Term paper on:

Credit Risk Management Of

Commercial banks in Bangladesh
(This Internship Report Is Submitted For the Partial Fulfillment Of The Degree of
Bachelor of Business of Administration With A a!or In Finance"
Prepared For
Lecture
Facult# Of Business Administration
Premier $ni%ersit#
&hittagong'Bangladesh
Prepared By:
Student name(
Id )o* (
Program ( BBA
a!or( Finance
Batch(
Submission Date ( +,-+.-/+01
0
2etter of Transmittal
Date( 3ul#+,' /+01
To
The super%isor
Facult# of Business Studies
Premier $ni%ersit#
&hittagong' Bangladesh
Dear Sir'
Submitting the internship report titled 4&redit Ris5 anagement Anal#sis of
commercial ban5s in Bangladesh*6 to #ou' it7s a great pleasure* The report pro%ides
the scope and gi%es the opportunit# of learn different trends and aspects of a reputed
organi8ation* I ha%e alread# ac9uired 5no:ledge regarding corporati%e culture and I
ha%e tried to e;plain the 5no:ledge b# :or5ing in different pri%ate and go%ernment
ban5s**
I ha%e also pic5ed up %aluable e;perience *I :ould li5e to than5 #ou for assisting me a
throughout and the Premier $ni%ersit#' Bangladesh for gi%ing the opportunit# to do
m# internship* I belie%e #ou :ill ha%e a positi%e %ie: point on me as m# anal#sis is
genuine and honest* I shall be than5ful if #ou 5indl# appro%e m# effort*
Sincerel# #ours'
<<<<<<<<
)ame(
ID(
Facult# of Business Studies
/
Premier $ni%ersit#'
&hittagong'Bangladesh
=
Acknowledgments
The path to:ard completion of an internship is hard and often times can seem 9uite
difficult* Than5s and all praises to Almight# Allah that b# his blessing I completed m#
report on >&redit Ris5 anagement Anal#sis of commercial ban5s in Bangladesh* ?et
it has been an enriching and re:arding e;perience for me both professionall# as :ell
as personall#* I :ould li5e to e;press m# than5s and appreciation to the man# that
ha%e encouraged and lifted m# feelings along the :a#*
I :ant to con%e# m# heartfelt respect and cordial than5s to my supervisor to gi%e an
opportunit# to carr# out m# internship and I also li5e to than5 for his generous
cooperation and constant guidance that made me reall# confident about the desired
outcome of m# internship pro!ect*
@9uall# I :ould li5e to e;press m# sincere gratitude and indebtedness to the authorit#
of the $ni%ersit# for their Aind &o-operation
1
Chapter: 1
B
INTRODUCTION:
The principal reason banks are chartered by state and federal authorities is to make loans
to their customers. Banks are accepted to support their local communities with an
adequate supply of credit for all legitimate business and consumer activities and to price
that credit reasonably in line with competitively determined interest rates. Indeed, making
loans is the principal economic function of banks-to fund consumption and investment
spending by businesses, individuals and units of government. ow well a bank performs
its lending function has a great deal to do the economic health of its region, because bank
loans support the growth of new businesses and !obs within the banks trade territory and
promote economic vitality.
"or most banks, loans account for half or more of their total assets and about two-thirds
of their revenues. #oreover, risk in banking tends to be concentrated in the loan portfolio.
$hen a bank gets into serious financial trouble, its problems usually springs from loans
that have become uncollectible due to mismanagement, illegal manipulation of loans,
misguided lending policies or an une%pected economic downturn.
,
OBJECTIVE
The main ob!ective of this pro!ect is to analy&e the performance of the loan
portfolio of 'outheast Bank (imited and also its credit policies which would show
how the private commercial banks of Bangladesh lends to different kinds of
clients.
To find out how effective is the loan recovery system of different commercial
banks.
To collect information about )redit *isk +rading 'ystem
To analy&e the data of different clients.
To learn about )redit *isk analysis
To identify strength and weakness of )redit *isk +rading system.
To gather comprehensive knowledge to measure risk grading.
METHODOLOGY
Both primary and secondary sources of data were used towards the completion of
this project. The main primary source of data was the interview with the
different level of employees in the credit department of the different local banks.
Relevant files study that were provided by the officers concerned with credit
department were also used.
econdary data were mainly used for the completion of this project. ome of the
secondary data that were used are:
!nnual Report of different commercial banks.
Credit Policy "uide
Credit #peration $anual
Boo5s' maga8ines' articles and etc* :ere also used*

.
LIMITATIONS
)redit is one of the most important parts of a bank. In order to get vast knowledge
regarding this sector, time is needed. Three months internship program is not enough to
gain enough information regarding this topic.
'ome of the data are very confidential and as a result, those information were not
revealed.
,ll data regarding were not available and could not be collected due to the
shortage of time.
I got a short period of time to prepare the report
In ban5 all emplo#ees are too bus#* It is tough to ha%e a brea5 from their tight
schedule
There are a lot of secret matters in the organi8ation* As an intern the researcher
cannot reach to those secret topics*
Technological aspect( The report does not describe an# technological aspect*
In some cases' up to date information :ere not published*
2ac5 of proper boo5s' !ournals and other elements*
Sufficient records' publications facts and figure are not a%ailableC these hamper
the scope of real anal#sis*
an# procedural matters :ere :ritten from our o:n obser%ation' :hich ma#
also %ar# from person to person*
In spite of all the limitations I full# prepare the :hole report :hile conducting the
stud# and ma5ing of it* It has managed to end up :ell* I belie%e that I ha%e
prepared a 9ualit# report on the credit management*
D
Chapter: 2
Theoretical Aspects
E
2.1 What is credit?
)redit is usually defined in terms of the borrowing and landing of money. The
most basic form is a loan granted to a borrower, who may be a consumer or a
company. )redit can also take the form of a financial instrument that entails fi%ed
payments determined up front and made over a set time period. -ong .ong
Institute of Bankers, /01/2
)redit means a provision of, or commitment to provide, funds or substitutes for
funds, to a borrower, including off-balance sheet transactions, customers3 lines of
credit, overdrafts, bills purchased and discounted, and finance leases. -Bank of
#auritius, 4ecember /0052
In banking terminology, credit refers to the loans and advances made by the
bank to its customers or borrowers.
2.2 What is credit risk?
)redit risk arises from the potential that a bank3s borrower will fail to meet its
obligations in accordance with agreed terms. )redit risk also refers the risk of
negative effects on the financial result and capital of the bank caused by
borrower3s default on its obligations to the bank -Bangladesh Bank, /01/2.
The risk that a borrower or counterparty may fail to fulfil an obligation. The
assessment of credit risk involves evaluating both the probability of default by the
counterparty, obligator, or issuer and the e%posure or financial impact on the
authori&ed institution in the event of default -ong .ong #onetary ,uthority,
/0012.
2.3 What is credit risk management?
*isk management contains
Identification,
#easurement,
,ggregation,
6lanning and management,
,s well as monitoring of the risks arising in a bank3s overall
business -7esterreichische 8ational bank, /0092.
2.4 Why manage credit risk?
The reasons behind managing credit risks are as follows:
0+
a2 Increase shareholder value
;alue creation
;alue preservation
)apital optimi&ation
b2 Instil confidence in the market place
c ,lleviate regulatory constraints and distortions thereof -Bhargara, /00<2.
2.5 What is credit Risk Management process?
)redit risk management process should cover the entire credit cycle starting from
the origination of the credit in a financial institution3s books to the point the credit
is e%tinguished from the books. It should provide for sound practices in:

)redit processing=appraisal
)redit approval=sanction
)redit documentation
)redit administration
4isbursement
#onitoring and control of individual credits
#onitoring the overall credit portfolio -stress testing2
#anaging problem credits=recovery -Bank of #auritius, 4ecember /0052


Gidelines !or "RM #y $angladesh $ank
In "ebruary /01/ 4epartment of 7ff-site 'upervision of Bangladesh Bank issued
>Risk Management gidelines !or $anks> -Bangladesh Bank, /01/2 for all
scheduled banks in Bangladesh. These guidelines are issued by Bangladesh
Bank under section <9 of 3 , 3 and introduced to provide a
structured way of identifying and analysing potential risks, and devising and
implementing responses appropriate to their impact. 'ummary of 'ome of the
important )*# guideline are presented here.


2.% "redit risk management !ramework
00
, typical credit risk management framework in a bank may be broadly
categori&ed into following main components:
a2 Board oversight
b2 'enior management3s oversight
c2 7rgani&ational structure
d2 'ystems and procedures for identification, acceptance, measurement of risks
e2 #onitoring and control of risk


2.& "redit administration
The credit administration function is basically a back office activity that supports
and controls e%tension and maintenance of credit. $hile developing credit
administration areas, banks must ensure:
The efficiency and effectiveness of credit administration operations,
including monitoring documentation, contractual requirements, legal covenants,
collateral, etc.?
The accuracy and timeliness of information provided to management
information systems?
The adequacy of control over all >back office> procedures? and compliance
with prescribed management policies and procedures as well as applicable laws
and regulations.
Banks need to enunciate a system that enables them to monitor quality of the
credit portfolio on day-to-day basis and take remedial measures as and when
any deterioration occurs. 'uch a system would enable a bank to ascertain
whether loans are being serviced as per facility terms, confirm the adequacy of
provisions, and establish that the overall risk profile is within limits established by
management and compliance of regulatory limits. #onitoring procedures and
systems should be in place so as to provide an early signal of the deteriorating
financial health of a borrower.
, typical credit administration unit performs the following functions:
4ocumentation
)redit disbursement
)redit monitoring
)redit repayment
0/
#aintenance of credit files
)ollateral and security documents


2.' Measring credit risk
The measurement of credit risk is a vital part of credit risk management. To start
with, banks should establish a credit risk rating framework across all type of
credit activities. ,mong other things, the rating framework may, incorporate:
Business risk
Industry characteristics
)ompetitive position -e.g. marketing=technological edge2
#anagement
Financial risk
"inancial condition
6rofitability
)apital structure
6resent and future cash flows


2.( "redit risk monitoring and control
Banks need to develop and implement comprehensive procedures and
information systems to monitor the condition of each individual credit across
various portfolios. Banks need to enunciate a system that enables them to
monitor quality of the credit portfolio on a day-to-day basis and take remedial
measures as and when any deterioration occurs. These procedures need to
define criteria for identifying and reporting potential problem credits and other
transactions to ensure that they are sub!ect to more frequent monitoring as well
as possible corrective action, classification and=or provisioning. @stablishing an
efficient and effective credit monitoring system would help senior management to
monitor the overall quality of the total credit portfolio and its trends and helps to
reassess credit strategy=policy accordingly before encountering any ma!or
setback.
The banks credit policy should e%plicitly provide procedural guideline relating to
credit risk monitoring. ,t the minimum it should lay down procedure relating to:
0=
The roles and responsibilities of individuals responsible for credit risk
monitoring?
The assessment procedures and analysis techniques -for individual loans
A overall portfolio2
The frequency of monitoring?
The periodic e%amination of collaterals and credit covenants?
The frequency of site visits? and
The identification of deterioration in any credit?
2.1) Managing credit concentration risk
)oncentration risk generally designates the risk arising from an uneven
distribution of counterparties in credit or any other business relationships or from
a concentration in business sectors or geographical regions which is capable of
generating losses large enough to !eopardi&e an institution3s solvency.


