Introduction of the study

Now the world is very much competitive and the banking sector of Bangladesh has grown day by day. As a financial institution, most of the banks perform some common functions but there is some difference between conventional banking and Islamic banking. So every body has to be expert in his field in both practical knowledge and theoretical knowledge. As II ! aims is to build future magnate with the practical knowledge of economic field of our country, Internship course and its report is a significant aspect in the direction of accomplishing the goal. It is a systematic process for gathering, recording and analy"ing of data about the topic that a student goes to learn on the program. #he aim of this internship report is to connect practical knowledge with theoretical aspects. Being a student of BBA with ma$or in %inance & Banking I have completed my internship from Shah$alal Islami Bank 'imited, (hatungong Branch, !hittagong. )uring my internship period, I have tried my best to use the opportunity to enrich my knowledge on banking system. *y findings were mostly related to the %oreign +xchange, as I have been working under this department. Beside this, I came many other findings, which are reflected through this internship report.

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Objectives of the study

#he ob$ective of the study is to gather practical knowledge regarding over all Islamic Banking system and its operations. 5owever my targeted area is know about the details operation of %oreign +xchange on S6IB'. So I tried my best to gather practical and over all idea about %oreign +xchange on S6IB'.

The Main Objective, #o get a good understanding of over all %oreign +xchange operation of Shah$alal Islami Bank 'td.

The Specific Objectives:

#o gather knowledge know about the +xport 7perations and evaluate the performance. #o gather knowledge know about the Import 7perations and evaluate the performance #o gather knowledge know about the -emittance 7perations and evaluate the performance #o explore the problems of %oreign +xchange operation. #o recommend solutions of the problems faced by S6IB'.

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Methodologies
A method involves a process or techni8ue in which various stages or steps of collection data9information are explained and the analytical techni8ues are defined. A dictionaries of social science observes, :*ethodology is the systematic and logical study of the principles guiding scientific investigation; #he information that I used in this study is collected from the following sources,

<rimary Sources observe

0.Information 2. )aily dairy

discuss

and

1. <ractical deskwork.

Secondary sources bank.

0.=arious publication of S6IB' 2. Annual statements of the 1. S6IB' website. >. )ifferent books about

banking. All this <rimary and Secondary data were collected, organi"ed, analy"ed and interpreted to draw some findings.

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Limitation of the study

I have tried my best to fulfill my report properly but there is some constraint during my internship period which otherwise would enabled me in making my study more appropriate and logical. #he limitations were from side, the bank and as well myself.

Foreign E change is too big to cover: %oreign +xchange is a too big to cover wholly in this limited scope. It re8uired huge time and huge space to cover. So, I have covered only some important topics of credit management. Engaged in !or": +very man of the branch was so busy in their work, so they were not able to provide sufficient care to make the internee?s clear about different topics. Time constraint: I had to prepare this report within a period less than three month which was not enough to prepare such a report. Because collection and arrangement of information is a time consuming $ob. #hen again I had to summari"e those. So I had to work in haste. #onfidential matter: It is not possible to get all sorts of information due to official confidentiality. Lac" of practical "no!ledge: %or the lack of practical knowledge, some short coming may be available in the report. Because in some cases I could not practically involved because of bank?s limitation and risky ness.

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7rgani"ational 7ver =iew 7f Shah$alal Islami Bank

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$bout Shahjalal Islami %an" Limited

Shah$alal Islami Bank 'imited 3S6IB'4 commenced its commercial operation in accordance with principle of Islamic Shariah on the 0.th *ay 2..0 under the Bank !ompanies Act, 0BB0. )uring last eight years S6IB' has diversified its service coverage by opening new branches at different strategically important locations across the country offering various service products both investment & deposit. Islamic Banking, in essence, is not only IN#+-+S#C%-++ banking business, it carries deal wise business product thereby generating real income and thus boosting D)< of the economy. Board of )irectors en$oys high credential in the business arena of the country, *anagement #eam is strong and supportive e8uipped with excellent professional knowledge under leadership of a veteran Banker *r. *uhammad Ali. At present, S6IB' has been carrying on business through its @0 branches and E S*+ !entre spread all over the country. #he Bank has in its use the latest information technology services of SFI%#. S6IB' is actively involved in Scholarship as well as in various SocioC!ultural activities. Banking is not only a profitCoriented commercial institution but it has a public base and social commitment. Admitting this true S6IB' is going on with its diversified banking activities. Inspired by its social obligation and commitment and responsibility, In !A*+' rating S6IB'?s <osition is 0st place in :A; category.

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&rofile of Shahjalal Islami %an" Limited' (S)I%L*

Fith the emergence of Bangladesh as an independent country in 0B/0, the then Dovt. nationali"ed all commercial banks with the hope of accelerating industrial growth through financial, fiscal and other support. Since the inception of independent Bangladesh, commercial banks, )evelopment %inancial Institution and Investment !orporation of Bangladesh have been the ma$or sources of finance in the country. #hese banks were predominantly serving the public sectors by extending support in the form of long term loan, working capital finance, bridge finance etc. and had limited experience in trade, commerce and industry. )ue to dearth of experience in investment decision, pro$ect financing, recovery of loan and recycle of loan, both entrepreneurs and banking financial institutions coupled with difficulties at every stage of development and accomplishment which ultimately led to the emergence of private commercial banks in Bangladesh.

Follo!ing are the potential areas for the private sector ban"s: Social contribution by banksC sponsoring sports, anti drug campaign etc. !onsumer credit to improve 8uality of life *ore $obs created +ntrepreneur ship development +lectronic Banking 3A#*4 %und #ransfer from abroad through overseas correspondents !redit !ard9)ebit card 7nline banking 3<hone link , money link4 Innovative Investment scheme !ontribution to export sector

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 -elationship banking 7ne stop service 'ease finance by bank

MISSIO+:
#o provide 8uality services to customers.

