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Export Import Bank of Bangladesh Limited is a new generation Bank. It is committed to provide high quality financial services/products to contribute to the growth of G.D.P. of the country through stimulating trade & commerce, accelerating the pace of industrialization, boosting up export, creating employment opportunity for the educated youth, poverty alleviation, raising standard of living of limited income group and over all sustainable socio-economic development of the country. In achieving the aforesaid objectives of the Bank, Investment Operation of the Bank is of paramount importance as the greatest share of total revenue of the Bank is generated from it, maximum risk is centered in it and even the very existence of Bank depends on prudent management of its investment portfolio. The failure of a commercial Bank is usually associated with the problem in investment portfolio and is less often the result of shrinkage in the value of other assets. As such investment 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 Investment Operation towards achieving the objectives of the Bank, for efficient and profitable deployment of its mobilized resources and to administer the Investment portfolio in the most efficient way, a clearly defined, well planned, comprehensive and appropriate Investment policy and control guidelines of the Bank is a pre-requisite. In view of the above, this Investment Policy and Control Guidelines of the Bank has been prepared which is subject to amendment, revision, readjustment and refinement from time to time as may be warranted by the change of circumstances due to passage of time to suite the requirement of the Bank.
3.2 Investment Policy
The Investment policy should be updated annually to reflect changes in the economic outwork and evolution of bank’s investment portfolio. The investment proposal should be forwarded to Head Office for sanction with recommendation showing justification that should include the following :
a) Industry and Business segment focus
The Bank shall provide suitable Investment services & products for the following sectors, which must meet the other requisites as set by the Bank from time to time. Sectors :a) b) c) d) e) f) g) h) i) j) k) l) m) n) o) p) q)
Steel & Engineering. Food & Allied. Agriculture. Textile & Garments. Pharmaceuticals & Chemicals. Paper & Paper Products. Service Industries. Housing & Real Estate. Cement. Bricks Fields. Edible Oil. Assembling Industry. Cottage Industry. Electronics & Electrical Commodities. Construction Company. Trading (Retail/Whole sale) Others.
Every year at the time of investment budgeting a clear indication of Bank’s appetite for growth to be reflected. Approved investment budget shall be strictly followed for the development of the Bank.
3.3 Investment Categories
Investment have primarily been divided into two major groups:
Izara Bill Baia : These are the investments made by the Bank with fixed repayment schedules. The term of investment are defined as follows : Short term Medium term Long term : : : Up to 12 months More than 12 and up to 36 months. More than 36 months.
ii)Continuing Investments : These are the investments having no fixed repayment schedule, but have an expiry date at which it is renewable on satisfactory performance. Further all categories of investments have been accommodated under the 7 prime categories as under:
I. Agriculture : Investment facilities to the agricultural sector falls under this category. It is subdivided into two major heads: a)Investments to primary producers : Financing under this categories refers to the investment facilities allowed to production units engaged in farming, fishing, forestry or livestock. Investments to processors or traders of agricultural products are not to be categories as agricultural investments. Investments to tea gardens for production are treated as agricultural investment, but investments to tea gardens for export should be treated under the category “Investment on Export”. Similarly medium and long term Investments to tea gardens are categorized as industrial term lending. b)Investment to dealers/distributors : It refers to the financing allowed to input dealers and (or) distributors in the agricultural sectors. Agricultural investments may include short, medium and long investments as well as continuing investment. As such, it may fall under the head “Izara Bill Baia/Izara Bill Baia (HP)/Izara (LF)”. II. Izara Bill Baia for Large & Medium Scale Industry : This category of investments accommodate the medium and long term financing for capital structure formation of new Industries or for BMRE of the existing units who are engaged in manufacturing goods and services. III. Izara Bill Baia to Small & Cottage Industries : These are the medium and long term investments allowed to small & cottage manufacturing industries (Small industry is presently defined as those establishments whose total investment in fixed capital such as land, building, machinery and equipment (excluding taxes and duties) does not exceed 30 million taka and investment in machinery and equipment (excluding taxes and duties) does not exceed 10 million taka. Cottage industries also fall within this definition). No short term or continuing investments are to be included in this category.
Like the Large & Medium Scale Industry it is also allowed in the form of “Izara Bill Baia/ Izara Bill Baia (HP)/Izara (LF)”. IV. Working Capital : Investments allowed to the manufacturing units to meet their working capital requirements, irrespective of their size-big, medium or small, fall under the category. These are usually continuing investments and as such fall under the head “Bai-Muazzal”. V. Investment on Export : Investment 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 “Musharaka Pre-shipment (ECC), Musharaka Pre-shipment (PC), Foreign Documentary Bills Purchased (FDBP), Local Documentary Bills Purchase (LDBP) etc. VI. Commercial Lending : Short-term investments and continuing investments allowed for commercial purposes other than exports fall under this category. It includes import financing, financing for internal trade, service establishment etc. No medium and long-term investments are accommodated here. This category of investments are allowed in the form of (i) Murabaha Post Import (MPI) (ii) Investment against trust receipt (TR) (iii) Murabaha Import Bills (MIB), (iv) Bai-Muazzal, (v) Izara Bill Baia, etc. for commercial purposes. VII. Others : Any investment that does not fall in any of the above categories is considered under the category “Others”. It includes investment to (i) Transport equipments, (ii) Construction works including housing (commercial/residential), (iii) work order finance, (iv) personal investment, etc.
3.4 Types of Investment Facilities
Depending on the various nature of financing, all the lending activities have been brought under the following major heads :
I. Izara Bill Baia (General) : Short term, Medium term & long term investments allowed to individual/firm/industries for a specific purpose but for a definite period and generally repayable by installments fall under this head. This type of lending are mainly allowed to accommodate financing under the categories (i) Large & Medium Scale Industry and (ii) Small & Cottage Industry. Very often term financing for (i) Agriculture & (ii) Others are also included here. II. Izara Bill Baia (HB) : Investments allowed to individual/enterprises for construction of house (commercial) fall under this type of investment. The amount is repayable by monthly installment with a specified period. Such investments are known as Izara Bill Baia (HB). No investment for construction of residential house building shall be accommodated to the Bank’s customer where there is no other business consideration. III. Izara Bill Baia (Staff HB) : Investment allowed to our Bank employees for purchase/construction of house shall be know as Investment (STAFF HB). IV. Other Investment to Staff : Investment allowed to employees other than for House Building shall be grouped under head of Staff Izara Bill Baia (General). V. Bai-Muazzal : Investment allowed to individual/firm for trading as well as wholesale purpose or to industries to meet up the working capital requirements against hypothecation of goods as primary security fall under this type of lending. it is a continuous investment. It is allowed under the categories (i) “Commercial Lending” when the customer is other than a industry and (ii) “Working Capital” when the customer is an industry.
