Credit Risk Management of NBL1

7/23/2019 Credit Risk Management of NBL1

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STAMFORD UNIVERSITY BANGLADESH

Internship ReportOn

“Credit Risk Management of National Bank Limited’’

Supervised For :

Md. Mamunur Rashid

Assistant Professor

Department of Business Administration

Stamford University Bangladesh

Submitted By:

Shanchita Malaker

ID !"#$#%&&

Batch "# 'A(

Program) BBAMajor in Accounting

Letter of Transmittal

*+*+

Md. Mamunur Rashid

Assistant Professor,

Department of Business Administration,

Stamford University, Bangladesh.

A Bank for Performance -ith Potential

Page $



Subject: Submission of BBA Internsi! Re!ort"

Dear Sir,

ith due respect and honor, I -ould like to su/mit internship report, -hich -as done on

0ational Bank 1imited, a Study on Modhupur Branch. *he internship program has given me

the opportunity to com/ine my theoretical kno-ledge -ith practical e2perience. I tried my

level /est to make the report meaningful and informative.

I have done my internship in 0ational Bank 1td. for the period of three months. *he officers

of 0B1 -ere very cordial and e2tended their hands -ithin the limit of their authority. As the

time -as limited, the report could not /e done more comprehensively and analytical.

3our valua/le advice, suggestion and guidance have helped me to prepare the report -ith

ease. I -ill /e very glad, if you kindly accept this report.

Sincerely 3ours,

))))))))))))))))))))))))))))))

Shanchita Malaker

ID !"#$#%&&

Batch "# 'A(Program) BBA

Ma4or in Accounting.

Letter of Autori#ation

*his is to certify that the Internship Report on 56redit Risk Management of 0ational Bank

1imited7 has /een prepared as a part of completion of the BBA program ma4or in Accounting

Discipline from Stamford University Bangladesh, carried out /y Sancita Malaker, /atch


Page 8



"# 'A( , /earing ID9 BBA !"#$#%&& under my supervision. *he report or the information -ill

not /e used for any other purposes.

:e is permitted to su/mit the Internship Report.

;;;;;;;;;;..

Md. Mamunur Rashid

Assitant Professor, 'Accounting(

Department of Business Administration

Stamford University Bangladesh


Page #



Declaration

))))))))))))))))))))))))))))))))

Shanchita Malaker

ID !"#$#%&&

Batch "# 'A(

Program) BBA

Ma4or in Accounting.S*AM<+RD U0I=>RSI*3, BA0?1AD>S:


Page "

I AM S$ANC$I%A MALA&'R( )* BAC$'L)R B+SIN'SS A,MINIS%RA%I)N(

MA-)R IN ACC)+N%IN. )* S%AM*)R, +NI/'RSI%0( BAN.LA,'S$( ,)

$'R'B0 ,'CLAR' %$A% %$' IN%'RNS$I1 R'1)R% )N “CR',I% RIS&

MANA.'M'N% )* NA%I)NAL BAN& LIMI%',2 $AS N)% B''N 0'%

S+BMI%%', B0 M' *)R AN0 ,'.R''( ,I1L)MA %I%L'( AN0

R'C).NI%I)N B'*)R'"



Preface

*hrough this report an individual can e2pect to have a good kno-ledge and understanding on

the various methods of operations performed /y 0ational Bank 1td. Particularly Performance

>valuation. <rom the inception of 0ational Bank 1td. to the present condition everything has

/een included here in a precise from. I have tried my level /est to put more emphasis on the

Performance >valuation of 0ational Bank 1td. since it -as the topic of the internship

program. *his report is to /e used only for the academic purpose. *he author of this report

collected all the necessary and relevant data. After month long hard offer it has /ecome

possi/le for the report /eing comprehensive and factual. Making the report as a part of my

internship program -as the main focus in fact. *he data are truly confidential and no one can

use its information for any pu/lic. I -ould like give thanks to everyone -ho has helped and

encouraged me in the process of preparing this report.


Page %



Acknowledgement

At first, I must sho- my gratitude to Almighty ?od for giving me energy @ capa/ilities to preparing this report. *hen I -ould like to remem/er the contri/ution and keen interest of my

parents that make me a/le to come to this stage. *hen I -ould like to e2press my sincere

gratitude and thanks to my :onora/le program supervisor Md. Mamunur Rashid, Assistant

Professor, Department of Business Administration of Stamford University Bangladesh for her

/rilliant and e2cellent guidance and assistance to complete this report.

0e2t, I like to e2press my thanks Md. Shahidullah Bhuiyan 'SP+ @ Manager( of the 0ational

Bank 1td, Modhupur Branch and Md. 0aim Uddin '>+( @ I also like to e2press my thanks

Mr.0asir Uddin 'S.+(.

<inally, I thanks to all of my teachers and friends -ho have helped me in different -ays.

Sancita Malaker


Page



Executive Summary

*he report is prepared on the /asis of # months practical e2perience at 0ational Bank 1td.

*he internship program helped me to acCuire lot kno-ledge a/out the practical situation of a

financial institution. *his program helped me to implement my theoretical kno-ledge in to

practical and realistic -ork environment.

In the age of modern civiliation, /ank is playing vital role to keep to the economic

development -heel moving. Bank provides means and mechanisms of transferring command

over resources those -ho have an e2cess of income over e2penditure to those -ho can make

use of the same for adding to the volume of productive capital. *here are a large num/er of

small amount of savings that are generally reluctant to invest their surplus income /ecause of

their lack of adeCuate kno-ledge a/out complicated investment affairs. *he /ank provides

them -ith the safety, liCuidity, and profita/ility of savings. *he savings /ank use as their key

of /usiness. Investing the savings in higher degrees of return and ma2imie their profit in

/usiness.

0ational Bank 1td. is a scheduled commercial /ank registered /y the Bangladesh /ank.

0ational Bank 1td. follo-s the rules and regulations prescri/ed /y the Bangladesh Bank. *he

functions of the /ank cover a -ide range of /anking and functional activities to individuals,

firms, corporate /odies and other multinational agencies.


Page



%able of Contents

Ca!ter %o!ic 1ag

eCa!ter

)ne

Introduction

$.$ +rigin of the

report;;;;;;;;;;;;;;;;;;;;..

$.8 Background of the

study;;;;;;;;;;;;;;;;;;.

$.# +/4ectives of the

study;;;;;;;;;;;;;;;;;..

$." Scope of the

study;;;;;;;;;;;;;;;;;;;;...

$.% Source of

information;;;;;;;;;;;;;;;;;;.

$. Methodology of the

report;;;;;;;;;;;;;;;;

$. 1imitations of the

report;;;;;;;;;;;;;;;;;;

Ca!ter

%3o

An o4er4ie3 of te National Bank

8.$ Profile of 0B1

8.8 =ision Statement

8.# Mission Statement

8." 6ommitments

8.% +rganiational Structure

8. Management structure of 0ational Bank 1td.

8..$Planning;;;;;;;;;;;;;;;;;;; 8..8 +rganiing;;;;;;;;;;;;;;;;;;

8..# Staffing;;;;;;;;;;;;;;;;;;;.

8.." 6ontrolling;;;;;;;;;;;;;;;;;;

+rgan ?ram of the 0B1;;;;;;;;;;;;;;;.....

:ierarchy of the Bank;;..;;;;;;;;;;;;;;.

8..%Divison of 0.B.1;;;;;;.

8.. Introducing the Branch;;;;;.

8. Deposit Products of

0B1;;;;;;;;;;;;;;;;...

8.& 1oan Products of 0B1;;;;;;.


Page &



Ca!ter

%ree

Credit management 1olic5 of NBL

#.$Introduction;;;;;;;;;;;;;;;;;;;;.

#.8 6redit risk policy ;;;;;;;;;;;;;;;

#.# 6redit principles;;;;;;;;;;;;;;;;;.

#." 6redit evaluation;;;;;;;;;;;;;.

#.% 6redit Policy guidelines;;;;;;;;;;;;;;;

#.%.$ 1ending guidelines;;;;;;;;;;;;.

#.%.$.$ Industry and /usiness segment

focus;;;;;;;;;;;;;;;;;.

#.%.$.8 Single Borro-er

;;;;;;;;;;;;;;;;;...

#.%.$.# 1ending caps;;;;;;;;;;;;;; #.%.$." Discouraged Business

types;;;;;;;;;;;;;;;;;;

#.%.$.% 1oan facility parameters

#. 6redit Assessment @ Risk ?rading

#. 6redit Risk ?rading '6R?(

#.& 6R? Revie-

#.E Management Information System of 6R?;;;;;;;;...

#.$! Special

Attention;;;;;;;;;;;;;;;;;;;..

#.$$ 1imitation of

6R?;;;;;;;;;;;;;;;;;;...

#.$8 6R? helps

#.$# >arly arning Signal '>S(;;;;;;;;;; ;;;

#.$" Approval Authority

#.$% Segregation of Duties

#.$ 6redit Risk Management System

#.$.$ Risk Management

#.$ Risk Management Process

#.$& Measuring Risk of 0B1

#.$E 6redit Risk

#.8! 1iCuidity Risk

#.8$ Interest rate Risk

#.88 Risk 6ontrol @ Measurement are *aken /y 0B1

#.8# Procedural ?uideline

#.8#.$ 6redit Approval Process

#.8#.8 Mandatory 6hecking


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#.8#.# Dis/ursement

#.8#." 6ustodian

#.8#.% 6ompliance ReCuirements of 6redit Administration

#.8" 6redit Monitoring

#.8".$ >arly Alert process

#.8% 6redit Recovery

#.8%.$ 0on)Performing 1oan'0P1( Accounts

Management

#.8%.8 0on)Performing 1oan '0P1( Monitoring

#.8%.# 0P1 Provisioning and rite +ff

#.8 6redit

ProcedureFs;;;;;;;;;;;;;;;;;;..

#.8 6redit

Administration;;;;;;;;;;;;;;;;;..

#.8& 6redit

Monitoring;;;;;;;;;;;;;;;;;;;

#.8E 6redit

Recovery;;;;;;;;;;;;;;;;;;;...

#.#! Principle of ?ood lending;;;;;;;;;;;;;;...

#.#$Safety;;;;;;;;;;;;;;;;;;;;;;.

#.#81iCuidity;;;;;;;;;;;;;;;;;;;;;.

#.##Purpose;;;;;;;;;;;;;;;;;;;;;...

#.#"Profita/ility;;;;;;;;;;;;;;;;;;;;

#.#% Security;;;;;;;;;;;;;;;;;;;;;..#.# Spread;;;;;;;;;;;;;;;;;;;;;;.

#.# 0ational interest;;;;;;;;;;;;;;;;;;.

#.#& <inancial Performance of 8!!$#

Assets

6apital

1ai/ilities

Deposit

Investment

1oans and Advances

+perating and 0et Profit

1ai/ilities

<oreign trade

Import

>2port

<oreign Remittance

#.#E <ive 3ears <inancial Summary


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#."! Analysis of 0B1 Performance -ith financial Ratio

#."!.$ Ratio Analysis

#."!.8 Profita/ility Ratio

#."$ Management >fficiency Ratio

#."8 Risk Management Ratio

#."# 6redit processing -ith special reference

#."" Risk analysis

#."% <indings

#." Recommendations

#." *ypes of advance)loan,over draft,cash credit

#."& 6ash credit

#."E Dra-ing Po-er;;;;;;;;;;;;;;;;;;.

#.%! 6omparative study among loan,6ash credit and +ver)

draft;;;;;;;;;;;;;;.

Ca!ter

*our

Credit )!erations of NBL

".$ *arget 6ustomers of 0B1

".8 *ypes of 1oan <acilities

".# Documentation of 1oan

"." 6reation of 6harges for 6harges for Securing 1oan

".% +ver the 3earFs 1oan Providing Information

". 0on)Performing 1oan

"..$ 0on)Performing 1oans in Bangladesh

"..8 0on)Performing 1oans9 0ational Bank Perspective

"..# 6ategories of 6lassified 1oan

".." Sector ise 6lassified 1oan

". Analysis @ Interpretation

Ca!ter

*i4e

*indings

%.$ <indings of the Study

%.8 1imitations of the Study

Ca!ter

Si6

S7)% Anal5sis of %e National Bank Limited

.$ Strengths;;;;;;;;;;;;;;;;;;;;;;.

.8eakness...;;;;;;;;;;;;;;;;;;;;

.# +pportunity;;;;;;;;;;;;;;;;;;;;;

."*hreats;;;;;;;;;;;;;;;;;;;;;;;

Ca!ter

Se4en

Recommendation 8 Conclusion


Page $$



.$ Prospects9 :o- to

achieveG ....................................................................

.8 6hallenges9 :o- to

faceG ......................................................................

.# 6onclusion;;;;;;;;;;;;;;;;

." Recommendation....................................

Ca!ter

'igt

Bi/liography

;;.>nd of the Report;;.

Anne2ure;;;;;;;..

*erms Used in the Report

IntroductionIntroduction

9"9 )rigin of te Re!ort:9"9 )rigin of te Re!ort:

BBA academic program is the /uilding up to the theoretical kno-ledge a/out /usiness

administration. hich is the /ase of practical kno-ledge. +ne semester internship program

is an attempt to provide /usiness students an orientation to a real life /usiness situation in


Page $8

Chapter:



-hich -e can o/serve and evaluate the use and applica/ility of the theoretical concepts,

-hich -ere taught in the classroom. As a student of /usiness administration, I preferred to

complete my internship program in a <inancial Institution like Bank. *hen I got a chance to

complete the program in a leading private commercial /ankH 5 The National Bank Limited The National Bank Limited .”

My internship topic is Credit Risk Management of National Bank Limited’Credit Risk Management of National Bank Limited’ and it -as

assigned to me /y my supervisor. It -as a challenge for me to complete a report on such an

important topic. But I have completed this report successfully thanks to continuous

supervision of my academic supervision Md" Mamunur Rasid"Md" Mamunur Rasid"

9";9"; Background of te stud5Background of te stud5

*his report has /een prepared /ased on one selected listed Bank in Bangladesh. *his report

has /een prepared /ased on the information of this /ank. All information is secondary and

collected from Internet, Brochures, annual report etc. Based on this information ratio has

/een calculated. <or the calculation of ratio has /een calculated to measure the current

position of the Bank. At the same time compare -ith the market performance.

9"<9"< )bjecti4e of te stud5:)bjecti4e of te stud5:

*he o/4ective of the report is to provide a general description of the traditional /anking and

an e2posure of the /anking environment of Bangladesh. It also provides an e2posure of

practices of different /anking activities of 0B1, Modhupur Branch in *angail. +/serving the

e2isting rules for /anking and fulfilling the partial reCuirement of BBA program is another

o/4ective of the report.

I have completed my internship program in 0ational Bank 1td. And this report is a/out this

/ank. As one of the main o/4ectives of internship is to gather 4o/ e2perience, I have tried to

put some of the e2periences that I have learnt from my internship in this report.


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9"<"9 1rimar5 )bjecti4e:9"<"9 1rimar5 )bjecti4e:

Primary o/4ective of this report is to measure and analye the operational and financial

performance of 0ational Bank 1td.

*o acCuaint -ith daytoday functioning of service oriented /anking /usinessH

*o have practical e2posure in /anks that -ill help a lot to understand the future

courses of the program

*o /e familiar -ith day to day functioning and service offered /y a commercial /ank.

*o o/serve and analye the performance of the specific /ranch and the /ank as a

-hole.

*o make a /ridge /et-een the theories and practices on /anking operations.

*o kno- a/out the international trade financing activities.

*o find out the internal and e2ternal lacking in the daily operation that -ould help to

0ational Bank 1imited for more progress.

9"<"; %e s!ecific objecti4es of tis re!ort are = 9"<"; %e s!ecific objecti4es of tis re!ort are =

*o present an overvie- of 0ational Bank 1td.

*o appraise the performance of 0ational Bank 1td.

*o apprise financial performance of 0ational Bank 1td.

*o identify the pro/lems of 0ational Bank 1td.

*o recommend remedial measures of the development of 0ational /ank 1td.

9">9"> Sco!e of te stud5:Sco!e of te stud5:

*he report covers all the /est possi/le -ays of fuming efficient information. In my report I

have tried at my level /est to descri/e each and every function ela/orately.

9"? Source of information:9"? Source of information:

Information collected to furnish this report is /oth from primary and secondary in nature. I

collected primary information /y direct conversation -ith the credit officers. Sources of


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secondary information -ere Annual Report of 0ational Bank. I also studied different /ooks

on <inance and 6redit and searched through Internet for more information.

9"@ Metodolog5 of %e Re!ort9"@ Metodolog5 of %e Re!ort

Methodology includes direct o/servation, face)to)face discussion -ith employees of different

departments, study of files, circulars, etc. and practical -ork. In preparing this report, /oth

primary and secondary sources of information have /een used.

<or collecting primary data, I had to ask the respective officer's(. +thers are like )

Direct communication -ith the clientsH

>2posure on different desk of the /ankH

<ile study.

*he secondary sources are

Annual Report of 0ational Bank 1td.H

Periodicals pu/lished /y the Bangladesh BankH

Different pu/lications regarding /anking functions, foreign e2change operation, and credit

policies I -orked at the Modhupur Branch in *angail of 0ational Bank 1td. *hat is -hy the

report has /een prepared in the light of the functioning of the Modhupur Branch of 0B1. Both

the Secondary and Primary Sources have /een used to collect data for this internship report "

9" Limitations of te re!ort:9" Limitations of te re!ort:

*o prepare the internship I encountered some limitations. *he limitations are given /elo-)

1imitation of time -as a ma4or constraint in making a complete study, due to time

limitation.

It -as too limited to cover all the /anking area. Many aspects could not /e discussed

in the present study.

1ack of comprehension of the respondents -as the ma4or pro/lem that created a lot of

confusion regarding verification of conceptual Cuestion.

Another limitation of this report is BankFs policy of not disclosing some data and

information for o/vious reason, -hich could /e very much useful.

As /eing an intern, it also created some pro/lems as I -as una/le to acCuire hands)on)

e2perience in all the departments, due to the /ankFs policy of maintaining secrecy andalso /ecause I did not get the opportunity in all the departments.


Page $%




Page $

Chapter: !"



An )4er4ie3 of te National Bank LimitedAn )4er4ie3 of te National Bank Limited

;"9 1rofile of National Bank Ltd:;"9 1rofile of National Bank Ltd:

%%he 0ational Bank 1imited '0B1( has a prolonged and glorious heritage in the /anking

industry in Bangladesh. It is the pioneer in the local private commercial -as inaugurated on

March $E&# under the supervision of Bangladesh Bank. A glorious fact of the 0ational Bank

1imited is its approval as first private commercial /ank from Bangladesh Bank in our country.

>conomic development activities in the post li/eration period reCuired service from private

commercial Banks. *o fulfill this demand as -ell as to improve the commercial /anking ser)

vice in Bangladesh, the 0ational Bank 1imited emerged as a private limited company. *he

0ational Bank 1imited is a remarka/le addition to the private sector /ranch /anking in

Bangladesh. Aiming at offering commercial /anking service to the customerJs door around the

country, the 0ational Bank 1imited esta/lished $" /ranches up to this year. *his is the highest

num/er for any private commercial /ank operating in Bangladesh. *his organiation achieve

customerJs confidence immediately its esta/lishment in domestic and international markets.

0B1 took participation in 0epal Ara/ Bank 1imited, 0epal in $EE%.Under a technical service

agreementH 0B1 is e2tending management services to 0BI1, in $EE. Bank opened a

representative office in 3angoon, Myanmar. 0B1 is proud to /e, first private Bank in

Bangladesh -ho introduce credit card 'Master 6ard( /oth local and international. *he Bank

has made agreement -ith estern Union Remittance services for speedy transfer of money

allover the -orld.

*he 0ational Bank limited provides financing in capital market, 6redit line and pro4ect

financing, investment counseling, Under-riting any guarantee, Port folio management etc

along -ith traditional /anking service, Sanchay Prokalpo and Bonus Deposit scheme are) )

praise-orthy /anking service for the middle and lo-er income group. Recently, this

organiation has taken operational decision of t-o pro4ects9 6onsumer 6redit scheme and

6redit 6ard marketing to -iden its service and customer /ase. *he 0ational Bank 1imited is

al-ays emphasiing the improvement of /anking service and /etterment of living standard of

the general people of Bangladesh.


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;"; /ision:;"; /ision:

>nsuring highest standard of clientele services through /est application of latest information

technology, making due contri/ution to the national economy and esta/lishing ourselves

firmly at home and a/road as a front ranking /ank of the country are our cherished vision.

;"< Mission:;"< Mission:

>fforts for e2pansion of our activities at home and a/road /y adding ne- dimension to our

/anking services are /eing continued una/ated. Alongside, -e are also putting highest

priority in ensuring transparency, accounta/ility, and improved clientele services as -ell as to

our commitment to serve the society, through -hich -e -ant to get closer and closer to the

people of all strata. inning an everlasting seat in the heart of the people as a caring

companion in uplifting the national economic standard through continuous up gradation and

diversification of our clientele services in line -ith national and international reCuirements is

the desired goal -e -ant to reach.

In Ser4ing CustomersIn Ser4ing Customers In Ser4ing te Bank In Ser4ing te Bank In Carr5ing )ursel4esIn Carr5ing )ursel4es

at 7ork at 7ork

6ustomer)first

Kuality)focus

6redi/ility @ secrecy

1oyalty

*otal commitment @

dedication

>2cellence through

team-ork

Discipline

:onesty @ Integrity

Sincerity

6aring

6reativity

;"> Commitments:;"> Commitments:

;"? )rgani#ation structure:;"? )rgani#ation structure:

<unctional oriented structure +rganiation structure plays an important role on the

profita/ility of any organiation. 0ational /ank limited is a centralied organiation and

operates in a. *hat is, its activities are designed on the /asis of traditional /anking /usiness,

such as credit, international division, investment, administration, and operation etc. 0B1 hasA formal organiational structure that is highly specialied and centralied.


Page $&



+rganiational setup of the 0ational /ank 1imited is consisting of three organiational

domains. <irstly the central top management, -hich contains Board of Directors, Managing

Director, Additional Managing Director and Deputy Managing director, Ma4or

responsi/ilities of this are to take central decision and transmit it to the second step.

Secondly, 6entral e2ecutive level management, -hich contains e2ecutive vice president,

senior vice president, vice president and Assistant vice president. Ma4or responsi/ilities of

this part are to supervise and control division department. *hirdly, /ranch operation

management, -hich contain /ranch manager and other mid lo-er level management. Ma4or

responsi/ilities of this part are to the % /ranches of this /ank and report to the :ead office

from time to time.