#o set high standards of integrity.

#o make 8uality investment.

#o ensure sustainable growth in business.

#o ensure maximi"ation of ShareholdersG wealth.

#o extend our customers innovative services ac8uiring stateCofCtheCart technology blended with Islamic principles.

#o ensure human resource development to meet the challenges of the time.

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,ISIO+

#o be the uni8ue modern Islami Bank in Bangladesh and to make significant contribution to the national economy and enhance customersG trust & wealth, 8uality investment, employeesG value and rapid growth in shareholdersG e8uity.

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Slogan of the %an"

The slogan of the Shahjalal Islami %an" Limited is -

.#ommitted to #ordial Service/

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Strategies

#o strive for customers best satisfaction & earn their confidence.

#o manage & operate the Bank in the most effective manner.

#o identify customers needs & monitor their perception towards meeting those re8uirements.

#o review & updates policies, procedures & practices to enhance the ability to extend better services to the customers.

#o train & develop all employees & provide them ade8uate resources so that the customers needs are reasonably addressed.

#o promote organi"ational efficiency by communicating company plans, polices & procedures openly to the employees in a timely fashion.

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#o cultivate a congenial working environment.

#o diversify portfolio both the retail & wholesale markets.

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Organi0ational Structure

Managing Director Deputy Managing Director Senior Executive Vice President Executive Vice President Senior Vice President Vice President Senior Assistant Vice President Assistant Vice President First Assistant Vice President Junior Assistant Vice President Senior Executive Officer Executive Officer First Executive Officer Junior Executive Officer Assistant Executive Officer Senior Officer Officer

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Shariah council of S6IB'

Shariah !ouncil of the Bank is playing a vital role in guiding and supervising the implementation and compliance of Islamic Shariah principles in all activities of the Bank since its very inception. #he !ouncil, which en$oys a high status in the structure of the Bank, consists of prominent ulema, reputed banker, renowned lawyer and eminent economist. *embers of the Shariah !ouncil meet fre8uently and deliberate on different issues confronting the Bank on Shariah matters. #hey also conduct Shariah inspection of branches regularly so as to ensure that the Shariah principles are implemented and complied with meticulously by the branches of the Bank. Members of Shariah #ouncil:

1. Chairman
Moulana Mufti Abdur Rahman Founder Director Islamic Research Centre Bangladesh

2. Member
Prof. Dr. Muhammad Mustafizur Rahaman Former Vice Chancellor Islamic Uiversity, Kustia.

3. Member
Moulana Abul Kalam Azad Khateeb Banani Bazar Bara as!ue

4. Member
Prof. Hamidur Rahman Islamic University o" #echnology $IIU#% &azi'ur

5. Member
hah Abdul Hannan Former Chairman Islami Ban( Bangladesh )td.

!. Member
"arrister M. #iaul Hasan *ead o" the Chamber *assan + ,ssociates

$. Member
M. Kamaluddin Cho%dhur& C-. /hah0alal Islami Ban( /ecurities )td.

'. Member
Alha( Md. olaiman Chairman, Board o" Directors /hah0alal Islami Ban( )td.

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!onventional =S Islamic Banking

#erms 7rigin #onventional ban"ing #he functions and operating modes of conventional banking are based on fully man maid principles. It is concerned with the higher classes and middle classes of people #he investor is assured of a predetermined rate of interest. <rofit maximi"ation is the core concepts of this banking. Islamic ban"ing It is based on Islamic Shariah.

Area

It is concerned with all classes of people. In contrast, it promotes risk sharing between investor and entrepreneur. *aximi"ation of welfare of the society and profit in basis of Islamic Shariah are the goal of this banking. <articipation in partnership business is the fundamental function of Islamic bank.

<rinciple

7b$ective

%unction

'ending money and getting it back with compounding interest is the fundamental function of conventional bank. #he status of a conventional bank, in relation to its clients, is that creditor and debtor. It does not flexible banking system. -ate of interest is fixed. It is invest any sector. It does not believe the e8uitable distribution of wealth.

-elationship

#he status of Islamic bank in relation to its clients is that partners, investor and traders. It is a flexible banking system. 5ere profit rate is flexible changeable. It does not invest in haram sector. It is believe the e8uitable distribution of wealth.

%lexibility

-estriction )istribution system

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%oreign +xchange

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1efinition of Foreign E change

%oreign +xchange means exchange of foreign currency between two countries. If we consider H%oreign +xchange? as a sub$ect, then it means all kinds of transaction related to foreign currency. In other words, foreign exchange deals with foreign financial transactions. +ecessity of foreign e change No country is selfCsufficient in this world. +veryone is, more or less, dependent on another, for goods or services. Say, Bangladesh has cheap manpower whereas Saudi Arabia has cheap petroleum. So Bangladesh is dependent on Saudi Arabia for petroleum and Saudi Arabia is dependent on Bangladesh for cheap manpower. <eople of one country are going to abroad for +ducation, *edical service etc. #hus there is exchange of foreign currency. 2egulations for foreign e change Local 2egulations, 7ur foreign exchange transactions are being controlled by the following rules & regulation. %oreign +xchange -egulation Act 0B>/. Bangladesh Bank issues foreign exchange circular from time to time to control the export, import & remittance business. *inistries of commerce issues export & import policy giving basic formalities for import & export business. Sometime !!I&+ issues public notice for any kind of change in foreign exchange transaction.

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Bangladesh bank published two volumes in 0BBA. #his is compilation of the instructions to be followed by the authori"ed dealers in transitions relation to foreign exchange.

