Professional Documents
Culture Documents
POLICY OF
PRIME BANK LIMITED
Supervised by:
Prepared by:
Ekramul Hoque
ID No: B061340
Batch: 22nd (A-2)
Department of Business Administration
International Islamic University Chittagong Dhaka Campus
Date of submission: 15th June, 2010
An Internship Report On
1
Prime Bank
Supervised by:
Prepared by:
Ekramul Hoque
ID No: B061340
Batch: 22nd (A-2)
Department of Business Administration
International Islamic University Chittagong Dhaka Campus
Date of submission: 17th June, 2010
Letter of Submission
2
Prime Bank
Dear Sir,
It is my great Pleasure to inform you that I have the opportunity to submit an
elaborate report on Credit Operation of PBL. I have completed my practical
Orientation in Banking from March 24, 2010 to Jun 23, 2010 as part of BBA
curriculum. The report is mainly focused on “Credit Operation” with special reference
of Satmasjid Road Branch.
I am very much fortune that got the opportunity to work with some experienced and
devoted professionals. I got acquainted about the banking environment by their
helping hand.
I sincerely believe that you find this study very much interesting, informative and
enlightening. I will glad to furnish you with further explanations or classifications that
you may feel necessary in this regard. I shall be obliged if you kindly approve this
reports.
Sincerely yours,
Ekramul Hoque
Matric no: B061340
Batch: 22nd A-2,
IIUC (Dhaka Campus)
Letter of Acceptance
3
Prime Bank
The Report has been prepared under my guidance and is a record of bonafide work
carried out successfully .
4
Prime Bank
Preface
All praises almighty Allah the sustainer of the universes, who has bestowed us with
the straight path of Islam. Peace is upon his last prophet Muhammad (S.M) the
leader of the Muslims, who has left behind him The Quran and Sunnah of their
guidance.
After completion of BBA program, I was being placed in Prime Bank Limited
(Satmosjid Road Branch) for my internship program. Theoretical discussion have
sometimes differs with practical world and put there to have a practical working
experience and have an understanding of the real from a close distance. One of the
most tried and a proven method of combating the shortcomings in experience is the
internship program. This type of curriculum is perhaps the best system yet devised to
integrate education and experience.
For this reason internship program is an indispensable part of the BBA program. As
a final year student of Business Administration of respective University I have been
placed in the Prime Bank Limited & assigned to work on best to smake this report
effective and realistic as well as at the same it may fruitful if any body is benefited
from this one.
5
Prime Bank
Acknowledgement
Thanks to Al-mighty Allah for blessing in completing the report with in the scheduled
time. No noble achievement can be achieved by an individual. We are indebted to a
number of persons for their kind recommendation, submission, direction, co-
operative, and their collaboration.
For fear of sounding like a vote of thanks speech, I could not possibly thank all of
those marvelous people who have contributed something of them to this report.
There are of course some very special people who can not go without mention.
First thanks my heartiest gratitude to my reverend teacher Prof. Dr. Jahirul Hoque
Head of Department of Business Administration IIUC (Dhaka Campus), for his kind
cooperation and suggest me prepared this Report.
And thanks to honorable heartiest gratitude teacher Md. Abdulla Raihan supervisor
of the internship program and Assistant Professor in Economics, Department of
Business Administration (Dhaka-Campus) who’s enthusiastic guidance and
comments during the entire phase of the study made it possible for me to prepare
this report. My debt to him is warmly acknowledged.
I would like to convey my sincerest gratitude to Md. Ehsan Habib, Senior Vice-
president and Manager of PBL Satmasjid Branch, for his kind permission to allow me
for practical Banking. I would also like to thank Md. Mahiuddin Ahmed, Vice
President and Second Officer of PBL Satmasjid Road Branch Branch. Grateful to
Shah Mohammad Moshin Senior Executive Officer, Md. Masud Uddin Ahmed,
First Assistant Vice President and other Employee of PBL Satmasjid Branch for
guiding supervising my work in this matter
I am truly very grateful from the bottom of my heart to all the employee of PBL
Satmosjid Road Branch Branch for the expansion of their tremendous helping hand
to me. And a sincere thanks to those helped me in giving information personally and
institutionally regardless of their busy schedule.
