2.

1 Definition of Internship
Internship is a process to achieve practical knowledge about some theoretical lesson. Its most important aspect is to acquire knowledge about the real position. As a practical subject, Management needs some practical knowledge. Marketing of Business studies includes an internship programs for its Bachelor of Business Administration (BBA) programs. According to Polin Efro (1977). Social Research is such a scientific effort which tries to discover new information through some rational and organized system, which tries to examine the reliability of former information, and which tries to make to new theories, systems and conceptions to understand and Explain a human attitude. Practical work is achieved to fulfill our knowledge. In practical work, we can realize some problems and possible determinants of their solution.

2.2 Objectives of Internship

Primary objectives of internship are to provide some practical knowledge, which will increase the practical experience with theoretical knowledge managerial efficiency. It helps to achieve real knowledge, perfect investigation, above discussion of known and unknown matter, techniques and experience. However, we can mention the objectives program of internship in the following ways: To show the guideline for searching various necessary information to solve the organizational problems. To add new information with established ways. To identify problems and recommends to solve them. To realize what kinds off organization can contribute to the economic development of a country. To determine entire actual situation of the organization. Another important objective of practical training is to implement the knowledge of practical training in the practical life. To prepare pragmatic report about entire management of organization. To make comprehensive solutions of problems to increase the diversification and modification of marketing. To show about the profitability, liquidity and solvency. To investigate the techniques those are used in decision-making. To show about the conditions of the Bank and its goodwill to the public. To identify managerial problems and eradicate those.

2.3 Importance of Internship

Goods and services are produced for the purpose of using in daily life. Similarly, Theoretical knowledge is acquired for the purpose of applying in the practical life. The propensity of application of theoretical knowledge in practical life successfully internship program is absolutely necessary because theoretical knowledge will be fruitful if it can be applied in the practical life. When we can implement the theoretical knowledge practically, we can say the knowledge is successful; otherwise the achieved knowledge is valueless. Internship program is the way of implementing the theoretical knowledge practically. However, the importance of internship may be described in the following ways: As internship program is the practical implementation of the theoretical knowledge, it helps to increase the quality and effectiveness of the trainer. We can only know the problems of an organization in directly through theoretical knowledge, but we can know the nature of the problems, problems of the various departments, methods of solving the problems through the practical training. So it is very important to identify the problems and eradicate the problems. The trend of all activities is an organization becomes growing through practical training. To Innovate new technique of management. To realize the present condition of the institution. To make policy for development of the organization. It mentally prepares for their professions. Internship program acts as a bridge between theoretical knowledge and managerial practice. Internship acts as a guideline during the service period. By internship program students can understand limitations, shortages and practicability of their knowledge and thereby can take necessary action for removing these limitation and shortages.

2.4 Statement of the Problem

NCC Bank is playing a remarkable role for the economic and social development of Bangladesh. NCC Bank at Rajshahi Branch is also playing such type of role. The activities of this bank are widely diversified. But I have got only 60 working days for my internship program. These sixty working days programs are not sufficient to acquire complete knowledge about overall activities of the bank. So, it may have some sort of problems in deed besides there may have a big problem in collecting

primary and secondary data. It is not abnormal that I may have problem of knowledge. Moreover, it might be said that data have reliable and valid as much as possible. So, I tried my best to prepare my report according to the information available to me.

2.5 Rationale of the Study

The present study is a pioneering attempt in the field of overall activities of NCC Bank Ltd. It is true that, financial performance is really important for realizing original financial position of a bank. In general uses the term fund frequently is used to include (i) cash (ii) liquid assets (iii) current assets (iv) working capital (v) total resources. Again, According to other fund constitutes the prime importance in starting and operating any business enterprise is the raising and management of funds financial decisions are those which concern the flow of funds from various sources and use of such funds. Efficient management of finance ensures best use of resources to earn profit. Bank finance management is the key to short to intermediate term decision-making in todays dynamic and volatile banking environment. This study is taken to enlighten the basic inherent problems of the bank which need a in- depth analysis for the survival of the bank in the situation of its chronics financial problems, such as lack of expected loan recovery, huge outstanding loan, large amount of classified loan and excess overdue loan etc. For continued the present condition of this branch it is now essential to verity its efficiency or lack. As student of BBA (in Marketing) I have considered all these matter and planned this study.

2.6 Objectives of the Study

Anything cant run without any objectives. There are so many objectives of each function. It is not exception of my study. I have selected the topics Loan Disbursement & Recovery System of NCC Bank limited. This study has many objectives. The main objectives of this study are as follows: To know about the functions of NCC Bank Ltd. To analysis the loan disbursement system of NCC Bank Ltd. To analysis the loan recovery position. To analysis the outstanding loan and overdue loan. To analysis deposit structure. To analysis the target and recovery of classified and unclassified loan of the three years. To analysis the financial management efficiency.

To find out the existing problems to loss and find out the causes of loss. To analysis the sector wise loan disbursement of the last three year. To measure the overall financial performance of NCC Bank Ltd. To give suggestions for improving its financial performance.

2.7 Limitations of the Study

This is the first research of my life. That is why, my knowledge in this field is not enough? In spite of this, I have tried hard to collect data from various sources. I think I could not collect all the information as my requirement. The main constraint of the study was insufficiency of information that was highly required for the study. Since the bank officials are very busy with their activities, as a result it was thought to have proper knowledge as was required for the study. The duration was not enough to study the all aspects of banking.

3.1 Introduction
Data collection through census or survey can be used for many purposes. The present study is concerned with the analysis of overall banking system of NCC Bank Ltd. The approach adopted is basically analytical and interpretation in nature considering the objectives of the study and review of literature. It is also decided to employ quantitative descriptive method of analysis and investigations of the empirical data related to the analysis of financial performance problem of NCC Bank Ltd.

3.2 Sources and Nature of Data

In order to performance this internship report, I can use various methods to collect and present data. Mainly I used two types of data for this purpose1. Primary data 2. Secondary data 1. Primary Data Generally the following methods are used in collection of primary data: a. Direct interviewing. b. Personal Communication. c. Questionnaire method a. Direct Interviewing Before starting the task of practical training I prepare a questionnaire to collect data. I collect data from the managers and officers of the NCC Bank Limited at Rajshahi Branch, b. Personal Communication I gathered data through personal distribution from the officers and lower level employees. c. Questionnaire Method At first I made a questionnaire as the direction of my supervisor about the NCC Bank Limited. Thus, I collected other concern questions from information sector and arranged then in that questionnaire. 2. Secondary Data I have collected secondary data from the various sources such: a. Annual report of NCC Bank limited b. Monthly performance report c. Personnel development of NCC Bank Ltd at Rajshahi branch

d. Central accounts department of NCC Bank limited e. Various types of official documents etc.

3.3 Data Collection and Limitation

For the purpose of data collection, personal interview approach has been used. This method relates to the collection of information directly from the respondents. So, in this method, the respondents (bankers) were directly contacted and the desired information was collected using a pre-designed questionnaire. The purpose of putting each question was explained to them. Some of the bankers have hesitated to give answer of some questions belonging to questionnaire.

3.4 Data Processing

Data Processing is a key factor for conduction a research and to write a report. Data processing procedure consist three parts. These are: a) Editing: After the collection of data day by day, I carefully checked each schedule of questionnaire. The data were edited rigorously to make correction of any existing inconsistencies in data and to minimize non-sampling error of the study. I make edition in order to have a complete, consistent, accurate and homogenous data. b) Coding: The recorded data were coded in sheets according to a comprehensive code plan. I tried my best to minimize possible bias due to coding of open question. c) Computerization: Edited and coded data were next processed in a computer. At first, I tried to entry each data in the worksheet. Entire computerization of data has performed by a computer package named SPSS for windows version 11.5, the most convenient program for data analysis for social science. Microsoft Excel and Microsoft word are also used for completing the research. To analyze the data, all the qualitative variables were transferred by suitable numeric values.

3.5 Techniques of Data Analysis

Under this study, the collected data are analyzed. To analyze the collected data, a person has to follow and apply some techniques. Accordingly, I have used some important techniques for analyzing the collected data so that I can get faithful result from my study. The techniques that I have applied in data analyses are as follows: Table Charts Graph

4.1 Profile of the Bank

National Credit and Commerce Bank Ltd. popularly known as NCC Bank Ltd., bears a unique history of its own. The organization started its journey in the financial sector of the country as an investment company named National Credit Limited back in 1985. The aim of the company was to mobilize resources from within and invest them in such way so as to develop country's Industrial and Trade Sector and playing a catalyst role in the formation of capital market as well. Its membership with the browse helped the company to a great extent in this regard. The company operated up to 1992 with 16 branches and thereafter with the permission of the Central Bank converted in to a fully fledged private commercial Bank in 1993 with paid up capital of Tk.39.00 crore to serve the nation from a broader platform. At present the bank is operating with 74 Branches with online facility across the country. Since its inception NCC Bank Ltd. has acquired commendable reputation by providing sincere personalized service to its customers in a technology based environment. The Bank has set up a new standard in financing in the Industrial, Trade and Foreign exchange business. Its various deposit & credit products have also attracted the clients-both corporate and individuals who feel comfort in doing business with the Bank.

