PROJECT REPORT

ON
FOREIGN EXCHANGE ACTIVATES: A STUDY ON SOCIAL ISLAMI
BANK LIMITED

Submitted to
Controller of Examinations
National University, Gazipur

Supervised by:
Nazmun Nahar Shanta
Lecturer

Submitted by:

Tabassum Hossain
Registration no: 1550100273
Roll no: 20164
Session: 2015-2016
Major: Finance
BBA Program (Professional)

Department of Business Administration

Shaikh Burhanuddin Post Graduate College

Date of Submission: ????

 Letter of Transmittal

February 06, 2021

Controller of Examinations
National University
Gazipur

Subject: Submission of Internship Report on Foreign Exchange Activates: a study on

Social Islami bank limited.
Dear Sir,
This is a great pleasure for me to submit this internship report on “Foreign Exchange
Activates: a study on Social Islami Bank Limited”. This report has been completed
within one month. This is a privilege for me to meet the prerequisite for the partial
fulfillment of the course- Bachelor of Business Administration.

In this report I tried to illustrate the Foreign Exchange of Social Islami Bank Limited.
I have aimed to represent whatever I found and observed in the organization during
my internship program.

I am really indebted to you for your suggestions and recommendations. I will feel
glad if you please render your valuable comments and observations.

Sincerely yours,

Name: Tabassum Hossain

Roll No: 20164
Registration No: 1550100273
Major: Finance
BBA Program (Professional)
Department of Business Administration
Shaikh Burhanuddin Post Graduate College

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 Supervisor’s Certificate

This is to certify that the internship Report on “Foreign Exchange Activates: a study
on Social Islami Bank Limited” is done by Tabassum Hossain as a partial fulfillment
of the requirement of Bachelor of Business Administration (BBA), major in Finance
degree from Shaikh Burhanuddin Post Graduate College under National University.

The report has been prepared under my guidance and is carried out successfully.

_________________
Nazmun Nahar Shanta
Lecturer
Department of Business Administration
Shaikh Burhanuddin Post Graduate College.
Date: ????????

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 Acknowledgement

First of all, I am expressing my heartfelt gratitude to the Allah, the most merciful and
the benevolent, for his special kindness to give me the opportunity to complete the
project successfully and prepare project report timely.

I would like to express my gratitude to the authority of National University and our
honorable coordinator Munmun Hossain, Department of Business Administration for
the valuable guidance.

I also like to give special thanks to my academic supervisor Nazmun Nahar Shanta,
Assistant Professor, Department of Business Administration, Shaikh Burhanuddin
Post Graduate College for her excellent supervision, individual suggestions,
continuous encouragement and unfailing enthusiasm throughout the process of
completion of this report. .
This report suffers from many shortcomings; sever the less I have exerted my best
effort in preparation of this report. I seek excuse for the errors that might have
occurred inspire of the best of my efforts.

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 Executive Summary

This Internship report is set up as a partial contentment of BBA program of the

department of Business Administration of Shaikh Burhanuddin Post Graduate
College. This report will give a reasonable information about the Foreign Exchange
Activities of Social Islami Bank Ltd.
The topic of this is “A study on Foreign Exchange Activities of Social Islami Bank
Limited”. The prime objective of this report is to analyze Foreign Exchange Activities
of Social Islami Bank Limited. The report would be based on a details discussion on
Foreign Exchange Activities of Social Islami Bank Limited. Throughout the report,
The use different types of research method to find out proper and correct information.
To make this report some limitation are faced which are included in this report. The
report covers historical background of Social Islami Bank Limited. It’s also discussed
vision, mission, objective, values, product & service etc of SIBL. I have briefly
described Foreign Exchange Activities of SIBL. Foreign Exchange Activities perform
mainly three sections such as Export, Import & Remittance. Who want to opening of
Letter of Credit, he has maintain L/C rules. I have described Letter of Credit
procedure and before Dispatching, Shipping guarantee, L/C Advising etc. The word
“Remittance” means sending money from one place to another place through TT, DD,
MT, etc. I have described procedure and charge DT, TT of SIBL. I have used
different data and graphical presentation to measure the performance about the
Foreign exchange activities on the basis of customer’s perception.

While working on this project, I have tried to find out some problems in my report.
SIBL employees are not always helpful or co-operative to their clients. Some
employee are not used properly modern technology so transaction are lengthy.

The bank should take necessary steps to improve it Foreign Exchange services by
making its employees more efficient, developing their transaction system, providing
modern services and so on.

Finally, some recommendation has been suggested based on the finding part of the
report that may help SIBL to improve its efficiency concerning of Foreign Exchange
division.

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Table of Contents
CHAPTER ONE
INTRODUCTION
1.1 Origin of the Report:

Theoretical knowledge gets perfections with practical application. The BBA program
is designed to focus on theoretical and professional development of the students to
take up business as a profession as well as service as a career. It is designed with an
excellent combination of theoretical and practical aspects. The project provides the
students to link their theoretical knowledge into practical fields. In this connection, I,
a student of BBA (Finance) in the department of Business Studies of Shaikh
Burhanuddin Post Graduate College was assigned to prepare an project report under
the guidance of supervising teacher on a selected subject matter to highlight my
experience and to conduct an in depth analysis on the subject matter. I have tried my
level best to present my experience of the practical orientation in this report.
1.2 Objectives of the report:

1.2.1 Broad Objective:

The broad objective of the study is to know the foreign exchange activities of Social
Islami Bank Limited (SIBL).

1.2.2 Specific Objectives:

● To know the import and export activities of Social Islami Bank Ltd.

● To know the foreign remittance activities of SIBL.

● To do the trend analysis of some important variables relating to foreign

exchange business.

● To recommend actions that may be necessary to redesign the foreign trade

procedure of Social Islami Bank Ltd.
1.3 Methodology of the report:

In arrange to make the report more meaningful and presentable, to source of data and
information have use widely. while conducting the study , sources were explored for
primary information of data. But hardly any update been found. In the absence of
updated information of data dependence on secondary has been inevitable. However
wherever possibly primary data has been used. Data were also collected by
interviewing the responsible officers and from some documents by printed by bank
and the website of SIBL.

