Credit Risk Analysis of Rupali Bank

Internship Report
On
Credit and Credit Risk Analysis of Rupali Bank Limited
Submitted To
Department of Finance
Jagannath University
Dhaka
Supervisied By
Nafisa Rounok
Assistant Professor
Submitted By:
Salek Sardar
2nd Batch
ID.07882755
Date of Submission: November 05, 2012

Letter Of Transmittal
November 05, 2012
Nafisa Rounok
Assistant Professor
Dhaka
Subject: Request for Accepting the Internship Project.
Sir,
I have the pleasure to submit my internship report on Rupali Bank Ltd. According to your
instruction, I am proposing to conduct the :Credit And Credit Risk Analysis of Rupali Bank
Ltd.”
The banking sector in Bangladesh has been growing rapidly since the 1990s under intense
rivalry. Credit Management or the Management of Loans and Advances is very crucial for a
commercial bank as successful loans are good sources of interest income while non-
performing loans may endanger the profitability of bank. Risk and Capital Management is
also necessary as risk management deals with the core risk i.e. Credit Risk, Asset Liability
Management, Foreign Exchange Risk, Money Laundering Risk, Internal Control and
Compliance Risk and Information and Communication Technology Risk and Capital
management ensures that the bank’s capital structure is least costly and appropriate to the risk
exposure. Through this report, I intend to analyze the management procedures of credit, and
Credit Risk of Rupali Bank Ltd.
I will put my best efforts to apply the theoretical concepts in real life situation. I am sure to
thoroughly enjoy preparing this report as a partial requirement of this course. If you need any
clarification, I will be obliged to provide you with further information.
Regards,
Salek Sardar
ID No: 07882755

ACKNOWLEDGEMENT
First of all, I would like to express my deep gratitude to the GOD for fruitfully preparing this
Internship Report.
It was a great pleasure to prepare project paper on the various aspects of credit activities and
operations by Rupali Bank Limited. I would like to thank and convey my gratitude to
honorable Supervisor, Nafisa Rounok Assistant Professor , Business Administration
Department, Jagannath University, for letting me to prepare this report. I would also like to
express my sincere appreciation to her for her support and guidance and comprehensive
feedback.
I am also grateful to the management of Rupali Bank Limited for offering me the Internship
Report. My special thanks to Abu Naser Md Masud, Immadiate past Manager (Nayatola
Branch), Sk.Md. Alauddin, Manager (Nayatola Branch) Selina Sultana Senior Officer
Humayun Ahmed senior officer Md Fahad AL Haque Patwary Senior Officer ,Md Liyakot
hossain Officer and many more.
I am also owed to each person who I bothered inside and outside of RBL,Nayatola Branch, in
Carrying out of this report.
Salek Sardar

DECLERATION
I do hereby solemnly declare that the work presented in this Internship Report has been carried out
by me and has not been previously submitted to any other University / College / Organization for an
academic qualification / Certificate /Diploma or Degree.
I further undertake to indemnify the university against loss or damage arising out of the breach of
the fore going obligation.
Salek Sardar
ID No: 07882755

Supervisor’s Certificate
This is to certify that the Internship Report on “An empirical analysis on credit risk of Rupali
bank limited” in the bonafide record at the report is done by Salek Sardar, ID No-07882755,
as a partial fulfillment of the requirement Bachelor of Business Administration (BBA)
degree..
The report has been prepared under my guidance and is a record of the bonafide work
Carried out successfully.
.
……………………………
Signature of the Supervisor
Nafisa Rounok
Assistant Professor
Dhaka

PREFACE
Theory is obviously a big fact for practical implication. But without practical practice theory
may become useless. Particularly as a student of Business Administration, we need to
practice the theories we learn through every semesters for the better understanding of
business & economic environment. Considering the facts, our course instruction has taken the
initiative to assign every student to analyze and to submit a report on the basis of my practical
experiences that I acquire in the 12 weeks Internship on Rupali Bank Ltd.
I enjoyed the Internship and done my report in a friendly atmosphere and under special care
of my honorable Madam Nafisa Rounok.
Salek Sardar

Executive Summary
Credit risk is an essential factor that needs to be managed. Credit Risk Management needs to
be a robust process that enables banks to proactively manage credit portfolios in order to
minimize losses and earn an acceptable level of return for shareholders. ‘Credit and Credit
Risk Analysis’ has become an important topic in banking and financial sectors. Risk is
inherent in all aspects of a commercial operation; however, for Banks and financial
institutions, credit risk is an essential factor that needs to be properly managed.
In formulating a credit judgment and making quality Credit Decisions, the lending officer
must be equipped with all information needed to evaluate a borrower’s character,
management competence, capacity, ability to provide collaterals and external conditions
which may affect his ability in meeting financial obligations.
In this report I tried to review the Credit facilities and credit risk management systems, credit
risk grading etc. for the banks. Researcher has also made an effort to identify the problems
and limitations of credit risk management systems as well as find out the causes of loan
defalcation tendency of Bangladesh. Eventually, researcher chalks out a sort of findings and
recommendation for improvement of credit risk management systems so that bank’s may
attain common standards for credit risk management that’s why loan defalcation in banking
sector may diminish.

Table of Contents
Chapter Particulars Page No.
Letter of Transmittal
Acknowledgement
Preface
Executive Summary
Chapter One 1.1 Introduction 13
1.2 Rationale of the study 13
1.3 Scope of the Study 14
1.4.Objectives of the report 14
1.5.Methodology 15
1.6.Limitations of the study 16
Chapter Two Background of Banking Industry and Overview of

Rupali Bank
2.1.Background of the Banking Industry 18
2.2.Present Status of Banking Industry 19
2.3.Banking Structure of Bangladesh 20
2.4.Overview of RBL 21
2.5.Mission of RBL 21
2.6.Vision of RBL 21
2.7.Core values of RBL 21-22
2.8.Strategic Objectives 22
2.9.Eithical Principles 22-23
2.10.Corporate Information of RBL 23-24

2.11.Board of Directors of RBL 25
2.12.Organizational Hierarchy 26
2.13.Products and services in Rupali Bank 28-31
2.14. Job Responsibilities 32
Chapter Three Credit Activities of Rupali Bank Limited
3.1.Credit 34
3.2.Credit Policy of RBL 34
3.3.Functions of Credit department 35
3.4.Mechanisam of Credit distributions of RBL 35-36
3.5.Disbursement 36-37
3.6.Credit Monitoring and Reviewing 37-38
3.7.Credit Analysis 38-40
3.8.Types of Credit facilities offered by RBL 40-49
3.9.Security 50
Chapter Four Loan Recovery
4.1.Policy of Loan Recovery 52
4.2.Loan Recovery Procedure 52-53
4.3.Cause of Loan Recovery 53-54
4.4.Suggesstion for Recovery 54
Chapter Five Credit Performance Evaluation of RBL
5.1.Loans & Advances of RBL 56
5.2.Growth of loans & advances 57
5.3.Deposits of RBL 58
5.4.Deposit Portfolio 59
5.5.Credit to Deposit Ratio Analysis 60-61
5.6.Concentration of loans & advances in Total 62

Assets
5.7.Regressions-Coefficients between loans & 63
Deposits
5.8.Industry wise loans & advances 64
5.9.Sector wise loans & advances 65
5.10.Classified Loans 66

5.11.Non performing loans & advances to Total loans 67-68
&advances
Chapter Six Credit Risk Analysis
6.1.Credit Risk 70
6.2.Overview of Credit Risk Management 70-72
6.3.Risk Grading 72-75
6.4.Credit Rating Report of RBL 75-79
Chapter Seven Overall Performance of RBL
7.1.Performance at a glance 81
7.2.Return of Equity 82
7.3.Return on Assets 83
7.4.Asset Utilization Ratio 84
7.5.Equity Multiplier 85
7.6.Some other Profitability Performance 86
7.7.CAMEL Rating 87-93
Chapter Eight SWOT Analysis 95-96
Recommendation 97
Conclusion 98
Bibliography 99
Appendix 100-106

List of table
Table no. Topic Page no.
1 Corporate Information of RBL 23
2 Board of Directors 25
3 Rupali Milestones 27
4 Interest Rate of Deposits 28
5 Interest Rate of Loan 49
6 Loans & advances of RBL 56
7 Growth of loans & advances 57
8 Deposits of RBL 58
9 Deposits Portfolio 59
10 Credit-Deposits Relationship 60
11 Credit to Deposit Ratio Analysis 61
12 Total loans & advances to Total Assets Ratio 62
13 Regressions Coefficients between loans and Deposits 63
14 Industry wise loans & advances 64
15 Sector wise loans & advances 65
16 Interest income and Loans & advances 66
17 Classified Loans 66
18 Non performing loans to Total Loans 67
19 Performance at a glance 81

List of figure/graph
Figure no. Topic Page

no.
1 Sources of Data 15
2 Banking Structure of Bangladesh 20
3 Trend of Loans & advances 56
4 Trend of Growth of Loans & advances 57
5 Trend of Deposits of RBL 58
6 Trend of Deposit Portfolio 59
7 Trend of Credit Deposit Relationship 60
8 Trend of Credit to Deposit Ratio Analysis 61
9 Trend of loans & advances to Total Assets 62
Ratio
10 Trend of Industry wise loans & advances 64
11 Trend of Sector wise loans & advances 65
12 Interest income and loans & advances 66
13 Trend of Classified loans 67
14 Trend of non performing loans to total loans 68
15 Return of Equity 83
16 Return on Assets 84
17 Assets Utilization Ratio 85
18 Equity Multiplier 86
19 Trend of Profitability performance 87

Chapter-1
Introduction of the
Report

Chapter-1
1.1.Introduction:
Rupali Bank Ltd. was constituted with the merger of 3 (three) erstwhile commercial banks
i.e. Muslim Commercial Bank Ltd., Australasia Bank Ltd. and Standard Bank Ltd. operated
in the then Pakistan on March 26, 1972 under the Bangladesh Banks (Nationalization) Order
1972 (P.O. No. 26 of 1972), with all their assets, benefits, rights, powers, authorities,
privileges, liabilities, borrowings and obligations. Rupali Bank worked as a nationalized
commercial bank till December13, 1986. Rupali Bank Ltd. emerged as the largest Public
Limited Banking Company of the country on December 14, 1986.
1.2.Rationale of The Study:
Banking sector is one of the strongest economic sectors in our country. Banks provide
necessary funds for executing various programs to enhance the economic development. They
collect savings of large masses of people scattered throughout the country, which in the
absence of banks would have remained idle and unproductive. These scattered amounts are
collected, pooled together and made available to commerce and industry for meeting the
requirements. Economy of Bangladesh is in the group of world’s most undeveloped
economies. To overcome our obstacles in banking sector we need to focus on the loan &
advance facilities of credit department which is very important in this globalize world.
Rupali Bank Ltd is one of the leading private commercial banks having a spread network to
be in line with its objectives where it works as a blend of development and commercial bank.
My study on this bank will give an edge on my professional learning. So, the importance of
my study on loan procedure of Rupali Bank Ltd is beyond explanation.
In addition, this study will also open an opportunity for the student of business administration
for future studies. The study will also enrich the store of information of University library as
it contained huge information about Rupali bank limited(especially about the credit
Department). Finally the study will give a feedback to the industry people to understand the
business in the banking industry.

1.3. Scope of the study:
The report commences with the outline of the organization in focus, presenting the mission
and vision, individual department job responsibilities, Credit Risk Management & Credit
Risk Analysis related issues are discussed in detail along with their results and possibilities.
In this report is all the aspect of credit risk management has been discussed detailed by those
the management can take decisions regarding modifying their plans for granting loans and
can strengthen the relationship with the business environment as well as with the stakeholders
and clients.
1.4.Objectives of the Report:

Internship is a prerequisite for the completion of BBA degree. It is the preparation time for
me to get a practical exposure and be prepared to achieve my future career goals as a
successful banker. Without objectives any study cannot be a productive one. So before
preparing the report I would like to set up my objectives as follows:
The report has two objectives:

1. General Objective
2. Specific Objective
General objective of the report:
To get a clear idea about the different issues regarding loan & advances and credit risk of
Rupali bank limited.
Specific objective of the report:
The specific objective of this report is to find and analyze the Credit facilities (its
outstanding, recovery, classified loans etc), approval and monitoring process of Rupali Bank
Limited, Local office. It will also include gathering an idea about the securities behind the
loan facilities and issuing different bank guarantees. The detail objectives of my study are as
follows-
To access the credit structure of banks in practice.
To identify the relationship with their customers.
To identify the loan recovery performances of the selected banks.
To find out the deposit utilization problems.

