Internship Report

Credit Management of Janata Bank Limited

Jamil Mahmud
Roll no. 114893
Reg. no.1101324893

BBA- 6th Batch

Department of Management Studies
Faculty of Business Studies
Jagannath University

August, 2015
Internship Report

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Credit Management of Janata Bank Limited

Jamil Mahmud
Roll no. 114893
Reg. no.1101324893
6th Batch

Supervisor

Md. Rashedul hoque

Lecturer

Department of Management Studies

Faculty of Business Studies

Jagannath University

August, 2015

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 Supervisor’ Forwarding

………………………….

Md. Rashedul hoque

Lecturer

Department of Management Studies

Faculty of Business Studies

Jagannath University

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 Jagannath University, Dhaka.

Letter of Transmittal

Md. Rashedul Hoque Sajib

Lecturer
Department of Management Studies
Jagannath University

Subject: Submission of Internship Report.

Dear Sir,
This is my pleasure that I have completed my internship report and hereby ready to
submit my report on “Credit Management of Janata Bank Limited”.According to the
instruction I have worked on the actual loan operation & credit management of JBL. I have
really enjoyed the working environment of the Janata Bank Limited, Badda Branch. I have
tried my best to present all those things that I have experienced over there while preparing my
report.

I have thoroughly enjoyed the overall work during my internship period which is
carrying vast description of practical knowledge. This report along with all kinds of
necessary information regarding the internship is being submitted to you for your
evaluation. I sincerely hope that you will appreciate my effort.

Sincerely yours,

__________________
Jamil Mahmud
BBA 6th Batch
Department of Management Studies
Jagannath University

Acknowledgement:
Education involves not only reading books and doing exercise but also acquiring knowledge
through doing in practical. I prepared this report for considering these objectives. In this
period of time, I enjoyed warm co-operation from every person in the bank.
For the successful accomplishment of this report, first I would like to thank Almighty Allah.
And Finally I would like to thank to my honorable supervisor for this report Md.Rashedul
Hoque Sajib who has always given support, effort and wise direction to reach at the peak
level of effectiveness to complete my report.

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Additionally, with my warm gratitude from the deepest of my soul I would like to remember
all of them who have helped me from every aspect in accomplishing this report as well as my
internship program.
I also wish to render my grateful thanks to all senior and junior officers of Janata Bank
Limited, Badda Branch, who helped me during the time of my internship program at the
bank. I must mention the excellent working environment and the positive group behavior of
this bank, which helped me tremendously to observe the banking activities, work with the
them and to stay there for 45 days without any kind of uncomforted feel. I take this
opportunity to express my deep sense of gratitude, thanks and appreciation to the following:

1. Md.Rashedul Hoque Sajib, for her help, encouragement, Guidance and valuable
suggestions throughout the period of this study, without which it would not have been
possible to submit this report on time.
2. All the officers and staffs of the Badda Branch for their co-operation and assistance.
3. My friends who were beside me wherever they were needed
Finally, I would like to thank everyone at Janata Bank Limited, (Badda Branch) who provided me
with ideas and invaluable experience of the corporate culture.

Jamil Mahmud

ID- 114893

Department of Management Studies

Faculty of Business Studies

Jagannath University

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 Preface

As a part of the course curriculum, each student of the Business Administration of Jagannath
University has to accomplish a project work, which is to preparing an Internship report. In
order to face the challenges of the new millennium, there is no better sector for us than to
learn about the Banking system and its Activities. The report has been prepared on the basis of
Loan and advancement activities and the analysis of performance of the bank in a specific
financial year. I have prepared this Internship report on “Credit Management of Janata
Bank Ltd” which is one of the better positions within the bank .I tried my level best to learn
something during 3months internship period and prepared this report. The case study will play
a great role to teach us about the Bank and its rules, activities and practices in different field
and different sectors of the country.

Executive Summary

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Commercial banks lend money to different categories of borrowers for various purposes with a
view to generating revenue. Accordingly, while processing and appraising a loan proposal,
banks essentially analyze the information relating to borrowers, assess the purposes of
loan and determine the viability of the loan proposal. If the proposal is sound and safe for
lending, loan is sanctioned and disbursed. The report discusses about the management practices
of different credit facilities, approval process, monitoring and performances of the bank under
study. This report is categorized in seven different chapters. Firstly, the introductory of the
study. Secondly, overview of the organization. Thirdly, Concept of Credit Management. Fourth
portion of this report is Credit Risk Management Process. Fifth the classified loans and
Bangladesh Bank guidelines. Then the performance of Badda Branch JBL. Next discussion is
the analysis and findings about different variables of Credit facilities. At the end, the report
makes some valuable recommendations.

Janata Bank Limited is the second largest Government owned Bank. It operates credit facilities
for business purpose as well as welfare of the economy. Bank finance at the rural level at a
very low interest rate. It has also Special loan procedures for the rural farmers. This helps for
the development of the rural economy of the country. As a government owned bank, Janata
Bank Ltd. faces different problems for credit facilities. But still it has more transparent Credit
program than other government banks

BACKGROUND OF THE STUDY

After completion of all the credit hours of BBA program demands a report on practical
experience. Internship program is a must criterion for Bachelor of Business Administration

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(BBA) students, designed to put them in a challenging environment of the relevant field, where
the students get sample opportunity to apply their theoretical knowledge into practical
applications. During the internship training, students have the opportunity to adopt themselves
into the particular environment of the organization. It provides a unique opportunity to see the
reality of business during student life, which enables them to building confidence and working
knowledge in advance of the start of their career. To fulfill this requirement every university of
business arrange a program of internship. Here we get a chance to apply our theoretical
knowledge that we acquired from class lectures, books, journals, case studies, seminar, project,
workshop, etc and compare them with practical setting. As part of the internship program of
Masters of Business Administration course requirement,

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 Table of Contents:

Page
Topic
Number

CHAPTER ONE
INTRODUCTION
1.1 Origin of the study 9
1.2 Rationale 9
1.3 Objective of the Report 10
1.4 Scope of the study 10
1.5 Acronyms 11

CHAPTER TWO
PROFILE OF JANATA BANK
2.1 History of Janata Bank Limited 12
2.2 Corporate Profile of JBL 12-13
2.3 Board of Director 14-15
2.4 Mission of Janata Bank Limited 15
2.5 Vision of Janata Bank Limited 15
2.6 Values of Janata Bank Limited 15
2.7 Key Milestones of Janata Bank Ltd 16-18
2.8 Services Provided by Janata Bank Ltd 18-23
2.9 Hierarchy of position 23
CHAPTER THREE
METHODOLOGY
3.1 Limitations of the report 24
3.2 Methodology of the report 24

CHAPTER FOUR
CREDIT MANAGEMANT SYSTEM JANATA BANK LIMITED
4.1 What is Credit? 25
4.2 Credit Related Information of Janata Bank Limited, Badda
26
Branch:
4.3 Types of Credit Offered by Janata Bank Limited 27-30

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4.4 Credit Management System 30-34
4.5 Credit Risk Management System of JBL: 35-43
4.6 Special Credit Schemes of Badda Branch 44-48
4.7 Credit Evaluation Principles 48-49
4.8 Problems in Loan Recovery 49-51

CHAPTER FIVE
CONCLUSION & RECOMMENDATIONS
5.1 Findings of the Report 52
5.2 Recommendations 53
5.3 Conclusion 54
References 55
Bibliography 55

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 CHAPTER-ONE
(INTRODUCTION)

1.1 Origin of the Report

BBA program is designed with an excellent combination of theoretical and practical
aspects. As the classroom discussion alone cannot make a student perfect in handling the
real business situation, so it is an opportunity for the students to know about real life
situation through this internship program. This internship program provides the students to
link up their theoretical knowledge with practical fields. In this connection, I was assigned
to Janata Bank Badda Branch, Credit department for my practical orientation.
I am required to prepare an internship report under the supervision of our honorable teacher
Md.Rashedul Hoque Sajib on “Credit Management System of Janata Bank Limited” to
conduct a depth analysis on this subject matter. I have tried my level best to present my
experience of the practical orientation in this report.