4.2Activities of NCCBL
The world economy is going through various crises arising from insurgent activities at various parts of the globe. The turbulence also affected Bangladesh Economy adversely as well. Taka has been devalued. The political unrest caused devastation to the industrial and service sectors. The business community as a whole, apprehending imminent doom, tried to negotiate for a compromise among the various concerned parties. The bank earned a modestly satisfactory result during the year 2008, which contributed in continuing its steady growth in respect of all major indicators, namely Deposit, Advance, Profit, etc. During the year NCCBL has concentrated its focus to a number of income increasing sectors such as SME Financing, Inward Foreign Remittance, etc. Also it has put efforts to bring discipline in administering Banks Asset through various measures. As a whole, the outcome of these efforts was very positive and encouraging indeed. Prudent handling of Asset-Liability is of utmost importance for keeping up profitability at a satisfactory level of any financial institution. During last few years,

with the timely measures taken by the Management under guidance of the Board, it was possible to sustain steady growth through maintaining asset quality. The Bank has separate Credit Administration Department, Recovery Department and also a Task Force for continuous monitoring of difficult loans and advances of the Bank and to propose ways of recovery of Banks dues. This process will continue in upcoming years also. Further, the Bank will pay attention to manage liability also so as to build up a strong deposit base to satisfy investment need of the market. Over the last few years remittance business contributed remarkably in increasing fee based income of the Bank. In order to motivate and inspire the Bangladeshis residing abroad to send their hard earned money through legal Banking channel, NCCBL has taken a number of steps like making remittance arrangements with different money exchange companies all over the world, participating in fairs and meetings with remitters and exchange companies, etc. which brought result beyond expectation. It is a matter of pride that the Bank has been awarded various trophies from exchange companies like MoneyGram for its initiatives in motivating people in this part of the world to avail of the opportunity of sending money through these enterprises. The bank started FRPP, a jointly funded project by DFID in partnership with Bangladesh Bank under the grant facility called Remittances and Payments Challenge Fund (RPCF) where Thangamara Mohila Sobuj Shangha (TMSS), an NGO working for empowering the womenfolk of the country is a partner. Under this project the Bank is using not less than 250 outlets of TMSS to deliver remittance to the beneficiaries where it has no Branch. NCCBL plans to continue this project even after expiry of the RPCF, if proved feasible. The Bank has put due emphasis on grooming up its workforce in a technology based working atmosphere for some time. Also to cater the needs of the customers, very recently NCCBL started full-fledged real time On Line Banking System with implementation of Flora Banking UBS Software and introduced Debit Card in the brand name of MPower Card. The bank also introduced a foreign remittance payment card in the brand name of MBridge Card. Banks Information Technology Division is always engaged in designing need based software and other programmers to ease the situation for the employees so as to enable them to work more dedicatedly to satisfy the customers. Of late financing in SMEs has been proven to be very beneficial for banking sector.

Banks have paid special focus to this sector to expand scopes of extending credit facilities to enhance sustainable profit. SME has been found to be a very potential avenue of financing, since it is believed that small and medium entrepreneurs are very hard working and sincere in paying back Banks money. Banks are optimistic that investing in this sector would not entail huge volume of default loan like conventional or cooperate financing.

4.3 VISION
The vision of the bank is to become the bank of choice in the communities they serve. The bank accomplishes this by offering to their customers the financial services which are expected by their customers while providing a return to their owners. In accomplishing this mission, the bank has now been free from all the natures of a problem bank though full filling all the conditions set by the central bank. They proudly say NCCBL is profit making and problem free.

4.4 MISSION
NCC Bank shall be at the forefront of national economic development by: i) Anticipating business solution required by all NCC Banks customers everywhere and innovatively supplying them beyond the expectation. ii) Setting industry benchmark of world class standard in delivering customer value through the comprehensive product range, customer service and all the activities. iii) Building an exciting team based working environment that will attract, develop and retain employees of exceptional ability who help celebrate the success of banks business, of banks customers and of national development. iv) Maintaining the highest ethical standards and a community responsibility worthy of a leading corporate citizen. v) Continuously improving productivity and profitability and thereby enhancing share holder value.

4.5 BOARD OF DIRECTOR

At present the Board of directors consists of 25 members including the Chairman and Vice Chairman of the Bank. Out of 25 members 21 of them are the sponsors of the shareholders. Most of the members are reputed industrialist and businesspersons of our country. The Chairman heads the Board. Each of the directors is the member of the Board. The members are obliged to maintain the annual general meeting and declare the dividend pay-out schedule on due time. Moreover, the committee selected by the shareholders represents individual body that then looks after the periodic issue with the management and tries to solve the problems.

The Board has appointed the management, which is responsible for the welfare of the Banks directors. Some members of the Board have formed the Executive Committee. Which organizes a meeting in every week to deal with the minor issues such as promotion of cadre change of a confirmed employee. Conversely at least one meeting of the Board is held in every month to deal with major issues such as modification of the existing policy or major policy reforms.

The particulars of the Board are presented as under.

Name Yakub Ali Md. Harunur Rashid Mohammed Nurul Amin S.M. Abu Mohsin Principal M. Wazhiullah Bhuiyan Mr. Tofazzal Hossain Mr.Abdus Salam Mr. A.S.M. Main Uddin Monem Nurul Islam Mr. K.Z. Mahmud Mr. Md. Shahjahan Mr. Md. Mohamad Ali Mr. Fakrul Anwar Md. Abdul Awal Masuda Begum Amjadul Ferdous Chowdhury Mahbubul Alam Tara Ainul Kabir Mostafizur Rahman Alhaj Md. Nurun Newaz Md. Humayun Kabir Din M. Rana Md. Abul Bashar Director Khairul Alam Chaklader Md. Moinuddin Designation Chairman Vice Chairman Managing Director & CEO Chairman, Executive Committee of the Board Chairman, Audit Committee of the Board Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director

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Managing Director (MD) Additional Managing Director (DMD) Sr. Executive Vice President (SEVP) Executive Vice President (EVP) Senior Vice President (SVP) Vice President (VP) Sr. Assistant Vice President (SAVP) Assistant Vice President (AVP) Senior Principal Officer (SPO) Principal Officer (PO) Senior officer (SO) Officer Grade- I Officer Grade- II Management Trainee officer (MTO) Junior officer (JO) Assistant Officer (AO)

ORGANOGRAM OF NCC BANK LTD.

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4.6 TRADE FINANCE & CORRESPONDENT BANK

Successful companies today are fully aware that they need to be able to rely on the services of a bank that can handle international trade with a good hand. Ever since its conversion into a full-fledge bank in 1993, NCC Bank has been an accomplished Trade Finance bank. With a highly professional team experienced and competent professionals we are able to provide a wide range of services to companies engaged in international trade. NCCBL has also positioned itself as an established correspondent Bank. Through a worldwide network of 260 correspondent Banks, NCCBL is present in all key areas of the globe. Our ambit of correspondents includes top ranking international banks with a global reach.

4.7

AUTHORIZED CASPITAL

The authorized Capital of the bank remained unchanged at TK. 5000 Million in the last four years (2006-2009)

4.8

PAID UP CAPI TAL

The bank raised its paid up capital from Tk. 1757.62 million to Tk. 2284.90 million during the year, through issuance of 47% bonus share.

4.9

RESERVE FUND

The reserve fund increased to Tk. 3749.64 million in 2009 from Tk. 2863.62 million in 2008 registering a growth of 30.94%

4.10 PRODUCT OF NCCBL

Deposit product: Current A/C Savings Bank Deposit A/C Short Term Deposit A/C Term Deposit A/C Premium Term Deposit A/C Instant Earnings Term Deposit A/C Special Savings Scheme Special Fixed Deposit Scheme NFCD RFCD Loans and Advance Products: Working Capital Financing Commercial and Trade Financing Long Term (Capital) Financing House Building Financing

12

Retail and Consumer Financing SME Financing Agricultural Financing Import and Export Financing Remittance Products: Special Interest rate on Savings and Term Deposits Wage Earners Welfare Deposit Pension Scheme Loans for Real Estate (Land purchase construction/renovation) Advance against Regular Remittance Service of NCC Bank: Brokerage House. Treasury Service. Remittance Service

and

House

4.11 CARD
ATM Card Credit Card (Local, International and Dual)

4.12 DEPOSIT
The total deposit of the bank is Tk. 53900.15million as on December 31, 2009. The Bank has introduced several welfare oriented deposit schemes to encourage and mobiles savings that have gained popularity among the public. Deposit Structure Year Take (In millions) 2002 16,062.35 2003 15,153.90 2004 16069.23 2005 21478.22 2006 28147.34 2007 34901.77 2008 46904.66 2009 53900.15 Deposit of the bank at the end of the year 2008 was Tk 53900.15 million, which is more than deposit of 2008. From 2000 to 2002 the bank had a rising position but in 2003 it has decrease. It had happened for increase competition in banking sector where the customers are going to the other banks.