To find out the implementation of credit risk management policy of the
selected banks.
To find out the unsound credit according to the credit risk management
policy.
To determine the core risk areas of commercial banks.
To know how to manage those risks.
To justify the capital adequacy.
To analyze the capital structure of the bank.
1.5.Methodology:
To make the Report more meaningful and presentable, two sources of data and information
have been used widely.
Source of Data
PRIMARY SECONDARY
DATA DATA
Figure 1.1: Sources of data
Primary Data:
It is obvious that the research will require a lot of primary data. Interviews will be conducted
on the managers of the bank for insights and clarification. The clients of the bank will also be
interviewed as they are one of the primary data sources.
Secondary Data: A lot of secondary resources will also be used. This will provide a
theoretical basis of the report. Secondary sources of data are as follows –
Annual reports of RBL.
Credit rating report of RBL by credit rating information & services limited.
Desk report of the related department.
Credit manual information.

Different reference books of the library.
Some of my course elements as related to this report.
1.6.Limitations Of the Study:
The collection of primary data is always a difficult thing because it is hard to ensure the
authenticity of the data. People might answer the questions but might not be expressing what
they actually do or feel. Also, from previous experience it is likely that managers might be
skeptical about sharing certain company information with the interns. Therefore, getting the
exact picture is always a challenging task. The limitations are –
Non-availability of some preceding and latest data.
Some information was withheld to retain the confidentiality of the bank.
The time period for preparing this kind of study was very short.
Difficulty in accessing latest data of internal operations
Access to all information was not allowed due to the purpose confidentiality.
Duration had been very short for accomplishing the study.
Unavailability of latest information and contemporary data.
Learning and depicting all the banking functions within just three months was really
difficult.
The communication gap among the different personnel because of excessive workload.
Lack of accessibility to respondents.
The executive and Bank authority were very busy, so they could not give me enough
time for discussion about Credit and its problems.

Chapter-2
Background of Banking
Industry and Overview of
Rupali Bank Ltd.

Chapter-2
2.1 BACKGROUND OF THE BANKING INDUSTRY
The history of banking is as old as the history of many. Generally, to the necessity for
keeping the money safe, the business of banking comes in to existence. The evolution if
money solved the problem of ‘Barter System’. Earlier there are two groups of people. One
group felt the need of honest and faithful person to keep their surplus money safe and the
other group owing to transaction felt the need of some person who could provide money. As
a result based on two groups a kind of businessman came in to picture. They used to keep the
money as deposit for security and give loans to the needy people. This is how the banking
sector has developed.
The English word ‘Bank’ is derived from the Italian word ‘Banco’. The Latin word ‘Bancus’
and the French word ’Banque’ which means a bench. They are of the opinion that the
medieval.
A bank is a financial intermediary a dealer in loans and debts (Prof. Cairncross).
A bank is an office or institution for the keeping, lending & exchanging etc. of money ( Prof.
Chambers)
A bank is an establishment which trades in money, an establishment for deposit, custody and
issue of money and also for granting loans, discounting bills & facilitating transmission of
remittances from one place to another SS( Imperial Dictionary)
European banker (i.e. moneychanger and moneylenders) transacted their banking activities on
the benches in the market place. This money changing and money lending business is known
as banking business.
Banking is the business of a banker, the keeping or management of a bank (Oxford English
Dictionary)

Banking means the accepting, for the purpose of lending or investment of deposits or money
from the public, repayable on demand or otherwise, and withdrawn able by cheque, draft,
order or otherwise (Indian banking law, 1949)
Banking industry is very important financial institution in the country and the present
economic state of Bangladesh demands immediate development of the financial institution.
Bangladesh was born as an independent and sovereign country in the year 1971. That time
banking industry faced a tremendous crisis as the Head office of the most of the banks was
located in West Pakistan. After that, ‘Bangladesh Bank’ was established according to the
order of Bangladesh Bank and this order effective from 16th December 1971. Bangladesh
Bank was given the duty to act as the Central Bank of Bangladesh.
After that in 1972 nationalization order was declared and all commercial banks were
nationalized accepts foreign banks. Thus four nationalized banks were formed. They are
Sonali Bank, Agrani Bank, Janata Bank, and Rupali Bank.
2.2 PRESENT STATUS OF BANKING INDUSTRY

Banking Business plays vital role in driving and manipulating the total financial management
and economy of any country. There are 52 different types of Banks operating in Bangladesh
including newly established privatized commercial Banks, up to December 2007. Amongst
these, there are 4 Nationalized commercial banks, 32 Private Banks, 10 Foreign Banks, 4
Government Specialized Banks, one Co-Operative Banks and one Grameen Bank.
In the recent years, Islamic Banking has been introduced which is a notable point in the
existing banking system. Out of the established private banks four of them are Islamic Banks.
Besides the banking sector, there are some non-banking financial institutes, which contribute
in financing the economy of the country. These institutions finance in different sector like
housing, industries etc. which contributes towards the development of the country.

2.3. Banking Structure of Bangladesh:
The Banking structure of Bangladesh is in given below:
Central Bank
(Bangladesh Bank)
Commercial Specialized Banks. Co-operative Banks.
Bank e.g. Bangladesh Krishi e.g. Bangladesh Shamabaya

Bank, Grameen Bank. Bank, Central co-operative
Nationalized Banks. Private Banks Foreign Banks.
e.g. Agrani Bank, e.g. H.S.B.C.

Sonali Bank
Traditional Banks. Islamic Bank.
e.g. Trust Bank Ltd. e.g. Al-Arafah Islami
Figure-2: Banking Structure of Bangladesh

2.4.Overview of Rupali Bank Limited:
Rupali Bank Limited was established in a newly independent country of Bangladesh as a

Nationalized Commercial Bank in the year 1972. RBL emerged through merger of three
comparatively smaller private banks of the then East Pakistan. The three banks namely,
Muslim Commercial Bank Ltd. Australasia Bank Ltd. and Standard bank Ltd. with all their
assets, liabilities, benefits, rights, powers, authorities, and obligations, merged into one by the
Bangladesh Bank (Nationalization) Order 1972 ( P.O.No. 26, 1972). Rupali Bank Ltd. came
out as the largest public limited banking company of Bangladesh on 14 December, 1986.
Capital Structure of the bank is summarized below:
 Authorized capital : Tk.7000 Million (US $ 120.70 Million)

 Paid up capital : Tk.1250 Million (US$ 21.55 Million)
 93.11% of shares are owned by the government while the rest 6.89% are owned by
private share holders.
2.5. Mission of the Bank

 Develop long term relationships that help our customers to achieve financial success.
 Offer rewarding career opportunity and cultivate staff commitments.
 Uphold ethical values and meet its customers financial needs in the fastest and most
appropriate way and continue innovative works in order to achieve human resource
with superior quality,technogical infrastructure and service packages.
2.6.Vision of RBL:
Our vision is to expand our loyal customer base by being known as the financial partner of
choice that constantly exceeds customer expectations.
2.7 Core Value

 Social Responsibility- We care for and contribute to our communities.
 Performance- We measure results and reward achievements

 Integrity- We uphold trustworthiness and business ethics
 Respect- We cherish every individual
 Innovation- We encourage creativity
 Teamwork- We work together to succeed
The first letters of the initial words from “ SPIRIT” and carry equal importance.
2.8.Strategic Objectives:
Develop a customer oriented service culture with special emphasis on customer care
and convenience.
Increase our market share by following a disciplined growth strategy.
Achieve a significant share of deposit and credit from the existing and niche market
Leverage our technology platform and pen scalable systems to achieve cost effective
operations, efficient MIS, improver delivery capability and high service standards.
Develop innovative products and service that attract our targeted customers and
market segments
Maintain a high quality assets portfolio to achieve strong and sustainable returns and
to continuously build shareholders value
Explore new avenues for growth and profitability, particularly by diversifying loan
portfolio through structured finance and expansion of retail and SME financing
Strengthen the banks brand recognitions
2.9.Eithical Principles:
 Customer focus and fairness:

At RBL, our prime focus is to achieve perfaction in our customer service. Customers
are our first priority and driving force. We wish to gain customer confidence and be
their trusted partner. We believe in fair treatment to all customers, depositors,
borrowers and clients without any discrimination.
 Quality: Quality service experience is a paramount to our customers and we are

strongly committed in fulfilling this ideal. We have a culture of timely compliance of
regulatory requirements.

 Honesty and Integrity:
We ensure the highest level of integrity to our customers, creating an ongoing
relationships of trust and confidence. We treat our customers with honesty, fairness
and respect.
 Belief in our People:
We recognize that employees are our most valuable asset and our competitive
strength. We trust in equal treatment to all shareholders irrespective of their individual
size of shareholdings.
 Teamwork:
We are a firm believer in team work and feel that loyal and motivated teams can
produce extraordinary results.
 Good Corporate Governance:
Effective corporate governance procedures are essential to achieve and maintain
public trust and confidence in any company, more so in a banking company. At RBL,
we are committed to following best practices resulting in good corporate governance.
2.10.Corporate Information of Rupali bank limited:
Name of the company Rupali Bank Limited
Chairman Ahmed Al-Kabir, PhD
Managing Director M. Farid Uddin
Company Secretary Md. Shahjahan Khandaker
Legal Status Public Limited Company
Genesis : Rupali Bank Limited has been incorporated

on 14 December 1986 under the Companies
Act 1913 after taking over and acquiring as a
going concern the undertaking and businesses
of Rupali Bank with all of its assets,
liabilities, benefits, rights, powers,
authorities, privileges, borrowings and
obligations. Rupali Bank, which initially

emerged as a Nationalized Commercial Bank
(NCB) under the Bangladesh Banks
(Nationalization) Order, 1972 (President’s
Order No. 26 of 1972), has now become a
state-owned commercial bank (SCB) through
a vendor’s agreement dated 15 November
2007.
Date of Incorporation 14 December 1986
Authorized Capital Tk. 700 Crore
Paid-up Capital Tk. 125 Crore
Reserve & Retained Earnings : Tk. 420 Crore
Credit Rating by CRAB Long Term - BB3

Short Term-ST3
National Support- AAA
Listing with DSE 19-08-1987
Listing with CSE 10-10-1995
Commencement of Trading 23-12-1986

with DSE & CSE
VAT Registration 9011039307
TIN Certificate 177-200-0021/LTU/Dhaka
Number of Employees 4503
Number of Branches 504
Number of Subsidiary Companies 01 (Rupali Investment Limited)
SWIFT BIC RUPBBDDH
Website www.rupalibank.org
E-mail info@rupalibank.org, it@rupalibank.org

Table-1: Corporate information of RBL
2.11. Board of Directors:
Chairman Dr. Ahmed Al-Kabir
Director Prof Mohammed Mainuddin
Director Mr. Mahabubur Rahman Hiron
Director Mr. Abul Kalam Chowdhury
Director Mr. Sheikh Serajul Hoque Farazi
Director Mr. Quazi Murshed Hossain Kamal
Director Dr. S.M. Mahfuzur Rahman
Director Advocate Md. Abdus Salam
Director Mr. Amalendu Mukherjee
Director Mr. Md. Syful Islam
Director Prof. Syed Ahsanul Alam
Managing Director Mr. M. Farid Uddin
Table-2: Board of Directors of Rupali Bank limited
2.12.Organizational Hierarchy

Rupali Milestones:

Date of Commencement of Banking 1972
Operation
First dividend(10% in cash) declared for 1986
the income year
Date of Incorporation 14.12.1986
Commencement of Trading with DSE & 23.12.1986
CSE
Listing with Dhaka Stock Exchange Ltd. 19.08.1987
Listing with Chittagong Stock Exchange 10.10.1995
Ltd.
Launching of New logo & Signboard 14.01.2010
Introducing Merchant Banking in the 04.03.2010
name of Rupali Investment Limited
Commencement of BACH operation 07.10.2010
Enhancement of paid-up capital from 19.05.2011
Tk.125 crore to Tk.137.50 crore
Inauguration of ATM service 01.08.2011
Award received for best published report 04.08.2011
in public sector entity from ICAB
Inauguration of online any where branch 11.12.2011
banking
Launching of Rupali CIB online system 20.12.2011
Table-3: Rupali Milestones
2.13.Products and Services in Rupali Bank Limited:
Deposits:
Rupali Bank offers different types of deposit products. These are……
 Current deposit (CD)

