Internship Report on

A study on
Foreign Exchange Operations of
Sonali Bank Limited

Submitted by:
MD. Shahidul Islam Satu
BBA Program 2014
17th Batch
Roll: 184

Submitted to:
Qazi Moinuddin Mahmud
Lecturer

Department of Management
University of Dhaka

Date of Submission: 28-2-2015

Letter of Transmittal
28 February, 2015
To
Qazi Moinuddin Mahmud
Lecturer
Department of Management
Faculty of Business Studies
University of Dhaka
Subject: Submission of the Internship Report.
Dear Sir,
It gives me immense gratification to submit the report on A study of Foreign Exchange
Operations of Sonali Bank which was assigned myself as a fulfillment of the course
Bachelor of Business Administration.
While making this report I come across many hurdles and pleasant experience. But the
valuable experiences I have gained during the period will undoubtedly benefit me in the
years ahead. This report attempts to describe my observations, learnings and experiences
gained in the Sonali Bank-Tongi Branch, Gazipur. Despite the several constraints, I gave
my all efforts to make this report a meaningful one.
I have tried sincerely to comprehend and translate my knowledge in writing this report.
My effort will be rewarded only if it adds value to the research literature. I enjoyed this
project work and gladly attend any of you calls to clarify on my point, if necessary.
Sincerely yours
MD. Shahidul Islam Satu
BBA Program,17TH Batch, Roll No # 184
Department of Management
Faculty of Business Studies
University of Dhaka.

Acknowledgement
First of all I would like to express my indebtedness and deep sense of gratitude to my
honorable internship supervisor Qazi Moinuddin Mahmud, Lecturer, Department of
Management, University of Dhaka, whose scholastic supervision, kindness and
sympathetic guidance, warm advice and encouragement have enabled me to materialize
this report successfully.
I would like to express my sincere gratitude to Mustak Ahmed, principal, Khondoker
Abdus Salam, faculty member of Sonali Bank staff college (SBSC) and all other faculty
members for their cordial attitude and extending helping hand to me in collection of data
and facing any problem.
I am greatly indebted to Md. Mamtaz Uddin, branch manager, Zahid Hossian Shiplo,
senior officer and all the staff of Tongi branch of Sonali Bank for giving their valuable
time, guidelines, suggestions and comments, which helped me very much during the
internship period in the branch. Many thanks to other branch officials for their kind help
to me.
I shall never forget the help from some books, term papers, journals, etc., above all I
really be indebted to authors of these works.
I am grateful to my beloved Parents, siblings, friends and all well-wishers for their
inspiration that lead me to go ahead.
Finally, I thank all the persons who have directly or indirectly contributed in conducting
this report.

Executive Summary
An internship program is very important & essential for acquiring experience through
learning and spreading the scope of Knowledge. I have done my internship program in
Sonali Bank Tongi Branch, Gazipur.
This internship Report is aimed at providing a comprehensive picture to the areas of
Foreign Exchange Operations of Sonali Bank. The Report has been divided in to seven
parts. These are: 1) Introduction, 2) An Overview of Sonali Bank, 3) General Banking of
Sonali Bank, 4) Foreign Exchange Operations, 5) Functions of Foreign Exchange
Operations Department, 6) Findings and Suggestions, 7) Conclusion and References.
Sonali Bank is the largest commercial Bank of Bangladesh. The Bank is fully owned by
the government of the Peoples Republic of Bangladesh. The main objective of the Bank
is to provide all of banking services at the doorsteps of the people. The Bank also
participates in various Social and Development programs and also takes part in
implementation of various policies and promises made by the Government.
Sonali Bank Plays a pioneer role in handling foreign trade and foreign exchange
transactions ever before independence of the country and still remains unchallenged. With
wide network of branches at home and also a large number of correspondent banks
worldwide it is singularly handling the largest volume of export-import business including
homebound remittances. For this reason Foreign Exchange of the Bank is very much
essential. But now a days banking sector of Bangladesh is suffering the disease of default
culture which is the consequence or result of bad performance of most banks.
There are three types of modes of foreign exchange market, which are: Export Finance, Import
Finance and Foreign Remittance. This Branch does these foreign exchange activities
vastly.
In this report it is mentioned that, the overall performance of Sonali Bank for the economic
development of Bangladesh.
I also mention the findings of my report and describe the recommendation to overcome the
limitations. I have taken all the reasonable care to ensure the accuracy and quality to
make the report standard. And I believe that it has included all the necessary information
to be relevant, reliable and useful.

Table of Contents
Title
Chapter-1
Introduction:
1.1 :Background of the study
1.2 :Objective of the study
1.3 :Methodology of the study
1.4 :Sources of data collection
1.5 :Limitations of the Study

Page No.

09
09
10
10
11

Chapter-2
An Overview of Sonali Bank:
2.1 :Sonali Bank Profile
2.2 :Historical Background of SBL
2.3 :Objectives of SBL
2.4 :Vision
2.5 :Mission
2.6 :Slogan
2.7 : Management
2.8 : Operational Network
2.9 : About Tongi Branch
2.10:Orientation of SBL at Tongi Branch

12
13
13
14
14
14
14
19
19

Chapter-3
General Banking
3.1: Account Opening Section
3.2: Local Remittance Section
3.3: Bills and Clearing Section
3.4: Cash Section
3.4: Deposit Section

20
21-23
23
23
24

Chapter-4
Foreign Exchange Operations
4.1: Introduction
4.2: Foreign Exchange operations of SBL
4.2.1: Letter of Credit
4.2.2: Dollar and Travellers Cheque
Endorsement
4.2.3: Foreign Remittance
4.2.4: Foreign Currency Account

25
25
26-30
31
31
31

Title
Chapter-5
Functions of Foreign Exchange
Department
5.1: Export Finance
5.1.1: Export Financing sectors of SBL
5.1.2: Export Financing systems of SBL
5.1.3: Pre Shipment and Post Shipment
5.1.4: Export Form of SBL
5.1.5: Export Development Fund of SBL
5.1.6: Scrutiny of Export Document
5.1.7: Risk of Export Financing

Page No.

32
32
33
33-36
36
36
37-39
39-40

5.2: Import Finance

5.2.1: Import Financing sectors of SBL
5.2.2: Import Financing systems of SBL
5.2.3: Import Registration Certificate
5.2.4: Import Procedures of SBL
5.2.5: Import Scrutiny of SBL
5.2.6: Import Bills Retirement
5.2.7: Risk of Import Financing

40
40
41
41
43
43
44

5.3: Foreign Remittance

5.3.1: Foreign Inward Remittance
5.3.2: Foreign outward Remittance
5.3.3: Homebound Remittance
5.3.4: Positioning Strategy
5.3.5: Target Market of the Branch
5.3.6: Product of the Brunch

45-47
47
48-50
51
52
53

Chapter-6
Findings and Recommendations
6.1: Major Findings
6.2: Suggestions and Recommendations
6.2.1: Suggestions
6.2.2: Recommendations

54
55
55
55-56

Chapter-7
Conclusion and References
7.1: Conclusion
7.2: References

57
57

Abbreviations
A/C Account
AOF Accounting Opening Form
ATM Automated Teller Machine
BB
BDT
BOE
B/L
BSTC
BRC

Bangladesh Bank
Bangladeshi Taka
Bill of Exchange
Bill of Lading
Bangladesh Standard Trade Classification
Bankers Recruitment Committee.

CC
CRM
CSO
CIF

Credit Card
Customer Relationship Manager
Customer Service Officer
Cost, Insurance & Freight

DD
DP
DSE
DPI

Demand Draft
Note Demand Promissory Note
Direct Sales Executive
Deferred Payment Import.

EXP
EPB
EXP
ERP
ECGS

Export Form
Export Promotion Bureau
Export Authorization.
Export Registration Certificate
Export Credit Grantee Scheme.

FC
FDR
FOB
FRC
FAS
FCAP
FCAD

Foreign Currency
Fixed Deposit Receipt
Free On Board
Free Carrier
Free Alongside Ship
Foreign Currency Account Pound.
Foreign Currency Account Dollar.

IMP
ICB
IPO
IRC
ILC
IMF
IMP
IRC

Import Form
Investment Corporation of Bangladesh
Initial Public Offering
Import Registration Certificate
Inland letter of credit.
International monetary fund.
Import authorization
Import Registration Certificate

LCA
L/C
LIM
LTR

Letter of credit authorization.

Letter of Credit
Loan against import merchandise
Loan against trust receipt.

MT

Mail Transfer.

PAD Payment against documents.

PI No. Proforma invoice number.
SB
Sonali Bank
SBSC Sonali Bank Staff College
TT
TC

Telegraphic Transfer.
Travelers Cheque.

CHAPTER - 1
1.1: Background of the study:
Banking is one of the most important sectors for countrys wealth building activities.
Commercial banks are certainly profit making Financial Institutions. These institutions
play great role in the money market of every economy.
Due to globalization, technological innovation and deregulation the banking system all
over the world has been changing rapidly. Now a days banks have to compete in the
market place not only with local institutions but also with foreign financial institutions.
Sonali bank is one of the leading nationalized commercial bank in Bangladesh. Its
pioneer role in handling foreign trade and foreign exchange transactions ever before
independence of the country still remains unchallenged. With wide network of branches at
home and also a large number of correspondent banks worldwide it is singularly handling
the largest volume of export-import business including homebound remittances.
For this reason Foreign Exchange of Sonali Bank is very much essential. But now a day the
banking sector of Bangladesh is suffering from the disease of default culture which is the
consequence or result of bad performance of most of the banks.
Sonali Bank is playing an important role toward the growth and economic development of
Bangladesh.
This study is attempted to produce a constructive report on Foreign Exchange Operations
of Sonali Bank.

1.2: Objectives of the Study:

1.2.1: Primary objective:
The primary objective of conducting this study is to represent the Sonali Bank
Bangladesh Limited and to have a clear conception about all of the essential parts of the
internship program.

