saif's internship report on credt management of janata bank and dhaka bank limited

8/13/2019 Saif's Internship Report on Credt Management of Janata Bank and Dhaka Bank Limited

1/72


2/72

Credit Management of Commercial

Banks( A Comparative Study of Public andPrivate sector

banks.)

Prepared for:Mr. e!an Ma"bub #ossain

epartment of A$S%aculty of Business Studies

&niversity of "aka

Prepared by:

Md. Saiful $slam (Saif)BBA 't"Batc"

oll*++epartment of A$S&niversity of "aka

$nterns"ip eport


3/72

Submitted ,o

Accounting and $nformation epartmentUNIVERSITY OF DHAKA

Mr. Dewan Mahbub Hossain

Department of AISFaculty of Business Studies

University of Dhaa

Subject: Letter regarding subissi!n !" Interns#i$ Re$!rt !n %redit &anageent !"

%!ercia' (an) *A %!$arati+e Stud, bet-een $ri+ate .

/!+ernent sect!r (an)s01

Dear Sir!

Here is the report on 2Credit Management of Commercial Bank (A Comparative Study

between private & Government sector Banks)3 you ased me to conduct on the

be"innin" of the Internship.

In this assi"nment! I have tried to focus some ey aspects of credit mana"ement of

Ban Services. Here I show how here I use different tools of credit mana"ement of

commercial Bans.

I appreciate havin" this assi"nment. I prepared this assi"nment with sincerity and

serious effort. #han you for providin" me the opportunity to prepare this. I am really"rateful to you for "ivin" me the scope to prepare this report under your observation. I

have en$oyed preparin" this report and presented it for your $ud"ment.

Sincerely yours!

&d0 Sai"u' Is'a *Sai"1

BBA %thBatch

&oll'())

Department of AISUniversity of Dhaa


4/72

Ackno!ledgement

It*s a "reat pleasure for me to wor with the report based on a topic 2Credit

Management of Commercial Bank (A Comparative Study between private & Government

sector Banks)3which is very much si"nificant for economy. I hope worin" on this

topic will help me to "ather various e+posures to practical field. So! at the very

be"innin"! I would lie to e+press my "ratitude to almi"hty Allah for whose indness

I am sound mentally and physically enou"h to prepare this report.

I wish to e+press my heartiest sense of "ratitude! sincere appreciation to my

honorable teacher Mr. Dewan Mahbub Hossain! Associate ,rofessor! Faculty

of Business Studies whose support and advice was instrument in preparin" this

report.

#hen I would lie to than the Dhaa Ban -imited authority to "ive me this

opportunity to wor there. ithout their support as well as help this paper

could never have been completed.

I would lie offer a special than to Mr.Md.Abdul Basir Hasu! senior officer!

Advance Division Dhaa Ban -imited. Dhanmondi Branch.

Here I cannot but state some of the person*s name who really helped me lots while

preparin" the report with inspections and ideas. I would lie to than Mr. Abdullah

Al Mahmud Shawon. MBA(6th batch).DU. and Nilufar Yasmin.

BBA. (7thbatch).DU.


5/72

-ecutive Summary

Internship pro"ram is the pre're/uisite for the "raduation in BBA. 0lassroom

discussion alone cannot mae a student perfect in handlin" the real business situation1

therefore! it is an opportunity for the students to now about the real life situation

throu"h this pro"ram. A report has to be built for the university and or"ani2ation

re/uirement. #he topic of my report is 30redit Mana"ement of 0ommercial Ban 4A

0omparative Study between private 5 6overnment sector Bans78. #he main purpose

of the report becomes very clear from the topic of the report. #he report discusses

about the credit mana"ement of private 5 6overnment sector commercial bans and

compare with each other. For comparin" between private and "overnment sector

commercial bans I use Dhaa Ban -imited as the sample of private sector

commercial bans and 9anata Ban as the sample of "overnment sector commercial

bans.

Both the bans 4public and private sector7 in our country are under some "eneral

special "uidelines of the central ban framed for the banin" system as a whole and

for bans of individual sectors. #he concept of private sector banin" in our country

is not so old and private sector bans are now "ivin" more emphasis to create a

constructive and meanin"ful competition with the nationali2ed commercial bans.

#his study maes an attempt to cover within its scope almost all the si"nificant

aspects of the credit operations of the selected bans. #he rest of the study is

or"ani2ed as follows'

0hapter: ;= branches in Ban"ladesh and also > branches out side of the

country and ((


13/72

I*d lie to than all the employees of DB-! Dhanmondi and Head

Cffice for their wholehearted co'operation and arran"in" time to help

me to mae this report properly in all these days of my internship

period! when they were so busy. But as it was a new branch! they were

not able to provide me much documents and papers! as they and me

would lie. Cn the way of my study! I have faced the followin"

problems that may be terms as the limitations shortcomin" of the

study.

Budgeted times for t"e study)

#he first obstruct is time itself. Due to the time limitation! the scope

and dimension of the study has been curtailed. As the time limit was

assi"ned for submittin" the report was very short! it was not possible to

spend sufficient time for the study.

ata $nsufficiency)

It was very difficult to collect data! which is very essential for

interpretation! because this branch of DB- was newly established.

