An Internship Report On Quot Foreign Exchange Operation And Performance Of MTB Quot

Submitted to: Submitted by:
Mr. Md. Abdul Halim Md. Delowar Hossain
Assistant Professor Roll no: 142121
Department of Finance and Banking
Islamic University, Kushtia
Reg. no:1489
Session:2014-15
This report is to be submitted to the Department of Finance & Banking, Islamic University, Kushtia
in partial fulfillment of the requirement for the degree of Master of Business Administration (MBA)
An Internship Report
on
Date of Submission: 28th
January, 2018

Department of Finance & Banking, IU, Kushtia Page 2
“Foreign Exchange Operation and Performance of MTB”
Letter of Transmittal
28 January, 2018
Md. Abdul Halim
Assistant professor
Department of Finance & Banking
Islamic University
Subject: Submission of Internship Report.
Dear Sir,
I would like to submit this report titled ‘Foreign Exchange Operation and Performance of Mutual
Trust Bank Limited (MTBL)’ prepared as a part of the requirement for my Internship at Mutual Trust
Bank, Kushtia Branch under the MBA Program of Department of Finance & Banking Islamic University.
I started my internship period at the organization on October 28, 2017 and have completed my internship
on January 28, 2018. During this period I have across different banking functions and responsibilities
undertaken at MTB Kushtia Branch. It has been an enlightening experience as I learnt about various
branch level functions in different departments such as General Banking, Foreign Exchange Department
and Clearing. After learning about the profile of Mutual Trust Bank and considering the bank‘s Kushtia
business operations, I decided it would be appropriate to choose an area relating foreign exchange
performance of the bank because of its being one of the major business operation of Mutual Trust Bank.
As such, I have chosen to prepare my report on ‘Foreign Exchange Operation and Performance of
Mutual Trust Bank Limited (MTBL)’. In this report, I have ventured to apply the knowledge and
guidelines from my education span and to focus on evaluating the foreign exchange performance and the
overall foreign exchange management activities of Mutual Trust Bank.
Despite several limitations faced while preparing the report, I have endeavored to make the study
thorough as possible. I sincerely expect that this report accomplishes the objectives and requirements of
my internship and that it finds your acceptance. Please accept my sincere thanks and gratitude for the
guidance, support and time and should you require any elaboration on any issue, I shall be glad to pursue.
Yours Faithfully
………………………..
Md. Delowar Hossain
Roll no: 142121
Reg; no: 1489
Session: 2014-2015

Certificate of the Supervisor
To Whom It May Concern
This is to certify that the internship report on ‘Foreign Exchange Operation and
Performance of Mutual Trust Bank Limited (MTBL)’for the degree of
Master of Business Administration (MBA) at the Department Finance &
Banking, Islamic University carried out by Md. Delowar Hossain, Roll no.-
142121, under my supervision. I have fully monitored his effort in the process of
completing this report.
I, hereby, acknowledge his work & wish him all the success in future.
………………………………
Md. Abdul Halim
Assistant Professor

Declaration
I do hereby solemnly declare that the work presented in this Internship Report titled ‘Foreign
Exchange Operation and Performance of Mutual Trust Bank Limited (MTBL)’ is an original work
done by me under the supervision of Md. Abdul Halim, Assistant Professor, Department of
Finance and Banking , Islamic University, Kushtia.
No part of this report has been previously submitted to any other Universities/ Colleges/
Institutions/ Organizations for any academic certificate/ degree/ diploma/ qualification.
The work I have presented does not breach of any existing copyright and no portion of this
copied from any work done earlier for a degree or otherwise.
I further undertake to indemnify the department against any loss or damage arising from breach
of the forgoing obligation, if any.
…………………………..
Md. Delowar Hossain
Roll no: 142121
Reg; no: 1489
Session: 2014-2015

Acknowledgement
At the very beginning I would like to extend my sincere gratitude to all those who have bestowed
their assistance and cooperation upon the preparation of this report titled ‘Foreign Exchange
Operation and Performance of Mutual Trust Bank Limited (MTBL)’.
I take this opportunity to thank everyone who took concern in the successful completion of this
internship. To put more specifically, I express my sincere gratitude to my Supervisor Mr. Abdul
Halim, Assistant Prof. Department of Finance & banking, Islamic University, Kushtia, for his
direction, prudent supervision and moral support on the ground of which I have put effort to
obtain knowledge on a new area.
I would like to thank the Human Resource Management (HRM) Department of Mutual Trust
Bank Limited for appointing me as intern in the bank, without the support of which I this report
couldn‘t have come into existence. In particular, I would like to thank Md. Nasir Uddin, the
Branch Head of MTB Kushtia Branch who cordially granted my access to branch specific
information and guided me through every step of difficulties I encountered during my internship
period.
I specially acknowledge the contribution of Darwin prince Goswami (JAVP & Deputy Manager),
MTBL (Kushtia Branch) for providing precious information and in depth idea of the Foreign
Exchange management practices performed at different levels of Mutual Trust Bank Limited. I
also express my sincere gratitude to GB Department officials who acquainted me with the
different practical functions undertaken at the General Banking Department of the bank.
Finally, I would show my gratitude to all the individuals who helped me to prepare this report
during this time.
------------------------
Md. Delowar Hossain
Roll no: 142121
Reg; no: 1489
Session: 2014-2015
Islamic University, Kushtia.

Executive Summary
Foreign Exchange we mean foreign currencies or more commonly, claims to foreign money
balances. It includes all monetary instruments which give residents of one country a financial
claim on another country. The use of foreign exchange is a country‗s principal means of settling
its transactions with other countries.
In the broader sense, the foreign exchange is related to the mechanism of foreign payments. It
refers to the system whereby one currency is exchanged for or converted into another Foreign
exchange also refers to the global market where currencies are traded virtually around-the-clock.
The term foreign exchange is usually abbreviated as "forex" and occasionally as "FX."
Within its 17th
year of operations, Mutual Trust Bank Limited has opened 110 branches across
the country and has been dealing with a wide variety of Foreign exchange Credit and Deposit
Products since its emergence. This study deals with the performance of foreign exchange and
the foreign exchange management practice of Mutual Trust Bank. The study is entitled as
‘Foreign Exchange Operation and Performance of Mutual Trust Bank Limited (MTBL)’.
In this report consist up with four individual parts. In here the First part is the Introduction part &
here briefly describe Rationale of the Study, Objective, Methodology, scope, Limitations and My
Experiences during the report.
The Second part is Theoretical Aspects and here describe Concepts, Principals, techniques, Legal
aspects etc. The third part is practical issues of Mutual Trust Bank (MTB), here described about
the Overview of Mutual Trust Bank, financial analysis, Foreign Exchange Operation analysis,
SWOT analysis, and findings. The Final part is Concluding Notes here describe
Recommendations and Conclusion.
Foreign exchange is an important department of Mutual Trust Bank, which deals with import,
export and foreign remittances. It bridges between importers and exporters. This department is
playing an important role in enhancing export earnings, which aids economic growth and in turn
it helps for the economic development. On the other hand, it also helps to meet those goods and
service, which are most demandable and not adequate in our country.

Department of Finance and Banking,IU, Kushtia Page 6
Table of Contents
Letter of Transmittal ....................................................................................................................... ..2
Certificate of Supervisor................................................................................................................................…3
Declaration.................................................................................................................................................... …4
Acknowledgement .......................................................................................................................... …5
Executive Summary........................................................................................................................ …6
Chapter: 01: Introduction................................................................................................................ ..9
Rationale of the Study: .........................................................................................................9
Objectives: ....................................................................................................................... .....9
METHODOLOGY OF THE STUDY.................................................................................10
Primary Data.. ……………………………………………………………………………..10
Secondary Data……………………………………………………….……………………10
Data Analysis ................................................................................................................. ....11
Scope of the Study.......................................................................................................... .…11
Limitations ..................................................................................................................... .....11
Chapter 02: .......................................................................................................................................12
Organization Overview ....................................................................................................................12
Mission & Vision............................................................................................................ ...…12
Our Vision.....................................................................................................................…..12
Our Mission.............................................................................................................…...12
MTB Core Values.................................................................................................................. .….13
Operational Area....................................................................................................................….13
Management Hierarchy of Mutual Trust Bank Limited: ............................................... …14
Figure 1: Management Hierarchy of Mutual Trust bank (Source-MTB Corporate Intra-net)
................................................................................................................................................. 15
Management Board.........................................................................................................…16
A Brief Overview of the Products of MTBL......................................................................17
Credit Rating of the Bank: ........................................................................................................ …17
Summary of Financial Performance ...................................................................................18
Chapter 03..................................................................................................................................... …19
Theoretical Aspects of Foreign Exchange .................................................................................... …19
Foreign Exchange ...........................................................................................................…19

