Intern Ific (Rajib)

8/12/2019 Intern Ific (Rajib)

http://slidepdf.com/reader/full/intern-ific-rajib 1/64

CHAPTER ONE

INTRODUCTION

1



INTRODUCTIONIn general sense we mean “Bank” as a financial institution that deals with money.There are different types of banks like Central bank, Commercial bank, a!ings bank,In!estment bank, "erchant bank, Co#operati!e bank etc. But when we use the term

bank it generally means $commercial bank% that collects the deposit from surplus unitof the society and then lends the deposits to the deficit units.

&ow#a day%s banking sector is moderni'ing and e(panding its hand in differentfinancial e!ents e!ery day. )t the same time the banking process is becoming faster,easier and is becoming wider. In order to sur!i!e in the competiti!e field of the

banking sector all organi'ations are looking for better ser!ice opportunities to pro!idetheir fellow clients. o it has become essential for e!ery person to ha!e some idea onthe bank and banking procedure.

Internship program so called work attachment program is essential for e!ery BB)student because it helps him or her to ac*uaint with the real life situation. )s bank isone of the most important financial intermediaries+ so I ha!e selected ‘International

Finance & Investment Corporation (IFIC) which is one of the most leading banksin the new banking arena.

O!"ECTI#E$ OF THE REPORT

The obecti!e of the internship program is to familiari'e myself with real marketsituation and compare it with bookish concept. The main obecti!e of this report is toha!e an assessment about -!erall Banking acti!ities of IIC Bank /imited. Inaddition the study seeks to achie!e the following obecti!es0

• To familiari'ed with practical ob en!ironment.

• To ha!e an e(posure on the financial institution especially on banking

en!ironment of Bangladesh.

• To present an o!er!iew of IIC Bank /imited.

• To identify the problems facing by IIC Bank /imited and suggest

remedial measures.



$COPE

This report has been prepared through e(tensi!e discussion with bank employees andwith the clients. 2rospectus pro!ided by the bank also time of preparing the report, Ihad a great opportunity to ha!e an in depth knowledge of all the banking acti!ities

practiced by the IIC Bank /imited.

%IITATION$

ome restraint at the time of preparing the report are appended below

• The insufficiency of information is main constraint of the study. "oreo!er

employees are not interested to pro!ide all information due to security andother corporate obligation.

• The employees and clients are busy to pro!ide me time for inter!iew.

•

Ine(perience and time limitation were the constraints of the study.

!AC'ROUND OF IFIC !AN' %IITED

3uring 4th 5anuary 1678 The 9astern Banking Corporation inaugurated its operation

in 9ast 2akistan as a commercial bank. )fter 7 months of its inauguration it has got

the status of chedule Bank. It was the first Bengali -wned commercial Bank. )fter

liberation the 9astern Banking Corporation was changed by name as IIC Bank /td.

3uring 16: it was taken under national ownership. )t that time it%s paid up capital

was 76.1; crore and profit figure was < lakhs. 3uring eptember 164; it was

pri!ati'ed under 2ri!ati'ation )ct. )t that time this deposit was ;1.=; crore and

profit figure was 8.=7 crore. >p to == its number of branch stands to 164 and it%s

paid up capital was 1== million. 68? of its shareholder is public and rest of share

holds by @o!ernment. The bank earned e!er#highest operating profit during the year

== among all pri!ate banks of Bangladesh Ae(cept Islami Bank B3 /td. The bank

earned an operating profit of Tk. 1;1.14 crore during the year ==.

;



ORANI*ATION HIERARCH+ OF IFIC !AN' %TD,

ana-in- Director

Dep.t/ ana-in- Director

Assistant ana-in- Director

eneral ana-er

Dep.t/ eneral ana-er

Assistant eneral an-er

$enior Principal O00icer

Principal O00icer

$enior O00icer ra1e23

O00icer ra1e233

<



ORIIN OF THE REPORT

There e(ists huge deference between theoretical knowledge and practical knowledge.

This report is an outcome of practical study. ince it is mandatory for the BB)

program, aculty of Business tudies, >ni!ersity of 3e!elopment )lternati!e, to

make a proper blending of student%s theoretical knowledge with the practical e(posure

which they ha!e earned in their internship program.

This report is an integral part of e!ery student course curricula and the gaining of his

practical training. It ensures the practical knowledge on a specific matter, which is

assigned to the students by their respecti!e teachers.

O!"ECTI#E$ OF THE $TUD+

This report on credit management system of IIC Bank /td. encompasses the

following maor obecti!es0

i. To grasp the theoretical aspects of credit management.

ii. To describe the term “Credit” by the IIC Bank /td.

iii. To identify !arious credit scheme of IIC Bank /td.

i!. To introduce the credit structure of IIC Bank /td.

!. To identify beneficiaries of loans.

!i. To show the disbursement procedure.

!ii. To highlight the reco!ery the loan.

!iii. To highlight the problems of reco!ery.

i(. To identify the o!erall performance regarding granting loan.

8



ETHODO%O+

In order to conduct such a study the repost prepare must follows some specific

methods. This report is based on an empirical method, which is stated hereafter.

ORANI*ATION CO#ERED

This study mainly co!ers a particular organi'ation, the IIC Bank /td. But the

rele!ant data are collected from the head office of the IIC Bank /td. training

institute and its ederal Branch.

$OURCE$ OF DATA

)ll the rele!ant data regarding this study are collected from two sources0

a) PRIAR+ $OURCE$

Inter!iewing with the bank officials, specially the principal officer of loan

and ad!ance department of IIC Bank /td ederation Branch.

4) $ECONDAR+ $OURCE$

)nnual report of IIC Bank /td.

2ublished Booklet of IIC Bank /td.

2ublished 5ournals of aculty of Business tudies, >ni!ersity of 3haka.

5ournals of BIB".

arious published documents.

7



CHAPTER T5O

ENERA% !AN'IN

:



Internship is the means of ha!ing some practical e(perience from an organi'ation

after getting the bachelor or master degree to do ob in any organi'ation. I feel proud

to do my internship in this bank because its position is second among all the pri!ate

banks in case of earning profit. )s I am an intern the following responsibilities ha!e

been carried out during my three A; months internship period0

OPENIN OF ACCOUNT

Dhen a person want to open an account in IIC Bank /imited, ederation Branch,

needs to communicate with responsible officer. or opening an account an accountee

must fill up a bank account opening form and needs to present the following things0

a. Trade license. Aor businessman

b. Citi'enship certificate.

c. Two copies passport si'e photographs.

Ot6er Re7.irements

a. Eeference of an account holder who has an account in this Branch.

b. "inimum deposit #incases of current accounts Tk. 1,=== and for sa!ing

account Tk. 8, ==.

AI% TRAN$FER (T)

"ail transfer means money transfer from one branch to another branch of the same

bank. It may occur between the two different banks. "T issues and recei!es is a

regular task of this branch. In case of "T issue a branch charges commission. This

commission depends on amount, which will be transferred.

rom "T issue this branch earned about Tk. =,=== per month.

Process o0 T

Dhen any body want to transfer money from this branch to another branch of IIC

Bank /imited or other bank at first the client needs to communicate with responsible

principal officer "d. Famal >ddin and then heGshe collects a printed "T form. )fter

filling the form heGshe needs to deposit cash with commission to the cash counter and

takes a receipt. In case of "T four A< copies of !ouchers are prepared. -riginal and

4



duplicate copy is send to the responding branch. Triplicate copy is send to the Head

-ffice with daily schedule. This branch preser!es the *uart#duplicate copy.

TE%EPHONE TRAN$FER (TT)

Telephone Transfer ATT means transfer of money from one branch to another branch

of the same bank through telephone message. Telephone transfer is *uicker process

than mail transfer. In case of TT issue this branch charges commission. This

commission depends on amount, which will be transferred. rom telephone transfer

per moth income of ederation Branch is about Tk. 8,===.