 Call Deposit (CDR)
 Special Notice Deposit (SND)
 Savings Deposit (SB)
 Deposit Schemes-
a) Rupali Deposit Scheme (RDS)
b) Rupali Monthly Earning Scheme (RMES)
 Special Attractive Products-
a) Rupali Monthly Savings Scheme (RMSS)
b) Rupali Monthly Profit Scheme (RMPS)
c) Rupali Double Benefit Scheme (RDBS)
d) Rupali Triple Benefit Scheme (RTBS)
SL No. Types of Deposit Interest Rate per annum

1. Savings Deposit 4.50%
2. Short Notice Deposit 3.50%
3. Time Deposits
a) 3 months & above but less than 6 7.50%
7.75%
months
8.00%
b) 6 months & above but less than 1 year
8.50%
c) 1 year & above but less than 2 years
d) 2 years & above but less than 3 years
4. Deposit From foreign Remitance 6.00%
5. Rupali Bank Deposit Pension-Scheme 2 6.50%
Table-4: Interest Rate of Deposit
Loans & Advances:
Rupali Bank extends its credit services to entrepreneurs in almost all economic sectors of
Bangladesh including trade, commerce and industry. International trade of export and import
is also properly addressed in this service. The economy of Bangladesh is much dependent on

agriculture and obviously RBL puts proper emphasis on agriculture and livestock, dairy and
poultry, fishery and hatchery etc.
Thrust Sectors as declared by the government, get deserved attention from the bank. All these
credit programs are processed according to the rules and guide lines set by Bangladesh Bank,
the central bank of Bangladesh.
Industrialization of Bangladesh is marching forward on strong footing and Rupali Bank is

one of the active partners on this journey. It has taken effective programs to finance deserving
entrepreneurs in private sector. More over its foreign investment friendly steps are
appreciated by all corners. The bank’s credit schemes prioritize thrust sectors like Textile,
Jute, Leather, Leather goods, frozen and Semi cooked Shrimps, Foot wear, Knit Garments
and SME enterprises. IT sector is one of the priority fields of RBL.
Rupali Bank participates in joint venture and consortium financing programs to implement
large scale projects.
General Products:
 Cash Credit { Hypothecation)
 Cash Credit (Pledge)
 Short Term Loan
 Overdraft
 Loan against FDR
 Loan against Deposit Scheme
 Industrial Project Loan
 Syndicate/ Consortium Loan
 Housing Loan-General and Commercial
 Personal / Professional Loan
 Household Loan
 Local Bank Guarantee
 Student Loan
Small and Medium Enterprise Loan:
 SHOHOJ
 SHULOV
 BABOSHAYEE

 MAJHARI
Small Enterprise Financing:

 Manufacturing
 Fixed Assets Financing
 Working Capital Financing
Rural and Agro Credit:
 Young Farmers Loan
 Solar-Energy and Bio-Gas Plant Establishment Loan
 Fishery Loan
 Shrimp Cultivation Loan
 Poultry Loan
 Dairy Loan
 Small Loan
 Micro-Credit
 Loan for Tree Plantation
 Bank-NGO Linkage Loan
 Other
Foreign Exchange Business:

All sorts of Foreign Exchange Transaction are made in Rupali bank limited under
“Guidelines for Foreign Exchange Transaction (GFET-2009) by Bangladesh Bank such as-
 Foreign Currency Accounts
 Import Finance
 Export Finance
 Bond
 Guarantee
Modern Banking Services:

 Online Banking
 SWIFT
 ATM service

 Western Union
New Products and Services:

 Merchant Banking Services
 BEFTN
 Local Remittance
 Foreign Remittance
2.14.Job Performance In RBL:
Since the beginning of my internship, I have worked and learned the following matters:
General Banking
1. Cash Management

 Procedure of cash receipt and payment.
 Computer posting of receipt and payment.
 Maintenance of Cash-in-Vault.
 Maintenance of Cash Remittance.
 Stop payment instructions received from clients and formalities thereof.
2. Account Opening Procedure
 Concept of liability of a bank.

 Know Your Customers (KYC) and its application and utility.
 Current Account.
 Saving Bank Account (individual and joint).
 Fixed Deposits.
 Minor A/C.
 Cheque Issuing formalities.
 Maintenance of specimen signature cards.
 Maintenance of Account Opening Forms.
3. Bills and Remittance
 Issuance of Pay Order, Demand Draft (DD).

 Issuance of Telegraphic Transfer (TT).
 Encashment procedures of TT, DD etc.
 Crossing and Endorsements of cheques.
 Inward and Outward clearing.

Chapter-3
Credit Activities of Rupali Bank
Ltd.
Chapter-3
3.1.CREDIT
Credit is the means of investment made by the bank to the entrepreneurs and business
community. Alternatively, this is the way of channeling fund to the deficit units where
various risks and uncertainties are involved. Therefore every decision on credit matter should
be taken with utmost care that can be ascertained through in-depth analysis, meticulous

calculation and prudent judgment. A detailed and very comprehensive credit policy can guide
the dealing credit officer to successfully maneuver the credit portfolio.
In formulating a credit judgment and making quality Credit Decisions, the lending officer
must be equipped with all information needed to evaluate a borrower's character,
management competence and capacity, capital, ability to provide collaterals and external
conditions which may affect his ability in meeting financial obligations
3.2.Credit Policy Of Rupali Bank Ltd
Lending being the most important function of commercial bank, every bank should have own
credit policy. The credit policy of Rupali Bank Limited has been formulated of the plan of
“Nogod Aday Barao, Khelapi Rin Komao”; the plan was formed on the basis of the
following objectives:
To maximize the profit of the bank by making sound lending.

To deliver credit to viable borrowing at a reasonable cost.
To provide satisfactory return on investment.
To assist the social and economic development of the country.
To deliver general banking services to the public and credit to viable borrowers at a
reasonable cost.
But in RBL most of the lending officers are not familiar with their written credit policy or
lending guidelines. They have got only some oral instruction from the senior management or
in charge of credit. If all the lending officers of RBL thoroughly know and understand their
credit policy it will be very helpful for them to do their job more efficiently.
3.3.Function of credit department:
Lending money is one of the main functions of commercial bank. In lending process
selection of a borrower is one of most crucial and vital job for a banker. Before customer can
enjoy credit facilities bank should it is important that customer should qualify 5 C’s. The five
C’s are:
 Character: Intention to pay back the loan.

 Capacity: Borrowers competence in terms of utilizing the

fund profitably and generate income
 Capital –Financial strength to cover the risk
 Conditions – General business condition between two
parties
 Collateral – Implies additional securities
This is also true for Rupali Bank Ltd. Successful loans and advances generate better return on
investment whereas non-performing loans cause loss for the banks. From disbursement to
recovery, credit department performs different activities along with several other functions.
Functions of credit department of RBL are:
Dealing with corporate and retail credit.

Analyzing credit proposals and evaluating customers.
Credit analysis of RBL and other banks.
Credit Risk Grading
Valuation of securities.
Project evaluation.
Classifying loans.
Perform collection and monitoring activity.
Support recovery and risk management.
3.4.Mechanism of Credit Distribution of the RBL

The primary factor determining the quality of the bank’s credit portfolio is the ability of each
borrower to honor, on a timely basis. All credit comities made to the bank. The authorizing
credit personnel prior to credit approval must accurately determine this. If the report of the
project appraisal is very satisfactory to approve the loan proposal, than the following steps
furnish the approval procedure:
Make a proposal by the client to the bank
Give all the necessary documents
Bank will send the parties statement to the Bangladesh Bank, their CIB (Credit
Information Bureau) will inquiry that whether this party is defaulter or a new one.

Bank will take the collateral from the party and analysis that how much it will cover the
total loans.
Bank will send this proposal to the head office. In the head office the Board of Directors
and Managing Director will approve the loan.
Head office will send the approval to the branch office.
Branch office will give the sanction letter to the party.
Bank will take the security and make it in their favor.
3.5Disbursement:
After completing all the necessary steps for sanctioning loans bank will create a loan account
by the name of the party and deposit the money to that account. Bank will give chequebooks
to the party and advise them to draw the money and use it as soon as possible, because
whenever the money will transfer to the account interest will count from that time.
3.5.1.Procedure or Steps of loan disbursement
Quality loan disbursement depends on the following steps:
Efficient and motivated manpower: Efficient and motivated manpower is the main force to
achieve the goal of the institution without which successful implementation of any program
can not be ensured. It is a great asset of organization.
Suitable plan: There should be a realistic plan for glorious output. One the other hand,
activities without planning will bring less output even with hared labor.
Area survey: Clear idea about the scope of sound investment can be derived through
conducting survey of jurisdiction of branch. It is necessary for smooth functioning of a
branch.
Selection of genuine: Borrower selection is the vital part of loan disbursement process. If
one fail to select the borrower properly that effort related to disbursement of loan will go in
vain undoubtly. So, genuine borrower selection should ensured first for quality loan
disbursement.

Spots investigation: A distinct picture of a borrower is found from spot investigation. It is
just like a survey report of borrower on which correct decision is taken regarding sanction
and disbursement of loan.
Prompt service: If prompt services are not given to the borrower, they will be dissatisfied
with the bank. The result will be the non-response of loanee at the time of recovery of loan.
So, there is no alternative of prompt service for attaining success in the bank-business.
Utilization: Without proper utilization of loan amount loanee will lose his capacity to repay
the loan in due time. That’s why strong monitoring should ensure for proper utilization of
loan.
Target achievement: Target of loan disbursement should be achieved along with the
achievement of profit target. So, strong initiative should be taken from the very beginning of
the financial year.
By this time a significant step has been taken by the top bank management to increase the
growth of sound investment.
3.6.Credit Monitoring and Reviewing:
It is the responsibility of the Manager to monitor the over all profile and risk aspect of the
credit portfolio in accordance with the criteria set down in the Bank Credit Policy. Such
monitoring shall be evidenced from the comments of the Manager in monthly Call/Visit
Report and be kept in the Credit File with a copy to the Head Office.
This Review shall be formally performed at intervals prescribed by Head Office but it is the
responsibility of the Manger to ensure at all times that the credit portfolio meets the standard
set forth by the Bank.
Periodic Review and Follow-up should aim at ensuring:
 Terms of approval have been maintained.

 Conduct (turnover, regularity of repayment etc.) of the borrowing accounts during the
period under the review has been satisfactory or as expected.
 Continuing value of the collateral is adequate.
 There are no adverse trends in market, economic and political conditions which may
endanger the reliability of the facility.

 Business reciprocity offered and received is commensurate with the facilities allowed.
 Earning from the account is cost effective (i.e. adequate to meet business cost of funds
and leave sufficient margin for adequate risk reward, overheads and profits).
 Borrowers business is being satisfactorily conducted as reflected through a review and
analysis of the financial and operating statements.
3.7.CREDIT ANALYSIS
The division of the bank responsible for analyzing and recommendations on the fate of most
loan applications is the credit department. Experience has shown that this department must
satisfactorily answer three major questions regarding each loan application:
Is the borrower creditworthy? How do you know?
Can the loan agreement are adequately protected and the customer has a high probability
of being able to service the loan without excessive strain?
Can the bank perfect its claim against the assets or earnings of the customer so that, in the
event of default, bank funds can be recovered rapidly at low cost and with low risk?
Let’s look in turn at each of these three key issues in the “yes” or “no” decision a bank must
make on every loan request.
3.7.1 Is the Borrower Creditworthy?
The question that must be dealt with before any other is whether or not the customer can
service the loan-that is, pay out the credit when due, with a comfortable margin for error.
This usually involves a detailed study of six aspects of the loan application- character,
capacity, cash, collateral, conditions, and control. All must be satisfactory for the loan to be a
good one from the lender’s point of view.
Character:
The loan officer must be convinced that the customer has a well-defined purpose for
requesting bank credit and a serious intention to repay. If the officer is not sure exactly why
the customer is requesting a loan, this purpose must be clarified to the bank’s satisfaction.

