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Internship report on “Investment and Credit Management in Banks:

A Look from NCC Bank Ltd.”

SUBMITTED TO

Sr. Executive Vice President NCC Bank Ltd, HRD, H.O, Dhaka

SUBMITTED BY

Khondaker Ashik Mahi ID: 2011-1-10-231

Date: 17 December, 2015

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Letter of Transmittal

December 17, 2015 To Sr. Executive Vice President NCC Bank Ltd, HRD, H.O, Dhaka

Subject: Submission of the Internship report

Dear Sir,

  • I am submitting my internship report titled "Credit Management and Investment of NCC Bank

Limited" as partial requirement of internship program under BBA curriculum.

  • I would like to thank you for assigning this report as it provided me with the opportunity to

venture into the real life scenario and to broaden the horizon of my understanding on how syndication is arranged and all the work that goes into it. I sincerely hope that my work will come up to the level of your expectation.

  • I welcome your query and grateful to answer them.

Sincerely yours,

Khondaker Ashik Mahi ID: 2011-1-10-231

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Acknowledgement

The successful accomplishment of this Internship Report is the outcome of the contribution and involvement of a number of people, especially those who took the time to share their thoughtful guidance and suggestions to improve the report. It's difficult for me to thank all of those people who have contributed something to this report. There are some special people who cannot go without mention.

First of all, I would like to thank my honorable academic supervisor Farzana Akter, Lecturer, Department of Business Administration, East West University. I am thankful to her for her continuous support and supervision, suggestions and providing me with valuable information that was very much needed for the completion of this presentation.

  • I would like to thank my manager Md. Zakir Hossain, AVP and Branch Manager, Dhakhinkhan

Branch, Dhaka for giving me the opportunity to execute my internship program under his supervision in NCC Bank Limited. I am really thankful to him for his valuable time to give me the information and knowledge about all over the bank. During this three month I saw him as a Lecturer also.

  • I would also like to express my immense gratitude & heartfelt thanks to all of the employees of

my team who not only helped me a lot to prepare this report but also helped me with their guidance and by sharing their invaluable knowledge throughout my entire tenure in NCC Bank Limited.

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TABLE OF CONTENTS

CHAPTER ONE:........................................................................................................................11-16 EXECUTIVE SUMMERY...............................................................................................................12 1.0 Introduction.............................................................................................................................12 1.1 Objective of the Report:............................................................................................................13 1.2 Methodology of the Report:......................................................................................................13

  • 1.2.1 Data Required...............................................................................................................13

  • 1.2.2 Data Sources:................................................................................................................14

  • 1.2.3 Data Analysis Tools and Techniques:.....................................................................14

  • 1.2.4 Variable Used................................................................................................................14

  • 1.2.5 Limitation of the Report:...........................................................................................15

CHAPTER TWO:.......................................................................................................................16-31 AN OVERVIEW OF NCC BANK LIMITED (NCCBL)....................................................................16

  • 2.1 AN OVERVIEW OF NCC BANK LIMITED (NCCBL)................................................17

  • 2.2 Background of NCC Bank Limited..............................................................................17

  • 2.3 Mission Statement..........................................................................................................17

  • 2.4 Objectives..........................................................................................................................18

  • 2.5 Values.................................................................................................................................18

  • 2.6 Management Information System..............................................................................18

  • 2.7 Correspondent Relationship........................................................................................19

  • 2.8 Departments of NCCBL.................................................................................................19

  • 2.9 Human Resources Management of NCCBL..............................................................19

    • 2.10 Financial Statement.....................................................................................................20

      • 2.10.1 Balance Sheet:...................................................................................................20

      • 2.10.2 Income Statement............................................................................................21

      • 2.10.3 Ratio Analysis:..................................................................................................22

      • 2.10.4 Investment analysis:...............................................................................................25

      • 2.10.5 Deposit and advance:......................................................................................26

  • 2.11 Board of Directors:.......................................................................................................27

  • 2.12 Organizational Structure of Dhakhinkhan Branch:............................................28

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    2.14 Product and Services...................................................................................................29

    • 2.14.1 Deposit Product.................................................................................................29

    • 2.14.2 Loan and Advance Product............................................................................29

    • 2.14.3 Cards....................................................................................................................29

    • 2.14.4 Remittance Products.......................................................................................30

    • 2.14.5 Brokerage House..............................................................................................30

    • 2.14.6 Treasury Service...............................................................................................30

    • 2.14.7 Remittance Service..........................................................................................30

    CHAPTER THREE:...................................................................................................................31-55 CREDIT MANAGEMENT..............................................................................................................31 3.1 Credit........................................................................................................................................32 Credit Policy of NCCBL..............................................................................................32 Credit Principles.........................................................................................................33

    Global Credit Portfolio limit of NCCBL.................................................................33 3.2 LOAN AND ADVANCE SECTION...........................................................................................34 3.2.1 Continuous Loan.........................................................................................................34 3.2.1.1 CASH Credit (CC):..........................................................................................34 3.2.1.2 OVER Draft (OD):..........................................................................................35

    • 3.2.2 Demand Loan...............................................................................................................35 Loan against Imported Merchandise (LIM)........................................................35 Loan against Trust Receipt (LTR)..........................................................................36 Payment against Documents (PAD).......................................................................36 Loan against Packing Credit....................................................................................36 Loan against Investment..........................................................................................36

    • 3.2.3 Term Loan.....................................................................................................................37 Loan (General)............................................................................................................37 Housing Loan...............................................................................................................37 Project Loan.................................................................................................................37 Transport Loan...........................................................................................................38 Small Business Loan Scheme..................................................................................38 Personal Loan Scheme..............................................................................................39

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    Consumer Scheme......................................................................................................39 Lease Financing..........................................................................................................39 Micro credit financing...............................................................................................40

    • 3.3 Documentation of the Loan:....................................................................................................41

    • 3.4 Credit Risk Management Policy:..............................................................................................41

      • 3.4.1 Credit Evaluation Principles...........................................................................42

      • 3.4.2 Pre-disbursement Compliance......................................................................43

      • 3.4.3 Scope:...................................................................................................................43

      • 3.4.4 Superseding Power:.........................................................................................44

      • 3.4.5 Amendment of the policy:...............................................................................44

      • 3.4.6 Access to the policy:..........................................................................................44

      • 3.4.7 Product and Services:.......................................................................................44

      • 3.4.8 Loan-Deposit Ratio:.........................................................................................44

      • 3.4.9 Risk Acceptance criteria:................................................................................45

        • 3.4.10 Deviation:..........................................................................................................45

        • 3.4.11 Return:................................................................................................................45

        • 3.4.12 Single customer exposure limit:..................................................................45

        • 3.4.13 Large Loan:.......................................................................................................46

        • 3.4.14 Diversification and sector allocation:........................................................46

        • 3.4.15 Maximum Tenor:.............................................................................................46

        • 3.4.16 Security:.............................................................................................................46

        • 3.4.17 General covenants:..........................................................................................47

  • 3.5 Advance...................................................................................................................................48

  • 3.5.1 Types of advance...................................................................................................................48

    Securities........................................................................................................................48

    Modes of Charging Security:......................................................................................49

    Lien...................................................................................................................................49

    Pledge...............................................................................................................................49

    Hypothecation................................................................................................................49

    Mortgage:........................................................................................................................49

    Trust Receipt..................................................................................................................50 Advances against Work-Order...................................................................................50 Advances against Approved Shares:........................................................................50

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    Advances against Fixed Deposit Receipts:.............................................................50

    • 3.6 Objective Basis of Classification...............................................................................................51

    Unclassified:..................................................................................................................51

    Substandard:.................................................................................................................51

    Doubtful:........................................................................................................................53

    Bad and Loss:................................................................................................................54

    CHAPTER FOUR:....................................................................................................................55-64 RISK ASSESSMENT......................................................................................................................55

    • 4.1 Risk Assessment.......................................................................................................................56

      • 4.1.1 Assessment Frequency:...................................................................................56

      • 4.1.2 Assessment Documentation:.........................................................................56

      • 4.1.3 Accountability:...................................................................................................56

      • 4.1.4 Credit requirement:.........................................................................................57

      • 4.1.5 Repayment source:...........................................................................................57

      • 4.1.6 Collateral:...........................................................................................................57

      • 4.1.7 Insurance coverage:..........................................................................................57

      • 4.1.8 Adherence to Policy:........................................................................................57

      • 4.1.9 Syndicate loan:..................................................................................................57

    4.1.10 CHANGES in Pricing:.....................................................................................58 4.1.11 Others:................................................................................................................58

    • 4.2 Credit Risk Grading:................................................................................................................58

      • 4.2.1 NCCBL’s Risk Grading Framework:.............................................................59

      • 4.2.2 Risk Grading Scorecard:..................................................................................59

      • 4.2.3 Risk Grading:....................................................................................................60

    CHAPTER FIVE:......................................................................................................................64-70

    CREDIT APPRAISAL....................................................................................................................64

    • 5.0 CREDIT APPRAISAL..............................................................................................................65

    • 5.1 CREDIT APPRAISAL PROCEDURE/LENDING CRITERIA..................................................65

    • 5.2 PROCEDURES OF SANCTIONING CREDIT.........................................................................66

    • 5.3 STEPS INVOLVED TO SANCTIONING A LOAN:.................................................................67

    • 5.4 LOAN DISBURSEMENT STEPS.............................................................................................69

    CHAPTER SIX:.........................................................................................................................70-76

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    Credit Monitoring and recovery process of NCCBL......................................................................70

    • 6.1 Credit monitoring process:.......................................................................................................71

    • 6.2 Early Alert Reporting:..............................................................................................................72

    • 6.3 Recovery Process of Problem Account:...................................................................................74

    • 6.4 Reporting of Classified Accounts:............................................................................................75

    CHAPTER SEVEN:...................................................................................................................76-81 SWOT ANALYSIS..........................................................................................................................76

    SWOT (Strength, Weakness, Opportunity & Threats):.................................................................77

    • 7.1 STRENGTH:...................................................................................................................77

    Innovation:........................................................................................................77

    Top Management:............................................................................................77 Company Reputation:.....................................................................................77

    Sponsors:...........................................................................................................77

    Modern facilities and Online Banking:......................................................78 String of Branches:.........................................................................................78 Good customer service:.................................................................................78 Interactive corporate Culture:.....................................................................78 Alliance in ATM:..............................................................................................78 7.2 WEAKNESS:.................................................................................................................78 Advertising and promotion:........................................................................78 Limited Network:...........................................................................................79

    • 7.3 OPPORTUNITY:...........................................................................................................79

    Diversification:...............................................................................................79

    Credit cards and Tele banking:...................................................................79

    • 7.4 THREATS:.....................................................................................................................79

    Contemporary Banks.....................................................................................79 Multinational Bank:......................................................................................80 Upcoming Banks:............................................................................................80 Default Culture:...............................................................................................80

    CHAPTER EIGHT:...................................................................................................................81-87 FINDINGS AND ANALYSIS..........................................................................................................81

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    8.0 Findings:.................................................................................................................................82

    • 8.1 CC Hypo (Cash Credit Hypothecation)......................................................................83

    • 8.2 CC Pledge (Cash Credit Pledge) Under SME............................................................83

    8.3. Overdraft (SOD)............................................................................................................84

    • 8.4 Loans against House Building:...................................................................................85

    • 8.5 Real Estate Financing for CRB:...................................................................................85

    • 8.6 Lease Financing:............................................................................................................86

    • 8.7 SME Loan.........................................................................................................................86

    CHAPTER NINE.......................................................................................................................87-91 RECOMMANDATIONS AND CONCLUSIONS.............................................................................87 9.1 RECOMMANDATION........................................................................................................88 9.2 CONCLUSIONS..................................................................................................................90

    CHAPTER TEN …………………………………………………………………………………92

    Bibliography and Appendix……………………………………………………

    ...

    92

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    CHAPTER ONE:

    INTRODUCTION

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    EXECUTIVE SUMMERY

    In order to provide a student with job exposure and an opportunity of the transition of theoretical knowledge into real life experience, an internship is very important. A better balance between theory & practice can be gained through this program.

    Banking system of Bangladesh has gone through three phase of development --- Nationalization, Privatization and Financial Sector Reform. National Credit and Commerce Bank is the largest Private Commercial Bank from 1993 with new hope and promise to serve the countrymen.

    This report mainly divided into three parts. First Part deals with my practical experience as an internee in NCC Bank Ltd, Dhakhinkhan Branch and my own observations on Management and Organizational Pattern of the NCC Bank Ltd. And final part deals with credit management of the NCC Bank Ltd.

    The report is a combination of three months internship program with NCC Bank. I acknowledged different banking functions and day-to-day banking operations on my way to complete internship. In this paper I have explained my best in respect of my real life experience gathered from different departments.

