Loan Services of Commercial Banks of Bangladesh a Case Study on Three Selected Banks

8/19/2019 Loan Services of Commercial Banks of Bangladesh a Case Study on Three Selected Banks

1/56

Term Paper

on

Loan Services of Commercial Banks of Bangladesh: A Case

Study on Three Selected Banks

Submitted To:

Mr !uad "asan

Lecturer

#epartment of Marketing

$niversity of Chittagong

Chittagong

Submitted By:

Moslah $ddin Ahmed

BBA %"ons& 'th (ear

)*am +oll: ,---./0

Class +oll: ''11

Session: 23334,---

#epartment of Marketing$niversity of Chittagong

Chittagong

#ate of Submission: #ecember 2,5 ,--6

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Table of Contents:

Page No.Letter of Submission...................................................................................................... 5

Preface........................................................................................................................... 6Acknowledgment...........................................................................................................

!b"ecti#e of Stud$ ........................................................................................................ %

Sco&e and 'et(odolog$ of t(e Stud$))))))))))))))))))). *

+ationale of t(e stud$))))))))))))))))))))))))). ,-

Limitation of t(e Stud$.................................................................................................. ,,

Part A /0&lorator$ findings

!n National 1ank

2, National 1ank at a glace .................................................................................. ,4

24 Procedures of gi#ing loan b$ N1L................................................................... ,4

23 T$&e of loan sanctioned b$ N1L...................................................................... ,5

2 Amount of loan gi#en to different sectors during last 5$ears 2,**%4--. ............................................................................................. ,6

25 Procedures of loan reco#er$ b$ N1L............................................................... ,%

26 Classification of loan according to status of +eco#er....................................... ,*

2 Conclusion....................................................................................................... 4,

!n t(e basis of 7S1C

2, 7S1C at glance................................................................................................ 44

24 An o#er#iew of 7S1C.................................................................................... 44

23 Terms and conditions considered for loan........................................................ 43

2 8ifferent t$&es of loan9 7S1C &ro#ide for customer )))))))))... 4

25 acilit$ for customer. ...................................................................................... 45

26 Classification of loan according to status of +eco#er$..................................... 462 +e&a$ment sc(edule for different loan............................................................. 4

2% 7ome loan........................................................................................................ 4%

2* Conclusion....................................................................................................... 3-

!n Pubali 1ank

2, ;ntroduction...................................................................................................... 3,

24 Condition < &rinci&les of landing considered for loan. ................................... 34

23 8ifferent t$&es of loan < ad#ances.................................................................. 36

2 acilit$ for t(e customer.................................................................................. -

25 ;n#estment of fund........................................................................................... 326 Loan +eco#er$ Producer..................................................................................

2 Necessar$ documents....................................................................................... 52% Problem in Loan reco#er$................................................................................ 6

2* Conclusion....................................................................................................... 53

Part 1

Com&arati#e stud$))))))))))))))))))))))))))) 5


3/56

8ecember ,49 4--6.

To

'r. uad 7asan

Lecturer 8e&artment of 'arketing

=ni#ersit$ of C(ittagong

C(ittagong.

Sub7ect: Submission of Term Paper

Sir9

>it( an immense &leasure9 ; would like to submit m$ term &a&er entitled

?Loan Ser#ice of Commercial 1ank in 1anglades(. A stud$ in National

1ank9 7S1C and Pubali 1ank.@ >it( m$ limited sco&e and knowledge9 ;

(a#e tried m$ best to gain &ractical e0&erience and also tried to reflect t(e

same in re&ort. ; wis( $ou are (eartil$ consideration9 if t(ere is an$

discre&anc$ in re&ort.

; wis( to t(anks for $our e0cellent coo&eration9 cordial guidance and

efficient direction to &re&are t(e re&ort successfull$.

ours Sincerel$

))))))))))..

'osla( =ddin A(med

11A 27ons.

t(

ear/0am. +oll: 4---B53

Class +oll: %%

Session: ,***4---

8e&artment of 'arketing

=ni#ersit$ of C(ittagong

C(ittagong.

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P+)!AC)

Practical knowledge is reuired to clear #iews on different issues for t(e

11A students. Ne#ert(eless9 we (a#e to confess t(at t(e raw ?1usiness

Tem&o@ is muc( more com&le0 t(an t(e t(eoretical knowledge. T(e businessworld is going to be more critical in t(is new millennium and t(e &ractical

situations are c(anging da$ b$ da$. ;n de#elo&ed countries9 t(e business

sc(ools gi#e more &reference to &ractical knowledge t(an t(eoretical

knowledge. Dee&ing t(is #iew in mind9 our curriculum includes ?Term

Pa&er@ in t(e t( $ear 11A as a &art of t(e final e0amination.

; am t(e student of 11A 2'arketing9 w(ic( is #er$ &rofessional sub"ect of

toda$Es business world. >e know toda$Es would business acti#ities (a#e to

o&erate under t(e tremendous &ressure of ?FlobaliGation@. FlobaliGation is

t(e term9 w(ic( refers t(e w(ole as a #illage. T(erefore9 its all businesso&erations go o#er all countries of t(e world. ;n global &ers&ecti#e9 loan

ser#ice is t(e most im&ortant matter for all t$&es of bending ser#ice.

inancial transaction is t(e ke$ t(ings in banking ser#ice. Loan is one of t(e

most im&ortant sectors in t(is &ers&ecti#e.

T(e to&ic on w(ic( ; (a#e &re&ared m$ term &a&er is ?Loan Ser#ice of

Commercial 1ank in 1anglades(: A Stud$ in N1L9 7S1C9 and Pubali

1ank@. ; (a#e tried m$ best to state all of m$ acti#ities in t(is re&ort and

(o&e t(is re&ort will (el& to t(e readersH t(e student of business and it will(el& to enric( t(e seminar librar$ of t(e de&artment.

An$ kind of criticism and ad#ice for furt(er de#elo&ment of t(e re&ort will

be acce&ted cordiall$ as a sign of recognition to me.

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AC89;L)#


6/56

B=)CT>?)S ! T") ST$#(

/#er$ researc( is to (a#e some ob"ecti#e. 7owe#er9 t(e ob"ecti#es of t(e

stud$ can briefl$ be started as following:

2i To know about t(e e0isted ser#ice &ro#ide b$ t(e commercial bank.

2iiTo know about t(eir &roduct to offer t(e customers.

