Chapter 1

Introduction

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1.1. Introduction

Risk is implicit in all aspects of commercial activities. However, for Banks and financial
institutions, credit risk is an essential fact that needs to be managed properly. Credit risk is the
possibility that a borrower will able to meet its obligations in accordance with agreed terms.
Credit risk, therefore, arises from the bank’s dealings with or lending to corporate, individuals,
and other banks or financial organizations. Credit risk management must be a comprehensive
mechanism that allows banks to control loan portfolios proactively in order to reduce losses and
achieve a satisfactory level of return for investors/shareholders. It is essential for banks having
strong credit risk management policies and procedures that are sensitive and responsive to these
changes. Bangladesh Bank issued rules on the Credit risk management function and it
emphasizes on – Arrangement rules, organizational structure, procedural rules and
responsibilities.

1.2. Background of the study

After our independence Sonali bank established them self the largest & leading government
commercial bank of Bangladesh by proclamation of the banks nationalization order 1972. Before
that Sonali bank known as National bank of Pakistan, Premier bank and bank of Bhwalpur. On
November 15, 2007 the bank converted as a public limited company with cent percent
government ownership bank and begun their activities as Sonali bank Ltd. Sonali bank made
eleven members as the board of directors. The bank is responsible for building new nations
various socio-economic schemes as well as money market operations on its own initiative,
covering all sector of our economy.

Sonali Bank is the most important financial institution for economy of our country. It plays a
very important role in the economy by providing means of payment and in utilizing resources.
Sometimes Sonali bank acts as a Central bank of Bangladesh. Sonali bank offer crucial capital in
the shape of loan and advances which are subject to non-repayment which is termed as credit
risk, the risk that a loan will now no longer be repaid timely. Hence the primary challenge of the
SBL is credit risk chance and its control as credit score or loans and advances are the primary
source of profits for them.

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1.3. Objective of the Study:

1.3.1. Primary Objective

The primary goal of this thesis paper is to obtain an MBA degree by gaining practical
experience, which is a prerequisite.
1.3.2. Secondary Objectives
 To evaluate the criteria of credit, sound credit, credit risk grading, credit risk assessment
and controlling procedures over the credit.
 To learn more about the consumer credit appraisal and credit management system,
practiced by Sonali bank Ltd.
 To gain a better understanding of the activities of "Consumer Credit Risk Management,"
especially the various credit and loan services provided by Sonali bank ltd.
 To identify the problems and challenges associated with Credit Risk Management
 To get data regarding the effectiveness of loan & sanction manner that’s carried out at the
evaluation of credit score risk.
 To analyze how credit risk management impact of profitability of the bank.

1.4. Methodology:
Methodology is a general term for a set of instructions for solving a specific problem that
includes stages, tasks, processes, strategies, and resources. It is the systematic examination of
approaches used within a discipline. It also applies to how to arrange data from a variety of
sources in order to complete an effective research project. Explanatory research has been carried
out in order to collect better data that will provide a more accurate picture. To procedure this
report primary and secondary both data has been used.

1.5. Methods of Collecting Data:

To conduct the research, data sources must be defined and collected, and the data must be
categorized, analyzed, interpreted, and presented in a logical order.

1.5.1. Primary sources:

 Conversation with teacher.
 Own calculations and knowledge’s.

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  Informal interview with Credit Analysts of CRM Department
 Informal discussion with various process and system related issues with higher
official

 Direct observation of the officers that how they meet various customer
requirements

1.5.2. Secondary sources:

 “Annual Report 2015, 2016, 2017, 2018, 2019” of the Sonali bank
 Different text books and materials.
 SBL websites.
 Different articles and documents in internet.
 Internal and External Circulars issued by the Sonali Bank
 Credit Risk Management Guideline of BB

1.6. Scope of the study:

The field of my study is the Credit Risk Management of the Sonali bank ltd, this report is
focused of the Credit Risk Management of Personal Loan, industrial loan, sequential process of
credit approval process, assessment activities of the Sonali Bank Limited. The study identifies
and analyzes the non-performing loan segments of the current portfolio and recommending
corrective measures which would finally help to improve the non-performance practice of Sonali
bank. It also analysis the importance of credit risk management process and weather the bank is
following the basic requirement and performance of CRM division.

1.7. Limitations of the study:

Even I have tried my best to collect the data but still I found some difficulties to collect
important data. Those limitation are given below

 SBL follow very strict rules of not giving any confidential data to an outsider. Hence I
have to do lots of hard work to collect required data to finish my project.

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 Allocate time period was too short to study properly about the whole procedure of CMS
of Sonali bank.
 Borrowers are not allowed to interact with this department so it is difficult and even
impossible to connect with borrowers for gathering information.
 Banks all employees are not helpful enough to explain all the internal process.
 It was tough to collect information from people those are completely unknown and
conservative to share proper information related to that content. It was also difficult to
collect demographic information as they were not interest to disclose.
 The report is principally supported the secondary information.
 And because it was my initial work. Thus there could also be some personal mistake
within the report. Some issues produce confusions relating to verification of
information

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 Chapter 2
Review of Literature

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Literature Review
Many agencies, researchers, and academicians have investigated credit risk management and
risk-based supervision in banks. So there is rich information available on this particular topic.
Prior to beginning their quest, they had to carefully pick relevant content. The literature that is
highly applicable to the Context is scanned.

Nikolaidou and Vogiazas (2015) Said that Credit risk management as a set of organized tasks
and activities for managing and guiding risks faced by a company by incorporating key risk
management tactics and processes in relation to the company's goals. It's important to note that
risk management practices aren't designed to completely eradicate risks; rather, they're designed
to control opportunities and hazards that lead to risk (Frank et al, 2014).
On the other hand Garca et al, (2012), stated that, good credit risk management practices have
never been able to completely remove the human factor in risk management decisions.
Furthermore, according to Ross et al. (2009), risk management strategies ensure that financial
organizations provide a logical, solid, and realistic basis for decision making in order to achieve
the firm's goals and objectives.
Khan, A.R. (2008), said that, credit risk is one of the most serious threats to any commercial
bank. Non-execution by a borrower causes credit risk. It can result from an inability or
unwillingness to perform in accordance with the pre-commitment contract. The true credit risk is
when a portfolio's execution deviates from its intended value. The book value of a bank is often
influenced by its credit risk. The more credit an individual has at risk, the more likely a bank will
be wiped out.

The aim of credit risk control, according to Banerjee, Prashanta K., and Farooqui Q.G.M.
(2010), is to minimize non-performing assets while maximizing performing assets, as well as to
ensure the ultimate factor of loan and advantages and their efficient management. Industry
Segment Focus, various types of loan and advances centers, individual Borrower and Group
Limits, and Lending Caps must all be included in the lending tenet. A credit risk grading system
must be implemented. Each center must be assigned a risk rating.