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60000 50000 40000 30000 20000 10000 0 2002 2003 2004 2005 2006 2007 2008 2009
Amount

But after 2004 banks deposit are Increases tremendously. This is happen because increasing confidence of customer to NCCBL inspires people to make more and more deposited to NCCBL.

4.13 ADVANCE
The Bank followed its own credit policy within the guidelines of Bangladesh Bank. The Credit portfolio of the Bank is well diversified and broad based covering various sectors of the economy in addition to traditional financing of domestic and international trade. The Bank extended credit facilities under consumer, hire purchase and lease financing schemes as well as loan syndication arrangement with other Banks and Financial Institutions. The Bank also extended financial assistance to small scale industries and industrial loans to a number of projects for employment generation so as to fulfill the socio economic objectives of the Government. During the year Bank has introduced some new collateral free credit products under small loans unit and feasible loan scheme for the first time in banking history. Year 2002 2003 2004 2005 2006 2007 2008 2009 Advance Table (2002- 2008) Taka (In millions) 13,147.72 12,850.85 15,211.15 20533.13 24678.36 32687.75 46322.69 50387.68

14

Credit of the bank at the end of the year 2009 was TK. 50387.68million, which is more than 8.77 % of the preceding year. Credit investments of bank are increases as increases in the deposit amount. The credit position is shown in the following graph.

60000 50000 40000 30000 20000 10000 0 2002 2003 2004 2005 2006 2007 2008 2009
Amount

4.14 CAPITAL MARKET OPERATION

The Bank continued to participate in the day to day transactions of Dhaka Stock Exchange as a member of DSE and expect to earn substantial income through capital market operation in future. The Bank has already established a separate Brokerage House with a view to facilitating the investors to operate the capital market in a hassle free atmosphere. The Bank also bought membership of Chittagong stock exchange. OPRATIONAL RESULT The operational Profit of the bank during 2009 was Tk. 3137.70 million as against Tk. 2363.49 million in 2008 recording an appreciable growth of 32.75 percent which was possible due to prudent lending and efficient management of funds. The net profit thus stood at Tk. 1719.50 million. NETWORK OF BRANCHES The bank has planned to expand its business network to reach large section of the potential clients living in remote areas. The total number f branches were 74th as on 22th November, 2010. DIVIDEND In the line of proposed appropriation of profit, the Board of Directors has been pleased to recommend 47% bonus share and 1R:2 right issues for its valued shareholders for the year 2009. NCC BANK AT PRESENT In the 2009 the Bank could increase its profit and consolidate its position in all areas of operations. The Bank followed cautious but prudent policy during the year in a

15

unpredictable economical and political situation. The profit figure at the end of the year stood at Tk 53900.15 million, an increase of 16.33% over the previous years profit figure of Tk 46332.69 million of 2009 and reserve fund went up-to Tk 3749.64 million registering 30.94% growth over last years position of Tk 2863.62 million.
2000 1500 1000 500 0 profit Paid up capital Reserve fund
2008 2009

Like clothes, shops, bakeshops, food shops, NCC Bank is not a debt shop. The term being used by many to call the present say banks. It is now being called a modern bank that undertakes all its operations at an international standard. The bank has been able to attain a commendable CAMEL rating and its performance has been outstanding in terms of profitability for the year ended 2002. Listed in both the Dhaka and Chittagong Bourses since 1993 with an IPO that raised the paid up capital of the bank to Tk.39.00 Crore, the current price level of its share and turn in trading is evidence of its high rating among investors.

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5.1 Management of NCC Bank

The twelve members of the Board of Directors are responsible for the strategic planning and overall policy guidelines of the Bank. Further, there is an Executive Committee of the Board to dispose of urgent business proposals. Besides, there is an Audit Committee in the Board to oversee compliance of major regulatory and operational issues. The CEO and Managing Director, Deputy Managing Director and Head of Divisions are responsible for achieving business goals and overseeing the day-to-day operation. The CEO and Managing Director are assisted by a Senior Management Group consisting of Deputy Managing Director and Head of Divisions who supervise operation of various Divisions centrally and co-ordinates operation of branches. A Management Committee headed by the CEO and Managing Director manages key issues. This facilitates rapid decisions. There is an Asset Liability Committee comprising member of the Senior Executives headed by CEO and Managing Director to look into all operational functions and Risk Management of the Bank.

5.2 District Wise Branch Distribution

The branches of the Bank cover all the important trading and commercial centres in Bangladesh. As date, it has 65 branches within Bangladesh. All the branches are equipped with computers in addition to modern facilities, logistics and professionally competent manpower. NCC Bank Ltd. is in the process of opening six more branches at important locations in the country.

5.3 Head Office of NCC Bank Ltd.

Head Office NCC Bank Ltd. Address 7-8 Motijheel Dhaka. Telephone ---------------------------------------Telex ----------------------------------------------Fax Swift ---------------------------------Website www.nccbankbd.com

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5.4 At a Glance of NCC Bank Ltd. in Bangladesh

Sl. Description 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Authorized capital Paid up capital Tier-I capital Tier-11 capital Total capital Total Deposit Total Loans & Advances Investment Total Asset Import Business Export Business Remittance Guarantee Business Total Income Total Expenditure Operating profit Credit Deposit Ratio Return on Asset Return on Equity 2005 Taka 500 492 1232 442 1674 21387 22331 3570 29800 13235 15325 2440 544 2873 2021 852 104.41 0.29% 6.85% 2004 Taka 500.00 406.39 1186.93 421.87 1608.80 20774.49 21280.88 2666.29 28575.83 24810.12 29513.90 4297.79 550.56 2687.02 1986.77 700.25 102.44% 0.25% 5.92% 2003 Taka 500.00 406.39 1115.02 421.87 1536.89 19799.33 20450.90 2406.27 27101.27 25412.20 27557.30 3344.00 2206.43 2543.83 1921.75 622.08 103.29% 0.24% 5.63% 2002 Taka 500.00 406.39 1050.63 321.87 1372.50 19131.85 20596.58 4239.88 28885.90 19407.20 21718.90 3344.25 2098.54 2163.63 1986.92 304.71 107.66% 0.27% 7.35%

An Over View of NCC Bank Ltd. at Rajshahi Branch 6.1 Historical Background
In Rajshahi zone, it has only one branch. The NCC Bank Ltd., Rajshahi Branch was established in 25 October, 2005 in Shaheb Bazar & it was transfer Shaheb Bazar to Alupotti more July/2009, at the present time, number of officers and staff at this branch one 15 which include, manager, second officer principal, principal officer, senior officer, officer, cashier, and others.

6.2 Organizational Structure

Organization structures of NCC Bank Ltd. at Rajshahi Branch are as follows: Manager & Senior Vice President Senior Officer Officer G-1

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Officer Junior Officer Asstt. Officer

6.3 Name of the Chief of the Organization

Aminur Rahman, Senior Vice President & Manager of NCC Bank Ltd. at Rajshahi, Branch.

6.4 Objectives of NCC Bank Ltd. at Rajshahi Branch

The main objectives of NCC Bank Ltd. are as follows: To earn profit and To give service. To maximize profit and wealth for the shareholder.

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Loan Disbursement & Recovery System Of NCC Bank Limited

All banking activities can be divided into four categories: General Banking Advance Banking Foreign Exchange Ancillary Services
Banking Activities of NCCBL Advance Banking Foreign Exchange

General Banking

Ancillary Service

Accounts Maintaining

Import

Cash Section

Export

Bills Collection

Remittance

Clean Cash

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Introduction
Banking is a business. This is run on the confidence and trust of people. This confidence enjoyed by banks and enables the bank to mobilize funds from various sources. The word credit derived from Latin word CREDO means I believe. If we analyze this theme it stands for trust & relationship between banker and customers. One of the most important ways a bank or other lending institution can make sure its loans meets regulatory standards and are profitable is to establish a written loan policy. Such a policy gives loan officers and managements specific guidelines in making individual loan decisions and in shaping the overall loan portfolio (Rose et.al. 1995). Each and every bank has got their own credit policy which generally formulated on the basis of prevailing countries socio-economic conditions, political and other related aspects from time to time and as per guideline of central bank. NCC Bank Limited have formulated their own credit policy indicating the areas of lending complied by Bangladesh Bank guidelines. The main features of credit policy of NCC Bank Ltd. have focus on the following areas: i. Trade and Commerce ii. Industry iii. Lease Financing iv. Consumer Financing v. Small & Medium Enterprise (SME) Financing vi. Agriculture & Agro-based Ventures vii. Housing Loan Scheme viii. Real Estate & Civil Construction

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4.1.1 Trade & commerce

This broad category encompasses large business houses dealing with imported consumer items, medium and small import business houses trading in similar item and finally, shop keepers, distributors, whole sellers, retailers and small manufacturers scattered across the country. While allowing facilities under the segment of trade & commerce, bank shall ensure that mere increase in the volume of business portfolio and relevant income generated from it is not the prime consideration as it involves payment in costly foreign exchange in case of foreign trade. Therefore, trading in non-essential items shall be discouraged for the greater interest of the country.

