Part -A

Internship Experience

1.1. Organization of internship:

I worked as an intern in Janata Bank Ltd. It is a govt. commercial bank. Among four government
commercial banks, it provides services in both extensive (with more than 900 branches throughout
the country) and intensive manner (with comparatively good financial position and corporate
governance). Here I will give brief description of my practical experience of internship program
at “Janata Bank Ltd”

1.1.2 Janata Bank Ltd

JBL was established immediately after the emergence of Bangladesh as an independent nation. It
was formed in 1972 by combining the resources, properties and funds of “United Bank Ltd” and
“Union Bank Ltd” of pre-East Pakistan. Currently it the second largest state owned commercial
bank in terms of deposit/asset.

Table-A.1: Description of JBL

Name Janata Bank Ltd

Legal Status Public Ltd Company
Sloan Your Committed Partner in Progress
Registered Address Janata Bhaban, 110, Motijheel Commercial Area Dhaka – 1000.
Position 2nd (Deposit/Asset)
Corporatization 15 November, 2007
CEO & MD Md. Abdus Salam Azad (F.F.)
Branches (Countrywide) 906
Branches (Overseas) 4
Subsidiary Janata Capital and Investment Limited, Dhaka
Janata Exchange Company srl, Italy
Janata Exchange Inc, USA

1|Page
 Employee 12,182
Authorized Capital BDT 30,000 Million
Paid up Capital BDT 19,140 Million
Share Ownership Fully (100%) owned by Bangladesh-Government

Source: Website of JBL

1.2. Description of the Place my internship: I was appointed as an intern in “Kawran Bazar
Corporate Branch “Janata Bank ltd”. I worked under the supervision Mr. Samiul Islam, Executive
officer (loan and advances) in this branch. Mr. Samiul Islam used to instruct me whatever I have
to do. Here a brief of the Kawran Bazar Corporate Branch of JBL.

Table: A.2: Description of the Internship Branch

Institution Janata Bank Ltd

Branch Kawran Bazar Corporate Branch
Location Wasa Bhaban, 98 Kazi Nazrul Islam Avenue, Karwan
Bazar, Tejgaon, Dhaka 1215

Tele phone 02 9111254, 9113778

SWIFT Code JANBBDDHKRN
Routing
Number 135262568

Source: Website of JBL

1.3 Job Description:

After joining in the branch as intern of the Branch I have met with Mr. Samol Bisiwas AGM of
Kawran Bazar corporate branch. After introduction with him I assigned an instructor Mr. Samiul
Islam, executive officer (loan and advance) under whose I have worked during my internship
period. I have done several jobs in this internship program. Though nearly all of them were simple,
clerical type jobs but I enjoyed them very much. Because this gave me the chance to embrace the
practical corporate world for the first time. I have done following jobs in Kawran Bazar Corporate
Branch of JBL.

2|Page
  Data Entry
 Account Opening
 Loan ad advance department

1.4. Job Duration

It was a 45-day-long (one and a half month) internship program in Janata Bank Ltd, Kawran Bazar
Corporate Branch. This includes all week days, weekends and all other govt. holydays. I attended
the bank for reasonable days.

1.5. Practical knowledge of internship:

I have learnt a lot of lesson from this internship program. Here, I will mention some of them, which
were valuable.

 This internship program gave me a golden opportunity of gaining first hand work
experience in the real business world. Before this, all I knew regarding banking business,
it was mere theoretical knowledge, which is more difficult to understand than the practical
world.
 : This helped me to apply the theoretical knowledge that I learnt in the class room, in real
life. It strengthened my theoretical knowledge and made me more confident than before.
 Account opening is a very common and basic function of banking business. Banks collect
deposit from customers by the means of this account. There are several types of bank
accounts. During this internship program I learnt a lot about account opening and other
aspects of different bank accounts in detail.
 For this internship program I have the opportunity to work with some highly talented, adept
bankers in our industry. Their valuable instructions, leadership motivated me to be a
business leader in real world.
 As banking business belongs to service industry, it requires the service providers to deal
with customers in a gentle, polite and humble manner. During the internship program, I
have to deal with different types of customers an it was very interesting to me.
 This program taught me how to manage a good relationship with customers. As the
customers are the prime concern of any business, especially for banking business I leant a
lot about this from the internship program.
 Punctuality and discipline are two basic features of the corporate world. It helped me to
attend any program timely and to do any task accordingly.
 I often had to communicate with my senior officers for different purposes. It helped me to
how to communicate with rigid senior which is very essential for any junior employees.
 We learn a lot about formality in class room, but it is not so much effective as we learn
only theoretically not practically.

3|Page
  I have work mainly in the credit management area as my research is related to credit
management. I have gain practical knowledge about to disbursed loan, what procedures are
follows in disbursing loan , what is the legal requirement of regulatory authority, how as
bank employee customer loan requests are scrutinized. It was great experience for me
because I have leant these issues theoretically in my commercial bank management Course.
So it was great opportunity for me know how the theoretical methods are applied in the
corporate world of Bangladesh.

1.6. Problems faced

I faced some problems also during this internship program. These problems are

 Kawran Bazar Corporate Branch of JBL has a very small office space. It facilitates
space for only a few compared to the number of customers visiting the branch every
day.
 Today’s corporate world is mostly computer and internet based. Without these facilities
it is quite impossible to work properly. There was extra computer facilities for the
intern. Most of the software used in Kawran Bazar Corporate Branch are back-graded.
It affects the efficiency of the bank to perform its jobs more accurately.
 Number of intern was more than the number of officials in Kawran Bazar Corporate
Branch of JBL. The branch has 10 officers and the number of interns were 12. This
affected the fair work environment.

 The banker in Kawran Bazar Corporate Branch normally give data entry using
traditional methods; such as writing in paper where other banks use up to date data
analysis software.
 Like any other govt. offices, JBL has also been suffering from complex, time
consuming problems. This affects the efficiency of the banker activity to the great
extent. The absence of this complex formality could have made it more profitable than
now.
 Young, fresh, energetic employees are less in Kawran Bazar Corporate Branch. Most
of its employees are aged. They are less adoptive to the modern technologies which
may increase its profitability and efficiency.

4|Page
 Part -B

An Analysis
Of
“Credit Risk Management of State
owned Commercial Bank in
Bangladesh”

5|Page
 Chapter -01
Introduction
1.1 Introduction
1.2 Background of study
1.3 Rationale of study
1.4 Research scope
1.5 Research objectives

1.1 Introduction
Banking sector is the driving force in the modern economy. All most all of the economic activity
related to the bank. Bangladesh is a developing country currently belongs to the top 11 emerging
markets’ list in the world. Banking sector is the key pillars of the economy of every economy
Bangladesh is no exception. Among 57 listed banks in Bangladesh, there are 6 state owned banks
where 4 are commercial bank 2 is specialized bank. Collecting deposit and giving loan is the main
function of commercial bank. But credit management of state owned commercial bank is not
satisfactory. Default loan and non-performing loan is increasing day to day. In the recent decades,
banking sector has experienced huge burden of non-performing loans which has huge impacts on
the banks performance. The increase of NPL the bank do business with others money so notion
about the bank is very important to ensuring the reliability one the basis of banking business. The
banking sector of our country is at risk due continuous default and non-performing loan. And when
there creates lack of trust the profitability and sustainability of banks are negatively influenced.
State owned banks have been the prime sufferers of this problem. Due to poor credit management
NPL loans increases which cause financial crisis and badly affect the profitability of the bank. The
confidence of the investors is reduced they perceived miss management in the banking sector. As
the banking sector Bangladesh is facing vulnerable time due to lack of proper management this
research is delivered on the credit risk management system of state owned banks in Bangladesh,
how credit risk is managed by state owned commercial banks in Bangladesh and how the credit
management practice in different state owned banks in Bangladesh affects its profitability.

1.2 Background of the Study

After completion of all the credit hours of BBA program there is a requirement for internship
program. Internship program is a must criterion for Bachelor of Business Administration (BBA)
students, designed to put them in a challenging environment of the relevant field, where the
students get ample opportunity to apply their theoretical knowledge in 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 our Finance department arrange
internship program for the BBA students. Here we get a chance to apply our theoretical
knowledge that we acquired from class lectures, books, journals, case studies, seminar, project,

6|Page
workshop, etc. and compare them with practical setting. As part of the BBA program requirement
I have work as intern at Janata bank kawran branch. During this internship period I have work in
different sector of bank work specially credit management department. On the basis of internship
experience I have prepared this research report. On this report I specially covered the credit
management practice by state owned commercial banks in Bangladesh and how this management
practice effect profitability of these banks.

1.3 Rationale of the Study

Bangladesh is one of the developing country in the world. The economy of the country has
achieved huge success in different sector including banking sector. There are lots of scopes for
massive improvement in different sector specially banking sector. Banking sector is like life
blood for every economy. For ensuring continuous development credit facility is very important
for developing country like Bangladesh. But side by side Credit Performance is very important
factor. 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 Bangladeshi state owned commercial banks regarding Credit
Performance Business. State owned commercial banks works as the bank of government of
Bangladesh which manage the overall development activities in Bangladesh. I think this analysis
ill help me to realize the credit management practice in state owned commercial banks and how
its management practice effect these banks profitability and its impacts on the economy of
Bangladesh. So I am interested to study credit risk management practice of state owned
commercial in Bangladesh.

