A report on public banking institutions

8/18/2019 A report on public banking institutions

1/71

An Internship Report

On

“Credit Management System: A Study on

Janata Bank Ltd.”

repared !or:

Md. Siddikur Rahman

Lecturer

Department of Management Studies

Comilla University

repared By:

Md. Jafar I!al

ID" #$$%$#%

Reg. &o" ''()M*+),$$$-$

Session" $#$)##

"#AR$M#%$ O! MA%AM#%$ S$'"I#S

COMILLA '%I(#RSI$)

"ate o* Su+mission: January ,- ,/-0


2/71

An Internship Report

On

Credit Management o* Janata Bank Ltd.

ii


3/71

Letter o* $ransmitta1

January #/ $#0

Md. Siddikur Rahman

Lecturer


Comilla University/ Comilla

Su+: Su+mission o* Internship Report.

Dear Sir/

I am pleased to su!mit the Internship Report as a part of ''( program. I tried my !est to

present this Internship Report on “Credit Management System: A Study on Janata Bank

Limited” according to your guideline. I tried my !est to 1ork sincerely to cover all aspects

regarding the matter. 2ractical e3posure is very essential for orientation 1ith the real 1orld)

1orking arena. I have learned a sound kno1ledge and understood on the !asic operation of

the !ank. +hough I faced some limitations to prepare the report due to scarcity of organi4ed

data/ time limitation/ I have thoroughly en5oyed in preparing this internship report 1hich has

contri!uted significantly to my understanding on the essentials and importance of practicalkno1ledge.

(ll of my efforts 1ill !e successful if the report can serve its purpose. I have tried my !est to

e3plain everything related 1ith this report. I am al1ays availa!le for any further ueries

regarding this report. I sincerely hope that you 1ill appreciate my effort.

6ours truly/

22222222

Md. Jafar I!al

ID &o" #$$%$#%

Session" $#$)$##

''( 78th 'atch9


Comilla University

iii


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Super5isor3s Certi*i4ate

+his is to certify that the report presented here has !een prepared !y Md. Ja*ar I6+a1

!earing Id" #$$%$#%/ Session" $#$)$##/ ''( 78th 'atch9 for the su!mission to the

Department of Management Studies/ Comilla University. In the partial fulfillment of the

reuirements for the degree of 'achelor of 'usiness (dministration 7''(9. +his report is

suita!le for su!mission.

:e has completed the internship program under my supervision. :e has al1ays maintained

communication 1ith me and has taken necessary advice. :e has prepared the Internship

Report on “Credit Management System: A Study on Janata Bank Limited” under my

guidance. I 1ish him all success in life.

;ith !est regards/

222222222222.

Md. Siddikur Rahman

Lecturer/

Department of Management studies

Comilla University

v


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Internship Certi*i4ate

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A4kno71edgement

(t the very !eginning/ I 1ould like to e3press my deepest gratitude to (lmighty (llah for

giving me the opportunity 1ith strength and patience to carry on this 1ork. In conducting this

study/ I have received generous help from many corners/ 1hich I like to mention 1ith

gratitude and great pleasure.

I 1ould like to e3press my gratitude to my internship supervisor Md. Siddikur Rahman

Lecturer/ Department of Management Studies/ Comilla University. :is suggestion and

comment have greatly inspired me to prepare the Internship Report successfully.

I e3press my heartiest respect to "r. Mohammad Ahsan '11ah :onora!le chairman/Department of Management Studies/ Comilla University for giving me permission for

Internship.

I 1ould also like to e3press my deep gratitude to Md. A+du1 Matin 7(*M/ Loan<

(dvance9/ Md. Mag*ar 8asan Bahadur 9!A&M and Md. A+du1 &a*ur 7(*M/ (dmin9.

Indeed I am grateful to the officials of Janata 'ank Ltd/ Local office/ Dhaka. +heir support

gave me opportunities to use various documents during my internship period and their

valua!le suggestion/ advice and e3tended helping have contri!uted most.

Lastly/ I 1ould like to e3press my special and cordial thanks to all of my teachers/ friends and

many individuals for their enthusiastic encouragements/ supports and helps during the

preparation of this report.

Sincerely yours/

Md. Jafar I!al

ID &o" #$$%$#%

''( 78th 'atch9


Comilla University/ Comilla

vii


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#;e4uti5e Summary

+his report is prepared on the !asis of my three months practical e3perience at Janata 'ank

Ltd. 7Local =ffice9. +he internship program has helped me a lot to learn more a!out the

practical situation of a financial institution. Loans or credits comprise the most importantasset as 1ell as the primary source of earning for the !anking institutions. =n the other hand/

loan>credit is also the ma5or source of risk for the !ank management. ( prudent !ank

management should al1ays try to make an appropriate !alance !et1een its return and risk

involved 1ith the loan portfolio. ?rom this report/ I have learned a!out ho1 Janata 'ank

provides and recovers loans and advances. I have also learned a!out their credit policy

applied for dis!ursement and recovery of loan and advance. In this report/ I have used

mainly secondary data. 'ut I have also used some primary data. During the preparation of

the report/ I have faced some pro!lems. +he main pro!lems are lack of information and time

limitation.

?or the convenience/ I have divided the report into five chapters.

In the *irst 4hapter/ the introductory part has !een developed for the proper e3ecution of the

study.

In the se4ond 4hapter/ overvie1 of Janata !ank and its local office/ 1here I completed my

internship/ has !een descri!ed.

In the third 4hapter/ I have discussed the theoretical aspects of credit management system.

In the *ourth 4hapter/ the credit management system of Janata !ank Ltd. has !een

descri!ed. I have discussed the loans and advances provided !y Janata !ank/ sector 1isecredit dis!ursement and credit recovery policy of the !ank.

In the *i*th 4hapter/ I have mentioned the findings of the study. I have provided several

recommendations that might !e useful for the further development of the credit management

system of the !ank. +hen I have dra1n the conclusion to the report.

viii


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$ABL# O! CO%$#%$S

LETTER OF TRANSMITTAL..............................................................................III

STUDENT’S DECLARATION.............................................................................IV

SUPERVISOR’S CERTIFICATE...........................................................................V

INTERNSHIP CERTIFICATE..............................................................................VI

ACKNOWLEDGEMENT...................................................................................VII

EXECUTIVE SUMMARY.................................................................................VIII

ACRONYMS................................................................................................XIII

CHAPTER 1....................................................................................................1

INTRODUCTION..............................................................................................1

1.1 BACKGROUND OF THE STUDY...........................................................................................2

1.2 ORIGIN OF THE REPORT............................................................................................2

1.3 OBJECTIVES OF THE REPORT....................................................................................2

1.3.1 Specifc Objectives............................................................................................2

1.4 SCOPE OF THE STUDY..............................................................................................3

1.5 METHODOLOGY OF THE STUDY................................................................................3

1.5.1 Data Assortment Procedure..............................................................................3

1.5.2. Data Dispensation & Study..............................................................................4

1.6 LIMITATIONS OF THE STUDY.....................................................................................4

CHAPTER 2....................................................................................................5

ORGANIZATIONAL PROFILE.............................................................................5

2.1 HISTORY OF JANATA BANK........................................................................................6

2.2 ORGANIZATIONAL STRUCTURE OF JANATA BANK LTD...............................................

2.3 CORPORATE PROFILE................................................................................................!

2.3.1 ision o! "#$......................................................................................................%

2.3.2 ission o! "#$....................................................................................................%

2.4 CORPORATE SLOGAN OF JBL....................................................................................."

2.5 OBJECTIVES OF JANATA BANK LIMITED......................................................................"

2.6 CORE VALUES OF JANATA BANK LIMITED.................................................................1#

2.'.1 (ore Stren)t*s................................................................................................1+

2.'.2 (ore (ompetencies.........................................................................................1+

2. ETHICAL PRINCIPLE................................................................................................112.! FUNCTIONAL STRUCTURE OF JBL............................................................................11

2." BRANCHES OF JANATA BANK LIMITED.....................................................................11

2.1# CORPORATE CREDIT RATING OF JBL......................................................................12

2.11 PRODUCTS OFFERED BY JANATA BANK L TD..........................................................12

2.12 CORPORATE GOVERNANCE...................................................................................13

2.13 CSR ACTIVITIES OF JANATA BANK LIMITED............................................................13

2.14 KEY FINANCIAL HIGHLIGHTS OF JBL......................................................................14

2.15 OVERVIE$ OF JANATA BANK% LOCAL OFFICE.........................................................15

2.15.1 (orporate Prof,e o! $oca, O-ce "anata #an/...............................................15

2.15.2 Departments o! t*e #ranc*...........................................................................1'

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2.15.3 Or)ani0ationa, Structure o! t*e #ranc*.........................................................1'