)redit concentrations of a bank may be pre-planned and part of its business
philosophy. owever, banks should make greater efforts to identify and limit
concentration risk or to demand appropriate risk premiums. @ach bank should
have effective internal policies, systems and controls to identify, measure,
monitor and control credit risk concentrations -))*2. Banks should minimi&e
concentration risk possibilities rather than providing capital cover. owever, BB
reserves the right to require higher levels of capital for individual banks with
e%cessive concentration risk.

01
Chapter: !
"ractical Aspects
0B
*istorical $ackgrond+
The second generation bank of the 'outheast Bank (imited -'@B(2 is a scheduled Bank
under private sector established under the ambit of bank )ompany ,ct, 1BB1 and
incorporated as a 6ublic (imited )ompany under )ompanies ,ct, 1BB< on #arch 1/,
1BB9. The Bank started commercial banking operations effective from #ay /9, 1BB9.
4uring this short period of time the Bank had been successful to position itself as a
progressive and dynamic financial institution in the country. The Bank had been widely
accepted by the business community, from small entrepreneur to large traders and
industrial conglomerates, including the top rated corporate borrowers for forward-looking
business outlook and innovative financing solutions. Thus within this very short period of
time it has been able to create an image for itself and has earned significant reputation in
the countrys banking sector as a Bank with vision. 6resently it has forty one branches in
operation.
The bank is managed by a team of efficient professionals. There prevails a positive
organi&ational climate in the bank that generates feeling of dignity, trust, discipline and
openness in the people and result in motivating them to post better result continuously in
the bank. The )ompany 6hilosophy , -A $ank with .ision/ has been preciously the
soul of the legend of banks success.
It has been growing faster as one of the leaders of the second generation banks in the
private sector in respect of business and profitability as it is evident from the financial
indicators as a pioneer banking institute in Bangladesh and contribute significantly to the
national economy.
'outheast Bank is today a synonym of quality banking products. It has a diverse array of
carefully tailored product and services to cater to the needs of all customer segments.
Today, 'outheast Bank is one of the leading and most successful banking institutions in
Bangladesh with a total assets base of T.. CD,9<<.E1 million as on Fune 50, /00D. The
credit rating of the bank for the Fune 50, /00D was done by )redit *ating ,gency of
Bangladesh -)*,B2. They have rated the bank ,1 -pronounced single , one2 -igh
safety2 for the long term. )ommercial Banks rated in this category are ad!udged to be
strong Banks.
0,
"orporate Mission and .ision o! 0otheast $ank 1imited
Mission
1. igh quality financial services with the help of latest technology.
/. "ast and accurate customer service.
5. Balanced growth strategy.
<. igh standard business ethics.
9. 'teady return on shareholders equity.GG
C. Innovative banking at a competitive price.
E. 4eep commitment to the society and the growth of national economy.
D. ,ttract and retain quality human resource.
.ision
To stand out as a pioneer banking institution in Bangladesh and contribute significantly to
the national economy.
2rgani3ational 0trctre
The following hierarchy is the organi&ational hierarchy of 'B( and it depicts the top-
bottom relationship:
6resident and #anaging 4irector 4M56
4eputy #anaging 4irector 45M56
'enior @%ecutive ;ice 6resident 407.86
@%ecutive ;ice 6resident 47.86
'enior ;ice 6resident 40.86
;ice 6resident 4.86
"irst ;ice 6resident 49.86
'enior ,ssistant ;ice 6resident 40A.86
,ssistant ;ice 6resident 4A.86
'enior 6rincipal 7fficer 40826
6rincipal 7fficer 4826
0.
@%ecutive 7fficer 4726
#anagement Trainee 4M:6
6robationary 7fficer 4826
'enior 7fficer 4026
7fficer 426
Funior 7fficer 4;26
Trainee Funior 7fficer 4:;26
'enior 7fficer -)omputer2
7fficer -)omputer2
Funior 7fficer -)omputer2
)omputer-Trainee
ead )ashier
'enior 7fficer -)ash2
7fficer -)ash2
Funior 7fficer -)ash2
)ashier-Trainee
#essenger
Bank +uard
Main 2perational Area
,s a commercial bank, 'outheast Bank does all traditional banking business including the
wide range of savings and credit scheme products, retail banking and ancillary services
with the support of modern technology and professional e%cellence. The bank has
0D
launched according to market demand a number of financial products and services since
its inception. 7ur !ourney towards greater operational success continues with increased
energy and enthusiasm. 7ur product-basket encompasses real time 7n-line any Branch
Banking, Islamic Banking, 6artial #erchant Banking, 4ual )urrency ;isa )redit )ard,
,T#s, @ducation loan scheme, 4ouble Benefit scheme, )onsumer loan, '#' Banking,
)orporate Banking, 'yndicate (oan, #onthly 'aving 'cheme, #onthly Income 'cheme,
6ension 'aving 'cheme, and $age @arner 6ension 'cheme etc. ,nd Bank finances the
Individual, 'mall Business, )ommercial, Te%tile, +arments, )hemical A )ements area.
A. 5eposit 0chemes
Bank has the following customer friendly deposit schemes:
)urrent 4eposit 'cheme -)42
'avings 4eposit scheme -'B2
'hort Term 4eposit 'cheme -'T42
6ension 'avings 'cheme -6''2
@ducation 'avings 'cheme -@''2
#onthly 'avings 'cheme -#''2
4ouble Benefit 4eposit 'cheme -'B4'2
"i%ed 4eposits - 1, /, 5, C A 1/ months 2
$. "redit 0chemes
The loan portfolio of the Bank is well diversified and covers funding to a wide spectrum of
business and industries including readymade garments, te%tile, edible oil, ship scrapping,
steel A engineering, chemical, pharmaceuticals, cement, construction, health-care, real-
estate and loans under consumers credit schemes allowed to the middle-class people of
the country for acquiring various household items.
'onali Bank
'onali Bank (imited was incorporated in Bangladesh on 05 Fune /00E as a
6ublic (imited )ompany under )ompanies ,ct 1BB<. "ormally this bank was
0E
incorporated as a nationali&ed commercial bank named as 'onali Bank
established by The Bangladesh Bank 7rder 1BE/ -6residential 7rder no. /C of
1BE/2 and was fully owned by the +overnment of the 6eople3s *epublic of
Bangladesh. ,fter incorporation dated 19 8ovember /00E 'onali Bank (td. has
taken over the undertaking and business of 'onali Bank. The Bank has total of
1/05 branches throughout the country including two overseas branches at
.olkata and 'iliguri in India as on 15 8ovember /015.
8rincipal Acti<ities o! the $ank
The principal activities of the bank are to provide a comprehensive range of
financial services, personal and commercial banking, trade and services, cash
management, treasury, securities and custody services and perform +overnment
treasury functions as an agent of the Bangladesh Bank. It offers various banking
services such as personal banking, rural banking, international banking, industrial
financing as well '#@ banking and Islamic banking -saving for a!!2. "or its retail
customers it offers savings, remittance and deposit products including savings
accounts, daily profit accounts as well as education deposit, #edicare deposit,
marriage savings deposit and rural deposit schemes.



3.3 8rodcts and ser<ices o!!ered -ome: 'onali Bank (imited, /01<2
)ore Business


H )orporate
Banking
H 6ro!ect "inance
H '#@ "inance
H Trade "inance
H (oan 'yndication
H "oreign @%change
4ealing
H Investment
H +overnment Treasury
"unction
H #oney #arket 7peration
/+
H *emittance
H (ease "inance
H )onsumer )redit

H International Trade
H 8+7-(inkage (oan
H )onsumer )redit

H *ural and #icro credit
H )apital #arket 7peration
H 'pecial 'mall (oan

7ther Business='ervices


H +overnment Treasury Bonds
H (ocker 'ervice
H ,.T.#. )ard
H Itility Bills )ollection
H ,ncillary 'ervices
H #erchant Banking

Islamic Banking 'ervices


Deposit "ro#$cts


I%&est'e%t "ro#$cts


H ,l-$adeeah )urrent ,ccount -,$),2
H #udaraba 'avings ,ccount -#',2
H #udaraba 'pecial 8otice 4eposit ,ccount
-#'84,2
H #udaraba Term 4eposit ,ccount -#T4,2
H #udaraba a!! saving ,ccount -#',2
H #udaraba 'onali #onthly 4eposit 'cheme


H Bai-#urabaha
H Bai-#ua!!al
H Bai-'alam
H Bai-Istisna
H ire 6urchase Inder 'hirkatul
#elk
/0
-'#4'2
H #udaraba #onthly 6rofit 'cheme
-##6'2