4.1.2 Industry
The domain of industry financing of NCC Bank Ltd. basically comprises of: Capital financing in the form of term loan Working capital financing; & Financing of small cottage industries.

Financing for establishment of new industries or reinvestment to existing industries is a specialized function of the bank. NCCBLs policy would be a selective approach to term loan financing to small scale industries and export oriented or import substitute industries which enjoy high degree of national economic priority. In case of financing in this sector bank would prefer syndication with other banks to keep a balanced portfolio. The core of NCCBLs lending activities shall be the working capital financing to large and medium scale industries as well as small scale industries. Track record of operational performance of the industries, credit worthiness of the entrepreneur, and reasonable security coverage shall form the basis of lending policies. Working capital financing to newly set up industries will also be considered on careful examination of validity, cash flow prospects, and entrepreneurial competence.

4.1.3 Lease financing

NCC Bank Ltd. to keep its contribution to the growth of national GDP, accelerate the total economic development by infusing the fund in productive sector in more efficient and effective way, diversity its portfolio and satisfy the customers need would go for leases finance for: i. Setting up of small and cottage industries/projects. ii. Financing of existing projects. iii. Transports (both road & marine).

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4.1.4 Consumer financing

In order to help the fixed income group in fulfilling their demand to upgrade the standard of living NCCBL has launched some consumer credit scheme such as: i. Personal Loan Scheme ii. Festival Personal Loan Scheme iii. Education Loan Scheme iv. Household appliance v. Furniture & fixture vi. Air conditioner vii. Fax machine & cellular phone viii. Motor cycle/car ix. Other equipments

4.1.5 Small & medium enterprises financing

According to ACSPD circular no.8 dated 26/05/08 of Bangladesh Bank Small & Medium Enterprise are defined taking into account that the basic criteria for both type of business concern will not be public limited company (Table 4.1). Table 4.1 Eligible criteria of small & medium enterprises (Tk. in lac) Type of business \criteria Small Enterprise Fixed assets1 No. employee Medium enterprise of Fixed assets No. of employe e 1-50 1-50

Service Concern

0.50-50.00 0.50-50.00

1-25 1-25

50.00-1000.00 50.00-1000.00

Trading Concern
Manufacturing Concern

0.50-150.00

1-50

150.00-2000.00

1-150

Adapted from: Bangladesh Bank ACSPD circular no.8 of the year 2008.

Value of fixed assets are calculated excluding value of land and building.

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A large section of our business community consists of small and medium business owners who are conducting there business with own resources without availing much support from financial institutions. Banks major concentration shall be under this sector under the following categories: i. ii. iii. iv. v. vi. Small Business Loan Festival Small Business Loan Earnest Money Financing Scheme Financing of Service Concern Financing of Trading Concern Financing of Manufacturing Concern

4.2 Lending Products of NCCBL

NCC Bank Ltd. has developed a wide variety of loan products to meet customers changing demand. The main products of the bank are as follows: i) Continuous Loan a) Secured Overdraft against Financial Obligation [SOD (FO)] b) Secured Overdraft against Work Order/Real Estate etc. [SOD (G)] c) Cash Credit (Hypothecation) [CC (H)] d) Export Cash Credit (ECC) ii) Demand Loan a) Loan General b) Demand Loan against Ship Breaking c) Payment against Documents (PAD) d) Loan against Imported Merchandise (LIM) e) Loan against Trust Receipt (LTR) f) Forced Loan g) Packing Credit (PC) h) Foreign Documentary Bill Purchased (FDBP) i) Local Documentary Bill Purchased (LDBP/IDBP) j) Festival Business Loan iii) Term Loan a) Project Loan b) Transport Loan

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c) House Building Loan d) Small Business Loan e) Consumer Finance Scheme f) Lease Finance g) Personal Loan

iv) Special Fee Earning Product a) Letter of Credit (L/C) b) Bank Guarantee (B/G) c) Foreign Bank Guarantee (F.B/G) d) Credit Card

4.3 Lending Rates of NCCBL

One of the most difficult tasks in lending is deciding how to price a loan. The lender wants to charge a high enough interest rate to ensure that each loan will be profitable and compensate the lending institution fully for the risk involved. However, the loan interest rate must also be low enough to accommodate the business customer in such a way that he or she can successfully repay the loan and not be driven away to other lenders or into the open market for credit. Pricing of loan depends on the cost of rising loanable funds and the operating costs of running the lending institutions. As consequences of regulatory compliance and global economic crises NCC Bank has re-fixed its interest rates at a lower rate from the second quarter of the year 2009 in the following manner (Table 4.2).

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Table 4.2 Lending rates of NCCBL

(Percent per year)

Serial

Category of Loan

Rate May09 (% P.A.)

before Existing Rate (% P.A.)

01 02

Agriculture

12.50

13.00 13.00

Term Loan (medium & 14.50 large scale industries) Working capital (medium 14.50 & large scale industries) Term Loan & Working 14.50 Capital (Small scale industry) Export Financing a) Packing Credit (PC) b) Export (ECC) Cash Credit 7.00

03

13.00

04

16.00

05

7.00

06

Commercial Loan a) Pledge b) Hypothecation c) PAD d) LIM e) LTR f) IBP g) FBP h) LDBP i) FDBP & Bills Discounted

14.50

13.00

07

Housing Loan (Commercial 15.00 & residential)

13.00

26

08

Consumer Financing a) Small Business Loan b) Festival Small Business Loan c) House Repairing Loan d) Personal loan e) Consumer Scheme Finance

17.00

17.00

09 10 11

Credit Card NBFI Others a) SOD (FO)

2.00/month 14.00

2.00/month 14.00

03% above FDR 03% above FDR rate rate 16.00

b) SOD (G) work/supply 16.00 order c) Trans port Loan d) Lease finance 16.00 16.00

16.00 16.00

Source: Adapted from Head Office Instructional Circular of NCCBL (May 2009).

4.4 Principle of Sound Lending

It is imperative precept of banking everywhere that advances are made to customer in reliance on his promise to repay, rather than the security held by the banker. Security is required by the banker as a protection against unexpected default in repayment by the customer. So it is necessary for any bank to develop sound and safe lending policies and practicing principles of sound lending. Principles of sound lending are:

i. ii. iii. iv. v. vi. vii.

Safety Liquidity Profitability Purpose Security Dispersal/ Spread, and National interest

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4.4.1

Safety

Safety first should be guiding principle of a banker. So far as his advances are concerned, because the very existence of a bank depends on the safety of its outstanding, which should never be sacrificed to the profit earnings capacity of its advances. This has led people to believe that a bank never advance any loan unless it is fully secured. To maintain a banking concern in sound condition, it is very essential that the safety of its advances to customers should be its first principle. The repayment capacity of a borrower depends on the borrowers a) capacity to pay and b) willingness to pay. 4.4.2 Liquidity

Liquidity is the availability of bank funds on short notice. It is not enough that the money will come back, it is also necessary that it must come back on demand or in accordance with agreed terms of repayment. The borrower must be in a position to repay within a reasonable time after a demand for repayment is made; otherwise, the liquidity position of the bank is endangered. 4.4.3 Profitability Commercial bank has to distribute its resources in a manner hat they meet the twin requirements of liquidity and profitability. A banker has; therefore, to see that major portion of the assets owned by it are not only liquid but also aim at earning a good profit. The working funds of a bank are collected mainly by means of deposits from the public and interest has to be paid on these deposits. 4.4.4 Purpose A banker would not through away money for any purpose of which the borrower wants. The purpose should be productive so that the money not only remains safe but also provides a definite source of repayment. The banker should study the purpose for which the loan is required and the resources from which the borrower is expected to repay. If the funds borrower is employed for unproductive purposes like marriage ceremony, pleasure trip, repayment of old debts etc., or speculative activities, the repayment in the normal course will become uncertain. Bankers also discourage advances for a hoarding of stocks. 4.4.5 Security

It is the practice of banks not to lend money without any security. The security offered for an advance is insurance or a cushion to fall back upon in case of need. A banker would not normally like to recover the advance from the safe of the security. They would prefer an advance to come back from the normal source. Security serves

28

as a safety value for an unexpected emergency. Security may be of i) Primary security and ii) Collateral security. 4.4.6 Dispersal/Spread

The advances should be as much broad-based as possible and must be in keeping with the deposit structure. The advance must not be in one particular direction or to one particular industry; because any adversity faced by that particular industry will have serious repercussions on the bank. Again advance must not be granted in one area alone. There should be spread of advances against different securities, industries as well as areas. Thus, by a diversification of the advance a banker will be able to spread his risks and considerably improve the safety of advance. 4.4.7 National interest

Banking industry has significant role to play in the economic development of a country. The banker would lend if the purpose of the advance is for overall national development plans necessitating flow of credit to propriety sector in the larger national interest.

