Final Report-Ific Bank

7/30/2019 Final Report-Ific Bank

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CHAPTER ONE

Institutional Overview

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1.1 HISTORICAL BACKGROUND OF IFIC BANK LTD.

International Finance Investment and Commerce Bank Limited (IFIC Bank) is banking

company incorporated in the Peoples Republic of Bangladesh with limited liability. It wasset up at the instance of the Government in 1976 as a joint venture between the Government

of Bangladesh and sponsors in the private sector with the objective of working as a finance c

company within the country and setting up joint venture banks/financial institutions aboard.

In 1983 when the Government allowed banks in the private sector, IFIC was converted into a

full fledged commercial bank. The Government of the Peoples Republic of Bangladesh now

holds 32.75% of the share capital of the Bank. The Government of the Peoples Republic of

Bangladesh now holds 32.75% of the share capital of the Bank. Directors and Sponsors

having vast experience in the field of trade and commerce own 11.42% of the share capital

and the rest is held by the general public.

1.2 MISSION OF IFIC BANK LTD.

The mission of IFIC Bank LTD. is to provide service to our clients with the help of a skilled

and dedicated workforce whose creative talents, innovative actions and competitive edge

make our position unique in giving quality service to all institutions and individuals that we

care for.

We are committed to the welfare and economic prosperity of the people and the community,

for we drive from them our inspiration and drive for onward progress to prosperity.

We want to be the leader among banks in Bangladesh and make our indelible mark as an

active partner in regional banking operating beyond the national boundary.

In an intensely competitive and complex financial and business environment, we particularly

focus on growth and profitability of all concerned.

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1.3 IFIC BANK ATA A GLANCE

1.4 JOINT VENTURES ABROAD

Bank of Maldives Limited

IFIC is the first among the banks in the private sector to have operations abroad. In 1983, the

Bank set up a joint venture bank in Maldives known as 'Bank of Maldives Limited' (BML) at

the request of the Government of the Republic of Maldives. This is the only national bank in

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Key Points Particulars

Name of the Bank International Finance Investment & Commerce Bank

Ltd.

Head officesDhaka

Date of incorporation June 24,1983

Branch 69 Domestics & 4 Affiliates

Board of Directors 13 executing members including chairman & managing

director.

Total Manpower 1997

Earning Per Share 43.32-(TK)

Total Assets 110,437

Capital Authorized capital Tk. 500 million, paid up capitalPaid up capital Tk.406.44 million

Customers 200,000


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that country having branches throughout that country. IFIC Bank managed the affairs of

BML from 1983 to 1992. IFIC Bank sold its shares in 1992 to the Government of the

Republic of Maldives and handed over the Management of BML to Maldives Government.

NIB Bank Ltd., Pakistan:

IFIC Bank had two branches in Pakistan, one in Karachi and the other in Lahore. Karachi

Branch was opened on 26th April 1987, while Lahore Branch was opened on 23rd December

1993.

To meet the Minimum Capital Requirement (MCR) of the State Bank of Pakistan, the

Overseas Branches in Pakistan have been amalgamated with a reputed leasing company in

Pakistan named National Development Leasing Corporation Ltd. Therefore, the existence of

our above Overseas Branches has ceased w.e.f. 2nd October 2003 and a new joint venture

bank entitled NDLC - IFIC Bank Ltd. emerged in Pakistan w.e.f. 3rd October 2003. The

Bank was subsequently renamed as NIB Bank Ltd. IFIC Bank presently holds 7.31% equity

in the Bank.

Nepal Bangladesh Bank Ltd. (NB Bank)

Nepal Bangladesh Bank Ltd. (NB Bank), a joint venture commercial bank between IFIC

Bank Ltd. and Nepal nationals, started operation with effect from June 06, 1994 in Nepal

with 50% equity from IFIC Bank Ltd.

The Bank has so far opened 17 (seventeen) branches at different important locations in

Nepal. IFIC Bank presently holds 25% shares in NB Bank.

Nepal Bangladesh Finance & Leasing Limited (NB Finance):

Nepal Bangladesh Finance & Leasing Co. Ltd. (subsequently renamed as Nepal Bangladesh

Finance & Leasing Ltd.), another joint venture leasing company between IFIC Bank Ltd. and

Nepali Nationals, started its operation on April 18, 1999 in Nepal. IFIC Bank presently holds

15% share in the company.

Oman International Exchange LLC (OIE)

Oman International Exchange LLC (OIE), a joint venture between IFIC Bank Limited and

Oman nationals, was established in 1985 to facilitate remittance by Bangladeshi wage

earners in Oman. IFIC Bank holds 25% shares, and the balance 75% is held by the Omani

sponsors. The exchange company has a network of 10 branches covering all the major

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cities/towns of Oman. The operations of the branches are fully computerized having online

system.

The affairs and business of the company is run and managed by the Bank under a

Management Contract.

1.5 BOARD OF DIRECTORS

Unlike other banks in the private sector, Board of Directors of the Bank is a unique

combination of both private and Government sector experience. Currently it consists of 13

directories. Of them Eight represent the sponsors and general public and four senior officials

in the rank and status of Joint Secretary/Additional Secretary reprent the Government

Managing Director s the ex-office Director of the board

01 Mr. Mohammad Lutfar Rahman Chairman

02 Mr. Abu Tahir Mohammad Golam Maruf Director

03 Mr. Aminur Rahman Director

04 Mr. Syed Anisul Huq Director

05 Mr. Mohammed Nayem Syed Director

06 Mr. S.M. Faruqi Hasan Director

07 Mr. Tanim Noman Sattar Director

08 Mr. Mahmudul Huq Bhuiyan Director

09 Mr. Arastoo Khan Director

10 Mr. Syed Monjurul Islam Director

11 Mr. Mohammad Ali Khan, ndc. Director

12 Mr. Mosharraf Hossain Managing Director

1.6 PROGRESS REPORT OF IFIC BANK LTD.

Progress report of IFIC Bank Ltd. For the five years is given below.

PARTICULARS 2003 2004 2005 2006 2007

Authorized capital 500.00 500.00 500.00 500.00 500.00

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Paid up capital 406.39 406.39 406.44 406.39 670.72

Total capital 1536.89 1608.8 1754.41 2028.89 3045.09

Deposit 19799.33 20774.49 22505.1

7

28620.91 29900.05

Credit 17312.79 18189.70 19502.7

0

25490.66 28361.46

Total loans & advances 1491.70 1623.45 2169.49 2549.07 2836.15

Total income 2543.83 2687.02 2672.20 3687.80 5196.50

Total expenditure 1921.75 1986.77 2122.66 2825.10 3693.60

Total assets 27101.27 28575.83 30201.0

5

36080.48 39914.15

Number of

Shareholders

6162 6210 5669 5724 9286

Number of employees 1780 1860 1883 2003 1997

No of Branches 56 62 65 65 69

1.7 CAPITAL AND RESERVES

IFIC Bank has been consistently maintaining the Capital Adequacy Ratio, as prescribed by

Bangladesh Bank. This has been made possible by a policy of building up both capital and

reserves. It started with an Authorized and Paid-up Capital of Tk. 100 million and Tk. 63.20

million respectively in 1983. Authorized and Paid-up Capital increased to Tk. 500 million

and Tk.406.44 million respectively in 2002.

1.8 AUTHORIZED & PAID UP CAPITAL

The authorized and paid-up capital of the Bank remained unchanged at Tk. 500 million and

Tk. 406.39 million respectively as on December 31,2006. this excludes proposed bonus

shares worth tk. 40.64 million for 2003, tj 44.70 million for 2004, tk 49.17 million for 2005

and tk 129.82 million for the year 2006 respectively.

1.9 MANAGEMENT STRUCTURE OF IFIC BANK LTD.

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The thirteen members of the Board of Directors are responsible for the strategic planning and

overall policy guidelines of the Bank. Further, there is an Executive Committee of the Board

to dispose of urgent business proposals.

Besides, there is an Audit Committee in the Board to oversee compliance of major regulatory

and operational issues.

The CEO and Managing Director, Deputy Managing Director and Head of Divisions are

responsible for achieving business goals and overseeing the day to day operation.

The CEO and Managing Director is assisted by a Senior Management Group consisting of

Deputy Managing Director and Head of Divisions who supervise operation of various

Divisions centrally and co-ordinates operation of branches.