//
/=
%istory & Back'round of (amuna Bank )T*:
3amuna Ban5 2td* (3B2" is a Ban5ing &ompan# registered under the Ban5 &ompanies
Act' 0EE0 and incorporated as Public &ompan# limited b# Shares under the &ompanies
Act' 0EE1 inBangladesh* The Ban5 starred its operation from =
rd
3une /++0 as a
scheduled Ban5*
3B2 came into being as a highl# capitali8ed ne: generation Ban5 started its operations
:ith an Authori8ed &apital and Paid-up &apital of T5* l,++*++ million and T5*=E+'++
million respecti%el#*
3B2' the onl# Bengali named pri%ate commercial ban5 :as established b# a group of
:ining local entrepreneurs concei%ing an idea of creating a model ban5ing institution
:ith different outloo5 to offer the %alued customers' a comprehensi%e range of financial
ser%ices and inno%ati%e products for sustainable mutual gro:th and prosperit#* The
sponsors are reputed personalities in the filed of trade' commerce and industries*
The Ban5 is being managed and operated b# a group of highl# educated and professional
team :ith di%ersified e;periences in finance and ban5ing* A team of highl# 9ualified and
e;perienced professionals headed b# the anaging Director of the Ban5 :ho has %ast
ban5ing e;perience operates ban5 and at the top there is an efficient Board' of *Directors
for ma5ing policies* @arnest and prudent in%ol%ement of the best management team in all
tires of the =an5 has brought the best out of the Ban5* The anagement of the ban5
constantl# focuses on understanding and anticipating customer7s needs*
The scenario of ban5ing business is changing' da# b# da#' so the ban57s responsibilit# is
to de%ise strateg# and ne: products to cope :ith the changing en%ironment* 3B2 has
alread# achie%ed tremendous progress :ithin onl# Se%en #ears* The ban5 has alread#
ran5ed at top of the 9ualit# ser%ice pro%iders F is 5no:n for its reputation*
3B2 is no: tr#ing to :iden its peripher# b# targeting all the potential sectors* With an
e;tensi%e range of financial products and ser%ices da# b# da# tine ban5 is committed to
pro%ide high dualit# financial ser%icesGproducts to contribute to the gro:th of HDP of the
countr# through stimulating trade F commerce' accelerating the pace of Industriali8ation'
/1
boosting up e;port' creating emplo#ment opportunit# for the educated #outh' po%ert#
alle%iation' raising standard of li%ing of limited income group and o%er all sustainable
socio-economic de%elopment of the countr#*
To 5eep pace :ith time and in harmon# :ith national and international economic
acti%ities and for rendering all modern ser%ices' 3B2' as a financial institution automated
all its branches :ith computer net:or5 in accordance :ill the competiti%e commercial
demand of time* oreo%er' considering is forthcoming future the infrastructure of the
Ban5 has been rearranging*
Since its inception the Ban57s footprint has gro:n to 10(ort# one" branches across the
countr# and the customer base has e;panded to .,'+1. and .'E/1 borro:ers as on =+
th
April' /++E* The e;pectation of all class businessman' entrepreneurs and general public is
much more to 3B2 Aeeping the target in mind the ban5 has ta5en preparation to open ne:
branches in coming months of /++E*
3B2 underta5es all t#pes of ban5ing transactions to support the de%elopment of tr# de and
commerce of the countr#* The 3B27s ser%ices also a%ailable for the entrepreneurs to set up
ne: %entures and BR@ of industrial units*
)o: 3B2 is on line to establish trade and columniation :ith the Prime Imitational
ban5ing companies of the :orld* As a result 3B2 :ill be able to build a strong root in
international >ban5ing hori8on* Ban5 has been dra:ing arrangement :ith :ell con%ersant
mone# transfer ser%e agenc# Hram6* It has a full time arrangement for speed# transfer of
mone# all o%er the :orld*
Ban5ing is not onl# a profit-oriented commercial institution but it has a public base and
social commitment* Admitting this true 3B2 is going on :ith its di%ersified ban5ing
acti%ities* 3B2 offers different t#pes of &orporate and Personal Ban5ing Ser%ices
in%ol%ing all segments of the societ# :ithin the pur%ie: of rules and regulations laid
do:n b# the &entral Ban5 and other regulator# authorities* 3B2 introduceI different t#pes
of Sa%ings Schemes' &onsumer7s &redit Scheme' Jousing 2oan' different t#pes of S@
2oan facilities to combine the people of lo:er and middle-income group*
As regards mobili8ation of the Ban57s deposit' utmost importance is attached for
mobili8ation of stable' lo: and no-cost deposit so that proper li9uidit# could be
maintained and ma;imum deplo#ment of fund could be made a%oiding mismatching of
fund*
Corporate +ision:
To become a leading ban5ing institution and to pla# a pi%otal role in the de%elopment of
the countr# through best application of modem information technolog# in business
acti%ities' offering high standard clientele ser%ices and proper coordination of high
9ualit# assets is the core of the %ision*
/B
Corporate $ission:
The Ban5 is committed to satisf#ing di%erse needs of its customers through an arra# of
products at a competiti%e price b# using appropriate technolog# and pro%iding timel#
ser%ice so sustainable gro:th' reasonable return and contribution to die de%elopment of
the countr# ensured :ith a moti%ated and professional :or5-force potential* With a %ie:
to achie%ing commercial ob!ecti%es of the Ban5' the sincere and all out efforts sta# put
unabated* Respected clients and shareholders are attracted to it for its transparenc#'
accountabilit#' social commitments and high 9ualit# of clientele ser%ices*
#bjectives of (B):
The follo:ing ob!ecti%es are set for 3B2(
K To earn and maintain &A@2 Raring 4Strong7*
K To establish relationship ban5ing and impro%e ser%ice 9ualit# through de%elopment
of Strategic ar5eting Plans*
K To remain one of the best ban5s in Bangladesh in terms of profitabilit# and assets
9ualit#*
K To introduce full# automated s#stems through integration of information technolog#*
K To ensure an ade9uate rate of return on in%estment*
K To 5eep ris5 position at an acceptable rarer (including an# off balance sheet ris5"*
K To maintain ade9uate li9uidit# to meet maturing obligations and commitment*
K To maintain a health# gro:th of business :ith desired image*
K To maintain ade9uate control s#stems and transparenc# in procedures*
K To de%elop and retain a 9ualit# :or5-force through an effecti%e human
anagement S#stem*
K To ensure optimum utili8ation of all a%ailable resources*
C
K To pursue an effecti%e s#stem of management b# ensuring compliance to ethical
norms' transparenc# and accountabilit# at all le%els sources
trate'ies of (B):
The strate'ies of (B) are as follows:
/,
K To raise the Paid-up &apital and Statutor# Reser%e Fund i*e* Regulator &apital up to
T5*/+++*++ million b# 3une' /+01
K To manage and operate the Ban5 in the most efficient manner to enhance financial
performance and to control cost of fund*
K To stri%e for customer satisfaction through 9ualit# control and deli%er# of timel#
ser%ices*
K To identif# customers7 credit and other ban5ing needs and monitor their perception
to:ards our performance in meeting those re9uirements*
K To re%ie: and update policies' procedures and practices to enhance the abilit# to
e;tend better ser%ice to customers*
K To train and de%elop all emplo#ees and pro%ide them ade9uate resources so that
customers7 needs can be reasonabl# addressed*
* K To culti%ate a :or5ing en%ironment that fosters positi%e moti%ation for
impro%ed performance*
K To di%ersif# portfolio bum in the retail and :holesale mar5et*
K To increase direct contact :ith customers in order to culti%ate a closer relationship
bet:een the ban5 and its customers*
)hapter: <
)redit risk management of 4ifferent Banks
/.
:ype 2! "redit Risk Grading =n 07$1
The main ob!ectives of calculating the )redit *isk +rading to minimi&e risk. In our country
all banks and financial institutes maintain and calculate The )*+ in two ways
1. "irst to calculate )*+ for manufacturing, Trading, 'ole proprietorship, *eal @state and
Individual.
/. 'econd to calculate )*+ for 8B"I -8on-Banking "inancial 7rgani&ation2.
:op :en "lients
J Bashundhara Import A @%port (imited.
J Islam Trading )onsortium (imited.
J *angs Industries (imited.
J 4eshbandhu 'ugar #ills (imited.
J ,mber )otton #ills (imited.
J #etro 'pinning.
J Keasmin 'pinning.
J '. ,lam )old *olled 'teels (imited.
J Thai 6oly 'hawn B4 (imited.
J +uamati "illing 'tation A 'ervice.
"ase>1 4 0.Alam "old Rolled 0teels 1imited6
Analysis !rom 9inancial 0tatement+
/D
0. A1AM "215 R21175 0:7710 1=M=:75
$alance 0heet as on 3).)(.2))& 4as s#mitted #y the client6

8articlars 5etails Amont in $5: :otal amont in $5:
"rrent Assets calclation
'tock /,<C9,9/C,CC/.00
Book 4ebt DEB,/BC,<91.00
,dvance, deposit and 6re-payments 1</,/5B,/EE.00
)ash and Bank Balances /1,<91,B50.00
:otal "rrent Assets 3?5)'?514?32).))

9i@ed Assets "alclation
Tangible "i%ed ,ssets 1,<5E,11<,11B.00
6reliminary "i%ed ,ssets /BD,0<0.00
'hare Issue @%pense C,5<1,<BD.00
:otal 9i@ed Assets
1?443?&53?%5&.))

"rrent 1ia#ility "alclation
)reditors and ,ccruals CD<,CCC,D<<.00
,dvance against sales 5E,EED,B01.00
'hort term Bank loan /,5B0,BE<,5C1.00
6rovision for workers profit participation fund C,1<<,CC9.00
Inclaimed 4ivident 5,BE5,900.00
)urrent portion of term loan 10E,/<D,D00.00
/E
(ease finance due within 01 year 11,D/B,09/.00
6ropsoed 4ivident D0,01E,/00.00
4effered Income Ta% E0,00<,9EB.00
:otal "rrent 1ia#ility 3?3(2?%3&?()2.))

1oag term lia#ility calclation
Term (oan -secured2 EDD,/DB,</1.00
(ease "inance -secured2 -
(oan from ,ssociated )ompanies -unsecured2 /1C,C<0,91B.00
1ong term 1oan 1?))4?(2(?(4).))

:otal 1oan 1ia#ility )urrent A fi%ed liability 4?3(&?5%&?'42.))

0hare *olders 7Aity calclation
share )apital 955,<<D,000.00
*atained @arnings /1,/9/,159.00
:otal shareholders eAity 554?&))?135.))

:2:A1 A007:0 4?(52?2%&?(&&.))

:2:A1 1=A$=1=:=70 AB5 2WB7R0 7CD=:E 4?(52?2%&?(&&.))