2iii To stud$ t(e bank background and its com&arati#e &osition in

ser#ice management.

2i# To know about t(e general trend in loan ser#ice.

2# To "ustif$ desirable attitude towards suitabilit$ of a&&ro&riate

sources of loan.2#i To know about t(e loan s$stem from t(e #iew &oint of 7S1C9

National 1ank and Pubali 1ank.

2#ii To stud$ (ow t(e$ &ro#ide different loan ser#ices to customers.

2#iii To know about t(e &resent situation of banking sector.

2i0 Com&etiti#e tec(niue in financial ser#ice.

20 To re#iew t(e &resent &osition of t(e &rescribed bank regarding t(e

loan reco#er$ of t(e outstanding loan amounts.

20i To determine t(e ualitati#e c(ange of loan reco#er$ &osition of it.

20ii To anal$Ge t(e &rocess of loan monitoring and su&er#ision offer

disbursement in order to reco#er t(e loan.

20iii To identif$ t(e default c(aracteristics of distributed loan in

different sectors.

20i# To anal$Ge t(e #olume of loan distributed and reco#ered during t(e

&eriod of 4--,4--5.

20# To suggest some remedies b$ w(ic( it can reduce t(e default loan

and at t(e same time to take some constructi#e &olicies for it.

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SCP) A9# M)T"#L


8/56

+AT>9AL) ! T") ST$#(

;n modern world9 wit(out lending facilities an$ &erson or an$ organiGations

donEt run (is "ob smoot(l$. Ca&ital is t(e blood of business. And ca&italEs

main source is loan from different commercial bank. Among t(e bank w(ic(

; (a#e c(osen for m$ term &a&er9 7S1C and National 1ank are &ri#ate 1ank

and Pubali 1ank is &ublic 1ank. ; (a#e gat(er knowledge about t(e

differences of loan facilities offering to t(e customers. And t(e more reasons

are &ointed below:

7S1C is t(e largest multinational banking cor&oration in t(e world.

National 1ank is t(e successful banking organiGation in our countr$.

Pubali 1ank struggle for t(e long time for (is e0istence in our countr$.

7S1C ser#es t(e customer worldwide basis.

National 1ank offers interest on dail$ balance.

Pubali 1ank increases t(e (eritage of t(e countr$ b$ doing t(eir

business o&eration.

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9/56

L>M>TAT>9 ! T") ST$#(

; faced some &roblem w(ile to &re&ared m$ stud$. As m$ re&ort was related

wit( loan ser#ice and e#er$t(ing on it is &erformed centrall$ in 8(aka so it

is so difficult for me to com&lete it accuratel$ sta$ing in C(ittagong.

2i 8ue to lack of facilities9 ; could not collect necessar$ data related to

loan s$stem in 1anglades( about t(e &resented bank.

2iiT(e inter#iews were reluctant to gi#e us enoug( time.

2iii T(e manager of 7S1C9 National 1ank and Publi 1ank did not gi#e

some of t(eir secret information. or t(is reason9 ; could not &re&are m$ term &a&er meaningfull$.

2i# 'ost of t(e data were collected t(roug( uestionnaire met(od. So9

t(e reliabilit$ of t(e collected data was based of t(e sincerit$ and

t(e cordialit$ of t(e inter#iews.

2#T(e$ are reluctant to &ro#ide confidential data.

2#i ;n man$ cases9 u& to data information is not &ublis(ed.

2#ii Fetting rele#ant &a&ers and documents were strictl$ &ro(ibited.

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PA+T @ A

)*ploratory !indings

9 9AT>9AL BA98

>9T+#$CT>9

National bank is one of t(e renowned sc(eduled commercial bank of

1anglades(. !n 'arc( 439,*%3 national bank limited 2N1L (as started its

o&eration wit( an aut(oriGed ca&ital of Tk. ,9--9--- millionafter t(en it (as

successfull$ continued its o&eration allo#er t(e countr$ b$ its 6 branc(es.

8uring 4--3 N1L earned an o&erati#e &rofit of taka ,-5 crores.

P+C)#$+)S ! ?>9< LA9 B( 9BL

N1L generall$ &ro#ides s(ortterm loans to indi#iduals and industries. T(eir

basic &rocedures of gi#ing loans are: Submission of a&&lication b$ t(e borrower

A&&raisal of t(e &ro"ect b$ t(e bank

Consideration of t(e bank about itself.

Consideration of t(e bank about t(e customer.

Consideration of t(e credit information bureau of 1anglades( bank.

Submission of Application by the Borroer

T(e first and foremost &rocedure of loan gi#ing is t(e submission of loan

a&&lication b$ t(e borrowert(e a&&lication must contain t(e amount of loan

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reuired9 t(e use of t(e loan9 t(e cost of t(e &ro"ect for w(ic( loan is

reuired and for an industrial loan industr$Js annual re&ort9 balance s(eet9

statement s(owing t(e recent condition of t(e firm must be included. >it(

a&&lication t(e securit$ against t(e loan9 t(e term or &eriod for w(ic( loan is

reuired9 t(e submission &eriod are ob#iousl$ included.

Appraisal of the Pro7ect by the Bank

Pro"ect a&&raisal is done b$ t(e bank b$ e#aluating t(e loan a&&lication and

ot(er statements attac(ed wit( it. /ac( of t(e as&ects related to &ro"ect

a&&raisal are s(own below

Tec(nical feasibilit$: bank "udge it b$ a detailed assessment of t(e

following factors9

Location of t(e &ro"ect.

Tec(nolog$ used.

Plant < eui&ment.

Construction < installation.

/conomic necessit$: taking into account t(e following factors assesses t(is

as&ect:

T(e res&onse of t(e t about t(e &ro"ect.

>ill t(e &ro"ect contribute to national econom$K

>ill t(e &ro"ect increase t(e em&lo$ment le#elK

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12/56

inancial iabilit$: T(is reuires careful anal$sis of t(e following:

Cost of t(e &ro"ect.

Sources of finance.

8ebt euit$ ratio.

Profitabilit$

+e&a$ing ca&acit$.

+e&a$ment sc(edule.

'anagerial com&etence: t(e loan a&&lication from concerns (a#ing

com&etent and (onest management finds t(e most fa#orable consideration.

Consideration of the Bank about >tself

T(e bank ad#ancing mone$ looks to its &osition regarding liuidit$9 safet$9

and &rofitabilit$.

Liuidit$: for t(is N.1.L. &refers s(ortterm loan.

