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Term Paper
on
Loan Services of Commercial Banks of Bangladesh: A Case
Study on Three Selected Banks
Submitted To:
Mr. Fuad Hasan
Lecturer
Department of Marketing
University of Chittagong
Chittagong.
Submitted By:
Moslah Uddin Ahmed
BBA (Hons.) 4th Year
Exam. Roll: 2000/53
Class Roll: 4488
Session: 1999-2000
Department of Marketing
University of Chittagong
Chittagong.

Date of Submission: December 12, 2006.

Table of Contents:
Letter of Submission......................................................................................................
Preface...........................................................................................................................
Acknowledgment...........................................................................................................
Objective of Study ........................................................................................................
Scope and Methodology of the Study.
Rationale of the study.
Limitation of the Study..................................................................................................
Part # A Exploratory findings
On National Bank
(1) National Bank at a glace ..................................................................................
(2) Procedures of giving loan by NBL...................................................................
(3) Type of loan sanctioned by NBL......................................................................
(4) Amount of loan given to different sectors during last 5
years (1998-2004). .............................................................................................
(5) Procedures of loan recovery by NBL...............................................................
(6) Classification of loan according to status of Recover.......................................
(7) Conclusion.......................................................................................................

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On the basis of HSBC


(1) HSBC at glance................................................................................................
(2) An overview of HSBC....................................................................................
(3) Terms and conditions considered for loan........................................................
(4) Different types of loan, HSBC provide for customer ...
(5) Facility for customer. ......................................................................................
(6) Classification of loan according to status of Recovery.....................................
(7) Repayment schedule for different loan.............................................................
(8) Home loan........................................................................................................
(9) Conclusion.......................................................................................................

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On Pubali Bank
(1) Introduction......................................................................................................
(2) Condition & principles of landing considered for loan. ...................................
(3) Different types of loan & advances..................................................................
(4) Facility for the customer..................................................................................
(5) Investment of fund...........................................................................................
(6) Loan Recovery Producer..................................................................................
(7) Necessary documents.......................................................................................
(8) Problem in Loan recovery................................................................................
(9) Conclusion.......................................................................................................

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Part # B
Comparative study

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December 12, 2006.


To
Mr. Fuad Hasan
Lecturer
Department of Marketing
University of Chittagong
Chittagong.
Subject: Submission of Term Paper
Sir,
With an immense pleasure, I would like to submit my term paper entitled
Loan Service of Commercial Bank in Bangladesh. A study in National
Bank, HSBC and Pubali Bank. With my limited scope and knowledge, I
have tried my best to gain practical experience and also tried to reflect the
same in report. I wish you are heartily consideration, if there is any
discrepancy in report.
I wish to thanks for your excellent co-operation, cordial guidance and
efficient direction to prepare the report successfully.
Yours Sincerely
..
Moslah Uddin Ahmed
BBA (Hons.) 4th Year
Exam. Roll: 2000/53
Class Roll: 4488
Session: 1999-2000
Department of Marketing
University of Chittagong
Chittagong.

PREFACE
Practical knowledge is required to clear views on different issues for the
BBA students. Nevertheless, we have to confess that the raw Business
Tempo is much more complex than the theoretical knowledge. The business
world is going to be more critical in this new millennium and the practical
situations are changing day by day. In developed countries, the business
schools give more preference to practical knowledge than theoretical
knowledge. Keeping this view in mind, our curriculum includes Term
Paper in the 4th year BBA as a part of the final examination.
I am the student of BBA (Marketing), which is very professional subject of
todays business world. We know todays would business activities have to
operate under the tremendous pressure of Globalization. Globalization is
the term, which refers the whole as a village. Therefore, its all business
operations go over all countries of the world. In global perspective, loan
service is the most important matter for all types of bending service.
Financial transaction is the key things in banking service. Loan is one of the
most important sectors in this perspective.
The topic on which I have prepared my term paper is Loan Service of
Commercial Bank in Bangladesh: A Study in NBL, HSBC, and Pubali
Bank. I have tried my best to state all of my activities in this report and
hope this report will help to the readers; the student of business and it will
help to enrich the seminar library of the department.
Any kind of criticism and advice for further development of the report will
be accepted cordially as a sign of recognition to me.

ACKNOWLEDGEMENT
As a student of BBA program, preparing a term paper is a new experience
for me through whom I have tried to gain practical knowledge about loan
service and management system and its practices in Bangladesh. This report
would get birth if there is no inspiration and co-operation from my teacher
and my friends.
I am expressing my heartiest thanks to those persons whose bona fide cooperation and wise suggestion helped me to prepare my Term Paper Report.
I am deeply thankful to my reverend teacher Fuad Hasan, Lecturer,
Department of Marketing for his guidance and all advices that help me to
be more formed and perfect to make the Term Paper Report. In addition, I
pay my regards to all the respected teachers and members of the Marketing
Department.
I express my sincerest gratitude to Md. Kamrul Islam, Sales Officer of
HSBC, Agrabad, Chittagong and Md. Sahadath Hossain, Member of
National Bank and also Salma Sultana, Manager, Puabli Bank, Chittagong,
to prepare the Term Paper entitled on Loan service of Commercial Bank in
Bangladesh.
I express my appreciation for all the personnel of HSBC, National Bank and
Pubali Bank, Chittagong, who provided me necessary information and
helped me in every step.

Yours Sincerely
Moslah Uddin Ahmed
BBA (Hons.) 4th Year
Exam. Roll: 2000/53
Class Roll: 4488
Session: 1999-2000
Department of Marketing.
University of Chittagong
Chittagong.

OBJECTIVES OF THE STUDY


Every research is to have some objective. However, the objectives of the
study can briefly be started as following: (i) To know about the existed service provide by the commercial bank.
(ii)To know about their product to offer the customers.
(iii)

To study the bank background and its comparative position in


service management.

(iv)
(v)

To know about the general trend in loan service.


To justify desirable attitude towards suitability of appropriate
sources of loan.

(vi)

To know about the loan system from the view point of HSBC,
National Bank and Pubali Bank.

(vii) To study how they provide different loan services to customers.


(viii) To know about the present situation of banking sector.
(ix)

Competitive technique in financial service.

(x)

To review the present position of the prescribed bank regarding the


loan recovery of the outstanding loan amounts.

(xi)

To determine the qualitative change of loan recovery position of it.

(xii) To analyze the process of loan monitoring and supervision offer


disbursement in order to recover the loan.
(xiii) To identify the default characteristics of distributed loan in
different sectors.
(xiv) To analyze the volume of loan distributed and recovered during the
period of 2001-2005.
(xv) To suggest some remedies by which it can reduce the default loan
and at the same time to take some constructive policies for it.

SCOPE AND METHODOLOGY OF THE STUDY


In order to complete the term paper I have to visit the selected enterprise that
is NB, HSBC Bank and Pubali Bank. Actually I have conducted a survey to
questionnaire method. Different statements of the published materials also
used as data. There data have been analyzed to achieve of the research.
Besides these, these, I myself asked other question to the officers and
executives and they replied the answer of that question very curtly.
I collected data from primary sources and secondary sources.
a) Primary data collected through
1. Questionnaire
2. Observation
b) Secondary data collection from
1. Internet
2. Companies all publications.
3. Newspaper.