    1.0 Introduction

    Bachelor of Business Administration (BBA) course requires 3 months attachment with an organization followed by a report assigned by the supervisor in the organization and endorsed by the faculty advisor. I took the opportunity to do my internship in National Credit and Commerce Bank Ltd (NCCBL). My topic of internship is authorized from the head office of NCC Bank Ltd. My faculty supervisor Farzana Akter, lecturer of EWU, also approved the topic and authorized me to prepare this report as part of the fulfillment of internship requirement.

    I have worked in various Department of NCC Bank Ltd, Dhakhinkhan Branch. In this report, I will try to make an overall analysis on all activities of NCC Bank Ltd specially focuses on Credit Management & Investment.

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    1.1 OBJECTIVE OF THE REPORT:

    The study has been undertaken with the following objectives:

    To have better orientation on credit management activities specially credit policy and practices, credit appraisal, credit processing steps, credit management, financing in various sector and recovery, loan classification method and practices of National Credit and Commerce Bank Ltd (NCCBL).

    To know the competitive strength and weakness of the bank and the marketing and expansion strategy of bank that can help to face the potential threats and opportunities.

    To know the technological advantage and lacking of this bank in the modern banking system and to make a bridge between the theories & practical procedures of banking day- to-day operations.

    1.2 METHODOLOGY OF THE REPORT:

    1.2.1 DATA REQUIRED

    Primary data:

    Primary data were collected through discussions with the executives & officials of the NCC, which has been presented in the report. Primary data sources are informal discussion with professionals and observation while working in different desks.

    Secondary data:

    The secondary data sources are annual reports, manuals, and brochures of NCC Bank Ltd. To identify the implementation, supervision, monitoring and repayment practice- interview with the employee and extensive study of the existing file was and practical case observations were done. I have collected secondary data from the following sources,

    Annual Reports of NCCBL: 2010-2014.

    Business Development Conference Report: 2011 and 2012.

    Unpublished data from the NCCBL, Dhakhinkhan Branch.

    Manuals of NCCBL regarding investment business.

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    Credit Risk Manual by Bangladesh Bank.

    NCCBL’s website ( www.nccbank.com.bd ).

    Official documents

    Foundation Training Course Book of NCCBL.

    • 1.2.2 DATA SOURCES:

    Both qualitative and quantitative analyses have been done while conducting this study. Microsoft Word and Microsoft Excel were used to analyze, process and graphically represents the gathered data.

    • 1.2.3 DATA ANALYSIS TOOLS AND TECHNIQUES:

    To analyze and present the numerical data and values associated with Investment Risk Management of NCCBL, I have used following tools and techniques,

    Column Chart,

    Bar Chart,

    Line Chart,

    Pie Chart, and

    The formula has generated and used in Microsoft Excel.

    • 1.2.4 VARIABLE USED

    Balance Sheet

    Income Statement

    Net income

    Total assets

    Total liabilities

    Total investments

    Total deposits

    Net profits

    Total advances

    Net operating income

    Net operating expense

    Total equity

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    This report will only consider credit management & Investment of NCC Bank Ltd. It will not cover

    Asset and liability/ balance sheet risk Management

    Internal control And compliance risk mgt

    Money laundering Risk mgt.

    Bank’s policy of not disclosing some data and information for obvious reason, which

    could be very much useful. The main constraint of the study was insufficiency of information, which was required for the study. There are various information the bank employee can’t provide due to security and other corporate obligations.

    All the branches of the bank were not physically visited and all the concerned personnel of the bank have not been interviewed.

    Lack of in-depth knowledge and analytical ability for writing such report.

    Learning all the banking functions about the investment risk management within just

    60 days was really tough. Data and information used in this study are mostly from secondary sources.

    Large scale research was not possible due to the constraints and restrictions posed by the bank.

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    P a g e | 15 CHAPTER TWO: AN OVERVIEW OF NCC BANK LIMITED (NCCBL) 2.1

    CHAPTER TWO:

    AN OVERVIEW OF NCC BANK LIMITED (NCCBL)

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    NCC Bank Limited is the leading private sector bank in Bangladesh offering full Range of Personal, Corporate, International Trade, Foreign Exchange, Lease Finance and Capital Market Services. NCC Bank Limited is the preferred choice in banking for friendly and personalized services, cutting edge technology, tailored solutions for business needs, global reach in trade and commerce and high yield on investments, assuring Excellence in Banking Services.

    2.2 BACKGROUND OF NCC BANK LIMITED

    National Credit and Commerce Bank Ltd. bears a unique history of its own. The Organization started its journey in the financial sector of the country as an investment company back in 1985. The aim of the company was to mobilize resources from within and invest them in such way so as to develop country's Industrial and Trade Sector and playing a catalyst role in the formation of capital market as well. Its membership with the browse helped the company to a great extent in this regard. The company operated up to 1992 with 16 branches and thereafter with the permission of the Central Bank converted in to a fully fledged private commercial Bank in 1993 with paid up capital of Tk. 39.00 corer to serve the nation from a broader platform.

    Since its inception NCC Bank Ltd. has acquired commendable reputation by providing sincere personalized service to its customers in a technology based environment.

    The Bank has set up a new standard in financing in the Industrial, Trade and Foreign exchange business. Its various deposit & credit products have also attracted the clients-both corporate and individuals who feel comfort in doing business with the Bank.

    Within this short time the bank has been successful in positioning itself as progressive and dynamic financial institution in the country. This is now widely acclaimed by the business community, from small entrepreneur to big merchant and conglomerates, including top rated corporate and foreign investors, for modern and innovative ideas and financial solution. Total Number of branch of NCCBL: 104 (Including SME/Agri Branch: 8)

    2.3 MISSION STATEMENT

    To become a bank of choice in serving the nation as a progressive and socially responsible financial institution by bringing credit and commerce together for profit and sustainable growth. NCC Bank shall be at the forefront of national economic development by: -

    i) Anticipating business solution required by all NCC Bank’s customers everywhere and innovatively supplying them beyond the expectation. ii) Setting industry benchmark of world class standard in delivering customer value through the comprehensive product range, customer service and all the activities.

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    iii) Building an exciting team based working environment that will attract, develop and retain employees of exceptional ability who help celebrate the success of bank’s business, of bank’s customers and of national development. iv) Maintaining the highest ethical standards and a community responsibility worthy of a leading corporate citizen

    • v) Continuously improving productivity and profitability and thereby enhancing share holder

    value.

    Slogan

    Where Credit & Commerce Integrates

    Motto

    The Bank will be a confluence of the following three interests:

    Of the Bank:

    Profit Maximization and Sustained Growth.

    Of the Customer:

    Maximum Benefit and Satisfaction.

    Of the Society:

    Maximization of Welfare

    • 2.4 OBJECTIVES

    Be one of the best banks of Bangladesh. Achieve excellence in customer service next to none and superior to all competitors. Cater to all differentiated segments of Retail and Wholesale Customers. Be a high quality distributor of product and services. Use state-of the art technology in all spheres of banking.

     
    • 2.5 VALUES

    Customer focus

    Integrity

    Team Work

    Respect for individual

    Quality

    Responsible citizenship

    • 2.6 MANAGEMENT INFORMATION SYSTEM

    Since its journey as commercial Bank in 1985 NCC Bank Limited has been laying Great emphasis on the use of improved technology. It has gone to online operation system since 2003. And the new Banking Software Flexible is under process of installation. As a result the bank will able to give the services of international standards.

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    2.7

    CORRESPONDENT RELATIONSHIP

    The Bank established correspondent relationships with a number of foreign banks, namely American Express Bank, Bank of Tokyo, Standard Chartered bank, Mashreq Bank, Hong Kong Shanghai Banking Corporation, CITI Bank NA-New York and AB Bank Ltd. The Bank is maintaining foreign exchange accounts in New York, Tokyo, Calcutta, and London. The bank has set up letter of credit on behalf of its valued customers using its correspondents as advising and reimbursing Banks. The Bank maintains a need based correspondent relationship policy, which is gradually expanding.

    • 2.8 DEPARTMENTS OF NCCBL

    If the jobs are not organized considering their interrelationship and are not allocated in a particular department it would be very difficult to control the system effectively. If the departments are not fitted for the particular works there would be haphazard situation and the performance of a particular department would not be measured. NCC Bank Limited has does this work very well. There are different departments in NCCBL. Are as follows:

    Human Resources Division

    Personal banking Division

    Treasury Division

    Operations Division

    Computer and Information Technology Division

    Credit Division

    Finance & Accounts Division

    Financial Institution Division

    Audit & Risk Management Division

    • 2.9 HUMAN RESOURCES MANAGEMENT OF NCCBL

    NCC Bank Limited recognizes that a productive and motivated work force is Prerequisite to leadership with its customers, its shareholders and in the market it serves. NCC bank treats every employee with dignity and respect in a supportive Environment of trust and openness where people of different backgrounds can reach their full potential. The bank’s human resources policy emphasize on providing job satisfaction, growth opportunities, and due recognition of superior performance. A good working environment reflects and promotes a high level of loyalty and commitment from the employees. Realizing this NCC Bank limited has placed the utmost importance on continuous development of its human resources, identify the strength and weakness of the employee to assess the individual training needs, they are sent for training for self-development. To orient, enhance the banking knowledge of the employees NCC Bank Training Institute (NCCBTI) organizes both in-house and external training. The remuneration is very competitive in comparison with industry average. Beside these the recruitment procedure is comprehensive.

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    2.10 FINANCIAL STATEMENT

    2.10.1 BALANCE SHEET:

    Balance

    2010

    2011

    2012

    2013

    2014

    Sheet

    PROPERT

    Y AND

    ASSETS

    Cash:

    6,231,607,253

    6,442,038,081

    7,732,385,281

    7,875,262,621

    8,612,160,908

    In hand

    731,592,743

    774,915,500

    1,139,317,553

    1,256,477,852

    1,173,484,082

    (including

    FC)

    Balances

    5,500,014,510

    5,667,122,581

    6,593,067,728

    6,618,784,769

    7,438,676,826

    with BB

    Balances

    567,325,877

    462,493,232

    1,316,317,832

    656,757,606

    2,407,581,410

    with other

    Investmen

    10,980,808,236

    20,840,288,280

    30,851,738,163

    19,908,322,002

    26,568,661,762

    ts

    Loans and

    63,230,141,628

    72,733,540,709

    79,948,220,174

    88,167,205,831

    90,920,772,028

    advances

    Fixed

    1,191,493,190

    1,506,770,757

    1,743,585,434

    1,736,637,982

    2,573,252,105

    assets

    Other

    1,352,801,369

    1,525,568,280

    4,249,255,937

    5,698,510,026

    4,077,095,326

    assets

    TOTAL

    83,554,177,553

    103,510,699,339

    125,841,502,821

    124,042,696,069

    135,159,523,539

    ASSETS

    Borrowing

    1,847,028,696

    5,565,102,190

    9,444,527,760

    2,763,533,530

    4,975,525,649

    s from

    Other

    Deposits

    67,961,244,777

    81,127,168,218

    96,918,222,155

    98,229,442,528

    105,703,614,110

    and other

    A/C

    Other

    4,388,794,697

    5,234,633,372

    7,342,935,755

    9,779,884,197

    10,130,694,248

    liabilities

    TOTAL

    74,197,068,170

    91,926,903,780

    113,705,685,670

    110,772,860,255

    120,809,834,007

    LIABILIT

    IES

    TOTAL S.

    9,357,109,383

    11,583,795,559

    12,135,817,151

    13,269,835,814

    14,349,689,532

    EQUITY

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    TOTAL L

    83,554,177,553

    103,510,699,339

    125,841,502,821

    124,042,696,069

    135,159,523,539

    & S.