;"@ Management structure of National Bank Ltd";"@ Management structure of National Bank Ltd"

In 8!!$ 0ational Bank 1imited made commenda/le progress in all /usiness, like deposit,

credit, fund management, investment, foreign remittance, credit card @ foreign e2change

related /usiness. Bank has e2pended /usiness activities as holding previously @ parallel /y

diversification its investment to a ne- product. As a ma4or financier remarka/le portion of

total e2ports of the country. *he total assets of the /ank -ere *k. "&#8.$ million as on #$ st

Decem/er 8!!$, -hich is higher than *k. $%&".!8 million than the previous year. *his is the

sign of good management. *he management processes are as follo-s9

;"@"9 1lanning:;"@"9 1lanning:

*he strategic planning approach in 0B1 is top)do-n. *op management formulates strategy at

the corporate level, and then it is transmitted through the division to the individual o/4ectives.Board of directors or >2ecutive committee usually takes the decision. In this process lo-er

level manager are detached in making process, even /rainstorming of lo-er level manager is

a/sent in decision)making and planning process.

;"@"; )rgani#e:;"@"; )rgani#e:


Page $E



+rganiing of the 0ational Bank 1imited is /ased on Departmentaliation. *he organiation

is divided into t-elve departments headed /y >2ecutive vice President or Senior =ice

President. In the 0ational Bank 1imited the -hole operation is centralied and authority is

delegated /y -ritten guidelines. *hese guidelines are9

+perational manual approved /y :ead +ffice, -here each aspect or /anking operation is

ela/orately defined.

Advance manual including advances limit for different management level.

Bad and dou/tful recovery manual.

6ode of conduct.

<oreign /anking guidelines.

6entral /ank directives.

Different management position holders in departments and /ranches practice their

authoried po-er in different cases -ith administrative loophole.

;"@"< Staffing:;"@"< Staffing:

>ntry)level recruitment process of the 0ational Bank 1imited is conducted in three -ays.

+ne -ay is recruitment of pro/ationary officer. >ach pro/ationary officer has one)year

pro/ation period. After completion of pro/ation period the officer 4oins as officer grade III

'/(. *he career path of pro/ationary officer is headed to-ard different management positions.

Second -ay of recruitment is to recruit non)pro/ationary officer -ho 4oins as an assistant

officer. *he career path of an assistant officer is lengthier than pro/ationary officer. *he third

-ay of recruitment is recruitment of staff and su/)staff such as typist, messenger, driver,

guard, attendant, cleaner and other lo-er level positions. Promotion policy of 0B1 is

/asically /ased on seniority /asis. Sometimes, employees are promoted to the higher position

for their outstanding performance. :o-ever, it is found that the average length of a position

held /y an employee is around five years.

;"@"> Controlling;"@"> Controlling

*he /ank has strict control over its all)organiational activities. *he Bangladesh Bank

directives indicate some control measures. *he central /ank conducts credit inspection /y a

team. *he 0ational Bank 1imited has audit and inspection department to take controlling

measures in internal operations. Audit and inspection team send to the /ranches no- and then


Page 8!



Department in Head Ofce o t!e Nationa" Ban# Limited

A$dit % In&pection Di'i&ion A$dit % B$d(et % Monitorin( Di'i&ion

)omp$ter Di'i&ion )redit Di'i&ion

)redit )ard Di'i&ion Di&patc! Di'i&ion

Financia" Admini&tration Di'i&ion

Internationa" Di'i&ion

Merc!ant Ban#in( Di'i&ion

S!are Di'i&ion

Mar#etin( Di'i&ion

S*&tem % Operation Di'i&ion

H$man Re&o$rce Di'i&ion

La+ % Reco'er* Di'i&ion

) H A I R M A N

Board Secretariat

Re&earc! and p"annin(

B$d(et % E,p- )ontro"

La+ % Reco'er*

BOARD OF DIRECTORS

)OMMITTEES

MANAGING DIRECTOR

Monitoring & Implementation

Special audit & Inspection

DMD

OperationDMD

Admin % E&ta."i&!ment

EV/ EV/ EV/ EV/ EV/

))D

EV/

V/ /$."ic Re"ation V/ Gen- Ban#in( SV/ SV/ SV/ SV/

Train Ins V/ )omp$terV/ Ind$&tria" )redit A$dit Acc % Fin

V/ V/ De'e"op

Admin-

V/ E&ta."i&!V/ Gen- )redit In&pection

OS- DE/0ING

F-MAN% OS-O/ GERMENTS RE)ON%STFORNTRADE % )OR/ BAN1ING

and is responsi/le for preparing report that -ill /e su/mitted to the chief Administration to

take necessary actions.

)ran gram of NBL)ran gram of NBL


Page 8$



$ierarc5 of te Bank:$ierarc5 of te Bank:


Page 88

-)-)*')*')')')S')S')$R $R S1)S1)A/1A/1SA/1SA/1/1/1S/1S/11)1)S'/1S'/1

,M,,M,

'/1'/1

AM,AM,

M,M,

C$AIRMANC$AIRMAN



;"@"? ,i4ision of NBL Audit @ Inspection Division.

A*M 6ard Division

Board Secretariat

Budget @ Monitoring Division.

6redit Division)$.

6redit Division. )8.

6redit 6ard Division.

6lassified 1oan Recovery Division.

<inancial Administration Division. ?eneral Banking Division.


Page 8#



:uman Resources Division.

International Division.

Information System @ *echnology Division.

1a- @ Recovery Division.

Marketing Division.

Merchant Banking Division. Pu/lic Relations Division.

Protocol Division.

Reconciliation Division.

System @ +perations

;"@"@ Introducing te branc: 0ational Bank Modhupur Branch is another largest /ranches of 0B1 is located at Modhupur

in *angail. It started its function in the year 8!!.

Presently there are 8% employees in this /ranch as -hich includes

+ne S=P, $ A=Ps, # SP+s, # Pos, % +fficers, # S+s, " +fficers, +ne assistant and others are

messengers, tellers, typist and security guards.

;" ,e!osit 1roducts of NBL:

6urrent Deposit.

Savings Banks Deposits.

Short *erm Deposit.

Monthly Savings Scheme 'MSS(.

0B1 Monthly Scheme.

Special Deposits Scheme 'SDS(.

<i2ed Deposits.

Sundry Deposits.

<oreign 6urrency Deposits.

>2porterFs <6 A6 'R>*0 KU+*A(.

Resident <oreign 6urrency Deposit 'R>6D(.


Page 8"



S!ecialS!ecial

,e!osit,e!osit

ScemeSceme

Sort%ermSort%erm

,e!osit S%,D:,e!osit S%,D:Current ,e!osits C,Current ,e!osits C,

AEcDAEcDMontl5Montl5

Sa4ingsSa4ings

ScemeSceme

*i6ed ,e!osits*i6ed ,e!osits

*,D*,D


Page 8%



<or most of the

people on fi2ed

income the

opportunity to

supplement

their monthlyearning is a

golden one.

And 0B1

Special

Deposit

Scheme gives a

customer 4ust

that.

Under this

scheme,customers can

deposit money

for a term of %

years. *he

deposited

money is fully

refunda/le at

the e2piry of

the term. At the

same time,

during the term

period they can

en4oy a

monthly profit

corresponding

to their

deposited

amount. As for

instance, under

this scheme a

deposit of *k.%%, !!!)

gives a

monthly

income of

*k.%!!).

Short *erm

Deposit or S*D

Account

+pening

procedure is

similar to thatof the current

account. *he

rate of interest

on this type of

account is %L.

ithdra-als

from this type

of account

reCuire a prior

notice of seven

days.

6urrent Deposits '6D

Ac( is a running Ac

-here a customer can

dra-, money

freCuentlycontinuously

. <unds of 6D Ac shall /e paya/le on demand.

Bank does not allo-

any interests on 6D

Ac. 6D Ac is

generally opened /y

Business men, Pu/lic

Institutions, 6orporate

Bodies @ other

organiations -ho -ant

to operate his Ac

numerously@freCuently.

0ational Bank 1imited

provides the follo-ing

types of current

account:

6urrent account

for individual

'*here must/e

anominee(

oint,

currentaccount

'*here must /e

nominee(

Proprietorship

current account9

It may /e 6D

Ac '6urrent

Proprietor Ac(

*his

scheme is

specially

designed

for the

/enefit of the

limited,

income

group

mem/ers.

*his helps

to accrue

small

monthly

savings

intosignificant

sum at the

end of the

term. So,

after the

e2piry of

the term

period the

depositor

-ill have

a siea/le

amount to

relish on.

<i2ed

Deposits '<D

Ac( shall /e

opened for a

longer period

such as #'three( months

to # 'three(

years or more.

?enerally -ho

-ants to invest

his money

safely can open

<D Ac. *he

interest of <D

Ac is

negotia/le @ itdepends on the

volume of

deposit and

period. At

present, our

/ranch is

allo-inginterest

from &L to

$!.8%L in <D

Ac. It may /e

noted that no

introduction is

necessary to

open <D Ac @

*he <DR is not

negotia/le

instrument @

cannot /e

transferred /y

endorsement.


Page 8



;"F Loan 1roducts of NBL:;"F Loan 1roducts of NBL:

Secured +verdraft 'S+D(

Investment against Imported Merchandise '1IM(

Investment against *rust Receipt '1*R( Payment Against Document 'PAD(

:ouse Building Investment

:ouse Building Investment 'staff(

*erm Investment.

Investment 'general(

Bank ?uarantee

$!. >2port 6ash 6redit

$$. 6ash 6redit ':ypo(

$8. 6ash 6redit ':ypo(

$#. <oreign Documentary Bill Purchase '<DBP(

$". 1ocal Documentary Bill Purchase '1DBP(


Page 8



Credit Management 1olic5 of %e National Bank Credit Management 1olic5 of %e National Bank

<"9 Introduction:<"9 Introduction:

6redit e2tension or lending is the principal /usiness of a /ank. 6redit 6onstitute more than

!L of a /anks asset and remain the main source of its income. But credit is also the most

risk /earing asset and if not managed prudently, it may cause server financial losses to the

/ank. *his conflicting characteristic of credit provides all the significance to credit

management. Strong and effective credit management is essential to ensure the financial

health of a /ank. 6redit management involves credit planning, credit policies, credit

producer, credit administration, credit monitoring and credit recovery.

<"; CR',I% R IS& 1)LIC0

Risk is inherent in all commercial operations. <or Banks and <inancial institutions, 6redit

risk is an essential factor, -hich needs to /e managed properly. 6redit risk virtually is the

possi/ility that a /orro-er -ill fail to repay de/t in accordance -ith the terms of sanction.

6redit risk therefore arises from the /ankFs lending operations. In the present dayFs state of

deregulation and glo/aliation, /anks range of activities have increased, so also are the risks.

>2pansion of /ankFs lending operations covering ne- products have forced the /anks to

confront ne-er risk areas and therefore to -ork out proper risk addressing devices. 6redit

risks are so e2haustive that a single device can not encompass all the risks, Moreover lending

risks today have assumed such diverse nature, that ne-er techniCues are to /e applied to

effectively contain the risks, In order to effectively contain risks, credit risk management has

to /e done in order to ena/le the /ank to proactively manage loan portfolios in order to

minimie losses and earn accepta/le level of return for the shareholders, In the present

scenario of fast changing, dynamic glo/al economy and the increasing pressure of

glo/aliation, li/eraliation, consolidation and disintermediation, it is essential to undertake

ro/ust credit risk management policies and procedures, sensitive and responsive to these

changes.


Page 8&

Chapter: !#



In the /ack drop, 0ational Bank 1imited underscoring the need of effective credit risk

management process has prepared the policy guidelines for credit risk Management. *he

policy should /e revie-ed annually /y the Board of Directors of the Bank. *he policy is

distri/uted to the concerned officials, all divisional heads, Branches, Regional +ffices and top

management officially. *he policy is strictly follo-ed /y all concerned. Any deviation from

the guidelines is to /e clearly identified and 4ustification for approval is to /e provided.

3.3 Credit Principles

*o achieve the goal for ma2imiing the stockholderFs value and protect the interest of the

depositors as -ell as to improve the Cuality of /anks assets as fundamentally sound financialinstitution, 0B1 is a/ide /y /ut -ill not /e limited to the follo-ing credit principles, -hich

should guide the /ehavior in lending decisions9

9 Assessment of the customerFs character, integrity and -illingness to repay -ill

from /asis of lending.

; 6ustomers having capacity and a/ility to repay shall only /e lent.

< Possi/ility of default -ill /e -orked out /efore lending.

> 6redit -ill /e e2tended in the areas risks of -hich can /e sufficiently understood

and managed. ? Independent 6redit participation in the credit process shall /e ensured.

@ >thical /ehavior in all credit activities shall /e ensured.

Be Proactive in identifying, managing and communicating credit risk.

F Be diligent in ensuring that credit e2posures and activities including processing

function complying -ith 0B1 reCuirements as -ell as reCuirement of regulatory

authority.

G Risk and re-ard to /e optimied.

9H Diversified 6redit Portfolio to /e /uilt and maintained.

99 6redit -ill normally /e financed from customersF deposits and not out of short)

term temporary funds or /orro-ing from other /anks.

9; *he /ank shall provide suita/le credit services and products for the market in

-hich it operates.

9< 6redit -ill /e allo-ed in a manner -hich -ill in no -ay compromise -ith the

BankFs standard of e2cellence and to customers -ho -ill not compromise such

standards.

9> All credit e2tension must comply -ith the reCuirement of /anking companies

Act.$EE$ and amendments thereof from time to time.

3.4. Credit Evaluation


Page 8E



0ational Bank 1imited follo-s the follo-ing credit evaluation process9

Prevailing credit practices in the market.

6redit -orthiness, /ackground and track record of the /orro-er.

<inancial standing of the /orro-er supported /y financial statement and other

documentary evidences.

1egal 4urisdiction and implications of applica/le la-s.

>ffect of any applica/le regulations and la-s.

Purpose of the loanfacility.

*enure of the loanfacility.

=ia/ility of the /usiness concern.

6ash flo- analysis and also pro4ections thereof.

Kuality, value and adeCuacy of security, if availa/le.

Risk taking capacity of the /orro-er.

>ntrepreneurship and managerial capa/ilities of the /orro-er.

Relia/ility of the sources of repayment.

=olume if risk in relation to the risk taking capacity of the /ank or company concern.

Profita/ility of the proposal to the /ank or company concerned.

6redit Risk ?rading.

3ield from the facility.

Market aspect.

♦ *otal glo/al e2posure of the /orro-er

♦ 6IB status.

3.5 Credit Policy uidelines

<"?"9" Lending .uidelines

<"?"9"9 Industr5 and Business Segment *ocus:

BankFs main focus on various lendingareas -ill /e under9

Industr5 and Business Segment *ocus


Page #!



i( *rading Business ?ro-

ii( Ready Made ?arments ?ro-

iii( *e2tile '3arn <a/rics Manufacturing( ?ro-

iv( 6hemicals*oiletries ?ro-

v( >ntertainment ?ro-

vi( *elecommunicationI* ?ro-

vii( Po-er ?eneration and Distri/ution ?ro-

viii( >nergy 'Po-er<uel?as( ?ro-

i2( >lectric ?oods ?ro-

2( Services vi. ?SA, <reight <or-arder, ?ro-

2i( Steel and Re)rolling Mills ?ro-

2ii( >ngineering and 6onstruction ?ro-

2iii( Small *radersSM> >ncourage

2iv( Agro)/ased industryDairy Products >ncourage

2v( >2port +riented Industries >ncourage

2vi( Pharmaceuticals >ncourage

2vii( 6onsumer loans 'personal, auto, credit card( >ncourage

2viii( <ood and Allied 'edi/le oil, flour, etc.( Maintain

2i2( ship Scrapping Maintain

22( Real >state Maintain

22i( Paper Maintain

22ii( *ransport Discourage

22iii( 6old storage finance Discourage

22iv( <inancing 6ement industries Discourage

<"?"9";" Single Borro3erE.rou! limitsES5ndication:

0ational Bank 1td. Peruses-ill continue to peruse the policy of avoiding too much loan

concentration to a single /orro-er group in order to /y pass possi/le threat in the event of

such advances turning sticky. In a /id to keep credit risk at the minimum level in respect of


Page #$



large /ut prospective advance, 0ational Bank 1td. -ill prefer syndicated financing after

proper feasi/ility study.

0ational Bank 1imited has /een follo-ing strictly and -ill continue its lending operation, in

complete o/edience to the guidelines circulated /y Bangladesh Bank on single party e2posure

limit to a /orro-ergroup. 0ational Bank 1imited -ill not e2tend credit '<unded N non)

funded( for more than the percentage on capital of the /ank, permitted /y Bangladesh Bank

and -ill follo- all modification, amendments, additions alterations that may /e made /y

Bangladesh Bank from time to time.

:o-ever, 0ational Bank follo-s the follo-ing ?uidelines of Bangladesh Bank on lending to

single /orro-ergroup under one o/ligor.

Lending ca! to single borro3er Amount

*otal e2posure '<unded and non funded( #%L of BankFs total capital

Ma2imum funded e2posure $%L of BankFs total capital

Ma2imum non)funded e2posure -here there

-ill /e no funded e2posure

#%L of BankFs total capital

Ma2imum e2posure for e2port sector %!L of BankFs total capital 'But funded

facility -ill not e2ceed $%L of the total

capital

<"?"9"<" Lending Ca!s:

0ational Bank 1imited is very much a-are of over concentration of credit in a particular

area, -hich may under some situation, create disaster for the /ank. Oeeping this in

consideration and also the over all /usiness, trend, prospectspotentials, pro/lems, risks @

mitigates, pricing, o-nerFs stake in /usiness competitors involvement, safety, liCuidity,

security etc. 0B1 is guided /y the follo-ing 1ending caps generally9)

Sector ca!s J

*rade @ 6ommerce "%L

SM> $!LIndustry)-orking capital $!L


Page #8



Pro4ect <inance)1ong *erm $!L

Retail6onsumer'66S( $!L

Agro 6redit %L

orkSupply order '6ontractual <inance( %L

+thers %L

%otal 9HHJ

*he caps -ill /e revised from time to time depending on the market conditions, shift in

?overnment Policy and 0ational BankFs credit focus.

<"?"9"> ,iscouraged Business %5!es

hile 0ational Bank follo-s the policy of financing prospective, feasi/le @ re-arding areas,

it has identified some areas as discouraged. ?enerally the follo-ing areas are discouraged for

financing9)

Military >Cuipmenteapon <inance

:igh leveraged *ransactions

<inance of speculative /usiness

1ogging, Mineral >2tractionMining or other activity that is ethically or

environmentally sensitive.

1ending to companies listed on 6IB /lack list or kno-n defaulters

6ounter parties in countries su/4ect to U0 sanctions

Share lending

*aking an eCuity stake in /orro-ers


Page ##



1ending to holding companies

Bridge 1oans relying on eCuity de/t issuance as a source of repayment

0e- cold storage finance

<inance cements industries.

<"?"9"? Loan *acilit5 1arameters

0ational Bank 1imited e2tends and -ill e2tend credit for various genuine purposes. +ne type

of advance reCuires to /e treated differently from other types. Depending on the type

financed, o-nership pattern, /usiness mode, cash flo-, security and other related matters

facility parameters are to /e set, ho-ever the general parameters in facility are as under9

Nature of Ad4ances:

>ach advance made, has to /e categoried under one of the arranged types and -ill /e

governed under the terms @ conditions related thereto.

1ur!ose:

0B1Fs lending is guided /y legitimate purpose. <inancing for hoarding, speculative purpose

and -hich are utilied for degrading the character of the people is avoided. 6redit -hich -ill

contri/ute to production, trade, commerce, import, e2port, development of Industry,development activities>conomic gro-th, infrastructural development, employment

generation, poverty alleviation etc -ill /e stressed.

LimitE Amount of facilit5EMa6imum Si#e:

<acility is considered /ased on assessment of reCuirement @ 4ustification su/4ect to the

overall lending cap as per Bangladesh Bank single party e2posure limit.

MarginE'Kuit5:

It is the general policy of the /ank to 4udiciously ensure stake of the /orro-er in any

financing plan. Margin -ill ho-ever /e su/4ect to institutional policy in this regard and

central /ank policy -here applica/le.

Rate of InterestECommission and oter carges:

Rate of interest is charged as per declared rate of the /ank. Pricing is /asically risk /ased.

:igher price is considered for riskier /orro-ers /ecause of their higher risk involved 'i.e.


Page #"



lo-er score o/tained /y an o/ligor as per 6R? score sheet is called a risky 6lint(. Similarly

lo-er price is considered for prime clients on the /asis of their lo- risk'1o- risk grade

clients means -here an o/ligor o/tained higher aggregate score as per 6R? score sheet or

$!!L cash covered or govt.international top /ank guarantee(.In fi2ing interest rate cost of

fund @ the prevailing rate in the competing market shall also /e considered. 6onfessionals

interest rates to the deserving customers -ill /e allo-ed -ithin the declared interest rate /and

of the /ank. 6ommission charges on credit facilities -ill /e realied taking the competing

scenario in the /anking market into account, involved risks in financing @ overall policy of

the /ank.

Mode of disbursement:

In dis/ursing credit the /ank ensures for the purpose the loan has /een sanctioned. here

reCuired visit of the /usinesssite etc are suggested and all su/seCuent dis/ursements are

made conditional to full utiliation of dis/ursed money in the preceding phase. In case of

dis/ursement of loan, money for acCuisition of assets, payment is suggested after receipt of

the assets /y the /orro-er. <or commercial lending, storage of merchandise against -hich

facilities have /een sanctioned is either in shopsho- room or in go do-n. Against

1IMpledge, go do-nsiing reCuired stock is ensured.

Mode of AdjustmentERe!a5ment:

<or the /orro-er to e2hi/it capa/ility to periodically ad4ust the dra-ing taken and as such to

have idea regarding the rationale for continuation of the facility, ad4ustment mode is given. In

term of lending, -here revolving transaction is not allo-ed, adherence to ad4ustment

stipulation 'month, Cuarterly, half yearly, yearly or other -ise( is suggested to ensure

recovery of the loan dis/ursed. By perusing adherence non)adherence to the stipulated

ad4ustment mode, status of the advances, capa/ility of the /orro-er, ho- the account to /e

treated and course of action to /e taken, etc are decided.

Securit5:

0B1 mostly relies-ill continue to rely on security /ased lending, taking into consideration,

the character of the /orro-er, nature of /usiness cash flo-, environmental, economic,

/usiness and other influencing factors. In o/taining security primary and collateral security

are suggested. Primary securities are valued on the /asis of landed cost in case on imported

goodse2)mill or factory price -hole sale market price for the local goods.