1.4 Research Scope

The financial sector of Bangladesh encompasses the capital market, money market, banking
institutions, non-banking financial institutions and other specialized organizations. Among all
these participants in the financial market of Bangladesh, the credit management, the non-
performing loans of state owned commercial banks and what factors affect this non-performing
loan and how this non-performing loan effect profitability of these banks in Bangladesh will be
evaluated through this research work. This research work includes data of last nine years (2008-
2016) for convenience of work. There are many other sectors to be researched in the banking sector
but in my report only credit management is covered. Besides there are private banks which is big
part of banking sector not covered in this study.

7|Page
1.5 RESEARCH OBJECTIVES

Following objectives are intended to be achieved in the process of the research work on the analysis
of the non-performing loans in state owned banks in Bangladesh.

 To review the different credit facilities and services provided by state owned banks in
Bangladesh.
 To review the credit management process of state owned banks in Bangladesh.
 Different credit management strategy followed by different state owned banks.
 To review the credit performance of the state owned commercial banks in Bangladesh.
 To evaluate the factors contributing to miss management of credit in state owned
commercial bank.
 Reviewing the position of loan which is not performing well.
 How credit management effect the profitability of the state owned commercial banks in
Bangladesh.
 Reviewing the relative influence of different credit management factor on profitability and
regulation which is more crucial.

8|Page
 Chapter-02

Profile of state owned banks in Bangladesh

1. State owned banks in Bangladesh at a glance.

2. Management policy and services provided of Janata Bank LTD.
3. Management policy and services provided of Agrani Bank LTD.
4. Management policy and services provided of Sonali Bank LTD.
5. Management policy and services provided of Rupali Bank LTD.

2.1 State owned banks in Bangladesh at a glance:

Table 2.1: (Overview of the SCBs in Bangladesh)

Particulars Sonali Bank Janata Bank Agrani Bank Rupali Bank

D™¢vebx e¨vswKs I Your Committed to DËg ‡mevi wbðZv
committed
Slogan Avcbvi wek¦¯Ím½x serve the
partner in progress.
nation.
In corporation
17th May,
as public 15-Nov-07 15-Nov-07 14th December, 1986
2007
LTD.
Public limited Public limited Public limited Public limited
Legal status
company company company company
35-42,44
Janata Bhaban 110, 34, Dilkusha
Motijheel
Registered Motijheel 9/d, Dilkusha, Commercial Area,
commercial area,
office commercial area, Dhaka-1000. Dhaka
Dhaka,
Dhaka-1000 1000,Bangladesh
Bangladesh.
Motijheel, Dhaka, Motijheel,
Headquarters Motijheel, Dhaka Motijheel, Dhaka
Bangladesh Dhaka
Authorized Taka 2500
Taka 6000 crore Taka 3000 crore Taka 700 crore
capital crore
Paid up Taka 2072
Taka 3830 crore Taka 19140 crore Taka 276 crore
capital crore
Number of
18,806 12939 12672 4000+
employee
Number of 898 including 4
1212 935 563
branches overseas brances.
Md. Ataur Mrs. Luna Dr. Zahid Mr. Sayed Monjur
Chairman
Rahman. Shamsuddoha Bakht Hossain

9|Page
 Mohammad
Md. Abdus Salam Md. Ataur Rahman
CEO Shams-Ul-
Azad (F.F) Pradhan
Islam
SWIFT BSONBDDH JANB BD DH AGBKBDDH RUPBBDDH

Source: Websites of the banks.

2.2. Credit policy of JBL:

Janata bank has a credit policy to provide loanable fund to the large industry including in the
manufacturing sector, for example, textile, pharmaceutical, agriculture, food and son. Long-term
sector are prioritized in Janata bank that they can make a good amount profit charging a higher
rate of interest. Thus, they also expand their credit policy in especially in ling term including
medium and short term.

2.3. Products and services offered:

Table 2.2: (credit facilities of Janata bank LTD.)

Demand draft Telegraphic transfer Mail transfer Pay order

Security deposit Transfer of fund by One stop services* General credit line
receipt normal transfer and
electronic transfer with
ready cash
International banking Export financing Import finance Financing IT sector
Foreign remittance NFCD (non-resident RFCD (resident NITA (non-resident
foreign currency foreign currency investors taka
services
deposit account deposits) account)
WEDB ( wage earners Utility services Rural credit program
development bond)
Source: website of JBL

2.3.1. One stop services: JBL has been introduced first among the state-owned banks of
Bangladesh this salient services. The salient features of this system are as under.

 Customer can deposit and withdraw from a single account.

 There is token and scroll system that has been discounted.
 Customer is having permitted to have services from a single
account.
 Signature verification is quite easy for the customer that made
banking services more flexible.

10 | P a g e
2.4. Components required of sound credit policy:

 Each individual of the bank know precisely how much ad under what conditions, they
are authorized to approve for a loan request. Authorities are approved by the resolution
of the board of directors.
 Types of loan extension by the authorities are to be regarded. The authority will have
well known what types of loan are to be approved or not.
 Pricing is another important term for a bank. Bank is quite aware in pricing regarding the
customer satisfaction as well as profit of the bank.
 The bank defined its market area at which it will broaden its loan and business that will
maximize the profit. Thus, the bank tries to spread over loan and business in both urban
and rural area, corporate and industry, retail and corporate.
 Collateral and securities are maintained by the bank in a way of pledge, hypothecation
and lien as well as personal guarantee for highly sound customer.

2.5. Loan disbursement procedure:

Request from the client

Scrutinising and collection of information

Presentation of credit prosal

Approval of credit

Sanctioning of credit by considering terms and conditions

Disbursement of Loan

Credit Admistration

credit monitoring and classification

Taking legal action against delinquents clients.

Chart 2.1 (loan disbursement process of Janata Bank Ltd.)

2.6. Documentation of loan:

These are the most frequent and common forms of loan documentation and other formalities for
sanctioning of loan.

11 | P a g e
  Promissory notes that is maintained by the borrower where he/she promises to repay the
loan in due time.
 Letter of arrangement is the written amount of the loan sanctioned to the borrower.
 Letter of continuity refers to taking continuous facilities as provided to continuous loan.
 Letter of hypothecation refers to the written document of the goods that is hypothecated
when needed.
 Stock report explains that the hypothecated goods are recorded and the goods quality
cannot go below the mentioned standard.
 Resolution of the board of directors is also needed.
 Letter of disclaimer indicates that the borrower has withdrawn all claims on the goods
and property.
 Letter of acceptance includes the acceptance of the loan to the borrower.
 Letter of disbursement describes that the payment to the borrower has been made as
mentioned in the agreement.
 Such other documents as letter of partnership, letter of instalment, letter of pledge and so
on are needed here.

2.7. Recovery programs:

JBL bank states the pattern of repayment in the loan agreement, when they sanction loan to the
borrower. But some borrower do not repay the loan in due time. This severe, specially, severe
in JBL that creates an extra burden for the bank in making good performance. For this, the bank
needs to take appropriate loan recovery process.

 Establish credit monitoring and supervision department in the bank

 Having loan restructuring for loan sanction and distribution policy
 Providing loan to the creditworthy borrowers and with sufficient collateral
 Offering discount and packages to the sound borrower to encourage others
 Imposing restrictions in case of granting credits to the sick industries.

2.8. Credit policy of ABL:

Credit planning and policy denotes utilization of loanable funds efficiently that will help the
Bank to earn profit. Thus, Agrani bank tries to distribute the loanable funds in a way that will
help them to earn a minimum profit without having a greater extent of risk. Agrani Bank provides
concentration in both rural and urban sector and thus they make a good portfolio to earn profit.
As like other state-owned banks, Agrani bank provide loan in agriculture, textile, foods,
pharmaceuticals, leather and so on.

12 | P a g e
2.9. Products and services:
Table 2.3: (credit facilities of Agrani bank LTD.)

Consumer finance Over draft Home loan SME

Trade finance Electronic fund Lease finance Home loan

transfer
Interbank fund Utility services Online banking Web based check, TT
issue and payment
transfer services
systems
Locker services Inland remittance Agency services and
so on.
facilities
Source: website of ABL

2.10. Steps followed by bank in credit processing:

Request from the client

collectiing the credit of information of borrwer

Inestigating the payment capability of the borrower

Disbursement of Loan

credit monitoring and supervision

Chart 2.2: (credit approval process of ABL)

13 | P a g e
2.11. Credit risk assessment:

ABL follows the rules and procedure of Bangladesh bank guideline in sanctioning loan and thus
it assess the credit risk as mentioned by Bangladesh bank in the guideline. LRA package is
designed to estimate the risk in case of assessing risk when accepting loan.

Bangladesh bank has been directed all commercial banks to use LRA technique to evaluate the
credit proposal from the borrower to reduce risk of repayment where amount will be considered
up to 10 lakh.

However, ABL use the LRA package only at 5-lakh credit approval that the sanctioned will be
more secured. For evaluating credit risk by the bank, the LRA package divides the credit risk
into two categories namely, business risk and security risk.

Business risk:

Business risk refers to the risk assessed by the borrower due to the change of market condition
or other industrial factors that affects the business and the business can‟t generate the cash flow
enough to repay the loan to the lender in due time. Business cannot avoid tis types of risk but
they can reduce the risk up to a level.

Security risk:

Security is the main concern for each bank in the case of their value that assessed by the bank.
Before granting loan, security should be scrutinised whether they are enough to recover the loan
amount in case of default or inability to repay the loan. Bank will approve loan up to 75% of the
value of security that it can be able to recover the position when defaulted.

