Report on Foreign Remittance

1 January 2017

The organization attachment started on February 01, 2006 and finished on April 31, 2006. My organization supervisor Mr Fuad Yusuf Khan (Manager, Motijhil Booth, HSBC) assigned me the topic of the term paper & my institution supervisor at Independent University Mrs. Sardana Islam, duly approved it. The report will definitely identify how the corporate world really works and how the Remittance are approved and disbursed; and will help to apply theoretical knowledge in the practical life. 1. 2 Background of the study:

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Hong Kong and Shanghai Banking Corporation (HSBC), Bangladesh were the most diversified banking service providers in Bangladesh, as they had various products and services for the customers. HSBC was always in the lookout for various financial opportunities. Towards this end, HSBC is intending to introduce new products and services of Payment and Cash Management for the corporate clients to serve them more efficiently & also they were intending to find what they were lacking in Payment & Cash Management services 1. 3 Objective of the study:

The purposes of this report cognates the internship purpose. The internship objective was to gather practical knowledge and experience of the corporate working environment with the close approximation to the business firm and the experts who are leading and making strategic decisions to enhance the growth of a financial institution. To this regard this report is contemplating the knowledge and experience accumulated from internship program. With the set guidelines and proposal by the School of Business of Independent University and with the kind advice of both the Organization and

Internship Supervisor this report comprise of an organization part and a project part. The prime objective of the organization part is: To present an overview and brief introduction of HongKong and Shanghai Banking Corporation Ltd. The Specific objectives of the project part are: ? To depict the Foreign operations by NSC, HSBC Bank Ltd, Motijheel branch. ? To know deeply about Import, Export and Remittance. ? To learn about the procedure of handling Inward & Outward Remittances by NSC, HSBC. ? To make analysis of Inward & Outward Remittances through HSBC. 1. 3 Scope

The scope of this report is limited to literature review (consisting of banking environment of Bangladesh, overview of HSBC group and overview of HSBC Bangladesh), overview of Network Service Centre (NSC), foreign outward and inward remittance, its analysis and recommendation. In the main report I discussed about the activities of Network Service Centre (NSC) of HSBC Bank Limited at its Motijheel office. I also discussed about foreign inward and outward remittance in detail. I made an analysis of Foreign Inward and Outward Remittances under local currency account of HSBC.

Foreign inward and outward remittances under foreign currency account are excluded due to simplicity and restriction on data collection. Foreign remittances against Import and Export are excluded. 1. 4 Methodology Both the primary as well as the secondary form of information was used to prepare the report. The details of these sources are highlighted below. 1. 4. 1 Primary Sources Major sources of primary information were discussions with Mr. A. T. M Afsaruzzaman Assistant Officer, HSBC and Other assistant officers at NSC, Motijheel Branch. 1. 4. 2 Secondary Sources

Sources of secondary data can be defined as: Internal Sources Bangladesh bank return report Bank’s Annual Report Group Business Principal manual Group Instruction Manual (GIM) & Business Instruction Manual (BIM) Prior research report Any information and literature regarding the Banking sector External Sources Different books and periodicals related to the banking sector Bangladesh Bank Report Newspapers Website information 1. 5 Limitations An Internee has to complete the internship and prepare an internship report within a semester.

In briefly, I faced following limitations during the time of preparing this report. Since I was an intern of “Foreign Remittance Department” of HSBC Motijhil, I was not allowed to stay in other departments for a long period. That is why it was really a big trouble for me to prepare an internship report on Freign Remitance staying in Anchor Tower at Banglamotor Booth. I had to visit Head office frequently to collect these data. As per Bank’s compliance, as an intern I was unable to obtain indispensable experiences of different departments.

Due to time shortage, details of many aspects of the services of HSBC Bangladesh Limited have been skipped in this report. One of the main barriers in writing this report was the confidentiality of data. Though I saw their internal procedure that is being used in processing and evaluating any documentary Remittance, but I was told strictly not to disclose that even in my internship report. Banking Environment in Bangladesh 1. History of Banking Industry in Bangladesh : The banking industry in Bangladesh is more than 600 years old.

The first commercial bank was ANZ Grindlays Bank which opened in 1905. It is presently named Standard Chartered Grindlays Bank Ltd. after it’s acquisition by the Standard Chartered Bank. Since liberation, Bangladesh passed through fragile phases of development in the Banking sector. The nationalization of Banks in the post liberation period was intended to safe the institutions and the interest of the depositors. Those handling the banking sector have borne the burden of putting banks on reliable footings. Despite all that was done, some elements of irregularities appeared.