#herefore! it was not possible to supply my topic related data. Cn the

other hand 9anata Ban is very much restricted for provide sufficient

data for my study. #hey did not help me by "ivin" the sufficient data.

-acs of records! sufficient boos! publications! facts and fi"ures

narrowed the scope of accurate analysis and interrupted the ways tomae the report more useful and attractive.

Poor 6ibrary %acility)

Most of the commercial bans have itsE own modern! rich and wealthy

collection of hu"e and various types of Banin" related Boos!

9ournals! Ma"a2ines! ,apers! 0ase Studies! #erm ,apers! Assi"nments

etc But the library of Dhaa Ban -imited is not well ornamented.


14/72

C"apter:/1

Bank overvie! B6 7 8B

"aka Bank 6td. at a glance:

Dhaa Ban -imited is the leadin" private sector ban in Ban"ladesh offerin" full

ran"e of ,ersonal! 0orporate! International #rade! Forei"n +chan"e! -ease Finance

and 0apital Maret Services. DB- is the preferred choice in banin" for friendly 5

personali2ed services! cuttin" ed"e technolo"y! tailored solutions for business needs!

"lobal reach in trade 5 commerce and hi"h yield on investments! assurin" +cellence

in Banin" Services.

DB- is a scheduled ban that was incorporated under the 0ompany Act (>! started

its operation on 9uly () with a tar"et to play the vital role on the socio'economic

development of the country. Aimin" at offerin" commercial banin" service to the

customers* door around the country! the DB- established


15/72

ithin this short time DB- has been successful in positionin" itself as pro"ressive

and dynamic financial institution in the country. #his is now widely acclaimed by the

business community! from small entrepreneur to bi" merchant and con"lomerates!

includin" top rated corporate and forei"n investors! for modern 5 innovative ideas

and financial solution.

Capital Base:

Authori2ed 0apital : DB# (;;;.;; million.

,aid up 0apital : DB# ??>.;; million 4=(.(7

Mission Statement:

#o be the premier financial institution in the country providin" hi"h /uality products

5 services baced by latest technolo"y and a team of hi"hly motivated personnel to

deliver +cellence in Banin".

9ision Statement:

At Dhaa Ban! we draw our inspiration from the distant stars. Cur term is committed

to assure a standard that maes every banin" transaction a pleasurable e+perience.

Cur endeavor is to offer you ra2or sharp sparle throu"h accuracy! reliability! timely

delivery! cuttin" ed"e technolo"y! and tailored solution for business needs! "lobal

reach in trade and commerce and hi"h yield on your investments.

Cur people! products and processes are ali"ned to meet the demand of our discernin"

customers. Cur "oal is to achieve a distinction lie the luminaries in the sy. Cur

prime ob$ective is to deliver a /uality that demonstrates a true reflection of our vision'

+cellence in Banin".

Slogan"+cellence in Banin".


16/72

Motto:#he ban will be a confluence of the followin" three interests:

Cf the ban : ,rofit ma+imi2ation and sustained "rowth.

Cf the customer : Ma+imum benefit and satisfaction.

Cf the society : Ma+imi2ation of welfare.

DB- has


17/72

Management $nformation System:

Since its $ourney as commercial ban in () DB- has been layin" "reat emphasis on

the use of technolo"y. It has "one to online operation system since = branches in Ban"ladesh and

also > branches out side of the country and ((


18/72

4ationali2ation7 order (%


19/72

#o be the lar"est! stron"est! innovative and service en"ineerin" commercial ban.

Motto:#he ban will be a confluence of the followin" three interests:

Cf the ban : ,rofit ma+imi2ation and sustained "rowth.

Cf the customer : Ma+imum benefit and satisfaction.

Cf the society : Ma+imi2ation of welfare.

Performance 2% 8B:

9anata Ban is the second lar"est commercial ban in Ban"ladesh. #he aim of is to

actively participate in the socio'economic development of the nation by operatin" a

commercially sound banin" system. It provides credit to deservin" borrowers and at

the same time protect depositor*s interest.

9alues of 8B:

0ustomer focus

Inte"rity

#eam wor

&espect for individual

Guality

&esponsible citi2enship.

%oreign correspondents:


20/72

9anata Ban has already established a worldwide networ and relationship with

international banin" throu"h its > branches in u.a.e. two subsidiaries 3 9anata

+chan"e 0ompany s.r.l.8 in Italy and ((


21/72

C"apter:4Credit isk Management

Policy B67 8B

Credit isk Management Policy of B6:

$,2&C,$2:

0redit &is Mana"ement ,olicy for Dhaa Ban -td. has been prepared in

accordance to the ,olicy 6uidelines of Ban"ladesh Ban*s Focus 6roup on 0redit 5&is Mana"ement with some chan"es to meet DB-*s internal needs.


22/72

0redit &is means the un'certainty to meet financial obli"ations as per a"reed terms

by the borrowers durin" the tenure of the credit facilities. For maintainin" steady

"rowth rate and economical development of the country! Bans and financial

institutions are re/uired to man"e 0redit &is properly. 0redit ris arises from the

facilities e+tended to corporate 5 individuals by the financial institutions.

0redit &is to be mana"ed in such a process that the ban can minimi2e its losses for

payment of e+pected dividend to the shareholders. ith the introduction of Fle+ cube!

DB- has the ability to capture all ey customers* data! ris mana"ement and

transaction information includin" Forei"n #rade 5 Forei"n +chan"e.

#he purpose of this document is to provide directional "uidelines that will improve

the ris mana"ement culture! establish minimum standards for se"re"ation of duties

and responsibilities! and assist in the on"oin" improvement of DB-*s Ban.

#he "uidelines have been or"ani2ed into the followin":

*. P26$C;


23/72

Approval ,rocess

0redit Administration

0redit Monitorin"

0redit &ecovery

#he "uidelines were prepared and endorsed by senior credit e+ecutives from private

sector! forei"n and nationali2ed commercial ban operatin" in Ban"ladesh. #hey are

intended for use in the corporatecommercial banin" businesses. DB- also su""est to

follow these "uidelines for DB-*s Ban.

All Branch Mana"ers and 0redit Cfficers must be conversant with the "uidelines and

ensure that the rules are strictly observed as hi"hli"hted in this policy.

*. P26$C;


24/72

-oan Structure 4#enor! 0ovenants! &epayment Schedule! Interest7

Security Arran"ements

Any other riss or issue

&is tri""ers 5 action plan'condition prudent! etc.

isk


25/72

Ban already has a se"re"ated internal auditcontrol department char"ed with

conductin" audits of all branches.

5. MAA


26/72

#he followin" dia"ram illustrates the approval process:

ecommended elegated Approval Aut"ority

6evels:

Branch Mana"er #.().;; lac to #J.(.;; crore accordin"

to desi"nation of Branch Mana"er 5

ature of advances

0redit 0ommittee #.


27/72

Disbursements under loan facilities are only to be made when all security

documentation is in place. 0IB report should reflectinclude the name of all the

lenders with facility! limit 5 outstandin". All formalities re"ardin" lar"e loans 5

loans to Directors should be "uided by Ban"ladesh Ban circulars 5 related section of

Banin" 0ompanies Act. All 0redit Approval terms have been met. A sample

documentation and disbursement checlist is attached asAppendi !! which ban will

use to control disbursements

Custodial uties:

Appropriate insurance covera"e is maintained 4and renewed on a timely basis7 on

assets pled"ed as collateral.

Security documentation to be held under strict control! preferably in loced

fireproof iron'safe at branches under dual custody.

Compliance e=uirements:

nsure all e+cess 5 e+ceptions are approved from the appropriate credit discretion

level.

All re/uired Ban"ladesh Ban returns are to be submitted in the correct format in

a timely manner.

Ban"ladesh Ban circularsre"ulations are to be maintained and advised to all

relevant departments to ensure compliance.

All third party service providers 4valuers! lawyers! insurers! 0,As etc.7 are to be

approved. -ist of -awyers to be enlisted and approved and circulated accordin"ly.

Credit Monitoring:

#o minimi2ed credit losses! monitorin" procedures and systems should be in place

that provide an early indication of the deterioratin" financial heath of borrower. At a


28/72

minimum! systems should be in place to report the followin" e+ceptions to Head

Cffice! 0redit:

,ast due principal or inters payments! past due trade bills! account e+cesses! and

breach of loan covenants:

-oan terms and conditions are monitored! financial statements are received on a

re"ular basis! and any covenant breaches or e+ceptions are referred to HC 0redit

for timely follow'up.

#imely corrective action is taen to address findin"s of any internal! e+ternal or

re"ulator inspectionaudit.

All borrower relationshipsloan facilities are reviewed and approved throu"h the

submission of a 0redit Application at least annually.

Credit ecovery:

#he &ecovery Unit of Branch should directly mana"e accounts with sustained

deterioration 4a &is &atin" of Sub Standard or worse7.

#he &U*s primary functions are:

Determine Account Action ,lan&ecovery Strate"y

,ursue all options to ma+imi2e recovery! includin" placin" customers into

receivership or li/uidation as appropriate.

nsure ade/uate and timely loan loss provisions are made base o'n actual and

e+pected losses.

P6 Account Management:


29/72

All ,-s should be assi"ned to an Account Mana"er within the &U! who is

responsible for coordinatin" the action planrecovery of the account! and should serve

as the primary customer contact after the account is down"raded to substandard.

Procedures:

&ecovery Units should ensure that the followin" is carried out when an account is

classified as Sub Standard or worse:

Facilities are withdrawn or repayment is demanded as appropriate. Any drawin"s

or advances should be restricted! and only approved after careful scrutiny and

approval from HC 0redit.

0IB reportin" is updated accordin" to Ban"ladesh Ban "uidelines and the

borrower*s &is 6rade is chan"ed as appropriate.

-oan loss provisions are taen based on Force Sale Kalue 4FSK7

-oans are only rescheduled in con$unction with the -ar"e -oan &eschedulin"

"uidelines of Ban"ladesh Ban. Any reschedulin" should be based on pro$ected

future cash flows! and should be strictly monitored.

,rompt le"al action is taen if the borrower is uncooperative.

on Performing 6oan (P6) Monitoring:

A 0lassified -oan review 40-&7 should be prepared by the &U Account Mana"er to

update the status of the actionrecovery plan! review and assess the ade/uacy of

provisions! and modify the ban*s strate"y as appropriate. #he proper authority

should approve the 0-& for ,-s.

P6 Provisioning and 0rite 2ff:


30/72

#he "uidelines established by Ban"ladesh Ban for 0IB reportin"! provisionin" and

write off of bad and doubtful debts! and suspension of interest should be followed in

all cases. &e"ardless of the len"th of time a loan is past due! provisions are to be

raised a"ainst the actual and e+pected losses at the time they are estimated. #he

approval to tae provisions! write offs! or release of provisionsup"rade of an account

should be restricted to the 0redit 0ommittee+ecute 0ommittee or Board.

Credit management policy of 8anataBank:

Accounting policies related to Advances:

4a7 Interest on advances

i. Interests is calculated on classified loans and advances as perBan"ladesh ban circulars and ept in interest suspense account and

credited to income on reali2ation.

ii. Interest is calculated on a daily product basis but debited to the party*s

loan account /uarterly. o interest is char"ed on bad and loss loans

advances from the date of filin" money suits a"ainst the borrowers.

4b7 ,rovision for bad and doubtful debt

6eneral and specific provisions a"ainst bad and doubtful loans and advances are

made in the boos of the Ban*s head office on the basis of information

furnished by the branches.

4c7 Interest and discount income


31/72

Interest on loans and advances! investment and other assets and discount income are

stated at "ross amount as per re/uirement of B&,D circular L (> dated


32/72


33/72


34/72

It is necessary to "rant credit to any individualfirm"roup more than ) of paid up

capital! syndication is necessary with other state owned ban and at least one private

ban.

6imit of credit of large sum:

0redit of () of ban total capital is called credit of lar"e sum. o ban can offer

more than () of its capital to any individual! firm or "roup.

isbursement of credit budget and sect oral

distribution:


35/72

Credit Budget 5//4

Prevention of credit centrali?ation and

diversification of credit:

,articulars

Balance

as at

=(.((%(.)> ((;=.>% (;.% ((.?@ >@;;.;; >%>).;; (()@.>% (;.%

Import

-oan (()>.>; ?;>%.?@ ?(?%.; (;=>.(@ (;.( ?;;;.;; )?;.;; (;%>.(@ (;.(%

Industry

-oan (>>).) (@=.


36/72

0redit should be distributed amon" various sectors and it should be diversified in the

followin" ways:

one based diversification:

More credit is distributin" in the sector of a"riculture! electricity and others in

underdeveloped 2one. Specially e+port oriented a"ro based industry is "iven priority.

Sector based diversification

0redit will be "iven to the conventional sectors as usual but ban will adopt cautious

step in "ivin" credit to the sectors which are unprofitable and risy. 0redit will not

concentrate in sin"le sectors.

0omparatively small and short term credit will be "iven priority.

A"ro based industries will be "iven priority. #he followin" a"ro based industries

are included in the prior list.

Bread and biscuits! Semai! -accha! chanachur! nuddles etc.

Ata! flour and su2y industry.

&ice! fried rice! beaten rice industry.

Mass room and spirulina processin" industry.

Starch! "lucose de+trose! producin" industry.

Mild processin" industry.

,aper processin" industry.

Shrimp and other fish processin" industries for e+port.

0old stora"e.

,ly wood.

A"ro product processin" industries.

-panding and organi?ing eport trading:


37/72

+port treadin" will be "iven priority in distributin" credit interest rate has been

hu"ely reduced. #he present interest rate is %

Conventional sector:

,revailin" "eneral credit! import e+port loan! industrial credit! rural credit! a"ricultural

credit and other will be contained.

Sectors of priority:

A"riculture and rural sector.

+port oriented industries.

Industrial term loan.

e! sectors:

Fundin" facility to woman entrepreneurs.

9ob holders.

0yber cafe credit.

0omputer.

Disable credit.

asy &eceivable consumers credit loan.

Small power plant.

Banded Sectors:

Military e/uipmenteapons finance! hi"hly levera"ed transactions! finance of

speculative investments! lo""in"! mineral e+tractionminin" or other activity that is

ethically or environmentally sensitive! lendin" to companies listed on 0IB blac'list

or nown defaulters! counterparties in countries sub$ect to U sanctions! share


38/72

leadin"! tain" an e/uity stae in borrowers! lendin" to holdin" companies! Brid"e

loans relyin" on e/uitydebt issuance as a source of repayment.

Competitive $nterest ate:

#o mae our e+portable product compete in the international maret! rate of interest

has been reduced. Moreover interest rate of all inds of credit has been reduced to

increase the flow of credit.

Assessment of credit c"aracteristics:

0redit should be analy2ed in term of its nature. -on" term credit would be reduced

"radually and term loan should be e+panded.

ecentrali?ation of aut"ority of credit

distributors proper monitoring:

0redit distribution authority has been decentrali2ed and as a result flow of credit has

increased.

2bservation and recovery of loan:

#o recover loan plan has been made in each branch. 0lassified loan will be reduced.

#he followin" steps are taen:

Seminar.

,aca"e reward.

#hreat for dissatisfactory result in credit handlin".

Mobile team.

,roper application of law.

arly alert process.


39/72

C"apter:/+

%und $nvested By ,"e

Selected Banks

$ntroduction:

,roper utili2ation of fund is essential behind the success of a ban. #he nature! pattern

and allocation of the sample bans! invest able resources is the main point of my

interest in this chapter. #he classification of the bans advances in to! lon"! short and

medium! classification on the basis of allocation to various economic sectors and

economic purpose etc .0omparative analysis has been made with respect to their

recovery performances! pattern of default.

Both the bans under study have been en"a"ed themselves in e+tendin" lon"! medium

and short term loans to various economic sector in the country. As a nationali2ed

0ommercial Ban 9anata Ban e+tend its credit pro"rams all over the economy such

as a"ricultural credit pro"ram! "eneral trade and commercial financin"! because

9anata Ban tries to achieve si"nificant profit from its operations and also to improve

the economic contributions of the "eneral public in the country. Cn the other handDhaa Ban -td. because of it*s absolutely profit earnin"s motive always e+tends its

credit pro"ram to profitable sectors only which are comparatively low ris and ris

free. #he comparative advance distributions of the both bans are "iven below.

-conomic Sector !ise distribution of 6oans

7 advances of 8anata bank:


40/72

Followin" the "uidelines of Ban"ladesh Ban! credit facilities have been e+tended to

productive and priority sectors. #he outstandin" advance of the ban is t. (>?.%;

crore on =(stDecember


41/72

Ec!n!ic sect!r -ise distributi!n !" '!ans and ad+ances during t#e ,ear *5664756681

9ANATA (ANK *N%(1

*Ta)a in cr!re1

Sources:

(. Statistic Department 9anata Ban


42/72

-conomic Sector !ise distribution of 6oans

7 advances of "aka bank limited:#he outstandin" advance of the ban is t. ? crore on =( stDecember


43/72

From the above tables we see that DB- was very much interested to "o throu"h on

short term commercial and trade loans and advances. #hey are also not e+tendin"

their credit co'operation in the a"ricultural sector as well as Industrial term lendin".

#he other*s classification of DB- credit pro"ramme includes mainly the credit for

+port e+pansion. Bedises! 9anata Ban too participation in all aspects of the

economy whether profitable sector or not.

ature !ise distribution of loans and

advances of 8B6 7 B6

Nature -ise distributi!n !" '!ans and ad+ances *5664756681

*Ta)a in cr!re1

Sources:

(. Statistic Department 9anata Ban.

>=;.?@ ?;(.== >%=.@%

DB- >.%@ (;=.? >).? %>. (?)=.;

@=%.>= ?%?.%; ?=?.%;

DB- @.?( (( 2199.46


44/72

Both 9B and DB- +tend their credit pro"rammes under various terms and

conditions. 0ash credit refers to the "rantin" of credit by the bans to its customers

for a lon" period and for a lar"er amount. It is also a seasonal borrowin" renewed

each season of year. #he ban places the a"reed amount of advancer to the credit of

the customers account "ains some securities. ven thou"h the ma+imum amount to be

advanced is credited to the customers account! the ban chares interest only on the

amount actually withdrawn by the customers. Both the bans e+tend financial

accommodation to their customers who are already operatin" current accounts with

them throu"h overdraft1 -IM: and other facilities. Cther facilities includes bills

purchased and discounted both 4forei"n and local bills7 etc.

$nstitutional Sector !ise distribution of %und:


45/72

F'!- !" L!ans and Ad+ances t! ub'ic and ri+ate Sect!r *5664756681

4#aa in 0ores7

Sources:

(. Statistic Department 9anata Ban.


46/72

As a nationali2ed commercial ban 9anata Ban invests a lar"e portion of its funds to

public sector1 thou"h it has a notable participation in the private sector trade and

business also. Besides as a private ban and also a profit motive ban DB- always

avoids public sector investment as far as possible. From the above table we can see

that in avera"e >> of total advance of 9anata ban is in public sector and )? in

private sector. Cn the other hand in avera"e of total advance of Dhaa Ban

-imited is in public sector and ( in private sector. So from here we can say that

9anata Ban "ive more emphasis on the public sector. But in the recent years! DB-

taes some interest in public sector investment.


47/72

ural Credit> Micro -nt. 7 Special program

financing

B; 8anata bank :

As nationali2ed commercial ban it has a social responsibility to improve the

financial condition of the poorunemployed people. ith a view to perform that

social responsibility! ban has initiated rural credit pro"ram since (%>. ow

under this rural credit portfolio there are == products. Information related to

important products under this pro"ram are shown below:

Sl ame of the products o. of -oanees Cutstandin"

#aa'.@;

;= 0redit pro"ram for

mployees

) Financin" oman

ntrepreneurship

@;.%;

;? 6haroa ,ro$ect


48/72

&aj!r L!an r!gras !" 9anata (an) and D#a)a (an) Liited

C"apter:/@

9anata (an) D#a)a (an) Liited

ID% ID%

(. 9ute Miles

. #anneries. tc

A/RI%ULTURAL %REDIT A/RI%ULTURAL %REDIT(. Irri"ation e/uipment.

. Su"ar cane cultivation.

). Fertili2er Dealers -oan.

?. Salt 6rower*s -oan. tc.

(. Fisheries development.

. &eal state.

). Cverseas and Forei"n #rade and bills.

?. Cthers.

(. #rade and 0ommerce.

. ,ersonal and ,rivate -oans.

). Cthers.


49/72

Credit Comparison 7

Analysis.

Percentage of ma3or credit program as

against total outstanding credit of

8anata Bank: As at 1*st ecember 5//+.

9ute industries' ?.@@

9ute trade' .;

#annery' =.;(

Steel 5 en"ineerin"' .@)

#ea(' .(;

Su"ar mills' .>

House buildin"' ?.>>

&ural credit' %.=%

Brics' .%;

0old stora"e' .(=

Food' (.;

+port credit' .;>

Import credit N


50/72

Grap"ical presentation is given below#

ercentage !" aj!r credit $r!gra as against t!ta' !utstanding credit !" 9(

Percentage of ma3or credit program as

against total outstanding credit of

fig-6.1

1 2 3 4 5 6 7 8 9 10 11

12 13 14 15 16 17


51/72

"aka Bank 6imited: As at 1*st

ecember 5//+.

A"riculture '.;@

Industrial term lendin"' ().;=

orin" capital'%.>=

+port '?.);

#rade and commercial lendin"'=(.;

Special pro"ram'(;.)(

Urban housin"').


52/72

ercentage !" aj!r credit $r!gra as against t!ta' !utstanding credit !" D(L

eposit Advance atio:

ormally bans are directed to invest not more than %) of their total available li/uid

fund. But this is not a hard and fast rule in the sense that if Ban"ladesh Ban is

satisfied about their li/uidity position then the ban may invest more then that limit.#he deposit advance ratio indicates the bans usual performance in respect to their

fund utili2ation because idle fund always incurs costs. #he deposit advance ratios of

both the bans have decreased in the year as compared to the previous years.

Tabular presentation is given below:

De$!sit Ad+ance Re'ati!ns#i$s !" 9( and D(L

Ta)a in i''i!n


53/72

>. Annual &eport ear ended


54/72

%[email protected]

-mployee Advance atio:

#his ratio shows human resource mana"ement efficiency as compared to the

utili2ation of available fund. #his is one of the most important measures of bans fund

allocation efficiency. #he ratio shows the proficiency in "eneral rather specific. #he

employee'advance ratio of both the selected bans is shown in the followin" table:

$abular presentation is given below#

E$'!,ee7Ad+ance Re'ati!ns#i$ !" 9( and D(L


55/72

#aa in million


DB- /B

%ig @.4

emarks:

#he human resources 4H&7 of DB- are better set for the achievement of the

or"ani2ational "oals. #he position of per employee loans and advances is very much

Ban ,articulars () (;? (() )=< )?@ ?(?

&atio (=.==


56/72

satisfactory and the ratio increased "radually. ,er employee advances of DB- in

#


57/72

#aa in million


%ig: @.+

ame

of the

Ban

,articulars .?) ((.%@ (


58/72

C"apter: /'ecovery of advances

$ntroduction:

#he most important part of sound credit mana"ement is of disclosin" the recovery of

loans and advances! problems thereon defaulter patterns! provisionin" a"ainst bad and

doubtful loans and advances etc. Usually ban*s credit mana"ement performance

represents the recovery performance of loans and advances as a"ainst the utili2ation

of funds. Because! it has substantial impact on the bans ultimate profit performance.

In this 0hapter the recovery performance of both the bans under study are critically

analy2ed from various socio'economic points in the county.

r!graes "!r '!an rec!+er,:

It is the subse/uent step of pro"rams for loan distribution. #he detailed pro"rammes

for loans recovery are stated within the terms and conditions of loans distribution. As

a result! it is not a new sub$ect in sound credit mana"ement. As the recovery

performance of commercial bans both public and private sector in Ban"ladesh

"radually decreasin" over time! "overnment as well as the board of directors of the

respective bans have taen some special pro"rammes in the area of recovery. As the

bi""est 0B in Ban"ladesh! 9anata Ban*s recovery performance is not in satisfactory

level. For increase the loan recovery performance 9anata Ban*s recovery pro"rams

are:

#o re'structure the loan sanctionin" and distributin" policy of the ban.

#o sanction loans and advances a"ainst sufficient securities as best as possible.

#o "ive more powers to the branch mana"er in credit mana"ement decisions

main" process.

#o offer a paca"e of incentives to the sound borrowers.


59/72

#o "ive more emphasis on short term loans and advances.

#o impose restrictions on loans and advances for $ust manufacturin" and tradin"

business as also for te+tile industries.

#o tae le"al actions /uicly a"ainst un'sound borrowers as best as possiblewithin the period specified by the -aw of -imitations.

Rec!+er, $attern !" '!ans and ad+ances:

#hus is the actual focus of this chapter. As the bi""est 0B in the county! 9anata

Ban e+pands its credit pro"rammes in each and every corner of the economy. -oans

are approved and disbursed thorou"hly &ural 0redit Division 4&0D71 Industrial 0redit

Division 4I0D7 and 6eneral 0redit Division 460D7 in 9anata Ban. here as DB-

operates only one division i.e. Advance Division 4AD7 because of their limited

operational areas! before analy2in" the recovery performance of the bans under study

the meanin" of the followin" terms should be specific to us.

Disburseent

Hi"hest outstandin" balance on any date durin" the reportin" period minusoutstandin" balance at the end of the precedin" period.

Deand "!r Rec!+er,:

Cverdue at the end of the reportin" period plus recovery durin" the reportin" period.

Rec!+er,:

Hi"hest outstandin" balance on any date durin" the reportin" period minus

outstandin" balance at the end of the recovery period.

Outstanding:

Cutstandin" fi"ures in the led"er at the end of the reportin" period.


60/72

O+erdue:

Demand for recovery minus recovery. Demand for recovery 4DF&71 &ecovery1

Cverdues! and outstandin" amount includes both interests and principal amount.

#able shows the detail recovery position of 9anata Ban. Durin" the periods under

study 9B never could achieve ); recovery performance as a"ainst DF&. #his is an

indication of the bans inefficient credit mana"ement in respect to its outstandin"

loans recovery. #hou"h the position was improvin" slowly the year


61/72

Rec!+er, er"!rance !" N%( *9(1

4#aa in 0rores7

Rec!+er, er"!rance !" S%( *D(L1

4#aa in 0rore7

,articulars ear

% %)>>

&ecovery ; >@ ); >

Cverdue as a

of DF&

)( ?; )


62/72

ow a day banin" laws and financial re"ulations have introduced additional

uncertainty and new dimension of ris for banin" sector in credit operations. In

reviewin" the default riss! the bans both in public and private sector must also

consider the borrowers* current and potential cost of compliance with recent banin"

laws and re"ulations. For avoid the default loans! bans should not "ive loans to the

client without receivin" the 0lean &eport from the 0redit Information Bouro. 4%I(7

C"apter:/

ature of efault

,articulars ear


63/72

$ntroduction:

#he causes of default are multifarious and they vary from sector to sector as

well as from institution to institution. #his chapter is intended to identify and

measure the impact of the poor loan recovery on the profit performances of the

commercial bans of Ban"ladesh.

0"at is default

ormally the term default refers to the non'repayment of loans and advances

within prescribed time limit. #hose who subse/uently default are termed as

defaulter. Before (@ there was no specific "uideline for commercial bans in

Ban"ladesh to identify their default borrowers. Durin" that time it was mostly

dependent on the discretionary power of respective ban and also on the

ODepartment Cf Banin" Inspection* 4DBI7.

Classified loan of 8anata Bank

%'assi"ied L!an !"9anata (an)

*Ta)a in cr!re1


64/72

Rec!+er, *9(1:

Cut of #


65/72


66/72

economy continuously increase over time! now a days it is an open secret that

0Bs in Ban"ladesh are under direct control of the respective ministry and the

private commercial bans in Ban"ladesh are "oin" ahead accordin" to the

directions of the directors! that is meanin" of the term Obanin" is beyond

considerations in both cases whether it is public sector or private sector ban.

In most cases sale of favour e+ist rather than banin". 0redit mana"ement of

the 0Bs in Ban"ladesh was so meanin"less and corrupted as it is now

assumed that more than #.;; crores has become unreali2able from the total

loans and advances disbursed within the previous years. Another source

reported that out of #(;; crores disbursed to various economic sectors by the0Bs in Ban"ladesh within the last () year! # N crores became unreali2able

and was considered as bad or loss. Cnly tow hundred lucy persons were

responsible for these over dues loans and advances of # );;; crores

C"apter:


67/72

ecommendation and

conclusion

Summary and findings of t"e study:

As mentioned earlier the ob$ectives of the study is to mae a comparative evaluation

of the credit mana"ement performances between public and private sector bans in

Ban"ladesh as on a sample basis and the scope of the study was desi"ned in such a

manner to achieve the ultimate ob$ectives of the study and I thin that the results and

findin"s of the study which are stated below will coincide with the predetermined

ob$ectives of the study.

P From their historical bac"round and ori"in the two bans under study are

/uite different from each other with respect to their ob$ectives! or"ani2ation structure!

and operational areas and so on. As an 0B! the ob$ectives of 9anata ban are to earn

profit as well as to improve the economic welfae of the people as well to improve the

economic welfare of the people as a whole. Cn the other as a private ban! DB-J

always wants to earn satisfactory profit with little emphasis on all the variables of the

economic welfare of the people.

P #he nature and types of advances of the two bans shoe some diver"ences.

First! 9anata Ban has been e+tendin" a si2able amount of lon"'term pro$ect financin"

in both a"ricultural and industrial sectors! while DB- has an insi"nificant role in lon"'term financin" in any of these two sectors. Second! a ma$or proportion of 9anata

ban*s loan "oes to the a"ricultural sector for the rural farmers while DB- has no

contribution in a"ricultural financin". #he DB- loans and advances are dominated

financin" on a short'term basis to the industries mostly to international trade.

P ,rivate sector bans in Ban"ladesh were located in few metropolitan and

urban cities ne"lectin" the vast and potential rural areas unbaned. #he rural people

are almost outside the credit networ of DB-.


68/72

P ,rivate sector banin" reminded confined to industry and trade business

i"norin" vital interests of priority and ne"lected sectored includin" a"riculture! small'

scale industries! etc

P conomic de"ree of connection on of economic power e+isted in the bans

both in public and private sector contrebuted to the enormous "rowth of only a few

persons fore a few persons for a few bi" business houses leadin" to concentration of

industrial and political monopolies.

P ith a view to implementin" "overnmental policies 9anata ban has been

maintainin" its pioneer position in e+istin" loans to "overnmental bodies. Sectors!

corporations and private enterpriners but DB- still now has an insi"nificant

contribution to public sector entrepreneurs in the country rather it has predominant

role in the private sector band individual persons.

