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Stamford University Bangladesh

Internship Affiliation Report on Credit Approval and Monitoring Process of The City Bank Limited

Supervised To: Nusrat Jahan


Assistant Professor Department of Business Administration Stamford University Bangladesh

Submitted By: Farzana Hoque


Id # BBA 02808868 BBA Program th 28 K Batch Major in Finance

Date of Submission: 31/01/2012 Date of Submission: 13/01/2012

Stamford University Bangladesh


744, Satmosjid Road, Dhanmondi, Dhaka-1209

To Whom It May Concern

This is to certify that, Farzana Hoque; a student of BBA program, Major in Finance, Department of Business Administration, Stamford University Bangladesh has completed the internee report titled Credit Approval and Monitoring Process of The City Bank Limited successfully under my supervision. I wish him every success in his life. Supervisor

----------------------Nusrat Jahan Assistant Professor Department of Business Administration Stamford University Bangladesh

Letter of Transmittal
31/01/2012

Nusrat Jahan Assistant Professor Department of Business Administration Stamford University Bangladesh
Subject: Submission of Internship Affiliation Report. Dear Madam, It is a great opportunity to submit the internship report on Credit Approval and Monitoring Process of The City Bank Limited as a requirement of the Bachelor of Business Administration Program. I have prepared this report according to your instructions. In the preparation process, I came to know some very interesting facts about Retail Finance Centre of The City Bank Limited. In this paper I mainly focused on the Credit approval and monitoring process in The City Bank. In affairs of preparing the report I tried my best and be specific as much as possible. I thank you very much for your guidance, diligent effort and awareness, whenever it was required. I would appreciate any query regarding this report. Sincerely yours,

----------------------Farzana Hoque Id # BBA 02808868 Major in Finance, Department of Business Administration Stamford University Bangladesh

Students Declaration

I hereby declare that the report of internship namely Credit Approval and Monitoring Process of The City Bank Limited by me after the completing of 3 (three) months of internship with THE CITY BANK LIMITED at Retail Finance Center (Head Office) and a comprehensive study of the existing activities of The City Bank Limited and its implementation.

I also declare that this paper is my original worked and prepared for academic purpose which is a part of BBA and THE PAPER MAY NOT BE USED IN ACTUAL MARKET SCENARIO.

----------------------Farzana Hoque ID # BBA 02808868 BBA Program th 28 K Batch Department of Business Administration Stamford University Bangladesh

Supervisors Declaration

I hereby declare that the concerned report entitled Credit Approval and Monitoring Process of The City Bank Limited is an original work by Farzana Hoque, Id # BBA 02808868, Major in Finance, Department of Business Administration, Stamford University Bangladesh, completed his internship under my supervision and submitted for the partial fulfillment of the requirement of the degree of Bachelor of Science in Business Administration (BBA) at Stamford University Bangladesh.

----------------------Nusrat Jahan Assistant Professor Department of Business Administration Stamford University Bangladesh

PREFACE

The discussing report is the terminal formalities of the internship program for the degree of Bachelor of Science in Business Administration course of Department of Business Administration of Stamford University Bangladesh which is compact professional progress rather than specialized. This report has prepared as per academic requirement of after the successfully completion of 3 (three) months internship organized at The City Bank Limited, Retail Finance Center (Head Office) with the view to familiarized the students with the practical implementations of the knowledge provides the theoretical aspects of practical life. It is my pleasure and great privilege to submit my report titled Credit Approval and Monitoring Process of The City Bank Limited worked out at Retail Finance Center (Head Office) during May 2011 to July 2011. As the presenter of this report, I have tried my level best to get together as much information as possible to enrich the report while working at Retail Finance Center on loan & credit card product of The City Bank Limited. I believe that it was a fascinating experience to work in the banking section and it has enriched both my knowledge and experience. However, after all this, as a human being, I believe everyone is not beyond limitation. There might have problems regarding lack and limitation in some aspects and also some minor mistake such as syntax error or typing mistake or lack of information. Please pardon me for that mistake and clarify these of my further information on those matters.

----------------------Farzana Hoque Id # BBA 02808868 BBA Program th 28 K Batch Department of Business Administration Stamford University Bangladesh

ACKNOLEDGEMENT
This is my humble attempt to present gratitude in preparing this report. This report would not have been possible without the dedication and contribution of a number of individuals. First and foremost, I would like to express my gratitude to Nusrat Jahan for his support during the preparation of this report. Her eagerness helped me in every step of the way and encouraged me to propel myself higher. Subsequently, I would like to thank my honourable supervisor Imtiaz Mahmood, Manager, MIS Retail Finance Centre, Who gave me to the opportunity to work in Retail Finance Centre and experience the factual environment of a bank. I decided to prepare the report on Credit Approval and Monitoring Process of The City Bank Limited. I am very much obliged for the cordial cooperation from mangers, Executives, Officers and especially the analysts of Retail Finance Centre Department. I want to express my whole hearted gratitude to them for their precious cooperation without which. It would not have been possible to bring the report in present form. Last but not in the least, I am very much thankful to Md. Assaduzzaman, Head of RFC and Rajesh Kumar Barua, Senior Manager of RFC and also all of the analysts of Retail Finance Centre as well as MIS operation department of city Bank ltd.

----------------------Farzana Hoque Id # BBA 02808868 Major in Finance Stamford University Bangladesh

EXECUTIVE SUMMARY
City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card. The bank is a principal member of VISA international and it issues both Local Currency (Taka) & Foreign Currency (US Dollar) card limits in a single plastic. VISA Debit Card is another popular product, which the bank is pushing hard in order to ease out the queues at the branch created by its astounding base of some 400,000 retail customers. The launch of VISA Prepaid Card for the travel sector is currently underway. City Bank prides itself in offering a very personalized and friendly customer service. It has in place a customized service excellence model called GAP (Graceful-AppropriatePleasing) that focuses on ensuring happy customers through setting benchmarks for the bank's employees' attitude, behavior, readiness level, accuracy and timelines of service quality. City Bank is one of the largest corporate banks in the country with a current business model that heavily encourages and supports the growth of the bank in Retail and SME Banking. The bank is very much on its way to opening many independent SME centers across the country within a short time. The bank is also very active in the workers' foreign remittance business. It has strong tie-ups with major exchange companies in the Middle East, Europe, Far East & USA, from where thousands of individual remittances come to the country every month for disbursements through the bank's large network of 83 online branches.

Table of contents
Topic: Credit Approval & Monitoring Process of The City Bank Limited
CHAPTER ONE : INTRODUCTION 1.1 BACKGROUND OF THE STUDY 1.2 STATEMENT OF THE PROBLEM 1.3 SCOPES OF THE STUDY 1.4 OBJECTIVE OF THE STUDY 1.5 METHODOLOGY 1.6 LIMITATIONS OF THE STUDY CHAPTER TWO : ORGANIZATIONAL PROFILE OF THE CITY BANK LIMITED 2.1 THE CITY BANK LTD - Making Sence of Money 2.2 STRATEGIC TASK ANALYSIS
2.2.1 Corporate Vision 2.2.2 Corporate Mission 2.2.3 Corporate Objective

1-3 2 2 2 3 3 3 4-17 5 7
7 7 7

2.3 PERFORMANCES OF THE CITY BANK


2.3.1 Operating Income 2.3.2 Deposit 2.3.3 Loans & Advances 2.3.4 Export 2.3.5 Import 2.3.6 Five years Performance (Business)

8
9 9 10 10 10 10

2.4 THE CITY BANK ACTIVITIES


2.4.1 Online Banking 2.4.2 Islamic Banking 2.4.3 SME Financing 2.4.4 SWIFT Banking 2.4.5 City Card 2.4.6 Capital Market Service

11
11 11 11 11 12 12

2.5 BROAD CATEGORIES OF CITY BANKS CREDIT


2.5.1 Retail Financing of CBL 2.5.1.1 Objective

12
13 13

2.5.1.2 Retail Financing Products 2.5.2 SME FINANCING OF CBL 2.5.2.1 CBL - Definition of SME 2.5.2.2 Product 2.5.2.3 Target Segment 2.5.3 CORPORATE CREDIT 2.5.3.1 CBL Customized Definition

13 13 14 14 14 14 15

2.6 CREDIT FACILITIES OF THEIR CORPORATE CLIENTS


2.6.1 Trade Finance 2.6.2 Project Finance 2.6.3 Working Capital (For Industrial Finance) 2.6.4 Working Capital (For Work Order) 2.6.5 Commercial Lending 2.6.6 Finance of NBFI 2.6.7 Specialized Scheme 2.6.8 Export Oriented Business 2.6.9 Advance Against Financial Obligation

15
15 15 16 16 16 16 16 16 16

2.7 SWOT ANALYSIS OF THE CITY BANK LIMITED CHAPTER THREE : CREDIT APPROVAL OF MONITORING PROGRESS 3.1 CREDIT POLICY IN THE CITY BANK LIMITED 3.2 LENDING PRINCIPLES FOLLOWED BY THE CITY BANK LIMITED
Principle # 1 - 3 Principle # 4 - 14 Principle # 15 - 23

17 1845 19 19
19 20 21

3.3 FLOW CHART FOR CREDIT PROGRESSING 3.4 PROCESSING OF LOAN APPLICATION & APPROVAL
3.4.1 The Progress 3.4.1.1 Beginning of Relationship 3.4.1.2 Placement of Application by The Client 3.4.1.3 Credit Rating Verified 3.4.1.4 Key Document's Collected 3.4.1.5 Site Visit and KYC 3.4.1.6 Conformity to Credit Policy 3.4.1.7 Management Analysis 3.4.1.8 Financial Analysis 3.4.1.9 Features of Existing CRG For Advance Exceeding 3.4.1.9.1 Demand & Supply Analysis 3.4.1.9.2 Technical Aspect (where applicable) 3.4.1.9.3 Economic Aspect (where applicable)

22 23
23 23 23 23 23 23 23 23 23 23 24 24 24

3.4.1.9.4 Ecological Aspect (where applicable) 3.4.1.9.5 SWOT Analysis 3.4.1.9.6 International Certification to ISO Certificates 3.4.1.10 Structuring The Proposal 3.4.1.11 Move The Proposal 3.4.1.12 Sanction Advice 3.4.1.13 Documentation (Security / Charge documents) 3.4.1.14 Legal & Regularity Compliance 3.4.1.15 Disbursement 3.4.1.16 Periodic Review 3.4.1.17 Collection 3.4.1.18 Workout of Advance Warning Process 3.4.1.19 Legal Procedures of Delinquent Loans

24 24 24 24 25 25 25 25 25 25 25 25 25

3.5 CREDIT RISK MANAGEMENT (CRM) 3.6 CREDIT RISK GRADING (CRG) 3.7 CREDIT ADMINISTRATION
3.7.1 Limit Maintenance 3.7.2 Authentication of Documentation Checklist, Issuance of Disbursement Authority 3.7.3 Verification Security 3.7.4 Credit Portfolio Review 3.7.5 Custodian 3.7.6 Monitoring & Follow up 3.7.7 Compliance 3.7.8 Supervisory or Audit Levels Questionnaire

25 26 27
27 28 28 28 28 29 29 29

3.8 CREDIT RECOVERY


3.8.1 Strategy 3.8.2 Procedure For NPL Account Management

30
30 31

3.9 CLASSIFIED LOAN REVIEWED 3.10 NEWLY ESTABLISHED REGULATIONS IN THE BANKING MANAGE CREDIT 3.10.1 Screeing Regulations
3.10.2 Monitoring Regulations 3.10.3 Transparency Regulations 3.10.4 Lenders Recourage Regulations

31 32
32 32 32 33

3.11 BANGLADESH BANK'S GUIDE LINES [UPDATE TILL 2009)


Guide Line - 1 Pricing Guide Line - 2 Lending And Risk Management Guide Line - 3 Restriction on Lending to Director of Private Bank Guide Line - 4 Instructions for Preparation of Financial Statements Guide Line - 5 Policies on Single Brower Exposure Guide Line - 6 Large Loan Restructuring Scheme (LLRS) Guide Line - 7 Requirements for Obtaining Information on Large Loan

33
33 34 34 34 36 36 37

Guide Line - 8 Interest Rates on Deposit & Lending Guide Line - 9 Bank Charges Guide Line - 10 Managing Core Risks in Banking Guide Line - 11 Credit Rating Guide Line - 12 Prudential Guidelines for Customer Enterprise Financing Guide Line - 13 Implementation of Credit Risk Grading Manual Guide Line - 14 Supervision, Monitoring And Recovery of Loss Guide Line - 15 Policies on Loan Classification and Provisioning Guide Line - 16 Policies For Rescheduling of Loan Guide Line - 17 Policies For Loan Write off

37 37 37 37 37 38 40 41 43 44

3.12 DEVIATION OF BANGLADESH BANKS POLICY GUIDELINES 3.13 COMMENTS ON CREDIT APPROVAL & MONITORING PROCESS OF THE CITY BANK LIMITED CHAPTER FOUR : ANALYTICAL PART 4.1 TREND ANALYSIS OF LOAN AND ADVANCES OF THE CITY BANK LIMITED 4.2 TREND ANALYSIS OF DEPOSIT OF THE CITY BANK LIMITED 4.3 CREDITPOSITION OF THE CITY BANK LIMITED
4.3.1 Credit Portfolio 4.3.2 Lead Time 4.3.3 Growth of Loan and Advances 4.3.4 Classification of Loan & Advances

45 45 4778 48 48 50
50 50 51 51

4.4 RECOVERY OF NONPERFORMING LOAN 4.5 PERFORMANCE EVALUATION 4.6 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER, 2008 4.6.1 Pie-Chart

53 53-58 59 60 60 4.6.2 Definition 4.7 PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER, 62 2008 63 4.7.1 Pie-Chart 63 4.7.2 Definition 4.8 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 65 DECEMBER, 2009 66 4.8.1 Pie-Chart 66 4.8.2 Definition 4.9 PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER, 70 2009 71 4.9.1 Pie-Chart 71 4.9.2 Definition 4.10 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 73 DECEMBER, 2010 74 4.10.1 Pie-Chart 74 4.10.2 Definition 4.11 PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER, 76 2010

4.11.1 Pie-Chart 4.11.2 Definition

4.12 Disbursement Situation CHAPTER FIVE : FINDINGS & SUGGESTIONS 5.1 Five FINDINGS
5.1.1 Major Problems 5.1.2 Minor Problems 5.1.3 Suggestion

77 77 78 7983 80
80 81 81-83

CHAPTER SIX : RECOMMENDATION & CONCLUSION BIBLIOGRAPHY References Acronyms Balance Sheet, Profit & Loss Account, Cash Flow Statement Balance Sheet Profit & Loss Account Cash Flow Statement THE END

8485 8789
88 89

9197
92 94 95

CHAPTER ONE: INTRODUCTION

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1.1. Background of the Study:


The business world is getting dynamic and competitive. It is hard for an organization to run & even survive in a fast paced, growing and uncertain world if it cannot keep tracks with the go of business dynamism. Business plays and links important roles in developing the economy of a country. So, as a business graduate, I think I need to be attached with any organization to get a handy & versatile experience about the business world before starting our career. Internship is the arrangement, which makes a bridge between our academic knowledge and practical world to have an acquaintance with the real business world as well as to gear me up to lead the future competitive business. The report is a requirement of the internship program for my BBA program. My internship instructor Nusrat Jahan, Assistant Professor, Dept. of Business Administration, Stamford University Bangladesh, has duly approved the topic of my report. During my internship, I was concentrated on different functions regarding the credit administrative division, corporate & investment banking division, which inspired me to choose this topic. The report thus was titled as Credit Approval & Monitoring Process of The City Bank Limited.

1.2. Statement of the Problem:


I was authorized to prepare a report on Credit Approval & Monitoring Process of The City Bank Limited for partial fulfillment of my course requirement. I was attached with The City Bank Limited, worked as an intern from May 07, 2011 to July 08, 2011. This report has been prepared to reflect my knowledge about Credit Approval & Monitoring Process with my practical experience on the day-to-day work with tracking and analyzing different activities of credit activities of the bank.

1.3. Scopes of the Study:


This report has prepared to gain a clear view of the credit approval & monitoring process. It includes all my experience in the City Bank Limited. I tried to show how the City Bank handles all the credit approval & monitoring activities necessary to approve credit, disburse, sanction, monitor etc. I focus on how the loan and advances were marketed to the customers, how the relationships were built and how each customer were followed up or handled by the Relationship Managers. Purpose of the report would be to focus on how the credit management practice is being carried out by the respective department like what is the mode of operation, what is the evaluation techniques followed by the officers during evaluating a loan proposal and so on so forth.