International regulations of foreign e change,

#here are also some international organi"ations, influencing our foreign exchange transactions. %ew of them are discussed bellow, International !hamber of !ommerce 3I!!4 is a world wide nonCgovernmental organi"ation of thousands of companies. It was founded in 0B0B. I!! has issued some publications like !<)!, -!, & -- etc, which are being followed by all the member countries. #here is also an international court of arbitration to solve the international business disputes. Forld #rade 7rgani"ation 3F.#.74 is another international trade organi"ation established in 0BB@. Deneral Agreement on #ariff & #rade 3DA##4 was established in 0B>E, after completion of it?s Eth roundI the organi"ation has been abolished & replaced by F.#.7. #his organi"ation has vital role in international trade, through its 02> member countries.

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Foreign E change Mechanism

%oreign exchange department plays significant roles through providing different services for the customer. %acilitating the trade with foreign country is the most important among those services the key instrument which facilitates this trade is '9! 3'etter of !redit4. Letter of #redit: 'etter of !redit may be defined as an arrangement or guarantee issued by a bank at the re8uest of the customer to make payment to or order of the beneficiary or authori"ed another bank to effect such payment or to pay, accept or negotiate such bill of exchange against stipulated documents, provided that the terms and conditions of the '9! are complied with. 3 !<)!C@.., 0BB14 The $dvising %an": It is the bank in the +xporter?s 3Normally the exporter?s bank4, which is usually the foreign correspondent of Importer?s bank through which the '9! is advised to the supplier. If the intermediary bank simply advises9notifies the '9! to the exporter without any obligation on its part, it is called :Advising Bank;. The #onfirming %an": If the Advising Bank also adds its own undertaking to honor the credit while advising the same to the beneficiary, he becomes the !onfirming Bank, in addition, becomes liable to pay for documents in conformity with the '9!?s terms and conditions. The +egotiating %an": #he Bank that negotiates the bill of exporter drawn under the credit is known as Negotiating Bank. If the advising bank is also authori"ed to negotiate the bill drawn by the exporter, he becomes the Negotiating Bank. The $ccepting %an": A Bank that accepts time or unasked drafts on behalf of the importer is called an Accepting Bank. #he Issuing Bank can also be the Accepting Bank. The &aying %an" and the 2eimbursing %an": If the Issuing Bank does not maintain any account with a bank that will be negotiating the documents under a '9!, then arrangement is made to reimburse the negotiating
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bank for the amount to be paid under from some other bank with which the Issuing Bank maintains his account.

3raphical representation of Foreign E change

Mechanism:

%45E26 IM&O2TE2 I+1E+TO2

SELLE2 E7&O2TE2 %E+EFI#I$25

Submit )ocuments

Advises and9or confirms

,''lication "or .'ening l1C

<resent )ocument

Issue '9! %orward )ocument *akes <ayment

ISS4I+3 %$+8

$1,ISI+3 %$+86 +E3OTI$TI+3 %$+8

7Pays or Reimburses

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2EIM%42SI+3 %$+8

2> FI3: FO2EI3+ E7#9$+3E ME#9$+ISM

*akes <ayment

*akes <ayment against )ocument

Instruction to <ay or -eimburse

$ctivities of foreign e change

#here are three kinds of foreign exchange transaction, 0. Import. 2. +xport. 1. %oreign -emittance.

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7verview of Import

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Import
4nderstanding, Imports are foreign goods and services purchased by consumers, firms, & Dovernments in Bangladesh. #he importers are asked by their exporters to open letter of credits so that their payment against goods is ensured. #lassification of importers Doods are being imported for personal use, commercial purpose or industrial use. So, there are three kinds of importers such as, 0. <ersonal importer, if the importer is insisting to import goods from the abroad for his need this importer called personal importer. 2. !ommercial importer, if the importer is insisting to import goods for commercial purpose then it is called commercial importer. 1. Industrial importer, if the importer is insisting to import goods for industrial purpose then it is called Industrial importer.

Import &olicy: nder the import and export control Act, 0B@. the Dovernment of Bangladesh formulates the Import policy through *inistry of !ommerce. #he existing Import policy 30BB/C.24 has come into effect from 6une 0>, 0BBE to 6une 1., 2..2. 3It can be reviewed every year if needed4

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Main Features of Import &olicy

)ifferent import policy Import facility up to J2... for actual user 3for self consumption, not for sale4 without permission, J2...C@..., and approval of regional controller of import & export 3!I&+4. Above J@..., approval of !hief !ontroller of Import J +xport 3!!I&+4. Import facility on the basis of direct payment on foreign countries. Import under '9!, '9! must be irrevocable. Import above J@...C '9! is re8uired. But in case of perishable items like food up to J/@.. transported by road '9! is not re8uired. Import without opening of any '9!, 0. Books, *aga"ine, <ublication. 2. Import up to J@... in case of payment from Bangladesh. 1. Import under foreign aid. >. Import of :International chemical -eference; by <harmaceutical companies with prior approval of )rug Administration. Dovernment sector bodies can import without any license, permit & I-!. !ommercial import by cash payment only.

Import &rocedure, #o import through NA#I7NA' Bank, a customer re8uiresC 3i4 3ii4 3iii4 3iv4 3v4 3vi4 3vii4 3viii4 Bank account Import -egistration !ertificate 3I-!4 #ax <aying Identification Number <roformaCInvoice Indent *embership !ertificate '!A 3'etter of !redit Authori"ation4 form duly attested 7ne set of I*< %orm Insurance !over note with money receipt

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Import Mechanism,
#o import, a person should be competent to be HImporter?. According to Import and +xport !ontrol Act, 0B@., the 7ffice 7f !hief !ontroller 7f Import and +xport provides the registration 3I-!4 to the importer. After obtaining this personGs has to secure a letter of credit authori"ation 3'!A4 from Bangladesh Bank. And then a person becomes a 8ualified importer. 5e is the person who re8uests or instructs the opening bank to open an '9!. 5e is also called opener or applicant of the credit. Things: !hich are done here, #he following things are done in this department, #otal supervision of Import )epartment 3!ash9Back to Back '9!4. %oreign !orrespondence related to above. <ayment of BackCtoCBack '9! and endorsement of +xport '9! against payment. %ollowCup of BackCtoCBack overdue bills. !orrespondence regarding BackCtoCBack '9! and !ash '9!. *aintenance of )ue )ate )iary. *aintenance & record of related '9! )ocuments. Audit !ompliance. *atching of Bill of +ntry with I*<, followCup of pending Bill of +ntry Kuarterly Statement. Batch !hecking. '9! opening9 Amendment 3Back to Back '9!4. +ndorsement of +xport '9! when opening. Batch checking. Balancing of '9! !ontingent 'iability BBack to Back '9!4.

