Internship Report on Credit Risk Management of NCC Bank Limited

8/12/2019 Internship Report on Credit Risk Management of NCC Bank Limited

1/60

ter ship-Report-o -Credit-Risk-Ma ageme t-of-NCC-Ba k-

Limited

It is necessary for all BBA (Bachelors of Business Students) to prepare an internship report at theend of this program. On the other hand internship is a course which is related to our coursecurriculum. As a student of BBA in International Islamic University Chittagang (IIUC) myintention is to capture some theoretical concept and to now how implement this theoreticalconcept in our real life solution. Students are applying this concept in different organi!ations. SoI was assigned to perform my internship in "eneral Ban ing #epartment at $arayangon% Branch&

$CC Ban 'imited.

'i e clothes shops& candy shops& a eshops& food shops& $CCB' is not a de t shop* the term eing used y many to call the present say an s. It is now een called a modern an thatunderta es all its operations at an international standard.

+aving started its operations as a commercial an in ,-- & recovering from some primarydifficulties& $CCB Ban has now emerged as a ma%or player in the financial sector. /he an has

een a le to attain a commenda le CA01'S rating and its performance has een outstanding interms of profita ility for the year ended 23,3. 'isted in oth the #ha a and Chittagong Stoc14change since late ,--- with an I5O that raised the paid6up capital of the an to / .78 core&the current price levels of its shares and turnover in trading is evidence of its high rating amonginvestors.

Over the years& $CCB' has uilt itself as one of the pillars of Bangladesh9s financial sector andis playing a pivotal role in e4tending the role of the private sector of the economy. Under the

dynamic guidance of its Board of #irectors headed y the Chairman 0r. :a u Ali& the currentmanagement has een& arching ahead with new !eal to reach its goal in 23,,. /he an is pledge

; ound to perform even etter in the coming years& opening new ranches& adding new and etter products and services to its customers at their doorsteps.

/he an has a strong ranch networ nationwide with ua6non for the progressand development of a service oriented industry li e Ban . ?rom very first emergence andinception of modern civili!ation& Ban plays a pivotal role in case of overall financial andsocioeconomic development of any modern country. /he economic development of our countrymainly depend upon the efficiency of the an ing results is so far as& whether the an ers have

1 www.AssignmentPoint.com


2/60

een a le to read the economic situation properly and are successful in selecting the promisingindustrial sectors see ing import and e4port assistance to grow. =ith the rapid changes of timemans are readily depend on an ing services in case of handling cash& transferring cash& and alsofinancing in various industrial and usiness pro%ects. So it is very much needed to develop the

an ing practices and guiding law in order to provide etter day to day an ing services to thevalued customers. Because as a service oriented industry a an should elieve that customers isall and the ing. Customers favoring to a an y providing the opportunity to the an toserving him. /he government of our country and the central an i.e.& the Bangladesh Ban hasdecided to e4tend considera le help in every respect of an ing and aware them a out the law ofthe an ing sector. 'i e other nationali!ed and non6nationali!ed commercial an s li e NCC BankLimited serves the nation y providing various modern an ing services and products. So as an Internee Ithought of having special nowledge on this field of increased importance.

1.3. SCOPESCOPE OFOF T ET E REPORTREPORT :

$ational Credit and Commerce Ban 'td. ($CCB') is operating widely with


3/60

1.'. (ET O)OLO*+ OF T E REPORT:

/he information incorporated in this report has een gathered from primary and secondarysources. Apart from this& a review of related circular and office circular as well as face6to faceinterview of the e4ecutives& officials and clients were carried out.

P,ima,y &ou,$e&-

?ace6to6face conversation with the respective officers and staff of the Branch.

Informal conversation with the clients.

5ractical wor e4posures from the different des s of the department of the ranch.

elevant file and documents study as provided y the concerned officers.

Se$onda,y &ou,$e&-

Unpu lished data received from the ranch. Annual eport. Ban s record. #ifferent paper of the an . arious oo s& periodical seminar papers& training papers& manuals& =e site& etc. related

to the topic.

1. . Limitation& of the ,e/o,t:

/he first o stacle was that they would not provide any remuneration even for doinginternship in $CCB'. It is not an easy tas to concentrate hard without any enefit.

'imitation of time was one of the most important factors that shortened the presentstudy. #ue to time limitation many aspect could not e discussed in the present study.

ush hours and usiness was another reason that acts as an o stacle while gatheringdata.

Confidentiality of data was another important arrier that was faced during the conductof this study. 1very organi!ation has their own secrecy that is not revealed to others.

/hough I am one of their staff& while collecting data on $CCB'& personnel did notdisclose enough information for the sa e of confidentiality of the organi!ation.



4/60

Sufficient oo s& pu lications and figures were not availa le. If these limitations werenot een there& the report would have een more useful.

It was very difficult to collect data from such a ig organi!ation .0y internship was at $arayangon% Branch which was esta lished on 22 nd Dune 23,3. So sufficient data was

not availa le to collect all inds of information.

One of the ma%or sources of collecting information is the Organi!ation9s we site. Butthe we site is not up6to6date comprising with other Ban s.

C 0PTER 2

OVERVIEW of NCC BANK Ltd



5/60

NTRO) CT ON:

$CC Ban 'imited is the leading private sector an in Bangladesh offering full rangeof 5ersonal& Corporate& International /rade& ?oreign 14change& 'ease ?inance and Capital0ar et Services. $CC Ban 'imited is the preferred choice in an ing for friendlyand personali!ed services& cutting edge technology& tailored solutions for usiness needs& glo alreach in trade and highly yields on investment& assuring e4cellence in an ing services.

2.1 . Ba$k ,ound of NCC Bank Limited:

$ational Credit and Commerce Ban 'td. ears a uni>ue history of its own. /he organi!ationstarted its %ourney in the financial sector of the country as an investment company ac in ,-


6/60

with paid up capital of / . -.33 corer to serve the nation from a roader platform. Since itsinception $CC Ban 'td. has ac>uired commenda le reputation y providing sincere

personali!ed service to its customers in a technology ased environment. /he Ban has set up anew standard in financing in the Industrial& /rade and ?oreign e4change usiness. Its variousdeposit @ credit products have also attracted the clients6 oth corporate and individuals who feelcomfort in doing usiness with the Ban . =ithin this short time the an has een successful in

positioning itself as progressive and dynamic financial institution in the country. /his is nowwidely acclaimed y the usiness community& from small entrepreneur to ig merchant andconglomerates& including top rated corporate and foreign investors& for modern and innovativeideas and financial services.

2.2. 4i&ion

/he vision of the an is to ecome the an of choice in the communities they serve the anaccomplishes this y offering to their customers the financial services which are e4pected y

their customers while providing a return to their owners. In accomplishing this mission& the anhas now een free from all the natures of a pro lem an though full filling all the conditions set

y the central an . /hey proudly say9s $CCB' is profit ma ing and pro lem freeG

2.3. (i&&on

$CC Ban shall e at the forefront of national economic development y 6

i) Anticipating usiness solution re>uired y all $CC Ban 9s customers everywhere and innovativelysupplying them eyond the e4pectation.

ii) Setting industry enchmar of world class standard in delivering customer value through thecomprehensive product range& customer service and all the activities.

iii) Building an e4citing team ased wor ing environment that will attract& develop and retainemployees of e4ceptional a ility who help cele rate the success of an 9s usiness& of an 9s

customers and of national development.iv) 0aintaining the highest ethical standards and a community responsi ility worthy of a leadingcorporate citi!en

v) Continuously improving productivity and profita ility and there y enhancing share holdervalue.



7/60

2.!. Slo an=here Credit @ Commerce Integrates

2.'. (otto

/he Ban will e a confluence of the following three interestsOf the Ban 5rofit 0a4imi!ation and Sustained "rowth.Of the Customer 0a4imum Benefit and Satisfaction.Of the Society 0a4imi!ation of =elfare.

2. . 0$ti%itie& of NCCBL

/he world economy is going through various crises arising from insurgent activities at various parts of the glo e. /he tur ulence also affected Bangladesh 1conomy adversely as well. /a ahas een devalued. /he political unrest caused devastation to the industrial and service sectors.

/he usiness communities as a whole apprehend ding imminent doom& tried to negotiate for acompromise among the various concerned parties. /he an earned a modestly satisfactory resultduring the year 233uality.

/he Ban has separate Credit Administration #epartment& ecovery #epartment and also a tas?orce for continuous monitoring of difficult loans and advances of the Ban and to propose waysof recovery of Ban 9s dues. /his process will continue in upcoming years also. ?urther& the Banwill pay attention to manage lia ility also so as to uild up a strong deposit ase to satisfyinvestment need of the mar et.

