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Evaluation of Credit Management System

of

Trust Bank Limited

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Trust Bank Ltd.


1.1Work Study:

I have work in Trust Bank Limited, Karwan Bazar Branch for three months as an internship student. I work in several departments. All sections were new to me. I was not familiar with them. At first I have joined in the Account Opening Department. I have tried to know about the responsibility of this department and the works perform by this department. In this way I work in Cash Department, Financial Control and Accounts Department (FCAD), Foreign Exchange Department, Credit Department, Clearing Department and Remittance department. In every department I have got new things. I have tried to learn and record all this things. I have also tried to match with my knowledge, which I have acquired throughout my academic period. Whenever I was facing any problem I asked them and they always helped me. In this way, I passed the internship period.

1.2Background of the study:

Now days, education is not just limited to books and classrooms. In today’s world, education is the tool to understand the real world and apply knowledge for the betterment of the society as well as business. From education the theoretical knowledge is obtained from courses of study, which is only the half way of the subject matter. Practical knowledge has no alternative. The perfect coordination between theory and practice is of paramount importance in the context of the modern business world in order to resolve the dichotomy between these two areas. Therefore, an opportunity is offered by Department of Finance Asian University of Bangladesh, for its potential business graduates to get three months practical experience, which is known is as “Internship Program”. Internship Program brings a student closer to the real life situation and thereby helps to launch a career with some prior experience.

I have completed my BBA from Asian University of Bangladesh from the department of Finance. After completion of that it is mandatory for


all students to make internship from a valuable organization. I have completed my internship from Trust Bank Limited (TBL). In these three months I have learned many things from there. Internship report is a part of BBA program.

1.3Objective of the Study:

The objective of the study is to fulfill the requirement of BBA program as well as to gain practical exposures about “Evaluation of Credit Management System of TBL”. In line with the broad objective, the detailed objectives of the study may be spelled out as follows:

To have a practical orientation of the job market;

To gather knowledge about the practical application of the

financial systems;

To examine the effectiveness of accounting as an information

system;

To present an over view of TBL;

To analyze the lending procedure maintained by TBL;

To observe principle lending activities of TBL;

To evaluate the lending performance of TBL;

To measure the actual position in classified loan and provision

maintained by TBL;

To appraise the actual recovery position of TBL;

To identify problems in credit operation of TBL;

And finally to recommends suggestions for the successful credit

operation of TBL.

1.4Coverage of the study:I mainly emphasized on the current account system of TBL. Therefore, I mainly concentrate on the credit department of this organization. This


report tells about the responsibilities of different department and mainly the performance of Credit department. In addition this report has covered the institutional background of TBL and many other information of TBL.

1.5 Methodology of the Study: The study is performed based on the information extracted from different sources collected by using a specific methodology. I have two types of data in this report. These are primary data and secondary data.Primary Sources:

Face-to-Face conversation with the respective officers and staffs;

Interviewing officers and staffs;

Sharing practical knowledge of officials;

Relevant file study provided by the officers concerned;

In-depth study of selected cases.

Secondary Sources: Annual Report of TBL;

Audit Reports;

Website;

Relevant books, Research papers, Newspapers and Journals;

Internet and various study selected reports.

Justification of the Study:There are three types of schedule commercial banks are in operation in our economy. They are Nationalized Commercial Banks, Local Private Commercial Banks and Foreign Private Commercial Banks. TBL has discovered a new horizon in the field of banking area, which offers different General Banking, Investments and Foreign Exchange banking system. So I have decided to study on the topic Evaluation of Credit Management System of TBL. Because the Internship program of the university is an integral part of the BBA program. So it is obligatory to


undertake such task by the students who desirous to complete and successfully end-up their BBA degree. This also provides an opportunity to the students to minimize the gap between theoretical and practical knowledge. During the internship program the teachers of the department are attached to actively and constantly guide the students. Students are required to work on a specific topic based on their theoretical and practical knowledge acquired during the period of the internship program and then submit it to the teacher. That is why I have prepared this report.

Limitation of the Study:

From the beginning to end, the study has been conducted with the intention of making it as a complete and truthful one. However, many problems appeared in the way of conducting the study. During the study, it was not possible to visit the whole area covered by the bank although the financial statements and other information regarding the study have been considered. For preparing this report, I have the following limitations:

All the branches of the sample bank were not physically visited;

All the concerned personnel of the bank have not been

interviewed because of the time constraints of the officials;

Lack of in-depth knowledge and analytical ability for writing such

report;

This is my first internship report. So I have some lack of

experience;

The time period for this study was short;

Inadequacy and lack of availability of required Current data;

Official secrecy of TBL.


Trust Bank Ltd.


2.1Institutional overview:

Trust Bank Limited is a scheduled commercial bank established under the Bank

Companies Act, 1991 and incorporated as Public Limited Company under the

Companies Act, 1994 in Bangladesh on 17 June 1999 with the primary objective to

carry on all kinds of banking businesses in and outside Bangladesh. The Bank has

Thirty five (35) branches operating in Bangladesh as 30th October 2008.

Initially bank has started its operation in the name of The Trust Bank Limited but

on 12 November 2006 it was renamed as “Trust Bank Limited” by the Registrar of

Joint Stock Companies. The new name of the bank was approved by Bangladesh

Bank on 03 December 2006. Composition of the Board of TBL consists of Ex-

officio Directors of in-service senior Army personnel, with the Chief of Army Staff

as its Chairman and the Adjutant General as its Vice-Chairman.

In addition to ensuring quality customer services related to general banking the bank

also deals in Foreign Exchange transactions. In the mean time the bank has extended

credit facilities to almost all the sectors of the country’s economy. The bank has

plans to invest extensively in the country’s industrial and agricultural sectors in the

coming days.

It has also plans to promote the agro-based industries of the country. The bank has

already participated in syndicated loan agreement with other banks to promote

textile sectors of the country. Such participation would continue in the future for

greater interest of the overall economy. Keeping in mind the client’s financial and

banking needs the bank is engaged in constantly improving its services to the clients

and launching new and innovative products to provide better services towards

fulfillment of growing demands of its customers. Recently the bank has changed its

logo. The bank believes the new logo is the symbol of dynamism automation and

trust.


Previous Logo New Logo

2.2Corporate Information:

Banking License received on : 15 July 1999

Certificate of Incorporation received on : 17 June 1999

Certificate of Commencement of Business

received on

: 17 June 1999

First Branch License received On : 9 August 1999

Formal inauguration on : 29 November

1999

Sponsor Shareholders : Army Welfare

Trust

Listed with DSE September 25,

2007

Listed with CSE September 24,

2007


Organization: Head office : Dhaka

Department : 8

Branches : 35(as on 20 October 2008)

Employees : 508 (as of 31 December 2007)

Capital Structure and Sources of Fund:Authorized Capital:

20,000,000 ordinary shares of Tk.100 each 2,000,000,000

Issued, Subscribed and Paid up Capital:

5,000,000 ordinary shares of Tk. 100 each 500,000,000

Other sources of Bank’s fund are the Bangladesh Bank, Commercial Banks, Local

and Overseas financial institutions and customer’s deposits.

2.3 Vision and Mission Statement of TBL

The efforts of TBL are focused on delivery of quality service in all areas of banking

activities with the aim to add increased value to shareholders’ investment and offer

highest possible benefits to the customers. There must have the vision as well

mission to what should back every effort of the bank as it is said, “A mission

without any vision is a daydream and a vision without any mission is a nightmare”.

Vision: We aim to provide financial services to meet customer expectations so that

customers feel we are always there when they need us, and refer us to their friends

with confidence. We want to be a preferred bank of choice with a distinctive

identity.


Mission: Our mission is to make banking easy for our customers by implementing

one-stop service concept and provide innovative and attractive products and services

through our skilled and qualified human resources. We always look forward to

benefit the local community through supporting entrepreneurship, social

responsibility and economic development of our country.

2.4 Core Values of the Bank

In all types of banking activities Trust Bank Ltd. sticks to six core

values. In any way the bank does not compromise with any of these

values. The bank believes the values are the guidelines in its banking

operation. The core values of the bank are as follows:

Dependable

Professional

Dynamic

Reliable

Trustworthy and

Fair.

2.5Philosophy of the Bank:

At present, the bank has 35 branches across the country and it is

committed to become equal service providers compatible with the norms

of commercial schedule bank. It renders all types of personal,

commercial and corporate banking services to its customers within the

purview of the Bank Companies Act, 1991 and in line with the

directives and policy guidelines lay down by Bangladesh bank.


2.6 Ownership:Army Welfare Trust and some defense personnel have retained the total number of

outstanding shares of this bank. Army Welfare Trust holds about 99.20% of total

number of shares. And eight defense personnel have retained the remaining 0.80%

shares equally. Particulars of the Sponsor Shareholders are as follows:

Name of the Sponsor Shareholders No. Of

Shares

Amount

1. Army Welfare Trust

2. Lt Gen Moeen U Ahmed, psc

3. Maj Gen Md. Matiur Rahman ndu, psc

4. Brig Gen Md. Zillur Rahman, MCPS,

MSC

5. Brig Gen S M Mahbubul Karim

6. Brig Gen Md. Rafiqul Islam, ndc, psc

7. Brig Gen Md. Shawkat Hossain, psc

8. Brig Gen Muhammad Anisur Rahman,

ndc, psc

9. Brig Gen Mohd. Mahbubul Hasan, ndc,

psc

4,999,920

10

10

10

10

10

10

10

10

499,992,000

1,000

1,000

1,000

1,000

1,000

1,000

1,000

1,000

Total 5,000,000 500,000,000

2.7 Managerial Hierarchy of TBL

The managerial hierarchy of Trust Bank Ltd. starts from Junior Officer

and ends to the Managing Director. The managing Director is the apex

body of the management of the bank


Figure: Organ gram of TBL


Deputy Managing Director

Senior Vice President

Senior Executive Vice President

Senior Officer

Vice President

Principal Officer

Assistant Vice President

Executive Officer

Senior Assistant Vice President

Officer

Senior Executive Officer

Managing Director

Junior Officer

2.8 Nature of the Bank’s Business

Trust Bank Ltd offers full range of banking services that include:

Deposit banking

Loans & advances

Export

Import

Financing inland

International remittance facilities

The bank offers a full scale commercial banking that includes:

Foreign Exchange transactions

Personal Credit

Consumer & Corporate Banking

2.9Management:Management of this bank has been lead by the Managing Director. The operational

head of each department represent in the management. Management of this bank

consists of the following members:

Managing Director (MD)

Deputy Managing Director (DMD)

Head of Credit represent by SVP

Head of Operation represent by SVP

Head of International Division represent by SVP

Head of Human Resources Division represent by SVP

Head of General Service Department represent by SAVP

Head of Retail Banking Unit represent by VP.