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 %ollowCup of SubC$udicial bills and maintaining liaison with 5ead 7ffice and %oreign !orrespondent. All correspondence related to BackCtoCBack '9! with 5ead 7ffice and %oreign !orrespondent. Supervision of checking, 'odgment and retirement of Import documents under BackCtoCBack '9!. Issuance of !ertificate and attestation of papers9documents of garments clients as re8uired by BD*+, +<B & other regulatory bodies. !hecking, lodgment, retirement of Import documents under BackCtoCBack '9!. Issuance of Shipping Duarantee 3Back to Back '9!4. I*< %orm %illCup 3!ash '9!4. Inform negotiating Bank about maturity date of BackCtoCBack '9!. Kuarterly statements for Bonded ware 5ouse. Balancing of Accepted 'iability. Statement of outstanding accepted import bills under BackCtoCBack '9!. '9! opening and Amendment of !ash '9! 3and Inland '9!4. *aintenance and record of <assbook and I-!. *aintenance & -ecord of related '9! 3s4 & )ocuments. !redit -eport. Statement of I-! -enewal fees to !!I&+. <reparation of monthly foreign exchange business position. '9! 'odgment 3!ash4. !hecking of !ash '9! documents. '9! -etirement. '!A Issue. B'! Statement. )iffered <ayment 3!ash4.
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 %ollowCup of outstanding B'!. !orrespondent 3!ash '9!4. <roof Sheet of '! *argin and !ontingent 'iability 3!ash '9!4. Issuance of shipping guarantees 3cash4 I*< forms fillCup 3cash4.

L6# Opening:
If an importer wants to import some goods from outside the country, at first he has to apply to a bank for opening a '9!. 'etter of !redit 3'9!4 is a written undertaking of a bank written to the seller and issued at the re8uest of the buyer to pay at site or a determinable future date. According to Import <olicy, unless or otherwise specified, all import is to be made by opening irrevocable letter of credit 3amendment or cancellation with the agreement of the opening bank, advising bank, beneficiary, and importer4. '9! can be opened against <erforma invoice if the exporter has no agent and '9! can be opened against Indent if the foreign supplier has indenting agent. 1ocuments 2e;uire for Opening a L6#: %or opening letter of credit an importer is re8uired to have some documents, which are to be submitted to the '9! issuing or popularly known as opening bank. A valid Import -egister !ertificate 3I-!4 *embership !ertificate from the registered local !hamber of !ommerce and Industry or valid trade license #IN 'etter of !redit Authori"ation form 3'!A4 Insurance cover note for '9! amount Indents for goods issued by indenter or <erforma Invoice issued by foreign supplier !harge )ocuments duly signed I*< form duly signed

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#he opener has to have a current account with the bank

&rocedure involved in L6# opening:

#here are few steps involved in '9! opening process. #hese are, C At first the '9! opener is re8uired to fill up the prescribed application form for re8uesting to open a '9! for him. After receiving the application form with other re8uired documents submitted by the opener they are to be thoroughly scrutini"ed. #he points, which shall be scrutini"ed, are describing bellowC a. #he amount and description of goods in the application should be relevant with the indent or <erforma invoice or import contract. b. #he amount is covered by the insurance amount. c. #he item is not a banned one. d. #he indent produced has the Import -egistration !ertificate number and the indenter?s registration number. #he indent has indenting agent?s signature and importer?s signature. e. Fhether transshipment and partial shipment is allowed. If all the documents along with the application are in order, the financial position and credit worthiness of the importer, market demand of the good is assessed. *argin for letter of credit will also be determined. #he rate of margin depends on the financial condition of the banker, Importers previous performance, status of relationship with the importer, nature of goods etc. #his margin is to be retained from the importer either in cash or debiting the importer?s current account with the bank. #he importer is also re8uired to pay

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the other concerning charges like foreign corresponding charge, telex charge 3if any4, handling charges, and commission etc. After all these steps of letter of credit is opened and forwarded to the advising bank. Accounting <rocedure Involved in '9! opening, #here are two types of accounting procedure involved in '9!. 7ne is '9! opening, and another is 'iability -egister, which includes 'iability amount, *argin, %oreign correspondent etc. Fhile opening '9! there are few accounting entries. L %or *argin importer account with bank is debited and *argin A9! is credited. L %or contingent liability 3'9! amount4 !ustomer?s liability on '9! cash is debited and Banker?s liability on cash is credited. L%or other charges customer?s current account is debited and commission A9!, income A9!, %oreign correspondent charge A9! and other related A9! is credited.

$dvising a Letter of #redit:

#he advising or notifying bank is the bank through which the '9! is advised to the exporter. It is a bank situated in the exporting country and it may be a branch of the opening bank. It becomes customary to advise a credit to the beneficiary through an advising bank.

$dding #onfirmation: #he confirming bank does adding confirmation. !onfirming bank is a bank, which adds its confirmation to the credit, and it is done at the re8uest of the issuing bank. #he confirming bank may or may not be the advising bank.