$CCB' plans to continue this pro%ect even after e4piry of the 5C?& if proved feasi le. /heBan has put due emphasis on grooming up its wor force in a technology ased wor ingatmosphere for some time. Also to cater the needs of the customers& very recently $CCB'started full6fledged real time On 'ine Ban ing System with implementation of ?lora Ban ingUBS Software and introduced #e it Card in the rand name of 05ower Card* /he an alsointroduced a foreign remittance payment card in the rand name of 0Bridge Card* Ban 9sInformation /echnology #ivision is always engaged in designing need ased software and other



8/60

programmers to ease the situation for the employees so as to ena le them to wor morededicatedly to satisfy the customers. Of late financing in S01s has een proven to e very

eneficial for an ing sector. Ban s have paid special focus to this sector to e4pand scopes ofe4tending credit facilities to enhance sustaina le profit. S01 has een found to e a very

potential avenue of financing& since it is elieved that small and medium entrepreneurs are veryhard wor ing and sincere in paying ac Ban 9s money. Ban s are optimistic that investing inthis sector would not entail huge volume of default loan li e conventional or cooperatefinancing.

2.5. Boa,d of di,e$to,

At present the Board of directors consists of 28 mem ers including the Chairman and iceChairman of the Ban . Out of 28 mem ers 2, of them are the sponsors of the shareholders. 0ost

of the mem ers are reputed industrialist and usinesspersons of our country. /he Chairmanheads the Board. 1ach of the directors is the mem er of the Board. /he mem ers are o liged tomaintain the annual general meeting and declare the dividend pay6out schedule on due time.0oreover& the committee selected y the shareholders represents individual ody that then loo safter the periodic issue with the management and tries to solve the pro lem.



9/60

2.8. Organogram of Ncc bank ltd



10/60

2.6. O, ani7ational St,u$tu,e of NCC Bank Limited at Na,ayan on# B,an$h:

2.18. (ana ement nfo,mation Sy&temSince its %ourney as commercial Ban in ,-


11/60

$CCB' has also positions itself as an esta lished correspondent an . /hrough a worldwidenetwor of 2F3 correspondent an s. $CCB' is present in all ey areas of the glo e. Ouram ition of correspondents includes top ran ing international an s with a glo al reach.

2.13. 0utho,i7ed $a/ital:/he Authori!ed Capital of the an / ,3&333.33 million in the year 23,3. In 233- theAuthori!ed Capital was / 8&333 million. So the Authori!ed Capital ecame dou le from 233-to 23,3.

2.1!. Paid-u/ $a/ital

/he an raised its 5aid6up capital from /H. 2&2


12/60

C 0PTER 3GENERAL BANKING OF NCC BANK LIMITED

NARAYANGONJ BRANCH



13/60

3.1. )e/o&it

#eposit of the an at the end of the year 23,3 was /H. F &-F,.27 million& which was more thandeposit of 233-. ?rom 233F to 23,3 an deposits has een increased than that previous year./his is happen ecause increasing confidence of customer to $CCB' inspires people to ma e

more and more deposited to $CCB'.

3.2. P,odu$t& and &e,%i$e& of N$$ "ank ltd

5roducts

#15OSI/ 5 O#UC/S 'OA$S @ A# A$C1

Cu,,ent 0$$ount

Sa%in & Bank )e/o&it 0$$ount

S/e$ial Noti$e )e/o&it SN); 0$$ount

Te,m )e/o&it 0$$ount

P,emium Te,m )e/o&it 0$$ount

n&tant Ea,nin & Te,m )e/o&it0$$ount

S/e$ial Sa%in & S$heme

S/e$ial Fi


14/60

Services

BRO=ER0*E O SE TRES R+ SER4 CE RE( TT0NCE SER4 CE

0em er& #ha a Stoc14change 'td.

?ull Service #epository5articipant

5rimary #ealer of

"ovt. Approved Securities

0ore than 3 ?inancialInstitutions all over the =orld.

,2 reputed 14change +ousescovering ma%or 'ocations ofour e4patriate9s convenience.

)e/o&it &e$tion

In fact& a an operates with the people9s money. /he an ing activity of a person starts with theopening of an account. $CCB' generally gives facility to open the following accounts

,. Current #eposit (C#)

2. Savings #eposit (SB)

. ?i4ed #eposit (?# )

7. Short /erm #eposit (S/#)

8. Special Savings Scheme (SSS)

F. Special ?i4ed #eposit Scheme(S?#S)

Cu,,ent )e/o&it 0$$ount

$CCB' opens current accounts for its clients to facilitate their day6to6day operations./he amount deposited in the current account can e withdrawn at any time. $o interest is

given on the current account. In certain cases& however& interest is availa le at an agreedrate where withdrawals are su %ect to a written notice for a specified period. /heminimum alance re>uirement for this account is /H.8333J6 and /H.283J6 is deductedfrom the account in case of closing the current account.



15/60

Sa%in & 0$$ount

/he an provides savings account services for the ease of its clients. It offers oth personal andcorporate Savings account to its clients in every ranch. /he current rate on the deposit amountis FK and the minimum alance re>uirement is /H.,333J6. /he an re>uires no other servicecharge for this account.

Fi


16/60

/wo types of Account can e opened under this scheme. One for a term of 8 years and anotherfor a term of ,3 years. ules for oth the accounts shall e the same. 0inimum 0onthlyinstallments of deposit will e /H.833J6 and its multiple up to /H.28333JL only as mentioned

elow to e deposited every month during the entire period of the scheme as fi4ed at the time ofopening of the account. Currently this interest rate is , .33K. Account may e opened for anyinstallment ut later on the same is not changea le. /he depositor(s) will e paid a fi4ed amountafter e4piry of the term as follows


(onthly)e/o&it

B)T;

0$tual Retu,nafte, ' +ea,&

0$tual Retu,nafte, 18 +ea,&

'88 7,&733 ,&,8&-331>888 888 ,2&72&333 7& &33328>888 ,F&8F&333 7F& F&3332'>888 23& 3&333 8 &-8&333


17/60

S/e$ial Fi


18/60

. Savings Ban Account may e opened in the name illiterate persons and minor personafter o servingJcompletion of necessary formalities.

7. Current #epositJ ?i4ed #eposit Account may e opened in the name of ?irm& CorporateBodies& Doint Stoc Companies.

8. Short /erm #eposit Account may e opened in the name of Corporate Bodies& DointStoc Companies.

F. A suita le introduction accepta le to the an is re>uired for opening an accounte4cept ?i4ed #eposit Account.

. Initial #eposit for opening Savings Ban is / . ,&333.33& for Current #eposit AJC andfor Short /erm deposit AJC is / . 8333.33


19/60

d) 5hotocopy of $ational I# CardJ5assportJ#riving 'icenceJ/I$ CertificateJBirthCertificate oth AJC holder(s) and $ominee(s) duly attasted y a authori!ed officer.

(ino,A& 0$$ount:

?ollowing documents have to e o tained in case of the account of minor

e) 5utting the word 0I$O * after the title of the account.

f) ecording of the special instruction of operation of the account.

g) /he AO? (Account Opening ?orm) is to e filled in and signed y either the parents orthe legal guardian appointed y the court of law and not y the minor.

P,o/,ieto,&hi/ Fi,m:

/he following documents have to e su mitted for preparing an account of a 5roprietorship firm

a) $ame of the firm.

) $ame of the 5roprietor.

c) Copy of /rade license.

d) Seal of 5roprietorship firm.

e) 5roprietor9s $ational oter Identification Card9s 5hotocopy.

Pa,tne,&hi/ Fi,m:

/he following documents have to e su mitted for preparing an account of a partnership firm

a) 5artnership deed.

(i) If the partnership firm is registered& one copy of registration forms.

(ii) If not& then a copy of certificate from the notary pu lic.

) Certified copy of valid trade license.

c) /rade seal.

d) 5artnership account agreement (#raft enclosed)

Limited Com/any:



20/60

?or the opening of an account of a limited company& following documents have to e su mitted

a) 14tract of esolution of the Board J "eneral 0eeting of the company for opening theaccount and authori!ation for its operation duly certified y the Chairman J 0anagingdirector of the company.

) Certified true copy of the 0emorandum @ Articles of Association of the Company.

c) Certificate of Incorporation of the company for inspection and return along with a dulycertified 5hotocopy for Ban 9s records.

d) Certificate from the egister of Doint Stoc Companies that the company is entitled tocommence usiness (in case of 5u lic 'td. Co. for inspection and return) along with aduly certified 5hotocopy for Ban 9s records.

e) 'atest copy of alance sheet.

f) 'ist of #irectors with address (a latest certified copy of ?orm6 ll).

Clu" ? So$iety:

?ollowing documents have to e o tained in case of the account of the clu or society

a) Up to date list of office earers.

) Certified copy of esolution for opening and operation of account.

c) Certified copy of Byelaw and egulations J Constitution.

d) Copy of "overnment Approval (if registered).

Non-*o%t. Colle e ? S$hool ? (ad,a&ha ? (ukta":

a) Up to date list of "overning Body J 0anaging Committee.

) Copy of esolution of the "overning BodyJ0anaging Committee authori!ing opening andoperation of the account duly certified y "a!etted Officer.

