banking sectors in bangladesh

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LETTER OF TRANSMITTAL January 03, 2009. To, Mr. Md. Anwar Hossain, Lecturer Department of Marketing, University of Dhaka, Bangladesh. Sub: Submission of Internship Report on “Correspondent Banking Products & Operations: A Study on STANDARD CHARTERED BANK”. Dear Sir; It is my pleasure in presenting you this internship report based on my observation and experience during my internship program in STANDARD CHARTERED BANK during the period from February 28 to May 02, 2005. My subject is “Correspondent Banking Products & Operations: A Study on STANDARD CHARTERED BANK”. During this period, I received full co-operation and assistance from the staff members that helped me a lot in preparing the report. I specially owe to my honorable Sir Mr. Md. Anwar Hossain, Lecturer, Department of Marketing, University of Dhaka for giving me this particular topic which enhanced my knowledge to a great extent. 1

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The commercial banking system dominates Bangladesh's financial sector. Bangladesh Bank is the Central Bank of Bangladesh and the chief regulatory authority in the sector.

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LETTER OF TRANSMITTALJanuary 03, 2009.

To,

Mr. Md. Anwar Hossain,

LecturerDepartment of Marketing,University of Dhaka,Bangladesh.

Sub: Submission of Internship Report on Correspondent Banking Products & Operations: A Study on Standard chartered Bank.

Dear Sir;

It is my pleasure in presenting you this internship report based on my observation and experience during my internship program in Standard chartered Bank during the period from February 28 to May 02, 2005. My subject is Correspondent Banking Products & Operations: A Study on Standard chartered Bank. During this period, I received full co-operation and assistance from the staff members that helped me a lot in preparing the report. I specially owe to my honorable Sir Mr. Md. Anwar Hossain, Lecturer, Department of Marketing, University of Dhaka for giving me this particular topic which enhanced my knowledge to a great extent.

It is my sincere hope that you will find the report to be an interesting and enlightening one. I place myself at your disposal for any further clarification should you feel the necessity.

Sincerely yours,

(Ummul Gofran Nazibah)

Roll No-51

BBA, 8th Semester

Department of MarketingUniversity of DhakaACKNOWLEDGEMENTI would like to express my sincerest feeling of gratitude to my honorable Sir Mr. Md. Anwar Hossain, Lecturer, Department of Marketing, University of Dhaka for his kind support and help in carrying out my research in a new field. His guidance and inspiration has immensely strengthened my confidence during my internship program.

I owe my profound sense of gratitude to Mr. Towhidul Islam, Director of Financial Institutions, Standard Chartered Bank, and to Mrs. Rumana Hashem, Asstt. Relationship Manager of Financial Institutions Dept., Standard Chartered Bank, for their kind help and co-operation which has made possible to prepare this report. Finally, any shortcomings remaining in the report is of course mine.

(Ummul Gofran Nazibah)

Executive Summary

Banking service in Bangladesh is characterized as a highly competitive and highly regulated sector. With a good number of banks already in operation and a few more in the pipeline, the market is becoming increasingly competitive by the day.

With the global slowdown in the face of rising competition, the commercial banks are constantly looking for ways to develop their market and product offerings to remain ahead of others. A significant amount of regulation by Bangladesh Bank prevents the scope of introducing newer products into the market and thereby restricts a banks ability to out perform others with a diversified product range.

Standard Chartered Bank is the oldest multinational bank operating in Bangladesh. It has, over the years, created one of the largest networks among all the foreign banks in Bangladesh. Although a trendsetter in offering a various range of products in the market, the product offers of Standard Chartered Bank are quickly imitated by competitors. Substitutes offered by other commercial banks make their way into the market and thereby eat a portion of the margin. Corporate Banking division is a very important part of banking activities because funds are mobilized; foreign trade related activities are conducted here.

Based on above, this report looks in depth towards the opportunity for Corporate Banking division.

CHAPTER: I

INTRODUCTION

1. Introduction

Internship program is an external dimension of career development for a business graduate. At the end of the graduation program (Academic part) the students of a University are sent to different organizations to get some real life experience as internees. Usually this program has duration of three months. Throughout these three months of internship program the internees are being assigned some assignments, which help them to learn the attitude of working in the organization. At the end of the internship program the internees are supposed to submit an internship report and have to face interview regarding this report. This is the last step that brings a successful end up of graduation program from University of Dhaka. Standard Chartered Bank, a leading & outstanding foreign commercial bank in the arena of banking business, gives many fresh graduates an opportunity to get a real taste of actual banking activities of various departments every year. This program gives a student the opportunity to practice his/her knowledge of theory in the field of practical life.

1.1 Origin of the Report:

This report has been prepared as a requirement of the internship program. The report is based upon the organization Standard Chartered Bank. My organization supervisor is Mr. Towhidul Islam, Director of Financial Institutions, and my institution supervisor is Md. Anwar Hossain, Lecturer, Department of Marketing, University of Dhaka. The topic, which has been decided for doing the report, is duly approved by my institute supervisor. The report will definitely increase the knowledge of other students to know the banking industry of Bangladesh, and the various services SCB is providing specially corresponding banking to sustain as leading foreign bank in Bangladesh.

1.2 Objective of the Report:

The objective of the study is to gather practical regarding over all banking system and its operations. Theoretical classes of BBA provide us theories regarding different subjects whereas practical training gives us the chance to view those systems and their operations. The principal intent of this report is to analyze the trend modern banking and their customer services. More precisely we can identify the objectives of this report as follows: To observe the customers satisfaction towards the products and services of Financial Institution of SCB.

To observe the customers reactions towards the services of SCB.

To study the services of Customer Care.

To describe the Foreign Exchange Systems, structure and its procedures, rules and regulations.

To provide recommendation for improvement of SCB.

1.3 Methodology of the Report:

Sample Information

Samples are collected from the client of SCBs Financial Institution Department. Here, the samples had been picked up on a judgemental basis. For the organization part, much information had been collected from different published articles, journals, brochures and web sites. All the information incorporated in this report has been collected both from the primary sources and as well as from the secondary sources.

Primary Source of Data

Collecting data directly from the practical field is called primary source of data. The method that was used to collect the primary data are as follows:

Observation Method:

Observation method may be defined as systematic viewing according to concise Oxford Dictionary accurate watching, nothing of phenomena as they occur in nature with regard to cause and effect and mutual relationship. I have observed many of the activities of Financial Institution Department.

Interview Method:

The face-to-face interview was taken, where one person-the interviewer, asks the respondent (in my case, the bankers), questions designed to obtained answer pertinent to research problems. In order to get the real information and data about the Financial Institution Departments Services, various bankers were interviewed directly.

Other Primary Sources are:

Discussion with officials of SCB

Face-to-face conversation with the bankers.

Discussions with bankers over the telephone & responding to their query.

Secondary Sources of Data

The secondary data has been collected from the MIS of Standard Chartered Bank. To clarify different conceptual matters, internet and different articles published in the journals & magazines have been used.Secondary Sources are:

Annual Publication of Export Promotion Bureau

Annual Reports of SCB

Other published documents of SCB.

Data Collection:

Both secondary and primary data are used for preparing this report. But the research was mainly based on the clients survey. Information was collected directly from the bankers who are directly dealing with the Standard Chartered Bank through Financial Institution Department. Printed questionnaires and personal interviews are treated as the main instruments for data collection. In many times, the telephonic interview was handy for collecting data.

1.4 Scope of the Report:

The scope of the report was to find the financial aspect of the operation of the bank.

The report focused on the feasibility study and practical market issues about new ventures and operational procedures of Financial Institutions. An infrastructure of organization has been detailed, accompanied by company corporate perceptive and look into the future. The scope of this report is limited to the overall descriptions of the bank, its services, and its position in the industry, and its competitive advantage. The scope of the study is limited to organizational setup, functions, and performances.

1.5 Limitations:

Limitations I have faced while doing my internship report are discussed below:

* Confidential information regarding past profit, financial information was not accurately obtained. Alike all other banking institutions, SCB is also very conservative and strict in providing those information. In those cases, I have relied upon some assumptions, which in result have created certain level of inaccuracy. Still, I had tried my best in obtaining those sensitive information, as much as possible.

* Next, many of the analysis on the obtained data are based upon my sole interpretation. This in result might bring some biases, as lack of knowledge and depth of understanding might hinder me to produce an absolute authentic and meaningful report* Time constraint was another limitation restricting this report from being more detailed or analytical. The Relationship Mangers at the operation or strategic level of the concerned department are awfully busy with meeting their targets. So, it was very difficult for me to get them free and obtain some practical ideas regarding their expectations and opportunities regarding my topic.

* Above all, this internship report was prepared just after starting my fist job at SCB. So, it was very hard for me to accommodate time for preparing this report. Mostly, our office timing at SCB is from early morning till 8 p.m. During office hours it's simply hard to manage time for working with the report. And, working with the report after regular office hours is quite hectic.

