1.1 Introduction:Bank is a financial intermediary whose prime function is to move scarce resources in the form of credit from savers to those who borrow for consumption and investment. The word credit is derived from the Latin word credere, which means to trust. The fundamental nature of credit is that an element of trust exists between buyer and seller-whether of goods or money. In a modern industrial society Banks are uniquely important because of their ability to create money. Lending comprises a very large portion of a Banks total assets and forms the backbone of the Bank and interest on lending constitutes the highest proportion of income of a Bank. As such credit quality remains the prime indicator of its commercial success. Unsound credit reduces the ability of a Bank to provide credit towards profitable borrowers and undermine liquidity and solvency. Therefore lending is very important for the profitability and success of a Bank.

This report on Credit Management of NCC Bank Limited -A case study on National Credit and Commerce Bank Limited (NCCBL), Anderkilla Branch is a collaborated representation of the internship program at which is a partial requirement of the Master of Business Administration (MBA) Program of International Islamic University Chittagong. The Purpose of the report is to contemplate the knowledge and experience accumulated from the internship program. Modern banks play an important part in promoting economic development of a country. Banks provide necessary funds for executing various programs of economic development. They collect savings of large masses of people scattered throughout the country, which in the absence of banks would have remained idle and unproductive. These scattered amounts are collected, pooled together and made available to commerce and industry for meeting the requirements. Economy of Bangladesh is developing economies. One of the reasons may be its underdeveloped banking system. So Government as well as different international organizations have also identified some obstacles to the process of economic development. So they have highly recommended for reforming financial sector.1.2 Objectives of the study:The main objective of the study is to analyze the Credit management of National Credit And Commerce Bank Limited (NCCBL), Anderkilla Branch, Chittagong. The following are the specific objectives of the study:1. To Know about the rules & regulations of credit management of a bank2. To discuss about the credit management of the sample bank. 3. To analyze the financial performance of credit management of the sample branch.4. To find out problems and to give some suggestions to overcome the problems

1.3 Methodology:The methodology of this report is totally different from conventional reports. I have emphasized on the practical observation. Almost the entire report consists of my practical observation. While preparing the report, I have taken information from the following sources:Primary sources of dataSecondary sources of data

Practical Deskwork Conversation with the bank personnel. Face to face conversation with the clients.

Manuals of NCCBL Annual report of NCC Bank Limited. Credit manual of NCC Bank Ltd. Various books, articles, compilation etc Various documents from the Branch Website of NCC Bank Limited

1.4 Scope:This study is based on theoretical and practical analysis. However the scope of the study is confined within the region of Anderkilla Branch, Chittagong. The study will focus on the following areas ----1. The kinds of credit facilities extended by National Credit And Commerce Bank Limited (NCCBL).1. General Procedure for getting different kinds of credit facilities.1. How different kinds of projects are appraised at National Credit And Commerce Bank Limited (NCCBL).1. Present Scenario of Credit Policy.Each of the above areas is critically analyzed in order to determine the efficiency of National Credit And Commerce Bank Limited (NCCBL), Anderkilla Branch.

1.5 Limitations:In the bank I attained some limitations though I tried my level best to make the report more informative & representative: Time limitation is the main barrier for the study. For the lack of our practical knowledge, some shortcoming may be available in the report. Bank is a busy organization with comparison to others. So it is very much tough for them to allocate time for an internee. It is mentioned that I had no opportunity to deal with those banking activities deeply. I just observed what the bankers were doing & how. Unavailability of sufficient written documents a required for making comprehensive. The bank has normally shown us some indifference connecting its most confidential information. My personal limitations also contributed greatly in making the study. 2.1 History:National Credit and Commerce Bank Ltd. is as a private bank in Bangladesh. It is facilitating real time online banking connecting all 87 branches nationwide. Like other banks it is also practicing liability & investment management.The National Credit and Commerce bank Ltd. registered in 1993 under the Companies Act 1913. This bank came into existence as an investment company named National Credit Ltd. on 25/11/1985. The aim of the company was to initiative taken by the members of the Board of directors and with the permission of the central Bank, it was converted in to fully fledged private commercial bank in the name of National Credit and Commerce Bank Ltd. on 17/05/1993 with paid up capital of Tk. 39.00 crore and authorized capital of Tk.75 crore which opened the way to serve the nation from a broader platform. It carries out all banking activities through 87 branches in Bangladesh. The bank is listed with Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited since the year 2000 as a publicly quoted company for its shared. NCCBL has acquired commendable reputation by providing sincere personalized service to its customers in a technology based environment.

2.2 Corporate Mission of NCCBL:To mobilize financial resources from within and abroad to contribute to Agriculture's, Industry & Socio-economic development of the country and to play a catalytic role in the formation of capital market.2.3 Corporate Vision of NCCBL:To become the Bank of choice in serving the Nation as a progressive and Socially Responsible financial institution by bringing credit & commerce together for profit and sustainable growth.

2.4 Corporate Information: 01.NAMENational Credit and Commerce Bank Ltd. (NCCBL)

02.STATUSPrivate Limited Company

03.SLOGANWhere credit & commerce integrates..

04.REGISTRATION17th May ,1993

05.Head Office7-8 Motijhell C/A, Dhaka-1000

06.ENLISTMENT IN DSE & CSEYear 2000

08.MARKET CATEGORYA

09.Authorized capitalTk. 10000 million

10.Paid up capitalTk. 5942 million

11.Total No. of SECURITIES594.165435 million

12RESERVE & SURPLUS476.723217 million

13.ChairmanAlhaj Md. Nurun Newaz

14.Managing DirectorMohammed Nurul Amin

15.BOARD OF DIRECTORS 26 Members

16.BRANCH87 branches all over the country Up to 2012

17.EMPLOYEES2000 above

18.Websitewww.nccbank.com.bd

2.5 Slogan of NCCBL:Where credit & commerce integrates..2.6 Products & Services: There are various types of products and services provided by NCC bank as shown bellow

National Credit & Commerce Bank Ltd.Special fee Earning productsMoney Transmission ProductsDeposit Products34 International Business Products Lending ProductsSocial service products

Detailed Products & Services NCC Bank Ltd.:

2.7 Financial Highlights: PARTICULARS2011 (Million)2012 (Million)

Authorized Capital500010000

Paid up Capital2284.94501.25

Reserve fund & Other Reserve4371.625771

Equity Fund6656.5210272

Deposit5390067971

Loans & Advance5038863230

Investments967210980

Import Business3307841245

Export Business1190416125

Operating Income 933310158

Operating Expenses 61956058

Operating Profit 31374100.2

Profit Before Tax 26873248.23

Profit After Tax 17202371.68

Retained Earning 46.47388

Total Assets(Excluding contra) 6593783554

Fixed Assets 8491191.41

Number of Branches 65 79

Number of Employees 14961622

Earnings Per Share 7.53 5.33

Dividend: cash (%) Nill Nill

Dividend: Bonus (%) 47 32

Return on Equity (ROE) (%) 29 25.35

Return on Assets (ROA) (%) 2.61 2.84

Capital Adequacy Ratio 13.55 10.91

Advance/Deposit Ratio (%) 93.48% 93.04%

2.8 SWOT Analysis: SWOT stands for Strength, Weakness, Opportunity and Threat. The SWOT of NCCBL has been shown in the next...Internal factors

StrengthWeaknesses

Wide Banking services through 87 branches Young Enthusiastic workforce Strong Management team Online Banking Services Existence of strict and standard Foreign exchange department. Experienced manpower in abroad in foreign exchange department Strong financial position Various Products Cordial relation with customers Well Decorated Branches 24 hour ATM Booth service

Lack of trained and highly educated officers. Absence of modern equipment in banking needs. Lack of proper media presence. Lack of proper advertisement of the products Some officials are having attitude problem at workspace.

External factors

OpportunitiesThreats

Country wide Network More Experienced and Managerial Know-How Debit Cards Can recruit fresh graduates and train them to bring up a team of talented officers. Can take initiative for introducing Islamic Banking system. Can reduce manpower through computerized system

Govt. policies are not in favor of the private banks. Up Coming Bank Moderate levels of Customer Satisfaction Effects of the World Economic Slums Better service offer of others Threat from Non bank banking

3.1 Credit: Credit is a contractual agreement in which a borrower receives something of value now and agrees to repay with agreed terms. Credit risk, the possibility of nonrepayment of credit amount, arises from the banks dealing with or lending to corporate, individuals and other banks or financial institutions.3.2 Credit management: Credit management is the process of planning, forecasting, deciding, granting & collecting the loans granted as well as formulating proper procedures to minimize risk arising from loan. Credit risk management is the vital of most commercial bank. Increase in credit risk will raise the managerial cost of debt and equity which in turn increase the cost of fund of the loan.3.3 Objectives of Credit management: To provide the directional guidelines Improve risk management culture Establish risk minimum standards Segregation of duties and responsibilities Assist the improvement of banking sector3.4 Policy on Capital Adequacy of Banks:To adopt the international best practices and to make the bank's capital more risk-absorbent as well as to build the banking industry more shock resistant and stable, all scheduled banks are obligated to comply with "Guidelines on Risk Based Capital Adequacy (RBCA) for Banks Revised Regulatory Framework in line with BASELII from January 01, 2010. These guidelines have been structured on following three aspects: Minimum capital requirement has been defined and to be maintained by a bank on solo basis as well as consolidated basis against RWA for credit, market, and operational risks. Process for assessing the overall capital adequacy aligned with comprehensive risk management of a bank. Framework of public disclosure on the position of a bank's risk profiles, capital adequacy, and risk management system.

The following headings containing specific instructions are issued for compliance by banks: 3.4.1 Definition of Capital:Regulatory capital is categorized in three tiers: A. Tier 1 capital called Core Capital comprises of highest quality of capital elements:a) Paid up capital b) Non-repayable share premium accountc) Statutory reserved) General reservee) Retained earningsf) Minority interest in subsidiariesg) Non-cumulative irredeemable preference shares h) Dividend equalization account B. Tier 2 capital called Supplementary Capital represents other elements which fall short of some of the characteristics of the core capital but contribute to the overall strength of a bank: a) General provisionb) Revaluation reserves Revaluation reserve for fixed assets Revaluation reserve for securities Revaluation reserve for equity instrument C. Tier 3 capital called Additional Supplementary Capital, consists of short-term subordinated debt (original maturity less than or equal to five years but greater than or equal to two years) would be solely for the purpose of meeting a proportion of the capital requirements for market risk. D. For foreign banks operating in Bangladesh- Tier 1 capital consists of the following items: a) Funds from head officeb) Remittable profit retained as capitalc) Any other items approved by BB for inclusion in Tier 1 capital Tier 2 capital consists of the following items:a) General provisionb) Borrowing from head office in foreign currency in compliance with the regulatory requirement.c) Revaluation reserve for securitiesd) Any other items approved by BB for inclusion in Tier 2 capital. 3.4.2 Conditions for maintaining regulatory capital:The calculation of Tier 1 capital, Tier 2 capital, and Tier 3 capital shall be subject to the following conditions: a) The amount of Tier 2 capital will be limited to 100% of the amount of Tier 1capital. b) 50% of revaluation reserves for fixed assets and securities eligible for Tier 2 capital. c) 10% of revaluation reserves for equity instruments eligible for Tier 2 capital. d) Subordinated debt shall be limited to a maximum of 30% of the amount of Tier1 capital. e) Limitation of Tier 3: A minimum of about 28.5% of market risk needs to be supported by Tier 1 capital. Supporting of Market Risk from Tier 3 capital shall be limited up to maximum of 250% of a banks Tier 1 capital that is available after meeting credit risk capital requirement.

3.4.3 Policy on Loan Classification and ProvisioningThe process of gradually upgrading the policies on loan classification and provisioning to the international level is going on. Measures have been taken to strengthen the credit discipline and the process of classification has been simplified. The following revised policies on loan classification and provisioning has been issued amending the previous circulars in this regard: - 3.4.3.1 Categories of Loans: All loans and advances will be grouped into 4(four) categories for the purpose of classification, namely- A. Continuous Loan: The loan Accounts in which transactions may be made within certain limit and have an expiry date for full adjustment will be treated as Continuous Loans. Examples are: CC, OD etc. B. Demand Loan: The loans that become repayable on demand by the bank will be treated as Demand Loans. If any contingent or any other liabilities are turned to forced loans (i.e. without any prior approval as regular loan) those too will be treated as Demand Loans. Such as: Forced LIM, PAD, FBP, and IBP etc. C. Fixed Term Loan: The loans, which are repayable within a specific time period under a specific repayment schedule, will be treated as Fixed Term Loans. D. Short-term Agricultural Credit: This will include the short-term credits as listed under the Annual Credit Program issued by the Agricultural Credit Department of Bangladesh Bank. Credits in the agricultural sector repayable within less than 12 months will also be included herein. Short term Micro-Credits will include any micro-credits for less than Tk.25,000/= and repayable within less than 12 months, be those termed in any names such as Non-agricultural credit, Self-reliant Credit, Weaver's Credit or Bank's individual project credit.