T,u&tee Boa,d: ?ollowing documents have to e o tained in case of the account of trustee

oard

a) 5rior approval of the +ead Office of 5B'.

) Certified copy of #eed of /rust& up to date list of mem ers of the /rustee.

c) Board and certified copy of the Resolution of rustee Board to open and operate theaccount!



21/60

Ca,d &e$tion

/he an eing a service oriented organi!ation offers A/0 card and various types of credit card

mentioned as elow

0T( Ca,d?)e"it Ca,d

$CC Ban is e4tending A/0 facility through 16Cash shared A/0 $etwor . Use of additional,72 A/09s Booth and F33 5OS of #utch6Bangla Ban . Cardholders can withdraw cash throughthe A/0 Booth 27 hours a day F8 days of the year. /here are two types of #e it card provided

y $CCB'

ISA (065ower) #e it Card

5roprietary #e it Card.

C,edit Ca,d

$CC Ban has launched its isa Credit Card Service on August 22& 2338 .Since then were a leto reach 8333 cards& oth corporate and general. $CC Ban has offering three types of CreditCard.

Ty/e of C,edit Ca,d

/here are three types of isa Credit Cards of $CCB'& these are 6,. isa Classic&

2. isa "old ('ocal)

. isa #ual Currency Card ("lo ally and 'ocally).

ide Ran e of 0$$e/t

$CC an isa Credit Card is accepted at over 8&333 merchant outlets around the country. Ourwide range of merchants include +otels& estaurants& Airline and /ravel Agents& Shopping0alls& +ospitals& Dewelers Shops& 0o ile 5hone and Internet Service 5roviders& 5etrol 5umpsand many moreP $ow $CC Ban isa Credit Cards can also e used at all ,72 A/09s Boothand F33 5OS (5oint of Sale) of #utch6Bangla Ban .

n&tant Ca&h 0d%an$e

:ou do not need to carry cash any more if you have a $CC Ban Credit Card. :ou can withdrawcash up to 83K of your credit limit from any A/0 across the country that shows isa logo.



22/60

C,edit Fa$ilitie&

$CC Ban isa Credit Card offers you free Credit facility up to 78 days and minimum of ,8days without any interest (5urchase only).

Su//lementa,y Ca,d

$CC an isa Credit Card holder can also en%oy spouse Credit Card free of cost for lifetime

and issue more Supplementary card.

Re a,d P,o ,am&

As a $CC Ban isa Credit Card holder& you will accumulate /reasure points for every purchase made y using isa Credit Card. ?or every / . 83 and US# , spent on your CreditCard& you will earn , and ,.8 /reasure 5oint accordingly and e closer to redeeming the rewardof your choice.

Fle


23/60

Attractive 5ricing (Annual fee 83K discount on card fee)

Strong Communication

Smiling faces of the Ban ers

"ood Am ience in the Ban

3.3. The $a&h $ounte, &e$tion

=e now that a Ban is the #ealer of 0oneyM it receives money and pay money. =here cashcounter should e the heart of any commercial an 9s ranch office as it receives and pay cash

every moment at its wor ing time. Cash Counter also does a very important wor y managingthe Ban 9s flow of ?und. All the money of any Ban Business enters @ e4its through the cashcounter. /his section is the ma%or part of Ban that wor s as the customer service orientedsection. /he efficiency of this section of a Ban crates the good image of that Ban to the alltype of customers. If the officials can serves at once the customer than it proves the stronghuman resources of that Ban and increases customer satisfactions& which improve the overall

position of that Ban in the mar et. It must e mentioned that $CCB' has a very strong group ofemployees& especially in the $arayangon% Branch& whom all the time serves the customerssatisfactorily. "enerally followings are some tas s done y the cash counter of $CCB' Ban

Cash eceive

Cash 5ayment

eceive of Credit Cards Bill.

5ayment of ?oreign emittance.

eceive Online /ransaction Charge.

5aymentJ eceive several #e itJCredit oucher.

3.!. The a$$ount& &e$tion

/his is the most confidential department of a an . ecording all inds of transactions of the ranch& confirming their accuracy and preparing statements are the main %o of this department. $ow6a6days under computeri!ed an ing system& the %o s of accounts department ecome very



24/60

easy. $ow the computer directly prepares the clean cash statement on party ledger vouchers. /hefunction of the accounts department can e divided into two parts

a. #aily function

. 5eriodical functionsa; )aily fun$tion&

/he routine daily tas s of the accounts departments are as follows

ecord the daily transactions in the cash oo .

ecord the daily transactions in general and su sidiary ledger.

5repare the daily position of the ranch comprising of deposit and cash.

5repare the daily statement of affairs showing all the assets and lia ility of the ranch as per ledger and su sidiary ledger separately.

5ay all e4penditure on ehalf of the ranch.

0a e salary statement and pay salary.

Chec ing whether all the vouchers are correctly passed to ensure the conformitywith the QActivity eport9M if otherwise ma ing it correct y calling the respectiveofficial to rectify the voucher.

"; Pe,iodi$al Ta&k&

/he routine periodicals tas ed performed y the department are as follows

5repare the monthly salary statements for the employees.

5u lish the asic data of the ranch.

5repare the wee ly position for the ranch& which is sent to the +ead Office tomaintain Cash eserve e>uirement.

5repare the monthly position for the ranch& which is sent to the +ead Office tomaintain li>uidity re>uirement.

5repare the wee ly position for the ranch comprising of the rea up of sector6wise deposit& credit etc.



25/60

5repare the wee ly position for the ranch comprising of the denomination wisestatement of cash in tills.

3.'. The $heDue $lea,in &e$tion

In Clearing Section che>ue& dividend warrants and other forms of financial instruments& whichare easy for encashment& are received. /he clearing department sends these instruments to theClearing +ouse of the Bangladesh Ban for collection. As soon as cash is received the amount isdeposited in the client9s account. Collection of che>ues& drafts etc. on ehalf of its customers inone ehalf of its customers in one of asic function of a commercial Ban . Clearing stands formutual settlement of claims made in etween mem er an s at an agreed time and place inrespect of instruments drawn on each other.

$egotia le instrument 'aw provides protection to a an er who collects a che>ue or a draft if the an er fulfills the following conditions

+e collects the instrument for customer

/he instrument e crossed

/he an er acts in good faith and without negligence

/here are two types of clearing6

,. Outward Clearing

2. Inward Clearing

Out a,d Clea,in

Outward Clearing means when a particular ranch receive instruments drawn on the other anwithin the clearing !one and those instruments for collection through the clearing arrangement isconsidered as outward clearing for that particular ranch.

CRE) T

In line with the policy guideline issued y the Central an from time to time& the anformulates its own credit policy eeping it fle4i le to accommodate changes that are ta ing

place. At present& several credit schemas are on the offer& which received >uit well response fromthe customers and may help the an to e4pand its customer ase. /he an also engaging in



26/60

syndication with other an s for allowing large loans converging Bangladesh an Qs rules andregulation.

3. Loan and 0d%an$e &e$tion

0a ing advances is the primary function of a an . A ma%or portion of its funds is used for this purpose and this is also the ma%or sources of an 9s income.

'oans are the right to receive payment or an o ligation to ma e payment on demand or at somefuture time on account of the immediate transfer of goods (securities).

'oans are the largest asset item& which generally account for half to almost three6>uarters of thetotal value of all an s assets. A an 9s loan account typically is ro en down into severalgroups of similar type loans. /he 'oan and Advances made y the $CCB' can roadly eclassified y following categories6

,. Continuous 'oan

2. #emand 'oan

. /erm 'oan

7. Other Special Scheme

Continuou& Loan

/hese are those advances which do not have any set schedule for drawing or dis ursement utusually have a terminal date of full ad%ustment or repayment.

a) Cash Credit (CC)

) Over #raft (O#)

0; Ca&h C,edit CC;:

A Cash Credit (CC) is an arrangement y which the customer is allowed to orrow money up toa limit. /his is a permanent arrangement and the customer need not draw the sanctioned amountat once& ut draw the amount as and when re>uired. /hey can put ac any surplus amount&which they may find with them. /hus Cash Credit (CC) is an active and running account& whichdeposits and with drawls may e affected fre>uently. Interest is charged only for the amountwithdrawn and not for the whole amount charged.

If the customer does not use the cash credit (CC) limit to the full e4tent& a commitment charge ismade y the an . /his charge is imposed on the unutili!ed portion of Cash Credit (CC) only.



27/60

Cash Credit (CC) provides an elastic form of orrowing since the limit fluctuates according tothe needs of the usiness. Cash Credits (CC) are the most favorite mode of orrowing y largecommercial and industrial concerns in our country.

Cash Credit (CC) arrangements are usually made against the security of commoditieshypothecated or pledged with the an .