6
Prime Bank
Executive Summary
Since inception, the Bank has been making significant profit every year and
positioning itself as second highest profit-making bank in the country for last five
consecutive years. This has been possible due to significant credit growth of the
bank. On an average, credit portfolio of the bank has been growing @ 40% every
year. Present size of the credit portfolio is about Tk. 3100 crore with about 30000
loan accounts. However, asset quality of the Bank was never compromised for this
high growth. It has been well maintained which is reflected in its classification rate
that never exceeded 2% in its 10 (Ten) years of life. As the lion share of the total
revenue comes from credit operation and the existence of the Bank depends on
quality of asset portfolio, efficient management of credit risk is of paramount
importance.
After analyzing the latest FY 2009 Financial Report of PBL, it was found that
Consolidated Loans and advances/investments (credit under Islamic Shariah) of the
Bank grew strongly by 18.97 percent and stood at Tk 89,946 million in 2009. Loans
and advances of PBL increased by Tk 14,096 million showing a growth of 18.76
percent during 2009. Concentration of loans and advances was well managed. Ratio
of non performing loan of PBL improved to 1.29 percent from 1.76 percent of
previous year and the ratio is much below the industry average of 10.8 percent. It
can be said undoubtedly that Prime Bank’s sound credit policy has a great impact on
this success which has made Prime Bank one of the most profitable commercial
Banks in the country.
7
Prime Bank
Table of Contents
CHAPTER : 2
AN OVERVIEW OF PRIME BANK
LIMITED
2.1 Background of PBL 15-16
CHAPTER : 3
AN OVERVIEW OF LOANS AND
ADVANCES PRODUCT OF PBL
3.1 Definition of Lending 26
8
Prime Bank
CHAPTER – 4
Contributions of Sound Lending Policy in
PBL
4.1 Significance of Sound Lending 47
CHAPTER – 5
5.1 Findings & Analysis 51-52
Chapter – 6
Recommendation & Conclusion
6.1 Recommendation 54
6.2 Conclusion 55
Appendix 56-66
Bibliography 67
9
Prime Bank
Chapter - 1
Introduction
10
Prime Bank
1.1 Introduction
Like any other business organizations, commercial banks are established for the
purpose of earning profit. The main profit earning activity of banks is to earn interest
income or profit from extending loans of the funds mobilized as deposits. As such
loan extended, both interest and principal must be recovered on time in order to
keep the depositors’ money safe and also to maintain funds to be utilized as loans.
Therefore, a sound lending policy is imperative for providing loans by properly
analyzing the creditworthiness of an individual or organization for maximization of
profit from its funds. In this connection, this report has been prepared to study the
concept of sound lending policy and its contribution in banks as a requirement of my
internship report which is mainly on “A Study of Different Aspects of Credit
Policy in PBL”
• Assess the Prime Bank’s Lending Policy in evaluating the credit worthiness of
the customers.
11
Prime Bank
In our economy, there are mainly three types of schedule commercial banks are in
operation. They are Nationalized Commercial Banks, Local Private Commercial
Banks and Foreign Private Commercial Banks. Islami Bank has discovered a new
horizon in the field of banking area, which offers different General Banking,
Investments and Foreign Exchange banking system. So I have decided to study on
the topic “A Study of Credit Operation Of Prime Bank Limited”. Because the
Internship program of the university is an integral part of the BBA program. So it is
obligatory to undertake such task by the students who desirous to complete and
successfully end-up their BBA degree. This also provides an opportunity to the
students to minimize the gap between theoretical and practical knowledge. During
the internship program the teachers of the department are attached to actively and
constantly guide the students.
Students are required to work on a specific topic based on their theoretical and
practical knowledge acquired during the period of the internship program and then
submit it to the teacher. That is why I have prepared this report.
