CHAPTER ONE

INTRODUCTION

1

INTRODUCTION
In general sense we mean Bank as a financial institution that deals with money.
There are different types of banks like Central bank, Commercial bank, a!ings bank,
In!estment bank, "erchant bank, Co#operati!e bank etc. But when we use the term
bank it generally means $commercial bank% that collects the deposit from surplus unit
of the society and then lends the deposits to the deficit units.
&ow#a day%s banking sector is moderni'ing and e(panding its hand in different
financial e!ents e!ery day. )t the same time the banking process is becoming faster,
easier and is becoming wider. In order to sur!i!e in the competiti!e field of the
banking sector all organi'ations are looking for better ser!ice opportunities to pro!ide
their fellow clients. o it has become essential for e!ery person to ha!e some idea on
the bank and banking procedure.
Internship program so called work attachment program is essential for e!ery BB)
student because it helps him or her to ac*uaint with the real life situation. )s bank is
one of the most important financial intermediaries+ so I ha!e selected International
Finance & Investment Corporation (IFIC) which is one of the most leading banks
in the new banking arena.
O!"ECTI#E$ OF THE REPORT
The ob,ecti!e of the internship program is to familiari'e myself with real market
situation and compare it with bookish concept. The main ob,ecti!e of this report is to
ha!e an assessment about -!erall Banking acti!ities of I.IC Bank /imited. In
addition the study seeks to achie!e the following ob,ecti!es0
To familiari'ed with practical ,ob en!ironment.
To ha!e an e(posure on the financial institution especially on banking
en!ironment of Bangladesh.
To present an o!er!iew of I.IC Bank /imited.
To identify the problems facing by I.IC Bank /imited and suggest
remedial measures.
1

$COPE
This report has been prepared through e(tensi!e discussion with bank employees and
with the clients. 2rospectus pro!ided by the bank also time of preparing the report, I
had a great opportunity to ha!e an in depth knowledge of all the banking acti!ities
practiced by the I.IC Bank /imited.
%I&ITATION$
ome restraint at the time of preparing the report are appended below
The insufficiency of information is main constraint of the study. "oreo!er
employees are not interested to pro!ide all information due to security and
other corporate obligation.
The employees and clients are busy to pro!ide me time for inter!iew.
Ine(perience and time limitation were the constraints of the study.
!AC'(ROUND OF IFIC !AN' %I&ITED)
3uring 14
th
5anuary 1678 The 9astern Banking Corporation inaugurated its operation
in 9ast 2akistan as a commercial bank. )fter 7 months of its inauguration it has got
the status of chedule Bank. It was the first Bengali -wned commercial Bank. )fter
liberation the 9astern Banking Corporation was changed by name as I.IC Bank /td.
3uring 16:1 it was taken under national ownership. )t that time it%s paid up capital
was 76.1; crore and profit figure was <1 lakhs. 3uring eptember 164; it was
pri!ati'ed under 2ri!ati'ation )ct. )t that time this deposit was 1;1.=; crore and
profit figure was 8.=7 crore. >p to 1==1 its number of branch stands to 164 and it%s
paid up capital was 1== million. 68? of its shareholder is public and rest of share
holds by @o!ernment. The bank earned e!er#highest operating profit during the year
1==1 among all pri!ate banks of Bangladesh Ae(cept Islami Bank B3 /td.B The bank
earned an operating profit of Tk. 1;1.14 crore during the year 1==1.


;

OR(ANI*ATION HIERARCH+ OF IFIC !AN' %TD,)
&ana-in- Director
Dep.t/ &ana-in- Director
Assistant &ana-in- Director
(eneral &ana-er
Dep.t/ (eneral &ana-er
Assistant (eneral &an-er
$enior Principal O00icer
Principal O00icer
$enior O00icer (ra1e23
O00icer (ra1e233
<

ORI(IN OF THE REPORT)
There e(ists huge deference between theoretical knowledge and practical knowledge.
This report is an outcome of practical study. ince it is mandatory for the BB)
program, .aculty of Business tudies, >ni!ersity of 3e!elopment )lternati!e, to
make a proper blending of student%s theoretical knowledge with the practical e(posure
which they ha!e earned in their internship program.
This report is an integral part of e!ery student course curricula and the gaining of his
practical training. It ensures the practical knowledge on a specific matter, which is
assigned to the students by their respecti!e teachers.
O!"ECTI#E$ OF THE $TUD+)
This report on credit management system of I.IC Bank /td. encompasses the
following ma,or ob,ecti!es0
i. To grasp the theoretical aspects of credit management.
ii. To describe the term Credit by the I.IC Bank /td.
iii. To identify !arious credit scheme of I.IC Bank /td.
i!. To introduce the credit structure of I.IC Bank /td.
!. To identify beneficiaries of loans.
!i. To show the disbursement procedure.
!ii. To highlight the reco!ery the loan.
!iii. To highlight the problems of reco!ery.
i(. To identify the o!erall performance regarding granting loan.
8

&ETHODO%O(+)
In order to conduct such a study the repost prepare must follows some specific
methods. This report is based on an empirical method, which is stated hereafter.
OR(ANI*ATION CO#ERED)
This study mainly co!ers a particular organi'ation, the I.IC Bank /td. But the
rele!ant data are collected from the head office of the I.IC Bank /td. training
institute and its .ederal Branch.
$OURCE$ OF DATA)
)ll the rele!ant data regarding this study are collected from two sources0
a) PRI&AR+ $OURCE$)
Inter!iewing with the bank officials, specially the principal officer of loan
and ad!ance department of I.IC Bank /td .ederation Branch.
4) $ECONDAR+ $OURCE$)
)nnual report of I.IC Bank /td.
2ublished Booklet of I.IC Bank /td.
2ublished 5ournals of .aculty of Business tudies, >ni!ersity of 3haka.
5ournals of BIB".
Carious published documents.
7


CHAPTER T5O
(ENERA% !AN'IN(

:

Internship is the means of ha!ing some practical e(perience from an organi'ation
after getting the bachelor or master degree to do ,ob in any organi'ation. I feel proud
to do my internship in this bank because its position is second among all the pri!ate
banks in case of earning profit. )s I am an intern the following responsibilities ha!e
been carried out during my three A;B months internship period0
OPENIN( OF ACCOUNT)
Dhen a person want to open an account in I.IC Bank /imited, .ederation Branch,
needs to communicate with responsible officer. .or opening an account an accountee
must fill up a bank account opening form and needs to present the following things0
a. Trade license. A.or businessmanB
b. Citi'enship certificate.
c. Two copies passport si'e photographs.
Ot6er Re7.irements)
a. Eeference of an account holder who has an account in this Branch.
b. "inimum deposit #incases of current accounts Tk. 1,=== and for sa!ing
account Tk. 8, ==.
&AI% TRAN$FER (&T))
"ail transfer means money transfer from one branch to another branch of the same
bank. It may occur between the two different banks. "T issues and recei!es is a
regular task of this branch. In case of "T issue a branch charges commission. This
commission depends on amount, which will be transferred.
.rom "T issue this branch earned about Tk. 1=,=== per month.
Process o0 &T)
Dhen any body want to transfer money from this branch to another branch of I.IC
Bank /imited or other bank at first the client needs to communicate with responsible
principal officer "d. Famal >ddin and then heGshe collects a printed "T form. )fter
filling the form heGshe needs to deposit cash with commission to the cash counter and
takes a receipt. In case of "T four A<B copies of !ouchers are prepared. -riginal and
4

duplicate copy is send to the responding branch. Triplicate copy is send to the Head
-ffice with daily schedule. This branch preser!es the *uart#duplicate copy.
TE%EPHONE TRAN$FER (TT))
Telephone Transfer ATTB means transfer of money from one branch to another branch
of the same bank through telephone message. Telephone transfer is *uicker process
than mail transfer. In case of TT issue this branch charges commission. This
commission depends on amount, which will be transferred. .rom telephone transfer
per moth income of .ederation Branch is about Tk. 18,===.
Process o0 TT)
Dhen anybody wants to transfer money through telephone message from this branch
to another branch of the same bank heGshe needs to communicate with responsible
officer. )t first the client collects a printed TT form and after filling the form heGshe
needs to communicate with econd -fficer and then deposits cash with commission
to the cash counter and finally takes a receipt. In case of TT issues, this bank prepares
three A;B copies of !ouchers. -riginal copy is sending to the responding Branch and
the duplicate copy is sending to the Head -ffice with schedule. This branch preser!es
the triplicate copy.
6

DE&AND DEPO$ITE (DD))
3emand 3raft means money transfer from one branch to another branch of the same
bank. It may occur between the two different banks. 33 issues and recei!es is a
regular task of this branch. In case of 33 issue a branch charges commission. This
commission depends on amount, which will be transferred. .rom 33 issue this
branch earned about Tk. 1=,=== per month.

