Professional Documents
Culture Documents
CHAPTER ONE
INTRODUCTION
1.1 DEFINITION OF INTERNSHIP PROGRAM
Internship training means to acquiring knowledge and information appearing directly by
searching an authentic another searching method.
We know there are two types of knowledge.
1. Theoretical Knowledge
2. Practical Knowledge
So, we can achieve theoretical knowledge through books, papers and lecture sessions
conducted by teachers. And, practical knowledge means the implementation of theoretical
knowledge in practical field.
Thus we can say when anyone observes any subject of theoretical knowledge in practical field
is called internship.
W Green says, Standard methods taken for searching knowledge are meant internship.
School of Business
School of Business
to visit other banks, different desks within branch in a short time. The constraint also
compelled me to go for smaller sample for my research. Due to their shortage of time and
opportunity some respondents of my research have not given proper heed my question it
troubled me a lot.
School of Business
CHAPTER TWO
METHODOLOGY OF THE STUDY
2.1 METHODOLOGY
Methodology is a systematic procedure, which is used to solve a problem easily in a particular
area. It starts which problem makes hypothesis and conclude decision finally. If covers
collection, censuring, analyzing and interpreting of data to lead decision, i e., methodology
includes why a study we have been undertaken, how the problems have been defined in what
way and why the hypothesis has been formulated What data have been collected and what
particular method has been adopted, why particular technique of analyzing data has been used
and a host of similar other questions are usually answered when we take about methodology
concerning a problem or study.
The report has been prepared on the basis of experience gathered during the period from 9 th
March 2011 to 9th June 2011. I visited three departments namely General Banking, Credit and
Foreign Exchange of National Bank, Rajshahi Branch. I also surveyed the view of the banks
and customers on the critical process of the credit approval system of the National Bank Ltd.
through informal interview and questionnaire. Questionnaire is given in Annexure-A and in
Annexure-B.
a) Primary Source: The data, which are directly collected from the study field, are called
primary data or raw data.
Primary data have been collected under the following methods:
(i)
Observation methods:
(ii)
Interviews
(iii)
Questionnaire.
University of Information Technology and Sciences
.
School of Business
b) Secondary source: I have collected secondary data from the following sources.
(i)
Annual Report of the bank.
(ii)
Different circulars sent by Head Office of National Bank and Bangladesh Bank.
(iii)
Study of old files.
(iv)
Consulting Credit Manuals of older generation PCBs (confidential).
(v)
Publications on Credit Approval System.
(vi)
Journals
(vii) Internet search.
2.3 SAMPLING
Sampling Procedure:
Probability sampling has been done for the research purpose. This was done for the
convenience of the study and to meet the available time in may hand. The bankers and
customers were surveyed by using both questionnaire and interview. I used convenient
sampling procedure.
Sampling Method:
The populations for the sampling were as follows, as they operate in the same market:
Rajshahi Branch Bank of the older two generations and the National Bank, Rajshahi
Branch is taken.
Five customers of composite facility, five customers of SOD and L/C facility and five
customers of CCS facility on each three bank are taken.
The subjective judgments of the officials and customers were used. The weighted scoring
model was used to reach a solution.
School of Business
CHAPTER THREE
AN OVERVIEW OF NATIONAL BANK LTD.
3.1 INTRODUCTION
In the present world the importance of bank is unlimited. In the respect of business it is
doubtlessly admitted. At present Bank such lifeblood of economy. That economy and trade are
turned to concentrate it.
Bank does not only help for giving loan even helps in kinds of financial transactions, thats
why it told, Bank is the compass of modern business. As a result the importance of banking
activates increasing day by day.
School of Business
was opened on 11th May 1983 at Khatungonj, Chittagong. At present, NBL has been carrying
on business through its 130 branches and 15 SME / Agri Branches (total 145 service
locations) spread all over the country. Since the very beginning, the bank has exerted much
emphasis on overseas operations and handled a sizable quantum of home bound foreign
remittance. It has drawing arrangements with 415 correspondents in 75 countries of the world,
as well as with 37 overseas Exchange Companies located in 13 countries. NBL was the first
domestic bank to establish agency arrangements with the world famous Western Union in
order to facilitate quick and safe remittance of the valuable foreign exchanges earned by the
expatriate Bangladeshi nationals. This has meant that the expatriates can remit their hardearned money to the country with much ease, confidence, safety and speed.
NBL was also the first among domestic banks to introduce international Master Card in
Bangladesh. In the meantime, NBL has also introduced the Visa Card and Power Card. The
Bank has in its use the latest information technology services of SWIFT and REUTERS. NBL
has been continuing its small credit programmes for disbursement of collateral free
agricultural loans among the poor farmers of Barindra area in Rajshahi district for improving
their livelihood. NBL focused on all key areas covering capital adequacy, maintaining good
asset quality, sound management, satisfactory earning and liquidity. As a consequence, it was
possible to a record growth of 175.51 percent with Tk. 8,809.40 million pre tax profit in the
year under review over the preceding year. The net profit after tax and provision stood at Tk.
6,860.34 million which was Tk. 2,070.47 million in the previous year registering a 231.34
percent rise. The total deposits increased to Tk. 102,471.83 million being 33.37 percent
increase over the preceding year. Loans and advances stood at Tk.92,003.56 million in the
year under report which was Tk. 65,129.289 million representing 41.26 percent rise over the
preceding year. Foreign trade stood at Tk. 144,255.00 million in 2010 compared to Tk.
115,939.00 million, increased by 24.42 percent compared to that of the previous year. During
2010, the bank handled inward remittance of Tk. 49,145.30 million, 10.73 percent higher than
that of the previous year. Return on Equity (ROE) registered a 77.84 percent rise over the
preceding year. National Bank, has now acquired strength and expertise to support the
banking needs of the foreign investors. NBL stepped into a new arena of business and opened
its Off Shore Banking Unit at Mohakhali to serve the wage earners and the foreign investors
better than before.
Since its inception, the bank was aware of complying with Corporate Social Responsibility. In
this direction, we have remained associated with the development of education, healthcare
and have sponsored sporting and cultural activities. During times of natural disasters like
floods, cyclones, landslides, we have extended our hand to mitigate the sufferings of victims.
It established the National Bank Foundation in 1989 to remain involved with social welfare
activities. The foundation runs the NBL Public School & College at Moghbazar where present
enrolment is 1140. Besides awarding scholarship to the meritorious children of the employees,
the bank has also extended financial support for their education. It also provided financial
University of Information Technology and Sciences
.
School of Business
assistance to the Asiatic Society of Bangladesh at the time of their publication of Banglapedia
and observance of 400 years of Dhaka City.
The Transparency and accountability of a financial institution are reflected in its Annual
Report containing its Balance Sheet and Profit & Loss Account. In recognition of this, NBL
was awarded Crest in 1999 and 2000, and Certificate of Appreciation in 2001 by the Institute
of Chartered Accountants of Bangladesh. The bank has a strong team of highly qualified and
experienced professionals, together with an efficient Board of Directors who play a vital role
in formulating and implementing policies.