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In addition, the report will not cover various legal issues regarding disbursement and recovery procedures of a loan. Finally entire risk management issues in the report will revolve around corporate loan proposals only.

1.4. Objective of the Study:


The basic objectives of this study are as follows: 1. To demonstrate the experiences of the seven weeks internship program at The City Bank Limited. 2. To be familiar with day-to-day functioning and services offered by a commercial bank. 3. To make a bridge between the theories and practices on banking operations. 4. To analyze the credit approval process in The City Bank Limited. 5. To analyze the credit monitoring process in The City Bank Limited. 6. To understand and evaluate which component is influential to loan & advances 7. To understand and assess the relationship among deposit, interest income, loan & advances

1.5. Methodology:
Methodology refers to the essential part of the study and the process of collecting information and arranging it in terms of the relevant issues of the study. It is designed in a way so that it correspondent to achieve the objectives of the study.

1.6. Limitations of the Study:


The following limitations are apparent in the report 1. Time is the first limitation as the duration of the program was of two months only. 2. Another limitation of this report is Banks policy of not disclosing some data and information for obvious reason, which could have been very much useful. 3. All the employees were always busy with heavy workload. Therefore, they got few times to extend their co-operation

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CHAPTER TWO: ORGANIZATIONAL PROFILE OF THE CITY BANK LIMITED

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2.1 THE CITY BANK LIMITED--- Making Sense of Money


Until the beginning of the eighties, the banking business in Bangladesh was only restricted to the nationalized sector in addition to two or three foreign banks. It is only in 1983 that the Government changed its policy on the banking sector paving the way for setting up new banks with private sector. In fact, 1983 saw the emergence of a bevy of local banks with private entrepreneurship of which The City Bank limited stands out prominently. It came on stream on the 27th March 1983. The City Bank Limited is the first private sector Bank in Bangladesh. The Bank has been operating since 1983 with an authorized capital of TK. 1.75 Billion under the entrepreneurship of twelve prominent and leading businessman of the country. The fine intention behind starting this Bank was to bring about qualitative changes in the sphere of Banking and Financial management. The bank currently has 88 online branches and 10 SME service centers and 1 SME Agro center spread across the length & breadth of the country that include a fully fledged Islami Banking branch. Besides these traditional delivery points, the bank is also very active in the alternative delivery area. It currently has 99 ATMs of its own; and ATM sharing understanding with a partner bank that has more than 550 ATMs in place; SMS Banking; Interest Banking and so on. It already started its Customer Call Center operation. The bank has a plan to end the current year with 100 own ATMs. City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card. The bank is a principal member of VISA international and it issues both Local Currency (Taka) & Foreign Currency (US Dollar) card limits in a single plastic. VISA Debit Card is another popular product which the bank is pushing hard in order to ease out the queues at the branch created by its astounding base of some 400,000 retail customers. The launch of VISA Prepaid Card for the travel sector is currently underway. City Bank has launched American Express Credit Card and American Express Gold Credit card in November 2009. City Bank is the local caretaker of the brand and is responsible for all operations supporting the issuing of the new credit cards, including billing and accounting, customer service, credit management and charge authorizations, as well as marketing the cards in Bangladesh. Both cards are international cards and accepted by the millions of merchants operating on the American Express global merchant network in over 200 countries and territories including Bangladesh. City Bank also introduced exclusive privileges for the card members under the American Express Selects program in Bangladesh. This will entitled any American Express card members to enjoy fantastic savings on retail and
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dining at some of the finest establishment in Bangladesh. It also provides incredible privileges all over the globe with more than 13,000 offers at over 10,000 merchants in 75 countries. They have a distinguished Board of Directors which consists of thirteen successful and reputed businessmen. Mr. Aziz Al-Kaiser, a top leading businessman, industrialist, pioneer personality and entrepreneur of private sector bank of Bangladesh, is the Chairman of the Bank. Mr. Kazi Mohmood Sattar a dynamic, nationally and internationally reputed banker is the Managing Director and CEO of the Bank. These directors commenced the journey with only Taka 3.4 crore worth of Capital, which now is a respectable Taka 330.77 crore as capital & reserve The bank was adorned with prestigious honors like one of the top ten companies, large tax payer, one of the top five hundred banks in Asia. From 1984 through 1992 the bank earned profits consistently and the performance was remarkable. The bank, however, ran into rough waters from 1993 due to multiple events like business slump, default culture, rigorous provisioning etc. The bank posted net losses after provision during the years from 1993 through 1995. The downtrend, however, could be arrested in 1995 when the net losses ebbed and the year 1996 showed net profits after provision. This trend could be sustained from 1997 onward. In the year 2000, the bank managed to offset its total accumulated losses. The year 2003, 2004 and 2005 are the heralded years of success showing encouraging performance in all the area of its operations. In year 2009, profit after provision of the Bank is 808.46 million. In 2010 City Bank wins The Asian Banker "Strongest Bank in Bangladesh 2010" Award. City Bank is among the very few local banks which do not follow the traditional, decentralized, geographically managed, branch based business or profit model. Instead the bank manages its business and operation vertically from the head office through 4 distinct business divisions namely: Corporate & Investment Banking; Retail Banking (including Cards); SME Banking; & Treasury & Market Risks.

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2.2 STRATEGIC TASK ANALYSIS 2.2.1 Corporate Vision


To be the leading bank in the country with best practices and highest social commitment

2.2.2 Corporate Mission


To contribute to the socio economic development of the country. To attain highest level of customer satisfaction through extension of services by dedicated and motivated team of professional team of professionals. To maintain continuous growth of market share ensuring quality. To maximize banks profits by ensuring its steady growth. To maintain the high moral and ethical standards. To ensure participative management system and empowerment of Human Resources. To nurture and enabling environment where innovativeness and performance is rewarded.

2.2.3 Corporate Objective


The City Banks objectives are reflected in the following areas: Highly personalized service. Customer-driven focus. Total commitment to quality. Contribute in the economy. Quality of human resources. Commitment to its clients at each level.

The company believes that communication with, and feedbacks from its clients help it achieve its goal of providing world-class products and services. The City Bank Ltd regularly conducts client satisfaction surveys and make immediate accommodations and adjustments where needed. It also constantly monitors its standards, and strives to meet clients requirements.

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2.3 PERFORMANCES OF THE CITY BANK:


The City Bank Limited, functioning as a conventional bank in the country, has been able to consolidate its position in this sector, the bank has been able to establish a solid presence with the customers and general public, through its improved services, value addition in the economy and increasing shareholders value. Income Statement Interest income Interest expenses Noninterest income Noninterest expenses Profit before provision Profit before tax Profit after tax Balance Sheet Authorized capital Paid up capital Reserve fund and surplus Total shareholders equity Deposits Loans and advances Investments Fixed assets Total assets Off balance sheet exposures FOREIGN EXCHANGE BUSINESS EXPORT IMPORT REMITTANCE 2007 4752.13 3172.28 1722.91 1626.89 1675.87 803.46 313.46 400 240 557.21 797.21 20046.31 14778.55 3379.26 686.69 23698.56 5216.27 2008 5809.65 4109.96 1898.19 1657.83 1922.05 923.05 480.26 1750 480 937.47 1417.47 22236.96 17027.84 3161.38 682.37 26375.56 6374.32 2009 6446.26 5366.98 2030.58 1861.01 2248.85 1130.92 640 1750 720 1238.4 1958.4 30647.83 23326.34 3648.27 764.9 35303.74 8459.64 2010 7772.07 6567.27 3445.36 1155.46 2494.7 1453.02 540.02 1750 1080 1450.9 2530.9 40881.4 1 30789.0 2 6405.08 1282.09 47445.7 5 12901.5 7 2011 8183.2 6 7325.3 6 4624.2 9 1316.3 2 2255.8 7 2808.4 6 843.46 1750 1188 1686.3 7 2874.3 7
40539. 63 26788. 47

7550.6 1 1390.7 3 48755. 4 8277.6 4

7719.7 17292.74 1493.38

12198.69 17909.94 2466.83

18218.97 21363.21 4158.7

28211.2 2 32096.3 9 8473

19151. 15 20308. 89

4932.0 5

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TOTAL CAPITAL ADEQUACY RATIO

6.57% 124.66 926.18 14.16%

9.78% 149.66 943.91 10.57%

9.63% 250.79 413.87 5.71%

9.21% 334.03 943.26 7.18%

12.6% 500.83 462.78 6.24%

CREDIT QUALITY PROVISION FOR UNCLASSIFIED LOAN PROVISION FOR CLASSIFIED LOAN PERCENTAGE OF NPL OVER TOTAL LOANS AND DEPOSITS SHARE INFORMATION NO OF SHARE OUTSTANDING (IN MILLION) EPS STOCK DIVIDEND MARKET VALUE PER SHARE PRICE EARNINGS RATIO NET ASSETS VALUE PER SHARE OPERATING PERFORMANCE RATIO CREDIT DEPOSIT RATIO COST OF FUNDS YIELD ON LOANS & ADVANCES RETURN ON ASSETS RETURN ON EQUITY

2.4 5.61 227.49 40.55 332.17

4.8 79.22 50% 877.76 11.08 295.31

7.2 75.13 50% 769.33 10.24 272

10.8 20.2 10% 390 19.31 234.34

11.88 28.91 15% 725.25 25.09 241.95

73.72% 6.37% 15.54% 2.85% 1.70%

76.57% 5.63% 13.23% 1.52% 34.34%

76.10% 5.34% 12.67% 1.75% 32.05%

75.31% 6.94% 13.30% 0.58% 10.69%

66.08 % 7.55% 13.15 % 0.71% 12.71 %

2.3.1 Operating Income:


Operating income for the year 2011 stood at tk.3672 million compared to that of tk. 4550 million in 2010.operating income decreased by tk. 82 million (3.9%) from 2010 primarily due to increased cost of deposit.

2.3.2 Deposit:
Total deposit of the bank as on December 31,2010 stood tk.40540 million against tk. 40881 million of the previous year registering a marginal negative growth of tk. (0.83%)this reduction in deposit was the result of the strategic plan by reducing high interest deposit, to not only reduce interest expense but also to match reducing in order to improve NPL of the bank.

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2.3.3 Loans and Advances:


The loans and advances portfolio of the bank at the end of the year 2010 stood at tk. 96788 million with loans diversified in both conventional credit and finance based on islami shariah.total loan volume of the bank during the reviewed year decreased by tk.4001 million reductions from previous year.

2.3.4 Export:
The amount of export business including local bills was tk.19151 million in the year under review compared to tk. 28211 million in the previous year.

2.3.5 Import:
The volume of import business including local L/Cs of the bank stood at tk. 90309 million in the year 2011 compared to tk. 132096 million in the year 2010.

2.3.6 Five years performance (Business):


Five years performance of The City Bank Ltd is increasing day by day. The most important areas of the bank such as deposits, advance, import, export and investment are given below. Deposits 2005 2006 2007 2008 2009 2010 2011 30647.83 40881.41 40539.63 46589.53 44698.13 54698.13 64698.13 Loans and advances 23326.34 30789.02 26788.47 20765.81 19056.31 29046.31 39046.31 Investments 3648.27 6405.08 7550.61 9564.54 9836.31 10856.31 11856.31 EXPORT 18218.97 28211.22 19151.15 25131.16 25980.03 55780.03 56780.03 IMPORT 21363.21 32096.39 20308.89 25256.65 28625.35 128725.35 158725.35

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2.4 THE CITY BANK ACTIVITIES: 2.4.1. Online Banking:


With computerization the bank had gone another step ahead towards providing pragmatic, safe and prompt banking services. All 84 branches including Islamic Banking Branch are brought under computerization net. Bank has implemented online real time banking through an agreement with Info sys Technologies Limited for supply of world reputed banking software FINACLE. Within March 2008 real time banking facilities have been introduced in 37 branches of the CBL. Under this system, client will be able to do the following type of transactions: Easy to withdraw or deposit from any online branch Fund transfer with one click, no need TT/DD. Customer can easily tell which payments have cleared

2.4.2. Islamic Banking:


CBL started its Islamic Banking operation by opening its first Islamic Banking Branch at 9/H, Motijheel, Dhaka. The salient features of Islamic Banking are as follows: To conduct all its activities as per Islamic Shariah. To conduct its monetary matters free of interest. To establish banker-customer relationship on the basis of partnership. To follow Islamic principle in its entire investment portfolio. To develop living standard of the poor incoming group. To conduct welfare related activities to the people.

2.4.3. SME Financing:


SME Division was formally formed in the bank in the middle of 2005.Before that, banking facilities (with focus on extending credits) were available for SMEs in traditional and conventional unstructured-method. Moreover, the work processes in place has been largely geography-based branch banking system.

2.4.4 SWIFT Banking:


CBL is one of the first few Bangladeshi Banks who has become member of SWIFT (Society for Worldwide Inter-bank Financial Telecommunication) in 1983. SWIFT is a member owned co-operative, which provides a fast and accurate communication network for financial transactions such as Letters of Credit, Fund transfer etc. By becoming a
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member of SWIFT, the bank has opened up possibilities for uninterrupted connectivity with over 5,700 user institutions in 150 countries around the world.

2.4.5 City Card:


The City Bank Limited launched their smart card - ATM card, credit card, debit card & utility bills payment card all in a single card in the name & style of "City Card" The city card provides round the clock banking through ATMs from which customers can avail: Cash withdrawals Balance inquiry Mini statement Cheque book request PIN charge Utility bills payment facilities

2.4.6. Capital market service:


In an effort to promote and economic development of Bangladesh, City Bank considered it appropriate to seize this opportunity by playing its due role in capital market related activities. Accordingly, the bank obtained Membership of Dhaka Stock Exchange (DSE) for operating a brokerage house. To provide infrastructure facilities for local & NonResident Bangladeshi (NRB) Investors through this brokerage house and all other capital market related activities, a new Division namely Capital Market Services Division (CMSD) has been created and a Consultant with proper a background has been appointed.

2.5 BROAD CATEGORIES OF CBLs CREDIT


CBLs credit can be divided into three broad classes:

Retail Financing

CBLs credit

SME Financing

Corporate Credit

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2.5.1 Retail Financing of CBL


Process of identifying individual needs and satisfy them accordingly. It can also be termed as consumer banking. What is Retail Credit/Loan? One of the credits, which is extended to people having fixed, but regular income for acquiring consumer durables and other purposes for satisfying personal needs. Consumer Credit is a collateral free credit and backed by the monthly income of the loonies and guarantees of guarantors acceptable to the bank.

2.5.1.1 Objective
Improve living standard of limited income segment by providing collateral free easy credit. To take part in the Scio-economic development of the country To ensure access to credit by mass people To diversify loan portfolio to minimize risk To maximize bank profit as well as to minimize pressure on liquidity through quicker recycling but higher yielding loan operation

2.5.1.2 Retail Financing Products


Personal Loan (Secured) Overdraft

Personal Loan (Unsecured) Car loan Education Loan Doctors Loan Travel Loan Household durables loan Marriage Loan - Advance Against Salary - Hospitalization Loan - Any Purpose Loan - CNG Conversion Loan - Home loan - Credit Card

2.5.2 SME Financing of CBL


Considering the growth potentially and demand situation The City Bank extended credit facilities to Small and Medium Enterprises through SME in larger volume in 2006. A

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separate division was established in the Head Office to process and loans under SME for attaining a respectable market share and successful operation of the scheme.

2.5.2.1 CBL definition of SME


Minimum 2 years in business (Exceptional cases for Start-up business will be considered if projections are very good) An Enterprise with minimum 3 and maximum 60 employees Minimum Annual Turnover BDT 5,00,000 to maximum BDT 5 Crores (BDT 5 m) Loan size of minimum taka 1,00,000 to a maximum BDT 1 crore (BDT 10 m)

2.5.2.2 Products:
Installment Loan Installment Loans against lien on eligible financial instrument and FDR Residential/Commercial mortgage backed loan Loan against Stocks (under hypothecation to bank) Trade/Working capital loan Overdrafts (secured and unsecured) Deposit Products & Remittance Letter of Credit Guarantees/Bonds

2.5.2.3 Target Segment:


Shop keepers Small and Medium Entrepreneurs, Manufacturers, Traders, Suppliers to Corporate Business Professionals (Doctors, Engineers etc) Cottage Industries

2.5.3 Corporate Credit


Corporate clients are distinct from an individual in respect of their legal status. Registering with a government agency creates business of a Corporate Client. In Bangladesh Companies that are registered with Registrar of Joint Stock Company, Security Exchange Commission, Stock Exchange or Registrar of Firms & have a distinct incorporation registration number are considered to be corporate business entities.