VI. Murabaha : Financial accommodations to individual/firm for trading as well as for wholesale or to industries as working capital against pledge of goods as primary security fall under this head of investment. It is also a continuous investment and like the above allowed under the categories (i) “Commercial Lending” and (ii) Working Capital”. VII. Izara Bill Baia (HP) : Izara Bill Baia (HP) is a type of installment investment under which the Purchaser agrees to take the goods on hire at a stated rental, which is inclusive of the repayment of Principal as well as profit for adjustment of the investment within a specified period. VIII. Izara (LF) : Izara (LF) is one of the most convenient sources of acquiring capital machinery and equipment whereby a client is given the opportunity to have an exclusive right to use an asset usually for an agreed period of time against payment of rent. It is a term financing repayable by installment.
IX. House Hold Durable Scheme (HDS) : It is a special investment scheme of the Bank to finance purchase of consumer durable to the fixed income group to raise their standard of living. The investments are allowed on soft terms against personal guarantee and deposit of specified percentage of equity by the customers. The investment is repayable by month installment within a fixed period. X. Bai-Muazzal (General/FO) : Investment allowed to individual/firms against financial obligation (i.e. lien on MTDR/ PSP/BSP/Insurance Policy/Share etc.) This may not be a continuous Investment. XI. Bai-Muazzal (WO) : Investment allowed against assignment of work order for execution of contractual work falls under this head. This investment is generally allowed for a definite period and specific purpose i.e. it is not a continuous investment. XII. Bai-Muazzal (Export) :
Investment allowed for purchasing foreign currency for payment against L/Cs (Back to Back) where the exports do not materialize before the date of import payment. This is also an investment for temporary period, which is known as export finance and falls under the category “Commercial Lending”. XIII. Murabaha Import Bills (MIB) : Payment made by the bank against lodgment of shipping documents of goods imported through L/C falls under this head. It is an interim investment connected with import and is generally liquidated against payment usually made by the party for retirement of the documents for release of imported goods from the customs authority. It falls under the category “Commercial Lending”. XIV. Murabaha Post Import (MPI) : Investment allowed for retirement of shipping documents and release of gods imported through L/C taking effective control over the goods by pledge in Godown under Bank’s lock & key fall under this type of investment. This is also a temporary investment connected with import that is known as post-import finance and falls under the category “Commercial Lending”. XV. Trust Receipt (TR) : Investment allowed for retirement of shipping documents and release of goods imported through L/C fall under this heard. The goods are handed over to the importer under trust with the arrangement that sale proceeds should be deposited to liquidate the investments within a given period. This is also a temporary investment connected with import and know as post-import finance and falls under the category “Commercial Lending”. XVI. IBP : Payment made through purchase of inland bills/cheques to meet urgent requirement of the customer falls under this type of investment facility. This temporary investment is adjustable from the proceeds of bills/cheques purchased for collection. If falls under he category “Commercial Lending”.
XVII. Musharaka Pre-shipment (ECC) : Financial accommodation allowed to a customer for exports of goods fall under this head and is categorized as “Investment on Export”. The investments must be liquidated out of export proceeds with 180 days. XVIII. Musharaka Pre-shipment (P.C.) : Investment allowed to a customer against specific L/C/firm contract for processing/ packing of goods to be exported falls under this head and is categorized as “Musharaka Pre-shipment”. The investments must be adjusted from proceeds of the relevant exports within 180 days. It falls under the category “Investment on Export. XIX. F D B P : Payment made to a customer through purchase/negotiation of a foreign documentary bills falls under this head. This temporary investment is adjustable from the proceeds of the shipping/export documents. It falls under the category “Investment on Export”. XX. L D B P : Payment made against documents representing sell of goods to Local export oriented industries that are deemed as exports and which are denominated in Local Currency/Foreign Currency falls under this head. This temporary liability is adjustable from proceeds of the Bill. XXI. FBP : Payment made to a customer through Purchase of Foreign Currency Cheques/Drafts fall under this head. This temporary investment is adjustable from the proceeds of the cheque/draft.
3.5 Single borrower/ Group limits/ syndication:
Bank may allow investment facilities to a single customer/Group (Funded & non funded) up to its 50% of total capital out of which funded facilities must not exceed 25% of total capital. All proposal submitted to Head Office will also be required to indicate the extent of the Bank’s global exposure to that customer group.
Group exposure shall be deemed to include the total investment facilities as detailed below :
Investment facility in the name of the borrower. Investment facility in the name of the firms & companies in which the borrower or its partner or its director is the proprietor or a partner or a Director. Investment facility in the name of any firm of company in which the borrower or its partner or its director owns 20% or more share even if not a Director. Any Investment facility guaranteed by the borrower or its partner, or its Director.
However, definition of group exposure if given by Bangladesh Bank shall be followed regardless of the above definition.
3.6 Lending Caps
The Bank shall establish a specific Industry sector exposure cap by preparing a sector wise investment budget In order to avoid over concentration in any one-industry sector. The Investment budget shall release (after approval from the Board) in the month January of every year. Investment budget shall be proposed /released considering the following points :
I. Total Facilities : The aggregated of all cash facilities shall not exceed 80% of customer’s deposits. It is further governed by the statutory and liquidity reserve requirement of Bangladesh Bank. II. Term Facility : Aggregate Long Term facilities shall not exceeds 20% of the total investment portfolio. Facilities shall not be allowed for a period exceeding 5 (Five) year. Any exceptions will require the approval of the Board of Director. iii. Unsecured Facilities : Aggregate Bank investments to corporate or individual customers which are not secured by collateral and are allowed on the strength of customer’s personal integrity and
financial standing or the corporate customer’s balance sheet, with or without hypothecation of stock shall not exceeds 30% of the total investment portfolio. No clean investments are allowed to accommodate. IV. Sector-wise Allocation : Sector-wise allocation of investment/investment budget shall be made in the month of January of each year with the approval of Executive Committee/Board of Directors. This will be reviewed from time to time. V. Security : Security accepted against investment facilities shall be properly valued and shall be effected in accordance with the laws of the country in which the security is held. An appropriate margin of security will be taken to reflect such factors as the disposal costs or potential price movement of the underlying assets.