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RATIONALE OF THE STUDY


In modern world, without lending facilities any person or any organizations
dont run his job smoothly. Capital is the blood of business. And capitals
main source is loan from different commercial bank. Among the bank which
I have chosen for my term paper, HSBC and National Bank are private Bank
and Pubali Bank is public Bank. I have gather knowledge about the
differences of loan facilities offering to the customers. And the more reasons
are pointed below:
HSBC is the largest multinational banking corporation in the world.
National Bank is the successful banking organization in our country.
Pubali Bank struggle for the long time for his existence in our country.
HSBC serves the customer worldwide basis.
National Bank offers interest on daily balance.
Pubali Bank increases the heritage of the country by doing their
business operation.

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LIMITATION OF THE STUDY


I faced some problem while to prepared my study. As my report was related
with loan service and everything on it is performed centrally in Dhaka so it
is so difficult for me to complete it accurately staying in Chittagong.
(i) Due to lack of facilities, I could not collect necessary data related to
loan system in Bangladesh about the presented bank.
(ii)The interviews were reluctant to give us enough time.
(iii)

The manager of HSBC, National Bank and Publi Bank did not give
some of their secret information. For this reason, I could not
prepare my term paper meaningfully.

(iv)

Most of the data were collected through questionnaire method. So,


the reliability of the collected data was based of the sincerity and
the cordiality of the interviews.

(v) They are reluctant to provide confidential data.


(vi)

In many cases, up to data information is not published.

(vii) Getting relevant papers and documents were strictly prohibited.

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PART # A

Exploratory Findings
ON NATIONAL BANK
INTRODUCTION
National bank is one of the renowned scheduled commercial bank of
Bangladesh. On March 23,1983 national bank limited (NBL) has started its
operation with an authorized capital of Tk. 1,00,000 million-after then it has
successfully continued its operation allover the country by its 76 branches.
During 2003 NBL earned an operative profit of taka 105 crores.

PROCEDURES OF GIVING LOAN BY NBL


NBL generally provides short-term loans to individuals and industries. Their
basic procedures of giving loans are:
Submission of application by the borrower Appraisal of the project by the bank Consideration of the bank about itself.
Consideration of the bank about the customer.
Consideration of the credit information bureau of Bangladesh bank.
Submission of Application by the Borrower
The first and foremost procedure of loan giving is the submission of loan
application by the borrower-the application must contain the amount of loan

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required, the use of the loan, the cost of the project for which loan is
required and for an industrial loan industry's annual report, balance sheet,
statement showing the recent condition of the firm must be included. With
application the security against the loan, the term or period for which loan is
required, the submission period are obviously included.
Appraisal of the Project by the Bank
Project appraisal is done by the bank by evaluating the loan application and
other statements attached with it. Each of the aspects related to project
appraisal are shown below
Technical feasibility: bank judge it by a detailed assessment of the
following factors,
Location of the project.
Technology used.
Plant & equipment.
Construction & installation.
Economic necessity: taking into account the following factors assesses this
aspect:
The response of the t about the project.
Will the project contribute to national economy?
Will the project increase the employment level?

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Financial Viability: This requires careful analysis of the following:


Cost of the project.
Sources of finance.
Debt equity ratio.
Profitability
Repaying capacity.
Repayment schedule.
Managerial competence: the loan application from concerns having
competent and honest management finds the most favorable consideration.
Consideration of the Bank about Itself
The bank advancing money looks to its position regarding liquidity, safety,
and profitability.
Liquidity: for this N.B.L. prefers short-term loan.
Safety: this includes the repaying capacity of the borrower.
Profitability: It is the most important aspect to considerConsideration of tire bank about borrower:
NBL consider the character, capacity, and capital of the borrower. Bank
collects that information from:
Internal sources: loan application, interview of the borrower, financial
statement, and banks own record.
Govt. Authority: income tax office, govt. Gazette, register of joint
stock company,

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Other Sources: Inspection of the bank, audit firm, market report, and
credit information bureau.
Consideration of the Bangladesh Bank
Bank sends all the state s to the Bangladesh bank for their consideration. The
department of credit information bureau of Bangladesh bank provides
informs anon of the borrower or company and on b of those consideration
loan is sanctioned by NBL.
TYPES OF LOAN SANCTIONED BY NBL
NBL has several loan programs or schemes for different groups of clients.
Among those following can be mentioned:
1. Working capital to trading houses
2. Import finance, export finance
3. Bank guarantee
4. Term loams for industrial unit
5. Working capital to industry
6. Micro finance
7. Procurement of consumer goods
8. Credit card
9. Contractors for construction work, e.g. building, roads, bridge etc.
10. Rural Credit in Brand area.
The loans NBL provides under those different programs are:
Loan (general)
Cash credit (hypothecation)

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Cash credit (Pledge)


Sod (secured over draft)
Pad (payments against document)
LC (letter of credit)
LIM. (loan against imported merchandise)
LTR. (Loan against trust received)
ECC (Export cash credit)
PC (personal credit)
AMOUNT OF LOAN GIVEN TO DIFFERENT SECTORS DURING
LAST 7 YEARS (1998-2004)
In below a complete date is showing the amount of loan sanctioned by
N.B.L. in different types of loans and schemes from 1998 to 2004.
Loans /
Schemes
Bank
Overdraft
Cash
credit
Loan
(general)
Real estate
loan
L.T.R.
P.A.D.
Consumer
Credit
BillsInland
BillsForeign
Others
Total

1998
3689.39

1999
4276.20

Loan amount (in million)


2000
2001
2002
5352.56 6513.94 7656.39

3965.84

4162.38

4311.45

4629.67

5193.52

5469.57

6094.51

4301.02

4290.49

4090.38

3703.78

3635.05

4171.17

3868.24

450.89

477.77

489.25

515.33

577.54

661.92

644.29

122.27
185.68
47.31

232.65
265.46
60.60

245.06
287.15
60.83

652.37
329.76
93.31

1112.90
275.05
93.71

1126.18
144.56
93.33

1870.65
313.36
98.46

506.11

713.52

723.33

1443.69

1059.17

863.84

981.61

680.21

969.37

574.34

461.88

282.24

273.78

245.05

2003
7538.76

2004
6392.86

2107.68 3064.08 2439.31 1856.89 1792.38 1918.53 2331.39


16056.40 18239.52 18553.66 20200.62 21677.95 22261.64 22840.42

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Now in below a data is showing in which sector N.B.L. Provides how


much loan (amount of loan in million)
Sectors
Agriculture
Industry
Import

1998
87.21
4048.15
1539.62

1999
103.24
4302.18
1816.17

2000
111.30
4306.91
1977.82

2001
63.26
4410.10
2737.58

2002
89.52
3403.14
3270.38

2003
111.90
4390.70
7169.13

2004
613.00
4735.11
8201.27

finance
Export

3940.53

4132.42

4917.31

4960.74

5848.76

6134.80

4969.77

finance
Others
Total

6440.89 7885.51 7240.2


8030.94 9066.15 4450.62 4321.36
10656.40 18239.52 18553.66 20200.62 21677.95 22267.15 22840.44

