Internship

Executive Summary
At present the importance of banking system is too much. No country can be improved
in its industrial and commercial sector without proper banking system. Credit
granting decision and proper management of it is the foremost function of a bank
.It is treated as lifeblood of a bank because lions share income of a bank is being
generated by this operation. There are numerous sources of information through
which the bank can get insight the costs and revenues from credit granting. Credit
analysts synthesize all information that has been collected and reach a udgment
regarding the applicants creditworthiness. !ainly "ive Cs of Credit# capital$
character$ collateral$ capacity and condition normally used in a bank to udge the
applicants credit worthiness. %efore sanctioning or renewing large loans %ank also
collects information on their borrowers from Credit Information %ureau &CI%' of
%angladesh %ank. %ank also performs (ending )isk Analysis &()A'$ and
e*amines borrowers Cash "low +tatement$ Audited %alance +heet$ Income
+tatement and other financial statements to make sure that borrower has the ability
to repay the loan. ,roperly maintaining documentation is an essential element for
smooth sanctioning$ renewing or rescheduling of any loans. If maintaining
documentation is not proper$ all activities of credit division will go in vain.
Corporate division deals the total loan processing$ sanctioning and disbursement
activities. Credit proposal is processed focusing on all angles of the clients
information &Age of the business$ e*perience in related field$ date of availing credit
facilities$ management e*perience$ account behavior$ personal banking li-uidity
position and profitability'. .n the other hand proper monitoring of regular and
struck /up loan and recovery of bad loan is the foremost task of credit
administration division. The bank for better monitoring applies various
mechanisms such as ,ast 0ue account +pecial !entioning Account &+!A'. %anks
try to adust the bad loan through applying recovery strategy provided time#to#time
circular by %angladesh %ank and also Initiating legal courses of action.
Credit !anagement +ystem of A%%( 12
Chapter-One
Introductory Part
1.1 Origin of the study: This report is originated as the course re-uirement of
the !%A program under the business studies faculty of 0haka 3niversity.
3nder this program students of every department of this faculty must go
through an internship program of 21#weeks duration. As practical orientation is
an integral part of the !%A degree re-uirement$ I was sent by the department to
Arab %angladesh %ank (imited &credit division#I$ 4ead .ffice' to take real life
e*posure of the activities of banking financial institutions from 5anuary 62$1667
to April 86$ 1667.
1.2 Objectives of the study:
The main obective of the study is to get a clear#cut idea about how Credit
division runs and what function it does.
That is$ how an investment or credit proposal is received$ how it is processed$
how it is analyzed$ how decisions regarding the sanction of a particular credit
facility is taken place etc. "urther more$ the orientation is very useful to detect
whether the theoretical knowledge matches with real life scenario or not.
Though the title 9Credit management system of Arab %angladesh %ank (imited
9 is very lengthy concern$ the specific obectives are as follows: #
2. To know the overall activities of the credit division.
1. To know how a credit proposal is treated in this division.
8. To learn about the credit analysis process of the division.
;. To know the decision making process of the division.
7. To measure the effectiveness of the bank in the utilization of available
resources.
<. To know how to monitor the struck /up loan.
=. To identify the total position of classified advances and cash recovery$
)escheduling> regularization$ and reserve of classified advances.
?. To analyze classified loans and advances.
@. To point out the problems in fund utilization and recovery thereon.
1.3 Sources of the study:
0ata are gathered from both primary and secondary sources. As Arab %angladesh %ank
is a leading first generation privet commercial bank in %angladesh$ so I got sufficient
data to prepare my report.
1.4 Scope of the study:
The study was limited to the 9Credit 0ivision$ 4ead .ffice of Arab %angladesh %ank
(imited. The report covers the functions performed by the Credit 0ivision of 4ead
.ffice$ rules and regulations related to Credit$ ,rocedure of +anctioning Credit$
!onitoring$ Aarious analysis related to this particular arena etc.
&a' 0ata collection:
&i' ,rimary 0ataB
## 0iscussion with the reactive organizations officials.
&ii' "or the completion of the present study$ secondary data has been collected. The
main sources of secondary data are:
Annual )eport of Arab %angladesh %ank (td.
0ata from published reports of %angladesh %ank
0ifferent %ooks$ 5ournals$ ,eriodicals$ News ,apers etc.
1.5 ethodo!ogy of the study:
Analysis has been made on the basis of the obectives mentioned before in the conte*t
of Credit !anagement of Arab %angladesh %ank (imited.
&a' !ethods used in the study: !ainly time series analysis &2@@@#1668' has used to
compare the performance of A%%(. %esides this ratio analysis &0eposit advance ratio$
employee advance ratio etc.' has also used in the study.
&b' "rame work of the study:
"or the internship program the 0epartment of "inance sent me to Arab %angladesh
%ank (imited / 4ead .ffice. The 4ead .ffice then sent me to the Credit 0ivision
of the %ank. !y obective was to get a clear idea about the activities of the Credit
0ivision of the 4ead .ffice. I was assigned by my organization supervisor to study
different credit proposals$ which were gathered there from different branches of the
bank for sanctioning purpose. I had to analyze the different aspects of the proposals
viz. Company C !anagement aspect$ marketing Aspect$ Dconomic Aspect$
Technical Aspect$ "inancial Aspect$ (iability with A%%($ (iability with other
%anks$ (iability as per CI%. Then they also assign various branches proposal
regarding the struck /up loan for dealing with the respective branchs credit officer
or concerned officer for monitoring purposes.
1." #i$itations of the study:
To make a report various aspects and e*perience are needed. %ut I have faced some
barriers for making a complete and perfect report. These barriers or limitations$ which
hinder my work$ are as follows:
0ifficulty in accessing data of its internal operations.
Non#Availability of some preceding and latest data.
+ome information was withheld to retain the confidentiality of the bank.
I was placed to this department for only 21 weeks of time C working like
a regular employee hindered the opportunity to put the effort for the study.
Therefore$ it was very difficult to carry out the whole analysis. The study was limited to
Credit 0ivision$ 4ead .ffice of Arab %angladesh %ank (imited.
Chapter Two
%cono$ic and Industry Scenario
%cono$ic Scenario:
0espite the turmoil in the !iddle Dast$ impact of the on /going campaign on global
terrorism and outbreak of +A)+$ to name a few$ the global economic situation
registered moderate improvement in the year 1668$ in relation to the previous year.
.ur domestic economy also responded with growth$ being propelled primarily by fiscal
and monetary measures$ initiated by the government in the previous years. .ur Eross
0omestic ,roduct &E0,' in "F 1668$ at the current market price$ stood at TG.8$667
billion in the year 1661$ representing a normal growth of 26H in "F 1668 against a
=.?6Hc growth in "F 1661.
Industry Scenario: Industry +cenario analysis includes the following elements:
This sector is of paramount importance to the government and the donor
agencies to ensure a sound monetary policy.
The sector is strictly regulated.
There are some 71 banks in the country.
The investment banks and other non#bank financial institutions intensify the
competition in the sector.
Interest rates have recently declined across the industry by 2H to 8H.
The overall flow of fund from the banking industry has increased with
government borrowing decreased and private borrowing increased significantly.
Industrial loan during the year 1668 registered an impressive growth$ with the
amount of overdue industrial term loans actually declining during 1668$ largely
due to the commercial banks overall policy of writing off or rescheduling such
overdue loans in conformity with the central %anks guidelines
%angladesh %ank reduced the %ank )ate from <H to 7H and the statutory
(i-uidity )atio &+()' as well$ from 2<H to 21H in a bid to bring down the
lending rates of the commercial banks and also augment their overall li-uidity
position.
0espite the prevailing recessionery financial and non# financial factors$ industry
registered a better growth.
!ost of the firms are in mediocre position with respect to Capital Ade-uacy$
(i-uidity$ Asset Iuality$ Darnings potential and management efficiency.
A good number of banks are going to float shares in the market.
4eavy restriction is imposed by %angladesh %ank regarding money laundering$
credit granting etc.
The percentage of classified loan is around ;6H in the industry.
Non#banking financial institutions are performing well in terms of turnover$
return on asset$ e-uity and loan provisioning.
The competition is intense regarding deposit mobilization due to poor savings
habit of the nation.
There are some financial products like the mutual fundB industrial bond$ zero
coupon bond$ and secondary market of repurchase agreement are being opened
that makes the industry ore dynamic and competitive
The industry has undergone rapid automation during the last decade. )eturn is
ma*imized and risk is diversified by the instruments
The banks have recently paid good amount of cash and stock dividend$ which
ranges from 16H to 86H.
The performance in the market regarding fre-uency of trading$ the number of
transaction$ placement in the inde* fund is well.
Chapter Three
Overvie& of '((#
3.1 )istorica! (ac*ground:
Arab %angladesh %ank (imited$ the first private sector %ank under 5oint Aenture with
0ubai %ank (imited$ 3AD incorporated in %angladesh on 82st 0ecember 2@?2 and
started its operation with effect from April 21$ 2@?1.
0ubai %ank (imited &name subse-uently changed to 3nion %ank of the !iddleast
(imited' decided to off#load their investment in Arab %angladesh %ank (imited with a
view to concentrate their activities in the 3AD in early part of 2@?= and in terms of
Articles 18A and 18% of the Articles of Association of the Company and with the
necessary approval of the relevant authorities$ the shares held by them in the %ank were
sold and transferred to Eroup JAJ +hareholders$ i.e. %angladeshi +ponsor +hareholders.
At present the Authorized Capital and the D-uity &,aid up Capital and )eserve' of the
%ank are %0T. ?66.66 million and %0T. 2267.81 million respectively. The +ponsor#
+hareholders hold 76H of the +hare CapitalB the Eeneral ,ublic +hareholders hold
;@.86H and the rest 6.=6H +hares are held by the Eovernment of the ,eopleKs )epublic
of %angladesh. 4owever$ no individual sponsor shareholder of A% %ank holds more
then 26H of its total shares.
+ince beginning$ the %ank ac-uired confidence and trust of the public and business
houses by rendering high -uality services in different areas of banking operations$
professional competence and employment of the state of art technology.
0uring the last 12 years$ Arab %angladesh %ank (imited has opened <? %ranches in
different %usiness Centers of the country$ one foreign %ranch in !umbai$ India$ two
)epresentative .ffices in (ondon and Fangon$ !yanmar respectively and also
established a wholly owned +ubsidiary "inance Company in 4ong Gong in the name of
A% International "inance (imited. To facilitate cross border trade and payment related
services$ the %ank has correspondent relationship with over 116 international banks of
repute across 7? countries of the Lorld. A% %ank is listed in 0haka and Chittagong
+tock D*change.
The sponsor and 0irectors of the %ank are a successful group of prominent local and
non# resident %angladeshi investors who have earned high credentials and e*cellent
reputation in their respective fields of %usiness at home and abroad.
Arab %angladesh %ank (imited$ the premier sector %ank of the country is making
headway with a mark of sustainable growth. The overall performance indicates mark of
improvement with 0eposit reaching %0T. 1?$286.66 million$ which is precisely 2;H
higher than the preceding year. .n the Advance side$ the %ank has been able to achieve
7H increase$ thereby raising a total portfolio to %0T. 2@$@26.66 million$ which places
the %ank in the top tier of private$ sector commercial banks of the country.
.n account of "oreign Trade$ the %ank made a significant headway in respect of
import$ e*port and inflow of foreign e*change remittances from abroad.
3.2 ission + ,ision Of '((#
Aision: To be the trendsetter for innovating banking with e*cellence and perfection
!ission: To be best performing bank in the country and the region.
Eoal of the %ank: To e*ceed customer e*pectations through innovative financial
products C services and establish a strong presence to recognize shareholders
e*pectations and optimize their rewards through dedicated workforce.
(ong term Eoal: Geeping ahead of other competitors in productivity and profitability.
+hort Term Eoal: To attain budgetary targets fi*ed in each areas of business.
3.4 Organi-ationa! structure + .epart$ents:
.rganizational setup of A% %ank (imited is consisting of three organizational domains.
"irstly the !anaging 0irector and +enior D*ecutive Aice ,resident. !aor
responsibilities of this are to take central decision and transmit it to the second step.
+econdly$ D*ecutive (evel !anagement$ which contains D*ecutive Aice ,resident$
+enior Aice ,resident$ Aice ,resident and Assistant Aice ,resident. !aor
responsibilities of this part are to supervise and control division>department. Thirdly$
branch operation management$ which contains branch management and other>lower
level management. !aor responsibilities of this part of the <@ branches of this bank are
to report to the head .ffice from time to time.
3.5. (oard of .irectors:
%oard of directors consists of 0irectors$ Chairman and ,resident C !anaging 0irector
and Company +ecretary.
"aisal ! Ghan Chairman
+aedur +era
Aice# Chairman
+yed Eolam Gibria
0irector
Asghar Garim
0irector
Eolam +arwar
0irector
+! +alauddin
0irector
!ohammad Tipu +ultan$ "CA
0irector
0+ "aisal 4yder
0irector
Abu 4aniff Ghan
,resident C !anaging 0irector
! A Awal
,resident C !anaging 0irector
! "azlur )ahman$ "CA
Company +ecretary
3." Products / Services of '((#:
A% %ank is offering the following ,roducts and services matched with modern ages
and technology.
0onsu$er ban*ing:
Consumer Credit is a concept$ which has conceived in the minds of many a banker and
has been thought about to bring the une*plored area of the consumers who belong
mainly to the middle class to enoy the benefits of %ank finance. This group consists of
the people who are employed individuals$ self#employed persons$ and even
businessmen. Arranging credit facilities for these individuals who have a limited
income may think of buying a car or any electronic items$ like # TA$ fridge$ etc. or
spend for house renovation or e*penses for marriages and enoy a minimum
comfortable living standard. +uch credit options have become a desperate need and
Arab %angladesh %ank (imited among the many other banks has successfully
introduced the scheme intheyear2@@=.
Arab %angladesh %ank (imited has attained a remarkable response from this section of
people including those of financial > educational institutions$ self#employed individuals$
government officials$ businessmen and employees of this %ank.
.ver a span of 7 &"ive' years there has been a dramatic rise in the number of Consumer
Credit. Nevertheless$ it may be mentioned that -uite a number of %anks have similar
schemes and each day newer products are being introduced.
Competition among the private banks is on the rise and clients move to those$ which
have more attractive terms and conditions.
Aisualizing the present scenario$ Arab %angladesh %ank (imited has relaunched the
Consumer Credit +cheme into < &+i*' product %rands as follows:
2. ,ersonal (oan &secured'.
1. ,ersonal .verdraft &secured'.
8. ,ersonal (oan &unsecured'.
;. I#Cash +taff .verdraft &unsecured'.
7. I#Cash Customer .verdraft &unsecured'.
<. Auto (oan &unsecured'.
.bective of the scheme:
The scheme is intended to improve the standard of living of the middle class population
by e*tending credit facilities to them for procuring costly and essential consumer
products on easy terms and conditions.
Target !arket:
a. +alaried individuals such as / Confirmed .fficers > D*ecutives of ,rivate >
!ultinational Companies$ Corporation$ %anks$ Insurance Companies.
b.
.fficers > D*ecutives of Eovernment > +emi#Eovernment or Autonomous %odies$
NE.s$ International Aid Agencies and 3N %odies.
c.
Teachers of Dducational Institutions.
d.
+elf#employed ,rofessionals &0octors > Dngineers > Chartered Accounts >
Architects Consultants'.
e.
%usinessmen.
Dligibility:
a. Any citizen of %angladesh falling under the above categories.
b. 4olding an +>%$ C>0 Account with any %ranch of Arab %angladesh %ank (imited
or any other %ank.
c. Age group: 17 / 71 years.
d. !inimum 1 &Two' years work e*perience.
e. Income Tk.27$ 666># &for ,ersonal (oan / unsecured'.
Income Tk.17$ 666># &for Auto (oan / unsecured'.
f. 0ebt burden ma*imum 86H for all categories.
,rocedure for availing the credit facility:
!inimum loan amount : Tk.17$ 666># and
!inimum loan amount : Tk.7$ 66$666># &for ,ersonal (oan # unsecured'.
!inimum loan amount : Tk.26$ 66$666># &for Auto (oan # unsecured'.
a. .btain the prescribed application form along with the folder and fill#in the detailed
information re-uired.
b. .pen an account with the %ank under proper introduction.
c. +ubmit re-uired papers along with the -uotation for purchase of proposed product
or for any other purpose.
d. .ne undated che-ue for total payment amount &(oan tenor: e-ual monthly
installment'.
e. Charge documents to be signed by applicant > guarantors.
)ate of Interest:
,roducts Interest )ate
a. ,ersonal (oan &secured'. 22H p. a. &with 1H spread on A%%( "0)'
b. ,ersonal .verdraft &secured'. 22H p. a. &with 1H spread on A%%( "0)'
c. ,ersonal (oan &unsecured'. 27H # 2<H p. a. &as per decision of %ranch
!anager'
d. I#Cash +taff .verdraft &unsecured'. 28H p. a.
e. I#Cash Customer .verdraft
&unsecured'.
2<H p. a.
f. Auto (oan &unsecured'. 27H p. a.
)epayment:
a. D-ual monthly Installments for both principal and interest$ covering the period of
the loan.
b. Installments to be paid within the 86th of each month.
+ecurities:
a. ,ersonal guarantee &for all product specification'.
b. Cash collateral &for secured overdraft > loans'.
c. Charge documents.
1o$en %ntrepreneurs:
The scheme is intended to finance the women entrepreneurs to efficiently and
successfully build up business enterprises of their own.
The statistics presently show that 76H of the total population is women. Thus the
participation of the women folk in the economic development of the country is a must
and their new enterprises will help in achieving the social and national goals$ which in
turn will enormously contribute towards employment generation and thereby add to the
countryKs E0,.
2enera! 2uide!ines:
A. Target Eroup
The +cheme is aimed to attract the enterprising female entrepreneurs to booster their
activities and make proper investments in formulation of proects$ which will reap both
social and economic benefits for a developing country like ours.
%. Dligibility
Dnterprising adult women working singly or involved in a group or association may be
eligible to apply.
The finance will be in the form of a Time (oan or .verdraft for a ma*imum period of 2
year. The ma*imum limit e*tended will be for Tk. 1.66 lac C minimum Tk. 76$666># to
each individual. The loan shall be sanctioned for a period of 2 &one' year and may be
renewed if the management deems fit. The ma*imum limit for trade associations will
be Tk. 16.66 lac.
C. )ate of Interest
The interest rate will be M of 21H p.a. The rate may be reviewed and re#fi*ed by the
%ank as may be decided from time to time.
Schoo! (an*ing Sche$e:
The J+chool %anking +chemeJ is one of the most recent products of the %ank. It has
been launched on "ebruary 6<$ 1661 at Ai-uarunnissa#Noon#+chool C College$ 0haka.
.bectives:
The banking sector of our country has developed tremendously with many private
banks being established that render multifarious services to the individuals$
businessmen$ entrepreneurs$ self#employed persons etc. %ut not many banks have
thought about the student community who may be motivated to grow the saving habit.
Nowadays the students are provided with enough pocket money by their parents$ which
are most often s-uandered on unnecessary buying.
Arab %angladesh %ank (imited$ besides the regular activities will now comes forward
to render some services to the student community. They will be given the opportunity
to open accounts in their own names and save from their pocket money. This will not
only booster their saving habit$ but also keep a check on them for incurring unnecessary
e*penses.
4ere the bank will not be benefited with significant increase in funds but most
importantly by our specialized service to the student community$ Arab %angladesh
%ank (imited will be further acclaimed and e*posed in the limelight of the growing
section of our society$ which may help the %ank in popularizing its activities in the long
run.
)ate of Interest :
The interest rate will be ?H &i.e. 2H higher than the rate allowed
on normal +avings %ank Account'.
%anking time :
.nce > Twice a week according to the timing set by the school$
within our usual transaction hours. The officers and tellers will
go to the schools once a week to collect deposit and make
payments against cash withdrawals if any.
%ank +taff : .ne .fficer with two Tellers.
Allowance
admissible
:
Allowance to be paid to the .fficers and Tellers who will be
assigned to go to the +chools. Dach .fficer: Tk. 176.66 and Dach
Teller: 166.66 per week.
+pecial Condition :
The %ank reserves to itself the right to alter or add to these rules
at any time.
0eclaration of
+tudent
:
IuoteN I>Le the undersigned$ re-uest you to open a savings
account in my>our name&s'. I>Le agree to comply with and be
bound by the rules and regulations of the %ank related to this
account and any amendments thereto 3n-uote.J
Target +chools :
4ead .ffice has initially decided to implement the +chool
%anking +cheme in the following schools of 0haka city:
2. +cholastica &,vt.' (td.
1. Ai-uarunnessa#Noon#+chool C College
8. Lills (ittle "lower
;. +unbeams
7. !aster mind
<. .*ford International +chool
=. Aga Ghan +chool
?. +unnydale
3.3 4echno!ogy:
Innovation has been called the most precious capability that any organization in todayKs
economy must have and nurture. Lithout a constant flow of new ideas# not only for
new products and services$ but also for new ways of doing things# an organization is
doomed to obsolescence or even worse$ failure. 'uto$ation is a technological change
that replaces certain tasks done by people with machines. ,robably the most visible
technological changes in recent years are computerization. !ost organizations of
developed countries now have sophisticated information systems. %5business is a
comprehensive term describing the way an organization does its work by using
electronic linkages with its key constituencies &employees$ managers$ customers$ and
partners' in order to efficiently and effectively achieve its goals. !anaging in an e#
world$ organization re-uires new insights and perspectives.
A% %ank is the first private sector bank to realize the importance of technology for
%angladesh market and introduced on#line banking in 2@?@. 0ue to various obstacles
the IT development process slowed down in the past few years. 4owever$ to meet the
customers demand in this competitive market$ A% %ank management$ once again$
turned their focuses on the IT sector. 3nder the guidance of the management$ the IT
0ivision of the bank designed a plan and engaged the resources in the implementation
of the IT proects at various segments of the banking business. "ollowing is the list that
details the work of ongoing IT proects:
At first$ the management has decided to build communication infrastructure for the
institution and advised the IT division to bring all its branches under one
communication network. Lithout communication network$ centralization of
information is virtually impossible. Today$ we are proud to disclose that 2< of our =6
branches are connected under one network. %y middle of 1668 all 0haka$ Chittagong$
and +ylhet branches will be able to share financial information.
Twenty#four hours banking service is increasingly getting popular among the customers
of all ages. Litnessing such facts$ A% %ank has launched 650ash '4 service at
various locations within 0haka and Chittagong for its customers. 0etail information of
the service is discussed below.
Customers$ nowadays$ demand to access their account information and transact from
any branch regardless of its location. To implement the concept$ proper communication
network$ centralized customer accounts$ and a modern banking software is a must. In
order to meet customerKs re-uirements$ !anagement$ together with the IT division of
the bank is searching for reputed banking software to support all the services provided
by modern banks. Le hope to provide such services to our customers by beginning of
166;. In addition to any branch banking$ the new software will allow many other
services including phone or Internet ban*ing. The concept J.ne profile per A%%(
customer all over %angladeshJ will soon be a reality.
All the above ongoing proects will have an instant and positive impact on the ways our
customers currently do banking with us. In addition to that there are many other
computer#based services that are being implemented in all the departments of the
organization to increase the work efficiency. Thus$ IT division of the bank is
effortlessly working toward improving the customer service -uality and training of the
A% %ank staffs and e*ecutives. The bank has introduced debit cards for our customers$
to facilitate withdrawal of their utility$ own funds through AT!s to pay their utility$
restaurant and shopping bills etc from locations in 0haka$ +ylhet and Chittagong.
Issuance of debit card is now under progress and the facility will be e*tended to other
parts of the country as well. The bank has also introduced ,IS' 0redit 0ard for
providing credit facilities of the client.