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Wallich (2006)., Stated that, within the administrative side of the budgetary division, pre-
election has an effect. As a result, the government and Bangladesh Bank seem to be underweight
in some quarters. The unwinding of the Bangladesh Bank's rules on defaulters receiving new
credit is a clear example of this. This is evident with the removal of Bangladesh Bank's rules
prohibiting defaulters from obtaining new credit. Usually clearly not a straightforward
environment to function in & particular steps ought to be taken to anticipate the circumstance
from encourage falling apart & undermining the keeping money segment.

Khemraj & Pasha, (2005) An observational outcome of econometric demonstrate based on a

investigation on Guyana appear that GDP development is contrarily related to non-performing
credits, proposing that a change within the genuine economy interprets into lower on-performing
loans. We also discover that banks which shift moderately larger interest rates & loan
unreasonably are likely to cause higher rate of non-performing loan.

Fan & Shaffer (2004) Accounting for non-performing loans improves the profit performance of
larger commercial banks. In spite of the fact that non-performing loans are adversely related to
banks’ profit, it isn't measurably critical or statistically significant.

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 Chapter 3
Overview of Sonali Bank Limited

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3.1. Overview of SBL
After our independence Sonali bank established themselves the largest & leading government
commercial bank of Bangladesh by proclamation of the bank’s nationalization order 1972.
Before that Sonali bank known as National bank of Pakistan, Premier bank and bank of
Bhwalpur. The bank is responsible for building new nations various socio-economic schemes as
well as money market operations on its own initiative, covering all sector of our economy.

On November 15,2007 the bank converted as a public limited company with cent percent
government ownership bank and begun their activities as Sonali bank Ltd. Sonali bank made 11
members as the board of directors. The managing director and CEO of Sonali bank is well
known and reputed banker. Sonali banks HQ is in Motijheel, Dhaka, The capital’s largest
commercial area. In current times Sonali bank is one of the largest and country’s main bank of
Bangladesh. Its activity is huge and it has branches all around the country. Sometimes Sonali
bank act as a country’s central bank as well. It plays an important rule to develop our country’s
economic growth as well as general public’s social welfare.

3.2. Group Corporate structure

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3.3. Sonali bank Ltd. 2019 at a Glance:

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3.4. Corporate Profile
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3.5. Vision
Socially committed leading banking institution with global presence.
3.6. Mission
Dedicated to extend a whole range of quality products that support divergent needs of people
aiming at enriching their lives, creating value for the stakeholders and contributing towards
socio-economic development of the country.

3.7. Slogan of Sonali Bank:

Your trusted partner in innovative banking.
3.8. Core Values of SBL:

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The following key elements make up Sonali Bank Limited's core value proposition, which will
help the bank perceive its employees as working as a team to complete assigned duties and
obligations in order to meet the bank's goals.

The core values are:

 Ethics: Every employee must follow the job ethics to their work place.

 Objective: In carrying out their duties, everybody would have a clear goal in mind.

 Integrity: Protecting and safeguarding the interests of consumers is a critical component

of societal trust.

 Self-Reliance: Each and every employee should have a sense of ownership for the bank

and self-assurance in his efforts to improve the banks performance.

 Innovation: New and innovative technologies are the needed to follow the current

dynamic banking world.

 Commitment: Every employee is dedicated to performing their best in order to ensure

the valued customer's satisfaction.

 Excellence: Excellence in efficiency and effectiveness are prerequisites for providing

high-quality service to the bank's vast customer base.

 Accountability: Workers are accountable for their actions and will report to their

respective supervisors when the tsk is completed.

 Transparency: Information should be made available to all stakeholders so that they

have a clear understanding of the bank's operations.

3.9. Objectives of Sonali Bank limited

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Sonali Bank Limited's main goals are to provide straightforward and standard banking services
to maximum customer satisfaction and to improve the bank's financial position by increasing
market share both domestically and internationally.

With the scaling up of various pilot projects, a greater emphasis will be placed on serving

the country's potential and unbanked population by offering banking services to

underserved areas.

Gaining a strategic edge over rivals by lowering overall costs form their competitors.

By providing timely and enhanced clientele services, establishing a cordial, deep-rooted,

and firm banker-customer relationship.

Responding to market demand by participating in syndicated large loan funding with

like-minded banks across the world, thereby broadening the bank's investment horizons.

Diversify and broaden the overall operations and activities.

Increasing the efficiency of the skilled workforce by improving their aptitude and

competence.

To provide clients with creative, customize and cost-effective financial solutions.

Sustained expansion of the SBL’s operations would improve the SBL’s reputation both at

home and abroad.

To establish a solid market presence.

To uphold the highest level of honesty and intellectual creativity.

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 Chapter – 4

Credit Risk Management of SBL

4.1. Credit Risk Management of SBL

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The Bank's Risk Management Division defines, analyzes, reviews, and supervises all risk-related
work, including risk control/mitigation measures, in accordance with Bangladesh Bank's
guidelines and guidance, with the Board of Directors' approval. In response to the instructions of
the Board of Directors, a high-powered ‘Board Risk Management Committee' comprised of five
members of the Board of Directors was recently created as per the directives of Bangladesh Bank
to improve overall risk management activities.

Risk Management Division has implemented a Risk Management Checklist (RMC) to achieve a
"satisfactory" rating on various segments of core risks by proper implementation of Core Risk
Management Guidelines, which is maintained at all Bank offices/branches. The Risk
Management Division also prepares a half-yearly "Comprehensive Risk Management Report
(CRMR)" and a monthly "Risk Management Report (RMR)" to classify, assess, and mitigate
risks relating to the bank's assets, liabilities, liquidity, and earnings, which it submits to the
Bank's Risk Management Committee as well as Bangladesh Bank for regulatory compliance.

Sonali Bank Ltd. has established an Asset-Liability Management Committee (ALCO) to

ensure that the bank's risk exposure is kept to a minimum. ALCO also evaluates, advises, and
manages cross-border and cross-country risk.

Sonali Bank Ltd. has a robust remedial management approach to handle non-performing loans
(NPLs), which includes a system of controls to recognize poor credits and account tracking.

4.2. Risk based CAM (Capital Adequacy Management) of SBL

Basel III guidelines were implemented on January 1, 2015, in accordance with BB guidelines for
deciding the Minimum Capital Requirement) and the Capital to Risk-weighted Asset Ratio for
banks.

The Capital to Risk weighted Asset Ratio was 10.09 percent at 2019 under Basel-III rules,
compared to 10.10 percent the last year, against a regulatory requirement of minimum 10.0
percent. Core resources (Tier 1 capital) totaled Tk. 45,522.76 million, accounting for 8.65% of
total Risk Weighted Assets (RWA). Tier 2 capital was Tk. 7,573.65 million being 1.44 percent of
RWA.