Process o0 TT

Dhen anybody wants to transfer money through telephone message from this branch

to another branch of the same bank heGshe needs to communicate with responsible

officer. )t first the client collects a printed TT form and after filling the form heGshe

needs to communicate with econd -fficer and then deposits cash with commission

to the cash counter and finally takes a receipt. In case of TT issues, this bank prepares

three A; copies of !ouchers. -riginal copy is sending to the responding Branch and

the duplicate copy is sending to the Head -ffice with schedule. This branch preser!es

the triplicate copy.

6



DEAND DEPO$ITE (DD)

3emand 3raft means money transfer from one branch to another branch of the same

bank. It may occur between the two different banks. 33 issues and recei!es is a

regular task of this branch. In case of 33 issue a branch charges commission. This

commission depends on amount, which will be transferred. rom 33 issue this

branch earned about Tk. =,=== per month.

Process o0 DD

Dhen any body want to transfer money from this branch to another branch of IIC

Bank /imited or other bank at first the client needs to communicate with responsible

officer and then heGshe collects a printed 33 form. )fter filling this form heGshe

needs to deposit cash with commission to the cash counter and takes a receipt. In case

of 33 four A< copies of !ouchers are prepared. -riginal and duplicate copy is send to

the responding branch. Triplicate copy is send to the Head -ffice with daily schedule.

This branch preser!es the *uart#duplicate copy.

PREPARATION OF $CHEDU%E

IIC Bank /imited, 3hanmondi Branch, needs to prepare daily schedule. 3aily

schedule is prepared for the purpose of measuring performance of this branch. This

schedule is prepared on the basis of !ouchers Adebit credit !ouchers. or preparing

a daily performance report or schedule bank has two separate colored printed forms.

C%EARIN HOU$E

9!ery working day IIC Bank /imited, ederation Branch, recei!es about ;8#7=

che*ues that made on another bank. Dhen IIC Bank /imited, ederation Branch,

recei!es this type of che*ues then it sends these che*ues to the Clearinghouse of

Bangladesh Bank through the Head -ffice. The Clearinghouse is formed with the

representati!e of e!ery scheduled bank. IIC Bank /imited representati!e gi!es the

che*ue to the representati!e of respected branch on which che*ue is made. )fter one

or two days the bank on which che*ue is made sends a message about the !alidity of

the che*ue that means it pro!ides information about account and deposited money on

this account.

1=



CU$TOER HAND%IN

Receives c.stomers p6one

3ifferent type%s phone calls were recei!ed from customers in different time

about IIC Bank /imited ser!ices.

Acco.nt openin- an1 closin-

The customers who came to booth to open an account, necessary support ser!ice were pro!ided them to fill up the opening form, account number and help them to do otherformalities. )lso help them to close the account.

Clearin-

ometimes a few of customers don%t understand how does he fill up the che*uebook,

this situation I try to help them as soon as possible.

11



%OAN PO%IC+

The Board of 3irectors of a bank has the ultimate responsibility for all of the loans

made by their bank. Because the board delegates to others the task of making loans, it

uses a written loan policy to establish general guidelines and principles for the bank%s

lending acti!ities. It is important to understand that the policies are guidelines and

they are not infle(ible rules car!ed in granite.

Dritten policies !ary widely from bank to bank. The policies of a small bank that

lends primarily to farmers are going to differ from that of large bank speciali'ing in

international lending. &e!ertheless, some of the items that are resent in many written

loan polices are presented here.

ENERA% PO%IC+

The general policy outlines the bank%s lending obecti!es in terms of profitability and

risk. or e(ample, the policy may state that the bank is in the business of making

sound and profitable loans. )n important part of this goal is that all loans should ha!e

a plan of li*uidation at the time they are made. The general policy section may also

include statements concerning the organi'ational structure for super!ising lending

acti!ity.

Ris8

By definition, lending funds in!ol!es some degree of risk, and we know that risk is

related to returns. The higher the risks, the higher the e(pected returns. The degree of

risk that a bank is willing to face could be e(pressed in the following way0

The bank is not an in!estor and should limit its risk to that which is commensurate

with the return usually a!ailable to it as a lender. The yield on a customer%s total

relationship should meet the bank%s earning obecti!es after allowing for the cost of

funds, risk factors, and the cost of administration.

%oan $.pervision

The Board of 3irectors has policies regarding the lending authority of indi!idual

loans officers and the appro!al process for particular types of loans of !arious si'es.

maller banks ha!e fewer layers of management and a simpler appro!al process.

1;



eo-rap6ic %imits

) bank%s trade area depends on its si'e. mall banks generally ha!e all local trade

area+ medium#si'ed banks may consider themsel!es regional banks+ and large banks

may be national or international in scope. Thus, one bank%s policy may state that,

“sound local loans are one of the most satisfactory and profitable means of employing

the bank%s funds. Therefore, it is the intent of the Board that with few e(ceptions the

bank%s loans are limited to the metropolitan area we ser!e. “In contrast, another

bank%s policy is “to concentrate our lending efforts in the 2acific Basin.”

CO%%ATERA%

Collateral an1 Ris8

ound banking practices re*uire that certain types of loans be backed by collateral.

Collateral refers to an asset pledged against the performance of an obligation. If a

borrower defaults on a loan the bank takes the collateral and sells it. Collateral

reduces the bank%s risk when it makes a loan. Howe!er, collateral does not reduce the

risk of the loan parse. The risk of the loan is determined by the borrower%s ability to

repay it.

Dhile collateral reduces the bank%s risk, it may increase cost. The higher costs are due

to the need for documentation and the costs of monitoring the collateral. &e!ertheless,

without collateral some borrowers could not obtain loans. Therefore, collateral

benefits both borrowers and lender in certain type of loans. In other types of loans

collateral is not used.

C6aracteristics o0 -oo1 Collateral

)lmost anything that is lawful may be used as collateral. &e!ertheless, some things

are better than others. The fi!e factors listed ne(t determine the suitability of items for

use as collateral. The suitability depends in !arying degrees on standardi'ation,

durability, identification, marketability, and stability of !alue.

9, $tan1ar1i:ation

The standardi'ation lea!es no ambiguity between the borrower and the lender as

to the nature of the asset that is being sued as collateral.

;, D.ra4ilit/

1<



;, Inventor/

In!entory is widely used as collateral against commercial loans. The most common

ways in which in!entory is used as collateral are e(plained ne(t.

Floatin- %ien

Eaw material through the finished goods. The floating lien has two ad!antages from

the ) floating lien or continuous lien is used to co!er a firm%s entire in!entory the

borrower%s point of !iew. It enables the entire in!entory to be pledged. The borrower

can self#finished in!entory in the ordinary course of business since the lien does not

follow each item. The maor disad!antage is that banks may only want to lend a small

percentage of the !alue of such in!entory because of its undesirable characteristics.

Tr.st Receipts

Trust receipts, or floor planning as it is commonly called, are used to finance

automobiles, trucks, airplanes, and consumer durable goods such as tele!ision, the

title for the in!entory is held by the lender and the borrower assumes the role of

trustee for the goods.

C6attel ort-a-e

) chattel mortgage, or security agreement as it is sometimes called, gi!es the lender a

lien on tangible personal property.

5are6o.se Receipts

Banks ha!e the greatest control and security when in!entory that is used as collateral

is held in a bonded public warehouse, which is commonly called a terminal

warehouse. >nder this arrangement, the in!entory is stored in a public warehouse and

the receipt is held by the lender. In!entory can only be releases when proper receipts

are presented at the warehouse. The receipts may be either negotiable or

nonnegotiable.

