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Loan classification, Provisioning policies, Risk management

framework and Recovery strategies of Eastern Bank Limited.


By:
Mam!d!l "asan
Matric #o: B$%&'$(
'(
t
Batc
Supervisor:
Professor )amad *+edin
"ead of te ,epartment
,epartment of B!siness *dministration
-nternational -slamic .niversity /ittagong 0--./1
,aka /amp!s
,epartment of B!siness *dministration
-nternational -slamic .niversity /ittagong 0--./1
,aka /amp!s
I
,ate: %(
t
2an!ary, %$$3
Prof. Md. )amad *+edin
"ead of te ,epartment
,ept. of B!siness *dministration
-nternational -slamic .niversity /ittagong 0,aka /amp!s1
,ear )ir:
Submission of Internship Report
-t is a great pleas!re for me tat, - ave te opport!nity to s!+mit te internsip
report on Loan classification, provisioning policies, risk management framework
and recovery strategies of Eastern Bank Limited to f!lfill te partial re4!irement
of BB* Program. 5ile preparing te report - fo!nd te linkage of academic
knowledge 6 concepts wit practical activities. - fo!nd te application of different
teory in my daily desk work.
- ave tried my level +est to p!t metic!lo!s effort for te preparation of te report.
*ny sortcoming or fa!lt may arise as my !nintentional mistakes. - will
woleeartedly welcome any clarification and s!ggestion a+o!t any view and
conception disseminated tro!g tis report.
7anking 8o!.
5it regards,
Mam!d!l "asan
-,9 B:$%:&:'$(
,epartment of B!siness *dministration
-nternational -slamic .niversity /ittagong 0,aka /amp!s1
II
PREFACE
7eory is o+vio!sly a +ig fact for practical implication. B!t wito!t practical
practice teory may +ecome !seless. Partic!larly as a st!dent of B!siness
*dministration, we need to practice te teories we learn tro!g every
semesters for te +etter !nderstanding of +!siness 6 economic environment.
/onsidering te facts, o!r co!rse instr!ction as taken te initiative to assign
every st!dent to analy;e and to s!+mit a report on te +asis of my practical
e<periences tat - ac4!ire in te '% weeks -nternsip on Eastern Bank Ltd.

- en=oyed te -nternsip, li+rary work and done my report in a friendly atmospere
and !nder special care of my onora+le Professor )amad *+edin )ir.
ACKNOWLEDGEMENT
III
*t te very +eginning, - e<press my gratef!lness and tanks to te immeas!ra+le
grace and profo!nd kindness of te almigty *lla, te s!preme a!tority of te
.niverse for completing tis report witin te sced!le time. *n individ!al can
acieve no no+le acievement. - am inde+ted to a n!m+er of persons for teir
kind recommendation, s!+mission, direction, co:operation and teir colla+oration.
My gratef!l appreciation goes to EBL>s a!tority for rendering me teir e<pertise,
knowledge and giving me te opport!nity of aving a practical e<perience
tro!g tis -nternsip program.
?or fear of so!nding like a vote @ of tanks speec, - co!ld not possi+ly tank all
of tose marvelo!s people wo ave contri+!ted someting of tem to tis
report. 7ere are of co!rse some very special people wo cannot go wito!t
mention.
?irst, - wo!ld like to give my eartiest gratit!de and sincere appreciation to
Professor Samad Abedin, Head of the Department, Department of Business
Administration, nternational slamic !niversity "hittagong #Dhaka "ampus$ for
iss!ing a forwarding letter to Eastern Bank Ltd. were my internsip program as
+een carried o!t.
- wo!ld like to convey my sincerest gratit!de to Mr. Ashfaq A. Cho!hur", E<:
Head of Human %esource Division, for is kind permission to allow me tree
monts practical training in te +ank and also like to sow my gratit!de to Mr. D.
S. #u$fi$ar %"!er& "ead of "!man Reso!rce ,ivision for e<tending my
internsip program for additional A weeks in wic time - earned a lot more
practical e<perience.
