Department of Management

Studies
Course Title: Bank Management
Course Code: MGT-324

Assignment on:
Loan Management
Submitted to:
Dr. G. M. Azmal Ali Quaosar
Associate Professor
Dept. of Management Studies
Comilla University
Submitted By: Group: 03
Serial Name ID No. Assignment Presentation
No. Marks Marks
01 Nadiya Rahman 11805027
02 Md Redoy Hossain 11805028
03 Mohammad Eftekhar 11805029
Hossain
04 Md. Abdur Rahman 11805030
05 Shabrina Akter 11805031
06 Md. Shahparan 11805032
07 Zakia Nur Munmun 11805033
08 Mahmudul Hasan 11805034
09 Kaikobad 11805035
10 Md. Mahedi Hasan 11805036
11 Tariqul Islam 11805037
12 Sharif Miah 11805038
13 Jannatul Ferdouse 11805039
 Table of Contents
No. Title Page No.
01 What is loan? 03
02 What is loan management system? 03
03 Characteristics of a loan management system 03
04 Classification of loans 04
05 Functions of Bank Loans 05
06 Importance of Bank loan 05
07 Consideration in Loan Pricing 06
08 Bank loan policy 07
09 Loan administration 07
10 What is Credit Analysis? 08
11 Credit Analysis for Loans 08
12 Documentation and supervision of a bank loan: 09
13 A credit rating 10
14 Loan review and identification of problem loan 10
15 Consideration for loan review 12
16 problems for handling problem in loan 12
17 Guidelines for handling problem in loan 13
18 Rescheduling of loan 14

What is loan?
A loan is when you receive money from a friend, bank or financial institution in exchange for future
repayment of the principal, plus interest. The principal is the amount you borrowed, and the interest is
the amount charged for receiving the loan. Loans basically can be secured or unsecured.

What is loan management system?

The Loan Management System is an innovative, entirely securities-based lending platform where the
machine automatically connects lenders seeking high-quality, collateralized loans with borrowers
requiring convenient access to credit. Loan management systems help automated the entire loan
lifecycle. Depending on requirements, these programs can assist in part or whole. The software can
help with processing customer information, create new loans, and more. They can also provide lenders
with accurate statements and reports. Moreover, they can manage interest rates and provide the tools
for collection automation.

These automated loan management/lending systems outshine legacy systems in many ways. Being a
digitized system, it also caters to the newer generation of customers. It also reduces manual errors and
risks.

Characteristics of a loan management system:

Digital and cloud-based lending solutions are scalable. They can help you manage the loan lifecycle.
Alternatively, you can also use the software for a single task such as tracking repayments. They can
also be complete systems that can validate loan applications and determine eligibility. Here are some
of the remarkable features of a loan management system.

1. Loan Origination: Loan origination is the process where a borrower applies for a loan, and the
lender processes it. Lending CRM can help evaluate the risk or make a decision. Loan
origination functionalities of a lending CRM can help lookup the credit history of an individual
or an organization. They can also suggest what loans are suitable for the client. The loan
origination system can analyze the application and provide insights to service the loan. A digital
solution will take a few seconds to do the tasks, whereas a manual workflow may take days.
2. Loan Servicing: The loan servicing feature will help you manage loans. Every loan is different:
they have different interest rates, payment dates, and more. You can track all these loans and
ensure that you receive payments on time. It allows you to calculate interests, fees, and more.
A loan management solution can also assist you in automatically collecting funds via wire
transfers, credit cards, and more.
3. Debt collection: Collecting back the payment is essential for lending businesses. A digital
lending platform can notify you when accounts become delinquent. You can also get notified
when the borrower pays back or when a repayment is due. The collection system can even
calculate late fees for you.
4. Reporting and Analytics: An essential feature of loan management software is the reporting
module. You can get comprehensive reports on the cash flow. You can create reports based on
interactions with a single individual or business. Or you can look at how profitable offerings are
 for you. Reporting allows you to visualize and understand in which direction your business is
moving.

Classification of loans:

There are four types of loans:

1. Continuous Loan
2. Demand Loan
3. Fixed Term Loan and
4. Short Term Agriculture & Micro Credit.

Continuous Loan: The loan A/c in which transaction may be made within a certain limit and have an
expiry date for full adjustment will be treated as continuous loan. Examples are: CC, OD etc.

Demand Loan: The loan that becomes repayable on demand by the Bank will be treated as demand
loan. If any contingent or any other liabilities are turned to forced loan (i.e. without any prior approval
as regular loan) those too will be treated as demand loan. Examples are: Forced LIM, PAD, FBP, IBP etc.