2.10 Audit Committee:An audit committee has been formed by the Board of Directors of the Bank in its

64th Board meeting held on 05 February 2003. In accordance with the BPRD circular


letter no. 12 dated 23 December 2002, the committee constituted with a chairman,

two members and a members secretary.

At 31 December 2006, the Honorable Members of the committee were

as follows:

Name Position Status

With

committee

Educational

qualification

Brig Gen S.M. Mahbubul

Karim

Brig Gen Md. Shawkat

Hossain

Brig Gen Md. Shawkat

Hasan

Mr. Farhad Uddin

Director

Director

Director

Director

Chairman

Member

Member

Member

Secretary

B.Sc.(Eng)MBA

PSC

NDC, PSC

M.Com. ACMA

2.11 Online baking service:From 1st March 2007 this bank has introduced online banking service with the

motive to provide faster and modern facilities to its customers. The bank is

providing online services through FLORA BANK SOFWARE. With the

introduction of this system the bank got positive feedback from its clients. The bank

takes money from the clients as online service charge at the time of transaction.

2.12 SWOT Analysis of the TBL:SWOT Analysis is an important tool for evaluating the company’s Strengths,

Weaknesses, Opportunities and Threats. It helps the organization to identify hoe to

evaluate its performance and can scan the macro environment, which is turn would

help the organization to navigate in the Turbulence Ocean of competition. Following

is given the SWOT analysis of The Trust Bank:


Strengths:1. Top Management:

The top management of the bank, the key strength for The Trust Bank has

contributed heavily towards the growth and development of the bank. The top

management officials are army’s highest position holder, so they have a good idea

about the current situation.

2. Company Reputation:

The Trust Bank has created a good reputation in the banking industry of the country.

Their main customers are army persons and other defense persons. The popularity of

this bank is increase day by day also in the general public area.

3. Sponsors:

The Trust Bank has founded by The Army Welfare Trust. The main sponsors for

this bank are Sena Kalyan Sangstha. The chairperson of this bank is Chief of Army

Staff and directors are also appointed by the Sangstha, that’s why the sponsor does

not have any problem for the fund.

4. Modern Facilities and Computer:

From the very beginning The Trust Bank tries to furnish their work surroundings

with modern equipment and facilities. For speedy service to the customer, The Trust

Bank had installed money-counting machine in the teller counter. The bank has

computerized banking operation under software called PC banking. More over

computer printed statements are available to internal use and occasionally for the

customers. The Trust Bank is equipped with telex and fax facilities.

5. Stirring Branches:

From the formative stage of The Trust Bank tried to furnish their branches by the

impressive style. Their well-decorated branches gets attention of the potential

customer, this is one kind of positioning strategy. The Sena Kalyan Bhaban Branch

is also impressive and is comparable of foreign banks.

6. Interactive Corporate Culture:


The corporate culture of The Trust Bank is very much interactive compare to other

local organization. This interactive environment encourages the employee to work

attentively. Science the banking jobs is very much routine work oriented and lovely

environment boots up the work capability of the employees.

Weaknesses:1. Hierarchy Problem:

The hierarchy problem treated as a weakness for The Trust Bank, because the

employee will not stay for a long. So there will be a chance of brain drain from this

bank to other bank.

2. Advertisement Problem:

There is another weakness for The Trust Bank is advertisement. Their media

coverage is so much low that people do not know the bank thoroughly.

Opportunities:1. Diversification:

The Trust Bank can pursue diversification strategy in expanding its current line of

business. They do not serve not only the army but also the general people.

2. Business Banking:

The investment potential of Bangladesh is foreign investors. So TBL has

opportunity to expand in business banking.

3. Credit Card:

There is an opportunity to launch Credit Card in Bangladesh by TBL. Beside this,

TBL can acquire services for cards like VISA, MASTER CARD etc. So that they

can enhance the market based card service.

Threats:1. Contemporary Banks:

The contemporary banks of The Trust Bank like: Dhaka Bank, Dutch Bangla Bank,

National Bank, Mutual Trust Bank, Mercantile Bank are its major rivals. They are

carrying out aggressive campaign to attract lucrative clients as well as big time

depositors. The Trust Bank should remain vigilant about the steps taken by these

banks, as these will in turn affect The Trust Bank strategies.


2. Multinational Bank:

The Rapid expansion of multinational bank poses a potential threat to new PCB’s.

Due to the booming energy sector, more foreign banks are expected to operate in

Bangladesh. Moreover, the existing foreign banks such as HSBC, AMEX, CITI

N.A, and Standard Chattered are now pursing an aggressive branch expansion

strategy. Since the foreign banks have tremendous financial strength, it will pose a

threat to local bank to a certain extant in terms of grabbing the lucrative clients.

3. Default Culture:

Default culture is very much familiar in our country. For a bank, it is very harmful.

As The Trust Bank is new, it has not faced it seriously yet. However as the bank

grows older it might become big problems.

2.13 Activities of TBL:

The main activities of TBL are as follows:

Deposit Banking

Issuing Credit

Supports in the industrialization

Foreign Remittance

Assistance in foreign transaction

Providing safe locker service to its customers

Supports to its clients.

2.14 Balance sheet of TBL:


2.16 Major Deposit Schemes of TBL:Trust Bank Limited has introduced different type of deposit schemes to support

lower, middle and high income group pf people. Presently they are offering

Operational and Non-operational Account to their prospective customers.

Operational Account: Savings Account

Current Account

STD Account

Non-Operational Account: Fixed Deposit Receipt (FDR)

Trust Smart Savers Scheme (TSS)

Trust Money Double Scheme (TMDS)

Trust Money Making Scheme (TMMS)

Trust Educare Scheme (TES)

Monthly Benefit Deposit Scheme (MBDS)

Lakhopati Savings Scheme (LSS)

Interest First Fixed Deposit Scheme (IFFDS)

Foreign Currency Account (FC)

Non-Resident Foreign Currency deposit Account (NFCD)

Non-Resident Investors’ Taka Account (NITA)


Trust Bank Ltd.


3. Literature ReviewLoans or credits comprise the most important asset as well as the primary source of

earning for the banking institutions. On the other hand, loan/credit is also the major

source of risk for the bank management. A prudent bank management should always

try to make an appropriate balance between its return and risk involved with the loan

portfolio. Credit appraisal process is the tool, which helps the bank to predict the

risk and return on the proposed project for credit disbursement. Therefore, from the

above definition it is clear that credit appraisal is a very important factor for banks.

To get a clear idea about credit appraisal process we need to know the key factors of

credit appraisal procedures.

3.1 Credit

The word credit is derived from the Latin word “credo” which means “I believe”

and is usually defined as the ability to buy with a promise to pay. It consists of

actual transfer and delivery of goods and services in exchange for a promise to pay

in future. It is simply the opposite of debt. Diversification of banking service has

accelerated the use of credit in the expansion of business operation. It is a

fundamental precept of banking everywhere that advances are made to customers in

reliance on his promise to pay rather than the security held by the banker.

3.2 Principles of Credit

A prudent Banker should always adhere to the following general principles of

lending funds to his customers.

Background, Character and ability of the borrowers

Purpose of the facility,

Term of facility,

Safety,

Security,

Profitability,

Source of repayment,

Diversity.


Bank should never put “All its eggs in one basket”. It should be noted that selection

of appropriate borrowers, proper follow-up and end-use supervision through

constant close contact with the borrowers, are the corner stones for timely recovery

of credit.

3.3 Factors of Credit Policy

Credit policy of all banks cannot be developed on same lines because of differences

in their operational needs and resource structures. In designing a credit policy,

considerations should be given to following:

1) Total deposit resources of the bank and rate of fluctuation of resources.

2) Deposit structure.

3) Trend of growth in deposit and economic growth rate of the country.

4) Capital fund and other reserves. Large bank’s capital fund and secondary

reserve in investment can permit its loan policy to be liberal in respect of its

limit of lending in high risk-high returns loans while a relatively new small

bank would stress more on liquid and highly secured loans at lower interest

in its policy.

5) Capability of loan administration shall have to be given due weight in the

credit policy. A large bank is able to hire numbers of highly skilled

specialists/experts in different areas to advise the bank in loan making but

smaller banks relying on usual credit managers cannot venture into sectors

that require expert appraisal of loan applications and also that requires

intensive post implementation monitoring of large and complex industrial

loans.

6) Investment size of the bank and its nature.

3.4 Loan Documentation

The minimum requirements for loan or other facility documentation of a Bank are:


a) Copies of the relative sanction letter indicating that the transaction has been

approved by properly authorized officers of the Bank.

b) A copy of the letter of sanction addressed to the customer and his acceptance

thereof.

c) All necessary documentation required to meet the terms and conditions of the

facility in the manner in which it was approved.

d) Before disbursement, it should be satisfied that all legal formalities have been

completed.

e) Disbursement of all facilities shall be made on an Offering Sheet basis to ensure

that all additional requests are duly approved by two authorized Officers one of

which must be the Manager or Sub-Manager.

f) Securities offered should also be thoroughly verified / inspected once in a month

and stock report prepared.

g) Where the loan agreement calls for restrictive covenants and ongoing conditions,

the Manager must not only satisfy himself that these are adhered to at the outset of

the transaction (i.e. date of initial takedown) but assure himself, at regular intervals,

that these are not being violated.

h) Since the Manager together with the Credit Officer is fully responsible for

documentation, they will formally sign a check list. Under no circumstances may

anyone permit drawings under any facilities, until they have signed off the check

list.