3.7 Discouraged business type
The Banks should outline industries or leading activities that are discouraged. As a minimum, the following should be discouraged. Military Equipment/Weapons Finance. Highly Leveraged Transactions. Finance of Speculative Investments. Logging, Mineral Extraction/Mining, or other activity that is Ethically of Environmentally Sensitive. Lending to companies listed on CIB black list or known defaulters. Counter parties in countries subject to UN sanctions. Share Lending. Taking an Equity Stake in Borrowers. Lending to Holding Companies. Bridge Investments relying on equity/debt issuance as a source of repayment. Tannery Finance. Izara Bill Baia (HB-residential) who has no other business with the Bank.
3.8 Investment facility parameters
a) Tenure : Bank shall not ordinarily go for any investment facilities for long term basis. Short-term investment facilities shall be for 3 month to 12 months. Medium term investment shall be 12 months to 36 months. Long terms investment shall be more than 36 months. b) Size : i) Bank. ii) Maximum 25% (funded) facility of total capital of the bank. Maximum 50% (Funded & non-funded) of total capital of the
c) Security : All assets (Bai-Muazzal & Murabaha) must be covered under proper insurance risk with enlisted Insurance Companies. Insurance coverage obtained outside enlisted companies are discouraged. For valuation of securities following guidelines to be followed: Valuation of Primary Security :
MPI : MPI facility shall be allowed as post-import finance against
imported goods under our L/Cs. MPI facility should not exceed invoice value net of L/C margin unless the3 Bank agrees to finance duties/VAT. However, where market price of the goods is lower than landed cost necessary arrangement should be made with the customer to obtained additional deposit. Head Office should approve the price at which MPI goods to be released to customer or it may be at market price or landed cost whichever is higher.
Murabaha : Valuation of the goods to be pledged to the Bank against
Murabaha limit shall in no cases exceed : I. The landed cost or market price whichever is lower in case of imported goods.
II. The ex-mill/factory price of market price whichever is lower in case of domestically manufactured commodities as evidenced by invoice. III. The wholesale price/competitive market price duly verified by the Branch and approved by Head Office. Valuation of Collateral Security : The branches should meticulously follow following instructions : •The property should be physically inspected and verified jointly by 2 (two) Bank’s Officers, one of who should be the Branch Manager of the 2 nd Officer. A valuation certificate mentioning market value and forced sale value should be prepared in the designated from supplied to the Branches and to be jointly signed by the above mentioned 2 (two) inspecting officers of the Bank. The forced sale value of the collateral security will have to be 1.5 times higher than the facility/facilities allowed unless specifically waived by the approving authority giving full justification. • “A Site Plan” and “Map” along with 3R size distinct photographs of the mortgaged property covering full exposure from 3 angles mentioning detailed particulars on the back to the photographs duly authenticated by the authorized officer(s) to be obtained by the Branches. • Its should be ensured that the collateral security is in the physical possession of the mortgagors(s) and the mortgagor(s)/owner(s) has/have valid title over it. • A letter of satisfaction from the Bank’s Lawyer to be obtained that the mortgage formality has been properly created.
3.9 Cross borders risk
Limit to be established by the Board of individual Country as well as or aggregate Bank Credit exposures to different countries. These limits are to be reviewed from time to time with due regard to the political and economic environment in each country. The country exposure limits may be utilized up to maximum amounts for different maturities as follows :
For maturities up to one year : For maturities up to two year : For maturities up to three year :
100% of the limit. maximum 50% of the limit. maximum 25% of the limit
For maturities beyond three years : maximum 10% of the limit. For exceptions, approval is required from the Board of Director.
3.10 Investment Assessment and Risk grading
Investment Assessment : A through investment and risk assessment should be conducted prior to the granting of investments and at least annually thereafter for all facilities. The results of this assessment should be presented in an investment proposal that originates from relationship manager/account officer and is approved by Head of Investment Division. The relationship manager/account officer should be the owner of customer relationship and must be held responsible to ensue the accuracy of the entire investment proposal submitted for approval. The following steps for completion of Investment Risk assessment for each facility should be followed in conjunction with the guidelines/instructions given in Head Office circulars issued from time to time. All proposals of investment facilities must be supported by a complete analysis of the proposed investment. A comprehensive and accurate appraisal of the risk in every investment exposure of the Bank is mandatory. No proposal can be put up for approval unless there has been a complete written analysis. Risk Management : Investment proposal should summaries the results of the risk assessment and include, as a minimum, the following details : Amount and type of investment(s) proposed. Purpose of investments. Investments Structure (Tenor. Covenants, Repayment Schedule, Profit) Security Arrangements.
In addition, the following risk areas should be addressed :
Borrower Analysis : The majority shareholders, management team and group of affiliate companies should be assessed. Any issues regarding lack of management depth, complicated ownership structure or inter group transactions should be addressed, and risk mitigated.
Industry Analysis : The key risk factors of the borrower’s industry should be assessed. Any issues regarding the borrower’s position in the industry, overall industry concerns or competitive forces should be addressed and the strengths and weaknesses of the borrower relative to its competition should be identified.
Supplier/Buyer Analysis : Any customer or supplier concentration should be assessed. Any issues regarding the borrower’s position in the industry, overall industry concern or competitive forces should be addressed and the strengths and weaknesses of the borrower relative to its competition should be identified.
Historical Financial Analysis : An analysis of a minimum of 3 years historical financial statements of the borrower should be presented. Where reliance is placed on a corporate guarantor, guarantor financial statements should also be analyzed. The analysis should address the quality and sustainability of earnings, cash flow and the strength of the borrower’s balance sheet. Specifically, cash flow, leverage and profitability must be analyzed.
Project Financial Performance : Where term facilities (tenor>1 year) are being proposed, a projection of the borrower’s future financial performance should be provided, indicating an analysis of the sufficiency of cash flow to service debt repayments. Investments should not be granted if projected cash flow is insufficient to repay debts.
Accounts Conduct : For existing borrowers, the historic performance in meeting repayment obligations (Trade payments, cheques, profit and principal payments, etc.) should be assessed.
Adherence of Lending Guidelines : Investment Application should clearly state whether or not the proposed application is in compliance with the banks
Lending Guidelines. The Managing Director should approve Investment proposal that do not adhere to the bank’s Lending Guidelines.
