Internship Report on Credit Risk Management of NCC Bank Limited
INTERN REPORT OF NCC BANK (1)
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Internship report on
Credit Management and Investment of NCC Bank Ltd
SUBMITTED TO
Farzana Akter
Lecturer
Department of Business Administration
East West University
SUBMITTED BY
Khondaker Ashik Mahi
ID: 2011-1-10-231
Date: 11 December, 2015
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Letter of Transmittal
December 11, 2015
To
Farzana Akter
Senior Lecturer
Department of Business Administration
East West University
Subject: Submission of the Internship report
Dear Madam,
I am submitting my internship report titled "Credit Management and Investment of NCC Bank
Limited" as partial requirement of internship program under BBA curriculum.
I would like to thank you for assigning this report as it provided me with the opportunity to
venture into the real life scenario and to broaden the horizon of my understanding on how
syndication is arranged and all the work that goes into it. I sincerely hope that my work will
come up to the level of your expectation.
I welcome your query and grateful to answer them.
Sincerely yours,
Khondaker Ashik Mahi
ID: 2011-1-10-231
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Acknowledgement
The successful accomplishment of this Internship Report is the outcome of the contribution and
involvement of a number of people, especially those who took the time to share their thoughtful
guidance and suggestions to improve the report. It's difficult for me to thank all of those people
who have contributed something to this report. There are some special people who cannot go
without mention.
First of all, I would like to thank my honorable academic supervisor Farzana Akter, Lecturer,
Department of Business Administration, East West University. I am thankful to her for her
continuous support and supervision, suggestions and providing me with valuable information
that was very much needed for the completion of this presentation.
I would like to thank my manager Md. Zakir Hossain, AVP and Branch Manager, Dhakhinkhan
Branch, Dhaka for giving me the opportunity to execute my internship program under his
supervision in NCC Bank Limited. I am really thankful to him for his valuable time to give me
the information and knowledge about all over the bank. During this three month I saw him as a
Lecturer also.
I would also like to express my immense gratitude & heartfelt thanks to all of the employees of
my team who not only helped me a lot to prepare this report but also helped me with their
guidance and by sharing their invaluable knowledge throughout my entire tenure in NCC Bank
Limited.
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Supervisor‟s approval
This is to certify that the intern report on “Credit Management and Investment of NCCBL” is
done by Khondaker Ashik Mahi bearing ID 2011-1-10-231 as a partial fulfillment of the
requirement of Bachelor of Business Administration degree major in Finance from East West
University under my supervisor.
She is permitted to submit the report
X
Farzana Akter
Lecturer
Department of Business Administration
East West University
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TABLE OF CONTENTS
CHAPTER ONE: ....................................................................................................................... 12-16
EXECUTIVE SUMMERY ............................................................................................................... 13
1.0 Introduction ............................................................................................................................. 13
1.1 Objective of the Report: ............................................................................................................ 14
1.2 Methodology of the Report: ..................................................................................................... 14
1.2.1 Data Required ............................................................................................................... 14
1.2.2 Data Sources: ................................................................................................................ 15
1.2.3 Data Analysis Tools and Techniques: ..................................................................... 15
1.2.4 Variable Used................................................................................................................ 15
1.2.5 Limitation of the Report: ........................................................................................... 16
CHAPTER TWO: ....................................................................................................................... 17-31
AN OVERVIEW OF NCC BANK LIMITED (NCCBL).................................................................... 17
2.1 AN OVERVIEW OF NCC BANK LIMITED (NCCBL) ................................................ 18
2.2 Background of NCC Bank Limited .............................................................................. 18
2.3 Mission Statement .......................................................................................................... 18
2.4 Objectives.......................................................................................................................... 19
2.5 Values................................................................................................................................. 19
2.6 Management Information System.............................................................................. 19
2.7 Correspondent Relationship ....................................................................................... 20
2.8 Departments of NCCBL ................................................................................................ 20
2.9 Human Resources Management of NCCBL ............................................................ 20
2.10 Financial Statement ..................................................................................................... 21
2.10.1 Balance Sheet: ................................................................................................... 21
2.10.2 Income Statement ........................................................................................... 22
2.10.3 Ratio Analysis: ................................................................................................. 23
2.10.4 Investment analysis: .............................................................................................. 26
2.10.5 Deposit and advance: ..................................................................................... 27
2.11 Board of Directors: ...................................................................................................... 28
2.12 Organizational Structure of Dhakhinkhan Branch: ........................................... 29
2.13 ORGANOGRAM OF NCC BANK LTD ....................................................................... 29
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2.14 Product and Services .................................................................................................. 30
2.14.1 Deposit Product ................................................................................................ 30
2.14.2 Loan and Advance Product ........................................................................... 30
2.14.3 Cards ................................................................................................................... 30
2.14.4 Remittance Products ....................................................................................... 31
2.14.5 Brokerage House .............................................................................................. 31
2.14.6 Treasury Service ............................................................................................... 31
2.14.7 Remittance Service ........................................................................................... 31
CHAPTER THREE: .................................................................................................................. 32-55
CREDIT MANAGEMENT ............................................................................................................. 32
3.1 Credit ....................................................................................................................................... 33
Credit Policy of NCCBL ............................................................................................. 33
Credit Principles ........................................................................................................ 34
Global Credit Portfolio limit of NCCBL ................................................................ 34
3.2 LOAN AND ADVANCE SECTION .......................................................................................... 35
3.2.1 Continuous Loan ........................................................................................................ 35
3.2.1.1 CASH Credit (CC): ......................................................................................... 35
3.2.1.2 OVER Draft (OD): ......................................................................................... 36
3.2.2 Demand Loan .............................................................................................................. 36
Loan against Imported Merchandise (LIM)........................................................ 36
Loan against Trust Receipt (LTR) .......................................................................... 37
Payment against Documents (PAD) ...................................................................... 37
Loan against Packing Credit ................................................................................... 37
Loan against Investment .......................................................................................... 37
3.2.3 Term Loan .................................................................................................................... 38
Loan (General) ........................................................................................................... 38
Housing Loan .............................................................................................................. 38
Project Loan ................................................................................................................ 38
Transport Loan ........................................................................................................... 39
Small Business Loan Scheme ................................................................................. 39
Personal Loan Scheme ............................................................................................. 40
3.2.4 Other Special Scheme ............................................................................................... 40
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Consumer Scheme ..................................................................................................... 40
Lease Financing .......................................................................................................... 40
Micro credit financing ............................................................................................... 41
3.3 Documentation of the Loan: ................................................................................................... 42
3.4 Credit Risk Management Policy: ............................................................................................ 42
3.4.1 Credit Evaluation Principles .......................................................................... 43
3.4.2 Pre-disbursement Compliance ..................................................................... 44
3.4.3 Scope: .................................................................................................................. 44
3.4.4 Superseding Power: ......................................................................................... 45
3.4.5 Amendment of the policy: .............................................................................. 45
3.4.6 Access to the policy: ......................................................................................... 45
3.4.7 Product and Services: ...................................................................................... 45
3.4.8 Loan-Deposit Ratio: ......................................................................................... 45
3.4.9 Risk Acceptance criteria: ................................................................................ 46
3.4.10 Deviation: ......................................................................................................... 46
3.4.11 Return: ............................................................................................................... 46
3.4.12 Single customer exposure limit: ................................................................. 46
3.4.13 Large Loan: ...................................................................................................... 47
3.4.14 Diversification and sector allocation: ....................................................... 47
3.4.15 Maximum Tenor: ............................................................................................ 47
3.4.16 Security: ............................................................................................................ 47
3.4.17 General covenants: ......................................................................................... 48
3.5 Advance ................................................................................................................................... 49
3.5.1 Types of advance ................................................................................................................... 49
Securities ....................................................................................................................... 49
Modes of Charging Security: ...................................................................................... 50
Lien .................................................................................................................................. 50
Pledge .............................................................................................................................. 50
Hypothecation ............................................................................................................... 50
Mortgage: ........................................................................................................................ 50
Trust Receipt .................................................................................................................. 51
Advances against Work-Order ................................................................................... 51
Advances against Approved Shares: ......................................................................... 51
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Advances against Fixed Deposit Receipts: ............................................................. 51
3.6 Objective Basis of Classification.............................................................................................. 52
Unclassified: ................................................................................................................ 52
Substandard:................................................................................................................ 52
Doubtful: ....................................................................................................................... 54
Bad and Loss: ............................................................................................................... 55
CHAPTER FOUR: ..................................................................................................................... 56-64
RISK ASSESSMENT ..................................................................................................................... 56
4.1 Risk Assessment ....................................................................................................................... 57
4.1.1 Assessment Frequency: ................................................................................... 57
4.1.2 Assessment Documentation:.......................................................................... 57
4.1.3 Accountability: ................................................................................................... 57
4.1.4 Credit requirement: ......................................................................................... 58
4.1.5 Repayment source: .......................................................................................... 58
4.1.6 Collateral: ........................................................................................................... 58
4.1.7 Insurance coverage: ......................................................................................... 58
4.1.8 Adherence to Policy: ........................................................................................ 58
4.1.9 Syndicate loan: .................................................................................................. 58
4.1.10 CHANGES in Pricing:..................................................................................... 59
4.1.11 Others: ............................................................................................................... 59
4.2 Credit Risk Grading: ............................................................................................................... 59
4.2.1 NCCBL’s Risk Grading Framework: ............................................................ 60
4.2.2 Risk Grading Scorecard: .................................................................................. 60
4.2.3 Risk Grading: ....................................................................................................... 61
CHAPTER FIVE: ....................................................................................................................... 65-70
CREDIT APPRAISAL .................................................................................................................... 65
5.0 CREDIT APPRAISAL .............................................................................................................. 66
5.1 CREDIT APPRAISAL PROCEDURE/LENDING CRITERIA ................................................. 66
5.2 PROCEDURES OF SANCTIONING CREDIT ......................................................................... 67
5.3 STEPS INVOLVED TO SANCTIONING A LOAN: ................................................................. 68
5.4 LOAN DISBURSEMENT STEPS ............................................................................................. 70
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CHAPTER SIX: ......................................................................................................................... 71-76
Credit Monitoring and recovery process of NCCBL ...................................................................... 71
6.1 Credit monitoring process:...................................................................................................... 72
6.2 Early Alert Reporting: ............................................................................................................. 73
6.3 Recovery Process of Problem Account: ................................................................................... 75
6.4 Reporting of Classified Accounts: ........................................................................................... 76
CHAPTER SEVEN: ................................................................................................................... 77-81
SWOT ANALYSIS .......................................................................................................................... 77
SWOT (Strength, Weakness, Opportunity & Threats): ................................................................ 78
7.1 STRENGTH: .................................................................................................................. 78
Innovation: ...................................................................................................... 78
Top Management:........................................................................................... 78
Company Reputation: ................................................................................... 78
Sponsors: .......................................................................................................... 78
Modern facilities and Online Banking: ..................................................... 79
String of Branches: ........................................................................................ 79
Good customer service: ................................................................................ 79
Interactive corporate Culture: .................................................................... 79
Alliance in ATM: ............................................................................................. 79
7.2 WEAKNESS: ................................................................................................................ 79
Advertising and promotion: ....................................................................... 79
Disguised Employment: ............................................................................... 80
Limited Network: .......................................................................................... 80
7.3 OPPORTUNITY: .......................................................................................................... 80
Diversification: .............................................................................................. 80
Credit cards and Tele banking: .................................................................. 80
7.4 THREATS: .................................................................................................................... 80
Contemporary Banks .................................................................................... 80
Multinational Bank: ....................................................................................... 81
Upcoming Banks: ............................................................................................ 81
Default Culture: ............................................................................................... 81
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CHAPTER EIGHT: .................................................................................................................. 82-87
FINDINGS AND ANALYSIS ......................................................................................................... 82
8.0 Findings: ................................................................................................................................. 83
8.1 CC Hypo (Cash Credit Hypothecation) ..................................................................... 84
8.2 CC Pledge (Cash Credit Pledge) Under SME ........................................................... 84
8.3. Overdraft (SOD) ............................................................................................................ 85
8.4 Loans against House Building: .................................................................................. 86
8.5 Real Estate Financing for CRB: .................................................................................. 86
8.6 Lease Financing: ............................................................................................................ 87
8.7 SME Loan ......................................................................................................................... 87
CHAPTER NINE ...................................................................................................................... 88-91
RECOMMANDATIONS AND CONCLUSIONS ............................................................................ 88
9.1 RECOMMANDATION ........................................................................................................ 89
9.2 CONCLUSIONS ................................................................................................................... 91
CHAPTER TEN …………………………………………………………………………………92
Bibliography and Appendix……………………………………………………...92
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CHAPTER ONE:
INTRODUCTION
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EXECUTIVE SUMMERY
In order to provide a student with job exposure and an opportunity of the transition of theoretical
knowledge into real life experience, an internship is very important. A better balance between
theory & practice can be gained through this program.
Banking system of Bangladesh has gone through three phase of development --- Nationalization,
Privatization and Financial Sector Reform. National Credit and Commerce Bank is the largest
Private Commercial Bank from 1993 with new hope and promise to serve the countrymen.
This report mainly divided into three parts. First Part deals with my practical experience as an
internee in NCC Bank Ltd, Dhakhinkhan Branch and my own observations on Management and
Organizational Pattern of the NCC Bank Ltd. And final part deals with credit management of the
NCC Bank Ltd.
