Professional Documents
Culture Documents
Internship Report On Loan and Advance Ma PDF
Internship Report On Loan and Advance Ma PDF
On
i
Internship Report
On
Prepared For
Md. Moniruzzaman
Senior Lecturer
Department of Business Administration
Stamford University Bangladesh
Prepared By
ii
Letter of Transmittal
January 30, 2017
Mr. Md. Moniruzzaman
Senior Lecturer
Department of Business Administration
Stamford University Bangladesh.
Dear Sir,
With due respect, I would like to inform you that, it is a great pleasure for me to submit the
working report on „„Loan & Advance Management Procedure of BASIC Bank Ltd.‟‟ As a
requirement to complete my BBA program. My internship period started from 14th September
2016 to 15th December 2016.
It was a great pleasure for me to have the opportunity to work on this bank. I endeavor my best
to come up with a good report.
I would be very happy to provide you with any clarification regarding the report.
Please contact with me if you have any query and please kindly accept my paper and oblige me
thereby.
Thank you,
Sincerely yours,
iii
Internship Report
Prepared in partial accomplishment of the Requirement for the award of the degree
iv
STAMFORD UNIVERSITY BANGLADESH
This is to certify that the internee report on “Loan & Advance Management Procedure of
BASIC Bank Limited” For the degree Bachelor of Business Administration (BBA) major in
Finance from Stamford University Bangladesh carried out by Anik Islam Khan, Student
ID # BBA 051 16003 under my supervision. No part of the internship report has been
submitted for any degree diploma, title, or recognition before.
Md. Moniruzzaman
Senior Lecturer
Department of Business Administration
Stamford University Bangladesh.
v
Acknowledgment
At the very beginning, I would like to express my deepest gratitude to the Almighty Allah for
giving me the ability and strength to finish the task successfully within the scheduled time. This
report “Loan & Advance Management Procedure BASIC Bank Ltd.” has been prepared to fulfill
the requirement of BBA degree.
During the time of my internship at BASIC Bank, Dilkusha Branch, I have found many people
who have co-operated me by providing data, suggestions and inspiration. I would like to thank
Mr. A K M Masudur Rahman, GM and branch in charge of BASIC Bank, Dilkusha Branch &
Mrs. Sadia Akter Shahin, AGM, BASIC Bank, Dilkusha Branch. Besides that I am grateful to
each and every employees of BASIC Bank, Dilkusha Branch for their co-operation.
Finally, my sincere gratitude goes to my all the other colleagues in the bank and teachers of my
major and minor discipline in the university, who helped me whenever I needed.
vi
Executive Summery
Banking industry is one of the most significant parts of economy. It is compared as the heart of
economy as it circulates money. This report is prepared to focus on BASIC bank, one of the state
owned banks in Bangladesh. Though the bank was established specially to support small
industries and commerce, now it is operating as a state owned commercial bank. The loan &
advance management procedure of BASIC bank ltd is analyzed and presented in this report.
This report is broadly categorized in six different chapters. Bank is the most important financial
institution in the economy. It plays vital role in the economy by providing means of payment and
in mobilizing resources. The prime objective of my internship program is to collect the practical
work experience in the arena of banking. During the study, I have faced so many limitations like
as time limit, legal obligation, little time to consult with management etc. To prepare this report
all the necessary information collected from both primary and secondary sources of data.
The BASIC Bank Limited was established as a banking company in January 1989. The Bank
started its operation as a joint venture enterprise; the Government of Bangladesh on 4th June
1992 became owner of the bank by taking its all shares. Thus the Bank is state-owned. However,
the Bank is not nationalized; it operates like a private bank as before. The mission, vision and the
strategy of the bank is quite different from the other banks. To ensure secured banking is one of
the goals and objectives of the bank. BASIC Bank works closely with its clients, the regulatory
authorities, the shareholders, banks and other financial institutions. This bank also achieved lots
of milestones rather than other banks. The risk management of the bank covers core risk areas of
banking viz. Now, the BASIC Bank operates their operation by 68 branches in Bangladesh.
General banking is the starting point of all the banking operations. It is the department, which
provides day-to-day services to the customers. Function of this department is account opening
section, clearing section, account section, cash section etc. On the other hand, the foreign
exchange department of the bank has a huge impact on export and import activities of
Bangladesh. Besides these services, BASIC Bank also provides other services and some kinds of
value added services.
vii
Lending being the most important function of commercial bank, every bank should have own
credit policy. There are different types of credit facilities offered by BASIC Bank. Like as, home
loan, car loan, demand loan, term loan, SME loan etc. Broadly, there are two types of loan such
as- retail loan and corporate loan. For each different types of loan, credit officer have follow
different steps to accomplish credit activities appropriately. BASIC Bank Limited was rated by
Credit Rating Agency of Bangladesh Limited (CRAB). Risk assessment or analysis is all about
understanding the risk associated with lending money. Until and unless risks are not assessed and
measured it will not be possible to control risks. Credit risk assessment process in the Bank shall
be governed by some principles.
Both the qualitative analysis (SWOT analysis) and quantitative analysis (Financial data analysis,
Ratio analysis) have been used to collect and analyze the gathered data. Besides this different
types of software are used for reporting the gathered information from the analysis, such as-
Microsoft Word, Microsoft Excel. It also included the summary of finding. Finding of the report
said about the prior and neglected sector of the credit facilities.
The last chapter ends with recommendations and conclusions. As the result I tried to give some
suggestions to the base of my knowledge and experience which I have achieved during
internship at BASIC Bank, Dilkusha Branch, for further growth in loan & advance expansion of
this Branch.