Page #%



6ollateral security of accepta/le type having adeCuate marketsale value is accepted.

6ollateral property is 4udiciously valued /efore accepting the same. *he property is valued /y

the /ranch officials /y applying prudence and considering prevailing rate in the area of the

property. Bank has some potential valuers engaged to assess the valuation of the mortgaga/le

property. *hese appraisers assess the value of the property independently @ su/mit the same

to the /ank directly. Assets are in from of goods pledged as security are duly insured

protecting the BankFs interest. ?oods and machinery 'for industry( taken as primary security

are also insured.

/alidit5E'6!ir5EMa6imum tenor:

=alidity>2piry date for continuous credit is set at a period not e2ceeding $ year, Short term

loan mostly is allo-ed for trade commerce. *his e2piry date is virtually the date for

ad4ustmentrevie- of the facility, su/4ect to periodical and satisfactory turn over of the limit.

6onduct of the /usiness during the -hole of validity period determines the fate of

continuation of the facility for the ne2t period. 1oan for shortmediumlong term are also

sanctioned depending upon the reCuirement thereof and also on cash flo- generation,

repayment capa/ility and over all lending feasi/ility. Such loans are allo-ed for ad4ustment

in installments.

Short term 9 up to $8 months

Medium term 9 More than $8 months up to ! months

1ong term 9 More than ! months.

Securit5 and Su!!ort:

*he follo-ing types of securities are generally accepted9

iD Machineries of factoryindustry on hypothecation /asis. =alue of machineries is

checked.

iiD Ra- materials -ork in process, finish goods, stock in trade on hypothecation and

pledge /asis. Inventory is held in a -arehouse goes do-n for financing against

pledge under BankFs control. =alue of inventory is checked.


Page #



iiiD 1and and /uilding of accepta/le type and value, under registered mortgage.

i4D <inancial o/ligation 'to /e kept under lien( after ascertaining its genuineness of

issuance, ensuring marking of lien of the lender /ank on the instrument and

o/taining confirmation from the issuing /ank that encashment including even

/efore maturity date -ill /e allo-ed to the lender /ank on reCuest -ithout

referring to the instrument holder.

4D Bills receiva/le against -ork order supply order duly assignedsupported /y

registered P.AQ e2ecuted /y the client for the /ank, confirmed /y the -ork

entrusting authority that the cheCues/ills against the -ork shall /e issued in the

name of the /ank A6 of the client.

4iD 6ars/uses-ater craftsvessels under hypothecation and 4oint registration.

4iiD Shipping documents as the lien against 16.

4iiiD *rust receipt 'for 1*R(.

i6D >2port documents)under lien 'for 1DBP<DBP(.

6D >2port 16 6ontract under lien 'for B*B16(.

6iD Packing credit letter 'for P6(.

6iiD Personal guaranteecorporate guaranteecross)corporate guarantee.

6iiiD Post dated cheCues.

6i4D $st 8nd charge$st ranking pari passu charge on fi2ed and floating assets of the

limited companies financed.

64D Bank o/tains authoriation to de/it clientFs account in order to keep policy in

force.

ualit5 of Securit5:

iD Primary security having adeCuate market value is accepted.

iiD Perisha/le goods and seasonal goods are generally discouraged as primary

security.

iiiD Accepta/le financial o/ligations are preferred.

i4D Receiva/le /ills against -ork ordersupply order funded /y <oreign Agencies

-hich /ear adeCuate funding arrangements are preferred.

4D Documents -hich are dra-n in conformity -ith the e2port 16 terms 'i.e.

documents -hich do not have discrepancies( are accepted for negotiation.


Page #



4iD Personal guarantee of those persons having high net -orth assets, satisfactory

commitment fulfillment track record and no connection -ith any irregular

classified advance are o/tained.

4iiD Su/ordinated rank 'in respect of financing( on fi2ed and floating assets of the

companies proposed for financing are generally discouraged.

4iiiD 1and, Building having defect less title, chain of proper document, adeCuate

valuation and accepta/le forced sale value, located under municipality Municipal

corporation RAUOODA6DA important commercial centers are /est choice for

creating mortgage thereon. #rd party mortgage is /acked /y personal guarantee of

the o-ner of the property. Property located outsides the a/ove areas are also

accepted as collateral, -ith out compromising -ith proper valuation proper title,

non)encum/rance sale possi/ility in reCuirement etc.

i6D RAUOODA6DAother govt. authority o-ned property is mortgaged after

getting 0+6 of the o-ning authority for the allotee)mortgagor to mortgage the

property against advance is also o/tained.

6D In syndicated financing mortgage is e2ecuted on the first ranking pari passu /asis.

Legal interest 1rotection:

iD *itle searches are conducted periodically for collateral /oth -ith RS6 and land

Registrar for mortgages.

iiD 6ollateral arrangements are detailed in credit proposal.

iiiD BankFs legal adviser esta/lishes the reCuired legal documentation for a /orro-erFs

legal standing and enforcement of the /ankFs interest.

i4D Mortgage documents are properly vetted /y BankFs legal advisor.

4D Registered mortgage of property are supported /y registered irrevoca/le general

po-er of attorney to sell the property.


Page #&



4iD Bank has proper inventory of standard security documentations vetted /y legal

counsel.

4iiD 0on)standard documentations are vetted /y appropriate authority.

/aluation of collateral:

iD 6redit administration department independently controls and matches the value of

cash collateral -hich is lien to the /ank and against -hich /orro-ings are-ill /e

allo-ed as per approval.

iiD =alue of inventory and machineries supplied /y client -ill /e cross checked.

iiiD 6redit administration department -ill ensure receiva/les that actually e2ist and

that past due. Disputed and other items -ith impaired collateral value to /eidentified and removed from collateral pool.

i4D =alue is sourced from independent appraisals addressed to the /ank.

Insurance:

0B1 having insura/le interest on a property an asset o/tains insurance policy as per norms

against credit facilities e2tended in order to protect the /anksF interest. Insurance policy is

taken covering all possi/le risks. Branches shall ensure that insurance policy is current and

rene-ed on a timely /asis. Insurance shall /e o/tained from a reputed company.

.eneralES!ecial conditionE Co4enants:


Page #E



?eneralSpecial condition 6ovenants -ill /e according to the nature of advance, security

arrangements, o-nership pattern, and mode of acCuisition, institutional normsinstructions,

and guides lines of the central /ank regulatory authority.

<"@ Credit Assessment 8 Risk .rading

<"@"9 Credit Assessment:

A thorough credit and risk assessment to /e conducted /efore g of loans, and once approved,

all facilities are to /e revie-ed at least annually. 6redit assessment -ill /e presented, in a

credit application duly signedapproved /y the official of the /ranch. In case an account

deviates from the guidelines the same should /e identified in credit applications and

4ustification for approval should /e provided /y the originating officials of the /ranch. Bank

has the conduct financial analysis on a regular /asis @ monitor changes in the clientFs

financial condition. *he proposals are prepared in proposal format that originates in credit

department of the /ranch and is processed and approved /y the head of /ranchRegional

:ead:ade office Management>2ecutive committee as per delegated authority .At the time

of originating a proposal accuracy of all information must /e ensured.

+riginating officers should follo- credit principles, credit policy and guidelines and conduct

due diligence on ne- /orro-ers, principals and guarantors. *hey need to adhere to the 0B1Fs

esta/lished Ono- 3our 6ustomer 'O36(, money laundering guidelines, and Bangladesh

BankFs regulations. <or initiating credit relationship credit officerRelationship Manager can

call on the client, visit factory /usiness centers to see production facility stock storage

pattern /usiness transactionsreputation etc and though these, to assess possi/ilities of

esta/lishing a remunerative relationship. :e she can also conduct due diligence to get

market information on the /orro-er from industry sources, competitors, local area. BranchManager may also /e part of this process. In this regard, if reCuired, the BM 6redit officer

Relationship Manager -ill also take help of :ead +ffice >ngineer :+ personnel for initial

assessing credit needs of large /orro-ers9

Based on finding of such callsvisitsinspection, Relationship Manager 'RM(6redit +fficer,

'along -ith the Branch Manager( -ill initial proposal, containing information on clientFs

/ackground, /usiness, market share, integrity, credit e2posure e2isting /anking relationships,

and credit needs along -ith pricing, loan structure 'tenor, covenants, repayment schedule(

purpose of credit, type of credit, security arrangement, etc.


Page "!



Before sending proposal to the approving authority, the originating officials of the /ranch

shall ensure that the follo-ing stepsformalities have /een taken properly and incorporated in

the credit proposal appropriately9

$. 6urrent 6IB Report o/tained.

8. Repayment sources of the /orro-er has 4ustifia/ly esta/lished /y financial analysis.

#. Purpose and amount -ith types of loan proposed /y the /orro-er stated in the proposal.

". >arnings from the relationship properly assessed in the credit proposal.

%. Pre)sanction inspection reportcall reportsite visit report is in place.

. Management profile @ capital structure, constitution, date of esta/lishment are stated in the

proposal.

. >2perience of /orro-ers, /usiness skills, management @ successions are properly

mentioned in the proposal.

&. Borro-erFs rating in the industry is assessed along -ith overall industry concerns and

/orro-erFs strength @ -eakness relative to its competitors are identified.

E. IndustryFs position along -ith supplier and /uyer risk is analyed.

$!. Borro-er credit -orthiness is esta/lished /y revie- of # years historical financial

statement and past track record.

$$. 6ash <lo- analysis 4ustifying clientFs a/ility to repay is reflected in the credit proposal.

$8. Industry and Business analysis is done in the proposal.

$#. 6redit facilities availed from other /anks is clearly stated in the proposal and opinions

are o/tained regarding the credit standing of the /orro-ers.

$". 6redit facilities are /ased on an evaluation of the /orro-erFs /usiness needs.

$%. Possi/le risks are identified in the credit assessment @ risk mitigating factors are clearly

mentioned in the proposal.

$. 6redit proposal clearly mention current outstanding against all limits.

$. Audited financials, 1arge loan position etc. reflected in the credit Proposals.

$&. Branches ensure that collateral has /een properly valued, verified and are managed.

$E. Account conduct of the /orro-er @ his allied concerns has /een done.

8!. Amount and tenors are 4ustified /ased on the pro4ected repayment a/ility @ loan purpose.

8$. AdeCuacy and the e2tent of insurance coverage are assessed.

88. Policy compliance is clearly stated in the credit proposal.

8#. 6hanges in pricing of facilities are highlighted in credit proposal.

8". Usage of /orro-ed fund is confirmed through financial statement analysis.


Page "$



8%. Borro-ers risk grade has /een done as per Bangladesh Bank guidelines e2amined @

approved /y the authoried official and stated in the credit proposal.

<"@";" Risk Assessment Areas:

Borro3er Anal5sis:

<ull particulars of the proprietor, partners, directors, etc are to /e e2aminedH their

management capa/ility is to /e ascertained. +verall performance and credit status of the

allied concern of the client i.e. group -ill /e assessed. 1ack of management capa/ility of the

co. concentration of the -hole affairs of /usiness is one hand and lack of initiative to create

su/seCuent management line, complicated o-nership structures of inter group transactions

shall /e addressed and related risks to /e mitigated.

Industr5 Anal5sis:

Before e2tending credit in an area, over all /usiness conditions of that areasector -ill /e

critically e2amined, prospects and pro/lems -ill /e ascertained. Demand and supply of the

concerned goods services, Demand and supply gap, contri/ution of the /orro-er in meeting

the gap, strength and -eakness of the /orro-er @ their competitors to /e accurately assessed.

Sales concentration of the /orro-er, /orro-ers rating -ith competitors in terms of market

share, prevalence of su/stitutes of the produced items in the market and /arriers to entry into

the product line of the /orro-er are needed to /e properly identified.

Su!!lierEBu5er Anal5sis:

1ending decision -ill /e preceded /y an intensive analysis on -hether the /orro-er depends

on a single or a very fe- customer or gets the supply of the ra- materialsdealing items from

a single supplier. Such sales and supply concentration -ill /e given a very careful

consideration, /ecause it -ill have significant impact on the future via/ility of the /orro-er.

$istorical *inancial Anal5sis:


Page "8



An analysis of a minimum of # years historical financial statements of the /orro-er shall /e

presented. here reliance is placed on a corporate guarantor, guarantorFs financial statements

shall also /e analyed. *he analysis shall address the Cuality and sustaina/ility of earnings,

cash flo- and the strength of the /orro-erFs /alance sheet.

1rojected *inancial 1erformance:

here term facilities 'tenor Q $ year( are proposed, /orro-erFs future pro4ected financial

performance should /e provided, indicating an analysis of the sufficiency of cash flo- to

service de/t repayments. 1oans should not /e granted if pro4ected cash flo- is insufficient to

repay de/ts.

Account Conduct:

<or e2isting /orro-ers, historic performance in meeting repayment o/ligations 'trade

payments, cheCue, interest and principal payments, etc( should /e assessed. 6redit)de/it

summation, ma2imum)minimum /alance, recycling and ad4ustment of the lia/ility -ill /e

looked into -hich generally -ill /ack our rene-al decision.

Aderence to Lending .uidelines:

6redit proposals to /e prepared in line -ith /ank are lending guidelines.

A credit applicationproposal -ill clearly mention -hether or not the proposal complies -ith

the /ankFs lending guidelines. A proposal that -ill not adhere to the /ankFs lending guidelines

-ill not /e approved.

Mitigating *actors:

In the credit assessment, possi/le risks, such as margin sustaina/ility andor volatility, high

de/t load 'leveragegearing(, over stocking or de/tor issues, rapid gro-th, acCuisition or

e2pansion, ne- /usiness lineproduct e2pansion, management changes or succession issues,

customer or supplier concentrations and lack of transparency or industry issues and their

mitigating factors to /e identified.

Loan Structure:


Page "#



Amount and tenor of loan -ill /e fi2ed 4ustifia/ly /ased on income generation prospect,

pro4ected repayment a/ility and loan purpose. <ailure in properly perusing these factors

especially allo-ing loan for e2cessively long period of more than -hat is really 4ustified

reCuired in the /usiness, -ill e2pose the /ank to risk and also to non)repayment /y the

/orro-er.

Securit5:

BanksF lending -ill generally /e adeCuately securitied. Securities must to /e o/tained and

-ill /e accepta/le, valua/le, and easily marketa/le @ defect less. =aluation of security -ill /e

properly assessed. Security -ill comprise primary and collateral and -ill /e adeCuately

insured -here applica/le(.

Name Lending:

1ending depending only on the fame and reputation of a /orro-er -ill /e avoided. All

associated risks, lending fundamentals and a through financial analysis -ill /e made.

<" Credit Risk .rading CR.D:

,efinition of Credit Risk .rading *he 6redit Risk ?rading '6R?( is a collective definition /ased on the pre)specified

scale and reflects the underlying credit)risk for a given e2posure.

A 6redit Risk ?rading deploys a num/er alpha/et sym/ol as a primary summary

indicator of risks associated -ith a credit e2posure.

6redit Risk ?rading is the /asic module for developing a 6redit Risk Management

system.

*unctions of Credit Risk .rading

ell)managed credit risk grading systems -ill promote /ank safety and soundness /y

facilitating informed decision)making. ?rading systems -ill measure credit risk and

differentiate individual credits and groups of credits /y the risk they pose. *his -ill allo-

/ank management and e2aminers to monitor changes and trends in risk levels. *he process

also allo-s /ank management to manage risk to optimie returns.

+ses of Credit Risk .rading


Page ""



*he 6redit Risk ?rading matri2 -ill allo- application of uniform standards to

credits to ensure a common standardied approach to assess the Cuality of

individual o/ligor, credit portfolio of a unit, line of /usiness, the /ranch or the

/ank as a -hole. As evident, the 6R? outputs -ould /e relevant for individual credit selection,

-herein either a /orro-er or a particular e2posurefacility is rated. *he other

decisions -ould /e related to pricing 'credit)spread( and specific features of the

credit facility. *hese -ould largely constitute o/ligor level analysis.

Risk grading -ould also /e relevant for surveillance and monitoring, internal MIS

and assessing the aggregate risk profile of a Bank. It is also relevant for portfolio

level analysis.

All Banks should adopt a credit risk grading system. *he system should define the risk profile

of /orro-erFs to ensure that account management, structure and pricing are commensurate

-ith the risk involved. Risk grading is a key measurement of a BankFs asset Cuality, and as

such, it is essential that grading is a ro/ust process. All facilities should /e assigned a risk

grade. here deterioration in risk is noted, the Risk ?rade assigned to a /orro-er and its

facilities should /e immediately changed. Borro-er Risk ?rades should /e clearly stated on

6redit Applications.

Risk Rating .rade Range of

Scores

,efinition

Superior1o- Risk $ <acilities fully secured /y

cash/onds /ank guarantee

?ood)Satisfactory Risk 8 &%N Repayment capacity of the /orro-er

is strong.

Accepta/le<air Risk # %)E" AdeCuate financial strength.

Marginal ) atch list " %)" ?rade " assets -arrant greater

attention due to conditions affecting

the /orro-er, the industry or the

economic environment.

Special Mention % %%)" Assets -ith potential -eaknesses

that deserve close attention. If left

uncorrected, may result in a

determination of the repayment

prospects of the /orro-er.


Page "%



Su/standard "%)%" <inancial condition is -eak and

capacity or inclination to repay is in

dou/t. *hese -eaknesses 4eopardie

the full settlement of loans.

Dou/tful and Bad

'non)performing(

#%)"" <ull repayment of principal and

interest is unlikely and the possi/ility of loss is e2tremely high.

1oss

'non)performing(

& #% Assets -ith long outstanding -ith

no progress in o/taining repayment.

*he prospect of recovery is poor and

legal options have /een pursued.

Regulator5 ,efinition on .rading of Classified Accounts:

Irrespective of credit score o/tained /y a particular o/ligor, grading of the classified names

-ill /e in line -ith Bangladesh Bank guidelines on classified accounts, -hich is e2tracted

from 5Prudential Regulation <or Banks9 Selected Issues7 'updated( /y Bangladesh Bank as

under the /asis for 1oan 6lassification9

AD )bjecti4e Criteria:

Any 6ontinuous 1oan if not repaidrene-ed -ithin the fi2ed e2piry date for

repayment -ill /e treated as irregular 4ust from the follo-ing day of the e2piry date.*his loan -ill /e classified as Su/)standard if it keep irregular for months or

/eyond /ut less than E months, as Dou/tfulJ if for E months or /eyond /ut less than

$8 months and as Bad)De/tJ if for $8 months or /eyond.

Any Demand 1oan -ill /e considered as Su/)standard if it remains unpaid for

months or /eyond /ut not over E months from the date of claim /y the /ank or from

the date of creation of the forced loanH like-ise the loan -ill /e classified as

TDou/tfulJ and Bad @ loss if remains unpaid for E months or /eyond /ut less than $8

months and for $8 months and /eyond respectively.

In case any installment's( or part of installment's( of a <i2ed *erm 1oan is not repaid

-ithin the due date, the amount of unpaid installment 's( -ill /e termed as defaulted

installmentJ.

In case of *i6ed %erm Loans( 3ic are re!a5able 3itin ma6imum ?fi4eD 5ears of

time:


Page "



If the amount of defaulted installmentJ is eCual to or more than the amount of installment 's(

due -ithin months, the entire loan -ill /e classified as FSu/)standardF. If the amount of

Jdefaulted installmentJ is eCual to or more than the amount of installment's( due -ithin $8

months, the entire loan -ill /e classified as JJDou/tful. If the amount of Jdefaulted installmentJ

is eCual to or more than the amount of installment 's( due -ithin $& months, the entire loan

-ill /e classified as JJBad )De/t.JJ

In case of *i6ed %erm Loans( 3ic are re!a5able in more tan ?fi4eD 5ears of time:

If the amount of defaulted installment is eCual to or more than the amount of

installment's( due -ithin $8 months, the entire loan -ill /e classified as JSu/)

standard.J


installment's( due -ithin $& months, the entire loan -ill /e classified as

JDou/tfulJ.


installment's( due -ithin 8" months, the entire loan -ill /e classified as JBad)

De/tJ.

>2planation9 If any <i2ed *erm 1oan is repaya/le at monthly installment, the amount of

installment 's( due -ithin months -ill /e eCual to the amount of summation of monthly

installments. Similarly, if repaya/le at Cuarterly installment, the amount of installment's( due

-ithin months -ill /e eCual to the amount of summation of 8 Cuarterly installments.

BDualitati4e -udgment:

If any uncertainty or dou/t arises in respect of recovery of any 6ontinuous 1oan, Demand

1oan or <i2ed *erm 1oan, the same -ill have to /e classified on the /asis of Cualitative

4udgment /e it classifia/le or not on the /asis of o/4ective criteria.

If any situational changes occur in the stipulations in terms of -hich the loan -as e2tended or

if the capital of the /orro-er is impaired due to adverse conditions or if the value of thesecurities decreases or if the recovery of the loan /ecomes uncertain due to any other


Page "



unfavora/le situation, the loan -ill have to /e classified on the /asis of Cualitative 4udgment.

Besides, if any loan is illogically or repeatedly re)scheduled or the norms of re)scheduling are

violated or instances of 'propensity to( freCuently e2ceeding the loan)limit are noticed or

legal action is lodged for recovery of the loan or the loan is e2tended -ithout the approval of

the proper authority, it -ill have to /e classified on the /asis of Cualitative 4udgment.

Despite the pro/a/ility of any loanJs /eing affected due to the reasons stated a/ove or for any

other reasons, if there e2ists any hope for change of the e2isting condition /y resorting to

proper steps, the loan, on the /asis of Cualitative 4udgment, -ill /e classified as JSu/)standard

J. But even if after resorting to proper steps, there e2ists no certainty of total recovery of the

loan, it -ill /e classified as J Dou/tful J and even after e2erting the all)out effort, there e2ists

no chance of recovery, it -ill /e classified as J Bad)De/t J on the /asis of Cualitative 4udgment

and can declassify the loans if Cualitative improvement does occur.

But if any loan is classified /y the Inspection *eam of Bangladesh Bank, the same can /e

declassified -ith the approval of the Board of Directors of the /ank. :o-ever, /efore placing

such case to the Board6>+ and concerned /ranch manager shall have to certify that the

conditions for declassification have /een fulfilled. *he /ank -ill have to inform such

declassificationFs to the Department of Banking Inspectionconcerned offices of Bangladesh

Bank -ithin $% days of such decision taken /y the Board of Directors. Bangladesh /ank -ill

e2amine these matters on case to case /asis and if any irregularitiesdeviations are detected is

detected, necessary legal action -ill /e taken against the concerned officials.