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L6# Transmitting: 'etter of credit can be transmitted to the advising bank through three methods. #hey are in #elex, !ourier, or SFI%# 3Society for Forldwide InterCbank %inancial #elecommunication4. '9! is send to advising bank in three copies. #he advising bank authenticates the original copy of '9! and delivers it to the exporter. #he duplicate copy is kept with the advising bank.

+egotiating: #he beneficiary 3exporter4 receives the letter of credit from advising bank. After proper shipment of goods as per terms and conditions of the '9!, re8uired documents like !ommercial Invoice, Bill of 'ading, and bill of exchange are presented to the negotiating bank by the beneficiary for negotiation. If the documents are in order as per '9! then the negotiating bank negotiates the drafts making payment to the beneficiary. #hen the negotiating bank forwards the drafts along with the shipping documents to the '9! opening bank. #he negotiating bank reimburses the amount paid against the draft from reimbursement bank. $mendment: <arties involved in a '9!, particularly the seller and the buyer cannot always satisfy the terms and conditions in full as expected due to some obvious and genuine reasons. In such a situation, the credit should be amended National Bank transmits the amendment by tested telex to the advising bank .In case of revocable credit it can be amended or cancelled by the issuing bank at any moment and without prior notice to the beneficiary. But in case of irrevocable letter of credit, it can neither be amended nor cancelled without the consent of the issuing bank, the confirming bank 3if any4 and the beneficiary. If the '9! is amended, service charge and telex charge is debited from the party account accordingly.

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Examination of Documents:
National Bank officials check whether these documents have any discrepancy or not. 5ere, )iscrepancy means the dissimilarity of any of the documents with the terms and conditions of '9!.

Adding Confirmation:
Add the confirming Bank gives confirmation. An Add confirmation letter contains the followings, 04 '9! No. 24 '9! amount 14 Items to be imported, etc. Lodgment: #he opening bank receives import bills, which have been negotiated. After receiving the documents, they are to be thoroughly scrutini"ed before lodgment.

Scrutiny of the 1ocuments: %irst of all it must be ensured that full set of documents as mentioned in the '9! has been received. )ocuments have been negotiated within the negotiation period. #he Bill of 'ading9AirCFay Bill9 -ailway receipt is not dated later than the last date of shipment mentioned in the '9!. #he '9! has not been amended or sub$ected to any special instructions, which might alter the value of '9! Import bills include following documents, which are to be scrutini"ed. Bill of +xchange !ommercial Invoice Bill of 'ading !ertificate of 7rigin
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 7thers %ill of E change, It has to be verified that the bill of exchange has been properly drawn and signed by the beneficiary according to the terms and conditions of '9!. #he amount in the Bill is identical with that mentioned in the invoice. #he amount drawn does not exceed the amount mentioned in the '9!. #he amount in words and figures should be same. #he bill of exchange should be properly endorsed.

#ommercial Invoice: It has to be verified that the commercial invoice has been properly drawn and signed by the beneficiary according to the terms and conditions of '9!. #he beneficiary should properly invoice the merchandise. #he merchandise is invoiced to the importer on whose account the '9! is opened. #he description of merchandise and the unit price correspond with that given in the '9!. #he import license or I-! number of the importer, indenter?s registration number and number of 'etter of !redit Authori"ation number are incorporated in the Invoice.

%ill of Lading: %irst of all it has to be cleared that the Bill of 'ading is showing :Shipped on Board; and it has to be properly endorsed to the bank. #he B9' should include the description of the merchandise according to invoice.

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#he port of shipment and destination, date of shipment and the name of the consignee are in agreement with those mentioned in the '9!. #he shipping company or their authori"ed agents properly sign the B9'. #he date on the B9' is not Hstale? which means it is not dated in unreasonably long time prior to negotiation.

#ertificate of Origin: #he *erchandise described in the !ertificate is in accordance with the '9!.

Others: #here are some other documents, which are also attached, with the shipping documents like packing list, preCshipment inspection certificate etc. #hese documents are also verified carefully before lodgment.

Steps Involved in Lodgment:

Fhen the scrutiny of import bills is over the steps should be taken for lodgment. At first all the particulars of the documents are entered in the <A) 3<ayment against )ocument4 register and <A) No. Seal is given on all the copies of the received documents. !onvert the foreign currency into Bangladeshi currency. -everse the contingent liability and entry in the liability register. <repare lodgment voucher. <repare other voucher. Send IB!A to the head office. *ake intimation to the importer.

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7verview of +xport
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E7&O2T
4nderstanding: #he terms, +xport means selling of the goods & services to the countries abroad. +xport is the only sector that earns huge remittance for the country. So all of banks, including S6IB' is also trying their best to provide smooth for the export operation. In order to export any goods and services to any foreign country an +xport -egistration !ertificate is re8uired. Fhen the exporter sends sight draft and then receives the '9! from the importer, the exporter submits the '9! to the paying bank including
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documents. If the authority is satisfied the bank starts the processing to collect export bill or open BankCtoCBack '9!. #he bank provides the BackCtoCBack '9! to the exporter to import the raw materials from abroad to produce the exportable commodity for the importer. #hus BackCtoCBack '9! is for manufacturing firms importing raw materials and exporting finished goods.

In the +xport section, two types of '9! s are openedC

Back to Back '9! +xport '9!

Things done here:

The follo!ing things are done in this department: Scrutiny of +xport Shipping )ocuments. %ollowCup for reali"ation of +xport <roceeds. All !orrespondence relating to +xport )epartment. !ompliance of Audit & Inspection. Advising of +xport '9!s to the beneficiary. Authentication of '9! and Amendments from other !orrespondent Bank.