I have tried to make clear understanding about loan & advance management procedure and
findings their loopholes. Here I have face some problems during working on report. Time limit is
not sufficient for preparing an outstanding report. I hope this report, despite its many limitations,
will be a gateway to have a clear concept about the loan & advance management procedure of
BASIC Bank Ltd.
viii
Table of Content
Content No Page No
Chapter 1
Introduction of the Report 1-6
Chapter 2
Background of the Organization 7-24
Chapter 3
General Activities of BASIC Bank Ltd 25-51
ix
Chapter 4
Loan & Advance Analysis 52-78
Chapter 5
Analysis and Findings 79-106
Chapter 6
Recommendation and Conclusion 107-129
Bibliography 110
Abbreviation 111
Appendix 114
x
List of Table
SWOT Analysis
6 SWOT Analysis 81
Ratio Analysis
7 Current Ratio 83
8 Quick Ratio 84
9 Net Loans to Deposit Ratio 84
10 Loan Loss Reserve to Gross Loan Ratio 85
11 Liquid Asset to Total Asset Ratio 86
12 Liquid Asset to Total Liabilities Ratio 87
13 Deposit to Total Asset Ratio 88
14 Deposit to Equity Ratio 88
15 Equity Multiplier 89
16 Return on Assets 90
17 Return on Equity 91
18 Return on Deposit 91
19 Cost of Income Ratios 92
Trend Analysis
20 Deposits 93
21 Deposits 94
22 Investment 94
23 Loan and Advances 95
24 Authorized Capital 96
25 Paid up Capital 97
26 Long Term Liabilities 98
27 Total Assets 99
28 Total Liabilities 100
29 Major Types of Credit Sectors 101
30 Geographical Distribution of Credit Exposures 102
Comparison
31 Total Assets Comparison 104
32 Loans Advances Comparison 104
xi
List of Figure
Figure Page
No. No.
1 Management Structure 13
2 Division wise Branch Distribution 24
3 Account Opening Procedure 28
4 Procedure of Issuance of a Cheque Book 29
5 Foreign Exchange in Brief 43
6 SWOT Analysis 80
Ratio analysis
7 Current Ratio 83
8 Quick Ratio 84
9 Net Loans to Deposit Ratio 85
10 Loan Loss Reserve to Gross Loan Ratio 86
11 Liquid Asset to Total Asset Ratio 86
12 Liquid Asset to Total Liabilities Ratio 87
13 Deposit to Total Asset Ratio 88
14 Deposit to Equity Ratio 89
15 Equity Multiplier 89
16 Return on Asset 90
17 Return on Equity 91
18 Return on Deposit 92
19 Cost of Income Ratios 92
Trend analysis
20 Deposits 93
21 Deposits 94
22 Investment 95
23 Loan and Advances 96
24 Authorized Capital 97
25 Paid up Capital 98
26 Long Term Liabilities 99
27 Total Asset 100
28 Total Liabilities 101
29 Major Types of Credit Sectors 102
30 Geographical Distribution of Credit Exposures 103
Comparison
31 Total Assets Comparison 104
32 Loans and Advances Comparison 105
xii
Introduction of the Report
Bank is the most important financial institution in the economy. It plays vital role in the
economy by providing means of payment and in mobilizing resources. The economic
development of a country depends on the development of banking sector to a great extent. The
dependence of banking sector in modern economy is increasing day by day because this sector
ultimately contributes to run the wheel of development in a more dynamic way. Today‟s modern
banks are not only provides traditional banking, rather banks are expanding the menu of financial
services, banks are making the untouchable service touchable for their customers. The changing
and expanding role of banking has made the banking business more complex and competitive.
For survival and growth of this business demands creativity, specialization and knowledge and
adoption of new technology are used. But technology, creativity, specialization all these cannot
support a bank to survive unless the services are marketed in the right track. For this banks need
experts who will able to run the business even in against the wind.
Banks provide important capital in the form of loan and advances which are subject to non-
repayment which is termed as credit risk, the chance that a loan will not be repaid timely. The
main concern of the banks is credit risk and its management as credit or loans and advances are
the main source of income for them.
Due to the increased competition of the increased number of commercial banks and the growing
economy, the expectations of the customers have also increased than ever before. Realizing the
present condition, banks, especially the commercial banks are trying to elevate their loan giving
service as much as reachable to their customers. The most serious difficulty facing the financial
sector especially commercial bank is loan and advance risks. When banks sanction credit there is
a possibility of defaulting whether the credit can be recovered or not so there is a scope to study
how banks manage their loan and advance risk. What kind of strategies they follow to minimize
loan and advance risks. No commercial banks can deny this risk they have to perform banking
operation facing this risk.
The prime objective of my internship program is to collect the practical work experience in the
arena of banking that helps me to fulfill the requirement of my BBA program under the
department of finance of Stamford University Bangladesh.
BASIC Bank Limited is now well growing and it is operating 68 branches in different parts of
Bangladesh. The scope of the study will be limited to the organizational setup, function and
operation of the Basic Bank in Bangladesh. This report mainly encompasses the performance of
BASIC Bank Limited in comparison to the overall credit sector in Bangladesh. This report
consists of the writer‟s observations and on the job experiences during the internship period in
the foreign exchange department in BASIC Bank Limited. For the purpose of my internship
program, I was assigned at the Dilkusha corporate Branch and this provided me the way to get
myself familiarized with banking environment for the first time indeed. I have an opportunity to
gather experience by working in corporate Branch.
In conducting this study the following methodology was adopted in collecting data &
information as well as preparation of the reports.
