qCHAPTER ONE

1.1) Background of the Study:
The MBA program is designed to focus on theoretical and professional development of people open to take up business as a profession a well as service as a career. The program is two months duration. This internship provides the students to link up their theoretical knowledge into practical fields. In this purpose, I was assigned to National Bank Ltd, Muradpur Branch, Chittagong for my practical orientation. Students are required to prepare an internship report under the guidance of supervising teachers on a selected subject matter to highlighting his experience and to conduct an in depth analysis on the subject matter. Banking is one of the most heavily regulated businesses in the world. Banks are the most important financial institutions in an economy. They are the principal source of credit for millions of individuals and families and for many units of Government. The credit is the king’s pin of trade and commerce and the cause of progress of economy as a whole, because without it the economy either stops totally or moves very slowly. Bank acts as a financial intermediary between actual lenders and actual borrowers. For doing lending business, a bank has to face lots of uncertainties or risk. In short, lending is a risky business but profitable also. Actually, the profit or income of the bank directly related to the loans and advance sector of bank. And this sector has the opportunity to do more diversified and creative task than other areas or sectors of the bank. I have tried my level best to highlight the credit management in the perspective of National Bank Ltd. which has also fulfilled my thirst to know about the most risky business of banking i.e. “Lending”.

1

1.2) Objectives of the study:
The main objective of the study is to know about the credit Management of National Bank Ltd. Some other specific objectives of the study may are shown bellow: 1) To know the rules & regulations of credit management. 2) To know the policy of credit management of National Bank Ltd. 3) To know the investment structure 4) To know the liquidity performance 5) To know the credit appraisal process 6)To identify the risk related with lending. 7) To evaluate the steps relating to recovery of defaulting loan. 8) To find out the lacking of the loans and advance procedure.

1.3) Scope of the Study:
Banking Sector is a robust and sensitive area. A Bank has different products, different services and different customers. Different departments of a Bank perform different activities. However, scope of the study is limited within a specific area of an organization that is National Bank Limited. This study covers only Credit management of National Bank Limited.

1.4) Methodology of the study:
1.4.1) All data and information by which this report is prepared, are collected mainly from two sources“Primary sources and Secondary sources” Primary sources are --Face- to- face conversation with employees and clients of the bank.   Observing the banking activities. Practical working experience.

2

Secondary sources are -- Different financial records of the bank.  Different files and leaflets of the bank.  Annual reports of the bank.  Different books on banking.

1.4.2) Analysis of Data
Collected data and information have been analyzed and examined critically in order to make the study more analytical and useful. For that purpose regression analysis and ratio analysis have been done.

1.5) Rationale of the Study:
In this 21st century Banks are the life-blood of modern economy irrespective of its size & pattern. Banks are established to earn profit and help economic and financial activities so as to help economic development of a county. In such a context, the main business of Banking is to take deposits from customers and sanction credit to the borrowers. In performing multidimensional activities like borrowing and lending of money, the world of banking is under going a transformation. Beside banks are direct agents to create opportunities for the development of a country and also provide large scale of employment opportunities. Banks are the most important functionary of financial system of a country and National Bank Limited is one of them. It plays a dynamic role in the economic development of a nation through of saving and allocation of credit to privates and industrial sectors. It diverts and employs the funds in such avenues which are aimed to develop a country’s economy.

1.6) Limitation of the Study:
During the study, I have faced the following limitations: • • Two months time is not enough for arranging an internship in a well recognized organization and preparing a Report on specific topic is very difficult. Due to some legal obligation and business secrecy banks are reluctant to provide data. For this reason, the study limits only on the available published data and certain degree of formal and informal interview. The bankers are very busy with their jobs, which lead a little time to consult with them. Inadequate data sources.

• •

CHAPTER TWO
3

The expectation of all class businessman. NBL has been flourishing as the largest private sector Bank with the passage of time after facing many stress and strain. govt. The Bank established extensive drawing 4 . Dhaka started functioning on March 23. The member of the board of directors is creative business and leading industrialist of the country. The 2nd Branch was opened on 11th May 1983 at Khatungonj. When the nation was in the grip of severe recession. entrepreneurs and general public is much more to NBL. prospective future and under processing projects and activities. Several dynamic entrepreneurs came forward for establishing a bank with a motto to revitalize the economy of the country. in the private sector in an important event in the Banking arena of Bangladesh. Moreover. as a financial institution automated all its branches with computer network in accordance with the competitive commercial demand of time.An Overview of NBL 2. We are determined to bring back the long forgotten taste of banking services and flavors. Since the very beginning. National Bank Limited was born as the first hundred percent Bangladeshi owned Bank in the private sector. glorious present.. 1983. NBL. Dilkusha Commercial Area. the Bank exerted much emphasis on overseas operation and handled a sizeable quantum of homebound foreign remittance. Chittagong. The then President of the People’s Republic of Bangladesh Justice Ahsanuddin Chowdhury inaugurated the bank formally on March 28. From the very inception it is the firm determination of National Bank Limited to play a vital role in the national economy. To keep pace with time and in harmony with national and international economic activities and for rendering all modern services. We want to serve each one promptly and with a sense of dedication and dignity. took the farsighted decision to allow in the private sector to revive the economy of the country. The emergence of National Bank Ltd. 1983 but the first branch at 48. Established as the first private sector bank fully owned by Bangladeshi entrepreneurs. Today we have total 106 Branches all over Bangladesh. considering its forthcoming future the infrastructure of the Bank has been rearranging.1 History of NBL: National Bank Limited has its prosperous past.

Special Deposit Scheme. operating since November. In the year 2000. Myanmar in October. Expatriates Bangladeshi wage earners residing in those countries can now easily remit their hard-earned money to the country with confidence safety and speed. 1996 by our Bank and obtained permission from the Government of Bangladesh to handle border trade with Myanmar. The Bank received Riyal Omani 12. NBL introduced Monthly saving scheme. the Bank managed to procure foreign remittance business to the turn of US$88. at a Glance: 5 .20 million in the previous year indicating a growth of 16.arrangement network with Banks and Exchange Companies located in important countries of the world. A term of highly qualified and experienced professionals headed by the Managing Director of the Bank who vast banking experience operates bank and at the top there is an efficient Board of Directors of making policies.450 equivalent to Tk. As a result NBL will be able to build a strong root in international banking horizon.96%. It has a full time arrangement for speedy transfer of money all over the world. Bank has been drawing arrangement with well conversant money transfer service agency “Western Union”. Admitting this true NBL is going on with its diversified banking activities. Banking is not only a profit-oriented commercial institution but it has a public base and social commitment. Now NBL is on lie to establish trade and communication with the Prime International banking companies of the world. a joint venture Exchange Company in Oman. Consumer’s Credit Scheme and Savings Insurance Scheme etc. A Representative Office was established in Yangon.10 million compared to Tk. 2.74 million a dividend for the year 2000. Opportunities are being explored for further business avenues there. 1. 1985 under the management of four Banks. 662. Our Bank invested 25% equity of Gulf Overseas Exchange Company LLC.44 million dollar equivalent to Tk. to combine the people of lower and middle-income group.2) National Bank Ltd.986. 3.

making due contribution to national economy & establishing ourselves firmly at home & abroad as front ranking bank of the country are cherished vision . Bangladesh entrepreneurs established it in Bangladesh in 1983 as the first private sector Bank fully owned. 6 . The bank has opened its representative officer Yangon in Myanmar in 1997. 2. which has experience for speedy remittance of money all over the world. This bank is run by a group of people who are well educated. The member of the Board of Directors is refuted business personalities and leading industries of the Country. NBL is the first Bangladesh private bank licensed by Master Card International to issue and acquire both domestic and international card. The bank has made an arrangement with Western Union. Total branches of NBL are now 81. experienced and energetic. NBL extended and diversified its activities to include a full range of commercial banking services with computer technology in all branches. NBL got the Certificate of Appreciation the Review Committee for Published Accounts and reports from the Institute of Chartered Accounts of Bangladesh in 2004. To set high standard of integrity and bring total satisfaction to the clients. Nepal in 1985 and provided management support to this bank a technical services agreement.National Bank Limited (NBL) has a long proud history.3) Vision Statement: Ensuring information highest standard of clientele services through best application of late test technology . 2.4) Mission Statement: To provide high quality services to the customers and to participate in the growth and expansion of our national economy. which are Operating all over the country. The Bank took equity in Nepal Arab Bank Ltd. shareholders and employees. Ana a management director is leader of them who has a lot experience about banking.

21 2980.82 1517.00 31824.50 280193.86 Graphically presented the net profit before tax trend for the 5 years of National Bank Ltd Like as.  Net Profit before tax in million 3000 2500 2000 1500 1000 500 0 2004 2005 2006 2007 2008 484.82  Profit after tax in million 7 .49 1627.06 2828.04 2007 2450.1 Net profit before tax 2828.55 2473.18 47961.25 49665.22 2035.31 2677.00 1872.37 2006 2450.21 3564.5) Five-year activities of NBL: (Million Tk.21 581.00 1208.20 3.35 35127.30 9035.32 36284.00 2271.11 1842.79 40350.43 1981.2.67 1431.73 507.02 895.10 13618.65 4374.33 1345.68 6239.23 1058.74 7760.59 2115.05 27020.30 17105.20 21344.75 484.82 31648.50 2988.00 619.90 3343.47 2468.20 21353.10 1238.00 805.) Particulars Authorized Capital Paid up capital Reserved Fund Deposit Loan Investment Import Export Remittance Total Income Expenditure Net Profit Before Tex Net Profit After Tex Fixed Asset Total Asset 2004 1000.28 56526.72 4253.00 27560.73 2035.17 22028.96 2008 2450.99 28973.13 271.87 32709.18 78226.55 60195.00 516.03 32984.38 62759.80 3715.288.44 39877.60 72212.39 23129.30 2005 1000.07 10162.22 36475.90 2064.13 1058.36 581.29 6796.83 42458.20 3360.80 3622.23 38400.21 170.

01 56.02 Net profit after tax 271. this graph indicates in consistency earning of net profit.Net profit after tax 1517.50 43.50% 2007 395.52 746.44 20.43 1238.31 1494 66.23% 2005 365.59 760.47 475.67 The trend of Net Profit after Taxes highest in 2008and lowest in 2004 but increasing in 2004. Tk.11 48.03 29.85 26.46%  Market value per share (taka in a million) Net Profit After Tax 8 .25 27.08% 2008 360.56% 2006 378.50 63. So.11 507.25 81. Particulars Book Value of Share Marke value of share Earning Per share Dividend 2004 361.68 1014.49 170.

1494 1014. of Shareholders No. Therefore.25 Market value of per share ( taka in a million) 2004 2005 2006 2007 2008 The market price of share lowest in 2004 and highest in 2007 which reveal current market price per share is high.5 760.6) Ownership and Management: Board can delegate its power and authority to the management. They are duty bound and morally obligated to exercise utmost care and effective prudence without bias without any fear or favor to secure a clean and well-founded administration for the company.5 475.25 746. 9 . Particulars Foreign Correspondent Officers/Staff No. mainly consisting of professionals but can in no way delegate or relinquish or avoid its responsibility and accountability. it goes without saying that the directors have an inherent obligation to all concerned to ensure that the company operates properly and sound basis. of Branch 2004 410 2025 8960 76 2005 391 2073 9052 86 2006 400 2171 9521 91 2007 405 2185 9276 101 2008 405 2133 9491 106 2 .

directors.Nurul Islam Mr.G. business acumen and integrity of its directors and executives. A commercial bank such as NBL depends for its success on the reputation.Zainul Hauqe Director Sikder Mrs. depositors. Salim Rahman Mr.Aziz Asraf PSC Mr. Power and functions: The managing director of the company shall act and discharge his duties. 10 .8) Power and Function of MD: Managing director is the chief executive of the company as per article 129(1) of the Article of Association of the company.7) Board of Directors and Responsibility of the Board: In NBL the Boards has been conceived as the source of all powers.B. It is the legislative body of the bank. Abu Sayed Monir Mr. The directors acting in a body will exercise the powers. Mahabub Ahamad Captain. He is also an Ex-Officio member of the Board of directors and shall be a professional man in banking and management.A. Enamul Hoque Mr.Col (Rtd)Md.Tajul Ialam : : : : : : : : : : : : : : Chairperson Director Director Director Director Director Director Director Director Director Director Director Director Director 2.S.M. society. He has to take the load of carrying out the guidelines.M. Government authority and clients alike. duties and responsibilities to shareholders. rules and regulations framed by the board from time to time and provide all vital information to the board/ committee for their knowledge and effective decision. Shahadat Hossain Mr. Parven Hauqe Sikder Mr. A director has his obligation.Murtuza Lt. Mozzam Hossain Mr. regulatory agencies.Shamim Iqbal Prof.2.M. responsibilities and obligations as per the powers delegated to him by the board and as envisaged hereinafter.AKM.Zakaria Thaher Mr.A. Directorship is not simply an honor.

To ensure maintenance of proper accounts of every aspect of the company. To ensure timely submission of financial. furniture. To explore investment opportunities in and outside the country. To run and manage the affairs of the company smoothly. (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) To ensure optimum clients service and satisfaction through appropriate marketing strategies and expansion. vehicle. To ensure economic purchase of equipment. (xiii) To formulate policy guideline for recruitment of staff. other consumable stores.(i) (ii) To promote a healthy organizational climate for most effective utilization of the services of the company’s employees in achieving the goal of the company. administration and other information’s to the regulatory agencies of the government as required by law. To evolve most economic system of managing the company to keep the expenditure of the company under control within budget. To prepare realistic budget including the fixation of half-yearly and or yearly business target and also to ensure that such targets are achieved. stationary. abides by the rules and regulations prescribed by Bangladesh Bank for scheduled commercial banks. To avoid any and such business where company may run for unnecessary/ undesirable/ inevitable risk and bad debts. efficiently within the framework of the rules and regulations of the company and guidelines given by the board and the committees. which a private commercial bank and registered under the Bangladesh Bank. To evaluate the marketing strategies and policies with their effectiveness for achieving the objectives of the company.9) Functional Aspects of NBL: NBL. 2 . The 11 . To prepare judicious plan for expansion of company’s business through operating of branches.

wheat.96 million import trade in 2008 with a growth of 25 percent over the previous year . Import Finance The Bank opened a total numbers of 21210 LC S amounting USD 1130. capital of machinery .50 280193. Imports & Exports Business  IMPORT& EXPOR BUSINESS IN MILLION: Import Export 22028.30 17105.202.82 crore as compared to US$ 367. 2. Sort descriptions of the following functions areas are given below: Deposit: Deposits of all kinds like the savings. petroleum product fabrics & accocerioes and other consumer items . The rate of growth was 43. petroleum. affects the national money supply.83 crore in 2004. capital machineries. Credit: Bank loans are a good source of the bank income and thus they are greatly hapteremphasized..knitwear .20 62759. The main commodities were scrap vessel .00 31824. corporate bodies and other multi national agencies.tanned leather .20 21344.in 2008 it handle 16234 documents valuing $ 531.44 Export Finance The Bank has been nursing the export fiancé with a special attention since its inception .67%. 3. sugar.03 million of 14 percent with a growth of the last year Export fiancé were made mainly readymade garments . fixed deposit etc are expected from the resident and non-resident customers. 12 .8 million or Tk. wheat edible oil .30 31648. rice .10 42458. rice. readymade garments and other consumer goods.functions converted by the bank include a wide banking and financial activities to individual firms. handicraft . Banks loans play a very important role in the economy since the level of the business activity.0 million or Tk.164. frozen food and fish .32 36284. which is controlled by the expansion of the bank loan. short-term deposit.00 78226. Import finance The volume of import trade financed by NBL during 2005 amounted to US$485. current. The main sectors financed were: old ships.

This growth was possible due the introduction of different instant payment of product and technology including extending SWIFT.90 million over the previous year.Export Import 2004 Remittance 2005 2006 2007 2008 In 2008.2 9035. EFT etc.and further efforts are being made of more speedy payment Foreign Remittance in the graphically for the 5 years 39877.47 million showing an increase of $ 179.8 21353. online.9 13618.8 27560.which registered and attractive growth of 45 percent .5 Foreign remittane ( Taka in Million) 2004 2005 2006 2007 2008 13 . foreign remittance brought into the country though the NBL was $ 582.

2. 000/= Tk. and a number of other expensive items are now within your buying range. 000/= Monthly Benefit Tk.000 gives a monthly income of tk. Microwave Oven. Under the scheme. Television. The deposited money is fully refundable at the expiry of the term. Personal Computer.1) Consumer Credit Scheme: National Bank’s Consumer Credit Scheme gives you a great opportunity to buy household and office items on easy installments. 55. VCR. 55. Furniture.10. And NBL Special Deposit Scheme gives a customer just that. 1. 1. 000/= Tk.20. under this scheme a deposit of Tk. Deposited Amount Tk. Car.10) Products & Services of NBL: Consumer Credit Scheme Special Deposit Scheme Monthly Savings Scheme Credit Card NBL ATM Service Western Union Money Transfer Saving Insurance Scheme 2. At the same time.2) Special Deposit Scheme: For most of the people of fixed income the opportunity to supplement their monthly earning is a golden one.65. 000/= 14 . customers can deposit. 500. 500/= Tk. 2. This scheme gives you the advantage of part payment to cope with the high price tags of many necessary home and office appliances.000/= Tk. 1. 2. As for instance. 2. Washing Machine. With this scheme NBL makes better living possible for people living of fixed income. Photocopier.000/= Tk. during the term period they can enjoy a monthly profit corresponding to their deposited amount. money for a term of 5 years. Refrigerator. Customers can buy those home and office equipment’s without over taxing their budget.10.10.500/= Tk. 1.

NBL was the first authorized agent of Western Union in Bangladesh.3) Monthly Savings Scheme: This scheme is specially designed for the benefit of the limited income group members. This simple transfer system.2.12.4) Credit Card: The most modern technology based facility for making hassle free financial transactions and drawing of each money all over the world is given by credit card. This helps to accrue small monthly savings into a significant sum at the end of the term.000/.24. Now money transfer between Bangladesh and any other part of the globe is safer and faster than ever before. 40.or Tk. even in holidays. 1. NBL ATM Card will give our distinguished clients the opportunity to withdraw cash at any time. NBL signed an agreement with the Western Union Financial Services. 80. The card will enable to save our valued customers from any kind of predicament in emergency situation and time consuming formalities. after the expiry of the term period the depositor will have a sizeable amount to relish on. NBL introduced master card in 1997. Through NBL Western Union Money Transfer Service.or Tk.6) Western Union Money Transfer: Money transfer from anywhere in the World to Bangladesh in Minutes Joining with the world’s largest money transfer service “Western Union” NBL has introduced Bangladesh to the faster track of money remittance. 500/. A monthly deposit of Tk. 2.respectively. your money will reach its destination within a few minutes. Western Union in short) in 1993. 2. being on line eliminates the complex process and makes it easy and convenient for both sender and the receiver.5) NBL ATM Service: NBL has introduced ATM service to its customers. NBL ATM card – clients’ access to prompt cash.100/Tk.000/Return after 5 years Tk. USA (or.for 5 or 10 years period earns in the end Tk.10. 7 days a week. 40. 1.10. So. 24 hours a day.500/= 2.10.100/Return after 10 years Tk. Monthly installment Tk. namely master card and VISA card. 2. 2. 15 . 500/= Tk. Now.10. 1000/. 24.500/= Tk.500/. NBL are the issuer and acquire of two most popular brands of credit card of the world.

00.50.0 billion US dollar as revenue every year. . National Bank has won the international award styled as “Most Outstanding Performance Among Banks in South Asia – 2005”.00. NBL delivers the money remitted by expatriate Bangladeshis safely and quickly to the recipients through its 76 branches.000/= 16 .00.00.000/= 15.000/= 2. 50. With the help of online connection with the central computer system of the Western Union.000/= 10.Millions of people from different parts of the world have been sending money with confidence to their near and dear ones through the Western Union. 50.000 representatives in 195 countries and regions. It combines the benefits of regular savings and insurance scheme.000/= 2. This NBL scheme gives your family protection against the insecurities of the world.000 for natural death and Tk. 1.000/= 4. Western Union has the most modern technology for remitting money within quickest possible time from any part of the world through their more than 2.000 for accidental death part from his /her deposited amount and inte Normal Death Benefit (Including Own Deposit) 1.00.00. so. Aminuzzaman received this prestigious award on behalf of the Bank at the South Asia Representatives Conference convened by the Western Union and held at Kochin in India 2. you get the usual rate of interest on the deposited amount while you enjoy the protection of a comprehensive insurance coverage.000/= 6. Under this scheme. This scheme is the first of its kind in Bangladesh.00.00.00. Western Union earns more than 3.000/= Accidental Death Benfit (Including Own Deposit) 1.10.000/= 5.000) he/she will get tk.000/= Class Easy Convenient Classic Standard Deposit 50.000/= 3. As for example. 25.00.7) Saving Insurance Scheme: This is an uncertain world and the threatening silhouettes of future catastrophes are always looming around. the beneficiary (ies) get equal the deposit in case of natural death of the account holder whereas in the event of accidental death of the account holder the beneficiary (ies) will receive twice the deposit.00. if a customer picks up Easy Class (Tk.000/= 1. Managing Director and Chief Executive of NBL M.

corresponding banking. institutional and private clients to help them realize their terms goals and long-term aspiration. Legal Considerations: NBL complies with all applicable Bangladesh laws and regulations. It provides a framework in which to conduct business and also enables National Bank Limited to have a long-term business plan. General Policy Guidelines: The general policy guidelines govern the implementation of the business strategy of NBL with respect credit risk are as follows: 1. This helps to shape and define the acceptable risk profile of NBL and to provide guidance in responding to business opportunities as they arise. short-term credit. 17 . Policy guidelines have been established and to be developed from time to time taking into consideration economic condition and market requirement. NBL makes loan only to reputable clients who are involved in legitimate business activities and whose income and wealth are derived from legitimate sources. Credit Products and services of NBL The services include import/export finance. Client Base: NBL’s client base consist corporate.CHAPTER – THREE Credit Policy of National Bank Limited 3. It is a document through which the Board of Directors (BOD) communicates the lending strategy of the NBL and duties and authorities of management and lending officers. providing both revenues as well as risk. retail banking project financing through syndication with other co-lenders.1) Credit Policy of National Bank Limited: The credit policy is a statement of basis principles that governs the extension of credit. Each of these areas involves credit exposure to client or to a third party.

There are cases however. where certain financial information about private clients is highly confidential any may not be disseminated. only to qualified borrowers where the where the amount and intended purpose or the use of precedes is clear and legitimate and where the amount and its use are reasonable. 18 . With adverse repercussions on their ability to service their obligations. 5. whenever possible . Borrowers must provide. and the credit approval package must contain. 7. Such situations are addressed individually at the discretion of management. 3. nationally important and financially important and financially viable sectors and not lend to unproductive purpose or socially undesired projects. Satisfactory security and collateral is required as appropriate NBL’l main thrust is on Cash Flow Statement of the business rather than on collateral security. NBL requires that borrowers have a source of repayment established at the inception of the credit. 6. There should be identified. As with any funds received any all repayment sources must be legitimate and consistent with what is known and documented about the client. 4. NBL does not engage in “Name lending” based only on the general reputation of the borrower. a secondary source of repayment. NBL extends credit in its discretion. sufficient information on the borrower to approve the extension of credit. At all times a policy of “Know your customer”( KYC) must be exercised in the credit application processes.2. (Note: Recently this practice is little bit relaxed and facility is provided if the client has good backup against the credit repayment capacity. NBL encourages lending to socially desirable. and that any exception must be specifically addressed the credit approval. NBL discourages the client with relatively low or no funds of their own and with a relative low or no funds of their own and with a relatively high ratio of borrowed to own funds tend to face liquidity problems.

in the opinion of NBL management. the senior management prepares the annual budget at the beginning of the year giving guidelines for limiting exposure to different sectors/sub-sections and term which is approved by the Board of Directors. or longer none except the Managing Director approves such loans. regardless of the size of the credit must have the prefect approval of the NBL’s high officials.  The amount of purchased funds.  The volatility and seasonal fluctuation of the deposit base. the Maximum limit can go up to 100% of the fund of the Bank. 9. Exceptions: There will be occasions when exceptional circumstances exist which. NBL extends venture capital to start up business or to business. but is considered with extreme caution and also secured by First Class or other acceptable collateral. which are entirely dependent on new technologies. NBL complies with the ceiling set by Bangladesh Bank.  The composition of investment portfolio and  Liquidity of banks assets. Maximum size of loan portfolio: The banking Companies Act 1991 restricts lending to any single obligor or a Group of companies up to 15% of the capital funds of the Bank without having any approval from Bangladesh Bank. With the permission of Bangladesh Bank. 19 . warrant the extension of credit as an exception to existing policy guidelines.8. Loan portfolio mix: After annual reviewing the performance of existing loan portfolio of NBL as well as market prospect of different sectors/sub-sectors of the country. Terms of lending (liquidity) are determined based on the following factors:  Deposit mix. Management reviews the terms loan portfolio periodically. Such policy exceptions. NBL may consider term loans with maturates up to five years.

This is reviewed by senior management and approved by the Board of Directors annually.  Cost of funds  Terms of loan (maturity) Account balances and other relationship. As a prudential norm. NBL will restrict large loan to maximum two-third of its total loan portfolio. The credit proposal moves through various management approval levels according to the amount of risk. Each loan proposal will be examined properly and nature and scope of appraisal to be carried out will depend upon the amount. Determining the rate: The interest rate on lending conforms to the prevailing rates offered by other financial institution. At the same time. the management has to keep in mind the following points while pricing a loan:  Risk exposure (Obligor and industry). Lending authority: NBL’s organization structure has two levels-Branch and Corporate Office. There are three approval levels.Credit budget will be prepared having a diversified loan portfolio spreading over a large number of obligors/sectors/purpose/location as well as different term. The approval limits for each of this sanctioning authority are defined in Business Discretionary power. Documentations: Each credit exposure is to be supported by proper documentation and standard from of documentation should be used whenever possible. 20 . which is also reviewed by senior management and approved by the Board of Directors. Branch Manager  Executive Vice President/Managing Director at Corporate Office. There is a schedule of annual interest rates for different types of credit allowing latitude to the management than would be true under the more rigid Schedules. obligor’s background and so on. type of credit facility. term.  Board of Directors of the Bank.

Bangladesh Banks “Procedures of loan classification and provisioning” is to be strictly complied with by NBL. BASIC LENDING CRITRIA It should be clearly understood that the criteria/principles are not inflexible laws and are given as guidelines for protecting an advance.  Character and ability of the borrower  Purpose of tile facility. accepted. Keeping in view all these factors and the Credit Policy of the Bank. The bank has also to extend more credit to increases its role in the growth of the economy. term and large /retail. CREDIT PLAN OF NATIONAL BANK LTD. At the same time. In a practical competitive world risks are identified.  Safety 21 . Control of credit operations is done at Branch and corporate Office levels.  Term of the facility. and an advance is often granted even though a proposal does not strictly with some of tile criteria described below The Basic Lending Criteria can be considered under six main headings as follows:  Profitability.  Source of repayment. Bangladesh Bank Guidelines have to be adhered to.Monitoring of Credit: The control of credit operations fall into two parts:  Monitoring and review of all accounts  Monitoring of delinquent accounts. In case of delinquent accounts. a Credit Plan has been crafted limiting the exposure to different sectors/sub-sectors. National Banks credit mission is to actively participate in the growth and expansion of national economy by providing credit to viable borrowers.

such as advances against foreign or local bills or bridge financing where evidence of credit sanction from another financial institutions is available: 2) Provision for current assets: this type of facility is needed for trading And/or manufacturing activities. Spreads are normally associated with element of risk undertaken and the period and nature of the liabilities.  Have you made the account opening inquiries required by the bank?  What are the business and its ownership?  What is the customer’s history and financial track record?  Customer integrity & honesty and personal stability – age/health?  How has the customer managed his financial circumstances in the past? The branch manager should have the answer of the above queries and should be able judge his ability to use the credit facilities to his advantage. The Bank’s advances can be classified in to three main categories. a long-term loan is repaid out off profits generated by the business. 3) Long-term advance. a farm or a shop generally. directly or indirectly. After the branch manager has ensured that the advances will be a profitable propositioning for the Bank.Each of these headings will now be discussed further in the following paragraph: 1. 2. example of such facilities are investment in plant and machinery. Advance should be granted only to those borrowers in whom the branch manager has full confidence. Profitability All credit facilities granted to the Banks customer must produce profit. C. generally over 5 years. he should then turn his attention to the cash flow Situation of the borrower. Character and ability of borrower The primary responsibility of lending banker is “Know your customer and his business” While considering the character and ability of a borrower.Source of repayment. building. why has he come to National Bank Ltd.? Try to see previous bank statement. tile following points must be kept in mind: Do you know the customer already?  Was he respectably introduced?  If he was previously customer of another bank. as follows: 1) A very short-term advance which will be liquidated by funds received in the very near future. Integrity of the borrower and his 22 .

Which are often used to finance the Acquisition of capital assets. It is outside the Banks policy. Consideration should or course be given to the nature business and certainty with which the business or tile project will yield results. Self-liquidating transactions as well as property structured term loans. Facilities covered under category (b) are generally for a slightly longer period says Lip to one year. f. a feasibility study of the project should be made and a repayment schedule should be agreed. TODs etc. that party must be subject to the same credit assessment as made for the principal borrower. e. The facilities under category (c) are for periods longer than one year. advances against salaries. Purpose of the facility The purpose of advance should be studied with a view to understanding whether it is within the policy of the Bank.  Facilities needed for long term/Investment requirements Facilities covered under category (a) above are generally required for a short period of up to three to six months. credit facilities are broadly divided under the following categories:  Facilities needed for temporary/seasonal/short term requirements.ability to conduct business are of paramount important and take precedence over the value of securities offered. When considering a facility of this nature. 23 . compliance with all legal formalities. the proposal Should not be given further consideration. 3. Such facilities include packing credits. This type of facility is granted for financing working capital. All advances will be against adequate security of a third party. which are self-liquidating transactions. Term of the facility As explained earlier.2) Types of Credit Facilities: NBL’s lending practices will favor extension of Credit for short term. advances against purchase/discount of bills. a comprehensive view of the capital. Each proposal should be considered on its own merits. d. capacity and integrity of the borrowers adequacy and nature of security.  Facilities needed for current assets requirements. completion of all documentation and finally a constant watch on the account are called for. Safety To safeguard Banks interest over the entire period of the credit me.

Loan: 24 . the credit facilities are classified as: Credit Facilities Funded credit facilities facilities Non-Funded credit Term Loan Working capital L/C Micro credit L/C L/G Back to Back SSI MSI Project loan Industrial Cash Credit LIM PAD LTR OD SOD CC (H) CC (P) TOD Commercial A. the credit facilities granted by the bank are classified under different account heads appearing in the Statement of Affairs. Broadly.For the convenience of reporting.

Advance make in a lump either at a time or phrases repayable either on fixed installment basis or in lump sum having no subsequent debit except by way of interest. PAD (it is an accounting step). LIM. The drawing is subject to drawing power. The customer may be sanctioned a certain limit within which he can overdraw his current account within a Stipulated period.G. incidental charges. which may be hypothecated or pledged (Which is to be highly discouraged by NBL) to the Bank. Cash credit is generally given to trader. 25 . It is operated upon like an overdraft account. C. The borrower may operate the account within stipulated limit as and when required. industrialists for meeting their working capital requirements. is a separate account by itself and is maintained in a separate ledger. Bills Portfolio Trade related credit facilities. agro based industries & technology development project and loan portfolio guarantee scheme) B. After creation of loan. The amount of loan is debited to the customer’s name on a loan account to be opened in the ledger and paid to the borrower either in cash or by way of credit to his current account or saving account. D. The primary security of cash credit facility is stock of goods. Cash Credit: Cash credit as a form of advance. such as bills portfolio E. is called a loan. Overdraft facility is generally granted to businessman for financing worked capital requirement and high net worth individual to overcome temporary liquidity crunch. it will be treated as separate transaction. A loan once repaid in full or in part cannot be drawn again by the borrowers if the borrower desires further accommodation. there will be only repayment by borrower. Over Draft: Advance in the form of overdraft are always allowed on a current on a current account operated upon by cheques. etc. Project loan (for small or large industries. This form of credit facilities may be used for financing important raw materials/capital machinery. Loans are given to the parties who have specific source of income or who desire to pay in lump sum.

which may be hypothecated or pledged. Secured Over draft (SOD) Overdrafts for longer periods are normally granted against the Security of tangible assets such as pledge/lien of FDR. Cash credit (C.C) An advance under this head is granted for financing inventory. Descriptions overdraft will depend upon the nature and type of security charged to tile Bank. Loan against Packing Credit (PC): A Credit under this head is granted to exporters to facilitate purchase of raw materials for the purpose of manufacturing and exporting goods. Loan agreements often contain restrictive covenants and loan is repayable in accordance to amortization schedule. They are called Secured overdrafts/collateralized overdraft. The credit is granted after the evidence of a letter of credit or firm contract in favor of the borrower and against the Security of inventory purchased by the borrowers. who are not in a position to retire the documents. and in exportable package. Bonds. The Bank opening L/C is bound to honor its Commitment to pay for import bills when these are presented for payment provided that it is drawn strictly in terms of letter of Credit. ICB unit certificate etc. to the Bank as security limit is advised to the borrowers. Loan against imported Merchandise (LIM): Parties. The foreign correspondent that negotiates the document. 26 . This is also fluctuating form of lending. The opening bank on receipt will lodge the shipping documents to their books and will respond to the documents.The above-mentioned loan facilities may be said of broader class: again these four broad categories can be illustrated through different segmentation: Terms Loan: Term loans are often used to financing the acquisition of capital assists. they may be allowed to retire their PAD through LIM account for a maximum period of 90 days for industrial raw materials and 45 days for commercial items. debits the amount thus advanced on behalf of the importer the a/c of the opening bank. Payment against document (PAD): PAD is associated with import and export financing. on returning sufficient margin on the landed cost of the goods or as prescribed by the Bangladesh Bank.

This bill is not accompanied by documents of title of goods. 27 . The bank acquires the ownership of the negotiable instrument and arranges to cover th3e exchange rise. The customer holds the goods or their sale proceeds in trust for the bank. which may be called by the bank at any time. till such time. the entire balance becomes due on maturity. Usually they are made for periods of three months to one year to cover short term funding requirements. the loan allowed against the trust receipt is fully paid of.And if they are reluctant to provide the aforesaid margin. for the remaining period of its tenure. Under such circumstances goods are cleared only through clearing agents. There is no principal reduction during the loan term. Other Bank’s Acceptance Purchased an advance granted against a bill accepted another bank. Foreign Bills Purchased (Clean) Amounts advanced against three purchase of a negotiable instrument are classified under this head. Loan against trust receipt (LTR): It is a document that creates the bankers lien on the goods and practically amounts of hypothecation of the proceeds of sale in discharge of the lien. The customer on whose account the branch issued an L/C may wish to obtain documents of the title to goods received under the I/s so that he can obtain delivery of the goods and arrange to retire the bill out of the sale proceeds of goods. goods may be allowed to be cleared through LIM account to save the consignment. Advances against a Trust Receipt obtained from the customer are allowed (for a maximum period of 180 days) when the documents covering an import shipment are given without payment. Demand Loans (Dl) It is short-term loans. Local Bills Purchased (clean): A bill drawn and payable within the country in which the branch operates and purchased by the branch is classified under is classified under this head. Bills are sent for the collection. Foreign Bill Discounted Here the amount of the interest calculated at the rate from the date of purchase to the expected date of return remittance is decocted from the face value of the while granting the advance.

21 2004 2005 2006 2007 2008 The Graph indicated upward trend of loan and advances over the last fiver years.Staff Loan Advance to member of staff is granted according to the policies laid down by the bank. Loan and Advances for 5 years.3) Advances against Security & Collateral: Secured loans offer a greater of protection to the bank than unsecured loans.4 loansn& advance ( taka in a million) 49665. 3. Advance is allowed to member to of staff who is in the bank’s permanent employee only.65 27020. Repayment of a secured loan is by no means ensured simply by the existence of collateral.07 36474. Proper 28 .1 2008 22844.68 23129.65 2005 20200. Showing the following table total loan and advance and represent it’s graphically In million Particular Loan& Advance 2004 23129.96 2007 22257.64 2006 21677.75 32709.

immovable properties such as land & building.Loans: Various kinds of Govt. if the borrower creates a mortgage of his land in the bank’s favor and then proceeds to build a factory on that lend. LIM: Pledge of imported merchandise. fixed deposit. etc. hypothecation of vehicles. Overdraft: Varies kinds of Govt. but not all. to strengthen the bank security and reduce the risk factor considerably. produce and merchandise. 4. receipt. shares quoted in the stock exchange debenture. 2. Each Security has its own suitability. Cash Credit: Pledge or hypothecation of goods. bonds. mainly due to steady inflation.documentation and an effective monitoring system are vitally important. Securities mainly may be in the following ways:  Documents of Goods (Import L/C Documents along with bill of lading. The following is a discussion of some. Land and buildings are accepted as collateral in high grade. Specific securities to be obtained by the bank against the varies types of advances.  Trust receipt form  Hypothecation of good  Personal guarantee of all direct loans  RJSC on fixed assets All securities are not suitable for all types of loans and advances. fixed deposit receipt. types of collateral frequently used in secured lending. etc. 3. and some important considerations in the area of monitoring the collateral. There is no hard and fast rule for establishing a proper monitoring system and each loan must be given action appropriate to the situation. in modern banking. such as: 1. debenture. Foreign Bills Purchased: Shipping documents for exports. 6. work order. Consequently. Inland bills purchased: Bill it self 5. share quoted in the stock exchange. the building automatically becomes part of the bank’s security. bonds. etc. 29 . It should always be remembered that the word ‘Land’ denotes not only the ground but also any building or fixtures upon it. 7. LTR: Trust Receipt obtained in lien of important documents. A. Pad: Shipping documents for imports. policies. 8. machinery. life insurance. Land&builddigs Land and buildings have become increasingly more acceptable securities in the recent years.

bonds scripts and other stock exchange security will be allowed will be allowed in accordance with bank’ credit policy. They are readily marketable: easily transferable and the market value can easily be determined accurately. C. 5. If the receipt is issued in joint names. 4. the following points to be scrutinized by the branch: 1. the branch where the advance is being allowed shall Obtained under joint signature of two officers of the issuing Branch/bank. 2. The fixed Deposit receipt is not in the name of the minor. a confirmation that the lien has been duly registered With them. The credit officer should check the price of the goods offered as security to establish the range of price fluctuation. The lien of the bank to be marked in red ink on the deposit receipt against which advance has been allowed. and possess many advantages. On adjustment of the advance. there will be 30 . These instruments are one of the very common terms of security offered to the bank. lien shall be released under signature of two officers on the back of the fixed deposit receipt. all shall discharge it The depositors named in the receipt on revenue stamp of adequate Value. 3. If other branch of the Bank or other Bank has issued the deposit Receipt. The depositor on revenue stamp of adequate value duly discharges it and his signature is verified. Inventory A borrower should normally be granted credit facilities against hypothecation of goods in which he usually deals. exchanger& other secretes Advances against stock and share certificate. If the range is wide. The fixed deposit receipt: While allowing advance against fixed deposit receipt.B) Stock bond. D.

Credit Department will put up a memorandum to Credit Committee. Title to the goods can be verified by reference to the original invoices. The first level of Organization NBL is the Branch. credit. After processing the credit line proposal. The Organization structure has two levels –Branch and corporate office. Foreign Exchange and Accounting.  Branch Manager  Credit Committee at Corporate Office  Board of Directors of the Bank. The Credit Line Proposal Moves through various management approval levels according to its amount. It is the responsibility of the Credit Committee to review and approve or reject the credit line proposals above the branch manager’s discretionary powers. Typical branch functions have been split into four main categorized: General Banking. There are three approval levels that are as under-.  Periodic visits to branches and client in order to understand the operations of Specific accounts first hand.4) Credit Process & Structure: In order to fully understand NBL’s procedures relating to sanctioning and control of advances. 31 . a necessary first step is to examine NBL’s Organization structure.  Processing of Credit Line Proposals for approval and renewal by the Credit Committee/Board. 3. The branch credit officer is responsible for the following duties.reservations about accepting the goods as security for the advance unless the branch manager can take an adequate margin.  Monitoring of temporary loan payments on a monthly basis. When considering an advance secured by inventory it is important to verify that the borrower has the title to goods intends to hypothecate to the Bank.  Ensuring that security is perfected for new Credit Line Proposals and review such Securities on a periodic basis. whichever is applicable?  Select the proposal to critical financial analysis using sophisticated tools to determine financial soundness and acceptability of risk. Size of the advance function depends on the number of borrowers and the size and complexity of their accounts.

32 . Credit line proposals of lower values that do not need Boards approval will pass through one two approval levels listed above.5) Credit Approval Process: The Credit Approval Process of sanctioning a loan is as follows: Getting loan proposal from party Collection Information Evaluating project & proposal About Project About party BR level evaluation Legal assessment Evaluating collateral Evaluation by agent Branch level Usual Recovery Recovery of the loan Supervision of loans Sanctioning & disbursing loan Decision Legal recovery Principal Officer Level Credit Line Proposals must be prepared for all credit facilities. except temporary overdrafts.There a Credit line proposal requiring Boards approval will pass through the other two sanctioning levels before being presented to the Board. For meeting urgent and lone financial requirements branch manager may consider temporary overdrafts in all account. dependent or their amount. not more than 7 days from the date overdraft is allowed. he must ensure that:  Banks lending criteria are satisfied  The amount to be sanctioned is within his discretionary powers. Such facility must be fully temporary overdraft. 3.  Overdraft is adjusted within a very short period.

A loan application may be received only from an existing customer of the Bank who has established a reliable relationship. the Bank Basic lending Criteria must be satisfied and its policy of “Know your customer” implemented to the full. new customer must be actively sought.The branch manager must follow the progress of adjustment of temporary overdraft on a daily basis. The Papers to be prepared at the time of initiating a loan are as follows:  Credit line proposal  Credit report  Spread sheen  Credit Risk Analysis  Loan application form The branch manager must follow the instructions set out in the following sections when compelling credit Line Proposal: A. Information Required: Although no list can be completed comprehensive to all situations. the following guide should be used for any corporate client:  Last three annual financial statement and opinion of auditor. This is the prime responsibility of branch manager. In all cases. Prescribed forms of Credit Line Proposal are then being completed. but for the Bank to grow and prosper. The branch manager and creditsponsoring officer both sign the Credit Line Proposal when it has been completed to their satisfaction. Satisfactory track records with the Bank. if available  Last interim financial statement  Amount of credit required and use of proceeds  Sources of repayment 33 . The Credit Line Proposal originated in the branch and is completed by officer dealing with advances after branch manager has interviewed the borrowers.

if appropriate  Intangible security available  Other existing bank lines and bank debt and nature of security/collateral offered. and concentration of receivables  Recent credit agency report (such as CIB) if available  Bank. and term of sale  Detail about inters company transactions with affiliates.  Major’s customers. reliability of sales projections. trade and character references reference  Regulatory constraints or licenses required. Analysis of the customer The analysis should provide answer in the following major areas: 34 . and tile competitive environment. Tangible collateral available with title searches and an independent valuation. if a business borrower  Background information about the owners and the experience and background of management  Certificate of Incorporation and by laws or Memorandum and Articles of Incorporation (or equivalent documents )if a business borrower  Certificate of good standing.  Detailed description and history of ownership. if appropriate  Tangible collateral available with title searches and an independent valuation.  Major Suppliers.  Details about transactions with owners or other member of management including amounts due to over due from principals  Composition and aging of inventory  Details about composition. where applicable  Partnership Agreement (if applicable)  Detailed knowledge of the business cash conversion cycle  Management projections and forecasts  Borrowers market and principal trade areas Information about the industry. tile borrower’s position in tile industry. aging.  Any and all other license of the assists of the borrower or guarantor B. reliability of supply.

The reason for deterring profitability is to know whether The borrowers capital is eroding The borrowers present cash flow may restrict future business growth The borrower’s return on capital is adequate for this type of business. Intangible assists consist of preliminary expenses in connection with setting up the business. all tangible fixed assets such as property. 2. For commutation of working capital current liabilities are deducted from the current assets. Capital Gearing: How does the amount of equity in the business compare with the borrowed funds? Some borrower tends to trade with largely borrowed money and invest as little of there own capital as possible. Borrower’s Net Worth: Net worth is calculated by deducting total debt liabilities from total assets. where earnings banking proposition. Working Capital: Whether the current assists as shown in the borrower’s accounts are sufficient to meet the borrower’s current commitments and liabilities. A high ratio may represent a high or low risk. What is necessary for purchase of fixed assets? Therefore. The type and nature of current assets should also be studied. machinery and equipment. This is not considered a good banking proposition. discounts in connection with issue of shares. trade creditors and the government (for taxes assessed on the borrower but not yet paid). goodwill and the cost of patents and trademark. the branch manager will ensure that the borrower’s liquidity is sufficient to support his proposed activity level 3. The day-to-day running cost of a business requires finance over and above. A high ratio 35 .    4. Profitability: Whether there are sufficient earnings to repay the credit facilities requested by the borrower and sufficient balance will be left over to provide a sufficient return on equity as well as to provide funds for his future operations. Debt liabilities comprise all claims on the borrower by third parties such as banks.      Borrower’s Net Worth Working Capital Profitability Capital Gearing Cash Flow Credit Risk Analysis: 1. Total assets include all tangible current assists such as stock and debtors.

His commitments must be placed in such a way that the business will not face a cash shortage in the foreseeable future. Credit Risk Analysis: The Risk Rating System is tool. The Ability of a firm to continue service and repay its debts is more function of reliability of earnings and inevitably cash flows than that of debt itself. A higher level of gearing may be satisfactory. 5. B. In case of such risk the following items to be studied:  Labor  Raw Materials  Power  Others 36 . Cash Flow: When assessing the borrowers liquidity and profitability. Tile risk rating system is used to indicate the perceived degree of risk. 6. Supplies Risk: What is the risk of failure due to disruption in the supply of Inputs.may represent a high or low risk. where earnings are sufficiently high and stable. Business Risk: It is mainly of two types: A.  Return on Investment (ROI) There are many other ratios. which may help in analyzing the Borrower’s financial statement. the timing of the borrower’s commitments must be considered. Industry risk Company risk Industry risk: a. which sets a uniform framework for assessing and monitoring risk in a credit portfolio. The following important ratios are analyzed at the time of considering a credit line proposal:  Current Ratio  Acid Test Ratio.  Debt coverage Ratio  Receivables to Sales Ratio  Stock Turnover Ratio. bank wide system to measure credit quality and provide early warning of deteriorating credits. It is intended to provide a uniform. The risks are mainly of two types: (i) (ii) Business Risk Security Risk.

Security Covering Risk: What is the risk that the bank realize security value less than the expenses. In such case The following items to be observed:  Quality. Security Covering risk should be analyzed by considering the following items:  Discount rate  Discount factor  P. Resilience Risk: What is the risk of failure due to lack of resilience to unexpected external condition. b. Company Risk: a.  Price b. Equipment  Premises b. In such case the following items to be observe:  Leverage  Consumption’s  Dependability  Management Risk: The risk related to the management is of two categories:   Management integrity risk Management Competence risks  Liquidity  Management honesty  Strategies  Cash flow forecasts  Barriers to entry  Customer concentration Security risk: This type of risk is of two types: a. Performance risk: What is the risk that the company position is so weak that It cannot perform well enough to repay loan given external condition. Security Control risk: What is the risk that the bank fails to realize the security.V of Security  Types of security 37 . Sales Risk: What is the risk failure due to disruption in sales? In case of such Risk the following items to be studied:  Competitive Pressure  Regulatory B.

 Speed of liquidation  Liquidation value Supporting documentation: When the relationship officer is preparing the Credit Line Proposal.  Credit Report from third parties/banks CIB Report. Some of the above supporting schedules may be omitted from certain Credit Line Proposal if considered not of much significance/relevance. he used to prepare supporting documentation. However. Failure to obtained and maintains documentation may 38 . the Following requirements are common to all cases:  Borrower’s Name  Subject.  Spread Sheet. and those are as follows: Credit Report from the branch manager.  Stock Inspection Report.6) Documentation for Credit: Loans or other Credit exposure must be supported by proper documentation.  Credit Risk Analysis.  Loan application form along with copies of relevant papers. Conveying offer to borrower The offer/facility letter is sent out to the borrower whenever the bank sanctions or renews a credit facility in his favor. I he precise format of the offer/facility letter is to be determined by Corporate Office covering the completion procedures for security documents.  Amount of the facility  Repayment schedule     Interest Rates: Fees for the facility Security of the facility Availability facility by the Borrower 3. It is vitally important to the Bank’s credit quality to have and to maintain documentation. which will complete. correct and properly executed.

Monthly CIB statement of Tk. I core and above 2. Monthly statement of Bank loans &Advances held by Government Sector.  After the properly executed loan documentation has been collected and signed off for completeness by the concerning credit officer. Quarterly statement of Outstanding & Classification Status of Loans 9. the documentation must reviewed and such review revered in writing at least annually by the sponsoring credit officer. 4. 5. maintaining and safeguarding documents. 8.  List of charge Documents/ Certificate with validity Besides acquiring document from the borrower the credit department of the bank is to supply various statements to the office as well as the Bangladesh Bank. 7. Monthly statement of Credit (Rescheduled /Increased/Newly sanctioned) 3. 10Quarterly statement of SBS-3 39 .  Standard form documentation should be used whenever possible to reduce legal expenses and minimizes documentation errors. Quarterly statement of Industrial Credit. and every precaution must be taken to prevent such situations. The reports to be sent are as follows: 1. Quarterly statement of loans disbursed irregularly. the Credit Department is responsible for itemizing. Monthly statement of loan in Agro-based industry. 6. Each advance or Credit Line proposal should be meticulously documented and retained in a separate folder divided into the following six sub-sections: Correspondence.  Sanction/Survey Reports. Monthly statement of Deposit held by Government Sector. Disbursed during last 5Years.  For term facilities where there is no change in the terms and conditions of the facility. filling.  Financial Statements  Credit Reports/Information.not prevent the bank from informing its rights against a borrower.

2 dated 1001-1999. Half yearly Statement of Sector wise Advance.11. the suspension of interest due. and provisioning carried out by the bank. 23. Half yearly Statement regarding Loans disbursed in Jute Sector 22. Quarterly statement regarding Write off – 18. Quarterly Statement of Branch Summery of Loan Classification & Provision. overdraft.g. lack below I crore. and the making of provisions against potential loan losses.g. Bangladesh bank will inspect the classification interest suspense. Half-yearly statement regarding loans & Advances of Tk 1 Crore and above. 14. Quarterly statement of Loans to the Bank’s Director 12. Quarterly CIB statement of Tk. interest suspense calculation and provisioning calculations on a loan basis. According to Bangladesh bank’s circular-No. LIM PAD etc. 20. which is to be followed by all scheduled banks operating in Bangladesh. 19. Half-yearly statement regarding suit filed –and settled in Artha-Rin dalat and others. Half-yearly Statement regarding loans disbursed in Tannery Sector.)  Demand loan (e. Half –yearly statement regarding suit filed and settled in two insolvency and three Artha – Rin Adalat 21. 16. 13. 16 dated 06-12-198 and Circular No. Quarterly statement regarding sanctioning of large loan.)  Fixed Term Loan  Short Term Agricultural and micro Credit Assets quality ratings break down into two main categories: 40 . all loans and advances have been classified into four categories as under Continuous loan (e. Monthly statement of loan under Agricultural Credit. etc. cash credit. 17. Bank will maintain adequate records to enable the inspection team of Bangladesh Bank to verify the classification. Monthly statement of loans to the Director of other Banks.7) Management of Delinquent Advances: Loan Classification & provisioning: Bangladesh bank has introduced a system covering loan classification. 3. Monthly statement of Recovery against Classified loans. 15.

A general privation of 1% to be makes against all unclassified loans The eligible securities are 1) Deposits on which lien is marked 2) Gold/ Gold ornaments physically held by the bank 41 100% .  Doubtful. Satisfactory  Delinquent/Classified Delinquent/Classified assets comprise of the following sections:  Sub-Standard. The banker can estimate loan recovery possibility of the borrower. Beside this usually the loans are classified on the basis of two fundamental criterions. the rates to be applied to the base are: 1. Basis for loan Classification: Bank must be responsible for classification of its loan portfolio in accordance with the guidelines provided by Bangladesh Bank form time to time through circular/ Circular letter. 1. Provision: Incase of continuous loan. 2. Here he uses the EWS (Early Warning Signals) method. Overdue Criteria: If the borrower becomes irregular in refunding the loan then the loan could be classified he basis of time duration of irregularity such as: Unclassified: The loan which recovery is regular. Classified: The loan of which the recovery period matures before 6months Doubtful: The loan of which the recovery period mature before 9month Bad loan: The loan of which the recovery period matures before 12 months and about what the management decided that the loan be recoverable. Sub Standard 20% Doubtful Bad & Loss 100% 50% The base for provisions on classified loans is the balance outstanding in the loan ledger for the loan less any interest taken in an interest suspense account which is also included in the loan ledge. demand loan and term loan. Qualitative Judgment: Basically it is the outcome of bankers experience and intelligence. 2. lese the value of eligible security.  Bad & Loss. 3.

e. In all cases. doubtful. then application of interest on that account to be suspended immediately.e. 42 . interest income) and then the principal amount to be adjusted. Substandard . then the interest to be applied up to suit filed dated and it is to be kept in Interest Suspense Account. Bangladesh Bank’ Procedure of loan Classified and provisioning is to be strictly complied with by all concern’ Rescheduling of Loan: If the loan Become classified then giving the chance to the borrower the rescheduling of the loan is make and here the borrower is to pay back first the 10% of the outstanding loan first and then the rest amount gets treated as the new loan and continued accordingly. Any recovery or payment received from classified loan is normally first applied as a reduction of interest (i. Irregular & regular) 2) All bad & loss Treatment of interest: 100% 5% 50% 100% 5) Goods with a ready market that are held in the control of the bank of market value Interest will continue to be charged on Substandard and doubtful loans of advances which will however not be credited to Income Account.of present market value 3) Government Bond and sanchay patra on which lien is marked 4) Guarantee given by Government of Bangladesh Bank 100% 100% 50% 6) Mortgage land & building of market value In case of Short-Term agricultural and Micro Credit All other loans except bad loans ( i. If a loan advance is classified as bad and loss. If the bank feels to file a suit in tile court for recovering of outstanding advance from a customer.

.....Debit Interest on loan ...........Debit Interest Suspense a/c...... And the treatment is as follows: Party a/c........  Net worth of the firm  Demand of the credit  Social cost of the credit. 43 ..........Credit By an example the accounting procedure of provisioning can be shown an by such practical instance a brief idea can be generated over this concept: A borrower outstanding loan is tk 32000 of which the principal is 20000 and interest is tk 12000 at the time of provisioning the interest earlier debited from his account to be shifted to the interest Suspense account as Interest on loan a/c ..................... 3..Accounting Procedure for loan provisioning: After every maturity date the interest on loan (Income) is credited from the borrower account by debiting his account.......Credit Again if the loan is rescheduled or the borrower paid partial amount of his due then the amount again will be shifted to the income account by the reverse of the above entry...........................  Opportunity & threat of the borrower in the market  Competitive strength & weaknesses of the borrower in the market  Necessity of the project in the society.....8) Credit Performance: Liquidity & Profitability: The bank disburses credit in different sectors of the economy considering the credit recover capability of the borrower........... Besides they consider a number if factors at the time of offering credit line proposal such as:  Customer’s reputation in the market..........

According to the policy of the bank it discouraged the credit against the security as pledge. They prefer authenticated documents fro disbursement of credit. At the time of evaluating performance of the credit operation of the bank regarding its liquidity and profitability a number of facts are to be considered such as:  Total deposit of the bank in different category;  Total liquid capital/working capital of the bank;  Running profit of the bank;  Investment opportunities of the bank;  Economic condition of the state;  Time duration of the banking operation;  Fixed asset volume and the Depreciation rate etc. Here it is to be remembered that the bank has gone to the operation just before two and half years so it is very obvious that the bank may carry a huge idle deposit and the lazy liquid capital; 1.The bank is carrying a huge liquid capital. 2.The utilization of the deposit is satisfactory since a bank is to invest its 80% of the deposit whereas this bank invests its 96% of the deposit. 3.Return on paid up capital is to be increased as it indicates the operating effectiveness of the company. 4.On the basis of operating efficiency it can be said that the profitability of the bank is to some extent sound.

44

CHAPTER FOUR Investment Structure
4.1 Introduction:
Commercial banks are known as lending institutions. Making loans to business houses and industrial enterprises has been their popular activity. Making loans can also be called one kind of investment. Bank is an institution which is engaged in the business of money and loan. The more loans a bank can provide the better and beneficial for the bank it will be. Loans can be of different types. National Bank Limited provides different types of loans which are briefly discussed in the below: a) Secured overdraft (SOD): Overdrafts for longer periods are normally granted against the Security of tangible assets such as pledge/lien of FDR, Bonds, ICB unit certificate etc. They are called Secured overdrafts/collateralized overdraft. Descriptions overdraft will depend upon the nature and type of security charged to tile Bank. b) Cash credit (C.C): An advance under this head is granted for financing inventory, which may be hypothecated or pledged, to the Bank as security limit is advised to the borrowers. This is also fluctuating form of lending. c) Loans (General): This type of loan is provided for general purpose. d) House Building Loans (HBL): This type of loan is given to the fixed or low income people for housing purposes. e) Loan against trust receipt (LTR): It is a document that creates the bankers lien on the goods and practically amounts of hypothecation of the proceeds of sale in discharge of the lien.

45

The customer on whose account the branch issued an L/C may wish to obtain documents of the title to goods received under the I/s so that he can obtain delivery of the goods and arrange to retire the bill out of the sale proceeds of goods. Advances against a Trust Receipt obtained from the customer are allowed (for a maximum period of 180 days) when the documents covering an import shipment are given without payment. The customer holds the goods or their sale proceeds in trust for the bank, till such time, the loan allowed against the trust receipt is fully paid of. f) Payment against document (PAD): PAD is associated with import and export financing. The Bank opening L/C is bound to honor its Commitment to pay for import bills when these are presented for payment provided that it is drawn strictly in terms of letter of Credit. The foreign correspondent that negotiates the document, debits the amount thus advanced on behalf of the importer the a/c of the opening bank. The opening bank on receipt will lodge the shipping documents to their books and will respond to the documents. g) Consumer Credit Scheme: National Bank’s Consumer Credit Scheme gives you a great opportunity to buy household and office items on easy installments. This scheme gives you the advantage of part payment to cope with the high price tags of many necessary home and office appliances. Television, Refrigerator, VCR, Personal Computer, Photocopier, Washing Machine, Furniture, Microwave Oven, Car, and a number of other expensive items are now within your buying range. With this scheme NBL makes better living possible for people living of fixed income. Customers can buy those home and office equipment’s without over taxing their budget. h) Credit Card: The most modern technology based facility for making hassle free financial transactions and drawing of each money all over the world is given by credit card. NBL introduced master card in 1997. Now, NBL are the issuer and acquire of two most popular brands of credit card of the world, namely master card and VISA card.

46

09 62.30 6816.2 General Analysis: Table: 1 Distribution of given loan amount for different loan products (TK.35 1046.20 5312.55 21248.25 6066.73 1488.So it is better for the bank in the future.02 88.53 48.32 8144.2375 727.99 2867.24 12643.33 5940. in Million) of NBL during the period 2005-2008 Year Secured Overdraft Cash Credit Loans (General) House Building Loans Loan Products Loans Payment Against Trust Receipts 2005 2006 2007 2008 Total Mean 5728.05 4184.95 3416.94 1640.59 27335.20 55.225 4776.02 32732.12 966.95 8183.12 1147.42 248.4.20 5993.95 11204.56 35708.55 Against Documents (PAD) 1015.76 253. 47 .39 8497.20 4708.0875 (LTR) 3102. Mean loan amount of different types of loan products is increasing from 2005 to 2008.94 3925.55 1674.8425 22943.0225 324.82 4621.48 31406.37 264.37 Consumer Credit Scheme Credit Card Total Mean Comment: From the above table: 1 we can see different types of loan products and their given amount in different years.08 1485.24 850.94 23974.90 8927.12 5054.94 55.19 10183.76 5437.08 43498.47 1761.05 7180.37 286.07 9179.33 5757.12 305.

92 281.56 2022.27 101.43 3835.54 719.69 97.11 Credit Card Total Mean 48 .77 588.69 517.22 3429.91 428.26 831.33 764.45 739.69 2656.42 Consumer Credit Scheme (CCS) 14.61 585.17 267.23 8.52 238.61 79.99 1680.61 1376.87 Payment Against Documents (PAD) 162.86 Against Trust Receipts (LTR) 496.37 229.62 1359.Table: 2 Distribution of interest income for different loan products (TK.59 1629.81 119.88 7.07 135.43 75.02 1077.94 344.02 631.21 1090.88 5237.40 970.87 39.68 5356.05 1221.64 598.13 4786.24 91.11 6648.71 8. in Million) of NBL during the period 2005-2008 Year Secured Overdraft (SOD) Cash Credit (CC) Loans (General) Loan Products House Loans Building Loans (HBL) 2005 2006 2007 2008 Total 716.53 4141.81 950.

77 -11.69 Table: 2.00% 0. in Million) 588.00% Growth rate 10.77 2007 (TK. in 2007 (TK.02 Interest income of Secured Overdraft 2006 (TK. in Growth (%) 2007 (TK.84% Million) Million) 588.00% 20.1.Table: 2.1.a 2005 (TK. in Million) 631.28% Figure: 1 Showing Growth rate of Secured Overdraft’s interest income & Year 25. in Growth (%) Million) Million) 716.b 2005 (TK. in Million) 719.54 -6.00% -15.00% 5.77% Million) Million) 631.54 719. in Million) 716.00% 15.77 588.00% Year 2005-2006 2006-2007 2007-2008 Series1 49 .69 22.02 631.00% -5. in Growth rate of Secured Overdraft’s interest income Growth (%) 2006 (TK.00% -10.54 2008 (TK. in 2008 (TK. in 2006 (TK.

00% 10.61 13. in Million) 1376.00% 5.61 2007 (TK.05% Figure: 2 Showing Growth rates of Cash Credit’s interest income & Year 25. in 2006 (TK. in Million) 1680.99 2008 (TK.00% Growth rate 20.2.61 1376.b 2005 (TK.a 2005 (TK. in 2008 (TK. in 2007 (TK.68 Table: 2.68 22.42% Million) Million) 1221.05% 50 .05 Interest income of Cash Credit 2006 (TK.00% 0.99 1680. in Growth rate of Cash Credit’s interest income Growth (%) 2006 (TK. in Million) 1077.2.42% 12. in Growth (%) 2007 (TK.72% Million) Million) 1376.Table: 2.72% Series1 22.05 1221. in Growth (%) Million) Million) 1077.00% 2005-2006 2006-2007 2007-2008 Year 13. in Million) 1221.00% 15.99 12.

71% 24.b 2005 (TK.a Interest income of House Building Loans (HBL) 51 .a 2005 (TK.62 2007 (TK.21 1090. in 2008 (TK.66% Million) Million) 1359.66% 48.00% 10. in 2006 (TK.Table: 2.62 42. in Million) 2022.00% 0. in Growth rate of Loans (General)’s interest income Growth (%) 2006 (TK. in Million) 764.79% Figure: 3 Showing Growth rates of Loans (General)’s interest income & Year 60.79% Series1 2005-2006 2006-2007 Year 2007-2008 Table: 2. in 2007 (TK.56 2008 (TK.88 48.3.00% 40.00% Growth rate 42.00% 20.71% Million) Million) 1090.88 Table: 2.62 1359.21 Interest income of Loans (General) 2006 (TK.00% 30.00% 50.56 2022. in Growth (%) 2007 (TK.56 24. in Million) 1090. in Growth (%) Million) Million) 764.3. in Million) 1359.4.

00% 0.81 119.37 13. in Growth (%) Million) Million) 101.81 2006 (TK.07 2007 (TK. in Growth (%) 2007 (TK.61 69. in Million) 52 .a 2005 Interest income of Loans against Trust Receipts (LTR) 2006 (TK. in Million) 2008 (TK.00% 10. in Million) 135.37 229.62% Figure: 4 Showing Growth rates of House Building Loans (HBL)’s interest income & Year 80.00% 50.00% 70.4.69% Million) Million) 135.50% Million) Million) 119.69% 2005-2006 2006-2007 Year 2007-2008 Table: 2.37 2008 (TK.2005 (TK.61 Table: 2.07 14. in Million) 2007 (TK. in Million) 119. in 2007 (TK.00% 40. in Million) 229.07 135.00% 69.00% 30.62% Growth rate Series1 14.00% 20. in Million) (TK. in Million) 101.50% 13.00% 60.b 2005 (TK. in 2008 (TK.5. in 2006 (TK. in Growth rate of House Building Loans (HBL)’s interest income Growth (%) 2006 (TK.

in Million) 53 .40 970. in 2008 (TK.496.00% 0.6.43 Table: 2.88% Figure: 5 Showing Growth rates of Loans against Trust Receipts (LTR)’s interest income & Year 80.40 48.27% Million) Million) 970.94% Million) Million) 739.a 2005 Interest income of Payment against Documents (PAD) 2006 (TK.27% Series1 67.43 67. in Million) 2007 (TK. in 2007 (TK. in Million) 2008 (TK.59 1629. in Growth (%) (TK.5.59 31.00% Growth rate 60.b 2005 (TK.45 739. in Growth (%) 2007 (TK.45 739. in 2006 Growth rate of Loans against Trust Receipts (LTR)’s interest income Growth (%) 2006 (TK. in Million) Million) 496.00% 40.59 1629. in Million) (TK.88% Table: 2.94% 31.00% 20.00% 2005-2006 2006-2007 Year 2007-2008 48.40 970.

88 2007 (TK.92 281.00% 10.18% Series1 46.00% Growth rate 40. in Growth rate of Payment against Documents (PAD)’s interest income Growth (%) 2006 (TK.92 12.00% 30.17 46.17 267.162.b 2005 (TK.49% 5.00% 20.87 (TK.81 Table: 2.55% Million) Million) 238. in 2008 (TK.92 281.55% Table: 2. in Million) 14.18% Figure: 6 Showing Growth rates of Payment against Documents (PAD)’s interest income & Year 50. in Growth (%) Million) Million) 162.00% 2005-2006 2006-2007 Year 2007-2008 12.71 2008 (TK.52 238.00% 0.17 267.6.52 238. in 2006 (TK. in Million) 7.49% Million) Million) 267. in 2007 (TK. in Million) 8. in Growth (%) 2007 (TK.7. in Million) 8.a 2005 Interest income of Consumer Credit Scheme (CCS) 2006 (TK.81 5.23 54 .

60% 8.00% -40. in Millio n) 2007 (TK.00% -50. in Million) 79.b 2005 (TK.a 2005 (TK.60% 2005-2006 2005-2006 -13.00% -20.18% 7.00% -30.00% Year -37.18% 2007-2008 Series1 15. in Growth rate of Consumer Credit Scheme (CCS)’s interest income Growth (%) 2006 (TK.61 2007 (TK.05% 2008 (TK. in Million) 91.00% -10. in 2006 (TK.23 8.7.88 Figure: 7 Showing Growth rates of Consumer Credit Scheme (CCS)’s interest income & Year 20.43 2008 (TK.Table: 2. in Million) Growth (%) 2007 (TK.00% Growth rate 0.8. in Million) 75.87 15.24 Interest income of Credit Card 2006 (TK. in Million) 97. in Million) Growth (%) Million) Million) 14.88 -37.71 -13. in Millio n) 7.94 55 .00% 10.05% Table: 2.71 8.

1 to 2. Mean interest income of different types of loan products is increasing from 2005 to 2008.b 2005 (TK.94 -4.00% -6.00% -2.39% -5. in Growth rate of Credit Card’s interest income Growth (%) 2006 (TK.43 75.00% -14.00% -8. in 2006 (TK.43 -13. it can be said that credit card sector is not 56 .79% Series1 2005-2006 2006-2007 2007-2008 Comment: From the above table: 2 we can see different types of loan products and their interest income in different years. House Building Loans (HBL) & Loans against Trust Receipts (LTR) and worst growth rate of interest income in credit card.00% -12.24 91.00% -10.39% Figure: 8 Showing Growth rates of Credit Card’s interest income interest income & Year 0.30% Year -4.30% Million) Million) 79. For the time being.00% -13.79% Million) Million) 91.00% Growth rate -4.8.Table: 2. in 2008 (TK. But from table: 2.61 79. in 2007 (TK.So it is better for the bank in the future.61 -5. in Growth (%) 2007 (TK.8 we can observe that best growth rate of interest income in Loans (General). in Growth (%) Million) Million) 97.

value .000 .012 Regression coefficient(b) .150 P. But for better comments. 4. we should go for regression analysis which has been done in Table: 3 and 4.000 57 .3 Regression analysis: We know that.017 .good. Y= Interest income X= Loan amount a= Intercept b=Regression coefficient Table: 3 Linear regression analysis between loan amount of different loan products and interest income of different loan products during period 2005-2008: Loan products Secured Overdraft(SOD) Cash Credit Intercept(a) -.125 . Y=a+bX Where.

140 .300 .001 .028 -.000 .160 . Payment against Documents (PAD) and Consumer Credit Scheme (CCS) are showing better position. P*<.004 .003 .Loans (General) House Building Loans(HBL) Loans Against Trust Receipts (LTR) Payment Against Documents (PAD) Consumer Credit .000 .05 Comment: From the table: 3.000 (The above linear regression calculation table has been done by using the data of table: 1 and 2. 58 . So from this viewpoint it is seen that the best earning sector is credit card which shows regression coefficient is . P**<.01. But Secured Overdraft (SOD) is showing worst position.006 .001.160 . it can be said that if we give 1 million loan in Secured Overdraft (SOD) then on an average the rate of interest during the given period(2005-2008) will increase by .160 .000 . Against Trust Receipts (LATR). Loans (General) Loans.300.) P***<0.000 -.000 Scheme(CCS) Credit Card .160 .125 million.008 .

on an average in Credit Card sector the decreasing rate per year is -25.272 .758 1310.365 -5064451.001.758 million. From the table: 4 we can see that on an average in Loans (General) sector the increasing rate per year is 2528.825 -4546413.value .125 million.096 . the rate of interest during the given period(2005-2008) will increase by .789 .151 -10.361 .01. P*<.525 2268.361 million significantly but from table: 3 it is observed that on an average in Credit Card.060 Intercept(a) 56995.477 -2621313. From the table: 3.419 -571859.038 Scheme(CCS) Credit Card 51173. Besides these.689 -25. P**<.860 2528.05 Comment: From the table: 4 it is seen that on an average in Secured Overdraft (SOD) sector the decreasing rate per year is -25.830 P.023 .101 million significantly which is really better for the bank.300 59 .018 .021 (The above linear regression calculation table has been done by using the data of table: 1) P***<0.238 -484633.Table: 4 Linear regression analysis between loan amount of different loan products and Year of different loan products during period 2005-2008: Loan products Secured Overdraft(SOD) Cash Credit Loans (General) House Building Loans(HBL) Loans Against Trust Receipts (LTR) Payment Against Documents (PAD) Consumer Credit 21710.101 285.936 .845 Regression coefficient(b) -25. it can be said that if we give 1 million loan in Secured Overdraft (SOD) then on an average the rate of interest during the given period(2005-2008) will increase by .748 242. Secured Overdraft (SOD) gives less interest income to the bank. But it is also seen that among the above stated loan products.

To meet current or short term obligations adequate liquidity is needed. liquidity is a precondition for the endurance of a firm. So measuring liquidity performance of NBL. In fact.1 Introduction: One of the important tasks. is ensuring adequate liquidity at all times. CHAPTER FIVE Liquidity Performance of NBL 5. But some loan products do not show good performance. The bank should give an extra effort to increase investment. the management of any bank faces. some liquidity ratios have been used. 4. These ratios are 60 . A bank is considered to be liquid if it has ready access to immediately spendable funds at reasonable costs at precisely the time those funds are needed. So bank should emphasize this sector and give more loans by using Credit Card.4 Conclusion: In conclusion we can say that the overall loan products are good. Liquidity ratios measure the ability of a firm to meet its short-term obligations and reflect the short-term financial strength of a firm.million which is the best interest income earning sector among all other sectors.

83: 1.a) b) c) d) e) f) Current Ratio Working Capital Cash Position Indicators Liquid Securities Indicator Riskless Assets Position Net Treasury Fund Position 5.2 Evaluation of liquidity performance: Liquidity Ratio Analysis a) Current Ratio: current asset current liabilities Table: 1 showing current ratio at different years Year Current Ratio 2005 1.87: 1.76: 1.00 61 .68: 1.00 2006 1.00 2007 1.00 2008 1.

85 1.00% 0.00% 1.50% 0.83 4 2008 1.68 : 100 1.55 Table: 2 2005 2006 showing growth rate of current ratio Growth (%) 2006 2007 Growth (%) 2007 2008 Growth (%) (Ratio) (Ratio) 1.00% 3.00 2.00% 2.98% (Ratio) (Ratio) 1.50% 1.19% 2005-2006 2006-2007 Year 2007-2008 62 .87 Series1 1.19% (Ratio) (Ratio) 1.76 3 2007 1.83:1.75 1.50% 3.65 1.76:1.7 1.00 1.50% 4.00 3.68 2 2006 1.6 1.76% Figure: 2 showing growth rate of current ratio Series2 5.76% 3.00 1.87:1.76:1.83:1.00 4.00% 4.9 1.00% 4.Figure: 1 showing current ratio at different years Series2 2009 2008 2007 2006 2005 2004 2003 Series2 Series1 1 2005 1.50% 2.8 1.98% Growth 2.

For that reason. it can be said that the liquidity position of NBL is satisfactory. So it is better for the bank to maintain liquidity. By analyzing the current ratio. b) Working Capital: current asset . Bank’s liquidity power is increasing. it is decreasing. Current ratio is better in 2008 in respect of previous year. it is seen that growth rate of current ratio is not so much satisfactory.current liabilities Table: 3 Showing Working Capital at different years 2005 6966019150 2006 13294056812 2007 18014474306 2008 20012281423 Figure: 3 Showing Working Capital at different years 25000000000 20000000000 Taka 15000000000 10000000000 5000000000 0 Series1 1 2005 2 2006 Year 3 2007 4 2008 Series1 Series2 Series2 6966019150 1329405681 1801447430 2001228142 63 . In 2005-2006 growth rate of ratio is 4. So bank has to increase its growth rate of ratio.76% but in 2006-2007 and 2007-2008. But from the above Table: 2 and figure: 2.Comments: From the above Table: 1 and figure: 1 we can see that current ratio is increasing. customer will rely on bank.

So bank has to increase its growth rate of working capital.09% Figure: 4 showing growth rate of Working Capital Series2 100. Bank’s liquidity power is increasing.84% (TK.) 1801447430620012281423 11.) 13294056812 90.51% Year 2007-2008 11. Working capital is better in 2008 in respect of previous year.84% but in 2006-2007 and 2007-2008. it is decreasing.84% 80.00% Series2 2005-2006 90. it is seen that growth rate of working capital is not so much pleasing.Table: 4 showing growth rate of Working Capital 2005 (TK) 6966019150 2006 Growth (%) 2006 2007 Growth (%) 007 2 2008 Growth (%) (TK.00% 90. it can be said that the liquidity position of NBL is pleasing.) 1329405681218014474306 35.00% 20.) (TK. 64 . By analyzing the working capital.51% Comments: From the above Table: 3 and figure: 3 we can see that working capital is increasing.00% 40.00% Growth 60. But from the above Table: 4 and figure: 4. So it is better for the bank to have more working capital so that it can help in maintaining proper liquidity as well as profitability.84% 2006-2007 35.) (TK. In 2005-2006 growth rate of working capital is 90.51% (TK.09% 0.00% 11.09% 35.

00 -7.82 : 1.82 : 1.61% .00 2007 .92 : 1.82 2007 0.82 : 1.82 : 1.00 2007 Growth (%) 2007 2008 Growth (%) .00 -3.92 Table: 6 showing growth rate of cash position 2005 .00 2008 .94 0.9 Ratio 0.85 0.00 Figure: 5 showing cash position at different years Series1 0.00 0% 65 .8 2004 2005 2006 Year 0.85 : 1.82 : 1.82 0.84 0.85 : 1.00 2006 Growth (%) 2006 .92 : 1.85 : 1.00 2006 .82 2008 2009 0.c) Cash Position Indicators: Cash + Deposit Total Assets Table: 5 Showing cash position at different years Year Cash Position Ratio 2005 .88 0.86 0.53% .00 .92 0.

But from the above Table: 6 and figure: 6.00% -1.00 66 . So it is not good sign for the bank.11 : 1. Cash position is better in 2005 in respect of other years.00 2008 .53% Year 2007-2008 0% Comments: From the above Table: 5 and figure: 5 we can see that cash position is decreasing.04 : 1.03: 1.00% Series2 -7.00 2006 .61% -3.00% -2. By analyzing cash position.09 : 1.61% 2005-2006 -7. Govt.00% -4. So bank has to increase its growth rate of cash position.Figure: 6 showing growth rate of cash position Series2 0. it is seen that growth rate of cash position is not so much pleasing. Bank’s liquidity control is decreasing.00% -6.00% -8.00% Growth -3. it can be said that the cash position of NBL should be increasing for better liquidity control.00% -7.00 2007 .00% -5.53% 0% 2006-2007 -3.Securities Total Assets d) Liquid Securities Indicator: Table: 7 Showing Liquid Securities Ratio at different years Year 2005 Liquid Securities Ratio .

06 0.00 226% .11 : 1.02 0 2004.04 : 1.00 -25% .00 .00 .03 0.12 0.5 2006 2006.09 : 1.00 -18% Figure: 8 showing growth rate of Liquid Securities Ratio Series2 250% 200% 150% Growth 100% 50% 0% -50% Series2 -25% 2005-2006 -25% -18% 2006-2007 226% Year 2007-2008 -18% 226% 67 .Figure: 7 Showing Liquid Securities Ratio at different years Series2 0.03 : 1.09 2005 2005.5 2008 2008.5 Table: 8 showing growth rate of Liquid Securities Ratio 2005 2006 Growth (%) 2006 2007 Growth (%) 2007 2008 Growth (%) .03 : 1.5 0.08 Ratio 0.00 .5 Year 2007 2007.04 0.11 0.11 : 1.04 0.1 0.

02 Ratio 1 0.94 0.98 0.94 2006 Year 2007 2008 2009 0.00 .02 68 . So bank has to increase its growth rate of liquid securities ratio. it is seen that growth rate of liquid securities ratio is not so much pleasing.92 2004 2005 0.02 : 1. But in 2008 it has decreased.96 0. e) Riskless Assets Position: Cash + Deposits + Govt.94: 1. In 2006-2007 growth rate of liquid securities ratio is really good but in 2007-2008.00 Series1 1.00 1. it can be said that bank should keep attention about the liquid securities.96 0. By analyzing the liquid securities ratio.00 Figure: 9 Showing Riskless Assets Position at different years 2008 .Comments: From the above Table: 7 and figure: 7 we can see that liquid securities ratio is increasing. it has decreased. Again from the above Table: 8 and figure: 8.96 : 1. So it is better for the bank to have more liquid securities in case of liquidity shortage.04 1.Securities Total Assets Table: 9 Showing Riskless Assets Position at different years Year 2005 2006 2007 Riskless Assets Position . Liquid securities ratio is better in 2007 in respect of previous year.98 : 1.98 1.

So it does not seem to be good for bank in maintaining proper liquidity. So bank has to increase its growth rate of riskless assets. it has decreased.00% 6.02 : 1.Table: 10 showing growth rate of Riskless Assets Position 2005 .00 69 .00 -2.00 1.00% 4.51% Growth rate Series1 2005-2006 -2.06 : 1.94 : 1. Riskless Assets Position is better in 2007 in respect of other years.08% . But from the above Table: 10 and figure: 10.05 : 1.00 .51% but in 2007-2008.00% -2. In 2006-2007 growth rate of riskless assets position is 8.92% Year Comments: From the above Table: 9 and figure: 9.00% 8.00 2007 .00% 0.02 : 1.06 : 1.94 : 1.96 : 1.51% 1.00-3.00 2008 .98 : 1.07 : 1.08% 2006-2007 2007-2008 -3.00% -4.00% 8.00% -6.00% 2. it is seen that growth rate of riskless assets position is not so much pleasing.92% Figure: 10 showing growth rate of Riskless Assets Position 10.00 2006 .00 2006 Growth (%) 2006 2007 . we can see that Riskless Assets Position is not in steady position. Balance of the reserve with the central bank Total Assets f) Net Treasury Fund Position: Table: 11 Showing Net Treasury Fund Position at different years Year Net Treasury Fund Position 2005 .00 Growth (%) 2007 2008 Growth (%) 8.

It is neither good nor bad.00 Growth (%) 0% 2008 2009 0.00% 10.57%but in 2006-2007.06 Growth rate 70 .57% .04 0.00% 20. 2006-2007 2007-2008 2008 . So it is better for the bank to have more Net Treasury Fund so that it can help in maintaining proper liquidity.06 : 1.02 0 2004 2005 2006 2007 Year Table: 12 showing growth rate of Net Treasury Fund Position 2005 2006 Growth (%) 2006 2007 Growth (%) 2007 . But from the above Table: 12 and figure: 12. So bank has to increase its growth rate of Net Treasury Fund Position. it is seen that in 2005-2006 growth rate of Net Treasury Fund Position is -28.Figure: 11 Showing Net Treasury Fund Position at different years Series1 0.05 0.00% -20.57% Year Comments: From the above Table: 11 and figure: 11 we can see that Net Treasury Fund Position is more or less in good position. it is 0%.00% -10.05 : 1.00% -30.06 0.07: 1.00 Figure: 12 showing growth rate of Net Treasury Fund Position Series1 30.08 0.00% -40.00 .06 Ratio 0.05: 1.00 -28.00 20% .07 0.00 . Net Treasury Fund is better in 2005 in respect of other years.06 : 1.06: 1.00% 20% 0% 2005-2006 -28. it is 20% and in2007-2008.00% 0.

431 4.738 3.266.259.391.568.288 Growth (%) 2007 39.266.568.391.738 Table: 14 Showing growth rate of Net liquidity gap 2006 2007 3.568.274.126.391.259.274.431 4.Net liquidity gap: Table: 13 2006 3.288 2008 6.266.391.266.738 Growth (%) 34.52% 4.10% 71 .288 Year 2008 3 2008 6.288 2008 6.259.431 2007 2 2007 4.431 Showing Net liquidity gap at different years 2007 4.738 Figure: 13 Showing Net liquidity gap at different years 7000000000 6000000000 5000000000 Taka 4000000000 3000000000 2000000000 1000000000 0 Series2 Series1 2006 1 2006 3.391.259.126.288 Series2 Series1 6.568.274.274.126.568.126.

00% 35.00% Growth 36.10% 39.00% 33. 5.52% Year 2007-2008 34. 72 . But in some cases corrective measure should be taken by the bank.00% 31.00% 32. So the bank should give an extra endeavor to increase the efficiency of liquidity management.52% Comments: From the above graph it is seen that net liquidity gap has been increased from 2006 to 2008.00% 38.00% Series2 2006-2007 39. Because bank can easily meet its short term obligation in case of financial crisis by maintaining more liquidity. It is actually good sign for the bank.Figure: 14 Showing growth rate of Net liquidity gap Series2 40.00% 39.10% 34.00% 37.00% 34.3 Conclusion: In conclusion we can say that the overall liquidity performance of NBL is good.

f) Name of Business /Industry. Designation. The Application form (Request for credit Limit) contains following particulars – a) Name of the Applicant------------Firm/company---------------------b) Address: i) ii) iii) Present --Permanent – Factory /showroom c) Nature of A/C and no— d) Telephone /Fax no i) Office— ii) Resident-e) Particular of proprietor’s /partners /directors name. Father’s /Husband’s/Mother’s Name.CHAPTER SIX Credit Appraisal Process 6. age. g) Date of Establishment /Incorporation h) Nature and amount of Limit— I) Purpose— j) Period— K) Mode of Repayment – j) Trade license number. date and expiry date (photocopy of trade license enclosed) 73 . permanent Address.1 Credit Appraisal Process (Theoretical Part): 1) Application for Loan The prospective borrower has to apply to the Branch for by filling up of a specific Application form.

value and adequacy of security. 15) Profitability of the proposal to the bank or company concern. 8) Viability of the business concern. what are the various facilities. The aggregation of such grading across the borrowers. 74 . 13) Reliability of the sources of the borrower. 4) Legal jurisdiction and implication of applicable of laws. credit grading helps the sanctioning authority to decide whether to lend or not to lend. 10) Quality. periodicity of the grading. what should be the loan price. 12) Entrepreneurship and managerial capabilities of the borrower. 11) Risk taking capacity of the borrower. 14) Volume of risk in relation to the taking capacity of the bank or company concern. what should be the extent of exposure. 6) Purpose of the loan. 9) Cash flow analysis and also projection thereof. The credit risk grading system is vital to take decisions both at the pre-sanction stage as well as post-sanction stage. background and track record of the borrower. At the post-sanction stage. what should be the appropriate credit facility. and other precautions to be taken. activities and the lines of business can provide better assessment of the quality of credit portfolio of a bank or a branch.2) Credit worthiness. At the pre-sanction stage. the bank can decide about the depth of the review or renewal. 7) Tenure of the loan. frequency of review. 5) Effect of any applicable regulations and laws. if available. 3) Financial standing of the borrower supported by financial statement and other documentary evidences. what are the various risk mitigation tools to put a cap on the risk level. 16) Credit risk grading (CRG): Credit risk grading is an important tool for credit risk management as it helps the Banks & financial institutions to understand various dimensions of risk involved in different credit transactions.

Functions of Credit Risk Grading: Well-managed credit risk grading systems promote bank safety and soundness by facilitating informed decision-making. • As evident. These would largely constitute obligor level analysis.Having considered the significance of credit risk grading. A Credit Risk Grading deploys a number/ alphabet/ symbol as a primary summary indicator of risks associated with a credit exposure. line of business. 75 . the CRG outputs would be relevant for individual credit selection. Credit Risk Grading is the basic module for developing a Credit Risk Management system. The process also allows bank management to manage risk to optimize returns. Grading systems measure credit risk and differentiate individual credits and groups of credits by the risk they pose. credit portfolio of a unit. the branch or the Bank as a whole. The other decisions would be related to pricing (credit-spread) and specific features of the credit facility. Use of Credit Risk Grading: • The Credit Risk Grading matrix allows application of uniform standards to credits to ensure a common standardized approach to assess the quality of individual obligor. wherein either a borrower or a particular exposure/facility is rated. internal MIS and assessing the aggregate risk profile of a Bank. it becomes imperative for the banking system to carefully develop a credit risk-grading model that meets the objective outlined above Definition of Credit Risk Grading: • • • The Credit Risk Grading (CRG) is a collective definition based on the pre-specified scale and reflects the underlying credit-risk for a given exposure. This allows bank management and examiners to monitor changes and trends in risk levels. • Risk grading would also be relevant for surveillance and monitoring. It is also relevant for portfolio level analysis.

⇒ Credit facilities fully covered by government guarantee. but still demonstrate consistent earnings.2 ⇒ Strong repayment capacity of the borrower ⇒ The borrower has excellent liquidity and low leverage. ⇒ Credit facilities fully covered by the guarantee of a top tier international Bank. cash flow and earnings. ⇒ Borrowers have adequate liquidity.(ACCPT) . cash flow and have a good track record. ⇒ Acceptable management 76 SHORT NAME SUP GD ACCPT MG/WL SM SS DF BL NUMBER 1 2 3 4 5 6 7 8 .e.1 ⇒ Credit facilities.Numbers and Short Name of Grades Used in the CRG: • The proposed CRG scale consists of 8 categories with Short names and Numbers are provided as follows: GRADING Superior Good Acceptable Marginal/Watchlist Special Mention Sub standard Doubtful Bad & Loss Credit Risk Grading Definitions: A clear definition of the different categories of Credit Risk Grading is given as follows: • Superior . ⇒ Very good management skill & expertise. fully cash covered.(SUP) . ⇒ Borrower has well established. strong market share.(GD) . ⇒ Aggregate Score of 85 or greater based on the Risk Grade Score Sheet • Acceptable . which are fully secured i. ⇒ Credit facilities fully covered by the guarantee of a top tier local Bank. • Good . ⇒ The company demonstrates consistently strong earnings and cash flow. ⇒ All security documentation should be in place.3 ⇒ These borrowers are not as strong as GOOD Grade borrowers. ⇒ Credit in this grade would normally be secured by acceptable collateral (1st charge over inventory / receivables / equipment / property).

If left uncorrected. thin cash flow and/or inconsistent earnings. • Substandard . the industry or the economic environment.(MG/WL) . excessive leverage).6 ⇒ Financial condition is weak and capacity or inclination to repay is in doubt. negative net worth. ⇒ Bangladesh Bank criteria for sub-standard credit shall apply.(SM) . ⇒ Severe management problems exist. ⇒ Weaker business credit & early warning signals of emerging business credit detected. these weaknesses may result in a deterioration of the repayment prospects of the borrower.(DF) .(SS) . ⇒ Credit requires attention ⇒ Aggregate Score of 65-74 based on the Risk Grade Score Sheet • Special Mention . ⇒ An Aggregate Score of 55-64 based on the Risk Grade Score Sheet. ⇒ These weaknesses jeopardize the full settlement of loans. ⇒ An Aggregate Score of 45-54 based on the Risk Grade Score Sheet. ⇒ These borrowers have an above average risk due to strained liquidity. ⇒ The borrower incurs a loss ⇒ Loan repayments routinely fall past due ⇒ Account conduct is poor.5 ⇒ This grade has potential weaknesses that deserve management’s close attention. • Doubtful .4 ⇒ This grade warrants greater attention due to conditions affecting the borrower. ⇒ Facilities should be downgraded to this grade if sustained deterioration in financial condition is noted (consecutive losses.⇒ Acceptable parent/sister company guarantee ⇒ Aggregate Score of 75-84 based on the Risk Grade Score Sheet • Marginal/Watch list . higher than normal leverage.7 77 . or other untoward factors are present.

Step I Step II Step IV Step V Step VI : Identify all the Principal Risk Components : Allocate weight ages to Principal Risk Components : Assign weight ages to each of the key parameters. The continuance of the loan as a bankable asset is not warranted. such as litigation. liquidation procedures or capital injection. and the anticipated loss should have been provided for. ⇒ Bangladesh Bank criteria for bad & loss credit shall apply. ⇒ However.⇒ Full repayment of principal and interest is unlikely and the possibility of loss is extremely high. the asset is not yet classified as Bad & Loss. ⇒ This classification reflects that it is not practical or desirable to defer writing off this basically valueless asset even though partial recovery may be affected in the future. • Bad & Loss . : Input data to arrive at the score on the key parameters : Arrive at the Credit Risk Grading based on total score obtained Step III: Establish the Key Parameters Credit Risk Grading Process: 78 . ⇒ Bangladesh Bank criteria for doubtful credit shall apply. due to specifically identifiable pending factors. ⇒ An Aggregate Score of 35-44 based on the Risk Grade Score Sheet.(BL) . ⇒ Prospect of recovery is poor and legal options have been pursued. Legal procedures/suit initiated. How to Compute Credit Risk Grading: The following step-wise activities outline the process for arriving at credit risk grading. ⇒ An Aggregate Score of less than 35 based on the Risk Grade Score Sheet. ⇒ Proceeds expected from the liquidation or realization of security may be awaited. Bangladesh Bank guidelines for timely write off of bad loans must be adhered to.8 ⇒ Credit of this grade has long outstanding with no progress in obtaining repayment or on the verge of wind up/liquidation.

c) dependable. upgrade or downgrade in credit risk grade. b) Limit Utilization Form c) Credit Risk Grading Score Sheet. b) current. Credit Risk Grading should be completed by a Bank for all exposures (irrespective of amount) other than those covered under Consumer and Small Enterprises Financing Prudential Guidelines and also under the Short-Term Agricultural and Micro . Actual parameter should be inputted in the Credit Risk Grading Score Sheet. renewal or specific facility should consist of a) Data Collection Checklist. Relationship Manager shall complete the Credit Risk Grading Score Sheet and shall arrive at a risk grading in consultation with a Senior Relationship Manager and document it as per Credit Risk Grading Form. Risk factors are to be evaluated and weighted very carefully. which shall then be concurred by the Credit Officer in consultation with a Senior Credit Officer. new or renewal for regular limits or specific transactions.e. The credit officers then would pass the approved Credit Risk Grading Form to Credit Administration Department and Corporate Banking/Line of Business/Recovery Unit for updating their MIS/record.Credit. The appropriate approving authority through the same Credit Risk Grading Form shall approve any subsequent change/revision i. All credit proposals whether new. Credit risk grading matrix would be useful in analyzing credit proposal. if basic information on a borrowing client to determine the degree of each factor is a) readily available. and d) parameters/risk factors are assessed judiciously and objectively. on the basis of most up-to-date and reliable data and complete objectivity must be ensured to assign the correct grading. and d) Credit Risk Grading Form.         79 . covered by government & bank guarantee. 100% cash covered.e. Relationship manager should ensure to correctly fill up the Limit Utilization Form in order to arrive at a realistic earning status for the borrower. For Superior Risk Grading (SUP-1) the score sheet is not applicable. Credit risk grading exercise should be originated by Relationship Manager and should be an on-going and continuous process. This will be guided by the criterion mentioned for superior grade account i.

 Recommendation for upgrading of an account has to be well justified by the recommending officers.  If a Bank has its own well-established risk grading system equivalent to the proposed credit risk grading or stricter. Frequencies of the review of the credit risk grading are mentioned below: Number 1 2 3 4 5 6 7 Risk Grading Superior Good Acceptable Marginal/Watch list Special Mention Sub-standard Doubtful Short SUP GD ACCPT MG/WL SM SS DF Review frequency (at least) Annually Annually Annually Half yearly Quarterly Quarterly Quarterly 80 . this may be substantiated and credit risk may be accepted if the exposure is additionally collateralized through cash collateral.Exceptions to Credit Risk Grading:  Head of Credit Risk Management may also downgrade/classify an account in the normal course of inspection of a Branch or during the periodic portfolio review. good tangible collaterals and strong guarantees. the Credit Risk Grading Form will then be filled up by Credit Risk Management Department and will be referred to Corporate Banking/Line of Business/Credit Administration Department/Recovery Unit for updating their MIS/records. In such event. Credit Risk Grading Review: Credit Risk Grading for each borrower should be assigned at the inception of lending and should be periodically updated. These are exceptions and should be exceptionally approved by the appropriate approving authority.  In case an account is rated marginal. special mention or unacceptable credit risk as per the risk grading score sheet. then they will have the option to continue with their own risk grading system. Essentially complete removal of the reasons for downgrade should be the basis of any upgrading.  Whenever required an independent assessment of the credit risk grading of an individual account may be conducted by the Head of Credit Risk Management or by the Internal Auditor documenting as to why the credit deteriorated and also pointing out the lapses.

which will then automatically generate the Output Sheets. Responding to the requirement of customers in the state of lack of full computerization facilities of the branches and on line banking facilities some credit sanctioning powers have been delegated to the Branch Managers and the Regional Managers. The CIB authority provides the related information for which he is asked for. quick credit delivery. conducts its banking operation under branch banking system. 21) Credit Approval Process National Bank. So to get the appropriate information about the creditability of the customer. Financial Spread Sheet (FSS): A Financial Spread Sheet (FSS) has been developed which may be used by the Banks while analyzing the credit risk elements of a credit proposal from financial point of view. 19) Total global exposure of the borrower. some branches have been placed under some Regional offices. 20) CIB status: There is possibility of hiding information about the current liability and transaction with other bank.  MIS reports as should be prepared and circulated at least on a quarterly basis. Input and Output Sheets. The FSS is well designed and programmed software having two parts. It is known that all the banks have to send liability position of the client. 18) Market aspect. The financial numbers of borrowers need to be inputted in the Input Sheets.8 Bad & Loss BL Quarterly MIS on Credit Risk Grading:  Bank should have comprehensive MIS reports on credit risk grading to evaluate entire credit portfolio of the Bank. 17) Yield from the facility. For administrative control and smoothening its day-to-day operation and extension of appropriate and quick services. 81 . The branch office collects CIB report through the head office.

where the approval will be accorded. the officers/executives of credit department will have full knowledge of the policy & procedures of credit operations. At the branch level. 82 . Financial Institutions. Head office Credit Operations Division will keep credit files under proper control number and its use will be restricted to the authorized officials only. it will be sent by the branch Manager to the Regional Manager with his recommendation. When the proposal falls beyond Regional Manager's power he will send it to Head Office. Credit Division. through Divisional Head. When the proposal falls beyond the power of the Branch Manager.Credit proposals are generally originated at branch. Credit will get credit and risk assessed by Credit officials. Credit. the proposal. prepare detailed credit memorandum after undertaking a thorough credit check and conducting credit risk assessment of the client in light of credit policy Guidelines of the Bank. it will be declined and Credit Operations Division will inform the decision to the branch accordingly. having been assessed by the credit Officers/Executives will be placed to the EC. Divisional Head. The fully documented Credit Memorandum (CM) will be placed to the Branch Credit Committee by the In charge credit. DMD (credit) and the Managing Director. The proposal being found acceptable will be placed to Head Office credit committee if the proposal falls under the delegated authority of the Management. When the proposal will be under the approval authority of the Executive Committee. Credit committee after thoroughly & critically examining the proposal will recommend it to the Branch Manager who will approve credit under his delegated authority. If a proposal does not meet the basic lending criteria as per CRM guidelines and banking norms. The credit officers/executives after obtaining credit applications through Branch Manager along with all required papers /documents ensure sufficiency and consistency of the papers/documents. However proposals may also be received at Head Office for syndication and also from big clients. Regional Manager will get the proposal critically examined by the credit officers and recommended by credit committee at Regional Office and will approve under his delegation of business power. They will originate credit proposals. if the proposal is found approval worthy.

Credit In Charge of the branch.Flow chart for approval Processor Loans & Advances Sanction/ Decline Credit Application processed by credit officers and recommended by. Credit Division Head Office Credit Committee Deputy Managing Director (Credit) Managing Director Executive Committee (EC) 83 . Branch Credit Committee Sanction/ Decline Branch Manager Regional Officer Regional Office Credit Committee Sanction/ Decline Regional Head Head Office.

o Approval authorities check that pricing of the facilities are within the Bank's declared band. o Limit is approved as per authority delegated in the rule book. Credit Administration (For HO. o Large loans are approved within the ceiling advised by Bangladesh Bank. Credit Administration functions will comprise the following: -(Refer to Flow Chart as Appendix-J) Disbursement: Before disbursement of the approved facilities. Appeal Process Any declined credit will be represented to the next higher authority for re-assessment/ approval. compromise agreement for large loan accounts are placed for approval by the Board as per Bangladesh Bank Guidelines. renewal. Regional Office & Branch) Credit Administration function will be critical in ensuring that proper documentation and approvals are in place in respect of disbursement of loan facilities.MANDATORY CHECKING: o Proposed Credit facilities are compliant of the existing banking regulations. o Fresh approvals. o Competent authority as per Bank's policy approves facilities in writing. o Other analysis and assessment has been done properly. rescheduling. which shall be mentioned in the sanction letter also. o Proposal incorporates that facilities are subject to banking regulation. o All Credit approvals are given on a one-obligor basis. branch Credit Administration shall ensure that the following steps have been properly followed: 84 . o CRG has been done. o Standard facilities are described using standard language.

i) Incomplete documentation receives a temporary waiver from approving authority. h) Bank's legal adviser ensures that the Bank's security interests are perfected. n) Excess over limit are allowed under pre-fact credit approvals. e) The approved terms and other requirements have been adhered to by the branch. which could not be completed for genuine reasons and request credit administration for allowing them to disburse. Branch Credit Administration on receipt of the sanction letter will complete full documentation and formalities as per terms of sanction and send a compliance to HO credit administration with a copy to Regional office along with a list of documents obtained. l) Evidence of disbursements is properly documented. For exception of full documentation. A copy of sanction letter will be sent by the credit sanctioning authority to HO Credit Administration Division / Branch and Regional Office (as the case may be). c) Limit Creation & documentation Check List has been completed. k) Authorized officers as per our bank's policy disburse facilities. In order to administer credit in a proper manner under the present institutional & operational set up. branch will mention in the compliance certificate about the documentation. b) Standard loan facility documentation including security documentation has been completed. g) Branch Credit Administration Unit/ (HO Credit Administration . d) Credit officer & Credit Administration officer of the branch has jointly signed documentation checklist before disbursement. f) 0 Branch Credit Administration Unit/ (HO Credit Administration . pending completion of those documents with specific mention about time within which incomplete documentation will be completed. 85 .if required) check collateral. j) Branch Credit Administration Unit/ HO Credit Administration ensure that all disbursements are covered by approved credit lines.a) Approval has been obtained. m) Unauthorized approvals are surfaced and proper actions are taken.if required) issues security-compliance certificate and Loan Disbursement /Limit Loading Checklist & Authorization Form before disbursement. tasks of credit administration will be done in the following manner: 1.

Head office credit administration will examine the sufficiency of the documentation. c) Periodic Review of Documentation d) Ensuring insurance of the insurable objects. HO credit administration will advise the branch to complete full documentation and confirm and disburse credit after completion of documentation. 3. f) Releasing of collateral of debt obligation instruments under appropriate approval. b) Credit Administration Division shall maintain Bangladesh Bank circulars/ regulations/guidelines relating to credit centrally. ensure issuance of corresponding Review Frequency Quarterly Semi-annuals Annually 86 . g) Ensuring keeping current Insurance policy in the vault and renewal of the policy on a timely basis. HO. Where branch seeks permission for disbursement keeping some documents incomplete. will issue authorization to disburse with the condition to complete incomplete documentation within specific time limit. Custodian a) Obtaining Security Documentation as per approval b) Safely Storing Loan/Security Documents Cash collateral such as Fixed Deposit Receipt.2. Bonds. Script. e) Ensuring maintenance of Safe in & safe out register properly to track their movement. Branch credit administration will keep the documents under their strict control preferably in locked fire proof storage and will ensure that all the terms of approval has been complied where against drawing will be allowed. Marketable Securities etc. Credit Administration Division if considers such exception acceptable. are under dual control in fireproof vault and for this purpose two custodians and their alternates are to be identified in writing. If documentation is found to have not been properly done. * Periodically Means: Risk Grade >6 4-5 1-3 Compliance requirements of credit administration: a) Credit administration shall submit all required Bangladesh Bank returns on credit in specific format in a timely manner.

(Monthly) 87 & Special mention account & . report on the following to be generated and submitted to management and instruct the branch to regularize the same. which shall be SMA if not renewed with in 2 months and taking necessary measures. At a minimum. a) Overdue principal & interest (Monthly) b) Overdue trade bills (Monthly) c) Excess over limit/ Excess over facility approved (Monthly). d) Status reports on drawing power and Collateral shortfall on a regular basis. h) Non-Receipt of Financial Statements in time (Annually) i) Objections of internal/external or regulator Inspection/ Audit and advise corrective measures timely. delinquent account (Monthly) l) Identification of the accounts. e) Breach of loan covenants/ terms and conditions/Documentations deficiencies (Fortnightly) f) Non payment and late payment g) Branch monitors OD/CC facilities on a regular basis to ensure accounts turn over. j) Details of Early Alert Accounts and preparation of list of delinquent account Special Mention Account (SMA). The procedures and system must provide early indication of deteriorating financial health of a borrower. Status reports on Excess over Limit and expired credit limit on a regular basis. CPA's etc shall be approved and their performance reviewed on annual basis. which have assumed SMA status due to non-renewal. Credit Monitoring To minimize credit losses. (Monthly) k) Identification of early alert accounts. lawyers. (Monthly) m) Listing of the accounts. monitoring procedures and system should be reinforced and more effective system should be developed in view of varied complexities involved in various types of credit. valuers.circulars and advise all relevant departments to ensure compliance of the contents of the circular. c) All 3rd party service providers like.

regional Office & Credit Division. Relationship Manager/ credit officer shall prepare Early Alert Report with in days after identification of weakness and signs or deterioration. V. prompt reporting and pro-active management of Early Alert Accounts will be placed under the responsibility of dealing credit officials and must be undertaken on a continuous basis. Regular inspections will be conducted to confirm that bank's security / collateral is secured. Head Office 2 months ahead of expiry limit dates. to ensure that calls/inspections are made regularly on the clients and documented. Credit Recovery: 88 . requiring monitoring. IV. Control mechanism to be made more effective and where required to be devised. early Identification. Early Alert Process: An account that has risks or potential weakness of material nature. As part of Early Alert Process the following takes will be performed: I. An Early Alert Report shall be completed by the Branch credit officers and sent to the HO Credit Administration for any account showing signs of deterioration within 7 days from the identification of weakness. II. the account will be reclassified as a Regular account under the approval of Credit Administration. supervision or close attention by the Management will be brought under Early Alert Process. When an account will show breach of loan covenants or adverse market rumors an Early Alert report should be raised. Relationship Manager/ credit officer shall regularly monitor the performance of the clients business as well as repayment and shall prepare status report. An Early Alert Account. III. when shows that the symptoms causing Early Alert classification have been regularized. otherwise these weaknesses will result in deterioration of repayment prospects for the assets or in the bank's credit position at future date. In order to keep an account on track.n) Status of timely renewal of limits and informing Branch. Early Identification and prompt reporting of deteriorating credit sign to be done to ensure quick action to protect banks interest. Call /Early Alert Reports to be analyzed by branch & Head office credit administration to ensure that affairs of the borrower are being run on expected lines and there are no material changes in the status of borrower.

Recovery Unit (RU) will directly manage accounts with the status of Sub-standard /DF/BL. e) Review classified accounts.Muradpur Branch. based on recommendation of In-charge credit Recovery Unit (RU) shall: a) Determine Account Action plan/ Recovery strategy. General Information 89 . A.2 A practical case related to credit appraisal process of lease finance: 6. b) Make all out efforts to maximize recovery including placing customers into receivership or liquidation as appropriate. Exit accounts graded 4-5 may also be transferred to RU for efficient exit. I / we furnish the following particulars and bind myself/ourselves to furnish you with any other information and comply with the required formalities which you may need any time. f) Initiate legal action as per norms. g) Follow up Court cases regularly and ensure that necessary steps are taken for early resolution. Chittagong. d) Reschedule accounts as per norms. based on actual and expected losses.for procurement of Vehicle.1) Lease Application Form The Manager National Bank Limited Muradpur Branch Chittagong Sub: Photo Application for Lease Financing facility of Tk 12.50. .000/. c) Provide for adequate and timely loan loss provision.2. Dear Sir. 6. I / we intend to avail of Lease Finance facility from National Bank Ltd.

Business Address ----------Telephone No. Equipment 2. Medical Instruments 6.E-mail------------------------------------------------------------Bhatiary (Hajee Badshah Meah Bari).12. Name of the Group (if any) ------------------------------------------------------------------------------------------------------+ 3.Azhar Uddin--------------------2. Capital Machinery 5. 4.1. 2) √ Proprietorship 5) Public Limited. Vehicle 4. 3) Partnership 6) Others ----------------------------. Legal Status (tick mark) 1) Individual 4) Private Limited. P. Consumer Durable 4.01678063450 Fax No.Rehab Steel Prop: Md. Factory Address ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------6. Nature of Business Seller of Scrap items( MS Malting Scrap & MS Plate) Proposal 1. Name of the applicant M/S. Date of establish /Date of incorporation / Date of commencement of business -2005--8. Quotation (attach) 2. Description of the Equipment/ Vehicles (Tick Mark) √ 1. Purpose 1) 24 2) 36 3) √ 48 4) 60 5) Others 3. Pro forma invoice (attach) 90 .S-Sitakunda.000/-------------------------------------------2. Others √ 1. chittagong---------------------------------------------------------------------------------------------------- 01815632724. Sagorica Road. Janata Iron Market. Permanent Address ---------5.50. Period (in months ) (Tick mark) 3. Chittagong--------------------------------------------------------------------------------------------------- 7.S-Pahartali.P. Lease Finance amount required for Tk. ----------------------------------------------Mobile no.

.... (ii) Paid up Capital : Tk..........Rehab Steel (Memorandum and Articles of Association alongwith Certificate of Incorporation and copy of registered partnership deed are to be attached) (1) Office address with phone no/ Fax / Email: Janata Iron Market.............. ……………………………………………………………………………………………………………… ……………………………………………………………………………………………………………… ………………… (2)Registered address: …………………………………………………………………………………………........: In case of Proprietor firm/ Partnership firm/ Limited Company: Name of Company / Firm: M/S......................... A..... Date..... 91 ... H............. Invoice f) Packing list........Azhar Uddin. Trade License no 42714..... D.......2007.......Pahartali........... Validity 30........ ...... B................ P..08.S....... shares of Tk.................. no..... C... if any . G........... No..... divided into ....... Sagorica Road..........09..................Chittagong F.06...... IRC /VAT Regd.... C.....18............ TIN : 346-107-5121 ..... ... ………………..............3....... of employee : 03 (Three) E Mill/Factory address with phone no. Contact person/Phone/ Designation: Md...... each Share capital : (i) Authorised Capital : Tk... Company information (if the applicant is a company /firm) 01..... For sale and lease back arrangement (Original Documents) a) LC Copy d) Country of Origin b) Bill of Lading c) Bill of Entry e)Comm..........

............. : ............................................. Permanent Address : ............................................. Chittagong Permament Address: Bhatiry..................................................... P............................................................................................................................12 lac Proprietor years (If required the particulars of directors/ partner/ proprietor may be furnished in separate sheet...........I....................................S-Sitakunda Chittgong 100% 191........ Particulars of Directors/Partners/Proprietor Name Position / Status Relationship with MD/ Chairman Age Residential Address and Permanent Address with Telephone number Shareholding Amount % Net worth as on…… (as per enclosed statement ) 36 Md.............C .................S.............................) (J) Educational qualification and business experience of Proprietor/all Partners/all the Directors and Share Holders: -(As per enclosed Annexure) S........................ : ................................. : ......................................... 08 years 02................... : ......................Agrabad C/A ................................................ 92 ...........…….. In case of Individual : Name Father's / Husband's Name Mother's Name Date of Birth Marital Status Residential Address : ............................ : ..................Near Bahutala Colony..............Azhar Uddin Chemon Ara House......................................................................... Sex: ....................................................................