The History of Foreign Exchange .................................................................................. 19
Foreign Exchange Regulation Act, 1994: ...................................................................... 20
Foreign Exchange Market .............................................................................................. 20
Foreign Exchange Rates................................................................................................. 20
Spot Rate and Forward Rate:............................................................................................ 21
Buying rates and selling rates ........................................................................................... 21
Single rate and multiple rates............................................................................................ 21
Fixed, Flexible and Floating rates:.................................................................................... 21
Risk in foreign exchange................................................................................................ 21
Concepts......................................................................................................................... 22
Some Important Documents of L/C or Documentary Credit .................................................... 24
Import Section:............................................................................................................... 25
Foreign Remittance: ....................................................................................................... 40
Working of this Department.................................................................................................. 40
Inward Foreign Remittance............................................................................................... 41
Outward Foreign Remittance............................................................................................ 41
Remittance Facilities:................................................................................................................ 41
Private Remittances............................................................................................................... 42
Official and Business Travel ................................................................................................. 42
Commercial Remittances....................................................................................................... 42
Chapter: 04.................................................................................................................................... 44
Foreign Exchange Function of MTBL.......................................................................................... 44
Foreign Exchange Department of MTBL.............................................................................. 44
Activities of Foreign Exchange of MTBL ................................................................................ 45
Foreign Remittance Section................................................................................................... 44
Working of this department....................................................................................................... 44
Function of the Remittance Section....................................................................................... 47
Inward Remittance................................................................................................................. 48
Foreign Remittance................................................................................................................ 49
Channel of Foreign Exchange................................................................................................ 51
Formal Channel................................................................................................................. 52

Informal Channel .............................................................................................................. 52
Chapter: 05.................................................................................................................................... 53
Data Analysisand Performance Evaluation................................................................................... 53
Analysis of Findings .............................................................................................................. 53
Total Import ...................................................................................................................... 53
Total Export............................................................................................................................... 54
Competitive preference:............................................................................................................ 55
Major export dealing zone of MTBL ........................................................................................ 56
Inward Remittance .................................................................................................................... 56
Comparative Analysis:.............................................................................................................. 57
Import Comparison of MTB with IBBL: .................................................................................. 58
Export Comparison of MTBL with IBBL................................................................................. 58
Comparison of Foreign Exchange Business.............................................................................. 60
EARNINGS PERSHARE................................................................................................. 61
Compare of EPS to Others bank ............................................................................................... 61
Chapter 6:...................................................................................................................................... 62
Observation................................................................................................................................... 62
Findings.................................................................................................................................. 62
Customers‗ View....................................................................................................................... 62
SWOT Analysis ..................................................................................................................... 63
Strength:............................................................................................................................ 63
Weakness:.................................................................................................................................. 63
Opportunities..................................................................................................................... 63
Threats............................................................................................................................... 63
RECOMMENDATIONS ................................................................................................... 64
CONCLUSION.................................................................................................................. 65
References:.................................................................................................................................... 66

Chapter: 01: Introduction
One of the largest businesses carried out by the commercial bank is foreign trading. Foreign
trade can be easily defined as a business activity, which crosses national boundaries. These may
be between parties or government ones. No country can produce all kinds of goods. From this
sense; this is the origin of foreign trade. When two countries exchange goods or services between
them we can call it foreign trade. The trade among various countries falls for close link between
the parties dealing in trade. The situation calls for expertise in the field of foreign operations. The
bank, which provides such operation, is referred to as rending international banking operation.
Mainly transactions with overseas countries are respects of import; export and foreign remittance
come under the preview of foreign exchange transactions. International trade demands a flow of
goods from seller to buyer and of payment from buyer to seller. In this case the bank plays a vital
role to bridge between the buyer and seller.
In the Mutual Trust Bank Limited, Kushtia Branch, there are nine peoples are working
continuously with great effort and teamwork. They are quite efficient and skilled at what they do.
There are more than 20 clients and 6 countries (China, India, Malaysia, Singapur, Katar, Soudi-
Arab) they are dealing with. They believe in teamwork and extreme hard work.
1.1. Rationale of the Study:
Internship program, being a core academic requirement of the four year MBA program, involves
receiving a realistic training through attending practical work at an organization. The program
facilitates an intern to have a close look into the real-life practice of what are theoretically learnt
in the whole period of his/her study. As a Student of a faculty of business studies majoring in
finance, I was appointed to Mutual Trust Bank Limited, Kushtia Branch under the supervision of
Md. Abdul Halim, Assistant professor, Department of Finance & Banking Islamic University,
Kushtia . As per the academic rule, my supervisor required me to prepare a report on the
basis of the experience gathered during my tenure as an intern and additional studies on
Foreign Exchange Operation Performance of Mutual Trust Bank Limited (MTBL).
1.2. Objectives:
The main objective is to get a clear-cut idea about procedures of foreign exchange
department,how its run its operations step by step every day. Along with the main objective other
objective of report are following:
 To Know the Foreign Exchange operation guideline of MTBL.
 To find out the contributions of foreign exchange business of a bank in its overall
earnings.
 To determine the factors that influences the choice of a bank by the customers.

 To identify the problems faced by the customers and the bankers.
 To evaluate whether the customer service provide by MTBL is good enough for its
congenial existence and growth.
 To evaluate the performance of sanction, disbursement and recovery of foreign trade of
MTBL.
1.3. Methodology of the Study
This study is based on a blended mix of primary and secondary sources of data. However, since
one of the core objectives of the study involves a number of analyses of the Foreign Exchange
performance of MTBL, the dependence on secondary data has been naturally to a greater extent.
Again, for the qualitative analysis of the overall Foreign Exchange management practices at
different level of MTBL, the author‘s observation as an intern in the bank has been used as the
primary data. For the quantitative analyses, different secondary data in internal and external
forms have been used.
1.3.1. Primary Data
Primary data used in this study have chiefly been gathered through observations of the activities
as performed at the Foreign Exchange department of MTBL Kushtia Branch. The author of this
study has been facilitated to undergo a close interaction with the foreign exchange department
officers that resulted in the disclosure of the foreign exchange managing tasks through the
author‘s informal interviews and inquisitions. The data collected at this stage served the
qualitative analysis of this study.
1.3.2. Secondary Data
In order to quantitatively evaluate MTBL‘s performance of foreign exchange through analyzing
ratios and showing their trend, this study had to take inputs from a wide number of secondary
sources. These secondary data can be subsumed into two following categories:
a. Secondary Data from Internal Source: Internal secondary data have been
gathered from the bank‘s own publications. Such data include the Audited Annual
Reports of the Mutual Trust Bank Limited (Up to 2016), the bank‘s website
(www.mutualtrustbank.com), forms, brochures and other documents used in the
credit department and overall branch operations of the Kushtia branch.
b. Secondary Data from External Source: These documents include different
regulatory guidelines issued from Bangladesh Bank such as BRPD circulars,
BASEL accords, Investopedia definitions, books, articles, blogs and journals and
other publications available on the internet son foreign exchange related issues.
Bangladesh Bank website has been used as an important source of the industry
performance the banking industry. Helps have also been inferred from economic
updates of Bangladesh from Websites like www.unnayan.org. A detail of the
secondary data would be available at the end of this study under the section titled
‗References‘.

1.4. Data Analysis
The Foreign Exchange data of Mutual Trust Bank Ltd. will be analyzed in a descriptive manner
1.5. Scope of the Study
The scope of the study is limited to the international Division of Mutual Trust Bank Limited.
This report is a descriptive study which tries to focus on the theories and practices of foreign
exchange operations in the context of the financial institutions in Bangladesh. It will not focus on
the comparable Foreign Exchange practices of other banks. In connection with this effort, a case
study has been conducted on Mutual Trust Bank Limited giving more emphasis on the foreign
exchange side of the institution compared to the other sides.
1.6. Limitations
Audited Annual reports, as available till date, up to 2016 have been used in the analysis,
while the audited financial statements of 2015 and 2016 could have given a sharper update
insight of the foreign exchange performance. The unaudited and incomplete financial
statements were not considered, as they lack notes to the foreign exchange related
particulars necessary for the calculations of this study. A detailed insight of the in-practice
approval and appraisal system performed at the Head Office level could not be possible because
of lack of access to necessary files due to the bank‘s concern of its confidentiality policies.
The personal observation of the author and some secondary data has been considered as the
basis for the qualitative analysis for lack of access to primary files, while listening from the
horse’s mouth could reflect better insights.

Chapter 02: Organization Overview
Mutual Trust Bank is one of the five oldest private commercial banks operating in Bangladesh
that were issued permission during the early ‗90s. The other contemporary banks were Dutch-
Bangla Bank, Al Arafa Islami Bank, Prime Bank, Dhaka Bank and Eastern Bank. These banks
are known as the second generation banks in the country as they have come out of bad loan
culture for the first time in the history of banking in Bangladesh. Mutual Trust bank limited is
licensed as a Scheduled Bank in the private banking sector. The bank has recently opened its
106th branch and in a period of 17 years, it has conspicuously shown a growth through meeting
its capital adequacy requirement of the central bank of Bangladesh. Following information
regarding the commencement of the bank have been adopted from the bank‘s website
(www.mutualtrustbanklimited.com):
Mutual Trust Bank was incorporated as a Public Limited Company in 1999, under the
Companies Act 1994. The company had an Authorized Share Capital of BDT 1,000,000,000
divided into 10,000,000 ordinary shares of BDT 100 each during its incorporation. Currently, the
Authorized Share Capital of the company is BDT 10,000,000,000 divided into 1,000,000,000
ordinary shares of BDT 10 each. The Company was also issued Certificate for Commencement
of Business on the same day and was granted license on October 05, 1999 by Bangladesh Bank
under the Banking Companies Act 1991 and started its banking operation on October 24, 1999.
According to the Memorandum of Association and as licensed by Bangladesh Bank under the
provisions of the Banking Companies Act 1991, the Company started its banking operation.
2.1. Mission & Vision
2.1.1. Our Vision
Mutual Trust Bank‘s vision is based on a philosophy known as MTB3V. We envision
MTB to be:
 One of the best performing banks in Bangladesh
 The bank of choice
 A truly world-class bank
2.1.2. Our Mission
We aspire to be the most admired financial institution in the country, recognized as a
dynamic, innovative and client focused company that offers an array of products and
services in the search for excellence and to create an impressive economic value.

