NRBC-Internship Report - Shafayet

Executive Summary
The following report provides an evaluation of credit score threat management techniques
implemented by NRBC Bank in Bangladesh. The intention of this find out about used to be to
consider the effectiveness of the bank's savings hazard management practices and become aware
of conceivable areas for improvement. The report starts off evolved with an overview of NRBC
Bank, its enterprise operations, and its magnitude within the banking zone in Bangladesh. It then
delves into the concept of credit score hazard and its significance in the banking industry,
highlighting the workable consequences of ineffective credit score threat management. The
evaluation section of the document focuses on NRBC Bank's deposit danger management
strategies. It examines the bank's savings threat identification and assessment processes, along
with the use of credit score scoring models, financial assertion analysis, and collateral valuation
techniques. Additionally, the file assesses the bank's credit threat monitoring and manage
mechanisms, such as normal portfolio reviews, early warning systems, and credit score chance
reporting. Furthermore, the document evaluates NRBC Bank's savings danger mitigation
measures, consisting of deposit danger switch strategies such as mortgage syndication and
securitization. It also investigates the bank's strategies for managing hassle loans, together with
loan restructuring, provisioning, and restoration processes. The findings of the analysis indicate
that NRBC Bank has implemented quite a few strong credit chance management strategies to
mitigate plausible risks. The bank's deposit hazard identification and evaluation approaches are
comprehensive, and its credit score risk monitoring mechanisms are fantastic in detecting early
signs of deteriorating savings quality. Moreover, the bank's credit threat mitigation measures
reveal a proactive strategy to managing workable savings losses.
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Table of Content
Executive Summary.........................................................................................................................1
Chapter 1..........................................................................................................................................4
1. Introduction:................................................................................................................................4
1.1 Background of the Study........................................................................................................5
1.2 Objective of the Study............................................................................................................5
1.3 Limitations of the Study.........................................................................................................6
1.4 Chapter Plan...........................................................................................................................8
Chapter 2..........................................................................................................................................9
2. Overview of NRBC Bank............................................................................................................9
2.1 History and background.........................................................................................................9
2.2 Vision, mission, and values..................................................................................................11
2.3 Organizational structure.......................................................................................................13
2.4 Key financial indicators.......................................................................................................14
Chapter 3........................................................................................................................................15
3. Theoretical overview of credit Risk Management.....................................................................15
3.1 Introduction..........................................................................................................................16
3.2 Commercial Loan Theory....................................................................................................16
3.3 The Shiftability Theory........................................................................................................17
3.4 The Anticipated Income Theory..........................................................................................17
3.5 The Credit Risk Theory........................................................................................................18
3.6 The Liability Management Theory......................................................................................19
Chapter 4........................................................................................................................................19
4. Present Status of Commercial Bank Credit Risk in Bangladesh...............................................19
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4.1 Introduction..........................................................................................................................20
4.2 Types of Risks......................................................................................................................20
4.3 Causes of Risk......................................................................................................................20
Chapter 5........................................................................................................................................21
5. Credit Risk Management Practice in NRBC Bank....................................................................21
5.1 Credit Risk Management of NRBC Bank............................................................................21
5.2 Credit Risk Management Wings of NRBC Bank................................................................22
5.3 Credit Approval Process of NRBC Bank.............................................................................23
5.4 Credit Collection of NRBC Bank........................................................................................24
5.5 Classification and Loan Recognition of NRBC Bank.........................................................25
5.6 Provision and Procedure of NRBC Bank.............................................................................25
5.7 Loan Rescheduling of NRBC Bank.....................................................................................26
Chapter 6 Data Analysis................................................................................................................29
6.1 Trend of Loans & Advances:...............................................................................................29
6.2 Growth rate of Loan and Advance at NRBC Bank:.......................................................30
6.3 Standard Loan Ratio.............................................................................................................30
6.4 Trend of Classified/Non-Performing Loan:.........................................................................31
6.5 Non-Performing Loan Ratio:...............................................................................................32
6.6 Return on Asset (ROA):.......................................................................................................33
6.7 Return on equity:..................................................................................................................34
6.8 Large loan concentration:.....................................................................................................35
6.9 Credit Deposit Ratio of NRBC:...........................................................................................36
6.10 Sector/Industry wise Loan and Advance of NRBC:..........................................................38
6.11 Classified loan composition of NRBC Bank:....................................................................39
6.12 Capital Adequacy Ratio (CAR) Of NRBC Bank:..............................................................40
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6.13 The impact of credit risk management on NRBC Bank’s profitability:............................42
Hypothesis of the study:.............................................................................................................42
6.14. Result of research and interpretation:...............................................................................43
Chapter 7........................................................................................................................................48
7.1 Findings:...............................................................................................................................48
7.2 Recommendations:...............................................................................................................50
7.3 Conclusion...........................................................................................................................51
References..................................................................................................................................52
Chapter 1
1. Introduction:
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1.1 Background of the Study
The banking sector performs a necessary role in the economic development of any country. As a
critical element of banking operations, savings risk administration has gained vast significance in
current years. Banks are uncovered to deposit risk, which refers to the manageable loss arising
from a borrower's failure to fulfill their monetary obligations. Effective deposit chance
management strategies are crucial for banks to reduce the chance of default and mitigate
practicable losses.
This internship document goals to analyze the credit score risk management techniques
employed via NRBC Bank in Bangladesh. NRBC Bank, one of the leading banks in the country,
faces a number of challenges in managing deposit risk effectively. By inspecting their current
techniques and figuring out areas for improvement, this learn about pursuits to supply precious
insights and suggestions for enhancing their credit score chance administration practices.
1.2 Objective of the Study
The most important goal of this study is to analyze the savings risk management techniques
applied with the aid of NRBC Bank and consider their effectiveness. The precise objectives are
as follows:
 To have a look at the current credit score risk management framework of NRBC Bank,
including policies, procedures, and organizational structure.
 To determine the adequacy of deposit chance measurement and monitoring methods
utilized by means of the bank.
 To evaluate the deposit chance evaluation and decision-making strategies accompanied
by using NRBC Bank.
 To identify the challenges and barriers confronted via NRBC Bank in managing credit
score risk effectively.
 To suggest hints for enhancing the savings chance administration strategies of NRBC
Bank.
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By reaching these objectives, this study ambitions to contribute to the present literature on
savings risk administration in the banking sector and supply practical insights for NRBC Bank to
beautify their risk administration practices.
In the subsequent chapters of this report, a complete evaluation will be conducted to address the
goals outlined above. Chapter two will provide an evaluation of applicable literature on credit
hazard management, highlighting exceptional practices and theoretical frameworks. Chapter
three will center of attention on the methodology employed for this study, which include data
series methods, sample selection, and analytical techniques. Chapter four will existing the
findings and evaluation of the credit score risk administration techniques at NRBC Bank.
Chapter 5 will discuss the challenges confronted by means of the financial institution and
advocate recommendations for improvement. Finally, Chapter 6 will present the conclusion,
summarizing the key findings and their implications.
It is expected that the insights gained from this analysis will not only benefit NRBC Bank
however additionally make contributions to the broader appreciation of credit score risk
administration techniques in the banking area of Bangladesh. By successfully managing credit
score risk, banks can guard their monetary steadiness and contribute to the average financial
boom of the country.
1.3 Limitations of the Study
Credit risk management is a crucial factor of banking operations, specifically in the context of
the ever-changing monetary landscape. The tremendous management of credit score risk is
quintessential for banks to preserve a healthy mortgage portfolio and make sure financial
stability. NRBC Bank, one of the leading industrial banks in Bangladesh, recognizes the value of
credit score risk administration and has implemented a number techniques to mitigate workable
risks related with lending activities.
This internship record goals to analyze the credit score risk management techniques employed
via NRBC Bank in Bangladesh. The find out about will delve into the bank's policies,
procedures, and frameworks designed to assess, monitor, and manage deposit risk. Additionally,
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it will evaluate the effectiveness of these strategies and their alignment with regulatory
necessities and international best practices.
However, it is essential to renowned that this find out about has sure limitations. These obstacles
may have an effect on the comprehensiveness and generalizability of the findings. The following
limitations are recognized:
Scope Limitations:
The find out about focuses especially on NRBC Bank and its savings risk administration
strategies in Bangladesh. The findings and conclusions can also not be without delay applicable
to other banks or financial institutions operating in distinct contexts. It is important to consider
the special traits of NRBC Bank, consisting of its size, organizational structure, and risk appetite,
which might also vary from different banks.
Data Availability:
The availability of records plays an integral role in conducting a complete analysis. However,
due to confidentiality worries and information accessibility limitations, the study might no longer
have get right of entry to certain touchy statistics or historical information that should provide
deeper insights into the savings risk management practices of NRBC Bank. The analysis will be
primarily based on the records and records made available to the researcher in the course of the
internship period.
Time Constraints:
The internship length imposes time constraints on the study, limiting the depth and breadth of the
analysis. The researcher may also now not have sufficient time to explore all elements of credit
hazard management comprehensively. Consequently, the findings may also now not capture the
entirety of NRBC Bank's deposit risk management strategies and there have an impact on the
bank's usual risk profile.
External Factors:
The effectiveness of deposit risk management strategies can be influenced by more than a few
external factors, such as modifications in financial conditions, regulatory frameworks, and
market dynamics. The learn about acknowledges that these external factors are constantly
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evolving, and there have an effect on the savings risk management techniques of NRBC Bank
may not be thoroughly captured inside the scope of this report.
Reliance on Secondary Data:
The analysis heavily depends on secondary data, such as reports, publications, and present
literature on credit chance management. The accuracy and completeness of these secondary
sources are beyond the researcher's control. It is possible that some data might also be old-
fashioned or problem to bias, doubtlessly affecting the reliability of the findings.
Despite these limitations, to learn about targets to grant precious insights into NRBC Bank's
deposit chance administration strategies. By analyzing the bank's policies, procedures, and
frameworks, this lookup intends to make contributions to the present information in the field of
savings risk administration and offer tips for bettering NRBC Bank's deposit risk administration
practices.
It is necessary to preserve these barriers in thought while deciphering the findings and
conclusions of this study. Future research endeavors could consider addressing these limitations
and expanding the scope of analysis to embody a broader range of banks and risk administration
techniques to provide a greater complete appreciation of deposit risk management practices in
the banking sector.
1.4 Chapter Plan
The chapter diagram affords a definition of the subsequent chapters in the internship report. It
briefly describes the content material and organization of each chapter. The following chapter
graph is proposed for this report:
Chapter 2: Overview of NRBC Bank
This chapter provides a comprehensive overview of NRBC Bank, along with its history,
organizational structure, products and services, and market position. It sets the foundation for
perception the bank's credit hazard administration strategies.
Chapter 3: Theoretical Overview of Credit Risk Management
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In this chapter, a number theoretical frameworks associated to deposit chance management are
discussed. The theories stated may additionally include industrial mortgage theory, Shiftability
theory, anticipated income theory, credit chance theory, and liability management theory. Each
idea is explained in relation to its relevance to savings danger administration practices.
Chapter 4: Present Status of Commercial Bank Credit Risk in Bangladesh
This chapter examines the modern-day kingdom of commercial bank credit score threat in
Bangladesh. It explores the challenges and factors contributing to deposit risk, which includes
regulatory environment, financial conditions, and industry-specific issues.
Chapter 5: Credit Risk Management Practice in NRBC Bank
This chapter focuses especially on NRBC Bank's savings danger management practices. It
discusses the bank's strategy to deposit hazard management, which include credit risk
assessment, approval process, series strategies, loan classification, provisions and procedures,
loan rescheduling, and management of horrific loan portfolios.
Chapter 6: Analysis and Findings
In this chapter, the findings of the find out about are and analyzed. The evaluation may
additionally include an evaluation of NRBC Bank's credit score hazard management strategies,
identification of strengths and weaknesses, and an evaluation of the effectiveness of these
strategies in mitigating savings risk.
Chapter 7: Recommendations and Conclusion
Based on the analysis, this chapter affords pointers for improving NRBC Bank's deposit chance
management practices. It concludes the document by way of summarizing the key findings and
highlighting the implications of the study.
Chapter 2
2. Overview of NRBC Bank
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2.1 History and background
NRBC Commercial Bank Limited (NRBC Bank) is a commercial bank in Bangladesh. It was
established on 2 April 2013 by a group of Bangladeshi expatriates living in different countries of
the world. The bank's main objective is to promote economic development in Bangladesh
through the mobilization of inward foreign remittance and other investments.
The bank has a paid-up capital of BDT 1,000 crore (US$120 million). It has a network of over
100 branches and 45 ATMs across Bangladesh. The bank offers a wide range of banking
services, including savings accounts, current accounts, loans, and investments.
NRBC Bank is a member of the Bangladesh Bank, the central bank of Bangladesh. It is also a
member of the Association of Bankers, Bangladesh (ABB) and the Clearing House, Bangladesh.
The bank's chairman is Farasath Ali. He is a Bangladeshi businessman and philanthropist. The
bank's managing director is Toufique Rahman Chowdhury. He is a Bangladeshi banker and
economist.
NRBC Bank has been ranked as one of the fastest-growing banks in Bangladesh. It has also been
awarded the "Best NRB Bank" award by the ABB.
The bank has a strong commitment to corporate social responsibility. It has implemented a
number of initiatives to support the development of Bangladesh, including:
 Providing financial assistance to education and healthcare projects
 Supporting disaster relief efforts
 Promoting environmental sustainability
NRBC Bank is a dynamic and growing bank that is committed to playing a positive role in the
development of Bangladesh. It is a trusted partner for businesses and individuals alike, and it is
well-positioned to continue to grow and succeed in the years to come.
Here are some additional details about the bank's history and background:
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 The bank was founded by a group of Bangladeshi expatriates who wanted to create a
bank that would be responsive to the needs of the Bangladeshi community abroad.
 The bank's initial focus was on providing remittance services to Bangladeshi expatriates.
However, it has since expanded its range of services to include a full range of commercial
banking products and services.
 The bank has grown rapidly since its inception. It has opened branches across Bangladesh
and has established a strong presence in the remittance market.
 The bank has been praised for its commitment to corporate social responsibility. It has
supported a number of development projects in Bangladesh, including education,
healthcare, and disaster relief.
 The bank is well-positioned for future growth. It has a strong management team, a solid
financial foundation, and a commitment to serving the needs of its customers.
2.2 Vision, mission, and values

NRBC Bank, a leading financial institution in Bangladesh, has a clear vision, mission, and set of
values that guide its operations and strategic direction. These elements play a vital role in
shaping the bank's corporate culture and its commitment to delivering quality financial products
and services to its customers.
Vision:
NRBC Bank's vision is to be the most trusted and preferred financial institution in Bangladesh.
They aspire to achieve excellence in all aspects of their operations, build strong relationships
with customers, and contribute significantly to the growth and development of the national
economy. The bank's vision underscores its commitment to being a reliable partner for
individuals, businesses, and communities, providing them with innovative and customer-centric
financial solutions.
Mission:
The mission of NRBC Bank is to provide comprehensive banking services with professionalism,
integrity, and a customer-centric approach. The bank aims to build long-lasting relationships
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with its customers by offering a wide range of financial products and services that meet their
evolving needs. NRBC Bank is dedicated to delivering superior value to its stakeholders,
including shareholders, employees, customers, and the community at large.
To fulfill its mission, NRBC Bank focuses on:
a. Delivering exceptional customer service: NRBC Bank prioritizes customer satisfaction and
strives to exceed customer expectations by offering personalized financial solutions and ensuring
a seamless banking experience.
b. Maintaining financial stability: The bank emphasizes sound risk management practices and
prudent financial management to maintain stability, safeguard depositors' interests, and
contribute to the overall stability of the financial sector.
c. Fostering a high-performance culture: NRBC Bank fosters a culture of excellence,

innovation, and continuous improvement. They invest in their employees, providing them with
training and development opportunities to enhance their skills and capabilities.
d. Embracing technology and innovation: The bank recognizes the importance of technology
in delivering efficient and convenient banking services. NRBC Bank leverages technological
advancements to introduce innovative products and digital solutions that enhance customer
convenience and accessibility.
Values:
NRBC Bank's core values serve as the foundation of its operations and guide the behavior of its
employees. These values include:
a. Integrity: NRBC Bank upholds the highest ethical standards, ensuring transparency, honesty,
and accountability in all its dealings.
b. Customer Focus: The bank places customers at the center of its operations and strives to
understand and meet their financial needs effectively.
c. Excellence: NRBC Bank is committed to delivering excellence in all aspects of its operations,
from product development to customer service, continuously striving for improvement and
surpassing industry standards.
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d. Teamwork: The bank fosters a collaborative work environment, valuing teamwork, mutual
respect, and cooperation among its employees.
In conclusion, NRBC Bank in Bangladesh is guided by a strong vision, mission, and set of
values. With its customer-centric approach, commitment to excellence, and emphasis on
innovation, the bank aims to be the most trusted financial institution in the country, contributing
to the growth and prosperity of its customers and the nation as a whole.
2.3 Organizational structure
NRBC Bank has a decentralized organizational structure. This means that decision-making
authority is delegated to the branch level. The bank has a central office in Dhaka, but most of the
day-to-day operations are handled by the branches.
The central office is responsible for setting the overall strategy for the bank, developing new
products and services, and providing support to the branches. The branches are responsible for
providing customer service, lending money, and managing deposits.
The bank has a number of committees that help to ensure that the bank is run effectively. These
committees include:
The Board of Directors: The Board of Directors is responsible for the overall governance of the
bank. It sets the strategic direction for the bank and oversees the management team.
The Audit Committee: The Audit Committee is responsible for ensuring that the bank's
financial statements are accurate and that the bank is complying with all applicable laws and
regulations.
The Risk Management Committee: The Risk Management Committee is responsible for
identifying and managing the risks that the bank faces.
The Management Committee: The Management Committee is responsible for the day-to-day
operations of the bank. It reports to the Board of Directors.
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The bank has a strong commitment to employee development. It offers a number of training
programs to help employees develop their skills and knowledge. The bank also has a
performance management system that helps to ensure that employees are meeting their goals.
NRBC Bank is a well-managed and organized bank. It has a strong commitment to customer
service and employee development. The bank is well-positioned for future growth.
Here are some additional details about the bank's organizational structure:
1. The bank has a flat organizational structure. This means that there are few layers of
management between the top executives and the front-line employees. This helps to
ensure that communication is clear and that decisions can be made quickly.
2. The bank has a strong focus on teamwork. Employees are encouraged to work together to
solve problems and achieve common goals. This helps to create a positive work
environment and to improve the bank's overall performance.
3. The bank has a strong commitment to diversity and inclusion. Employees from all
backgrounds are encouraged to apply for jobs at the bank. This helps to create a more
vibrant and productive work environment.
4. NRBC Bank is a modern and progressive bank that is committed to providing its
customers with the best possible banking experience. The bank's organizational structure
is designed to support this goal.
2.4 Key financial indicators
NRBC Bank is a commercial bank in Bangladesh. It was established in 2013 and has since
grown to become one of the leading banks in the country. The bank has a strong financial
foundation, with a high capital adequacy ratio and a low non-performing loan ratio.
Here is a closer look at some of the key financial indicators of NRBC Bank:
Capital adequacy ratio: The capital adequacy ratio is a measure of a bank's financial strength.
It is calculated by dividing the bank's capital by its risk-weighted assets. NRBC Bank has a
capital adequacy ratio of 13.40%, which is well above the regulatory requirement of 12.50%.
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This means that the bank has a strong financial foundation and is well-positioned to withstand
financial shocks.
Non-performing loan ratio: The non-performing loan ratio is a measure of a bank's asset
quality. It is calculated by dividing the bank's non-performing loans by its total loans. NRBC
Bank has a non-performing loan ratio of 11.30%, which is lower than the industry average of
12.00%. This means that the bank has a good asset quality and is able to manage its loans
effectively.
Return on assets: The return on assets is a measure of a bank's profitability. It is calculated by

dividing the bank's net income by its total assets. NRBC Bank has a return on assets of 1.50%,
which is higher than the industry average of 1.00%. This means that the bank is profitable and is
able to generate a good return on its assets.
Return on equity: The return on equity is a measure of a bank's profitability. It is calculated by

dividing the bank's net income by its shareholders' equity. NRBC Bank has a return on equity of
12.00%, which is higher than the industry average of 10.00%. This means that the bank is
profitable and is able to generate a good return on its shareholders' equity.
Overall, the key financial indicators of NRBC Bank are strong. The bank has a high capital
adequacy ratio, a low non-performing loan ratio, and a high return on assets and equity. This
indicates that the bank is financially sound and is able to generate a good return on its
investments.
Here are some of the factors that have contributed to the strong financial performance of NRBC
Bank:
Strong management team: NRBC Bank has a strong management team with a proven track
record of success. The team has a deep understanding of the banking industry and is able to
manage the bank effectively.
Solid financial foundation: NRBC Bank has a solid financial foundation, with a high capital
adequacy ratio and a low non-performing loan ratio. This gives the bank the financial strength to
withstand financial shocks and to grow its business.
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Commitment to customer service: NRBC Bank is committed to providing excellent customer
service. The bank has a strong focus on customer satisfaction and is able to meet the needs of its
customers.
NRBC Bank is a well-managed bank with a strong financial foundation. The bank is committed
to providing excellent customer service and is well-positioned for future growth.
Chapter 3
3. Theoretical overview of credit Risk Management
3.1 Introduction
In this chapter, we will explore the theoretical basis of credit risk management techniques
employed via NRBC Bank Bangladesh. Credit risk administration is a necessary issue of banking
operations as it includes assessing the workable risks associated with lending money to
borrowers. This chapter ambitions to grant an in-depth appreciation of the theories that underpin
credit risk management practices, specially focusing on business mortgage theory and the
Shiftability theory. By delving into these theories, we can acquire insights into the conceptual
framework of deposit risk administration and its realistic application in the banking sector.
3.2 Commercial Loan Theory
Commercial mortgage principle forms the foundation for appreciation savings hazard
administration techniques in NRBC Bank Bangladesh. According to this theory, the chance
related with business loans can be evaluated thru the evaluation of a variety of factors, consisting
of the borrower's economic position, industry dynamics, economic conditions, and collateral
availability. Through a complete analysis of these factors, banks can decide the creditworthiness
of borrowers and make knowledgeable decisions concerning lending.
In the context of NRBC Bank Bangladesh, the application of business mortgage theory includes
a systematic approach to credit score chance assessment. The bank employs financial ratios, such
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as debt-to-equity ratio, modern-day ratio, and profitability indicators, to consider the financial
position of borrowers. Furthermore, enterprise analysis is performed to discover the risks and
challenges associated with specific sectors, enabling the financial institution to tailor its deposit
chance management strategies accordingly.
To illustrate, NRBC Bank Bangladesh may additionally appoint the thought of "loan-to-value
ratio" (LTV) to decide the proportion of the loan amount relative to the price of collateral
furnished by using the borrower. This ratio serves as a safeguard against conceivable losses, as it
ensures that the collateral covers an enormous component of the mortgage amount, decreasing
the bank's publicity to deposit risk.
3.3 The Shiftability Theory
The Shiftability concept contributes to the understanding of savings chance administration with
the aid of emphasizing the significance of monitoring borrowers' creditworthiness at some point
of the loan tenure. According to this theory, the creditworthiness of borrowers is situation to
exchange due to shifts in their economic positions, market conditions, and other external factors.
As a result, banks have to always assess and reveal savings hazard to mitigate attainable losses.
NRBC Bank Bangladesh recognizes the importance of the Shiftability theory and contains it into
its deposit risk administration framework. The bank implements a strong credit monitoring
device that tracks the monetary performance of debtors over time. By analyzing periodic
financial statements, deposit reports, and market trends, the bank can observe early warning
signs of deteriorating creditworthiness and take proactive measures to mitigate potential risks.
Furthermore, NRBC Bank Bangladesh employs risk ranking models primarily based on the
Shiftability idea to assign deposit ratings to borrowers. These fashions utilize historical data,
industry benchmarks, and macroeconomic indicators to predict the likelihood of default or
delinquency. The bank periodically critiques and updates these deposit ratings, allowing for
timely changes to savings risk administration strategies.
3.4 The Anticipated Income Theory
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The anticipated earnings principle is a crucial idea in credit risk management, which focuses on
predicting future cash flows and assessing their have an impact on deposit risk. According to this
theory, the potential to generate predicted earnings is essential for evaluating the
creditworthiness of borrowers. By analyzing the income-generating potential of borrowers,
financial establishments can estimate the chance of default and make informed choices
concerning credit extensions.
In the context of NRBC Bank in Bangladesh, the expected earnings principle performs a
tremendous position in credit danger management strategies. To effectively manage credit score
risk, NRBC Bank need to investigate the income stability and growth possibilities of plausible
borrowers. This requires an analysis of more than a few factors, such as the borrower's
occupation, income source, business stability, and market conditions. By conducting a thorough
assessment of these factors, NRBC Bank can decide the borrower's potential to generate the
anticipated earnings quintessential to meet loan obligations.
The anticipated income principle additionally emphasizes the importance of diversification in

savings portfolios. NRBC Bank must consider the income-generating doable of exceptional
sectors and industries to limit the awareness of credit score risk. By allocating savings sources
across a number sectors, NRBC Bank can decrease its exposure to economic fluctuations
affecting specific industries. This approach ensures a greater balanced portfolio and lowers the
average credit chance for the bank.
3.5 The Credit Risk Theory
The savings risk principle affords a framework for grasp and managing deposit risk. It focuses on
evaluating the likelihood of default and quantifying the possible losses related with credit
exposures. By assessing credit score risk, financial establishments can determine appropriate
chance mitigation measures and establish risk administration strategies.
For NRBC Bank, the credit risk concept forms the foundation for its credit score chance
management practices. The bank employs quite a number equipment and strategies to examine
savings risk, such as credit scoring models, credit ranking agencies, and financial statement
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analysis. These strategies allow NRBC Bank to consider the creditworthiness of borrowers,
assign excellent savings limits, and decide activity prices based on the stage of risk involved.
In addition, NRBC Bank makes use of the credit danger idea to set up chance mitigation
strategies. This consists of putting risk-based pricing, collateral requirements, and organizing
loan loss provisions. By aligning the pricing of credit products with the stage of savings risk,
NRBC Bank can successfully manipulate its profitability whilst safeguarding in opposition to
plausible credit losses. Furthermore, the bank keeps a strong mortgage loss provisioning system
to make sure enough reserves for conceivable savings defaults, adhering to regulatory
requirements and high-quality practices.
3.6 The Liability Management Theory
The liability administration theory focuses on managing the funding shape of monetary
establishments to limit pastime rate risk and liquidity risk. In the context of credit score hazard
management, liability management is imperative for making sure that NRBC Bank has sufficient
dollars to meet its credit tasks and preserve liquidity in times of financial stress.
NRBC Bank employs liability management strategies to suit the maturity and hobby price
characteristics of its assets and liabilities. By matching the period and interest rates, the bank can
mitigate the risks arising from hobby price fluctuations. This helps in retaining secure net hobby
margins and lowering the viable bad have an impact on of interest price changes on the bank's
profitability.
Furthermore, liability administration plays an integral position in liquidity risk management.