I) The Manager/Sub-Manager should ensure that appropriate steps are being taken to

keep loan documentation current for all assets of the Bank. The loan documentation

check-list, should therefore, be reviewed at regular intervals.

J) Lines of credit should, as a rule, be confirmed in writing to the borrower. A

Specific expiration date for the line should be included. Moreover every letter of

sanction must contain the Bank's standard clauses.

K) The borrower must explicitly undertake that all information supplied by him to

Bank in connection with the approved lines of credit is correct.


L) Any material or adverse change in business conditions will cause the amount due

to Bank from the client immediately repayable. The Bank reserves the right to call

back the facilities extended at any time without assigning any reason whatsoever.

3.5 Standard Procedure of CreditThe Standard Procedure of Credit of a Bank is completed through the following

Steps:

A) Any request for credit facilities must be made by the borrower in the Bank's prescribed standard form properly filled in and completed in all respect and duly signed by the prospective borrower.

B) Submission of past 3 Years financial statement: For all credit proposals, the borrowers and guarantors (if any) should, wherever possible submit past 3 years’ Profit & Loss A/C and Balance sheet duly audited by a recognized and competent Chartered Accountant containing unqualified opinions. Some borrowers may not have audited financial statements at all. In either case, the lending officer must interview the potential borrower or guarantor and obtain satisfactory, accurate and complete financial information supporting any prior financial statements either audited or not audited. In the case of an individual borrower or guarantor, the financial statements must be signed by competent authority and must contain legend to the signatory, all assets and liabilities both direct and contingent and all sources of income and items of expenses. For all un-audited statements provided by a company, financial officer of the company must execute such legend.

C) On all new credit arrangements and annual reviews emanating in Branches, an analysis of the credit worthiness of the borrower and guarantor (if any) should be prepared by the Credit Department at the Branch where credit monitoring responsibility lies and a copy thereof forwarded to the Head of Credit Division at 'Head Office for pre-factor or post-factor review as the case may be. In case such credit originates in the Head Office, it will be forwarded to the Branch Manager for record and action.

3.6 Credit Analysis

When a customer requests a loan, bank officers analyse all available information to

determine whether the loan meets the bank’s risk-return objectives. Credit analysis


is essentially default risk analysis in which a loan officer attempts to evaluate a

borrower’s ability and willingness to repay. The banker has to identify three distinct

areas of commercial risk analysis related to the following questions:

1. What risks are inherent in the operations of the business?

2. What have managers done or failed to do in mitigating those risks?

3. How can a lender structure and control its own risks in supplying funds?

The first question forces the banker to generate a list of factors that indicate what

could harm a borrower’s ability to repay. The second recognizes that repayment is

largely a function of decision made by a borrower. Is management aware of the

important risks and has it responded? The last question forces the banker to specify

how risks can be controlled so that bank can structure an acceptable loan agreement.

Therefore, Bankers look into key risk factors or Qualitative analysis which has

been classified according to the five Cs of credit:

1. Character:

Character refers to the borrower’s honesty and trustworthiness. A banker must asses

the borrower’s integrity and subsequent intent to repay. If there are any serious

doubts, the loan should be rejected.

2. Capital:

Capital refers to the borrower’s wealth position measured by financial soundness

and market standing. It helps cushion loses and reduces the likelihood of

bankruptcy.

3. Capacity:

Capacity involves both borrower’s legal standing and management’s expertise in

maintaining operations so the firm or individual can repay its debt obligations.

Under capacity an individual must be able to generate income to repay the cash.

4. Condition:

A condition refers to the economic environment or industry specific supply,

production and distribution factors influencing a firm’s operations. Repayment

sources of cash often vary with the business cycle or consumer demand.

5. Collateral:


Collateral is the lender’s secondary source of repayment or security in the case of

default. Having an asset that the bank can seize and liquidate when a borrower

defaults reduces loss, but does not justify lending proceeds when the credit decision

is originally made.

Under credit analysis Bank also does Quantitative analysis which refers to the

analysis of financial statement ratios to know the past performance of a company.

Some of the key ratios which serve as a tool for financial analysis are classified as

1) Financial Ratio

2) Turnover Ratio

3) Profitability Ratio

1) Financial Ratio

Financial ratios indicate about the financial position of the company. A company is

deemed to be financially sound if it is in a position to carry on its business smoothly

and meet its obligations-both long-term as well as short term-without strain. Some

of the important ratios which are calculated in order to judge the financial position

of the company are:

i) Fixed Asset Ratio =

ii) Current Ratio =

iii) Quick Ratio =

iv) Debt Equity Ratio =

2) Turnover Ratio

The turnover ratios indicate the efficiency with which the capital employed is

rotated. They are also known as Activity or efficiency ratio. The overall profitability

of the business depends on the turnover i.e. the speed at which the capital employed


in the business rotates. Higher the rate of rotation, greater the profitability. In order

to find out which part of capital is efficiently employed and which part not, different

ratios are calculated. These are:

i) Fixed Asset Turnover Ratio =

ii) Working Capital Turnover Ratio =

3) Profitability Ratio

Profitability is an indication of the efficiency with which the operations of the

business are carried on. Poor operational performance may indicate poor sales and

hence poor profits. Bankers look at the profitability ratio as an indicator whether

or not the firm/company earns substantially more than it pays interest for the use

of borrowed funds and whether the ultimate repayment of their debt appears

reasonably certain. The important profitability ratios are:

i) Overall Profitability Ratio =

ii) Gross Profit Ratio =

iii) Net Profit Ratio =

3.7 Lending Risk Analysis

Lending Risk analysis (LRA) is simply a loan processing manual and has done when

the amount of loan is above 1 core. By going through this manual the lending

bankers can asses the creditworthiness of their prospective borrowers.

Therefore, LRA is such an instrument which is definitely and directly related with

lending information to analyze the borrower’s financial, marketing, managerial and

organisational aspects subjectively and objectively. It also facilitates the analyst to


know the security risk of the credit. Lending risk Analysis involves assessing the

likelihood of repayment of loans to the bank as per agreement on the basis of

analysis of certain risks. To analyze these risks bankers will need to fill-up a 16-

page LRA form. The form leads to scoring various risk factors involved in lending.

LRA has divided the various risks into two groups namely, Business Risk and

Security Risk.

1. Business Risk:Business Risk is concerned with whatever the borrowing company would fail to

generate sufficient cash out of business to repay the loan Business Risk, the main

component of lending risk, consists of the Industry Risk and the company Risk

A. Industry Risk:

Due to some external reasons a business may fail and the risk which arrives from

external reasons of the business is called Industry Risk. It has two components:

i) Supplies Risk:

When the business fails due to disruption in the supply of inputs, the consequent risk

which would arise is known as Supply Risk

ii) Sales Risk:

When the business fails for disruption in sales, this type of risk would generate.

B. Company Risk:

Company Risk is shown for some internal reasons of the business. It has also two

main components and four sub-components

i) Company position Risk:

Each and every company holds a position within an industry. This position is very

much competitive. Due to weakness in the company’s position in its industry, a

company may fail and the risk of failure is called Company Position Risk. It

depends on-

(a) Performance Risk:

If a company fails to perform well enough to repay the loan because of its weakness

under given expected external conditions, the company is said to suffer from

performance risk.


(b) Resilience Risk:

When a company fails due to lack of its resilience to unexpected external conditions,

the resilience risk is generated.

ii) Management Risk:

If the management of a company fails to exploit the company’s position effectively,

the company can fail and this risk of failure is called management Risk. It can be

subdivided further-

(a) Management Competence Risk:

Management competence risk is the risk that the company fails because the

management is incomplete

(b) Management Integrity Risk:

Management integrity risk is the risk that the company fails to repay its loan due to

lack of management integrity.

2. Security Risk:

Security risk is the risk that the realised value of the security does not cover the

exposure of loan. Exposure means principal plus outstanding interest. Security risk

can be divided into two parts:

(a) Security Control Risk:

Security control Risk is the Risk that the bank fails to realise the security because of

lack of bank’s control over the security offered by the borrowers.

(b) Security Cover Risk:

Security cover risk is the risk that the realised security value may not cover the full

exposure of loans.

3.8 Collateral

Collateral is the lender’s secondary source of repayment or security in the case of

default. Having an asset that the bank can seize and liquidate when a borrower


defaults reduces loss, but does not justify lending proceeds when the credit decision

is originally made.

3.8.1 Characteristics of Good Collateral

The following five items determine the suitability of items for use as collateral. The

suitability depends in varying on standardisation, durability, identification,

marketability and stability of value.

1. Standardization:

The standardisation leaves no ambiguity between the borrower and the lender as to

the nature of the asset that is being used as collateral.

2. Durability:

Durability refers to the ability of the assets to withstand wear. Or it can refer to its

useful life. Durable goods make better collateral than non-durable. Stated otherwise

crushed rocks make better collateral than fresh flowers.

3. Identification:

Certain types of assets are readily identified because they have definite

characteristics or serial numbers that cannot be removed. Two examples are a large

office building and an automobile that can be identified y make, model and serial

number.

4. Marketability:

In order for collateral to be of value to the bank, the collateral must be marketable.

That is the borrower must be able to sell it. Specialised equipment is not as good as

collateral as are dump trucks, which have multiple uses.

5. Stability of value:

Bankers prefer collateral whose market values are not likely to decline dramatically

during the period of the loan such as common stock.


3.8.2 Different Kinds of Collateral

Secured loans have a pledge of some of the borrower’s property behind them (such

as home or an automobile) as collateral that may have to be sold if the borrowers

have no other way to repay the bank. Some of the most popular collaterals are:

1. Account Receivable: The banks take a security in the form of a stated

percentage of the borrower’s balance sheet. When the borrowers credit

customers send in cash to retire their debts this cash payments are applied to

the balance of borrowers loans. The bank may agree to lend more money as

new receivable arise from the borrowers sells to its customers thus allowing

the loan to continue as long as the borrower has need for credit and

continuous to generate and adequate volume of sales .