8ro!it F 1oss Accont
Bet 0ales 1?33(?)(%?))4.))
(ess: )ost of goods sold BD<,D1B,E19.00
=+
Gross 8ro!it 354?2&%?2'(.))
(ess: 7perating e%penses 5<,//C,159.00
(ess: "inancial @%penses 1BE,19C,D<E.00
(ess: $66$" C,1<<,CC9.00
(ess : ,morti&ation of preliminary @%panses 1<B,0/0.00
(ess: ,morti&ation of 'hare Issue @%panses /,115,D55.00
Bet pro!it #e!ore ta@ 114?4'5?&'(.))
(ess: 6rovision for income ta% </,B1C,D<1.00
8ro!it a!ter :a@ &1?5%'?(4'.))

"alclation o! 7$=:5A
6rofit after ta% E1,9CD,B<D.00
,dd: provision for ta% </,B1C,D<1.00
,dd: "inancial @%penses 1BE,19C,D<E.00
,dd: ,morti&ation /,/C/,D95.00
,dd: 4epreciation 9B,9<E,DB/.00
7$=:5A 3&3?453?3'1.))

0mmery !or 9inancial Risk Measrement as a part o! "RG+
1. Total (iabilities <,5BE,9CE,D</.00
/. 'hareholders @quity 99<,E00,159.00
5. )urrent ,ssets 5,90D,91<,5/0.00
<. )urrent (iabilities 5,5B/,C5E,B0/.00
9. @BIT,4 5E5,<95,5D1.00
C. Interest on debt 1BE,19C,D<E.00
=0
E. 'ales 1,55B,0BC,00<.00

5e#t>7Aity Ratio &.(3
"rrent Ratio 1.)3
2perating 8ro!it Margin 2&.'(G
=nterest 0er<ice "o<erage Ratio 1.'(
Kear of @stablishment in 1BBC. -To get from proposal2
Business outlook is "avorable. is or her market condition is very well because sales,
profit, productivity has remarkable growth.
e=she cant enter=e%it easily
To count the each 4irector e%perience
The scenario of private (td. )o. is good but may be opposite its public (td.
'ecurity risk depends on )ollateral coverage. ,nd guarantee
' ,lam )old *olled 'teels (td. obtains the )*+ number total CB. and we finance this
organi&ation because their sales, profit, product quality, payment of installment and overall
company image is well.
"R75=: R=0H GRA5=BG 0"2R7 0*77:

Re!erence Bo.+

5ate+
1%>;l>)'
$orrower 0 Alam "old Rolled 0teels 1td.
Grop Bame 4i! any6 BIa Aggregate 0core+
%(
Branch: 6rincipal Branch
Industry='ector #anufacturing Risk
Grading+
MarginalIWatch 1ist
4ate of "inancials
50=0B=/00E -,udited2
)ompleted by @mran ,hmed, @7
,pproved by #r. +iash Iddin ,hmed, '@;6 A
oB

Bm#er
Grading
0hort 0core
1
'uperior
'I6 "ully cash secured, secured by
government guarantee=international
bank guarantee
/
+ood
+4 D9G
=/
5
,cceptable
,))6T E9-D<
<
#arginal=$atchlist
#+=$( C9-E<
9
'pecial #ention
'# 99-C<
C
'ubstandard
'' <9-9<
E
4oubtful
4" 59-<<
D
Bad=(oss
B( L59

"riteria
Weight
8arameter
0core Actal 8arameter 0core
2#tained
A. 9inancial Risk 5)G
1. 1e<erage+ 415G6 (ess than 0./9M
19 E.B5 )
4ebt @quity *atio -M2 N Times 0./CM to 0.59 %
1<
Total (iabilities to Tangible 8et worth 0.5CM to 0.90 %
15
0.91M to 0.E9 %
1/
,ll calculations should be based on 0.ECM to 1./9 %
11
annual financial statements of the 1./CM to /.00 %
10
borrower -audited preferred2 /.01M to /.90 %
D
/.91M to /.E9 %
E
#ore than /.E9M
0
2. 1iAidity+ 415G6 +reater than /.E<M
19 1.05 1)
)urrent *atio -M2 -Times /.90M to /.E< %
1<
)urrent ,ssets to )urrent (iabilities /.00M to /.<B %
15
1.90M to 1.BB %
1/
1.10M to 1.<B %
11
0.B0M to 1.0B %
10
0.D0M to 0.DB %
D
==
0.E0M to 0.EB %
E
(ess than 0.E0M
0
3. 8ro!ita#ility+ 415G6 +reater than /9O
19 /E.DB 15
7perating 6rofit #argin -O2 /0O to /<O
1<


-7perating 6rofit='ales2 P 100 19O to 1BO
15
10O to 1<O
1/
EO to BO
10
<O to CO
B
1O to 5O
E
(ess than 1O
0
4. "o<erage+ 45G6

Interest )overage *atio -M2 N Times

@arning before interest A ta%
-@BIT2
#ore than /.00M
9 1.DB 4
Interest on debt
#ore than 1.91M (ess than /.00M
<
#ore than 1./9M (ess than 1.90M
5
#ore than 1.00M (ess than 1./<M
/
(ess than 1.00M
0
:otal 0core> 9inancial Risk
5) 2(


$. $sinessI =ndstry Risk 1'G

1. 0i3e o! $siness -in B4T crore2 Q C0.00
9 155.B0 5
50.00 N 9B.BB
<
The si&e of the borrowers business 10.00 N /B.BB
5
=1
measured by the most recent years 9.00 N B.BB
/
total sales. 6referably audited
numbers.
/.90 N <.BB
1
L /.90
0
2. Age o! $siness Q 10 Kears
5 1/ 3
Q 9 N 10 Kears
/
The number of years the borrower / N 9 Kears
1
engaged in the primary line of
business
L / Kears
0
3. $siness 2tlook "avorable
5 "avorable 3
)ritical assessment of medium term 'table
/
prospects of industry, market share 'lightly Incertain
1
and economic factors. )ause for )oncern
0
4. =ndstry Growth 'trong -10OG2
5 'trong -10OG2 3
+ood -Q9O N 10O2
/
#oderate -1O-9O2
1
8o +rowth -L1O2
0
5. Market "ompetition 4ominant 6layer
/ 4ominant 6layer 2
#oderately )ompetitive
1
ighly )ompetitive
0
%. 7ntryI7@it $arriers 4ifficult
/ 4ifficult 2
,verage
1
@asy
0
:otal 0core> $sinessI=ndstry
Risk

1' 1'


". Management Risk 12G

1. 7@perience #ore than 10 years in the related
line of business
9 #ore than 10 years in 5
=B
the related line of
business
Ruality of management based on
total
9N10 years in the related line of
business
5
S of years of e%perience of the senior 1N9 years in the related line of
business
/
management in the Industry. 8o e%perience
0
2. 0econd 1ineI 0ccession *eady 'uccession
< *eady 'uccession 4
'uccession within 1-/ years
5
'uccession within /-5 years
/
'uccession in question
0
3. :eam Work ;ery +ood
5 ;ery +ood 3
#oderate
/
6oor
1
*egular )onflict
0
:otal 0core> Management Risk
12 12


5. 0ecrity Risk 1)G

1. 0ecrity "o<erage 48rimary6 "ully 6ledged facilities=substantially
cash covered = *eg. #ortg. for B(
< *egistered
ypothecation -1st
)harge=1st 6ari passu
)harge2
3
*egistered ypothecation
-1
st
)harge=1st 6ari passu )harge2
5
/nd charge=Inferior charge
/
'imple hypothecation=8egative lien
on assets
1
8o security
0
2. "ollateral "o<erage 48roperty
1ocation6
*egistered #ortgage on #unicipal
corporation=6rime ,rea property
< 8o collateral )
*egistered #ortgage on
5
=,
6ourashava='emi-Irban area
property
@quitable #ortgage or 8o property
but 6lant and #achinery as collateral
/
8egative lien on collateral
1
8o collateral
0
3. 0pport 4Garantee6 6ersonal +uarantee with high net
worth or 'trong )orporate
+uarantee
/ 6ersonal +uarantee
with high net worth or
'trong )orporate
+uarantee
2
6ersonal +uarantees or )orporate
+uarantee with average financial
strength
1
8o support=guarantee
0
:otal 0core> 0ecrity Risk
1) 5
7. Relationship Risk 1)G

1. Accont "ondct #ore than 5 years ,ccounts with
faultless record
9 ,ccounts having
satisfactory dealings
with some late
payments.
2
(ess than 5 years ,ccounts with
faultless record
<
,ccounts having satisfactory
dealings with some late payments.
/
"requent 6ast dues A Irregular
dealings in account
0
2. Dtili3ation o! 1imit #ore than C0O
/ 100.00O 2
-actual=pro!ection2 <0O N C0O
1
(ess than <0O
0
3. "ompliance o! "o<enants I "ull )ompliance
/ 'ome 8on-
)ompliance
1
"onditions 'ome 8on-)ompliance
1
8o )ompliance
0
=.
4. 8ersonal 5eposits 6ersonal accounts of the key
business 'ponsors= 6rincipals are
maintained in the bank, with
significant deposits
1 8o depository
relationship
)
8o depository relationship
0
:otal 0core> Relationship Risk
1) 5
Grand :otal , All Risk
1)) %(

' ,lam )old *olled 'teels (td. obtains the )*+ number total CB. and we finance this
organi&ation because their sales, profit, product quality, payment of installment and overall
company image is well.
"ase>2 49rnitec =ndstries 1t d.6
9rnitec =ndstries 1imited
,nalysis from "inancial 'tatement
<."I*8IT@) I84I'T*I@' (I#IT@4,4,.,
9=BAB"=A1 R=0H 2))&
1.1e<erage
Lia(ilit)
Lo%* Ter' Loa%
'@B(=6B 31?&(%?&3)
C$rre%t Lia(ilit)
Bank 7verdraft 5<,D1E,55/
6rovision for Ta% /,/<B,150
'undry )reditors 159,<CD
O$tsta%#i%* Loa%
$ages 5E9,/00
'taff 'alary A ,llowance D/,B90
'howroom A 7ffice *ent 19/,900
@lectricity Bill C,B19
=D
Telephone A "a% Bill 1C,/5/
,udit "ee 9,000
(eagal "ee 10,000
3&?'5)?&2&
Total (iability %(?%4&?45&
E+$it)
6aid up )apital 10,000,000
'hare #oney 4eposit 1E,000,000
6rofit A (oss ,=) E,BCC,C5<
Total @quity 34?(%%?%34