Mitigating Factors : Mitigating factors for risk identified in the investment assessment should be identified. Possible risk include, but are not limited to : margin sustainability and/or volatility, high debt investment (leverage/gearing), overstocking or debtor issues; rapid growth, acquisition or expansion; new business line/product expansion; management changes or succession issues; customer or supplier concentration; and lack of transparency of industry issues.
Investment Structure : The amounts and tenors of financing proposed should be justified based on the projected repayment ability and investment purpose. Excessive tenor or amount relative to business needs increase the risk of fund diversion and any adversely impact the borrower’s repayment ability.
Security : A current valuation of collateral should be obtained and the quality and priority of security being proposed should be assessed. Investments should not be granted based solely on security. Adequacy and the extent of the insurance coverage should be assessed.
Name Lending : Investment proposals should not be unduly influenced by an over reliance on the sponsoring principal’s reputation, reported independent means, or their perceived willingness to inject fund into various business enterprises in case of need. These situations should be discouraged and treated with great caution. Rather, investment proposals and the granting of Investments should be based on sound fundamental, supported by a thorough financial and risk analysis.
Risk Grading :
The risk grading system should define the risk profile of borrower’s to ensure that account management, structure and pricing are commensurate with the risk involved. Risk grading is a key measurement of a Bank’s asset quality, and as such, it is essential that grading is a robust process. All facilities should be assigned a risk grade. Where deterioration in risk is noted, the Risk Grade assigned to a borrower and its facilities
should be immediately changed. Borrower Risk Grades should be clearly stated on Investment proposal. The Risk Rating to be determined with the help of enclosed risk grade scorecard. Risk Rating Superior-Low Risk Grade 1 Facilities Definition are fully secured by cash deposits,
government bonds or a counter guarantee from a top tier international bank. All security documentation Good-Satisfactory Risk 2 should be in place. The repayment capacity of the borrower is strong. The borrower should have excellent liquidity and low leverage. The company should demonstrate consistently strong earning and cash flow and have an unblemished track record. All security documentation should be in place. Aggregate Score of 95 or greater Acceptable-Fair Risk 3 based on the Risk Grade Scorecard. Adequate financial condition though may not be able to sustain any major or continued setbacks. These borrowers are not as strong as Grade 2 borrowers, but should still demonstrate consistent A borrower should not be grade better than 3 if realistic audited financial statement are not received. These assets would normally be secured by acceptable collateral (1st charge over stocks/debtors/equipment/property). Borrowers should have adequate liquidity, cash flow and earnings. An Aggregate Score of 75-94 based on Marginal-Watch list 4 the Risk Grade Scorecard. Grade 4 assets warrant greater attention due to conditions affecting the borrower, the industry or the economic environment. These borrowers have an above a average risk due to strained liquidity, higher than normal leverage, thin cash flow and/or inconsistent earnings. Facilities should be downgraded to 4 if the borrower incurs a loss, investment payments routinely fall past due, account conduct is poor, or
other untoward factors are present. An Aggregate Special Mention 5 Score of 65-74 based on the Risk Grade Scorecard. Grade 5 assets have potential weaknesses that deserve management’s close attention. If left uncorrected, these weaknesses may result in a deterioration of the repayment prospectus of the borrower. Faculties should be downgraded to 5 if sustained deterioration in financial condition is noted (Consecutive losses, negative net worth, excessive leverage), if investment payments remain past due for 30-60 days, or if a significant petition or claim is lodged against the borrower. Full repayment of facilities is still expected and profit can still be taken into incomes. An aggregate Score of 55.-64 based on the Risk Grade Scorecard. Substandard 6 Financial condition is weak and capacity or inclination to repay is in doubt. These weaknesses jeopardize the full settlement of investments. Investments should be downgraded to 6 if investment payments remain past due for 60-90 days. if the customer intends to create a lender group for debt restructuring purposes, the operation has cased trading or any indication suggesting the winding up or closure of the borrower is discovered. Not yet considered non-performing as the correction of the deficiencies may result in an improved condition, and profit can still be taken into incomes. An aggregate Score of 45-54 based on the Doubtful and Bad (non-performing) 7 Risk Grade Scorecard. Full repayment of principal and profit is unlikely and the possibility of loss is extremely high. However, due to specifically identifiable pending factors, such as litigation, liquidation procedures or capital injection, the asset is not yet classified as Loss. Assets should be downgraded to 7 if investment payments remain past
due in excess of 90 days, and profit income should be taken into suspense (non-accrual). Investment loss provisions must be raised against the estimated unrealizable amount of all facilities. The adequacy of provisions must be review at least quarterly on all nonperforming investments, and the bank should pursue legal options to enforce security to obtain repayment or negotiate an appropriate investment rescheduling. In all case, the requirements of Bangladesh Bank in CIB reporting investment rescheduling and provisioning must be followed. An aggregate Score of 35-44 based Loss (non-performing) 8 on the Risk Grade Scorecard. Assets graded 8 are long outstanding with no progress in obtaining repayment (in excess of 180 days past due) or in he late stages of wind up/liquidation. The prospect of recovery is poor and legal options have been pursued. The proceeds expected from the liquidation or realization of security may be awaited. The continuance on the investment as a bankable asset is not warranted, and the anticipated loss should have been provided for. The classification reflects that it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be effected in the future. Bangladesh Bank guidelines for timely write off of bad investments must be adhered to. An Aggregate Score of 35 or less based on the Risk Grade Scorecard. Before sending a proposal Risk Grade Scorecard will be done under following manner. Borrower/Group : Industry Code : Date of Grading : Date of : Score 95+ 75-94 65-74 55-64 45-54
Risk Grade 2 3 4 5 6 Aggregate Score : ___
Risk Grade : ___________
Completed by : Criteria Gearing Weight 20%
35-44 <35 Parameter
7 8 Points
< 0.25 0.26-0.35 The ratio of a borrower’s 0.36-0.50 Total Debt to Tangible Net Worth. All calculation should be based on annual financial Statements of the borrower (audited preferred). Criteria Weight Liquidity 20% >3.50 3.00-3.49 The ratio of a borrower’s 2.75-2.99 current Assets to current liabilities. All calculation should be Based on annual financial Statement in the borrower (audited preferred). Profitability 20% The ratio of a borrower’s Operating Profit to Sales Operating Profit defined as Gross Profit minus all Expenses. >0.30 0.25-0.29 0.20-0.25 0.15-0.19 0.10-0.14 0.05-0.09 0.02-0.04 0.00-0.01 <0 2.50-2.74 2.00-2.49 1.50-1.99 1.10-1.49 0.90-1.09 0.80-0.89 0.70-0.79 <0.70 0.51-0.75 0.76-1.25 1.26-2.00 2.01-2.25 2.26-2.50 2.51-2.75 2.76-3.00 >3.00 Parameter
100 95 90 85 80 75 70 65 60 55 0 Points
100 95 90 85 80 75 70 65 60 55 0
100 95 85 80 75 70 65 50 0
Condition Customer for more than 2 years, with no past dues and faultless record. Customer for more than 6 months up to 2 years with faultless behavior. New Account with known satisfactory dealing with other banks. Some late payments or bounced cheques, though always cleared in 15 days or less. Frequent past dues, irregular items or bounced cheques.