1.3.1 The sources of data:

The following source have been use for purpose of gathering and collecting data as
required.

 Primary data :

● Consolation with the bank officials.

● Study of relevant documents.

● Observering the operations of different departments of the bank.

● Discussion with the supervisors.

 Secondary data:

● Annual Reports of Social Islami Bank Limited.

● Foreign exchange function Guidelines provided by Bangladesh Bank.

● Other Website information.

● Website of Social Islami Bank Limited
1.4 Scope:

In this report the scope of the organizational part covers the hierarchical structure,
foundation, products and administrations of the Social Islami Bank Ltd all in all and
the principle part covers Foreign Exchange Activities. This report encourages us to
comprehend the reasonable continuous experience about the Foreign Exchange
activities of SIBL. It additionally encourages us to see how they manage the
customers close by the method for Foreign Exchange Activities. This report is
improved the situation gathering data about Foreign Exchange Activities of SIBL by
centering the executives of foreign trade close by of SIBL while overlooking some
other division of the bank.

1.5 Limitation of the Report

Limitations are the drawbacks of any work. There is hardly any activity which has no
limitation. This study also has some limitations. In preparing this report some
problems and limitation I have encountered which are as follows:

● Time variance is the major limitation of this study. As the project is for 1
month, it is really a short time to analysis a huge organization like SIBL.

● The officials of SIBL have a busy working schedule. So, data collection
process is also hampered for this.

● Organization secrecy policies are also a limitation of this report.

Confidential data of SIBL which would be helpful for this report cannot be
accesses
 CHAPTER TWO

ORGANIZATIONAL OVERVIEW
2.1 ORGANIZATIONAL OVERVIEW OF SOCIAL
ISLAMI BANK LIMITED

Social Islami Bank Limited (SIBL) was established in 5th July 1995 and went on
operation on 22nd November, 1995 as a public limited company which is engaged in
Shariah based commercial banking in the country and its modus-operandi are
substantially different from other conventional banks. This is the second-generation
pioneer Islamic Bank in this country providing online banking facilities to its
customers. Social Islami Bank Limited (SIBL) registered under the companies Act
1994 with its head office in 15 Dilkusha C/A, Dhaka-1000. The bank operates as a
scheduled bank under a banking license issued by the Bangladesh Bank, Central Bank
of the country. SIBL is a capitalized new generating bank with an authorized capital
of Tk. 10,000,000,000 million in 2014 and paid up capital of Tk. 703,14,15,640
million in 2014.

Social Islamic Bank Limited achieved World Islamic Banking Conference

Performance Award -2015 because of their financial stability, financial performance,
better corporate governance and corporate social responsibility. In the formal
corporate sector, this Bank would, offer the most up to date banking services through
opening of various types of deposit and investment accounts, financing trade,
providing letters of guarantee, opening letters of credit, collection of bills, leasing of
equipment and consumers durable, hire purchase and installment sale for capital
goods, investment in low-cost housing and management of real estate, participatory
investment in various industrial, agricultural, transport, educational and health
projects and so on. SIBL has now 112 branches all over the country with two
subsidiary companies- SIBL Securities and SIBL Investment Ltd.

The bank has already introduced Internet banking and launched some new products to
strengthen its business. The products are Sonali Din, Kafela, Proshanti,, Sonchita,
SIBL Young Star Account and SIBL Zameel ATM Debit Card. SIBL has centralized
its international trade finance through a focused Centralized Trade Processing Unit
(CTPU) for up gradation of service distribution system in all the branches irrespective
of being an AD or non-AD branch. As a result, every branch of the bank has been

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authorized to facilitate L/C clearance to its clients. Moreover, the bank introduced
SIBL Visa Islamic Credit Card having four types of card namely Duel Currency Gold,
Duel Currency Classic, Local Currency Gold & Local Currency Classic.

2.2 GENERATION OF BANK IN BANGLADESH

Chart 1: Generation of Bank in Bangladesh

AB Bank, IFIC Bank, National Bank, Pubali Bank, The City Bank, United
1st GENARETION BANK: Commercial Bank, Uttara Bank , ICB Islamic Bank, Islami Bank
(1971-1991) Bangladesh.; Agrani Bank , Janata Bank , Rupali Bank , Sonali Bank ,
BASIC Bank , Bangladesh Krishi Bank, RajshahiKrishiUnnayan Bank.

2nd GENERATION Prime Bank ,Dhaka Bank , Dutch-Bangla Bank , Eastern Bank , Al-
Arafah Islami Bank , NCC Bank , Social Islami Bank, Southeast Bank
BANK: ( 1992 - 1998)

Jamuna Bank, Bangladesh Commerce Bank , Bank Asia, BRAC Bank,

3rd GENERATION Mercantile Bank, Mutual Trust Bank, First Security Islami Bank, One
BANK: (1999- 2010) Bank, Premier Bank, Standard Bank , Trust Bank, EXIM Bank , Shahjalal
Bank.

Jamuna Bank, Bangladesh Commerce Bank , Bank Asia, BRAC Bank,

4Th GENERATION Mercantile Bank, Mutual Trust Bank, First Security Islami Bank, One
BANK: (2011- present) Bank, Premier Bank, Standard Bank , Trust Bank, EXIM Bank , Shahjalal
Bank.

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2.3 VISION OF SIBL

Working Together for a Caring Society.

2.4 MISSION OF SIBL

● Establishing three sector banking model

● Transformation into a service-oriented technology-driven profit earning Bank.

Ensure fast, accurate and best-in-class customer service.

● Balanced & sustainable growth strategy.

● Optimum return on shareholder’s equity.

● Introducing innovative Islamic Banking products. Attract and retain high

quality human resources.

● Empowering real poor families and create local income.

● providing support for social benefit organizations-by way of mobilizing Funds

and social services.

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2.5 STRATEGIC OBJECTIVES OF SIBL

● Transformation into a service-oriented technology-driven profit earning bank.

● Ensure fast, accurate and best-in-class customer services with customers’

satisfaction.

● Balanced and sustainable growth strategy.

● Optimum return on shareholders’ equity.

● Introducing innovative Islamic Banking Products. Attract, motivate and retain

high quality human resources.