Credit Card
.
Credit Card comes in both local and international forms$ giving the client power to buy
all over the Lorld. Now enoy the conveniences and advantages of Credit Card
Money transfer from anywhere in the World to Bangladesh in minutes.
5oining with the worldKs largest money transfer service JLestern 3nionJ$ A%%( has
introduced %angladesh to the faster track of money remittance. Now money transfer
between %angladesh and any other part of the globe is safer and faster than ever before.
This simple transfer system$ being on line eliminates the comple* process and makes it
easy and convenient for both the sender and the receiver. Through A%%(# Lestern
3nion !oney Transfer +ervice$ your money will reach its destination within a few
minutes.
3.7 '( (an* .eposit:

Total deposit increased to TG. 1=$1<6 million as on 82st 0ecember 1668 from TG.
17$717 million of the previous year indicating an increase of <.6?H compared to the
previous year. Time 0eposit being the main component$ constituted 71H of the total
deposit mi* followed by +avings and 0emand 0eposit$ which were 86H and 2?H
respectively.
The following table and chart show the growth of deposit and deposit mi*:

&Tk. In !illion'
,articulars 1888 2999 2991 2992 2993
Aolume 28$<17 2<$7@< 2@$;26 17$717 1=$1<6
Erowth in volume # 1$@=2 1$?2; <$227 2$=87
Erowth in &H' # 12.?2 2<.@< 82.76 <.?6

Deposit Amount (in million)
1
3
,
6
2
5
1
6
,
5
9
6
1
9
,
4
1
2
5
,
5
2
5
2
!
,
2
6
5 1 15 2 25 3
"ear
1999
2
21
22
23
#mount $in million%
&e'osit Mi(ture
52%
30%
18%
Fixed
Savings
Demand
Types of 0eposit )ate of Interest
A. +avings 0eposit =.66H
%. +pecial Notice 0eposit &+T0' <.76H
C. +ecurity 0eposit )eceipts &+0)' 7.66H
0. "oreign Currency 0eposits &Current' 2.66H
D. "i*ed 0eposit &Time 0eposits'
a. 8&three'!onths
b. <&si*'!onths
c. 2&.ne'Fear to
1&Two'Fears
?.7H
?.=7
@.76
Note: )ate may be negotiated.
8.@ A% %ank (oans and Advances:
Credit activity during the year 1668$ was vibrant registering significant growth. Total
loans and advances at the end of the year increased by TG. @7? million or 7H
over the preceding period. This is due to an increase in commercial and trade
financing$ term lending and working capital support.
A% %ank continued to support long /term loan under syndicate financing to augment
the industrialization process. This include cement !anufacturing$ modern poultry
and hatchery$ agro / processing and setting up of intermediary industries.
The consumer credit scheme also gained momentum this year$ besides other credit
schemes like$ ,C loan scheme and Dducational loan scheme.
The bank is also to focusing its attention on state# of /the# art information technology
to sustain economic and social development. The fabrics sub# sector of )!E
backward linkage industries also offers us the opportunity to finance the local
weaving industry as their supply is still less than 16H at the moment. Thus$ an
investment opportunity for establishing composite units that includes spinning$
weaving and processing was opened up as a result.
The following table and chart show the growth of loans advances:
#oan and 'dvances of '((# :i!!ion in 4a*a;
,articulars 2@@@ 1666 1662 1661 1668
Aolume 26$=<@ 21$<?1 2;$?<1 2@$;== 16$;87
Erowth &in volume' # 2$@28 1$2?6 ;$<27 @7?
Erowth in &H' # 2=.=< 2=.2@ 82.67 ;.@1
1999 10!9
2000 12!82
2001 1"8!2
2002 19"
2003 20"35
Com'arati)e 'osition of loan and ad)an*es
8.26 Sector5 &ise brea*up of #oan and 'dvances of '((#
Agriculture 1; 7? &8;' &7@'
(arge and !edium Industry 1$@?; ;$267 &2$212' &1='
Current Capital 7$2;= ;$6?8 2$6<; 1<
D*port "inancing ??? ;76 ;8? @=
Commercial (ending 1$7?2 ?$17@ &7$<=?' &<@'
+mall and Cottage Industry 212 7? <8 26@
.thers ?$<@6 1$;<; <$11< 178
Total 16$;87 2@$;== @7? 7
+e*tor, wise Brea- u' of .oan and #d)an*es 23
0%
15%
25%
"%
13%
1%
"2%
Ag#i$ulu#al %a#ge and medium &ndust#'
(u##ent (apital Finan$ing in )xpo#t
(omme#$ial loan Small and $ottage &ndust#'
*t+e#s
Sector 2993 2992 2ro&th
'$ount <
+e*tor ,wise /rea- u' of loans and ad)an*es
22
0%
21%
21%
2%
"3%
0%
13%
Ag#i$ulu#al %a#ge and medium &ndust#'
(u##ent (apital Finan$ing in )xpo#t
(omme#$ial loan Small and $ottage &ndust#'
*t+e#s
3.11 '( (an* Invest$ent:
The size of the investment portfolio in 1668 stood at TG. 8$88< million compared to
TG. 8$12@ million in 1661$ indicating an increase of ; H. !a*imum investment
was on Eovernment +ector involving TG. 1$@68 million
The following table shows the year /wise growth of investment:
&Tk.in million'
Particu!ars 1888 2999 2991 2992 2993
Aolume 1$228 1$;86 1$=6; 8$12@ 8$88<
Erowth in volume # 82= 1=; 727 22=
Erowth in &H' # 27.66 22.1? 2@.67 8.<8
.n the above Investment Treasury bill$ Eovt. bonds$ debentures$ share$ prize bond etc
.is notable. 0istribution of investment amount on each instruments in 1668 are as
under:
&Tk. In million'
Particu!ars '$ount
Treasury %ond 1$@17
0ebenture and %onds 27<
+hare 171
,rize bond 8
Total 888<