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LENDING PROCESS
5.2 Stages of Lending
Most loans to individuals are arise from a direct request from customer who approaches a member of the lenders staff and asks to fill out a loan application. A well thought out lending process is a significant safe guard of depositors money as well as business of the bank (Rose, et.at. 2005). This chapter aims at discussing the scrutiny, approval, disbursement, monitoring, follow-up and supervision process of credit of NCC Bank Limited.

Lending process involves the following three stages: such as i) ii) iii) Pre-sanction Post-sanction/pre-disbursement Post disbursement

5.2.1 Pre-sanction stage

Virtually the very supervision of loans starts during pre-sanction stage at the time a borrower approaches to a banker and applies for loan. Unlike other bank NCC Bank has got a prescribed loan application form for applying for a loan. In the first stage credit investigation is very important as it involves selection of right and qualitative borrower. Credit Report. Bank obtain undertaking from the borrower about their present credit exposure (if any) lies with other banks, financial institutions. Bank invariably collect credit report from Credit Information Bureau (CIB) of Bangladesh Bank to justify the declaration made by the applicant borrower regarding their credit exposure. Bank also uses internal sources, i.e., account performance, reputation, track record, repayment capacity, and intention to pay banks money to evaluate the prospective borrower.

Feasibility study. In case of feasibility study NCC Bank Ltd. focuses mainly on
the following aspects: a) Managerial aspects i) Managerial ability ii) Honesty and integrity. iii) Managerial succession. b) Technical aspects i) Whether the technology is outdated or modern to handle by the firm. ii) Cross-check of the pricing as stipulated in the indent/pro-forma invoice. iii) Check the productivity of the proposed plant and machinery matching with the firms goal.

30

c) Financial aspects i) Companys operating performance and future earnings prospects. ii) Current financial condition and factors likely to affect in the near future. iii) Demand-supply gap keeping in view the other similar existing industries and the industries which are in the offing. iv) Net worth of the sponsor directors/entrepreneurs/proprietors. v) Credit Risk Analysis.

5.2.2 Post-sanction/ Pre-disbursement stage

Proper documentation and securitization is very important at this stage for safety of credit facility to be extended and enabling the bank to liquidate the loan liability in the event of borrowers default. Proper and correct documentation serves the following three basic purposes: a) Borrowers unqualified assent of availing credit facility. b) Banks legal right is created to the securities deposited/offered as of the loan. c) In case of default of the borrower to repay, the documents can be placed before court for a decree to realize the dues. Documentation. Documents means any matter expressed of described on any substance by means of letters figures or marks or by more than one of those means intended to be used for or which may be used for the purpose of recording that matter. And documents are the physical embodiment of the existence of loans and advances. Documentation is the execution of documents in right form and in lawful manner. Documentation forms a permanent record of the rights responsibilities and obligations of the executants that the borrower and guarantors towards the lender (Bank). Charge Documents. Charge means to impose a duty, responsibility, or obligation on or to hold financially liable, right to demand payment from a person. Such formation constructive rights of lender on borrower and offered security are the charge. The documents by which such rights are to be established on offered security is called Charge Document. Before starting documentation bank officer who takes documents must consider the following preconditions: a) Nature of advance and purpose. b) Nature of borrower. c) Nature of security and mode of charging. d) Charge requiring registration or not. e) Charge documents to be stamped or not. f) If stamped, amount and type of stamp. g) Special conditions of documents as per sanction advice. h) Capacity of executants and signing capacity. i) Banks supplied printed documents and their contents.

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Steps of Documentation. There is a saying that bank deal with documents, not with merchandize. Therefore, proper and accurate documentation is utmost necessary to ensure banks interest. Flaw less documentation ensure proper title and rights to the security offered to the bank by the borrower. Documentation involves; a) Preparation of deed. b) Legal opinion. c) Executants and execution. d) Witnessing. e) Stamping of documents as per Stamp Act-1999. f) Registration as per Registration Act-1920, and g) Safe keeping/ preservation of documents. Conditions of a Valid Document. Documents must be made in conformity with the conventional rules, regulations of Bangladesh Bank and the law of the nation. Valid documents must satisfy the following criteria to become acceptable to the bank. a) Documents which are not acceptable in the court of law following cause are mainly behind the invalidation of bank document. b) Alteration and interlineations in documents if it is done after execution. c) The mis-statement misleads delivers a deed. d) If the party is blind or illiterate and if the documents are read falsely. e) The parties executing the documents are not competent. f) Improper stamping/under stamping. g) Want of attestation or witnessing, if necessary. h) Failure to register with competent authority within specific time. i) Ambiguous schedule of the offered security. j) Forgery, tempering deleting of documents. k) Deed executed as a result of undue influence or forcefully. l) Instruments executed in blank (amount, security, liability) with a bad intension. Securitization. Direct securities like Fixed Deposit Receipt (FDR), other Term Deposit Receipt, of Deposit Pension Scheme (DPS) etc., standing in the name of the borrower himself and those standing in the name of 3rd party should be liened duly discharged. In case of Collateral Security, Registered mortgage should be created as per Banks Panel Lawyers opinion taking all the chain documents. Such as: a) Original deed b) Bia deed c) C.S., S.A., R.S., Parcha d) Non-encumbrance certificate e) Up-to-date rent receipt, etc.

32

Creation of charge with RJSC. In case of accommodation against hypothecation of moveable property (machinery, stock, etc.) of limited company, charge (on the assets acquired/ to be acquired) must be created with the Registrar of Joint Stock Company (RJSC) with in 21 days from the date of documentation and the certificate thereof must be maintained with the charge documents.

5.2.3 Post disbursement stage

At the post disbursement stage the following points must be examined by the branch in-charge and credit officer in order to keep the lending portfolio sound: a) Whether transaction in the loan account is being done satisfactory. b) Whether balance in the loan account remains within limit. c) Whether fund disbursed has been used for the purpose the loan has been sanctioned for. d) Whether stock reports are obtained and stocks are being inspected at a regular interval. e) Whether personal contact with the borrower kept on at regular intervals. f) Whether keen watch is exercised on irregularity of any form on the loan account. g) Whether the aspects revealing financial and management position of the borrower are under close watch and supervision. h) Whether balance confirmation is being obtained from the borrow at regular interval. i) Whether befitting step is being taken so that the loan does not turn time barred. 5.3 Realization Realization of loan, in whatever form it may be disbursed, is of prime importance. Because bank lends out of deposit of people. As such, to get scarce deposit and maintain confidence of the people, it is moral responsibility and prime duty of manager to realize loan. It is of no doubt that effective and subjective supervision and control pave the ground wide for realization of loan. A manager gifted with the quality of subtlety and diligence should remain alert on following points: a) b) c) d) e) If any borrower dies. If a borrower is declared insolvent. If borrower is a partnership firm and the firm is dissolved. If a borrower limited company is winded up. If market price of pledged goods falls down

33

PORTFOLIO OF NCCBL RAJSHAHI BRANCH

7.2 Deposit Mix of the Branch Deposit of the branch stood at Tk.4197.00 lac at the end of the year 2009. Term deposit (FDR, MDP, EITD, SDS) consists the largest portion of the deposit mix of the branch and Short Term Deposit consists the smallest share of total deposit of the deposit mix of the branch (Table 7.1). Total deposit consists of 15 percent cost free deposits and 85 percent cost bearing deposits, respective Table 7.1 Distribution of deposits by category (Fig. in lac) Type of Deposit Amount (Tk.) Percentage

Cost Free Deposit Current Deposit Sundry Deposit Accrued Innt. Payable Bills Payable Sub-total 188.00 251.00 138.00 59.00 636.00 4.48 5.98 3.29 1.41 15.00

Cost Bearing Deposit Savings Deposit Short Term Deposit Term Deposit Special Savings Schemes Sub-total Total deposit (1+2) 188.00 29.00 3134.00 210.00 3561.00 4197.00 4.48 0.69 74.67 5.00 85.00 100

Source: Daily Statement of Affairs as on 31 December 2009 of NCCBL, Rajshahi Br.