● Empowering real poor families and create local income opportunities.

● Providing support for social benefit organizations-by way of mobilizing funds

and social services

● To achieve global standards in Islamic Banking

● To invest in the priority sector for the overall economic development Ensure
best CSR (Corporate Social Responsibilities) practices.

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2.6 SIBL CORE VALUES

Towards the journey of excellence ,SIBL has changed its brand logo .The new logo
depicts bird’s wings with 9 feathers to represent its core values-comfortable and safe
flying in the economic sky of the country connecting it with the global sky by passing
the territorial boundary.

1) Honesty: SIBL is trying to be honest to its customer, employees, regulators

shareholders and others.

2) Efficiency: gaining efficiency through best use of man and machine.

3) Accountability: accountable to the stakeholders and to the society at large

4) Transparency: SIBL tries to be transparent in each and every banking

transaction

5) Flexibility: service flexibility is one of the most important features

6) Innovation: continuous innovative idea generation and designing of banking

products and services

7) Religiousness: SIBL enhances economic well-being with the bliss of religious

ethics

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2.7 CORPORATE PROFILE:

Social Islami Bank Ltd (SIBL) was set up in the year 1995 as an open constrained
organization which is occupied with Shariah based business keeping money in the
nation and its usual way of doing things are significantly not quite the same as other
customary banks. This is the second era pioneer Social Islami Bank in this nation
giving web based saving money offices to its clients.

Name of the Company Social Islami Bank Ltd

Legal Form Public Limited Company
Company Registration No C-28763(44)/95
Authorized Capital Taka 10,000,000,000
Paid up Capital Taka 703,14,15,640
Registered Office City Center, Level 19, 20, 21, 22, 28 & 29, 90/1
Motijheel C/A, Dhaka-1000 Phone PABX 88 02
09612001122 FAX 88 02 9568098 Email
info@sibl-bd.com Web www.siblbd.com SWIFT
SOIVBDDH
Tax Payer Identification No 035-200-4971
VAT Registration No 9011046380 Area Code 90101
Credit Rating Agency Emerging Credit Rating Limited. Auditors:
M/S Kazi Zahir Khan & Co. Chartered
Accountants, 67/4, Pioneer Road, Kakrail,
Dhaka-1000
Chairman Major Dr. Md. Rezaul Haque (Retd.)
Managing Director & CEO Md. Shafiqur Rahman
Company Secretary Md. Humayun Kabir
ACS Chief Risk Officer Md. Yunus Ali
Chief Financial Officer Walid Mahmud Sobhani
FCMA Number of 2130
Employees
Number of Branches 111(one hundred eleven)

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 Table 2: Performance of Social Islami Bank (BDT in million)

Indicator Target Actual Actual Achievement Growth

(2014) (2014) (2013)
Deposit 150000 109040.63 95984.8 72.69% 13.60%
Investment 120000 107899.96 85922.33 89.92% 25.58%
Foreign 230000 139910 132374.70 60.83% 5.69%
Exchange
Business
Operating 5500 3964.27 2894.06 72.08% 36.98%

Source: Annual Report 2014 of SIBL

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CHAPTER THREE

ANALYSIS & EVALUTION

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3.1 DEFINITION OF FOREIGN EXCHANGE

Foreign exchange refers to the process or mechanism by which the currency of one
country is converted into the currency of another country. Foreign exchange is the
means and methods by which rights to wealth in a country’s currency are converted
into rights to wealth in another country’s currency. In banks when we talk of foreign
exchange, we refer to the general mechanism by which a bank converts currency of
one country into that of another. Foreign trade gives rise to foreign exchange.
According to foreign exchange regulation act

1947, “Anything that conveys the right to wealth in another country is foreign
exchange”.

Foreign exchange department plays significant roles through providing different

services for the customers. Opening or issuing letters of credit is one or the important
services provided by the banks.

3.2 TYPES OF FOREIGN EXCHANGE FUNCTION

Foreign trades are mainly of two types. These two are: Import Trade & Export Trade.
The import and export trade of Bangladesh is controlled under the Import and Export
Control Act, 1950. In normal sense the imports involve outward remittances and the
export involves inward remittances. The terms and conditions of contracts between
the importers and the exporters and the eventual remittances in foreign countries are
subject to such restrictions and formalities as are laid down from time to time by the
Import and Export Control and Exchange control in their respective jurisdiction which
the importers and exporters must comply with.

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There are three kind of foreign exchange transaction:
 Import
 Export
 Foreign Remittance

F o re ig n E x ch a n g e A ctiv itie s
Import

Export

Remittance

3.2.1 IMPORT

The bank defines import as to bring in, from abroad, something in kind of goods or
services (to behave lawfully). It includes the following services:

Letter of Credit (L/C) opening.

Presentation/Retirement of import documents.

The import mechanism first involves the issuing of a L/C as an instrument by a bank
on behalf of one of its customers, authorizing an individual or a firm to draw draft on
the bank or on one of its correspondents for its account under certain conditions
stipulated in the credit. Secondly the bank import mechanism involves the retirement
of import mechanism on receiving the payment or under certain conditions against the

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security of payments made by the importer in documents stipulating an advance
payment date.

3.2.2 EXPORT

As stated earlier, the foreign trade plays a vital role in the economic advancement
processor nation. So the trend or parameters of foreign trade i.e., import and export is
of great concern to the government of a country. By the term ‘Export’ we mean
carrying of anything from the country of origin to another country in return for a
value. The bankers define ‘Export’ as the sending of visible things outside the country
for sale. The export is important because with the export earnings we met our import
bills

3.2.3 FOREIGN REMITTANCE

Foreign remittance can be stated as the purchase and sale of freely convertible foreign
currency as admissible under Exchange Control Regulations of the country. The
functions of this department are outward and inward remittances of foreign exchange
from one country to another country. In this process of providing this remittance
service, it sells and buys foreign currency.

3.3 AUTHORIZED DEALERS:

For conducting foreign dealings the respective banks need authorization of the central
bank. The respective Banks need” Authorized Dealer License” for conducting this
foreign correspondence. The bank which holds this license is called authorized dealer.
Bangladesh Bank issues this license by seeing the Banks performance and also the
other parties. Authorized dealer means a Bank Authorized by Bangladesh Bank to
deal in foreign exchange under the Foreign Exchange Regulation (FER) Act 1947.

