MBA Full Report

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Daffodil International University

Internship ReportOn

“Remittance Management System of Sonali Bank Ltd.’’Dhanmondi Corporate Branch.

Submitted By:GolamSaroarParvez

ID: 143-14-1550Major: FinanceProgram: MBA

Department of Business AdministrationFaculty of Business & EconomicsDaffodil International University


“Remittance Management System of Sonali Bank Ltd.’’

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“Remittance Management System of Sonali Bank Ltd.’’Dhanmondi Corporate Branch.

Submitted To:Rafiqul Islam

Professor & DeanFaculty of Business & EconomicsDaffodil International University

Submitted By:GolamSaroarParvez

ID: 143-14-1550Major: FinanceProgram: MBA

Department of Business AdministrationFaculty of Business & EconomicsDaffodil International University

Date of submission26December 2015

Daffodil International University102, Sukrabad, Mirpur Road, Dhanmondi

Dhaka- 1207


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LETTER OF TRANSMITTAL

26 December 2015Mr. Rafiqul IslamProfessor & DeanFaculty of Business & EconomicsDaffodil International University

Subject: Submission of internship report.

Dear Sir, It is a great pleasure for me to submit my internship report On “Remittance Management System of Sonali Bank Ltd.’’ It was a great opportunity for me to acquire knowledge and experience in respect of the functions, procedures, and operational mechanism of a commercial bank based on conventional banking principle while working in Dhanmondi Corporate Branch ofSonali Bank Limited. I believe that the knowledge and experience I have gathered during my internship period will immensely help me in my professional and practical life.

I have concentrated my best efforts to achieve the objectives of the practical orientation and hope that my endeavor will serve the purpose. However, I will always be happy to welcome any further clarification that you may require.

Sincerely Yours

Golam Saroar ParvezID: 143-14-1550Program: MBADaffodil International University


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DISCLAIMER

I am, Golam Saroar Parvez, hereby declare that this report of internship titled “Remittance Management System of Sonali Bank Ltd.’’, is prepared by me after completion of three months work in Sonali Bank Limited.

In addition, the report prepared is only for my academic requirement not for any other purpose. It might not be used with the interest of opposite party of the organization.

…………………….Golam Saroar ParvezMBA ProgramID:143-14-1550 Major: FinanceDepartment of Business AdministrationFaculty of Business & EconomicsDaffodil International University


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Certificate of Approval

I am pleased to certify that the internship report on “Remittance Management System of Sonali Bank Ltd.’’ prepared by Golam Saroar Parvez bearing ID: 143-14-1550 of the Department of Business Administration is approved for presentation and defense. He worked with Sonali Bank Ltd. as an intern. Under my supervision, he has completed the work during the Fall, 2015 semester.

I am pleased to certify that the data and findings presented in the report seem to be authentic.

I wish him all success in life.

_______________Mr. Rafiqul IslamProfessor & DeanFaculty of Business & EconomicsDaffodil International University


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Acknowledgement

First of all I am grateful to almighty Allah for blessing me in completing the report, “No noble achievement can be achieved by an individual without help of others’’. I am indebted to a number of people for their kind recommendation, submission, direction, co- operation, and their collaboration.

It was a great pleasure for preparing Internship report on “Deposit and Loan Products of National Credit and Commerce Bank Limited’’. I would like to thank and convey my gratitude to honorable supervisor, Mr. Rafiqul Islam (Professor & Dean, Faculty of Business & Economics, Daffodil International University), for lettingme toprepare this report and I would also like to express my sincere appreciation to him for his wholehearted support and guidance.

I am also grateful to the management of Sonali Bank Ltd. for offering me the Internship training. My special thanks to Md. Sohel Rana (Executive Officer) who teach me about overall banking system of Sonali bank limited with significant, vital, imperative, and essential information during face-to- face conversation, by providing some papers etc.

I am also owed to each person who I bothered inside and outside of Sonali Bank Ltd.Dhanmondi Corporate Branch, in carrying out this report.


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Dedication:My Respectable Parents


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Executive Summary

The report emphasize on the “Remittance Management System of Sonali Bank

Limited’’ highlights the wide range of banking and financial activities to individuals ,

firms, corporate bodies and other multinational agencies as well as products and services

offered by the bank to its customers in order to maintain quality of service.

Bank activities can be divided into three categories. These are general banking activities,

credit or loan advance activities and foreign Exchange activities. Credit or loan and

advance activities do the most important works of the bank. Bank’s main task is to collect

deposit from surplus unit and provide loan to the deficit unit. Bangladesh is a developing

country. Remittance means transfer of money from one to another. Bank provides this

facility to their customer as a part of essential services provided to them. The transfer of

money can take place either within the country or from one country to another.

Remittance is most important part of a country’s economy. For the developing countries

like Bangladesh remittance plays a golden role in GDP growth.

This report contains four chapters. The first chapter of the report describes the

introductory words of the internship report in which Introduction of topic, Objectives of

the study, Significance of the study, Methodology and Limitations. The second chapter

contains the overview of SBL. Chapter three contains learning part of the study. Different

suggestions, findings, recommendations and conclusion have come at the end of the

report in the chapter four. The problems findings during the three months long internship

period & suggestions are given from observation. To increase the efficacy in customer

service SBL should try to develop the process of providing services. SBL has passed a

long way since it is providing services. Already it has earned a strong position in the field

of customer service. To continue or to hold the position and be perfect in this sector it will

have to keep more and more attention to the customer retention and development.