Responsibility, truthfulness, serious purpose, and serious intention to repay all monies owed
make up what a loan officer calls character.
Capacity:
The loan officer must be sure that the customer requesting credit has the authority to request a
loan and the legal standing to sign a binding loan agreement. This customer characteristic is
known as the capacity to borrow money. For example, in most states a minor (e.g., under age
18 or 21) cannot legally be held responsible for a credit agreement; thus, the bank would have
great difficulty collectors on such a loan.
Cash:
This key feature of any loan application centers on the question: Does the borrower have the
ability to generate enough cash, in the form of cash flow, to repay the loan? In general,
borrowing customers have only three sources to draw upon to repay their loans: or (a) cash
flows generated from sales or income, (b) the sale or liquidation of assets or (c) funds is
raised by issuing debt or equity securities. Any of these sources may provide sufficient cash
to repay a bank loan.
Collateral:
In assessing the collateral aspect of a loan request, the loan officer must ask, does the
borrower possess adequate net worth or own enough quality assets to provide adequate
support for the loan? The loan officer is particularly sensitive to such features as the age,
condition, and degree of specialization of the borrower’s assets.
Conditions:
The loan officer and credit analyst must be aware of recent trends in the borrower’s line of
work or industry and how changing economic conditions might affect the loan.
Control:
The last factor in assessing a borrower’s creditworthy status is control which centers on such
questions as whether changes in law and regulation could adversely affect the borrower and

whether the loan request meets the bank’s and the regulatory authorities’ standards for loan
quality.
The six Cs of credit aid the loan officer and bank credit analyst in answering the broad
question: Is the borrower creditworthy? Once that question is answered, however, a second
issue must be faced: Can the proposed loan agreement be structured and documented to
satisfy the needs of both borrower and bank?
A properly structured loan agreement must also protect the bank and those it represents-
principally its depositors and stockholders- by imposing certain restrictions (covenants) on
the borrower’s activities then these activities could threaten the recovery of bank funds. The
process of recovering the bank’s funds- when and where the bank can take action to get its
funds returned-also must be carefully spelled out in a loan agreement.
3.8.Types of Credit Facilities Offered by RBL
Rupali Bank Limited offered different kinds of loan and advances. These are:
1. Continuous Loan,
2. Demand Loan,
3. Fixed Term Loan and
4. Short-term Agricultural & Micro- Credit.
1. Continuous Loan
These are the advances having no fixed repayment schedule but have an date at which it is
renewable on satisfactory performance of the clients. Continuous loan mainly includes "Cash
credit both hypothecation and pledge" and "Overdraft".
(a) Cash Credit:
It is a popular method of creating advances by which commercial banks lends money in the
customer (borrower) up to a certain limit against the security of commodities hypothecated or
pledged with the banks. The borrowers of the cash credits are traders, industries, limited
companies etc.
The Cash Credit are two types:
Cash credit hypothecation and

Cash credit pledge
Cash credit hypothecation: When cash credit is allowed by the bankers against
hypothecation of goods as security is called the cash credit hypothecation (C.C.hypo). In this
method, the ownership and possession of the goods remain with the borrower but an
equitable charge is created on the goods (as security) in favor of the lending bank. The owner
of the goods which are hypothecated is called the hypothecator. The person to whom goods
are hypothecated is called the hypothecated. In fact, hypothecation is passed to the creditor.
Under the hypothecation agreement the borrower binds himself to give possession of the
goods to the lender when called upon to do so.
Amount of maximum credit: 50% of security

Who can apply: Professional or Business Persons.
Age limit: Minimum 18 years.
Securities: Hypothecation.
Credit period: 1 year (period can be enhanced by renewal).
Cash Credit (pledge) The bailment of goods as security for payment of a debt of
performance of a promise is called pledge. By signing the letter of pledge, the borrower
surrenders the physical possession of the goods under the Banks effective control as security
for payment of Bank dues
Amount of maximum credit: 50% of security.

Who can apply: Professionals or Business Persons.
Securities: Pledge.
Credit period: 1 year.
(b)Overdraft:
The overdraft is a kind of advance always allowed on a current account operated upon by
cheques. The customer by sanctioned a certain limit upon which he can overdrawn his current
account within a stipulated period.
Amount of maximum credit: Who can apply:

80% of Financial Instruments. Individuals who have purchased those

financial instruments from RBL.
Age limit: Minimum 18 years. Securities:
Purchased Financial Instruments.
Credit period:
1 – 3 years (Period can be enhanced by
renewal).
2. Demand Loan
Demand loans are loan agreements that provide the lender with the ability to demand full
payment of the remaining balance of the loan at any point in time after the loan is executed.
Unlike an installment loan, the demand loan format does not include a specific maturity date
and may not include a specific schedule for making payments to retire the debt. Sometimes
referred to as a call loan, a demand loan is usually employed when the lender and borrower
have a long standing and positive business relationship, and the lender has confidence that the
borrower will pay off the loan within a reasonable period of time.
RBL also offers several types of demand loan. These are:
1. Loan against trust receipt (LTR)

2. Loans against Imported Merchandise (LIM)
3. Payment against documents.(PAD)
4. Packing Credit (PC)

5. Foreign and Inland Bill Discounting
Loan against Trust Receipt (LTR)

Under this arrangement, credit is allowed against trust receipt and the exportable goods
remain in the custody of exporter but he is required to execute a stamped export trust receipt
in favor of the bank. Where the declaration is made that he holds purchase with financial
assistance of the bank lit trust for the bank.
Loans against Imported Merchandise (LIM)

Loan against the merchandise imported through bank maybe allowed pledge of goods
retaining margin prescribed on their landed cost. The branch shall also obtain letter of
undertaking and indemnity from the customer before getting goods cleared through L.I.M.
account. Clearing should be taken by approved clearing agent of the bank. Merchandise
should be insured with specific risk clauses.
The following matters must consider while allowing L.I.M. against secured of goods. The
landed cost of the merchandise is measured before the goods are delivered the client against
proportionate payments. The landed cost is determined by taking following items:
 Invoice value if the merchandise including freight

 Customs duty
 Sales tax
 Warfare
 Derange agent’s charges
 Railway freight
 Insurance premium
 Other charges
Amount of maximum credit: 80% of merchandise.

Who can apply: Persons who have opened an LC in RBL.
Securities: Imported Merchandise (Primary Security)
Credit period: For Commercial Purpose – 45 days.
For Industrial Purpose – 60 days.
Rate of interest: 16% (additional 2% will be charged if applied for
extended approval period).
Payment Against Documents (PAD)

PAD loan is created upon lodgment of import documents. This loan is created for 21 days –
the time being the tolerance for taking documents for the importer. If after 21 days the
documents are not taken by the importer, the bank may sell the imported goods to recover the
given amount.

Amount of maximum credit: Amount equal to Letter of Credit (LC).
Who can apply: Personas who have opened an LC in RBL.
Securities: Imported Goods
Credit period: Maximum 21 days.
Percentage of interest: 16%
Packing Credit (PC)

Under this arrangement credit facilities are extended against security of railway receipt /
steamer receipt / truck receipt / vessel receipt, evidencing transportation of goods to the port
for shipment of the goods in addition to the usual charge documents and lien of export letter
of credit. This type of credit is sanctioned for transitional period from dispatch of goods to
negotiations of export documents. It is mainly given for payment of factory salary and wages.
Amount of maximum credit: 10% of L/C

Who can apply: Persons who have opened an L/C with RBL.
Securities: L/C
Credit period: 3-6 months (period may be enhanced in special cases).
Rate of interest: 7%
Foreign and Inland Bill Discounting

While discounting a bill, the Bank buys the bill (i.e. Bill of Exchange or Promissory Note)
before it is due and credits the value of the bill after a discount charge to the customer's
account. The transaction is practically an advance against the security of the bill and the
discount represents the interest on the advance from the date of purchase of the bill until it is
due for payment
3. Fixed Term Loan:

The loans, which are repayable within a specific time period under a specific repayment
schedule, will be treated as Fixed Term Loan.
4. Short-term Agricultural & Micro-Credit

Short-term Agricultural Credit will include the short-term credits as listed under the Annual
Credit Program issued by the Agricultural Credit and Financial Inclusion Department
(ACFID) of Bangladesh Bank. Credits in the agricultural sector repayable within 12 (twelve)
months will also be included herein. Short-term Micro- Credit will include any micro-credits
not exceeding an amount determined by the ACFID of Bangladesh Bank from time to time
and repayable within 12 (twelve) months, be those termed in any names such as Non-
agricultural credit, Self-reliant Credit, Weaver's Credit or Bank's individual project credit.
Four types of SME loan are:
a. Flexible Loan
b. Loan for professionals
c. Business Loan
d. Medium Loan
Retail Loan:
RBL offers different types of retail loans. some are….
1. Car Loan
Now a car is no longer luxury but necessity. Moreover, a car is more than a symbol of
prestige. So for that RBL offers car loan facilities to their customers.
Amount of maximum credit: Maximum 10 Lac or 40% margin.

Who can apply: Professional or Business Persons.
Securities: Car purchased.
Credit period: Max 48 months.
Percentage of interest: 13%
Application & Disbursement:

a. Receiving customer Application in prescribed form along with required documents &
Application fee.
b. Receiving CIB Undertaking for the Applicant & Guarantor along with fee
c. Scrutinize the Application Form & attached documents carefully
d. Forward the Application Form & CIB Undertaking to Head Office (if found in order
and you are satisfied)
e. Follow-up the progress of the file in Retail Banking Division
f. Preparation of Sanction Advice & get it accepted by the client after getting approval
from Head Office
g. Obtain signature on the charge documents from the client
h. Obtain 3 unfilled Cheques from the client
i. Issue Purchase Order in favor of the Car Vendor with other related documents
j. Obtain all required Car Documents (copy of Registration & Insurance cover note,
Original Delivery Challan, Bill, Money Receipt, and Insurance Policy) and cross
match those with the sanction & Quotation
k. Physically verify the vehicle (Reg. No., Engine No. & Chasis No.)
l. Ensure deposit of charges by the client in the link account
m. Disburse the Loan vide Pay Order favoring Car Vendor after completion of
documentation as per H.O. approval
n. Stamping the charge documents
o. Entry of Security Documents in the SISO Register
p. Safekeeping of Security Documents in the Safety Vault.
2.Personal Loan
Amount of maximum credit: For Male – 5 Lac.
For Female – 10 Lac.
Who can apply: Professionals.
Age limit: Minimum 21 to Maximum 57 Years.
Securities: Personal Guaranty (from 2 persons).
Credit period: 1 – 4 years.

Application fee.
d. Forward the Application Form & CIB Undertaking to Head Office (if found in order
e. Follow-up the progress of the file in Retail Banking Division
f. Preparation of Sanction Advice & get it accepted by the client after getting approval
from Head Office
g. Obtain signature on the charge documents from the client
h. Obtain 3 unfilled Cheques from the client
i. Ensure deposit of charges by the client in the link account
j. Disburse the Loan by transferring the amount to client’s Savings Account after
completion of documentation as per H.O. approval
k. Stamping the charge documents
l. Entry of Security Documents in the SISO Register
m. Safekeeping of Security Documents in the Safety Vault.
3.House Building Loan

Amount of maximum credit: 60 Lac
Who can apply: Persons employed in Rupali Bank Limited.
Age limit: 18 – 57 years.
Securities: Land and Buildings.
Credit period: Entire Employment Period

Application fee.

d. Visit the property to physically verify the possession & ownership and also obtain
valuation Report by the Surveyor
e. Forward the Application Form & CIB Undertaking to Head Office (if found in order
f. Follow-up the progress of the file in Retail Banking Division
g. Preparation of Sanction Advice & get it accepted by the client after getting approval
from Head Office
h. Obtain all land related documents from the client and get it verified by the lawyer
(Vetting the Documents)
i. Obtain signature on the charge
j. Obtain 3 unfilled Cheques from the client
k. Execute Tripartite Agreement as per Lawyer’s draft
l. Complete all other documentation formalities as per H.O. approval
m. Physically verify the
n. Ensure deposit of all charges by the client in the link account
o. Disburse the Loan vide Pay Order favoring Car Vendor after completion of
documentation as per H.O. approval
p. Stamping the charge documents
q. Entry of Security Documents in the SISO Register
4.Study Loan
Amount of maximum credit: Maximum 12 Lac.
Who can apply: Any student who has necessary documents to get
himself admitted into a foreign college or university .
Credit period: Maximum 6 months.
Rate of interest: 13%
Interest Rate of Loans:
Sl. No. Types of Loans Interest Rate
1. Term Loan / Project Loan 15%

(If the customer fails to pay two
consecutive monthly installments,
additional 2% interest will be charged on
the due installments.)
2. Working Capital Loan (CC Pledge, 16%

CC Hypo)
3. Residential House Building Loan 16%

(If the customer fails to pay two
consecutive monthly installments,
additional 2% interest will be charged on
the due installments.)
Commercial House Building Loan 17%
Staff House Building Loan According to Bank Rate

(4% for loans sanctioned before July 01,
1985).
4. Loan against FDR, DPS, RDPS Addition of 3% to Receiving Interest Rate
5. Overdraft (OD) 16%