12
Prime Bank
The study has focused primarily on sound lending policy and principles in banking
sectors specially in Prime Bank Ltd. Specifically, the funded credit and advance
facilities have been studied in detail as lending is provided with fund of the bank.
• The time allowed for conducting the study considering the subject
matter is quite short and due to day long training primary data and
information could not be collected through many interviewees.
13
Prime Bank
Chapter - 2
An overview of Prime Bank Ltd.
14
Prime Bank
The Bank offers almost all kinds of Commercial Corporate and Personal
Banking services covering all segments of society within the framework
of Banking Company Act and rules and regulations laid down by our
central bank. Diversification of products and services include Corporate
Banking, Retail Banking and Consumer Banking right from industry to
Telecommunication, RMG, FMCG and so on.
It has already made significant progress within a very short period of its
existence. The bank has been graded as a top class bank in the country
through internationally accepted CAMEL rating. The bank has already
occupied an enviable position among its competitors after achieving
success in all areas of business operations so far.
Prime Bank Ltd. has consistently turned over good returns on Assets and
Capital. Until the year 2007, the bank has achieved an operating profit of
Tk. 3257 million and its capital funds stood at Tk 6382 million. Out of
this, Tk. 2659.21 million represents reserves and retained earnings and
Tk. 2275 million consists of paid up capital by shareholders. Even after
the business environment and default culture, quantum of classified loan
in the bank is very insignificant and stood at less than 1.35%. The bank’s
current capital adequacy ratio of 11.50% is in the market.
15
Prime Bank
Finally, Prime Bank Ltd. has already made significant progress within a
very short period of its existence. The bank has been graded as a top
class bank in the country through internationally accepted CAMEL
(Capital, Asset, Management, Earnings and Liquidity) rating. The bank
has already occupied an enviable position among its competitors after
achieving success in all areas of business operation.
16
Prime Bank
5. Number of Branches : 71
17
Prime Bank
Consumer Finance
There are branches and finance centers under this division with a qualitative
workforce of employees. Some of the services provided by this division are
unsecured personal loans, credit cards, and vehicle related lease etc.
Personal Banking
There are branches with highly qualified workforce provide various kinds of loans,
various types of accounts, cheques, card money etc.
Islamic Banking
Prime Bank Ltd. works under the correspondence with Bangladesh Bank regarding
operation of Islamic Banking Branches through a Subsidiary.
Corporate Banking
This division is operational throughout the group and PBL’s core strength is trade
finance and services. With an experience, Prime Bank has developed knowledge of
18
Prime Bank
trade finance, which is world class. Principle services to importers include imports
letter of credit, import bills for collection and back-to-back letters of credit facilities.
Services provide to exporters include export letters of credit, direct export bills,
bonds, and guarantees.
Cash Management
Treasury
Electronic Banking
Over the years, foreign trade operations of the bank played a crucial role in
the overall business development of the bank. The bank has established
relationship with as many as 110 new foreign correspondents abroad thereby
raising the total number of correspondents to 350. The bank has also entered
into remittance arrangements with several banks and exchange houses and
expects to handle increased volume of remittance business over the near
future.
19
Prime Bank
The bank has set up a Wide Area Network (WAN) across the country to provide
online branch banking facility to its valued clients. Under this scheme, clients of any
branch shall be able to do banking transaction at other branches of the bank.
Swift
Prime Bank Limited has become member of SWIFT (Society for Worldwide Inter-
bank Financial Telecommunication) in 1999. SWIFT is a member-owned co-
operative system, which provides a fast and accurate communication network for
financial transactions such as Letters of Credit, Fund Transfer etc. By becoming a
member of SWIFT, the bank has opened up possibilities for uninterrupted
connectivity with over 5,700 user institutions in 150 countries around the world.
Prime Bank Limited adopted automation in banking operation from the first day of its
operation. The main objective of this automation is to provide efficient and prompt
services to the bank's clients. At present, all the branches of the bank are
computerized. At branch level, the bank is using server-based multi-user software
under UNIX operating system to provide best security of automation.