The public sector management of banks left some negative effects in the money market in particular and the economy in general. The agility among the borrowers manipulates the banking sector as a whole. In effect, a default culture, among other effects, appeared on the scene. 2. Default Culture : The clever, among the user of banking services, have influenced the management of banks, for obtaining short term and long term loans. They sometimes showed inflated equity to get money for investment in businesses and industry.

Few diverted their loan money to purposes different from the loan proposals, and invested in non profitable units have failed to repay their loans to the banks. For this reason new entrepreneurs are not getting capital while defaulting entrepreneurs have started obtaining either relief in the form of rescheduling of the repayment program or additional inevitable money for diversified units. Control by Central Bank : With the assertion of the role of the Central Bank, the Bangladesh Bank started adopting measures to check the default culture and to put banking institutions on the right track.

As a result the Bangladeshi banking industry is now characterized by the tight banking rules and regulations set by Bangladesh bank. All banks and financial Institutions (FI) are highly governed and controlled under the Banking Companies Act – 1993, which lays out many restrictions, besides other guidelines. Among the many regulations imposed, Bangladesh Bank does not allow any FI get into bankruptcy or insolvency. 3. Opening of New Banks : The opening of private and foreign participants to the banking sector was intended to obtain desirable results from banking.

The authorization of private banks was designed to create competition among the banks and competition in the form of efficiency within and the productivity in enterprises funded by banks. Government has recently issued licenses to 8 merchant banks. Primary decision has been taken to allow another couple of local commercial banks soon. 2. 5 Caution Against Opening of New Banks : Opening of the recently permitted new banks, without implementation of the needed reforms, could lead to unethical competition and horse- trading in the country’s troubled banking sector, according to the bankers.

Mr. Lutfar Rahman Sarkar, Ex-governor Bangladesh Bank echoed his views and said “Allowing the new banks, without restoring discipline and resolving their numerous problems, will create unhealthy atmosphere and unethical banking in the whole country. ” The international Monetary Fund (IMF) and the world Bank earlier asked the government to reconsider its decision to permit new banks without restoring discipline in the sector, crippled by huge amount of bad debts. 2. 6 Financial Institutions : Currently the major financial institutions under the banking system in Bangladesh are

Bangladesh Bank ? Commrcial Banks ? Islamic Banks (For interest free Islamic banking in adherence to the shariah, i. e. , Islamic banking principles and practices) ? Leasing Companies ? Finance Companies ? Merchant Banks 2. 7 Performance and Growth : Performance (holding market share) in terms of deposit and advance are presented separately in the following figures: Source: Schedule Bank Statistics, Bangladesh Bank, July 2000 Among Foreign Banks, Standard Chartered Grindlays Bank is enjoying the name of the largest multinational bank operating in Bangladesh.

According to the recent Schedule Bank Statistics, SCGB shares 32% of the market share of FCB’s in terms of deposit. SCGB holds the largest market share in terms of advance also among all the foreign banks. In recent days, the bank has concentrated in diversifying its operational activities in personal as well as retail banking. Source: Schedule Bank Statistics SCGB holds the largest market share in terms of advance also among all the foreign banks. In comparison, HSBC, Bangladesh, shares only 11% of the market share of FCB’s in terms of deposit. An Overview of HSBC Group 3. 1 Brief History

The HSBC Group is named after its founding member, The Hongkong and Shanghai Banking Corporation Limited, which was established in 1865 in Hong Kong and Shanghai to finance the growing trade between China and Europe. Thomas Sutherland, a Hong Kong Superintendent of the Peninsular and Oriental Steam Navigation Company helped to establish this bank in March 1865. Throughout the late nineteenth and the early twentieth centuries, the bank established a network of agencies and branches based mainly in China and South East Asia but also with representation in the Indian sub-continent, Japan, Europe and North America.

The post-war political and economic changes in the world forced the bank to analyze its strategy for continued growth in the 1950s. The bank diversified both its business and its geographical spread through acquisitions and alliances. HSBC Holdings plc, the parent company of the HSBC Group, was established in 1991 with its shares quoted on both the London and Hong Kong stock exchanges. The HSBC Group now comprises a unique range of banks and financial service providers around the globe. 3. 2 Banks under the HSBC group

Many of the members have changed their name into HSBC, The Hongkong and Shanghai Banking Corporation Limited to introduce the whole group under one brand name. Midland Bank, one of the principal UK clearing banks, was acquired by HSBC Holdings in 1992. Headquartered in London, the bank has a personal customer base of five and a half million, business customers of over half a million, and a network of almost 1,700 branches in the United Kingdom. Midland has offices in 28 countries and territories, principally in continental Europe, with a number of offices in Latin America.

