TFFE 5th Banking Professional Exam: Short Notes

Write short notes on any five of the following

(a) Cryptocurrency

Cryptocurrency is a digital or virtual currency that uses cryptography for security and generally operates through blockchain technology without being issued or controlled by a central bank.

Its value is mainly determined by market demand and supply, so it can be highly volatile.
Cryptocurrency is not recognised as legal tender in Bangladesh and is outside the country’s regulated foreign exchange system.
It may create AML/CFT and capital-flight concerns because value can move across borders outside formal banking channels.

(b) Open Account

Under Open Account, the exporter ships the goods first and the buyer makes payment later on an agreed date, such as 30, 60 or 90 days after shipment or invoice.

It is a simple and low-cost method of international trade payment.
It is riskier for the exporter because there is no bank payment undertaking.
It is generally suitable for long-standing and trusted trading partners.

(c) SWIFT

SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a secure international messaging network used by banks to exchange payment instructions, LC messages and other banking information in a standard format.

SWIFT only sends messages; the actual transfer of funds takes place through banks’ correspondent accounts such as Nostro and Vostro accounts.
Common SWIFT messages include MT700 for issuing a documentary credit and MT103 for customer payments.
SWIFT also plays an important role in international trade, payment and compliance activities.

(d) FMJ Form

FMJ Form is a declaration form used at Bangladesh’s ports of entry by incoming passengers carrying foreign currency notes, coins or travellers’ cheques.

Declaration on Form FMJ is not mandatory for amounts up to USD 10,000 or equivalent; amounts above this limit must be declared on arrival.
If foreign currency declared through FMJ is encashed, the encashed amount is endorsed on the form.
For taking the declared foreign currency back out of Bangladesh or depositing it into an FC/NFCD account, the FMJ declaration is required for amounts above USD 10,000.

(e) Entrepot Trade

Entrepot trade means exporting an imported product to a third country without changing its quality, quantity, shape or other characteristics, at a price at least 5% higher than the original import price.

Goods under entrepot trade generally cannot be taken outside the port area.
If the goods need to be moved to another port for re-export, permission from the Ministry of Commerce is required.
It allows Bangladesh to earn a trading margin through re-export without manufacturing the goods locally.

(f) Export-led Growth Strategy

Export-led growth is a development strategy where a country focuses on increasing exports and export earnings as a major source of economic growth.

It helps earn foreign currency, create employment and develop production capacity.
Bangladesh has largely followed this approach through the growth of the RMG sector, along with export incentives, bonded warehouse facilities, back-to-back LC financing and EPZs.
Product and market diversification is important to make this strategy more sustainable.

(g) ERQ Account

Exporters’ Retention Quota (ERQ) Account allows exporters to retain a portion of their repatriated export earnings in foreign currency instead of converting the entire amount into Taka.

Merchandise exporters can generally retain 60% of repatriated FOB export proceeds, while the rate is 15% for certain products with high import content.
Software, data processing and other ICT service exporters can retain 70% of net repatriated earnings, while other service exporters can retain 60%.
The retained foreign currency can be used for legitimate business purposes such as overseas business travel, trade fairs, foreign offices, import of raw materials or machinery, and repayment of authorised foreign loans.