4% (on pulse, spice, oil seed, linseed, maize
7. Agriculture Credit
according to the order of Bangladesh Bank.)
12% (for others Agriculture Credit.)
8. SME Loan 15%
9. Payment Against Documents (PAD) 16%

(additional 2% interest will be charged if
credit period is enhanced)
10. Loan against Imported Merchandise 16%

(LIM) (additional 2% interest will be charged if
16%
11. Loan against Trust Receipt (LTR)
(additional 2% interest will be charged if
12. Packing Credit (PC) 7%

13. Car Loan 13%
Table-5:Interest Rate of Loan
3.9. Security :
Security is obtained as a line of last defense to fall bank upon. It is meant to be an insurance
against emergency. By taking security, bank acquires a claim upon the assets of the borrower
if repayment is not made as planned. Security taken by banks may be classified into two
broad categories, Primary security and Collateral security.
Primary Security: Primary security is one, which is deposited by the borrower himself and
thus provides the main cover for the advance made. Primary security may be either personal
security or impersonal security or both.
Collateral Security: A collateral security is a security belonging to and deposited by

borrower himself or by a third party to secure loans and advances. Collateral security in a
wider sense is used to denote any type of security that runs parallel to or side by side with the
personal right of action against a debtor in respect of an advance. Collateral security may be
direct or indirect
Chapter-4
Loan Recovery
CHAPTER -4
4.1. Policy of Loan of Recovery
Loan recovery is an important function of Rupali Bank like loan disbursement. Basically,
success of the bank depends on the performance of loan recovery. For these reason Rupali
Bank follows some rules and regulation of loan recovery. These are –
General Policy
Statutory policy
General Policy: At first Rupali Bank pursues general policy to recover loan. It is an easy and
simple way of credit collection. The general policies are:

To inspire with courage pay back of the installment money in due time.
To provide reward for those lenders who clear off his installment money in due time.
To provide punishment for those borrowers who do not pay back the installment
money in time.
To supervise credit.
Statutory Policy: When Rupali Bank cannot recover its disbursed loan through general
policies then Rupali Bank follows statutory rules and regulation to recover disbursed loan. It
is a complex system of loan recovery.
4.2 Loan Recovery Procedure
Demand Notice: Demand Notice is issued before one month of being due of outstanding
loan or installment through field supervisor of mail.
Legal Notice: If the borrower do not repay their respective loans and interest after maturity in
spite of receiving the demand notice by the bank sends legal notice by registered mail with
acknowledgement to the borrower.
Special Notice: Besides the aforesaid two notices, a special notice signed by DC, TNO is
sent to respective borrower to keep mental pressure on him for paying the loan.
Field Recovery: Loan officer recovers the recovered loan through L.O. receipts by visiting
the spot and houses of the borrower.
Loan Recovery Camp: During the harvesting period, loan recovery camp can be set up on
the spot for recovering loan.
Case Filing: If all the procedure except legal action of recovering loan fails, then certificate
case filed against borrower. If the borrower is in the following category then case has to be
field with priority.
Unwilling to repay loan although he is financially solvent
Every effort of loan recovery becomes failure
Detrimental to the interest of bank loan

Loan Recovery with the Interest Exemption: The loan amount which is not possible to
cover with the help of legal action then this loan can be recovered by exempting interest. By
this was the bad loan can be recovered.
4.3 . Cause of Poor Recovery of Loan
Error in selecting appropriate: Loan recovery mainly depends upon selecting appropriate
loanee. If the bank sanctions loan an in appropriate party it is impossible to recover the loan
during its recovery period. He appropriate loanee means the party will be honest, socially
acceptable and able to repay the loan. But incase of selecting loanee this procedure is no fully
maintained by the branch. So, a large number of loanee becomes defaulter in every year.
Granting consumer loans are not appropriate: Historically, most banks did not actively
pursue loan account from individual and families, believing that the relatively small size of
most consumer loan and their relatively high default rate would make such lending
unprofitable.
Lack of intensive inspection: It is the major cause of poor recovery. If the bank properly
supervise the loan utilization and other considerable factor, then recovery position must be
satisfactory. But because of dishonesty or misuse of job duties bank failed to inspect the
disbursed loan. As a result a huge amount of loan is not recovered every year.
Influence of local prominent: Many local elite’s misguides loanee not to pay loan. It is one
of the most important barriers to recover loan timely.
Lack of public awareness: Most of the in our country are not aware of social and
economical condition of country. They do not try to understand that if they do not repay the
loan to bank timely then the bank cannot play significant role in the economy.
Political situation: Some times political situation create great barrier to recover the loan.
Such as some time government takes decision to exempt loan and much political leader
default a large number of loans by miss use of their power.
4.4 Suggestion for Recovery
To meet with the borrower and to inspire him to repay at least 2 days in a week.

If the borrower does not come to repay then the bank should take the help of
administration.
Bank should try to convince the borrower that the legal action or try rule of law will
go against him.
It should be described to the borrower about the rule of loans and interest. By this the
borrower will know that if he does not repay then it will be increased geometrically
and for this he will inspired to repay as early as possible.
Different committee for the purpose of recovery should be formed.
The bank may recover with the help of interest exempting.
Chapter-5
Credit Performance Evaluation of
Rupali Bank Ltd.
Chapter-5
Loans Performance Evaluation Of RBL
5.1.Loan & advances:

Rupali Bank limited gradually increases its loans and advances from 2006 to 2011..
loans and advances of Rupali Bank Bangladesh is given below
(Taka in Crore)
Year Total Loans & Advances
2011 7652.49
2010 6604.90

2009 5234.42
2008 4903.00
2007 4708.03
2006 4570.95
Table-6: Loans & advances Of Rupali Bank Lid.
Figure-3: Trend Of Loans & advances of RBL
Comment :
From the graphical presentation I want to conclude that its loans and advances are increasing
from the year of establishment. In the above figure it is observable that it is upward trend..
The expansion of loan & advances help the business people to invest more in different sector
which result in the growth of the economy.
5.2GROWTH OF LOAN & ADVANCES

The growth rate of loans and advance from year 2006 to 2011 is observable which is
summarized as:
Table-7: Growth of Loans & advances
Year Growth rate [%]

2007 2.99%
2008 4.14%
2009 6.76%
2010 26.18%
2011 15.86%
Fig-4: Trend of the growth rate of the loan and advances
Comment:
From the above pictorial presentation it can be said that growth rate of loans and advances are
increasing balances from year 2007 to 2009. In 2010 ,the bank growth rate of loans and
advances is increasing in higher rate than the previous year.But In 2011, the bank growth rate
of loans and advances is decreasing. not increasing at their previous rate.
5.3.Deposits:
Table-8: Deposit of RBL Taka in crore
Year Total Deposits
2011 10723.40

2010 9112.38
2009 7380.34
2008 7028.05
2007 7244.61
2006 6783.21
Fig-5: Trend od Deposits

Comment: From the above presentation, I conclude that in 2006 to2009 the RBL deposits
are stay in Ups & down sitiution. But in 2010 to 2011 the deposit are increasing in RBL.
5.4.Deposit Portfolio
Table-9: Deposit Portfolio of RBL (Taka in crore)
Types of 2011 2010

Deposits
Current and 1485.20 1427.65

other deposits
Bills Payable 133.74 129.67
Saving 3517.82 3324.36

Deposits
Fixed deposits 5586.63 4230.70

Total 10723.39 9112.38
Fig-6: Trend of Deposit Portfolio
Comment: In 2011,Rupali bank has more fixed deposits than in 2010.
5.5.Credit & Deposits Relationship

The relation of deposit and loans & advances of Rupali Bank is given below:
Table-10: Credit & Deposit Relationship (Taka in crore)
Year Total Credit Total Deposit
2011 7652.49 10723.40
2010 6604.90 9112.38
2009 5234.42 7380.34
2008 4903.00 7028.05
2007 4708.03 7244.61

Fig-7: Trend of Credit & deposit Relationship
Comment:
From the above figure it can be concluded that deposit is higher from loans and advances in
all year. This year bank had to acquire loan for their investment proposal. Deposit and
advances of last five years. Graph shows that advances are increase day by day, as deposit is
increasing. Although, its shows a more pubic reliance about bank.
5.5.Credit to deposit Ratio Analysis

Credit deposit ratio measures the portion of deposit used for credit. The more the ratio the
more the bank is capable to uses its deposit as credit.
Credit to deposit ratio= Total Credit/ Total Deposit
Table-11: Credit to Deposit Ratio Analysis (Tk. In crore )
Year Total Credit Total Deposit Total Credit/Total

Deposit
2011 7652.49 10723.40 71.36%
2010 6604.90 9112.38 72.48%
2009 5234.42 7380.34 70.92%
2008 4903.00 7028.05 69.76%
2007 4708.03 7244.61 64.99%

2006 4570.95 6783.21 67.39%
Figure-8: Trend of credit to deposit ratio
From the figure it can be said that the collection of deposit in increasing year by year that
form into loan & advances increasing year by year subsequently. If we noticed that from year
2009 to 2010 credit deposit ratio has increased significantly which is positive sign that the
bank is successfully utilizing its deposit collected from the people by the lowest interest rate
into in the form of loan and advances which is main source of Bank’s income. But in 2011,
ratio is decreasing.
5.6. CONCENTRATION OF LOANS AND ADVANCES IN TOTAL ASSETS

Table shows the concentration of loans and advances in total assets of Rupali Bank. The high
concentration of loans and advances indicates vulnerability of assets to credit risk. Here it is
noticeable that ratio of total loans and advances to total assets is increasing from year to year
Table-12: Total Loan & advances-Total Assets Ratio
Year Total loans & Total Assets Total loans&

advances advances/Total

Assets
2011 7652.49 14483.63 52.83%
2010 6604.90 12443.45 53.08%
2009 5234.42 8779.14 59.62%
2008 4903.00 8231.18 59.57%
2007 4708.03 8151.20 57.76%
2006 4570.95 7624.05 59.95%
Meanwhile, any analysis of asset quality needs to take into account indicators of the likelihood of
borrowers to repay their loans.
Figure-9:Trend of loans to assets ratio
Comment: Decrease loan & advance to total asset ratio because of volatile financial
situation of Bangladesh & beyond of Bangladesh.
From the above figure it can be concluded that the ratio of total loans and advances of Rupali
Bank is decreasing day by day.. Here the lowest ratio is 52.83% in the year of 2011.The
highest ratio is 59.95% in 2006 .In 2011 .So, Rupali Bank should care their total loans to
assets ratio.
5.7.Regression Coefficients between loans and deposits

Table-13:Calculation Regression Coefficients

Year (X-7500) d²x Loans (Y) (Y-5000) d²y dxdy
Deposit( X dx dy
)
2011 10723.4 3223.4 10390307.6 7652.49 2652.49 7035703.2 8550036.27
2010 9112.38 1612.38 2599769.26 6604.9 1604.9 2575704 2587708.66
2009 7380.34 -119.66 14318.52 5234.42 234.42 54952.74 -28050.7
2008 7028.05 -471.95 222736.8 4903 -97 9409 45779.15
2007 7244.61 -255.39 65224.05 4708.03 -291.97 85246.48 74566.22
2006 6783.21 -716.79 513787.9 4570.95 -429.05 184083.9 307538.75

Total 48271.99 3271.99 13806144.1 33673.79 3673.79 9945099.3 11537578.4
N∑dxdy-∑dx∑dy
bxy = =1.24
N∑d²y-(∑dy)²
N∑dxdy-∑dx∑dy
byx= = .79
N∑d²x-(∑dx)²
Here, is the correlation analysis between two ratio.
r=√(bxy*byx)= √1.24*0.79=0.99
Interpretation:
There is a very high degree of positive relationship between loan & deposits ratio That means, when
deposits increases ,Loans Is also increases.
5.8.Industry Wise loans & advances: Taka in Crore
Total Loans
Sectors & Advances
Tannery & Chemical 586.75
Textile 2081.00
Engineering 1041.00
Jute 446.60
Agro Products 230.00

Printing & Publication 54.00
Shoe 42.00
Plastic 34.00
Shipping 7.00
Garments 315.00
Others 2815.14
Total 7652.49
Table-14: Industry wise loans & advances
Fig-10: Trend of Industry wise loans & advances
5.9.Sector wise loans & advances: Taka in

crore
Sector Wise 2011 2010
Government Sector 54.06 61.99
Other Public Sector 501.87 969.79
Private Sector 7096.56 5573.12
Table-15:Sector
wise loans &
advances

Fig-11: Trend of Sector wise loans & advances
5.10.Interest Income and Loans & advances:

Taka in Crore
Year Total Loans & Advances Interest Income

2007 4708.03 342.25
2008 4903.00 409.06
2009 5234.42 497.86
2010 6604.90 555.26
2011 7652.49 938.23
Table-16: Interest Income and Loans & advances
Fig-12: Trend of interest income and loans & advances
Comment:
As Rupali Bank increases its loans and advances from year to year, so it is logical that it
interest income from sanctioning loans and advances are more. The bank has achieved the
highest profit in 2011 from any other previous year. So performance of providing loans and
advances of the bank is not dissatisfaction.