2. Factoring: Bank can purchase a borrowers account receivable based upon

some percentage of the book value because the bank takes over the

ownership of the receivable, it will inform the borrowers customers that hey

should send their payments to the purchasing bank.

3. Inventory: A bank will lend only a percentage of the estimated market value

of a borrower’s inventory in order to leave a substantial cushion in case the

inventories value begins to decline. The inventory pledged may be controlled

completely by the borrower using a so-called floating line approach.

4. Real Property: A bank may take a security interest in land and / or

improvements on land own by the borrower and records its clime-a

mortgage-with a government agency in order to define against successful

claim by others.

5. Personal Property: Bank takes a security in jewellery, securities and other

forms of personal property owned by a borrower.

6. Personal Guarantees: A pledge of the stock deposits or other personal

assets held by the major stock holders or owners of a company may be

required as collateral to secure a business loan.


Trust Bank Ltd.


Loans and Advances of TBLThe following types of credit facilities are generally allowed by Trust Bank ltd. to

the individuals, partnership firms, Corporations and others, either on Demand, Time

or Self liquidating basis and are carried on the Bank's General Ledger. The credit

facilities provided by the bank are divided into two broad categories:

Funded Facilities

Non- Funded Facilities

4.1 Funded FacilitiesAny type of credit facility which involves direct outflow of Bank's fund on account

of borrower is termed as funded credit facility, the funded facilities of loans and

advances are:

1. Short Term Loans

2. Short Term Loans (Others)

3. Long Term Loans

4.1.1 Short Term Loans

a) Secured over draft

OD is some kind of advance. In this case, the customer can over draw from his/her

current account. There is a limit of overdraw, which is set by the bank. A customer

can with draw that much amount of money from their account. For this there is an

interest charge on the over draw amount. This facility does not provide for every

one, the bank will provide only those who will fulfill the requirement. It means that

only real customer can get this kind of facility. The practice of TBL is that it states

the Over draft as Secured Overdraft. This is a type of over draft facility given by

keeping sufficient collateral from the customer. This facility provides specific right

to a client to over draw within a pre fixed limit for a certain period of time. SOD is

normally granted against the security of tangible asset such Lien of FDR, Bonds,

Sanchay Patra etc. Interest charge on SOD is calculated on the basis of the security

liened.


Incase of FDR with Trust Bank the interest rate is 2.5% above the FDR rate,

with other bank is 14%

Incase of Sanchay Patra purchased from Trust Bank the interest rate is 2.5%

above the rate Sanchay Patra, from other bank is 14%

The common thing is 2.5% spread is kept in charging interest. Interest is

calculated on outstanding amount at daily basis.

SOD (General)

Advance allowed to individual/firm against financial obligation (i.e. lien of

FDR/PS/BSP etc.) and against assignment of work order for execution of contract

works fall under this head. This advance is generally allowed for allowed for

definite period and specific purpose.

SOD (Imports)

Advances allowed for purchasing foreign currency for opening L/C for imports of

goods fall under this type of leading. This is also an advance for a temporary period,

which is known as preemptor finance and falls under the category ‘Commercial

Lending’.

b) Time Loan:

Cash Credit (Hypothecation):

It allows to individuals or firm for trading as well as whole-sale purpose or to

industries to meet up the working capital requirements against hypothecation of

goods as primary security fall under this type of lending. It is a continuous credit. It

allowed fewer than two categories:

Commercial Lending

Working Capital

Cash Credit (Pledge)


Financial accommodation to individual/firm for trading as well as whole sale

purpose or to industries as working capital against pledge of goods primary security

falls under this head of advance. It also a continuous credit and like the above

allowed under the categories:

Commercial Lending

Working Capital

4.1.2 Short Term Loans (Others)

a. Micro Credit:

Loan has given only to the Army Person for the purpose of Repairing and

Reconstruction of dwelling Houses. It is usually given for a small amount, such as

20000, 30000, and 40000. The amount is given on the basis of salary range.

b. PAD (Payment against document):

Payment made by the bank against lodgment of shipping documents of goods

imported through L/C falls under this type head. It is an interim type of advance

connected with import and is generally liquidated shortly against payments usually

made by the party for retirements of documents for release of import goods from the

customer authority. It falls under the category ‘Commercial Lending’.

c. LTR (Loan against Trust Receipts):

Advances allowed for retirement of shipping documents and release of goods

imported through L/C without effective control over the goods delivered to the

customer fall under this head. The goods are handed over the importer under trust

with arrangement that sales proceed should be deposited to liquidate the advances

within a given period. This is also temporary advance connected with import that is

known post-import finance under category ‘Commercial lending’.

d. IDBP (Inland documentary bill purchase):

Payment made through purchase of inlands bill to meet urgent requirements of

customer fall under this type of credit facility. This temporary advance is adjusted


from the proceeds of bills purchased for collection. It falls under the category

‘Commercial Lending’.

e. FDBP (Foreign documentary bill purchase):

Payment made to a party through purchase of foreign documentary bills fall under

this head. This temporary advance is adjustable from the proceeds of negotiable

shipping/export documents. It falls under category ‘Export Credit’.

4.1.3 Long Term Loans

a. HBL (House Building loan)

A credit facility is available for the Armed Forces officials. This loan is provided to

build and repair dwelling house. The highest limit of this loan is 25 lac.

b. Term Loans:

The term of loan is determined on the basis of gestation period of a project

generation of income by the use of the loan. Such loans are provided for Farm

Machinery, Dairy, Poultry, etc. It is categorized in the following segments:

Midterm – This loan facility is extended for more then 1 year but less the 3 year.

Trust Bank encourages midterm loan.

Long term – Tenure of long term loan is more then 5 years.

The long term loans / Project loans are provided in two ways by TBL:

Sole Financing

Syndicate Financing.

4.1.3.1 Sole Financing by TBL

Here Trust Bank Ltd. finances the whole project from its own fund. Self help is the

best help. TBL believes in this norm. for this it tries its best to fund the loan amount


solely except very rare cases. The project appraisal in case of sole financing of TBL

covers five different aspects of a project which we shall discuss later in

4.1.3.2 Syndicate Financing by TBL

Trust Bank is a private commercial bank. The main focus of Trust Bank is to

provide short term & medium term loan facility. So it does not concern much about

Long term project finance & syndicated finance. Trust Bank acts simply as a

participatory bank rather than Lead bank. Its main concern is to collect the interest

& the loan installment and all the regulatory & legal functions are performed by the

Lead arranger.

The major syndicate loans provided by Trust Bank are Confidence Salt Ltd., Nasir

Glass Industries Ltd, and Popular Pharmaceuticals Ltd.

For the Syndicate loan Trust Bank analyses the project feasibility by analyzing the

projected data of the particular project. The project analysis practice of Trust Bank is

given later in case of Confidence Salt Ltd.

Syndicate Loan to Nasir Glass Industries Ltd

The features of this syndicated loan are as follows:

1. Name of the Project: Nasir Glass Industries Ltd.

2. Type of Project: Manufacturing Plant of Float glass sheet.

3. Project Location: Gazipur.

4. Estimated project cost: Tk. 199.54 Crore.

5. Capacity: To produce 135 Metric Tons finished float glass sheet per day.

6. Source of raw materials: Both import & local procurement.

7. Total facilities granted by banks: Total facility provided by all banks is

Tk. 100 crore where Trust Bank Ltd. provided 9 crore. Trust bank sanction

the loan on 25-03-2004 and the expiry date is 24-03-2010.


8. Interest rate: @ 14% on the total amount of total facility provided, whereas

trust bank charges @14% on loan provided by it.

9. Trust bank’s position in this Syndicate loan: Trust bank acts as

participatory bank whereas Prime Bank Ltd. act as lead bank and all legal

responsibility upon the lead bank. Other participatory banks are:

Mutual Trust Bank Ltd.

Dhaka Bank Ltd.

Mercantile Bank Ltd.

Arab Bangladesh Bank Ltd.

United Commercial Bank Ltd.

State Bank of India.

Export Import Bank of Bangladesh Ltd.

Dutch Bangla Bank Ltd.

International leasing & Financial Services Ltd.

Premier Leasing International Ltd.

Uttara Finance & Investment Ltd.

Standard Bank Ltd.

Syndicate loan in case of Popular Pharmaceuticals Ltd.

The features of this syndicated loan are as follows:

1. Name of the Project: Popular Pharmaceuticals Ltd.

2. Type of Project: Manufacturing biological and non-biological drugs.

3. Estimated project cost: Tk. 91 Crore 56 lac..

4. Source of raw materials: Both import & local procurement.

5. Total facilities granted by banks: Total facility provided by all banks is

Tk. 39 crore where Trust Bank Ltd. provided 4 crore. Trust bank sanctions

the loan on 19-12-2004 and the expiry date is 19-06-2012.

6. Interest rate: @ 11% on the total amount of total facility provided, whereas

trust bank charges @14% on loan provided by them.


7. Trust bank position in this Syndicated loan: Trust bank acts as

participatory bank whereas Prime Bank Ltd. acts as lead bank and all legal

responsibility upon the lead bank. Other participatory banks are:

United Commercial Bank Ltd.

State Bank of India.

Export Import Bank of Bangladesh Ltd.

Standard Bank Ltd.

Security documents maintained by Trust Bank Ltd. in this syndicate finance:

Facility agreement

Paripassu security agreement

Escrow account agreement

Memorandum of deposit of title deeds and copy of certificate of registration

of mortgage.

Deed of agreement.

Letter of hypothecation by way of fixed and floating charge.

Personal guarantee of Managing Director and witnesses.

4.2 Non Funded Facilities provided by Trust Bank LtdNon funded facilities are divided into the following categories:

Bank Guarantee.

Letter of credit.