2.12. Recovery of loan:

ABL is effective in recovery of loan in compare to other state-owned banks in Bangladesh. The
following is taken by the bank in case of recovery of loan.
a) General steps:

 Preparation the list of borrowers

 Follow up personal approach
 Sending letter to the borrower
 Sending a notice to the borrower and guarantor

b) Steps from head office:

14 | P a g e
  Letters from head office and zone office
 Formation a team of expertise to recover the loan
 Issuance of circular and notice with some offerings

c) Rescheduling and restructuring:

 Rescheduling with block A/C

 Rescheduling with block A/C interest waving
 Rescheduling interest waiving and period extending
 Rescheduling by considering technical, management and marketing

2.13. Credit policy of SBL:

As a large bank in the country, the leader of all bank in Bangladesh, Sonali Bank provide
concentration in both rural and urban sector equally. In each year, a good amount of loanable
fund is provided to the agriculture sector purpose to develop the rural sector.

Sonali bank provides a wide range of banking services to the mass people including financial
services, trade and commerce, personal and commercial, cash management, treasury, custody
services and government treasury functions as the agent of Bangladesh bank. Sonali bank has a
greater influence in rural area development programme.

2.14. Products and services:

Sonali bank provides different types of personal and commercial services. Several products are
provided by the Sonali Bank.
Table 2.4: (credit facilities of SBL.)

Corporate banking Trade finance NGO-Linkage loan Rural and micro credit
Project finance Loan syndication Consumer credit Capital market
operation
SME finance Consumer credit Investment Special small loan
Remittance Foreign exchange Government treasury
dealing function

Lease finance International trade Money market

operation
Source: website of SB

15 | P a g e
There are several other products that are provided by Sonali bank including government treasury
bonds, locker services, A.T.M. card, utility bills, ancillary services and merchant banking.

2.15. Credit risk management:

Credit risk is the risk that one party of financial instruments will fail in discharging the liability
or obligations that the other party to suffer loss. Credit risk concentration arises from the several
counter party engagement, risky activities in geographical areas, changes in economic condition,
political situation and so on. To manage credit risk, a bank applies several rules and process that
will be able to minimize the credit risk.

Sonali bank has been introduced asset liability management (ALCO) that will determine the risk
exposure in a portfolio investment as well as determine the credit quality to minimise the losses.

Sonali bank also assesses credit risk before accepting proposal from the clients. They use the
following steps to assess the credit risk.

• Borrower analysis:
• Share holding
• Reputation
• Education
• Experience
• Net worth
• Age of relationship
• Industry analysis
• Risk factor pertaining to the industry
• Strength and weakness of the borrower in comparison to the
competitors
• Debt to equity analysis
• Historical financial analysis
• Project analysis

2.16. Sources of credit used by the banks to analyze the clients:

Sonali bank uses the following sources to have information to analyze the clients.

 Loan application
 Financial statement
 Study accounts
16 | P a g e
  CRG information
 Report form CIB
 Personal interview
 Site visit

2.17. Preparation of credit report, loan the process and loan documentation:

Sonali bank is the main role-playing in our economy that extends credit to the clients and thus
makes profit as well as participates in the development of the economy.

Documentation are applied in Sonali bank in two ways one is personal, such as credit worthiness
of the proposed borrower and the second is immovable property, such as FDR, shanchaypatra,
goods and commodities and so on. Thus, Sonali bank follow different steps in documentation
process that are described in the following.

Prepare list of that will be required for loan approval

Scrutinising Status of the borrower

collection of collateral and determining its market value

Eecution of the ahe loan approval decision

Credit Admistration

credit monitoring and classification

Chart 2.3: (credit approval process of SBL

2.18. Credit policy of RBL:

Rupali bank had established to have provided term and other financial assistance in small-scale
industry of Bangladesh and thus to provide an assistance in the development of small-scale
industry. According to its policy, the bank stated its article of association to provide loan around
50% of its total loanable funds in the small-scale industry. For their small-scale industry loan
concern, the following steps were taken.

17 | P a g e
  Expand the financial assistance to the small-scale industry including private and public
sector.
 Swell financial assistance to the micro-enterprise to develop the lower level economy of
the country.
 Undertake project promotion in the area to make profit.

2.19. Products and services:

Table 2.4: (credit facilities of RBL)

Overdraft Cash credit Cash Term loan

(hypothecation) credit(pledge)
Export cash credit Loan against Local bill purchase Payment against
imported documents
merchandise
Foreign bill purchase Locker services Consumer credit International banking
and so on
Source: website of RBL

2.20. Disbursement of credit: A proper disbursement procedure is required by the bank that will
increase the potentiality of loan to be highly secured and sound. The following procedure can be
followed in loan disbursement.

 The bank will require opening irrevocable letter of credit at the joint name of the bank
and the borrower.
 Disbursement of loan for foreign currency is made when irrevocable letter of credit is
established.
 The loan for local currency is made after borrower has present satisfactory result.
 The local currency loan has been might be disbursed in one or more instalment.
 The borrower must use the loan for which the advances are made.
 The borrower should be aware in using the fund of credit, especially to finance the cost
of the project.

18 | P a g e
 Chapter - 03

Research Methodology
3.1 Research Methodology
3.2 Research Design
3.3 Research schedule
3.4 Research Data
3.5 Research limitations

3.1 Research Methodology

Research methodology determines the models, approaches, methods and techniques that are used
throughout the research process (Goddard and Melville, 2011). In the research methodology, the
data collection process and the data analysis process are also stated. How the research work on the
analysis of the credit risk management of state owned commercial banks in Bangladesh will be
conducted. How this research is done is illustrated here in the methodology part.

3.2 Research Design

The design of a research work refers to the structure and process of a research work. There are
mainly two models of conducting research work that are inductive research approach and
deductive research approach. The inductive research approach is adopted when there is not much
information and studies available from earlier research works. To establish a new theory or to
develop an opinion in a new issue, inductive research approach is adopted (Jha, 2013). This
research work is started with the collection of information. After the processing of the information
through various analyses, a theory is developed. On the other hand, in the deductive model of a
research, the validity and relevance of theory in the current period is evaluated (Creswell and
Creswell, 2018). This research model starts with the selection of theory based on the research issue
and based on the data collection and analysis, the suitability of the theory is examined. As there
are many research works conducted by Bangladesh Bank, World Bank, State Owned Banks,
private banks, and other Non-Government Organizations, there are available data and theories on
this issue of credit management. So, deductive research model will be adopted in this research
work.

19 | P a g e
3.3 Research Schedule

I have a plan to complete the research work in a step by step process. I have planned to schedule
my research work according to the illustration in the following table-

Weeks 1 2 3 4 5 6 7 Remarks
Topic Selection
Proposal Writing
Proposal
submission
Article Search
Literature
Review
Draft Report
submission
Final Submission

3.4 Research Data

There are two types of research data that are generally used in all types of studies those are primary
data and secondary data. Primary data are collected directly from the respondents related to the
related issue (Jha, 2013). For this research report both primary and secondary data is used. In this
research work, the sources of primary data are the discussions with the managers of different state
owned banks. To collect primary data, direct communication with the loan takers and loan givers
is necessary. On the other hand, secondary sources of data are those are already collected by
different researchers and institutions. The data from Bangladesh Bureau of Statistics, Bangladesh
Bank, World Bank, and other researchers are the secondary sources of data. Secondary data must
be reliable and validated for which recent and trusted institutions’ data must be collected.
In the following data sources are shown-

The Primary source are:

 Personal observation
 Desk work in different section, of the bank.
 Conversation with bank’s employees.

20 | P a g e
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.
To review the credit management process of state owned banks in Bangladesh.

Different credit management strategy followed by different state owned banks.

3.5 Research Limitation

While completing this research work, I might encounter several problems those might inhibit the
process of the preparation of a flawless research work. First of all, I do not have any prior
knowledge of completing a research work as a result of which I am not a skilled researcher. I can’t
collect full range of data and to communicate with enough number of people and due to unwilling
of bank staff for being confidential data. I have very short time to compete this research work as I
am supposed to complete the whole research work within a specific period. I may also face
problems in delineate the research issue properly as I have little knowledge in the banking sector
of Bangladesh.

21 | P a g e
 Chapter-04
Literature Review

“State of governance in the banking sector” in Bangladesh is an article of Fahmida Khatun(

research director of CPD shown her analysis based on different quantitive and qualitative data.in
this research she tried to find out challenges confronting the banking sector of Bangladesh
specially state owned commercial banks. Hence, the main objective of his study is to examine how
far the SCBs performance indicators are credible and whether the state owned banks can fulfill the
demand of the emerging economy.

To fill her research objective she use (CAR, Asset quality, management quality, earning, liquidity
and sensitivity to market risks) as indicator. She use data from (20014-2012). The performance
data of state commercial banks is –
Table: 4.1 (performance of SCB’s in Bangladesh)

Parameter Ratios 2004 2006 2008 2010 2011 2012

Capital
adequacy CAR 4.1 1.1 6.9 8.9 9.5 11.16
Asset quality NPL to asset 25.3 22.9 25.4 15.7 14.1 12.8
Expenditure to
Management income 102.3 100 89.6 80.7 65.9 NA
Return to asset -0.1 0 0.7 1.1 0.6 0.75
profitability
ROE -5.3 0 22.5 18.4 10 11.72
Liquid asset % 22.8 20.1 32.9 27.2 27 NA
Liquidity
Excess liquidity 6.8 2.1 14.9 8.2 8.1 NA
Source: Research report of State of governance in the banking sector by of Fahmida Khatun
research director of CPD

By showing quantitative data she have concluded that though SCBs are doing well along with
others bank but these are grappled with the inefficiency and solvency problems. Thus the
performance of SCBs cannot remove the element of doubts about the real health them of general
people. So the SCBs are facing reliability problems.