Loan givenby NBL during 1999-2004 (amount in million)

Amount of loan (in taka)

25000
20000
15000
amount of loan

10000
5000
0

1998 1999 2000 2001 2002 2003 2004

Financial year

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PROCEDURES OF LOAN RECOVERY BY NBL


In whatever form bank advances are granted they are repayable on demand
or at the expiry of some fixed

period. Overdrafts and cash credit are

repayable on demand. If a borrower fails to make repayment of the dues then


banks consider the steps necessary to recover the debt. Those steps are: of
the dues then banks consider the steps necessary to recover the debt. Those
steps are:
1. Exerting moral pressure.
2. Notice.
Those are discussed below:
1. Exerting moral pressure: the banker visits the borrower's place of
business and find out the causes of non-payment of the bank's dues.
The bank may also request some influential customers of the area to
exert pressure on the borrower to clear bank's dues. If is any grantor,
be is also called upon to adjust the accounts.
2. Notice: in case of borrower does not adjust the account as desired, the
only course left open to the bank would be to send a notice by
registered post to the borrower and to the grantor-in notice a stipulated
period is given for repayment of loan. If the borrower fails, bank
liquidates the securities in possible market rate either in public auction
or by private negotiation. Where intervention of the court is necessary
to dispose of securities N.B.L. obtains court's verdict.

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Recover in case of death of borrower


In the event of death of a borrower before or after filing suit or obtaining the
decree, the banker will have to proceed against the legal representative of the
deceased.
Recover in case of insolvency of the borrowed
In case of insolvency of the borrower, the property of the insolvent is taken
over by the official assignee or the official receiver. The bank also submits a
paper of debt due to the defaulting borrower to the concerned court.
CLASSIFICATION OF LOAN ACCORDING TO STATUS OF
RECOVER
NBL classified their loan in two classes according to recovery status. Those
two classes are:
1.

Unclassified loan

2.

Classified loan

Those are discussed below


1. Unclassified Loan:
The loans which are already recovered are known as unclassified loans.
2. Classified Loan:
The loan which are not recovered yet known as classified loan. They are
again sub-divided into Groups:
a. Sub-Standard Loans: These have a higher chance to recover.
b. Doubtful Loans: these have a very lower chance to recover.
c. Bad Debts: these are not recovered by bank at all.

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Unclassified & Classified loan during 1998-2002


(Amount in Million Taka)
Classes of

1998

1999

2000

2001

2002

2003

2004

loan
Unclassified 10911.93
Classified
32.04%

12439.35 12727.36 14514.11


31.8%
31.4%
28.15%

15425.66 16664.64 18851.84


28.48%
25.17%
17.46%

(%)
1.sub

730.32

518.37

317.36

475.46
3938.68
16056.4

417.88
791.43
163.02
4863.92 4575.64 5269.43
18239.52 18553.66 20200.62

459.23

254.06

488.90

262.33

standar
d
2.doubtful
3.bad debts
Total

572.18
134.65
973.00
5362.15 5404.96 3865.06
21677.95 22257.15 22840.43

A comparative chart of total loan sanction & total loan recovered by NBL
during 1998-2002 is shown below:

Comparative chart of total loan & recovered


loan
Amount (in taka)

25000
20000
15000

Total loan
Recovered loan

10000
5000

19
99
20
00
20
01
20
02
20
03
20
04

19
98

Financial year

CONCLUSION

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According to rules of Bangladesh bank the bank whose percentage rate of


classified loan is 35% and above, marked as "problem bank" which shows
the bad performance of that bank. By analyzing the above data and graphs,
we can say that the performance of NBL is quit well and their rate of
recovering of loan is increasing. Bangladesh bank has fixed a new rate of
classified loan for this fiscal year (2003-2004) and it is 20%. While talking
with NBL officials they inform us that they can be able to achieve the target
and they are now working for this purpose. Again from the amount of loan
given in the last five years we see that NBL's investment is increasing. So
evaluating all the circumstances about loan sanction and loan recovery we
can conclude with the decision that the performance of loan management by
national bank limited of Bangladesh is in a satisfactory position. And this
makes them one of the leading commercial bank of Bangladesh.

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ON HONG KONG SHANGHAI BANKING CORPORATION


(HSBC)
I
NTRODUCTION
Introductorily for decision making in any organization such as Banking
Corporation. It is one of the most difficult tasks in business fin-n. The
lender wants to charge a high enough rate to ensure that each loan will be
profitable and compensate the bank fully for the risks involved.
However, the loan rate must also be low enough to accommodate the
business customer is the loan & not be driver away to another lender or into
the open market for credit.
AN OVERVIEW OF HSBC
The HSBC group is one of the largest banking and financial service
organizations in the world, with well established business in Europe, the
Asia Pacific region, in USA, the Middle East & Africa.
It is the largest bank incorporated in the Hong Kong special
administrative region. Its head office: I Queen's Road Central, Hong Kong,
Europe's largest and the world's second largest bank by market capitalization
5th largest international firm by aggregate sales, assets, profit and market
value.
HSBC incorporated in Bangladesh in 1996 HSBC started its operation
in Bangladesh from anchor tower in December 1996.
There are 616 Branches of HSBC in the world and 5 branches in
Bangladesh. Chittagong branch is one of them. Now we discussing about

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the loan section of HSBC. HSBC has a loan section called "My loan".
Under 'My Loan' sector HSBC provide different loan the customer.
TERMS AND CONDITIONS CONSIDERED FOR LOAN
I)

Application latter from customers.

ii)

Customers should be 25 years and the loan must end before their
age reaches 60 years or retirement date, whichever is earlier.

iii) Customer should be employed in a well-established company for


2 years.
iv) Customers minimum monthly income should be BDT 18,000 if
you are a salaried individual. Self employed individuals. Self
employed individuals can also apply subject to proof of income
and the monthly income should be BDT 50,000.
v)

If customers are an Auto-pay or CEPy customer, their monthly


salary should be BDT 15,000

vi) Loan repayment are made in the from of equal monthly


installment (EMI) which can be automatically debited from
customers personal account held with HSBC.
vi) Customer has the flexibility of choosing the repayment period
(12, 24, 36, 48 or 60 installments).
viii) Partial and full prepayment is also allowed.

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DIFFERENT TYPES OF LOAN, HSBC PROVIDE FOR CUSTOMER


(A) Personal Installment Loan:
HSBC's personal loan is any purpose loan. For customer's convenience
HSBC have categorized into the following:
(1) Professional Loan
(ii) Lifestyle loan
(iii)Furniture loan
(iv) Wedding loan

(v) Festival loan


(vi) Travel loan
(vii) Motorbike loan
(viii) Student loan

A brief above these as below:


(i) Professional Loan: To meet farmer's professional needs.
(ii) Lifestyle loan: To add comport to customer's personal life.
(iii)

Furniture loan: To decorate customer's home with the right


furniture.