4.2.1 Bank Guarantee

Trust Bank offers guarantee for its reliable and valuable customer as per

requirements. This is also a Credit facility in contingent liabilities from extended for

participation in development work like supply of goods and services. The features of

Bank Guarantee are as follows:

It is a written document on non-judicial stamp

Expiry date is mentioned specifically with other terms and conditions


Trust Bank receives commission quarterly @ 0.50% of the guaranteed

amount.

Trust Bank offers two types of Bank Guarantee, which are as follows:

1. Tender or Bid Bond Guarantee

In time of tender bidding either cash or bank guarantee is required in case payment

of earnest money. The tender guarantee assures that the tenders shall uphold the

conditions of his tender during the period of the officer as binding and that he /she

will also sign the contract in the event of the order being granted. The steps in the

process of Bid bond Guarantee are:

Request letter from customer along with board resolution in case of Limited

company

Trade license in case of Proprietorship Company

Copy of tender form

Margin:

Incase of reliable client 10% to 20%

For a new client 100% margin is required

Bank guarantee is issued in 150 Tk. Stamp Pad

Note is initiated

Approval of Bank guarantee is given.

2. Performance Guarantee:

Trust Bank also gives guarantee on behalf of the customer on completion of the

delivery or performance after getting the tender. Beneficiary finds that as a

guarantee, the contract will be fulfilled in every respect and can retain the guarantee

as per provision for long time. Including a clause stating that the supplier can claim

under the guarantee, by presenting an acceptance certificate signed by the buyer, can

counteract this. Document required for performance guarantee are:

Tender schedule.

Guarantee letter.


A guarantee can be converted into funded facility if it is en cashed. If the client is

unable to meet up banks demand a loan account is created like Over Draft as Bank is

liable to pay to the beneficiary of the guarantee. If Bank guarantee is not used then

the beneficiary or party to whom the guarantee was given on behalf of the client will

sign on the back of the Bank Guarantee stamp and write the word ‘Released’. Then

the facility will be expired as well as banks liability.

4.2.2 Letter of Credit

Through Letter of Credit Trust Bank Ltd. provides a credit line to an importer to

facilitate both foreign and inland transactions. This is a contingent liability which

can be converted to a funded facility incase bank makes the payment on behalf of

the importer. A letter of credit can be revocable or irrevocable, restricted or

negotiable so on.

As Letter of Credit is an issue to be discussed in the management of Foreign

Exchange Operation of the bank, we shall not proceed in discussing this issue.

4.3 The Rates of different types of loansThe revised lending rates as mentioned below effected from 30.04.2007 for all

existing and fresh sanction of credit facilities.

Particulars of Sectors Revised rate(s)% p.a

1. Agriculture/Agro-based industry:

a) Loan to primary producer 10.50

b) Loan to Agricultural in put Traders/Fertilizer

Dealers/Distributors 10.00

c) Agro processing industry/farms 10.00

2. Large & Medium scale industry (Term Loan) 15.00

3. Working Capital:

a) Jute 11.00


b) Other than jute 15.00

4. Export Finance:

Jute & Jute Products

Other Exports

7.00

7.00

5. Commercial Lending:

Loans against Work order and Brick Manufacturing

Commercial Loan (Garments)

Commercial Loan (Others)

Small & Medium Scale Enterprises (SME’s)

15.00

14.00

15.00

16.00

6. Term Loan:

a) Small and Cottage industries 14.00

b) Urban Housing (residential) 15.00

c) Urban Housing (commercial) 15.50

d) Loan for dwelling house repair and reconstruction

(Bank’s Scheme loan for low income bracket)

12.00

e) Transport loan 16.00

f) House building scheme loan for serving Army

Officers

11.00

g) Consumer Durable Scheme 17.00

h) Car & Marriage Loan Scheme 12.00

7. Loan against FDR issued by Trust Bank Ltd. 2.50% above FDR rate

8. Loan against Savings Certificates & other allowable

Financial securities issued by TBL

13.00

9. Loan against Lien of FDR / Savings Certificates /

WEDB & other allowable instruments issued by other

Banks/ Financial institutions

14.00

It is mentioned that variation by 1.5% is allowable both at the upper and lower end

from the mid rate on case to case basis with the approval of head office.


Trust Bank Ltd.


Consumer Credit SchemeRetail banking is a modern concept of the age. Trust Bank Ltd. has also introduced

retail banking recently. The consumer product is not new for TBL. Before Retail

banking scheme TBL also provided some credit of retail banking. The new change is

that TBL has added few new credit lines and opened a new department named Retail

Banking. The credit lines of Consumer Credit are as follows:

Any Purpose Loan

Apon Nibash Loan

Car Loan

Household Durables Loan

Doctors Loan

Marriage Loan

CNG Conversion Loan

5.1 Any Purpose Loan"Any purpose" Loan is a terminating facility offered by the Retail Banking Unit of

the Bank to individual salaried persons living in the cities/towns where the Bank has

its own branches. It is a clean or unsecured loan in the sense that only security in this

type of loan product is:

Letter of introduction from employer

Two Personal Guarantees, acceptable to the Bank preferably earning person

from family member and an individual having minimum solvency/income

not less than that of the customer.

"Any Purpose" loan which means the applicant does not have to declare the purpose

for which he/she is taking the loan hence there will be no hypothecation over the

asset to be purchased but the loan is obviously not allowed for any unlawful

purpose.


Market Segments for Any Purpose Loan

Employees of reputed MNCs .large local corporate, employees of mid-range local

companies, reputed Educational institute, Banks/Financial Institutions, Diagnostic

center, Hospital, Hotels, Restaurant, Telecommunication, Airlines, Real-Estate

Developers of repute, Insurance companies, NGOs, Aid agencies, UN Bodies, and

all other salaried employees including Government Employees etc.

5.2 House Finance (Apon Nibash Loan)Following are the features of Apon Nibash Loan:

Scope

For individual to build or purchase house/ apartment for own use or for let out purpose.

Purpose of the Loan

a) Purchasing apartment

b) Constructing new house(s)

c) Taking over of House Building Loans from other Banks/Non Banking Finance

Institutions.

Location

a) Any municipal area where there is branch of TBL.

b) Outside municipal area but within 1 km radius of Trust Bank Branch

Eligibility

Any Bangladeshi (Singly or jointly with other co-customers e.g. spouse / son / daughter).

To be more specific the following group of people will be eligible for Apon Nibash

Loan.

Salaried People

a) Employees of govt./Autonomous body.

b) Employees of financial institution.


c) Employees of different Public Limited.

Company/Private Limited Company having Corporate Structure.

d) Teachers of any school/college/university.

Professional

(a) Doctor /Medical Professionals (b) Engineer

(c) Accountants (d) IT Professionals (e) Management

Consultant

Self-Employed

Businessman (in business at least for five years).

Loan Amount (Loan to value ratio)

a. Upto 60% of the total cost of construction of house

b. Upto 70% of purchase price of new apartment/house. However, total loan amount shall

not exceed Tk. 50 lac

Debt Burden Ratio

40% of gross income. However, the quantum of loan shall be such to ensure

monthly installment size would not exceed 40% of the gross income 80% of. the

residual income (after deducting all expenses except present rental expense) which

over is lower.

Equity participation

a. At least 40% of the total cost of the construction of house.

b. At least 30% of purchase price of new apartment/house and repairing cost, if any.

Age Limit

Maximum age at loan maturity should be considered up to 60 years.

Minimum Construction Standard

A one storied RCC building with at least 600 sft. area and having all utility.

An apartment not less than 600 sft. area with all utilities.


Mode of disbursement

For purchasing apartment

Firstly, the customer shall pay the equity portion to the developer Later on, the

remaining amount will be provided by the Bank.

For construction of building:

The customer will have to invest the equity portion first for having disbursement

from the sanctioned loan. Bank's Civil Engineer will ascertain whether the

customer's equity is rightly invested or not.

Any cost overrun of the projected cost shall be borne by the customer.

Period of the lending

Particular Grace Period Loan repayment(months)

Construction of new house 1-12 Up to 1 5 years

Purchase of new apartment under construction 1-12 Up to 15 yearsPurchase of new ready apartment 3 Up to 15 years

Note: The grace period interest may be recovered before starting repayment of

installments or may be capitalized with the principal for repayment.

Rate of Interest

14.50% to 15.00% p.a. with quarterly compounded.

Processing fees (It may be waived by Head Office considering the merit of the

case)

1.00% on loan amount plus 15% vat on processing fees will be realized from the

customer before disbursement of the loan.

Mode of Repayment


The repayment will be started from the subsequent month of disbursement or from the

following month at the end of grace period. The repayment will be made in amortized

monthly equal installment comprising of principal and interest

Penal Interest

If the customer fails to deposit any installment 1 % Penal Interest shall be recovered per

month on the defaulted loan amount.

Pre-payment penalty

No Pre-payment penalty will be levied, if the loan is adjusted by the customer from his

own sources. However, if the customer desires to switch to other Bank/Financial

institutions 1% penal interest shall be charged on the outstanding loan amount.

Primary Security

Under construction apartment

Under supervision of Bank's Penal Lawyer, a Tri-partite agreement will be signed among

the customer, the developer and the Bank to the effect that the developer will handover

property related documents directly to the Bank being the financer of the apartment.

Subsequently the apartment will be registered mortgaged in the name of Trust Bank

Ltd..

Collateral

On a case to case basis, if available

Mortgage (Registered / equitable) or any other property

Pledge of shares/securities and other encashable securities.

Lien on retirement benefits

Guarantee from a person acceptable to the Bank (if possible)

5.3 Car Loan


Car Loan is a terminating loan facility for the middle class to upper class people of

the cities where the bank has its branches to buy a car for their personal usage.

Under this scheme, the vehicle is registered in the name of the Bank under Hire

Purchase mode only.

Product Communication Points

For Any New or Reconditioned Car, Microbus, Jeep, Minibus, Truck, Pick-up,

Covered van etc.

Loan Amount

For New car - Loan Limit upto Tk. 20 lac for maximum 5 years

For Reconditioned car - Loan Limit upto Tk. 20 lac for maximum 4 years

For Microbus - Loan Limit upto Tk. 15 lac for maximum 3 years.

