3. Inward Remittance:

Remittance comes from foreign countries to our country is called inward remittance. To the
bankers or ADs inward remittance means purchase of foreign currency by authorized dealers.
Generally, inward remittances are received by draft, mail transfer, TT, purchase of foreign bills
& travelers Check, export bills. Basically, these are the formal channels of receiving inward
remittance. A local bank also receives indenting commission of local firm also comes under
purview of inward remittance. Any person can remit funds to another through Inland remittance
by using the following means of remitting funds with charges-

 Pay Order (PO)

 Demand Draft (DD)
 Telegraphic Transfer (T.T)
 Mail Transfers
4.5.3.1. Pay Order (PO)

Internship Report
46 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

A pay order is a written under, issued by a branch of the Bank, to pay a certain sum of money to
a specific person or a bank. It may be said as to be a banker‘s cheque as it is issued by a bank and
payable by itself.

4.5.3.2. Demand Draft (DD)

This is an instrument through which customers money is remitted to another

person/Firm/organization in outstation (outside the clearing house area) form a branch of one
Bank to an outstation branch of the same Bank or to a branch of another Bank ( with prior
arrangement between that Bank with the issuing branch).

4.5.3.3. Telegraphic Transfer (TT)

A Telegraphic Transfer is a method of remittance, which is effected by the banker through a
coded telegram attested by secret cheek signal, on receipt of which, the paying office pay the
amount to the payee by crediting his account.

4.5.3.4. Mail Transfers

This process also occurs through Mail Transfers.

4.5.4. Outward Remittance:

Remittance from our country to foreign countries is called outward foreign remittance. On the
other word, sales of foreign currency by the authorized dealer or formal channels may be
addressed as outward remittance. The authorized dealers must utmost caution to ensure that
foreign currencies remitted or released by them are used only for the purposes for which they are
released. Out ward remittance may be made by appropriate method to the country to which
remittance is authorized. Most outward remittance is approved by the authorized dealer on
behalf of Bangladesh Bank.
Outward remittance may be made for following purposes-
 Travel
 Medical treatment
 Educational purpose
 Attending seminar etc.
 Balance amount of F.C account.
 Profit of foreign companies.
 Technical assistance
 New exporters up to USD 6,000/- for business promotion

Internship Report
47 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

 F.C. remittance can be made for fare, exhibition from export retention
quota.

Chapter – 5

Foreign exchange Data analysis

Internship Report
48 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

5.1. Foreign Exchange Business analysis with competitors Bank:

The Farmers bank ltd. started its operation from 2013. Though the bank got authorized dealer
certificate in the last of 2013, but started its foreign exchange operation from April of 2014.

The Foreign exchange operation of new banks which started operation at the same time Farmers
bank started is NRB commercial bank and Midland bank ltd. So we will compare first year of
foreign exchange operation among Farmers bank, NRB commercial and Midland bank ltd.

5.1.1. Import

Import operation In 1st year

200
180
160
140
In Crore (Taka)

120
100
80
60
40
20
0
NRBC Farmers Bank Midland Bank

From 1st year operation Farmers Bank has the highest compare to other new bank. It has 192.73
(source: FBL Annual Report 2014) core BDT amount import operation. Though Midland and
NRB commercial bank started FOREX operation from 2013. Here is the data comparison of 1st
year FOREX operation.

This comparison indicates significant growth hopefully will achieve in Upcoming year of
Farmers bank ltd. Import Operation.
Internship Report
49 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

5.1.2. Export:

Export Operation in 1st year

30

25

20
BDT Core

15

10

0
NRBC Farmers Bank Midland Bank

Source: Annual Report

From pictorial presentation we see here NRB commercial has highest export operation in 1st year
of FOREX operation. Farmers bank has 7.82 core export business and 35 export bills in first
year. This is not at all a bad start. Still better operation than Midland bank ltd. So Farmers bank
can open its more branches in export processing zone.

Internship Report
50 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

5.1.3. Remittance:

Remmittance in 1st year

9
8
7
6
BDT core

5
4
3
2
1
0
NRBC Farmers Midland

Midland bank has no remittance on 1st year of operation. Farmers Bank has the highest
Remittance inward compare to NRBC and Midland bank. If the service is available to more
consumers through marketing technique then it will more improve day by day.

Overall Comments:

The Farmers Bank ltd has very good FOREX operation in its very first year compare to
other bank commenced at the same time.

