1

1.1│ Introduction

There are two major functions of bank. These are collecting deposits from the savers and providing

advances to the potential customers. Banks have to pay interest for collecting deposits and also earn

interest by providing loans to different entrepreneurs, business persons and also different business firms at

the interest rate which is higher than their cost of debt which is paid to the depositors. The spread between

the interest earned and interest expense incurred is the main source of income of a banking business. So

the collection of deposit as well as the loan disbursement is a great concern of the bank officials. Banks

need to sanction loan in a profitable manner and also be aware about the borrower capability and

willingness for making repayment of loan with interest. Creditworthiness analysis is one of the most

important activities before sanctioning any credit to a new customer as well as the existing borrowers to

avoid any default risk in long run for improving the operational efficiency of nationalized and private

sector commercial banks. Satisfactory credit performance of a branch of a bank depends on the bank‟s

ability to disburse loan to credit worthy borrowers who are loyal to the bank as well as collection of

repayments from the borrowers in due time and in case of defaults bank‟s ability to recover the classified

loan amount.

If the borrowers fail to make the repayment of the loan that means the borrower defaults and the in future

bank will not be able to make repayment to their respective depositors on demand that may ham the

reputation of the bank and depositors confidence regarding the bank may hamper and in long run it may

lead to bankruptcy in long run.

Loan comprises the most important sourcing of earning for the banking institutions. On the other hand

this loan is also the major source of risk for the bank management. A prudent bank management should

always attempt to make the appropriate balance between its return and risk with the loan portfolio.

An unregulated banking institution might be confronted with unmanageable risks for the purpose of

maximizing its profitable return. In such situation banking institutions might find itself in serious

financial distress instead of improving its financial health. Consequently, not only the depositors but also

the shareholders will be deprived of their money from the bank. The deterioration of the loan quality will

also affect the intermediation efficiency of the financial institutions and thus the economic growth of the

country. This establishes the fact that banks should provide increasing emphasis on various analytical

techniques for screening loan proposals and loan decision taking.

2

1.2│Objective of the report

This objective can be staged into two distinctive ways. First of all, primary objective and second one is

secondary objective. My objectives behind preparing this report are discussed below.

1.2.1│Primary Objectives

To evaluate the system of analyzing credit worthiness of the potential borrowers based on past

information.

To analyze the disbursement and recovery performance of loans and advances based on existing

criteria and recommend a model to improve the recovery performance.

To access the performance of different types of credit facilities of “Exim Bank Limited” (Dilkusa

Branch) based on consumer requirement and recommend different sectors of credit facilities.

Provide a model to effectively evaluate the credibility of customers for loan repayment based on

previous transaction.

To identify the weakness and problems in successful/effective credit management system.

To have an idea of the existing systems of loan and advances innovated and practiced by “Exim

Bank Limited” and recommend how they can improve their existing policy.

Provide a “Loan amortization schedule” of “Exim Bank Limited” and describe different parts

of it

1.2.2│Secondary Objectives

The partial fulfillment of the requirement for the award of the degree of Bachelor of

Business Administration (BBA).

To gain practical job experience and view the application of theoretical knowledge in real

life situation.

1.3│Significance of the Study

Credit risk management is very important for a branch of any bank as granting credit is one of the most

important functions of banking business. By evaluating credit performance a branch can easily understand

their efficiency in case of credit risk management. If the credit performance of a branch is excellent then

the branch must be profitable. Credit risk management is very much important to understand the potential

profitability of the branch of the bank in future. If the weakness could be identified in the credit

3

performance, corrective actions can be taken to solve the problem and improve the credit system. It is

necessary to develop a sound policy and modern lending techniques following as per guidelines of the

central bank to ensure that loans/ advances are safe and the money will come back within the time frame

of repayment. Lending comprises a very large portion of a bank‟s profitability and success of a bank.

Therefore, it is very important for profitability and success of the bank. Like other financial intermediary,

commercial banks also intermediate between the savers and borrowers to mobilize the financial surplus of

the savers and allocate this savings to the creditworthy borrowers of different sectors of economy. In this

way they not only help in financial development of the country, but also facilitate its economic

development by means of investments in different sectors and improve the infrastructure and reduce the

unemployment of a country which results in the improvement of the living standard of people.

In the background of above things, the issue “Credit Performance Of a Branch “Exim Bank Limited” has

been undertaken as a comprehensive research topic, which will serve the BBA programme.My concerned

branch is Dilcusa Branch of Exim Bank Ltd.

1.4│Expected Findings

After conducting the research I can expect to find out the following things:

The report intends to cover Exim Bank‟s organizational overview, management and organizational

structure, functions performed by Exim Bank.

It will also cover view of the credit division, identification of the problems regarding credit extended and

sector of credit allocation . (Dilcusa Branch)

The report will also assess the performance of different types of credit facilities of Exim Bank Ltd.

The report will mainly focus on the analysis of the disbursement and recovery performance of loans and

advances and also assess the performance of different types of credit facilities of Exim Bank Ltd.

Finally the report will incorporate an evaluation of the different aspects of the lending process and

monitoring techniques and some recommendation.

1.5│Scope of Study

After conducting the research I can expect to find out the following things:

4

The report intends to cover Exim bank‟s organizational overview, management and organizational

structure, functions performed by Exim Bank.

It will also cover view of the credit division, identification of the problems regarding credit extended and

sector of credit allocation of Exim Bank Dilcusa Branch.

The report will also assess the performance of different types of credit facilities of Exim Bank Ltd.

The report will mainly focus on the analysis of the disbursement and recovery performance of loans and

advances and also assess the performance of different types of credit facilities of Exim Bank Ltd.(Dilcusa

Branch)

Finally the report will incorporate an evaluation of the different aspects of the lending process and

monitoring techniques and some recommendation.

1.6│Methodology

Methodology of this report includes the following:

Theoretical Framework.

Sources of Information (Primary and Secondary).

Selected type of the study.

Data preparation method.

1.7│Theoretical Framework

I designed my theoretical framework by the assistance of different manuals and brochures on loans and advance

published by Bangladesh Bank and Exim Bank Ltd.

1.8│Sources

Sources refer to the origin from where we have gathered all the information. The reliability of the report depends

on the source of information. Both primary and secondary source related to the preparation of the report are discussed

below:

1.8.1│Primary source

Discussion with the officials related with the department of “Investment” of the Exim Bank Ltd, Dilcusa Branch.

Practical work experience in the different desks of the department of the Branch.

Relevant file study as provided by the officers concerned.

5

Face to Face conversation with the clients.

Discussion with the supervising officer and manager.

1.8.2│Secondary sources

Annual report of Exim Bank Ltd.

Data collection from internal report.

Various books, training papers, manuals related to general banking, foreign exchange and credit policy.

Bank records.

Different procedure manuals published by Exim academy.

1.9│Selected Type of Study

As this report is based on the description of the various aspects of loans and advances as well as analysis of the

credit performance of Dilcusa Branch of Exim Bank, I selected to go on with both qualitative and quantitative

study as this will include the whole process of selection of the potential borrower to the collection of repayment

from the borrowers in the due time.

1.10│Limitations of the study

There are so many limitations. Here the limitations of the study of this report are few but it would have been a far

better work if I could overcome those limitations.

1.11│Time limitations

As I have to submit the report within a timeframe, I would not get or use a proficient way of collection

information. All I have to depend on the employees and previous record kept by the department. I will not get

sufficient opportunity to collect information to all the types of industry who are the potential customers or

borrowers of the bank. If I could have more time to prepare this report, I would definitely find out the sources to

collect that information.

1.12│Centralized Service System

As I am an intern in the Exim Bank, Dilcusa branch, which includes a more diversified lines of credit facilities

regarding loans and advances, it might not be possible for me to collect all the information regarding credit

department. That‟s why I will discuss the most significant part of credit department facilities provided by Exim

Bank.

6

1.13│Inadequate discussion with the officials

To prepare a standard quality report I feel the urgency of discussion with the high officials of Exim Bank but as I

am an intern and it takes a considerable time to get used to the environment, it is difficult for me to communicate

with the high officials. Most often I have to find out the difficulty which is when I try to communicate with the

officials they are busy with their own works so I am supposed to get less support from them regarding to prepare

my intern report.

1.14│Limited Disclosure

Since, interns are not allowed in every section of Exim Bank that is why access to the information is limited.

Since the working area of my internship is all the departments in Dilcusa Branch, I will get less time to

concentrate in credit department. Because of confidentiality data required for sufficient analysis for writing the

report is not expected to be collected up to the mark.

1.15│Budget for the study

The budget of the study basically includes the following two factors:

A. Financial Budget.

B. Time Budget.

1.16│Financial Budget

In the financial budget I include the transportation cost and food cost of my work place as well as cost of

preparing the report.

1.17│Time Budget

A. Preparation of the Project Proposal: 2 weeks.

B. Preparation of the Questionnaire : 1 week.

C. Collection of Data : 4 weeks.

D. Analysis of Data : 2 weeks.

E .Preparation of Draft Report : 2 weeks.

F. Preparation of Final Report : 2 weeks.

7

1.18│Request for Approval

I therefore request you to approve my internship proposal. If any change or revision is required, I will

resubmit it incorporating necessary changes. I will be more than happy to have your advice and guideline

for doing the project properly.

Sincerely Yours,

MD. Sabbir Ali

ID: 072 777 030

8

2.1│ Historical Background

2.1.1│The Beginning

Export Import Bank of Bangladesh Limited is a public listed scheduled private commercial bank

established under the sphere of Bank Companies Act 1991 and incorporated under the Companies Act

1994 on 2nd June, 1999. The bank started functioning from 3rd August, 1999 under the leadership of

Late Mr. Shahjahan Kabir, Founder Chairman who had a long dream of floating a commercial bank

which would contribute to the socio-economic development of our country. A group of highly qualified

and successful entrepreneurs [Mr. Alamgir Kabir, FCA as the Advisor and Mr. Mohammad Lakiotullah

as the Managing Director] joined their hands with the founder chairman to materialize his dream. Among

them, Mr. Nazrul Islam Mazumder became the honorable chairman of EXIM Bank of Bangladesh after

the demise of the honorable founder chairman.

2.1.2│The Migration

EXIM bank migrated all of its Conventional Banking operations into Shariah based Islami Banking

operations since 1st July, 2004 after obtaining approval from Bangladesh Bank with an optimism that the

bank would be able to serve the country's economy in a better way through introducing complete Islamic

Banking System. The Bank started conducting its business on the principles of Bai-Muazzal, Mudaraba,

Murabaha and hire Purchase Transaction as per the policy of Bangladesh Bank.

2.1.3│At Present

The Bank is one of the widely acclaimed Shariah based Islami banks in the country which operational

technique is substantially different from those of other commercial banks. It has made a significant

contribution to the national economy under the prudent leadership and untiring support of the member of

the Board of Directors, who are leading business personalities and reputed industrialists of the country.

With the business community, small entrepreneurs to large traders and industrial conglomerates including

the top rated corporate borrowers for forward looking business outlook and innovative financing solutions

on the basis of Islamic Shariah, the bank has been able to create an image of responsibility for itself and

has earned a secured & distinctive position. By their Pragmatic Decision and Management Directives in

the eleven years long operational activities, the bank has arrived at a strong financial and business

position by expanding its market share compared to its contemporaries and to some extent to the old

generation banks of private sector.

9

2.2│General Profile

Registered Name: Export Import Bank of Bangladesh Limited

Registered Brand Name: EXIM BANK

Registered Logo:

Slogan: “Together Towards Tomorrow”

Registered Office: “Symphony”

Plot No. SE (F) 9, Road No. 142,

Gulshan Aveneue Dhaka- 1212, Bangladesh.

PABX: 880-2-9889363

Fax: 880-2-9889358

Website: www.eximbankbd.com

SWIFT: EXBKBDDH

Date of Incorporation: June 02, 1999

Inauguration of 1st Branch: August 03, 1999

Inauguration of 56th Branch: September 05, 2010

Migration to Islami Bank: August 03, 1999

Number of Branches: 56

SME Service Centers: 02*

ATM Network: 10 ATMs (Approximately by the end of October 2010)

Number of Employees:1440*

10

2.3│Management Profile

Md. Nazrul Islam Mazumder

Chairman

Kazi Masihur Rahman Md. Golam Mahbub

Managing Director & CEO Executive Vice President &

Company Secretary

Figure 2.2.2.A│Board of Directors, EXIM Bank of Bangladesh Limited

Late Mr. Shahjahan Kabir

Founder Chairman

11

Mr. Mohammed Lakiotullah Mr. Alamgir Kabir

Former Managing Director Former Adviser & FCA

Former Board of Directors, Exim Bank of Bangladesh Limited

Capital Structure

Authorized Capital: BDT 1000.00 Crore*

Paid up Capital: BDT 337.39 Crore*

Credit Rating

Long Term: „AA‟ High Safety

Short Term: „ST-2‟ High Grade

Notification of Reporting: June 02, 2010

Board Audit Committee

Chairman: Mr. A.K.M. Nurul Fazal Bulbul

Members: Md. Abdul Mannan

Mr. Zubayer Kabir

Mr. Muhammad Sekandar Khan (Independent Director)

Auditor: Hoda Vasi Chowdhury & Co.

Chartered Accountants

BTMC Bhaban (8th Level), 7- 9, Karwan Bazar Dhaka- 1215.

12

2.4│The Strategic Goal

2.4.1│EXIM Mission

The Bank has sketched the following Corporate Missions in order to ensure smooth achievement of its

Strategic Goal:

To be the most Caring, Customer Friendly and Superior Service-Oriented Bank.

To create a Technology-based most Efficient Banking Environment for its customers.

To ensure Ethics and Transparency at all levels.

To ensure Sustainable Growth and establish full Value to the honorable Stakeholders.

Above all, to add Effective contribution to the National Economy.

2.4.2│EXIM Vision

“TOGETHER TOWARDS TOMORROW”

Export Import Bank of Bangladesh Limited believes in „Togetherness‟ with its customers, in its march on

the road to rapid growth and progress with credible service. To achieve the desired goal, there will be

pursuit of „Excellence‟ at all stages with a climate of continuous strive for improvement, because EXIM

Bank believes, the line of excellence never ends. The Banks‟ Strategic Plans and Networking will

strengthen its competitive edge over others in swiftly changing competitive environment. Its Personalised

Quality Services to the customers with the trend of Constant Improvement & Upgrading will be the

cornerstone to achieve the operational success.

2.4.3│EXIM Objectives

The Bank also accentuates on the Corporate Objectives outlined below to differentiate its Corporate

Image and boost up its Performance:

Provide High Quality Financial Services in Export and Import Trade.

Providing Efficient Customer Services.

Maintaining Corporate and Business Ethics.

Being the Trusted Repository of customers‟ money and their Financial Adviser.

Making its products Superior and Rewarding to the customers.

Display Team Spirit and Professionalism.

13

Sound Capital Base.

Enhancement of Shareholders‟ Wealth.

Fulfilling Social Commitments by expanding its Charitable & Humanitarian activities.

2.4.4│EXIM Culture

EXIM is one of the most disciplined banks of Bangladesh with a distinctive corporate culture of Sharing

& Caring. The bank believes in shared meaning, shared understanding and shared sense making. People

of the bank mould their manners and etiquette, character individually and encourage each other to suit the

purpose of the Bank and the needs of the customers who are of paramount importance to the bank. They

see themselves as a tight knit team/family that believes in caring the bank‟s main concern and working

together for growth.

2.5│The Corporation Structure & Development

2.5.1│Organisational Development

Organisational development is an intervention strategy that is been used to focus on the whole culture of

an organization. The general objective of organisational development is to change all parts of the

organisation in order to make Humanly Responsive, More Effective, and more capable of Self

Replenishment.

The management of EXIM Bank is strictly concerned about the organisational development. They believe

organisational development is underlined with the development of employee skills and expertise.

Therefore, EXIM Bank periodically sends a number of employees to training institutions such as

Bangladesh Bank, National Bank Training Institute, Bangladesh Institute of Bank Management.

2.5.2│Multidivisional Corporate Structure

The development of an organization depends on the structure of the corporate management since, the

management of the EXIM Bank controls all the resources. EXIM Bank has an exclusively strong

management team that is innovative, skilled, efficient, professional, simple but honest and committed for

„Better than the Best‟.

The Board of Directors formulates policy and gives full independence to the management to execute the

business with integrity, competence and vision. Transparency and Accountability are strictly ensured at

all levels of the bank. EXIM Bank is committed to pursue a straight forward, upright legitimate banking

business required by the national policy.

14

CBS

System &

SWIFT

General Banking

Foreign

Exchange

Remittance

Admin

Approval

Purchase

Recovery

International

Division

Investment Division

IT Division

Admin &

Monitoring

Finance Division

Marketing Division

HR Division

Share Division

Corporate Affairs

Executive Vice

President

Deputy Managing Director

Additional Managing Director

Company

Secretary

Board

Audit

Committee

Managing

Director

Shariah

Council

Executive

Committee

Board of Directors

Chairman

15

2.5.3│Corporate Hierarchy

h

Assistant Officer (AO)

Officer

Junior Officer (JO)

Management Trainee Officer (MTO)

Senior Officer (SO)

Executive Officer (EO)

Senior Executive Officer (SEO)

Principal Officer (PO)

Senior Principal Officer (SPO)

Assistant Vice President (AVP)

Senior Assistant Vice President (SAVP)

Vice President (VP)

Senior Vice President (SVP)

Executive Vice President (EVP)

Senior Executive Vice President (SEVP)

Deputy Managing Director

Additional Managing Director

Managing Director

Chairman E

xec

uti

ve

Lev

el

Off

icer

Lev

el

16

2.6│The Strategic Corporate Management

2.6.1│Description of Business

The Corporation “Export Import Bank of Bangladesh Limited” is currently running its business through

three Strategic Business Units (SBUs) namely

EXIM Bank of Bangladesh Limited*

EXIM Exchange Company (UK) Limited

EXIM Exchange Company (Canada) Limited

2.6.2│EXIM Exchange Company (UK) Limited

EXIM Exchange Company (UK) Limited is a fully owned subsidiary company of Export Import Bank of

Bangladesh Ltd.

2.6.3│Services

Although, the FRMD division of EXIM Bank ensures a smooth transfer of remittances to beneficiaries

account or cash payment within 24 hours (Next Day Service), the fastest method will be through 56

branches of EXIM Bank located strategically throughout Bangladesh or using the Eldorado network of

Banks. Besides, money can be remitted through the head office to all other Banks in Bangladesh.

Next day cash collection service not more than BDT 3 Lac without any additional charge

Money could be remitted within approximately 4/5 days for bank transfer to the remote areas of

Bangladesh

Approximately 3/4 days within the branches of sub division Credit the beneficiary account within 2 days

for bank transfer to other members of the Eldorado network

17

Eldorado Network, EXIM Exchange Company (UK) Limited

Management Staff

To provide an excellent level of service to the customers, staff has been selected from all sections of the

Bangladeshi community having sound background within the money remittance industry. They are the

first point of contact and are there to ensure that the remittances are sent in an efficient and quick manner

and will make their best efforts to ensure that the customers‟ needs are met.

Khurrum IBN Alam

CEO

EXIM Bank Ltd.

Social Islami

Bank Ltd.

Bank Asia Ltd.

First Security Islami

Bank Ltd.

Dhaka Bank Ltd.

Al Arafah Bank Ltd.

Brac Bank Ltd.

Mutual Trust

Bank Ltd.

18

Khaled Ahmed Chowdhury Ashraf Mahmud Md. Khurshed Alam

Customer Service Officer Chowdhury Customer Service Officer

Customer Service Officer

Management Staff, EXIM Exchange Company (UK) Limited

2.6.4│EXIM Exchange Company (Canada) Limited

EXIM Exchange Company (Canada) Limited is a fully owned subsidiary company of Export Import

Bank of Bangladesh Ltd. Bangladeshi Community of Canada is involved with the development of the

Bangladesh economy through the remittance of foreign exchange and trade finance. The Managing

Director Mr. Mashihur Rahman and Md. Nazrul Islam Mazumder honorable Chairman of EXIM Bank

Ltd. are giving strong support to this company.