    EQUITY

    Figure: 2.6.1

    2.10.2 INCOME STATEMENT

    Particular

    2010

    2011

    2012

    2013

    2014

    Profit and

    Loss

    Account

    Net interest

    2,486,468,804

    1,661,817,872

    2,241,539,584

    2,039,393,557

    2,680,556,207

    income

    Total

    5,674,450,977

    5,915,529,141

    6,179,587,783

    6,073,188,991

    6,532,499,519

    operating

    income

    Total

    1,574,245,636

    1,700,764,012

    2,152,767,271

    2,374,375,016

    2,785,697,656

    operating

    expense

    Profit before

    4,100,205,341

    4,214,765,129

    4,026,820,512

    3,698,813,975

    3,746,801,863

    provisions

    Total

    835,652,069

    547,949,936

    1,274,074,479

    1,351,935,762

    1,221,323,403

    provisions

    Profit after

    3,264,553,272

    3,666,815,193

    2,752,746,033

    2,346,878,213

    2,525,478,460

    provision

    Profit before

    3,248,230,506

    3,630,147,041

    2,742,746,033

    2,326,878,213

    2,500,478,460

    tax

    Provision

    876,551,737

    1,431,190,726

    1,308,985,033

    1,189,031,038

    999,149,242

    for tax

    Profit after

    2,371,678,769

    2,198,956,315

    1,433,761,000

    1,137,847,175

    1,501,329,218

    tax

    Figure: 2.6.2

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    2.10.3 RATIO ANALYSIS:

    ROE 0.3000 0.2500 0.2000 ROE 0.1500 0.1000 0.0500 0.0000 2010 2011 2012 2013 2014
    ROE
    0.3000
    0.2500
    0.2000
    ROE
    0.1500
    0.1000
    0.0500
    0.0000
    2010
    2011
    2012
    2013
    2014
    ROA 0.0300 0.0250 0.0200 ROA 0.0150 0.0100 0.0050 0.0000 2010 2011 2012 2013 2014
    ROA
    0.0300
    0.0250
    0.0200
    ROA
    0.0150
    0.0100
    0.0050
    0.0000
    2010
    2011
    2012
    2013
    2014

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    Net Operating Margin

    0.0600 0.0500 0.0400 0.0300 0.0200 0.0100 0.0000 2010 2011 2012 2013 2014
    0.0600
    0.0500
    0.0400
    0.0300
    0.0200
    0.0100
    0.0000
    2010
    2011
    2012
    2013
    2014

    Net Operating Margin

    Net Profit Margin

    0.5000

    0.4000

    0.3000

    0.2000

    0.1000

    0.0000

    2010 2011 2012 2013 2014
    2010
    2011
    2012
    2013
    2014

    Net Profit Margin

    Asset Utilization ratio

    0.0800

    0.0600

    0.0400

    0.0200

    0.0000

    2010 2011 2012 2013 2014
    2010
    2011
    2012
    2013
    2014

    Asset Utilization ratio

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    Equity Multiplier

    10.5000 10.0000 9.5000 9.0000 8.5000 8.0000 2010 2011 2012 2013 2014
    10.5000
    10.0000
    9.5000
    9.0000
    8.5000
    8.0000
    2010
    2011
    2012
    2013
    2014

    Equity Multiplier

    Asset Management Efficiency

    0.0800

    0.0600

    0.0400

    0.0200

    0.0000

    2010 2011 2012 2013 2014
    2010
    2011
    2012
    2013
    2014

    Asset Management Efficiency

    Operating Efficency ratio

    0.5000

    0.4000

    0.3000

    0.2000

    0.1000

    0.0000

    2010 2011 2012 2013 2014
    2010
    2011
    2012
    2013
    2014

    Operating Efficency ratio

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    Particular

    2010

    2011

    2012

    2013

    2014

    Investment

    10,980,808,236

    20,859,689,665

    30,851,738,163

    19,908,322,002

    26,568,661,762

    Return on

    14.95%

    13.99%

    09.05%

    11.04%

    11.05%

    Investment

     

    %

    Figure: 6.1

    Investment

    35,000,000,000 30,000,000,000 25,000,000,000 20,000,000,000 15,000,000,000 10,000,000,000 5,000,000,000 0 2010 2011 2012 2013 2014
    35,000,000,000
    30,000,000,000
    25,000,000,000
    20,000,000,000
    15,000,000,000
    10,000,000,000
    5,000,000,000
    0
    2010
    2011
    2012
    2013
    2014

    Investment

    Return on Investment %:

    ROI %

    16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2010 2011 2012 2013 2014
    16.00%
    14.00%
    12.00%
    10.00%
    8.00%
    6.00%
    4.00%
    2.00%
    0.00%
    2010
    2011
    2012
    2013
    2014

    ROI %

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    Particular

    2010

    2011

    2012

    2013

    2014

    Deposit

    67,961,244,777

    81,152,374,463

    96,918,222,155

    98,229,442,528

    105,703,614,110

    Advance

    63,230,141,628

    73,107,385,390

    79,948,220,174

    88,167,205,831

    90,920,772,028

    Figure: 6.2

    120,000,000,000 100,000,000,000 80,000,000,000 60,000,000,000 Deposit Advance 40,000,000,000 20,000,000,000 0 2010 2011 2012 2013 2014
    120,000,000,000
    100,000,000,000
    80,000,000,000
    60,000,000,000 Deposit
    Advance
    40,000,000,000
    20,000,000,000
    0
    2010
    2011
    2012
    2013
    2014

    2.11 BOARD OF DIRECTORS:

    ALHAJ MD. NURUN NEWAZ

    Chairman

    MR. A.S.M. MAIN UDDIN MONEM

    Vice-Chairman

    MR. MD. ABDUL AWAL

    Director

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    MR. AMJADUL FERDOUS CHOWDHURY

    Director

    MR. S.M. ABU MOHSIN

    Director

    MRS. SOHELA HOSSAIN

    Director

    MR. ABDUS SALAM

    Director

    MR. GOLAM HAFIZ AHMED

    Managing Director & CEO

    MR. YAKUB ALI

    Director

    MR. MD. ABUL BASHAR

    Director

    MR. MD. HARUNUR RASHID

    Director

    MR. KHAIRUL ALAM CHAKLADER

    Director

    MR. MD. MOINUDDIN

    Director

    MR. MD. AMIRUL ISLAM, FCS, FCA

    Independent Director

    MR. K.A.M. HAROON

    Independent Director

    Figure: 2.7

    2.12 ORGANIZATIONAL STRUCTURE OF DHAKHINKHAN BRANCH:

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    A A D S S D s s s s i i s s t t
    A
    A D S S
    D
    s
    s
    s
    s
    i
    i
    s
    s
    t
    t
    a
    a
    n
    n
    t e e e
    t e
    V
    V
    i
    i
    c
    c
    e
    e
    P p
    P p n n
    r
    r
    e
    e
    s
    s
    i
    i
    d
    d
    e
    e
    n u
    n u i i
    t
    t
    a
    a
    n
    n
    d
    d
    M t o o
    M
    t
    a
    a
    n
    n
    a
    a
    g
    g
    e
    e
    r r i r r i
    M O O M
    a f f a
    n f f n
    a i i a
    g c c g
    e e e e
    2.13 ORGANOGRAM OF NCC BANK LTD
    Managing Director (MD)
    Deputy Managing Director (DMD)

    Executive Vice President (EVP)

    Senior Vice President (SVP)

    First Vice President (FVP)

    Vice President (VP)

    First Assistance Vice President (FAVP)

    Assistance Vice President (AVP)

    Senior Executive Officer (SEO)

    Executive Officer (EO)

    Senior Officer

    Management Trainee Officer

    Officer

    Junior Officer

    • 2.14 PRODUCT AND SERVICES

    The product and services that are currently available are given below.

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    2.14.1

    DEPOSIT PRODUCT

    NCC Bank Limited is now offering different types product for mobilizing the savings of the general people.

    2.14.2

    LOAN AND ADVANCE PRODUCT

    The NCC Bank is offering the following loan and advance product to the client for financing different purpose that fulfill the requirements of the bank and have well return to the investment as well as satisfy the client. The loan and advance products are:

    Working Capital Financing

    Commercial and Trade Financing

    Long Term (Capital) Financing

    House Building Financing

    Retail and Consumer Financing

    SME Financing

    Agricultural Financing

    Import and Export Financing

    2.14.3

    CARDS

    Debit card

    Credit card

    2.14.4

    REMITTANCE PRODUCTS

    Special Interest rate on Savings and Term Deposits

    Wage Earners Welfare Deposit Pension Scheme

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    Loans for Real Estate (Land purchase and House construction/renovation)

    Advance against Regular Remittance

    • 2.14.5 BROKERAGE HOUSE

    Member, Dhaka Stock Exchange Ltd. Full Service Depository Participant

    • 2.14.6 TREASURY SERVICE

    Primary Dealer of Govt. Approved Securities

    • 2.14.7 REMITTANCE SERVICE

    Correspondence arrangement with more than 330 Financial Institutions all over the World For Wage Earners Remittance we have Agency arrangement with 12 reputed Exchange Houses covering major Locations of our Expatriates

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    P a g e | 30 CHAPTER THREE: CREDIT MANAGEMENT 3.1 CREDIT

    CHAPTER THREE:

    CREDIT MANAGEMENT

    3.1 CREDIT

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    In line with the policy guideline issued by the Central bank from time to time, the bank formulates its own credit policy keeping it flexible to accommodate changes that are taking place. At present, several credit schemes are on the offer, which received quit well response from the customers and may help the bank to expand its customer base. The bank also engaging in syndication with other banks for allowing large loans converging Bangladesh bank‘s rules and regulation.

    The word credit comes from the Latin word “Credo” meaning “I believe”. It is a lender’s trust in a person’s/ firm’s/ or company’s ability or potential ability and intention to repay. In other words, credit is the ability to command goods or services of another in return for promise to pay such goods or services at some specified time in the future. For a bank, it is the main source of profit and on the other hand, the wrong use of credit would bring disaster not only for the bank but also for the economy as a whole.

    The objective of the credit management 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 needed 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 constituted the bank’s asset structure but also a vital factor of the bank’s success. The overall success in credit management depends on the banks credit policy, portfolio of credit, monitoring, supervision and follow-up of the loan and advance. Therefore, while analyzing the credit management of NCCBL, it is required to analyze its credit policy, credit procedure and quality of credit portfolio.

    CREDIT POLICY OF NCCBL

    One of the most important ways, a bank can make sure that its loan meet organizational and regulatory standards and they are profitable is to establish a loan policy. Such a policy gives loan management a specific guideline in making individual loans decisions and in shaping the bank’s overall loan portfolio. In NCC Bank Limited there is perhaps a credit policy but there is no credit written policy.

    CREDIT PRINCIPLES

    In the feature, credit principles include the general guidelines of providing credit by branch manager or credit officer. In NCC Bank Limited they follow the following guideline while giving loan and advance to the client. Credit advancement shall focus on the development and

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    enhancement of customer relationship. All credit extension must comply with the requirements of Bank’s Memorandum and Article of Association, Banking Company’s Act, Bangladesh Bank’s instructions, other rules and regulation as amended from time to time. Loans and advances shall normally be financed from customer’s deposit and not out of temporary funds or borrowing from other banks. The bank shall provide suitable credit services for the markets in which it operates. It should be provided to those customers who can make best use of them. The conduct and administration of the loan portfolio should contribute with in defined risk limitation for achievement of profitable growth and superior return on bank capital. Interest rate of various lending categories will depend on the level of risk and types of security offered.

    GLOBAL CREDIT PORTFOLIO LIMIT OF NCCBL

    The features which deals with how much total deposits would be used as lending the proportion of long term lending, customer exposure, country exposure, proportion of unsecured facility etc. the most notable ones are:

    The aggregate of all cash facility will not be more than the 80% of the customer’s deposit

    Long term loan must not exceed 20% of the total loan portfolio.

    Facilities are not allowed for a period of more than 5 (Five) years.

    Credit facilities to any one customer group shall not normally exceed 15% of the capital fund or TK. 100 cores

    3.2 LOAN AND ADVANCE SECTION

    Making advances is the primary function of a bank. A major portion of its funds is used for this purpose and this is also the major sources of bank’s income. Loans are the right to receive

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    payment or an obligation to make payment on demand or at some future time on account of the immediate transfer of goods (securities). Loans are the largest asset item, which generally account for half to almost three-quarters of the total value of all banks assets. A bank’s loan account typically is broken down into several groups of similar type loans. The Loan and Advances made by the NCCBL can broadly be classified by following categories-

    • 1. Continuous Loan

    • 2. Demand Loan

    • 3. Term Loan

    • 4. Other Special Scheme

    3.2.1 CONTINUOUS LOAN

    These are those advances which do not have any set schedule for drawing or disbursement but usually have a terminal date of full adjustment or repayment.

    • a) Cash Credit (CC)

    • b) Over Draft (OD)

    • 3.2.1.1 CASH CREDIT (CC):

    A Cash Credit (CC) is an arrangement by which the customer is allowed to borrow money up to a limit. This is a permanent arrangement and the customer need not draw the sanctioned amount at once, but draw the amount as and when required. They can put back any surplus amount, which they may find with them. Thus Cash Credit (CC) is an active and running account, which deposits and withdraws, may be affected frequently. Interest is charged only for the amount withdrawn and not for the whole amount charged. If the customer does not use the cash credit (CC) limit to the full extent, a commitment charge is made by the bank. This charge is imposed on the unutilized portion of Cash Credit (CC) only. Cash Credit (CC) provides an elastic form of borrowing since the limit fluctuates according to the needs of the business. Cash Credits (CC) are the most favorite mode of borrowing by large commercial and industrial concerns in our country. Cash Credit (CC) arrangements are usually made against the security of commodities hypothecated or pledged with the bank. There are two types of CC account:

    i).