Internship Report
51 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

5.2. FARMERS BANK FOREX OPERATION 2014 (Pictorial Presentation)

5.2.1. Irrevocable letter of credit Position on 2014 Fiscal Year: (in million BDT)

1800 1650.5

1600
1400
1200
1000
800 649.97

600 446.17 442.2

342.53
400
200
0
Farmers Union NRBC NRB Midland

Irrevocable LC

5.2.2. Bills for collection: (in million BDT)

Internship Report
52 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Irrevocable LC
Irrevocable LC

658.94

147.75

21.41 2.71 2.73

Farmers Union NRBC NRB Midland

5.2.3. Farmers Bank Irrevocable LC in 2014:

Irrevocable LC
B2B Usance In land cash
10% 4%

B2B Sight
19%

Foreign defered Foreign sight

0% 67%

5.2.4. Farmers Bank Income from Foreign exchange operation:

Internship Report
53 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Income from Forex

Import
Remittance Exchange gain SWIFT
4% 2%
2% 0%

Commission
25%

Export LTR
1% 65%

Source : FBL Annual Report 2014

Chapter – 6

Internship Report
54 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Financial Performance Analysis

and Comparative study

6.1. Horizontal analysis of Farmers Bank ltd. Financial statement

items:

6.1.1. Horizontal analysis of Income statement items:

Particulars 2014 2013 Change Change in

percentage
Income Statement

Interest income 1101.3 271.41 829.89 306%

Interest expense 669.09 42.9 626.19 1460%

Net interest income 432.21 228.51 203.7 90%

Investment income 107.05 1.007 106.04 10530%

Commission , Exchange &

Brokerage 18.92 0.159 18.761 11799%

Other operating income 71.99 0.608 71.382 11740%

Total operating income 630.17 230.28 400 174%

Internship Report
55 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Operating expense 495.57 175.66 320 182%

Profit before tax & provision 134.6 54.62 80 146%

Provision for loan & assets 73.51 1.03 72.48 7037%

Tax including deferred 30.14 15.41 14.73 96%

Profit after Tax 30.95 38.18 (7.23) (18%)

6.1.2. Horizontal analysis of Balance sheet items:

Particulars 2014 2013 Change Change in

percentage
Balance sheet

Authorized capital

Paid up capital 4016.1 4016.1 0 0%

Total shareholder equity 4079.68 4054.92 24.76 0.61%

Deposits 11789.83 1867.94 9921.89 531%

Loan and advance 10066.88 107.08 9960 9308%

Investments 1850.98 168.07 1682.91 1001%

Fixed assets 402.88 75.29 327.6 435%

Other Assets 343.59 332.23 11.36 3.42%

Internship Report
56 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Total Assets 16761.59 6058.99 10702.6 177%

Total liabilities 12681.59 2004.06 10677.85 532%

Trade off balance sheet item 1099.47 6.25 1093.22 17491%

Foreign exchange

Import 1920 0

Export 78.2 0

Inward Remittance 88 0

6.1.3. Horizontal analysis of BASEL regulatory requirement items:

Particulars 2014 2013 Change Change in

percentage
Capital measure

Risk weighted assets 14027.14 2614.2 11412.94 437%

Core capital (tier 1) 4065.14 4054.28 10.86 0.27%

Supplementary capital 81.81 1.3 80.51 6193%

Total Capital 4146.96 4055.64 91.32 2.25%

Capital surplus/ Deficit 146.96 55.64 91.32 164%

Tier-1 Capital Ratio 28.98% 155%

Tier-2 Capital Ratio 0.58%

0.05%
Internship Report
57 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

6.2. Ratio Analysis and comparative study:

6.2.1. Return on Equity:

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).
Among the most important ratio measures of bank profitability used today are following:

Return on Equity (ROE) = Net income after taxes/ Total equity capital.

Farmers Bank Midland bank Janata bank

Year 2013 2014 2013 2014 2013 2014

ROE .94% .75 % .26% .85% 30.09% 9.71%

Interpretation:

Internship Report
58 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

 Farmers Bank has comparatively lower ROE than 2013

 Though Farmers Bank has better ROE than Midland bank in 2013 but in 2014
farmers has lower ROE.
 ROE is not satisfactory than Janata bank or industry average.