Safet$: t(is includes t(e re&a$ing ca&acit$ of t(e borrower.

Profitabilit$: ;t is t(e most im&ortant as&ect to consider

Consideration of tire bank about borroer:

N1L consider t(e c(aracter9 ca&acit$9 and ca&ital of t(e borrower. 1ank

collects t(at information from:

;nternal sources: loan a&&lication9 inter#iew of t(e borrower9 financial

statement9 and banks own record.

Fo#t. Aut(orit$: income ta0 office9 go#t. FaGette9 register of "oint

stock com&an$9

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13/56

!t(er Sources: ;ns&ection of t(e bank9 audit firm9 market re&ort9 and

credit information bureau.

Consideration of the Bangladesh Bank

1ank sends all t(e state s to t(e 1anglades( bank for t(eir consideration. T(e

de&artment of credit information bureau of 1anglades( bank &ro#ides

informs anon of t(e borrower or com&an$ and on b of t(ose consideration

loan is sanctioned b$ N1L.

T(P)S ! LA9 SA9CT>9)# B( 9BL N1L (as se#eral loan &rograms or sc(emes for different grou&s of clients.

Among t(ose following can be mentioned:

,. >orking ca&ital to trading (ouses

4. ;m&ort finance9 e0&ort finance

3. 1ank guarantee

. Term loams for industrial unit

5. >orking ca&ital to industr$

6. 'icro finance

. Procurement of consumer goods

%. Credit card

*. Contractors for construction work9 e.g. building9 roads9 bridge etc.

,-. +ural Credit in 1rand area.

The loans 9BL provides under those different programs are:

Loan 2general

Cas( credit 2($&ot(ecation

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Cas( credit 2Pledge

Sod 2secured o#er draft

Pad 2&a$ments against document

LC 2letter of credit

L;'. 2loan against im&orted merc(andise

LT+. 2Loan against trust recei#ed

/CC 2/0&ort cas( credit

PC 2&ersonal credit

AM$9T ! LA9 ?)9 T #>!!)+)9T S)CT+S #$+>9<

LAST ()A+S %23314,--'&

;n below a com&lete date is s(owing t(e amount of loan sanctioned b$

N.1.L. in different t$&es of loans and sc(emes from ,**% to 4--.

Loans B

Sc(emes

Loan amount 2in million

,**% ,*** 4--- 4--, 4--4 4--3 4--

1ank

!#erdraft

36%*.3* 46.4- 5354.56 65,3.* 656.3* 53%.6 63*4.%6

Cas(

credit

3*65.% ,64.3% 3,,.5 64*.6 5,*3.54 56*.5 6-*.5,

Loan

2general

3-,.-4 4*-.* -*-.3% 3-3.% 3635.-5 ,,., 3%6%.4

+eal estate

loan

5-.%* . %*.45 5,5.33 5.5 66,.*4 6.4*

L.T.+. ,44.4 434.65 45.-6 654.3 ,,,4.*- ,,46.,% ,%-.65

P.A.8. ,%5.6% 465.6 4%.,5 34*.6 45.-5 ,.56 3,3.36

Consumer

Credit

.3, 6-.6- 6-.%3 *3.3, *3., *3.33 *%.6

1ills

;nland

5-6.,, ,3.54 43.33 ,3.6* ,-5*., %63.% *%,.6,

1ills

oreign

6%-.4, *6*.3 5.3 6,.%% 4%4.4 43.% 45.-5

!t(ers 4,-.6% 3-6.-% 43*.3, ,%56.%* ,*4.3% ,*,%.53 433,.3*

Total ,6-56.- ,%43*.54 ,%553.66 4-4--.64 4,6.*5 4446,.6 44%-.4

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9o in belo a data is shoing in hich sector 9BL Provides ho

much loan %amount of loan in million&

Sectors ,**% ,*** 4--- 4--, 4--4 4--3 4--

Agriculture %.4, ,-3.4 ,,,.3- 63.46 %*.54 ,,,.*- 6,3.--

;ndustr$ -%.,5 3-4.,% 3-6.*, ,-.,- 3-3., 3*-.- 35.,,

;m&ort

finance

,53*.64 ,%,6., ,*.%4 43.5% 34-.3% ,6*.,3 %4-,.4

/0&ortfinance

3*-.53 ,34.4 *,.3, *6-. 5%%.6 6,3.%- *6*.

!t(ers 6-.%* %%5.5, 4-.4 %-3-.* *-66.,5 5-.64 34,.36

Total ,-656.- ,%43*.54 ,%553.66 4-4--.64 4,6.*5 4446.,5 44%-.

0

5000

10000

15000

20000

25000

A m o u n t o f l o a n ( i n t a k a )

1998 1999 2000 2001 2002 2003 2004

Financial year

Loan givenby NBL during 1999-200 (amount in million)

amount of loan

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16/56

P+C)#$+)S ! LA9 +)C?)+( B( 9BL

;n w(ate#er form bank ad#ances are granted t(e$ are re&a$able on demand

or at t(e e0&ir$ of some fi0ed &eriod. !#erdrafts and cas( credit are

re&a$able on demand. ;f a borrower fails to make re&a$ment of t(e dues t(en

banks consider t(e ste&s necessar$ to reco#er t(e debt. T(ose ste&s are: of

t(e dues t(en banks consider t(e ste&s necessar$ to reco#er t(e debt. T(ose

ste&s are:

,. /0erting moral &ressure.

4. Notice.

Those are discussed belo:

,. )*erting moral pressure: t(e banker #isits t(e borrowerJs &lace of

business and find out t(e causes of non&a$ment of t(e bankJs dues.

T(e bank ma$ also reuest some influential customers of t(e area to

e0ert &ressure on t(e borrower to clear bankJs dues. ;f is an$ grantor9

be is also called u&on to ad"ust t(e accounts.

4. 9otice: in case of borrower does not ad"ust t(e account as desired9 t(e

onl$ course left o&en to t(e bank would be to send a notice b$

registered &ost to t(e borrower and to t(e grantorin notice a sti&ulated

&eriod is gi#en for re&a$ment of loan. ;f t(e borrower fails9 bank

liuidates t(e securities in &ossible market rate eit(er in &ublic auction

or b$ &ri#ate negotiation. >(ere inter#ention of t(e court is necessar$

to dis&ose of securities N.1.L. obtains courtJs #erdict.