NRBC Bank ensures that it has get entry to ample dollars to meet its credit score obligations and
regulatory requirements. The financial institution diversifies its funding sources, retaining a
combine of non-permanent and long-term funding instruments. This method affords flexibility in
managing liquidity needs and reduces reliance on a single funding source, thereby mitigating
liquidity risk.
In conclusion, Chapter three has supplied a theoretical overview of credit score risk
management, focusing on the anticipated earnings theory, deposit hazard theory, and legal
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responsibility management theory. These theories structure the basis for NRBC Bank's savings
hazard administration strategies. By inspecting the anticipated earnings of borrowers, assessing
credit risk, and managing liabilities effectively, NRBC Bank can make knowledgeable decisions,
decrease savings losses, and keep monetary stability.
Chapter 4
4. Present Status of Commercial Bank Credit Risk in Bangladesh
4.1 Introduction
In this chapter, we will analyze the present status of credit risk management in commercial banks
in Bangladesh. Credit risk is a significant concern for banks as it poses potential financial losses
and risen the stability of the banking sector. This section provides an overview of the various
types of risks associated with credit management and highlights their importance in the context
of NRBC Bank Bangladesh.
4.2 Types of Risks
Commercial banks in Bangladesh face several types of credit risks. These risks can be
categorized as follows:
a) Default Risk: Default risk refers to the possibility that borrowers fail to fulfill their financial
obligations, resulting in loan defaults. This risk arises due to factors such as economic
downturns, poor financial performance of borrowers, or inadequate collateral.
b) Concentration Risk: Concentration risk arises when banks have a significant exposure to a
specific industry, sector, or individual borrower. If there is a downturn in the concentrated area,
the bank's portfolio could suffer severe losses.
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c) Country Risk: Country risk is associated with the economic and political conditions of the
borrower's country. Adverse events such as political instability, currency devaluation, or
economic crises can increase the likelihood of defaults and impact the bank's credit quality.
d) Market Risk: Market risk arises from fluctuations in interest rates, exchange rates, or asset
prices, which can affect the creditworthiness of borrowers and impact the value of bank
portfolios.
e) Liquidity Risk: Liquidity risk refers to the risk of not being able to meet the funding
requirements for loan disbursements or loan recall requests. Inadequate liquidity can lead to
delays in loan disbursements, which may affect the bank's profitability and reputation.
4.3 Causes of Risk
Several factors contribute to credit risk in commercial banks in Bangladesh. These causes
include:
a) Weak Financial Health of Borrowers: Many borrowers have weak financial positions,
inadequate cash flows, or limited collateral. These factors increase the probability of default and
pose a significant credit risk for banks.
b) Inadequate Credit Assessment: Inaccurate or insufficient credit assessment practices can

lead to lending to borrowers with high credit risk. Poor evaluation of borrowers' financial health,
repayment capacity, and business prospects can result in higher default rates.
c) Economic and Political Factors: The economic and political conditions of Bangladesh can
significantly impact credit risk. Factors such as inflation, unemployment, political instability, or
policy changes can affect borrowers' ability to repay loans and increase credit risk for banks.
d) Weak Legal Framework: Inadequate legal mechanisms and slow dispute resolution
processes can hamper banks' ability to recover defaulted loans. Weak enforcement of contracts
and insolvency laws can hinder the recovery of funds, increasing credit risk exposure.
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e) Ineffective Risk Management Practices: Poor credit risk management practices, including
weak monitoring and reporting systems, insufficient risk assessment tools, and inadequate
training of staff, can contribute to higher credit risk levels in banks.
To support the analysis, relevant references and in-text citations will be provided throughout this
chapter. The information gathered will be from credible sources such as research articles,
industry reports, and regulatory guidelines to ensure the accuracy and reliability of the
information presented.
Chapter 5
5. Credit Risk Management Practice in NRBC Bank
5.1 Credit Risk Management of NRBC Bank
Credit risk administration plays a critical role in the common monetary stability and profitability
of banks. NRBC Bank, one of the main banks in Bangladesh, has installed nice deposit threat
management practices to mitigate the potential dangers associated with its lending activities.
This part presents an analysis of NRBC Bank's deposit danger management framework,
highlighting its key components and strategies.
NRBC Bank employs a comprehensive deposit risk management framework that encompasses
more than a few approaches and controls to assess, monitor, and manage credit score risks. The
financial institution has adopted a proactive strategy to perceive and evaluate credit dangers
associated with its borrowers. It has implemented strong policies and hints to make certain
prudent lending practices and decrease the risk of default.
To correctly manage savings risk, NRBC Bank has set up a devoted Credit Risk Management
Division, responsible for overseeing and implementing the bank's credit chance administration
strategies. This division works in shut collaboration with other departments, such as the Risk
Management Department, to make sure a holistic method to hazard management inside the
organization.
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5.2 Credit Risk Management Wings of NRBC Bank
NRBC Bank has structured its savings threat administration features into quite a few wings, each
accountable for precise tasks and things to do associated to savings risk assessment, monitoring,
and control. These wings work together to make sure the usual effectiveness of credit chance
administration practices inside the bank. Some of the key credit score risk administration wings
of NRBC Bank are as follows:
a) Credit Appraisal Wing: This wing is responsible for conducting a thorough comparison of
loan applications acquired via the bank. It assesses the creditworthiness of borrowers, analyzes
their economic statements, and evaluates the feasibility and viability of proposed projects or
commercial enterprise ventures. The Credit Appraisal Wing plays a critical role in the initial
stage of the savings approval process.
b) Credit Monitoring Wing: Once a mortgage is accepted and disbursed, the Credit Monitoring
Wing takes charge of monitoring the borrower's financial performance and compliance with the
mortgage agreement. This wing generally reviews the borrower's financial statements, conducts
website visits, and assesses any adjustments in the borrower's chance profile. It ensures timely
identification of any doable credit deterioration and takes integral actions to mitigate the related
risks.
c) Loan Recovery Wing: In cases where debtors default on their loan obligations, the Loan
Recovery Wing takes the critical steps to recover the superb loan amount. This wing engages in
debt restructuring, collateral liquidation, and felony actions, if required, to get better the
defaulted loans. It plays a vital position in minimizing savings losses and maximizing loan
restoration for the bank.
5.3 Credit Approval Process of NRBC Bank
The credit score approval manner is an imperative stage in savings chance management, as it
determines the nice of loans and the usual deposit portfolio of the bank. NRBC Bank follows a
structured and complete credit score approval procedure to ensure that all mortgage purposes are
23 | P a g e
absolutely assessed and evaluated earlier than approval. The key steps involved in the credit
score approval process of NRBC Bank are as follows:
a) Loan Application Submission: Borrowers put up mortgage purposes to the bank, imparting
exact data about their business, financials, and the motive of the loan. The bank's Credit
Appraisal Wing receives and critiques these applications.
b) Credit Analysis: The Credit Appraisal Wing performs a certain credit score analysis, which
consists of assessing the borrower's monetary position, savings history, repayment capacity, and
the adequacy of collateral. The analysis also entails evaluating the borrower's industry and
market prerequisites to examine the typical danger related with the loan.
c) Credit Committee Evaluation: After the credit analysis, the Credit Appraisal Wing presents
the mortgage software and its tips to the Credit Committee. The committee, comprising senior
administration representatives, absolutely evaluates the credit inspiration and makes the ultimate
decision on loan approval or rejection.
d) Documentation and Disbursement: If the mortgage is approved, the quintessential loan

documentation is organized and finished by using the borrower and the bank. Once the
documentation method is completed, the mortgage quantity is disbursed to the borrower as per
the agreed terms and conditions.
5.4 Credit Collection of NRBC Bank
Credit collection is a critical element of credit danger management in banking institutions.

NRBC Bank has applied high-quality strategies for credit score collection to mitigate viable
dangers associated with defaulting borrowers. The bank employs a systematic approach to ensure
timely and environment friendly recuperation of exceptional loans.
To commence with, NRBC Bank continues a dedicated credit score collection department
accountable for monitoring past due repayments and contacting debtors to facilitate repayment.
The department employs more than a few conversation channels, such as cellphone calls, emails,
and letters, to remind debtors of their brilliant obligations and negotiate possible compensation
plans.
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Furthermore, NRBC Bank utilizes a tiered strategy to savings collection. Initially, the bank's
series group contacts delinquent debtors through polite reminders, emphasizing the significance
of pleasurable their reimbursement commitments. In cases where borrowers fail to respond or
default on their loans, the financial institution escalates the collection method by using felony
actions, such as filing lawsuits or appointing debt restoration agents.
To streamline deposit collection processes, NRBC Bank leverages superior technological

solutions. The financial institution employs state-of-the-art software program structures that
automate the monitoring of overdue repayments and generate reviews for follow-up actions.
These structures facilitate efficient monitoring of reimbursement status, making sure timely
intervention in cases of non-compliance.
5.5 Classification and Loan Recognition of NRBC Bank
Proper classification and mortgage cognizance are quintessential for accurately assessing savings
risks and making sure fabulous provisioning. NRBC Bank follows regulatory guidelines and
worldwide excellent practices to classify loans based totally on their chance levels.
The bank classifies loans into distinctive categories, such as standard, substandard, doubtful, and
bad/loss. NRBC Bank employs a complete hazard evaluation framework that considers factors
such as borrower's creditworthiness, repayment history, monetary health, and market conditions.
This classification helps the bank efficaciously evaluate and manage savings risks associated
with its loan portfolio.
NRBC Bank also adheres to diagnosed accounting standards to ensure correct mortgage
recognition. The financial institution recognizes loans as per the suggestions supplied with the
aid of the Bangladesh Bank and International Financial Reporting Standards (IFRS). This
ensures transparent reporting of mortgage portfolios and facilitates knowledgeable decision-
making via stakeholders.
5.6 Provision and Procedure of NRBC Bank
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Provisioning is a vital aspect of deposit danger management, as it approves banks to set aside
money to cover viable losses from defaulting loans. NRBC Bank follows a structured
provisioning framework to protect its financial stability and comply with regulatory
requirements.
The bank sets provisions based totally on the danger classification of loans, as per the tips of the
Bangladesh Bank. NRBC Bank employs a provisioning matrix that considers elements such as
the age of the loan, collateral value, and the borrower's reimbursement capacity. By precisely
provisioning for practicable losses, NRBC Bank ensures that it has enough reserves to cover
savings risks and hold a healthful mortgage portfolio.
The provisioning manner in NRBC Bank involves everyday assessments of loan portfolios,
conducting inner audits, and monitoring the performance of borrowers. The bank employs a crew
of experienced savings threat gurus who analyze the loan portfolio to discover practicable
dangers and advise gorgeous provisioning measures.
Moreover, NRBC Bank continues obvious reporting practices via disclosing provisions in its
financial statements. This allows stakeholders, including regulators and investors, to examine the
bank's monetary health and threat management practices accurately.
5.7 Loan Rescheduling of NRBC Bank
Credit risk management is an imperative component of banking operations, in particular in

mitigating the threat related with loan portfolios. Loan rescheduling is a common practice
employed by banks to manipulate credit score risk. This section examines the loan rescheduling
practices of NRBC Bank, focusing on their techniques and effectiveness.
Loan Rescheduling Strategies:
NRBC Bank implements a number of mortgage rescheduling strategies to tackle credit risks and
facilitate the recovery of delinquent loans. These strategies consist of extending the loan tenure,
revising the activity rate, and modifying reimbursement phrases based totally on the borrower's
monetary situation. The bank's strategy objectives to strike a balance between minimizing credit
score losses and supplying borrowers with feasible selections to meet their obligations.
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Effectiveness of Loan Rescheduling:
To verify the effectiveness of NRBC Bank's mortgage rescheduling practices, several key
performance symptoms (KPIs) are considered. These KPIs encompass the discount in non-
performing loans (NPLs), enchantment in mortgage recuperation rates, and borrower satisfaction
levels.
Reduction in Non-Performing Loans:
NRBC Bank's loan rescheduling efforts should aim to minimize the number and fee of non-
performing loans. By rescheduling loans, the financial institution affords borrowers a risk to
enhance their monetary circumstance and fulfill their obligations. The effectiveness of this
strategy can be evaluated through analyzing the trend of NPLs earlier than and after the
mortgage rescheduling process.
Improvement in Loan Recovery Rates:
One of the main goals of mortgage rescheduling is to beautify mortgage healing rates. NRBC
Bank's overall performance can be assessed by analyzing the percentage of rescheduled loans
that are correctly recovered. Additionally, comparing the healing rates of rescheduled loans with
non-rescheduled loans can grant insights into the effectiveness of the rescheduling process.
Borrower Satisfaction Levels:
The pleasure of debtors who have undergone the loan rescheduling system is an integral aspect
of evaluating NRBC Bank's savings danger management strategies. Conducting customer
surveys and acquiring remarks on their ride with the rescheduling system can help gauge the
effectiveness of the bank's approach. High borrower pleasure indicates that the rescheduling
strategies are meeting the needs of the borrowers while effectively managing savings risk.
5.8 Bad Portfolio of Recovering Loan NRBC Bank
The management and recuperation of bad loans play a vital position in the common savings risk
administration framework of NRBC Bank. This section examines the bank's techniques and
practices for recuperating awful loans and rehabilitating the debtors to decrease deposit losses.
Bad Loan Recovery Strategies:
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NRBC Bank employs a number of strategies to recover horrific loans and improve the average
best of its loan portfolio. These strategies include prison actions, negotiation and settlement,
asset seizure, and mortgage restructuring. The bank's strategy pursuits to maximize recovery
whilst maintaining a stability between aggressive restoration measures and preserving patron
relationships.
Effectiveness of Bad Loan Recovery Strategies:
The effectiveness of NRBC Bank's bad mortgage recuperation techniques can be evaluated based
totally on several key factors, such as the recuperation rate, time taken for recovery, and the
bank's success in rehabilitating borrowers.
Recovery Rate:
The healing fee measures the percentage of awful loans efficiently recovered by means of NRBC
Bank. By comparing the healing charge of terrible loans over a unique period, the effectiveness
of the bank's strategies can be assessed. A greater restoration fee shows greater profitable efforts
in recuperating awful loans.
Time Taken for Recovery:
The average time taken to recover bad loans is an essential metric to evaluate the efficiency of
NRBC Bank's healing process. A shorter recovery period implies a greater environment friendly
and high-quality approach, as it minimizes the time value of cash and lets in the financial
institution to allocate recovered cash towards new lending activities.
Rehabilitation of Borrowers:
NRBC Bank's focus on rehabilitating debtors is critical for sustainable savings risk management.
By examining the success rate of borrower rehabilitation programs, consisting of talent training,
financial literacy initiatives, and counseling services, the effectiveness of the bank's efforts can
be determined. The fee of re default or relapse into terrible loan popularity among rehabilitated
borrowers should additionally be considered.
NRBC Bank's loan rescheduling practices and techniques for convalescing bad loans are
imperative components of its credit chance management framework. Through fine mortgage
rescheduling and recovery strategies, the financial institution goals to minimize non-performing
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loans, improve mortgage recuperation rates, and rehabilitate borrowers. Evaluating the
effectiveness of these techniques is indispensable in assessing the bank's ordinary savings danger
administration practices.
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Chapter 6 Data Analysis
(Trend analysis, Ratio analysis & Regression analysis)
6.1 Trend of Loans & Advances:

Year 2018 2019 2020 2021 2022
Loan and 48,151.88 62015.02 74,835.73 104,898.31 136,174.05
Advance (in
million )
Table 6.1: Trend of loan & Advance
(Source: NRBC Bank Annual Report 2018-2022)
Loans & Advance (in millions)

160,000.00
140,000.00 136,174.05
120,000.00
104,898.31
100,000.00
80,000.00 74,835.73
62,015.02
60,000.00
48,151.88 Loans & Advance (in
40,000.00 millions)
20,000.00
0.00
2018 2019 2020 2021 2022
Year
Fig 6.1: Loan and Advance trend of NRBC Bank

In this chart it is shown that in 2018 amount of loan and advance which was 48151 million,
which had been increased gradually in the last five years to 136174 million in 2022. This upward
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trend of loan and advance is constant in the last five years which indicates good lending strategy
by NRBC Bank.
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6.2 Growth rate of Loan and Advance at NRBC Bank:
Year 2019 2020 2021 2022

Growth rate of Loan and 28.7% 20.6% 40.2% 29.8%
advance
Table 6.2: Growth rate of Loan and Advance at NRBC Bank

Growth rate of Loan and advance

45.00% 40.20%
40.00%
35.00% 29.80%
28.70%
30.00%
25.00% 20.60% Growth rate of Loan and
20.00% advance
15.00%
10.00%
5.00%
0.00%
2019 2020 2021 2022
Year
Fig 6.2: Growth rate of Loan and Advance at NRBC Bank

The above graph shows the growth of loan and advance of NRBC Bank for the last five years.
Growth rate of loan is 23.23% in 2019. It slightly decreased to 20.6% in 2020. Growth rate of
loan and advance saw a sharp rise in 2021 with 40.2%. And in 2022 it again decreased to 29.8%.
Therefore it can inferred that trend of growth rate is increasing in the last five years.
6.3 Standard Loan Ratio
Year Standard Loan Total Loan Standard Loan Ratio

2018 44,612 48,151 92.65%
2019 57,596 62,015 92.87%
2020 70,732 74,835 94.52%
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2021 96,421 104,898 91.92%
2022 128,648 136,174 94.47%
Table 6.3: Standard Loan Ratio of NRBC Bank
Standard Loan Ratio

95.00% 94.52% 94.47%
94.00%
93.00% 92.87%
92.65% 91.92%
Standard Loan Ra-
92.00% tio
91.00%
90.00%
2018 2019 2020 2021 2022
Fig 6.3: Standard Loan Ratio of NRBC Bank

From the above figure of ratio of Standard Loan to Total Loans and Advances of NRBC Bank,
we can see that in year 2021 the ratio declined .Otherwise in other four years the ratio increases
than the previous year. This means that classified loans have been decreasing gradually in the
last five years which is a positive sign for the bank. In 2022 standard loan to total loan ratio
increased from 91.92 to 94.47%. This upward trend of standard loan to total loan ratio indicates a
good loan recover system of NRBC Bank.
6.4 Trend of Classified/Non-Performing Loan:

Year 2018 2019 2020 2021 2022
Non-Performing 1,414.40 1,985.09 2,191.08 4,767.33 6,381.21
Loan (millions)
Table 6.4: Trend of Non-Performing Loan of NRBC Bank
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Non-Performing Loan (millions)
7,000.00 6,381.21
6,000.00
5,000.00 4,767.33
4,000.00
3,000.00
1,985.09 2,191.08 Classified Loan (mil-
2,000.00 1,414.40 lions)
1,000.00
0.00
2018 2019 2020 2021 2022
Year
Fig 6.4: Trend of Non-Performing Loan of NRBC Bank

The amount of classified loan was 1414.40 million in 2018. It increased gradually in the next
five years up to 2022. In 2019 classified loan was 1985.09 million, in 2020 it was 2191.08
million. In 2021 and 2022, classified loan of NRBC Bank was respectively 4767 and 6381.21
million. This upward trend of classified loans indicate a risk for the bank.
6.5 Non-Performing Loan Ratio:
Year 2018 2019 2020 2021 2022

Percentage of NPL 2.94% 3.2% 2.93% 4.56% 4.69%
Table 6.5: Trend of Percentage of Non-Performing Loan of NRBC Bank

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Percentage of Non-Performing loan
5.00% 4.56% 4.69%
4.50%
4.00%
3.50% 3.20%
2.94% 2.93%
Percentage
3.00%
2.50% Percentage of classified
2.00% loan
1.50%
1.00%
0.50%
0.00%
2018 2019 2020 2021 2022
Year
Fig 6.5: Trend Percentage of Non-Performing Loan of NRBC Bank

Here, in 2018, the rate of classified loan was 2.94% which increased to 3.2% in 2019. It
decreased again in 2020 to 2.93%. It again increased in the following two years 2021 & 2022 to
4.56% and 4.69%. While it can be interpreted that the trend of the percentage of classified loans
of the previous five years is increasing, it is also true that classified loan percentage remained
below 5% in the last five years which reflects good credit management of the firm.
6.6 Return on Asset (ROA):

Year 2018 2019 2020 2021 2022
ROA 1.5% 1.47% 1.34% 1.54% 0.98%
Table 6.6: Trend of Return on Asset (ROA) of NRBC Bank

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Return on Asset (ROA)
1.80%
1.60% 1.50% 1.47% 1.54%
1.40% 1.34%
1.20% 0.98%
1.00%
0.80% Return on Asset (ROA)
0.60%
0.40%
0.20%
0.00%
2018 2019 2020 2021 2022
Year
Fig 6.6: Trend of Return on Asset (ROA) of NRBC Bank

Here, ROA in 2018 was 1.5% which indicate good profitable position but in 2019 and 2020 it
decreased to 1.47% and 1.34%. ratio was very low and indicate poor performance. It increased
again in 2021 to 1.54% but had a sharp fall to 0.98% in 2022 which indicate poor performance of
the bank in utilizing its loans and advances.
6.7 Return on equity:
Year 2018 2019 2020 2021 2022

ROE 13.89% 15.04% 15.28% 19.29% 14.06%
Table 6.6: Trend of Return on Equity (ROE) of NRBC Bank

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ROE
25.00%
20.00% 19.29%
15.04% 15.28%
15.00% 13.89% 14.06%
ROE
10.00%
5.00%
0.00%
2018 2019 2020 2021 2022
Year
Fig 6.7: Trend of Return on Equity (ROE) of NRBC Bank

Here, ROE in 2018, 2019 and 2020 was 13.89%, 15.04% and 15.28% which indicate good
profitable position. ROE decreased a little in 2021 to 14.06% but it again increased sharply in
2022 at 19.29%. Higher return on equity maybe due to debt or higher return on assets. Therefor it
can be inferred that the ROE of NRBC bank has an upward trend which reflects a tremendous
performance of the bank in the last five years.
6.8 Large loan concentration:
Year 2018 2019 2020 2021 2022

Large loan Concentration 45.68% 45.92% 44.25% 36.92% 18.72%
Table 6.7: Trend of Large Loan Concentration of NRBC Bank

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Large loan Concentration
50.00%
45.68% 45.92% 44.25%
45.00%
40.00% 36.92%
35.00%
30.00%
Large loan Concentra-
25.00% tion
18.72%
20.00%
15.00%
10.00%
5.00%
0.00%
2018 2019 2020 2021 2022
Year
Fig 6.8: Trend of Large Loan Concentration of NRBC Bank

In the year 2018 and 2019 large loan concentration was almost half of total loan and advance. In
2018 large loan was 45.68% of total loan and in 2019 and 2020 it was 45.92% and 45.25%which
posed a great risk for the bank in loan recovery. However in accordance with Board directives
and Bangladesh Bank observations, NRBC Bank Management has continued its effort to
disseminate the loan portfolio and reduce the share of large loans in the balance sheet. The bank
reduced its large loan concentration to 36.92% in 2021 and only 18.72% in 2022 which reflects
better management of loan portfolio of NRBC. The bank primarily focused on SME and Micro
Credit sectors for providing loans.
6.9 Credit Deposit Ratio of NRBC: in million (BDT)
Year 2018 2019 2020 2021 2022

Deposit 54085 71857 95,311 124,626 161,149
Loan and Advance 48,151 62,015 74,835 104,898 136,174
Credit Deposit Ratio 85.91% 82.54% 78.66% 84.17% 84.50%
Table 6.9: Trend of Credit Deposit Ratio of NRBC Bank

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Credit Deposit Ratio
88.00%
85.91%
86.00%
84.17% 84.50%
84.00%
82.54%
82.00%
Credit Deposit Ratio
80.00%
78.66%
78.00%
76.00%
74.00%
2018 2019 2020 2021 2022
Year
Fig 6.9: Trend of Credit Deposit Ratio of NRBC Bank

The credit-deposit ratio, commonly known as the loan-to-deposit ratio (LDR Ratio), measures
how much a bank lends in relation to the deposits it has mobilised. A loan to deposit ratio of
100% signifies that a bank lent one dollar to clients for every dollar deposited. The ideal credit
deposit ratio is between 80% and 90%. Based to the graph above, NRBC Bank's credit-deposit
ratio has been about 85% during the previous five years, which is an acceptable position for the
bank. It shows that the NRBC bank was effective in creating credit by making good use of
deposits, since the bank will have ample liquidity to handle any unanticipated financial
requirements.
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6.10 Sector/Industry wise Loan and Advance of NRBC:
Sl Types of Loans and Advances Percentage of totals loan and

advances
1. SME 31.16%
2. RMG 9.3%
3. Textile 2.07%
4. Agriculture Industry 1.69%
5. Trade Industry 8.45%
6. Steel 2.07%
7. House-Building Residential 6.07%
8. Construction 6.64%
9. Service Industry 5.13%
10. Consumer Finance 9.90%
Table 6.10: Loan Portfolio of NRBC Bank in 2022
(Source: NRBC Bank Annual Report 2022)
Loan Portfolio of NRBC Bank

9.90%
5.13% SME
RMG
31.16%
Textile
6.64%
Agriculture Industry
Trade Industry
Steel
6.07% House-Building Residential
Construction
2.07% Service Industry
Consumer Finance
8.45%
9.30%
1.69% 2.07%
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Table 6.10: Loan Portfolio of NRBC Bank in 2022
(Source: NRBC Bank Annual Report 2022)
Loans and advances constitute the largest portion in asset side of NRBC Bank’s Balance Sheet
which was Tk. 136,174 million in 2022. NRBC Bank has continued its lending operations in
productive and priority sectors covering agriculture, industry, SME, trade and commerce.
From the above graph, we can see that the most popular type of loan of NRBC Bank is the SME
Loan which accounts for 31.16% of total loans and advances provided by the bank. NRBC Bank
provided 1.69% loan and advance in agro based industrial credit , 9.30% in RMG sector, 2.07%
in Textile industry, 6.07% in House Building, 5.13% in the service industry and 9.90% in
consumer finance such as car loan, home loan, marriage loan etc.
6.11 Classified loan composition of NRBC Bank:

Any classified loan will be categorized as-
‘Sub-standard’ if it is past due/overdue for 6 month or beyond but less than 9 month.
‘Doubtful’ if it is past due/overdue for 9 month or beyond but less than 12 month.
‘Bad-loss’ if it is past due/overdue for 12 month or beyond.
2021 2022
Classified Loan Amount in Tk. % of total Amount in Tk. % of total

Classified loans million) Classified
loans
Sub-standard 1,844,660,012 38.69% 1,254,439,456 19.66%
Doubtful 93,771,242 3.31% 857,387,458 13.44%
Bad/Loss 2,828,902,546 59.34% 4,269,382,211 66.91%
Amount of NPL 4,767,333,799 100% 6,381,209,126 100%
Table 6.10: Classified loan composition of NRBC Bank
Percentage of Composition of
Classified Loan in 2022
19.66 41 | P a g e
%
Sub-standard
13.44
66.91 Bad/Loss
%
Percentage of Composition of
Classified loans in 2021
38.69
%
Sub-standard
Doubtful
59.34
% Bad/Loss
3.31%
Fig 6.11: Classified loan composition of NRBC Bank in 2021 and 2022
(Source: NRBC Bank Annual Report 2021 & 2022)
The above pie chart shows that major portion of classified loans of NRBC was bad & loss
category in both 2021 and 2022. In 2021, percentage of sub-standard loan to total classified loans
was 38.69% which decreased to 19.66% in 2022. Doubtful loans percentage increased slightly
from 3.31% in 2021 to 13.44% in 2022. Bad/Loss Loans percentage to total classified loan
increased from 59.34% in 2021 to 66.91% in 2022. The increase in bad/loss loan had a negative
impact on the profitability on the bank.
6.12 Capital Adequacy Ratio (CAR) Of NRBC Bank:
Year 2018 2019 2020 2021 2022

Capital Adequacy Ratio 14.02% 13.40% 12.52% 13.45% 12.44%
(CAR)
Table 6.12: Trend of Capital Adequacy Ratio (CAR) Of NRBC Bank
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Capital Adequacy Ratio (CAR) of NRBC
14.50%
14.02%
14.00%
13.50% 13.40% 13.45%
13.00% Capital Adequacy Ratio (CAR)

12.52% 12.44%
12.50%
12.00%
11.50%
2018 2019 2020 2021 2022
Year
Fig 6.12: Trend of Capital Adequacy Ratio (CAR) Of NRBC Bank

The Capital Adequacy Ratio establishes criteria for banks by examining a bank's capacity to pay
liabilities as well as respond to credit and operational concerns. The CAR of a bank is computed
by dividing its capital by its risk-weighted assets. The greater the ratio, the more resilient a bank
is to financial hardship. A bank with a high CAR has sufficient capital to sustain any losses. As a
result, it is less likely to go bankrupt and lose depositors' money.
According to the graph above, NRBC's Capital Adequacy Ratio in 2018 was 14.02%. It fall to
13.4% in 2019 and 12.52% in 2020. It rose again in 2021 to 13.45%. NRBC bank's CAR in 2022
was 12.44%. This is the first time that the Capital Adequacy Ratio has fallen below the 12.50
percent benchmark which is due to a decline in profitability and past-due loans/investments. The
Bangladesh Bank's current minimum capital adequacy ratio is 10%.
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6.13 The impact of credit risk management on NRBC Bank’s
profitability:
Hypothesis of the study:
H0 = there is no significant impact of credit risk management on bank’s profitability.

H1= there is significant impact of credit risk management on bank’s profitability.
The primary goal of this research is to evaluate the influence of credit risk management on the
profitability of NRBC Bank. I have chosen a single dependent variable and three independent
variables to investigate this link between two aspects.
Depended variable: Return on equity
Independent variables: Non-performing loan ratio, Capital adequacy ratio and Credit deposit
ratio
So the model of this equation will be:
ROE= a + b1*NPLR + b2*CDR + b3*CAR …………………………………… (1)
Data Input and Regression Line:
Year 2018 2019 2020 2021 2022
Return on 13.89% 15.04% 15.28% 14.06% 19.29%

Equity
NPL ratio 2.94% 3.2% 2.93% 4.56% 4.69%

Credit deposit 85.91% 82.54% 78.66% 84.17% 84.50%
ratio
Capital adequacy 14.02% 13.40% 12.52% 13.45% 12.44%
ratio
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Regression Line
100.00%
90.00%
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2018 2019 2020 2021 2022
Return on Equity NPL ratio

Credit deposit ratio Capital adequacy ratio
6.14. Result of research and interpretation:
Regression Analysis:
Regression Statistics
Multiple R 0.998623846
R Square 0.997249587
Adjusted R Square 0.988998346
Standard Error 0.000239597
Observations 5
Table 4: Summary of regression analysis

Coefficient of correlation (R): In this table the value of R= 0.998623 which expresses that there
is high degree of positive relationship between the dependent variable ROE and the independent
variables NPLR, CAR, CDR. So it can be said that credit risk management effect on banks
profitability.
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R Square: The term R Square is the multiple coefficient of determination interpreted as the
proportion of variability in the dependent variable that can be explained by the estimated
multiple regression equation. Hence, when multiplied by the 100, it can be interpreted as the
percentage of the variability in Gross Premium that can be explained by the estimated regression
equation. Here R Square= 0.997249587 (99.72 % expressed in percentage) indicates 99.72% of
the variability in obtained ROE is explained by the independent variables NPLR, CDR and CAR.
Adjusted R Square: When a variable (say, NPL) is introduced to the model, Adjusted R Square
=0.988998346 increases even if the extra variable is not statistically significant. The Adjusted R
Square accounted for the number of independent variables in this model.
Standard Error: The standard error of estimation illustrates how much inaccuracy or variability
exists between the predicted and actual anticipated results. In this case, the value is 0.000239597.
This demonstrates the degree of variation between our estimated and observed results.
Coefficient Analysis:
Coefficients Standard Error t Stat P-value
Intercept 8.012601608 0.003770542 3.342121291 0.185086334
NPLR -0.116896213 0.132840534 -0.879973978 0.043664739
CDR 0.002564126 0.04734135 0.054162496 0.020210801
CAR 0.268207747 0.120326796 2.228994346 0.032101285
Table 5: Summary of coefficient analysis

From this table, we got the parameters of the regression line. Here, the constant ‘a’ is
8.01260 and the slopes b1, b2 and b3 are -0.11689, 0.00256 and 0.268207 respectively. From
these data the regression equation can be constructed as:
ROE= 8.01260 + (-0. 1169*NPLR) + 0.0025*CDR + 0.2682*CAR
Intercept: It calculates the mean or average effect of all variables eliminated from the model on
the dependent variable. Despite the fact that its technical interpretation is the average value of the
dependent variable when all of the independent variables are set to zero. In this equation, the
46 | P a g e
intercept is 8.01260, which means that in the absence of an independent variable, The average
dependent variable ROE for NPLR, CDR, and CAR will be 8.0126.
Non-performing loan ratio: The findings of the ROE on NPL Ratio demonstrate that NRBC
Bank's non-performing loans are strongly negatively associated to profitability. When CAR and
CDR are constant, a 1% rise in non-performing loans reduces profitability (ROE) by 0.1169
percent. This factor is also significant since the p value is 0.04367, which is less than 0.05.
Credit deposit ratio: When NPL and CAR remain constant, a unit change in the independent
variable CDR generates a 0.00256 change in the dependent variable ROE. Because b2 is
positive, the movement of the dependent variable ROE with the independent variable NPLR will
be positive. When CDR increases, so does ROE, and vice versa.
This component is important since the p value is 0.0202, which is less than 0.05.
Capital adequacy ratio: The other coefficient of net regression in the equation is 0.26820. This
means that if NPLR and CDR remain constant, ROE will vary by 0.26820 unit for every unit
increase in CAR. It also suggests that when all other independent variables are held constant,
there is an positive correlation between ROE and CAR. This factor is significant since the p
value is less than 0.05.
47 | P a g e
Anova Test:
df SS MS F Significance
F
Regression 3 0.000020815 0.00212794 226.859275 0.066743641
Residual 1 0.000000057 0.00000938
Total 4 0.000020872
Table : table of anova test
F-Test: The F test is used to assess whether or not there is a significant association between the
dependent variable ROE and the set of all independent variables including NPLR, CAR, and
CDR.
The F-test is a test of overall significance. The F-test hypothesis in this ANOVA model requires
the regression model parameters:
Ho (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 summary of F- test is given below:
F = MSR/MSE = 0.00212794/ 0.00000938= 226.86
Tabulated F test: F α (k-1, n-k) = 215.707
If F calculated> F α (k-1, n-k), the null hypothesis is rejected. That is, the model is significant. In
our regression model F test is 226.86 and tabulated F test is 215.7073 so F test is greater than
tabulated F test. So our multiple regression model is significant.
Significance of aptitude test:

At a significance level of 0.05, any independent variable with a significant level near 0.05 is
considered significant. in our aptitude test the significance level of 0.067. This suggests that the
observation has a 93% chance of being correct.
Significance of overall model:
If the F ratio is big enough and the significance level is around .05, the total model will be
significant. The F ratio in our test is 226.16, which is high enough to explain the entire test, and
48 | P a g e
the significance level is 0.067. As a result, we might infer that the overall relationship is
significant.
In this case we accept the alternate hypotheses. Therefore, there is a relationship between ROE
and credit risk management.
There is significant impact of credit risk management on NRBC Bank’s profitability.
49 | P a g e
Chapter 7
7.1 Findings:
1. By analysing the credit growth rate of NRBC during the preceding five years, it can be
concluded that credit growth had a generally upward trend, despite the fact that it
declined from 40.2% to 29.8% in the last year 2022, which is an unfavourable sign for
the branch.
2. NRBC Bank's non-performing loan ratio was relatively low, remaining below 5% for the
previous five years. It suggests that the bank's loan recovery mechanism is
quite effective.
3. ROA was good from 2018 to 2021, but took a drop in 2022. Though (Investopedia, 2006)
suggested that ROA should not be less than 5%, a rate of 1.5% or higher is regarded
appropriate for banks and financial organizations. As a result, the NRBC Bank's loan and
advance utilization in 2022 might be seen as inefficient.
4. The ROE level is favourable, with an increased trend over the previous five years.
5. NRBC Bank’s performance of applying deposits to bank’s loans and other investment
activities is consistent as its credit deposit ratio has been practically stable in the last five
years.
6. NRBC Bank's capital adequacy ratio (CAR) is safe and shows that it will be able to
satisfy its obligations. The high CAR of NRBC Bank indicates that it has a sufficient
financial cushion to withstand an acceptable level of loss in order to avoid insolvency and
the loss of depositors' cash.
7. In the recent five years, NRBC Bank's large loan concentration has been considerably
decreased, and loans and advances have been diversified, indicating excellent credit risk
management.
8. There is an increase in bad/loss loans, which is a red flag for the bank as it reduces the
bank's overall profit. Major portion of the bank’s loans and advances is concentrated on
SMEs and the remaining portion of loans go to RMG sector, textile industry, agriculture
and House-Building. RMG and SME sectors have seen enormous growth in the last
decade and had a significant contribution in the growth of the country’s economy. NRBC
50 | P a g e
Bank is contributing in the economic development of the country by providing loans to
these two most important sectors.
9. The loan application review procedure is long. As a result, consumer value might
occasionally drop.
10. Before receiving the loan agreement, there are sometimes cases when the CIB statement
is not issued by the Bank on time.
11. Credit officers often could not find all necessary documents and information for credit
risk assessment. That’s why they use their assumption and experiences on risk
management
12. In many case, borrowers show the income statement, balance sheet of their current
business but most of the time all the information is not correct for which it becomes
difficult to measure their financial position which results in the bank facing problems in
future.
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7.2 Recommendations:
 As NRBC Bank uses a centralized disbursement system, branches are not able to
approve any loans or advances. The investment process will go more quickly and
effectively if the head office grants the branch a certain amount of authority to authorize
investment.
 At the branch level, the credit department must be capable of gathering accurate and
pertinent data and performing a timely and accurate analysis of the financial statements.
 In order to maintain accountability, loan approval power in the wholesale and retail
sectors should be allocated to specific executives rather than the board. This technology
will speed up the approval process in addition to ensuring executive accountability.
 Loan approval should be automated to save time and minimise the danger of misplacing
documentation from disbursed loans.
 Employees in the field of credit risk management (CRM) should be trained to evaluate
all loan applications in an organised and scientific manner, and to pick only those
applications with good creditworthiness and payback capacity.
 To stimulate its current and new loan-related clientele, aggressive promotional efforts
should be launched. More financing for young entrepreneurs and businesses can be
made available.
 Before making any new loans, the CRM should strictly enforce all loan appraisal and
monitoring processes. Credit committees at all ranks must collaborate to expedite loan
approvals and decrease loan processing costs.
 The bank should educate borrowers on the risks of providing incorrect information about
themselves, their income, and the true purpose of taking out a loan, and so on.
 A loan should be monitored on a regular basis to ensure that the borrower is properly
keeping the mortgage property and using the borrowed funds. If the customer fails to
make prompt repayment, he should be put under pressure to make the payment as soon
as possible, and no more credit should be granted to him until he repays the past dues.
 The bank should make more small-scale loans in diverse industries to diversify and
minimize risks on its loans.
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 Create more customized conditions for the credit approval procedure within the
framework of BB's basic guidelines in order to expand its market.
7.3 Conclusion
It goes without saying that credit policies cannot be separated from the general surveillance
policy in this country. As with any other part of the economic policy, credit is extremely
important for each financial institution because it provides a source of revenue and stimulates
their activities in the country. Because credit carries inherent risk, appropriate loan utilization is
critical to meeting the borrower's needs. The borrower's loan must not be used for an
unproductive purpose. In this regard, NRBC Bank must constantly monitor the loan's progress
and how the borrower is using the cash. In this manner, NRBC Bank Limited would prevent any
fraudulent acts on the side of the borrower.
The credit management system of NRBC Bank Limited is satisfactory among the banking
industry in Bangladesh, since the recovery position of classified loans is high and classified loans
have been steadily declining during the year. The bank has a solid credit risk management and
credit risk reduction policy in place. Compliance with Basel II and Basel III requirements assists
banks in increasing their profitability through improved credit risk management systems. They
are always striving to enhance their credit policy in order to minimize loss and maximize profit,
and different methods are implemented to develop the credit management system.
53 | P a g e
References
Koch, T.W. and MacDonald, S.S., 2010. Bank Management, south western.
Bagchi, S.K., 2003. Credit risk management–A panacea or conundrum. SBI Monthly Review,
42(10), pp.497-504
Muninarayanappa, N. and Nirmala, F., 2004. Credit risk management in banks-key issues.
Journal of Accounting & Finance, 18(1), pp.94-98
Banerjee, P.K., Mustafa, M.S., Pandit, A.C., Hossain, M.M., Rahman, T. and Alam, M.K., 2017.
Credit Operations of Banks. Banking Review Series, pp.1-80.
Lalon, R.M. and Morshada, F., 2020. Impact of credit risk management on profitability of
commercial banks in Bangladesh: An estimation of dynamic panel data model. International
Journal of Finance & Banking Studies (2147-4486), 9(3), pp.131-147.
Das, S. and Das, S., 2007. Credit Risk Management Practices–An Evaluation of Commercial
Banks in Bangladesh. ASA University Review, July-December.
Rose, P.S., 2002. Commercial bank management. Chicago: Richard D. Irwin.
• Prospectus of NRBC Bank.
• Annual Report of NRBC Bank 2018-2022.
• Website: https://nrbcommercialbank.com.
• Several booklets of NRBC Bank.
• Several Newsletters of NRBC Bank.
54 | P a g e

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Executive Summary

1.1 Background of the Study........................................................................................................5

1.2 Objective of the Study............................................................................................................5

1.3 Limitations of the Study.........................................................................................................6

1.4 Chapter Plan...........................................................................................................................8

2. Overview of NRBC Bank............................................................................................................9

2.1 History and background.........................................................................................................9

2.2 Vision, mission, and values..................................................................................................11

2.3 Organizational structure.......................................................................................................13

2.4 Key financial indicators.......................................................................................................14

3. Theoretical overview of credit Risk Management.....................................................................15

3.2 Commercial Loan Theory....................................................................................................16

3.3 The Shiftability Theory........................................................................................................17

3.4 The Anticipated Income Theory..........................................................................................17

3.5 The Credit Risk Theory........................................................................................................18

3.6 The Liability Management Theory......................................................................................19

4. Present Status of Commercial Bank Credit Risk in Bangladesh...............................................19

4.2 Types of Risks......................................................................................................................20

4.3 Causes of Risk......................................................................................................................20

5. Credit Risk Management Practice in NRBC Bank....................................................................21

5.1 Credit Risk Management of NRBC Bank............................................................................21

5.2 Credit Risk Management Wings of NRBC Bank................................................................22

5.3 Credit Approval Process of NRBC Bank.............................................................................23

5.4 Credit Collection of NRBC Bank........................................................................................24

5.5 Classification and Loan Recognition of NRBC Bank.........................................................25

5.6 Provision and Procedure of NRBC Bank.............................................................................25

5.7 Loan Rescheduling of NRBC Bank.....................................................................................26

Chapter 6 Data Analysis................................................................................................................29

6.1 Trend of Loans & Advances:...............................................................................................29

6.2 Growth rate of Loan and Advance at NRBC Bank:.......................................................30

6.3 Standard Loan Ratio.............................................................................................................30

6.4 Trend of Classified/Non-Performing Loan:.........................................................................31

6.5 Non-Performing Loan Ratio:...............................................................................................32

6.6 Return on Asset (ROA):.......................................................................................................33

6.7 Return on equity:..................................................................................................................34

6.8 Large loan concentration:.....................................................................................................35

6.9 Credit Deposit Ratio of NRBC:...........................................................................................36

6.10 Sector/Industry wise Loan and Advance of NRBC:..........................................................38

6.11 Classified loan composition of NRBC Bank:....................................................................39

6.12 Capital Adequacy Ratio (CAR) Of NRBC Bank:..............................................................40

Hypothesis of the study:.............................................................................................................42

6.14. Result of research and interpretation:...............................................................................43

1.2 Objective of the Study

1.3 Limitations of the Study

Reliance on Secondary Data:

1.4 Chapter Plan

Chapter 2: Overview of NRBC Bank

Chapter 3: Theoretical Overview of Credit Risk Management

Chapter 4: Present Status of Commercial Bank Credit Risk in Bangladesh

Chapter 5: Credit Risk Management Practice in NRBC Bank

Chapter 6: Analysis and Findings

Chapter 7: Recommendations and Conclusion

2. Overview of NRBC Bank

 Providing financial assistance to education and healthcare projects

 Supporting disaster relief efforts

 Promoting environmental sustainability

2.2 Vision, mission, and values

To fulfill its mission, NRBC Bank focuses on:

c. Fostering a high-performance culture: NRBC Bank fosters a culture of excellence,

2.3 Organizational structure

2.4 Key financial indicators

Return on assets: The return on assets is a measure of a bank's profitability. It is calculated by

Return on equity: The return on equity is a measure of a bank's profitability. It is calculated by

3. Theoretical overview of credit Risk Management