FOREIGN REMITTANCE

FOREIGN REMITTANCE

Definition:

Remittance represents transfer of fund from one place to another through official channel.

Foreign Remittance:

Foreign Remittance refers remittance of Foreign currency that are received in and made out abroad. Foreign Remittance also includes purchase and sale of freely convertible foreign bills and currencies.

Types:

a)    Foreign Inward Remittance

b)    Foreign Outward Remittance

Foreign Inward Remittance

 Remittance of foreign currency being received in the Country from abroad is called inward foreign remittance. Means and ways of inward remittance are:

a)    Repatriation of Export proceeds

       b)    Aid, Loans

       c)    Wage Earners

d)    Indenting commission

e)    Donation, gift etc.

Modes of Foreign Inward Remittance and its Accounting procedure:

Telegraphic Transfer (TT)/SWIFT Transfer, Demand Draft (DD), Mail Transfer (MT) and Travellers Cheque (TC) are the common modes of Foreign Inward Remittances.

Besides, foreign Inward Remittance also includes remittances on account of export, purchase of bills, purchase of Drafts, purchase of TC, Foreign currency notes and coins, Cheques issued on Foreign banks in favour of beneficiaries in Bangladesh etc.

 Local currency debited to Non-Resident Taka Accounts of foreign banks or Convertible Taka account constitutes Inward Remittances of Foreign Exchange.

TT: Tested telex/SWIFT instructions of payment are called as Telegraphic Transfer (TT). Where a bank/Exchange House issue a TT in favour of beneficiary in Bangladesh, it credits the amount, received from the remitter to the NOSTRO A/C of its correspondent bank. On receipt of the TT the Paying bank in Bangladesh will make payment of the proceeds of the TT in foreign currency or in equivalent Bangladeshi Taka to the beneficiary. TT clean purchase rate will be applied for the payment of TT.

 Settlement of TT

When received from abroad (Inward Remittance)                                                

Dr.-   ETDA – HO (Respective Nostro A/C)                                                                       Tk.

Cr.-    Party’s A/C (At TT Clean Buying Rate)                                                                    Tk.

Note:  i)     TT should not be responded without receipt of control number from ID.

            ii)      ETDA shall not issued on the bank at which the amount originally credited.

            iii)      Foreign currency shall be retained by International Division, Head Office, only.

DD: A Demand Draft is an Instrument in writing containing an order of the issuing bank on the drawee bank to pay a certain amount to the payee or to his order. There are two ways to handle DD/Cheque to give value to the beneficiary:

          Before realization of the proceeds of the instruments (FBP)

Settlement of FBP:

(A)       If 100% is purchsed:

When foreign Drafts/Cheque etc. received:

i)         At the time of purchase

 Dr.-FBP @ OD Transfer                                                                                               Tk.

Cr.-    Party’s A/C                                                                                                          Tk.

Cr.-    Income A/C – Postage etc.                                                                                    Tk.

After purchase the branch shall send this instrument to foreign bank for collection of the proceeds.

ii)         At the time of Realization:

            When the proceed is credited to our Nostro A/C and confirmed by ID.

Dr.-   ETDA – HO (Respective Nostro A/C) (At TT Clean Buying Rate on the date of FBP)     Tk.

Cr.-    FBP @ OD Transfer (Reversal of original entry)                                                        Tk.

Cr.-    Income A/C – Exchange Earnings                                                                         Tk.

                     (Difference between TT Clean and OD transfer)

 

(B)       If partial amount is paid to the client

When Foreign Drafts/Cheque etc. received:

a. At the time of Purchase

  Dr.   FBP @ OD Transfer (Full amount)                                                                          Tk.

Cr.   Party’s A/C (Amount to be paid)                                                                             Tk.

Cr.-    Sundry Deposit A/C – Margin on FBP (Amount left)                                                  Tk.

Cr.-    Income A/C – Postage etc.                                                                                  Tk.

After purchase the branch shall send this instrument to foreign bank for collection of the proceeds.

 b.   At the time of Realisation:

            When the proceed is credited to our Nostro A/C and confirmed by ID.

i)  Dr.-   ETDA – HO (Respective Nostro A/C) (At TT Clean Buying Rate on the date of FBP)    Tk.

   Cr –     FBP @ OD Transfer (Reversal of Original entry)                                                      Tk.

   Cr.-    Income A/C – Exchange Earnings (Difference between TT Clean and OD transfer A/C)          Tk.

ii)Dr.     Sundry Deposit A/C- Margin on FBP                                                                       Tk.

  Cr.-    Party’s A/C (Balance held in Sundry Deposit A/C)                                                     Tk.

 Settlement of FBC:

            a).  At the time of lodgement:

  Dr.    Outward Foreign Bills lodged (OFBL)                                                                     Tk.

  Cr.    Outward Foreign Bills for collection (OFBC) (At TT Clean Buying Rate)                        Tk.

