1. Can you Prohibit transshipment

• No

 

2. What is the Popular meaning of Stale B/L in Bangladesh

• Late Shipment

 

3. What are the visual contents of a commercial invoice

• A commercial invoice:

1. must appear to have been issued by the beneficiary
2. must be made out in the name of the applicant

iii. must be made out in the same currency as the credit; and

1. need not be signed.

• A nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank may accept a commercial invoice issued for an amount in excess of the amount permitted by the credit, and its decision will be binding upon all parties, provided the bank in question has not honored or negotiated for an amount in excess of that permitted by the credit.
• The description of the goods, services or performance in a commercial invoice must correspond with that appearing in the credit. (Article-18)

 

4. Write down the situation where 5% tolerance in regard to the quality of goods is not applicable

• When partial shipments are not allowed, a tolerance not to exceed 5% less than the amount of the credit is allowed, provided that the quantity of the goods, if stated in the credit, is shipped in full and a unit price, if stated in the credit, is not reduced

 

5. What does UCPDC say regarding, ’Clean on Board’ notification on B/L. (Article-30)

• A bank will only accept a clean transport document. A clean transport document is one bearing no clause or notation expressly declaring a defective condition of the goods or their packaging. The word “clean” need not appear on a transport document, even if a credit has a requirement for that transport document to be “clean on board”. (Article-27)

 

6. Why an LC must stipulate an expiry date and place

• As per Article -6 of UCPDC-600 LC must stipulate an expiry date and place for presentation of documents.

 

7. What is the type of T-bill?

• Treasury Bills

28 Days

91 Days

182 Days

364 Days

• Bangladesh Government Treasury Bills

05 Years

10 Years

15 Years

20 Years

 

8. Meaning of Spot rate

• The spot rate is the rate which reflects the price for immediate exchange of foreign currency

 

9. What are the main duties of a documentary credit transactions?

• The Letter of Credit Process

Step 1: The order is placed.

Step 2: The Buyer applies for a letter of credit with the Issuing Bank.

Step 3: The Issuing Bank does a credit check on the buyer and agrees to issue a

letter of credit.

Step 4: The Issuing Bank sends the letter of credit to the Advising Bank in the

country of the Seller.

Step 5: The Advising Bank advises the Seller that an L/C has been opened.

Step 6: The Seller ships the goods, which will be held at Customs in the Buyer’s

country and obtains the shipping documents.

Step 7: The Seller presents the documents and a draft to the negotiating bank.

Step 8: The negotiating bank pays the Seller

Step 9: The Negotiating Bank reimburses itself by debiting the Issuing Bank’s

account

Step 10: The documents are sent to the Issuing Bank.

Steps 11: The Issuing Bank reimburses itself by debiting the Buyer’s account

Step 12: The Issuing Bank forwards the documents to the Buyer.

Step 13: The Buyer presents the documents to Customs.

Step 14: Customs releases the goods to the Buyer.

10. Meaning of Direct and Bank to Bank reimbursement

• Direct Reimbursement-Reimbursement when Negotiating Bank (Nominated Bank) and Reimbursing Bank are same.
• Bank to Bank reimbursement- Reimbursement when Negotiating bank (Nominated Bank) and Reimbursing Bank are different.

 

11. How many days a collecting bank can hold documents at their counter

• 05 Days

 

12. Types of Company of EPZ

• Type-A-100% foreign owned entrepreneurs
• Type-B-joint ventures of foreign and Bangladeshi entrepreneurs
• Type-C-100% foreign Bangladeshi entrepreneurs

 

13. Meaning of FDI

• Foreign direct Investment

 

14. What is endorsement

• According to section 15 of NI Act, an endorsement is “when the holder of a negotiable instrument signs the same, otherwise than such as maker, for the purpose of negotiation, on the back or face thereof or on a slip of paper annexed thereto, he is said to endorse the same and is called the “endorser”. The person to whom the instrument is endorsed is called the “endorsee”.

 

15. Type of endorsement

• Endorsement in Blank or General Endorsement
• Endorsement in Full or Special Endorsement
• Restrictive Endorsement
• Partial Endorsement
• Conditional Endorsement
• Sans Frais Endorsement
• Endorsement by legal representative

 

16. What is Negotiable Instrument

• A Negotiable Instrument means a promissory note, bill of exchange or cheque payable either to order of bearer.

 

17. What is Mate’s receipt

• When the goods are handed over to the agent of the shipping company for shipment by a specified vessel and the agent contracts to do so, he issues a receipt known as Mate’s Receipt. When the goods are actually shipped the Mate’s Receipt is exchanged for the regular B/L

 

18. What is Bill of Entry

• A declaration by an importer or exporter of the exact nature, precise quantity and value of goods that have landed or are being shipped out. Prepared by a qualified customs clerk or broker, it is examined by customs authorities for its accuracy and conformity with the tariff and regulations. See also customs entry.