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2.5.3.1 CBL Customized Definition:


Incorporation under a statutory body is indeed a distinct hallmark for identification of corporate entity. This category of clients is invariably the corporate clients in CBL. However, recent Bangladesh Bank (BB) guidelines have set yet another parameter for alienating the corporate clients. BB had defined the Small Enterprise Financing (SEF) and Consumer Financing (CF) as those falling under an exposure range of between TK. 50,000 to 1 crore (as at March 2005) For avoidance of conflicting parameterization, CBL benchmarked its own definition of Corporate Credit, which is as follows: 1) Excluding SEF or SME and CF loans all credits that are considered by PCFD irrespective of their amount will be treated as Corporate Credit Portfolio. 2) In case of credit line which is less than TK> Five core yet considered by PCFD it is assumed that the client has the potentially of doing larger transaction and thus categorized under Corporate Credit. 3) Other characteristics of Corporate Credit Portfolio in CBL are: a) All project/industrial loans b) Working Capital Financing c) Commercial Transport Loans d) Trade Financing e) Commercial House Building Loans f) Loans to Trading House

2.6 Credit Facilities to their Corporate Clients:


The City Bank Limited is continuously introducing diversified, tailor made and derivatives products along with usual Banking Products. At present CBL offers the following facilities:

2.6.1 Trade Finance:


a) Non-Funded: Letter of Credit (L/C), Acceptance, Bank Guarantee, etc. b) Funded: Loan against Trust Receipt (LTR), Payment against Documents (PAD), Inland Bills Purchase (IBP), Foreign Documentary Bills Purchase (FDBP), Inland Documentary Bills Purchase (IDBP), Short Term Loan (STL), Short Term Revolving Loan (STRL) etc.

2.6.2 Project Finance: (Large and Medium Industries / Small Industries including Agro-based Industries):
a) Non-Funded: L/C for import of Machinery, Acceptance, Bank Guarantee, etc. b) Funded: STL, STRL, Term loan for retirement of documents of imported

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machinery / Local machinery / other project fixed costs, Hire Purchase, Lease Finance, Loan (General), HBL (Commercial).

2.6.3 Working Capital (For Industrial Finance):


a) Non Funded: L/C for import of Raw Materials, Acceptance, Bank Guarantee, etc. b) Funded: Overdraft Cash Credit (Hypo), Cash Credit (Pledge), PAD, LTR, STL, STRL, IBP, SODSE, etc.

2.6.4 Working Capital (For Work Order):


a) Non Funded: Letter of Credit, Bank Guarantee, etc. b) Funded: SOD (work order), SOD (General), etc.

2.6.5 Commercial Lending:


a) Non Funded: L/C for import of goods, Acceptance, Bank Guarantee, etc. b) Funded: Cash Credit (Hypo), Cash Credit (Pledge), SOD, PAD, LTR, STL, STRL, IBP, etc.

2.6.6 Finance to NBFI:


a) Non Funded: L/C for import of machinerys / equipment for their clients, Bank Guarantee, etc. b) Funded: SOD, STL, STRL, Term Loan (Credit line), Call Loan, and Zero Coupon Bond Purchase.

2.6.7 Specialized Scheme:


a) SME Products: SME Installment Loan, SME Revolving Loan, SME Muldhan Revolving Loan, SME Shulov Revolving Loan, Munafa Installment Loan, Munafa Installment Loan, SME Muldhan Installment Loan, SME Sheba Installment Loan, SME Shulov Installment Loan, SME (OD) Fully Secured, SME (OD) Partially Secured b) Retail Products: City Express Cash Branch, Loan against Deposit, SOD against Deposit, City Solution, City Drive, ATM, VISA Credit Card etc.

2.6.8 Export Oriented Business:


a) Non Funded: Back-to-Back L/C, Acceptance, Bank Guarantee, Letter of Credit, etc. b) Funded: Packing Credit, Overdraft, Hire purchase, Lease Finance, FDBP, and IDBP etc.

2.6.9 Advance against Financial Obligation:


Funded: SODDP, SODOR and SODSE
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2.7 SWOT ANALYSIS OF THE CITY BANK LIMITED


The Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis of CBL is described in the following table (Table 1.3):

Table 1.3: SWOT Analysis of CBL


S Sound profitability and growth with good internal capital generation Larger corporate client base Experienced and efficient management team and human resource Quality products and services Company reputation and goodwill Large number of on line Branches all over the country Lack of adequate marketing (advertising and promotion) effort Lack of trained employees. Lack of full automation Scope of market penetration through diversified products Automation of transaction processes and online branch banking Regulatory environment favoring private sector development Value addition in products and services. Increased competition for market share in the industry Frequent changes of banking rules by the Central Bank Market pressure for lowering of lending rate National and global political unrest Default culture of credit

O T

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CHAPTER THREE: CREDIT APPROVAL & MONITORING PROCESS

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3.1 CREDIT POLICY IN THE CITY BANK LTD:


Banks are the principal source of credit for borrowers. Banks provide loan able funds for millions of households (individuals and families), for most local units of government and for agricultural, commercial and industrial activities of a nation. Worldwide, banks grant more installments loans to consumers than any other financial institution. Without adequate finance, there can be no growth or maintenance of a stable output. Bank lending is important to the economy, for it makes possible the financing of different sectors. At the same time, a bank will distribute its funds among various businesses in a manner as to derive sufficient income. One of the primary functions of commercial banks is sanctioning of credit to the potential borrowers. Bank credit is an important catalyst for bringing about economic development in a country. Without adequate finance, there can be no growth or maintenance of a stable economy. At the same time, a bank will distribute its funds among various sectors in a manner as to derive sufficient incomes. The objective of the credit management of a bank is to maximize the performing asset and the minimization of the non-performing asset as well as ensuring the optimal point of loan and advance and their efficient management. Credit management is a dynamic field where a certain standard of long-range planning is need to allocate the fund in diverse field and to minimize the risk and maximizing the return on the invested fund. Continuous supervision, monitoring and follow-up are highly required for ensuring the timely repayment and minimizing the default. Actually, the credit portfolio is not only constitutes the banks asset structure but also a vital factor of the banks success. The overall success in credit management depends on the banks credit policy, portfolio of credit, monitoring, and supervision and follow-up of the loan and advance. Therefore, while analyzing the credit management of The City Bank Limited, it is required to analyze its credit policy, credit procedure and quality of credit portfolio.

3.2 LENDING PRINCIPLES FOLLOWED BY CBL: CBL Credit Policy is guided by the following Principles:
Principle # 1 Credit is not to be making available or services to a customer where we lack an understanding of the customer or the customers business. Principle # 2 Insider loans and self-dealing loans are prohibits. Principle # 3 Name lending is to be avoiding in respect of all customers/ counter parties.

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Principle # 4 All companies in a group shall be assesses individually and collectively. Applies for approval, reporting and regulatory ceiling compliance purpose. Principle # 5 Lending to the holding companies is prohibiting. Principle # 6 Lending to the Govt. or sector corporations should not always be considering as low risk. Principle # 7 (a) Money should not be lent in property merely because of evident collateral. (b) Companies or individuals who are seeking to develop their property should have a proven title or legitimate construction authority. Principle # 8 No lending or deal is to be making with a bank or the appropriate authority unless its credit worthiness is establishing through due diligence and appropriate counter party limit approves financial institution. Principle # 9 While dealing with the groups their tendency of drawing accommodation bills and originating in-house transactions should be clearly identifying and avoided. Banks own acceptance is not to be purchasing unless business case supports it and specific permission from head office authority. Principle # 10 Per party credit, exposure to be clearly worked out and determined. Principle # 11 Only the products that are covered by approved product program guidelines (PPGs) or Departmental operating Instructions (DOI) may be provided to CBL customer. Principle # 12 Facilities should be priced on risk adjustment basis. Nature of product or facilities, Customer credit grades, security, risk transfer factor (customer guarantee from another bank/insurance cover) should be considered. Principle # 13 Products that are appropriate for the nature of business and amount of loan that is appropriate for the scale of operation of the customer should provided. Principle # 14 Tenor &terms of financing should be structured in relation to customers own business cycle.

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Principle # 15 Specialized areas for bank financing should be defined, measured and clearly understood. Only those areas where CBL has competence and capacity may be taken up for financing. Principle # 16 Facilities will be provided after a full analysis of the risks associated with customers as well as facilities proposed & review of the risk adjusted return has been completed &documented. Principle # 17 All Corporate clients should be allocated a credit grade using appropriate grading methods as adopted from the best practices & in compliance with central banks Prudential Guide Lines. Principle # 18 All loan application should be obtained in banks standard format and signed by the authorized signatories. Principle # 19 Loan origination and disbursement authority must generate from two different persons and/or Department/Divisions. Principle # 20 Facilities may be drawn only after authorization from credit Administration & Monitoring Department, which must be organizationally independent of the credit marketing and credit approval process. Principle # 21 All items that are pledged, mortgaged, collateralized to the bank must be tangible, have quantifiable value and should be under physical (actual or constructive) control of CBL or have legal title/charge thereto. These characteristics should be backed by appropriate documentation. Principle # 22 All loans and advances originated and disbursed should be collected or realized from the borrower at maturity. Principle # 23 All decision makers should be aware of the risk concentration at portfolio level. They must proactively manage, define and diversify the risk concentration.

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3.3 FLOW CHART FOR CREDIT PROCESSING

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3.4 PROCESSING OF LOAN APPLICATION AND APPROVAL


Appraisal and approval process of a bank loan application involve a series of activities. These activities reveal a true element of banking intermediation ranging from establishing relationship with a stranger (walk-in customer) to structuring a credit line for the existing clients. In order to manage the risk inherent in lending, banks across the world development many tools. These processes are generally benchmarked for application across the bank.

3.4.1 THE PROCESS


3.4.1.1 Beginning of Relationship: Relationship Manager (RM) or contacts prospective client. 3.4.1.2 Placement of Application by the client: Client will place a credit request through banks prescribed application from. 3.4.1.3 Credit Rating Verified: CIB report or peer group reports obtained (CIB blacklist clients are rejected at this stage) 3.4.1.4 Key Documents Collected: Bank statement for new customer, Financials, regulatory permissions, business charters like Trade License, Article and Memo of Assn., Boars Resolution etc. 3.4.1.5 Site visit and KYC: Business premise/factory visit and call report made. Banks KYC package completed. 3.4.1.6 Conformity to credit policy: conformity to credit policy in force is to be verified while accepting a credit proposal. 3.4.1.7 Management Analysis: Management capability to run the business is checked. Customers ability in relation to risk is measured, security examined, pricing for the product and remuneration for CBL 3.4.1.8 Financial Analysis: a) b) c) d) e) The Spreadsheet analysis Profitability analysis Leverage/gearing analysis IRR (where applicable/if possible) Breakeven point and Sensitivity analysis (if possible)

3.4.1.9 Some of the Features of existing CRG from in use to be considered for advances exceeding TK 5 crore:

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3.4.1.9.1 a) b) c) d) e) f) 3.4.1.9.2 a) b) c) d) e) 3.4.1.9.3 a) b) c) 3.4.1.9.4 a) b) 3.4.1.9.5

Demand and Supply analysis: Major competitors Aggregate demand Supply position Market share of the firm under appraisal Production capacity Distributions channels and marketing policies in use Technical Aspect (where applicable): Availability of the raw materials, power and other inputs has been established Production process chosen is suitable Equipment and machineries chosen are appropriate Proposed layout of the site/location, buildings and plant is sound Human resources assessment and competency Economic Aspect (where applicable): Direct benefit of the society Employment opportunity Contribution to GDP Ecological Aspect (where applicable): The likely damage caused by the project to the environment The certificate is obtained from the competent authority (like directorate of Environment) SWOT Analysis: SWOT refers Strength & weakness of the client, Opportunity & Threats of the industry--- Where possible SWOT analysis can be made. International Certification to ISO certificates

3.4.1.9.6

3.4.1.10 Structuring the proposal: Based on financial and management analysis and need of the client and his capability of operating the business, RM shall design the credit keeping in mind on the following issues: a) b) c) d) e) f) g) h) Purpose of the credit Experience in the similar business Risk, Remuneration Ancillary business Validity Loan Period & Business Profitability Debt Equity Ratio Repayment capacity & Production capacity Market demand of the product

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3.4.1.11 Move the proposal: If the preliminary findings are positive and acceptable to the bank as per Credit Policy, BB Regulations, Remuneration and Risk profile. 3.4.1.12 Sanction Advice: 3.4.1.12.1 Bank will prepare a detailed approval advice for the client. Banks standard format shall be used for advising the approval to the client. Rejection intimation should be promptly sent. 3.4.1.12.2 Clients signature on the duplicate copy of the sanction advice should be obtained as the confirmation of having accepted the terms and condition of approval. 3.4.1.13 Documentation (security/charge documents): The respective official/officer shall complete documentation as per the sanction advice. 3.4.1.14 Legal and regulatory compliance: For legal and regulatory compliances, reference should be made to head office legal department (where applicable) 3.4.1.15 Disbursement: Disbursement to be made after due diligence. 3.4.1.16 Periodic review: Periodic review of all loan accounts should be made in the bank given format. 3.4.1.17 Collection: Branch will collect the installments or the money for adjustment of liability as per the sanction advice. Proper record should be kept in the loan file regarding their collection status. In cases of default this should be reported to credit administration department (CAD) 3.4.1.18 Workout of advance warning process: Workout on each slow or potentially risky account should be made and reported to Head Office on quarterly basis. Account that fall under BB norms of Special Mention Accounts should be carefully identified and reported to th HO as per guidelines provided in circular no 2005/01 dated 8 march, 2005 issued by Project & Corporate Finance Division. 3.4.1.19 Legal procedures for delinquent loans: Legal process starts only when a loan is classified and considered non recoverable under normal interaction with the borrower. Decision for a legal action is made on case-to-case basis.

3.5 CREDIT RISK MANAGEMENT (CRM)


CRM refers to credit risk management that means robustly manage credit risk in order to attain profit and contribute to GDP. The core risks of commercial banks are: Credit Risk: The Bank has formulated Credit Risk Manual, Departmental Operating Instruction, Departmental Control Function Checklist and Credit policy to address credit risk.

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Asset Liability Risk:


To address the issue of Foreign Exchange Risk Management, all foreign exchange activities are segregated into Front & Back Office operation. Bank has developed Departmental Operating Instruction to minimize foreign exchange risk.

Foreign Exchange Business Risk:


To identify & control of operational risk bank have been place various exception reports, Management Action Triggers (MAT), early warning system.

Operation Risk:
The Bank had formed Assets Liability Committee (ALCO), which holds meeting and reviews issues like interest rate trends, foreign exchange position, balance sheet risk, pricing on deposit, advances, and take appropriate action.

Internal Control and Compliance:


To implement the desired roadmap of risk management under the prudential guideline of Bangladesh Bank, the bank had effectively responded to build a proper Internal Control & Compliance (ICC) to identify and mitigate risk.

Money Laundering Prevention Risk:


Money laundering risk is defined as the loss of reputation and expenses incurred as penalty for being negligent in prevention of money laundering. Nominated Anti Money Laundering Compliance Officers in branches is required report to Chief of Anti Money Laundering Compliance Officer at Head Office level on any suspicious transaction. Steps are taken to have KYC, transaction profile completed before opening any account.

3.6 CREDIT RISK GRADING (CRG)


As a recommendation of BASEL-2 Bangladesh Bank establish a CRGM (Credit Risk Grading Manual) aiming to form a good credit system in the country.