Key issues are managed by a Management Committee headed by the CEO and Managing

Director. This facilitates rapid decisions.

There is an Asset Liability Committee comprising member of the Senior Executives headed

by CEO and Managing Director to look into all operational functions and Risk Management

of the Bank.

1.10 INFORMATION ABOUT THE EMPOLYEE OF IFIC

BANK LTD. [ELEPHANT ROAD BRANCH]:

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IFIC Bank Limited of Banani Road Branch is one of the Profitable Branch of IFIC Bank Ltd.

IS located at 73/1 (1st floor), Banani Road, Dhaka. It started its journey at the year 1989, 31 st

October.

Manpower Position of IFIC Bank, Banani, Road, Branch

S.L No. Category employee Number

1 Vice President & Manager 1

2 First Assistant Vice President 1

3 Senior Staff Officer 2

4 Staff Officer 4

5 Office grade 1 5

6 Office grade 2 47 Cash Officer 4

8 Computer Officer 3

9 Security Guard 2

10 Office attendant 3

TOTAL 29

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CHAPTER TWO

2.1 Introduction of the study

Deregulation of interest rates, rising competition from bank and non bank competitors and

continuing development of innovative ways to provide financial services are all contributing

to a growing interest in evaluating bank performance; various groups of individuals are

particularly interested in evaluating bank performance. First, bank shareholders are directly

affected by bank performance. Investors take advantages of bank information to develop

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exceptions concerning future performance that can be used to price common shares appraise.

Second, bank management traditionally is evaluated on the basis of how well the bank

performs relative to previous years and compared with similar banks. Hence, employees

salaries and promotions are frequently tied to the performance of the bank. Bankers also need

to be informed the condition of other banks with which they have dealing. Third, regulators

concerned about the safety and soundness of the banking system and the preservation of

public confidence, monitor banks using onsite examinations and computer oriented early

alarming system to keep track on bank performance. Forth, and last, the business

community and public should be concerned about their banks performance to the extent that

their economic prosperity is linked to the success or failure of their bank.

2.2 Background of the study

International Finance Investment and Commerce Bank Limited (IFIC Bank) is a banking

company incorporated in the People's Republic of Bangladesh with limited liability. It was

set up at the instance of the Government in 1976 as a joint venture between the Government

of Bangladesh and sponsors in the private sector with the objective of working as a finance

company within the country and setting up joint venture banks/financial institutions abroad.

The Government held 49 per cent shares and the rest 51 per cent were held by the sponsors

and general public. In 1983 when the Government allowed banks in the private sector, IFIC

was converted into a full-fledged commercial bank. The Government of the Peoples

Republic of Bangladesh now holds 35% of the share capital of the Bank. Leading

industrialists of the country having vast experience in the field of trade and commerce own

34% of the share capital and the rest is held by the general public.

2.3 Objective of the study

A bank operates its activities not only to earn profit, but also to serve its clients in accordance

with their needs and demands.

General Objectives:

The general objective of the study is to have a General Evaluation of the

performance of IFIC Bank Ltd.

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Specific Objectives:

In line of the general objective of the specific objectives of the study are as follows:

To present an overview of IFIC Bank Limited.

To review the management system of the bank.

To gather comprehensive knowledge of the loan and advance.

To identify the factor contributing to the attractive and operative performance

of the local branches of the bank.

To identify the sectors the bank is giving loan and advance.

To find out strength and weakness of the organization.

2.4 Scope of the studyA bank has different products, different services and different customers. Different

departments of a bank perform different activities.

However, this study is done on the basis of performing three-month internship program by

the researcher in the IFIC Bank Ltd. So, this study says only abut the loan and advance of

IFIC Bank Ltd. Besides this as IFIC Bank Ltd. Is a large Bank and it facilities various

products and services, this study covers loans and advances of IFIC Bank Ltd.

As I was an Intern my scope was very limited and restricted. I had maintained some official

formality for the collection of the data of my report. I had the opportunity to work only at the

IFIC Bank Ltd., Banani Branch. The report is based on my observation and studies during

my internship period in Elephant Road Branch of the IFIC Bank. I have to engage in various

sectors & to understand how they work.

2.5 Methodology of the study

Methodology refer to process by which reports data are collected, data interpreted and

recommendation are made. In other word, it is a process by which total report are planned,

organized and illustrated. The methodology of the report is stated below, which was

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appropriately exercised in achieving the above stated objective. The sources of data are as

below:

I. Primary Data

II. Secondary Data

2.5.1 Primary Data:

The primary sources of data are as follows:

Informal conversation with the bankers.

Practical work exposure from the different desks of the three departments of the

branch.

Face-to-face conversation with the respective officers and staffs of the banks.

2.5.2 Secondary Data:

The secondary sources of data and information are:

Various books, articles, compilations etc. regarding general banking functions,

foreign exchange operations and credit policies.

Annual reports of IFIC Bank Ltd.

Annual reports of other banks.

Banks papers

Hand note

Prospectus

2.6 Limitations

Through internship program is a practical oriented program, it faces some difficulties. The

major difficulties I have faced during my period in IFIC Bank Ltd. Are as follows:

Initially, adjustment with the new environment. A sudden change of studentship to a

job-like situation is a problem.

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Usually company is not willing to provide their actual data of financial statement for

maintaining confidentiality.

Short time is another major problem for a sound internship report. To prepare a report

on some issues takes much time but in practice we are given a short time.

Finally, the lack of the depth of my knowledge and the analytical capacity for writing

such report is also a shortcoming of this study.

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CHAPTER THREE

Credit services of IFIC Bank Ltd.

3.1 Introduction:

This is the survival unit of a bank because unite and unless the success of this section is a

question to every bank. If this section is not properly working, the bank it self may become

bankrupt. This is important because this is the earning unite of the bank. Banks are accepting

deposit from the depositors in condition of providing interest to them as well as safe keeping

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their deposits. Now the question may gradually arise how the bank will provide interest to the

clients and the simple answer is advance. We often use loans and advances as an alternative

to one another. But academically this concept is incorrect. Advance is the combination of

such items where loan is a part only for this credit section of the bank.

To run operations and to earn profit thereby every bank advances and invests its deposited

money and reserves equity and other available funds in various profitable sector. The

effectives and profitable policies concerning advancing and investment is needed

increasingly without proper mobilization of deposits under the shadow of advances and

investments, no bank can exists. In the area of investment and advancing IFIC Bank Ltd.

stand among leaders of private commercial bank of the country.

Advances are the main revenue generating area for any bank. But a commercial bank cannot

advances all of its deposits and Bangladesh Bank governs the rules that a maximum of 80

percent of total deposit can be advance to the clients. The rest 20 percent of the total deposits

gas to be kept in the Bangladesh Bank as government policy. IFIC bank ltd. has extended its

advance facilities for the past year with the policy guidelines of Bangladesh Bank. In 2000

total advances was 1731.28 crores whereas the amount reached 2836.15 in the year 2007.

Advances of IFIC Bank (2003-2007) (figures in corers)

YEAR 2003 2004 2005 2006 2007

ADVANCE 2045.09 2128.09 2169.49 2549.06 2836.15

3.2 Types of Advance:

All loan and advance that are provided by this bank can be categorized into there heads

according to the nature and characteristics of each product:

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Figure shows the different types of advances

Nature of Different Types of Advance:

3.3 CONTINUOUS LOAN:

IFIC Bank gives in the following Continuous Loan:

Cash Credit HYPOTHECATION (CC HYPO)

Cash Credit pledge (CC PLEDGE)

Secured Overdraft (SOD)

3.3.1 Cash Credit HYPOTHECATION (CC HYPO):

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ADVACE

Continuous Term Loan Loan General


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Cash credit id given through the cash credit account. Cash credit is an active and

running account where deposit and withdrawals may be made frequently. The debit

balance of the account on any day can not exceed the agreed limit.

Instrument HYPOTHECATION DEED.

50% margin requires opening a CC account. (varies)

Operation of cash credit is same as that of overdraft the purpose of cash credit is to

meet working capital needs of traders, farmers, and industrialist.

It is granted only the first class parties.

It is charged against a property where neither the ownership nor the possession is

passed to the bank.

3.3.2 Cash Credit Pledge (CC PLEADGE): The nature, operational work, and characteristics of CC- PLEDGE in as same as CC

HYPO.