1:



Or1er !ills o0 %an1in-

inally, there are some ways in which in!entories are used that are uni*ue to

particular industries. Common carries, for e(ample, use order bills of lading, which

are a special kind of receipt, as collateral on commodities that are in transit.

%ivestoc8 an1 Crops

/i!estock is widely used as collateral, and credit is e(tended on it through all stages

of the production process. Credit is also e(tended for planting crops. uch loans are

normally payable when the crops are har!ested.

<, ar8eta4le $ec.rities

"arketable securities, including corporate stocks and bonds, certificates of deposit

AC3s, Treasury securities, and others, may be used as collateral for business loans.

The amount of credit e(tended on such securities !aries widely one problem with

securities as collateral is that the market !alue of publicly held stocks an bonds can

!ary widely from day to day. Te !alue of publicly traded securities is readily a!ailable

in the press.

=, Nat.ral Reso.rces

&atural resources, such as oil and gas reser!es are used as collateral. The !alue of the

natural resources depends on estimates by *ualified engineering firms. The bank

should order the estimates, not by the borrower.

>, Real Propert/ an1 E7.ipment

Eeal property refers to real estate, which includes houses,

-ffices, buildings, shopping centers, factories, and so on. uch property is widely

used as collateral. in addition, e*uipment of !arious sorts may be used.

?, .arantees

Bankers can impro!e their security by ha!ing a third party guarantee the payments.

The third party may be an indi!idual, insurance company.

14



CHAPTER FOUR

PROCE$$ OF RANTIN CREDIT

16



5A+$ FOR !AN'$ TO A'E %OAN$

Banks intentionally make loans in si( ways. -!erdrafts, which are unintentional loans

to customers who o!erdraw their transaction accounts, are not considered here. There

is no significance to the order in which the methods are presented.

9, !an8s $olicit %oans

irst, bank acti!ely solicits loans in local and distant markets. /oan officers !isit

prospecti!e customers offering loans and other ser!ices pro!ided by their respecti!e

banks. This type of sales effort is typical of banks seeking new customers.

;, !./in- %oans

econdly, bank buy parts of loans, called participations from other banks, suppose

that a large bank is making a J 1== million loan to an airline, but the originating bank

does not want to keep such a large loan in its loan portfolio. It may sell parts of that

loan to other banks. The sale of participations “downstream” to smaller banks allow

smaller bank to participate in loans that they could not originate. In addition, it is one

way for a bank with slack demand for loans to increase its loan portfolio. It also

allows all of the banks in!ol!ed to di!ersify their loan portfolios. 2articipations can

originate from small banks too. uppose that a small bank wants to make a loan that

e(ceeds its lending limits. It can make the loan and sell participations “upstream” to

larger banks.

.

<, Commitments

Third, banks make loans under commitments. )s noted in the pre!ious chapter,

commitments are agreements between banks and borrowers to make a loan under

certain conditions. or purposes of this discussion, commitments include both letters

of credit and standby letters of credit.

=, Re0inancin-

ourth, banks refinance loans. uppose that interest rates ha!e declined and that

borrowers with high fi(ed rate loans want to take ad!antage of the lower rates. The

can make a new loan at the lower ate and pay off the higher ate loan. The refinancing

is at the borrower%s option, and only occurs when it is to their ad!antage.

=



>, %oan !ro8ers

ifth, loan brokers sell loans to banks and other lenders. /oan brokers are indi!iduals

or firms who act as agents or brokers between the borrower and the lender for

e(ample, a loan broker may contract with a real estate de!eloper to find financing for

a particular proect. The broker will seek lenders and arrange for the loan. -nce the

loan is made and the fees are paid, the broker is out of the picture.

?, C.stomers Re7.est %oans

The final method of originating a loan is the most common. omeone asks for a

commercial loan. >nfortunately, many potential borrowers are denied loans or do not

get what they need because they do not know what information the bank needs in

order to grant to loan re*uest. ome borrowers, for e(ample, do not know what type

of loan will meet their financial needs or what type of collateral is suitable for their

loans. @ood loan officers work with prospecti!e borrowers who do not know the

procedures by e(plaining to them what information they must pro!ide to the bank.

RO%E OF INFORATION FOR RANTIN %OAN

Information plays a crucial role throughout the lending process. Initially, there is

asymmetric information one party has substantially more information than the other.

The prospecti!e borrower knows more about his or her own financial condition and

prospects for the future than the bank knows. It may be in the borrower%s best interest

to re!eal only the minimum amount of information necessary to get a loan. or

e(ample, the borrower might not want to re!eal that the book !alue of certain assets is

o!erstated or that proected sales are inflated. In contrast, the bank wants to obtain as

much rele!ant information as possible in order to A1 e!aluate the loan re*uest and A

reduce the risk of loss if the loan is made.

Banks, wanting to minimi'e the risk of loss, must monitor information about the

borrower%s financial beha!ior throughout the term of the loan. If the information

suggests that a borrower is ha!ing financial difficulties and may not be able to repay

the loan, the bank must react *uickly to deal with the problem. 9arly detection of

potential problems may allow the bank to help the borrower resol!e the problem

before the loan defaults and it becomes a loss. Feep in mind the crucial role of

information as you read no only about commercial loans, but all loans.

1



%OAN PROCE$$

The type of information that banks prefers to recei!e from customers re*uesting

commercials loan is illustrated by the following e(ample. "ost loan re*uests are not

as well organi'ed or as complete as the one presented here. It is a “model” loan

re*uest that pro!ides the information needed by the bank in order to make a lending

decision.

9, %oan Re7.est

The bank recei!ed a letter from borrower, which is called as application for loan. The

letter contents a brief history of the firm and other pertinent information.



customer necessary to make a loan decision. or e(ample, the banker may want to

clarify some points in the customer%s business plan or pro forma statements.

Dhen a borrower%s business plan and financial statements are not a!ailable, the

banker will want to know0

Dhat is the amount of the loanL

Dhen the funds are needsL

How are the funds going to be usedL

Dhen is the loan going to be repaidL

How is the loan going to be repaidL

Dhat collateral will be pledgedL

)dditional information will be re*uired about the organi'ation of the business Asole

proprietorship, partnership or corporation, its trade area other banking relationships,

and more.

<



E#A%UATIN A %OAN REUE$T

The bank must e!aluate the loan re*uest and determine if a loan will be granted. The

e!aluation in!ol!es the 7C%s of credit as follows0

Character Apersonal characteristics of the borrower, honesty and attitudes

about willingness and commitment to pay debts.

Capacity Athe success of the business.

Capital Afinancial condition.

Collateral Apledged assets.

Conditions Aeconomic conditions.

Compliance Alaws and regulations.

8



CHAPTER FI#E

T+PE$ OF CREDIT

7



COERCIA% AND INDU$TRIA% %OAN

Commercial and industrial loans ACI loans are loans made to business concerns to

finance their day#to#day acti!ities Ae.g. in!entories, recei!ables, to finance their

longer#term needs Ae.g. plant and e*uipments and for other business purposes. The

maturity of these loans ranges from one day Acalled o!ernight loans to 1= years or

longer.

3ifferent types of CI loans are used to finance different types of assts. The principal

types of CI /oans presented here0

a, %ine o0 Cre1it

) line of credit is an agreement between a customer and the bank that the bank will

entertain re*uests from that customer for a loan up to a predetermined amount.

The line of credit is the ma(imum amount that can be borrowed under the terms of the

loan. They are fre*uently made for periods of one year or less, and are used to finance

seasonal increases in in!entory, an accounts recei!able. Then the in!entory is sold,

recei!ables are collected, and the funds are used to reduce the loan. re*uently,

lenders re*uire in!entory or recei!ables as collateral. The loans are usually payable on

demand by the bank or within 6= days.

ometimes short#term loans are renewed or rolled o!er so often that both the firms

and the banks !iew them as a form of long term financing. Dhen that occurs, both

parties should consider long#term financing.