.. IRC /VAT Regd..23....12... Brief description of existing business Line of business: Whole seller of Scrap Iron..... 2........................……………………………………………..............................................-----------.....CC-37000446 DT 31..... Telephone : Office: ........ Issued on: ................ Monthly Income : ... Monthly Income : ..940.... (as per enclosed statement) D......00 E..... (if any) Income from other source Monthly expense Occupation : ... Sum... Bank Information (maintaining the day to day transaction) Name of the Bank:-National Bank Ltd...................84.. no................ if any ..............................……............. :……………........ Net worth as on ……………..... TIN : .................................................06 Last 3 years transaction record Year 2007(cc –h) No..……...96...2006 ..02. Sum 2..….......................... Issued by............00 Cr..CD 33007131 DT-02.................31.……….............. Monthly net income: ..........: Passport no..766.... : Source ..………………………………….. Market details:…………………………………............Branch : Pahartali................... Name of the product:……………………………………………………………………………………................................... ……………………………………………………………………………………………………................................ Residence : . Date... 93 .... Mobile: ............ Trade License no.................. Chittagong---Type of account (tick mark) 1) Current Deposit 2) Savings Deposit 3) Others Account number and date of opening:. Fax……………………………………Email………………………………………………………......... of transactions Dr...... Validity .....................

. Name and Address of Supplier and mode of delivery Name and Address of supplier MAXIM car Centre Delivery Schedule Mode of Delivery 1 day after confirmed order ( Details in separate sheet may be furnished.50.00 17.00.00 Year-3 4.00 22.373.98.000/Remarks H. 17. attach Indent/ Quotation/ Proforma Invoice) Description of equipment with country of origin and year of manufacturing Totoyota Hiace .00 (ii) Financial Performance of the sister concerns for last 3 years: Particulars Sales Net Profit after Tax Year-1 N/a Year-2 Year-3 G.000/In FC Total Price In Taka 17. ………………………………………………………………………… J.Super GL Microbus No.176.600. if necessary) Remarks I.50.500.50. Description of Equipment proposed under this Lease (Pls.Others………………………………………………………………………………………………………… . (i) Financial Performance of the Firm/Company for last 3 years: Particulars Sales Net Profit after Tax Year-1 Year-2 2.26. Procurement cost of Equipment 94 .84. ……………….97. Place of installation of Equipment/Capital Machinery:……………. ……………………………………………………………………………………………………………. F. of Unit 01 Unit Price Tk.

Particulars of guarantor (s)....50...... if any : Residential and Permanent Address Bhatiary........... Tk..... Sitakunda.......91 Lac Age Profession Net worth Relationship with Applicant Brother Name..000/-......... ..........C&F Cost/Procurement Cost (as per quotation / Indent / Proforma Invoice) Less: Down Payment. Expected Date of Lease Execution/ Disbursement : K... Father's/ Husband's Name and Mother's Md.. Tk..... Description and Type of security offered by the Applicant Full Description of Securities Owner Value of Security Remarks 95 .. . Financial projection from Lease Asset : Particulars Year-1 Year-2 N/A Year-3 Year-4 Year-5 M.....................50. Tk.............. if any Sub Total Add: Duty / VAT / Other Cost etc......................000/-..……………… L.......12.... Chittagong ---do--38 yrs Business 147... . 17.........Bazlur Rahman Father’s Name :Hajee Badshah Meah Mother’s Name :Nurjahan Begum (Details of Guarantor (s) to be furnished in separate sheet in above format along with Net worth Statement) N........................000/-.... J....17..... Total Procurement Cost Acquisition Cost/Lease Finance Tk....17.000/-.................. Tk.........50.....................50.... Tk..

Liability position of the Applicant and its sister concern/Group with other banks (Both funded & non funded) …10. Chittagong CC(H) 30. Amt. Period Classific ation Status 96 .) Q.2008 Name of the branch Nature of Limit Amount of Limit Validity of Limit Outstanding (in crore) Type and Value of Collateral Securities Annual Turn Over (in crore) Overdue Status as on… Amt.2008… Name of the borrowing Concern / Group Name of Bank Branch Nature of Limit Amount of Limit Validity of Limit Outstandi ng in crore Overdue Status as on… Amt.06.12.06.Pahart ali. Liability Position of the Applicant with National Bank Ltd.00 lac 31. Period Classifi cation Status N/A (If required the liability position may be furnished in separate sheet. branch. (Both funded & non funded) as on 10.O.97 lac Overdue Status as on.. all branches (Both funded & non funded) as on 31.2007 Name of the branch Nature of Limit Amount of Limit Validity of Limit Outstanding (in crore) Type and Value of Collateral Securities 88.82 lac Annual Turn Over (in crore) 223.. Liability Position of the sister concern / Group of the Applicant with National Bank Ltd.88 lac (If required the liability position may be furnished in separate sheet.. Period Classifi cation Status Uc NBL.2008 7.) P.12.

be enclosed in above format.) R. Outstanding. Yours faithfully. Tk. Lease Term Date of Expiry Overdue Status as on Name of the Leasing Company/ Bank Amoun t of monthl y rental Amt. Details of Financial Commitment with other Leasing Companies / Bank under Lease Finance as on 10. Period NIL I/We do hereby declare that the particulars furnished above are true and correct to the best of my/our knowledge. Tk.06.2008… Type of Asset Leased Lease Amount. I/We authorise you to obtain and / or verify information from any source regarding my/our credit worthiness.N/A (Details of liabilities of the Applicant with other Branches of National Bank Ltd. (Seal & Signature of the Applicant) Name: 97 .

....50... ……………………………….2......... Sagoriza Road.. …………………………………………........ ………………………………... Janata Iron Market..... 98 ............00…. for procurement of Capital Machinery/ Equipment / Consumer durable / Medical instrument / Vehicles etc....2008 Sub: Application for Lease Financing facility of Tk 12...06.... CRG Information: (a) Risk Grading: (b) Aggregate Score:80 (Pls....... chittagong. ……………………………..6....2) Limit proposal and approval form: National Bank Ltd. attach evaluation sheet) 01. iii) Factory : Phone No. Particulars of the client a) Name of the Account b) Address i) Business/Show room/shop : : : M/S Rehab Steel.....S-Pahartali. ii) Office : Phone .... Muradpur Branch Chittagong LEASE PROPOSAL FORM Reference No.. Phone No...AHU/MRD/LEASE-01 Date 11. ……………………………………………… ……………………………………………. P.000. ………………………………………….

c)

Account No. & date of Account : opening

CD-713, Date: 02.02.06 & CC-37000446, Date:31.12.06 lac. Maximum Balance : Tk.5.08 Minimum Balance Tk. .01 lac

Average Balance Tk. 8.10 lac Dr. Summation : 231.85 lac Cr. Summation :223.97 lac (During d) e) f) g) h) i) j) k) Sanction status of Lease Legal Status Date of Incorporation/Establishment Date of Commencement of business TIN Nature of Business Net worth of business (calculation : : : : : : : last one year). Fresh 2005 346-107-5121 Whole seller and retailer of Scrap Iron TK.98,85,574.00 Throughout Bangladesh.

to be enclosed) Market/Place of business/area of : operation / name of major buyer etc. History of relationship with the : customer (How & when the relationship started/state if repayment and adjustment have been regular)

l)

The Party has been banking with our NBL, Pahartali branch, chittagong with full of satisfaction since 02.02.2006 and also availing CC (H) facility of Tk.30.00 lac since 31.12.2006.

m) Purpose of Lease n) Capital Structure (For Ltd. Company) i) Authorized Capital ii) Paid up capital iii) Total capital Funds(Paid-up Capital + Retained Earnings + reserves + Others) Investment in business (For Individual & Firm) 02. Name of individual borrower/ Proprietor / Partners / Directors Name Father’s Name, Mother’s Name, Husband’s Name :

: : : : : :

For private use

Tk………………. Tk………………

o)

TK.98,85,574.00

Address Permanent Present Phone No. (Residential) Phone No.

Age (years)

Share %

Status

Net worth as on…… (as per enclosed statement) 99

Md.Azhar Uddin .

Hajee Badshah Meah. & Nurjahan Begum

Bahtiary,P.SSitakunda , Chittagong

Chemon ara House,Near bahutala colony ,Agrabad, Chittagong

36 years

100%

proprie tor

183.24 lAC

03. 04. 05.

Date of application submitted by the customer: 10.06.2008 Place of installation of Equipment/Capital Machinery: Procurement cost of Machinery/ Equipment: (Pls. verify price competitiveness) C&F Cost/Procurement Cost (as per quotation / Indent / Proforma Invoice) Less: Down Payment, if any Sub Total Add: Duty / VAT / Other Cost etc. Total Procurement Cost Lease Finance Tk. .............................................. Tk.17,50,000.00 .............................................. Tk. .............................................. Tk. 17,50,000.00.................... Tk. 17,50,000.00.............................................

Tk.12,50,000.00 ......................................... :

06. Particulars of the Guarantor (where applicable)

(i) (ii)

Guarantor’s Name

Address
a) Permanent b) Present (Residential)

: : : : : : :

Md.Bazlur Rahman Bhatiary, P.S-Sitakunda, Chittagong Bhatiary, (Badshah Meah Bari), Sitakunda , Chittagong Brother Prop of M/S .Earfan Steel , (Pls. attach net-worth statement)

(iii) Relationship of the Guarantor with the applicant (iv) Guarantor’s back ground (v) Net worth of the Guarantor

07. Liability Position of the Applicant with National Bank Ltd., all branches (Both funded & non funded) as on 04.06.2008
Name of the branch Nature of Limit Amount of Limit Validity of Limit Outstanding (in crore) Type and Value of Annual Turn Overdue Status as on…

100

Collateral Securities

Over (in crore) 2,23,96,7 66.00 as on 31.12.07

Amt.

Period

Classifi cation Status uc

NBL ,PAHARTA LI BR., CTG

CC (H)

30.00 LAC

31.12.2008

29,49,787.00

Reg mort of 30.83 dec land valuing 88.82 lac

N/A

(If required the liability position may be furnished in separate sheet.)

08. Liability Position of the sister concern / Group of the Applicant with National Bank Ltd., (Both funded & non funded) as on
Name of the branch Nature of Limit Amount of Limit Validity of Limit Outstanding (in crore) Type and Value of Collateral Securities N/A Annual Turn Over (in crore) Overdue Status as on…. Amt. Period Classifi cation Status

(If required the liability position may be furnished in separate sheet.)

101

Period Classific ation Status N/A (Details of liabilities of the Applicant with other Branches of National Bank Ltd. Opinion on Customer’s Management (Education. Liability position of the Applicant and its sister concern/Group with other banks and financial institution (Both funded & non funded)…………… Name of the borrowing Concern / Group Name of Bank Branch Nature of Limit Amount of Limit Validity of Limit Outstandi ng in crore Overdue Status as on…. post dated cheques. ……………. Training background and past experience of key management personnel to be mentioned) : The party is now well established business man and tested and trusted customer of our NBL. Amt.09. 11. dated …………. pahartali branch. ii) Collaterals (Valuation certificate with : mention of forced sale value to be enclosed as per Head Office circular letter no.) 10.. CIB report (Applicant and Guarantor): CIB enclosed received date 08. Chittagong.05. 102 .. be enclosed in above format.2008 Securities (Details to be mentioned separately for each limit) : i) Primary security : • • Ownership of Leased Assets …48 nos. ) iii) Other securities (if any) : 12.

Factory/ site visit report ( Pls.24 lac Cr. Summ 231. enclose separate sheet if necessary) : 14.Turnover of the account(s) during last 3-years: Nature of Advance CC (H) Cc (H) 2007 2008 Year Dr.08 lac Adjustment in time 05 Recycling in time 23 -.97 lac 00 2. Import (Other Banks) : Name of Account N/A Export (Our Bank) : Name of Year Account Year L/C Opened No.13.73 lac 16. Amount Remarks Export made Proceeds Realized Export made Proceeds yet to be realized Remarks Remarks N/A Export (Other Banks) : Name of Account Year N/A 103 .22 lac 29. Balance Maximum Minimum 20. Summ. Performance of the client/allied concern(s) (Last 3 years) with our Bank/Other Bank(s): Import (Our Bank) : Name of Year L/C Opened Documents retired Outstanding Remarks No.97 lac 182.85 lac 211. Existing Production details : Item of Rated Capacity (at 100%) production Quantity Taka Attainable/Attained Capacity (at………%) Quantity Taka 15. Amount No. Amount Account N/A 223. Amount No.

Financial expense & Depreciation OPERATING PROFIT/LOSS Add Other Incomes Less Income Tax NET PROFIT / LOSS Before Income Tax Net Profit/Loss after Income Tax : : : : : : : : Year Year Year ASSETS & LIABILITIES Cash in hand/at Bank Inventory/Stocks Receivables Others Current Assets : : : : TOTAL CURRENT ASSETS 104 . Admn. do 2008 70.) b) How others in the same business are doing – Name of 2/3 leading companies: : Total 93.821/Ctg.821/70. a) Financial Statement of the Customer for the last three years (State whether audited/unaudited and the name of the audit firm) SALES & PROFITABILITY (For last 3 years) Sales Cost of goods sold GROSS PROFIT Selling General.Others (if any) : 17.943/18. a) Competitive position of the customer (Pricing/Marketing/Special Advantage etc.943/- 19.Pahartali 2007 93. Earnings from the client/allied concerns (during last 3 years) by our bank : Name of Account Year Interest Commission Others NBL. Any adverse comments from last Inspection/Audit Report : (Our Bank and Bangladesh Bank): N/A 20.

Non Current Assets Fixed Assets : : : : : TOTAL ASSETS Cash Credit/Overdrafts Trade Payables Other Current Liabilities TOTAL CURRENT LIABILITIES Non Current Liabilities : : : TOTAL LIABILITIES Equity (Total Assets – Total Liabilities) b) CASH FLOW FROM OPERATING ACTIVITIES Net Profit/Net Loss : Plus Depreciation : Minus Dividend Paid : Accounts Payable Increase/Decrease : Inventory Increase/Decrease : +/.Other Non Cash Adjustment : : NET OPERATING CASH FLOW c) IMPORTANT RATIO: Current Ratio Quick Ratio Leverage Debt to Assets Gross Profit to sales : : Current Asset Current Liabilities Current Asset-Inventory Current Liabilities Total Liabilities Equity Total Liabilities Total Assets : : : CRG ENCLOSED : : : : : Gross Profit X 100 Net Sales 105 .

repayment capacity. business worthiness. Azhar Uddin owner of M/S Rehab Steel is extremely hospitable and with a scale of aristocracy in personal life.12. We may able to procure more business from them and other customers of their association in the days to come if we can accommodate them. He has gathered huge knowledge in the line of trading and Scrap Business. OTHER INFORMATION (IF ANY) : 23. . He is well known to us as well as in the market who is a man of commitment. Financial projection from proposed Lease Asset under Lease Finance: Particulars Proposed Sales /Turnover Proposed Net Profit after Tax Year-1 Year-2 Year-3 22. BRANCH COMMENTS / RECOMMENDATION : a) Comments / Recommendation : Mr. As a very much tested party he has been banking with our Pahartali Branch with satisfactory transactions and adjustment of liability regularly in his loan account. we recommend for sanction of Tk.07. Md.2012.50 lac as Lease Finance Facility with validity up to 106 . M/S Rehab Steel is a growing and prospective firm. In view of the above and considering the party’s past good track record.Net Profit to sales : Net Profit X 100 Net Sales : Return on Equity : Debt Service Coverage Ratio : Net Profit X 100 Equity : : d) Net Profit + Depreciation +Interest paid Interest Paid + 12 months Principal Payment Comments on Financial Statements : three years) Comments on cash flow : (Enclose Financial Statement preferably audited of the Company/Firm for the last e) 21. commitment. experience 31.

(b) Basic Terms & Condition of Lease: i. ii. iii. iv. v. vi. vii. viii. ix. x. xi. xii. Lease Amount Lease Period Application Fee Service Charge Commitment Charge Risk Fund Supervision & Monitoring Fee Rate of interest for determining Lease Rental Lease Deposit Lease Margin / Down Payment : : : : : : : : : : : : N/A 24. DECLARATION : a) All procedures in respect of opening of Account have been complied b) c) d) e) f) g) with All necessary documents establishing the borrower’s legal entity have been obtained Generate sufficient cash flow to pay lease rentals on regular basis. Existing securities/Banking documentations and collaterals with their valuation have been checked and they are in order Documents establishing that proposed facility is within authorization and borrowing powers of the applicant have been obtained All assets offered as security/collateral have been verified to be free from all encumbrances & acquisition. Security documents as prescribed have been obtained/will be obtained along with complete set of borrowing documents before h) i) j) disbursements. The customer is a Director/Shareholder of our bank, if yes, the extent of share holding (value Tk………..) The customer is a Director/share holder of other banks (If yes, mention the name of the Bank). The customer has got no classified liability in it’s name/in the name of the Proprietor / Partners / Directors of the company and/or in the name of the allied concerns in which the subject company/the above persons have interest. 107 Yes/No Yes/No Yes/No 12,50,000.00 ……48. months from the date of execution. Tk. 500.00 (already realized) Tk. 3,000/1% lease Amount 1% lease Amount 1% lease Amount 15% ………………% 2 (Two) Lease Rentals 29 % 02.07.2008

Expected date of disbursement Others if any

Yes/No Yes/No Yes/No Yes/No Yes/No Yes/No Yes/No

k)

Up-to-date CIB report (date 30.04.08.) obtained / collection under process.

Yes/No

Signature of Other Official (Executive / Officer) Name : MD .JAMAL UDDIN CHY. Designation : SR.PRINCIPAL OFFICER

Signature of Manager (Head of the Branch) Name :ASM HELAL UDDIN Designation : MANAGER

6.2.3 Net worth calculation (Individual)
Personal Net- worth Statement as on 31.12.2007

The Manager National Bank Limited Muradpur Branch Chittagong...
Dear Sir, I do hereby furnish the under noted particulars of my assets and liabilities and information. The information furnished below are correct to the best of my knowledge. 1. 2. 3. 4. Name Md.Azhar Uddin.............................………………….. Father's Name / Husband's Name Mother's Name Residential Address : .Hajee Mohammed Badshah Meah

Date:10.06.2008..