    Cash Credit (Hypothecation)

    ii). Cash Credit (Pledge)

    • 3.2.1.2 OVER DRAFT (OD):

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    Overdraft (OD) is an arrangement between a banker and its customer by which the latter is allowed to withdraw over his credit balance in the current account up to an agreed limit. This is only a temporary accommodation usually granted against securities. The borrower is permitted to draw and repay any number of times, provided the total amount overdrawn does not exceed the agreed limit. The interest is charged only for the amount drawn and not for the whole amount

    sanctioned. A cash credit is differs from an overdraft in one respect. A cash credit is used for long term by businessmen in doing regular business whereas overdraft is made occasionally and for short duration. There are two kinds of overdraft.

    • a) Secured Over Draft

    • b) Unsecured Over Draft

    3.2.2 DEMAND LOAN

    The loan which become payable after serving demand notice by the bank concerned are termed as Demand Loan. There are five kinds of demand loan. These are given bellow:

    • a) Loan against Imported Merchandise (LIM)

    • b) Loan against Trust Receipt (LTR)

    • c) Payment against Documents (PAD)

    • d) Loan against Packing Credit

    • e) Loan against Investment

    LOAN AGAINST IMPORTED MERCHANDISE (LIM)

    Usually, importer fails to retire the documents in spite of repeated reminders of the banker or the bank has to clear the goods imported under the Letter of Credit at the request of the importer (borrower). In both the cases, whether the importer fails to retire the documents or request for clearance of goods, the outstanding under PAD or B/E is transferred to “Loan against Imported Merchandise (LIM)” account and the overdue interest from the date of accompanying Bills of Exchange or negotiating date to the date of transfer to LIM account is charged. At the time of opening of letter of credit the banks obtain from the importer an arrangement on stamped paper which provides for financing and if necessary, clearance and storage of goods by debiting importer’s account at their risk and responsibilities. After clearance, consignments are taken delivery by the importer on full payment of bank’s liability. Normally part delivery is not

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    allowed while on LIM account. When the delivery in part is desired by the importer, the LIM is converted into cash credit account retaining proper margin and executing charge documents.

    LOAN AGAINST TRUST RECEIPT (LTR)

    Under this arrangement, credit is allowed to the importer to retire documents and release the consignment from the customs authority against trust receipt keeping the goods under importer’s control.

    PAYMENT AGAINST DOCUMENTS (PAD)

    The bank that opens the letter of credit is bound to honor its commitment to pay for import bills when these are presented for payment, if drawn strictly in terms letter of credit. The foreign correspondent bank, who negotiates the documents, debits the account of the opening bank and, in fact, the amount thus stands advanced on behalf of the importer. The opening bank will lodge the shipping documents to their book and will respond to the debit advice originated by the foreign correspondent to the debit of “Payment against Documents (PAD)” account or “Bills of Exchange (B/E)” accounts and present the bill to the importer for payment.

    LOAN AGAINST PACKING CREDIT

    Packing credit is a short term advance granted by bank to an exporter for assisting him to buy, process, packs and ships the goods. The credit is gradually extended for payment of freight, handling charges, insurance and export duties. A packing credit advance does not normally extend beyond 180 days and has to be liquidated by negotiation/ purchase of the bills of exchange.

    LOAN AGAINST INVESTMENT

    In order to contribute to the development of the Capital Market of the country NCC Bank Limited extends credit facilities against pledge of Shares, Debentures, Prize Bonds, Bangladesh Bank Treasury Bills etc. to the individuals as well as to the Member of DSE & CSE.

    3.2.3 TERM LOAN

    These are loans which have a specific term for repayment as specified in the loan agreement.

    • a) Loan (General)

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    • b) Housing Loan

    • c) Project Loan

    • d) Transport Loan

    • e) Small Business Loan Scheme

    • f) Personal Loan Scheme

    LOAN (GENERAL)

    In case of loan general, the bank advances a lump sum for a certain period at an agreed rate of interest. The entire amount is paid on an occasion either in cash or by credit in his/her current account which he/she can draw at any time. The interest is charged for the full amount sanctioned whether he/she withdraws the money from his/her account or not. The loan may be repaid in monthly installments or at the expiry of a certain period.

    HOUSING LOAN

    A large amount of money needed to construct a house or purchase an apartment. It is not possible to of all people to construct a house by only own income sources. Especially this problem largely faces by middle level and fixed income people. To solve this problem, NCCBL’s offer Housing loan with easy repayment condition and less interest rate.

    PROJECT LOAN

    NCC bank Ltd has their project loan scheme. Though they do not invest in project loan extensively but now they are planning on project loan. Because project loan is huge investment and it completely depends on success of the project for that reason bank always keeps eye some major factor before invest on project loan. Before invest on project loan Bank always who is the people involves in the project Security standard of the borrower. Then bank looks for the feasibility report of the project. Borrower has to completely show the feasibility report to the head office. In the feasibility report borrower has to show them what the mission of the project, who are the target customer, comparative analysis of the project with other same project, how the project meets the demand of the target customer, for which purpose the loan is asking for, detail information of the project operation, detail price list of the equipment, approximate repayment planning by the borrower. Branches do not have any authority to sanction any amount of loan for Project loan. Branch can only asses the project feasibility, evaluate the client check the necessary papers and collect it from the client. After getting the entire necessary papers branch makes a proposal for the loan and send it to the head office. Head office then re-evaluate the proposal with necessary papers. Then head office again inspects the project. After getting all the

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    evaluation head office then send the sanction letter to the branch. Loan amount then disburse from the branch. Branch has to do the regular monitoring until the whole loan amount is repaid.

    TRANSPORT LOAN

    NCC Bank Ltd was an investment company before the conversion in a bank. So they have good idea about lease financing. Transport loan is fallen under the lease financing, though it is called transport loan but it is actually fallen under leasing term and condition. NCC Bank Ltd does not have any car loan scheme for individual clients, they had this scheme but the scheme is completely stopped for the time being. Process of transport loan is more or less similar to project loan. Borrower has to apply for the loan in prescribed bank application form. In the application form borrower must mention which vehicle he wants to buy and what’s the quantity. Borrower also has to provide detail price list of the vehicle, insurance paper for each vehicle, possible repayment planning of the loan; list of collateral, list of hypothecation of securities and other necessary papers depends on clients and number of vehicles. After getting all necessary papers and field inspection branch makes a proposal for the loan and sends it to the head office. Head offices then again check the necessary papers and do the field inspection. After inspection if Head Office thinks that for sanction of the loan they need more papers and securities, borrower has to provide those papers. Branches usually do not have any authority to sanction any amount of loan amount branch only disburse the amount and do the regular monitoring whether the vehicle is purchased, is they quotation match with the real one, vehicle is in the route and more importantly borrower is repaying the installment regularly.

    SMALL BUSINESS LOAN SCHEME

    Small businessman take place a large portion in our country. More of them are honest, energetic and hardy. In the absence of sufficient capital more of them cannot manage their business properly. They have not sufficient asset to make a security against loan, as a result they are failure to take a loan from bank or other financial assistance institution. If a loan give to them with easy terms and condition then this energetic small businessman not only manage and increase their business properly but also they take important role in development of our country. To meet up this purpose, NCCBL start Small Business Loan Scheme.

    PERSONAL LOAN SCHEME

    Fixed income employee’s of various firm or company need urgently financial assistance for the following purpose-

    Marriage purpose

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    Education purpose

    Advance against Salary

    Education Loan

    Travel Loan

    Especially meet up this financing by own income source is very difficult for middle class people. To solving these problems NCCBL introduce Personal Loan Scheme for Salaried Person.

    3.2.4 OTHER SPECIAL SCHEME

    NCCBL Operate some kind of loan scheme as well to contribute the overall economy, poverty alleviation and fulfill some basic needs of the people. The special loan schemes are:

    • a) Consumer Scheme

    • b) Lease Finance

    • c) Micro credit financing

    CONSUMER SCHEME

    The Scheme aims at improving the standard of living of the fixed income group. Under the scheme the clients may secure loan facilities at easy installments to procure household amenities.

    LEASE FINANCING

    An entrepreneur, under this scheme, may avail of the lease facilities to procure industrial machinery (without having to purchase it by down payment) with easy repayment schedule. The clients also get special rebate in their income-tax payment under the scheme. Lease financing is one of the most convenient long term sources of acquiring capital machinery and equipment. It is a very popular scheme whereby a client is given the opportunity to have an exclusive right to use an asset, usually for an agreed period of time, against payment of rent. Of late, the lease finance has become very popular in almost all the countries of the world. An obvious advantage of the lease is to use an asset without having to buy it. The lessee is obligated to make lease payments until the expiration of the lease agreement, which corresponds to the useful life of the assets. In a capital scarce economy like ours, Lease Financing is suitable for firms to acquire Capital Machinery, Equipments, Medical Instruments, and Automobiles etc. And thereby employ own resources more advantageously in some other investments. Lease financing

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    also helps a firm to reap significant economic benefit through tax saving and by reducing the risk of the equipments becoming obsolete due to the technological advancement.

    MICRO CREDIT FINANCING

    To fulfill its commitment to play a vital role in socio economic development of the country NCC Bank Ltd has introduce a small and medium credit scheme for its customers. The objective of the scheme is:

    To encourage and develop medium and small entrepreneurs

    To provide credit with minimum complexity

    To generate employment.

    Under the scheme, NCC Bank Ltd. is providing loan:

    To meet working capital

    To purchase capital machinery and for expansion of business and for purchasing household durably.

    The Scheme covers the following areas of options:

    Agriculture sector: Seed or crop loan, Poultry and Fisheries, Fish processing, Plot, Fish storage and Marketing Project, with processing project etc.

    Small and Cottage Industry:

    Handicraft maker, Blacksmith, Fishing net weaver,

    handloom industry, Goldsmith, watch assembling project, mineral water plant etc. Service Industry: Transportation, medical service provider, different type of shop

    owners, hotel and restaurant owners, vocational training center etc. Household durable and Consumer credit: Electric equipment, Electronics, Vehicles,

    Furniture, medication and Hospitalization, cookeries etc. Information Technology Sector: Computer and Computer accessories purchase for

    household use, selling up of Computer training institute, Software development for exporting purpose, Software development for local business and household users.

    Energy Sector:

    Household purchase of substitute energy like UPS, IPS, Stabilizer,

    Battery

    etc.

    Biogas

    technology, solar electricity producing plant, small electricity

    production etc.

     

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    Documentation is obtaining such agreement where all the terms and condition and securities are written and signed by the borrower. It specifies rights and liabilities of both the banker and the borrower. In documentation each type of advances requires a different set of documents. It also differs with the nature of securities. The documents should be stamped according to the stamp Act. There are no hard and fast rules of documentation and it varies from bank to bank. Generally, the documents are taken in the case of a secured advance by NCCBL:

    Demand promissory note: Here the borrower promises to pay the loan as and when demand by bank to repay the loan.

    Letter of arrangement.

    Letter of continuity. Letter of hypothecation of goods and capital machinery’s. Stock report: This Report is

    used for OD and CC. In this report, information about the quality and Quantity of goods hypothecated is furnished. Memorandum of deposit of title deed of property duly signed by the owners of the

    property with resolution of Board of Directors of the company owning the landed. Personal guarantee of the owners of the property.

    Guarantee of all the directors of the company.

    Resolution of the board of directors to borrow fund to execute documents and completes

    other formalities Form no. XVII/XIX for filling charges with the register of joint stock companies under

    relevant section. Letter of Revival

    Letter of lien for advance against FDR.

    3.4 CREDIT RISK MANAGEMENT POLICY:

    The Credit Risk Management Policy is a statement of basic principles that govern the extension and administration of Credit. The main purpose of this policy document is to set out yardsticks for and spell out standard practices regarding management of Credit risk. As such, it specially addresses the following areas:

    • a) Establishing an appropriate Credit environment,

    • b) Setting up a sound Credit approval process,

    • c) Maintaining an appropriate Credit administration, measurement and monitoring process,

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    • d) Ensuring adequate over Credit risk.

    3.4.1 CREDIT EVALUATION PRINCIPLES

    Some principles or standards of lending are maintained in approving loans in order to keep credit risk to a minimum level as well as for successful banking business. The main principles of lending are given below:

    Liquidity:

    Liquidity means the availability of bank funds on short notice. The liquidity of an advance means it repayment on demand on due date or after a short notice. Therefore, the banks must have to maintain sufficient liquidity to repay its depositors and trade off between the liquidity and profitability is must.

    Safety:

    Safety means the assurance of repayment of distributed loans. Bank is in business to make money but safety should never be sacrificed for profitability, to ensure the safety of loan. The borrower should be chosen carefully. He should be a person of good character & capacity as well as bank must have to maintain eligible number of security from borrower.