4.3. Implementation of BASEL- III

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To develop the banking sector's capability to withstand resulting from economic stress,
regardless of source, and thereby reduce the risk of a financial to real economy spillover.
Bangladesh Bank issued BRPD circular no. 18/2014 instructing all scheduled banks in
Bangladesh to phase in BASEL-III from January 1, 2015 to January 31, 2019.

The following areas were primarily covered by these new supervisory standards:

 Raise the capital quality standard to ensure that banks can bear losses both as a ongoing
concern
 Standardized capital framework risk coverage factor.
 Introduce leverage ratio as a backup to the risk-based capital metric
 Improve the level of the supervisory review process (Pillar-II)

In January 2015, SBL began implementing BASEL-III, and the bank's Capital to Risk Weighted
Asset Ratio (CRAR) was submitted to Bangladesh bank in compliance with BASEL-III criteria.

4.4. Credit Rating Report of Sonali Bank Limited 

  With Government Support 

 Without Government Support

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4.5. Risk Management activities
SBL follows those steps to reduce the credit risk:

1. Identification of risk
2. Analysis of data
3. Measurement of risk level
4. Price of risk
5. Monitoring of the risk level
6. Controlling risk level
7. Mitigation of the risk

4.6. Risk Management Framework of Sonali bank Ltd.

The Sonali banks risk management method is based on BB rules & regulations and a simple and
clear definition of risk recognition, evaluation, regulating, and monitoring task. The primary
goals of risk management are to make sure that the results of risk-taking activities are compatible
with the Bank's strategy, and that risk and reward are appropriately balanced to maximize profit.

The Bank's risk management system lays on the groundwork for these goals and objectives. This
framework is regularly checked to ensure that the bank's CMS continues to meet the challenges
and requirements of the market in which it operates, including regulatory expectations and
industry practices.

In all material ways, the Bank's subsidiaries' risk management systems are compatible with the
Bank's risk management framework, though the actual execution of their programs can differ.

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The Bank's risk management strategy is applied in the organization and is made up of three key
components.

i. Risk Governance
ii. Appetite of risk
ii. Risk monitoring & management Tools

Picture: Risk management

I. Risk Governance:

During the last few years, SBL has strengthened risk-related policies, procedures, processes,
control systems, and reporting, resulting in a comprehensive risk management system. To
maintain and strengthen resiliency, the Bank continues to develop its risk management
capabilities by investing in people and IT infrastructure.

II. Appetite of risk

Viable chance administration requires a clear explanation of the bank's risk craving and how that
craving will be dealt with in relationship to the SBL's risk profile. SBL began planning its risk
appetite statement in 2017 in accordance with Bangladesh Bank guidelines. The Sonali Bank’s
Risk Appetite Framework contains of a risk appetite measurement, risk capacity & key risk

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appetite measures. When used in conjunction, the risk appetite statement and the key risk
appetite metrics help to ensure that the Bank remains within appropriate risk boundaries. Sonali
Bank's Risk Appetite Framework includes a risk appetite declaration, risk capacity, and key risk
appetite measures.

Picture: Appetite of risk

III. Risk Monitoring & Management Tools

Risk monitoring & management methods that are driven by the banks appetite framework
activities and combined with the bank’s strategy and business planning processes are create to
manage risk effectively.

Picture: Risk management tools

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4.7. Risk Monitoring & Measurement System of Sonali bank
 To identify and measure both quantifiable and material risk factors, the Bank has a
rigorous risk management procedure in place.
 Sonali bank has Management Information Systems division and they give information to
the Risk Management Division in order to understand the bank's status and risk level in
real time.
 A Solid risk management system is underway to notify all kind of risks.
 Senior Management receives proper and reliable reports obtaining appropriate info for
detecting any negative trends and assessing the level of risk.

4.8. Evaluation of loan proposal and risk assessment:

Credit risk management guidelines, as well as conventional methods and lending, are used to
assess risk prior to loan approval. The decision is based on the calculated risk. Aside from that,
risk measurement is assessed once a year. Any loan plan must include a risk analysis statement.

As a result, any type of proposal, such as a new loan, extension, or improvement, must include
the following properly completed form/data:-

a) Check the quality of data collection

b) Control the limit of utilization form

c) Grading Score sheet

d) Grading Form of risk

e) Internal rating management rating system

4.9. Process of Credit Sanction Followed by Sonali Bank Ltd

The following procedure has to be compelled to be followed for giving advances to
the client. These are:

Client’s Application

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 Filling Form properly

Collecting CIB from BB

Loan Proposal

Collecting proper Documents

Project Appraisal report

Approval from HQ

Sanction

Documentation

4.10. Credit risk mitigation techniques of SBL

 The bank develops CR mitigation plans based on the policies.

 Appropriate credit assessment systems are used to mitigate credit risk before lend the money
and proper collateral are used to hedge the risk.
 For better credit risk management, a risk management tool is designed and risk ranking that
complies with Bangladesh Bank guidelines.
 The term loan rating system is annual cycle

4.11. Recovery of loan & advance of SBL

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Sonali bank is largely depended on the recovery of its outstanding debt. Since advances account
for 80% of the bank’s earning, the outstanding balance includes both principle and interest. A
low recover rate means that the banking operation is in bad shape and vice versa.

4.12. Loan recovery programs

SBL specifically states the Repayment trend in the loan agreement as it grants loans and
advances to its customers. However, some credit card holders do not pay their bills on time. This
is an issue that public banks must deal with. Sonali Bank is in a similar situation. To address the
issue of past-due loans, the bank has implemented specific loan recovery schemes.

4.13. Loan Recovery method taken by SBL

 Creating a credit monitoring and supervision cell.

 Sanctioning loans and advances against adequate collateral
 Increasing the branch manager's decision-making authority in the credit management
phase
 Short-term loans and advances are being emphasized more.
 Limiting the amount of money that can be borrowed and advanced to sick industries.
 Taking legal action against unsound creditors as soon as possible, preferably within the
statute of limitations.

4.14. Loan recovery procedure:

Recovery procedure may be an extended one that needs efforts of the bank for
legal establishments. It additionally takes cash and time. The most responsibility of bank
manager and advance / loan officer is to recover the outstanding loan in Sonali Bank. The
loan recovery procedure is split into many steps. They are as follows:

 Reminder: After a while a reminder has given to the borrower in a proper way. A
formal letter was send to the client and the letters contain sign of higher authority of the
bank.
 Demand Notice: Demand notice is issued before one month being due of outstanding
loan or installment. It’s sent to the borrower.