Total (iability=Total @quity ,.--,.2/,0-

2.1iAidity
C$rre%t Assets
6riliminary @%penses /0,900
,dvance 4eposit A 6re-6ayment E,109,000
Inallocated *evenue @%penditure 1,/0B,DC9
)losing 'tock <E,5C<,0E9
*aw materials 50,BC/,DCD
"inish +oods 1C,<01,/0E
Bills *eceivable <,<BB,50/
)ash A Bank Balance <BD,<C9
Total )urrent ,ssets %)?%(&?2)&
C$rre%t Lia(ilit)
=E
Bank 7verdraft 5<,D1E,55/
6rovision for Ta% /,/<B,150
'undry )reditors 159,<CD
O$tsta%#i%* Loa%
$ages 5E9,/00
'taff 'alary A ,llowance D/,B90
'howroom A 7ffice *ent 19/,900
@lectricity Bill C,B19
Telephone A "a% Bill 1C,/5/
,udit "ee 9,000
(eagal "ee 10,000
3&?'5)?&2&

),=)( ,./1!2-32,-

3.8ro!ita#ility
8et 6rofit 9,C//,D/9
,dd:Bank Interest A )harge <,1D9,5D5
,dd:4epreciation -,dmin2 /E,E0D
,dd:4epreciation -"actory2 <,B00,0D5
@BIT,4 14?&35?(((
'ales 4'?'&5?325

-@BIT,4='ales2T100 !14

1+
4."o<erage
@BIT,4 1<,E59,BBB
Interest="inancial )harge <,1D9,5D5

@BIT,4=Interest !.221.233-.
"R75=: R=0H GRA5=BG 0"2R7 0*77:

Re!erence Bo.+

5ate+
24>;l>)'
$orrower 9rnitec =ndstries 1td
Grop Bame 4i! any6 BIa Aggregate 0core+
&5
Branch: 6rincipal Branch
Industry='ector #anufacturing,Trading Risk
Grading+
Accepta#le
4ate of "inancials
50-Fun-0E
)ompleted by 'ayeed 'ikder, Internee
,pproved by abibur *ahman #olla, '67
Bm#er
Grading
0hort 0core
1
'uperior
'I6 "ully cash secured, secured by
government guarantee=international
bank guarantee
/
+ood
+4 D9G
5
,cceptable
,))6T E9-D<
<
#arginal=$atch list
#+=$( C9-E<
9
'pecial #ention
'# 99-C<
C
'ubstandard
'' <9-9<
E
4oubtful
4" 59-<<
D
Bad=(oss
B( L59
"riteria Weight 8arameter
0core Actal 8arameter 0core
10
2#tained
A. 9inancial Risk 5)G
1. 1e<erage+ 415G6 (ess than 0./9M
19 1.BB 1)
4ebt @quity *atio -M2 N Times 0./CM to 0.59 %
1<
Total (iabilities to Tangible 8et
worth
0.5CM to 0.90 %
15
0.91M to 0.E9 %
1/
,ll calculations should be based on 0.ECM to 1./9 %
11
annual financial statements of the 1./CM to /.00 %
10
borrower -audited preferred2 /.01M to /.90 %
D
/.91M to /.E9 %
E
#ore than /.E9M
0
2. 1iAidity+ 415G6 +reater than /.E<M
19 1.C0 12
)urrent *atio -M2 -Times /.90M to /.E< %
1<
)urrent ,ssets to )urrent (iabilities /.00M to /.<B %
15
1.90M to 1.BB %
1/
1.10M to 1.<B %
11
0.B0M to 1.0B %
10
0.D0M to 0.DB %
D
0.E0M to 0.EB %
E
(ess than 0.E0M
0
3. 8ro!ita#ility+ 415G6 +reater than /9O
19 50O 15
7perating 6rofit #argin -O2 /0O to /<O
1<
-7perating 6rofit='ales2 P 100 19O to 1BO
15
10O to 1<O
1/
EO to BO
10
1/
<O to CO
B
1O to 5O
E
(ess than 1O
0
4. "o<erage+ 45G6

Interest )overage *atio -M2 N
Times


@arning before interest A
ta% -@BIT2
#ore than /.00M
9 5.90 5
Interest on debt
#ore than 1.91M (ess than /.00M
<
#ore than 1./9M (ess than 1.90M
5
#ore than 1.00M (ess than 1./<M
/
(ess than 1.00M
0
:otal 0core> 9inancial Risk
5) 42


$. $sinessI =ndstry Risk 1'G

1. 0i3e o! $siness -in B4T crore2 Q C0.00
9 <.DD 2
50.00 N 9B.BB
<
The si&e of the borrowers business 10.00 N /B.BB
5
measured by the most recent
years
9.00 N B.BB
/
total sales. 6referably audited
numbers.
/.90 N <.BB
1
L /.90
0
2. Age o! $siness Q 10 Kears
5 < 1
Q 9 N 10 Kears
/
The number of years the borrower / N 9 Kears
1
engaged in the primary line of
business
L / Kears
0
3. $siness 2tlook "avorable
5 'table 2
1=
)ritical assesment of medium term 'table
/
prospects of industry, market share 'lightly Incertain
1
and economic factors. )ause for )oncern
0
4. =ndstry Growth 'trong -10OG2
5 +ood -Q9O N 10O2 2
+ood -Q9O N 10O2
/
#oderate -1O-9O2
1
8o +rowth -L1O2
0
5. Market "ompetition 4ominant 6layer
/ #oderately
)ompetitive
1
#oderately )ompetitive
1
ighly )ompetitive
0
%. 7ntryI7@it $arriers 4ifficult
/ 4ifficult 2
,verage
1
@asy
0
:otal 0core> $sinessI=ndstry
Risk

1' 1)


". Management Risk 12G

1. 7@perience #ore than 10 years in the related
line of business
9 1N9 years in the
related line of
business
2
Ruality of management based on
total
9N10 years in the related line of
business
5
S of years of e%perience of the
senior
1N9 years in the related line of
business
/
management in the Industry. 8o e%perience
0
2. 0econd 1ineI 0ccession *eady 'uccession
< *eady 'uccession 4
'uccession within 1-/ years
5
11
'uccession within /-5 years
/
'uccession in question
0
3. :eam Work ;ery +ood
5 ;ery +ood 3
#oderate
/
6oor
1
*egular )onflict
0
:otal 0core> Management Risk
12 (


5. 0ecrity Risk 1)G

1. 0ecrity "o<erage 48rimary6 "ully 6ledged
facilities=substantially cash covered
= *eg. #ortg. for B(
< *egistered
ypothecation -1st
)harge=1st 6ari passu
)harge2
3
*egistered ypothecation
-1
st
)harge=1st 6ari passu )harge2
5
/nd charge=Inferior charge
/
'imple hypothecation=8egative
lien on assets
1
8o security
0
2. "ollateral "o<erage 48roperty
1ocation6
*egistered #ortgage on #unicipal
corporation=6rime ,rea property
< *egistered #ortgage
on 6ourashava='emi-
Irban area property
3
*egistered #ortgage on
6ourashava='emi-Irban area
property
5
@quitable #ortgage or 8o property
but 6lant and #achinery as
collateral
/
8egative lien on collateral
1
8o collateral
0
3. 0pport 4Garantee6 6ersonal +uarantee with high net
worth or 'trong )orporate
+uarantee
/ 6ersonal +uarantee 2
1B
with high net worth or
'trong )orporate
+uarantee
6ersonal +uarantees or )orporate
+uarantee with average financial
strength
1
8o support=guarantee
0
:otal 0core> 0ecrity Risk
1) '
7. Relationship Risk 1)G

1. Accont "ondct #ore than 5 years ,ccounts with
faultless record
9 ,ccounts having
satisfactory dealings
with some late
payments.
2
(ess than 5 years ,ccounts with
faultless record
<
,ccounts having satisfactory
dealings with some late payments.
/
"requent 6ast dues A Irregular
dealings in account
0
2. Dtili3ation o! 1imit #ore than C0O
/ D0.00O 2
-actual=pro!ection2 <0O N C0O
1
(ess than <0O
0
3. "ompliance o! "o<enants I "ull )ompliance
/ "ull )ompliance 2
"onditions 'ome 8on-)ompliance
1
8o )ompliance
0
4. 8ersonal 5eposits 6ersonal accounts of the key
business 'ponsors= 6rincipals are
maintained in the bank, with
significant deposits
1 8o depository
relationship
)
8o depository relationship
0
:otal 0core> Relationship Risk
1) %
Grand :otal , All Risk
1)) &5
1,
"urnitec Industries is a manufacturing and Trading )ompany. Their need minimum paid
up )apital Tk.1 corer and 'ales minimum Tk. 90-E0 lac. But we consider about their
Business.
"ase>3 4 :hai 8oly 0hawn6
T,I 67(K ',$8
/00E /00C
,."I8,8)I,( *I'.
1.1e<erage
Lia(ilit)
I64) (oan C,C0C,D1/ B,5B<,<DC
'outh Bank (td -Term (oan2 /,<BD,C9C E,9/E,DD<
'outh Bank (td -7ther2 <B,<9C,/D< 95,09/,BBB
5'?5%1?&52 %(?(&5?3%(
C$rre%t Lia(ilit)
)reditors for @%penses /,DEE,11/ /,959,DE1
'undry )reditors 5,00<,500 1,1C9,D90
Bank 7verdraft -'@B(2 <,BD1,CBB 9,1E9,BEE
1)?'%3?111 '?'&&?%('
Total (iability %(?424?'%3 &'?'53?)%&
E+$it)
6aid up )apital 9,C00,000 9,C00,000
'hare money 4eposit 1D,/9/,/C< 1D,/9/,/C<
6rofit ,nd (oss ,=) 1,<DC,E99 BE9,5BD
Ta% olyday *eserve BBD,C59 C9E,E51
2%?33&?%54 25?4'5?3(3