Hang Seng Bank, in which HongkongBank has a 62. 1% equity interest, maintains a network of 146 branches in the Hong Kong SAR, where it is the second-largest locally incorporated bank after HongkongBank. Hang Seng Bank also has a branch in Singapore and two branches and two representative offices in China. Marine Midland Bank, headquartered in Buffalo, New York, has 380 banking locations state-wide. The bank serves over two million personal customers and 120,000 commercial and institutional customers in New York State and, in selected businesses, throughout the United States.

Hongkong Bank of Canada is the largest foreign-owned bank in Canada and the country’s seventh-largest bank. With headquarters in Vancouver, it has 116 branches across Canada and two branches in the western United States. Banco HSBC Bamerindus was established in Brazil in 1997. The bank has its head office in Curitibank and a network of some 1,900 branches and sub-branches, the second largest in Brazil. Hongkong Bank Malaysia is the largest foreign-owned bank in Malaysia and the country’s fifth-largest bank, with 36 branches.

The British Bank of the Middle East (British Bank) is the largest and most widely represented international bank in the Middle East, with 31 branches throughout the United Arab Emirates, Oman, Bahrain, Qatar, Jordan, Lebanon and the Palestinian Autonomous Area, including an offshore banking unit in Bahrain. The bank also has branches in Mumbai and Trivandrum, India, and Baku, Azerbaijan, as well as private banking operations in London and Geneva. HSBC Banco Roberts was acquired in 1997.

Based in Buenos Aires, it is one of Argentina’s largest privately owned banks, with 60 branches throughout the country. HongkongBank of Australia has 16 branches across Australia. It is the flagship of the HSBC Group’s businesses there, operating under the name HSBC Australia, and providing a complete range of financial services. The Saudi British Bank, a 40%-owned member of the HSBC Group, has 63 branches throughout Saudi Arabia and a branch in London. Other associated Group banks are British Arab Commercial Bank, The Cyprus Popular Bank and Egyptian British Bank.

Wells Fargo HSBC Trade Bank is a San Francisco-based joint venture between HSBC and Wells Fargo Bank, providing trade finance and international banking services in the United States through its offices in five western states and in conjunction with Wells Fargo’s 32 regional commercial banking offices in 10 western states. In addition, the Group has a non-equity strategic alliance with Wells Fargo Bank, which provides access to a wide range of banking services through that bank’s more than 1,900 staffed outlets.

The Group also has a non-equity alliance with Wachovia Corporation, one of the leading corporate banks in the United States, with business relationships in 50 states. 3. 3 HSBC Vision Statement: “We aim to satisfy our customers with high quality service that reflects our global image as the premier international bank” 3. 4 Objectives of HSBC: To beat mean Total Shareholder Return performance of a peer group of financial institutions over a three-year rolling average, with a minimum objective to double shareholder return value in five years.

HSBC’s objectives are to provide innovative products supported by quality delivery of systems and excellence customer services, to train and motivate staffs and to exercise social responsibility. By combining regional strengths with group network HSBC’s aim is to be the one of the leading banks in its principle markets. HSBC’s goal is to achieve sustained earnings growth and to continue to enhance shareholders value. 3. 5 HSBC’s International Network: The HSBC Group’s international network comprises of some 10,500 offices in 81 countries. 3. Country Classifications: To ensure that the key resources (management time, capital, human resources and information technology) are correctly allocated and that the exchange of best practice is accelerated between entities, the group has classified the countries where it operates into 3 categories: the large, the major and the international. These classifications are a function of sustainable, attributable earnings, the number of retail clients, balance sheet and size of operation. A brief presentation of this classification is shown below:

Large: Uniited Kingdom, USA and Hong Kong SAR/Mainland China. Major : Argentina, Canada, India, Malaysia, kingdom of Saudi Arabia, Singapore and United Arab Emirates. International: The Rest of the World. 3. 7 International Brand: A key part of the Group’s business strategy, announced in 1998, is the creation of a global brand featuring the HSBC name and hexagon symbol. The symbol is now a familiar sight around the world. The Group has embarked on the next phase — making the HSBC brand universally synonymous with its core values of integrity, trust and excellent customer service. . 8 Corporate Character : HSBC is a prudent, cost conscious, ethically grounded, conservative, trustworthy international builder of long-term customer relationships. 3. 9 Basic Drives : HSBC’s basic drives are Higher Productivity, Team Orientation, and Creative Organization & Customer Orientation. The essence of HSBC brand is integrity, trust and excellent customer service. It gives confidence to customers, value to investors & comfort to colleagues. 3. 10 Products and Services :

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