2.2. MTB Core Values
 Commitment:
Shareholders – Create sustainable economic value for our shareholders by utilizing an
honest and efficient business methodology.
Community – Committed to serve the society through employment creation, support
community projects and events and be a responsible corporate citizen.
Customers – Render state-of-the-art service to our customers by offering diversified
products and by aspiring to fulfill their banking needs to the best of our abilities.
Employees – We rely on the inherent merits of the employee and honor our relation as a
part of this renowned financial institution. We work together to celebrate and reward
unique backgrounds, viewpoints, skills and talents of everyone at the work place, no
matter what their job is.
Accountability - As a bank, we are judged solely by the successful execution of our
commitments; we expect and embrace this form of judgment. We are accountable for
providing the highest level of service along with meeting the strict requirements of
regulatory standards and ethical business practices.
Agility - We can see things from different perspectives; we are open to change and not
bound by how we have done things in the past. We can respond rapidly and adjust our
mode of operation to meet stakeholder needs and achieve our goals.
Trust - We value mutual trust, which encompasses transparent and candid
communications among all parties.
2.3. Operational Area
Currently Mutual Trust Bank Limited conducts the following banking operations:
 Wholesale Banking
 Retail Banking
 International Trade Financing
 Small and Medium Enterprises (SME) Banking
 NRB Banking
 Privilege Banking
 Card Services and
 Treasury Operations
MTB operates through its Head Office at Dhaka and the bank carries out international
business through a Global Network of Foreign Correspondent Banks

2.4. Management Hierarchy of Mutual Trust Bank Limited:
Managing Director
Deputy managing director Deputy managing director
(Operations) (Credit and Risk Management)
SVP,
EVP SVP, Financial VP, FAVP,
Operations institution Division Personal HRD
Division Banking
Senior Vice SVP, Audit &
President Risk
Vice Management Senior Assistant
President VP Vice President
Vice
President
Assistant FAVP First
Vice
Assistant
Assistant Vice
present
vice
Present
Chairman
Board of Directors
Figure 1: Management Hierarchy of Mutual Trust bank (Source-MTB Corporate Intra-net)

As the figure depicts, MTBL has a standard organization structure which has compliance and
consistence with the guideline as prescribed by the Bangladesh Bank.
As per their detailed organizational structure relevant with the credit management process, Board
of directors is the source of all power which is delegated by the Managing Director and CEO of
the Bank. Every Divisions and Departments has a divisional and departmental heads, sufficient
manpower is employed under these departmental heads. Officers has to report to their line
managers, Line Mangers has to report to their divisional heads, Divisional heads are accountable
to Deputy Managing Directors, Deputy Managing Director has to report to Managing Director
and CEO. CEO is accountable for his actions to the Board of Directors.
It is relevant to articulate that the MTBL restructured its banking system from Branch Banking to
Centralized Banking in the year 2007. A corporate intra-net is used to centrally control the
branch banking operations from the Head Office

2.5. Management Board

2.6. A Brief Overview of the Products of MTBL
MTB‘s products are broadly classified into four categories, namely:
1. Retail banking products
a. Deposit products
b. Loan Products
Retail products are enjoyed by individuals and institutions. MTB has a wide variety of deposit
products, mainly dividing into 4 categories: Current Deposit (no interest paid), Savings Deposit
(interest paid on a monthly basis), Fixed Deposits and other specific deposit plans that offer
different interest earnings depending on the maturity. Retail Loan Products include Personal
Loan, Auto Loan, Home Loan, Home Equity Loan and Professional Loan. MTB levies different
interest rates (floating) on these credits issued.
2. Wholesale banking products-MTB‘s wholesale banking includes:
a. Term Finance
b. Working Capital Finance
c. Trade Finance
d. Offshore Banking
e. Syndication and Structured Finance.
MTB often term these financing activities as ‗Corporate Finance‘ and the interest rate earned on
these credits amount a greater amount of earnings for MTB.
3. SME Banking: Followings are MTB‘s SME banking products:
 MTB Bhagyobati
 MTB Krishi
 MTB Moushumi
 MTB Revolving Loan
 MTB Small Business Loan
 MTB Digoon
 MTB Green Energy Loan
The Revolving Loan, in the suburb areas is a popular credit scheme.
4. NRB
 NRB Savings A/C
 NRB DPS A/C
 NRB FDR
5. Treasury
 Dibor
 Money Market
 Foreign Exchange
 Primary Dealers Business

Apart from these MTB provides other services such as taking Electricity Bills, Telephone Bills,
Gas Bills etc, though these services are subject to branch specifications.
Credit Rating of the Bank: Mutual Trust Bank was last rated by CRAB, one of the leading
credit rating agencies of the country, in May, 2010 which expired on June 30 2011. The agency
didn‘t rate it further, as per their website suggests. (http://crabrating.com/index.php)
2.7. Summary of Financial Performance:
The following summary has been prepared by taking inputs from the annual report of
Mutual Trust Bank Limited 2012-2016. Since the audited financial statement for the year 2017 is
yet to be published, this study had to depend on the audited reports that were published up to
2016. For this, some facts, such as total branches have reached 110 in number, total number of
employees has increased to a considerable amount etc couldn‘t be included in this table.
BDT Million
Particulars 2016 2015 2014 2013 2012
Authorized Capital 10000 10000 10000 10000 10000
Paid up Capital 3693 3078 2798 2543 2543
Shareholders’
Equity
8929 6770 5449 4834 4815
Total capital 12413 8712 8137 6981 6925
Total Assets 146073 116301 101646 93162 76331
Total Deposits 118405 96065 84373 75140 59051
Total Loan &
Advances
97589 77141 59548 56511 47005
Total Investment 26210 20768 25823 23251 20149
Export 45940 36154 32479 25455 26596
Import 63988 51593 44273 39427 36945
Total contingent
Liabilities
35029 30802 23896 17676 17211
Operating Income 6580 5690 4619 3507 3104
Operating
Expenditure
3769 3087 2593 2175 1899
Profit before
provision & tax
2811 2603 2026 1332 1204
Profit after provision
& tax
1366 962 573 327 404
Total provision
maintained
2835 2388 2297 1828 1483
Earning asset 126017 98026 85324 78807 66665
Price earnings ratio 5.27 7.60 7.96 18.74 20.95
Number of Branches 106 103 92 86 76
Number of
Employees
1801 1586 1378 1317 1269
[Source: Annual reports of MTB, 2012-2016]

Chapter 03: Theoretical Aspects of Foreign Exchange
3.1. Foreign Exchange
By Foreign Exchange we mean foreign currencies or, more commonly, claims to foreign money
balances. It includes all monetary instruments which give residents of one country a financial
claim on another country. The use of foreign exchange is a country‗s principal means of settling
its transactions with other countries.
In the broader sense, the foreign exchange is related to the mechanism of foreign payments. It
refers to the system whereby one currency is exchanged for or converted into another Foreign
exchange also refers to the global market where currencies are traded virtually around-the-clock.
The term foreign exchange is usually abbreviated as "forex" and occasionally as "FX."
3.2. The History of Foreign Exchange
The Forex trading history started in 1875 with the birth of the gold standard monetary. Prior to
1875, countries primarily used gold and silver as a form of international payment. Payment using
gold and silver were hampered by their devaluation according to external factors such as an
increase in the discovery of new deposits, which would lead to a change in supply and demand.
This factor would change the Forex trading history forever.
The aim of the implementation of the gold standard was to guarantee any currency, to set amount
of gold. Currency was now backed by gold, measured in ounces. Countries needed large gold
reserves to back the demand for currency. The price difference of an ounce of gold between two
different currencies now became the foreign exchange rate for those two currencies. This History
of Forex was changed by the birth of an international standard by which foreign exchange could
take place between countries. The gold standard monetary broke down during the start of the
First World War Political turmoil with Germany forced the larger European powers to focus on
military projects. This financial drain on Europe gave way to a lack of gold to back the excess
printing of currency and would determine a new change in the FX trading history.
The abolishment of the gold standard monetary system left a void in the method of foreign
exchange, and changed the path of Forex history. This matter was a concern to the Allied
countries and a convention were held at Bretton Woods, New Hampshire, in July 1944, to solve
this problem. This convention led to the inception of the Bretton Woods monetary system.
This new Bretton Woods monetary system defined the new Forex market history:
 A new method of obtaining a fixed foreign exchange rate.
 The gold standard to be replaced with the US Dollar as the ultimate exchange currency.