1.2 Rationale:
Bangladesh is one of the developing country in the world. The economy of the country has
a lot left to be desired and there are lots of scopes for massive improvement. In an economy
like this, Credit Performance can play a vital role to improve the overall economic condition
of the country. The banks by playing the role of an intermediary can mobilize the excess
fund of surplus sectors to provide necessary finance, to those sectors, which are needed to
promote for the sound development of the economy.
This report is an effort to reflect a clear idea about the strategies, activities, and performance
of Bangladesh regarding Credit Performance Business.

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1.3 Objectives of the report

The objectives of the report are to determine how credit policy applied in sanctioning and
recovering loans and advances. Credit policy varies in terms of loan sector, status of the
organization, government policy, fiscal budget and guidelines etc.

Specific objectives:
To present an overview of Janata Bank Limited.
To measure the effectiveness of the bank in the utilization of available resources.

To assess the credit structure of the Janata Bank. Limited in practice.

To identify the recovery performance of Janata Bank. Limited.

To point out the problems in fund utilization and recovery thereon.
To make a critical reasoning in respect to the treatment of provision for bad and doubtful
credit.
To assess and highlight on the legal actions followed by the Janata Bank. Limited.
To find out the extent of similarities and dissimilarities in the course of action followed by
Janata Bank. Limited.
To compare the credit supervision of Janata Bank. Limited.

To find out problems and suggesting recommendations for further improvement.

1.4 Scope of the report

Janata Bank Limited is the second largest commercial Bank in Bangladesh. Janata Bank
Limited operates through 898 branches including 4 overseas branches. It is linked with 1239
foreign correspondents all over the world. I am assigned to learn practical knowledge from
Janata Bank Limited, at Badda Branch. In this study I would try to concentrate on the
theoretical aspect of credit management, that is, the definition of credit management, policy of
credit management, tools for managing credit etc. I would analyze the data on the bank and
various programs for loan recovery, problems in loan in loan recovery, pattern of loan
recovery and the performance of the bank under study in loan recovery, the information in
respect to the classification of unsound credit and provision thereon and also concentrates on
the performance of the bank. And finally I would conclude with the critical evaluation of the
credit management under the guidelines of the Bank Companies Act 1991, IAS#30 and a
discussion on the major findings and recommendations.

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1.5 Acronyms:
BB Bangladesh Bank
CRG Credit Risk grading
CRM Credit Risk Management
FDR Fixed Deposit Receipt
JBL Janata Bank Limited
L/C Letter of Credit
GM General Manager
DMD Deputy Managing Director
DGM Deputy General Manager

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 CHAPTER-TWO
(PROFILE / JANATA BANK LIMITED)

2.1 History of Janata Bank LTD

Janata Bank Limited welcomes you to explore the world of progressive Banking in Bangladesh.
It is a state owned commercial bank and is catering the need of the mass business people. It was
corporatized on 15th November 2007. Janata Bank was born with a new concept of purposeful
banking sub serving the growing and diversified financial needs of planned economic
development of the country. Our commitment and the people’s belief in us have given us the
edge over others to earn this trust about the safe keeping of their money in the right kind of
banking channel. Janata Bank Limited, one of the state owned commercial banks in Bangladesh,
has an authorized capital of Tk. 20000 million (approx. US$ 283.33 million). The total asset of
the bank in FY 2013 was BDT 586,083 million which was BDT 511,129 million in the previous
year. Net profit of the bank stood at BDT 9,551.39 million in the FY 2013 as against BDT
15,280.34 million net losses in the previous year. The deficit of capital of bank was BDT 20,117
million in the FY 2012 which has transformed into a surplus of BDT 908 million in the FY 2013.
As a result capital adequacy ratio rose from 3.70% to 10.27%. Janata Bank Limited operates
through 898 branches

2.2 Corporate Profile of Janata Bank:

Janata Bank Limited
Name :

Janata Bhaban 110, Motijheel Commercial Area

Registered Address :
Dhaka – 1000.
Date of Incorporation : 21 May, 2007
Authorized Capital : TK. 20,000 Million
Paid up Capital TK. 5,000 Million
Reserve TK.10823.01 Million
Retained surplus Tk. 5167.18 Million
Asset Tk. 345233.92 Million
Face value of per share TK. 100 per share
100% Share owned by the Government of
Shareholding Pattern
Bangladesh
Domestic Network:
Numbers of Branch 898
Numbers of Divisional Office 10
Numbers of Area Office 47
Numbers of AD Branches 57
Overseas Network:
Numbers of Branch 04

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Subsidiaries:
1. Janata Capital and Investment Ltd.
2. Janata Exchange Company
Numbers of Correspondent 1239
Number of Exchange House 68
Departments 38
Numbers of Employees 15,485
Banking License (obtained from 31 May, 2007 Bangladesh Bank)
Telex 675840 JBDBJ, 671288 JBHOBJ
9560000, 9566020, 9556245-49, 9565041-45,
Phone
9560027-30.
Fax 88-02-9564644, 9560869
E-mail md@janatabank-bd.com
Swift JANB BDDH
Corporate Rating Status

A+ in the long run :

AR-2 in the short run As Government owned
Entity Rating (2012) Bank : AAA in the long run : AR-1 in the short
run

2.3 Board of Directors:

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The Board of Directors is composed of 11 (eleven) members headed by a Chairman. The
Directors are representatives from both public and private sectors. The name and position of
directors are as under.
Chairman of the Board of Directors
Professor Dr. Abul Barkat
Members of the Board of Directors
Dr. Jamaluddin Ahmed, FCA
Mr. Md. Emdadul Hoque
Mr. Nagibul Islam Dipu
Dr. R M Debnath Syed Bazlul Karim, B.P.M.
Prof. Mohammad Moinuddin
Mr. Md. Abu Naser
Mrs. Sangita Ahmed
Prof. Dr. Nitai Chandra Nag
Mr. A.K.M Kamrul Islam, FCA
Mr. Md. Mahabubur Rahman Hiron
Mr. S M Aminur Rahman, CEO & Managing Director

2.4 Mission of the Janata Bank

1. To actively participate in the socio- economic development of the nation by
2. Operating a commercially sound banking organization.
3. Providing credits to viable borrowers.
4. Efficiently delivered and competitively priced credit for the viable borrower.
5. Simultaneously protecting depositor’s funds.
6. Providing a satisfactory return on equity to the owners.

2.5 Vision of the Janata Bank

To become effective largest commercial bank in Bangladesh to support socio-economic

development of the country and to be a leading bank in South-Asia.

2.6 Values of Janata Bank Ltd.

Janata Bank Ltd. holds the following values and will be guided by them as
they do their jobs.
 Creating an honest, open and enabling environment.

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  Have a strong customer focus and relationships based on integrity, superior
service and mutual benefit.
 Strive for profit & sound growth.
 Work as a team to serve the best interest of their owners.
 Relentless in pursuit of business innovation and improvement.
 Value and respect people and make decisions based on merit.
 Base recognition and reward on performance.
 Responsible, trustworthy and law-abiding in all that they do.

2.7 Key Milestones of Janata Bank Ltd.

International Awards
Recently The Bank has been recognized nationally and internationally for its
outstanding performance.
 Janata Bank Limited achieves '2013 Performance Excellence Award' by Citi
Bank N.A. Citi Bank N.A recently recognized Janata Bank Limited with '2013
Performance Excellence Award'. The awarding ceremony was held on 11 September,
2013 at the Head Office premise of the BankJanata Bank Ltd achieved this award
for solidifying leadership in the payment space.
 Janata Bank Limited won 'The Asian Banking & Finance Wholesale Banking
Awards 2013 & Retail Banking Awards 2013, awarded by Asian Banking and
Finance (ABF) Magazine, a concern of Carlton Media Group (CMG), Singapore.
Evaluating Janata Bank Limited's last year's performance in different fields
the magazine has judged JBL winner of three awards in two following
categories:
A. Asian Banking & Finance Wholesale Banking Awards 2013
i. Bangladesh Domestic Project Finance Bank of the Year
ii. Bangladesh Domestic Trade Finance Bank of the Year
B. Asian Banking & Finance Retail Banking Awards 2013
iii. Domestic Retail Bank of the Year Bangladesh