The report is a combination of three months internship program with NCC Bank. I
acknowledged different banking functions and day-to-day banking operations on my way to
complete internship. In this paper I have explained my best in respect of my real life experience
gathered from different departments.
1.0 Introduction
Bachelor of Business Administration (BBA) course requires 3 months attachment with an
organization followed by a report assigned by the supervisor in the organization and endorsed by
the faculty advisor. I took the opportunity to do my internship in National Credit and Commerce
Bank Ltd (NCCBL). My topic of internship is authorized from the head office of NCC Bank Ltd.
My faculty supervisor Farzana Akter, lecturer of EWU, also approved the topic and authorized
me to prepare this report as part of the fulfillment of internship requirement.
I have worked in various Department of NCC Bank Ltd, Dhakhinkhan Branch. In this report, I
will try to make an overall analysis on all activities of NCC Bank Ltd specially focuses on Credit
Management & Investment.
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1.1 OBJECTIVE OF THE REPORT:
The study has been undertaken with the following objectives:
To have better orientation on credit management activities specially credit policy and
practices, credit appraisal, credit processing steps, credit management, financing in
various sector and recovery, loan classification method and practices of National Credit
and Commerce Bank Ltd (NCCBL).
To know the competitive strength and weakness of the bank and the marketing and
expansion strategy of bank that can help to face the potential threats and opportunities.
To know the technological advantage and lacking of this bank in the modern banking
system and to make a bridge between the theories & practical procedures of banking day-
to-day operations.
1.2 METHODOLOGY OF THE REPORT:
1.2.1 DATA REQUIRED
Primary data:
Primary data were collected through discussions with the executives & officials of the NCC,
which has been presented in the report. Primary data sources are informal discussion with
professionals and observation while working in different desks.
Secondary data:
The secondary data sources are annual reports, manuals, and brochures of NCC Bank Ltd. To
identify the implementation, supervision, monitoring and repayment practice- interview with the
employee and extensive study of the existing file was and practical case observations were done.
I have collected secondary data from the following sources,
Annual Reports of NCCBL: 2010-2014.
Business Development Conference Report: 2011 and 2012.
Unpublished data from the NCCBL, Dhakhinkhan Branch.
Manuals of NCCBL regarding investment business.
Credit Risk Manual by Bangladesh Bank.
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NCCBL‟s website (www.nccbank.com.bd).
Official documents
Foundation Training Course Book of NCCBL.
1.2.2 DATA SOURCES: Both qualitative and quantitative analyses have been done while conducting this study. Microsoft
Word and Microsoft Excel were used to analyze, process and graphically represents the gathered
data.
1.2.3 DATA ANALYSIS TOOLS AND TECHNIQUES:
To analyze and present the numerical data and values associated with Investment Risk
Management of NCCBL, I have used following tools and techniques,
Column Chart,
Bar Chart,
Line Chart,
Pie Chart, and
The formula has generated and used in Microsoft Excel.
1.2.4 VARIABLE USED
Balance Sheet
Income Statement
Net income
Total assets
Total liabilities
Total investments
Total deposits
Net profits
Total advances
Net operating income
Net operating expense
Total equity
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1.2.5 LIMITATION OF THE REPORT:
This report will only consider credit management & Investment of NCC Bank Ltd. It will not
cover
Asset and liability/ balance sheet risk Management
Internal control And compliance risk mgt
Money laundering Risk mgt.
Bank‟s policy of not disclosing some data and information for obvious reason, which
could be very much useful.
The main constraint of the study was insufficiency of information, which was
required for the study. There are various information the bank employee can‟t provide
due to security and other corporate obligations.
All the branches of the bank were not physically visited and all the concerned
personnel of the bank have not been interviewed.
Lack of in-depth knowledge and analytical ability for writing such report.
Learning all the banking functions about the investment risk management within just
60 days was really tough.
Data and information used in this study are mostly from secondary sources.
Large scale research was not possible due to the constraints and restrictions posed by
the bank.
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CHAPTER TWO:
AN OVERVIEW OF NCC BANK
LIMITED (NCCBL)
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2.1 AN OVERVIEW OF NCC BANK LIMITED (NCCBL)
NCC Bank Limited is the leading private sector bank in Bangladesh offering full Range of
Personal, Corporate, International Trade, Foreign Exchange, Lease Finance and Capital Market
Services. NCC Bank Limited is the preferred choice in banking for friendly and personalized
services, cutting edge technology, tailored solutions for business needs, global reach in trade and
commerce and high yield on investments, assuring Excellence in Banking Services.
2.2 BACKGROUND OF NCC BANK LIMITED
National Credit and Commerce Bank Ltd. bears a unique history of its own. The Organization
started its journey in the financial sector of the country as an investment company back in 1985.
The aim of the company was to mobilize resources from within and invest them in such way so
as to develop country's Industrial and Trade Sector and playing a catalyst role in the formation of
capital market as well. Its membership with the browse helped the company to a great extent in
this regard. The company operated up to 1992 with 16 branches and thereafter with the
permission of the Central Bank converted in to a fully fledged private commercial Bank in 1993
with paid up capital of Tk. 39.00 corer to serve the nation from a broader platform.
Since its inception NCC Bank Ltd. has acquired commendable reputation by providing sincere
personalized service to its customers in a technology based environment.
The Bank has set up a new standard in financing in the Industrial, Trade and Foreign exchange
business. Its various deposit & credit products have also attracted the clients-both corporate and
individuals who feel comfort in doing business with the Bank.
Within this short time the bank has been successful in positioning itself as progressive and
dynamic financial institution in the country. This is now widely acclaimed by the business
community, from small entrepreneur to big merchant and conglomerates, including top rated
corporate and foreign investors, for modern and innovative ideas and financial solution.
Total Number of branch of NCCBL: 104 (Including SME/Agri Branch: 8)
2.3 MISSION STATEMENT
To become a bank of choice in serving the nation as a progressive and socially responsible
financial institution by bringing credit and commerce together for profit and sustainable growth.
NCC Bank shall be at the forefront of national economic development by: -
i) Anticipating business solution required by all NCC Bank‟s customers everywhere and innovatively
supplying them beyond the expectation.
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ii) Setting industry benchmark of world class standard in delivering customer value through the
comprehensive product range, customer service and all the activities.
iii) Building an exciting team based working environment that will attract, develop and retain
employees of exceptional ability who help celebrate the success of bank‟s business, of bank‟s customers
and of national development.
iv) Maintaining the highest ethical standards and a community responsibility worthy of a leading
corporate citizen
v) Continuously improving productivity and profitability and thereby enhancing share holder value.
Slogan
Where Credit & Commerce Integrates
Motto
The Bank will be a confluence of the following three interests:
Of the Bank: Profit Maximization and Sustained Growth.
Of the Customer: Maximum Benefit and Satisfaction.
Of the Society: Maximization of Welfare
2.4 OBJECTIVES
Be one of the best banks of Bangladesh. Achieve excellence in customer service next to none
and superior to all competitors. Cater to all differentiated segments of Retail and Wholesale
Customers. Be a high quality distributor of product and services. Use state-of the art technology
in all spheres of banking.
2.5 VALUES
Customer focus
Integrity
Team Work
Respect for individual
Quality
Responsible citizenship
2.6 MANAGEMENT INFORMATION SYSTEM
Since its journey as commercial Bank in 1985 NCC Bank Limited has been laying Great
emphasis on the use of improved technology. It has gone to online operation system since 2003.
And the new Banking Software Flexible is under process of installation. As a result the bank will
able to give the services of international standards.
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2.7 CORRESPONDENT RELATIONSHIP
The Bank established correspondent relationships with a number of foreign banks, namely
American Express Bank, Bank of Tokyo, Standard Chartered bank, Mashreq Bank, Hong Kong
Shanghai Banking Corporation, CITI Bank NA-New York and AB Bank Ltd. The Bank is
maintaining foreign exchange accounts in New York, Tokyo, Calcutta, and London. The bank
has set up letter of credit on behalf of its valued customers using its correspondents as advising
and reimbursing Banks. The Bank maintains a need based correspondent relationship policy,
which is gradually expanding.
2.8 DEPARTMENTS OF NCCBL
If the jobs are not organized considering their interrelationship and are not allocated in a
particular department it would be very difficult to control the system effectively. If the
departments are not fitted for the particular works there would be haphazard situation and the
performance of a particular department would not be measured. NCC Bank Limited has does this
work very well. There are different departments in NCCBL.
Are as follows:
Human Resources Division
Personal banking Division
Treasury Division
Operations Division
Computer and Information Technology Division
Credit Division
Finance & Accounts Division
Financial Institution Division
Audit & Risk Management Division
2.9 HUMAN RESOURCES MANAGEMENT OF NCCBL
NCC Bank Limited recognizes that a productive and motivated work force is Prerequisite to
leadership with its customers, its shareholders and in the market it serves. NCC bank treats every
employee with dignity and respect in a supportive Environment of trust and openness where
people of different backgrounds can reach their full potential.
The bank‟s human resources policy emphasize on providing job satisfaction, growth
opportunities, and due recognition of superior performance. A good working environment
reflects and promotes a high level of loyalty and commitment from the employees. Realizing this
NCC Bank limited has placed the utmost importance on continuous development of its human
resources, identify the strength and weakness of the employee to assess the individual training
needs, they are sent for training for self-development. To orient, enhance the banking knowledge
of the employees NCC Bank Training Institute (NCCBTI) organizes both in-house and external
training. The remuneration is very competitive in comparison with industry average. Beside
these the recruitment procedure is comprehensive.
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2.10 FINANCIAL STATEMENT
2.10.1 BALANCE SHEET:
Balance
Sheet 2010 2011 2012 2013 2014
PROPERT
Y AND
ASSETS
Cash: 6,231,607,253 6,442,038,081 7,732,385,281 7,875,262,621 8,612,160,908
In hand
(including
FC)
731,592,743 774,915,500 1,139,317,553 1,256,477,852 1,173,484,082
Balances
with BB
5,500,014,510 5,667,122,581 6,593,067,728 6,618,784,769 7,438,676,826
Balances
with other
567,325,877 462,493,232 1,316,317,832 656,757,606 2,407,581,410
Investment
s
10,980,808,236 20,840,288,280 30,851,738,163 19,908,322,002 26,568,661,762
Loans and
advances
63,230,141,628 72,733,540,709 79,948,220,174 88,167,205,831 90,920,772,028
Fixed
assets
1,191,493,190 1,506,770,757 1,743,585,434 1,736,637,982 2,573,252,105
Other
assets
1,352,801,369 1,525,568,280 4,249,255,937 5,698,510,026 4,077,095,326
TOTAL
ASSETS
83,554,177,553 103,510,699,339 125,841,502,821 124,042,696,069 135,159,523,539
Borrowing
s from
Other
1,847,028,696 5,565,102,190 9,444,527,760 2,763,533,530 4,975,525,649
Deposits
and other
A/C
67,961,244,777 81,127,168,218 96,918,222,155 98,229,442,528 105,703,614,110
Other
liabilities
4,388,794,697 5,234,633,372 7,342,935,755 9,779,884,197 10,130,694,248
TOTAL
LIABILIT
IES
74,197,068,170 91,926,903,780 113,705,685,670 110,772,860,255 120,809,834,007
TOTAL S.
EQUITY
9,357,109,383 11,583,795,559 12,135,817,151 13,269,835,814 14,349,689,532
TOTAL L
& S.