Process o0 DD)
Dhen any body want to transfer money from this branch to another branch of I.IC
Bank /imited or other bank at first the client needs to communicate with responsible
officer and then heGshe collects a printed 33 form. )fter filling this form heGshe
needs to deposit cash with commission to the cash counter and takes a receipt. In case
of 33 four A<B copies of !ouchers are prepared. -riginal and duplicate copy is send to
the responding branch. Triplicate copy is send to the Head -ffice with daily schedule.
This branch preser!es the *uart#duplicate copy.
PREPARATION OF $CHEDU%E)
I.IC Bank /imited, 3hanmondi Branch, needs to prepare daily schedule. 3aily
schedule is prepared for the purpose of measuring performance of this branch. This
schedule is prepared on the basis of !ouchers Adebit I credit !ouchersB. .or preparing
a daily performance report or schedule bank has two separate colored printed forms.
C%EARIN( HOU$E)
9!ery working day I.IC Bank /imited, .ederation Branch, recei!es about ;8#7=
che*ues that made on another bank. Dhen I.IC Bank /imited, .ederation Branch,
recei!es this type of che*ues then it sends these che*ues to the Clearinghouse of
Bangladesh Bank through the Head -ffice. The Clearinghouse is formed with the
representati!e of e!ery scheduled bank. I.IC Bank /imited representati!e gi!es the
che*ue to the representati!e of respected branch on which che*ue is made. )fter one
or two days the bank on which che*ue is made sends a message about the !alidity of
the che*ue that means it pro!ides information about account and deposited money on
this account.
1=

CU$TO&ER HAND%IN()
Receives c.stomers p6one)
3ifferent type%s phone calls were recei!ed from customers in different time
about I.IC Bank /imited ser!ices.

Acco.nt openin- an1 closin-)
The customers who came to booth to open an account, necessary support ser!ice were
pro!ided them to fill up the opening form, account number and help them to do other
formalities. )lso help them to close the account.
Clearin-)
ometimes a few of customers don%t understand how does he fill up the che*uebook,
this situation I try to help them as soon as possible.
11

CHAPTER THREE
%ITERATURE RE#IE5
11

%OAN PO%IC+)
The Board of 3irectors of a bank has the ultimate responsibility for all of the loans
made by their bank. Because the board delegates to others the task of making loans, it
uses a written loan policy to establish general guidelines and principles for the bank%s
lending acti!ities. It is important to understand that the policies are guidelines and
they are not infle(ible rules car!ed in granite.
Dritten policies !ary widely from bank to bank. The policies of a small bank that
lends primarily to farmers are going to differ from that of large bank speciali'ing in
international lending. &e!ertheless, some of the items that are resent in many written
loan polices are presented here.
(ENERA% PO%IC+)
The general policy outlines the bank%s lending ob,ecti!es in terms of profitability and
risk. .or e(ample, the policy may state that the bank is in the business of making
sound and profitable loans. )n important part of this goal is that all loans should ha!e
a plan of li*uidation at the time they are made. The general policy section may also
include statements concerning the organi'ational structure for super!ising lending
acti!ity.
Ris8)
By definition, lending funds in!ol!es some degree of risk, and we know that risk is
related to returns. The higher the risks, the higher the e(pected returns. The degree of
risk that a bank is willing to face could be e(pressed in the following way0
The bank is not an in!estor and should limit its risk to that which is commensurate
with the return usually a!ailable to it as a lender. The yield on a customer%s total
relationship should meet the bank%s earning ob,ecti!es after allowing for the cost of
funds, risk factors, and the cost of administration.
%oan $.pervision)
The Board of 3irectors has policies regarding the lending authority of indi!idual
loans officers and the appro!al process for particular types of loans of !arious si'es.
maller banks ha!e fewer layers of management and a simpler appro!al process.
1;

(eo-rap6ic %imits)
) bank%s trade area depends on its si'e. mall banks generally ha!e all local trade
area+ medium#si'ed banks may consider themsel!es regional banks+ and large banks
may be national or international in scope. Thus, one bank%s policy may state that,
sound local loans are one of the most satisfactory and profitable means of employing
the bank%s funds. Therefore, it is the intent of the Board that with few e(ceptions the
bank%s loans are limited to the metropolitan area we ser!e. In contrast, another
bank%s policy is to concentrate our lending efforts in the 2acific Basin.
CO%%ATERA%)
Collateral an1 Ris8)
ound banking practices re*uire that certain types of loans be backed by collateral.
Collateral refers to an asset pledged against the performance of an obligation. If a
borrower defaults on a loan the bank takes the collateral and sells it. Collateral
reduces the bank%s risk when it makes a loan. Howe!er, collateral does not reduce the
risk of the loan parse. The risk of the loan is determined by the borrower%s ability to
repay it.
Dhile collateral reduces the bank%s risk, it may increase cost. The higher costs are due
to the need for documentation and the costs of monitoring the collateral. &e!ertheless,
without collateral some borrowers could not obtain loans. Therefore, collateral
benefits both borrowers and lender in certain type of loans. In other types of loans
collateral is not used.
C6aracteristics o0 -oo1 Collateral)
)lmost anything that is lawful may be used as collateral. &e!ertheless, some things
are better than others. The fi!e factors listed ne(t determine the suitability of items for
use as collateral. The suitability depends in !arying degrees on standardi'ation,
durability, identification, marketability, and stability of !alue.
9, $tan1ar1i:ation)
The standardi'ation lea!es no ambiguity between the borrower and the lender as
to the nature of the asset that is being sued as collateral.
;, D.ra4ilit/)
1<

3urability refers to the ability of the assets to withstand or it can refer to its useful
life. 3urable goods make better collateral than non#durables. tated otherwise,
crushed rocks make better collateral then fresh flowers.
<, I1enti0ication)
Certain types of assets are readily identifiable because they ha!e definite
characteristics or serial numbers that cannot be remo!ed. Two e(amples are a
large office building and an automobile that can be identified by make, model, and
serial number.
=, &ar8eta4ilit/)
In order for collateral to be of !alue to the bank, the collateral must be marketable.
That is, you must be able to sell it. peciali'ed e*uipment that has limited use is
not as good as collaterals are dump trucks, which ha!e multiple uses.
>, $ta4ilit/ o0 #al.e)
Bankers prefer collateral whose market !alues are not likely to decline
dramatically during the period of the loan. Common stocks, for e(ample, are not
as desirable as real estate for collateral because stock prices are more !ariable than
real estate prices.
18

T/pes o0 Collateral)
The most common types of collateral used in commercial lending are e(amined here0
9, Acco.nts Receiva4le)
)ccounts recei!able can be used as collateral in three ways. They are pledging
factoring, and banker%s acceptances.
Ple1-in-)
) borrower can pledge accounts recei!able with his or her bank. In this case the
borrower retains ownership of the recei!ables+ and there is usually no notification
made to the buyer of the goods for which the recei!ables ha!e been pledged.
Before accepting the recei!ables, the bankers e!aluate the credit rating of the firms
owing the recei!ables. )ccounts recei!able from firm with weak credit ratings or
those that are o!erdue may not be acceptable as collateral.
The percentage of face !alue of the accounts recei!able that the banker is wiling to
ad!ance depends on the si'e, number, and *uality of the recei!ables. "ost bankers
prefer to ad!ance funds from recei!ables from a few well#established firms with good
credit ratings.
Factorin-)
.actoring is the sale of accounts recei!able to a factor, which is usually a bank or
finance company. Dhen the recei!ables are sold, the buyer of the goods is usually
notified to make repayments to the factor like pledging, factors prefer recei!ables
from well#established firms.
!an8ers Acceptance)
) banker%s acceptance usually arises from foreign trade. The means of payment is a
time draft, which is similar to a predated che*ue.
17