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.

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.

Classification of Continuous Loan:

1. Sub-standard: If the loan is past due/overdue for 03 (three) months or beyond but less than
06 (six) months.
2. Doubtful: If the loan is past due/overdue for 06 (six) months or beyond but less than 09
(nine) months.
3. Bad/Loss: If the loan is past due/overdue for 09 (nine) months or beyond.

Classification of Demand Loan:

1. Sub-standard: If it remains past due/overdue for 03 (three) months or beyond but not over
06 (six) months from the date of expiry or claim by the bank or from the date of creation of
forced loan.
2. Doubtful: If it remains past due/overdue for 06 (six) months or beyond but not over 09 (nine)
months from the date of expiry or claim by the bank or from the date of creation of forced
loan.
3. Bad/Loss: If it remains past due/overdue for 09 (nine) months or beyond from the date of
expiry or claim by the bank or from the date of creation of forced loan.
 Classification of Fixed Term Loan:
1. Sub-standard: If the amount of past due installment is installment(s) due within 03 (three)
months.
2. Doubtful: If the amount of past due installment is installment(s) due within 06 (six) months.
3. Bad/Loss: If the amount of ' past due installment is equal to or more than the amount
installment(s) due within 09 (nine) months.

Functions of Bank Loans:

1. Working Capital Loan: If the business organizations need more capital in production due to lack
of working capital, mostly to procure raw materials, fuels, accessories, etc. banks help them by
lending the money in order to arrange those and thus assist the business organizations to
increase production.
2. Seasonal Deficit Loan: Some business organizations need more capital in some seasons
because of great seasonal demand. Commercial banks provide loans for the deficit capital in
order to buy raw materials and other related inputs.
3. Economic Cycle Requirement Loan: In a recession, banks may need a loan to recover from the
bad times. With this type of loan, production is increased. Employment and national income
may also be increased. And at last, the economic condition of the country will be improved.
4. Asset Replacement Loan: Business institutions need loans for replacement of fixed assets. This
type of loan helps business organizations to repair and reestablish the torn out and old assets
and machineries.
5. Asset Acquisition Loan: In the light of competitors’ demonstration a business organization may
plan to acquire newly developed machines or other assets for which bank may extend loans.
6. Bridge Loan: Public limited companies are required to fulfill some formalities in order to be
established in the stock exchanges. When in short of funds they may require additional
financing for the purpose. Banks, when finding reasonable, extend loans to such companies
from raising money through new issues arrange to repay the loans taken. The purpose of this
loan is to make the business organization capable of issuing shares.
7. Export and import Loan: Export-Import business helps the economy to grow fast. The
exporters and importer are helped to augment the volume of their businesses with additional
loans by the banks. Banks also help these business houses by issuing L/C and even standby L/C
for a particular period of time.

Importance of Bank loan:

To start a new business you require a huge amount of money. A person willing to setup a business may
not have that much cash which can meet out his requirements. For this business loans are available.
You can get business loans to start and well establish a new business in market. Business loans are of
great help in meeting working capital requirements and expand the business. It can help in maintaining
the cash-flow during difficult times. In the changing economic climate, business loans can help
strengthen your financial stability during lean periods.
Consideration in Loan Pricing:

There are two considerations in loan pricing are given below:

A. Internal factors B. External factors

1. Internal factors:
 Amount of loanable fund: Before determining the appropriate price for the loans, the bank
authority at first has to reckon the amount of available loanable funds. If banks have larger
volume of surplus funds, loans may be provided with low interest rate and vice versa.
 Cost of bank fund: Banks have to incur different types of expenses for utilizing the funds. If the
interest payable to depositors and expenses for investment are smaller than the interest, the
rate of interest may be lower.
 Overhead expenses: If the overhead expenses are larger in amount, loan should be priced
accordingly.
 Supervision and collection expenses: At the time of determining the interest to be charged on
loan, a bank must consider the supervision and collection expenses. If expected interest
revenue exceeds the expected supervision and collection expenses, the bank should sanction
the loan and vice versa.
 Amount of risk of loan and cost of risk: A bank must consider the associated risk for the loan
and the expenses due to risk. If the cost of risk to grant the loan is lower than the expected
interest revenue from the loan, the loan should be granted. If the amount of risk of loan and
cost of risk is higher than the expected interest revenue, the loan request should be discarded.
 Amount of bad debt: Before sanctioning a loan, a commercial bank must estimate the probable
uncollectible portion or the expected portion of bad debt in the total loan amount. If it is
higher, the interest rate should be higher and vice versa.
 Earning possibility from the alternative use of fund : Banks must determine the opportunity
cost of using the fund elsewhere. Banks must compare the amount of return from any other
alternative investment with the return from the loan amount. After considering this, banks
should fix the price of the loan.
2. B. External Factors:
 Guidance of the government and bank regulatory agencies: If there is no intervention of govt.
or bank regulatory authorities, the market price for loan is determined by the interaction of the
supply of loanable fund and the demand for loan. Government or bank regulatory authority can
increase or decrease the limit of the market rate of loan in order to materialize the planned
economic development and to increase or decrease money supply. So, bank must consider the
direction of the government and bank regulatory authorities at the time of loan pricing.
 Nature of loan pricing by competitors : If a bank sanctions loan at a higher rate and the
adjacent competitor banks start to provide loans at a lower rate, loan clients may go to the
competitors banks for the loan. So bank should determine the price of loans after considering
the price offered by the competitors.
 Risk of increase and decrease of interest rate : The bank should analyze the trends of a few
previous years behaviour of interest rate changes. The bank should also try to predict the
 extent of increase or decrease in the given period. Otherwise, the bank may face difficulties to
achieve its established loan targets.
 Possibility of raising funds through other alternatives : If the borrowers can manage funds
from the money market at relatively lower cost, they will not go for the expensive option, i.e.
taking loans from the bank. So at the time of loan pricing, a commercial bank must consider the
interest rate on alternative money market securities.

Bank loan policy:

Policies and procedures sought to be introduced as a design for all real credit choices and activities,
encasing every material part of credit chance, and reflecting the many-sided quality of the exercises in
which a bank is lengaged.

These policies are:

1. Goal Statement for the Bank’s Loan portfolio

2. Specification of Lending Authority of Each Loan Officer and Committee
3. Lines of Responsibility for Making Assignments and Reporting Information
4. Operating Procedures for Reviewing, Evaluating and Making Loan Decisions
5. Required Documentation for All Loans
6. Lines of Authority for Maintaining and Reviewing Credit Files.
7. Guidelines for Taking and Perfecting Collateral
8. Policies and procedures for setting loan interest rates and fees and the terms for repayment of
loans
9. Statement of Quality Standards
10. Statement of Upper Limit for Total Loans
11. Description of Principal Trade Area Where Loans Should Come From
12. Discussion of Preferred Procedure for Working Out Problem Loans

Loan administration:

Loan administration:-Loan administration means a lender's Processing of a loan and include review,
under writing and evaluation of the loan application, document processing and preparation and
administration of the loan closing, but doesn’t include appraisal, inspection, surveys, credit reports or
other activities incidental to loan organization and normally taking place outside the office of the
lender or performed by third persons.

Keys to effective loan administration:

 Accurate, timely information :-The backbone of loan monitoring is the ability to get updated
financial statement, insurance document and collteral documentation in a timely manner, and
to be able to access that information quickly. System should be designed to remind staff of
information needs, to automate client correspondent as much as possible, and to track the
collected date easily.
  Analysis that calls out potential trouble spots:- Many financial institutions have to pull loan
related information from the core processing system and either combine it with data from
paper files or manipulated the information (adding to it or performing calculation) in order to
monitor the health of the loan. A loan administration system that easily provides automated
reports of exception or that standardize risk rating can help bankers perform loan reviews
quickly in order to assess whether a borrower is headed for trouble.
 Action: - Effective loan administration system market easier for bankers to take proactive steps
to keep the portfolio healthy. This can mean providing information early enough to allow the
bank to work with the borrower to avoid late payments, or it can mean taking other action
(such as adjusting the risk rating or taking reverse on the individual loan)as warranted to
minimize institutional credit risk.

What is Credit Analysis?

Credit analysis is the process of determining the ability of a company or person to repay their debt
obligations. It incorporates both qualitative and quantitative factors.

Credit analysis is used by:

 Creditors to determine a corporation’s ability to pay back loans

 Creditors to determine an individual’s ability to pay back a loan or mortgage
 Investors to determine a corporation’s financial stability.

The purpose of credit Analysis:

The main purpose of credit risk analysis is to quantify the level of credit risk that the borrower presents
to the lender.