Referring to the Hallmark scandal she said that due to poor supervision capacity, weak institutional
framework, weak internal control and risk management profitability of the SCBs Bangladesh is
started to decline. She identified some reasons behind inefficient management of the SCBs in
Bangladesh. The reasons identified by her is given below-
 Absence of risk management policy.

22 | P a g e
  Lack of internal control.
 Political baggage of board of directors.
 Inappropriate appointment of CEOs and senior officials.
 Shortcomings in the HR policy.
 Dualism in the regulatory mechanisms and regulator’s oversight.
 Lack of independent commission for regulating the SCBs.

A research is done by Abriman Das and Saibal Ghosh on “Determinants of credit risks in the
Indian state owned banks: and empirical investigation”. In their research they try to find factors
affecting problems specially SCBs by using macro and micro economic variables. According to
their research macro variable (GDP growth, real loan growth and bank size) play important role in
problem loan size. They show that after mid 1990s the financial crisis in Asia and elsewhere
occurred due to weak financial system and inadequate macroeconomic policies. Besides they
mentioned widely recognized fact for Asia’s banking system id the legacy of years of bad lending
practices which is fueled by inadequate supervision and regulations that led to rapid lending
growth and excessive risk taking.

Riyashad Ahmed in his article, titled with “credit management of Janata Bank ltd”, states the
credit performance of the bank using some theoretical analysis. Janata Bank has long-term
project financing in both agriculture and industrial sector. Thus, it seems that it has huge
concentration in rural sector and all over the country. The article described that the bank provides
house-building loan with a higher rate that is 17%. The collateral position is not secured enough
to recover the loan amount in case of default. Bank loan approval process is not good to recover
the loan. Sometimes they accept loan proposal without maintaining the Bangladesh bank
guidelines that prescribed in company act 1991 and international accounting standard
30(IAS30). For this reason, the problematic loan is increasing day by day.

Banik & Das (2015) conducted a research on “Classified Loans and Recovery Performance: A
Comparative Study between SOCBs and PCBs in Bangladesh” and found that Average
Percentage of Classified Loans are higher in Bangladesh compared to other countries. Government
has taken different initiatives to reduce this rate. Now trend of percentage of classified loans is
decreasing. But it is still of two digits.Lata (2015) conducted a research on ClassifiedLoan and
Profitability: The Case of State Owned Commercial Banks in Bangladesh and found that NPLs as
percentage of total loans of SCBs is very high and they holds more than 50 % of total NPLs of
the banking industry from FY2006 to FY2013. Moreover it is one of the major factors of
influencing banks profitability and it has statistically significant negative impact on Net Interest
Income of SCBs for the study periods.

23 | P a g e
 Chapter-5
Theoretical background

1. Credit.
2. Different types of credit facilities provided by commercial banks
3. Different types of risks faced by banks.
4. Credit risk
5. Types of credit risks.
6. Different types of credit facilities provided by banks.
7. Capital adequacy ratio(CAR)
8. Non-performing loan.
9. Non-performing loan ratio (NPLR)
10. profitability
11. Return on asset (ROA)
12. Return on Equity (ROE)

5.1. Credit: credit is a contractual agreement between borrower and lender to give some value or
resource for using certain period and repayment of these resource to the owner with interest after
maturity of contract. It is a liability for the borrower and asset for the lender.

5.2. Different types of credit facilities provided by commercial banks:

The facilities provided by banks can be divided from two perspectives. These are-

1. Funded facility: these facilities require direct investment of banks fund to the customers.
These types of facilities are-

Loan: this is the credit facilities of banks under which banks provided fund to the customer
which is repayable in a certain period.
Cash credit: it is a credit facilities where banks gives facility to borrow a certain amount
of money to the customer. Customer can use this facilities according to their need of funds
with minimum costs.
Others cash based facilities: Bill discounting, consumer loan, house loan, lease financing,
lease financing, import- export facilities etc.
2. Non- funded facility: is a credit facility where there is no direct outflow of fund to
borrowers own account rather to others on behalf of borrower. These type facilities are-
Letter of credit: when a buyer of a country wants to buy from the country than there create
reliability problem due to lack of proper introduction between them. So to facilitate
international banks provided special kind of facility by opening letter of credit in the favor

24 | P a g e
 of exporter and on behalf of importer. It is a most important non-funded facilitates provided
by banks to the customers.

Bank guarantee: It is an assurance provided by banks on behalf of customer to lender on

case of occurrence or non-occurrence of certain incidents banks will fulfill the contract for
which it gives assurance.

5.3. Different types of risks faced by banks:

Commercial banks faces different types of risks. The most significant risk are-

a. Credit risk.
b. Market risk
c. Operational risk
d. Business risk
e. Reputation risk
f. Systematic risk
g. Moral hazard risk.

Credit risk: credit risk is the most influential risk for the commercial banks. It is the risk that
arises from the inability to pay the required principal and interest payment by the borrower to the
lender. As commercial banks one of the main activity is lending it faces credit risk in large extent.

Hence, to minimize the credit risk on the bank’s end, the rate of interest will be higher for
borrowers if they are associated with high credit risk. Factors like unsteady income, low credit
score, employment type, collateral assets and others determine the credit risk associated with a
borrower. As stated earlier, credit risk can be associated with interbank transactions, foreign
transactions and other types of transactions happening outside the bank. If the transaction at one
end is successful but unsuccessful at the other end, loss occurs. If the transaction at one end is
settled but there are delays in settlement at the other end, there might be lost investment
opportunities

5.4. Types of credit risks:

Credit default risk – The risk of loss arising from a debtor being unlikely to pay its loan
obligations in full or the debtor is more than 90 days past due on any material credit obligation;
default risk may impact all credit-sensitive transactions, including loans, securities and derivatives.
Concentration risk – The risk associated with any single exposure or group of exposures with the
potential to produce large enough losses to threaten a bank's core operations. It may arise in the
form of single name concentration or industry concentration.

Country risk – The risk of loss arising from a sovereign state freezing foreign currency payments
(transfer/conversion risk) or when it defaults on its obligations (sovereign risk); this type of risk is
prominently associated with the country's macroeconomic performance and its political stability.

25 | P a g e
5.5. Credit management: The ultimate goal of commercial bank is profit. It can be increase either
by taking high risk or minimizing cost. Management of credit risk is very important because it
directly affect the profitability of the banks. Proper management of credit risk is important both
for policy makers and banks because financial stability of a country mostly depends on the banking
sector of a country.

5.6. Capital adequacy ratio (car):

Capital adequacy is the ratio capital to the total risk weighted assets. CAR measures the financial
stability of the banks. After the financial crisis 2007 caused by subprime mortgage CAR become
major issue in banking industry. Capital base of banks significantly decreases due to losses in
mortgages and mortgage related securities. To protect the banking sector regulatory authority
emphasize CAR ratio.
𝐓𝐢𝐞𝐫 𝐈 𝐜𝐩𝐢𝐭𝐚𝐥+𝐓𝐢𝐞𝐫 𝐈𝐈 𝐜𝐚𝐩𝐢𝐫𝐚𝐥
CAR = 𝐓𝐨𝐭𝐚𝐥 𝐑𝐢𝐬𝐤 𝐰𝐞𝐢𝐠𝐡𝐭𝐞𝐝 𝐚𝐬𝐬𝐞𝐭𝐬

Tier I capital is the banks permanent and available cushion against losses and ensuring its smooth
operations. It covers the banks ordinary share capital.

On the other hand tier II capital is called supplementary capital which covers the reserves for
various expenditures.

Risk weighted asset calculation is by following Basel I and Basel II guidelines. The total risk
weighted asset is determined by multiplying the capital requirement for credit risk, market risk and
operational risk.
Total Risk Weighted asset = Credit risk RWA + Market RWA + Operational Risk weighted asset.

5.7. Non-performing loan ratio (NPLR):

NPL is the aggregate amount of loan and advances upon which the borrower has not made
scheduled payment for at least 90 days. The NPL amount shows the soundness in the banking
sector. In the financial crisis 2007 many banks experienced huge loss on their credit portfolios.
This crisis increases the concerns on financial stability and the need of more control on lending
activities and institutions. Late is considered as NPL rather than defaulted if the borrower still in
business. Sometimes NPL is written off as default irrespective of borrower condition. In that case
100% of the defaulted loan is funded by bank’s capital.
Non−performing loan
NPLR = Total laon and advances

NPLR shows the soundness of banks by demonstrating the the quality of bank loans. The quality
of the bank loan is very important because it is one of the indicator banks major activities lending.

26 | P a g e
Commercial banks face huge risk exposures from its borrower. So quality credit risk assessment,
proper risk management and creation of adequate provision against bad and doubtful loans can
reduce the credit risks of banks. So NPLR is an effective tools for bank management to manage
the credit risk exposure.

5.8 Profitability: profitability is an indicator of how a company can generate new value and
resources to increase its assets and invested capital. The ultimate goal of commercial bank is profit.
It can be increase either by taking high risk or minimizing cost. Management of credit risk is very
important because it directly affect the profitability of the banks. Without ensuring sustainable
profit the business of banking can’t fulfilled specially commercial banks because it is their main
objective to exist. But the scenario of Bangladeshi state owned commercial banks is opposite.