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17/56

+ecover in case of death of borroer

;n t(e e#ent of deat( of a borrower before or after filing suit or obtaining t(e

decree9 t(e banker will (a#e to &roceed against t(e legal re&resentati#e of t(e

deceased.

+ecover in case of insolvency of the borroed

;n case of insol#enc$ of t(e borrower9 t(e &ro&ert$ of t(e insol#ent is taken

o#er b$ t(e official assignee or t(e official recei#er. T(e bank also submits a

&a&er of debt due to t(e defaulting borrower to t(e concerned court.

CLASS>!>CAT>9 ! LA9 ACC+#>9< T STAT$S !

+)C?)+

N1L classified t(eir loan in two classes according to reco#er$ status. T(ose

two classes are:

,. =nclassified loan

4. Classified loan

Those are discussed belo

,. $nclassified Loan:

T(e loans w(ic( are alread$ reco#ered are known as unclassified loans.

4. Classified Loan:

T(e loan w(ic( are not reco#ered $et known as classified loan. T(e$ are

again subdi#ided into Frou&s:

a. Sub4Standard Loans: T(ese (a#e a (ig(er c(ance to reco#er.

b. #oubtful Loans: t(ese (a#e a #er$ lower c(ance to reco#er.

c. Bad #ebts: t(ese are not reco#ered b$ bank at all.

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18/56

=nclassified < Classified loan during ,**%4--4

2Amount in 'illion Taka

Classes of

loan

2331 2333 ,--- ,--2 ,--, ,--0 ,--'

=nclassified ,-*,,.*3 ,43*.35 ,44.36 ,5,.,, ,545.66 ,666.6 ,%%5,.%

Classified

2M

34.-M 3,.%M 3,.M 4%.,5M 4%.%M 45.,M ,.6M

,.sub

standar

d

3-.34 5,%.3 5*.43 45.-6 3,.36 %%.*- 464.33

4.doubtful 5.6 ,.%% *,.3 ,63.-4 54.,% ,3.65 *3.--

3.bad debts 3*3%.6% %63.*4 55.6 546*.3 5364.,5 5-.*6 3%65.-6

Total 26-/6' 21,03/, 21//066 ,-,--6, ,263/ ,,,/2/ ,,1'-'0

A com&arati#e c(art of total loan sanction < total loan reco#ered b$ N1L

during ,**%4--4 is s(own below:

!om"arative c#art of total loan $ recovered

loan

0

5000

10000

15000

20000

25000

1 9

9 8

1 9

9 9

2 0

0 0

2 0

0 1

2 0

0 2

2 0

0 3

2 0

0 4

Financial year

A m o u n t ( i n t a k a )

Total loan

Recovered loan

C9CL$S>9

4-


19/56

According to rules of 1anglades( bank t(e bank w(ose &ercentage rate of

classified loan is 35M and abo#e9 marked as &roblem bank w(ic( s(ows

t(e bad &erformance of t(at bank. 1$ anal$Ging t(e abo#e data and gra&(s9

we can sa$ t(at t(e &erformance of N1L is uit well and t(eir rate of

reco#ering of loan is increasing. 1anglades( bank (as fi0ed a new rate of

classified loan for t(is fiscal $ear 24--34-- and it is 4-M. >(ile talking

wit( N1L officials t(e$ inform us t(at t(e$ can be able to ac(ie#e t(e target

and t(e$ are now working for t(is &ur&ose. Again from t(e amount of loan

gi#en in t(e last fi#e $ears we see t(at N1LJs in#estment is increasing. So

e#aluating all t(e circumstances about loan sanction and loan reco#er$ we

can conclude wit( t(e decision t(at t(e &erformance of loan management b$

national bank limited of 1anglades( is in a satisfactor$ &osition. And t(is

makes t(em one of t(e leading commercial bank of 1anglades(.

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20/56

9 "9< 89< S"A9

9T+#$CT>9

;ntroductoril$ for decision making in an$ organiGation suc( as 1anking

Cor&oration. ;t is one of t(e most difficult tasks in business finn. T(e

lender wants to c(arge a (ig( enoug( rate to ensure t(at eac( loan will be

&rofitable and com&ensate t(e bank full$ for t(e risks in#ol#ed.

7owe#er9 t(e loan rate must also be low enoug( to accommodate t(e business customer is t(e loan < not be dri#er awa$ to anot(er lender or into

t(e o&en market for credit.

A9 ?)+?>); ! "SBC

T(e 7S1C grou& is one of t(e largest banking and financial ser#ice

organiGations in t(e world9 wit( well establis(ed business in /uro&e9 t(e

Asia Pacific region9 in =SA9 t(e 'iddle /ast < Africa.

;t is t(e largest bank incor&orated in t(e 7ong Dong s&ecial

administrati#e region. ;ts (ead office: ; IueenJs +oad Central9 7ong Dong9

/uro&eJs largest and t(e worldJs second largest bank b$ market ca&italiGation

5t( largest international firm b$ aggregate sales9 assets9 &rofit and market

#alue.

7S1C incor&orated in 1anglades( in ,**6 7S1C started its o&eration

in 1anglades( from anc(or tower in 8ecember ,**6.

T(ere are 6,6 1ranc(es of 7S1C in t(e world and 5 branc(es in

1anglades(. C(ittagong branc( is one of t(em. Now we discussing about

44


21/56

t(e loan section of 7S1C. 7S1C (as a loan section called '$ loan.

=nder J'$ LoanJ sector 7S1C &ro#ide different loan t(e customer.

T)+MS A9# C9#>T>9S C9S>#)+)# !+ LA9

; A&&lication latter from customers.

ii Customers s(ould be 45 $ears and t(e loan must end before t(eir

age reac(es 6- $ears or retirement date9 w(ic(e#er is earlier.

iii Customer s(ould be em&lo$ed in a wellestablis(ed com&an$ for

4 $ears.

i# Customers minimum mont(l$ income s(ould be 18T ,%9--- if

$ou are a salaried indi#idual. Self em&lo$ed indi#iduals. Self

em&lo$ed indi#iduals can also a&&l$ sub"ect to &roof of income

and t(e mont(l$ income s(ould be 18T 5-9---.

# ;f customers are an Auto&a$ or C/P$ customer9 t(eir mont(l$

salar$ s(ould be 18T ,59---

#i Loan re&a$ment are made in t(e from of eual mont(l$

installment 2/'; w(ic( can be automaticall$ debited from

customers &ersonal account (eld wit( 7S1C.