Outlook Exceptional 100 90 80 70 0 Points
A critical assessment of the medium term prospects of the borrower, taking into account the industry market share and economic sector.
Favorable Stable Slightly Uncertain Cause for Concern
Criteria Weight Agreement 5% Quality of management based on the aggregate number of years that the Senior Management Team (top 5 executives) has been in the industry.
>30 years 25-30 years 10-24 years 15-19 years 10-14 years <10 years or any succession issues or other management weaknesses are identified.
Deposit All personal accounts are maintained in the bank, with significant deposits. Principals maintain some accounts, but have relationship with other banks. No relationship.
5% The extent to which the bank maintains a personal banking Relationship with the key business/principals.
Business >25 years 20-25 years 15-20 years 10-15 years 5-10 years 2-5 years <2 years 100 95 85 80 75 70 0
The number of years the borrower has been engaged in the primary line of business.
Business Sales in BDT Millions
The size of the borrower’s business measured by the most recent year’s total sales. Preferably based on audited Financial statements.
>1,000 750-1,000 500-750 250-500 100-250 50-100 25-50 <25
100 95 90 85 80 75 70 0
3.11 Approval authority
To ensure proper and orderly conduct of the business of the Bank, the Board of Director will empower the Managing Director and other Executives of the Bank to lend up to certain amount under certain terms and conditions at their discretion. The lending authority are broadly categorized as follows: (1) Board/Executive Committee. (2) Managing Directors.
(3) Head of Investment Division. Investment approval authority must be delegated in writing from the Board/Managing Director. The authority must review delegated approval authority annually. The Investment approval function should be separate from the marketing/relationship management. The Investment Committed shall recommend the investment proposal and put up the proposal for sanction. The aggregate exposures to any borrower or borrowing group must be used to determine the approved authority required. Any investment proposal that does not comply with lending guidelines regardless of amount, should be referred to the Board for approval. It is essential that executives/officers charged with process/approve of investment proposal having relevant training and experience to carry out their responsibilities effectively. As a minimum, approving executives should have. At least 5 years experience working in corporate/commercial banking as a relationship manager or account executive. Training and experience in financial statement, cash flow and risk analysis. A thorough working knowledge of Accounting. A good understanding of the local industry/market dynamics. Successfully completed an assessment test demonstrating adequate knowledge of the following areas : o Introduction of accrual accounting. o Industry/Business Risk Analysis. o Borrowing Causes. o Financial reporting and full disclosure. o Financial Statement Analysis. o The Asset Conversion/Trade Cycle. o Cash Flow Analysis. o Projections. o Investment Management.
The responsibilities for Investment Policy, procedure, approval & review shall vest amongst the following groups : a) Board of Directors : o Establishing overall policies and procedures for approving & reviewing Investments. o Delegating authority to approve and review Investments. o Approving Investment for which authority is not delegated. o Approving all extension of investment that is contrary to Bank’s written investment policies. b) Executive Committee of the Board shall be responsible for ; o Approving investment facilities as delegated by the Board of Directors. o Supervising the implementation of the Directives of the Board of Directors. o Reviewing of each extension of investment approval by the Head Office Investment Committee/Managing Director. o Keeping the Board of Directors informed covering all the above. c) Managing Director. d) Head of Investment, Head Office : o Norms for sanction & delegates of power has been given separately. e) Head Office Investment Committee : The members as nominated by the Managing Director will constitute Head Office Investment Committee. The Committee shall be responsible for; o Reviewing, analyzing and recommend for extension of investment in accordance with authority established and delegated by the Board o Directors. o Evaluation the quality of lending staff in the Bank & take appropriate steps to improve upon.
o In exceptional circumstances when approval of an extension of Investment is required at short notice, the proposal may be referred by the Branches directly to the Head Office, Investment Division by Telex/Fax. The Head office, Investment Division with the approval of Managing Director and in case where the amount exceeds the Authority of Management with the approval of both the Managing Director & the Chairman of the Executive Committee/Board of Directors may approve the extension. Documentation must be submitted to the Head Office Investment Committee/Executive Committee/Board of Directors as the case may be for Post facto approval at their next regular meeting. o Ensuring that all elements of the Investment proposal i.e. forms, analysis, statement and other papers have been obtained and are in order.
Confirming that the transaction is consistent with existing investment policy and Bangladesh Bank guidelines & if not the Committee may prepare a recommendation for an exception to or a change in policy for consideration by the Executive Committee/Board of Director.
f) Branch Marketing & Investment Committee : Branch Marketing & Investment Committee to be headed by the Branch Manager; other members to be selected by the Manager in consultation with head Office. Apart from the members of Marketing & Investment Committees other officials shall also endeavor for marketing of investment. The Executives/Officials shall also involve themselves for marketing of investment. The officials posted in investment division at Branch shall be designated as investment relationship officer as allocated them by Branch Manager.
It is essential that the proposal define clearly the purpose of the facility, the sources of repayment, the agreed repayment schedule, the value of security and the customer relationship consideration implicit in the investment decision.