The BASIC Bank Limited (Bangladesh Small Industries and Commerce Bank Limited) was
established as a banking company under the erstwhile Companies Act 1913 and launched its
operation in January 1989. The Banking Companies Act 1991 governs it. The Bank started its
operation as a joint venture enterprise of the then BCC Foundation with 70 percent shares and
the Government of Bangladesh with 30 percent shares. The BCC Foundation being
nonfunctional following the closure of the BCCI, the Government of Bangladesh took over 70
percent shares of the BCC Foundation on 4th June 1992 and became100 percent owner of the
Bank. Thus the Bank is state-owned. However, the Bank is not nationalized; it operates like a
private bank as before. Adjudged one of the soundest banks in Bangladesh, BASIC Bank is
unique in its objectives. It is blend of development and commercial banking function mix. It is
one of the specialized banks in Bangladesh which takes pride itself as the pioneer in financing to
small and medium scale industries. By-laws of constitution the bank is obliged to invest its 50%
loanable fund for development and growth of Small and Medium Scale industries
accommodating the growing number of non-farming labor force. It motto is to boost Small and
Medium industries as it is now being treated as employment generating machine across the world
for creating employment opportunities and thus to reduce poverty and raise income of the
developing society. With the prudent and true guidance of the Board, BASIC continued to
register growth in prime areas-expansion through opening of new branches, launching on-line
services and widening ATM cards facility covering broader area and targeting opening of
exchange houses abroad and notable achievement in profit, capital and assets. The Bank‟s
achievement over the years offers ample testimony of success in the strength of our industrial-
commercial focused based business mix, as well as the exercising franchise of client-oriented
model of banking that allowed us to overcome all barriers and contemporary challenges of the
time.
Being treated as development bank BASIC works with local and international a genies like
Government.
2.2.1 Mission
“Establishing the bank as a strong and a socially responsible bank in the market and society with
good fundamentals by:
Offering best value based greener products and services;
Embracing appropriate knowledge and technology;
Creating an environment for professional, efficient and motivated pool of human
resources;
Establishing a culture of innovation and continuous improvement;
Ensuring maximum return/value to shareholders;
Establishing good corporate governance and compliance culture;
Maintaining good relations with shareholders; and
Forecasting financial inclusion and opening up a human side of banking.”
2.2.2 Vision
“To be a bank of choice by intertwining excellence in customer service experience, optimum
profitability with efficiency, imitable corporate culture in terms of compliant banking activities,
efficient and motivated human resources and endless quest for becoming the best corporate
citizen through serving people for progress.”
BASIC Bank is always ready to maintain the highest quality of services by upgrading banking
technology prudence in management and by applying high standard of business ethics through its
established commitment and heritage.
To invest 50 percent of loanable funds in financing small and medium industries sector;
To serve the depositors in safekeeping and growing their savings;
To contract or negotiate all kinds of loan, aid or assistance, private or public, from any
source, local or foreign and to take all such steps as may be required to complete and
effectuate such deals;
To act as agent for the sale and purchase of any stocks, shares or securities or for any
other monetary or mercantile transaction;
To guarantee or become liable for the payment of money or for the performance of any
obligation and generally to transact all kinds of guarantee business and also transact all
kinds of agency business;
To promote the development of small and medium industries and to provide finance to all
kinds of banking facilities and to provide technical services to small and medium
industries in Bangladesh;
To develop a culture of compassionate banking;
To establish and open offices and branches to carry on all or any of the above businesses
within the country and abroad, provided prior permission is obtained from the
Bangladesh bank and carry on, transact, undertake and conduct the business of banking in
all its branches and to transact and do all relevant matters and things; and
The Bank came into being as outcome of the pragmatic thinking of the policy makers of the
country of urgency for a bank in the private sector for financing small scale Industries (SSIs). At
the outset, it had been a joint venture enterprise of the defunct BCC Foundation with 70 percent
shares and the Government of Bangladesh (GOB) with the remaining 30 percent shares. After
the closure of BCCI, when BCC Foundation became nonfunctional the Government of
Bangladesh took over 100 percent ownership of the Bank on June 4, 1992. Thus it is recognized
as a state-owned Bank.
Chairman
Board of directors
Managing Director
Risk Audit
Management Committee
Deputy Managing Director
Executive Committee
General Manager
Manager
Deputy Manager
Assistant Manger
Officer
Assistant Officer
Logo :
Directors :7
Number of Branches : 68
The risk of BASIC Bank Limited is defined as the possibility of losses, financial or otherwise.
The risk management of the Bank covers core risk areas of banking viz. credit risk, liquidity risk,
market risk that includes foreign exchange risk, interest rate risk, equity risk, operational risk &
reputation risk arising from money laundering incidents. The prime objective of the risk
management is that the Bank evaluates & takes well calculative business risk & thereby
safeguards the Bank‟s capital, its financial resources & profitability from various business risks
through its own measures & through implementing Bangladesh Bank guidelines & following
some best practices as under:
The functions of Human Resources Department are strategic, planning and policy formulation
for compensation, recruitment, promotion, training, development and appraisal. This department
also contributes to employees' performance by providing standard of training.
Ensures security of the company.
Ensures value actability.
To assist the top-level decision making process on compensation, promotion, training,
development and appraisal.
Sylhet Dhaka
05 27
Mymensingh
Chittagong
02
14
Barisal Khulna
03 09
Rangpur
Bangladesh Rajshahi
02 06
68
General banking is the starting point of all the banking operations. It is the department, which
provides day-to-day services to the customers. Every day it receives deposits from the customers
and meets their demand for cash by honoring cheques. It opens new accounts, remit funds, issues
bank drafts and pay orders etc. Since bank is confined to provide the services every day. General
banking is also known as „retail banking‟. Function of this Department is given below:
Account Opening Section
Clearing Section
Account Section
Cash Section
4. The authorized officers analyze the introduction and examine the documents submitted.
5. Issuance of deposit slip and the deposit must be made in cash. No cheque or draft is
acceptable to the Bank.