2.15.4 ota, umber o! Accounts o! t*e #ranc*.......................................................1

2.15.5 ota, inancia, Aairs o! t*e #ranc*..............................................................1

CHAPTER 3.................................................................................................. 18

THEORETICAL DISCUSSION ON CREDIT MANAGEMENT....................................183.1 CREDIT...................................................................................................................1"

3.2 FACTORS RELATED $ITH CREIDT...........................................................................1"

3.3 PRINCIPLES OF CREDIT...........................................................................................1"

3.4 IMPORTANCE OF CREDIT.........................................................................................2#

3.5 SOURCES OF CREDIT..............................................................................................2#

3.6 MODES OF CREDIT.................................................................................................2#

3.'.1 (ontinuous $oan.............................................................................................2+

3.'.2 Demand $oan..................................................................................................21

3.'.3 erm $oan.......................................................................................................21

3. CREDIT MANAGEMENT............................................................................................21

3.! PROCESS OF CREDIT MANAGEMENT.......................................................................213.6.1 Po,icy 7uide,ines.............................................................................................21

3.6.2. Pro)ram 7uide,ines........................................................................................23

3." CREDIT RISK GRADING &CRG'.................................................................................23

3.%.1 Steps in (redit 8is/ 7radin)............................................................................23

3.%.2 unctions o! (redit 8is/ 7radin).....................................................................23

3.%.3 9se o! (redit 8is/ 7radin)..............................................................................24

3.%.4 umber and S*ort ame o! 7rades 9sed in t*e (87......................................24

3.1# CREDIT POLICY.....................................................................................................24

3.1+.1 Objectives o! (redit Po,icy.............................................................................25

3.1+.2 ormu,ation o! (redit Po,icy..........................................................................25

3.1+.3 Princip,es o! Sound $endin)..........................................................................253.1+.4 (omponents 8e:uired !or a Sound (redit Po,icy...........................................2'

3.11 CREDIT$ORTHINESS OF A BORRO$ER................................................................2

3.12 CREDIT GRANTING PROCEDURES.........................................................................2

3.13 CREDIT COMMITTEE..............................................................................................2!

3.14 SECURITIES FOR CREDIT MANAGEMENT...............................................................2"

3.15 S$OT ANALYSIS FOR CREDIT MANAGEMENT OF JBL.............................................3#

3.15.1 Stren)t*s......................................................................................................3+

3.15.2 ;ea/nesses..................................................................................................31

3.15.3 Opportunities................................................................................................31

3.15.4 *reats..........................................................................................................31

CHAPTER .................................................................................................. 32

CREDIT MANAGEMENT OF !"L.......................................................................32

4.1 LOANS AND ADVANCES..........................................................................................33

4.2 TYPES OF LOAN......................................................................................................33

4.2.1 (ontinuous $oan.............................................................................................33

4.2.2 Demand $oan..................................................................................................34

4.2.3 erm $oan.......................................................................................................34

4.3 TABLE OF LOAN CLASSIFICATION............................................................................34

4.4 DIFFERENT TYPES OF LOANS AND ADVANCES........................................................35

3


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4.5 CREDIT SCHEMES OF JANATA BANK LIMITED...........................................................3

4.5.1 icro (redit Pro)rams.....................................................................................3

4.5.2


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LIS$ O! !I&'R#S

FIGURE 1% ORGANIZATIONAL S TRUCTURE OF JBL........................................................................

FIGURE 2% CORE VALUES OF JBL...........................................................................................1#

FIGURE 3% FUNCTIONAL S TRUCTURE OF JBL.............................................................................11

FIGURE % CORPORATE CREDIT RATING OF JBL.........................................................................12

FIGURE 5% CORPORATE GOVERNANCE.....................................................................................13

FIGURE &% ORGANIZATIONAL S TRUCTURE OF THE BRANCH..........................................................16

FIGURE '% MODES OF CREDIT...............................................................................................2#

FIGURE 8% CREDIT GRANTING PROCEDURES.............................................................................2

FIGURE (% CREDIT COMMITTEE..............................................................................................2"

FIGURE 1#% SECTOR $ISE LOANS + ADVANCES........................................................................46

FIGURE 11% SECTOR $ISE CLASSIFIED LOANS..........................................................................4

LIS$ O! $ABL#S

T)*+, 1% C,-,-/0 P-, , JBL.......................................................................................!TA"LE 2% BRANCHES OF JBL.................................................................................................11

TA"LE 3% K EY FINANCIAL HIGHLIGHTS OF JBL...........................................................................15

TA"LE % OVERVIE$ OF JBL% LOCAL OFFICE.............................................................................15

TA"LE 5% NUMBER OF ACCOUNTS OF THE BRANCH....................................................................1

TA"LE &% FINANCIAL AFFAIRS OF THE BRANCH..........................................................................1

TA"LE '% NUMBER + SHORT NAMES USED IN CRG....................................................................24

TA"LE 8% LOAN CLASSIFICATION.............................................................................................34

TA"LE (% INTEREST RATE OF LOANS IN JBL..............................................................................3!

TA"LE 1#% OVERALL SECTOR $ISE LOAN DISBURSEMENT OF JBL &SOURCE) ANNUAL REPORT 2#14'..43

TA"LE 11% LOANS + ADVANCES $ITH RISK S TATUS...................................................................44

TA"LE 12% SECTOR $ISE LOAN DISBURSEMENT OF JBL% LOCAL OFFICE.........................................45TA"LE 13% SECTOR $ISE CLASSIFIED LOANS OF JBL% LOCAL OFFICE.............................................46

TA"LE 1% SECTOR $ISE LOAN RECOVERY RATE OF JBL............................................................4!

3ii


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A4ronyms

A++re5iation !u11 %ame

JBL Janata 'ank Limited

A


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JA%A$A BA%> LIMI$#"A C-/00, )04, /4 P-,66

CHAPTER 1

INTRODUCTION

-.- BAC>&RO'%" O! $8# S$'")

'anking is the !ack!one of an economy. (ll kinds of economic and financial activities

revolve around the a3is of the !ank. (n industry produces goods and commodities. ( !ank

creates and controls money market and promotes formation of capital. ?rom this perspective/

!anking) a technical profession) can !e termed as an industry. Services to its customers are

the products of !anking industry. (s all economic and fiscal activities revolve around this

(redit ana)ement System A Study on "anata #an/ $imited

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important AIndustryB/ the role of !anking can hardly !e over emphasi4ed. In these

circumstances/ it !ecomes crucial to find out the roles that !anks are no1 playing in the

country and analy4e their operational aspects so as to learn the importance of this delicate

financial sector and their overall impacts on our national economy.

+he role of !anks is far reaching and more penetrating in the economic and fiscal discipline/trade/ commerce/ industry/ e3port and import) all carried through the !ank. 'anks are the

only media through 1hich international trade and commerce emerge and perform entire credit

transactions/ !oth national and international. 'anks collect small savings from individual

depositor and create capital for investment. 'anks transfer fund from surplus unit to deficit

unit and thus reduce gap !et1een savings and investment and foster economic gro1th. 'anks

provide interest to the depositor at a lo1er rate/ collect interest from the !orro1er at a higher

rate and the difference !et1een these t1o is their profit.

:o1ever/ the main element of the !anking !usiness is credit. ( !ank sometime faces loss

1hen it cannot collect dis!ursed credit. So a !ank is al1ays under risk a!out the credit issue.+herefore/ it has !een uite essential to kno1 a!out the credit management system of our

!anking industry. +his report has !een prepared to analy4e the credit management system of

Janata 'ank Limited/ Local =ffice.

-., ORI&I% O! $8# R#OR$

Since the ''( 2rogram is an integrated/ practical and theoretical method of learning/ the

students of this program are reuired to have practical e3posure in any kind of !usiness

organi4ation last term of this course. +his report on practical orientation has !een originated

from a!ove thinking.

+he report entitled Credit Management System: A study on Janata Bank Limited” Local

=ffice/ Dhaka/ has !een prepared as an internship report fulfillment of ''( 2rogram

authori4ed !y the Department of Management Studies in Comilla University.

