1.1 Background of the Report Commercial Banks are one of the key contributors to the economy of Bangladesh. The process of economic development requires the banking sector to operate efficiently and allocate the capital resources to the proper development agencies. People and the government itself are very much dependent on the services provided by these banks in the financial market for the process of economic development to function properly. Commercial banks act as financial intermediaries by performing the function of mobilization the funds from one group and lending the same to another while making a reasonable amount of profit after meeting the cost of funding. Lending is said to be the primary function of a banker and through this function he earns income for the bank by charging interest on the extended credit facility (in the form of loans and advances) to the clients. There are various types of loans and advances through which the bank exercises the function of lending. Modern Banking system plays a vital role for a nation’s economic development. Over 1 Introduction
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Transcript
1.1 Background of the Report
Commercial Banks are one of the key contributors to the economy of Bangladesh. The
process of economic development requires the banking sector to operate efficiently and
allocate the capital resources to the proper development agencies. People and the
government itself are very much dependent on the services provided by these banks in the
financial market for the process of economic development to function properly.
Commercial banks act as financial intermediaries by performing the function of
mobilization the funds from one group and lending the same to another while making a
reasonable amount of profit after meeting the cost of funding. Lending is said to be the
primary function of a banker and through this function he earns income for the bank by
charging interest on the extended credit facility (in the form of loans and advances) to the
clients. There are various types of loans and advances through which the bank exercises
the function of lending.
Modern Banking system plays a vital role for a nation’s economic development. Over
the last few years the Banking world has been undergoing a lot of change due to
deregulation, technological innovations, globalization etc. These changes also made
revolutionary changes of a country’s economy. Present world is changing rapidly to face
the challenge of competitive free market economy.
It is well recognized that there is an urgent need for better-qualified management and
better-trained staff in the dynamic global financial market. Bangladesh is no excepting of
this trend. Banking sector in Bangladesh is facing challenges from different angles
though its prospect is bright in the future. Money and Banking is the center around which
all-economic science clusters. So this report is carried on to find out the problems faced
by Eastern Bank and recommend some measures to overcome these problems for
economic development of Bangladesh.
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Introduction
About EBL:
Eastern Bank Limited (EBL) is one of the modern, fully online and technologically
superior private commercial Banks in Bangladesh. Eastern Bank markets a wide range of
depository, loan & card products. These products include different types of Savings &
Current Accounts, Personal Loans, Auto Loan, Debit Card, Pre-paid Cards, Internet
Banking, Treasury, Syndication, Corporate Banking and SME Banking services through
a network of branches & centers countrywide. Eastern Bank has its presence in major
cities/towns of the country including Dhaka, Chittagong, Sylhet, Khulna and Rajshahi.
Tracing its origin back to 1992, EBL is serving the individual and corporate clientele
alike with remarkable success offering innovative banking services since then.
1.2 Objectives of the Report:
There had been some objectives set forward in doing this report so that it can be
determined what task I have to perform in the bank. The objectives of the report are
divided into two parts-
Broad Objective:
To identify Consumer Loan classification, Provisioning Requirement & Recovery
Strategies of Eastern Bank Ltd.
Specific Objective:
To understand the gap between banking theory and practice.
To identify the consumer loan sanction process of EBL.
To evaluate how information technology in modern business help bankers to
manage their activities.
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1.3 Topic of the Report
To write a report is necessary to select a topic. A well defined topic reflects what is going
on to be discussed through out the report. The topic that has been assigned by supervisor
is “Consumer Loan classification, Provisioning Requirement & Recovery Strategies
of Eastern Bank Ltd”. The report has discussed how the bank operates their activities
with their regular customers
1.4 Methodology of the Report:
Source:
Information provided on this report is of two types. One is primary source and the next
one is secondary source. In fact, most of the information has collected from primary
sources.
Primary Sources:
1. Interview with the EBL employees.
2. Day-to-day conversation and discussion with the credit analysts.
3. MIS officers.
Moreover, I have maintained a close contact with the direct sales team members of
Eastern Bank Ltd. who regularly visit clients and consult with prospective customers.
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Secondary Sources:
1. Eastern Bank Limited Annual Reports 2007
2. Product Program Guide [PPG]
3. Credit Assessment Guideline
4. Loan files of the client.
5. Websites and so on.
Data Collection Method:
The process of financial data collection is not hassle free for any outsiders. As I worked
there for three months, they have allowed me to collect data from MIS of CFC. Some
times, they have provided data verbally and I took note of that.
1.5 Scope of the Study:
This report has prepared to gain a clear view of the consumer loan management process.
It includes all my experience in CFC. I tried to show how EBL handles all the activities
necessary to disburse loans to its clients. But there are some policy issues like which loan
needs to be reviewed, what should be the interest rates, how many documents should be
made compulsory for security reasons, who will be liable for the default loan, how
responsibility will be delegated to officials and so on. These issues have not addressed in
this report – as my goal was to reveal how work is done not how it should be done.