Credit Analysis for Loans:

For corporate loans, the 5 C’s of Credit are often used to determine credit quality:

1. Character- The first C is character—reflected by the applicant's credit history.

2. Capacity - The second C is capacity—the applicant's debt-to-income ratio.
3. Capital - The third C is capital—the amount of money an applicant has.
4. Conditions - The fourth C is collateral—an asset that can back or act as security for the loan.
5. Collateral - The fifth C is conditions—the purpose of the loan, the amount involved, and
prevailing interest rates.

Three steps of Credit Analysis:

1. Steps during the Information Collection Stage:

Collecting information about the applicant: The first step in credit analysis is to collect information of
the applicant regarding his/her record of loan repayment, character, individual and organizational
reputation, financial solvency, ability to utilize the load(if granted), etc.
Collecting information about the business: The loan officer should know the purpose of the loan, the
amount of the loan and if it is possible to implement the project by that amount. The banker should
make sure the project is feasible.

Collecting information about the recovery process: The loan officer should collect information about
the sources from which the borrower would repay the loan.

Collecting information about the security: Banks lend money against personal and non-personal
securities. A bank would always prefer getting the loan repaid by the borrower to realizing the loan
from the sale proceeds of the security.

2. Steps during the Information Analysis Stage:

Analyzing the accuracy of information: The information given in and along with the application is
analyzed to judge their accuracy.

Analyzing the financial ability of the applicant: In this stage, the financial ability of the applicant is
taken into consideration.

Analyzing the effectiveness of the project: One aspect of credit analysis is the analysis of quality,
purpose, and prospect of the project for which loan has been applied.

Analyzing the possibility of loan repayment: The analyst looks at what effect the proposed loan will
have on increasing the liquidity and income of the applicant. The net cash flow is a good indicator of
the ability of the applicant to repay the loan along with interest and other expenses within due time.

3. Decision-Making Stage:

If the analyst is satisfied that the risk is acceptable and is convinced that the loan will be repaid, he/she
prepares and submits a recommendation to the appropriate loan approval authority for sanctioning
the loan.

Documentation and supervision of a bank loan:

Bank loan Documentation: Loan documents are all that stand between charging off a loan or
recovering against collateral and/or guarantors. This part of the lending process is essential in order to
avoid loan losses due to poor documentation. Many banks/NBFIs assign this important responsibility
to loan officers and loan administrators.

What are the process of bank loan:

1) Understand Your Credit: You generally need credit to get a bank loan. In addition, your credit
will often dictate the type of loan and loan terms a lender grants you. This means that you
should have a history of borrowing and repaying loans to get a loan. How do you get a loan
when you need money if you don’t have credit?
2) Decide on a Bank Loan Amount: Remember that a loan isn't free money—you will eventually
have to pay the borrowed amount plus interest back to a bank or other lender. If you don't
 make loan payments on time, your credit score could drop.2 This is why it's important to settle
on the right borrowing amount.
3) Determine the Type of Bank Loan You Need : Next, figure out what type of bank loan you
need. The type of loan you get will depend on what you plan to do with the money.
4) Decide Where to Borrow Money: Once you have an idea of your credit, loan type, and loan
amount, shop around for a lender. The Balance provides lists of the best mortgage lenders and
personal loan companies so that you can compare individual lenders.
5) Understand the Loan: Before you get a bank loan, take a look at how the loan works. How will
you repay it—monthly or all at once? What are the interest costs? Do you have to repay a
certain way (perhaps the lender requires you to pay electronically through your bank account)?
Make sure you understand what you’re getting into and how everything will work before you
borrow money.
6) Apply for the Loan.
7) Go Through Underwriting: After you submit the bank loan application, the lender will evaluate
you as a potential borrower. This process may be instant, or it may take a few weeks.

Supervision of Bank loan

Loan money utilization, the study on investment, as well as overall family status, is known as the loan
supervision and this is very important. Because the development depends on the proper investment of
the loan received by the members. The member has got the accountability to invest the loan money in
the right track as well as other members group leader, staff and the manager have got the
responsibility in this respect. This system includes the study on the family members of the incumbent.
Supervision does not mean only the utilization of loan money but includes the total status of the same.

A credit rating:

A credit rating is an evaluation of the credit risk of a prospective debtor (an individual, a business,
company or a government), predicting their ability to pay back the debt, and an implicit forecast of the
likelihood of the debtor defaulting. The credit rating represent an evaluation of a credit rating agency
of the qualitative and quantitative information for the prospective debtor, including information
provided by the prospective debtor and other non-public information obtained by the credit rating
agency's analysts.