: Nurjahan Begum.......... :Chemon Ara Vila, Near bahutala colony,
Agrabad C/A, Chittagong

5.

Permanent Address

: Bhatiary, Badshah Meah’s House, P.S-Sitakunda Chittagong

6.

Telephone: Office .......................... Mobile: 01815632724,01678063450

Residence : ............................

108

7.a) 7.b) 7.c)

TIN no.346-107-5121 Occupation Income from other source

: ....................................................………………………………………. : seller of scrap iron........... Monthly Income :2,00,000/-.......................... : Source .................................................... Monthly Income :

Monthly expenditure:…Tk.25,000/-

8.

Description of the properties and Assets :

8.(a) Land & Building (Unencumbered):
Location & Particulars of the Property Area of Land/ Covered area (in case of Building) Ownership Market Value of Land/Building

Total 8.(b) Land & Building (Encumbered):
Area of Land/ Covered area (in
case of Building) Ownership

Tk =

Location & Particulars of the Property

Market Value of Land/Building

Mortgaged amount
(credit limit)

Mortgage with ................... ...... (name of Bank with branch) NBL,Pahartali Branch, Ctg.

Mouza- Dakkin Jangle Sonaichari, PS-Sitakunda, Ctg. Mouza- Bhatiary, PS-Sitakunda, Ctg. Mouza- Bhatiary, PS-Sitakunda, Ctg. Mouza- Bhatiary, PS-Sitakunda, Ctg.

5.17 dec.

10.34 lac

Tk.30.00 lac

8.00 dec. 2.00 dec. 15.66 dec.

16.00 lac 4.00 lac 58.48 lac

Do Do DO

DO DO DO

8.(c)

Investments details as on .31.12.2007..........

109

...85.74.P. Other Assets.....Sagoica Road.000/-.......... 110 .........000/-..(e) 9...91..2........70.S-Pahartali... Chittagong Associated as (Status) Proprietor Nature of Business Seller of Scrap iron Amount of investment 98.... Tk..(d) Cash and Bank balances as on date i) with National Bank Ltd.......... 8...........574........00 8.12...... Tk. ii) with other Bank Tk...000/-.................Name of the Concern & address M/s Rehab Steel Janata Iron Market. if any Total Assets 8(a) + 8(b) + 8(c) + 8(d)+8(e) Tk=1......

.... Details of Liabilities 10.......24.00 lac 7..1.. 7...........88........88...174/-.................10.83...... if any 11............ (Signature of the Customer) Name: Date:10......2007..2008 111 ..00 lac Present outstanding 7... Name of the Bank with Branch National Bank limited Total Tk =30....00 Nature of Loan CC (H) Limit sanctioned 30.. Yours faithfully...(b) Other liabilities..(a) Borrowing from Banks as on 31..... I authorise you to obtain any information and / or verify any information from any source you require regarding my credit worthiness.88...06.............00 Expiry of limit 31...12.174...... Tk......11) Tk.....2008 Classification status uc 10........ 12......174.. Total Liabilities 10(a) + 10(b) Net Worth (9 ..12... Tk ..000/.

...................06............ Badshah Meah’s House.. Father's Name / Husband's Name Mother's Name Residential Address : . Monthly Income :2.. P....... Mobile: 01819611339.6.. 4.... P...20..b) 7......000/-...... Telephone: Office ........................ Monthly Income : ............worth Statement as on 31................S-Sitakunda Chittagong 5.. The information furnished below are correct to the best of my knowledge.... Dear Sir.S-Sitakunda Chittagong 6. 1............ : Nurjahan Begum.... 3... 2......... 7............ : Bhatiary...……………………………….........Hajee Mohammed Badshah Meah Date:26..a) 7..........2008....Bazlur Rahman....000/- 112 ............. Monthly expenditure:…Tk.......4 ) Net worth calculation (Guarantor): Personal Net.........2.…………………....12..... Permanent Address : Bhatiary........2007 The Manager National Bank Limited Muradpur Branch Chittagong.............c) TIN no...346-106-2655 Occupation Income from other source : ............. : seller of scrap iron.... I do hereby furnish the under noted particulars of my assets and liabilities and information.... Residence : ..... Name Md.. : Source ...... Badshah Meah’s House...20..

00 lac 24. 2. Sonaichari. PSSitakunda.00 lac 8.00 lac 5. 2.50 dec. 12 Dec. Description of building / structure Residential land Agricultural land Value Name of Land 27.(a) Land & Building (Unencumbered): Location & Particulars of the Property Area of Land/ Covered area (in case of Building) Ownership Market Value of Land/Building Total 8.00 lac 5.00 lac 5.(b) Land & Building (Encumbered): Tk = Schedule of Land & Building Mouza-Bhatiary. Ctg Area of land 18.8. Ctg Mouza-Dakkin Jangal.00 lac 24. Ctg Mouza-Bhatiary. PSSitakunda. 4 dec.00 lac Structure - Total 27.00 lac 5.(c) Investments details as on . PSSitakunda.3112. -Do-Do-Do-Do- - -Do-Do-Do- 8.00 lac 8.00 lac Mortgagee NBL. Ctg Mouza-Bhatiary. PSSitakunda.2007 113 . Description of the properties and Assets : 8. PSSitakunda. Ctg Mouza-Bhatiary.50 dec.00 Dec.

...(d) Cash and Bank balances as on date i) with National Bank Ltd... Bhatiary...00 lac 47. Name of the Bank with Branch M/s Earfan Steel National Bank limited Pahartali Br....12.06..84.Name of the Concern & address Associated as (Status) Nature of Business Seller of Scrap iron Amount of investment 1.......00 M/S.926/- 10.... Tk.1.. 8. if any Total Assets 8(a) + 8(b) + 8(c) + 8(d)+8(e) Tk=1.06..2009 Uc Nature of Loan CC (H) Limit sanctioned 45........08 Classification status Uc 114 .Earfan Steel.........50.000/-.19.70... ii) with other Bank Tk.25.34..20.07.926.(a) Borrowing from Banks as on 31... Fouzderhat Station.35... Tk.926/STD 10........00 6. Details of Liabilities 10... Other Assets... Chittagong Sitakunda..... ctg..Tulatali Proprietor Road..000/-.......00 lac Present outstanding 40.. Md Bazlur rahman Standered Chartered Bank Total 55......926/Expiry of limit 30.90.......000/30.....(e) 9.. 8.....

.....(b) Other liabilities.....5 Check List: Check List: 1) 2) Lease Application form duly filled in... I authorise you to obtain any information and / or verify any information from any source you require regarding my credit worthiness... Tk......... (Signature of the Customer) Name: Date:26....926.. b) For Vehicle / Lift / Generator / Air Condition etc. 1... Quotation(s) of party's desired Machinery / Equipment must be marked "Accepted" with signature of the Applicant...06.10....47..42..000/-......... (ii) Production capacity of the machinery etc........2... 12....11) Tk ....... 115 ..... Information and papers relating to:a) For machinery / Equipment: (i) Competitive quotations/ Invoice for proposed Machinery/ Equipment (imported/ local) along with copy of supporting literature / catalogue...2008 6...34.................: Competitive quotations along with copy of supporting literature/catalogue......... Total Liabilities 10(a) + 10(b) Net Worth (9 .. Yours faithfully. Tk.... Quotation(s) of party's desired items must be marked "Accepted" with his signature of the applicant. if any 11...........91...00 .

Certified copy of Memorandum and Article of Association along with Certificate of Incorporation. copy of Lease Agreement be furnished. competitive pressure (i.) Certified copy of Annual Return statements to Registrar of Joint Stock Company. Government permission for setting up of the Industry. Board resolution to avail Lease Financing facility and also execute documents. TIN certificate. Cash flow Statement -Preferably audited) for the last consecutive three years. Certified copy of CS. Original copy of Mutation order and certified copy of Mutation Khatian.e. RS & SA Khatian. Original Title Deed for property offered as security along with the following documents a) b) c) d) e) Bia deed Non encumbrance certificate. 4) 5) 6) 7) 8) 9) 2 (Two) copies of Passport Size recent photograph of the Directors /Individual/ Partner/ Proprietor. IRC duly attested by the promoters / Directors. Original copy of Up-to-date rent receipt. 13) 14) 15) Copy of Bank Statement duly attested by the MD/Chairman. list of competitors and their performance.3) Detailed break-up of personal Net worth of each individual / proprietor/ Partner/Director of the Company / Firm as per prescribed format. Certified copy of Commencement of business (in case of Co. If the project is located / to be located in rented premises. barriers to prevent new competitors to enter this industry). Income statement. Competitive position (i. Industry profile mentioning therein industry growth. 10) Financial Statements (Balance sheet. Copy of Trade License. company rank in industry in terms of market share) and strength & weakness of the company in comparison to its competitors.e. 116 . 16) 17) Feasibility report of the project. [ 11) 12) Projected Financial statements as well as cash flow statement.

Tele Phone No : : . Name of Branch : Muradpur Branch Branch Code Date : Date : 3.00. of Head Office : 6.000/In words: Fifteen LAC ONLY. Under district of : Chittagong. Mother’s Name ( In case of Individual) : 11. Reference Nos of branch : 5. 1. Name of the borrower in full : 8. Father’s Name ( In case of Individual) : 10. if necessary. N/A N/A N/A : M/S REHAB STEEL 117 . Borrower code ( If available) : 7. Name of the Bank/ Financial Institution: NATIONAL BANK LIMITED.18) Other relevant information / documents. Individual ID No. Husband’s name ( In case of Individual) : 12. 2.6) CIB Report: Inquiry Form: CIB . Address : a) Permanent : b) Present c) Business : d) Factory 14. : 13. Abbreviated Name : 9.2.1A (For Individual/ Institution) Amount of loan applied for: In figure: 15. Reference Nos. 6. TIN : 15. 4.

Name of the branch with districts Note: Suppressing or distortion of any information ( related to borrower/owner ) by the banks/financial institution is punishable under Bangladesh bank Order 1972. Chapter IV Art 48 118 . Name: ASM MANAGER Seal : Tele Phone No. HELAL UDDIN.To the best of our knowledge the above borrower obtained the credit facilities from different banks/ financial institutions as mentioned below :Name of the banks/ financial institutions (i) (ii) (iii) NIL Signature Head of the Branch/ Manager.

Full name of the borrower 7. of branch : 4. Reference Nos of Head Office 5. Mother’s Name ( In case of Individual) : NURJAHAN BEGUM 12.Owner’s ID No. Name of the bank/ financial Institution/ Insurance co.* 16. Abbreviated name of the owner : M/S REHAB STEEL Muradpur Branch Date : Date : : MD.(Of which the above owner is Chairman/Director)…. Reference Nos.) Name of the Bank/ Financial Institution : National Bank Ltd. To best of our knowledge the above owner : 119 Other : N/A . Borrower Code : ( If available ): 6. Branch Code No : 3. Father’s Name ( In case of Individual) : HAJEE BADSHA MIAH 11. Sponsor/Appoint ed Director Sponsor/ Elected DirectorNominated ( by Govt. Husband’s name ( In case of Individual) : 13. AZHAR UDDIN.) 17. Status of the owner ( Tick Only) : Proprietor √ Partner ChairmanSponsor/ Appointed MD. 1.) ( by Pvt. Full name of the owner 8. Name of Branch : 2. Address : a) Permanent : b) Present c) Business : d) Factory : 15. TIN of the Owner _____________________________15.(TO BE FILLED IN CAPITAL LETTER/ TYPE) Inquiry Form : CIB – 2A (Owner information if borrower is institution. : N/A 10. int.

NIL Name of branch with District Signature Head of the Branch/ Manager. 120 .MANAGER : MD. ASM HELAL Seal : Tele Phone No.c) Obtained credit facilities in individual name : Yes as mentioned below. No d) Has got other business which obtained credit facilities from the bank/financial Institution Name of the owner related business/ firm with Name of bank/financial institution address : i) ii) To the best of our knowledge the above information is correct . Name UDDIN. Note : Suppressing or distortion of any information ( related to borrower/owner ) by the banks/financial institution is punishable under Bangladesh bank Order 1972. Chapter IV Art 48 * Applicable for individual only.

of Head Office : 6. Name of the Group 8. Reference Nos. Branch code NoDate : Date : Borrower Code : 4. Related Business concern Name i) ii) iii) iv) v) Please write N/A or Not Applicable if the concerned borrower is neither a group nor a subsidiary/ sister concern under declared a group. Address of Group a) Permanent b) Present c) Business : : : :Business address N/A : : 9.( TO BE FILLED IN CAPITAL LETTER /TYPE) Inquiry Form : CIB – 3A (Information of group / Related Business concern) 1. Name of the Branch : Muradpur Branch 3. Full Name of Borrower : M/S REHAB STEEL ( If available) : 7. 2. Name of the Bank/ Financial Institution : NATIONAL BANK LIMITED. To the best of our knowledge the above information is correct . Under district of : Chittagong. of Branch : 5. 121 . Reference Nos.

MANAGER HELAL UDDIN Seal : Tele Phone No. Chapter IV Art 48 122 . Note : Suppressing or distortion of any information ( related to borrower/owner ) by the banks/financial institution is punishable under Bangladesh bank Order 1972. Name:ASM .Signature Head of the Branch/ Manager.

 Interest rate gap: One of the most important problems in advance is – ‘Interest Rate Gap’ which means the negative gap between interest rate on deposit and interest rate on advance.  High interest rate: Due to increased cost of fund. the bank has to charge high interest rate on loan. And this can be a cause of classified loan.  Lack of strong monitoring system: There is a lack of proper monitoring system after sanctioning loans and advances. proper implementation of those procedures is not seen. 123 .CHAPTER SEVEN Problem related to Credit Management  Reluctant to maintain procedures: In spite of having strong procedures in association with credit. The bank is efficient in client management for which clients are not strongly motivated for further investment. the bank can’t attract more customers for investment.  High cost of fund: The cost of fund of this bank is relatively higher than other banks.  Inadequate information: Some customers give improper and incomplete information about themselves while taking loan for which risk increases  Break of commitment by clients: Some of clients do not utilize the ‘loan amount’ for the purpose which the client didn’t acknowledge the bank before. Due to this high interest rate. Usually this gap is created because of having more cost of fund.

 Insufficient advertisement: There is a lack of proper advertisement for different loan scheme of the bank. Inability to reduce interest rate: Govt. has declared to charge single digit interest rate on loan. policy is not favorable for banking business.  Demotivating working environment: Working environment of the advance section is not influencing and satisfactory enough to attract interested candidates who are looking for a smart banking job. policy: Sometimes Govt. which has been exercised in some of the banks but NBL.  Unfavorable govt. It makes the customer ignorant about the bank’s credit service.  Lack of manpower: There are not enough officers in the ‘Advance section’ of the branch to handle all the activities properly. 124 . still now charges two-digit interest rate from the customer.

 Absence of Islamic Banking System. Weakness.  Harmonious lender (bank) .  It offers diversified loan offerings.  Absence of high tech computerized system.  Lack of young. Weaknesses  Lack of modern equipment. The SWOT of NBL has been shown below: SWOT Analysis Internal Factors External Factors Strength Weakness Opportunity Threats Internal factors Strength  Existence of strict and standard credit management.  Experienced manpower in advance/loan department.borrower (Client) relationship.  Lack of proper advertisement of the products and services of advance.  Wide network branches with online services. energetic and talented officers.  Existence of some new & attractive credit scheme. 125 .  Decreasing trend of classified loan.  Lack of proper office space. Opportunity and Threat.CHAPTER EIGHT SWOT Analysis SWOT stands for Strength.

 Competitors have young and energetic work force. energetic and talented officers.  Remarkable progress on Islamic Banks.  Govt.  Entrance of highly equipped and modern banks.  It can take initiative for introducing Islamic Banking system. policies are not in favor of the private banks.  Competitors done the credit services to customers more effectively. 126 .  It can set a competitive interest rate. has imposed high rate of taxes and VAT on interest received on advance.  It can recruit young.  Intense competition in the credit market.External factors Opportunities  It can introduce more new and attractive credit scheme.  Competitors offer low interest rate on loan. Threats  Govt.

(1) Branch should intensify its quality of client service. NBL’s liquidity performance is satisfactory. RECOMMENDATION & CONCLUSION 9.CHAPTER NINE FINDINGS. NBL has started to diversify its business into different areas of the country. NBL is maintaining steady profitability. Customer services must be made dynamic and prompt. (3) Put more emphasis on the depository service and create more depository services.1) Findings are as follows: (1) (2) (3) (4) (5) (6) (7) (8) (9) NBL has a good set of institutional owners that gives it a better Board of Directors that many other banking companies. The growth of the NBL has so far been very steady and very high. 127 . NBL is a bank.2) Recommendations: The following steps may be taken for the betterment of the bank. which has been successful in developing a professional job environment where each officer has substantial level of authority and responsibility. NBL has good investment structure but in some sector it does not perform very well. NBL should establish its own networking system between its branches so that they can exchange their information faster and efficiently. (2) Bank should be more innovative and diversified in its services. NBL’s credit appraisal process is pleasing but some corrective measure has to be taken. (4) Information system should be developed. 9. NBL is maintaining good credit policy.

So National Bank Limited has many strength and opportunities to make more benefit in the future. NBL has established itself as renowned private bank. (8) Proper and effective monitoring system should be developed in order to prevent loan default. (7) The bank should try to decrease the interest rate on loan in ‘single digit’ according to the declaration of the Government. the more of the income will be from credit operations. Success in the banking business largely depends on effective lending. Less the amount of loan losses. 9. (6) NBL should always monitor the performance of its competitors in the field of credit. (9) The officers of this department to make a remarkable standard should strictly follow advance procedure. Banks are the pillars of the financial system. The bank has a tremendous management side that is still truing to make the bank more successful. (10) The bank should strictly follow the ‘principal of sound lending’. The more the income form credit operations the more will be the profit of the bank. The bank should not sanction loan to the customer without all necessary documents (11) There should have adequate advertisement for the new loan scheme in order to influence customer. opening more branches year by year facilitates the expansion of network of the bank. Likewise Lending is the pillar of a bank. Then the bank can get more clients. NBL has introduced some attractive credit scheme. 128 . In spite of many shortcomings.(5) NBL should develop their E-Banking system. Without lending operations a bank has no sense. On the other hand.3) Conclusion In the face fierce competition from the other players of the market and strict policies being introduced by the Government and Bangladesh Bank.

3.nblbd. 2.References 1. 2007.com 5.2006. Instruction Manual of National Bank Training Institute. Office Website of the Bank: www. Credit Manual: Complied by Training Institute. 129 . 2008. 4. National Bank Brochure. National Bank Ltd. Annual Report of National Bank Ltd.

Sign up to vote on this title
UsefulNot useful