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1.6 Limitations of the Study:
Actually, the truth is that, the limitations of this report are well concrete. They have stated
below –
Time:
It was one of the major limitations of this report. Nevertheless, according to
PARKINSON’S Law: “Works tend to expand to fill the time available’’. The subject
matter of this report was so vast that despite of the time given, I have not included all the
aspects of consumer loan as I expected earlier. However, I tried my best to present this
report before the submission deadline.
Inadequate Discussion:
As a newcomer to banking service, I have taken considerable time to understand this
business. To make a solid report I felt the urgency of communication with high-level
employees but there is no opportunity to make appointments with them. I think
inadequate discussion is one of the limitations of the report.
Restricted Disclosure:
The report will be very information worthy if I get the opportunity to make a comparative
analysis of consumer loan. Nevertheless, the fact is, most of the banks do not disclose
consumer loan data in a separate heading in the annual report. Moreover, trend analysis
of EBL consumer’s loan also lacks the historical data necessary to make a valid forecast.
Most of the loans have launched in recent times.
Lack of knowledge and experience :
Honestly, I agree that making a comprehensive study on consumer’s loan requires a great
deal of experience and current banking knowledge. As an M.B.A student, I do not
possess that kind of knowledge and experience.
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2.1 Consumer Loan:
EBL Consumer Loan has aimed at solving our personal financial needs. Its
flexible nature allow customer to improve their home, office, and life style. Their
Consumer loan Scheme will allow to avail credit up to 75% of the price of the
item they want to buy. As a loan customer, we get to use our online banking
services as well.
The maximum repayment period for EBL Consumer Loan is 3 years. Customers
can choose 12, 24, or 36 equated monthly installments (EMI) to repay the loan.
Their interest rates are competitive in the market.
Now a day, education is not just limited to books and classrooms. In today’s world,
education is to understand the real world and applying knowledge for the betterment of
the society as well as business. From the education, theoretical knowledge is obtained
from a course of study, which is only the half way of the subject matter. Practical
knowledge has no alternative. The perfect coordination between theory and practice is of
paramount importance in the context of the modern business world in order to resolve the
dichotomy between these two areas.
2.2 Loan for Professionals:
EBL Loan for Professionals is meant for the development of our professional life.
With a little financial help under EBL's Loan for Professionals Scheme, we can
add value to your profession.
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Literature Review
If anyone is a self-employed Doctor, Engineer, Architect, Lawyer, Computer
Professional or a Chartered Account, they can buy or import equipment, tools,
customized products for use in your chamber. The purchase of the item is
expected to directly contribute to the advancement of their professional/
business solution
They need to be a Bangladeshi national between the ages of 25-60 working in the above-
mentioned field for at least five years.
3.1 Organization Orientation
3.1.1 Formation:
In pursuance of the “Bank of Credit and Commerce International (Overseas) Limited in
Bangladesh (Reconstruction) Scheme, 1992”, framed by the Bangladesh Bank and
approved by the Government of Bangladesh, the Eastern Bank Limited was formed as a
public limited company incorporated in Bangladesh with primary objective to carry on all
kinds of banking business in and outside Bangladesh. Eastern Bank Limited had also
taken over the business, assets, and liabilities of erstwhile Bank of Credit and Commerce
International (Overseas) Limited branches in Bangladesh with effect from 16h August
1992.
Now EBL is a second-generation commercial bank with 25 online branches across
major cities in Bangladesh a 612 full time employees on year end 2006. It offers full
range of commercial banking products and services to the corporate, mid-market and
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Organizational Features:
retail segment. Besides main operation, EBL has an Offshore Banking Unit
(OBU) setup in 2004, which gives loans, and takes deposits only in freely
convertible foreign currency to and from resident son/institutions, foreign
owned EPZ companies etc.
Fig: 1 Loan Deposit
3.1.2 Banking Industry Scenario:
Loan Deposit Growth & NPL: As per BB statistics, commercial banks operating in
Bangladesh disbursed an accumulated amount of BDT 1,28.8 billions on year end 2006
against BDT 1,292.51 billion year end 2005(growth 18.26). Whereas non-performing
loans as on year end, 2006 stood at BDT 200.98 billion or 13.15 percent of total loans as
against BDT 175.09 billion or 13.55 per cent of total loans on year end 2005.this better
NPL scenario was mainly attributable to write off of around BDT 110 billion bad loans
till the end of September 2006 among which state owned enterprises wrote more than half
of bad debts off. Besides, in the first half of FY 07, overall domestic credit rises by 9.62
percent over same period of FY 06mainly due to increased borrowing by Govt in the
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Back drop of shortfall in revenue collection. Private sector credit grew by
12.15 percent in first half Y 07 compared to same period FY 06. in response
to the rise in policy rates, the commercial banks ‘lending rates increased from
1.3percent to 12.4 percent and deposit rates from 5.9 percent to 7 percent
from December 2005 to September 2006. Deposit, on the other hand, stood at
BDT 1,76182billion as n December 31, 2006 registering around 20 percent
growth.