To come technology in contact each other by improving relation in between Bank and
respective client and to perform important role in national progress.
2.
3.
School of Business
4.
5.
6.
7.
To keep Bank position in firm footing by ensuring better service in competition market.
8.
To arrange investment of large amount and its enlargement in the field of loan through
syndication financing.
9.
VICE PRESIDENT
PRINCIPAL OFFICER
SENIOR OFFICER
OFFICER
ASSISTANT OFFICER
School of Business
10
JUNIOR OFFICER
Chairman
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Managing Director
Chairman
Member
Member
Member
Member
Member
Member
Managing Director, Ex-officio
Mr
Mr
Mr
Mr
Neaz Ahmed
Md Badiul Alam
S M Jaffar
Shamsul Huda Khan
Managing Director
Additional Managing Director
Deputy Managing Director
Deputy Managing Director
School of Business
Chairman
Member
Member
Member
11
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
Member
Vice Persident
Member
Mr Md Saidur Rahman
Vice Persident
Member
Mr Md Abdul Wahab
Vice Persident
Member
Member
Mr Mahmud Al Hasan
Member
School of Business
12
CHAPTER FOUR
A BIRDS VIEW OF NATIONAL BANK LTD. RAJSHAHI
BRANCH
4.1 INTRODUCTION
On my part of internship I had been assigned to get a practical training in National Bank Ltd.
Rajshahi branch, Rajshahi. The training program is running between March 09, 2014 to June
09, 2014. Accordingly I am trying to pasteurize the experience accorded there from.
National Bank is one of the largest private banks in the country. It has 145 branches all over
the country. Rajshahi branch is the 5th branch of this bank. As it is situated at the middle point
of the Rajshahi town so its function is much wide.
PRINCIPAL OFFICER
SENIOR OFFICER
OFFICER
ASSISTANT OFFICER
PROBATIONARY OFFICER
School of Business
13
NUMBER
01
06
03
01
04
05
01
01
04
02
28
Interest
2.
Commission
LC Commission
LG Commission
3.
Remittance
Local Remittance
Foreign Remittance
4.
Exchange Earning
5.
Locker Rent
6.
Collection
7.
Service Charge
School of Business
14
School of Business
Taka
1,474,308,630
7,221,005,129
3,360,312,010
99,500,000
24,993,327,747
92,003,564,102
2,224,747,697
2,970,828,673
384,718,241
134,732,312,229
4,101,795,198
102,471,832,969
2,500,000,000
6,553,084,739
115,626,712,906
4,412,131,300
4,180,253,183
497,723,327
4,915,334,354
5,100,157,159
19,105,599,323
134,732,312,229
15
CHAPTER FIVE
CREDIT APPROVAL PROCESS OF NATIONAL BANK LTD.
5.1 INTRODUCTION
The management of banks assets must be conducted in a profitable and safe manner. Safety is
essential to commercial banking since banks hold billons of Taka of deposits of individuals,
business, and governments. Profit is also necessary for the successful operation of a bank.
Lending is the most profitable as well as the most risky function preformed by banks.
Therefore, it must be done efficiently and with a minimum of loss Loan and Advance
management is essential for the bank.
Credit Section is the survival unit of the bank because until and unless the success of this
section the survival is a question to every bank. If this section is not properly working the
bank itself may become bankrupt. This is important because this is the earning unit of the
bank. Banks are accepting deposits from the depositors in condition of providing interest to
them as well as safe keeping their interest. Now the question may gradually arise how the
bank will provide interest to the clients and the simple answer is advance. Bank provides
advances to the borrowers for the following reasons:
1.
To earn interest from the borrowers and give the depositors interest back
2.
To accelerate economic development by providing different industrial as well as
agricultural advances
3.
To create employment by providing industrial loans
4.
To pay the employees as well as meeting the interest groups
Credit is continuous process. Recovery of one credit gives rise to another credit. In this
process of revolving of funds, bank earns income in the form of interest. A bank can invest its
fund in many ways. Bank makes loans and advances to traders, businessmen, and
industrialists. Moreover nature of credit may differ in terms of security requirement,
disbursement provision, terms and conditions etc.
We often use loans and advances as an alternative to one another. But academically this
concept is incorrect. Academically Advances is the combination such items where loans is a
part only. For this credit section of the banks is known as advance section.
Academically Advance is the combined form of the following items:
School of Business
16
To analyze the credit approval process, the very first thing to understand the security and
mode of charges on securities because without security, no credit is approved.
School of Business
a.
b.
c.
Mortgage
a.
17
b.
c.
Trust Receipt
School of Business
Step 3
Step 4
Step 5
18
School of Business
19
These are the account opening formalities and first step of credit approval system. The second
step of credit approval system is discussed here.
School of Business
20
Purpose
Business capital/Working capital
Against financial obligation/work orders/supply orders
Payment of Accepted bills at maturity before receipt of
export proceeds.
Acquiring capital assets/ purchasing, construction,
finishing, expansion, repair, renovation of House/Flats/
Real Estate Business, etc.
LCA (Loans Against Cash Financing for the period of non-receipt of reimbursement
Assistance)
for Bangladesh Bank.
LC (Local & Foreign) Sight & For Import/Local procurement of goods/services.
on Deferred Payment basis
PAD (Payment Against Document) For making payment of the L/C obligations against receipt
of documents.
LTR (Letter of Task Receipt)
Retirement of shipping documents.
LIM (Loan against Imported Retirement of shipping documents.
Merchandise)
PC (Packing Credit)
Meeting financial requirement of the exporter at pershipment stage against Export L/C.
LDBP/FDBP (Local/Foreign As post shipment finance against local/foreign export
Documentary Bill Purchase)
bills.
Back to Back (BTB) L/C
Import of raw/packing materials against Export L/C.
University of Information Technology and Sciences
.
School of Business
21
National Bank will also finance any other activity under any credit nature, which will meet
the institutions basic principles of safety, liquidity and spread, upholding, credit norms and
complying with the guidelines/directives of the Central Bank/ regulatory body.
Single Borrower/Group Limits/Syndication:
National Bank Ltd. pursues/will continue to pursue the policy of avoiding too much loan
concentration to a single borrower/group in order to by pass possible threat in the event of
such advances turning sticky. In a bid to keep credit risk at the minimum level in respect of
large but prospective advance National Bank will prefer syndicated financing after proper
feasibility study.
National Bank Limited has bee following strictly and will continue its lending operation, in
complete obedience to the guidelines circulated by Bangladesh Bank on single party exposure
limit to a borrower / group National Bank Limited will not extend credit (Funded + non
funded) for more then the percentage on capital of the bank, permitted by Bangladesh Bank
and will follow all modification, amendments, additions that may be may by made by
Bangladesh Bank from time to time.