/here are two types of CC account

i). Cash Credit (+ypothecation)

ii). Cash Credit (5ledge)

"; O%e, ),aft O);:

Overdraft (O#) is an arrangement etween a an er and its customer y which the latter isallowed to withdraw over his credit alance in the current account up to an agreed limit. /his isonly a temporary accommodation usually granted against securities. /he orrower is permitted todraw and repay any num er of times& provided the total amount overdrawn does not e4ceed theagreed limit. /he interest is charged only for the amount drawn and not for the whole amountsanctioned.

A cash credit is differs from an overdraft in one respect. A cash credit is used for long term y

usinessmen in doing regular usiness whereas overdraft is made occasionally and for shortduration.

/here are two inds of overdraft.

a) Secured Over #raft

) Unsecured Over #raft

)emand Loan

/he loan which ecome paya le after serving demand notice y the an concerned are termedas #emand 'oan.

/here are five inds of demand loan. /hese are given ellow

a) 'oan against Imported 0erchandise ('I0)

) 'oan against /rust eceipt ('/ )



28/60

c) 5ayment against #ocuments (5A#)

d) 'oan against 5ac ing Credit

a; Loan a ain&t m/o,ted (e,$handi&e L (;

Usually& importer fails to retire the documents in spite of repeated reminders of the an er or the an has to clear the goods imported under the 'etter of Credit at the re>uest of the importer( orrower). In oth the cases& whether the importer fails to retire the documents or re>uest forclearance of goods& the outstanding under 5A# or BJ1 is transferred to Loan a ain&t m/o,ted(e,$handi&e L (; account and the overdue interest from the date of accompanying Bills of14change or negotiating date to the date of transfer to 'I0 account is charged. At the time ofopening of letter of credit the an s o tain from the importer an arrangement on stamped paperwhich provides for financing and& if necessary& clearance and storage of goods y de itingimporter9s account at their ris and responsi ilities. After clearance& consignments are ta en

delivery y the importer on full payment of an 9s lia ility. $ormally part delivery is notallowed while on 'I0 account. =hen the delivery in part is desired y the importer& the 'I0 isconverted into cash credit account retaining proper margin and e4ecuting charge documents& thedelivery is affected thereafter on o taining pro rata payment.

"; Loan a ain&t T,u&t Re$ei/t LTR;

Under this arrangement& credit is allowed to the importer to retire documents and release theconsignment from the customs authority against trust& receipt eeping the goods under importer9scontrol. /he rate of interest of $CCB' on '/ N ,7.83K.

$; Payment a ain&t )o$ument& P0);

/he an that opens the letter of credit is ound to honor its commitment to pay for import illswhen these are presented for payment& if drawn strictly in terms letter of credit. /he foreigncorrespondent an & who negotiates the documents& de its the account of the opening an and&in fact& the amount thus stands advanced on ehalf of the importer. /he opening an will lodgethe shipping documents to their oo and will respond to the de it advice originated y theforeign correspondent to the de it of 5ayment against #ocuments (5A#)* account or Bills of14change (BJ1)* accounts and present the ill to the importer for payment. /he rate of interest of

$CCB' on 5A# N ,7.83K

d; Loan a ain&t Pa$kin C,edit

5ac ing credit is a short term advance granted y an to an e4porter for assisting him to uy& process& pac s and ships the goods. /he credit is gradually e4tended for payment of freight&handling charges& insurance and e4port duties. A pac ing credit advance does not normallye4tend eyond ,uidated y negotiationJ purchase of the ills ofe4change. /he rate of interest of $CCB' on this pac ing credit N .33K.



29/60

e; Loan a ain&t n%e&tment

In order to contri ute to the development of the Capital 0ar et of the country $CC Ban'imited e4tends credit facilities against pledge of Shares& #e entures& 5ri!e Bonds& BangladeshBan /reasury Bills etc. to the individuals as well as to the 0em er of #S1 @ CS1.

Te,m Loan

/hese are loans which have a specific term for repayment as specified in the loan agreement.

a) 'oan ("eneral)

) +ousing 'oan

c) 5ro%ect 'oan

d) /ransport 'oan

e) Small Business 'oan Scheme

f) 5ersonal 'oan Scheme

a; Loan *ene,al;

In case of loan general& the a er advances a lump sum for a certain period at an agreed rate ofinterest. /he entire amount is paid on an occasion either in cash or y credit in hisJher currentaccount which heJshe can draw at any time. /he interest is charged for the full amountsanctioned whether heJshe withdraws the money from hisJher account or not. /he loan may erepaid in monthly installments or at the e4piry of a certain period.

"; ou&in Loan

A large amount of money needed to construct a house or purchase a apartment .It is not possi leto of all people to construct a house y only own income sources. 1specially this pro lem largelyfaces y middle level and fi4ed income people. /o solve this pro lem& $CCB'9s offer +ousingloan with easy repayment condition and less interest rate.

$; P,o#e$t Loan



30/60

$CC an 'td has their pro%ect loan scheme. /hough they do not invest in pro%ect loane4tensively ut now they are planning on pro%ect loan. Because pro%ect loan is huge investmentand it completely depends on success of the pro%ect for that reason an always eeps eye somema%or factor efore invest on pro%ect loan. Before invest on pro%ect loan Ban always who is the

people involves in the pro%ect Security standard of the orrower. /hen an loo s for thefeasi ility report of the pro%ect. Borrower has to completely show the feasi ility report to thehead office. In the feasi ility report orrower has to show the what the mission of the pro%ect&who are the target customer& comparative analysis of the pro%ect with other same pro%ect& how the

pro%ect meets the demand of the target customer& for which purpose the loan is as ing for& detailinformation of the pro%ect operation& detail price list of the e>uipment& appro4imate repayment

planning y the orrower. Branches do not have any authority to sanction any amount of loan for

pro%ect loan. Branch can only asses the pro%ect feasi ility& evaluate the client chec the necessary papers and collect it from the client. After getting the entire necessary papers ranch ma es a proposal for the loan and send it to the head office. +ead office then re6evaluate the proposalwith necessary papers. /hen head office again inspects the pro%ect. After getting all theevaluation head office then send the sanction letter to the ranch. 'oan amount then dis ursefrom the ranch. Branch has to do the regular monitoring until the whole loan amount is repaid.d; T,an&/o,t Loan

$CC Ban 'td was an investment company efore the conversion in a an . So they have goodidea a out lease financing. /ransport loan is fallen under the lease financing& though it is calledtransport loan ut it is actually fallen under leasing term and condition. $CC Ban 'td does nothave any car loan scheme for individual clients& they had this scheme ut the scheme iscompletely stopped for the time eing.

5rocess of transport loan is more or less similar to pro%ect loan. Borrower has to apply for theloan in prescri ed an application form. In the application form orrower must mention whichvehicle he wants to uy and what9s the >uantity. Borrower also has to provide detail price list ofthe vehicle& insurance paper for each vehicle& possi le repayment planning of the loanM list ofcollateral& list of hypothecation of securities and other necessary papers depends on clients andnum er of vehicles. After getting all necessary papers and field inspection ranch ma es a

proposal for the loan and sends it to the head office. +ead offices then again chec s thenecessary papers and do the field inspection. After inspection if +ead Office thin s that for

sanction of the loan they need more papers and securities& orrower has to provide those papers.Branches usually do not have any authority to sanction any amount of loan amount ranch onlydis urse the amount and do the regular monitoring whether the vehicle is purchased& is they>uotation match with the real one& vehicle is in the route and more importantly orrower isrepaying the installment regularly.

e; Small Bu&ine&& Loan S$heme



31/60

Small usinessman ta e place a large portion in our country. 0ore of them are honest& energeticand hardy. In the a sence of sufficient capital more of them cannot manage their usiness properly./hey have not sufficient asset to ma e a security against loan& as a result they are failure to ta e aloan from an or other financial assistance institution. If a loan give to them with easy terms andcondition then this energetic small usinessman not only manage and increase their usiness

properly ut also they ta e important role in development of our country. /o meet up this purpose& $CCB' start Small Business 'oan Scheme.

f; Pe,&onal Loan S$heme

?i4ed income employee9s of various firm or company need urgently financial assistance for thefollowing purpose6

0arriage purpose

1ducation purpose

Advance against Salary

1ducation 'oan

/ravel 'oan

1specially meet up this financing y own income source is very difficult for middle class people./o solving these pro lems $CCB' introduce 5ersonal 'oan Scheme for Salaried 5erson.

Othe, S/e$ial S$heme

$CCB' Operate some ind of loan scheme as well to contri ute the overall economy& povertyalleviation and fulfill some asic needs of the people. /he special loan schemes are

a) Consumer Scheme

) 'ease ?inance

c) 0icro credit financing

a; Con&ume, S$heme

/he Scheme aims at improving the standard of living of the fi4ed income group. Under thescheme the clients may secure loan facilities at easy installments to procure household amenities.

";Lea&e Finan$in



32/60

An entrepreneur& under this scheme& may avail of the lease facilities to procure industrialmachinery (without having to purchase it y down payment) with easy repayment schedule. /heclients also get special re ate in their income6ta4 payment under the scheme.