5.11.Classified Loans
Status of loans and advances is one of the criterions of judging the performance of a bank. In
case of classified or unsound loan Rupali Bank's performance has not been so quite
impressive as the table discloses.
Table-17: Classified loans Taka in crore
Particulars 2011 2010
Total loans & 7652.49 6604.90

advances
Total classified loans 454.66 760.27

& advances
% of classified loans 5.94% 11.96%

& advances
Total Recovery 357.52 272.72
Fig-13: Trend of Classified Loans
Comment:
Rupali bank ltd. has succeed in classified loans. From 2010, the ratio of classified loan
against total loan and advances rate is decreasing. It is good sign for bank. because, classified
loan is harmful and which turn into to the bank as a loss project.

5.12.Non-Performing Loans & advances to Total loans &
advances:
Table-18: (Taka in Crore)
Years Amount of Non- % of Non Performing

Performing Loan Loan
2007 124.28 58.74
2008 120.23 53.94
2009 72.53 30.96
2010 50.59 21.11
2011 50.00 16.60
Fig-14: Trend of Non performing loans to Total Loans
Comment: We see that Nom-performing Loans & Advances in RBL is decreasing year by
year. That means % of non-performing loans & advances to Total loans & advances is
decreasing from 2007 to 2011.

Chapter-6
Credit Risk Analysis

Chapter-6
Credit Risk Analysis
6.1.CREDIT RISK :
Credit risk is the possibility that a borrower or a counter party will fail to meet its obligation
in accordance with agreed terms.
Credit risk arises from the bank’s dealing with or lending to corporate, individuals and other
banks or financial institutions.
Credit risk is an investor's risk of loss arising from a borrower who does not make payments
as promised. Such an event is called a default. Another term for credit risk is default risk.
Probable causes of Credit risk:
Inability to pay
Short term cash flow or liquidity problem
Longer term solvency issues
Delays in payment due to operational issues with the treasury function
Unwillingness to pay
When a government grants bankruptcy protection to an insolvent consumer or

business

6.2.OVERVIEW OF CREDIT RISK MANAGEMENT (CRM):
CRM enables banks to proactively manage loan portfolios in order to minimize losses and
earn an acceptable level of return for the shareholders. In the fast changing, dynamic global
economy, and the increasing pressure of globalization, liberalization, consolidation and
disintermediation, Banks should have robust credit risk management policies and procedures
that are sensitive and responsive to these changes.
CRM requires:
The goal of credit risk management is to maximize a bank’s risk-adjusted rate of return by
maintaining credit risk exposure within acceptable parameters. Banks need to manage the
credit risk inherent in the entire portfolio as well as the risk in individual credits or
transactions. Banks should also consider the relationships between credit risk and other risks.
For the most part, these methods consist of the following elements, performed, more or less,
in the following order.
1. identify, characterize, and assess threats
2. assess the vulnerability of critical assets to specific threats
3. determine the risk (the expected consequences of specific types of attacks on specific
assets)
4. identify ways to reduce those risks
5. prioritize risk reduction measures based on a strategy
High credit risk is typically indicated by increasing credit losses in the form of charge-offs,
write-offs, or higher loss provisions, high cost of funding and flat or declining net interest
margins.
Credit risk management needs to be a robust process that enables banks to proactively
manage loan portfolio in order to minimize losses and earn an acceptable level of return for
shareholders. Credit risk management processes are sub-divided into the following four parts.
1) Credit Risk Identification
2) Credit Risk Measurement
3) Credit Risk Monitoring and Control
4) Credit Risk Mitigation
Risk Identification:

Credit risk arises from potential changes in the credit quality of a borrower has two
components; default risk & spread risk.
Default risk: Default risk is driven by the potential failure of a borrower to make promised
payments, either partly or wholly.
Spread risk or Downgrade risk: If a borrower does not default, there is still risk due to
worsening in credit quality. This results in the possible widening of the credit-spread. This is
credit spread risk. These may arise from a rating change.
Risk Measurement:
Measurement of credit risk consists of:
a) Measurement of credit risk through credit rating/scoring
b) Quantifying the risk through estimating expected loan losses like the amount of loan losses
that bank would experience over a chosen time horizon (through tracking portfolio behavior
over 5 or more years) and unexpected loan losses like the amount by which actual losses
exceed the expected loss (through standard deviation of losses or the difference between
expected loan losses and some selected target credit loss quintile)
Risk Monitoring & Control:
Risk taking through lending activities needs to be supported by a very effective control &
monitoring mechanism .An elaborate and well – communicated policy that articulates
guidelines for risk taking, procedural guidelines and an effective monitoring system is
necessary.
It must be mentioned that an appropriate credit information system is basic prerequisite for
effective control & monitoring. A comprehensive & detailed MIS and CIS is the backbone
for an effective CRM system.
Risk Mitigation:
Credit risk mitigation is an essential part of credit risk management. This refers to the process
through which credit risk is reduced or it is transferred to a counter party.
Asset securitization, Credit derivatives etc are used to mitigate risks in the portfolio.
6.3.Risk Grading
Credit Risk Grading (CRG) is an important tool of credit risk management to understand
dimension of risk in credit transaction. CRG, a replacement of LRA, was first introduced in
2005.It is a common standardized method for the Bankers to select borrowers based on their

different risk level. It is useful for both pre-sanction and post sanction stage of a loan.
Following factors should be taken in consideration in grading a Loan Client. These are also
known as principal risk factors of the client. These are
(a) Financial Risk factor
(b) Business / Industry Risk factor
(c) Management Risk factor,
(d) Security Risk factor and
(e) Relationship Risk factor.
Before preparing the grading of the client the Bank go through the above mentioned factors
of the client and analyze the same with a view to arrive a decision whether they should go for
finance or not. In order to prepare the Clients Credit Grade they will follow meticulously the
CRG Manual as prescribed by Bangladesh Bank. CRG is the mandatory replacement of LRA.
Step I:
Identifying all the Principal Risk Components like financial risk, Business / Industry Risk,
management Risk, Security risk and Relationship Risk. Each of the above mentioned key
areas required to be evaluating and aggregating to arrive at an overall risk grading measure.
Step II:
Allocate weightages to principal risk components. According to the importance of risk
profile, the following weightages are proposed for corresponding principal risk:
Principal Risk Components Weight(%)

Financial Risk 50%
Business/ Industry Risk 18%
Management Risk 12%
Security Risk 10%
Relationship Risk 10%
Step III:
Establish the key Parameters: Principal Risk Key Parameters
Components
Financial Risk Leverage, Liquidity, profitability & Coverage
Ratio.
Business / Industry Risk Size of Business, Age of Business, Business
Outlook, Industry Growth, Competition &
Barriers to Business

Management Risk Experience, Succession, & Team work.
Security Risk Security Coverage, Collateral Coverage and
Support.
Relationship Risk Account Conduct, Utilization of Limit,
Compliance of Covenants / Conditions &
personal Deposit.
Step IV:
Assign weightages to each of the key parameters:
Principal Risk Components Key Parameters Weight(%)

Financial Risk 50%
Leverage 15%
Liquidity 15%
Profitability 15%
Coverage 05%
Business/ Industry Risk 18%

Size of Business 5%
Age of Business 3%
Business Outlook 3%
Industry Growth 3%
Market Competition 2%
Entry /Exit Barriers 2%
Management Risk 12%

Experience 5%
Succession 4%
Team work 3%
Security Risk 10%

Security Coverage 4%
Collateral Coverage 4%
Support 2%
Relationship Risk 10%

Account Conduct 5%
Utilization of Limit 2%
Compliance of Covenants/ 2%
Conditions
Personal Deposit 1%

Step V:
Input Data to arrive at the score on the key parameters. After the risk identification &
weightage assignment process (as mentioned above), the next steps will be to input actual
parameter in score sheet to arrive at the scores corresponding to the actual parameters.
Step VI:
Arrive at the credit risk grading based on total score obtained. The following is the credit
risk grade matrix based on the total score obtained by an obligor:
Number Risk Grade Short Name Score

1 Superior SUP  100% cash
Covered
 Govt. Guarantee
 International
Bank Guarantee
2 Good GD 85+
3 Acceptable ACCPT 75-84
4 Marginal MG 65-74
5 Special Mention SM 55-64
6 Sub-Standard SS 45-54
7 Doubtful DF 35-44
8 Bad/Loss BL <35
All Banks should adopt a credit risk grading system. The system should define the risk profile
of borrower’s to ensure that account management, structure and pricing are commensurate
with the risk involved. Risk grading is a key measurement of a Bank’s asset quality, and as
such, it is essential that grading is a robust process. Borrower Risk Grades should be clearly
stated on Credit Applications.
6.4.Credit Rating Report Of RBL:
Current Ratings
Date of Ratings Long-term Short-term Govt. Support
01 December, 2011 BB3 ST – 3 AAA

Previous Ratings
Date of Ratings Long-term Short-term Govt. Support
19 December, 2010 BB2 ST – 3 AAA
Rating Based on:

Audited financial statement up to 31 December, 2010 and other relevant quantitative as well
as qualitative information up to the date of rating declaration.
CRAB RATING SCALES AND DEFINITIONS - LONG TERM: BANKS
Rating Definition
AAA Commercial Banks rated 'AAA' have extremely strong
Triple A capacity to meet their financial commitments. 'AAA' is the
(Extremely Strong Capacity & highest issuer credit rating assigned by CRAB. AAA is
Highest Quality) judged to be of the highest quality, with minimal credit
risk.
AA1, AA2, AA3* Commercial Banks rated 'AA' have very strong capacity to
Double A meet their financial commitments. They differ from the
(Very Strong Capacity & Very highest-rated Commercial Banks only to a small degree.
High Quality) AA is judged to be of very high quality and is subject to
very low credit risk.
A1, A2, A3 Commercial Banks rated 'A' have strong capacity to meet
Single A their financial commitments but are somewhat more
(Strong Capacity & High susceptible to the adverse effects of changes in
Quality) circumstances and economic conditions than Commercial
Banks in higher-rated categories. A is judged to be of high
quality and are subject to low credit risk.
BBB1, BBB2, BBB3 Commercial Banks rated 'BBB' have adequate capacity to
Triple B meet their financial commitments. However, adverse
(Adequate Capacity & Medium economic conditions or changing circumstances are more
Quality) likely to lead to a weakened capacity of the Commercial
Banks to meet their financial commitments. BBB is subject

to moderate credit risk.
BB1, BB2, BB3 Commercial Banks rated 'BB' are less vulnerable in the
Double B near term than other lower-rated Commercial Banks.
(Inadequate Capacity & However, they faces major ongoing uncertainties and
Substantial Credit Risk) exposure to adverse business, financial, or economic
conditions, which may lead to the Commercial Bank’s
inadequate capacity to meet their financial commitments.
BB is judged to have speculative elements and is subject to
substantial credit risk.
B1, B2, B3 Commercial Banks rated 'B' are more vulnerable than the
Single B Commercial Banks rated 'BB', but the Commercial Banks
(Weak Capacity & High Credit currently have the capacity to meet their financial
Risk) commitments. Adverse business, financial, or economic
conditions are likely to impair the Banks’ capacity or
willingness to meet their financial commitments. B is
considered speculative and weak capacity and is subject to
high credit risk.
CCC1, CCC2, CCC3 Commercial Banks rated 'CCC' are currently vulnerable,
Triple C and are dependent on favorable business, financial, and
(Very Weak Capacity & Very economic conditions to meet their financial commitments.
High Credit Risk) CCC is judged to be of very weak standing and is subject
to very high credit risk.
CC Commercial Banks rated 'CC' are currently highly
Double C vulnerable. CC is highly speculative and is likely in, or
(Extremely Weak Capacity & very near, default, with some prospect of recovery of
Extremely High Credit Risk) principal and interest.
C A 'C' rating is assigned to Banks that are currently highly
Single C vulnerable to nonpayment of obligations, or in the verge of
(Near to Default) default or faced with insolvency petition or bankruptcy
petition or similar actions, but have not yet experienced a
payment default with external support.
D D' is in default. The 'D' rating also will be used upon the
(Default) filing of a bankruptcy petition or the taking of a similar
action if payments on an obligation are jeopardized.

