Eastern Bank Limited

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American International University of Bangladesh
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Table of Contents
Introduction.................................................................................................................................................2
Vision of EBL.............................................................................................................................................2
EBL Facts....................................................................................................................................................2
GOVERNANCE & REGULATORY COMPLIANCE...............................................................................3
EBL credit default method..........................................................................................................................3
CREDIT RISK MANAGEMENT PRACTICE...........................................................................................3
Non-Performing loan...................................................................................................................................4
conclusion...................................................................................................................................................4
Reference.....................................................................................................................................................4

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 Eastern Bank Limited is a Dhaka, Bangladesh-based private commercial bank. It was
set up as a limited liability public limited company on 8 August 1992 pursuant to the Act of 1991
on the Bank Companies. Their stock is listed on the stock exchange of Dhaka and the stock
exchanges of Chittagong. The bank offers retail, corporate, wealth management, stock trading
and security products and services. It employs about 3000 people and has 85 branches and 214
ATMs in Bangladesh.
The bank of choice is to translate their business strategy and establish a truly unique
financial institution which delivers superior success and economic results and which is
Bangladesh's most trusted company. EBL dreams of being the bank of choice of both the
individual and the business customers. It introduced a new logo that appears very versatile and
represents all the changes in EBL's attractive colors. As at 31 December 2004, all the bank 's
assets stood at Taka 23,048 million compared to Taka 18, 445 million as at 31 December 2002.
The bank's total loans and advances amounted to TK 14,973 million, an rise of 32,64%,
compared with the previous year's TK 11,288 million. The deposit advance ratio was 95.68
percent as at 31 December 2004. For each ordinary Taka 100 share of the Taka 43, the Board of
Directors recommended that payment should be made of a cash dividend of 828 million for the
year ending December 31, 2004, compared with 20 percent of the dividend of cash for each share
in 2003, which showed an increase of 115 percent. Total bank loans and development amounted
to TK 14.973 million, which suggests an improvement of 32.64% over TK 11.288 million the
year before. On 31 December 2004 the advance to payment ratio was 95.68%.
Over the years, Eastern Bank Limited has been applying the principles of good
governance to meet regulatory requirements which address different stakeholders. Eastern Bank
Limited has Corporate governance spirit often encompassed and expressed the corporate culture
within the group. Eastern Bank Limited has complied with the regulatory requirements of
Bangladesh Bank, National Board of Revenue and Securities & Exchange Commission,
International Accounting Standards etc. as laid down in the Banking Companies Act.
The management of credit risks is one of the most important components of the bank
management dynamics, since credit lending is the key operation for business banks. In this part
of the study, Eastern Bank Restricted Credit Risk Management Practice will be addressed
extensively, compared with the Bangladesh Bank Prudential Guidelines. The two primary credit
management strategies will then be addressed concurrently, which involves managing non-
performing loans as well as loan classification procedures. Risk is inevitable in all facets of a
commercial operation, but credit risk is a basic element that must be handled by banks and
financial institutions. The loan risk could mean that the borrower or the counterpart will not
fulfill its obligations according to the negotiated terms and conditions. Therefore, the credit risk
emerges from transactions or lending by the bank to businesses, individuals and other banks or
financial institutions. For its risk management purposes, Eastern Bank Limited has classified its
credit risk into four different categories. The special management strategy of each class of risk.

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 The key sector for a commercial bank is credit lending. It has become very important to
take prudential decisions on the competitive business market when disbursing any loan – be it in
the corporate sector, in the small and medium-sized enterprises or in consumer finance. Although
a bank cannot decide on a loan, the expense and the price must be assessed against a loan
disbursement. Credit risk management therefore needs to be a rigorous process, allowing banks
to control their loan portfolio proactively to reduce losses and give shareholders a reasonable
level of return. In this sense, it is very critical that a bank has a CRM department. This is so for
Eastern Bank Limited, which has a full CRM department to concentrate solely on Corporate and
SME loans for the entire portfolio.

In order to achieve optimum performance, the credit risk management department is fully
incorporated into organizational dynamism. This specific banking department supports all the
corporate and SME proposals by the bank. The department 's work comprises:
Supervision of credit policy, procedures and controls for all credit risks emanating from
company, sector, operational, industrial, and financial transactions. Monitoring the efficiency of
the asset of the bank. To improve the recovery and ensure that sufficient and prompt provision
has been made for loss loans, handle directly all Substandard & Doubtable & Poor and Loss
records. The department is well prepared to address all types of complex challenges. The
department, which is well equipped in the sense of providing enough employees, is also well
equipped, with bright technological equipment. The experienced team leader is the 7-member
team. The following parts define the Department for SMEs' normal operational procedures.
NPL (Non-performing loans) includes such loans, which display signs of loan vulnerability.
In case of a declining loan rate, the first indicator of the client's repayment is an irregularity. A
loan account also begins to have dues in the past. International best practices allow for a loan to
be listed as non-performing if the principal and/or interest is in arrears for three months or
longer. Bangladeshi banks may identify non-performing loans on a three-month schedule. Early
identification of non-performing loans promotes restructuring efforts and leads to the elimination
of the risk of defaults. Loans may be defined as both factual and subjective non-performing
loans. Bangladesh Bank falsely sets objective requirements for credit classification. The
subjective decision by the bank officials is driven by the Top Management Guidance Circulars.
For all the planned banks in the country compliance with the BB guidelines or guidance is a
must. This case is no exception to EBL. In the department all credit circulars are correctly filed.
The top management ensures that every credit officer understands all the circulars and
instructions and cares about the specified issue during service. The following section deals with a
similar issue, which requires strong bank enforcement.

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