-.@ OBJ#C$I(#S O! $8# R#OR$

+he main o!5ective of the report is to identify and evaluate the credit and loan management

system of Janata !ank limited/ 1hich includes the follo1ing specific o!5ectives"

[email protected] Spe4i*i4 O+e4ti5es

+o present an overvie1 of Janata 'ank Limited

+o assess the credit structure of the Janata 'ank Limited in practice

+o identify the recovery performance of Janata 'ank Limited

+o point out the pro!lems in fund utili4ation and recovery thereon

+o make a critical reasoning in respect to the treatment of provision for !ad and

dou!tful credit

+o assess and highlight on the legal actions follo1ed !y the Janata 'ank Limited


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JA%A$A BA%> LIMI$#"A C-/00, )04, /4 P-,66

+o find out pro!lems and to suggest recommendations for further improvement

-. SCO# O! $8# S$'")

+he reporter 1as assigned to learn practical kno1ledge from Janata 'ank Limited/ Local

=ffice 'ranch. In this study/ the reporter has tried to concentrate on the theoretical aspects of

credit management/ i.e. the definition of credit management/ policy of credit management/

tools for managing credit etc. +he reporter has analy4ed the data on the !ank and various

programs for loan dis!ursement system/ loan recovery/ pro!lems in loan recovery/ and the

performance of the !ank in credit management. (nd finally/ the reporter has concluded 1ith

the critical evaluation of the credit management under the guidelines of the 'ank Companies

(ct and a discussion on the ma5or findings and recommendations.

-. M#$8O"OLO&) O! $8# S$'")

+he study is performed !ased on the information e3tracted from different sources collected

!y using a specific methodology. +o fulfill the o!5ectives of this report/ total methodology has

!een divided into t1o ma5or parts"

-..- "ata Assortment ro4edure

In order to make the report more meaningful and presenta!le/ t1o sources of data and

information have !een used 1idely.

The “Main Sources” are as follows:

uestionnaire survey of !oth managers of credit department and the customers 1ho

have taken loans from Janata 'ank Limited

Relevant file study as provided !y the officers concerned

Sharing practical kno1ledge of officials

Desk)1ork in different sections/ of the !ank

Conversation 1ith the !ankBs employees

The “Subordinate Sources” are as follows:

(nnual report of Janata 'ank Limited

2eriodicals 2u!lished !y 'angladesh 'ank

=ffice files and documents

Study related !ooks and 5ournals

-..,. "ata "ispensation D Study

Collected information has !een processed < compiled 1ith the aid of MS ;ord/ @3cel <

other related computer soft1are. &ecessary ta!les have !een prepared on the !asis of

collected data. Detail e3planation and analysis have also !een incorporated in the report.


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JA%A$A BA%> LIMI$#"A C-/00, )04, /4 P-,66

-.0 LIMI$A$IO%S O! $8# S$'")

+o prepare a report on the topic like this in a short duration is not an easy task. ?rom the

!eginning to end/ the study has !een conducted 1ith the intention of making it as a complete

and truthful one. In preparing this report/ some pro!lems and limitations have !een

encountered 1hich are as follo1s"

Insufficiency of reuired information.

Lack of opportunity to access to internal data due to security and other corporate

o!ligations.

(s the data/ in most cases/ are not in organi4ed 1ay/ the reporter failed to process

most of the information.

Due to time limitation/ many of the aspects could not !e discussed in the report.

+he reporter had to !ase on secondary data for preparing this report.

Legal action related information 1as not availa!le.

Lack of in)depth kno1ledge and analytical a!ility for 1riting such report.


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JA%A$A BA%> LIMI$#"A C-/00, )04, /4 P-,66

CHAPTER 2ORGANIZATIONAL

PROFILE

,.- 8IS$OR) O! JA%A$A BA%>

Janata Bank Limited is one of the !iggest commercial !anks of the country. ItBs a state

o1ned !ank that 1as formed 5ust after li!eration of 'angladesh. In fact it 1as a com!inationof t1o smaller !anks namely United 'ank Limited and Union 'ank Limited. Janata 'ank


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JA%A$A BA%> LIMI$#"A C-/00, )04, /4 P-,66

Limited 1elcomes you to e3plore the 1orld of progressive 'anking in 'angladesh. It is a

state o1ned 7second largest commercial !ank9 !ank and is catering the need of the mass

!usiness people. It 1as corporati4ed on #8th &ovem!er $$-. Janata 'ank 1as !orn 1ith a

ne1 concept of purposeful !anking su! serving the gro1ing and diversified financial needs of

planned economic development of the country.Janata 'ank Limited/ one of the state o1ned commercial !anks in 'angladesh/ has an

authori4ed capital of +k. E$/$$$ million 7appro3. USF E-8 million9/ paid up capital of

+k. #G/#,$.$$ million/ reserve of +k. $/E#.8, million and retained surplus +k . @@.@E

million. +he 'ank has a total asset of +k. 0G/,8,.#, million as on E#st Decem!er $#,.

Janata 'ank Limited operates through E/ !ranches including , overseas !ranches at United

(ra! @mirates. It is linked 1ith #/, foreign correspondents all over the 1orld. +he 'ank

employs more than #, 7fourteen9 thousand persons. +he corporate head office is located at

Dhaka 1ith E8 7thirty five9 Divisions. (s a part the conscious development of e3isting

:uman Resources/ Janata 'ank through its three training institutes during the year $$Eimparted training to ,0GG officers and staffs. It computeri4ed (ll of their G$, !ranchesH

=&LI&@ 'anking in #-, important !ranches under important !ranches under

implementationH 1e have installed #8 (+M !ooths and shared ,#$ (+M of other !anks

across the country. +he 'oard of Directors is composed of ## mem!ers headed !y a

Chairman. +he Directors are representatives from !oth pu!lic and private sectors. +he 'ank

is headed !y the Managing Director 7Chief @3ecutive9/ 1ho is a reputed !anker.

+he !ank 1as registered as a pu!lic limited company on May #/ $$-.

,., OR&A%IFA$IO%AL S$R'C$'R# O! JA%A$A BA%> L$"

+here is a 'oard of Directors consisting of #E mem!ers 1ho manage Janata 'ank Limited.

?or efficient operation of the !ank/ the 'oard of directors forms an @3ecutive Committee of

#G mem!ers. 'esides/ a management Committee looks after the affairs of the !ank. +he !ank

maintains transparency in its entire 1orks. (ll decisions of the management come through

discussions in appropriate forum and reuired follo1)ups are also made to see their effectiveness.


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!igure -: =rgani4ational Structure of J'L

,.@ CORORA$# RO!IL#

!eatures (a1ues

&ame Janata 'ank Limited


- ? 2 a g e

Chairman

'oard of Directors

C@= < Managing Director

Deputy Managing Director

(ssistant *eneral Manager

?irst (ssistant *eneral Manager

Senior @3ecutive =fficer

@3ecutive =fficer

(ssistant @3ecutive =fficer

(ssistant =fficer/ *rade #

(ssistant =fficer/ *rade

Support Stuff)#

Support Stuff)


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JA%A$A BA%> LIMI$#"A C-/00, )04, /4 P-,66

*enesis

Janata 'ank Limited/ the nd largest State =1ned Commercial 'ank 7SC'9

in 'angladesh/ is playing pivotal role in overall financial activities of the

country. +he 'ank emerged as AJanata 'ankB !y com!ining the erst1hile

United 'ank Limited and Union 'ank Limited under the 'anks

&ationali4ation =rder 72residentBs =rder) 09 of #G- and 1as restructured

as a limited company in &ovem!er/ $$-. Since inception in #G- the 'ank

has commenda!ly contri!uted to the socio)economic development of

'angladesh and helped structuring solid financial ground of the country as

1ell. Janata 'ank runs its !usiness 1ith G$, !ranches across the country

including , overseas !ranches in United (ra! @mirates.

Registered (ddress Janata 'ha!an/ ##$/ Moti5heel Commercial (rea Dhaka ) #$$$/ 'angladesh.

Legal Status 2u!lic Limited Company

Chairman Shaikh Md. ;ahid)u4)aman

Managing Director

< C@=Md. (!dus Salam

Company Secretary Md. Mosaddake)Ul)(lam

Date of

Incorporation# May $$-

(uthori4ed Capital 'D+ E$/$$$ Million

2aid up Capital 'D+ #G/#,$ Million

?ace value per

share'D+ #$$ per share

Shareholding

2attern#$$ Share o1ned !y the *overnment of 'angladesh

&um!er of@mployees #,,,7(s on $#.$8.$#89

'anking license

o!tained from

'angladesh 'ank

E# May $$-

2hone G80$$$$/ G800$$/ G880,8),G/ G808$,#),8/ G80$$-)E$

?a3 %%)$)G88,,0$/ G88EEG/ G88$-%

S;I?+ J(&' 'D D:

;e!site http">>5!.com.!d

@)mail mdK5anata!ank)!d.com

$a+1e -: Corporate 2rofile of J'L

,[email protected] (ision o* JBL

+o !ecome the effective largest commercial

!ank in 'angladesh to support social

development on country and to !e a leading

!ank in South (sia.


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JA%A$A BA%> LIMI$#"A C-/00, )04, /4 P-,66

,.@., Mission o* JBL

Janata 'ank Limited 1ill !e an effective

commercial !ank !y maintaining sta!le gro1th

strategy and deliver high uality financial

products/ providing e3cellent customer service

through and e3perienced management team and

ensuring good corporate governance in every

step of !anking net1ork.