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 #ransfer of +xport '9! to the 2nd Beneficiary & issuance of notice of transfer to '9! issuing Bank. -ecording of +xport '9! particulars in +xport '9! #ransfer -egister. -eali"ation of transfer changes. Issuance of precedes reali"ation certificates. And other works as & when directed by the manager and SubC*anager. !ertificate of +M< %orms. <osting of #ickets. 'odgment of +xport Bills 3%B<, %)B!, IB< & IB!4. <reparation of tickets elating to negotiation of documents. Negotiation of Inland Bills. *aintenance of all records related to %B<, %)B! and Inland Bills. Balancing of %B<, %)B!, and I<B & A9- +xport A9!s. <reparation of statement and all returns to Bangladesh Bank and 5ead 7ffice 3Feekly9 *onthly9 8uarterly4.

E port %ill Scrutiny

Scrutini"es the export bill on the following points, $' 3eneral: >2 'ate shipment. 'ate presentation. '9! expired.

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'9! overdrawn. <artial shipment or transshipment beyond '9! terms.

%' %ill Of E change: Amount of bill differs with Invoice. Not drawn on '9! issuing bank not signed. #enor of B9+ not identical with '9! Not issued by the beneficiary Not signed by the beneficiary Not made out in the name of the Applicant )escription, <rice, 8uantity, sales terms of the goods not corresponds to the credit. Not marked one fold as original Shipping marks differs with B9' & packing list. #' &ac"ing List: Dross weight, net weight, & measurement, number of cartoons9 packages differs with B9'. Not marked one fold as original. Not signed by the beneficiary. Shipping marks differs with B9'.

%ull set not submitted Invoice,

1' %ill of Lading6$ir <ay %ill: %ull set of bill not submitted. B9' is not drawn or endorsed to the 7rder 7f National Bank.

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:Shipping 7n Board;, :%reight <repaid; or :%reight !ollect; etc. notations are not marked on the B9'. B9' not indicate the name and capacity of the party i.e. carrier or master, on whose behalf the agent is signing the B9'. Shipped on Board Notation not showing name of preCcarriage vessel9 intended vessel. Shipped on Board Notation not showing port of loading and vessel name 3In case B9' indicates a place of receipt or taking in charge different from the port of lading4.

+' Others,

Short %orm B9'. !harter party B9'. )escription of goods in B9' not agrees with that of Invoice, B9+ & <9'. Alterations in B9' not authenticated. 'oaded on deck. B9' bearing clauses or notations expressly declaring defective condition of the goods and 9 or the packages. NonCNegotiable documents not forwarded to buyers or forwarded beyond '9! terms. Inade8uate number of Invoice, <acking 'ist, & others submitted. Short shipment certificate not submitted.

E port Finance
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&re-shipment credit, <reCshipment credit usually takes the following forms, 7verdraft against hypothecation of exportable commodities. 7verdraft against #rust -eceipt 3#.-.4 <acking !redit 3<.!.4 &ost shipment #redit: <ost shipment credit refers to credit facilities extended to export after actual shipment of goods against shipping documents. It is usually provided in the following ways. Bill negotiation 9 purchase. Bill for collection. %ill +egotiation 6 &urchase: #he most usual method of financing exporters at the postCshipment stage is negotiation of documents under '9!. 5ere the bank acts as negotiating bank. After the shipment of the goods, the exporter submits the relative documents to the branch for negotiation. #he documents generally include a4 Bill of +xchange b4 Bill of 'ading, c4 Insurance policy d4 Invoice e4 !ertificate of origin etc. #he documents are to submit within the period mentioned in the '9!. #he documents are sent to the '9! opening branch with a forwarding letter. #hen the branch claim reimbursement from the issuing bank or from the reimbursing bank. 7n negotiation9 <urchase of the export bills, the exporter is paid the value of the bill 3converted into Bangladeshi #k at the ruling bill buying rates4.

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1ocuments on #ollection %asis, #he documents, which are not negotiable by the branch due to some discrepancies, are sent to '9! opening bank on collection basis. #he bank mentions the discrepancies on their forwarding schedule. 7n receiving the documents, the '9! opening bank will further scrutini"e the document with the '9! and inform the importer regarding discrepancies found in the documents. If these are acceptable to the importer and or permissible with the exiting +xchange control regulation, the documents will be lodged and '9! opening bank will send the payment instruction to the collection bank.

%ac"-To-%ac" L6#: In case of a Back to back letter of credit, a new '9! 3an Import '9!4 is opened on the basis of an original '9! 3an +xport '9!4. nder the GBack to BackG concept, the seller as the Beneficiary of the first '9! offers it as a GsecurityG to the advising Bank for the issuance of the second '9!. #he Beneficiary of the BackCtoCBack '9! may be located inside or outside the original BeneficiaryGs country. In case of a BackCtoCBack '9!, no cash security 3no margin4 is taken by the BankI Bank liens the first '9!. In case of a BackCtoCBack '9!, the drawn bill is an Issuance9 #ime bill. In National Bank, papers9documents re8uired for submission for opening of backCtoC back '9!, a4 *aster '9! b4 =alid Import -egistration !ertificate 3I-!4 & +xport -egistration !ertificate 3+-!4 c4 '9! application & '!A form duly filled in signed. d4 <ro forma Invoice or Indent. e4 Insurance !over Note with money -eceipt f4 I*<C form duly signed

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In addition to the above the following papers9documents are also re8uired for export oriented garment industries while re8uesting for opening of backCtoCback letter of credit, 04 #extile permission 24 =alid Bonded Farehouse 'icense 14 Kuota allocation letter issued by +xport <romotion Bureau 3+<B4 in favor of the applicant in case of 8uota items. In case the %actory premises is a rented one, 'etter of )isclaimer duly executed by the owner of the house9premises to be submitted.

&ayment of %ac"-to-%ac" L6#: In case back to back as A.CB.C02.C0E. days of maturity period, deferred payment is made. <ayment is given after reali"ing export proceeds from the '9! issuing bank.