20
Prime Bank
Deposit Products
21
Prime Bank
• Current Account
Current Account is a non interest bearing checkable deposit (Demand Deposit)
which allows the owner of the bank accounts to write checks to third parties.
• Savings account
22
Prime Bank
• Fixed term
These are the loans made by the Bank with fixed repayment schedules. Fixed tern
loans are categorized into three based upon its tenure which is defined as follows:
• Continuing Loans
These are the loans having no fixed repayment schedule, but have an expiry date at
which it is renewable on satisfactory performance of the customer. Furthermore, all
categories of loans are accommodated under the following prime sectors:
ii. Term Loan to Large & Medium Scale Industry: This category of advances
accommodate the medium and long term financing for capital formation of
new Industries or for an existing units who are engaged in manufacturing of
goods and services.
23
Prime Bank
iii. Term Loans to Small & Cottage Industries: These are the medium and
long term loans allowed to small & cottage manufacturing industries. No short
term or continuous credits will be included in this category.
iv. Working Capital: Loans allowed to the manufacturing units to meet their
working capital requirements, irrespective of their size - big, medium or small,
fall under this category. These are usually continuous credits and as such fall
under the head "Cash Credit"
v. Export Credit: Credit facilities allowed to facilitate export of all items against
Letter of Credit and/or confirmed export orders fall under this category. It is
accommodated under the heads "Export Cash Credit (ECC)", Packing Credit
(PC), Foreign Documentary Bill Purchased (FDBP) etc.
vi. Commercial Lending: Short term Loans and continuous credits allowed for
commercial purposes other than exports fall under this category. It includes
import financing for local trade, service establishment etc. No medium and
long term loans are accommodated here. This category of advance is allowed
in the form of (i) Loan against Imported Merchandise (LIM), (ii) Loan against
Trust Receipt (LTR), (iii) Payment against Documents (PAD), (iv) Secured
Overdraft (SOD), (v) Cash Credit etc. for commercial purposes.
24
Prime Bank
Chapter-3
An Overview of
Prime Bank Lending Policy
25
Prime Bank
So a profit oriented business such as bank provides its resources for lending or
credit to its clients under certain conditions for specific durations.
• Loan (General)
Short, Medium & Long term loans allowed to individual/firm/industries for a specific
purpose but for a definite period and generally repayable by installments fall under
this type. These are mainly allowed to accommodate financing under the categories
(I) Large & Medium Scale Industry and (ii) Small & Cottage Industry.
• Home Loan
Loans allowed to individuals for purchase of apartment or construction of house for
residential purpose fall under this type. The amount is repayable by monthly
installments within a specified period.
26
Prime Bank
• Lease Financing
Lease Financing is one of the most convenient sources of acquiring capital
machinery and equipment whereby a customer is given the opportunity to have an
exclusive right to use an asset usually for an agreed period of time against payment
of rental.
• SOD (General)
SOD (General) is allowed to individuals/firms for miscellaneous purpose. This is a
continuous loan having usual maturity period of 1 (one) year and renewable for
further, periods at maturity.
•
SOD (Work Order)
Advances allowed against assignment of work order for execution of contractual
works falls under this type. This advance is generally allowed for a definite period
and specific purpose. It falls under the category "Others".
• SOD (Export)
Advance allowed for purchasing foreign currency for payment of Back to Back (BTB)
L/C liability where the exports do not materialize before due the date of import
payment. This is an advance for temporary period and categorized "Export Finance".
• PAD
Payment made by the Bank against lodgment of shipping documents of goods
imported through L/C falls under this type. It is an interim advance connected with
import and is generally liquidated against payments usually made by the customer
27
Prime Bank
for retirement of the documents towards release of imported consignment from the
customs authority.
• LIM
This is funded credit facility allowed for retirement of shipping documents and
release of goods imported through L/C taking effective control over the goods by
pledge in go downs under Bank's lock & key. This is a temporary advance connected
with import which is known as post-import finance and falls under the category
"Commercial Lending".