,. CORORA$# SLO&A% O! JBL

S1ogan" @3cellence of 'anking

Motto" +he !ank 1ill !e a confluence of the follo1ing three interests"

Of the bank : 2rofit ma3imi4ation and sustained gro1th

Of the customer : Ma3imum !enefit and satisfaction

Of the society: Ma3imi4ation of 1elfare

,. OBJ#C$I(#S O! JA%A$A BA%> LIMI$#"

+he o!5ectives for 1hich the !ank is esta!lished are as follo1s"

+o carry on/ transact/ undertake and conduct the !usiness of !anking in all !ranches.

+o receive/ !orro1 or to raise money on deposit/ loan or other1ise upon such terms as

the company may approve.

+o carry on the !usiness of discounting and dealing in e3change of specie and

securities and all kinds of mercantile !anking.

+o provide for safe)deposit vaults and the safe custody of valua!les of all kinds.

+o carry on !usiness as financiers/ promoters/ capitalists/ financial and monitory

agents/ concessionaires and !rokers.

+o act as agents for sale and purchase of any stock/ shares or securities or for any

other momentary or mercantile transaction.

+o esta!lish and open offices and !ranches to carry on all or any of the !usiness

a!road and 1ithin the country provided prior permission is o!tained from 'angladesh

!ank.

+o ensure optimum utili4ation of all availa!le resources.

+o remain one of the !est !anks in 'angladesh in terms of profita!ility and asset

uality


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,.0 COR# (AL'#S O! JA%A$A BA%> LIMI$#"

!igure ,: Core alues of J'L

,.0.- Core Strengths

+ransparent and uick Decision

Making.

@fficient +eam of 2erformer.

Satisfied Customers.

Internal Control.

Skilled Risk Management.

Diversification.

,.0., Core Competen4ies

Nno1ledge.

@3perience < @3pertise.

Customer =rientation> ?ocus.

+ransparency.

Determination.

eal for Improvement.

,.G #$8ICAL RI%CIL#

'ank deals 1ith pu!lic money 1here ethics/ integrity and trust are the most essential. Janata

'ank protects and upholds these principle issues in every area of its management activities

and customer services. +he !asic characteristics of employee code of ethics and !usiness

conduct are as follo1s"

+o ensure customer service 1ith utmost care/ respect/ dedication/ integrity and

un1avering responsi!ility

+o protect privacy and confidentiality of customersB information. 2revent money

laundering and fraud forgery


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+o protect and uphold corporate values

,.H !'%C$IO%AL S$R'C$'R# O! JBL

!igure @: ?unctional Structure of J'L

,.E BRA%C8#S O! JA%A$A BA%> LIMI$#"

Bran4hes %o. o* Bran4hes

Local =ffice #

Special corporate

Corporate)# 'ranch

Corporate) 'ranch -#=verseas 'ranch $,

*rade)# 'ranch $#

*rade) 'ranch #

*rade)E 'ranch -

*rade), 'ranch ###

Total G$,

$a+1e ,: 'ranches of J'L


## ? 2 a g e

:ead =ffice

*M =ffice

2rincipal =ffice

Regional =ffice

'ranch =ffice


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,.-/ CORORA$# CR#"I$ RA$I%& O! JBL

!igure : Corporate Credit Rating of J'L

,.-- RO"'C$S O!!#R#" B) JA%A$A BA%> L$".

"eposits

Current< call deposit

Savings 'ank Deposit

Monthly Scheme

+erm Deposit

Special &otice Deposit

Loans and Ad5an4es

+erm loan

Small < Medium

@nterprise loan

Continuous loan

Rural < (gro credit

2overty (lleviation

2rogram

Speciali4ed loan program

Micro < cottage Industry

Loan

Import < @3port ?inance

Letter of credit

Letter of *uarantee

=ther Credit 2rogram


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Ser5i4es

?inancial services 7?oreign Remittance9

?inancial Services 7Inland Remittance

Utility services

(+M

;elfare Services

Service to *overnment

=ther services

Customer Service

,.-, CORORA$# &O(#R%A%C#

!igure : Corporate *overnance

,.-@ CSR AC$I(I$I#S O! JA%A$A BA%> LIMI$#"

?or !ringing dynamism in CSR activities and including the most part of the deprived people/

the total activities have !een categori4ed and su!)categori4ed in the follo1ing 1ays"

@ducation < Research

:ealth < +reatment

2overty reduction < reha!ilitation

Com!at against natural calamity

( try to !ring the marginal agriculturists and the poor out of the grip of loan

2reservation of history)tradition/ culture and sports

2reservation of environment

@3pansion of technology

Invention


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,.- >#) !I%A%CIAL 8I&8LI&8$S O! JBL

Ney =perational Indicators and ?inancial Information

(BDT in million unless stated otherwise)

SSurplus #$,% G$% 7$##%9 8GG ,%#

-G Loan loss provision reuired

a9 ?or classified loans andadvances

#0%, #GE,8 E#-- %#-8 0%E

!9 ?or unclassified loans

and advances

)))))) G,0 ,$ GG% #8

-H 2rovision Nept ))))) G# E,$# ###-E %G-8

-E +otal (ssets 0G,8, 8%0$% 8###G ,,$E%G E,8E,

,/ @arning (ssets ,G0-%8 ,0#G$ ,E,8-% E-0$-# GE$$


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,- +otal Contingent

(ssets>Lia!ility 7=ff

'alance Sheet Items9

-,G8 GG-0 ##88G #8#$- #$0%

,, 2rofit after ta3 < 2rovision E%#E G88# 7#0%$9 ,,,8 ,G$%

,@ Rate of Return on profit

after ta3

)))) )))) 7E.#G9 #.$# #.,

, Return on Investment 7R=I9 %.,- G.EG %.$, -.- ,.%G

, Cost of Deposit -.E, -.-8 -., 8.8- ,.#-

,0 =perating Cost ))))) %-E# #.G- .E .E#

,G Cost of ?und %.% G.E G.# -.%$ 0.,%

,H (verage Return on Loan <(dvances

##.,, #.EG #.# G.%, %.G-

,E Interest Spread ,.#$ ,.0, ,.%% ,.- ,.%$

@/ &et spread .$0 E.#0 .,$ .#E .8$

@- @arning per share #G.G %0.E# 7#,%.$9 0$.,8 G%.#0

@, Current Ratio ))))) #.$, #.$E #.$0 #.#$

@@ @fficiency Ratio ))))) #8.%0 #8.## #-.8, #.0#

$a+1e @: Ney ?inancial :ighlights of J'L

,.- O(#R(I#= O! JA%A$A BA%> LOCAL O!!IC#

,.-.- Corporate ro*i1e o* Lo4a1 O**i4e Janata Bank

Bank %ame Janata Bank Limited

Bran4h %ame Local =ffice

Address # Dilkusha C>(/ Moti5heel/ Dhaka #$$$

S=I!$ Code J(&''DD:J'D

$e1ephone $ G880,),,/ G88E#$0

"istri4t Dhaka

=orking "ays Sunday ) +hursday 7@3cept :olidays9

$a+1e : =vervie1 of J'L/ Local =ffice

,.-., "epartments o* the Bran4h

(ccount =pening Department(dministration DepartmentCash DepartmentCleaning and Collection


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Loans and (dvance DepartmentLoan and (dvance Recovery Department@3port < Import Department?oreign Remittance Department

?oreign @3change Department

,.-.@ Organiationa1 Stru4ture o* the Bran4h

*eneral Manager

Deputy *eneral Manager

(ssistant *eneral Manager

?ast (ssistant *eneral Manager

Senior @3ecutive =fficer

@3ecutive =fficer

(ssistant @3ecutive officer>+ailor

Staff

!igure 0: =rgani4ational Structure of the 'ranch

,.-. $ota1 %um+er o* A44ounts o* the Bran4h

%um+er o* A44ount Kuantity

Current E0$

Sa5ings #,E,%

S%" #E$

!"R 0,G

"S


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!C #E080

JBSS #0

Loan D Ad5an4e GGE

JB"S #G8

S"S 8#

M"S $

#"S $

MSS -G

MBS $

"BS #,

MA 8G$

LRSS $

Total 37,326

$a+1e : &um!er of (ccounts of the 'ranch

,.-. $ota1 !inan4ia1 A**airs o* the Bran4h

$ota1 "eposit @G@0@--/HGG.,E $k.

+otal (dvance 008#-$8--08.0 +k.

Less interest suspense E%00$#,%.EG +k.Su+ $ota1 0EE$,80%E.E +k.

Less: loan to 'DC $.$$

$ota1 %et Ad5an4e 0EE$,80%E +k.