CC.PLEDGE in different from CC-HYPO only from the securities or business goods

against the loan amount.

It is charged against properties where the ownership may remain to the borrower but

the possession is passed to the bank.

Instrument Pledge Deed.

Cash Credit HYPOTHECATION (CC HYPO & PLEDGE)

IFIC Bank Ltd.,Banani Road Branch

Month of Distribution Amount (taka)

February-2007 54593854.25

March-2007 52858711.82

April-2007 50014025.11

May-2007 50178910.00

3.3.3 Secured Overdraft (SOD):

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Overdraft are those drawing, which are allowed by the bank in excess of the balance

in the current account up to a specified amount for definite period as arranged for.

Generally it is given to the business to increase their business activities.

Usually provide against FDR, PSS, i.e. financial obligation or any primary securities.

The interest charge from the date of first withdraw.

Interest is calculated and charged only on the actual debit balance on daily product

basis.

Balance of OD account are fluctuates

The interest rate of SOD is 3% above of FDR interest rate if the FDR is in our Bank.

If the FDR is in other bank then the interest rate is 14.50%

3.4 TERM LOAN:

IFIC Bank gives in the following Term Loan:

Industries Loan

Others loan

Staff House Building Loan (SHBL)

Stuff loan against Provident Fund(SLPF)

Loan against PSS

House Building Loan

Consumers Credit Scheme

3.4.1 Industries Loan:

It is a term loan.

It is given for three (3) years at equal installment.

Grass period is allowed of this types of loan.

Grass period is the period that require to earn visible returns.

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3.4.2 Others loan:

Loan provider for other purpose which is productive and less risk rather industrial sector are

treated as others loan.

The terms and condition of these types of loan are as industry loan.

3.4.3 Staff House Building Loan (SHBL):

120 times of BASIC salary is provided as SHBL. Bank rate +1% interest is charged to the

loan amount. Repayment adjusted from their monthly salary. Repayment is made at equal

monthly installment.

3.4.4 Stuff Loan against Provident Fund (SLPF):

10% of basic in contributed by employee Repayment is adjusted from their on they salary.

Maximum sanction from PF.

3.4.5 Loan against PSS:

This loan is provides against PSS fund. 80% are given of the PSS fund. This is 100% secured

for the bank.

3.4.6 House Building Loan:

This loan is give for the construction of building house. It is gives for three (3) years at equal

monthly installment. This loan is not provides frequently.

3.4.7 Consumers Credit Scheme:

Under this scheme credit is given to the customer to purchase necessary and luxury

commodities like computer, motor vehicle, television, refrigerator, music system sewing

machine, furniture etc.

Other then the employee it is given to the valuable client.

It is a 24, 36, 48 installment system @ 15.50% interest.

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3.5 SMALL ENTERPRISE FINANCING:

IFIC Bank gives in the following important sectors of Small Enterprise:

Easy Commercial loan

Retailers loan

Transport loan

Commercial house building loan

Possession right loan

Contractors loan

Letter of guarantee

Loan against imported merchandise (LIM)

Loan against trust receipt (LTR)

Bidders loan

Project loan

3.5.1 Easy Commercial loan:

Individual, business enterprises (other than public limited company) engaged in any business

to meet business requirement. Any Bangladeshi individual or business house having valid

trade license and must have an account with IFIC Bank Ltd. can apply for this loan.

Minimum age 21 (twenty one) years. Security needed- Pledge of instrument duly discharge

by the other (where applicable), FDR/other deposits with IFIC Bank Ltd/FDR/other financial

instrument issued from other Banks/ ICB unit certificate/ PSS account/MIS/Demand share of

A & B group Traded in SDE & CSE/ Any other Government security eligible for credit

facility (ies). Maximum 90% of the face value of FDR/NCD/WEDB. Face value would mean

the original amount for the loan is maximum 12(twelve) months. 2% is to be charged as apenal interest on overdue amount (if any). Taka 500/- to be realized before disbursement as

processing fee.

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3.5.2 Retailers loan:

Individual/ Proprietorship firm engaged in retail business. They need this type of loan to

meet working capital/ capital finance requirement. Any Bangladeshi individual pr small andretail business house having valid trade license and must have an account with IFIC Bank

Ltd can apply for this loan. The tenor for the loan is maximum 24(twenty four) months. 2%

is to be charged as a penal interest on overdue amount (if any). 1% on the loan amount to be

realized before disbursement as its service charge and Taka. 500/- to be realized before

disbursement as processing fee.

3.5.3 Transport Loan:

Individual, business Enterprises (Other than Public Limited Company) engaged in transport

business. They need fund to Purchase of Road/ Water Transport for commercial use. Any

Bangladeshi Customer of the respective branch having business house/ office in the

command area with at least 2(two) years experience in their line of business.

Additional 2% charged on the overdue amount as its penal interest. The tenor for the loan

maximum 48(forty eight) months.0.50% is charged as service charge on loan amount to be

realized at the time of disbursement of loan. 1% on loan amount (Maximum Tk. 10,000/-) to

be realized at the time of disbursement of loan for process the loan.

3.5.4 Commercial house building loan:

Individual, business Enterprise (Other than Public Limited Company) having commercial

plot can apply for this loan to construct of commercial building. Any individual or business

house in the command area having account with the branch have the eligibility to apply for

this loan. Additional 2% on the overdue amount charged as penal interest, if any. The

maximum term of loan is maximum 5(five) years including grace period.

0.25% is treated as service charge on loan amount to be realized at the time of disbursement

of loan. Loan processing fee is 1% on loan amount (Maximum Tk. 10,000/-) to be realized at

the of disbursement of loan.

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3.5.5 Possession right loan:

Proprietorship concern having no collateral security to offer other than possession right of

shop can apply for this loan to meet up the need of Fixed Working capital customer of the

respective branch having shop/ business place in the command area having at least 2(two)

years experience in their line of business have the eligibility for applying this loan.

Additional 2% per month on the overdue charged as penal interest (amount if any). The tenor

of the loan is maximum 36(thirty six) months. Tk. 2000/- to be realized at the time of

disbursement of loan as a loan processing fee. Service charge is 0.50% charged on loan

amount to be realized at the time of disbursement of loan.

3.5.6 Contractors loan:

Individual, business Enterprises (Other than Public Limited Company) engaged in

construction and supply business can apply for this loan to execute work order awarded by

Govt. / Semi Govt. & Autonomous Bodies. Any business house in the command area having

at least 2(two) years experience in their line of business has the eligibility for this loan.

Additional 2% is charged per annum on the overdue amount as its service charge (if any).The

tenor for this loan is maximum 12(twelve) months. Taka. 2000/- to be realized at the time of

allowing of drawings as the processing fee of the loan. Service charge is 0.25% on loan

amount to be realized at the time of disbursement of loan maximum Taka.5000/-.

3.5.7 Letter of guarantee:

Business Enterprises (Other than Public Limited Company) engaged in construction, supply

and other business can apply for this loan to participate in tender(s) invited by Govt. / SemiGovt.& Autonomous Bodies and execute job against work order awarded from different

agencies and for any other obligation.

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Customer of the respective branch having business place in the command area with at least

2(two) years experience on their line of business have the eligibility for application. The

margin is depending upon Banker-Customer relationship.

3.5.8 Working capital loan:

Business Enterprise (other than Public Limited Company) engaged in manufacturing/ trading

business can apply for this to meet working capital requirement.

Firms or companies incorporated in Bangladesh, customer of respective branch having shop

or business place is in the command area with at least 2(two) years experience on their line

of business. Additional 2% is Charged on the overdue or excess over limit as the penal

interest (if any). The tenor for the loan is maximum 12(twelve) months.

Tk. 2000/- to be realized before disbursement of loan as its processing fee. Service charge is

0.25% charged on loan amount or maximum Tk. 5000/-.

3.5.9 Project loan:

Business enterprises (other than Public Limited Company) engaged in manufacturing/service

industry can apply for this loan to set up new manufacturing/ service unit. To BMRE existing

manufacturing/ services unit. Firms/ companies incorporated in Bangladesh. The

firm/company should have business account with the branch. The firm/ company should

generate sufficient cash flow from operation from which firms can make the repayment of

the loan.

Penal interest is additional 2% per annum charged on the overdue amount. The tenor of the

loan is maximum 5 years including grace period. The length of grace period is to be

determining on the fund generation of the project.