CRAB RATING SCALES AND DEFINITIONS - SHORT TERM: BANKS
Rating Definition
ST-1 Commercial Banks rated in this category are considered to
Highest Grade have the highest capacity for timely repayment of
obligations. Commercial Banks rated in this category are
characterized with excellent position in terms of liquidity,
internal fund generation, and access to alternative sources
of funds is outstanding.
High Grade have strong capacity for timely repayment. Commercial
Banks rated in this category are characterized with
commendable position in terms of liquidity, internal fund
generation, and access to alternative sources of funds is
outstanding.
Average Grade average capacity for timely repayment of obligations,
although such capacity may impair by adverse changes in
business, economic, or financial conditions. Commercial
Banks rated in this category are characterized with
satisfactory level of liquidity, internal fund generation, and
access to alternative sources of funds is outstanding.
Below Average Grade have below average capacity for timely repayment of
obligations. Such capacity is highly susceptible to adverse
changes in business, economic, or financial conditions than
for obligations in higher categories. Commercial Banks
rated in this category are characterized with average
liquidity, internal fund generation, and access to alternative
sources of funds is outstanding.

Inadequate Grade have inadequate capacity for timely repayment of
obligations susceptible to adverse changes in business,
economic, or financial conditions. Commercial Banks
rated in this category are characterized with risky position
in terms of liquidity, internal fund generation, and access
to alternative sources of funds is outstanding.
Lowest Grade have obligations which have a high risk of default or
which are currently in default. Commercial Banks rated in
this category are characterized with risky position in terms
of liquidity, internal fund generation, and access to
alternative sources of funds is outstanding.

Chapter-7
Overall Performance of
RBL
Chapter-7

Overall Performance of a bank
7.1.PERFORMANCE AT A GLANCE
Performance of Trust Bank Ltd. from the year 2006 to 2010 is given in the following table
Taka in crore
Particulars 2011 2010 2009 2008 2007

Authorized Capital 700 700 700 700 700
Paid-up Capital 137.50 125 125 125 125
Loans And 7652.49 6604.90 5234.42 4903.00 4708.03
Advances
Total Equity 1525.08 1415.15 (558.18) (816.91) (1054.91)
Total Deposits 10723.40 9112.38 7380.34 7028.05 7244.61
Total Investments 2361.12 1571.72 1430.30 1254.57 1409.06
Import Business 6926.00 6024.00 2519.41 2058.97 1985.67
Export Business 1351.00 849.00 745.81 728.42 639.88
Remittance 2114.00 1985.00 2231.17 2164.27 1889.43
Total Income 1246.22 825.36
Net Profit before 360.36 244.69 209.87 114.51 281.38
Tax
Net Profit after Tax 109.13 60.03 166.85 87.41 (1101.74)
Total Assets 14483.63 12443.45 8779.14 8231.18 8151.20
Number of 503 492 492 492 492
Branches
Earning per Share 7.94 4.37
(Taka)
Table-19: Performance at a glance
7.2.Return on Equity (ROE)

ROE measures of a corporation's profitability that reveals how much profit a company
generates with the money shareholders have invested. This is where the shareholders look at
to see how efficiently the board of directors or the manger are running the company with the
money i.e. equity they have provided. ROE is the rate of return flowing to bank’s
shareholders, i.e., the net benefit the investors have received from investing their capital in
the bank. ROE is calculated as follows:
ROE = Net Income after Tax / Total Equity Capital
Year Return On Equity
2011 7.16%
2010 4.24%
2009 -29.89%
2008 -10.70%
Fig-15: Trend of Return on Equity
As per the figure , the trend of ROE has been decreasing from the year 2008 to the year 2009
because of the decrease of shareholders equity.In 2010 to 2011 ROE is increasing Because of
increase the shareholders equity.
7.3.Return on Assets (ROA)

ROA is a managerial efficiency indicator that shows how successfully the management has
been converting the bank’s assets into net earnings. ROA is calculated as follows:
ROA = Net Income after Tax / Total Asset

Year Return On Assets
2011 .75%
2010 .48%
2009 1.90%
2008 1.06%
Fig-16: Trend of Return on Assets
As per figure , the trend of ROA has started increasing from the year 2008. But in 2010 ROA
is decreasing and in 2011 its again increased. The figure suggests that the total assets has
been utilized quite efficiently, which indicates that the resources are being used closed to
their fullest of capacities.
7.4.Asset Utilization Ratio

It reflects the portfolio management policies, especially the mix and yield on a bank’s asset.
The asset utilization ratio of a bank is calculated as follows:
Asset Utilization Ratio = Total Operating Revenue / Total Assets

Year Asset Utilization Ratio
2011 72.24%
2010 64.09%
Fig-17: Trend of Asset Utilization Ratio
From figure 1 it can be seen that from 2010 to 2011 it started to increase. When we consider
the last two years, the trend has been increasing indicating that yield on the Bank’s asset has
been increasing and credit for this goes to the portfolio management policies formed by the
management.
7.5.Equity Multiplier
Equity multiplier reflects the leverage or financing policies that indicates the sources chosen
to fund a bank (debt or equity). It is a way of examining how a company uses debt to finance
its assets. This shows how much the equity is multiplied to get the assets the company owns.
In other words, it shows a company's total assets per dollar of stockholders' equity. A higher
equity multiplier indicates higher financial leverage, which means the company is relying

more on debt to finance its assets. The following formula is used to calculate equity
multiplier of a bank:
Equity Multiplier = Total Assets / Total Equity Capital

Year Equity Multiplier
2011 9.49
2010 8.79
2009 -15.73
2008 -10.08
Fig-18: Trend of Equity Multiplier

As per figure , the equity multiplier has decreased between the year 2008 and 2009. But in
2010 to 2011 its increased.
7.6.Some Other Profitability Performance of RBL:

Table-20: Profitability Performance of RBL
Particulars 2011 2010
Price Earning Ratio 17.21% 36.15%
Net profit Ratio 8.76% 7.27%
Return On Investment 7.07% 11.22%

Interest Margin to Total 2.91% 1.68%
Assets
Efficiency Ratio 29.65% 28.39%
Fig-19:Trend of Profitability performance of RBL
7.7.Evaluation of Financial Statement of Rupali Bank Ltd. based on

CAMEL Approach:
CAMELS is an international bank-rating system with which bank supervisory authorities rate
institutions according to six factors. The six areas examined are represented by the acronym
"CAMELS." The six factors are:
1)Capital adequacy,
2)Asset quality,

3)Management,
4)Earnings
5)Liquidity
)6)Sensitivity to market risk
Performance of the banking sector under CAMELS involves analysis and evaluation of these
six crucial dimensions of banking operations. The CAMEL methodology was originally
adopted by North American bank regulators to evaluate the financial and managerial
soundness of U.S. commercial lending institutions.
CAMELS Rating System of Bangladesh
In Bangladesh, since the early nineties, the same 5 components of CAMEL have been used for evaluating
the five crucial dimensions of a banks operations that reflect in a comprehensive fashion an
institutions financial condition, compliance with bank in regulations and statutes and overall
operating soundness. Recently, Bangladesh Bank has upgraded the CAMEL into
CAMELS effective from June, 2006. After inserting sensitivity to market risk, it is
presumed that this off-site supervision technique of central bank would make it a more effective
tool in rating banks. The present system requires that a banks condition and performance be regularly
appraised according to predetermined stress testing on asset and liability and foreign
exchange exposures, procedures, rules and criteria and on the basis of the results obtained through
risk-based audits under core risk management guidelines. A single CAMEL rating for each bank is the result of
both off-site monitoring ,which uses monthly financial statement information, and an on-site examination, from
which bank supervisors gather further private information not reflected in the financial
reports. These examinations result in the development of "credit points" ranging from 0 to
100. As noted above, the six key performance dimensions - capital adequacy, asset quality ,management,
earnings, liquidity and sensitivity to market risk - are to be evaluated on a scale of 1 to 5 in ascending order.
Following is a description of the graduations of rating:
Rating 1 indicates strong performance: BEST rating.
Rating 2 reflects satisfactory performance.
Rating3 represents performancethat isflawedtosome degree.
Rating 4 refers to marginal performance and is significantly below average and

Rating 5 is considered unsatisfactory: WORST rating
Capital Adequacy
Capital Adequacy is a measurement of a bank to determine if solvency can be maintained due
to risks that have been incurred as a course of business. Capital allows a financial institution
to grow, establish and maintain public confidence, and provides a cushion (reserves) to be
able to absorb potential loan losses above and beyond identified problems. A bank must be
able to generate capital internally, through earnings retention, as a test of capital strength. An
increase in capital as a result of restatements due to accounting standard changes is not an
actual increase in capital.
Risk Weighting Assets
Capital Adequacy ratio which is calculated by dividing the bank's core capital by the bank's
total risk-weighted assets, then multiply by 100.
Core Capital Adequacy ratio which is calculated by dividing the bank's risk-based capital by
the bank’s total risk-weighted assets, then multiply by 100.
Banks in Bangladesh have to maintain a minimum capital adequacy ratio(CAR)of not less
than 9.0 percent of their risk weighted assets (RWA, with at least 4.5 percent incore capital)
or Taka 1 billion, whichever is highest.
Capital Adequacy position of RBL:
Rating Description Percentage

1. Strong 9% and above
2. Satisfactory 8% - 8.99%

3. Fair 7% - 7.99%
4. Marginal 5% - 6.99%
5. Unsatisfactory 4.99% and below
Comment: Capital Adequacy Rating is 1 (Strong).
Asset Quality
In the standard CAMELS framework, asset quality is assessed according to: the level,
distribution, and severity of classified assets, the level and composition of nonaccrual and reduced rate
assets, the adequacy of valuation reserves; and the demonstrated ability to administer and collect
problem credits
Assets Quality of RBL:

1. Strong Up to -5.00%
2. Satisfactory 5.01%-10.00%
3. Fair 10.01%-15.00%
4. Marginal 15.01%-20.00%
5. Unsatisfactory Above-20.00%
Comment: Assets Quality Rating is 2 (Satisfactory).
Volume and Level of Earnings (Profitability)
Earnings determine the ability of a bank to retain capital, support the future growth of assets,
and provide a return to investors. The largest source of income for a bank is net interest
revenue (interest income from lending activity less interest paid on deposits and debt). The
second most important source is from investing activity. A substantial source of income also

comes from foreign exchange and precious metal trading, and commissions/transaction fees
and trust operations.
Rating Description ROA (%)

1. Strong 0.85% and above
3. Fair 0.45%-0.64%
4. Marginal Below-0.44%
5. Unsatisfactory Net losses
Comment: Level of Earnings (Profitability) Rating is 2 (Satisfactory).
Strength and Level of Liquidity
Funding and Liquidity are related, however they are separate situations. Funding is what a
bank relies upon to grow its business and the asset side of the balance sheet above and
beyond what could be accomplished with just equity. Funding is provided by deposits, short-
term debt and longer-term debt. Funding means access to capital. Liquidity is what a bank
requires if Funding is interrupted and the bank must still be able to meet certain obligations.
What is the liability structure / composition of the institution’s liabilities, including their
tenor, interest rate, payment terms, sensitivity to changes in the macroeconomic environment,
types of guarantees required on credit facilities, sources of credit available to the institution
and the extent of resource diversification.
Liquidity Rating of RBL:

1. Strong 30% and above
3. Fair 19.00%-19.99%
4. Marginal 15.00%-18.99%
5. Unsatisfactory Below-15.00%
Comment: The liquidly rating is 4 (Marginal)

Efficiency and Quality of Management
Management Rating of RBL:

1. Strong 1.00-1.49
2. Satisfactory 1.50-2.49
3. Fair 2.50-3.49
4. Marginal 3.50-4.49
5. Unsatisfactory 4.50-5.00
Comment: The Management Rating is 2 (Satisfactory).

Bank Rating

1. Strong 1.00-1.49
2. Satisfactory 1.50-2.49
3. Fair 2.50-3.49
4. Marginal 3.50-4.49
5. Unsatisfactory 4.50-5.00

Comment: The Bank rate is the total of all the capital, assets, management, earning and
liquidity. Bank rate of RBL is 2 (Satisfactory) which implies –
RBL is fundamentally sound.

Findings are of a minor nature and can be handled routinely.
Stable and can withstand business fluctuations well.
Supervisory concerns are limited to the extent that findings are corrected.