Where security is to be accepted as collateral for the facility all documentation relating to the security shall be in the approved form. All approval procedures and required documentation shall be completed and all securities shall be in place, prior to the disbursement of the facilities. General documentation, as required for different kinds of investment is enumerated below. There may be requirement of specific banking or legal documents to secure an investment according to sanction terms and conditions, which should also be obtained in addition to the following : a) Investment : D.P. Note. Letter of partnership (in case of partnership concerns) or resolution of the Board of Directors (in case of Limited Companies). Letter of arrangement. Letter of disbursement. Letter of Pledge (in case of pledge of goods). Letter of hypothecation (in case of hypothecation of goods) Trust Receipts (incase of TR facility). Letter of lien and ownership/share transfer from (in case of investment against shares). Letter of Lien for Musharaka Pre-shipment (in case of Musharaka Pre-shipment-PC). Letter of Lien (in case of investment against MTDR). Letter of Lien (in case of investment against PSP, BSCP etc.) Legal documents for mortgage of property (as drafted by Legal Adviser). Copy of Sanction letter mentioning details of terms & conditions duly acknowledge by the borrower. Letter of Guarantee of all Directors (in case of Limited Company).
b) Overdrafts :
D.P. Note. Letter of partnership (in case of partnership concerns) or resolution of the Board of Directors (in case of Limited Companies). Letter of arrangement. Letter of continuity. Letter of Lien (in case of Investment against MTDR). Letter of Lien and ownership/share transfer from (in case of investment against shares). Letter of Lien and transfer authority (in case of investment against PSP, BSP etc.) Legal documents for mortgage of property (as drafted by Legal Adviser).
c) Bai-Muazzal : D.P. Note. Letter of partnership (in case of partnership concerns) or resolution of the Board of Directors (in case of Limited Companies). Letter of arrangement. Letter of continuity. Letter of Hypothecation [in case of Bai-Muazzal] Letter of Pledge/Agreement of Pledge [in case of Murabaha]. Legal documents for mortgage of property (as drafted by Legal Adviser).
d) Bill Purchased : D.P. Note. Letter of partnership (in case of partnership concerns) or resolution of the Board of Directors (in case of Limited Companies). Letter of arrangement.
Letter of Hypothecation of bill. Letter of Acceptance, where it calls for acceptance by the drawer.
All required documents, as enumerated above, should be obtained before any investment is disbursed. Disbursement of any investment facility requires approval of the authorized official of the Branch who should ensure, before exercising such authority, that all the required documentation’s have been completed. Segregation of Duties : Banks should aim to segregate the following lending functions : Investment Approval/Risk Management. Relationship Management/Marketing. Investment Administration/Documentation & disbursement. Monitoring& Recovery
The purpose of the segregation is to improve the knowledge levels and expertise in each department, to impose controls over the disbursement of authorized investment facilities and obtain an objective and independent judgment of investment proposals. Internal Audit : Banks should have a segregated internal audit/control department charged with conducting audits of all departments. Audits should be carried out annually, and should ensure compliance with regulatory guidelines, internal procedures, Lending Guidelines and Bangladesh Bank requirements.
3.13 Organization structure & responsibilities
The appropriate organizational structure must be in place to support the adoption of the policies detailed in Section 1 of these guidelines. The key feature is the segregation of the Marketing/Relationship Management function from Approval/Risk Management/ Administration function. Investment approval should preferably be centralized within the CRM function. The head of Investment Risk Management or Managing Director/CEO/Board of delegated Head Office investment executive must approve all proposals applications.
Organization Structure : The following chart represents the preferred management structure: Board Executive Committee Managing Director Head of investment/C RM Investment approval Department Investment Administrator / Documentatio n& disbursement Monitoring / Recovery Marketing Others (Internal Audit etc)
Relationship Business Manager Developme (Branch) nt (Branch & HO) Relationship Manager (HO for corporate clients)
Key Responsibilities The key responsibilities of the above functions are as follows. a) Investment Risk Management (CRM) : Oversight of the bank’s investment policies, procedures and relating to the investment risk arising from
corporate/commercial/institutional banking, personal banking & treasury Oversight of the bank’s asset quality. Directly manage all substandard, Doubtful & Bad Loss accounts to
maximize recovering and ensure that appropriate and timely investment loss provisions have been made. To approve for decline within delegated authority, Investment Applications recommended by RM. Where aggregate borrower exposure is
in excess of approval limits, to provide recommendation of MD/CEO for approval. To provide advice/assistance regarding all investment matters to To ensure that lending executives have adequate experience and/or To ensure that all security documentation complies with the terms To monitor insurance coverage to ensure appropriate coverage is in line management/RMs. training in order to carry out job duties effectively. of approval and is enforceable. bank. place. To maintain control over all security documentation. To monitor borrower’s compliance with covenant and agreed terms To control investment disbursements only after all terms and conditions of approval have been met, and all security documentation is in place over assets pledged as collateral, and is properly assigned to the
and conditions, and general monitoring of account conduct/performance. b) Relationship Management/Marketing (RM) To act as the primary bank contact with borrowers. To Know their borrower fully; To comply with the applicable instruction, manuals, circulars and other rules of the Bank as well those of Bangladesh including Banking companies Act 1991 (as amended from time to time). To ensure that Investment proposals submitted to Head Office, Investment Division are complete and consistent with established polices & procedure. To review and analyze the following in connection with investment risk proposals covering any obligor : a) History of antecedent of the obligor and its management personnel. b) Financial condition of the obligor evidenced by comparative statement, latest Balance Sheet, income statement, operating results and
supplementary facts as well as by Personal Net worth Statement of the Proprietor, Partners & Directors. c) Bank & Credit information Bureau (CIB) checking and trade standing obtained through investigation. d) Any other pertinent information.
To be responsible for the timely and accurate submission of Investment proposal for new proposals and annual reviews, taking into account the investment assessment requirements as mentioned in the prepares.
To highlight any deterioration in borrower’s financial standing and amend the borrower’s Risk Grade in a timely manner. Changes in Risk Grades should be advised to and approved by CRM. To seek assistance/advice at the earliest from CRM regarding the structuring of facilities, potential deterioration in accounts or for any investment related issues.
c) Internal Audit/Control Conducts independent inspections annually to ensure compliance with Lending Guidelines, operating procedures, bank policies and Bangladesh Bank directives. Reports directly to MD/CEO or Audit Committee of the Board.
3.14 Procedural guidelines
This section outlines of the main procedures that are needed to ensure compliance with the policies contained in earlier Sections of these guidelines. 1)Approval Process : The approval process must reinforce the segregation of Relationship Management/ Marketing from the approving authority. The responsibility for preparing the Investment proposal should rest with the RM within the corporate/commercial banking department. Investment proposal should be recommended for approval by the RM team and forwarded to the approval team within CRM and approved by individual executive. The
recommendation of the Head of Corporate/Commercial Banking is required prior to onward recommendation to CRM for approval. The recommending or approving executives should take responsibility for and be held accountable for their recommendations or approval. The Board should approve delegation of approval limits of the executives.