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Table of Contents

Sl. No. Particulars Page No.

Letter of Transmittal i

Disclaimer ii

Certificate of Approval iii

Acknowledgement iv

Dedication v

Executive Summary vi

CHAPTER- 1 : INTRODUCTION 1-3

1.1 Introduction 2

1.2 Origin of the Report 2

1.3 Objectives of the Report 3

1.4 Scope of the Study 3

1.5 Methodology 3

1.6 Limitations 3

CHAPTER- 2 : ORGANIZATION OVERVIEW 4-9

2.1 Definition of Bank 5

2.2 Objective of a Bank 5

2.3 A brief overview of Sonali bank limited 6

2.4 Objectives of SBL 7

2.5 Hierarchy of SBL 8

2.6 Organizational Structure of SBL 9

CHAPTER- 3 : LEARNING PART 10-24

3.1 Introduction 11

3.2 Definition 12

3.3 Foreign Remittance 12

3.4 Local Remittance 15

3.5 Mode of Remittances 15

3.6 Features of Remittance Management System 16

3.7 Sources of Inward Remittance 17

3.8 Purpose of Remittance 17

3.9 Approval of Bangladesh Bank 17


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3.10 Main Flow of Foreign Remittance 17

3.11 Contribution of remittance to the National Economy 19

3.12 Role of Different Institutions Considering Foreign

Remittance

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3.13 Country Wise Comparative Statement of Foreign

Remittance

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CHAPTER- 4 : FINDINGS & RECOMMENDATIONS 25-29

4.1 Findings 26

4.2 Recommendations 27

4.3 Other Problems and Suggestions 28

Conclusion 30

Bibliography 31

Glossary 31


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CHAPTER 01:

INTRODUCTION


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1.1 IntroductionAfter the end of Second World-war the world was involved in another war called the

trade war of achieving superiority over other countries through implementing the

strategies of free market economy. The conference of GATT (General Agreement on

Tariffs and Trade) to W.T.O. (World Trade Organization) with adopting new policies,

the emergence of various region oriented economic organizations like NAFTA,

SAFTA, ASEAN, APEC, G-8 etc. indicates that the 21st century will be the century of

economic and business challenge.

Commercial Banks are one of the key contributors to the Bangladesh economy. The

process of economic development requires the banking sector to operate efficiently

and distribute the capital resources to the proper development agencies. People and the

government itself are very much dependent on the services provided by these banks in

the financial market. Commercial banks act as financial intermediaries by performing

the function of mobilization the funds from one group and lending the same to another

for the purpose of a reasonable amount of profit after meeting the cost of funding. So

the objectives of a Bank can be looked at from three different perspectives of the key

parties to the banking activities, these are the Bank owner, the Govt. and the bank

customer.

Among other banks and as government owned bank Sonali Bank Limited is playing a

good role in our economy through its various operations. Its general banking services,

investment in several specified sectors and foreign exchange business is notable.

From the modest beginning, with an increase of responsibility and virtue of

performance, Sonali Bank Limited, within a few years, emerged as the largest

Nationalized Commercial Bank (NCB) in the country. The principal activities of the

bank are providing all kinds of commercial banking services to the customers. It also

performs Government Treasury functions as an agent of the Bangladesh Bank.

1.2Origin of the Report

This report is prepared as partial requirement of the three-month internship

program for MBA program. I took the opportunity to do my internship in the Sonali Bank

Limited (SBL). In the report I have mainly given concentration on “Remittance

Management System of SonaliBank Limited”, which is assigned by the Human

Resource Division of SBL. My faculty supervisor Mr. Rafiqul Islam, Professor &Dean, Faculty of

Business & Economics, Daffodil International University, also approved this topic.


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1.3 Objectives of the Study To understand the remittance management system of Sonali Bank Limited.

To know comparative contribution of foreign remittance received from various

countries.

To know remittance received by Sonali Bank Limited.

To provide recommendations on the basis of findings.

1.4 Scope of the Study

Scope means area of operations or field of the study. The report focuses upon the Remittance

Management System and the organizational structure of SBL.

1.5 Methodology

The report is Descriptive in nature. Data used in this report have been collected from both

primary and secondary sources. Regarding the organizational part, information required was

collected within the organization from the different departments of Sonali Bank Ltd.

The primary sources are as follows:

1) Face to face conversation with the respective officer of the branch.

2) Exposure on different desk of the bank.

3) Relevant file study as provided by the officers concerned.

The Secondary sources of data and information are:

1) Annual Reports of SonaliBank Ltd.

2) Web site of Sonali Bank Ltd. & Bangladesh Bank.

1.6 Limitations of the studyDue to reluctance of relevant officials to provide information, I could not discuss some

aspects. The officers are extremely busy with their assigned jobs. And even I had to

perform the internship while doing the job. On the way of my study, I have faced the

following problems that may be termed as the limitations of the study. The main

limitations encountered in producing this report are:

I have used 5 years data in the financial analysis 2009- 2014 (up to September).

At the time of preparing my report I tried to gather every details but the major

limitation was lack of adequate information.


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Part 02:

Organization Overview


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2.1 Definition of bankGenerally bank refers to an organization that deals with money. The definition of Bank

may be as follows:

As per Bank companies act 1991:

Banking Company means any company which transacts the business of banking in

Bangladesh and includes a new bank and specialized bank.