EQUITY
83,554,177,553 103,510,699,339 125,841,502,821 124,042,696,069 135,159,523,539
Figure: 2.6.1
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2.10.2 INCOME STATEMENT
Particular 2010 2011 2012 2013 2014
Profit and
Loss
Account
Net interest
income
2,486,468,804 1,661,817,872 2,241,539,584 2,039,393,557 2,680,556,207
Total
operating
income
5,674,450,977 5,915,529,141 6,179,587,783 6,073,188,991 6,532,499,519
Total
operating
expense
1,574,245,636 1,700,764,012 2,152,767,271 2,374,375,016 2,785,697,656
Profit before
provisions
4,100,205,341 4,214,765,129 4,026,820,512 3,698,813,975 3,746,801,863
Total
provisions
835,652,069 547,949,936 1,274,074,479 1,351,935,762 1,221,323,403
Profit after
provision
3,264,553,272 3,666,815,193 2,752,746,033 2,346,878,213 2,525,478,460
Profit before
tax
3,248,230,506 3,630,147,041 2,742,746,033 2,326,878,213 2,500,478,460
Provision for
tax
876,551,737 1,431,190,726 1,308,985,033 1,189,031,038 999,149,242
Profit after
tax
2,371,678,769 2,198,956,315 1,433,761,000 1,137,847,175 1,501,329,218
Figure: 2.6.2
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2.10.3 RATIO ANALYSIS:
0.0000
0.0500
0.1000
0.1500
0.2000
0.2500
0.3000
2010 2011 2012 2013 2014
ROE
ROE
0.0000
0.0050
0.0100
0.0150
0.0200
0.0250
0.0300
2010 2011 2012 2013 2014
ROA
ROA
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2010 2011 2012 2013 2014
0.0000
0.0100
0.0200
0.0300
0.0400
0.0500
0.0600
Net Operating Margin
Net Operating Margin
0.0000
0.1000
0.2000
0.3000
0.4000
0.5000
2010 2011 2012 2013 2014
Net Profit Margin
Net Profit Margin
0.0000
0.0200
0.0400
0.0600
0.0800
2010 2011 2012 2013 2014
Asset Utilization ratio
Asset Utilization ratio
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8.0000
8.5000
9.0000
9.5000
10.0000
10.5000
2010 2011 2012 2013 2014
Equity Multiplier
Equity Multiplier
0.0000
0.0200
0.0400
0.0600
0.0800
2010 2011 2012 2013 2014
Asset Management Efficiency
Asset Management Efficiency
0.0000
0.1000
0.2000
0.3000
0.4000
0.5000
2010 2011 2012 2013 2014
Operating Efficency ratio
Operating Efficency ratio
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2.10.4 INVESTMENT ANALYSIS:
Particular 2010 2011 2012 2013 2014
Investment 10,980,808,236 20,859,689,665 30,851,738,163 19,908,322,002 26,568,661,762
Return on
Investment
%
14.95% 13.99% 09.05% 11.04% 11.05%
Figure: 6.1
Return on Investment %:
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
2010 2011 2012 2013 2014
ROI %
ROI %
0
5,000,000,000
10,000,000,000
15,000,000,000
20,000,000,000
25,000,000,000
30,000,000,000
35,000,000,000
2010 2011 2012 2013 2014
Investment
Investment
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2.10.5 DEPOSIT AND ADVANCE:
Particular 2010 2011 2012 2013 2014
Deposit 67,961,244,777 81,152,374,463 96,918,222,155 98,229,442,528 105,703,614,110
Advance 63,230,141,628 73,107,385,390 79,948,220,174 88,167,205,831 90,920,772,028
Figure: 6.2
0
20,000,000,000
40,000,000,000
60,000,000,000
80,000,000,000
100,000,000,000
120,000,000,000
2010 2011 2012 2013 2014
Deposit
Advance
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2.11 BOARD OF DIRECTORS:
ALHAJ MD. NURUN NEWAZ Chairman
MR. A.S.M. MAIN UDDIN MONEM Vice-Chairman
MR. MD. ABDUL AWAL Director
MR. AMJADUL FERDOUS CHOWDHURY Director
MR. S.M. ABU MOHSIN Director
MRS. SOHELA HOSSAIN Director
MR. ABDUS SALAM Director
MR. GOLAM HAFIZ AHMED Managing Director & CEO
MR. YAKUB ALI Director
MR. MD. ABUL BASHAR Director
MR. MD. HARUNUR RASHID Director
MR. KHAIRUL ALAM CHAKLADER Director
MR. MD. MOINUDDIN Director
MR. MD. AMIRUL ISLAM, FCS, FCA Independent Director
MR. K.A.M. HAROON Independent Director
Figure: 2.7
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2.12 ORGANIZATIONAL STRUCTURE OF DHAKHINKHAN BRANCH:
2.13 ORGANOGRAM OF NCC BANK LTD
Assistant Vice President and
Manager
Senior Officer Junior Officer Junior OfficerAssistant Officer
Deputi Manager
Managing Director (MD)
Deputy Managing Director (DMD)
Executive Vice President (EVP)
Senior Vice President (SVP)
First Vice President (FVP)
Vice President (VP)
First Assistance Vice President (FAVP)
Assistance Vice President (AVP)
Senior Executive Officer (SEO)
Executive Officer (EO)
Senior Officer
Management Trainee Officer
Officer
Junior Officer
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2.14 PRODUCT AND SERVICES
The product and services that are currently available are given below.
2.14.1 DEPOSIT PRODUCT
NCC Bank Limited is now offering different types product for mobilizing the savings of the
general people.
Current Deposit A/C
Savings Bank Deposit A/C
Special Notice Deposit A/C
Instant Earnings Term Deposit
Special Savings Scheme
Special Deposit Scheme
Money Double Program
Youngster Account
Youngster Maximum Account
Youngster Money plant Scheme
2.14.2 LOAN AND ADVANCE PRODUCT
The NCC Bank is offering the following loan and advance product to the client for financing
different purpose that fulfill the requirements of the bank and have well return to the investment
as well as satisfy the client. The loan and advance products are:
Working Capital Financing
Commercial and Trade Financing
Long Term (Capital) Financing
House Building Financing
Retail and Consumer Financing
SME Financing
Agricultural Financing
Import and Export Financing
2.14.3 CARDS
Debit card
Credit card
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2.14.4 REMITTANCE PRODUCTS
Special Interest rate on Savings and Term Deposits
Wage Earners Welfare Deposit Pension Scheme
Loans for Real Estate (Land purchase and House construction/renovation)
Advance against Regular Remittance
2.14.5 BROKERAGE HOUSE
Member, Dhaka Stock Exchange Ltd.
Full Service Depository Participant
2.14.6 TREASURY SERVICE
Primary Dealer of Govt. Approved Securities
2.14.7 REMITTANCE SERVICE
Correspondence arrangement with more than 330 Financial Institutions all over the World For
Wage Earners Remittance we have Agency arrangement with 12 reputed Exchange Houses
covering major Locations of our Expatriates
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CHAPTER THREE:
CREDIT MANAGEMENT
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3.1 CREDIT
In line with the policy guideline issued by the Central bank from time to time, the bank
formulates its own credit policy keeping it flexible to accommodate changes that are taking
place. At present, several credit schemes are on the offer, which received quit well response from
the customers and may help the bank to expand its customer base. The bank also engaging in
syndication with other banks for allowing large loans converging Bangladesh bank„s rules and
regulation.
The word credit comes from the Latin word “Credo” meaning “I believe”. It is a lender‟s trust in
a person‟s/ firm‟s/ or company‟s ability or potential ability and intention to repay. In other
words, credit is the ability to command goods or services of another in return for promise to pay
such goods or services at some specified time in the future. For a bank, it is the main source of
profit and on the other hand, the wrong use of credit would bring disaster not only for the bank
but also for the economy as a whole.
The objective of the credit management is to maximize the performing asset and the
minimization of the non-performing asset as well as ensuring the optimal point of loan and
advance and their efficient management. Credit management is a dynamic field where a certain
standard of long-range planning is needed to allocate the fund in diverse field and to minimize
the risk and maximizing the return on the invested fund. Continuous supervision, monitoring and
follow-up are highly required for ensuring the timely repayment and minimizing the default.
Actually the credit portfolio is not only constituted the bank‟s asset structure but also a vital
factor of the bank‟s success. The overall success in credit management depends on the banks
credit policy, portfolio of credit, monitoring, supervision and follow-up of the loan and advance.
Therefore, while analyzing the credit management of NCCBL, it is required to analyze its credit
policy, credit procedure and quality of credit portfolio.
CREDIT POLICY OF NCCBL
One of the most important ways, a bank can make sure that its loan meet organizational and
regulatory standards and they are profitable is to establish a loan policy. Such a policy gives loan
management a specific guideline in making individual loans decisions and in shaping the bank‟s
overall loan portfolio. In NCC Bank Limited there is perhaps a credit policy but there is no credit
written policy.
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CREDIT PRINCIPLES
In the feature, credit principles include the general guidelines of providing credit by branch
manager or credit officer. In NCC Bank Limited they follow the following guideline while
giving loan and advance to the client. Credit advancement shall focus on the development and
enhancement of customer relationship.
All credit extension must comply with the requirements of Bank‟s Memorandum and Article of
Association, Banking Company‟s Act, Bangladesh Bank‟s instructions, other rules and
regulation as amended from time to time. Loans and advances shall normally be financed from
customer‟s deposit and not out of temporary funds or borrowing from other banks. The bank
shall provide suitable credit services for the markets in which it operates. It should be provided
to those customers who can make best use of them.
The conduct and administration of the loan portfolio should contribute with in defined risk
limitation for achievement of profitable growth and superior return on bank capital. Interest rate
of various lending categories will depend on the level of risk and types of security offered.
GLOBAL CREDIT PORTFOLIO LIMIT OF NCCBL
The features which deals with how much total deposits would be used as lending the proportion
of long term lending, customer exposure, country exposure, proportion of unsecured facility etc.
the most notable ones are:
The aggregate of all cash facility will not be more than the 80% of the customer‟s deposit
Long term loan must not exceed 20% of the total loan portfolio.
Facilities are not allowed for a period of more than 5 (Five) years.
Credit facilities to any one customer group shall not normally exceed 15% of the capital
fund or TK. 100 cores
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3.2 LOAN AND ADVANCE SECTION
Making advances is the primary function of a bank. A major portion of its funds is used for this
purpose and this is also the major sources of bank‟s income. Loans are the right to receive
payment or an obligation to make payment on demand or at some future time on account of the
immediate transfer of goods (securities). Loans are the largest asset item, which generally
account for half to almost three-quarters of the total value of all banks assets. A bank‟s loan
account typically is broken down into several groups of similar type loans. The Loan and
Advances made by the NCCBL can broadly be classified by following categories-
1. Continuous Loan
2. Demand Loan
3. Term Loan
4. Other Special Scheme
3.2.1 CONTINUOUS LOAN
These are those advances which do not have any set schedule for drawing or disbursement but
usually have a terminal date of full adjustment or repayment.
a) Cash Credit (CC)
b) Over Draft (OD)
3.2.1.1 CASH CREDIT (CC):
A Cash Credit (CC) is an arrangement by which the customer is allowed to borrow money up to
a limit. This is a permanent arrangement and the customer need not draw the sanctioned amount
at once, but draw the amount as and when required. They can put back any surplus amount,
which they may find with them. Thus Cash Credit (CC) is an active and running account, which
deposits and withdraws, may be affected frequently. Interest is charged only for the amount
withdrawn and not for the whole amount charged. If the customer does not use the cash credit
(CC) limit to the full extent, a commitment charge is made by the bank. This charge is imposed
on the unutilized portion of Cash Credit (CC) only.
Cash Credit (CC) provides an elastic form of borrowing since the limit fluctuates according to
the needs of the business. Cash Credits (CC) are the most favorite mode of borrowing by large
commercial and industrial concerns in our country.
Cash Credit (CC) arrangements are usually made against the security of commodities
hypothecated or pledged with the bank.
There are two types of CC account:
P a g e | 36
i). Cash Credit (Hypothecation)
ii). Cash Credit (Pledge)
3.2.1.2 OVER DRAFT (OD):
Overdraft (OD) is an arrangement between a banker and its customer by which the latter is
allowed to withdraw over his credit balance in the current account up to an agreed limit. This is
only a temporary accommodation usually granted against securities. The borrower is permitted to
draw and repay any number of times, provided the total amount overdrawn does not exceed the
agreed limit. The interest is charged only for the amount drawn and not for the whole amount
sanctioned.
A cash credit is differs from an overdraft in one respect. A cash credit is used for long term by
businessmen in doing regular business whereas overdraft is made occasionally and for short
duration.
There are two kinds of overdraft.
a) Secured Over Draft
b) Unsecured Over Draft
3.2.2 DEMAND LOAN
The loan which become payable after serving demand notice by the bank concerned are termed
as Demand Loan.
There are five kinds of demand loan. These are given bellow:
a) Loan against Imported Merchandise (LIM)
b) Loan against Trust Receipt (LTR)
c) Payment against Documents (PAD)
d) Loan against Packing Credit
e) Loan against Investment
LOAN AGAINST IMPORTED MERCHANDISE (LIM)
Usually, importer fails to retire the documents in spite of repeated reminders of the banker or the
bank has to clear the goods imported under the Letter of Credit at the request of the importer
(borrower). In both the cases, whether the importer fails to retire the documents or request for
clearance of goods, the outstanding under PAD or B/E is transferred to “Loan against Imported
Merchandise (LIM)” account and the overdue interest from the date of accompanying Bills of
Exchange or negotiating date to the date of transfer to LIM account is charged. At the time of
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opening of letter of credit the banks obtain from the importer an arrangement on stamped paper
which provides for financing and if necessary, clearance and storage of goods by debiting
importer‟s account at their risk and responsibilities. After clearance, consignments are taken
delivery by the importer on full payment of bank‟s liability. Normally part delivery is not
allowed while on LIM account. When the delivery in part is desired by the importer, the LIM is
converted into cash credit account retaining proper margin and executing charge documents.
LOAN AGAINST TRUST RECEIPT (LTR)
Under this arrangement, credit is allowed to the importer to retire documents and release the
consignment from the customs authority against trust receipt keeping the goods under importer‟s
control.
PAYMENT AGAINST DOCUMENTS (PAD)
The bank that opens the letter of credit is bound to honor its commitment to pay for import bills
when these are presented for payment, if drawn strictly in terms letter of credit. The foreign
correspondent bank, who negotiates the documents, debits the account of the opening bank and,
in fact, the amount thus stands advanced on behalf of the importer. The opening bank will lodge
the shipping documents to their book and will respond to the debit advice originated by the
foreign correspondent to the debit of “Payment against Documents (PAD)” account or “Bills of
Exchange (B/E)” accounts and present the bill to the importer for payment.
LOAN AGAINST PACKING CREDIT
Packing credit is a short term advance granted by bank to an exporter for assisting him to buy,
process, packs and ships the goods. The credit is gradually extended for payment of freight,
handling charges, insurance and export duties. A packing credit advance does not normally
extend beyond 180 days and has to be liquidated by negotiation/ purchase of the bills of
exchange.