Appeal Process Any declined investment may be re-presented to the next higher authority for reassessment/ Approval. However, there should be no appeal process beyond the Managing Director.
2) Investment Administration : The Investment Administration function is critical in ensuring that proper documentation and approvals are in place prior to the disbursement of investment facilities. For this reasons, it is essential that the functions of Investment Administration be strictly segregated from Relationship Management/Marketing in order to avoid the possibility of controls being compromised or issues not being highlighted at the appropriate level. a) Disbursement : Security documents are prepared in accordance with approval terms and are legally enforceable. Standard investment facility documentation that has been reviewed by legal counsel should be used in all case. Exceptions should be referred to legal counsel for advice based on authorization from an appropriate executive in CRM. Disbursement under investment facilities are only be made when all security documentation is in place. CIB report should reflect/include the name of all the lenders with facility, limit & outstanding. All formalities regarding large investments & investments to Directors should be guided by Bangladesh bank
circular & related section of Banking Companies Act. All Investment Approval terms have been met. b) Custodial Duties : Investment disbursements and the preparation and storage of security documents should be centralized in the regional investment centers. 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. c) Compliance Requirements : All required Bangladesh Bank returns are submitted in the correct format in a timely manner. Bangladesh Bank circulars/regulations are maintained centrally, and advised to al relevant departments to ensure compliance.
All third party service providers (value’s, lawyers, insurers etc.) are approved and performance reviewed on an annual basis.
3) Investment Monitoring : To minimize investment losses, monitoring procedures and systems should be in place that provide an early indication of the deteriorating financial health of a borrower. The respective officials shall monitor the following exceptions : Past due principal or profit payments, past due trade bills, account excesses, and branch of investment covenants; Investment terms and conditions are monitored, financial statements are received on a regular basis, and any covenant breaches or exceptions are referred to CRM and the RM team for timely follow up. Timely corrective action is taken to address findings of any internal, external or regulator inspection/audit.
Computer systems must be able to produce the above information for central/had office as well as local review. Where automated systems are not available, a manual process should have the capability to produce accurate exception reports. Exceptions should be followed up on and corrective action taken in a timely manner before the account deteriorates further. a) 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 Bank’s investment 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 investment 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 account to the CRM department for assistance in recovery. Despite a prudent investment approval process, investments may still become troubled. Therefore, it is essential that early identification and prompt reporting of deteriorating investment signs be done to ensure swift action to protect the Bank’s interest. b) Investment Recovery : The Recovery Unit (RU) of CRM should directly manage account with sustained deterioration (a Risk Rating of Sub Standard (6) or worse). The RU’s primary function is : Determine Account Action Plan/Recovery Strategy.
Pursue all options to maximize recovery, including placing customers into receivership or liquidation as appropriate. Ensure adequate and timely investment loss provisions are made based on actual and expected losses. Regular review of grade 6 or worse account.
i) Non-Performing Investment (NPI) Account Management : All NPIs should be assigned to an Account Manager within the RU, who is responsible for coordinating and administering the action plan/recovery of the account, and should serve as the primary customer contact after the account is downgraded to substandard. ii) Account Transfer Procedure : Within 7 days of an account being downgraded to substandard (grade 6), a Request for Action and a handover/downgrade checklist should be completed by the RM and forwarded to RU for acknowledgment. The account should be assigned to an account manager within the RU, who should review all documentation, meet the customer, and prepare a Classified Investment Review Report within 15 days of the transfer. Recovery Units should ensure that the following is carried out when an account is classified as Sub Standard or worse : Facilities are withdrawn or repayment is demanded as appropriate. Any drawings or investments should be restricted, and only approved after careful scrutiny and approval from appropriate executives within CRM. CIB reporting is updated according to Bangladesh Bank guidelines and the borrower’s Risk Grade is changed as appropriate. Investment loss provisions are taken based on Force Sale Value (FSV). Investments are only rescheduled in conjunction with the Large Investment Rescheduling guidelines of Bangladesh Bank. Any rescheduling should be based on projected future cash flows and should be strictly monitored. Prompt legal action is taken if the borrower is uncooperative.
iii) Non-Performing Investment (NPI) Monitoring :
On a quarterly basis, a Classified Investment Review should be prepared by the RU Account Manger to update the status of the action/recovery plan, review and asses the adequacy of provisions, and modify the bank’s strategy as appropriate.