    Profitability:

    Banking is a business aiming at earning a good profit. The difference between the interest received on advances and the interest paid on deposit constitutes a major portion of the bank income, besides, foreign exchange business is also highly remunerative. The bank will not enter into a transaction unless a fair return from it is assured.

    Intent:

    Banks sanction loans for productive purpose. No advances will be made by bank for unproductive purposes though the borrower may be free from all risks.

    Security:

    The security offered for an advance is an insurance to fall bank upon in cases of need. Security serves as a safety value for an unexpected emergency. Since risk factors are involved, security coverage has to be taken before a lending.

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    National interest:

    Banking industry has significant role to play in the economic development of a country. The bank would lend if the purpose of the advances can contribute more to the overall economic development of the country.

    • 3.4.2 PRE-DISBURSEMENT COMPLIANCE

    When the credit proposal are approved the credit officer must have to be ensured that the disbursement of the credit facilities must comply with the directions written in the credit policy and circular made by time to time along with checking all the following terms and conditions. The officer of Loan Administration must collect the acceptance of the customer’s of the terms and conditions on the duplicate copy of the sanctioned advice. They will thoroughly examine and ensure that the subject credit facility does not contradict to any law, rules and regulation of the country, Bangladesh Bank and Deed of the Mortgage and power of the Attorney to be drafted and executed under the Supervision of the Bank’s Legal Advisor. Lawyers certificate to the effect that all the legal formalities (Equitable/ Registered Mortgaged) has been properly created on the land and building in favor of the bank & bank has acquired the effective title of the property. Registered power of attorney has been collected from the borrower (contractor) assigning the work order favoring the NCCBL and the power of attorney has been registered with the work order given agency and they have agreed that they will issue all the cheques favoring NCCBL. The legal documents of the vehicle have been obtained. Collection of the satisfaction certificate in respect of all the documents both legal and banking from the lawyer. Entry has been made in the Safe-in and Safe-out register and the documents are preserved. After being satisfied all the above terms and conditions the credit in-charge will disburse the loan amount to the client.

    3.4.3 SCOPE:
    3.4.3
    SCOPE:

    This policy document will be applicable for issues related to Credit risk with respect to both direct and indirect Credit products of traditional banking sector.

    • 3.4.4 SUPERSEDING POWER:

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    If any provision of this policy document contradicts with the instructions contained in Credit operational Manual or any existing circular, the Credit risk management policy will supersedes and be held.

    • 3.4.5 AMENDMENT OF THE POLICY:

    The directors of the bank will review the Credit risk management policy at least annually and make in view of the dynamic nature of banking business, the bank’s Credit Risk Management Policy and procedures are evolutionary in nature and should be subject to ongoing review, modification and revision. This Credit risk Management policy will be amended, revised as and when warranted to accommodate the changes in the market condition, cyclic aspect of the economy, government policy, industry demand, central bank regulation and experience of the bank in managing Credit risk. For this purpose, the boards adopt necessary amendment.

    • 3.4.6 ACCESS TO THE POLICY:

    This policy document is categorized as a confidential one will be officially distributed to the executives/officers working in the corporate Banking and Credit risk Management Division(computing of Credit Risk Review Department, Credit Administration Department and recovery department) of both Branch and Head office. It will also distributed to all Deputy Managing Directors, Senior Executive Vice President, Executive Vice President.

    • 3.4.7 PRODUCT AND SERVICES:

    The Bank shall sell suitable Credit products and services in the market. For this purpose, Bank will design new product from time to time, reengineer the existing ones to keep the same competitive in the market. While designing new products and/or reengineering the existing ones Bank will always take into consideration the customers’ demand. Product innovation and/or reengineering shall be continuous process.

    • 3.4.8 LOAN-DEPOSIT RATIO:

    Loans and advances shall normally be financed from customers deposit and sometimes from capital fund of the Bank. However, it will be ensured that loan-deposit Ratio should not exceed 90% at any particular point of time and regulatory compliance of CRR/SLR would be maintained. Generally loans and advances shall not be extended out of temporary fund of borrowing from money market.

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    The Management will revise and prepare periodically Risk Acceptance criteria (RAC) duly

    approved by the executive committee/Board and disseminate to the concerned executives at operational level. In preparation of RAC the following area would be covered with flexibility for deviation by the competent authority:

    • a) Maximum amount in cash type of facility line

    • b) Maximum limit to a single obligor and group

    • c) Acceptable Leverage, Current ratio, Interest coverage, Operating margin for an industry

    • d) Geographical location

    • e) Security and support

    National Credit and Commerce Bank Ltd. will extend Credit only to qualified borrowers where the amount and intended purpose are clear and legitimate. Credit facilities shall be allowed in manner that the expansion in Credit does not compromise the asset quality of the bank.

    • 3.4.10 DEVIATION:

    Any deviation from the Credit Policy of the Bank must be justified in the proposal and well documented, especially, all Credit assessment form shall invariably include the deviation from the policy, if any, and proposal that does not comply with the Credit risk Management Policy should be approved by Head office. However, no regulatory regulations shall be compromised.

    • 3.4.11 RETURN:

    Credit operation of the Bank should contribute return at optimum level within the defined risk limitation. In other words, Credit facilities should be extended in such a manner that each deal becomes a profitable one so that Bank can achieve its targets and has a superior on capital. Besides, Credit extension shall focus on the development and enhancement of customer’s relationship and shall be measured on the basis of the total yield for each relationship with a customer.

    • 3.4.12 SINGLE CUSTOMER EXPOSURE LIMIT:

    An important element of risk management is to establish exposure limits for single obligors and group connected obligors. To spread the risk to ensure that funds of the Banks are not used form limited number of clients. Bangladesh Bank has laid down guidelines. As per prevailing regulation, Bank will take maximum exposure (outstanding at any point of time) on a single customer (individual, Enterprise, Company, corporate organization, Group) for the amount not exceeding 35% of Bank’s total capital. However, for single customer of the export sector maximum exposure limit shall be 50% of the total capital subject to the condition that total funded facility shall not exceed 15% of the total capital of the bank at any point of time. National Credit and Commerce Bank Ltd. will follow the ceiling set by Bangladesh Bank. However, size of any Credit limit in each case shall be fixed after proper assessment of genuine Credit requirement of the customer within the maximum allowable limit

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    3.4.13

    LARGE LOAN:

    Credit facility to single customer (individual, Enterprise, Company, Corporate, organization, Group) shall be treated as large loan if total outstanding amount against the limits at a particular point of time equals or exceeds 10% of the total capital of the Bank. NCCBL’s total large loan exposure shall not exceed 56% of the total outstanding funded loans and advances at any point of time or as per guidelines of Bangladesh Bank.

    • 3.4.14 DIVERSIFICATION AND SECTOR ALLOCATION:

    The portfolio shall be well diversified to reduce the risk of dependence on a particular sector. The management will review periodically the existing sartorial performance, economic trends both local and global with respect to that sector, industry saturation, Industry structure, Geographical advantage, Government policy, Risks specific to the industry etc to provide guidelines for annual industry/Sector allocation in Credit portfolio. At the annual budget, Industry/Sector lending limits/Caps will be fixed and approved by the appropriate authority to provide directional guidelines to the Relationship Managers.

    • 3.4.15 MAXIMUM TENOR:

    Maximum tenor for any continuous loan shall be 1(one) year which is renewable at maturity or within the validity period upon satisfactory performance of the customer. Period of any term loan shall be fixed on case to case basis considering repayment capacity, projected cash flow, payback period etc.

    • 3.4.16 SECURITY:

    Bank will try to have as much security coverage as possible against and every Credit facility sanctioned to the customers. Security taken against Credit facility shall be properly valued and legally enforceable in accordance with the laws of the country, security requirement will be determined on case to case basis based on customer’s business strength, level of risk bank is undertaking. However, Bank will always prefer to have security equivalent to 1.25 times of the total funded limit. Security may be in the following forms subject to restrictions of regulatory authority:

    • 1. Bank deposit.

    • 2. Gold/Gold ornaments

    • 3. Government Bond

    • 4. Guarantee given by government of Bangladesh

    • 5. Bank guarantee

    • 6. Land and Building

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    • 8. Stock

    • 9. Machinery and equipment

      • 10. Charge on the fixed and floating asset

      • 11. Part-passu charge on fixed and floating assets

      • 12. Corporate guarantee of another company backed by Board Resolution.

      • 13. Personal Guarantee

      • 14. Bill of receivables

      • 15. Ownership of Vehicles/assets

      • 16. Life Insurance policy

      • 17. Post Dated Cheque

      • 18. Trust receipt

      • 19. Others as demand acceptable by the approving authority.

    3.4.17 GENERAL COVENANTS:

    While sanctioning Credit facility, Bank will set some covenants, some of the covenants will be general and others will be specific to a particular Credit facility and/or customer. General covenants may be as follows:

    All expense (including legal, professional and out of pocket expenses) incurred in the

    negotiation, Preparation, execution and enforcement of sanction advice and the documents referred to the sanction advice shall be on the account of the borrower. The bank should be authorized to debit all sort of fees from the Borrowers account without prior permission of the Borrower. Moreover, the bank may be debit the account of the Borrower for paying the insurance premium on behalf of the Borrower and the Borrower shall have the right to proceeds of such insurance. Ownership structure of the borrower shall not be changed without prior approval of the

    Bank. By accepting the offer of the Bank, the borrower should confirm and undertake that it is

    not enjoying any other available lines of Credit from any lender, apart from those disclosed in writing to the Bank. Any repayment whether in part of full, will be attributable first towards servicing interest

    which has accrued on the facilities and then to the principal. The Borrower should confirm that during the continuance of the facilities by the Bank to

    the Borrower, It will advise the bank prior to any commitment for availing of any additional line(s) of Credit from any other banks. The customer shall not go for expansion without consent of the Bank.

    The customer shall not withdraw profit without consent of the Bank.

    The customer shall submit financial statements within 30 days after you ending.

    Other covenant as set by the sanctioning authority.

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    3.5 ADVANCE

    The different types of securities that may be offered to a banker are as follows:

    • (a) Immovable property

    • (b) Movable property

    Pratiraksha Sanchaya Patra, Bangladesh Sanchaya Patra, ICB unit certificate, Wage

    earner development bond. Fixed Deposit Receipt

    Shares quoted in the Dhaka Stock Exchange and Chittagong Stock Exchange.

    Pledge of goods

    Hypothecation of goods, produce and machinery

    Fixed assets of manufacturing unit.

    Shipping documents.

    3.5.1 TYPES OF ADVANCE

    SECURITIES
    SECURITIES

    Loans Lien or various kinds of Sanchaya patras, Govt. Securities, FDR, Collateral of immovable property, shares quoted in stock exchange Overdraft, Pledge or hypothecation of machinery, land and building on which machinery are installed, stock in trade, goods products and merchandise. Bills purchased, Bills it.

    MODES OF CHARGING SECURITY:

    A wide range of securities is offered to banks as coverage for loan. In order to make the securities available to banker, in case of default of customer, a charge should be created on the security. Creating charge means making it available as a cover for advance. The following modes of charging securities are applied in the NCC Bank Limited.

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    LIEN
    LIEN

    A lien is right of banker to hold the debtor’s property until the debt is discharged. Bank generally retains the assets in his own custody but sometimes these goods are in the hands of third party with lien marked. When it is in the hand of third party, the third party cannot discharge it without the permission of bank. Lien gives banker the right to retain the property not the right to sell. Permission from the appropriate court is necessary. Lien can be made on moveable goods only such as raw materials, finished goods, shares debentures etc.

    PLEDGE
    PLEDGE

    Pledge is also like lien but here bank enjoys more right. Bank can sell the property without the intervention of any court, in case of default on loan, But for such selling proper notice must be given to the debtor. To create pledge, physical transfer of goods to the bank is must.

    HYPOTHECATION

    In this charge creation method physically the goods remained in the hand of debtor. But documents of title to goods are handed over to the banker. This method is also called equitable charge. Since the goods are in the hand of the borrower, bank inspects the goods regularly to judge it s quality and quantity for the maximum safety of loan.

    MORTGAGE:

    Mortgage is transfer of interest in specific immovable property. Mortgage is created on the immovable property like land, building, plant etc. Most common type of mortgage is legal mortgage in which ownership is transferred to the bank by registration of the mortgage deed. Another method called equitable mortgage is also used in bank for creation of charge. Here mere deposit of title to goods is sufficient for creation of charge. Registration is not required. In both the cases, the mortgage property is retained in the hank of borrower.

    TRUST RECEIPT

    Generally goods imported or bought by bank's financial assistance are held by bank as security. Bank may release this lien / pledge these goods against trust receipt. This means that the borrower holds goods in trust of the bank; trust receipt arrangement is needed when the borrower is going to sell these goods or process it further but borrower has no sufficient fund to pay off the bank loan. Here proceeds from any part of these goods are deposited to this bank.