However, National Bank will flow the following guidelines of Bangladesh Bank on lending to
single borrower / group Linder one obligor:
Lending cap to single borrower
Total exposure (Funded and non funded
Maximum funded exposure
Maximum non funded exposure where
there will be no funded exposure
Maximum exposure for export sector
Amount
35% of Banks total capital
15% of Banks total capital
35% of Banks total capital
50% of Banks total capital (But funded facility
will not exceed 15% of the total capital)
The above single Borrower / Group Exposure in currently mandatory as per Bangladesh Bank
instruction. However, this is subject to change depending on Bangladesh Banks policy.
Lending Caps:
University of Information Technology and Sciences
.
School of Business
22
National Bank Limited is very much aware of over concentration of credit in a particular area,
which may under some situation, create disaster for the bank keeping this in consideration and
also the over all business trend, prospects / potentials, problems risks mitigates, pricing
owners stake in business, business computers involvement, safety, liquidity security etc. our
bank will be the following lending gaps generally.
Sector Caps*
Trade & Commerce
Industry Working Capital
Project Finance Long Term
Retail/Consumer (CCS)
Agro Credit
Work/Supply Order (Contractual Finance)
Others
Total
Percentage
45%
10%
10%
10%
5%
5%
5%
100%
*The Caps will be revised from time depending on the market conditions, shift in Government
Policy and National Banks credit focus.
Discouraged Business Types:
While National Bank will follow the policy of financing prospective, feasible & rewarding
areas, it will have (as presently has) some areas, identified as discourage. Generally the
following areas will be discouraged for financing:
Share lending
School of Business
23
Nature of Advance
Purpose
Margin/Equity
Rate of Interest
Rate of Commission/Charges
Mode of Disbursement
Mode of Repayment
Security
Validity/Maximum Tenor
General/Special Conditions/Covenants
Nature of Advances:
Each advance to be made will be categorized under one of the arranged types and will
governed under the terms & conditions related thereto.
Purpose:
Our lending will be guided by legitimate purpose. Financing for hoarding, speculative
purpose and which will be utilized for degrading the character of the people will be avoided.
Credit which will contribute to production, trade, commerce, import, export, development of
Industries, development activities, Economic growth, infrastructural development,
employment generation, poverty alleviation etc. will be stressed.
Limit/Amount of Facility/Maximum Size:
Facility will be considered based on assessment of requirement & justification subject to the
overall lending cap as per Bangladesh Bank single party exposure limit.
Margin/Equity:
School of Business
24
It will be the general policy of the bank to judiciously ensure stake of the borrower in any
financing plan. Margin will however, be subject to institutional policy in this regard, and
central bank policy where applicable.
Rate of Interest/Commission and Other Charges:
Rate of interest will be changed as per declared rate of the bank. Pricing will be basically risk
based. Higher price will be considered for riskier borrowers because of their higher risk
involved (i.e., lower score obtained by an obligor as per CRG score sheet is called a risky
client). Similarly lower price will be considered for prime clients on the basis of their low risk
(Low risk grade clients means where and obligor obtained higher aggregate score as per CRG
score sheet or 100% cash covered or govt./international Top bank Guarantee). In fixing
interest rate cost of fund & the prevailing rate in the competing market shall also be
considered. Confessional interest rates to tile deserving customers will be allowed within the
declared interest rates band of the bank. Commission/charges on credit facilities will be
realized taking the competing scenario in the banking market into account, involved risks in
financing & overall policy of the bank.
Mode of Disbursement:
In disbursing credit the bank ensures drawing for the purpose the loan has been sanctioned.
Where required visit of the business/site etc. are suggested and all subsequent disbursements
are made conditional to full utilization of disbursed money in the preceding phase. In case of
disbursement of loan, money for acquisition of assets, payment is suggested after receipt of
the assets by the borrower. For commercial lending, storage of merchandise against which
facilities have been sanctioned is ensured either in shop/show room or in godown. Against
LIM/pledge, godownizing required stock is ensured.
Mode of Adjustment/Repayment:
For the borrower to exhibit capability to periodically adjust the drawings taken and as such to
have idea regarding the rationale for continuation of the facility, adjustment mode is given. In
term of lending, where revolving transaction is not allowed, adherence to adjustment
stipulation (monthly, quarterly, half yearly, yearly or other wise) is suggested to ensure
recovery of the loan disbursed. By perusing adherence/non-adherence to the Stipulated
adjustment mode, status of the advances capability of the borrower, how the account to be
treated and course of action to be taken, etc. are decided.
Security:
Our bank mostly relies/will continue to rely on security based lending, taking into
consideration, the character of the borrower, nature of business cash flow, environmental,
economic, business and the influencing factors. In obtaining security primary and collateral
security are suggested. Primary securities are valued on the basis of landed cost in case on
imported goods/ex-mill or factory price/whole sale market price for the local goods.
School of Business
25
School of Business
26
Perishable goods and seasonal goods are generally discouraged as primary security.
iii.
iv.
v.
Documents which are drawn in conformity with the export UC terms (i.e., documents
which do not have discrepancies) are accepted for negotiation.
vi.
vii.
Subordinated rank (in respect of financing) on fixed and floating assets of the
companies proposed for financing is generally discouraged.
viii.
Land, Building having defectless title, chain of proper documents, adequate valuation
and acceptable forced sale value, located under municipality/Municipal
corporation/RAJUK/KDA/CDA important commercial centers are best choice for
creating mortgage thereon. 3rd party mortgage is backed by personal guarantee of the
owner of the property. Property located outsides the above areas are also accepted as
collateral, with out compromising with proper valuation proper title, non-encumbrance
sale possibility in requirement etc.
ix.
x.
School of Business
27
iii.
Banks legal adviser establishes the required legal documentation for a borrowers
legal standing and enforcement of the banks interest.
iv.
v.
vi.
Bank has proper inventory of standard security documentations vetted by Legal counsel.
vii.
Valuation of Collateral:
i.
Credit administration department independently will control and match the value of
cash collateral which will be liened to the bank and against which borrowings are/will
be allowed as per approval.
ii.
Value of inventory and machinery supplied by client will be cross checked.
iii.
iv.
Credit administration department will ensure receivables that actually exist and that
past due. Disputed and other items with impaired collateral value to be identified and
removed from collateral pool.
Value is sourced from independent appraisals addressed to the bank.
Insurance:
Our bank having insurable interest on a property/an asset obtain insurance policy as per norms
against credit facilities extended in order to protect our banks interest. Insurance policy shall
be taken covering all possible risks. Branches shall ensure that insurance Policy is current and
renewed on a timely basis. Insurance shall be obtained from a reputed company.
General/Special Conditions/Covenants:
General/Special Conditions/Covenants will be according to be nature of advance, security
arrangements, ownership pattern, mode of acquisition, institutional norms/instructions, guides
lines of the central bank/ regulatory authority.
Cross Border Risk:
The bank takes/will take care of analyzing the risks involved with Cross Border Lending.
Risks associated with import of a commodity are kept in mind which may basically take the
form of failure of the foreign supplier to:
i.
Supply goods of specified standard and quality.
ii.
Supply the contracted goods timely.
These risks are tried to be handled by obtaining satisfactory credit report on the supplier before
opening L/C. Track record of the exporter, past performance, capability of the seller to comply
with the terms of sale purchase, timely shipment etc. are examined before opening L/C. Advance
University of Information Technology and Sciences
.
