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20 October, 2021

CIB

CIB means Credit Information Bureau. With a view to strengthening credit discipline and streamlining all sorts  of data in a systematic  way for formulation  of monetary,  economic  and credit   policy.  A full fledged  CIB  was  established  in BB  on 18/08/1992.  Full  particulars  of  all  borrowers  and  guarantors (individual/firms/company) of all banks and NBFI in Bangladesh and whose outstanding balance is Tk.
50000 and above and defaulter credit card borrower of Tk 10000 and above are maintaining in the CIB
department.
In Bangladesh there is loan default culture exists. At present 10% amount of loan is classified. This type of  loan  is  called  non-performing.to  arrest  the  worst  situation  of  default  loan,  BB  has  taken  some measures. CIB is one of them. Before sanctioning of any loan (and other purposes also) clean report of the  borrower  and  guarantors  is  compulsory  to  obtain  for  the  banking  and  NBFIs.  So,  there  is  no possibility of concealment of fact by any bad elements. As a result old bad borrowers are not getting fresh loan resulting reduction in bad loans. Defaulter borrowers will not be eligible to participate in the parliament election, be a CIP, be a director in a bank or NBFI, joint venture entrepreneur, member of stock exchange etc.
The users of CIB are
I.           Bank
II.          NBFI
III.         Ministry of Industry, commerce and finance
IV.        Election commission
V.         Security and exchange commission
VI.        Parliament
VII.       Board of investment
VIII.      National Board of Revenue 

Write the procedure for opening a back to back LC with precautions to be taken in this regard.


Back to Back L/C is a type of import L/C either in inland or in abroad, which open against lien on a valid export L/C.
In our country in export of garments this method of finance is widely used and is very well known to the manufacturers of garments Bangladeshi exporter received an irrevocable L/C for supply of readymade shirts from an American Bank. For manufacture of the ordered shorts the exporter does not have the required raw materials and cloths. To execute the order he is to import materials and cloths from Korea. Then the Bangladeshi Exporter will have to open an import L/C favouring Korean Supplier for import of cloths and accessories. The L/C is opened by the Bangladeshi Bank keeping the American Bank L/C in the
‘BACK’ (i.e. to fulfill the requirement of the export L/C) is called Back to Back L/C.
PROCESSING AND OPERATING OF BACK TO BACK L/C Procedure  :
An exporter desires to have an import L/C limit under back to back arrangement, must have apply to the designated bank in prescribed forms for sanction for opening of Back to Back L/C. In that case the following informations are to be furnished by the applicant : -
1)      Full particulars of Bank account.

2)      Types of business (proprietorship, partnership, Ltd. Co.) . In case of Ltd. Co. In case of Ltd. Co. balance sheet of last 3 (three) years and the name of directors.
3)      Historical background.
4)      Amount of limit required. 

5)      Terms of payment.
6)      Goods to be imported.
7)      Security to be offered.
8)      Repayment Schedule and source of fund.
9)      Other liabilities of the customer with the bank.
10)    Statement of Assets and liabilities.
11)    Trade License.
12)    Valid bonded warehouse license.
13)    Membership Certificate
14)    Income Tax declaration with TIN.
15)    Memorandum & Articles of Association.
16)    Registered partnership deed (if partnership firm).
17)    Board Resolution.
18)     Photographs (all directors)
19)    Vat Registration Certificate.
On receipt of above particulars  and papers, the Back to Back L/C opening section of the bank will prepare a credit report of the concerned importer/exporter. The report should be collected from their previous banker if any.
Banks prepared a credit report in prescribed forms. Bankers have to make enquiries from those if their customers and other people and enquired the report made by the banker. Sometime information are gathered by deputing marketing officer or a credit officer.
On receipt of above information, the designated branch must obtain a sanction from Head Office for opening Back to Back L/C.
In all cases the sanction must be informed to the importer for acceptance. On security confirmation
from  the  client  that  the  terms  and  conditions  of  the  sanction  are  acceptable,  the  subsequent documentation/charge documents are taken up.
Bank will supply the following papers/documents for opening a Back to Back L/C:
i)       L/C application form. ii)      LCA Form.
iii)     IMP Form.
iv)     Charge documents.
The above paper must be completed and signed by the party and will be verified the signatures.
For  opening  L/C,  the  client  is  to  submit  to  the  bank  an  application  in  the  printed  format  of  the designated bank which is also an agreement between the Importer and the Bank. The form is to be stamped under stamp act. In force in Bangladesh. The importer must submit the LCAF, IMP Insurance Cover Note and Indent/Contract/Purchase Order/Proforma Invoice (duly accepted by the importer) or more whenever required.
The L/C application must be completed/filled in and signed by the authorized person of the importer
giving the following particulars :
i)       Full name and address of the suppliers or beneficiary and importer. ii)      Brief description of the goods.

iii)     L/C amount (CFR value) which must not exceed the LCAF value. iv)     The unit price, quantity, quality of the goods. 