7. Account is opened.
Transfer of Account
Proper care must be exercised while transferring any account to other branch similarly when any
account is transferred-in from other branch.
All such transfer cases must be brought to the knowledge of the Branch Manager.
Signature of the account holder on the application to be verified and the reason for
transfer to be examined.
Basic Bank Limited Page 29
Unused cheques to be received back from the account holder before any such transfer.
Closing of Account
Upon the request of a customer, an account can be closed. After receiving an application from
the customer to close an Account, the following procedure is followed by a banker.
Closing of Accounts by the account holders
A banker can also close the account of his customer or stop the operation of the account under
following considerable circumstances:
Application of the Account Holder is to be obtained stating reason of the closing.
Signature of the Account Holder to be verified.
Permission of BM to be obtained on the application.
Unused cheques to be surrendered by the account holder and to be destroyed by the
Branch Manager keeping proper record.
Related charges/commission to be realized.
Closing balances to be paid to the account holder by the cheque drawn by the account
holder or by a Payment Order.
Account Opening Forms, Specimen Signature Card and other related papers to be marked
“CLOSED” and to be filled separately for record.
Closing of Accounts by the Bank
A banker can stop payment of cheque of his customer under following considerable
circumstances.
When the account holder is not desirable to the bank.
When the account holder is convicted for fraud/forgeries in the court of law.
When the account holder is found habitual to draw cheques without prior arranging fund
there-against.
When bank considers that the concerned account is not remunerative.
Any other reason considered fit/justified by the bank.
The account holder must be given prior notice to close the account giving sufficient time for the
purpose. The unused cheques must be collected from the account holder and to be destroyed
keeping proper record.
Sending/Transfer money from one place to another place for the customer is another important
service of banks. And this service is an important part of country‟s payment system. For this
service, people, especially businessmen can transfer funds from one place to another place very
quickly.
Demand Draft
Pay order
Online Transaction
Demand Draft
Demand Draft is an order of issuing bank on another branch of the same bank to pay specified
sum of money to payee on demand. It‟s payment from ordered branch. Outside the clearing
house area of issuing branch, Payee can also be the purchaser. Payment process of the paying
bank:
Confirm that the DD is not forged one
Confirm with sent advice
Check the „Test Code‟
Make payment
For this service Bank only takes commission and telex charge.
Pay order
Pay Order gives the payee the right to claim payment from the issuing bank. It‟s payment from
the issuing branch only. Generally used to remit fund are within the clearinghouse area of issuing
branch. Its Payment is made through clearing. For, that‟s service bank takes commission and vat
charge.
Online Transaction
Issuing branch requests specified money to the specific payee on demand by online. It‟s Payment
from ordered branch. Generally used to Remit fund anywhere in the country. Payment process of
the paying bank:
Confirm issuing branch
Confirm Payee A/C
Beside loan and account services; BASIC Bank Ltd. serve customer in some new area;
SMS Banking
Phone Banking
Utility Bills Pay Service
For transforming fund BASIC Bank Ltd. use five types via;
Inter-Branch Money Transfer
SWIFT
Issuing and Encasing Foreign Drafts
Electronic Fund Transfer (BEFTN)
Bangladesh Automated Cheque Processing System (BACPS)
The definition of a foreign exchange is the exchange of one currency for another by
governments, businesses and residents in two different countries. Foreign Exchange is the
exchange of one currency for another or the conversion of one currency into another currency.
Foreign exchange also refers to the global market where currencies are traded virtually around-
the-clock. The term foreign exchange is usually abbreviated as "forex" and occasionally as "FX."
This is the process by which people in different countries pay each other by exchanging different
types of money. Any currency other than the local currency which is used in settling
international transactions is called foreign currency. FOREIGN EXCHANGE operation is one of
major activities of a commercial bank. These operations are also important for a country‟s
overall trade situation. This department of a bank has a huge impact on export and import
activities of a country. Following discussion is based on the activities and there procedure.
3.8.5 Import
Import is the flow of goods and services purchased by economic agents located in one country
from economic agents located in another. Hence, import of merchandise essentially involves two
things: bringing of goods physically into the country and remittance of foreign exchange towards
the cost of the merchandise and services connected with its dispatch to the importer. In case of
import, the importers are asked by their exporters to open letters of credit so that their payment
against goods is ensured.
Import trade in Bangladesh is controlled under the Import and Export control Act 1950.
Authorized Dealer Banks will import the goods into Bangladesh following the import policy,
public notice, F.E. circular and other instructions from competent authorities from time to time.
Procedure of Import
Import of merchandise essentially involves two things:
Bringing of goods physically into the country
Remittance of foreign exchange towards the cost of the merchandise
The Ministry of Commerce through the Chief Controller of Import regulates physical import and
Exports being office at the important trade center while Bangladesh Bank regulates the payment
for the imports through its various departments. The following are the steps involved in import of
merchandise into Bangladesh.
Registration of Import
In terms of the Importers, Exporters and Indenters (Registration) Order 1981, no person can
import goods into Bangladesh unless he is registered with the Chief Controller of Import and
Export or exempted from the provisions of the said order. So the following documents are
required to be submitted to the licensing authority for registration as importers:
Questionnaire form duly filled in and signed
Income tax registration certificate
Trade License from the Municipal or Local Authority
3.8.6 Export
Export means outflow of goods and services produced in one country, which purchase by
Government, Firms and individuals of other countries. Development of a country depends on its
participation in the international trade by increasing production and export of commodities and
service sector. By way of this a country can improve Employment Generation-Income level-
Savings-Growth-Economic Development.