'ease financing is one of the most convenient long term sources of ac>uiring capital machineryand e>uipment. It is a very popular scheme where y a client is given the opportunity to have ane4clusive right to use an asset& usually for an agreed period of time& against payment of rent. Oflate& the lease finance has ecome very popular in almost all the countries of the world. Ano vious advantage of the lease is to use an asset without having to uy it. /he lessee is o ligatedto ma e lease payments until the e4piration of the lease agreement& which corresponds to theuseful life of the assets. In a capital scarce economy li e ours& 'ease ?inancing is suita le forfirms to ac>uire Capital 0achinery& 1>uipments& 0edical Instruments& and Automo iles etc.And there y employ their own resources more advantageously in some other investments. 'easefinancing also helps a firm to reap significant economic enefit through ta4 saving and yreducing the ris of the e>uipments ecoming o solete due to the technological advancement.

$; (i$,o $,edit finan$in

/o fulfill its commitment to play a vital role in socio economic development of the country $CCBan 'td has introduce a small and medium credit scheme for its customers.

/he o %ective of the scheme is

/o encourage and develop medium and small entrepreneurs

/o provide credit with minimum comple4ity

/o generate employment.

Under the scheme& $CC Ban 'td. is providing loan

/o meet wor ing capital

/o purchase capital machinery and for e4pansion of usiness and for purchasinghousehold dura ly.

/he Scheme covers the following areas of options

0 ,i$ultu,e &e$to, Seed or crop loan& 5oultry and ?isheries& ?ish processing&5lot& ?ish storage and 0ar eting 5ro%ect& with processing pro%ect etc.



33/60

Small and Cotta e ndu&t,y +andicraft ma er& Blac smith& ?ishing net weaver&handloom industry& "oldsmith& watch assem ling pro%ect& mineral water plant etc.

Se,%i$e ndu&t,y: /ransportation& medical service provider& different type of shopowners& hotel and restaurant owners& vocational training center etc.

ou&ehold du,a"le and Con&ume, $,edit 1lectric e>uipment& 1lectronics&ehicles& ?urniture& medication and +ospitali!ation& coo eries etc.

nfo,mation Te$hnolo y Se$to, Computer and Computer accessories purchasefor household use& selling up of Computer training institute& Software developmentfor e4porting purpose& Software development for local usiness and household

users.

Ene, y Se$to, +ousehold purchase of su stitute energy li e U5S& I5S&Sta ili!er& Battery etc. Biogas technology& solar electricity producing plant& smallelectricity production etc.

3.5. Rate& of )iffe,ent Loan and 0d%an$e:

P rti!"l rs #nterest

$ teCash Credit (CC) 13"

Overdraft (OD) 14"

Small Loan 14"

Exports [Packing Credit & ECC 7"

Cons!mer "inance Scheme 16"

Commercial and #rade "inancing 14!50"

$orking Capital "inancing 14!00"

Loan(%) against (P ") 16!00"

'etail and Cons!mer "inancing 16!00"

S E "inancing 16!00"

#ransport Loan 16!00"



34/60

mport and Export "inancing 07!00"

Long #erm (Capital) "inancing 14!00"

*o!se Loan+'esidential (*,LS) 13!00"

*o!sing Loan (Commercial) 14!00"

-gric!lt!ral "inancing 11!50"

Loan+%.#erm Loan [Small Cottage nd!str/ 13!25"

Loan+%.#erm Loan [Large & edi!m Scale nd!str/ 13!25"

Commercial Loan (P-D0 L#' & L ) 14!50"

Commercial Loan [Pledge & */pothecation 13!00"

Small Scale nd!str/ [Loan+%.#erm Loan & $orkingCapital

16!00"

C 0PTER !

B0N= N* OPER0T ONS

CONTROLL N* BO)+ N NCC B0N=

LT).

.



35/60

/he +ead Office is located at 6< 0oti%heel CJA& #ha a. It monitors and controls the an ingoperations of the ranches scattered in different strategic usiness locations in Bangladesh. At

present& there are , divisions in the +ead Office. /he classifications of the different divisionsare mentioned as follows



36/60

$ow descri e it elow

C,edit di%i&ion

/he Credit #ivision is one of the most essential and valua le divisions of every commercial an s. /he Credit #ivision of the Ban deals with issues regarding Corporate ?inance& "eneralCredit& Special Schemes such as +ouse Building 'oan (+B') and Consumer Credit Scheme(CCS)& Small @ 0edium 1nterprise (S01) 'oan etc.

0 ) T NSPECT ON RECO4ER+ ) STR B T ON



37/60

Although the loan Administration #ivision is not at par with the Credit #ivision of the an interms of +uman esource& the performance of the Ban relies heavily on this division. It isresponsi le for credit monitoring& documentation& distri ution '.#.O.s (loans& discounts andoverdrafts)& preparing 0SOC? (0onthly Statement Of Outstanding Credit ?acilities) and dealingwith / (/rust eceipt) etc.

. BO0R) ) 4 S ON

/his division deals with oard of directors of the organi!ation. Usually when the oard meetingheld where it will held and other activities are done y this department.

(0N RESO RCE ) 4 S ON

/he necessary of having an efficient +uman esource #ivision is one of the uni>ue re>uirementsfor the success of any usiness organi!ation. $ational Credit and Commerce an 'imited unli eother commercial an s has a proficient +uman esource #ivision that deals with recruitment

and manpower planning& performance evaluation& disciplinary actions& promotion& cadre charge&employee service rules and enefits& training and development. An 14ecutive ice 5residentleads this division with the assistance of a ice 5resident.

EST0BL S (ENT ) 4 S ON

'ogistic and "eneral Services #ivision is considered as the center for providing necessarysupporting services to other department as well as the employee. /he function of this divisionincludes providing utility services& maintenance of premises& and purchase of printing andgeneral stationery& dispatch and transport pool. A ice 5resident monitors this division.

NTERN0T ON0L ) 4 S ON

/he role of the International #ivision is very vital to providing various an ing service to theclients. /his division also maintains the mutual relationship with many corresponding an s onseveral issues such as agency and credit line arrangement& reconciliation& authori!ed signaturecontrol& /HC (test ey control)& issuance of power of attorney& fund management and treasuryoperations (foreign) etc.

nfo,mation te$hnolo y di%i&ion

It is very significant to adapt with the ongoing information technology revolution to providefaster services to the clients. /he Information /echnology #ivision supervises the overallcomputeri!ation of the an ing operations and networ ing& provides system support& deals withdata processing and data entry& procures and maintain hardware& maintain and develop softwarere>uired y the an to facilitate and support the day to day operations.

Ca,d di%i&ion



38/60

/he core functions of the Card #ivision include dealing with issues regarding de it card& A/0card& and credit card& customer and vendors management. An Assistant. ice 5resident headsthis division.

. (a,ketin and ",an$h di%i&ion

/his division is e4pected to deal with issues regarding mar eting of asset and lia ility products& ranch e4pansion etc. this division involves introducing new financial products. It also dealswith renovation of new ranches and location of new ranches.

T,ainin di%i&ion

/he main o %ective of this division is to ma e the employees efficient. Usually this divisionoffers training to their employee time to time. /his is helpful to the employee to do their %oefficiently and effectively.

T,ea&u,y di%i&ion

/he ey responsi ility of this division is to utili!e its fund to various profita le usinesses.Usually financial organi!ation has huge capital and they invest this capital in various usiness.

. Pu"li$ ,elation di%i&ion

/he main o %ective of the pu lic relation department is to ma e a ridge within the organi!ation

and outsiders. /his division directly deals with general pu lic.

Cent,al a$$ount di%i&ion

/his division monitors several important functions of an ing operations performed in different

ranches across the country. It deals with accounts& financial planning& udget and monitoring&

preparation of returns and statement& reconciliation& maintenance of 5? (5rovident ?und)&

gratuity and superannuation fund& local treasury etc.



39/60

CHAPTER 5

CREDIT RISK MANAGEMENT GUIDELINES BY BANGLADESH BANK

0mendment of &e$tion 13 of 0$t N.1! of 1661: In section , of the said Act6 the wordsRprevious financial yearR& wherever they are mentioned& the words Raccounting yearR thefollowing e4planation shall e added& namely 6 R?or the purpose of this section& demandlia ilities and temporary lia ilities shall not include the paid6up capital& the consolidated fund&the lia ilities shown in the profit and loss account and loans received from the Bangladesh Banand inter an lia ilities.R



40/60

N) STR+ BEST PR0CT CES 0S S **EST) B+ B0N*L0)ES B0N=

'.1 Poli$y *uideline&/his section details fundamental credit ris management policies that are recommended foradoption y all an s in Bangladesh. /he guidelines contained herein outline general principlesthat are designed to govern the implementation of more detailed lending procedures and risgrading systems within individual an s.