 The US Dollar to be the only currency backed by gold.
 The inception of three international authorities to guard over all foreign transactions.
The Bretton Woods monetary system only lasted about 25 years and failed primarily on the basis
of making the US Dollar the only currency to be backed by gold. The U.S announced the end of
the exchange of gold for US Dollars by foreign banks on 15 August 1971
3.3. Foreign Exchange Regulation Act, 1994:
This Act regulates the exchange of foreign currencies, remittances and opening of foreign
currency account under various classifications. According to this law, FC Accounts can be
opened without initial deposits, and bears no interest and both the account holder and the
nominee can operate the account. The entire remittance from adored is free from income tax. It
also states the documents required for the opening of such account.
3.4. Foreign Exchange Market:
The foreign exchange market (Forex, FX, or currency market) is a form of exchange for the
global decentralized trading of international currencies. Financial centers around the world
function as anchors of trading between a wide range of different types of buyers and sellers
around the clock, with the exception of weekends. EBS and Reuters' dealing 3000 are two main
interbank FX trading platforms. The foreign exchange market determines the relative values of
different currencies.
The foreign exchange market is unique because of the following characteristics:
 Its huge trading volume representing the largest asset class in the world leading to high
liquidity
 Its geographical dispersion
 Its continuous operation: 24 hours a day except weekends, i.e., trading from 20:15 GMT
on Sunday until 22:00 GMT Friday
 The variety of factors that affect exchange rates
3.5. Foreign Exchange Rates
A country‗s demand for foreign exchange and the supply of foreign exchange available to it
provide a convenient basis for the determination of foreign exchange rate.
There are as many exchange rates as there are currencies traded. At any given moment it may be
regarded as the price of one currency in terms of another. It is more enlightening, however to
look upon the exchange rate as the price not of foreign money but of documents representing

claims to foreign money. There is, thus, a cluster of rates in the exchange market and not one rate
between any two currencies. Each rate shows some slight variation from the other rate.
3.5.1. Spot Rate and Forward Rate:
The spot rate of exchange is quoted for the immediate delivery of foreign exchange. It is
distinguished from the forward rate which is quoted for the delivery of foreign exchange at a
future date. The spot rate refers to the rate or quotation prevailing at a particular time, the foreign
exchange required being made available on spot. The forward rate, on the other hand, refers to
the rate at which a future contract for foreign currency to buy or to sell is made on the basis of
the spot rates.
3.5.2. Buying rates and selling rates:
Under the exchange control system, when the government or the central bank of the country hold
full control over the purchase and sale of foreign exchange, two different rates may be fixed for
buying and selling foreign currencies.
3.5.3. Single rate and multiple rates:
Ordinarily, the government of a country adopts a single rate vis-à-vis the currency of another
country. But in certain circumstances it may adopt more than one rate- two or even three rates
vis-à-vis another currency. This is known as the system of multiple exchange rates. There may
be one rate for exports, one rate for imports and still another for capital transactions.
3.5.4. Fixed, Flexible and Floating rates:
Fixed exchange rate refers to that rate which is fixed in terms of gold or is pegged to another
currency which has a fixed value in terms of gold. Flexible exchange rate involves keeping the
exchange rate fixed over short periods but allowing it to change from time to time according to
the changed conditions of demand for and the supply of foreign exchange. Floating exchange
rate is that which finds the natural price of the currency in accordance with the demand and
supply conditions in relation to a foreign currency.
3.6. Risk in foreign exchange
Foreign exchange risk (also known as FX risk, exchange rate risk or currency risk) is
a financial risk that exists when a financial transaction is denominated in a currency other than that
of the base currency of the company. Foreign exchange risk also exists when the foreign
subsidiary of a firm maintains financial statements in a currency other than the reporting
currency of the consolidated entity. The risk is that there may be an adverse movement in
the exchange rate of the denomination currency in relation to the base currency before the date
when the transaction is completed. Investors and businesses exporting or importing goods and

services or making foreign investments have an exchange rate risk which can have severe
financial consequences; but steps can be taken to manage (i.e., reduce) the risk.
Figure: Risk in foreign Exchange
3.7. Concepts
Foreign Exchange Department of Kushtia Branch has two sections. They are-
I. Import Section and
II. Export Section.
Before discussing the Import and Export section, some concepts related to foreign trade should
be clarified.
Important concepts of foreign trade as per UCPDC 600 are discussed below:
Importer / Buyer/ Opener/ Applicant:
Applicant means the party on whose request the credit is issued.
Issuing/ opening bank:
Issuing bank means the bank that issues a credit at the request of an applicant or on its own
behalf.
Foreign
Exchange
Risk
Financial
Risk
Political
Risk
Leagal Risk
Exchange
Rate
fluctuation

Exporter/ seller/ beneficiary:
Beneficiary means the party in whose favor a credit is issued.
Advising / notifying bank:
Advising bank means the bank that advises the credit at the request of the issuing bank.
Confirming bank:
Confirming bank means the bank that adds its confirmation to a credit upon the issuing bank‗s
authorization or request.
Confirmation:
Confirmation means a definite undertaking of the confirming bank, in addition to that of issuing
bank, to honor or negotiate a complying presentation.
Complying presentation:
Complying presentation means a presentation that is in accordance with the terms and conditions
of the credit, the applicable provisions of these rules and international standard banking practice.
Negotiating bank:
The bank that negotiates the bill (draft) of exporter drawn under the credit is known as
Negotiating bank. If the advising bank is also authorized to negotiate the bill (draft) drawn by the
exporter then it becomes the negotiating bank.
Reimbursing bank:
If the issuing bank does not maintain any account with a bank who will be negotiating
documents under a L/C, then arrangement is made to reimburse the negotiating bank for the
amount to be paid under credit from some other bank with which the issuing bank maintains his
account. The latter bank is termed as reimbursing bank. An authority to debit his account is sent
to the bank where he holds balance advising to honor claims placed by a negotiating bank.
Paying bank:
The bank that effects payment to the beneficiary (as named in the latter of credit) is known as
paying bank/drawee bank.

Letter of Credit:
Credit means any arrangement however named or described, whereby a bank (issuing bank)
acting at the request and the instructions of a customer (the applicant) or of its own behalf.
1). is to make payment to or to the order of a third party (beneficiary), or is to accept and pay bill
of exchange (drafts) drawn by the beneficiary.
2) Authorizes another bank to effect such payment, or to accept and pay such bill of exchange.
3). Authorizes another bank to negotiate.
Against stipulated documents, provided that the terms and conditions of the credit are complied
with.
Types of L/C or Documentary Credit
Documentary Credits may be either:
(i) Revocable
(ii) Irrevocable.
Revocable credit: A revocable credit is a credit that can be amended or cancelled by the issuing
bank at any time without prior notice to the seller. In case of seller (beneficiary), revocable credit
involves risk, as the credit may be amended or cancelled while the goods are in transit and before
the documents are presented, or although presented before payments has been made. The seller
would then face the problem of obtaining payment on the other hand revocable credit gives the
buyer maximum flexibility, as it can be amended or cancelled without prior notice to the seller
Up to the moment of payment buy the issuing bank at which the issuing bank has made the credit
Available, in the modern banking the use of revocable credit is not widespread.
Irrevocable credit: An irrevocable credit constitutes a definite undertaking of the issuing
bank(since it cannot be amended or cancelled without the agreement of all parties thereto),
provided that the stipulated documents are presented and the terms and conditions are satisfied
by the seller. This sort of credit is always preferred to revocable letter of credit. Sometimes,
Letter of Credits is marked as either 'with recourse to drawee or 'without recourse to drawer'.
Some Important Documents of L/C or Documentary Credit:
Forwarding: Forwarding is the letter given by the advising bank to the issuing bank. Several
copies are sent to the issuing bank. All copies including original should be kept in the bank.
Bill of Exchange: According to the section 05, Negotiable Instruments (NI) Act-1881, A "bill of

exchange" is an instrument in writing containing an unconditional order signed by the maker,
directing a certain person to pay [on demand or at fixed or determinable future time] a certain
sum of money only to or to the order of a certain person or to the bearer of the instrument. It may
be either at sight or certain day sight. At sight means making payment whenever documents will
reach in the issuing bank.
Invoice: Invoice is the price list along with quantities. Several copies of invoice are given. Two
copies should be given to the client and the other copies should be kept in the bank. If there is
only one copy, then its photocopy should be kept in the bank and the original copy should be
given to the client. If any original invoice contains the custom's seal, then it cannot be given to
the client.
Packing List: Packing list is the letter describing the number of packets and size. If there are
several copies, then two copies should be given to the client and the remaining should be kept in
the bank. But if there is only one copy, then the photocopy should be kept in the bank and the
original copy should be given to the client.
Bill of Lading: Bill of Lading is the bill given by shipping company to the client. Only one copy
of Bill of Lading should be given to the client and the remaining copy should be kept in the bank.
Certificate of Origin: Certificate of origin is a document describing the producing country of
the goods. One copy of the certificate of origin should be given to the client and the remaining
copy should be kept in the bank. But if there is only one copy, then the photocopy should be kept
in the bank and the original should be given to the client.
Shipment Advice: The copy mentioning the name of the insurance company should be given to
the client and the remaining copies should be kept in the bank. But if only one copy is given,
then the photocopy should be kept in the bank and the original copy should be given to the bank.
IMP-Form
This form is prepared for maintaining account of the money, which goes outside the country for
the purpose of payment. This form is required by Bangladesh Bank. It is an application for
permission under 4/5 of the Foreign Exchange Regulation Act, 1947 to purchase foreign
currency for the payment of import.
IMP - FORM has four copies:
 Original copy for Bangladesh Bank.
 Duplicate copy for authorized dealers. It is issued for processing Exchange Control Copy of bill
of entry or certified invoice.
 Triplicate copy for authorized dealers' record.
 Quadruplicate copy for submission to the bank in case of imports where documents are retired.