CHAPTER II:

BANKING SECTORS IN BANGLADESH

2. Overview of Banking

Whoever, being an individual firm, company or corporation generally deals in the business of money and credit is called bank. In our country, any institution, which accepts, for the purpose of lending or investment deposits of money from public, repayable on demand or otherwise, and with transferable by checks draft order and otherwise can be termed as a bank.

The purpose of banking is to ensure transfer of money from surplus unit to deficit units. Banks in all countries work as the repository of money. The owners look for safety and amount of interest for their deposits with Banks. Entrepreneurs try to obtain money from the banks as working capital and for long-term investment. These entrepreneurs welcome effective and forward-looking advice for investment. Banking sector thus owe a great to the deposit holders on the hand and the entrepreneurs on the other. They are expected to play the role of friend, philosopher, and guide for the deposit holders and the entrepreneurs.

The opening of PRIVATE and FOREIGN participants to the banking sector was intended to obtain desirable results from banking. The authorization of private banks was designed to create competition among the banks and competition in the from of efficiency with and the productivity in enterprises funded by banks. Unfortunately, for the people, at large banking sector is yet to obtain the credit for efficiency, credibility, and growth.

2.1 Banks in Bangladesh:The commercial banking system dominates Bangladesh's financial sector. Bangladesh Bank is the Central Bank of Bangladesh and the chief regulatory authority in the sector. The banking system consists of four nationalized commercial Banks, around thirty private commercial banks, seven foreign multinational banks and some specialized banks. 2.1.1 The Central Bank: Bangladesh Bank

Pursuant to Bangladesh Bank Order, 1972 the Government of Bangladesh reorganized the Dhaka branch of the State Bank of Pakistan as the central bank of the country, and named it Bangladesh Bank with retrospective effect from 16th December, 1971.2.1.2 Nationalized Commercial Banks

The nationalized commercial banks are:

Sonali Bank

Janata Bank

Agrani Bank

Rupali Bank

2.1.3 Private Commercial Banks

AB Bank Limited

BRAC Bank Limited

Eastern Bank Limited

Dutch Bangla Bank Limited

Dhaka Bank Limited

Islami Bank Bangladesh Ltd

Pubali Bank Limited

Uttara Bank Limited

IFIC Bank Limited

National Bank Limited

The City Bank Limited

United Commercial Bank Limited

NCC Bank Limited

Prime Bank Limited

SouthEast Bank Limited

Al-Arafah Islami Bank Limited

Social Investment Bank Limited Standard Bank Limited

One Bank Limited

Exim Bank Limited

Mercantile Bank Limited

Bangladesh Commerce Bank Limited

Mutual Trust Bank Limited

First Security Bank Limited

The Premier Bank Limited

Bank Asia Limited

Trust Bank Limited

Shahjalal Bank Limited

Jamuna Bank Limited 2.1.4 Foreign Banks

Citi Bank.NA HSBC

Standard Chartered Bank

Commercial Bank of Ceylon

State Bank of India

Habib Bank

National Bank of Pakistan

Woori Bank ICB Islami Bank2.1.5 Specialized Banks

The Specialized banks are:

Bangladesh Krishi Bank

Bangladesh Shilpa Bank

Grameen Bank

Rajshahi Krishi Unnayan Bank

Bangladesh Shilpa Rin Sangstha

Basic Bank Ltd (Bank of Small Industries and Commerce)

Bangladesh Somobay Bank Limited(Cooperative Bank)

The Dhaka Mercantile Co-operative Bank Limited (DMCBL) 2.2 Health of the Banking System in Bangladesh Total banking industry assets, deposits and loans as on Dec. 31, 2006 was available to me.

The net interest income, equity and net revenue was not available. I have therefore individuallyprovided the data by each bank name. I have provided data on 4 Nationalized CommercialBanks and 27 of the 30 private commercial banks in following chart. Please note that there are 48 banks now operating in Bangladesh which includes 7 foreign commercial banks.

Bank

Figures in USD $ Mil

1USD$=70BDTAssetsDepositsLoansNet Interest

IncomeEquityNet Revenue

NATIONALIZED COMMERCIAL BANK

Sonali Bank50414319344313406518

Janata Bank3038261419784281142

Agrani Bank 2201184215123511528

Rupali Bank1089981653952

PRIVATE COMMERCIAL BANK

Brac42932927917405

EBL514379383104763

DBBL65057340513245

Dhaka697612501143681

Islami214618924514320

Pubali834716594346581

Uttara64656235914304

Arab68660144748378

IFIC51540936412234

National669594482174785

City678582453173677

UCBL550486384183361

NCC466414363143258

Prime870782643215515

Southeast7836786061572100

Al-Arafah30524725782432

Standard2412101868255

One3312892446225

EXIM597516481124474

Mercantile53146438374647

Mutual Trust3753182669277

Premier38835630542054

Bank Asia43537232792856

Trust3032711886161

Shahjalal3052582229177

Jamuna2882471837224

Basic42034427114328

TOTAL BANKING SECTOR343522443121837

BankAsset %

Al-Arafah0.888%

Bank Asia1.266%

Basic1.223%

City1.974%

Dhaka2.029%

Eastern1.496%

EXIM1.738%

National 1.947%

NCC1.357%

Premier1.129%

Pubali 2.428%

Southeast2.279%

Standard0.702%

UCBL1.601%

Others77.90%

BankDeposits %

Al-Arafah1.01%

Bank Asia1.52%

Basic bank 1.41%

City bank 2.38%

Dhaka Bank2.51%

Eastern bank 1.55%

EXIM2.11%

National 2.43%

NCC1.69%

Premier1.46%

Pubali 2.93%

Southeast2.78%

Standard0.86%

UCBL1.99%

Others73.37%

BankLOANS %

Al-Arafah1.18%

Bank Asia1.50%

Basic bank 1.24%

City bank 2.07%

Dhaka Bank2.29%

Eastern bank 1.75%

EXIM2.20%

National 2.21%

NCC1.66%

Premier1.40%

Pubali 2.72%

Southeast2.78%

Standard0.85%

UCBL1.76%

Others74.39%

CHAPTER: IIIORGANIZATIONAL OVERVIEW3. General OverviewStandard Chartered Bank (SCB) is an international bank, which primarily focuses its activities in Asia, Africa, and Middle East. This bank plays an invigorating role in linking the worlds developed economies with emerging markets and provides personal banking, corporate banking, institutional banking, consumer finance and custodial services. The act of the bank is to provide the most efficient, consistent and up to date services and to be the bank of choice in its principal territories. SCB is a multinational bank and financial services group that is incorporated in the U.K. with a unique international network. It now spans in the developed and emerging economies of the world, after having been in existence for 150 years now.

The name Standard Chartered comes from the two original banks from which it was founded The Chartered Bank of India, Australia, and China, and The Standard Bank of British South Africa.

The Chartered Bank was founded by James Wilson following the grant of a Royal Charter by Queen Victoria in 1853, while The Standard Bank was founded in the Cape Province of South Africa in 1862 by John Paterson. Both companies were keen to capitalize on the huge expansion of trade and to earn the handsome profits to be made from financing the movement of goods from Europe to the East and to Africa.

In those early years, both banks prospered. Chartered opened its first branches in Bombay. Traditional business was in cotton from Bombay, indigo, and tea from Calcutta, rice in Burma, sugar from Java, tobacco from Sumatra, hemp in Manila and silk from Yokohama.

In South Africa, Standard, having established a considerable number of branches, was prominent in financing the development of the diamond fields of Kimberley from 1867 and later extended its network further north to the new town of Johannesburg when gold was discovered therein 1885. Half the output of the second largest gold field in the world passed through The Standard Bank on its way to London.

Both banks at that time still quite separate companies survived the First World War and the Depression, but were directly affected by the wider conflict of the Second World War in terms of loss of business and closure of branches. There were also longer-term effects for both banks as countries in Asia and Africa gained their independence in the 50s and 60s.

Each and acquired other small banks along the way and spread their networks further. In 1969, the decision was made by Chartered and by Standard to undergo a friendly merger. They decided to counterbalance their network with expansion in Europe and the United States. Further expansion also took place in Standard Chartereds traditional markets in Asia and Africa. All appeared to be going well, when a hostile takeover bid was made for the Group by Lloyds Bank of the United Kingdom in 1986.

In August 2000, the US $1.34 billion acquisition of Grindlays Bank was completed. This made Standard Chartered the leading international bank in India and the other countries of South Asia strengthened the Groups competitive position in the Middle East and brought to the Group a respected private banking business.

Recently SCB acquires AMEX one of the biggest bank in the world as a result SCB is becoming the third biggest bank on very short time. The acquisition has been started on 29th February, 2008 and will be completed by December, 2008.

3.1 Global presence of Standard Chartered Bank:

In the world map above the blue portion indicates the places where Standard Chartered Bank has its prominent presence.

Standard Chartered Bank has its prominence presence in total of 48 countries:

AfricaAsia PacificLatin AmericaMiddle East & South AsiaUK & USA

Botswana

Cameroon

Gambia

Ghana

Kenya

Sierra Leon

South Africa

Tanzania

Uganda

Zambia

ZimbabweAustralia

Brunei Darussalam

Cambodia

China

Hong Kong

Indonesia

Japan

Laos

Macao

Malaysia

Myanmar

Philippines

Singapore

South Korea

Taiwan

Thailand

Vietnam

Argentina

Brazil

Colombia

Mexico

Peru

VenezuelaBahrain

Bangladesh

India

Iran

Nepal

Oman

Pakistan

Qatar

Sri Lanka

UAEFalkland Islands

Jersey

UK

USA

3.2 Business Activities of the Global Standard Chartered Bank:The bank provides a full range of products and services all around the world, such as:Global Consumer Finance

Personal Banking

Global Corporate and Institutional Banking

Global Custodial Service

International Trade Management

Global Cash Management

Global Institutional banking

Global Electronic Banking

3.3 Standard Chartered Bank in Bangladesh

Since liberation, Bangladesh has passed through fragile phases of development in the banking sector. The nationalization of banks in the post liberation period was intended to save the institutions and the interest of the depositors. But the performance of the public sector management left some negative effects in the economy. Therefore, the authorization of private banks was designed to create competition among the banks. Now, as it has come to the discussion of private banks in Bangladesh, the first and foremost name that comes to the peoples mind is the Standard Chartered Bank

The Chartered Bank opened its operation in Chittagong in 1948 which, at that time was the eastern region of the newly created Pakistan. The branch opened mainly to facilitate the post war re-establishment and expansion in South East Asia. The bank opened its first branch in Dhaka in 1966 and shifted its headquarter from Chittagong to Dhaka after the birth of the Republic of Bangladesh in 1971. The bank increasingly invested in people, technology and premises as its business grew in relation to the countrys thriving economy. SCB acquired ANZ Grindlays Bank for 1.34 billion dollars in the year 2000. The new venture that is the merger was named as Standard Chartered Grindlays Bank. Now after the takeover it is known as Standard Chartered Bank.

Extensive knowledge of the market and essential expertise in wide financial services underline SCBs strength to build business opportunities and institutional clients at home and abroad. Continuous upgrading of technology and control system has enabled the bank to offer new services, which include ATM, Phone Banking, SMS banking and I-banking on a 24 hour basis. Standard Chartered Bank services in Bangladesh, ranges from Personal & Corporate Banking to Institutional Banking, Treasury and Custodial services.

3.3.1 SCB in Bangladesh at a glanceYear of Establishment1948

Head officeSCB House, 67 Gulshan Avenue, Dhaka

Service Coverage & CustomersBusiness or Corporate Financial Services

Retail or Consumer Financial Services

ProductsSavings & Deposit services

Loan products

Corporate & Institutional Services

Number of Offices (25)16 Branches in Dhaka

Off Shore banking unit at EPZ in Savar

5 branches in Chittagong

1 branch in Sylhet

1 branch in Bogra

1 branch in Khulna

1 branch in Narayangonj

Number of ATMs35 ATM booths

Number of Bills Pay Centres3 (Dilkusha, Gulshan, Dhanmondi 2)

Table: SCB in Bangladesh 3.3.2 The divisions of SCB in Bangladesh

There are different divisions for targeting different type of customers. Mainly consist of two divisions, that is Consumer Banking Division (CB) and other is Corporate Banking Division named Corporate and Institutional Banking (C&I).

Consumer banking division meets the needs of individual customers with various products like Savings Account, Extra Value Savings Account, Access Account, Call Deposit, FCY Deposit, NFCD Fixed Deposits, RFCD Account, Personal Loans, Auto Loans, Flexi loans, Cash Line, Installment loans, etc. This department also deals with other savings instruments like education savings scheme, rainy day scheme, marriage day scheme, millionaire scheme (some printed brochures are enclosed in the Appendix)

Corporate and institutional banking meets the needs of companies, banks and other financial institutions. Standard Chartered provides a full range deposit and loan products to it's corporate clients. Rapid decision-making is an important feature of SCBs services to international and domestic companies doing business in Bangladesh. All accounts are assigned to a Relationship Manager to look after client needs. Each relationship manager keeps close contact with the client obtaining in-depth knowledge of the client's business and providing timely advice.

This divisions products include network banking and borrowing services like working capital loan, long term loans, short term loans, margin account, commercial large loans, real estate apartment loans, heavy transport buying loans, real estate mortgage loans, construction loans, restaurant loans, and above all it includes all international trade related services like L/C issuing, L/C amendment, L/C Transfer, L/C Confirmation, Negotiation, Bank Guarantees etc. These products are only served to the corporate clients of the bank, and those are mostly local corporate, large and local corporations, multinational, national companies. List of some of them are given in the appendix section. Figure : The Relationship between Respective Customers to Different Departments of SCB

Companies Banks and other

Financial Institutions

This focus allows the business to develop an in-depth understanding of the banks customers evolving requirements. This in turn enables SCB to develop the products and services that help them to stand out from the competition. Treasury provides support to the customers of both these business and develops customers (both individual and organizational) of its own.

3.3.3 Organizational Structure of SCBStandard Chartered Bank in Bangladesh follows a hierarchical pattern of command. The Chief Executive Officer (CEO), David M. Fletcher reports to the Regional General Manager, MESA in Dubai. The entire department heads at the headquarters report to the CEO. In Chittagong, however, since there are two major business activities, a manager or senior manager, who reports directly to the head of the respective division in Dhaka, heads each. The Custodial Service division at the headquarters reports to the Head of Corporate Banking.

The respective branch managers are responsible for the performance of their unit. Each branch is organized functionally along line divisions with some support facilities and the manager assigns tasks to his/her subordinate personnel and supervises their performance, instructions are often given without necessary details and clarifications.

The organizational structure of Standard Chartered Bank as a whole:

Figure: Organization structure of Standard Chartered Bank3.3.4 Functional Structure of SCB

SCB Bangladesh operates with a functional structure with sufficient flexibility to reap the benefit of matrix system of organizational structure. The functional structure that relies on grouping of people on the basis of common expertise and experience allows ample opportunity to become more specialized and productive by doing the same work repeatedly and over long exposure to the work. SCB in Bangladesh can be broadly divided into two functional areas;

Business Division

Support DivisionThe divisions at a glance

Figure: Functional areas of SCB, Bangladesh

CHAPTER: IV

PRODUCTS AND OPERATIONS OF FI4. FI Products of SCB for Worldwide

4.1 The key Products of Financial Institution

The key Product of Financial institution Department is divided into two categories:Risk Products

L/C Confirmation

Negotiations

Inter and intra Bank Guarantee

Local Bill Discounting

Non-Risk Products

L/C Advising

L/C Transfer

L/C amendment advising

Reimbursement Undertaking and Authorities

Fund Transfers

Export proceeds

BDT Draft Drawing

International Payments (TT's)

Account Services (Nostro Account Management)

4.1.1 Payment Services

Standard Chartered Bank (SCB) is highly recognized as a leading cash management supplier across the emerging markets. Their Cash Management Services cover local and cross border Payments, Collections, Information Management, Account Services and Liquidity Management for both corporate and institutional customers.

SCB payments solution for efficient transaction processing:

Standard Chartered's Straight Through Services (STS) payments solution can be tailored to the different payments needs of companies. With a compressive End-to end payment processing cycle, STS allows companies to process a variety of payment types, whether they are domestic or international, local or central in different countries, all in a single system file, payment Types:

Telegraphic Transfers

Direct Credits (ACH/GIRO/Credit vouchers)

Local Bank Transfers (RTGS)

Book Transfers (account transfer between Standard Chartered branches in

different countries)

Payroll

Local Bank Cheques (Cashier order/Local bank drafts) International Bank Drafts (Int. Bank cheque)

4.1.2 Collection Services

The Standard Chartered Collections Solution leverages the Bank's extensive regional knowledge and widespread branch network across their key markets to specially Tailor solutions for regional and local collection needs. This collections solutions, delivered through a standardized international platform, has the flexibility to cater local needs, thus enabling to reducing costs and increasing efficiency and profitability through better receivables and risk management. The key components of their solution include the following:

Extensive Clearing Network

Guaranteed Credit

Comprehensive MIS

System Integration

Outsourcing of Collection

Types of collections

They provide collection services for:

Local currency cheques.

Foreign currency cheques.

Lock box services- retail and wholesale

Direct Debits

Credit Card Collections

Inward Telegraphic Transfers.

4.1.3 Liquidity Management

A corporate treasure's main challenge often revolves around ensuring that the company's cash resources are utilized to their maximum advantage.

If need a partner bank that can help:

Maximize interest income on surplus balances; minimize interest expense on deficit balances for domestic, regional and global accounts.

Minimize FX conversion for cross-currency cash concentration

Customize liquidity management solutions for different entities in different countries

Centralize information management of consolidated account balances

Key featuresBased needs and the regulatory environment that can choose any of the following features:

Physical Sweeping

National Pooling

Interest Reallocation

Investment

Main features:

Multiple-layer sweep;

Standing instruction;

1-way Sweep; 2-Way Sweep

Zero-balancing Sweep; Target Balancing Sweep

Debit Sweep; Credit Sweep

Sweep with back Value transactions;

Comprehensive MIS reporting

4.1.4 Trade Services

SCB provide Trade Services that ensure prompt payment for the letters of credit and documentary collections. They also provide expert processing of documentary transactions to get goods or funds faster.

Functions:

Process trade services transaction s as per DOI/Trade policy and other internal polices/Guidelines of the bank.

Liaison with CSE and resolve queries.

Maintain and update all records related to the trade services.

Deliver products within the set time frame and as per SLA.

Prepare customer positions for approval process

Conduct investigation to rectify errors or to conventional facts.

Deal with customers in other banks to respond touting quires or problem.

Identify risks in day to day roe ratios bring it to the attention of management.

Ensure that all charges are recovered while processing transaction.

Provide technical guidance to customers when needed.

Maintain quality systems as to meet quality standard as.

4.1.5 Exports

Document Preparation

Benefit from lower costs, faster processing and fewer processing and fewererrors-out sources to Standard Chartered the paperwork and administrative functions related to export activities based on letter of credit or purchase order. Export Letter of Credit Advising

Benefit from timely receipt, expert advising and a wide international network when letter of credits is advised through Standard Chartered.

Export Bilk for Collection

Simplify the administration, tracking and reconciliation export collections whether the customer choose Standard Chartered's Documents against Acceptance, Documents against Payment or a clean collection.

Letter of Credit Checking and Negotiation

Standard Chartered's through checking standards will ensure that the customer are fully aware of any risk that the documents might be rejected. Strict services level in all their offices ensure that the documents are negotiated and dispatched quickly.

Export Letter of Credit SafekeepingTo speed up process of receiving the full proceeds the exports, Standard Chartered offers to safe keep original Letter of Credit whilst the customer keep a copy. This reduces the time required to physically move the L/C between their service center and the back office.To speed up process of receiving the full proceeds the exports, Standard Chartered offers to safe keep original Letter of Credit whilst the customer keep a copy. This reduces the time required to physically move the L/C between their service center and the back office Pre-shipment Export FinancingSCB provide pre-shipment finance against irrevocable Letter of Credit from approved banks in a number of currencies to allow the trade with confidence.

Credit Bills Negotiated

To improve working capital, Standard Chartered can advance cash to customer against a bill of exchange negotiated under a Letter of Credit. This product is provided without resources subject to all the terms and conditions of the Letter of Credit being met.4.1.6 Imports

Letter of Credit

When dealing with unknown suppliers, customers can be confident that payment will not be made until the documents have been verified to be in order. A Standard Chartered Letter of Credit gives the customers to assurance from a world-class bank that might be unable to get pricing discounts or extended payment terms.

Import Bills for Collection

Using collection terms ensures that have all the shipping documents before making the payment. Correct payment to suppliers to assured, as payment will be made only when the customers authorize them to make the payment.

Shipping Guarantee

To operate business efficiency, it is vital for goods be cleared expeditiously. By issuing shipping guarantees in the shipper's favor. Standard Chartered can protect from lost or delayed documents. Custom Bonds and Guarantees

Standard Chartered offers tailored solutions to meet entire Bond and Guarantee needs. They also issue Trade Bonds to guarantee an exporter's performance.

Import Financing Tap on Standard Chartered's expertise to structure a financing solution that best suits Customer's working capital needs, trade terms and the goods involved to draw under a Letter of Credit or an Import Collection.

4.1.7 B2Bex

Standard Chartered B2BeX offers a suite of web-based supply chain management tools designated to streamline and accelerate the entire trade cycle- from sourcing, procurement, financial service, shipping and issuance to payments.

The B2Bex Solution

The B2BeX solution can significantly reduce the amount of labor-intensive administrative work, automate routine tasks, reduce paper-flow and radically improve overall speed of communication, accuracy and clarity with the trading partners. Some of the major modules in B2BeX include.

Target Document Manager

Manage all your trade documents electronically.

PO Grouping Services

Consolidate multiple purchase orders into a single L/C application.

Trade Banking Services

Gateway to an extensive range of online trade banking services.

Catalogue Services

Sources and promote products to buyers and suppliers globally.

Logistics Services

Organize transportation, insurance and inspection with B2BeX partners.

Business Intelligence

Stay informed and make smart business decisions.

Management Information

Track all the B2BeX transactions and activities.4.1.8 Supply Chain Financing

Standard Chartered offers Supply Chain Financing, as a solution to the financing needs for entire supply chain.The supply Chain Financing Solution:

Supplier Financing

If suppliers request to move from Letter of Credit to open account terms, Supplier Financing may help for this solution. SCB can provide pre-shipment financing with or without resources.

Buyer Financing

If buyers need a longer credit term to raise the funds to pay for the goods than Buyer Financing may help for this solution.

4.1.9 Receivables Services

Receivables Services helps to manage the balance sheet better. It offers quick and reliable financing through the sale of invoices or accounts receivables or accounts receivables. Under this programmed, SCB extended financing on approved receivables for up to 90 percent of invoice values on a resource or non-resource basis.

The Receivables Solution:

Financing

Accelerate the cash flow converted from money tied up in accounts receivable soon after the invoices are raised. Enjoy flexible funding that is geared to sales turnover. Non-recourse arrangements

Protect against bad debts under non-recourse arrangement for all approved invoices in the event the buyer defaults or becomes insolvent.

Tracing & Reporting

Keep track of customer's sales through their timely, computerized reports and analysis on sales and overdue. Better debt collection

Enhance the debt collection ability, especially for export sales, with the support of their trained professionals worldwide.

Collateral

Customers are not normally required to pledge assets in order to enjoy their (SCB) receivables services. Beyond the borders

To monitoring the local and export receivables and the difficulties associated with language barriers, unfamiliar commercial customs and laws, long distances communications in different time zones etc.

4.1.10 Letter of credit confirmation

Trading with confidence

Standard Chartered can help mitigate these risks by confirming the Letter of Credit. This means that the guaranteed payments even if there are problems with the buyer's bank or country provided to the customer comply with the terms and conditions of the Letter of Credit.

The Letter of Credit Confirmation

When the beneficiary or the seller receives the letter of credit from the issuing bank he wants to be sure that he must get paid after delivering the goods. In this case the seller wants the confirmation of payments from the advising bank. Standard Chartered Bank, when acts as an advising bank gives the add confirmation to the seller that this letter of credit is authenticate and the payments will be made after full filling all the terms and

conditions of the letter of credit, so Standard Chartered is prepared to add its confirmation to the letter of credits advised through its network, subject to credit and country limits being available.

Assured PaymentsSCB protect the customer against delayed or non-payments, subject to fulfillment of specified terms and conditions in the Letter of Credit.

Explore and ExpandSCB mitigate the payment risk to face from dealing with counter parties when the customers never dealt with before, or when they are located in high-risk areas.

4.2 Currency Clearing Service

4.2.1 Asian Clearing Union (ACU)

Asian Clearing Union (ACU) is the simplest form of payments arrangements whereby the members settle payments for intra-regional transactions among the participating central banks on a multilateral basis. The ACU is a clearing union among other clearing payments arrangements which have been operating in various regions of the world.

The ACU was established at the initiative of the United Nations Economic and social Commission for Asia and the Pacific (ESCAP). The decision to establish the ACU was taken at the fourth Ministerial Conference on Asian Economic Cooperation held in December 1970 at Kabul. The Draft Agreement, establishing the ACU, was finalized at a meeting of senior officials of the governments and central banks held at ESCAP, Bangkok, in February 1973, and the agreement came into force in December 1974 after five central banks signed the agreement and held their first meeting in Bangkok. Bangladesh was the sixth signatory to this Agreement. The ACU commenced operations in November, 1975 with the following participants:

1. Bangladesh Bank2. Reserve Bank of India3. Central Bank of the Islamic Republic of Iran4. Central Bank of Myanmar5. Nepal Rastra Bank

6. State Bank of Pakistan

7. Central Bank of Sri-Lanka

Objectives

Economizing on the use of exchange reserves through the utilization of national currencies for settlement of import payments, thereby minimizing the need of member counties to convertible currencies, and greatly reducing their dependency on them.

Shifting banking services from non-domestic ones, and thereby reducing reliance on foreign banking centers outside the region.

Providing short term credit facilities by the system to the debtor participants for a period of two calendar months.

Settlement of foreign payments through the ACU is a departure from the traditional dependence on the west and therefore enhance economic, financial and commercial co-operation among nations of the region.Bangladeshi trades with ACU member Countries

Bangladesh joined the ACU in 1975. The volume of transactions on Bangladesh's account under the ACU recorded some increase during 1997-98. In all the six settlement that took place under the ACU arrangements during the year, Bangladesh emerged as a net debtor. Receipts under the ACU arrangements on Bangladesh's account increased by US $ 28.78 million or 31.47 % to US $ 120.24 million while payments increased by US $ 76.61 million or 8.0% to US $ 1038.60 million. As a result, the debtor position of Bangladesh widened by US $ 47.83 million to US $ 918.36 million during 1997-98. Receipts of Bangladesh under ACU arrangement record a decline of ACU Dollars 20.76m or 17.3% to ACU Dollars 99.48m while payments increased by ACU Dollar 334.49m or 32.2% to ACU Dollar 1373.09m. As a result, the net debtor position of Bangladesh widened by ACU Dollar 1273.61m during FY 1998-99.

4.2.2 Cash Management

Standard Chartered is highly recognized as a leading cash management supplier across the emerging markets. Their cash Management Services cover local and cross border payments, Collections, Information management, Account Services and Liquidity Management for both corporate and institutional customers.

They have more than 50 offices located in 50 countries throughout the world and, with 150 years of on-the-ground experiences, they can help their bank clients with all their cash management needs.

Clearing Services

Continuous Linked Settlement

Asian Gateway

4.2.3 Clearing Services

Making the right connections for Financial Institutions Clearing is one of the important services to support to facilities the clients' smooth international trade and cross-border transaction.

SCB Solution

Standard Chartered's international network and multi-currency capabilities are well placed to provide a seamless service for all clearing requirements worldwide. Their network extends across Africa, the Middle East, South Asia, Latin America, the USA and the UK.

Standard Chartered's offers "Best in Class" technology and processes clearing services for all types of business and currency:

Emerging markets - Asia Pacific, South Asia, The Middle East and Africa

USD

EURO-includes Sterling

Emerging markets

SCB is an excellent position to design the clearing service that meets customers has offices in every Asian country, with the exception of North Korea- and with almost 150 years of on-the-ground experience.

Asia Pacific

Middle East and South Asia

Africa4.2.4 USD Clearing

The US Dollar is the primary currency for the settlement of foreign exchange and international trade transactions. With a comprehensive range of US Dollar Clearing services and corresponding reports available, they can tailor products to suit specific needs so that customers can operate more efficiently and effectively. Automated Payments using SWIFT, detailed reporting and simplified billing are all designated to streamline the Clearing process and improve liquidity.

Features:One of the 1st foreign banks to be invited to join the Clearing House Inter bank payments System (CHIPS), Standard Chartered is a major US Dollar Clearing provider. SCB understands the markets where they do business, their clients' needs and the rapid changes.Automated Payments: To making use of electronic transfer technology that reduces errors, enhances processing times and minimizes costs-completing with maximum speed & efficiency.

Value added reporting: SCB offer comprehensive reporting on balances and transaction activities. With this information, customers will be better able to track transactions, oversee the reconciliation process and analyze usage patterns. Full reporting is also available through their Electronic Delivery channels including the internet. Their extensive management information systems provide clear and timely information to facilities the management decisions and simplify reconciliation. At SCB their vast range of tailor-made reporting capabilities satisfies all record keeping needs. Billing: SCB provides simple and transparent billing system. They offer innovative pricing structures. As such customers will find that the billing covers tired pricing, volume rates as well as standard fees and services.

4.2.5 EURO and GBP Clearing

Features:

The key features for using SCB for Euro as well as GBP account and payment services are:

Interest bearing account.

Electronic payment and receipts capability, with competitive cut-off times,

Full range have inter bank and customer electronic same day funds transfer. The ability to handle paper processing as required.

Full range of SWIFT and electronic banking reporting capabilities, including on an intraday basis where required. Monthly Billing of MT200/202 type transaction fees to assist the customers,with an appropriate invoice breakdown sent for reconciliation purpose.

Quality Assurance Program available to assist the customers, to achieve

higher Straight through Processing(STP) rates and improve cost. Efficient enquiries service provided by a dedicated experienced Customer

Services team.

Services of a local account relationship manager in every time zone and language.

Multi-currency capability- at Standard Chartered Bank London, an account held with automatically means that make payments in other currencies. An euro account can be used as a multi-currency base.

As the "Banker's Bank ", Standard Chartered not only services the needs of their own global network across 55 countries they also serve hundreds of correspondent banks globally.

4.3 Continuous Linked Settlement (CLS)

Continuous Linked Settlement (CLS) is the new private sector response to increasing regulatory pressure to reduce foreign exchange settlement risk exposure. The initiative has been live since the end of 2002 and is endorsed by the G10 central banks and lead regulations. The primary objectives of CLS are to eliminate the inherent settlement risk from the current foreign currency settlement processes and to provide a mechanism for containing any systemic risk arising from Standard Chartered at the forefront.

SCB has been deeply committed to this industry initiative since its inception in 1997 and holds full shareholder states in the new Bank. Standard Chartered operates as a full Settlement Member within CLSB and extends comprehensive Third party services to their customers, enabling them to take full advantage of the settlement risk benefits associated with FX settlement through CLS.

4.4 SWIFT Messages PC Connect

PC connect is the message gateway system. It allows preparation of SWIFT messages transmits and process both incoming and outgoing messages.Procedure for Incoming Messages

The following procedures must be followed

The first copy and second copies of the messages must be removed from the printer by a designated staff and checked for continuity of sequence numbers.

The sequences number range must be noted in the PC connect sequence number register.

The checker must also identify Test not verified/irrelevant messages actions to be taken on such messages is defined bellow: The designated staff must incorporate the first page serial no. of the messages in the respective columns of the register.

At the end of the day /following day, the designated staff must perform the following reconciliation Incorporate the last Page Serial No. in the register

Check whether there is any missing serial number if any reprint the missing message and incorporate the last serial number in the register.

Procedures for Outward MessagesSWIFT messages are released from Exim bills and are transfer and transmitted through PC connect to the correspondent bank. The status of the messages must be checked an hour before the PC connect cut-off times, so that rejected messages could be rectified and resent. This must be checked from PC Connect.CHAPTER V:FI PRODUCTS AND OPERATIONS IN BANGLADESH5. FI PRODUCTS AND OPERATIONS IN BANGLADESH5.1 Financial Institution (FI) Department in Bangladesh:

FI, Bangladesh Provides trade related services and leveraging on the world-wide network of Standard Chartered branches such as advising and confirming, negotiating and discounting letter of credit, reimbursement and fund transfer under letters of credit and account services i.e. deposit of export proceeds, term and overnight investment of excess cash. The bulk of business relates to the Ready Made Garment Industry (RMG), oil and other commodities and capital equipments. Almost entire business is traded with tenors less than 180 days. Over 50% of banks limits are used for the import of raw materials from the Far East for the RMG industry, whereby garments are made up in Bangladesh and then shipped out to Europe and the US against export L/Cs.5.2 Organogram of FI Department in Bangladesh:

5.3 Target customer of SCB in Bangladesh (FI)

Target customers in this case are those branches of Banks who have Authorized Dealership License to do Foreign Trade business operation. SCB has agency agreement with 35 commercial banks in Bangladesh to whom they offer their FI products.5.4 Market Size of FI in Bangladesh 5.5 Products and Operations of Financial Institution: 5.4.1 Letter of Credit Advising

Letter of Credit (L/C)

Letter of Credit can be defined as a "Credit Contract" whereby the buyer's is committed (on behalf of the buyer) to place an agreed amount of money at the seller's disposal under some agreed conditions. Since the agreed conditions include, amongst other things, the presentation of some specified documents, the LC is called Documentary Letter of Credit.

Any agreement, however named or described, whereby a bank (the issuing bank), acting at the request and on the instructions of a customer (the applicant) or on its own behalf:

a. is to make a payment to or to the order of third party(the beneficiary), or is to accept and pay bills of exchange (Drafts) drawn by the Beneficiary, b. authorizes another bank to effect such payments, or to accept and pay such bills of exchange (Draft),

c. authorizes another bank to negotiate, against stipulated documents, provided that the terms and conditions are completed with

Documentary Credit is of two types:i. Revocable:

A revocable credit is a credit which can be amended or cancelled by the issuing at any time without prior notice to the seller.ii. Irrevocable Credit:

An irrevocable credit constitutes a definite undertaking of the issuing bank (since it can not be amended or changed without the agreement of all parties thereto), provided that the stipulated documents are presented and the terms and conditions are satisfied by the seller. An irrevocable credit can be either confirmed or unconfirmed depending on the desire of the seller. The sort of credit is always preferred to revocable letter of credit. Sometimes, Letter of credits are marked as either 'with recourse to drawer' or 'without recourse to drawer'.

Parties of Letter of Credit

i. Importer/Buyer:

Importer/Buyer is the person who requests/instruct the opening bank to open a LC. He is also called opener or applicant of the credit.

ii. Opening/Issuing Bank:

Opening/Issuing Bank which open/issues a LC of behalf of the Importer. It is also called the Importers or buyer bank.

iii. Exporter/Seller/Beneficiary:

is the party in whose favor the LC is established.

iv. Advising/ Notifying:

Advising/ notifying is the bank through which the LC is advised to the exporter. It is a bank situated in the exporting country and it may be the opening bank or a correspondent bank It may also assume the role of confirming and negotiating bank depending upon the conditions of the credit.

v. Confirming Bank:

Is a bank which add its confirmation to the credit and it is done at the request of the issuing bank. The confirming may or not be the advising bank.

vi. Negotiating Bank:

It is the bank which negotiates the bill and pays the amount to the beneficiary. It has to carefully scrutinize the documentary credit before negotiation in order to see whether the documents apparently are in order or not. The advising bank and the negotiating bank may or may not be one and the same. Sometimes it can also be the confirming bankvii. Paying/Reimbursing Bank:

Paying/Reimbursing Bank is the bank or home the bill will be drawn(as per conditions of the credit). It is nominated in the credit to make payments against stipulated documents complying with the terms of the credit. It may or may not be the issuing bank.

L/C Advising

Payments

Advising Beneficiary

Beneficiary Processing documents

Collection Payment

Payments

L/C application

Documents Processing

Goods Figure: Add instructions & send to SCB

Advising through a bank is a proof of apparent authenticity of the credit to the seller. The process of advising a credit consists of forwarding the original credit to the beneficiary to whom it is a addressed. Before forwarding, the advising bank has to verify the signature(s) of the officer(s) of the opening bank and ensure that the terms and other regulations relating to export. In such act of advising, the advising bank does not undertake any liability.When a corporate customer process a letter of credit from a local bank favoring the buyer in the different country the letter of credit has to be advised to the sellers or beneficiary. It means after the contract between the buyer and seller, the buyer and the seller. The buyer issues a letter of credit from his bank to the seller's bank. When the buyers and sellers are in the different countries, the risk of the non-payment is high and the authenticity of the letter of credit also major issue.

In this situation international or global banks or any other nominated banks, like Standard Chartered Banks takes the responsibility to advice the letter of credit to the sellers or seller's bank. The beneficiary receives the letter of credit promptly and the authenticity is checked though the seller can start the process to deliver the goods right in time to the buyers.

5. 4. 2 L/C Confirmation on behalf of their customer banks

When the beneficiary or the seller receives the letter of credit from the issuing bank he wants to be sure that he must get paid after delivering the goods. In this case the seller wants the confirmation of payments from the advising bank. Standard Chartered Bank, when acts as an advising bank gives the add confirmation to the seller that this letter of credit is authenticate and the payments will be made after full filling all the terms and conditions of the letter of credit, so Standard Chartered is prepared to add its confirmation to the letter of credits advised through its network, subject credit and country limits beings available.

The issuing Bank requests to add confirmation to their LC, and if we do so our confirmation constitutes a separate undertaking on our part as the Confirming Bank, in addition to what of the issuing bank, to pay the beneficiary, without resources, if documents are presented in compliance with the terms and conditions of the SCB will consider adding confirmation only when see requested by the issuing bank, but subject to Bank and country risk approvals and checking of KYC and dealing with restricted countries. If the beneficiary requests us to add confirmation, if will be deemed to be a silent confirmation, in which case, these are subject to separate controls discussed later.A contingent Liability is booked in the name of the issuing bank or in the case of reconfirmation, either in the name of the confirming bank or the LC issuing bank, under file type 87, in the currency of the credit.

The liability is reversed on fulfillment of our commitment or 14 days after expiry of the LC or 14 days after the due date. Process indicated earlier under "Advising of Export LCs" regard in authenticity etc must also be followed prior to adding confirmation. All necessary amendments much as, reimbursement clause, B/L clause, restriction the LC at the counter of SCB and other local exchange regulation etc must be requested and obtained before the LC is confirmed.

On receipt of the instructions to confirm a letter of credit, the processing unit must ensure that:

The letter of credit is authentic.

Sufficient Product limits are available in the name of the Issuing Bank and Country-including any tolerance allowed with regards to amount.

The terms of the L/C are clear and unambiguous.

Clarification is sought immediately from the Issuing Bank where necessary.

The reimbursement instructions are clear and concise.

The beneficiary agrees to the payment of confirmation fees (when they are for his account). This is particularly important in certain Asian markets.

When the forwarding the confirmed letter of credit to the beneficiary, it is critical that the amount confirmed and the period of confirmation is clearly stated. In cases where discrepancies are found in documents under an issuance Confirmed L/C, which are subsequently accepted by the Issuing Bank, SCB must: Obtain approval from the original approving units to extend the confirmation period if appropriate (e.g. the L/C has expired or the amount has exceeded);or

Consider whether it still wishes to extend the confirmation period. If not, the L/C beneficiary must be advised that SCB's confirmation has fallen away at the same time as they are advised that the Issuing bank accepts the discrepancies.

Issuing a Letter of Credit:

Before issuing a L/C, the buyer and seller located in different countries, concludes a 'sales contract' providing for payment by documentary credit. As per requirement of the seller, the buyer then instructs the bank-the issuing bank-to issue a credit in favour of the seller (beneficiary). Instruction/Application for issuing a credit should be made by the buyer (importer) in the issuing bank's standard form. The credit application which contains the full details of the proposed credit, also serves as an agreement between the bank and the buyer. After being convinced about the 'necessary conditions' contained in the application form and 'sufficient conditions' to be fulfilled by the buyer for opening a credits the opening bank then proceeds for opening the credit to be addressed to the beneficiary.

5.4.3 Reimbursement Authorities:

Reimbursement authorization means an instruction or authorization, independent of the credit, issued by an Issuing Bank to a Reimbursing Bank to reimburse a claiming Banker if so requested by the issuing bank, to accept and pay a time draft drawn on the reimbursing Bank. Infect, FI of Standard Chartered Bank Dhaka acts as corresponding banks of Reimbursing Bank i.e. Standard Chartered Bank, New York. Performing as the corresponding bank of Reimbursing Bank (SCB, New York), the FI of SCB, Dhaka, acts on the instruction and under the authority of the Issuing Bank.

In case of Reimbursement Authority, these should be a reimbursement claim from the Claiming Bank to the Reimbursing Bank (SCB, New York). Except as provided by the

terms of its Reimbursement undertaking, a Reimbursing Bank (SCB, New York) is not obligated to honor a Reimbursement Claim.

Local bank's branches in Bangladesh send reimbursement authorizations (RAs) to FI Unit at Dhaka. These RAs are either collected by nominated courier service or sent directly by the branch. On many occasions FI peon collects RAs from branches of customer banks.

RAs should contain L/C number, L/C Expiry, Amount, Charges, the account to be debited and in some occasion the name of the claiming bank. Prior to process/forwarding, FI concerned official checks these details and in case of any clarification, contacts the concerned branch.

As it is a legal requirement that all Reimbursement Authorizations and Reimbursement Amendments must be issued in the form of an authenticated tele-transmission that's why RAs are usually sent to respective network offices by Swift/Telex. RAs are sent through swift MT 799. RAs are also sent by courier.

Processing of RA:

Where courier service is used for onward transmission of RAs:

Original copies are sent to receiving group office e.g. SCB NY, Attn. Trade Reimbursement Dept. And copies are retained for future reference. Where RAs are sent by SWIFT :

FI- ops concerned official prepares the reimbursement authority in MT 1999 on behalf of the local bank. FI-Ops officer verifies the message.

Any of the Relationship Managers authenticates & sends the message.

The following morning FI receives the original/copies of the SWIFT message.

Concerned official sends a copy of the message to the concerned bank.

Another copy of the transmitted message is filed along with the original RA received from the local bank.

Where RAs are sent by Telex:

Having completed the above, concerned official prepared an authority on behalf of the local bank.

"Concerned Official" takes a print out of the message, checks and puts his initial on the print-out. At the same time he also saves the file in a diskette for communications room.

A Manager/RM FI check the print-out against instructions received and puts his signature in full on the print out and sends the same to communications room for dispatch.

Communication room authenticates and dispatches the RA message.

The following morning FI receives the original copy of the dispatched message and ensures it agrees with the original instruction. Checking concerned official/officer initials the copy.

Concerned official sends a copy of the message to the concerned bank.

The original transmitted copy is filed along with the original RA received from the local bank.

Bank to Bank Reimbursement:

The buyer is also concern that when and how to pay the seller. Letter of Credit Reimbursement helps the simplify a complex trade finance problem; how to settle payment when the issuing bank is not a corresponded of the beneficiary bank. When the sellers opens a letter of credit, incorporate a reimbursement instruction into the terms of the letter of credit allowing a beneficiary bank anywhere in the world to claim payments

from the Standard Chartered branches in the country where the issuing bank has established its account relationship.

When the buyer uses a letter of credit along with that simplify send a separate reimbursement Authorization to Standard Chartered to effect reimbursement, preferably in a written paper. Standard Chartered Bank offers the flexibility to stipulate an exact or an approximate amount, as well as choosing whether the claim may or may not be restricted. On the receipt of a claim from any bank from the beneficiary, Standard Chartered will be processed on the day received or on the following day depending on the agreement.5.4.4 Issuance of Counter Guarantees:By the risk product Standard Chartered gives facilities to both the local and international corporate customers. This types guarantee gives the buyers a certainty over receiving pre-agreed payments if suppliers fail to meet its contractual obligations. Standard Chartered's Financial Institution Banking issues guarantees and advance payments guarantees against counter guarantees received from correspondent banks worldwide.

5.4.5 Issuance of Irrevocable Reimbursement Undertaking:

Irrevocable Reimbursement Undertaking (IRU) means a separate irrevocable undertaking of Reimbursement Bank, issued upon the authorization or request of the Issuing Bank, to the Clearing Bank named in the Reimbursement Authorization, to honor that bank's Reimbursement Claim provided the terms and conditions of the Reimbursement Undertaking have been complied

5.4.6 Fund Transfer/Payment Instruction:

Payment Instruction or Fund Transfer means an instruction issued by an Issuing Bank to a Reimbursement Bank to debit its respective account directly on the value date mentioned in it. This product of Financial Institutions facilitates payment services. In case of fund transfer their need not to be claimed. On the value date the instruction of the issuing bank is executed.

Local banks branches in Bangladesh send Fund Transfer (FT) Instructions to FI Unit at Dhaka. These FTs are either collected by our nominated courier service or sent directly by the branch. On many occasions FI peon collects FTs from branches of customer banks. All FTs are signed by two authorized signatories of the concerned bank branch. Signatures appearing in the FTs are to be verified by any FI-Ops Staffs using Authorized Signature Booklet of the banks and / or List of Authorized Signatories received from branches.

The FTs contain L/C number, Amount, Value date, Beneficiary details, Ordering customer, Charges, the account to be debited etc. FI concerned official checks the FTs for all these details and in case of any incomplete information/clarification, he/she contacts the concerned branch. Any subsequent amendments are made through an authorized signatory of the concerned bank and this is further verified at our end.

5.4.7 Negotiation of services against L/Cs :

As the Letter of Credit is a freely negotiable financial instrument, any bank in the seller's country can be a negotiating of a letter of credit mean after delivering the goods to the buyers and fulfilling all the terms and conditions of the letter of credit, the seller presents the documents to a bank, like Standard Chartered. Then, it will examine all the documents as per the letter of credit. If the documents are correct and up to date the negotiating bank pays the seller or its like just purchases the documents from the seller. Standard Chartered advising and negotiation fees for each market are based on local practices and applicable regulatory guidelines. This is subject to periodic review and revision.5.5 The Procedure of Export & Import Business:

The imports & exports trade of our country is regulated by the Import and Exports (Control) Act, 1950. No person who has been granted registration by the chief Controller of Imports & Exports shall indent, import or export any thing into or out of Bangladesh except in cases of exemption issued by the government. If any person contravenes any provision of the Act or any order made under this Act is punishable with imprisonment for a team, which may extend to one year or with fine or both.

5.5.1 Export Procedure:

1. Registration of Exports

The exports from Bangladesh are subject to export trade control exercised by the Ministry of Commerce through Chief Controller of Imports and export (CCI & E) No exporter is allowed to export any commodity permissible for export from Bangladesh unless he is registered with CCI & E and holds valid Exports Registration Certificate (ERC). The ERC is required to be renewed every year.

2. Procedure for obtaining Export Registration Certificate (ERC)

Obtaining Export Registration Certificate (ERC), intending Bangladeshi Exporters are required to apply to the Controller /Joint Controller/Deputy Controller/Assistant Controller of Imports and Exports, Dhaka/ Chittagong/ Rajshahi/ Khulna/ Mymensing/ Sylhet/ comilla/ Barishal/ Pabna/ Bogra/ Rangpur/ Dinajpur, as the case may be in the prescribed form along with the following documents:

I. Nationality and Assets Certificate of the proprietary/ Directors

II. Registered Partnership Deed in case of Partnership concerns

III. Memorandum and Articles of Association and Incorporation Certificate in case of Limited Company.IV. Bank Certificate

V. Income Tax Certificate (GIR)

VI. Copy of Valid Trade License

VII. Membership Certificate of a trade Association

VIII. Affidavit from a 1st class magistrate

IX. Copy of Rent Receipt of business Premises

X. Any other certificate as required in the policy etc.

3. Registration or Renewal:

On receipt of necessary advice from the offices of the Controller of Imports and Exports, applicants for Export Registration Certificate are required to deposit requisite Registration Fee to the Government Head of Account "42- Trade and Commerce- Fees released under the imports and Exports Control Act. 1950 " through Bangladesh Bank/ Government Treasury/ Sonali Bank.

4. Signing the contract:

Description of the commodity

Quantity of the commodity

Price of the commodity

Shipment

Insurance and marks

Inspection

Arbitration

5. Receiving the Letter of Credit:

The issue 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

The L/C allows sufficient time for shipment and a reasonable time for negotiation

If the exporter wants the letter of credit to be transferable, divisible and advisable, he should ensure that these stipulations are specifically mentioned in the L/C.6. Procuring the materials:

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

7. Shipments of Goods

8. Preparation Procurement of Export Documents

9. Submission of the Documents to the bank for negotiation

5.5.2 Import Procedures:

Procurement of IRC from the concerned authority

Signing purchase contract with the seller

Requesting the concerned bank(importer's bank/issuing bank to open an L/C irrevocable) on behalf of the importer favoring the exporter/seller/beneficiary.

The issuing bank issues the L/C in accordance with the instruction of the importer and requests another bank (advising bank). The issuing bank may also request the advising bank to confirm the credit, if necessary

The advising bank advices the seller that the L/C has been issued

As soon as the exporter/seller receives the L/C and is satisfied that he can meet the L/C's term and conditions, he is in a position to make shipment of the goods.

After making shipment of goods in favor of the importer the exporter/seller submits the documents to the negotiating bank for negotiation

The negotiating bank scrutinizes the documents and if found o.k. negotiations the documents and sends the said documents to the L/C issuing bank

After receiving the documents the L/C issuing bank also examines the documents and if found o.k. makes payment to the negotiating bank

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

The importer after paying all dues receives the documents from the L/C issuing bank and then release the imported goods from the port authority

5.6 International Trade Payment:

An international payment trade, one may come across a number of modes of payments there are being used for receiving trade proceeds.

A.Cash in Advance:

In these payments, the buyer places the funds at the disposal of seller (exporter) prior to shipment of goods in accordance with the sales or purchase contract, which is certainly to be concluded between exporter and importer before the trade transaction. If the exporter is not sure about buyers creditor there are other circumstances which cast doubt on the certainty of getting paid. Since this method of payment is expensive and contains a lot of risk on the part of buyer (because they have no assurance that what they contracted for will be supplied and received in appropriate manner),they may not be willing to accept such terms of payments. Thus it is rarely used in Bangladesh.

B. Open Account System:

At the other end of the range of payment methods is the open account system. This is an arrangement between the buyer and seller (sales/purchase contract) whereby the goods are manufactured and delivered before payments is required. Open account provides for payments at some stated specific future date and without requiring the buyer to issue any negotiable instrument evidencing his legal commitment. The seller must have absolute trust that he will be paid at the agreed date. Though the seller can avoid a lot of banking charges and other costs, but he has no securities that he will be receiving payments in due course. For this reason, the exporter may not be willing to accept this sort of mode of payment. This system is also uncommon in Bangladesh.

C. Documentary Collection:

This is an arrangement (sales /purchase) contract where by the goods are shipped and the relevant bill of exchange draft is drawn by the seller on the buyer and documents are send to sellers bank with clear instructions for collection through one of its correspondent banks located in the buyers domicile. In this method, the export will hand over the shipping documents to his bank and ask it to forward the documents to the buyer's bank, with instructions to release them to the buyer on payment of his invoice. This is called cash against documents. The exporter can also give the buyers trade credit by drawing a bill of exchange on him and requiring him to accept the bill when he collects the documents. This is called documentary collections against acceptance because the buyer accepts bill of exchange.

D. Documentary Credits:

The documentary credit or letter of credit is an undertaking issued by a bank on behalf of the buyer (or for its own account), to pay the beneficiary the value of the draft and documents provided that the terms and condition of the credit are complied with. This is the most frequently used method in international trade. Although the one of the costliest, it is often considered the most secure because the buyer assured that the seller will be paid only when the documents representing goods have been delivered. Conversely, the seller assured that the buyer will receive the documents for ultimate delivery of the goods only when a payment has been made. The security of the transaction is assured by one or more third parties. This is normally buyers' bank, which issues the letter of credit and the seller's bank, which informs the seller that the LC has been issued and perhaps adds its confirmation to the LC in other words.5.7 Import Under Back to Back LC:

The process of Back to Back letter of Credit arises generally when an importer wants to import to raw materials from the exporter purpose of preparing products and the finished products are to be again to the exporter of raw materials. In such cases, the bank of the exporter of raw materials at first opens a letter of credit in favor of the importer which is known as Master/Mother LC. This LC is an undertaking as well as a facility given by the exporter of raw materials by way of importing finished products from the buyer of their raw materials. And as such, the bank of the importer of raw materials open a letter of credit on the basis of master /Mother LC which is known as Back to Back LC which is opened for 75% of the net F.O.B. value of the Master /Mother LC in favor of the exporter of the raw materials.

Therefore, "A Back to Back Credit is the term given to an ancillary credit which arises where the beneficiary uses the credit granted to him by the issuing bank to support another credit granted by the beneficiaries bank to his supplier, not necessarily from the inter me diary sank but from the prime beneficiaries own bank, and thus the benefits of an irrevocable credit are otherwise transferred. In our country, especially the proprietors of garment industries able this facilities through their bankers. Besides, some local Back to Back LC's are being opened by the banks.

On receipt of authenticated export L/C (Mother/Master L/C) our client will submit the same to the bank along with following papers and documents with the following papers and documents with a request to open a Back to Back L/C on the basis of export L/C:

L/C application & agreement from dully filled in & signed

Pro-forma invoice/indent

Insurance cover note

Indemnity bond for tk. 150/-

IMP form

Quota allocation letter issued by EPB The bank then scrutinizes the following points of the Master L/C:

Whether the Master L/C has been opened by a internationally reputed bank

Whether L/C is irrevocable

L/C should not contain unacceptable conditions, stipulations clause

Regarding terms of delivery i.e. FOB/CER/CIF price, we should prefer CIF as we can payment the freight & insurance in local currency

If exportable goods are under quota, allocation of quota from E.P.B. is required

Terms of payment should be at straight.Back to Back L/C:

While opening Back to Back L/C, Following additional papers must be obtained:

Export L/C (Master L/C)

Valid Bonded ware house license

Quota allocation

ERC in addition to IRC

Indemnity/undertaking of Importer/Exporter

Factory inspection Certificate

VAT registration

5.8 Foreign exchange Account:

Foreign exchange transactions involve movement of fund from one place to another, one bank to another and one account to another. Based on the requirement each bank has to open and maintain foreign currency accounts in different places of the world for settlement of their international transactions. These accounts are called Foreign Exchange Accounts.

All authorized dealer banks in Bangladesh, may open and maintain accounts in freely convertible currencies with their correspondents/branches abroad without prior approval from Bangladesh Bank. After opening of the accounts an intimation is to sent to Bangladesh Bank within 15 days from the date of opening of such accounts. For various reasons, the said accounts of authorized dealer banks may be overdrawn. But the banks are allowed to remain overdrawn in their accounts abroad for a period not exceeding 7 (seven) days at a time. Interest on such overdraft may be remitted by the bank without any prior approval of Bangladesh Bank but subject to report to Bangladesh Bank.

Authorized dealers may also freely open and maintain taka accounts in the name of their foreign correspondents against inward remittance in convertible currencies in convertible currencies only. These accounts are termed as 'Nor-Resident Taka Account of Foreign Bank Branches or Correspondents'.

Foreign currency accounts are frequently terms as 'Nostro'. 'Vostro and 'Loro'. These are all Italian words, the Nostro means 'our', Nostro means 'your', Loro means 'their'.Nostro Account:

Nostro Account means "our account with you". A Nostro Account is a foreign currency account of a bank maintained with its foreign correspondents abroad. For EXAMPLE, Agrani Bank, Dhaka's US Dollar account maintained with Citibank, NA. New York, USA is a Nostro Account of Agrani bank i.e. from the point of view of Agrani Bank it is their Nostro Account.

Vostro Account:

Vostro account means your account with us. "The account maintained by a foreign correspondent in a bank of a particular country is known as Vostro Account. For

Example: State bank of Indias taka account maintained with Agrani bank. Dhaka is aVostro Account i.e. from the point of view of Agrani Bank it is a Vostro Account held for State Bank of India.

Loro Account:

Loro account means "their account with you". Account maintained by their party is known as Loro account. Suppose Agrani Bank maintained a Nostro account with Citibank, N.A. New York and simultaneously Janata Bank have also maintained a Nostro account with Citibank, N.A. New York. From the point of Agrani Bank, Janata Bank's account with Citibank regarded as Loro account.

CHAPTER VI :

GENERAL DISCUSSION

6. GENERAL DISCUSSION6.1 Discounting of Drafts

SCB can offer Corporate Customers without recourse discounting of local currency bills of exchange and drafts that have been accepted by the buyers bank (the Accepting Bank). Such drafts are hereinafter called Accepted Drafts and are transferable to a third party.

Transaction Process:A typical transaction would be:

a) Customer sells goods or services to its Buyer. The buyer issues a draft drawn on its bank and asks its bank to Accept it. The date for payment of the Accepted Draft will reflect the agreed payment terms between customer and the buyer.

b) The buyer sends to customer the Accepted Draft.

c) Customer requires SCB to discount the Accepted Draft on a without recourse basis.

d) Upon request to discount the Accepted Draft, SCB telex request via SWIFT the Acceptance Bank to confirm by authenticated telex/SWIFT that proceeds are to be remitted to SCB on due date (specifying the due date).

e) At presentation on maturity, the Accepting Bank honors the Accepted Draft and remits proceeds to SCB

Risk:

The main risks here are: Risk

Credit Risk Bank Risk & Operational Risk Market Risk Country Risk Credit Risk :

SCBs obligor under this program is the accepting bank SCB normally has no recourse to the corporate customer, except in the event of fraud alteration of bills etc. Transactions should reflect the nature/size of the customers business and the terms of trade. Local practice should be to introduce nominal credit ceilings for borrowing customers but these should not be advised to customers. For non-borrowing corporate customers, the value of Accepted draft per transaction must not to exceed USD250, 000. Any exceptions must be approved by the SCO.

Bank and Country Risk:This is the risk that SCB undertakes on the Accepted Bank (and associated country risk where applicable) who has guaranteed the payment of the draft. In these circumstances the primary recourse is to the Accepting Bank, and it is without recourse to the corporate exporter. Discounting should only be undertaken where appropriate bank and country risk approval has been obtained. In countries, where the risk of late or non-payment depends on individual branches of the Accepting Bank, the limit approval must be on a branch basis. This must be covered in the Country product Template.Operational Risk :

Normal operational risk in the handling of drafts apply (e.g. safekeeping, presentation, checking for alteration, fraud etc.)

To mitigate the risk of fraud or accommodation paper, the Customer should provide SCB with the original supporting commercial documents to support the Accepted Draft including but not limited to sales order, commercial/VAT invoice, transport/shipping documents etc.

Market Risk :

There may also be a basis risk due to movements between the reference rate for interest charges for the product and the banks actual cost of funds (eg Prime/Inter bank spread etc.). The product should, wherever possible, be match funded to remove this risk.

6.2 Local Bill Discounting for Non-Corporate Entities by FI Department

Local Bill Discounting (LBD) refers to discounting of BDT/US$ usance bills drawn under in-land Letters of Credit utilizing either the exposure on corporate or the LC issuing bank. Currently Corporate Banking is offering this product to their regular client base using exposure on both customer as well as L/C issuing banks.

Financial Institution Department is contemplating to offer standard Local Bill Discounting product to a clientele base currently in the status of non-corporate or non-borrowing corporate customer. FI intends to leverage on the strong relationship with local banks and use a portion of trade limits currently extended to these banks for this product.

Product Description

SCB offers Corporate Customers with or without recourse discounting of bills of exchange / drafts that have been accepted by the Issuing bank (the Accepting Bank) under local L/Cs. In some countries these local L/Cs can also be issued in a form of Quasi Back to Back L/Cs with Export L/Cs held as a security.

A typical transaction would be:

1. An exporter receives export L/Cs from its importer (the master L/C).2. Local issuance L/Cs issued from the exporters bank in favor of its Domestic Suppliers (SCB Customers) and advised through SCB. These LCs can be Quasi Back to Back LCs if the master LC is held as security.3. The Domestic Supplier (beneficiary of the local L/C) presents LC documents to SCB with an issuance bill drawn on the Issuing Bank.4. The Domestic Suppliers Bank (SCB) will forward documents to Issuing Bank on approval basis acceptance under UCP 500.5. The