• LTR
Advance allowed for retirement of shipping documents and release of goods
imported through L/C falls under this type. The goods are handed over to the
importer on trust with the arrangement that sale proceeds will be deposited to
liquidate the loan account within the specific time.
• ECC
Funded credit facility allowed to a customer for export of goods falls under this type
and is categorized as "Export Cash Credit". The advances must be liquidated out of
export proceeds within 180 days.
• FBP
Payment made to a customer through Purchase or Foreign Currency
Cheques/Drafts falls under this type. This temporary advance is adjustable from the
proceeds of the cheque/draft.
28
Prime Bank
As initiated by Bangladesh Bank vide BCD Circular No. 33 dated 16-11-89 different
kinds of lending were subdivided into 11 categories w.e.f. 01-01-90 which was
subsequently reduced to 9 vide BCD Circular No. 23 dated 09-10-93 and again to 7
prime sectors vide BCD Circular No.8 dated 25.04.94.
Loan and advances have primarily been divided into two major groups:
a) Fixed term loan: These are the loans made by the Bank with fixed
repayment schedules. Fixed term loans are categorized into three based upon its
tenure which is defined as follows:
3.1.1 Agriculture
Credit facilities provided to the customers for doing agro business falls under this
category. It is divided into two major sub-sectors:
29
Prime Bank
30
Prime Bank
3.1.7 Others :
Any loan that does not fall in any of the above categories is considered under the
category "Others". It includes loan to (I) transport equipments, (ii) construction works
including housing (commercial/residential), (iii) work order finance, (iv) personal
loans, etc.
31
Prime Bank
In achieving the aforesaid objectives of the Bank, Credit Operation of the Bank is of
paramount importance as the greatest share of the total revenue of the bank is
generated from it, Maximum risk is centered in it and even the very existence of the
bank depends on prudent management of the credit portfolio .The failure of the
commercial bank is usually associated with the problem in credit portfolio and is less
often the result of shrinkage in the value of other assets. As such, credit portfolio not
only features dominant in the assets structure of the Bank, it is critically important to
the success of the bank also.
To provide a broad guide line for the Credit Operation towards achieving the
objectives of this Bank, for efficient and profitable deployment of its mobilized
resources and to administer the credit port-folio in the most efficient way, a clearly
defined, well-planned, comprehensive and appropriate credit policy and control
guidelines of the bank is prerequisite.
32
Prime Bank
1. Loans and advances shall normally be financed from customers’ deposits and
not out of temporary funds or borrowing from other banks.
2. Credit will be allowed in manner which will no way compromise the bank’s
standards of excellence and customers who will complement such standards.
4. Interest on various lending categories will depend on the level of risk and type
of security offered. It should be borne in mind that rate of interest in the
reflection of risk in the transaction. The higher the risk, the higher is the
interest rate.
5. Interest may be reviewed at least once in 6 month and more often when
appropriate fixed interest rate should be discouraged. Preferably all rates
should vary with cost of funds fluctuation based on a spread of profit.
6. Effective yield can be enhanced to the extent the borrowers are required to
maintain deposits to support borrowing activities. Yield should be further
improved by commitment fee and Service charges where possible .All pricing
of loans should however have relevance with the market condition and be
approved by the Executive committee / Managing Director from time to time.
8. It is recognized that there will be exceptions to the stated policy which can be
justified. However,, these should be approved by the Executive Committee or
by the Board and the circumstances must be fully documented din the credit
file.
9. The aggregate of all cash facilities shall not exceed 80% of customer
deposits. It is further governed by the statutory and liquidity reserve
requirement of Bangladesh Bank.
33
Prime Bank
10. Aggregate long term facilities shall not exceed 20% of the total credit portfolio.
Facilities shall not be allowed for a period exceeding 5 year. Any exceptions
will require the approval of the Board of Directors.
11. Credit facilities in aggregate extended to any one customer group shall not
normally exceed 15% of the capital Fund or Tk 16.50 crore whichever is
lower. However, Board o f Directors may relax this limit in deserving cases. All
proposals submitted to Head Office will also be required to indicate the extent
of the Bank’s global exposure to that customer group.