For Minibus, Trucks, Pick-up, Covered van - Loan Limit upto Tk. 50 lac for

maximum 5 years

Minimum 20% down payment required.

5.4 Consumer Durable LoanConsumer Durable Loan is a loan which facilitates middle class people to purchase

different household items such as Television, Refrigerator, Air -Conditioners,

Washing Machine, Computers and other household furniture etc. for personal use.


Consumer Durables for personal use. Items like: Television, Refrigerator,

Air - Conditioners, Washing Machine, Computers and other household

furniture etc.

Financing 70% of the cost of the item is allowed.

Tenor for this loan is minimum 12 months and maximum 36 months.

Maximum loan will be allowed Tk. 5.00 lac

Market Segments


Any Bangladeshi individual who has the means and capacity to repay bank loan. In

specific terms, these could be salaried person of multinational and middle to large

size local corporate, Government officials, Officials working in reputed NGOs (Non

Government Organizations), Banks/Financial Institutions, International Aid

Agencies & UN bodies, any Tax paying businessmen of reputation, any employed/

self-employed tax-paying individual having a reliable source of income.

5.5 Doctors' LoanDoctors' Loan is a loan for professional Doctor to support their small scale purchase

of different medical equipments, tools and small machineries for installation of their

chamber/hospital/clinic. This is partially secured product, security being the

commodity acceptable form of quasi cash securities available in the market.


Doctors' Loan for professional use. Items like medical equipments to setup

chamber/ hospital/clinic with necessary medical equipments.

Financing 80% of the cost of the item is allowed.

Tenor for this loan is minimum 12 months & maximum 48 months.

Loan amount maximum Tk. 5 lac for general practionear

Loan amount maximum Tk. 10 lac for specialized Doctors

5.6 Marriage LoanMarriage Loan is a loan facility offered by the Retail Banking Unit to provide

financial support for marriage purpose for Bangladeshi people. This loan is offered

to the persons who have stable monthly income. It is a clean or unsecured loan in the

sense that there is no cash security taken against the loan.

Product communication points


This loan is applicable for first marriage only for applicant himself/herself

and may be applied by the guardian also.

Down payment 20% (minimum).

Tenor for this loan is minimum 12 months and maximum 36 months.

Maximum loan will be allowed Tk.3.00 lac.

5.7 CNG Conversion LoanCNG Conversion Loan is a loan to provide financial supports for converting the

vehicle from carbon based fuel system to CNG system. This is an unsecured loan

because no additional security is arranged against this loan.

This Product Program Guide (PPG) contains the details rules and regulations of

CNG Conversion Loan.


CNG Conversion Loan is to convert the vehicle from carbon based fuel

system to CNG system.

Financing 90% of the cost of conversion is allowed.

Tenor for this loan is maximum 18 months.

Market Segments

Any Bangladeshi Individual who has the means and capacity to repay Bank loan. In

specific terms, these could be confirmed Service Holders, Businessman,

Professionals (owner of the vehicle or valid user of the vehicle) & Corporate Clients

(for more than one car). Any other persons who have adequate cash flow to repay

the loan installment.


Trust Bank Ltd.


6.1 Lending Procedure of Trust BankThe lending procedure of Trust Bank Ltd. starts with building up relationship with

customer through account opening. Control of credit operations is done at branch

and Corporate Office Level. There are twelve steps in the lending procedure of TBL

which are as follow.

Step-One

A loan procedure starts with a loan application from a client who must have an

account with the Bank. At first it starts form the branch. Branch receives application

from client for a loan facility. In the application, client mentions what type of credit

facility he/she wants form the bank including his personal information and business

information. Branch Manager or regarding Officer in-charge of credit department

conducts the initial interview with the customer.

Step-Two

After receiving the loan application form, the bank sends a letter to Bangladesh

Bank for obtaining a credit inquiry report of the customer from there. This report is

called CIB (Credit information Bureau) report. This report is usually collected if the

loan amount exceeds Tk.50 thousand. The purpose of this report is to be informed

that whether the borrower has taken loan from any other bank or not, if ‘yes’ then

whether these loans are classified or not.

Step-Three

If Bangladesh Bank sends positive CIB report on that particular borrower and if the

Bank thinks that the prospective borrower will be a good one, the bank will inspect

the documents. Required documents in case of Corporate Client are Financial

documents of the company of last three to five years is required. If the company is

new then projected financial data are required.

In this stage, the Bank will look whether the documents are properly filled up and

signed. Credit in charge of the relevant branch is responsible to know about the ins

and outs of the client’s business through discussing with him.


Step-Four

Bank officially inspects the project for which the loan is applied. Project’s existence,

distance from bank office, viability, monitoring cost and possibilities are examined.

Step-Five

Any loan proposal needs to be evaluated on the basis of financial information

provided by the applicant. Experienced personel of Credit department in Trust Bank

do an analysis through Credit Risk Grading Score. It is a ranking whose total score

are 100. Among this score, minimum score is 75 to grant any commercial loan. For

individual borrower this score is not required.

Step-Six

Obtain legal opinion on the collateral provided by the applicant, whether those are

properly submitted, regular and up to date or else those documents will be asked to

regularize by the client.

Step-Seven

Then comes the processing stage of loan. In this stage, the Bank will prepare a

Proposal. The proposal contains following relevant information.

Name of the Borrower/borrowers

Nature of Limit

Purpose of Limit

Extent of Limit

Collateral

Margin

Rate of Interest

Repayment

Validity

Step-Eight


If the proposal meets Trust Bank’s lending criteria and is within the manager’s

discretionary powers, the credit line is approved. The manager and the sponsoring

officer sign the credit line proposal and issue a sanction letter to client.

If the value of the credit line is above the branch managers’ limit then it is sent to

head office or zonal office for final sanction with detailed information regarding

clients, business or purpose of the loan, security papers.

Step-Nine

Head office processes the credit proposal and afterwards puts up a memorandum to

credit committee. The credit committee reviews the credit proposal and accepts or

rejects the proposal.

Step-Ten

After approval by the Credit Committee, head office or zonal office gives an

approval letter to the branch and branch gives a sanction letter. The client should

accept sanction advice with seal, which will prove his agreement with the terms and

condition offered by the bank.

Step-Eleven

After the sanction advice, Bank will collect necessary charge documents. Charge

documents vary on the basis of types of facility, types of collateral.

Step-Twelve

Finally loan is disbursed and monitoring of the disbursed loan starts as well.

6.2 Credit Approval Authority in TBLDifferent amounts and different types of loans and advances are approved at

different Divisions by different authorities:

Branch manager can approve those loan proposals that are backed by 100%

security (SOD).


Up to Tk 30. lac, Credit Department / Management Board in the head office

can approve.

Beyond Tk.30 lac to Tk. 1.00 crore, M.D/CEO can approve the Credit

proposal.

The Board of Directors can approve a credit proposal not exceeding

Tk.32.31 crore.

Credit proposals of above Tk. 32.31 crore can be approved by Bangladesh

Bank as large loan.

A monthly summary of all new facilities approved, renewed, enhanced, and a list of

proposals declined stating reasons thereof should be reported by CRM to the

CEO/MD.

6.3 Mechanism to the Appraisal of a Credit ProposalThere is no fixed or standardized approach to project appraisal. Numerous and

diverse elements enter into the process of appraisal. It is difficult to have a cut and

dried formula with the help of which a proposal for financial assistance can be

adjusted straightway as acceptable or unacceptable. While broadly the same set of

factors is taken into consideration in the scrutiny of individual proposals, the weight

given to the factors varies from project to project. However, Trust Bank Ltd.

considers five aspects of a credit proposal while appraisal.

6.3.1 Technical Appraisal

Technical appraisal report is prepared by an engineer of the appraisal section to see

whether the project is sound with regard to every engineering and technological

consideration, including product specification, product process, size, internal

balance, suitability and availability of physical facilities, designs and layouts of

equipment and building etc.

The basic aspects of technical appraisal are:

Cost of the project.


Annual production capacity & manufacturing process.

Location, infrastructural facilities feature and estimated cost of the land.

Civil drawing(s) and cost of civil works.

Layout plan for Building and Machinery.

Estimated cost of machinery with installation.

Selection of product process involving the choice of alternatives, wastage,

by-product, disposal of waste and effluents etc.

Annual requirement of raw material(s) with source of availability.

All input output data of the project.

6.3.2 Marketing Appraisal

An industrial project is to bring in some goods or services for a community. But the

community does not need them infinitely. Their demand is of course finite and at

given prices. Marketing plan, as in the case of production and financial plan, should

have objective in the back drop; and the objective is what is wanted to be achieved.

While appraising industrial projects Trust Bank Ltd. analyses 3 factors and brings

out the objectives in quantitative terms:

Macro/ Micro demand/ supply situation for specific products in the market.

Existing and expected competition in local and foreign markets and

The market share.

6.3.3 Financial Appraisal

The next step is to prepare a detailed report on the financial viability of the project.

The main purpose of such appraisal is to assess the viability of the project in terms

of its operation in the future years and its financial soundness. It is concerned with

assessing the feasibility of a project from the point of view of its financial result.

The project’s direct costs and benefits are calculated in pecuniary terms at the

prevailing market prices. Trust Bank Ltd. satisfies itself not only about the current

solvency of the project but also about its continued solvency to ensure timely

payment of the principal and regular payment of interest. The revenant information

collected on technical economic and management aspects of the project have got


direct bearing upon the financial appraisal. Such appraisal is directed to examine

mainly the following aspects:

1. Financial requirement to bring the project into existence and the probable

sources of finance;

2. Prospect of adequate revenue generation with particular emphasis on actual

cash generation (liquidity) and probable impact on the financial condition

(solvency).

The basic aspects of financial appraisal are: Ratio Analysis:

Break-even Analysis

Earning Forecast

Fund flow Statement

Internal Rate of Return (IRR)

Pay Back Period Method

Net present value (NPV) Method.