Return On Equity
35.00%
30.00%
25.00%
20.00%
Axis Title 15.00%

10.00%
5.00%
0.00%
Farmers bank Midland Bank Janata Bank

Farmers Bank ROE= 30.95/4079.68 (2014) =38.18/4054.92 (2013)

Source: Annual Report 2014

6.2.2. Return on Asset:

ROA is primarily an indicator of managerial efficiency; it indicates how capably the

management of the bank has been converting the institution of assets into net earnings. The ratio
of a bank’s net after tax income divided by its total equity capital

Return on Asset (ROA) = Net income after tax / Total Asset

Farmers Bank Midland bank Janata bank

Year 2013 2014 2013 2014 2013 2014

ROA .63% .18% .14% .22% 1.42% 0.61%

Interpretation:

 Return on asset decrease in 2014 compare to 2013 in Farmers bank

 Midland bank’s ROA increase in 2014

Internship Report
59 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Return On Asset
1.60%
1.40%
1.20%
1.00%

Axis Title 0.80%

0.60%
0.40%
0.20%
0.00%
Farmers Bank Midland bank janata bank

Farmers Bank ROA = 30.95/16761.59 (2014) =38.18/6058.99 (2013)

Midland bank ROA = 34.67/15167 (2014) =10.79/7532 (2013)

Source: Annual Report 2014

6.2.3. Net Interest Margin:

Net interest margin is a performance metric that examines how successful a firm's investment
decisions are compared to its debt situations. A negative value denotes that the firm did not
make an optimal decision, because interest expenses were greater than the amount of returns
generated by investments.

Net Interest Margin= (interest income from loans security investment)-(interest expense on
deposits and other debt issue)/ Total Asset

Farmers Bank Midland bank JANATA bank

Year 2013 2014 2013 2014 2013 2014

NIM 3.77% 2.57% 2.67% 2.29% .47% 1.73%

 Net margin interest decrease in 2014 compare to 2013

 Net margin in FBL is way better than competitor and industry standard Janata
bank.

Internship Report
60 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Net Interest Margin

4.00%
3.50%
3.00%
2.50%

Axis Title 2.00%

1.50%
1.00%
0.50%
0.00%
Farmers Bank Midland Bank Janata Bank

Farmers Bank Net interest Margin:: =432.21/16761.59 (2014)

=228.51/6058.99 (2013) Source: Annual report 2014

6.2.4. Net Non Interest Margin:

The noninterest margin, in contrast, measure the amount of noninterest revenues stemming from
deposit service charges and other service charges other services fees the bank has been able to
collect relative to the amount of noninterest cost incurred.

Net non-interest margin= Noninterest Revenue-noninterest expense/Total Asset

Farmers Bank Midland bank JANATA bank

Year 2013 2014 2013 2014 2013 2014

NNIM .029% .86% .088% 1.69% (.61%) .0034%

 Farmers bank earns more income from non interest source in 2014 compare to
2013.

Internship Report
61 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

 The income is lower than competitor midland bank but above average than
industry.

Net non interest margin

2.00%

1.50%

1.00%

Axis Title 0.50%

0.00%
Farmers Bank Midland Bank Janata Bank
-0.50%

-1.00%

Farmers Bank Net Non Interest Margin:

2014:: 144.89/16761.59 2013:: 1.774/6058.99

Source: Annual Report 2014

6.2.5. Net Bank Operating Margin:

Operating margin is a measurement of what proportion of a company's revenue is left over after
paying for variable costs of production such as wages, raw materials, etc. A healthy operating
margin is required for a company to be able to pay for its fixed costs, such as interest on debt.
Also known as "operating profit margin" or "net profit margin".

Net Bank Operating Margin= (Total operating revenue)-(Total operating expense)/Total

Asset

Farmers Bank Midland bank JANATA bank

Year 2013 2014 2013 2014 2013 2014

NBOM .9% .8% .48% 1.04% 2.07% 2.10%

 Net bank operating margin is lower than previous year. That means company
Internship Report
62 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

incurs more operating expense.

 Operating margin is not satisfactory compare to competitor.
 Very lower than industry average.