1.2.2: Secondary objectives:

To get an overall idea about the Foreign exchange operations of Sonali Bank.
To apply theoretical knowledge in the practical field.
To describe the organizational structure, management, background, functions and
objectives of the bank and its contribution to the national economy.
To achieve overall understanding of Sonali Bank.
To analyze the financing systems of the bank to find out any contributing field.
To examine the profitability and productivity of the bank.
To acquire knowledge about the every day banking operation of Sonali Bank.
To establish welfare oriented banking system.
9

1.3: Methodology of the Study:

1.3.1: Research Design:
Both descriptive and exploratory researches have been selected to analyze this study.
Exploratory research is used for following purposes:
Formulate or define problem more precisely.
Identify relevant courses of action.
Discover ideas and gain insights of foreign exchange operations.
Descriptive research was used for following reasons:
To describe the main characteristics of foreign exchange operations.
To estimate the present situation of foreign exchange operations in Bangladesh.
To determine the degree of quality and the perceptions of foreign exchange
operations.

1.4: Sources of Data Collection:

Data collection is a term used to describe a process of preparing and collecting data. The
purpose of data collection is to obtain information to keep on record, to make decisions
about important issues. Different data and information are required to meet the goal of
this report. Those data and information are collected from primary and secondary sources
which are showed below:

1.4.1: Primary Data:

In primary data collection, I collect the data myself using methods such as interviews and
questionnaires. The key point here is that the data I collect is unique. There are many
methods of collecting primary data and the main methods include:
Questionnaire development
Focus group interviews
Observation
Face to face conversation with officers and clients.

1.4.2: Secondary Data:

All methods of data collection can supply quantitative data (numbers, statistics or
financial) or qualitative data (usually words or text). Quantitative data may often be
presented in tabular or graphical form. Secondary data is data that has already been
collected by someone else for a different purpose. For example, this could mean using:
Annual report of Sonali Bank Limited.
Internal records of the bank.
Website of the bank.

10

1.5: Limitations of the Study:

To provide current information and to make the report read-worthy, support from various
sources is a must. In spite of my best effort, I could not collect some information required
at the time of the study. So this study is not free from the following limitation:
For the whole internship I had only 45 days, which were not sufficient. So I faced
time shortage extremely.
Sometimes the officers of Sonali Bank were very busy. For this reason the
personal did not co-operate me.
Lack of previous experience to prepare this type of report and it is totally new to
me as an intern.
Sonali Bank did not give me any kind of monetary support for this internship
program.

11

CHAPTER-2
An Overview of Sonali Bank
2.1: Sonali Bank Profile :
Registered Name
Known As
SWIFT Code
Category
Type
Date of Registration
1st Branch
Opening Ceremony
Head office
Phone
Fax
Email
Website
Official Logo
Chairman
CEO and Managing
Director
Branch
Number of Employees
Authorized Capital
Paid-up Capital
Local Partnership of
Capital
Services provided
Banking operating
system
Technology used

Sonali bank Limited

SBL
BSONBDDH
Commercial
Public
1972
Motijheel Branch, Dhaka
1972
Sonali Bank Limited, 35-42, 44 Motijheel C/A,Dhaka -1000,
Bangladesh.
+880-2-9550426-31, 33, 34
+88-02-9561410, +88-02-9552007
itd@sonalibank.com.bd

www.sonalibank.com.bd
Dr. A.H.M. Habibur Rahman
Pradip Kumar Dutta
1204
22446
Taka 6000 core
Taka 3120 core
Public Limited Company under 100% ownership of
Government
Deposit Scheme, Credit Facility, money transfer and Foreign
Exchange Services.
Both conventional and foreign system (E-Banking Software by
Dextop corporation ltd.)
Member of SWIFT, online Banking, Sonali based Computer
system.

12

2.2: Historical Background of the Sonali Bank:

Sonali Bank, the largest commercial bank in Bangladesh, was established under the
Bangladesh Banks (Nationalization) Order 1972 (Presidents Order No. 26 of 1972) by
taking over branches of former National Bank of Pakistan, Bank of Bhawalpur Limited
and Premier Bank of Pakistan. After the independence of Bangladesh in 1971, the then
Government, for the preannounce commitment, nationalized all the banks (except the
foreign-owned banks) operating in the country.
As a fully state-owned enterprise, Sonali Bank has discharged its responsibility by
undertaking government entrusted different socio-economic scheme as well as money
market activities of its own volition, covering all spheres of the economy. Sonali Bank
singularly enjoys the prestige of being the agent of the Central Bank.
Bank of Bhawalpur Limited and Premier Bank of Pakistan Limited were two private
banks performing class banking over the country (then East Pakistan) and National Bank
of Pakistan was a Government supported bank with 51% shares being owned by the
Government of Pakistan that was mainly established to finance the jute sector in East
Pakistan.
From a modest beginning with an increase of responsibility and by virtue of performance,
Sonali Bank has, within a few years, emerged as the largest Nationalized Commercial
Bank (NCB) in the country. The principal activities of the bank are providing all kinds of
commercial banking services to the customers. It also performs Government Treasury
functions as an agent of the Bangladesh .

2.3: Objectives of the Sonali Bank:

The main objective of the Bank is to provide all of banking services at the doorsteps of
the people. The Bank also participates in various Social and Development programs and
also takes part in implementation of various policies and promises made by the
Government.
Sonali Bank has the following specific objectives:

To collect scattered savings of the people.

To maintain a satisfactory deposit mix.
To extend credit facilities to agriculture, rural development, commercial and
industrial sectors.
To increase loan portfolio diversification and geographical coverage.
To develop human resources through continuous training.
To provide Export Finance.
To provide Import Finance.

13

To provide Foreign Remittance.

2.4: Vision:
Socially committed leading banking institution with global presence.

2.5: Mission:
Dedicated to extend a whole range of quality products that support divergent needs of
people aiming at enriching their lives, creating value for the stakeholders and
contributing towards socio-economic development of the country.

2.6: Slogan:
Your trusted partner in innovating banking.

2.7: Management:
The Board of Directors is the top management and apex policy-making body of Sonali
Bank, which is constituted in terms of the Bangladesh Banks of (Nationalization) Order,
1972. The Board of Directors has autonomy to organize, operate and manage its affairs
on commercial consideration subject to broad policy of the government. Presently, the
Board consists of a Chairman a Managing Director and nine Directors. It is to be noted
that the Chairman and MD, appointed by the Government. The Directors are appointed
from amongst people who, in the opinion of the Government, have had experience and
shown capacity in the field of finance & banking, trade, commerce, industry or
agriculture.
The Managing Director (MD) is the Chief Executive of the Bank. He executes all the
activities under the direction of the Board. The banking officers of the Bank are selected
by the Bankers Recruitment Committee (BRC) and the other line and staffs personnel
are appointed by the Banks own Recruitment Committee.

14

Sonali Bank: Management Hierarchy

Board of Directors

Managing Directors (MD)

Deputy Managing Director (DMD)

General Manager (GM)
Deputy General Manager (DGM)
Assistant General Manager (AGM)
Senior Principal Officer (SPO)

Principal Officer (PO)

Senior Officer (SO)

Officer

15

2.8: Operational Network:

The Bank through its 1204 branches- 1204 domestic and 2 overseas (Kolkata and Siliguri
in India) have been providing banking services to its customers. Out of total 1186
branches, 696 are operating in rural areas and 490 in the urban areas. Besides, 26 booths
under different branches are performing specialized functions at different locations.
The Head office of the Bank is located at the Motijheel Commercial Area, Dhaka
consisting of 41 Divisions and 59 Departments. The Divisions are headed by the DGMs
and the Departments are by AGMs. There are also many Sections under each Department
in the Head Office. The Sections are run by Senior Principal Officers (SPOs).
The Bank has eight (08) GM Offices in six Divisional Headquarters and 27 Principal
Offices and 62 (27+35) Regional Offices. A DGM is the chief of the Principal Office and
an AGM usually run a Regional Office. Principal Offices have jurisdiction over the entire
area of a district, i.e., Principal Offices are the local points of the banks administrative
zone in the districts. The Regional Offices, under the control and supervision of the
Principal Offices, are responsible for their performance and activities to the district-level
Principal Offices. The Regional Heads exercise control and supervision over all the
branches within their jurisdictions and keep the Head of the Principal Office informed
about the developments of their respective areas from time to time.
There are also 21 Corporate Branches existing in different important places over the
country and 11 of them are in Dhaka. The Corporate Branches are nearly equivalent to
the GM office and usually headed by DGMs. They are called Corporate Branch as they
provide all the banking services, e.g., general banking, foreign exchange, credit services
etc., in one place and they have their own discretionary power.
From 10 December, 2002 Sonali Bank (UK) Ltd. (a joint venture Company of Sonali
Bank & Govt. of Bangladesh) is operating to channel wise banking activities covering the
whole Europe.
Besides, the Bank established a wholly owned subsidiary company in New York, USA in
the name of Sonali Exchange Company Inc. to act as an international money remitter
through which Bangladeshi citizens living in the USA are conveniently remitting money
to Bangladesh. There are three representative offices of Sonali Bank in Jeddah and
Riyadh of KSA and another in Kuwait of middle east engaged in motivating Bangladeshi
expatriates living there to remit money through banking channel.

16

Functional Hierarchy:
Head Office

GM Office (8)

Principal Office (27)

Regional Office (62)

Branches (1186)

Corporate Branches (21)

Department (59)

17

18

2.9: About Tongi Branch:

Year of Establishment: 1979.
Name of the Manager: MD. Mamtaz Uddin.
Number of Employees: 14.
Address of the Branch: Mill gate, Tongi, Gazipur, Dhaka.
Tel: 9801197
E-mail: www.sonalibankbd.com

2.10: Orientation of Sonali Bank Tongi Branch:

Sonali Bank Tongi Branch is located in Mill gate, Gazipur, Dhaka. The corporate branch
does all the banking functions and I worked in Foreign Exchange Corporate Branch of
Sonali Bank. It is a small branch because its total employees are about 14 and it performs
all the four basic functions. The head of the department is Manager and the lower rank is
officer. The positional hierarchy of Tongi Branch of Sonali Bank is given bellow:

Senior Principal Officer (1)

Principal Officer (2)
Senior Officer (3)
Officer (4)
Staff (4)

19

Chapter-3
General Banking
General banking is the starting point of the banking operation. It is the department which
provides day-to-day services to the customers main functions of general banking department are
the following:

3.1: Accounting Opening Section:

The relationship between banker and customers begins with the opening of an account by
the customer. Opening an account binds the banker and customers into contractual
relationship. But selection of customer for opening an account is very crucial for a bank.
In fact, fraud and forgery for all kinds start by opening an account. So bank should take
extreme caution in this section. A customer can open different types of accounts through
this department such as:
Current Account.
Savings Account.
Term Deposit (STD) Account.
Fixed Deposit (FDR) Account.
Deposit Scheme.