1.
Total (iability= Total @quity 2./!2-230, !.1-313-3.2

2.1iAidity
C$rre%e Asset
)ash in and 9/,//C <D,55<
)ash in Bank 9,1BC,E9E C,EEE,B<D
(=) ,dvance 9B5,B0E /B0,511
'ecurity 4eposit 59<,C<0 59<,C<0
'tock and 'tores <C,5D9,/0/ 91,1/E,9<1
Bank +uarantee 1/<,190 C1,5C9
'alary ,dvance 1D0,BBD 1/9,1C<
Total )urrent ,ssets 52?''&?'') 5'?&'5?3)3
C$rre%t Lia(ilit)
)reditors for @%penses /,DEE,11/ /,959,DE1
'undry )reditors 5,00<,500 1,1C9,D90
Bank 7verdraft -'@B(2 <,BD1,CBB 9,1E9,BEE
1)?'%3?111 '?'&&?%('

),=)( 3../.202./ C.C/1CD51/1

3.8ro!ita#ility
Operatio% pro5it
8et 6rofit D9/,/C1 <E0,D19
,dd: 4epreciation BC,B5C 100,11<
,dd: "inancial )harge 9,D/<,B<B E,D<0,C99
1D
Interest on Term (oan -'@B(2 <50,EE5 1,CE5,1E5
Interest on (oan -I64)2 B/C,99D 1,D1C,E/B
Interest on 'hort Term (oan-'@B(2 5,<EC,/B0 5,0<C,05E
Interest on '@B( )=) ,=) 5<B,5EB C/B,C9B
Bank )harge A )ommission C<1,B<B CE9,09E
@BIT,4 C,EE<,1<C D,<11,9D<
'ales //B,CD1,5<< 5<D,<<1,5C1

-@BIT,4='ales2T100 !.114 /.<1O

<.)overage
@BIT4 C,EE<,1<C D,<11,9D<
Interest="inancial )harge 9,D/<,B<B E,D<0,C99

@BIT4= Interest ,.,/2-2!0 1.0E/D1C<B5
"R75=: R=0H GRA5=BG 0"2R7 0*77:

Re!erence Bo.+

5ate+
23>0ep>)&
$orrower :hai 8oly 0hawn 4$56 1td.
Grop Bame 4i! any6 Aggregate 0core+
&%
Branch: 6rincipal
Industry='ector #anufacturer of plastic based
packages wrapping
J
Accepta#le
4ate of "inancials
51.0D./00E
)ompleted by #d. abibur *ahman #ollah
,pproved by
Bm#er
Grading
0hort 0core
1E
1
'uperior
'I6 "ully cash secured, secured by government
guarantee=international bank guarantee
/
+ood
+4 D9G
5
,cceptable
,))6T E9-D<
<
#arginal=$atchlist
#+=$( C9-E<
9
'pecial #ention
'# 99-C<
C
'ubstandard
'' <9-9<
E
4oubtful
4" 59-<<
D
Bad=(oss
B( L59

"riteria
Weight
8arameter
0core Actal 8arameter 0core
2#tained
A. 9inancial Risk 5)G
1. 1e<erage+ 415G6 (ess than 0./9M
19 /.<C '
4ebt @quity *atio -M2 N Times 0./CM to 0.59 %
1<
Total (iabilities to Tangible 8et
worth
0.5CM to 0.90 %
15
0.91M to 0.E9 %
1/
,ll calculations should be based
on
0.ECM to 1./9 %
11
annula financial statements of the 1./CM to /.00 %
10
borrower -audited preferred2 /.01M to /.90 %
D
/.91M to /.E9 %
E
#ore than /.E9M
0
2. 1iAidity+ 415G6 +reater than /.E<M
19 <.DE 15
)urrent *atio -M2 -Times /.90M to /.E< %
1<
)urrent ,ssets to )urrent
(iabilities
/.00M to /.<B %
15
1.90M to 1.BB %
1/
B+
1.10M to 1.<B %
11
0.B0M to 1.0B %
10
0.D0M to 0.DB %
D
0.E0M to 0.EB %
E
(ess than 0.E0M
0
3. 8ro!ita#ility+ 415G6 +reater than /9O
19 5.00O &
7perating 6rofit #argin -O2 /0O to /<O
1<
-7perating 6rofit='ales2 P 100 19O to 1BO
15
10O to 1<O
1/
EO to BO
10
<O to CO
B
1O to 5O
E
(ess than 1O
0
4. "o<erage+ 45G6

Interest )overage *atio -M2 N
Times


@arning before interest A
ta% -@BIT2
#ore than /.00M
9 1.1C 2
Interest on debt
#ore than 1.91M (ess than /.00M
<
#ore than 1./9M (ess than 1.90M
5
#ore than 1.00M (ess than 1./<M
/
(ess than 1.00M
0
:otal 0core> 9inancial Risk
5) 32


$. $sinessI =ndstry Risk 1'G

1. 0i3e o! $siness -in B4T
crore2
Q C0.00
9 59.00 4
B0
50.00 N 9B.BB
<
The si&e of the borrowers
business
10.00 N /B.BB
5 'ales position as per
financial statement as of
51.0D.0E is Tk.//.BC crore.
$e assume that sales
position at the end of this
year will be more
than :k.35.)) crore. Their
last years sales was Tk.5<.D<
crore.

measured by the most recent
years
9.00 N B.BB
/
total sales. 6referably audited
numbers.
/.90 N <.BB
1
L /.90
0
2. Age o! $siness Q 10 Kears
5 10 3
Q 9 N 10 Kears
/
The number of years the borrower / N 9 Kears
1
engaged in the primary line of
business
L / Kears
0
3. $siness 2tlook "avorable
5 "avorable 3
)ritical assesment of medium term 'table
/
prospects of industry, market
share
'lightly Incertain
1
and economic factors. )ause for )oncern
0
4. =ndstry Growth 'trong -10OG2
5 'trong -10OG2 3
+ood -Q9O N 10O2
/
#oderate -1O-9O2
1
8o +rowth -L1O2
0
5. Market "ompetition 4ominant 6layer
/ 4ominant 6layer 2
#oderately )ompetitive
1
ighly )ompetitive
0
%. 7ntryI7@it $arriers 4ifficult
/ 4ifficult 2
,verage
1
B/
@asy
0
:otal 0core> $sinessI=ndstry
Risk

1' 1&


". Management Risk 12G

1. 7@perience #ore than 10 years in the related
line of business
9 #ore than 10 years in the
related line of business
5
Ruality of management based on
total
9N10 years in the related line of
business
5
S of years of e%perience of the
senior
1N9 years in the related line of
business
/
management in the Industry. 8o e%perience
0
2. 0econd 1ineI 0ccession *eady 'uccession
< *eady 'uccession 4
'uccession within 1-/ years
5
'uccession within /-5 years
/
'uccession in question
0
3. :eam Work ;ery +ood
5 ;ery +ood 3
#oderate
/
6oor
1
*egular )onflict
0
:otal 0core> Management Risk
12 12


5. 0ecrity Risk 1)G

1. 0ecrity "o<erage 48rimary6 "ully 6ledged facilities=substantially
cash covered = *eg. #ortg. for B(
< *egistered ypothecation
-1st )harge=1st 6ari passu
)harge2
3
*egistered ypothecation
-1
st
)harge=1st 6ari passu )harge2
5
/nd charge=Inferior charge
/
B=
'imple hypothecation=8egative lien
on assets
1
8o security
0
2. "ollateral "o<erage 48roperty
1ocation6
*egistered #ortgage on #unicipal
corporation=6rime ,rea property
< 8o collateral )
*egistered #ortgage on
6ourashava='emi-Irban area
property
5
@quitable #ortgage or 8o property
but 6lant and #achinery as
collateral
/
8egative lien on collateral
1
8o collateral
0
3. 0pport 4Garantee6 6ersonal +uarantee with high net
worth or 'trong )orporate
+uarantee
/ 6ersonal +uarantee with high
net worth or 'trong )orporate
+uarantee
2
6ersonal +uarantees or )orporate
+uarantee with average financial
strength
1
8o support=guarantee
0
:otal 0core> 0ecrity Risk
1) 5
7. Relationship Risk
1)G


1. Accont "ondct #ore than 5 years ,ccounts with
faultless record
9 #ore than 5 years ,ccounts
with faultless record
5
(ess than 5 years ,ccounts with
faultless record
<
,ccounts having satisfactory
dealings with some late payments.
/
"requent 6ast dues A Irregular
dealings in account
0
2. Dtili3ation o! 1imit #ore than C0O
/ QC0O 2
-actual=pro!ection2 <0O N C0O
1
(ess than <0O
0
3. "ompliance o! "o<enants I "ull )ompliance
/ "ull )ompliance 2
"onditions 'ome 8on-)ompliance
1
B1
8o )ompliance
0
4. 8ersonal 5eposits 6ersonal accounts of the key
business 'ponsors= 6rincipals are
maintained in the bank, with
significant deposits
1 6ersonal accounts of the key
business 'ponsors=
6rincipals are maintained in
the bank, with significant
deposits
1
8o depository relationship
0
:otal 0core> Relationship Risk
1) 1)
Grand :otal , All Risk
1)) &%
Thus way I had calculated various types of clients )*+ with financial statements and to
gather practical e%perience.
'onali Bank
BB
"apital strctre 45isclosre on Risk $ased "apital? 5ec 2)126


Calitati<e 5isclosres
)ore capital of 'onali Bank (imited comprises of fully paid up capital against
ordinary shares, statutory reserve and general reserve created out of profit,
retained earning etc, and supplementary capital include +eneral provision A
assets revaluation reserve. @ligible )apital of 'onali Bank (imited on the basis of
,udited Balance 'heet of 51
st
4ecember /01/ has been calculated as per Basel-
II guidelines as shown below.




Cantitati<e 5isclosres


-b2
@ligible )apital
-Tk. in )rore2

Tier-1 )apital:
-I2 6aid up )apital 11/9.00
-II2 'tatutory *eserve 9B/.<B
-III2 +eneral *eserve <.E0
-I;2 *etained @arnings -1DE5.D9
Total Tier-1 )apital -191.CC
B,
-c2 Total Tier-/ )apital. 1<E5.B5
-d2 4eductions from )apital. 1D/.D9
-e2 Total eligible )apital.-b-d2 -55<.91


4.3 "apital AdeAacy 45isclosre on Risk $ased "apital? 5ec 2)126


Calitati<e 5isclosres
'onali Bank (imited is very much aware of maintaining )apital to support its
current and future activities. , three year capital growth plan up to /019 has also
been prepared. The government -owner of the bank2 has been approach to
provide additional capital amounting to Tk. 55E9.00 crore to meet the capital
requirement of the bank.