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  "The Banker"- a magazine of Financial Times Group, London ranked JBL in
its Global Ranking of Banks-2012 as follows:
i. Top 5 ROC, Asia pacific- 1st
ii. Top 25 top 1000 ontenders,Tier-1 growth- 4th
iii. Top 1000 Contenders by region, Asia Pacific- 7th
iv. Top 25 top 1000 Contenders, ROC -16th
v. Top 100 of the top 1000 Contenders-23rd
The Banker" selected winning banks based on their overall performance.
 Janata Bank Limited has been awarded 'Business Asia Most Respected
Company Awards-2012' by Business Asia. Business Asia has selected winning
banks based on Overall performance.
 ICMAB Best Corporate Award-2011: Janata Bank Limited has been awarded
ICMAB Best Corporate Award - 2011 by the Institute of Cost and Management
Accountants of Bangladesh. This Bank secured first position among the State
Owned Commercial Banks in Bangladesh.
 World's Best Bank Award-2009 in Bangladesh: Janata Bank Limited was awarded
Best Bank-Bangladesh in the Global Finance, World's Best Bank Awards, 2009
by New York based Financial Magazine "Global Finance". "Global Finance"
has selected winning banks based on number of criteria including growth in
Assets, Profitability, Strategic relationships, Customer Service,Competitive
pricing and innovative products.
 World's Best Bank Award-2008 in Bangladesh: Janata Bank Limited was awarded
Best Bank-Bangladesh in the Global Finance, World's Best Bank Awards, 2008
by New York based Financial Magazine "GlobalFinance". "Global Finance" has
identified winning banks based on number of criteriaincluding growth in Assets,
Profitability, Strategic relationships, Customer Service, Competitive pricing and
innovative products.
 Janata Bank Limited receives "Asian Banking Awards 2005" on Credit Scheme
for Handicapped People: The Awards were presented by the Asian Bankers
Association (ABA) and Bank Marketing Association of the Philippines
(BMAP) in the Asia Pacific Bankers Congress (APBC) 2005 on June 17, 2005 in
Manila, Philippines.

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  International Award -The Bank of the Year-2004 in Bangladesh Janata Bank Limited
has been awarded as 'The bank of the year 2004 in Bangladesh by the London
based Financial Magazine “The Banker of the Financial Times Group”. This is
for the second consecutive year that the Janata Bank Limited has been awarded
'Bank of the year'. Janata Bank Limited shows a remarkable progress in the year
2003. Its return on assets was 1.36% and return on investment was 6.47%
respectively. Janata Bank Limited is also emerging as the strong and innovative
bank within the country. The profile of its success is enriched by a package
of new qualitative product lines, prudent liability and assets management and
others. Most of the key financial indicators of the bank showed a very positive
improvement at the year ended December 2003.
 Janata Bank Limited receives "Asian Banking Awards 2004" on Financing
Program for Women Entrepreneurship. Financing program for Women
Entrepreneurship of Janata Bank Limited has highly been commended as a
Runner-Up in the Micro-Finance Product or Program category of the Asian Banking
awards 2004. The Awards were presented by the Asian Bankers Association (ABA)
and Bank Marketing Association of the Philippines (BMAP) in the Asia
Pacific Bankers Congress (APBC) 2004 on March 26, 2004 in Manila,
Philippines.
 Janata Bank Limited gets “The Banker Award-2003” The Banker, an International
Banking Magazine of the Financial Times group in London has selected Janata
Bank Limited as “The Bank of the Year, 2003” among all other banks in
Bangladesh. The Banker’s assessment for award is based on a number of criteria.
Besides core data and results, the criteria include key growth and performance
measures, the use of technology and particular achievement in the past and
overall strategy, it may be mentioned that Janata Bank Limited could achieve the
same award for the year 2001.

2.8 Services provided by Janata Bank

Janata Bank Ltd. offers all the major banking facilities and services to its customers.
The Bank with its network spreading throughout the country has a unique feature of
ploughing back savings from those places and then investing them into different loan
portfolios.

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Janata Bank Ltd. with its wide ranging branch network and skilled personnel provides
prompt and personalized services like issuing:
1. Demand Draft
2. Telegraphic Transfer
3. Mail Transfer
4. Pay Order
5. Security Deposit Receipt
6. Transfer of fund by special arrangement
a. Normal transfer
b. Electronic transfer through Ready Cash Card
7. Foreign Remittance Payment

Interest Facilities:
The Bank provides the following Interest facilities:
 Current/Savings/STD account status
 FDR account status
 Advance account status
 Loan account status
 NRB Accounts
International Banking
 Janata Bank Limited has already established a worldwide network and
relationship in international Banking through its 4 (four) overseas branches
and 1239 foreign correspondents.
 The bank has earned an excellent business reputation in handling and funding
international trade particularly in boosting export & import of the country.
 The bank finances exports within the frame-work of the export policy of the
country.
 It is one of the pioneers in promoting back to back Letter of Credit for the
RMG (Ready Made Garments) sectors.

Export Finance
 To boost up country's Export, Janata Bank Limited has been providing

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different kinds of assistance to exporters. Some of which are as below:-  Providing Pre-
Shipment and Post-Shipment Finance, Export Guarantee and
bonding facility etc.
 Concessional rate of interest for exports Finance.
 Back to Back L/C under bonded Warehouse facility
 Sight & Unasked L/C against Firm Contract for import of raw materials.
 Sight L/C under EDF
 Exporter's Retention Quota A/C both interest bearing and non-interest bearing.
 Export incentive Program.
 Banking at Export Processing Zone
 Scope for establishment of export oriented industry by 100% foreign
investment and by joint-venture
 The sole bank to disburse Government Export Promotion Fund against export
of computer software & data entry processing
 Undergone to an agreement with Bangladesh Bank to obtain fund from
Government EEF (Equity & Entrepreneurship Fund) to build up entrepreneur's
equity.
 Consultancy and advisory services by an expert group of officials.
 Special export financing program towards computer software data entry and
service export.
Export Trend of Janata Bank.
(Taka in Crore)
Year 2009 8,865
Year 2010 11,851
Year 2011 15,375
Year 2012 15,652
Year 2013 15,325
Source: Janata Bank Limited, Annual Report 2009-2013 (page 21)

Scope of Further Expansion

The Janata Bank Ltd. has the following scopes for further expansion in international
banking:-
 Software and data entry
 Jewellery

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 Frozen fish
 Dry & dehydrated fish
 Processed and semi-processed food fishes and shrimps
 Electrical and electronics item
 Toys and Luggage
 Fashion item
 Leather goods
 Stationary goods
 Diamond cutting and polishing
 Orchid
 Gift item
 Bamboo, Cane and Wooden furniture

Working Capital Loan

from EPB under Government Export Promotion Fund
(EPF),Government Equity and Entrepreneurship Fund from Bangladesh Bank
Working Capital Loan from Epb Under The Government Export Promotion
FundThe eligibility for obtaining this loan is:-Limited Company, Partnership or
Proprietorship firm having valid ERC and
members of BASIC or BCS.
Import Finance
Through quite a good number of Authorized Dealer Branches and 1198 nos. foreign
correspondents world wide Janata Bank Limited has been extending full range import
and relevant finance facilities.
Import Items:
 Fuel & Lubricants.al Machineries and Industrial raw materials.
 Intermediate goods.
 Consumer durable, spare parts and equipment.
 Consumer goods : Food & Food Grains, Baby food, Petroleum, CDSO
(Crude Degummed Soya bean Oil), CPO (Crude Palm Olin) Oilseeds, Cement
Clinker, Construction Materials, Fertilizer, Chemicals and many other goods
permissible by Import by Import Policy of the country.
Facilities Offered:

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Opening of L/C at competitive/ reasonable margin and commission
Interest at concession rate on import finance to the prime customers & interest rebate
facilities.

Import Trend
Setting Industrial vision to facilitate optimally, bank's involvement has been showing
sharp rising trend as under:
(Taka in Crore)
Year 2009 11,852
Year 2010 18,374
Year 2011 19,728
Year 2012 18,828
Year 2013 17,667
Source: Janata Bank Limited, Annual Report 2009-2013 (page 21)
Correspondent Banking
Janata Bank Limited always aims to increase its foreign exchange business The Bank
has been doing international banking with all major Banks of the world. It has been,
however, handling bulk of the international businesses with the following
multinational Banks:
i. Citibank N. A.
ii. American Express Bank Ltd.
iii. Standard Chartered Bank
iv. HSBC.
v. The Chase Manhattan Bank

Utility Services of Janata Bank Ltd.