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But there are some persons or firms Authorized by Bangladesh Bank to deal in
foreign Exchange with Limited scope are called Authorized Money Changes. To get a
license for authorization a bank will apply the general manager, foreign exchange
policy department, Bangladesh Bank, Head Office, and Dhaka, complying on the
subsequent conditions. The Bank must have adequate manpower trained in Foreign
Exchange. Prospect to attract reasonable volume of foreign exchange business in the
desired location. The bank meticulously complies with the instruction of Bangladesh
Bank. The bank will commit to deal in Foreign Exchange within the and will submit
periodical returns as instructed by Bangladesh Bank.

3.3.1 AUTHORIZED DEALERSHIP LICENSE

License to deal in foreign exchange are normally granted only to schedule banks that
have offices in Bangladesh, after being satisfied that they have adequate number of
staff/officers properly trained in handling foreign exchange transactions and will be
able to comply with the requirements of the administration of exchange control.
Authorized Dealership License can at any time be withdrawn by Bangladesh Bank if
the bank in whose favor it is issued fails to conduct its business to the satisfaction of
the Bangladesh Bank.

3.3.2 FUNCTIONS OF AUTHORIZED DEALER

Authorized dealer can handle all kinds of Foreign Exchange transactions as per
Foreign Exchange Regulation (FER) Act 1947 under the instruction of Bangladesh
Bank. Following are the main functions of an Authorized Dealer:

 Exchange of Foreign Currencies.

 To make arrangement with Foreign Correspondent.

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 Buying and Selling Foreign currencies & Handling Inward and Outward
Remittance.

 Opening of L/C and Settlement of payment.

Opening and Maintenance of Accounts with Banks Under intimation to BB

Investment in foreign Trade & Export Documents handling

3.3.3 GUIDELINE OF FOREIGN EXCHANGE TRANSACTION

Banks follows three guidelines in foreign exchange transaction. These are as below:

 Guideline for Foreign Exchange Transaction, Voll.1, 2.

 Commerce and Finance Ministry jointly made the rules and procedures of
Import Policy.

 Uniform Custom Practice of Documentary Credit (U.C.P.D.C)

3.4 DOCUMENT USE IN FOREIGN TRADE

As foreign trade involves transaction in between the country, the formalities attached
are complicated and multifarious. The documents used in foreign trade are following:

I. Bill of Exchange

The bill of exchange is a particular through which payment is effected in internal and
international trade. The payment for the goods is received by the seller though the
medium of a bill of exchange (commonly) called draft or bill drawn on the buyer for
the amount depending on the contact. It is a negotiable instrument. Negotiable
instrument act 1881 (section -5) define the bill of exchange as “an instrument in
writing containing an unconditional order” signed by the maker, directing a certain
person to pay a certain sum of money only to, or the order of a certain parson, or to
the bearer of the instruments.

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II. Bill of Lading

It is a document issued by the shipping company or its agent acknowledging the

goods mentioned therein on board the carrying vessel in apparent good order and
condition unless otherwise indicated therein, for shipment to the consignee on terms
and conditions as agreed upon as to their carriage. Bill of Lading is a document of
title to goods entitling the holder to receive the goods as beneficiary on endorsee and
it is with help of this document on receipt from the exporter that importer takes
possession of the goods from the carrying varying vessel at the port of destination.

III. Invoice/Commercial Invoice/Pro-Forma Invoice

It is seller’s bill for merchandise. It contains a description of the goods, the price per
unit, total value of the goods, packing specifications, terms of sale, letter of credit, bill
of lading number, etc.

IV. Marine Insurance Policy

In the international trade marine insurance policy is must to cover the risk of loss on
consignments while they are on seas. The marine insurance is the responsibility of the
buyers (consignee) under FAS, FOB and CFR contacts and the seller
(consignor/shipper) under GIF contact. The policy must be of the type as specified in
the relative contact. It must be properly stamped, negotiable and be endorsed where it
is payable to order

V. Packing List

The exporter must prepared an accurate packing list showing item by item, the
contents of the consignment will enable to receive the shipment to check the contents
of the goods, number and marks of the packages, quantity, per package net weight,
gross weight, measurement etc.

VI. Inspection certificate

Inspection certificate by an established inspection authority is needed under some

contracts or by some country.

VII. Bill of Entry

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A bill of entry is a document which contains the particulars of the imported goods as
well as the amount of customs duty payable.

VIII. Certified Invoice

Is an invoice bearing a signed statement by someone in the importers country that has
inspected the goods and found that the goods are in accordance with the specific
contact of the Pro-forma invoice and the goods are of a specific country of origin

IX. Export Form

All exports must be declared on EXP Form. These forms will be supplied by the
Authorized Dealers for use of the exporter. The Authorized Dealers should, before
certifying any export form, ensure that the exporter is registered with the CCI & E
under the Registration (Importers and Exporters) Order 1952. The registration number
should be quoted on the relative EXP Form.

X. Trust Receive

At times, the documents of title to goods (not the bill) are delivered by the banker to
the importer against trust receipt. This is done in exceptional cases to valued
customer.

3.5 PAYMENT METHOD FOR INTERNATIONAL

TRADE:

In general five basic methods of payment are used to settle international transaction,
each with a different degree of risk to the exporter and importer. These are:

Prepayment: Under the prepayment method, the exporter will not ship the goods until
the buyer has remitted payment to the exporter.

Letter of Credit: A letter of credit (L/C) is an instrument issued by a bank on behalf of

the importers (buyer) promising to pay the exporter (beneficiary) upon presentation of
shipping documents in compliance with the terms stipulated therein.

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Draft (bill of exchange): A draft (bill of exchange) is an unconditional promise drawn
by one party, usually the exporter, instructing the buyer to pay the face amount of the
draft upon presentation.

Consignment: under a consignment arrangement, the exporters ship the goods to the
importer while still retaining actual title to the merchandise. Open Account: The
opposite of prepayment is the open account transaction in which the exporters ships
the merchandise and expect the buyer to remit payment according to the agreed upon
terms.