Credit reporting is a subset of credit rating - it is a numeric evaluation of an individuals' credit

worthiness, which is done by a credit bureau or consumer credit reporting agency.

Loan review and identification of problem loan

Loan Review: Loan review refers to the examination of outstanding loans to make sure borrowers are
adhering to their credit agreements and the bank is following its own loan policies. Effective loan
portfolio management is crucial to controlling credit risk. In order to control risk, community
development financial institution must know the types and levels of credit risk in its portfolio. Loan
review is an important tool which can help CDFI to identify this risk.
Objectives of loan Reviews:

1. Identification of actual & potential problem loans

2. Encouraging loan executives in the recovery of loans
3. Facilitating the loan executive in making report about the conduct of the borrowers
4. Ensuring Identical documentation among the banks
5. Ensuring compliance of loan policy procedures, etc.
6. Keeping the board of directors updated about the trend of latest conditions of the problem
loans

Consideration for loan review:

Loan review refers to the examination of outstanding loans to make sure borrowers are adhering to
their credit agreements and the bank is following its own loan policies. Carrying out reviews of all types
of loans on a periodic basis – for example, every 30, 60, or 90 days.

What happens to a loan agreement after it has been endorsed by the borrower and the bank?

Should it be filed away and forgotten until the loan falls due and the borrower makes the final
payment?

Obviously, that would be a foolish thing for a bank to do because the conditions under which each loan
is made are constantly changing, affecting the borrower’s financial condition and his or her ability to
repay a loan. Fluctuations in the economy weaken some businesses and increase the credit needs of
others, while individuals may lose their jobs or contract serious health problems, imperiling their
ability to repay any outstanding loans.

The bank’s loan department must be sensitive to these developments and periodically review all loans
until they reach maturity. While banks today use a variety of different loan review procedures, a few
general principles, are followed by nearly all banks.

These include:

1. Carrying out reviews of all types of loans on a periodic basis – for example, every 30, 60, or 90
days.
2. Structuring the loan review process carefully to make sure the most important features of each
loan are checked.
3. The record of borrower payments, to ensure that the customer is not falling behind the
planned repayment schedule.
4. The quality and condition of any collateral pledged behind the loan.
5. The completeness of loan documentation, to make sure the bank has access to any collateral
pledged and possesses the full legal authority to take action against the borrower in the courts
if necessary.
6. An evaluation of whether the borrower’s financial condition and forecasts have changed which
may have increased or decreased the borrower’s need for bank credit.
 7. An assessment of whether the loan conforms to the bank’s lending policies and to the
standards applied to its loan portfolio by examiners from the regulatory agencies.
8. Reviewing most frequently the largest loans, because the default on these credit agreements
could seriously affect the bank’s own financial condition.
9. Conducting more frequent reviews of troubled loans, with the frequency of review increasing
as the problems surrounding any particular loan increase.
10. Accelerating the loan review schedule if the economy slows down or if the industries in which
the bank has made a substantial portion of its loan develop significant problems.

Problems for handling problem in loan.

Loans may become problem in various reasons. There are two main causes which create problems for
handling problem in loan.

1. Quantitative Causes 2. Qualitative Causes

Quantitative Causes:

1. Excessive loan expansion for getting high rate of profit

2. Ambitious lending of large sized loans to overpower the competitors.
3. Providing loans beyond the repayment capacity of the borrowers,
4. Sanctioning loans without adequate collateral
5. Disbursement of fund before documentation finished,
6. Repeatedly asking for loan renewal to avoid overdue interest
7. Inaccurately assessing the capacity of inflow of cash
8. Lending against fictitious assets and unaudited financial statements.
9. Insufficient / improper analysis of loan proposals.
10. Overemphasis on bank profit & growth.
11. Loans given on the basis of transaction rather than net-worth.
12. Loans made on the size of deposit rather than net-worth.

Qualitative Causes:

1. Repayment plan not clear or not stated on the face of the note:
2. Inadequate professionally capable persons to handle loan cases.
3. Sanctioning loan through nepotism and favoritism.
4. Hurriedly sanctioning loan cases without going through all technical steps to judging
creditworthiness.
5. Failure to inspect borrower's business premises.
6. Sanctioning credits ignoring reports of negative track records provided by other banks and
those provided by credit information bureau.
7. Analyzing creditworthiness based on incomplete/wrong credit information,
8. Technical incompetence to make a thorough analysis of potential borrowers' particulars.
9. Unclear and confused legal remedy often encourages wicked borrowers to default.
10. Absence or inadequate loan supervision
 11. Loans for speculative business.
12. Loans to borrowers with bad moral character.
13. Poor communications with borrower.