6.3.4 Economic Appraisal

Trust Bank Ltd. does economic analysis of a project to determine whether the

project is consistent with overall national objectives and whether the investment

proposed is the best means of achieving the intended objectives. It involves a

systematic evaluation of a range of options for achieving the intended objectives.

Economic appraisal of the project by TBL covers both quantifiable and non-

quantifiable benefits (where applicable).

Quantifiable Benefits

TBL considers the following quantifiable benefits of the economic appraisal:

Economic Rate of Return (ERR),

Bruno Ratio/Domestic Resource cost,

Contribution of Gross Domestic Product, and

Employment generation and cost per employment.


Non-quantifiable/Intangible Benefits/Externalities

The non-quantifiable benefits that TBL considers while doing the economic

appraisal of any project are:

Developing a good relation with the client which will benefit the bank in

future.

Creating a good impression in the industry.

6.3.5 Management appraisal

TBL emphasizes on the appraisal of management as a very important part of project

appraisal. The successful implementation and running of the project depends on the

resourcefulness, competence and integrity of its management. There are no sets of

rules to find out if the borrowers’ are persons of integrity. The bank does it through

direct and indirect investigation.

The basic aspects of the management appraisal by TBL are:

Structure & Shares.

Memorandum of Articles and relevant (Joint Stock Company’s) registration

certificates.

Introduction to members of the proposed management, relevant experience

and net worth.

Comparison of equity proposed and net worth declared.

Source of working capital or working capital loan.

6.4 Credit Risk Grading Score

Trust Bank Ltd. makes another analysis of a credit proposal named Credit Risk

Grading Score. In this analysis TBL considers the following factors:


Financial Risk

Business/ Industry Risk

Management Risk

Security Risk

Relationship Risk

To understand Financial Risk TBL considers the factors such as leverage, liquidity,

profitability and coverage of the credit. The weight of this section is 50%. After

calculating the financial risk the bank gives a score.

To analyze Business/ Industry Risk TBL considers the factors such as size of the

business, age of the business, business outlook, industry growth, market

competition, entry/exit barriers. The weight of this section is 18%. After calculating

the business risk the bank gives a score.

To analyze Management risk TBL considers the factors such as management

experience, success, team work, background etc. The weight of this section is 12%.

In the same way the bank calculate the management risk and gives a score.

To analyze Security Risk TBL considers the factors such as security coverage,

collateral coverage, support etc. The weight of this section is10%. After calculating

the security risk the bank gives a score.

To analyze Relationship Risk TBL considers the factors such as account conduct,

utilization limit, compliance of condition, personal deposit. The weight of this

section is10%. After calculating the relationship risk the bank gives a score.

After calculating the factors if the total score is at least 75%, then the bank

sanctions loan on the project.

6.5 Credit Portfolio as a Tool of Credit Risk Management


The bank’s loans and advances grew steadily during 2007. The growth rate was

41.66% against previous year. The bank follows specific guidelines in extending

credit to reduce the credit risk at an optimum level and so it concentrates on specific

areas than others while providing loan and advances. Here we shall see the graphical

presentation of credit portfolio of the year 2007 based on different concentrations.

Category-wise Credit Portfolio

Category Amount in Tk. % of Total Loan

Loans Crore 1,363 73

Cash Credit 117 6

Over Draft 388 21

Category-w ise Credit Portfolio

Loans (73%)

Cash Credit (6%)

Over Draft (21%)

Industry-wise Credit Portfolio

Industry Amount in Tk. % of Total Loan

Agro-sector Crore 81 4

Automobiles 33 2

Energy & Power 27 1

Steel & Engineering 146 8

Chemical & Pharmaceuticals 38 2

Textiles & Garments 311 17

Others 1,232 66


Industry-wise Credit portfolioAgro (4%)

Automobiles (2%)

Energy (1%)

Engineering (8%)

Pharma (2%)

Textiles (17%)

Others (66%)

Geographical Location-wise Credit Portfolio

Division Amount in Tk. % of Total Loan

Dhaka Crore 1,157 61

Chittagong 662 35

Sylhet 28 2

Rajshahi 12 1

Khulna 9 1

Barisal 0 0

Nature-wise Credit Portfolio

(In Crore)


Geographical Location-wise Credit Dhaka (61%)

Chittagong(35%)

Sylhet (2%)

Rajshahi (1%)

Khulna (1%)

Barisal (0%)

Nature Amount in Tk. % of Total Loan

Continuous 1,037 55

Demand Loan 119 6

Term up to 5 Years 477 26

Term above 5 Years 224 12

Short term Agro & Micro Credit 0.5 0

Staff Loan 10 1

Nature-wise Credit PortfolioContinuous (55%)

Demand Loan (6%)

Term 5 Years (26)

Term >5 Years (12%)

Micro Credit (0%)

Staff Loan (1%)

So we find that Trust Bank Ltd. favors Loans (73%) over Cash Credit (6%) and

Over Draft (21%) in its credit portfolio. In case of industry-wise credit portfolio we

find that the bank prefers Textiles & Garments Industry (17%) as its borrowers and

its second preference here is Steel & Engineering (8%) though the major portion of

its credit (66%) is not in any specific sector. As most of the industries and

businesses are operated in Dhaka and Chittagong, the bank prefers these two areas

while granting credit (Dhaka-61% & Chittagong-26%). If we consider nature of the

loans, the bank prefers to provide the borrowers with Continuous Loan (55%) as it is

safer to extend loans and advances to any client who is already known to the bank.

Here Term Loan of 5 Years (26%) is its 2nd Preference. Thus through various

concentrations the bank has tried to make an optimum portfolio of its loans and

advances to reduce the credit risk.


Trust Bank Ltd.


Credit Provisions from BD Bank and Compliance by TBLAs Bangladesh Bank is the apex body of all commercial banks in Bangladesh, it has

set necessary rules, regulations and provisions for each of the departments of the

commercial banks. The banks must abide by those provisions. In this chapter we

shall see what the provisions are Bangladesh Bank has set for the credit divisions of

the commercial banks as a whole and how the credit division pf Trust Bank Ltd. is

complying with all those provisions.

7.1 Loan Classification as per Bangladesh BankThe classification of loans provided by different commercial banks in Bangladesh

can be shown through the following table as guided by Bangladesh Bank.

ClassificationTypes of Loans

Agricultur

al Short

Term

Continuous Demand Term (Up

to 5 years)

Term (>5

years)

Unclassified12 months

or below

Less than 6

months

Less than 6

months

Less than 6

months

Less than

12 months

Substandard

Overdue

more than

12 months

but less

than 36

months

Overdue

from 6

months to 9

months

Overdue

from 6

months to 9

months

If defaulted

amount of

installments

is equal to 6

months’

payable

If defaulted

amount of

installments

is equal to

12 months’

payable


Doubtful

Overdue

more than

36 months

but less

than 60

months

Overdue

from 9

months to

12 months

Overdue

from 9

months to

12 months

If defaulted

amount of

installments

is equal to

12 months’

payable

18 months

or more

Bad loan

Overdue

more than

60 months

Overdue 12

months or

more

Overdue 12

months or

more

Overdue of

18 months’

payable

Overdue of

24 months’

payable

Source: BRPD Circular no. 09 dated May 14, 2001

7.1.1 Qualitative Judgment Criteria of the Classification

The criteria on the basis of which the classification of the loans has been made are as

follows.

Unclassified: Repayment is regular.

Substandard: Repayment is irregular but has reasonable prospect of

improvement.

Doubtful Debt: Unlikely to be repaid but special collection efforts may

result in partial recovery.

Bad Loan / Loss: When the chance of recovery is very little.

7.1.2 Percentage of Provisions under the Classification

Provision has to be made under the same circular which is as follows.

Types / Classification Provision

A. Agricultural Short Term Loans

Unclassified, Substandard, Doubtful

Bad / Loss

5%

100%


B. All other Loans

Unclassified

Substandard

Doubtful

Bad / Loss

1%

20%

50%

100%

7.2 Other Loan Provisions from Bangladesh BankThe other provisions on loan and advances as circulated time to time to be complied

by the commercial banks of Bangladesh are as follows.

1. A policy on maintaining general provision at 5% on Special Mention Account

was circulated vide BRPD Circular No. 09 dated August20, 2005. Furthermore all

banks have been advised to maintain general provision at 2% on Small Enterprise

Financing and Consumer Financing.

2. As per existing interest rate policy, banks are empowered to determine interest

rate on lending themselves. In order to inform their clients, banks will announce

information relating to interest rates through brochures. It may be mentioned that

banks can differentiate an interest rate not more than 3% in the same sector

considering comparative risk among the borrowers.

3. In order to establish more transparency in determining interest rates and also to

make it easily understandable and clear to their clients, it has been decided that

henceforth banks will announce mid rate of interest rate band (if any) on respective

sector while declaring interest rate on lending. Banks may charge interest rate 1.5%

lower or higher than the declared rate considering comparative risk from client to

client.

4. According to the BRPD Circular 02, dated February 15, 2005, Bangladesh Bank

will time to time revise its prudential norms for loan classification and provisioning

to strengthen credit discipline. As part of the process, Bangladesh Bank has alredy

introduced Special Mention Account so that bank can raise early warning signals


for accounts showing first signs of weakness. As a further move towards this end,

Bangladesh Bank feels that appropriate provisioning against such accounts is

necessary.

Accordingly the following amendments have been made to the above circular:

1. Banks will be required to make General Provision at 5% on the outstanding

amount of loans kept in the Special Mention Account (SMA) after netting

off the amount of Interest Suspense.

2. The status of the loan should be reported to the Credit Information Bureau

(CIB) of Bangladesh Bank based on five categories of loan classification

status including SMA in stead of the aforesaid classification (four) of

outstanding loans. However,

5. Banks have been instructed to conduct loan classification activities and also to

maintain provisions on quarterly basis vide BRPD Circular 16, dated December

1998.