2.6.5│Services

Service Process and policy is just like EXIM Exchange Company (UK) Limited.

2.6.6│Management Staff

The EXIM Exchange Company (Canada) Limited has better service provider. The Manager and one

customer service officer always try to give best service and connect for the valued customer.

Mohammad Hanif Kazi Serajul Isla

19

Manager Customer Service Office

Management Staff, EXIM Exchange Company (Canada) Limited

2.6.7│Major Functions

The word „EXIM‟ itself is clearly implying the major function and core operation of the bank. Although,

like other commercial banks, EXIM Bank performs all traditional banking operations, it emphasizes

mostly on Export and Import trade handling and financing the export & import oriented industries that

would help to reduce the deficit in Balance of Payment (BOP) of our country. The major functions of

Export Import Bank of Bangladesh Limited have been categorized in two levels for easier identification

and clarification.

Corporate Level Functions

Business Level Functions

2.6.8│Description of Functional Divisions

An overall functional standing of EXIM Bank has been described briefly adjacent to the purpose of the

project.

2.6.9│Corporate Level Functions

Basically, EXIM Bank functions centrally at its Head Office but management is decentralized in

functional divisions and branches.

Dr. Mohammed Haider Ali Miah

Deputy Managing Director

Head of Investment, Marketing & International (RMG) Division

20

Mr. Shah Md. Abdul Bari Mr. Shaikh Bashirul Islam

Executive Vice President Executive Vice President

Head of Human Resource Head of International Division

Division

Head of Functional Divisions, EXIM Bank of Bangladesh Limited

2.6.10│Human Resource Division

EXIM Bank counts human resource as the most important factor for its successful business operations

since its inception. It believes an honest, efficient and perseverant workforce can optimize its

productivity. This is why the Human Resource Division of EXIM Bank has been maintaining a flawless

combination of merit, experience and innovation in its workforce by ensuring „Systematic & Transparent‟

Recruitment and exclusive Training Facility.

Until now, 1229* personnel have been trained in different training institutions at home like Bangladesh

Bank Training Academy, Bangladesh Institute of Bank Management, Bangladesh Foreign Exchange

Dealer Association and The Central Shariah Board for Islamic Banks of Bangladesh whereas 6*

personnel have been sent abroad to attend overseas training programs on a wide array of subjects.

EXIM Bank provides the optimum benefits and career growth support to its personnel. Soon, it is going to

restructure its pay scale to a competitive position in the market. The human resource division has given

„Gold Medal‟ to 30* executives and officers based on the performance appraisal.

2.6.11│Marketing Division

It has been a couple of years that EXIM Bank has started its Marketing Division. Honestly speaking, the

division should be called „Public Relation‟ division. Recently, this division is going to work with the

„Card Division‟ (Business Level Function) to promote and sell the very first VISA Islamic Credit Card in

Bangladesh.

21

2.6.12│Finance Division

EXIM Bank has achieved a significant financial progress in the banking operations for more than 10

years. It has successfully mobilized the deposits and disbursed investment with its most competitive

Finance Division among all the Shariah based Islami Banks of Bangladesh. Mr. Kazi Masihur Rahman,

Managing Director of EXIM Bank takes care of this division with personal interest.

2.6.13│Administration & Monitoring Division

„Monitor & Supply‟ is the core task of Administration & Monitoring Division. This division keeps all the

record regarding the operational materials, assets and agreements of all branches of EXIM Bank

throughout Bangladesh and supply the requirement of each branch upon request and necessity.

2.6.14│Information Technology Division

EXIM Bank is one of the first few Bangladeshi Banks which have become member of SWIFT (Society

for Worldwide Interbank Financial Telecommunication) which provides a fast and accurate

communication network for financial transactions.

Under this division, EXIM Bank has a unit called „CBS (Core Banking Solution) System‟. This unit

administrates and monitors the operation of Switzerland based TEMENOS T-24 software. Since, EXIM

Bank has constantly been making efforts for providing IT driven products and services to its clients

through a good number of in house developed software, it has decided to go for a robust and centralized

CBS that will ensure greater quality, productivity and performance.

2.6.15│Audit Division & Shariah Council

The Board of Directors, EXIM Bank has formed a Shariah Council. Their duty is to monitor the entire

Bank‟s transactional procedures, & assuring its Shariah compliancy. They reply to the queries of

administration, staff members, shareholders, depositors, & customers of the bank, follow up with the

Shariah Auditors periodic reports with accordance of Islamic „Fatwa & Shariah‟. The council consists of

11 members who are prominent ulemas, reputed bankers and eminent economists of the country. Total 5

meetings of the council have been held so far.

22

Professor Moulana Mohammad Salah Uddin

Chairman

Md. Nazrul Islam Mazumder

Mr. Kazi Masihur Rahman

Moulana Mohammad Sadequl Islam

Hafez Moulana Mufti Mohammad Khair Ullah

Hafez Quari Moulana Mufti Mohammad Nur

Uddin

Professor H.M. Shahidul Islam Barakaty

Mr. A.K.M Nurul Fazal Bulbul

Mr. Abdullah Al-Zahir Shapan

Md. Abdul Mannan

Mr. A.S.M. Fakhrul Ahsan

Mr. Zubayer Kabir

Members of Shariah Council, EXIM Bank of Bangladesh Limited

2.6.16│Investment Division

The primary objective of Investment Division is to evaluate the worthiness of investment and debt

payment capability of present customers and loan/advance applicants. This division

Manages the Investment Portfolio of EXIM Bank

Receive, appraise & approve the loan/advance proposal from branches

Monitor and follow up the principal with profit received so far

Set up the loan/advance limit and profit rate.

2.6.17│International Division

International Division is responsible for assisting the authorized branches to deal in foreign trades, that is,

import and export businesses on account of the customers of the bank by giving approval for transactions

and controlling them at various stages. It deals with all correspondents of foreign banks through 31

„Nostro Account‟ with 19 banks (Foreign & Domestic) in 13 countries all over the world.

Country Banks of Nostro Account

Bhutan

Canada

Germany

Hong Kong

India

Japan

Arab Bangladesh Bank Ltd.

Bank of Bhutan Ltd.

Citibank N.A.

Commerz Bank AG.

Habib Bank AG.

HSBC Bank

NDLC-IFIC Bank Ltd.

Nepal Bangladesh Bank Ltd.

Standard Chartered Bank

Sumitomo Mitsui Banking Corp.

The Bank of Nova Scotia

Union Bank of Switzerland AG.

23

Nepal

Pakistan

KSA

Sri Lanka

Switzerland

U.K.

U.S.A.

Hypo Vereins Bank

ICICI Bank Ltd.

Mashreq Bank Psc.

National Commercial Bank

Union De Banques Arabes Et Francaises

(U.B.A.F.)

Wachovia Bank N.A.

Zuercher Kantonal Bank

Nostro Account, EXIM Bank of Bangladesh Limited

Besides, the division makes guidelines and frameworks for foreign dealings complying with the rules of

Bangladesh Bank. It is also involved in fixing and sending foreign exchange rates to Authorized Dealer

(AD) branches and Bangladesh Bank. The International Division has a separate sector called International

Division (RMG). This sector only deals with RMG industries import & export business.

2.6.18│Business Level Functions

Like all other Shariah based private commercial banks EXIM Bank operates in three Business Level

Functional Divisions. Besides, it has some other growing trend functional divisions.

2.6.19│General Banking

EXIM Bank offers a wide array of deposit products with accordance of Islamic Fatwa & Shariah.

2.6.20│Deposit Products

The most recent deposit products offered by EXIM Bank are

Al-Wadiah Current Deposit Account

Mudraba Savings Deposit Account (MSD, MSTD, RFCD, NFCD)

Mudraba Term Deposit Receipt (1, 3, 6, 12, 24, 36 Months)

Foreign Currency Deposit Scheme

Mudraba Monthly Savings Scheme (Money Grower)

The savings period is for 5, 8, 10 or 12 Years.

Monthly installment is BDT 500.00, 1,000.00, 2,000.00, 5,000.00

24

Mudraba Monthly Income Scheme (Steady Money)

Proper utilization of savings from stipend, wage earning, pension etc.

Higher monthly income for higher deposit

Minimum deposit BDT 1,00,000.00 for 3 years

Mudraba Super Savings Scheme (Double Scheme)

Any individual, company, educational institution, government organization, NGO etc. may invest their

savings under this scheme.

The deposit can be made in multiples of BDT 5,000.00 that would become almost double in 6 Years.

Mudraba Multiplus Savings Scheme (Triple Scheme)

Mudraba Hajj Scheme

Other Deposits

Consumers can deposit their Grameenphone bill in all the branches except Motijheel.

Palli Biddut Shomity of Gazipur can deposit their electricity bill to Gazipur branch

2.6.21│Deposit Performance

0

10000

20000

30000

40000

50000

60000

70000

80000

2005 2006 2007 2008 2009

28319.21

35032.02

42546.57

57586.99

73835.46

25

2.6.22│Deposit in million BDT for Five Years

Deposit 2009 in million BDT from Different Schemes

2.7│Investment

EXIM Bank offers an extensive range of investment products with accordance of Islamic Fatwa &

Shariah.

2.7.1│Investment Products

Corporate Finance

Commercial Finance

Industrial Finance

Project Finance

Lease Finance

Syndicate Finance

Hire Purchase Finance

8554.46, 12%

44559.5, 60%

4444.33, 6%

178.99, 0%

2287.57, 3%

13178.71, 18%

631.9, 1%

Al-Wadiah Current Deposit

Mudraba Term Deposit

Mudraba Savings Deposit

Foreign Currency Deposit

Mudraba Income Deposit

Mudraba Scheme Deposit

Bills Payable

26

Real Estate Finance

2.7.2│Mode of Investment

Murabaha Bai Muazzal

Izara Bil Baia Wazirat Bil Wakala

Foreign Documentary Bill Purchased (FDBP) Local Documentary Bill Purchased (LDBP)

In 2010, EXIM Bank has come up with three new retail/customer investment products.

New Retail Investment Products

2.7.3│EXIM Abasan

Easy to avail home investment with convenient repayment facility within maximum 18 months including

grace period and maximum investment limit of BDT 50.00 Lac.

Purchase apartment/house (Not older than 8 years)

Completion of construction work

Renovation of existing house

EXIM ABASAN

EXIM

SAHAYAK

EXIM BAHAN

27

2.7.4│EXIM Bahan

Investment facility to an individual for purchasing a new/reconditioned car/jeep/station wagon/any other

commercial vehicle

Maximum investment limit is BDT 20.00 Lac for 5 years of tenure

2.7.5│EXIM Sahayak

An investment product for procuring household durables like personal computer, television, refrigerator,

generator and any other interior decorators

Maximum investment limit is BDT 3.00 Lac for 3 years tenure

2.7.6│Investment Performance

Graph Investment in million BDT for Five Years

2.7.7│Foreign Exchange

EXIM Bank offers a vast range of core and supplementary service products in foreign exchange business

division with accordance of Islamic Fatwa & Shariah.

2.7.8│Import

0

10000

20000

30000

40000

50000

60000

70000

2005 2006 2007 2008 2009

26046.35

32641.27

40195.24

53637.68

68609.91

1633.03 2233.25 2457.72 2894.02 2169.44

Investment (General) Investment (Shares & Securities)

28

Issuing Letter of Credit is the core service of this division

Besides, it sanctions loan against leasing the imported materials (LIM).

2.7.9│Export

Issuing the EXP form and receiving/collecting the payment from the foreign importer is the core service

of this division. Besides, it provides loan/advance to the exporter and purchases the export bill

As supplementary service, this division claims Cash Subsidy for exporting economic products like jute,

paper, bamboo etc. and Duty Drawback for importing machineries and raw materials for processing these

export oriented products.

2.7.10│Remittance

Foreign currencies are remitted in form of Foreign Demand Draft (FDD) and Foreign Telegraphic transfer

(FTT) for mostly „Wage Earners‟, „Students‟ and „SMEs‟ through

EXIM Exchange Company Limited.

Cilenco Fast Cash.

Western Union Money Transfer and ELDORADO Money Transfer.

2.7.11│Foreign Exchange Performance

Graph Foreign Exchange in million BDT for Five Years

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

2005 2006 2007 2008 2009

72940

96175.1

117900.14

156434.57162604.61

29

Graph Foreign Exchange 2009 in million BDT Sector Wise

2.7.12│SME Banking

Small and medium enterprises (SMEs) remain the engine of growth in almost all the emerging economies

worldwide. To serve the overwhelming promising sector, EXIM SME Banking started its journey in 2008

with two products called EXIM Uddyog and EXIM Abalamban. Currently, EXIM Bank has two SME

Service Center in Gazipur and Sitakundo.

2.7.13│Merchant Banking

EXIM Bank has a well organized Merchant Banking Division that provides most efficiently engineered

portfolio management plan that minimizes risk and maximizes profit to its clients.

The MBD is extremely careful to its clients. It provides its clients their portfolio reports regularly and

arranges for investor awareness program regularly to develop awareness regarding capital market and all

its risk factors. It also provides underwriting service to IPO and right issue of different companies. It is

also making arrangements to provide issue management service.

2.7.14│Agricultural Investment

EXIM Bank has launched a short term agricultural investment program called “EXIM KISHAN” by

which farmers especially share croppers and marginal farmers are getting loan/advance without collateral

security.

83911.51, 52%

76240.77, 47% 2452.33, 1%

Import

Export

Remittance

30

2.7.15│VISA Islamic Card

By the grace of Almighty Allah, EXIM Bank has started commercial operation of fully Shariah based

VISA Islamic Card (Local, International & Dual Currency) under the principle of Bai-Murabaha (Credit

Card). This is the first Islamic electronic product for any Islamic bank in Bangladesh. The Salient

Features of the card are-

Lowest Profit Rate in the Card Market Simple Profit Rate

No Hidden Charge Dual Currency Facility in One Card

Free Supplementary Card 24 Hours Customer Service

Auto Debit Payment Facility Worldwide Acceptance

Instant card message service in mobile

Operational Area

Until now, EXIM Bank has opened 56 branches in 18 districts.

31

Figure Operational Area, EXIM Bank of Bangladesh Limited

32

2.8│Current State of Operation

Currently, EXIM Bank is involved in the following states of operation.

2.8.1│Issuing Right Share

On October 3rd, 2010, SEC has approved the Rights offer of Export Import Bank of Bangladesh Ltd. for

227742293 ordinary shares of Tk. 10.00 each at par totaling BDT 2277422930 only at a ratio of 1R: 2.

The Bank is complying with the requirements embodied in the Securities & Exchange Commission

(Rights Issue) Rules 2006 and other relevant laws and Regulatory Requirements.

2.8.2│Asset Liability Committee (ALCO)

EXIM Bank has formed an ALCO headed by the CEO. The committee calls for at least one meeting a

month and review the Asset Liability Management process through various key indicators like investment

deposit trend, deposit mix, investment mix, cost of fund, yield on investment, liquidity management etc.

Anti Money Laundering Activities

EXIM Bank has an authority designated Chief Anti Money Laundering Compliance Officer to implement

& enforce corporate wide AML policies, procedures and measures.

2.8.3│Implementation of Basel II Accord

EXIM Bank has started submitting Risk based Capital Adequacy Statement since the first quarter ended

on 31 March, 2009 to Bangladesh Bank as a parallel run with Basel I.

2.8.4│Future State of Operation

EXIM bank is thinking and processing to start its fully owned subsidiary “EXIM Exchange Company

Limited” in USA and Australia.

EXIM Bank is also preparing to be the fully centralized private commercial bank. After that all

transactions and decisions would be handled by the Head Office and the branches would work as front

line service order recipients.

33

2.8.5│Competitive Position

Positioning Map*

Diagram Operational Area, EXIM Bank of Bangladesh Limited

2.9│SWOT Analysis

Export Import Bank of Bangladesh Limited

2.9.1│Strengths

a. Distinct Corporate Identity

EXIM Bank is one of the leading Shariah based Islami banking service provider in Bangladesh that has

become the first to launch the VISA Islamic Card (Credit Card) and the very first private commercial

bank to open a fully owned subsidiary EXIM Exchange Company Limited in UK and Canada.

Low Management Efficiency High

Poor

S

ervic

e Q

uali

ty

E

xce

llen

t

Str

on

g B

ran

d I

mage

W

eak

Low Service Charge High

EXIM

IBBL

SIBL

SCB

HSBC

DBL

BA

SCB HSBC

DBL

EXIM SIBL

IBBL

34

b. Strong Employee Bonding and Belongingness

Employees are the most precious asset of EXIM Bank. They have a strong sense of commitment towards

the organisation and also feel proud and a sense of belonging towards EXIM Bank. The strong culture of

EXIM Bank is the main reason behind this strength.*

c. Management Efficiency

Comparing to the other private commercial banks of Bangladesh, EXIM Bank provides hassle free

customer service with a few distinctive features to its client base.

d. Young Enthusiastic & Empowered Workforce

The selection & training process ensures that EXIM Bank gets the best human resource it needs. On an

average, EXIM staffs are relatively younger than the staffs of other banks. The human resource of EXIM

Bank is extremely well thought & perfectly managed.

e. No communication barriers

At EXIM Bank the main objective is to setting up workshops are to remove authority from an artificial

spot at the top & place it where the most knowledgeable people are, the people closest to the operations.

The free exchange of ideas is reinforced by a policy of Sharing & Caring. Each employee is expected to

challenge ideas openly & aggressively, but never attack an individual‟s motives for presenting an idea.

f. Technology

EXIM Bank owns the best centrally administered banking and information technology software in

Bangladesh called TEMENOS T- 24.

2.9.2│Weaknesses

Limited Access to T-24 EXIM Bank has a limitation of 500 employees to get access at T-24 at a time

whereas the number of employees is 1440 all over Bangladesh.

35

a. Narrow ATM Network

Although, EXIM Bank has launched the very first VISA Islamic Credit Card in Bangladesh but the ATM

Network has not been installed yet. 10 ATM booths are about to be inaugurated by the end of October,

2010 but it won‟t be enough if the demand jumps double step higher.

b. Shortage of Manpower in Every Division

EXIM Bank has shortage of manpower in every division. So during the pick up working hour the

employees can‟t provide proper attention to the customer that results in waiting long hour and ultimately

customer dissatisfaction.

c. Lack of Service Convenience

Most of the branch is located with an insufficient office space and does not have any car parking facility.

2.9.3│Opportunities

Export Import Bank of Bangladesh Limited has a lot of growth opportunities in the Merchant Banking,

SME Banking, Consumer Banking, Agricultural Investment & also Export Oriented Industries due to

global economic recovery. It is foreseeing to expand its business lines by opening up some more branches

in Bangladesh, installing wide range of ATM Network, SME service centers and EXIM Exchange

Companies in USA and Australia. They are looking forward to increase their product or service basket.

2.9.4│Threats

The major challenge of EXIM Bank is there are already many Shariah based Islami banks sharing the

same size of the pie that results in an intense competition for generating more profit & attracting more

customers than others. Foreign banks like Standard Chartered* and HSBC* within the past few years are

also offering Shariah based services with competitive charge & features that can be a long term threat for

the bank.

2.10│The Corporate Social Responsibility

Obviously, the purpose of the banking business is to earn profit. But, the promoters and the equity holders

of EXIM Bank are aware of their commitment to the society to which they belong. Therefore, the bank

has built a foundation for CSR activities. At least 2% of the annual profit of every year is kept aside

and/or spent for socio-economic development through trustee and in patronization of art; culture and

sports of the country. The mainstream CSR activities that are carried out through this foundation are:

36

2.10.1│Healthcare Service

EXIM Bank is running a hospital as a part of CSR in a hired building having 10,000 sq ft floor space at

840 Kazi Para, Rokeya Sarani, Mirpur, Dhaka-1216 with a doctor as a resident director of the hospital

other hospital staffs. On October, 2010 they have published an ad in “The Daily Prothom-Alo” seeking

for suitable land to construct their own hospital building.