v)      Origin of the goods, prot of loading and port of destination must be mentioned. vi)     Mode of shipment (Sea, Air, Truck or Rail)
vii)    Last date of shipment and negotiation time (must not be beyond 30 days from the shipment date). viii)   Insurance cover note number and name of the company.
ix)     Tenor of draft (i.e. sight / usance / deferred etc.)
x)      Mode of Advising L/C (Air/Full telex or short telex). xi)     Whether shipment/transshipment is allowed.
xii)    Instruction to add confirmation if required. xiii)   LCAF number.
xiv)   Export L/C number and date.
xv)    Any other relevant information and instructions if any must be mentioned in the L/C application form.
Scrutiny/Checking of L/C application :
On receipt  of L/C application  it must be checked  by an officer  of L/C section very  carefully  in the following manner :
1.      That the terms and conditions as stipulated in the L/C application are in order as per export L/C
lien with bank and exchange control regulation of the country and UCPDC.
2.      That all the informations mentioned in above column have been furnished.
3.      That the terms to be imported is eligible according to importers entitlement.
4.      That all the cutting / erasing / alternation if any are authenticated by the authorized person of the company.
Confidential report of foreign suppliers  :
According to exchange control regulations bankers are required to obtain confidential report of the beneficiary of L/C before opening the same, if the amount of L/C exceeds Tk. 5.00 lac. Bank can open l/C below   Tk.   5.00   lac   without   obtaining   confidential   report.   Bankers   can   write   to  their   foreign correspondents to supply the confidential report. But from practical experience foreign correspondents of different countries do not supply the C.R. timely.
To overcome the above situation bankers can consult reference books i.e. MUNN/DUNN/BRADSTREET/ Trade Directory  of various Chamber  of Commerce  of different  countries.  On receipt of confidential report from any source the banker can accumulate the same in one master file.
LCA Form :
L/C authorization form consists of six copies. 1st  copy (original) for exchange control purpose, 2nd  copy
customs purposes for delivery of goods, 3rd and 4th copies will be sent to the concerned licensing office.
5th copy for registration unit of the Bangladesh Bank, 6th copy is the office copy of the issuing bank.
Authorized dealer shall keep carefully till retirement of the documents.
L/C numbering  :
If the L/C application and other all formalities are found in order then the serial number in the Back to Back L/C opening register. The L/C number put the L/C application form on the appropriate blank space. Enter the particulars in the L/C opening and the L/C opening commission and other charges to the realized.
L/C advising :
L/C must be typed in the printed format of a bank. After typing, L/C should again be checked up by two authorized signatories and would be despatched under their full signature, bearing signature number. Add confirmation  : 

Sometimes the beneficiaries of the L/C may ask for add confirmation to a L/C by and internationally reputed bank in the beneficiary’s country. The importer is to request his bank i.e. opening bank to do so in writing.
The  opening   bank  advised   the  L/C  through   their   correspondent   with  whose   they  have  prior arrangement of credit line. Adding confirmation L/C is the negotiation restricted to the Bank who has added their confirmation to the credit.

Clayton’s Rule

 Clayton's Rule is a presumption in relation to the distribution of monies from a bank account. The rule is based upon the deceptively simple notion of first-in, first-out to determine the effect of payments from an account, and will normally apply in the absence of evidence of any other intention. Payments are presumed to be appropriated to debts in the order in which the debts are incurred.


What factors should be considered while taking security

 1. Lien is a right to retain that which is in possession of a person and belongs to another until his demands are satisfied. According to the Contract Act 1872 Section 170 a lien is the right of a creditor in possession of goods, securities or any other assets belonging to the debtor to retain them until the debt is repaid.”

The owner of the property, who grants the lien, is referred to as the lienor and the person who has the

benefit of the lien is referred to as the lienee. There are two types of lien

1)      particular lien is a right of the creditor to retain the goods of the debtor in respect of a particular debt and this debt must have arisen out of service rendered or money expended on the goods

2)      General lien is a right of the creditor to retain in possession of the goods and securities till the dues are paid. In case of general lien the creditor has no right to sell or liquidate the property without filing suit against the debtor.

What is mortgage? What are the rights and liabilities of a mortgagor and a mortgagee

 Mortgage: A mortgage is a security interest in real property held by a lender as a security for a debt, usually a loan of money. According to Transfer of Property Act 1882, 58(a) defines, "Mortgage is the transfer of an interest in specific immovable property"

While a mortgage in itself is not a debt, it is the lender's security for a debt. It is a transfer of an interest in land (or the equivalent) from the owner to the mortgage lender, on the condition that this interest will be returned to the owner when the terms of the mortgage have been satisfied or performed. In other words, the mortgage is a security for the loan that the lender makes to the borrower.

Participants:

01. Mortgage lender:

A mortgage lender is an investor that lends money secured by a mortgage on real estate. The borrower, known as the mortgagor, gives the mortgage to the lender, known as the mortgagee. As the mortgagee, the lender has the right to sell the property to pay off the loan if the borrower fails to pay.

02. Borrower:

A  mortgagor  is  the  borrower  in  a  mortgage;  they  owe  the  obligation  secured  bthe  mortgage. Generally, the debtor must meet the conditions of the underlying loan or other obligation and the conditions of the mortgage. Otherwise, the debtor usually runs the risk of foreclosure of the mortgage by the creditor to recover the debt. Typically the debtors will be the individual home-owners, landlords or businesses who are purchasing their property by way of a loan.