3.4.3.2 Basis for Loan Classification: A. Objective Criteria: A.1. Any Continuous Loan if not repaid/renewed within the fixed expiry date for repayment will be treated as past due/overdue from the following day of the expiry date. This loan will be classified as Sub-standard. A.2. In case any installment(s) or part of installment(s) of a Fixed Term Loan is not repaid within the due date, the amount of unpaid installment(s) will be termed as defaulted installment'- A.3.The Short-term Agricultural and Micro - Credit will be considered irregular if not repaid within the due date will be classified as 'Substandard '. A.4. All unclassified loans other than Special Mention Account (SMA) will be treated as Standard. A.5. A Continuous credit, Demand loan or a Term Loan which will remain overdue for a period of 90 days or more, will be put into the "Special Mention Account (SMA)'' B. Qualitative Judgment: B.1. If any uncertainty or doubt arises in respect of recovery of any Continuous Loan, Demand Loan or Fixed Term Loan, the same will have to be classified on the basis of qualitative judgment be it classifiable or not on the basis of objective criteria. B.2. loan was extended or if the capital of the borrower is impaired due to adverse conditions or if the value of the securities decreases or if the recovery of the loan becomes uncertain due to any other unfavorable situation, the loan will have to be classified on the basis of qualitative judgment. B.3. Besides, if any loan is illogically or repeatedly re-scheduled or the norms of rescheduling are violated or instances of (propensity to) frequently exceeding the loan-limit are noticed or legal action is lodged for recovery of the loan or the loan is extended without the approval of the proper authority, it will have to be classified on the basis of qualitative judgment. B.5. The concerned bank will classify on the basis of qualitative judgment and can declassify the loans if qualitative improvement does occur. B.6. But if any loan is classified by the Inspection Team of Bangladesh Bank, the same can be declassified with the approval of the Board of Directors of the bank. However, before placing such case to the Board, the CEO and concerned branch manager shall have to certify that the conditions for declassification have been fulfilled.

3.4.3.3 Accounting of the interest of classified loans: A. If any loan or advance is classified as 'Sub-standard' and 'Doubtful', interest accrued on such loan will be credited to Interest Suspense Account, instead of crediting the same to Income Account. B. As soon as any loan or advance is classified as 'Bad Debt', charging of interest in the same account will cease. In case of filing a law-suit for recovery of such loan, interest for the period till filing of the suit can be charged in the loan account in order to file the same for the amount of principal plus interest. But interest thus charged in the loan account has to be preserved in the 'Interest Suspense ' account. C. If classified loan or part of it is recovered i.e., real deposit is effected in the loan account, first the interest charged and not charged is to be recovered from the said deposit and the principal to be adjusted afterwards.D. Interest accrued on "Special Mention Account (SMA)'' will be credited to Interest Suspense Account, instead of crediting the same to Income Account.

3.4.3.4 Maintenance of provision:A. Banks will be required to maintain General Provision in the following way: A.1. @ 1% against all unclassified loans (other than- (i) loans under Consumer Financing, (ii) loans against shares etc. and (iii) Special Mention Account.) A.2. @ 5% on the unclassified amount for Consumer Financing whereas it has to be maintained @ 2% on the unclassified amount for (i) Housing Finance and (ii) Loans for Professionals to set up business under Consumer Financing Scheme. A.3. @ 2% against unclassified amount of any kind of funded loan disbursed to stock dealers enlisted with Stock Exchange, separate subsidiary company established by a bank company for dealing business in share brokerage and merchant banking and any other company or institution or individual for dealing such business. A.4. @ 5% on the outstanding amount of loans kept in the 'Special Mention Account' after netting off the amount of Interest Suspense.

B. Banks will maintain provision at the following rates in respect of classified Continuous, Demand and Fixed Term Loans:Sub-standard 20%

Doubtful 50%

Bad/Loss 100%

C. Provision in respect of Short-term Agricultural and Micro-Credits is to be maintained at the following rates: C.1. All credits except 'Bad/Loss'(i.e. 'Doubtful', 'Sub-standard', irregular and regular credit account : 5% C.2. 'Bad/Loss' : 100%D. Banks are required to maintain general provision against Off-balance sheet exposures in the following manner: D.1. @ 0.5% provision effective from December 31, 2007 and D.2. @ 1% provision effective from December 31, 2008. 3.4.3.5 Base for Provision: Provision will be maintained at the above rate on the balance to be ascertained by deducting the amount of 'Interest Suspense' and value of eligible securities from the outstanding balance of classified accounts. 3.4.3.6 Eligible Securities: In the definition of 'Eligible Securities' as mentioned in the above paragraph the following securities will be included as eligible securities in determining base for provision: 100% of deposit under lien against the loan, 100% of the value of government bond/savings certificate under lien, 100% of the value of guarantee given by Government or Bangladesh Bank, 100% of the market value of gold or gold ornaments pledged with the bank, 50% of the market value of easily marketable commodities kept under control of the bank,

3.5 POLICY ON SINGLE BORROWER EXPOSUREAs a prudential measure intended for ensuring improved risk management through restriction on credit concentration, Bangladesh Bank has from time to time advised the scheduled banks in Bangladesh to fix limits on their large credit exposures and their exposures to single and group borrowers. In general, and as practiced internationally, exposure ceiling is derived from a bank's total capital as defined under capital adequacy standards (Tier I and Tier II Capital). Following the same practice, Bangladesh Bank issued BRPD Circular No. 08 dated March 18, 2003, recommending uniform exposure limits for both local and foreign banks. In order to enable the banks to improve their credit risk management further, Bangladesh Bank has issued this circular by consolidating all the instructions issued so far and incorporating some amendments to the previous circular.

3.5.1 In general case, single borrower exposure limit is 35% A. The total outstanding financing facilities by a bank to any single person or enterprise or organization of a group shall not at any point of time exceed 35% of the bank's total capital subject to the condition that the maximum outstanding against fund based financing facilities (funded facilities) do not exceed 15% of the total capital. B. Non-funded credit facilities, e.g. letter of credit, guarantee etc. be provided to a single large borrower. But under no circumstances, the total amount of the funded and non-funded credit facilities shall exceed 35% of a bank's total capital.