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 Legal Notice: If the borrower doesn't repay their individual loans and
interest when maturity being received the demand notice by the bank; then bank
sends legal notice under registered with acknowledgement by post to the borrowers.
Before taking any action against the borrower the bank ought to send
legal professional notice to him.
 Special Notice: Besides the higher than 2 notices, a special notice signed by DC,
TNO is send to the respective borrower to stay mental pressure on him for repaying
the loan.
 Field Recovery: Loan officer tries to recover loan through I.O. receipt by visiting the
spot and houses of the borrower.
 Case Filing: If all the procedure except action of bad loan becomes unsuccessful then
certificate case is filed against the borrower. If the recipient is within the following
category then the case must be filed with priority:
 Unwilling to repay loan though he’s financially solvent
 Each effort of loan recovery becomes failure.
 Damaging to the interest of loan.
 Loan recovery with the help of interest exempting:
The loan quality that becomes double in principle and interest and which isn’t possible to
recover with the assistance of legal actions then this loan will be recovered by exempting
interest. By doing this loan are often recovered.

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 Chapter- 5
Data Analysis
(Trend analysis, Ratio analysis, Comparative analysis &
Regression analysis)

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5.1. Trend Analysis & Ratio Analysis of Sonali Bank:
5.1.1 Trend of Loan and advance:

Year 2015 2016 2017 2018 2019

(Million) 3,44,538 3,84,538 4,23,218 4,64,166 5,51,026

600000

500000

400000

300000

200000

100000

0
2015 2016 2017 2018 2019

Graph1: Trend of loan and advance (2015-2019)

In this chart, it is shown that in 2015 amount of loan and advance which was 3,44,538 million,
was increase gradually to 5,51,026 million in 2019. Which indicate that the trend of loan and
advance of Sonali bank is upward side.

5.1.2. Classified loan: (Non-performing loan)

Year 2015 2016 2017 2018 2019
(Million) 86,850 1,09,114 1.49,302 1,21,883 1,11,994

160000

140000

120000

100000

80000

60000

40000

20000

0
2015 2016 2017 2018 2019

Graph 2: Trend of classified loan (2015-2019)

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The amount of NPL was increase till 2017. The amount of classified loan of Sonali bank was
large in 2017 which indicate risk for the bank. But after 2017 it was decreasing gradually which
is a good sign for bank. Last two years they recover pretty well as their classified loan amount
decreased.

5.1.3. Rate of classified Loan: (NPLs to Total Loans and Advance)

Year 2015 2016 2017 2018 2019

(Percentage) 25.08% 28.37% 35.28% 26.26% 20.32%

40.00%

35.00%

30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
2015 2016 2017 2018 2019

Graph 3: Rate of classified loan (2015-2019)

Here. In 2015 rate of classified loan was 25.08% in 2016 increase at 28.37%, in 2017 the rate of
classified loan was more increased at 35.28%, which is not a good sign for the bank. Form 2018
rate of classified loan started to decreased and continues at 2019 as well, it means they are doing
well in last two year as they are able to minimize their NPL rate.

5.1.4. Trend of Classified Loan Recovery

Year 2015 2016 2017 2018 2019

(Million) 27,263 12,880 10,912 36,757 31,974

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 40000

35000

30000

25000

20000

15000

10000

5000

0
2015 2016 2017 2018 2019

Graph 4: Classified loan recovery (2015-2019)

Here, the amount of classified loan recovery is decreased in a significant amount from 27,263
million in 2015 to 10912 million in 2017. At that time period Sonali banks loan recovery
performance was worst. But in 2108 and 2019 loan recovery rate is very high which is indicate
that Sonali bank collect more money from their classified loans.

5.1.5. Yields on Loans and Advances

Year 2015 2016 2017 2018 2019
(Percentage) 8.78% 7.14% 6.85% 5.74% 5.51%

10.00%

9.00%

8.00%

7.00%

6.00%

5.00%

4.00%

3.00%

2.00%

1.00%

0.00%
2015 2016 2017 2018 2019

Graph 5: Yields on Loan & Advances ratio (2015-2019)

Here, from 2015 to 2019 the rate of yields on loan and advances decreased gradually. Which
indicates Sonali bank is doing reasonably well.

5.1.6. Return on Asset (ROA)

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 Year 2015 2016 2017 2018 2019

(Percentage) 0.06% 0.14% 0.58% 0.18% 0.20%

0.70%

0.60%

0.50%

0.40%

0.30%

0.20%

0.10%

0.00%
2015 2016 2017 2018 2019

Graph 6: Return on Asset (2015-2019)

Here, ROA in 2015 and 2016 which was 0.06% and 0.14% indicate very low profitable position,
in 2017 the ratio of ROA is 0.58% which indicate good profitability rate. But in 2018 and 2019
which was 0.18% and .20% ratio was very low that indicates poor performance.

5.1.7. Return on Equity (ROE)

Year 2015 2016 2017 2018 2019
(Percentage) 0.99% 2.18% 10.63% 3.32% 3.92%

12.00%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%
2015 2016 2017 2018 2019

Graph 7: Return on equity (2015-2019)

ROE measures profit as well as efficiency. Here, ROE in 2015 and 2016 which was only 0.99%
and 2.18% indicate low profitable position. In 2017 the ratio of ROE is 10.63% which indicate

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good profitability rate. But in 2018 and 2019 which was on 3.32% and 3.92% it was very low
and indicate poor performance. If we consider last 5year performance then we can say 2017 is
the best year for SBL.

5.1.8 Return on investment (ROI)

Year 2015 2016 2017 2018 2019

(Percentage) 7.50% 7.06% 7.29% 7.78% 5.98%

5
ROI
4

0
2015 2016 2017 2018 2019

Here, we can see return on investment decrease gradually every year which is not good sign for
the bank. It means sonali banks profit decrease every year. Though 2018 is a good year for SBL
in terms of ROI, but in 2019 bank perform worst in recent five years.

5.1.9 Efficiency ratio

Year 2015 2016 2017 2018 2019

(Percentage) 20.20% 27.30% 26.25% 24.33% 25.55%

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 30

25

20

15

10

0
2015 2016 2017 2018 2019

An efficiency ratio of 50% or under is considered optimal. In this chart, After 2015 SBL’s
efficiency ratio increase it means bank's expenses are increasing or its revenues are decreasing.
But in last two years its efficiency ratio decrease slightly.

5.1.10. Return on Loan & Advance

Year 2015 2016 2017 2018 2019
(Percentage) 8.78% 7.14% 6.85% 5.74% 5.51%

9.00%
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
2015
2016
2017
2018
2019

Graph 8: Return on loan and advance from (2015-2019)

Here, from 2015 to 2019 the rate on loan & advances decreased gradually. Here, it shows that
return on loan & advance is slightly decreased in every year. And 2019 is the worst year. This
indicates that rate of return from loan and advance was very bed in 2019. Though SBL’s Loan &
advance amount increasing gradually every year but return from this segment was very low.

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5.1.11. Capital adequacy Ratio (CAR)
Year 2015 2016 2017 2018 2019
(Percentage) 10.08% 10.33% 10.35% 10.10% 10.09%

10.40%

10.35%

10.30%

10.25%

10.20%

10.15%

10.10%

10.05%

10.00%

9.95%

9.90%
2015 2016 2017 2018 2019

Graph 9: Capital adequacy ratio (2015-2019)

This ratio shows us of how much a bank lends out of the deposits it has mobilized. A higher ratio
indicates more reliance on deposits for lending and vice-versa. In this chart CAR ratio is almost
same and consistent from last 5year. In 2019 CAR ratio is 10.09% which is higher side that
indicates bank is considered safe and likely to meet its financial obligation.

5.1.12. Credit Deposit Ratio

Year 2015 2016 2017 2018 2019
(Percentage) 39.99% 37.28% 39.76% 42.43% 47.55%

50.00%

45.00%

40.00%

35.00%

30.00%

25.00%

20.00%

15.00%

10.00%

5.00%

0.00%
2015 2016 2017 2018 2019

Graph 10: Credit deposit ratio (2015-2019)

33 | P a g e
This ratio shows us of how much a bank lends out of the deposits it has mobilized.
It indicates how much of a bank's core funds are being used for lending, the main banking
activity. A higher ratio indicates more reliance on deposits for lending & vice-versa. In this chart,
credit deposit ratio is increasing gradually per year. It increases from 39.99% in 2015 to 47.55%
in 2019. This indicates that the bank was efficient enough to make credit through proper use of
the deposit.

5.2. Comparative analysis with other Government bank

5.2.1 Loan & advances

Year 2015 2016 2017 2018 2019

Sonali bank 3,44,538 3,84,538 4,23,218 4,64,166 5,51,026
Pubali bank 1,73,125 2,03,011 2,39,540 2,70,910 2,87,035
Janata bank 3,49,861 4,03,037 4,59,580 5,33,707 5,48,474
Agrani bank 2,44,800 2,65,870 3,19,121 3,95,750 4,65,832
(Million)

600000

500000

400000
Sonali
Pubali
300000
Janata
Agrani
200000

100000

0
2015 2016 2017 2018 2019

Compare to other government bank Sonali banks loan & advances amount is bigger size. In last
five year they giving more loans compare to other bank. Janata bank was come near to Sonali
bank in terms of giving loan. Pubali bank was the bottom of the table. They give less amount of
loans compared to those four banks.

5.2.2. Non-performing loan:

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 Year 2015 2016 2017 2018 2019
Sonali bank 86,850 1,09,114 1.49,302 1,21,883 1,11,994
Pubali bank 9,218 10,921 20,787 14,778 12,561
Janata bank 43,182 59,360 75,996 1,79,946 1,46,033
Agrani bank 46,400 68,040 55,700 69,993 66,430
(Million)

180,000

160,000

140,000

120,000
Sonali
100,000
Pubali
80,000 Janata
Agrani
60,000

40,000

20,000

0
2015 2016 2017 2018 2019

In last five years SBL’s classified loan is always higher side compare to other government bank,
which is not a good sign for Sonali bank. Pubali bank is doing well because their classified loan
was smaller than those four banks,

5.2.3 NPL rate:

Year 2015 2016 2017 2018 2019

Sonali bank 25.08% 28.37% 35.28% 26.26% 20.32%
Pubali bank 5.32% 5.38% 8.68% 5.46% 4.38%
Janata bank 12.34% 14.73% 16.54% 33.75% 26.63%
Agrani bank 18.96% 25.59% 17.45% 17.67% 14.26%

35 | P a g e
 40

35

30

25
Pubali

20 Janata
Agrani
15
Sonali

10

0
2015 2016 2017 2018 2019

Sonali banks NPl rate is 2nd highest among those four banks. Which indicate SBL perform not so
well in terms of NPL rate. Pubali bank is in the best shape among those four government bank.
In last five years Pubali banks non-performing loan was always on lower side.

5.2.4 Return on Loan & Advances:

Year 2015 2016 2017 2018 2019

Sonali bank 8.78% 7.14% 6.85% 5.74% 5.51%
Pubali bank 1.67% 0.66% -0.12% 1.26% 0.75%
Janata bank 9.35% 8.54% 8.04% 7.15% 6.40%
Agrani bank 4.50% 5.53% 6.80% 7.66% 7.09%

10

Sonali
4
Pubali
Janata
2 Agrani

0
2015 2016 2017 2018 2019

-2

36 | P a g e
Here, Janata and Agrani banks return on loan & advances is higher side compare Sonali banks
performance. Pubali bank performance was worst among those four govt. banks. In 2017 Pubali
banks return on loan and advance was minus figure which means they was in loss at that time
period. In last five years Sonali banks return was moderate and plenty of room to improve their
performance.

5.5.5 ROE:

Year 2015 2016 2017 2018 2019

Sonali bank 0.99% 2.18% 10.63% 3.32% 3.92%
Pubali bank 11.64% 5.31% -1.15% 12.51% 7.51%
Janata bank 9.70% 5.22% 5.23% 0.46% 0.49%
Agrani bank 1.46% -19.06% 16.59% 2.49% 2.53%

20

15

10

Sonali
0
Pubali
2015 2016 2017 2018 2019
Janata
-5
Agrani

-10

-15

-20

-25

In this chart, SBL’s ROE in 2015 and 2016 which was only 0.99% and 2.18% indicate low
profitable position. In 2017 the ratio of ROE is 10.63% which indicate good profitability rate.
But in 2018 and 2019 which was on 3.32% and 3.92% it was very low and indicate poor
performance. Pubali bank is doing pretty well all the four year except 2017 which is -1.15. rather
than that Pubali banks ROE is good. Janata banks ROE decrease gradually every year. It means
their profitability rate was decreasing. In those four banks Agrani banks performance was worst.

37 | P a g e
In 2016 their ROE is -19.06% which is worsted of all. But in 2017 they bounce back with 6.59
ROE. Compare to those three bank Sonali bank’s ROE is good shape.

5.2.6 Credit deposit ratio:

Year 2015 2016 2017 2018 2019

Sonali bank 39.99% 37.28% 39.76% 42.43% 47.55%
Pubali bank 77.01% 82.10% 83.34% 82.94% 76.15%
Janata bank 61.50% 62.80% 70.77% 79.00% 79.33%
Agrani bank 55.64% 53.81% 60.17% 63.63% 67.27%

90

80

70

60

50 Sonali
Pubal
40 i
Agran
30 i
Janat
20 a
10

0
2015
2016
2017
2018
2019

At the end of FY19, CD ratio for Sonali bank stood at 47.55%. It implies that of every 100taka
deposits banks are lending as much as 47.55 taka. In terms of CD ratio SBLs performance is not
up to the mark. Pubali and Janata bank performance was pretty good as they stood t 76.15& and
79.33% respectively in FY19. Agrani bank is not far behind in terms of credit deposit ratio
performance.

5.2.7 Capital to Risk Weighted Asset ratio

Year 2015 2016 2017 2018 2019
Sonali bank 10.08% 10.33% 10.35% 10.10% 10.09%
Pubali bank 11.87% 11.22% 12.34% 12.17% 13.80%
Janata bank 10.16% 10.69% 10.06% 10.09% 10.03%
38 | P a g e
 Agrani bank 9.54% 10.03% 10.24% 10.09% 10.02%

16

14

12

10

8 Sonali Pubali

6
Janata Agrani
4

0
2015 2016 2017 2018 2019

The Capital to Risk Weighted Asset ratio (CRAR) According to BBG policy, all the banks
have to maintain a minimum Capital Adequacy Ratio of at least 10percent of Risk Weighted
with core capital (Tier-1) not less than 5percent of RWA.
In last five year all the bank maintain 10percent CRAR rate except Agrani bank in 2015 can’t
maintain the rate. In terms of CRAR Sonali banks rate was consistent in the last five year.

5.3. Others Aspects of Sonali Bank ltd.

5.3.1. Loans and advances
Sonali bank limited gives TK 464,165 million loan which is 37% of banks total asset. Total loan
amount is huge as SBL is the one of the largest government bank in Bangladesh. Sonali banks
loan increased by 18% taka 464,165 million to taka 551,029 million in 2019. Sonali bank
contributes every sector like agriculture, industry, SME, commerce and trade. SBL provide loan

39 | P a g e
& advance both government and private sector. Sometimes SBL gives loan to central bank as
well. Sonali banks AD ratio is 48%, NPL stood at 111,994TK. NPL loan percentage was
20percent compare to 2018 which was 26 percent.

5.3.2. Composition of Total Loans and Advances of the SB

(Million)
Types Of Loan & Advances 2019 2018 Change (%)

Agricultural / Rural 50,388 47,326 6.47

Micro Credit 12.177 12,191 (0.61)
Industrial Credit 74,297 71,044 4.58
Agro-Based Industrial credit 34,001 31,560 7.73
International Trade 97597 78310 24.63
SME Finance 24,411 2,03,005 17.76
General Advance & Others 2,58,216 2,03,005 27.20
Total 5,51,026 4,64,166 18.71

Industry wise Loan & advances

9%
2%
Agricultural / Rural
Micro Credit
14% Industrial Credit
Agro-Based Industrial credit
47% SME Finance
International Trade
6%
General Advance & Others

18%
4%

Sonali provide large amount of loan to the agriculture sector. We know Bangladesh is
agricultural country. Our country’s economy largely depends on agriculture. So if we develop
our agriculture sector eventually it will boost up our economy as well. Thetas why government
bank like SBL give large amount of loan to the agriculture sector. They provide small amount of
loan to SME finance and micro credit section, which need to improve. They give 14% of its total
loan to industrial credit and 6% to agro based industrial credit. SBL also provide loan to foreign
export import business. They provide 4% loan to international trade.

40 | P a g e
 Sector wisw Loan & Advances

1%
24%
Govertment

Private

Other Public
75%

Sonali bank ltd provide loan both public and private sector. They provide 75% loan to private
sector from its total loan and advances budget. SBL also gives loan to government which is 24%.
And finally 1% sanction to other public.

Division wise Loan & advances

8%
1%
Dhaka
8%
Barishal
7% Chitaagong

Rajshahi
9% Rangpur
64%
3% Sylhet

Khulna

One of the major drawback of SBL’s loan system is they always provide more amount loan to
Dhaka division which create an imbalance to our society. They provide 64% of its total loan
amount for only Dhaka division. And second large amount of loan give to Chittagong division
which is 9%. They provide only 1% loan to Barishal division. SBL’s loan and advance
department should give more emphasis to this segment and make a balance loan providing bank
to all division of Bangladesh.

41 | P a g e
5.3.3 General Credits
(TK in Million)
Particulars 2019 2018 Change (%)

Total Outstanding 1,42,860 12,720 12.31

Total Disbursement 45,770 40,430 13.21
Total Recovery 6,010 16,475 (63.52)

5.3.4. Classified Loan Recovery Program

SBL’s total NPL stood at 111,993 million taka that is 20% of its total loan amount which is
551,026 million as on 2019. In 2018 SBL’s classified loan was 121,883 million taka which is
26.26 percent of banks total loan. In 2018 SBL’s total outstanding loan and advances was
464,165 million. SBL used all types of method to collect their non-performing loan and make
strong loan recover method. There is still room for improvement of sonali bank loan recover
technique. Hager officials need to give more focus on their loan recovery process.

Impact of credit risk management on SBL’s profitability:

5.4.1. Hypothesis of the study:
H0 = There is no significant impact of credit risk management on Sonali bank’s profitability
H1= There is a significant impact of credit risk management on Sonali bank’s profitability.
The main Goal of this project is investigating the impact of credit risk management in SBL’s
profitability.
To find this relationship between two elements, we need one depended variable and three
independent variables.

Depended variable: ROE (Return on Equity)

Independent variables: Non Performing loan (NPL), Credit deposit ratio (CDR), and Capital
adequacy ratio (CAR)

So the equation will be:

ROE= a + b1 * NPLR + b2 * CDR + b3 * CAR …………………………………… (1)

42 | P a g e
Data input and Regression line:
Year ROE NPLR CDR CRA

2019 3.92 20.30 47.55 14.09

2018 3.32 26.26 42.43 10.10
2017 10.63 35.28 39.76 10.35
2016 2.18 28.37 37.28 10.33
2015 0.99 25.08 39.99 10.08

Table: Table of data input

120

100

80
CAR

CDR
60
NPLR
40 ROE

20

0
2015 2016 2017 2018 2019

Graph: Regression line

Result of research and interpretation

Regression Analysis
Regression Statistics
Multiple R 0.99905783

R Square 0.99816548
Adjusted R Square 0.992466194
Standard Error 0.326449431
Observations 5

43 | P a g e
Coefficient of correlation: Here, the value of Coefficient of correlation (R) is 0.099905783 that
means there is a high chance of positive relation between the ROE (dependent variable) and
NPLR, CDR, CAR (Independent variables). So it can be said CRM effect Sonali bank’s
profitability.
R Square:
The term R Square refers to the multiple coefficient of determination, which is defined as the
proportion of the dependent variable's variability explained by the estimated multiple regression
equation.
Here R Square is 99816548 indicates 99.8% of the variability in obtained ROE is explained by
the independent variables (NPL, CDR & CAR)

Adjusted R Square:

If a variable (say for NPLR) is added to the model, Adjusted R Square becomes larger even if the
added variable is not statistically significant. The Adjusted R Square compensated for the
number of independent variables in this model.