LOAN AGAINST INVESTMENT
In order to contribute to the development of the Capital Market of the country NCC Bank
Limited extends credit facilities against pledge of Shares, Debentures, Prize Bonds, Bangladesh
Bank Treasury Bills etc. to the individuals as well as to the Member of DSE & CSE.
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3.2.3 TERM LOAN
These are loans which have a specific term for repayment as specified in the loan agreement.
a) Loan (General)
b) Housing Loan
c) Project Loan
d) Transport Loan
e) Small Business Loan Scheme
f) Personal Loan Scheme
LOAN (GENERAL)
In case of loan general, the bank advances a lump sum for a certain period at an agreed rate of
interest. The entire amount is paid on an occasion either in cash or by credit in his/her current
account which he/she can draw at any time. The interest is charged for the full amount
sanctioned whether he/she withdraws the money from his/her account or not. The loan may be
repaid in monthly installments or at the expiry of a certain period.
HOUSING LOAN
A large amount of money needed to construct a house or purchase an apartment. It is not
possible to of all people to construct a house by only own income sources. Especially this
problem largely faces by middle level and fixed income people. To solve this problem,
NCCBL‟s offer Housing loan with easy repayment condition and less interest rate.
PROJECT LOAN
NCC bank Ltd has their project loan scheme. Though they do not invest in project loan
extensively but now they are planning on project loan. Because project loan is huge investment
and it completely depends on success of the project for that reason bank always keeps eye some
major factor before invest on project loan. Before invest on project loan Bank always who is the
people involves in the project Security standard of the borrower. Then bank looks for the
feasibility report of the project. Borrower has to completely show the feasibility report to the
head office. In the feasibility report borrower has to show them what the mission of the project,
who are the target customer, comparative analysis of the project with other same project, how the
project meets the demand of the target customer, for which purpose the loan is asking for, detail
information of the project operation, detail price list of the equipment, approximate repayment
planning by the borrower. Branches do not have any authority to sanction any amount of loan for
P a g e | 39
Project loan. Branch can only asses the project feasibility, evaluate the client check the necessary
papers and collect it from the client. After getting the entire necessary papers branch makes a
proposal for the loan and send it to the head office. Head office then re-evaluate the proposal
with necessary papers. Then head office again inspects the project. After getting all the
evaluation head office then send the sanction letter to the branch. Loan amount then disburse
from the branch. Branch has to do the regular monitoring until the whole loan amount is repaid.
TRANSPORT LOAN
NCC Bank Ltd was an investment company before the conversion in a bank. So they have good
idea about lease financing. Transport loan is fallen under the lease financing, though it is called
transport loan but it is actually fallen under leasing term and condition. NCC Bank Ltd does not
have any car loan scheme for individual clients, they had this scheme but the scheme is
completely stopped for the time being.
Process of transport loan is more or less similar to project loan. Borrower has to apply for the
loan in prescribed bank application form. In the application form borrower must mention which
vehicle he wants to buy and what‟s the quantity. Borrower also has to provide detail price list of
the vehicle, insurance paper for each vehicle, possible repayment planning of the loan; list of
collateral, list of hypothecation of securities and other necessary papers depends on clients and
number of vehicles. After getting all necessary papers and field inspection branch makes a
proposal for the loan and sends it to the head office. Head offices then again check the necessary
papers and do the field inspection. After inspection if Head Office thinks that for sanction of the
loan they need more papers and securities, borrower has to provide those papers. Branches
usually do not have any authority to sanction any amount of loan amount branch only disburse
the amount and do the regular monitoring whether the vehicle is purchased, is they quotation
match with the real one, vehicle is in the route and more importantly borrower is repaying the
installment regularly.
SMALL BUSINESS LOAN SCHEME
Small businessman take place a large portion in our country. More of them are honest, energetic
and hardy. In the absence of sufficient capital more of them cannot manage their business properly.
They have not sufficient asset to make a security against loan, as a result they are failure to take a
loan from bank or other financial assistance institution. If a loan give to them with easy terms and
condition then this energetic small businessman not only manage and increase their business
properly but also they take important role in development of our country. To meet up this purpose,
NCCBL start Small Business Loan Scheme.
P a g e | 40
PERSONAL LOAN SCHEME
Fixed income employee‟s of various firm or company need urgently financial assistance for the
following purpose-
Marriage purpose
Education purpose
Advance against Salary
Education Loan
Travel Loan
Especially meet up this financing by own income source is very difficult for middle class people.
To solving these problems NCCBL introduce Personal Loan Scheme for Salaried Person.
3.2.4 OTHER SPECIAL SCHEME
NCCBL Operate some kind of loan scheme as well to contribute the overall economy, poverty
alleviation and fulfill some basic needs of the people. The special loan schemes are:
a) Consumer Scheme
b) Lease Finance
c) Micro credit financing
CONSUMER SCHEME
The Scheme aims at improving the standard of living of the fixed income group. Under the
scheme the clients may secure loan facilities at easy installments to procure household amenities.
LEASE FINANCING
An entrepreneur, under this scheme, may avail of the lease facilities to procure industrial
machinery (without having to purchase it by down payment) with easy repayment schedule. The
clients also get special rebate in their income-tax payment under the scheme.
Lease financing is one of the most convenient long term sources of acquiring capital machinery
and equipment. It is a very popular scheme whereby a client is given the opportunity to have an
exclusive right to use an asset, usually for an agreed period of time, against payment of rent. Of
late, the lease finance has become very popular in almost all the countries of the world. An
obvious advantage of the lease is to use an asset without having to buy it. The lessee is obligated
to make lease payments until the expiration of the lease agreement, which corresponds to the
P a g e | 41
useful life of the assets. In a capital scarce economy like ours, Lease Financing is suitable for
firms to acquire Capital Machinery, Equipments, Medical Instruments, and Automobiles etc.
And thereby employ own resources more advantageously in some other investments. Lease
financing also helps a firm to reap significant economic benefit through tax saving and by
reducing the risk of the equipments becoming obsolete due to the technological advancement.
MICRO CREDIT FINANCING
To fulfill its commitment to play a vital role in socio economic development of the country NCC
Bank Ltd has introduce a small and medium credit scheme for its customers.
The objective of the scheme is:
To encourage and develop medium and small entrepreneurs
To provide credit with minimum complexity
To generate employment.
Under the scheme, NCC Bank Ltd. is providing loan:
To meet working capital
To purchase capital machinery and for expansion of business and for purchasing
household durably.
The Scheme covers the following areas of options:
Agriculture sector: Seed or crop loan, Poultry and Fisheries, Fish processing, Plot, Fish
storage and Marketing Project, with processing project etc.
Small and Cottage Industry: Handicraft maker, Blacksmith, Fishing net weaver,
handloom industry, Goldsmith, watch assembling project, mineral water plant etc.
Service Industry: Transportation, medical service provider, different type of shop
owners, hotel and restaurant owners, vocational training center etc.
Household durable and Consumer credit: Electric equipment, Electronics, Vehicles,
Furniture, medication and Hospitalization, cookeries etc.
Information Technology Sector: Computer and Computer accessories purchase for
household use, selling up of Computer training institute, Software development for
exporting purpose, Software development for local business and household users.
Energy Sector: Household purchase of substitute energy like UPS, IPS, Stabilizer,
Battery etc. Biogas technology, solar electricity producing plant, small electricity
production etc.
P a g e | 42
3.3 DOCUMENTATION OF THE LOAN:
Documentation is obtaining such agreement where all the terms and condition and securities are
written and signed by the borrower. It specifies rights and liabilities of both the banker and the
borrower. In documentation each type of advances requires a different set of documents. It also
differs with the nature of securities. The documents should be stamped according to the stamp
Act. There are no hard and fast rules of documentation and it varies from bank to bank.
Generally, the documents are taken in the case of a secured advance by NCCBL:
Demand promissory note: Here the borrower promises to pay the loan as and when
demand by bank to repay the loan.
Letter of arrangement.
Letter of continuity.
Letter of hypothecation of goods and capital machinery‟s. Stock report: This Report is
used for OD and CC. In this report, information about the quality and Quantity of goods
hypothecated is furnished.
Memorandum of deposit of title deed of property duly signed by the owners of the
property with resolution of Board of Directors of the company owning the landed.
Personal guarantee of the owners of the property.
Guarantee of all the directors of the company.
Resolution of the board of directors to borrow fund to execute documents and completes
other formalities
Form no. XVII/XIX for filling charges with the register of joint stock companies under
relevant section.
Letter of Revival
Letter of lien for advance against FDR.
3.4 CREDIT RISK MANAGEMENT
POLICY:
The Credit Risk Management Policy is a statement of basic principles that govern the extension
and administration of Credit. The main purpose of this policy document is to set out yardsticks
for and spell out standard practices regarding management of Credit risk. As such, it specially
addresses the following areas:
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a) Establishing an appropriate Credit environment,
b) Setting up a sound Credit approval process,
c) Maintaining an appropriate Credit administration, measurement and monitoring process,
d) Ensuring adequate over Credit risk.
3.4.1 CREDIT EVALUATION PRINCIPLES
Some principles or standards of lending are maintained in approving loans in order to keep credit
risk to a minimum level as well as for successful banking business. The main principles of
lending are given below:
Liquidity:
Liquidity means the availability of bank funds on short notice. The liquidity of an advance means
it repayment on demand on due date or after a short notice. Therefore, the banks must have to
maintain sufficient liquidity to repay its depositors and trade off between the liquidity and
profitability is must.
Safety:
Safety means the assurance of repayment of distributed loans. Bank is in business to make
money but safety should never be sacrificed for profitability, to ensure the safety of loan. The
borrower should be chosen carefully. He should be a person of good character & capacity as well
as bank must have to maintain eligible number of security from borrower.
Profitability:
Banking is a business aiming at earning a good profit. The difference between the interest
received on advances and the interest paid on deposit constitutes a major portion of the bank
income, besides, foreign exchange business is also highly remunerative. The bank will not enter
into a transaction unless a fair return from it is assured.
Intent:
Banks sanction loans for productive purpose. No advances will be made by bank for
unproductive purposes though the borrower may be free from all risks.
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Security:
The security offered for an advance is an insurance to fall bank upon in cases of need. Security
serves as a safety value for an unexpected emergency. Since risk factors are involved, security
coverage has to be taken before a lending.
National interest:
Banking industry has significant role to play in the economic development of a country. The
bank would lend if the purpose of the advances can contribute more to the overall economic
development of the country.
3.4.2 PRE-DISBURSEMENT COMPLIANCE
When the credit proposal are approved the credit officer must have to be ensured that the
disbursement of the credit facilities must comply with the directions written in the credit policy
and circular made by time to time along with checking all the following terms and conditions.
The officer of Loan Administration must collect the acceptance of the customer‟s of the terms
and conditions on the duplicate copy of the sanctioned advice.
They will thoroughly examine and ensure that the subject credit facility does not contradict to
any law, rules and regulation of the country, Bangladesh Bank and Deed of the Mortgage and
power of the Attorney to be drafted and executed under the Supervision of the Bank‟s Legal
Advisor.
Lawyers certificate to the effect that all the legal formalities (Equitable/ Registered Mortgaged)
has been properly created on the land and building in favor of the bank & bank has acquired the
effective title of the property.
Registered power of attorney has been collected from the borrower (contractor) assigning the
work order favoring the NCCBL and the power of attorney has been registered with the work
order given agency and they have agreed that they will issue all the cheques favoring NCCBL.
The legal documents of the vehicle have been obtained. Collection of the satisfaction certificate
in respect of all the documents both legal and banking from the lawyer. Entry has been made in
the Safe-in and Safe-out register and the documents are preserved. After being satisfied all the
above terms and conditions the credit in-charge will disburse the loan amount to the client.
3.4.3 SCOPE:
This policy document will be applicable for issues related to Credit risk with respect to both
direct and indirect Credit products of traditional banking sector.
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3.4.4 SUPERSEDING POWER:
If any provision of this policy document contradicts with the instructions contained in Credit
operational Manual or any existing circular, the Credit risk management policy will supersedes
and be held.
3.4.5 AMENDMENT OF THE POLICY:
The directors of the bank will review the Credit risk management policy at least annually and
make in view of the dynamic nature of banking business, the bank‟s Credit Risk Management
Policy and procedures are evolutionary in nature and should be subject to ongoing review,
modification and revision. This Credit risk Management policy will be amended, revised as and
when warranted to accommodate the changes in the market condition, cyclic aspect of the
economy, government policy, industry demand, central bank regulation and experience of the
bank in managing Credit risk. For this purpose, the boards adopt necessary amendment.
3.4.6 ACCESS TO THE POLICY:
This policy document is categorized as a confidential one will be officially distributed to the
executives/officers working in the corporate Banking and Credit risk Management
Division(computing of Credit Risk Review Department, Credit Administration Department and
recovery department) of both Branch and Head office. It will also distributed to all Deputy
Managing Directors, Senior Executive Vice President, Executive Vice President.
3.4.7 PRODUCT AND SERVICES:
The Bank shall sell suitable Credit products and services in the market. For this purpose, Bank
will design new product from time to time, reengineer the existing ones to keep the same
competitive in the market. While designing new products and/or reengineering the existing ones
Bank will always take into consideration the customers‟ demand. Product innovation and/or
reengineering shall be continuous process.