(iv) Wedding loan: To fulfill customer's dream of a perfect wedding


and good beginning of a new life.
(v) Festival loan: To minimize customer's purchasing power during
various festivals, a festival loan is going to be
The following loans with different benefits are also available
under personal installment loan.
(vi) Travel loan: To meet the travelers necessity.
(vii) Motorbike loan: Motorbike loan increase customers purchasing
power.
(viii)
(B)

Student loan: To meet student's requirement.

Car Loan: Car loan giving facility to the customer to buy car.

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(C)

Home Loan: To buy or renovate a home. This loan is given after the
construction of home.

FACILITY FOR CUSTOMER


Customer will be able to take the pleasure of the following benefits by
availing any of these loans.
1. No personal guarantee or each security.
2. In case of professional loan, lifestyle, furniture and weeding
loan, the amount ranges from BDT 50,000 to BDTI 10,
00,000 or maximum of tour times of monthly income,
which is lower. Loan amount ranges from BDT 50,000 to
BDT 5, 00,000 for travel loan, BDT 50,000 to BDT 2,
00,000 for Motorbike loan.
BDT 50,000 to BDT 7,50,000 for student loan or a maximum
of tour times of monthly income, whichever is lower.
The loan amount ranges from BDT 1,00,000 to BDT
8,000000 for car loan (up to a maximum of 75% for brand new car or 70%
for reconditioned car value)
Loan size between a minimums of BDT 750,000 and
maximum of BDT 10,000,000 for home loan. A maximum loan amount of
70% of the total value of the apartment of 70% of the land value for
renovation.
3. In case of auto pay CEPZ customers they can get 6 times &
then times of their monthly income respectively
4. Competitive interest rates
5. Low processing fees.

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6. Customers can repay the loan in 12, 24, 36, 48 or 60


months.

In case of home loan repayments by equal

installments of up to 15 years.
CLASSIFICATION OF LOAN ACCORDING TO STATUS OF
RECOVERY
Classification of loan according to status of recovery.
Unclassified and classified loan
2001-2005 (In Tk.)
Class

of 2001

loan
Unclassified 24999

2002

2003

2004

2005

309993

379936

449927

5999056000.00

Classified

370000.00
.05%

7500.00
.05%

0000.00
.03%

0000.00
.02%

.02%

(%)
1.Sub

4,00,000.00

5,00,000.00

4,50,000.00

5,00,000.00

6,00,000.00

2,00,000.00
30,000.00
450,00,00,000

3,00,000.00
44,000.00
600,00,00,000.00

standard
2. Doubtful 2,00,000.00
1,00,000.00
1,50,000.00
3. Bad debts 30,000.00
25,000.00
40, 000.00
Total
250,00,00,000 310,00,00,000 380,00,00,000

REPAYMENT SCHEDULE FOR DIFFERENT LOAN


Personal Installment Loan:
Loan amount 12 Months 24 Months 36 Months 48 Months 60 Months
50,000
4,549
2,461
1,1771
100,000
9,097
4,921
3,5411
150,000
13,646
7,381
3,511
200,000
18,194
9,841
7,622
300,000
27,291
14,681
10,622
400,000
36,388
19,681
14,162
11,439
500,000
45,484
24,602
17,703
14,299
12,293
650,000
59,129
31,982
23,013
18,589
15,980
750,000
68,226
36,902
26,554
21,448
18,439
1,000,000
90,968
49,203
35,405
28,598
24,585

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Interest rate: 16.5%


For CEPS/Auto Pay / Customer
Loan amount 12 Months 24 Months 36 Months 48 Months 60 Months
50,000
4,490
2401
1709
100,000
8,979
4802
3418
150,000
13,469
7202
5127
200,000
17,958
9603
3836
300,000
26,937
14404
10254
400,000
35,915
19206
13672
10931
500,000
44,984
24007
71089
13664
11635
650,000
58,362
31209
22216
17763
15125
750,000
67,341
36010
25634
20495
17452
1,000,000
89,788
48013
34178
27327
23269
1,250,000
112,234
60017
42723
34159
29086
1,500,000
134,681
72020
51267
40990
34903
2,000,000
179,575
96026
68356
54653
46537

28

HOME LOAN
Monthly installments in BDT @14.25% (annual reducing balance)
Loan amount
750,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
7,500,000
10,000,000

5 years
18315
24420
36630
48840
61050
73259
85469
97679
109889
122099
183148
244197

7 years
14687
19582
29373
39163
48954
58745
68535
78326
88117
97907
146861
195814

10 years
12100
16133
24199
32265
40331
48397
56464
64530
72596
80662
120993
161323

12 years
11164
14885
22327
29769
37211
44653
52095
59537
66979
74421
111632
148842

15 years
10304
13738
20607
27475
34344
41213
48081
54950
61819
68687
103031
137374

It is calculated under the annual reducing balance method.


Monthly installment for a loan of BDT 4,000,000

Loan Term

5 years
7 Years
10 Years
12 Years
15 years

Monthly Reducing
Total
At 14.00%
Payme
with
nt
HSBC
HSBC
(BDT)
(BDT)
93074
5584440
74961
6296724
62107
7452840
57486
8277984
53270
9588600

Annual Reducing
Total
At 14.25%
Payme
with
nt
others
Others
(BDT)
(BDT)
97679
5860740
78326
6579384
64530
7743600
59537
8573328
54940
9891000

Savings
with
HSBC
(BDT)
276300
282660
290760
295344
302400

29

It is calculated under the monthly reducing balance method.

CAR LOAN
Loan amount
100,000
300,000
500,000
700,000
1,000,000
1,500,000
3,000,000
5,000,000
8,000,000

12 Months
8979
26937
44894
62851
89788
134681
269362
448936
718297

24 Months
4802
14404
24007
3610
48013
72020
144039
240065
384104

36 Months
3418
10254
17089
23925
34178
51267
120533
170889
273422

48 Months
2733
8198
13664
19129
24327
40990
81980
136633
218612

60 Months
2327
6981
11635
16288
23269
34903
69805
116342
186147

Reduced interest rate is 14%


If, any borrower failed to repay any installment, they informed by four
times:
First, Informed automatically by computer, telephone etc.
Second, Informed with a strong notice, provide by HSBC.
Then third and forth steps provide with more strong notice.
After that, HSBC go to court, provide warranty and such kinds of activity of
court of law.
Moreover HSBC, change 24% penalty on his installment on day basis, from
which day, the installment is not repaid.

30

CONCLUSION
HSBC in Bangladesh has the technology to put the customer in better
control of routine operation & has been successfully handling payment
requirements throughout the nations for its corporate clients.
A receivable management is crucial to use financial cycle. HSBC have
developed products for customers to efficiently manage customers
requirements & replace cost.
Thus, from these overall discussions we can say that, HSBC have a
well arrange loan management system is Bangladesh.