0.10% on loan amount (Minimum Tk.2000/-) to be realize disbursement of loan. 0.25 on loan

amount subject to minimum of Tk.5000.00 to be realize before disbursement of loan.

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3.6 CONSUMER FINANCING

IFIC Bank Ltd. Introduced Consumer Credit Scheme for its customer during 1999 dulyapproved by the Board of Directors of the bank in their 251st meeting held on April 4, 1999

with the following loan product:

1. Vehicle loan

2. Domestic appliances loan

3. Office equipment loan

4. Entertainment purpose loan

5. Loan for intangible loan

6. Others.

The purpose of this section is to provide direct loan guidelines to the branches for providing

consumer financing under consumer Finance Scheme. Guidelines under the prudential

Regulation and Direction of Bangladesh bank have been formulated. These guidelines will

assist the branches as to how the CCs loan port-folio should be managed. The committee

studied existing products available in the market. Considering the market demand and

investment opportunities in Consumer Financing Sector, the committee has formulated the

following 7 products for our bank to be launched under Consumer Financing Scheme:

Easy loan ( Secured personal loan)

Consumer durable loan

Parua ( Education loan)

Thikana ( House building loan)

Any Purpose Loan

Peshajeebi loan ( Loan for professional)

Auto loan

Festival loan

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3.6.1 Easy loan (Secured Personal loan):

Any individual can apply for this loan to meet personal financial requirement. This potential

borrower with minimum age 18 years must have an account with IFIC Bank Ltd. Repayment

will be made in lump sum within expiry or as per acceptable terms and interest to be serviced

as and when due.

3.6.2 Consumer Durable loan:

This applicant for this loan are employee of Govt./semi Govt./Corporation/autonomous

bodies, employee of reputed multinational corporation and large local corporate, employees

of reputed university/ college/school, employees of reputed NGOs/Aid Agencies, other

salaried persons acceptable to the bank, tax paying businessmen having adequate cash flow

tax paying self employed person and individual having reliable source of income. The

purpose of this loan is to purchase of consumer durables like - computer, television,

refrigerator, washing machine, air conditioner, music systems, motor cycle and a lot of other

things by Consumer Durable Loan. IFIC Bank is providing maximum 1.00 lac taka to be

repayable in by 12 to 36 monthly installments.

Consumer Durable Loan Repayment Schedule

Loan Amount Interest Rate

Monthly installment

36

months

24

months

12

months

Maximum Tk.

100,000/[email protected]%

Tk.

3,542/-

Tk.

4,922/-

Tk.

9,099/-

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3.6.3. Parua (Education loan)

IFIC Bank offers Education Loan that can make a student's dream comes true. IFIC Bank

firmly believes that expense for education is an investment for future. Only education can

fulfill the dreams of an individual as well as a nation. IFIC Bank is providing maximum Tk.

8.00 lac to be repayable in 12 to 48 monthly Installments. Parua (Education Loan)

Repayment Schedule

Loan

Amount

Interest

Rate

Monthly installment

48

months

36

months

24

months12 months

Tk. 100,000/-

or multiple

@16.50%Tk.

2,861/-

Tk.

3,542/-

Tk.

4,922/-Tk. 9,099/-

3.6.4. Thikana (House Building loan)

Home is an address, a shelter for entire life, and this is what one leaves behind for the family.

A house is the single biggest investment that you will make in your lifetime. To own a home

from savings takes a long time and full payment at a time is difficult too. Don't wait your

entire life saving. Trust us, take a Home loan from IFIC and realize your dreams now. IFIC

Bank is providing maximum Tk.75.00 lac to be repayable in 12 to 180 monthly installments.

Thikana (Home Loan) Repayment Schedule

Loan

AmountInterest Rate

Monthly installment (Tk.)

15 years 14 years 13 years 12 yearss

Tk.1,00,000/-

or Multiple

@ 15.00% p.a. 1,401/- 1,429/- 1,462/- 1,503/-


1,553/- 1,615/- 1,694/- 1,796/-


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1,932/- 2,117/- 2,381/- 2,785/-

03 years 02 years 01 years

3,469/- 4,851/- 9,029/-

3.6.5. Any Purpose Loan

This applicant for this loan are employee of Govt./semi Govt./Corporation/autonomous

bodies, employee of reputed multinational corporation and large local corporate, employees

of reputed university/ college/school, employees of reputed NGOs/Aid Agencies, other

salaried persons acceptable to the bank, tax paying businessmen having adequate cash flow

tax paying self employed person and individual having reliable source of income. IFIC AnyPurpose Loan caters to various needs of salaried people. With minimum formalities you can

get a loan for an amount upto Tk.3.00 lac to be repayable at 12 to 36 monthly installment.

The loans are easy & absolutely hassle free.

Any Purpose Loan Repayment Schedule

Loan

AmountInterest Rate

Monthly installment

36 months 24 months 12 months

Tk. 100,000/- @16.50% Tk. 3,542/- Tk. 4,922/- Tk. 9,099/-

3.6.6. Peshajeebi Loan (Loan for Professional):

This type of loan is only for the people who are Doctor/ Engineer/ IT professional/

Management Consultant or any other professional, sometimes you just need that little bit

extra money for whatever reason? Don't make yourself worry about it. Come to us at IFIC

Bank and trust that we'll help you to realize your dreams.

IFIC Bank is providing Maximum Tk. 10.00 lac to repayable in 12 to 48 monthly instalment.

Quick Processing & Least Formalities.

IFIC Peshajee Loan Repayment Schedule

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Loan

Amount

Interest

Rate

Monthly installment

48

months

36

months

24

months12 months

Tk. 100,000/-

or multiple

@16.50%Tk.

2,861/-

Tk.

3,542/-

Tk.

4,922/-Tk. 9,099/-

3.6.7. Auto Loan

Owning a car means freedom of convenience for moving out, affords punctuality, shelter

from rain and heat during traveling and above all guarantees the much needed safety.

Owning a car is a dream of many people. To materialize your dream, now we have Auto

Loan with more flexible, affordable and convenient package option.

IFIC Bank is providing maximum Tk. 20 lac to be repayable in 12 to 60 monthly

installments.

Auto Loan Repayment Schedule

Loan

Amount

Interest

Rate

Monthly installment (TK.)

60

months

48

months

36

months

24

months

12

months

Tk.1,00,000/-

or Multiple

15.50%

p.a.2,407/- 2,810/- 3,493/- 4,874/- 9,051/-

Tk.20,00,000/-

maximum

15.50%

p.a.48,140/- 56,200/- 69,860/- 97,480/- 1,81,020/-

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3.6.8. Festival loan:

Extended to meet expenses of major religious festival like Eid, Puja, Chiristmas and Budda

Purnima.

Consumer Financing of IFIC Bank (2007-2009)

YEAR 2007 2008 2009

Consumer

Financing

418,600,000 314,400,000 188,431,000

3.7 Credit:

Credit portfolio of the Bank consists of Trade Financing, Project loans for new projects and

BMRE of the existing projects, Working Capital financing and Small Scale Industrial

financing. Besides, the Bank financing the need of individual borrowers under Consumer

Credit Scheme. The Bank is also involved in financing Agriculture sector.

Credit portfolio recorded a growth of 11.26 percent in2009. The total outstanding loans and

advances stood at Tk. 2836.15 million at the end of December 2009 as against Tk. 2549.06

million in December 2006.

Credit portfolio of the bank was under as on 31.12.2009

Particular Amount Percent

1. Agriculture 23.29 0.82

2. large & Medium

Industry(TL)

548.89 19.35

3. Working Capital 303.13 10.68

4.Export Finance 150.84 5.32

5.Import Finance 488.87 17.246. Transport 59.81 2.11

7. Commercial lending 616.55 21.74

8.House building loan 484.87 17.08

9.Consumer Credit

Scheme

111.29 3.92

10. Others 48.96 1.73

Total 2836.15 100.00

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3.8 Lending operations:

Growth has been seen in all types of lending facilities with more emphasis nationwide beingmade on entrepreneurial ventures and the re-emergence of micro, small and medium sectors

which pawing potential contributors to the overall profitability of the bank and to the

economy of the countr

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CHAPTER FOUR

4.1 GUIDELINES FOR BANK FOR GIVING LOAN:This guideline includes objective/ quantitative parameters for the eligibility of the borrowers

and determining the maximum permission limit per borrower.