<"F CR. Re4ie3<"F CR. Re4ie3:

<"G Management Information S5stem MISD on CR.<"G Management Information S5stem MISD on CR.

6redit Risk ?rading Report '6onsolidated(

6redit Risk ?rading Report 'Branch ise(

6redit Risk ?rading Report 'Branch @?rade ise(


Page "&

Risk .radingRisk .rading Re4ie3 *reKuenc5 at leastDRe4ie3 *reKuenc5 at leastD

Superior, ?ood and Accepta/le Annually

Marginalatch list :alf yearlySpecial Mention, SS, D< and B1 Kuarterly



6redit Risk ?rading Report '?rade ise Borro-er 1ist(

<"9H S!ecial Attention<"9H S!ecial Attention99

>nsure implementation of the instructions provided in 6redit +perations

Division, 6AD and Bangladesh Bank regarding 6redit Risk ?rading.

+fficers -ho -ill approve Risk ?rading shall have necessary

competence and overall understanding of 6R? Manual.

>nsure origination of 6redit Risk ?rading Score sheet, 6R? <orm /y

trained officers only accurately in all cases, -hich shall then /e approved

/y the approving authority at the /ranch level and thereafter /e sent to

sanctioning authority.

>nsure completion of 6R? <orm for all the accounts having >arly

arning Signals. Prepare financials prefera/ly form audited Accounts.

>nsure calculation of financial ratios correctly.

6ompute parameters of different components of /usinessIndustry risk.

Assess grading Score o/4ectively '-here applica/le(.

>nsure that Risk ?rading is sho-n in the first page of proposal.

>nsure matching of security risk -ith sanction advice and

documentation.

>nsure proper understanding /y the originating officer of relationship Risk.

Prepare financials on the /asis of latest financial statements.

6omplete prescri/ed format in preparing comprehensive MIS on risk

grading.

Data 6ollection 6hecklist @ 1imit Utiliation <orm should /e used

uniformly.

<or considering proposal of a client under any group 6R? shall have to /e done on the group

instead of the concerned unit only. In case a /orro-er has sister concern than sister concernFs

6R? shall have to /e done also.

Monitoring should /e in place to ensure that risk factors are evaluated and -eighted very

carefully, on the /asis of most up)to)sate and relia/le data and complete o/4ectivity must /e

ensured to assign the correct grading. 6areful assessment should /e done after receiving all

the reCuired information and actual parameters that deserves /y the account should /e

inputted in the 6redit Risk ?rading Score Sheet.

<"99 Limitation of CR.:<"99 Limitation of CR.:

*here are some limitation of 6R? -hich are given /elo-9


Page "E



Basically the template of 6R? Score sheet is fully applica/le for

manufacturing concern and it may also useful for trading concern although

some pro/lems have occurred here, /ut the template of 6R? Score sheet if

not in line -ith fully for Service concern.

Sie of /usiness has /een determined on the /asis of turnover of salesH as a

result a num/er of good enterprises may /e deprived due to sales turnover

/eing less than *k.!.!! crore. +n the other hand a num/er of /ad enterprises

may /e a-arded due to sales turnover /eing more than *k.!.!! crore.

6R? score sheet /asically highly -eighted on <inancial Risk i.e. it is

/asically /ased on financial statement.

Kuality of management /ased on total V of years of e2perience of the senior

management in the Industry, /ut ho- many managementG

1ack of data /ank to ascertain the Industry gro-th, Business outlook, market

competition accurately.

Security Risk is not a 6redit risk.

6R? does not fully cover the security risk parameter for all cases.

6amouflageindedness of <inancial Statement.

Most of the entrepreneurs are not a-are a/out financial statement.

Although some pro/lems have /een occurred in 6R? /ut also 6R? is a /est key

measurement process of a /ankFs assets Cuality.

<"9; CR. el!s:<"9; CR. el!s:

Promote /anks safety and soundness.

Measure credit risks.

Management monitor change and trend in risk level.

Management manages risk to optimie return.

Use of 6redit Risk ?rading9

6R? allo-s application of Uniform Standards to 6redits.

+/ligor)1evel Analysis '6R? output is used(

6redit selection and pricing.

Monitoring and internal MIS and assessing the aggregate risk profile of a

Bank.

<"9< 'ARL0 7ARNIN. SI.NALS '7SD


Page %!



>arly arning Signals '>S( indicate risks or potential -eaknesses of an e2posure reCuiring

monitoring, supervision, or close attention /y management.

If these -eaknesses are left uncorrected, they may result in deterioration of the repayment

prospects in the BankFs assets at some future date -ith a likely prospect of /eing do-ngraded

to classified assets .Do-n grade should not /e postponed until further improvement @ revie-

process.

>arly identification, prompt reporting to the Branch Manager and proactive management of

>arly arning Accounts are prime credit responsi/ilities of /ranch credit

managerRelationship Managers and must /e undertaken on a continuous /asis. Branch shall

report also 6redit Administration Division, :+, and Particulars of >arly arning Accounts.

:+ 6redit Administration Division -ill also identify accounts -ith >arly arning Signals

'>S(, report to the higher authority, monitor such accounts, and advise the /ranch suita/ly

to improve status of such accounts.

Despite a prudent credit Determination of Market =alue of >ligi/le Security, loans may still

/ecome trou/led. *herefore, it is essential that early identification and prompt reporting of

deteriorating credit signs /e done to ensure s-ift action to protect the BankFs interest. *he

symptoms of early -arning signals as mentioned /elo- are /y no means e2haustive and

hence, if there are other concerns, like /reach of loan covenants or adverse market rumors

that -arrant additional caution, a 6redit Risk ?rading <orm should /e presented.

Irrespective of credit score o/tained /y any o/ligor 'i.e. a Bank( as per the proposed risk

grade score sheet, the grading of the account highlighted as >arly arning Signals '>S(

accounts shall have the follo-ing risk symptoms.

a( Marginalatch list 'M?1 ) "(9 if )

Any loan is past dueoverdue for ! days and a/ove.

<reCuent drop in security value or shortfall in dra-ing po-er e2ists.

/( Special Mention 'SM ) %(9 if

Any loan is past dueoverdue for E! days and a/ove.

Ma4or document deficiency prevails.

A significant petition or claim is lodged against the /orro-er.


Page %$



*he 6redit Risk ?rading <orm of accounts having >arly arning Signals should /e

completed /y the Relationship Manager of the /ranch and sent to the /ranch approving

authority. *he 6redit Risk ?rading should /e updated as soon as possi/le and no delay should

/e there in referring >arly arning Signal accounts or any pro/lem accounts to the 6redit

Administration Division, :ead +ffice.

Re!orting of '7S accounts9 *he Credit Risk .rading form of

accounts having >arly arning Signals should /e completely /y the

credit officer of the /ranch and sent to the /ranch approving authority.

*he 6redit Risk ?rade should /e updated as soon as possi/le and no

delay should /e there in referring >arly arning Signal accounts or any

pro/lem accounts to the 6redit Administration Division, :ead +ffice.

Branch hall report also 6redit Administration Division, :+, and

Particulars of >arly arning Accounts :+ 6redit Administration

Division -ill also identify accounts -ith >arly arning Signals, report

to the higher authority, monitor such accounts, advise the /ranch

suita/ility to improve status of such accounts.

<"9> A!!ro4al Autorit5:

All po-ers of the /ank are vested in the /oard. >2ecutivesofficers in 0B1 are allo-ed to

e2ercise only those po-ers -hich are delegated to himher /y the Managing Director @

Board in the manner as specified in -riting /y the Board in the rule /ook of the Bank and

those approved /y the Board from time to time for facilitating smooth operations. In order to

ensure Cuick and timely delivery of credit, 0B1 has resorted to the policy of 4udicious

delegation of authority to sanction approve loans and advances to its e2ecutives officers.

0B1 has its o-n rule /ook containing all e2ercisa/le po-ers including those of credit /y its

e2ecutives officers, approved /y the Board. *he rule /ook is su/4ect to revie- and update

depending on the reCuirement of prompt and efficient credit delivery. In spite of the rule

/ookFs having contained authority of e2ercising /usiness po-er, the po-er are e2ercised /y

the officerse2ecutives -hen ever they are empo-ered to do so /y the Managing Director.

6redit approval at the management level is made /ased on the recommendation of the credit

committee -here the sanctioning authority is not a mem/er. 6redit 6ommitteeFs role in 0B1

is only restricted to the recommendationrevie- of /ankFs loan proposals. 6redit approvals

are evidenced in -riting and records -hereof are kept in the file -ith credit proposals.


Page %8



In approving credit proposals, all credit risks are authoried /y the +fficers>2ecutives under

their delegated /usiness po-er. Pooling or com/ining of authority limits are not permitted.

All large loans, under single party e2posure limits are sanctioned /y the >2ecutive

6ommittee of the Board. Aggregate of e2posure of a /orro-ergroup is taken into

consideration -hile applying delegated authority. Any credit proposal, -hich does not

comply -ith lending guidelines, should /e referred to :+ for consideration. Any /reach of

lending authority /y any e2ecutives officers entrusted -ith approving loans should have

aptitude, training and e2perience to carry out their responsi/ilities effectively. 6redit

approving e2ecutives should prefera/ly have, reasona/le -orking e2perience in credit line

' minimum % years(, understanding '*raining @ >2perience( of financial statement, cash flo-

and risk analysis, kno-ledge of accounting, good understanding of local industrymarket

conditions, trend and industryBusiness risk analysis, rationale of /orro-ing, -orking capital

assessment techniCue, /usiness pro4ections, 6R?, loan structuring, documentation, overall

loan management.

Approving e2ecutive should have the kno-ledge of the follo-ing areas9

Introduction of accrual accounting.

Industry Business Risk Analysis.

Borro-ing 6auses.

<inancial reporting and full disclosure.

<inancial Statement Analysis.

*he Asset 6onversion *rade 6ycle.

6ash <lo- Analysis.

Pro4ections.

1oan Structure and Documentation.

1oan Management.

<"9? Segregation of ,uties:


Page %#



0B1 has an esta/lished credit handling set up, -here the -hole task from receipt of credit

application to dis/ursement @ recovery is handled /y the concerted efforts of

officers>2ecutives of /ranch, Regional office @ :ead +ffice. In the present set up credit

proposals are received at the /ranch. *he proposal is processed /y the +fficers >2ecutives in

the credit department of the /ranch. If the proposal is accepta/le the same is placed to the

/ranch committee. hen the 6ommittee recommends the proposal it is placed to the Branch

Manager, -ho finally approves the proposal under his /usiness delegation. hen the

proposal is /eyond the delegated po-er of the Branch Manager, it is sent to the Regional

:ead. *he proposal is processed /y the +fficer>2ecutive of credit department of the

Regional +fficer and it is placed to the Regional 6redit 6ommittee, the committee if finds the

proposal accepta/le, su/mits to the Regional :ead, -ho, if finds the proposal via/le and if

the proposal falls -ithin his delegated po-er, the same is sanctioned /y him. If the proposal

is /eyond his delegated po-er, he sends the same to :ead +ffice 6redit Division -ith his

recommendation for consideration.

3.!" C#E$%T # %&' ( )N)E(ENT &*&TE(

*o manage the credit risk, capacity of o-ner, director, managers, and officers are very

important. *he capacity of the o-ner, director, managers depends on9 Physical A/ility,

>ducation Cualification, *raining, >2perience, -illing to -ork, Perseverance, self)confidence,

Self)relia/ility presence of mind etc.

*he a/ility of -ork -ith staff-orkers depends on9 +rgan gram, 6hange in Management, *he

relation of staff-orkers -ith management, *ime to take decision, A/ility to take right

decision etc. Analying the a/ove things, one can have the idea a/out the o-ner, director,

managers.

6redit risk is one of the ma4or risks faced /y the /anks. *his can descri/ed as potential loss

arising from the failure of a counter party to perform according to contractual arrangement

-ith the /ank. *he failure may arise due to un-illingness of the counter party or decline the

economic condition etc. /ankFs risk management has /een designed to address all these

issues. *he Board itself decides on the largest financing application. <or corporate loan, a key

concept in 0B1Fs policy for accepting ne- clients is the Ono- 3our 6ustomerF principle,

meaning that loans are granted only to the corporate clients are kno-n to 0B1.


Page %"



R i& #Ma na (

eme n

t

L i2$

idi t*

Mar#

et

R ep $t at i on

r i &#

O pe ra t io na "R i& #

)redit

3.!".! #%&' ( )N)E(ENT

*he risk of 0B1 is defined as the possi/ility of losses, financial or other-ise. In todayFs

challenging financial and economic environment effective risk management is vital for

sustaina/le gro-th of shareholders value. *he ma4or areas of risk -hich the activities of the

/anking operation are e2posed to are 6redit 6ard, 1iCuidity Risk, Market Risk, +peration

Risk and Reputation Risk due to Money 1aundering Risk. Market risks include <oreign

e2change risk, Interest rate risk and >Cuity risk.

Cart: *i4e Major %5!es Risk in Banking Sector


Page %%



3.!+ # %&' ( )N)E(ENT P #,CE&&

0B1Fs activities involve analysis, evaluation, acceptance and management of some risk or

com/ination of risks. Risk management is emphasied not only for regulatory purpose /ut

also to improve operational and financial performance of the /ank. *he prime o/4ective of the

risk management is that the Bank takes -ell calculative /usiness risks -hile safeguarding the

BankFs capital, its financial resources and profita/ility from various risks. *he Risk

management policy of the /ank operates under % /road principles9 +versight /y the

Board>2ecutive committee. Board approves policies and processes of risk management

recommended /y the management and >2ecutive 6ommittee approves the credit proposals

su/mitted /y the managementH Audit committee of the /oard revie-s the internal audit

reports of the Bank and risk management covering credit risk, operational risk includingmoney laundering risk, market risk and liCuidity riskH Dedicated independent risk

management units vi 6redit Risk Management units, 6redit Administration Unit, 6redit

Monitoring and Recovery Unit, Internal 6ontrol and 6ompliance Unit are responsi/le for

implementation of the risk policies and monitoring of compliance -ith risk policies. *hey are

also responsi/le for identification of and measuring risks. Dedicated committee at

management level has /een set up to monitor risk vi. credit risk through 6redit Revie-

6ommittee and Risk Management Division, +perational Risk through Management

6ommittee and Internal 6ontrol and 6ompliance Division, Market and 1iCuidity risk through

Asset 1ia/ility 6ommittee 'A16+(H Information risk through MRS 6ommittee and

Reputation risk arising out of money laundering through 6hief 6ompliance +fficer of the

Bank and 6ompliance +fficers of the /ranches.

In order to streamline risk control features in a more effective manner, 0B1 has put in places

all manuals all manuals as suggested in the core risk management guide lines of Bangladesh

Bank. Its standard +peration 'S+P( contains all the guide lines and also includes some of

internationally accepted /est practices. S+Ps cover all operating department including

corporate /anking, SM> /anking, retail /anking, credit card, foreign e2change, treasury,

human resources and financial administration.

3.!- (E)&#%N # %&' ,/ NBL


Page %



Risk to /anker means the perceived uncertainty connected -ith some event. Bankers may /e

most interested in achieving high stock values and high profita/ility, /ut none can fail to pay

attention to the risks they are accepting ass -ell. *he more volatile the economy and the

recent pro/lem in the default culture led the /anker to focus on the risk arises from taking any

decision and ho- the /anking risks can /e measures and minimie. In the follo-ing section

different risks of 0ational Bank 1imited are discussed.

*a/le9 Risk of 0B1

<"9G Credit Risk

*he pro/a/ility are that some of the /ank assets, especially its loans, -ill decline in values

and perhaps /ecome -orthless is credit risks. Because /anks hold relatively little o-ners

capital relative to the aggregate of their assets, only a relative small percentage of total loans

need to turn /ad in order to push any /ank to the /rink of failure. *he credit risk is increasing

is increasing for 0B1.

<";H LiKuidit5 Risks

1iCuidity risk is the risk that may not meet financial o/ligation as they /ecome due. 1iCuidity

risks also include the ina/ility to liCuidate any asset at reasona/le price in a timely manner. It

is the policy of the Bank to maintain adeCuate liCuidity at all times and in /oth local and

foreign currencies. 1iCuidity risks are managed on a short, medium and long)term /asis.

*here are approved limits for credit)deposit ratio, liCuid assets to total assets ratio, maturity

mismatch, commitments for /oth in on)/alance sheet and off)/alance sheet items and

/orro-ing from money market to ensure that loans @ investments are funded /y sta/le

source, maturity mismatches are -ithin limits and that cash inflo- from maturities of assets,

customer deposits in a given period e2ceeds cash outflo- /y a comforta/le margin even

under a stressed liCuidity scenario.

1iCuidity risk is decreasing as the ratio sho-s increasing trend over the last three years. *he

ratios are $!L, $#L and $"L for the year 8!$$, 8!$8, and 8!$#.


Page %

Categor5 1rocedure 0ear

8!$$ 8!$8 8!$#

1iCuidity Risk S* securities Deposit $!L $#L $"L

6redit Risk Medium 1oans Asset ""L "L "L

Interest Risk I.S AssetI.S 1ia/ilities

$.8&L $.#"L $.%%L



<";9 Interest Rate Risks:

Interest rate risk is potential reduction in net interest income caused /y changes in the level of

interest rates. In 0B1, it is ensured that the Bank is not su/4ected to undue interest rate risks

due to interest rate mismatch and maturity mismatch. <i2ed rates assets are not financed /y

floating rates lia/ilities or vice versa. Movements in the market interest rate can have potent

effects on a /ankFs margin of revenues over opening cost. Rising interest rates can lo-er a

/ankFs margin of profit if the structure of the institutionFs assets and lia/ilities is such that

interest e2pense on /orro-ed money increase more rapidly than interest revenues on loans

and security investment. If the /ank has less interest sensitive asset 'ISA( than interest

sensitive lia/ilities 'AS1(, during rising interest rate it -ill suffer a loss. *he ratio of interest

is sensitive assets to interest sensitive lia/ilities are $.8&, $.## and $.%" in the year of 8!$$,

8!$8, and 8!$# respectively. So it can /e said that 0B1 in good position in terms of ISA and

IS1 matching.

3.00 # %&' C,NT#,L )N$ ( E)&#E(ENT )#E T)'EN B* NBL

Manual and standard operating procedure is in place and its implementation is

regularly monitored. Regular revie- of system and net-ork of management committee 'MA06+M(

and Management Information System 6ommittee (MIS).

Management through Internal 6ontrol and 6ompliance Division

control operational procedure of the /ank.

Internal 6ontrol and 6ompliance Division undertakes periodical and special

audit of the /ranches and departments at :ead office for revie- of the operation

and compliance of statutory reCuirement.

6omprehensive and special audit of /ranches and /usiness unit /y internal

audit, internal control and compliance division.

Risk /ased audit /y internal audit division.

Segregation of duties and multi)tier approval procedure.

I* audit is conducted on regular /asis.

>sta/lishing a Data 6enter for /ackup of data and information.


Page %&



Regular testing of systemJs /ack)up procedure and contingency plan.

3.03 P #,CE$#)L %$EL%NE&

<";<"9" Credit A!!ro4al 1rocess

0ational Bank limited conducts its /anking operation under /ranch /anking system. <or

administrative control and smoothening its day)to)day operation and e2tension of

appropriate and Cuick services, Cuick credit delivery, some /ranches have /een placed

under some Regional offices. Responding to the reCuirement of customers in the state of lack

of full computeriation facilities of the /ranches and on line /anking facilities some credit

sanctioning po-ers have /een delegated to the Branch Managers and the Regional

Managers. 6redit proposals are generally originated at /ranch. :o-ever proposals may

also /e received at :ead +ffice for syndication and also from /ig clients, <inancial

Institutions.

At the /ranch level, the officerse2ecutives of credit department have to o/tain full

kno-ledge of the policy @ procedures of credit operations. *he credit officerse2ecutives

after o/taining credit applications through Branch Manager along -ith all reCuired papers

documents ensure sufficiency and consistency of the papersdocuments. *hey can

originate credit proposals, prepare detailed credit memorandum after undertaking a

thorough credit check and conducting credit risk assessment of the client in light of credit

policy ?uidelines of the Bank. *he fully documented 6redit Memorandum '6M( -ill /e

placed to the Branch 6redit 6ommittee /y the officer in charge credit. 6redit committee

after thoroughly @ critically e2amining the proposal recommends it to the Branch

Manager -ho approves credit under his delegated authority.

o n E ,

*lo3 cart for a!!ro4al 1rocess of Loans 8 Ad4ances

<";<"; Mandator5 Cecking:

Proposed 6redit facilities are compliant of the e2isting /anking regulations.

6R? has /een done.

+ther analysis and assessment has /een done properly.

6ompetent authority as per BankJs policy approves facilities in -riting.


Page %E

)redit App"ication proce&&ed.* creditOfcer& and recommended

E,ec$ti'e )ommittee 3E)4Mana(in( DirectorDep$t* Mana(in( DirectorHead Ofce5 )reditHead Ofce5 )redit Di'i&ionRe(iona" HeadRe(iona" Ofce )redit

Re(iona" Ofce

Branc! Mana(er

Branc! )redit )ommittee



All 6redit approvals are given on a one)o/ligor /asis.

1imit is approved as per authority delegated in the rule /ook.

Standard facilities are descri/ed using standard language.

1arge loans are approved -ithin the ceiling advised /y Bangladesh Bank.

<resh approvals, rene-al, rescheduling, compromise agreement for large loan

accounts are placed for approval /y the Board as per Bangladesh Bank ?uidelines.

Proposal incorporates that facilities are su/4ect to /anking regulation, -hich shall /e

mentioned in the sanction letter also.

Approvals authorities check that pricing of the facilities are -ithin the BankJs

declared /and.

<";<"< ,isbursement:

Before dis/ursement of the approved facilities, /ranch 6redit Administration should

ensure that the follo-ing steps have /een properly follo-ed9

aD Approval has /een o/tained.

bD Standard loan facility documentation including security documentation has /een

completed.

cD 1imit 6reation @ documentation 6heck 1ist has /een completed.

dD 6redit officer @ 6redit Administration officer of the /ranch has 4ointly signed

documentation checklist /efore dis/ursement.

eD *he approved terms and other reCuirements have /een adhered to /y the /ranch.

fD Branch 6redit Administration Unit ':+ 6redit Administration ) if reCuired(

issues security compliance certificate and 1oan Dis/ursement 1imit 1oading

6hecklist @ Authoriation <orm /efore dis/ursement.gD Branch 6redit Administration Unit ':+ 6redit Administration ) if reCuired( check

collateral.