3.6 DIFFERENT PARTIES IN FOREIGN

EXCHANGE

Normally the following parties are involved to a documentary credit:

i. Importer

The buyer or the importer is he who initiates the credit. He applies to bank for issue
foreign a documentary credit. The obligations between the importer and the issuing
bank are governed by the application-cum-agreement submitted by the importer to the
bank. He is bound to reimburse the bank, which effects payment or incurred a
deferred payment undertaking or has accepted or negotiated under the credit as per
terms, and to take up the documents.

ii. Opening Bank

The issuing or opening bank is the importer’s bank and it issues a letter of credit
normally pursuant to the terms of sales contract as set out in the application for the
credit by the importer. The issuing bank should nominate the bank, which is
authorized to pay or to accept drafts or to negotiate, unless the credit allows
negotiation by any bank.

iii. Exporter

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The seller or exporter is the beneficiary of the credit. The letter of credit is opened in
his favor and addressed to him. The beneficiary has the obligation to make export as
per the contract and produce the documents as required by the credit.

iv. The Advising Bank

It is the bank in the exporter’s country (normally the exporter’s bank), which is
usually the foreign correspondent of importer’s bank through which the L/C is
advised to the supplier. If the intermediary bank simply advises/notifies the L/C to the
exporter part, it is called “Advising Bank”.

v. The Confirming Bank

If the advising bank also adds its own undertaking to honor the credit while advising
the same to the beneficiary, he becomes the confirming bank. In addition, becomes
liable to pay for documents in conformity with the L/C’s terms and conditions. The
liability of the confirming bank is the primary liability and it is not contingent on the
fulfillment of the obligation by the issuing bank.

vi. The Accepting Bank

Accepting bank is the bank nominated in the letter of credit to accept bills drawn
under the credit. If the bank so nominated accepts the nomination, its responsibility to
the beneficiary is not only to accept the drafts drawn but also to make payment on
their due dates.

vii. The Paying Bank

Paying bank is a bank in the beneficiary’s country nominated in the letter of credit to
make payment against documents to be tendered under the credit. Paying Bank must
examine all documents with reasonable care to ascertain that these are drawn in
accordance with the terms and conditions of the credit.

viii. Reimbursing Bank

The issuing bank may indicate in the credit the name of a bank. From whom the
paying/negotiating bank can obtain reimbursement. The documents are sent to the
issuing bank. The negotiating/paying bank simultaneously makes a claim with the
reimbursing bank for the payment effected. Normally the reimbursing bank would be
the bank with which the issuing bank maintains an account.

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ix. The Transferring Bank

If the L/C is transferable, then the 1st beneficiary of the L/C may transfer the L/C to
the 2nd beneficiary, through a bank nominated by the Issuing Bank. This bank is
called the Transferring.

3.7 ROLE OF BANGLADESH BANK IN FOREIGN

EXCHANGE

Bangladesh Bank is the regulatory authority in case of all commercial banks’

operation. It provides specific rules and regulation for all types of banking activities.
The foreign exchange department is a bank regulated under the Foreign Exchange
Regulation Act, 1947 and there is also a guideline for foreign exchange transaction
which was passed in 2009. The foreign exchange regulation acts are as follows in
brief:

This Act may be called the Foreign Exchange Regulation Act, 1947.

It extends to the whole of Bangladesh and applies to all citizens of Bangladesh and
persons in the service of the Republic wherever they may be.

It shall come into force on such date as the Government may, by notification in the
official Gazette, appoint in this behalf security the principal of or interest on which is
payable in any foreign

3.7.1 RESTRICTION ON DEALING IN FOREIGN EXCHANGE

Except with the previous general or special permission of the Bangladesh Bank, no
person other than an authorized dealer shall in Bangladesh and no person resident in
Bangladesh other than an authorized dealer shall outside Bangladesh, buy or borrow

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from, or sell or lend to, or exchange with, any person not being an authorized dealer,
any foreign exchange.

Except with the previous general or special permission of the Bangladesh Bank, no
person whether an authorized dealer or otherwise, shall enter into any transaction
which provides for the conversion of Bangladesh currency into foreign currency or
foreign currency into Bangladesh currency at rates of exchange other than the rates
for the time being authorized by the Bangladesh Bank.

Where any foreign exchange is acquired by any person other than an authorized
dealer for any particular purpose, or where any person has been permitted
conditionally to acquire foreign exchange, the said person shall not use the foreign
exchange so acquired otherwise than for that purpose or, as the case may be, fail to
comply with any condition to which the permission granted to him is subject, and
where any foreign exchange so acquired cannot be so used or, as the case may be, the
conditions cannot be complied with, the said person shall without delay sell the
foreign exchange to an authorized dealer.

3.7.2 RESTRICTION ON IMPORT AND EXPORT

The Government may, by notification in the official Gazette, order that subject to
such exemptions, if any, as may be contained in the notification, no person shall,
except with the general or special permission of the Bangladesh Bank and on payment
of the fee, if any, prescribed bring or send into Bangladesh any gold or silver or any
currency notes or bank notes or coins whether Bangladesh or foreign.

No person shall, except with the general or special permission of the Bangladesh
Bank or the written permission of a person authorized in this behalf by the
Bangladesh Bank, take or send out of Bangladesh any gold, jewelers or precious
stones, or Bangladesh currency notes, bank notes or coins or foreign exchange.

The restrictions imposed by sub-section (1 and 2) shall be deemed to have been

imposed under section 16 of the Customs Act, 1969, without prejudice to the

Page | 23
provisions of section 23 of this Act, and all the provisions of that Act shall have effect
accordingly.

3.8 TREND ANALYSIS

Trend of Import, Export & Remittance

3.8.1 Import Business of SIBL (2013-2017):

Figure 1: Trend in Import of SIBL since 2013-2017

Year Import
2013 39459
2014 68198
2015 76986
2016 73859
2017 79024

Import
90000

80000

70000

60000

50000

40000

30000

20000

10000

0
2013 2014 2015 2016 2017

Import

BDT in million

Page | 24
Source: Annual Report 2013 - 2017 of SIBL

Page | 25
Interpretation:

The above graphical description shows Imports Business Social Islami Bank Ltd
(SIBL), (2013 to 2017). In FY 2015 (12984.31 million) the highest increase in
Imports Business have been happened comparable and the other FY but in FY 2016
(9153.89 million) the lowest in Imports Business. So here we can see a difference
between these 2015 and 2016 following year. But the trend of Import Business of the
SIBL is overall increasing and from (2013 to 2017).