Fundamentally, credit policies and procedures can never sufficient capture all the

complexities of the product. Therefore, the following credit principles are the ultimate

references points for making SE financing decisions:

Assess the entrepreneurs character for integrity and willingness to repay.

Only lend when the entrepreneurs has capacity and ability to repay

Use extends credit if bank can sufficiently understand and manage risk.

Use common sense and past experience in conjunction with through evaluation and

credit analysis.

Do not base decision solely on customers reputation, accepted practice, others

Lenders risk assessment or the recommendation of other officers.

Be proactive in identifying, managing and communication credit risk.

Be diligent in ensuring that credit exposures and activities comply with me

requirement setout in product program

4.2 Process of Loan Section:

Step-1 : Sanctioning by the competent authority

A secured advance may be grant to a party only after getting a limit sectioned

from the competent authority.

Step-2 : Loan/Advance Proposal

For obtaining a loan/advance the party must make an application in standard

form in writing to the branch where he maintains his operative account. After

receiving the applications from the party, the party based on the following

sources of information:

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Personal investigation

Confidential supports from

Other banks,

Chamber of commerce

CIB from Bangladesh bank as the earnable

Treading account P/C, B/S,M/A if any and other documents submitted by the party.

The average balance and the present maintained in the account.

The nature of operation during the last six months and the date of opening account.

Step-3 : Preparation of limit proposalThe branch, may prepare limit proposal after being fully satisfied with the

following points:

The financial position of the party.

Purpose for which advance is required.

Nature of securities offered.

The payment arrangement.

Step-4 : Renewal proposal.

Step-5 : Approval by Head Office and Branch responsible.

Limit proposal sent to HO.

Sanction/reject.

Receive the limit section advice.

Step-6 : Disbursement of loan.

Step-7 : loan monitoring and administration.

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Rules and Documents:

4.3 PRUDENTIAL REGULATION:

REGULATION: 1

Source and capacity of repayment and cash flow backed lending

A. Bank shall specially identify the sources of repayment and asses the repayment

capacity of the borrow on the basis of assets conversion cycle and expected future

cash flows. In order to add value, the bank must asses the conditions in the particular

sector/ industry they are lending to and its future prospects. The banks must be able to

identify the key drivers of their borrowers, business, the key risks to their business

and their risk mitigate.

B. The rationale and parameters used to project the future cash flows shall be

documented and annexed with the cash flow analysis undertaken by the bank.

REGULATION: 2

Personal guarantees

All facilities to SEs shall be backed by the personal guarantees of the owners of SEs. In case

of limited companies, guarantees of all directors other than nominee directors shall be

obtained. In case of proprietorship concern, spouses guarantee other than the personal

guarantee of the owners may be taken.

REGULATION: 3

Per party exposure limitThe minimum and maximum exposure of the bank on a single SE shall remain within the

range of Tk.50 lac respectively subject to the following:

a) In case of working capital finance-maximum up to 100% of the net required

working capital or 75% of the sum of total inventory and receivables whichever is

lower.

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b) In case of fixed assets purchase-maximum up to 90% of the purchase price.

REGULATION: 4

Aggregate exposure of bank on small enterprise sector

The aggregate exposure of the bank on SE sector shall not exceed the limits as specified

below:

% of the classified SE advances to total

portfolio of SE advances

Maximum limit

a. below 5% 10 times of equityb. below 10% 6 times of the equity

c. below 15% 4 times of the equity

d. up to and above 15% Up to the equity

REGULATION: 5

Limit on clean facilities

In order to facilitate growth of smaller loans, banks are free to determine security

requirements for loans up to TK.5 lac. Guidelines for security requirements for loans of

amounts more than TK. 5 lac are given in Regulation-6.

REGULATION: 6

Securities

Consequent to the regulation stated in Regulation-5, facilities provided to SEs shall be

secured by banks as follows:As a minimum banks must take charge over assets being financec.

For loan amounting Tk. 10 lac above.

a) Legal mortgage over immovable properties with registered Power of Attorney.

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b) Personal Hypothecation on the inventory, receivable, advance payments, plant &

machineries.

c) Guarantees of spouse/parents/other family members.

d) One third party personal guarantee.

e) Post dated cheque for each installment and undated cheque for full loan value

including full interest.

REGULATION: 7

Loan documentation

For all facilities, banks must obtain (as applicable) and not limiting to following documents

before disbursement of loan can be made:

1. loan Application Form duly signed by the customer

2. Acceptance of the terms and conditions of Sanction Advice.

4. in case of partnership firm:

a) Copy of registered partnership deed certified as true copy or partnership deed on non-

judicial stamp of Tk. 150 denominated duly notarized.

5. in case of limited company:

a) Copy of memorandum & Articles of Association of the company including Certificate of

incorporation duly certified by Register joint stock Companies (RJSC) and attested by the

managing director accompanied by an up-to-date list of Directories.

b) Copy of Boarder solution of the company for availing credit facilities and authorizing

managing director/chairman/director for execution of documents and operation of the

accounts.

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c) An undertaking not to change the management of the company without prior permission of

the bank.

d) Copy of last audited financial statement up to last 3 years (as applicable and subject to

regulation-10).

e) Personal guarantee of all directors including the chairman and managing directors.

f) Certificate of registration of charges over the fixed and floating assets of the company duly

issued by RJSC.

g) certificate of registration of amendment of charges over the fixed and floating assets of the

company duly issued by RJSC in case of repeat loan or change in terms and condition of

sanction Advice regarding loan amount.

6) Demand promissory Note.

7) Letter of hypothecation of stocks and goods.

8) Letter of hypothecation of book debts and receivable.

9) Letter of hypothecation of plant & machinery

10) Charge on fixed assets

11) Personal letter of guarantee

12) Whenever practical, insurance policy for 110% of the stock value covering all risks with

banks mortgage clause in joint name of the bank and client.

In the case of individual person:

2 copy passport size photograph of intending borrower & gurantor.

Letter of introduced from employer(where require)

Bank statement( for last 6 months)

Personal Net worth Statement.

Copy of passport/voter ID/Driving license(if any) Utility bill copy (telephone/Gas/Electricity)-anyone

Salary certificate/Trade License.

T.I.N. Number.

Copy of offer letter recognized college/university for studying abroad.

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For local private university/Medical college submission of evidence related to

admission and cost. CIB report on the borrows as required.

In the case of sole proprietorship firm:

One copy passport size photograph

Copy of trade license.

Personal net worth statement

Hypothecation of stock.

Personal guarantee of a business having at the same area or any person acceptable to

the bank.

REGULATION: 8

Margin Requirements

Banks shall adhere to the minimum margin requirement as prescribed by Bangladesh Bank

(if any).

REGULATION: 9

Credit information Bureau (CTB) clearance

While considering proposals for any exposure, banks should give due weights to the credit

report relating to the borrower and his group obtained from Credit information Bureau (CTB)

of Bangladesh bank. The economic of obtaining CIB report will be government by rules and

regulations as prescribed by Bangladesh Bank from time to time.

REGULATION: 10

Minimum conditions for taking exposure

1. Banks shall, as a matter, obtain a copy of financial statements duly edited by a

practicing Chartered Accountant, relating to the business of every borrower who is a

limited company or where exposure of a bank exceeds TK.40 lac, for analysis and re-

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record. However, financial statements singed by the borrower will suffice where the

exposure is fully secured by liquid assets.

2. It is recognize that a large number of enterprises other than limited companies may

not have proper books of accounts including balance sheet, profit & loss account and

they may not be able to prepare current and future cash flows due to lack of

sophistication and expertise. It is

REGULATION: 11

Proper utilization of loan

The bank should ensure that the loans have been properly utilized by the SEs and for the

same purpose for which they were acquired/obtained. Banks should develop and implement

an appropriate system for monitoring the utilization of the loans.

REGULATIONS: 12

Registration on facilities to related parties

1. Banks shall not take any exposure on SE in which any of its director, shareholder,

employer or their immediate family members is holding 5% or more of the share

capital of the SE.

2. THROUGH THE INSTRUCTION OF Regulation-12 of Prudential Guideline for

Small enterprise financing banks are barred to take any exposure on a small enterprise

in which any of its director, shareholder, employer or their immediate family

members are holding hare capital of 5% or more. However, this restriction for the

shareholder has been withdrawn and henceforth, the word shareholder should be

considered as omitted.

