ReportBD.

Com: Website for Students & Educators

• Home
• Contact Us
• Site Map
Search
Top of Form

Advanced Search
Bottom of Form
• Home

• Report, Assignment, Case Study and Term Paper

• Lending Risk Analysis LRA, Securities & documentation

Lending Risk Analysis LRA, Securities & documentation

• By Super Admin

• Published 26 October 2007

• Report, Assignment, Case Study and Term Paper

• Unrated

Lending Risk Analysis (LRA), Nature of Securities & Charging, Necessary Documents

LENDING RISK ANALYSIS (LRA):

Lending Risk Analysis (LRA) is a technique by which the risk of the loan is calculated. Banker must analyze
LRA when loan application is above 1 crore. This analysis is done by experienced people of Credit
department of a bank. It is a ranking whose total score is 140. Among this score, 120 is for Total Business
Risk and 20 for Total Security Risk.

? In case of business risk, if the score falls ---------

“Between” 13-19, then-------Poor risk
“Between” 20-26, then -----Acceptable risk
“Between” 27-34, then-----Marginal risk
Over 34, then ------------- Good risk.

? In case of security risk, if the score fall --------

“Between” 0 to 10 then ------------Poor risk
“Between” 10 to 14, then -------- Acceptable risk
“Between” 14 to 20, then --------Marginal risk
Over 20, then ----------------------Good risk.

In LRA, following aspects are analyzed:

1) Supplies risk
2) Sales risk
3) Performance risk
4) Resilience risk
5) Management ability.
6) Level of Managerial teamwork
7) Management competent risk
8) Management integrity risk
9) Security control risk
10) Security covers risk.

SECURITIES:
Bank charges the following two types of security:
1. Primary security
2. Collateral security.

MODES OF CHARGING SECURITY:

Common methods of charging security:
? Lien
? Assignment
? Set off
? Pledge
? Hypothecation
? Mortgage

Nature of security and way of charging:

Nature of security Way of charging

Cash, Cash collateral and Documents of
title to goods
Moveable stock of raw materials,
finished goods, merchandise.
Immovable property
Intangible assets (Goodwill)
Lien, Assignment
Pledge, Hypothecation
Simple/legal/registered and equitable
mortgage
Execution of personal guarantee and
Letter of Trust Receipt.

DOCUMENT AND DOCUMENTATION:

A document is a written statement of facts of proof or evidence arising out of particular transaction which
placement may bind the parties there to answerable and liable to the court of law for satisfaction of the
change in question. The execution of documents in proper form and according to the law is known as
documentation.

Steps in documentation:
o Obtaining the documents.
o Stamping (Stamp Act-1899)
o Witnessing.
o Execution of Documents.
o Registration of Documents (assignment on the body of an insurance Policy, Mortgage deed, Advance to a
limited company etc.)

Common Compulsory Documents:

o Letter of Acceptance about the terms and conditions laid down in Sanction Advice.
o D.P. Note (Depending on the types of borrowers)
o Letter of Arrangement.
Besides, there are other documents that are to be obtained depending on the types of Advance. Such as-

? In case of loan:
1. Letter of Disbursement.
2. Letter of Authority (if required)
3. Letter of Hypothecation (when goods are hypothecated as security)
4. Insurance Policy (if required).
5. Any other document as stated in Sanction Advice.

? In case of overdraft:
1. Letter of Continuity.
2. Letter of Authority (if required)
3. Letter of Hypothecation (when goods are hypothecated as security)
4. Insurance Policy (if required)
5. Any other document as stated in Sanction Advice.

? In case of cash credit:

1. Letter of Continuity.
2. Letter of Authority (if required)
3. Letter of Pledge/Hypothecation.
4. Insurance Policy under Bank’s Mortgage clause.
5. Letter of disbursement incase of renewed godown.
6. Any other document as stated in Sanction Advice.

? Advance against lien of FDR/ Insurance Policy etc:

1. Letter of Lien (1st party/ 3rd party)
2. Letter of Authority (if required)
3. Any other document as stated in Vehicles (in a separate form)

? Transport Loan:
1. Letter of hypothecation of vehicles (in separate form)
2. Photocopy of blue book
3. Photocopy of rote permit
4. Insurance policy under Bank’s mortgage clause
5. Any other documents stated in Sanction Advice

? Legal Mortgage:
1. Mortgage deed (certified copy)
2. Registration receipt in
3. Chain of documents for title (original if available)
4. C.S, S.A and R.S parcha
5. Up to date Rent Receipt
6. Non-encumbrance certificate
7. Power of Attorney (if asked for)
8. Legal opinion
9. Valuation Certificate
10. Location plan etc./Site plan etc

? Equitable mortgage:
1. Chain of documents for title
2. original title deed
3. C.S, S.A and R.S parcha
4. Up to date Rent Receipt
5. Memorandum of deposit of title deed
6. Registered power of Attorney
7. Legal opinion
8. Valuation Certificate
 9. Location plan etc
10. Non-encumbrance Certificate

Super Admin

View all articles by Super Admin

Spread The Word

• del.icio.us it
• Digg this
• Furl
• Reddit
• Yahoo! this!
• StumbleUpon
• Google Bookmarks
• Live Favorites
• Technorati

Comments

Top of Form

Rate this article and leave a reply:

Rating: *
Poor Excellent

Your Name *: Email (private) *: Website:

Please copy the characters from the image below into the text field below. Doing this helps us prevent
automated submissions.

Security Code:

Submit

Bottom of Form
 Categories
• Report, Assignment, Case Study and Term Paper
• Internship Report
• Annual Reports
• Education Softwares
• Articles-Bangladesh
• Articles-Other

Site Menu
• View Blogs
• View Authors
• Become an Author
• Account Login

Article Options
• Email to Friend
• Add to Favorites
• Add to 'Articles to Read'

You Recently Viewed...

• Lending Risk Analysis LRA, Securities & documentation
Popular Authors
• Super Admin
• Mominur Rahman
• Hasan Mahmud
• Abu Zafour
• Yasir Farabi
• shofiq uddin khan
• Hosney Mobarak
• atm adnan
• Ashraful Rasel
• Md. Mostafizur Rahman

Popular Articles
• Private Bank Credit Risk Management Policy With Bangladesh Bank - Dhaka Bank Limited
• Foreign Exchange Business L/C of the Prime Bank Limited
• HRM practice of SQUARE
• The analysis of financial performance of BOC Bangladesh Limited (Bangladesh Oxygen Limited)
• The role of various cost concepts in decision making process

Copyright 2010 ReportBD.Com: Website for Students & Educators All rights reserved. Privacy Policy
Provides Free Project Paper, Internship Report, Annual Report, Case Analysis, Financial Software Written by Students of
Public and Private Universities of Bangladesh. DISCLAIMER: The creator of this page takes no responsibility for the way
you use the information provided on this site. The contents provided here are only for educational assistance & private
purposes.