Following documents are sent with FORM-IMP:
a) Letter of Credit Authorization Form,
b) One copy of invoice,
c) Indent copy / Pro-forma invoice.
The following Information is included in the FORM-IMP:
i. Name and address of the authorized dealer,
ii. Amount of foreign currency in words and figures,
iii. Names and address of the beneficiary,
iv. L/C Authorization Form number and date,
v. Registration number of L/C Authorization Form with Bangladesh Bank, and
vi. Description of the goods.
3.8. Import Section:
Import may be defined as bringing of visible item to the country from abroad through letter of
credit or the Authorization form (LCAF) paying foreign Currency to that of exporting country.
Import Mechanism
To import, a person should be competent to be Importer‗. According to Import and Export
Control Act, 1950, the Office of Chief Controller of Import and Export provides the Import
Registration Certificate (IRC) to the importer. After obtaining this, person has to secure a Letter
of Credit Authorization (LCA). And then a person becomes a qualified importer. He is the
person who requests or instructs the opening bank to open an L/C. He is also called opener or
applicant of the credit.
Parties of L/C or Documentary Credit the parties are:
 The Importer
 The Issuing Bank,
 The Confirming Bank, if any, and
 The Beneficiary.

Other parties that facilitate the Documentary Credit are:
 The Applicant,
 The Advising Bank,
 The Nominated Paying/ Accepting Bank, and
 The Transferring Bank, if any.
Things Are Done In Import Mechanism
In broader aspect the major responsibilities that are performed here are —
 L/C Issuing.
 L/C Amendment (if necessary)
 Lodgment.
 Retirement of documents.
 Import Financing.
L/C Issuing:
This is the first thing to be done for import. Already the definition of L/C is discussed. Now, the
important types of L/C are discussed below:
There are three types of L/C offered by Kushtia Branch, Mutual Trust Bank. They are:
1. Sight L/C: Payment must be made within five (5) working days after the documents have
been received from the exporter.
2. Differed / Usance L/C: Payment must be made on or after the due date i.e. shipment date
or Bill of Lading date. Differed L/C usually opened for 90 days.
3. Back -to -Back L/C: Usually, this L/C is opened by the exporter. If exporter needs to
import goods or equipments to manufacture the ordered goods, then he may import those
goods or equipments by opening a L/C against this mother L/C. The value of the back-to-
back L/C can be 80 percent of the mother L/C.

Classification of Back-to-Back Letter of Credit
Back to back L/C can be divided into four categories. These are:
 Local (04)
 EDF(05)
 EPZ foreign (12)
 Foreign (06)
Procedure to open an L/C
Usually, Kushtia Branch, Mutual Trust Bank issues import L/C for both the regular and for new
importers.
An importer is required to have the following to import through PBL-
i. Applicant has to apply for opening LC by a prescribed form.
ii. Applicant has to submit the Letter of Indent or Letter of Pro-forma Invoice.
Letter of Intent: Many sellers have their agent in seller‗s country. If the contract
of buying is made between the buyers and the agent of the sellers then Letter of
Indent is required.
Letter of Pro-forma Invoice: If the contract is made directly between the buyer
and the sellers then Letter of Pro-forma Invoice is needed.
iii. Applicant has to submit IRC (Inventors Registration Certificate). It is a
certificate being renewed every year. This certificate is necessary if the contract is
made between the buyers and the agents of the sellers. IRC is of two types -
COM and IND. COM is given for commerce purpose and IND is given for
industrial purpose.
iv. Applicant has to submit LCAF (Letter of Credit Authorization Form).
v. Applicant has to submit insurance document.
vi. Applicant has to prepare FORM-IMP.
vii. Recently, there has been made a provision to give a certificate named TIN (Tax
Payers Identification Number).Taxation department issues this certificate.
viii. Then after proper scrutiny bank will open an L/C.

Considerations for issuing bank
i. He must have an account in PBL.
ii. He must have Importers Registration Certificate (IRC)
iii. Report on past performance with other bank. PBL collect this report from Bangladesh
Bank.
iv. CIB (Credit Information Bureau) report from Bangladesh Bank.
v. A proposal approved by the meeting of executive committee of the bank. It is
necessary only when the L/C amount is small or there is no limit.
Desk Work:
a. Register Entry
 Then the particulars of L/C are recorded in the L/C opening register - Date and L/C
number
 Name of the party
 Amount in Tk. And foreign currency
 Name of advising bank
 Expiry dates.
 Percentage of margin and amount of margin
 Amount of commission, handling charge, postage charges, SWIFT charges.
b. Bangladesh Bank Entry
Another entry is made to L/C Monitoring cell of Bangladesh Bank through its web site.
Transmitting L/C
After securitization of the L/C application and authorization L/C is transmitted to the advising
bank. Letter of credit can be transmitted to the advising bank through three methods. They are in
Telex, Courier, or SWIFT (Society for Worldwide Inter Telecommunication Network).
Amendment:
Parties involved in a L/C, 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. Bank transmits the amendment by SWIFT or by post to the
advising bank. If the L/C is amended, service charge and telex charge is debited from the party
account accordingly.

Lodgment:
Lodgment means payment of import bills or transfer of funds for import bills. Here L/C issuing
bank will arrange to make payment against L/C through reimbursement bank or any other way.
Through SWIFT a telex message is transmitted to the correspondent bank ensuring that payment
is being made.
Steps involved in Lodgment
When the scrutiny of import bills is over the steps should be taken for lodgment:
 At first all the particulars of the document are entered in PAD register. PAD No. Seal is
given on all the copies of the received document.
 Convert the foreign currency into Bangladeshi currency.
 Prepare Lodgment voucher
 Send IBCA to the Head Office
 Entry is made to L/C Monitoring cell of Bangladesh Bank through its web site.
 Make initiation to the import
Retirement of Documents:
After lodgment the issuing bank will send the importer an intimation regarding the document
arrival notice. On intimation the importer calls on the bank‗s counter requesting retirement of the
shipping documents against payment to the debit of their account by the bill amount and other
charges payable.
Shipment of Goods and Lodgment of Documents by Exporter
Then exporter ships the goods to the destination of the importer country Sends the documents to
the L/C opening bank through his/her negotiating bank. Generally the following documents are
sent to the Opening Banker with L/C:
 Bill of Exchange
 Bill of Lading
 Commercial Invoice
 Certification of Origin
 A certificate stating that each packet contains the description of goods over
the packet.
 Packing List

 Advice Details of Shipment
 Pre-shipment Inspection Certificate
 Vessel Particular
 Shipment Certificate
Payment against Documents (PAD)
Payment made by bank against lodgment of shipping documents of goods imported though
Letter of credit falls under this head. It is an interim advanced with import and it is generally
liquidated against payments usually made by the party for retirement of the documents for
release of imported goods from the customer‗s authority. It falls under the category of
commercial loan.
Loan against Imported Merchandise (LIM)
Advances allowed for retirement of shipping document and release of goods imported though
LIM taking effective control over the goods by pledge fall under this type of advance. When the
importer failed to pay the amount payable the exporter against import LIM, then Mutual Trust
Bank gives loan against imported merchandise to the importer. The importer will bear all of the
expenses.
Import against Trust Receipt (LTR)
Advance against a LTR obtained from the customer is allowed when the documents covering an
importer shipment are given without payment. The customer holds the goods or their sale
proceeds in trust for the bank until the LTR are fully paid off. LTR is a document that creates the
bankers line on the goods. The period of LTR may be 30, 45, 60 or 90 days.
Payment Procedure of Import documents
This is the most sensitive task of the Import Department. The officials have to be very much
careful while making payment. This task constitutes the following:
Date of Payment
Usually payment is made within seven days after the documents have been received. If the
payment is become deferred, the negotiating bank may claim interest for making delay.

Preparing Sale Memo
A sale memo is made at BC rate to the customer. As the TT & OD rate is paid to the ID, the
difference between these two rates is exchange trading. Finally, an Inter Branch Exchange
Trading Credit Advice is sent to ID.
Requisition for the Foreign Currency
For arranging necessary fund for payment, a requisition is sent to the International Department.
Transmission of Message
Message is transmitted to the correspondent bank ensuring that payment is being made.
Kind of Import Business Related to L/C
 Food
 Chemical(Textile)
 Medical Instruments
 Electric Device( IPS, UPS cables etc)
 Computer accessories
 Others
Export Section:
The goods and services sold by Bangladesh to foreign households, businessmen and Government
are called export.
Things Done in Export
In broader aspect the major responsibility that re performed here are —
 L/C Advising
 Documents Collection
 Documents negotiation
 Export financing

Parties Involves In Export L/C
1. L/C issuing Bank
2. Importer
3. Exporter L/C advising Bank
4. Negotiation Bank
5. The Paying / Reimbursing Bank
Documents Required for Export Letter of Credit
These documents should be submitted to the bank for negotiation:
 Export L/C EXP form
 Pro-forma invoice
 Certificate of origin
 Bill of Lading
 Packing list
 Inspection certificate Insurance document
 Any other document as per L/C
Procedure for Export Letter of Credit
There are a number of formalities that require to procedure of Export Letter of Credit:
ERC (Export Registration Certificate)
For export from Bangladesh unless he is registered with CCI & E and holds valid Export
Registration Certificate (ERC). The ERC is required to be renewed every year. The ERC number
is to be incorporated on EXP forms and other documents connected with exports.