:



4, Revolvin- %oan

Ee!ol!ing loans are similar to a line of credit because these two are used to finance

borrower%s temporary and seasonal needs. -ne difference between a re!ol!ing loan

and line of credit is that the bank is obligated to make the loans up to the amount of

the commitment, if the borrower is in compliance with the terms of the agreement.

The borrower may repay the loans and then borrow again, up to the amount of the

commitment.

c, Term %oan

) term loan is usually a single loan for a stated period of time or a series of loans for

specified dates. They are used for a specific purpose, such as ac*uitting machinery,

reno!ating a building refinancing debt, and so forth. They should not be used to

finance day#to#day operations.

Term loans can ha!e an original maturity of fi!e years or more. The maturity of the

loans should not e(ceed the economic life of the asset being financed if that asset is

being used as collateral for the loan.

The !alue of the asset being financed should always e(ceed the amount of the loan.

The difference between the !alue of asset and the amount being financed is the

borrower%s e*uity. The borrower%s e*uity represents the borrower%s in!estment in the

asset being financed. The also pro!ides the bank with a “cushion” in the e!ent of

default. The borrower will lose his or her funds before the bank e(periences a loss.

Borrowers not wanting to less their e*uity in!estment ha!e an incenti!e to operate

their business so that the loan will be repaid.

4



1, !ri1-e %oans

Bridge loans are loans that “bridge a gap” in a borrower%s financing until some

specific e!ent occurs. or e(ample, a firm wants to ac*uire a new warehouse facility

but needs funds to finance the transaction until the old warehouse can be sold. )

bridge loan can be used to fill the gap.

e, Asset2!ase1 %en1in-

)sset#based lending is a form of commercial lending in which the assets of a

company are used to secure the company%s obligation to the lender. In the broadest

sense, all secured loans could be classified as asset#base lending. )sset#based loans

ha!e as their collateral base accounts recei!able, in!entory, machinery and

e*uipment, and real estate, single or packaged in !arious combinations.

0, Over1ra0ts

)n o!erdraft occurs when a cheek is written on uncollected funds. If a bank pays on a

check written against uncollected balances, it is e(tending and unsecured loan. ome

o!erdrafts are written with period permission of the bank, but most are not. In the

later case, the o!erdraft represents a loan that the bank may not want make. It is

certainly a loan where the borrower did not make an application to the bank to re*uest

the funds in ad!ance. The o!erdraft loan can be for less than one day, such as when a

check is written or funds transferred wire in the morning and the deposit to co!er that

check or wire transfer is not made until that afternoon, or for one or more days.

-, Cas6 Cre1it

Cash credit refers to the issue of credits to respectable and trustworthy persons against

the guarantee of a third party or parties. The cash credit is a credit specially granted

by the banker in fa!or of a customer, but instead of the customer ha!ing to take up

whole amount as a demand loan, he can either draw or repay, in whole or in part, the

amount ad!anced at anytime to suit his own con!enience.

This $cash credit% may either take the form of “2ledge% or “Hypothecation.” In case of

“Hypothecation” possession of goods is not transferred to the banker and therefore,

such an ad!ance is no better that a clean loan. uch an ad!ance can, thus, only be

granted to a person in whose integrity the banker has full confidence, but in case of

6



“pledge” the possession of the goods an not the ownership passes to the creditor,

namely, the banker.

6, %oan Commitments

) loan commitment is an agreement between a bank and a firm to lend funds under

terms that are agreed on in writing. )bout three#fourths of all commercial and

industrial loans are made under loan commitments.

REA% E$TATE %ENDIN

Eeal estate loan is the largest !olume of loans made by commercial banks. The term

mortgage is used in connection with real estate lending. )t common law, a mortgage

is a written con!eyance of title to real property to pro!ide security for the

performance of a duty or the payment of a debt. In some states, mortgage is regarded

as a lien, but not crating title or an estate. In general terms, it is an agreement that the

property will be sold if the debt is not paid as agreed. The proceeds of the sale of the

property are used to reimburse the lender. The mortgage gi!es the lender a security

interest on the property, if the mortgage is properly recorded in the country

courthouse.

CON$UER %ENDIN

Consumer lending is the heart of retail banking. Eetail banking refers to banking

ser!ices pro!ide to indi!iduals and to small business concerns. er!ices pro!ided to

medium and large#si'e business concerns and go!ernment is called wholesale

banking. "ost banks do both retail and wholesale banking although some speciali'e

more than others. mall banks tend to speciali'e in retail banking because they do not

ha!e sufficient assets to do large#scale wholesale lending.

;=



CHAPTER $IB

TECHNIUE$ OF CREDIT

ANAEENT

;1



INTRODUCTION

"anagement of credit means the cycle that starts from the issuing of credit and ends

with its reco!ery. The good credit management means the reco!ery of credit with

interest. The bank%s credit management policy !aries under the different credit

sanction procedures. The bank grants credit by taking securities in order to ensure the

reco!ery of loans. If the bank can manage those securities effecti!ely the management

of credit is ensured. This chapter deals with the management of credit under different

credit sanction procedure.

FACTOR$ %IITIN THE %E#E% OF A !AN'$ CREDIT

i. The si'e and maturity#wise pattern of deposits0 The primary source of funds is

the deposits made by the depositors. Their si'e and maturity#wise pattern has

an impact on the le!el of a bank%s ad!ances. Bank%s capacity to grant loans

ad!ances increases with an increase in deposit resources moreo!er, the

maturity#wise pattern of such deposits affects the pattern of ad!ances. In case

of demand liabilities, the banker is under an obligation to repay the fund on

demand and hence he needs larger cash reser!e.

ii. Credit Control by Eeser!e Bank. The capacity of banks to pro!ide loans and

ad!ances depends on their cash resources Ai.e. cash in hand and balances with

the Eeser!e Bank. The cash resources increase through 1. Eise in deposits, or

. By they%re borrowing from the Eeser!e Bank, or ;. By sale of their

in!estments. The Eeser!e bank regulates the *uantum of cash resources of the

banks by e(ercising the power conferred upon it. If it feels the necessity of

e(pansion of credit, measures are adopted to increase bank%s cash resources

and !ice#!ersa.

iii. easonal !ariations in Bank Credit. )n important feature of bank credit in an

agricultural country like ours is the seasonal !ariations in the *uantum of

credit granted by banks.

i!. The 3emand of credit. The e(pansion or contraction of credit largely depends

on the demand for bank credit by borrowers, which in turn depends upon.

1. The le!el of production, both agricultural an industrial.

. The le!el of in!entories held by business an industrial houses.

;. The price le!el of goods and commodities in the country.

;



<. The procurement policy of ood Corporation.

) banker should always keep in min the abo!e limiting factors of issuing credit.

@ood credit management in case of issuing credit means granting credit by

considering the abo!e limiting factor. The banker who can manage the abo!e limiting

factors he is called an effecti!e credit manager.

ANAEENT OF CREDIT !+ TA'IN $ECURIT+,

In the employment of his funds a banker generally attaches great significance to the

consideration of security. /argely depending upon the borrowed funds, a banker

cannot afford to take undue risks. He, therefore, safeguards his interests by granting

loans an ad!ance on the security of tangible assts, i.e. a large !ariety of goods and

commodities, documents and immo!able property. ecured ad!ances account for a

maor option of the total bank ad!ances. In case of secured ad!ances, a charge is

created o!er the assets of the borrower in fa!or of the banker. The banker may,

therefore reco!er his dues from the customer out of the sale proceeds of the assets

charged to him.