Banking means the accepting for the purpose of lending or institute of deposit of

money from public repayable on demand or otherwise and withdraw able by draft,

order or otherwise.

Provided by Banking Institutes:

A bank performs an essentially distributive task, service or acts as an intermediary

between borrowers & lenders. In broader sense, a bank can be considered the heart of

a complex financial structure.

– American Institute of Banking

2.2 Objective of a bankThe objectives of a Bank can be looked at from 3 different perspectives of the 3 key

parties to the banking activities- Bank owners, the Government and the Bank clients.

From the owner’s perspective:

i) Earning Profit: Just like any owner(s) of a commercial institution, a bank owner’s

main objective is to earn profit, which is achieved mainly through monetary

exchanges.

ii) Rendering Service: Banks provide different types of services to the government

and people of the country.

iii) Good Will: In order to earn profit through rendering services, banks need to have a

lot of good will, maybe a bit more than other commercial institutions.

iv) Raising Efficiency: To earn maximum profit, banks need to provide efficient

service, for which they require expert workforce.

From the Government’s perspective:

i) Assisting economic development by providing credit facilities.


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ii) Capital Formation: The government wants that bank assist in the macroeconomic

objective of capital formation by encouraging people to participate in savings.

iii) Capital Investment & Industrialization: The government, as a part of their

secondary macroeconomic objective, wants the bank to assist in capital investment &

industrialization by lending out their accumulated capital.

iv) Control Money Market: Government tries to stabilize the money market through

banks.

v) Employment: As part of their primary macroeconomic objectives, they expect

banks to provide employment for its people.

vi) Advice on Financial Matters: Since banks hire a lot of financial experts and

advisors, it often seeks advice from banks to help them develop policies.

From the bank clients’ perspective:

i) Deposit: One of the banks’ main objectives is to accept its clients’ deposits. Bank

clients also want to deposit money with a competitive rate of interest.

ii) Safety: Providing safekeeping of its clients’ monetary possessions and valuables is

another one of banks’ essential objectives.

iii) Advisors & Consultants: Banks provide its clients with advisors and consultants

to help them chalk out an appropriate savings plan.

v) Raising living standard: By providing interests against their deposits, banks help

their clients to improve their living standards.

2.3 A brief overview of Sonali bank limitedSonali Bank is a state-owned commercial bank in Bangladesh. It is the largest bank of

the country. A fully state-owned enterprise, the bank has been discharging its nation-

building responsibilities by undertaking government entrusted different socio-

economic schemes as well as money market activities of its own volition, covering all

spheres of the economy. Sonali Bank Limited singularly enjoys the prestige of being

the agent of the Central Bank of Bangladesh in such places where the guardian of the

money market has chosen not to act by itself. Sonali Bank was established in 1972

under the Bangladesh Banks (Nationalization) Order, through the amalgamation and

nationalization of the branches of National Bank of Pakistan, Bank of Bahawalpur and

Premier Bank branches located in East Pakistan until the 1971 Bangladesh Liberation


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War. When it was established, Sonali Bank had a paid up capital of 30 million taka. In

30 June 2015, it’s paid up capital were Taka 38,300,000,000 (38,300 million), and the

authorized capital amount were Taka 60,000,000,000 (60,000 million).

Sonali Bank has a total of 1207 branches. Out of them, 343 are located in urban areas,

862 in rural areas, and 2 are located overseas. It also operates the Sonali Exchange

Company Inc. in USA and Sonali Bank (UK) Ltd., United Kingdom, to facilitate foreign

exchange remittances. Sonali Bank UK remits up to 14 destinations across Bangladesh

directly,these include Dhaka, Chittagong, Sylhet, Maulvibazar, Beanibazar, Balaganj,

Biswanath, Jagannathpur, Sunamganj, Golapganj, Nabigonj, Habigonj, Kulaura or Tajpur.

There are currently three branches in the UK, one located in Brick Lane, London, another

in Small Heath; Birmingham and in Manchester.

2.4 Objectives of Sonali Bank Ltd.The main objective of the Bank is to provide all of banking services at the doorsteps of

the people. The Bank also participates in various Social and Development programs and

also takes part in implementation of various policies and promises made by the

Government.

Sonali Bank has the following specific objectives:

To collect scattered savings of the people.

To maintain a satisfactory deposit mix.

To extend credit facilities to agriculture, rural development, commercial and

industrial sectors.

To increase loan portfolio diversification and geographical coverage.

To develop human resources through continuous training.

To provide Export Finance

To provide Import Finance

To provide Foreign Remittance

To create new employment.


https://en.wikipedia.org/wiki/Manchester

https://en.wikipedia.org/wiki/Small_Heath,_Birmingham

https://en.wikipedia.org/wiki/London

https://en.wikipedia.org/wiki/Brick_Lane

https://en.wikipedia.org/wiki/Tajpur

https://en.wikipedia.org/w/index.php?title=Kulaura&action=edit&redlink=1

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2.5 Management Hierarchy of SBL


Board of Directors

Managing Directors (MD)

Deputy Managing Director (DMD)

General Manager (GM)

Deputy General Manager (DGM)

Assistant General Manager (AGM)

Senior Principal Officer (SPO)

Principal Officer (PO)

Senior Officer (SO)

Officer

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2.6 Organizational Structure of Sonali Bank


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Part 03:

Learning Part


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3.1 Introduction Remittance Management System is a regular work of Sonali Bank Ltd. This is totally

bank’s own system where foreign remittances were processed. Basically bank collects

the remittance from the 41 exchange houses of different foreign countries. These

exchange houses collect money from the customers and then send information about

the customers to the bank.