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    ADVANCES AGAINST WORK-ORDER

    Advances can be made to a client to perform work order. The following points are to be taken into consideration. The client’s management capability, equity strength, nature of scheduled work and feasibility study should be judiciously made to arrive at logical decision. If there is a provision for running bills for the work, appropriate amount to be deducted from each bill to ensure complete adjustment of the liability within the payment period of the final bill besides assigning bills receivable, additional collateral security may be insisted upon. Disbursement should be made only after completion of documentation formalities and fulfillment of arrangements by the client to undertake the contract. The progress of work under contract is reviewed periodically.

    ADVANCES AGAINST APPROVED SHARES:

    Credit facilities to extend against shares will be called “Investment Scheme against Shares”. Advance may be allowed against shares of companies listed with the Stock Exchange Ltd. Subject to margin or may other restrictions imposed by Bangladesh Bank/Head Office of the bank from time to time. Value of shares & margin should be worked out as per guidelines issued from time to time by Bangladesh Bank / Head Office of the bank.

    ADVANCES AGAINST FIXED DEPOSIT RECEIPTS:

    Advance against Fixed Deposit Receipt will be subject to credit Restrictions imposed from time to time by Head Office / Bangladesh Bank. Scrutinize the Fixed Deposit Receipts with regard to the following points.

    The Fixed Deposit Receipt is not in the name of minor.

    It is discharged by the depositor on revenue stamp of adequate value & his Signature is verified.

    Creation of liability on Fixed Deposit issued in joint names by any one of the Depositors is regular.

    If the Deposit Receipt is offered as a security for allowing advances, a letter of lien shall be obtained from the depositors, on the appropriate form.

    If the Deposit Receipt has been issued by the branch-allowing advance, lien against that specific Deposit Receipt to be marked in the fixed Deposit Register of the branch.

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    The discharged receipt, the letter of lien duly verified by the issuing branch & the letter confirming registration of the lien on the deposit receipts shall be kept along with other documents under safe custody of the bank.

    3.6 OBJECTIVE BASIS OF CLASSIFICATION

    In classifying the loan and advance there are four classes in the loan review Practiced in NCC Bank Limited. They are as follows

    UNCLASSIFIED:

    The loan account is performing satisfactorily in the terms of its installments and no overdue is occurred. This type of loan and advances are fall into this class.

    SUBSTANDARD:

    This classification contains where irregularities have been occurred but such Irregularities are temporarily in nature. To fall in this class the loan and advance has to fulfill the following factor.

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    P a g e | 51 The main criterion for a substandard advance is that despite

    The main criterion for a substandard advance is that despite these technicalities or Irregularities no loss is expected to be arising for the bank. These accounts will require close supervision by management to ensure that the situation does not deteriorate further.

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    DOUBTFUL:
    DOUBTFUL:

    This classification contains where doubt exists on the full recovery of the loan and advance along with a loss is anticipated but cannot be quantifiable at this stage. Moreover if the state of the loan accounts falls under the following criterion can be declared as doubtful loan and advance.

    P a g e | 52 DOUBTFUL: This classification contains where doubt exists on the full

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    BAD AND LOSS:

    A particular loan and advance fall in this class when it seems that this loan and Advance is not collectable or worthless even after all the security has been exhausted. In the following table the criteria to be fulfilled to fall in this category are summarized:

    P a g e | 53 BAD AND LOSS: A particular loan and advance fall in

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    CHAPTER FOUR:

    RISK ASSESSMENT

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    4.1 RISK ASSESSMENT

    The primary purpose of a bank is to borrow money from those who have a surplus funds then lend this money out to those who are in need of funds. It is essential that when it lends out money than the bank has a certain confidence that the money will be repaid at the given time, together with interest. Risk assessment of analysis is all about understanding the risk associated with lending money. Until and unless risks are not assessed and measured it will not be possible to control risks. The primary factor determining the quality of the Bank’s credit portfolio is the ability of each borrower to honor, on timely basis, all credit commitments made to the Bank. This must be accurately determined by the authorized Credit Officers/Executives prior to approval. Therefore a thorough credit risk assessment shall be conducted prior to the sanction of any credit facilities.

    • 4.1.1 ASSESSMENT FREQUENCY:

    A comprehensive Credit Assessment (Due Diligence) shall be conducted before sanction of any loan. Thereafter, it will be done annually for all types of credit facilities i.e. Demand Loan, Continuous Loan and Term Loan.

    • 4.1.2 ASSESSMENT DOCUMENTATION:

    The result of the Credit Assessment shall have to be presented in the Credit Assessment Form enclosed in -2. Initially, it will be originated by the Relationship officer of the Branch and reassessed in corporate Banking Division. Credit Review Department of Credit Risk Management Division will review the risk factors and facility structure to determine that all the risks have been properly assessed and Risk mitigation have been and all bank’s policy requirement and regulatory requirements have been addressed. All evidences or Credit assessment have to be filed properly in the respective Credit File.

    • 4.1.3 ACCOUNTABILITY:

    The Relationship Manager (presently Head of Branch) shall be the owner of the customer relationship and he held responsible to ensure the accuracy of the entire credit application/assessment form submitted for approval. He/she will be responsible for conducting due diligence on the borrower, Filling up Credit Assessment form:

    Bank requires sufficient information to enable comprehensive assessment of the true risk profile of the borrower. Hence, Credit Assessment Form must be filled in with accurate information in full. No field in the assessment form should be erased or left vacant. If information, is not available, concerned field should be filled in with” information not Available” with proper justification.

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    4.1.4

    CREDIT REQUIREMENT:

    Credit Requirement of the borrower must be assessed properly. The relationship officer will apply prudence to find out actual credit requirement of the borrower and place his/her findings in the Credit Assessment Form.

    • 4.1.5 REPAYMENT SOURCE:

    Repayment source of the borrower is to be validated in the Credit Assessment Form by cash flow and other financial analysis. For such analysis, at least three years financials are to be reviewed. Loan amount and tenor must commensurate with repayment capacity of the borrower.

    • 4.1.6 COLLATERAL:

    Collateral offered against a credit facility shall properly be valued and verified by the concerned Relationship Officer and/or Relationship Manager and revalued and re-verified annually in the subsequent period(s). In addition to the valuation of the Relationship Officer/Manager, the same collateral must be valued and verified by an enlisted surveyor of the Bank if the total credit facility to the concerned customer exceeds Tk 25.00 lac (Taka Twenty Five Lac). Any valuation of collateral must be supported by the photograph and site map, where applicable.

    • 4.1.7 INSURANCE COVERAGE:

    Adequacy and extent of insurance coverage must be assessed in the Credit Assessment Form. Customer’s preference for not taking required insurance policy must be justified properly and it must be mentioned as deviation. The policy must be obtained from approved of the Bank.

    • 4.1.8 ADHERENCE TO POLICY:

    It should be clarified whether the customer has agreed to comply with bank’s internal policy and external regulatory requirements. Any deviation from the policy or other internal or external requirements must be justified properly and mentioned as Deviation in the Credit Assessment Form. Furthermore, the originating officer will affix a declaration in the Credit Assessment Form that the proposal does not contradict with any rules and regulations of the Bank, Banking Companies Act, any circulars of Bangladesh Bank etc.

    • 4.1.9 SYNDICATE LOAN:

    Proposal for syndicated loans shall be analyzed with respect to risk return in the same manner as directly sourced loans. In case of participation in a syndication deal, Bank will independently assess the proposal and will not solely depend on the credit assessment of the Lead Arranger.

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    4.1.10

    CHANGES IN PRICING:

    Any changes in the pricing of an existing credit facility must be highlighted and to be justified in the Credit assessment form.

    • 4.1.11 OTHERS:

    Finally, detailed and complete Credit Risk Assessment for each facility and customer relationship is of paramount importance. The steps that should be followed in carrying out such an assessment are set out in the Credit Operational Manual and in Head office circulars issued from time to time. No proposal shall be put up for approval unless there has been a complete written analysis. It is of the responsibility of the originating officer to collect all necessary documentation before the facility request is sent to the competent authority for approval.

    4.2 CREDIT RISK GRADING:

    While providing credit facility to a customer, Bank undertakes many risks among which credit risk is considered to be the most important one. Bank needs to manage the credit risk inherent in the entire portfolio as well as the risks in individual credit of transaction. One of the strategies employed in managing credit risk is Credit Grading of borrower accounts. Credit Risk Grading framework is essential to avoid the limitation associated with a simplistic & broad classification of loans informs “good” or a “bad” category. Credit Risk Grading helps a bank to understand various dimension of underlying risk involved in different credit transaction. The Risk Grading framework is used for following purposes:

    Single point indicator of diverse risk factors of a loan portfolio and talking credit decision in constant manner.

    It’s a tool for measurement of various risks associated with lending. It provides basis for risk

    pricing and fixation of rate of interest on lending to different borrowers based on their credit rating. Reveals the weak parameters based on the points scored.

    Facilitates the bank to monitor/focus on the weaker areas and follow up with the borrower for bringing improvement.

    To identify the parameters which have improved/deteriorated by comparing with earlier tatting?

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    Overall health of the advances

    Basis for setting non-price terms of loans and also present meaningful information for review

    and management of loan portfolio. Assessing the aggregate risk profile of a bank.

    4.2.1 NCCBL’S RISK GRADING FRAMEWORK:

    Effective risk management requires an accurate and forward looking estimation of the probability of default over the next 12 months. It should be noted that Credit Risk Grading is not a replacement of comprehensive credit appraisal. Credit Risk Grading is a dynamic process for measuring credit risk to help the sanctioning authority in taking decisions. All credit proposals whether new or renewal must be supported by Credit Risk Grading. It will encompass the following two things:

    • a) Risk grading scorecard and

    • b) Risk grading sheet

    No proposal will be processed until Risk Grading is completed, submitted for approval and the result is shown in proposal. It is the responsibility of the originating officer to ensure that analyzes has been carried out with authentic and reliable information.

    4.2.2 RISK GRADING SCORECARD:

    As per instruction of Bangladesh Bank, Risk Grading Scorecard has been developed for all exposures of NCCBL (irrespective of amount) other than those covered under consumer and small Enterprise Financing Prudential Guidelines and also under the Short Term Agricultural and Micro-Credit. The Score Card will be updated if required. The score of the risk grading scorecard will be weighted one. These are 5 broad head rating components and separate parameters have been set to measure borrower’s position against each component. Score Cards are tools to determine a borrower’s aggregate score based on assessment of quantitative and qualitative factors. Score Cards shall records the Assigned rating through a combination of the Aggregate Score as well as exercise of judgment. Judgment plays an important role in the scoring of qualitative factors as well as recommendations made to change the risk rating in case of disagreement. It should be noted that industry volatility is a key driver in the Risk Grading as it has been proved that the probability of default is higher in industries with higher volatility. However, since there is no acceptable industry average of key financials and industry volatility factor is absent, the matter has not been included in the present Risk Grading Score Card. A snapshot of Principal Risk Component and Corresponding Parameters and weight assigned to each Component is as follows:

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    SL no.

    Components

    Parameters

    Weight (%)

    1)

    Financial Risk

    • a) Leverage

    50

    • b) Liquidity

    • c) Profitability

    • d) Coverage

    2)

    Business Risk

    • a) Turnover of Business

    18

    • b) Age of Business

    • c) Business Outlook

    • d) Technology/Resource

    • e) Industry Growth

    • f) Inventory/Receivables

    • g) Market Competition

    • h) Entry/Exit Barriers

    3)

    Management

    • a) Business Experience

    12

    Risk

    • b) Expertise of the Management

    • c) Second line/Succession

    • d) Team Work

    4)

    Security Risk

    • a) Security Coverage (Primary)

    10

    • b) Security Coverage (FSV)

    • c) Security Coverage (Location)

    • d) Support/Guarantee

    5)

    Relationship

    • a) Account Conduct

    10

    Risk

    • b) Utilization of limit

    • c) Compliance

    of

    Covenants/Conditions

    The Relationship officer of the Branch will prepare Risk Grading Scorecard in case of new proposal, renewal and/or enhancement of existing facility, any deterioration in the borrower’s business position, any breach of contract by the borrower or as and when he/she feel it necessary. In addition, aggregate weighted score of the customer is to be affixed in the relevant field of the Credit Assessment Sheet.

    4.2.3 RISK GRADING:

    After preparation of Risk Grading Scorecard, concerned Relationship Officer will assign risk grade to the customer within the following definition of Credit Risk Grading:

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    Risk Grade

    Numeric Grade

    Definition

    Superior-Low Risk

    1

    Facilities are fully Secured by cash deposits, government bonds or a counter guarantee from a top tier international bank. All security

    documentations are in place.

