Foreign Exchange Procedure of Shahjalal Islami Bank Ltd. (SJIBL)

Due to the time constraint it was not possible to include all aspects of Shahjalal Islami Bank Ltd. I have also given my recommendations on how to improve the bank's currency functions.

Introduction

Introduction of the report
Background of the Study
Origin of the Report
Objectives of the report
Methodology of the study
Sources of data
Scope of the Study
Limitation of the Study
Rationale of the study

Shahjala Islami Bank sh.pk., as it has realized this potential and highlights the bank's foreign exchange activity. The overall objective of the study is to prepare and present a report on the subject of Foreign Exchange Activities of Shahjalal Islami Bank Limited, Uttara Branch.

Company Overview

Overview of Shahjalal Islami Bank Limited
Corporate Information
Vision of SJIBL
Mission of SJIBL
Strategy of SJIBL
Management and Organization structure
Company Profile

Since its inception in 2001, Shahjalal Islami Bank Limited (SJIBL) has been offering various products to boost the country's economy and serve the customers. The shareholders, as investors, are in the position of owners, but the actual management of Shahjalal Islami Bank Ltd lies in the hands of their elected representative.

SJIBL Financial Summary

Introduction

A country's foreign trade and activities include activities of buying and selling or exchanging goods and services between two countries. In Bangladesh, the bank facilitating such a transaction is relisted as an authorized dealer, certified by Bangladesh Bank. International trade requires a flow of both goods from seller to buyer and payment from buyer to seller.

This flow of goods and payments takes place via credit instruments, for example letters of credit, bills of exchange, etc.

Functions of foreign exchange department of SJIBL

A Bangladeshi working in another country can remit funds to support his family living in Bangladesh. All these transactions result in the transfer of funds to Bangladesh or remittance of funds from Bangladesh. The banks have to quote rates for foreign exchange that will be bought and sold to customers as per the regulations of the Reserve Bank and the Foreign Exchange Dealers Association of Bangladesh.

Types of Exchange rates

Causes of Exchange rate fluctuation

If a country has a lower inflation rate, then there will be an appreciation in the value of the currency. If a country has consistently low inflation rates, then there will be an increase in the value of that country's currency. However, if the country has a higher inflation rate, then the value of the currency will decrease.

Interest rates: Any change in the interest rate also affects the value of currency and dollar exchange rate. If there is an increase in the interest rate, the country's currency will appreciate and attract more foreign capital. Political stability and performance: The currency value of a country also depends on its political condition and economic performance.

There will be increase in the foreign capital and thus it will lead to an appreciation of the domestic currency value. Speculation: If the currency value of a country is predicted to increase, the investors will try to get more of that currency to make profit in the future.

Opening Letter of Credit

Letter of credit advantages for the seller
How does letter of credit work?
Different types of L/C

The buyer will not be able to refuse to pay, even if there is a complaint about the goods. 3.5.2 Letter of credit benefits for the buyer. The bank will pay the seller for the goods on presentation of the documents in terms of the letter of credit. The seller of the goods verifies through his bank whether the letter of credit is valid or not before shipping the buyer's order.

When the seller verifies that the letter of credit is valid, the order is processed and shipped. The bank issuing the letter of credit makes sure that both parties do their part so that the goods are delivered correctly and the money is paid on time. Transferable L/C: This L/C allows the Seller to assign a portion of the letter of credit to other parties.

Back-to-Back L/C: This type of L/C issues a second L/C based on the first letter of credit. According to this letter of credit, payment to the seller is not made upon presentation of the documents, but at a later date specified in the letter of credit.

Import Section

Introduction
Import procedure through SJIBL
Workings in import department
Import mechanism

Importer application for L/C limit
Procedure of opening L/C to import To open an L/C, the following are necessary
Advising of letter of credit
Advising bank liability
The confirming bank
L/C Amendment
Consignment
Scrutiny of document by negotiating bank
Settlement of L/C
Lodgment of the documents
Retirement of the documents

Import financing

Sources of finance
Types of import financing There are two types of import financing

Legal documents needed for import

It must be ensured that the signatures on the L/C match the sample signature book of the bank. But if the advising bank is involved, the bank will be responsible for checking the authenticity of the credit. The letter of credit terms are the agreement with the terms of the original contract of sale.

After opening the L/C, the importer may feel it necessary to delete, add or change some of the credit clauses. At maturity, reimbursement is made in the manner of prior agreement, provided that the credit requirements of the documents are met. After examining the documents, the bank can negotiate the documents and give value to the beneficiary.

Withdrawal of the documents is the process by which the documents are collected from the bank by the importer. By creating the LIM, the name of the importer's goods is deleted from the customs authorities by the L/C issuing bank, the same by going under the custody of the banks.

Export Section

Introduction
Export policy
Export procedures

Securing the order
Singing the contract
Receiving L/C
Negotiation
Procuring the materials
Shipment of goods
Final steps

Parties to export transaction

EXP forms
Receipt of Export L/C & Advising thereof
Packing credit

Export financing

Types of credit
Export foreign documentary bill purchase
Advances against export bills surrendered for collection
Export incentives
Overdue export bills
Transfer export L/C

EXP form is issued only on account of bona fide parties after verification of their ERC when presented duly signed by the exporter certified by the authorized officer of the bank. Submission of duplicate copy of EXP form within 15 days from the date of negotiation of documents as per request of ECD Bangladesh bank. Creditworthiness of the export should be judged where applicable by reference to the financial statement.

An exporter needs financial services at various stages of the export process according to the nature of the contract. Pre-shipment credit: Pre-shipment credit is given to finance activities of an exporter before the actual shipment of the goods. Post-shipment credit: This type of credit is given to the exporter after the shipment of the goods.

If there is no discrepancy in the documents, the bank gives the money to the exporter. The credit can only be transferred under the conditions specified in the original credit, with the exception of the credit amount and the expiration of the unit price, shipping period.

Fig. 8: Flow Chart of Import-Export Procedure

Remittance Section

Foreign Remittance

Types of foreign remittance
Remittance under WES
Salient feature of FC account
Papers/ documents required for opening the foreign currency account Remittance Received Other Than WES
Remittance and Other Facilities for Foreign Nationals

Foreign remittance means the purchase and sale of freely convertible foreign currencies and administration under the exchange control of the country's regulation. The purchase of foreign currencies constitutes outward foreign remittances and the sale of foreign currencies constitutes outward remittances. Foreign Foreign Remittances: Inward Foreign Remittances means remittances received in Bangladesh from abroad through normal banking channel in the form of F.T.T, F.M.T & F.D etc.

Handling student file of the student going abroad for educational purposes in USD, GBP, EURO, AUD and JPY. Permission of the Bangladesh Bank for remittance of foreign exchange in excess of the normal quota as per the standing circular of the Bangladesh Bank. It means inward remittance earned by earners who live abroad and earn sending their earnings through the bank channel entitled to have the exchange rate below WES as set by Bangladesh bank which is normally higher than the official rate.

Without prior approval of the Bangladesh Bank, FC A/C can be opened in US Dollar, British Pound, Japanese Yean and EURO. The FC account can be in the form of: Non-Resident Foreign Currency Deposit Account (NFCD).

Commercial Remittance

Family Remittance Facility: Foreign nationals living in Bangladesh can remit monthly remittances to their home country. Original copies of the IMP and TM forms must be submitted to the Bangladesh Bank along with the itemized returns. The branches may receive applications on Form TM from airlines and shipping companies or their agents, along with a declaration on Form FP for remittance of freight and passage charges collected in Bangladesh.

Bangladesh Bank has laid down extensive guidelines in Chapter 16 of the Foreign Exchange Transactions Guidelines, 1996. If a branch receives applications for these types of remittances, they must dispose of them strictly according to those guidelines. Similarly, applications of Bangladesh Biman and Bangladesh Shipping Companies for remittance of operating expenses of their vessels at foreign ports and stations should be disposed of as per the instructions contained in the said guidelines.

The branch can waive export claims that do not exceed 10% of the repatriated export proceeds on the following points:-.

Foreign Currency and Convertible Taka Account

The account holder can manage the account himself or appoint other persons in Bangladesh for this purpose. People living in Bangladesh can open this account and maintain it with the foreign exchange received when they returned from abroad. Any amount purchased with the declaration to Customs can be credited to this account.

All non-resident Bangladeshi nationals and persons of Bangladeshi origin, including those with dual citizenship and ordinarily residing abroad, can maintain profit-making term deposit accounts called Non-Resident Foreign Currency Deposit (NFCD) accounts. with authorized dealers. Branches can open Convertible Taka Accounts in the names of: Foreign Organisations/Nationals i.e. Diplomatic Missions, UN Organisations, International Non-Profit Organisations, Foreign Contractors and Consultants engaged for specific projects under the Government. A Taka convertible account can be debited for foreign currency payments abroad for domestic expenses, transfer to the foreign currency account or another convertible account or for credits to a non-convertible account.

Foreign organizations and their foreign personnel eligible to open a Taka convertible account may maintain non-convertible accounts at branches without the prior approval of Bangladesh Bank. If the account is operated by the resident alone or jointly with the non-resident, it should be treated as a "Resident Account", but if it is operated by a non-resident alone, it should be treated as a non-resident account.

Findings, Recommendations and Conclusion

Findings

Recommendations

The bank needs to review currency-related costs so that they can remain competitive in the market. SJIBL needs to increase their exchange office so that many people from outside Bangladesh can transfer their money through SJIBL. The bank can provide detailed reports to the exporters so that they can assess the demand for their products abroad.

It is necessary for the bank to keep up to date with current and future trends in this industry. One of the most important goals of the foreign exchange department must be to ensure that their operations are dynamic and less time consuming. Providing good customer service must be a priority and steps must be taken to attract more customers to shop for products abroad.

Conclusion

Bibliography

Books

Websites