School of Business
28
payment against import is avoided in order to avert credit associated risk. Risks involved in export
deal in also taken care of. Capability of the consignee is when required ascertained by obtaining
credit report on them. Here also past record past payment behavior, instances of payment refusal,
instances of taking discount, frequency of raising of objections of minor grounds and making
delay in payments etc. are carefully perused and the results form the basis of proceeding properly
avoiding risks associated with export deal. Besides, the country risks both of the importing &
exporting countries are kept in view in respect of handling the import export deal.
School of Business
29
Before sending proposal to the approving authority, the originating officials of the
branch shall ensure that the following steps/formalities have been taken/completed
properly and incorporated in the credit proposal appropriately:
1.
Current CIB Report obtained.
2.
Repayment sources of the borrower have been justifiably established by financial analysis.
3.
Purpose and amount with types of loan proposed by the borrower stated in the proposal.
4.
Earnings from the relationship properly assessed in the credit proposal.
5.
Per-sanction Inspection report/call report/site visit report is in place.
6.
Management profile and Capital structure, constitution, Date of Establishment are stated
in the proposal.
7.
Experience of Borrowers business skills, management and successions are properly
mentioned in the proposal.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
Borrowers Rating in the Industry is assessed along with overall industry concerns and
borrowers strength and weakness relative to its competitions are identified.
Industrys position along with supplier and buyer risk is analyzed.
Borrower credit worthiness is established by review of 3 years historical financial
statements and past track record.
Cash flow analysis justifying clients ability to repay is reflected in the credit proposal.
Industry and business analysis is done in the proposal.
Credit facilities availed from other banks are clearly stated in the proposal and opinions
are obtained regarding the credit standing of the borrowers.
Credit facilities are based on an evaluation of the borrowers business needs.
Possible risks are identified in the credit assessment and risk mitigating factors are
clearly mentioned in the credit proposal.
Credit proposals clearly mention current outstanding against all limits.
Audited financials large loan position etc. is reflected in the credit proposals.
Branches ensure that collateral has been properly valued verified and are managed.
Account conducts of the borrower and his allied concerns have been done.
Amount and tenors are justified based on the projected repayment ability and loan purpose.
Adequacy and the extent of Insurance coverage are assessed.
Policy compliance is clearly stated in the Credit Proposal.
Changes in pricing of facilities are highlighted in credit proposal.
Usage of borrowed fund is confirmed through financial statement analysis.
Borrowers risk grade has been done as per Bangladesh bank guidelines examined and
approved by the authorized official and stated in the credit proposal.
School of Business
30
Security:
a. Primary
b. Collateral
c. Others
XXIII.
School of Business
31
a. Land
b. Building
c. Other structures
d. Machinery
e. Others
XXIV.
XXV.
Financial highlight.
Business performance of the client/allied concerns with our bank/other banks (last 3 years).
a. Import
b. Export
Earnings from the client (last 3 year) and projected earnings from the relationship.
Sales profitability (last 3 year) projected sales.
Important ratios (where applicable)
Cash Flow
Experience of Borrowers, business skills management and successions
SWOT Analysis
Major 5 competitors
Possible risks and risk mitigating factors
Other terms, Conditions and Covenants.
XXVI.
XXVII.
XXVIII.
XXIX.
XXX.
XXXI.
XXXII.
XXXIII.
XXXIV.
XXXV.
School of Business
32
Lending decision will be preceded by an intensive analysis on whether the borrower depends
on single or a very few customer or gets the supply of the raw materials/dealing items from a
single supplier. Such sales and supply concentration will be given a very careful consideration
because it will have significant impact on the future viability of the borrower.
Historical Financial Analysis:
An analysis of a minimum of 3 years historical financial statements of the borrower shall be
presented. Where reliance is placed on a corporate guarantor, guarantors financial statements
shall also be analyzed. The analysis shall address the quality and sustainability of earnings,
cash flow and the strength of the borrowers balance sheet.
Projected Financial Performance:
Where term facilities (tenor more than 1 year) are proposed, borrowers future/projected
financial performance should be provided, indicating an analysis of the sufficiency of cash
flow to service debt repayments. Loans should not be granted if projected cash flow is
insufficient to repay debts.
Account Conduct:
For existing borrowers, historic performance in meeting repayment obligations (trade
payments, cheque, interest and principal payments etc.) shall be addressed. Credit debit
summation, maximum-minimum balance, recycling and adjustment of the liability will be
looked into which generally will back our renewal decisions.
Adherence to Lending Guidelines:
Credit proposals to be prepared in line with Banks lending Guidelines. A credit
application/proposal will clearly mention whether or not the proposal complies with the
banks lending guidelines. A proposal that will not adhere to the banks lending guidelines
will not be approved.
Mitigating Factors:
In credit assessment, possible risks, such as margin sustainability and or volatility, high debt
load (leverage/gearing), over stocking of debtor issues rapid growth acquisition or
expansion new business line product expansion, management changes or succession issues
customer or supplier concentrations and lack of transparency or industry issues and their
mitigating factors to be identified.
Loan Structure:
Amount and tenor of loan will be fixed justifiably depending on income generation
prospect, projected repayment capacity and the purpose of the loan. Failure in properly
perusing these factors especially allowing loan for excessively long period of more than
University of Information Technology and Sciences
.
School of Business
33
what is really justified/required in the business, will expose the bank to risk and also to nonrepayment by the borrower.
Security:
Our banks lending will generally be adequately secured. Securities to be obtained will be
acceptable, valuable easily marketable and defect less (in title). Valuation of security will be
properly assessed. Security will comprise primary and collateral and will be adequately
insured (where applicable).
Name Lending:
Lending depending only on the fame and reputation of a borrower will be avoided. All
associated risks lending fundamentals and a through financial analysis will be made.
School of Business
34
simplified and user friendly model for application by the Banks and financial institutions in
processing credit decisions and evaluating the magnitude of risk involved therein with the
expectation that all commercial banks will have a well defined credit risk management system
which will deliver accurate and timely risk grading. In line with the above expectation our bank
will undertake gradation of credit risks taking into consideration the varied complexities involved
in lending operation. CRG with the above expectation will be a mandatory replacement of LRA.
Our bank has already adopted a Credit Risk Grading System as per Bangladesh bank CRG
Manual. The details of CRG are as under:
Definition of Credit Risk Grading (CRG):
The Credit Risk Grading (CRG) is a collective definition based on the pre-specified
scale and reflects the underlying credit risk for a given exposure.
Credit risk grading is the basic module for developing credit risk management system.
The Credit Risk Grading matrix will allow application of uniform standards to credits to
ensure a common standardized approach to assess the quality of individual obligor,
credit portfolio of a unit, line of business, the branch or the bank as a whole.
As evident, the CRG outputs would be relevant for individual credit selection, wherein
either a borrower or a particular exposure/facility is rated. The other decisions would be
related to pricing (credit-spread) and specific features of the credit facility. These would
largely constitute obligor level analysis.