5.9 Return on asset (ROA): Return on assets ratio indicators how the company is profitable
relative to its total assets. ROA indicates how efficiently the company can use its assets to generate
profit. Higher ROA indicates the more efficient use of assets than lower ROA Company. To sustain
in the competitive world ROA is an important factor. So every business entity should try to keep
it in certain level.
Net income befe tax
ROA =
Total assets

5.10. Return on Equity (ROE): Return on equity shows the income of investors on their invested
resources.it indicates how efficiently company can generate profit on the invested capital. It also
helps in making decision by considering riskiness of the company. If a company generate abnormal
profit without value generation than it indicates it is risky investment. So by observing this ratio
an investor and regulatory can take decision about the company. Every company should try to keep
it within certain level.
𝐧𝐞𝐭 𝐢𝐧𝐜𝐨𝐦𝐞 𝐚𝐟𝐭𝐞𝐫𝐭𝐚𝐱
ROE =
𝐬𝐡𝐚𝐫𝐞 𝐡𝐨𝐥𝐝𝐞𝐫 𝐞𝐪𝐮𝐢𝐭𝐲

27 | P a g e
 Chapter-06
performance analysis of banks

1. Trends of loan performance of SCBs in Bangladesh.

2. Credit Management position of SCBs in Bangladesh.
3. Interest income condition of SCBs banks in Bangladesh.
4. Profit trends of SCBs in Bangladesh.

6.1. Trends of loan performance of SCBs

Table 6.1: (Loan and advance performance of JBL)

Trends of loan performance of Janata Bank Limited(Tk. in crore)

2008 2008 2008 2008 2012 2013 2014 2015 2016
Total Loan
144678 166359 225732 257801 305340 285748 319773 349861 403037
and advances
Performing
127534 152322 210578 243458 252935 253981 282398 299640 343677
loan
NPL 17144 14037 15154 14343 52405 31767 37375 50221 59360
Source: Annual report of JBL

JBL is regarded as one of the largest bank in our country. The bad or good performance of the
bank has a large impact in our economy. However, loan default in recent few years makes a bad
impression of the bank that badly affect in the economy. From the NPL of this bank significantly
increased in 2012 and almost same figure in nest year till 2016.

28 | P a g e
 450000
400000
350000
300000
250000
200000
150000
100000
50000
0
2008 2009 2010 2011 2012 2013 2014 2015 2016

Total Loan and advances Performing loan NPL

Figure 6.1 : Loan and advance performance of JBL

After preparing chart it is more clear the flow total loan, performing loan, non-performing loan.
From the graph we see that total loan is almost in increased trends due growth of economy. On the
other the non-perming loan is significantly increasing after 2012. The reason behind that after the
financial crisis in 2010 the economy of Bangladesh faces tremendous challenge where created
liquidity crisis due to Bangladesh banks strict regulatory measures. Besides this Janata bank
limited faced huge default loan in 2011-2012 from Bismillah group scam. Bismillah group
defaulted to pay 1100 crore taka loan of 5 banks in Bangladesh where Janata bank is one of them.

So from the above table and figure of Janata bank limited shows that the loan performance of this
bank is not satisfactory in the recent years. To recover its image bank should comply more with
the regulation of Bangladesh and increase its loan performance efforts to avoid non-performing
loan.

Table 6.2: (Loan and advance performance of ABL)

Trends of loan performance of Agrani Bank Limited(Tk. In crore)

2008 2009 2010 2011 2012 2013 2014 2015 2016

Total Loan and
advances 11336 12224 16326 19409 21266 20297 23385 24323 26439

Performing loan 8787 9850 14224 17260 15886 16717 19419 19683 19635

NPL 2549 2374 2102 2149 5380 3580 3966 4640 6804
Source: Annual report of ABL

29 | P a g e
ABL, is one of the most prominent bank, provides to the both corporate and public sector loans
and advances that will help the country in economic development. ABL provides loan in a
concrete manner that makes it possible to have good performance over the previous few years.

30000

25000

20000

15000

10000

5000

0
2008 2009 2010 2011 2012 2013 2014 2015 2016

Total Loan and advances Performing loan NPL

Figure 6.2 : Loan and advance performance of ABL

From the graph we can see that as others SCBs Agrani bank LTD faced high non-performing loan
in financial year. Financial market is related to the overall economy. As banks performance
depends on the economic activity due to overall economic disaster it also faced high NPL though
in 203 and 2014 NPL was relevantly lower than 2012 it’s started to increase from 2015 again.

Table 6.3: (Loan and advance performance of SBL)

Trends of loan performance of Sonali Bank Limited(Tk. in crore)

2008 2009 2010 2011 2012 2013 2014 2015 2016
Total Loan and
231167 254023 286098 345991 378147 343451 339766 348444 386653
advances
Performing
192685 213541 240616 308424 304472 257014 253330 261594 284178
loan
NPL 38481.7 40481.7 45481.7 37567.7 73675.2 86436.6 86436.6 86849.7 102475
Source: Annual report of SBL

From the above table we see that Sonali bank disbursed huge amount of loan to the economic
activity of the country. The amount is higher than the others SCBs in Bangladesh. Sonali bank is
the largest bank in Bangladesh. The total loan is comparatively in financial year 2012-2015. In
2016 the total loan of this bank is significantly higher than the previous year. The NPL figure is
significantly higher in 2010 (45481.7 crore) than previous year 2009(40481.7) about 5000 crore
higher. The reason behind it faces a huge disaster due to poor credit management. This Hallmark

30 | P a g e
scam is not a disaster for the Sonali bank only but is a crisis of total banking sector and whole
economy.

450000
400000
350000
300000
250000
200000
150000
100000
50000
0
2008 2009 2010 2011 2012 2013 2014 2015 2016

Total Loan and advances Performing loan

NPL 2 per. Mov. Avg. (NPL)

Figure 6.3: Loan and advance performance of SBL

Fro the chart we can see that after revelation of the Sonali bank hallmark scam the NPL of this
bank is almost doubled in the financial year. As far, we know that hallmark group were engulfed
in a big scandal that badly influenced in the year 2012. Due to scandal, the bank was unable to
recover the situation after the situation has been happened.. This situation was as such a big
amount that makes vulnerable the bank in the upcoming years i.e. in the year 2013, 2014, 2015
and 2016 also.

The above chart also indicates the performing and non-performing loan amount in the several
years. From the year 2013 to 2016, there was constant performance in case of non-performing
loan volume as the bank followed strict loan acceptance policy. The also upgrade the loan
recovery situation following the hallmark scandal. Due to the strict lending policy, the
performing loan was quit high in the year 2013 after hallmark crisis in the previous year.

The present situation of lending policy of SBL must be upholder to minimize the amount of
defaulted loan. The bank should follow the following matter to upgrade the situation.

 The appointment of bank management body and other responsible person like
Branch manager should be properly supervised by Bangladesh bank.

 The bank should make concentration in good collateral system that will make the
possibility to recover the loan.
 The bank can follow the strict policy in case acceptance of loan amount, especially when
the loan is big that must be authorized by the top-level management to ensure the
capability of repayment.

31 | P a g e
  The borrower must be scrutinized with all possible information they have to ensure right
payment and to reduce the possibility of fraud.

Table 6.4: (Loan and advance performance of RBL)

Trends of loan performance of Agrani Bank Limited(Tk. in crore)

2008 2008 2008 2008 2012 2013 2014 2015 2016
Total Loan and
11336 12224 16326 19409 21266 20297 23385.5 24323.3 26439.1
advances
Performing loan 8787 9850 14224 17260 15886 16717 19419.5 19683.3 19635.1
NPL 2549 2374 2102 2149 5380 3580 3966 4640 6804
Source: Annual report of RBL

RBL bank makes good performance in case of providing loans and advances from the year 2012
to 2016. The bank’s recent performance indicates that it has a constant result on providing loans
and advances.
20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
2008 2009 2010 2011 2012 2013 2014 2015 2016

Total Loan and advances Performing loan NPL

Figure 6.4 : Loan and advance performance of RBL

The bank provides loan to the economy for the benefit of our rural sector as well as industrial
sector. The total loan figure constantly in upward trend. The performing loans and advances of
the bank moderately increased year by year due to the loan recovery system and good
management of the administrative body. The bank has a good collateral and security system that
makes the bank possible to perform well. But the recent performance of the bank in case recovery
in non-performing loan, the bank is in risky situation as the non-performing loan trends are
getting higher in the year 2016 that may be a concern in the upcoming days.

32 | P a g e
6.2.Interest income and Expenditure

Table 6.5: (Marginal Interest coverage ratio of SCBs)

Marginal Interest coverage ratio

2008 2009 2010 2011 2012 2013 2014 2015 2016
JBL 0.36 0.43 0.59 0.48 0.25 0.06 -0.06 -0.10 0.02
ABL 0.82 0.66 0.98 0.87 0.21 0.06 -0.89 0.03 0.04
SBL (0.06) 0.19 0.19 0.25 (0.07) (0.28) (0.31) 0.75 0.17
RBL 0.33 0.54 0.60 0.82 0.35 0.08 (0.08) (0.10) (0.11)
Source: Annual report of SCBs in Bangladesh
Less interest income than interest indicates more leveraged situation of an entity. In the above table
I have shown the increase or decrease of the interest income in comparison a standard ratio 1. From
the figure I see that the interest income is lower than the interest expense mostly after financial
year 2013 for every SCBs in Bangladesh. Sonali bank limited faces less interest income compare
other banks SCBs.