8.21 Interest )ates on lending &Dffective from 5uly 6?$ 166;'
,articulars
Approved
!id )ate
w.e.f
6?>6=>166;
Approved Interest rate
%and w.e.f
6?>6=>166;
2' Agriculture:
i' (oan to ,rimary producer @.76H ?.66H to 21.66H
ii' (oan to Agricultural Input 26.76H @.66H to 21.66H
iii' 5ute @.66H "i*ed
1' (arge C !edium +cale Industry
i' (arge C !edium +cale Industry &Term (oan
below Tk.17.66 Crore'
28.66H 22.76H to 2;.76H
ii' (arge C !edium +cale Industry &Term
(oan Tk.17.66 Crore C above'
21.76H 22.66H to 2;.66H
8' Lorking Capital
.ther than 5ute &+!D':
i' +mall &below Tk. 8 Crore' 28.76H 21.66H to 27.66H
ii' +mall &above Tk. 8 Crore below Tk.26
Crore'
28.66H 22.76H to 2;.76H
iii' !edium &above Tk.26 Crore below Tk.17
Crore'
21.76H 22.66H to 2;.66H
iii' (arge &above Tk.17 Crore' 21.66H 26.76H to 28.76H
;' D*ports
i' 5ute C 5ute Eoods D*port =.66H "i*ed
ii' .ther D*port =.66H "i*ed
7' Commercial (ending
i'5ute Trading 22.66H @.76H to 21.76H
ii' Commercial (ending &.thers' 28.76H 21.66H to 27.66H
iii' Commercial (ending &(arge#specific' 28.66H 22.76H to 2;.76H
<' +mall C Cottage Industry &Term (oan' 22.66H @.76H to 21.76H
=' Consumer Credit:
a' Customer 3nsecured 2<.76H 27.66H to 2?.66H
b' +taff 3nsecured 2;.66H 21.76H to 27.76H
?' I#Cash .verdraft &Credit Card' 1.76H >mo. "i*ed
@' 3rban 4ousing 2;.=7H 28.17H to 2<.17H
26' .thers
i' +pecial ,rograms 26.76H @.66H to 21.66H
ii' .ther &Cash Coll. # .wn %ankKs "0)' 22.76H 26.66H to 28.66H
iii' Cash Coll.# L0% and others 22.76H 26.66H to 28.66H
iv' Cash Coll.# "0) of other banks 21.76H 22.66H to 2;.66H
3.13. (usiness 'rea:
A%%( operate its business in the Nationwide with <@ %ranches. A%%( divides its
%ranches in < different )egions all over %Angladesh$ which are as follows:
0haka 17 %ranches
Chittagong 16 %ranches
)ashahi = %ranches
+ylhet = %ranches
Ghulna = %ranches
%arisal 1 %ranches
!umbai 2 .verseas &branch'
=ive >ears Perfor$ance at a g!ance
&!illion Taka'
,articulars 1888 2999 2991 2993 2993
Authorized Capital ?66.66 ?66.66 ?66.66 ?66.66 ?66.66
,aid / up Capital ;6@.@7 ;6@.@7 ;6@.@7 ;6@.@7 ;=2.;;
+tatutory C .ther )eserves 7;.?2 ;1@.?; 7;?.8; 7<@.67 7@1.26
+hareholders D-uity =@=.1; @?6.6= 22=1.?; 2267.81 2287.@?
0eposits 28<17.1= 2<7@<.88 2@;6@.?? 1771;.7? 1=1<6.2<
(oans C Advances 26=<?.?2 21<?1.2? 2;?<2.@? 2@;==.81 16;87.1;
Investments 1228.6< 1;1@.<< 1=68.=8 812?.<8 8887.?=
Import 266<7.86 2822@.66 21;1?.6? 2=128.66 2@1?2.18
D*port <?2?.26 ?;87.?6 ?1=7.26 ?;<=.66 @=;8.6?
.perating Income <<6.2@ =?=.2; 226@.1= 26==.86 21@8.11
.perating D*penses ;6=.8; ;=2.;6 7<;.2< @=7.21 221@.?=
Net profit before Ta* 21=.?7 1<8.?< ;;8.1? ;=.2? ;=.21
Net ,rofit After Ta* =?.?7 27?.?< 1<8.1? 18.<@ 2=.21
"i*ed Assets 118.@= 1=?.2< 1=?.== 1??.77 1?7.16
Total Assets 2?;6?.2@ 1128?.<= 17871.67 82@2?.@6 81@<@.;7
0ividends &H' 21.76 2?.66 17.66 27.66 7.66
%ook value of the share &Taka' 2@;.;= 112.6= 1?<.6@ 1<7.2; 1;6.@<
Average price of the share&Taka' @8.@6 288.66 12@.<@ 86=.66 11;.<=
No. .f %ranches <1 <1 <; <@ <@
No. of Dmployees 2;=1 2777 27@6 2<7@ 2<61
No. of +hareholders 1?<8 8==@ ;;;7 ;=1@ ;=<<
%va!uation of recent Perfor$ance:
The overall performance of A%%( is increasing gradually. The total authorized capital
remains same during the five years and ,aid /up capital has increased to Tk. ;=2.;;
million in the year 1668. +tatutory and other reserves has increasing trend. The total
asset of the %ank increased to Tk. 81@<@ million in 1668 against Tk. 82@2@ million last
year. The total deposits stood at TG. 1=1<6 million in 1668 against Tk.17717 million in
1661.The total loans and advances have also registered an increase to Tk. 16;87
million in 1668 compared to Tk. 2@;== million last year. 4owever$ the net profit after
ta*es during the year reduced significantly due to provision for bad and doubtful debts.
?ecent focusing attention of '((# on S% 0redit Portfo!io
+mall and !edium Dnterprise program gained new momentum this year$ besides other
credit schemes. A%%( is focusing special attention on this approach to sustain
economic and social development.
S% Structure: It composite of # +mall Dnterprise &3p to Tk. 8.66 Crore'
#!edium Dnterprise &3p to Tk. 26.66 Crore'
S% Strategy for 2995
4arget
To achieve %anks operational profit of Tk 266.66 Crore$ management has fi*ed
target to sanction additional 876.66 Crore freshB loan for the year 1667.
'pproach
%ranches have been advised to provide prescribed information C action plan for
achieving the target
Needs vigorous marketing drive to achieve the ambitious target.
Strategy
After receiving re-uired information from the branches appropriate strategy
shall be formulated.
'pprova! 'uthority:
%oard : Above Tk. 8.66 Crore
Credit Committee : 3p to Tk. 8.66 Crore
1 )egional 4eads
of 0haka C Chittagong : 3p to Tk. 86.66 (ac
D*ecutives &by name' : 3p to Tk. 27.66 (ac
%ranch Authority
&designed branches' : I%, C Cash collateral
S% (usiness ,o!u$e:
No. .f %ranches : <?
No of Clients : ;$<<;
Amount of Credit (imit : Tk. 21=7 crore
.utstanding : Tk. @67 crore
Amount IN DAA : Tk.=1.?7 crore
No. of Account : 2@6
,ast 0ue amount :Tk. 2<6.?; crore
No. of past due account :86=
'!!ocation 'nd onitoring Of 'ccount:
%ranch: %ranch manager > )elationship manager and Credit .fficer > )elation .fficer
have primary responsibility for marketing new accountsB maintain relationship and
monitoring +!D accounts.
0ivision:
1 0ivision 4eads have approval authority for Tk. 86.66 lac but do not have any targete
to achieve.
4ead .ffice:
+!D department is headed by one +A,
+!D accounts of Chittagong )egion are allotted and monitored by one +A,.
+!D accounts of Ghulna$ )ashahi C +ylhet 0ivision are allotted and monitored by
one A,
)!E accounts of all divisions are allotted C monitored by on e AA,.
%oard memos of specific branches prepared by on e AA,
?e!ationship 1ith (ranch:
< Credit officers under 0haka )egion
2 Credit officer under Chittagong )egion
2 Credit .fficer under )ashahi )egion
2 Credit .fficer under Ghulna )egion
2 Credit officer under +ylhet )egion.
< Credit officers C 1 D*ecutives maintain relationship with branches under
0haka )egion
2 Credit officerC 2 D*ecutive maintain relationship with branches under
Chittagong )egion
2 Credit officerC 2 D*ecutive maintain relationship with branches under
)ashahi )egion
2 Credit officerC 2 D*ecutive maintain relationship with branches under Ghulna
)egion
2 Credit officerC 2 D*ecutive maintain relationship with branches under +ylhet
)egion.
Segregation of responsibi!ity:
At %ranch:
!arketing is segregated from Credit Admin. 0eptt.
At 4ead .ffice:
Credit processing > approving deptt. Is segregated from Credit Admin. 0eptt.
Credit .fficer of processing deptt. +crutiny the credit proposal and submit to
their respective recommending e*ecutive for onward submission to the
Credit Committee or %oard through 4ead of +!D for decision > approval.
Credit Admin. 0ivision consists of 8 departments:
(egal$ !onitoring > )eturns and )ecovery
Darly alert accounts are monitored by respective supervising e*ecutives.
CI% Cell is headed by one Aice ,resident in addition to his assigned ob of
processing of Credit ,roposals.
0o$$unication to (ranches:
The credit officers under the guidance of the D*ecutive responsible for the
division makes necessary scrutiny and -ueries while processing the proposals.
Credit ,rocessing 0eptt. Is responsible for communicating decision to branches.
Dach Credit .fficer$ in addition to three support staff$ is responsible for delivery
of Credit decisions.
Security .ocu$entation + .isburse$ent:
%ranch is responsible for completion and maintaining security documents
After completion of documentation formalities$ branches disburse the loan.
"or any waiver or deferral 4. sanctioning authority is referred to recovery
division.
0onc!usion:
A% %ank is a leading private bank is conducting its banking activities satisfactorily
through <? branches all over %angladesh with 2 &one' overseas branch at !umbai$
India. 0espite the prevailing recessionary financial and non# financial factors$ the bank
registered a growth of 16H in 1668$ over last year.
Chapter Four
0redit Investigation
Eenerally credit is the confidence of the lender in the ability C willingness of the
borrower to repay the loan at a future date. Credit /Eranting decisions are a maor task
in financial management of the firm. The policies necessary for the proper management
of credit granting are e*tremely important and need to be carefully formulated$ as the
-uestions involved in credit granting are comple* and their impact is substantial.
Among the policy -uestions that must be addressed are:
4ow much information should the firm collect on each credit applicantO
4ow should the credit / related parameters of credit applicants be estimated
&borrowers selection'O
4.1. There are several sources of credit information about potential customers$
proceeding from the least costly to the most costly.
4he Se!!er@s Prior %Aperience &ith the 0usto$er: .ne of the cheapest and most
reliable sources of information about e*pected future payment patterns is that
customers history of dealings with the seller. If the customer has paid promptly for
the last 16 orders$ it is very likely that the customer will pay promptly for the
twenty# first. To obtain information on the customers history of payments to the
seller$ the credit analyst -ueries the sellers database of prior customer payments.
0redit ?atings and ?eports: +everal firms are in the business of collecting and
selling credit# related information to sellers. +ome of these investigation firms
report on wide varieties of buyers while others report only on buyers in a single
industry. !ost of these agencies provide several types of service. They issue ratings
based on buyers financial strength and payments to sellers. They provide reports$
which may include the buyers financial statements and results of a n investigation
into legal records regarding the buyers business dealings. They collect and
distribute trade clearances$ which are lists of amounts owing$ amount past due and
histories of payments by buyers to their trade creditors.
Persona! 0ontact &ith the 'pp!icant@s (an* and Other 0reditors: A more
e*pensive &but very reliable' source of information is the applicants current
creditors and its bank. To obtain such information$ the analyst may personally
contact these sources to discuss their e*periences with the applicant. In this way$ the
analyst can verify the information in credit agency reports and gain other insights
that are not available from these reports. 3nfortunately$ such an investigation
usually -uite time consuming.
'na!ysis of the 'pp!icant@s =inancia! State$ents: Any credit applicants ability
to pay is in great part dependent on its financial condition. Analysis of this financial
condition can thus considerably aid in credit evaluation. "inancial statements must
first be obtained this may entail significant effort if the applicant firm is not
publicly traded. These statements must then be e*amined and analyzed. This
analysis often begins by making adustments to these statements to utilize
accounting conventions other than those chosen by the applicants accountants.
+uch adustments are made if the analyst believes that the conventions used did not
do the best ob of portraying the economic health of the firm. . .nce these
adustments are made$ ratio analysis and > or statistical analysis is then applied to
these statements to assess the financial health of the applicant.
0usto$er ,isit :.ne very e*pensive option in the collection of information is is for
the credit analyst to visit the applicant. An on# site viewing of the applicants
facilities and discussions with the applicants management can provide insights and
information that cannot be obtained in other ways. "or e*ample$ the credit analyst
can obtain impressions on the competence of the applicants management and on
the physical condition of the applicants plant$ service facilities and e-uipment.
There are not specific credit agencies in our country$ which can assist banks by giving
reports on parties>clients. %angladesh bank has recently opened. PCredit information
%ureauN through which some information regarding borrowers are supplied. CI% must
be compulsory for that compulsory for that loan which covers the range above Tk.76 666.
Profor$a for inBuiry about individua! borro&ers is as fo!!o&s:
InBuiry =or$: 0I( C 1 '
:=or Individua! /Institution;
'$ount of !oan app!ied for:
In figure 5555555555555555555555555555555555555555555
In &ords 5555555555555555555555555555555555555555555
1. Da$e of the (an*/=inancia! Institution
2. Da$e and 0ode Do. Of (ranch
3. .ate
4. ?eference Dos. of branch
5. ?eference Dos. of )ead office
". (orro&er 0ode
3. Da$e of the borro&er
7. =ather@s and $other@s na$e
8. 'ddress :Per$anentE present business and factory;
19. 4e!. Do.
11. 4ID
12. Individua! I. Do.
13. %Aisting 0redit faci!ities fro$ different ban*s / financia! institution.
14. Signature of the (ranch / anger &ith na$e
Perfor$a for inBuiry about institution :#i$ited 0o$pany; inc!udes the fo!!o&ing
e!e$ents:
InBuiry =or$:0I( C 2 '
:O&ner infor$ation if borro&er is institution;
1. Da$e of the (an*/=inancia! Institution
2. Da$e and 0ode Do. of (ranch
3. .ate
4. ?eference Dos. of branch
5. ?eference Dos. of )ead office
". (orro&er 0ode
3. Da$e of the borro&er
7. =ather@s and $other@s na$e
8. 'ddress :Per$anentE present business and factory;
19. 4e!. Do
11. 4ID
12. Status of the o&ner :ProprietorE partnerE 0hair$anE anaging .irectorE .irector or
other;
13. Da$e of the (an* / financia! institution / insurance co.:of &hich the above
o&ner is 0hair$an / .irector
14. Da$e and address of the o&ner re!ated business / fir$
15. Signature of the (ranch / anger &ith na$e contact no.
4.2 (orro&ers Se!ection: In credit granting decision it is the credit analysts ob
to synthesize all information that has been collected and reach a udgment regarding the
applicants creditworthiness. .ne way of organizing this information is characterizing
the applicant along five dimensions. These dimensions are called the "ive Cs of credit.
In all business dealings$ officers and employees must be guided by the principles of
honesty and integrity and safe# guard the interest of the shareholders and the depositors
of the banks. They should strictly adhere to the %anking (aws$ )ules and )egulation of
the E.AT. of %angladesh and the instructions issued by the %angladesh %ank from
time to time$ which affect the business practice of the %ank
In formulating a credit udgment and making Iuality Credit 0ecisions$ the lending
officer must be e-uipped with all information needed to evaluate a borrowers
character$ management competence and capacity$ ability to provide collaterals and
e*ternal conditions which may affect his ability in meeting financial obligations
0apita!: 5The evaluation of the applicants capital refers to an analysis of the
applicant firms financial position. Lhat are the applicant firms financial strengthsO
Lhat are their weaknessesO
#To assess the capital dimension$ the credit analyst considers the
data obtained from the applicants financial statements. The usual procedure is to
perform an e*tensive ratio analysis$ comparing the applicants fanatical ratios to ratios
for the applicants industry and performing trend analysis of the applicants ratios over
time.
0haracter: In assessing character$ the credit analyst considers all the information
that relates to willingness to pay by the applicants management. Lhat ids the
applicants history of payments to the tradeO 4as the firm defaulted to other trade
suppliersO 0oes the applicants management make a good# faith effort to honor debts
as they come dueO Information in these areas bears on the analysts assessment of the
applicants character.
0o!!atera!: If the applicant e*periences financial difficulty$ it may be forced to
li-uidate. In such a situation$ the recoveries to trade creditors will depend on &2' the
recoveries on assets sold$ &1' the amount of debt owned by the firm and &8' the e*tent
to which these debts are secured. If the firm li-uidates$ the recoveries on assets that are
security for debt will go to the holders of that secured debt. That is$ the secured
creditors get paid first from the revenues of selling the assets that have been granted to
them as security. +ince$ in general$ it is very difficult for trade creditors to obtain
secured positions$ this means that the recoveries to trade creditors are significantly
lower when the applicant has financed by using secured borrowings. Information on
secured borrowing sis gleaned from the applicants financial statements$ from the
applicants bank$ from credit reports on the applicant$ or directly from conversations
with the applicant.
0apacity: 5This dimension has two aspects: managements capacity to run the
business and the applicant firms plant capacity. !anagements capacity to run the
business relates to the competency &ability' of the management personnel in the
applicants operations. Any information relevant to this capacity is assessed$ including
personal impressions$ the history of success or failure by the managers running the
applicant business$ the number of years that the applicant has been in business$ and so
forth. The better is managements capacity to run the firmB the lower is the chance of
default.
#,hysical capacity refers to the value and technology of the applicants
production or service facilities. The more up#to#date and well maintained are the
applicants facilities$ the more likely that the applicant will be able to stay in business
and to take advantage of business upturns.
0onditions: These are the economic conditions in the applicants industry and in the
economy in general. If there is a good deal of foreign and domestic competition in the
applicants industry$ the possibility of failure and default to trade creditors is larger$
since profit margins are likely to be lower. If the economy in general is undergoing a
contraction$ failures are more likely to occur than during an e*pansionary period.
4.3 0redit report /0redit app!ication
Credit report is an essential document through which a banker can udge the feasibility
of a proposal for sanctioning loan. This report is prepared for getting information
regarding all the PCN s mentioned above. Credit report provides a complete picture of
the borrowers credit worthiness by focusing the following elements:
Name of the borrower
Nature of business involvement
Age of business
D*perience in the trade>business
Amount of loan re-uired
,urpose of borrowing
Account ,erformance.
Investment made in the business
0uration of loan source of repayment
!eans
+ecurity offered for the loan
!anagement +tability
%usiness .utlook
(i-uidity
,rofitability of the transactions
!arket reputation$ personal banking etc. of the borrowers.
' detai!ed 0redit 'pp!ication/ report enc!osed in the 'ppendiA no.1
Chapter Five
Overa!! 0redit anage$ent of '((#
5.1. 2uide !ines of 0redit po!icy: The guidelines contained outline general
principles that are designed to govern the implementation of more detailed lending
procedures and risk grading system within individual banks.
5.1.1 #ending 2uide!ines:
All banks have an established PCredit ,oliciesN that clearly outline the business
development priorities and the terms and conditions that should be adhered to in order
for loans to be approved. A%%( has such type of guideline through which it manages
the credit operation. This lending guideline is updated regularly in response to
%angladesh %anks guidelines to reflect changes in the economic outlook and the
evolution of the banks loan portfolio$ and distributed to all lending>marketing officers.
The lending Euidelines are approved by the !anaging 0irector> CD. C %oard of
0irectors of the bank based on the endorsement of the banks 4ead of Credit )isk
!anagement and the 4ead of Corporate> Commercial %anking.
Any departure or deviation from the (ending Euidelines is e*plicitly identified in
credit applications and ustification for approval provided.
The lending guidelines provide the key functions for relationship managers to
formulate their recommendations for approval incorporating the following:
Industry and (usiness Seg$ent =ocus
The (ending Euidelines clearly identify the business> industry sectors that
constitute the maority of the banks loan portfolio. "or each sector$ a clear
indication of the banks appetite for growth is indicated &as an e*ample$ Te*tiles:
Erow$ Cement: !aintain$ Construction: +hrink'. This will provide necessary
direction to the banks marketing staff.
4ypes of #oan =aci!ities
Indication of the type of loan that are permitted$ such as working capital$ Trade
"inance$ Term (oan$ etc.
Sing!e (orro&er /2roup #i$its/ Syndication
0etails of the banks +ingle %orrower> Eroup limits are included as per %angladesh
%ank guidelines. A%%( establish more conservative criteria in this regard.

#ending 0aps
The %ank establishes a specific industry sector e*posure cap to avoid over
concentration in any one#industry sector.
.iscouraged (usiness 4ypes
A%%( outline industries or lending activities that are discouraged. As a minimum$
the following is discouraged:
#!ilitary D-uipment> Leapons "inance
#4ighly (everaged Transactions
#"inance of +peculative Investments
#(ogging$ !ineral D*traction> !ining$ or other activity that is Dthically
or Dnvironmentally +ensitive
#(ending to companies listed on CI% black list or known defaulters
#Counter parties in countries subect to 3N sanctions
#+hare (ending
#Taking an D-uity +take in %orrowers
#(ending to 4olding Companies
#%ridge (oans relying on e-uity> debt issuance as a source of repayment.
#oan =aci!ity Para$eters
"acility parameters &e.g. ma*imum size$ ma*imum tenor$ and covenant and security
re-uirements; clearly stated. As a minimum$ the following parameters are adopted:
#%ank does not grant facilities where the banks security position is
inferior to that of any other financial institution.
#Assets pledged$ as security is properly insured.
#Aaluations of property taken$ as security performed prior to loans being
granted. A recognized third party professional valuation firm appointed to conduct
valuations.
0ross (order ?is*
)isk associated with cross border lending. %orrowers of a particular country may be
unable or unwilling to fulfill principle and >or interest obligations. 0istinguished
from ordinary credit risk because the difficulty arises from a political event$ such as
suspension of e*ternal payments
#+ynonymous with political C sovereign risk
#Third world debt crisis
"or e*ample$ e*port documents negotiated for countries like Nigeria.
5.1.2 0redit 'ssess$ent + ?is* 2rading
5.1.2.1 0redit 'ssess$ent
A thorough credit and risk assessment conducted prior to the granting of loans$ and
at least annually thereafter for all facilities. The results of this assessment are
presented in a Credit Application that originates from the relationship manager>
account officer &9)!'$ and is approved by Credit )isk !anagement &C)!'. The
)! is the owner of the customer relationship$ and responsible to ensure the
accuracy of the entire credit application submitted for approval. )!s must be
familiar with the banks (ending Euidelines and conduct due diligence on new
borrowers$ principals$ and guarantors.
It is essential that )!s know their customers and conduct due diligence on new
borrowers$ principals$ and guarantors to ensure such parties are in fact who they
represent themselves to be.
Credit Applications summaries the result of the )!s risk assessment and includes$
as a minimum$ the following details:
#Amount and type of loans proposed.
#,urpose of loans.
#(oan structure &Tenor$ Covenants$ )epayment +chedule$ Interest'
#+ecurity Arrangements.
In addition$ the following risk areas is being addressed by the %ank:
%orrower Analysis: The maority shareholders$ management team and group
or affiliate companies are assessed. Any issues regarding lack of management
depth$ complicated ownership structures or inter#group transactions are being
addressed$ and risks mitigated.
Industry Analysis: The key risk factors of the borrowers industry need to be
assessed. Any issues regarding the borrowers position in the industry$ overall
industry concerns or competitive forces is being addressed and the strengths and
weaknesses of the borrower relative to its competition are identified.
+upplier>%uyer Analysis: Any customer or supplier concentration is being
addressed$ as these have significant impact on the future viability of the
borrower.
4istorical "inancial Analysis: An analysis of a minimum of 8 Fears historical
financial statement of the borrower is presented. Lhere reliance is placed on a
corporate guarantor$ analysis of guarantor financial .The analysis addresses the
-uality and sustainability of earnings$ cash flow and the strength of the
borrowers balance sheet. +pecifically$ cash flow$ leverage and profitability are
being analyzed.
,roected "inancial ,erformance: Lhere term facilities &tenorQ2year' are
proposed$ a proection of the borrowers future financial performance need to be
provided$ indicating an analysis of the sufficiency of cash flow to service debt
repayments. (oans do not granted if proected cash flow is insufficient to repay
debts.
Account Conduct: "or e*isting borrowers$ the historic performance in
meeting repayment obligations &trade payments$ che-ues$ interest and principal
payments$ etc' is being assessed.
Adherence to (ending Euidelines: Credit Applications clearly state whether
or not the proposed application is in compliance with the banks (ending
Euidelines. The %anks 4ead of Credit or !anaging 0irector>CD. approved
credit Applications that do not adhere to the banks (ending Euidelines
!itigating "actors: !itigating factors for risks identified in the credit
assessment are being identified. ,ossible risks include$ but are not limited to
margin sustainability and>or volatility$ high debt load &leverage>gearing'$
overstocking or debtor issuesB rapid growth$ ac-uisition or e*pansionB new
business line>product e*pansionB management changes or succession issuesB
customer or supplier concentrationsB and lack of transparency or industry issuesB
(oan +tructure: The amounts and tenors of proposed financing is being
ustified based on he proected repayment ability and loan purpose. D*cessive
tenor or amount relative to business needs increases the risk of fund diversion
and may adversely impact the borrowers repayment ability.
+ecurity: .btaining a current valuation of collateral and the -uality and
priority being proposed need to be. (oans do not grant based solely on security.
Ade-uacy and the e*tent of the insurance coverage are also assessed.
Name (ending: Credit proposals do not be unduly influenced by an over
reliance on the sponsoring principals reputation$ reported independent means$
or their perceived willingness to inect funds into various business enterprises in
case of need. These situations are discouraged and treated with great caution.
)ather$ credit proposals and the granting of loans are based on sound
fundamentals$ supported by a through financial and risk analysis.
5.1.2.2 ?is* 2rading
All banks should adopt a risk grading system. A%%( adopt a system that define the
risk profile of borrowers to ensure account management$ structure and pricing are
commensurate with the risk involved. )isk grading is a key measurement of a %anks
asset -uality$ and as such$ it is essential that grading is a robust process. All facilities
should be assigned a risk grade. Lhere deterioration in risk is noted$ the )isk Erade
assigned to a borrower and its facilities should be immediately changed. %orrower
)isk Erades should be clearly stated on Credit Applications.