Guidelines for handling problem in loans: Problem loan can be solved in various ways. There are
some guidelines for handling problem in loan.

Taking Legal Actions through the Court: If bank finds no way to handle problem loans, then bank goes
for taking legal action to handle it. This can be done in two ways. Such as:

1) General recovery suit: When bank finds that the borrower has the ability to repay the loan but
he/she has no interest to pay, at first bank tries to resolve the matter by mutual discussion but if it fails
then the bank goes for general recovery suit to collect the loan along with the expenses of suit from
the borrower.

2) Recovery suit by liquidation: In this case, the borrowing institution is really unable to repay the
debt. When the borrowing organization becomes bankrupt, the bank along with all the creditors may
go for recovery suit through liquidation of the borrowing organization. In this case, net asset of the
borrowing company is smaller than the net claim of the creditors. Court employs a liquidation receiver.
This liquidator distributes the proceeds from selling the assets of the company to all the creditors
proportionately.

Steps by bank itself: Problem loan can solve by bank in two ways.

A. Preventive step

Bank can take the following steps to handle problem loans:

1. Discussion & advice: At the end of a specific time, bank asks the borrower for discuss problem.
the loan inspectors of the bank visits the borrower's business organization and discuss with the
borrower. At the end of the meeting, if any problem arises on the part of the borrower, bank
will provide appropriate advice regarding that problem
2. Additional collateral: Additional collateral is required when the value of the previous collateral
has decreased.
3. Accountability of the loan officer: Banks must ensure the accountability of the loan officer to
his/her superior. Every loan officer must perform his/her duty according to the established loan
policy. Then, he/she informs the superior about the progress.
4. Limit based loan: According to the loan policy, banks have specific limits for specific type of
loans. The loan officer should not cross this limit.
5. Nor making loan without proper credit analysis: Banks should not make loan without
conducting proper credit analysis.
6. Collection de preservation of all the documents related to the loan: Before sanctioning loans
all the documents related to the loans must be collected & preserved.
 7. Restrict diversion of loans: In many cases, dishonest borrowers utilize loan not in the purpose
stated in the loan agreement but in the purpose of consumption or in other type of risky
investments. By restricting this type of diversions, banks can reduce problem loans.

B. Curative Steps: In order to control problem loans, Banks can undertake the following steps in order
to get rid of problem loans:

1. Adjusting financing structure: If the firms are using much debt in their capital structure, the bank
will encourage them to use more equity financing rather than debt financing.

2. Additional loan facilities: The bank will provide additional loan facilities in order to help the firm to
recover from its present crisis. If the firm can recover now, it will be able to repay the banks previous
loan along with this additional loan.

3. Change of repayment schedule of loan: Sometimes, borrower may be unable to repay the loan
installments according to his/her cash flow pattern. In this case, if the bank changes the repayment
schedule in favor of the cash flow pattern of the firm; most of the problem loan borrowers will be able
to make the repayments.

4. Correction of loan diversion: If banks find that the reason of problem loan is utilization of loan in
unproductive sector by the borrower. then to cure the problem loan, banks need to correct the loan
diversion.

Rescheduling of loan:

If a loan is rescheduled, it means that the original arrangement for repayments is altered, typically
because the borrower is finding it difficult to pay back the lender. In other words, rescheduling, often
referred to as debt rescheduling, is a way in which the repayment of debts may be reorganized.
Sample letter of requesting loan rescheduling to bank. To Reschedule Loan Payment. The rescheduling
of loan is required to pay the debt according to new policies in terms of revised interest ratio and
duration of time period in which loan is to be paid. These easy formats are a real help for the
interested ones.
Sample Letter of Requesting Loan Rescheduling to Bank
To,
Mr. Manager,
Alan and Sundry System,
Texas, United State of America.
Subject: Requesting loan rescheduling to bank by the employee
Respected Sir,
It is to state with due respect and honor that I am Mr. Yew Layman and a worker in the Steel Mills firm.
In recent days, I had received a text message from this reputed bank regarding change in the schedule
of the loan payment, so I am here at my earliest to get the new framework of the loan reschedules. I
cannot come in person as I am coming to an old age so kindly see to this matter on a personal level and
make me thankful. Thank you.
Yours Truly,
Mr. Yew Layman.