34

Cost Free Deposit 15%

Cost Bearing Deposit 85%

Chart 7.1 Distribution of deposit by cost.

Trend of Deposit of the Branch

Total deposit of NCCBL, Rajshahi Branch was the lowest, Tk.141.94 lac only, in the year 2005. However, the year 2005 was the establishment year of the Branch and the Branch was operated only from October to December in that year. In the year 2009 total deposit stands for Tk4197.06 lac with the growth rate of 77.39 percent over the last years deposit. (Table 7.2). Deposit trend shows that the growth of deposit was increasing over the years of operation. (Chart 7.2). Table 7.2 Growth of deposit over the years Year 2005 2006 2007 2008 2009 Source: Survey (2010). Deposit 141.94 1553.06 2493.41 2366.73 4197.06
(Fig. in lac)

Growth 99.41% 37.71% 101.25% 77.36 %

35

Deposit 6000

Trend of deposit over time

y = 892.39x - 526.73 5000

Deposit (Tk. in lac)

4000 3000 2000 1553.06 1000 0 141.94 2005 2006 2007 2008

4197.06

2493.41 2366.73

2009

Year

Chart 7.2 Growth of deposit over time.

7.3

Loans and Advances

At the end of financial year 2009, lending assets of the Branch reached at Tk.2458.00 lac. Cash Credit (Hypo) was Tk.1179.00 lac and SOD was Tk1123.00 lac, respectively. Those were 47.97 percent and 45.69 percent of the total loans and advances of he Branch, respectively. Is was found that Cash Credit (Hypo) and Secured Over Draft consists the largest portion of the lending assets. Where as Consumer Finance Scheme consists the smallest share of the loans and advances of the branch (Table 7.3). Table 7.3 Distribution of loans and advances by category
(Fig. in lac)

Products Cash Credit (Hypo) Secured Over Draft (SOD) Small Business Loan Scheme Loan Against House Building Consumer Finance Scheme Lease Finance Scheme

No. of A/C 39 93 90 1 1 3

Amount (Tk.) Percentage 1179.00 1123.00 69.00 21.00 1.00 7.00 47.97 45.69 2.81 0.85 0.04 0.28

36

House Renovation Loan Scheme Personal Loan Scheme NCCBL Car Loan Scheme Festival Small Business Loan Scheme Short Term Loan (STL) Total Loan

5 28 2 3 1 266

12.00 4.00 15.00 8.00 19.00 2458.00

0.49 0.16 0.61 0.33 0.77 100%

Source: Adapted from Daily Statement of Affairs and Module Wise Customer Lager Balance as on 31 December 2009 of NCCBL, Rajshahi Br.

7.3 Trend of Lending Portfolio

Lending assets of the Branch was increasing over the year of its operation (Chart 7.3). After the bank was opened in the last quarter of the year 2005 it sanctioned Tk.0.60 lac to the borrowers. From the year 2005 on credit portfolio of the branch was increasing every year. And in the year ended 2009 total loans and advances was Tk.2458.00 lac, which shows 179.24 percent growth of the portfolio over the last years portfolio (Table 7.4). Table 7.4 Growth of credit portfolio over time
(Fig. in lac)

Year 2005 2006 2007 2008 2009 Source: Survey (2010).

Advance (Tk.) 6.00 295.99 434.13 889.79 2458.00

Growth (%) 48.33 46.67 104.96 176.24

37

Advance (Tk.) 3000

Linear (Advance (Tk.)) y = 549.78x - 832.56

2500

2458

Loans & Advances (Tk. in lac)

2000 1500 1000 500 295.99 0 -500 Year 6 2005 2006 2007 2008 2009 434.13 889.79

Chart 7.3 Growth of loans and advances over time.

7.5 Operating Profit

Total operating profit of the Branch was negative in the year 2005. The reason behind the loss was huge set up cost and non availability of adequate time to make investment to generate income; as the Branch was inaugurated in October 2005. The Branch started making profit from the year 2006. It was found from table 7.5 that the Branch made highest profit of Tk. 63.25 lac in the year 2009 with a growth rate of 102.66 percent over the last years profit figure, where as profit was lowest at the end of the year 2006. Trend of growth of profit of the branch was increasing upward over the years of operation (Chart 7.4). Table 7.5 Growth of profit over time Year 2005 2006 2007 2008 2009 Profit (Tk.) -7.14 1.05 5.15 31.21 63.25
(Fig. in lac)

Growth (%) 1.05 390.47 506.01 102.66

Source: Survey (2010).

38

Profit (Tk.)

Linear (Profit (Tk.))

80 70

y = 17.094x - 32.578 63.25

Profit (Tk. in lac)

60 50 40 30 20 10 0 -10 -20 5.15 1.05 2005 -7.14 2006 2007 2008 31.21

2009 Year

Chart 7.4 Growth of profit over time

7.6 Non-performing Assets of the Branch

The ratio of classified loan amount was 03 percent of total loans and advances in the year ended 2009. Therefore, 97 percent of the lending was fallen in the category of unclassified or standard assets of the branch (Chart 7.5). In the lending portfolio Tk.69.99 lac out of total loans and advances of Tk.2458.00 lac was classified adversely under different loan products. It was found in the table 7.6 that Bad and Loss (BL) consists the largest share of classified loans and advances. Where as Special Mention Account (SMA) consists the smallest portion of classified loans and advances of the Branch. Table 7.6 Non-performing assets at the year ended 2009
(Fig. in lac)

Classification Unclassified SMA SS DF

Amount (Tk.) 2388.01 4.43 16.58 18.05

Percentage

97.15 0.18 0.67 0.73

39

BL Total Classified Loan Total Loan and Advance

30.93 69.99 2458.00

1.26 100.00

Source: Adapted from all loan customer wise balance statement, NCC Bank Ltd., Rajshahi
Branch as on 31 December 2009.

Classified 3%

Unclassified 97%

Chart 7.5 Classification of lending assets of the Branch

Qualitative Evaluation of Lending Assets

National Credit and Commerce Bank Limited has got a vide variety of lending products. Among which some products are in operation in its Rajshahi Branch. There are namely CC (H), SOD, SBLS, PLS, FSBLS, CFS, LFS, Car Loan, HBL, HRRLS and STL. The present section aims at evaluating quality of individual products in terms of classification status of those products under prudential guidelines of loan classification.

7.7.1 Cash Credit (Hypo)

Cash Credit (Hypo) is the most prominent product of NCCBL, Rajshahi Branchs credit portfolio. It was found from table 7.8 that at the end of the year 2009 the branchs CC (H) outstanding stands for Tk.1179.28 lac only, among which 98.33 percent was standard and generating income for the branch and 0.28 percent was market as SS, 0.26 percent was marked as DF, and 1.14 percent was marked as BL, respectively.

40

Table 7.7 Classification of Cash Credit (Hypo)

(Amount in lac)

CL Status UC SMA SS DF BL Total

Branch as on 31 December 2009.

Amount (Tk.) 1159.53 0.00 3.31 3.03 13.41 1179.28

Percent of total 98.33 0.00 0.28 0.26 1.14 100.00

Source: Adapted from all loan customer wise balance statement, NCC Bank Ltd., Rajshahi

7.7.2 Secured Over Draft (SOD)

Secured Over Draft (SOD) is another prominent product of NCCBL Rajshahi Branchs credit portfolio. It was found from table 7.9 that at the end of the year 2009 the branchs SOD outstanding stands for Tk.1119.72 lac only, among which .027 percent was marked as BL. Table 7.8 Classification of Secured Over Draft (SOD)
(Amount in lac)

CL Status UC SMA SS DF BL Total

Branch as on 31 December 2009.

Amount (Tk.) 1119.72 0.00 0.00 0.00 3.07 1122.79

Percent of total 99.73 0.00 0.00 0.00 0.27 100.00

Source: Adapted from all loan customer wise balance statement, NCC Bank Ltd., Rajshahi

7.7.3 Small Business Loan Scheme (SBLS)

Small Business Loan Scheme (SBLS) is another loan product of NCCBL Rajshahi Branchs credit portfolio. The loan is being disbursed to the small business houses without taking and collateral security. It was found from table 7.10 that at the end of the year 2009 the branchs SBLS outstanding stands for Tk.68.53 lac only, among which 36.18 percent is standard and generating income for the branch and 5.61

41

Table 7.9 Classification of Small Business Loan Scheme

(Amount in lac)

CL Status UC SMA SS DF BL Total

Branch as on 31 December 2009.

