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1.3 SCOPE OF THE STUDYThis study is based of on theoretical and practical analysis. However the scope of the
study is confined within the region of CDA Avenue Branch, Chittagong.
The study will focus on the following areas ----
The kinds of consumer credit facilities extended by Bank Asia Limited.
General Procedure for getting different kinds of consumer credit facilities.
How different kinds of projects are appraised at Bank Asia Limited. Present scenario of Consumer Credit Policy.
Each of the above areas is critically analyzed in order to determine the efficiency of
Bank Asia Limited, CDA Avenue Branch.
1.4 Methodology:
A method involves a process or technique in which various stages or steps collecting
data/information are explained and the analytical techniques are defined. The report is
composed of both primary and secondary data or sources.
Primary Data:
Primary data have been collected by informal interview with the officers. Some
information regarding my report objects has been collected through discussion with
different executives of the Bank.
Secondary Data:
Secondary data means data those are already available i.e. they refer to the data,
which have already been collected and analyzed by someone else.
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I used the following sources of secondary data.i. Credit Manual of the Bank.
ii. Annual Reports of the Bank.
iii . Different Documents of the Bank.
1.5 Limitation of the study
This study report is based upon primary and secondary source of information from the
documents and databases of the Bank. Though I tried my level best to produce acomprehensive and well-organized report on the Bank. The study that has been
conducted in Bank Asia Limited has certainly some limitations, which are as follows-
A short course of time is allowed for the program.
The customers some times unable to provide information because of their busytime.
The employees of the Bank are very busy to provide accurate information aboutsome particular matters.
The bank has naturally shown us some indifference connecting its mostconfidential information.
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2.0 AN OVERVIEW OF THE BANK
2.1 THE WORD BANK
The word Bank originated by Italian word Banco means long tool. In ancient time
Italian Jews merchants used to do business of lending money by setting on the tools.
Audit is assumed that, the Word Bank derived from the word Banco (Tools) to meet
the expenses of war 1171 one type credit certificate was launched in Italy at an interest
rate 5%. It was called a Monte in Italian language and Bank in German language.
Then German was widely used in Italy. As a result, the Word Bank gradually changed
to the word Banco from which the word Bank originated.
2.2 Bank Asia
The present day Banking structure has evolved over several decades. The far-reaching
program of economic reform is being carried out at present towards efficient utilization
of scarce resources and the development of private entrepreneurship. In a fast changing
business environment, financial intermediaries are lift to be guided by market forces
rather than regulations. Competition is strengthened by the entry of new and innovative
providers of financial services through the development of money market and the
capital market under the ongoing financial liberalization program. Bank Asia Ltd.
emerges as a new Bank in the private sector to operate in the commercial area of the
country. Presently the Bank is not operating in the rural area. But in near future they
have plan to extent the branch lithe rural areas.
Management of the bank
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MANAGING DIRECTOR
The members of board of directors sponsor the paid up capital of the Bank. The Bank is
managed by experienced officers committed to provide highly efficient personalized
and quality services. There is no conventional system of Clark guard &peon in the
Bank. The security aspect is locked & managed through private security agency. The
Bank has a good number of professional managers to manage competitive & complex
situation efficiently & effectively. They follow the formal relationship among the
different level of the management.
Board of Directors
The first Board of Directors of the Bank was constituted with 13 Directors. According
to Article 128 of the Articles of Association of the Bank, four Directors of the Bank
will retire in this Annual General Meeting. They all have expressed their desire for re-election, being eligible for the same. Since the Bank has floated its share, for public
subscription, two Directors will be elected from the public shareholders
Organogram Of Bank Asia Ltd.
SENIOR EXECUTIVE VICE PRESIDENT(SEVP)
EXECUTIVE VICE PRESIDENT (EVP)
SENIOR VICE PRESIDENT (SVP)
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VICE PRESIDENT (VP)
FIRST VICE PRESIDENT (FVP)
ASSISTANCE VICE PRESIDENT (AVP)
FIRST ASSISTANCE VICE PRESIDENT (FAVP)
SENIOR EXECUTIVE OFFICER
EXECUTIVE OFFICER
JUNIOR OFFICER
OFFICER
SENIOR OFFICER
ASSISTANCE OFFICER
TELLER
BANKING OFFICER
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Recently Bank Asia offers its second IPO of 20 Crore and for this amount of share the
initial application was for Tk- 1100 crore which indicates that the Bank has got a brand
image in the market and has got the faith of the customer. Such response from the
investor provides the bank more confidence over its operation and helps to take forward
looking decision.