The following )isk Erade !atri* is provided as an e*ample. If there is a difference
between the personal udgment and the )isk grade +corecard results$ A%%( applied
the more conservative risk grade &higher' however$ monitoring standards and account
management must be appropriate given the assigned )isk Erade:
?is* ?ating 2rade .efinition
+uperior / (ow )isk 2 "acilities are fully secured by cash
deposits$ government bonds or a
counter guarantee from a top tier
international bank. All security
documentation should be in place.
Eood / +atisfactory )isk 1 The repayment capacity of the
borrower is strong. The borrower
should have e*cellent li-uidity and low
leverage. The company should
demonstrate consistently strong
earnings and cash flow and have an
unblemished track record. All security
documentation should be in place.
Aggregate score of @7 or greater based
on the )isk Erade +corecard
Acceptable# "air 8 Ade-uate financial condition though
may not be able to sustain any maor
or continued setbacks. These
borrowers are not as strong as grade 1
borrowers$ but should still demonstrate
consistent earnings$ cash flow and
have a good track record. A borrower
should not be graded better than 8 if
realistic audited financial statements
are not received. These assets would
normally be secured by acceptable
collateral &2
st
charge over
stocks>debtors> e-uipment> property'.
%orrowers should have ade-uate
li-uidity$ cash flow and earnings. An
Aggregate +core of =7#@; based on the
)isk Erade +corecard.
!arginal /Latch (ist ; Erade ; assets warrant greater
attention due to conditions affecting
the borrower$ the industry or the
economic environment. These
borrowers have an above average risk
due to strained li-uidity$ higher than
normal leverage$ thin cash flow and >or
inconsistent earnings. "acilities should
be downgraded to ; if the borrower
incurs a loss$ loan payments routinely
fall past due$ account conduct is poor$
or other untoward factors are present.
An Aggregate +core of <7#=; based on
the )isk Erade +corecard.
+pecial !ention 7 Erade 7 assets have potential
weaknesses that deserve managements
close attention. If left uncorrected$
these weaknesses may result in a
deterioration of the repayment
prospects of the borrower. "acilities
should be downgraded to 7 if sustained
deterioration in financial condition is
noted &consecutive losses$ negative net
worth$ e*cessive leverage'$ if loan
payments remain past due for 86#<6
days$ or if a significant.
,etition or claim is lodged against the
borrower. "ull repayment of facilities
is still e*pected and interest can still be
taken into profits. An Aggregate +core
of 77#<; based on the )isk Erade
+corecard
+ubstandard < "inancial condition is weak and
capacity or inclination to repay is in
doubt. These weaknesses eopardize
the full settlement of loans. (oans
should be downgraded to < if loan
payments remain past due for <6#@6
day$ if the customer intends to creates
a lending group for debt restructuring
purposes$ the operation has ceased
trading or any indication suggesting
the winding up or closure of the
borrower is discovered. Not yet
considered non#performing as the
correction of the deficiencies may
result in an improved condition$ and
interest can still be taken into profits.
An Aggregate +core of ;7#7; based on
the )isk Erade +corecard.
0oubtful and %ad &non#
performing'
= "ull repayment of principal and
interest is unlikely and the possibility
of loss is e*tremely high. 4owever$
due to specifically identifiable pending
factors$ such as litigation$ li-uidation
procedures or capital inection$ the
asset is not yet classified as (oss.
Assets should be downgraded to= if
loan payments remain past due in
e*cess of @6 days$ and interest income
should be taken into suspense &non#
accrual'. (oan loss provisions must be
reviewed at least -uarterly on all non#
performing loans$ and the bank should
pursue legal options to enforce security
to obtain repayment or negotiate an
appropriate loan rescheduling. In all
cases$ the re-uirements of %angladesh
%ank in CI% reporting$ loan
rescheduling and provisioning must be
followed. An Aggregate +corecard.

(oss &non#performing' ? Assets graded ? are long outstanding
with no progress in obtaining
repayment &in e*cess of 2?6 days past
due' or in the late stages of wind up >
li-uidation. The prospect of recovery
is poor and legal options have been
pursued. The proceeds e*pected from
the li-uidation or realization of
security may be awaited. The
continuance of the loan as a bankable
asset is not warranted$ and the
anticipated loss should have been
provide for. This classification reflects
that it is not practical or desirable to
defer writing off this basically
worthless asset even though partial
recovery may be affected in the future.
%angladesh %ank guidelines for timely
write off of bad loans must be adhered
to. An Aggregate Erade scorecard.
Common types of risks that can be found in an industry proect. The list is non#
limitative$ but can definitely be used as a checklist.
%Aterna! ?is*
)egulatory 3nanticipated regulatory changes
New standards or guidelines
+hareholders >.wners .bections to proect
Dnvironmental Leather
Act of Eod
,olitical ,olitical unrest
Eovernment intervention
Ta*ation
+ocial +ocial unrest
Aandalism>damage
Dconomical D*change rates
Inflation
Dconomic growth
+ector ,eer pressure
Competitor product introductions
Changing customer behavior
Interna! ?is*
!anagement Inade-uate management
Inade-uate staff
(ack of integrity$ insincerity
Incapacity
No co#ordination>communication
,oor policies and procedures
+enior staff changes
Inappropriate organizational structure
Incompatible >mismatch goals
(oss of sponsor support
+cope changes
Time Inade-uate scheduling
Inade-uate planning
Competency issues
0uration of proect
(abor shortage
(abor stoppages>strikes
(abor productivity
(ate deliveries
Access problems
Cost Inade-uate estimating
Contractor claims
,ay negotiations
Inappropriate procurement
%udget availability
,erformance Ine*perience
(ack of system>process understanding
)eliability
Inade-uate data availability
Inade-uate testing
,oor systems integration
Implementation Inade-uate trained staff
+taff availability
Inade-uate reconciliation
,oor post#implementation support
,oor marketing
Technology Changes in technology
Comple*ity
New products becoming available
,arts discontinued
0esign inade-uacies
Iuantum ump
(egal (icensing
Lork permits
,atent rights
Contractual inade-uacies
(aw suits from within
(aw suit from outside &contractors$
competitors'
.ther Competing proects
)e#organization
!ergers and take#over
The Darly Alert )eport &shown in Appendi* no. 1' is completed by the bank in a timely
manner by the )! and forward to C)! for approval to affect any downgrade. After
approval the report forwarded to Credit Administration$ who is responsible to ensure
the correct facility> borrower )isk Erades are updated on the system. The downgrading
of an account done immediately when adverse information is noted$ and do not
postpone until the annual review process.
5.1.3 'pprova! 'uthority
The authority to sanction> approve loans clearly delegated to senior credit
e*ecutives by the !anaging 0irector> CD. C %oard based on the e*ecutives
knowledge and e*perience. Approval authority delegated to individual e*ecutives
and not to committee to ensure accountability in the approval process. The
following guidelines are normally applied in the approval> sanctioning of loans:
Credit approval authority delegated in writing from the !0 >CD. C %oard &as
appropriate'$ acknowledged by receipts$ and records of all delegation retained in
C)!.
0elegated approval authorities reviewed annually by !0>CD. >%oard.
The credit approval function separated from the marketing>relationship
management &)!' function
The role of credit committee may be restricted to only review of proposals i.e.
recommendations or review of banks loan portfolios.
Approvals must be evidenced in writing$ or by electronic signature. Approval
records must be kept on file with the Credit Applications.
All credit risks must be authorized by e*ecutives within the authority limit
delegated to them by the !0>CD.. The 9pooling or combining of authority
limits should not be permitted.
Credit Approval should be centralized within the C)! function. )egional credit
centers may be established$ however$ all large loans must be approved by the
4ead of Credit and )isk !anagement or managing 0irector> CD.>%oard or
delegated 4ead .ffice Credit e*ecutives
The aggregate e*posure to any borrower or borrowing group must be used to
determine the approval authority re-uired.
Any credit proposal that does not comply with (ending Euidelines$ regardless
of amount$ should be referred to 4ead .fficer for Approval
!d > 4ead of Credit )isk !anagement approve and monitor any cross# border
e*posure risk.
Any breaches of lending authority should be reported to !0>CD.$ 4ead of
Internal Control$ and 4ead of C)!.
It is essential that e*ecutives charged with approving loans have relevant
training and e*perience to carry out their responsibilities effectively. As a
minimum$ approving e*ecutives should have:
#At least 7 years e*perience working in corporate> commercial banking as a
relationship manager or account e*ecutives.
#Training and e*perience in financial statement$ cash flow and risk analysis.
#A thorough working knowledge of accounting.
#A good understanding of the local industry> market dynamics.
#+uccessfully completed an assessment test demonstrating ade-uate knowledge
of the following areas:
Introduction of accrual accounting.
Industry >%usiness )isk Analysis.
%orrowing Causes.
"inancial reporting and full disclosure.
"inancial +tatement Analysis
The Asset Conversion >Trade Cycle
Cash "low Analysis
,roections
(oan +tructure and 0ocumentation
(oan !anagement.
A monthly summary of all new facilities approved$ renewed$ enhanced$ and a list of
proposals declined stating reasons thereof reported by C)! to the CD. >!d.
5.1.4 Segregation .uties:
%anks aim to segregate the following lending functions:
0redit 'pprova! / ?is* anage$ent
?e!ationship anage$ent / ar*eting
0redit 'd$inistration
The purpose of the segregation is to improve the knowledge levels and e*pertise in
each department$ to impose controls over the disbursement levels and e*pertise in teach
department$ to impose controls over the disbursement of authorized loan facilities and
obtain an obective and independent udgment of credit proposals.
.
Organi-ationa! structure :credit .ivision'
!!
Credit
The appropriate organizational structure is in place to support the segregation of the
!arketing > )elationship !anagement function from Approval >)isk !anagement
>Administration functions.
Credit approval centralized within the C)! function. )egional credit centers are
established$ however$ all applications are approved by the 4ead of Credit and )isk
!anagement or !anaging 0irector >CD. >%oard or delegated 4ead .ffice credit
e*ecutive.
!anaging 0irector>CD.
4ead of Credit )isk
!anagement C)!'
4ead of Corporate
>Commercial %anking
.ther 0irect )eports
&internal Audit$ etc'
Credit Administration
&!ay report separately to
!0 >CD.'
Credit Approval &include
regional credit centers if
applicable'
!onitoring >)ecovery
&includes regional recovery
centers if applicable'
)elationship
!anagement>!arketing
&)!'
%usiness 0evelopment
(oard of .irectors
Fey ?esponsibi!ities
Gey )esponsibilities of the functions are as follows:
0redit ?is* anage$ent :0?;
.versight of the banks credit policies$ procedures and controls relating to all
credit risks arising from corporate >commercial >institutional banking$ personal
banking C treasury operations.
.versight of the banks asset -uality.
0irectly manage all substandard$ 0oubtful C %ad and (oss accounts to
ma*imize recovery and ensure that appropriate and timely loan loss provisions
have been made.
To approve &or decline'$ within delegated authority$ Credit Applications
recommended by )!. Lhere aggregate borrower e*posure is in e*cess of
approval limits$ to provide recommendation to !0 >CD. for approval.
To provide advice >assistance regarding all credit matters to line management
>)!s.
To ensure that lending e*ecutives have ade-uate e*perience and >or training in
order to carry out duties effectively.
0redit 'd$inistration
To ensure that all security documentation complies with the terms of
approval and is enforceable.
To monitor insurance coverage to ensure appropriate coverage is in place
over assets pledged as collateral$ and is properly assigned to the bank.
To control loan disbursements only after all terms and conditions of
approval have been met$ and all security documentation is in place
To maintain control over all security documentation.
To monitor borrowers compliance with covenants and agreed terms and
conditions$ and general monitoring of account conduct> performance.
?e!ationship anage$ent /ar*eting :?;
To act as the primary bank contact with borrowers.
To maintain thorough knowledge of borrowers business and industry through
regular contact$ factory >warehouse inspections$ etc. )!s should proactively
monitor the financial performance and account conduct of borrowers
To be responsible for the timely and accurate submission of Credit Applications
for new proposal and annual reviews$ taking into account the credit assessment
re-uirements.
To highlight any deterioration in borrowers financial standing and amend the
borrowers risk Erade in a timely manner. Changes in risk Erades should be
advised to and approved by C)!.
To seek assistance >advice at the earliest from C)! regarding the structuring of
facilities$ potential deterioration in accounts or for any credit related issues.
Interna! 'udit /0ontro!
%anks have a segregated internal audit>control department charged with conducting
audits of all departments. Audits carried out annually$ and ensure compliance with
regulatory guidelines$ internal procedures$ (ending Euidelines and %angladesh %ank
re-uirements.
Conducts independent inspections annually to ensure compliance with (ending
Euidelines$ operating procedures$ bank policies and %angladesh %ank directives.
)eports directly to !0 >CD. or Audit committee of the %oard.
5.2 Procedura! 2uide!ines
The main procedures that are followed by A%%( to ensure compliance with the credit
policies narrated as under heads:
5.2.1 'pprova! Process
The approval process reinforce the segregation of relationship !anagement >!arketing
from the approving authority. The responsibility for preparing the Credit Application
rest with the )! within the corporate >commercial banking department. Credit
Applications recommended for approval by the )! team and forwarded to the
approval team within C)! and approved by individual e*ecutives. %anks may wish to
establish various threshold$ above which$ the recommendation of the 4ead of Corporate
>Commercial %anking is re-uired prior to onward recommendation to C)! for
approval team to handle routine approvals. D*ecutives in head office C)! approve all
large loans.
The recommending or approving e*ecutives take responsibility for and are held
accountable for their recommendations or approval. 0elegation of approval limits are
such that all proposals where the facilities are up to 27H of the banks capital approved
at the C)! level$ facilities up to 17H of capital approved by CD.>!0$ with proposals
in e*cess of 17H of capital to be approved by the DC >%oard only after
recommendation of C)!$ Corporate %anking an !0>CD..
The following diagram illustrates approval process:

Credit Application )ecommended by )!
>!arketing
Ronal Credit .fficer &RC.'
4ead of Credit &4.C' C 4ead of Corporate
%anking &4.C%'
2. Application forwarded to Ronal .ffice for approved >decline
1. Advise the decision as per delegated authority &approved decline' to
recommending branches. A monthly summary of RC. approvals sent to 4.C
and 4.C% to report the previous months approvals sanctioned at the Ronal
offices. The 4.C reviews 26H of RC. approvals to ensure adherence to
(ending Euidelines and %ank policies.
8. RC. supports C forwarded to 4ead of Corporate %anking &4.C%' or delegate
for endorsement$ and 4ead of Credit &4.C' for approval or onward
recommendation.
;. 4.C advises the decision as per delegated authority to RC..
7. 4.C C 4.C% supports C forwarded on !anaging 0irector.
<. !anaging 0irector advises the decision as per delegated authority to 4.C C
4.C%.
=. !anaging 0irector presents the proposal to DC >%oard
?. DC >%oard advises the decision to 4.C C 4.C%
)egardless of the delegated authority 4.C to advice the decision &approval>decline' to
marketing department through RC..
?eco$$ended .e!egated 'pprova! 'uthority #eve!s
4.C >C)! D*ecutives up to 27H of Capital
!anaging 0irector >CD. up to 17H of Capital
DC>%oard all e*ceed 17H of Capital
!anaging 0irector
D*ecutive Committee >%oard
0isbursement: 5+ecurity documents are prepared in accordance with approval terms and
are legally enforceable. +tandard loan facility documentation that has been reviewed by
legal counsel should use in all cases. D*ceptions are referred to legal counsel for advice
based on authorization from an appropriate e*ecutive in C)!.
# 0isbursements under loan facilities are only be made when all security
documentation is in place. CI% report reflect> include the name of all the lenders with
facility$ limit C outstanding. All formalities regarding large loans C loans to 0irectors
should be guided by %angladesh %ank circulars C related section of %anking
Companies Act.
'ppea! Process
Any declined credit may be re# presented to the ne*t higher authority for reassessment>
approval. 4owever$ there is no appeal process beyond the !anaging 0irector.
5.2.2 0redit 'd$inistration
The credit Administration function is critical in ensuring that proper documentation and
approvals are in place prior to the disbursement of loan facilities. "or this reason$ it is
essential that the functions of Credit Administration be strictly segregated from
)elationship !anagement >!arketing in order to avoid the possibility of controls being
compromised or issues not being highlighted at the appropriate level.
Credit Administration procedures should be in place to ensure the following:
0ustodian .uties:

(oan disbursements and the preparation and storage of security
documents centralized in the regional credit centers.
Appropriate insurance coverage is maintained &and renewed on timely
basis' on assets pledged as collateral.
+ecurity documentation is held under strict control$ preferably in locked
fireproof storage.
0o$p!iance reBuire$ents:
All re-uired %angladesh bank returns are submitted in the
correct format in a timely manner.
%angladesh %ank circulars >regulations are maintained
centrally$ and advised to all relevant departments to ensure compliance.
All third party service providers &values$ lawyers$
insurers$ C,As etc.' are approved and performance reviewed on an annual
basis. %anks are referred to %angladesh %ank circular outlining approved
e*ternal audit firms that are acceptable.
5.2.3 0redit onitoring
To minimize credit losses$ monitoring procedures and system is to be in place that
provides an early indication of the deteriorating financial health of a borrower. At a
minimum$ systems are in place to report the following e*ceptions to relevant e*ecutives
in C)! and )! team:
,ast due principal or interest payments$ past due trade
bills$ account e*cesses and breach of loan covenantsB
(oan terms and conditions are monitored$ financial
statements are received on a regular basis$ and any covenant breaches or
e*ceptions are referred to C)! and the )! team for timely follow /up
Timely corrective action is taken to address findings of
any internal$ e*ternal or regulator inspection>audit
All borrower relationships > loan facilities are received an
approved through the submission of a Credit Application at least
annually.
Computer system must be able to produce the above information for central >head
office as well as local review. Lhere automated systems are not available$ a manual
process has the capability to produce accurate e*ception reports. D*ceptions are
followed up on and corrective action taken in a timely manner before the account
deteriorates further.
%ar!y '!ert Process:
An Darly Alert Account is one that has risks or potential weakness of a material nature
re-uiring monitoring$ supervision$ or close attention by management.
If these are left uncorrected$ they may result in deterioration of the repayment prospects
for the asset or in the %anks credit position at some future date with a likely prospect
of being downgraded to CE 7 or worse &Impaired status' within the ne*t twelve
months.
Darly identification$ prompt reporting and proactive management of Darly Alert
Accounts are ,rime credit responsibilities of all )elationship !anagers and must be
undertaken on a continuous basis. An Darly Alert report is completed by the )! and
sent to the approving authority in C)! for any account that is showing signs of
deterioration within seven days from the identification of weakness. The )isk Erade
updated as soon as possible and no delay taken in referring problem accounts to the
C)! department for assistance in recovery.
0espite a prudent credit approval process$ loans may still become troubled. Therefore$
it is essential that early identification and prompt reporting of deteriorating credit signs
be done to ensure swift action to protect the %anks interest .The symptoms of early
alert are by no means e*haustive and hence$ if there are other concerns$ such as a
breach of loan covenants or adverse market rumors that warrant additional caution$ an
Darly Alert report raised.
!oreover$ regular contacts with customers will enhance the likelihood of developing
strategies mutually acceptable to both the customer and the %ank. )epresentation from
the %ank in such discussions should include the local legal adviser when appropriate.
An account may be reclassified as a )egular Account from Alert Account status when
the symptom$ or symptoms$ causing the Darly Alert classification have been regularized
or no longer e*ist. The concurrence of the C)! approval authority is re-uired for
conversion from Darly Alert Account status to )egular Account status.
5.2.4. 0redit ?ecovery
The )ecovery 3nit &)3' directly manages accounts with sustained deterioration
&a )isk )ating of +ub +tandard &<' or worse'. %anks may wish to transfer DSIT
accounts graded ;#7 to the )3 for efficient e*it based on recommendation of
C)! and Corporate %anking. Lhenever an account is handed over from
)elationship !anagement to )3$ a 4andover >0owngrade Checklist &Appendi*
no.8' is completed.
The )3s primary functions are:
0etermine Account Action ,lan>)ecovery +trategy
,ursue all options to ma*imize recovery$ including placing customers
into receivership or li-uidation as appropriate.
Dnsure ade-uate and timely loan loss provisions are made based and
e*pected losses.
)egular review of grade < or worse accounts
The management of problem loans &N,(s' must be a dynamic process$ and the
associated strategy together with the ade-uacy of provisions must be regularly
reviewed. A process is established to share the lessons learned from the e*perience of
credit losses in order to update the lending guidelines.
DP# 'ccount anage$ent
All N,(s are assigned to an Account !anager within the )3$ who is responsible for
coordinating and administering the action plan> recovery of the account$ and serve as
the primary customer contact after the account is downgraded to substandard. Lhilst
some assistance from Corporate %anking > )elationship !anagement may be sought$ it
is essential that the autonomy of the )3 be maintained to ensure appropriate recovery
strategies are implemented.
'ccount 4ransfer Procedures
Lithin = days of an account being downgraded to substandard &grade<'$ a
)e-uest for Action &)"A$ Appendi* no.;' and a hand over > downgrade checklist
&Appendi* no.8' is completed by the )! and forwarded to )3 for acknowledgement.
The account assigned to an account manager within the )3$ who reviews all
documentation$ meet the customer$ and prepare a classified (oan )eview )eport &C()$
Appendi* no. 7' within 27 days of the transfer. The C() approved by the 4ead of
Credit$ and copied to the 4ead of Corporate banking and to the %ranch> office where
the loan was originally sanctioned. This initial C() highlight any documentation
issues$ loan structuring weaknesses$ proposed workout strategy$ and seek approval for
any loan loss provisions that are necessary.
)ecovery 3nits ensure that the following is carried out when an account is classified as
+ub +tandard or worse:
"acilities are withdrawn or repayment is demanded as appropriate. Any drawing
or advances restricted$ and only approved after careful scrutiny and approval
from appropriate e*ecutives within C)!.
CI% reporting is updated according to %angladesh %ank guidelines and the
borrowers )isk Erade is changed as appropriate.
(oan loss provisions are taken based on "orce +ale Aalue &"+A'.
(oans are only rescheduled in conunction with the (arge (oan )escheduling
guidelines of %angladesh %ank. Any rescheduling is based on proected future
cash flows$ and should be strictly monitored.
,rompt legal action is taken if the borrower is uncooperative.
Don perfor$ing #oan :DP#; onitoring
.n a -uarterly basis$ a Classified (oan )eview &C()' prepared by the )3 Account
!anager to update the status of the action >recovery plan$ review and assess the
ade-uacy of provisions$ and modify the banks strategy as appropriate. The 4ead of
Credit approved the C() for N,(s up to 27H of the banks capital$ with !0> CD.
approval needed for N,(s in e*cess of 27H .the C()s for N,(s above 17H of capital
approved by the !0> CD.$ with a copy received by the %oard.
DP# Provisioning and 1rite Off
This guideline established by %angladesh %ank for CI% reporting provisioning and
writes off of bad and doubtful debts$ and suspensions of interest are followed in all
cases. These re-uirements are the minimum$ and A%%( adopt more stringent
provisioning >write off policies. )egardless of the length of time a loan is past due$
provisions raised against the actual and e*pected losses at the time they are estimated.
The )3 account !anager determines the "orce +ale Aalue &"+A' for accounts grade <
or worse. "orce +ale Aalue is generally the amount that is e*pected to be realized
through the li-uidation of collateral held as security or through the available operating
cash flows of the business$ net of any realization costs. Any shortfall of the "orce +ale
Aalue compared to total (oan outstanding fully provided for once an account is
downgraded to grade=. Lhere the customer in not cooperative$ no value assigned to the
operating cash flow in determining "orce +ale Aalue.
"orce +ale Aalue and provisioning levels are updated as and when new information is
obtained$ but as a minimum$ on a -uarterly basis in the C() &Appendi*'
"ollowing formula is to be applied in determining the re-uired amount of provision:
2. Eross .utstanding ***
1. (ess: &a' Cash margin held or fi*ed
0eposits>+p under lien &***'
&b' Interest in +uspense Account &***'
8 (oan Aalue
&"or which provision is to be created before considering
estimated realizable value of other security >collateral held' &***'
;. (ess: Dstimated salvage value of security> collateral held &***'
&+ee Note below'
Net (oan Aalue &***'
Dote: The amount of re-uired provision may$ in some circumstances$ be reduced by
an estimated realizable forced +ale Aalue of &i.e. +alvage Aalue' of any tangible
collateral held &viz: mortgage of property$ pledged goods > or hypothecated goods
repossessed by the bank$ pledged readily marketable securities etc'. 4ence$ in these
situations$ it will be advisable to evaluate such collateral$ estimate the most realistic
sale Aalue under duress and net /off the value against the outstanding before
determining the Net (oan value for provision purposes. Conservative approach is taken
to arrive at provision re-uirement and %angladesh %ank guideline properly followed.
5.3 4ypes of 0redit =aci!ities
The following types of credit facilities are generally allowed by the %ank to the
individuals$ partnership firms$ companies$ corporations and others$ either on
0emand$ Time or +elf (i-uidating basis and are carried on the %anks Eeneral
(edger:
a; #oans:
I. 0emand (oans
II. Time (oans
III. Term loans &more than one year'
b; Overdrafts:
I. Against pledge of goods >stocks
II. Against hypothecation of goods >stocks
III. Against any other permissible securities.
c; Other 'dvances:
I. Against Import %ills &%(C'
II. Against Imported !erchandise &(I!'
III. Against T>)
IA. Against D*port %ills purchased >discounted
A. Against Lork .rder
AI. Against other securities
d; #etters of 0redit
e; #etters of 2uarantee
.e$and #oans:
0emand loan is granted by the %ank for purchase of foreign currency for financing
import under Lage Darners +cheme &LD+'> secondary D*change !arket &+D!'
4i$e #oans:
This type of loan has a fi*ed maturity date indicating due date of repayment in full or in
installments. In special case$ the type of loan could be made to mature at any time up to
one year.
4er$ #oan:
If any loan is e*tended over a period e*ceeding one year$ it is called PTerm (oanN.
These loans are usually made to large well established business enterprises for capital
financing$ such as setting up of industry$ balancing or modernization of e*isting plan
>machineries of industries$ purchase of e-uipment etcB covering the repayment period
beyond one year
Overdrafts:
Arranged .>0 In this case the customer is allowed on the basis of prior arrangement to
overdraw his current Account by drawing che-ues for amounts e*ceeding the balance up to an
agreed limit within certain period of time not e*ceeding one year$ against acceptable securities.
These facilities are granted after the credit standing$ financial ability and status of the customer
as well as the purpose have been favorably established. The limit o f the .>0 is based on
PA0AI+D0 (IND ." C)DD0ITN available on a revolving basis$ subect to review prior to
e*piration of agreed period$ if a renewal is anticipated.
2..>0 against pledge of goods > stocks:
3nder this arrangement$ the credit facility is granted to the borrower against the security of
pledge of goods >produce in the form of raw materials or finished products subect to
credit>margin restrictions. The borrower signs a letter of pledge and surrenders the physical
possession of the goods> produce pledged under %anks effective control but retains the
ownership with himself. In case of default$ the %ank can sell the goods on serving proper
notice to the borrower and adust the out standings out of sale proceeds. +ometimes collateral
securities by way of legal or e-uitable mortgage of immovable properties are also obtained
before disbursement of the loan.
1. .>0 against hypothecation of goods>stocks>plant C machineries
3nder this method$ facilities are e*tended to borrower on his signing a letter of
hypothecation$ creating a charge against the goods>produce$ plant C machineries etc.
hypothecated$ for the amount of agreed limit of the debt subect to credit >margin
restrictions. The control >possession as well as the ownership of the hypothecated
goods> produce etc. is retained by the borrower but binding himself to surrender
possession of the goods to the %ank as and when called upon to do so. The %ank only
ac-uires a right or interest over the goods hypothecated. The %ank$ therefore$ almost
always insist on furnishing collateral securities by way of legal or e-uitable mortgage
of immovable properties and or guarantees where deemed fit.

5.4 4ypes of #oan 'ctivities:
0epending on the various nature of financing$ all the lending activities have been
brought under the following maor heads:
#oan :2enera!;:
+hort term$ !edium term C long term loans allowed to individual> firm>industries for a
specific purpose but for a definite period and generally repayable by installments fall
under this head. This type of lending are mainly allowed accommodating financing
under the categories &i' (arge C !edium +cale Industry and &ii' +mall C Cottage
Industry. Aery often term financing for &i' Agriculture C &ii' .thers are also included
here.
)ouse (ui!ding #oan :2enera!;:
(oans allowed to individual>enterprises for construction of house &residential or
commercial' fall under this type of advance. The amount is repayable by monthly
installment within a specified period. +uch advances are known as (oan &4%('.
4ouse %uilding (oan &+taff':
(oans allowed to our %ank employees for purchase>construction of house shall be
known as +taff (oan &4%('.
Other #oans to Staff:
(oans allowed to employees other than for 4ouse shall be grouped under head # +taff
(oan &Een'.
0ash 0redit :)ypo;:
Advances allowed to individual>firm for trading as well as wholesale purpose or to
industries to meet up the working capital re-uirements against hypothecation of goods
as primary security fall under this type of lending. It is a continuous credit. It is allowed
under the categories &i' JCommercial (endingJ when the customer is other than an
industry and &ii' JLorking CapitalJ when the customer is an industry.
0ash 0redit :P!edge;:
"inancial accommodations to individual>firms for trading as well as whole#sale purpose
or to industries as working capital against pledge of goods as primary security fall
under this head of advance. It is also a continuous credit and like the above allowed
under the categories &i' JCommercial (endingJ and &ii' JLorking Capital.J
SO. :2enera!;:
Advances allowed to individual>firms against financial obligation &i.e. lien of
"0)>,+,>%+,>Insurance ,olicy$ etc' and against assignment of work order for
e*ecution of contractual works falls under this head. This advance is generally allowed
for a definite period and specific purpose i.e. it is not a continuous credit. It falls under
the category J.thers.J
SO. :IPO?4;:
Advances allowed for purchasing foreign currency for opening (.C for import of goods
fall under this type of lending. This is also an advance for temporary period$ which is
known as pre#import finance and falls under the category JCommercial (ending.J
#oan 'gainst )ypothecation of 0arsE (uses 4ruc*sE Scooters and 1ater 0rafts:
Lhile allowing loan against hypothecation of Cars$ %uses Trucks$ +cooters and Later
Crafts some salient points should be taken into consideration such as / trustworthiness
of the borrower$ value of the vehicle$ brand of the new vehicle$ total landed cost and
retirement arrangement in case of imported vehicle and repayment capacity of the
borrower.
#oan 'gainst I$ported erchandise :#.I.;
Advance allowed against pledge of goods$ retaining margin prescribed on their (anded
cost$ depending on their categories and credit restrictions imposed by the %angladesh
%ank. %ranches shall also obtain letter of undertaking and indemnity from the clients$
before getting goods cleared through (I! account. The landed cost of the goods
subect to the credit restrictions imposed by %angladesh %ank is arrived at by taking
into account &The invoice values of the merchandise include freight. Customs 0uty.
+ales Ta*$ Lharf age$ Clearing Agents charges$ )ailway "reight etc$ Insurance
,remium$ 0emurrage and .ther charge$ if any'
Charge 0ocuments:
a' 0.,. Note
b' (etter of Agreement (etter of pledge.
c' !erchandise to be duly insured with specific risk clauses along with
%anks mortgage clause.
d' (etter of ,ledge
e' (etter of disclaimer to be obtained from the owner of godown in case of
rented godown
#oan 'gainst 4rust ?eceipt =aci!ity
Advance allowed when the documents covering an import shipment are given &to first
class parties only' without payment. "or such advances prior permission from 4ead
.ffice must be obtained. The customer holds the goods or their sale proceeds in trust
for the %ank$ till such time$ the loan allowed against the Trust )eceipt is fully paid off.
The period of Trust )eceipt may be 86$;7$<6or @6 days$ as allowed by the 4ead .ffice.
The following charge documents before allowing the advance:
a' 0.,. Note
b' Eeneral (etter of Trust )eceipt with supplementary agreement
c' (etter of agreement.
d' In case of ,artnership "irms documents are same as work order
'dvance 'gainst Shares :#oans + Overdrafts;
Advances may be allowed against shares of various companies approved by 4ead
.ffice from time to time -uoted on the stock D*change against re-uired margin
subect to credit restriction C ,rior permission from office.
%efore allowing the advance$ obtain the delivery of the shares and their Transfer
0eed forms and thoroughly scrutinize them with regard to the following:
a' They are original share scripts and bear the seal of the company.
The shares are fully paid up. 0o not allow advance against partly paid up shares$
unless approved by the office.
b' The shares are accompanied with blank Transfer 0eed duly signed by the
person in whose name those shares stand and witnessed by some body who
is easily traceable.
c' The transferors signature 0eed is verified by the company concerned
under its stamp.
d' The transfer 0eeds are undated.
e' A fresh set of Transfer 0eeds signed by the borrower$ and witnessed by
some body who is easily traceable is obtained and retained with the branch$
for all such shares which are to be sent to various companies for
registration in his name$ before the closure of their books$ if so re-uested
by him.
f' These shares are lodged with the companies concerned for registration with
their .riginal Transfer 0eeds$ duly completed in all respect$ under a
covering letter from the branch$ re-uesting them to return the shares to the
branch$ as the %ank has its lien on them. The Transfer 0eeds attached with
the shares are completed and signed by the borrower as transferee$ before
these are dispatched to the companies.
g' These shares are lodged with the companies for registration with their
original Transfer 0eeds$ duly completed in all respects$ under a covering
letter from the branch$ re-uesting them to return the shares to the branch$
as the bank has its lien on them. The Transfer 0eeds attached with the shares
are completed and signed by the borrower as transferee$ before these are
dispatched to the companies.
h' A receipt is obtained from the companies and retained with branch$ duly
discharged by the shareholder$ for e*change with the share certificates$
when ready for delivery.
i' The borrowers signatures on the fresh set of Transfer 0eeds are verified by
the companies concerned and retained with branch along with their
respective share certificate when received back from them after registration.
' The branch should obtained a letter of lien the borrower in respect of all
such shares which stand in his name$ or which have been sent to the various
companies for registration$ in his name. Lhere has been allowed to the
borrower at the specific re-uest of a third party against shares owned by
them the letter of lien shall be obtained from third party$ in its own name.
k' The branch shall not generally resort to transferring the shares registered in
the name of the borrower or any third party$ in its own name.
l' In the event of transferring the shares in the name of the %ank with the
approval of the 4ead .ffice$ branches shall take special notice of any
declaration of 0ividends$ %onus +hares or any offer of )ight shares made
by the companies concerned. They shall also ensure that all such 0ividends
and %onus +hares are duly received by them.
I. The dividend is credited to the account of the borrowers and the
bonus shares are kept along with other shares of the borrower.
II. In case of an offer of )ight +hares$ branches shall send an
intimation to the borrowers concerned en-uiring from them if they
were interested to ac-uire them for the value mentioned on the letter
of )ight which should immediately be deposited by them with the
%ank.
III. If the borrower do not deposit the money from their own resources
or make any alternate arrangement in that behalf$ the letter of right
may be renounced with the permission of the 4ead .ffice and sold$
and the sale proceeds should be credited to the borrowers account
under intimation to him.
Allow the advances on obtaining the following charge documents duly stamped:
a' 0 , Note.
b' (etter of lien or incase of advance to a third party$ letter of
Agreement
c' In case of ,artnership "irms documents re-uired are same as
Lork order.
d' Certified copy of resolution of 0irectors in accordance with
corporate %orrowing ,ower laid down in the !emorandum and
Articles of Association of the company in case of limited
concern and resolution of the %oard along with a copy of
character in case of corporation$ to be vetted by (egal Adviser
>)etainer.
e' (etter of ownership.
f' Transfer 0eeds duly verified.
g' ,ersonal Euarantee of 0irectors &e*cepting nomited 0irectors by
Eovt.>Corporations' in case of limited companies.
h' "or (oans: (etter of 0isbursement.
i' "or .verdrafts: (etter of continuity.
' An undertaking from the 0irectors of the (imited Company to
obtain prior clearance from the %ank before declaring any
interim >final dividend.
'dvances 'gainst P?'4I?'F)>' S'D0)'>'?'E (ODGS S'D0)'>'
P'4?' 'D. ('D2#'.%S) S'D0)'>' P'4?':
Lhile allowing advances ,ratirakhya +anchaya ,atra$ %onus +anchaya ,atra and
%angladesh +anchaya ,atra ensure the following$ subect to credit restrictions imposed
by %angladesh %ank from time to time:
a' The certificates have been issued in the name of the borrower himself.
b' The +anchaya ,atra are signed by the holder on the back thereof$ in
accordance with his signature appearing on the PIdentity +lipN &incase of
oint holders ensure that certificates are duly signed by all the holders as per
instructions contained for encashment'
c' The certificates do not stand in the name of minors.
d' The PIdentity +lipN containing the specimen signature of the holder$ is duly
authenticated by the issuing authority under his signature and the stamp >
seal of the issuing .fficer.
e' The PIdentity +lipN is surrendered to the %ank for the purpose of transfer of
the Certificates to the pledgee %ank.
f' +anchaya ,atras must be pledged and an undated letter of authority for
encashment of the certificate be obtained .The re-uired charger documents
are as same as others e*pect %angladesh +anchaya ,atra>,arirakhaya
+anchya ,atra >%onus +anchaya ,atras duly discharged.
'dvance 'gainst #ife Insurance Po!icies:
Take the following precautions in accepting a life policy as security for advance$
subect to credit restrictions and prior approval of 4ead .ffice:
a' The insurance policy is an endowment ,olicy.
b' The borrower has an insurable interest in the life o f the insured$ if the
policy does not stand in his own name.
c' The policy does not bear any restrictive conditions likely to affect its
value as a security.
d' The surrender value of the policy is ascertained from the Insurance
Corporation >Company &,olicies for less than three years have no
surrender value.
e' The last premium receipt or other evidence of the payments is obtained
along with standing instructions from the borrower to pay further
premiums.
f' In case$ the age of assured is obtained by the Corporation >Company a
birth certificates is obtained from the assured and forwarded to the
company as evidence of the assureds age.
g' The policy is to be sent to the Insurance Company concerned for
registering assignment in favor of the %ank along with a re-uest letter
from the assignor.
a' Insurance Company.
'dvances 'gainst =iAed /Short 4er$ .eposit ?eceipts /(earer 0ertificate of
.eposit:
+crutinize the "i*ed >+hort Term 0eposit )eceipt with regard to the following points
subect to credit restriction imposed from time to time:
a' The "i*ed >+hort Term 0eposit )eceipt is not in the name of a minor.
b' It is duly discharge by the depositor on revenue stamp of ade-uate value and his
signature is verified.
c' If the receipt is issued in oint names and > or payable to either or suvivor it shall
be discharge by all the depositors named in the receipt on revenue stamp of
ade-uate value and their signature$ verified.
d' If the 0eposit )eceipt is offered as a security for allowing advance to a third
party$ a letter of lien shall be obtained from the depositors$ on the appropriate
form.
e' If the 0eposit receipt has been issued by the same branch$ lien against that
specific 0eposit )eceipt is marked in the "i*ed 0eposit and >or +hort Term
0eposit )egister of the branch.
f' As far as possible advances against "0)>+T0 receipt issued by other banks
should be avoided. 4owever$ in case it is decided to make advance against such
"0) >+T0 receipts$ the branch concerned should re-uest the Issuing %ank>
%ranch to register 9(IDNN of the Arab %angladesh %ank (td. Against the
"0)>+T0 receipts and issue a letter confirming the registration of 9 lien in their
books of accounts under authorized signature. "urther$ the branch where the
advance is allowed shall directly get the signature of the depositor on the letter
of lien as well as his discharge on the back of the ".0 )eceipts >+T.0 )eceipt
duly verified from the issuing %ank >%ranch under authorized signature. The
borrower shall not be allowed$ under any circumstances$ to have such verified
done on his own.
g' The discharge receipt$ the letter of lien duly verified by the issuing branch and
the letter confirming registration of the lien on the 0eposit )eceipt shall be kept
along with other documents for the relative advance$ duly entered in the
documentation check list
h' (ien .n the partial amounts on "i*ed >+hort Term 0eposits shall not be
accepted.
i' The lien of the %ank has to be marked in red ink >rubber stamp on the face of
the 0eposit )eceipt against which advance has been allowed. .n adustment of
the advance$ lien shall be released under signature of two officers on the back of
the deposit )eceipt.
' An undertaking from the borrower > third party &if the deposit is in the name of
a third party' for encashment of the "0) >+hort Term 0eposit and appropriation
of the proceeds thereof without reference to them be obtained.
k' An undertaking from the borrower >third party &if the deposit is in the name of
third party' for renewal of the "i*ed and short Term 0eposits without reference
to them be obtained.
l' In case of %earer Certificate of 0eposit$ lien to be marked on the face of the
certificates and margin to be calculated on the amount deposited.
Charge 0ocuments before allowing the advances are same as others e*pect "i*ed
Term 0eposit )eceipt duly discharged are re-uired.
'dvances against (a!ances in savings (an* 'nd 0urrent .eposit 'ccounts:
2. +ubect to the credit restrictions imposed$ the following precautionary
measures are to be observed in allowing advances against balances lying in the
+avings %ank and >or current 0eposit Accounts of the parties:
a' Dar# marks the balance in the account.
b' !ake a note of it at the top of the ledger folios> card of the account holder in
bold )D0 letters duly authenticated.
1. Lhile allowing advance to the party against a credit balance ear#marked in
another account kept by him in his own name and in the same rights$
whether at the same branch or at some other branch of the %ank$ take a letter
of authority from the account#holder to combine the two accounts &one
having a credit balance and the other a debit balance'$ at any time without
notice$ and to return che-ues which$ as a result of the bank having taken
such an action$ would overdraw the combined account. 4e should also agree
not to close the account and withdraw the balance$ pending adustment of
the advance.
8. Lhere the advance is allowed against credit balance$ ear# marked in the
account of a third party$ whether at the same branch or at some other branch
of the %ank$ take an irrevocable letter of authority from third party$
authorizing the bank to appropriate the credit balance lying in their account
to the e*tent of the debit balance appearing in the account of the borrower$
at any time$ without any reference to them. This being an irrevocable letter
of authority$ they should agree neither to close the account pending
adustment of the advance allowed at their instance$ nor top issue che-ues$
which would reduce that balance.
;. The signature of the account holder in whose account a credit balance is ear#
marked is verified on the irrevocable letter of authority given by him.
Pay$ent 'gainst .ocu$ents :P'.;:
,ayment made by the %ank against lodgments of shipping documents of goods
imported through (.C. falls under this head. It is an interim advance connected with
import and is generally li-uidated shortly against payments usually made by the party
for retirement of the documents for release of imported goods from the customs
authority. It falls under the category JCommercial (ending.J
In!and (i!!s Purchased :I ( P;:
,ayment made through purchase of inland bills>che-ues to meet urgent re-uirement of
the customer falls under this type of credit facility. This temporary advance is
adustable from the proceeds of bills>che-ues purchased for collection. It falls under the
category JCommercial (ending.J
7.=.16 D*port against Cash Credit &D C C':
"inancial accommodation allowed to a party for e*ports of goods falls under this head
and is categorized as JD*port Credit.J The advances must be li-uidated out of e*port
proceeds within 2?6 days.
Pac*ing 0redit :P 0;:
Advance allowed to a party against specific (.C>firm contract for processing>packing of
goods to be e*ported falls under this head and is categorized as J,acking Credit.J The
advances must be adusted from proceeds of the relevant e*ports within 2?6 days.
=oreign .ocu$entary (i!!s Purchased := . ( P;:
,ayment made to a party through purchase of a foreign documentary bills falls under
this head. This temporary advance is adustable from the proceeds of the negotiable
shipping>e*port documents. It falls under the category JD*port Credit.J
#oca! .ocu$entary (i!!s purchased :# . ( P;:
,ayment made to a party through purchase of local documentary bills falls under this
head. This temporary liability is adustable from proceeds of the %ill.
Chapter Six
#oan .epart$ent :operation/0orporate;
In Compliance with the changing economic condition and providing corporate banking
facilities to maor customers relationship#banking arrangement has been established
named at corporate %anking. It contains instructions covering the details of various
types of loans and advances of the %ank$ the documents to be obtained$ accounting
record to be maintained$ process of the loan 0epartment$ which is responsible for
processing and servicing all advances as well as maintaining the records connected
with the function.
!ain function of Credit 0epartment &.peration':
a' Interviewing the prospective borrower.
b' )eceiving the credit information assembled and placed in the customers Credit
"ile
c' ,rocessing and sanctioning of credit facilities to the customer.
d' 0isbursement of credit facilities to borrowers in according with established
procedures.
e' )ecording credit facilities in the )egister> Card.
f' ,reparing 9DNT)F TICGDT+ &Aoucher' pertaining to credit facilities disbursed
and passing to Eeneral (edger Accounts.
g' Controlling of securities and their proper custody.
h' !aintenance >filling of %orrowers loan card >)egister.
i' "ollow up and recovery of credit as per due date.
' Computation and checking of interest accrued on (oans and Advances and
preparation of Dntry Ticket thereof.
k' ,reparing of PDntry TicketsN &Aouchers' for credit repaid and passing the same
to the corresponding Eeneral (edger Accounts.
".1 #oan sanctioning process:
It conducts in corporate division and starts when a borrower is selected who -ualifies to
get loan. The whole process is initiated when the bank on principle agrees to e*tend
credit facility to a specific borrower.
In credit decision$ although selection of borrower plays a vital role$ proper analysis is
no less important and that is the core function of sanctioning process. The sanctioning
process starts and moves as per following stages:
a. )eceipt of clients approach >proposal in writing. The application should be in
"irm> Companys letterhead unless the client is an individual.
b. ,roperly filled# in )"C( &)e-uest for Credit (imit' to be obtained which gives
sufficient information about the client.
c. Lherever application the clients last three years Audited %alance +heet to be
e*amined.
d. All relevant papers about the client and his business to be collected.
e. CI% report to be obtained and proper bank checking to be done.
f. (ending )isk Analysis &()A' to be done in case of loan above TG. 8.66 crore.
g. Clients bank statement to be analyzed properly to see the transaction pattern.
h. +tock report to be checked and tallied with actual stock by physical verification.
i. Clients business premises$ factory$ godown$ show room an property to be
mortgage should be inspected properly.
. Information about the client and his business to be collected from all possible
sources.
k. The client to be interview &in an informal manner' to understand him and his
business.
Lith the help of the above papers > information$ the credit proposalB &C,' is prepared
which is the main sanction document and must have the following information:
Clients details.
Nature of business
"acility recommended vis#a vis clients re-uested amount.
D*pected earning from the proposed lending.
Gey financial indicators about the client.
Analysis and ustification of the client.
0etails of credit facilities > account with other banks if the clients bank with
them.
Account turnover$ highest and lowest balance.
)isk analysis and mitigates.
,roposed debt structure.
)ecommendation
The sanctioning process is carried out by two authorities: %ranch C 4ead .ffice
sanctions$ which do not fall under delegated authority of the branch management$ are
generally done by 4ead .ffice Credit committee. (oans beyond a certain amount &in
case of A%%( Tk. 8.66 crore' are sanctioned by %oard of directors or their nominated
body e.g. D*ecutive Committee.
4ead office Credit 0ivision$ after receiving the C, from branch$ scrutinize the proposal
and the attached papers> documents and verifies branches reasoning$ ustification and
potential business out of the lending. 4ead .ffice may seek additional information
from the recommending branch$ if re-uired. 4aving been fully satisfied with the
contents of the branchs proposal$ the 4ead .ffice Credit 0ivision prepares loan#
sanctioning !emo with relevant information in brief for obtaining approval from the
Credit Committee. In case$ the proposed lending is beyond Credit Committee Authority$
detailed memorandum for placing to the %oard of 0irectors is prepared .In both the
cases Credit Committee or %oard$ if satisfied$ accord approval to the proposal.
.nce the proposal is approved the sanction letter$ with all terms C conditions$ is sent to
the recommending branch.
".1.1 .ocu$entation:
3pon receipt of the sanction letter$ branch takes necessary steps to complete
documentation formalities. 0ocuments are the written statement of facts of proof or
evidence arising out of particular transaction$ which can make the parties involved
answerable and liable to the court of law. D*ecution of such documents in prescribed
form as per the law is known as documentation. 0ocumentation is necessary for
acknowledgement of debt by the borrower and charging of securities to the bank by
him.
The main documents for all types of loans are under:
a' %orrowers acceptance to the sanction letter.
b' 0emand promissory note &0.,.Note'.
c' (etter of agreement.
.ther documents based on the types of security and advance are as follows:
a' (etter of continuity.
b' (etter of revival.
c' (etter of hypothecation with supplementary agreement.
d' (etter of pledge &in case of loan against pledge of goods'
e' (etter of personal guarantee from the guarantor$ 8
rd
part mortgagor$ partners or
directors.
f' (etter of Trust )eceipt &for T) facility'
g' (etter of lien &for loan against "0)' with letter of encashment.
h' (etter of disclaimer from the godown owner &in case pledged goods are kept in
rented godown'
i' (etter of counter guarantee &in case of guarantee facility'
' Notarized ,ower of Attorney to sell the pledged or hypothecated goods > to
receive the bills.
#ega! docu$ents:
a' !emorandum and articles of association &for limited company'
b' )egistered partnership deed &for partnership firms'
c' Trade license
d' %oard resolution for opening account
e' %oard resolution for obtaining credit facilities &in case of limited company'
f' "or creation of mortgage#
I. .riginal title deed with baya deed.
II. Ghatian > parcha.
III. !utation certificates.
IA. )ent receipt.
A. !unicipal ta* receipt &if applicable'
AI. Aaluation certificate &by banks nominated surveyor /where applicable'
AII. (egal opinion as to right and title of the owner over the property.
%ased on the above documents$ the following documents are e*ecuted:

I. !emorandum of deposit of title deed.
II. )egistered mortgage deed.
III. )egistered irrevocable power of attorney to sell the property
.ther related documents$ which must be obtained#
a' Insurance policy covering hypothecated or pledged goods.
b' D*port (>c duly liened &for packing credit'.
c' 0uly discharged "0) or other instruments treated as cash collateral.
There are different ways of charging the above documents which may specified as
under:
+ecurity Lay of charging
2. Cash collateral$ (ife Insurance
,olicy
,ledge >(ien >assignment
1. +tock of goods ,ledge>hypothecation
8. Immovable property D-uitable and >or registered
mortgage
;. Eoodwill C Trust ,ersonal guarantee C (etter of
Trust )eceipt.
After preparing the documents$ the documentation process involves some further
stages which are as follows:
".1.2 Sta$ping:
Types of stamping:
2. Non# udicial :0eed$ Agreement$ 3ndertaking$ ,ower of
Attorney etc.
1. Adhesive :)evenue +tamps C +pecial Adhesive +tamps &for
some documents'
8. Dmbossed or Impressed :+eal of Notary ,ublic$ .rganization +tamps etc.

".1.3 %Aecution:
!ain points to note:
I. D*ecution must be done by the borrower or his authorized representative.
II. 0ocuments to be filled in with permanent ING or Type.
III. 0ocuments are e*ecuted in presence of the !anager or an Authorized .fficer.
IA. No document and no column should remain blank. Also mention of date C
place of e*ecution is a must.
A. There should not be any cutting$ overwriting etc.in any documents. If any such
things happen$ the e*ecutor must duly authenticate it.
".1.4 1itness:
Any documents$ be it charge documents or legal documents$ to be witnessed by at least
1 &Two' persons at the time of e*ecution.
".1.5 ?egistration:
After obtaining of documents C completing the formalities of stamping$ e*ecution$
witnessing$ the -uestion of registration arises. All documents do not re-uire
registration. The following are the cases where registration is necessary to give legal
effects the instruments:
i' The assignment on the body of an Insurance ,olicy.
ii' A !ortgage 0eed.
iii' In case of advance to a limited company$ charges are to be registered with the
concerned registrar of companies.
iv' ,ower of attorney to sell immovable mortgaged property.
v' Lhen the above cited documentation formalities are completed$ list of documents
to be put in documentation checklist duly scrutinized and signed by an
Authorized .fficer. Thereafter the documents are kept in the vault.
0hec*!ist for sanctioning #oan
+l No. 0ocuments > ,apers Tick if available or
remark otherwise
62 ,roposal for Approval of Credit "acilities in
prescribed format
61 )"C( duly filled
68 ()A &for loans above Tk. 2.66 crore'
6; Credit score Card
67 0ocumentation Completion Certificate &for
renewal cases'
6< +tock )eport> %ook debts > other primary
securities verified by the !anager.
6= ,roperty inspection )eport &I#16'
6? +urveyors )eport &if application'
6@ +tatement of Accounts of other %ank for the new
clients
26 CI% report not older than ;7 days prior to the
date of proposal for the %oards approval and @6
days for the Credit Committee
22 "inancial statements of last three years
preferably audited in case of limited companies
21 Copy of the other relevant papers duly attested
by the !anager
Chapter Seven
#oan .epart$ent :0redit 'd$in.;
A standard credit Application used by A%%( clearly state the following points for
administrative purpose of facilities:
2. ,urposeTmust be clearly stated$ verified for proper analysis.
1. Amount / must be sufficient for the purpose$ insufficient amount put the
proect in sick$ owners contribution must be verified.
8. ,eriodTsufficient for repayment.
;. D*change Control C other )egulationTlocal$ "oreign$ %>%ank )egulation.
7. )epayment## must be clear$ within the capacity of borrower# verified$ self#
li-uidating.
<. CharacterT)eputation of borrower$ ,ast> ,revious %usiness D*perience$
!anagement &+uccessor ,lanning'$ (abor >industrial law.
=. !andateT(td. Co. ,artnership$ ,roprietorship$ Articles C !emorandum of
Association$ ,artnership 0eed$ )egistration Certificate / Audited %>+heet$
!anagement %> sheet$ "easibility +tudy$ !arket +urvey report$ CI% )eport$
N.C from 0epartment of "ire and Civil 0efense.
?. ,rofitabilityTfacility must increase profitability for repayment within a
reasonable time leaving a margin for the borrower.
@. DnvironmentTmust not be polluted$ not hazardous$ N.C from 0epartment
of Dnvironment.
26. +ecurityTmust be valuable$ easily realizable and legally enforceable$
charged to the %ank without difficulty.
Credit Administration is divided into 8 components:
2. Credit Controlling and monitoring.
1. Credit )ecovery C
8. (egal Affairs Cell
=.2 Credit Controlling and monitoring
In this area the responsibility of the !anager is to monitor the over all profile
and risk aspect of the credit portfolio in accordance with the criteria set down
in the %ank credit policy. +uch monitoring shall be evidenced from the
comments of the !anager in monthly call>visit reports of the assigned officers
and be kept in the credit file with copy to 4ead .ffice.
This review shall be formally performed at regular interval &-uarterly'
prescribed by 4ead .ffice but it is the responsibility of the !anager to ensure
at all times that the credit portfolio meets the standard set forth by the %ank. If
there appeared any irregularities in the borrowers account$ !anager will serve
Darly Alert Notice upon the client>borrower. Thereafter$ if the borrower does
not possess any positive attitude towards the notice within the given period$ the
account transferred into the past due.
,eriodic review and follow#up should aim at ensuring:
a' That terms of approval have been adhered toB
b' Lhether the conduct &turnover$ regularity of repayments$ etc.' of the borrowers
account during the period under review has been satisfactory or as e*pectedB
c' Lhether the continuing value of collateral is ade-uateB
d' Lhether there are any adverse trends in market$ economic and political conditions
that may endanger the reliability of the facilityB
e' Lhether the borrowerKs business is being satisfactorily conducted as reflected
through a review and analysis of their financial and operating statements and
detailed information such as -uality of the inventory$ ageing of receivables$ trend
in sales and profitability$ li-uidity and cash flow situation$ maintaining various
ratios$ particularly those stipulated by %ank at the time the facility was granted$
etcB
f' Lhether the business reciprocity offered and received is commensurate with the
facilities allowed C
g' Lhether the earnings from the account are cost effective &i.e. ade-uate to meet
direct cost of funds and leave sufficient margin for ade-uate risk reward$
overheads and profits'.
3.2 0redit ?ecovery P!an:
)ecently recovery is the prime task among all the activities of the %ank. To get the
entire stuck up > classified loans li-uidated within 8# yearsB A%%( has devised the
formula that are narrated below:
?ecovery Strategy: %ranch !anagers$ +ub# !anagers$ and .fficers working in Credit
0epartment will sit together for reviewing the present past due statements of
the %ranch. They will carefully review and analysis each and every stuck /up >
classified (oan Account and segregated all Accounts in 8# categories as per the
suggestions contained in the formula of each category narrated below:
0ategory H 1
#This category will include the newly classified loans or the loans recently transferred
to past due papers. These loans can be adusted through reschedulement outside the
Court. This category can e*pect =7H recovery within 2 &one' year and rest 17H within
a ma*imum period of ne*t < &si*' months.
0ategory H2
#This category will include those stuck /up > Classified loans which can be recovered
amicably$ through negotiation$ outside the court$ if %ank allows waiver of interests
partly or fully or >and giving interest freezing benefits during the repayment period$
analyzing the merits of each loan on case to case basis.
#%ranch can arrange meeting with the client and 4ead .ffice D*ecutives to facilitate
amicable settlement$ if necessary.
#This category loans to be targeted to li-uidate within a ma*imum period of 1 &two'
years.
0ategory H3
#.nly those loans will fall in this category$ which cannot be settled under the formula of
category &2' and &1'$ stated above. This category will need the assistance of the court of
(aws. The provisions of newly enacted PA)T4A )IN A0A(AT AIN#1668N will act as
the weapon to recover this category of loans. At one stage$ these category clients will
also come forward for amicable settlement. 4ere the target period to be 1 U &two C
half' years$ ma*imum.
The following items are enclosed in the =or$at regarding the targeted recovery
through reschedulement &within ma*imum 2?#months$ giving interest waiver > freezing
benefits within ma*imum 1# years$ e*ercising Artha )in Adalat Ain#1668 within 1 U#
years':
2.Name of the client.
1.Nature of funded loan &.0> T(>%(C>(I!>T) DTC'
8.(imit.
;.D*piry of limit.
7.Total outstanding.
<.0ate of transferring into ,ast due.
=.+ecurity value.
?.Classing status.
@.Amount recovered since transferring to ,ast due.
26.+uit filed or not C
22.4ow many times rescheduled.
0ash ?ecovery Perfor$ance of '((#
>ear 4ota! c!assified !oans
and advances
0ash recovery
during the period
< Of cash
?ecovery
1666 1@;.16 crore 2?.=? crore <.8?
1662 1;8.=6 crore 16.8; crore ?.87
1661 ;?2.?= crore ;;.1? crore @.2@
1668 8@8.;; crore 1=.7< crore =.66
82.21.166; 2@8.17 crore 71.@8 crore 1=.8@
In 1668 only T.k 1=.7< crore were recovered out of total amount of TG. 8@8.;; crore
which represents =H of the total Classified loans and advances. This percentage is
lesser than from previous year. %ut in 166; the recovery position is worth standing that
is 1=.8@H of the total classified loans amount.
In recovery division the fo!!o&ing e!e$ents are essentia! for better $onitoring and
recovery purposes:
3.2.1 Past .ue Papers:
a' All (oans$ Advances$ %ills 0iscounted etc. which are not paid or
renewed at maturity &due date' is credited to the respective account on the
Eeneral (edger and debited to the P,ast 0ue ,aperN Account on the due date.
Lhen the loan is paid off$ renewed or charged off$ it is then taken out of 9,ast
0ue ,aper. If partial payments are made to a loan$ which is in 9,ast 0ue ,aper$
the unpaid amount must remain in ,ast 0ue ,aper until fully li-uidated.
b' In the case of 9Trade %ill 0iscounted any %ill &Note'$ which is returned
unpaid by the paying bank$ charged directly to the customers che-uing account.
If there are not sufficient funds in his che-uing account and payment cannot be
obtained immediately from the customer$ such items must be debited to 9,ast 0ue
,aper until payment is received from him. Interest charged to the customer for
the period in which the item was in 9,ast 0ue ,aper.
Note: Lhen the %ank is notified that a borrower who has a 90emand (oan is
deceased or when the bank demands payment from a 90emand (oan$ borrower$
the loan placed in the 9,ast 0ue ,aper until paid. Lhen an agreement is entered
into between the borrower and the %ank$ specifying that reductions will be made
on a 90emand (oan or 9Term (oan at specified times$ and the reductions are not
made accordingly$ the loan may be considered as P,ast 0ue ,aperN.
Lhen a loan goes into P,ast 0ue ,aperN$ it entered on the P(oans !ade and
(oans ,aid report in theN (oans ,aidN section under the respective loan account
heading and the words Transferred to P,ast 0ue ,aperN noted in the remarks
section. The corresponding entry to P,ast 0ue ,aperN entered in the P(oans
!adeN section under the P,ast 0ue ,aperN heading.
As per accounting system$ although advances remaining unpaid on maturity date$
are transferred to past due account$ but such accounts are not treated to be
classified as substandard or doubtful.
Past due position
:in I999;
?ange '$ount
3p to Tk. 2 lac 1333
"rom Tk.2 lac upto 26 lac 1433"8
"rom Tk. 26 lac upto 76 lac 5"2159
"rom Tk.76 lac upto Tk. 2 crore 33"552
"rom Tk. 2 crore upto 26 crore 5"9217
Total 1"97498
Past .ue: Sector 1ise :in crore;
Particu!ars '$ount :4a*a;
Agriculture: ,rimary 12.77
Agriculture: +econdary ".34
Te*tile: )!E 7.37
(eather C leather ,roducts 9.78
,rinting C packaging 9.55
Chemicals 1.57
!anufacturing: others 13.82
Trading: wholesale 32.31
Trading: retail 17.71
+ervices 5.43
Transport 19.98
)eal Dstate 5.51
Contractual works 9.34
Construction 13.45
,ower 9.48
266H secured 8.28
.thers 18.38
Interest on Past .ue #oans /'dvances:
a' Lhen a loan is placed in the P,ast 0ue ,aperN category$ the interest continue to be
computed on the back of the loan card$ but$ The Interest computed on a ,ast 0ue
(oan do not debited to PAccrued Interest )eceivableN or credited to PDarnings#
Interest on (oansN while in the ,ast 0ue ,aper.
Nevertheless$ if the borrower has sufficient funds in his che-uing account$ the
interest for ,ast 0ue (oans may be charged to his che-uing account after obtaining
approval from management$ and credited to PDarnings# Interest on (oansN as a
separate entry from the current loan interest entries. %y the same token$ the loan
may also be charged to the borrowers che-uing account under the same
circumstances. A memorandum account set up for the accrued interest due to the
bank and unpaid on P,ast 0ue (oans &!emo Account# Accrued Interest
)eceivable' and such interest booked to PDarnings Interest on (oansN only when
actually collected.
b' Lhen a loan goes into the P,ast 0ue ,aperN category$ any unpaid interest which
has previously been credited to PDarning# Interest on (oansN and carried in
PAccrued Interest )eceivableN$ adusted as follows:
I. 0ebit such Interest to PDarnings /Interest on (oansNB
II. Credit such interest to PAccrued Interest )eceivableN. !aintain a
memorandum record account for the interest due to the %anking the Credit
0epartment.
Note: %efore making the above adustment$ look into the possibility of
charging the unpaid interest to the customers che-uing account. If such interest is
charged to the customers che-uing account$ the adustment as outlined above
would not be necessary.