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Marks 100%Distribution for Grading Financial Risk Business/Industrial Risk Management Risk Security Risk Relationship Risk Total Under Management risk (12%) Management experience Second in line Team work Total Under Relationship Risk (10%) Account conduct Utilization of limit Compliance Personal deposit Total

Under Business/Industrial Risk (18%) 50% 18% 12% 10% 10% 50% 5% 4% 3% 12% 5% 2% 2% 1% 10% Size of business Age of business Outlook Industrial Growth Market competition Entry/Exit Total Under Security Risk (10%) Coverage Primary Collateral Support security Total Under Financial Risk (50%) Leverage Risk Liquidity Risk Profitability Risk Coverage Risk Total 5% 3% 3% 3% 2% 2% 18 % 4% 4% 2% 10 %

50 %

3.7 CREDIT ADMINISTRATION


Credit Administration Division (CAD) will be responsible for the followings: Limit maintenance Authentication of documentation Checklist, issuance of Disbursement authority Verification of Security Management of Exposure Credit Portfolio Review Custodianship Monitoring & Follow up Compliance

3.7.1 Limit Maintenance:


Limit creation and maintenance of limit i.e. origination of loan account & verification, limit setup, renewal, rescheduling, enhancement, reduction, rate of interest modification and other important issues will be done centrally by Credit Administration Division. On receipt of copy of limit approval letter/sanction advice and upon confirmation regarding completion of documentation, Credit Administration Division (CAD) will create and maintain limit(s) for the clients and take necessary steps for managing MIS/Database.
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3.7.2 Authentication of Documentation Checklist, issuance of Disbursement authority:


Credit Administration Division (CAD) will check and sign the documentation checklist. Thereafter, the Head of Credit Administration Division (CAD) will issue Satisfactory Security Certificate Security Clearance Certificate/ Disbursement Authority.

3.7.3 Verification of Security:


Credit Administration Division must check all collateral, primary securities and, legal opinion may be obtained to protect banks interest. Ensure Mortgage documents are properly vetted by legal counsel /panel lawyer as per existing norms of the bank. Project appraisal unit (PAU) will primarily check valuations of inventory and Credit Administration Division will crosscheck machineries and the same. The bank will collect a statement of Financial Obligations against which credit facilities has been allowed in February, May, August, and November to head of Credit Administration Division as per following format:
Facilities Type Limit Outstanding as on Issuing authority FO Value Issue date Maturity date Safe in Safe out

A/c

3.7.4 Credit Portfolio Review:


Credit administration Division will review credit portfolio on quarter basis in light of the following Top 10 sectors Overall sectorised dispersal/concentration Sector wise performance: overdue, import/export Client wise security yield Top 10 clients concentration & performance & SMA status Asset quality: Based on grading

3.7.5 Custodian:
After receipt of the sanction advice from the Corporate & Investment Banking Division, CAD will maintain the following: Maintain all sanction/renewal advice of each client

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Preserve security documentations along with the security documentation checklists, security satisfaction certificate/disbursement authority. Preserve the verification report of all collateral security

3.7.6 Monitoring & Follow up:


Monitor adherence to the approved terms & conditions Review documentation periodically but at least annually In case of any Excess Over Limit (ECL) /Temporary Accommodation is allowed to any case account, ensure that there is approval Check & review the periodical statement to ensure compliance to the conditions laid down in the loan approval advice and/or the covenants of loan reschedule agreement, if any. Prepare client to the consolidated exception/deficiencies reports/statements in regard to the following: 1. 2. 3. 4. 5. 6. Past due/non collection of loan installment at maturity, non-collection of Principal at maturity and non-servicing of interest Unauthorized EOL (Excess Over Limit) Expired limit EAL (Early Alert List) SMA (Special Mention Account) Covenant violations & document deficiencies

Follow up for regularization/rectification accounts

3.7.7 Compliance:
Submission of returns to Bangladesh Bank Ensure timely collection of CIB report & forward a copy of the same to the Corporate & Investment banking Division as & when received from Bangladesh Bank Ensure default lost circulations Ensure compliance of Credit policy

3.7.8 SUPERVISORY OR AUDIT LEVELS QUESTIONNAIRE


SL Questionnaire ORIGINATION STAGE Whether loan application in standard format obtained i. KYC procedure followed and documents ii. Business/factory site visited and documented iii. Financial obtained, analyzed & spread sheet made iv. End use of funds clearly identified v. CBI & other credit reports satisfactory vi. Loan approved as per delegated power vii. Compliance (Yes/No)

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viii. ix. x. xi. xii. xiii. xiv.

Ownership & title of collateral fully verified & physically in possession In the case of limited companies charge with registrar JT Stock Companies created within mandatory period Disbursement authority obtained from Head Office Sanction offer letter accepted by the borrower Security documents adequate Regular meeting with borrower at appraisal stage documented. Regular monitoring of stock report/DP/pledged goods (documented)

xv. i. ii. iii. iv.

Charge documents obtained If exception report on interest or principal payment failure on record If periodic review made on Borrowers security, financial results are reviewed periodically and documented Key administrative dates such as renewal of security doc. Dates, charge registration with RJSC etc. are properly recorded

MONITORING

COLLECTION & CONFIRMATIONS i. ii. iii. If record of principal & interest collection are maintained. If arrear payments are followed up on timely basis Work out for special Mention Account carried out periodically

3.8 CREDIT RECOVERY: 3.8.1 Strategy:


Recovery Strategy includes but not limited to the followings: Meeting with the client Phone call Checking & verification of collateral security Explore the possibility of amicable settlement Initiate legal action Any other strategy depending on the situation deemed appropriate

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Transfer of NPL account to Recovery & Legal Division


On updating status of each account, if any account becomes substandard or worse, the Recovery Division will obtain file from Credit Division and the account would be assigned to an account manager. All correspondences made with the client during the last sent to the credit division

3.8.2 Procedure Management

for

NPL

Account

Within 15 days from the receipt of file from Credit Division, Recovery Division will initiate office note/classified review report on stand-alone basis. Information must be included: Name of client Cl status Name of the sponsor/owner/proprietor/partner Name of the guarantors Sanctioning authority Primary/collateral security Present dues Written off or not Present proposal of client

Drawing against the account being downgraded to sub-standard or worse are prohibited Defaulting borrowers are pursued vigorously to repay the banks dues. If the defaulting borrower cant repay the dues for the moment and applies for rescheduling, loan amount, upon approval of the competent authority may be rescheduled as per Bangladesh Bank guidelines. If the borrower does not come forward to settle the liability, due process should be initiated to take legal action against the borrower if the borrower is not capable to repay loan due to his genuine financial hardship, waiver of interest may be considered

3.9 CLASSIFIED LOAN REVIEWED


Every quarter a comparative position will be submitted & placed before the higher management where the following issues will be highlighted Comparative CL position of present quarter & 4 precedent quarter Provision required for Unclassified & Classified loans Provision kept for Unclassified & Classified loans Provision excess/shortfall for Unclassified & Classified loans Suspended interest (including SMA)

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Newly classified loan SMA

3.10 NEWLY ESTABLISHED REGULATIONS IN THE BANKING SECTOR TO MANAGE CREDIT


Though the ultimate or combined objective of each of the regulations, established in the banking sector is the same (improvement of loan quality), yet in terms of individual or specific objectives, they differ from each other. According to these discussions Credit Management regulations can be classified in the following categories: 1) 2) 3) 4) Monitoring Regulations Screening Regulations Transparency Regulations Lenders Recourse Regulations

3.10.1 SCREENING REGULATIONS


Whether a particular loan will perform or not, mainly depends on the quality of screening of the loan proposal. This quality of screening again depends on the availability of the information on the borrowers, methodology for screening and the expertise of the credit officers. The screening mechanisms that are being employed include: Credit risk (CRG) Credit Information Bureau (CIB) Loans to insiders and connected parties (The Banking Companies Act 1991 with amendments) Interest Rate Deregulation

3.10.2 MONITORING REGULATIONS


Not just only loan screening, but also the performance of a loan is equally dependent on the monitoring system (regarding loan use and repayment) of the loan giving agencies. This sort of monitoring method is very weak in the Bangladesh banking financial system. To overcome such shortcomings several method have been introduced, which are: New Loan Ledger Card (NLLC) Large Loan Reporting System (LLRS) Performance Planning System (PPS) Off-site Supervision

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3.10.3 TRANSPARENCY REGULATIONS


Lack of appropriate accounting standard for recording the present performance position of loans hinders the process of reflecting the actual financial position or health of banking financial institutions. The measures (regulations in regard to transparency) as adopted in our financial system are as mentioned below: Loan Classification and Provisioning Risk-Based Capital Adequacy

3.10.4 LENDERS RECOURSE REGULATIONS


In case a borrower is unable to repay, whether willingly or unwillingly, the lenders must have access on the borrowers to get back their money. In the context of Bangladesh, lenders recourse base was not only weak but also delay prone. In order to break through this weak recourse base, some new legal frameworks had been instituted, which are: Artha Rin Adalat Act 1990 Bankruptcy Act 1997

3.11 BANHLADESH BANKS GUIDELINES [UPDATED TILL MARCH 15, 2009]


Guidelines 1-Loan Pricing One of the most important jobs of a bank is to correctly fix banks interest rates for lending. Interest rates play a crucial role in the overall growth of a bank. The rate of interest on loan & advances should be fixed by the bank that the interest margin would be sufficient. Considerations of Loan Pricing Internal factors Amount of loan able fund Cost of bank fund Administrative & transaction cost Overhead expenses Credit investigation & analysis cost Supervision & collection expenses Amount bad debt External factor Govt. & regulatory agencies Money Market competitions

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Methods of calculating interest margin


1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Interest to be paid on deposit at weighted average Interest to be paid on borrowings at weighted average Total interest paid (Add IOD + IOB) = Add operating expenses Total expenses (Add TIP + OE) = Interest to be received from loan at weighted average lending rate Interest to be received from investment at weighted average lending rate Calculate fees & other incomes expected Total interest earned (Add IOL + IOI) Interest margin (TIP TIE) = Interest surplus / deficit (IM OE) = IOD IOB TIP OE TEX IOL IOI FOI TIE IM IS or ID

Guideline -2 - Lending and Risk Management The policies, in respect of appraisal of loan/investment proposal, sanction, disbursement, recovery, reschedule and write-off thereof shall be made with the board's approval under the purview of the existing laws, rules and regulations. Guideline -3 - Restrictions on Lending to Directors of Private Banks 1. Any loan facility provided to a Director or to his relatives must be sanctioned by the Board of Directors & amount of the loan should not exceed 50% of the paid-up value of the shares. 2. The quarterly statement of liabilities of Directors & Ex-Directors of the bank as defined in the latest amendment of Bank Companies Act, 1991, will have to be submitted to B.Bank in the format as enclosed with BRPD Circular Letter No. 8 dated 19 June, 1997. 3. If re-scheduling is required in case of loans extended before the issuance of BRPD Circular No. 07 dated 5.8.99 in favor of Director or any organization wherein he has interest, time of repayment in case of term loan can be extended for maximum 03(three) years and in case of working capital latest up to 31st December, 2001. Guideline 4 - Instructions for Preparation of Financial Statements

Loans and Advances:


(a) Loans and advances should be shown as per the remaining maturity grouping in the following order: (i) (ii) (iii) (iv) (v) Repayable on demand Not more than 3 months More than 3 months but not more than 1 year More than 1 year but not more than 5 years More than 5 years. Page 34

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(b) The items of loans and advances i.e., loans, Cash credits, Overdrafts should be segregated into two sub-heads viz. (i) Within Bangladesh and (ii) Outside Bangladesh (c) Loans & advances should be analyzed to disclose any significant concentration such as:(i) Advances to allied concerns of directors; (ii) Advances to Chief Executive and other senior executives; (iii) Advances to customers' (number of clients & outstanding amount of loans & advances each amounting more than 15% of bank's total capital, classified amount therein and measures taken for recovery of such loan should be mentioned); (iv) Industry-wise & Geographical location-wise.

Provision for loans and advances:


The note on movement in specific provision for bad and doubtful debts should be presented in the following format: Particulars Provisions held at the beginning of the year Fully provided debt written off Recoveries of amounts previously written off Specific Provision for the year Recoveries and provisions no longer required Net Charge to Profit & Loss A/C Provisions held at the end of the year (-) (+) Taka xxxx xxxxx xxxx

(+) xxxxx (-) xxxx (+) xxxxx xxxxxx

Interest Suspense Account:


This should be shown according to the following format: Particulars Taka Balance at the beginning of the year xxxx Amount transferred to "Interest Suspense" Account during the year (+) xxxxx Amount recovered in "Interest Suspense" Account during the year Amount written off during the year Balance at the end of the year (-) (-) xxxx xxxxx xxxxx

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Guideline -5 - Policies on Single Borrower Exposure 01. As a result of increase in capital of almost all the banks, now it has been decided to reduce the single borrower exposure limit from 50% to 35%. 02. (a) Loan sanctioned to any individual or enterprise or any organization of a group amounting to 10% or more of a bank's total capital shall be considered as large loan. (b) The banks will be able to sanction large loans as per the following limits set against their respective classified loans:

Rate of net classified loans

The highest rate fixed for large loan against bank's total loans & advances Up to 5 56% 52% 48% 44% 40%

Up to 5% More than 5% but up to 10% More than 10% but up to 15% More than 15% but up to 20% More than 20%

04. (a) Banks should collect the large loan information on their borrowers form Credit Information Bureau (CIB). (b) Banks must perform CRG before sanctioning or renewing large loans. 05. For the loans that have already been disbursed with the approval of Bangladesh Bank, and that have exceeded the limit as stipulated in Section 01 (mentioned above), banks shall take necessary steps to bring down the loan amount within the specified limit. Guideline 6 - Large Loan Restructuring Scheme (LLRS) The scheme will be known as "Large Loan Restructuring Scheme (LLRS)". The objective of the scheme is to ensure a transparent mechanism for restructuring of loans and to involve all the financing banks in the restructuring process.

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Guideline 7 - Requirements for obtaining Information on Large Loan from Credit Information Bureau Previous Circular on the above matter was issued vide CIB Circular No. 02 dated December 27, 1992. In the this circular, branches of the bank were directed to collect from January 01, 1993 onwards, before taking effective steps on fresh loan-application of any borrower after receipt of the same or before renewal of regular loan account or rescheduling. Guideline 8 - Interest Rates on Deposit and Lending Banks are now free to fix their rates of interest on their deposits of different types after withdrawal of restriction about the floor rate of interest in 1997[37]. Banks are also free to fix their rates of interest on lending except for export sector, which has been fixed at 7%[38] per annum with effect from January 10, 2004. Guideline 9 - Bank Charges 1. With the rescinding of F.F. Circular No. 16 dated 31-3-1982 and BCD Circular No. - 7, dated 12-3-1986 on the captioned subject; the banks are now free to fix the fees and commissions relating to the services offered by them to their customers. 2. Each bank will forward to BCD (now BRPD), Bangladesh Bank a copy of the schedule of charges and commissions. Guideline 10 - Managing Core Risks in Banking Due to deregulation and globalization of banking business, banks are now exposed to diversified and complex risks Bangladesh Bank has issued guidelines on 'Managing Core Risks in Banking' on 07 October 2003. The five core risks are a) Credit Risks, b) Asset and Liability/Balance Sheet Risks, c) Foreign Exchange Risks, d) Internal Control and Compliance Risks and e) Money Laundering Risks. Guideline 11 - Credit Rating In terms of the BRPD Circular Letter No. 05 dated May 29, 2004 it was made mandatory for the banks to have themselves credit rated to raise capital from capital market through IPO. Banks will be required to complete their credit rating by June 30, 2007. Guideline 12 - Prudential Guidelines for Consumer Financing and Small Enterprise Financing Due to significant increase in credit disbursement in the arena of Consumer Financing and encouraging credit flow in the Small Enterprise Financing sector in the recent time, two separate guidelines have been issued to the banks for better management of credit in those two sectors [45] where-in loans will have to be classified into 8(eight) categories (in light of Credit Risk Grading Manual). Page 37

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Guideline 13 - Implementation of Credit Risk Grading Manual With the aim to fully implement a Risk Grading System, an Integrated Credit Risk Grading Manual has been developed and forwarded to the banks.