2.4 BOARD OF DIRECTORS
C a s h
A c c o u n t s
R e m i t t a n c e
C l e a r i n g
C u s t o m e r S e r
G e n e r a l B a n k
O v e r d r a f t
S e c u r e d O v e r
T e r m L o a n
P e r s o n a l C r e
S t a f f L o a n
L T R
F D B P
M o n e y + +
L o a n G e n e r
L D B P
P A D
C r e d i t /
A d v a n c e
I m p o r t
E x p o r t
R e m i t t a n c e
F o r e i g n E x c h a
B a n k i n g S e r v i
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3.0 CONSUMER FINANCING- AN OVERVIEW OFPOLICY
'Consumer financing' means any financing allowed to individuals for meeting their
personal, family or household needs. The facilities categorized as Consumer Financing
are given as under:
(i) Credit Cards forms of clean lending with a maximum limit of Tk.
500,000/- to a single borrower. Supplementary credit cards shall be
considered part of the principal borrower for this purpose. The bank shall
secure the limits exceeding Tk. 500,000/- appropriately. Corporate Card
will not fall under this category and shall be regulated by exiting
guideline/regulations for lending.
(ii) Auto Loans (Secured by way of hypothecation /charge on vehicle).
(iii)Housing Finance (secured by mortgage on the property. e.g.
house/flat/land).
(iv)Consumer Durables Loans for purchasing various consumer items for
personal use or use in the family.
(v) Loans for Professionals only for professionals like doctors, engineers,
architects, IT professionals, and management consultants.
(vi)Unsecured Personal Loans for payment/ purchase of goods service and
expenses.
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3. For every type of consumer finance activity, the bank shall develop a specific
Product Program Guide (PPG). The program shall include the
objective/quantitative parameters for the eligibility of the borrower and determining
the maximum permissible limit per borrower. The PPG will also indicate the
maximum permissible exposure bank will take against each product.
4. Bank shall put in place an efficient computer based MIS for the purpose of consumer
finance, which should be able to effectively cater to the needs of consumer financing
portfolio and should be flexible enough to generate necessary information reports used
by the management for effective monitoring of the bank's exposure in the area. The
MIS is expected to generate the following periodical reports:
Delinquency reports (for 30, 60, 90 180 & 360 days and above) on monthly
basis.
Reports interrelating delinquencies with various type of customers of
various attributes of the customers to enable the management to take
important policy decisions and make appropriate modifications in the lending
program.
Quarterly product wise profit and loss account duly adjusted with the
provision on account of classified accounts.
3. The bank shall develop comprehensive recovery procedures for the delinquent
consumer loans. The recovery procedures may vary from product to product.
However, distinct and objective triggers should be prescribed for taking pre-
planned enforcement/recovery measures.
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develop an appropriate procedure for repossession of the vehicles and shall ensure thatprocedure is strictly in accordance with law.
3.4.20 REGULATION - 20
A detailed repayment schedule should be provided to the borrower at the outset. Where
alterations become imminent because of late payment or prepayment and the
installment amount or period changes significantly, the revised schedule should be
provided to the borrower at earliest convenience of the bank but not later than 15 days
of the change. Further even in case of insignificant changes, upon the request of the
customer, the bank shall provide him revised repayment schedule free of cost.
3.4.21 REGULATION 21
The banks desirous of financing the purchase of used cars shall prepare uniform
guidelines for determining value of the used vehicles. However, in no case the bank
shall finance the cars older than five year.
3.4.22 REGULATION 22
The banks should ensure that a good number of authorized auto dealers are placed at
their panel to eliminate the caches of collusion of other unethical practices.
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Banks shall either engage professional staff or arrange sufficient training for theirconcerned officials evaluate the property, assess the genuineness and integrity of the
title documents, etc.
3.4.28 REGULATION 28
The bank's management should put in place a mechanism to monitor conditions in the
real estate market (or other product market) to ensure that its policies are aligned to
current market conditions.