Even if a variable (NPLR) is not statistically significant, Adjusted R Square increases when it is
applied to the model. The number of independent variables in this model was accounted for
using the Adjusted R Square.

Standard Error:
The Standard Error of Estimate indicates how much uncertainty or error exists between the
predicted and actual forecasted results. Here the standard error value is 0.326449431
This illustrates the degree of uncertainty between our predicted result and the actual observation
result.

Coefficient analysis:
Coefficients Standard t-Stat P-value
Error

44 | P a g e
Intercept -56.3458 3.296928 -17.0904 0.037208

NPLR 0.957529 0.041599 23.01802 0.02764

CDR 0.649959 0.086841 7.484462 0.084558

CAR 0.703853 0.185102 3.802522 0.163713

Table: Summary of coefficient analysis

Here, we found the parameters of the regression line. The constant ‘a’ is -56.3458 and slopes b1=
0.957529, b2= 0.649959 and b3= 0.703853.
The regression equation can be constructed using these data as follows:
ROE= -56.3458+ 0.957529*NPLR + 0.649959*CDR + 0.703853*CAR

Intercept:
It gives the mean or average effect of the entire variable excluded from the model on the
depended variable. Although its mechanical interpretation, is the average value of the depended
variable when the independent variables are set equal to zero.
In this equation intercept is -56.3458 that’s mean in the absence of independent variable NPLR,
CDR and CAR on an average dependent variable ROE will be -56.3458

Non-performing loan ratio:

According to the equation, a unit change in the independent variable NPLR induces a change in
the dependent variable ROE of by .957529 when the CAR and CDR are the same. It also shows
that this factor is significant because the p value is 0.02764 which is below 0.05.

Credit deposit ratio:

According to the equation, when NPLR and CAR are constant, one unit of independent variable
CDR resulting changes 0.649959 unit of depended variable ROE. Since b2 is positive, the
dependent variable ROE would shift in the same direction as the independent variable NPLR.
As the amount of CDR will increase, ROE will also increase and vice versa.
This factor is not significant because the p value is 0.084558 which is above 0.05.

45 | P a g e
Capital adequacy ratio:
Here, The other coefficient of net regression in this equation is 0. 703853.When the NPLR and
CDR remain unchanged, the ROE changes by 0.703853 units when the CAR rises by one unit.
And it also indicates that there is a positive relation between ROE and CAR when other
independent variable remains constant. This factor is not significant as the p value is 0.163713
which is above 0.05.

ANOVA test
ANOVA
df SS MS F Significance F
Regression 3 56.47531 18.8251 176.6467 0.05524
Residual 1 0.106569 0.106569
Total 4 56.58188
Table: ANOVA test

F-Test:
The F test is used to see whether the dependent variable (ROE) and the set of all independent
variables (NPLR, CAR and CDR) have a significant relationship.
The overall significance measure is referred to as the F-test. The F-test hypothesis in this
ANOVA model is based on the regression model parameters:

H0 (Null Hypothesis): β1 = 0
H1 (Alternative Hypothesis) : β1 ≠ 0
The sampling distribution of MSR/MSE is an F-distribution with p degrees of freedom in the
numerator and (n-p-1) in the denominator.  The outline of F- test is given below
F = MSR / MSE = 18.8251 / 0.106569 = 176.65

Tabulated F test: F α(k-1, n-k) = 142.50

If F calculated> F α(k-1, n-k), the null hypothesis is rejected. It means the model is significant. In
our regression model F test is 176.65 and tabulated F test is 142.50 so F test is greater than
tabulated F test. So, our multiple regression model is significant.

Significance of aptitude test:

46 | P a g e
Any independent variable with a significant level around.05 would be considered significant at a
significance level of.05. Here the significance level of 0.05524 in our aptitude test. So we can
say 0.005524 is significant.

Significance of overall model:

If the F ratio is high enough and the significance level is around.05. The overall model would be
significant at a significance level of .05. In our test the F ratio is 176.65 which are large enough
to describe the overall test and the significance level is 05524. As a result, we can conclude
that the overall relationship is significant.

Here we accept alternative hypothesis. Thus there is a relationship between the credit risk
management and Return on equity (ROE)

There is significant impact of credit risk management on Sonali bank’s profitability.

47 | P a g e
 Chapter 6
Findings, SWOT Analysis, Recommendation

48 | P a g e
6.1. Findings:
The amount of loan and advance that SBL provides to its customers is gradually

increasing each year, and the amount of bad / classified loan is also gradually increasing

each year due to poor credit risk management .

The amount of classified loan was quite low in 2015 and 2016 but in 2017 the amount is

grater then previous 2 years & the rate of classified loan are same also. Although in 2018

and 2019 classified loan was depressing but not as much as 2015-16 period. It indicates

poor credit risk management of Sonali bank.

Non-performing loan ratio of Sonali bank in recent 3 years is higher side which means

bank is in credit risk.

The amount of classified loan recovery is consistently decreased per year to 2017 but

2018-19 loan recovery trends are higher side. So it indicates that they improving

performance on loan and advance.

Return on loan and advance is decreeing every year which is not a good sign at all.

ROA and ROE are in satisfied level but 2017 is the best year for Sonali bank.

SBL’s capital adequacy ratio is nearly constant and stable. It implies that it will be able to

fulfill its obligations.

Credit deposit ratio of Sonali bank is almost constant till 2017 but increasing in 2018-19.

But still the performance of using deposit to banks activities is not up to the mark.

In microcredit and SME finance, Sonali Bank offers the smallest loan and advance

amounts.

49 | P a g e
 Sonali Bank provides a larger amount of loan and advance in the Dhaka division and a

smaller amount in the Barisal and Khulna divisions, causing divisional imbalance.

SBL does not hold adequate loan and advance provisions, and their loan and advance

performance is not satisfactory.

The credit sanction and disbursement procedure takes lots of time

All branches are not under networking system that’s why all the work is not record

automatically online.