- sow inn!mera+le esteem for Mr. Moha''a! Ra(i) %ossai*& #%elationship
&anager$ and Mr. S"e! Shahe! +'a' 0Assistant %elationship &anager1 for
teir val!a+le advice and cordial co:operation in vario!s aspects of my st!dy.
?inally, eartiest gratit!de to my reverend teacer and advisor, Professor
Sa'a! A)e!i* of te internsip program, wo>s ent!siastic g!idance and
critical comments d!ring te entire pase of te st!dy made it possi+le for me to
prepare tis report. My de+t to er is warmly acknowledged.
Table Content
Part-A
` Executive summary
1.0 Introduction
IV
1.1 Origin of the report
1.2 Objective
1.3 Scope of the report
1.4 Limitations
1.5 Sources of ata
1.! "etho#o$og%
Part-B
2.0 Overvie o! t"e Ban#
2.1 &istor% an# 'ac(groun# of )astern 'an( Limite#
2.2 )'L*s Vision
2.3 )'L*s mission
2.4 +resent 'usiness +hi$osoph%
2.5 Objectives
2.! "anagement ,spect 1
2.- ivision of )'L
2.. /orporate 'an(ing ivision
2.0 /re#it 1is( "anagement an# ,#ministration
2.12 /onsumer 'an(ing ivision
2.12.1 S") 'an(ing
2.12.13a4 )mall )egment
2.12.13b4 "e#ium Segment
2.11 'ran# "anagement ivision
2.12 5ra#e service #ivision
2.13 Internationa$ #ivision
2.14 &uman 1esources ivision
2.15 Information 5echno$og% ivision
2.1! ,u#it an# /omp$iance ivision
2.1- 6inance an# accounts #ivision
2.1. Specia$ ,sset "anagement ivision
2.10 ,#ministration
2.22 Strengths of the 'an(
V
2.21 7ea(ness of the 'an(
2.22 5hreats of the 'an(
2.23 Opportunities of the 'an(
2.24 6inancia$ 1atio ,na$%sis of )astern 'an( Limite#
2.24.1 1eturn on ,ssets
2.24.2 1eturn on )8uit%
2.24.3 9et Interest "argin
2.24.4 9et 9on interest margin
2.24.5 9et operating margin
2.24.! ,sset :ti$i;ation 1atio
2.24.- )8uit% mu$tip$ier
2.24.. )arning sprea#
2.24.0 Li8ui#it% ris( 2
2.25 "ain )vents of )astern 'an( Limite#
2.2! 'usiness eve$opment ,ctivities of 2225
Part-C
$.0 Products and %ervices o! EB&
3.1 1etai$ 'an(ing
3.2 Institutiona$ 'an(ing
3.3 /orporate 'an(ing
3.4 /ommercia$ 'an(ing
3.5 /orrespon#ent 'an(
3.! Services offere# b% the 'an(
3.- /re#it +ro#uct
3.-.1 Secure# Over#rafts
3.-.2 "ash "redit #""$
3.-.23a4 /ash /re#it 3&%po4
3.-.23b4 /ash /re#it 3+$e#ge4
3.-.3 P!rcases 6 ,isco!nt of Bills
3.-.4 <:,1,95))=
3.. Loan +rograms>Schemes
VI
3.0 Loans
3.12 'asic Information of Loan
3.11 "o#e of 1epa%ment
3.12 Loan processing cost
3.13 Loan processing 5ime
3.14 +apers> ocuments 1e8uire#
3.15 +roce#ures for <iving ,#vances
3.1! /harging Securit%
3.1!3a4 Lien
3.1!3b4 "ypotecation
3.1!3c4 Pledge
3.1!3#4 Mortgage
3.1!3e4 *ssignment
3.1!3f4 )et:off
Part-'
(.0 &oan Classi!ication) Provisionin* Policies) +is#
,ana*ement -rameor# . +ecovery %trate*ies o!