 

19. Meaning of bonded ware-house

• Secured facility supervised by customs authorities, where dutiable landed imports are stored pending their re-export, or release on assessment and payment of import duties, taxes, and other charges. Also called customs warehouse.

 

20. Meaning of Drawee and Drawer

• The Drawee: The drawer is the person who is directed to pay the amount of the bill. He is to accept the bill of exchange to make it legal one and he is not liable until and unless he has accepted it.
• The Drawer: The drawer is the person to whom debt is due. He is the maker of the bill.
• The Payee: The payee is the person to whom or to whose order the amount of the instrument is payable.

 

21. Meaning of AD

• In exercise of the powers conferred by of the Foreign Exchange Regulation Act. 1947 on certain schedule banks, who are Authorised to deal in foreign exchange by Bangladesh Bank, the selected branches of the bank can transact such businesses. They are known as “Authorised Dealers”. Bangladesh Bank does not deal directly with the members of the public; the transactions are done by Authorised Dealers in accordance with the guidelines given by Bangladesh Bank. These Authorised Dealers have generally been delegated powers to buy foreign exchange from the customers without limits, sell foreign exchange from the customers without limits, sell foreign exchange against imports authorised under Import Policy of the country, provide forward exchange for travel abroad at the prescribed quota and sell foreign exchange to customers to cover remittances of various nature. A few types of transactions, however, require Bangladesh Bank’s approval for which applications are required to be made on prescribed forms.

 

22. Meaning of 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.

 

23. Meaning of Honor

• Honor means:

1. to pay at sight if the credit is available by sight payment.
2. to incur a deferred payment undertaking and pay at maturity if the credit is available by deferred payment.
3. to accept a bill of exchange (“draft”) drawn by the beneficiary and pay at maturity if the credit is available by acceptance.

 

24. What is nominated bank

• Nominated bank means the bank with which the credit is available or any bank in the case of a credit available with any bank.

 

25. What does UCPDC say regarding partial acceptance of an amendment

• Partial acceptance of an amendment is not allowed and will be deemed to be notification of rejection of the amendment. (Article-10(e))

 

26. What does UCPDC say regarding waiver of discrepancy of the documents

• That the issuing bank is holding the documents until it receives a waiver from the applicant and agrees to accept it, or receives further instructions from the presenter prior to agreeing to accept a waiver. (Article-16c(iii)b)

27. What percentage of insurance coverage for CIF/CIP

• If there is no indication in the credit of the insurance coverage required, the amount of insurance coverage must be at least 110% of the CIF or CIP value of the goods. (Article-28)

 

28. What does UCPDC say regarding, “All risk”

• When a credit requires insurance against “all risks” and an insurance document is presented containing any “all risks” notation or clause, whether or not bearing the heading “all risks”, the insurance document will be accepted without regard to any risks stated to be excluded. (Article-28)

 

29. If expiry of LC is on holiday, what can you do, explain

• If the expiry date of a credit or the last day for presentation falls on a day when the bank to which presentation is to be made is closed for reasons other than those referred to in article 36, the expiry date or the last day for presentation, as the case may be, will be extended to the first following banking day. (Article-29)

 

30. Meaning of Transferred credit

• Transferable credit means a credit that specifically states it is “transferable”. A transferable credit may be made available in whole or in part to another beneficiary (“second beneficiary”) at the request of the beneficiary (“first beneficiary”).
• Transferring bank means a nominated bank that transfers the credit or, in a credit available with any bank, a bank that is specifically authorized by the issuing bank to transfer and that transfers the credit. An issuing bank may be a transferring bank.
• Transferred credit means a credit that has been made available by the transferring bank to a second beneficiary. (Article-38)

31. Who has the right to transfer the credit

• Transferring bank means a nominated bank that transfers the credit or, in a credit available with any bank, a bank that is specifically authorized by the issuing bank to transfer and that transfers the credit. An issuing bank may be a transferring bank. (Article-38).

 

32. Partial shipment allowed/not allowed in case of transferrable credit

• A credit may be transferred in part to more than one second beneficiary provided partial drawing or shipments are allowed. (Article-38)

 

33. What does UCPDC say regarding addresses of Applicant and beneficiary

• When the addresses of the beneficiary and the applicant appear in any stipulated document, they need not be the same as those stated in the credit or in any other stipulated document, but must be within the same country as the respective addresses mentioned in the credit. Contact details (tele-fax, telephone, email and the like) stated as part of the beneficiary’s and the applicant’s address will be disregarded. However, when the address and contact details of the applicant appear as part of the consignee or notify party details on a transport document subject to articles 19, 20, 21, 22, 23, 24 or 25, they must be as stated in the credit. (Article-14)

 

34. What does a Transport document indicate?

• Transport documents give proof of shipment/carriage of goods from port of loading/port of shipment/place of receipt to port of discharge/place of destination.
• Usually, transport documents are the documents of title of goods and
• Act as the evidence of contract for the carriage or transportation of the goods between the shipper and the carrier.