The uses software like RMS+, and Baxibank 5000 that runs on windows XP which is out

dated and involved in high risk

Their online software are not good enough to prevent cyber attack

6.2. SOWT Analysis:

6.2.1. Strengths
 Branches all over the country to serve their customer.
 They have compared association with different banks
 Strong connection with Bangladesh bank.
 It has foreign correspondence relationship with 98 countries
 Membership with SWIFT
 Strong local remittance executive’s frameworks.
 Energetic and smart team Collaboration.
 Lending rate is competitive
 Strong position in CAMEL rating
 Good banker customer relationship
 Strong corporate personality
 Strong Financial Position
 Huge business region
 Service charges are affordable
 Youthful energetic workforce

50 | P a g e
6.2.2. Weakness
 Slow growth of modernization because of its gigantic size.
 Insufficiency in industrial export & import
 The administrations are moderate.
 Lack of legitimate inspiration, training and work rotation
 Lack of experienced representatives in junior dimension the executives
 Lack of own ATM administrations
 Limited promoting and exposure of bank's product and services
 Lack of capable workforce in some divisional area
 Office condition is not good / decorated as private bank condition
 Absence of solid promoting activities
 Diversification Out-of-date Software and Hardware at Branches
 Excessive Classified Loans

6.3.3. Opportunities:
 The bank can offer increasingly creative product and services then different banks
 Since SBL has such a large number of branches it can influence much of a stretch impact
the financial area.
 Growth of sales volume
 Incentives for export of nontraditional / industrial products
 Launching own ATM card administrations
 Expansion of banking administrations into other diverse administrations
 Expansion online banking
 Experienced Managers

6.4.4. Threats
 Increase in the utilization of current innovation and administrations
 Increase in the challenge in banking division.
 Government has been controlling industrial credit.
 Unwillingness to work of some of employees.
 Recent events like cheats and stealing where representatives were discovered included

51 | P a g e
  Defaulting culture of the borrowers
 Similar items are offered by different banks.
 Recession of worldwide economy.
 Intensification of rivalry in the business.
 Financial Crisis.

6.3. Recommendations:
The following suggestions are made in light of the above findings
 Credit disbursement to a small number of divisions could jeopardize the bank's credit
portfolio. As a result, for sustainable economic development, bank management should
provide loans and advances to all divisions.
 Sonali Bank Limited should also focus on expanding its credit portfolio in the small loan
market. Concentration in a few specific sectors could pose risks and hamper the bank's long-
term viability.
 SBL should create new and alternative schemes to disburse further credit from its deposit to
eligible borrowers.
 SBL should be more concerned about controlling the classified loans & advances. To
reduce the amount of NPLs, the bank should make loans to creditworthy borrowers and
establish an efficient monitoring and recovery mechanism.
 Before approving a loan, officials should pay more attention to the details provided by
browsers.
 The policy maker of credit risk management should look after the customer who took
loan form banks and strictly monitor them regular basis.
 To avoid loan defaulters, strict supervision is required in the credit department.
 Central monitoring system should be pro-active and strict to keep classified loan to a
minimum level.
 All of the branches of SBL should be more digitalized and modernized their banking
software.
 Space of some branches should be increase.

52 | P a g e
 Uninterrupted and modern network has to be installed in order to save time for both
employee and customer.
 It is important to ensure that the network infrastructure is up-to-date and running at all times.
It will save the officials a great deal of time and effort.
 The bank should make a concerted effort to reduce Classified and non-performing credits.
 Higher officials should be more pro-active about the activities of loan sanction.
 The security of vaults should be improved, and all branches should be equipped with high-
tech security systems.
 New marketing plan/strategy is needed to increase more Clint.
 Lending or project financing that has been affected by politics should be avoided.

6.4. Conclusion:

Sonali Bank Limited is more distinguish in every way. Its workload is huge and in any cases
distinct to other bank in our country. In comparison to other banks, its deposits and loans are
enormous. It gives huge loan to government projects and give different kind of loans to its
customer. Sometimes Sonali bank acts as a central bank of Bangladesh. And it also sometime
gives loan to central bank as well. Sonali bank often makes policy to development of people of
our country. Even SBL face some Credit risk due to make policy in favors of general people. In
recent years SBL design a rock solid Credit risk management & control policy to reduce their
risk and maximize their return and profit. Applied Basel-III norms and policy the bank increase
their return in recent years.

Recently the bank has been exposed to credit risk as a result of large-scale loan defaults.
Mistakes and mismanagement by top management resulted in a lower return on investment.
Credit risk management has become evident as a dynamic, critical and continuous process. All
the banks and financial organization take necessary steps to resolve this credit risk problem.

53 | P a g e
Bibliography & References
 Akter, R. & Roy, K.J. (2018), The Impacts of Non-performing Loan on Profitability: An
Empirical Study on Banking Sector of Dhaka Stock Exchange. Daffodil International
University, pp. 126-131.

 Ndka, s. & Islami, M. (2017), The Impact of Credit Risk Management in the Profitability
of Albanian commercial banks During the Period 2012-2017, pp. 449-451.

 Hossain, J. (2015), Credit risk management practices in banks: a study on Basic bank
Limited. University of Dhaka, pp. 7-8, pp.35-47.

 Ahamad, I. ( 2016), An Internship Report on “ Credit Risk Management Practice of

Sonali Bank Limited”

 Ibtasum, M. (2018), Credit control of Sonali Bank, Khustia branch, Islamic university,
Khustia, pp. 44-55.

 Annual report of Sonali Bank Limited (2015-2019)

Website:
 https://www.sonalibank.com.bd/
 https://en.wikipedia.org/wiki/Sonali_Bank
 https://www.facebook.com/sonalibankltdbd

54 | P a g e
Appendix

55 | P a g e
 Year Return on Non-performing Credit deposit Capital adequacy
Equity loan ratio ratio ratio
2019 3.92 20.30 47.55 14.09
2018 3.32 26.26 42.43 10.10
2017 10.63 35.28 39.76 10.35
2016 2.18 28.37 37.28 10.33
2015 0.99 25.08 39.99 10.08

Regression Statistics
Multiple R 0.99905783
R Square 0.99816548
Adjusted R Square 0.992466194
Standard Error 0.326449431
Observations 5

Coefficien Standar t Stat P-value Lower Upper Lower Upper

ts d Error 95% 95% 95.0% 95.0%
Interce -56.3458 3.29692 - 0.03720 - - - -
pt 8 17.0904 8 98.2372 14.4543 98.2372 14.4543
NPLR 0.957529 0.04159 23.0180 0.02764 0.42896 1.48609 0.42896 1.48609
9 2 2 6 2 6
CDR 0.649959 0.08684 7.48446 0.08455 - 1.75338 - 1.75338
1 2 8 0.45346 0.45346
CAR 0.703853 0.18510 3.80252 0.16371 - 3.05579 - 3.05579
2 2 3 1.64809 3 1.64809 3

56 | P a g e
 ANOVA
df SS MS F Significance F
Regression 3 56.47531 18.8251 176.6467 0.05524
Residual 1 0.106569 0.106569
Total 4 56.58188

57 | P a g e