The imports and exports trade in Bangladesh is regulated by the Import & Exports Control Act
1950. There are number of formalities an exporter has to fulfill before and after execution of
export, some of are under:
Procedure/ Formalities for Export
The imports and exports trade is regulated by the Import & Exports Control Act 1950. There are
number of formalities an exporter has to fulfill before and after execution of export, some of are
as under: The intending exporter has to register with CCI&E and obtained Export Registration
Certificate [ERC]. The ERC number is to be used in all places relating to exports.
Export Letter of Credit
The export is normally executed against letters of credit opened by overseas buyers. Sometimes
shipments are made on CAD, DP, DA or consignment basis without cover of L/C. When export
is made against L/C, the exporter should examine the following terms of L/C to avoid any future
complicity to execute the order:
The terms and conditions of L/C are definite, clear and explicit and also are in conformity
with those of the contract.
The L/C should be an irrevocable one and be confirmed by the advising bank.
3.9 Treasury
Treasury services are a function of an investment bank which provides transaction, investment,
and information services for chief financial officers or treasurers. Treasury services concentrates
and invests client money, and provides trade finance and logistics solutions as well as
safeguards, values, clears and services securities and portfolios for investors and broker-dealers.
Treasury Services is a transaction intensive and system intensive business. This is a source of
risk free fees income for the banks.
Agreement, in which a borrower receives something of value now, with the agreement to repay
the Credit, is a contractual lender at some date in the future. One of the basic functions of the
bank is to deposit extraction and credit extension. And managing credit operations is the crying
need for any bank. The objective of the credit management is to maximize the performing asset
and the minimization of the non-performing asset as well as ensuring the optimal point of loans
and advances and their efficient management.
The loan and credit department is one of the most important departments of any bank. The
money mobilized from ultimate surplus units are allocated through this department to the
ultimate deficit unit (borrower). Success of this department keeps a great influence on the overall
profit of a bank. Again, Failure of this department may lead the bank to huge losses or even to
bankruptcy. Like any other bank BASIC bank‟s loan & advance division also tries to do their job
perfectly.
Lending being the most important function of commercial bank, every bank should have own
credit policy. The loans & Advance of BASIC Bank Limited has been formulated of the plan of
“ALL NEW LOANS TO BE GOODS LOANS”; the plan was formed on the basis of the following
objectives:
To deliver general banking services to the public and credit to viable borrowers at
a reasonable cost
To maximize the profit of the bank by making sound lending
To deliver credit to viable borrowing at a reasonable cost
To provide satisfactory return on investment
To assist the social and economic development of the country
But in BASIC Bank Ltd. most of the lending officers are not familiar with their written credit
policy or lending guidelines. They have got only some oral instruction from the senior
management or in charge of credit. If all the lending officers of BASIC Bank Ltd. thoroughly
Money lending is one of the main functions of a commercial bank. In the lending process,
selection of borrower is the most crucial and vital job for a banker. Before a customer enjoys
credit facilities it is important that the applicant should qualify for five Cs. The five Cs are:
Character – Intention to pay back the loan
Capacity – Borrower‟s competence in terms of utilizing the fund profitably and
generate income
Capital –Financial strength to Lending cover the risk
Conditions – General business condition between two parties
Collateral – Implies additional securities
In addition, objectives of the loan & advance department are managing credit exposure of the
bank, maintaining credit risk, compliance of Central Bank Ltd. recovering or collecting dues of
retail loans or advances. At present loan & advance division performs following activities:
• Dealing with Corporate & Retail Credit
• Perform Collection and Monitoring Activity
• Support Recovery & Risk Management
Besides this, the activities of this department include managing the financial books of the bank,
checking all entries of the book are according to standards, preparing daily reports for
Bangladesh Bank, revenue appropriation and calculations, setting the internal pricing rates etc.
There are different types o credit facilities offered by BASIC Bank from which some of are
explaining below:
4.4.1 Overdraft
The word overdraft means the act of overdrawing from the Bank account. In other words, the
account holder withdraws more money from the Current Account than has been deposited in it.
The loan holder can freely draw money from this account up to the limit and can deposit money
in the account. The Overdraft loan has an expiry date after which renewal or enhancement is
necessary for enjoying such facility. Any deposit in the overdraft account is treated as repayment
of loan. Interest is charged as balance outstanding on quarterly basis. Overdraft facilities are
generally granted to businessmen.
4.4.6 Loan
In case of loan the banker advances a lump sum for a certain period at an agreed rate of interest.
The entire amount is paid on an occasion either in cash or by crediting in his current account,
which he can draw at any time. The interest is charged for the full amount sanctioned whether he
withdraws the money from his account or not. The loan may be repaid in installments or at
expiry of a certain period. Loan may be demand loan or a term loan.
BASIC Bank Limited was rated by Credit Rating Agency of Bangladesh Limited (CRAB) on the
basis of Audited Financial Statements as on December 31, 2015. The summary of Rating is
represented below:
Broadly, there are two types of loan such as- Retail Loan and Corporate Loan. For each different
types of loan, credit officer have follow different steps to accomplish credit activities
appropriately. Each and every step is given below for various purposes of loan.
The following procedure need to be followed for giving advances to the customer. These are:
Party‟s application
Filling form-A
Collecting CIB report from Bangladesh Bank
Processing loan proposal
Project appraisal
Head office approval
Sanction letter
Documentation
Disbursement.
4.7.8 Documentation
If the borrower accepts the sanction letter, the Documentation starts. Documentation is a written
statement of fact evidencing certain transactions covering the legal aspects duly signed by the
authorized persons having the legal status. The most common documents used by the BASIC
Bank for sanctioning different kinds of Investment are:
Joint Promissory Note,
Letter of Arrangement,
Letter of Disbursement,
Letter of Installment,
Letter of Continuity,
Trust Receipt,
Counter Guarantee,
Stock Report,
Letter of Lien,
Status Report,
Letter of Hypothecation,
Letter of Guarantee
Documents Relating to Mortgage.