There are two processes for sending the information to the bank.

1. EFT (Electronic Fund Transfer)

2. SWIFT (Society for worldwide Inter Bank Finance & Telecommunication)

After receiving this data bank process this data with the help of customized software

which is prepared for processing this data. This software is called Remittance

Management System (RMS) software. Some high quality, energetic, IT specialist and

dynamic young group are engaged to ensure the faster and swift service to the

customers.

The exchange house collect information from the customer’s regarding their –

PON (Payment Order No) No.

Date

Beneficiary Name

Account Name

Amount

Remitter Name

Beneficiary Branch Name etc.

The bank has installed Remittance Management System (RMS) at Wage Earner’s

Corporate Branch (WECB), Dhaka. The incoming remittances are downloaded and

processed at WECB using RMS.

RMS captures various structured remittances from various exchange company and

converts it into a unique structure and imposes a security. After capturing the

remittances RMS receives an administrative password, a part-1 test key holder

password, a part-2 test key holder password and two signatures activation password

daily. In RMS there are 20 (Twenty) parameterized signature. We can change the

signatory dynamically per day. RMS has automated secured test key module. So RMS

generates test key automatically for every amount. Then we accumulate the TRA data


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of various exchange company and impose three types of security and validate using

RMSDataCenter for live outlets.

The RMS module of outlets receives incoming remittance data packet & validate it.

After validation the TRA prints automatically with two signatures and a test number.

An authorized signatory of outlets sign on TRA as third signature and distribute it. The

TRA of distance location is distributed over phone initially and put a seal on TRA as

“credit over phone”.

The outlet collects the credit date of TRA from branches and sends a feedback file to

WECB. This feedback is used for Reconciliation and overseas exchange

company/Bank.

3.2 Definition Remittance means transfer of money from one to another. Bank provides this facility

to their customer as a part of essential services provided to them. The transfer of

money can take place either within the country or from one country to another.

The remittance of freely convertible foreign currencies which we are receiving from

abroad against which the Authorized Dealers making payment in local currency to the

beneficiaries may be termed as Foreign Inward Remittance. The transfer of money can

take place either within the country or from one country to another.

> Foreign Remittance.

> Local Remittance.

3.3 Foreign RemittanceINTRODUCTION:

Foreign remittance means, money remitted in foreign currency. More precisely, it is

termed as remittances in foreign currency that are received in & made out abroad.

Conceptual Issues International remittances are defined as the portion of migrant

workers’ earnings sent back from the country of employment to the country of origin

(ILO, 2000). Remittance can also be sent in kind. Transfers that take place in kind is

quite difficult to measure. Remittances can be individual and it can also be collective.

When individuals are send remittance to his/her household or kith and kin that can be

termed as individual remittance. When a group of migrants, their associations or


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professional bodies mobilize resource together and send for collective or community

program that can be termed as collective remittance. Individual remittances are mostly

geared towards the family whereas collective remittances are generally used for

community development.

Transfer of remittances takes place through different methods. 46% of the total volume

of remittance has been channeled through official sources, around 40% through hundi,

4.61% through friends and relatives, and about 8 percent of the total was hand carried

by migrant workers themselves when they visited Bangladesh.

DEFINITION:

When transfer of money occurs from any foreign country to the home country it is

called foreign remittance. The economy of Bangladesh is mainly depended on this

sector. A lot of people staying outside the country send money to their relatives and

family. Both the receiver and sender want this money to be transferred. safely and

rapidly. Bank provides these services to them in a secured way.

TYPES

Two types of Foreign remittance:-

Foreign Inward Remittance.

Foreign Outward Remittance.

FOREIGN INWARD REMITTANCE

The remittance of freely convertible foreign currencies which we are receiving from

abroad against which the Authorized Dealers making payment in local currency to the

beneficiaries may be termed as Foreign Inward Remittance.

FOREIGN OUTWARD REMITTANCE

The remittances in foreign currency which are being made from our country to abroad

is known as foreign outward remittance.

PURPOSE OF OUTWARD REMITTANCE

1. To settle Import Payment.

2. To meet Travel Expenses/Medical Expenses/Educational Expenses etc.

There are three foreign remittance management processes. These are:


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REMITTANCE THROUGH THE DIRECT ARRANGEMENT WITH SONALI BANK

Sonali Bank has arrangement with some foreign bank and transfer agencies in various

countries. When transfer is made from those countries and through any of those

financial institutions, they transfer it directly to the Sonali Bank. This transfer is made

through online. Generally Sonali Bank Wage Earners Branch receives all these

remittance and then sends it to the respective branches of the bank. This is transferred

by filling up a TTPO (Telegraphic Transfer Pay Order) form or FTT (Foreign

Telegraphic Transfer) form.