3.5.2 In case of export sector, single borrower exposure limit is 50% In case of export sector single borrower exposure limit shall remain unchanged at 50% of the bank's total capital. But funded facilities in case of export credit shall also not exceed 15% of the total capital.

3.5.3 Additional prudential norms: A. Loan sanctioned to any individual or enterprise or any organization of a group amounting to 10% or more of a bank's total capital shall be considered as large loan. B. In order to determine the above maximum rates of large loans, all non-funded credit facilities e.g. letter of credit, guarantee etc. included in the loan shall be considered as 50% credit equivalent. However, the entire amount of non-funded credit facilities shall be included in determining the total credit facilities provided to an individual or enterprises or an organization of a group.C. The banks will be able to sanction large loans as per the following limits set against their respective classified loans: Rate of net classified loansThe highest rate fixed for large loanagainst bank's total loans & advances

Upto 5% 56%

More than 5% but upto 10% 52%

More than 10% but upto 15% 48%

More than 15% but upto 20% 44%

More than 20% 40%

D. A public limited company, which has 50% or more public shareholdings, shall not be considered as an enterprise/organization of any group. E. In the cases of credit facilities provided against government guarantees and AAA rated Multilateral Development Banks (MDBs) guarantee, the aforementioned restrictions shall not be applicable.F. In the cases of loans backed by cash and encashable securities (e.g. FDR), the actual lending facilities shall be determined by deducting the amount of such securities from the outstanding balance of the loans. G. Banks should collect the large loan information on their borrowers form Credit Information Bureau (CIB) of Bangladesh Bank before sanctioning, renewing or rescheduling large loans in order to ensure that credit facilities are not being provided to defaulters. H. Banks must perform Lending Risk Analysis (LRA) before sanctioning or renewing large loans. If the rating of an LRA turns out to be "marginal", a bank shall not sanction the large loan, but it can consider renewal of an existing large loan taking into account other favorable, conditions and factors. However if the result of an LRA is unsatisfactory, neither sanction nor renewal of large loans can be considered. I. While sanctioning or renewing of large loan, a bank should judge debt repayment capacity taking into consideration the borrower's Cash Flow Statement, Audited Balance Sheet, Income Statement and other financial statements to make sure that its borrower has the ability to repay the loan. 3.6 Policy for rescheduling of Loans:Experience shows that the existing system of loan rescheduling has created impediments in the way of realizing defaulted loans. Specially, a tendency has been observed among the defaulted borrowers to avail the opportunity of loan rescheduling again and again without any definite business rationale. Some confusions have also cropped up relating to the condition of cash deposit as down payment for loan rescheduling. After careful and overall review of the aforesaid problems and in suppression of all previous instructions the following detailed policies for rescheduling of loans are being issued for compliance by banks: 3.6.1 Guidelines for Consideration of Loan Rescheduling Applications: While considering loan rescheduling application the banks shall follow the under mentioned guidelines: 3.6.1.1 When a borrower asks for rescheduling of loans the banks shall examine the causes as to why the loan has become non-performing. If it is found from such review that the borrower has diverted the funds elsewhere or the borrower is a habitual loan defaulter the bank shall not consider the application for loan rescheduling. Instead, the bank shall take/continue all legal steps for recovery of the loans. 3.6.1.2 At the time of considering loan rescheduling proposal bank must assess the borrower's overall repayment capacity taking into account the borrower's liability position with other banks. 3.6.1.3 In order to ensure whether the borrower would be able to repay the rescheduled installments/existing liability the bank shall review the borrower's cash flow statement, audited balance sheet, income statement and other financial statements. 3.6.1.4 Bank officers should ensure, if required, by spot inspection of the borrower's company/business place, that the concerned company/business enterprise will be able to generate surplus to repay the rescheduled liability. Such inspection reports should be preserved by the banks. 3.6.1.5 If a bank is satisfied after due diligence mentioned above that the borrower will be able to repay, the loan may be rescheduled. Otherwise, bank shall take all legal steps to realize the loan, make necessary provision and take measures to write-off. 3.6.1.6 The rescheduling shall be for a minimum reasonable period of time. 3.6.1.7 At the time of placing the rescheduling proposal before the Board of Directors the Bank shall apprise the Board in details, what would be implications of such loan rescheduling on the income and other areas of the bank.3.6.2 Rescheduling of Term Loans: The loans which are repayable within a specific time period under a prescribed repayment schedule are treated as Term Loans. For rescheduling such loans following policies shall, henceforth, be followed: 3.6.2.1 Application for first rescheduling will be considered only after cash payment of at least 15% of the overdue installments or 10% of the total outstanding amount of loan, whichever, is less; 3.6.2.2 Rescheduling application for the second time will be considered after cash payment of minimum 30% of the overdue installments or 20% of the total outstanding amount of loan, whichever, is less; 3.6.2.3 Application for rescheduling for more than two times will be considered after cash payment of minimum 50% of the overdue installments or 30% of the total outstanding amount of loan, whichever is less; 3.6.2.4 Explanation: If any loan is rescheduled once before issuance of this policy the conditions set forth in this circular for second rescheduling shall be applicable for rescheduling of such loans. Likewise, the terms for 3rd rescheduling as per this circular shall be applicable for rescheduling of any loan which has already been rescheduled twice. 3.6.3 Rescheduling of Demand and Continuous Loan: The loans which can be transacted without any specific repayment schedule but have an expiry date for repayment and a limit are treated as Continuous Loan. In addition, the loans which become repayable after those are claimed by the bank are treated as Demand Loans. If any contingent or any other liabilities are turned to forced loan (i.e. without any prior approval as regular loan) those also are treated as Demand Loans. For rescheduling of Demand and Continuous Loans the rates of down payment, depending on the loan amount, shall be as followsAmount of Overdue LoanRates of Down payment

Up to Tk.1.00 (one) crore15%

Tk. 1.00(one) crore to Tk. 5.00 (five)crore 10% (but not less than Tk.15.00lacs)

Tk. 5.00(five) crore and above5% (but not less than Tk.50.00 lacs)