14. any one key individual. The policy to be assigned to the Bank and the
premium to be paid by the customer through the bank under suitable
arrangement.
15. Sector –wise allocation of Credit shall be made annually with the approval of
Executive Committee /Board of Directors. This will be reviewed from time to
time.
19. CRG
34
Prime Bank
26. Safety
27. Security
28. Profitability
29. Purpose
30. Diversification
35
Prime Bank
Alert Account is the one that has risks or potential weakness requires monitoring,
supervision or close attention of the management. After having the Early Alert
Report, Credit Administrative Division monitors the loan on an off-site basis and
thereby reports the Credit Risk Management Division to take necessary action.
On the other hand, if any clients fail to pay three monthly installments
simultaneously, the Relationship officers reminds the clients through phone calls,
reminds later or visit in person where necessary.
36
Prime Bank
Appraisal
Interviewing the client’s
CIB
Preparing the credit proposal
Landed property valuation
Pre-disbursement
Issuing Sanction letter
Acceptance from the client
37
Completion of all documentation
formalities as per Head Office.
Prime Bank
Disbursement
Loan Input
Voucher
Monitoring
Ensure adjustment as per
repayment
Communicate with the clients.
Physical visit.
Obtain various reports regarding
Repayment
Installment realizes from the clients.
38
Prime Bank
39
Prime Bank
Lending Risk Analysis (LRA) will be conducted for the credit facilities of Tk 50 lac or
above in the prescribed form. The lending risk analysis tool concentrates on analysis
of both the business risk and security risk. The important part of this analysis is the
assessment of risk of failure to repay which deals with the overall lending risk
composed of the business risks and security risks i.e (i) Suppliers risk, (ii) Sales risk,
(iii) Performance risk, (iv) Resilience risk, (v) Management Competence Risk, (vi)
Management Integrity Risk, (vii) Security Cover Risk and (viii) Security Control
Risk. The overall matrix provides four kinds of lending risk for decision makers i.e. (i)
Good, (ii) Acceptable, (iii) Marginal and (iv) Poor. Prime Bank will not approve any
credit facility having overall risk at “Marginal” or “Poor” level without proper
justification except for renewal of existing facilities under compelling circumstances.
As per instruction of Bangladesh Bank, Prime Bank Limited has developed Risk
Grading Scorecard which will be used to find out rating of all credit facilities and/or
customers of the bank except the loans under Retail Credit Division. The score of the
risk grading scorecard will be weighted one. There are 10 (ten) rating criteria and
separate parameters have been set to measure borrower’s position against each
criterion. After analyzing borrower’s financials or other relevant documents, the
Relationship Officer will first find out the points the borrower earns against each
criterion based on the parameters set and then multiply the points obtained by the
relevant risk weight which will produce Weighted Score. A snapshot of criteria and
weight assigned to each criterion is as follows:
40
Prime Bank
The Relationship Officer of the Branch will prepare Risk Grading Scorecard in case
of new proposal, renewal and/or enhancement of existing facility, any deterioration in
the borrower’s business position, any breach of contract by the borrower or as and
when he/she feel it necessary. In addition, aggregate weighted score of the customer
is to be affixed in the relevant field of the Credit Assessment Sheet.
Risk Grading:
41
Prime Bank
42
Prime Bank
43
Prime Bank
The Relationship Officer will insert the risk grade of the customer in the concerned
44
Prime Bank
field alongwith Risk Grading Score and forward the same through proper channel to
the Credit Risk Management Unit for approval.
Subjective Grading:
The more conservative risk grade (higher) should be applied if there is a difference
between the personal judgment and Risk Grading Scorecard result and Credit Risk
Grading Model. This will remain at the absolute discretion of the concerned
Relationship Officer(s) of the Branch or Corporate Banking Division, Head Office and
Credit Officer of the Branch or Credit Risk Management Unit, Head Office.