 

35. When a bill of Entry and EXP become overdue

• Bill of Entry-120 Days from the date of lodgment
• EXP-120 Days from the date of shipment

 

36. What is SLR and CRR

• SLR –Statutory Liquidity Requirement and CRR-Cash Reserve ratio
• Conventional Bank

SLR-19% of Total time and demand liabilities of Bank

CRR-5.50% daily and 6.00 Bi-weekly of Total time and demand liabilities of Bank

• Islami Bank

SLR-11.50% of Total time and demand liabilities of Bank

CRR-5.50% daily and 6.00 Bi-weekly of Total time and demand liabilities of Bank

(Effective from 15 December 2010).

 

37. What is BASEL-II?

Basel –II is recommendatory framework for banking supervision, issued by the Basel Committee on Banking Supervision in June 2004. The objective of Basel-II is to bring about international convergence of capital measurement and standards in the banking system.

 

38. What are three pillars?

Pillar-1: Minimum Capital Requirements- Deals with the maintenance of regulatory capital calculated for three major components of risk that a bank faces: Credit Risk, Operational Risk and Market Risk.

Pillar-2: Supervisory Review Process- Deals with regulatory response to the first pillar, giving regulators much improved tools over those available to them under Basel-I.

Pillar-3: Market Discipline Requirements- The third pillar greatly increases the disclosures that the bank must make.

39. What id Money Laundering?

Money Laundering means –

–  Properties acquired or earned directly or indirectly through illegal means;

Or, Illegal transfer, conversion, concealment of location of property, acquired or earned directly or indirectly, through       legal or illegal means or providing assistance to such activities.

 

40. What is CRG

Credit Risk Grading (CRG): It is an effective tool based on pre-specified scale reflecting the credit risk for an exposure.

CRG is mandatory as per BRPD Circular No.18 of May’2005

 

 

Usage of CRG:

• Obligor level analysis
• Credit Selection & Pricing
• Monitoring & Internal MIS

History of CRG:

• LRA introduced in 1993 suffers from subjectivity
• Risk Grade Score Card introduced in 2003 is not comprehensive
• CRG introduced in 2005; simplified & user-friendly

 

Categories of CRG for commercial client:

 

Number	Grading	Score
1	Superior	Fully cash secured, secured by government/International Bank    Guarantee
2	Good	85+
3	Acceptable	75-84
4	Marginal/Watch list	65-74
5	Special Mention	55-64
6	Substandard	45-54
7	Doubtful	35-44
8	Bad & Loss	<35

 

A. Financial Risk (50%) : Probability of failure to meet obligation due to financial distress.
1. Leverage: (15%) 2. Liquidity: (15%) 3. Profitability: (15%) 4. Coverage: (5%)	Debt-Equity Ratio: 15 for less than 0.26 & 0 for more than 2.75 Current Ratio: 15 for greater than 2.74 & 0 for less than 0.70 Operating Profit margin: 15 for greater than or equal to 25% & 0 for less than 1%. Interest Coverage Ratio: 5 for greater than or equal to 2 & 0 for less than 1.

 

B. Business/Industry Risk (18%) : Adverse Industrial situation /Unfavourable business condition.

1. Size of Business (5%)  [5 for ‘Sales 60 crore’ & 0 for ‘Sales less than 2.50 crore’ ] 2. Age of Business (3%)  [3 for >10 years & 0 for < 2 years] 3. Business Outlook (3%) [3 for ‘favorable’ & 0 for ‘Cause for concern’] 4. Industry Growth (3%) [3 for Strong & 0 for No Growth] 5. Market Competition (2%) [2 for Dominant Player & 0 for Highly Competitive] 6. Entry/Exit Barriers (2%) [ 2 for Difficult & 0 for Easy ]

 

C. Management Risk (12%): Probability of default due to poor management ability.

1. Experience (5%)  [5 for >10 years & 0 for no experience] 2. Second Line/ Succession (4%) [4 for ready succession & 0 for succession in question] 3. Team Work (3%) [3 for Very Good & 0 for Regular Conflict]

 

D. Security Risk (10%) : Probability of default due to poor quality of security.

1. Security Coverage (Primary)- 4% [4 for Fully pledged/substantially cash covered/Reg. Mortg  & 0 for no security] 2. Collateral Coverage (Property Location) – 4% [4 for Municipal/Prime Area & 0 for no collateral] 3. Support (Guarantee)- 2% [2 for high networth & 0 for no guarantee]

 

E. Relationship Risk (10%): Risk areas in terms of Borrower-Lender relationship.

1. Account Conduct (5%)  [5 for >5 years faultless record & 0 for Irregular dealings in account] 2. Utilization of Limit (2%) [2 for >60% & 0 for <40%] 3. Compliance of Covenants/Conditions (2%) [2 for full compliance & 0 for No compliance] 4. Personal Deposits (1%) [1 for significant personal deposit & 0 for No deposit]