Obtaining EXP
After having the registration, the exporter applies to First Security Bank Limited with the trade
license, Export Registration Certificate and the Certificate from the concerned government
Organization to get EXP. If the bank is satisfied, an EXP is issued to the exporter. An EXP-From
contains the following particulars:
 Name and address of Authorized Dealer
 Particulars of the commodity to be exported with code
 Country of destination
 Port of destination
 Quantity
 L/C value in foreign currency
 Terms of Sale
 Name and address of Importer / Consignee
 Bill of Lading/ Railway Receipt! Airway Bill/ Truck Receipt/ Post Parcel
Receipt no. and date
 Port of Shipment
 Land Custom Post
 Shipment Date
 Name of the Exporter with address CCI & EI‗s Registration number and Date
of the Exporter
 Sector (Public or Private) under which the Exporter falls
Securing the Order
Upon registration, the exporter may proceed to secure the export order. Contracting the buyers
directly through correspondence may be done. Some buyers of goods like jute and jute goods
maintain liaison office. Representative of local agents who can be contacted to the secure a deal.

Signing of the Contract
The following points are to be mentioned in terms of signing of the contract:
 Quantity of the commodity
 Price of the commodity
 Shipment
 Insurance and marks. Inspection
 How can solve any kind of conflicts between the contract parties.
 The terms of the L/C are in conformity with those of the contract
Procuring the Materials
After making the deal and on having the L.C opened in his favor, the nest step for the exporters
to set about the task of procuring or manufacturing the contracted merchandise.
Shipment of Goods
The following are the documents normally involved at the stage of shipment:
 EXP Form
 Photocopy of registration certificate
 Photocopy the contract
 Photocopy of the L/C
 Freight certificate from the bank in case of payment of the freight at his
port of loading is involved.
 Railway Receipt, Berge Receipt or Truck Receipt.
 shipping instructions
 Insurance policy

Settlement of Local Bill to Back to Back
The settlement of local bills is done in the following ways:
 The customer submits the LIC to First Security Islamic Bank Limited along
with the documents for negotiate
 First Security Islamic Bank Limited official scrutinizes the documents to
endue the conformity with the term and conditions.
 The documents are then forwarded to the to the L/C opening bank.
Preparation of the Export Document:
Substantive Document
Substantive document are those which are normally required to be furnished under almost all the
contracts for sale of goods to overseas buyers and they include:
 Draft or bill exchange
 Commercial invoice
 Bill of lading or airway bill
 Marine insurance policy
Auxiliary Document
In substantive document, the exporter may be required to prepare other document, called
auxiliary document. The number and type of those documents depends on the terms of the
contract and /or the L/C, but they mainly include:
 Packing list
 Consular invoice
 Certificate of origin
 Inspection certificate
 Quality control certificate
 Photo- sanitary certificate
 GSP certificate

Negotiation of Documents under Letter of Credit
Under this arrangement, after the goods are shipped, the exporter submits the concerned
document to the negotiating bank for negotiation. The documents should be negotiated strictly in
accordance with the terms and conditions and within the period mentioned in the letter of credit.
After shipment, exporter submits the following documents to the Bank for negotiation.
 Bill of exchange
 Bill of Lading
 Invoice
 Insurance Policy/Certificate
 Certificate of Origin
 Inspection Certificate
 Consular Invoice
 Packing List
 Quality Control Certificate
 G.S.P. certificate.
Mode of Payment of Export Bill under Letter of Credit
As per UCPDC 500, 1993 revision there are four types of credit. These are as follows:
 Sight Payment Credit
 Deferred payment Credit
 Acceptance credit
 Negotiation Credit

Export Financing
Export financing can be two types:
Pre- Shipment
Pre- shipment, as the name suggest, is given to finance the activities of an exporter prior to the
actual shipment of goods. Pre-shipment credit is essentially a short-term credit and liquidated by
negotiation or purchase of export bills covering the merchandise.
Export Cash Credit (Hypothecation)
Under this arrangement, a credit is sanction against hypothecation of the raw materials or
finished goods for export. Such facility is allowed only to major exports. As the bank has no got
security, in this case, except change documents and line of export L/C or contract, the bank
normally insists on the exporter furnishing collateral security.
Export Cash Credit (Pledge)
This credit facility is allowed against a pledge of exporter goods or raw materials. In this case,
cash credit facilities are extended against pledge of goods to be stored in the go down under
banks control by signing the letter of pledge and other documents.
Packing Credit
In this case, the credit facilities are extended against security of railway receipt or steamer receipt
or barge receipt or truck receipt evidencing transportation of goods to the port for shipment of
the goods in addition to the usual charge document and lien of export letter of credit.
Payment of Back-To-Back Letter of Credit
In case back to back as 60-90-120 days of maturity period, deferred payment is made. Payment is
given after realizing export proceeds from the L/C issuing bank.
Post-Shipment
Post shipment credit refers to the credit facilities extended to the exporter by the bank after
Shipment of the goods against export documents. Necessary of credit arises, as the exporter
cannot afford to wait for a long time without paying manufacturers/ suppliers.
Purchase of DP& DA Bills
In such a case, the bank purchased/discount the DP (document against payment) and DA
(document against acceptance) bills operated under the payment method of documents

separately, and clear instructions have to be obtained from the drawer of the bills in regard to all
important issues related to the negotiation of the bills.
Advances against Bills for Collections
Banks generally accept export bills for collection of proceeds when they are not drawn under
against an L/C contain some discrepancies. The bank generally negotiates bills drawn under L/C,
without any discrepancy in the documents and the exporter gets the money from the bank
immediately.
The goods and services sold by Bangladesh to foreign households, businessmen and Government
are called export. The export trade of the country is regulated by the Imports and
Exports(control) Act, 1950. There are a number of formalities, which an exporter has to fulfill
before and after shipment of goods. The exports from Bangladesh are subject to export trade
control exercised by the Ministry Of Commerce through Chief Controller of Imports and Exports
(CCI& E). No exporter is allowed to export any commodity permissible for export from
Bangladesh unless he is registered with CCI & E and holds valid Export Registration Certificate
(ERC). The ERC is required to be renewed every year. The ERC number is to be incorporated on
EXP forms and other documents connected with exports.
Payment Procedure for FDBP
 After purchasing the documents, Bank gives the following entries:
o FDBP A/C ---------------------------------------------------- Dr. (at OD sight rate)
o Customer A/C ------------------------------------------------ Cr.
(Before realization of proceeds)
Bank would realize only postage charges from the exporter.
Subsequently, Bank will send the documents to the L/C opening Bank for payment with a
forwarding letter detailing the enclosures. Upon realization of proceeds the Negotiating Bank
would pass the following vouchers:
o Head Office A/C -------------------------------------------- Dr. (at T.T Clean rate)
o FDBP A/C --------------------------------------------------- Cr.
o Income A/C Profit on Exchange Trading --------------- Cr.
(Adjustment after realization of proceeds)

A FDBP Register is maintained for recording all the particulars
Kind of Export Business Related to Letter of Credit
 Garments
 Shrimpfish
 Jute
 Others
3.9. Foreign Remittance:
MTBL, Kushtia Branch is an authorized dealer of foreign exchange. Their dealing in foreign
exchange involves buying and selling of foreign exchange covering inward remittances received
from abroad and outward remittances sent abroad.
The basic functions of this department are outward and inboard remittance of foreign exchange
from one country to another country. In the process of providing this remittance service, it sells
and buys foreign currency. The conversion of one currency into another takes places at an agreed
rate of exchange, in where the banker quotes, one for buying and another for selling. In such
transactions the foreign currencies are like any other commodities offered for sales and
purchases, the cost being paid by the buyer in home currency, the legal tender.
Working of this Department
 Foreign TT payment &purchase of F. Drafts, preparations of FBP (Foreign Bill
Purchase)
 Issuance of outward TT & FDD
 Issuance of proceed responding certificate (PRC)
 Foreign collection, Bangladesh Bank Clearing Check Collection, that comes from all
branch of FSBL
 Withdrawal from F.C. A/C
 Encashment of T.C & Cash Dollar and Sterling Pound
 Deduction of Tax and VAT. On behalf of Bangladesh Bank