Cantitati<e 5isclosres
-Tk. in )rore2
)apital *equirement for )redit *isk /D/5.11
)apital *equirement for #arket *isk /DE.0/
)apital *equirement for 7perational
*isk
<50.95
)apital ,dequacy *atio -),*2 -0.B<
Tier-1 )apital to *$, -0.B<
B.






4.4 "redit Risk 45isclosre on Risk $ased "apital? 5ec 2)126


Calitati<e 5isclosres
'onali Bank (imited has its own )redit *isk #anagement guideline in terms of
)ore *isks #anagement guidelines of Bangladesh Bank. The Bank also follows
other instructions=guidelines of Bangladesh Bank in this regard.
'onali Bank (imited constantly monitors, reviews and analyses its credit portfolio
with a view to improving ability of credit portfolio, minimi&ing potential losses and
ensuring efficient credit process.
To manage the 8on-6erforming (oans -86(2, 'onali Bank (imited has a
comprehensive remedial management policy, which includes a framework of
controls to identify weak credits and monitoring of these accounts constantly.


Cantitati<e 5isclosres
Total gross credit risk e%posures broken down by ma!or types of credit
e%posure.
$alance 0heet 7@posres -as per ,udited Balance 'heet2
12 )ash
B4T
-in )rore2


C0/.19
BD
/2 )laims on Bangladesh +overnment and BB 11BC<.1D
52 )laims on 6ublic 'ector @ntities -7ther than +overnment2 in
Bangladesh
E<09.5C
<2 )laims on Banks A 8B"Is <1<B.99
92 )laims on )orporate 9DC1.<D
C2 )laims under )redit *isk #itigation 1/CD./1
E2 )laims categori&ed as retail portfolio A '#@ 5E5<./B
D2 )onsumer "inance <0/.EC
B2 )laims fully secured by residential property 5/.9<
102 6ast 4ue )laims -*isk weights are to be assigned net of specific
provision2
9D//.</
112 Inlisted equity investments and regulatory capital instruments
issued by other banks -other than those deducted from capital2 held in
banking book
99D.5E
1/2 Investments in premises, plant and equipment and all other fi%ed
assets
/51/./<
152 ,ll other assets 1ED/D.<E
2!!>$alance 0heet 7@posre
12 )laims on Bangladesh +overnment and Bangladesh Bank


BE
D99.C0
/2 )laims on 6ublic 'ector @ntities - 7ther than +overnment2 in
Bangladesh
/B10.<0
52 )laims on Banks A 8B"Is /<.00
<2 )laims on )orporate //5.D0
92 )laims against retail portfolio A '#@ </9.05
Industry or counterparty type distribution of e%posures, broken down
by ma!or types of credit e%posure.

12 ,gricultural = *ural )redit /B/E.B0
/2 #icro )redit BD/.0<
52 Industrial )redit D//1.9/
<2 ,gro-based Industrial )redit /5<<.CB
92 International Trade 1<00<.5E
C2 '#@ "inance /B5.0B
E2 +eneral ,dvance A 7thers B0<1.10
*esidual contractual maturity breakdown of the whole portfolio, broken
down by ma!or types of credit e%posure.

,+
1oans and Ad<ances
7n demand 5950.B/
8ot more than 5 months B0/.0/
#ore than 5 months but not more than 1 year 1911E.01
#ore than 1 year but not more than 9 years <0C0.E/
#ore than 9 years 10///.CC
$ills prchased and disconted
8ot more than 1 month 509C.90
#ore than 1 month but not more than 5 months /CC.51
#ore than 5 months but not more than C months </C.19
#ore than C months /5/.</
+ross 8on 6erforming ,ssets -86,s2
8on-6erforming ,ssets -86,s2 to 7utstanding (oans A advances
Mo<ement o! Bon>8er!orming Assets 4B8As6 4(oans A advances2

7pening balance CC0E.95
,0
,dditions E<9B.D1
*eductions D<C.D<
)losing balance 15//0.90




Mo<ement o! speci!ic pro<isions !or B8As -(oans A advances2
B4T
-in )rore2
7pening balance 5E9C.EE
(ess: (oans written off which fully 6rovided for B0.B/
,dd: *ecovery (oans which was written off earlier -
,dd: 'pecific 6rovisions made during the year 5E01.CE
)losing balance E5CE.9/


4.5 0orces o! "redit =n<estigation
The following are the sources of credit information
(oan application
,/
"inancial statements -profit and loss account, Balance sheet, cash
flow statement2.
'tudy of accounts
#arket reputation
)*+
*eport from )IB
6ersonal interview
6ersonal visit
7ther sources, i.e.
H Income ta% statement
H *egistration office
H 6ress report
H *evenue and municipal rent receipt register of !oint stock
company
H ;,T return
H )onfidential report from fellow banks.


4.% 9or in<estigation the manager ha<e to enAiry a#ot
$ho is the borrowerU
8ature of business
(ocation= site of the business
(iving standard =living style of the Borrower
@%perience in the business
@quity in the business
6urpose of borrowing
4uration of loan
'ources of repayment
#eans and security offered
6hysical verification of security
6rofitability of the transaction
istory of accounts operated by borrower
#arket reputation regarding character, honesty, integrity etc.


,=
4.& "redit Risk Assessment
, through credit risk assessment should be conducted prior to the sanctioning of
credit facilities. They must conduct necessary .K) -.now Kour )ustomer2 part
on the customer and money laundering guidelines must be followed.
"ollowing risk areas in the credit proposal should be addressed and assessed
before sending to ead 7ffice.
1. Borrower ,nalysis:
a. 'hare holding
b. *eputation
c. @ducation
d. @%perience N success history
e. 8et worth
f. ,ge etc.
/. Industry ,nalysis:
a. Industry 6osition=Threat=6rospect.
b. *isk factors pertaining to the industry.
c. Borrower3s position = share in the industry.
d. 'trength, weakness of the borrower compared to the competitors etc.
5. 'upplier= Buyer *isk ,nalysis
)oncentration on single=few buyer=supplier is addressed.
<. 4emand 'upply position
9. Technical feasibilities = Infrastructural facilities
C. #anagement Teams )ompetence
E. 'easonality of demand
D. 4ebt to equity *atio
B. istorical financial analysis:
,1
a. ,n analysis of 5 years historical financial statements.
b. @arning N its sustainability.
c. )ash flow
d. (everage
e. 6rofitability
f. 'trength and reliability of Balance 'heet etc.
10. 6ro!ected "inancials:
a. 'ufficiency of cash flows to service debt repayment.
b. 4ebt 'ervice )overage *atio.
11. Trade )hecking:
1/. ,ccount conduct:
a. "or e%isting customer the repayment history, credit turnover, study of
account statement
b. If the customer is proposed to be migrated from other Bank,
statement of account from present Banker is required
,llied deposit with our Bank.
7ther business with our Bank.
15. 'ecurity:
a. , current valuation of collateral security by 6rofessional @nlisted
'urveyor be obtained with photograph and site map. )ollaterals within
command area of the respective branch location are preferred. Third 6arty
property and vacant land should be discouraged.
b. (oans should not be considered based solely on collateral.
c. ,dequacy and e%tent of Insurance coverage should be assessed.
Insurance 6olicy should be obtained from approved Insurance )ompany.
6remium should be paid through Bank, duly stamped money receipt be
obtained. Insurance 6olicy be held by the Bank. The 6olicy be renewed in
time. (etter of authority be obtained from the customer to debit account to
pay premium for renewal=enhancement of the policy.
,B
1<. 'uccession issue:
#argin, volatility of business, high debt -(everage = gearing2, over
stocking, huge receivables with long aging, rapid e%pansion, new business
line, management change, lack of transparency should be addressed.
19. ,dherence to credit guidelines:
a. It should be clarified whether the customer is agreeable to comply with
guidelines in respect of regulatory requirement and Bank3s policy
requirement.
b. ,ny deviation be clearly identified and maintained.
1C. #itigating "actors:
a. *isk factors be identified and side by side mitigating factors of
those risks should also be mentioned to !ustify the proposed facility.
1E. @nvironmental factor.
1D. @mployment generation and contribution to the national economy.


4.' 8reparation o! credit report
7n the basis of investigation the branch manager will prepare a credit report as
per format provided by their head office.
,fter preparing credit report banks ask for loan documentation.


4.( 1oan docmentation


4.(.1 What is docmentation?
,s other commercial banks one of the main functions of 'onali bank is to e%tend
credit facilities of its valued customers. The credit facilities are given against
varies types of securities. These are mainly:
,,
6ersonal i.e. credit worthiness of the proposed borrower and guarantor.
#oveable i.e. "4*, shanchaypattra goods and commodities balance of
deposit ,=) etc.
Immoveable i.e. land building etc.
Before rendering credit facilities bank has to create charge over the securities
through a number of agreements .papers etc. which are called documents.


4.(.2 8rpose o! docment
The entire purpose of the document is that reliance can be place up on the truth
of the statement contains in them. #ainly three questions may be e%amined
when document is produced in the court. These are:
Is the document genuineU
$hat is it3s containU
,re the statements in the document trueU
The documents should correctly be taken by the bank in order to crate required
charges on the securities defectively in favour of the bank the proper and correct
documentation is essential from the point of view of the safety of the banks
interest.


4.(.3 0teps o! the docmentation
"or proper and correct documentation a banker has to go through the following
steps:
12 6repare a list of require document
/2 ;erify the legal capacity of the e%ecutor
52 ,ffi% properly valued adhesive stamp or type on a duly stamped paper
<2 @%ecution
V In presence of manager
V In one sitting and with indelible ink
,.
V ,ny correction altercation etc. must be authenticated with full
signature
V )orrectly dated
V If several pages e%ecution must put their full signature in all pages
V $itness
92 *egistration.