If any Continuous or Demand Loan is rescheduled by restructuring/converting partly or wholly into Term Loan and repayment installments have been fixed, application for rescheduling such loans shall be considered on cash payment of minimum 30% of the overdue installments or 20% of the total outstanding amount of loan, whichever is less. For subsequent rescheduling minimum 50% of the overdue installments or 30% of the total outstanding amount of loan amount shall have to be deposited in cash. 3.6.4 Other Terms and Conditions of Rescheduling: The Borrowers whose credit facility has been rescheduled will get new loan facility subject to fulfillment of the following conditions:- 3.6.4.1 The defaulting borrower who has availed interest waiver must settle at least 15% of the compromise amount to avail any further credit facility from any Bank. 3.6.4.2. In case of borrowing from other Banks, the same rule will be applicable, i.e. the borrower will have to settle at least 15% of compromise amount (excluding the down payment on rescheduling as per present guidelines), then, will be allowed to take regular facility from other Banks subject to the submission of NOC (No Objection Certificate) from the rescheduling bank. 3.6.4.3. Export borrowers may be granted further credit facility (after being identified as not a willful defaulter), if required, subject to settle at least 7.5% of the compromise amount (excluding the down payment on rescheduling as per present guidelines) being paid. 3.6.4.4. If any such issue is already there (such fresh facility has already been allowed after allowing waiver), the same will not fall under purview of this circular. 3.7 POLICY FOR LOAN WRITE OFFIn course of conducting credit operations by banks the quality of a portion of their loan portfolio, in many cases, deteriorates and uncertainty arises in realizing such loans and advances. These loans are adversely classified as per existing rules and necessary provision has to be made against such loans. Writing off bad loans having adequate provision is an internationally accepted normal phenomenon in banking business. Owing to the reluctance of banks in Bangladesh in resorting to this system their balance sheets are becoming unnecessarily and artificially inflated. In order to avoid possible legal complications in retaining the claims of the banks over the loans written off section 28 ka has been incorporated in 2001 in the Bank Company Act, 1991.3.8 Interest Rates on Deposit and Lending:Banks in general are free to charge/fix their deposit and lending rate. However, the maximum cap of 7% interest rate on export credit has been fixed since January 10, 2004 by Bangladesh Bank to facilitate export earnings. The maximum rate of interest on agriculture and term loans to industrial sector is 13%. The maximum rate of interest on import financing of rice, wheat, edible oil (crude and refined), pulse, gram, onions, dates and sugar (refined & raw sugar/raw cane sugar) is in force at 12%. The key features of interest rate on deposit and lending are as follows: In case of Fixed Term Loan and Continuous Loan, interest will be calculated on the basis of the product of the day end balance but interest must be charged on quarterly basis. Banks are allowed to charge penal interest. The loan accounts will be repaid according to Equal Monthly Installment (EMI) method. No additional charges shall be collected along with the rate of interest/profit on loans other than the announced Schedule of Charges. 4.1 Meaning of Bank Products: Bank is a financial institution, which mobilizes funds from surplus unit & allocates it to deficit unit. Surplus unit means the people who have surplus money & willingness to save. Deficit unit means the people who need money for industry, trade, business or for personal use but dont have sufficient money of them for such purpose. Bank mobilizes the fund by accepting deposits from depositor & allocates the fund by providing loan to borrower, which is known as Bank products.NCC Bank Ltd mobilizes the fund by introducing various products. Efficient & effective fund mobilization depends on individual bank capacity of designing bank products. A good number of products came out in the market that was out of imagination. Schemes innovated like Consumer Credit Scheme, Housing Loan, Personal Loan; SME Loan etc. attracted the general public which helps the bank in securing more business & thereby earning greater profit.

4.2 Loan Products Offered by the NCCBL:Generally the clients of NCCBL enjoy two types of Loan / Credit facilities.These are:

Funded facility includes:Non-funded facility includes:

1) Overdraft (Limit can enjoy within * Cash Credit (HYPO + Mortgage) * Cash Credit (pledge)2) Term Loan >> Personal Term Loan: a) Personal secured b) Personal unsecured c) Auto loan d) Staff loan e)Consumer Credit Scheme >> Corporate Term Loan: a) Bills under Letter of Credit b) TR- Trust Receipt c) FBP- Foreign Bill Purchased d) IBP- Inland Bill Purchased e) Past Due Loan

1) Export L/C2) Import L/C3) Back to Back L/C4) Bank Guarantee

Deposits are invested in Trade, Commerce & Industries in term basis i.e., short, medium & long term. Deposits come from business, housewives, institutions & small income group etc. who has excess or available money. It may be said that though banks are performing social responsibilities by securing both small & large depositors money & also helping industrial, social & economical development, but like others, prime objective of the institute is maximization it profit by optimization of resources.

4.3 Loans and Advances:Loans and Advances are the core asset of a Bank. The Bank gives emphasis to acquire quality assets and does appropriate risk analysis while approving commercial and trade loans to clients. In NCCBL Anderkilla branch, a big amount of loan and advances are sanctioned every year.4.4 Interest Rates on Lending:SL. No.ParticularsMid-Rate

1Cash Credit 15.00%

2Term loan (large & Medium Scale) 16.00%

3Working Capital (Except Jute) 15.00%

4Export Credit16.00%

5Commercial Lending (cash credit, hire purchase, PAD, TR, IBP, etc.) 15.00%

7Others Credit

7.1i) SOD against work order/ Other Bank's FDR's/ ICB unit certificates/ Wage Earner's Development Bonds 16.00%