$a+1e 0: ?inancial (ffairs of the 'ranch


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CHAPTER 3THEORETICAL

DISCUSSION ON CREDIT

MANAGEMENT

@.- CR#"I$

+he 1ord credit is derived from the Latin 1ord 4redo 1hich means ) I !elieve and is

usually defined as the a!ility to !uy 1ith a promise to pay. It consists of actual transfer and

delivery of goods and services in e3change for a promise to pay in future. It is simply the

opposite of de!t. Diversification of !anking service has accelerated the use of credit in the

e3pansion of !usiness operation. It is a fundamental precept of !anking every1here that

advances are made to customers in reliance on his promise to pay rather than the security held

!y the !anker.

@., !AC$ORS R#LA$#" =I$8 CR#I"$

Risk

+ime


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Interest rate

Security or Collateral

=perating @3pense

Legal Considerations

Inflation

?inance Charge

@.@ RI%CIL#S O! CR#"I$

( prudent !anker should al1ays adhere to the follo1ing general principles of lending funds

to his customers"

'ackground/ Character and a!ility of the !orro1ers/

2urpose of the facility/

+erm of facility/

Safety/

Security/

2rofita!ility/

Source of repayment/

Diversity.

@. IMOR$A%C# O! CR#"I$

'ank gives interest at a fi3ed rate to the different types of depositor. Moreover 'ank needed

huge money for maintaining administrative e3penses. 'anks have to make profit after

meeting these e3penses and also providing the interest to the depositor. 'ank cannot make

eual profit the entire loan. It depends on the right use and principles of the loan. (ll

depositors do not 1ant money at a time. If !ank give the entire deposit at a time then !ank

canBt meet the demand of the customer on the other hand all the deposit to keep as a reserve is

prohi!ited !y it principle. So/ !anks to make com!ination !et1een them.

@. SO'RC#S O! CR#"I$

+he sources of providing loan of a !ank are given !elo1"

Different types of deposit

2aid up Capital


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Retained earnings

Loans from 'angladesh 'ank and other 'ank

(mong these sources different types of deposits are the main sources.

@.0 MO"#S O! CR#"I$

Loan and advance have primarily !een divided into ma5or groups"

!igure G: Modes of Credit

@.0.- Continuous Loan

+hese are the advances having no fi3ed repayment schedule !ut have a date at 1hich it is

rene1a!le on satisfactory performance of the clients. Continuous loan mainly includes Cash

credit !oth hypothecation and pledge and =verdraft.

@.0., "emand Loan

In opening letter of credit 7L>C9/ the clients have to provide the full L>C amount in foreign

e3change to the !ank. +o purchase this foreign e3change/ !ank e3tends demand loan to the

clients at stipulated margin. &o specific repayment date is fi3ed. :o1ever/ as soon as the L>C

documents arrive/ the !ank reuests the clients to ad5ust their loan and to retire the L>C

documents. Demand loans mainly include 2ayment against Documents/ Loan against

imported merchandise 7LIM9 and Later of trust Receipt.

@.0.@ $erm Loan

+hese are the advances made !y the !ank 1ith a fi3ed repayment schedule. +erms loans

mainly include Consumer credit scheme/ Lease finance/ :ire purchase/ and Staff

loan. +he term loans are defined as follo1s"

Short term loan" Up to # months.

Medium term loan" More than # months < up to E0 months

Long term loan" More than E0 months.


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@.G CR#"I$ MA%AM#%$

Loans or credits comprise the most important asset as 1ell as the primary source of earning

for the !anking institutions. =n the other hand/ loan>credit is also the ma5or source of risk for the !ank management. ( prudent !ank management should al1ays try to make an appropriate

!alance !et1een its return and risk involved 1ith the loan portfolio. Credit appraisal process

is the tool/ 1hich helps the !ank to predict the risk and return on the proposed pro5ect for

credit dis!ursement. +o get a clear idea a!out credit appraisal process 1e need to kno1 the

key factors of credit appraisal procedures.

@.H ROC#SS O! CR#"I$ MA%AM#%$

Credit management must !e organi4ed in such a process that the !ank can minimi4e its lossesfor payment of e3pected dividend to the shareholders. +he purpose of this process is to

provide directional guidelines that 1ill improve the risk management culture/ esta!lish

minimum standards for segregation of duties and responsi!ilities/ and assist in the ongoing

improvement of concerned !ank. +he guidelines for credit management may !e organi4ed

into the follo1ing sections"

@.H.- o1i4y &uide1ines

A. Lending &uide1ines: +he lending guidelines include the follo1ing)

Industry and 'usiness Segment ?ocus

+ypes of loan facilities

Single !orro1ers> group limits> syndication

Lending caps

Discouraged !usiness types

B. Credit Assessment and Risk &rading: ( thorough credit and risk assessment should !e

conducted prior to the granting of loans/ and at least annually thereafter for all facilities.

Credit (pplications should summaries the results of the risk assessment and include/ as a

minimum/ the follo1ing details)

@nvironment or social risk inputs

(mount and type of loan 7s9 proposed

2urpose of loans

Loan structure 7 tenor/ covenants/ repayment schedule/ interest9

Security arrangement

(ny other risk or issue


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Risk triggers and action plan)condition prudent/ etc.

Risk is graded as per Lending Risk (nalysis 7LR(9/ 'angladesh 'ankAs *uidelines of

classification of loans and advances.

C. Appro5a1 Authority: (pproval authority may !e as the follo1ing)

Credit approval authority has !een delegated to 'ranch Manager/ Credit

Committee !y the MD> 'oard

Delegated approval authorities shall !e revie1ed annually !y MD> 'oard.

(pprovals must !e evidenced in 1riting. (pproval records must !e kept on file 1ith

credit application

+he aggregate e3posure to any !orro1er or !orro1ing group must !e used to

Determine the approval authority reuired.

(ny credit proposal that does not comply 1ith Lending *uidelines/ regardless of

(mount/ should !e referred to :ead =ffice for approval.

". Segregation o* "uties: 'anks should aim at segregating the follo1ing lending function

Credit approval> risk management

Relationship management> marketing

Credit administration

@.H.,. rogram &uide1ines

Appro5a1 ro4ess: +he credit program undergoes through several approval process.

Credit Administration: +he credit administration function is critical in ensuring that

proper documentation and approvals are in place prior to the dis!ursement of loan

facilities.

Credit Monitoring: +o minimi4ed credit losses/ monitoring procedures and systems

should !e in place that provides an early indication of the deteriorating financial health

of !orro1er.

Credit Re4o5ery: +he recovery unit of !ranch should directly manage accounts 1ith

sustained deterioration 7a risk rating of su!)standard or 1orse9.

@.E CR#"I$ RIS> &RA"I%& 9CR&

+he Credit Risk *rading 7CR*9 is a collective definition !ased on the pre) specified scale

and reflects the underlying credit)risk for a given e3posure. ( Credit Risk *rading deploys a

num!er> alpha!et> sym!ol as a primary summary indicator of risks associated 1ith a credit

e3posure.


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Credit Risk *rading is the !asic module for developing a Credit Risk Management system.

@.E.- Steps in Credit Risk &rading

Step I: Identify all the 2rincipal Risk Components

Step II: (llocate 1eights to 2rincipal Risk Components

Step III: Identify the Ney 2arameters

Step IV: (ssign 1eight to each of the key parameters

Step V: Input data to arrive at the score on the key parameters

Step VI: (rrive at the Credit Risk *rading !ased on total score o!tained

@.E., !un4tions o* Credit Risk &rading

;ell)managed credit risk grading systems promote !ank safety and soundness !y facilitating

informed decision)making. *rading systems measure credit risk and differentiate individual

credits and groups of credits !y the risk they pose. +his allo1s !ank management and

e3aminers to monitor changes and trends in risk levels. +he process also allo1s !ank

management to manage risk to optimi4e returns.

@.E.@ 'se o* Credit Risk &rading

+he Credit Risk *rading matri3 allo1s application of uniform standards to credits to

ensure a common standardi4ed approach to assess the uality of individual o!ligor/

credit portfolio of a nit/ line of !usiness/ the !ranch or the !ank as a 1hole.

(s evident/ the CR* outputs 1ould !e relevant for individual credit selection/

1herein a !orro1er or a particular e3posure> facility are rated. +he other decisions

1ould !e related to pricing 7credit)spread9 and specific features of credit facility.

+hese 1ould largely constitute o!ligor level analysis.

Risk grading is also relevant for surveillance and monitoring/ internal MIS and

assessing the aggregate risk portfolio level analysis.

@.E. %um+er and Short %ame o* &rades 'sed in the CR&

+he proposed CR* scale consists of % categories 1ith short names and num!ers are provided

as follo1s"

&rading Short %ame %um+er

Superior SU2 #


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*ood *D .