Besides normal banking operation, Janata Bank Limited offers special services to a
large number of clients/agencies throughout the country. Under the network of utility
service, customers of different govt. organizations, corporate bodies, local bodies,
educational institutions, students, etc are continuously getting benefits from the Bank.
Janata Bank Limited's utility services are:

Bills Collection:
a. Gas bills of Titas, Bakhrabad and Jalalabad Gas Transmission and

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Distribution Companies.
b. Electricity bills of Dhaka Electricity Supply Authority, Dhaka Electricity
Company, Bangladesh Power Development Board and Rural Electrification
Board.
c. Telephone bills of Telegraph and Telephone Board.
d. Water/Sewerage bills of Water and Sewerage Authority.
e. Municipal holding tax of City Corporation/Municipalities.
f. A pilot scheme is underway to provide personalized services to our clients.

Payments made on behalf of Govt. to:

a. Non- Govt. teachers salaries
b. Girl Students scholarship/stipend & Primary Student Stipend.
c. Army pension d. Widows , divorcees and destitute Women Allowances
e. Old-age Allowances f. Food procurement Bills
Issuance of Television License:
The only Bank providing this service in Bangladesh

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.2.9 Hierarchy of position

AGM & Manager

EO & Operation Manager

General Banking Division Loans & Advances Division

Deposit

Remittance

A/C Opening & Others

Cash Department

Clearing Department

Accounts Department

The JBL has its Divisional Office, Local Office, Regional office and 83 branches in Dhaka,
and other regional office and other branches are held in another district in country. While the
full range of services is available at the headquarters, other branches offer specific services
appropriate for the location. The organizational structure of the Janata Bank operation is
depicted in the following figure:

CHAPTER-THREE
(Methodology)

3.1 Limitations of the report

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To prepare this report, I have faced some limitations, which are mentioned below.
• Limitation of time: It was one of the main constraints that hindered to cover all aspects of
the study.
• Lack of Secondary Information: The secondary source of information was not enough
to complete the report.
• Limitation of the Scope: Some confidential information was not disclosed by various
personnel of their respective department. Such as:

 In many case the relevant authorities are not helpful to provide information.
 Since the Bank personnel were very busy with their activities, they failed to co-
operate me to complete this report.
 The main difficulty of the study was insufficiency of current information relevant to
the study.
 Consolidated data related to the study were not given due to time shortage.
 Duration of the study was too short to find out the exact calculation from the
Employee.

3.2 Methodology of the report

This report is done mainly secondary source of data and some primary source.

 The Primary source are :

 Personal observation

 Desk work in different section, of the bank.

 Conversation with bank’s employees.

 Secondary Source:

 Annual report of Janata Bank Limited

 Variety of books, articles & journal related to banking.

 Information from the internet.

 Credit books, banking all credit documents.

CHAPTER-FOUR
(CREDIT MANAGEMANT SYSTEM OF JANATA BANK LIMITED)

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4.1 What is Credit?

The word credit comes from the Latin word “Credo” meaning “I believe”. It is a
lender’s trust in a people /firms or company’s ability or potential ability and intention
to repay. In other words, credit is the ability to command goods or services of another
in return for promise to pay such goods or services at some specified time in the future.
For a bank, it is the main source of profit and on the other hand, the wrong use of
credit would bring disaster not only for the bank but also for the economy a whole.
The objective of the credit management is to maximize the performing asset
and the minimization of the non-performing asset as well as ensuring the optimal point
of loan and advance and their efficient management. Credit management is a dynamic
field where a certain standard of long-range planning is needed to allocate the fund in
diverse field and to minimize the risk and maximize the return on the invested fund.

4.2 Credit Related Information of Janata Bank Limited, Badda Branch:

(Account Information)

Types of Account Number of Account Balance

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 Savings (Party A/C)
CD 380 52642354.26
SD 5575 451256.36
SND 14 2644375.94
Loan A/C
Party Loan A/C
CC 10 15919279.00
FDR 9 1015057.00
SOD 15 1293146.00
SBDS 21 6084340.00
Staff Loan
SHBL 6 35848066.00
SMCL 5 1096776.00
SCL 8 389885.00

4.3 Types of Credit Offered by Janata Bank Limited

Cash Credit (Hypothecation)
The mortgage of movable property for securing loan is called hypothecation. Hypothecation
is a legal transaction whereby goods are made available to the lending banker as security for
a debt without transferring either the property in the goods or either possessing. The banker
has only equitable charge on stocks, which practically means nothing. Since the goods
always remain in the physical possession of the borrower, there is much risk to the bank. So,
it is granted to parties of undoubted means with highest integrity.
Interest rate is 13%

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Cash Credit (Pledge)
Transfer of possession in the judicial sense of essential in the valid pledge. In case of
pledge, the bank acquire the possession of the goods or a right to hold goods until the
repayment for credit with a special right to sell after due notice to the borrower in the event
of non-repayment.
Interest rate is 13%.

Consumer Credit Scheme

This scheme is aimed to attract consumers from the middle and upper middle class
population with limited income. The borrower should have saving or current deposit
account with the bank. Minimum 25% of the purchase cost of the product is to be deposited
be the borrower with the bank is equity before the disbursement of the loan. The rest 75% is
to be kept as cash collateral (FDR, Shanchay Patra etc.) with the bank. Loan amount is
disbursed through a/c payee pay order/demand draft directly to the seller after submission of
the indent, deposit of client equity and completion of documentation formalities.

Loan (general)
JBL considers the loans, which are sanctioned for more than one year as loan (g). Under
this facility, an enterprise of financed from the stating to its finishing, i.e. from installment
to its production. JBL offers this facility only to big industries.

Working Credit
Loans allowed to the manufacturing unit to meet their working capital requirement,
irrespective of their size big, medium or large fall under the category.

Staff Loan
Bank official from senior officer and above is eligible for this loan. The maximum amount
disbursed is Tk. 50,000/- for a period of 2 years.

House Building Loan

This loan is provided against 100% cash collateral, besides; the land & building are also
mortgaged with the bank. Interest rate is 17% p.a.

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 Small Loan Scheme
JBL introduced three new small loan scheme are:
a) House Renovation Loan
b) Personal Loan
c) Small Business Loan

House Repairing/Renovation Loan Scheme

This loan is offered for renovation and modernization of the house/building/flat which are
acquired by inheritably or purchasing and other ways to make the properties liable and
durable.
Interest rate is 14%

Personal Loan for Salaried Person

This loan is provided to fixed salaried persons in various organizations to meet any
emergency cash needs at various events- treatment/operations of critical disease,
matrimonial, maternity expenditure etc. Interest rate is 10% p.a. and maximum credit
ceiling is Tk1, 00,000/-

Small Business Loan Scheme

This loan is offered to the small and promising entrepreneurs to meet their capital
requirement and enable them to operate and expand the business purposely.
Maximum credit ceiling is Tk 5.00 lac with interest rate is 10% p.a.

Loan against Imported Merchandise (LIM)

Advances allowed for retirement of shipping documents and release of goods imported
through L/C taking effective control over the goods by pledge fall under this type of
advance, when the importer failed to pay the amount payable to the exporter against import
L/C, than JBL gives loan against imported merchandise to the importer. The importer will
bear all the expenses i.e. the go down charge, insurance fees, etc. and the ownership of the
goods is retaining to the bank.
Interest rate is 16%

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Loan against Trust Receipt (LTR)
Investment allowed for retirement of shipping documents and release of goods imported
through L/C fall under this heard. The goods are handed over to the importer under trust
with the arrangement that sale proceeds should be deposited to liquidate the investments
within a given period. This is also a temporary investment connected with import and
knows as post-import finance and falls under the category “Commercial Lending”.
Interest rate is 16%

Payment Again Documents (PAD)

This facility originates payment of Import bills on lodgment of CLEAN shipping
documents received from FOREIGN correspondent against Letter of Credit opened on
behalf of the customers. This is an obligation which the bank shall extend strictly on the
merit of shipping document and which must conform to the terms & conditions of LC.

Loan documentary Bill Purchase (LDBP)

Payment made against documents representing sell of goods to local export oriented
industries, which are deemed as exports, and which are deemed as exports, and which are
dominated in local currency/foreign currency falls under this head. The bill of exchange is
held as the primary security. The client submits the stance bill and the bank discounts it.
This temporarily liability is adjustable from the proceeds off the bill.
Interest rate is 10%

Loan against Other Securities (LAOS)

Loan against other securities is a 100% secured advance, which requires no sanction from
the Head Officer. It is sanctioned by marketing lien of FDR, ICB Unit Certificate.
Interest rate is16%

4.4 Credit Management System

Getting Credit Information

Janata Bank collects credit information about the applicant to determine the credit
worthiness of the borrower. The bank collects the information about the borrower from

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the following sources:

 Personal investigation.
 Confidential report from other bank Head Office/Branch/chamber of the commerce.
 CIB Report from Central Bank.