3.8.2 Export Business of SIBL (2013-2017):

Figure 2: Trend of Export of SIBL since 20013-2017 (BDT in millions)

Year Export
2013 21372
2014 34975
2015 42712
2016 51775
2017 53044
BDT in million

Export
60000

50000

40000

30000

20000

10000

0
2013 2014 2015 2016 2017

Export

Source: Annual Report 2013 - 2017 of SIBL

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Interpretation:

The above graphical presentation shows Imports Business of Social Islami Bank Ltd
(SIBL), (2013 to 2017). In FY2015 the highest increase in Imports Business have
been happened contrasted and the other FY yet in FY 2016 the lowest in Imports
Business. Here we can see in these years there have a difference of (17814.40 -
12759.28) = 5055.12 million in export business But the trend of export Business of
the SIBL is overall increasing down from (2013 to 2017).

3.8.3 Foreign Remittance Business of SIBL (2013-2017):

Year Remittance
2013 1099
2014 5135
2015 6822
2016 6740
2017 7840

Figure5 .3: Trend in Remittance of SIBL since 2013-2017 (BDT in million)

Remittance
9000

8000 7840

7000 6822 6740

6000
5135
5000

4000

3000

2000
1099
1000

0
2013 2014 2015 2016 2017

Remittance

Source: Annual Report 2013-2017 of SIBL

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Interpretation:

The above graphical presentation shows Foreign Remittance Business of Social Islami
Bank Limited (SIBL), (2013 to 2017). In FY2017 (92812.4 million) the highest
increased in Foreign Remittance Business have been occurred compared with the
other FY but in FY 2013(57832.7 million) the lowest Foreign Remittance Business.
Here we can see in 2013 to 2017 there have a difference of 34979.7 million dollar of
remittance business. But the trend of Foreign Remittance Business of the SIBL is
overall increasing and from (2013 to 2017).

3.9 PERFORMANCE ANALYSIS

3.9.1 Performance in Foreign Trade

The performance of the Social Islami Bank in the last five (5) years especially in the
sector of Import, Export, Remittance and comparison of the data with the operating
Profit of the Bank is graphically presented below:

Chart Title
90000

80000

70000

60000

50000

40000

30000

20000

10000

0
2013 2014 2015 2016 2017

Import Export Remittance Operating Income

Source: Annual Report 2014 of SIBL

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The overall performance regarding foreign trade operation from the year 2010-2014
are placed in this figure .According to this figure an official Year 2014 will be a
milestone regarding its overall performance in foreign trade. SIBL has established
Centralized Trade Processing Unit (CTPU) for serving customers in a more effective
and efficient way. For the branches around Dhaka Division and Chittagong Division,
two base stations have been established at Foreign Exchange Branch, Dhaka and
Agrabad Branch of Chittagong respectively. All the branches under CTPU Dhaka and
Chittagong are able to serve their clients through these base stations. As a result,
processing becomes faster and efficient. It has established the concept of any branch
banking. As a result, the operating income has increased significantly.

3.9.2 Percentage of total L/C opened in 2017 & 2016

Percentage of total L/C opens in 2017

6%
industry material
14%
garments accessories
Oil
8%
52% Consumer goods

12% Capital machinery

Other
8%

Figure 4: Percentage of Total L/C opened at 2017

Source: Annual Report 2014 of SIBL

From this graphical presentation of the pie chat it has shown that 52% L/C opened in
Industrial Raw material purpose which secured the majority portion of the L/C opened

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than 8% in consumers goods,14 % in capital machinery and 12% in oil sectors in
2017.

Figure 5: Percentage of Total L/C opened at 2016

Percentage of total L/C opens in 2016

7% industry material
12% garments accessories
Oil
Consumer goods
11% 50% Capital machinery
Other
7%
13%

Source: Annual Report 2014 of SIBL

From this graphical presentation of the pie chat it has shown that 50% L/C opened in
Industrial Raw material purpose which secured the majority portion of the L/C opened
than 11% in consumer’s goods, 12 % in capital machinery 7% in oil and 7% in other
sectors in 2016.

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3.10 Regression Analysis:

3.10.1 Dictionary of accounting terms for:

Regression analysis statistical procedure for estimating the average relationship
between the dependent on variable (sales, for example) and one or more independent
variables (price and advertising, for example), It is a popularly used method for
estimating the cost-volume formula(y - a + bx). Simple regression involves one
independent variable, e.g., direct labor-hours or machine-hours alone, whereas
multiple regression involves two or more independent variables. Assuming a linear
relationship, the simple regression model indicates that the relationship is y = a + bx,
where a, and b are unknown constants, called regression coefficients. The multiple
regression model is y = ao + aixi + ax2t . + axk, where a's are coefficients and x's
represent the number of independent variables. In estimating the cost-volume formula,
regression analysis attempts to find a line of best fit. To find the line of best fit, a
technique called the least-squares method is widely used. Dictionary of Banking
Terms for: regression analysis statistical techniques that quantify the relationship
between two or more variables. The objective is quantitative prediction or forecasting
to find out whether or not the variables being examined can be expected to be closely
related to a larger population group. Regression analysis is a frequently used
statistical tool in Asset-Liability Management, credit scoring, and econometrics much
econometric theory relates to theoretical problems arising from the application of
various regression models, based on certain assumptions about economic activity.
Regression analysis allows a bank to set credit criteria for the general public, and
build a statistical formula predicting how new accounts will perform in the future, that
is, their ability to repay debt, by studying a sample of existing accounts. The banker
wants to know the credit characteristics of consumers who are good payers, and those
who are poor payers. Consumer credit ideally is suitable for statistical tools such as
regression analysis because consumer behavior in handling credit is fairly predictable,
based on a study of previous credit experience; even the credit losses are predictable.