Risk Rating
Superior Low Risk

Grade
1

Definition

Good Satisfactory Risk

Acceptable Fair Risk

Marginal Watch list

Special Mention

Credit facilities, which are fully secured, fully cash covered. Credit facilities fully covered by government guarantee Credit facilities fully covered by the guarantee of a top tier international Bank 2[ Score Strong repayment capacity of the borrower 85+ ] The borrower has excellent liquidity and low leverage The company demonstrates consistently strong earnings and cash flow All security documentation should be in place Credit facilities fully covered by the guarantee of a top tier local bank Aggregate Score of 85 or greater based on the Risk grade Score Sheet 3[ score These borrowers are not as strong as GOOD Grade 75-84] borrowers, but still demonstrate consistent earnings, cash flow and have a good track record. Borrowers have adequate liquidity, cash flow and earnings. Credit in this grade would normally be secured by acceptable collateral (1st charge over inventory / receivables/equipment/property). Acceptable parent/sister company guarantee Aggregate Score of 75-84 based on the Risk Grade Score 4[ Score These borrowers have an above average risk due to strained 65-74 ] liquidity, higher than normal leverage, thin cash flow and/or inconsistent earnings. Weaker business credit & early warning signals of emerging business credit detected. The borrower incurs a loss. Loan repayments routinely fall past due Account conduct is poor, or other untoward factors are present Aggregate score of 65-74 based on the RGSS 5[ Score 55-64 ] This grade has potential weaknesses that deserve managements close attention. If left uncorrected, these weaknesses may result in a deterioration of the repayment prospects of the borrower

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Risk Rating
Special Mention

Grade

Definition

5[ Score Severe management problems exist 55-64 ] Facilities should be downgraded to this grade if sustained deterioration in financial condition is noted (consecutive losses, negative net worth, excessive leverage) An Aggregate Score of 55-64 based on the RGSS 6[Score: 45-54] Financial condition is weak and capacity or inclination t6o repay is in doubt. These weaknesses jeopardize the full settlement of loans Bangladesh Bank criteria for sub-standard credit shall apply An Aggregate Score of 45-54 based on the RGSS Full repayment of principal and interest 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 Bad & Loss Bangladesh Bank criteria for doubtful credit shall apply An Aggregate Score of 35-44 based on the RGSS Credit of this grade has long outstanding with no progress in obtaining repayment or on the verge of wind up/liquidation Prospect of recovery is poor & legal options have been pursued Proceeds expected from the liquidation or realization of security may be awaited. The continuance of the loan as a bankable asset is not warranted, and the anticipated loss should have been provided for This classification reflects that it is not practical or desirable to defer writing off this basically valueless asset even though partial recovery may be affected in the future. Bangladesh Bank guidelines for timely write off of bad loans must be adhered to. Legal procedures/suit initiated Bangladesh Bank criteria for Bad & Loss credit shall apply An Aggregate Score of less than 35 based on

Substandard

Doubtful (nonperforming)

7[Score:3544]

Bad & Loss (nonperforming)

8[Score: <35]

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Guideline 14 - Supervision, Monitoring & Recovery of Loans

Supervision:
Supervision means to have a proper control over the borrowers operation to ensure the enduse of the loan amount. Supervision work actually starts from the stage of selection of a borrower. So, before disbursement of the loan the bankers must perform the following: (a) (b) (c) (d) To justify the purpose of the loan applied for To execute the documentation with utmost care To supervise the progress made in construction and operations To supervise the production, sales record & keep watch on safety of the fund

Monitoring:
Monitoring is a systematic process. It is a very important work for the bank which starts immediately after disbursement of the loan. In this respect the bankers should perform the following activities: (a) (b) (c) To ensure/observe whether the loan in being used properly for the purpose against which the loan was disbursed To check the borrowers A/C whether the regular transaction/deposit is being maintained by the borrower To observe keen fully the financial condition of the borrower

Recovery of Banks Advance:


Most of banks are heavily burdened with stuck-up advances at present. As a result most of the cases are left without any substantive action on the following grounds: (a) The borrower is not traceable & the borrower does not have any property to be proceeded against or the particulars of the borrowers properties are not respond (b) The borrowers business has failed and he has for further loan to revive his business (c) The borrower has died and the responsibility of repayment of the loan can not be fixed up easily (d) Already a criminal case and or a civil suit has started against the borrower and the case is lying pending in the court To contend with each kind of the above contingencies, the Bank Manager has to advise appropriate techniques both legal and administrative by adopting following procedures for recovery of stuck-up loans: 1) Separate Recovery Cell to be established at the big branches to gear up the recovery efforts under direct supervision of the Branch Manager

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2) Officers to whom stuck-up loan accounts are allocated for recovery will maintain close contact with the borrowers including personal visits, at least once in a fortnight. 3) A part of the dues of a loan may be recovered by giving remission to the borrower. 4) At the branches, where suits have been filed, one officer will be deputed for follow-up with the concerned Lawyer & to remain present at court on the date of the case. Guideline 15- Policies on Loan Classification & Provisioning

Basis for Loan Classification:


(A) Objective Criteria: Continuous Loan will be treated as past due/overdue from the following day of the expiry date. Demand Loan if not repaid/rescheduled within the fixed expiry date for repayment will be treated as past due/overdue from the following day of the expiry date. Fixed Term Loans may be treated overdue even before expiry of the loan period. Overdue is considered on the basis of past due installments which is converted into Time Equivalent of amount in arrears. Amount in arrears * Installment frequency (Month) Time Equivalent = Installment Size

Types Objective Criteria Continuous Overdue period for Loan Less than 3 months 3 months or more but below 6 months 6 months to less than 8 months and 29 days 9 months to less than 11 months and 29 days Left un recovered for 12 months or above

Status Unclassified Special Mention Account Substandard Doubtful Bad loan

Demand Loan

Overdue period for Less than 3 months 3 months or more but below 6 months 6 months to less than 8 months and 29 days 9 months to less than 11 months and 29 days Left un recovered for 12 months or above

Unclassified Special Mention Account Substandard Doubtful Bad loan

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Fixed Term Loan period up to 5 years

Time equivalent of amount in arrears for Less than 3 months 3 months or more but below 6 months 6 months to 11months 29 days 12 months to 17months 29 days 18month

Unclassified Special Mention Account Substandard Doubtful Bad loan

Fixed Term Loan period more than 5 years

Time equivalent of amount in arrears for Less than 11 months to 29 days 3 months or more but below 12 months 12 months to 17months 29 days 18 months to 23months 29 days 24 month above

Unclassified Special Mention Account Substandard Doubtful Bad loan

SHORT-tERM AGRICULTURAL CREDIT AND MICRO cREDIT

Overdue period for 0 month to 11 months 3 months or more but below 12 months 12months to 35 months and 29 days 36 months to 59 months and 29 days 60 months or above

Unclassified Special Mention Account Substandard Doubtful Bad loan

(B). Qualitative Judgment: If any uncertainty or doubt arises in respect of recovery of any Continuous Loan, Demand Loan or Fixed Term Loan, the same will have to be classified on the basis of qualitative judgment be it classifiable or not on the basis of objective criteria. If the recovery of the credit becomes uncertain resulting from Change of circumstance under which credit was extended or The borrower sustain loss of capital or the value of the security decreases or Any adverse situation arises & The credit is rescheduled frequently A suit filed for recovery of the credit

Maintenance of provision:
(a) Banks will be required to maintain General Provision in the following way: (1) @ 1% against all unclassified loans (other than loans under Small Enterprise and Consumer Financing and Special Mention Account.)

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(2) @ 2% on the unclassified amount for Small Enterprise Financing. (3) @ 5% on the unclassified amount for Consumer financing whereas it has to be maintained @ 2% on the unclassified amount for (i) Housing Finance and (ii) Loans for Professionals to set up business under Consumer Financing Scheme. (4) @ 5% on the outstanding amount of loans kept in the 'Special Mention Account' after netting off the amount of Interest Suspense. (b) (i) Banks will maintain provision at the following rates in respect of classified Continuous, Demand and Fixed Term Loans: Sub-standard 20% Doubtful 50% Bad/Loss 100% (ii) Provision in respect of Short-term Agricultural and Micro-Credits is to be maintained at the following rates: All credits except 'Bad/Loss'(i.e. 'Doubtful', 'Sub-standard', irregular and regular credit accounts): 5% and 'Bad/Loss: 100%

Base for Provision:


Base for Provision = (Outstanding Suspended interest Value of eligible Securities)

Eligible Securities:
100% of deposit under lien against the loan 100% of the value of government bond/savings certificate under lien. 100% of the value of guarantee given by Government or Bangladesh Bank 100% of the market value of gold or gold ornaments pledged with the bank. 50% of the market value of easily marketable commodities kept under control of bank 50% of the average market value for last 06 months or 50% of the face value, whichever is less, of the shares traded in stock exchange. Guideline -16 - Policies for Rescheduling of Loans When a borrower asks for rescheduling of loans the banks shall examine the causes as to why the loan has become non-performing. If it is found from such review that the borrower has diverted the funds elsewhere or the borrower is a habitual loan defaulter the bank shall not consider the application for loan rescheduling. At the time of considering loan rescheduling proposal bank must assess borrower's overall repayment capacity taking into account the borrower's liability position with other banks.

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Rescheduling of Term Loans:


Application for first rescheduling will be considered only after cash payment of at least 15% of the overdue installments or 10% of the total outstanding amount of loan, which is less; Rescheduling application for the second time will be considered after cash payment of minimum 30% of the overdue installments or 20% of the total outstanding amount of loan, whichever, is less; Application for rescheduling for more than two times will be considered after cash payment of minimum 50% of the overdue installments or 30% of the total outstanding amount of loan, whichever is less;

Rescheduling of Demand and Continuous Loan:


For rescheduling of Demand and Continuous Loans the rates of down payment, depending on the loan amount, shall be as under:

Amount of Overdue Loan Up to Tk.1.00 (one) crore Tk. 1.00(one) crore to Tk. 5.00 (five) crore Tk. 5.00(five) crore and above

Rates of Down payment 15% 10% (but not less than Tk.15.00 lac)

5% (but not less than Tk.50.00 lac)

Guideline -17 - Policies for Loan Write Off In order to avoid possible legal complications in retaining the claims of the banks over the loans written off section 28 ka has been incorporated in 2001 in the Bank Company Act, 1991. Banks may, at any time, write off loans classified as bad/loss. Those loans which have been classified as bad/loss for the last five years and for which 100% provisions have been kept should be written off without delay. A separate "Debt Collection Unit" should be set up in the bank for recovery of written off loans. In spite of writing off the loans the concerned borrower shall be identified as defaulter as usual. Like other loans and advances, the writing off loans and advances shall be reported to the Credit Information Bureau (CIB) of Bangladesh Bank.

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3.12 DEVIATION OF BANGLADESH BANKS POLICY GUIDELINES


The City Bank Limited sets out its Credit Policy on the basis of credit philosophy & standards by which business run & credit risk managed within CBL operation. CBL Credit Policy is based upon past experience both within CBL & across the industry as a whole. In practice no bank can operate its business without following the credit policies of Bangladesh Bank and violating the rules and regulations. The City Bank Limited also maintains the standard rules & regulations of Bangladesh Bank and has modified its credit policy with the consistence of its business nature. So there are not much more deviations of any standard of the credit policy guidelines of Bangladesh Bank. After that, I have found some deviations of Bangladesh Bank Credit Policy Guidelines. Those are mentioned below: There are some restrictions on Lending to Directors of Private Banks in the Bangladesh Bank guidelines. But I have not found any clear guideline and credit policy in CBL credit principal on lending to directors of CBL. There is a scheme known as "Large Loan Restructuring Scheme (LLRS)". The objective of the scheme is to ensure a transparent mechanism for restructuring of loans and to involve all the financing banks in the restructuring process. But I have not found any clear guideline and credit policy in CBL credit principal about this. I have not found any clear guideline and credit policy in CBL credit principal about Policies on single borrower exposure which is a prudential guideline of Bangladesh Banks Credit Policy. CBL provides sophisticated services to their big corporate client mainly. But Government takes initiatives to provide loan to support small investors and budding entrepreneurs. CBL does not maintain this properly. After analyzing the credit policy of CBL I have found that it has created a large portion of its Credit Policy on the basis of its own requirements. CBL maintain Bangladesh Banks guidelines strictly only in some few cases like counter party lending evaluation; credit grading, acceptance & valuation of securities, Product Program Guidelines for SME & consumer loan, Loan classification etc.

3.13 COMMENTS ON CREDIT APPROVAL & MONITORING PROCESS OF CITY BANK


In the city bank, corporate credit approval process is fully centralized. For approving a proposal the relationship manager, place the proposal to the CRM division. The CRM division analyzes the proposal. If they found mismatch they inform the RM .RM contact with client give the necessary information. So the client feels very comfortable because he has to contact with client. RM always assists the client in the approval process but in the branch, banking system the client has to contact with different person. There is many steps, procedure in the loan approval process in the branch banking system. They have to take the approval
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from head office credit committee. So it takes more time for approving a credit. Moreover the monitoring and supervision process of the branch banking system is not good because loan approval, sanction, disbursement data are not centralized but in the city bank they follow centralized banking system they have modern e-top for electronic storage of the document. They give i-banking facilities to their customer that gives their customer the opportunity to get account information 24 hours a day. As the all-83 branches are under on line so supervision & monitoring process of the loan are well done. So for practicing centralized banking system online they approve a loan all most 60-90 days where the branch banking system takes more time to

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CHAPTER FOUR: ANALYTICAL PART

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4.1 Trend Analysis of Loan & Advances of The City Bank Limited
TREND ANALYSIS OF LOAN & ADVANCES
40000 Linear Trend Model Yt = -1177.77 + 2362.32*t
Actual Fits Forecasts Actual Fits Forecasts

LOAN &ADVANC

30000

20000

10000
MAPE: MAD: MSD: 19 1877 6075740

0 0 2000 2005 2010

Time

Fitted Trend Equation

Yt = -1177.77 2362.32*t

From this equation I found that by increasing 1 year the company loan & advance is increase by TK. 2362.32 million. But the increase is decline due to negative intercept. The intercept is negative because other factor declines the growth of the loan & advances. Overall the loan & advance growth shows a very good satisfactory performance of the company. BY THIS EQUATION WE FORECAST YEAR 2009 2010 2011 2012 LOAN & ADVANCE (FAORECAST) 31894.7 34257 36619.3 38981

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4.2 Trend Analysis of Deposit of The City Bank Limited

TREND ANALYSIS OF DEPOSIT


50000 40000 Linear Trend Model Yt = 592.444 + 3008.89*t
Actual Fits Forecasts Actual Fits

DEPOSIT

30000 20000 10000 0 0 2000 2005 2010


MAPE: MAD: MSD:

Forecasts

17 2989 13682502

Time

Fitted Trend Equation Yt = 592.444 3008.89*t +

From this equation I found that by increasing 1 year the company Deposit is increase by TK. 3008.89 million. During the year 2011 there is a negative growth of the deposit. This reduction in deposit was the result of a strategic plan by reducing high interest bearing deposit, to not only reduce interest expense but also to match reduced lending in order to improve NPL of the bank. But overall the deposit growth rate shows a satisfactory performance of the company. BY THIS EQUATION WE FORECAST

LOAN & ADVANCE (FAORECAST) 2009 2010 42717 45725

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4.3 Credit Position of CBL


4.3.1 Credit Portfolio: The portfolio of loan & advances at the end of the year 2011stood at TK. 26788.46 million. The outstanding amount at the same period of previous year was TK. 30789.01million. Sartorial allocation of loan portfolio is given below:

Sector Agriculture Large & medium scale industries Small & cottage industries Commerce & trade Insurance, real state & trade Transport & communication Other Total loans & advances

2010 Amount 147 4863.1 25.58 7947.17 5732.69 238.43 11835.04 30789.01 Share 0.48% 15.79% 0.08% 25.81% 18.62% 0.77% 38.44% 100.00%

2011 Amount 5.22 5541.25 27.9 10998.5 2158.9 284.61 7772.08 26788.46 Share 0.02% 20.69% 0.10% 41.06% 8.06% 1.06% 29.01% 100.00%

Table: Credit Portfolio

As seen from the above table, less than 1% of CBLs loan portfolio comprises of Agricultural Finance compared to 41.06% in the Commercial Lending. For an agro-based economy like ours, Emphasis should, therefore, be placed more upon the agricultural sector. Portion of loan in case of Small & cottage industries is also less, which is 0.10%. 4.3.2 Lead Time: The lead-time is the duration of time between the request of a potential lender for a particular loan and approval of the loan. Talking with the officials of credit division of the bank I found that the lead-time for sanctioning loan varies loan to loan. On an average the lead-time is 7

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days for Retail Loan, 15 days for SME Loan and Almost 60days for Corporate Loan sanction in The City Bank Limited. 4.3.3 Growth of Loan & Advances: The following table shows the changes of loan & advances of CBL from 2006 to 2011.