31

ON THE BASIS OF PUBALI BANK


INTRODUCTION
Pubali Bank Limited was incorporated in the year 1959 under the name
limited under companies Act 10913. After the countrys liberation in 1971,
the Bank was nationalized as per policy of the government of the peoples
republic of Bangladesh under the Bangladesh Bank (Nationalization) order
1972 and was renamed as Pubali Bank. Subsequently the bank was
denationalized in the year 1983 and was again incorporated in Bangladesh
under the name and style of Publai Bank Limited in that year. The
government transferred the entire under taking of Pubali Bank to Pubali
Bank Limited, which took over the same as a going concern.
The Bank is engaged in all types of commercial banking services within the
stipulations laid down by Bank companies Act 1991 and directives as
received from Bangladesh Bank from time to time. It has 350 branches all
over Bangladesh. It is listed in the stock exchanges at Dhaka and Chittagong
as a publicity-traded company for its general class of shares branches are
in rural areas and branches in urban area. It has I corporate branches.
Seven in Dhaka and two in Chittagong.
Agrabad corporate branch is one of them. It is an important and effective
branch of Pubali Bank.

32

CONDITIONS & PRINCIPLES OF LENDING


Principles of Lending
Lending money to different kind of borrowers is one of the most important
functions of a bank. Lending is a risky business. The borrowers from a bank
range from individuals to partnership from. Joint stock companies,
institutions, societies, corporation etc engaged in such activities as farming,
transport, business and industry etc. The nature of their economic activity,
the location of business, financial stability, earning and re-paying capacity,
purpose of advance, securities for advance all differ. To this business of
lending successfully and profitably, a banker has to follow certain principles,
some of which are mentioned below.
Safety:
They very survival of a banker depends on the safety of his loans and
advances. Bankers base of operation is the money of his depositors, which
constitutes his stock-in-trade. The money being repayable on demand or a
after a short notice determines the capacity of a Banker as to the period for
which he can safely lend without any risk.

Banker cannot indulge in

unsecured or long dated advances. It depends upon the nature of his funds
and practical experience, sound common sense and judgment about the
customer.
Liquidity:
The liquidity of an advance means its repayment on demand or on due date
or after a short notice. The loan must stand fair changes of repayment
according to the repayment schedule. It is utmost important that bank loans
must be repaid as they become due otherwise the liquidity position of the
bank is endangered.

33

Dispersal:
The advances should be broad-based as far as possible and must be in
keeping with the deposit structure. The advances must not be in one
particular direction or to one particular industry. There should be spread of
advances against different securities, industries as well as areas.
Diversification of advances will spread risk and will improve safety of the
outstanding advances.
Remuneration:
The variation in the rtes of interest charged depends on the following
considerations
The rate of interest on advances against first class securities is lower than in
the case of clean overdraft or on advances where the securities held are not
easily realizable or are of less stable character or of doubtful value.
Advances for fixed periods and for fixed amounts are generally on lower
rates than fluctuating overdrafts where the borrower is free to utilize the
limit according to his requirement; paying interest only on the amount
actually utilized. The banker on the other hand is under an obligation to keep
funds in readiness and hence for the lock up of funds he charges a higher
rate of interest.
The rate of interest charged on advances normally depends on the following
factors.
a. Interest payable to depositors
b. Depreciation to be provided on the fixed assets of the bank.
c. Staff salaries, provident and pension funds, and other overhead
expenses.
d. Provision to meet the possible bad debts.

34

e. Reserve fund to be created out of profits for the safety and


security of the bank for unknown contingencies.
f. Dividend to be paid to the shareholders.
g. Risky borrowers are to pay higher rate of interest.
Suitability:
Suitability of an advance from national viewpoint has therefore cme to be
regarded as one of the principles of lending. The banker should lend, if the
purpose of the advance is for overall national development.
Purpose:
A banker studies purpose of advance before lending. The funds borrowed are
employed for unproductive purpose; the repayment in the normal course will
become uncertain. Banks, therefore, should refuse advances for speculative
and unproductive purpose and should be very cautious in entertaining such a
proposal.
Security:
The security offered for an advance is only a cushion to fall back upon in
case of need. A banker would not normally like to recover the advance from
the sale of the security. They would prefer an advance, which will come
back in time from the normal source. Security serves as a safety value for an
unexpected emergency.
Profitability
As a matter fact the difference between the interest received on a advances
and the interest paid on deposits constitutes a major portion of the Banks

35

income. Besides, foreign exchange business is also highly remunerative. So,


banks will not allow any advance unless a fair return from it is assured.
Borrowers character, capacity, standing, means & judicious selection
Wherever a banker lends money, he must carefully consider the chances of
his being repaid by the borrowers, which depend upon their character,
capacity, standing and means. The banker may sometimes allow an
unsecured loan to substantial customer in whose integrity and honesty he has
complete confidence. Bank officials on the basis of the information they
have and other factors can judge character and honesty in each case. The
standing and means of the borrowers can be known from their bank account,
business record, market, good will, etc. Proper selection of the borrower is
therefore, the prime principle of lending.
Safe margin:
When a security is offered to cover a bank advance, the banker has to
consider two aspects, the first is economic, consisting of an estimate of the
probable market value of the security at time of its realization, and the
second is the legal aspect, that is they validity of the security offered and the
difficulties that may arise in its enforcement. The banker should take care to
ensure that not only its valuation is a accurate but that, in the case of
securities of a speculative nature which are subject to heavy fluctuations, the
margin of safety is maintained in the form of a must higher percentage than
it is in other cases.

36

Supervision, National/Social interest & Credit Guidelines of Bangladesh


Bank:
It is to be always remembered that the Bank is the custodian of public
money and as such we must be judicious, careful and selective while lending
out the depositors, money to ensure timely recovery. The deciding factors for
recovery of loans are selection of right type of borrowers, end-use of credits
and effective follow-up and proper supervision.
The following conditions are to be followed before allowing Bridge Loan:
i)

Prior consent of the other bank/ financial institution, which has


sanctioned a term loan, must be obtained.

ii)

Term lending bank/financial institution must give a commitment to


remit the amount of the term loan to the bank concerned.

iii)

Period of such bridge loan should not exceed four months.

iv)

No extension of time for repayment of bridge loan will be allowed.

v)

Bridge loan sanctioned, is utilized for the purpose, for which the
loan has been sanctioned, has to be ensured.

DIFFERENT TYPES OF LOAN & ADVANCES


Unsecured Advances:
An unsecured advance is one, which is granted to a borrower, without
obtaining any security from his subject to restriction imposed from time to
time. It includes
a) Clean overdrafts
b) Clean Loan

37

Secured Advances:
Secured Advance means a loan or advance made against the security of
assets, the market value of which is not at any time less then the amount of
such loan or advance. The security can be sold/enforced and adjusted against
the advance after giving proper notice or taking action through the court.
The following type of secured advances may be allowed against tangible
securities subject to margin restrictions:
(i)

Over drafts.

(ii)

Cash credits.

(iii)

Loans

(iv)

House Building Loan

(v)

Term Loan (project loan)

(vi)

Consumer Credits

(vii) Hire Purchase


(viii) Lease Finance.
(ix)

Work Order Finance.

(x)

Bills Purchased and Discounted

(xi)

Loan against Trust Receipt

(xii) Loan against Imported Merchandise


(xiii) Packing Credits
(xiv) Payment against Documents
(xv) Foreign Bills Purchased
(xvi) Guarantee (non Funded)
(xvii) Letter of Credit (Non Funded)
(xviii)Rural Credit.