Page | 31
3.10.2 Dictionary of Business Terms for:
Regression analysis statistical technique used to establish the relationship of a
dependent variable, such as the sales of a company, and one or more independent
variables, such as family formations, gross national product, per capita income, and
other economic indicators. By measuring exactly how large and significant each
independent variable has historically been in its relation to the dependent variable, the
future value of the dependent variable can be predicted, Essentially, regression
analysis attempts to measure the degree of correlation between dependent and
independent variables, thereby establishing the latter's predictive value. Dictionary of
Finance and Investment Terms for: regression analysis statistical technique used to
establish the relationship of a dependent variable, such as the sales of a company, and
one or more independent variables, such as family formations, Gross Domestic
Product, per capita income, and other indicators. Bring exactly how large and
significant each independent variable has historically been in its relation to the
dependent variable, the future value of the dependent variable can be predicted.
Essentially, regression analysis attempts to measure the degree of correlation between
the dependent and independent variables, thereby establishing the latter's predictive
value. For example, a manufacturer of baby food might want to determine the
relationship between sales and housing starts as part of a sales forecast. Using a
technique called a scatter graph, it might plot on the X and Yaxes the historical sales
for ten years and the historical annual housing starts for the same period. Aline
connecting the average dots, called the regression line, and would reveal the degree of
correlation between the two factors by showing the amount of unexplained variation-
represented by the dots falling outside the line. Thus, if the regression line connected
all the dots, it would demonstrate a direct relationship between baby food sales and
housing starts, meaning that one could be predicted on the basis of the other. The
proportion of dots scattered outside the regression line would indicate, on the other
hand, the degree to which the relationship was less direct, a high enough degree of
unexplained variation meaning there was no meaningful relationship and that housing
starts have no predictive value in terms of baby food sales. This proportion of
unexplained variations is termed the coefficient of determination, and its square root
the correlation coefficient.

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3.10.3 The correlation coefficient is the ultimate yardstick of
regression analysis:
A correlation coefficient of 1 means the relationship is direct-baby food and housing
starts move together; -1 means there is a negative relationship- the more housing
starts there are, the less baby food is sold; a coefficient of zero means there is no
relationship between the two factors.

Comment:

From the graph we can see that return on foreign remittance ratio was varying year by
year. In 2012 the return on foreign remittance of Social Islami Bank Ltd. was 8.41%
and in 2013 increased on 32.33%. In 2014 to 2015 was on decline position and
decreased from 32.33% to 25.96%. Again in 2016 it will be reach at 28.54%. So, we
can say that foreign remittance ratio was on up & down position.

3.11 Camel Ratings

Assest
Quality

Capital Management
Adequacy Quality

Camels

Sensitivity Earnings

Liquidity

CAMELS rating are a supervisory tool to assess and review the financial soundness of
the banking companies.

Page | 33
It helps Bangladesh Bank (BB) to remain always vigilant over the banks and identify
those banking companies which have problems and require close supervision. The
previous CAMELS rating guideline has been reviewed by the Department of Off -site
Supervision with a view to assessing the banks' soundness more accurately, reflecting
the banks' financial condition and management issues more pragmatically, making the
guideline more country perspective oriented and making an effort to address good
governance issues in the banking sector. The revised CAMELS rating guideline came
into effect from 2013. Along with emphasizing best quality capital, investments in the
capital market, the amount of off -balance sheet items in comparison to the capital of
the banks, large loan exposures to capital, etc. are considered to calculate capital
adequacy. HHI (Herfindahl- Hirschman Index) has been incorporated in the updated
CAMELS rating guideline to analyze loan concentration, as a complement to
percentages of classified loans and provisioning in the evaluation of asset quality. The
amount of loan disbursed to different risk associated sectors has been included as
well.

3.11.1 Capital Adequacy:

Examiners assess institutions' capital adequacy through capital trend analysis.
Examiners also check if institutions comply with regulations pertaining to risk-based
net worth requirement. To get a high capital adequacy rating, institutions must also
comply with interest and dividend rules and practices.

3.11.2 Asset Quality:

Asset quality covers an institutional loan's quality which reflects the earnings of the
institution. Assessing asset quality involves rating investment risk factors that the
company may face and comparing them to the company's capital earnings. This shows
the stability of the company when faced with particular risks.

This report is mainly founded on Foreign exchange operation of Social Islami Bank
Ltd. The mechanism of foreign exchange doesn't explain in a single word, it's a vast
procedure. Govt. is taking necessary steps to enhance its export sector through the
help of market mechanism as well as different financial and influential incentives to
exporters. IN the line of liberalization of our economic sector, our current account has
already been made adaptable along with floating exchange rate. The Social Islami
Bank already has shown impressive performance in different financial sector

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3.12 SWOT Analysis

SWOT Analysis is an important tool for estimating the company's Strengths,

Weaknesses, Opportunities and Threats. It helps the organization to recognize how to
evaluate its performance and scan the macro environment, which in turn would help
the organization to navigate in the raging ocean of competition.

The abbreviation for SWOT stands for-

SWOT analysis of SIBL's foreign exchange function is given below:

3.12.1 Strengths
1. Central trade processing unit (CTPU): In order to smoothen trade finance,
founding of 'central trade processing unit (CTPU)' was a timely decision and has
changed the total process of foreign exchange business through speed up of the
facility and the business potential of SIBL. They have CTPU facilities based in Dhaka
and Chittagong.

2. Efficient Employee: At present, the bank has 21 well equipped Authorized Dealer
Branches with highly trained professionals to meet different requirements of import
and export based clients.

3. Minimum risk: Foreign exchange risk is negligible because of the transactions are
conceded out on behalf of customers against underlying LC commitments. If the
importer fails to pay the amount to the exporter, then the bank pays on behalf of the
importer but the payment is made against import documents or in the form of loan
against imported merchandise.

4. Well-structured Foreign Exchange Department: Foreign exchange risks are

managed and checked by well-structured Foreign exchange department. Foreign
exchange operation is concentrated on funding operation and foreign exchange
dealings.

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3.12.2 Weaknesses
 Sometimes risk may not be appropriately measured and can cause holdings
loss
 Foreign exchange department sometimes do not work well in dealing foreign
exchange business.
 Sometimes they can't estimate foreign exchange rate properly it may cause
future trouble.
 Sometimes clients do not show the genuine price of imported product to avoid
customer duty which generates risk for banker but they have nothing to do for
that.
 If information from the correspondents and subsidiaries are not readily
available, then the business may be hampered.

3.12.3 Opportunities
 SIBL endured within the prescribed holding limits set by Bangladesh Bank.
 All foreign exchange transactions are revaluated at Market to Market rate as
determined by Bangladesh Bank
 It has well managed holdings for transferring remittance and this is the first
initiative of any Islamic bank in Bangladesh ever.
 It has good impression to public which ensure future vision of foreign
exchange income of the bank.

3.12.4 Threats
 Major threat for foreign exchange department is the instability of prices of
foreign currency
 SIBL has to strive with the other private commercial & Islamic bank &
foreign banks in case of its foreign exchange business
 Govt. policy change may affect its functions.
 Lack of responsiveness of people is also responsible for not using the proper
way in transferring remittance.
 The foreign exchange business is also facing loss because of not transferring
the remittance to the suitable way.

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 CHAPTER FOUR

FINDINGS, RECOMMENDATIONS &

CONCLUSIONS

Page | 37
4.1 FINDING OF THE REPORT

Major findings of the study are as follows:

 Import and export financing is increasing year to year.

 Foreign exchange related fees are not clear to the customer.

 The growth rate of import business has increased from 2010 to 2012.
In 2013, the growth rate of import business fall a little but in 2014 it increased.
The growth rate of export business increases during last five years, while the
growth rate of remittance business has increased during last five years.

 In opening L/C, bank sometimes rejects the small business enterprise,

which ultimately decreases the bank’s profit.

 SIBL is not interested to open more L/C’s with higher values. It means
that bank don’t willing to increase the value of the limit on L/C value, which
ultimately decrease the potential clients.

 The officers are helpful to the customer’s but most of the time they are
try to provide quality service to the known person, it may loses general
customers.

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4.2 RECOMMENDATIONS

After analysis of foreign exchange operation of Social Islami Bank Limited (SIBL) I
would like to make some recommendation that may improve their export, import and
foreign remittance in future.

1. They should improve latest technologies and skilled manpower for operating
foreign exchange Business:

2. They should come out Backward Legal Islamic Framework for conducting foreign
exchange business.

3. They should solve backward linkage for foreign Exchange business which is
related back to back L/C.

4. They should open L/C for the product like energy drinks, CD, VCD and DVD.

5. If the Bank wants to increase their total foreign business then they should increase
total export, Import and remittance. So they need increase export and import.

6. Ensure high level customer service.

7. The Bank should follow Islami Sharia strictly in every of its operation.

8. Bank should introduce ATM system.

9. Should introduce one-stop service center.

10. Bank should introduce consumer credit scheme.

11. Bank should increase their office space and take more care in interior decoration.

12. Some new investment schemes are to be introduced for socio-economic

development and welfare of the distressed humanity.

Finally, the Bank should have the vision to automate it's all operations and
functionalities and should be committed to achieve the goal to be a lead Bank in the
country both in service and in technical aspect and to fulfill the requirements of mass
people.

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4.3 CONCUSION

Social Islami Bank is a bank with excellence. During the time of my internship
program I have gathered lots of practical knowledge and experiences and finally
agreed this statement to be true. Working and get involved in such a reputed bank is
really a great pleasure for me. This internship program is obviously helpful for further
thinking about my career. I must thankful to all of the officials with whom I have
worked and who have given me appropriate opportunities to apply my theoretical
knowledge in the practical field.

SIBL offers full range of banking services that include deposit banking, investment,
export, import and financing national and international remittance facilities etc. The
strategy of Social Islami Bank Ltd. is to add more strength to the company’s
performance by highlighting the areas where they have the advantage today and
where they can grow faster than their competitors.

This report mainly based on Foreign exchange operation of Social Islami Bank Ltd.
The mechanism of foreign exchange doesn’t explain in a single word, it’s a vast
procedure. Government is taking necessary steps to enhance its Export sector through
the help of market mechanism as well as different financial and institutional
incentives to the exporters. At the same time SIBL is taking necessary steps to attract
foreign investments and creating efficient human resource to fight the edge of
competition. In the line of liberalization of our economic sector, our current account
has already been made convertible along with floating exchange rate.

At last concluded remarks that Social Islami Bank’s Foreign exchange activities
strategy is to add more strength to the company’s performance by highlighting the
areas where they have the advantage today and where they can grow faster than their
competitors. Along with maintaining standard level of services Social Islami Bank
Ltd. is playing a leading role in economic development of the country I think Social
Islami Bank is contributing greatly to the economy of Bangladesh along with high
level of corporate social responsibility. Working and get involved in such a reputed
bank is really a great pleasure for me. This internship program is obviously helpful for
further thinking about my future career planning.

Page | 40
 Bibliography

Books and Articles

1. Ali, S.A. (1995), "Foreign Exchange and Finance of Foreign Trade", 1st Edition,
Lita Academics, Dhaka.
2. Ali, S. A, (May 2005), "Foreign Exchange && Risk Management", 1st Edition,
Mowla Brothers, Dhaka.
3. S.M. Ahsan Habib & Md. Sajjdur Rahman, International Trade and Foreign
Exchange [Published by BIBM]
4. Bangladesh Bank (1997), Guideline for Foreign Exchange Transactions, Vol-1,
Dhaka.
5. Bangladesh Bank's Monthly major Economic Trends, Statistics table
6. Chowdhury L. (2011), A Text Book on Foreign Exchange, Fifth Edition, Dhaka:
7. Foreign Exchange Regulation Act, 1947; Act No. VII of 1947

Websites
1. www.siblbd.com
2. http://www.facebook.com/SIBLDHAKA
3. www.bangladeshinfo.com
4. www.bangladesh-bank.org

Reports
1. Annual Report of SIBL 2017
2. Annual Report of SIBL 2016
3. Annual Report of SIBL 2015
4. Annual Report of SIBL 2014

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