D BankJs legal adviser ensures that the BankJs security interest is perfected.

iD Incomplete documentation receives a temporary -aiver from approving authority.

jD Branch 6redit Administration Unit :+ 6redit Administration ensure that all

dis/ursements are covered /y approved credit lines.

kD Authoried officers as per our /ankJs policy dis/urse facilities.

lD >vidence of dis/ursements is properly documented.


Page !



mD Unauthoried approvals are surfaced and proper actions are taken.

nD >2cess over limit are allo-ed under pre)fact credit approvals.

<";<"> Custodian

aD +/taining Security Documentation as per approval

bD Safely Storing 1oanSecurity Documents 6ash collateral such as <i2ed

Deposit Receipt, Script, Bonds, Marketa/le Securities etc. are under dual

control in fireproof vault and for this purpose t-o custodians and their

alternates are to /e identified in -riting.

cD Periodic Revie- of Documentation

dD >nsuring insurance of the insura/le o/4ects.

eD >nsuring maintenance of Safe in @ safe out register properly to track

their movement.

fD Releasing of collateral of de/t o/ligation instruments under appropriate approval.

gD >nsuring keeping current Insurance policy in the vault and rene-al of the policy

on a timely /asis.

Periodically Means9 Risk ?rade Revie- <reCuency

Q Kuarterly

")% Semi)Annuals

$)# Annually

<";<"? Com!liance reKuirements of credit administration:

a( 6redit administration shall su/mit all reCuired Bangladesh Bank returns

on credit in specific format in a timely manner.

/( 6redit Administration Division maintains Bangladesh Bank circularsregulations

guidelines relating to credit centrally ensure issuance of corresponding


Page $



circulars and advise all relevant departments to ensure compliance of the

contents of the circular.

c( All #rd party service providers like, valuers, la-yers, 6PAJs etc shall /e

approved and their performance revie-ed on annual /asis.

3.04 C #E$%T ( ,N%T,#%N

*o minimie credit losses, monitoring procedures and system should /e reinforced and more

effective system should /e developed in vie- of varied comple2ities involved in various

types of credit. *he procedures and system must provide early indication of deteriorating

financial health of a /orro-er.

At a minimum, report on the follo-ing to /e generated and su/mitted to management andinstruct the /ranch to regularie the same.

a( +verdue principal @ interest 'Monthly(

/( +verdue trade /ills 'Monthly(

c( >2cess over limit >2cess over facility approved 'Monthly(. Status reports on

>2cess over 1imit and e2pired credit limit on a regular /asis.

d( Status reports on dra-ing po-er and 6ollateral shortfall on a regular /asis.e( Breach of loan covenants terms and conditionsDocumentations deficiencies

'<ortnightly(

f( 0onpayment and late payment

g( Branch monitors +D66 facilities on a regular /asis to ensure accounts turn over.

h( 0on)Receipt of <inancial Statements in time 'Annually(

i( +/4ections of internale2ternal or regulator Inspection Audit and advise

corrective measures timely. 4( Details of >arly Alert Accounts and preparation of list of delinCuent account @

Special Mention Account 'SMA(. 'Monthly(

k( Identification of early alert accounts, delinCuent account @ Special mention

account 'Monthly(

l( Identification of the accounts, -hich have assumed SMA status due to non)

rene-al. 'Monthly(

m( 1isting of the accounts, -hich shall /e SMA if not rene-ed -ithin 8 months and

taking necessary measures. 'Monthly(


Page 8



n( Status of timely rene-al of limits and informing Branch, regional +ffice @ 6redit

Division, :ead +ffice 8 months ahead of e2piry limit dates.

<";>"9 'arl5 Alert 1rocess:

An account that has risks or potential -eakness of material nature, reCuiring monitoring,supervision or close attention /y the Management is /rought under >arly Alert ProcessH

other-ise these -eaknesses may result in deterioration of repayment prospects for the

assets or in the /ankJs credit position at future date.

In order to keep an account on track, early Identification, prompt reporting and pro)active

management of >arly Alert Accounts are to /e placed under the responsi/ility of dealing

credit officials and must /e undertaken on a continuous /asis. An >arly Alert Report

should /e completed /y the Branch credit officers and sent to the :+ 6redit

Administration for any account sho-ing signs of deterioration -ithin days from the

identification of -eakness.

iD As part of >arly Alert Process the follo-ing takes are to /e performed9

iiD 6ontrol mechanism to /e made more effective and -here reCuired to /e

devised, to ensure that callsinspections are made regularly on the clients and

documented.

iiiD Regular inspections are conducted to confirm that /ankJs security collateral is

secured.

i4D 6all >arly Alert Reports is to /e analyed /y /ranch @ :ead office credit

administration to ensure that affairs of the /orro-er are /eing run on

e2pected lines and there are no material changes in the status of /orro-er.

4D Relationship Manager credit officer should regularly monitor the

performance of the clients /usiness as -ell as repayment and prepare status

report.

4iD Relationship Manager credit officer should prepare >arly Alert Report

-ithin days after identification of -eakness and signs or deterioration.

3.05 C #E$%T # EC,1E#*

Recovery Unit 'RU( should9

aD Determine Account Action plan Recovery strategy.


Page #



bD Make all out efforts to ma2imie recovery including placing customers into

receivership or liCuidation as appropriate.

cD Provide for adeCuate and timely loan loss provision, /ased on actual and e2pected

losses.

dD Reschedule accounts as per norms.

eD Revie- classified accounts.

fD Initiate legal action as per norms.

gD <ollo- up 6ourt cases regularly and ensure that necessary steps are taken for

early resolution.

<";?"9 Non!erforming Loan N1LD Accounts Management:

As management of pro/lem loans is a dynamic process, management strategy and

adeCuacy of provisions should /e revie-ed regularly. All 0P1s are assigned to a

responsi/le official -ithin Recovery unit 'at Branch Regional +ffice:ead +ffice level(

-ho is responsi/le for coordinating and administering the action planrecovery of the

advance. Recovery Unit 'Branch Regional +ffice:ead +ffice(, if reCuired, seeks

assistance from :+ 6redit Division /ut the responsi/ility to recover 0P1 should /e -ith

Recovery Unit 'Branch Regional +ffice:ead +ffice(.

<";?"; Non!erforming Loan N1LD monitoring:

6lassified 1oan Revie- '61R( should /e prepared /y 1a- @ Recovery Division on

Cuarterly /asis to update status of actionrecovery plan, revie- and assess the adeCuacy of

provisions and modify /ankJs strategy appropriately. 6lassified 1oan Revie- '61R( for

0P1s up to $%L of the /ankJs capital should /e approved /y :ead of la- and

Recovery Division. hile 0P1s a/ove $%L /ut /elo- 8%L is approved /y :ead of 1a-

and Recovery Division -ith the approval of MD6>+. 0P1 for more than 8%L of /ankJs

capital is approved /y the MD6>+ and Board is informed.

<";?"< N1L !ro4isioning and 3rite off:

In compliance -ith Bangladesh Bank guidelines for 6IB reporting, provisioning, -rite

off @ suspension of interest, /ank tries to adopt more stringent provisioning -rite off

policies in order to strengthen credit portfolio.


Page "



* h e a m o u n t o f r e C u i r e d p r o v i s i o n m a y , i n s o m e c i r c u m s t a n c e s , / e

r e d u c e d / y a n estimated realia/le forced sale value 'i.e. Salvage =alue( of any tangi/le

collateral held 'vi. mortgage of property, pledged goodsor hypothecated goods repossessed

/y the /ank, pledged readily marketa/le securities etc(. :ence, in these situations, it is

advisa/le to evaluate such collateral, estimate the most realistic sale value under duress and

net)off the value against the outstanding /efore determining the 0et 1oan value for provision

purposes. 6onservative approach should /e taken to arrive at provision reCuirement and

Bangladesh Bank guideline to /e properly follo-ed.

Appropriate authori t ies should approve e2ceptions, -aiver of in terest and

reschedulecompromise, settlement, -here applica/le Bangladesh Bank approvals are

also to /e o/tained. Appropriate authorities should also approve rite off in line -ith

Bangladesh /ank guidelines.

<";@ Credit 1rocedure’s:<";@ Credit 1rocedure’s:

*he /ank should have clear guidelines for procedure to /e follo-ed for loan approval. *he

approval process should provide for the RMMarketing team should recommend segregation

of Relationship Management Marketing from the Approving Authority and for-arded to the

approval team and /e approved /y the individual e2ecutives"

<"; Credit Administration:<"; Credit Administration:

6redit administration is responsi/le to ensure proper documentation and compliance of terms and

conditions of approval /efore dis/ursement of loan. <or this reason it is essential that the function

of credit administration /e strictly segregated from Relationship ManagementMarketing"

<";F Credit Monitoring:<";F Credit Monitoring:

*o minimie credit losses, monitoring procedures and systems should /e in place that should

/e in place that should provide an early indication of the deteriorating financial health of a

/orro-er. Strong credit monitoring system helps in identifying potential -eakness of material

nature reCuiring closes supervision and attention of the management.

<";G Credit Reco4er5:<";G Credit Reco4er5:

*he /ank should have a separate credit recovery unit, the primary functions of -hich including the

follo-ing9

Determine action planrecovery strategy


Page %



Pursue all options to ma2imie recovery

>nsure adeCuate and timely loan loss provision /ased and e2pected losses.

Regular revie- of classified loans.

<"<H 1rinci!le of .ood Lending<"<H 1rinci!le of .ood Lending

In appraising a credit proposal, every /anker follo-s a fe- general principles of goods

lending, these are stated /elo-9

<"<9 Safet5:<"<9 Safet5:

Safety first is the main slogan of principle of good lending. hile lending a /anker must feel

certain that the money -ill definitely come /ack. *he /anker is to ensure that the money

advanced /y him -ill /e employed in a productive field and repaid -ith interest.

<"<; LiKuidit5:<"<; LiKuidit5:

Money -ill come /ack is not allG *hat must come /ack -ithin a reasona/le time or on

demand. >mployment of funds for shirt)term reCuirements and not locked up in long term

schemes is desira/le. *he repayment through definite, /ut slo- in coming /ack does not

serve the purpose of liCuidity. Recovery of mortgage money of much higher value than

advance money through court process involving fe- years is safe /ut not liCuid.

<"<<1ur!ose<"<<1ur!ose99

*he /anker should ensure practica/ly that the /orro-er applies the money /orro-ed for a

particular purpose accordingly. Advances for personal e2pense, say, marriages, pleasure tours

or repayment of a previous outstanding de/t are ordinarily refused /y /anks. Banks also

discourage advance for hoarding stocks or speculative activities.

<"<> 1rofitabilit5:<"<> 1rofitabilit5:

Banks must make profit to meet up the e2penses of deposit interest, esta/lishment, staff

salary, rent, stationery etc. and then make reserve or pay dividend to shareholders. After

considering all these factors a /ank decides upon its lending rates. A particulars transaction


Page



may not appear profita/le in itself. But /orro-ers some ancillary /usiness may /e highly

remunerative to the lending /ank. In this -ay, the transaction may on the -hole /e profita/le

for the /ank.

<"<? Securit5:<"<? Securit5:

Banks lend out of /orro-ed money against security. Security serves as a safety valve for an

emergency. Apart from this character, capacity, and capital of the /orro-er are -ell looked

into -hen an advance is granted.

<"<@ S!read<"<@ S!read99

Risk is al-ays inherent in every advance. A successful /anker is an e2pert in assessing such

risk. :e is keen on spreading dispersing lending risks over a large num/er of /orro-ers,

industries, areas and different types of securities. <or e2ample, advancing against only one

type of security -ill run if that class of security steeply depreciates.

<"< National interest:<"< National interest:

An advance satisfying all the aforesaid principles may run counter to national interest. In the

changing concept of /anking, advancing to priority sectors such as agriculture, small

industries and e2port)oriented industries are assuming greater importance than security.

<"<F*inancial 1erformance of;H9<

Assets:

*he total assets of the /ank gre- up /y 8.%# percent to *k. E8!&".E million in 8!$# from

*k. 88!%."E of 8!$8. the significant increase in assets -as achieve due to rise in loans andadvances, investments, cash and /alances -ith other /anks and financial institution etc. 6ash

in hand increased /y *k. 8"#.&E million or 8#.#$ percent to *k. $8E!.$ million -hile the

/alances maintained -ith the Bangladesh /y 8.E" percent at the end of Decem/er 8!$#. *he

deposit gro-th increases the /alances -ith Bangladesh Bank and its agent's( for maintaining

the cash reserve reCuirement '6RR(.

Money at 6all @ Short decreased to *k. $#%E.&! million as at Decem/er 8!$#as against *k.

#!&E.E! million reported as on 8!$8.


Page



Investment increased /y #".%! percent to *k. $8#$%.8! million as at Decem/er 8!$# over the

previous year. *he gro-th is due to mainly purchase of ?overnment *reasury Bills,

De/entures, investment in secondary share portfolio.

Ca!ital:

0B1 has a consistent dividend policy. In line -ith that Stock Dividend of %8 percent -as

declared for the ear 8!$8 -hich strengthened paid)up capital /ase and it stood at *k. 8,&".%#

million 8!$# against authoried capital of "%!.!! million. *he statutory reserve enhanced /y

#%.E% percent to *k. 8"$&.# million in 8!$# after transferring 8! percent on pre)ta2 profit

-hile it -as *k. $&.& million in 8!$8. at the end of 8!$# shareholderFs eCuity increased

/y "%.%% percent to *k. &E$. million from *k. $8.8 million of 8!$8.


Page &



)apita" 3Ta#a in mi""ion

4

Aut!orised capital

"aid up capital

Reser#e $und & capital

Liabilities:

*otal lia/ilities increased /y 8%.& percent to *k. &#$&.!8 million as of #$ Decem/er, 8!$#.

*his -as mainly due to increase in customersF deposits and keeping provision for income ta2,

gratuity and loan loss etc.


Page E



Depo&it& 3Ta#a in mi""ion4

,e!osit:

*he deposit /ase of the /ank registered a gro-th of 8. percent in the reporting year over

the last year and stood at *k. &#&." million. >2panded /ranch net-ork, innovative deposit

products including 0MS and 0DS attracted a huge num/er of customers, -hich contri/uted

to the gro-th of deposit. *he main customers include individuals, government and

autonomous /odies, etc


Page !



Depo&it Mi,

Term depo&it&5

6789:-;95 99<

)$rrent depo&it& and

ot!er acco$nt&55

68:=>-8;5 6?<

Bi""& pa*a."e5 69>@-@?5

9<

Sa'in(& depo&it&5

6;@8=->75 96<

Fi,ed depo&it&5:6;96-@@5 ?6<

In'e&tment& 3Ta#a in mi""

In4estment:

*he /ankFs investment gre- /y #".%! percent and stood at *k.$8#$%.8! million in 8!$#against *k.E$%.$ million in the previous year. It mostly invested in high yield long)term

government securities to cover the increased statuary liCuidity ratio 'S1R( reCuirement

arising from the gro-th of deposit lia/ilities

Loans And Ad4ances:


Page $



97898-96:978=-;>

:;?7@-7?

?=;;@-@6

;@69=-9=

988= 9868 9866 9869 986:

Loan& % Ad'ance& 3Ta#a in mi""ion4

0B1 Designed appropriate credit risk management criteria and strategies for /alance leading

mi2 commensurate -ith sound capacity to finance in the short and the long)term credit.

Deposit of slo-er gro-th in /usiness s during 8!$# due to glo/al crisis significant

improvement has made second half of the year. 1oans and advances gre- /y 8&.%% percent

and stood at *k. %$8E.8E million in 8!$# compared to *k. %!.%.! million of 8!$8. *he

gro-th -as due to in4ecting significant amount of fund in ne- ventures of Syndication loan,

Pro4ect loan, and 1ease finance specially, SM> and Agri loan.

)!erating and Net 1rofit: Before !ro4isionD

0B1 generated profit /efore provision of *k. ##E.! million in 8!$# -hich -as *k. #$8#.&8

million in 8!$8 registering a gro-th of &. percent. 0et profit after ta2 gre- /y #."%

percent to *k. 8!!." million in 8!$# after making provision for loan loss and income ta2

for *k. 8!!.!! million and *k. $$%!.!! million respectively.


Page 8



976-;7

@87-?=

69:>-66

6@67-?:

9878-?7

988= 9868 9866 9869 986:

Operatin( % Net /rot 3Ta#a in mi""ion""4

Liabilities 9

*otal lia/ilities increased /y 8%.& percent to *k. &#$&.!8 million as of #$ Decem/er,

8!$#.*his -as mainly due to increase in customerFs deposit and making provision for income

ta2, gratuity and loan losses etc.

*oreign %rade:

0B1 -as keenly active in international trade during the year 8!$# and financing of e2port)

import trade, mo/iliation of -age)earners remittances from a/road etc. /esides, the /ank put

forth every attempts to e2pand its e2ternal /usiness /y undertaking e2port /ill negotiations,

realiation of e2port proceeds, foreign remittance etc.

Im!orts:


Page #



%%Taa in million'

77@:=-777>99;-:9

;97@=-88

?9?@>-@8

:6;?>-98

:>:=>->@:;9>?-??:6>9?-88

9>86=-98

96:??-68

988= 9868 9866 9869 986:

Import E,port

*he /ank opened a total num/er of 8".#&% 16s amounting USD $$$.$ million in import

trade in 8!$#. *he main commodities -ere scrape vessels, rice, -heat, edi/le oil, capital

machinery, petroleum products, fa/rics @ accessories and other consumer items.

'6!orts:

*he /ank has /een nursing the e2port finance -ith special emphasis since its inception. In

8!$# it handled $&$ e2port documents valuing USD %%E.& million -ith gro-th of %."$

percent over the last year. >2port finances -ere made mainly to readymade garments,

knit-ear, froen food and fish, tanned leather, handicraft, tea etc.

*oreign Remittance:

0ational /ank has remittance arrangements -ith different /anks and e2change houses in

various countries throughout the -orld. *he /ank has earned the confidence and reputation as

a relia/le organiation of paying hard)earned money of the e2patriate Bangladeshis to their

/eneficiaries in the country safely and Cuickly. *he /ank handled USD "!8.% million

'*k.8%.!& crore( remittance in 8!$#, -hich -as USD E8!&% million '*k.8!.E crore(

higher than that of 8!$8 achieving a gro-th rate of 8E.! percent.


Page "



6:;6>-9

96:@:-=

97@;8->

:=>77->??:>6-@

988= 9868 9866 9869 986:

Remittance 3Ta#a in mi""ion4

3.32 / %1E * E)#& / %N)NC%)L & ((E#*

%aka in MillionD

;HHG ;H9H ;H99 ;H9; ;H9<

Income Statement

Interest Income 8%$8.$ #".#8 "8&&.&! %&.$ &8$."!

Interest >2pense $&E.&# 8""E. 8&##."% #%E".&" ""E!.#"

0on)Interest Income $E!.#8 8!%"."& 8&E#.&# #$!.# "$&".%

0on)Interest >2pense $"%#.#" 8$#8.8 8$#".!& 8$"."! #$$&.$$

Profit Before *a2 and Provision &%$.#8 $$".& 88$%.$! #$8#.&# ##E.!

Profit After *a2 8$. %!."E $8#&.$$ $%$."# 8!!."

Balance Seet

Authoried 6apital $!!!.!! 8"%!.!! 8"%!.!! 8"%!.!! "%!.!!

Paid)up 6apital $E.%E &!%." $8!&.8! $&8.8 8&".%"

Reserve <und @ Surplus 8$$%.!8 8"&.& ##!.$E "8%#.%% !!.88

*otal Shareholders >Cuity 8#".$ #8".8% "%&.#E $8E.8 &E$.

Deposits #8E&".! "!#%!.& "E$.88 !$&.&E &#&."

1oan @ Advances 8!8!.8$ #8!E.& #"%." %!%.! %$8E.8E

Investments #%".&8 8#E.&# !.#& E$%.$ $8#$%.8!

<i2ed Assets $"#$.8# $8.8E $&"8.8& $E&$.$ 88!!.&

*otal Assets #&"!!.# "E.!" %%8.E 88!%.%! E8!&".E

)ff Balance Seet '6!osure$"%.% $E#.% 8&!$.! 88#!%.! #!!&E.!#

*oreign '6cange Business

Import #$"&.8! "8"%&.%! 8%E.!! &88.#8 %#E.

>2port 8$#"".$! 8&!$E.8! #$&8".!! #8&"."" #&#E&.&%

Remittance $#$&.8! 8$#%#.E! 8%!.&! #E&.&! ""#&$.%!

Regulatory 6apital Measures

*otal Risk eighted Assets 8%%E&.$# #8!%%.$ #%E"!.E "&%8. 8&$.E$

6ore 6apital '*ire I( $EE."$ 8%!#.E! #"8.!$ %8%E."% #8E.E8

Supplementary 6apital '*ire II( $.$ ##.E$ EE." $8%E.E $E".!

*otal 6apital

*ire I 6apital Ratio .&L .&$L $!."$L $!.&#L $!.&EL

*ire II 6apital Ratio 8.%&L 8.8EL 8.!L 8.%EL 8.L*otal 6apital AdeCuacy Ratio $!."%L $!.$!L $#.$$L $#."8L $#.%L


Page %



Credit ualit5

Provision for Unclassified 1oans 8%$.$# #!."# %$".E$ &".E$ E%E.E$

Provision for 6lassified loans $.! &%".$& E"." $$8$. $$E%.&

Sare Information

0o of Shareholders E%& $!8"& $"!!# 8"8E #"

0o of Shares +utstanding'million(

.8! &.!% $8.!& $&.# 8&."

'arning 1er Sare

Basic "#.&% #.!$ .$$ %#.#$ 8."

Diluted ) ) ) ) )

Dividend per Share ) ) ) ) )

6ash ) ) ) ) )

Stock #!L %!L %%L %8L %%L

>ffective Dividend Ratio 8.%L %.%!L "&.!&L 8E."L "8.&$L

Market Price Per Share '*aka( ".%! !.%! $"E".!! $!$".8% ".8%

Market 6apitaliation "8%.8" $8%.! $&!%!.%$ $&EE".! $&#E%.

Price earning ration '*imes( $.!8 $8.! 88.! $E.!# &.&&

0et Assets =alue Per Share '*aka( ""$.# "!.%! #&.$8 #8.$# $#$.8%

)ter Information

0um/er of Branches 'Including

SM> 6enters(

E$ $!$ $! $#$

0um/er of >mployees 8$&# 88! 8"#8 8# 8E!