Calculation of Provision for Loans and Advances as per CL December 2006:
Nature Outstanding Interest Suspense
Eligible Security
Base for Provision
Required Capital
Standard 24392,209,377 N/A N/A 24,392,291,144 371,003,511
SMA 437,053,469 N/A N/A 407,371,915 20368,596
SS 240,093,692 14,330,705 20,424,000 205,338,987 41,067,797
EBL Jiban Dhara loan is an any purpose Lifestyle loan, Purpose might be considered as follows:
- House renovation- Interior Decoration - Marriages in the family- Advance rental payments- Hospitalization or other emergency medical needs - Trips abroad - Purchase of miscellaneous household appliances- Purchase of professional equipment like X-ray machine,
medical beds, ultra-sonogram machine, engineering/ mechanical tools
- Other legitimate purpose.
Purposes not allowed
This loan cannot be taken for solely business purposes like working capital and industrial machinery purchase. However, self-employed professionals, who have private practices can avail this loan to buy their office equipment, machines, and accessories or premise renovation.
Availability All EBL branches subject to CPV being in place
- Lawyer- Journalists of reasonably lower rank - Defense official below Lt. Colonel level
- Minimum TK. 50,000/-
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1JIBAN
DHARA LOAN
EBL Jiban Dhara loan is any purpose unsecured and terminating loan facility (EMI based) for any legitimate purpose. Bank would finance against gross monthly income of the any credit worthy individual. To meet lifestyle needs of the creditworthy individuals and to capitalize the vast market gap; Jiban Dhara Loan is suitable unsecured consumer loan product.
Loan Amount (minimum and maximum) for
A category customers
- Maximum TK. 10, 00,000/- or 12 times of gross monthly income, whichever is lower. In addition, DBR must be supportive with income and EMI as per our income assessment policy. Monthly Income = Gross monthly salary or Business income + 80% income of other proven sources like spouse salary, rent income and so on.
Interest Rate- 16% p.a. (Interest rates can be changed by Authority from time
to time based on market situation
Processing Fee - 1% of the loan amount.
Repayment Tenor
12 to 60 months (As per clients will, affordability and our credit assessment criteria)
Disbursement Credit to the customer’s deposit account with us.
Repayment - System will be auto debit installment from customer’s CASA account.
Advance /Partial pre payment
- Allowed after 6 month. At least minimum 30% of the loan
outstanding has to pay by customer while making advance/prepayments amount.
Early payment fee
- Early full and final settlement is flat 1% of the outstanding loan amount.
Installment failure charge
- Penal interest of 3% p.a. on dues amount.
Stamp charge - All relevant stamp charges will be on borrower’s account and will be debited from the account at the time of disbursement
Top-ups - Customer can avail more than 1 loan from EBL if income and DBR supports [Separate new loan account will be created in the case of top-up, i.e., will not be an additional draw down over existing loan account]
Personal Guarantee
- 1 Personal Guarantee will be required for EBL Jiban Dhara Loan.
- A guarantor can provide personal guarantee once only for any EBL consumer loan.
Eligibility of guarantor:- Any salaried executive deemed acceptable to EBL or- Professionals (Doctors, Chartered Accountants, and
Engineers etc) or- Reputed Businessman acceptable to EBL
Identification Document of guarantor:- TIN
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- Photograph or business card
Waiver of Guarantee for
Priority Organizations’
Employees
- No personal guarantee would be required for the
salaried executives of EBL priority organization list that will mainly comprise the MNCs, Banks, and large local corporate House.
Good Boy/Good Girl Note
Good Boy/Good Girl Note will be required for all EBL Jiban Dhara Loan.
Purpose
EBL Jiban Dhara loan is an any purpose Lifestyle loan, Purpose might be considered as follows:- House renovation- Interior Decoration - Marriages in the family- Advance rental payments- Hospitalization or other emergency medical needs - Trips abroad - Purchase of miscellaneous household appliances- Purchase of professional equipment like X-ray machine,
medical beds, ultra-sonogram machine, engineering/ mechanical tools
- Other legitimate purpose.
Purposes not allowed
This loan cannot be taken for solely business purposes like working capital and industrial machinery purchase. However, self-employed professionals, who have private practices can avail this loan to buy their office equipment, machines, and accessories or premise renovation.
Availability All EBL branches subject to CPV being in place
- Lawyer- Journalists of reasonably lower rank - Defense official below Lt. Colonel level
Loan Amount (minimum and
maximum) for A category
customers
- Minimum TK. 50,000/-- Maximum TK. 10, 00,000/- or 12 times of gross monthly
income, whichever is lower. In addition, DBR must be supportive with income and EMI as per our income assessment policy. Monthly Income = Gross monthly salary or Business income + 80% income of other proven sources like spouse salary, rent income and so on.
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4.2 Description and Features:
Purpose
EBL Utsheb Loan is any purpose Lifestyle loan that will support customer Eid related financial needs. Purpose might be considered as follows:
- Eid Shopping- Purchase of miscellaneous household appliances like TV,
Fridge or Home Theater - Travel in abroad - Purchase of personal computers- Purchase of audio-video equipment- Purchase of furniture during Eid time
Purposes not allowed
This loan cannot be taken for solely business purposes like working capital and industrial machinery purchase.
Availability All EBL branches subject to CPV being in place
EBL Utshab loan is any purpose unsecured and terminating loan facility (EMI based) for credit worthy individuals to meet the expenses on the Eve of Holy Eid, Christmas and other festivals. Bank would finance against gross monthly income of the any credit worthy individual. To meet life style needs of the credit worthy individuals and to capitalize the vast market gap, this loan is a suitable unsecured consumer loan product.
Consultant and IT professionals- Businessperson
Non target customers
- Lawyer- Journalists of reasonably lower rank- Defense official below Lt. Colonel level
Loan Amount (minimum and
maximum)
- Minimum TK. 50,000/-- Maximum TK. 1,50,000/- or 10 times of gross monthly income,
whichever is lower. And DBR must be supportive with income and EMI as per our income assessment policy. Monthly Income = Gross monthly salary or Business income + 80% income of other proven sources like spouse salary, rent income and so on.
Interest Rate 15% p.a.
Processing Fee Nil
Repayment tenor
12,24 or 36 months
Loan Availability
From the time of launch in First week of September 2005.
Disbursement Credit to the customer’s deposit account with us.
Repayment - System will be auto debit installment from customer’s CASA account.
Advance /Partial pre payment
- Allowed after 6 month. At least minimum 30% of the loan outstanding to be paid by customer while making advance/prepayments amount. Fee: 1% of the partial payment amount.
Early payment fee
- Early full and final settlement is allowed. A charge for early full and final settlement is flat 1% of the outstanding loan amount.
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Installment failure charge
- Penal interest of 3% p.a. on the dues amount.
Stamp charge - All relevant stamp charges will be on borrower’s account and will be debited from the account at the time of disbursement
Top-ups- Customer can avail more than 1 loan from EBL if income and
DBR supports [Separate, new loan account will be created in the case of top-up, i.e., will not be an additional draw down over existing loan account]
Personal Guarantee - 1 Personal Guarantee will be required for EBL Utshab Loan for
general customers including businessmen and employees of the companies not included in the “EBL Priority Organization List’’
- A guarantor can provide personal guarantee once only for any EBL consumer loan.
Eligibility of guarantor:- Any salaried executive deemed acceptable to EBL or- Professionals (Doctors, Chartered Accountants, and
Engineers etc) or- Reputed Businessman acceptable to EBL
Identification Document of guarantor:- TIN- Photograph or business card
Waiver of Guarantee for
Priority Organizations’
Employees
- No personal guarantee would be required for the salaried executives of EBL “Priority Organization List’’ (POL) that will mainly comprise the MNCs, Banks and large local corporate House.
Good Boy/Good Girl
Note
A satisfactory Good Boy/Good Girl Note will be required for all EBL Utshab Loan.
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3EXECUTIVELOAN
Many Private Banks have introduced unsecured personal loan in the market with varying degree of success. Considering the market trend for consumers Loans, EBL has launched an unsecured personal loan products “EBL executive loan’’ targeting salari-ed executive only. It was the first consumer loan among the four other loans. EBL laun-ched this product in Aught, 2004. It is an “All Purpose’’ loan aimed to meet the short- term financial needs of an upper income groups of salaried executives.
There are three (3) categories:
Category A: Individuals, who maintain or will open a salary
account with EBL and will arrange for irrevocable letter.
Category B: Individuals, who will open a salary account with EBL
arranging an irrevocable letter from employer to deposit only their salary with the Bank.
Category C: Individuals who will avail the loan by depositing post-
dated cheque for each EMI amount.
4.3 Product Description and Features:
Availability - EBL all branches. -
Loan amount Minimum Taka 50,000/-Maximum Taka 3, 00,000/- or 3 times of Gross salary, which ever is lower.
Processing Fee - 1% up to 1,00,000/-- 0.75% above 1,00,000/-
Stamp charge - All relevant stamp charges will be on borrower’s account and will be debited from the account at the time of disbursement
Tenor - 12,24,36 months-
Disbursement - Credit to the customers deposit account with EBL
Repayment EMI via standing order will be raised in the salary account, so that moment his/her salary is credited to the account, system will automatically debit the installment amount and credit it to the loan account.
Advance/Partial prepayment
Not allowed
Early payment Fee
Early full and final settlement is allowed. Penalty for early full and final settlement is TK. 1,000/- flat.