Eastern Ban#
3
A.' Loan classification
A.% Policy on loan classification of EBL
A.& Basis for Loan /lassification of EBL
A.&.' B+=ective /riteria
A.&.% C!alitative 2!dgment
A.A *cco!nting of te interest of classified loans of EBL
A.( /lassified Loans and advances of EBL
A.D Ratio of /lassified loans of EBL
Par,-E
../ Ris$ 'a*a0e'e*, fra'eor$ of E1L
(.' -ntrod!ction to Risk Management ?ramework
5.2 1is( <overnance
VII
5.3 /re#it 1is( "anagement
5.4 ,sset an# Liabi$it% 1is( "anagement
5.5 Operationa$ 1is( "anagement
5.! "anagement of +rogramme# Len#ing
5.. +rovisioning +o$icies
5.0 9on +erforming Loans Status
Part--
/.0 +ECO0E+1 %T+ATE21
!.1. Signs for /$assification
!.2 Steps to fo$$o? for /$assification
!.3 /$assification +rocess
!.4 :p@o?n <ra#ing /$assification
!.5 Specia$ ,sset "anagement epartment
!.! 1ecover% +robabi$it% /ategories to be assigne# 5o ,$$
/$assifie# Loans
!.- 7hat are the main reasons behin# c$assification 4
!.. 7hat*s ?rong ?ith +rovision
!.0 )'L is #ifferent in 1ecover%
!.12 7h% 1ecover% ta(es so much time
Part-2
3.1 +ecommendation
3.2 CO4C&5%IO4
6.0 Biblio*ra7"y
6.1 Acronyms
E2e3u,ive Su''ar":
)mall and Medi!m Enterprises 0)ME1 in Banglades contri+!ted %(E of gross domestic
prod!ct 0F,P1 and G$E of te ind!strial =o+s of te co!ntry in %$$A. *ccording to *,B,
te co!ntryHs estimated D million )MEs and micro enterprises firms of less tan '$$
employees ave a significant role in generating growt and =o+s. 7is is a sector tat
as its own distinct needs and re4!ires speciali;ed foc!s. Eastern Bank Ltd. 0EBL1 as
la!nced )ME Banking in early %$$( wit tis view in mind.
VIII
*t EBL:
Provide )MEs wit easy access to financing.
I ,eliver prod!cts tat ens!re s!perior ret!rns to o!r c!stomers.
I Brient c!stomers wit ind!stry trends, reg!latory iss!es etc, for teir s!ccess.
I Jal!e long term relationsip +anking.
7e report entitled Loan classification, provisioning policies, risk management
framework and recovery strategies of Eastern Bank Limited. foc!s on +asis and policies
of loan classification, risk governance, credit, asset, lia+ility and operational risk
management of te +ank. *t te same times, tis report also empasi;es on te
provisioning conditions and recovery strategies of tose +anks.
-dentifications of te reasons for wic te loans are act!ally +ecoming classified are a
ard =o+. -t re4!ires e<pertise in +anking field. 7e most common reasons are +asically
divided into tree types. ?irst of all, te fa!lt is wit te +ankers. Most of te times tey
fail to identify te motivation of te clients. 7en tey rely on te data provided +y te
clients, wic are not cent percent valid. *t te same time tey don>t analy;e te data
properly. )econdly, client>s over confidence a+o!t te pro=ect. ?inally, e<isting r!les are
enco!raging tonic for te intentional defa!lters +eca!se, for recovery +anks ave to go
for a time cons!ming proced!re and most of te time +ank fail to recover.
7e final step of loan classification is to recover te loan amo!nt from te respective
client. "ere te proced!re is almost same for every +ank. *t +eginning tey give
reminder letter. 7en tey send letter informing tat +ank is going to s!e against te
client. -f client dose not give satisfactory response after tis letter ten +ank s!e against
te client. Mainly +anks s!e in te *rta Rin *dalat located at %ai 'ha(ar Ba)ar. 7ere
is a separate act for +anks called Bank *ct 'KK&.
IA

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