3.4.8 LOAN-DEPOSIT RATIO:
Loans and advances shall normally be financed from customers deposit and sometimes from
capital fund of the Bank. However, it will be ensured that loan-deposit Ratio should not exceed
90% at any particular point of time and regulatory compliance of CRR/SLR would be
maintained. Generally loans and advances shall not be extended out of temporary fund of
borrowing from money market.
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3.4.9 RISK ACCEPTANCE CRITERIA:
The Management will revise and prepare periodically Risk Acceptance criteria (RAC) duly
approved by the executive committee/Board and disseminate to the concerned executives at
operational level. In preparation of RAC the following area would be covered with flexibility for
deviation by the competent authority:
a) Maximum amount in cash type of facility line
b) Maximum limit to a single obligor and group
c) Acceptable Leverage, Current ratio, Interest coverage, Operating margin for an industry
d) Geographical location
e) Security and support
National Credit and Commerce Bank Ltd. will extend Credit only to qualified borrowers where
the amount and intended purpose are clear and legitimate. Credit facilities shall be allowed in
manner that the expansion in Credit does not compromise the asset quality of the bank.
3.4.10 DEVIATION:
Any deviation from the Credit Policy of the Bank must be justified in the proposal and well
documented, especially, all Credit assessment form shall invariably include the deviation from
the policy, if any, and proposal that does not comply with the Credit risk Management Policy
should be approved by Head office. However, no regulatory regulations shall be compromised.
3.4.11 RETURN:
Credit operation of the Bank should contribute return at optimum level within the defined risk
limitation. In other words, Credit facilities should be extended in such a manner that each deal
becomes a profitable one so that Bank can achieve its targets and has a superior on capital.
Besides, Credit extension shall focus on the development and enhancement of customer‟s
relationship and shall be measured on the basis of the total yield for each relationship with a
customer.
3.4.12 SINGLE CUSTOMER EXPOSURE LIMIT:
An important element of risk management is to establish exposure limits for single obligors and
group connected obligors. To spread the risk to ensure that funds of the Banks are not used form
limited number of clients. Bangladesh Bank has laid down guidelines. As per prevailing
regulation, Bank will take maximum exposure (outstanding at any point of time) on a single
customer (individual, Enterprise, Company, corporate organization, Group) for the amount not
exceeding 35% of Bank‟s total capital. However, for single customer of the export sector
maximum exposure limit shall be 50% of the total capital subject to the condition that total
funded facility shall not exceed 15% of the total capital of the bank at any point of time. National
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Credit and Commerce Bank Ltd. will follow the ceiling set by Bangladesh Bank. However, size
of any Credit limit in each case shall be fixed after proper assessment of genuine Credit
requirement of the customer within the maximum allowable limit
3.4.13 LARGE LOAN:
Credit facility to single customer (individual, Enterprise, Company, Corporate, organization,
Group) shall be treated as large loan if total outstanding amount against the limits at a particular
point of time equals or exceeds 10% of the total capital of the Bank. NCCBL‟s total large loan
exposure shall not exceed 56% of the total outstanding funded loans and advances at any point of
time or as per guidelines of Bangladesh Bank.
3.4.14 DIVERSIFICATION AND SECTOR ALLOCATION:
The portfolio shall be well diversified to reduce the risk of dependence on a particular sector.
The management will review periodically the existing sartorial performance, economic trends
both local and global with respect to that sector, industry saturation, Industry structure,
Geographical advantage, Government policy, Risks specific to the industry etc to provide
guidelines for annual industry/Sector allocation in Credit portfolio. At the annual budget,
Industry/Sector lending limits/Caps will be fixed and approved by the appropriate authority to
provide directional guidelines to the Relationship Managers.
3.4.15 MAXIMUM TENOR:
Maximum tenor for any continuous loan shall be 1(one) year which is renewable at maturity or
within the validity period upon satisfactory performance of the customer. Period of any term loan
shall be fixed on case to case basis considering repayment capacity, projected cash flow, payback
period etc.
3.4.16 SECURITY:
Bank will try to have as much security coverage as possible against and every Credit facility
sanctioned to the customers. Security taken against Credit facility shall be properly valued and
legally enforceable in accordance with the laws of the country, security requirement will be
determined on case to case basis based on customer‟s business strength, level of risk bank is
undertaking. However, Bank will always prefer to have security equivalent to 1.25 times of the
total funded limit. Security may be in the following forms subject to restrictions of regulatory
authority:
1. Bank deposit.
2. Gold/Gold ornaments
3. Government Bond
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4. Guarantee given by government of Bangladesh
5. Bank guarantee
6. Land and Building
7. Share
8. Stock
9. Machinery and equipment
10. Charge on the fixed and floating asset
11. Part-passu charge on fixed and floating assets
12. Corporate guarantee of another company backed by Board Resolution.
13. Personal Guarantee
14. Bill of receivables
15. Ownership of Vehicles/assets
16. Life Insurance policy
17. Post Dated Cheque
18. Trust receipt
19. Others as demand acceptable by the approving authority.
3.4.17 GENERAL COVENANTS:
While sanctioning Credit facility, Bank will set some covenants, some of the covenants will be
general and others will be specific to a particular Credit facility and/or customer. General
covenants may be as follows:
All expense (including legal, professional and out of pocket expenses) incurred in the
negotiation, Preparation, execution and enforcement of sanction advice and the
documents referred to the sanction advice shall be on the account of the borrower. The
bank should be authorized to debit all sort of fees from the Borrowers account without
prior permission of the Borrower. Moreover, the bank may be debit the account of the
Borrower for paying the insurance premium on behalf of the Borrower and the Borrower
shall have the right to proceeds of such insurance.
Ownership structure of the borrower shall not be changed without prior approval of the
Bank.
By accepting the offer of the Bank, the borrower should confirm and undertake that it is
not enjoying any other available lines of Credit from any lender, apart from those
disclosed in writing to the Bank.
Any repayment whether in part of full, will be attributable first towards servicing interest
which has accrued on the facilities and then to the principal.
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The Borrower should confirm that during the continuance of the facilities by the Bank to
the Borrower, It will advise the bank prior to any commitment for availing of any
additional line(s) of Credit from any other banks.
The customer shall not go for expansion without consent of the Bank.
The customer shall not withdraw profit without consent of the Bank.
The customer shall submit financial statements within 30 days after you ending.
Other covenant as set by the sanctioning authority.
3.5 ADVANCE
The different types of securities that may be offered to a banker are as follows:
(a) Immovable property
(b) Movable property
Pratiraksha Sanchaya Patra, Bangladesh Sanchaya Patra, ICB unit certificate, Wage
earner development bond.
Fixed Deposit Receipt
Shares quoted in the Dhaka Stock Exchange and Chittagong Stock Exchange.
Pledge of goods
Hypothecation of goods, produce and machinery
Fixed assets of manufacturing unit.
Shipping documents.
3.5.1 TYPES OF ADVANCE
SECURITIES
Loans Lien or various kinds of Sanchaya patras, Govt. Securities, FDR, Collateral of immovable
property, shares quoted in stock exchange Overdraft, Pledge or hypothecation of machinery, land
and building on which machinery are installed, stock in trade, goods products and merchandise.
Bills purchased, Bills it.
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MODES OF CHARGING SECURITY:
A wide range of securities is offered to banks as coverage for loan. In order to make the
securities available to banker, in case of default of customer, a charge should be created on the
security. Creating charge means making it available as a cover for advance. The following modes
of charging securities are applied in the NCC Bank Limited.
LIEN
A lien is right of banker to hold the debtor‟s property until the debt is discharged. Bank generally
retains the assets in his own custody but sometimes these goods are in the hands of third party
with lien marked. When it is in the hand of third party, the third party cannot discharge it without
the permission of bank. Lien gives banker the right to retain the property not the right to sell.
Permission from the appropriate court is necessary. Lien can be made on moveable goods only
such as raw materials, finished goods, shares debentures etc.
PLEDGE
Pledge is also like lien but here bank enjoys more right. Bank can sell the property without the
intervention of any court, in case of default on loan, But for such selling proper notice must be
given to the debtor. To create pledge, physical transfer of goods to the bank is must.
HYPOTHECATION
In this charge creation method physically the goods remained in the hand of debtor. But
documents of title to goods are handed over to the banker. This method is also called equitable
charge. Since the goods are in the hand of the borrower, bank inspects the goods regularly to
judge it s quality and quantity for the maximum safety of loan.
MORTGAGE:
Mortgage is transfer of interest in specific immovable property. Mortgage is created on the
immovable property like land, building, plant etc. Most common type of mortgage is legal
mortgage in which ownership is transferred to the bank by registration of the mortgage deed.
Another method called equitable mortgage is also used in bank for creation of charge. Here mere
deposit of title to goods is sufficient for creation of charge. Registration is not required. In both
the cases, the mortgage property is retained in the hank of borrower.
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TRUST RECEIPT
Generally goods imported or bought by bank's financial assistance are held by bank as security.
Bank may release this lien / pledge these goods against trust receipt. This means that the
borrower holds goods in trust of the bank; trust receipt arrangement is needed when the borrower
is going to sell these goods or process it further but borrower has no sufficient fund to pay off the
bank loan. Here proceeds from any part of these goods are deposited to this bank.
ADVANCES AGAINST WORK-ORDER
Advances can be made to a client to perform work order. The following points are to be taken
into consideration. The client‟s management capability, equity strength, nature of scheduled
work and feasibility study should be judiciously made to arrive at logical decision. If there is a
provision for running bills for the work, appropriate amount to be deducted from each bill to
ensure complete adjustment of the liability within the payment period of the final bill besides
assigning bills receivable, additional collateral security may be insisted upon. Disbursement
should be made only after completion of documentation formalities and fulfillment of
arrangements by the client to undertake the contract. The progress of work under contract is
reviewed periodically.
ADVANCES AGAINST APPROVED SHARES:
Credit facilities to extend against shares will be called “Investment Scheme against Shares”.
Advance may be allowed against shares of companies listed with the Stock Exchange Ltd.
Subject to margin or may other restrictions imposed by Bangladesh Bank/Head Office of the
bank from time to time. Value of shares & margin should be worked out as per guidelines issued
from time to time by Bangladesh Bank / Head Office of the bank.
ADVANCES AGAINST FIXED DEPOSIT RECEIPTS:
Advance against Fixed Deposit Receipt will be subject to credit Restrictions imposed from time
to time by Head Office / Bangladesh Bank. Scrutinize the Fixed Deposit Receipts with regard to
the following points.
The Fixed Deposit Receipt is not in the name of minor.
It is discharged by the depositor on revenue stamp of adequate value & his Signature is
verified.
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Creation of liability on Fixed Deposit issued in joint names by any one of the Depositors
is regular.
If the Deposit Receipt is offered as a security for allowing advances, a letter of lien shall
be obtained from the depositors, on the appropriate form.
If the Deposit Receipt has been issued by the branch-allowing advance, lien against that
specific Deposit Receipt to be marked in the fixed Deposit Register of the branch.
The discharged receipt, the letter of lien duly verified by the issuing branch & the letter
confirming registration of the lien on the deposit receipts shall be kept along with other
documents under safe custody of the bank.
3.6 OBJECTIVE BASIS OF
CLASSIFICATION
In classifying the loan and advance there are four classes in the loan review Practiced in NCC
Bank Limited. They are as follows
UNCLASSIFIED:
The loan account is performing satisfactorily in the terms of its installments and no overdue is
occurred. This type of loan and advances are fall into this class.
SUBSTANDARD:
This classification contains where irregularities have been occurred but such Irregularities are
temporarily in nature. To fall in this class the loan and advance has to fulfill the following factor.
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The main criterion for a substandard advance is that despite these technicalities or Irregularities
no loss is expected to be arising for the bank. These accounts will require close supervision by
management to ensure that the situation does not deteriorate further.
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DOUBTFUL:
This classification contains where doubt exists on the full recovery of the loan and advance along
with a loss is anticipated but cannot be quantifiable at this stage. Moreover if the state of the loan
accounts falls under the following criterion can be declared as doubtful loan and advance.
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BAD AND LOSS:
A particular loan and advance fall in this class when it seems that this loan and Advance is not
collectable or worthless even after all the security has been exhausted. In the following table the
criteria to be fulfilled to fall in this category are summarized:
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CHAPTER FOUR:
RISK ASSESSMENT
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4.1 RISK ASSESSMENT
The primary purpose of a bank is to borrow money from those who have a surplus funds then
lend this money out to those who are in need of funds. It is essential that when it lends out
money than the bank has a certain confidence that the money will be repaid at the given time,
together with interest. Risk assessment of analysis is all about understanding the risk associated
with lending money. Until and unless risks are not assessed and measured it will not be possible
to control risks. The primary factor determining the quality of the Bank‟s credit portfolio is the
ability of each borrower to honor, on timely basis, all credit commitments made to the Bank.
This must be accurately determined by the authorized Credit Officers/Executives prior to
approval. Therefore a thorough credit risk assessment shall be conducted prior to the sanction of
any credit facilities.
4.1.1 ASSESSMENT FREQUENCY:
A comprehensive Credit Assessment (Due Diligence) shall be conducted before sanction of any
loan. Thereafter, it will be done annually for all types of credit facilities i.e. Demand Loan,
Continuous Loan and Term Loan.
