Credit Appraisal & Credit management syatem in Prime Bank Ltd.with special study on cost of credit management.
Prime Bank Limited is one of the leading commercial bank in our country with hugegrowth in almost every sphere. It was incorporated under the Companies Act 1994started its operation on April 17, 1995 with a target to play the vital role on the socioeconomic development of the country and with the motto “Bank with difference”. Iavailed its registration as a banking company under the Banking Company Act 1993 frothe Bangladesh Bank dated February 12, 1995. Currently the bank has 24 branches anlately introduced the ATM services to the people. Currently the bank has 20 directors anMr. Mohd Aminul Haque in chair and MR. Kazi Abdul Mazid is the Managing Director.The objectives of preparing this report are identifying the credit appraisal, anmanagement system. Beside this a formula to calculate the cost of credit management has been presented with the brief analysis of the performance of PBL.The equity capital and total assets are Tk. 89.70 crore and Tk. 1284.58 crore at the end othe 2000. The deposit of PBL stood at Tk. 1033 crore and the growth rate is 54%.Moreover the default rate is only 1.43% and the credit disbursed at the end of 2000 Tk.766.7 crore. The return on asset and equity for the last three year were 2.81%, 2.36%1.82 and 40.2%, 30.8%, 12.6% which indicate the efficient management of the bank. Thenet interest margin was 3.86% and 3.7% in the year of 2000 and 1999. He equitmultiplier (leverage) is as high as seems riskier.The failure of the commercial bank is mainly occurs due to bad loans, which occurs dueto inefficient management of the loan and advance portfolio. Actually the credit portfoliois not only constitute the banks asset structure but also a vital factor of the bank’ssuccess. PBL has a credit policy and guideline with operational manual under which the bank will operate. The bank provide loan in almost all mode like; Overdraft, Loa(general), PAD, LIM, LTR, IBP, FDBP, Packing Credit Loan, lease finance, and CCSetc. While sanctioning of credit undergoes some steps-like collecting of relatedocuments and information with dully filed-up credit application form, scrutinizinginvestigation (appraisal), preparation of proposal, sanctioning, pre-disbursemencompliance, disbursement, supervision monitoring. Credit management deals with all this process. The loan policy has established the lending limit for all loan officers ancombination of officers and loan committee. In general like any other bank in PBsecured loans will carry higher limit than the unsecured loans for comparable purposeseasonal working capital loans, might carry higher limit than term loan. The bank has26% payable on demand loan.Effective Credit Administration can ensure good recovery of loan and advance and gooyield. When the credit proposal are approved the credit officer must have to be ensurethat the disbursement of the credit facilities must comply with the directions written ithe credit policy and circular made by time to time. Moreover the credit officer has tocollect NOC from other bank where the client is enjoying the credit facility and the CIB