Remittance through any other Bangladeshi Banks:

When there is no arrangement between the foreign financial institution and Sonali

Bank, the foreign institution transfer it to any other bank in Bangladesh with whom it

has arrangement. Then the bank transfers it to the Sonali Bank. When the transferor

and transferee bank are within the same clear house area, the transferor uses P0 (Pay

Order). And if the two banks are in different clearing house area, the transferor uses

DD (Demand Draft)

REMITTANCE THROUGH ANY OTHER BANGLADESHI BANKS

When there is no arrangement between the foreign financial institution and Sonali

Bank, the foreign institution transfer it to any other bank in Bangladesh with whom it

has arrangement. Then the bank transfers it to the Sonali Bank. When the transferor

and transferee bank are within the same clear house area, the transferor uses P0 (Pay

Order). And if the two banks are in different clearing house area, the transferor uses

DD (Demand Draft)

REMITTANCE THROUGH A FOREIGN BANK

The remitter can send money through any financial institution which has branches in

both countries. In this case, the bank in Bangladesh receives the amount from its

foreign branches and then transfers it to the bank where the client wishes to draw the

money. Here the bank needs to fill up a C’ form if the amount of money is $2,000 or

more. It is done for the declaration for remittance received from foreign country in the

amount of $2,000 or more.


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3.4 Local Remittance When money is transferred through one place to another place within the country, it is

called Local Remittance. Sonali Bank has highest number of branches all over the

country and offers various kinds of remittance facilities to the public.

3.5 Mode of RemittancesThe following are the mode of Inward/Outward Remittances.

1. TT = Telegraphic Transfer.

2. MT = Mail Transfer.

3. FD = Foreign Drafts.

4. PO = Payment Order.

5. TC = Travelers Cheque.

6. EFT = Electronic Fund Transfer

PAY-ORDER (P0)

Payment Order is an instrument that is used to remit fund within a local area i.e.

within the same clearing house area. For example, if we want to remit fund from one

place of Dhaka to another place, we generally use payment order.

DEMAND DRAFT (DD)

It is an instrument that is drawn on one banker office to another or other banker’s

branch to pay certain sum of money to the named person. It is generally used to remit

fund from one corner of the country to another. For example,, if we want to remit fund

from Dhaka to Khulna we use DD. DD is very popular instrument for remitting money

from one corner of the country to another.

Difference between Pay-Order and Demand Draft:

There are some differences between pay order and demand draft. These are given

below

# In case of Demand Draft both the payer and payee need to have accounts. But

there is no certain rule for pay order.

# PU is used in the same clearing area; DD is used for all kinds. DD can not be done

in the same clearing area.


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# DD is drawn on a certain bank office. But there is no certain rule for pay

order(PO).

TELEGRAPHIC TRANSFER (TT)

Sometimes the remitter of the fund wants the money to be available to the receiver’s

account immediately. In that case bankers arrange to remit the fund telegraphically.

Here the remitter bears the additional charge for telex/telephone.

MAIL TRANSFER (MT)

It is an instrument that is drawn by one banker office on another or other banker’s

branch to pay certain sum of money to the named person. This instrument is not given

to the holder but the bank carries it and a message is sent to the particular branch. It is

generally used to remit fund from one corner of the country to another.

Commission for MT, DD, & TT are giving below:

Total Amount Commission

UP to TK 20,000 Tk 20

Above Tk 20,000 Per thousand costs Tk 1

For MT minimum charge is Tk. 15. And for IT in addition to the commission TT

charge is paid Tk. 50 and a VAT is paid on the commission @15%

3.6 Features of Remittance Management System1. Credit beneficiary Account within 8-24 Hours.

2. Auto Test Number for any amount (Parameterized)

3. Auto Signature (Parameterized)

4. Highly secured data transmission

5. Auto Feed Back

6. Data Ready for Reconciliation

7. Unique platform for all exchange company

8. Consolidated Data packet for all overseas exchange/Bank

9. Missing data packet traceable by outlet software

10. Single Copy instrument print

11. Additional instrument copy prints with “Care Duplicate”.


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12. Generate all types of required statements

13. 100% parameterized Software

3.7 Sources of Inward Remittance1. Expatriate Bangladeshis.

2. Exporters.

3. Visitors.

3.8 Purpose of RemittanceIn short, remittances are being sent from abroad for the following purposes:-

Family maintenance

Indenting Commission

Recruiting Agents Commission

Realization of Export Proceeds

Donation

Gift

Export broker’s Commission etc.

3.9 Approval of Bangladesh Bank Bangladesh is always in a scarcity of foreign exchange and foreign exchange business

is restricted and controlled by the Central Bank of the country. For this reason

Bangladesh Bank’s prior permission is required for any remittance to be made to

outside the country.

Bangladesh Bank provides permission/approval for outward remittances to the

applicants who are to lodge an application for the purpose on the following prescribed

forms with an Authorized Dealer who forwarded the same to Bangladesh Bank for

approval.

3.10 Main Flow of Foreign Remittance Saudi Arabia

Kuwait

Qatar

Oman


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Iraq

Libya

Bahrain,

Iran

Malaysia

South Korea

Singapore

Hong Kong

Brunei

These are some of the major countries of destination. Saudi Arabia alone accounts for

nearly one-half of the total number of workers who migrated from Bangladesh. Labor

market of Bangladeshi workers is not static. During the 1970s Saudi Arabia, Iraq, Iran

and Libya were some of the major destination countries. While the position of Saudi

Arabia remains at the top, Malaysia and UAE became important receivers. In mid-

1990s, Malaysia became the second largest employer of Bangladeshi workers.

However, since the financial crisis of 1997, Bangladeshis migrating to Malaysia

dropped drastically. Now UAE has taken over its place.