Downgrading:
Asset Migration:
Risk Grading Model will be used for assessing / measuring risk in the credit
exposure taken on a particular customer. It is the key measurement of Bank’s asset
quality. Therefore, all facilities will be assigned a risk grade. And, asset portfolio of
the Bank will be reviewed quarterly. At each quarter end, Credit Risk Management
45
Prime Bank
Unit, Credit Division will report summarizing the migration of the assets with respect
to risk grade and place before the management for review. The Management will
ensure non-concentration of assets in lower grades.
External Rating:
At least top twenty five clients/obligors of the Bank may preferably be rated by an
outside credit rating agency.
System Review:
Proper application of the Risk Grading Scorecard and Risk Grading Model in Credit
operation shall reviewed at least once in a year. And, if change is required, it will be
done at the year-end. Furthermore, accuracy and consistency of the concerned
officers/executives will be reviewed annually.
46
Prime Bank
Chapter - 4
47
Prime Bank
From the above graph, it is evident that loans and advances rules the asset structure
of the Bank and managing these loans & advances has a crucial impact on the
overall success of the Bank. In doing so, it is mandatory to follow an effective lending
policy to grab the success. In the following sub sections, focus will be given on the
management of the credit portfolio of PBL, the impact of following a sound lending
policy etc to give an idea of the contribution of following sound lending policy in the
Banks.
48
Prime Bank
In designing a loan portfolio, PBL always keeps three things in mind – first, the type
of customers the bank wants to serve. Second, involvement of risks with various
kinds of loans and finally, the relative profitability of various kinds of loans.
With each and every coin of loan, there is an involvement of risk. So the quantum of
risk should be spread over the various types of loan through diversification.
Diversification of credit can be made by extending credit to different sectors, to
different geographical areas, to different lines of product or business and allocating
the loanable fund into different types of credit.
49
Prime Bank
improved to 1.29 percent to 1.76 percent of previous year and the ratio is much
below the industry average of 10.8 percent.
From the Financial analysis of year 2009, some important findings are pointed
below:
• Loans & Advances were well spread. Retail ans SME sector showed
significant growth during 2009.
• The pressure from Bangladesh Bank to keep the interest spread to 5 percent
continued. In addition to indierect restrictions, Bangladesh Bank imposed the
ceiling of maximum 13 percent interest on lending except for small and retail
finacne. Later on maximum interest rate of 13 percent was ijmposed on
housign loans. But the spread did not reduced that much as the Bank
successfully improved its deposit mix along with reduction of interest rates on
deposits.
• Non-performing laon decreased during the year by Tk. 184 million and stood
at 1.29 percent. The ratio is much below the market average os 10.8 percent.
As such the asset quality may be termed as strong.
• PBL made adequate provision against bad and doubtful debt as per
Bangladesh Bank requirement. Despite the Bank could register significant
grwoth of net profit.
50
Prime Bank
Chapter 5
51
Prime Bank
5.1 FINDINGS:
A/ Executive and officer working and various levels in the bank to be groomed
with clear understanding of the entire range of products and banking services
ensuring quality of services help accomplished set target of customer
satisfaction. The techniques those to be pursued for transforming of strategies
into action through “Mode Marketing Plan – (MMP)” to achieve the goal of
higher customer satisfaction along with sustained growth of profitability for the
bank are :-
52
Prime Bank
B/ In managing the credit operation, PBL, Satmasjid Road Branch face the
following problem:
53
Prime Bank
Chapter 6
54
Prime Bank
6.1 Recommendation
A banker can not sleep well with bad debts in his portfolio. The failure of commercial
banks occurs mainly due to bad loans, which occurs due to inefficient management
of the loans and advances portfolio. Therefore any banks must be extremely
cautious about its lending portfolio and credit policy. So far Prime Bank Limited has
been able to manage its credit portfolio skillfully and kept the classified loan at a very
lower rate ---thanks goes to the standard and stringent credit appraisal policy and
practices of the bank.