. Le can generate ins and out of each and every stuck#up loan as past due contains the
following items:
2. Name of the client &including name of !.0 >!anaging partner> ,roprietor'.
1. Type of credit$ approved limit C e*piry date.
8. Name of initiating manager> +ubse-uent !anagers.
;. 0ate of first disbursement C date of transferring to past due.
7. +ecurity value with brief description &distress value'.
<. .verdue amount &,rincipal$ Interest in clients account.
=. Interest suspense.
?. Total overdue outstanding.
@. Interest held in memo.
26. Erand total outstanding.
22. +uite No. &date and name of lawyer'B if any
21. Classification status &%(>0">++' and date classification C
28. %ranch compliance report and !anagers comments.
4ead .ffice review the past due report on the basis of aforementioned item no.28
&%ranch compliance report and !anagers comments' and preserve it for seeking
necessary information regarding the status of clients bank dues.
3.2.2 ?eschedu!ing of #oan:
In earlier period any loan could be rescheduled on the basis of 26H down payment on
the outstanding overdue amount. 4owever$ it has been observed that the loan defaulters
were taking advantages of the 26H down payment system and tried to delay repayment
by getting the loan reschedule again and again$ for which the very purpose of the
recovery of defaulted loan through the rescheduling arrangement on 26H down
payment system$ was defeated.
i; 2uide!ines for consideration of the app!ication for reschedu!ing faci!ity:
"or the purpose of considering the rescheduling applications$ A%%( follow the
instructions as under:
a' After receipt of the application for rescheduling$ %ank e*amine the reasons as to
why the loan account has become defaulted. If in course of such e*amining$ it
appears that the client has diverted the loan money elsewhere instead of investing the
same in the establishment for which the loan actually taken or the borrower is a
habitual loan#defaulter$ then the %ank does not consider the rescheduling application.
.n the contrary %ank in such cases$ take >continue all legal measures for recovery of
its dues.
b' In course of processing the loan#rescheduling proposal$ the repayment
capability of the borrower taken into considered on the basis of reviewing the
position of borrowers outstanding loan liabilities with other %anks.
c' To ensure whether the borrower will be able to repay the rescheduled loan
installments> e*isting loan liabilities$ %ank e*amine the borrowers cash flow
statement$ Audited %alance sheet$ Income +tatement and other "inancial +tatement.
d' If necessary$ %ank official physically inspects the borrower company > business
establishment and ensure that the concerned company > business establishment will be
able to repay the rescheduled loan liability. %ank preserves this sort of inspection
report in their record.
e' .nly upon completing all the aforementioned steps and subect to %anks
satisfaction$ the loan can be rescheduled. .therwise$ %ank take all recourse for
recovery of the loan. %ank will also take steps for preserving proper provision against
the defaulted &classified' loan and arrange for writing /off &as per the given
guidelines'.
f' (oan rescheduling is for a minimum realistic period.
g' Lhile placing the rescheduling proposal to the %anks %oard of 0irectors$ the
%oard apprised in details of the implication regarding the %anks earning and
other issues upon fulfillment> e*ecution of the rescheduling arrangement.
ii; ?eschedu!ing of 4er$ #oans:
The loans$ which have a set repayment schedule through installments and repayable
within fi*ed term > period are considered as Term (oans. In case of rescheduling of
such loans$ the undernoted rules followed by A%%(.
a' "or first time rescheduling$ minimum 27H of overdue installments or 26H of
the total outstanding whichever is less$ re-uired to be deposited in cash as
down payment for consideration of the rescheduling application.
b' "or 1
nd
rescheduling$ minimum 86H of the overdue installments or 16H of the
total outstanding$ whichever is less$ re-uired to be deposited in cash as down
payment for consideration of the rescheduling application.
c' )egarding rescheduling for more than 1 &two'$ minimum 76H of the overdue
installments or 86H of the total outstanding whichever is less$ shall be
re-uired to be deposited in cash as down payment for consideration of the
rescheduling application.
If any loan has been rescheduled once before issuance of the present rules$ then the
conditions for 1
nd
time rescheduling as per the present rules will be applicable for the
purpose of rescheduling of the said loans under the present rules. +imilarly$ the
conditions for the 8
rd
time rescheduling as per the present rules will be applicable for
such loans$ which have been twice rescheduled before.
iii; ?eschedu!ing of .e$and #oans and 0ontinuous #oans:
a' The loans$ which can be transacted without any specific repayment schedule but
usually$ have a fi*ed limit and a terminal date &e*piry date' for full adustment>
repayment is considered as continuous loans. %esides this$ the loans$ which
become due for repayment after the %ank has served demand notice$ are
considered as 0emand (oans. If a contingent or other liability is converted into
compulsory loan or "orced (oan &i. e. if there is no prior approval as regular
loan'$ such loans considered as 0emand (oan. The re-uired rate of down
payment in case of rescheduling of 0emand (oans and Continuous (oans to be
according to the size of the overdue loan amount$ as under:

Amount of overdue loan )ate of 0own payment
3p to Tk. 2.66 crore : 27H
"rom TG. 2.66 crore to TG. 7.66 crore : 26H &but not less than
Tk. 27.66lac'
TG. 7.66 crore and above : 7H &but not less than
TG.76.66lac'
a' If any 0emand (oan or Continuous loan is partly or fully re#structured >
converted into Term loan and rescheduled with repayment installments$ than in
case of rescheduling of such loans$ the rescheduling application will have to be
submitted after payment of minimum 86H of the overdue installments or 16H of
the total outstanding$ whichever is less. In case of subse-uent rescheduling$ the
application for rescheduling will be eligible for consideration only after cash
payment of minimum 76H of the overdue installments or 86H of the total
outstanding$ whichever is less.
iv; Other conditions for !oan reschedu!ing:
a' The borrower availing the rescheduling facility$ will not be allowed to avail
nay additional new direct or indirect loan facility beyond the e*isting loan
facility$ during the period of 2&one' year from the date of rescheduling or until
the loan is fully adusted &whichever is earlier'
b' %angladesh %anks prior approval will not be re-uired for rescheduling of
loans on the above manner. 4owever$ for reasons of the loan being linked
with the interest of the %ank companys directors or from the point of view of
large loan criteria$ if %angladesh %anks prior approval is necessary$ then
%angladesh %anks prior approval must be obtained.
c' In those cases where amount e-uivalent to minimum double the amount of
drawn> disbursed principal loan amount has been adusted upto the date of
issuance of this circular$ the application of the aforementioned new rules for
rescheduling will not be compulsory for 2 &one' year from the date of
issuance of this circular$ in respect of such loans.
d' The particulars> information relating to the loans being rescheduled &for
e*ample$ how many times the loan account has been rescheduled etc.'
reported to Credit Information %ureau &CI%' of %angladesh %ank.

3.2.3 #oan 0!assification and Provisioning
0!assification of #oan:

Lell#defined weakness that give raise to serious concern that payment of either
interest or principal may default. 0ebt repayment will re-uire restructuring of debt$
restructuring of the business$ li-uidation of assets or any combination of these. If
weaknesses are uncorrected$ loss to the bank is possible$ but there is still reasonable
e*pectation of full repayment. Conse-uently interest continues to be taken to
income on accrual basis.

(a!ance Sheet: 0eteriorating trend evident with weak capitalization or li-uidity
relative to business needs. !ay become technically insolvent. ,lans &if any' to
increase additional funding are unlikely to succeed without restructuring.
0ash f!o& + Operations: Cash flow covers interest and is insufficient and is
insufficient to meet scheduled debt repayments. +ignificant and sustained operating
losses may have occurred. %orrowings are being used for non#core activities.
O&nership/ anage$ent: !anagement needs reinforcement or change. Controls
are probably poor. .wners either unwilling or unable to provide the necessary
degree of support. No succession planning. .ld age of the entrepreneur> Gey man
of the borrowing concern.
Industry+ 0o$petition: ,oor competitive position and industry conditions are
unfavorable.
Pri$ary ?epay$ent source: The primary repayment source is unlikely to service
debt without restructuring and maturity e*tensions. Asset> security cover still
sufficient for outstanding but tight and deteriorating.
Perfor$ance: ,ayment 0efault:
2. Interest$ principal or any other amount overdue by 86 days.
1. Che-ues returned to the customer on account of insufficient funds or
where there is insufficient turnover to cover payment
8. ,ayments not yet 86 days overdue but which are unlikely to be
received within this period.
;. Clients failure to adust .0 outstanding at least once before e*piry
as per production cycle.
.ther 0efault:
7. Covenant breaches$ which cannot be remedied within 86 days of
notice to the customerB
<. Cases where the obligor or any other relevant party has instituted
proceedings for credit protection$ bankruptcy$ insolvency or any
other actions$ which potentially$ eopardize the obligors viability.
=. Current or other non# payment event imminent and unconditional
waiver is unlikely.
Security: +ecurities are neither easily en#cashable nor legally enforceable.
%Aterna! Indicators:
The borrowers shares are -uoted in the secondary market at a discount of 27H or more
for a period of <6 days$ or at a discount of 16H or more for a period of 86 days or
more.
4he fo!!o&ing ite$s are inc!uded in the c!assified !oan :0#; for$at provided by
(ang!adesh ban*:
%ranch wise name of the clients.
(egal suit filled.
Classification status of previous years.
Classification status of recent years.
D*piry date.
,rincipal (oan Amount.
Interest in suspense account
Total outstanding
Interest in !emo account
Dligible +ecurity
%ase for ,rovision
,rovision amount
In urisdictions where reliable financial information may reasonably be e*pected$ the
lack of such information or information$ which is unclear$ giving rise to uncertainty
and indicating poor controls. +ome common types of risk &attached' periodically re#
verified$ at least during annual review to identify sickness in a proect.
The procedure of classification for all types of bank loans and provisioning thereof was
introduced and is being governed by the guidelines contained in %C0 Circular No. 8;
issued by %angladesh %ank in 2@?@ and the subse-uent &,artially revised' %C0
circular No. 16 issued in 2@@;.The target of the programme is to strengthen credit
discipline and to improve the recovery position of loans and advances by the banks.
The entire process covers loan classification through identification C -uantification of
risk levels of the loans$ suspension of interest due and making a provision against
potential loan loss.
4ypes of !oans: "or classification$ all the loans and advances will be divided into ;
&four' typesB namely as
a. Continuous (oans.
b. 0emand (oans
c. "i*ed Term (oans
d. +hort Term Agricultural (oans C !icro /Credit.
a. 0ontinuous #oans: These are the loans and advances$ which
do not have any set$ schedule for drawing or payment on disbursement but usually
have a fi*ed limit and a terminal date &e*piry date' for full adustment> repayment.
.verdraft &.0'$ Cash Credit &CC'$ ,acking Credit &,C'$ (oan Against Imported
!erchandise &(I!'$ (oan Against Trust )eceipt &(T)'$ etc. are some of this type of
loans and advances.
b. 0emand (oan: These are the loans for fi*ed amount$ which become due
whenever the %ank so re-uires by issue of formal notice to the borrower. "orced loan
created against contingent liabilities also belong to this category. ,A0> %(C$ I%,$ "%,
are some of this type of loans.
c. "i*ed Term (oan: These are the loans and advances$ which have a set
repayment schedule of some instalments within a fi*ed term>period.
d. +hort Term Agricultural (oans C !icro#Credit: These are the loans sanctioned
to individuals or farms for agricultural activities like crop production$ fishing livestock$
etc. which are categories as +hort Term in the annual program issued by Agricultural
Credit 0epartment &AC0' of %angladesh %ank. (oans sanctioned in Agriculture +ector
which are payable within 21 &twelve' months will be include to this type. All the
!icro# Credit which are not more than Tk. 26666># &Taka Ten thousand'' only in
amount and are payable within 21 &twelve' months will be treated in this type.
0riteria / (asis for #oan 0!assification:
(oan Classification is to be completed by A%%( on the basis of the following two
criteria:
&A' .bective Criteria
&%' Iualitative udgment
A. Objective 0riteria: This criteria is based on the overdue
period >overdue installment which will be applied as under:
i; # If a continuous loan is not renewed at its e*piry or
if it remains un#adusted on the date$ it will be treated as overdue from the e*piry date.
If the overdue period is less than 8 &three' months$ the loan may remain unclassified.
%ut if the overdue period is 8 &three' months or more but less than < &si*' months$ the
loan will be classified as SubCStandard :SS;.
# It will be classified as .oubtfu! :.=; if the overdue period is < &si*' months or more
but less than 21&twelve' monthsB and
# It will be classified as %ad >(oss &%(' if it remains overdue for 21 &twelve' months or
more.
ii; # A 0emand (oan will become overdue from the
date of issuance of formal notice served by the bank to the borrower asking them for
adustment> repayment of the loan. If the overdue period is less than 8 &three' months$
the loan may remain unclassified. %ut if the overdue period is 8 &three' months or more
but less than <&si*' months$ the loan will be classified as +ub#+tandard &++'. It will be
Classified as 0oubtful &0"' if the overdue period is < &si*' months or more but les than
21 &twelve' monthsB and it will be classified as %ad >(oss &%(' if it remains overdue
for 21 &twelve' months or more.