 Preparation of related statements including convertible Take Accounts
 Preparation of IBCA & IBDA and balancing of collection and other special assignment
as desired by department in charge
 Balancing of account statement
 Compliance of audit & inspection
 Statement of all related works submitted to Bangladesh Bank
There are two types of remittance:
1. Inward remittance
2. Outward remittance
3.9.1. Inward Foreign Remittance
Inward Foreign Remittance covers purchase of foreign currency in the form of foreign TT, DD,
MT, Bills etc. sent from aboard favoring a beneficiary in Bangladesh. Purchase of foreign
exchange is to be reported to exchange control department of Bangladesh Bank prescribing two
forms:
 EXP from: Remittances received against export of goods from Bangladesh are done by
this.
 From C: Inward remittances equivalent to US$ 2000/- and above are done by this.
3.9.2. Outward Foreign Remittance
Outward Foreign Remittance covers sales of foreign currency though issuing foreign T.T, Drafts,
Travelers Check etc. as well as sell of foreign exchange under L/C and against import bills
retired. Two forms are used for outward remittance of foreign currency are:
 IMP Form: All Outward Remittance on account of imports
 TM: For all other Outward Remittances

3.10. Remittance Facilities:
Private Remittances:
 Family remittances facilities
 Remittances of membership fees
 Education
 Remittances of consular fees
 Remittances of evaluation fees
 Travel
 Health & medical
 Seminars & workshops
 Foreign nationals
 Remittances for Hajj
 Other private Remittances
Official and Business Travel
 Official visit
 Business travel quota for new exporter
 Business travel quota for importer
 Exporter retention quota
Commercial Remittances
 Opening of branches or subsidiary companies abroad.
 Remittances by shipping, airlines and courier services.

 Remittance for royalty and technical fees.
 Remittance on account of training & consultancy.
 Remittance of dividends.
 Subscription of foreign media services.
 Fees for return monitors.
 Adv. of Bang. Products in mass media abroad.
 Bank charges.
 Sundries.
The bank also gives service to the customer through-
 Wall Street Finance
 Prabhu Money Transfer
 KMB Money Transfer
 Dollex Dollar Express
 Money Gram
 X-press money.

Chapter: 04: Foreign Exchange Function of MTB
4.1. Foreign Exchange Department of MTBL
Foreign Exchange is an important department of MTBL, which deals with import, export and
foreign remittances. Foreign exchange is an International Department of the Bank. It facilitates
international trade through is various modes of services. It bridges between importers and
exporters. This department mainly deals in foreign currency, that‘s why it is called foreign
exchange department.
This department is plating an important role in enhancing export earning which aids economic
growth and in turn it helps for the economic development, on the other hand, it also helps to meet
those goods and service, which are most demandable and not adequate in our country.
Functions of Foreign Exchange of MTBL:
Figure: Functions of Foreign Exchange of MTBL

MTBL acts as a media for the system of foreign exchange policy. For this reason, the employee
who is related of the bank to foreign exchange, especially foreign business should have
knowledge of these following functions:
4.2. Activities of Foreign Exchange of MTBL
There are three kinds of Foreign Exchange transaction-
Figure: Foreign Exchange transaction
Functional
area of FX
Export
Remittance
Import

Mechanism of Foreign Exchange:
4.3. Foreign Remittance Section:
The basic function of this department are outward and inward remittance of foreign exchange
from one country to another country. In the process of providing this remittance services; it sells
and buys foreign currency. The conversion of one currency into another takes place at an agreed
rate of exchange in where the banker quotes, one for buying and another for selling. In such
transactions the foreign currencies are like any other commodities offered for sales and purchase,
the cost (convention value) being paid by the buyer in home currency, the legal tender.

Working of this department:
 Overall supervision of Foreign Remit, Dept.
 Foreign TT payment and purchase of F. Drafts, preparation of F.B.P (Foreign Bill
Purchased).
 Issuance of outward TT and FDD.
 Issuance of proceed Responding Certificate(PRC)
 Foreign Collection, Bangladesh Bank Clearing Check Collection, which comes from
all branch of Mutual T rust Bank Ltd.
 Withdrawal from F.C A/C.
 Encashment of T.C and Cash Dollar and Sterling Pound.
 Deduction of Tax and VAT on behalf of Bangladesh Bank.
 Preparation of related statements including convertible Taka Accounts.
 Preparation of IBCA and IBDA and Balancing of Collection and other special
assignment as desired by Department in Charge.
 Balancing of Account Statements.
 Compliance of audit and inspection.
 Statement of all related works submitted to Bangladesh Bank.
4.4. Function of the Remittance Section:
 Handling of all incoming and outgoing foreign and local remittance is the major
Function for this department.
 Handling of incoming and outgoing T.T.
 Outstation Cheque Collection.
 Outstation Cheque Purchase.
 Demand Draft Handling.
 Other assorted work.

Remittance of Fund
Remittance of fund is to be collected in two ways. First of all, it comes from inward basis and
then, it happens outward.
4.5. Inward Remittance
Any person can remit funds to another through Inland remittance by using the following means
of remitting funds with charges
 Pay Order (PO).
 Demand Draft (DD).
 Telegraphic Transfer (T.T).
 Mail Transfers
Pay Order (PO):
A pay order is a written under, issued by a branch of the 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 cheque as it is issued by a bank and
payable by itself.
Demand Draft (DD):
This is an instrument through which customers money is remitted to another
person/Firm/organization in outstation (outside the clearing house area) form a branch of one
Bank to an outstation branch of the same Bank or to a branch of another Bank (with prior
arrangement between that Banks with the issuing branch).

Telegraphic Transfer (TT):
A Telegraphic Transfer is a method of remittance, which is effected by the banker through a
coded telegram attested by secret cheek signal, on receipt of which, the paying office pay the
amount to the payee by crediting his account.
4.6. Foreign Remittance
Foreign remittance is the transfer of foreign currency from one country to another country. In
another word, foreign remittance means, remittance in foreign currency that are received in and
made out abroad. Actually, foreign remittance is purchase and sale of freely convertible foreign
currencies as permissible under exchange control regulations of the country. Foreign remittance
is very important for the country as valuable foreign exchange is involved in the transfer
mechanism. Foreign remittance takes place in two ways-
Foreign Remittance Process
Fund transfer from one country to another country goes through a process which is known as
remitting process. Suppose a local bank has 200 domestic branches. The bank has corresponding
relationship with a foreign bank say-―X‖, and maintaining ―Nostro Account‖ in US $ with the
bank. Bangladeshi expatriates are sending foreign remittances to their local beneficiary, through
that account. Now, when the Bangladeshi expatriates through other banks of different countries
remit the fund to their ―Nostro Account‖ with ―X‖, then the local bank‘s Head Office
international division will receive telex message and the remittance section will record the advice
and generate the advice letter to the respective branch of the bank. The branch will first decode
the test, verify signature and check the account number and name of the beneficiary. After full
satisfaction, the branches transfer the amount to the account of the beneficiary and intimate the
beneficiary accordingly. But sometimes the complexity arises, if the respective local bank has no
branch where the beneficiary maintains his account. Then the local bank has to take help of a
third bank who has branch there.
Inward Remittance
Remittance comes from foreign countries to our country is called inward remittance. To the
bankers or ADs inward remittance means purchase of foreign currency by authorized dealers.
Generally, inward remittances are received by draft, mail transfer, TT, purchase of foreign bills
& travelers Cheque, export bills. Basically, these are the formal channels of receiving inward
remittance. A local bank also receives indenting commission of local firm also comes under
purview of inward remittance.

Figure: Inward Remittance
Outward Remittance
Remittance from our country to foreign countries is called outward foreign remittance. On the
other word, sales of foreign currency by the authorized dealer or formal channels may be
addressed as outward remittance. The authorized dealers must utmost caution to ensure that
foreign currencies remitted or released by them are used only for the purposes for which they are
released. Out ward remittance may be made by appropriate method to the country to which
remittance is authorized. Most outward remittance is approved by the authorized dealer on behalf
of Bangladesh Bank.
Outward remittance may be made for following purposes:
 Travel
 Medical treatment
 Educational purpose
 Attending seminar etc.
 Balance amount of F.C account.
 Profit of foreign companies.
 Technical assistance
 New exporters up to USD 6,000/- for business promotion

F.C. remittance can be made for fare, exhibition from export retention quota.
Outward remittance in favor of beneficiaries outside Bangladesh may be made in any of the
following manners
Figure: Modes of Outward Remittance
4.7. Channel of Foreign Exchange
There are two types of Foreign Exchange channel
I) Formal Channel
II) Informal channel

4.7.1. Formal Channel
Fund transfer from one country to another country through official channels, i.e. banking
channel, post office, and other private service channels, such as – Western money order, Neno
money order etc.
Figure: Forms of formal channel
4.7.2. Informal Channel
Fund transfer from one country to another country through hand by hand or over telephone in an
unofficial channel like as ―Hundy‖. Haque (1992) comments, that remittance collected by
informal ―Hundi‖ rings operating in Middle East countries and UK are also used to finance
illegal trade and transactions.
Islam (2000) observes that as informal channel is needed for illegal trade of goods, as well as
gold and drugs into Bangladesh, and therefore, helping the ever-present problem of capital flight
out of Bangladesh
Figure:Forms of Informal channel