Marginal Interest coverage ratio

1.50

1.00

0.50

0.00
2008 2009 2010 2011 2012 2013 2014 2015 2016
-0.50

-1.00

JBL ABL SBL RBL

Figure 6.5 : Marginal Interest coverage ratio of SCBs)

From the chart we see that the interest income of SCBs was far more than interest expense before
2011. In 2012 interest income significantly lower than 2011 and in 2013 negative for the Rupali
bank LTD. In 2014 interest income is less than expenditure for the all SCBs. Due Bangladesh bank
regulation to not giving loan above certain threshold banks face problem to disburse loan as a
result the interest income less than the expenditure. After cooling the regulation for specific sector
Rupali bank able to improve its interest income by disbursing to small scale sector. The others
banks still struggling to improve its situation in interest income sector. More leverage is not good
for any company so banks should try to improve its loan recovery performance to get more flexible
regulations from the authority.

33 | P a g e
6.3.Credit Management position

Table 6.6: (CAR of JBL)

CAR
2008 2009 2010 2011 2012 2013 2014 2015 2016
Required 9.00% 9.00% 9.00% 10.00% 9.00% 10.00% 10.00% 10.00% 10.00%
JBL 10.45% 13.81% 9.19% 10.30% 3.70% 10.27% 10.30% 10.16% 10.69%
ABL 9.16% 10.80% 8.00% 11.00% -6.15% 10.00% 10.44% 9.54% 10.03%
SBL 10.90% 8.98% 10.80% 12.60% -0.94% 7.59% 12.24% 10.08% 10.33%
RBL -17.58% -8.68% 9.47% 11.13% 10.11% 5.34% 10.43% 9.94% 6.69%
Source: Annual report of JBL

14.00%

12.00%

10.00%

8.00%

6.00%

4.00% 2008 2009 2010 2011 2012 2013 2014 2015 2016
2.00%

0.00%

-2.00%

-4.00%

-6.00%

-8.00%

-10.00%

Required CAR JBL ABL SBL RBL

Figure 6.6: CAR of JBL (Source: Annual report of JBL)

The requirement for capital adequacy ratio is almost is the most influential tool for Bangladesh
bank to improve the credit performance of the banks. Bangladesh banks increase or decrease the
required capital adequacy ratio according to the market condition. CAR have direct influence on
the loan performance.

If we see in the figure 6.6 we that CAR of the Rupali bank in 2008 and 2009 (-17.58%, -8.68%) is
significantly lower than Bangladesh bank required CAR (9 %, 9%). If we see in the chart 6.4 we
see that the NPL performing loan is high in 2008 and 2009 for this bank. After 2010 Rupali comply
with the required CAR ratio side by side the NPL decrease by significantly low. If we see in figure
34 | P a g e
6.6 we see that CAR is lower than the required CAR on the other we seen in the chart 6.4 the non-
performing loan figure is significantly high for the all SCBs. So we can say that CAR is an
influential factor for loan performance of the banks.

6.4. Profit trends of SCBs in Bangladesh

Table 6.7: (ROA and ROE of JBL)

Janata Bank LTD.

2008 2009 2010 2011 2012 2013 2014 2015 2016
ROA 1.78% 1.96% 2.27% 2.02% -2.51% 1.81% 0.91% 0.95% 0.47%
ROE(after tax) 34.71% 21.51% 24.07% 14.74% -87.43% 25.73% 9.66% 9.70% 5.22%
60.00%

40.00%

20.00%

0.00%
2008 2009 2010 2011 2012 2013 2014 2015 2016
-20.00%

-40.00%

-60.00%

-80.00%

-100.00%

ROA(Before tax) ROE(after tax)

Figure 6.7 : ROA and ROE of JBL

From the above table and figure we can see sad that ROE of Janata bank LTD is more than ROA
almost every year except 2012. In 2012 the ROA is (-2.51%) and ROE is (-87.43). In this year the
ROE of the bank not only low but also it is far lower than the return on asset. It can be result of
fixed cost of the bank but lower income this year due financial sector turbulence of Bangladesh.
On the other hand if we see in the figure and table 6.5 we can see that interest income significantly
lower than the expense. As cost increased largely than income and tax payment the net income
after tax turns in to large negative figure.
Table 6.8: ROA and ROE of ABL

Agrani Bank LTD.

2008 2009 2010 2011 2012 2013 2014 2015 2016
ROA(Before tax) 1.54% 1.52% 2.42% 2.10% -4.92% 1.55% 0.35% -0.11% -1.20%
ROE(after tax) 41.22% 9.69% 22.39% 9.64% -259.6% 25.39% 5.03% 1.45% -19.0%

35 | P a g e
 ROA(Before tax) ROE(after tax)
100.00%

50.00%

0.00%
2008 2009 2010 2011 2012 2013 2014 2015 2016
-50.00%

-100.00%

-150.00%

-200.00%

-250.00%

-300.00%

Figure 6.8 : ROA and ROE of ABL

The loss in banking sector influenced almost all banks profitability In Bangladesh. Like others
SCBs in Bangladesh Agrani bank is far lower than previous years. The ROA and ROE are (-4.92%
and -259%). As the owner of the SCBs is government of Bangladesh the ultimate loss is
Bangladesh government. It impacts overall economy of Bangladesh.
Table 6.9: (ROA and ROE of SBL)

Sonali Bank LTD.

2008 2009 2010 2011 2012 2013 2014 2015 2016
ROA(Before tax) 0.27% 0.35% -0.34% 1.42% -3.75% 0.30% 0.63% 0.22% 0.28%
ROE(after tax) 3.99% 7.62% -2.60% 17.74% -111.7% 7.16% 10.16% 0.82% 2.25%
40.00%
20.00%
0.00%
2008 2009 2010 2011 2012 2013 2014 2015 2016
-20.00%
-40.00%
-60.00%
-80.00%
-100.00%
-120.00%
-140.00%

ROA(Before tax) ROE(after tax)

Figure 6.9: ROA and ROE of SBL

36 | P a g e
From the above table we see that the ROA and ROE is negative for the year 2010 (-.34% and -
2.60%). We know that Sonali bank faced a huge disaster of default loan from Hallmark groups
which turns the profitability of the banks into negative figure for this year. The loss in banking
sector influenced almost all banks profitability In Bangladesh. Like others SCBs in Bangladesh
Sonali bank is far lower than previous years. The ROA and ROE are (-3.75% and -111.7%). As
the owner of the SCBs is government of Bangladesh the ultimate loss is Bangladesh government.

So the ultimate goal of the bank is not fulfilled the recent performance of the banks. The loss of
SCBs are subsidized by the govt. to keep this bank on operation by recapitalization projects which
is ultimately the loss of the country people. If this money not have to subsidized it can be used in
development projects. One bank can’t run under this situation for long time so for fulfilling the
demand of time Sonali bank should try to improve the profitability of the bank.
Table 6.10: (ROA and ROE of RBL

Rupali Bank LTD.

2008 2009 2010 2011 2012 2013 2014 2015 2016
ROE 1.06% 1.90% 1.15% 1.75% 0.74% 0.52% 0.33% 0.36% -0.26%
ROE -10.70% -29.89% 4.24% 8.12% 10.42% 3.81% 3.29% 1.84% -10.58%
15.00%

10.00%

5.00%

0.00%
2008 2009 2010 2011 2012 2013 2014 2015 2016
-5.00%

-10.00%

-15.00%

-20.00%

-25.00%

-30.00%

ROA(Before tax) ROE(after tax)

Figure 6.10 : ROA and ROE of RBL

From the above table and figure we see that profitability is negative for the bank in 2008 and 2016
for Agrani bank limited. Rupali bank is exceptional than other banks where others SCBs face
losses in 2012 but Rupali banks maintain its profit trends. But recently Rupali banks loss due to
the bank has faced high amount of interest expenses.

37 | P a g e
Form the above discussion, it is clear that the state-owned banks of Bangladesh excluding SBL
are effective in maintaining leverage but they are quit inefficient in maintaining earning from
interest and using their assets and resources effectively. The state-owned banks of Bangladesh
made concern, as they cannot maximize of their profits using assets that is they are quit
ineffective in using assets and resources.

So to fulfill the objective of banking business SCBs should be careful about the proper
management of loan and advances and ensure a consistent profitability. The bank must be aware
using its assets and resources to maximize its profits. Due to lack of management efficiency, the
bank cannot use its resources that are going to be fall below the level of its profit. Management
should be aware in using sources of fund and uses of fund to have interest income from the
collected fund.

The performance scenario of SCBs is not satisfactory in Bangladesh. We see that credit
management and profitability is significantly related to one another. How significant this
relationship and the influence of on one another is justified in the following section by using
regression analysis.

38 | P a g e
 Chapter -7
Regression Analysis
1. Effects of credit management on profitability.
2. Rationale for choosing variable.
3. Research Model.
4. Application of research model
5. Interpretation of regression result.

7.1. Rationale of choosing variable:

The research of Ara , Bakavea & Sun’s research ( 2009, p.13) shown that, Basel regulations
requires minimum regulatory capital to the underlying risk exposures of banks, which means the
higher risk bank exposed requires higher amount of capital. This regulations indicates the
importance of capital management in risk management and compliance with relations is a sign of
risk management practice in bank. CAR seems to decrease the level of problems loans which
means higher CAR leads to lower credit exposure. Another research shown that “higher CAR
increase the interest of shareholder in managing bank portfolio” which generates “high cost of
intermediation and probability.
The study of Boudriga, Taktak & Jellouli (2009) shows CAR seems to decrease the level of
problem loans which means higher CAR leads to lower credit exposures.

There is close relationship between NPLR and credit risk. NPL to total loan and advances show
the efficient management of credit risk. NPLs are also involve the assessment of the role of
regulatory supervision on credit risk and show positive relationship.