Installment failure charge
Penal interest of 3% p.a. on the dues amount.
Top-ups Not Allowed
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4.4 Description and Features:
Purpose
Purchase value new and reconditioned Car, Jeep, Station Wagon, 4-Wheeler, Microbus for private use only:
- Brand new-any brand at purchaser’s choice- Reconditioned-Toyota brands preferred. Cars older than 4 years
will treat as an exception.- Purchase value refers to car price as quoted by the Vendor and
may include VAT and Registration cost. However, it does not include comprehensive insurance cost that is on purchaser’s account.
Availability All EBL branches subject to CPV being in place
Loan Amount (minimum and
maximum)
- Minimum TK. 3,50,000/-- Maximum TK. 50, 00,000/- or 15 times of gross monthly income,
whichever is lower. (Maximum Loan allowable for purchase of very high value or premium vehicles was TK. 1, 00 crore, however Bangladesh Bank fixed loan ceiling of TK 20 lac recently. So, maximum amount will be TK 20 lac from the publication of this circular.)
Interest Rate(Interest rates
can be changed by ALCO from
time to time based
Loan cash coverage 100%
Loan cash coverage 75%
Loan cash coverage 50%
Unsecured
11.75% 12.00% 13.00% 14.00%
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4CAR
LOAN
EBL Car loan is a terminating loan facility (EMI based) of the purpose of brand new and reconditioned but unregistered automobiles for personal use only. (Unregistered means first time registration is yet have to done. Purchase of second hand vehicles are not allowed unless exception approval obtained jointly from MD and DMD. Please refer to section “Permissible Exceptions’’ at later part of this document.)
Processing Fee1.00% of the loan amount for all cases other than 100% cash secured. For 100% cash secured cases, it is 0.5% of the loan amount.
Loan vehicle
Piece Ratio
100% cash covered: 100% of quotation price75% cash covered: 100% of quotation price 50% cash covered: 100% of quotation price0% cash covered: New 75% Recondition 70% (Price includes car value + VAT + Registration)Customer will bear comprehensive insurance cost.
Tenor
Reconditioned Vehicles above 3 years old
Brand New and 3 years reconditioned Vehicles
12-48 month 12-60 months
Disbursement
-On loan being sanctioned, Vendor will register the car on behalf of Eastern Bank Ltd. Vendor also collects the copy of the comprehensive insurance (Insurance company from EBL approved list) and submits both the documents along with the delivery Challan for the car to EBL.
- CASA (in case of new customer, a current/savings account will be opened in customer’s name).-CFC will disburse Loan amount through CASA.On email confirmation from CFC, branch will issue P.O favoring vendor by debiting CASA. P.O will include only the loan amount portion of total quotation amount (i.e. excluding borrower’s equality)Branch to ensure PO commission and VAT will deduct from customer CASA. R.M will organize to send the P.O to the vendor.
Repayment- System will auto debit installment from customer’s CSAC
account.
Advance /Partial pre payment
- Allowed after 6 month. At least minimum 30% of the loan outstanding must be paid by the customer while making advance/pre-payments amount.
- Fee: 1% of the partial payment amount.
Early payment fee
- Early full and final settlement is allowed. A charge for early full and final settlement is flat 1% of the outstanding loan amount.
Installment failure charge
- Penal interest of 3% p.a. on the dues amount.
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Stamp charge- All relevant stamp charges will be on borrower’s
account and will be debited from the account at the time of disbursement
Top-ups- Customer can avail more than 1 loan from EBL if income and
DBR supports [Separate, new loan account will be created in the case of top-up, i.e, will not be an additional draw down over existing loan account]
Personal Guarantee
- One [1] Personal Guarantee for salaried executive. - One [1] Personal Guarantee for businesspersons and self
employed.- A guarantor can provide personal guarantee once only for any
EBL consumer loan.- Eligibility of guarantor:
Individuals with ranges equivalent Senior Assistant Secretary or higher would qualify as grantor.Bank and NBFI officials (equivalent to AGM of NCBs, AVP/ Branch Manager, Department Head of Local and Foreign Banks and NBFIs),Professional (Doctors, Engineer, Chartered Accountants etc.) have to provide copy of their professional certificate.
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4.5 Description and Features:
Debit Line is an unsecured and revolving credit facility for any legitimate purpose.
PurposeDebit line is an any purpose unsecured OD facility to be drawn through charging debit Card.
Target CustomersAny credit worthy individuals like : Salaried Executives of priority organization & Corporate Organization (List enclosed) Self-employed Doctor, Engineer, and Architect.
A Category customer & Limit
Employees of POL (Priority Organization List), provided in the later section. Self Employees of COL (Corporate Organization List), provide in the later section. EBL Employees will also fall in A Category
Minimum Tk. 20,000/- Maximum Tk. 1, 00,000/- or 5 times of gross monthly income, whichever is lower.