2eporting to %angladesh %an": At the end of every month, the reporting regarding the following information is mandatory, A. %illing of +C29<C2 schedule of SC0 categoryI which covers the entire month amount of import, category of goods, currency, country etc. B. %illing of +C19<C1 schedule for all charges, commission with #9* form. !. )isposal of I*< form, which includes, 7riginal I*< is forwarded to Bangladesh Bank with invoice and Indent. )uplicate I*< is kept with the Bank along with the bill of entry9 !ertified Invoice. #riplicate I*< is kept with the Bank for office record. Kuadruplicate is kept for submission to Bangladesh Bank in case of imports where documents are retired.

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E port L6#:
#he other type of '9! facility offered by National Bank is +xport '9!. Bangladesh exports a large 8uantity of goods and services to foreign households. -eadymade textile garments 3both knitted and woven4, 6ute, 6uteCmade products, fro"en shrimps, tea are the main goods that Bangladeshi exporters exports to foreign countries. Darments sector is the largest sector that exports the lion share of the countryGs export. Bangladesh exports most of its readymade garment products to .S.A and +uropean !ommunity 3+!4 countries. Bangladesh exports about >.N of its readymade garment products to .S.A. *ost of the exporters who export through National Bank are readymade garment exporters. #hey open export '9!s here to export their goods, which they open against the import '9!s opened by their foreign importers.

Formalities for E port L6#: #he export trade of the country is regulated by the Imports and +xports 3control4 Act, 0B@.. #here are a number of formalities, which an exporter has to fulfill before and after shipment of goods. #hese formalities or procedures are enumerated as follows, 0. +-!, #he exports from Bangladesh are sub$ect to export trade control exercised by the *inistry 7f !ommerce through !hief !ontroller of Imports and +xports 3!!I+4. No exporter is allowed to export any commodity permissible for export from Bangladesh unless he is registered with !!I & + and holds valid +xport -egistration !ertificate 3+-!4. #he +-! is to be renewed every year. #he +-! number is to be incorporated on +M< forms and other documents connected with exports.

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7btaining +M<, After having the registration, the exporter applies to National Bank with the trade license, +-!, and the !ertificate from the concerned Dovernment 7rgani"ation to get +M<. If the bank is satisfied, an +M< is issued to the exporter.

2. Securing the 7rder,

pon registration, the exporter may proceed to secure the

export order. !ontracting the buyers directly through correspondence can do this. 1. Signing of the !ontract, Fhile making a contract, the following points are to be mentioned, )escription of the goods Kuantity of the commodity <rice of the commodity Shipment Insurance and marks Inspection Arbitration

The follo!ing points are to be loo"ed for: i4 #he terms of the '9! are in conformity with those of the contract. ii4 #he '9! is an irrevocable one, preferably confirmed by the advising bank. iii4 #he '9! allows sufficient time for shipment and a reasonable time for registration. iv4 If the exporter wants the '9! to be transferable, divisible and advisable, he should ensure those stipulations are specially mentioned in the '9!.

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>. <rocuring the *aterials, After making the deal and on having the '9! opened in his favor, the next step for the exporter is to set about the task of procuring or manufacturing the contracted merchandise. @. -egistration of Sale, #his is needed when the items proposed to be export, are raw $ute and $ute goods.

A. Shipment of Doods, #he following are the documents normally involved at the stage of shipmentC

+M< %orm <hotocopy of registration certificate <hotocopy of the contract <hotocopy of the '9! !ustoms copy of +-% %orm for shipment of $ute goods and +<! %orm for raw $ute. %reight certificate from the bank in case of payment of the freight at the port of lading is involved. -ailway receipt, Berg -eceipt or #ruck -eceipt. Shipping instructions. Insurance policy. After those, exporter submits all these documents along with a 'etter of Indemnity to National Bank for negotiation. An officer scrutini"es all the documents. If the document is a clean one, National Bank purchases the documents on the basis of bankerC customer relationship. #his is known as %oreign )ocumentary Bill <urchase 3%)B<4.

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%oreign -emittance

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%7-+IDN -+*I##AN!+

-emittance refers to the send or receipt of money from one place to another place. %oreign remittance refers that the exchange of money between two countries or among several countries. #his is mainly occurred through banking institution. National Bank 'imited is not beyond this. It performs the remittance function with different countries. It maintains the foreign remittance in the following form, Inward -emittance. 7utward -emittance.

In!ard 2emittance Inward remittance refers to the extent where by bank makes payment to the client against foreign demand draft. #hey will make payment to the client by verifying the, test number, and signature of the authori"ed officer. Modes of Foreign In!ard 2emittance, #.# 3#elegraphic #ransfer4 *.# 3*ail #ransfer4 ).) 3)emand )raft4 #.! 3#ravelers !he8ue4 <7 3<ay 7rder4

Besides this foreign Inward -emittance also includes remittances on account of export, purpose of bills, purpose of #.! %oreign currency notes and coins, che8ue issued on foreign banks in favor of beneficiaries in Bangladesh etc.

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T'T !able or telex instructions of payment are called as #elegraphic #ransfer, where a foreign bank issue a #.# in favor of some one in Bangladesh, it credits the amount, received from the remitter to the N7S#-7 A9! of its correspondent bank. 7n receipt of the #.# the paying bank in Bangladesh will make payment of the proceeds of the #.# in foreign currency or in e8uivalent Bangladesh #aka to the beneficiary. M'T *.# is an instrument issued by a remitting bank to the paying bank advising in writing to make payment of certain amount to specific beneficiary. 1'1 A demand draft is a negotiable instrument issued by a bank drawn on other bank with the instruction to pay a certain amount to beneficiary on demand.