Risk grading would also be relevant for surveillance and monitoring, internal MIS and
assessing the aggregate risk profile of a Bank. It is also relevant for portfolio level analysis.
School of Business
35
The proposed CRG scale consists of 8 categories with short names and numbers are
provided as follows:
Grading
Short Name
Number
Superior
SUP
1
Good
GD
2
Acceptable
ACCPT
3
Marginal/Waitlist MG/WL
4
Special Mention SM
5
Sub Standard
SS
6
Doubtful
DF
7
Bad & Loss
BL
8
Credit facilities, which are fully secured i.e., fully cash covered.
Credit facilities fully covered by the guarantee of a top tier international Bank.
Credit facilities fully covered by the guarantee of a top tier local Bank.
School of Business
36
Credit in this grade would normally be secured by acceptable collateral (1 st charge over
inventory/receivables/equipment/property).
Acceptable management.
Acceptable parent/sister company guarantee.
Acceptable Score of 75-84 based on the risk grade score sheet.
School of Business
37
Any Continues Loan if not repaid/renewed within the fixed expiry date for repayment
will be treated as irregular just from the following day of the expiry date. This loan will
be classified as sub-standard if it is kept irregular for 6 months or beyond but less than 9
months, as Doubtful if for 9 months or beyond but less than 12 months and as Bad
and Loss if for 12 months or beyond.
Any Demand Loan will be considered as sub-standard if it remains unpaid for 6 months
or beyond but not less then 9 months from the date of claim by the bank or from the date
of forced creation of the loan; likewise the loan will be considered as Doubtful and
Bad and Loss if remains unpaid for 9 months or beyond but less then 12 months and
for 12 months and beyond respectively.
School of Business
38
In case any installment (s) or part of installment (s) of a fixed term Loan is not repaid
within the due date, the amount of unpaid installment (s) will be termed as defaulted
installment.
In case of Fixed Term Loans, which are repayable within maximum 5 (Five) years of time:
If the amount of defaulted installment is equal to or more than the amount of installment (s)
due within 6 months, the entire loan will be classified as sub-standard. If the amount of
defaulted installment is equal to or more than the amount of installment (s) due within 12
months, the entire loan will be classified as Doubtful.
If the amount of defaulted installment is equal to or more than the amount of installment (s)
due within 18 months, the entire loan will be classified as Bad and Loss.
In case of Fixed Term Loans, which are repayable in more than 5 (Five) years of time:
If the amount of defaulted installment is equal to or more than the amount of installment
(s) due within 12 months, the entire loan will be classified as substandard.
If the amount of defaulted installment is equal to or more than the amount of installment
(s) due within 18 moths, the entire loan will be classified as Doubtful.
If the amount of defaulted installment is equal to or more than the amount of installment
(s) due within 24 months, the entire loan will be classified as Bad and Loss.
Explanation: If any fixed term loan is repayable at monthly installment, the amount of
installment (s) due within 6 will be equal to the amount of summation of 6 monthly
installments. Similarly, if repayable at quarterly installment, the amount of installment (s) due
within 6 months will be equal to the amount of summation of 2 quarterly installments.
B. Qualitative Judgment:
If any uncertainty or doubt arises in respect of recovery of any Continuous Loan, Demand
Loan or Fixed Term Loan, the same will have to be classified on the basis of qualitative
judgment be it classifiable or not on the basis of objective criteria.
If any situational changes occur in the stipulations in terms of which the loan was extended or
if the capital of the borrower is impaired due to adverse conditions or if the value of the
securities decreases or if the recovery of the loan becomes uncertain due to any other
unfavorable situation, the loan will have to be classified on the basis of qualitative judgment.
Besides, if any loan is illogically or repeatedly re-scheduled or the norms or rescheduling are
violated or instances of (propensity to) frequently exceeding the loan limit are noticed or legal
action is lodged for recovery or the loan or the loan is extended without the approval of the
proper authority, it will have to be classified on the basis of qualitative judgment.
Despite the probability of any loans being affected due to the reasons stated above or for any
other reasons, if there exists any hope for change of the existing condition by resorting to
University of Information Technology and Sciences
.
School of Business
39
proper steps, the loan, on the basis of qualitative judgment, will be classified as sub-standard.
But even if after resorting to proper steps, there exists no certainty of total recovery of the loan,
it will be classified as Doubtful and even after exerting the all out effort, there exists no chance
of recovery, it will be classified as Bad and Loss on the basis of qualitative judgment.
The concerned bank will classify on the basis of qualitative judgment and can declassify the
loans if qualitative improvement does occur.
But if any loan is classified by the Inspection Team or Bangladesh Bank, the same can be
declassified with the approval of the Board of Directors of the bank. However, before placing
such case to the Board, the Managing Director/CEO and concerned branch manager shall
have to certify that the conditions for declassification have fulfilled.
The bank will have to inform such declassifications to the Department of Banking
Inspection/Concerned offices of Bangladesh Bank within 15 days of such decision taken by
the Board of Directors. Bangladesh bank will examine these matters on case-to-case basis and
if any irregularities/deviations is detected, necessary legal action will action will be taken
against the concerned officials.
Note:
a. Any change in classification criteria provided by the Bangladesh Bank shall supersede this
grading system for classified accounts.
b. Any account may also be classified based on qualitative judgment in line with Bangladesh
Bank guidelines.
c. A particular bank may have classification criteria stricter than Bangladesh Bank guidelines.
School of Business
40
Risk that counterparts will fail to meet obligation due to financial distress. This typically
entails analysis of financials i.e., analysis of leverage, liquidity, profitability and interest
coverage rations. To conclude, this capitalizes on the risk of high leverage, poor liquidity, low
profitability and insufficient cash flow.
b. Evaluation of Business/Industry Risk:
Risk that adverse industry situation or unfavorable business condition will impact borrowers
capacity to meet obligation. The evaluation of this category of risk look at parameters such as
business outlook, size of business, industry growth, market competition and barriers to entry/exit. To
conclude, the capitalizes on the risk of failure due to low market share and poor industry growth.
c. Evaluation of Management Risk:
Risk that counterparts may default as a result of poor managerial ability including experience
of the management its succession plan and team work.
d. Evaluation of Security Risk:
Risk that the bank might be exposed due to poor quality or strength of the security in case of
default. This may entail strength of security and collateral, location of collateral and support.
e. Evaluation of Relationship Risk:
These risk areas cover evaluation of limits utilization, account
conditions/covenants compliance by the borrower and deposit relationship.
School of Business
performance,
41
Weight
50%
18%
12%
10%
10%
Key Parameters:
Leverage, Liquidity, Profitability and coverage ratio.
Size of Business, Age of Business Outlook, Industry
Growth, Competition and Barriers to Business
School of Business
42
Security Risk
Relationship Risk
Key Parameters:
Leverage
Liquidity
Profitability
Coverage
Business/Industry Risk
Size of Business
Age of Business
Business Outlook
Industry Growth
Market Competition
Entry/Exit Barriers
Management Risk
Experience
Succession
Team Work
Security Risk
Security Coverage
Collateral Coverage
Support
Relationship Risk
Account Conduct
Utilization of Limit
Compliance of Covenants/Condition
Personal Deposit
Weight:
50%
15%
15%
15%
5%
18%
5%
3%
3%
3%
2%
2%
12%
5%
4%
3%
10%
4%
4%
2%
10%
5%
2%
2%
1%
School of Business
43
After the risk identification and weight assignment process (as mentioned above), the next
steps will be to input actual parameter in the score sheet to arrive at the scores corresponding
to the actual parameters.
This manual also provides a well-programmed MS Excel based credit risk scoring sheet to
arrive at a total score on each borrower. The excel program requires inputting data accurately
in particular cells for input and will automatically calculate the risk grade for a particular
borrower based on the total score obtained. The following steps are to be followed while
using the MS Excel program.
a.
Open the MS Excel file named, CRG_SCORE_SHEET
b.
The entire XL sheet named, CRG is protected except the particular cells to input data.
c.
d.
Input data accurately in the cells which are BORDERED & are colored YELLOW.
Some input cells contain DROP DOWN LIST for some criteria corresponding to the
Key Parameters. Click to the input cell and select the appropriate parameters from the
DROP DOWN LIST as shown below.
e.
All the cells provided for input must be filled in order to arrive at accurate risk grade.
SETP-6: ARRIVE AT THE CREDIT RISK GRADING BASED ON TOTAL SCORE OBTAINED
The following is the Proposed Credit Risk Grade matrix based on the total score obtained by
an obligor.
Number
Risk Grading
1.
Superior
2.
3.
4.
5.
6.
7.
8.
Good
Acceptable
Marginal/Watchlist
Special Mention
Sub-standard
Doubtful
Bad & Loss
Short Name
SUP
GD
ACCPT
MG/WL
SM
SS
DF
BL
School of Business
Score
100% cash covered
Government guarantee
International Bank guarantees
85+
75-84
65-74
55-64
45-54
35-44
<35
44
Credit Risk Grading will be completed for all exposures (irrespective of amount) other
than those covered under Consumer and Small Enterprises Financing Prudential
Guidelines and also under The Short Term Agricultural and Micro Credit.
School of Business
45
bank is only restricted to the recommendation/review of banks loan proposals. Credit approvals
are evidenced in writing and records whereof are kept in the file with credit proposals.
In approving credit proposals, all credit risks are authorized by the Officers/Executives under
their delegated business power. Pooling or combining of authority limits are not permitted. All
large loans, under single party exposure limits are sanctioned by the Executive Committee of
the Board, Aggregate of exposure of borrower/group is taken into consideration while
applying delegated authority. Any credit proposal, which does not comply with lending
guidelines, should be referred to HO for consideration. Any branch of lending authority by
any Officer/Executives should be reported to Managing Director, Head of internal Control and
compliance and Head of Credit. The Officer/Executives entrusted with approving loans
should have aptitude, training and experience to carry out their responsibilities effectively.
Credit approving executives should preferably have, reasonable working experience in credit
line (minimum 5 years), understanding (Training and Experience) of financial statement, cash
flow and risk analysis, knowledge of accounting, good understanding of local Industry/Market
conditions, trend and Industry/Business risk analysis, rationale of borrower, working capital
assessment technique, gushiness projections, CRG, loan structuring, documentation, overall
loan management, Approving executives should have the knowledge of the following areas:
Borrowing Causes.
Projections.
Loan Management.
A monthly summary of all new facilities approved, renewed, enhanced and a list of proposals
declined stating reasons thereof to be reported by Credit Division to the CEO/MD.
5.14 PROCEDURAL GUIDELINES OF CREDIT APPROVAL PROCESS
National Bank conducts is banking operation under branch banking system. For
administrative control and smoothening its day-to-day operation and extension of appropriate
and quick services, quick credit delivery, some branches have been placed under some
Regional offices. Responding to the requirement of customers in the state of lack of full
computerization facilities of the branches and on the banking facilities some credit
sanctioning powers have been delegated to the Branch Mangers and the Regional Mangers.
University of Information Technology and Sciences
.
School of Business
46
Credit proposals are generally originated at branch. However proposals may also be received
at Head Office for syndication and also from big clients, Financial Institutions.
At the branch level, the officers/executives of credit department will have full knowledge of
the policy and procedures of credit operations. The credit officers/executives after obtaining
credit applications through Branch Manger along with all required papers/documents ensures
sufficiency and consistency of the papers/documents. They will originate credit proposals,
prepare detailed credit memorandum after undertaking a thorough credit check and
conducting credit risk assessment of the client in light of credit policy Guidelines of the Bank.
The full documented Credit Memorandum (CM) will be placed to the Branch Credit
Committee by the in-charge of credit department. Credit committee after thoroughly and
critically examining the proposal will recommend it to the Branch Manager who will approve
credit under his delegated authority. When the proposal falls beyond the power of the Branch
Manger, it will be sent by the branch Manager to the Regional Manager with his
recommendation, Regional Manager will get the proposal critically examined by the credit
officers and recommended by credit committee at Regional Office and will approve under his
delegation of business power, if the proposal is found approval worthy.
When the proposal falls beyond Regional Managers power he will send it to Head Office,
Credit Division. Divisional Head, Credit will get credit and risk assessed by Credit officials.
The proposal being found acceptable will be placed to Head Office credit committee if the
proposal falls under the delegated authority of the Management. When the proposal will be
under the approval authority of the Executive Committee, the proposal, having been assessed
by the credit Officers/Executives will be placed to the EC, through Divisional Head, Credit,
DMD (credit) and the Managing Director, where the approval will be accorded. If a proposal
does not meet the basic lending criteria as per CRM guidelines and banking norms, it will be
declined and credit operations division will inform the decision to the branch accordingly.
Head office Credit Operations Division will keep credit files under proper control under and
its use will be restricted to the authorized officials only.
Flow Chart for Approval Process of Loans & Advances:
School of Business
Mandatory Checking:
Proposed Credit facilities are compliant of the existing banking regulations.
School of Business
47
48
Large loans are approved within the ceiling advised by Bangladesh Bank.
Fresh approvals, rescheduling, compromise agreement for large loan accounts are placed
for approval by the Brand as per Bangladesh Bank Guidelines.
Approval authorities check that pricing of the facilities are within the Banks
declared band.
Appeal Process:
Any declined credit will be represented to the next higher authority for reassessment/approval.
5.15 DISBURSEMENT
Before disbursement of the approved facilities, branch Credit Administration shall ensure that
the following steps have been properly followed:
a.
Approval has been obtained.
b.
Standard loan facility documentation including security documentation has been completed.
c.
Limit Creation & documentation Check List has been completed.
d.
Credit officer & Credit Administration officer of the branch has jointly signed
documentation checklist before disbursement.
e.
The approved terms and other requirements have been adhered to by the branch.
f.
g.
h.
i.
j.
k.
l.
m.
n.
In order to administer credit in a proper manner under the present institutional and
operational Set up, tasks of credit administration will be done in the following manner:
School of Business
49
1.
A copy of sanction letter will be sent by the credit sanctioning authority to HO Credit
Administration Division/Branch and Regional Office (as the case may be). Branch Credit
Administration on receipt of the sanction letter will complete full documentation and
formalities as per terms of sanction and send a compliance to HO credit administration
with a copy to Regional office along with a list of documents obtained. For exception of
full documentation, branch will mention in the compliance certificate about the
documentation, which could not be completed for genuine reasons and request credit
administration for allowing them to disburse, pending completion of those documents with
specific mention about time within which incomplete documentation will be completed.
2.
Head office credit administration will examine the sufficiency of the documentation. If it
is found that documentation have not been properly done, HO credit administration will
advise the branch to complete full documentation and confirm and disburse credit after
completion of documentation. Where branch seeks permission for disbursement keeping
some documents incomplete. HO, Credit Administration Division if considers such
exception acceptable, will issue authorization to disburse with the condition to complete
incomplete documentation within specific time limit.
3.
Branch credit administration will keep the documents under their strict control
preferably in locked fire proof storage and will ensure that all the terms of approval has
been complied where against drawing will be allowed.
5.16 CUSTODIAN
i.
ii.
School of Business
50
School of Business
51
An account that has risks or potential weakness of material nature, requiring monitoring,
supervision or close attention by the Management will be brought under Early Alter Process,
otherwise these weaknesses will result in deterioration or repayment prospects for the assets
or in the banks credit position at future date.
In order to keep an account on track, early Identification, prompt reporting and proactive
management of Early Alter Accounts will be placed under the responsibility of dealing credit
officials and must be undertaken on a continuous basis. An Early After Report shall be
completed by the Branch credit officers and sent to the HO Credit Administration for any
account showing signs of deterioration within 7 days from the identification of weakness.
Early Identification and prompt reporting of deteriorating credit sing to be done to ensure
quick action to protect banks interest. When an account will show breach of loan
covenants or adverse market rumors an Early Alter report should be raised. An Early Alter
Account, when shoes that the symptoms causing Early Alter classification has been
regularized, the account will be reclassified as a Regular account under the approval of
Credit Administration.
As part of Early Process the following Tasks will be performed:
i.
Control mechanism to be made more effective and where required to be devised, to
ensure that calls/inspections are made regularly on the clients and documented.
ii.
Regular inspections will be conducted to confirm that banks security/collateral
is secured.
iii.
Call/Early Alter Reports to be analyzed by branch and Head Office credit
administration to ensure that affairs of the borrower are being run on expected lines
and there are on material changes in the status of borrower.
iv.
Relationship Manager/credit officer shall regularly monitor the performance of the
clients business as well as repayment and shall prepare status report.
v.
Relationship Manger/credit officer shall prepare Early Alter Report with in 7 days
after identification of weakness and signs or deterioration.
School of Business
52
Follow up court cases regularly and ensure that necessary steps are taken for
early resolution.
Non-Performing Loan (NPL) Account Management:
As management of problem loans is a dynamic process, management strategy and
adequacy of provisions will be reviewed regularly. All NPLs shall be assigned to a
responsible official within Recovery unit (at Branch/Regional Office level) who will be
responsible for coordinating and administering the action plan/recovery of the advance.
Recovery Unit (Branch/Regional Office/Head Office), if required, will seek assistance
from HO Credit Division but the responsibility to recover NPL shall be with Recovery
Unit (Branch/Regional Office/Head Office).
Account Transfer Procedures:
The review and classification of credit facilities starts at credit Department of the Branch with
the Branch Manager and finally with head office credit division.
School of Business
53
CHAPTER SIX
CONCLUSION
6.1 STRENGTHS OF THE CREDIT PRACTICES OF THE NATIONAL
BANK LTD.
Quick disposal of cases (Time taken for commitment and disbursement of facility,
minimum Primary information requirement etc.).
Business potentiality (pay back ability from profit, determining the appropriate
percentage of fund requirement) is considered first.
Effective administration (distressed value of immovable collaterals are found out from
primary and secondary sources).
The bank has an excess capital of Tk. 405.45 million. The larger equity multiplier
exposed the bank to failure risk but it also indicates banks potential for high returns for
its stockholders.
The bank has branches in many places of the country. So they are taking the benefits of
economies of scale in some factors like using the excess deposit of one branch to fulfill
the credit facilities of another.
Its important branches have the facility of computer systems. Seven main branches are
operating under Local Area Network environment. Recently the National Bank Limited
has joined the group of local banks for introduction of Automated Teller Machine
(ATM), which is also very popular, convenient way to withdrawal of cash. ATM also
gives other facilities to the customers, as they can pay their electricity bills with the help
of this machine. As such, the low cost deposit increases.
They have many efficient employees, who have brought valued clients with them in the
bank fulfilling the mission of the bank.
The bank has a good reserve on its probations for default loans. So like other small
private banks it will not face much difficulty if default rate is a little bit higher.
School of Business
54
From 2004-2007, the recovery against the advances of the National Bank Ltd., Rajshahi
Branch is 100%. There is no bad loan during this time. So, to analyze the scenario, we can the
credit policy is working very well. However, I have got some weaknesses in this credit policy
for which the recovery share will hamper in future. For this reason, I have found out these
weaknesses and given some suggestions in the following.
The National Bank Ltd. does not have written recognized credit manual, although the
preparation process is going on at this moment.
Less promotional activities as to sponsor any aid program against calamity or to as in
the broadcasting media.
High cost of Fund, as non traded and not yet allowed to transact the government money
and as such the low cost fund is lesser.
The bank is not using its financial control effectively. As a result they are occurring high
operating costs in different segments.
The foreign currency exchange rate is quite high.
The industry analysis is not done as to identify the beneficial sector.
The practice of advance against non quasi security, at the moment is almost 80%,
whereas the 1st and 2nd generation banks experienced the possibility of failure is much
higher if advance exceeds 50%.
The Borrowers Credit worthy ness analysis, is so much liberal that mainly the business
is seen, others are not much considered even, may turn to a threat against credit in
future, though giving profit now.
School of Business
55
The bank should endeavor to bring the foreign currency exchange rate lower by more
foreign remittance through establishing foreign branches.
Credit is a scarce commodity, so matching between demand for and supply of credit.
School of Business
56
6.4 CONCLUSION
Every bank under NCBs and PCBs are following a systematic process regarding credit approval
process. These processes are almost same for the both banks because they are operated under the same
regulations. The entire credit of a bank is discussed briefly in below. Almost all banks under NCBs and
PCBs are following the same system in credit operations.
Since credit is a scare resource, its use has to be planned carefully so as to obtain optimum benefits. It
should tell about estimating first the total lend able fund that are likely to be available within the given
period of the individual banks and then allocating the same amongst various alternatives uses in
conformity with the guidelines issued by the central bank and priorities. It should have the following
objectives as Provide credit to right person, at right time and right quantity, Getting maximum return
from allocating credit in various purposes, Ensure the best alternatives of credit, Achieving declared
objectives such as providing credit to priority sector.
The loan officer must be convinced that customer has a well-defined purpose for bank credit and a
serious intention to lending. One the purpose is known, the loan officer must determine if it is
consistent with banks loan policy or not. Even with a good purpose the loan officer must determine
the borrower has a responsible attitude toward using the borrowed fund, the truthful in answering
the banks question and will make every effort to repay what is owed. The loan officer must be sure
that the customer requesting credit has the authority to request a loan and the legal standing to sign a
loan agreement. This customer characteristic is known as the capacity to borrow money. The loan
officer and the credit analysis must be aware of recent trends of borrower line of work and industry
and how changing economic condition might affect the loan. To assess industry and economic
condition most bank maintain files of newspaper clipping magazines articles, assessing the collateral
aspect of a loan request, the loan officer must ask, does the borrower possess adequate net worth
own enough quality assets to provide adequate support for the loan? The loan officer is particularly
sensitive to such feature as the age, condition and degree of specialization of the borrowers assets.
The last factor in assessing borrower credit worthy status is control, which centers on such questions
as whether changing in law and regulation could adversely affect the borrower and whether the loan
request meet the banks and the regulatory authorities standard for loan quality.
During the ninety days of Internship program at Rajshahi Branch, almost all the desks have been
observed more or less. This Orientation program, in first, has been arranged for gaining knowledge
of practical banking, giving more emphasis on credit approval process and to compare this practical
knowledge with theoretical knowledge. Comparing practical knowledge with theoretical involves
identification of strengths and weakness in the bank activities and contemporary banks and making
recommendations for improving the practices, Covering all the details of credit after orientation
with the bank in this short time is not possible. However, highest effort has been given to achieve
the objectives of the internship program.
School of Business
57
APPENDIX-A
QUESTIONNAIRE FOR BANKERS
These following answers were required as to know about other two banks, whose documents
cannot be seen by me.
Dear Sir/Madam
I am a student of University of Information Technology and Sciences(UITS) undergoing
internship training of BBA Program. As part of training, I am carrying out research on the
Credit Approval process of the National Bank Ltd. On answering the following questions will
be smooth conduct of the research. I assure you that all the information provided to me will be
utilized for academic purpose only.
1.
In analyzing the credit worthy ness (character, capacity, condition, cash, collateral and
control) of the client, when does your bank provides the facility?
Answer: a. 100% OK
b. 90%
c. 80%
d. 70%
e. 50% OK
2.
What is the minimum % of quasi cash security, you maintain against funded loan?
Answer: a. 80%
b. 60%
c. 40%
d. 200%
e. May be nil
3.
Among the Commercial Banks in your area, what is the position on your service
charge (including all expenses)?
Answer: a. Highest
b. Higher
c. Average
d. Lower
e. Lowest
4.
How much flexibility the Branch should enjoy in fixing service charges for efficient
Credit handling?
Answer: a. Full
b. With intimation
c. With permission d. Within range
e. Rigid.
5.
How much flexibility our Branch is enjoying in fixing service charges for efficient
Credit handling?
Answer: a. Full
b. Almost full
c. Partial
d. Reasonable
e. Not at all
6.
What is the position of foreign currency exchange rate for L/C of your Bank among
the Banks of Rajshahi area?
Answer: a. Highest
b. Higher
c. Averaged. Lower
e. Lowest
7.
What steps your Bank has taken to Lower the Foreign Currency exchange rate by
increasing reserve, among the followings?
Answer: a. Established Branch abroad
b. More Correspondent Banks
c. Increasing Trade
d. Effective hedging
e. No effort
8.
Now often do you carry out industry analysis for marketing and offering credit?
Answer: a. Quarterly
b. Bi-annually
c. Yearly
School of Business
d. Once in life
e. Never
58
Among the classified loans and "Tied-up Fund" of your Bank, majority was:
b. Trading
c. Construction
d. Transport
e. Service
Answer: a. Manufacturing
b. Trading
c. Construction
Your Name
:
Your Age
:
Your Education
:
Your Designation
:
Your Average Income :
Thank You for Your Cooperation
School of Business
d. Transport
e. Service
59
APPENDIX-B
QUESTIONNAIRE FOR BANKERS
Dear Sir/Madam
I am a student of University of Information Technology and Sciences(UITS) undergoing
internship training of BBA program. As part of training, I am carrying out research on the
Credit approval process of the National Bank Ltd. On answering the following questions will
be smooth conduct of the research. I assure you that all the information provided to me will be
utilized for academic purpose only.
2.
Why dont your go to other Bank of credit facility?
Answer: a. Best service
b. Better service
c. Good service
e. Long acutance
d. No reason
3.
For making L/C, what is the most important consideration for you?
Answer: a. Lower Foreign Currency exchange rate
b. Better service
c. Creating Loan facility.
4.
Which Industry is presently doing the best in your opinion?
Answer: a. Manufacturing
b. Trading
c. Construction
d. Transport
e. Service
5.
What sort of interest rate fixation in CCS loan repayment is preferred by you?
Answer: a. Lower but Flat rate
b. Higher on remaining but with risk premium
c. Highest on remaining but no extra charges
6.
For Composite loan facility, basing on which of the following you prefer to take
the credit?
Answer: a. Higher limit of Funded Loan for long time with higher interest rate,
b. Higher limit of Funded Loan for short time with higher interest rate,
c. Lower limit of Funded Loan for long time with higher interest rate,
d. Lower limit of Funded Loan for short time with higher interest rate.
University of Information Technology and Sciences
.
School of Business
60
7.
How does the Bank measure your non quasi cash securities against credit facility?
d. Distressed value
How much time was taken from your I" appearance, in getting the CCS credit facility
from the bank?
Do you think that the credit approval process of the National Bank Ltd. is lengthy than
the other banks?
Answer: a. Yes
b. No.
Your Name
Your Age
Your Education
Your Designation
School of Business
61
BIBLIOGRAPHY
www.nblbd.com
Altman, E. Valuating, Loss Reserves and the pricing of Corporate Bank Loans,
Journal of Commercial Bank Lending, August 1993, 8-25.
Berger, A. and Udell, G. Relationship Lending and Lines of Credit in Small Firm
Finance, Journal of Business, July 1995.
Berger, A. and Udell, Securitization, Risk, and the Liquidity Problem in Banking,
Structural Change in Banking, M. Klausner and L. White, editors, Irwin Publishers,
Illinois, 1993.
Furash, E., Organizing the Risk Management Process in Large Banks, Risk
Management Planning Seminar, Federal Financial Institutions Examination Council,
Washington, D.C., September 29, 1994.
School of Business
Format of a report.
1. Cover title page
2. Inside title page
3. Approval sheet
4. Declaration sheet
5. Acknowledgement /Preface
6. Abstract /Executive Summary
7. Table of contents
8. List of tables(if any)
9. List of figures(if any)
10. Context chapters
11. Bibliography
12. Appendix
School of Business
62