Information Collection

The loans and advances department gets a form filled by the party seeking a lot of
information. The information is listed below:

 Name and address of the borrower (present and permanent).

 Constitution or status of the business.
 Data of establishment and place of incorporation.
 Particulars of properties, partners and Directors.
 Background and business experience of the borrowers.
 Particulars of personal assets, name of subsidiaries, percentage of share holding and
nature of business.
 Details of liabilities in name of borrowers, in the name of any directors.
 Financial Statement of the last three years.
 Nature and details of business/products.
 Details of securities offered.
 Proposed debt equity ratio.
 Other relevant information.

Analyzing these Information

Janata Bank then starts examination whether the loan applied for, is complying with its
lending policy. If comply, then it examines the documents submitted and the credit
worthiness. Credit worthiness analysis, i.e. analysis financial conditions of the loan
applicant is very important. If loan amount is more than 50, 00,000, then bank goes for
Lending Risk Analysis (LRA) and Spreadsheet Analysis (SA) which are recently
introduced by Bangladesh Bank. According to Bangladesh Bank Rules, LRA and SA are

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a must for the loan exceed of one crore. If these two analyses reflect favorable condition
and document submitted for the loan appeared to be satisfactory, then bank goes for
further action.

Lending Risk Analysis (LRA)

LRA is a very important and vital analysis for deciding whether the loan proposal is
potential or not. Many types of scientific, mathematical, statistical and managerial tools
and devices are required to perform this analysis. Janata Bank maintains a prescribed
format for Lending Risk Analysis, which includes a spreadsheet to analyze a lot of
things. It is not possible to discuss the entire LRA in this report.

Proposal Analysis

The Project Proposal is analyzed and decision about the project is taken. The loans and
advance department is responsible for the analysis. After preliminary appraisal of the
loan project the final approval is obtain from the manager. If the loan amount crosses a
certain amount (no found), managers send the loan project to the principal office for
final approval. The experts in principal office find out different projected ratios and
developed and understanding about the potentiality of the project. Bank evaluates a loan
proposal by considering, few predetermined variables. These are:

 Safety
 Liquidity
 Profitability
 Security
 Purpose of the loans
 Sources of repayment
 Diversification of risk etc.

The most important measure of appraising a loan proposal is safety of proposal. Safety
is measured by the security offered by the borrower and repaying capacity of the
borrower. The attitude of the borrower is also important consideration. Liquidity means
the inflow of cash into the project in course of its operation. The profit is the blood of
any commercial institution. Before approval of any loan project the bank authority has
to ensure that the proposed project will be profitable venture. Profitability is assessed

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from the projected Profit and Loss Statement. The security is the only tangible asset
remains with the banker. Securing of collateral is the only weapon to recover the loan
amount. So bank has to see that the collateral is easy to sale and sufficient to recover the
loan amount. Bank can not sanction loan by only depending on collateral.

The sources of the payment of the project should be a feasible one. During sanctioning
any loan Bank has to be attentive about diversification of risk. All money must not be
disbursed amongst a small number of people. In addition any project must be established
for the national interest growth.

Collateral Evaluation

Janata Bank is very cautious about valuation of the collateral. The bank officials
simultaneously evaluate the collateral of the party offered by the private firm. The
valuation of the collateral increases the accuracy of its value estimated. Three types of
value of the collateral are assumed:

 Current market price

 Distressed price
 Price after five years

The legal officers of the bank check the document ascertain their impurity.

Final Decision about the Project

If the loan decision remains with the branch level, that branch sanctions the loan and if
the approving authority is Head Office then the decision comes to the branch by telex or
fax.

Proper Supervision of the Project

If such provision is kept in the sanction contracts, the Janata Bank officials go to the
project area to observe how the loan is utilized. If no such clause to supervise the loan is
added, even then the bank can see the performance of the project.

Documentation of the Loan

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These are the most frequently used and common documents of above mentioned
charged and for other formalities for sanctioning the loan:

 Demand Promissory Note: Here the borrower promises to pay the loan as and when
demanded by the bank to repay the loan.
 Letter of Arrangement: Here the written amount of the loan sanctioned to the borrower
is specified.
 Letter of Continuity: It is used to take continuous facilities as providing continuous
securities.
 Letter of Hypothecation: It is the written document of the goods hypothecated thus to
put in case of need.
 Stock Report: This report is used for SOD and CC. In this report information about the
quality and quantity of goods hypothecated have furnished.
 Personal guarantee: It is the additional confirmation of the borrower to repay.
 Guarantee of the Directors of the company.
 Resolution of the board of directors: It is used to borrow the fund to execute
Documents and complete other documents.
 Letter of disclaimer: By this letter, the borrower withdraws his all claim on the
property/mortgaged.
 Letter of Acceptance: Letter indicating the acceptance of the sanction proposal by the
borrower.
 Letter of Pledge: It is the written document of the goods pledge thus the legality of
holding the goods.
 Letter of Disbursement: This is the document through which the payment of
sanctioned
loan indicates.
 Letter of partnership: In case of partnership firm, the partnership deeds are to be
provided.
 Letter of Installment: The amount of installment that is to be paid at certain intervals.
 Tax Paying Certificate.
 Any document if described, as essential in the sanctioned advice sanctioned by the
Head Office.

Creation of Charges for Securing Loan

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For the safety of loan, Janata Bank requires security from the loaner so that it can
recover the loan by selling security if borrower fails to repay. Creation of a charge
means making it available as a cover for an advance. The method of charging should be
legal, perfect complete. Importance of charging securities is as:
 Protection of interest.
 Ensuring the recovery of the money lent.
 Provision against unexpected change.
 Commitment of the borrower.

4.5 Credit Risk Management System of JBL:

The Credit Risk Management Division is vital for the efficient functioning of JBL. It
critically scrutinizes the credit proposals from risk weighted point of view before
sanctioning approvals ensuring a high quality credit portfolio. The goal of credit risk
management is to maximize a bank's risk-adjusted rate of return by maintaining credit
risk exposure within acceptable parameters. Banks need to manage the credit risk
inherent in the entire portfolio as well as the risk in individual credits or transactions.
The credit management process of Janata Bank Ltd. covers the following tasks:
 Credit Processing/Appraisal
 Credit Approval/Sanction
 Credit Documentation
 Credit Administration

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 Disbursement
 Monitoring and Control of Individual Credits
 Monitoring the Overall Credit Portfolio (stress testing)
 Credit Classification
 Disbursement of Loan
 Classified Loans
 Recovery of Loan

Credit Processing/Appraisal

Credit processing is the stage where all required information on credit is gathered and
applications are screened. Credit application forms should be sufficiently detailed to
permit gathering of all information needed for credit assessment at the outset. In this
connection, financial institutions should have a checklist to ensure that all required
information is, in fact, collected. Financial institutions should set out pre-qualification
screening criteria, which would act as a guide for their officers to determine the types of
credit that are acceptable. For instance, the criteria may include rejecting applications
from blacklisted customers. These criteria would help institutions avoid processing and
screening applications that would be later rejected. The next stage to credit screening is
credit appraisal where the financial institution assesses the customer’s ability to meet his
obligations. Institutions should establish well designed credit appraisal criteria to ensure
that facilities are granted only to creditworthy customers who can make repayments
from reasonably determinable sources of cash flow on a timely basis.
As a general rule, the appraisal criteria will focus on:

 amount and purpose of facilities and sources of repayment;

 integrity and reputation of the applicant as well as his legal capacity to

 assume the credit obligation;

 risk profile of the borrower and the sensitivity of the applicable industry

 sector to economic fluctuations;

 physical inspection of the borrower’s business premises as well as the

 facility that is the subject of the proposed financing;

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  current and forecast operating environment of the borrower;
 management capacity of corporate customers

Credit Approval/Sanction

A financial institution must have in place written process and the approval authorities
of individuals or committees as well as the basis of those decisions. Approval
authorities should be sanctioned by the board of directors. Approval authorities will
cover new credit and changes in terms and conditions of previously approved
credits, particularly credit restructuring, all of which should be fully documented
and recorded. Prudent credit practice requires that persons empowered with approval
authority should not also have the customer relationship responsibility.