Basic Bank Limited Page 72
4.7.8 Disbursement
After sanction and completion of all formalities the respective officer disburses the loan. The
officer writes cheque and provides it to the borrower. For this borrower has to open an account
through which he/she can withdraw the money.
Strategies for Recovery: Recovery of loan can be made in the following three methods.
Persuasive Recovery
The first step in recovery procedure is private communication that creates a mental pressure on
borrower to repay the loan. In this situation bank can provide some advice to the borrower for
repaying the loan.
Voluntarily
In this method, some steps are followed for recovering loan. These are:
Building Task Force
Arranging Seminar
Loan Rescheduling Policy
Waiver of Interest Rate
Legal Recovery
When all steps fail to keep an account regular and the borrower does not pay the installments and
interests then the bank take necessary legal steps against the borrower for realization of its dues.
In this case “Artha Rin Adalat Law 2003” plays an important role for collecting the loan.
The administration function is critical in ensuring that proper documentation and approvals are in
place prior to the disbursement of loan facilities. For this reason it is essential that the function
credit administration be strictly segregated from relationship management/ marketing in order
the possibility of controls being compromised of issues not being highlighted at the appropriate
level.
To minimize credit losses, monitoring procedures and systems shall be in place that provides an
early indication of the deteriorating financial health of a borrower. At a minimum, systems shall
be in place to report the following exceptions to relevant executives in CRM and RM team: Past
due principal or interest payments, past due trade bills, account excesses, and breach of loan
covenants.
Loan terms and conditions are monitored, financial statements are received on regular
basis, and any covenant braches or exceptions are referred to CRG and the RM team for
timely follow-up.
Timely corrective action is taken to address finding of internal, external or regulator
inspection/audit.
All borrower relationships/loan facilities are reviewed and approved through the
submission of a credit proposal at least annually.
Risk assessment or analysis is all about understanding the risk associated with lending money.
Until and unless risks are not assessed and measured it will not be possible to control risks. The
primary factor determining the quality of the Bank‟s credit portfolio is the ability of each
borrower to honor, on timely basis, all credit commitments made to the Bank. This must be
accurately determined by the authorized Credit Officers/ Executives prior to approval. Therefore
a thorough credit risk assessment shall be conducted prior to the sanction of any credit facilities.
While assessing a credit proposal total emphasis shall be given on repayment potential of loans
out of funds generated from borrower‟s business (cash flow) instead of realization potential of
underlying securities. Credit risk assessment process in the Bank shall be governed by the
following principles:
4.10.4 Accountability
The Relationship Manager (presently Head of Branch) shall be the owner of the customer
relationship and be held responsible to ensure the accuracy of the entire credit
application/assessment form submitted for approval. He/she will be responsible for conducting
due diligence on the borrower, principals and guarantors.
4.10.9 Collateral
Collateral offered against a credit facility shall properly be valued and verified by the concerned
Relationship Officer and/or Relationship Manager and revalued and re-verified annually in the
subsequent period. In addition to the valuation of the Relationship Officer/Manager, the same
collateral must be valued and verified by an enlisted surveyor of the Bank if the total credit
facility to the concerned customer exceeds BDT Lac (Taka Twenty Five Lac). Any
valuation of collateral must be supported by the photograph and site map, where applicable.
Credit risk grading is an important tool for credit risk management as it helps the Banks &
financial institutions to understand various dimensions of risk involved in different credit
Financial Risk 50%
Business risk 18%
Management risk 12%
Security risk 10%
Relationship risk 10%
Table 4: Different Risk Components
Input data to arrive at score Finally, data is put on Excel based CRG matrix for getting the score.
Number Grading Short Score
1 Superior SUP Fully cash secured, secured by govt.
guarantee/international bank guarantee
2 Good GD 85+
3 Acceptable ACCPT 75-84
4 Marginal/Watch list MG/WL 65-74
5 Special Mention SM 55-64
6 Substandard SS 45-64
7 Doubtful DF 35-44
8 Bad/Loss BL Less than 35
Table 5: Credit Risk Grading
Strength
(S)
Oppertunity Weakness
(O) SWOT (W)
Threat
(T)
For all of these, SWOT analysis is considered as an important tool for making changes in the
strategic management of an organization. Through direct observation and discussion with the
BASIC officials I am able to point out some major strength and weaknesses as well as some
threats and opportunities regarding the various issues of the Bank such as –
Organizational identity
Service level
Operational efficiency
Technology
Employee efficiency etc. along with many other issues
Opportunities Threats
Country wide network Similar products are offered by other
Introducing more branches Banks
Introducing special corporate scheme Default Loans
Real time online banking Industrial Downturn
Creation of brand image Increased Competition in the market
5.1.1 Strengths
BASIC Bank is one of the leading providers of financial services. With its strong corporate
image and identity, it has better positioned itself in the minds of customers. The employees of
BASIC Bank have a strong sense of commitment towards organization and also feel proud and a
sense of belonging towards BASIC Bank. They are very enthusiastic as well as self motivated
towards their responsibilities. BASIC Bank provides hassle-free customer services to its client.
Another positive thing is that net profit is gradually increasing over the years.
5.1.2 Weakness
BASIC Bank provides clean Import Loan to most of its solvent clients. But they usually do not
want to finance small entrepreneurs whose financial standing is not clean to them. BASIC Bank
currently don‟t have any strong marketing activities through mass media e.g. Television, Radio.