Net BanK operating margin

2.50%

2.00%

1.50%

Axis Title
1.00%

0.50%

0.00%
Farmers Bank Midland Bank Janata Bank

Farmers Bank Net bank Margin:

2014:: 134.6/16761.59 2013:: 54.62/6058.99

Source: Annual Report 2014

6.2.6. Earnings per Share (EPS):

The portion of a company's profit allocated to each outstanding share of common stock. Earnings
per share serve as an indicator of a company's profitability

Earnings per Share= Net Income after Taxes/ Common equity shares outstanding

Farmers Bank Midland bank

Year 2013 2014 2013 2014

EPS 0.10 0.08 0.054 0.087

 EPS is Lower compare to previous year.

Internship Report
63 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

 EPS is still better than competitor.

Earning Per Share

0.12%

0.10%

0.08%

Axis Title 0.06%

0.04%

0.02%

0.00%
Farmers Bank Midland Bank

6.2.7. Net profit margin:

Net profit margin is the percentage of revenue remaining after all operating expenses, interest,
taxes and preferred stock dividends (but not common stock dividends) have been deducted from
a company's total revenue.

Net profit margin= Net income after taxes/ Total operating revenue

Farmers Bank Midland bank JANATA bank

Year 2013 2014 2013 2014 2013 2014

Net Profit 16.58% 4.9% 5.15% 5.56% 17.37% 12.55%
margin
Internship Report
64 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

 2014 is not a good year as net profit margin decline in huge amount.
 Decline margin is still similar to competitor.
 Net profit margin is not satisfactory compare to industry average.

Net Profit Margin

20.00%
18.00%
16.00%
14.00%
12.00%

Axis Title 10.00%

8.00%
6.00%
4.00%
2.00%
0.00%
Farmers Bank Midland Bank Janata Bank

Farmers Bank Net Profit Margin:

2014:: 30.95/630.17 2013::38.18/230.28

Source: Annual Report 2014

6.2.8. Asset Utilization:

The asset utilization ratio measures management's ability to make the best use of its assets to
generate revenue. The more effectively that the equipment is used, the more profitable the
company will be.

Asset Utilization= Total operating revenues/Total Asset

Farmers Bank Midland bank JANATA bank

Year 2013 2014 2013 2014 2013 2014

Internship Report
65 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Asset 3.8% 3.76% 2.78% 4.11% 9.39% 9.69%

Utilization

 In 2014 is not good and asset is not used efficiently

 Is very depressing compare to competitors and industry average.

Asset Utilization
12.00%

10.00%

8.00%

Axis Title 6.00%

4.00%

2.00%

0.00%
Farmers Bank Midland Bank Janata Bank

Farmers Bank Asset Utilization:

2014: 630.17/16761.59 2013::230.28/6058.99

6.2.9. Efficiency Ratio:

Efficiency ratios also called activity ratios measure how well companies utilize their assets to
generate income.

Efficiency Ratio= Total operating expenses / Total operating revenues

Farmers Bank Midland bank JANATA bank

Internship Report
66 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Year 2013 2014 2013 2014 2013 2014

Efficiency 76.28% 78.64% 82.60% 74.53% 21.28% 17.25%
ratio

 Efficiency ratio is very good

 Better than previous year.
 Above industry average.

Efficiency
90.00%

80.00%

70.00%

60.00%

50.00%
Axis Title
40.00%

30.00%

20.00%

10.00%

0.00%
Farmers Bank Midland Bank Janata Bank

Internship Report
67 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Chapter – 7
FINDINGS, CONCLUSION &
RECOMMENDATION

7.1. Findings or Problem:

1. New Customer who wants to open LC on margin need head office approval which
consumes time. Competitors provide LC on margin instant without head office approval.
2. Performance of Remittance is comparatively not much good against competitors.
3. Customs copy of LCAF form looks like carbon copy. Clients face problem regarding it is
original or not.

Internship Report
68 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

4. To meet the challenges in the banking industry & to help employees to adapt the changes
& new working condition, training is essential but no such training center has yet been
established in Farmers Bank. Moreover, training is given to employees is not adequate.

5. The marketing strategy adopted by the bank is effective but not efficient. The appearance
of the bank in the printing media and electronic media has become a matter of fortune. As
a new it needs more aggressive marketing.
6. Documentation & filing process of foreign exchange operation is not so easier. it waste
valuable time along with not cost effective.
7. In the area of import business the bank is continuously improving.
8. All the charges and Interest rate of the Farmers Bank is comparatively lower.
9. Employees of the Branch maintain good relation with their customer.
10. For the better facilities people are interested to do business with Farmers Bank.
11. The officers are very helpful to the business man. Some of our business men do not know
exactly the procedures of opening L/C. The officers of Farmers Bank help them properly
to execute their business.