T'# It is an instrument issued by the Banks9 !ompany?s payable to the purchaser on presentation. &'O A <ay order is a written under issued by a branch of bank, to pay a certain sum of money to a specific person or a bank. It may be said as to be a banker?s che8ue as it is issued by a bank and payable by itself. &urpose of In!ard 2emittance, %amily maintenance. Indenting commission. -ecruiting Agents commission. -eali"ation of export proceeds

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)onation Dift +xport brokers commission etc.

Out!ard 2emittance %oreign currency being made out abroad may be termed as foreign outward remittance. #hat means remittance in foreign currency that goes out abroad is called foreign outward remittance.

#ollection of foreign currency instrument: #o collect proceed of %oreign Instrument following procedures to be maintained, -eceive instrument with deposit slip. Affix crossing stamp of the Bank. +ntry in the register putting IB!A number. Affix endorsement :pay to the order of any Bank or trust company, prior endorsement guaranteed;. Instrument to be sent to ad$acent correspondents.

2emittances are allocated, 5ousehold remittance. Advance payment. +ducation purpose. +xporting traveling.

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Implications & Strategies

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S<OT $nalysis 1efined:

SF7# consists of Strength, Feakness, and 7pportunity & #hreat. It exhibits strengths of the organi"ation, weaknesses of it, potential opportunities existing in the market and prevailing or upcoming threats in the market place. S<OT $nalysis of +ational %an" Limited: =' Strength: Fide image +xcellent management 5igh commitment of customer and 8ualified & experienced human resource Sophisticate automated system and strong network.

>' <ea"ness: 'ack of motivation of employees 5eavily depends on 5ead 7ffice for decision making Absence of teamwork.

?' Opportunity: Increasing demand of customer finance Investment potential of Bangladesh -elationship management !harge is lower.

@' Threats: Some commercial 9 foreign banks as well as private banks Similar type of retail banking products !ertain Bangladesh Bank rules and regulations !ustomer awareness of pricing and services.

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&roblems of Foreign E change Mechanism

#here is some problem in foreign exchange mechanism in S6IB' these are given in below, Fluctuation in E change rate: It is often found that the rate of foreign currency is changed at the time of lodgment of import bill which increase import cost from the end of '9! opening. $nomaly bet!een theory A practice: Fhile handling the %oreign +xchange transaction we always follow the rules and regulations laid down in !<)!CA.., but practically we face many problems which

are not integrated by !<)!CA... Erratic govt' policy: In Bangladesh rules and policies formulated by govt. change very fre8uently. #his causes a ma$or problem for the growth of any industry including bank. Being a service industry banks should be consistent in their services. But due to fre8uent changes in regulatory and monetary policies hamper the growth. Again our govt. policies are short lived. Fith the change of govt. policies also become invalid due to the political considerations in the overall policy making. E cessive #ontrol by #entral %an": Banking sector in Bangladesh is underway the reform programs. #herefore Bangladesh bank and the govt. are formulating new policies in compliance with the present scenario. #hese policies are made available on a trail and error basis. #oo much experimenting thereby is making a slack in the sector.
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 Scarcity of foreign currency, Sometimes foreign currency become scarce in the market and Bangladesh bank do not release foreign currency to maintain the reserve position. Finance against discrepant documents: In most case it is observed that bank has to finance to the client against discrepant document.

Over invoicing of the importable commodities: Sometimes the value of the importable goods is overstated in the indent9 proCforma invoice. #he bank does not find any way to verify the authenticity of the 8uoted price. Failure to shipment of goods in due time: Sometimes it is not possible to the party to shipments the goods as fixed time due to inade8uate power supply and political unrest. As a result of paying late chaege have to pay.

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2ecommendations:
#o perform better in foreign exchange S6IB' adopts some necessary steps. 5ere I would like to mention some of them, Necessary undertaking mat be obtained from the importer to cover the fluctuation in foreign exchange rate. #he financial authority of Bangladesh may persue I!! 3International !hamber of !ommerce4 to update !<)!CA.. and necessary compromising points to be explored to solve the problem. #he international division of the bank may set up additional correspondent relationship in potential territories on mwrit basis. #he I!! & SFI%# may frame some common guidelines to nationali"e the charges in international level so that no single country becomes the victim of willful increase in charges. #he government may fix up tariff rates to prevent over invoicing. Necessary incentives may be allowed to the exporters to upgrade the reserve position. #he Bankers may pursue the financial authorities like Bangladesh bank, *inistry of finance, National board of revenue to liberali"e the policy matters so that genuine importers do not suffer due to any adverse policy matter. *ore branches9networks to be developed for greater coverage especially in rural areas. #o encourage foreign remittances through correspondence overseas exchangers #o strictly follow the foreign currency regulations *ore efforts to improve customer service
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#onclusion:
Banks play a very important financial role towards the country. <roper financial system of a country can develop the country?s economy system. As a Islamic bank S6IB' try their best to running their function on the basis of Islamic Shariah. #he slogan of S6IB' is :committed to cordial service; and day by day its area of servicing is increased all over the country through setting up new branch at new place. As a Islamic bank S6IB', I have a chance to understand the Islamic banking properly and I found that the transaction are mostly trade oriented. S6IB' can be a role model for conventional bank and show the path of Islamic financial system that is spread all over the world. %inally, without any doubt it can be concluded that, S6IB', is successfully discharging their best service for the welfare of their client. I wish tremendous success to S6IB' & hope that it will expand its operations across the country.

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%I%LIO32$&95

Shah$alal Islami Bank 'imited Annual -eport 2..EC.B. #erms and !onditions <ublished by Shah$alal Islami Bank 'imited. Duideline for %oreign +xchange #ransactions published by Bangladesh Bank. <revious %oundation !ourse -eports. Fhat the Banker )oesC Abul 5ashem <rospectus of Shah$alal Islami Bank 'imited www.shah$alalbank.com.bd www. o''a'ers.com www.scribd.com

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