20

3.2: Local Remittance Section:

The commercial Bank Remittance facilities to its customer is to enable them top avoid
risk rising out of profit or loss in cash carrying cash money to one place to another or
making payment to someone in another places. Banks take this risk remit the fund on
behalf of the customers to save them from any awkward happening through the network
of their branches and ensure payment to the beneficiary in exchange of a little bit benefit
known as commission. There are four mode of remitting money from one place to
another.

Mail
Transfer
(MT)

Pay
Order
(PO)

Local
Remittance
Section

Telegraphic
Transfer
(TT)

Demand
Draft
(DD)

Figure: Local Remittance Section

21

3.2.1: Pay Order Issue (PO):

Following procedure is maintained for the issuance of pay order (PO):
Customer is given a PO form.
After filling the form carefully, the customer is pays the money in cash or by
cheques.
The concerned teller then issue PO on its specific block. This block has three
parts, one for bank and another two for customer. A/C payee crossing its sealed
on all PO issued by the bank. The teller then
Writes down the name and address of the beneficiary on the main part of the PO
block. In other two part name and address of the customer is written.
The teller gives an entry to the registry book and maintains the same number of
PO block.
Two authorized officer signed the PO block.
At the end customer is provided with the two parts of the PO block after signing
of the backs of banks part.

3.2.2: Demand Draft Issue (DD):

Customer is supplied with DD form.

Customer fill up the form, which includes the name of the drawer, name of the
payee, amount of money to be sent, commission, name of the drawee branch,
signature and address of the drawer.
The customer may pay in cash or by cheques from his accounts
After the money is paid and the form is sealed and signed accordingly it is given
to the DD issuing desk.
Bank part contains issuing date, drawers name, payees name and some of the
money and name of the drawee branch.

After finishing all the required information entry of the DD is given in the DD issuing
register and at the same time bank issues a DD confirmation slip is entered into the DD
advice issue register and a number is put on the confirmation slip form the same register.
Later the bank mails this advice to the drawer branch.

3.2.3: Telegraphic Transfer (TT):

Customer fills the TT form and pays the amount along with commission in cash or by
cheques. The concerned officer issues a coast memo after receiving the TT form with
payment seal, than signed it charge Tk. 40.00 and 15% of VAT on TT charge. The TT
charge will increase @ Tk. 1 for every Tk. 1000.00.

22

3.2.4: Mail Transfer (MT):

Following procedure is maintained while issuing a MT.
Customer is supplied with MT form.
Customer fill up the form which include the name of the drawer, name of the
payee, amount of the money to be sent, commission, name of the drawee branch,
signature and address of the drawer.
The customer may pay in cash or by cheques from his account (if any).
After the money is paid and form is sealed and signed accordingly it is given to
the MT issuing desk.
Upon receiving the form the concerned officer issues a MT on a particular block
MT block contain issuing date, drawers name, payees name, and sum of the
money and name of the drawee branch

3.3: Bills and Clearing Section:

According to the article 37(2) OF Bangladesh Bank order, 1972, the banks which are the
number of clearinghouse are called as schedule banks. The schedule banks clear the
cheques drawn upon one another through the clearinghouse. This is an agreement by the
central bank where every day the representative of the member banks gather to clearing
the cheques. Banks for credit of the proceeds to the customers account accept cheques
and other similar instruments. The bank receives many such instruments during the day
form account holders. Many of these instruments are drawn payable at other banks. As
cheques payment order or bill come from a bank with the range of local clearinghouse
then it is sent for collection through clearinghouse. The cheques may be crossed or not, if
a customer of Sonali bank deposits a cheques of another bank which is within
clearinghouse, then the bank will credit his account, and collect the cheques. Through the
amount is credited in the customers account but will not get the money until the cheques
is honored.
There are three Essential things for clearing the instrument:
(i)
Crossing seal.
(ii)
Endorsement seal
(iii)
Clearing seal

3.4: Cash Section:

Cash section is a very sensitive organ in a branch and is handling with extra care.
Operation of this section being at the beginning of the banking hour. Cash officer being
his transaction with taking money from the vault, known as the opening cash balance.
Vault is kept in a much secured room. Keys to the room under control of the cash officer
and branch in charge. The amount of opening cash balance is entering into the cash
register. After transaction of whole day, the surplus money remain in the cash counter is
put back in the vault and known as the closing balance.

23

3.5: Deposit Section:

The function of the deposit section is very important. It is fully computerized. The Officer of
the deposit section maintains account number of all the customers of the bank. They are used
different code number for different account. By this section a depositor can know what is the
present position of his/her account. The officer makes three types of transactions such as
cash, clearing and transfer.
This section perform the following task:

Post all kind of transaction.

Provide on demand report.
Cheque maintenance.
Preparation of day transaction position.
Preparation of closing monthly transaction

24

Chapter-4
Foreign Exchange Operations:
4.1: Introduction:
Foreign Exchange refers exchange foreign currency between two countries. If we
consider Foreign Exchange as a subject, then it means all kind of transactions related to
foreign currency. In other words foreign exchange deals with foreign financial
transactions.
Foreign Exchange deals with the means & methods by which rights to wealth in one
country's currency are converted into those of another currency. It is a part of economic
science of foreign trade. By the same view, it covers the methods used for conversion, the
forms in which such conversions take place and causes which render these conversions
necessary.
According to Mr. H. E. Evit. Foreign exchange is that section of economic science which
deals with the means and method by which right to wealth in one countrys currency are
converted into right to wealth in term of another countrys currency.
In Bangladesh, we have the unit of money is 'Taka' for domestic transaction; also have
other obligations by exchanging foreign currencies. To meet-up the obligation that arise import
of goods & services from other countries, other foreign necessity, that part of the economic
science, which deals with the conversion of domestic currency into foreign currency for the
purpose of setting international obligations, is called Foreign Exchange. Every country has
certain natural advantages in producing certain commodities while they have some
natural disadvantages as well as in other. As a result we find that some countries need to
import certain commodities while others necessity to export their surpluses.
Commercially banks deals with both internal and foreign correspondence. The foreign
correspondences are conducted through foreign currency and the department dealing with
these businesses is called foreign exchange department.
Sonali Bank's expertise in International Banking has a record of in-house growth over more
than half a century. Its pioneer role in handling foreign trade and foreign exchange
transactions ever before independence of the country still remains unchallenged. In
exercise of the powers conferred by sec-3 of the foreign exchange regulation-1947,
Bangladesh bank issues license to scheduled banks to deal with foreign exchange.

4.2: Foreign Exchange Operations of Sonali Bank:

Foreign exchange department deals with foreign currency and the transaction of it. The major
job of this department is listed below:

Letter of Credit (for Export & Import)

Dollar/Travelers Cheque (TC) Endorsement
Foreign Remittance

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Foreign Currency Account

4.2.1: Letter of Credit (For Export & Import):

Letter of Credit is a guarantee or undertaking or commitment to the beneficiary/exporter
for making payment issued by the issuing bank on behalf of the importer upon fulfillment
of some conditions. As distance involved in international trade, buyers and sellers do not
know each other. It is difficult for both the buyers and seller to appreciate each others
integrity and credit worthiness. Apart from this it is also difficult to know various
regulations prevailing in their respective countries regarding export and import. Thus the
buyer wants to be assured of goods and sellers want to be assured of payments. Central
Banks, therefore assure these things to happen simultaneously by opening Letter of
Credit guaranteeing payments to seller and goods to buyer. By opening a Letter of Credit
on behalf of buyer in favor of seller, commercial banks undertake to make payments to a
seller subject to submission of documents drawn on in strictly compliance with Letter of
Credit terms giving title of goods to the buyer. It is a conditional guarantee. The Letter of
Credit thus constitutes one of the most important methods of financing foreign trade. The
primary reasons of making letter of credit:

Is to make a payment to or the order of a third party (the Beneficiary ), or is to

accept and pay bills of exchange (Drafts) drawn by the Beneficiary,
Authorizes another bank to effect such payment, or to accept and pay such bills of
exchange (Draft(s)),
Authorizes another bank to negotiate,

Against stipulated document(s), provided that the terms and conditions of the Credit and
complied with.
On the other hand Letter of credit can be defined as a Credit Contract whereby the buyers
bank is committed (on behalf of the buyers) to place an agreed amount of money at the
sellers disposal under some agreed conditions. Since the agreed conditions include amongst
other things, the presentation of some specified documents, the letter of credit is called
Documentary letter of credit.
Types of Letter Of Credit:
There are many types of Letter of Credits that are used in different countries of the world. But
International Chamber of Commerce (ICC) vides their UCPDC- 500, which denotes only two
types of LETTER OF Credits

4.2.1.1: Forms of latter of credit:

Revocable
Irrevocable
Revocable Letter Of Credit:
A revocable credit may be amended or cancelled by the issuing bank at any moment and
without prior notice to the beneficiary. That is to say, this type of letter of credit can be
revoked or cancelled at any time without consent of, or notice to the beneficiary. In case
of seller (beneficiary), revocable credit involves risk, as the credit may be amended or

26

cancelled while the goods are in transit and before the documents are presented, or
although presented before payments has been made. The seller would then face the
problem of obtaining payment on the other hand revocable credit gives the buyer
maximum flexibility, as it can be amended or cancelled without prior notice to the seller
up to the moment of payment buy the issuing bank at which the issuing bank has made
the credit available. In the modern banking the use of revocable credit is not widespread.
Irrevocable Letter Of Credit:
An irrevocable credit is a documentary credit, which cannot be revoked, varied or
changed/amended or cancelled without the consent of all parties- buyer (Applicant),
seller (Beneficiary), Issuing Bank, and Confirming Bank (in case of confirmed Letter of
Credit). Irrevocable Credit gives the seller greater assurance of payments, but he/she
remains dependent on an undertaking of a foreign bank.
Liability of the Issuing and Conforming Banks:
An irrevocable credit constitutes a definite undertaking of the Issuing Bank, provided that
the stipulated documents are presented to the Nominated Bank or to the Issuing Bank and
that the terms and conditions of the credit.