;;



eneral Principles o0 $ec.re1 A1vances

Dhile granting ad!ances on the basis of securities offered by customers, a banker

should obser!e the following basic principles0

9, A1e7.ac/ o0 ar-in

The word $margin% has special meaning and significance in the banking

business. In banking terminology, $margin% means the deference between the

market !alue of the security and the amount of the ad!ance granted against it.

or e(ample, if banker sanctions an ad!ance to Tk. := against the security of

goods worth Tk. 1==, the difference between the two is called the margin. )

banker always deeps an ade*uate margin because of the following reasons.

i. The market !alue of securities is liable to fluctuations in future with

the result that the banker%s secured loans may turn into party secured

ones.

ii. The liability of the borrower towards the banker increases gradually as

interest accrues and other charges become payable by him.

Factors Determinin- ar-in

The *uantum of margin is not uniform in case of all commodities or in case of all

customers. The following factors determine the margin0

i. The amount of margin depends upon the likely fluctuations in the prices of the

!arious commodities.

ii. In case of shares of industrial concerns the financial position and reputation of

the issuing undertaking is also taken into account. hares of sound industrial

concerns are treated as good as go!ernment securities and lower margin is

re*uired.

iii. "argins are fi(ed keeping in !iew the credit an reputation of the borrower#

concern.

i!. The margin, determined at the time of sanctioning an ad!ance, may be raised

or reduced subse*uently according to the !ariation in the prices of the

securities.

!. In case of commodities, which are subect to selecti!e credit control of the

Central Bank, margins are usually prescribed by the Central Bank from time to

time. It is essential for the banks to deep such margins.

;<



;, ar8eta4ilit/ o0 $ec.rities

Credits are usually granted for short periods by the commercial banks because their

deposit resources Ae(cept term deposits are either repayable on demand or at short

notice. If the customer defaults in making payment, the banker has to li*uidate the

security. It is, therefore, essential that the security offered by a borrower may be

disposed of without loss of time and money. ) banker should be !ery cautious in

accepting assets, which are not easily marketable.

It is pro!erbially said “a banker lends his umbrella when the sky is clear an demands

it back as soon as it rains.”

<, Doc.mentation

3ocumentation means that necessary documents, e.g. )greement of pledge or

mortgage, etc, are prepared and signed by the borrower at the time of securing a loan

from the bank.

=, Reali:ation o0 t6e Cre1it

If the borrower defaults in making payment on the specified date, the banker may

reali'e his debt from the sale proceeds of the securities pledged to him.

;8



ANAEENT OF CREDIT AAIN$T OOD$,

Credit sanctioned may be secured by goods and commodities broadly di!ided into

four main heads as follows0

1. ood articles.

. Industrial raw materials.

;. 2lantation products, and

<. "anufactures and material.

These credits meet the needs of working capital of a large number of businesses and

industrial concerns. In fact, such credits are essential for all trading and commercial

acti!ities in the country.

PRECAUTION$ TO !E TA'EN !+ A !AN'ER

@oods and commodities are safe, sound and dependable securities for a banker but

they are not always free from certain risks. ) banker should, therefore, be !ery careful

in accepting them as security and take the following precautions0

1. Though the goods and commodities are the best securities to a banker for

granting loans, the customer is also e*ually important. The customer must be

honest and trustworthy otherwise the risks of fraud or dishonest practices

always remain.

. Before accepting any commodity as security the banker must be well

ac*uainted with the nature of its demand. He must en*uire whether the

commodity is an item of necessity, comfort or lu(ury and whether its demand

is elastic or otherwise, is constant through out the year or is seasonal in nature.

;. The banker must be well ac*uainted with the commodity market. He should

know well the commodities offered as security, the conditions and customer of

their trades and also the trend of their prices in the market. uch knowledge is

essential for him to regulate the margins to be maintained.

<. The market should take deli!ery of the goods before he grants a loan against it

to a customer.

8. The banker should estimate the !alue of the goods !ery carefully.

;7



7. The banker should also take necessary care regarding the storage of the goods

pledged.

:. The goods should be duly and ade*uately insured against fire, theft, etc.

4. )s the borrower is allowed by the banker to repay the loan in parts also and to

get the commodities released, it is !ery important for the banker to ensure that

goods released should be in proportion to the amount of the loan repaid by the

customer.

ANAEENT OF CREDIT AAIN$T DOCUENT OF TIT%E OF

OOD$,

) document of title to goods is a document used in the ordinary course of business

as a proof of the possession or control of goods. It authori'es, either by

endorsement or by deli!ery, the processor of the document to transfer or recei!e

the goods represented by it.

There are two tests by which we may udge the !alidity of such a document0

a The person who possesses such document is recogni'ed by law or by business

practice as possessing the actual goods0 and

b The person who possesses such document can transfer the goods to any person

by endorsement or deli!ery or by both. Te transferee is thus entitled to take

deli!ery of the goods in his own right.

;:



PRECAUTION TO !E TA'EN !+ THE !AN'ER

1. In order to a!oid risks of fraud or dishonesty, the banker should accept such

documents a security from honest, reliable and trusted parties only.

. pecial care should be taken to see that documents are genuine and not forged

ones.

;. It should be carefully noted that documents of title do not contain any onerous

or preudicial remark about packing of the goods. If the documents contain a

remark to this effect, such as “2acking defecti!e” or “@oods not properly

packed” or “The container is leaking”, the banker should not grant any

ad!ance against such receipt.

<. The goods must be insured for its full !alue against the risks of fire, theft, etc.

8. To ensure that the goods packed in bags, etc. actually conform to the

description contained in the documents, it is described that a certificate from a

reliable firm of packers is obtained, especially in case of !aluable goods.

7. The banker should also take memorandum of charge from the borrower

authori'ing the banker to sell the goods if the borrower defaults in making

payment.

:. It is also essential that the issuer of the document of title to goods, i.e.

transport, warehouseman, etc., is a reliable person of firm.

ANAEENT OF PRO!%E %OAN$

2roblem loans usually means the borrower has missed one or more promised

payments or the collateral pledged behind a loan has declined significantly in !alue.

;4



$+PTO$ OF PRO!%E %OAN$,

Dhile each problem loan situation is somewhat different, se!eral features common to

most such situation should warn a banker that troubles ha!e set in0

Irregular or delin*uent loan payments.

re*uent alteration in loan terms.

2oor loan renewal record Awith little reduction of principal each time the loan

is renewed.

>nusual high loan rate Aperhaps an attempt to compensate the bank for a high

M risk loan.

>nusual or une(pected build up of the borrowing customer%s accounts

recei!able and Gor in!entories.

Eising debt Mto#net#worth Ale!erage ratio.

"issing documentation Aespecially missing customer financial statements.

2oor *uality collateral.

Eeliance on reappraisals of assets to increase the borrowing customer%s net

worth.

)bsence of cash flow statements or proections.

Customer reliance on nonrecurring sources of funds to met loan payments

Ae.g., selling buildings or e*uipment.

or business loan, any sudden change in methods used by the borrowing firm

to account for0

3epreciation

"ake pension plan contributions.

alue in!entories

)ccount for ta(es or

Eecogni'e income

Change in the customer%s credit ratings

)d!erse change in the price of borrowing customer%s stock.

&et earnings losses in one or more years, especially as measured by E-), E-9

and 9BIT.

)d!erse changes in the borrowers capital structures.

;6



3e!iations of actual sales or flow form those proected when the loan was

re*uested.

udden, une(pected and une(plained changes in deposit balances maintained by

the customer.

CAU$E$ OF PRO!%E$ %OAN$

9mpirical studies show that loans fall into problems owing to the following causes0

>nrealistically structured loan installment.

>nusually high interest rate.

)d!erse change in the price of borrowing customer%s stick.

&et earnings losses in one or more years, especially as measured by E-),

E-9 and 9BIT.

)d!erse changes in the borrowers capital structures.

Incompetent management.