3.4.29 REGULATION 29
Banks must develop floating rate products for extending housing finance, thereby
managing interest rate risk to avoid its adverse effects. Banks also must develop in-
house system to stress test their housing portfolio against adverse movements in
interest rates as also maturity mismatches.
REGULATIONS FOR PERSONAL LOANS INCLUDINGLOANS FOR THE PURCHASE OF CONSUMERDURABLES
3.4.30 REGULATION 30
Limits per person for such loans will be Tk.3 lakh with out any securities. However,
banks may lend higher amounts provided the loans are secured appropriately. But, in no
case, the loan amount will be allowed to exceed Tk.10 lakh. The loan secured against
liquid securities shall however, be exempt from this limit.
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g. Constitution
Some other important matters:
Whether the firm is registered or not
Borrowing powers
Worth of the client in the business and as well as partners
Purpose of the advance consistent with the company object
Existing borrowing
Verification of prior charges
3.6 Preferred Organizational Structure
An appropriate structure for Consumer Credit must be in place to ensure that the
segregation of the marketing / sales function from Approval / Risk Management
and also Credit Administration.
Credit approval should be centralized within the Consumer Credit Division. All
applications must be approved by the Head of Consumer Credit or delegated
Corporate Office Executive/ Regional Head.
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4.1 Auto Loan
This product will allow car financing to the customer segment. Under this
scheme, the vehicle is hypothecated to the bank only. In addition to this
registration requirement, on a case-to-case basis, bank may also secure the loan
partially by the commonly acceptable form of cash/quasi cash securitiesavailable in the market.
Auto Loan :Customer Segment
Any Bangladeshi who has the capacity to repay bank loan. In specific terms,
these could be salaried executives of multinational and middle to large size local
corporate, Government officials, Officials working in reputed NGOs (Non
Government Organizations), international aid agencies & UN bodies, any tax
paying businessmen of repute, any employed / self-employed tax-paying
individual having a reliable source of income
Auto Loan : Purpose
Purchase of non-commercial new and reconditioned vehicles for personal use
only.
Auto Loan : Nationality
Bangladeshi only
Auto Loan : Age Limit
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size local corporate, Government officials, Officials working in reputed NGOs(Non Government Organizations), international aid agencies &
UN bodies, any tax paying businessmen of repute, any employed / self-employed
tax-paying individual having a reliable source of income.
Consumer Durables Loan : Purpose
Consumer durables for personal/ family use. Items like Television, Refrigerator,
Air Conditioner, Audio-Video Equipments, Washing Machine, Personal
Computers, other household furniture/ appliances etc.
Consumer Durables Loan : Nationality
Bangladeshi only
Consumer Durables Loan : Age
Minimum age (years) : 25
Maximum age (years) : 65 years at loan
maturity
Consumer Durables Loan : Minimum Service / length of
business
- For salaried individual, minimum total service length of 3 years;
- Govt Employees must be confirmed on job;
- For self employed individual, a business record of minimum 4 years.
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Consumer Durables Loan : Minimum Income
Monthly surplus income (after meeting expenses) shall be at least two times of
the installment amount.
Consumer Durables Loan : Loan Size
Minimum : Tk. 50,000/=Maximum : Tk. 300,000/=
Consumer Durables Loan : Loan to Price Ratio
Financing maximum 80% of the cost of the item is allowed.
Consumer Durables Loan : Security/ Collateral
Hypothecation over purchased assets.
Comprehensive insurance over assets (Policy must be renewed every year
and copy of the policy must be submitted to the bank)
Post dated cheques for each 6 monthly installment
One undated cheque for full loan value including full interest to be taken in
advance.
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Professional Loans : Customer Segment
Any Bangladeshi in the following professions as self employed or salaried
people:
- Doctors or medical professionals
- Engineers
- Architects
- IT professionals
- Management Consultants
Professional Loans :Purpose
For purchase of items to support professional needs of above customer segment
(e.g. purchase of X-ray machine, Dental chair, medical beds, ultra- sonogram
machine, engineering/ mechanical tools, purchase of office equipments/
accessories, etc.)
Professional Loans: Nationality
Bangladeshi only
Professional Loans : Age
Minimum age (years) : 25
Maximum age (years) : 65 years at loan maturity
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Professional : Tenor
Minimum 12 months
Maximum 48 months
Professional Loans: Repayment Method
Equal Monthly Installments
Professional Loans :Disbursement Mode
Payment to be made by issuing Pay Order in favor of vendors by crediting
customers Savings/ Current account with our bank.