#i Customer (as t(e fle0ibilit$ of c(oosing t(e re&a$ment &eriod

2,49 49 369 % or 6- installments.

#iii Partial and full &re&a$ment is also allowed.

43


22/56

#>!!)+)9T T(P)S ! LA95 "SBC P+?>#) !+ C$STM)+

%A& Personal >nstallment Loan:

7S1CJs &ersonal loan is an$ &ur&ose loan. or customerJs con#enience

7S1C (a#e categoriGed into t(e following:

2, Professional Loan

2ii Lifest$le loan

2iiiurniture loan

2i# >edding loan

2# esti#al loan

2#iTra#el loan

2#ii 'otorbike loan

2#iii Student loan

A brief above these as belo:

%i& Professional Loan: To meet farmerJs &rofessional needs.

%ii& Lifestyle loan: To add com&ort to customerJs &ersonal life.

%iii& !urniture loan: To decorate customerJs (ome wit( t(e rig(t

furniture.

%iv& ;edding loan: To fulfill customerJs dream of a &erfect wedding

and good beginning of a new life.

%v& !estival loan: To minimiGe customerJs &urc(asing &ower during

#arious festi#als9 a festi#al loan is going to be

T(e following loans wit( different benefits are also a#ailable

under &ersonal installment loan.

%vi& Travel loan: To meet t(e tra#elersE necessit$.

%vii& Motorbike loan: 'otorbike loan increase customersE &urc(asing

&ower.

%viii& Student loan: To meet studentJs reuirement.

%B& Car Loan: Car loan gi#ing facilit$ to t(e customer to bu$ car.

4


23/56

%C& "ome Loan: To bu$ or reno#ate a (ome. T(is loan is gi#en after t(e

construction of (ome.

!AC>L>T( !+ C$STM)+

Customer will be able to take t(e &leasure of t(e following benefits b$

a#ailing an$ of t(ese loans.

,. No &ersonal guarantee or eac( securit$.

4. ;n case of &rofessional loan9 lifest$le9 furniture and weeding

loan9 t(e amount ranges from 18T 5-9--- to 18T; ,-9

--9--- or ma0imum of tour times of mont(l$ income9

w(ic( is lower. Loan amount ranges from 18T 5-9--- to

18T 59 --9--- for tra#el loan9 18T 5-9--- to 18T 49

--9--- for 'otorbike loan.

18T 5-9--- to 18T 95-9--- for student loan or a ma0imum

of tour times of mont(l$ income9 w(ic(e#er is lower.

T(e loan amount ranges from 18T ,9--9--- to 18T

%9------ for car loan 2u& to a ma0imum of 5M for brand new car or -M

for reconditioned car #alue

Loan siGe between a minimums of 18T 5-9--- and

ma0imum of 18T ,-9---9--- for (ome loan. A ma0imum loan amount of

-M of t(e total #alue of t(e a&artment of -M of t(e land #alue for

reno#ation.

3. ;n case of auto &a$ C/PO customers t(e$ can get 6 times <

t(en times of t(eir mont(l$ income res&ecti#el$

. Com&etiti#e interest rates

5. Low &rocessing fees.

45


24/56

6. Customers can re&a$ t(e loan in ,49 49 369 % or 6-

mont(s. ;n case of (ome loan re&a$ments b$ eual

installments of u& to ,5 $ears.

CLASS>!>CAT>9 ! LA9 ACC+#>9< T STAT$S !

+)C?)+(

Classification of loan according to status of reco#er$.

=nclassified and classified loan

4--,4--5 2;n Tk.Class of

loan

4--, 4--4 4--3 4-- 4--5

=nclassified 4***

3----.--

3-***3

5--.--

3**36

----.--

**4

----.--

5***-56---.--

Classified

2M

.-5M .-5M .-3M .-4M .-4M

,.Sub

standard

9--9---.-- 59--9---.-- 95-9---.-- 59--9---.-- 69--9---.--

4. 8oubtful 49--9---.-- ,9--9---.-- ,95-9---.-- 49--9---.-- 39--9---.--

3. 1ad debts 3-9---.-- 459---.-- -9 ---.-- 3-9---.-- 9---.--

Total 45-9--9--9--- 3,-9--9--9--- 3%-9--9--9--- 5-9--9--9--- 6--9--9--9---.--

+)PA(M)9T SC")#$L) !+ #>!!)+)9T LA9

Personal >nstallment Loan:

Loan amount 2, Months ,' Months 06 Months '1 Months 6- Months

5-9--- 95* 496, ,9,,

,--9--- *9-* 9*4, 395,,

,5-9--- ,3966 93%, 395,,

4--9--- ,%9,* *9%, 9644

3--9--- 494*, ,96%, ,-9644 --9--- 3693%% ,*96%, ,9,64 ,,93*

5--9--- 59% 496-4 ,9-3 ,94** ,494*3

65-9--- 5*9,4* 3,9*%4 439-,3 ,%95%* ,59*%-

5-9--- 6%9446 369*-4 46955 4,9% ,%93*

,9---9--- *-9*6% *94-3 359-5 4%95*% 495%5

46


25/56

;nterest rate: ,6.5M

!or C)PS.Auto Pay . Customer

Loan amount 2, Months ,' Months 06 Months '1 Months 6- Months5-9--- 9*- 4-, ,-*

,--9--- %9** %-4 3,%

,5-9--- ,396* 4-4 5,4

4--9--- ,9*5% *6-3 3%36

3--9--- 469*3 ,- ,-45

--9--- 359*,5 ,*4-6 ,364 ,-*3,

5--9--- 9*% 4-- ,-%* ,366 ,,635

65-9--- 5%9364 3,4-* 444,6 ,63 ,5,45

5-9--- 693, 36-,- 4563 4-*5 ,54

,9---9--- %*9%% %-,3 3,% 434 4346*,945-9--- ,,4943 6--, 443 3,5* 4*-%6

,95--9--- ,396%, 4-4- 5,46 -**- 3*-3

49---9--- ,*955 *6-46 6%356 5653 653

4


26/56

"M) LA9

Monthly installments in B#T 2',/D %annual reducing balance&

Loan amount / years years 2- years 2, years 2/ years

5-9--- ,%3,5 ,6% ,4,-- ,,,6 ,-3-

,9---9--- 44- ,*5%4 ,6,33 ,%%5 ,33%

,95--9--- 3663- 4*33 4,** 4434 4-6-49---9--- %%- 3*,63 34465 4*6* 45

495--9--- 6,-5- %*5 -33, 34,, 33

39---9--- 345* 5%5 %3* 653 ,4,3

395--9--- %56* 6%535 566 54-*5 %-%,

9---9--- *6* %346 653- 5*53 5*5-

95--9--- ,-*%%* %%,, 45*6 66** 6,%,*

59---9--- ,44-** **- %-664 4, 6%6%

95--9--- ,%3,% ,6%6, ,4-**3 ,,,634 ,-3-3,

,-9---9--- 4,* ,*5%, ,6,343 ,%%4 ,33

;t is calculated under t(e annual reducing balance met(od.

Monthly installment for a loan of B#T '5---5---

Loan Term

'ont(l$ +educing Annual +educing

Sa#ings

wit(

7S1C

218T

At ,.--M

wit(

7S1C

218T

Total

Pa$me

nt

7S1C

218T

At ,.45M

wit(

ot(ers

218T

Total

Pa$me

nt

!t(ers

218T5 $ears *3- 55%- *6* 5%6-- 463--

ears *6, 64*64 %346 65*3% 4%466-

,- ears 64,- 54%- 653- 36-- 4*-6-

,4 ears 5%6 %4*% 5*53 %5334% 4*53

,5 $ears 534- *5%%6-- 5*- *%*,--- 3-4--

4%


27/56

;t is calculated under t(e mont(l$ reducing balance met(od.

CA+ LA9

Loan amount 2, Months ,' Months 06 Months '1 Months 6- Months

,--9--- %** %-4 3,% 433 434

3--9--- 46*3 ,- ,-45 %,*% 6*%,

5--9--- %* 4-- ,-%* ,366 ,,635

--9--- 64%5, 36,- 43*45 ,*,4* ,64%%

,9---9--- %*%% %-,3 3,% 434 4346*

,95--9--- ,36%, 4-4- 5,46 -**- 3*-3

39---9--- 46*364 ,-3* ,4-533 %,*%- 6*%-559---9--- %*36 4--65 ,-%%* ,36633 ,,634

%9---9--- ,%4* 3%,- 4344 4,%6,4 ,%6,

+educed interest rate is ,M

;f9 an$ borrower failed to re&a$ an$ installment9 t(e$ informed b$ four

times:

irst9 ;nformed automaticall$ b$ com&uter9 tele&(one etc.Second9 ;nformed wit( a strong notice9 &ro#ide b$ 7S1C.

T(en t(ird and fort( ste&s &ro#ide wit( more strong notice.

After t(at9 7S1C go to court9 &ro#ide warrant$ and suc( kinds of acti#it$ of

court of law.

'oreo#er 7S1C9 c(ange 4M &enalt$ on (is installment on da$ basis9 from

w(ic( da$9 t(e installment is not re&aid.

4*


28/56

C9CL$S>9

7S1C in 1anglades( (as t(e tec(nolog$ to &ut t(e customer in better

control of routine o&eration < (as been successfull$ (andling &a$ment

reuirements t(roug(out t(e nations for its cor&orate clients.

A recei#able management is crucial to use financial c$cle. 7S1C (a#e

de#elo&ed &roducts for customers to efficientl$ manage customersE

reuirements < re&lace cost.

T(us9 from t(ese o#erall discussions we can sa$ t(at9 7S1C (a#e a

well arrange loan management s$stem is 1anglades(.

3-


29/56

9 T") BAS>S ! P$BAL> BA98

>9T+#$CT>9

Pubali 1ank Limited was incor&orated in t(e $ear ,*5* under t(e name

limited under com&anies Act ,-*,3. After t(e countr$Es liberation in ,*,9

t(e 1ank was nationaliGed as &er &olic$ of t(e go#ernment of t(e &eo&leEs

re&ublic of 1anglades( under t(e 1anglades( 1ank 2NationaliGation order

,*4 and was renamed as Pubali 1ank. Subseuentl$ t(e bank was

denationaliGed in t(e $ear ,*%3 and was again incor&orated in 1anglades(under t(e name and st$le of Publai 1ank Limited in t(at $ear. T(e

go#ernment transferred t(e entire under taking of Pubali 1ank to Pubali

1ank Limited9 w(ic( took o#er t(e same as a going concern.

T(e 1ank is engaged in all t$&es of commercial banking ser#ices wit(in t(e

sti&ulations laid down b$ 1ank com&anies Act ,**, and directi#es as

recei#ed from 1anglades( 1ank from time to time. ;t (as 35- branc(es all

o#er 1anglades(. ;t is listed in t(e stock e0c(anges at 8(aka and C(ittagong

as a &ublicit$traded com&an$ for its general class of s(ares branc(es are

in rural areas and branc(es in urban area. ;t (as ; cor&orate branc(es.

Se#en in 8(aka and two in C(ittagong.

Agrabad cor&orate branc( is one of t(em. ;t is an im&ortant and effecti#e

branc( of Pubali 1ank.

3,


30/56

C9#>T>9S E P+>9C>PL)S ! L)9#>9<

Principles of Lending

Lending mone$ to different kind of borrowers is one of t(e most im&ortant

functions of a bank. Lending is a risk$ business. T(e borrowers from a bank

range from indi#iduals to &artners(i& from. Qoint stock com&anies9

institutions9 societies9 cor&oration etc engaged in suc( acti#ities as farming9

trans&ort9 business and industr$ etc. T(e nature of t(eir economic acti#it$9

t(e location of business9 financial stabilit$9 earning and re&a$ing ca&acit$9

&ur&ose of ad#ance9 securities for ad#ance all differ. To t(is business of

lending successfull$ and &rofitabl$9 a banker (as to follow certain &rinci&les9

some of w(ic( are mentioned below.

Safety:

T(e$ #er$ sur#i#al of a banker de&ends on t(e safet$ of (is loans and

ad#ances. 1ankers base of o&eration is t(e mone$ of (is de&ositors9 w(ic(

constitutes (is stockintrade. T(e mone$ being re&a$able on demand or a

after a s(ort notice determines t(e ca&acit$ of a 1anker as to t(e &eriod for

w(ic( (e can safel$ lend wit(out an$ risk. 1anker cannot indulge in

unsecured or long dated ad#ances. ;t de&ends u&on t(e nature of (is funds

and &ractical e0&erience9 sound common sense and "udgment about t(e

customer.

LiFuidity:

T(e liuidit$ of an ad#ance means its re&a$ment on demand or on due date

or after a s(ort notice. T(e loan must stand fair c(anges of re&a$ment

according to t(e re&a$ment sc(edule. ;t is utmost im&ortant t(at bank loans

must be re&aid as t(e$ become due ot(erwise t(e liuidit$ &osition of t(e

bank is endangered.

34


31/56

#ispersal:

T(e ad#ances s(ould be broadbased as far as &ossible and must be in

kee&ing wit( t(e de&osit structure. T(e ad#ances must not be in one

&articular direction or to one &articular industr$. T(ere s(ould be s&read of

ad#ances against different securities9 industries as well as areas.

8i#ersification of ad#ances will s&read risk and will im&ro#e safet$ of t(e

outstanding ad#ances.

+emuneration:

T(e #ariation in t(e rtes of interest c(arged de&ends on t(e following

considerations

T(e rate of interest on ad#ances against first class securities is lower t(an in

t(e case of clean o#erdraft or on ad#ances w(ere t(e securities (eld are not

easil$ realiGable or are of less stable c(aracter or of doubtful #alue.

Ad#ances for fi0ed &eriods and for fi0ed amounts are generall$ on lower

rates t(an fluctuating o#erdrafts w(ere t(e borrower is free to utiliGe t(e

limit according to (is reuirementH &a$ing interest onl$ on t(e amount

actuall$ utiliGed. T(e banker on t(e ot(er (and is under an obligation to kee&

funds in readiness and (ence for t(e lock u& of funds (e c(arges a (ig(er

rate of interest.

T(e rate of interest c(arged on ad#ances normall$ de&ends on t(e following

factors.

a. ;nterest &a$able to de&ositors

b. 8e&reciation to be &ro#ided on t(e fi0ed assets of t(e bank.

c. Staff salaries9 &ro#ident and &ension funds9 and ot(er o#er(ead

e0&enses.

d. Pro#ision to meet t(e &ossible bad debts.

33


32/56

e. +eser#e fund to be created out of &rofits for t(e safet$ and

securit$ of t(e bank for unknown contingencies.

f. 8i#idend to be &aid to t(e s(are(olders.

g. +isk$ borrowers are to &a$ (ig(er rate of interest.

Suitability:

Suitabilit$ of an ad#ance from national #iew&oint (as t(erefore cme to be

regarded as one of t(e &rinci&les of lending. T(e banker s(ould lend9 if t(e

&ur&ose of t(e ad#ance is for o#erall national de#elo&ment.

Purpose:

A banker studies &ur&ose of ad#ance before lending. T(e funds borrowed are

em&lo$ed for un&roducti#e &ur&oseH t(e re&a$ment in t(e normal course will

become uncertain. 1anks9 t(erefore9 s(ould refuse ad#ances for s&eculati#e

and un&roducti#e &ur&ose and s(ould be #er$ cautious in entertaining suc( a

&ro&osal.

Security:

T(e securit$ offered for an ad#ance is onl$ a cus(ion to fall back u&on in

case of need. A banker would not normall$ like to reco#er t(e ad#ance from

t(e sale of t(e securit$. T(e$ would &refer an ad#ance9 w(ic( will come

back in time from t(e normal source. Securit$ ser#es as a safet$ #alue for an

une0&ected emergenc$.

Profitability

As a matter fact t(e difference between t(e interest recei#ed on a ad#ances

and t(e interest &aid on de&osits constitutes a ma"or &ortion of t(e 1ankEs

3


33/56

income. 1esides9 foreign e0c(ange business is also (ig(l$ remunerati#e. So9

banks will not allow an$ ad#ance unless a fair return from it is assured.

BorroerGs character5 capacity5 standing5 means E 7udicious selection

>(ere#er a banker lends mone$9 (e must carefull$ consider t(e c(ances of

(is being re&aid b$ t(e borrowers9 w(ic( de&end u&on t(eir c(aracter9

ca&acit$9 standing and means. T(e banker ma$ sometimes allow an

unsecured loan to substantial customer in w(ose integrit$ and (onest$ (e (as

com&lete confidence. 1ank officials on t(e basis of t(e information t(e$

(a#e and ot(er factors can "udge c(aracter and (onest$ in eac( case. T(e

standing and means of t(e borrowers can be known from t(eir bank account9

business record9 market9 good will9 etc. Pro&er selection of t(e borrower is

t(erefore9 t(e &rime &rinci&le of lending.

Safe margin:

>(en a securit$ is offered to co#er a bank ad#ance9 t(e banker (as to

consider two as&ects9 t(e first is economic9 consisting of an estimate of t(e

&robable market #alue of t(e securit$ at time of its realiGation9 and t(e

second is t(e legal as&ect9 t(at is t(e$ #alidit$ of t(e securit$ offered and t(e

difficulties t(at ma$ arise in its enforcement. T(e banker s(ould take care to

ensure t(at not onl$ its #aluation is a accurate but t(at9 in t(e case of

securities of a s&eculati#e nature w(ic( are sub"ect to (ea#$ fluctuations9 t(e

margin of safet$ is maintained in t(e form of a must (ig(er &ercentage t(an

it is in ot(er cases.

35


34/56

Supervision5 9ational.Social interest E Credit


35/56

Secured Advances:

Secured Ad#ance means a loan or ad#ance made against t(e securit$ of

assets9 t(e market #alue of w(ic( is not at an$ time less t(en t(e amount of

suc( loan or ad#ance. T(e securit$ can be soldBenforced and ad"usted against

t(e ad#ance after gi#ing &ro&er notice or taking action t(roug( t(e court.

T(e following t$&e of secured ad#ances ma$ be allowed against tangible

securities sub"ect to margin restrictions:

2i !#er drafts.

2ii Cas( credits.

2iii Loans

2i# 7ouse 1uilding Loan

2# Term Loan 2&ro"ect loan

2#i Consumer Credits

2#ii 7ire Purc(ase

2#iii Lease inance.

2i0 >ork !rder inance.

20 1ills Purc(ased and 8iscounted

20i Loan against Trust +ecei&t

20ii Loan against ;m&orted 'erc(andise

20iii Packing Credits

20i# Pa$ment against 8ocuments

20# oreign 1ills Purc(ased

20#i Fuarantee 2non unded

20#ii Letter of Credit 2Non unded

20#iii+ural Credit.