Lendin *uideline&:All an s should have esta lished Credit 5olicies ( 'ending "uidelines*) that clearly outline thesenior management9s view of usiness development priorities and the terms and conditions thatshould e adhered to in order for loans to e approved. /he 'ending "uidelines should eupdated at least annually to reflect changes in the economic outloo and the evolution of the

an 9s loan portfolio& and e distri uted to all lendingJmar eting officers. /he 'ending"uidelines should e approved y the 0anaging #irectorJC1O @ Board of #irectors of the an

ased on the endorsement of the an 9s +ead of Credit is 0anagement and the +ead ofCorporateJCommercial Ban ing. (Section 2., of these guidelines refers) Any departure ordeviation from the 'ending "uidelines should e e4plicitly identified in credit applications and a

%ustification for approval provided. Approval of loans that do not comply with 'ending"uidelines should e restricted to the an 9s +ead of Credit or 0anaging #irectorJC1O @ Boardof #irectors. /he 'ending "uidelines should provide the ey foundations for accountofficersJrelationship managers ( 0) to formulate their recommendations for approval& andshould include the following

ndu&t,y and Bu&ine&& Se ment Fo$u&:/he 'ending "uidelines should clearly identify the usinessJindustry sectors that shouldconstitute the ma%ority of the an 9s loan portfolio. ?or each sector& a clear indication of the

an 9s appetite for growth should e indicated (as an e4ample& /e4tiles "row& Cement0aintain& Construction Shrin ). /his will provide necessary direction to the an 9s mar etingstaff.

Ty/e& of Loan Fa$ilitie&:

/he type of loans that are permitted should e clearly indicated& such as =or ing Capital& /rade?inance& /erm 'oan& etc.

C,o&& Bo,de, Ri&k:is associated with cross order lending. Borrowers of a particular country may e una le or

unwilling to fulfill principle andJor interest o ligations. #istinguished from ordinary credit ris ecause the difficulty arises from a political event& such as suspension of e4ternal payments



41/60

o Synonymous with political @ sovereign ris o /hird world de t crisis. ?or e4ample& e4port documents

negotiated for countries li e $igeria.

'.2 C,edit 0&&e&&ment 9 Ri&k *,adin C,edit 0&&e&&ment

A thorough credit and ris assessment should e conducted prior to the granting of loans& and atleast annually thereafter for all facilities. /he results of this assessment should e presented in aCredit Application that originates from the relationship managerJaccount officer ( 0*)& and isapproved y Credit is 0anagement (C 0). /he 0 should e the owner of the customerrelationship& and must e held responsi le to ensure the accuracy of the entire credit applicationsu mitted for approval. 0s must e familiar with the an 9s 'ending "uidelines and shouldconduct due diligence on new orrowers& principals& and guarantors. It is essential that 0s

now their customers and conduct due diligence on new orrowers& principals& and guarantors toensure such parties are in fact who they represent themselves to e. All an s should haveesta lished Hnow :our Customer (H:C) and 0oney 'aundering guidelines which should eadhered to at all times. Credit Applications should summaries the results of the 0s risassessment and include& as a minimum& the following details

o Amount and type of loan(s) proposed.o 5urpose of loans.o 'oan Structure (/enor& Covenants& epayment Schedule&

Interest)o Security Arrangements.

In addition& the following ris areas should e addressed

Bo,,o e, 0naly&i&: /he ma%ority shareholders& management team and group or affiliatecompanies should e assessed. Any issues regarding lac of management depth&complicated ownership structures or intergroup transactions should e addressed& andris s mitigated Industry analysis.

Su//lie,?Buye, 0naly&i&. Any customer or supplier concentration should e addressed&as these could have a significant impact on the future via ility of the orrower.

i&to,i$al Finan$ial 0naly&i&. An analysis of a minimum of years historical financialstatements of the orrower should e presented. =here reliance is placed on a corporate

guarantor& guarantor financial statements should also e analyses. /he analysis should

address the >uality and sustaina ility of earnings& cash flow and the strength of the



42/60

orrower9s alance sheet. Specifically& cash flow& leverage and profita ility must e

analy!ed.

P,o#e$ted Finan$ial Pe,fo,man$e: =here term facilities are eing proposed& pro%ectionof the orrower9s future financial performance should e provided& indicating an analysisof the sufficiency of cash flow to service de t repayments. 'oans should not e grantedif pro%ected cash flow is insufficient to repay de ts.

0$$ount Condu$t: ?or e4isting orrowers& the historic performance in meetingrepayment o ligations (trade payments& che>ues& interest and principal payments& etc)should e assessed.

0dhe,en$e to Lendin *uideline&: Credit Applications should clearly state whether ornot the proposed application is in compliance with the an 9s 'ending "uidelines. /heBan 9s +ead of Credit or 0anaging #irectorJC1O should approve Credit Applicationsthat do not adhere to the an 9s 'ending "uidelines.

. Loan St,u$tu,e: /he amounts and tenors of financing proposed should e %ustified ased

on the pro%ected repayment a ility and loan purpose. 14cessive tenor or amount relativeto usiness needs increases the ris of fund diversion and may adversely impact the

orrower9s repayment a ility.

Se$u,ity: A current valuation of collateral should e o tained and the >uality and priorityof security eing proposed should e assessed. 'oans should not e granted ased solelyon security. Ade>uacy and the e4tent of the insurance coverage should e assessed.

Name Lendin : Credit proposals should not e unduly influenced y an over reliance onthe sponsoring principal9s reputation& reported independent means& or their perceivedwillingness to in%ect funds into various usiness enterprises in case of need. /hesesituations should e discouraged and treated with great caution. ather& credit proposalsand the granting of loans should e ased on sound fundamentals& supported y athorough financial and ris analysis. Appendi4 iv contains a template for creditapplication.

Ri&k ,adin

All Ban s should adopt a credit ris grading system. /he system should define the ris profile of orrower9s to ensure that account management& structure and pricing are commensurate with theris involved. is grading is a ey measurement of a an 9s asset >uality& and as such& it is



43/60

essential that grading is a ro ust process. All facilities should e assigned a ris grade. =heredeterioration in ris is noted& the is "rade assigned to a orrower and its facilities should eimmediately changed. Borrower is "rades should e clearly stated on Credit Applications./he following is "rade 0atri4 is provided as an e4ample. /he more conservative ris grade(higher) should e applied if there is a difference etween the personal %udgment and the is"rade Scorecard results. It is recogni!ed that the an s may have more or less is "radesMhowever& monitoring standards and account management must e appropriate given the assigned

is "rade

'.3 0//,o%al 0utho,ity> Se ,e ation of )utie& 9 nte,nal 0udit

0//,o%al 0utho,ity/he authority to sanctionJapprove loans must e clearly delegated to senior credit e4ecutives ythe 0anaging #irectorJC1O @ Board ased on the e4ecutive9s nowledge and e4perience.Approval authority should e delegated to individual e4ecutives and not to committees to ensureaccounta ility in the approval process. /he following guidelines should apply in theapprovalJsanctioning of loans

Credit approval authority must e delegated in writing from the 0#JC1O @ Board (asappropriate)& ac nowledged y recipients& and records of all delegation retained in C 0.

#elegated approval authorities must e reviewed annually y 0#JC1OJBoard.

/he credit approval function should e separate from the mar etingJrelationshipmanagement ( 0) function.

/he role of Credit Committee may e restricted to only review of proposals i.e.ecommendations or review of an 9s loan portfolios.

Approvals must e evidenced in writing& or y electronic signature. Approval recordsmust e ept on file with the Credit Applications.

All credit ris s must e authori!ed y e4ecutives within the authority limit delegated tothem y the 0#JC1O. /he pooling* or com ining of authority limits should not e

permitted.

Credit approval should e centrali!ed within the C 0 function. egional credit centers

may e esta lished& however& all large loans must e approved y the +ead .

Credit and is 0anagement or 0anaging #irectorJC1OJBoard or delegated +eadOffice credit e4ecutive.

/he aggregate e4posure to any orrower or orrowing group must e used to determinethe approval authority re>uired.



44/60

Any credit proposal that does not comply with 'ending "uidelines& regardless of amount&should e referred to +ead Office for Approval.

0#J+ead of Credit is 0anagement must approve and monitor any cross ordere4posure ris .

Any reaches of lending authority should e reported to 0#JC1O& +ead of InternalControl& and +ead of C 0.

Se ,e ation of )utie&

Ban s should aim to segregate the following lending functionso Credit ApprovalJ is 0anagemento elationship 0anagementJ0ar etingo Credit Administration

/he purpose of the segregation is to improve the nowledge levels and e4pertise in eachdepartment& to impose controls over the dis ursement of authori!ed loan facilities and o tain ano %ective and independent %udgment of credit proposals.

nte,nal 0uditBan s should have a segregated internal auditJcontrol department charged with conducting auditsof all departments. Audits should e carried out annually& and should ensure compliance withregulatory guidelines& internal procedures& and 'ending "uidelines and Bangladesh Banre>uirements.