6. Bank companies are advised to submit a Statement of Loans Extended to the

Directors of the Financial Institutions as per Annexure A to the Financial Institutions

Department of Bangladesh Bank at the end of each quarter within next 15 days of

the following month of the quarter to which the statement relates. The first statement

will be based on June 30, 2004. To this end, up to date list of the Directors of

financial institutions may be collected from the Financial Institutions Department of

Bangladesh Bank.

7. At a time a loan as funded facility to a single client will not exceed 15% of the

shareholders’ equity and a loan as non-funded facility will not exceed 25%. But if

the use of the loan accelerates the socio-economic development and serves a greater

interest of our country, Bangladesh Bank may allow a loan exceeding the aforesaid

percentage. In this case a prior approval of Bangladesh Bank is a must.


7.3 Compliance with the Provisions by TBLTrust Bank Ltd. has divided its loans and advances into three broad classifications:

Unclassified

Special Mention Account and

Classified.

Classified loans are again divided into three categories. The amounts of loans and

advances under different categories are as follows:

Classification of Loans Amount in Tk.

Unclassified 17,885,238,957

Special Mention Account 290,276,290

Classified

Sub-standard

Doubtful

Bad/Loss

506,649,407

27,998,203

317,805,298

160,845,906

The provisions against the loans under this classification are as follows:

Status Base for Provision Rate (%) Amount in Tk.

Unclassified (Excluding SMA) 17,781,747,000 Various* 206,371,000

Special Mention Account 277,321,760 5% 13,866,000

Sub-standard 19,134,240 20% 3,827,000

Doubtful 249,327,000 50% 124,663,000

Bad / Loss 97,347,000 100% 97,347,000


* General provision is kept @ 2% on Consumer Financing (House Financing & to

Professionals) and Small Enterprise Financing, 5% on Other Consumer Financing

and Short Term Agriculture & Micro credit and 1% on all other loans and advances.

So we find that Trust Bank Ltd. complies with the provision of loan classification as

Bangladesh Bank directed and provisions against different statuses have been kept

accordingly. The bank has classified its loans as Special Mention Account also and

kept a provision against this loan @ 5%. We also find that the bank complies with

the provision of keeping a provision @ 2% on small enterprise financing.

From the interest rates of the bank as stated earlier, we have found that the highest

difference among the interest rates in the same sector is 1.5% from the mid rate of

interest which does not exceed 3% as required by Bangladesh.

To comply with the provision of quarterly basis revision of loan classification Trust

Bank Ltd. revises the classification of loans and related necessary provision

quarterly and submit a report to Bangladesh Bank.

Besides, Trust Bank Ltd. complies with the provision of submitting the Statement of

Loans Extended to the Directors of Financial Institutions on quarterly basis within

the next 15 days of the following month of the quarter.

Again I have observed the approval of a Term Loan of Tk. 50 crore to BRAC by

Trust Bank Ltd. The amount of loan supersedes the limit of Tk. 32.31 crore

(Shareholders’ equity is Tk. 215.43 crore and the credit facility is funded, so the

limit = Tk. 215.43 crore * 15%) as set by Bangladesh Bank based on share holders’

equity. As a result before granting the loan to BRAC the bank had to take a special

approval from Bangladesh Bank. So TBL complies the provision regarding the limit

of loan based on share holders’ equity also.


Trust Bank Ltd.


Trend Analysis of Different Credit Lines of TBLBelow we shall see the performance analysis of different credit lines of Trust bank

Ltd from 2004 to 2007 through graphical presentation.

8.1 OverdraftFrom the table we find that the trend of Overdraft is increasing over time. It is quite

satisfactory. TBL has no risk on this credit, because Trust Bank provides Overdraft

by keeping 100% security. So interest income is certain in this credit.

8.2 Car LoanCar loan is increasing over time. Trust Bank has a good performance in this regard.

It is also a profitable credit line.


Overdraft

YEAR 2007 2006 2005 2004Amount 12323004303 3747855568 2683519276 2031240321

05000000000

10000000000

15000000000

AMOUNT

2007 2006 2005 2004

YEAR

OVERDRAFT

Car Loan

YEAR 2007 2006 2005 2004Amount 30181894 28277050 26758040 16997368

8.3 Staff LoanTrust bank gives loans to its staffs at a flexible rate. The staff loan is increasing

because with the expansion of branches its staffs are also increasing. The motive of

this credit is not to earn profit rather than to provide facility to its officials.

8.4 Consumer Durable Loan Scheme


010000000

20000000

30000000

40000000

AMOUNT

2007 2006 2005 2004

YEAR

CAR LOAN

Staff Loan

YEAR 2007 2006 2005 2004Amount 96701751 46158884 20943257 11225088

STAFF LOAN

0

50000000

100000000

150000000

2007 2006 2005 2004

YEAR

AM

OU

NT

It is a product of retail banking department. Consumer durable loan was highest in

2004 among last 4 years.

Consumer Durable Loan

YEAR 2007 2006 2005 2004Amount 32072590 25868706 25697584 33037145

8.5 Apon Nibas Loan

It is a term loan (usually mid term). House building loan has an increasing trend in

return. TBL’s performance is better in this regard.

House Building Loan

YEAR 2007 2006 2005 2004Amount 677554651 397726271 100226839 89164634


010000000

20000000

30000000

40000000

AMOUNT

2007 2006 2005 2004

YEAR

CONSUMER DURABLE LOAN

8.6 Loan against Trust ReceiptIt is provided to the trustworthy clients. It is an import finance. Among last 4 years

the highest amount is provided in 2007.

8.7 Marriage Loan


0200000000400000000600000000

800000000

AMOUNT

2007 2006 2005 2004

YEAR

HOUSE BUILDING LOAN

Loan against Trust Receipt

YEAR 2007 2006 2005 2004Amount 3177579488 1823806937 2044412443 987849930

LOAN AGAINST TRUST RECEIPTS

0

1000000000

2000000000

3000000000

4000000000

2007 2006 2005 2004

YEAR

AM

OU

NT

Marriage loan is reducing day by day. It is mainly provided to the Army officials

against their salary.

8.8 Term LoanIt is the main long term loan of TBL. The major source of interest income is term

loan. The graph shows that it is increasing with the expansion of Trust Bank.

Term Loan

YEAR 2007 2006 2005 2004Amount 3455665526 1774037159 834564116 284342327


Marriage Loan

YEAR 2007 2006 2005 2004Amount 67212516 74034648 81896327 87350560

MARRIAGE LOAN SCHEME

0

20000000400000006000000080000000

100000000

2007 2006 2005 2004

YEAR

TK

8.9 Time LoanTime loan is another major short term loan. Among the last 4 year TBL provides the

highest loan in 2006. In 2007 the performance of this loan is not satisfactory.

TIME LOANS

YEAR 2007 2006 2005 2004Amount 378641271 477720151 365358941 328511506

0

100000000

200000000

300000000

400000000

500000000

TK

1 2 3 4

2007 2006 2005 2004 YEAR

TIME LOAN


TERM LOANS

0

1000000000

2000000000

3000000000

4000000000

2007 2006 2005 2004

YEAR

AM

OU

NT

8.10 Payment against DocumentIt is an import financing provided for 21 days. In 2007 payment against document is

highest. So the performance of this loan is good.

Payment against Document

YEAR 2007 2006 2005 2004Amount 384910469 114475493 257493793 209007234


PAYMENT AGAINST DOCUMENT

0100000000200000000300000000400000000500000000

2007 2006 2005 2004

YEAR

TK.

Trust Bank Ltd.


9.1 Recommendations for the Credit Division of TBL

I think Trust Bank has still many measures to take in managing the Credit Division

more effectively and efficiently. Below I have made some recommendations. I think

these will be helpful to the Bank and it will be able to manage its credit operation

better than earlier.

The credit policy of Trust Bank is very restrictive and defensive. As a result,

its loan sanction procedure is somewhat complex. The loan policy and loan

sanction procedure should be made flexible and easy.

Trust Bank, usually, does not provide overdraft without full coverage of

security, i.e., TBL only provides Secured Overdraft. As a result, its overdraft

facility is not expanding.

Trust Bank has little attention about publicity and advertisement. As a result,

most of the consumers are unaware about the bank. So extensive publicity

and advertisement is required. Trust bank can set up bill board and it can

sponsor different social program to introduce TBL.

Trust bank holds huge reserves and fund that are not utilized. As a result,

huge opportunity cost is incurred by TBL. So TBL should provide more

loans to the profitable credit line.

Trust Bank has introduced retail banking in recent time. But the rules and

loan sanction requirement is so strict and conservative that retail banking

department is not in satisfactory position.

Trust Bank analyses the commercial loan feasibility by “Credit Risk Grading

Score Sheet”. I think this manual technique lacks some important factors

such as Audit Risk, Foreign Exchange Risk (in case of import finance), and

Inherent Risk of client. So these factors should be included in Credit Risk

Grading Score Sheet.


Bank should use automated and electronic modern equipments like ATM,

debit card, credit card, and smart card extensively.

Trust bank’s training programs can encourage their trainees to seek

additional education including computer classes, accounting, MBA programs

and foreign language instruction. So the training should be full fledged.

The number of employees & Officers should increase for operating official

activities smoothly.

In the credit department, strict supervision is necessary to avoid loan

defaulters. The bank official should do regular visit to the project.

9.2 Conclusion

Trust Bank Limited is a 3rd generation bank in Bangladesh and has a strong position

in the today’s competitive market. It has some features which makes the bank quite

different in the private sector. The bank has a tremendous management side that is

still trying to make the bank more successful.

Trust Bank Ltd. has incorporated in 1999 but within this short period of time it has

achieved a good position and is continuously upgrading itself with a view to be

competitive and to attain the leading position of the banking industry. The bank

renders service accuracy, friendliness, new ways of meeting customer needs and

good quality of services.

The image created by the bank is very good and the total condition is almost within

their control. I am hopeful that Trust Bank Limited will be one of the topmost banks

and be capable of taking challenges of the present competitive arena. I am quite

satisfied with their overall performance so far and wish a good success and bright

future of Trust Bank Limited.


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