Amount (Tk.) 24.80 3.85 12.77 15.02 12.09 68.53

Percent of total 36.18 5.61 18.64 21.92 17.64 100.00

Source: Adapted from all loan customer wise balance statement, NCC Bank Ltd., Rajshahi

7.7.4 House Building Loan Scheme (HBL)

House Building loan Scheme is a convenient product of NCCBL Rajshahi Branch. It is a low cost credit facility to whom wants to make residential or commercial houses. During the study it was found that at the end of the year 2009 the branchs HBL outstanding stands for Tk.21.00 lac only, under only one loan account, which was unclassified and generating income for the branch (Table 7.3).

7.7.5 Consumer Finance Scheme (CFS)

CFS is a product of NCCBL Rajshahi Branch to help fixed income group house hold durables. It was found from table 7.3 that at the end of the year 2009 the branchs CFS outstanding stands for Tk.1.00 lac only, under only one loan account, which was unclassified and generating income for the branch.

7.7.6 Lease Finance Scheme (LFS)

LFS is another sound lending product of NCCBL Rajshahi Branch to finance in to capital machinery to set up industry, private hospital, clinic, etc. It was found from table 7.3 that at the end of the year 2009 the branchs LFS outstanding stands for Tk.7.00 lac only, under three loan accounts, which was unclassified and generating income for the branch.

7.7.7 House Repairing and Renovation Loan Scheme (HRRLS)

HRRLS is another income generating lending product of NCCBL Rajshahi Branchs portfolio. The present study revealed that at the end of the year 2009, HRRLS outstanding was Tk.12.00 lac only. This product of the lending portfolio was still unclassified and earning income for the Branch. There were five loan accounts under this product (Table 7.3).

42

7.7.8 Personal Loan Scheme (PLS)

PLS is another product which was designed to help fixed income group in case of their sudden requirement of money. Fixed income earning people such as Teacher, Doctor, service holders in private organizations and other professionals are entitled to avail the facility. It was found from table 7.11 that at the end of the year 2009 the branchs PLS outstanding stands for Tk.3.71 lac only, among which 67.69 percent was standard and generating income for the branch. While 15.67 percent was marked as SMA, 13.34 percent was market as SS, and 3.30 percent was marked as BL, respectively.

Table 7.10 Classification of Personal Loan Scheme

(Amount in lac)

CL Status UC SMA SS DF BL Total

Branch as on 31 December 2009.

Amount (Tk.) 2.51 0.58 0.49 0.00 0.12 3.71

Percent of tatal 67.69 15.67 13.34 0.00 3.30 100.00

Source: Adapted from all loan customer wise balance statement, NCC Bank Ltd., Rajshahi

7.7.9 NCCBL Car Loan Scheme

LFS is another sound lending product of NCCBL Rajshahi Branch s credit portfolio. It was found that at the end of the year 2009 the branchs LFS outstanding stands for Tk.15.00 lac only, under two loan accounts, which was unclassified and generating income for the branch (Table 7.3). 7.7.10 Festival Small Business Loan Scheme (FSBLS) FSBLS is the product which was designed to help small business group in the time of any festival - Eid, Puja - when they require huge amount of cash money to maintain stock of goods in their shop. Kinds of business with have extensive seasonal demand variation is entitled to get this facility.

43

Table 7.11 Classification of FSBLS

(Amount in lac)

CL Status UC SMA SS DF BL Total

Amount (Tk.) 6.18 0.00 0.00 0.00 2.24 8.42

Percent of total 73.40 0.00 0.00 0.00 26.60 100.00

Source: Adapted from all loan customer wise balance statement, NCC Bank Ltd., Rajshahi
Branch as on 31 December 2009.

7.7.11 Short Term Loan (STL)

STL is a newly developed lending product of NCC Bank Ltd. It was developed in the last quarter of the year 2009 in order to strengthen banks lending base. The loan is being allowed for 12 months to 24 months period. Table 7.3 postulated that at the end of the year 2009 the branchs STL outstanding stands for Tk.19.00 lac only, under only one loan account, which was unclassified and generating income for the branch. The following ratios are used for calculating KPI for evaluating Banks performance: Cost of Deposit:
Interest Paid on Deposit Average Deposit
Operating Cost (Note: Operating Cost = Total Cost Average Deposit

Cost of Operation: Interest Cost) Cost of Fund:

Interest Paid on Deposit Operating Cost Average Deposit

Interest Earned on Advance Average Advance

Yield on advance:

Spread: Cost of Deposit Yield on Advance Credit Deposit Ratio:

Total Credit Total Deposit

44

Cost Income Ratio:

Total Operating Cost Total Operating Income

Non Interest Income Non Interest Expense

Burden Coverage Ratio:

Per Employee Income:

Operating Income Number of Employees

Operating Expense Number of Employees

Per Employee Expense:

Profit per Employee: Per Employee Income Per Employee Expense Non Performing Loan Ratio:
Non Perfor min g Loan Outs tan ding Loan

Return on Assets:

Operating Pr ofit Total Assets Contra Item

Table 7.12 Performance Indicator of the Branch for the year ended 2009 Indicators 1.Deposit a) i) Cost bearing deposit ii) Cost free Deposit Total Deposit b) % of Cost bearing Deposit c) % of Cost free deposit d) Cost of Deposit e) Cost of operation(Total cost-Interest cost) Total Cost of fund (d+e) 3583 457 4040 88.69% 11.31% 10.32% 3.15% 13.47% Taka (in lac) / %

2.Loans & Advances

45

a) Total Loans & Advances b) Classified portfolio c) % of Classified Loan to total Loan & Advances d) yield of advances 3. Credit Deposit Ratio 4. Spread {2(d)-1(d)} 5.Income a) Net Interest Income b) Exchange gain c) Commission & fees Income d) Total Income e) Ratio of Non-Interest Income to Total Income f) Interest income Kept in suspense A/C 6. Expense a) Net Interest Expense b) Salary & Allowances c) Others d) Total Expense e) % Empolyees Expense to Total Expense

2066 0.61 2.95 14.84 34:66 4.52

311

49 360 27.22 7.42%

249 46 30 325 14.15%

7. Opwerating Profit/(Loss)-(5d-6d) 8. Cost Income Ratio (Operating Income)

35 155.10%

46

9.Burden Coverage Ratio 10. Return on Assets (ROA) 11. Efficiency Ratio i. ii. iii. iv. v. vi. Per Emplyee Deposit Per Employee Deposit Per EmployeeClassified Loan Per Employee interest Income Per Employee Non Interest Income Per Employee Income

61:39 0.0079

311 159 5 19 3 23 20 3 2 13 3 16

vii. Per Employee Expense viii. Per Employee Salary & Allowances Expenses ix. Profit/(Loss) per Employee

Executives & Officers Support Staff Total: Source: survey (2009).

7.9 SWOT Analysis for the Branch

SWOT analysis was done to identify the factors affecting profitability of our branch business.

Strength.
Congenial working environment of the branch. Quality manpower who wants to serve customer well. Branch situated in a prime location of the city. Online facility

47

Weakness.
Imbalanced rank and profile of staffs in the branch; Manager is a Sr. Vice President and Deputy Manager is only Senior Officer. In adequate training facility to improve managerial skills No any branch clearing facility Inadequate manpower in cash, general banking, and advances department. At least an ATM booth is required adjacent to branch.

Opportunity.
Trade finance business. Increase small savings. Lease finance to professionals-doctor, finance to small and cottage industry.

Threat.
Latest technology adoption- ATM, Alert Banking, Phone Banking- by competitors. Small segment of large-scale business concern in the city. Risky SME financing due to borrowers easy access to NGO loan, which may lead to over finance and reduce borrowers credit worthiness. CIB report is not available to trace out NGOs loan made to borrower. Customer preference to deposit to FDR which increase cost of fund. Intense competition among competing banks to grab business, which may lead to unsecured financing.

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SUMMARY CONCLUSION AND RECOMENDATION SUMMARY

National Credit and Commerce Bank Ltd. bears a unique history of its own. The organization started its journey in the financial sector of the country as an investment company back in 1985. . The company operated upto 1992 with 16 branches and thereafter with the permission of the Central Bank converted into a full fledged private commercial Bank in 1993 with paid up capital of Tk.39.00 crore to serve the nation from a broader platform. At present the bank is operating with 65 Branches with online facility across the country. The bank has started FRPP, a jointly funded project by DFID in partnership with Bangladesh Bank under the grant facility called Remittances and Payments Challenge Fund (RPCF) where Thangamara Mohila Sobuj Shangha (TMSS), an NGO working for empowering the womenfolk of the country is a partner. Under this project the Bank is using not less than 250 outlets of TMSS to deliver remittance to the beneficiaries where it has no Branch. The bank is always aware of its social responsibility and consciously put its efforts to discharge this responsibility. For effective discharge of CSR, NCC Bank Foundation was established a few years back. Under the banner of this foundation, the bank has continued its social works. Mission of the bank is to mobilize financial resources from within and abroad to contribute to Agricultures, Industry & Socio-economic development of the country and to pay a catalytic role in the-formation-of-capital-market. And vision of the bank is to become the Bank of choice in serving the Nation as a progressive and Socially Responsible financial institution by bringing credit & commerce together for profit and sustainable growth.