'.!. P,efe,,ed o, ani7ational &t,u$tu,e 9 ,e&/on&i"ilitie&/he appropriate organi!ational structure must e in place to support the adoption of the policiesdetailed in Section , of these guidelines. /he ey feature is the segregation of the0ar etingJ elationship 0anagement function from Approval J is 0anagementJAdministration functions. Credit approval should e centrali!ed within the C 0 function.

egional credit centers may e esta lished& however& all applications must e approved y the+ead of Credit and is 0anagement or 0anaging #irector JC1O Board or delegated +eadOffice credit e4ecutive.

=ey Re&/on&i"ilitie&/he ey responsi ilities of the a ove functions are as follows

C,edit Ri&k (ana ement CR(;



45/60

o Oversight of the an 9s credit policies& procedures and controls relating to all credit ris sarising from corporateJcommercial institutional an ing& personal an ing& @ treasuryoperations.

o Oversight of the an 9s asset >uality.o #irectly manage all Su standard& #ou tful @ Bad and 'oss accounts to ma4imi!e

recovery and ensure that appropriate and timely loan loss provisions have een made.o /o approve (or decline)& within delegated authority& Credit Applications recommended y

0. =here aggregate orrower e4posure is in e4cess of approval limits& to providerecommendation to 0#JC1O for approval.

o /o provide adviceJassistance regarding all credit matters to line managementJ 0s.o /o ensure that lending e4ecutives have ade>uate e4perience andJor training in order to

carry out %o duties effectively.o Credit Administrationo /o ensure that all security documentation complies with the terms of approval and is

enforcea le.o /o monitor insurance coverage to ensure appropriate coverage is in place over assets

pledged as collateral& and is properly assigned to the an .o /o control loan dis ursements only after all terms and conditions of approval have een

met& and all security documentation is in place.o /o maintain control over all security documentation.o /o monitor orrower9s compliance with covenants and agreed terms and conditions& and

general monitoring of account conductJperformance.

Relation&hi/ (ana ement?(a,ketin R(;

o /o act as the primary an contact with orrowers.o /o maintain thorough nowledge of orrower9s usiness and industry through regular

contact& factoryJwarehouse inspections& etc. 0s should proactively monitor the financial performance and account conduct of orrowers.

o /o e responsi le for the timely and accurate su mission of Credit Applications for new proposals and annual reviews& ta ing into account the credit assessment

o /o highlight any deterioration in orrower9s financial standing and amend the orrower9sis "rade in a timely manner. Changes in is "rades should e advised to and

approved y C 0.o /o see assistanceJadvice at the earliest from C 0 regarding the structuring of facilities&

potential deterioration in accounts or for any credit related issues. Internal AuditJControl

o Conducts independent inspections annually to ensure compliance with 'ending"uidelines& operating procedures& an policies and Bangladesh Ban directives. eportsdirectly to 0#JC1O or Audit committee of the Board.



46/60

'.'. P,o$edu,al uideline&/his section outlines of the main procedures that are needed to ensure compliance with the

policies contained in Section ,.3 of these guidelines.

'. 0//,o%al P,o$e&&/he approval process must reinforce the segregation of elationship 0anagementJ 0ar etingfrom the approving authority. /he responsi ility for preparing the Credit Application should restwith the 0 within the corporateJcommercial an ing department. Credit Applications should

e recommended for approval y the 0 team and forwarded to the approval team within C 0and approved y individual e4ecutives. Ban s may wish to esta lish various thresholds& a ovewhich& the recommendation of the+ead of CorporateJCommercial Ban ing is re>uired prior to onward recommendation to C 0for approval. In addition& an s may wish to esta lish regional credit centres within the approvalteam to handle routine approvals. 14ecutives in head office C 0 should approve all large loans./he recommending or approving e4ecutives should ta e responsi ility for and e heldaccounta le for their recommendations or approval. #elegation of approval limits should e suchthat all proposals where the facilities are up to ,8K of the an 9s capital should e approved atthe C 0 level& facilities up to 28K of capital should e approved y C1OJ0#& with proposalsin e4cess of 28K of capital to e approved y the 1CJBoard only after recommendation of C 0&Corporate Ban ing and 0#JC1O.

C,edit 0dmini&t,ation/he Credit Administration function is critical in ensuring that proper documentation and

approvals are in place prior to the dis ursement of loan facilities. ?or this reason& it is essentialthat the functions of Credit Administration e strictly segregated from elationship0anagementJ0ar eting in order to avoid the possi ility of controls eing compromised or issuesnot eing highlighted at the appropriate level. Credit Administration procedures should e in

place to ensure the following

)i&"u,&ement:Security documents are prepared in accordance with approval terms and are legally enforcea le.

Standard loan facility documentation that has een reviewed y legal counsel should e used inall cases. 14ceptions should e referred to legal counsel for advice ased on authori!ation froman appropriate e4ecutive in C 0. #is ursements under loan facilities are only e made when allsecurity documentation is in place. CIB report should reflectJinclude the name of all the lenderswith facility& limit @ outstanding. All formalities regarding large loans @ loans to #irectorsshould e guided y Bangladesh Ban circulars @ related section of Ban ing Companies Act.All Credit Approval terms have een met.



47/60

Cu&todial )utie&:'oan dis ursements and the preparation and storage of security documents should e centrali!edin the regional credit centers. Appropriate insurance coverage is maintained (and renewed on atimely asis) on assets pledged as collateral. Security documentation is held under strict control&

prefera ly in loc ed fireproof storage.

Com/lian$e ReDui,ement&:All re>uired Bangladesh Ban returns are su mitted in the correct format in a timely manner.Bangladesh Ban circularsJregulations are maintained centrally& and advised to all relevantdepartments to ensure compliance. All T third party service providers (value9s& lawyers& insurers&C5As etc.) are approved and performance reviewed on an annual asis. Ban s are referred toBangladesh Ban circular outlining approved e4ternal audit firms that are accepta le.

'.5 n$enti%e P,o ,am:Ban s may wish to introduce incentive programs to encourage ecovery Unit ( U) Account0anagers to ring down the $on 5erforming 'oans ($5's).

/he ta le elow shows an indicative incentive plan for U account managers


ecovery as a K of

5rincipal plus interest

ecommended Incentive as K of net recovery

amount

If CG 7- if ,itten off 5 G to 188G ,.33K 2.33K'1G t8 5'G 3.83K ,.33K28G to '8G 3.28K 3.83K


48/60

CHAPTER !

CO(PL 0NCE OF B0N*L0)ES B0N=* )EL NES B+ NCC B0N= L ( TE)



49/60

All of Commercial Ban & $CC Ban 'td. also follow and practices Ban ing Companies Act on,--, regarding of Bangladesh Ban .

In the previous sections of this report we have critically analy!ed $CC Ban 9s e4isting creditris management system as well as Bangladesh Ban 9s est practices guidelines for managingcredit ris . Comparing $CC Ban 9s current credit ris management system with the BBH est

practices guideline we see that $CC Ban lac s some of the est practices in an ing industrywhich can e generated in the following way6

.1C,edit Poli$ie&? Lendin *uideline: In the a ove analysis we have seen that $CC Banlimited has no written credit policy though it follows some policy. As there is no written credit

policy& ranch managers sometimes get confused whether to go with a pro%ect or not. /hus $CCBan limited should have a lending guideline availa le in every ranches so that credit officerscan ta e >uic decision whether to accept or re%ect a pro%ect. /he lending guideline shouldinclude the following6

Industry or usiness segment focus./ypes of loan facilities#etails of single orrowerJ group limit'ending caps#iscouraged usiness type'oan facility 5arametersCross Border ris

.2 C,edit 0&&e&&ment 9 Ri&k *,adin : /hough credit is properly assessed in $CCB'& utthere is no ris grading system applied here. It should adopt a credit ris grading system toensure account management& structure and pricing are commensurate with the ris involved.

.3 0//,o%al 0utho,ity: In Bangladesh Ban 9s guideline it is written that Approval authorityshould e delegated to individual e4ecutives and not to committees to ensure accounta ility inapproval process*. But in $CC Ban limited we see that every credit goes to the oard via creditcommittee. As a result& wastage of time occurs and no one is held accounta le for a ad loan.

.! Se ,e ation of )utie&: According to Bangladesh Ban "uideline Ban s should aim tosegregate the following lending functions to improve the nowledge levels and e4pertise in eachdepartment

Credit ApprovalJ is 0anagement



50/60

elationship 0anagementJ 0ar eting Credit Administration

But in $CC Ban limited there is no such depart mention or segregation of duties. In small ranches of $CCB' only single loan officer do all the %o s li e loan mar eting& ris assessing

and credit administration.

..' nte,nal 0udit: $CC Ban limited has a segregated internal auditJ control departmentcharged with conducting audit of all departments as suggested y Bangladesh an guideline.

. P,efe,,ed O, ani7ational St,u$tu,e: Currently $CC Ban does not follow the preferredmanagement structure as suggested y BB guideline. /he ey feature in the preferredmanagement structure is the segregation of 0ar etingJ elationship function from approvalJ ismanagementJ Administration function.