Chapter-8
SWOT Analysis ;
Recommendations and
Conclusion
Chapter-8
SWOT analysis:
Strength:
 The RBL has well-arrayed network with 492 branches in rural, semi- urban and urban
areas for rendering services throughout the country.

 RBL has reputation and tradition for a long time.
 RBL has well acquainted and independent brand
 RBL has sound, reliable and extensive deposit base of long duration
 RBL has worldwide 163 correspondence arrangement and 22 exchange houses

through which foreign tread transaction and Remittance activities are accomplished
 RBL has a huge number of tested customers
Weaknesses:
 Lack of long term business planning
 Weaknesses of Credit management
 Tangle of a huge number of suits
 Defaulted loan for a colossal amount
 Blocked loan at interest free rate or nominal rate of interest
 Weak automation and lack of application of modern technology
 Lack of efficient and experienced officers
 Training weaknesses
 Lack of marketing planning
 Absence of time suited products
 Lack of foreign branches and a limited number of correspondents and exchange

houses

 Absences of subject related and specialized (such as CA, lawyer ,IT specialist etc.)
officers.
Opportunities:
 Branch modernization and automation
 Introduction of On-line banking and delivery of ATM services
 Relocation of branches in commercially important locations
 Strengthening of Marketing activities
 Introduction of competitive modern banking products
 Expansion of local and foreign remittance business through vast branch network
 Introduction of mobile banking service
 Introduction of merchant banking
 Expansion of corporate branches
 Expansion of AD branches
Threats:
 Competitive state owned commercial bank
 Competition with private & foreign commercial banks working in Bangladesh
 Lack of competitive pay & allowances and facilities for the officers /staff.
RECOMMENDATION
For improve their performance and remove the problem The Rupali Bank has to do some
thing and these are:
Vast Advertising:
Firstly the bank has to increase their advertisement and also increase their social activities.
So they have to explore their name to the people that everyone can know about The Rupali
Bank.

Increase Number of Branches:
In this time there is so much competition between each other that a single step can change
the all direction. Today’s people are very much willing to do banking, which one is near to
them. So if the number of branches will not increases than it can lose the customer.
Decentralization of the Power:
The authority power should be decentralized according to their rules and responsibility for
the purpose of loan sanction, there is a lot of authority but it should be reduced. The main
authority power should provide the responsible branch manager to reduce the unnecessary
hassle then it will be better for the bank.
Inactive Marketing Team:
RBL’s marketing team is not so much active for collecting loan and deposit. And it has a
shortage of marketing people. So more marketing or sales promotion officer is necessary.
Minimize the Disbursement Time:
It takes 15 days, sometimes 1 month also for sanctioning a loan. So it is really a huge time
for a person which creates customer dissatisfaction.
Employee Dissatisfaction and reshape of Salary Structure:
The exits dissatisfaction among the employees. Their promotion is very slow manner so in
future the switching tendency will increase. Employees’ salary structure is not so much
standard if we compare with The Standard Bank Limited. So their skill employee always is
searching for better offer which will affect the bank performance.
Conclusion…..
Bangladesh is one of the world's most prominent developing nations. The financial service
providing system and bank’s ability to deliver sound financial services to its constituencies
can have far-reaching implications for the economic development of the nation. Financial
sector of Bangladesh, like most developing countries, is dominated by banking enterprises.
Bank is very old institution that is contributing towards the development of the economy as

well as plays a vital role of financial intermediary of Bangladesh. Bank is treated as an
important service industry in modern world. Credit / Loan constitute the major revenue
earning asset of a Bank. Banks lend mostly depositors money. Credit / Loan able fund having
cost implication and repayment obligations to the depositors have to be managed competently
with minimum possible credit (default) risk. Incidence of Credit Risk may be higher unless
the risk is cared and monitored adequately. Rupali Bank should emphasis more on credit risk
management policy (CRM) as CRM enables banks to proactively manage loan portfolios in
order to minimize losses and earn an acceptable level of return for the shareholders.
BIBLIOGRAPHY
 WEB SITES-
 www.rupalibank-bd.com
 www.google.com
 www.bangadeshbank.bd.org

 Annual Report (2011) of Rupali Bank Limited
 Annual Report (2010) of Rupali Bank Limited
 Bank Management by Dr. A R Khan
 Bank Management and Financial Service by Peter S. Rose and Sylvia C. Hudgins
 Accounting Principles by Weygandt, Kieso and Kimmel
 Weekly Schedule of RBL

Appendix
ABBREVIATION
A/C Account
B/L Bill of Lading
BB Bangladesh Bank
BIC Bank Identifier Code
BR Branch

C&F Clearing & Forwarding
CC Cash Credit
CCI & E Chief Controller of Import & Export
CFR Cost & Freight
CRF Clean Report Findings
DD Demand Draft
EDF Export Development Fund
EPB Export Promotion Bureau
EPZ Export Processing Zone
ERC Export Registration Certificate
EXP Export Form
FC Foreign Currency
FDD Foreign Demand Draft
FDR Fixed Deposit Receipt
FOB Free On Board
IBCT Inter Branch Credit Transaction
IMP Import Form
IRC Import Registration Certificate
L/C Letter of Credit
LCAF Letter of Credit Authorization Form
LIM Loan against Imported Merchandise
LTR Loan against Trust Receipt
PAD Payment against Document
PO Payment Order
PSI Pre Shipment Inspection
SOD Secured Overdraft
STD Short Term Deposit

SWIFT Society for Worldwide Interbank Financial
TC Travelers Cheque
TIN Tax Identification Number
TR Truck Receipt
TT Telegraphic Transfer
UCPDC Uniform Custom & Practice for Documentary Credit
Rupali Bank Limited

Balance Sheet
As at 31 December 2011
Particulars 31.12.2011(Taka) 31.12.2010(Taka)
Property And Assets
Cash in hand( including Foreign 1,508,175,263 1,458,862,759
Currencies)

Balance with Bangladesh Bank and Its 5,870,525,343 6,083,778,114
Agent Banks
Balance with Other Banks and Financial
Institutions
In Bangladesh 5,952,900,9000 2,373,500,000
Outside Bangladesh 546,920,156 315,023,347
Money at Call and Short Notice - 3,200,000,000

Investments
Governments 20,330,749,837 13,549,701,995
Others 3,280,403,922 2,167,492,727
Loans and Advances
Loans, Cash credit, Overdrafts, etc/ 71,134,671,704 61,082,086,481
Investments
5,390,250,743 4,966,879,658
Bills purchased and discounted
Fixed Assets including premises, furniture 9,671,817,445 9,520,746,146
and fixtures
Other Assets 21,149,896,953 19,969,706,216
Non-Banking Assets - -
TOTAL ASSETS 144,836,311,366 124,687,777,443
LIABILITIES AND CAPITAL
Liabilities
Borrowing from other Banks, Financial 1,604,970,053 269,497,245
Institutions and agents
Deposits and Other Accounts

Current and Other accounts 14,852,048,521 14,276,520,569
Bills Payable 1,337,427,170 1,296,682,408
Savings Bank Deposits 35,178,178,074 33,243,580,223
Fixed Deposits 55,866,300,807 42,306,971,817
Other Deposits - -

Other Liabilities 20,746,595,947 19,143,047,520
TOTAL LIABILITIES 129,585,520,572 110,536,299,782

CAPITAL/ SHAREHOLDERS EQUITY
Paid-up Capital 1,375,000,000 1,250,000,000
Share Premium Account 74,953,800 74,953,800
Statutory Reserve 2,035,092,183 1,535,376,752
General Reserves 1,013,298,170 513,298,170
Retained Earnings 760,041,897 315,146,322
Assets Revaluation Reserves 8,799,356,626 8,914,107,941
Revaluation Reserve for Securities 1,193,048,118 1,213,032,176
TOTAL SHAREHOLDERS EQUITY 15,250,790,794 14,151,477,661
TOTAL LIABILITIES AND 144,836,311,366 124,687,777,443
SHAREHOLDERS EQUITY
Rupali Bank Limited
Profit and Loss Account
For the period ended as on 31 December 2011
Particulars Year ended Year ended
31.12.2011 31.12.2010
Interest Income 9,382,331,618 5,552,622,912

Less: Interest Paid on Deposits and Borrowings 5,163,924,073 3,463,821,453
Net Interest Income 4,218,407,545 2,088,801,459
Income from Investments 1,668,240,055 1,762,760,524
Commission, Exchange and Brokerage 803,784,983 549,923,015
Other Operating Income 607,883,837 388,334,037
Total Operating Income 7,298,316,420 4,789,819,035
Salaries and Allowances 2,126,527,566 1,626,272,273
Rent, Taxes, Insurance, Electricity, etc. 167,649,264 144,957,187
Legal Expenses 315,018 2,144,748
Postage, Stamps, Telecommunications, etc. 11,501,373 11,234,992
Stationery, Printing, Advertisement, etc. 47,416,769 36,928,583
Managing Director's salary and benefits 504,360 527,860
Charges on Loan losses - -
Directors' Fees 1,480,000 1,611,000
Auditors' Fee 1,040,000 515,000
Depreciation on Fixed Assets 860,207,041 95,315,199
Other Expenses 478,097,872 423,458,228
Total Operating Expenses 3,694,739,263 2,342,965,070
Profit before Provisions 3,603,577,157 2,446,853,965
Provision for loans and advances - -
Provision for Diminution in value of Investment - -
Other Provisions 1,105,000,000 1,021,125,510
Total Profit before income Tax for the year 2,498,577,157 1,425,728,455
Provision for Income Tax 1,407,266,405 825,436,442
Net Profit after Tax for the year 1,091,310,752 600,292,013


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Internship Report

Date of Submission: November 05, 2012

Credit and Credit Risk Analysis of Rupali Bank Limited

hossain Officer and many more.

Carrying out of this report.

Credit and Credit Risk Analysis of Rupali Bank Limited

Credit and Credit Risk Analysis of Rupali Bank Limited

Credit and Credit Risk Analysis of Rupali Bank Limited

Credit and Credit Risk Analysis of Rupali Bank Limited

Credit and Credit Risk Analysis of Rupali Bank Limited

Chapter Particulars Page No.

Chapter One 1.1 Introduction 13

1.2 Rationale of the study 13

1.3 Scope of the Study 14

1.4.Objectives of the report 14

1.6.Limitations of the study 16

Chapter Two Background of Banking Industry and Overview of

2.1.Background of the Banking Industry 18

2.2.Present Status of Banking Industry 19

2.3.Banking Structure of Bangladesh 20

2.7.Core values of RBL 21-22

2.9.Eithical Principles 22-23

2.10.Corporate Information of RBL 23-24

Credit and Credit Risk Analysis of Rupali Bank Limited

2.13.Products and services in Rupali Bank 28-31

2.14. Job Responsibilities 32

Chapter Three Credit Activities of Rupali Bank Limited

3.2.Credit Policy of RBL 34

3.3.Functions of Credit department 35

3.4.Mechanisam of Credit distributions of RBL 35-36

3.6.Credit Monitoring and Reviewing 37-38

3.7.Credit Analysis 38-40

3.8.Types of Credit facilities offered by RBL 40-49

Chapter Four Loan Recovery

4.1.Policy of Loan Recovery 52

4.2.Loan Recovery Procedure 52-53

4.3.Cause of Loan Recovery 53-54

4.4.Suggesstion for Recovery 54

Chapter Five Credit Performance Evaluation of RBL

5.1.Loans & Advances of RBL 56

5.2.Growth of loans & advances 57

5.5.Credit to Deposit Ratio Analysis 60-61

5.6.Concentration of loans & advances in Total 62

5.9.Sector wise loans & advances 65

Credit and Credit Risk Analysis of Rupali Bank Limited

Chapter Six Credit Risk Analysis

6.2.Overview of Credit Risk Management 70-72

6.3.Risk Grading 72-75

6.4.Credit Rating Report of RBL 75-79

Chapter Seven Overall Performance of RBL

7.4.Asset Utilization Ratio 84

7.6.Some other Profitability Performance 86

7.7.CAMEL Rating 87-93

Chapter Eight SWOT Analysis 95-96

Credit and Credit Risk Analysis of Rupali Bank Limited

Credit and Credit Risk Analysis of Rupali Bank Limited

Figure no. Topic Page

Credit and Credit Risk Analysis of Rupali Bank Limited

Credit and Credit Risk Analysis of Rupali Bank Limited

1.2.Rationale of The Study:

Credit and Credit Risk Analysis of Rupali Bank Limited

1.4.Objectives of the Report: