American International University-Bangladesh (AIUB)

A PRESENTATION ONForeign Exchange Management of Uttara Bank Ltd.Supervised By Mr. M. Taseen Chowdhury Assistant Professor Department of Accounting and Finance Faculty of Business Administration Presented By Zubayer Rahman, Tanim ID # 06-07501-3 Major: Accounting & Finance

Date : 20.05.2010

FOREIGN EXCHANGE MANAGEMENT OF UTTARA BANK LTD

Background of the study Rationale of the Study Statements of the Problems

FOREIGN EXCHANGE MANAGEMENT OF UTTARA BANK LTD

Limitations of the study Objectives of the Study

Main Objective Other Objectives

Methodology of the study

AN OVERVIEW OF UTTARA BANK LIMITED

Uttara Bank started banking business as Eastern Banking Corporation in 22 June 1965. Eastern Banking Corporation was nationalized under the Bangladesh Banks Nationalization Order 1972 and its name was changed to Uttara Bank. It was transformed into a limited company on 15 September 1983. Today Uttara Bank is one of the largest and oldest privatesector commercial bank in Bangladesh Now its operating 211 branches at home and 600 affiliates worldwide to create efficient networking and reach capability.

OVERVIEW OF ECONOMIC AND BANKING SECTOR IN BANGLADESH

Financial institutions play an important role for the economic development of any country. The main objective of these institutes is to accumulate the scattered deposits and invest in a productive manner so that some sort of value is added. The banking sector of Bangladesh categories of scheduled banks. comprises four

a. State-owned commercial banks (SCBs) b. State-owned development finance institutions (DFIs) c. Private commercial banks (PCBs) d. Foreign commercial banks (FCBs)

OVERVIEW OF ECONOMIC AND BANKING SECTOR IN BANGLADESH

Aggregated Balance Sheet

Assets Liabilities

FOREIGN EXCHENGE MANAGEMENT OF UTTARA BANK LTD.

Foreign Exchange Operation What is Foreign exchange ?

FUNCTIONS OF FOREIGN EXCHANGE DEPARTMENT OF UTTARA BANK LTD.

Exports Imports Remittances

FUNCTIONS OF FOREIGN EXCHANGE DEPARTMENT OF UTTARA BANK LTD.Few commonly used documents in foreign exchange

Documentary letter of credit Bill of Exchange Bill of lading Commercial invoice Certificate of origin of goods Inspection certificate Packing list Insurance policy Proforma invoice/indent Master receipt G.S.P certificate

IMPORTImport is purchase of foreign goods and services by consumers, firms & Governments in Bangladesh. An importer must have import registration certificate (IRC) given by chief controller of import and exports (CCI & E) to import any thing from other country.

HOW TO IMPORT THROUGH UTTARA BANK

Import procedure Import Mechanism

Importers application for L/C limit/margin Opening of letter of credit by Uttara Bank Liability of Issuing Bank Advising of Letter of Credit Advising Banks Liability Adding confirmation Amendments to Letter of Credit Settlement of Letter of Credit Settlement by payment Settlement by acceptance Settlement by negotiation Payment procedure of the import documents

EXPORT

Practically by the term export we mean carrying out of anything from one country to another. From the Bankers point of view- export means sending of visible things outside the country for sale. Export trade plays a vital role in the development process o an economy.

EXPORT PROCEDURERegistration of Exporters Securing the Order Signing the contract Procuring the materials Shipment of goods Foreign documentary bills for collection Export Bill Security Sheet Settlement of local bill Mode of payment of export bill under L/C Back to back Letter of Credit Defective points or clauses appear in the master L/C Payment of back to back Letter of Credit

PERFORMANCE OF UTTARA BANK LTD. IN FOREIGN EXCHANGE MANAGEMENT(Figure in million Tk)

Particulars Authorized Capital Paid-up Capital Reserve fund Deposits Loans and advance Investments Gross Income Gross Expenditure Net profit/loss Foreign Exchange business a. Export b. Import No. of Share holders

2005 200.0 99.8 1765.2 36891.9 42062.2 10062.1 4265.0 2650.4 142.6

2006 1000.0 199.7 1885.8 39360.2 45217.0 9564.5 4435.1 3153.2 248.8

2007 1000.0 399.3 2054.2 43586.4 52860.3 14455.8 5020.2 3554.0 409.5

2008 1600.0 798.6 2890.2 50817.0 58444.3 11181.3 6313.5 4007.9 1138.5

18191.8 23092.4 5351

18133.9 22630.7 5390

14784.5 25407.9 12467

15039.6 31146.9 27228

PERFORMANCE OF UTTARA BANK LTD. IN FOREIGN EXCHANGE MANAGEMENTImport businessYear2005 2006 2007 2008(Figure in million Tk)

Import23092.4 22630.7 25407.9 31146.9

Export BusinessYear2005 2006 2007 2008(Figure in million Tk)

Export18191.8 18133.9 14784.5 15039.6

PERFORMANCE OF UTTARA BANK LTD. IN FOREIGN EXCHANGE MANAGEMENTExport and Import side by sideYear2005 2006 2007 2008

Import23092.4 22630.7 25407.9 31146.9

Export18191.8 18133.9 14784.5 15039.6

Sources of fund Uses of funds

FINDINGS AND ANALYSIS

Insufficient usage of modern facility like communication technology Little application of modern technology such as computer and Internet Poor condition of balance of payment Lack of enthusiastic scheme for exporter and importer Improper allocation of employees Lack of skilled employee Absence of attractive remuneration package Proper location should be selected for establishing a branch Network of corresponded Banks is poor Non-cooperation of government bodies Lack of fair entrepreneur class Knowledge of entrepreneur regarding foreign trade policy is very poor

RECOMMENDATION

Formation of new marketing strategy. Set up various incentives to increase remittance. Effective and efficient initiative to recover the default loans. Attractive incentive package for the exporter. Effective training system for employee. Establish e-banking in all brunches. Uttara Bank should be more liberal in post shipment finance. Provide foreign market reports to its clients. Segregation of international trade transaction. Dedicated foreign exchange division. The request of credit facilities in the form of L/Cs, PADs should be assessed by separate department. Foreign trade department will not create any additional credit.

CONCLUSION

Uttara Bank Limited (UBL) has achieved outstanding operational performance in 2008 by posting laudable growth in Capital, Assets, Deposits, Loans and Advances and Profit. Classified loan of the Bank is also reduced significantly to 8.78% from 10.03% (Period 2008). Uttara Bank has potential to play more significant role in the arena of financial sector. To increase the in foreign exchange business the management of Uttara Bank Ltd. should take appropriate measures to eliminate the drawbacks regarding foreign exchange

Bibliography

Annual report of Uttara Bank Ltd. for the year 2008, 2007, 2006, 2005. Website: www.uttarabank.com Choudhury, Dr. T.A, Modes of Payment in International Trade, Reading Materials on International Trade & Finance (E-102), Bangladesh Institute of Bank Management (BIBM) Andley, K.K & Mattoo, V.J, Foreign Exchange Principles & Practices, Sultan Chand & Sons, New Delhi, 1996. Guide lines for Foreign Exchange Transaction, Bangladesh Bank. Vaish M.C, Money, Banking and International Tr.