7.2. Recommendation:

1. As Farmers bank is a new bank, it should use more aggressive marketing strategy. People
will tend to deal with bank if they know about services provide by Farmers Bank. Present
situation is those who deal with FBL is loyal. FBL needs new customer. Bank should
more focus on marketing strategy either in person to person or newspaper advertisement.
2. This is really good as Farmers Bank imamgonj branch only deals 100% cash LC with
new customer in Foreign exchange operation. But as FBL is new, it needs more
Internship Report
69 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

customers. The bank should be flexible in head office approval system. Branch manager
should have the authority in approving Margin LC for new customer.
3. FBL LCAF Form Customs part should be changed. Customs officer very frequently
thought the document as duplicate carbon copy as it is very light and transparent. It made
client harassing situation regarding customs clearance.
4. Bank should extend more training facilities for its employee to be more efficient.FBL
must provide more intensive training facilities for those employees who have no idea
about banking sector.
5. FBL should more focus on customer relationship management.
6. The bank should take initiative to develop an effective research and development (R &
D) center to promote innovative product or service ideas & to sense threats &
competitiveness in advance to reduce risks & capture competitiveness in the fierce
marketplace.
7. Farmers Bank has no Credit Card. To meet today's need of the customer, the bank should
introduce these.
8. The Bank should develop an effective database needed for analyzing Foreign Exchange
Business.
9. Diversified scheme for export and import with fewer margins for L/C should introduced
by the bank or small entrepreneur to target a different segment to increase volume of
export and import.
10. FBL should open their branches in the business area like near EPZ, port etc to provide
prompt services to importer and exporter.
11. The bank has no provision of internship program for Graduating students. The bank can
properly utilize the internees at fixed tasks on the routine basis yearly at minimum cost if
they wish. The bank can introduce organized structure and requirement for internship.

7.3. Conclusion:

Bank is the main hub of all kinds of business as well as financial activities and economic

Internship Report
70 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

development of any country. Businessmen and industrialists solve financial constraint through
bank and contribute in economic development of any nation. As Bangladesh is the developing
country, a strong banking sector can change the socio economic condition of Bangladesh. To
meet the urge of upcoming development demand, Farmers bank incorporated as commercial
bank in 2013.
Farmers bank is now one of the growing commercial bank compare to its competitor. It has 34
branches within 2 years of operation and continues their banking operation by expanding
network in urban as well as rural areas.

Client is the heart of bank. As Farmers Bank is new and expand its network, so it is most
important for the bank to have more clients and specifically loyal customers. Bank should more
focus on marketing strategy and efficient customer service management. Through Client bank
can make profit. So Farmers Bank official should make research before opening any branch and
should focus on target customer as well as ensure better service. Farmers bank can open its
foreign exchange branch in EPZ zone where available potentiality of foreign exchange business.

Assets make things possible but people make things happen. As Farmers bank is new it should
recruit qualified employees by whom it can be an efficient bank.

The import or export is motivated by the Farmers Bank ltd to the foreign exchange business
particularly to open the letter of credit .A letter of credit offer advantages both to the importer
and exporter. During Letter of credit opening the bank should ensure precaution measure.
The bank can enhance profit through most profitable foreign exchange operation if it open’s
branch in EPZ and garments zone area.

Internship Report
71 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Chapter – 8