But all things around us are changing at an accelerating rate. Today is not like
yesterday and tomorrow will be different from today. Given the fast changing,
dynamic global economy and the increasing pressure of globalization, liberalization,
consolidation and disintermediation, it is essential that Prime bank limited has a
robust credit risk management policies and procedures that are sensitive to these
changes. To improve the risk management culture further, Prime Bank limited should
adopt some of the industry best practices that are not practiced currently. These are
• The lending guideline should include Industry and Business Segment Focus,
Types of loan facilities, Single Borrower and group limit, Lending caps,
Discouraged Business Types, Loan Facility Parameters and Cross boarder
Risk.
• It should adopt a credit grading system All facilities should be assigned a risk
grade. And the borrowers risk grades should be clearly stated on credit
application.
55
Prime Bank
6.2 Conclusion
We hope that PBL will lead by example by continuing its efficient lending
policy in keeping the bank’s financial performance indicators at above
industrial average and contribute to country’s economic development-
thus attaining a middle income status in the world.
56
Prime Bank
APPENDIX
Performance of PBL:
Performance at a glance
Taka in Million
57
Prime Bank
Income Statement
519
Interest Income 3446 7170 9096 10831
9
Profit before provision and tax 1520 2131 3257 3847 5289
Provision for loans and assets 320 390 910 1384 700
Profit after provision before tax 1201 1741 2347 2463 4589
Balance Sheet
5472
Deposits 36022 70512 88021 106956
4
66
Property, Plant and Equipment 372 412 1375 1573
0
58
Prime Bank
59
Prime Bank
8000
7054
7000
6000 5547 5761
4958
5000 4816
4211 41594020
3997 3933
Crore Taka 4000 Deposits 2008
2940 3140 3170
2910 Advances 2008
3000
2000
1000
0
DBL SEB PBL DBBL EXIM MBL EBL
DBL 956
SEB 731
DBL 1293
DBBL 1271
EXIM 139
MBL 793
60
Prime Bank
EBL 260
EBL 260
MBL 793
EXIM 139
DBBL 1271
PBL 1293
SEB 731
DBL 956
CRORE TAKA
DBL 205
SEB 294
EXIM 205
PBL 351
EBL 190
MBL 157
DBBL 151
61
Prime Bank
Profit 2009
400
351
350
294
300
250
205 205
190
200
Crore Taka 157 151
150
100
50
0
DBL SEB EXIM PBL EBL MBL DBBL
DBL 4950
EXIM 7026
PBL 9645
MBL 4038
EBL 3782
SEB 3847
DBBL 3567
62
Prime Bank
Import 2009
10000
9645
7000 6140
6000
4950
5000 4038
3782 3847 3567
Crore Taka 4000
3000
2000
1000
0
EXIM PBL MBL EBL SEB DBBL DBL
EXIM 5579
DBL 3108
DBBL 3406
MBL 3267
PBL 5132
SEB 2877
EBL 3357
63
Prime Bank
Export 2009
6000 5579
5132
5000
2000
1000
0
EXIM DBL DBBL MBL PBL SEB EBL
DBBL 3406
DBL 3108
EBL 3322
EXIM 5579
MBL 3267
PBL 5132
SEB 2877
64
Prime Bank
6000 5579
5132
5000
4000 3406
3108 3322 3267
2877
Rate(%) 3000
2000
1000
0
DBBL DBL EBL EXIM MBL PBL SEB
DBBL 3406
DBL 3108
EXIM 5579
MBL 3267
PBL 5132
SEB 2877
65
Prime Bank
6000 5579
5132
5000
2000
1000
0
DBBL DBL EXIM MBL PBL SEB
Bibliography
1.Ahmed Nasiruddin. (1989), Banking And Finance Compendium: 1st edn. Standard
Printing and Packages: Dhaka
5. Credit Rating Information and Services Limited. Retrieved August 5, 2008, from
CRISL Official Web site: http://www.crislbd.org/
66
Prime Bank
Other Reference
Brochures of products of Prime Bank Ltd
Annual Report 2005-2009, Prime Bank Ltd
67