credit operation process of ucbl

Welcome to

Our Presentation

Presentation of Credit Management

Presented to

Mohammed Zahed HossainSenior Lecturer

Dept. of Business AdministrationLeading University, Sylhet

Credit Operation process of United Commercial Bank Limited (UCBL)

Credit Objectives of UCBL

Extends credit facilities at competitive price with prudence and efficiency Encourage loans and advances to income generating activities and thereby creates employment opportunity and help to improve standard of living. Prioritizes welfare oriented banking service

Attaches importance to consumer credit, loans to small businessmen, festival loan, personal loan for salaried persons and any purpose loan.

General Guidelines of UCBL

The Bank will prefer trade financing in the short term (up to 12 months) self liquidating cash flow supported and collateralized trade transactions. The Bank will consider lending short-term working capital finance to well establish entities

The Bank will selectively, on a case-by-case basis, carefully approve term loans

The Bank will, on a case-to-case basis, approve disclosed participations in syndications.

The Bank will consider financing construction contractors.

Types of Credit of UCBLLoan & Advance

Term Loan Continuous Loan

Demand Loan

Term Loan

Short-term Loan

Mid Term Loan

Long Term Loan

Continuous Loan

Over Draft (OD)

Secured OD

Temporary OD

Cash Credit (CC)

CC Hypothecation

CC pledge

Credit Approval Process of UCBL

Guided by some basic principles:

Prepared a concise and objective assessment of risks regarding lending money to the potential borrower by the Relationship Management Team or Corporate Division, Head Office.A credit proposal may be defined as:

• Initial Credit Proposal • Annual Credit Proposal • Interim Credit Proposal

Credit Proposal

Identification NumberEach borrower would have a unique Loan Identification

NumberThe identification number will consist of three parts: • Three digit Branch Code, •Four digit Unique Serial Number and •Four digit Year

Credit Approval Process of UCBL (Contd.)

Time Frame for DecisionFurther information regarding a particular credit proposal shall

have to be communicated in writing to the customer within 5 days from the date of submission .Decision of declining a credit application shall have to be communicated to the customer by the Relationship Team within 15 days from the date of receiving all information from the customer. Reporting ApprovalsCredit Executives at Branch level should report all credit facilities sanctioned by him/her during the month in the prescribed form

Review of ApprovalThe Head of CRMD will review at least 10% of total approval of an individual executive

Revision of Credit DecisionAny credit proposal declined by Credit Risk Management Division

may be placed before next higher authority for reassessment/review

Compliance to RegulationAny credit approval/sanction shall be subject to the compliance of

Bank’s Credit Policy as well as banking regulations Credit Committee

Corporate Banking Division place Credit proposals after preliminary evaluation and making necessary adjustment before the Credit CommitteeCredit Risk Review Department of CRMD will place their observation before the Credit Committee concerning risk assessment on different aspects of the proposal

Form Branch Credit Committee to review the Credit proposal which fall under the delegated power of Branch incumbent

Credit Approval Process of UCBL (Contd.)

Steps in Credit Approval Process Step 1

Collect & fill Credit Application form by the customer

Submits the filled in credit form along with required papers to the relationship officer of Branch/Corporate Division, Head Office/website Step 2 Relationship Officer scrutinizes the credit application form

Make a preliminary assessment on creditworthiness of the potential borrower

A refusal letter to be sent if found not credit worthy

Relationship Officer will forward the application to the concerned RM if proposal is found acceptable

Step 3 RM along with RO visits potential clients’ business premise

physically RM negotiates about the structure of the proposed credit RM assess the value of the security to be offered and prepared valuation report RM summarizes all these information in the pre-sanction inspection Report/Call Report/Visit Report & send to Corporate Division, Head Office RO collects ‘CIM Inquiry Form’ from the customer & send it to CAD of Head office

Step 4 Head of Corporate Division or assigned executives assess

credit proposal and may contact with RM or directly to the customer for any queryHead of Corporate Division communicates their decision to the RM in fine.

Steps in Credit Approval Process (Contd.)

Step 5 CAD on receipt of the request letter from the branch will send

CIM Inquiry Form to BB CAD will also send CIB report immediately by email/courier service to the concerned RO Everything may be closed if adverse CIB report is received & thus a letter of regrets would be sent to the customer

Step 6 If clean CIB report is received, RO originates a formal credit

proposal in prescribed format with recommendations of the RM

The proposal is to be sent to the Corporate Banking Division, Head Office & a copy to the Credit Risk Review Department of CRMD.


Step 7 Corporate Banking Division, Head Office after modifying place

the proposal with recommendation of Head before Credit Committee. Head of Credit Risk Review Department of CRMD or his delegated authority may report his observation in writing/verbally before credit committee

Credit Committee will analyze the proposal & if found viable recommend for approval to the appropriate authority. Corporate Banking Division will prepare Memo mitigating the weakness/risk factors and incorporating suggestion of the Credit Risk Review Department as well as Credit Committee.

On receipt of memo Head of Credit Risk Review Department will distribute to credit officer to review, scrutinize and analyze and back to Head.

Step 8


If the final memo is acceptable, among other things consideration it will be recommended by CRMD for approval

if the proposal exceeds Managing Director’s delegated authority, s/he recommends it to the Executive Committee of Board of Directors/full BoD.

if the facility is approved by the appropriate approval authority, Corporate Banking Division will send the copy of approval memo to CRMD Credit Risk Review Department issues Sanction advice to the Branch along with a documentation checklist spells out indicators before disbursement

Step 9


Sanction Letter to the customer to be issued under dual signatures from the originating Branch.

Step 10

Preferably, Relationship Manager and Credit Administration Officer of the Branch should sign on the Sanction Letter.


Disbursement Process

To minimize the risk Relationship Department and Disbursement Authority shall be separate from each other.

Separation of Authority

each type of advances requires a different set of documents all the terms and condition and securities are written and signed by the borrower

specifies rights and liabilities of both the banker and the borrower

Separation of Authority

Signing Documentation Check List Deferral of

Documentation Disbursement Authority

Credit Monitoring ProcessFollowing are sequential steps for controlling and monitoring of the

loan pursued by the credit department of UCBL

Controlling & Monitoring

Reporting & Communication

Reminder

Formal Letters Telephone Meet with Client

Social Pressure

Legal Notice

Legal Actions

THANK YOU!

credit operation process of ucbl

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