REGULATION: 13

Classification and provisioning for assets

LOANS/ADVANCES

1. Banks shall observe the prudential guidelines given at Appendix-X in the matter of

classification of their SE asset portfolio and provisioning there-against.

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2. Apart from specific provisioning requirement as prescribed above, banks will create

adequate general provision over the entire credit portfolio of Small Enterprise

business. Therefore, allo banks shall maintain at all times a general provisions of 20%

of unclassified SE assets outstanding in its books.

REVERSAL OF PROVISION:

4. The provision held against classified assets will only be released when cash realization

stats exceeding:

i. In case of loss category the net book value of the assets.

ii. In case of doubtful category 520% of the net book value of these assets.

iii. In case of sub-standard category 25% of the net book value of the assets.

Further, the provision made on the advice of Bangladesh Bank will not be reversed without

prior approval of Bangladesh Bank.

SUBMISSION OF RETURNS:

5. Banks shall submit the borrower-wise annual statements regarding classified

loans/advances to the Banking inspection department.

TIMING OF CREATING PROVISION;

6. Banks shall review, at least on a quarterly basis, the collectibles of their loans/advances

portfolio and shall properly document the evaluation so made. Shortfall in provisioning, if

any, determined, as a result of quarterly assessment shall be provided for immediately in their

books of accounts by the banks on quarterly basis.

VERIFIVCATION BY THE AUDITORS:

7. The external auditors as a part of their audits of banks shall verify that all requirements of

Regulation-12 for assets have been compiled with. Bangladesh bank shall also check

adequacy of provisioning during their on-site inspection.

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4.4 Required Securities:

The bank requires some securities that are compulsory for getting loan and the securities are:

Personal guarantee of a businessman having business at the same area or any person

acceptable to the bank.

Personal guarantee of spouse/parents.

Hypothecation of vehicles. The vehicles to be registered with

BRTA/BIWTA/Mercantile & Marine dept with Bank mortgage clause.

Comprehensive insurance in the joint name of the Bank & borrower.

Legal mortgage of land & building within City Corporation and/or Municipal area

preferably 1st party.

Registered Power of Attorney to sell the mortgage property without intervention of

court.

Personal guarantee of partners/directors.

Registration of charges with Joint Stock Companies under relavant section where

required.

Pledge of Financial Instrument if any.

Tripartite agreement among the Bank, Lessor & Borrrower to the effect that the

Lessee and Lessor can not transfer profession right of the property without prior

consent of the Bank.

Notarized Power of attorney to sell the profession Right as per possession right deed

of agreement executed between Lessor and lessee.

One cheque covering residual amount of loan duly signed by the borrower.

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Memorandum deposit of cheques.

Assignment to work order.

Confirmation from Work awarding Authority that all cheques will be issued in favour

of the borrower A/c. IFIC Bank Ltd.-------------branch.

Counter Guarantee.

Lien on financial obligation.

Hypothecation of machinery, where required.

Pledge of stocks duly insured with bank mortgage clause.

Documents of title to goods when received.

In case of L/C, borrower acceptance on Bill of Exchange drawn by L/C opening

branch. Lien on export L/C contract. As per Banker-customer relationship.

Trust receipt.

Legal mortgage of the fixed assets of the company comprising land and building and

machinery already installed or to installed thereon.

Personal guarantee of the mortgage.

Creation of charge with the RJSC under relevant section.

4.5 legal Documents:

The legal documents that are needed for getting above mentioned loan are following-

D.P Note.

Letter of arrangement.

Letter of installment.

Letter of disbursement.

Personal guarantee of guarantor.

Personal guarantee of Spouses/parents.

24 post dated cheque in favor of Bank for payment of monthly installments each duly

signed by the borrower.

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One post dated blank cheque duly signed by the individual or proprietor.

Memorandum of Deposit of Cheque.

Letter of hypothecation of vehicles.

Letter of authority to deposit debit the account.

Memorandum of deposit of title deed.

Deed of mortgage registered with Sub-Register.

Letter of guarantee.

Registration of vehicle with bank mortgage clause.

Comprehensive Insurance coverage with bank mortgage clause.

Registration of charges with RJSC under relevant section.

Pledge of Financial obligation where applicable.

One cheque covering residual amount of loan duly signed by the borrower.

Personal guarantee of the Directors in case of Private Limited Company.

Personal guarantee of all the partners.

Letter of lien where applicable.

Letter of hypothecation of stock.

Insurance policy.

One bank cheque dated maturity date of loan signed by the borrower.

Notarized Power of attorney to sell the possession Right as per possession right deed

of agreement executed between lessor and lessee.

Apropiate form of letter of lien on security.

Letter of pledge.

Letter of hypothecation of machinery, if applicable.

Letter of continuity.

Letter of disclaimer.

Letter of understanding.

Trust receipt.

Lien Confirmation from issuing branch in case of FDR issued by our bank.

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Lien confirmation from issuing authority duly authenticated by the Head office of the

issuing bank in case of FDR issued by other bank.

List of the latest Directors of the company.

NOC from component authority for creation of legal mortgage in favor of the bank (if

required).

Letter of partnership in prescribed form of Bank.

Authority to debit account.

4.6 Credit approval authority:

The authority to sanction or approval loans shall be delegated to Senior Executives by the

managing board based on the Executives knowledge and experience. Approval authority

shall be delegated to individual Executive and not to commit to ensure accountability in the

approval process. The following should apply in the approval or sanctioning of loan:

1. Credit approval authority shall be delegated in writing from the MD & Board,

acknowledged by recipients and records of all delegation retained in CRM.

2. Delegated approval authority shall be reviewed by Board or MD from time to time.

3. The approval function shall be separate from the marketing or relationship

management function.

4. The role of credit shall be restricted to only review of proposal.

5. Approval shall be evidenced in writing or by electronic signature. Approval file shall

be kept on file with credit application.

6. All credit risk shall be authorized by the executives within the authority limit

delegated to them by the MD.

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7. The aggregate exposure to any borrower or borrowing group shall be used to

determine the approval authority required.

8. MD/DMD/Head of Credit Risk Management must approve and monitor any Cross

border exposure risk.

9. Any Branches of lending authority should report to MD, DMD, Head of Internal

Control and Head of CRM.

10. Authority will be delegated to each individual in writing by the managing director.

Authority delegated to the individual will not automatically be transferred to a

replacement lending authority.

11. The Managing Director will have the right to exercise lending authority delegated to

other executive having authority lower than him.

12. The Managing Director is authorized to sub-delegate his business discretionary, if

deemed necessary for quick of business proposals either wholly or partially to Deputy

Managing Director, head of Credit Risk Management, credit executives, Credit

Managers or any other officer within CRM.

13. Any credit proposals that do not comply with guidelines regardless of amount may be

referred to managing director for decision.

14. A monthly summary of all new facilities approval, renewed, enhanced and a list of

proposals declined stating reasons there of should be reported by CRM to MD.

4.7 Credit Investigation:

Lending is one of the most important functions of a bank and with the modern concept of

social order and participation of commercial banks in various phase of commercial industry.

FIC Bank is providing a wide range of financial services, offering specialist advice and

products to corporate clients to meet diverse demands of changing market scenario. We have

expertise to customize products & services to meet specific requirements of our clients. We

are committed to serve our customer with extensive branch net work all over the country to

expedite our client's business growth. We facilitate your business to face the challenges and

realize opportunities, now and in the future. Our main focus is relationship based banking

and understanding corporate & institutional business environments.

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Our experienced Relationship Managers & their team can respond to and anticipate your

needs and give you competitive business advantages. Products and services for commercial

and business customers include: Working Capital Finance, Project Finance, Term Finance,

Trade Finance, Lease Finance, Syndication Loan etc.

4.8 The integrity and reliability of the borrower:

It will be clear from the above study that advance, to be safe, should be granted to a reliable

and honest borrower, who has the capacity ton conduct, his business. The study of a borrower

involves the study of three Cs of the party.

4.8.1 Character

Character denotes integrity of the borrower; he should willingness to repay the money

borrowed. This is the greatest single asset any individual can have and is the first factor to be

evaluated. A person who is really honest will rarely change whatever be the testing factors.