(ccepta!le (CC2+ E

Marginal> ;atch list M*> ;L ,

Special Mention SM 8

Su! Standard SS 0

Dou!tful D? -

'ad and Loss 'L %

$a+1e G: &um!er < Short names used in CR*

@.-/ CR#"I$ OLIC)

2olicy entails pro5ected course of action. Janata 'ank Ltd. has its o1n policy granting creditalthough credit is al1ays a matter of 5udgment applying common sense in the light of oneAs

e3perience.

( sound credit policy includes among other things safety of funds invested vis)O vis

profita!ility of the !ank. @ncouraging ma3imum num!er of small loans is !etter than

concentration in a particular type of advances/ 1hich ensures sufficient liuidity 1ith least

incidence of !ad de!ts.

It has to !e !orne in mind that a good loan allo1ed to a properly selected !orro1er is half

collected. In order to make a good loan there should have a good loan policy.

@.-/.- O+e4ti5es o* Credit o1i4y

+here are some o!5ectives !ehind a 1ritten credit policy of Janata 'ank Ltd. that are as

follo1s"

+o provide a guideline for giving loan

2rompt response to the customer need

Shorten the procedure of giving loan

Reduce the volume of 1ork from top level management

Delegation of authority of 1ork from top level of management

+o check and !alance the operational activities

@.-/., !ormu1ation o* Credit o1i4y

=ne of uestions that should arise in a discussion of credit is 1ho should formulate

the policy.


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(lthough the ultimate responsi!ilities lay at the highest level in the organi4ation i.e.

the !oard of directors. 6et the actual drafting shall have to !e done !y the senior

lending office in consultations 1ith the chief e3ecutive officer and 1ith contri!ution

from senior officers/ associates and su!ordinates.=!viously the level of origin 1ill vary 1ith the si4e and structure of the organi4ation.

+he matter then referred to the !oard for approval after careful e3amination

consideration and discussion.

@.-/.@ rin4ip1es o* Sound Lending

It should !e clearly understood that the criteria>principles are not infle3i!le la1s < are given

as guidelines for protecting credit. In a practical competitive 1orld/ risks are defined/

accepted and credit is often granted even though a proposal does not strictly 1ith some of the

criteria descri!ed !elo1"

$he +asi4 1ending 4riteria 4an +e 4onsidered as eight main headings as *o11o7s:

- 2rinciple of Safety

, 2rinciple of Liuidity

@ 2rinciple of 2urpose

Character and a!ility of the !orro1er

2rinciple of Security

0 2rinciple of profita!ility

G Source of repayment

H 2rinciple of &ational Interest

@.-/. Components Re6uired *or a Sound Credit o1i4y

+here can !e some variations !ased on the needs of a particular organi4ation/ !ut at least the

follo1ing areas should !e covered in any comprehensive statement of credit policy and J'LBs

policy also covers these areas"Lega1 4onsideration: +he !ankBs legal lending limit and other constraints should !e

set forth to avoid inadvertent violation of !anking regulations.

"e1egation o* authority: @ach individual authori4ed to e3tend credit should kno1

precisely ho1 much and under 1hat conditions he or she may commit the !ankBs

funds. +hese authorities should !e approved/ at least annually/ !y 1ritten resolution of

the !oard of directors and kept current at all times.

$ypes o* 4redit e;tension: =ne of the most su!stances parts of a loan is a delineation

of 1hich types of loans are accepta!le and 1hich type are not.


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ri4ing: In any profit motivated endeavor/ the price to !e charged for the goods or

services rendered is of paramount 1ithout it/ individuals have fe1 guidelines for

uoting retag or fees/ and the variations resulting from human nature 1ill !e a source

of customer dissatisfaction.Market Area: @ach !ank should esta!lish its proper market area/ !ased upon/ among

other things/ the si4e and sophistication of its organi4ation its capital standpoint/

defining oneBs market area is pro!a!ly more important in the lending function than in

any other aspect of !anking.

Loan Standard: +his is a definition of the types of credit to !e e3pended/ 1herein the

ualitative standards for accepta!le loans are set forth.

Credit &ranting pro4edures: +his su!5ect may !e covered in separate manual/ and

usually is in larger !anks. (t any rate/ it should not !e overlooked !ecause proper

procedures are essential in loan esta!lishing policy and standards. ;ithout proper

procedure for granting credit and constant policing to ensure that these procedures are

meticulous carried out/ the !est conceived loan policy 1ill not function and inevita!le/

pro!lems 1ill develop.

@.-- CR#"I$=OR$8I%#SS O! A BORRO=#R

@.--.- Chara4ter

+o determine 1hether the !orro1er has a responsi!le attitude to1ards !orro1ed fundsand 1hether he 1ill have every effort to repay 1hat is o1ed.

Responsi!ility/ truthfulness/ serious purpose/ and serious intention to repay loans make

up the characters of the !orro1er

@.--., Capa4ity

;hether customer reuesting loan has the authority to reuest loan and have the legal

standing to sign loan agreement and documents.

@.--.@ #4onomi4 Condition


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@.--. Credit Rating

Credit Ratings of the !orro1er !y credit rating agencies

@.-, CR#"I$ &RA%$I%& ROC#"'R#SIn Janata !ank 7Local office !ranch9/ for granting credit to the clients/ there is follo1ed

several steps to ensure a!out the party. 'y follo1ing these steps the lender can achieve

efficiency of loan dis!ursement. +he steps are discussed !elo1"

!igure H: Credit *ranting 2rocedures

Re4ei5ing proposa1: +he !ank first receives the loan proposal from the clients 1ho

1ant to get loan. +he party has to fulfill the reuirements 1hich are 1anted in the

prescri!ed form. +he information provided in the form has to !e accurate and fair.

S4rutiniing: Scrutini4ing means to e3amine closely/ it is conducted to make security.+he information provided in the form are e3amined that it is true or not.

Inspe4tion: (t this stage/ the lender inspect the actual condition of the clients that he

or she provided the information is right or 1rong. +he !ank sends the officer related

to loan and security 1ho o!serve the physical picture of the asset or !usiness firm.

#5a1uation: +he information 1hich are collected from the clients/ are evaluated here.

It is also called screening. +he lender evaluates the core factors and fi3 1hat kind of

amount can !e lent to the clients.

1a4ing the authority: Loans is dis!ursed !y the :ead office 'oard of Directors. +he !ranch credit committee sends the document to the :ead office credit committee and

the committee also provides to the 'oard of Director for sanctioning loan.

Appro5a1: (t this stage/ the :ead office 'oard of Director 1ill take decision that the

loan can !e approved or not.

"o4umentation: 'efore final decision to dis!urse loan/ the client has to provide all

the documents are needed to get loan. If any document cannot !e ensured to the !ank/

then the loan cannot !e provided.


- ? 2 a g e

Receiving proposal

Scrutini4ing Inspection @valuation

2lacing theauthority

(pproval Documentation Dis!ursement


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"is+ursement: It is the last step of loan sanctioning. If the !oard seems that the

formalities and information provided !y the clients are accurate and relia!le/ then the

!oard can dis!urse the fi3ed amount of loan for a certain period of time.

@.-@ CR#"I$ COMMI$$##

+he credit committee of Lo4a1 O**i4e/ Janata !ank consists of #$ mem!ers including #

Chairman/ % mem!ers and # mem!er secretary.


% ? 2 a g e

&M Lo4a1 O**i4e

Chairman of the committee

&M Lo4a1 O**i4e

Chairman of the committee

D*M/ (dministration Department/ mem!er

D*M/ ?oreign +rade Department/ mem!er

D*M/ Loan and (dvance Department/ mem!er

D*M/ @sta!lishment Department/ mem!er

(*M/ ICD Loan and (dvance Department/ mem!er

(*M/ ?oreign +rade Department/ mem!er



(*M/ Loan and (dvance Department/ mem!er

(*M/ Recovery Department

Mem!er Secretary


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!igure E: Credit Committee

@.- S#C'RI$I#S !OR CR#"I$ MA%AM#%$

=ne of the most important functions of a !ank is to employ its fund !y 1ay of loans and

advances to its customers and a !ankBs strength depends considera!ly on the uality of its

loans and advances. In older times/ 1hen the !ankers kne1 the customers personally and

intimately and had complete confidence in the integrity and honesty of a customer/ they used

to allo1 loans and advances 1ithout a security.+he position is uite different today. 'anks having a large num!er of officers over a 1ide

area cannot allo1 loans and advances 1ithout retention of security in one form or the other.

Security is o!tained as a line of last defense to fall !ack upon. It is meant to !e an insurance

against emergency. 'ut taking security/ !ank acuires a claim upon the assets of the !orro1er

if repayment is not made as planned. 'ut 1hat should !e the significant securities of loans

depends on the guidelines prescri!ed !y the 'angladesh 'ank through 'CD circular no.