             After lodgement the branch shall send the instrument to foreign bank for collection.

b.     At the time of Realisation:

            When the proceed is credited to our Nostro A/C and confirmed by ID.

i)Dr.    Outward Foreign Bills for collection (OFBC)                                                           Tk.

  Cr.     Outward Foreign Bills Lodged (OFBL) (Reversal of original entry)                             Tk.
 

ii)Dr.  ETDA – HO – (Respective Nostro A/C) (At TT Clean Buying Rate)                             Tk.

  Cr.     Party’s A/C (At TT Clean buying rate less charges)                                                Tk.

  Cr.-    Income A/C – Commission on FC                                                                          Tk.

Cr.-    Income A/C – Postage etc.                                                                                   Tk.

MT:  MT is an instrument issued by a remitting bank to the paying bank advising in writing to make payment of certain amount to the specific beneficiary.

TC:   It is an instrument issued by a Bank/company payable to the purchaser on presentation after verifying purchaser’s signature.

      Settlement of T.C.:

 a. When T.C purchased from the clients:

Dr.    FBP – @ OD Transfer)                                                                                         Tk.

Cr.     Party’s A/C                                                                                                       Tk.

Cr.     Income A/C – Postage etc.                                                                                 Tk.

After purchase the branch shall send the instrument to foreign bank for collection of the proceeds.

    At the time of Realisation

    Same as FBP mentioned earliar.

Purposes of Inward Remittances:

Family maintenance, Indenting Commission, Recruiting Agents Commission, Realization of export proceeds, Donation, Gift etc.

Payment Procedures: FDD/FMT/FTT:

 The paying bank must observe the following procedure while making payment:

i.              Verifies the instrument to see that it is in order (Amount, name of beneficiary and remitter’s particular)

ii.             Verifies the signatures of the authorized officers of the issuing bank

iii.            Test Decode (if any)

iv.           Convert the foreign currency in Taka (where payment has to be made in BD Taka) at the prevailing exchange rate.

v.            To obtain ‘C’ form if the remittance is equivalent to US$ 2,000/- or above (Form ‘C’ will not be required for Bangladeshi nationals working aboard)

vi.           In case of big amount, the paying branch before effecting payment may take confirmation from the issuing bank

vii.          Value date to be observed (value date-The particular date of crediting Nostro A/C)

viii.         Purpose of the remittance to be confirmed

ix.           To prepare FET schedule & send voucher to International Division, Head Office.

x.            It will be very essential for our safeguard being received of HO, ID advice then prepare related vouchers.

Payment of TC:

Travellers Cheques may be paid at the counter of the bank on presentation, obtaining signature of the purchaser on the TC. After verifying the signature of the holder with the signature already on the TC, the payment will be effected in local currency at the prevailing conversion rate. The TC may also can be deposited in foreign currency account.

Payment of Foreign Currency Notes:

 Authorized Dealer branches of the bank are to make payment of FC notes in equivalent Taka at the prevailing rate. ADs and Moneychangers may freely buy foreign currency from incoming passengers regardless of nationality and regardless of whether or not a declaration on form FMJ is produced at the time of encashment.

 Handling of Cash Foreign Currency:

 

 a.   Purchase from the Clients:

Dr.     FC in Hand                                                                                                         Tk.

Cr.     Party’s A/C (At Cash FC Buying Rate)                                                                      Tk.

b.-        Sales to the Clients:

Dr.     Party’s A/C (At Cash FC Selling rate.)                                                                   Tk.

Cr.     FC in Hand                                                                                                       Tk.

Note:     i)       The Foreign Exchange Department of each branch shall maintain currency wise FC in Hand

                      control ledger where all the transactions of a day shall be entered.

            ii)      On the last working day of the month the branch shall calculate gain/loss by multiplying the FC

                     into TT Clean buying rate and pass either of the following vouchers.:

a.   If the converted taka amount is higher than the actual balance:

Dr.     FC in Hand (Control Ledger)                                                                                Tk.

Cr.     Income A/C Exchange Earnings                                                                            Tk.

OR

b.-        If the converted taka amount is less than the actual balance:

Dr.     Expenditure A/C Exchange Loss                                                                            Tk.

Cr.     FC in Hand (Control Ledger)                                                                                  Tk.

Receipt of Taka draft, issued by the different Exchange House and Payment there of:

The commercial banks in Bangladesh established Taka Drawing arrangements with difference Exchange Companies having prior approval of Bangladesh Bank. The Exchange Companies draw Taka drafts on the nominated branches of the banks. The Exchange Companies remit cover of their drawings in US Dollar. The bank purchase such US Dollar and credits the Taka proceeds to the Tk A/C of the Exchange companies. The Drafts are being paid by debit to NRT (Non Resident Taka) A/C of the Exchange Companies provided the instruments are found otherwise in order.

  Reporting to Bangladesh Bank:

All the foreign exchange transactions of each month on Inward remittances have to be reported to Bangladesh Bank through statements along with schedules before a stipulated date. 5th day for the ADs and 12th day for Head Office.

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