4.1.2 ASSESSMENT DOCUMENTATION:
The result of the Credit Assessment shall have to be presented in the Credit Assessment Form
enclosed in -2. Initially, it will be originated by the Relationship officer of the Branch and
reassessed in corporate Banking Division. Credit Review Department of Credit Risk
Management Division will review the risk factors and facility structure to determine that all the
risks have been properly assessed and Risk mitigation have been and all bank‟s policy
requirement and regulatory requirements have been addressed. All evidences or Credit
assessment have to be filed properly in the respective Credit File.
4.1.3 ACCOUNTABILITY:
The Relationship Manager (presently Head of Branch) shall be the owner of the customer
relationship and he held responsible to ensure the accuracy of the entire credit
application/assessment form submitted for approval. He/she will be responsible for conducting
due diligence on the borrower, Filling up Credit Assessment form:
Bank requires sufficient information to enable comprehensive assessment of the true risk profile
of the borrower. Hence, Credit Assessment Form must be filled in with accurate information in
full. No field in the assessment form should be erased or left vacant. If information, is not
available, concerned field should be filled in with” information not Available” with proper
justification.
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4.1.4 CREDIT REQUIREMENT:
Credit Requirement of the borrower must be assessed properly. The relationship officer will
apply prudence to find out actual credit requirement of the borrower and place his/her findings in
the Credit Assessment Form.
4.1.5 REPAYMENT SOURCE:
Repayment source of the borrower is to be validated in the Credit Assessment Form by cash flow
and other financial analysis. For such analysis, at least three years financials are to be reviewed.
Loan amount and tenor must commensurate with repayment capacity of the borrower.
4.1.6 COLLATERAL:
Collateral offered against a credit facility shall properly be valued and verified by the concerned
Relationship Officer and/or Relationship Manager and revalued and re-verified annually in the
subsequent period(s). In addition to the valuation of the Relationship Officer/Manager, the same
collateral must be valued and verified by an enlisted surveyor of the Bank if the total credit
facility to the concerned customer exceeds Tk 25.00 lac (Taka Twenty Five Lac). Any valuation
of collateral must be supported by the photograph and site map, where applicable.
4.1.7 INSURANCE COVERAGE:
Adequacy and extent of insurance coverage must be assessed in the Credit Assessment Form.
Customer‟s preference for not taking required insurance policy must be justified properly and it
must be mentioned as deviation. The policy must be obtained from approved of the Bank.
4.1.8 ADHERENCE TO POLICY:
It should be clarified whether the customer has agreed to comply with bank‟s internal policy and
external regulatory requirements. Any deviation from the policy or other internal or external
requirements must be justified properly and mentioned as Deviation in the Credit Assessment
Form. Furthermore, the originating officer will affix a declaration in the Credit Assessment Form
that the proposal does not contradict with any rules and regulations of the Bank, Banking
Companies Act, any circulars of Bangladesh Bank etc.
4.1.9 SYNDICATE LOAN:
Proposal for syndicated loans shall be analyzed with respect to risk return in the same manner as
directly sourced loans. In case of participation in a syndication deal, Bank will independently
assess the proposal and will not solely depend on the credit assessment of the Lead Arranger.
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4.1.10 CHANGES IN PRICING:
Any changes in the pricing of an existing credit facility must be highlighted and to be justified in
the Credit assessment form.
4.1.11 OTHERS:
Finally, detailed and complete Credit Risk Assessment for each facility and customer
relationship is of paramount importance. The steps that should be followed in carrying out such
an assessment are set out in the Credit Operational Manual and in Head office circulars issued
from time to time. No proposal shall be put up for approval unless there has been a complete
written analysis. It is of the responsibility of the originating officer to collect all necessary
documentation before the facility request is sent to the competent authority for approval.
4.2 CREDIT RISK GRADING:
While providing credit facility to a customer, Bank undertakes many risks among which credit
risk is considered to be the most important one. Bank needs to manage the credit risk inherent in
the entire portfolio as well as the risks in individual credit of transaction. One of the strategies
employed in managing credit risk is Credit Grading of borrower accounts. Credit Risk Grading
framework is essential to avoid the limitation associated with a simplistic & broad classification
of loans informs “good” or a “bad” category. Credit Risk Grading helps a bank to understand
various dimension of underlying risk involved in different credit transaction.
The Risk Grading framework is used for following purposes:
Single point indicator of diverse risk factors of a loan portfolio and talking credit decision in
constant manner.
It‟s a tool for measurement of various risks associated with lending. It provides basis for risk
pricing and fixation of rate of interest on lending to different borrowers based on their credit
rating.
Reveals the weak parameters based on the points scored.
Facilitates the bank to monitor/focus on the weaker areas and follow up with the borrower for
bringing improvement.
To identify the parameters which have improved/deteriorated by comparing with earlier
tatting?
Overall health of the advances
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Basis for setting non-price terms of loans and also present meaningful information for review
and management of loan portfolio.
Assessing the aggregate risk profile of a bank.
4.2.1 NCCBL‟S RISK GRADING FRAMEWORK:
Effective risk management requires an accurate and forward looking estimation of the
probability of default over the next 12 months. It should be noted that Credit Risk Grading is not
a replacement of comprehensive credit appraisal. Credit Risk Grading is a dynamic process for
measuring credit risk to help the sanctioning authority in taking decisions. All credit proposals
whether new or renewal must be supported by Credit Risk Grading. It will encompass the
following two things:
a) Risk grading scorecard and
b) Risk grading sheet
No proposal will be processed until Risk Grading is completed, submitted for approval and the
result is shown in proposal. It is the responsibility of the originating officer to ensure that
analyzes has been carried out with authentic and reliable information.
4.2.2 RISK GRADING SCORECARD:
As per instruction of Bangladesh Bank, Risk Grading Scorecard has been developed for all
exposures of NCCBL (irrespective of amount) other than those covered under consumer and
small Enterprise Financing Prudential Guidelines and also under the Short Term Agricultural and
Micro-Credit. The Score Card will be updated if required. The score of the risk grading
scorecard will be weighted one. These are 5 broad head rating components and separate
parameters have been set to measure borrower‟s position against each component. Score Cards
are tools to determine a borrower‟s aggregate score based on assessment of quantitative and
qualitative factors. Score Cards shall records the Assigned rating through a combination of the
Aggregate Score as well as exercise of judgment. Judgment plays an important role in the
scoring of qualitative factors as well as recommendations made to change the risk rating in case
of disagreement. It should be noted that industry volatility is a key driver in the Risk Grading as
it has been proved that the probability of default is higher in industries with higher volatility.
However, since there is no acceptable industry average of key financials and industry volatility
factor is absent, the matter has not been included in the present Risk Grading Score Card. A
snapshot of Principal Risk Component and Corresponding Parameters and weight assigned to
each Component is as follows:
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SL no. Components Parameters Weight (%)
1) Financial Risk a) Leverage
b) Liquidity
c) Profitability
d) Coverage
50
2) Business Risk a) Turnover of Business
b) Age of Business
c) Business Outlook
d) Technology/Resource
e) Industry Growth
f) Inventory/Receivables
g) Market Competition
h) Entry/Exit Barriers
18
3) Management
Risk
a) Business Experience
b) Expertise of the Management
c) Second line/Succession
d) Team Work
12
4) Security Risk a) Security Coverage (Primary)
b) Security Coverage (FSV)
c) Security Coverage (Location)
d) Support/Guarantee
10
5) Relationship
Risk
a) Account Conduct
b) Utilization of limit
c) Compliance of
Covenants/Conditions
10
The Relationship officer of the Branch will prepare Risk Grading Scorecard in case of new
proposal, renewal and/or enhancement of existing facility, any deterioration in the borrower‟s
business position, any breach of contract by the borrower or as and when he/she feel it necessary.
In addition, aggregate weighted score of the customer is to be affixed in the relevant field of the
Credit Assessment Sheet.
4.2.3 RISK GRADING:
After preparation of Risk Grading Scorecard, concerned Relationship Officer will assign risk
grade to the customer within the following definition of Credit Risk Grading:
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Risk Grade Numeric Grade Definition
Superior-Low Risk 1 Facilities are fully Secured by cash deposits,
government bonds or a counter guarantee
from a top tier international bank. All security
documentations are in place.
Good Satisfactory Risk 2 The repayment capacity of the borrower is
strong. The borrower has excellent liquidity
and low leverage. The company demonstrates
consistently strong earnings and cash flow.
Borrower has well established market and
very good management skill. All security
documentation should be in place. Aggregate
Score of 85 or greater based on the Risk
Grade Scorecard.
Acceptable-Fair Risk 3 These borrowers are not as strong as Grade-2
borrowers, but should still demonstrate
consistent earnings, cash flow and have good
track record. Borrowers have adequate
liquidity, cash flow and earnings, Credit is
normally be secured by acceptable collateral
(stocks/debtors/equipment/property),
Acceptable management. Acceptable parent/
sister company guarantee. An aggregate score
of 75-84 based on Risk Grade Scorecard.
Marginal-Watch list 4 Grade-4 assets warrant greater attention due
to conditions affecting the borrower, the
industry or the economic environment. These
borrowers have an above average risk due to
strained liquidity, higher than normal
leverage, thin cash flow and/or inconsistent
earnings. Borrower incurs a loss, loan
payments routinely fall past due, account
conduct is poor, or other untoward factors are
present. Weaker business credit and early
warning signals of emerging business credit
detected. An Aggregate Score of 65-74 based
on the Risk grade Scorecard.
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Special Mention 5 Grade 5 assets have potential weaknesses due
to conditions affecting borrower, industry or
economic condition and deserve
management‟s close attention. If left
uncorrected, these weaknesses may result in a
deterioration of the repayment prospects of
the borrower. Facilities should be
downgraded to 5 if sustained deterioration in
financial condition is noted (consecutive
losses, negative net worth, excessive
leverage), if loan payments remain past due
for 30-60 days, or if a significant petition or
claim is lodged against the borrower. Full
repayment of facilities is still expected and
interest can still be taken into profits. An
Aggregate score 55-64 based on the Risk
Grade Scorecard.
Substandard 6 Financial condition is weak and capacity or
inclination to repay is in doubt. These
weaknesses may jeopardize the full settlement
of loans. Loans should be downgraded to 6
following Bank Criteria of classification. An
Aggregate Score of 45-54 based on the Risk
Grade scorecard.
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Doubtful and Bad(non-
performing)
7 Full repayment of principal and interest is
unlikely the possibility of loss is extremely
high. However, due to specifically
identifiable pending factors, such as litigation
liquidation procedures or capital injection, the
asset is not yet classified as loss. Bangladesh
Bank criteria of classification should apply.
An Aggregate score of 35-44 based on the
Risk Grade Scorecard.
Loss(non-performing) 8 Assets graded 8 are long outstanding with no
progress in obtaining repayment or in the later
stages of wind up/ liquidation. The project of
recovery is poor and legal options have been
pursued. The proceeds expected from the
liquidation or realization of security may be
awaited. The continuance of the loan as a
bankable asset is not warranted, and the
anticipated loss should have been provided
for. This classification reflects that it is not
practical or desirable to defer writing off this
credit and it is basically worthless asset even
though partial recovery may be affected in
future. Bangladesh Bank guideline for timely
write off of bad loans must be adhered to. An
Aggregate Score of 35 or less based on the
Risk Grade Scorecard.
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CHAPTER FIVE:
CREDIT APPRAISAL
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5.0 CREDIT APPRAISAL
Credit Appraisal is the systematic scrutinizing and evaluation of a potential borrower‟s proposal
for the purpose of sanctioning credit to the person seeking the credit. The sanctioning depends on
the purpose of borrowing, rationality of borrowing, borrower‟s financial capability, capability of
repaying the loan, collateral provided as security and other factors. A close scrutiny, examination
and evaluation are made to reach the decision whether the person should be given credit or not.
Before sanctioning a credit, a proposal is to go through process, which is discussed below.
5.1 CREDIT APPRAISAL
PROCEDURE/LENDING CRITERIA
Commercial /Marketing viability
Technical viability
Financial viability
Social acceptance
These criteria are discussed separately below:
Commercial /Marketing viability
Considerations here are-
Market prospect and potential for the product has to be fully assured at
competitive prices.
Marketing channels existing for the product should be accessible to the
entrepreneurs.
Technical viability
Considerations here are-
Technical process proposed should preferably by a proven one.
The project should be technically sound and environment-friendly.
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Technology transfer in case of borrowed know-how ought to be ensured.
Building should be well planned and well constructed at a suitable location.
Financial viability
Considerations here are-
There should be reasonable debt-equity ratio as determined by the Bank on
individual case basis.
The project should be found viable in financial analysis done by the Bank such as
Ratio Analysis, IRR Analysis, and Break-even Analysis etc.
Economic viability
Considerations here are-
The project should benefit the national economy be creating employment and
increasing income.
Savings/Earnings of foreign currency may give an additional dimension
Social acceptance
Considerations here are-
The project should be socially acceptable, should benefit the society without
creating any social, ethical, environmental, and ecological disturbance or
pollution.
5.2 PROCEDURES OF SANCTIONING
CREDIT
Obtaining a loan application from the customer on bank‟s prescribed form duly filled and
signed by the proprietor/partners/directors.
Submission of all required documents/papers mentioned in the application form.
Visiting the business site of the customer by the bank authority; verifying the particulars,
which are furnished with the application and ascertain of the customer honesty, integrity
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and business dealings directly and through other sources also. Examination of the
turnover/transactions of the account of the customer seeking loan.