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5DEBIT
LINE
Debit card has substantial momentum across the world due to its customer-oriented features. Customers prefer debit card for cash withdrawal & shopping purpose. Offering small overdraft facility in debit card has become a popular product worldwide. Risk profile of the debit card is much lower than that of credit card due to small ticket size and due to allowing only to executives of selective corporate client & professionals as per enclosed list. Debit card is more of a transactional facility than credit card. However, EBL is planning to launch credit card, this debit line would not hinder sales prospect of credit card since initial credit card limit will be the maximum limit of debit line based on
B Category Customer & Limit
Employees of COL (Corporate Organization List), provided in the later section Self-EmployedProfessionals like Doctors, Engineers, and Architect. Govt. employees
Minimum Tk. 20,000/- Maximum Tk. 50,000/- or 3 times of gross monthly income, whichever is lower.
C Category & Limit
Executives of POL & COL and Professionals who are holding the credit card of SCB/PrimeBank/Lanka Bangla
Minimum Tk. 20,000/- Maximum Tk. 50,000/- or 80% of exiting limit (highest limit of all cards) of the existing credit card of SCB/Prime Bank/ Lanka Bangla, whichever is lower. Applicant having credit cards of other Banks may also apply for A & B Category meeting the criteria.
Non target customers
Businessmen Lawyer Individuals with political affinity Journalists of reasonably lower level Defense official below Lt. Colonel level
Availability All branches subject to CPV in place
Interest Rate 20%
Interest Rate for EBL Employees
15% p.a
Interest Accrual Interest would accrue on daily basis based on EOD balance and would be applied on monthly basis.
Processing Fee 1% of the approved limit or Tk. 1,000 whichever is higher. Processing free will be waived for EBL employees.
Available cash Withdrawal limit
Client would be able to withdraw full amount in cash through ATM as per ATM cash withdrawal policy.
Monthly Statement
Monthly statement covering the limit, minimum payment due, payment deadline, utilization and available room and transaction history etc. would be provided to the customer due the card Division within the first week of every month. The statement has to be generated by the system.
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Validity
Revolving limit for 12 months, Initial limit expiry date to be set on quarter end only (nearest quarter of a year).(e.g. Limit loaded on January 25, 2006 will expired on December 31, 2006)(e.g. Limit loaded on February 18, 2006 will expired on December 31, 2006)(e.g. Limit loaded on April 25, 2006 will expired on March 31, 2007)
Grace Period No grace period for interest will be allowed.
Repayment
Client may reduce/repay outstanding through standing instruction option, sweep in option & through cheque/cash deposit. Clients need to repay every month 5% of month-end total outstanding by the 15th of each month. This will be the minimum payment due.
Penalty & Late Payment Fee
3% on outstanding on expired account. Minimum Payment failure charge is Flat Tk 200/= to be charged and appliedin the Debit Line account.
Facility call Up
If applicants fail to make available monthly repayment for consecutively 3 months or more over the tenor of the facility, entire outstanding will be called back by collection department. Bank reserves the right to call up the line at its discretion or in the event of default.
Renewal Fee Renewal Fee would be 1% of outstanding or Tk 1,000 whichever is higher Renewal fee for EBL employees will be waived.
Early payment Fee Early full and final settlement is allowed. No early payment charge is required
Personal Guarantee No Personal Guarantee will be required for Debit Line
Loan KYC Good Boy/ Good Girl Note or KYC will be required for all Debit Line Applications
Stamp Charges All relevant Stamp charges will be borne by the Borrower and will be debited from his/her account, at the time of disbursement.
Updated Cheque 1 EBL UDC covering full limit.
Cheque Book No cheque book will be issued against EBL Debit Line account
CIB No CIB is required
Nationality Bangladeshi
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Age 22-66 years old
Length of Service/Practice
Salaried Executives: Minimum 1 year of permanent employment with present employer. Professionals: Minimum 1 year of practice in the profession
Income for Salaried Executives
Minimum BDT 15,000/- per month Minimum BDT 12,000/- per month (For Govt. Employees)
Income for Self Employed Professionals
Minimum BDT 20,000/- per month
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6FAST
LOAN
7FAST
CASH
4.6Fast loan is a short-term loan facility from EBL. This loan is fully
secured against cash security (EBL FDR, Govt. Sanchaya Patra,
ICB Unit certificates etc.). EBL Fast Loan has convenient
repayment period ranging from 12/24/36 EMI's. EBL Fast Loan is
priced at competitive rates and loan is sanctioned within 24 hours
of application
4.7EBL Fast Cash is a revolving credit facility. Fast Cash allows the
customer to draw up to a predetermined amount of credit from their
Current Account. Customers will only be charged interest for the
amount they draw. The minimum limit for EBL Fast Cash is Tk.