Depending on the size of the financial institution, it should develop a corps of credit risk
specialists who have high level expertise and experience and demonstrate judgment
in assessing, approving and managing credit risk. An accountability regime should be
established for the decision trail of decisions taken, with proper identification of
individuals/committees involveAll this must be properly documented.

Graph 5: Net Profit (Figures in millions)

Source: Credit Risk Management Guideline, Bangladesh Bank (page 18)

Credit Documentation

Documentation is an essential part of the credit process and is required for each phase of
the credit cycle, including credit application, credit analysis, credit approval, credit
monitoring, and collateral valuation, and impairment recognition, foreclosure of
impaired loan and realization of security. The format of credit files must be
standardized and files neatly maintained with an appropriate system of cross-indexing to
facilitate review and follow up. The Bangladesh Bank will pay particular attention to
the quality of files and the systems in place for their maintenance. Documentation
establishes the relationship between the financial institution and the borrower and

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forms the basis for any legal action in a court of law. Institutions must ensure that
contractual agreements with their borrowers are vetted by their legal advisers.

For security reasons, financial institutions should consider keeping only the copies of
critical documents (i.e., those of legal value, facility letters, and signed loan
agreements) in credit files while retaining the originals in more secure custody. Credit
files should also be stored in fire-proof cabinets and should not be removed from the
institution's premises.

Financial institutions should maintain a checklist that can show that all their policies and
procedures ranging from receiving the credit application to the disbursement of
funds have been complied with. The checklist should also include the identity of
individual(s) and/or committee(s) involved in the decision-making process.

Disbursement

Once the credit is approved, the customer should be advised of the terms and
conditions of the credit by wa5y of a letter of offer. The duplicate of this letter should be
duly signed and returned to the institution by the customer. The facility
disbursement process should start only upon receipt of this letter and should involve, inter
alia, the completion of formalities regarding documentation, the registration of
collateral, insurance cover in the institution’s favor and the vetting of documents by a
legal expert. Under no circumstances shall funds be released prior to compliance with
pre-disbursement conditions and approval by the relevant authorities in the financial
institution.

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 Graph 6: Credit Disbursement Process

Source: Credit Risk Management Guideline, Bangladesh Bank (page 20)

Monitoring and Control of Individual Credits

To safeguard financial institutions against potential losses, problem facilities need to be

identified early. A proper credit monitoring system will provide the basis for taking prompt
corrective actions when warning signs point to deterioration in the financial health of
the borrower. Examples of such warning signs include unauthorized drawings, arrears in
capital and interest and deterioration in the borrower’s operating environment. Financial
institutions must have a system in place to formally review the status of the credit
and the financial health of the borrower at least once a year. More frequent reviews
(e.g at least quarterly) should be carried out of large credits, problem credits or when
the operating environment of the customer is undergoing significant changes.

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In broad terms, the monitoring activity of the institution will ensure that:

 funds advanced are used only for the purpose stated in the customer’s credit
application;

 financial condition of a borrower is regularly tracked and management advised

in a timely fashion;

 collateral coverage is regularly assessed and related to the borrower’s financial

health;

 The institution’s internal risk ratings reflect the current condition of the
customer.

Monitoring the Overall Credit Portfolio (stress testing)

An important element of sound credit risk management is analyzing what could

potentially go wrong with individual credits and the overall credit portfolio if
conditions/environment in which borrowers operate change significantly. The results of
this analysis should then be factored into the assessment of the adequacy of
provisioning and capital of the institution. Such stress analysis can reveal previously
undetected areas of potential credit risk exposure that could arise in times of crisis. Possible
scenarios that financial institutions should consider in carrying out stress testing
include:

 Significant economic or industry sector downturns;

 Adverse market-risk events; and

 Unfavorable liquidity conditions.

Financial institutions should have industry profiles in respect of all industries where
they have significant exposures. Such profiles must be reviewed /updated every year. Each
stress test should be followed by a contingency plan as regards recommended
corrective actions. Senior management must regularly review the results of stress tests and
contingency plans. The results must serve as an important input into a review of credit risk
management framework and setting limits and provisioning levels

Credit Classification

It is required for the board of directors of a financial institution to “establish credit

risk management policy, and credit impairment recognition and measurement policy, the
associated internal controls, documentation processes and information systems;”Credit
classification process grades individual credits in terms of the expected degree of
recoverability. Financial institutions must have in place the processes and controls to
implement the board approved policies, which will, in turn, be in accord with the
proposed guideline. They should have appropriate criteria for credit provisioning and write
off. International Accounting Standard 39 requires that financial institutions shall, in

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addition to individual credit provisioning, assess credit impairment and ensuing
provisioning on a credit portfolio basis. Financial institutions must, therefore, establish
appropriate systems and processes to identify credits with similar characteristics in order
to assess the degree of their recoverability on a portfolio basis.

Financial institutions should establish appropriate systems and controls to ensure that
collateral continues to be legally valid and enforceable and its net realizable value is properly
determined. This is particularly important for any delinquent credits, before netting off the
collateral’s value against the outstanding amount of the credit for determining
provision. As to any guarantees given in support of credits, financial institutions must
establish procedures for verifying periodically the net worth of the guarantor.

Classified Loans

Banks are financial service firm, producing and selling professional management of the
public’s funds as well as performing many other roles in the economy. But now-a-days
commercial banks are not performing their activities smoothly for a large burden of
default loan. Every year Janata Bank distributes thousand crore taka among individuals,
organizations etc. but a large sum of these distributed fund cannot be recovered in due
time. The Bank has to classify this loan.

 Signs for Classification: First and foremost requirement for any and all credit
managers is to identify a problem credit in its earlier stages by recognizing the
signs of deterioration. Such signs include but not limited to the following:
 Non-payment of interest or principal or both on due dates or past dues beyond a
reasonable period or recurring past dues.

 In case of Overdraft no movement in the account beyond a reasonable period.

 Deterioration in financial condition of the client, as gathered from client’s latest

financial statement.

 A shortfall in collateral coverage, particularly if the collateral was a key factor in the
decision-making.

 Death or withdraw of key-owners or management personnel.

 Company filing for bankruptcy or voluntary dissolution.

 Adverse market report about the company itself or its principal owners.

 Loan Classification Guidelines from Bangladesh Bank

Classification of overdue loans and advances opened a new era in the credit
management of commercial banks in Bangladesh. Before 1989 no specific guidelines were
followed by the commercial banks for this purpose. In 1989, Bangladesh Bank issued BCD
circular No.34/1989 stating specific rules and conditions of loan classification. After that

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each schedule banks except BKB, RAKUB, and BSB would be responsible for its own loan
classification according to the guidelines are presented in the following table:
Loan Classification Systems:

Table – 7 Loan Classification Systems

*Source: BCD Circular no. 34/1989

According to this circular loans and advances were classified on a loan by loan basis rather
sample classification. This process was continued till 1994. Bangladesh Bank further
issued a circular in1995 (BCD circular#20/1994). The title of the circular was “Revised rules
of classification and provisioning of loans and advances,” which came into implementation
from January 1, 1995.

 Summary of Loans and Advances with the Risk Status

The summary of loans and advances of Janata Bank Ltd. with the risk status is given below

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Table: Table 8: Summary of Loans and Advances with the Risk Status

Source: Janata Bank Limited, Annual Report 2009-2013 (page 119)

Recovery of Loan

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The Recovery procedure of Janata Bank is the ultimate combination of time, effort of money.
It follows several procedural steps to recover the lending amount, which is joint effort
of Bank, society and legal institutions. There are several programs taken by the bank to
recover the disbursed loans. They are discussed hereafter.

 Programs for Loan Recovery

When Janata Bank sanctions loans and advances to its customers, they clearly state
the repayment pattern in the loan agreement. But some credit holders do not pay their credit
in due period. The nationalized and private sector commercial banks have to face this
sort of problems. This situation is especially severe in Janata Bank. To overcome the
problem of overdue loan, the bank needs to take some particular loan recovery
programs. They are:

 Establishing credit supervision and monitoring cell in the bank

 Re-structuring the loan sanctioning and distributing policy of the bank

 Sanctioning loans and advances against sufficient securities as best as possible

 Giving more powers to the branch manager in credit management decision

 making process

 Offering a package of incentives to the sound borrowers

 Giving more emphasis on short term loans and advances

 Imposing restrictions on loans and advances for sick industries

 Taking legal actions quickly against unsound borrowers as best as possible

 within the period specified by the law of limitations.