According to salas and saurian(2002), the tendency of state owned banks to take riskier projects
leads to more favorable credits to small medium firms which encourage the development of
economy. But such risk taking behavior leads to higher level of NPLs. Some other researchers
examine the relationship between ROA and NPL and find negative relationship between them.
NPL also increase the probability of loss which requires provision. The amount of provision in
future subtracted from the profit. So high NPL increases the provision and so reduces the profit.

In summary the choice of CAR and NPLR as variable is based on the relevance and relationship
found in different previous empirical research. Car measures capital of banks which related to the
risk weighted credit exposure. It is also important factor of Basel regulations and so it is a crucial
factor that bank managers have to manage effectively to manage credit risk effectively.

On the other hand NPLR is closely related to the bank credit management which influence the
efficient management of credit risk. Thus using CAR and NPLR as research variable would be
reasonable.

7.2.Research Model:

39 | P a g e
 Figure 7.1: Research model

This research model is originally done for credit risk management of commercial bank specially
credit risk management. It is the main foundation which makes me interested in the study of
relationship between risk management and profitability.

To do this study I have to quantify credit risk and profitability to disclose the statistical
relationship.to do this I have two indicators for measuring credit risk ( CAR and NPLR) and two
indicators for profitability ( ROA and ROE ). After collecting the variable data I have tried to relate
this ratios with profitability of the state owned commercial banks in Bangladesh.

7.3. Application of the research model:

7.3.1. Data collection:
In my research I have tried to show the relationship credit management and profitability of
commercial banks. For convenience research I other limitations I have done this only for state
owned commercial banks in Bangladesh.

In order to do regression analysis, I need data for the variables (ROA, ROE, CAR and NPLR). For
this data I have collected this data from this banks annual reports. By using this collected data I
have calculate these ratio in Microsoft excel. I have done this only for this bank not on
consolidation basis.

7.3.2. Time horizon:

40 | P a g e
I have collected data from banks annual report of each state owned commercial banks. Not all
banks published their annual report for financial 2017. On the other hand annual report before
2007 is not available. As state owned commercial banks except Rupali Bank Limited are not listed
in Dhaka Stock Exchange required annual report data are not available. So due to this constraints
I have collected data (2008-2016).

7.3.3. Summary variable:

I have mentioned previously that I have chosen ROA, ROE, CAR and NPLR as a variable in my
study. ROE and ROA are dependent variables and independent variables are CAR and NPLR.
These variables are summarized below-
Table 7.1 :( Summary of regression variables)

Variable name Calculating Method

Dependent variable ROA Net income before tax/ total assets
ROE Net income after tax/ total Equity
CAR Total capital/RWAs
Independent variable NPLR NPLs/ Total loan and advances

From the First regression I have I have found credit management indicators (CAR and NPLR) are
significantly related to the profitability of state owned commercial banks in Bangladesh. So in this
section I have tried to show the total effects of credit management on the total profitability by
multiple regression analysis.

7.3.4. The regression equation are:

Y = a + B0X + B1X1
Equation 1: Profitability (ROA) = a + B1 (CAR) + B2 (NPLR)
Equation 2: Profitability (ROE) = a + B1 (CAR) + B2 (NPLR)

7.3.5. Hypothesis:
From the previous chapter discussion, literature review and other research findings it appears that
credit risk management of commercial banks has significant influence on the profitability. So the
topics become worthy to study. I will perform this analysis for the state owned commercial banks
in Bangladesh by using collected data from 2008 to 2016. I have summarized the indicator of credit
management and profitability in previous section. In the following I have developed hypothesis to
prove the relationship on statistical methods.

Hypothesis 1:

41 | P a g e
Null Hypothesis: There no correlation between ROA and CAR and NPLR of the commercial
banks.
Alternative hypothesis: There is a correlation between ROA and CAR and NPLR
HO: B1 = B2 =0
Ha: Ho is not true

These hypothesis if there any statistically significant between ROA and credit management
indicators (CAR and NPLR).

Hypothesis 2:
Null Hypothesis: There no correlation between ROE and CAR and NPLR of the commercial
banks.
Alternative hypothesis: There is a correlation between ROE and CAR and NPLR
HO: B1 = B2 =0
Ha: Ho is not true

These hypothesis if there any statistically significant between ROE and credit management
indicators (CAR and NPLR).

Hypothesis -1

Table 7.1: summary of regression of ROA and CAR, NPLR)

ROA
Banks
Ratios R2 F Coef. Std.Err. T sig. Overall sig.
CAR 0.275 -0.565 2.844 0.029
JBL 0.937 21.34 0.002
NPLR -0.222 0.493 -3.262 0.017
CAR 0.636 0.077 3.507 0.013
ABL 0.919 16.408 0.004
NPLR -0.432 0.082 -2.383 0.055
CAR 0.94 0.052 6.448 0.001
SBL 0.878 21.637 0.002
NPLR 0.013 0.033 0.087 0.934
CAR -0.926 0.031 -2.082 0.083
RBL 0.429 2.251 0.186
NPLR -0.793 0.041 -1.783 0.125

42 | P a g e
7.3.5.1 R2: Coefficient of Determination Analysis
Coefficient of determination, the higher R2 the more regression equation fits the data.R2 measures
the proportion of the variation in dependent variable that can be explained by the independent
variables. This normally ranges between 0 and 1.
In case of my first regression hypothesis regression R2 values are significant mostly in case of
JBL, ABL and SBL. So I can say that my regression equation is fit for analyzing the relationship
between dependent variable profitability (ROA) and independent variable (CAR and NPLR).

Table7.2: Coefficient of Determinant: R2

ROA
Banks
Ratios R2
CAR
JBL 0.937
NPLR
CAR
ABL 0.919
NPLR
CAR
SBL 0.878
NPLR
CAR
RBL 0.429
NPLR

Our model has a R2 of CAR and NPLR is .937, which means 94% of the variation in dependent
variable (JBL’s ROA) is explained by the independent variables (CAR). The remaining 7% is error
of the model. This means that these independent variables are highly dominant in Janata Bank’s,
but there are not the all. There are some other variables that have not been considered in this model.
As the R2 is 94% (more than 50%) the model is valid and significant.
This Model is valid for ABL by 92%, SBL by 88% and RBL is 43%.

7.3.5.2 Level of significance test:

Level of significant value important to accept or reject the hypothesis. The results of the analysis.
If the significance level is 5% and the p value lower than 5% than null hypothesis should bre
rejected. On the other hand if the p value is higher than 5% than null hypothesis accepted and
alternative hypothesis rejected.

43 | P a g e
 Table7.3: Level of significance test
ROA
Banks Overall
P
Ratios sig.
CAR 0.029
JBL 0.002
NPLR 0.017
CAR 0.013
ABL 0.004
NPLR 0.055
CAR 0.001
SBL 0.002
NPLR 0.934
CAR 0.083
RBL 0.186
NPLR 0.125

To be statistically significant the value of significant should be lower than the significance level
5%. In my regression model the p value is lower than significant level 5% for JBL, SBL and ABL
except RBL. The p value for JBL is 3%, ABL2.5% and SBL is .01%. So the null hypothesis is
rejected and alternative hypothesis is accepted. So we can say that there is significant relationship
between credit management and profitability of the commercial banks.

On the other hand p value for NPLR of JBL .017 which is acceptable as P> 5%. In case of ABL
NPLR is .05 is acceptable as P= 5%., In case of SBL NPLR is .93 which is not acceptable as P<5%.
In case of SBL NPLR is .125 which is not acceptable as P<5%.

7.3.5.2. Coefficient test: Coefficient value descript how change in 1 unit of impendent variable
effect the defendant variable. It is most important indicator how change in factor can change in
other factor. So it has profound implication in case of decision making.

Table7.4: Coefficient test

ROA
Banks
Ratios Coefficient
CAR 0.275
JBL
NPLR -0.222
CAR 0.636
ABL
NPLR -0.432
CAR 0.94
SBL
NPLR 0.013
CAR -0.926
RBL
NPLR -0.793

44 | P a g e
In the statistically significant regression results shows positive coefficient for CAR and negative
coefficient in case of NPLR. In case of JBL the coefficient for CAR is .275 which means if capital
adequacy ratio increase by 1 unit than ROA will be increased by .30. In case of ABL the coefficient
for CAR is .65 which means if capital adequacy ratio increase by 1 unit than ROA will be increased
by .65. In case of SBL the coefficient for CAR is .95 which means if capital adequacy ratio increase
by 1 unit than ROA will be increased by .95

On the hand coefficient of NPLR is negative which means if the NPLR ratio increased by 1 unit
the profitability of the will decrease. In case of JBL the coefficient for NPLR is -.22 which means
if capital adequacy ratio increase by 1 unit than ROA will be decreased by .22. In case of ABL the
coefficient for NPLR is -.43 which means if capital adequacy ratio increase by 1 unit than ROA
will be decreased by .43.

Null Hypothesis: Rejected in case of significant statistical relationship which occurred in of JBL,
ABL and SBL.

Alternative Hypothesis: Independent variables are significant to dependent variable. Accepted in

case of significant statistical relationship which occurred in of JBL, ABL and SBL.

7.3.5.3.Statistically insignificant results:

In case Rupali bank limited the statistical model is unfit. In case of RBL the value coefficient of
determination R2 is .429 which is not statistically significant as it’s lower than 50%. On the other
hand p value is .185 or 18.5% which is much more than the significant level 5%.

So we can say that we can’t find sufficient relationship between ROA and car and NPLR. Rupali
bank is exceptional than other state owned banks in as we see it in the previous chapter analysis.
Where other bank incur losses it make profit and vice versa.