7.2i i) Urban Housing Loan & Transport loan15.00%

8Staff House Building Loan9.00%

4.5 Principles of Lending:Banks are profit oriented organization for which a bank invests its funds in many ways to earn income. At the same time bank runs the risk of default in repayment. Because of this problem, banks exercise a lot of precaution while considering loan cases. They generally consider each loan proposal from four angles. These are:(1) Banks point of view(2) Borrowers standing(3) Proposal of loan itself, and(4) Social point of view.These aspects are proposed to be discussed below: Banks point of view:Banks generally examine four aspects of their own before granting any loan to any customer. These are:A. Profitability:Profitability is one of the most important criteria of banks rating in the stock exchange as well. Depending on it, the share prices of the banks rise or fall in the stock exchange. Not only has the Stock Exchange, Bangladesh Bank also used financial profitability as one of the indicators of assessment of the banks. Profitability also enhances the image of the banks among the members of the public. It is an indicator of good management of the banks as well. Therefore, banks think twice about maximizing profit before lending.B. Liquidity:While lending commercial banks have to take liquidity into consideration. Liquidity is related to deposits which are the life blood of the commercial banks. Deposits are the borrowings by the banks from the depositors repayable on demand or after expiry of a certain period. Everyday depositors either deposit or withdraw cash. To meet the demand for cash all the commercial banks have to keep a certain amount of cash in their tills. In the absence of liquidity, banks may fail to meet the customers requirements of cash. Then the credibility is seriously affected and they may face a run i.e. failure to meet cash demand of depositors. That is why; banks are to keep adequate funds, i.e. liquidity to meet customers need before lending. This is also a legal requirement.C. Safety of Funds:No commercial bank can afford to keep its fund idle. Because they are earn enough money to pay interest to the depositors as well as to meet their administrative cost. That is why they are to lend and invest their money profitably. While doing so, banks are to be very cautious as the money of banks is the depositors money. These are payable on demand. Unless the money lent out is safe, the banks cannot pay depositors money back. The banks are, therefore, required to consider the aspects of safety of the lent out money very seriously.D. Diversification of Risks:Banks, while lending, always try to keep in mind the famous maxim do not keep all the eggs in one basket. Since there is a risk in every advance, banks spread the risk by lending to as many borrowers as possible instead of giving the advances to a few large borrowers. Banks thus avoid concentration of advances to a few big firms or a few industries. They spread advances for various purposes amongst a number of firms and business located throughout the country. Borrowers Standing:Borrowing customers are very important to a bank. Before lending, a bank thoroughly assesses the customer who approaches the banks for loan. The banks here judge five things to know financial soundness of the borrower which are called FIVE Cs as shown bellow1CharacterCustomers willingness to meet credit obligation

2CapacityCapacity is the ability to meet credit obligation

3Condition Condition is general economic condition of borrower

4CollateralAn asset pledged in the case of default

5CapitalCapital is customers financial reserve

Proposal Itself:Not only the borrower but also the proposal of the customer is very important to a banker. He must be satisfied about both the customer and his proposal before processing it. Normally, a bank wants to be sure about four things in this case:a. Purpose of the loanb. Security against the loanc. Sources of repaymentd. Period for which the loan is being sought.A bank thoroughly examines these issues and when satisfied, they process the loan. Social Point of View:Commercial banks work in a society and hence they are to consider and meet the expectations of the members of the society. Society demands that the commercial banks should contribute to the economic wellbeing of the people. These can be done by savings mobilization, lending money to the priority sectors and employing the unemployed. In many countries, the government ensures that the commercial banks perform these functions. This implies that profitability alone is not the criteria of commercial banks operations. 4.6 Forms of Bank Credit:4.6.1 Secured Credit And Unsecured Credit:Bank credit may theoretically be classified broadly under two categories, namely: 1. Secured credit

2. Unsecured credit

Secured Credit:Secured credit means loans or advances made against security of assets, the market value of which is not at any time less than the amount of such loans or advances. It is called so because security can be enforced in case of default by the borrowers. Unsecured Credit:An unsecured or clean credit is one, which is granted to a borrower without obtaining any security from him. These kinds of credits may include: Clean overdrafts or clean loans. 4.6.2 Other Forms of Credit:Banks classify their credit into various categories having their own features. Each has its own utility to the customers. Generally bank credit takes the following forms:4.6.2.1 Loans:A sizeable amount of the credit of the banks is in the form of loans. These are such advances which are made on lump sum or installment basis depending on the purpose of loans. Similarly they are also repayable generally either by fixed installments or by lump sum having no subsequent debits to the loan account except by way of interest and incidental charges etc. House building loans, Agricultural credit and Different kinds of small loans etc are the examples of loans.1. Overdrafts (OD):Overdrafts constitute another important segment of the credit portfolio of the commercial banks. This kind of advance in the form of Overdraft is always allowed on a current account to be operated upon by cheques. The customer may be sanctioned a certain limit within which he can overdraw his current account within drawing power and a stipulated period. Balance of the Overdraw account may fluctuate. It may increase by withdrawals by the customers and may decrease if payment into the account is made by the customers.2. Temporary Overdraft (TOD):Customer who maintains satisfactory conducted accounts may be accommodated at specific request to overdraw their balance in the current account to meet unexpected and urgent requirements for credit facilities. The amount up to which overdrawing is permitted is dependent on the need of the customer, the previous conduct of his account with the Bank and turnover in the account, average balance maintained etc. The overdraft must not be allowed to continue beyond 7 days from the date of sanction. In case of purchase of cheque, the maximum period may be five months.3. Overdraft against Securities (SOD):Overdraft for longer periods is normally granted against the security of tangible assets such as pledge/lien of FDR, Bonds (sanchay patra, wage earners development bonds, ICB unit certified etc), called secured overdraft.4. Loan against Packaging Credit (PC) : A credit under this head is granted to exporter to facilitate purchase of raw material for the purpose of manufacturing and exporting finished goods. The credit is granted after the evidence of a letter of credit or firm contract in favor of the borrower and in exportable package5. Cash Credit (CC):A very important credit portfolio of the commercial banks i.e. cash credit is generally extended to the traders, industrialists and large farmers for meeting their working capital requirement. Cash credit is an active and running account to which deposits and withdrawals may be made frequently. The debit balance of the account on any day cannot exceed the agreed limit.

6. Payment Against Documents (PAD):Another important constituent of credit portfolio of the banks is Payment against documents (PAD). The importers are to open letter of credit through any bank for importing goods. Most of the time, the banks are to extend credit to the importers, if not prohibited by Bangladesh Bank, for buying required foreign exchange. This loan, on receipt of shipping documents from the negotiating bank, is transferred and lodged to PAD.7. Loan Against Imported Merchandise (LIM):In the import sector Loan against imported merchandise (LIM) is an important credit portfolio of the commercial banks. It often happens that a bank itself has to clear the goods imported under letter of credit at the request of the borrowers. When the importer does not come forward to retire the documents in spite of repeated reminders banks also have to, on forced circumstances, clear the imported consignment on arrival of the same to avoid heavy demurrage at the port which adds to the burden of commitment.8. Loan against Trust Receipts (LTR):This is an arrangement under which credit is allowed against trust receipts. Imported or exportable goods remain in the custody of the importer or exporter. But he is to execute a stamped Trust receipt in favor of the bank wherein a declaration is made that the goods imported or bought with the banks financial assistance are held by him in trust for the bank. 9. Local Bill Purchased (LBP) : Purchasing of local bills of exchanging arising out of commercial transactions is called foreign bill purchased10. Foreign Bill Purchased (FBP):Purchasing of foreign bills of exchanging arising out of commercial transactions is called foreign bill purchased.

11. Foreign Bill Discounted: In this case the amount of interest calculated at the ruling rate from the date of purchase to the expected date of return remittance is deducted from the face value of the bill while granting the advance. The interest amount so worked out is called the Discount.12. Local Bill Discounted: Same as in foreign bills of this title, except that local bills are classified under this head.13. Other Banks Acceptance Purchase:An advance granted against a bill, accepted by another bank, for the remaining period of its tenure.14. Demand Loan (DL) :Demand loan is a short term loans which may be called by the Bank at any time. Usually they are made for periods of three months to one year to cover short term funding requirements. There is no principal reduction during the loan term, the entire balance becoming due on maturity.15. Staff Loan (SL) :Advance to members of staff is granted according to the policies laid down by the Bank. Advances are allowed to members of staff who are in the Banks permanent employment only.

4.7 Different Securities for Different Advances:Types of AdvancesSecurities

LoanLien of various kinds of sanchay patras, government debentures, fixed deposit receipts, Pledge of gold/gold ornaments, Hypothecation of vehicles and Collateral of immovable properties.

Overdraft (OD)Sanchay patras, Non-resident foreign currency deposits (NFCD), Shares & Debentures, Life insurance policies, Government promissory notes, Fixed deposit receipts, Gold & Gold ornaments; and Work order.

Overdraft against Securities (SOD)Pledge of FDR, Bonds, ICB Unit Certificate

Cash Credits (CC)Pledges or Hypothecation of assets are installed.

Payment Against Documents (PAD)Shipping documents for imports.

Loan Against Imported Merchandise (LIM)Pledge of imported merchandise.

Loan against Trust Receipt (LTR)Trust receipt in lieu of import documents.

Local Bills Purchased (LBP)Bill itself.

Foreign Bills Purchased (FBP)Shipping documents for exports.

4.8 Modes of Charging Securities:Charge means a right to make the security available for sale in order to adjust the loan. We know that a person other than the owner cannot sell a property. But if a charge is created, banks can sell property of others without being owners for realization of their dues.Some of the modes of charges adopted by the banks are as follows:a) Lien:Lien is the right of a person to hold back or retain goods belonging to another until the claims of the possessor are met. There are two types of lien, namely: (i) Particular lien and (ii) General lien.Particular lien relates to only the subject goods against which advances have been sanctioned whereas a general lien entitles a person to retain all the goods in his possession until all claims are satisfied. There is, however, another kind of lien which is called Negative lien. In this case banks take a declaration from the borrowers that the assets mentioned therein will be free from any sort of charge.b) Hypothecation:Hypothecation is a charge against property for an amount of debt where neither ownership nor possession is passed to the creditor. Under hypothecation goods remain with the borrowers. But the borrowers by an agreement bind themselves to hand over the possession of the goods if the banks so desire. c) Pledge:Pledge is the bailment of goods as security for payment of a debt or performance of a promise. In a pledge, goods remain under the possession of the lenders. In case of pledge, the borrower is to take the repossession of the goods after paying off the loan within the contracted period. On the other hand, the banks are to take usual care of the goods pledged with them.

d) Mortgage:A mortgage is the transfer of an interest in specific immovable property like land and building for the purpose of securing the payment of money advanced or, to be advanced by way of loan, existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability.

4.9 Documents Obtained While Lending:While advancing money, banks create a lot of documents which are required to be signed by the borrowers before disbursement of the loan. Of them some are technically called charge documents. Among the documents frequently used, some are:(1) Letter of Disclaimer: This is a letter given by the owner of a godown which has been taken on rent by a bank borrower. The owner declares that he has or will have no interest in the stock of goods or that may be stored therein from time to time.(2) Memorandum of Deposit of Title Deeds: This instrument signed by the borrower is obtained by the banks along with the deposit of title deed of house property, land etc. The borrower through the deposit confirms, admits, acknowledges and records that he has deposited the title deed with the intention of creating an equitable mortgage upon the property and interest thereon for securitization of the advances made to him.(3) Letter of Guarantee: In consideration of extending any loan to a party, banks obtain a letter of guarantee from a third party. The third party undertakes by this letter of guarantee to repay all dues by the principal debtor in case the principal fails to pay the banks money.

(4) Letter of Continuity:This letter along with the demand promissory note is obtained by the banks from the borrowers in case of overdraft/cash credit. We know that debit balances in such accounts vary frequently. In view of this letter of continuity is obtained with a view to making the party liable to pay the ultimate balance of the account. (5) Letter of Arrangement:This is the letter signed by the borrower acknowledging the right of the lending bank to call back the loan facility at any time with or without intimation to the borrower.(6) Letter of Request:Through this letter the borrowers request the banks to clear the goods from the ports on his behalf. (7) Letter of Installments:A letter by the borrower confirming that he will pay off the loan by installments, if such loan is recalled, is called a letter of installment.

4.10 Credit Information Bureau (CIB):All banks operating in the country are required by law to furnish all kinds of credit information to the Central Bank. For this purpose, there are various kinds of statements and returns which are to be sent regularly (weekly, monthly, quarterly, half-yearly and annually) to the Central Bank. In addition, the Central Bank may ask for any time any information with regard to any area of operation including credit and borrowers. Information so collected are maintained, analyzed and examined by a department specially created. This department is called the Credit Information Bureau. It works as a common source of information with regard to the borrowers and their financial status.

4.11 Credit Policies and Guidelines Maintain by NCCBL:

4.11.1 Credit Client SelectionThe study of a borrower is a study of his character, capacity, capital, collateral and condition often known as the five Cs with a view to consider his credit worthiness and eligibility for a bank investment. In order to get a complete picture of the borrowers credit worthiness, enquiries will have to be made about his business, trade experience assets and liabilities, etc. from various sources. His account with the bank or other banks will throw light on his personal habits and business dealings. His financial statements and income tax returns will have to be seen. Probably an interview with him will be necessary to elucidate or supplement the information that may have been collected. It would appear that banks could be in a better position to serve the business community and themselves, if they evolve a system by which detailed credit reports on customers are communicated to each other.

1) Status Report:Status reports on borrowers are sometimes called credit reports, financial reports, bankers opinion or confidential reports. All these terms carry more or less the same meaning. A status report is an assessment of the borrowers character, capacity and capital from the point of view of a banker.