#->#G-- and also the negotiation of the respective !ranch to its !orro1ers. +he most

significant categories of security lodged are as"

*oods and commodities

?DR

Real estate

Stock e3change securities

Life insurance policies

*old and gold ornaments

Documents of title of goods

Supply !ills

Janata 'ank Ltd. 9Lo4a1 o**i4e !ranch keeps sufficient security !efore final sanctioning of

loans and advances.

@.- S=O$ A%AL)SIS !OR CR#"I$ MA%AM#%$ O! JBL

S;=+ (nalysis is an important tool for evaluating the companyBs Strengths/ ;eaknesses/

=pportunities and +hreats. It helps the organi4ation to identify ho1 to evaluate its

performance and can scan the macro environment/ 1hich in turn 1ould help the organi4ation


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to navigate in the +ur!ulence =cean of competition. S;=+ analysis is commonly used in

marketing and !usiness in general as a method of identifying opposition for a ne1 venture or

strategy. Short for Strengths/ ;eaknesses/ =pportunities and +hreats/ this allo1s

professionals to identify all of the positive and negative elements that may affect any ne1 proposed actions. S;=+ analysis of Janata 'ank Ltd is given !elo1"

@.-.- Strengths

Large customer !ase

Strong capital and asset uality

+he !ank is financially safe

Community involvement

Speedy foreign remittance payment system 1ith ;estern Union Money +ransfer

+he Image>*ood1ill of the !ank is very good

+he !ank has huge amount of deposit and market potentiality

Regulatory performance is strong and positive

@.-., =eaknesses

Lack of technological resources such as computeri4ed !anking as 1ell as Internet

!anking

'ecause of manual service/ it is more costly and time consuming

Lack of promotional activities

2oor information !ased 1e!site.

+here is no specific training institute for J'L employees

+he !ank has more non)performing assets

Credit providing procedures are very lengthy

@.-.@ Opportunities

Internal conditions those are helpful to achieve organi4ationBs o!5ectives. Some opportunities

of the deposit department of J'L are as follo1s)

( large num!er of private !anks coming into the market in recent times. In this

competitive environment J'L must e3pand its product line to enhance its sustaina!le

competitive advantage

In that product line/ they can introduce the (+M to compete 1ith the local and the

foreign !ank


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+hey can introduce credit card and de!it card system for their potential customers. In

addition of those things/ J'L can introduce special corporate scheme for the corporate

customer or officer 1ho has an income level higher from the service holder

(t the same time/ they can introduce scheme or loan for various service holders. In

order to reduce the !usiness risk/ J'L has to e3pand their !usiness portfolio

@.-. $hreats

Loan defaulter

2olitical insta!ility of the country

+he continuing increase in non)!ank competitors offering similar services

( large num!er of private !anks are increasing in 'angladesh day !y day !y taking

huge capital and skilled human resources

2rivate 'anks provide handsome salary to the employees

*overnment facilities may !e insufficient 1hen the economic condition of the country

!ecomes unfavora!le


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CHAPTER

CREDIT MANAGEMENTOF !"L

.- LOA%S A%" A"(A%C#S

In common practice/ the loan document means any 1ritten record 1hich serves as evidence

in respect of a transaction and can !e descri!ed as anything o!tained for recording a

transaction. Documentation may !e descri!ed as the process or techniue of o!taining the

relevant documents. ( !anker must o!tain proper documents e3ecuted from the !orro1er to

protect himself against 1illful defaults. Moreover/ 1hen money is lent against security of

some assets/ the documents must !e got e3ecuted in order to give to the !anker a legal and

!inding charge against those assets. Documents contain the precise terms of granting loans

and advance and they serve as important evidence in la1 counts if the circumstance so

reuire. It is/ therefore/ a!solutely necessary for a !anker to o!tain proper documents from

the !orro1er 1hile granting a loan or advance to him. In !anking system/ loan interest is

calculated in daily !asis.

Janata !ank is one of the leading largest commercial !anks in our country. It has !een playing

a vital role in our economy flourishing industrial sector !y providing financial support.

?ollo1ing the guidelines of 'angladesh 'ank/ credit facilities have !een e3tended to

productive and priority sectors. In consideration of the importance of rural sector on overall

economy of the country Janata 'ank has !een involved in Rural ?inancing through the vast


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!ranch net1ork spread all over the country. +he main o!5ectives of the rural credit policy and

programs of the !ank have !een designed to cover all segments of rural population 1hether

skilled or unskilled such as farmers/ landless/ la!orers/ 1omen/ unemployment educated and

vocational trained youths/ 1eavers/ and other rural d1ellers and artisan.( good num!er of micro credit programs have !een launched for poverty reduction

sponsored !y the !ank on its o1n and in colla!oration 1ith local and foreign agencies.

@mphasi4e has !een given on entrepreneurship development and *ender @uality in the

credit programs. 'esides/ the !ank has also given emphasis on agro)!ased industries. Most of

the rural and micro credit programs are collateral free. Interest has !een fi3ed up at #$. +o

provide co)operation and necessary counseling to the rural entrepreneurs/ !ank has opened

Micro @nterprise ;ing at :ead =ffice/ Regional =ffice and !ranch level.

., $)#S O! LOA%

.,.- Continuous Loan

Secured =ver Draft (gainst

?inancial =!ligation PS=D7?=9Q

Secured =ver Draft (gainst ;ork

=rder PS=D7*9Q

Cash Credit 7:ypothecation9

Cash Credit 72ledge9

@3port Cash Credit 7@CC9

.,., "emand Loan

Loan general

Demand loan against ship !reaking

2ayment against documents 7pad9

Loan against import merchandise

7LIM9

Loan against trust receipt 7L+R9

?orced loan

2acking credit

Secured over draft against cash

incentives

?oreign documentary !ills

purchased 7?D'29

Local documentary !ills purchased

7LD'29

?estival !usiness loan

.,.@ $erm Loan

2ro5ect loan

+ransport loan

:ouse !uilding loan

Small !usiness loan

Consumer finance loan

Lease finance

2ersonal loan


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.@ $ABL# O! LOA% CLASSI!ICA$IO%

Loan $ype

'n41assi*ied

9Month

Su+standard

9MO%$8

"ou+t*u1

9Month

Bad

9Month

ontinues

Loan !eman"

Loan

@3piry up to 8

month

0 to % month G to ## month # month

Term Loan #p

to $ years

$ to 8 month 0 to ## month # to #-

month

#% month

Term Loan

more than $

years

$ to ## month # to #- month #% to E

month

, month

%icro re"it $ to ## month # to #E month E0 to 8G moth 0$ month

$a+1e H: Loan Classification

. "I!!#R#%$ $)#S O! LOA%S A%" A"(A%C#S

SO" 9!O: (dvance is granted to a client against financial o!ligations. +he securityof advance is granted to the person to 1hom the instrument !elongs. +he discharged

instrument is surrendered to the !ank along 1ith a letter signed !y holder>holders. +he

!ankBs lien is prominently noted on the face of the instrument under the signature of

an authori4ed !ank official. Interest rate is #E to #8.

SO" 9&: *ranted against the 1ork order of government departments/ corporationBs

autonomous !odies and reported multinational private organi4ation. +o arrive at

logical decision/ the clientBs managerial capa!ility/ euity strength/ nature of

scheduled 1ork is to !e 5udged. Dis!ursement is made after completion of

documentation formalities/ !esides usual charge/ documents like a notari4edirrevoca!le po1er of attorney to collect the !ills from the concerned authority and a

letter from the concerned authority confirming direct payment to the !ank is also

o!tained. +he 1ork is strictly monitored to revie1 the progress at each interval.

Interest rate is #E to #8.

Cash Credit 98ypothe4ation: +he mortgage of mova!le property for securing loan

is called hypothecation. :ypothecation is a legal transaction 1here!y goods are made

availa!le to the lending !anker as security for a de!t 1ithout transferring either the

property in the goods or either possessing. +he !anker has only euita!le charge on


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stocks/ 1hich practically means nothing. Since the goods al1ays remain in the

physical possession of the !orro1er/ there is much risk to the !ank. So/ it is granted to

parties of undou!ted means 1ith highest integrity. Interest rate is #E.

Cash Credit 91edge: +ransfer of possession in the 5udicial sense of essential in thevalid pledge. In case of pledge/ the !ank acuire the possession of the goods or a right

to hold goods until the repayment for credit 1ith a special right to sell after due notice

to the !orro1er in the event of non)repayment. Interest rate is #E.