    Good Satisfactory Risk

    2

    The repayment capacity of the borrower is strong. The borrower has excellent liquidity and low leverage. The company demonstrates consistently strong earnings and cash flow. Borrower has well established market and very good management skill. All security documentation should be in place. Aggregate Score of 85 or greater based on the Risk

    Grade Scorecard.

    Acceptable-Fair Risk

    3

    These borrowers are not as strong as Grade-2 borrowers, but should still demonstrate consistent earnings, cash flow and have good track record. Borrowers have adequate liquidity, cash flow and earnings, Credit is normally be secured by acceptable collateral (stocks/debtors/equipment/property), Acceptable management. Acceptable parent/ sister company guarantee. An aggregate score

    of 75-84 based on Risk Grade Scorecard.

    Marginal-Watch list

    4

    Grade-4 assets warrant greater attention due to conditions affecting the borrower, the industry or the economic environment. These borrowers have an above average risk due to strained liquidity, higher than normal leverage, thin cash flow and/or inconsistent earnings. Borrower incurs a loss, loan payments routinely fall past due, account conduct is poor, or other untoward factors are present. Weaker business credit and early warning signals of emerging business credit detected. An Aggregate Score of 65-74 based on the Risk grade Scorecard.

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    Special Mention

    5

    Grade 5 assets have potential weaknesses due to conditions affecting borrower, industry or economic condition and deserve management’s close attention. If left uncorrected, these weaknesses may result in a deterioration of the repayment prospects of the borrower. Facilities should be downgraded to 5 if sustained deterioration in financial condition is noted (consecutive losses, negative net worth, excessive leverage), if loan payments remain past due for 30-60 days, or if a significant petition or claim is lodged against the borrower. Full repayment of facilities is still expected and interest can still be taken into profits. An Aggregate score 55-64 based on the Risk Grade Scorecard.

    Substandard

    6

    Financial condition is weak and capacity or inclination to repay is in doubt. These weaknesses may jeopardize the full settlement of loans. Loans should be downgraded to 6 following Bank Criteria of classification. An Aggregate Score of 45-54

    based on the Risk Grade scorecard.

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    Doubtful

    and

    Bad(non-

    7

    Full repayment of principal and interest is

    performing)

    unlikely the possibility of loss is extremely high. However, due to specifically identifiable pending factors, such as litigation liquidation procedures or capital injection, the asset is not yet classified as loss. Bangladesh Bank criteria of classification should apply. An Aggregate score of 35-44 based on the Risk Grade Scorecard.

    Loss(non-performing)

    8

    Assets graded 8 are long outstanding with no progress in obtaining repayment or in the later stages of wind up/ liquidation. The project of recovery is poor and legal options have been pursued. The proceeds expected from the liquidation or realization of security may be awaited. The continuance 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 credit and it is basically worthless asset even though partial recovery may be affected in future. Bangladesh Bank guideline for timely write off of bad loans must be adhered to. An Aggregate Score of 35 or less based on the

    Risk Grade Scorecard.

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    CHAPTER FIVE:

    CREDIT APPRAISAL

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    5.0 CREDIT APPRAISAL

    Credit Appraisal is the systematic scrutinizing and evaluation of a potential borrower’s proposal for the purpose of sanctioning credit to the person seeking the credit. The sanctioning depends on the purpose of borrowing, rationality of borrowing, borrower’s financial capability, capability of repaying the loan, collateral provided as security and other factors. A close scrutiny, examination and evaluation are made to reach the decision whether the person should be given credit or not. Before sanctioning a credit, a proposal is to go through process, which is discussed below.

    5.1 CREDIT APPRAISAL PROCEDURE/LENDING CRITERIA

    Commercial /Marketing viability

    Technical viability

    Financial viability

    Social acceptance

    These criteria are discussed separately below:

    Commercial /Marketing viability

    Considerations here are- Market prospect and potential for

    the

    product has to

    be fully assured

    at

    competitive prices. Marketing channels existing for the product should be accessible to the entrepreneurs. Technical viability

    Considerations here are- Technical process proposed should preferably by a proven one.

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    The project should be technically sound and environment-friendly.

    Technology transfer in case of borrowed know-how ought to be ensured.

    Building should be well planned and well constructed at a suitable location. Financial viability

    Considerations here are- There should be reasonable debt-equity ratio as determined by the Bank on individual case basis. The project should be found viable in financial analysis done by the Bank such as Ratio Analysis, IRR Analysis, and Break-even Analysis etc. Economic viability

    Considerations here are- The project should benefit the national economy be creating employment and increasing income. Savings/Earnings of foreign currency may give an additional dimension Social acceptance Considerations here are- The project should be socially acceptable, should benefit the society without creating any social, ethical, environmental, and ecological disturbance or pollution.

    5.2 PROCEDURES OF SANCTIONING CREDIT

    Obtaining a loan application from the customer on bank’s prescribed form duly filled and signed by the proprietor/partners/directors. Submission of all required documents/papers mentioned in the application form.

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    Visiting the business site of the customer by the bank authority; verifying the particulars, which are furnished with the application and ascertain of the customer honesty, integrity and business dealings directly and through other sources also. Examination of the turnover/transactions of the account of the customer seeking loan. Collecting report on borrower and its sister concerns from the Credit Information Bureau of Bangladesh Bank; obtaining credit report from local bank and financial and credit institutions. Preparation of appraisal report for all credit proposals. Following the lending criteria in appraising advance proposal. Issue of the sanction letter in duplicate incorporating all the terms and conditions to the customer with an endorsement of a copy of letter to head office after obtaining Clean Credit Report and being satisfied regarding land, building and other assets/properties to be mortgage or hypothecated and prima-facie genuineness and correctness by scrutinizing the documents, title deeds and other relevant papers and if the sanctioning of loan is within the discretionary power of the branch. If the limit is beyond the manager’s power they will forward the proposal to head office giving specific comments and recommendation for approval. Lending Risk is to be analyzed as per prescribed format, which is supplied by Bangladesh Bank if the credit amount is ten million and above. LRA is to be forwarded along with the proposal. On receipt of Head Office approval, branch will issue sanction advice duplicate to the customer and obtain one copy should be preserved with security documents. Documentation formalities needs to be completed before disbursement If the customer accepted the terms and conditions.

    5.3 STEPS INVOLVED TO SANCTIONING A LOAN:

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    • 2. Then (3) three additional form to be filled up.

    Inquiry form-CIB 1A (Provides such information as amount for fresh loan or

    renews the loan.) Inquiry form- CIB 2A (If the applicant is an institution; all the information to be

    provided by the owner) The inquiry form CIB-3A (Seeks the applicant to supply information of group or

    related business concern)

    • 3. Then the applicant gives a list of assets which can be kept as collateral. The applicant will declare in faith that such assets offered as collateral are owned by the business owner and are not already kept as collateral to other financial institution against any sanction of loan or credit limit.

    • 4. Then the bank makes the valuation of fixed assets (to be kept as collateral) to be assessed and valued by independent inspection services. The inspection company submits the survey report and provides an independent valuation of the assets that were offered as collateral.

    • 5. Then the bank will perform a lending risk analysis or LRA. The LRA is a kind of assessment where some scoring is made on various risks to which the applicant’s business or project is exposed. The scoring result is arriving at the level of risks of the business or project. A detailed discussion or LRA is made later.

    • 6. After the lending risk analysis net worth is calculated by subtracting total liabilities from total assets. This net worth is calculated both for the organization and for the individuals including the Managing Directors and Directors.

    • 7. A prescribed form ‘Form B’ is to be filled in by case of proposal for loans and advances for individuals, proprietorship, partnership limited company(private or public), other bank’s loan proposal acceptance certificates. If the applicant has received any sanction of loan or advance from other banks a certificate showing such acceptance of loan proposed must be submitted.

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    5.4 LOAN DISBURSEMENT STEPS

    • - Accounts must be opened before disbursement of loan in the respective bank.

    • - Documentation: Conditions--

    Rate of interest

    Security (Primary and collateral provided should be duly insured)

    Personal guarantee of the owner

    Execution of Delivery of Promissory Note and other usual charge document /agreement undertaking Registered power of attorney in favor of the bank to sell mortgage property without the consent of the court or the owner of the property Other conditions- - Comprehensive Insurance Policy on the property of the company covering FRSD in the joint name of the bank must be provided. Submission of Loan Utilization Report, Progress Report, and Annual Accounts as and when asked for by the bank. Providing Report on Stock Position, Sales and Production Statement on monthly basis and also providing Balance Sheet of the Company annually. Completion of all documentation formalities by the firm and taking of disbursement within 6 months from the data of sanction letter. Failing to do so will result in cancellation of the Credit automatically. Loan is subject to not having any liability with other banks.

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    CHAPTER SIX:

    CREDIT MONITORING AND RECOVERY PROCESS OF NCCBL

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    6.1 CREDIT MONITORING PROCESS:

    Credit monitoring is a formal program for reviewing all exciting loans regularly, frequently, critically that is essential to the continued success of banks portfolio. Once the loan is disbursed, risk remains and continues until the borrowing is fully repaid and the loan should be continuously watched over. These include keeping track of borrows compliance with Credit terms, identifying early signs of irregularity and monitoring timely repayments. Steps involved in monitoring process are as follows:

    Daily passed due statement should be generated from the system to another the relationship to take proactive steps at an early stage. Branch should sent at least weekly past due statement either by email or courier service to Credit administration department who in turn place a consolidated statement before additional managing director/ managing director if the system failed to generate the centrally.

    Accounts activity of the Credit facility should be monitored critically either relationship manager frequently or monthly by the CAD officer to understand whether the risk commensurate with the business. Any exceptions observed by CAD officer should be reported to Credit administration department, Head Office.

    Monthly statement should be prepared with observation for LTR/ LIM/ PAD facilities and should be reported to Head of Credit Risk Management Division. Exceptions should be reported to the addition Managing Director/managing director

    To ensure that borrowers business is being satisfactorily conducted, physical inspections are to be conducted half yearly basis by the relationship officer/ relationship manager as the case may be. Business call report to prepare and to be maintained in Credit file with a copy to Credit Risk Management Division/ Co-operate Banking Division. Exceptions should be reported to Additional Managing Director/ Managing Director.

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    Large unit, where aggregate facilities is above taka 5 crore would be inspected by head of Credit Risk Management Division or his nominated executive once in a year but at least three months before the annual review date.

    Borrowers Business or management of Accounts along with covenant mentioned in the section in the section letter should be reviewed on half yearly basis and exception should be reported to Additional Managing Director/ Managing Director.

    Inventory, aging of receivables and pledged goods, trend in sale and market position of the goods and deposit of sale proceeds should be monitored closely.

    Comparative study of financial statements should be made in order to ascertain whether the figures matched with the accounts turnover, sales, Profitability, debt servicing, liquidity and cash flow situation should be reviewed.

    Call reports shall be analyzed to ensure that the affairs of the business of the borrowers

    are being run on expected borrower.

    line

    and there

    is no material

    change in the status of the

    It is to be mentioned here that Managing Director may constitute separate body to monitor the problem accounts closely as identified and the affairs of large accounts.

    6.2 EARLY ALERT REPORTING:

    As per present system of classification, any continuous loan or demand loan will be considered as SMA if it remains unpaid for 90 days from the due date. In case of Term Loans with 5 years’ time limit, if the amount of defaulted installment is equal to or more than the amount of installments due within 3(three) months the entire loan will be treated as SMA. Despite a product Credit approval process, loan may still trouble. The reasons and symptoms in respect of borrower’s inability to meet its commitment occur, much earlier. The essence of good Credit

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    management lies in early problem recognition, leading the bank to take corrective measure to protect asset quality through prompt remedial. An “Early Alert Account” is one that has risks or potential weakness of a material nature requiring monitoring, supervision, or close attention of the management. If such weaknesses are left uncorrected, they may result in deterioration of the repayment prospects for the asset or in the Bank’s Credit position at some future date with a likely prospects of being downgraded to Grade 5 or worse (Impaired status), within the next twelve months. Therefore, in order to protect and improve the quality of Bank’s portfolio, a more pro active approach needs to be adopted. An early warning system in the form of “Early Alert Account” is being instituted to cover the gap between Current and SMA categories. “Early Alert Account” is not a classified account but reflects the weakness in Credit, which requires to be addressed. Also it requires an assessment of the borrower’s ability to rectify the problem within reasonable time frame, and thus improve its position as Creditor.

    First and foremost requirement for any or all relationship officers/Managers of the originating unit are to identify a problem Credit in its early stages by recognizing the signs of deterioration. Such signs include, but not limited to, the following:

    Non-payment of interest or principal or both on due dates or past dues beyond a reasonable period or recurring past dates.

    In Case of Overdrafts, (or Cash Credits of similar facility), no movement in the account beyond a reasonable period.