3ishonesty and immorality of the client.

udden rise in corporate ta( rate.

resh imposition of e(cise or sales ta( on client%s products.

/oss of market share of the client.

@eneral economic recession.

-bsolescence of the client%s product causing a fall in demand thereof.

Dindow dressing of financial accounts.

"aor contract loss.

ignificant rise business competition.

2rocrastination in proect implementation.

9rroneous proect feasibility analysis.

Borrower%s reluctance to pay off the loan.

/oop holes in the stipulated loan contract.

/ower e*uity of the borrower in the pledged collateral.

2olitical pressure.

Corrupted loan reco!ery officer.

<=



$TEP$ TO HAND%E PRO!%E %OAN$

Dhat a banker should do when a loan is in trouble is of supreme importance for

today%s bank lending operations. 9(perts in loan workouts the process of reco!ering

the bank%s funds from a problem loan situation#suggest the following key steps0

1. )lways keeps the goal of loan workouts firmly in mind0 to ma(imi'e the

bank%s chances for the full reco!ery of its funds.

. The rapid detection and reporting of any problems with a loan are essential.

3elay often worsened problem loan situation.

;. Feep the loan workout responsibility separate from the lending function of

a!oid possible conflicts of interest for the loan officer.

<. Bank workout specialists should confer with the troubled customer *uickly on

possible options, especially for cutting e(penses, increasing cash flow and

impro!ing management control. 2recede this meting with a preliminary

analysis of the problem and its possible causes noting any#special workout

problems Aincluding the presence of competing creditors. 3e!elop a

preliminary plan of action after determining the bank%s risk e(posure and the

sufficiency of loan documents especially any claims against the customer%s

collateral other that held by the bank.

8. 9stimate what resources are a!ailable to collect the trouble loan Aincluding the

estimated li*uidation !alues of assets an deposits.

7. /oan workout personal should conduct a ta( and litigation search to see if the

borrower has other unpaid obligations.

:. or business borrowers, bank loan personnel must e!aluate the *uality

competence and integrity of current management and !isit the site to assess the

borrower%s property and operations.

4. Bank workout professional must consider all reasonable alternati!es for

cleaning up the troubled loan including making a new temporary agreement if

loan problems appear to be short#term in nature or finding a way to help the

customer strengthen cash flow Asuch as reducing e(penses or entering

3hanmondi or to infuse new capital into the business. -ther possibilities

include finding additional collateral, securing endorsements or guarantees,

reorgani'ing, merging or li*uidating the firm or filing a bankruptcy petition.

<1



-f course, the preferred option nearly always is to see a re!ised loan agreement that

gi!es both the bank and its customer the chance to restore normal operations.

RECO#ER+ OF %OAN

The most important part of sound credit management is of disclosing the reco!ery of

loans and ad!ances, problems thereon defaulter patterns, pro!isioning against bad and

doubtful loans an ad!ances etc. usually bank%s credit management performance

represents the reco!ery perform of loans an ad!ances as against the utili'ation of

funds. Besides, it has substantial impact on the bank%s ultimate profit performance.

PRORA$ FOR %OAN RECO#ER+

It is the subse*uent step of programs for loan distribution. The detailed programs for

loan reco!ery are stated within the terms and conditions of loan distribution. )s a

result, it is not a new subect in sound credit management. To ma(imi'e the loan

reco!ery performance the following programs should be taken0

i. To establish credit super!ision and monitoring cell in the bank.

ii. To re#structure the loan sanctioning and distributing policy of the bank.

iii. To sanction loans and ad!ances against sufficient securities as best possible.

i!. To gi!e more posers to the branch manger in credit management decisions

making process.

!. To offer a package of incenti!es to the sound borrowers.

!i. To gi!e more emphasis on short#term loans an ad!ances.

!ii. To impose restrictions on loans and ad!ances for trading business.

To take legal actions *uickly against un#sound borrowers as best as possible within

the period specified by the /aw of /imitations.

<



CHAPTER $E#EN

CREDIT ANAEENT

$+$TE OF IFIC !AN'

%IITED A PRACTICA% EBPO$URE

<;



$PECIA% CREDIT $CHEE OF IFIC!AN' %IITED,

Besides general credit facilities IIC Bank /imited also introduced some special

credit schemes named as “>ttaran”. This scheme encompasses the following credit

facilities.

Cons.mer Cre1it $c6eme

"ost of the people of Bangladesh are middle class and in the orbit of /imited income.

They are not able to buy necessary consumable goods by their own sa!ings. or this

reason IIC Bank /imited introduced consumer credit scheme from -ctober 1667.

/oan disbursed under this scheme stood at Tk. 8.=: corer up to 3ecember ==. The

rate of reco!ery of loan under this scheme also 1== percent.

Feat.res o0 t6is sc6ema are

a, O4ectives o0 t6e sc6eme

i. Creating the habits of sa!ings for limited income group

ii. Increasing standard of /i!ing

iii. To play an important role in de!eloping the socio economic condition of

Bangladesh.

4, oo1s .n1er t6is sc6eme

&ew and re#conditioned car, "otorcycle, Eefrigerator, Tele!ision, .C.2, Eadio, Two

in one, )ir Conditioner, Dater Cooler, Dater 2ump, 2.C, >2, 2rinter, Type Driter,

Dashing "achine, Iron Dooden urniture, ewing "achine, Toaster, pressure

Cooker, 2hotocopier, Cellular 2hone, a(, !arious kind of an, 3ish )ntenna,

Bicycle, Baby Ta(i, Tempo, "icrobus etc.

<8



c, Ceilin- o0 %oan an1 Do@n Pa/ment

>nder this scheme highest amount of loan is Tk. 8.== /ac. Borrower must pay down

payment at the following rate0

i. &ew "otor Car ;8?ii. Eecondition CarG"icrobus <=?

iii. Baby Ta(iGTempo <=?i!. "otor Cycle ;8?!. Eefrigerator, 3eep ridge, Dashing

"achine, )ir Conditioner, 2ersonal

Computer, 2hoto Copier, a(, "obile

2hone 8?

!i. -thers =?

1, Interest Rate an1 ot6er C6ar-e

i. Interest 1<? at imple Interest Eate.ii. 3efault Interest ? at imple Interest Eate.

iii. er!ice Charge >p to Tk. 8=,===0 Tk. ==,

)bo!e Tk. 8=,===0 Tk. 8==.i!. Eisk und ? of loans but at least Tk. ==

A"ust pay before taking loan.

e, %oan Repa/ment Perio1

i. &ew "otorcar < years A9*ual monthly Installmentii. Baby Ta(iGTempoG"icrobus < years A9*ual monthly Installment

2artial amount of Installment must be

paid e!ery week.iii. -thers ; years A9*ual monthly Installment

<7



$A%% !U$INE$$ %OAN $CHEE ($!% $CHEE)

B/ scheme has introduced for e(tending loans to the small business owners who are

dong business with their own capital, which is inade*uate to e(pand business and

ha!e no tangible security to offer as collaterals.

Feat.res o0 $!% $c6eme are

a, .ali0ication o0 !orro@er

Borrower must ha!e a current account in the branch from which he is willing to take

loan.

4, Ceilin- o0 %oan

>nder B/ scheme one can borrow an amount not more than Tk. 8 /ac. But it

depends on the monthly income of the borrower.

c, Interest an1 Ot6er C6ar-e

Interest 0 17.8? per annum.

)pplication rom 0 Tk. 1==

1, %oan Repa/ment Proce1.re

/oan must be repaid within ; years at monthly installment.

,<,< Ho.se Repairin-Renovation $c6eme

This scheme was introduced for e(tending loans to the people who own

houseGbuilding of their own or inherit from their ancestors, which may re*uire

reno!ationGrepairing but cannot afford to make such e(penditure at a time.