0um/er of <oreign

6orrespondents

#E$ "!! "!% "!% "$%

Ratings:

1ong *erm 0A A8 A$ A$ A$

Short *erm 0A S*)8 S*)8 S*)8 S*)8

3.4 ) N)L*&%& ,/ NBL & P E#/,#()NCE %T6 / %N)NC%)L # )T%,&

<">H"9 Ratio Anal5sis:

R atio analysis is a po-erful tool of financial analysis. A ratio is defined as the indicated

Cuotient of t-o mathematical impressions and as the relationship /et-een t-o or more

things. In financial analysis, a ratio is used as /enchmark for evaluating the financial position

and performance of a firm. e are descri/ing some ratios for the measurement of the

performance of the /ank.

<">H"; 1rofitabilit5 Ratio:

Profita/ility ratios are used to assess a /usinessJ a/ility to generate earnings as compared to

e2penses over a specified time period. *hese tutorials define the ratios and -alk you through

the calculations, including -here on the financial statements the num/ers can /e found.


Page



Return on 'Kuit5 R)'D

*he rate of return on eCuity is a good condition last five years. R+> indicates the rate of

return on eCuity capital. ?enerally /ank stockholders prefer R+> to /e high. :ere, R+> is

increased last four years, /ut last yearFs R+> indicates lo-er than previous year. It is

possi/le, ho-ever, that an increase in R+> indicates increased /ankFs risk.

Return on 'Kuit5 JD Net Income after %a6E%otal 'Kuit5 Ca!ital9HH

%aka in millionD

R+> of

0B1 -ere

6hanges in the year, 8!$!, 8!$$, 8!$8 @ 8!$# respectively. R+> has /een increased as 0et

Income of the Bank has /een increased over the years.

Return on Asset R)AD

*he rate of return on assets 'R+A( measures the a/ility of management to utilie the real and

financial resources of the /ank to generate returns. R+A is most commonly used to evaluate

/ank management.

Return on Asset Net Income after %a6E%otal Asset9HH

%aka in millionD


Page

0ear Net Income

after %a6

%otal 'Kuit5

Ca!ital

R)' JD Canges

JD

8!!E 8$. 8#".$ E.E#L ))))))))))

8!$! %!."E #8".8% $%.%!L %.%L

8!$$ $8#&.$$ "%&.#E 8.$!L $$.L

8!$8 $%$."# $8.8 8".L '8.##L(

8!$# 8!!." &E$. 8.88L 8."%L



0ear Net Income

After %a6

%otal Assets R)A JD Canges

JD

8!!E 8$. #&"!!.# !.$L )))))))))

8!$! %!."E "E.!" $.!&L !.#L

8!$$ $8#&.$$ %%8.E 8.$EL $.$$L

8!$8 $%$."# 88!%.%! 8.$!L '!.!EL(

8!$# 8!!." E8!&".!# 8.8%L !.$%L

<rom the ta/le -e can see that R+A of 0B1 has /een increased over the year from 8!!E to

8!$#. Both R+A and *A of 0B1 over the last five years.

Net Interest Margin NIMD

0et interest margin '0IM( is a measure of the difference /et-een the interest income

generated /y /anks and the amount of interest paid out to their lenders 'for e2ample,

deposits(, relative to the amount of their 'interest)earning( assets. It is similar to the gross

margin of non)financial companies.

Net Interest Margin Interest IncomeInterest e6!enseDE%otal Asset9HH

%aka in millionD

0ear Interest Income

Interest e6!ense

%otal Assets Net Interest

Margin JD

Canges

JD

8!!E 8%$8.$$&E.&# #&"!!.# $.!L )))))))

8!$! #".#88""E. "E.!" 8.8L $.!8L

8!$$ "8&&.&!)8&##."% %%8.E 8.%L '!.!%L(

8!$8 %&.$)#%E".&" 88!%.%! #.!"L !."L

8!$# &8$."!)""E!.#" E8!&".!# 8.%$L '!.%#L(

6ost of Deposit has /een increased due to the tough competition /et-een private /anks.

Net NonInterest Margin:


Page &



*he non)interest margin, in contrast, measures the amount of non)interest revenues stemming

from deposit service charges and other service fees the /ank has /een a/le to collect 'fee

income( relative to the amount of non)interest costs incurred 'including salaries and -ages,

repair and maintenance costs on /ank facilities, and loan)loss e2penses(.

Net NonInterest Margin Non Interest Income)!erating '6!enseDE%otal

Asset9HH

%aka in millionD

0ear Non Interest Income

)!erating '6!ense

%otal

Assets

Net Non

Interest

Margin Margin

JDInterest

Canges

JD

8!!E $E!.#8)$"%#.#" #&"!!.# !.8L )))))))

8!$! 8!%"."&)8$#8.8 "E.!" '!.$L( '!."%L(

8!$$ 8&E#.&#)8$#".!& %%8.E $.#"L $.$L

8!$8 #$!.#)8$"."! 88!%.%! $.8EL '!.!%L(

8!$# "$&".%)#$$&.$$ E8!&".!# $.$L '!.$#L(

♦ Net 1rofit Margin 9

0et profit margin ratio esta/lishes a relationship /et-een net income and operating income

that indicates management efficiency in providing services, administrating and selling the

product. It reminds us that /ank can increase their earnings and their returns to their

stockholders /y successfully controlling e2penses and ma2imiing revenues.

0et Profit Margin W 0et Income after *a2 *otal +perating Income $!!

%aka in millionD

0ear Net Income %otal )!erating Net 1rofit Canges


Page E



after %a6 Income Margin JD JD

8!$! $8#&.$$ "#%&."# 8&."$L ))))))

8!$8 $%$."# %8E.$& 8&.%L '!.8"L(

8!$# 8!!." "E8."E #$.&EL '#.8"L(

*he increment has a positive effect on /anks financial performance. *his indicates that the

/ank has properly managed all its e2penses and thus ma2imiing the profit.

'1S'arning 1er SareD

*he portion of a companyJs profit allocated to each outstanding share of common

stock. >arnings per share serve as an indicator of a companyJs profita/ility.

'1S 'arning 1er SareD Net Income after %a6E No" of Sare )utstanding

%aka in millionD

0ear Net Income

After %a6

No" of Sare

)utstanding

'1S Canges

8!!E 8$. .8! "#.&8 )))))))

8!$! %!."E &.!% #.!" $E.88

8!$$ $8#&.$$ $8.!& $!8."E #E."%

8!$8 $%$."# $&.# &$.!8 '8$."(

8!$# 8!!." 8&." 8.# '&.8E(

In 8!$$)8!$# the >PS -as increased /ut in 8!!E @ 8!$! the >PS is decreased. 0et Income

after *a2 increased /ut in respect of the no. of share the 0IA* not that much increased.

Asset +tili#ation


Page &!



*he asset utiliation ratio represents the a/ility of management to employ asset effectively to

generate revenue. *he more income generated per *aka of assets, the more profita/le is the

/ank.

Asset +tili#ation %otal )!erating IncomeE %otal Asset9HH

%aka in millionD

0ear %otal )!erating

Income

%otal Assets Asset

+tili#ation

JD

Canges

JD

8!$$ "#%&."# %%8.E 8."!L )))))))

8!$8 %8E.$& 88!%.%! .##L ".E#L

8!$# "E8."E E8!&".!# .!%L '!.8&L(

*he /ank has sho-n a very slight decrease in its a/ility to use its assets for generating

income. *he decrease is too small to influence the /ankJs financial performance

<">9 Management 'fficienc5 Ratio:

A strong management team is one of the key elements for a good company other than

corporate /usiness model, products and services etc.

)!erating 'fficienc5:

A ratio used to calculate a /ankFs efficiency. 0ot all /anks calculate the efficiency ratio the

same -ay. eFve seen the ratio calculated as all of the follo-ing9

$. 0on)interest e2pense divided /y total revenue less interest e2pense

8. 0on)interest e2pense divided /y net interest income /efore provision for loan losses

#. 0on)interest e2pense divided into revenue

". +perating e2penses divided /y fee income plus ta2 eCuivalent net interest income.


Page &$



<or all versions of the ratio, an increase means the company is losing a larger percentage of

its income to e2penses. If it is getting lo-er, it is good for the /ank and its shareholders.

)!erating 'fficienc5%otal )!erating '6!enseE%otal )!erating

Income9HH

0ear %otal

)!erating

'6!ense

%otal

)!erating

Income

)!erating

'fficienc5

JD

Canges

JD

8!$$ 8$#".!& "#%&."# "E.!#L ))))))))

8!$8 8$"."! %8E.$& "$.!L '.EL(

8!$# #$$&.$$ "E8."E "&.!#L '.EL(

'm!lo5ee 1roducti4it5:

'm!lo5ee 1roducti4it5Net Income after %a6ENo of 'm!lo5ees

%aka in millionD

0ear Net Income After

%a6

No" of

'm!lo5ees

'm!lo5ee

1roducti4it5

millionD

Canges

8!!E 8$. 8$&# !.$8 )))))))

8!$! %!."E 88! !.88 !.$!

8!$$ $8#&.$$ 8"#8 !.%$ !.8E

8!$8 $%$."# 8# !.%% !.!"

8!$8 8!!." 8E! !.! !.$%

<">; Risk Measurement Ratio


Page &8



A measure of the risk of a certain event happening in one group compared to the risk of the

same event happening in another group. In cancer research, risk ratios are used in prospective

'for-ard looking( studies, such as cohort studies and clinical trials. A risk ratio of one means

there is no difference /et-een t-o groups in terms of their risk of cancer, /ased on -hether

or not they -ere e2posed to a certain su/stance or factor, or ho- they responded to t-o

treatments /eing compared. A risk ratio of greater than one or of less than one usually means

that /eing e2posed to a certain su/stance or factor either increases 'risk ratio greater than

one( or decreases 'risk ratio less than one( the risk of cancer, or that the treatments /eing

compared do not have the same effects. Also called relative risk.

Credit Risk:

6redit risk ratio is the percentage or the likelihood that lenders -ill lose /ecause of a

/orro-erJs ina/ility to pay on time. +r, in other -ords, it is the odds that /anks, lending

institutions,

Credit Risk Classified LoanE%otal Loan9HH

%aka in millionD

0ear Classified Loan %otal Loan Credit Risk JD

CangesJD

8!!E $E!." 8!8!.8$ .!L )))))))))

8!$! $E.8 #8!E.& .!$L '$.!%L(

8!$$$%.$$

#"%."".%#L

'$."&L(

8!$8 88.E# %!%.! %."EL !.EL

8!$# #&&.!# %$8E.8E %.EL !."L

6redit Risk -as decreased in 8!$! @ 8!$$./ut it -as increased in 8!$8 @ 8!$# due to the

increase in classified loan and also in loan.

♦ %otal Loan Risk:


Page &#



%otal Loan Risk %otal LoanE%otal ,e!osit9HH

%aka in millionD

0ear %otal Loan %otal ,e!osit %otal Loan

Risk JD CangesJD

8!!E 8!8!.8$ #8E&".!% &$.E8L )))))))))

8!$! #8!E.& "!#%!.& &$.!L '!.&L(

8!$$ #"%." "E$.88 .!%L '%.!$L(

8!$8 %!%.! !$&.&E &".$&L &.$#L

8!$# %$8E.8E &#&." &".L '!.%&L(

LiKuidit5 Risk:

1iCuidity risk is the risk that a given security or asset cannot /e traded Cuickly enough in the

market to prevent a loss 'or make the reCuired profit(.

LiKuidit5 Risk Net LoanE%otal AssetD9HH

%aka in millionD

0ear Net Loan %otal Asset %otal Loan

Risk JD

Canges

JD

8!!E 8!8!.8$ #&"!!.# !.#L )))))))

8!$! #8!E.& "E.!" E.E!L '!."L(

8!$$ #"%." %%8.E ".%#L '%.#L(

8!$8 %!%.! 88!%.%! !.!#L %.%L

8!$# %$8E.8E E8!&".!# !.#L !.L

Ca!ital AdeKuac5 Ratio


Page &"



6apital adeCuacy ratio is the ratio -hich determines the capacity of the /ank in terms of

meeting the time lia/ilities and other risks such as credit risk, operational risk, etc. In the

most simple formulation, a /ankJs capital is the TcushionT for potential losses, -hich protects

the /ankJs depositors or other lenders. Banking regulators in most countries define and

monitor CAR to protect depositors, there/y maintaining confidence in the /anking system

CAR %ier I Ca!ital %ier II Ca!italDE Risk 7eigted Assets

As per Basel)II the minimum

reCuirement for 6AR is $!L so in 8!!E)

8!$# 0ational Bank 1td. fulfill the

reCuirement

<">< Credit 1rocessing 7it S!ecial Reference to Credit Risk Management:<">< Credit 1rocessing 7it S!ecial Reference to Credit Risk Management:

6redit Processing covers the tasks from receipt of application for credit along -ith all

reCuired Papersdocumentsinformation to evaluationanalysis of the application and

Preparation of the proposal for ultimate approval.


Page &%

0ear CAR Canges

8!!E $!."%L )))))

8!$! $!.$!L '!.#%(

8!$$ $#.$$L #.!$

8!$8 $#."8L !.#$

8!$# $#.%L !.$"



1rocessing of Credit co4ers te follo3ing stages:1rocessing of Credit co4ers te follo3ing stages:

Receipt of 6redit application.

6redit Investigation.

Matching of credit application -ith policy.

Mode and sufficiency of securitiation.

6redit evaluation in terms various risks involved for ultimate approval.

<or /anks, e2tension of credit /asically is full of risksH Such as risks are to /e managed

properly, in course of the -hole process of credit approval. 6redit risks are virtually, the

possi/ility that a /orro-er -ill fail to repay the de/t -ithin the maturity date of the loansas

per terms of sanction. 6redit risks arise from /anks lending operation. >2pansion of /anks

lending operations today has increased the sphere of risksH addressing devices of risks are

therefore to /e taken care of at every stage of credit decision.

6redit risks are so e2haustive that a single device cannot encompass all the risk. Moreover

lending to day has assumed such diverse nature, that ne-er techniCues are to /e applied to

effectively contain risks. ith this end in vie- credit risks management has to /e done inorder to ena/le the /ank to manage loan portfolio in order to minimie losses. In the present

scenario of fast changing, dynamic glo/al economy and the increasing pressure of

glo/aliation, li/eraliation, consolidation and dis)intermedeation, it is essential to under take

ro/ust credit risks management policies and procedures, sensitive and responsive to these

changes.

In the initiation of credit processing the prospective /orro-er has to initially pass the

selection processvarious steps)

♦♦ Credit assessmentCredit assessment99

A through credit and risk assessment is to /e conducted /efore granting of loans, and once

approved all facilities are to /e revie-ed at least annually. 6redit assessment should /e

presented in a credit application duly singedapproved /y the official of the /ranch.


Page &



In case an account deviates from the guidelines the same should /e identified in credit

applications and the originating officials of the /ranch should provide 4ustification for

approval. Bank -ill conduct financial analysis on a regular /asis and monitor changes in the

financial condition.

*he proposals are in proposal format that originates in the credit department of the /ranch

and is processed and approved /y the head of /ranchRegional :ead:ead office

Management>2ecutive committee as per delegated authority. At the time of originating a

proposal accuracy of all information to /e ensured. +riginating officers shall follo- credit

principles, credit policy and guidelines and conduct due diligence on ne- /orro-ers,

principals and guarantors. *hey -ill also adhere to the 0B1, s esta/lished Ono- 3our

6ustomer 'O36(, Money 1aundering guidelines, and Bangladesh Banks regulations. <or

initiating credit relationship credit officer -ill call on the client, visit factory/usiness center

to see. Production facility stockstorage pattern/usiness transactionreputation etc and

through these, to assess possi/ilities of esta/lishing a remunerative relationship. :eShe -ill

also conduct due diligence to get market information on the /orro-er from industry sources,

competitors, local area. Branch Manager may also /e part of this process. In this regard, if

reCuired, the BM6redit officer -ill also take help of head +ffice >ngineer:+ personnel for initial assessing credit needs of large /orro-ers.

Based on findings of such callsvisitinspection, 6redit +fficer, along -ith the Branch

Manager, -ill initiate proposal, containing information on clientFs /ackground, /usiness,

market share, integrity, credit e2posuree2isting /anking relationships, and credit needs along

-ith pricing etc.

Before sending proposal to the approving authority, the originating official of the /ranch shall

ensure that the follo-ing stepformalities have /een takencompleted properly and

incorporated in the credit proposal appropriately9

6urrent 6IB Report is o/tained.

Repayment sources for /orro-er are 4ustified /y financial analysis.

Purpose and amount -ith types of loan proposed /y the /orro-er are stated in the

proposal.

>arning from the relationship are properly assessed in the credit proposal.


Page &



Pre)sanction Inspection reportcall reportsite visit report is in place.

Management profile and 6apital structure, 6onstitution, Date of >sta/lishment

are stated in the proposal.

>2perience of Borro-ers, /usiness skills, management and successions are

properly mentioned in the proposal.

Borro-erFs Rating in the Industry is assessed along -ith overall industry

concerns and /orro-ers strength and -eakness relative to its competitors are

identified.

IndustryFs position along -ith supplier and /uyer risk is analyed.

Borro-er credit -orthiness is esta/lished /y revie- of, # years historical

financial statements and past track record esta/lish /orro-er credit -orthiness.

6ash flo- analysis 4ustifying clientFs a/ility to repay is reflected in the credit

proposal.

Industry and /usiness analysis is done in the proposal.

6redit facilities availed from other /anks are clearly stated in the in the proposal

and opinions are o/tained regarding the credit standing of the /orro-ers.

Possi/le risks are identified in the credit assessment and Risk mitigating factors

are clearly mentioned in the credit proposal.

6redit proposal clearly mention current outstanding against all limits.

Audited financials, large loan position etc. are reflected in the credit proposals.

Branches ensure that collateral has /een properly valued, verified and managed.

Amount and *enors are 4ustified /ased on the pro4ected repayment a/ility and

loan purpose.

Account conduct of the /orro-er and his allied concern has /een done.

Credit Monitoring E Su!er4ision of Cell

0B1 is a uniCue characteristic in its loan Management to make sure that mere -ill /e

no /ad loan in its loan portfolio. 0ational Bank 1imited esta/lished a loan monitoring

and supervision cell headed /y and Assistant vice President under the nursing for its

chief advisor.


Page &&



*hey freCuently visit 6ustomer premises of /usiness -hether the loan amount, -hich

is taken is used properly or into, sometimes it happens that customers need more fun

or other type facilities to run its /usiness profita/ly. *he monitoring authority takes

necessary steps to meet the customerJs need.

Interest rate of different %5!es of Ad4ances

Sector Interest rate

Agriculture $!)$#L

%erm Loan

(arge & Medium Industries $#L

Small Industries $"L

0or#in( )apita"

(arge & Medium Industries $#LSmall Industries $".%L

Trade Finance $#L

E,port )redit L'<i2ed(

)ommercia" Loan $".%L

Ho$&in( Loan $#L

)on&$mer )redit $L

)redit )ard 8L

Loan to Non Ban#in( Financia"In&tit$tion

$%L

)ters $#L)$L

<">> Risk Anal5sis

0ear ;HHG ;H9H ;H99 ;H9; ;H9<

Degree of

Operating

Leverage (DOL)

9"H@6 9"HG6 9">H6 9"9F6 9"<H6


Page &E



Degree Of

Financial

Leverage (DFL)

9"HH6 9"H6 9"HF6 9"HH6 9"H6

Degree Of Total

Leverage (DTL)

<"9H6 <"HF6 ;">F6 ;"9F6 ;"<6

Standard

Deviation

;"99

.45

Findings

9" 0ational Bank tries to follo- all rules and regulation given /y

Bangladesh Bank -hen they sanction any loan.

;" Before sanctioning any loan the authoried officer and the entire

management try to collect all information a/out the /orro-er as stated in

Bangladesh Bank regulation .

<" Strictly implement 6redit Risk ?rading process.>" 0B1 committed to their prospective customer to honor its cheCue -ithin

#! seconds after su/mission /ut unfortunately most of the time they are

una/le.

?" 0B1 provides high Cuality financial services to strengthen the -ell)/eing

and success of individual industries @ /usiness communities.

@" 1acks of motivating mid and lo-er level officers.

" 1o-er level officers compare to the upper and mid level officers are not

happy regarding their promotion.

F" In a fe- case I have seen that the right person isnFt placed in the right

place.G" 0B1 has not yet setup proper net-ork system, -hich is very important to

compete -ith the others in this technical -orld.9H" *he soft-are those are used /y the Bank is not compati/le to the

technical -orld. *he others competitive Banks are attracting the people

-ith ne- technologies for the ne- generation.

99" Modern technology is hardly used to maintain documentation, yet they

are using register)/ased document.

9;" In order to provide faster service, full)scale online system should /e

implemented.

9<" 1ack of promotional initiatives to e2pand the <oreign >2change /usiness.9>" Some employees are less trained to handling technology such as

computer, Internet etc.


Page E!



9?" *he o/4ectives of 0B1 is not only to earn profit /ut also to keep social

commitment @ to ensure its cooperation to the person of all level, to the

/usinessman, industrialist)specially -ho are engaged in esta/lishing large

scale industry /y consortium and the agro)/ased e2port oriented medium

@ small scale industries /y self inspiration.

.46

Recommendations:

9" *he /ank should take the initiative to develop an effective research and

development center to get innovative ideas to capture the competitive market.

;" Management should set proper planning for its operations of each and every

-ork for the -hole /ank as -ell as all /ranches of 0B1.

<" Accounting system of the Bank should /e soft-are /ase.>" *he num/er of customer is increasing. *o keep the commitment 0B1 must

increase its manpo-er. So the customer gets their result -ithout -asting time.?" 0B1 should take necessary action to motivate its officers to encourage them to

-ork hard to make them /elieve that they are also a part of the team and the

/ank does think a/out them.

@" Management should place right person in the right place" Stuck up advances should /e reduced through more recovery at lo-er rate of

interest.

F" 0B1 should take necessary step to increase their net-ork facilities.

G" Automated *eller Machine 'A*M( card facilities are not easy of 0B1. So they

are losing their many potential customers. So I think 0B1 should take

necessary step to easy their A*M card facilities for their customers.9H"Proper training should /e designed and imparted for all level of employee to

ad4ust comple2 /anking environment.

99" *o attract more clients @ hold the market 0ational Bank has to create a ne-

marketing strategy, -hich -ill increase the total e2port)import /usiness.

9;"More gaps are sho-ing /et-een perception @ e2pectation of the respondents.

As soon as possi/le the gap should /e removed, -hich e2ist /et-een clients @

/ank.