2.10.2│Scholarship Program for Brilliant Poor Student

EXIM Bank Scholarship Program, a stipend package, launched in 2006 with 61 poor and meritorious

students selected from different reputed educational institutions of Dhaka City including Govt.

Laboratory High School, Viqarunnissa Noon School and College, Dhaka University, BUET, Dhaka

Medical College, etc. The program is going to enroll as much as 2000* students from around 150 reputed

educational institutions across the country to be taken care of for their whole educational life subject to

their fulfillment of the eligibility criteria that include satisfactory academic results, non-involvement in

student politics, financial insolvency etc. So far BDT 32.9 million has been disbursed in this program.

2.10.3│Education Promotion Scheme (Interest Free Loan)

Under Education Promotion Scheme, an interest free loan is provided to the poor but meritorious students

to help them bear monthly educational expenditure including academic expenses, food expenses,

accommodation, etc. till accomplishing their master degree. The students are required to repay only the

principal amount in long term monthly installments after joining a full time job. By October, 2010 the

number of beneficiaries has been grown to around 200 poor and meritorious students from a number of

reputed educational institutions like Dhaka University, Chittagong University, Dhaka Medical College,

BUET, Bangladesh Agricultural University, Shahjalal University of Science and Technology etc.

2.10.4│Helping People Affected by Natural Calamities

Another vital area EXIM Bank is dealing with as part of CSR activities is helping people survived natural

calamities. Under this welfare program, EXIM Bank provides relief in form of cash/goods for flood, fire

or cyclone victims and cold/monga-stricken people. The aim of these CSR activities is to help the target

group overcome their provisional handicap and contribute to the socio-economic growth as soon as

possible. In the BDR Carnage EXIM Bank took full responsibility of eight helpless families for next 10

years. Besides, a good deal of charity is done from the „Zakat Fund‟.

2.10.5│Helping People in Slum Areas

37

Besides natural calamities, fire breaks out sometimes in slum areas that guts the shanties and renders the

affected people totally helpless. In that situation, EXIM Bank helps the victims fight against the hard days

and return to normal life.

2.10.6│Donation to Educational Institutions to Setup Computer Lab

A good deal of charity is done for developing infrastructure of educational institutions. EXIM Bank has

donated to Dhaka University and Chittagong University to set up two computer labs that would help the

students of those universities acquire ICT knowledge. This will certainly help the students to be ready to

take the challenges of forming a new Digital Bangladesh.

2.10.7│Beautification of Dhaka City

In response to the call of the Dhaka City Corporation, EXIM Bank has been sharing a good portion of the

mammoth task of beautifying the capital since 2005. To make the capital a modern city enriched with

adequate urban amenities, EXIM Bank always joins hands with the government. Besides, a good share of

its fund goes to charitable organisations working for the betterment of the socio-economic condition of

the people as well.

38

2.11│The Financial State

2.11.1│Liquidity Ratios

Ratios 2007 2008 2009

Current Ratio 0.96 0.91 0.93

Quick (Acid-Test) Ratio 0.908 0.862 0.899

2.11.2│Table Liquidity Ratios [2007-2009]

The higher the Current Ration the more Liquid the Company. Quick (Acid-Test) Ratio gives a better

estimation of liquidity of the company when the inventories are not easily convertible to cash. EXIM

Bank was more liquid in 2007.

2.11.3│Activity Ratios

Ratios 2007 2008 2009

Inventory Turnover 2.45 2.66 2.71

Avg. Age of Inventory 252.72 Days 219.87 Days 134.69 Days

Total Asset Turnover 0.096 0.0961 0.0944

Average Collection Period 146.25 Days 155.37 Days 76.68 Days

Average Payment Period 75.65 Days 70.13 Days 38.81 Days

2.11.4│Table Activity Ratios [2007-2009]

Efficiency in inventory management has increases by 60%. EXIM Bank takes 134.69* days to liquid

inventories. The higher a firm‟s Total Asset Turnover, the more efficiently its assets have been used.

EXIM Bank has well balanced asset utilization. It takes 76.68* days to collect accounts receivable and

clears all accounts payable within 38.81* days.

2.11.5│Debt Ratios

Ratios 2007 2008 2009

Debt to Equity Ratio 12.74 12.71 12.83

Times Interest Earned 6.59 5.09 8.36

39

2.11.6│Debt Ratios

Creditors of EXIM Bank are providing BDT 12.83 for each BDT 1 being provided by shareholders. The

more the Debt to Equity Ratio the higher the leverage. A Times Interest Earned Ratio of 2 or more is

considered to be sufficient to protect long term creditors. EXIM Bank has significantly increased its

ability to protect long term creditors over last three years.

2.11.7│Profitability Ratios

Ratios 2007 2008 2009

Gross Profit Margin 27.43% 26.88% 27.05%

Earnings Per Share BDT 34.76 BDT 32.50 BDT 50.21

Return on Total Assets 2.13% 2.99% 2.229%

2.12│Profitability Ratios

2.12.1│Market Ratios

Ratios 2007 2008 2009 2010

Price/Earnings (P/E) Ratio 2.29 2.53 2.19 2.68

2.12.2│Table Market Ratios

The higher Price/Earnings Ratio the more investors will to invest. EXIM Bank‟s stock is being sold at a

price of 2.68* times of its current earnings per share.

40

3.1│Foreign Exchange Section

Foreign Exchange business of EXIM Bank has been divided into three sections:

Figure: Function of foreign Exchange (An overview)

3.1.1│The Function of Foreign Exchange

The bank has action as a media for the system of foreign exchange policy. For this reason, the employee

who is related of bank of foreign exchange, especially foreign business should have knowledge of this

following function.

Rate of exchange.

How the rate of Exchange works.

Forward and spot rate.

Methods of quoting Exchange rate.

Premium and discount.

Risk of exchange rate.

Causes of Exchange rate.

Exchange control.

Convertibility.

Exchange position.

Intervention money.

41

Foreign exchange transaction.

Foreign exchange trading.

Export and import letter of credit.

Non commercial letter of trade.

Financing of foreign trade.

42

3.1.2│Import section:

To import, a person should be competent to be and importer. According to Import and export control act,

1950, the Office of Import and Export provides the registration (IRC) to the importer. Bank gives export

guarantee that it will pay for the goods on behalf of the buyer if the buyer does not pay. This guarantee is

called Letter of Credit. Thus the contract between importer and exporter is given a legal shape by the

banker by „Letter of Credit‟.

3.1.3│Documentary Credit/ Letter of Credit (LC):

Documentary Credit is an arrangement whereby a bank (issuing bank) acting at the request and on the

instruction of a customer (the applicant) or on its own behalf undertakes to make payment to or to the

order of a third party (the beneficiary) or to accept and pay bills of exchange (draft) drawn by the

beneficiary, or authorize another bank to negotiate against stipulated documents provided the terms and

conditions to the credit are complied. Thus documentary credits are akin to bank guarantees. In popular

language, they are known as Letter of Credit.

Sales contract

Reimbursing Agreement

Documentary Credit Agreement

Figure: Triangular contractual Agreement under the documentary credit system.

The seller

The buyer

The Issuing Bank

The Buyer

The Issuing Bank

The Beneficiary

43

3.1.4│Uses

A letter of credit is an essential element for conducting world today. It ensures beneficiary to get price of

his consignment consigned to an unknown buyer. So it acts as a bridge between buyer and seller of two

different countries that helps foreign trade to a great extent.

3.1.5│Parties to L/C

Importer / Buyer / Applicant

Exporter / Seller / Beneficiary / Supplier

Issuing Bank / Opening Bank

Advising Bank / Notified Bank

Confirming bank

Negotiating Bank / Nominated Bank

Paying Bank / Reimbursing Bank

Notify party

3.1.6│General Credit Division

A wide range of products and services, such as different type of loans are offered by this department. It

faces continuous challenge from the local private banks, which mainly specializes in the consumer

banking. As a result, it has to develop new products and services to ease the competition on a continuous

basis. The approval is mainly based on the risk analysis of the corporate clients done by the Corporate

Banking division.

Besides providing traditional services in the areas like, deposit, advance, import-export financing,

remittance and collection, treasury operations and lockers, the Bank has in the recent years introduced a

good number of new products to meet the increasing demands of the clients and the members of the

public. Some of them are Visa Credit cards, ATMs (Automated Teller Machine), Phone Banking, Pension

Savings Scheme, Death Risk Benefit Scheme, Monthly Income Scheme and Consumer Credit Scheme,

Education Assistance Plan (Deposit Scheme).

44

3.2│ Consumer Credit Scheme

In a developing country like Bangladesh people of middle and lower middle class specially service

holders with limited income find it difficult to purchase articles like refrigerator, television, almirah,

wardrobe, sofa-set, pressure cooker, sewing machine etc. which are part of modern and decent living.

They can not enhance the standard and quality of life to the desired level due to the constrain of their

limited income.

Southeast Bank Limited has, therefore, introduced Consumer Credit Scheme which has already created

great enthusiasm among the people and received tremendous response from them.

3.2.1│Objectives:

The objectives of Consumer Credit Scheme are:

To assist the service holders with limited income in purchasing household durables.

To assist the fixed income group in raising the standard of living.

To create opportunity for the service holders to enjoy the benefit of modern and sophisticated living

and at the time lead a decent and honest life.

3.2.2│Eligibility of Customer

The criteria to become eligible for availing the facility under the scheme are given below:

Any Citizen of Bangladesh having age in between 18–55 falling under the following categories

are eligible for availing of credit facilities under the scheme:

Confirmed Officers of government organization, Semi Government organizations, Autonomous

bodies, Banks, Leasing Companies, Insurance Companies, any other financial /business

organizations and public & private organizations having corporate structure.

Professionals viz. Doctors, Engineers, Architects, Chartered Accountants, Cost Accountants,

Lawyers Journalists and Teachers etc.

Members of Armed Forces, BDR, Police & Ansar subject to fulfillment of terms and conditions

as per circular No. 320–4/R/AG (PS–1) dated 03.03.99 of Head Quarters of Armed Forces (Copy

enclosed).

45

3.2.3│Service & Business Length Requirement:

Permanent Employees with minimum of 02 years continued service as to the limit date of

application

Self employed businessmen with minimum of 03 years continued business as to the date

application.

3.2.4│Amount of Credit & Equity:

The amount of Credit to be allowed to a particular customer will be maximum of Tk. 2.00 (Two) lac

excluding minimum of 25% equity from the customer.

The credit shall be allowed considering the repayment capability of a customer. Loan amount will be

determined in such a way that the monthly installments do not exceed 40% of the total take home salary

(disposable income) of the client. In case of a service holder take home salary shall be determined from

the salary certEximate from competent authority supported by bank account statement and for a self

employed person take home monthly income shall be at maximum 20% of average monthly balance for

last two years. To compute average monthly balances 1st, 15th & last working day of each month shall be

taken into consideration.

A customer who has liability under the scheme will be eligible for further credit up to the maximum

ceiling as indicated above should to complete satisfactory performance i.e. installments are regularly

repaid.

For client already availed facility and fully repaid in the full satisfaction at the bank, second time loan

disbursement equity amount is to be minimum 20% and this rate the may be minimum at 15% and 10%

for 2nd

time and more respectively.

3.2.5│Staff House Building Loan

One of the basic human needs is to have a house to live in. A house is an abode of peace and happiness.

Housing has now become an acute problem in the country, especially in the towns, cities and metropolis.

With their limited income, it has become almost impossible on the part of the service holders and

professionals to solve their housing problem. To meet this basic human need of the clients; Southeast

Bank Limited is committed to contribute to this end to provide a peaceful and happy living. The Bank has

introduced 'Staff House Building Loan‟ with the objective to ease and minimize the housing problem and

assist the clients with limited income in materializing their dream of becoming owner of houses.

46

3.2.5.1│Objectives:

To extend the benefits of the investment of the Bank to different sections of the staff.

To assist in solving the existing housing problem of the country.

To assist the staffs with fixed income to arrange for houses of their own.

To make investment facilities easily available under Islamic Shariah to those who do not want to

avail investment facilities from interest-based financial institutions.

3.2.6│Eligibility

Only the staffs of Southeast Bank Limited shall be eligible to apply for availing investment facilities.

3.2.7│Credit Policy of EXIM

The credit policy of EXIM BANK is a combination of certain accepted, time tested standards and other

dynamic factors dictated by the realities of changing situations in different market places.

The accepted standards relate to safety, liquidity and profitability of the advance whereas the dynamic

factors relate to aspects such as the nature and extent of risk, interest or margin, credit spread and credit

dispersal. General guidelines about the conduct of advances are issued by Head Office. In all business

dealings, officers and employees must be guided by the principles of honesty, integrity and safe-guard the

interest of the depositors and shareholders of the Bank. They should strictly adhere to the Banking Laws,

Rules and Regulations of the Govt. of Bangladesh, the instructions issued by the Bangladesh Bank/Head

Office from time to time which affect the business practices of the Bank. However, the key to safe, liquid,

healthy and profitable credit operation lies in the quality of judgment used by the officers making lending

decisions and their knowledge of the borrowers and the market place.

In formulating a credit judgment and making QUALITY Credit Decisions the lending officer must be

equipped with all information needed to evaluate a borrower‟s character, management competence,

capacity, ability to provide collaterals and external conditions which may affect his ability in meeting

financial obligations.

3.2.8│Discouraged Business Types

The Bank will discourage lending to following areas of business:

Military Equipment/Weapons Finance

Tobacco sector

Highly Leveraged Transactions (Maximum debt to equity ratio is 60:40 )

47

Finance of Speculative Investments (Not more than 40% of share value)

Logging, Mineral Extraction/Mining, or other activity that is Ethically Sensitive.

Lending to companies listed on CIB black list or known defaulters

Counterparties in countries subject to UN sanctions

Share Lending (Not more than 40% of share value or as per guidelines of Bangladesh Bank)

Taking an Equity Stake in Borrowers (except under Islamic Banking Operation)

Lending to Holding Companies

Bridge Loans relying on equity/debt issuance as a source of repayment.

3.2.9│Credit Evaluation Principles

Some principles or standards of lending are maintained in approving loans in order to keep credit risk to a

minimum level as well as for successful banking business. It should be clearly understood, at the outset,

that these factors are not inflexible and are given as guidelines for protecting the advances. A prudent

banker should always adhere to the following general guidelines of lending funds to his customers, e.g.

a) Background, Character and ability of the Borrowers

b) Purpose of the facility

c) Liquidity

d) Safety

e) Nature of Security

f) Profitability

g) Diversity

h) National interest

3.2.10│Determinants for Selection of Borrower

The business of sanctioning advances whether secured or unsecured, is risky and needs special attention.

In the absence of a charge over any specExim asset, the safety of advance depends upon the honesty and

integrity of the borrower as much as upon the worth of his tangible assets. The banker has, therefore, to

make proper enquiries about the borrower. This is more important in Bangladesh where the incidence of

default has become almost endemic.

Here I will try to discuss some determinants which help to select a good borrower but these will not give

the ultimate decision to select the borrower.

48

The C‟s of Good & Bad Loan

Collection of Credit Information

3.2.11│ Documentation of the Loan

Before disbursement of loan, correct Documentation is essential for the safety of an advance.

Documentation is obtaining such agreement where all the terms and condition and securities are written

and signed by the borrower. It specifies rights and liabilities of both the banker and the borrower. In

documentation each type of advances requires a different set of documents. It also differs with the nature

of securities. The documents should be stamped according to the stamp Act. There are no hard and fast

rules of documentation and it varies from bank to bank. Generally, following documents are taken in the

case of a secured advance by Southeast Bank Limited:

i. Demand promissory note: Here the borrower promises to pay the loan as and when demand by

bank to repay the loan.

ii. Letter of arrangement.

iii. Letter of continuity.

iv. Letter of hypothecation of goods and capital machinery.

v. Stock report: This report is used for OD and CC. In this report, information about the quality and

quantity of goods hypothecated is furnished.

vi. Memorandum of deposit of title deed of property duly signed by the owners of the property with

resolution of Board of Directors of the company owning the landed.

vii. Personal guarantee of the owners of the property.

viii. Guarantee of all the directors of the company.

ix. Resolution of the board of directors to borrow fund to execute documents and completes other

formalities.

x. Letter of Revival.

xi. Letter of lien for advance against FDR.

3.2.12│ Objectives of Documentation against loan/advance:

It procures a written evidence of transaction.

The Document will help the bank to include protective clauses to safeguard the interest of the

bank.

It identifies the borrowers, co-borrowers & guarantors.

49

It defines the security.

It also identifies the nature of charge created by the bank.

3.2.13│Steps for Documentation:

The following steps are followed in case of taking documentation

1. Drafting of Documents.

2. Filling of Documents

3. Execution of Documents

4. Witnessing

5. Stamping

6. Registration

7. Signature VerEximation

8. Safe Keeping of Documents

3.2.14│When Documents become Invalid:

1. Alteration and Interlineations in documents: If it is done after execution.

2. Deed misled by the miss-statement.

3. If the party is blind or illiterate and if the documents is read falsely.

4. The party executing the documents in not competent

5. Improper stamping/under stamping

6. Want of attestation or witnessing, if necessary.

7. Failure to register with competent authority within specExim time.

8. Ambiguous schedule of the offered security

9. Forgery, tempering deleting of documents.

10. Deed executed by undue influence or forcefully.

11. Instrument executed in blank (amount. security, and liability) with a bad intention.

12. When documents have become time barred.

3.2.15│ Security against Advances

Security means things deposited as a guarantee of an undertaking or loan, to be forfeited on case of

default. Also means documents as evidence of a loan, certEximate of stock, bonds, etc. it is also means to

be an insurance against an emergency. The customer should own it.

50

3.2.16│ Types of securities:

The different types of securities that may be offered to a banker are as follows:

a) Personal security

b) Tangible security

c) Primary security

d) Collateral security

Personal security: Guarantee of a respectable third party as personal security.

Tangible Security: That can be realized from the sale or transfer e.g. shares, stocks, land, goods, life

policy etc.

Primary Security: Main cover for an advance. Primary security is the Principal or direct security

against which loan is sanctioned. The banks get their charge noted over this security in the form of

pledge or hypothecation or mortgage.

Collateral security: A collateral security is an additional security taken for advance.

Collateral security may be two types:

i. Direct collateral security: Direct collateral security means security obtained from the borrower

himself to secure his own account.

ii. Indirect collateral security: Indirect collateral security means any form of security given by a

third person to secure a customer‟s account.

3.2.17│Attributes of a Good Security:

There are certain qualities which a good tangible security should posses. Some of the important attributes

are given below:

a) Ready Marketability

b) Easy Ascertainment of Value

c) Stability of Value

d) Durability

e) Storability

f) Low cost of Labor and Supervision

g) Transportability

h) Ascertainment of Title

i) Easy transfer of title

j) Absence of contingent liability

k) Yield

51

3.2.18│ Method of Creating Charges

Charge means “Where in a transaction for value both parties evidence an intention that property existing

or future shall be made available as security for payment of a debt and that the creditors shall have a

present right to have it made available, there is a charge, even though the present legal right which is

contemplated can only be enforced at some future date, and though the creditor gets no legal rights to

property, either absolute or special or any legal right to possession but only gets the right to have the

security made available by an order of the court."

3.2.19│Types of Charges:

i) Fixed Charge: A charge is said to be fixed if it is made specially to cover definite and ascertained

assets of a permanent nature or assets capable of being ascertained and defined, e.g., charge on Land

and building or heavy machinery. It precludes the company from dealing with the property charged' -

without the consent of the shareholder.

ii) Floating Charges: It is charge on property which is constantly changing, e.g., stock-in trade. The

company can deal with such property in normal course of its business until it becomes fixed on the

happening of an event. Thus, it is a charge on the assets of the company in general.