<:



Feat.res o0 t6is $c6eme are

a, Amo.nt o0 %oan

>nder House repairingGreno!ation scheme you can take loan up to Tk. 8 /ac. But the

actual account of loan will depend on your monthly income.

4, Interest an1 Ot6er C6ar-e

Interest 0 18?

/oan 2rocessing ee 0 Tk. 8,=== A8=? of this amount are refundable if .

reected

)pplication rom 0 Tk. 1==.

If the customer repay loan regularly and timely than 8? of interest will e(empt.

c, %oan Repa/ment Perio1

/oan must repay within 8 years including interest at installment basis.

%ease Financin- $c6eme

) credit schema in the name of /ease inancing cheme has been functioning

effecti!ely from 5une 1666 to finance the prospecti!e and genuine customers for

ac*uisition of capital machinery e*uipment, medical instruments automobiles etc. The

balance of the loan under this scheme stood at Tk. <6=7= corore as on ;1 st 3ecember

==<.

RECO#ER+ PRORA

It is the subse*uent step of programs for loan distribution. The detailed programs for

loan reco!ery are state within the terms and conditions of loan distribution. )s a

result, it is not a new subect in sound credit management. )s the reco!ery

performance of the commercial banks Aboth public and pri!ate in Bangladesh

gradually deteriorating o!ertime, go!ernment as well as the board of directors of the

respecti!e banks ha!e taken some special programs in the area of loans reco!ery.

<4



IIC Bank /td. has taken the following programs to ensure ma(imum reco!ery0

i. It establishes credit super!ision and monitoring cell in the bank.

ii. It re#structures the loan sanctioning and distribution policy of the bank.

iii. It sanctions loans and ad!ances against sufficient securities as best as possible.

i!. It gi!es more powers t the branch manager in credit management decisions

making process.

!. It offers a package of incenti!es to the sound borrowers.

!i. It gi!es more emphasis on short#term loans ad!ances.

!ii. It imposes restrictions on loans and ad!ances for trading business.

!iii. Ti takes legal actions *uickly against un#sound borrowers as best as possible

with the period specified by the /aw of /imitations.

<6



CHAPTER EIHT

$TUD+ FINDIN$

8=



$ECTOR25I$E PO$ITION OF %OAN AND AD#ANCE A$ ON <929;2;GG= I$

I#EN !E%O5

$ectors o0 %oan & A1vances P.4licNationali:e1

ATaka in Crore

Private

ATaka inCrore

Total

ATaka inCrore

9, A-ric.lt.re

a 2rimary 2roducer b ertili'er

##

1.7:=.=:

1.7:=.=:

;. In1.strial Term %en1in- 18<.;= 18<.;=

<, 5or1in- Capital

a 5ute Industry b -ther Dorking Capital

#1<.=1

6=.:67<.6

6=.:6:4.6;

=, Eport

a 5ute and 5ute @oods b -ther @oodsGCommodities

##

6.;<:.;1

6.;<:.;1

>, Tra1e an1 Commercial %en1in-

a 5ute Trading b Commercial

##

=.<=1,1<7.<;

=.<=1,1<7.<;

?, $pecial Pro-ramme

a mall and Cottage IndustryATerm /oan

b 2ersonal /oan chemec Consumer Credit cheme

A>ttaran

#

##

;.77

<.4<<<.76

;.77

<.4<<<.76

, Ur4an Ho.sin- 84.<6 <.44 4;.;:, O00icers an1 $ta00 Ho.se !.il1in- # 1.=1 1.=1

J, Ot6ers 1<.:6 841.=: 868.47

Total ,;J ;K;G?,>= ;K;J<,<

81



DEPO$IT$ AND AD#ANCE$ (CORE TA'A) PO$ITION FOR FI#E +EAR$

Deposit & A1vance

8

0

500

1000

1500

2000

2500

3000

1998 1999 2000 2001 2002

Deposit

Advance



$ECTOR 5I$E %OAN$ AND AD#ANCE$ UNDER PIE CHART

$ector 5ise A1vance (L)

8;

Commercial

Lending(51%)

Export(2%)

Agriculture (1%)Industrial

Lending(7%)

Special

Programme(2%)

or!ing

Capital(7%)"ousing(#%)

$ters (2&%)



PRO!%E$ IN %OAN RECO#ER+ OF IFIC !AN' %TD,

Those who are the sound borrowers can easily to be identified but the status and the

number of unsound borrowers cannot be measured accurately as they are the maor

portions of total number of borrowers. This is the present status of credit management

in Bangladesh both in the public sector banking and the pri!ate sector banking also.

2roblems in loan reco!ery are the outcome of the default in loan disbursement IIC

Bank /td. usually faces the following problems in loan reco!ery0

I. ometimes loans are gi!en without sufficient securities.

II. ometimes loans are gi!en under fictitious names and enterprises.

III. )ppro!al of loans in e(cess of the branch manager%s powers.

I. ometimes o!er#!aluation of securities is a common phenomenon.

. /oans are appro!ed against defecti!e proect appraisal report.

I. Improper monitoring and super!ision of credit.

II. /oans are sometimes disbursed for economically un#sound proect.

III. 9mphasis on public sector in!estment causes the high rate of non#reco!ery.

IN. /oans are appro!ed for the parties by the authorities bearing in mind their

personal obecti!es not the o!erall obecti!es of the bank and the economy.

N. /oans are appro!ed for industries, which are only socially desirable.

NI. 2olitical misuse of loans programs.

8<



CHAPTER NINE

$UE$TION AND

CONC%U$ION

88



RECOENDATION$

In the light of the !ariations of the problem the following measures if adopted, may go

a long way in impro!ing the situation0

1. election of borrower shall be made as per rules and procedures of the

ad!ances and after making proper assessment of business establishment,

respectability, creditability, actual re*uirement of fund repayment capacity etc.

)ppraisal of feasibility and !iability of the proects shall be dine in proper

manner e(amining all the factors by an efficient and *ualified appraiser so that

no difficulties are faced at any stage of the proect from construction to

production stage.

. The lack of proper super!ision, conduct and control of the loan shall be done

by the financiers to ensure purpose for which the loan is sanctioned, close

contact and persuasion shall also be borrowers to ensure reco!ery of loan

installment as and when due without allowing it to become arrear.

;. The bank should not always be !ery much sensiti!e of reco!ery of loans and

will not bring necessary pressures for reco!ery pro!ided the borrowers are

incorrigible and habitual defaulters. The lenders shall not resort to any hasty

decision and take legal action against the borrowers if there is any scope for

reco!ery of the dues on compromise terms e!en by allowing some concession

of interest and rescheduling the repayment program by allowing reasonable

time to the borrowers.

<. 2roblem of the borrower%s proects or business, which ha!e turned sick

una!oidable circumstances of unforeseen e!ents, shall be looked into

sympathetically by the lending bank. If necessary, bank shall not hesitate to

allow further finance to re!i!e the sick unit to ensure safe reco!ery of the loan

in future for which a suitable repayment schedule may be prepared in

consultation with borrowers.

8. The officials of the bank should be made well con!ersant with the methodical

and procedural components of credit management starting from the stage of

preparation of loan proposal and ending up to the follow up and reco!ery of

the same. &one of the officials who has sporadic knowledge in handling loan

cases should be assigned with the duty of operation of loans ad!ances.

87



7. The lenders shall take legal action against the incorrigible defaulting borrowes

who are a!oiding payment on flimsy grounds without bonafide intention to

s*uare up their dues without wasting of time. "oney suits criminal cases

filled against the bad borrower shall be closely followed up for early decision

of the court and immediate steps shall be taken for satisfaction of the decrees

against the udgment debtors. 2roper !igilance are re*uired to be kept o!er

disposal of court cases reco!ery of the decretal dues as per udgment and in

default, to file e(ecution suit for attachment sale of borrower%s properties

for satisfaction of the decree.