The present study of conducted to attain a broad objective of analyzing credit policy of NCC Bank Ltd. and to evaluate efficiency and effectiveness of credit operations of Rajshahi Branch of NCC Bank Limited. The study further attempt to attain the following objectives in order to reach its broad objective. i. to study the credit policy of NCC Bank Limited; ii. to study the credit risk grading system of NCC Bank Limited; iii. to analyze credit portfolio of NCCBL Rajshahi Branch; iv. to analyze key performance indicators of the Branch;

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v. to analyze Branchs strengths & weakness; and vi. to suggest some policy recommendations. The present study was conducted based on secondary date generated mostly by the automated banking software-Flora Bank UBS- of the bank. The researcher himself collected the data from different published and unpublished material of NCCBL financial documents. Published document is the annual report of the bank, while unpublished sources of secondary data are different monthly statements, quarterly statements, deposit and loan ledgers, Daily Statement of Affairs, Income Statement, Expenditure Statement, and annual closing statements of the branch under study. Each and every bank has got its own credit policy which generally formulated on the basis of prevailing countries socio-economic conditions, political and other related aspects from time to time and as per guideline of central bank. NCC Bank Limited have formulated own credit policy indicating the areas of lending complied by Bangladesh Bank guideline. The main features of credit policy of NCC Bank Ltd. have focus on the following areas: i. Trade and Commerce ii. Industry iii. Lease Financing iv. Consumer Financing v. Small & Medium Enterprise (SME) Financing vi. Agriculture & Agro-based Ventures vii. Housing Loan Scheme and viii. Real Estate & Civil Construction Pricing of loan depends on the cost of rising loanable funds and the operating costs of running the lending institutions. As consequences of regulatory compliance and global economic crises NCC Bank re-fixed its interest rates at a lower rate in the second quarter of the year 2009. Now the banks interest rates ranges from 13 percent to 17 percent per year. Most loans to individuals are arise from a direct request from customer who approaches a member of the lenders staff and asks to fill out a loan application. A well thought out lending process is a significant safe guard of depositors money as well as business of the bank (Rose, et.at. 2005). Lending process involves three stages: such as i. ii. iii. Pre-sanction Post-sanction/pre-disbursement and Post disbursement

Pre-sanctions stage involves justification of the prospective borrowers credit worthiness. Pre-disbursement stage involves securitization of the loans with adequate primary and collateral security. While post-disbursement stage involves monitoring

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and realization of the lending money. The Credit Risk Grading matrix allows application of uniform standards to credits to ensure a common standardized approach to assess the quality of individual obligor, credit portfolio of a unit, line of business, the branch or the Bank as a whole. Risk grading would also be relevant for surveillance and monitoring, internal MIS and assessing the aggregate risk profile of a Bank. It is also relevant for portfolio level analysis. Credit risk for counter party arises from an aggregation of the following: i. ii. iii. iv. v. Financial Risk Business/Industry Risk Management Risk Security Risk Relationship Risk

Each of the above mentioned key risk areas require be evaluating and aggregating to arrive at an overall risk grading measure. NCC Bank Ltd. Rajshahi Branch commenced its journey on 25th October 2005. Since inception the branch was trying to serve for the greater interest of all its stakeholders and of the society. There are one executive, Sr. Vice President & Manager, and eleven officers employed in the branch. Deposit of the branch stood at Tk.4197.00 lac at the end of the year 2009. Total deposit consists of 15 percent cost free deposits and 85 percent cost bearing deposits, respectively. And the growth rate of deposit was 77.39 percent over the last years deposit. In the year ended 2009, lending assets of the Branch reached at Tk.2458.00 lac. Cash Credit (Hypo) was Tk.1179.00 lac and SOD was Tk1123.00 lac, respectively. Which were 47.97 percent and 45.69 percent of the total loans and advances of the branch, respectively. It was found that Cash Credit (Hypo) and Secured Over Draft consisted the largest portion of the lending assets. Where as Consumer Finance Scheme consisted the smallest share of the loans and advances portfolio of the branch. And in the year ended 2009 total loans and advances was Tk.2458.00 lac, which shows 179.24 percent growth of the portfolio over the last years loans and advances. The Branch made highest profit of Tk. 63.25 lac in the year 2009 with a growth rate of 102.66 percent over the last year, where as profit was lowest at the end of the year 2006. Trend of growth of profit of the branch was increasing upward over the years of operation. Is was found in the study that Tk.69.99 lac out of total loans and advances of Tk.2458.00 lac was classified adversely under different category of loans and advances accounts. The ratio of classified loan amount was 03 percent of total loans

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and advances in the year ended 2009. Therefore, 97 percent of the lending was fallen in the category of unclassified or standard category of assets of the branch. In case of qualitative evaluation of individual lending products it was found that CC (H) and SOD were the highest performing products of the Branch. And SBLS was the worst performing product of the branch in terms of income generation and classification status. It was found in the study that at the end of the year 2009 the branchs SBLS outstanding stands for Tk.68.53 lac only, among which 36.18 percent was standard and generating income for the branch and 5.61 percent was marked as SMA, 18.64 percent was market as SS, 21.92 percent was marked as DF, and 17.64 percent was marked as BL, respectively. It was observed that most of the SBLS loan accounts are non-performing in the branch.

RECOMMENDATION
On the basis of the finding of the study it was evident that NCCBL Rajshahi Branch was operating profitably and generating employment opportunity to the people of Bangladesh. But the bank still has scope to improve its operating efficiency to generate more income. The policy makers should, therefore, take necessary measures according to the findings of the study; some policy recommendations may be advanced which are likely to be useful for policy formulation: (a) A balance in the hierocracy of employees of the branch should be maintained. That is huge gap between Manager and Deputy Manager and different section in charge should be eliminated. (b) More employment training and development program should be taken by controlling authority to ensure employee competence in order to cope with the changing financial markets. (c) ATM network and any branch clearing facility should be introduced. (d) Some service charge free deposit accounts should be developed. Such as salary account for corporate houses, students savings account, retired peoples savings account, savings accounts for farmers and so on. and (e) Loan sanctioning process should be more quickly.

CONCLUSION
There are many banks in Bangladesh. Every bank has the same target to earn profit. To earn profit bank needs to accept several policies so that it can provide more satisfaction to its customers than the competitors. For this perspective bank strengthen its marketing activities. As a result, all banks are not tantamount, and accordingly Bangladesh Bank as the watchdog of the money market grading the banks. However the discipline of the banking sector is now outstanding. This is the only sector, where the technologies cope very fast. The officials are trying hard to provide their best for

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the betterment of the bank and also for the society. The NCC bank has successfully made a positive contribution to the economy of Bangladesh with in very short period. NCCBL is offering special deposit schemes with higher benefit, which is a crying need for long-term position in the financial market Because of the existence of many banks in the financial market, deposit has spread over So, it is necessary to hold some permanent customer by offering special deposit schemes otherwise in future amount of deposit may come down To strengthen the future prospect of branch, it is emergence to collect more deposit. From the practical implementation of the customer dealing the whole period of any practical orientation in NCC Bank Limited, Rajshahi branch, I have reached fain and concrete contusion in a very confident way. I believe that my realization will be in harmony with most of the banking thinkers. Success in banking business largely depends on effective and efficient loan services. the more income from the credit operation the more will be profit of the bank . Foreign trade operation and general banking both section of the bank played a significant role in the overall business where the potential customers are always there. It can be easily said that NCC Bank is a progressive Commercial Bank in private sector it creates new opportunities for its clients as well as give customerized services and maintains harmonious banker-client relationship. It contributes towards formation of national capital, growth of savings & investment in trade, commerce & industrial sectors. If they follow recommendation and take necessary action accordingly I think the bank will develop quickly and will come in top position in banking sector.

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REFERENCE

International Financial Management- 7th ed.- Jeff Madura Foreign Exchange and Financing of Foreign Trade- Syed Asraf Ali Financial management and Policy-10th ed. -Van Horne Financial Statement analysis- 2nd Edition - George Foster Newspaper: Financial Express Bangladesh Bank Publications Annual Report of NCC Bank Ltd. 2008 www.bangladesh-bank.com www.google.com www.seribd.com www.roc.gov.bd www.nccbank-bd.com

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