4.1) 1oan classi!ication
#onitoring can be done through loan classification. (oan is mainly classified to
understand that which loan account are performing well -regularly interest
payment, timely repayment, and timely renewal etc.2 and which are not. In
classifying the loan and advance there are two classes in the loan review
practiced in 'B(. They are as follows as the table.
4.1).1 Dnclassi!ied
The loan account is performing satisfactory in the terms if its instalment and no
overdue is occurred.
4.1).2 "lassi!ied
The loan account is not performing satisfactory in the terms of instalments and
overdue is occurred. These types of loan need close monitoring to stop the
deteriorating position.
,2 'ubstandard
The main criteria for a substandard advance are that despite these
technicalities or irregularities no loss is e%pected to be arise for the bank.
These accounts will require close supervision by management to ensure
that he situation does not deteriorate further.
B2 4oubtful
This classification contains where doubt e%ists on the fully recovery of the
loan or advance but cannot quantifiable at this stage.
)2 Bad A (oss
,D
, particular loan or advance fall in this class when it seems that this loan or
advance is not collectable or worthless even after all security has been
e%hausted.
In the following table the criteria to be fall in classified category are summari&ed:
'ubstandard 4oubtful Bad A (oss
5 months and above but
less than C month.
C month and above but
less than 1/ month.
8ot recover within more
than 1/ months.
,E
"redit 2perations in ;amna $ank 1td+
)redit operation is the vital part of a Bank. ,t first the customer approach to Branch
accordingly branch sends proposal to #ead 7ffice and by analy&ing the proposal makes
the decision. Famuna Bank (imited has a sound credit operation system, detail of which
described as under:
2rgani3ational 0trctre !or "redit 2perations+
FB( has a suitable organi&ational structure for credit operations. The credit organogram of
the bank has been structured in the following manner:
.+
=n case o! 1I" proposal+
H 6erformance of (=) during the last year i.e. 8o. A 4ate of (=)
opened:
H )ommodity?
H (=) value?
H 4ate of creation of 6,4?
H 4ate of retirement?
H #ode of retirement etc.
=n case o! $:$ 1I" proposal+
H 4etailed list of machinery?
H 6roduction capacity?
H $orking )apital -BTB (=)2 ,ssessment? !
H @%isting @%port (=) in hand mentioning date of shipment? !
H 4etailed position of outstanding BTB (=)=,ccepted Bills? !
H 6rogress of production and e%pected date of shipment?
H 'tatement of 7utstanding "4B6=I4B6, if any.
.0
H Ruota 6osition?
H Inspection *eport?
H )opy of ;alid Bonded $are ouse (icense?
H )ustoms )learance of dispute, if any
H $hether the applicant is 4irector of FB( as per definition of Banking )ompany ,ct.
"inancial ,nalysis to be prepared by the Branch #anager based on the financial
statement with trends etc. It should ago contain an assessment of the competence and
quality of he business management, the general economic and competitive environment
of the borrowers industry and any other pertinent factors relevant for credit decision.
"redit 8rincipal o! ;$1
The Bank shall provide suitable credit services mid products for the market in which it
operates. 6roduct innovation shall be a continuous process. B( miles the understated
credit principle for considering potential credit proposal
H (oans and advances shall normally be financed from customers deposit and not out
of temporary fund or borrowing from money market.
H )redit facilities shall be allowed in a manner so that credit e%pansion goes on
ensuring quality i.e. no compromise with the Bank s standard of e%cellence. )redit is
e%tend to customers who will complement such standards.
H ,ll credit e%tension must comply with the requirements of Banks #emorandum and
,rticles of ,ssociation, Bank companies ,ct as amended from time to time, Bangladesh
Banks instructions )irculars, +uidelines and other applicable laws, rules and regulations.
H The conduct of the credit portfolio should contribute, within defined risk. (imitation,
to the achievement of profitable growth and superior return on the Banks capital.
H )redit advancement shall focus on tine development and enhancement of
customers relationship and shall be measured on the basis of the total yield for each
relationship with a customer -on the global basis2, though individual transactions should
also be profitable.
H )redit facilities will be e%tended to those compares=persons, which can make best
use of the facility thus helping ma%imi&e our profit as well is economic growth of the
country. To ensure achievement of this ob!ective lending decision shall be based mainly
on the borrowers ability to repay.
The portfolio shall be well diversified sector wise, Industry wise, geographical area wise,
maturity wise, si&e wise, mode wise, purpose wise. )oncentration of credit shall be
carefully avoided to minim risk.
./
If )redit facilities are granted on a trisection one-off basis, the yield from the facility
should be commensurate with the - risk 6ricing of )redits shall depend on the level of risk
and type of securities offered. *ate of interest is the reflection of risk in the Transaction.
The higher the risk, the higher is pricing. Interest rate may be revised from time at time in
view of the change it? the cost of "und and market condition. @ffective yield can be
enhanced by requiring the customer to maintain deposit to support borrowing flutings.
Kield may be further improved by reali&ing #anagement fee, )ommitment fee service
charge etc where possible.
T 6roper staffing: 6roper analysis of )redit proposal is comple% and required high level of
numerical as well as analytical ability and common sense. To ensure effective
understanding of the concept and thus to make the overall credit port-folio of the Bank
healthy, proper staffing shall be made through placement of qualified officials having
appropriate background, who have got the right aptitude, formal training in )redit *isk
,nalysis, Banks credit procedures as well as required e%perience
"redit "ategories in ;amna $ank 1td+
Famuna Bank (imited has broadly three categories of loan facilities, these are )ontinuous
credit, "i%ed term loan and 4emand loan. "i%ed term loan are divided into three parts
based on loan tenor. The? categori&ation is shown below:
(oan and advances have primarily been divided into three ma!or groups as under:

:erm 1oans !or 1arge F Medim 0cale =ndstries+
W(arge IndustryX is defined to include all industrial enterprises whose total fi%ed costY
replacement cost e%cluding land an factor building is over Tk.100 million. #ed Industry is
defined to include all industrial enterprises whose total fi%ed cost replacement cost
e%cluding value of land and facto: y building is between Tk.19 million of Tk.100 million.
.=
This category of advances accommodate the medium and long term financing for
acquiring capital machinery of new Industries or for B# U@ of the e%isting units who are
engaged in manufacturing goods and services.
Term financing to tea gardens may included in this category depending on the nature and
si&e.
,s the financing under this category have fi%ed repayment schedule it under the head
W(oan -+en2=ire-6urchase=(ease.
:erm 1oans to 0mall F "ottage =ndstries+
W'mall IndustryX will mean enterpriser whose total fi%ed cost= replacement cost e%cluding
land and factory building is not more than Tk.19 million.
8o short term or continuing credits are to by included in this category. #edium A term
credits arc also included under the category.
(ike the (arge A #edium 'cale Industry it is also allowed in the form of W(oan -+en2Yire
6urchase= (ease "inancingX.
Working "apital+
(oans A ,dvances are allowed to the manufacturing units to meet their working capital
requirements, irrespective of their si&e N big, medium or small, fall under the category.
These are usually continuing credits are as such fall under the head W)ash )reditX.
7@port credit +
)redit facilities allowed to facilitate e%port of ill items against (etter of )redit and=or
confirmed e%port orders fall under this category. It is accommodated under the heads
W@%port )ash )redit -@))2X, 6acking )redit -6)2, "oreign 4ocumentary Bills 6urchased
-"4B62, (ocal @%port Bills 6urchased etc. owever, bills discounted= purchased against
supply of goods and services to companies= industries which are located in the country
and not involved in e%port= deemed e%port shall not fill under e%port credit.
'hort term loans and continuing creeps inflows for commercial purposes other that
e%ports fall under this category. It incipit (imner financing, financing for internal trade.
'ervice establishment, etc. 8o medium and long term loans are accommodated here.
This category of advances are allowed in the for of -+en2, etc. for commercial purposes.
,ny loan that does net fall in any of the above categories is considered under the
category W7thersX. It includes loan to FB( has separate '#@ "inancing 'cheme duly
approved by tic oard. There are several products, modalities and loan ceiling for '#@
financing. '#@ )e witling )orporate 4ivision handles '#@ loans.
.1
Analysis
5eposits F 5eposit+ Mi@+
In commercial Bank operation starts with mobili&ation of resources i.e. tapping of deposits
and then the same are deployed as loans, advancesA. investment for the purpose of
ma%imi&ing wealth. Thus, cenobite is the lifeblood of a bank.
In keeping with this a%iom FB( attaches utmost importance to the deposit mobili&ation
campaign and to the optimal dine-sit rid for minimum cost of fund as far as practicable.
:he comparati<e position o! 5eposits F 5eposit Mi@ o! the $ank !or the last two
years are depicted #elow+
T7T,( 4@67'IT' Z ['ource: ,nnual *eport, Famuna Bank (td.
Inder the prevailing stiffly competitive market FB( has been able to install confidence
customers as to its commitment to depositorde could mobili&e a total deposit of Tk
Tk./0B/<.0/ million showing an increase of T..C5D5.B/ million being 5+.99 percent.
"ost o! 9nds 45eposit "ost F 2<erhead "ost+
The )ost of "unds of FB( in /00E was 1/.<BO, which was /00EDwas 1/./CO, 1/.1DO in
/00C. 'o, it is noted that in /00B the cost of funds was big higher than that of /00CEA
/00D.
1oans F Ad<ances+
Inder favorable business environment due to political turmoil throughout the FB( was in
constant efforts to e%plore different areas of credit operation and could raise the loans
and advances portfolios to Tk. /105C.DC million in /00DBwith an increase Tk.<<1B.<1
million being /C.9BO, over that of the preceding year.
"lassi!ied 1oans F Ad<ance+
7ver the last couple of years the *atio of )lassified (oans A ,dvances out of Total (oans
A ,dvances has been increased alarmingly year /00C and year /00E with respect to than
that of the previous years, but in /00D it declined substantially.
=n<estment+
FB(s investment portfolio as on 51=,/=/00Bwas Tk.</5D.C5 million from which Tk.95B0.05
million as on 51=1/=/00D registering a decrease of Tk. 1191.<0 million i.e. /1.5C percent.
The investment portfolio was blended with +ovt. investment of Tk.<1D9.<C million,
Treasury Bonds of Tk./B59.9< million, investment in 6rimary 'hares and \ero )oupon
Bonds of Tk.<5.C1 million. Its investment was made in acquisition of 6reference 'ilages
of Tk./.90 -9.00-/.902 million of ,fter ,utomobiles (td. Besides, Tk./.00 million has been
invested in acquisition of two shares of )entral 4eponent= Bangladesh (td. -)4B(2. The
.B
Bank s ma!or portion of investment in +ovt. Treasury Bills and Bonds for the purpose of
fulfilling 'tatutory (iquidity *equirement -'(*2. X
.,