38

Overdrafts
In the case of advances sanctioned by way of overdrafts, the customer is
sanctioned a limit up to which he can overdraw his current account within a
stipulated period. In cases where the customer cannot offer any kind of
security except his personal security, the facility-is-termed as clean
overdraft. The overdraft may be created by the customer drawing a cheque
on his account. The customer is free to increase or decrease the overdraft
provided it remains within the sanctioned limit and within the agreed period.
The banker must bind the customer by obtaining a letter of continuity,
whereby the customer confirms that he would be liable on the final balance
of his account and that every debt and every credit will not be counted.
Cash credits
This type of facility is always either against pledge or hypothecation of
goods (cash credit) differs from an overdraft in matter of securities obtained
only but for all practical purposes, it has the same legal implication as an
overdraft. Overdraft accounts are maintained in current account ledgers
while a separate ledger or ledgers are maintained for Cash Credit Accounts.
The Cash Credit Accounts represent pledge or hypothecation of goods,
produce and merchandise.
Bills purchased and discounted
Bank purchase demand bill of exchange, which are accompanied by
Documents of Title to Goods such as Bills of Lading, Railway or Steamer
Receipts. While purchasing a cheque or a demand Bill of Exchange a banker
becomes a holder for value and is not entitled to the protection given to him

39

as a collecting bank under section 131 of the Negotiable instruments Act as


regards the collection of a cheque. Purchase of cheque, therefore, warrants
special precaution to be taken as to the title of the customer. As regards Bills
of Exchange, the banker has no protection and he has to be on his guard
while purchasing a bill of exchange accompanied by Documents of Title of
Goods. The banks normally do not purchase documents of title to goods,
unless these documents are accompanied by a bill of exchange the bank on
purchasing bill of exchange, being a Holder in Due Course has the privileges
and acquires a good title provided he has acted in good faith, without
negligence and under the circumstances, which do not afford a ground to
suspect that his endorser had no title to the instrument.
Bill of exchange is classified into (a) Demand Bills and Usance Bills, (b)
Clean Bills and Documentary Bills. Where a bill is payable, at sight or on
demand or on presentation, it is called Demand Bill. If a bill matures for
payment after a certain period of time, it is called Usance Bill.
Advances against railway and steamer receipts are very common. These
documents however give constructive possession and control of the goods.
The holder is authorized to transfer or receive the relative goods by
endorsement and delivery. They are accompanied by a bill of exchange
before they are discounted or purchased.
Moreover, banks also purchase cheques drawn by Govt., Semi Govt.
institution and local authorities. In this case, amount of the cheque is
credited to the partys account to the debit of cheque purchased account and
on realization of the cheque the account is liquidated.

40

Loans
Banks grant loans for different period short, medium and long, and for
different purposes. Broadly, the loans granted by banks are classified as
under.
Fixed Loan
Under this type of loan, the advance is given for a fixed amount recoverable
in fixed monthly installments. This form of loan suits the borrowers need
accommodation against Fixed Deposits, Insurance Policies, Shares of Joint
Stock Companies and Govt. Securities etc. These securities are offered
against an overdraft, for day-to-day facility for business purposes, the
facility is availed by way of overdraft.
Short Term Loan
Short-term loans are granted to meet the working capital needs of the
borrowers. These loans are granted against the security of tangible assets
mainly the movable assets like goods and commodities, shares, debentures
etc. and backed by collateral securities. This loan may be allowed up to 12
months.
Medium and Long Term Loan
Generally bank advances are repayable on demand. But now-a-days banks
are to allow medium and long-term loans. These loans accounts are the fixed
assets of the borrower. These loans are meant for purchase of capital assets
for establishment of new units or for expansion or diversification of an
existing unit. Medium Term Loan may be allowed for more than 12 months
up to 60 months and long-term loan for more than 60 months.

41

Bridge Loan
Bridge loans are short-term loans, which are granted to industrial
undertaking to meet their urgent and essential needs during the period when
formalities for availing of the term loans sanctioned by financial institutions
are being fulfilled or necessary steps are being taken to raise funds from the
capital market. These loans are granted by banks or by financial institutions
and are automatically repaid out of amount of the term loan or the funds
raised in the capital market.
Micro-Credit:
This Short Term Micro Credit will not exceed Tk. 10,000.00 and is
repayable within 12 months. Such loan may be for non-agricultural credit,
swanirvor credit; weaving credit or banks self financed project loan and
whatsoever.
Packing Credits:
Packing credit facility is a pre-shipment advance granted to a customer to
produce or buy goods for export to a foreign country against a letter of
credit, a bankers letter of authority or a firm contract already in hand and
lodged with the banker. Such a credit facility is allowed usually by way of
cash credit to the extent of the contracted amount with or without any
security. The borrower submits the export bills to the banker in due course
and the banker adjusts the advance by negotiation of the documents. The
goods purchased or produced from time to time may be pledged or
hypothecated to the banker to cover the advance.

42

Loan against Trust Receipts:


When the banker has to part with the goods or the bill of lading without
receiving the amount due from the customer, it is essential that he should get
a Trust Receipt, signed by his customer, agreeing to hold the goods or their
sale proceeds in trust for the banker so long as the entire amount, due to the
banker is not paid off.
Loan against Imported Merchandise:
In many cases a Bank has to clear the goods imported under letter of credit
at the request of the importer. When the customer requests for opening a
letter of credit, the banks obtain from him a agreement on stamped paper
which provides for financing and if necessary clearance and storage of goods
by debiting his loan account.
Payment against Documents (PAD):
a) The importers are to open letter of credit though and bank for
importing goods. Most of the time, the banks are to extend credit to
the importers, if not prohibited by Bangladesh Bank, for buying
required foreign exchange. This loan, on receipt of shipping
documents from the negotiation bank, is transferred and lodged in
PAD.
b) PAD is associated with import and import financing. The bank
opening letter of bound to honor its commitment to pay for import
bills when these are presented for payment provided that it is drown
strictly in terms of the letter of credit.

43

c) The foreign correspondent, which negotiates the documents; debits


the account of the opening bank and in fact, the amount thus stands
advanced on behalf of the importer.
d) The opening bank on receipt will lodge the shipping documents to
their book and will respond to the debit advice originated by foreign
correspondent to the debit of Payment against Document (PAD)
account and present the bill to the importer for payment.
Foreign Bill Purchased:
Purchasing of foreign bills of exchange arising out of commercial
transactions is called foreign bill purchased. Details have been discussed in
INLAND BILL PURCHASED.

FACILITIES FOR THE CUSTOMERS


Every bank gives some facilities for their customers. Customer will be able
to take the pleasure of that benefit facilities by availing any loan. Pubali
Bank also gives various facilities for their customers. Some of these are
given below:
1. Guarantee: Guarantee is a credit facility in contingent liability form
provided to their clients by the banks for participation in development
works like supply of goods and service etc. In includes all types of
guarantees service etc. In includes all types of guarantees including
performance guarantee, payment guarantee. Advance payment
guarantee, slipping guarantee etc.
2. Letter of Credit: Bank gives all types of letter of credit facilities
including back-to-back L/C etc.