Collecting report on borrower and its sister concerns from the Credit Information Bureau
of Bangladesh Bank; obtaining credit report from local bank and financial and credit
institutions.
Preparation of appraisal report for all credit proposals. Following the lending criteria in
appraising advance proposal.
Issue of the sanction letter in duplicate incorporating all the terms and conditions to the
customer with an endorsement of a copy of letter to head office after obtaining Clean
Credit Report and being satisfied regarding land, building and other assets/properties to
be mortgage or hypothecated and prima-facie genuineness and correctness by scrutinizing
the documents, title deeds and other relevant papers and if the sanctioning of loan is
within the discretionary power of the branch. If the limit is beyond the manager‟s power
they will forward the proposal to head office giving specific comments and
recommendation for approval.
Lending Risk is to be analyzed as per prescribed format, which is supplied by Bangladesh
Bank if the credit amount is ten million and above. LRA is to be forwarded along with
the proposal. On receipt of Head Office approval, branch will issue sanction advice
duplicate to the customer and obtain one copy should be preserved with security
documents.
Documentation formalities needs to be completed before disbursement If the customer
accepted the terms and conditions.
5.3 STEPS INVOLVED TO
SANCTIONING A LOAN:
1. The applicant needs to apply in prescribed application such as „Form A‟
2. Then (3) three additional form to be filled up.
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Inquiry form-CIB 1A (Provides such information as amount for fresh loan or
renews the loan.)
Inquiry form- CIB 2A (If the applicant is an institution; all the information to be
provided by the owner)
The inquiry form CIB-3A (Seeks the applicant to supply information of group or
related business concern)
3. Then the applicant gives a list of assets which can be kept as collateral. The applicant will
declare in faith that such assets offered as collateral are owned by the business owner and
are not already kept as collateral to other financial institution against any sanction of loan
or credit limit.
4. Then the bank makes the valuation of fixed assets (to be kept as collateral) to be assessed
and valued by independent inspection services. The inspection company submits the
survey report and provides an independent valuation of the assets that were offered as
collateral.
5. Then the bank will perform a lending risk analysis or LRA. The LRA is a kind of
assessment where some scoring is made on various risks to which the applicant‟s
business or project is exposed. The scoring result is arriving at the level of risks of the
business or project. A detailed discussion or LRA is made later.
6. After the lending risk analysis net worth is calculated by subtracting total liabilities from
total assets. This net worth is calculated both for the organization and for the individuals
including the Managing Directors and Directors.
7. A prescribed form „Form B‟ is to be filled in by case of proposal for loans and advances
for individuals, proprietorship, partnership limited company(private or public), other
bank‟s loan proposal acceptance certificates. If the applicant has received any sanction of
loan or advance from other banks a certificate showing such acceptance of loan proposed
must be submitted.
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5.4 LOAN DISBURSEMENT STEPS
- Accounts must be opened before disbursement of loan in the respective bank.
- Documentation: Conditions--
Rate of interest
Security (Primary and collateral provided should be duly insured)
Personal guarantee of the owner
Execution of Delivery of Promissory Note and other usual charge document
/agreement undertaking
Registered power of attorney in favor of the bank to sell mortgage property
without the consent of the court or the owner of the property
Other conditions- -
Comprehensive Insurance Policy on the property of the company covering FRSD
in the joint name of the bank must be provided.
Submission of Loan Utilization Report, Progress Report, and Annual Accounts as
and when asked for by the bank.
Providing Report on Stock Position, Sales and Production Statement on monthly
basis and also providing Balance Sheet of the Company annually.
Completion of all documentation formalities by the firm and taking of
disbursement within 6 months from the data of sanction letter. Failing to do so
will result in cancellation of the Credit automatically.
Loan is subject to not having any liability with other banks.
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CHAPTER SIX:
CREDIT MONITORING AND
RECOVERY PROCESS OF NCCBL
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6.1 CREDIT MONITORING
PROCESS:
Credit monitoring is a formal program for reviewing all exciting loans regularly, frequently,
critically that is essential to the continued success of banks portfolio. Once the loan is disbursed,
risk remains and continues until the borrowing is fully repaid and the loan should be
continuously watched over. These include keeping track of borrows compliance with Credit
terms, identifying early signs of irregularity and monitoring timely repayments. Steps involved in
monitoring process are as follows:
Daily passed due statement should be generated from the system to another the
relationship to take proactive steps at an early stage. Branch should sent at least weekly
past due statement either by email or courier service to Credit administration department
who in turn place a consolidated statement before additional managing director/
managing director if the system failed to generate the centrally.
Accounts activity of the Credit facility should be monitored critically either relationship
manager frequently or monthly by the CAD officer to understand whether the risk
commensurate with the business. Any exceptions observed by CAD officer should be
reported to Credit administration department, Head Office.
Monthly statement should be prepared with observation for LTR/ LIM/ PAD facilities
and should be reported to Head of Credit Risk Management Division. Exceptions should
be reported to the addition Managing Director/managing director
To ensure that borrowers business is being satisfactorily conducted, physical inspections
are to be conducted half yearly basis by the relationship officer/ relationship manager as
the case may be. Business call report to prepare and to be maintained in Credit file with a
copy to Credit Risk Management Division/ Co-operate Banking Division. Exceptions
should be reported to Additional Managing Director/ Managing Director.
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Large unit, where aggregate facilities is above taka 5 crore would be inspected by head of
Credit Risk Management Division or his nominated executive once in a year but at least
three months before the annual review date.
Borrowers Business or management of Accounts along with covenant mentioned in the
section in the section letter should be reviewed on half yearly basis and exception should
be reported to Additional Managing Director/ Managing Director.
Inventory, aging of receivables and pledged goods, trend in sale and market position of
the goods and deposit of sale proceeds should be monitored closely.
Comparative study of financial statements should be made in order to ascertain whether
the figures matched with the accounts turnover, sales, Profitability, debt servicing,
liquidity and cash flow situation should be reviewed.
Call reports shall be analyzed to ensure that the affairs of the business of the borrowers
are being run on expected line and there is no material change in the status of the
borrower.
It is to be mentioned here that Managing Director may constitute separate body to monitor the
problem accounts closely as identified and the affairs of large accounts.
6.2 EARLY ALERT REPORTING:
As per present system of classification, any continuous loan or demand loan will be considered
as SMA if it remains unpaid for 90 days from the due date. In case of Term Loans with 5 years‟
time limit, if the amount of defaulted installment is equal to or more than the amount of
installments due within 3(three) months the entire loan will be treated as SMA. Despite a
product Credit approval process, loan may still trouble. The reasons and symptoms in respect of
borrower‟s inability to meet its commitment occur, much earlier. The essence of good Credit
management lies in early problem recognition, leading the bank to take corrective measure to
protect asset quality through prompt remedial.
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An “Early Alert Account” is one that has risks or potential weakness of a material nature
requiring monitoring, supervision, or close attention of the management. If such weaknesses are
left uncorrected, they may result in deterioration of the repayment prospects for the asset or in
the Bank‟s Credit position at some future date with a likely prospects of being downgraded to
Grade 5 or worse (Impaired status), within the next twelve months.
Therefore, in order to protect and improve the quality of Bank‟s portfolio, a more pro active
approach needs to be adopted. An early warning system in the form of “Early Alert Account” is
being instituted to cover the gap between Current and SMA categories. “Early Alert Account” is
not a classified account but reflects the weakness in Credit, which requires to be addressed. Also
it requires an assessment of the borrower‟s ability to rectify the problem within reasonable time
frame, and thus improve its position as Creditor.
First and foremost requirement for any or all relationship officers/Managers of the originating
unit are to identify a problem Credit in its early stages by recognizing the signs of deterioration.
Such signs include, but not limited to, the following:
Non-payment of interest or principal or both on due dates or past dues beyond a
reasonable period or recurring past dates.
In Case of Overdrafts, (or Cash Credits of similar facility), no movement in the
account beyond a reasonable period.
Deterioration in financial condition of the client, as gathered from client‟s late
financial statements.
A shortfall in collateral coverage, particularly if the collateral was a key factor in
decision making or the loan was predicted on the sole factor of collateral.
Death, illness or withdrawal/removal of key owner‟s or management personnel
Adverse market report about the company or its principal owners.
The symptoms of early alert shown in Annexure-19 are by no means exhaustive and hence, if
there are other concerns, such as a breach of loan covenants or adverse market rumors that
warrant additional caution, an Early Alert report should be raised.
An account may be reclassified as a regular account from Early Alert Account status when the
symptom, or symptoms, causing the Early Alert classification have been regularized or no longer
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exist. The concurrence of the CRM approval authority is required for conversion from Early
Alert Account status to Regular Account status.
6.3 RECOVERY PROCESS OF
PROBLEM ACCOUNT:
It is important that once a credit is classified it should be monitored and administrated properly
with a clear action plan for recovery/upgrade. Once an account is classified following regulatory
definition or objective criteria by the concerned Relationship Manager/ Branch Managers/ of
independently by the head of Credit Risk Review Department. If the bank feels that legal action
is warranted at any stage, then the account will directly be referred to legal Division in
consultation with Head of Recovery Department and Head of Credit Risk Management Division.
As soon as the account is downgraded to sub-standard status from SMA, the same should be
transferred to the Recovery Department under Credit Risk Management Division, Head office in
the following manner:
Within 7 days of and account being classified/downgraded t Sub-standard (grade-6), shall
be transferred to Recovery department.
Recovery Department would get the copy of the credit files from the Branch (keeping the
original with the Branch) of classified account form formulating necessary action.
Transfer of Account responsibility will take place via a standard format called Classified
Account Transfer form shown in Annexure-17.
Representative of Recovery Department would review the documentation following
Documentation checklist to ensure that all loan documentation is in place.
Representative of recovery department would meet the customer, and if required, review
the stock Report and conduct stock inspection of accounts to arrive at an effective action
plan form recovery/upgrade.
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Representative of Recovery Department will prepare a classified credit review report,
CCR Annexure-18 within 15 days of the transfer. The CCR should be approved by the
Head of Credit Risk Management Division, and copied to the Head of corporate Banking
and to the Branch/office where the loan proposal was originated. This initial CCR should
highlight any documentation issues, loan structuring weaknesses, proposed workout
strategy, and should seek approval for any loan loss provisions that are necessary.
The recovery department of Credit Risk Management Division will manage accounts
with sustained deterioration (a Risk Grade of sub-standard (6 or worse). Sometimes, as
per recommendation of the Credit administration Department and corporate Banking
Division the Management may decide to transfer some SMA Accounts form effective
supervision or EXIT accounts graded 4-5 tp the Recovery Department form efficient exit.
Whenever an account is handed over form corporate banking division/ Relationship
Management to Recovery Department, a Classified Account transfer form (Annexure-17)
will be prepared. Down grading should be done immediate Ely and should not be
postponed until the annual review process.
6.4 REPORTING OF CLASSIFIED
ACCOUNTS:
1. Accounts, which are once classified but not upgraded or recovered, are to be separately
reported on a quarterly basis by Recovery Department of Credit Risk Management
Division to Additional Managing Director and Managing Director.
2. Recovery Department should submit monthly results on recovery status on all existing
and newly classified Accounts to Head of Credit Risk Management Division, Additional
Managing Director and Managing Director.
3. Recovery Department should submit quarterly report of newly Classified Accounts to
Additional Managing Direction/Managing Director
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CHAPTER SEVEN:
SWOT ANALYSIS
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7.0 SWOT (STRENGTH, WEAKNESS,
OPPORTUNITY & THREATS):
SWOT analysis is an important tool for evaluating the company‟s Strength, Weaknesses,
Opportunities, and Threats, it helps the organization to identify the how to evaluate its
performance and scan the micro environment, which in turn would help the organization to
navigate in the turbulent of competition.
7.1 STRENGTH:
INNOVATION:
The major strength of NCCBL is product innovation. They have introduced new product every
year. Their innovative product creates a positive image. In this year they have introduced the
Festival loan for the business man and the salaried person to meet their extra finance during the
Festival period i.e. Eid-ul-Fitr, Eid-ul-Azha, Durga Puza that highly appreciated among the
customers.
TOP MANAGEMENT:
The top management of the bank is a key strength for the NCCBL and the contributed heavily
towards the growth and development of the bank. The top management officials all have
reputed of banking experience, skill and proficiency.
COMPANY REPUTATION:
NCCBL has created a standing in the banking industry of the country chiefly among the new
corners. NCCBL has already established a firm grip in the banking sector having tremendous
growth in the profits and deposits within a phase of five years.
SPONSORS:
NCCBL has been founded by a group of prominent entrepreneur of the country. The sponsor‟s
directors belongs large industrial conglomerates of the country. The giant name in director‟s
list is Nurul Islam, owner of Sanawara Corporation, Abdul Halim the owner of Prime Group.
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MODERN FACILITIES AND ONLINE BANKING:
From the very beginning of the NCC Bank tried to furnish their work surroundings with
modern equipment and facilities. For the speedy services to the customer NCC has installed
money- counting machine in teller counter. The bank has already started online banking
operation.
STRING OF BRANCHES:
From the formative stage NCC tried to furnish their branches by impressive style. These well
decorated branches get attention of the potential customers; this is one kind of strategy. The
Gulshan branch, Dhanmondi branch is also impressive and is comparable to foreign banks.
GOOD CUSTOMER SERVICE:
Good customer services are another major strength of the NCCBL. They provide a one- stop
service. In a highly competitive market the quality of service rendered by the bank to their
valued customers is absolutely vital to ensure growth of both deposits loans and advances.
INTERACTIVE CORPORATE CULTURE:
The corporate culture of NCCBL is very much interacting compare to our other local
organization. These interactive environments encourage the employees to work attentively.
Since the banking job is very much routine work oriented, NCC‟s friendly, interactive and also
lovely environment boosts up the work capability of the employees.
ALLIANCE IN ATM:
ATM is the fastest growing modern banking concept. NCC has launched ATM along with
seven other contemporary banks jointly which gave the product more acceptability.
7.2 WEAKNESS:
ADVERTISING AND PROMOTION:
Advertising and promotion is the one of the weak point of NCC. NCC does not have any
effective truck for aggressive marketing activities. This lacking pushes the bank far behind the
form the other competitor.
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DISGUISED EMPLOYMENT:
Reference appointment is effective in NCC. As a result of this there are many people who are
only drawing salaries at the end of the month but making a minimum contribution towards the
organization. And this is related to the problem of reference appointment.
LIMITED NETWORK:
NCC has limited branches. Now 104 branches are operating over the country. Bank should
open their branches in prime locations. They have to target some effective area in which they
can enhance their profit.
7.3 OPPORTUNITY:
DIVERSIFICATION:
NCC can pursue a diversification strategy in expanding its current line of business. The
management can consider can option of starting merchant banking or diversify into leasing and
insurance. By expending business portfolio, NCC can shrink business risk. Also they can build
some ATM machine for giving extra benefit to customers.
CREDIT CARDS AND TELE BANKING:
These are the new retail banking services provided by the foreign banks. NCC can evaluate the
option of launching credit cards and Tele Banking system.
7.4 THREATS:
CONTEMPORARY BANKS
The contemporary banks of NCC like Prime Bank, Dhaka Bank and Southeast Bank, One
Bank, are its major rivals. They are carrying out aggressive campaign to attract lucrative
corporate clients as well as big time depositor. NCC should remain vigilant about the steps
taken by these banks, as this will in turn affect NCC strategies.
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MULTINATIONAL BANK:
The rapid expansion of multinational bank poses a potential threat to the PCB‟s. Due to the
booming energy sector more foreign banks are expected to operate in Bangladesh. Moreover
the already existing foreign banks such as Standard Chartered and CITI NA are new pursing an
aggressive branch expansion strategy. Since the foreign bank has tremendous financial
strength, it will pose a threat to local banks to a certain extent in terms of grabbing the lucrative
clients.
UPCOMING BANKS:
The upcoming local private banks can also pose threats to the PCB‟s. The govt. has planned to
permit new banks. It is expected that in the next few years more local private banks may
emerge. If that happens the intensity of competition will rise further and banks will have to
develop strategies to compete against foreign banks. Like as Meghna Bank, Jamuna Bank, etc.
DEFAULT CULTURE:
Default culture is very much familiar to our country. For a bank is very harmful NCC has not
faced seriously yet. However the bank grows older it may be ill with this situation.
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CHAPTER EIGHT:
FINDINGS AND
ANALYSIS
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8.0 FINDINGS:
After analyzing the whole report we come up with some finding. Some of the tasks in NCC Bank
do very much traditional. If we compare them with other local banks like City bank, Eastern
Bank, Brac Bank, Prime bank we came to know about this. With the modern computerized
system they make their works easier than the NCC Bank. NCC Bank follows the same old
process to save their data and they do their whole operation manually where other banks are
doing with their computer. Some findings are given below
While working at NCC Bank, Dhakhinkhan Branch, I have attainted to the newer kind of
experience. After the collecting and analyzing of data I have got some findings. Those findings
are completely from my personal point of view. Those are:
Branch Manager Conscious efforts to achieve the targets and knows how to motivate
employees and how to represent the Bank well in the local community.
The employees of the bank are young, energetic, co-operative and friendly. Their
dealings with the clients are co-operative and friendly which create positive perception
about the bank in the clients mind.
The bank uses some modern technology such as: Fax, Telex, and SWIFT. So, their
service is better than most of the bank.
The credit & investment analysts have a strong background in accounting financial
statement analysis, business law and economics along with good negotiating skills. This
lessens the possibility of bad debt.
The loans and deposits of this bank are rising at an impressive rate.
The Customer service of NCCBL is very much impressive than other financial
institution.
Special schemes like consumer deposit scheme, monthly saving scheme etc. are very
popular.
The working environment of the office is very nice.
The bank provided online banking in all branches .The operations of the Bank are
computer oriented to ensure prompt and efficient services to the customers.
Cost of fund is high in this branch.
In NCCBL, customers can open DPS within the first ten days of a month.
The web-site of NCCBL is updated.
NCC Bank Limited should properly advertise and Communicate to public about the
services provided by it. So that, more customers will be attracted.
They save their all kinds of data in papers.
They find the interest suspense account through their computer but manually they check
those out.
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Sometimes very simple work is done by the head office which takes time and make
difficult.
Sometimes verification is done by a new officer which dangerous both for the bank and
the branch office.
All types of loans and their problems and prospects which provided by NCC Bank Ltd
at are given below:
8.1 CC HYPO (CASH CREDIT HYPOTHECATION)
National Credit And Commerce Bank Limited security falls under this type of lending. It is a
continuous credit. It is allowed Linder the categories.
# Commercial lending - when the customer is other than an industry.
# Working capital when the customer is an industry.
Problems of the Cash Credit Hypothecation:
Lengthy documentation procedure. For this reason many customers feel boring to get this
type of loan.
Many customers submit duplicate land documents.
This type of loan amount cannot do for further investment.
Prospects of Cash Credit Hypothecation:
Highly secured loan.
Gain high interest from this type of loan.
Day by day income will be increase for this type of loan.
8.2 CC PLEDGE (CASH CREDIT PLEDGE) UNDER SME
Problems of Cash Credit Hypo under SME:
This type of loan provided only for personal guarantee.
Highly unsecured loan
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If fault, it is difficult to recover.
Credit employee feels tension from this type of loan.
Prospects of Cash Credit Hypo under SME:
Their repayment systems are monthly. As a result after every month loan amount
decreases and also risk decrease.
Repayment is invested in further purposes and bank earns money.
To solve unemployment problem and contribute SME business in Bangladesh.
8.3. OVERDRAFT (SOD)
In this branch three type of SOD:
a) SOD (Financial Obligation)
b) SOD (General)
c) SOD (FDR)
Problems of SOD:
Less interest rate
Prospects of SOD:
Fully secured loan
Against FDR, Savings and Deposits these type of loan are taken.
To help customer in their necessity of loan without condition.
To contribute customers benefit.
To businessman for expansion of their business
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8.4 LOANS AGAINST HOUSE BUILDING:
Problems of loans against house building:
* Documents are not clear
* Difficult to sell mortgage property when needed.
Prospects of loans against house building:
* Highly secured loan
* Repayment can be further investment
* Earn high interest rate
* Contribute on Country‟s development
8.5 REAL ESTATE FINANCING FOR CRB:
Real estate financing for Construction of Residential Building Loan are provided against high
document of land and properties.
Problems of real estate financing for CRB:
• Incorrect document
• Political pressure
• Repayment not pay due time
Prospects of real estate financing for CRB:
• To increase residential building
• To help people for solving accommodation problem
• If fault, can be sold asset.
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8.6 LEASE FINANCING:
Problems of Lease Financing:
Bank cannot proper observation of their asset.
Borrowers often give incorrect statement of asset.
Prospects of Lease Financing:
To help industrial production through the machinery
To help many investor for buying car, vehicle and other equipment
To increase banking income and contribute country‟s development
8.7 SME LOAN
SME means Small and Medium Enterprise.
Problems of SME:
• Not preserve hardly document
• Loan provide easy condition
• Loan receiver get opportunity for cheating
Prospects of SME:
• Supporting SME business in Bangladesh
• Investor are come to invest in SME for easy loan condition
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CHAPTER NINE
RECOMMANDATIONS AND
CONCLUSIONS
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9.1 RECOMMENDATIONS:
Based on findings it can be recommended to progress in future. The recommendations are
disclosed below:
- The investment sanction procedure should be made quicker since competition is very
hard today in the banking industry, it can be done through the creation of sub-department
of investment department who will only be liable for sanctioning investment.
- An NCC bank earns its principal revenue from profit on investment. To avoid investment
risk as much as possible through minimizing adverse selection, before sanctioning any
investment (loan) the officers of the bank have to observe whether every aspect of
principles of lending is filled and other things such as credit requirement, accountability,
prepayment of loans, collections, insurance and other required fields are covered or not.
- An energetic investment recovery unit should also be formed to manage directly accounts
with sustained deterioration of investment. To encourage investment recovery unit
incentive program may also be introduced.
- SME Investment of NCCBL was increasing very rapidly during last five years. The bank
should keep it up in order to make their position stronger and to take them as a role model
as the contributor on SME sector in this country which will inspire others to come
forward.
- The bank provided the maximum amount of investment focusing commercial and
industrial sectors in urban areas mainly on Dhaka Division and Chittagong Division
basis. To help the country‟s development regionally equal and take the bank as amiable
to mass people countrywide, the bank should give more accentuate to make their fund
available as functional to rural based industries and organizations alongside diversified
industries which may act as the factors to minimize the investment risk of the bank.
- In order to lessen the classified investment, interested customers for investment should be
analyzed more cautiously and flawlessly. It can be made by gathering and accumulating
customers‟ information through the online CIB Report or historical activities of the
customers toward investment so that their classified investment will be less.
For the probable solutions of the identified problems ensure better progress to NCC Bank in
future, some necessary steps are recommended bellow on the basis of collected data, observation,
expert staffs opinion and my knowledge and judgment. Banks always contribute towards the
economic development of a country. Compared with other banks NCC Bank Ltd. is contributing
more by investing most of its funds in fruitful projects lending to increase in production of the
country.
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For Cash Credit Hypothecation loan procedure time should be decrease so that
customers get loan easily and quickly. Document justification process can be easy if
employ a lawyer so that quickly justify document and able to provide loan.
For Cash Credit Pledge‟s repayment amount should be further invest and always careful
so that customer can‟t be able to default.
For SOD (Overdrafts) promote customers to do FDR, DPS so that customers take loan
against FDR and DPS. It is fully secured for banks and customers give less interest from
other loan.
For Loan Against House Building Credit officer should check all documents perfectly
so that when will be needed it can be sold.
For Consumer Credit Scheme bank try to increase loan amount so that employee can
buy as they need and feel happy and work hardly.
Real Estate Financing for CRB High rise building increase day by day and also
increase real estate financing for future purpose bank should increase loan and check all
document which are provided by the organization.
For Lease Financing Many fields banks provide lease financing but can‟t able to see all
time their lease asset. So banks should employ extra employee so that he /she can be able
to see lease items.
For SME Bankers should provide loan and go customer business and give advice so that
they increase their business and can give repayment perfectly.
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9.2 CONCLUSIONS
Today‟s business is very competitive and complex. To survive in the related sector the
organization need competitive people and has to take some effective policy. Every country must
have a plan for important role in economic activities. Bangladesh is no exception of that.
Commercial Banks‟ financial development and economic developments are closely related.
That‟s why the private commercial banks‟ are playing significant role in this regard.
The National Credit and Commerce Bank Limited (NCCBL) is one of the best Banks in respect
of service, profitability and strength among the private commercial banks‟ in our country and
also to play a catalyst role in the formation of capital market. National Credit and Commerce
bank Limited bears a unique history of its own.. Its various deposit and credit products have also
attracted the clients-both corporate and individuals who feel comfort in doing business with the
Bank.
The National Credit and Commerce Bank Limited (NCCBL) is now been called a modern bank
that undertakes all its operations at an international standard. Over the years, NCCBL has built
itself as one of the pillars of Bangladesh‟s financial sector and is playing a pivotal role in
extending the role of the private sector of the economy. Each and every bank has got its own
credit policy which generally promulgated on the basis of prevailing countries socio economic
conditions, political and other related aspects from time to time as per guideline of central bank.
NCC Bank limited have formulated own policy indicating the areas of lending complied by
Bangladesh Bank guideline. The main features of credit policy of NCC Bank Ltd focus on the
following areas:
Trade and Commerce
Industry
Leasing Financing
Consumer Financing
Small & Medium Enterprise (SME) Finance.
Agricultural & Agro based Ventures
Housing Loan Scheme
Real Estate & Civil Construction
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Bibliography
Foundation Training Course Book of NCCBL
Volume -1
Volume-2
Reading on International Trade, Finance and Foreign Exchange-
Written by Sk. Harun-Ur-Rashid
Published By Bangladesh Institute of Bank Management
Banking Theory, Law and Practice
Written by Gordon E. & Natarajan K.
Published By Himalayan Publishing House
Foreign Exchange Regulation-
Published By Bangladesh Bank.
Statements of Affairs, NCCBL (O.R. Dhakhinkhan Branch)
Banking Manuals of NCCBL
Annual Report of NCCBL -2010-2014
Import Policy Order 2014
Export Policy Order 2014
Bank Web Site:
http://www.nccbank.com.bd
http://www.bankinforbd.com
http://www.bb.org.bd
Newspaper-
The Daily Star
The Daily Prothom-Alo