:. )lertness and education amongst the sub#conscious about their obligation to

return bank%s money in time and utili'ation of funds of funds only for

producti!e purpose of moti!ation and education field assistants of the lending

bank may play !ital role.

4. The officials of the bank shall be honest, sincere and free !ices in their deal

with borrowers for personal gain should be skillfully detected and e(emplary

punished to pre!ent others from indulging such irregularities. teps should

also be taken to arrest growing moral degradation amongst the officials by

impro!ing their ser!ice benefits, socio#economic condition and a standard of

li!ing where the officials shall ha!e no reasons to be allured by the borrowers.

6. The problem can be sol!ed by rational strategy formulation.

1=. The lenders shall sanction and disburse loan to the borrowers in proper time

of in!estment. They will see that no delay is caused in completing formalities

and processes which may create problem to the borrowers to di!ert funds

elsewhere or want of scope for in!estment and thus the funds become stuck up

ultimately. o loans should always be sanctioned disbursed in proper time

of in!estment to ensure reco!ery of the loan in time from the borrowers.

8:



CONC%U$ION

or any B.B.) student who would like to build up hisGher career in the banking

sector, heGshe must need this type of internship training. )s a successful intern,I am really a lucky person that I could perform my Internship in IIC Bank

/imited, ederation Branch, which is the second bank of Bangladesh in case of

earning profit. I hope this report prepared by me on the basis of my internship

training will be beneficial for the personnel who are already in!ol!ed in ob in

any reputed organi'ation and will also be helpful for the future internees those

who will carry out their internship training in IIC Bank /imited or in other

banks.

IIC Bank /td. has been able to continue its o!er all progress for year to year,

specially in granting loan to right sector and its reco!ery. ince bank%s profit largely

depends on its interest income. IIC Bank /td. was able to achie!e nd highest profit

in year ==. Dhich shows that the loan position, interest and reco!ery are e(cellentL

This success has been making possible due to dynamic leadership of the bank

management, proper guidelines good counsel and de!otion and sincerity of all

categories of officers an employees of the bank.

84



!i4lio-rap6/

1. iddi*ui, ). @. M“Bankier%s )d!ances” AEauf 2ublication.

. 3r. ). E. Fhan #“Bank "anagement”, 2rogati 2rakashani, nd 9dition.

;. Taylor, D.@. /ongworth M“Credit ystem”, 8th 9dition.

Reports an1 "o.rnals

1. IIC Bank /td. )nnual Eeport M ==1,==,==;,==<.

. anti &arayan @hosh, 5agadish Chandra ukladas and "ahbub )hmed

“Choice of Banks Customers% er!ice Credit 2olicy” Bureau of

Business Eesearch, >ni!ersity of 3haka.

;. Booklet of IIC Bank /td.

<. The Bangladesh Bank -rder 16:.

8. -ther 2ublished Information.

86



II NTERNSHIPNTERNSHIP RR EPORTEPORT

OONN

GENERA !AN"ING O# I#I$ !AN"GENERA !AN"ING O# I#I$ !AN"

!! % %

ANOAR RAIHAN FERDOU$

I' o 0033&2001'3**A Program (#+" *atc%)

SS(PER)ISOR(PER)ISOR

RE*A FA'HRU**AAN

ect*+e+

Sc%ool o, *usiness Studies

-ni.ersit/ o, 'e.elopment Alternati.e

7=



)pril =, ==:

To

RE*A FA'HRU**AAN

/ecturer

chool of Business tudies

>ni!ersity of 3e!elopment )lternati!e

$.4ect %etter o0 $.4mission

3ear ir,

Dith due respect, I am submitting this Internship Eeport on ENERA%ENERA%

!AN'IN OF IFIC !AN'!AN'IN OF IFIC !AN' >nder the re*uirement of BB) curriculum.

I thank you for gi!ing me the opportunity to ac*uire these learning and hereby I am

submitting the Internship Eeport. I shall be honored to pro!ide you any additional

information if necessary.

incerely


I' o 0033&201'3

**A Program (#+" *atc%

71



AA $ " N O , E D G E - E N T$ " N O , E D G E - E N T

or the preparation of the report, I am grateful to !arious indi!iduals. Here Iwant to mention them. irst of all, I am !ery much grateful to my faculty

super!isor RE*A FA'HRU**AAN as he asked me to concentrate only

one issue and make a focus in depth, so that, I worked only with “GENERAL

BANKING” and learned much of it. His guidance and suggestions made my

works easier.

I would like to e(press my gratitude I am grateful to "r. )bdus abur Fhan

A2- Head of -peration, &ational Bank /imited and "r. &a'mul )hsan

A"anager, tandard Chartered Bank for allowing me to work with them on

this proect and pro!ide necessary support to me. They has a!ailed me with

their best support.

I want to thank my organi'ational super!isor "d. )riful Ho*ue, 9(ecuti!e

-fficer, Information Technology 3i!ision of IIC B)&F /I"IT93 to assist

me with ad!ice and information during this proect. Truthfully, they gi!e me

the concept and appropriate direction to work in this paper. I am beholden to

them for their information about the present circumstances and future prospect

of card business in Bangladesh.

/astly, I would like to thank all of my family members and friends.


I' o 0033&201'3

7



TA!%E OF CONTENT

• INTRODUCTION

• O!"ECTI#E$ OF THE REPORT

• $COPE

• %IITATION$

• !AC'ROUND OF IFIC !AN' %IITED

• ORANI*ATION HIERARCH+ OF IFIC !AN' %TD

• O!"ECTI#E$ OF THE $TUD+

• ORIIN OF THE REPORT

• ETHODO%O+

• ORANI*ATION CO#ERED

• $OURCE$ OF DATA

• OPENIN OF ACCOUNT

• AI% TRAN$FER (T)

• TE%EPHONE TRAN$FER (TT)

• DEAND DEPO$ITE (DD)

• PREPARATION OF $CHEDU%E

• C%EARIN HOU$E

• CU$TOER HAND%IN

• %OAN PO%IC+

• ENERA% PO%IC+

• CO%%ATERA%

• 5A+$ FOR !AN'$ TO A'E %OAN$

• RO%E OF INFORATION FOR RANTIN %OAN

• %OAN PROCE$$

• E#A%UATIN A %OAN REUE$T

• COERCIA% AND INDU$TRIA% %OAN

• REA% E$TATE %ENDIN

• CON$UER %ENDIN

• INTRODUCTION

• FACTOR$ %IITIN THE %E#E% OF A !AN'$ CREDIT

7;



• ANAEENT OF CREDIT !+ TA'IN $ECURIT+,

• ANAEENT OF CREDIT AAIN$T OOD$,

• PRECAUTION$ TO !E TA'EN !+ A !AN'ER

• ANAEENT OF CREDIT AAIN$T DOCUENT OF TIT%E

OF OOD$,

• $+PTO$ OF PRO!%E %OAN$,

• ANAEENT OF PRO!%E %OAN$

• CAU$E$ OF PRO!%E$ %OAN$

• $TEP$ TO HAND%E PRO!%E %OAN$

• RECO#ER+ OF %OAN

• PRORA$ FOR %OAN RECO#ER+

• CREDIT PO%IC+ OF IFIC!AN' %TD,

• C%A$$IFICATION OF CREDIT OF IFIC!AN' %TD,

• $PECIA% CREDIT $CHEE OF IFIC!AN' %IITED,

• $ECTOR25I$E PO$ITION OF %OAN AND AD#ANCE

• PRO!%E$ IN %OAN RECO#ER+ OF IFIC !AN' %TD• RECOENDATION$

• CONC%U$ION

Intern Ific (Rajib)

Documents

Transcript of Intern Ific (Rajib)