LOANS & ADVANCES

2006 13884.9

2007 14778.55 6.44%

2008 17027.84 15.22%

2009 23326.34 36.99%

2010 30789.02 31.99%

2011 26788.47 -12.99%

Amount Growth

There is a sharp increase in loans in 2009. The figure below shows the trend of change over 5years.but after 1/11 the political situation of the country is changed. Thats affected the economic situation of the country most. Economic activities are slowdown that ultimately affects the company loan and advances growth. Loan & advances growth rate in the year 2011 is negative. 4.3.4 Classification of Loans & Advances:

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The classified loan stood at TK. 1671.83 Million. In terms of ratio, classified loan was only 6.28%of the total loan portfolio. The position of non-performing loan on net out basis was only 2.25%. Noteworthy that the Bank maintains a surplus amount as provision against provision for classified loan. Break up of non-performing loan stood as follows;
CLASSIFICATION TYPE 31.12.2010(AMOUNT IN TK) 100.45 PERCENTAGE 4.55 31.12.2011(AMOUNT IN TK) 348.08 PERCENTAGE 20.82%

Sub standa rd Doubtful


Bad/Loss Total classified loan

175.95 1933.33 2209.73

7.96 87.49 100

129.86 1193.89 1671.83

7.77% 71.41% 100.00%

Table: Classification of Loans & Advances

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4.4 Recovery of Non-performing Loan:


During the year under review, CBL recovered, including recovery from written off loans, an amount of tk. 547.77 million Compared to tk.576.02 million during last year. As per rescheduling policy, your bank reschedule d tk.889.18 million in 2011.total recovery amount with rescheduling for the year 2011 stood at tk.1436.96 million compared to tk. 320.66 million of the previous year. In line with guidelines of write off policy, an amount of tk.687.52 million was also written off during the year.

Table: Recovery of Non-performing Loan

2007

2008

2009

2010

2011

4.5 Performance Evaluation


Evaluation of Credit Position of CBL through UBPR technique:

Theoretical Framework:
The Uniform Bank Performance Report (UBPR) is an analytical tool created for bank supervisory, examination and management purposes. The performance & contained data in the report can be used as an aid in evaluating the adequacy of earnings, liquidity, capital, asset and liability management and growth management.

Criteria for financial performance evaluation:


Financial performance evaluation must be made in order to understand the financial position of the enterprise. This is done with the help of the following criteria of performance evaluation like (a) Different years balance sheet and profit & loss account, Page 53

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(b) Ratio Analysis, (c) Trend Analysis.

Ratio Analysis:
Financial Ratio analysis is a fascinating topic to study because it can teach us so much about accounts and businesses. When we use ratio analysis we can tell if it has enough money to pay its bills and we can even tell whether its shareholders should be happy! Ratio analysis can help us whether a business is doing better this year than it was last year.

Risk Ratio/analysis:
Basically a bank faces risk when it provides loan to the external borrowers. It is often argued that a relationship exists between rapid loan growth deterioration of credit quality and the chances of bank becoming insolvent. Robert Claire recently provided evidence on this relationship. In his study of loan growth and charge off at Texas Bank, Claire found a significant relationship between loan growth and loan charge off rates. As such loan growth represents important indication of quality of loan, a relationship that is an important one for senior management of a bank. a) Advance-Deposit Ratio (AD Ratio):

Advance deposit ratio, calculated as the ratio of loans & advances against deposits, is the most common way to see a banks liquidity position. In an ideal scenario, loan deposit ratio should not exceed 82% (as 18% is required for statutory requirements). However, a bank may decide to lend out its capital or raise funds from the interbank with a view that market interest rates would be low. But excessive lending (a high AD ratio) may expose a bank in serious liquidity and interest rate risk as the market liquidity may tighten any time. Ad Ratio (%) = (Total Advance/Total Deposits)*100

Year 2011 2010 2009 2008 2007 2006

Total Advance 26788.466 30789.02 23326.34 17027.82 14778.55 13884.90

Total Deposit 40539.63 39571.94 30647.83 22236.96 20086.31 19683.30

AD Ratio% 66.08% 77.81 76.11 76.57 73.72 70.54

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2006

2007

2008

2009

2010

2011

b)

Provision for Loan Losses (%):

Each bank provides an estimation of future loan losses as an expense on its income statement. This expense can be related to the volume of loan as follows:

PLL (%) = (Provision for Loan Losses / Total Loan & Leases) * 100

Year 2011 2010 2009 2008 2007 2006

Provision for Loan Losses 297.100 841.68 117.93 99.00 472.41 485.60

Total Loans & Leases 26788.466 30789.02 23326.34 17027.82 14778.55 13884.90

PLL (%) 1.11 2.73 00.51 00.58 03.20 03.50

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2006

2007

2008

2009

2010

2011

c)

Loan Ratio:

The loan ratio indicates the extent to which assets are devoted to loan as opposed to other assets, including cash, securities and plant & Equipment.

Loan Ratio (%) = Net Loan / Total Assets * 100

Year 2011 2010 2009 2008 2007 2006

Net Loan 26788.46 30789.02 23326.34 17027.82 14778.55 13884.90

Total Assets 48755.403 47445.75 35303.74 26375.56 23698.56 24481.60

Loan ratio (%) 54.94 64.89 66.07 64.56 62.36 56.72

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2006

2007

2008

2009

2010

2011

d)

Percentage of Classified Loan to Total Loans & Advances:

To determine the percentage of classified loans against total loans the following ratio is used:

Classified Loans to Total Loans & Advances (%) = (Classified Loans/ Total Loans & Advances) * 100 YEAR CLASSIFIED LOAN TOTAL LOANS & ADVANCES %

2011 2010 2009 2008 2007 2006

1672 2210 1332 1800 2094 4235

26788.466 30789.02 23326.34 17027.82 14778.55 13884.90

6.24 7.18 5.71 10.57 14.17 30.50

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2011

2010

2009

2008

2007

2006

Trend Analysis:
Trend analysis involves a comparison of ratio of the same firm over time, i.e., present ratios are compared with past ratios. The comparison of the credit position of a firm, from 20062011 s an illustration of a trend analysis which indicated the direction of change in the performance improvement or deterioration or constancy over the years.

Risk Ratio
AD Ratio% PLL (%) Loan ratio (%) Classified loan to Total Loan (%)

2006

2007

2008

2009

2010

2011

70.54 73.72 76.57 76.11 77.81 66.08 3.5 3.2 0.58 0.51 2.73 1.11

56.72 62.36 64.56 66.07 64.89 54.94 30.50 14.17 10.57 5.71 7.18 6.24

From the above trend analysis, different performance indicators inception of this institution, it may be concluded that, CBLs performance is satisfactory over the period despite some minor function.
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4.6 Notes to the Financial Statements for the year ended 31 December, 2008
Loans and advances/investment Loans, cash credits, overdrafts etc Inside Bangladesh Secured overdraft Quard against TDR Cash credit Murabaha Loans (General) House building loans Loans against trust receipt Loans against imported merchandise Payment against document Consumer credit scheme Lease finance / Izara (note - 7.3) Hire purchase shirkatul melk Bai-Salam Industrial credit Export development fund Staff loan City card loans* Small and medium enterprise loans Transportation loans Bai-muajjal City Drive City solution City Express Total= 2008 Taka 1,859,298,145 6,864,063 5,403,424,164 19,356,308 21,876,648 227,201,747 5,663,678,651 377,982,013 832,998,474 19,747,821 210,776,595 266,798,351 12,212,829,187 102,854,826 884,944,291 539,324,510 571,405,230 392,471,080 302,079,587 119,703,270 914,122,102 166,491,108 1,310,517,973 32,426,746,144 2007 Taka 2,243,144,722 9,347,508 6,650,487,648 31,393,741 23,967,722 272,106,278 2,484,080,608 424,050,119 242,846,963 34,792,449 269,740,360 395,227,122 1,439,550 8,849,321,383 66,313,409 662,088,222 251,081,080 399,008,851 284,611,303 138,363,073 1,306,380,597 25,039,792,708 Growth Rate % -0.21% -0.36% -0.23% -0.62% -0.09% -0.19% 0.56% -0.12% 0.71% -0.76% -0.28% -3.44% -1.06% 0.36% 0.25% 0.53% 0.30% 0.27% 0.54% 0 .003% 0.23%

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4.6.1 Pie-Chart: 200 8


8% 8% 11 % -2%

-3% 4% 4% 8%

Loans (General) House building loans Loans against trust receipt

Loans against imported merchandise -52% Lease finance / Izara Staff loan

4.6.2 Definitions:
Loans (General) An arrangement in which a lender gives money or property to a borrower, and the borrower agrees to return the property or repay the money, usually along with interest, at some future point(s) in time. Usually, there is a predetermined time for repaying a loan, and generally the lender has to bear the risk that the borrower may not repay a loan (though modern capital markets have developed many ways of managing this risk). House Building Loans Your dream to build your own house is only a matter of choice. And when you do decide, we will help you make your dream come true. Introducing City House Building Loan from City Bank Introducing City House Building Loan from City Bank Features Loan amount BDT 3 Lac maximum BDT 1 crore Repayment tenor 1 year t25 years Financing up to 80% of property value Early settlement facility Faster processing of loan Loan against property No hidden cost

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Eligibility Bangladeshi citizen within age limit of 22 years to 65 years Minimum income for primary applicant BDT 30,000/month for salaried & self-employed personal BDT 40,000/month for business person & other personal Minimum requirement of 2 (Two) years of experience for all professionals Salaried employee Minimum 6 months permanent with current employer Contractual employee Minimum 1 year of existing contract with current employer Trust Receipt Loans Trust receipt is an expression that was first given general currency in transactions involving the important of goods. Staff Loans The City Bank Limited provides advances to the staff for purchasing house building, meeting up certain requirements like family medical, personal medical, wedding purposes. Bank provides this facility under installments. Loan able amount varies on the basis of purpose. At least two years job in CBL. 5 years in banking carrier. Eligibility The borrower must be executive and staff of this Bank. Interest 6% rate

City Card Loan


City Express Loan City express loan is a fully secured and terminating (EMI Based) loan facility for any legitimate purpose. Bank would finance against clients CBL FDR or other bank FDR/NBFIs security.

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4.7 Notes to the Profit & Loss Account for the year ended 31 December 2008:
Interest income / profit on investment Loans (General) / Musharaka Loans against imported merchandise / Murabaha Loans against trust receipts Packing credit Interest on EDF House building loan Industrial credit Transport loan Lease finance / Izara Demand loan Payment against documents Cash credit / Bai-Muajjal Hire purchase shirkatul melk Fully and partly secured overdraft Consumer credit scheme Interest on SME Staff loan Documentary bills purchased Interest income from credit card Interest on cash incentive Other loans and advances / Investments Total interest / profit on loans and advances / investments Interest / profit on balance with other banks and financial institutions Interest on call loans Interest received from foreign banks Total= 2008 Taka 2 ,953,119 31,196,453 531,905,006 17,091,792 154,465 33,694,650 65,841,013 28,942,397 202,085,213 54,347,021 820,188,537 47,863,604 359,159,125 5 ,620,237 83,779,832 46,037,035 253,318,311 84,082,652 4 ,679,112 73,122,128 4,263,284,463 368,624,725 30,244,151 7,217,035 4,669,370,374 2007 Taka 4,280,786 90,847,158 434,098,326 34,661,086 55,921,839 1,194,078,099 34,615,773 34,354,995 121,300,149 92,550,629 860,059,080 35,023,005 299,696,442 7,372,803 84,625,415 33,492,273 312,475,397 38,017,789 15,410,109 7,363,879 3,790,245,032 280,840,887 83,146,162 29,028,631 4,183,260,712 Growth Rate -0.45% -1.91% 0.18% -1.03% -0.66% 0.47% 0.89% 0.39% -0.70% -0.45% 0.27% 0.17% -0.31% -0.01% 0.27% -0.23% 0.55% 2.29% 0.89% 0.11% 0.24% -1.75% -3.02% 0.10%

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4.7.2 Definitions:
Bai Murabaha: For financing procurement of raw material where goods are kept under banks custody Bai Salam For financing pre-shipment expenses by purchasing exportable goods in advance.

Other Loans
City Double Loan City Double is a unique loan facility where your fixed deposit in City Bank or in any other financial institution will now allow you to avail two loans at the same time from us one as overdraft (up to 95% of FD value) and other as an EMI loan (up to Tk. 10 Lacs). Product Features Fully secured loan in the for up to 95% of FD value Unsecured loan for up to Tk. 10 Lac payable in Equal Monthly Installments (tenor ranging from 12 to 60 months). Zero processing fee for the overdraft facility Interest rate lower than other competitive products Eligibility Any credit worthy individuals like: salaried executives, professionals like doctors, architects, engineers, chartered accountants, consultants, IT professionals and businesspersons etc. can apply for this loan.

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Minimum Income Category Salaried executives Self employed professionals like doctors, engineers and architects Businessperson, landlord and other-income individuals Requirement Minimum Tk. 15,000/per month Minimum Tk. 25,000/per month Minimum Tk. 30,000/per month

Loan Takeover Plan an exclusive offer for other bank's credit worthy customers who can now transfer their personal loan outstanding to City Solution with a preferential interest rate and waiver on processing fee. Eligibility Minimum 6 loan EMI repayment with existing bank A minimum take over loan amount is Tk. 1,00,000 and maximum Tk 9,50,000 Benefits No processing fee No extra cost for loan takeover No processing fee for additional loan 1% reduced from City Solution interest rate

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4.8 Notes to the Financial Statements for the year ended 31 December, 2009
Loans and advances/investment Loans, cash credits, overdrafts etc Inside Bangladesh Secured overdraft Quard against TDR Cash credit Loans (General) House building loans Loans against trust receipt Loans against imported merchandise Payment against document Consumer credit scheme Lease finance / Izara Hire purchase shirkatul melk Industrial credit Export development fund Staff loan City card loans* Small and medium enterprise loans Transportation loans Bai-muajjal City Drive City solution City Express Margin Loan Other loans & advances Total= 2009 Taka 618,731,160 6,663,470 5,627,633,155 19,159 219,588,715 6,576,333,532 132,150,205 381,743,838 10,986,993 218,306,424 178,173,575 15,462,923,707 121,313,714 994,366,048 858,581,628 2,128,644,902 337,975,974 307,255,654 449,051,298 3,283,111,540 1,251,561,819 1,854,171,212 925,962,807 41,945,250,529 2008 Taka 1,859,298,145 6,864,063 5,403,424,164 19,356,308 21,876,648 227,201,747 5,663,678,651 377,982,013 832,998,474 19,747,821 210,776,595 266,798,351 12,212,829,187 102,854,826 884,944,291 539,324,510 571,405,230 392,471,080 302,079,587 119,703,270 914,122,102 166,491,108 1,310,517,973 32,426,746,144 Growth Rate % 0.99% -809.90% 0.99% -1140.85% -0.03% 0.14% -1.86% -1.18% -0.79% 0.03% -0.49% -99.67% 0.89% -0.03% 0.15% -0.69% -0.28% 0.33% 0.96% 0.27% 0.91% -0.42% 0.23%

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4.8.1 Pie-Chart
Loans against imported merchand ise 0%

200 9
Loans against trust receipt 0 %

House building loans 0 % Oth er loan s 0%

Loans (General) 100%

Margin Loan 0 %

Other 0%

City card loans 0 %

Staff loan 0 %

Transporta tion loans 0% Small and medium enterprise loans 0%

4.8.2 Definitions
Hire Purchase under Shirkatul Melk For financing procurement of capital machinery

Small & Medium Enterprise (SME) Banking


SME Banking of City Bank is assuming a new and modern dimension. It is entering in to a wider horizon. The philosophy of extending banking services to SME's of the country is to meaningfully push every one of them up to the next level of respective business operations. The upward push would be meaningful as they would be business wise competitive for a sustainable future. It is therefore would be turning in to an abode of SME's to grow to the next level. Hence, the bank has named it City Business - for taking SME's to the next level. For the first time in the history of City Bank, SME Banking business processes are going to be driven thru a centralized platform model. This is a fundamental move away from a 25 years legacy system of decentralized geography based branch banking model. City Muldhan SME business in Bangladesh mostly requires active financial / banking support for their business to grow. To cater various such needs of different trade related business , very soon in July , 08 The City Bank is going introduce a complete tailor made package which surely will meet your specific financial needs and services.

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Features Loan amount ranging from Tk. 500,000 to Tk. 40,00,000 Competitive interest rate. Flexible security arrangement. Complete business solution. Considerations of cash transactions besides bank statement. Quick approval process. City Bank SME Loan for Woman City Bank Ltd launched City Nokshi, the bank's SME loan product tailor-made for women entrepreneurs. K Mahmood Sattar, managing director and chief executive officer of the bank, launched the product at a ceremony in Dhaka, where Rehana Rahman, president of the Women Entrepreneurs Association of Bangladesh, was present as chief guest. The bank has set a 10 percent interest rate a year on the gender-specific loan in line with the guidelines of Bangladesh Bank. It will be available at SME outlets of the bank, where a client can apply for loans of up to Tk 25 lakh. At the ceremony, Kabita Begum, proprietor of KB International, received the first offer letter from the CEO of the bank. "The new loan product is aimed to promote the prospective women entrepreneurs to explore their potentials in the business industry," the bank said in the statement. City Sheba To facilitate different concerns engaged in service related industry, The City Bank is going to introduce a customized product naming City Bank Sheba. The product will positively satisfy different business related needs of the clients involved in different service sectors. Features Loan amount ranging from Tk. 500,000 to Tk. 40,00,000 Competitive interest rate. Flexible security arrangement Quick approval process. Considerations of cash transactions besides bank statement.