3.2.20│ Lien

A lien is right of banker to hold the debtor‟s property until the debt is discharged. Bank generally retains

the assets in his own custody but sometimes these goods are in the hands of third party with lien marked.

When it is in the hand of third party, the third party cannot discharge it without the permission of bank.

Lien gives banker the right to retain the property not the right to sell. Permission from the appropriate

court is necessary. Lien can be made on moveable goods only such as raw materials, finished goods,

shares debentures etc.

3.2.20.1│ Types of Lien:

There are two types of Lion:

a. Particular Lien: Particular lien retains the particular commodity by the creditor in respect of particular

debt.

b. General Lien: The characteristics of the general lien are

Right for a general balance

Does not have the right to sell the property

52

Simply the right to retain

3.2.21│Pledge:

Pledge is the "Bailment of goods as security for payment of a debt or performance of a promise"(sec-

172 of Cont. Act)

Bailment is the delivery of goods by one person to another for some purpose, under a contract that the

goods shall, when the purpose is accomplished, be returned or otherwise disposed of, according to the

direction of the persons delivering them.(sec-172 of Cont. Act)

Features of Pledge:

Goods bailed/pledged must be movable property,

Ownership remains with pledgor, (borrower) Possession retains with pledgee, (bank).

3.2.22│Hypothecation:

Hypothecation is a charge against property for an amount of debt where neither ownership nor possession

is passed to the creditor. Though the borrower is an actual physical possession but the constructive

possession remains with the Bank as per the deed of hypothecation. The borrower holds the possession

not in his own right as the owner of the goods but as the agent of the Bank.

3.2.22.1│Features of Hypothecation:

Charge against a property for an amount of debt.

Goods remain in the possession of the borrower.

Equitable charge to the bank under document Letter of credit.

Borrower binds himself to give possession of the hypothecated goods to the Bank -when called

upon to do so.

It is a floating charge.

It is rather precarious.

3.2.23│ Mortgage:

Mortgage is created on the immovable property like land, building, plant etc. Most common type of

mortgage is legal mortgage in which ownership is transferred to the bank by registration of the mortgage

53

deed. Another method called equitable mortgage is also used in bank for creation of charge. Here mere

deposit of title to goods is sufficient for creation of charge. Registration is not required. In both the cases,

the mortgage property is retained in the hand of borrower.

3.2.24│ CREDIT ASSESSMENT & RISK GRADING

All financial activities involve a certain degree of risk and particularly, the financial institutions of the

modern era are engaged in various complex financial activities requiring them to put proper attention to

every detail.

3.2.25│ Credit Assessment:

A thorough credit and risk assessment should be conducted prior to granting of loans, and at least

annually thereafter for all facilities. The results of this assessment should be presented in a Credit

Appraisal that originates from the Credit Officer/ relationship manager/ (RM) and is approved by Head

Office Credit Committee (HOCC)/Executive Committee of Directors/ Board of Directors. The Credit

Officer/RM should be the owner of the customer relationship, and must be held responsible to ensure the

accuracy of the entire credit application submitted for approval. The Credit Officer/RMs must be familiar

with the bank's Lending Guidelines and should conduct due diligence on new borrowers, principals, and

guarantors.

The credit officers/RM must know their customers and conduct due diligence on new borrowers,

principals, and guarantors to ensure such parties are in fact who they represent themselves to be i. e.

Know Your Customer (KYC).

Credit Appraisal should summarize the results of the RMs risk assessment and include, as a minimum, the

following details:

Amount and type of loan(s) proposed.

Purpose of loan (s).

Result of financial analysis

Loan Structure (Tenor, Covenants, Repayment Schedule, Interest)

Security Arrangements

3.2.26│KYC Concept:

The credit officers/RM must know their customers and conduct due diligence on new borrowers,

54

principals, and guarantors to ensure such parties are in fact who they represent themselves to be i.e. Know

Your Customer (KYC).

At first the Banker-Customer relationship would be established through opening of CD/SB accounts.

Proper introduction, photographs of the account holders/ signatories, passports etc., all the required papers

as per Bank's policy are to be obtained during account opening. Physical verEximation of the address is to

be made. A declaration regarding approximate transaction in the account is to be obtained during opening

of account. Information regarding business pattern, nature of business, volume of business, etc are be

ascertained. At least three Cs, i.e., Character, Capital & Capacity must be confirmed. Any suspicious-

transaction must be timely addressed and brought down to the notice of Head Office/ Bangladesh Bank as

required and also appropriate corrective measures to be taken as per the direction of Bank authority/

Bangladesh Bank.

3.2.27│ Risk Management -Lending Decision

To safeguard Bank‟s interest over the entire period of the advance, a comprehensive view of the capital,

capacity, integrity of the borrower, adequacy, nature of security, compliance with all legal formalities,

completion of all documentation and finally a constant watch on the account is called for. Where

advances are granted against the guarantee of a third party, that guarantor must be subjected to the same

credit assessment as made for the principal borrower. The basis of security valuations will be expert third

party assessments, current market price and forced sale value. The Bank has enlisted some surveyor

firms/companies for valuation of assets of the borrower; the credit officer must obtain the valuation report

from the enlisted surveyors only for the valuation of security.

While making lending decisions, particular attention should be given to the analysis of credit proposals

received from heavily leveraged companies and those dealing in non-essential consumer goods, taking

special care about their debt servicing abilities.

Emphasis should be given on the following sound credit principles:-

Present and future business potentiality for optimum deployment of Bank‟s fund to increase return

on assets.

Preference for self liquidating QUALITY business.

Avoiding Marginal performers.

Risk dispersion is basic to sound credit principles and policies. Bank should be careful about large

and undue concentration of credit to industry, one obligor and common product line etc.

55

Managing the amount, size, nature and soundness of one obligor exposures relative to the size of

the borrower and Bank‟s position among his other lenders.

Personal guarantees of the principal partners or the Directors of the companies and where

necessary, subordination agreement should be obtained.

Recognize impact of fee income through Remittances, Letter of Credit, Letter of Guarantee,

Foreign Exchange business in enhancing return on assets.

The asset-conversion or transaction flow cycle and the net-trading cycle of the customer i.e. the

terms on which they conduct the business.

3.2.28│ Basics of Credit Risk

One of the most sign Examine risks is exposed to is, what is generally termed as „Credit Risk‟. Since the

largest slice of income generated by a bank and a major percentage of assets is subject to this risk. It is

obvious that prudent management of this risk is fundamental to the sustainability of a bank. So, the

following risk areas should be considered for analyzing a credit proposal:

Borrower Analysis (Management/Ownership/Corporate Structure Risk)

Industry Analysis (Business & Industry Risk)

Supplier/Buyer Analysis/Market Risk

Technological Risk

Interest Rate Risk

Foreign Exchange Risk

Cost Overrun Risk

Financial Analysis (Historical/Projected)

Account Conduct

Adherence to Lending Guidelines

Mitigating Factors

Loan Structure

Security

Name lending ( Relationship Assessment)

3.2.29│Credit Risk Grading (CRG)

The Credit Risk Grading (CRG) is a collective definition based on the pre-specified scale and reflects the

underlying credit-risk for a given exposure.

56

Credit risk grading is an important tool for credit risk management as it helps the Banks & financial

institutions to understand various dimensions of risk involved in different credit transactions. The

aggregation of such grading across the borrowers, activities and the lines of business can provide better

assessment of the quality of credit portfolio of a bank or a branch. The credit risk grading system is vital

to take decisions both at the pre-sanction stage as well as post-sanction stage.

3.2.30│USE OF CREDIT RISK GRADING

The Credit Risk Grading matrix allows application of uniform standards to credits to ensure a

common standardized approach to assess the quality of individual obligor, credit portfolio of a

unit, line of business, the branch or the Bank as a whole.

As evident, the CRG outputs would be relevant for individual credit selection, wherein either a

borrower or a particular exposure/facility is rated. The other decisions would be related to pricing

(credit-spread) and specExim features of the credit facility. These would largely constitute

obligor level analysis.

Risk grading would also be relevant for surveillance and monitoring, internal MIS and assessing

the aggregate risk profile of a Bank. It is also relevant for portfolio level analysis.

3.2.31│NUMBER AND SHORT NAME OF GRADES USED IN THE CRG

The proposed CRG scale consists of 8 categories with Short names and Numbers are provided as follows:

Table-4: Credit Risk Grading

Grading Short Name Number

Superior SUP 1

Good GD 2

Acceptable ACCPT 3

Marginal/Watchlist MG/WL 4

Special Mention SM 5

Sub standard SS 6

Doubtful DF 7

Bad & Loss BL 8

57

Source: Credit Risk Grading Manual 2009.

3.2.31.1│CREDIT RISK GRADING DEFINITIONS

A clear definition of the different categories of Credit Risk Grading is given as follows:

Superior - (SUP) – 1:

Credit facilities, which are fully secured i.e. fully cash covered.

Credit facilities fully covered by government guarantee.

Credit facilities fully covered by the guarantee of a top tier international Bank.

Good - (GD) – 2:

Strong repayment capacity of the borrower

The borrower has excellent liquidity and low leverage.

The company demonstrates consistently strong earnings and cash flow.

Borrower has well established, strong market share.

Very good management skill & expertise.

All security documentation should be in place.

Credit facilities fully covered by the guarantee of a top tier local Bank.

Aggregate Score of 85 or greater based on the Risk Grade Score Sheet.

Acceptable - (ACCPT) – 3:

These borrowers are not as strong as GOOD Grade borrowers, but still demonstrate consistent

earnings, cash flow and have a good track record.

Borrowers have adequate liquidity, cash flow and earnings.

Credit in this grade would normally be secured by acceptable collateral (1st charge over inventory /

receivables / equipment / property).

Acceptable management

Acceptable parent/sister company guarantee

Aggregate Score of 75-84 based on the Risk Grade Score Sheet.

Marginal /Watchlist - (MG/WL) – 4:

This grade warrants greater attention due to conditions affecting the borrower, the industry or the

economic environment.

58

These borrowers have an above average risk due to strained liquidity, higher than normal leverage,

thin cash flow and/or inconsistent earnings.

Weaker business credit & early warning signals of emerging business credit detected.

The borrower incurs a loss

Loan repayments routinely fall past due

Account conduct is poor, or other untoward factors are present.

Credit requires attention

Aggregate Score of 65-74 based on the Risk Grade Score Sheet

Special Mention - (SM) – 5:

This grade has potential weaknesses that deserve management's close attention. If left uncorrected,

these weaknesses may result in a deterioration of the repayment prospects of the borrower.

Severe management problems exist.

Facilities should be downgraded to this grade if sustained deterioration in financial condition is noted

(consecutive losses, negative net worth, excessive leverage)

An Aggregate Score of 55-64 based on the Risk Grade Score Sheet.

Substandard - (SS) – 6:

Financial condition is weak and capacity or inclination to repay is in doubt.

These weaknesses jeopardize the full settlement of loans.

Bangladesh Bank criteria for sub-standard credit shall apply.

An Aggregate Score of 45-54 based on the Risk Grade Score Sheet

Doubtful - (DF) – 7:

Full repayment of principal and interest is unlikely and the possibility of loss is extremely high.

However, due to specEximally identifiable pending factors, such as litigation, liquidation procedures

or capital injection, the asset is not yet classified as Bad & Loss.

Bangladesh Bank criteria for doubtful credit shall apply.

An Aggregate Score of 35-44 based on the Risk Grade Score Sheet.

Bad & Loss - (BL) -8:

Credit of this grade has long outstanding with no progress in obtaining repayment or on the verge of

wind up/liquidation.

Prospect of recovery is poor and legal options have been pursued.

Bangladesh Bank criteria for bad & loss credit shall apply.

An Aggregate Score of less than 35 based on the Risk Grade Score Sheet.

59

3.2.32│Organizational Structure of Credit Management

The appropriate organizational structure must be in placed to support the adoption of the guidelines which

are discussed earlier. The key feature is the segregation of the Marketing/ Relationship Management

function from Approval/Risk Management / Administrative functions.

The lending authority should be centralized in Head Office and currently the authority is vested on the

Head Office Credit Committee (HOCC) and beyond their approval authority the proposal to be placed to

the Executive Committee of Directors or Board of Directors. However, the process of delegation of

discretionary power to individual Executives for approval of credit proposals is under active consideration

of the Bank Management/Board of Directors.

A detailed organ gram is given in the next page:

60

3.2.33│Organogram of Credit Department

An organogram of Credit Department is given below:

3.3│The credit process of Exim Bank is given below:

Board of Directors

President & Managing Director

Deputy Managing

Director - 1

Head of

Corporate/Commerc

ial Banking

(Marketing)

Head of Credit

Administration

Department

Head of Credit (Credit

Appraisal & Approval)

Disbursement

(Ensuring

compliance

with terms &

conditions of

approval,

Issuing

Disbursement

Letter)

Custodial

Duties

(CIB Report

collection,

Documentati

on

formalities)

Compliance

(CIB, CL

returns,

producing

all

statements

required by

the

Managemen

t)

Monitoring &

Recovery

(Managing

SMA, SS, DF,

BL accounts,

Dealing legal

matters)

Executives/Officers

Executive

Officers

Executives/Officers

Relationship

Managers (RM)

Deputy Managing

Director - 2

Executive

Officers

Executive

Officers

Executive

Officers

61

Source: Credit Policy Guide 2009.

Credit Performance Analysis

Selection of Borrower

(Credit Worthy or not)

Credit

Characte

r Capacity Cash Collateral Condition

Control

Borrower is defaulter or not

Approval Process

Disbursemen

t

Custodian Monitoring Complains

Recovery Process & Follow up

Giving moral

pressure

Notice for recalling Legal Action

Renewal & status verification

Write off loan & advances

Disbursement Authority & Credit Administration

62

3.3.1│Step 1:

3.3. 1 │The C’s of Good & Bad Loan:

The Branch manager of EXIM BANK try to judge the possible client based on some criteria. These

criteria are called the C‟s of good and bad loans. These C‟s are described below:

a. Character

The outcome of analyzing the character is to have overall idea about the integrity, experience, and

business sense of the borrower. Two variables; Interaction/interview, and Market Research are used to

analyze the character of the borrower.

b. Capital

For identifying the capital invested in the business can be disclosed using the following indicators:

a) Financial Statements

b) Receivable, Payable, statements to practically assess the business positions.

c. Capacity

Capability of the borrower in running the business is highly emphasized in the time of selecting a good

borrower.

d. Collateral

Make sure that there is a “second way out “of a credit, but do not allow that to drive the credit decision.

e. Cash Flow

Cash flow is the vital factor that is used to identify whether the borrower will have enough cash to repay

the loan or advance.

f. Conditions

Understanding the business and economic conditions can and will change after the loan is made.

g. Complacency

Do not rely on past history to continue. Stay alert to what can go wrong in any loan.

63

h. Carelessness

Remember that documentation, follow-up and consistent monitoring are essential to high quality loan

portfolios.

i. Communication

Share credit objectives and credit decision making both vertically and laterally within the bank.

j. Contingencies

Make sure that you understand the risks, particularly the downside possibilities and that you structure and

price the loan consistently with that understanding.

k. Competition

Do not get swept away by what others are doing.

3.3.2│Step 2:

3.3.2.1│Approval Process

In approval process the Bank segregates its relationship Management / Marketing from the approving

authority. The existing approval authorities are Head of Branch (wherever applicable) and Head Office

Credit Committee, Executive Committee of Directors and Board of Directors. The Bank Management/

Board of Directors of the Bank is actively considering for the Individual Delegation Power to the Senior

Level Executives at Head Office instead of Head Office Credit Committee for effective credit risk

management.

Before approving any facility the following guidelines are to be applied:

Before approving any facility the approval authority must ensure that the borrowers CIB report as

obtained is updated and clean.

Delegated approval authorities should be reviewed annually by MD/EC/Board.

The credit approval function has been separated- from the marketing/ relationship management

function.

Approvals are evidenced in writing (sanction letter). Approval records are kept in file with the Credit

Applications.

All credit risks must be authorized by Committee within the authority limit delegated to them by the

MD/EC/Board. The "pooling" or combining of authority limits is not permitted.

64

The aggregate exposure to any borrower or borrowing group is used to determine the approval

authority required.

Any credit proposal that does not comply with. Lending Guidelines, regardless of amount, is referred

to Head Office for Approval

MD/Head Office Credit Committee / Board as per the delegated power approve and monitor any

exceptional case.

Any breaches of lending authority to be reported to MD, Head of Internal Audit/ Control &

Compliance Department.

65

3.3.2.2│Flow Chart of Approval process

A flow chart of approval process of loan is given below:

Source: Credit Policy Guide 2009, Southeast Bank Ltd.

3.3.2.3│Appeal Process

Any declined credit may be represented to the next higher authority for reassessment/approval. However, there

should be no appeal process beyond the President & Managing Director.

BRANCH MARKETING TEAM

(EXECUTIVES & OFFICERS)

HEAD OF BRANCH

(APPROVAL/DECLINE)

AS PER DELEGATION

BEYOND CAPACITY

RECOMMENDED TO

DMD

(APPROVAL/DECLINE)

AS PER DELEGATION

HEAD OF CREDIT (APPROVAL/ DECLINE)

AS PER DELIGATION

HEAD OF

CORPORATE/COMMERCIAL

BANKING (MARKETING)

(MARKETING)

BEYOND CAPACITY

RECOMMENDED TO

BEYOND CAPACITY

RECOMMENDED TO

BEYOND CAPACITY

RECOMMENDED TO

BEYOND CAPACITY

RECOMMENDED TO

FORWARDED TO

EXECUTIVE COMMITTEE OF DIRECTORS

(APPROVAL/DECLINE)

AS PER DELIGATION

MD

(APPROVAL/DECLINE)

AS PER DELEGATION

BOARD OF DIRECTORS

(APPROVAL/DECLINE)

66

3.3.2.5│Time requirement

At Branch level : Branch Authority must take decision within maximum of 3-5 days

At Head Office level: The Head Office Credit Committee/EC/Board should take decision within

maximum of:

3 -5 days for simple type of facility.

7-15 days for Project Loan.

15-30 days for loans under Syndication.

Sanction letter – on approval, the sanction letter to be issued within 1-2 days time.

In case of Large Loans it must be reported to Bangladesh Bank.

In case of other Exim loans like Director‟s loan, prior approval from Bangladesh Bank to be obtained

as per the requirements/ guidelines of Bangladesh Bank.

3.3.3│Step 3:

3.3.3.1│Disbursement Procedure of Investment:

Bank will pay the sanctioned money through Pay-Order directly or through investment staff to the

supplier of construction materials/owner of the apartment/owner of the built house. However, the

following points shall be taken into consideration in disbursing the investment:

In case of purchase of apartment/flat/built house, the staff shall have to deposit the equity money

in the Branch or produce documentary evidence in support of his investment up to the

satisfaction of the concerned Branch.

In case of construction of house on the staff's own land or for extension of the existing house, the

valuation of the Bank as regards staff's investment shall be considered final.

The staff shall have to submit to the Bank, the construction plan approved by the competent

authority and also the required permission to mortgage the property, where necessary.

The staff must execute all necessary documents including mortgage deed and complete all

necessary documentation formalities to avail the investment. Related documents of mortgage,

agreement of sale and other documents must be vetted by the penal lawyer of the Bank.

67

3.3.3.2│Procedure for Application:

Interested persons shall have to apply in prescribed form of the Bank through the Branch of the concerned

area. The Bank shall sanction investment if the proposal is found acceptable after examination of its

viability and profitability. The Bank reserves the right to sanction or reject any investment proposal.

3.3.3.3│Collection of Credit Information

Credit information can be collected from the following sources:

a. Personal Interview

After having collected all the information from outside source, it is advisable to arrange for a personal

interview with the borrower. The interview should be conducted in a free and pleasant atmosphere.

b. Loan Application

When a loan proposal has to be processed a banker first studies the loan application made by the

borrower. A loan application usually contains information pertaining to the name of the concern,

constitution, nature and place of business, year of establishment, borrower‟s experience in the line,

particulars of assets and liabilities, purpose of advance, amount required, the period of advance applied

for, nature of security offered, sources of repayment etc.

c. Market Reports

Reports can be obtained from the various markets, particularly, from businessman carrying on the same

trade as the borrower does, some of whom may be his/her friends, others his/her rivals or enemies.

d. Study of account

If the borrower is the customer of the bank, a study of the borrowers account and his/her past dealings

will throw light on the aspect of keeping up commitments, borrowing else-where etc. which will assist a

banker in judging about creditworthiness of the borrower.

e. Financial statement

The borrower should be requested to supply the latest statement in regard to his/her assets and liabilities.

It is always preferable to have audited statements for the last three years.

3.3.3.4│Credit Information Bureau (CIB) Report

The Credit Information Bureau (CIB) was created in on august 18, 1992. After establishment of Credit

Information Bureau (CIB) at Bangladesh Bank, collection of information about the borrower has become

easier. Bankers, of course, have their own ways to collect information about the prospective borrower.

68

The Credit Information Bureau (CIB) of Bangladesh Bank has undertaken the task of collecting, collating

and storing detailed credit information from scheduled Banks and other financial institutions in its proper

prospective so that these can be exchanged among the scheduled banks, financial institutions and

Bangladesh Bank for quick processing of new loan proposals and re-scheduling of existing loans.

The information so far collected by CIB is:

1. Debtor‟s/Borrower‟s information

2. Owner‟s information

3. Group / Affiliation information

4. Credit Exposure Matrix or Financial information

5. Third Party guarantors information

3.3.3.5│Other sources

Other sources of information about the borrower include press reports regarding purchase and sales of

property, auctions and decrees. Registration, revenue and municipal records can also be referred to with

advantage to verify the properties owned by the borrower and charges thereon, if any.

3.3.3.6│Disbursement Authority &Credit Administration

The Disbursement Authority has been separated from Approval Authority. The Disbursement Authority is

vested upon the Credit Administration department (CAD).

The Credit Administration function is critical in ensuring that proper documentation and approvals are in

place prior to the disbursement of loan facilities. The functions of Credit Administration are strictly

segregated from Relationship Management/Marketing in order to avoid the possibility of controls being

compromised or issues not being highlighted at the appropriate level.

3.3.3.7│Functions of Credit Administration Department (CAD):

The functions of Credit Administration Department (CAD) are given below by using a Flow Chart:

3.3.3.8│Function of Credit Administration Flowchart

69

_

Source: Credit Policy Guide 2009, EXIM Bank Ltd.

Step: 4

3.3.4│Disbursement Process

Security documents are to be prepared in accordance with approval terms and to be legally enforceable.

Standard loan facility documentation is to be drafted/ prepared by the legal counsel. Disbursements under

Functions of Credit Administration

Department

Disbursement Compliance Custodian

Monitoring

Approval from

competent

authority

Returns to BB,

CIB Reporting,

default list

circulation

Conditions &

Covenant Breach

Monitoring

Obtaining

Security

Documentation

as per approval

Completion of

Security

Documentatio

n

Safely Storing

Loan/Security

Documents (fire-proof)

Monitoring of Past Due,

Limit, Expiry & Documents

Deficiency

Maintain BB

Circulars & ensure

compliance by all

Depts.

Limit Creation

& Complying

Disbursement

Check List

Ensure all valuers,

lawyers, insurers

are approved,

enlisted & their

performance are

reviewed

periodically

Audit, Internal/BB

Inspection

Compliance

Periodic Review of

Documentation

Ensure

adherence to

approved

terms & other

requirements

before

disbursement.

Disbursement

Ensure Collateral is

Insured & Properly

Valued

70

loan facilities should be made when all security documentation is in place. CIB report should

reflect/include the name of all the lenders with facility, limit & outstanding. All formalities regarding

large loans & loans to Directors is guided by Bangladesh Bank circulars & related section of Banking

Companies Act. All Credit Approval terms must be met. The check list certEximate is to be signed by

Credit In-charge and Head of Branch. The disbursement authority is vested to the Head of Credit

Administration Department upto Tk 5.00 crore, above which is vested to the President and Managing

Director.

3.3.4.1│Procedure for Loan Sanction

Loan sanctioning is a comprehensive method that involves different steps.

Fig: Procedure for Loan Sanction

STEP-1: APPLICATION FOR LOAN

STEP-2: GETTING CREDIT INFORMATION

STEP-4: SENDING LOAN PROPOSAL TO THE HEAD OFFICE

STEP-5: ANALYSIS OF CREDIT PROPOSAL BY HEAD OFFICE

STEP-6: RECEIVE SANCTION ADVICE FROM THE HEAD OFFICE

STEP-7: SENDING SANCTION LETTER TO THE PROSPECTIVE BORROWER

STEP-8: EXECUTION OF DOCUMENTATION

STEP-9: DISBURSEMENT OF LOAN

STEP-3: SCRUTINIZING AND INVESTIGATION

71

3.3.4.2│ Credit Monitoring

To minimize credit losses, monitoring procedures and systems should be in place which will provide an

early indication of the deteriorating financial health of a borrower. The credit monitoring process in Bank

is vested on CAD. The Head of Credit Administration Department will report the exceptional list of assets

on daily basis on the following categories:

Past due (which are not paid or renewed at maturity (Grade E) principal or interest payments, past due

trade bills, account excesses, and breach of loan covenants;

Loan terms and conditions are monitored, financial statements are received on a regular basis, and

any covenant breaches or exceptions are referred to CRM and the credit officer / RM team for timely

follow-up.

Timely corrective action is taken to address findings of any internal, external or regulator

inspection/audit.

All borrower relationships/loan facilities are reviewed and approved through the submission of a

Credit Application at least annually.

Credit Administration Department regularly will keep follow up on and corrective action takes in a timely

manner before the account deteriorates further.

3.3.4.3│ Early Alert process

An Early Alert Account is one that has risks or potential weaknesses of a material nature requiring

monitoring, supervision, or close attention by management.

Early identEximation, prompt reporting and proactive management of Early Alert Accounts are prime

credit responsibilities of all Credit Officers / RMs and must be undertaken on a continuous basis. An

Early Alert report should be completed by the Credit Officers/RM and sent to the approving authority in

CRM for any account that is showing signs of deterioration within seven days from the identEximation of

weaknesses. The Risk Grade should be updated as soon as possible and no delay should be taken in

referring problem accounts to the CRM department for assistance in recovery.

Step 5

3.3.5│ Recovery and Follow up of Non Performing Loans (NPL) and Advances

72

Loans and advances in whatever form granted by the Bank to its clients are repayable either on demand or

at the expiry of fixed period or as per repayment schedule agreed upon while granting the facilities. If

loan is repayable on installment basis, default may be purely an oversight on the part of borrower but, in

other cases, it may be much more serious, giving the Bank the first tangible evidence that the borrower is

in financial difficulty. At this point the procedure for dealing with potential loan losses comes into

operation. The Branch Managers (HoBs) should, therefore, keep a close and constant watch on all their

loans and advances to ensure that timely action is initiated in each case for adjustment of the account or

its renewal, if it is decided to continue the facility.

3.3.5.1│ Recovery procedure of EXIM Bank:

When Southeast Bank is facing difficulties in getting repayment of advance, he takes the following steps:

A. Exerting moral pressure

B. Notice for recalling advance

C. Legal Action

a. Exerting moral pressure: The banker will visit the borrower‟s place of business and find out the

causes of non-payment of the bank‟s dues. If there is a guarantor, he is also called upon to adjust the

account or have it adjusted by the principal. In case of small borrower manger invite for tea and try to say

about dues.

b. Notice for recalling advance: In case the borrower does not adjust the account as desired, the only

course left open to the bank would be to send a notice by registered post to the last known address of the

borrower and guarantor, if any, preferably through a lawyer.

c. Legal Action: Legal proceedings are lengthy and time consuming as well as having an element of

negative publicity and as such every effort must be made to settle a defaulter‟s outstanding out of court.

However, if situation compels the Bank to take legal action for recovery of stuck up loans and advances,

the same should be done with prior approval of Head Office.

3.3.6│ Step: 6

3.3.6.1│ Renewal and Verification

On expiry of a facility, the borrower may come forward with a proposal either for renewal of the facility

for a further period or for enhancement of the existing facilities. He may also agree to offer additional

stocks/ securities or even furnish a guarantor. The Head of Branch (Branch Manager) should examine all

73

such proposals and if he is satisfied the proposals should be sent to Sanctioning Authority, duly supported

by full blown credit analysis including report of justification of Stocks status of Collateral Securities etc.

as is done in case of fresh proposals. The Head Office in turn will process the renewal/ enhancement

proposal after verifying the following factors:

Justification for renewal.

Reasons for non-payment/ adjustment of the loan.

Security aspect in terms of outstanding loan.

Credit worthiness of the client

3.3.7│ Step: 7

3.3.7.1│Write Off of Loans / Advances

On occasion it may be required to write off any loan/advance or portion thereof which may become

unrecoverable or represent a total or partial loss. Normally many of these loans / advances would have

already been placed in the Special Mention Loan. In 2003 Bangladesh Bank has issued circular providing

instruction / guidelines for write-off of loan (BRPD circular no. 02 dated January 13, 2003). It is,

however, the responsibility of the Head Office to decide which loans/advances are to be written-off. All

loans / advances written-off must be recommended for prior approval of the Head Office and the

recommendation must be accompanied by a memo summarizing the circumstances necessitating the

current write-offs as well as recovery efforts to date. Under no circumstances should the fact that all or

any portion of a loan / advances that has been written-off be revealed to the borrower, nor should the

borrower be informed that the loan / advances is on a non-accrual basis. Despite the loans being written-

off the recovery process will be continued for those loan and advances.

In case of write-off / waiver the Bank‟s policy is to realize the entire Principal amount along with 100%

Interest taken into income account. Then the Bank may waive / unapplied interest / Write off maximum

50% of interest as kept in interest suspense account against the respective client as decided by the Board

of Directors.

74

4.1│Frequency Analysis

Age

Table 1 Age distribution

Age

Frequency Percent Valid Percent Cumulative Percent

Valid 18-22 2 1.7 1.7 1.7

23-26 20 16.7 16.7 18.3

27-30 31 25.8 25.8 44.2

31-35 49 40.8 40.8 85.0

Above 36 18 15.0 15.0 100.0

Total 120 100.0 100.0

Out of 120 employees, 40.8 % of the employees belong to 31 - 35 age range, 25.8% of the employees are

in the age group of 27 – 30 range, 16.7% of the employees are in the age group of 23 – 26 and the rest

1.7% of the employees belong to other group members.

The numbers of employees working in EXIM bank are mostly in their mid-thirties. However, there are

also a significant number of employees who are at their mid-twenties. This shows that EXIM bank has a

young labor force as there are only few employees who are above forties.

75

Gender

Table 2 Gender Distribution

Gender

Frequency Percent Valid Percent Cumulative Percent

Valid Male 76 63.3 63.3 63.3

Female 44 36.7 36.7 100.0

Total 120 100.0 100.0

From the table above it can be seen that the total number of respondent EXIM bank are 120. Among them

76 were male and 44 are female. These respondents are all employees in EXIM bank from various

departments.

From the sample size of 120 employees working in EXIM bank it can be assumed that the numbers of

male are more than the female.

Job Position

Table 3 Job Position of EXIM bank

Job position

Frequency Percent Valid Percent Cumulative

Percent

Valid

Manager Level 16 13.3 13.3 13.3

Officer level 104 86.7 86.7 100.0

Total 120 100.0 100.0

76

Out of 120 employees, 13.3% of the employees belong to manager level which is 16 sample and 86.7% of

the employees are in the officer level which is 104 employees.

So from the table above it can be assumed that EXIM bank uses centralize controlling system where

managers are in charge of officer level employees.

Financial Analysis of Customers

Table 4 Customer's financial analysis

Customer’s 6C’s (Character, Capacity, Cash, Collateral, Condition, Control) analysis

is done by the Bank before approving the credit.

Frequency Percent Valid Percent

Cumulative

Percent

Valid Strongly Agree 41 34.2 34.2 34.2

Agree 78 65.0 65.0 99.2

Neutral 1 .8 .8 100.0

Total 120 100.0 100.0

Figure 1 Customer's financial analysis

77

Of the respondents 34.2% strongly agreed that Customer's financial 6c‟s analysis done by the bank before

approving the credit, 65% agreed and .8% is neutral about the earning. None of them strongly disagreed

or disagreed.

Since there is only 0.8% neutral answer, if agreement and disagreement are added up, it can be found that

99.2% agree and 0% disagrees. So it can be assumed that most of the Customer's financial analysis is

done by the bank before approving the credit

Evaluating Credit Worthiness

Table 5 Evaluating credit worthiness

Customer’s credit rating is a good option to evaluate credit worthiness.

Frequency Percent Valid Percent

Cumulative

Percent

Valid Strongly Agree 22 18.3 18.3 18.3

Agree 84 70.0 70.0 88.3

Neutral 13 10.8 10.8 99.2

Disagree 1 .8 .8 100.0

Total 120 100.0 100.0

Figure 2 Evaluating credit worthiness.

78

Of the 120 respondents 18.3% strongly agreed that Customer‟s credit rating is a good option to evaluate

credit worthiness. 70.0% agreed and 10.8% are neutral about the earning. .8 % strongly disagreed.

Since there is only 10.8% neutral answer, if agreement and disagreement are added up, it can be found

that 88.3% agree and .8% disagrees. So it can be assumed that most of the Customer‟s credit rating is a

good option to evaluate credit worthiness.

Minimize credit risk.

Table 6 Minimize credit risk.

Customer’s credit worthiness evaluations are necessary to minimize credit risk.

Frequency Percent Valid Percent Cumulative Percent

Valid

Strongly Agree 26 21.7 21.7 21.7

Agree 83 69.2 69.2 90.8

Neutral 10 8.3 8.3 99.2

Disagree 1 .8 .8 100.0

Total 120 100.0 100.0

Figure 3 Minimize credit risk.

79

Of the 120 respondents 21.7% strongly agreed that Evaluating credit worthiness is necessary to minimize

credit risk, 69.2% agreed, 8.3% are neutral about the credit risk, 0.8% disagreed that Evaluating credit

worthiness is not necessary to minimize credit risk

Since the neutral answer is only 8.3%, if agreement and disagreement are added up, it can be found that

90.8% agree and 0.8% disagrees. So it can be assumed that evaluating credit worthiness is necessary to

minimize credit risk.

Worthiness is not effective.

Table 7 Existing system of analyzing credit worthiness

Existing system of analyzing credit worthiness is not effective.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 36 30.0 30.0 30.0

Agree 67 55.8 55.8 85.8

Neutral 15 12.5 12.5 98.3

Disagree 2 1.7 1.7 100.0

Total 120 100.0 100.0

Figure 4 Worthiness is not effective.

80

Of the 120 respondents 30.0% strongly agreed that Existing system of analyzing credit worthiness has no

flaws, 55.8% agreed, 12.5% are neutral about the credit flaws, 1.7% disagreed that Existing system of

analyzing credit worthiness has flaws.

Since the neutral answer is only 14.2%, if agreement and disagreement are added up, it can be found that

85.8% agree and 1.7% disagrees. So it can be assumed that Existing system of analyzing credit

worthiness has no flaws.

Credit given to worthy customer only

Table 8 Credit is given only if the customer is found worthy

Credit is given only if the customer is found worthy.

Frequency Percent Valid Percent

Cumulative

Percent

Valid Strongly Agree 22 18.3 18.3 18.3

Agree 82 68.3 68.3 86.7

Neutral 15 12.5 12.5 99.2

Disagree 1 .8 .8 100.0

Total 120 100.0 100.0

Figure 5 customers are found worthy.

81

Of the 120 respondents 18.3% strongly agreed that at EXIM bank, Credit is given only if the customer is

found worthy, 70.0% agreed, 10.8% are neutral about the worthiness, 0.8% disagreed that at EXIM bank,

Credit may not be given if the customer is found worthy.

Since the neutral answer is only 10.8%, if agreement and disagreement are added up, it can be found that

88.3% agree and 0.8% disagrees. So it can be assumed that at EXIM bank, Credit is given only if the

customer is found worthy.

Verified Credit Worthiness

Table 9 Verified Credit Worthiness

Credit worthiness is verified before approving the loan.

Frequency Percent Valid Percent Cumulative Percent

Valid Agree 106 88.3 88.3 88.3

Neutral 13 10.8 10.8 99.2

Disagree 1 .8 .8 100.0

Total 120 100.0 100.0

Figure 6 Verified Credit Worthiness

82

Of the 120 respondents 88.3% agreed that Transition profile is checked before granting credit, 10.8% are

neutral about the transition profile .8% disagreed or strongly disagreed about this.

Since the neutral answer is only 10.8%, if agreement and disagreement are added up, it can be found that

88.3% agree and .8% disagrees. So it can be assumed that credit worthiness is verifying profile before

granting credit.

Checking transaction profile

Table 10 Transition profile

Transaction profile is verified before giving way credit.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 14 11.7 11.7 11.7

Agree 87 72.5 72.5 84.2

Neutral 19 15.8 15.8 100.0

Total 120 100.0 100.0

Figure 7 Verifying Credit Worthiness

83

Of the 120 respondents 11.7% strongly agreed that Transition profile is checked before granting credit,

72.5% agreed, 15.8% are neutral about the transition profile. But none of the employees disagreed or

strongly disagreed about this.

Since the neutral answer is only 15.8%, if agreement and disagreement are added up, it can be found that

84.2% agree and 0.0% disagrees. So it can be assumed that Transition profile is checked before granting

credit.

CIB report is the most important document

Table 11 CIB report is the most important document

CIB report is most important document which makes the safety of credit.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 38 31.7 31.7 31.7

Agree 61 50.8 50.8 82.5

Neutral 20 16.7 16.7 99.2

Disagree 1 .8 .8 100.0

Total 120 100.0 100.0

Figure 8 CIB report is the most important document

84

Of the 120 respondents 31.7% strongly agreed that CIB report works as the most important document to

ensure safety, 50.8% agreed, 16.7% are neutral about the safety, 0.8% disagreed that CIB report does not

works as the most important document to ensure safety.

Since the neutral answer is only 16.7%, if agreement and disagreement are added up, it can be found that

82.5% agree and 0.8% disagrees. So it can be assumed that at EXIM bank, that CIB report works as the

most important document to ensure safety.

Credit monitoring to minimize credit risk

Table 12 Credit monitoring is a good option

Credit monitoring is a good option to minimize credit risk.

Frequency Percent Valid Percent Cumulative Percent

Valid Agree 106 88.3 88.3 88.3

Neutral 13 10.8 10.8 99.2

Disagree 1 .8 .8 100.0

Total 120 100.0 100.0

Figure 9 Credit monitoring is a good option

85

Of the 120 respondents 88.3% agreed that Credit monitoring is a good option to minimize credit risk,

10.8% are neutral about the safety, 0.8% disagreed that Credit monitoring is not a good option to

minimize credit risk.

Since the neutral answer is only 10.8%, if agreement and disagreement are added up, it can be found that

88.3% agree and 0.8% disagrees. So it can be assumed that at EXIM bank, Credit monitoring is a good

option to minimize credit risk.

Nonperforming loan to a minimum level

Table 13 reduce nonperforming loan to a minimum level.

Early recovery process can reduce nonperforming loan to a minimum level.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 13 10.8 10.8 10.8

Agree 87 72.5 72.5 83.3

Neutral 20 16.7 16.7 100.0

Total 120 100.0 100.0

Figure 10 reduce nonperforming loan to a minimum level

86

Of the 120 respondents 10.8 strongly agree, 72.5 % agreed that reduce nonperforming loan to a minimum

level. 16.7% are neutral. Since the neutral answer is only 16.7%, if agreement and disagreement are added

up, it can be found that 83.3% agree and 0.8% disagrees. So it can be assumed that at Exim bank, Early

recovery process can reduce nonperforming loan to a minimum level.