50,000.00
4.8 Guidelines For 100% Cash Covered Loans:
1. Supporting identification documents will apply as part of KYC. But the
general attitude will be lenient in this regard too. Basic identification is all
that is required, and we will ask for nothing more than what is “basic.”
s
2. No UDC and no PDC will be required since it is free to credit risk. UDC and PDC are
for ensuring payment guarantee. For a 100% secured terminating loan, payment is
guaranteed anyway. Hence no UDC or PDC.
3. CIB thing will be based on the policy of CIB. If CIB policy gives any leeway on this
for 100% secured cases, we will take that leeway. If not, CIB to be obtained.
4. A LAP has to be properly filled up in any cases only thing we will keep in mind: it‘s a
100 secured loan, hence there may be some sort of relaxation n minor items. No
compromise on major items in the LAP though.
5. Income: for cases like these, income needs not be substantiated. Client will just declare
his income, which will be noted in the LAP. No supporting paper to prove income is
needed. Hence, no bank account statements etc are needed.
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4.9 Interest Rates on Deposits:
The Asset Liability Committee (ALCO) of the Bank in its special meeting
held on May 07, 2007 as decided to introduce new interest rates on deposit,
which will be effective from May 07, 2007.
Types of Deposit (HPA/SB/STD)
Rates Effective From May 07, 2007
HPA less than 1M 6.00%HPA more than 1M 6.00%Saving up to 1M 7.00%Saving above 1M 7.00%
STD- less than 10 M 6.00%STD- 10M to< 30M 7.00%STD- 30M to< 100M 8.00%STD- 100M to< 150M 8.00%STD- 150M and above 8.00%STD- Bank Market RateSTD- Collect 8.25%STD- IPO Proceeds 8.00%
Types of Deposits (FDR)FDR-1 Month- Less than- 5M 8.25%FDR-1 Month- 5M to < 10M 8.25%FDR-1 Month- 10M to < 50M 8.25%FDR-1 Month- 50M to < 100M 8.40%FDR-1 Month- 100M to < 150M 8.40%FDR-1 Month- 150M and above 9.25%
Table: 5
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Consumer loan of EBL are processed and approved through its Consumer Finance
Center. Before the establishment of CFC, branches had the authority to approve &
disburse loans though consultation with higher authority – Head of Consumer Banking,
Deputy Managing Director, and Managing Director.
As the process faces some crucial pitfalls, management of EBL decided to set up a central
unit CFC- that will be responsible for loan assessment, approval, disbursement, and
collection.
4.10 Consumer Finance Center:
CFC is located on the second floor of Jiban Bima Bhaban, Motijheal, Dhaka. CFC has set
up on March 15, 2004 for evaluating credit worthiness in consumer lending. It will
consist of a team of people to identify, analysis, measure and manage risk related
business.
4.11 Structure of CFC:
CFC handles all the retail loan applications coming from all the branches and Direct
Sales Teams (DST) across the country.
4.12 Management Structure:
The management hierarchy of CFC is very simple as total much of employees are only 16.
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Loan Approval Process
Fig: 2 Management Structure
4.13 Responsibilities of the Department of CFC:
Head of CFC:
The head of CFC is primarily responsible to oversee the activities of CFC & to
collaborate with the 25 branches across the country.
Daily activities include – Consultation with prospective client where necessary,
_ To assist analyst group to measure credit risk,
_ To provide information and to keep contact with higher
authority– HOCNB, DMD, MD and
_To take measures to keep smooth operation.
Manager
Credit Analysis
Collection & Recovery
Security & Disbursement
Management Information System
Head of CFC
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Manager of CFC:
Manager of CFC has the authority to approve or decline loan applications. If his
authority does not permit, then he consults with higher authority.
Credit Analysis is one of the core activities that can make a difference in retail banking.
If an eligible Client is refused then the revenue of the banks decreases and if an unworthy
client is included loan disbursement, bank may face loan defaults. CFC has five (5)
members dedicated to assess credit risk in consumer lending. They can also take help
from higher authority- manager of CFC, Head of CFC where necessary.
Security Checking & Disbursement:
Officer lading support & officer disbursement both cheek all the relevant documents and
give authorized signature where necessary. If discrepancies or any fraudulent is found,
they consult with manager CFC and if everything is okay then disburse the loan.
Management Information System (MIS):
Within the CFC, two people keep track of all the laps that CFC receives or CFC returned.
MIS officer provide a database that contains all true relevant information of each and any
lap irrespective of there status- approved, declined, disbursed, pending on process, place
for decision, sent to queries. It serves an important purpose of inform all related members
about retail loan. The branch managers may also benefit from this MIS as it updates
every two or three hours.
The next part describes how CFC handles loan application and gives decision, which means the actual loan sanction process of Consumer Finance Center.