45 | P a g e
 Hypothesis 02

Table 7.5: summary of regression of ROE and CAR, NPLR)

ROE
Banks
Ratios R2 F Coef. Std.Err. T sig. Overall sig.
JBL CAR 0.696 3.212 2.992 0.024
0.779 10.604 0.011
NPLR -0.277 2.259 -1.19 0.279
ABL CAR 0.92 2.208 7.085 0.00
0.959 34.786 0.082
NPLR -0.079 2.371 -0.607 0.57
SBL CAR 0.947 1.4 6.541 0.001
0.938 21.983 0.002
NPLR 0.045 0.901 0.314 0.764
RBL CAR 0.889 0.486 2.91 0.062
0.565 3.891 0.083
NPLR 0.211 0.656 0.545 0.606

7.3.6.1. R2: Coefficient of Determination Analysis

Coefficient of determination, the higher R2 the more regression equation fits the data.R2 measures
the proportion of the variation in dependent variable that can be explained by the independent
variables. This normally ranges between 0 and 1.
In case of my first regression hypothesis regression R2 values are significant mostly in case of
JBL, ABL and SBL. So I can say that my regression equation is fit for analyzing the relationship
between dependent variable profitability (ROE) and independent variable (CAR and NPLR)

Table7.6: Coefficient of Determinant: R2

ROE
Banks
Ratios R2
JBL CAR
0.779
NPLR
ABL CAR
0.959
NPLR
SBL CAR
0.938
NPLR
RBL CAR
0.565
NPLR

46 | P a g e
Our model has R2 of CAR and NPLR is .78, which means 78% of the variation in dependent
variable (JBL’s ROE) is explained by the independent variables (CAR). The remaining 22% is
error of the model. This means that these independent variables are highly dominant in Janata
Bank’s, but there are not the all. There are some other variables that have not been considered in
this model. As the R2 is 78% (more than 50%) the model is valid and significant.
This Model is valid for ABL by 96%, SBL by 94% and RBL is 57%.

7.3.6.2 Level of significance test:

Level of significant value important to accept or reject the hypothesis. The results of the analysis.
If the significance level is 5% and the p value lower than 5% than null hypothesis should bre
rejected. On the other hand if the p value is higher than 5% than null hypothesis accepted and
alternative hypothesis rejected.

Table7.7: Level of significance test

ROE
Banks
Ratios sig. Overall sig.
JBL CAR 0.024
0.011
NPLR 0.279
ABL CAR 0.00
0.082
NPLR 0.57
SBL CAR 0.001
0.002
NPLR 0.764
RBL CAR 0.062
0.083
NPLR 0.606

To be statistically significant the value of significant should be lower than the significance level
5%. In my regression model the p value is lower than significant level 5% for JBL, SBL and ABL
except RBL. The p value for JBL is 1%, ABL 8% , SBL is .02% and RBL 8%. So the null
hypothesis is rejected and alternative hypothesis is accepted for JBL and SBL. So we can say that
there is significant relationship between credit management and profitability of the commercial
banks.

On the other hand p value for of JBL .27 which is acceptable as p> 5%. In case of ABL .57, in
SBL .76 and in RBL .60. So in case of all SCBs the relationship between ROE and NPLR is not
mostly influenced.

47 | P a g e
7.3.6.3 Coefficient test:

Coefficient value descript how change in 1 unit of impendent variable effect the defendant
variable. It is most important indicator how change in factor can change in other factor. So it has
profound implication in case of decision making.

Table7.8: Coefficient test

ROE
Banks
Ratios Coef.
JBL CAR 0.696
NPLR -0.277
ABL CAR 0.92
NPLR -0.079
SBL CAR 0.947
NPLR 0.045
RBL CAR 0.889
NPLR 0.211

In the statistically significant regression results shows positive coefficient for CAR and negative
coefficient in case of NPLR. In case of JBL the coefficient for CAR is .70 which means if capital
adequacy ratio increase by 1 unit than ROE will be increased by .70. In case of ABL the coefficient
for CAR is .92 which means if capital adequacy ratio increase by 1 unit than ROE will be increased
by .92. In case of SBL the coefficient for CAR is .95 which means if capital adequacy ratio increase
by 1 unit than ROE will be increased by .95. In case RBL the coefficient for RBL CAR is .89
which means if capital adequacy ratio increase by 1 unit than ROE will be increased by .89

So we can say that CAR is the most appropriate variable to justify the credit management effects
on profitability. On the other hand NPLR ratio is not significant predictor for justifying effects of
credit management on profitability.

Null Hypothesis: Rejected in case of significant statistical relationship which occurred in case of
JBL, ABL and SBL and RBL for CAR and ROE relationship.

Alternative Hypothesis: Independent variables are significant to dependent variable. Accepted in

case of significant statistical relationship which occurred in of JBL, ABL, SBL and RBL in case
of relationship between ROE and CAR. That means alternative hypothesis is accepted. So we can
say the credit management indicator CAR have a significant influence on return of equity of the
commercial banks.

48 | P a g e
7.3.6.4. Statistically insignificant results:

The overall model is fit according to R2 value because it’s significantly higher than the required
R2 50%.But it is a combined value of the independent variable CAR and NPLR. As CAR is highly
statistically fit we can’t infer individual fitness of these variable to the dependent variable.so have
seen individual fitness of dependent and independent variable by P value analysis.

According statistical result summary P value for NPLR ratio of JBL .27 which is not acceptable
as p> 5%. In case of ABL .57, in SBL .76 and in RBL .60. So in case of all SCBs the relationship
between ROE and NPLR is not statistically significant.

So we can say that we can’t find sufficient relationship between ROE and NPLR for all the state
owned commercial banks in Bangladesh by which we can find sufficient inside to accept or reject
the null hypothesis and alternative hypothesis.

Finally we can say from this chapter that credit management have significant influence on the
profitability of the state owned commercial banks in Bangladesh. In case of variable relationship
CAR has statistically significant relation with profitability indicator ROA and ROE. On the other
the NPLR ratio is statistically fit and provide significant inside about ROA of the banks but it’s
not totally fit to show the relationship between independent variable and dependent variable. The
overall findings from this statistical analysis that the profitability of the state owned commercial
banks in Bangladesh have greatly influenced regulation of credit management and so we have to
emphasize on credit management of our country commercial banks.

49 | P a g e
 Chapter-8
Findings and Conclusion
8.1 Findings
8.2 Conclusions

8.1. Findings:
From the above analysis it’s seen that the performance of state owned commercial banks good in
case of overall activity of the banks. The profit figure and other economic activity is increasing
hand in hand to the development of our economy. But it is matter of concern that the performance
scenario of SCBs is not satisfactory in case loan recovery performance and which have profound
influence on the profitability of the state owned commercial banks in Bangladesh. We see in the
analysis that credit management is as important determinant for ensuring the profit of the
commercial banks. CAR have statistically significant relationship with the dependent variable
profitability. The statistical result shows that if CAR is increased the profitability of the bank also
increased. On the other hand if the NPLR ratio increased the profitability decreased.so the
compliance of the commercial banks to the required CAR and effective measures to minimize
NPLR can improve the profitability of the state owned commercial banks in Bangladesh. But it is
matter of regret that state owned commercial banks in Bangladesh not fully comply with the credit
management regulatory requirement of Bangladesh bank. As a result these banks faced disastrous
financial crisis which don’t only hamper the profitability of these banks but also the whole
economy of Bangladesh. The ownership and control of these state owned banks on the hand of
govt. Bangladesh. As state owned banks are the oldest bank and these banks activity directly to
the banks activity of government its performance is very important for the overall economic
performance of our country the authority of Bangladeshi banking sector should give more
emphasize on the most efficient and effective credit controlling mechanism. As I have seen that
the profitability of the bank (ROA and ROE) have direct relationship with the credit management
indicator (CAR and NPLR) Bangladesh bank should regulate the CAR compliance of the bank
and the NPLR ratio of the bank time to time basis.

50 | P a g e
8.2. Conclusion:
As far, we know that state-owned banks hold the majority portion of loanable funds in our
banking sectors. The performance and reputation of the credit management of our state-owned
banks are influencing the whole banking industry. However, bad performance may affect other
banks of the industry that might create threat for the economy and smooth financial transaction.
To reduce the credit management risk, all banks should be aware otherwise they would suffer
a huge loss that drastically reduces profit. As the state-owned banks are the major role playing
part of our economy, government also inject capital to support the banks as though they can
perform in the economy. The recapitalization of banks by using the money of country
government can’t be the ultimate solution of a country’s mismanagement of banking sector.
The recapitalization of bank with state money finder the development of a country because if
this money is not used in this project it can be used in the development activities of the country.
So the ultimate way is to emphasis on management of the banking sector. According to study
there is a significant correlation between the credit management and the profitability of state
owned commercial banks. So government should emphasize on the strengthening of monitoring
and supervision of the by making proper law and effective implementation of that law. As
banking sector is backbone an economy government should try to do the ultimate solution of
the banking sector. As state owned banks are in the vulnerable situation due poor performance
government should focus on this bank. The better management and control mechanism will
increase the performance of the banking sector which will increase the growth of our overall
economy.

51 | P a g e
Reference:
1. https://www.google.com/
2. itd@sonalibank.com.bd.
3. md@janatabank.bd.com
4. agrani@agranibank .org
5. rblhocom@bdcom.com
6. http://cpd.org.bd/loan-default-and-flaunting-money-dr-fahmida-khatun/

52 | P a g e