44

3. In case of overdraft the facility to the customer is that he utilizes the


advance and pays interest on the actual amount availed day to day.
The customer may pay in larger amounts wiping out the entire debit
balance and the account at times may show credit balance.
4. In case of bills purchase & discounted, Banks purchase outstation
cheques of reliable customers. Bank purchase demand bill of
exchange, which are accompanied by documents of title to goods such
as bills of lading, Railway or Steamer receipts.
5. Packing credits facility is allowed usually by way of cash credit to the
extent of the contracted amount with or without any security.
6. Bank also give trust receipt facility is extended to first class parties of
outstanding status and integrity & as a matter of obsolete necessity.
There are some others facility that the bank give to the customer like as no
personal guarantee, comparative interest rate, low processing fees, time of
repay the loan is long, etc.
INVESTMENT OF FUND:
The trade-off between profitability and liquidity is the basic principles of
banking business. Every branch showed has to maintain sufficient cash on
liquid assets to repay the claims when they become due for payment. At the
same time every branch showed give proper attention to invest its available
funds in a profitable manner. Because, every idle Taka will have to incur a
cost to the bank. Investment and liquidity position of Agrabad corporate
branch of Pubali Bank are mentioned in the following:

45

Investment and liquidity position of Agrabad corporate branch:


Year

2001

2002

2003

2004

2005

variable
Advances
Deposits
A/D ratio

56.50
42.50
1.329

23
36.30
0.633

21.00
32.30
0.652

25.00
40.04
0.624

75.00
43.60
1.720

In the preceding schedule we observe that in 2001 and 2005 advance is more
than deposit. It may be seemed impossible. But it is reality. Because it can
collect other rural branches deposit through head office and grants as loan.
But total deposits of Pubali Bank are never less than advances.

LOAN RECOVERY PROCEDURE


(1) Letter issue
(2) Legal notice
(3) Mortgage Property Action.
(4) Case File.
Letter issue:
The first procedure of loan recovery is to issue letter to the concerned party.
It is given within 3 months after maturity. In this letter there is a request to
repay the loan to the pasties.
Legal Notice:
Secondly bank sends a legal notice to the response the letter of the bank then
such kind of legal notice is sent. It is said to the party.

46

Mortgage Property Action:


After legal notice mortgage property of the party are made duct ion. After
mortgage property auction if the total loan is not recovered then a case is file
life for remaining money.
Case File:
The last procedure of loan recovery is to file a case, when there is no other
alternative way to recover loan them the bank is bounded to file a case.
NECESSARY DOCUMENTS:
LOT (Letter of Introduction)
Salary Certificate: It is considerable on the basis of last 3 months
prescribed.
Utility Bill: It is prepared on the Bank statement for last 6 month.
Passport Copy: It's also a necessary document for identified a person
for bank loan.
T.I.N. Certificate: Tax identification no. Certificate is considerable
also for bank loan.
Statement from other Bank: This statement is considerable
especially for businessman, who has different A/C in different bank.
PROBLEM IN LOAN RECOVERY
That is the problem in loan recovery proves are the outcome of the default
process in loan disbursement. The main reasons of poor loan recovery are
categorized in four broad types as follows:

47

Changing in the management pattern changing of management


patterns my delay the recovery of matured loan.
Operation of open market economy in our country many industries
become stock and also close their business on account of emerging of
open market.
Rapid Expansion of Business- There is many companies, which
expand their business rapidly, but the expansion is for short time. In
the long run, the amount of classified loan increases.

Problems created by Government:


External Pressure: Bank has also faced many problems in the loan
recovery process as a part of continuous pressure from various
interested groups.
Loan to govt. organization: Some times bank is bound to sanction
loan to govt. organization, though these are losing concern.
Legal Problems: Existing rules and regulations are insufficient to
cover the legal aspects of loan recovery.
Frequent changes in government policies in regard to recovery of
loan.
Problems created by the bank:
Lock of analysis of Business Risk: Before lending bank does not
properly analyze the business risk of the borrowers and bank can not
forecast whether the business will succeed or fail.

48

Lack of Proper Monitoring of the Borrowers: The responsibilities of


bank are not ended after disbursement of loan.
Lack of proper valuation of security or mortgage property: In most of
the cases, bank fails to determine the value of security against the
loan.
Other general causes of poor loan recovery: Apart from the specific
reasons creating problems to Sonali Bank in the way of recumbent of
loan money, the exist some other general cause which have a great
impact on creating the problems which are faced by Sonali Bank in
loan recovery process. These are

Early sanction and disbursement of loan to the borrowers


without proper inspection of the project by the bank on
account of pressure from lobbing group.

Lack of evaluation of technical and economic feasibility


of the program.

Delay in disbursement of credit.

Credits are not allowed to actual entrepreneurs.

Lack of proper supervision

Illiteracy of borrowers.

Negative attitude of borrowers to repay the loan.

Deterioration of the value system of the borrowers.

Lack of competent and required expertise creates a great


problem to the non-recovery of loan.

Many borrowers use their loan-money other than


specified project i.e. if the loan is sanctioned for

49

industrial purpose; they use the money in house building


or purchase or land for their own purpose.

Sometimes borrowers invest their money outside the


country. Many borrowers transfer loan-money to abroad
where they deposited this money in their own account or
spent some other purpose.

Undue

influence

by

borrowers-

Sometimes

local

borrowers are found to be so much compelled to grant


them loan without proper study due to some unexpected
reasons.

Shortage of competent expertise: Lack of competent


expertise creates a great problem to the non-recovery of
loan by the bank.

Table:
Economic Sector wise Distribution of advances:
(Tk. In crore)
Sectors
Short Term

2001

2002

2003

2004

2005

Other & Foreign Business


Long Term

15.35

5.10

4.21

6.55

63

.20

0.10

0.10

0.15

0.200

37.20

14.95

14

15

9.30

3. Lease financing

0.35

0.45

4. Consume credit

3.05

2.50

2.25

2.20

1.25

.70
56.50

0.35
23.00

0.44
21.00

0.75
25.00

0.80
75.00

1. House building
2. Other trading business

5. Others
Total

50

Note:
We observe that in 2001 maximum loan in given in other trading business
and then in other foreign business. Loan in other foreign business was
decreased in the next 3 years. But it was increased tremendously in 2005 and
it was 63 crore.