9<"As the top management has decided to start online /anking system, necessary

steps should /e taken to make this decision implement as soon as possi/le.

9>"*op management must ensure the proper implication of I* in all /ranches.

<"> %5!es of ad4anceloan( o4er draft( cas credit:<"> %5!es of ad4anceloan( o4er draft( cas credit:

*he main function of a 6ommercial Bank are t-o,'$( to take deposits and'8( to make

advance. Making of advance is the most important function of a Bank as upon it depends the

profita/ility of the /ank. Moreover, Bank make advance out of deposit of the pu/lic -hich

are paya/le on demand. A 6ommercial Bank makes advance to different sectors for different

purposes. I.e. financing of *rade and 6ommerce, imports and e2ports, Industries, Agriculture,


Page E$



*ransport, and :ouse)Building etc. Advance /y 6ommercial Banks are made in different

forms such as 1oans, +verdrafts, 6ash 6redits.

L)AN:L)AN:

hen an advance is made in a lump sum repaya/le either in fi2ed monthly installments or in

lump sum and su/seCuent de/it is ordinarily allo-ed e2pected /y -ay in interest and

incidental charges, etc. it is called a loan.

1oan is allo-ed for a single purpose -here the entire amount may /e reCuired at a time or in

a num/er of installments -ithin a period of short span.

After dis/ursement of the entire loan amount, there -ill /e only repayment /y the /orro-er.

A 1oan, once repaid in full or in part, cannot /e dra-n again /y the /orro-er.

>ntire amount of loan is de/ited to the loan Ac in the name of the of the customer and is paid

to him through his SB6DAc. Some times loan amount is dis/ursed in cash.

6ommercial Banks generally make loans for the follo-ing purpose9

<or purchasing Bus, *rucks, 1aunches and ships, for construction of house and /uilding for

capital financing of Industrial pro4ects etc.

0o- a day, 6ommercial Banks, especially the nationalied 6ommercial Banks in our country,

are to make loans under different schemes =IX.Agricultural 1oans, and loans under self)

employment scheme etc.

Depending upon the purpose, loans may /e repaya/le -ithin a fe- months or the repayment

period may e2tend up to a fe- years.

Agricultural loans are generally repaya/le -ithin a period of #'three( months to $ 'one( year.But repayment of transport loans and :ouse Building loans may take longer period

comprising a num/er of years.

1oans are generally secured /y lien on fi2edterm deposits, shares, De/entures, Protirakhsha

Sachoya Patra, Insurance Policy, pledge of gold, mortgage of real estate and hypothecation of

crops, vehicles, machineries etc, depending upon the nature and purpose of the loan.

)4erdraft:)4erdraft:

*he overdrafts are al-ays allo-ed on a 6urrent Ac operated upon /y cheCues. *he customer

may /e allo-ed a certain limit up to -hich he can overdra- -ithin a stipulated period of

time. In an overdraft Ac -ithdra-als and deposits can /e made any num/er of times -ithin

the limit and prescri/ed period. Interest is calculated and charged only on the actual de/it

/alances on a daily product /asis.

)4erdrafts are of tree kinds:)4erdrafts are of tree kinds:

i. *emporary +ver Draft '*+D(.

ii. 6lean +ver Draft '6+D(.


Page E8



iii" Secured +ver Draft 'S+D(

%),:%),:

*+D is allo-ed to honor an important cheCue of a valued client -ithout any prior

arrangement. As this facility is allo-ed for a very short period, it is called *emporary

overdraft.

C),:C),: Sometimes +verdrafts are allo-ed -ith no other security e2cept the personal security

of the /orro-ers. *hese types of overdrafts are called clean overdrafts.

S),S),99 hen +verdrafts are allo-ed against securities they are called secured +verdrafts.

+verdrafts are generally to contractors and supplier for carrying on construction -orks and

supply orders and to /usinessmen for their /usiness

..

<">F CAS$ CR',I%<">F CAS$ CR',I%99

6ash 6redit is allo-ed to the /usinessmen, traders and industrialists etc.for meeting their

-orking capital reCuirements, 6ash 6redit is al-ays allo-ed against hypothecation or pledge

of goods. :ence, 6ash 6redit is t-o types9

'$( 6ash 6redit ':ypothecation(,

'8( 6ash 6redit 'pledge(.

Cas Credit $01)D:Cas Credit $01)D:

6ash 6redit allo-ed against hypothecation of goods is kno-n as 6ash 6redit ':3P+( limit.

In case of hypothecation, the /orro-er retains the o-nership and possession of goods on

-hich charge of the lending /ank is created. :olden says, :ypothecation is a legal

transaction, -here/y goods may /e made availa/le as security for de/it -ithout transferring

either the property or the possession to the lender. *he documents, -hich creates charge of

the lending Bank on the hypothecated goods, is called letter of hypothecation. By singing this

letter of hypothecation, the /orro-er /inds him to give possession of the hypothecated goods

to the lending Bank -hen called upon to do so. As the hypothecated goods remain under the

possession of the /orro-er, such advance is more or less clean.

As such the /anker should taken the follo-ing precautions9

*he Banker should carefully verify the stocks of hypothecated goods and their market

price.


Page E#



Periodical statement of stock duly signed /y the /orro-er should /e o/tained.

Stock should /e duly insured against fire /urglary R.S.D -ith Bank clause.

Banker should try to o/tain sufficient collateral security.

*he /orro-er should /e trust-orthy and prudent customer.

*he goods are readily salea/le and have good demand in the market.

*he price of the goods, offered as security, is to /e calculated as per follo-ing

principle)Purchase price or market price -hichever is lo-er.

*he price of the goods is steady.

♦♦ Cas Credit 1ledgeD:Cas Credit 1ledgeD:

6ash 6redit Allo-ed against pledge of goods is kno-n as cash credit 'pledge( limit. In case

of cash credit 'pledge( limit, the /orro-er pledges his goods to the Bankers as a security

against the credit facilityH pledge has /een defined as 5 a /ailment of goods as security for

payment of a de/t or performance of a promise7. *he o-nership of the pledge goods remains

-ith the pledged.

Banks retain the effective control of the pledge goods. Pledged goods may /e stored in

godo-n of the /orro-er /ut under lock and key of the /ank. BankFs guards are posted round

the clock to protect the godo-n. Sometimes, pledge goods are stored in BankFs godo-n.

Banks makes delivery of the pledge goods to the party against payment.

<ollo-ing points should /e taken into consideration -hile allo-ing 6ash 6redit 'pledge(

limit.

*he Cuantity of the goods is ascertained. *he goods are readily sala/le and have a constant and effective

demand in the market.

*he Cuantity of the goods is ensured, the goods are not perisha/le and

-ill not deteriorate and Cuality as a result for long or short duration.

?oods are stored in pucca godo-n to save them from deterioration and

to guard them against risks of pilferage.

*he /orro-er has an a/solute title to the goods.

*he prices of the goods should /e steady and are not su/4ect to violent

changes.

*he valuation of the goods should /e made very carefully. 5Purchase

price or market price -hichever is lo-er7)is the general principle for assessing the valuation of the goods.

*he goods should /e stored in the presence of a responsi/le /ank

official.

*he goods are insured against all risks, such as fire, theft R.S.D.etc

and the insurance policy /ears 5Bank Mortgage 6lause7.

*he stocks report is o/tained duly singed /y the /orro-er.

Stocks must /e inspected regularly /y the /ranch) in)charge.

<">G ,ra3ing 1o3er:<">G ,ra3ing 1o3er:


Page E"



Both in case of hypothecation and pledge, the /anker should find out the Dra-ing po-er.

Advance is allo-ed against hypothecationpledge of goods after deduction of the margin. If

the margin for advance against stock of 56otton 3arn7 is #!L then /ank can advance *k !)

against hypothecationpledge of stock of 6otton 3earn of *k $!!)In this case *k !)is the

Dra-ing Po-er. A Banker should kno- the market price of the goods to arrive at a correct

D.P.

<"?H Com!arati4e stud5 among loan .D( cas credit and<"?H Com!arati4e stud5 among loan .D( cas credit and o4erdrafto4erdraft

SL"SL"

N)N)

""R+,IM'N%SR+,IM'N%S L)AN .DL)AN .D CAS$ CR',I%CAS$ CR',I% )/'R,RA*%)/'R,RA*%

H9H9 DISBURS>M>0* +0> *IM>DISBURS>M>0* +R MA3 B> PAR* B3 PAR*

AS A0D :>0R>KUIR>D

AS :>0 R>KUIR>D

H;H; I0*>R>S* +0 DISBURS>DAM+U0* AS P>R S6:>DU1>

+0 DRA0AM+U0*

+0 DRA0 AM+U0*

H<H< R>PA3M>0* A* A *IM> +R B3

I0S*A1M>0* AS P>R S6:>DU1>

A03 AM+U0* A03

*IM> I*:I0S*IPU1A*>D

P>RI+D

A03 AM+U0* A03

*IM> I*:I0S*IPU1A*>D P>RI+D

H>H> PURP+S> P>RS+0A1, =>:I61>,I0DUS*RIA1 PR+>6*+R <IY>D ASS>*SPURP+S>

6+MM>R6IA1,+ROI0? 6API*A1

6+MM>R6IA1,+ROI0? 6API*A1

H?H? 6:>6OI0?<A6I1I*3

0+ 3>S 3>S

H@H@ *RA0SA6*I+0 +06> R>PAID 6A0 0+* B> I*:DRA0

R>=+1=I0? 0A*UR>

AS P>R R>KIR>M>0*R>=+1=I0? 0A*UR>

HH B+RR+>R B+*: 0> @ +1D6US*+M>R

0+RMA113 +1D6US*+M>R

0+RMA113 +1D6US*+M>R

HFHF A66+U0* *:R+U?: A S>PARA*>1+A0 A66+U0*

*:R+U?: AS>PARA*> 1+A0A66+U0*

A11+>D +0 A6URR>0*A66+U0*S>PARA*>

1+A0 A66+U0*

HGHG S>6URI*3'PRIMAR3(

<DR, ?+1D, R>A1>S*A*>, =>:I61>,<I0A06>D ASS>*S

P1>D?>D ?++DS,:3P+*:>6A*>D?++DS

<DR, ASSI?0>D +RO +RD>RSUPP13 +RD>R >*6.


Page E%



CHAPTER: FOUR

CREDIT OPERATION OF N!"


Page E



4.! T )#ET C &T,(E#& ,/ T6E N )T%,N)L B )N' L %(%TE$

*he customers for the loan services are categories as follo-s9

Individual person.

Sole proprietorship firms.

Partnership firms.

Private limited company.

Pu/lic limited company.

?overnment and semi government organiation.

Bank employees.

4.0 T *PE& ,/ L,)N / )C%L%T%E&

0ational Bank 1imited has /een offering -ide range of credit facilities as under9

NAM' 1+R1)S'

6ash 6redit ':ypo @ Pledge( Business capitalorking capitalS+D '?eneral( Against <.+ork ordersSupply orders

6ash 6redit ':ypo @ Pledge( Business capitalorking capital

S+D '>2port( Payment of Accepted /ills at maturity /efore

receipt of e2port procedure.

1oan 'general( AcCuiring capital assetspurchasing,

6onstruction, finishing, e2pansion, repair,

renovation of house<latReal estate /usiness.

16A '1oan against cash Assistance( <inancing for the period of non)receipt of

reim/ursement from Bangladesh Bank.

16 '1ocal @ <oreign( Sight @ on

Deferred payment /asis

<or importlocal procurement of goodsservices.

PAD 'Payment Against document( <or making payment of the 16 o/ligations

against receipt of documentation.

1*R' 1oan Against *rust receive( Retirement of shipping documents.

1IM'1oan Against Imported

Merchandise(

Retirement of shipping documents.

P6 'Packing 6redit( Meeting financial reCuirement of the e2porter at

pre)shipment stage against e2port 16.


Page E



1DBP<DBP'1ocal documentary /ill

purchased('<oreign documentary /ill

purchased(

As post shipment financing against localforeign

e2port /olls.

B*B 16'Back to Back 16( Import of ra-packing materials against e2port

16.

Bank ?uarantee 1ocal<oreign

Performance guarantee

<or su/mission of tenderto o/tain and offer as

security against -ork order, supply order<or

?as, >lectricity connectionagainst delivery of

goodsagainst release of goods, -ithout or against

partial payments /y customer etc.

4.3 $,C(ENT)T%,N ,/ T6E L,)N

*hese are the most freCuently used and common documents for creation of a/ove mentioned

charged and for other formalities for sanctioning the loan practiced /y 0ational Bank

1imited9

Demand promissory note9 :ere the /orro-er promises to pay the loan as and -hen

demanded /y the /ank to repay the loan.

1etter of Arrangement9 :ere the -ritten amount of the loan sanctioned to the /orro-er

is specified.

1etter of 6ontinuity9 It is used to take continuous facilities as providing continuous

securities.

1etter of :ypothecation9 It is the -ritten document of the goods hypothecated thus to

put in case of need.

Stock Report9 *his report is used for S+D and 66. in this report, information a/out the

Cuality and Cuantity of goods hypothecated furnished.


Page E&



Memorandum of deposit of title deed of property duly signed /y the o-ners of the

property -ith resolution of /oard of directors of the company o-ning the landed

property.

Personal guarantee9 It is the additional confirmation of the /orro-er to repay.

?uarantee of all the directors of the company.

Resolution of the /oard of directors9 It is used to /orro- the fund to e2ecute documents

and complete other documents.

1etter of disclaimer9 By this letter, the /orro-er -ithdra-s his all claim on the

propertygoods lienedmortgaged.

<orm no. $&$E for filling charges -ith the register of 4oint stock companies under

relevant section. 1etter of Acceptance9 1etter indicating the acceptance of the sanction proposal /y the

/orro-er.

1etter of Pledge9 It is the -ritten document of the goods pledge thus the legality of

holding the goods.

1etter of Dis/ursement9 *his is the document through -hich the payment of sanctioned

loan indicates.

1etter of Partnership9 In case of partnership firm, the partnership deeds are to /e

provided.

1etter of Installment9 *he amount of installment that is to /e paid at certain intervals.

Insurance Policy9 It sho-s the up)to)date insurance profile of the customer.

*a2 Paying 6ertificate.

4.4 C #E)T%,N ,/ C 6)#E& / ,# & EC#%N L,)N

<or the safety of loan, Dhaka Bank reCuires security from the leaner so that it can recover the

loan /y selling security if /orro-er fails to repay. 6reation of a charge means making it

availa/le as a cover for an advance. *he method of charging should /e legal, perfect, and

complete. Importance of charging security9

Protection of interest.

>nsuring the recovery of the money lend.


Page EE



Provision against une2pected change.

6ommitment of the /orro-er.

Securities are t-o types9

aD 1rimar5 Securit5 ZSecurity deposited /y the /orro-er himself to cover the loan

such as <DR, 6ash, PSS, PSP easily casha/le items.

bD Collateral Securit5 Z any types of security on -hich the creditor has a personal

right of action on the de/tor in respect of advance.

%e common metods of carging securit5 and teir nature are described belo3:

Mode of

Securit5

Nature of securit5 8 its caracteristics

Lien 6ash, cash collateral and documents of the title to the goods.

It is the right of the /anker to hold the de/torJs properly until

the de/t is discharged)generally retained /y the /ank in its

o-n custody or to the hands of third party -ith lien marked.

*he third party cannot discharge it -ithout the permission of

the /ank.

In case of need /ank needs the permission from the court to

sell the property.

Assignment Borro-er transfers the right of property or de/t to the /ank.

1ife insurance policies, supply /ills, /ook de/t of the

/orro-er can /e assigned.

1ledge Movea/le stock of ra- materials, finished goods,

merchandise.

Pledge is also lien /ut here /ank en4oys more right.

Physical transfer of goods to the /ank is must.

Bank can sell the property -ithout the intervention of any

court, in case of default on loan.


Page $!!



$5!otecatio

n

Movea/le stock of ra- materials, finished goods,

merchandise.

?oods remain in the hands of de/tor, /ut documents of title

to goods are handed over to the /anker. *his method is also

called TeCuita/le chargeT.

Bank inspects the goods regularly to 4udge its Cuality and

Cuantity for the ma2imum safety of its loan.

Mortgage Mortgage is the transfer of specific immovea/le property)

like land, /uilding, plant etc.

Most common type of mortgage is legal mortgage in -hich

o-nership is transferred to the /ank /y registration of themortgage deed.

Another method called eCuita/le mortgage is also used in

/ank for creation of charge. :ere mere deposit of title to goods

is sufficient for creation of charge. Registration is not reCuired.

In /oth the cases, the mortgaged property is retained in the

hand of /orro-er.

%rust Recei!t Intangi/le asset 'good-ill( It is used in foreign e2change

/usiness.


Page $!$



4.5 ,1E# T 6E * E)# & L,)N P #,1%$%N % N/,#()T%,N

%k in MillionD

0ea

r

Amount

as

sanctione

d

,isburse

d

amount

Reco4er

5

amount

at due

date

Amount of

outstandin

g

'6!ire

d loan

Classifie

d loan

J of

Classifie

d loan to

total

ad4ance

s

8!!

E$8#." $8&.%E E"&.$# 8!8.!8 8"#."" $E!." .!

8!$

!$88."$ 8!.# $$"&.& #8!.E$ 8".8E $E.8 .!$

8!$

$8$8E.%8 8%E%.8 8$$8.$ #".E 8&$. $%.$$ ".%#

8!$

88#&. #"E."# 8$$8. "E%.% ##%.%" 88.E# %."E

8!$

#"#$8. "%!%.&% 8E##."" %!%.$" "E&.# #&&.!# %.E

*igure : )4er te 5ear’s loan !ro4iding information

Comments

+ver the years the amount of sanction, dis/ursement, loan e2pired and outstanding loan have

/een increased. *hough the total classified loan is more in 8!$# /ut as a percentage of total

loans it is only %.EL.In 8!$# the dis/ursement amount is a/out $.#! times is clear that there

is significant difference /et-een the amount of sanction and dis/ursement over the years and

the gap is creasing tendency. *his indicates the poor to very poor management system.


Page $!8



4." N ,N 7P E#/,#(%N L,)N&

IM< defines 5A loan is nonperforming -hen payments of interest and principal are past due

/y E! days or more, or at least E! days of interest payments have /een capitalied, refinanced

or delayed /y agreement, or payments are less than E! days overdue, /ut there are other good

reasons to dou/t that payments -ill /e made in full7.

By Bank regulatory definition non)performing loans consist of a( other real estate o-ned

-hich is that taken /y foreclosure or a deed in lieu of foreclosure, /( loans that are E! days or

more past due and still accruing interest, and c( loans -hich have /een placed on nonaccrual

'i.e., loans for -hich interest is no longer accrued and posted to the income statements(.

In Bangladesh, loans /ecomes non)performing -hen it is classified as /ad and loss for -hichBangladesh Bank reCuires $!!L provisioning /y the scheduled commercial /anks 'as per

BRPD circular(.

Under Basel)II, loans past due for more than E! days are non)performing.

>"@"9 Non!erforming loans in Banglades

According to the information availa/le in Bangladesh Bank -e/site in Bangladesh State)

o-ned 6ommercial Banks 'S6Bs( and Specialied Banks 'SBs( has significant amount of 0onperforming loans '0P1s( mainly resulting from political intervention in the past. +ne of

the reasons for having high 0P1 is a high lending rate. :igh 0P1 reflects serious inefficiency

of /ank management. 6ommercial /anks should e2plore possi/ilities to reduce 0P1s so that

they can lo-er the lending rate to a reasona/le level. Banks -ith high 0P1 suffer form

capital inadeCuacy pro/lem. <or e2ample the name of +riental Bank 1imited can /e

mentioned /ecause of 0P1s the /ank has suffered and /een sold to another company. 0P1

rate -as a/out #!L in +riental Bank 1imited.

According to :ua Du, 6ountry director of Bangladesh Resident Mission '8!!( 0on)

performing loans '0P1s( are a reflection of pro/lems in the /anking and corporate sectors.

0P1s create a negative impact on the income statement /ecause of provisioning for loan

losses. In an e2treme case, a high level of 0P1s in /anking system causes systemic risk,

inviting a panic run on deposits and sharply limiting financial intermediation, and

su/seCuently investment and gro-th. In addition, it -ill further deteriorate -hen some

e2ternals shocks such as an unfavora/le phase of the macroeconomic cycle or inadeCuate

political or legal support.


Page $!#



Non/erormin( Loan

=?-8?<

@-=;<

>"@"; Non!erforming loan: National Bank’s !ers!ecti4e

0on Performing 1oan is one of the ma4or concerns in the financial sector of Bangladesh.NA%I)NAL BAN&’S loan Cuality situation is not very pleasing. *he percentage of 0P1 is

on an increasing tone during the last t-o years sho-ing the poor risk allocation procedure

that is prevalent in 0B1. *hough 0ational Bank 1td. tries to fight against the challenges of

0P1 /y strict adherence to the risk management processes and guidelines /ut there is scope

to improve. 0o- I am going to present a fe- /ars and charts that -ill reflect the loan Cuality

of 0B1 in short.

*ifure : J of Non1erforming Loan in te )4erall Credit 1ortfolio

>"@"< Categories of Classified loan

%aka In MillionD

0ear Classified loan


Page $!"



)

*)

+))

+*)

,))

,*)

,))- ,)+) ,)++ ,)+, ,)+.

)"a&&ied Loan

Sudstandard %SS'

Dou/t$ul %DF'

Bad & (oss%B('

Sub standard SSD ,oubtful

,*D

Bad 8 loss

BLD

%otal

8!!E 8"."! $8.#! $%#.E" $E!."

8!$! $"."" #.E$ $&.# $E.8

8!$$ E.88 #."" $%8."% $%.$$

8!$8 ".%$ $!.8# 8$%.$E 88.E#

8!$# $#8.EE $!."# 8"".$ #&&.!#

%is can be 4ie3 in a gra!ical !resentation belo3

Comment

+ver the years the classified loan is in increasing tendency e2cept the year 8!$$. In 8!$$

classified loan is lo-est of the five years. So in that year Bank management sho-ed good

performance in case of classified loan. In the year 8!$$, /ank had also highest loan loss

provision -hich -as the highest idle money for the /ank. In 8!$# su/ standard loan is 8.&!

times more compared to 8!$8. *here is flo- of increasing of su/ standard -hich is turning to

dou/tful and ultimately falling into /ad and loss amount increasing over the years.