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City Shulov A unique product to facilitate concerns engaged in manufacturing business. The product will facilitate to meet up diversified needs to different manufacturing concerns. Features Loan amount ranging from Tk. 500,000 to Tk. 40,00,000 Competitive interest rate. Flexible security arrangement Quick approval process. Considerations of cash transactions besides bank statement. City Munafa There are around 106,000 Small and Medium Enterprises in Bangladesh according to a market survey. Based on the estimate, there is a total funding requirements of BDT 200 Billion. A lot of banks are financing for their working capital, fixed asset purchase and other business purposes through complicated or less friendly credit analysis methods by taking land or building as primary collateral. City Bank, as specified in its Small and Medium Enterprise financing policy, would like to offer simply structured, process based, yet risk mitigating banking product to the SMEs. CBL MUNAFA has been designed based on the above objectives to achieve. "MUNAFA" is a terminating loan facility (EMI based) for working capital, fixed asset purchase, or any other business purpose. Bank would finance against net cash flow of the socio economic entity derived from cash flow of any creditworthy business and secure the lending against lien of CBL fixed deposit amounting 50% of loan volume. The product will allow the bank to capture the existing market opportunity. City Nokshi Women are no more belong for household activities only. Rather their movement started shifting toward ruling nation, leading corporate office, developing as business think tank. In all over the world for the last decade women has proved their capacity and entrepreneurship skill in their respective arena. The state and Bangladesh bank feel to give a comfortable ground for the development of the women in the business entity and are encouraging and inviting the financial facilitators to extend their hands. There are thousands women especially in handicrafts, boutique, agro based industry, beauty parlour, readymade garments, creative works, interior design, entertainment market etc keeping their superb contribution. That's why City Bank introduces City Nokshi an exclusive SME financial facility for women entrepreneur. City Khamar City Khamar is the loan product to assist the growers who are involved in fish and poultry production. Fish & poultry industry has become one of the advance industries in the past decade and many of our growers shifted their focus from crops to fish & poultry production because of scarcity of natural fish & meat to meet the high demand. City Khamar boost this industry in producing more fish & Poultry to meet our demand

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City Jontropati City Jontropati is aimed to facilitate the farmers to produce different agro based machinery and equipment for their irrigarion and cultivation. Production of modern cultivation is heavily dependent on availability facility of equipment and machinery for irrigation and cultivation. This loan product will help the farmers to buy these equipment for cultivation process. City Shossho Agricultural is the main artery of the nation like Bangladesh. More that 80% of our citizen still depends on agriculture. Agro based products are no more restricted to just producing paddy. The scope of agriculture has been spread from crops to livestock, livestock to fisheries, fisheries to fruit cultivation etc. Till date rice is our staple food and we do have heavy dependency on potato, vegetable, fish, live stocks, fruits etc. In absence of adequate production of all these necessities, we need to live on imported crops and cost of living ultimately goes up and a huge stake of our population is simply lives very hard life because of crisis of the necessities. Private sector facilities are invited to take part in the development of this agro based industry to avoid the deadly sufferings of crisis and City Bank has come forward to accept the call and introduced City Shossho to facilitate rural agricultural development. City Livestock City Livestock is the loan product to assist the persons involve in farming livestock in different areas in the country. Livestock has a huge demand in our country for our food, milk and cultivation as well. The raw hide of the livestock is also highly demanded for the leather industry. As we cant meet our domestic demand of milk and meat from our local sources, we are hugely dependent in import for livestock products. City Livestock has been aimed to facilitate the people who are involved in livestock business in the country.

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4.9 Notes to the Profit & Loss Account for the year ended 31 December 2009:

Interest income / profit on investment Loans (General) / Musharaka Loans against imported merchandise / Murabaha Loans against trust receipts Packing credit Interest on EDF House building loan Industrial credit Transport loan Lease finance / Izara Demand loan Payment against documents Cash credit / Bai-Muajjal Hire purchase shirkatul melk Fully and partly secured overdraft Consumer credit scheme Interest on SME Staff loan Documentary bills purchased Interest income from credit card Interest on cash incentive Other loans and advances / Investments Total interest / profit on loans and advances / investments Interest / profit on balance with other banks and financial institutions Interest on call loans Interest received from foreign banks Total=

2009 Taka 1,566,130 6,471,996 993,968,852 6,661,187 787,391 25,571,690 1,837,949,928 55,426,029 30,577,432 111,151,454 49,065,548 700,581,691 22,233,076 159,484,034 1,735,028 187,717,577 56,588,719 212,146,527 137,305,990 182,776 42,507,554 374,073,477 100,224,303 55,587,947 915,723

2008 Taka 2 ,953,119 31,196,453 531,905,006 17,091,792 154,465 33,694,650 65,841,013 28,942,397 202,085,213 54,347,021 820,188,537 4 ,863,604 359,159,125 5,620,237 83,779,832 46,037,035 253,318,311 84,082,652 4,679,112 73,122,128 4,263,284,463 368,624,725 30,244,151 7,217,035 4,669,370,374

Growth Rate (%) -0.89% 4.82% 0.46% -1.57% 0.80% -0.32% -0.19% 0.05% -0.82% -0.11% -0.17% 0.78% -1.25% -2.24% 0.55% 0.19% -0.19% 0.39% -24.60% -0.72% -10.39% -2.68% 0.87% -5098.11%

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4.9.1 Pie-Chart 2010


5% 26 % -55% 2 % - 1% 2% 1% -4% 4% Musharaka Murabaha Loans against trust receipts House building loan Transport loan Demand loan Staff loan Other loans and advances profit on loans and advances

4.9.2 Definitions
Trade Finance City Banks trade finance is tailored to meet the individual needs of your business. We can help even if your company has limited unstructured credit lines, due to reasons such as limited financial resources or sudden spike requirements. Thats because our risk evaluation focuses more on your performance track record, existing performance and collateral valuation.

Imports:
Letter of Credit When buying goods from overseas suppliers, you will wish to receive the goods as ordered in the right quantity, on time and at the designated place. You will also wish to make payments only after receipt of the required documents including the title of goods. We can solve your needs by issuing a documentary credit on your behalf. A documentary credit is our Bank's guarantee of payment for a shipment of goods against specific documents as stipulated on it. By using a Letter of Credit, we will only make payment after receipt of titles and other documents that should fully comply with the terms of the credit. You can enjoy a safer and cheaper alternative to making advance payment or deposits. Back-To-Back Letter of Credit If you are an intermediary and your supplier wants to sell on documentary credit term only, you may apply for the issuance of a Back-to-Back Letter of Credit from us against the export Letter of Credit.

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A Back-to-Back Letter of Credit is issued against the export credit (the master credit), but the terms and conditions may not the same as the export credit. You must submit your own draft and invoice, together with the other shipping documents presented by your supplier to secure payment under the export credit. After processing, you will have the export proceeds to pay your supplier and the balance credited to your account. Deferred Letter of Credit ADC which allows the nomination of a bank, or the issuing bank to effect payment against stipulated documents at a maturity date as specified or determinable from the wording of the credit. With this you are able to receive the goods now and pay later. Import bills for collection By informing your supplier to send their shipping documents to City Bank, you will enjoy prompt advice upon our receipt of documents and efficient payment according to your instructions. Shipping Guarantee To operate your business efficiently, it is vital your goods be cleared expeditiously. By issuing a shipping guarantee in the shippers favor, City Bank facilitates prompt clearance of goods until a bill of lading is received. Import Financing City Bank will be able to provide financing solutions to pay for the suppliers documents under letter of credit or import collections. Open account invoice financing is also available. Performance bonds and other guarantees City Bank offers tailored solutions to meet your entire performance bond and guarantee needs.

Exports:
If you are in the export business, we can help you with Export L/C advising, L/C Safekeeping, L/C Confirmation, L/C Checking and Negotiation. For financing solutions, tap on to Pre-shipment Export Finance, Export Bills for Collections, Invoice Financing. Outsource your administrative functions to City Banks document preparation service. Export letter of credit advising Benefit from prompt advising of export letter of credit from a wide international network through City Bank. Export letter of credit safekeeping Rather than be inconvenienced by having to come to the bank to collect your export letter of credit, City Bank will safe keep your original and send you a working copy to facilitate the preparation of documents. Export letter of credit confirmation Exporters may deal not only with unknown foreign buyers, but also with their banks which are less well known institutions and whose letter of credit (LC) may not be sufficient comfort. By requesting City Bank to confirm your export LCs, you obtain our guarantee of payment for document presented in compliance with the credit.

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4.10 Notes to the Financial Statements for the year ended 31 December 2010
Loans and advances/investment Loans, cash credits, overdrafts etc Inside Bangladesh Secured overdraft Quard against TDR Cash credit Loans (General) House building loans Loans against trust receipt Loans against imported merchandise Payment against document Consumer credit scheme Lease finance / Izara Hire purchase shirkatul melk Industrial credit Export development fund Staff loan City card loans* Small and medium enterprise loans Transportation loans Bai-muajjal City Drive City solution City Express Margin Loan Other loans & advances Total= 2010 Taka 337,433,410 7,387,500 8,565,062,907 122,103,113 6,375,685,728 76,390,148 255,589,655 1,548,018 108,382,535 29,396,475 13,707,597,645 749,127,326 1,109,121,666 2,665,822,197 3,813,462,872 348,746,253 22,954,462 720,391,252 5,055,363,978 2,450,005,817 9,370,319,953 55,891,892,910 2009 Taka 618,731,160 6,663,470 5,627,633,155 19,159 219,588,715 6,576,333,532 132,150,205 381,743,838 10,986,993 218,306,424 178,173,575 15,462,923,707 121,313,714 994,366,048 858,581,628 2,128,644,902 337,975,974 307,255,654 449,051,298 3,283,111,540 1,251,561,819 1,854,171,212 925,962,807 41,945,250,529 Growth Rate (%) -0.83% 0.09% 0.34% -0.79% -0.03% -0.73% -0.49% -0.69% -1.01% -5.06% -0.13% 0.84% 0.11% 0.67% 0.44% 0.03% -12.39% 0.38% 0.35% 0.48% 0.90% 0.25%

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4.10.1 Pie-Chart 2010


House building loans

24 % 1 % 12% 18 %

21 % 20 %

Loans against trust receipt

1%

Loans against imported merchandise Staff loan City card loans

3%

Small and medium enterprise loans

4.10.2 Definitions:
Structure Finance A leading provider of cost-efficient, lease-based and asset-based financing solutions to businesses in Bangladesh, we can create and tailor the right structured solutions for your business needs in order to enhance shareholders wealth and your market competitiveness. These solutions include: Structured financing solutions Principal to principal structured capital market transactions optimizes investment returns and reduces effective funding costs. Syndications This normally involves getting a group of banks together (forming a syndicate) to provide the loan amount required by the customer under a set of common terms and conditions laid down in a loan agreement. Choose City Bank and you gain access to full loan origination, distribution and trading capabilities, together with an unrivalled ability to match lenders and borrowers. Our leadership position and world class distribution capability result from the teams ability to read the market, and to provide superb sell down coverage. Local know-how Our intimate knowledge of the diverse industries as well as understanding and working with regulatory bodies, means we can provide you with a solution designed solely to meet your needs. We also partner our clients to arrange syndicated loan facilities for project finance, aircraft finance, structured trade and acquisition financing including leveraged buy-outs.

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We have been successful in loan capital raisings for financial institutions, real estate development, hotels, telecoms, institutional banking and finance, public utility, oil and petroleum, light manufacturing and food sectors. Project Finance City Bank has been very active in the Project Finance. Our project financing solutions mitigate sponsor exposure to project risk enhance use of leverage to increase project returns by lowering the weighted average cost of capital provide access to significantly longer tenor debt financings Create optimum financing structures (source of debt, currency, derivatives) that take into account your companys particular capital needs as well as industry specific issues. Lease and Long Term Loans We can customize a Term Loan or Lease to finance the fixed assets that your business needs (such as land, new premises, equipment and machinery). It may be a greenfield project or an expansion of an existing plant, that may be financed at competitive floating rate of interest. Foreign Exchange Foreign Exchange market is known as the market in which currencies are traded. The forex market is the largest, most liquid market in the world with an average traded value that exceeds $1.9 trillion per day and includes all of the currencies in the world. The volume of this market is increasing continuously. There is no central marketplace for currency exchange; trade is conducted over the counter (OTC). The international forex market is open 24 hours a day, five days a week, and these currencies are traded worldwide among the major financial centers of London, New York, Tokyo, Zrich, Frankfurt, Hong Kong, Singapore, Paris and Sydney The forex is the largest market in the world in terms of the total cash value traded, and any person, firm or country may participate in this market. Deposit City Bank offers a wide variety of deposit products to meet your financial needs. From current and savings accounts to Fixed Deposits and Deposit Schemes each account is designed to give you the best value for your money. Please take a closer look at all the deposit products of City Bank has to offer and then visit any of our branches close to your location.

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4.11 Notes to the Profit & Loss Account for the year ended 31 December 2010:
Interest income / profit on investment Loans (General) / Musharaka Loans against imported merchandise / Murabaha Loans against trust receipts Packing credit Interest on EDF House building loan Industrial credit Transport loan Lease finance / Izara Demand loan Payment against documents Cash credit / Bai-Muajjal Hire purchase shirkatul melk Fully and partly secured overdraft Consumer credit scheme Small and Medium Enterprise Staff loan Documentary bills purchased Credit card Cash incentive City Drive City Solution City Express Double Loan Corporate Express loan Short Term Loan Export Margin loan Other loans and advances / Investments Total = 2010 Taka 5,565,867 713,209,769 9,617,919 4,146,492 17,635,716 1,882,002,794 47,977,643 31,233,834 62,572,150 23,911,809 641,311,806 5,158,161 49,194,841 583,938 409,342,077 53,958,614 260,860,315 371,394,709 1,090,492 91,518,226 754,964,347 191,721,552 201,689 503,622,823 182,454 439,057,220 32,342,563 6,604,379,820 2009 Taka 1,566,130 6,471,996 993,968,852 6,661,187 787,391 25,571,690 1,837,949,928 55,426,029 30,577,432 111,151,454 49,065,548 700,581,691 22,233,076 159,484,034 1,735,028 187,717,577 56,588,719 212,146,527 137,305,990 182,776 42,507,554 374,073,477 100,224,303 55,587,947 915,723 5,170,482,059 Growth Rate -0.16% -0.39% 0.31% 0.81% -0.44% 0.02% -0.15% 0.02% -0.78% -1.05% -0.09% -3.31% -2.24% -1.97% 0.54% -0.45% 0.19% 0.63% 0.83% 0.54% 0.51% 0.48% 0.87% 0.97% 0.22%

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4.11.1 Pie-Chart 2010


Demand loan 18 % Staff loan 11 % Margin loan 21 %

Transport loan 4 %

Oth er 54 %

House building loan 10 % Loans against trust receipts 9 % Muraba ha 4 %

Other loans and advances 23 %

4.11.2 Definitions City Foreign Remittance


By your side - all the way The city Bank's Foreign Remittance unit meets growing customer needs for fast, sucure & easy money transfers to an extensive range of destinations. Being a committed bank to its customers, we go all the lengths to remit your hard earned money safely to your loved ones. With us, apart from a range of high-class modem remittance solutions, you will get peace of mind which we believe counts to most. Facility City Bank Limited has 83 online branches across the country, Besides, the Bank has a storng remittance network with other major banks of the country. Therefore, wherever your account is, we are able to send your money instantly. If you are a City Bank account holder, then please visit any of our branches. Our Foreign remittance service personnel will be there to help you out. If you are not an account holder, then please open an account of your choice with us to receive your remittance at earliest convenience. CBL understands the value of your precious time. That's why have made the payment procedure simple & easy. You have the privilege of enchashing the remitted money instantly from your branch counter without going through any hassle. That is to say, if you are an account holder of City Bank, we can instantly credit the money to your account or pay cash to the receiver. So, place your trust with City Foreign Remittance Service. Send your money to your loved ones & expreence peace of mind

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Short / Mid-term Financing


Short Term Financing As the responsive player in market, you may anytime need fund to utilize for a very short time due to either emergency or short term projects. In such case, City Bank is there to facilitate you. This can be a Short Term Loan or a Short Term Revolving Loan. You can get it either for your inland business or cross-border payment in foreign trade. Mid Term Financing City Bank can also equip you the required fund for a longer period. If you worry about fund requirement for a bit longer, City Bank Term Loan will make you feel confident that, you got a friend for this.