Over the past 25 years labor migration from Bangladesh has registered a steady

increase. From 1990 onwards on an average 3, 25,000 Bangladeshis are migrating on

short-term employment, mostly to 13 countries. In the past the bulk of the migrants

consisted of professional and skilled labor. However, the recent trend is more towards

semi- and unskilled labor migration. Due to increase in the flow of unskilled and semi-

skilled labor, remittance is increasing at a much lower rate than the labor flow.

Remittance is crucial for Bangladesh’s economy. It constitutes almost one-third of the

foreign exchange earnings. About 25 percent of remittance senders were students

when they went abroad and another 25 percent were living off their own land. A large

segment of them were working as construction laborers overseas, another group

worked as agricultural laborers. UAE, Saudi Arabia and Singapore constituted the

most of important destinations of these migrants.

One survey comments that if the migrant workers’ total income abroad and the

present family income from other sources is combined and then compared with the

pre- migration family income, it registers an increase in total income by 119 percent.

On an average, the interviewee households annually received about Tk.72,800 as

remittance. This means that a typical migrant remits 55.65 percent of his income.


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Remittance constitutes 51.12% of the total income of these families. Transfer of

remittances takes place through different methods. 46% of the total volume of

remittance has been channeled through official sources, around 40% through hundi,

4.61% through friends and relatives, and about 8 percent of the total was hand carried

by migrant workers themselves when they visited

3.11 Contribution of remittance to the National Economy Labor migration plays a vital role in the economy of Bangladesh. Bangladesh has a

very narrow export base. Readymade garments, frozen fish, jute, leather and tea are

the five groups of items that account for four-fifths of its export earnings. Currently,

garments manufacturing is treated as the highest foreign exchange earning sector of

the country (US $ 4.583 billion in 2003). However, if the cost of import of raw

material is adjusted, then the net earnings from migrant workers’ remittances is higher

than that of the garments sector. In 2003, net export earnings from RMG should be

between US$2.29-2.52 billion, whereas the earning from remittance is net US$3.063

billion. In fact, since the 1980s, contrary to the popular belief, remittances sent by the

migrants played a much greater role in sustaining the economy of Bangladesh than the

garments sector. For the last two decades, remittances have been at levels of around

35% of export earnings, making it the single largest source of foreign currency earner

for the country. This has been used in financing the import of capital goods and raw

materials for industrial development. The steady flow of remittances has resolved the

foreign exchange constraints, improved the balance of payments, and helped increase

the supply of national savings. Remittances also constituted a very important source of

the country’s development budget. In certain years in the 1990s remittances’

contribution rose to more than 50 percent of the country’s development budget.

Government of Bangladesh treats Foreign aid (concessional loan and grants) as an

important resource base of the country. However, remittances that Bangladesh

received last year was twice that of foreign aid. Remittances have played a major role

in reducing the extent of the country’s dependence on foreign aid. The contribution of

remittance to GDP has also grown from a meager 1 percent in 1977-1978 to 5.2

percent in 1982-83. During the 1990s the ratio hovered around 4 percent. However if

one takes into account the unofficial flow of remittances, its contribution to GDP

would certainly be much higher. It is certain that an increase in remittance by Taka 1


30


would result in an increase in national income by Tk 3.33. Following the expiry of

multi-fiber agreement (MFA), Bangladesh will face steep competition in export of

RMG. The country will cease to enjoy any special quota. It is apprehended that

Bangladesh’s RMG export will decline sharply. This will result in loss of job of many

workers and shortfall in foreign exchange earnings. Potential of retaining employment

and export earnings through export of frozen fish, jute, leather and tea seems rather

bleak. It is in this context labor migration has become key sector for earning foreign

exchange and creating opportunities for employment. Therefore, the importance of

migrant remittance to the economy of Bangladesh can hardly be over emphasized.

3.12 Role of Different Institutions Considering Foreign RemittanceMINISTRY OF FINANCE:

Ministry of Finance (MoF) is the prime policy making body regarding banking and

remittance. Macro-economic policies that affect exchange rate, monetary and fiscal

mechanisms, foreign exchange reserve etc. are regulated by this ministry.

BANGLADESH BANK:

Bangladesh Bank (BB) is the central bank of Bangladesh. Among other powers and

functions, BB regulates scheduled bank activities, acts as a clearing-house, maintains

foreign exchange reserves and monitors floating exchange rate mechanism in the

current accounts. Bangladesh Bank encourages the nationalized and private banks to

link up with foreign banks and exchange houses in the destination countries. It has a

separate department for regulating and monitoring remittance entitled Foreign


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EXCHANGE POLICY DEPARTMENT:

It also generates analyses, interprets and distributes data on inflow of remittance.

NATIONALISED COMMERCIAL BANKS:

Nationalized Commercial Banks (NCBs) of Bangladesh make direct banking facilities

available at the doorsteps of Bangladeshi emigrants especially in those countries where

a large number of Bangladeshis are employed. Five NCBs are deeply involved in

remittance transfer. These are Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank

Ltd. and Bangladesh Krishi Bank (BKB). Among the NCBs, BKB is solely targeted

towards agricultural development in rural areas. Within Bangladesh these five NCBs

have 2945 branches. Through them they can disburse remittances even in distant areas.

Besides their own branches, NCBs have opened exchange houses in joint collaboration

with different banks and financial institutions in different countries of the world.