;, Inventor/)
In!entory is widely used as collateral against commercial loans. The most common
ways in which in!entory is used as collateral are e(plained ne(t.
Floatin- %ien)
Eaw material through the finished goods. The floating lien has two ad!antages from
the ) floating lien or continuous lien is used to co!er a firm%s entire in!entory the
borrower%s point of !iew. It enables the entire in!entory to be pledged. The borrower
can self#finished in!entory in the ordinary course of business since the lien does not
follow each item. The ma,or disad!antage is that banks may only want to lend a small
percentage of the !alue of such in!entory because of its undesirable characteristics.
Tr.st Receipts)
Trust receipts, or floor planning as it is commonly called, are used to finance
automobiles, trucks, airplanes, and consumer durable goods such as tele!ision, the
title for the in!entory is held by the lender and the borrower assumes the role of
trustee for the goods.
C6attel &ort-a-e)
) chattel mortgage, or security agreement as it is sometimes called, gi!es the lender a
lien on tangible personal property.
5are6o.se Receipts)
Banks ha!e the greatest control and security when in!entory that is used as collateral
is held in a bonded public warehouse, which is commonly called a terminal
warehouse. >nder this arrangement, the in!entory is stored in a public warehouse and
the receipt is held by the lender. In!entory can only be releases when proper receipts
are presented at the warehouse. The receipts may be either negotiable or
nonnegotiable.
1:

Or1er !ills o0 %an1in-)
.inally, there are some ways in which in!entories are used that are uni*ue to
particular industries. Common carries, for e(ample, use order bills of lading, which
are a special kind of receipt, as collateral on commodities that are in transit.
%ivestoc8 an1 Crops)
/i!estock is widely used as collateral, and credit is e(tended on it through all stages
of the production process. Credit is also e(tended for planting crops. uch loans are
normally payable when the crops are har!ested.
<, &ar8eta4le $ec.rities)
"arketable securities, including corporate stocks and bonds, certificates of deposit
AC3sB, Treasury securities, and others, may be used as collateral for business loans.
The amount of credit e(tended on such securities !aries widely one problem with
securities as collateral is that the market !alue of publicly held stocks an bonds can
!ary widely from day to day. Te !alue of publicly traded securities is readily a!ailable
in the press.
=, Nat.ral Reso.rces)
&atural resources, such as oil and gas reser!es are used as collateral. The !alue of the
natural resources depends on estimates by *ualified engineering firms. The bank
should order the estimates, not by the borrower.
>, Real Propert/ an1 E7.ipment)
Eeal property refers to real estate, which includes houses,
-ffices, buildings, shopping centers, factories, and so on. uch property is widely
used as collateral. in addition, e*uipment of !arious sorts may be used.
?, (.arantees)
Bankers can impro!e their security by ha!ing a third party guarantee the payments.
The third party may be an indi!idual, insurance company.
14

CHAPTER FOUR
PROCE$$ OF (RANTIN( CREDIT
16

5A+$ FOR !AN'$ TO &A'E %OAN$)
Banks intentionally make loans in si( ways. -!erdrafts, which are unintentional loans
to customers who o!erdraw their transaction accounts, are not considered here. There
is no significance to the order in which the methods are presented.
9, !an8s $olicit %oans)
.irst, bank acti!ely solicits loans in local and distant markets. /oan officers !isit
prospecti!e customers offering loans and other ser!ices pro!ided by their respecti!e
banks. This type of sales effort is typical of banks seeking new customers.
;, !./in- %oans)
econdly, bank buy parts of loans, called participations from other banks, suppose
that a large bank is making a J 1== million loan to an airline, but the originating bank
does not want to keep such a large loan in its loan portfolio. It may sell parts of that
loan to other banks. The sale of participations downstream to smaller banks allow
smaller bank to participate in loans that they could not originate. In addition, it is one
way for a bank with slack demand for loans to increase its loan portfolio. It also
allows all of the banks in!ol!ed to di!ersify their loan portfolios. 2articipations can
originate from small banks too. uppose that a small bank wants to make a loan that
e(ceeds its lending limits. It can make the loan and sell participations upstream to
larger banks.
.
<, Commitments)
Third, banks make loans under commitments. )s noted in the pre!ious chapter,
commitments are agreements between banks and borrowers to make a loan under
certain conditions. .or purposes of this discussion, commitments include both letters
of credit and standby letters of credit.
=, Re0inancin-)
.ourth, banks refinance loans. uppose that interest rates ha!e declined and that
borrowers with high fi(ed rate loans want to take ad!antage of the lower rates. The
can make a new loan at the lower ate and pay off the higher ate loan. The refinancing
is at the borrower%s option, and only occurs when it is to their ad!antage.
1=

>, %oan !ro8ers)
.ifth, loan brokers sell loans to banks and other lenders. /oan brokers are indi!iduals
or firms who act as agents or brokers between the borrower and the lender for
e(ample, a loan broker may contract with a real estate de!eloper to find financing for
a particular pro,ect. The broker will seek lenders and arrange for the loan. -nce the
loan is made and the fees are paid, the broker is out of the picture.
?, C.stomers Re7.est %oans)
The final method of originating a loan is the most common. omeone asks for a
commercial loan. >nfortunately, many potential borrowers are denied loans or do not
get what they need because they do not know what information the bank needs in
order to grant to loan re*uest. ome borrowers, for e(ample, do not know what type
of loan will meet their financial needs or what type of collateral is suitable for their
loans. @ood loan officers work with prospecti!e borrowers who do not know the
procedures by e(plaining to them what information they must pro!ide to the bank.
RO%E OF INFOR&ATION FOR (RANTIN( %OAN)
Information plays a crucial role throughout the lending process. Initially, there is
asymmetric information one party has substantially more information than the other.
The prospecti!e borrower knows more about his or her own financial condition and
prospects for the future than the bank knows. It may be in the borrower%s best interest
to re!eal only the minimum amount of information necessary to get a loan. .or
e(ample, the borrower might not want to re!eal that the book !alue of certain assets is
o!erstated or that pro,ected sales are inflated. In contrast, the bank wants to obtain as
much rele!ant information as possible in order to A1B e!aluate the loan re*uest and A1B
reduce the risk of loss if the loan is made.
Banks, wanting to minimi'e the risk of loss, must monitor information about the
borrower%s financial beha!ior throughout the term of the loan. If the information
suggests that a borrower is ha!ing financial difficulties and may not be able to repay
the loan, the bank must react *uickly to deal with the problem. 9arly detection of
potential problems may allow the bank to help the borrower resol!e the problem
before the loan defaults and it becomes a loss. Feep in mind the crucial role of
information as you read no only about commercial loans, but all loans.
11

%OAN PROCE$$)
The type of information that banks prefers to recei!e from customers re*uesting
commercials loan is illustrated by the following e(ample. "ost loan re*uests are not
as well organi'ed or as complete as the one presented here. It is a model loan
re*uest that pro!ides the information needed by the bank in order to make a lending
decision.
9, %oan Re7.est)
The bank recei!ed a letter from borrower, which is called as application for loan. The
letter contents a brief history of the firm and other pertinent information.
11

;, !.siness Plan)
) business plan ser!es tow purposes. .irst, it is a document used to raise money. It
describes a firm%s past and current operations. It also e(plains hoe the funds that are
being raised will be used to further the firm%s goals, the reward the firm%s in!estors,
and to repay the loans. econd, a business plan is used internally to pro!ide operating
guidelines to managers so they know what is e(pected of them. ome of key elements
of business plan follow0
The goals and ob,ecti!es of the business.
) description of the business including its history and comments on products,
ser!ices, and markets. Included here is an analysis of the firm%s strengths,
weaknesses, opportunities, and threats.
trategies that the firm will use to compete.
)n operating plans to carry out the goals and strategies.
) process to monitor the progress of the plan and to re!ise it if the need arises.
<, Financial Data)
Borrower need to sent the bank its balance sheet and income statements for the .i!e
Kears of its e(istence. ome firms pro!ide banks with pro forma financial statement
and cash budgets, which are pro,ections of inflows and outflows of cash. This is
especially useful to banks because loans are repaid out of cash. The cash a!ailable to
repay loans each month is not same as the net income. The usefulness of cash budgets
and pro forma statements depends on the accuracy of the pro,ections and the
assumptions that are made while constructing them. If the pro,ections and
assumptions are correct, the statement is a useful tool for both the firm and the bank.
-therwise, it usefulness depends on the degree to which it errs. The bank%s credit
analysis should make their own pro,ections and do a sensiti!ity analysis in order to
compare the results. ) sensiti!ity analysis allows the bank to change critical !ariables,
such as sales, and determine the effect of those changes on earnings, cash flows, and
the ability to repay loans.
=, Initial Intervie@)
The initial inter!iew may be the only time the borrower and banker meet face to face.
Therefore, the bank must use this meeting to obtain additional information from the
1;

customer necessary to make a loan decision. .or e(ample, the banker may want to
clarify some points in the customer%s business plan or pro forma statements.
Dhen a borrower%s business plan and financial statements are not a!ailable, the
banker will want to know0
Dhat is the amount of the loanL
Dhen the funds are needsL
How are the funds going to be usedL
Dhen is the loan going to be repaidL
How is the loan going to be repaidL
Dhat collateral will be pledgedL
)dditional information will be re*uired about the organi'ation of the business Asole
proprietorship, partnership or corporationB, its trade area other banking relationships,
and more.
1<