Document increases the overall efficiency

Table 14 Document increases the overall efficiency

Proper documentation increases the overall efficiency.

Frequency Percent Valid Percent

Cumulative

Percent

Valid Strongly Agree 47 39.2 39.2 39.2

Agree 54 45.0 45.0 84.2

Neutral 17 14.2 14.2 98.3

Disagree 2 1.7 1.7 100.0

Total 120 100.0 100.0

Figure 11 Document increases the overall efficiency

87

Of the 120 respondents 39.2% strongly agreed that Proper documentation of loan and advance provides

legal support against the loan, 45% agreed, 14.2% are neutral about the transition profile. But none of the

employees disagreed or strongly disagreed about Proper documentation of loan and advance does not

provide legal support against the loan.

Since the neutral answer is only 14.2%, if agreement and disagreement are added up, it can be found that

84.2% agree and 0.0% disagrees. So it can be assumed that Proper documentation of loan and advance

provides legal support against the loan.

Information about a customer

Table 15 Credit files should provide all information about a customer.

Credit files should provide all information about a customer.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 14 11.7 11.7 11.7

Agree 87 72.5 72.5 84.2

Neutral 19 15.8 15.8 100.0

Total 120 100.0 100.0

Figure 12 Information about a customer.

88

Of the 120 respondents 11.7% strongly agreed that Proper documentation of loan and advance provides

legal support against the loan, 72.5% agreed, 15.8% are neutral about the information of customer but

none of the employees disagreed or strongly disagreed about Credit files should provide all information

about a customer.

Since the neutral answer is only 15.8%, if agreement and disagreement are added up, it can be found that

84.2% agree and 0.0% disagrees. So it can be assumed that Credit files should provide all information

about a customer.

Credit granting and review process.

Table 16 Institution maintains credit files supporting the credit granting and review process.

Institution maintains credit files supporting the credit granting and review process.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 26 21.7 21.7 21.7

Agree 78 65.0 65.0 86.7

Neutral 16 13.3 13.3 100.0

Total 120 100.0 100.0

Figure 13 Credit granting and review process.

89

Of the 120 respondents 21.7% strongly agreed that at EXIM bank, Credit is given only if the customer is

found worthy, 65% agreed, 13.3% are neutral about the Institution maintains credit files supporting the

credit granting and review process..

Since the neutral answer is only 13.3%, if agreement and disagreement are added up, it can be found that

86.7% agree and 0% disagrees. So it can be assumed that Institution maintains credit files supporting the

credit granting and review process.

Documentation process

Table 17 At Exim Bank documentation process is done properly.

At Exim Bank documentation process is done properly.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 14 11.7 11.7 11.7

Agree 87 72.5 72.5 84.2

Neutral 19 15.8 15.8 100.0

Total 120 100.0 100.0

Figure 14 Documentation process

90

Of the 120 respondents 11.7% strongly agreed that at EXIM bank, Credit is given only if the

customer is found worthy, 72.5% agreed, 15.8% are neutral about the worthiness, 0.8% disagreed

that at EXIM bank, At Exim Bank documentation process is done properly.

Since the neutral answer is only 15.8%, if agreement and disagreement are added up, it can be

found that 84.2% agree and 0% disagrees. So it can be assumed that at EXIM bank, At Exim

Bank documentation process is done properly.

Loan and advance

Table 18 Collateral is must for a loan and advance.

Collateral is must for a loan and advance.

Frequency Percent Valid Percent

Cumulative

Percent

Valid Strongly Agree 21 17.5 17.5 17.5

Agree 95 79.2 79.2 96.7

Neutral 3 2.5 2.5 99.2

Disagree 1 .8 .8 100.0

Total 120 100.0 100.0

Figure 15 loan and advance

91

Of the 120 respondents 17.5% strongly agreed that at EXIM bank, Credit is given only if the customer is

found worthy, 79.2% agreed, 2.5% are neutral about the worthiness, 0.8% disagreed that at EXIM bank,

Collateral is must for a loan and advance.

Since the neutral answer is only 10.8%, if agreement and disagreement are added up, it can be found that

88.3% agree and 0.8% disagrees. So it can be assumed that at EXIM bank, Collateral is must for a loan

and advance.

Collateral securities provide a safeguard against the advance.

Table 19 collateral securities provide a safeguard against the advance.

Good collateral securities provide a safeguard against the advance.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 33 27.5 27.5 27.5

Agree 61 50.8 50.8 78.3

Neutral 24 20.0 20.0 98.3

Disagree 2 1.7 1.7 100.0

Total 120 100.0 100.0

92

Figure 16 collateral securities provide a safeguard against the advance

Of the 120 respondents 27.5% strongly agreed that at EXIM bank, Credit is given only if the customer is

found worthy,50.8% agreed, 20.0% are neutral about the worthiness, 1.7% disagreed that at EXIM bank,

Collateral is must for a loan and advance.

Since the neutral answer is only 10.8%, if agreement and disagreement are added up, it can be found that

88.3% agree and 0.8% disagrees. So it can be assumed that at EXIM bank, collateral securities provide a

safeguard against the advance

Different credit facilities.

Table 20 Collateral policy varies depending on different credit facilities.

Collateral policy varies depending on different credit facilities.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 21 17.5 17.5 17.5

Agree 95 79.2 79.2 96.7

Neutral 3 2.5 2.5 99.2

Disagree 1 .8 .8 100.0

Total 120 100.0 100.0

Figure 17 Different credit facilities.

93

Of the 120 respondents 17.5% strongly agreed that at EXIM bank, Credit is given only if the customer is

found worthy, 79.2% agreed, 2.5% are neutral about credit facilities, .8% disagreed that at EXIM bank,

Collateral policy varies depending on different credit facilities.

Since the neutral answer is only 2.5%, if agreement and disagreement are added up, it can be found that

96.7% agree and 0.8% disagrees. So it can be assumed that at EXIM bank, Collateral policy varies

depending on different credit facilities.

Quality of collateral

Table 21 Quality of collateral affects the loan recovery performance.

Quality of collateral affects the loan recovery performance.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 33 27.5 27.5 27.5

Agree 61 50.8 50.8 78.3

Neutral 24 20.0 20.0 98.3

Disagree 2 1.7 1.7 100.0

Total 120 100.0 100.0

Figure 18 Quality of collateral

94

Of the 120 respondents 27.5% strongly agreed that at EXIM bank, Credit is given only if the customer is

found worthy, 50.8% agreed, 20.0% are neutral about the performance, 1.7% disagreed that at EXIM

bank, Quality of collateral affects the loan recovery performance.

Since the neutral answer is only 10.8%, if agreement and disagreement are added up, it can be found that

88.3% agree and 0.8% disagrees. So it can be assumed that at EXIM bank, Quality of collateral affects the

loan recovery performance.

Collateral is managed properly.

Table 22 Exim Bank collateral is managed properly.

Exim Bank collateral is managed properly.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 21 17.5 17.5 17.5

Agree 95 79.2 79.2 96.7

Neutral 3 2.5 2.5 99.2

Disagree 1 .8 .8 100.0

Total 120 100.0 100.0

Figure 19 Collateral is managed properly.

95

Of the 120 respondents 17.5% strongly agreed that at EXIM bank, Credit is given only if the customer is

found worthy, 79.2% agreed, 2.5% are neutral about the credit, 0.8% disagreed that at EXIM bank, Exim

Bank collateral is managed properly.

Since the neutral answer is only 10.8%, if agreement and disagreement are added up, it can be found that

96.7% agree and 0.8% disagrees. So it can be assumed that at EXIM bank, Exim Bank collateral is

managed properly.

Consumer satisfaction as well as efficiency.

Table 23 any above service and processing of different loans increases consumer satisfaction as well

as efficiency.

Any above service and processing of different loans increases consumer satisfaction as well as efficiency.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 56 46.7 46.7 46.7

Agree 58 48.3 48.3 95.0

Neutral 5 4.2 4.2 99.2

Disagree 1 .8 .8 100.0

Total 120 100.0 100.0

96

Figure 20 consumer satisfaction as well as efficiency.

Of the 120 respondents 46.7% strongly agreed that at EXIM bank, Consumer satisfaction as well as

efficiency. 48.3% agreed, 4.2 % are neutral about the efficiency, 0.8% disagreed that at EXIM bank, Any

above service and processing of different loans increases consumer satisfaction as well as efficiency.

Since the neutral answer is only 4.2%, if agreement and disagreement are added up, it can be found that

95% agree and 0.8% disagrees. So it can be assumed that at EXIM bank, Credit is given only if the

customer is found worthy.

Documentation increases efficiency.

Table 24 Proper documentation increases the overall efficiency.

Proper documentation increases the overall efficiency.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 47 39.2 39.2 39.2

Agree 54 45.0 45.0 84.2

Neutral 17 14.2 14.2 98.3

Disagree 2 1.7 1.7 100.0

Total 120 100.0 100.0

97

Figure 21 Documentation increases efficiency.

Of the 120 respondents 39.2% strongly agreed that at EXIM bank, Credit is given only if the customer is

found worthy, 45.0% agreed, 14.2% are neutral about the documentation, 1.7% disagreed that at EXIM

bank, Documentation increases efficiency.

Since the neutral answer is only 14.2%, if agreement and disagreement are added up, it can be found that

84.2% agree and 1.7% disagrees. So it can be assumed that at EXIM bank, Documentation increases

efficiency.

Provide all information about a customer.

Table 25 Credit files should provide all information about a customer.

Credit files should provide all information about a customer.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 14 11.7 11.7 11.7

Agree 87 72.5 72.5 84.2

Neutral 19 15.8 15.8 100.0

Total 120 100.0 100.0

Figure 22 provide all information about a customer.

98

Of the 120 respondents 11.7% strongly agreed that at EXIM bank, Credit is given only if the customer is

found worthy, 72.5% agreed, 15.8% are neutral about the all information about a customer at EXIM bank,

provide all information about a customer.

Since the neutral answer is only 15.8%, if agreement and disagreement are added up, it can be found that

84.2% agree and 0% disagrees. So it can be assumed that at EXIM bank, Credit files should provide all

information about a customer.

Disbursement of loans

Table 26 Disbursement of loans will increase overall efficiency.

Disbursement of loans will increase overall efficiency.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 49 40.8 40.8 40.8

Agree 56 46.7 46.7 87.5

Neutral 11 9.2 9.2 96.7

Disagree 4 3.3 3.3 100.0

Total 120 100.0 100.0

Figure 23 provide all information about a customer.

99

Of the 120 respondents 40.8% strongly agreed that at EXIM bank, Credit is given only if the customer is

found worthy, 46.7% agreed, 9.2% are neutral about the customers, 3.3% disagreed that at EXIM bank,

provide all information about a customer.

Since the neutral answer is only 10.8%, if agreement and disagreement are added up, it can be found that

87.5% agree and 3.3% disagrees. So it can be assumed that at EXIM bank, provide all information about a

customer.

Monitoring customer loan

Table 27 Monitoring provides information of customer’s loan accounts create efficient credit risk

management.

Monitoring provides information of customer’s loan accounts create efficient credit risk

management.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 41 34.2 34.2 34.2

Agree 62 51.7 51.7 85.8

Neutral 16 13.3 13.3 99.2

Disagree 1 .8 .8 100.0

Total 120 100.0 100.0

Figure 24 Monitoring customer loan

100

Of the 120 respondents 34.2% strongly agreed that at EXIM bank, Credit is given only if the customer is

found worthy, 51.7% agreed, 13.3% are neutral about the monitoring customer loan, .8% disagreed that at

EXIM bank, Monitoring provides information of customer‟s loan accounts create efficient credit risk

management.

Since the neutral answer is only 13.3%, if agreement and disagreement are added up, it can be found that

85.9% agree and 0.8% disagrees. So it can be assumed that at EXIM bank, Monitoring provides

information of customer‟s loan accounts create efficient credit risk management.

Collection of loan

Table 28 Collection of loan installments will ensure efficiency in credit risk management.

Collection of loan installments will ensure efficiency in credit risk management.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 38 31.7 31.7 31.7

Agree 66 55.0 55.0 86.7

Neutral 15 12.5 12.5 99.2

Disagree 1 .8 .8 100.0

Total 120 100.0 100.0

Figure 25 Collection of loan

101

Of the 120 respondents 18.3% strongly agreed that at EXIM bank, Credit is given only if the customer is

found worthy, 70.0% agreed, 10.8% are neutral about the collation of loan, 0.8% disagreed that at EXIM

bank, Collection of loan installments will ensure efficiency in credit Risk management Process

Since the neutral answer is only 10.8%, if agreement and disagreement are added up, it can be found that

88.3% agree and 0.8% disagrees. So it can be assumed that at EXIM bank, Collection of loan installments

will ensure efficiency in credit risk management.

Legal response

Table 29 Legal response (case of nonperforming loan) will increase efficiency in credit risk

management.

Legal response (case of nonperforming loan) will increase efficiency in credit risk management.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 41 34.2 34.2 34.2

Agree 62 51.7 51.7 85.8

Neutral 16 13.3 13.3 99.2

Disagree 1 .8 .8 100.0

Total 120 100.0 100.0

Figure 26 Legal response

102

Of the 120 respondents 34.2% strongly agreed that at EXIM bank, Credit is given only if the customer is

found worthy, 51.7% agreed, 13.3% are neutral about the legal response, 0.8% disagreed that at EXIM

bank, Legal response (case of nonperforming loan) will increase efficiency in credit risk management.

Since the neutral answer is only 10.8%, if agreement and disagreement are added up, it can be found that

85.9% agree and 0.8% disagrees. So it can be assumed that at EXIM bank, Legal response (case of

nonperforming loan) will increase efficiency in credit risk management.

Credit Risk

Table 30 it is possible to minimize credit risk throughout Credit Risk Management.

It is possible to minimize credit risk throughout Credit Risk Management.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 56 46.7 46.7 46.7

Agree 58 48.3 48.3 95.0

Neutral 5 4.2 4.2 99.2

Disagree 1 .8 .8 100.0

Total 120 100.0 100.0

Figure 27 Minimize Credit Risk

103

Of the 120 respondents 46.7% strongly agreed that at EXIM bank, Credit is given only if the customer is

found worthy, 48.3% agreed, 4.2% are neutral about the credit risk, 0.8% disagreed that at EXIM bank, It

is possible to minimize credit risk throughout Credit Risk Management.

Since the neutral answer is only 10.8%, if agreement and disagreement are added up, it can be found that

85.9% agree and 0.8% disagrees. So it can be assumed that at EXIM bank is minimize credit risk

throughout Credit Risk Management.

Adopting security measurement

Table 31 Adopting security measures are a good way to minimize Non-performing Loans and

Defaults.

Adopting security measures is a good way to minimize Non-performing Loans and Defaults.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 49 40.8 40.8 40.8

Agree 55 45.8 45.8 86.7

Neutral 13 10.8 10.8 97.5

Disagree 3 2.5 2.5 100.0

Total 120 100.0 100.0

Figure 28Adopting security measurement

104

Of the 120 respondents 40.8% strongly agreed that at EXIM bank, Credit is given only if the customer is

found worthy, 45.8% agreed, 10.8% are neutral about the Adopting security measurement, 2.5%

disagreed that at EXIM bank, Adopting security measures is a good way to minimize Non-performing

Loans and Defaults.

Since the neutral answer is only 10.8%, if agreement and disagreement are added up, it can be found that

86.6% agree and 2.5 disagrees. So it can be assumed that at EXIM bank, Adopting security measures is a

good way to minimize Non-performing Loans and Defaults.

Worthy customers

Table 32 Credit should be given to worthy customers only.

Credit should be given to worthy customers only.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 56 46.7 46.7 46.7

Agree 58 48.3 48.3 95.0

Neutral 5 4.2 4.2 99.2

Disagree 1 .8 .8 100.0

Total 120 100.0 100.0

Figure 29 worthy customers

105

Of the 120 respondents 46.7% strongly agreed that at EXIM bank, Credit is given only if the customer is

found worthy, 48.3% agreed, 10.8% are neutral about the worthy customers , 4.2% disagreed that at

EXIM bank, Credit should be given to worthy customers only.

Since the neutral answer is only 10.8%, if agreement and disagreement are added up, it can be found that

84% agree and 2.5 disagrees. So it can be assumed that at EXIM bank, Credit should be given to worthy

customers only

Proper Documentation

Table 33 Proper documentation can minimize the Credit Risk.

Proper documentation can minimize the Credit Risk.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 49 40.8 40.8 40.8

Agree 55 45.8 45.8 86.7

Neutral 12 10.0 10.0 96.7

Disagree 4 3.3 3.3 100.0

Total 120 100.0 100.0

Figure 30 Proper Documentation

106

Of the 120 respondents 40.8% strongly agreed that at EXIM bank, Credit is given only if the customer is

found worthy, 45.8% agreed, 10% are neutral about the documenation, 3.3% disagreed that at EXIM

bank, Proper documentation can minimize the Credit Risk.

Since the neutral answer is only 10%, if agreement and disagreement are added up, it can be found that

86.6% agree and 3.3% disagrees. So it can be assumed that at EXIM bank, Proper documentation can

minimize the Credit Risk.

Quality Collateral

Table 34 keeping quality collateral can minimize the Credit Risk.

Keeping quality collateral can minimize the Credit Risk.

Frequency Percent Valid Percent Cumulative Percent

Valid Strongly Agree 41 34.2 34.2 34.2

Agree 63 52.5 52.5 86.7

Neutral 15 12.5 12.5 99.2

Disagree 1 .8 .8 100.0

Total 120 100.0 100.0

Figure 31 Quality Collateral

107

are neutral about the credit risk, 0.8% disagreed that at EXIM bank, keeping quality collateral can

minimize the Credit Risk.

Since the neutral answer is only 12.5%, if agreement and disagreement are added up, it can be found that

86.7% agree and 0.8% disagrees. So it can be assumed that at EXIM bank, Credit is given only if the

customer is found worthy. keeping quality collateral can minimize the Credit Risk.

4.2│Correlation Analysis

Correlation analysis measures the relationship between two continuous numeric variables that indicates

both the direction and degree to which they co-vary with one another from case to case, without implying

that one is causing the other. The significance of each correlation coefficient is displayed in the

correlation Table. The significance level (or p-value) is the probability of obtaining results as extreme as

the one observed. If the significance level is very small (less than 0.05) then the correlation is significant

and the two variables are linearly related. If the significance level is relatively large (for example, 0.50)

then the correlation is not significant, hence the two variables are not linearly related.

Correlation between Risk management Process and Collateral

H0: Collateral is not related with Risk management Process

H1: Collateral is related with Risk management Process

Table 35 Correlation between Risk management Process and Collateral

108

Correlations

Risk. Management Collateral

Risk. Management

Pearson Correlation 1 .249**

Sig. (2-tailed) .006

N 120 120

Collateral

Pearson Correlation .249** 1

Sig. (2-tailed) .006

N 120 120

**. Correlation is significant at the 0.01 level (2-tailed).

Decision:

The table above shows that the correlation of two variables, Risk management Processand Collateral, is

0.249. That means two variables have weak positive relation. Also the significance level is .006 which is

lower than 0.05. That means we can reject null hypothesis and at 95% confidence interval we can state

that Collateral is related with Risk management Process .

Correlation between Risk management Process and Documentation

H0: Documentation is not related with Risk management Process

H1: Documentation is related with Risk management Process

109

Table 36 Correlation between Risk management Process and Documentation

Correlations

Risk. Management Documentation

Risk. Management

Pearson Correlation 1 .176

Sig. (2-tailed) .054

N 120 120

Documentation

Pearson Correlation .176 1

Sig. (2-tailed) .054

N 120 120

Decision: The table above shows that the correlation of two variables, Risk management Processand

Documentation, is 0.176. That means two variables have weak positive relation. Also the significance

level is .054 which is higher than 0.05. That means we cannot reject null hypothesis and at 95%

confidence interval we can state that Documentation is not related with Risk management.