4.2.1.2: Transferable L/C:

A transferable credit is a credit, which can be transferred in whole or part by the original
beneficiary to one or more Second beneficiaries. It is normally used when the 1st
beneficiary does not supply the goods himself, but acts as an intermediary between the
supplier and the ultimate buyer.

4.2.1.3. Documentary requirement for opening L/C of Sonali Bank Ltd.

Importer shall submit following documents for opening L/C
Valid import registration certificate (commercial/ industrial).
TIN certificate.
VAT registration certificate.
Membership certificate of a recognize Trade Association as per IPO.
A declaration that the importer has paid income tax or submitted income tax return
for the preceding year.
Performa invoice or indent duly accepted by the importer
Insurance Cover Note with Money Paid Receipt covering value good to the imported
plus 10% above.
L/C application form duly signed by the importer.
Letter of Credit Authorization form (LCAF) commercial or industrial as the case may
be, duly signed by the importer and incorporating. New ITC number at least 6 digits
under Harmonized System as given in the Import Trade Control Schedule 1998.
The Sonali Bank may now proceed the opening the credit on behalf of their own customers
with them accept government organizations. Necessary entries to be given in the L/C opening
register by allocating a L/C number and following vouchers are to be passed for completion
of opening transactions at BC selling rate (spot):

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4.2.1.4: Creation of L/C Liability:

Particular

Dr.

Customers liability on L/C cash

XXXX

Cr.

Bankers liability on L/C cash

XXXX

4.2.1.5: Margin/Commission & Charges:

Particular

Dr.

Clients Account

XXXX

Cr.

Sundry deposit margin on L/C

XXXX

Income A/C commission

XXXX

Sundry deposit Document Handling Charge

XXXX

S/D VAT (% of Commission) on L/C

XXXX

Income A/C (Courier Charges)

XXXX

Income A/C (Postage/Telex)

XXXX

Income A/C (Other Charges)

XXXX

4.2.1.6: Issuing the Letter of Credit of Sonali Bank Limited:

In this stage, Sonali bank fills the bank-specified-form for issuing Letter of Credit. Generally
a Letter of Credit contains the following information and terms and conditions:
Charges;
Country of origin of goods;
Currency and amount ;

28

Date and place of the expiry of the Documentary Credits ;

Description of goods and quantity ;
Documents required for negotiation;
Instruction for negotiating bank;
Last date of shipment;
Letter of Credit Authorization (LCA) number, IRC (Import Registration Certificate)
number and Harmonized System (HS) code;
Mode of Carrying Air/Ship/Truck;
Name and address of beneficiary ;
Name and address of the advising bank;
Name and address of the applicant;
Name of the issuing Bank and Branch;
Negotiating bank preferably freely negotiable in any bank;
Number of Letter of Credit and date of opening ;
Payment Term-Sight ;
Period of Negotiation ;
Period of presentation ;
Port of Loading and port of Discharge;
Reimbursing Bank and payment mode;
Terms and conditions regarding Transshipment and Partial Shipment;

4.2.1.7: The Letter of Credit (L/C) Process:

The various steps involved in the operation of a letter of credit are described as follows.
Please refer to Figure below for an elaborate illustration.
1. The importer and exporter have made a contract before a L/C has been issued.
2. The importer applies for a L/C from his banker known as the issuing bank. He may
have to use his credit lines.
3. The issuing bank opens the L/C that is channeled through its overseas Correspondent
bank, known as the advising bank.
4. The advising bank informs the exporter (beneficiary) of the arrival of the L/C
5. Exporter ships the goods to the importer or other designated place as stipulated in the
L/C.
6. Meanwhile, the exporter also prepares his own documents & collects transport
documents or other documents from relevant parties. All these documents will be sent
to his banker, which is acting as the negotiating bank.
7. Negotiation of export bills happens when the banker agrees to provide him with
finance. In such case, he obtains payment immediately upon presentation of
documents. If not, the documents will be sent to the issuing bank for payment or on
an approval basis as in the next step.
8. Documents are sent to the issuing bank for reimbursement or payment
9. Issuing bank honors it's undertaking to pay the negotiating bank on condition that the
documents comply with the L/C terms and conditions.

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10. Issuing bank releases documents to the importer when the latter makes payment to
the former or against the latter's trust receipt facility.
11. The importer takes delivery of goods upon presentation of the transport (usually
shipping) documents.

4.2.1.8: Parties Involved in Letter Of Credit (L/C):

The Applicant :
The applicant is the party who approaches a bank in order to issue the L/C. Generally, the
applicant is an importer who reaches an agreement with the exporter before approaching
the bank to issue the L/C. The applicant is also normally obligated to reimburse the
issuing bank for any payments made under the L/C.
The Issuing Bank :
The bank issuing the L/C is known, as the issuing bank and it is usually the bank with
which the importer maintains an account. The issuing bank undertakes an absolute
obligation to pay upon presentation of documents drawn in strict conformity with the
terms and conditions of the L/C.
The Advising Bank :
The correspondent bank in the beneficiary's country to which the issuing bank sends the
L/C is commonly referred to as the advising bank. The advising bank simply advises the
L/C without any obligation on its part. However, the advising bank shall take reasonable
care to check the apparent authenticity of the credit that it advises.
The Beneficiary:
The beneficiary or exporter is the party entitled to draw payment under the L/C. The
beneficiary will have to present the required documents to avail payment under the L/C.
The Confirming Bank:
The confirming bank confirms that the issuing bank has issued a L/C. The confirming
bank becomes directly obligated on the credit to the extent of its confirmation and by
confirming, it acquires the rights and obligations of an issuer. The advising bank usually
does L/C confirmation or a third bank in the beneficiarys located.
The Negotiating Bank:
The bank that agrees to examine the documents under the L/C and pay the beneficiary is
called the negotiating bank. Typically, the advising bank is nominated as the negotiating
bank.

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Reimbursing Bank:
The bank nominated by the issuing bank to provide reimbursement to the negotiating
bank or the payee bank is referred to as the reimbursing bank.

4.2.2: Dollar & Travelers Cheque Endorsement:

Sonali Bank is an Authorized Dealer of American Express T/C. At the same time, they
can buy and sell T/C and dollar. Every morning they get a telex from Head Office, Which
carries the rate of the foreign currency transaction of the day. EXIM fix the rate by them.
At the end of the each month the branch uses to submit all supportive documents (all
foreign transactions documents and balance of the foreign currency) to the Bangladesh
Bank and their Head Office.

4.2.3. Foreign Remittance:

Foreign DD and receiving any bill from foreign country is known as foreign remittance.
The amount of foreign remittance is very significant in Sonali Bank.

4.2.4 Foreign Currency Account:

A Foreigner, a Wage Earner working in foreign country can open this account, but it is
possible to open a foreign currency (Dollar) account in Tongi Branch. The account holder
gets a cheque book against the account and has to mention the amount in respective
currency.

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Chapter-5
Functions of Foreign Exchange Operations Department:
Foreign Exchange Department performs many functions to facilitate the foreign exchange
transactions. These are:
Facilitating Import Trade
Facilitating Export Trade
Providing Funded and Non-funded Credit Facility.
Provide Non Commercial Remittance
Maintaining Foreign Currency Accounts
Selling of Foreign Currency Bond
Preparation and Submission of Statements
The above mentioned functions are done by three sections namely:

Export Section
Import Section
Foreign Remittance Section.

5.1: Export Finance:

In case of export finance is perceived as one of the important elements. It is linked to
nearly all the stages of conversion cycle- procurement of raw materials, processing of
goods, packing storage, transportation to the port, shipment to the buyer, assembling of
shipping documents & finally, collection of payments. The term Export Finance should
therefore mean moneys needed by an exporting farm at each stage of the conversion
cycles.

5.1.1: Export Financing Sectors of Sonali Bank:

Export financing can play a vital role in the development process of Bangladesh. With
earning on export we can meet our import bills. The export trade is always encouraged
because the major portion of foreign exchange earning is derived from export. Because of
shortage of adequate capital exporters have to come in contact with commercial bank and
financial institution to get finance from them. Sonali bank as a commercial bank provides
certain facilities to the exporters to boost up export earnings.
The traditional & non-traditional sectors in which Sonali Bank provides export-financing
facilities are as follows:

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Ready Made Garments in all sorts.

Jute manufactures
Jute - raw & meshta
Fish & Prawns.
Hides, Skins & Leather.
Tea
Fertilizer etc.

5.1.2: Export Financing System of Sonali Bank:

Bangladesh as a developing country depends mainly on foreign exchange earning for its
development activities. The major portion of foreign exchange earnings is derived from
export obviously, to boost export, government provide certain incentives to the exporters namely:
Export Financing
Development Financing
Export Credit Guarantee Scheme
Export performance benefits
Duty draw back
Rebate on duty & tax
Income tax rebate
Insurance premium rebate
Conditional cash subsidy to Garments Industry etc.

5.1.3: Pre-shipment & Post-shipment:

In Sonali Bank export finance is required by the exports at two stages namely
Pre-shipment & Post-shipment stages:
1. Pre-shipment: It is required to purchase of raw materials, to meet cost of production,
procurement of exportable goods, packing, transport, payment of insurance premium,
inspection fee, freight charges, ware housing etc.
2. Post-shipment: It is required by the exporters after actual shipment of goods in order to
bridge the period between shipment of the goods and receipts of sales proceeds from
abroad.
An exporter owns resource may not be adequate to meet all such expenses. Commercial bank
Sonali Bank provides credits to exporters at a consideration rate of interest as an export
promotion measure as per government directive.

5.1.3.1: Pre shipment financing in foreign exchange operations:

The classes of pre-shipment financing extended to the exporters by the Sonali Bank are as
follows:

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Export Cash Credit - Pledge: This facility is allowed for a short period. Under this
credit the exportable goods are kept under the effective control of bank either at
exporter's godown or bank own godown. In either of the cases, the bank engage full time
security (chowkider) to observe over the goods & the movement the goods are done under the
supervision of the bank who maintain its proper records through storage, delivery order,
godown registration etc.
Cash Credit - Hypothecation: This advance is allowed for a short period or 3 to 6 months
mainly to purchase raw materials or for procurement of exportable goods. So virtually the
goods are kept under the Export control of the exporter but by creating charge on the goods at
the time of disbursing credit. The bank has the right to take possession of the goods. The
exporter will submit stock report to the bank usually on monthly basis & the bank will verify
them.

Documents & Security to be obtained:

Export registration certificates
Bank usually charge documents to be signed by exporter or his / her duly
authorized agent.
Confirmed irrevocable export letter of credit or firm contract made by the buyer with the
exporter.
Insurance coverage
Collateral securities.

Packing Credit: This facility is generally extended when the goods become ready for
shipment for a very short period usually from the date of dispatch of the stock from the
godown up to the date of actual shipment of the goods that is for the transit period of
shipment for further purchase of raw materials or procurement of exportable goods by
exporter.

5.1.3.2: Back to back letter of credit:

Pre-shipment facilities are also credited in the form of back- to-back letter of credit. When the
beneficiary of an export letter of credit is not the actual manufacturer or producer of
exportable goods mentioned in the relative export letter of credit as securities with his / her
banker for procurement of exportable goods to enable him /her to execute the export letter of
credit and such letter of credit is called inland back to back letter of credit.

5.1.3.3: Precautions used by Sonali Bank to sanction pre-shipment credit:

Before making lien on the original export letter of credit all the terms and conditions should be
scrutinized so that no detrimental clauses including violation of foreign exchange
regulation and terms are included there in.
Expiry date of letter of credit should be properly recorded in the book and no drawing
is to be allowed against expired letter of credit.
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The credit worthiness or solvency of the foreign buyer as well as the exporters must
be ascertained before hand.
In case of mortgage of properties as collateral securities, the bank by engaging
lawyer together with valuation certificate from proper authority must scrutinize
the relative documents.
The exporter should arrange forward sale of foreign exchange loss at the time of
negotiation of export documents.
In case of packing credit, the export letter of credit and relative documents have to
submit in, such a way that the bank may not face any problem in negotiation of shipping
documents in due course.
To dispatch goods for shipment to post under packing credit the bank must verify
the shipping mark on the each packet or cartoon and the relative invoice.

5.1.3.4: Post-shipment Financing Foreign Exchange Operations:

Post shipment financing refers to the credit facilities extended to the exporters by Sonali Bank
after actual shipment of the goods against export documents. Sonali Bank generally finance the
exporters at post shipment stage after verifying the credit worthiness and export performances of
the exporters as well as the reputation and financial soundness of the foreign buyers
provided the shipping documents are drawn strictly in accordance with letter of credit
terms and in accordance with foreign exchange regulation in force.
Post shipment financing is extended to the exporters by the following terms:
Negotiation of export documents under letter of credit.
Purchase of askance bills drawn on D. A. basis.
Providing loan against export bills tendered collection.
Discounting of export bills.

5.1.3.4.1: Negotiation of export documents under letter of credit:

Most important and widely used method of financing export at post-shipment stage is negotiation
of export documents. After the shipment of the goods the exporter generally submits the
following documents to the bank for negotiation:
Bill of exchange.
Bill of lading or air way bill.
Commercial invoice - eight copies within these four original copies.
Custom invoice of importer's country.
Certificate of origin-original copy.
Packing list - eight copies within these four original copies.
Weight certificate.
Declaration of shipment to the insurance company.
Pre-shipment inspection certificate.
Quality control certificate when required.
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 Acknowledgement letter indicating received sample / approval letter.

Frightful letter.
Any other document if called for letter of credit.

5.1.3.4.2: Purchase of uses bills drawn on D.A. basis:

Sometimes export letter of credit stipulates payment at 30 to 40 months; the period is called
askance period. The bills drawn under this letter of credit is termed as askance bill. On
presentation of documents foreign buyers give written acceptance on the bill of exchange to
pay after the askance period. In dealing such documents the banker must take proper precaution to realize the proceeds in time.

5.1.3.4.3: Providing loan against export bills tendered for collection:

Export bills are sending abroad generally by banks on collection. Export bills not drawn under
letter of credit. Bills drawn under letter of credit but contains margin on the basis of banker
customer relationship with the exporter. While handling such documents the banker must remain
vigilant to refer the exporter proceed with a view to adjust the credit so extended. Against the
above collection documents bank may allow loans keeping substantial.

5.1.3.4.4: Discounting of export bills:

When the export bills are not drawn under letter of credit or the goods send on consignment
basis, the exporter may approach the bank for discounting the export bills on commission
basis. Bank generally does not accept such proposal excepting on exceptional cases. If the
exporters have very good credit worthiness and previous good export performance and foreign
buyers have also good report & good reputation for past transaction.

5.1.4: Export Form:

The customer, now issued by the authorized dealers, must declare all export of which the
requirement of declaration of exchange control manual of Bangladesh Bank applies on
theExport Forms. Disposal of Export Forms:
Origin : From custom authority to Bangladesh Bank (ECD) after shipment
Duplicate : From negotiating bank to Bangladesh Bank after negotiation.
Tripilicate: From negotiating bank to Bangladesh Bank after realization of the proceeds of
the export bill.
Quadruplicate: Retained by the negotiating bank as office copy.

36

5.1.5: Export Development Fund:

The main objective of developing export is to assure a continued availability of foreign
exchange to meet the import requirement of non-traditional manufactured items, this facility
is available to the non-traditional exporters, particularly newer exporters, exporters diversify
into higher value export and exporters diversify into new markets. An exporter identified
above is eligible on the basis of the conditionally stated below:

One must be an exporter of non-traditional manufacturing items.

The value added of these products could be 20% except in the case of garments where it
has to be 30% & above.
The loan should be utilized in the case of importing raw materials for manufacturing
the exportable products.
The exporter must have an export letter of credit.
One must create a back-to-back for importing raw materials.
The period of loan is 180 days.

5.1.6: Scrutiny of Export Document:

After the shipment of goods the exporters submit export documents to authorized dealer
for negotiation of the same. As bankers deal with documents only, not with commodity
they are required to be very much careful about the genuineness and correctness of the
documents evidencing shipment of the respective commodities. The bankers are to ascertain that
the documents are strictly as per the terms of letter of credit. Before negotiation of the export
bill, the bankers are to scrutinize and examine each & every document with great care.
Negligence in the part of the bankers may result in non-repatriation or delay in realization of
proceeds as incorrect documents may put the importers abroad into unnecessary troubles. The
scrutiny procedure is as follows:

5.1.6.1: Scrutiny of Draft or Draft of Exchange:

The draft should be drawn by the party indicated as the beneficiary of the credit i.e. the
exporter; drawee must be in accordance with the terms of the credit.The tenor and amount of the
draft be in conformity with the credit terms.The bill of exchange should be properly stamped if
necessary with the requisite value and the cost must be recovered from the drawers unless
it is provided otherwise in the letter of credit. The draft or bill must bear the correct date and
must be drawn or endorsed to the order of the bank. The drawer's signature must be verified.

5.1.6.2: Scrutiny of Invoice:

The physical description of the goods i.e. price, quantity, quality, markings etc. in the invoice
must correspond with the specifications in the credit.
If the credit stipulates a consular invoice, the requisite invoice should be furnished.
37

All copies must be signed and certified as correct shipper. If the credit stipulate for any other
particulars to be stated in the invoice these must complied with. It should not include
charges such as postage; cable etc. unless specifically authorized under the credit.

5.1.6.3: Scrutiny of Shipping Bill:

Transshipment and port shipment clauses in the The bill of lading should be a full set clean
on board ocean bill of lading, unless the credit stipulates otherwise. 'Received for shipment'
bills of lading must not be accepted unless permitted by the credit.
It must agree with the invoice as regards quantity and description of goods as well as in
respect of ports of shipment and destination. The bill of lading must also indicate where it is
'freight paid' (C & F, GIF) or freight payable at destination (FOB transaction).
shipping bill should be in accordance with credit terms and the provisions of the uniform
custom and practice.
Credit frequently stipulates for shipment not letter than a specified date. Bill of lading must
be examined to ensure that these are dated not later than the date mentioned.
Must be properly signed by or behalf of the carries, must be properly stamped
and must be endorsed, expect when the relative credit stipulate for bill of lading to order of a
named firm.
Dock shipment not permitted unless specifically authorized and covers by insurance.
Bill of lading must not be a stale one.

5.1.6.4: Scrutiny of Insurance:

Where insurance is to be effected by the beneficiary for GIF consignment, the policy
accompanying the documents should be examined to ensure:
That the insurance covers the merchandise for the value stipulated in the credit.
That the document is of the class stipulated in the credit.
That the insurance documents describe the merchandise covered and mention the name
of the carrying steamer. In case where 'on board' bill of lading are not presented the
following clause or words of similar indent must follow the name of the steamer' and /
or 'following steamer'.

That all risk stipulate in the credit are properly covered in the insurance
documents. When the credit stipulates that 'all risk' are be covered, it is not
sufficient that various risks are mentioned but a clause to the credit that 'all risk' are
covered, is required.
That the policy is in the name of the bank and the importer.
That the party designed in the documents to perform such act properly
countersigns the insurance document.
That the insurance document complies with the conditions of the letter of credit is in
negotiable form that it is endorsed by the party to when the loss payable, unless the
credit stipulates that the insurance must be issued 'loss payable to a specified party in
the country of destination'.

38

That the date appearing on the insurance document is not later than the date
appearing on the bill of lading.
That the insurance document covers transshipment when the bill of lading
indicates that transshipment would take place.
That the insurance claims are payable at the port of destination, That insurance
certificate / policy acknowledges the payment of the premium.

5.1.6.5: Scrutiny of other documents:

The other documents i.e. certificate of origin, packing list, weight / measurement certificate,
inspection certificate, survey report, quality control certificate etc. should be issued or signed
by the proper authorized and description of 'export - order' given in these documents not be
in contradiction to the credit terms.

5.1.7: Risk of export financing:

In the trade - there are so many risk factors involved. In banking sector - the bank face risk
basically from loans & advances and foreign exchange. In this section I discuss the risk of
Export Financing.
While there are many advantages to exporting it is not without risk. In deed there are often
factors present in international market, which make foreign exchange substantially more
risky than domestic ones, including the credit risk of non-payment or non-acceptance of the
merchandise by the buyer. For international sales, these risks are far more pronounced than
they are domestically. For these reasons Sonali Bank also accompanied with elements of
uncertainty some which are as follows:

5.1.7.1: Commercial risk:

Insolvency of overseas buyer, which result in non-realization of export proceeds. Failure of the
buyer to retire credit already accepted by him / her in case of askance bill within
stipulated period. Willful negligence of the importer to accept of pay bill or to accept goods for
no fault of the exporter.

5.1.7.2: Political risk:

Sudden out break of war revolution or civil disobedience in buyer's country. Imposition of
restrictions on remittance on any government action in the buyer's country which may block
or delay payment. Imposition of trade embargo or blockade against any country. New import
restriction on the buyer or cancellation of the license.
Additional handling transport or insurance charges due to interruption or diversion of
voyage, which cannot be recovered from buyer. Bankrupt or closure of a bank or stoppage of

39

operation of a bank may hamper repatriation of exports proceeds of letters of credit opened by
such a bank. Any other cause of loss occurring outside the exporter's country beyond the
control of importer or exporter.

5.1.7.3: Informational risk:

Often credit information on the importer is not available or at best sketchy because buyers and
sellers live in different socio-economic & political environment. It is much harder to judge
the financial strength, reputation, integrity of a buyer who is thousands of miles away and
belongs to a different culture. Moreover, many importers may have good reputation in their
own environment based on local value system; they may - never the less engage in some
surprising business practices when judged by a different set of standard.

5.1.7.4: Pre-shipment export credit risk:

Pre-shipment export credit risk involves the following additional risks:
There may be diversion of fund because of low interest rate.
Uncertainties relating to non-availability of new materials may hamper
processing of exportable products.
The exporter may not be able to make shipment within the stipulated time due to power
failure, strike, natural calamites etc.
The materials under back-to-back letter of credit may not reach well in time to allow
the exporter to process goods within the expiry date of original export letter of credit.

5.2: Import Finance:

All over the world there is no country, which can meet its requirements from its own
sources. Some imports raw materials, some finished goods & some food products or other
commodities. As it is in export & import are invariably conducted through commercial
banks. Sonali Bank is engaged to extend the facilities to the importers.
After getting the completed registration, application for opening letter of credit is made
through a bank where applicant has a current account. An importer is required to fill up
import application form & letter of credit authorization form & importer has to deposit margin
money to the bank from 10% to 40% of the import value, depending on the credibility of the
importer. After the letter of credit is established the exporter after executing the export,
submits the negotiable document through its bankers and in terms of exporters bank submit
the documents to the corresponding bank of the importer's bank in the country. If the documents
are found correctly fulfilling all the terms & conditions stipulated in the letter of credit the
corresponding bank of import's bank will realize payment that will debited to the importer's
account. In banking term this is known as LATR and the importer has to pay the LATR amount in
90 days with the bank interest rate.

5.2.1: Import financing sectors of Sonali Bank:

40

Sonali Bank is the major financer of import business in our country. In extend credit, grant
and other facilities Sonali Bank finance to the following sectors:
Machinery & transport equipment.
Petroleum & petroleum products
Textile, yarn, fabrics, article & related products
Chemicals
Iron & steels
Cereal & cereal preparations
Dairy products & eggs
Other including loans & grants.

5.2.2: Import financing system of Sonali Bank:

Registration of import
Income tax registration certificate
Partnership deed in the cases of partnership concern
Certificate of registration with the register of joint stock companies
Articles & Memorandum of association in the case of limited companies.
Nationality certificate & Bank certificate
Ownership documents in place of business
Trade license from the relevant authority.
Survey clearance from the relevant authority
Other documents prescribed in the import policy.

5.2.3: Import Registration Certificate (IRC):

In case of import IRC is the first necessity for the importer. The IRC is not required for
import goods by government departments, Local authorities, statutory bodies, recognized
educational institutes, Hospitals. In addition registration is not required for import goods,
which do not involved remittance of foreign exchange like -medicine, reading materials etc.
can be imported without IRC by the users within monetary limit.

5.2.3.1: Procedure for obtaining IRC:

For IRC the interested person / firm's submit the application along with the following
documents directly to the Chief controller of Import & Export respective zonal office (CCI&E):
Income tax registration certificate.
Nationality certificate.
Certificate from chamber of commerce & industry registered trade association.
Bank solvency certificate.
.
Copy of trade license.
Any other document if required by CCI&E.
41

On receiving application the respective CCI&E office will scrutinize the documents,
conduct physical verification, and issue demand note to the prospective importers to furnish
the following documents through their nominated bank:
Original copy of treasury deposited as IRC fees.
Assets certificate.
Affidavit from 1s'class magistrate.
Rent receipts.
Two passport size photograph.
Partnership deed in case of partnership firms.
Certificate of registration
Memorandum & Articles of association in case of limited company.
After securitization and verification the nominated bank will forward the same to the
respective CCI&E office with forwarding schedule in duplicate through banks representative.
CCI & E then issues import registration certificate to the applicant.

5.2.4: Import Procedure:

Imports & Exports (control) Act 1950 regulates the import & export trade of the country.
There are a number of formalities, which on 'importer has to fulfill before import goods. The
importer follows the following steps:
The buyer & the seller conclude a sales contract provided for payment by
documentary credit.
The buyer instructs his / her bank i.e. issuing bank to issue a credit in favor of the seller
i.e. beneficiary.
The issuing bank asks another bank usually in the country of the seller, the advice
or confirms the credit.
The advising or confirming bank informs the seller that the credit has been issued.
As soon as the seller receives the credit and is satisfied that he / she can meet its terms
& conditions, he / she is in a position to load the goods & dispatch them.
The seller then sends the documents evidencing the shipment to the bank where the
credit is available i.e. the nominated bank. This may be the issuing bank, or the
confirming bank, bank named in the credit as the paying, accepting or negotiating
bank.
The bank if other than the issuing bank, sends the documents to the issuing bank, the
issuing bank checks the documents and if they meet the credit requirement.
The payment in accordance with the terms of the credit either to the seller if s/he has
sent the documents directly to the issuing bank or to the bank that has made funds
available to him/her in anticipation.
Or, Reimburses in the pre-agreed manner the confirming bank or any bank that has paid,
accepted or negotiated under the credit.
The bank checks the documents against the credit. If the documents meet the
requirements of the credit, the bank then pay, accept or negotiate accordingly to,
terms of credit. In case of a credit available by negotiation, issuing bank or the

42

confirming bank will negotiate with recourse; another bank including the
advising bank has not confirmed the credit, which negotiates will with recourse.
When the documents have been checked by the issuing bank and found to meet the
credit requirements, they are released to the buyer upon payment of the amount
due or upon other terms agreed between importer & the issuing bank.
The buyer sends transport documents to the carrier who will then proceed to deliver
the goods.

5.2.5: Import Scrutiny:

The import bills consist of the following documents & the order of their scrutiny should be as
below:
Forwarding schedule of negotiating bank.
Bill of exchange.
Invoice.
Bill of lading
Insurance documents
Certificate of origin
Lodgment:
Intimation should be given to the party in time.
Conversion of foreign currency in to Bangladesh Currency.
Entry in PAD (payment against document) register
Entry in Letter of Credit opening register by rounding the letter of credit number with
date.
Scrutinize the shipping documents meticulously.
Inform the importer to deposit balance amount of letter of credit and to release the
necessary documents.
Enter the shipping documents in inward foreign bills register.

5.2.6: Import Bills Retirement:

Import bills will be retired in the bank through following ways:
Banker will prepare & pass retirement vouchers.
Importer will deposit the claim amount.
Certifying Invoices.
Passing & prepare the vouchers.
Entry in the register.
Endorsement in the Bill of Exchange and Transport documents i.e. Bill of
Lading; A. W.B.; T.R. etc.
43

Accounting treatment of voucher passing:

Party's A/C ..............................Dr.
Margin on import A/C. ................Dr.
PAD A/C.Cr.
I.A. Interest & other charges A/C... ... .Cr.

At the end of the total procedure, taking the retirement of import bills or clearing certificate
from the bank, the importer will clear the goods from the port through the clearing &
forwarding agent.
On the other hand, completing the above all steps the issuing bank will prepare "foreign
exchange transaction schedule" and send one copy to international division of Head Office
and another one copy to reconciliation.

5.2.7: Risk of Import Financing:

In the trade - there are so many risk factors involved. In banking sector - the bank face risk
basically from loans & advances and foreign exchange. In this section I discuss the risk of
import financing.
In international trade transaction takes place between buyers and sellers living in different
socio-economic and political environments. There may be abrupt changes in socio-economic or
political situation in the buyer's country or in the seller's country. Even the exchange value of
currencies of the two countries had gone so much down that they were not acceptable or
exchangeable in international market. More over the importer or the exporter may not be
able to comply with the terms of credit for some reasons. Therefore, risk inherent in all
credits. The bank have to consider following risk in financing the import procedure:-

5.2.7.1: Commercial risk:

Violation of the requirement of letter of credit authorization or letter of credit:
Shipment effected before authentication of the letter of credit authorization from by the
nominated bank and registration with the Bangladesh bank, whenever necessary and before
opening of letter of credit or after expiry of the validity of the letter of credit authorization or
letter of credit shall be treated as import in contravention of this order. Letter of credit
authorization obtained in the basis of false or incorrect particulars or by adopting any
fraudulent means shall be treated as invalid and void.
Import against indent and Performa invoice: Letter of credit may be opened against and
indent issued by a local registered indenter or against a Performa invoice issued by a foreign
manufacturer or seller or supplier.

5.2.7.2: Political risk:

In addition to the credit and commercial risk we have outlined, international transaction
such as import financing take on the whole new dimensions of political risk. They are as
follows:

44

Sudden outbreak of war, revolution, coups or civil disobedience in the seller's country.
Imposition of restriction on remittance.
Imposition of trade embargo or blockade.
New import restriction on the buyer or cancellation of the license.
Additional handing transport or issuance charges due to interruption or diversion of
voyage, which can't be recovered from the buyer.

5.2.7.3: Informational risk:

There may be informational risk inherent in import financing on the importer because of
shortage of required information. So it is much harder to judge the financial strength,
reputation and integrity of a seller or buyer who is thousands of miles away and belongs
to a different culture.

5.3: Foreign Remittance:

The word Remittance originates from the word remit which means to transmit money/
fund. In banking terminology, remittance means transfer of fund one place to another.
When money transferred from one country to another, this is called Foreign Remittance
Foreign remittance is the sums of foreign currency to a distance from one place another place
i.e. country to country. The person who is the receiver of the remittance is remittee. The person
who is the sender of the remittance is remitter or remittor. There are two types of foreign
remittance, which are as below:

Foreign inward remittance

Foreign

outward

remittance

5.3.1: Foreign Inward Remittance:

Inward foreign remittance means Remittance received from abroad. In other words
remittance coming into our country from another country by the remitter by way of
permissible banking channel through freely convertible. Sonali Bank Foreign Exchange
Corporate branch is receiving from abroad against which the authorized dealers making payment
in local currency to the beneficiaries may be termed as foreign inward remittance.

5.3.1.1: Mode of inward remittances:

The term inward remittances includes not only remittances by TT., MT., Drafts etc. but
also purchases of bills, purchases of drafts under travelers letter of credit and purchases of
travelers cheques. Foreign currency notes against which payment is made to the beneficiary
also a part of inward remittances. Thus the following are the mode of inward remittances:
TT: Telegraphic Transfer.
MT.: Mail Transfer.
FD: Foreign Drafts.
TC: Travelers Cheque.
45

 Foreign currency notes.

Purpose of inward remittance:
The purpose of remittance is of various reasons. Such as:
For family maintenance.
Realization of exports proceeds.
Gift.
Donation
About Form-C":
The authorized dealer should obtain 'Form - C' from the beneficiary to know the purpose of
the remittances in all cases and they are to submit the "Form - C' to Bangladesh Bank along
with the monthly returns where the proceeds of the remittances is TK. 5000/= & above.
'Form - C' is a prescribed declaration form & this 'Form -C' is to be filled up and signed
by the beneficiary himself.

5.3.1.2: Payment procedures of MT. & PO. Drawn on Sonali Bank:

The above investments that are drawn on Sonali Bank Foreign Exchange Corporate Branch
may be paid on the spot before making payment the following procedures to be observed by the
authorized dealer:
To obtain Form-C.
To verify the signatures of the instrument.
To convert the foreign currency into Bangladesh TK. with O.D. (On Demand Transfer)
buying rate prevailing on the date.
To make entry in TTs, drafts & Mails received register.
To prepare FET schedule and to send first five copies of FET along with vouchers to
international division, Head Office, Dhaka.
Payment procedure of T.T.:
To verify the 'test number'.
To inform the beneficiary for submission of "Form - C".
To confirm from issuing bank or reimbursing bank.
To covert of foreign currency into Bangladesh currency with T.T.
To make entry in T.T.s, drafts, M.T.s, received registration.
To prepare vouchers.
To prepare FET schedule.
Purchase of Drafts & Cheques:
Authorized dealer may purchase drafts & cheques which are not drawing on Sonali
Bank at the request of the beneficiary. Procedures of purchase are as below:
To obtain an application or undertaking from the beneficiary with 'Form C
To verify the signature of the drafts (if possible).
To make entry in the register for drafts & T.C. purchased.
To convert foreign currency into Bangladesh currency.
To prepare voucher.

46

To prepare FET schedule.

To send the instrument for collection.

Collection procedure of drafts & cheques:

To make entry in foreign Bills Collection Register.
To prepare forwarding schedule in quadruplicate.
To prepare vouchers on realization of proceeds i.e. on receipt of advice from the
collecting bank.
Payment of traveler's cheque (TC):
To checkup the custom declaration (if any).
To consult with purchase agreement (if any).
To obtain signature on TC and to verify the same with the previous signature of the
beneficiary of the TC.
To make entry in register for TC & drafts purchased.
To convert foreign currency into Bangladesh currency.
To prepare FET schedule.
To send the TC for collection.
To prepare the vouchers.
Payment of foreign currency notes:
To check the custom declaration (if any).
To made entry in (kateha) raw register.
To convert foreign currency into Bangladesh currency.
To prepare vouchers.
No FET schedule is required to be prepared & sent to head office .

5.3.1.3: Cancellation of inward remittance:

In the event of any inward remittance which has already been reported to the Bangladesh
Bank being subsequently cancelled, either in full or in part because of non-availability of
beneficiary. Authorized dealers must report the cancellation of the inward remittance as an
outward remittance of "Form-T/M". Required documents are:
The date of return in which the inward remittance was reported.
The name & address of the beneficiary.
The amount of the purchase as effected.
Reasons for cancellation.
Reporting to Bangladesh Bank:
On the last working day of each month the transaction during the month to be reported to
Bangladesh Bank through the following schedule:
Schedule -J-l / 0-3 for TK. 5000 & above.
Inward remittance voucher-1/04 for below TK. 5000.

5.3.2: Foreign outward Remittances:

47

The remittance in foreign currency which is being made from our country to abroad, is
known as foreign outward remittance.

5.3.2.1: Mode of outward remittance:

Thus the following are the Mode of outward remittances:

TT. Telegraphic Transfer.

MT: Mail Transfer.
FD: Foreign Drafts.
PO: Payment Order
TC: Travelers Cheque.
Foreign currency notes.

5.3.2.2: Approval of Bangladesh Bank:

Bangladesh Bank provides permission or approval for outward remittances to the applicants
who are to lodge an application for the purpose on the following prescribed forms with an
authorized dealer who forwarded the same to Bangladesh Bank for approval:

The IMP form (cover remittances for imports).

Form T/M (Traveling & Miscellaneous).
Issuance procedure of FD, MT. & TT.:
To prepare the instrument.
To make entry in DD, MT, TT issued register.
To prepare draft advice in duplicate one for drawee bank & one for reimbursing bank.
To make entry in draft advice dispatched register.
To send reimbursement authority in case of MT & TT.
T o prepare FET schedule.

Issuance procedures of traveler cheque:

To verify the approved T / M form or Bangladesh Bank permit.
To issue TC by obtaining signature of the purchaser on the TC.
To endorse in the passport.
To prepare FET schedule.
To make entry in the travelers cheque issue register.
The TC issuing slip of the issued TC to be sent to that bank (whose TC issued)
With reimbursement instruction.
Issuance procedure of foreign currency notes:
To verify the approved T.M form or Bangladesh Bank permit.
48

To issue foreign currency notes by endorsing in the passport.

Voucher preparing with accounting treatment

5.3.3: Home bound remittance:

More than 40% of home bound remittances are routed through Sonali Bank for its excellent
personalized services and wide network of foreign inlets and domestic outlets. Remittance can be
sent to all the 1186 local branches of the Bank spreading over the urban and remote rural areas of
Bangladesh. To facilitate home bound remittance the Bank has two subsidiary companies, one in
the USA and another in the UK. Besides, it has one representative office in Saudi Arabia and 23
agency offices in other Middle East Countries.
Sonali Bank has made arrangements to deposit/pay remitted money to the beneficiaries within 48
hours on receipt of the remittance from abroad.
Facilities for wages Earners:
Bangladeshi national/Bangladesh origin dual citizen working abroad may open Foreign
Currency account (F.C. A/C ) in US Dollar and Pound Sterling without initial deposit.
Nominee can operate the account
Interest is paid on F.C. A/C
Balance in F.C. A/C can be utilized for import of goods
Balance available in the F.C. account may wholly or partially be sent abroad.
Foreign currency brought in by Wage Earners can be deposited in the F.C. A/C
Wage earners Development Bond in Taka can be purchased from the balance of F.C. A/C
Non-Resident Foreign Currency A/C (NFCD A/C) can also be opened by Wage Earners.
F.C. A/C & NFCD A/C may be maintained as long as the account holder desires.
These accounts can be opened from abroad on submission of required papers duly attested by
our Embassy/ Branch/ Representative office abroad.
Monthly statement to Bangladesh Bank:
On the last working day of each month, the transaction of outward remittance during the
month to be reported to Bangladesh Bank.
Observation of Sonali Bank Foreign Exchange Corporate Branch of F.E.D.:
Foreign Exchange division is very efficient margin of letter of credit. The branch
achieved the target on export & import.
Strategic Planning
Strategic planning helps to guide the directions Sonali Bank management takes
for the future. The first step in strategic planning is an assessment of the banks
strengths and weaknesses. Some common criteria to assess strengths and
weaknesses are as follows:
Profitability;
Competitiveness;
Efficiency;
Flexibility;

49

 Risk.
Subsequent to evaluating strengths and weaknesses, SB management can consider
alternative marketing strategies.

5.3.3.1: Marketing Planning

With strategic plan in hand; bank management can proceed with the development of a
marketing plan. The marketing plan should be compatible with and contribute to the
strategic plan. From this perspective, two aspects of marketing planning are product
portfolio analysis and intangible services.
Intangible services relate to the fact that financial products are services rather than goods.
The intangible nature of services presents difficulties in their promotion and sale. One
way to overcome this dilemma is to associate the service with a tangible object. Another
approach is to divert attention away from the intangible service and toward the
relationship between the banks employees and the customer. The bank personnel are
tangible and customers become their personal clients. You are not receiving a nameless,
faceless service but a friendly, helpful salesperson.

5.3.3.2: Organizational Structure

Organizations typically either have a functional-oriented or market-oriented management
structure. As a function-oriented Sonali Banks structure is designed on the basis of
traditional lines of banking business, such as loans, investments, trust, and operations. It
is a formal structure that is highly specialized and centralized and has a lengthy chain of
command. By contrast, a market-oriented structure is market driven and therefore,
evolves subject to the needs of customers.
It is essential that market strategy precede organizational structure issues. Reversing this
order of decision-making would unnecessarily constrain management activities.
Organizational structure should be adapted to fit the competitive needs of the bank and
not the other way around. As the strategy and structure of an organization change over
time the reward system in terms of play promotion, benefits, etc., should be adapted to be
consistent with the new direction of the bank.

5.3.3.3: Market Segmentation:

Market segmentation is an essential part of bank marketing strategy. Customer demands
in retail markets usually vary with demographics (e.g., age, sex, family size, occupation,
education, race, religion and income), but other characteristics such as social class,
lifestyle, and attitudes can also be important. In a corporate market, company size,
products, location, extent of credit needed. And other financial service support
requirements will affect customer demands.
Sonali Bank, Foreign Exchange Branch segments its market on two criteria:
Occupation (Businessman or High Income Occupation)
Institution (Business Institution)

50

Another important set of decisions related to market segmentation is market positioning.

So you want to be an international, national, regional, or community bank. Other
questions arise with regard to pricing personnel distribution or delivery, and profitability.
Donnelly, Berry, and Thompson propose the following minimal level of institutional
positioning.
Relationship Bank;
Investment Bank;
Everywhere Banking.

5.3.4: Positioning Strategy:

The Foreign Exchange Branch of Sonali Bank is trying to take position in the mind of the
target market through using marketing tools appropriately.

Product
Strategy

Promotion
Strategy

Distribution
Strategy

Price
Strategy

51

Figure: Positioning Development

5.3.5: Target Market of the Branch:

The branch has to sell both liabilities (such as various deposits) and assets (credit and
advance). So it has two sided target market what are given below.

Target Market

Liabilities Market

Assets Market

Individual person

Business Man

Sole proprietorship firm

Business Institution

Partnership firm

Exporter and

Private Limited Company

Importer

Public Limited Company

Project Investor

Bank Employee etc.

Others

Bank Employee etc.

52

Pure services

5.3.6: Product of The Branch:

The Foreign Exchange Branch of Sonali bank plays with a number of products which are
assets, liabilities, pure service oriented.

Product of the Branch

Assets oriented
i. Business loan
ii. Consumer loan
iii. Advance
iv. Car loan
v. Housing loan
vi. Various project
etc.

Pure Services
Liabilities oriented
Accounts of Deposit
i.

Current
Account
ii.
Saving
Account

i.

Collection
Cheques/bills/
documentary
outstation
ii.
Issuance
duplicate DD,
PO
iii.
Others.
53

Chapter-6
Findings and Suggestions
6.1: Major Findings:
During the internship period following findings have been gained from the study on
Foreign Exchange Operations of Sonali Bank:
Sonali Bank is playing an important role toward the growth and economic development
of Bangladesh.
There are three types of functions of foreign exchange operations, which are: Export
Finance, Import Finance and Foreign Remittance
It is discovered that the total Foreign Exchange Operations are increasing in a great
number.
The liquidity & profitability condition of the Foreign Exchange Operations is standard
With wide network of branches at home and also a large number of correspondent banks
worldwide it is singularly handling the largest volume of export-import business including
homebound remittances.
The total Assets of the bank of the year 2013 was 8 52,223,550 as against 753,949,686 in
2012.
The total Deposit of the Bank for the year 2013 was TK. 6 85,894,589 as against TK.
599,293,702 in 2012.

54

The total Advances of the Bank for the year 2013 was TK. 3 43,450,526 as against TK.
378,147,056 in 2012.
The total Shareholders equity of the year 2013 was 50,008,685,720 as against
22,389,999,962 in 2012.
Note: all amount are provided in thousand.
The Net Profit of the Bank for the year 2013 was TK. 3,580,184. It is auspicious that The
Earning per share of the Bank of the year is 31.82.
Sonali bank Staff College provides training facilities to its medium and junior level
officers of the bank and also provides executive development and internship program.
It was discovered that the whole Branch is computerized and maintained by updated
banking software named CBS (Core Banking System), which is controlled by Head
Office.
Through this software each of the transaction is stored regularly in the head office server.
It has prevented internal fraudulent if anybody wants to do.
Sonali Bank is the leading bank of Bangladesh but the official appearance of the bank is
not up to the mark.
It is identified that few employees of the bank are not focused on the customer
satisfaction, which is not appreciable. There are lot of paper-based works still exist.
Following chart is being provided to make a clear concept about of the situation of
foreign exchange operations departments transaction amount of the year 2012 and 2013
Particulars

2013 (TK)

2012 (TK)

Draft Payable

3,479,603,618

4,675,326,116

Govt. Draft Payable

Foreign L/C Opened
Foreign Bills & Cheque
Collection
Foreign DD Purchased/TT
Collection
Foreign
Draft/Travelers
Cheque Issued A/c
Net Exchange

9 1,420,881
7 ,402,954
1 ,383,849

29,676,495
4,506,317

162,609

1,324,545

3 6,650,060

8,279,073

2,144,481,010

212,269,518

6.2: Suggestions & Recommendations:

6.2.1 Suggestions:

To provide online services all over the country immediately.

To directly credit the foreign remittances through online banking.
To easy procurement & procedures in respect of all transaction.

55

To strengthen sufficient logistic supports.

To develop customers service with harmony.
Prompt customers service is needed, like one stop services.
To recruit sufficient skilled manpower with sound computer literacy and English
proficiency.
To motivate the human resources for mobilizing deposit, reduction of overdue etc.
To analyze & build-up consciousness of competitors strategies.
To enhance employees remuneration comparing to others.

6.2.1: Recommendations:
After surveying and analyzing the study following recommendations are provided for
Sonali Bank.
The Bank should develop an effective database needed for analyzing Foreign
Exchange Business.
The Bank should develop sectors wise export-financing facilities.
Letter of Credit (L/C) opening system for the importer should be easier.
In many cases, the foreign banks want confirmations from other foreign banks with
which this bank has correspondence. This proves the poor financial condition of our
banking sector and also our country. Banks should try to improve this situation.
The bank should arrange more training programs for their officials. Quality training
will help the officials to enrich them with more recent knowledge of foreign
exchange activities.
As the clients are not in favor of introducer system that currently present, if possible
the rule of introducing to open an account should be changed. Because many people
face different problems to arrange an introducer in the time of opening accounts.
Margin and commission on L/Cs varies from customer to customer. A few customers
are allowed to open L/C even with nil margin and fees commission. I think the bank
should review the customer transaction behavior for a period of time and should
develop a certain policy in this regard.
In case of L/Cs, sometimes customers insist on giving their payments though their
documents are found discrepant. In some cases bank has to give payment to these
customers for different reasons. But it lessens the credibility of the bank. I think the
bank should be strict as possible about giving payment against discrepant documents
without hurting the customers.
The manager may also provide sufficient software facilities to the employees in the
foreign exchange department of this branch.
The manager should take some promotional activities so that the businessmen will
feel interest to open their L/C in the foreign exchange department. As a result, the
manager can successfully expand the activities of foreign exchange department of
this branch.
In foreign exchange department it is required to communicate with foreign banks and
International Division more frequently and quickly. To make the process easily
modern communication media for example e-mail, Fax, Internet etc. should be used
in Sonali Bank.

56

Up to date banking software should be use to give better service to the customers.
The Software in General Banking as well as foreign exchange should be upgraded.
The valuation of the property should be calculated by the surveyors.
Online Banking should be provided for fast services.
Manpower should be increase in foreign exchange section.
For selling their products this branch need strong marketing to sell their products.
Regular Performance Appraisal and assuring promotion/reward depending upon that
will resist the employees switching tendency.
Space shortage is another major problem for decoration. It is congested than other
commercial banks. Management should consider this for external marketing.

Chapter-7
Conclusion and References
7.1: Conclusion:
It has been great privileged to learn many things from the Foreign exchange operations.
The Banking arena in recent time is one of the most competitive business fields in
Bangladesh. As Bangladesh is a developing country, a strong banking sector can change
the socio economic structure of the country. So we can say, the whole economy of the
country in linked up with its banking system. There are 54 banks in Bangladesh in which
38 are indigenous commercial Banks. Sonali Bank is the largest nationalized commercial
Bank of Bangladesh. This bank performs hundreds of important activities both for the
public and for the government as a whole. It has an outstanding bearing to thrive our
business sector. It has strong performance on General Banking, Loans & Advances,
Industrial credit and foreign Exchange. In this paper I have tried to highlight Foreign
Exchange Business of Sonali Bank. Its pioneer role in handling foreign trade and foreign
exchange transactions ever before independence of the country still remains unchallenged.
With wide network of branches at home and also a large number of correspondent banks
worldwide it is singularly handling the largest volume of export-import business including
homebound remittances.
The effective and efficient Foreign Exchange Business of the Bank helps in the continuous
growth and progress of national economy.

7.2: References:
57

Foreign Exchange and Financing of Foreign trade

-Syed Ashraf Ali (1995)
A Text book on Foreign Exchange 1st edition
-L.R.Chowdhury (2000)
A Hand Book of Bank Management-S.A.Sakoor
Chowdhury, Dr. T.A., an Overview of Banks and Their Services. Reading Materials on
Theory & Practice of Banking (B-101), Bangladesh Institute of Bank Management
(BIBM), 2000.
Gulshan, S.S. & Kapoor, G.K. Banking Law and Practice, S Chand & Company, New
Delhi, 1994.
Annual Report of Sonali Bank (Published-2014)
Annual Report of Sonali Bank (Published-2013)
Monthly Statement of Sonali Bank, March 31, 2014
Lecture Materials from Sonali Bank Staff College (SBSC).
The Daily Prothom Alo-March 05, 2014.

58