iv) NPI Provisioning and Write Off : The Guidelines established by Bangladesh Bank for CIB reporting provisioning and write off of bad and doubtful debts, and suspension of profit should be followed in all case. Regardless of the length of time an investment is past due, provisions should be raised against the actual and expected losses at the time they are estimated. The approval to take provisions, write offs, or release of provisions/upgrade of an account should be restricted to the Head of Investment or MD/CEO based on recommendation from the Recovery Unit. The RU Account Manager should determine the Force Sale Value (FSV) for accounts grade 6 or worse. Force Sale Value is generally the amount that is expected to be realized through the liquidation of collateral held as security or through the available operating cash flows of the business, net of any realization costs. Any shortfall of the Force Sale Value compared to total investment outstanding should be fully provided for once an account is downgraded to grade 7. Where the customer is not cooperative, no value should be assigned to the operating cash flow in determining Force Sale Value. Force Sale Value and provisioning levels should be updated as and when new information is obtained, but as minimum, on a quarterly basis in the Classified Investment Review (CIR). Following formula is to be applied in determining the required amount of provision : 1. Gross Outstanding *** 2. Less : (i)Cash margin held or Fixed Deposits/SP under lien etc. (ii) Profit in Suspense Account (***) (***)
a. Investment Value (For which provision is to be created before considering
estimated realizable value of other security/collateral held) *** b. Less : Estimated salvage value of security/collateral held (See Note below) Net Investment value *** (***)
Note : The amount of required provision may, in some circumstances, be reduced by an estimated realizable forced sale value of (i.e. Salvage value) of any tangible collateral held (viz : mortgage of property, pledged goods/or hypothecated goods repossessed by the bank, pledged readily marketable securities etc.). Hence, in these situation, it will be advisable to evaluate such collateral, estimate the most realistic sale value under duress and net-off the value against the outstanding before determining the Net Investment value for provision purposes. Conservative approach should be taken to arrive at provision requirement and Bangladesh bank guideline to be properly followed. V) Incentive Program : Bank shall introduce incentive programs to encourage recovery of non performing investments and circulate the same in due time
3.15 Lending Procedure
Lending is the main profit generating activity of a bank. Every bank should possess a lending procedure that provides correct borrower selection, quick processing, assurance of repayment and effective monitoring and supervision. The lending procedure followed by Prime Bank Limited consists of a set of sequential activities. In these sequential activities, both bank officials and potential borrowers play significant role. Different Activities in Lending Process The lending procedure starts with building up relationship with customer through account opening. The stages of credit approval are done both at the branches and at the corporate office level. The lending procedure is described below in sequential order: Step-1
A loan procedure formally starts with a loan application from a client who must have an account with the bank. Branch receives application from client for a loan facility. In the application client mention what type of credit facility he/she wants from the bank including his/her personal information and business information. Branch Manager or the Officer-in-charge of the credit department conducts the initial interview with the customer. Step-2 The bank sends a letter to Credit Information Bureau of Bangladesh Bank for obtaining a credit inquiry report of the customer from there. This report is called CIB (Credit Information Bureau) report. This report is usually collected if the loan amount exceeds Taka fifty thousand. The purpose of this report is to be informed that whether or not the borrower has taken loans and advances from any other banks and if so, what is the status of those loans and advances i.e. whether those loans are classified. Step-3 If Bangladesh Bank sends positive CIB report on that particular borrower and if the Bank thinks that the prospective borrower will be a good one, then the bank will scrutinize the documents. Required documents are: In case of corporate client, financial statements of the company for the last three to five years. If the company is a new one, projected financial data for the same duration is required. Personal net worth of the borrower(s). Step-4 Bank officials of the credit department will inspect the project for which the loan is applied. Project existence, its distance from the bank originating the loan, monitoring cost and possibilities are examined. Step-5 Any loan proposal is evaluated on the basis of financial information provided by the applicant. Financial spreadsheet analysis that consists of a series of quantitative techniques is employed to analyze the risks associated with a particular loan and to judge the financial soundness and worthiness of the borrower. Besides lending risk analysis is also undertaken by the bank to measure the borrower’s ability to pay considering various
risks associated the loan. These quantitative techniques supported with qualitative judgment are the most important and integral part of the credit approval process used by Prime Bank Limited.
Step-6 Documents related to the collateral security offered by the customer are sent to the bank’s panel lawyer for vetting. Bank based on the expert opinion of the lawyer further process the loan proposal. Step-7 If the proposal meets Prime Bank’s lending criteria and is within the manager’s delegated power, the manager himself approves the credit line. The manager and the sponsoring officer sign the credit line proposal and issue a sanction letter to the client. If the value of the credit line is above the branch manager’s limit then it is sent to head office or for final approval with detailed information regarding the client (s), credit analysis and security papers. Step-8 Head office processes the credit proposal and puts forward an office note if the loan is within the power of the head office credit committee. Otherwise it is sent to board if the loan requires approval from the board of directors. Step-9 If the credit committee of the head office or the board as the case may be approves the credit line, an approval letter is sent to the branch. The branch then issues a sanction letter to the borrower with a duplicate copy. Step-10 After issuing the sanction advice, the bank will collect necessary charge documents. Charge documents vary on the basis of types of facility, types of collateral.
Step-11 Finally the branch through a loan account in the name of the borrower disburses loan and monitoring of the loan starts formally.
3.16 Credit Information Bureau: Bangladesh Experience
Background: In the backdrop of huge non performing loan that totally deluged the banking sector of the country during the decade of 80s, a full fledge Credit Information Bureau (CIB) was set up a decade ago (August 18,1992) in Bangladesh Bank (the central bank of the country) to act as an unfailing cure to the devil of bad debt. Subsequently, since Dec. 1992 CIB has been collecting detailed credit information' in respect of individual borrower/ owners vide various prescribed formats developed and designed from time to time according to the need of the changing circumstances. Objective and Function: The objective with which CIB was established is to improve credit risk and reduce the extent of default loan by extending lending facilities only to the genuine borrowers. To fulfill the objective the defaulters, under existing laws, are not permitted to: Enjoy further lending or rescheduling facilities extended by the banks and financial institutions: • • • • Float shares in the capital market. Qualify for directorship of banks, financial institutions or insurance companies. Participate in National election and Enjoy CIP status award by Ministry of Industry/ Commerce/ Manpower Planning for outstanding contribution to the' relevant sector of the economy. The request for CIB report comes from: • • • Banks and financial Institutions Central Bank Govt. of Bangladesh
The Credit Information Bureau is committed to give CIB report on request within 72 hours of receiving the request. The report is giving to the users free of cost. Under existing laws CIB report has been made mandatory for the lending banks/ financial institutions before extending lending or rescheduling facilities of any amount to any borrower. Under existing laws CIB report is to be kept confidential by the users. The users are not allowed to desire it to any other individual or institution (except for their own purpose of loan sanctioning/ rescheduling or for any other policy purpose). The violation of this is punishable under law, CIB has an automated data base of its own where detailed information of around 447 thousands borrowers, owners and guarantors are stored after the same is collected from the banks on monthly (of outstanding amount of loan of Tk. 10 million and above) and quarterly (of outstanding amount of loan of TK. 50 thousand & above but below tk. 10 million) basis and form financial institutions on half yearly basis. The credit information collected from and retrieved to the banks and financial Institutions includes consumer credit (At present consumer credit is around 1 % of total credit) also. No separate information on consumer credit is collected or stored in CIB database. Suppression or distortion of facts by the reporting banks/ financial institution in respect of the borrower/ owner is also prohibited under the existing laws. To ensure correct and accurate information as regards the borrowers and owners of the borrowing institution so as to minimize credit risk it has also been made obligatory for the banks and financial institutions to enclose the prescribed undertaking forms along with the prescribed enquiry (request form). Minimize credit risk step has also been taken to give CRR report along with the CIB report. • • • • Automation of CIB Data Base: Detailed information in respect of the borrowers/owners/guarantors are collected through floppy diskette and stored in CIB database. The PCs and the servers are connected under Local Area Network (LAN). The network operating system is Novell 4.11 .The data processing programs are developed in house using developing tools" Fox Pro".
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