To know about the borrower, the banker should proceed on the following lines:

1. Who the borrower is and, what is his family background?

2. Is his dealing with other businessmen honest?

3. Are there instances where he was not sincere in honoring his commitments?

4. Does he indulge in speculative activities?

5. What is the reputation of the borrower among his employees?

4.8.2 Capacity:Capacity means the ability to employ the funds profitably and repay the advance according to

the terms and conditions of the sanction. The capacity of the borrower has to be determined

and, for these purpose, enquires will be necessary to find out his qualifications and

experience in the line which he is working.

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1. What is his business and when did he start it?

2. Has he recently shifted to a new line of business?

3. Has the required knowledge to carry on the business?

4. Is he well established in the business; what is the working result or is he still making

experiments to make his business steady.

All these study will enable the banker to arrive at a conclusion, whether the borrower has the

capacity to run the business on sound lines.

4.8.3 Capital:

Capital denotes financial soundness. In finance and accounting, capital generally refers to

saved-up financial wealth especially that used to start or maintain a business. A financial

concept of capital is adopted by most entities in preparing their financial reports. Under a

financial concept of capital, such as invested money or invested purchasing power, capital is

synonymous with the net assets or equity of the entity. Under a physical concept of capital,

such as operating capability, capital is regarded as the productive capacity of the entity based

on, for example, units of output per day. Financial capital maintenance can be measured in

either nominal monetary units or units of constant purchasing power. There are thus three

concepts of capital maintenance in terms of International Financial Reporting Standards

(IFRS): (1) Physical capital maintenance (2) Financial capital maintenance in nominal

monetary units (3) Financial capital maintenance in units of constant purchasing power.

4.9 Credit Information Bureau:

The CIB has been in operation for several years. The need for such an

Organization had been discussed for several years and the Government included this in the

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Financial Sector Reform Project. The central bank established a separate unit headed by a

General Manager tasked to develop the CIB. The FSRP worked with the CIB to develop the

reporting formats, computer programs, and hardware to support CIBs operations. The CIB is

operated by the central bank, as a regular part of the bank. No separate organization was

established and so the CIB does not have separate corporate identify. It is staffed with regular

employees of the central bank who work in the CIB on rotation of their assignments. There

are currently over 40 persons working of the CIB. These are drawn from the statistics,

computer and general cadres. All financial institutions submit reports to the CIB on every

borrower with a Total exposure of more than one million Taka. This report provides the

balance on each facility as of the reporting data and information on the classification of the

loaner facility if any. Originally these forms were completed in paper versions by the Banks

and forwarded to the CIB. This required a major data entry effort. Recently has required the

banks to provide the data on diskettes, which greatly eases the Time that it takes to enter

information in the database. [See Annex 3 for the forms Used; these indicate the type of

information available to the CIB. There is currently no on-line connection between banks and

the central bank. Moreover the classification condition of a loan changes only when the

administrative process of classification is executed within the commercial bank. Otherwise,

while total exposures may change, the criteria for bad debt only changes with the

administrative process of classification. Two databases are maintained by CIB: First the

borrower database that lists all companies that have credit facilities. This enables the CIB to

review the total exposure of the company with all banks. The second data base is called the

owners database; it links the owners i.e. listed owners or directors as reported by the lending

bank, to the businesses which they own. Consequently the credit exposures associated with a

particular individual can be determined. Building up the database for the businesses was

straightforward, as identification of a company is generally simple. The owner's database is

more difficult as there are differences in spelling and some room for mistakes in the matching

process of Mr. X with Mr. Y. CIB has now successfully built up this database and generally it

works well. There is also difficulty from submitted lists of directors and owners, as there is

not always an exact correspondence with CIBs records. However, there is great experience

built up in resolving these problems although sometimes it takes time to do so. The data

collection process is now well organized and the banks are experienced in the collection and

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submission of data on borrowers.

4.10 Landing Rate:

Name of the Bank: IFIC Bank Limited

Statement of Revised rates of interest

(Per annum percentage)

Effective date: 01.04.2008

Lending Rate (Mid-rate)

1. Agriculture 12.00

2. Large & Medium Industry 13.25

3. Small Scale Industry 14.75

4.KA Large & Medium Industrial loan 13

4.Kha Small Scale Industrial loan 1475

5 Exports 7.00

6. Commercial Lending 14.75

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7. Housing Loan 14.75 & 16.50

8. Consumer credit Scheme 15,15.50 &16.50

9. Credit card 2

10. Lending to non-Banking Financial Institutions(NBFs) 14.75

11. Others 14.75

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CHAPTER FIVE

5.1 RISK MANAGEMENT:

Risk management is the identification, assessment, and prioritization ofrisks (defined in ISO

31000 as the effect of uncertainty on objectives, whether positive or negative) followed by

coordinated and economical application of resources to minimize, monitor, and control the

probability and/or impact of unfortunate events or to maximize the realization of

opportunities. Risks can come from uncertainty in financial markets, project failures, legal

liabilities, credit risk, accidents, natural causes and disasters as well as deliberate attacks

from an adversary. Several risk management standards have been developed including the

Project Management Institute, the National Institute of Science and Technology, actuarial

societies, and ISO standards. Methods, definitions and goals vary widely according to

whether the risk management method is in the context of project management, security,

engineering, industrial processes, financial portfolios, actuarial assessments, or public healthand safety.

The strategies to manage risk include transferring the risk to another party, avoiding the risk,

reducing the negative effect of the risk, and accepting some or all of the consequences of a

particular risk.

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Certain aspects of many of the risk management standards have come under criticism for

having no measurable improvement on risk even though the confidence in estimates and

decisions increase.

5.2 Main principles:

The assessment of risk is one of the major tasks of banks and other financial institutions.

Main risk factors can affect IFIC. The policy of the Board of Directors is to constantly

monitor and manage the various risks that IFIC faces in its business. For these purposes the

Bank operates a centralized Risk Management Division.

5.3 Structure of Risk Management:

The banks operates Risk Management departments that responsible for processing risk

management data for reporting to the Boar, management, analysts and other stakeholders, as

well as annual reports and financial statements. The Risk Management departments increased

their cooperation substantially for ensuring unification in processes, risk measurements and

methodology. Uniform processes enhance the scalability and increase transparency and

manageability and thereby aid senior management in their decision making.

5.4 Credit Risk Management:

While financial institutions have faced difficulties over the years for a multitude of reasons,

the major cause of serious banking problems continues to be directly related to lax credit

standards for borrowers and counterparties, poor portfolio risk management, or a lack of

attention to changes in economic or other circumstances that can lead to a deterioration in the

credit standing of a bank's counterparties. This experience is common in both G-10 and non-

G-10 countries. Credit risk is most simply defined as the potential that a bank borrower or

counterparty will fail to meet its obligations in accordance with agreed terms. The goal of

credit risk management is to maximise a bank's risk-adjusted rate of return by maintaining

credit risk exposure within acceptable parameters. Banks need to manage the credit risk

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inherent in the entire portfolio as well as the risk in individual credits or transactions. Banks

should also consider the relationships between credit risk and other risks. The effective

management of credit risk is a critical component of a comprehensive approach to risk

management and essential to the long-term success of any banking organization. For most

banks, loans are the largest and most obvious source of credit risk; however, other sources of

credit risk exist throughout the activities of a bank, including in the banking book and in the

trading book, and both on and off the balance sheet. Banks are increasingly facing credit risk

(or counterparty risk) in various financial instruments other than loans, including

acceptances, interbank transactions, trade financing, foreign exchange transactions, financial

futures, swaps, bonds, equities, options, and in the extension of commitments and guarantees,

and the settlement of transactions. Since exposure to credit risk continues to be the leading

source of problems in banks world-wide, banks and their supervisors should be able to draw

useful lessons from past experiences. Banks should now have a keen awareness of the need

to identify, measure, monitor and control credit risk as well as to determine that they hold

adequate capital against these risks and that they are adequately compensated for risks

incurred. The Basel Committee is issuing this document in order to encourage banking

supervisors globally to promote sound practices for managing credit risk.

Although specific credit risk management practices may differ among banks depending upon

the nature and complexity of their credit activities, a comprehensive credit risk management

program will address these four areas. These practices should also be applied in conjunction

with sound practices related to the assessment of asset quality, the adequacy of provisions

and reserves, and the disclosure of credit risk, all of which have been addressed in other

recent Basel Committee documents. While the exact approach chosen by individual

supervisors will depend on a host of factors, including their on-site and off-site supervisory

techniques and the degree to which external auditors are also used in the supervisory

function, all members of the Basel Committee agree that the principles set out in this paper

should be used in evaluating a bank's credit risk management system. Supervisory

expectations for the credit risk management approach used by individual banks should be

commensurate with the scope and sophistication of the bank's activities. For smaller or less

sophisticated banks, supervisors need to determine that the credit risk management approach

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used is sufficient for their activities and that they have instilled sufficient risk-return

discipline in their credit risk management processes.