(1) Jiban Dhara Loan.(2) Utshab Loan.(3) Executive Loan.(4) Car Loan.(5) Debit Line and
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(6) Fast Cash(7) Fast Loan
4.14 LAP Work Flow for All Consumer Loans:
Fig: 3 LAP Work Flow
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Lap filled & assessed by ARM/ RM and necessary Recommendations
taken
Final review by supervisor
Branch provides documents-
Sanction letter, UDC, DP note
CFC (MIS) status updated
Lap with major discrepancy will be returned to branch and lap
with minor discrepancy will be assessed and needs to rectified
CFC informs branch about approved laps, ask for necessary documents if needed, and wait
for CPV/CIB clearance
CFC (MIS) receives the lap, gives necessary input and hand over to
analyst group for assessment.
Approved laps will be review by Manager-CFC, HOCFC and where applicable by HOCNB, DMD, MD
CFC checks all documents & CIB/CPV if found ok then
disburse.
Client receives money on the same day by electronic fund transfer.
Necessary stamps will be attached, copy of sanction letter, return to
client.Send for storage in CFC
Branch Level CFC Level
4.15 The Lap flow chart described in details:
Loan Booking:
EBL consumer loan has two sources– (Direct sales team) DST & Branch. There are 25
branches & more than 250 DST in EBL. DST knocks prospective clients and collects
information about them. After preliminary screening, they invite client to EBL Branch. If
the client is a ‘walking customer’ then the ARM & RM stars talking with him/her. If
client expresses strong will to avail a JDL/UL, The employee in change wills request
her/him for the following documents –
Applicant’s photograph and visiting card (if available).
Copy of valid Passport/Voter ID/Driving License/Others.
Last 6 months bank statement (Personal/Company).
Copy of TIN certificate.
Bill copy of T&T/Mobile phone/ Contract copy of pre-paid phone.
Other loan’s sanction letter and last 6 months bank statement of that.
Letter of introduction by the organization.
One (1) personal guarantor, copy of guarantor’s TIN, visiting card, photograph
and sign verified by the applicant.
Copy of Trade License.
Memorandum and Article of Association certified by Joint Stock company.
Summary of Share Capital (Form X and XII)
Partnership Deed of Partnership firm.
If other income added than required supporting documents.
CIB report.
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When client submit the above documents (not every document is essential but
it varies client to client) the ARM or RM performs the following tasks:
(1) In presence of ARM/RM, client fills the pre formatted lap –
A. Personal Information and contact details.
B. Joint Applicant (spouse only)
C. Employment details.
D. Financial information – Monthly income & expenses.
E. Bank A/C Defaults.
This bank A/C details will help managers to access client’s income. More over, for
loan purpose, client must open an EBL current A/C.
A. Facility Defaults.
B. Debit Authority.
C. When this part of lap is filled properly, client will give signature with date
on pre-formatted space and it must be verified by RM/SSM.
The next part of lap will be filled by branch; here branch will provide a
documentation cheek list– whatever the documents required by the bank.
(2)Branch fills the Loan KYC-
B. Good boy/ Good girl Assessment curd – It is also called KYC. Her branch
delineates clients Background, Education, Personal life, Lifestyle, Credit worthiness,
Loan behavior, Criminal record, Compliance, Appearance, and Willingness to repay.
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These ratings are gives in each category.
High Rating – Excellent beyond any question or doubt’
Medium Rating- When performance or position of that client is in respective criteria
can’t be assessed with full certainty but however estimated or known to be okay.
Low Ratings – When position on performance is “Not known to Branch or doubt full.
Loan KYC-serves a key role in evaluating loan proposal as CFC employees never
met them physically, KYC help then visualize the client, his behavior, his family
status and so on.
Under the KYC table the officer in change produces – summary comments,
recordation and waiver (if sought) with signature of the respective authority.
At this point, the branch manager sends the lap to CFC.
On receiving Lap, MIS (CFC) inputs some basic information about the client and
assigned a Lap number. This number is used for further reference. Excel sheet of MIS
contains-
Serial no, Lap receive date, Credit officer, clients name, source- branch /DST,
Applied amount, Approved amount, CPV (out) – date no which CPV asked for, CPV
(in)- date on which CPV received, Status- Approved/Declined/On process/ Pending/
Cancelled/ Disbursed, Comments, Status date, Disbursed date.
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Sample of MIS Excel Sheet:
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MIS update data on a continuous basis, so whenever any action taken or any
loan status changed MIS inputs it. MIS is built in a way that with short notice
– MIS can produce
Daily status report
Approved loan amount report.
Status report sort by branch, approved amount, credit officer, date, week,
month and so on.
MIS officer distributes the laps received each day to the credit analysts for credit
assessment, recommendation & approval.
Retail Credit Assessment: (Same for All Loans)
6 persons are employed for credit analysis at CFC, EBL. Two are specialized in car loan
analysis and other analyst evaluates rest of the loans.
Credit Analysis:Credit Analyst will read the lap carefully before embarking on finding credit worthiness
that is income assessment. Loan KYC helps analyst to judge the client’s social status and
some other attributes. Then analyst focuses on key area – assessing financial capacity of