2) Sources:Banks get information on borrowers through various sources enumerated below: Loan application. Market reports mostly from the borrowers trade or business. Mode of living. Borrowers account with the banks or statement of accounts with other banks. Statement of assets and liabilities. Income tax statements. Wealth tax statements. Sales tax returns. Trade and other reports in the press. Reports about actions and decrees in Government Gazettes. Registration, revenue and/or municipal records. Operations by a customer on his safe custody account or locker. Bangladesh Bank Credit Information Bureau. Personal Contact including personal interview.

3) Personal Interview:After having collected all the information from outside sources, it is advisable to arrange for a personal interview with the borrower. The interview should be conducted in a free and pleasant atmosphere. The questions must be suggestive and helpful to put him/her at ease so that he/she gives all information required by the bank. It is not necessary for the banker to make any commitments in a case which requires further analysis. Enquires may be made to verify the information given by the customer. Points Covered in an Interview:The main points that will be covered in an interview with the borrower are: His business. His capital with particular reference to his working capital. His experience in the line. Working results. Amount of the credit and period. Purpose of the credit. Source of repayment. Terms of repayment. Security offered. Type of charge available.

4.12 Credit Marketing:Many people think marketing only as selling and advertising. However, selling and advertising is only the tip of the marketing iceberg. Today, marketing must be understood satisfying customer needs. If the marketer does a good job of understanding consumer needs, develops product that provide superior value and prices, distributes and promotes them effectively; these products will sell very easily. Bank sells their services. Here service is banks product which needs to be sold to their customers. The range of services includes:1. Import/export finance;1. Short-term credit;1. Retail banking;1. Project financing through syndication with other co-lenders;1. Corresponding banking; and1. Treasury services.Each of these areas may involve credit exposure to a client or to a third party, providing both revenues as well as risks.

4.13 Credit Pricing:The interest rate on lending conforms to the prevailing rates offered by other financial institutions. At the same time, the management has to keep in mind the following points while pricing a loan:1.Risk exposure (obligor and industry);

2.Cost of funds;

3.Term of loan (maturity);

4.Account balances and other relationship

There is a schedule of annual interest rates for different types of credit allowing latitude to the management than would be true under the more rigid schedules. This is reviewed by senior management and approved by the Board of Directors time to time.

4.14 Credit Facility Parameters: 4.14.1 Maximum Size of Loan Portfolio:Bangladesh Bank restricts maximum lending to any single obligor or a Group of companies up to 50% of the total capital of the Bank. But the Bank can extend funded facilities to any single obligor or a Group of companies to the extent of 25% of the total capital of the Bank. The total capital is determined in accordance with Section 13 of The Banking Companies Act 1991. NCC Bank complies with the ceiling set by Bangladesh Bank. 4.14.2 Loan Portfolio Mix:After annual reviewing the performance of existing loan portfolio of NCCBL as well as market prospect of different sectors of the country, the senior management prepares the annual budget at the beginning of the year giving guidelines for limiting exposure to different sectors and term which is approved by the Board of Directors. Terms of lending are determined based on the following factors:1) Deposit mix;2) The volatility and seasonal fluctuation of the deposit base;3) The amount of purchased funds;4) The composition of investment portfolio; and5) Liquidity of other bank assets.Credit budget will be prepared having a diversified loan portfolio spreading over a large number of obligors/sectors/purpose/location as well as different term. As a prudential norm, Standard Bank will restrict large loan to maximum two-third of its total loan portfolio4.14.3 Security Structure:NCC Banks position should not be subordinate to other lenders and second liens, second mortgages, etc. should not be accepted as primary security for lending, but should be in pari passu terms vis--vis with other lenders. In case of corporate financing, maximum emphasis is given on companys Projected Cash Flow Statement based on realistic assumptions.4.15 The borrowers are the stake of the following risk:The borrowers are also face some risks when got loan facilities from the bank: The interest rate charged by the bank will be dependent on the bank view of the borrowers credit worthiness. A bank might decide to reduce customers borrowing facility. Lending covenants on existing loan could restrict the ability of the borrower to obtain further loans.A bank might refuse to extend a loan to support a company with temporary cash flows difficulties caused perhaps by a delay in payment on a major contract or a delayed start to a major project.4.16 The problems faced by this bank in its lending process: Almost every Commercial Bank have been faced some problem in its lending process. This problem basically arises from misrepresentation by the borrower, fake information by the people and information hidden by the customer etc.1) Misrepresentation by the borrower: Sometimes the clients show the property by his name. But in real, the property is not belongs to him at all. They just how it to get money from the bank. So the bank faces such type of problems in its lending process by misrepresent the information the information by the borrower. 2) Fake information by the people:Sometimes bank itself evaluate the stock or property of the borrower which is one of the important task of its lending process. But here also bank faces the problems of showing overvalue or undervalue of the stock or property by the area people. So this fake information creating problems when the bank deciding about the loan giving to the borrower.3) L/C Operation: In the case of L/C operation, the client show over invoice or under invoice of the L/C document. This is a severe problem faced by this bank.4) Loan against Mortgage: When bank sanctioned the credit facilities against mortgage, then it will be very complex system in case of recovery process. In this situation, bank takes a shelter of Law & filing a suit to Artha Rin Adalat for recovery.4.17 Credit Risk Grading Model:Credit Risk Analysis is one of the modern concepts of loan analysis. To measure the credit risk of the NCC Bank Ltd, the total grade point of all the criteria is 100. The criteria and their assigned points are mentioned below:SL. NoComponents & Key parametersWeight

1.Financial Risk50%

a. Leverage: 15% b. Liquidity: 15% c. Profitability: 15% d. Coverage: 5%

2.Business/ Industrial Risk18%

a. Size of Business 5%b. Age of Business 3%c. Business Outlook 3%d. Industry Growth 3%e. Market Competition 2% f. Entry/Exit Barriers 2%

3.Management Risk:12%

a. Experience 5%b. Second Line/ Succession 4%c. Team Work 3%

4.Security Risk10%

a. Security Coverage (Primary) 4%b. Collateral Coverage (Property) 4%c. Support (Guarantee) 2%

5.Relationship Risk10%

a. Account Conduct 5%b. Utilization of Limit 2%c. Compliance of Covenants / 2%Conditionsd. Personal Deposits 1%

Grand Total All Risk100%

4.17.1 Credit Risk Grading(CRG) Score:

NumberGradingShortScore

1SuperiorSUP100% (Fully cash secured)

2GoodGD85+

3AcceptableACCPT75-84

4Marginal/Watch listMG/WL65-74

5Special MentionSM55-64

6SubstandardSS45-54

7DoubtfulDF35-44

8Bad/LossBL