.5 0//,o%al /,o$e&&: According to BB est practice guideline& Qthe recommending orapproving e4ecutives should ta e responsi ility for and e held accounta le for theirrecommendations and approval9. /he recommended delegated approval authority levels are asfollows

+ead of CreditJC 0 14ecutives up to ,8K of capital 0anaging #irectorJ C1O Up to 28K of capital 1CJ Board All e4ceed 28K of capital But in $CC Ban we see that every credit proposal goes to 14ecutive committee

i.e. oard.

.H C,edit 0dmini&t,ation: /he BB guidelines suggest that Credit administration e strictlysegregated from relationship managementJ mar eting. As a result the possi ility of controls

eing compromised or issues not eing highlighted at the appropriate level can e avoided. /hecredit administration has the following functions6

#is ursementCustodial dutiesCompliance re>uirement

In $CC Ban credit officers under supervision of Branch Credit In6charge or 0anager also carryout all the three functions of credit administration. But Credit 0ar eting an administration is yetto e segregated.

.6 C,edit (onito,in : /o minimi!e credit losses& monitoring procedures and system should ein place that provides an early indication of the deteriorating financial health of a orrower. 1arlyidentification& prompt reporting and proactive management of 1arly Alert Accounts are primecredit responsi ilities of all relationship 0anagers. An early Alert Account is one that has ris sor potential wea ness of a material nature re>uiring.



51/60

.18 Ste/& n%ol%ed to San$tionin a Loan:

,. /he applicant needs to apply in prescri ed application such as IFo,m 0A

2. /hen ( ) three additional form to e filled up.

In>uiry form6CIB ,A (5rovides such information as amount for fresh loan orrenews the loan.)

In>uiry form6 CIB 2A (If the applicant is an institutionM all the information to e provided y the owner)

/he in>uiry form CIB6 A (See s the applicant to supply information of group orrelated usiness concern)

. /hen the applicant gives a list of assets which can e ept as collateral. /he applicant willdeclare in faith that such assets offered as collateral are owned y the usiness owner andare not already ept as collateral to other financial institution against any sanction of loanor credit limit.

7. /hen the an ma es the valuation of fi4ed assets (to e ept as collateral) to e assessedand valued y independent inspection services. /he inspection company su mits thesurvey report and provides an independent valuation of the assets that were offered ascollateral.

8. /hen the an will perform a lending ris analysis or '/A. /he ' A is a ind ofassessment where some scoring is made on various ris s to which the applicant9s

usiness or pro%ect is e4posed. /he scoring result is arriving at the level of ris s of the usiness or pro%ect. A detailed discussion or ' A is made later.

F. After the lending ris analysis net worth is calculated y su tracting total lia ilities fromtotal assets. /his net worth is calculated oth for the organi!ation and for the individualsincluding the 0anaging #irectors and #irectors.

. A prescri ed form IFo,m BA is to e filled in y case of proposal for loans and advancesfor individuals& proprietorship& partnership limited company(private or pu lic)& other

an 9s loan proposal acceptance certificates. If the applicant has received any sanction ofloan or advance from other an s a certificate showing such acceptance of loan proposedmust e su mitted.



52/60

CHAPTER 7

FINDINGS AND ANALYSIS



53/60


54/60

Credit employee feels tension from this type of loan.

P,o&/e$t& of Ca&h C,edit y/o unde, S(E:

It9s repayment system are monthly. As a result after every month loan amount

decreases and also ris decrease.

epayment is invested in further purposes and an earns money.

/o solve unemployment pro lem and contri ute S01 usiness in Bangladesh.

3. O%e,d,aft SO);

In this ranch three type of SO#

a) SO# (?inancial O ligation)

) SO# ("eneral)

c) SO# (?# )

P,o"lem& of SO):

'ess interest rate

P,o&/e$t& of SO):

?ully secured loan

Against ?# & Savings and #eposits these type of loan are ta en.

/o help customer in their necessity of loan without condition.

/o contri ute customers enefit.

/o usinessman for e4pansion of their usiness

7. Loan& a ain&t ou&e Buildin

P,o"lem& of loan& a ain&t hou&e "uildin :

W #ocuments are not clear

W #ifficult to sell mortgage property when needed.



55/60

P,o&/e$t& of loan& a ain&t hou&e "uildin :

W +ighly secured loan

W epayment can e further investment

W 1arn high interest rate

W Contri ute on Country9s development

'. Con&ume, C,edit S$heme CCS;

P,o"lem& of CCS:

Only office staff will e enefit these type of loan.

/hey can uy home appliance from these loan.

0ost of the time an will e less enefited from these type of loan

P,o&/e$t& of CCS:

/o motivate employee for doing wor well.

/o activate employee for an ing activities.

. Real E&tate Finan$in fo, CRB:

eal estate financing for Construction of esidential Building 'oan are provided against highdocument of land and properties.

P,o"lem& of ,eal e&tate finan$in fo, CRB:

Incorrect document

5olitical pressure

epayment not pay due time



56/60

P,o&/e$t& of ,eal e&tate finan$in fo, CRB:

/o increase residential uilding

/o help people for solving accommodation pro lem

If fault& can e sold asset.

. Lea&e Finan$in :

P,o"lem& of Lea&e Finan$in :

Ban cannot proper o servation of their asset.

Borrowers often give incorrect statement of asset.

P,o&/e$t& of Lea&e Finan$in :

/o help industrial production through the machinery

/o help many investor for uying car& vehicle and other e>uipment

/o increase an ing income and contri ute country9s development

H. S(E loan

S01 means Small and 0edium 1nterprise .

P,o"lem& of S(E:

$ot preserve hardly document

'oan provide easy condition

'oan receiver get opportunity for cheating

P,o&/e$t& of S(E:

Supporting S01 usiness in Bangladesh

Investor are come to invest in S01 for easy loan condition



57/60

CHAPTER

RECOMMENDATIONS AND CONCLUSION



58/60

R(.o//(#d*t"o#%

?or the pro a le solutions of the identified pro lems ensure etter progress to $CC Ban infuture& some necessary steps are recommended ellow on the asis of collected data& o servation&e4pert staffs opinion and my nowledge and %udgment.

Ban s always contri ute towards the economic development of a country. Compared with other an s $CC Ban 'td. is contri uting more y investing most of its funds in fruitful pro%ectslending to increase in production of the country.

Fo, Ca&h C,edit y/othe$ation loan procedure time should e decrease so that customers getloan easily and >uic ly. #ocument %ustification process can e easy if employ a lawyer so that>uic ly %ustify document and a le to provide loan.

Fo, Ca&h C,edit Pled eA& repayment amount should e further invest and always careful so thatcustomer can9t e a le to default.

Fo, SO) O%e,d,aft&; promote customers to do ?# & #5S so that customers ta e loan against?# and #5S. It is fully secured for an s and customers give less interest from other loan.

Fo, Loan 0 ain&t ou&e Buildin Credit officer should chec all documents perfectly so thatwhen will e needed it can e sold.

Fo, Con&ume, C,edit S$heme an try to increase loan amount so that employee can uy asthey need and feel happy and wor hardly.

Real E&tate Finan$in fo, CRB +igh rise uilding increase day y day and also increase realestate financing for future purpose an should increase loan and chec all document which are

provided y the organi!ation.

Fo, Lea&e Finan$in 0any fields an s provide lease financing ut can9t a le to see all timetheir lease asset. So an s should employ e4tra employee so that he Jshe can e a le to see leaseitems.



59/60

Fo, S(E Ban ers should provide loan and go customer usiness and give advice so that theyincrease their usiness and can give repayment perfectly.

Co#.'0%"o#

/oday9s usiness is very competitive and comple4. /o survive in the related sector theorgani!ation need competitive people and has to ta e some effective policy. 1very country musthave a plan for important role in economic activities. Bangladesh is no e4ception of that.Commercial Ban s9 financial development and economic developments are closely related./hat9s why the private commercial an s9 are playing significant role in this regard.

/he $ational Credit and Commerce Ban 'imited ($CCB') is one of the est Ban s in respectof service& profita ility and strength among the private commercial an s9 in our country andalso to play a catalyst role in the formation of capital mar et. $ational Credit and Commerce

an 'imited ears a uni>ue history of its own.. Its various deposit and credit products have alsoattracted the clients6 oth corporate and individuals who feel comfort in doing usiness with theBan .

/he $ational Credit and Commerce Ban 'imited ($CCB') is now een called a modern anthat underta es all its operations at an international standard. Over the years& $CCB' has uiltitself as one of the pillars of Bangladesh9s financial sector and is playing a pivotal role in

e4tending the role of the private sector of the economy.

1ach and every an has got its own credit policy which generally promulgated on the asis of prevailing countries socio economic conditions& political and other related aspects from time totime as per guideline of central an . $CC Ban limited have formulated own policy indicatingthe areas of lending complied y Bangladesh Ban guideline. /he main features of credit policyof $CC Ban 'td focus on the following areas

/rade and Commerce

Industry

Internship Report on Credit Risk Management of NCC Bank Limited

Documents