iii; / A "i*ed Term (oan will be classified on the basis
of overdue installments. If any installment as per the repayment schedule remains
unpaid within due date$ it will be considered as P .verdue InstallmentN. "or
classification of the loan$ the amount of the overdue installments is to compare with
the actually payable installment within a set period. The case will be considered
separately i.e. &aa' Term loans which are payable within 7 &five' years and &bb' term
(oans which are payable within more than 7 &five' years period.
aa' "or Term (oans which are payable within 7 &"ive' years:#
# Dntire outstanding loan liabilities will be classified as +3%#standard &ss' if the
amount of P.verdue installmentsN is e-ual to or more than the total amount of the
installments payable within <&si*' months.
# Dntire .utstanding loan liabilities will be classified as 0oubtful &0"' if the amount of
P.verdue installmentsN stands e-ual to or more than the total amount of the
installments payable within 21 &twelve' months.
# Dntire outstanding loan liabilities will be classified as %ad >(oss &%(' if the amount
of .verdue InstallmentsN stands e-ual to or more that the total amount of the
installments payable within 2? &eighteen' months.
bb' "or Term (oans which are payable within more than 7 &five'years:#
# Dntire (oan liabilities will be classified as +ub# standard &++' if the amount of
P.verdue installmentsN is e-ual to or more than the total amount of the installments
payable within 21 &twelve' months.
# Dntire loan liabilities will be classified as 0oubtful &0"' if the amount P.verdue
installmentsN is e-ual to or more than the total amount of the installments payable
within 2? &eighteen' months.
# Dntire (oan liabilities will be classified as %ad > (oss &%(' if the amount of the
installments payable within 1; &twenty#four' months.
Dote: If a Term (oan is payable in monthly instalments$ the amount of payable
installment within < &si*' months will be the sum# total of < &si*' Nos. of installments
&monthly'. +imilarly$ if a term (oan is payable in -uarterly installments$ the amount of
payable installments within < &si*' months will be the sum# total of 1 &two' installments
&-uarterly'.
iv; #The short Term Agricultural (oans and the !icro# Credits will be considered as
overdue if it remains unpaid>unadusted within the period of e*piry. If the overdue
period is 21 &twelve' months or more but less than 8< &thirty si*' monthsB the loan will
be classified as +ub# standard &++'. It will be classified as 0oubtful &0"' if the overdue
period is 8< &thirty #si*' months or more but less than <6 &si*ty' months and will be
classified as %ad>(oss &%(' if it remains overdue for <6 &si*ty' months or more.
(. 6ua!itative Judg$ent: A continuous (oan$ a 0emand (oan or a "i*ed Term (oan#
be classified or not in obective Criteria$ will have to be classified on the basis of
-ualitative criteria if there arise any doubt or uncertainty regarding recovery of the
same.
This criteria is applied if there is a change in the circumstances under which the loan
was originally sanctioned or adverse financial condition due to loss of a part of
borrowers capital or poor financial performance of the borrower or insufficiency of
security or downfall of security value or any other unfavorable factors whenever the
%ank has reason to believe that the loanee may not be able to repay the loan.
(oans and advances$ if observed$ a fre-uent trend of re#scheduling$ violation of rules
while re#scheduling or limit overdrawn will have to be classified in this criterion.
%esides$ the criterion is applicable if legal action is taken against the borrower or the
loan had been disbursed without prior sanction of the competent authority.
In this criterion$ the loan will be classified as +ub#standard &++'$ if there is a possibility
of full recovery of the loans through proper action. It will be 0oubtful &0"' if there is
no possibility of full recovery of the loan &however$ has possibility of partial recovery'
amount through proper action. If there is no possibility of recovering the loan despite
all actions$ the loan will be classified as %ad >(oss &%('.
The %ank classifies the loans and advances in this criterion according to the specific
condition. 4owever$ on improvement of the conditions$ the loans declassified. If a loan
is classified by the %angladesh %ank Inspection Team on the basis of this criterion$ it is
treated as final and will remain unchanged upto their ne*t inspection. To de#classify it$
prior permission from %angladesh %ank is a must.
0!assification of unsound 0redit
&amount in crore'
Fear +ubstand
ard &++'
0oubtf
ul &0"'
%ad loss
&%('
Total
Classified
(oans C
Advances
Total
(oans
and
Advances
Classified as a
H of total
(oans C
Advances
1666 Tk @.?@ 1@.6= 177.17 1@;.16 21<?.16 18.16
H 8.8< @.?? ?<.=< 266
1662 Tk 2@.16 88.6@ 2@2.2? 1;8.=6 2;?<.16 2<.;6
H =.?? 28.7? =?.78 266
1661 Tk 111.<8 22.2? 1;?.6< ;?2.?= 2@17.;< 17.68
H ;<.16 1.81 72.;? 266
1668 Tk 2=.;1 187.66 2;2.61 8@8.;; 166@.<? 2@.7?
H ;.;8 7@.=8 87.?; 266
166; Tk 2=.?< 27.7? 27@.?2 2@8.17 2<?8.26 22.;?
H
@.1; ?.6< ?1.=6 266
Classified as a 0 of total .oans 1 #d)an*es
23.2
1!."
25.03
19.58
11."8
0
5
10
15
20
25
30
2000 2001 2002 2003 200"
"ear
0

o
f

t
o
t
a
l

l
o
a
n
s
"rom the above figure it is shown that classified loan and advances has down ward
trend$ which represents effective management of credit administration and monitoring
review.
4reat$ent of Interest of 0!assified #oans:
Interest on the (oans C Advances classified as ++ C 0" charged by A%%( as usual.
%ut the unpaid accrued interest amount is not be transferred into income account. It is
to be booked into interest suspense account.
The charging of interest suspended whenever a loan classified as %ad >(oss &%('. If
legal Action is taken to realize the loan$ the suit filed for the total component of
principal loan amount and the interest charged thereof upto the date of legal suit.
4owever$ the charged interest remains in suspense account.
If a classified loan is adusted or a partial amount of the same is recovered$ the
adustment procedure will be thus#
i' To Interest in +uspense account
ii' To Interest currently due.
iii' To ,rincipal (oan Amount.
# In recent years %angladesh %ank has been trying to bring the prudential norms in line
with best international practices. International best practices re-uire that a loan be
classified as non# performing if its principal and > or interest are three months or more
in arrears. A%%( are allowed to classify non#performing loans based on a time frame of
si* months. Darly recognition of non#performing loans stimulates collection efforts and
helps reduce the possibility of loss of such assets.
A continuous credit$ 0emand (oan or a Term (oan which will remain overdue for a
period of @6# days or more$ will be put into the P+pecial !ention AccountN and interest
accrued on such loan will be credited in Interest +uspense Account$ instead of crediting
the same to Income Account. This will help banks to look at accounts with potential
problems in a focused manner and it will capture early warning signals for accounts
showing first signs of weakness.
(oans in the P+pecial !ention AccountN will not be treated as default loan for the
purpose of section 1= Ga Ga &8' of the %anking Companies Act$ 2@@2 and the status of
loan &+pecial !ention' need not be reported to the Credit Information %ureau &CI%' of
%angladesh %ank.
Provisioning:
a' (oans C Advances categorized as Continuous (oans$ 0emand (oans and "i*ed
Term (oans the %anks will maintain a provision in the following rates$ if any of
them is classified as: #
+ub +tandard &++' ###########################16H
0oubtful &0"'#################################76H
%ad >loss &%('#################################266H
b' The above rates of provisioning against the classified loans are to be the base
amount$ which is found by deducting Interest +uspense C the value of Dligible
+ecurity from the total outstanding balance of the (oan.
A 2H general provision will have to be made on the balance outstanding of all
unclassified (oans C Advances e*cept the +hort Term Agricultural (oans C the
!icro credits.
a' The following items will be considered as 9Dligible +ecurity:#
#266H values of the fi*ed C other deposits on which (ien is marked.
#266H of the present value of gold > gold ornaments held by the %ank.
#266H value of the government +ecurity %ond and +anchayapatra.
#266H value of guarantees>Counter Euarantees issued directly C formally by
the Eovernment of %angladesh or %angladesh %ank.
#76H value of goods with a ready market$ which are physically held in the
control of %ank in its godown> warehouse.
#76H market value of the (and C %uilding duly mortgaged with the %ank.
b' "or the agricultural +hort Term (oans C !icro#credit$ the rate of ,rovisioning
will be /
i' Classified as %ad >(oss &%('######################266H
ii' .ther than %( &i.e. 0"$ ++ C 3C'#################7H
The entire program of (oan Classification$ ,rovisioning thereof and +uspension of
Interest is to be done on -uarterly basis by the %anks$ as per the above revised policy
>procedures.
3.2.4 #ega! 'ffairs 0e!!:
.nce (oan recovery division covers struck up loan$ some loans and advances precludes
legal matters that are vested to legal affairs cell. This cell consists of panel lawyer and
A%%( official e*ecutives where the panel lawyer solicits suggestion regarding the legal
matters and e*ecuted by the official personnel.
It performs the following function to e*pedite the legal proceedings:
1. 4andling of all the clients having legal matters.
2. Initiation and filling of Court cases on behalf of A%%($ %ranches by
the %anks panel lawyer.
3. "ollow /up of pending cases in different courts.
4. "ollow /up with %anks lawyers> branches.
5. .btaining of legal opinion on various legal matters$ as and when
re-uired C.
". 4andling of other legal matters$ as and when arises.
Chapter Eight
0redit 'na!ysis
7.1 .eposit 'dvance ?atio: 'dvances/ deposit
:4a*a in
i!!ions;
>ear
Particu!ars
1888 2999 2991 2992 2993
.eposit 13E"25 1"E58" 18E419 25E525 23E2"9
'dvance 19E3"8 12E"72 14E7"2 18E433 29E435
.eposit5'dvance
ratio
38.94 3".42 3".53 3".31 34.8"
Source: =inancia! 'd$inistrative .ivision
2
3
"
5
!
8
9
80
2atio
1999 2000 2001 2002 2003
"ear
&e'osit #d)an*e ratio
0eposit Advance ratio indicates the banks usual performance in response of fund
utilization. That is how efficiently the fund invested by the bank. %ecause the idle fund
incurs cost. The A%%( has invested the fund efficiently even though the deposit
advance ratio has decreased more than the previous years.
7.2 %$p!oyee 'dvance ?atio:

>ear
Particu!ars
1888 2999 2991 2992 2993
'dvance 19E3"8 12E"72 14E7"2 18E433 29E435
Do. Of %$p!oyee 1432 1555 1589 1"58 1"92
%$p!oyee 'dvance
ratio
3.32 7.1" 8.35 11.34 12.3"
0
2
"
!
8
10
12
1"
ratio
1999 2000 2001 2002 2003
"ear
3m'loyee #d)an*e ratio
The human resources &4)' of A%%( are better set for the achievement of the
organizational goal. The position of per employee loans and advances is very
satisfactory and the ratio increased gradually from previous years.
7.3 (ranch 'dvance ?atio

>ear
Particu!ars
1888 2999 2991 2992 2993
'dvance 19E3"8 12E"72 14E7"2 18E433 29E435
Do. Of (ranch "2 "2 "7 "8 "8
?atio 133."8 294.55 217.5" 272.27 28".91"
0
50
100
150
200
250
300
ratio
1999 2000 2001 2002 2003
"ears
Bran*h #d)an*e ratio
%ranch advance ratio is an indication of the branch management performance as well as
the contribution of the branches in fund utilization and overall profitability
contributions there on. A%%( utilize its funds most properly through efficient branch
management$ which represents through increasing trends of this ratio.
Chapter Nine
ajor #oopho!es in credit $anage$ent syste$ of '((#:
1. %ranch provides the inappropriate and incomplete information regarding the clients >
parties. Lhen processing is conducted on the basis of inappropriate and incomplete
information there may be possibility that the loan may bad. It may be either to
disburse the loan to inappropriate or more risky areas$ or where there is no business of
the borrower etc.

2. (ack of maintaining documentation is the maor loopholes of credit management
system. +ometimes loans are disbursed to the borrower without providing all re-uired
security documents.
3. (ack of proper valuation of primary stock and mortgaged property. %esides the
Clients estimation$ branch estimation is also re-uired for udging the proper valuation
of hypotheticated stocks. %ut branch estimation may be made without going the
location physically.
4. +ometimes single borrower credit e*posure limit e*ceeds in response to the other
banks credit limit due to competitive business environment. %ut the assessment of
granting proposed credit limit may sometimes inaccurate due to analysis of incomplete.
5. +ometimes sanctioning or renewing of large loan$ may done without properly
udgment its borrowers overall debt repayment capacity$ borrowers cash flow
statement$ audited balance sheet$ income statement and other financial statements to
make sure that borrower has the ability to repay the loan.
". (ack of early identification$ prompt reporting and proactive management of
accounts are the main problems in credit division. 0ue to this weakness proper
monitoring in timely manner is not possible.
3. Lhere disbursement done management of credit starts there but lack of monitoring
within the specified period the loan may be classified. In this way overdue increases
day by day.
7. Centrally there may not be possible to direct control over documentation$
independent udgment disbursement and other re-uirements. That is branches manager$
sub manager take the custodian duties and disbursing the loan.
Chapter Ten
+ummary and findings
After analyzing all the parts of the report finally$ I review the following points as on
summary and findings:
2' As a private bank$ A%%( always wants to earn satisfactory profit with little
emphasis on all the variables of the economic welfare of the people.
1' A%%( used to focus its attention on commercial sector for large and medium
scale industrialization but the recent concentration on +mall and !edium
Dnterprise &+!D' got the new momentum as lending spheres. Though the +!D
is the focusing attention$ A% %anks contribution on agricultural sector is
insignificant.
8' The A%%( loans C advances are dominated by financing on short#term credit
programmes mainly to the trade commerce C processing units rather in any
manufacturing unit.
;' A%%( has an insignificant contribution to public sector enterprises rather it has
predominant role in the private sectors C individual persons.
7' A%%( has also increased its lending in e*port finance and working capital
support.
<' 0eposit Advance ratio indicates that the banks usual performance in response of
fund utilization. %ecause the idle fund incurs cost. The A%%( has invested =7H
of the fund efficiently during the year.
=' Classified loan and advances has down ward trend$ which represents e*cellent
performance of credit administration and monitoring review.
?' Cash recovery position of A%%( is up most satisfactory. In 166; the recovery
position is worth standing that is 1=.8@H of the total classified loans amount.
@' The human resources &4)' of A%%( are better set for the achievement of the
organizational goal. The position of per employee loans and advances is very
satisfactory and the ratio increased gradually from previous years.
26' %ranch management performance as well as the contribution of the branches in
funds utilization and overall profitability contributions there on.
22' A%%( properly follow the credit guideline provided by %angladesh %ank.
21' "or smooth functioning of credit management A%%( always adopt modern
automation system.
28' Dspecially for controlling the branch activities A%%( delegates disbursement to
the credit administration division.

Chapter Eleven
Possib!e easures for co$ing out the 0redit prob!e$
As a prudential measure intended for ensuring improved risk management through
restriction on credit concentration$ %angladesh %ank has from time to time advised the
scheduled banks in %angladesh to fi* limits on their large credit e*posures and their
e*posures to single and group borrowers.
In general$ and as practiced Internationally$ e*posure ceiling is derived from a banks
total capital as defined under capital ade-uacy standards &Tier 2 and Tier 22 Capital'.
"ollowing the same practice$ %angladesh %ank issued a circular &%),0 Circular No.
6?' on !arch 2?$ 1668$ recommending uniform e*posure limits for both local and
foreign banks.
2' As a result of increase in capital of almost all the banks$ now it has been
decided to reduce the single borrower e*posure limit from 76H to 87H. Thus#
&a' The total outstanding financing facilities by a bank to any single person or
enterprise or organization of a group shall not at any point of time e*ceed 87H of
the banks total capital subect to the condition that the ma*imum outstanding
against fund based financing facilities &funded facilities' do not e*ceed 27 H of the
total capital. In this case total capital shall mean the capital held by banks as per
section# 28 of the %ank Company Act$ 2@@2
&b' Non# funded credit facilities$ e.g. (etter of creditB guarantee etc. can be
provided to a single large borrower. %ut under no circumstances$ the total amount
of the funded and non# funded credit facilities shall e*ceed 87 H of a banks total
capital.
4owever$ in case of e*port sector single borrower e*posure limit shall remain
unchanged at 76H of the banks total capital. %ut funded facilities in case of e*port
credit shall also not e*ceed 27H of the total capital.
In addition$ the banks shall follow the following prudential norms$ where applicable:
1' &a' (oan sanctioned to any individual or enterprise or any organization of a
group amounting to 26H or more of a banks total capital shall be considered as large
loan.
&b' The banks will be able to sanction large loans as per the following limits set
against their respective classified loans:
?ate of net c!assified !oans 4he highest rate fiAed for !arge !oan against
ban*@s tota! !oans + advances
3p to 7 H 7<H
!ore than 7H but up to 26H 71H
!ore than 26H but up to 27H ;?H
!ore than 27H but up to 16H ;;H
!ore than 16H ;6H
In order to determine the above ma*imum rates of large loans$ all non# funded facilities
e.g. (etter of credit guarantee$ etc.$ included in the loan shall be considered as 76H
credit e-uivalent. 4owever$ the entire amount of non# funded shall be included in
determining the total credit facilities provided to an individual or enterprise or an
organization of a group.
8' a. A ,ublic limited company$ which has 76H or more public shareholdings$ shall
not be considered as an enterprise > organization of any group.
b. In the cases of loans backed by cash and encashable securities &e.g. "0)'$ the
actual lending facilities shall be determined by deducting the amount of such
securities from the outstanding balance of the loans.
c. In the cases of credit facilities provided against government guarantees$ the
aforementioned restrictions shall not be applicable.
;' a. %anks should collect the large loan in formation on their borrowers from Credit
Information %ureau &CI%' of %angladesh %ank before sanctioning$ renewing or
rescheduling large loans in order to ensure the credit facilities are not being
provided to defaulters.
b. %anks must perform (ending )isk Analysis &()A' before
sanctioning or renewing large loans. if the rating of an ()A turns out to be
PmarginalN$ a bank shall not sanction the large loan$ but it can consider renewal
of an e*isting large loan taking into account other favorable conditions and
factors. 4owever$ if the result of an ()A is unsatisfactory$ neither sanction nor
renewal of large loans can be considered.
c. Lhile sanctioning or renewing of large loan$ a bank should udge its
borrowers overall debt repayment capacity taking into consideration the
borrowers liabilities with other banks and financial institutions.
d. A bank shall e*amine its borrowers Cash "low +tatement$
Audited %alance +heet$ Income +tatement and other financial statement to make
sure that its borrower has the ability to repay the loan.
e. +anctioning$ renewing or rescheduling of large loans is
approved by the %oard of 0irectors in case of local banks. +uch decisions
should be taken by the Chief D*ecutives in case of foreign banks. 4owever$
while approving proposals of large loans$ among other things$ compliance with
the above guidelines must be ensured.
;' "or the loans that have already been disbursed with the approval of %angladesh
%ank$ and that have e*ceeded the limit as stipulated in +ection 62 &mentioned
above'$ banks shall take necessary steps to bring down the loan amounts within
the specified limit. In order to accomplish this condition$ banks may$ if
necessary$ arrange partaking with other banks.
7' %anks shall submit the -uarterly statement of large loan in the specified format
to 0epartment of .ff# site +upervision of %angladesh %ank within 26 days after
the end of respective -uarter.
Conclusion
Credit management system of A%%( is very lengthy process. It has been revised time
to time in response to the respective circular of %angladesh %ank .The overall credit
activity of A%%( is composed of corporate credit division and credit administration
division. In fine$ credit management system of A%%( is more or less effective as
recovery position of classified loan is high and classified loan has been decreasing
gradually during the year. Dven though there are some loopholes in credit policy$ A%%(
always trying to improve their credit policy for minimizing loss and ma*imizing profit
and various measures are undertaken to develop the credit management system.
)ecently A%%( is going to adopt pure automation system in credit division for proper
handling of disbursement and better monitoring$ reviewing of regular and irregular
loan. In addition$ they are e*ploring new ideas$ implementing new technology to serve
the better service to clients. The bank focusing strategy of engaging in client / centric
relationship groups to aggressively market their wide range of products and services to
clients has yielded rich dividends.

Internship

Загружено:

Сведения о документе

Исходное описание:

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Internship

Загружено:

Авторское право:

Доступные форматы

Executive Summary

Вам также может понравиться