E#A%UATIN( A %OAN REAUE$T)
The bank must e!aluate the loan re*uest and determine if a loan will be granted. The
e!aluation in!ol!es the 7C%s of credit as follows0
Character Apersonal characteristics of the borrower, honesty and attitudes
about willingness and commitment to pay debtsB.
Capacity Athe success of the businessB.
Capital Afinancial conditionB.
Collateral Apledged assetsB.
Conditions Aeconomic conditionsB.
Compliance Alaws and regulationsB.
18

CHAPTER FI#E
T+PE$ OF CREDIT
17

CO&&ERCIA% AND INDU$TRIA% %OAN
Commercial and industrial loans ACII loansB are loans made to business concerns to
finance their day#to#day acti!ities Ae.g. in!entories, recei!ablesB, to finance their
longer#term needs Ae.g. plant and e*uipmentsB and for other business purposes. The
maturity of these loans ranges from one day Acalled o!ernight loansB to 1= years or
longer.
3ifferent types of CII loans are used to finance different types of assts. The principal
types of CII /oans presented here0
a, %ine o0 Cre1it)
) line of credit is an agreement between a customer and the bank that the bank will
entertain re*uests from that customer for a loan up to a predetermined amount.
The line of credit is the ma(imum amount that can be borrowed under the terms of the
loan. They are fre*uently made for periods of one year or less, and are used to finance
seasonal increases in in!entory, an accounts recei!able. Then the in!entory is sold,
recei!ables are collected, and the funds are used to reduce the loan. .re*uently,
lenders re*uire in!entory or recei!ables as collateral. The loans are usually payable on
demand by the bank or within 6= days.
ometimes short#term loans are renewed or rolled o!er so often that both the firms
and the banks !iew them as a form of long term financing. Dhen that occurs, both
parties should consider long#term financing.
1:

4, Revolvin- %oan)
Ee!ol!ing loans are similar to a line of credit because these two are used to finance
borrower%s temporary and seasonal needs. -ne difference between a re!ol!ing loan
and line of credit is that the bank is obligated to make the loans up to the amount of
the commitment, if the borrower is in compliance with the terms of the agreement.
The borrower may repay the loans and then borrow again, up to the amount of the
commitment.
c, Term %oan)
) term loan is usually a single loan for a stated period of time or a series of loans for
specified dates. They are used for a specific purpose, such as ac*uitting machinery,
reno!ating a building refinancing debt, and so forth. They should not be used to
finance day#to#day operations.
Term loans can ha!e an original maturity of fi!e years or more. The maturity of the
loans should not e(ceed the economic life of the asset being financed if that asset is
being used as collateral for the loan.
The !alue of the asset being financed should always e(ceed the amount of the loan.
The difference between the !alue of asset and the amount being financed is the
borrower%s e*uity. The borrower%s e*uity represents the borrower%s in!estment in the
asset being financed. The also pro!ides the bank with a cushion in the e!ent of
default. The borrower will lose his or her funds before the bank e(periences a loss.
Borrowers not wanting to less their e*uity in!estment ha!e an incenti!e to operate
their business so that the loan will be repaid.
14

1, !ri1-e %oans)
Bridge loans are loans that bridge a gap in a borrower%s financing until some
specific e!ent occurs. .or e(ample, a firm wants to ac*uire a new warehouse facility
but needs funds to finance the transaction until the old warehouse can be sold. )
bridge loan can be used to fill the gap.
e, Asset2!ase1 %en1in-)
)sset#based lending is a form of commercial lending in which the assets of a
company are used to secure the company%s obligation to the lender. In the broadest
sense, all secured loans could be classified as asset#base lending. )sset#based loans
ha!e as their collateral base accounts recei!able, in!entory, machinery and
e*uipment, and real estate, single or packaged in !arious combinations.
0, Over1ra0ts)
)n o!erdraft occurs when a cheek is written on uncollected funds. If a bank pays on a
check written against uncollected balances, it is e(tending and unsecured loan. ome
o!erdrafts are written with period permission of the bank, but most are not. In the
later case, the o!erdraft represents a loan that the bank may not want make. It is
certainly a loan where the borrower did not make an application to the bank to re*uest
the funds in ad!ance. The o!erdraft loan can be for less than one day, such as when a
check is written or funds transferred wire in the morning and the deposit to co!er that
check or wire transfer is not made until that afternoon, or for one or more days.
-, Cas6 Cre1it)
Cash credit refers to the issue of credits to respectable and trustworthy persons against
the guarantee of a third party or parties. The cash credit is a credit specially granted
by the banker in fa!or of a customer, but instead of the customer ha!ing to take up
whole amount as a demand loan, he can either draw or repay, in whole or in part, the
amount ad!anced at anytime to suit his own con!enience.
This $cash credit% may either take the form of 2ledge% or Hypothecation. In case of
Hypothecation possession of goods is not transferred to the banker and therefore,
such an ad!ance is no better that a clean loan. uch an ad!ance can, thus, only be
granted to a person in whose integrity the banker has full confidence, but in case of
16

pledge the possession of the goods an not the ownership passes to the creditor,
namely, the banker.
6, %oan Commitments)
) loan commitment is an agreement between a bank and a firm to lend funds under
terms that are agreed on in writing. )bout three#fourths of all commercial and
industrial loans are made under loan commitments.
REA% E$TATE %ENDIN(
Eeal estate loan is the largest !olume of loans made by commercial banks. The term
mortgage is used in connection with real estate lending. )t common law, a mortgage
is a written con!eyance of title to real property to pro!ide security for the
performance of a duty or the payment of a debt. In some states, mortgage is regarded
as a lien, but not crating title or an estate. In general terms, it is an agreement that the
property will be sold if the debt is not paid as agreed. The proceeds of the sale of the
property are used to reimburse the lender. The mortgage gi!es the lender a security
interest on the property, if the mortgage is properly recorded in the country
courthouse.
CON$U&ER %ENDIN(
Consumer lending is the heart of retail banking. Eetail banking refers to banking
ser!ices pro!ide to indi!iduals and to small business concerns. er!ices pro!ided to
medium and large#si'e business concerns and go!ernment is called wholesale
banking. "ost banks do both retail and wholesale banking although some speciali'e
more than others. mall banks tend to speciali'e in retail banking because they do not
ha!e sufficient assets to do large#scale wholesale lending.
;=

CHAPTER $IB
TECHNIAUE$ OF CREDIT
&ANA(E&ENT
;1

INTRODUCTION)
"anagement of credit means the cycle that starts from the issuing of credit and ends
with its reco!ery. The good credit management means the reco!ery of credit with
interest. The bank%s credit management policy !aries under the different credit
sanction procedures. The bank grants credit by taking securities in order to ensure the
reco!ery of loans. If the bank can manage those securities effecti!ely the management
of credit is ensured. This chapter deals with the management of credit under different
credit sanction procedure.
FACTOR$ %I&ITIN( THE %E#E% OF A !AN'$ CREDIT)
i. The si'e and maturity#wise pattern of deposits0 The primary source of funds is
the deposits made by the depositors. Their si'e and maturity#wise pattern has
an impact on the le!el of a bank%s ad!ances. Bank%s capacity to grant loans
ad!ances increases with an increase in deposit resources moreo!er, the
maturity#wise pattern of such deposits affects the pattern of ad!ances. In case
of demand liabilities, the banker is under an obligation to repay the fund on
demand and hence he needs larger cash reser!e.
ii. Credit Control by Eeser!e Bank. The capacity of banks to pro!ide loans and
ad!ances depends on their cash resources Ai.e. cash in hand and balances with
the Eeser!e BankB. The cash resources increase through 1. Eise in deposits, or
1. By they%re borrowing from the Eeser!e Bank, or ;. By sale of their
in!estments. The Eeser!e bank regulates the *uantum of cash resources of the
banks by e(ercising the power conferred upon it. If it feels the necessity of
e(pansion of credit, measures are adopted to increase bank%s cash resources
and !ice#!ersa.
iii. easonal !ariations in Bank Credit. )n important feature of bank credit in an
agricultural country like ours is the seasonal !ariations in the *uantum of
credit granted by banks.
i!. The 3emand of credit. The e(pansion or contraction of credit largely depends
on the demand for bank credit by borrowers, which in turn depends upon.
1. The le!el of production, both agricultural an industrial.
1. The le!el of in!entories held by business an industrial houses.
;. The price le!el of goods and commodities in the country.
;1