Consumer Credit S4heme: +his scheme is aimed to attract consumers from the

middle and upper middle class population 1ith limited income. +he !orro1er should

have saving or current deposit account 1ith the !ank. Minimum 8 of the purchase

cost of the product is to !e deposited !e the !orro1er 1ith the !ank is euity !efore

the dis!ursement of the loan. +he rest -8 is to !e kept as cash collateral 7?DR/

Shanchay 2atra etc.9 1ith the !ank. Loan amount is dis!ursed through a>c payee pay

order>demand draft directly to the seller after su!mission of the indent/ deposit of

client euity and completion of documentation formalities.

Loan 9&enera1: J'L considers the loans/ 1hich are sanctioned for more than one

year as loan 7g9. Under this facility/ an enterprise of financed from the stating to its

finishing/ i.e. from installment to its production. J'L offers this facility only to !ig

industries.

Sta** Loan: 'ank official from senior officer and a!ove is eligi!le for this loan. +he

ma3imum amount dis!ursed is +k. 8$/$$$>) for a period of years.

8ouse Bui1ding Loan: +his loan is provided against #$$ cash collateral/ !esidesH

the land < !uilding are also mortgaged 1ith the !ank. Interest rate is #- p.a.

Sma11 Loan S4heme: J'L introduced three ne1 small loan scheme are"

I. :ouse Renovation Loan

II. 2ersonal Loan

III.Small 'usiness Loan

Loan against Imported Mer4handise 9LIM: (dvances allo1ed for retirement of shipping documents and release of goods imported through L>C taking effective

control over the goods !y pledge fall under this type of advance/ 1hen the importer

failed to pay the amount paya!le to the e3porter against import L>C/ than J'L gives

loan against imported merchandise to the importer. +he importer 1ill !ear all the

e3penses i.e. the godo1n charge/ insurance fees/ etc. and the o1nership of the goods

is retaining to the !ank. Interest rate is #0.

Loan against $rust Re4eipt 9L$R: Investment allo1ed for retirement of shipping

documents and release of goods imported through L>C fall under this heard. +he

goods are handed over to the importer under trust 1ith the arrangement that sale


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proceeds should !e deposited to liuidate the investments 1ithin a given period. +his

is also a temporary investment connected 1ith import and kno1s as post)import

finance and falls under the category Commercial Lending. Interest rate is #0.

ayment Again "o4uments 9A": +his facility originates payment of Import !illson lodgment of CL@(& shipping documents received from ?=R@I*& correspondent

against Letter of Credit opened on !ehalf of the customers. +his is an o!ligation

1hich the !ank shall e3tend strictly on the merit of shipping document and 1hich

must conform to the terms < conditions of LC.

Loan "o4umentary Bi11 ur4hase 9L"B: 2ayment made against documents

representing sell of goods to local e3port oriented industries/ 1hich are deemed as

e3ports/ and 1hich are deemed as e3ports/ and 1hich are dominated in local

currency>foreign currency falls under this head. +he !ill of e3change is held as the

primary security. +he client su!mits the stance !ill and the !ank discounts it. +his

temporarily lia!ility is ad5usta!le from the proceeds off the !ill. Interest rate is #$.

In1and Bi11 ur4hase 9IB: 2ayment made through purchase of inland !ills>cheues

to meet urgent reuirement of the customer falls under this type of investment facility.

+his temporary investment is ad5usta!le from the proceeds of !ills>cheues purchased

for collection. It falls under the category Commercial Landing.

!oreign Bi11 ur4hase 9!B: 2ayment made to customer through 2urchase of

?oreign Currency Cheues>Drafts fall under this head. +his temporary investment is

ad5usta!le from the proceeds of the cheue>draft. ?oreign @3change Department deals1ith Letter of credit 7L>C9 operation and foreign remittance. L>C operation divided

into import operation/ e3port operation and inland trade. Janata 'ank offers t1o types

of credit facilities to its customers such as"

I. ?unded Credit

II. &on ?unded Credit

. CR#"I$ SC8#M#S O! JA%A$A BA%> LIMI$#"

..- Mi4ro Credit rograms

A. Sma11 !armers D Land1ess La+orers "e5e1opment roe4t 9S!":

$arget &roup" Small ?armers < Landless

O+e4ti5es" +o increase production and to create employment amongst rural poor !y

providing credit

Se4urity" &o collateral is reuired


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Interest" #$

Repayment" Loan repaya!le !y installment

B. Short Credit S4heme: +his type of credit facility is given to the poor and landless rural

people. +he o!5ective of this scheme is to create employment opportunity amongst poor. +he

interest is #$. It is repaya!le !y 8 1eekly installments.

C. Cooperati5e Credit *or Rura1 oor: +his credit is given to the mem!ers of Co)operative

(ssociation to create employment to the rural poor co)operators. +he (ssociation gives

guarantee. Interest rate is #$.

.., #ntrepreneurship "e5e1opment rogram

A. =omen #ntrepreneurship "e5e1opment Credit rogram: ;omen @ntrepreneurs

Development Scheme has !een introduced to encourage 1omen in doing !usiness. Under

this scheme/ the !ank finances the small and cottage industry pro5ects sponsored !y 1omen.

Interest rate is #$. It is repaya!le in monthly installment 1ithin E years that star from the

,th month after o!taining loans.

B. Sma11 Business "e5e1opment Loan S4heme: +his scheme has !een evolved especially

for small shopkeepers 1ho need credit facility for their !usiness. +his credit facility is given

to the small !usiness !y third party guarantee that is accepta!le to the !ank at ## interest

rate. It is to !e repaid in 8 years in 0$ monthly installments in case of term loan or # year in

1orking capital. 'esides/ !ank also e3tends credit facilities for the goat farming/ seed

development program/ forestry>horticulture &ursery/ flo1er plantation < garden/

handicapped>disa!le people to make them self)reliant.

..@ Other Spe4ia1 Credit rograms

Credit for @mployees

Consumer Credit Scheme

2ersonal Loan Scheme

Car Loan Scheme

?inancing of Industries

.0 I%$#R#S$ RA$# O! LOA%S I% JBL

+he interest rates of various types of loans are as follo1s"

$ypes o* Loans D Ad5an4es Interest

Rate

Co11atera1 Re6uired Loan 1imit


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C.C 72ledge9 #8 &ot Compulsory #$$$$$)$$$$$

C.C 7:ypothecation9 D= Do Do

=ver Draft 7=.D9 D= 'ank Deposit 8$$$$)#$$$$$

Real @state 7Resident9 # Documents of (ssets &o limit

Real @state7Commercial9 #8.8 Do Do

2alli Rin #$ 2ersonal *uarantee 8$$$$

Service Loan # Check of monthly 8$$$$

Consumer Credit #E 2ersonal *uarantee 8$$$$

DoctorBs Loan #$ Do 8$$$$

Cy!er CafT Loan #$ Do 8$$$$

2rati!ondhi Loan #$ Do 8$$$$

*eneral Loan #$ 8$$$$

$a+1e E: Interest Rate of Loans in J'L

.G LOA% SA%C$IO%I%& ROC#"'R# O! JBL

+he follo1ing procedure is applica!le for giving advance to the customer. +hese are"

.G.- &etting Credit In*ormation

Janata 'ank Ltd. collects credit information a!out the applicant to determine the credit1orthiness of the !orro1er. +he !ank collects the information a!out the !orro1er from the

follo1ing sources"

2ersonal investigation.

Confidential report from other !ank :ead =ffice>'ranch>cham!er of the commerce.

CI' Report from Central 'ank.

.G., In*ormation Co11e4tion

+he loans and advances department gets a form filled !y the party seeking a lot of

information. +he information is listed !elo1"

&ame and address of the !orro1er 7present and permanent9.

Constitution or status of the !usiness.

Data of esta!lishment and place of incorporation.

2articulars of properties/ partners and Directors.

'ackground and !usiness e3perience of the !orro1ers.


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2articulars of personal assets/ name of su!sidiaries/ percentage of shareholding and

nature of !usiness.

Details of lia!ilities in name of !orro1ers/ in the name of any directors.

?inancial Statement of the last three years.

&ature and details of !usiness>products.

Details of securities offered.

2roposed de!t euity ratio.

=ther relevant information.

.G.@ Ana1ying the In*ormation

Janata 'ank Ltd. then starts e3amination 1hether the loan applied for/ is complying 1ith its

lending policy. If comply/ then it e3amines the documents su!mitted and the credit

1orthiness. Credit 1orthiness analysis/ i.e. analysis financial conditions of the loan applicant

is very important. If loan amount is more than 8$/ $$/$$$/ then !ank goes for Lending Risk

(nalysis 7LR(9 and Spreadsheet (nalysis 7S(9 1hich are recently introduced !y 'angladesh

'ank. (ccording to 'angladesh 'ank Rules/

A report on public banking institutions

Documents

Transcript of A report on public banking institutions