Chapter: 05: Data Analysis and Performance Evaluation
5.1. Analysis of Findings
Some general observations of the performance Mutual Trust Bank, Kushtia Branch of last
FIVE years (2012-2016) of the bank are as follows.
(All data collected from Annual report and internal document)
5.1.1. Total Import:
As, All the businesses located near the MTBL, Kushtia Branch. Because MTBL, Kushtia
Branch provides fast and quality service to the customers with proper security. Due to the nature
of the businesses located near the branch, all the import LCs opened here for importing industrial
purpose.
The above Table show that in 2012 the import L/C was opened 36,945 million and in 2016 was
63,988 million respectively. Import L/C increased to TK 63,988 million from TK 36,945 million during
the five year period.
Figure: Total Import of MTBL
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2012 2013 2014 2015 2016
Total Import(BDT in Million)
Year 2012 2013 2014 2015 2016
Total Import (BDT Million) 36,945 39,427 44,273 51,593 63,988

5.1.2. Total Export:
Major export items involved with the bank‗s foreign trade activities are related to trading of jute
products, commercial ply woods, Cable, Metal goods, Polymer, Tobacco etc.
Figure:(FX Dept.- Kushtia Branch)
10%
17%
7%
6%
20%
28%
6%
6%
Goods Category
Jute
Metal
Ply wood
Polymer
Tobacco
Cable
Others
Others

Table: shows that in 2012 exports were 26,596 million and in 2016 were 45,940
million respectively. Export L/C increased to TK 45,940 million from TK 26,596 million during
the five year period.
Figure: Total Export of MTBL
5.1.3. Competitive preference:
From the human preference index, it is stated that among ten individual nine chose SCB for
foreign exchange. In Kushtia there is no branch of SCB. So MTBL is getting the competitive
advantage in the foreign exchange field.
Figure: Human Preference among different Banks
0
10,000
20,000
30,000
40,000
50,000
2012 2013 2014 2015 2016
Total Export of MTBL
Total Export
0
2
4
6
8
10
IBBL SCB EXIM MTBL
Human Preference
Year 2012 2013 2014 2015 2016
Total Export(BDT Million) 26,596 25,455 32,479 36,154 45,940

5.1.4. Major export dealing zone of MTBL:
MTBL, Kushtia Branch maintaining a good foreign exchange relationship with USA which
covers 36% of the foreign trade relationship of Kushtia branch. China is also a good partner of
this branch. This relationship is built for BRB group of industries.
Figure: Major Export Zone
5.1.5. Inward Remittance
During the year 2016, the inflow of inward foreign remittance was TK 88 LAC where in the
previous year 2015 the amount was TK.72 LAC which is TK.16 LAC higher than the previous
year.
Figure: Inward Remittance
USA
36%
CHINA
24%
MALAYSIA
12%
THAILAND
7%
INDIA
11%
OTHERS
10%
MAJOR EXPORT ZONE
0
50
100
2012 2013 2014 2015 2016
INWARD REMMITTANCE(IN LAC)
INWARD REMMITTANCE(IN
LAC)
2012 2013 2014 2015 2016
Foreign remittance (in lac) 39 47 65 72 88

5.1.6. Comparative Analysis:
Comparative Analysis of the Mutual Trust Bank Ltd. with Islami Bank Bangladesh Ltd. (IBBL)
The Mutual Trust Bank Ltd.
(Million in Taka)
Year 2013 2014 2015 2016
Import 39,427 44,273 51,593 63,988
Export 25,455 32,479 36,154 45,940
Source: Annul report and internal document
Islami Bank Bangladesh Ltd
(Million in Taka)
Year 2013 2014 2015 2016
Import
284,588 285,890 316,975 343,668
Export
197,095 205,269 222,753 224,236
Source: annul report 2016

5.1.7. Import Comparison of MTB with IBBL:
Figure: Import Comparison of MTB with IBBL.
Interpretation:
The above graphical presentation shows comparison imports between The Mutual Trust Bank
Ltd. (MTBL) and the Islami Bank Bangladesh Ltd (IBBL). The trend of import business of the
MTBL and IBBL is increasing and experiencing from 2013 to 2016. The growth of MTBL in
2015 to 2016 was Tk.12395 million and the growth of IBBL in 2015 to 2016 was Tk.26693
million. So the growth of export business of IBBL is higher than MTBL in 2016.
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
2013 2014 2015 2016
IBBL
MTBL

5.1.8. Export Comparison of MTBL with IBBL
_
Figure: Export Comparison of MTBL with IBBL
Interpretation:
The above graphical presentation shows comparison exports between The Mutual Trust Bank
Ltd. (MTBL) and the Islami Bank Bangladesh Ltd (IBBL). The trend of export business of the
MTBL and IBBL is increasing and experiencing from 2013 to 2016. The growth of MTBL in
2015 to 2016 was Tk.9786 million and the growth of IBBL in 2015 to 2016 was Tk.1483
million. So the growth of export business of MTBL is higher than IBBL in 2016.
0
50,000
100,000
150,000
200,000
250,000
300,000
2013 2014 2015 2016
IBBL
MTBL

5.1.9. Comparison of Foreign Exchange Business
Comparison of Foreign Exchange Business:
(Amount in Million)TK
Year MTBL FSIBL IBBL EXIM
2013 49553 19327 98955 49313
2014 63481 22684 120694 72940
2015 89577 18979 134384 96175
2016 115775 56983 156880 115683
Total 318386 117973 510913 334111
Figure: Foreign Exchange Comparison among Different Banks
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
2013 2014 2015 2016
Foreign Exchange Comparison
MTBL FSIBL IBBL EXIM

5.1.9. EARNINGS PERSHARE
5.1.10. Compare of EPS to Others bank
2015 2016 Average
AB Bank Ltd. 3.78 3.32 3.55
Bank Asia Ltd. 3.89 1.35 2.62
BRAC Bank Ltd. 5.54 1.74 3.64
Dutch- Bangla Bank Ltd. 10.77 11.57 11.17
Dhaka Bank Ltd. 6.25 1.69 3.97
Eastern Bank Ltd. 5.59 3.91 4.75
IFIC Bank Ltd. 3.00 1.20 2.1
Jamuna Bank Ltd. 3.71 2.47 3.09
Mercantile Bank Ltd. 3.53 2.24 2.89
Mutual Trust Bank Ltd. 5.27 7.60 6.44
NCC Bank Ltd. 3.76 2.09 2.93
National Bank Ltd. 7.11 1.01 4.06
ONE Bank Ltd. 3.99 2.70 3.35
Prime Bank Ltd. 4.77 2.89 3.83
Southeast Bank Ltd. 2.33 1.89 2.11
Standard Bank Ltd. 3.19 2.73 2.96
The Premier Bank Ltd. 1.34 1.30 1.32
The City Bank Ltd. 4.07 1.26 2.67
Trust Bank Ltd. 3.51 .55 2.03
Uttara Bank Ltd. 5.76 3.76 4.76
United Commercial Bank Ltd. 4.19 1.89 3.04
Rupali Bank Ltd 7.94 7.37 7.66
Total EPS 98.60
Mean 4.02

Chapter 06: Observation
6.1. Findings
The main objective of Mutual Trust Bank Ltd. is to maximize profit by utilizing its resources at
the optimum level and to ensure the best possible service towards the customers. Mutual Trust
Bank always tries to uphold its social commitment, so it fixes the terms and conditions for
getting loan under Foreign exchange activities in a most flexible fashion and reveal the actual
interest rate it charges against the credit to be offered.
Mutual Trust Bank Limited disburses all loans through the bank stuffs and all bank stuffs
emphasize on the bank‗s goals and objectives.
MTB foreign exchange department is doing well and it shows the growth compare to previous
year.
 Export, Import, Foreign Remittance growth rate increasing in 2013 compared to
previous year.
 For the effectiveness of the foreign exchange department, MTB has divided the
whole department into three major parts, which are Export, Import, and
Remittance.
 The monitoring system of the foreign exchange department of MTB is
excellent. The chain of command is strictly maintained here. The executives
now and then visit the department, which keeps all the officers alert about their
duty.
 MTB financial growth rate is not good in 2014 compare to 2015 and 2016.
 MTB earning per share is decreasing and EPS is lower than average commercial
Bank EPS.
 Some rules and regulations of government work as barrier for the free flow of
remittance, export and import of profitable goods.
Customers’ View
 Most of the clients are satisfied with the management philosophy of the Bank.
 They diverse modern technology in banking service.
 Customers doing their business with the bank because of relationship and also for good
communication.
 Customers not doing their business with the bank because of lack of relationship.

6.2. SWOT Analysis
SWOT analysis basically as follows:
Internal:
 Strength
 Weakness
External:
 Opportunities
 Threats
6.2.1. Strength:
 Strong non interest earning
base.
 Wide Branch network among
the 2nd
generation banks.
 Low infection in loan
exposure.
 Wide product line.
 Competency development &
performance-management
processes were good enough.
 Profits have increased.
6.2.2. Weakness:
 High cost of fund.
 Highly exposed to volatile garment business.
 Inadequate delegation of power.
 Inadequate IT infrastructure.
 Excessive dependency on term deposits.
6.2.3. Opportunities:
 Scope of market penetration through diversified products and wide banking network.
 Regulatory environment favoring private sector development.
 Trade and Investment Framework Agreement (TIFA)
6.2.4. Threats
 Increased competition in market for public deposits.
 Market pressure for lowering the interest rate.

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