Correlation between Risk management Process and Efficiency

H0: Efficiency is not related with Risk management Process

H1: Efficiency is related with Risk management Process

110

Table 37 Correlation between Risk management Process and Efficiency

Correlations

Risk. Management Efficiency

Risk. Management

Pearson Correlation 1 .196*

Sig. (2-tailed) .032

N 120 120

Efficiency

Pearson Correlation .196* 1

Sig. (2-tailed) .032

N 120 120

*. Correlation is significant at the 0.05 level (2-tailed).

Decision: The table above shows that the correlation of two variables, Risk management Processand

Efficiency, is 0.196. That means two variables have weak positive relation. Also the significance level is

.032 which is lower than 0.05. That means we can reject null hypothesis and at 95% confidence interval

we can state that Efficiency is related with Risk management Process .

Correlation between Risk management Process and Approval process

H0: Approval process is not related with Risk management

H1: Approval process is related with Risk management

111

Table 38 Correlation between Risk management Processand Approval process

Correlations

Risk. Management Security. Policy

Risk. Management

Pearson Correlation 1 .142

Sig. (2-tailed) .123

N 120 120

Security. Policy

Pearson Correlation .142 1

Sig. (2-tailed) .123

N 120 120

Decision:

The table above shows that the correlation of two variables, Risk management Processand Approval

process, is 0.142. That means two variables have weak positive relation. Also the significance level is

.123 which is higher than 0.05. That means we cannot reject null hypothesis and at 95% confidence

interval we can state that Approval process is not related with Risk management.

112

4.3│T Tests

T-Test on financial analysis of Customer

H0: Customer's financial analysis is not done before approving the credit.

H1: Customer's financial analysis is done before approving the credit.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

Table 39 One sample T test on financial analysis of customer

One-Sample Test

Test Value = 1

t df Sig. (2-

tailed)

Mean

Difference

95% Confidence Interval of the

Difference

Lower Upper

Customer's financial

analysis is done by the

bank before approving the

credit.

14.879 119 .000 .66667 .5779 .7554

Test Statistic: The One Sample T-test table shows that the t value is 14.879 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Customer's financial analysis is done before

approving the credit.

113

T-Test on evaluating credit worthiness

H0: . Customer’s credit rating is not a good option to evaluate credit worthiness

H1: . Customer’s credit rating is a good option to evaluate credit worthiness

Following SPSS output was generated after conducting One Sample T-test in SPSS.

Table 40 One sample T-Test on evaluating credit worthiness

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Customer‟s credit rating is a

good option to evaluate credit

worthiness.

37.350 119 .000 1.94167 1.8387 2.0446

Test Statistic: The One Sample T-test table shows that the t value is 37.350 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Customer’s credit rating is a good option to

evaluate credit worthiness

T-Test on minimize credit risk

H0: Customer’s credit worthiness evaluation is not necessary to minimize credit risk.

H1: Customer’s credit worthiness evaluation is necessary to minimize credit risk.

114

Following SPSS output was generated after conducting One Sample T-test in SPSS.

Table 41 One sample T test on credit worthiness evaluation is necessary to minimize credit

risk.

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Customer‟s credit worthiness

evaluation is necessary to

minimize credit risk.

36.334 119 .000 1.88333 1.7807 1.9860

Test Statistic: The One Sample T-test table shows that the t value is 36.334 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that credit worthiness evaluation is necessary to

minimize credit risk.

T-Test on credit worthiness is not effective.

H0: Existing system of analyzing is not credit worthiness is not effective.

H1: Existing system of analyzing credit worthiness is not effective.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

115

Table 42 One sample T test on Existing system of analyzing credit worthiness is not effective.

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Existing system of analyzing

credit worthiness is not

effective.

29.520 119 .000 1.85833 1.7337 1.9830

Test Statistic: The One Sample T-test table shows that the t value is 29.520 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Existing system of analyzing credit worthiness is

not effective.

T-Test on customer is found worthy

H0: Credit is given only if the customer is not found worthy

H1: Credit is given only if the customer is found worthy

Following SPSS output was generated after conducting One Sample T-test in SPSS.

116

Table 43 One sample T test on Credit is given only if the customer is found worthy

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Credit is given only if the

customer is found worthy.

36.641 119 .000 1.95833 1.8525 2.0642

Test Statistic: The One Sample T-test table shows that the t value is 36.641 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Credit is given only if the customer is found

worthy.

T-Test on approving the loan.

H0: Credit worthiness is not verified before approving the loan.

H1: Credit worthiness is verified before approving the loan.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

117

Table 44 one sample t test on Credit worthiness is verified before approving the loan.

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Transaction profile is verified

before giving way credit.

42.606 119 .000 2.04167 1.9468 2.1366

Test Statistic: The One Sample T-test table shows that the t value is 42.606 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Credit worthiness is verified before approving

the loan.

T-Test on CIB report is not most important document which makes the safety of credit.

H0: CIB report is not most important document which makes the safety of credit.

H1: CIB report is most important document which makes the safety of credit.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

118

Table 45 One sample T test on CIB report is not most important document which makes

the safety of credit.

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

CIB report is most important

document which makes the

safety of credit.

28.830 119 .000 1.86667 1.7385 1.9949

Test Statistic: The One Sample T-test table shows that the t value is 28.830 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that CIB report is not most important document

which makes the safety of credit.

T-Test on minimize credit risk

H0: Credit monitoring is not a good option to minimize credit risk

H1: Credit monitoring is a good option to minimize credit risk

Following SPSS output was generated after conducting One Sample T-test in SPSS.

119

Table 46 One sample T test on Credit monitoring is a good option to minimize credit risk

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Credit monitoring is a good

option to minimize credit risk.

65.294 119 .000 2.12500 2.0606 2.1894

Test Statistic: The One Sample T-test table shows that the t value is 65.294 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Credit monitoring is a good option to minimize

credit risk.

T-Test on recovery process to a minimum level.

H0: Early recovery process is not reducing nonperforming loan to a minimum level.

H1: Early recovery process can reduce nonperforming loan to a minimum level.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

Table 47 One sample T test on early recovery process reduce nonperforming loan

120

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Early recovery process can

reduce nonperforming loan to a

minimum level.

43.085 119 .000 2.05833 1.9637 2.1529

Test Statistic: The One Sample T-test table shows that the t value is 43.085 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that early recovery process can reduce

nonperforming loan to a minimum level.

T-Test on disbursement of funds.

H0: Proper documentation is not necessary prior to the approval or the disbursement of funds.

H1: . Proper documentation is necessary prior to the approval or the disbursement of funds.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

121

Table 48 one sample T test on disbursement of funds.

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Proper documentation is

necessary prior to the approval

or the disbursement of funds.

63.805 119 .000 2.10833 2.0429 2.1738

Test Statistic: The One Sample T-test table shows that the t value is 63.805 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Proper documentation is necessary prior to the

approval or the disbursement of funds.

T-Test on Credit files about a customer

H0: Credit files should not provide all information about a customer

H1: Credit files should provide all information about a customer

Following SPSS output was generated after conducting One Sample T-test in SPSS.

122

Table 69 One sample T test on all information about a customer

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Credit files should provide all

information about a customer.

42.606 119 .000 2.04167 1.9468 2.1366

Test Statistic: The One Sample T-test table shows that the t value is 42.606 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Credit files should provide all information about

a customer

T-Test on granting and review process.

H0: Institution maintains credit files supporting the credit granting and review process

H1: Institution maintains credit files supporting the credit granting and review process

Following SPSS output was generated after conducting One Sample T-test in SPSS

123

Table 70 One sample T test on process

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Institution maintains credit

files supporting the credit

granting and review process.

35.698 119 .000 1.91667 1.8104 2.0230

Test Statistic: The One Sample T-test table shows that the t value is 35.698 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Institution maintains credit files supporting the

credit granting and review process.

T-Test on Proper documentation

H0: Proper documentation is not for loans and advance provides legal support against the loan.

H1: Proper documentation of loans and advance provides legal support against the loan.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

124

Table 51 One sample T test on Proper documentation

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Proper documentation of loans

and advance provides legal

support against the loan.

34.400 119 .000 1.85000 1.7435 1.9565

Test Statistic: The One Sample T-test table shows that the t value is 34.400 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Proper documentation can minimize the credit

risk.

T-Test on documentation process

H0: At Exim Bank documentation process is done properly.

H1: At Exim Bank documentation process is done properly.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

125

Table 52 One sample T test on documentation process

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

At Exim Bank documentation

process is done properly.

42.606 119 .000 2.04167 1.9468 2.1366

Test Statistic: The One Sample T-test table shows that the t value is 42.606 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Proper documentation can minimize the credit

risk.

Collateral is must for a loan and advance.

T-Test on loan and advance

H0: Collateral is not must for a loan and advance.

H1: Collateral is must for a loan and advance.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

126

Table 53 One sample T test on Collateral is must for a loan and advance.

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Collateral is must for a loan and

advance.

43.859 119 .000 1.86667 1.7824 1.9509

Test Statistic: The One Sample T-test table shows that the t value is 43.859 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that collateral is must for a loan and advance.

T-Test on safeguard against the advance

H0: Good collateral is not securities provide a safeguard against the advance

H1: Good collateral securities provide a safeguard against the advance

Following SPSS output was generated after conducting One Sample T-test in SPSS.

127

Table 54 One sample T test on safeguard against the advance

One-Sample Test

Test Value = 0

t df Sig. (2-tailed)

Mean

Difference

95% Confidence Interval of the

Difference

Lower Upper

Good collateral securities

provide a safeguard against

the advance.

29.073 119 .000 1.95833 1.8250 2.0917

Test Statistic: The One Sample T-test table shows that the t value is 29.073 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that good collateral securities provide a safeguard

against the advance.

T-Test on credit facilities.

H0: Collateral policy varies depending on different credit facilities.

H1: Collateral policy varies depending on different credit facilities.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

128

Table 55 One different credit facilities.

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Collateral policy varies

depending on different credit

facilities.

43.859 119 .000 1.86667 1.7824 1.9509

Test Statistic: The One Sample T-test table shows that the t value is 43.859 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Collateral policy varies depending on different

credit facilities.

T-Test on Quality of collateral

H0: Quality of collateral is not affects the loan recovery performance.

H1: Quality of collateral affects the loan recovery performance.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

129

Table 56 One sample T test on loan recovery performance.

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Quality of collateral affects the

loan recovery performance.

29.073 119 .000 1.95833 1.8250 2.0917

Test Statistic: The One Sample T-test table shows that the t value is 29.073 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Quality of collateral affects the loan recovery

performance.

T-Test on Exim Bank collateral is managed properly.

H0: Exim Bank collateral is not managed properly..

H1: Exim Bank collateral is managed properly.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

130

Table 57 One sample T test on Exim Bank collateral is managed properly.

One-Sample Test

Test Value = 0

t Df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Exim Bank collateral is

managed properly.

43.859 119 .000 1.86667 1.7824 1.9509

Test Statistic: The One Sample T-test table shows that the t value is 43.859 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Exim Bank collateral is managed properly.

T-Test on increases consumer satisfaction as well as efficiency.

H0: Any above service is not and processing of different loans increases consumer satisfaction as

well as efficiency.

H1: Any above service and processing of different loans increases consumer satisfaction as well as

efficiency.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

131

Table 58 T test On Consumer satisfaction as well as efficiency.

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Any above service and

processing of different loans

increases consumer satisfaction

as well as efficiency.

28.356 119 .000 1.59167 1.4805 1.7028

Test Statistic: The One Sample T-test table shows that the t value is 28.356 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that any above service and processing of different

loans increases consumer satisfaction as well as efficiency.

T-Test on Overall efficiency.

H0: Proper documentation is not increases the overall efficiency.

H1: Proper documentation increases the overall efficiency.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

132

Table 59 One Proper documentation increases the overall efficiency.

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Proper documentation

increases the overall

efficiency.

26.159 119 .000 1.78333 1.6483 1.9183

Test Statistic: The One Sample T-test table shows that the t value is 28.356 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Proper documentation increases the overall

efficiency.

T-Test Disbursement of loans will increase overall efficiency.

H0: Disbursement of loans will increase overall efficiency.

H1: Disbursement of loans will increase overall efficiency.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

133

Table 80 One Disbursement of loans will increase overall efficiency.

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Disbursement of loans will

increase overall efficiency.

25.267 119 .000 1.75000 1.6129 1.8871

Test Statistic: The One Sample T-test table shows that the t value is 25.267 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Disbursement of loans will increase overall

efficiency.

T-Test on efficient credit Risk management Process

H0: Monitoring provides is not information of customer’s loan accounts create efficient credit risk

management

H1: Monitoring provides information of customer’s loan accounts create efficient credit risk

management.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

134

Table 91 Monitoring provides information

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Monitoring provides

information of customer‟s loan

accounts create efficient credit

risk management.

28.725 119 .000 1.80833 1.6837 1.9330

Test Statistic: The One Sample T-test table shows that the t value is 28.725 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that monitoring provides information of customer’s

loan accounts create efficient credit risk management.

T-Test on Collection of loan installments

H0: Collection of loan is not installments will ensure efficiency in credit Risk management Process

H1: Collection of loan installments will ensure efficiency in credit Risk management Process

Following SPSS output was generated after conducting One Sample T-test in SPSS.

135

Table 102 Collection of loan installments will ensure efficiency in credit risk management

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Collection of loan

installments will ensure

efficiency in credit risk

management.

29.865 119 .000 1.82500 1.7040 1.9460

Test Statistic: The One Sample T-test table shows that the t value is 29.865 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Collection of loan installments will ensure

efficiency in credit risk management

T-Test on legal response (case of nonperforming loan)

H0: legal response (case of nonperforming loan) will not increase efficiency in credit Risk

management Process

H1: legal response (case of nonperforming loan) will increase efficiency in credit Risk management

Process

136

Following SPSS output was generated after conducting One Sample T-test in SPSS.

Table 113 legal response (case of nonperforming loan)

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Legal response (case of

nonperforming loan) will

increase efficiency in credit

risk management.

28.725 119 .000 1.80833 1.6837 1.9330

Test Statistic: The One Sample T-test table shows that the t value is 28.725 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that legal response (case of nonperforming loan) will

increase efficiency in credit risk management.

T-Test on minimize credit risk

H0: It is not possible to minimize credit risk throughout Credit Risk Management.

H1: It is possible to minimize credit risk throughout Credit Risk Management.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

137

Table 124 It is possible to minimize credit risk

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

It is possible to minimize credit

risk throughout Credit Risk

Management.

28.356 119 .000 1.59167 1.4805 1.7028

Test Statistic: The One Sample T-test table shows that the t value is 28.725 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that it is possible to minimize credit risk throughout

Credit Risk Management.

T-Test on adopting security

H0: Adopting security measures is a good way to minimize Non-performing Loans and Defaults.

H1: Adopting security measures is a good way to minimize Non-performing Loans and Defaults.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

138

Table 135 Adopting Non-performing Loans and Defaults.

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Adopting security measures is

a good way to minimize Non-

performing Loans and

Defaults.

25.644 119 .000 1.75000 1.6149 1.8851

Test Statistic: The One Sample T-test table shows that the t value is 25.644 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that adopting security measures is a good way to

minimize Non-performing Loans and Defaults.

T-Test on worthy customers

H0: Credit should not be given to worthy customers only.

H1: Credit should be given to worthy customers only.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

Table 146 Credit should be given to worthy customers only.

139

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Credit should be given to

worthy customers only.

28.356 119 .000 1.59167 1.4805 1.7028

Test Statistic: The One Sample T-test table shows that the t value is 28.356 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Credit should be given to worthy customers

only.

T-Test on Proper documentation can minimize the Credit Risk.

H0: Proper documentation can minimize the Credit Risk.

H1: Proper documentation can minimize the Credit Risk.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

140

Table 157 Proper documentation can minimize the Credit Risk.

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Proper documentation can

minimize the Credit Risk.

25.116 119 .000 1.75833 1.6197 1.8970

Test Statistic: The One Sample T-test table shows that the t value is 25.116 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Proper documentation can minimize the Credit

Risk.

T-Test on worthy customers

H0: Credit should not be given to worthy customers only.

H1: Credit should be given to worthy customers only.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

141

Table 168 Credit should be given to worthy customers only

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Credit should be given to

worthy customers only.

28.356 119 .000 1.59167 1.4805 1.7028

Test Statistic: The One Sample T-test table shows that the t value is 28.356 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Credit should be given to worthy customers

only.

T-Test on keeping quality collateral can minimize the Credit Risk.

H0: Keeping quality collateral can minimize the Credit Risk.

H1: Keeping quality collateral can minimize the Credit Risk.

Following SPSS output was generated after conducting One Sample T-test in SPSS.

142

Table 179 Keeping quality collateral can minimize the Credit Risk.

One-Sample Test

Test Value = 0

t df Sig. (2-tailed) Mean Difference

95% Confidence Interval of the

Difference

Lower Upper

Keeping quality collateral can

minimize the Credit Risk.

28.951 119 .000 1.80000 1.6769 1.9231

Test Statistic: The One Sample T-test table shows that the t value is 28.951 with degree of freedom of

119. Also the level of significance is .000.

Decision: Here the significance level .000 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that keeping quality collateral can minimize the Credit

Risk.

143

4.3│Anova

Risk management Process and Collateral

The Anova test was conducted to measure measuring Risk management Process due to Collateral.

H0: Collateral can’t help to Improve Risk Management Process

H1: Collateral can help to Improve Risk Management Process

The output shown below was generated after conducting ANOVA test at 95% confidence interval in

SPSS.

Table 180 Anova Table measuring Risk management Process and Collateral

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1

Regression .808 1 .808 7.826 .006b

Residual 12.176 118 .103

Total 12.984 119

a. Dependent Variable: Risk Management

b. Predictors: (Constant), Collateral

Decision: The SPSS output for ANOVA shows that F value is 7.826 and the level of significance is .006.

Because the significance level .006 is lower than the acceptable level of significance .05, we can reject the

null hypothesis. Therefore, it can be stated that Collateral can help to Improve Risk Management.

Risk management Process sand Credit worthiness

The Anova test was conducted to measure measuring Risk management Process due to Credit worthiness.

H0: Credit worthiness can’t help to Improve Risk Management

H1: Credit worthiness can help to Improve Risk Management

144

The output shown below was generated after conducting ANOVA test at 95% confidence interval in

SPSS.

Table 71 Anova Table measuring Risk management Process and Credit worthiness

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1

Regression .086 1 .086 .788 .377b

Residual 12.898 118 .109

Total 12.984 119

a. Dependent Variable: Risk. Management

b. Predictors: (Constant), Worthiness

Decision: The SPSS output for ANOVA shows that F value is .788 and the level of significance is .337.

Because the significance level .337 is higher than the acceptable level of significance .05, we can accept

the null hypothesis. Therefore, it can be stated that Credit worthiness cannot help to Improve Risk

Management.

Risk management Process and Documentation

The Anova test was conducted to measure measuring Risk management Process due to Documentation.

H0: Documentation can’t help to Improve Risk management Process

H1: Documentation can help to Improve Risk Management

The output shown below was generated after conducting ANOVA test at 95% confidence interval in

SPSS.

145

Table 19 Anova Table measuring Risk management Process and Documentation

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1

Regression .403 1 .403 3.776 .054b

Residual 12.581 118 .107

Total 12.984 119

a. Dependent Variable: Risk. Management

b. Predictors: (Constant), Documentation

Decision: The SPSS output for ANOVA shows that F value is 3.776 and the level of significance is .054.

Because the significance level .054 is higher than the acceptable level of significance .05, so we can

accept the null hypothesis. Therefore, it can be stated that Documentation cannot help to Improve Risk

Management.

Risk management Process and Efficiency

The Anova test was conducted to measure measuring Risk management Process due to Efficiency.

H0: Efficiency can’t help to Improve Risk management Process

H1: Efficiency can help to Improve Risk Management

The output shown below was generated after conducting ANOVA test at 95% confidence interval in

SPSS.