PRIVATE COMMERCIAL BANKS:

Private Commercial Banks (PCBs) are also involved in remittance transfer. Of the

PCBs, Islami Bank of Bangladesh Ltd. has been found to be most proactive in the area

of migrants’ remittance. National Bank, International Finance and Investment

Corporation (IFIC), Prime Bank and Uttara Bank are other private banks involved in

remittance transfer. Most of their activities are in the Middle East. Saudi Arabia is the

major working area of Islami Bank along with Qatar, Bahrain and UAE. National

Bank is operating in Oman, Kuwait, UAE, Qatar, Bahrain and Saudi Arabia. IFIC has

curved out a major niche in Bangladeshi community in Oman and has its largest share

with 41% of the market. It also has branches and exchange offices in Nepal and some

other Middle Eastern countries. Uttara Bank runs exchange house in Qatar in

collaboration with a local financial institution. Corresponding Relationships In almost

all countries of the world, both NCBs and PCBs have corresponding relationships with

banks through which Bangladeshi migrants may easily send their money to their

beneficiaries’ accounts with any branch of any bank in Bangladesh.


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3.13 Country Wise Comparative Statement of Foreign Remittance

Table 1: Remittance flows from Middle East countries

USD in millions

2008- 2009- 2010- 2011- 2012-2013-2014

Countries (uptoSeptember)2009 2010 2011 2012 2013

K.S.A. 2859.09 3427.05 3290.03 3684.36 3829.45 709.15Bahrain 157.43 170.14 185.93 298.46 361.70 92.57Kuwait 970.75 1019.18 1075.75 1190.14 1186.93 267.10U.A.E. 1754.92 1890.31 2002.63 2404.78 2829.40 620.41Oman 290.06 349.08 334.31 400.93 610.11 151.46Qatar 343.36 360.91 319.36 335.26 286.89 60.40Libya 1.25 1.46 5.20 12.91 57.65 19.42Iran 3.28 4.49 2.32 1.16 2.59 0.00Total 6380.14 7222.62 7215.53 8328 9164.72 1920.51

Source: Bangladesh Bank

From this chart, it has shown that, Kingdom of Saudi Arabia (KSA) topped the

position for wagebecauseofitsupward trends, even though employment

opportunity is shrinking there. Kingdom of Bahrain, U.A.E and Oman have also

upward trend of remittance inclusion. Contribution from Libya and Iran become

less due to turmoil situations.

Remittance flows of FY 2008-09 to 2013-14 (up to September 2013) from

Europe- America are as follows,

Table 2: Remittance flows from Europe- America

USD in millions

2008- 2009- 2010- 2011- 2012-2013-2014

Countries (up toSeptember)2009 2010 2011 2012 2013

U.S.A. 1575.22 1451.89 1848.51 1498.46 1859.76 529.50U.K. 789.65 827.51 889.60 987.46 991.59 237.74Germany 19.32 16.50 25.64 34.99 25.81 6.53Italy 186.90 182.19 215.58 244.75 233.23 83.42Total 2571.09 2478.09 2979.33 2765.66 3110.39 857.19



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From Table-2, it has shown that, U.S.A holds the topmost oiinhogo horizon. It is also

holds top position in the current fiscal year also. United Kingdom showed moderate

figure where as Germany possesses the little.

Remittance flows of FY 2008-09 to 2013-14 (up to September 2013) from Asia

(except Middle East) - Australia are as follows,

Table 3: Remittance flows from Asia (except Middle East) - Australia

USD in millions

2008- 2009- 2010- 2011- 2012-

2013-2014

Countries

(up toSeptember)

2009 2010 2011 2012 2013

Australia 6.78 8.45 13.00 53.27 60.91 11.41Hongkong 9.09 8.32 11.12 22.64 19.54 3.66

Malaysia 282.22 587.09 703.73 847.49 997.43 220.19Singapore 165.13 193.46 202.33 311.46 498.79 91.56Japan 14.12 14.74 15.21 22.16 21.18 4.21S.Korea 18.33 20.77 23.95 30.05 61.77 12.06Total 495.67 832.83 969.34 1287.07 1659.62 343.09


From Table-3, it has shown that, Malaysia topped the position throughout time

horizon i.e, FY 2008-09 to FY 2013-14 (up to September 2013) followed by

Singapore. Contribution from Hongkong is the least from above.

Based on above tables, a comparative table is given below,

Table 4: Comparative Contribution on Remittance

Segment 2008 % 2009- % 2010- % 2011- % 2012- % 2013 %- 2010 2011 2012 2013 -2009 2014

Middle 6380. 66 7222. 66% 7215. 62 8328 65 9164. 63 1920. 59%East 14 % 62 53 % % 72 % 51Europe- 2571. 27 2478. 22% 2979. 26 2765. 21 3110. 22 857.1 26%America 09 % 09 33 % 66 % 39 % 9Asia(except Middle 495.6 5% 832.8 8% 969.3 8% 1287. 10 1659. 11 343.0 10%


34


East)- 7 3 4 07 % 62 % 9Australiaothers 242.3 2% 453.8 4% 486.1 4% 462.7 4% 526.4 4% 149.1 5%

6 6 3 1 0 7Total 9689 100 1098 100 1165 100 1284 10 1446 10 3269 100

.26 % 7.4 % 0.33 % 3.44 0% 1.13 0% .96 %

From this table, it has shown that, contribution from Middle East countries topped the

position on remittance inclusion from 2008 –09

Arabia (K.S.A.) holds the top contributory position. From Europe- America, United

States of America (U.S.A.) holds the top position and from Asia (except Middle East) –

Australia, Malaysia holds the top contributor. Comparative contributions of these

countries are given below in a bar chart.