5.5 Lending Risk Analysis (LRA)

LRA is the combination of analysis of various types of risks that may occur while a loan

have sanctioned. This is an analysis of the measurement of performance of a company or

individuals. When a loan has been provided by the bank then all types of risks have to

calculate. This is not easy to express all the pros and corns of LRA are not possible in this

report. Before sanctioning a loan it is necessary to analyze the LRA. IFIC Bank has

formatted this analysis which several sheets of analysis to identify the strength and weakness

and the repayment probability of the lending.

LENDING RISK ANALYSIS

Business risk

Industry risk- Supply Risk & Sales Risk

Company risk-

1) Company Performance Risk & Reliance Risk

2) Management Risk- Mgt. Competence Risk & Mgt. integrity Mgt. Competence Risk

3) Security Risk- security Control Risk & Security Cover Risk

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CHAPTER SIX

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6.1 Strength of the organization:

A wide range of business, industries & sector constitute the banks advance portfolio.

Major sectors they have extended credit included textile and ready made garments,

edible oil, telecom, media & technology shipping, steel & engineering, energy

chemical etc. IFIC Bank developed smooth relationship with their clients and

corporate business holders.

In case of services offered by all private banks in our country, IFIC Bank Ltd, has

maintained high quality.

Since the govt. has imposed some new rules regarding private banking operation,

IFIC Bank Ltd. easily cope up the given rules.

Adopting Islamic banking concept gives a new dimension in their services.

Regarding contribution towards countrys GDP they have contributed a handsome

amount per year.

Experience and competing workforce who have expertise knowledge about the bank.

Some loyal customer who always bring in new customers.

Management consists of knowledge and authoritative personnel.

Reputation of the management.

Interaction of the employees with the top management.

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6.2 Weakness of the IFIC Bank:

Problems with General Banking

1. To open an account some times people have given incomplete information which

will become a very acute when any dispute arises.

2. Because of good relationship sometime branch manager authenticated the account

with introducer.

3. Sometimes title of the account holder differs.

Problems with Cash

1. Because of unavailability of notes and coins they cant give the proper services to the

potential customers.

2. Big parties or for big amount parties wouldnt tk. 100 notes but the Bangladesh Bank

issues mix notes.

Problems with Advances

1. In case of advances in different project, the interest rate is too high.

2. Maximum parties have no financial strength.

3. To liquidated the collateral when the party is unable to pay the debit.

Sometimes the process of information transferring to the management is lengthy.

Only a few number of 4 branches online banking facilities.

On the counter services is sometimes unsatisfactory because of not having Enough

employees for the counter sector.

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6.3 Opportunity of the IFIC Bank:

Favorable in this climate by the commercial banking sector in our countries to

comparison other business, high funding cost for lending is great opportunity for the

bank.

Another mentionable opportunity of the PCBs is high grades services in regards of

customer service. Besides the NCBs services is very poor and so much traditional.

IFIC is going to credit card and ATM facility. It is a sign of product innovation which

IFIC can do further and successfully.

It has branches abroad which many commercial bank of the country don not have.

6.4 Threat of the IFIC bank:

Recovery Loan:

This is a vital thereat for IFIC Bank Limited because the financial market strength of our

country is not so strong. As far to recover the lending money and great thereat, because in

our country; business chain is so difficult like other countries and depend to other. So if the

monetary flow faces any obstacle it hampers the functioning of full chains. As a result

recovery face a great thereat for commercial banks as well as IFIC Bank Limited is not out of

this thereat.

Competitive Deposit collection of Fin Inst.

Another mentionable thereat for IFIC Bank limited is competitive deposit collection from the

market. We know total fund of our country is limited and foreign earnings ate also not

substantial. So as a old but new generation commercial bank of our country the bank is

facing a very touch competition for collection of its deposits from the market. It has created

new rule for taking deposit from government source.

Classification of loan

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Another major obstacle for banks is its classified loan. Through this picture is not new for

this particular bank it is exits to all commercial banks throughout the world. But our country

this bad culture created by the NCBs and its impacts conies to the PCBs also.

Many new have started operating in Bangladesh causing competition with IFIC.

Some other banks are about to start operations as commercial banks shortly.

CHAPTER SEVEN

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7.1 Findings:

Project loan requires testing of feasibility of project and judging the marketability of

the product. It requires infusion of knowledge of both the fields-marketing and

banking. But the bank has hardly any person with this kind of ability.

A vigorous and comprehensive orientation and training program should be launched

to enhance the employees skill because sometime they fail to inform the customer

about loan requirements without viewing companys book.

Hopefully the management decided to provide fully computerized services that will

booster services of the bank.

Few offers of the bank are competent. Even through many of them simply know the

working procedure of what they are doing but dont know the philosophy behind

doing those and some are inefficient to serve the customer.

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7.2 Recommendation:

The study was limited to some specific variables assuming other variables are insignificant to

selection the borrowers. Moreover, in the organization part the area of activities of IFIC Bank

Ltd. specifically loans and advance division is highlighted. For the viewpoint of above thefollowing can be recommended:

The rules and regulation that a borrower must follow is very difficult and sometimes

impossible. So, the bank should procedure easy and understandable to attract the

potential customer.

In the selection procedure, the new entrepreneur should be encouraged in getting

loans and those who have the records of regular repayment may be given preference.

Review the borrowers financial position periodically to measure the risk implication

from the beginning to full repayment of loan.

Not to emphasize on experience of the borrowers as the key factor in providing loan

facilities.

IFIC Bank Ltd. Can follow the modern banking approach called Unit Banking.

Units banking make the rules and regulation for their banking area and applicants are

easily fulfilling banks requirement.

7.3 FEW SUGGETATIONS:

IFIC Bank should reduce interest rate for given customer and small enterprise loan.

IFIC Bank should reduce interest on overdue amount, which depends on the category

of loan.

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Loan processing of 1%, which is very high, should be reduced.

Maximum loan limit size of the bank should increase.

At the time disbursement of loan Bank charges 0.50%-0.25 % as service charge that

should be reduced. The Bank takes Ltd. Needs to advertise through various media about types of loan

offers and other products.

7.4 Conclusion:

Form the learning and experience point of view I can say that I really enjoyed my internship

period in IFIC Bank Ltd. At the Banani Br. From the very first day. I am confident that this 3months internship program will definitely help me to realize my further carrier in the job

market.

Loans & Advances a bank is not so sufficient to measure and express perfectly within this

short time of my internship period. But it is a great opportunity for me to get used to with the

loan & Advance Procedure of Commercial banking of IFIC Bank. I have tried by soul to

incorporate the necessary relevant information in my report.

During the course of my practical orientation I have tried to learn the practical banking to

relate it with theoretical knowledge, what I have gathered and going to acquire from various

course.

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CHAPTER EIGHT

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8.1. BIBLIOGRAPHY

1. Published Article:

i. Prospectus of IFIC Bank Ltd.

ii. Leaflet, booklet and department published documents.

iii. Annual report of IFIC Bank ltd.(2008)

iv. My daily- daily note book, written during the orientation program.

v. Special project Report- Published by IFIC Bank.

8.2. Web site:

http://www.ificbankbd.com./

http://www.answer.com

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Appendix - 2

ACRONYMS

@:at the rate of.Acc: acceptance/accepted.

ACH: automated clearing house.

ADJ: adjustment.

AD: authorized dealer/after date.

A/O: account of.

A/R:all risk.

ASST: assistant.

A.T.M: automated teller machine.

BAL: balance.

B.C: bill of collection.

BG:bank guarantee.

B/E:bill of exchange.

B/B L/C: back to back L/C.

B/P:bills payable.

B/R:bills receivable.

BR: branch.

C.A.: current account.

CAP: capital/capitalization.

CLG: clearing.

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CSH: cash.

COM: commission.

C.C.: cash credit.

C/B: cash book.

Final Report-Ific Bank

Documents

Transcript of Final Report-Ific Bank