146

Table 72 Anova Table measuring Risk management Process and Efficiency

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1

Regression .498 1 .498 4.710 .032b

Residual 12.485 118 .106

Total 12.984 119

a. Dependent Variable: Risk. Management

b. Predictors: (Constant), Efficiency

Decision: The SPSS output for ANOVA shows that F value is 4.710 and the level of significance is .032.

Because the significance level .032 is lower than the acceptable level of significance .05, we can reject the

null hypothesis. Therefore, it can be stated that Efficiency can help to Improve Risk Management.

Risk management Process and Efficiency

The ANOVA test was conducted to measure measuring Risk management Processdue to Safety Policy.

H0: Safety Policy can’t help to Improve Risk management Process

H1: Safety Policy can help to Improve Risk Management

The output shown below was generated after conducting ANOVA test at 95% confidence interval in

SPSS:

147

Table 73 ANOVA Table measuring Risk management Process and Approval Process

ANOVAa

Model Sum of Squares df Mean Square F Sig.

1

Regression .261 1 .261 2.420 .123b

Residual 12.723 118 .108

Total 12.984 119

a. Dependent Variable: Risk. Management

b. Predictors: (Constant), approval process

Decision: The SPSS output for ANOVA shows that F value is 2.420 and the level of significance is .123.

Because the significance level .123 is higher than the acceptable level of significance .05, so we can

accept the null hypothesis. Therefore, it can be stated that approval cannot help to Improve Risk

Management.

148

4.4│Regression Analysis

Risk management Process and Collateral

Purpose of this regression analysis was to find out whether Collateral can improve the Risk management

Process system of the Exim bank. Here Risk management Process is considered as dependent variable and

Collateral is considered as independent variable. Following Model Summary was generated after running

the regression analysis is SPSS.

Table 74 Model Summary table measuring Risk management Process and Collateral

Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .249a .062 .054 .32123

a. Predictors: (Constant), Collateral

Model summary above shows that correlation, r = .249. That means two variables, Collateral and Risk

Management, have a weak positive correlation. Coefficient of determination or the R-Square value is

0.062. That means 6.2% changes in the Risk management Process can be explained by Collateral. Value

of adjusted R-Square is 0.054 indicates 5.4% variation in the Risk management Process can be measured

by Collateral.

Regression was conducted at 95% confidence interval to test the effect of Risk management Process due

to Collateral of Exim bank. And the coefficient table of the regression is shown below:

149

Table 75 Coefficients Table measuring Risk management Process and Collateral

Coefficientsa

Model Unstandardized Coefficients Standardized

Coefficients

t Sig.

B Std. Error Beta

1

(Constant) 1.292 .180 7.182 .000

Collateral .256 .091 .249 2.798 .006

a. Dependent Variable: Risk. Management process

H0: Collateral has no effect on Risk Management Process

H1: Collateral has effect on Risk Management Process

Test Statistic: The value of the β for Collateral is .249, value of t statistic is 2.798 and the significance

level is .006

Decision: Here the significance level .06 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Collateral has effect on Risk Management.

The regression model to predict Risk management Process through Collateral is:

Risk management Process= α + β (Collateral)

The coefficient table shows that value of α is 1.292 and value of β is .249. Therefore the model is

Risk management Process= 1.292 + 0.249 (Collateral)

Now, the model will show how much effect Collateral has on Risk management Process of Exim Bank if

the value of Collateral is inserted in the model.

150

Risk management Process and Credit worthiness

Purpose of this regression analysis was to find out whether Worthiness can improve the Risk management

Process system of the Exim bank. Here Risk management Processes considered as dependent variable and

Worthiness is considered as independent variable. Following Model Summary was generated after

running the regression analysis is SPSS.

Table 76 Model Summary table measuring Risk management Process and Worthiness

Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .081a .007 .002 .33061

a. Predictors: (Constant), Worthiness

Model summary above shows that correlation, r = .081. That means two variables, Worthiness and Risk

Management, have a weak positive correlation. Coefficient of determination or the R-Square value is

0.007. That means 0.7% changes in the Risk management Processcan be explained by Worthiness. Value

of adjusted R-Square is 0.002 indicates 0.2% variation in the Risk management Processcan be measured

by Worthiness.

Regression was conducted at 95% confidence interval to test the effect of Risk management Processdue

to Worthiness of Exim bank. And the coefficient table of the regression is shown below:

151

Table 77 Coefficients Table measuring Risk management Process and Worthiness

Coefficientsa

Model Unstandardized Coefficients Standardized

Coefficients

t Sig.

B Std. Error Beta

1

(Constant) 1.620 .192

8.443 .000

Worthiness .091 .103 .081 .888 .377

a. Dependent Variable: Risk. Management process

H0: Worthinesshas no effect on Risk Management Process.

H1: Worthiness has effect on Risk Management Process.

Test Statistic:

The value of the β for Worthiness is .081, value of t statistic is 0.888 and the significance level is .337

Decision:

Here the significance level .337 which is higher than statistical significance .05. Therefore, we can accept

the null hypothesis and it can be concluded that Worthiness has no effect on Risk Management.

The regression model to predict Risk management Process through Worthiness is:

Risk Management Process= α + β (Worthiness)

The coefficient table shows that value of α is 1.620 and value of β is .081. Therefore the model is

Risk Management Process= 1.620 + 0.081 (Worthiness)

Now, the model will show how much effect Worthiness has on Risk management Process of Exim Bank

if the value of Worthiness is inserted in the model.

152

Risk management Process and Documentation

Purpose of this regression analysis was to find out whether Documentation can improve the Risk

management Process system of the Exim bank. Here Risk management Processes considered as

dependent variable and Documentation is considered as independent variable. Following Model Summary

was generated after running the regression analysis is SPSS.

Table 78 Model Summary table measuring Risk management Processand Documentation

Model summary above shows that correlation, r = .176. That means two variables, Documentation and

Risk Management, have a weak positive correlation. Coefficient of determination or the R-Square value is

0.031. That means 3.1% changes in the Risk management Process can be explained by Documentation.

Value of adjusted R-Square is 0.023 indicates 2.3% variation in the Risk management Process can be

measured by Documentation.

Regression was conducted at 95% confidence interval to test the effect of Risk management Processdue

to Documentation of Exim bank. And the coefficient table of the regression is shown below:

Table 79 Coefficients Table measuring Risk management Process and Documentation

Coefficientsa

Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .176a .031 .023 .32653

a. Predictors: (Constant), Documentation

153

Model Unstandardized Coefficients Standardized

Coefficients

t Sig.

B Std. Error Beta

1

(Constant) 1.466 .169

8.684 .000

Documentation .176 .091 .176 1.943 .054

a. Dependent Variable: Risk. Management

H0: Documentation has no effect on Risk Management.

H1: Documentation has effect on Risk Management.

Test Statistic: The value of the β for Documentation is 0.176, value of t statistic is 1.943 and the

significance level is .054

Decision: Here the significance level .054 which is higher than statistical significance .05. Therefore, we

can accept the null hypothesis and it can be concluded that Documentation has no effect on Risk

Management.

The regression model to predict Risk management Process through Documentation is:

Risk Management Process= α + β (Documentation)

The coefficient table shows that value of α is 1.466 and value of β is .176. Therefore the model is

Risk Management Process= 1.466 + 0.176 (Documentation)

Now, the model will show how much effect Documentation has on Risk management Processof Exim

Bank if the value of Documentation is inserted in the model.

154

Risk management Process and Efficiency

Purpose of this regression analysis was to find out whether efficiency can improve the Risk management

Process system of the Exim bank. Here Risk management Processes is considered as dependent variable

and efficiency is considered as independent variable. Following Model Summary was generated after

running the regression analysis is SPSS.

Table 200 Model Summary table measuring Risk management Processand Efficiency

Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .196a .038 .030 .32528

a. Predictors: (Constant), Efficiency

Model summary above shows that correlation, r = .196. That means two variables, Efficiency and Risk

Management, have a weak positive correlation. Coefficient of determination or the R-Square value is

0.038. That means 3.8% changes in the Risk management Process can be explained by Efficiency. Value

of adjusted R-Square is 0.030 indicates 3.0% variation in the Risk management Process can be measured

by Efficiency.

Regression was conducted at 95% confidence interval to test the effect of Risk management Process due

to Efficiency of Exim bank. And the coefficient table of the regression is shown below:

155

Table 81 Coefficients Table measuring Risk management Process and Efficiency

Coefficientsa

Model Unstandardized Coefficients Standardized

Coefficients

t Sig.

B Std. Error Beta

1

(Constant) 1.371 .195

7.043 .000

Efficiency .166 .076 .196 2.170 .032

a. Dependent Variable: Risk. Management process

H0: Efficiency has no effect on Risk Management.

H1: Efficiency has effect on Risk Management.

Test Statistic: The value of the β for Efficiency is .196 value of t statistic is 2.170 and the significance

level is .032

Decision: Here the significance level .032 is lower than statistical significance .05. Therefore, we can

reject the null hypothesis and it can be concluded that Efficiency has effect on Risk Management.

The regression model to predict Risk management Process through Efficiency is:

Risk Management Process= α + β (Efficiency)

The coefficient table shows that value of α is 1.371 and value of β is .196. Therefore the model is

Risk Management Process= 1.371 + 0.196 (Efficiency)

Now, the model will show how much effect Efficiency has on Risk management Process of Exim Bank if

the value of Efficiency is inserted in the model.

156

Risk management Process and approval Process

Purpose of this regression analysis was to find out whether approval process can improve the Risk

management Process system of the Exim bank. Here Risk management Process is considered as

dependent variable and approval process is considered as independent variable. Following Model

Summary was generated after running the regression analysis is SPSS.

Table 82 Model Summary table measuring Risk management Process and Approval

process

Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .142a .020 .012 .32836

a. Predictors: (Constant), approval process

Model summary above shows that correlation, r = .142. That means two variables, Approval process and

Risk Management, have a weak positive correlation. Coefficient of determination or the R-Square value is

0.020. That means 2.0% changes in the Risk management Process can be explained by Approval process.

Value of adjusted R-Square is 0.012 indicates 1.2% variation in the Risk management Process can be

measured by Approval process.

Regression was conducted at 95% confidence interval to test the effect of Risk management Process due

to Approval process of Exim bank. And the coefficient table of the regression is shown below:

157

Table 83 Coefficients Table measuring Risk management Process and approval process

Coefficientsa

Model Unstandardized Coefficients Standardized

Coefficients

t Sig.

B Std. Error Beta

1

(Constant) 1.507 .183 8.220 .000

Security. Policy .151 .097 .142 1.556 .123

a. Dependent Variable: Risk. Management Process

H0: Approval process has no effect on Risk Management.

H1: Approval process has effect on Risk Management.

Test Statistic: The value of the β for Approval process is 0.142, value of t statistic is 1.556 and the

significance level is .123

Decision: Here the significance level .123 which is higher than statistical significance .05. Therefore, we

can accept the null hypothesis and it can be concluded that Approval process has no effect on Risk

Management.

The regression model to predict Risk management Process through Approval process is:

Risk Management process= α + β (Approval process)

The coefficient table shows that value of α is 1.507 and value of β is .142. Therefore the model is

Risk Management process= 1.507 + 0.142 (Approval process)

Now, the model will show how much effect Approval process has on Risk management Process of Exim

Bank if the value of Approval process is inserted in the model.

158

4.5│Multiple Regression Model

Multiple regression models was used to formulate a model that explains how 5 independent variables

Efficiency, Worthiness, Documentation, Approval process and Collateral affects the Risk management

Process which is the only dependent variable of this research. In other words, the model was formulated

to understand how customer satisfaction is affected because of all independent variable together.

Following output was generated after conducting multiple regressions in SPSS

Table 84 Model Summary of Multiple Regressions

Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .287a .082 .042 .32332

a. Predictors: (Constant), Efficiency, Worthiness, Documentation, Security. Approval process, Collateral

Model summary above shows that correlation, r = .142. That means Risk management Process is weakly

related with Efficiency, Worthiness, Documentation, Approval process and Collateral. Coefficient of

determination or the R-Square value is 0.020. That means 2.0% changes in the Risk management Process

can be explained by Efficiency, Worthiness, Documentation, Approval process and Collateral. Value of

adjusted R-Square is 0.012 indicates 1.2% variation in the Risk management Process can be measured by

Efficiency, Worthiness, Documentation, Approval process and Collateral.

Regression was conducted at 95% confidence interval to test the effect of Risk management Process due

to Efficiency, Worthiness, Documentation, Approval process and Collateral of Exim bank. The regression

model to predict the Risk management Process of Exim bank is:

Risk management Process= α + β1 (Efficiency) + β2 (Worthiness) + β3 (Documentation) + β4

(Approval process) + β5 (Collateral)

159

Total change in Risk management Process can be found after inserting the value of constant, α, all

variables and their related beta (β).

The coefficient table of the multiple regressions is shown below:

Table 85 Coefficients Table of Multiple Regressions

Coefficientsa

Model Unstandardized Coefficients Standardized

Coefficients

t Sig.

B Std. Error Beta

1

(Constant) .970 .297 3.262 .001

Worthiness .019 .105 .017 .182 .856

Security. Policy .061 .106 .057 .575 .566

Documentation .092 .102 .092 .907 .366

Collateral .160 .118 .156 1.363 .175

Efficiency .075 .092 .089 .814 .417

a. Dependent Variable: Risk. Management process

The coefficients table above shows that significance level of Worthiness is 0.856, Approval process is

.556, Documentation received is .366,Collateral is .175and Efficiency is .417 which are higher than

acceptable significance level of 0.05. Therefore it can be concluded that most of the variable has no effect

on the model.

Individually all variables have some effect on employee performance. After inserting the values of

constant and related beta of all variables, the multiple regressions model is

Risk management Process= 0.970 + .019 (Worthiness) + .061 (Approval process) + .092

(Documentation) + 160 (Collateral) + 175 (Efficiency)

160

5.0│Findings

Findings of the research are given below:

Exim bank has a young employee base.

Evaluating credit worthiness is necessary to minimize credit risk.

Existing system of analyzing credit worthiness has no flaws.

Exim bank gives credit to only the customers who are found worthy.

Transition profile is checked before granting credit.

CIB report works as the most important document to ensure safety.

Credit monitoring is a good option to minimize credit risk.

Proper documentation of loan and advance provides legal support against the loan.

Quality collateral is must for a loan and advance.

Regular collection on loan installments will ensure efficiency in credit risk management.

Adopting security measures is a good way to minimize non-performing loans and defaults.

Collateral has positive related with Risk management.

Evaluating credit worthiness is necessary to minimize credit risk.

Credit rating is a good option to evaluate credit worthiness.

Early alert process can minimize non-performing loans.

Proper documentation of loan and advance can provide legal support against the loan.

Collateral securities provide a safeguard against the advance.

Quality of collateral affects the loan recovery performance.

Collateral can help to Improve Risk Management.

Efficiency can help to Improve Risk Management.

Documentation affects credit risk management.

161

6.0│Summary of the findings

From the research it has been found that evaluating credit worthiness is the very first step of minimizing

credit risk. Exim bank always evaluates worthiness of customers before granting their loans or advances.

Employees of the bank believe that the existing way of evaluating credit worthiness has no flaws.

Exim bank takes different kind of security measures before and after granting credit. For example, exim

bank looks at the CIB report and Transaction Profile to find out the credit history and credit defaults of

the customer. Security measures like frequent monitoring and early alert process for loan payment can

reduce the risk of credit default.

From the research it has been found that documentation has positive correlation with credit Risk

management Processand hence documentation can minimize credit risk. Proper documentation of loan

and advance provides legal support against the loan.

Collateral is one of the most important parts of credit risk management. Collateral provides safeguard

against non-performing loans and advances. For that reason banks always trends to keep good quality

collateral. This research has found that there is a positive correlation between collateral and minimizing

credit risk.

Efficiency also has an effect on credit risk management. Bank‟s ability to understand risk and schedule

disbursement and collection increases efficiency and minimizes credit risk.

162

7.0│Recommendation

Few recommendations for the Exim bank have been popped out from the findings of the research.

Recommendations of the research are given below:

Exim bank should keep focusing on properly evaluate customer credit worthiness as it is the first

step of minimizing credit risk.

Security policies that are developed internally or set by the regulatory organization should be

followed strictly.

Collateral works a as safeguard against credit default. Therefore Exim bank should always try to

keep good quality collateral.

Proper documentation provides legal support. So Exim Bank should keep document of all

necessary information about customers.

Increase operating and collection efficiency to minimize credit default.

Create an early alert system so that customers‟ know when their payment is due.

163

8.0│Conclusion

The banking sector in any country plays an important role in economic activities. Bangladesh is

not exception of that. Its financial development and economic development are closely related.

That is why the private commercial banks are playing significant role in this regard. This report

focuses on and analyzed Credit Risk management Processof Exim BANK LTD, Gulshan Branch.

During my internship period I have found that the bank provides all the conventional banking

activities as well as some specialized financing activities to the economy. Credit department is the

largest department of the branch in terms of profit earned. The department provides majority

types of loan if the proposal is sound. As specialized financing it provides term finance to SMEs.

The branch also provides house building finance, cash credit (Hypothecation), consumer durable

loan and so on. As credit Risk management Process is the main focus of this report, I have found

during the study that:

The Credit department shows an excellent performance in maintaining outstanding loans and

advance. Monthly actual disbursed loan for the last twelve months was almost the same as the

targeted outstanding. In some months actual outstanding was higher than targeted outstanding. At

the end of the year achievement was 104% of the target.

If we compare advances with deposits of different year we have noticed that loan disbursement

performance is not satisfactory as outstanding loans are almost half of total deposits. As a

proportion we can see that Branch is improving its performance. Now it is 53%.Structurally

general loan, loan against trust receipt and consumer credit has decreased clearly and cash credit,

house building loan has increased smoothly.

164

Loan productivity per employee is increasing year to year. Now nonperforming loan is only 1%

in this year. The branch has shown tremendous success in case of recovery of classified loans.

Their targeted recovery was TK 20 crore and they recovered more that 5 crore in this year that‟s

why classified loan has decreased at a large scale.

Exim Bank Dilcusa Branch is a profitable branch as it is situated in Dilcusa. Due to locational

advantage it can attract more customers which make it possible to fulfill their targeted profit.

Performance of Dilcusa Branch is very much impressive compared to other branches of other

Banks.

165

9.0│Bibliography

Export Import Bank of Bangladesh Limited (2009). Annual Report, Year Ended

December 31, 2009.

Export Import Bank of Bangladesh Limited (2008). Annual Report, Year Ended

December 31, 2008.

EXIM Bank of Bangladesh Limited, http://www.eximbankbd.com/, retrieved on August

3, 2010.

EXIM Exchange Company (UK) Limited, http://www.eximexchange.co.uk/, retrieved on

August 3, 2010.

EXIM Exchange Company (Canada) Limited, http://www.eximexchangeca.com/,

retrieved on August 3, 2010.

Banks of Bangladesh, http://www.qualisteam.com/Banks/Asia/Bangladesh/, retrieved on

August 17, 2010.

List of Banks in Bangladesh, http://en.wikipedia.org/wiki/ListofbanksinBangladesh,

retrieved on August 17, 2010.

Bangladesh Bank, http://www.bangladesh-bank.org/, retrieved on August 23, 2010.

Islamic Banking, http://en.wikipedia.org/wiki/Islamic_banking, retrieved on August 23,

2010.

International Banking, http://en.wikipedia.org/wiki/International_Banking_Systems,

retrieved on September 4, 2010.

Core Banking Solution System, http://www.temenos.com/, retrieved on September 4,

2010.

HSBC Amanah, www.hsbcamanah.com , retrieved on September 9, 2010.

166

Standard Chartered Bank, www.standardchartered.com , retrieved on September 9, 2010.

Camels Rating of Banks in Bangladesh, http://www.reportbd.com/blogs/, retrieved on

September 11, 2010