Comparative Contribution of K.S.A., U.S.A. and Malaysia

Comparative Contribution

K.S.A. U.S.A. Malaysia

3829.453427.05 3684.36

3290.032859.09

1575.22 1451.891848.51

1498.461859.76

997.43587.09 703.73 847.49 709.15

282.22529.5

220.19

2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 (up toSeptember)


35


PART-4:FINDINGS AND RECOMMENDATIONS


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4.1 Findingsa) Most of the time SBL tries to provide quality services to the known clients, it

may lose general customers.

b) Most of the clients think that, the terms and conditions are too lengthy to receive

remittance from this bank.

c) SBL website is not sufficient to provide all information about every type of document required to receive remittance.

d) Lack of skilled manpower in remittance sector on this branch.

e) Lack of Internet facility.

f) Lack of proper monitoring in remittance sector.

g) Problems in software (it is now in the ongoing process)

h) Process of receiving remittance is very lengthy. As a result some of the customers are trying to go another bank.


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4.2 Recommendations

a) Sonali Bank Limited should introduce batter services for all customers.

b) Terms and conditions to receive remittance should be specified.

c) SBL should rich there website with better information.

d) The bank should recruit efficient manpower on this sector.

e) High speed internet facility should be implemented.

f) SBL should establish a proper monitoring cell to control the queries of the

customers.

g) Problems of software should be managed soon.

h) The bank should reduce harassments and take a less time for the processing to

give remittance like NCC Bank.


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4.3 Other Problems and SuggestionsBANKING POLICY:

Banking policies are generally made at the Ministry of Finance and the policies are

scrutinized and implemented by the Bangladesh Bank. Later, the Bangladesh bank

enforces these rules and regulation, interest rates, loan disbursement etc. In many

cases, the faulty decision-making and policymaking costs commercial banks dearly.

So, before making any sort of drastic decision regarding policymaking the government

should at least discuss with the top management of the commercial banks.

WEAK MANAGEMENT:

Sonali bank Ltd faces severe lack in strong management policy. Most of the top

management is influenced by the government bodies like Bangladesh bank and

Ministries. They are not allowed to work freely rather depend heavily on government

organizations. So in most cases independent decisions do not come from bank

officials.

EMPLOYMENT BALANCE:

There are more than 1,000 branches of Sonali Bank all over Bangladesh and outside

Bangladesh. But all the branches are not balanced from employment point of view.

Some branches of Regional/Principal offices have over employment while some faces

the problem of under employment. The balance of the personnel working in each

branch has to be set properly depending on the volume of work.

POOR SERVICE:

This is basically due to lack of manpower against huge amount of work the bank

usually deals with. Sonali bank does what a private bank does, apart from that it also

works as the treasury service of the government, utility services, passport services,

foreign currency service and virtually all the services that can be done by a bank is

done by Sonali Bank. Considering huge amount of work some branches notoriously

lag enough manpower against it. It is not the efficiency of the workers that is lagging,

but it is the huge amount of work to be done is not met by the present manpower.

LOAN DEFAULT:

We have already considered data where we have found the recovery of Sonali Bank’s

credit is very poor. There are many reasons behind it. The culture of loan default has

to be overcome taking appropriate measures.


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Sonali bank Ltd has to follow the above measures, so that its performance, deposit

disbursement, recovery, investors, importer, goodwill etc. will be increased.

ONLINE BANKING:

Although Sonali Bank Ltd has taken the facility of using computers in maintaining

cash and other sections but still it has not taken the full advantage of the modern day

wonder of full fledged computer facilities. Most of the private banks are operating on

24 hour basis online banking – the sector is still ignored by Sonali Bank. All the

branches do not maintain their ledgers using computers yet. Money transfer in

different modes, wage earners and foreign exchange etc. has not been still taken up by

the computers till now.


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Conclusion

The Banking arena in recent time is one of the most competitive business fields in

Bangladesh. As Bangladesh is a developing country, a strong banking sector can

change the socio economic structure of the country. So we can say the whole economy

of the country in linked up with its banking system. There are 54 banks in Bangladesh

of which 38 are indigenous commercial Banks. Sonali Bank Ltd. is the largest

commercial Bank of Bangladesh. This bank performs hundreds of important activities

both for the private and for the government as a whole. Remittance is very important

issue in our economy. A major portion of GDP comes from this sector. So I think

theterms and conditions of this bank should be easier to receive remittance. If it is

possible to improve the Remittance Management System of Sonali Bank Ltd. it may

increase remittance. I had the privilege to learn many things about the remittance

management system from the DHANMONDI Corporate Branch through my active

involvement in this branch.


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REFERENCES

http://www.sonalibank.com.bd/

https://www.bb.org.bd/

https://www.wikipedia.org/

http://www.investopedia.com/

Internet

Annual Reports of Sonali Bank Limited (2010-2014)

Data provided by corporate branch

Glossary

TT = Telegraphic Transfer

MT = Mail Transfer

FD = Foreign Drafts

PO = Payment Order

TC = Travelers Cheque

EFT = Electronic Fund Transfer

SBL = Sonali Bank Limited

NCB = Nationalized Commercial Bank


Documents

MBA Full Report