Table==: Economic Performance of Pubali Bank (Corporate Branch) (Pubali


Bank).
Particulars
Total disbursement
Demand for Recovery

2001
3.52
45.22

2002
5.72
9.50

2003
3.12
14.85

2004
17.25
4.07

2005
65.32
3.10

(DFR)
Recovery
1.02
35.72
(3.35)
10.78
0.97
Overdue
44.97
891
14.05
3.11
1.98
Recovery as 9% of DFR
2.26%
376% (36.02%) 264.86% 31.29%
Overdue as a 100% DFR 99.45% 93.79% 94.61% 76.41% 63.87%
Outstanding balance
56.50
23.00
21.00
25.00
75.00

Table ==: Schedule of loan classification & provisioning program:


1st stage
2nd stage
3rd stage
4th stage
5th stage
a) Types of Period of Period of Period of Period of Period of

51

classification
Unclassified

overdue
overdue
overdue
overdue
overdue
Less than Less than Less than Less than Less than

(UC)
Substandard

18months 12months 8months


6 months 3 months
18 months 12 months 8 months 6 months 3 months

(SS)

or
but

more or
less but

than

more or
less but

36 than

more or
less but

24 than

Doubtful

months
months
months
36 months 24 months 13

(DF)

or
but

more or
less but

than
months

less

12 than

more or
less but

36 less than than


24

more
6

months
months
9 months 3 months

less more but but

months

less but

24 than

more months or or

48 than

more or

more
less

12 than

months

months

months
Bad loss (BL) More than 36 months 9 months 24 months 12 months
b)

Rate

48 months or more
of 1%
1%

or more
1%

or more
1%

or more
1%

provision
(Unclassified)
Substandard 20%

20%

20%

20%

20%

(SS)
Doubtful

50%

50%

50%

50%

50%

(DF)
Bad loss (BL) 100%
c) Period of Annual

100%
100%
100%
Half years Half years Quarterly

100%
Quarterly

classification. basis

basis

basis

basis

Table ==: Classification of Unsound Credit:

basis

52

Date

of

Inspection

2001

2002

2003

2004

2005

advances

56.50

23.00

21.00

25.00

75.00

(OA)
Total classified amount
Classified as a % of

45.22
80%

9.5
41.30%

14.85
70.71%

4.07
16.28

3.10
4.13%

(OA)
Recovery Target
Amount Recover
Recover as a % of

0.85
11.305
2.375
3.625 1.10175
1.03
35.72
(5.35)
70.78
0.79
120% 315.96% (25.26%) 297.37% 95.33%

Particular
Outstanding

Target

Note: Pubali Bank recovery target is 25% of target amount.

Table ===: Provisioning Pattern of Pubali Bank:


Particulars
Provisions should be
Actual Provision

2001
44.65
34.80

2002
8.78
3.33

2003
13.78
3.95

2004
3.66
1.08

2005
3.60
1.14

The actual provisions of Agrabad corporate branch are not much lower than
its calculated provision according to the guidelines.
CONCLUSION:
Agrabad corporate branch is one of the most successful and branches of
Pubali Bank. It is plying an important role in our economy and it provides a

53

trend of appropriate activities and multi dimensional progress of banks. It is


expected that the given recommendations may help positive impact on loan
recovery activities of Pubai Bank Agrabad corporate branch:
1. The value of the security must be valued properly by the independent
valuer and constantly watched so that the value of the mortgage
properly becomes sufficient to recover of default loan.
2. Stopping the grant of loan to any organization by the other banks,
which is defaulter to bank May of much help to pressure the defaulters
to pay its outstanding loan?
3. Aged old loss to bank loan recovery should be changed.
4. The new entrepreneurs should be encouraged in disbursing loan and
those who have the records of regular re-payment should be given
preference.
5. Steps should be taken so that guarantors cant avoid their
responsibilities.

PART # B
COMPARATIVE ANALYSIS AND INTERPRETATION
The main objective of this study is to know the loan service, i.e. to identify
the problem and position of loan recovery of some commercial bank in
Bangladesh. There are some factors, which make the sanctioned loans as
classified. From the above analysis the following Findings were detected.
In case of National Bank:
The advance credit rations of the National Bank are not bad. It is not quite
satisfactory. Some reasons are given below:
(i)

The ratio of unclassified loan of National Bank is


67.96%, 68.2%, 68.6%, 71.85%, 71.16%, 74.83% in

54

1998,

1999,

2000,

2001,

2002,

2003,

2004

respectively.
(ii)

The ratio of classified loan of National bank is


32.04%, 17.16% in 1998, 2004 respectively.

In case of HSBC Bank:


The loan recovery level of the HSBC Bank is satisfactory.
(i) The ratio of the unclassified loan of the HSBC bank is 99.98% in 2005
and .02% is classified loan in 2005. There recovery position of the HSBC
Bank is satisfactory.

In case of Pubali Bank:


From the above analysis of the Pubali Bank, the following findings were
detected.
(i)

The advance to credit ratio of the Pubali Bank is not so


satisfactory. The ratio of advance/ deposits was 1.329% in 2001
and it became 1.720% in 2005.

(ii)

Pubali bank sanctioned more loans to private sector, and it is


increased year to year. The sanctioned loan of this loan was 35% in
2001 in Pubali sector but bank not sanctioned in 2002 to 2005.
Pubali bank sanctioned 21.5% in 2001 and 75% in 2005.

55

(iii)

The recovery position as a percentage of DFR was 2.26% and


overdue as a percentage of DFR was 99.45% in 2001 and it came
to 31.29% and 63.87% in 2005.

(iv)

The outstanding advances were Tk. 56.50 core and 75.00 croes in
2001 & 2005 respectively. The classified percentages were 80% &
4.13% respectively and the amount recovered from the outstanding
advances was Tk. 1.02 crores & Tk. 97 crores.

(v)

The provision of Pubali Bank should be Tk. 44.65 crore & Tk. 3.60
crore in the year 2001 & 2005 respectively but the

actual

provisions were only Tk. 34.80 crors & Tk. 1.14 crore respectively.

RECOMMENDATIONS FOR THESE THREE TYPES OF


BANKS
From above the report my recommendations about loan operations of those
Banks are:
1. HSBC can launch various loan programs on easy terms based on
economical affairs people of Bangladesh.
2. HSBC should reduce the interest rate for the people of Bangladesh.
3. National Bank offers interest on instant loan amount.
4. National Bank expands their loan facilities for mass people.

56

5. Pubali Bank should expand their capital to serve the loan receiver.
6. Pubali Bank should offer various types of loan facility.

APPENDIX
List of Table:

Page

1.

Amount of loan given to different sector during last 7 years (NBL) :

16

2.

N.B.L. Provides how much loan (amount of loan in million)

17

3.

Unclassified & Classified loan during 1998-2002(NBL)

20

4.
5.
6.

Classification of loan according to status of recovery(HSBC)


Repayment schedule for different loan (HSBC)
Monthly installments in BDT @14.25% (annual reducing balance)

:
:
:

26
27
28

7.

Monthly installment for a loan of BDT 4,000,000(HSBC)

28

8.
9.

Car loan
:
Investment and liquidity position of Agrabad corporate branch(PB) :

29
45

10. Economic Sector wise Distribution of advances

47

57
11. Economic Performance of Pubali Bank

48

12. Schedule of loan classification & provisioning program


13. Classification of Unsound Credit
14. Provisioning Pattern of Pubali Bank

:
:
:

51
52
53

List of Chart:
1.

Loan giving by NBL during (1999-2004)

17

2.

Comparative chart of total loan and receive loan(NBL)

20

ACRONYMS
NBL=National Bank Limited.
HSBC=Hong Kong Shanghai Banking Corporation.
SOD=Secured Over Draft
PAD= Payments Against Document
LC= Letter of Credit
LIM=Loan against Imported Merchandise

58

LTR=loan against trust received


ECC=Export cash credit
PC =personal credit
EML=Equal monthly installment
TIN=Taxation identification number