>"@"> Sector 3ise classified loan

*aka in Million(

Name of sectors ;HHG ;H9H ;H99 ;H9; ;H9<

.o4ernment %.& %.& %.& %.& %.&

Nongo4ernment: $&". $E!.&% $%E.8" 8.! #&8.$

Agricultural loan !.$ !.E% !.E8 !.! !.%1arge @ Medium 8#.E! 8!.EE 8".#E "".E8 $%$.!#


Page $!%



Industry

orking 6apital "!.!$ #.% "%.&! "%." "%.%

>2port 1oan 8%.%& 8%.8" $.8% $$.E8 ".&%

6ommerce loan "#.#! %8.& #8.8% "".& %#.$&

Small @ 6ottage

Industry#.% !.$! !.E 8.$E8.$E 8.%

+ther loan "&.! %#.!% #. $$.!E &8.#$

%otal $E!." $E.8 $%.$$ 88.E# #&&.!#

Comment

In government sector the invested amount -as in static position from the year 8!!E to 8!$#.

Among the non government sectors, in agricultural sector total classified loan -as more in

8!$! and lo-er in 8!$#. In 8!, huge amount of loan -as classified in the large and medium

industry sector, a/out #."# times more compare to the year 8!$8. 6ommerce loanH e2port

loan and small @ cottage loan from other sectors have /een reduced. *he increase of

classified loan in e2port sector and large @ medium sector in 8!$# indicates -eak monitoring

and supervision system of the /ank.

4.+ )nalysis and %nterpretation

In this section, I -ould like to sho- some important factors that I consider as Part)I9

Performance of loan of 0ational Bank 1imited, Part)II9 ?eo)graphical location -ise 1oan @

Advances inside Bangladesh, Part)III9 Provision for 1oan and advances.

*he aim of this section is to find out loan position among them. *o achieve my o/4ectives I

-ould like to present the 1oan Dis/ursement amount, amount of Performing and non)

performing loan along -ith their percentage. I used historical data from 8!$! to 8!$# from

the statements of the Bank provided to Bangladesh Bank monthly and half yearly. :ere I also

try to present the different L of provision of loan and advances -hich are almost fi2ed every

time. In the #rd part, there are the amount of loan and advances /ased on the geo)graphical

location inside the country.

1artI: 1erformance of loan of National Bank Limited

%aka in MillionD

Items ;H9< ;H9; ;H99 ;H9H


Page $!



1oan Dis/ursement "%!%.&% #"E."# 8%E%.8 8!.#

Performing 1oan $!&.8 "E#.% #"&8." #!".8%

0on)Performing 1oan #&&.!# 88.E# $%.$$ $E.8

1oan +verdue "%8.E #!. 8"#." 8!.&&

1oan +utstanding #&&.!# 88.E# $%.$$ $E.8

ritten off 1oan E." $%.#& $!.#% ".#

Recovery Amount #".%# #&. !.%8 8".

Rate of Recovery 'L( $8.L ##."&L #!.L $8.EL

6lassified Amount of 1oan #&&.!# 88.E# $%.$$ $E.8

6lassified L %.EL %."EL ".%#L .!$L

Unclassified Amount of 1oan ".&E 88.E# $%.$8 $E.$

Unclassified L $".L .&L .#L E.%L

Comment

*he overall loan performance of 0ational Bank 1imited can /e easily vie-ed from the a/ove

chart. <rom the chart -e can see that, the amount of dis/ursed loan is increasing significantly

from year to year. e can also see that the amount of non)performing loan is Cuite lo-er than

the amount of performing loan. *hat means the /ank is performing -ell.

1artII: .eogra!ical location 3ise Loan 8 Ad4ances inside Banglades

8!$! 8!$$ 8!$8 8!$#

Dhaka Division

$E#.$

E

8$"&.!

"

8E%".$

#

#!#."

E

6hittagong Division &!.&E"E.!&

"$"!!.$

8$&"$."

E

Ohulna Division $%8.!& $".%# 8#%.!% "!!.8

Sylhet Division #". ".$ &%.8 $$8.%

Ra4shahi Division 8!.#& ##.% "!&.& %#&.#8


Page $!



)

*))

+)))

+*))

,)))

,*))

.)))

.*))

0)))

,)+) ,)++ ,)+, ,)+.

D!aa Di#isionC!ittagong Di#ision

1!ulna Di#ision

S2l!et Di#ision

Ra3s!a!i Di#ision

*he a/ove graph represents the amount of loans and advances dis/ursed inside the country.

:ere -e can see that the amount of dis/ursed loans and advances is increasing in all districts

over the year. *his represents the enhanced activity of the /ank.

1artIII: Loan Loss 1ro4ision

Amount in million *k(

3ear

1oan loss provision

ReCuired

amount

Availa/le

in hand

Shortfall>2cess

8!!E &E.## E."! .!

8!$! &!.E! $!.&# 8.E#

8!$$ $!#.8" $#%.# #8.#E

8!$8 $"".# $%$.# .!$

8!$# $&.!E $E. E.%

Comment

In the year 8!$$, the amount of loan loss provision is highest than other years. *he highest

amount indicates that the amount is the part of profit and they are more capa/le to face the

pro/a/le risks in 8!$$. >ven this reserve is idle money for the /ankH this amount should /e

kept as the recommendation of Bangladesh Bank.

CHAPTER: FI#E


Page $!&



FINDIN$

?"9 *indings of te stud5

0ational Bank 1imited is a /ank that runs its operation -ith a slogan keeping in mind al-ays

A Bank for Performance -ith PotentialF. *hough the risk is inherent, 0ational Bank al-ays

tries to estimate, evaluate and analye the risk in providing loan and advances to the

/orro-ers.

0ational Bank 1imited is committed to e2tend high Cuality services to its clients through

different financial products and profita/le utiliation of fund /y undertaking various lending

operations including financing trade, commerce and industry etc. In conducting lending

operations 0B1 al-ays /ears in mind the essence of proper risk identification and their

effective management. It is also recognied that failure in proper identification and

management of risks may result in a large Cuantum of /ank advances turning into non)

performing.

In the /ack drop, 0ational Bank 1imited underscoring the need of an effective credit risk

management process -hich is going to provide effective policy guidelines for 6redit Risk

Management. I have found that the credit policy is /eing revie-ed annually /y the Board of

Directors and it is distri/uted to the concerned officials, all divisional :eads, Branches,

Regional +ffices and top management formally. 0B1 also ensured that the policy is /eing

implemented /y all levels -ith strict rigidity. Any deviation from the guidelines to /e clearly

identified and 4ustification for approval -ould have to /e provided -ith detail clarification.

I" *indings about source of fund:

Most of the funds for 0B1 come from customer deposit -hich has $& types of deposit

facilities. It can also take loan from Bangladesh Bank -hen needed. *he percent of deposit as

a total source of fund over the five years '8!$! ) 8!$#( are9 &%.&L, &.8L, &".&%L and

&#.#"L respectively.

II" *indings about loan disbursement:

0B1 provides loan mainly in % /road sectors. *he main fields -here the 0ational Bank

provide loan are) *rade <inance, +verdraft, 6onsumer 1oan, SM> 1oan and 1ease


Page $!E



<inancing. *hrough the study it -as found that Branches have po-er to dis/urse any loan to

the applicants -ithin the sanction provided /y the /ranch itself or the regional office or the

head office. Branches can dis/urse loan to the applicant at any time after the approval of

sanction. Most of the loans and advances are provided for trading and commerce. A/out "%

percent of the total loan is dis/ursed to this sector.

III" *indings about te reason for loan loss:

In the study from the year 8!$! to 8!$# it -as found that there is an increasing tendency of

the amount of /ad @ loss for the 0B1. Most of the classified loan is Bad @ loss. It is found

from ta/le)# that it is regularly s-itching from su/)standard to dou/tful and ultimately to the

/ad and loss loan. In 8!$#, su/ standard loan is 8.&! times more compared to 8!$8 and /adloan is $.$" times more than in 8!$8. *he reason is for increasing classified loan in 8!$# is

for glo/al recession and political insta/ility in commerce and trade. Apart from this there

found large /orro-ers -ere foiled to repay the loan in due time in year 8!$#. But the

continuous increasing of classified loan is for increasing the amount of dis/ursement, and

-eak regular monitoring system, faulty in customer selection, and faulty in documentation.

I/" *indings about sanction !rocedure:In sanction procedure generally most of the tasks are done /y /ranches and large proposal is

sent to the :ead +ffice. :ead +ffice has the format to evaluate the task of /ranches and the

applicants. If the documents provide right information then head office approves the proposal

for loan of applicants. :ead +ffice mainly checks the documents, security, and 6IB report

and credit -orthiness of the applicants in case of sanction. *he proposals are not only

sanctioned /y head office /ut also /y /ranches and regional offices -ithin delegated

authority, most of the cases the /ranch manager ignore the decision of credit administration @

rather goes -ith the Branch Incharge decision. It appears that the sanction authority is

decentralied in case of small amount /ut highly centralied in case of large /orro-ing.

/" *indings about securit5 selection:

Most of the time, 0B1 provides loan and advances to the /orro-ers against hypothecation

and pledge. :o-ever, recently it allo-s loan only against hypothecations for avoiding trou/le

in pledge /ecause of the pro/lems associated -ith the keeping of -arehouse keys. Assets inthe form of goods pledged as security are duly insured protecting the BankFs interest. ?oods


Page $$!



and machinery 'for industry( taken as primary security are also insured. It also provides loans

against collateral security. Most of the loan in Dhaka city and ad4acent area to Dhaka is

distri/uted as cash credit '66( and security overdraft 'S+D( /y taking primary and collateral

security.

/I" *indings about loan !ro4ision:

1oan loss provision for the year 8!$8 and 8!$# are much lo-er than 8!$! and 8!$$ In 8!$!

and 8!$$ the e2cess loan loss provision -ere *k. 8.E# million and *k. #8.#E million

respectively. So this e2cess amount -as non)remunerating.

/II" *indings about e6!ired loan 8 classified loan:

In spite of taking all out efforts to reduce the non performing loan, and follo-ing guidelines

provided /y Bangladesh Bank, classified loan for the Bank has /een increased from the year

8!$8 amounting tk. 88E.## million to 8!$# amounting tk. #&&!.#$ -hich is "8.$L more

than 8!$8. *he reason is for the glo/al recession and political insta/ility -hich hampers

/usiness concerns to run properly. Apart from this I found that total loan dis/ursement has

/een increased from 8!$8 to 8!$#. So e2pired loan and classified loan is higher than previous

year. In 8!$# /ank faced pro/lem to recovery loan from large and medium industry sector.

A/out #&.E8 percentage of total classified loan -as originated from large and medium

industry sector.

/III" )ter findings:

*here is a no standard format in each and every paper. *hey -ork manually. *heManagement of 0B1 al-ays delay -hile make any decision. Deposits are the main sources

of fund and loan @ advances are the main application of fund. 1oan dis/ursement and loan

recovery do have positive correlation /ut not so strongly correlated. *hat is the increase in

loan dis/ursement leads to increase in loan recovery. 1oan dis/ursement and e2pired loan do

have strong positive correlation. *hat is the increase in loan dis/ursement leads to increase

a/out same rate of e2pired loan. 1oan dis/ursement and classified loan do have positive

correlation. *hat is the increase of loan dis/ursement is increasing the classified loan over the

years. Dis/ursements of loan, recovery of loan, e2pire of loan and classified loan are inter)


Page $$$



related and more or less they are dependent -ith one another.

5.0 L %(%T)T%,N ,/ N )T%,N)L B )N' L %(%TE$

0ational Bank has achieved many a-ards for positive performance, still no- it is doing some

lauda/le tasks for the society as -ell as for its o-n. But it is not out of limitation. *here are

some limitations I found to remark -hich are as follo-s9

$. Inclusion of Independent Director in the audit committee has not /een done yet.

8. Intensify of recovery of past due loan and initiate early -arning reports for loan sho-s

deteriorating condition.

#. In the :ead +ffice I found, the environment is not suita/le for -orking in long time.

". 6redit risk management division is designed to restructure at regular time. I heard the

present structure is of this division ne-ly /uilt up. So much information is not readily

availa/le and data is not online /ased processing system.

%. *he sanction procedure is -ell enough /ut :ead +ffice most of the cases depends on the

/ranches for evaluating of /orro-ers in sanctioning of loan.

. *he system of getting loan for the small /orro-ers very rigid and interest rate is high.

*hese are the limitations for 0ational Bank, /ut I think these are the minor dra-/acks. I think

these -ill not hamper its image /ut /y solving these minor limitations it can /e the num/er

one Private Bank in the country. By removing these more competitive advantages are easily

possi/le to get for the /ank

S7)% Anal5sis of %e National Bank LimitedS7)% Anal5sis of %e National Bank Limited

S+*S+* analysis is the detailed study of an organiationJs e2posure and potential in

perspective of its strength, -eakness, opportunity and threat. *his facilitates the organiation

to make their e2isting line of performance and also foresee the future to improve their

performance in comparison to their competitors. As though this tool, an organiation can also


Page $$8

Chapter: !$



study its current position, it can also /e considered as an important tool for making changes

in the strategic management of the organiation.

@"9 Strengts:@"9 Strengts:

0ational Bank 1imited has already esta/lished a favora/le reputation in the /anking industry

of the country. It is one of the leading private sector commercial /anks in Bangladesh. *he

/ank has already sho-n a tremendous gro-th in the profits and deposits sector.

0ational Bank 1imited has already achieved a high gro-th rate accompanied /y an

impressive profit gro-th rate in 8!$#. *he num/er of deposits and the loans and advancesare also increasing rapidly.

0ational Bank has the reputation of /eing the provider of good Cuality services too its,

potential customers.

@"; 7eakness:@"; 7eakness:

*he main important thing is that the /ank has no clear mission statement and strategic plan.

*he /anks not have any long)term strategies of -hether it -ants to focus on retail /anking or

/ecome a corporate /ank. *he path of the future should /e determined no- -ith a strong

feasi/le strategic plan.

*he /ank failed to provide a strong Cuality)recruitment policy in the lo-er and some mid

level position. As a result the services of the /ank seem to /e Deus in the present days.

*he poor service Cuality has /ecome a ma4or pro/lem for the /ank. *he Cuality of the service

at 0ational Bank is not higher than the Dhaka Bank, Prime Bank or Dutch Bangla Bank etc.

So the /ank has to compete -ith the multinational Bank located here.

Some of the 4o/ in 0ational Bank has no gro-th or advisement path. So lack of motivation

e2ists in persons filling those positions. *his is a -eakness of 0ational Bank that it is having

a group of unsatisfied employees.


Page $$#



In terms of promotional sector, 0ational Bank has to more emphasie on that. *hey have to

follo- aggressive marketing campaign.

@"< )!!ortunit5:@"< )!!ortunit5:

In order to reduce the /usiness risk, 0ational Bank has to e2pand their /usiness portfolio. *he

management can consider options of starting merchant /anking or diversify into leasing and

insurance sector.

*he activity in the secondary financial market has direct impact on the primary financial

market. Banks operate in the primary financial market. Investment in the secondary market

governs the national economic activity. Activity in the national economy controls the

/usiness of the /ank.

+pportunity in retail /anking lies in the fact that the countries increased population is

gradually learning to adopt consumer finance. *he /ulk of our population is middle class.

Deferent types of retail lending products have great appeal to this class. So a -ide variety of

retail lending products has a very large and easily pregna/le market.

A large num/er of private /anks coming into the market in the recent time. In this

competitive environment 0ational Bank must e2pand its product line to enhance its

sustaina/le competitive advantage. In that product line, they can introduce the A*M to

compete -ith the local and the foreign /ank. *hey can introduce credit card and de/it card

system for their potential customer.

In addition of those things, 0ational Bank can introduce special corporate scheme for the

corporate customer or officer -ho have an income level higher form the service holed. At the

same time, they can introduce scheme or loan for various service holders. And the scheme

should /e separate according to the professions, such as engineers, la-yers, doctors, etc.

@"> %reats:@"> %reats:


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All sustain multinational /anks and upcoming foreign, private /anks posseJs enormous threats

to 0ational Bank 1imited. If that happens the intensity of competition -ill rise further and

/anks -ill have to develop strategies to compete against an on slough of foreign the /anks.

*he default risks of all terms of loan have to /e minimiing in order to sustain in the financial

market. Because default risk leads the organiation to-ards to /ankrupt. 0ational Bank has to

remain vigilant a/out this pro/lem so that proactive strategies are talent to minimie this

pro/lem if not elimination.

*he lo- compensation package of the employees from mid level to lo-er level position

threats the employee motivation. As a result, good Cuality employees leave the organiation

and it effects the organiation as a -hole.

Recommendation 8 ConclusionRecommendation 8 Conclusion

Although the /ank is making a huge amount of profit and generating a large volume of

deposit, /ased on my -orking e2perience at 0ationa$ Bank limited, 6redit card division, I

-ould like to put up the follo-ing recommendations.

"9 1ros!ects: o3 to Acie4eO"9 1ros!ects: o3 to Acie4eO


Page $$%

Chapter: !%



6redit card division should increase their marketing activities and for these the -ill formulate

a card marketing group and the remuneration of the mem/er of the group -ill semi varia/le.

*hatJs means they get a fi2ed salary and get commission for every card.

*he division should maintain a card marketing strategy. *hey must identify -hich type of

people get preference in issuing card, like as /ankers, e2porters, importers, government high

officials.

*he /ank may circulate student credit card and the card limit -ill /e *k. %!!!.

*he may sort out the cardholder -ho paid their payment regular and issue another credit card

to their spouse -ithout any security

*o increase the num/er of cardholder the /ank may decrease the annual fee and interest.

6redit card division should improve their customer service

"; Callenges:"; Callenges: o3o3 to face tese Oto face tese O

*o avoid telecommunication pro/lem the /ank should follo- modern telecommunication

system.

Bank may encourage the /usiness firm to esta/lish fi2ed price shopping center.

Because of different type of merchant commission rate may /e different according

merchantFs type of /usiness.

Bank should concentrate on Cuickly merchant payment. <or this /ank may use computeried

system in preparing pay order

"< C"< Conclusiononclusion

During the $8 -eeks internship program at 0B1, almost all the desk has /een o/served more

or less. <or gaining kno-ledge of practical /anking and to compare this practical kno-ledge

-ith theoretical kno-ledge. *hough all departments and sections are covered in the

internship program, it is not possi/le to go to the depth or each activities of division /ecause

of time limitation. So, o/4ectives of this internship program have not /een fulfilled -ith

complete satisfaction. :o-ever, highest effort has /een given to achieve the o/4ectives the

internship program. Banking /usiness has gained an increased importance in the economy of

Bangladesh. *he financial environment has /ecome hyper competitive as the num/er of <Is

are increasing and every/ody is interested to have shares from the same deposit and loansegments. So itFs the time to adopt a proper marketing plan for the company.


Page $$



*here are num/er of commercial /anks and leasing companies operating their activities in

Bangladesh. 0ational Bank 1imited is a promising /ank among these. *he /ank financed an

amount of *k.##&.!! million in 8!$# to ",$8 /orro-ers -hile it -as *k.#8%.!! million to$,&8 /orro-ers in 8!$8.

<or maintaining steady gro-th of the /ank and for economic development of the country,

0ational Bank 1imited manages credit risk meticulously. 0ational Bank 1imited e2tends

credit facilities to different clients in different sectors after doing due diligence and mitigating

risk factors properly as per guidelines set /y Bangladesh Bank, >2ecutive 6ommittee of the

Board of Directors and Management 6redit 6ommittee of the /ank.

ith a /ulk of Cualified and e2perienced human resources, 0B1 can e2ploit any opportunity

in the /anking sector. During the internship, it is found that the /ranch provides all the

conventional /anking services as -ell as some specialied financing activities to the

economy. *he 6redit department provides all the services related to international and dis/urse

credit if the proposal is sound. As specialied financing, it provides term finance to medium

and small)scale industries. *hus, /y providing this various services, 6redit +perations @

6redit Management Dept, is playing an important role in the /anking system and e2pansion

of /usiness @ industry for economic development of Bangladesh.

+.4 # EC,((EN$)T%,N&

*he e2isting credit policy is good enough to run the /ank. But as the competition is

increasing day /y day the /ank should take some measures so that they can distinguish it

from the others. *o attain its goals more successfully the credit management of 0B1 Bank

1td. can follo- the follo-ing suggestion to improve their performance and distinguish fromothers.

Branches may give suggestion regarding the features of lending products and regular

revision for its products -ith more competitive advantage and local demand.

*he /ank management can give permission to its /ranches to design or change

lending products on the /asis of local demand.

*he /ank management can reduce the interest rate. Because of high interest rate, the

net profit of 0B1 is increasing over the years. *hough the net profit is increasing /ut


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some good loan may turn to /ad loan. So if the interest rate decreases then the default

loan may decrease.

*o grade the credit risk, the /ank can follo- other appropriate models /esides the

credit risk grading model, /ecause the credit risk grading models yardsticks are static-hich do not take into account the fle2i/ility in economic or /usiness or financial

condition.

*he /ank management should follo- the changes in policy, system, procedure,

product, technology and compliance in the /anking industry, so that 0B1 can take

appropriate measure to adapt her -ith the changes.

Sanction procedure should /e evaluated more effectively. 1oan recovery system

should /e monitored more strictly.

Interest rate for loan providing to marginal farmer should /e in some-hat lo-er rate.

Sometimes loan can /e provided as collateral free.

*he credit management of 0ational Bank 1imited can follo- the a/ove mentioned

suggestion to improve their performance so that they can /e competitive in the market

and can gain some competitive advantage.

Bibliogra!5Bibliogra!5


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Chapter: !&

9" 'ssential of Managerial *inance b5 Besle5 8

Brigam

;" NBL Annual Re!ort ;HHG(;H9H( ;H99(

;H9;(;H9<"

<" 7eb site of te NBL: 333"nblbd"com

>" tt!:EE333"re!ortbd"com

http://www.nblbd.com/





"""""""""""""""""""""""'nd )f %e Re!ort"""""""""""""'nd )f %e Re!ort""""""""""""

ANN'P+R'ANN'P+R'

TE#(& &E$ %N T6E #EP,#T TE#(& &E$ %N T6E #EP,#T

AB1AB1 8 )ccepted 9ill :or payment

CIB%CIB% 8 Computer inter 9ranch transaction

CCSCCS 8 Consumer credit scheme$BL$BL 8 6ouse 9uildin; loan

LIMLIM 8 Loan a;ainst imported merchandised

LRALRA 8 Lendin; risk analysis

L%R L%R 8 Lendin; trust receive

1)1) 8 Pay order

1C1C 8 Packin; credit

S),S), 8 &ecurity over dra:t

S,SS,S 8 &pecial deposit scheme

%%%% 8 Tele;raphic trans:e

Credit Risk Management of NBL1

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