<. The procurement policy of .ood Corporation.
) banker should always keep in min the abo!e limiting factors of issuing credit.
@ood credit management in case of issuing credit means granting credit by
considering the abo!e limiting factor. The banker who can manage the abo!e limiting
factors he is called an effecti!e credit manager.
&ANA(E&ENT OF CREDIT !+ TA'IN( $ECURIT+,
In the employment of his funds a banker generally attaches great significance to the
consideration of security. /argely depending upon the borrowed funds, a banker
cannot afford to take undue risks. He, therefore, safeguards his interests by granting
loans an ad!ance on the security of tangible assts, i.e. a large !ariety of goods and
commodities, documents and immo!able property. ecured ad!ances account for a
ma,or option of the total bank ad!ances. In case of secured ad!ances, a charge is
created o!er the assets of the borrower in fa!or of the banker. The banker may,
therefore reco!er his dues from the customer out of the sale proceeds of the assets
charged to him.
;;

(eneral Principles o0 $ec.re1 A1vances)
Dhile granting ad!ances on the basis of securities offered by customers, a banker
should obser!e the following basic principles0
9, A1e7.ac/ o0 &ar-in)
The word $margin% has special meaning and significance in the banking
business. In banking terminology, $margin% means the deference between the
market !alue of the security and the amount of the ad!ance granted against it.
.or e(ample, if banker sanctions an ad!ance to Tk. := against the security of
goods worth Tk. 1==, the difference between the two is called the margin. )
banker always deeps an ade*uate margin because of the following reasons.
i. The market !alue of securities is liable to fluctuations in future with
the result that the banker%s secured loans may turn into party secured
ones.
ii. The liability of the borrower towards the banker increases gradually as
interest accrues and other charges become payable by him.
Factors Determinin- &ar-in)
The *uantum of margin is not uniform in case of all commodities or in case of all
customers. The following factors determine the margin0
i. The amount of margin depends upon the likely fluctuations in the prices of the
!arious commodities.
ii. In case of shares of industrial concerns the financial position and reputation of
the issuing undertaking is also taken into account. hares of sound industrial
concerns are treated as good as go!ernment securities and lower margin is
re*uired.
iii. "argins are fi(ed keeping in !iew the credit an reputation of the borrower#
concern.
i!. The margin, determined at the time of sanctioning an ad!ance, may be raised
or reduced subse*uently according to the !ariation in the prices of the
securities.
!. In case of commodities, which are sub,ect to selecti!e credit control of the
Central Bank, margins are usually prescribed by the Central Bank from time to
time. It is essential for the banks to deep such margins.
;<

;, &ar8eta4ilit/ o0 $ec.rities)
Credits are usually granted for short periods by the commercial banks because their
deposit resources Ae(cept term depositsB are either repayable on demand or at short
notice. If the customer defaults in making payment, the banker has to li*uidate the
security. It is, therefore, essential that the security offered by a borrower may be
disposed of without loss of time and money. ) banker should be !ery cautious in
accepting assets, which are not easily marketable.
It is pro!erbially said a banker lends his umbrella when the sky is clear an demands
it back as soon as it rains.
<, Doc.mentation)
3ocumentation means that necessary documents, e.g. )greement of pledge or
mortgage, etc, are prepared and signed by the borrower at the time of securing a loan
from the bank.
=, Reali:ation o0 t6e Cre1it)
If the borrower defaults in making payment on the specified date, the banker may
reali'e his debt from the sale proceeds of the securities pledged to him.
;8

&ANA(E&ENT OF CREDIT A(AIN$T (OOD$,
Credit sanctioned may be secured by goods and commodities broadly di!ided into
four main heads as follows0
1. .ood articles.
1. Industrial raw materials.
;. 2lantation products, and
<. "anufactures and material.
These credits meet the needs of working capital of a large number of businesses and
industrial concerns. In fact, such credits are essential for all trading and commercial
acti!ities in the country.
PRECAUTION$ TO !E TA'EN !+ A !AN'ER
@oods and commodities are safe, sound and dependable securities for a banker but
they are not always free from certain risks. ) banker should, therefore, be !ery careful
in accepting them as security and take the following precautions0
1. Though the goods and commodities are the best securities to a banker for
granting loans, the customer is also e*ually important. The customer must be
honest and trustworthy otherwise the risks of fraud or dishonest practices
always remain.
1. Before accepting any commodity as security the banker must be well
ac*uainted with the nature of its demand. He must en*uire whether the
commodity is an item of necessity, comfort or lu(ury and whether its demand
is elastic or otherwise, is constant through out the year or is seasonal in nature.
;. The banker must be well ac*uainted with the commodity market. He should
know well the commodities offered as security, the conditions and customer of
their trades and also the trend of their prices in the market. uch knowledge is
essential for him to regulate the margins to be maintained.
<. The market should take deli!ery of the goods before he grants a loan against it
to a customer.
8. The banker should estimate the !alue of the goods !ery carefully.
;7

7. The banker should also take necessary care regarding the storage of the goods
pledged.
:. The goods should be duly and ade*uately insured against fire, theft, etc.
4. )s the borrower is allowed by the banker to repay the loan in parts also and to
get the commodities released, it is !ery important for the banker to ensure that
goods released should be in proportion to the amount of the loan repaid by the
customer.
&ANA(E&ENT OF CREDIT A(AIN$T DOCU&ENT OF TIT%E OF
(OOD$,
) document of title to goods is a document used in the ordinary course of business
as a proof of the possession or control of goods. It authori'es, either by
endorsement or by deli!ery, the processor of the document to transfer or recei!e
the goods represented by it.
There are two tests by which we may ,udge the !alidity of such a document0
aB The person who possesses such document is recogni'ed by law or by business
practice as possessing the actual goods0 and
bB The person who possesses such document can transfer the goods to any person
by endorsement or deli!ery or by both. Te transferee is thus entitled to take
deli!ery of the goods in his own right.
;:

PRECAUTION TO !E TA'EN !+ THE !AN'ER)
1. In order to a!oid risks of fraud or dishonesty, the banker should accept such
documents a security from honest, reliable and trusted parties only.
1. pecial care should be taken to see that documents are genuine and not forged
ones.
;. It should be carefully noted that documents of title do not contain any onerous
or pre,udicial remark about packing of the goods. If the documents contain a
remark to this effect, such as 2acking defecti!e or @oods not properly
packed or The container is leaking, the banker should not grant any
ad!ance against such receipt.
<. The goods must be insured for its full !alue against the risks of fire, theft, etc.
8. To ensure that the goods packed in bags, etc. actually conform to the
description contained in the documents, it is described that a certificate from a
reliable firm of packers is obtained, especially in case of !aluable goods.
7. The banker should also take memorandum of charge from the borrower
authori'ing the banker to sell the goods if the borrower defaults in making
payment.
:. It is also essential that the issuer of the document of title to goods, i.e.
transport, warehouseman, etc., is a reliable person of firm.
&ANA(E&ENT OF PRO!%E& %OAN$
2roblem loans usually means the borrower has missed one or more promised
payments or the collateral pledged behind a loan has declined significantly in !alue.
;4

$+&PTO&$ OF PRO!%E& %OAN$,
Dhile each problem loan situation is somewhat different, se!eral features common to
most such situation should warn a banker that troubles ha!e set in0
Irregular or delin*uent loan payments.
.re*uent alteration in loan terms.
2oor loan renewal record Awith little reduction of principal each time the loan
is renewedB.
>nusual high loan rate Aperhaps an attempt to compensate the bank for a high
M risk loanB.
>nusual or une(pected build up of the borrowing customer%s accounts
recei!able and Gor in!entories.
Eising debt Mto#net#worth Ale!erageB ratio.
"issing documentation Aespecially missing customer financial statementsB.
2oor *uality collateral.
Eeliance on reappraisals of assets to increase the borrowing customer%s net
worth.
)bsence of cash flow statements or pro,ections.
Customer reliance on nonrecurring sources of funds to met loan payments
Ae.g., selling buildings or e*uipmentB.
.or business loan, any sudden change in methods used by the borrowing firm
to account for0
3epreciation
"ake pension plan contributions.
Calue in!entories
)ccount for ta(es or
Eecogni'e income
Change in the customer%s credit ratings
)d!erse change in the price of borrowing customer%s stock.
&et earnings losses in one or more years, especially as measured by E-), E-9
and 9BIT.
)d!erse changes in the borrowers capital structures.
;6

3e!iations of actual sales or flow form those pro,ected when the loan was
re*uested.
udden, une(pected and une(plained changes in deposit balances maintained by
the customer.
CAU$E$ OF PRO!%E&$ %OAN$
9mpirical studies show that loans fall into problems owing to the following causes0
>nrealistically structured loan installment.
>nusually high interest rate.
)d!erse change in the price of borrowing customer%s stick.
&et earnings losses in one or more years, especially as measured by E-),
E-9 and 9BIT.
)d!erse changes in the borrowers capital structures.
Incompetent management.
3ishonesty and immorality of the client.
udden rise in corporate ta( rate.
.resh imposition of e(cise or sales ta( on client%s products.
/oss of market share of the client.
@eneral economic recession.
-bsolescence of the client%s product causing a fall in demand thereof.
Dindow dressing of financial accounts.
"a,or contract loss.
ignificant rise business competition.
2rocrastination in pro,ect implementation.
9rroneous pro,ect feasibility analysis.
Borrower%s reluctance to pay off the loan.
/oop holes in the stipulated loan contract.
/ower e*uity of the borrower in the pledged collateral.
2olitical pressure.
Corrupted loan reco!ery officer.
<=

$TEP$ TO HAND%E PRO!%E& %OAN$
Dhat a banker should do when a loan is in trouble is of supreme importance for
today%s bank lending operations. 9(perts in loan workouts the process of reco!ering
the bank%s funds from a problem loan situation#suggest the following key steps0
1. )lways keeps the goal of loan workouts firmly in mind0 to ma(imi'e the
bank%s chances for the full reco!ery of its funds.
1. The rapid detection and reporting of any problems with a loan are essential.
3elay often worsened problem loan situation.
;. Feep the loan workout responsibility separate from the lending function of
a!oid possible conflicts of interest for the loan officer.
<. Bank workout specialists should confer with the troubled customer *uickly on
possible options, especially for cutting e(penses, increasing cash flow and
impro!ing management control. 2recede this meting with a preliminary
analysis of the problem and its possible causes noting any#special workout
problems Aincluding the presence of competing creditorsB. 3e!elop a
preliminary plan of action after determining the bank%s risk e(posure and the
sufficiency of loan documents especially any claims against the customer%s
collateral other that held by the bank.
8. 9stimate what resources are a!ailable to collect the trouble loan Aincluding the
estimated li*uidation !alues of assets an depositsB.
7. /oan workout personal should conduct a ta( and litigation search to see if the
borrower has other unpaid obligations.
:. .or business borrowers, bank loan personnel must e!aluate the *uality
competence and integrity of current management and !isit the site to assess the
borrower%s property and operations.
4. Bank workout professional must consider all reasonable alternati!es for
cleaning up the troubled loan including making a new temporary agreement if
loan problems appear to be short#term in nature or finding a way to help the
customer strengthen cash flow Asuch as reducing e(penses or entering
3hanmondiB or to infuse new capital into the business. -ther possibilities
include finding additional collateral, securing endorsements or guarantees,
reorgani'ing, merging or li*uidating the firm or filing a bankruptcy petition.
<1

-f course, the preferred option nearly always is to see a re!ised loan agreement that
gi!es both the bank and its customer the chance to restore normal operations.
RECO#ER+ OF %OAN
The most important part of sound credit management is of disclosing the reco!ery of
loans and ad!ances, problems thereon defaulter patterns, pro!isioning against bad and
doubtful loans an ad!ances etc. usually bank%s credit management performance
represents the reco!ery perform of loans an ad!ances as against the utili'ation of
funds. Besides, it has substantial impact on the bank%s ultimate profit performance.
PRO(RA&$ FOR %OAN RECO#ER+
It is the subse*uent step of programs for loan distribution. The detailed programs for
loan reco!ery are stated within the terms and conditions of loan distribution. )s a
result, it is not a new sub,ect in sound credit management. To ma(imi'e the loan
reco!ery performance the following programs should be taken0
i. To establish credit super!ision and monitoring cell in the bank.
ii. To re#structure the loan sanctioning and distributing policy of the bank.
iii. To sanction loans and ad!ances against sufficient securities as best possible.
i!. To gi!e more posers to the branch manger in credit management decisions
making process.
!. To offer a package of incenti!es to the sound borrowers.
!i. To gi!e more emphasis on short#term loans an ad!ances.
!ii. To impose restrictions on loans and ad!ances for trading business.
To take legal actions *uickly against un#sound borrowers as best as possible within
the period specified by the /aw of /imitations.
<1

CHAPTER $E#EN
CREDIT &ANA(E&ENT
$+$TE& OF IFIC !AN'
%I&ITED C A PRACTICA% EBPO$URE
<;

CREDIT PO%IC+ OF IFIC !AN' %TD,
)s a continued process I.IC Bank /td followed the course of its own credit policy
within the framework and guidelines outlined by the @o!ernment and Bangladesh
Bank in respect of deployment of its loan able fund. The Bank continued to e(plore
and di!ersify the area of its operation to e(tend credit facilities throughout the year to
the !arious producti!e sectors on priority basis.
C%A$$IFICATION OF CREDIT OF IFIC !AN' %TD,
I.IC Bank /imited pro!ides !arious credit facilities to the borrows general credit
facilities and the interest rate are stated below.
Cre1it Interest Rate
a. -!erdraft i. )gainst .3E
;? I )bo!e
the rate allowed on
.3E.
ii. )gainst hare 1<.8=?
b. Cash Credit i. Hypothecation 18.8=?
ii. 2ledge 18.8=?
c. 3emand /oan i. ecured 18.8=?
ii. >nsecured 18.8=?
d. /oan )gainst trust Eeceipts 18.8=?
e. 2ayment )gainst 3ocument 18.8=?
f. /oan )gainst Import "erchandise 18.8=?
g. Inland Bill 2urchase 18.8=?
h. .oreign Bill 2urchase 18.8=?

<<

$PECIA% CREDIT $CHE&E OF IFIC!AN' %I&ITED,
Besides general credit facilities I.IC Bank /imited also introduced some special
credit schemes named as >ttaran. This scheme encompasses the following credit
facilities.
Cons.mer Cre1it $c6eme)
"ost of the people of Bangladesh are middle class and in the orbit of /imited income.
They are not able to buy necessary consumable goods by their own sa!ings. .or this
reason I.IC Bank /imited introduced consumer credit scheme from -ctober 1667.
/oan disbursed under this scheme stood at Tk. 81.=: corer up to 3ecember 1==1. The
rate of reco!ery of loan under this scheme also 1== percent.
Feat.res o0 t6is sc6ema are)
a, O4Dectives o0 t6e sc6eme)
i. Creating the habits of sa!ings for limited income group
ii. Increasing standard of /i!ing
iii. To play an important role in de!eloping the socio economic condition of
Bangladesh.
4, (oo1s .n1er t6is sc6eme)
&ew and re#conditioned car, "otorcycle, Eefrigerator, Tele!ision, C.C.2, Eadio, Two
in one, )ir Conditioner, Dater Cooler, Dater 2ump, 2.C, >2, 2rinter, Type Driter,
Dashing "achine, Iron I Dooden .urniture, ewing "achine, Toaster, pressure
Cooker, 2hotocopier, Cellular 2hone, .a(, !arious kind of .an, 3ish )ntenna,
Bicycle, Baby Ta(i, Tempo, "icrobus etc.
<8

c, Ceilin- o0 %oan an1 Do@n Pa/ment)
>nder this scheme highest amount of loan is Tk. 8.== /ac. Borrower must pay down
payment at the following rate0
i. &ew "otor Car ) ;8?
ii. Eecondition CarG"icrobus ) <=?
iii. Baby Ta(iGTempo ) <=?
i!. "otor Cycle ) ;8?
!. Eefrigerator, 3eep .ridge, Dashing
"achine, )ir Conditioner, 2ersonal
Computer, 2hoto Copier, .a(, "obile
2hone ) 18?
!i. -thers ) 1=?
1, Interest Rate an1 ot6er C6ar-e)
i. Interest ) 1<? at imple Interest Eate.
ii. 3efault Interest ) 1? at imple Interest Eate.
iii. er!ice Charge ) >p to Tk. 8=,===0 Tk. 1==,
)bo!e Tk. 8=,===0 Tk. 8==.
i!. Eisk .und ) 1? of loans but at least Tk. 1==
A"ust pay before taking loanB.
e, %oan Repa/ment Perio1)
i. &ew "otorcar ) < years A9*ual monthly InstallmentB
ii. Baby Ta(iGTempoG"icrobus ) < years A9*ual monthly InstallmentB
2artial amount of Installment must be
paid e!ery week.
iii. -thers ) ; years A9*ual monthly InstallmentB
<7

$&A%% !U$INE$$ %OAN $CHE&E ($!% $CHE&E))
B/ scheme has introduced for e(tending loans to the small business owners who are
dong business with their own capital, which is inade*uate to e(pand business and
ha!e no tangible security to offer as collaterals.
Feat.res o0 $!% $c6eme are)
a, A.ali0ication o0 !orro@er)
Borrower must ha!e a current account in the branch from which he is willing to take
loan.
4, Ceilin- o0 %oan)
>nder B/ scheme one can borrow an amount not more than Tk. 8 /ac. But it
depends on the monthly income of the borrower.
c, Interest an1 Ot6er C6ar-e)
Interest 0 17.8? per annum.
)pplication .rom 0 Tk. 1==
1, %oan Repa/ment Proce1.re)
/oan must be repaid within ; years at monthly installment.
E,<,< Ho.se Repairin-FRenovation $c6eme)
This scheme was introduced for e(tending loans to the people who own
houseGbuilding of their own or inherit from their ancestors, which may re*uire
reno!ationGrepairing but cannot afford to make such e(penditure at a time.
<:

Feat.res o0 t6is $c6eme are)
a, Amo.nt o0 %oan)
>nder House repairingGreno!ation scheme you can take loan up to Tk. 8 /ac. But the
actual account of loan will depend on your monthly income.
4, Interest an1 Ot6er C6ar-e)
Interest 0 18?
/oan 2rocessing .ee 0 Tk. 8,=== A8=? of this amount are refundable if .
re,ectedB
)pplication .rom 0 Tk. 1==.
If the customer repay loan regularly and timely than 8? of interest will e(empt.
c, %oan Repa/ment Perio1)
/oan must repay within 8 years including interest at installment basis.
%ease Financin- $c6eme)
) credit schema in the name of /ease .inancing cheme has been functioning
effecti!ely from 5une 1666 to finance the prospecti!e and genuine customers for
ac*uisition of capital machinery e*uipment, medical instruments automobiles etc. The
balance of the loan under this scheme stood at Tk. <6=7= corore as on ;1
st
3ecember
1==<.
RECO#ER+ PRO(RA&
It is the subse*uent step of programs for loan distribution. The detailed programs for
loan reco!ery are state within the terms and conditions of loan distribution. )s a
result, it is not a new sub,ect in sound credit management. )s the reco!ery
performance of the commercial banks Aboth public and pri!ate in BangladeshB
gradually deteriorating o!ertime, go!ernment as well as the board of directors of the
respecti!e banks ha!e taken some special programs in the area of loans reco!ery.
<4

I.IC Bank /td. has taken the following programs to ensure ma(imum reco!ery0
i. It establishes credit super!ision and monitoring cell in the bank.
ii. It re#structures the loan sanctioning and distribution policy of the bank.
iii. It sanctions loans and ad!ances against sufficient securities as best as possible.
i!. It gi!es more powers t the branch manager in credit management decisions
making process.
!. It offers a package of incenti!es to the sound borrowers.
!i. It gi!es more emphasis on short#term loans ad!ances.
!ii. It imposes restrictions on loans and ad!ances for trading business.
!iii. Ti takes legal actions *uickly against un#sound borrowers as best as possible
with the period specified by the /aw of /imitations.
<6

CHAPTER EI(HT
$TUD+ FINDIN($
8=

$ECTOR25I$E PO$ITION OF %OAN AND AD#ANCE A$ ON <929;2;GG= I$
(I#EN !E%O5)
$ectors o0 %oan & A1vances P.4licFNationali:e1
ATaka in CroreB
Private
ATaka in
CroreB
Total
ATaka in
CroreB
9, A-ric.lt.re)
aB 2rimary 2roducer
bB .ertili'er
#
#
1.7:
=.=:
1.7:
=.=:
;. In1.strial Term %en1in- 18<.;= 18<.;=
<, 5or1in- Capital)
aB 5ute Industry
bB -ther Dorking Capital
#
1<.=1
6=.:6
7<.61
6=.:6
:4.6;
=, EHport)
aB 5ute and 5ute @oods
bB -ther @oodsGCommodities
#
#
6.1;
<:.;1
6.1;
<:.;1
>, Tra1e an1 Commercial %en1in-)
aB 5ute Trading
bB Commercial
#
#
1=.<=
1,1<7.<;
1=.<=
1,1<7.<;
?, $pecial Pro-ramme)
aB mall and Cottage Industry
ATerm /oanB
bB 2ersonal /oan cheme
cB Consumer Credit cheme
A>ttaranB
#
#
#
;.77
<.4<
<<.76
;.77
<.4<
<<.76
E, Ur4an Ho.sin- 84.<6 1<.44 4;.;:
I, O00icers an1 $ta00 Ho.se !.il1in- # 11.=1 11.=1
J, Ot6ers 1<.:6 841.=: 868.47
Total IE,;J ;K;G?,>= ;K;J<,I<
81

DEPO$IT$ AND AD#ANCE$ (CORE TA'A) PO$ITION FOR FI#E +EAR$
Deposit & A1vance
81
0
500
1000
1500
2000
2500
3000
1998 1999 2000 2001 2002
Deposit
Advance

$ECTOR 5I$E %OAN$ AND AD#ANCE$ UNDER PIE CHART)
$ector 5ise A1vance (L)
8;
Commercial
Lending(51%)
Export(2%)
Agriculture (1%)
Industrial
Lending(7%)
Special
Programme(2%)
or!ing
Capital(7%)
"ousing(#%)
$t%ers (2&%)

PRO!%E&$ IN %OAN RECO#ER+ OF IFIC !AN' %TD,
Those who are the sound borrowers can easily to be identified but the status and the
number of unsound borrowers cannot be measured accurately as they are the ma,or
portions of total number of borrowers. This is the present status of credit management
in Bangladesh both in the public sector banking and the pri!ate sector banking also.
2roblems in loan reco!ery are the outcome of the default in loan disbursement I.IC
Bank /td. usually faces the following problems in loan reco!ery0
I. ometimes loans are gi!en without sufficient securities.
II. ometimes loans are gi!en under fictitious names and enterprises.
III. )ppro!al of loans in e(cess of the branch manager%s powers.
IC. ometimes o!er#!aluation of securities is a common phenomenon.
C. /oans are appro!ed against defecti!e pro,ect appraisal report.
CI. Improper monitoring and super!ision of credit.
CII. /oans are sometimes disbursed for economically un#sound pro,ect.
CIII. 9mphasis on public sector in!estment causes the high rate of non#reco!ery.
IN. /oans are appro!ed for the parties by the authorities bearing in mind their
personal ob,ecti!es not the o!erall ob,ecti!es of the bank and the economy.
N. /oans are appro!ed for industries, which are only socially desirable.
NI. 2olitical misuse of loans programs.
8<

CHAPTER NINE
$U((E$TION AND
CONC%U$ION
88

RECO&&ENDATION$
In the light of the !ariations of the problem the following measures if adopted, may go
a long way in impro!ing the situation0
1. election of borrower shall be made as per rules and procedures of the
ad!ances and after making proper assessment of business establishment,
respectability, creditability, actual re*uirement of fund repayment capacity etc.
)ppraisal of feasibility and !iability of the pro,ects shall be dine in proper
manner e(amining all the factors by an efficient and *ualified appraiser so that
no difficulties are faced at any stage of the pro,ect from construction to
production stage.
1. The lack of proper super!ision, conduct and control of the loan shall be done
by the financiers to ensure purpose for which the loan is sanctioned, close
contact and persuasion shall also be borrowers to ensure reco!ery of loan
installment as and when due without allowing it to become arrear.
;. The bank should not always be !ery much sensiti!e of reco!ery of loans and
will not bring necessary pressures for reco!ery pro!ided the borrowers are
incorrigible and habitual defaulters. The lenders shall not resort to any hasty
decision and take legal action against the borrowers if there is any scope for
reco!ery of the dues on compromise terms e!en by allowing some concession
of interest and rescheduling the repayment program by allowing reasonable
time to the borrowers.
<. 2roblem of the borrower%s pro,ects or business, which ha!e turned sick
una!oidable circumstances of unforeseen e!ents, shall be looked into
sympathetically by the lending bank. If necessary, bank shall not hesitate to
allow further finance to re!i!e the sick unit to ensure safe reco!ery of the loan
in future for which a suitable repayment schedule may be prepared in
consultation with borrowers.
8. The officials of the bank should be made well con!ersant with the methodical
and procedural components of credit management starting from the stage of
preparation of loan proposal and ending up to the follow up and reco!ery of
the same. &one of the officials who has sporadic knowledge in handling loan
cases should be assigned with the duty of operation of loans I ad!ances.
87

7. The lenders shall take legal action against the incorrigible defaulting borrowes
who are a!oiding payment on flimsy grounds without bonafide intention to
s*uare up their dues without wasting of time. "oney suits I criminal cases
filled against the bad borrower shall be closely followed up for early decision
of the court and immediate steps shall be taken for satisfaction of the decrees
against the ,udgment debtors. 2roper !igilance are re*uired to be kept o!er
disposal of court cases I reco!ery of the decretal dues as per ,udgment and in
default, to file e(ecution suit for attachment I sale of borrower%s properties
for satisfaction of the decree.
:. )lertness and education amongst the sub#conscious about their obligation to
return bank%s money in time and utili'ation of funds of funds only for
producti!e purpose of moti!ation and education field assistants of the lending
bank may play !ital role.
4. The officials of the bank shall be honest, sincere and free !ices in their deal
with borrowers for personal gain should be skillfully detected and e(emplary
punished to pre!ent others from indulging such irregularities. teps should
also be taken to arrest growing moral degradation amongst the officials by
impro!ing their ser!ice benefits, socio#economic condition and a standard of
li!ing where the officials shall ha!e no reasons to be allured by the borrowers.
6. The problem can be sol!ed by rational strategy formulation.
1=. The lenders shall sanction and disburse loan to the borrowers in proper time
of in!estment. They will see that no delay is caused in completing formalities
and processes which may create problem to the borrowers to di!ert funds
elsewhere or want of scope for in!estment and thus the funds become stuck up
ultimately. o loans should always be sanctioned I disbursed in proper time
of in!estment to ensure reco!ery of the loan in time from the borrowers.
8:

CONC%U$ION)
.or any B.B.) student who would like to build up hisGher career in the banking
sector, heGshe must need this type of internship training. )s a successful intern,
I am really a lucky person that I could perform my Internship in I.IC Bank
/imited, .ederation Branch, which is the second bank of Bangladesh in case of
earning profit. I hope this report prepared by me on the basis of my internship
training will be beneficial for the personnel who are already in!ol!ed in ,ob in
any reputed organi'ation and will also be helpful for the future internees those
who will carry out their internship training in I.IC Bank /imited or in other
banks.
I.IC Bank /td. has been able to continue its o!er all progress for year to year,
specially in granting loan to right sector and its reco!ery. ince bank%s profit largely
depends on its interest income. I.IC Bank /td. was able to achie!e 1
nd
highest profit
in year 1==1. Dhich shows that the loan position, interest and reco!ery are e(cellentL
This success has been making possible due to dynamic leadership of the bank
management, proper guidelines good counsel and de!otion and sincerity of all
categories of officers an employees of the bank.
84

!i4lio-rap6/)
1. iddi*ui, ). @. MBankier%s )d!ances AEauf 2ublicationB.
1. 3r. ). E. Fhan #Bank "anagement, 2rogati 2rakashani, 1
nd
9dition.
;. Taylor, D.@. /ongworth MCredit ystem, 8
th
9dition.
Reports an1 "o.rnals)
1. I.IC Bank /td. )nnual Eeport M 1==1,1==1,1==;,1==<.
1. anti &arayan @hosh, 5agadish Chandra ukladas and "ahbub )hmed
Choice of Banks Customers% er!ice I Credit 2olicy Bureau of
Business Eesearch, >ni!ersity of 3haka.
;. Booklet of I.IC Bank /td.
<. The Bangladesh Bank -rder 16:1.
8. -ther 2ublished Information.
86

I I NTERNSHI P NTERNSHI P R REPORT EPORT
O ON N
GENERA !AN"ING O# I#I$ !AN" GENERA !AN"ING O# I#I$ !AN"
! !% %
&ANOAR RAIHAN FERDOU$
I' (o) 0033&2001'3
**A Program (
#+"
*atc%)
S S(PER)ISOR (PER)ISOR
RE*A FA'HRU**A&AN
ect*+e+
Sc%ool o, *usiness Studies
-ni.ersit/ o, 'e.elopment Alternati.e
7=

)pril 1=, 1==:
To
RE*A FA'HRU**A&AN
/ecturer
chool of Business tudies
>ni!ersity of 3e!elopment )lternati!e
$.4Dect) %etter o0 $.4mission
3ear ir,
Dith due respect, I am submitting this Internship Eeport on (ENERA% (ENERA%
!AN'IN( OF IFIC !AN' !AN'IN( OF IFIC !AN' >nder the re*uirement of BB) curriculum.
I thank you for gi!ing me the opportunity to ac*uire these learning and hereby I am
submitting the Internship Eeport. I shall be honored to pro!ide you any additional
information if necessary.
incerely
&ANOAR RAIHAN FERDOU$
I' (o) 0033&201'3
**A Program (
#+"
*atc%
71

A A $ " N O , E D G E - E N T $ " N O , E D G E - E N T
.or the preparation of the report, I am grateful to !arious indi!iduals. Here I
want to mention them. .irst of all, I am !ery much grateful to my faculty
super!isor RE*A FA'HRU**A&AN as he asked me to concentrate only
one issue and make a focus in depth, so that, I worked only with GENERAL
BANKING and learned much of it. His guidance and suggestions made my
works easier.
I would like to e(press my gratitude I am grateful to "r. )bdus abur Fhan
A2-B Head of -peration, &ational Bank /imited and "r. &a'mul )hsan
A"anagerB, tandard Chartered Bank for allowing me to work with them on
this pro,ect and pro!ide necessary support to me. They has a!ailed me with
their best support.
I want to thank my organi'ational super!isor "d. )riful Ho*ue, 9(ecuti!e
-fficer, Information Technology 3i!ision of I.IC B)&F /I"IT93 to assist
me with ad!ice and information during this pro,ect. Truthfully, they gi!e me
the concept and appropriate direction to work in this paper. I am beholden to
them for their information about the present circumstances and future prospect
of card business in Bangladesh.
/astly, I would like to thank all of my family members and friends.
&ANOAR RAIHAN FERDOU$
I' (o) 0033&201'3
71

TA!%E OF CONTENT
INTRODUCTION
O!"ECTI#E$ OF THE REPORT
$COPE
%I&ITATION$
!AC'(ROUND OF IFIC !AN' %I&ITED
OR(ANI*ATION HIERARCH+ OF IFIC !AN' %TD
O!"ECTI#E$ OF THE $TUD+
ORI(IN OF THE REPORT
&ETHODO%O(+
OR(ANI*ATION CO#ERED
$OURCE$ OF DATA
OPENIN( OF ACCOUNT
&AI% TRAN$FER (&T)
TE%EPHONE TRAN$FER (TT)
DE&AND DEPO$ITE (DD))
PREPARATION OF $CHEDU%E)
C%EARIN( HOU$E)
CU$TO&ER HAND%IN()
%OAN PO%IC+)
(ENERA% PO%IC+)
CO%%ATERA%)
5A+$ FOR !AN'$ TO &A'E %OAN$)
RO%E OF INFOR&ATION FOR (RANTIN( %OAN)
%OAN PROCE$$)
E#A%UATIN( A %OAN REAUE$T
CO&&ERCIA% AND INDU$TRIA% %OAN
REA% E$TATE %ENDIN(
CON$U&ER %ENDIN(
INTRODUCTION)
FACTOR$ %I&ITIN( THE %E#E% OF A !AN'$ CREDIT)
7;

&ANA(E&ENT OF CREDIT !+ TA'IN( $ECURIT+,
&ANA(E&ENT OF CREDIT A(AIN$T (OOD$,
PRECAUTION$ TO !E TA'EN !+ A !AN'ER
&ANA(E&ENT OF CREDIT A(AIN$T DOCU&ENT OF TIT%E
OF (OOD$,
$+&PTO&$ OF PRO!%E& %OAN$,
&ANA(E&ENT OF PRO!%E& %OAN$
CAU$E$ OF PRO!%E&$ %OAN$
$TEP$ TO HAND%E PRO!%E& %OAN$
RECO#ER+ OF %OAN
PRO(RA&$ FOR %OAN RECO#ER+
CREDIT PO%IC+ OF IFIC!AN' %TD,
C%A$$IFICATION OF CREDIT OF IFIC!AN' %TD,
$PECIA% CREDIT $CHE&E OF IFIC!AN' %I&ITED,
$ECTOR25I$E PO$ITION OF %OAN AND AD#ANCE
PRO!%E&$ IN %OAN RECO#ER+ OF IFIC !AN' %TD
RECO&&ENDATION$
CONC%U$ION
7<