    Deterioration in financial condition of the client, as gathered from client’s late financial statements.

    A shortfall in collateral coverage, particularly if the collateral was a key factor in decision making or the loan was predicted on the sole factor of collateral.

    Death, illness or withdrawal/removal of key owner’s or management personnel

    Adverse market report about the company or its principal owners.

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    The symptoms of early alert shown in Annexure-19 are by no means exhaustive and hence, if there are other concerns, such as a breach of loan covenants or adverse market rumors that warrant additional caution, an Early Alert report should be raised. An account may be reclassified as a regular account from Early Alert Account status when the symptom, or symptoms, causing the Early Alert classification have been regularized or no longer exist. The concurrence of the CRM approval authority is required for conversion from Early Alert Account status to Regular Account status.

    6.3 RECOVERY PROCESS OF PROBLEM ACCOUNT:

    It is important that once a credit is classified it should be monitored and administrated properly with a clear action plan for recovery/upgrade. Once an account is classified following regulatory definition or objective criteria by the concerned Relationship Manager/ Branch Managers/ of independently by the head of Credit Risk Review Department. If the bank feels that legal action is warranted at any stage, then the account will directly be referred to legal Division in consultation with Head of Recovery Department and Head of Credit Risk Management Division. As soon as the account is downgraded to sub-standard status from SMA, the same should be transferred to the Recovery Department under Credit Risk Management Division, Head office in the following manner:

    Within 7 days of and account being classified/downgraded t Sub-standard (grade-6), shall be transferred to Recovery department.

    Recovery Department would get the copy of the credit files from the Branch (keeping the original with the Branch) of classified account form formulating necessary action. Transfer of Account responsibility will take place via a standard format called Classified Account Transfer form shown in Annexure-17.

    Representative of Recovery Department would review the documentation following Documentation checklist to ensure that all loan documentation is in place.

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    Representative of recovery department would meet the customer, and if required, review the stock Report and conduct stock inspection of accounts to arrive at an effective action plan form recovery/upgrade.

    Representative of Recovery Department will prepare a classified credit review report, CCR Annexure-18 within 15 days of the transfer. The CCR should be approved by the Head of Credit Risk Management Division, and copied to the Head of corporate Banking and to the Branch/office where the loan proposal was originated. This initial CCR should highlight any documentation issues, loan structuring weaknesses, proposed workout strategy, and should seek approval for any loan loss provisions that are necessary.

    The recovery department of Credit Risk Management Division will manage accounts with sustained deterioration (a Risk Grade of sub-standard (6 or worse). Sometimes, as per recommendation of the Credit administration Department and corporate Banking Division the Management may decide to transfer some SMA Accounts form effective supervision or EXIT accounts graded 4-5 tp the Recovery Department form efficient exit. Whenever an account is handed over form corporate banking division/ Relationship Management to Recovery Department, a Classified Account transfer form (Annexure-17) will be prepared. Down grading should be done immediate Ely and should not be postponed until the annual review process.

    6.4 REPORTING OF CLASSIFIED ACCOUNTS:

    • 1. Accounts, which are once classified but not upgraded or recovered, are to be separately reported on a quarterly basis by Recovery Department of Credit Risk Management Division to Additional Managing Director and Managing Director.

    • 2. Recovery Department should submit monthly results on recovery status on all existing and newly classified Accounts to Head of Credit Risk Management Division, Additional Managing Director and Managing Director.

    • 3. Recovery Department should submit quarterly report of newly Classified Accounts to Additional Managing Direction/Managing Director

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    CHAPTER SEVEN:

    SWOT ANALYSIS

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    7.0 SWOT (STRENGTH, WEAKNESS, OPPORTUNITY & THREATS):

    SWOT analysis is an important tool for evaluating the company’s Strength, Weaknesses, Opportunities, and Threats, it helps the organization to identify the how to evaluate its performance and scan the micro environment, which in turn would help the organization to navigate in the turbulent of competition.

    7.1 STRENGTH:

    INNOVATION:

    The major strength of NCCBL is product innovation. They have introduced new product every year. Their innovative product creates a positive image. In this year they have introduced the Festival loan for the business man and the salaried person to meet their extra finance during the Festival period i.e. Eid-ul-Fitr, Eid-ul-Azha, Durga Puza that highly appreciated among the customers.

    TOP MANAGEMENT:

    The top management of the bank is a key strength for the NCCBL and the contributed heavily towards the growth and development of the bank. The top management officials all have reputed of banking experience, skill and proficiency.

    COMPANY REPUTATION:

    NCCBL has created a standing in the banking industry of the country chiefly among the new corners. NCCBL has already established a firm grip in the banking sector having tremendous growth in the profits and deposits within a phase of five years.

    SPONSORS:
    SPONSORS:

    NCCBL has been founded by a group of prominent entrepreneur of the country. The sponsor’s directors belongs large industrial conglomerates of the country. The giant name in director’s list is Nurul Islam, owner of Sanawara Corporation, Abdul Halim the owner of Prime Group.

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    MODERN FACILITIES AND ONLINE BANKING:

    From the very beginning of the NCC Bank tried to furnish their work surroundings with modern equipment and facilities. For the speedy services to the customer NCC has installed money- counting machine in teller counter. The bank has already started online banking operation.

    STRING OF BRANCHES:

    From the formative stage NCC tried to furnish their branches by impressive style. These well decorated branches get attention of the potential customers; this is one kind of strategy. The Gulshan branch, Dhanmondi branch is also impressive and is comparable to foreign banks.

    GOOD CUSTOMER SERVICE:

    Good customer services are another major strength of the NCCBL. They provide a one- stop service. In a highly competitive market the quality of service rendered by the bank to their valued customers is absolutely vital to ensure growth of both deposits loans and advances.

    INTERACTIVE CORPORATE CULTURE:

    The corporate culture of NCCBL is very much interacting compare to our other local organization. These interactive environments encourage the employees to work attentively. Since the banking job is very much routine work oriented, NCC’s friendly, interactive and also lovely environment boosts up the work capability of the employees.

    ALLIANCE IN ATM:

    ATM is the fastest growing modern banking concept. NCC has launched ATM along with seven other contemporary banks jointly which gave the product more acceptability.

    7.2 WEAKNESS:

    ADVERTISING AND PROMOTION:

    Advertising and promotion is the one of the weak point of NCC. NCC does not have any effective truck for aggressive marketing activities. This lacking pushes the bank far behind the form the other competitor.

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    LIMITED NETWORK:

    NCC has limited branches. Now 104 branches are operating over the country. Bank should open their branches in prime locations. They have to target some effective area in which they can enhance their profit.

    • 7.3 OPPORTUNITY:

    DIVERSIFICATION:

    NCC can pursue a diversification strategy in expanding its current line of business. The management can consider can option of starting merchant banking or diversify into leasing and insurance. By expending business portfolio, NCC can shrink business risk. Also they can build some ATM machine for giving extra benefit to customers.

    CREDIT CARDS AND TELE BANKING:

    These are the new retail banking services provided by the foreign banks. NCC can evaluate the option of launching credit cards and Tele Banking system.

    • 7.4 THREATS:

    CONTEMPORARY BANKS

    The contemporary banks of NCC like Prime Bank, Dhaka Bank and Southeast Bank, One Bank, are its major rivals. They are carrying out aggressive campaign to attract lucrative corporate clients as well as big time depositor. NCC should remain vigilant about the steps taken by these banks, as this will in turn affect NCC strategies.

    MULTINATIONAL BANK:

    The rapid expansion of multinational bank poses a potential threat to the PCB’s. Due to the booming energy sector more foreign banks are expected to operate in Bangladesh. Moreover the already existing foreign banks such as Standard Chartered and CITI NA are new pursing an

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    aggressive branch expansion strategy. Since the foreign bank has tremendous financial strength, it will pose a threat to local banks to a certain extent in terms of grabbing the lucrative clients.

    UPCOMING BANKS:

    The upcoming local private banks can also pose threats to the PCB’s. The govt. has planned to permit new banks. It is expected that in the next few years more local private banks may emerge. If that happens the intensity of competition will rise further and banks will have to develop strategies to compete against foreign banks. Like as Meghna Bank, Jamuna Bank, etc.

    DEFAULT CULTURE:

    Default culture is very much familiar to our country. For a bank is very harmful NCC has not faced seriously yet. However the bank grows older it may be ill with this situation.

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    CHAPTER EIGHT:

    FINDINGS AND ANALYSIS

    8.0 FINDINGS:

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    After analyzing the whole report we come up with some finding. Some of the tasks in NCC Bank do very much traditional. If we compare them with other local banks like City bank, Eastern Bank, Brac Bank, Prime bank we came to know about this. With the modern computerized system they make their works easier than the NCC Bank. NCC Bank follows the same old process to save their data and they do their whole operation manually where other banks are doing with their computer. Some findings are given below

    While working at NCC Bank, Dhakhinkhan Branch, I have attainted to the newer kind of experience. After the collecting and analyzing of data I have got some findings. Those findings are completely from my personal point of view. Those are:

    Branch Manager Conscious efforts to achieve the targets and knows how to motivate employees and how to represent the Bank well in the local community.

    The employees of the bank are young, energetic, co-operative and friendly. Their dealings with the clients are co-operative and friendly which create positive perception about the

    bank in the clients mind. The bank uses some modern technology such as: Fax, Telex, and SWIFT. So, their

    service is better than most of the bank. The credit & investment analysts have a strong background in accounting financial

    statement analysis, business law and economics along with good negotiating skills. This

    lessens the possibility of bad debt. The loans and deposits of this bank are rising at an impressive rate.

    The Customer service of NCCBL is very much impressive than other financial institution.

    Special schemes like consumer deposit scheme, monthly saving scheme etc. are very popular.

    The working environment of the office is very nice.

    The bank provided online banking in all branches .The operations of the Bank are

    computer oriented to ensure prompt and efficient services to the customers. Cost of fund is high in this branch.

    In NCCBL, customers can open DPS within the first ten days of a month. The web-site of NCCBL is updated. NCC Bank Limited should properly advertise and Communicate to public about the

    services provided by it. So that, more customers will be attracted. They save their all kinds of data in papers.

    They find the interest suspense account through their computer but manually they check

    those out. Sometimes very simple work is done by the head office which takes time and make

    difficult. Sometimes verification is done by a new officer which dangerous both for the bank and

    the branch office.

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    All types of loans and their problems and prospects which provided by NCC Bank Ltd at are given below:

    8.1 CC HYPO (CASH CREDIT HYPOTHECATION)

    National Credit And Commerce Bank Limited security falls under this type of lending. It is a continuous credit. It is allowed Linder the categories.

    #

    Commercial lending - when the customer is other than an industry.

    #

    Working capital when the customer is an industry.

    Problems of the Cash Credit Hypothecation:

    Lengthy documentation procedure. For this reason many customers feel boring to get this type of loan.

    Many customers submit duplicate land documents.

    This type of loan amount cannot do for further investment.

    Prospects of Cash Credit Hypothecation:

    Highly secured loan.

    Gain high interest from this type of loan.

    Day by day income will be increase for this type of loan.

    8.2 CC PLEDGE (CASH CREDIT PLEDGE) UNDER SME

    Problems of Cash Credit Hypo under SME:

    This type of loan provided only for personal guarantee.

    Highly unsecured loan

    If fault, it is difficult to recover.

    Credit employee feels tension from this type of loan.

    Prospects of Cash Credit Hypo under SME:

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    Their repayment systems are monthly. As a result after every month loan amount decreases and also risk decrease.

    Repayment is invested in further purposes and bank earns money.

    To solve unemployment problem and contribute SME business in Bangladesh.

    8.3. OVERDRAFT (SOD)

    In this branch three type of SOD:

    • a) SOD (Financial Obligation)

    • b) SOD (General)

    • c) SOD (FDR)

    Problems of SOD:

    Less interest rate

    Prospects of SOD:

    Fully secured loan

    Against FDR, Savings and Deposits these type of loan are taken.

    To help customer in their necessity of loan without condition.

    To contribute customers benefit.

    To businessman for expansion of their business

    8.4 LOANS AGAINST HOUSE BUILDING:

    Problems of loans against house building:

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    * Documents are not clear

    * Difficult to sell mortgage property when needed.

    Prospects of loans against house building:

    * Highly secured loan

    * Repayment can be further investment

    * Earn high interest rate

    * Contribute on Country’s development

    • 8.5 REAL ESTATE FINANCING FOR CRB:

    Real estate financing for Construction of Residential Building Loan are provided against high document of land and properties.

    Problems of real estate financing for CRB:

    Incorrect document

    Political pressure

    Repayment not pay due time

    Prospects of real estate financing for CRB:

    To increase residential building

    To help people for solving accommodation problem

    If fault, can be sold asset.

    • 8.6 LEASE FINANCING:

    Problems of Lease Financing: