Internship Report

On
Credit Management Of First Security Islami Bank
Limited(FSIBL) - A Case Study

Supervised by
Kamrul Hasan
Assistant Professor
Department of Business Administration
Southern University Bangladesh
Prepared By

Rahul Palit
ID-111-30-14
Major Finance
Date of submission: 8th OCTOBER, 2012

Letter of Transmittal

8th OCTOBER, 2012

Dean

Faculty of Business Administration

Southern University Bangladesh
Subject: Submission of Internship Report.
Dear Sir,
It is my great pleasure to submit the internship report on Credit
Management of First Security Islami Bank Limited (FSIBL) - A Case
Study.
I made sincere efforts to study related materials, documents, observe
operations performed in First Security Islami Bank Limited. and
examine relevant records for preparation of the report. I had to put in
a lot of effort & hard work to the preparation of this report with the
help of all the bank officials in the Bahadder Hat Branch.
Within the time limit, I have to make this report as comprehensive as
possible. But there may be some mistakes due to various limitations.
For this reason, I ask for your kind consideration in this regard.
Yours Faithfully,
--------------------------Rahul Palit
ID-111-30-14

Students Declaration
I hereby announced that the extensive study entitled Credit
Management of First Security Islami Bank Limited
(FSIBL) - A Case Study.(Conducted on behalf of First
Security Islami Bank Limited, Head Office, HR
Division)Prepared in partial accomplishment of the
requirements for the award of the degree in Bachelor of
Business Administration (BBA).
From
Southern University
BBA Department.
Is my original work and not put forward For the award of the
any other degree/fellowship Or other similar designation or
accolade.

Rahul Palit
ID-111-30-14

SUPERVISORS DECLARATION

This is certify that this paper is prepared by Rahul Palit (ID

No:111-30-14) Degree of BBA (Finance).This is his original
work. I am sure it will contribute to enhance existing
knowledge. For his excellent paper work recommend
accepting this paper and approved this for the Degree of BBA
in Finance.

Kamrul Hasan
Assistant Professor
Department of Business Administration
Southern University Bangladesh

Chittagong, Bangladesh.

ACKNOWLEDGEMENT
Thanks to Al-mighty Allah for Blessing in completing the report with
in the scheduled time. I am indebted to a number of persons for their
kind recommendation, co-operative, submission, direction and their
collaboration.
I have the unique opportunity to apply my theoretical & practical
knowledge in this assignment. Its my obligation to disclose the name
of all who have contributed in many ways to complete my assignment
on the selected topic entitled Credit Management.
First, I would like to remember the contribution of Internship
supervisor & my teacher: Mr. Kamrul Hasan whose guidance & help
was very much required prepare the report successfully.
I am grateful to the Management of FSIBL Bahadder Hat Branch for
providing me all sorts of facilities requested from time to time. My
practical working knowledge in this financial institution helped me a
lot. I am lucky and feel proud to get this opportunity for preparing this
assignment. I have learned many things from this reputed organization
in a short time.
Yours sincerely,
Rahul Palit
ID-111-30-14

Executive Summary

As banks play the key roles in the economy, it is important to know

the performance of banks in their operational areas. In addition to
this, banks performances should be measured because of the several
parties related to the banking industry. Depositors evaluate
performance to make a decision regarding whether to trade with the
bank, bank managers evaluate performance to formulate a strategy,
and regulators evaluate to ensure whether the banks performances
align with the legal and societal structure of the country.
The objective of the study is to analyze the Credit Management of
First Security Islami Bank Limited A Case Study Though primary
objective of preparing this paper is to fulfil the requirement of BBA
internship program but this study will serve as a reference for any
kind of further research both for academic or business purposes.
From the study we will get a clear picture of overall performance of
FSIBL and also special scenario of customer satisfaction level of
monthly savings scheme. Overall customer satisfaction depends on
what type of service marketer providing to customer. Customers
expect more return on their savings which is comparatively lower
than other private commercial bank.
The study has some shortcoming are lack of knowledge to such type
of survey, time limitations, respondents unwillingness to cooperate
and limited sample size.
This report is prepared on the basis of information collected from both
secondary and primary sources and every effort has been made ensure
that the information compiled in the report is accurate.

Serial
no

Table of Contents
Subject

Page No

Chapter-ONE
INTRODUCTION
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8

Introduction
Definition of Credit Management
Importance of Credit Management
Objectives of the Study
Scope of the Study
Methodology of the Study
Limitations of the Study
Plan of the Study

Xl
Xl
Xl
Xll
XIll
Xlll
XIV
XV

Chapter-TWO
Overview of FSIBL
2.1
2.2
2.3
2.4
2.5
2.6
2.7

Overview of the bank

Mission of the bank
Vision of the bank
Objectives of the bank
Deposit
Loans and Advance
Services

XVII
XVII
XVII
XVIII
XVIII
XVIII
XIX

Chapter-THREE
The Principles And Procedures Of Credit Planning

3.1
3.2

Principles
Overall procedure for sanctioning loan

XXII
XXII

Chapter-FOUR
4.1
4.2
4.3

The Administrative Aspects Of Credit Management

Functions of credit division
XXVIII
Operational guidelines for different
XXVIII
credit facilities
Credit administration
XXXIII

4.4

Credit monitoring

XXXIII

Chapter-FIVE
The Social Objective Of Credit Management
5.1

5.2
5.3
5.4

Corporate Social Responsibility

Ensuring better liquidity management
Improving institutional efficiency
Strengthening local banks

XXXV
XXXVI
XXXVI
XXXVII

Chapter-SIX
The lending Policy And Evaluating The lending Operations
Overall Credit Policy of FSIBL
XXXIX
6.1
Rules for Application
XXXIX
6.2
Documentation of Loan
XXXIX
6.3
Loan Sanction
XL
6.4

Chapter-SEVEN
The Credit Risk Management
7.1
7.2
7.3
7.4
7.5
7.6

Impaired Asset Management Department

Credit assessment
Risk grading
Reporting to business unit
Rejection database
Audit & Risk Management Division

XLII
XLII
XLIII
XLIII
XLIII
XLIII

Chapter-EIGHT
8.1
8.2
8.3
8.4
8.5
8.6
8.7
8.8
8.9

The Recovery Monitoring System Of The Credit

Credit monitoring
XLV
Early Alert process
XLV
Custodial Duties
XLVI
Categories of loan
XLVII
Credit Monitoring
XLVIII
Operational Network
XLIX
Recovery Rate
XLIX
Sectoral and Credit Concentration
LI
Finance & Advisory Services
LII

8.10

Loan Recovery Unit

LII

Chapter-NINE
The Impact Of Credit Management On Profitability And
Productivity

9.1
9.2
9.3

9.4
9.5
9.6

Financial Highlights of FSIBL

Customer Satisfaction
Loan Department
Credit Department
Ratio Analysis
Profitability Ratio

LIV
LV
LVII
LVIII
LXI
LXIII

Chapter-TEN
Major findings Problems And
Recommendation
10.1
10.2
10.3
10.4
10.5
10.6

10.7

Documents deficiency and

problem resolving
Problems and Challenges of FSIBL
ICT and its use in MIS
SWOT Analysis
Profit Rate Risk
Recommendation of FSIBL
Conclusions

LXVII
LXVII
LXVIII
LXIX
LXXIV
LXXV
LXXVI

List of Table
Name of the table

Page

Table-1

Table-2

LI

Table-3

LVI

Table-4

LVII

Table-5

LVIII

List of Chart
Number of the chart

Page

Chart-1

XIX

Chart-2

LIV

Chart-3

LV

Chart-4

LVI

Chart-5

LIX

Chart-6

LX

CHAPTER 1
Introduction

CHAPTER 1:
INTRODUCTION
1.1 Introduction
A banking institution is indispensable in a modern society. It plays a
pivotal role in the economic development of a country and forms the
core of the money market in an advanced country. In recent times the
banking sector over the world has been undergoing a lot of changes
due to deregulation, technological innovation, globalization etc.
Bangladesh banking sector is lagging for behind in adopting these
changes. Bank plays an important role in the business sectors and in
the industrialization of a country. Basically the banks take deposits
from the customers against interest and lend it to the borrowers
against interest cessation period. Under these circumstances of bank
offers different interest rates and other options to the customers to
remit and deposit their money. These options are vary common
among all the banks, but only the customer services and other
facilities very from bank to bank.
1.2. Definition of credit management
A function performed within a company to improve and control credit
policies that will lead to increased revenues and lower risk including
increasing collections, reducing credit costs, extending more credit to
creditworthy customers, and developing competitive credit terms.
Also called credit control.
1.3. Importance of Credit Management
Turnover can only become profit when your debtor has fully paid for
your product or service. It is of outmost importance that payment
takes place within the agreed upon time limit.

Your debtor paying later than agreed upon (or not paying at all), costs
your company a lot of money. Consequently, it may be necessary to
request payment or, in extreme cases, resort to legal debt collection.
A perfectly organised credit management contributes to a better
assessment of your credit risks as well as to a better collection of your
debts, increasing the efficiency of your company and its usable
capital.
A company may be confronted with a temporary or a structural credit
management problem.
A company can have a temporary problem like short-term payment
delays, lack of personnel or lack of practical knowledge in the field of
credit management. Companies in these situations can rely on
CRiONs credit managers. These managers will assess the credit risks,
take on the debtors efficiently, guarantee the continuity of debt
collection actions and critically screen debt collection in order to give
additional advice.
When a thorough change in the organisation takes place, external help
is often very necessary. Far reaching reorganisation measures and new
implementation procedures can be optimally monitored by CRiONs
project managers. They help to streamline processes of change,
minimize resistance and implement more efficient, more effective
working methods.
1.4. Objectives of the Study
The main objective of the study is to analyze the performance of
corporate and consumer loan disbursement of FSIBL. To achieve this
main objective the following sub objectives have been undertaken:
1. To examine the principles and procedures of credit planning.
2. To study the administrative aspects of credit management.
3. To evaluate the social objective of credit management.
4. To examine the lending policies and evaluating the lending
operations.
5. To examine the credit risk management.
6.To examine the recovery monitoring system of the credit.
7.To examine the impact of credit management profitability and
productivity.
8.To identify the major findings problems and recommendation.

1.5. Scope of the Study

This report will be dealing with the overview of First Security Ialami
Bank Ltd. & mainly deals with Loan Disbursement of this Bank.
The topic is fixed. But the report has tried to cover overview of
FSIBL objectives, functions, management, business policy and other
things. This report has also mentioned some problems of FSIBLs
Operating systems and its solutions. The empirical part includes only
the published information and current practices of the First Security
Islamic Bank Limited included.
1.6. Methodology of the Study
The research design is presented belowArea of the study
The proposed study has been focused on the Loan Disbursement of
the FSIBL. In relation with the primary & secondary objectives, the
Bahadderhat branch of the FSIBL has been selected to perform my
internship program.
Sources of information
Primary Data: Data has been collected primarily through
correspondence with the personnel working in different desks.
Secondary data: Secondary sources consist of several reading
materials such as circulars, journals, brochures, and annual reports.
The required data and information to prepare the assignment have
been collected from the
followings sources:
1. Procedures published by the FSIBL, Head office.
2. Files and documents of the branch.
3. Personal interview with branch officials and Executives.
Methods of data collection: The data presented in this report has
been collected from the annual reports of the bank from 2006 to 2010,
by taking interview of the credit officer, from the training instruments
of the bank, from published books and through structured
questionnaire.

Data Processing & Analysis: Data has been computerized &

processed by using MS Word, MS Excel. For the purpose of analyzing
the data we have presented in tabular form, percentage form with
necessary chart and graphs
1.7. Limitations of the study
Lack of adequate Information of banking institution for preparing
this report, so this report is based on only publicly available
information.
Although bankers have tried their best to help me, their nature of
job is such that gives them little time to discuss. It was very
difficult to get the actual information.

1.8.Plan of the study

Chapter -1 : Introduction

Chapter -2 :Overview of FSIBL

Chapter -3: The principles and procedures of credit planning

Chapter -4:The administrative aspects of credit management

Chapter -5: The social objective of credit management.

Chapter -6:The lending policies and evaluating the lending

operations.
Chapter -7:The credit risk management.
Chapter -8: The recovery monitoring system of the credit.
Chapter -9: The impact of credit management profitability and
productivity.
Chapter -10:The problems of credit management and to suggest
their probable solution.
Under the above discussion the next chapter -2 will deal with
the overview of FSIBL.

CHAPTER 2
Overview Of FSIBL

2.1. Overview of the bank

First Security Islami Bank Limited (FSIBL) was incorporated in
Bangladesh on 29 August 1999 as a banking company under
Companies Act 1994 to carry on banking business. It obtained

permission from Bangladesh Bank on 22 September 1999 to

commence its business. The Bank carries banking activities through
its 67 branches in the country. The commercial banking activities of
the bank encompass a wide range of services including accepting
deposits, making loans, discounting bills, conducting money transfer
and foreign exchange transactions, and performing other related
services such as safe keeping, collections and issuing guarantees,
acceptances and letter of credit. From January 01, 2009 bank has
converted into islami shariah based banking system instead of
conventional banking system. The bank has constituted a sariah
council consisting prominent ulama, bankers, lawyer and Economists
to advice and guide on the implementation of islami sariah in business
activates.
2.2 Mission of the bank
FSBL mission is to provide banking services to our valued clientele
with utmost proficiency & sincerity reinforced by an efficient
workforce and the latest state of the art technology.
2.3 Vision of the bank
The vision of FSBL is to always strive to achieve superior financial
performance, be considered a leading Islamic Bank by reputation and
performance.
Try to encourage savings in the form of direct investment.
To pay a vital role in human development and employment
generation.
To establish a welfare-oriented banking system.
2.4. Objectives of the bank
The objectives of the FSIBL are given below:
To provide efficient computerized banking system
To enhance Loan with their valued client
To accept deposits on profit-loss sharing basis.
2.5. Deposit

The deposit of First Security Islami Bank Ltd. Stood at tk. 56344.95
million as on 31.12.2010 as against tk.42423.09 million of 31.12.2009
registering an increasing of tk. 13921.86 million i.e.32.81% growth.
Deposit is the life-blood of a bank. Bank has given utmost
importance mobilization of deposit introducing a few popular and
innovative schemes.

2.6. Loans and Advance

First Security Islami Bank Ltd. has able to increase its investment
despite adverse condition in the domestic as well as in the global
economy. Total amounts of loans and Advance of the bank stood at tk.
52123.9 million as on December 31,2010as against tk.38725.87
million as on December 31, 2009 showing an increasing of
tk.13398.03 million With a growth rate of 34.6% Investments are the
core asset of a bank. The bank gives emphasis to acquire quality asset
and does appropriate lending risk analysis and follow all the terms
and condition all sorts of investments to client.

Chart-1

2.7 Branch Network

At present, the bank has 67 branches of which 26 branches are in

Dhaka Division, 26 branches are in Chittagong Division, 06 branches

Another few branches are planning to open within December 2011.
FSIBL has already started their on-line, SMS and ATM banking
facilities for their clients.
2.7. Services
(i) Deposits
In addition to the normal deposit scheme, the bank has introduced
attractive deposit scheme to encourage people and mobilize the
deposit. Deposit scheme are:
Current account
Short term deposit
Sundry Deposit
Savings Bank account
Fixed Deposit
Non Resident Foreign Currency Account
Resident Foreign Currency Account
Monthly savings Scheme
Monthly profit based savings scheme
Double benefit deposit Scheme
(ii) Online any Branch Banking
FSIB have set up Wide Area Network through Radio, Fibre-Optics &
other available communication media systems to provide any branch
banking to our customers.
Customer of one branch is now able to deposit and withdraw money
at any of our branches. All Branches are included in our Wide Area
Network. No TT/DD or cash carrying will be necessary.
(iii) SMS Banking

First Security Islami Bank Ltd. has officially launched SMS banking
service from December 17,2007.
(iv) Locker Service
For safekeeping of customer's valuables like important documents and
goods like jewelleries and gold ornaments, FSIB Locker Service is
available in most of the Branches in urban areas.

Under the above discussion the next chapter -3 will deal with the
principles and procedures of credit planning.

CHAPTER 3
The Principles And
Procedures Of Credit
Planning

CHAPTER 3

3.1. Principles
The Principles are:
To identify the credit approval, their securities and monitoring
process of FSIBL.
Identify the lending activities at FSIBL.
To identify the recovery rates of the loans in different sectors in last
4 years and have a comparison among them.

3.2. Overall procedure for sanctioning loan

The following procedure need to be followed for giving advances to
the customer. These are:
a) Partys application
b) Filling form-A
c) Collecting CIB report from Bangladesh Bank
d) Processing loan proposal
e) Project appraisal
f) Head office approval
g) Sanction letter
h) Documentation
i) Disbursement

A. Partys application
At first borrower had to submit an application to the respective branch
for loan, where he/she has to clearly specify the reason for loan. After
receiving the application form the borrower Bank officer verifies all
the information carefully. He also checks the account maintains by the
borrower with the Bank. If the official becomes satisfied then he gives
form-A (prescribed application form of Bank) to the prospective
borrower.

B. Filling Form -A
After satisfying with partys application the applicant need to fill
Form-A. It is the prescribed form provides by the respective branch
that contains information of the borrower. It contains- Name with its
factory location, Official address and telephone number, details of
past and present business, its achievement and failures, type of loan
needed etc.

C. Collecting CIB Report from Bangladesh Bank

After receiving the application for advance, Dhaka Bank sends a letter
to Bangladesh Bank for obtaining a report from there. This report is
called CIB (Credit Information Bureau) report. Dhaka Bank generally
seeks this report from the head office for all kinds of investment. The
purpose of this report is to being informed that whether the borrower
has taken loan from any other Bank; if yes then whether the party
has any overdue amount or not.

D. Processing loan Proposal

After receiving CIB report from Bangladesh Bank, then respective
branch prepare an Investment proposal, which contains terms and
conditions of Investment for approval of Head Office. Documents
those are necessary for sending Investment proposal are:
Necessary Documents
While advancing money, banks create a lot of documents, which are
required to be signed by the borrowers before the disbursement of the
loan. Of them some are technically called charge documents.
Necessary steps and documents:
1. Loan application form duly signed by the customer.
2. Acceptance of the term and conditions of sanction advice.
3. Trade license.

4. In Case Of Partnership Firm, copy of registered partnership deed

duly certified as true copy or a partnership deed on non-judicial stamp
of taka-150 denomination duly
notarized.
5. In Case Of Limited Company
a. Copy of memorandum and articles of association of the company
including certificate of incorporation duly certified by Registered
Joint Stock Companies (RJSC) and attested by the managing director
and accompanied by an up-to-date list of directors.
b. Copy of board resolution of the company for availing credit
facilities and authorizing managing director/chairman/director for
execution of documents and operation of the accounts.
c. An undertaking not to change the management of the company and
the memorandum and article of the company without prior permission
d. Copy of last audited financial statement up to last 3 years.
e. Personal guarantee of the directors including the chairman and
managing director.
f. Certificate of registration of charges over the fixed and floating
assets of the company duly issued by RJSC.
g. Certificate of registration of amendment of charges over the fixed
and floating assets of the company duly issued by RJSC in case of
repeat loan or change in terms and conditions of sanction advice
regarding loan amount and securities etc.
6. Demand promissory notes.
7. Letter of hypothecation of stocks and goods.
8. Letter of hypothecation of books debts and receivable.
9. Letter of hypothecation of plant and machinery.
10. Personal letter of guarantee.

E. Project Appraisal
It is the pre-investment analysis. Project appraisal in the Banking
sector is important for the following reasons:
To achieve organizational goals
To recommend if the project is not designed properly
To justify the soundness of an investment

 To ensure repayment of Bank finance

Techniques of Project Appraisal
An appraisal is a systematic exercise to establish that the proposed
project is a viable preposition. Appraising officer checks the various
information submitted by the promoter in first information sheet,
application for Investment and Investment proposal. The Head Office
(HO) mainly checks the technical, commercial and financial viability
of the project. For others, HO is dependent on branchs information.
But when the investment size is big, then the HO verifies the
authenticity of information physically.
F. Head Office Approval
When Head office receive appraisal from the branch then, Head
Office again appraises the project. If it seems to be a viable one, the
HO sends it to the Board of Directors for the approval of the
Investment. The Board of Directors (BOD) considers the proposal and
takes decision whether to approve the Investment or not. If the BOD
approves the investment, the HO sends the approval to the concerned
branch.
The respective officer of Head Office appraises the project by
preparing a summary named Top Sheet or Executive Summary
and then he sends it to the Head Office Credit Division for the
approval of the Loan. The Head Office Credit Division considers the
proposal and takes decision whether to approve the Investment or not.
If the committee approves the investment; the HO sends the approval
to the concerned branch.
G. Sanction Letter
After getting the approval of the HO the branch issues sanction letter
to the borrower. A sanction
letter contains:
o Name of borrower,
o Facility allowed,
o Purpose,
o Rate of interest,
o Period of the Investment and mode of adjustment,
o Security and Other terms and condition.

H. Documentation
If the borrower accepts the sanction letter, the Documentation starts.
Documentation is a written statement of fact evidencing certain
transactions covering the legal aspects duly signed by the authorized
persons having the legal status. The most common documents used by
the Dhaka Bank for sanctioning different kinds of Investment are:
o Joint Promissory Note,
o Letter of Arrangement,
o Letter of Disbursement,
o Letter of Instalment,
o Letter of Continuity,
o Trust Receipt,
o Counter Guarantee,
o Stock Report,
o Letter of Lien,
I. Disbursement
After sanction and completion of all formalities the respective officer
disburses the loan. The officer writes cheque and provides it to the
borrower. For this borrower has to open an account through which
he/she can withdraw the money.
Strategies for Recovery: Recovery of loan can be made in the
following three methods:
1) Persuasive Recovery: The first step in recovery procedure is private
communication that creates a mental pressure on borrower to repay
the loan. In this situation bank can provide some advice to the
borrower for repaying the loan.
2) Voluntarily: In this method, some steps are followed for recovering
loan. These are:
a. Building Task Force
b. Arranging Seminar
Under the above discussion the next chapter -4 will deal with the
administrative aspects of credit management.

CHAPTER 4
The Administrative Aspects
Of Credit Management

CHAPTER 4

4.1. Functions of credit division

Money lending is one of the main functions of a commercial bank. In
the lending process, selection of borrower is the most crucial and vital
job for a banker. Before a customer enjoys credit facilities it is
important that the applicant should qualify for five Cs. The five Cs
are:
Character Intention to pay back the loan
Capacity Borrowers competence in terms of utilizing the fund
profitably and generate income
Capital Financial strength to Lending cover the risk
Conditions General business condition between two parties
Collateral Implies additional securities
In addition, objectives of the credit department are managing credit
exposure of the bank, maintaining credit risk, compliance of Central
Bank Ltd, recovering or collecting dues of retail loans or advances. At
present credit division performs following activities:
Dealing with Corporate & Retail Credit
Perform Collection and Monitoring Activity
Support Recovery & Risk Management
Besides this, the activities of this department include managing the
financial books of the bank, checking all entries of the book are
according to standards, preparing daily reports for Bangladesh Bank,
revenue appropriation and calculations, setting the internal pricing
rates etc.

4.2.Operational guidelines for different credit facilities

Broadly, there are two types of loan such asq RETAIL LOAN AND
q CORPORATE LOAN

For each different types of loan, credit officer have follow different
steps to accomplish credit activities appropriately. Each and every
step is given below for various purposes of loan.
q RETAIL LOAN: Retail loan can be classified into different types
which are as follows1. Secured Overdraft (FO-FDR, DPS)

In case of Fresh loan:

a) Receiving customer Application (RFCL)
b) Receiving the Instrument (FDR, DPS) duly discharged by the client
c) Verification of the Instrument, signature verification & lien
marking from General
Banking Division
d) Preparation of Office Note
e) Preparation of Sanction Advice & get it accepted by the client
f) Obtain charge documents from the clients
g) Mail limit request form to Credit Admin, Head Office for limit
insertion
h) Deduct charges
i) Stamping the charge documents
j) Entry of Security Documents in the SISO Register
k) Safekeeping of Security Documents in the Safety Vault.
In case of Renewal:
a) Receiving customer Application
b) Preparation of Office Note
c) Preparation of Sanction Advice & get it accepted by the client
d) Obtain charge documents from the clients
e) Mail limit request form to Credit Admin, Head Office for limit
insertion
f) Entry of Security Documents in the SISO Register
g) Safekeeping of Security Documents in the Safety Vault.
In case of Enhancement:
a) Receiving customer Application
b) Receiving new Instrument (FDR, DPS) duly discharged by the
client

c) Verification of the Instrument, signature verification & lien

marking from General Banking Division
d) Preparation of Office Note
e) Preparation of Sanction Advice & get it accepted by the client
f) Obtain charge documents from the clients
g) Mail limit request form to Credit Admin, Head Office for limit
insertion
h) Deduct charges
i) Stamping the charge documents
j) Entry of Security Documents in the SISO Register
k) Safekeeping of Security Documents in the Safety Vault.
In case of Reduction:
a) Receiving customer Application
b) Ensure outstanding has brought down (By cash or encashment of
FDR)
c) Preparation of Office Note
d) Preparation of Sanction Advice & get it accepted by the client
e) Mail limit request form to Credit Admin, Head Office for limit
reduction
f) Return of Original Instrument (if adjustment by cash)
g) Entry the release of Instrument in the SISO Register (Take clients
signature on the register)
In case of closing the Account:
a) Receiving customer Application with cheque book (if issued)
b) Ensure adjustment of outstanding liability (By cash or encashment
of FDR
c) Mail limit cancellation request form to Credit Admin, Head Office
d) Close the account
e) Return of Original Instrument (if adjustment by cash)
f) Entry the release of Instrument in the SISO Register (Take clients
signature on the register)

2. Personal Loan
Application & Disbursement:
a) Receiving customer Application in prescribed form along with
required documents & Application fee.
b) Receiving CIB Undertaking for the Applicant & Guarantor along
with fee.
c) Scrutinize the Application Form & attached documents carefully
d) Forward the Application Form & CIB Undertaking to Head Office
(if found in order and you are satisfied)
e) Follow-up the progress of the file in Retail Banking Division
f) Preparation of Sanction Advice & get it accepted by the client after
getting approval from Head Office
g) Obtain signature on the charge documents from the client
h) Obtain 3 unfilled Cheques from the client
i) Ensure deposit of charges by the client in the link account
j) Disburse the Loan by transferring the amount to clients Savings
Account after completion of documentation as per H.O. approval
k) Stamping the charge documents
l) Entry of Security Documents in the SISO Register
m) Safekeeping of Security Documents in the Safety Vault.
3. Car Loan
Application & Disbursement:
a) Receiving customer Application in prescribed form along with
required documents & Application fee.
b) Receiving CIB Undertaking for the Applicant & Guarantor along
with fee
c) Scrutinize the Application Form & attached documents carefully
d) Forward the Application Form & CIB Undertaking to Head Office
(if found in order
and you are satisfied)
e) Follow-up the progress of the file in Retail Banking Division
f) Preparation of Sanction Advice & get it accepted by the client after
getting approval from Head Office.
g) Obtain signature on the charge documents from the client
h) Obtain 3 unfilled Cheques from the client

i) Issue Purchase Order in favour of the Car Vendor with other related
documents.
j) Obtain all required Car Documents (copy of Registration &
Insurance cover note, Original Delivery Chillan, Bill, Money Receipt,
and Insurance Policy) and cross match those with the sanction &
Quotation.
k) Physically verify the vehicle (Reg. No., Engine No. & Chassis No.)
l) Ensure deposit of charges by the client in the link account
m) Disburse the Loan vide Pay Order favouring Car Vendor after
completion of documentation as per H.O. approval.
4. Home Loan
Application & Disbursement:
a) Receiving customer Application in prescribed form along with
required documents & Application fee.
b) Receiving CIB Undertaking for the Applicant & Guarantor along
with fee
c) Scrutinize the Application Form & attached documents carefully
d) Visit the property to physically verify the possession & ownership
and also obtain valuation Report by the Surveyor
e) Forward the Application Form & CIB Undertaking to Head Office
(if found in order and you are satisfied)
f) Follow-up the progress of the file in Retail Banking Division
g) Preparation of Sanction Advice & get it accepted by the client after
getting approval from Head Office
h) Obtain all land related documents from the client and get it verified
by the lawyer (Vetting the Documents)
i) Obtain signature on the charge documents from the client
j) Obtain 3 unfilled Cheques from the client
k) Execute Tripartite Agreement as per Lawyers draft
l) Complete all other documentation formalities as per H.O. approval
m) Physically verify the
n) Ensure deposit of all charges by the client in the link account
o) Disburse the Loan vide Pay Order favouring Car Vendor after
completion of documentation as per H.O. approval
p) Stamping the charge documents
q) Entry of Security Documents in the SISO Register

4.3.Credit Administration
The administration function is critical in ensuring that proper
documentation and approvals are in place prior to the disbursement of
loan facilities. For this reason it is essential that the function credit
administration be strictly segregated from relationship management/
marketing in order the possibility of controls being compromised of
issues not being highlighted at the appropriate level.

4.4.Credit Monitoring
To minimize credit losses, monitoring procedures and systems shall
be in place that provides an early indication of the deteriorating
financial health of a borrower. At a minimum, systems shall be in
place to report the following exceptions to relevant executives in
CRM and RM team:
Past due principal or interest payments, past due trade bills, account
excesses, and breach of loan covenants.
Loan terms and conditions are monitored, financial statements are
received on regular basis, and any covenant braches or exceptions are
referred to CRG and the RM team for timely follow-up.
Timely corrective action is taken to address finding of internal,
external or regulator inspection/audit.
All borrower relationships/loan facilities are reviewed and
approved through the submission of a credit proposal at least
annually.
Under the above discussion the next chapter -5 will deal with the
social objective of credit management.

CHAPTER 5
Social Objective Of Credit
Management

5.1.Corporate Social Responsibility

FSIBL is committed to their corporate responsibility toward the
community. They allocate 2% of their tax profit for CSR practices
each year. They have also taken numerous initiatives towards social
welfare and community development. They also donated Anti-Drug Campaign in Chittagong
Donation to Prime Ministers Relief Fund for bereaved family
members of the Army Officers during the recent carnage at BDR
Head Quarter, Peelkhana, Dhaka on March 10, 2009 of taka 25
Lac.
Donation to Prime Ministers Relief Fund for bereaved family
members of the Army Officers during the recent carnage at BDR
Head Quarter, Peelkhana, Dhaka on April 1, 2009 of taka 9.60
Lac.
Donation to BIRDEM Hospital in 2009 of taka 24 Lac.
Donation to Centre for Women &Child Health Hospital in 2009
of taka 24 Lac.
Contribution to Bangladesh Tennis Federation (BTF) as
sponsorship of 23rd Bangladesh International Junior Tennis
Championships 2009 of taka 5 Lac.
Financial assistance for Shahidbagh Jame Mosque, Dhaka of
taka 50 Lac.
Financial assistance for Kapasatia Jame Mosque, Hossainpur,
Kishoreganj of taka 20 Lac.
Donation to Bangladesh Hockey Federation for sponsorship of
Jawharlal Nehru Cup Hockey Tournament of taka 10 Lac.
Donation for the Aila Cyclone Victims of taka 10 Lac.
Donate 2 unit of Ambulances to be used by the Highway Police
of taka 48.86 Lac.
Donation to the Players and Officials of National Hockey Team
for winning 3rd AHP Cup Tournament held in Singapore of taka
2 Lac.
Donation to Bangladesh Athletic Federation Sponsorship of 25 th
National Junior Athletic Championships 2009 of taka 8 Lac.

 Sponsorship of Air Ticket an international player to participate

in International Chess Tournament to be held in Hungary of taka
0.80 Lac.
5.2.Ensuring better liquidity management
Under the market-oriented practice adopted by the Bangladesh Bank,
unilaterally imposed regulatory mechanisms are unlikely to contribute
toward reducing the IRS in a sustained manner. Raising reserve ratios
and/or increasing bank equity, for example, would more likely to
induce the banks to increase IRS to cover the higher cost of loan able
funds. On the other hand, measures like introduction of deposit
insurance should contribute to reducing the IRS.
Similarly, other plausible measures of reducing interest rate volatility
and IRS include introducing refinance facility and market stabilisation
funds, ensuring greater predictability of Bangladesh Bank's stand on
inflation and monetary policy, and creating higher capability to
procure funds and wider access to international markets for funding
and hedging the interest rate risks.
5.3.Improving institutional efficiency
Since the financial sector reform programme aims at bringing a
competitive and liberalised environment leading to more integrated
and efficient functioning of the financial markets, it is important for
Bangladesh Bank to adopt deposit and lending rates (and hence IRS)
of different bank groups as important indicators, monitor their
movements regularly, and adopt appropriate measures to bring
convergence toward competitive rates except for risk and other real
differences.
For ensuring such a competitive level of IRS, the banking sector
needs to move toward achieving a level of institutional efficiency that
would ensure effective competition, efficient banking operations, and
credible risk and portfolio management within an environment
characterised by high standards of regulation and supervision by
Bangladesh Bank.

5.4.Strengthening local banks

As the present analysis shows, the local banks (SCBs, PCBs, and
SBs) are weak compared with the FCBs on most counts of earning
and profitability indicators and hence face unfair competition. For
these banks, the better return on capital is mainly due to their small
paid up capital relative to total equity.24 It is important therefore for
the Bangladesh Bank to use its regulatory power to strengthen the
capital base of the local banks. This is necessary to strengthen the
local banks especially in view of the increasing competition that the
local banks will have to withstand as the banking sector opens up
through reform and liberalisation enabling greater participation of the
foreign banks.

Under the above discussion the next chapter -6 will deal with the
lending policy and evaluating the lending operations.

CHAPTER 6
The lending Policy And
Evaluating The lending
Operations

6.1. Overall Credit Policy of FSIBL

Lending being the most important function of commercial bank, every
bank should have own credit policy. Credit policy generally aims at
(a) creating healthy loan assets to ensure goods interest earning for the
bank (b) ensuring ultimate safety through judicious selection of based
on its saleability.
The credit policy of FSIBL has been formulated of the plan of ALL
NEW LOANS TO BE GOODS LOANS, The plan was formed on the
basis of the following objectives:
To maximize the profit of the bank by making sound lending
To deliver credit to viable borrowing at a reasonable cost
To provide satisfactory return on investment
To assist the social and economic development of the country
To deliver general banking services to the public and credit to
viable borrowers at a reasonable cost.
6.2. Rules for Application
Interested clients shall apply to any branch of the bank as per
following procedures:
1. Application In Banks prescribed form duly filled in all accounts.
2. Two passport size photographs duly attested.
3. A certificate of net monthly income from the employer (in case of
Service holders).
4. Suppliers should be authorized by the Bank.
6.3. Documentation of Loan
The customer will execute the following documents:
D.P. Note
Letter of Undertaking
Letter of Instalments
Letter of Hypothecation
Loan Agreement Under Consumers Finance Schemes

 Letter of disbursement
Letter of Authority
The client will also submit crossed cheques in advance for all the
stipulated instalments in favour of the Bank towards repayment of
loan including interest and service charge.
Personal guarantee of two officials of the same rank or of superior
rank of the borrower, officers/Managers of Bank in the grade of
principal officer or above. The guarantor must have to be a man of
means and shall have to be acceptable to bank. Security in the form
of FDR/BSP/PSP or Bank/ Insurance guarantee or corporate if
possible may be obtained. The articles procured under the scheme
shall remain hypothecated to the bank as security.
6.4. Loan Sanction
Clients demand specific amount of loan from the Bank after making
justification of clients demand, the amount of money sanctioned by
Bank as loan is called Loan Sanction. Generally the loan FSIB offers
to its clients is divided into two categories; Retail loan and
Consumer Credit Scheme.

Under the above discussion the next chapter -7 will deal with the
credit risk management.

CHAPTER 7
The Credit Risk
Management

7.1. Impaired Asset Management Department

This department of the bank looks after the default loans and tries to
recover them. It is said that the less job load this department has, the
better it is for the bank itself. The head of IAM directly reports to the
Managing Director of the Bank and this division is an administrative
division of the bank. This department of the bank has two wings. One
wing looks after the impaired assets of SME wing and another wing
looks after the impaired assets of retail business. Normally if a loan
instalment is six months over due, then the credit department hands
over the file to IAM for recovery. IAM first issues a letter in soft
language. Then if it does not work, IAM issues further three letters to
the defaulter. If it does not work either, then IAM files a case against
the defaulter. Usually this case filing is done in the 11 month of the
default.
Loan Admin - The posting is done in the system in the Asset
Operations Department. Then Loan Admin sends requisition to Fin
Admin.
Fin Admin: Fin Admin take care of the other expenses.
Recovery: Recovery Dept. prepares an overdue report and informs the
TM. Recovery dept. keeps track of the money. Legal notices are given
to the defaulters.
MIS: MIS dept. keeps the total record of loan from its sanction to
repayment.
7.2. Credit assessment
The evaluation process is carried out based on Lending Guideline
described in this Policy and the clauses and documents checklist as
per the PPG. The detailed credit risk assessment should be conducted
prior to the approving of any loans. The Credit Risks are detailed in
the Risk Management Chapter of this policy.

7.3. Risk grading

Bank shall formulate a separate risk-grading matrix customized for
SME financing on the basis of expert opinion taking into
consideration the experience of the Bank in lending the SMEs for last
few years.
7.4. Reporting to business unit
A monthly summary of all new loans approved, renewed, enhanced,
and a list of proposals declined stating reasons thereof shall be
reported by Credit Team to the Business Head.
7.5. Rejection database
A rejection database is to be maintained listing the businesses and
owners/sponsors to ensure that businesses and owners/sponsors with
bad history, dubious integrity and high delinquency rate do not get
loan from banks.
7.6. Audit & Risk Management Division
The Risk Management Division is responsible for
measuring risks that the Bank might face in the course
of its operations, developing corporate risk
management policies and ensuring that risks remain
within the limits in which the Bank prefers to bear such
risks in line with its own strategic targets and risk
appetite. The primary goal of risk management is to
provide capital to businesses in line with their risks
(economic capital), maximize risk-adjusted return and
increase the added value.

Under the above discussion the next chapter -8 will deal with the
monitoring system of the credit.

CHAPTER 8
The Monitoring System Of
The Credit

8.1. Credit monitoring

To minimize credit losses, monitoring procedures and systems shall
be in place that provides an early indication of the deteriorating
financial health of a borrower. At a minimum, systems shall be in
place to report the following exceptions to relevant executives in
CRM and RM team:
Past due principal or interest payments, past due trade bills, account
excesses, and breach of loan covenants.
Loan terms and conditions are monitored, financial statements are
received on regular basis, and any covenant braches or exceptions are
referred to CRG and the RM team for timely follow-up.
Timely corrective action is taken to address finding of internal,
external or regulator inspection/audit.
All borrower relationships/loan facilities are reviewed and
approved through the submission of a credit proposal at least
annually.
8.2. Early Alert process
An Early Alert Account is one that has risks or potential weaknesses
of a material nature requiring monitoring, supervision, or close
attention by management.
If these weaknesses are left uncorrected, they may result in
deterioration of the repayment prospects for the asset or in the Banks
credit position at some future date with a likely prospect of being
downgraded to CG 5 or worse (Impaired status), within the next
twelve months.
Early identification, prompt reporting and proactive management of
Early Alert Accounts are prime credit responsibilities of all
Relationship Managers and must be undertaken on a continuous basis.
An Early Alert report should be completed by the RM and sent to the
approving authority in CRM for any account that is showing signs of
deterioration within seven days from the identification of weaknesses.
The Risk Grade should be updated as soon as possible and no delay
should be taken in referring problem accounts to the CRM department
for assistance in recovery.

Despite a prudent credit approval process, loans may still become

troubled. Therefore, it is essential that early identification and
prompt reporting of deteriorating credit signs be done to ensure
swift action to protect the Banks interest.
The symptoms of early alert shown in are by no means exhaustive
and hence, if there are other concerns, such as a breach of loan
covenants or adverse market rumours that warrant additional caution,
an Early Alert report should be raised.
Moreover, regular contact with customers will enhance the likelihood
of developing strategies mutually acceptable to both the customer and
the Bank. Representation from the Bank in such discussions should
include the local legal adviser when appropriate.
8.3. Custodial Duties
Loan disbursements and the preparation and storage of security
documents should be centralised in the regional credit centres.
Appropriate insurance coverage is maintained (and renewed on a
timely basis) on assets pledged as collateral.
Security documentation is held under strict control, preferably in
locked fireproof storage.

8.4.Categories of loan
All loans advances will be grouped into 4 categories for the purpose
of classification.
These areas Continuous Loan
Demand Loan
Fixed Term Loan and
Short Term Agricultural & Micro Credit
Continuous Loan: The loan Accounts in which transaction may be
made within certain limit and have an expiry date for full adjustment
will be treated as continuous loan. For example: CC (cash credit), OD
(Over Draft) etc.
In continuous loan bank need some collateral securities to the
customer. If customer wants to take a lone against his FDR (any bank
account) he has to submit all documents of FDR. He also take loan
against his fix assets like land, house.
Demand Loan: The loan that becomes repayable on demand by the
bank will be treated as Demand Loans. If any contingent or any other
liabilities are turned to forced loans (i.e. without any prior approval as
regular loan) those too will be treated as Demand Loans.
Such as: Forced LIM, PAD, FBP, and IBP etc.
In demand loan bank need charged documents (shown in 4.3). If
customer wants to take loan against his house, at first bank have to
see all deeds and documents legal or not, then take the valuation of
assets and give loan 80% (force rate) of value.
Fixed Term Loan: Loans which are repayable within a specific time
period under a specific repayment schedule will be treated as Fixed
Term Loans.
Short Term Agricultural & Micro Credit: Short Term Agricultural
& Micro Credit will include the short-term credits as listed under the
Annual Credit program issued by the Agricultural Credit department
of Bangladesh Bank. Credit in the agricultural sector repayable within
less than 12 months will also be included herein. Short-term Micro-

Credits will include any Micro-Credits for less than Tk. 25,000/- and
repayable within less than 12 months, be those termed in
any names Such as non-agricultural credit, self-reliant Credit,
Weavers Credit or Banks individual project credit.
Actually this loan doesnt need special documents. Its only need
chairmen/commissioner certificate.
Term Loan
A term loan is a contract under which a borrower agrees to make a
series of interest and principal payments on specific dates to the
lender. Term loan have three major advantages over public offeringsspeed, flexibility & low issuance costs.
There are two of term loan one is short term another is long term.
Short term loan is only five years or less than five years and long term
loan up to five years. These two loan recovery system can be same
like instalment.
8.5.Credit Monitoring
To minimize credit losses, monitoring procedures and systems shall
be in place that provides an early indication of the deteriorating
financial health of a borrower. At a minimum, systems shall be in
place to report the following exceptions to relevant executives in
CRM and RM team:
Past due principal or interest payments, past due trade bills, account
excesses, and breach of loan covenants.
Loan terms and conditions are monitored, financial statements are
received on regular basis, and any covenant braches or exceptions are
referred to CRG and the RM team for timely follow-up.
Timely corrective action is taken to address finding of internal,
external or regulator inspection/audit.
All borrower relationships/loan facilities are reviewed and
approved through the submission of a credit proposal at least
annually.

8.6.Operational Network
FSIBL is currently operating with the highest operating network
among the private commercial banks (PCBs). The bank has been
operating with 86 branches (including 30 SME/Agriculture branches)
with the inclusion of 15 new branches during 2011. In order to
facilitate and control the administrative function of the branches,
FSIBL has set up 12 zones including one new zone (Mymensingh)
throughout the country. Among 86 branches, 9 branches are in Dhaka
Central Zone, 24 branches (excluding 2 SME/Agriculture branches) in
Dhaka South Zone, 22 branches (excluding 2 SME/Agriculture
branches) in Dhaka North Zone, 15 branches (excluding 2
SME/Agriculture branches) in Chittagong North Zone, 16 branches
(excluding 2 SME/Agriculture branches) in Chittagong South Zone,
24 branches (excluding 4 SME/Agriculture branches) in Bogra Zone,
23 branches (excluding 3 SME/Agriculture branches) in Khulna Zone,
29 branches (excluding 4 SME/Agriculture branches) in Comilla
Zone, 20 branches (excluding 3 SME/Agriculture branches) in Sylhet
Zone, 17 branches (excluding 3 SME/Agriculture branches) in
Barishal Zone, 18 branches (excluding 3 SME/Agriculture branches)
in Rajshahi Zone and 19 branches (excluding 2 SME/Agriculture
branches) in Mymensingh Zone. This large branch network of FSIBL
is supported by 100 own ATM and 1035 shared ATM along with 30
SME/Agriculture branches and Internet Banking.

8.7. Recovery Rate

The recovery perspective in Bangladesh has always been poor and
ineffective that sometimes made the Banking sector insolvent.
However, the recovery rate of NCBs, PCBs and ICBs are given
below:

Table 1: Recovery Rate of NCBs, PCBs and ICBs

Source: Various Issues of FSIBL and Newspaper Articles.

the comparison of NCBs and PCBs show that in order to strengthen

the economic conditions of the economy, the NCBs must be improved
in terms of its NPL, ROA, ROE, NII and other monitoring,
assessment and performance evaluation metrics. The Islamic Banks
have been found to be investing generally in the projects with quick
returns resulting higher recovery rate of commercial loans provided
by the banks. This leads the banks not to take up the projects with
long gestation period, i.e., insignificant investment under Mudaraba
and Musharaka mode of financing. The short term financing under
Murabaha and Bai Muajjal assures the required rate of return, as
themark up of profit is pre assigned according to the bankers and the
users of the loans. Moreover, the Islamic Banks cover their loan risk
by taking the collateral and other forms of securities such as FDR
Account with the Bank. Thus, the better performance recovery rate of
commercial loans in Islamic Banks is due to its lending portfolio and
its different modes of financing. Generally, the Islamic Banks are not
performing the true Islamic Banking instruments.

Table-2

Source: News paper Source and Various Issues of FSIBL.

8.8. Sectoral and Credit Concentration (Stand alone basis)

The bank is continuing its operation with concentration to trade
finance and textile sector. The sectoral portfolio reveals that 32.52%
investment was in trade finance, followed by 20.82% in textile, 5.24%
in iron & steel engineering, 5.04% in housing, 3.50% in RMG, 2.00%
in agricultural sector and rest are segregated to other general
investment. While reviewing sectoral NPI in 2011, it was revealed
that classified investment pie is mostly comprised of trade finance
(23.16%) followed by Textile (20.34%), Transport (19.53%), House
building (4.59%), others (30.23%) and rest are insignificantly
distributed in different sectors. CRISL views that the bank is
significantly exposed to sectoral concentration risk in textile sector
which might be affected with the volatility of commodity price both
in the national and international market and the sectoral performance.

CRISL reviewed financing facilities extended to Group of companies

of FSIBL and it was revealed that the funded exposure of the bank to
different Group of companies contribute significant portion of capital
which exposes the bank to credit concentration risk.
8.9. Finance & Advisory Services
Given the needs of its large and varied base of corporate clients
FSIBL will be positioning itself to provide investment banking
advisory services. These could cover a whole spectrum of activities
such as Guidance on means of raising finance from the local Stock
markets, Mergers and Acquisitions, Valuations, Reconstructions of
Distressed companies and other expert knowledge based advice. By
this means FSIBL hopes to play the role of strategic counsellor to
blue-chip Bangladesh companies and then move from the level of
advice to possible implementation of solutions to complex financing
problems that may arise from time to time.
8.10. Loan Recovery Unit
The RU should directly mange accounts with sustained deterioration.
All time bank monitoring the loan client with a very special care. If
any client fails to adjust his loan amount, bank has to take some step
against client to recover the loan. The RUs Functions
are:
At first, Bank can send 3 times reminder to the client. (1st
reminder, 2nd reminder,3rd reminder).
Make call to the customer or verbally say the entire problem about
loan adjustment and request to clean up all the deals.
If client fail to pay the money the guarantor is responsible to pay
in terms of complain.
Under the above discussion the next chapter -9 will deal with the
impact of credit management profitability and productivity.

CHAPTER 9
The Impact Of Credit
Management On
Profitability And
Productivity

9.1. Financial Highlights of FSIBL

Although there are a number of other competitors, this serves as a
basic competitors for FSIBL. For Bahadderhat Branch, it seemed the
competitors are the surrounding banks. I have done a questionnaire
method and face-to face interview lush secondary information to
collect the following data.
Chart-2:Basic competitors for FSIBL

Analysis:
From the survey, I found that out of 100 percent 36 percent of the
total sample size said that the overall quality of DBL is excellent, 34
percent good and 30 percent moderate.

Chart-3:Loan department of FSIBL

How satisfied you are by the Loan Department of FSIBL?

Analysis:
Here I find that among 50 (100%) clients 20 (40%) are very much
satisfied with the loan department of FSIBL where as only 1 (2%) is
very dissatisfied with the performances. But average percent is good.
Here we can see that 2 clients are dissatisfied and 1 is very
dissatisfied. The reason that he was dissatisfied was because he
wanted more time to pay his instalments. But FSIBL did not allow
this.

9.2. Customer Satisfaction

I have done a questionnaire method and face-to face interview lus
secondary information to collect the following data.

Table-3:Quality of service of FSIBL

How do you rate the quality of services of FSIBL?

Chart-4:Qality of service of FSIBL

Analysis:
From the survey, I found that out of 100 percent 36 percent of the
total sample size said that the overall quality of FSIBL is excellent,
34 percent good and 30 percent moderate.

9.3. Loan Department

How satisfied you are by the Loan Department FSIBL?
Table-4:Loan department of FSIBL

Analysis:
Here I find that among 50 (100%) clients 20 (40%) are very much
satisfied with the loan department of FSIBL where as only 1 (2%) is
very dissatisfied with the performances. But average percent is good.
Here we can see that 2 clients are dissatisfied and 1 is very
dissatisfied. The reason that he was dissatisfied was because he
wanted more time to pay his instalments. But FSIBL did not allow
this.
9.4. Credit Department
How would you rate the quality of The Credit Department service
of Bank Limited?
Table-5:Credit department of FSIBL

Chart-5:Credit department of FSIBL

Analysis:
From the survey, I found that out of 100 percent 38 percent of the
total sample size said that the overall quality of lending service of
FSIBL is excellent, 22 percent satisfactory and 24 percent moderate
and only 16 percent is not dissatisfactory. It means the overall opinion
of clients is positive about the quality of customer care service of
FSIBL.

Chart-6:Total ATM Booths

Analysis:
Here in the graph we can see BRAC Bank have maximum ATM
booths around 120, next we have DBBL who have total of 65 ATM
booths. EBL and SCB have almost equal number of ATM booths.
Mercantile Bank, AB Bank and Dhaka Bank have least ATM booth in
different division in Bangladesh. Surprisingly MTB and UCBL dont
have any ATM booth, in order to meet up with customer requirements
they have co branding with FSIBL for providing ATM service.

9.5. Ratio Analysis

Capital Adequacy Ratio
This ratio expresses capital as a proportion of total risk-weighted
assets. Both capital and assets should be fairly stated with the
appropriate loan loss provisions and intangible assets having been
deducted. This ratio indicates the margin of protection available to
both depositors and creditors against unanticipated losses that may be
incurred by the bank. For the FSIBL, the ratio is computed as:

Earning Assets to Total Assets Ratio: This consists of earning assets

(interest-bearing investments, loans and advances) divided by total
assets. It will reveal the extent to which bank's assets are put into
productive use. Investment in equipment and buildings may not
directly generate income but they are important for the bank's
operations. For the FSIBL, the ratio is computed as:

Cash Ratio
This ratio relates the sum of cash in hand and at banks including the
Central Bank to total deposits. For the FSIBL, the ratio is calculated
as:

Loans to Deposit Ratio

This ratio is a measure of bank liquidity; the higher the ratio, the
lower the liquidity. For the FSIBL, the ratio is calculated as:

FIRST SECURITY ISLAMI BANK LIMITED

BALANCE SHEET

Loans to Assets Ratio

The loans to asset ratio is similar to the loans to deposits ratio. Other
things equal, a rise in this ratio would indicate lower liquidity and the
need to evaluate other liquidity ratios. For the FSIBL, the ratio is
computed.

There is no standard way to measure a bank's liquidity. Those without

access to internal data will have to use a number of ratios. Larger
banks will have greater flexibility in liquidity planning because they
can practise liability management nation-wide. Because of this ability,
their liquidity planning horizon is much shorter than it is for smaller
banks.

9.6. Profitability Ratio

Return on Assets
Return on assets, often described as the primary ratio, relates the
income earned by the bank to the resources employed by it. Normally

return' is taken as profit before extraordinary items, since these items

fall outside the scope of the bank's normal operations. This does not

mean that extraordinary items should be ignored by the analyst, but

that their significance should be assessed as a separate exercise from
the analysis of the bank's performance.

For the FSIBL, the ratio would be computed as follows:

The ratio of profit before tax to average total assets essentially is an

indication of management ability to generate income and its ability to
control expenses. The variations in this ratio could be due to a number
of factors including a portfolio shift to higher or lower yielding assets,
an increase or decrease in the level of interest rates, or an increase or
decrease in fees and other income not related to the employment of
assets.

Return on Equity
This ratio relates profit earned after tax by the bank to resources
contributed by its owners, i.e. ordinary share capital plus reserves.

Under the above discussion the next chapter -10 will deal with the
major findings problem and recommendation.

CHAPTER 10
Major Findings Problems
And Recommendation

10.1. Documents deficiency and problem resolving:

If there is any error found then it informed to the respective CRO. If
the application form is not filled properly then the file is sent to the
CRO to fill the application properly. If any document error is found
then the loan administration division asks the CRO to send the
required documents and the file stored to the loan administration
division.
10.2. Problems and Challenges of FSIBL
Problems Related to Macro Operation of the Islamic Banks
1 Liquidity and Capital
2 Valuation of bank Assets
3 Financial Stability
4 The Ownership of Banks
5 Increased Cost of Information
6 Control over Cost of Funds.
7 Mark-up Financing and Corrupted Mark-up
8 Excess Resort to the Murabaha Mode of Financing
9 Utilization of Interest Rate of fixing the Profit Margin in Bay
Modes.
10 Financing Social Concerns.
11 Lack of Positive Response to the Requirement of government
Financing.
12 Failure of Islamic Banks to Finance High Return Projects.
13 Sacrifice of allocate Efficiency
14 Loss of Distributive Efficiency.
15 Depression of Profit.
16 Lack of Full-fledged Shariah Audit.
17 Fraud-Forgery or corruption in Islamic Banks.
18 Minimum Budget for Research and Development.

19 Working Environment.
20 Issuance of Letter of Guarantee (L/G)
21 Minimum Budget for Research and Development.
22 Lack of Shariah Manual or Guidelines.
23 Non-exemption of Stamp Duty for Purchasing Property by Banks.
24 Lack of Co-operation between Islamic Banks and Islamic NGOs
for extending Microcredit.
25 Lack of Establishment of Links with other Training Institutes and
Shariah Supervisory Bodies.
26 Lack of Intention of the Management to be strict with Shariah
Guidelines.
The above problems are some of the burning problems confronting
the Islamic banks in Bangladesh. However it is
felt that much operational work and in-depth research work has to be
undertaken to allow the Islamic banks to
flourish with highest quality and strength.
10.3. ICT and its use in MIS
FSIBL is continuously improving in the automation of banking
activities. All the branches have been brought under on-line banking
using Fiber Optics, DDN and Radio Link where Any Branch
Banking facilities are being provided. FSIBL is the only bank in
Bangladesh, which developed in-house built integrated Banking
system namely eIBS having major modules viz.: General Banking
(GB), Investment and Foreign Exchange. Both GB and Investment
module are running at all 266 branches including 30 SME/Agriculture
branches. The foreign exchange module has been implemented at 43
authorized Dealer (AD) branches. Apart from the core banking
facilities, the bank provides other IT enabled services such as shared
and owned Automated Teller Machine (ATM), SMS banking, EFTN
and i-banking.FSIBL has established the countrys largest Data Center
in the banking sector running on Sun Solaris 10 & Oracle 10g

Enterprise Edition. Branch data are being uploaded in the Data Centre
from all online branches, which are being used as branch backup data
and preparing MIS reports for different Wings/Divisions/Departments
of Head Office. A strong central MIS has already been set up through
using data from the Data Centre. IBBL has completed setting up
Disaster Recovery Site (DRS) as per guideline of Bangladesh Bank as
a replication of existing Data Centre which is on live operation.
10.4. SWOT Analysis
Strengths:
Strong corporate identity
According to the customers, FSIBL is the leading provider of
financial services identity worldwide. With its strong corporate image
and identity, it has better positioned itself in the minds of the
customers. This image has helped FSIBL grab the personal banking
sector of Bangladesh very rapidly.
Strong employee bonding and belongings
FSIBL employees are one of the major assets of the company. The
employees of FSIBL have a strong sense of commitment towards
organization and also feel proud and a sense of belonging towards
FSIBL. The strong organizational culture of FSIBL is the main reason
behind its strength.
Efficient Performance
It has been seen from customers opinion that FSIBL provides hasslefree customer services to its client comparing to other financial
institutions of Bangladesh. Personalized approach to the needs of
customers is its motto.
Young enthusiastic workforce

The selection & recruitment of FSIBL emphasizes on having the

skilled graduates & postgraduates who have little or no previous work
experience. The logic behind is that FSIBL wants to avoid the
problem of 'garbage in & garbage out'. And this type of young & fresh
workforce stimulates the whole working environment of FSIBL.
Empowered Work force
The human resource of FSIBL is extremely well thought & perfectly
managed. As from the very first, the top management believed in
empowering employees, where they refused to put their finger in
every part of the pie. This empowered environment makes FSIBL a
better place for the employees. The employees are not suffocated with
authority but are able to grow as the organization matures.
Hospitable Working Environment
All office walls in FSIBL are only shoulder high partitions & there is
no executive dining room. Any of the executives is likely to plop
down at a table in its cafeteria & join in a lunch, chat with whoever is
there.
Strong Financial Position
It has been seen that the net profit has been gradually rising over the
years. Furthermore, FSIBL is not just sitting on its previous years
success, but also taking initiatives to improve.
Weaknesses:
High charges of L/C
Presently FSIBL charges same rates for all types of
import L/C. But for import L/C of exports-oriented
industry, FSIBL should reduce the charge of L/C. As a
result, exporter will be benefited and the country

will earn more foreign exchange. The commission often even rises up
to 30%.
Absence of strong marketing activities
FSIBL currently don't have any strong marketing activities through
mass media e.g. Television. TV ads play vital role in awareness
building. FSIBL has no such TV ad campaign. Although they do a lot
of CSR activities compared to other banks.
Not enough innovative products
In order to be more competitive in the market, DBL should come up
with more new attractive and innovative products. This is one of the
weaknesses that DBL is currently passing through but plans to get rid
of by 2010.
Diversification
FSIBL can pursue a diversification strategy in expanding its current
line of business. The management can consider options of starting
merchant banking or diversify it to leasing and insurance. As FSIBL is
one of the leading providers of all financial services, in Bangladesh it
can also offer these services.
Lack of Proper Motivation
The salary at FSIBL is very decent, but it lacks other sorts of
motivation. Incentives such as bonuses are given for acquiring a
particular figure, but all in all these are the only motivational factors.
High Cost for maintaining account
The account maintenance cost for FSIBL is comparatively high. Other
banks very often highlight this. In the long run, this might turn out to
be a negative issue for FSIBL.

Opportunities:
Distinct operating procedures
Repayment capacity as assessed by FSIBL of individual client helps
to decide how much one can borrow. As the whole lending process is
based on a client's repayment capacity, the recovery rate of FSIBL is
close to 100%. This provides FSIBL financial stability & gears up
FSIBL to be remaining in the business for the long run.
Country wide network
The ultimate goal of FSIBL is to expand its operations to whole
Bangladesh. Nurturing this type of vision & mission & to act as
required, will not only increase FSIBL's profitability but also will
secure its existence in the log run.
Experienced Managers
One of the key opportunities for FSIBL is its efficient managers.
FSIBL has employed experienced managers to facilitate its operation.
These managers have already triggered the business for FSIBL as
being new in the market.
Huge Population
Bangladesh is a developing country to satisfy the needs
of the huge population, a large amount of investment is
required. On the other hand, building EPZ areas and
some Govt. policies easing foreign investment in our
country made it attractive to the foreigners to invest in
our country. So, FSIBL has a large opportunity here.
El Dorado Program
It is software which enables customers to deposit and withdraw
money from any bank with the cheque or deposit of any other bank.
Although a select few has implemented this program, this poses as an
opportunity for FSIBL as the number of transactions would drastically
increase.

 Bigger Market
Although the GDP per head decreased a bit in 2009 from 2008, there
is a huge untapped market that requires loans and intends to deposit
also.
BASEL II
Implementation of BASEL II would definitely provide benefits. But it
requires a lot of monitoring. For this FSIBL has formed BIU
(BASELL II Implementation Unit). BASEL II is basically a
framework set forth by Bangladesh Bank to reduce credit risk,
operational risk and market risk. This would definitely aid FSIBL if it
is stringently followed.
Threats:
Upcoming Banks/Branches
The upcoming private, local, & multinational banks posses serious
threats to the existing banking network of FSIBL: it is expected that
in the next few years more commercial banks will emerge. If that
happens the intensity of competition will rise further and banks will
have to develop strategies to compete against and win the battle of
banks.
Similar products are offered by other banks
Now-a-days different foreign and private banks are also offering
similar type of products with an almost similar profit margin. So, if all
competitors fight with the same weapon, the natural result is declining
profit.
Default Loans
The problem of non-performing loans or default loans is very
minimum or insignificant. However, this problem may rise in the
future thus; FSIBL has to remain vigilant about this problem so that
proactive strategies are taken to minimize this problem.

 Industrial Downturn
Bangladesh is economically and political unstable country. Flood,
draught, cyclone, and newly added terrorism have become an identity
of our country. Along with inflation, unemployment also creates
industry wide recession. These caused downward pressure on the
capital demand for investment.
10.5. Profit Rate Risk
Regulatory pressure to reduce profit rate in the market has been
creating substantial profit rate risk for the banks. The Asset Liability
Committee (ALCO) of FSIBL monitors and evaluated the overall
profit rate structure. FSIBL has been following a competitive profit
rate and has flexibility of setting profit rate according to market
conditions and Bangladesh Bank ceilings. The bank has no profit
sensitive trading portfolio. For non trading portfolio (general
investment), the bank has been operating through buying and selling
policy i.e. Bai-Murabaha, Bai-Muajjal, Bai-Salam, Bai-as-Sarf and
Rent sharing mode like HPSM. IBBL also makes Investment under
Musharaka mode i.e. profit and loss sharing mode and Mudaraba
mode i.e. profit sharing and loss bearing on short term basis.
Investment exposures under profit loss sharing mode is insignificant,
hence facing little risk of investment loss. In case of rent sharing
mode i.e. HPSM, the bank can adjust the rate of rent in line with
market situation. FSIBL has been exposed to some risk on buying and
selling mode.

10.6.Recommendation of FSIBL
The following are some recommendation of FSIBL:
(i) Improvement of the HRD
The HR department of the bank is one of the weakest areas and many
of the human resources development and policies are not being
followed or implemented. Though there has been performance
appraisal for the employees but still it is lying idle and no action has
been taken. The management should immediately apply the
performance appraisal system and take appropriate actions on the
basis of that appraisal.
(ii) Better recruitment
FSIBL must pursue a strong and an effective recruitment system so
that the right people are recruited at the job. It must focus on
attracting, getting and retaining qualified personnel for filling up the
positions. It is worth spending more on attracting qualified human
recourses rather than getting wrong people in the wrong position.
(iii) Stop reference appointment
FSIBL management and particularly the Board of director must
change the system of appointing people by giving their reference. It
has been deeply observed that most of the appoint references are not
up to the standard and have a poor performance. It may not be
absolutely possible to eliminate the reference appointment system as
it is a local private company, but still the tendency can be reduced to a
certain extent if bold steps are undertaken by the management and the
board of directors.
(iv) Branch expansion
For expanding geographically the bank should open up new branches
strategies important places. The bank can open new branches in
Mailbag, Karkalla and new Eskaton of Dhaka city. Some of its rivals
already entered in some of this regions and some of are on the way, so
the bank should expand in this regions without making any delay.
Before entering

into new market the bank should do extensive market research.

The bank should build reflective management team who can make
quick decision.
Improved customer service and consequently get satisfactory
operational result.
Avoid force loan as minimum as it can.
Incorporate more products for the customer.
Proper training and technology should be used to minimize risk at
the root level.
Auto mated letter machine (ATM) and credit cards should be
introduced as soon as possible because of its prevailing demand in the
market.
10.7. Conclusions
Modern commercial banking is challenging business. The rewards are
modest. The penalties for bad looking are enormous. Commercial
banks are great monetary institutions, important to general welfare of
the company more than many other financial institutions. FSIBL is an
emerging bank. The bank has completed twelve years of banking
services. At the initial stage of business, every institution has to go
through the difficult stage of survival. To achieve the confidence of
the customers, the bank must execute some improvement in its
marketing and operational areas FSIBL should try to win customers
faith by providing them efficient and dependable services, credit
facilities and updating with user friendly modern technologies. The
bank should redesign all sorts of banking procedure to be more users
friendly, attractive and impressive. Information and Analysis is not
sufficient because it is difficult to measure and express perfectly
within this short time of my internship period. But it is a great
opportunity for me to get use to with the operational environment of
commercial banking of FSIBL.

I have tried by soul to incorporate the research report with necessary

relevant information in my report. This report basically deals with
Investment Management. But all information is not available about
this topic. It is found from the report that credit management of
FSIBL,Bahadderhat Branch. There are many terms and conditions
about this credit.FSIBL should always try to improve their service
level in every term.
Reference
Books:
Bank Management & Financial Services 6th Edition. McGrawHill Singapore.
- Peter S. Rose & Sylvia C. Hudgins (2007)
Mishkin, F. S (2009), The Economics of Money, Banking, and
Financial Markets. 9th ed. New York: Pearson, Addison Wesley.
BIBM.

1999.

Reading

Materials

on

Islamic

Banking.

Performance.

Appraisal And Compensation Management: A Modern Approach.

pp 8 - 272.
Reports:
First Security Islami Bank Limited, Annual Report 2008-2009.
First Security Islami Bank Limited, Annual Report 2010-2011.
Internet:
http://www.fsiblbd.com