5.1.3 Opportunities
Bangladesh is a developing country to satisfy the needs of the huge population, so BASIC Bank
has great opportunity to grab the customer by providing greater services. Besides this, BASIC
Bank has employed experienced managers to facilitate its operation. There is certain software
which enables customers to deposit and withdraw money from any bank with the cheque or
deposit of any other bank thus poses as an opportunity for BASIC Bank as the number of
transactions would drastically increase.
5.1.3 Threats
The upcoming private, local, & multinational banks posse‟s serious threats to the existing
banking network of BASIC Bank. Now-a-days different foreign and private banks are also
offering similar type of products with an almost similar profit margin like BASIC Bank. Besides
this industrial downturn trend has seen due to unemployment, inflation which can cause threats
to the banking.
Ratio analysis is one of the major tools of analysis. A single variable cannot all the time provide
correct information. Though trend analysis plays a vital role in the field of analysis, there are
always some other factor, that are needed to be considered. More clearly, when one variable is
linked with other variable or the result is obtained in percentage or proportion of other variable,
it becomes more accurate. The ratio analyses of BASIC bank are conducted under four head.
Such as:
Liquidity ratios
Asset management ratios
Debt management ratios
Basic Bank Limited Page 82
Profitability ratios
Ratio analysis is presented below:
Comment: From this graph it is found that quick ratio of BASIC bank was decreasing from
2011 to 2014 and then it increased in 2015.
Net Loans to Deposit (Total Borrowing) Ratio
Net loans to deposit ratio shows the percentage of loan disbursed from total deposit amount.
Formula: Net Loans Deposit (Total Borrowing) = Net Loans / Total Deposits
0.8
0.6
Net Loans to Deposit Ratio's
0.4 Trend
0.2
0
2011 2012 2013 2014 2015
Comment: From the graph it is seen that net loan to deposit ratio was increasing till 2012 after
that it is decreasing. And then it increases in 2015. It indicates that from 2013 to 2015 BASIC
bank are not providing the large portion of deposit as loan.
0.02
0.015
0.005
0
2011 2012 2013 2014 2015
Comment: From this graph it is clear that BASIC bank made provision to face bad loans. It was
in 2011, 0.07% then it increased in 2012, after that it declined. In 2014 there was no provision
prevails. But in 2015 is increased 0.06%.
Liquid Asset to Total Asset Ratio
Liquid asset to total asset ratio shows that the percent of liquid asset in total asset.
Formula: Liquid Asset to Total Asset Ratio = Liquid Asset / Total Asset
0.12
0.1
0.08
Liquid Asset to Total Asset Ratio's
0.06
Trend
0.04
0.02
0
2011 2012 2013 2014 2015
Comment: From the graph it can be determined that the loan to total deposit ratio was not too
higher during the year 2011, 2012. In the year 2013 and 2014 it is stable. After that it is
increasing.
Comment: Deposit to total asset ratio shows that in 2013 it was .85 and after that it is declining.
Deposit to Equity Ratio
Deposit to Equity Ratio shows the amount of deposit (debt) in percentage of equity.
Formula: Deposit to Equity (DE) Ratio = Total Deposit / Total Equity
25
20
15
Deposit to Equity Ratio's Trend
10
0
2011 2012 2013 2014 2015
Comment: Deposit to total equity ratio shows there are some ups and downs in the year 2011 to
2014. The highest value reached at 2013, 22.15 and lowest at 2015, 5.71.
Equity Multiplier
Equity multiplier is a ratio that represents the amount of total asset with the times of equity.
Formula: Equity Multiplier (EM) = Total Asset / Total Equity
30
25
20
15 Equity Multiplier's Trend
10
5
0
2011 2012 2013 2014 2015
0.015
0.01
0.005
0 Return on Asset's Trend
-0.005 2011 2012 2013 2014 2015
-0.01
-0.015
-0.02
Comment: In the Return on asset ratio of BASIC Bank it is seen that the ratio decreases
gradually from 2011 to 2015. In the year 2013 it was declined out of control.
Return on Equity (ROE)
Return on equity measures the percentage of net income in proportion to total equity.
Formula: Return on Equity (ROE) = Net Profit / Total Equity
Comment: As return on equity is closely related with net income. With positive net income it
provides positive value. From 2011 to 2012 it was positive. With the net loss started in 2013 it
became negative.
Return on Deposit (ROD)
Return on deposits measures how much revenue is gained from deposit.
Formula: Return on Deposit = Net Profit / Total Deposit
0.02
0.01
-0.02
-0.03
Comment: As Return on Deposit is closely related with net income. With positive net income it
provides positive value. From 20011 to 2012 it was positive. With the net loss started in 2013 it
became negative.
Cost to Income Ratio
Cost to income ratio states that the amount of cost incurred in percentage of total income.
Formula: Cost of Income (COI) Ratio = Cost / Total Income
-2
-3
5.3.1 Deposits
Not only the quantum of deposits but also brought about qualitative changes in The Bank
mobilized total deposits of Tk.148,167.23 million as of December, 2015 as compared to
Tk.139,934.06 million in 2014. Competitive interest rates, attractive deposit products, deposit
mobilization efforts of the employees and confidence reposed by the customers in the Bank
contributed to the notable growth in deposits. The Bank introduced a number of attractive
deposit schemes to cater to the requirement of small and medium savers. It is improved deposits
structure. The deposit mix of the Bank as on December 31, 2015 was as follows:
Taka in million
Year Current and Other Bills payable Savings Fixed Deposits
Accounts
2015 4734.86 619.96 3497.32 139315.10
Table 20: Deposits
Deposits
Fixed Deposit
Current & Other Accounts
Savings
Bills Payable
Deposits
160000
140000
120000
100000
80000
Deposits
60000
40000
20000
0
2011 2012 2013 2014 2015
5.3.2 Investment
The investment portfolio of the Bank during the year 2013 was Tk.56940 million against
Tk.45862 million in the previous year. The portfolio of investment included Government
Treasury Bills, Prize Bonds etc. The Bank has always given emphasis on investment of Funds in
high yield areas simultaneously maintaining Statutory Liquidity Requirements (SLR) as fixed by
Bangladesh Bank.