Working Capital Finance


Overdraft A convenient and flexible form of short-term financing for routine operating expenses and overheads of your company. Guarantees and Bonds City Bank issues a full range of Performance Guarantees, Advance Payment Guarantees, Financial Guarantees and Bid bonds for supporting the underlying business of our customers.

4.12 Disbursement Situation


The bank has many loans from the beginning of the bank. The total disbursement of Loan within 2008 to 2010 from this bank is given below: Year Total no of Loan 2007
12502840

2008
70783441

2009
2587345878

2010
3075736836

Loan Disbursement over years


Total no of Loan

2010 2009 2008 2007 70783441

3075736836 2587345878

12502840

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CHAPTER FIVE: FINDINGS & SUGGESTIONS

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5.1 Findings:
First, this is to be remembering that it is not a research report. Therefore, the report covers an existing banking system that has been observed in the last twelve weeks. The findings of this report describe the tasks that take place in the Credit division of CBL. Here I mainly focused on the problems of the credit division of the bank these findings are completely from my personal point of view. Those are given below:

5.1.1 Major Problems


a) Highly Centralized Lending Authority: One of the major problems of The City Bank Limited is its highly centralized lending authority. Market environment is becoming highly competitive as well as volatile, which requires instant decision making to exploit business potentiality. In spite of globalization of economy, business opportunity on region basis also has been created which demands decentralized making process. b) Highly Subjective Judgment in Lending Decision Making: Another major problem of The City Bank Limited is using highly subjective judgment in lending decision-making. Due to lack of forward looking structuring policy banks resort to subject to judgment based on current situation. c) Concentration of Loans: CBL provides sophisticated services to their big corporate clients mainly. They need to introduce many innovative & enterprising schemes to support small investors. d) Lengthy Time: As the process of sanctioning loan takes a long time to processing. It sometimes creates bad impact in market. Many clients are switching to other banks to reduce this processing hour. e) Overvaluation of Securities: Sometimes the employee to unlawfully help the client deliberately overvalues the securities taken against the loan. As a result if he fails to repay the loan, the Bank authority cannot collect even the principal money invested by the selling those assets. In addition, a very important factor leads to loan default. a) Lack of all Update Products: Lack of all update products in all branches is also a drawback of the Credit Department area of the CBL. The bank provides only some limited traditional services in some branches and most of their services are Head Office Oriented. But their competitor Eastern bank limited (EBL), Dhaka Bank, Citi NA. All introduce new type of product into the market. To compete in the market they should introduce new type of product into the market.

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b) Large Spread Between Deposit & Advance Rates: The large spread between deposit & advance rates is indicative of weak competition in the banking sector that can be attributed to the oligopolistic pricing policy of the banks in determining their lending rates.

5.1.2 Minor Problems


Usually Banks are responsible to provide loan to those who are eligible for the loan. However, in reality, small investors do not get the loan easily. They have to fulfill more terms & conditions than those who have greater influence in the business community. Political influence is one the major problems in Bangladesh. Due to political influence bank has to provide loans in most of the cases, which are rarely recovered. The banking system is impaired by a web of weak balance sheets, weak demand from credit worthy borrowers & heavy reliance on liquid asset-based lending. Despite market reforms, such as the liberalization of interest rates, govt. continues to encourage its own banks to lend to 'sick' industries, both public & private. From where there is very keen possibility to get return. These cause a great hamper in the lending. Because of the legal loopholes & lengthy court procedures, involved in loan disputes, the banks tend to pass on the cost of probable loan defaults to the borrowers. All these reasons explain the wide spread between deposit rates & lending rates. The counter service is sometimes unsatisfactory because of not having enough employees for the counter sector. The project appraisal unit is run by only one person (AVP) for last six month. But the bank management does not employ a new person there that hampers the corporate project visit and call report.

5.1.3 Suggestion
To have a well functioning financial system it is absolutely essential to have a sound and efficient banking sector. As the government has recognized the banking sectors problems are deep rooted and well required time and fiscal resources to resolve. Rules and regulation should be implemented on an urgent basis to create a healthy banking sector. Firstly, for the meaningful reforms in the banking sector and it continued progress, first and foremost requirement is firm internal commitment of the management of CBL. Secondly, Diversification of the loan portfolio is, of course, the key to lowering overall credit risk. Default risk can be lowered through diversification of credit programs at each and every corner of the economy as best as possible. So the CBL should diversify the loan portfolio to reduce risk.

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Thirdly, The City Bank Limited should be enforced to expand its activities and loan programs in the rural areas to serve the national interest. Fourthly, for ensuring competition on the banking sector, the prime necessity is to increase the efficiency of the employees for which the requirements are Nominate those in the management who has social acceptability and efficiency beyond the any doubt. Rationalize and increase the efficiency of manpower and prevent illegal activities. Fifthly, for recovering the defaults loans the requirements are Quicken legal forces Formulation of loan worked out department or problems loan handling department in the individual department. Establishment of effective HRD. Sixthly, For effective and quick enforcement of legal system related to banking, the requirements are: Improvement in overall law and order situation Findings out means for stopping frequent stay order by the courts Extending cooperation to loan defaulters by the administration should be stopped Providing severe punishment to corrupt employees. Ensuring ethical standard and effective cooperation among employees. Changes in banking policies will not suffice the purposes unless it is followed by a change in the attitude and outlook of both the customers and the bankers. Seventhly, for making the supervisory system of Head Office more intensify and effective the requirements include Keeping Head Office and Directors free from all sorts of influences and rationalizing and increasing the efficiency of the manpower. Eighthly, More ICT based product For the matter of survival in the competitive world market, the expansion of banking automation and ICT based product are very necessary. Though CBL has already achieved the credit for better the asset quality. But this sector is most vital part for better performance of any bank. That is why CBL should give more emphasis in this sector and cautious, so that huge amount of asset would not be classified. For strengthening the banking system, a number of accounting, supervisory and management oriented reform measures were undertaken. Among them, loan classification and capital adequacy are most important. These two measures are important preconditions for ensuring safety and soundness of the banking system. It has been mentioned that the loan classification norms have already been raised to international standard.

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There are various reasons for loan default problems: lack of loan screening skill, lack of accountability on the part of bank officials, high loan price, risky economic environment, etc. Among all these, corruption and lack of ethics on the part of concerned stakeholders are also important. For the recovery of default loan, the main hindrance at this moment exists legal framework and its lengthy procedure. It has already been mentioned that for bringing dynamism in the enforcement of legal framework, a number of new Acts have been enacted and old Acts have been amended. The role of banking automation and information technology is considered very important not only for Human Resources Development but also for surviving the competition and expanding the financial market. Information and communication Technology penetration in the banking sector is very poor.

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CHAPTER SIX: RECOMMENDATION & CONCLUTION

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6.1 Recommendation:
The interest rate in The City Bank Limited is now 18%, which is very high for the customers. Interest rate3 should be reducing. The disburse time in the City Bank Limited is very time consuming. It should be reducing and the customers should get their service at a minimum. The application process time is very lengthy. The time required for the applications should be reducing. The employees of RFC should be more cooperative with the customers especially the MIS sector over phone when applicants are looking for the necessary information. Sales team should be training to increase the efficiency. Debt burden ratio should be relaxed especially in case of highly potential and successful business personnel. The early settlement fee and processing fee should be reducing.

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6.2 Conclusion
CBL is a first generation bank in the private sector and the first bank to register as private commercial bank. This bank remained profitable at the early stage of its operation but last one decade it declared as problem bank by Bangladesh Bank for its huge provision shortfall, negative capital adequacy, poor asset quality etc. However, under the leadership of present Managing Director, CBL started to revive its position in the market through diversifying its product line, strict supervision and monitoring of loans & advances. Last two year it came out from problem bank. The Bank has also overcome its main drawbacks in shortfall in capital provisioning. Having strong liquidity and wide network of branches the bank management aims to attain its target to become one of the well performing banks of the country. This is to a great extent depends on achieving business growth with asset quality. Banks are the mainstays of the financial system of a country like Bangladesh. Because of close relationship between economic and financial development, the banking system must be made robust, resilient and sound for efficient intermediation of financial resources. For that reason sound economic environment, effective bank management strategies and prudential financial regulations are essential. Continuous support and patronage extended by valued clients, shareholders, sponsors, business associates and well wishes played a vital role in achieving the results. The Board of Directors expresses thanks and gratitude to all concerned. The Directors also acknowledged with gratitude the valuable guidance and co-operation received from the Ministry of Finance, Bangladesh Bank and Securities & Exchange Commission. The Directors place on record their deep appreciation for the dedicated services rendered by the executives, officers and staff members of the Bank. I as an employee of CBL express my firm commitment in achieving our mission and convert our vision into reality.

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BIBLIOGRAPHY

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References:
Annual report of The City Bank limited. From Year 2010, 2009, 2008 Introducing City solution and city drive-Lifestyle loan from city Bank Ltd Retrieved November 15, 2011, from https://www.thecitybank.com.bd/retail_banking.php https://www.thecitybank.com.bd

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ACRONYMS
AD APG CC CD CFC DD EPS ERC FBP FDBC FDBP IBC IBCA IBDA IBP IDBP LIM LTR L/C CBL OBC PAD PC PG Authorized Dealer Advance Payment Guarantee Cash Credit Current Deposit Consumer Finance Scheme Demand Draft Earnings per Share Export Registration Certificate Foreign Bill Purchase Foreign Documentary Bills Collection Foreign Documentary Bills Purchase Inward Bills for Collection Inter Branch Credit Advice Inter Branch Debit Advice Inward Bill Purchase Inland Documentary Bill Purchase Loan Import Merchandize Loan Trust Receipt Letter of Credit The City Bank Limited Outward Bills for Collection Payment against Document Packing Credit Performance Guarantee Page 89

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PO ROA ROE SB SBS SOD SSC STD SWOT TIN TR

Pay Order Return on Assets Return on Equity Saving Deposit Schedule Bank Statement Secured Over Draft Specimen Signature Card Short Term Deposit Strengths, Weakness, Opportunity, and Threats Tax Paying Identification Number Trust Receipt

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Balance Sheet Profit & Loss Account Cash Flow Statement


For the year ended 31 December, 2010

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Balance Sheet as at 31 December, 2010


Property & Assets Cash In hand (including foreign currencies) Balance with Bangladesh Bank and its agent bank (s) (including foreign currencies) Balance with other banks and financial institutions In Bangladesh Outside Bangladesh Money at call and short notice Investments Government Others Loans and advances / Investments Loans, cash credits, overdrafts, etc./ general investments Bills purchased and discounted Fixed assets including premises, furniture and fixtures Other assets Non - banking assets Total assets LIABILITIES AND CAPITAL Liabilities Borrowings from other banks, financial institutions and agents Deposits and other accounts Current deposits and other accounts Bills payable Savings bank deposits Fixed deposits Bearer certificate of deposit Other liabilities Total liabilities Capital / Shareholders' equity Paid up capital Notes 3.a 2010 1,468,826,333 4,689,637,981 6,158,464,314 4 2,400,939,650 221,689,766 2,622,629,416 99,579,166 8,976,868,762 3,497,093,964 12,473,962,726 7.a 55,891,892,910 8 4,434,652,174 60,326,545,084 3,206,205,668 6,010,665,598 90,898,051,972 41,945,250,529 1,541,171,274 43,486,421,803 2,788,065,869 4,312,637,456 76,466,801,564 9,641,882,575 208,901,519 9,850,784,094 299,779,167 8,468,751,198 2,117,701,415 10,586,452,613 2009 746,634,507 4,396,026,055 5,142,660,562

5 6.a

9.a 10.a

11 12.a

2,808,272,142 15,398,511,465 656,360,770 15,045,952,603 36,318,976,892 67,419,801,730 9,151,052,310 79,379,126,182 3,888,547,200

992,651,503 7,810,690,728 696,878,540 11,377,098,331 42,499,612,403 62,384,280,002 7,225,635,781 70,602,567,286 1,571,130,000 Page 92

13.a

14.2

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Statutory reserve Share premium Other reserve Surplus in profit and loss account / Retained earnings Total Shareholders' equity Total liabilities and Shareholders' equity

15 16 17 18.a

1,977,234,036 1,924,634,700 2,291,116,401 1,437,393,453 11,518,925,790 90,898,051,972

1,377,386,294 2,340,537,297 575,180,687 5,864,234,278 76,466,801,564

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Profit & Loss Account as at 31 December, 2010


Note Interest income/profit on 22.a investments Interest / profit paid on deposits 23 and borrowings, etc. Net interest / net profit on investments Investment income 24 Commission, exchange and 25.a brokerage Other operating income 26.a Total operating income (A) Salaries and allowances 27.a Rent, taxes, insurance, electricity, 28.a etc. Legal expenses 29.a Postage, stamp, 30.a telecommunication, etc. Stationery, printing, 31.a advertisements, etc. Chief Executive's salary and fees 32 Directors' fees 33 Auditors' fees Depreciation and repair of Bank's 34.a assets Other expenses 35.a Total operating expenses (B) Profit / (loss) before provision (C=A-B) Provision for loans and advances / 36 investments Provision for Off-Balance Sheet exposures Provision for gratuity Provision for diminution in value of investments Other provision 37 Total provision (D) Total profit / (loss) before taxes (CD) Provision for Income Tax 13.a.5 Net profit after taxation Retained earnings brought forward from previous year 2010 7,089,931,344 (3,516,494,763) 3,573,436,581 2,140,001,878 1,139,637,577 447,994,360 7,301,070,396 1,649,083,246 327,023,801 12,945,518 42,222,376 273,763,962 13,320,400 937,000 906,500 352,798,408 527,830,476 3,200,831,687 4,100,238,709 (542,300,000) (100,000,000) (175,000,000) (41,600,000) (242,100,000) (1,101,000,000) 2,999,238,709 (1,150,000,000) 1,849,238,709 182,398,187 2,031,636,896 2009 5,742,821,087 (3,671,989,101) 2,070,831,986 1,325,037,780 717,020,599 254,989,978 4,367,880,343 1,194,956,965 219,124,158 10,244,829 20,587,524 186,672,739 11,304,000 536,000.0 365,750 263,055,610 205,397,136 2,112,244,711 2,255,635,632 (610,428,283) (202,151,208) (55,000,000) (867,579,491) 1,388,056,141 (569,336,541) 818,719,600 28,468,017 847,187,617 Page 94

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Cash Flow Statement as at 31 December, 2010


Note A) Cash flows from operating activities Interest receipts in cash Interest payments Dividend receipts Fees and commission receipts in cash Recoveries of loans previously written off Cash payments to employees Cash payments to suppliers Income taxes paid Receipts from other operating activities Payments for other operating activities Cash generated from operating activities before changes in operating assets and liabilities Increase / (decrease) in operating assets and liabilities Statutory deposits Purchase of trading securities (Treasury bills) Loans and advances to other banks Loans and advances to customers Other assets Deposits from other banks / borrowings Deposits from customers Other liabilities account of customers Trading liabilities Other liabilities Net cash from operating activities B) Cash flows from investing activities Debentures Proceeds from sale of securities Payments for purchases of 2010 2009

6,991,303,007 (3,369,704,276) 95,461,886 846,673,866 22,905,642 (1,566,403,647) (74,962,181) (608,718,100) 2,492,534,352 (1,237,213,568)

5,761,654,757 (3,421,229,319) 111,914,912 503,447,420 11,147,320 (1,206,260,965) (47,247,010) (575,645,186) 1,468,112,846 (720,183,186)

38.a 39.a

3,591,876,981

1,885,711,589

(16,840,123,281) (1,538,689,335) 243,164,505 6,607,977,863 (43,271,970) (11,570,942,219) (7,979,065,237)

(9,065,476,823) (575,995,727) (91,755,780) 16,227,141,760 (117,491,357) 6,376,422,073 8,262,133,663

40.a

(1,379,392,549)

(651,612,362) Page 95

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securities Purchase / sale of property, plant and equipment Payment against lease obligation Proceeds from sale of property, plant and equipment Net cash used in investing activities

(644,392,091) (2,023,784,640)

(138,553,550) (790,165,912)

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THE END

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