Bibliography and appendix

Bibliography

1. Ali, Syed Ashraf [2005] : Foreign Exchange and Risk Management, Mowla Brothers,
Dhaka.

Internship Report
72 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

2. Andley, K.K. & V.J. Matto [1996] : “Foreign Exchange principles and Practice”, Sultan
chand and sons, New Delhi.
3. Annual Report 2013, The Farmers Bank Ltd, Retrieved From:
http://www.farmersbankbd.com
4. Annual Report 2014, Midland Bank ltd, Available from
http://www.midlandbankbd.net/assets/files/Annual_Report_2014.pdf
5. Annual Report 2014, NRB commercial Bank ltd. , available from
http://www.nrbbankbd.com/annual_report/annual_report_2014.pdf
6. Annual Report 2014, The Farmers Bank Ltd, Retrieved From:
http://www.farmersbankbd.com
7. Half Yearly Financial Statement 2015, Farmers Bank Ltd.
8. http://www.bangladeshbank.org.bd
9. http://www.farmersbankbd.com
10. Mustafa, M. Golam [2010]: “Guideline for foreign exchange transactions”, Department
of Printing & Publications, Bangladesh Bank, Dhaka.
11. Schedule of Charges, Farmers Bank Ltd. Available From:
http://www.farmersbankbd.com
12. Sekaran, Uma. [2009]: “Research Methods for business: a skill building approach”,
Wiley India Pvt. Ltd. , New delhi.
13. The Foreign Exchange Regulation Act [1947]: Ministry of Law, Justice and
parliamentary affair of Bangladesh.
14. User Manual for Online Export Monitoring System, Export Trade Section, Bangladesh
Bank, Dhaka. Retrieved from https://www.bb.org.bd/services/frngmonitor.php
15. User Manual for Online Import Monitoring System, Import Trade Section, Bangladesh
Bank, Dhaka. Retrieved from https://www.bb.org.bd/services/frngmonitor.php

Appendix A
Annual Report of Farmers Bank
Internship Report
73 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Appendix A
Internship Report
74 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Appendix B
Internship Report
75 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Internship Experience in Farmers Bank (Imamgonj Branch)

Now a day’s education is not just limited to books and classrooms. In today’s world, education is
the tool to understand the real world and apply knowledge for the betterment of the society as
well as business. From education the theoretical knowledge is obtained from courses of study,
which is only the half way of the subject matter. Practical knowledge has no alternative.

Internship Program brings a student closer to the real life situation and thereby helps to launch a
career with some prior experience. I have prepared this report on The Farmers Bank Limited
(Imamgonj Branch) and their foreign exchange procedure where I have worked from 12 th July
2015. During my internship I have gathered lots of experience. I was placed as regular employee
from 12 th July to 12th August in general Banking Division. In general Banking Division, I filled
the account opening Form, cheek the account opening File before Audit, and Placed the UN
identification form with every account opening Form. I have carefully scrutinized all the account
opening form before conducting Bangladesh bank audit. Then I have worked 1 week in clearing
section. In clearing section I scanned cheque and give command in FLORA cheque processing
system. I also write voucher for inward and outward clearing cheque. After clearing section I
worked in Credit section for 1 week. During this tenure, I carefully scrutinized previous credit
file and all the documents that needed to grant loan. I discussed with employees on various
documents of Loan. I have Interviewed land valuator and legal deed investigator.

Finally I joined in Foreign exchange department in 01 September and continue it to 15 th October

2015. I work in import section where I filled LCAF form, Posting in register, cheek the Letter of
credit, cheek the documents from exporter, give seal in documents before dispatch, posting in
Bangladesh bank website and posting and keeping bills of entry. Then last 1 week I collect data
on procedure of export and remittance. I have to say, I was surprised to learn about all the
different areas that the Bank is involved in and how the Bank affects our daily lives. When I
worked as an internee I was treated by them as an paid employee of this bank and learned how to
work as an employee, time maintenance, behavior with other colleague, how to deal with
customer. Moreover, I also felt safe and secure, as the Farmers Bank had comfortable place for
me. I wish to thank the Farmers bank Ltd for giving me this opportunity. I have learned an
abundant amount of information, and I have grown both personally and professionally.

Appendix C
Internship Report
76 Jagannath University
 Foreign exchange operation in Farmers Bank (imamgonj Branch)

Acronyms
Term Meaning or full form
AD Authorized Dealer
B/L Bill of Lading
BB Bangladesh Bank
BOE bill of exchange
FOB Free On Board
HS Code Harmonized system of coding
IBC Inward Bills for Collection
IMP Import Form
IRC Import Registration Certificate
L/C Letter of Credit
LCAF Letter of Credit Authorization Form
CCI & E Chief Controller of Import & Export
CFR Cost & Freight
CIB Credit Information Bureau
CIF Cost Insurance & Freight
DD Demand Draft
DP Note Demand Promissory Note
EPB Export Promotion Bureau
EXP Export Form
PO Payment Order
PAD Payment against Document
SWIFT Society for Worldwide Inter bank Financial TC
TIN Tax Identification Number
C&F Clearing & Forwarding
FBL Farmers Bank ltd.

Internship Report
77 Jagannath University