Steps for Loan Recovery Against Defaulters

The following steps are taken by Janata Bank Ltd against the defaulters for recovery of loan:
Reminding the party to repay the loan after validity dates: First of all, the Credit
Administration division reminds the borrower about the remaining days to repay the loan
mentioning the validity dates from time to time.
i. Send final notice: If the borrower fails to repay the loan within the sanctioned period for
repayment then he or she is given an additional period for the repayment of the loan
attaching a final notice for the repayment as well.
ii. Send legal notice: When the borrower fails to repay the loan even after the
additional period and the final notice, the credit administration of JBL sends a legal notice to
the borrower mentioning that if he or she is not capable to repay the loan within a specific
time then the bank will file a suit in the court against him or her.
iii. Eventually sue a case against the party: Finally, the bank, not getting any
repayment from the borrower, suits a case against the defaulter according to the
respective law. Then the decision of the court will be final for the recovery process and both
the party and bank will have to abide by the law.

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These are the general procedures for recovery of loan followed by Janata Bank Ltd.

4.6 Special Credit Schemes of Badda Branch

A. Entrepreneurship Development Program:

1.Women Entrepreneurship Development Credit Program: Women Entrepreneurs

Development Scheme has been introduced to encourage women in doing business. Under
this scheme, the bank finances the small and cottage industry projects sponsored by
women. Interest rate is 10%. It is repayable in monthly installment within 3 years that star
from the 4th month after obtaining loans

2. Cyber Café loan: This type of loan is given to the trained youth in computer
technology in order to create employment opportunity for the unemployed trained youth
and expansion of information business in the country. Up to tk. 300000, no collateral is
required. It is given through personal guarantee at 10%.
3. Doctor’s Loan: Doctor Credit scheme is designed to facilitate financing to fresh
medical graduates and established physicians to acquire medical equipments and set up
clinics and hospitals and to create employment opportunity of Doctor’s possessing
certificate. Interest rate is 10%.

4. Small business development loan scheme: This scheme has been evolved especially
for small shopkeepers who need credit facility for their business. This credit facility is
given to the small business by third party guarantee that is acceptable to the bank at 11%
interest rate. It is to be repaid in 5 years in 60 monthly installments in case of term loan or
1 year in working capital. Besides, bank also extends credit facilities for the goat farming,
seed development program, forestry/horticulture Nursery, flower plantation & garden,
handicapped/disable people to make them self-reliant

B. Other special credit programs:

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1 .Credit for Employees: This type of credit is given to the employees of the bank to
meet up the emergency needs at 12% interest rate. Advance cheques of monthly salary are
considered as security that is repaid within 2 years in 24 installments.

2. Consumer Credit Scheme: Consumer Credit Scheme is related to relatively new field
of collateral free finance of the Bank. People with limited income can avail of this credit
facility to buy household goods including computer and other consumer durables. Interest
rate is 12% that is repaid between 1 and 2 years.

3. Personal Loan Scheme: Personal Loan Scheme has been introduced to extend credit
facilities to cater to the credit needs of low and medium income group for any purpose.
Government and semi-government officials, employees of autonomous bodies, banks and
other financial organizations, multinational companies, reputed private organizations and
teachers of recognized public and private schools, collages and universities are eligible for
the loan facilities.

4. Financing in IT Sectors: Today, we are living in the age of information that is Internet.
To accelerate the growth of information and expanding IT business in our country and to
attract young energetic in IT professions JANATA BANK has launched a new credit
scheme titled “Financing Computer Software Development & Data Export.” The
maximum loan amount is take. 10 million, with debt to equity ratio being 80:20. The rate
of interest is 10%. But anybody with export market exposure can get the benefit at 9%
interest rate. The main feature of this scheme is to set up industrial based IT projects for
development of software for data export. No collateral is required. if anyone wants to
show interest to provide collateral security, they will be given priority.

5. Car Loan Scheme: Car Loan Scheme has been introduced to enable middle-income
people to purchase Cars/SUVs/Jeeps. Governments and semi-government officials,
employees of autonomous bodies, banks and other financial organizations, multinational
companies, reputed private organizations, teachers of recognized public and private
universities and businessmen are eligible for the loan facilities.

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6. Gharoa Prokalpa: Performance of on going micro-credit programs has encouraged
Janata Bank authority to undertake a new product. ‘Gharoa Prokalpa’ which is a package
of facilities employment and retain them in the rural areas. It was launched on 25 th July
2000.

7. Financing of Industries: Janata Bank Limited entrusted with the responsibility of

developing industries within the frame work of Industrial policy of the Government of
Bangladesh and credit norms of Bangladesh Bank as well as by the Investment Board. If
the project is managerially, marketing Pont of view, technically, commercially and
financially viable, then Janata Bank Limited finances the project. Sponsors/companies
having prior experience in the related field are given priority.

Loan Limit: Janata Bank Limited may be financed up to Tk. 129.60 million in single
project a year. But if any project required above the limit, the project may be financed
under consortium/syndication arrangement with other financial institutions.

Rate of Interest: Rate of interest of project loan ranges from 11%-13%. Working capital
rate of interest is 12% to 13.50% and with that in export oriented industries ranges from
7% to 14%(changeable).

Debt Equity Ratio: Normally debt equity ratio is 50:50. But higher equity ratio sharing is
given preference. Above all, Bankers/Customers relation is also considered in fixing debt
equity ratio.

Repayment Mode and Period: 5 years to 10 years with 6-24 months grace period
inclusive of construction period. Project loan is repayable by half yearly installment.
Working capital loan and export credit are sanctioned for 1 (one) year and they are
renewable every year.

Security: The project land, building, machineries and others i.e. project assets are
considered as primary security against term/project loan. But if the project is to be set up
on rented premises, collateral securities is obtained minimum 1.3 times of project loan.

Sanctioning Authority: Janata Bank Limited, Head Office, Dhaka.

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8. Ready Cash:
Janata Bank Limited has entered into an agreement with American International
Investment (AII) to provide financial plastic card services to Janata Bank Limited’s
clients. This product is a“Debit Card” called the Ready Cash. Currently, the Ready Cash
system is operating in Dhaka and will soon be expanded to other urban areas of
Bangladesh. Cardholder’s primary benefits are Safety, Shopping at a wide merchant
network, Payment of Utility Bills, flexible saving plan and the convenience of not having
to carry cash. As the only micro-processor chip based debit card available in Bangladesh
for financial payment. It combines the most desirable aspects of the credit card, together
with the advantages of the Debit or ATM card. It is the first step that most Bangladeshi
citizens will take on the path to a cashless economy. Ready Cash is a debit card as it
allows the cardholder to spend no more money than he/she has in his/her Bank account –
unless a credit line Page 30has been extended.

9.Financing in SME Sector:

From the very inception of Industrial credit financing of Janata Bank (Currently Janata
Bank Limited) SME division has sanctioned term loan in small and medium industries
sector in 4535 projects of taka 941.36 crore. Among which taka 548.69 crore has been
disbursed against 4310 projects. Outstanding as 31.12.2007 is taka 446.12 crore and
recovery of loan is 70%.

10. Loan to Travel Agencies:

Eligibility : Annual business turnover should be satisfactory
Loan Sanction : On a case to case basis
Nature of Loan : CC (HYP).
Purpose of Loan : For running travel agency business
Rate of Interest : 15%
Security : Hyp. Of receivables/tickets, all office furniture and equipments
Collateral to be twice the value of the loan
Mode of repayment : Sale proceeds of tickets.
Duration of the Loan: One year

11. Loan to Diagnostic Centers:

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Eligibility: Annual business turnover should be good; the diagnostic centre should have
been set up as per Govt. health policy and this must be confirmed by the loanee.
Loan Sanction : On a case to case basis
Nature of Loan : CC (HYP).
Purpose of Loan : For running a diagnostic centre
Rate of Interest : 15%
Margin : 40%

4.7 Credit Evaluation Principles

Some principles or standards of lending are maintained in approving loans in order to keep
credit risk to a minimum level as well as for successful banking business. The main
principles of lending are given below:

Liquidity:
Liquidity means the availability of bank funds on short notice. The liquidity of an advance
means it repayment on demand on due date or after a short notice. Therefore, the banks
must have to maintain sufficient liquidity to repay its depositors and trade off between the
liquidity and profitability is must.