Professional Loans : Debt Burden Ratio (DBR %)
Monthly Installment size will be maximum 33% of Monthly Net Income.
Professional Loans : Verification of Personal Details and
Quotation
Details of an applicant to be verified by a banks officer/ third party (nominated
by bank) before an approval is accorded.
Letter from employer with details of employment and salary
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House Finance: Maximum exposure under this product
20% of Banks equity.
4.6 Credit Card
The target market consists of salaried and self-employed individuals generally with a
minimum gross income of Tk. 10,000 per month and usually at least 21 years of age for
a primary card and 18 years of age for a supplementary card. Cards are not normally
issued to individuals over 60 years old. Applicant must be a citizen of Bangladesh.
Credit Card: Target Market
Salaried & Self-employed.
Credit Card: Nationality
Bangladeshi only.
Credit Card: Age
For Primary card 21 years to 60 years
For Supplementary card 18 years to 60 years
Credit Card: Business Existence
1 year for self employed only.
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Credit Card: Determination of Income
Salaried: Gross Monthly Income (GMI) is defined as the total income of an
applicant including overtime and other allowances received on a regular basis
before any deductions/loan installments as reflected in the salary certificate or pay-
slips or the bank statements.
Where free accommodation is provided by the employer, up to 25% of the salary
and allowances as mentioned in the salary certificate may be added to arrive at G
Self-employed: GMI is defined as the average monthly income of an applicant after
deduction of all business expenses. GMI is determined on the basis of Income Tax
Return (IT 88) and/or Bank Statement(s).
a. Income Tax Return (IT 88) shows gross yearly income (before deduction),
which is divided by twelve to arrive at GMI.
b. Personal (or company account statement in case of sole proprietorship) and/or
company bank statements are considered as supporting income documents.
Bank statement is analyzed to calculate average monthly credit (both frequency
& volume) and average monthly balance. In calculating GMI, maximum 50%
of average monthly credit can be taken into consideration. Depending on the
nature, frequency and size of business and cash flow, credit
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c. Analysts will use their discretion to decide on the appropriate discountedpercentage to be taken to calculate GMI. As a general rule, the average monthly
balance should cover at least 30% (minimum repayment option being 5%) of
the approved credit limit. For calculating GMI from company bank statement,
the appropriate discounted percentage will be applied first and then the
applicants share of the business (ownership share %).
Credit Card: Debt Burden Ratio
Defined as the amount of monthly loan repayments of an individual as
declared in the application or identified in the bank statements taken as a
percentage of the gross income.
For applicants provided with accommodation by employer/having own house,
up to 25% of gross income may be added to gross income while calculating
the DB ratio.
In cases where DB ratio exceeds prescribed norms, spousal income may
be added to enable recalculate DB ratio provided this income is substantiated
and the proof of relationship is given.
Credit Card: Documentation
Documents usually sought from the applicants are:
Salary certificate : Signed by Manager
Accounts/HR/Admin/Finance/Personnel or equivalent on official letterhead). In
case of Govt. Employees copy of Pay Bill acknowledged by Treasury.
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The loan-processing time is lengthy, which is not good for borrower. Most of the time spent for correspondence between
Head Office and branch.
There Human resource management are not that much efficient
to do the work. Their lacking of knowledge and they are not that
much well organized.
6.1 RECOMMENDATION
It is highly recommended to improve and diversify in accordance with
the customers need and expectations to more than loyal in the long run
business.
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through the cordial assistance of its members. I had the scope to focus on consumercredit policy. After completion the whole project it can be realized that Bank Asia is in
a competitive position in this viable environment. Working as an intern in the Bank
Asia, I got practical experiences of the demands of consumer credit and also the banks
effort to meet them. The bank should maintain a well-structured communication from
upper level to lower level. Each official should be valued and treated as a part of the
bank and they must have the privilege to devote themselves for the betterment of
services of the bank.
This is a company, which has so far shown good performance and holds the strongest
position in the banking market. Overall, the bank must make a positive attempt to be
more outward looking in their goals and aware of what is happening.
I hope, in spite of my all limitations, this experience of sharing works with such
working environment will help me a lot in professional life. This has a remarkable
impact on the economic growth of our country and financial support of
individuals.
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