Taka in Million
2011 2012 2013 2014 2015
Investment 13760.82 14111.57 34584.88 37299.33 44677.93
Table 22: Investment
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
25000
20000
15000
Authorized Capital
10000
5000
0
2011 2012 2013 2014 2015
12000
10000
8000
6000 Paid up Capital
4000
2000
0
2011 2012 2013 2014 2015
BASIC Bank‟s paid up capital was BDT 2357.59 million in 2011. It was increasing to BDT
2946.98 million in 2012. After that it was stable from 2012 to 2014. Then it‟s increased
surprisingly to BDT 10846.98 million in 2015.
Comment: Long term liabilities were increasing from 2011 to 2012. After that it was decreasing
to 2015. During year of 2015, it was BDT 2482.94 million.
150000
100000
50000
Total assets
0
2011
2012
2013
2014
2015
150000
100000
50000
Total Liabilities
0
2011
2012
2013
2014
2015
Dhaka 10825.33
Chittagong 1155.87
Rajshahi 246.00
Khulna 318.20
Barisal 23.71
Sylhet 107.34
Rangpur 182.70
Mymensingh 21.55
Total 12880.70
Table 30: Geographical Distribution of Credit Exposures
Dhaka
Chittagong
Rajshahi
Khulna
Barisal
Sylhet
Rangpur
Mymensingh
2014
South East Bank Ltd
Prime Bank Ltd
BASIC Bank Ltd
2015
5.5 Findings
After completing the analysis some points has come regarding the loan and advance of BASIC
bank. The findings of the report are presented below:
BASIC bank‟s profit has been dramatically declined from 2012. Because, they could not
recover the credit from the loan borrower
Also net interest income is negative in the year 2015 which trend is started from the year of
2012. Here also the same reason.
Though BASIC bank is in loss the operating expenses are increasing.
Though loan and advance of BASIC bank is increasing with time. In 2013, the loan advance
is dramatically increased, and also in the year of 2015. But, return on asset is not increasing
in a steady growth, it has been dramatically declined.
Maximum amount of loan is provided to the long-term industrial sectors. They intentionally
ignore the agriculture sector because of riskiness and safety issues.
6.2 Conclusion
As an internee of BASIC Bank Ltd, I have truly enjoying my internship from the learning and
experience viewpoint. I am confident that this three months internship program at BASIC Bank
will definitely help me to realize my further carrier in the job market. As there are lots of local
and foreign banks in Bangladesh the BASIC Bank is promising commercial Bank among them.
In this competitive market BASIC Bank has to compete the others commercial banks in
Bangladesh. At the end of the report it can be mentioned that, Economic emancipation is our
largest victory. Better banking system can pave the way of this greatest achievement. BASIC
bank has been playing a very vital role in this arena. This is my close look of the vision during
my training period there. Contribution of this bank for our industrial development was
unparalleled. At present time the bank is being operated as a state owned commercial bank. But
it needs some modification which is the demand of the time. So, necessary steps such as reforms,
restructuring should be taken to run the banking system smoothly and efficiently as we know it
very well that a sound banking system can ensure a strong financial structure in a country.
Annual Reports
Annual Report of BASIC Bank Limited, (Year ended December 31, 2015-2011)
Annual Report of Prime Bank Limited, (Year ended December 31, 2014 & 2015)
Annual Report of South East Bank Limited, (Year ended December 31, 2014 & 2015)
Book
Financial Statement Analysis – George Foster
Essentials of Managerial Finance – Basley & Brigham
The Economics of Money, Banking, and Financial markets –Frederic S. Mishkin
Credit Division Manual of BASIC
Web site
http://www.basicbanklimited.com
http://www.investopedia.com
http://www.businessdictionary.com
http://www.wikipedia.org
http://www.bangladesh-bank.org
Chapter 1
BASIC Bangladesh Small Industries and Commerce
BBA Bachelors of Business Administration
Chapter 2
AFIC Anti Fraud Internal Control
ALCO Asset Liability Committee
ALM Asset Liability Management
AMLD Anti-Money Laundering Division
ATM Automated Teller Machine
BAMLCO Branch Anti-Money Laundering Compliance Officer
BB Bangladesh Bank
BCCI Bank of Credit & Commerce Industries
BOA Bangladesh Olympic Association
CAD Credit Administration Division
CAMLCO Chief Anti-Money Laundering Compliance Officer
CCD Commercial Credit Division
CCU Central Compliance Unit
CFD Consumer Finance Division
CR Configuration Review
CRAB Credit Rating Agency of Bangladesh
DITF Dhaka International Trade Fair
GOB Government of Bangladesh
HRD Human Research Department
HOMC Head Office Management Committee
ICD Industrial Credit Division
Jr. Junior
KCBS KASTLE CORE Banking Software
Chapter 3
A/C Account
BM Branch Manager
BRS Balance Requisition Slip
CIB Credit information bureau
DD Demand Draft
DPS Deposit Pension Scheme
IBCA Inward bills for collection account
IRC Import Registration Certificate
LOA Letter of Authority
NFC Non-residential Foreign Currency
PO Pay order
RFC Residential Foreign Currency
RMG Readymade Garments
SND Special Notice Deposit
TT Telegraphic Transfer
VAT Value Added Tax
Chapter 4
BDT Bangladeshi Taka