Safety:
Safety means the assurance of repayment of distributed loans. Bank is in business to make
money but safety should never be sacrificed for profitability, To ensure the safety of loan.
The borrower should be chosen carefully. He should be a person of good character &
capacity as well as bank must have to maintain eligible number of security from borrower.

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 Profitability:
Banking is a business aiming at earning a good profit. The difference between the interest
received on advances and the interest paid on deposit constitutes a major portion of the
bank income, Besides, foreign exchange business is also highly remunerative. The bank
will not enter into a transaction unless a fair return from it is assured.

Intent:
Banks sanction loans for productive purpose. No advances will be made by bank for
unproductive purposes though the borrower june be free from all risks.
Security:
The security offered for an advance is an insurance to fall bank upon in cases of need.
Security serves as a safety value for an unexpected emergency. Since risk factors are
involved, security coverage has to be taken before a lending.
National interest:
Banking industry has significant role to play in the economic development of a country.
The bank would lend if the purpose of the advances can contribute more to the overall
economic development of the country.

4.8 Problems in Loan Recovery

There are a lot of reasons for which the loan recovery of the bank is very defective.
In most cases, problems june be raised from sanctioning procedures of loan,
investigation of the project, and investigation of the loans etc. that is, the problem
in loan recovery proves the outcomes of the default process in loan
disbursement. The main reasons of poor loan recovery are categorized in four
broad types as follow:

 Problems created by government

The following problems are arisen by the government:

External pressure: Janata Bank Ltd. has also faced many problems in the loan recovery
process as a part of continuous pressure from various interested groups.

Loan to government organization: Janata Bank Ltd. is bound to sanction loan to

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government organization, though these are losing concern. For this reason, banks faced
problems in loan recovery.

Legal problems: Existing rules and regulations are insufficient to cover the legal aspects of
loan recovery. As a result, defaulters can get release easily from all charges against them.

 Problems created by the bank:

The following problems are created by the banks:

Lack of analysis of business risk: Before lending, Janata Bank Ltd. does not
properly analyze the business risk of the borrowers and the bank cannot forecast
whether the business will succeed or fail. If it fails to run well, the loan becomes classified.

Lack of proper valuation of security or mortgage property: In most cases, bank fails to
determine the value of security against the loan. As a result, if the loan becomes classified,
the bank cannot recover its loan through the sale of mortgage.

 Other general causes of poor loan recovery:

Apart from the specific reasons creating problems to recoup loan, there
exists some other general causes which have a great impact on creating the
problems which are faced by the Janata Bank Ltd. under study in the loan
recovery process. These are:

 Lack evaluation of technical and economic feasibility of the program.

 Credit is not allowed to actual entrepreneurs.

 Lack of proper supervision.

 Illiteracy of borrowers.

 Deterioration of the value system of the borrowers.

All of these reasons discussed above are general reasons for problems loan
recovery of Janata Bank Ltd. Besides these, there are some specific reasons
for loan recovery problems faced.

continuously by Janata Bank Ltd. They are as:

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  Loans are given under fictitious names and enterprise

 Loans are given without sufficient securities

 Approval of the loans in excess of the branch manager’s power

 Improper monitoring and supervision of credit

 Political misuse if loan programs operated by the public sector banks

Problems in loan recovery are the outcome of the default on loans

disbursements in the earlier period.

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 CHAPTER-FIVE
(FINDINGS, CONCLUSION & RECOMMENDATION)

5.1 Findings of the report

Every bank has its own credit procedure. Bank under study possesses a
standard credit procedure. As the objective of my study is to make a comment
on the credit management of Janata Bank Ltd, I try my best to collect data for
the study and find out the reality. Based on the data generated during my study
period I will sum up my findings here and I think this will help me to achieve
my objectives.
Janata Bank Ltd. has a significant role in long term project financing in both agriculture and
industrial sectors. Again JBL has a deep concern for rural farmers.
 Janata Bank Ltd. house building loan interest rate is high
 Private sector usually concentrates in the urban areas where as public sector i.e. JBL
spread their banking network all over the world.
 According to the standard and bank’s credit procedure, credit operation is started from
the customer application to the branch for the loan. But in most cases, many customers go
directly to the directors of the bank and directors send them to the branch offices
 Bangladesh Bank monitors all the policies of all the private and nationalized banks of
the country. According to the Bangladesh Bank’s strategy, all banks must possess
the standard policies which are designed by the central bank. Janata Bank Ltd. Also
possesses a standard credit proposal form. In that form all necessary information are
required to fill up. But in practice credit officers do not fill up the proposal form
properly. Most of the cases, they use assumption rather than exact figure. This practice
might end up with bad or classified one.
 JBL distribute loans without sufficient security in some cases. This is violation of the
Bangladesh bank order.
 JBL does not keep enough provisions against classified loans and advances.
 The credit management of JBL are not fully conformity with the guidelines
prescribed in the bank companies Act 1991 and International Accounting Standerd-
30(IAS-30)

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5.2 Recommendations
To improve the risk management culture further, Janata Bank Limited should adopt some
of the industy’s best practices that are not practiced currently. These are:
 Continuous monitoring of the customer should be conducted so that loan cannot be
classified.
 The bank should emphasis more on loan diversification like loans on different promising
sectors and newly invented thrust sectors in the economy.
 Political intervention should be avoided while approving and sanctioning loan.
 Every day the business environment is changing and so the risk. So the bank should be
developed as a dynamic organization to adapt with the changing circumstances.
 All the loan documentations have to done honestly. The bank should concentrate more
on proper documentation of all types of loans to make the department trustworthy &
healthy.
 The documents supporting the security against the loan have to be verifiedproperly by
the bank before sanctioning the loan.
 An Early Alert Account system should be introduced to have adequate monitoring,
supervision or close attention by management
 There should be a Recovery Unit to manage directly the accounts with sustained
deterioration. To encourage Recovery Unit, incentive program may also be introduced.

5.3 Conclusion
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I have discussed so far about the different aspects of credit management Janata Bank
Limited. For my report, I have selected Janata bank Ltd. JBL plays an important role
in the banking sector as well as in our economy. The success of a bank depends
largely on the efficient credit management. A successful credit management is not
only need for a bank’s own performance but also it is needed for the smooth
development of an economy. In any strategy of economic development, therefore, it
is essential to emphasize the evaluation of a sound and well integrated credit
management system from the view point of both resources mobilization and efficient
allocation of funds. In conclusion it can be suggested a number of recommendations in
order to overcome the problems and how to remove the causes of problem in
credit management.

1. Central Bank should take proper actions for ensuring equivalent distribution
of loans and advances.
2. Lending policies in our country should be geared to growth potential
rather than being determined by the pre-existing collateral.
3. House loan interest rate reducing.
4. The new entrepreneurs should be encouraged in disturbing loans and those
who have the records of regular payment, should be given preference.
5. It is observed that the defaulters generally get various sorts of exemptions as
declared by the regulatory authority.

References

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 1. Managing Core Risk in Banking: Credit Risk Management, Janata Bank
Ltd, Head Office, Dhaka.
2. Daily Financial Express ( Online Achieve)
3. https://www.bb.org.bd
4. http://www.janatabank-bd.com
5. Overview of Janata Bank: http://www.janatabank-bd.com/jb1.htm
6. Corporate Profile: http://www.janatabank-bd.com/Corporate_Profile.pdf
7. Credit Facilities and Programs: http://www.janatabank-bd.com/jb2.htm
8. Rural Banking Credit Programs: http://www.janatabank-bd.com/jb4.htm
9. Micro and Special Credit Scheme: http://www.janatabank-bd.com/jb15.htm
10. Annual Report 2012, 2013, 2014: http://www.janatabank-bd.com/finance2004.htm

Bibliography:
1.Managing Core risk in Banking by Janata Bank Limited.
2.Annual Report 2010, 2011, 2012, 2013, by Janata Bank Limited.
3.Training Manuel's for E O by Janata Bank Limited.
4.Credit policy of Janata Bank Limited by Janata Bank Limited.

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