P 0ontributions of 9anata ban in trade and commerce financin" decreased

"radually over time.

P Dhaa ban limited was comparatively efficient in processin" and e+ecutin"

le"al actions a"ainst defaulters for their non'repayment of loans and advances in due

time than that of 9anata ban! 9anata ban too more time in that respect and the

number of pendin" cases increased "radually over time that reason.

P #he credit mana"ement system both in public and private sector in Ban"ladesh

are far from the "uidelines stated by International Accountin" Standard L =; 4AIS L

=;7

P ,olitical misuse of credit pro"rams operated by 9anata ban was a common

phenomenon. Cn the other hand director*s misuse of loan pro"rams operated by

Dhaa ban was a continuous event. Accordin" to Ban"ladesh ban inspection report

loans are "iven to the directors beyond their limit.


69/72

P So Ban"ladesh is an a"ricultural country that Dhaa ban limited should "ive

loan to the a"ricultural sector more and 9anata ban should provide lendin" facilities

more liberally.

P #he deposit advance ratio indicates the bans usual performance in respect to

their fund utili2ation. #he deposit advance ratio of Dhaa ban limited was'''''

566>085 ?@ 56647 8;0; ?@ 56667 860=;?0

Cn the other hand the deposit advance ratio of 9anata ban was '''''

566 ?@ 566=7 ;=056 ?@ 56657 ;404 ?@ 56647 ;8 ?0 So9anata ban utili2es more than%= of its inevitable fund as credit which are "uided by the Ban"ladesh Bans

standard notion in fund utili2ation. But the performance of Dhaa ban is not

satisfactory.

Conclusions and ecommendations:

Banin" sectors no more depends on only on a traditional method of banin". In this

competitive world banin" sector has stretched its win"s wide enou"h to cover any

ind of financial services. ot only from the local bans but also from the forei"n

bans! the bans of today face a tou"h competition. #he ma$or tass of bans for

bans to survive in this competitive environment are by mana"in" its assets and

liabilities in an efficient way. #o mae the assets especially loan and advances bans

must have to more cautious and otherwise these asset will became a burden for the

ban. #o have fruitful investment ban must have to do the credit appraisal perfectly.Ctherwise loan default culture will never end.

I have seen that DB- is not much different from other commercial ban of

Ban"ladesh. It follows the same practice and procedure which is followed by its

elders. But one thin" should be mentioned new loan reformation have sli"htly

chan"ed the appraisal procedure. #his -endin" &is Analysis maes the procedure

better than previous.


70/72

I should say that the standard appraisal procedure is nearly perfect. But bans have to

practice this procedure rather followin" their own procedure. If ban follow the

standard appraisal hopefully the chances of failure will be decline in future.

-endin" policies in Ban"ladesh should be "eared to "rowth potential.

Improvement of credit mana"ement depends on the maintainin" and development

of relevant! ade/uate! proper and reliable data base both at private and public

sector commercial bans.

#he re"ional imbalance between private and public sector bans in respect to their

computational areas should be removed by enforcin" private sector bans to

e+pand their activities and loan pro"rams in the rural areas.

More trainin" should be conducted for the baners to improve their analytical

ability and professional standard re"ardin" the use of -&A and other tools and

techni/ues in selectin" the borrowers and analy2in" the loan proposals.

Bans should be dele"ated to the lower level with ade/uate measures for the

necessary control and follow'up for main" the lendin" decision and recovery

In case of both Bans one proper standard procedure should be developed for all

types of clients and no interpersonal relationship should be involved in approve a

loan

Bans should fi+ed'up specific types of client strate"y accordin" to the different

character of client.

Interest income occupies the ma$or part of the total earnin"s of a ban and ban*s

profitability mainly depends on interest earnin" capacity! so ban should establish

a research and development cell for the purpose of lendin" analysis and recovery

of loans.

For /uic information and proper monitorin" of client! private sector and public

sector commercial bans should e+pand computer based data base system. 9anata

ban use a software named O$b soft* which facility do not "et all the branches of

the ban.


71/72

C"apter: */

Bibliograp"y

Annual 1!ort of Dha*a Ban* -imit!d.#3.

Annual 1!ort of Dha*a Ban* -imit!d.#0.

Annual 1!ort of /anata Ban*.#0.Annual 1!ort of /anata Ban*.#3.

8!b sit! of Dha*a Ban* -imit!d www.dha*aban*ltd.com

8!b sit! of /anata Ban*. www.9anataban*:bd.com

Cr!dit 1is* Mana'!m!nt olic of Dha*a Ban* ltd.

Cr!dit 1is* Mana'!m!nt olic of /anata Ban*.

Cr!dit ris* 'radin' manual. Ban'lad!sh Ban*.

Ban* Statistics. Ban'lad!sh Ban*.

1!s!arch 1!ort"

Md. Sar*!r 1ahman Ma*sudur. ACMA.: ;Cr!ditMana'!m!nt of Comm!rcial Ban*s.< " A

Comarati+! stud of ublic and ri+at! s!ctorban*s.
http://www.dhakabankltd.com/http://www.janatabank-bd.com/http://www.dhakabankltd.com/http://www.janatabank-bd.com/


72/72

saif's internship report on credt management of janata bank and dhaka bank limited

Documents