3


36/56

verdrafts

;n t(e case of ad#ances sanctioned b$ wa$ of o#erdrafts9 t(e customer is

sanctioned a limit u& to w(ic( (e can o#erdraw (is current account wit(in a

sti&ulated &eriod. ;n cases w(ere t(e customer cannot offer an$ kind of

securit$ e0ce&t (is &ersonal securit$9 t(e facilit$istermed as clean

o#erdraft. T(e o#erdraft ma$ be created b$ t(e customer drawing a c(eue

on (is account. T(e customer is free to increase or decrease t(e o#erdraft

&ro#ided it remains wit(in t(e sanctioned limit and wit(in t(e agreed &eriod.

T(e banker must bind t(e customer b$ obtaining a letter of continuit$9

w(ereb$ t(e customer confirms t(at (e would be liable on t(e final balance

of (is account and t(at e#er$ debt and e#er$ credit will not be counted.

Cash credits

T(is t$&e of facilit$ is alwa$s eit(er against &ledge or ($&ot(ecation of

goods 2cas( credit differs from an o#erdraft in matter of securities obtained

onl$ but for all &ractical &ur&oses9 it (as t(e same legal im&lication as an

o#erdraft. !#erdraft accounts are maintained in current account ledgers

w(ile a se&arate ledger or ledgers are maintained for Cas( Credit Accounts.

T(e Cas( Credit Accounts re&resent &ledge or ($&ot(ecation of goods9

&roduce and merc(andise.

Bills purchased and discounted

1ank &urc(ase demand bill of e0c(ange9 w(ic( are accom&anied b$

8ocuments of Title to Foods suc( as 1ills of Lading9 +ailwa$ or Steamer

+ecei&ts. >(ile &urc(asing a c(eue or a demand 1ill of /0c(ange a banker

becomes a (older for #alue and is not entitled to t(e &rotection gi#en to (im

3%


37/56

as a collecting bank under section ,3, of t(e Negotiable instruments Act as

regards t(e collection of a c(eue. Purc(ase of c(eue9 t(erefore9 warrants

s&ecial &recaution to be taken as to t(e title of t(e customer. As regards 1ills

of /0c(ange9 t(e banker (as no &rotection and (e (as to be on (is guard

w(ile &urc(asing a bill of e0c(ange accom&anied b$ 8ocuments of Title of

Foods. T(e banks normall$ do not &urc(ase documents of title to goods9

unless t(ese documents are accom&anied b$ a bill of e0c(ange t(e bank on

&urc(asing bill of e0c(ange9 being a 7older in 8ue Course (as t(e &ri#ileges

and acuires a good title &ro#ided (e (as acted in good fait(9 wit(out

negligence and under t(e circumstances9 w(ic( do not afford a ground to

sus&ect t(at (is endorser (ad no title to t(e instrument.

1ill of e0c(ange is classified into 2a 8emand 1ills and =sance 1ills9 2b

Clean 1ills and 8ocumentar$ 1ills. >(ere a bill is &a$able9 at sig(t or on

demand or on &resentation9 it is called 8emand 1ill. ;f a bill matures for

&a$ment after a certain &eriod of time9 it is called =sance 1ill.

Ad#ances against railwa$ and steamer recei&ts are #er$ common. T(ese

documents (owe#er gi#e constructi#e &ossession and control of t(e goods.

T(e (older is aut(oriGed to transfer or recei#e t(e relati#e goods b$

endorsement and deli#er$. T(e$ are accom&anied b$ a bill of e0c(ange

before t(e$ are discounted or &urc(ased.

'oreo#er9 banks also &urc(ase c(eues drawn b$ Fo#t.9 Semi Fo#t.

institution and local aut(orities. ;n t(is case9 amount of t(e c(eue is

credited to t(e &art$Es account to t(e debit of c(eue &urc(ased account and

on realiGation of t(e c(eue t(e account is liuidated.

3*


38/56

Loans

1anks grant loans for different &eriod s(ort9 medium and long9 and for

different &ur&oses. 1roadl$9 t(e loans granted b$ banks are classified as

under.

!i*ed Loan

=nder t(is t$&e of loan9 t(e ad#ance is gi#en for a fi0ed amount reco#erable

in fi0ed mont(l$ installments. T(is form of loan suits t(e borrowers need

accommodation against i0ed 8e&osits9 ;nsurance Policies9 S(ares of Qoint

Stock Com&anies and Fo#t. Securities etc. T(ese securities are offered

against an o#erdraft9 for da$toda$ facilit$ for business &ur&oses9 t(e

facilit$ is a#ailed b$ wa$ of o#erdraft.

Short Term Loan

S(ortterm loans are granted to meet t(e working ca&ital needs of t(e

borrowers. T(ese loans are granted against t(e securit$ of tangible assets

mainl$ t(e mo#able assets like goods and commodities9 s(ares9 debentures

etc. and backed b$ collateral securities. T(is loan ma$ be allowed u& to ,4

mont(s.

Medium and Long Term Loan

Fenerall$ bank ad#ances are re&a$able on demand. 1ut nowada$s banks

are to allow medium and longterm loans. T(ese loans accounts are t(e fi0ed

assets of t(e borrower. T(ese loans are meant for &urc(ase of ca&ital assets

for establis(ment of new units or for e0&ansion or di#ersification of an

e0isting unit. 'edium Term Loan ma$ be allowed for more t(an ,4 mont(s

u& to 6- mont(s and longterm loan for more t(an 6- mont(s.

-


39/56

Bridge Loan

1ridge loans are s(ortterm loans9 w(ic( are granted to industrial

undertaking to meet t(eir urgent and essential needs during t(e &eriod w(en

formalities for a#ailing of t(e term loans sanctioned b$ financial institutions

are being fulfilled or necessar$ ste&s are being taken to raise funds from t(e

ca&ital market. T(ese loans are granted b$ banks or b$ financial institutions

and are automaticall$ re&aid out of amount of t(e term loan or t(e funds

raised in t(e ca&ital market.

Micro4Credit:

T(is S(ort Term 'icro Credit will not e0ceed Tk. ,-9---.-- and is

re&a$able wit(in ,4 mont(s. Suc( loan ma$ be for nonagricultural credit9

swanir#or creditH wea#ing credit or banks self financed &ro"ect loan and

w(atsoe#er.

Packing Credits:

Packing credit facilit$ is a &res(i&ment ad#ance granted to a customer to

&roduce or bu$ goods for e0&ort to a foreign countr$ against a letter of

credit9 a bankerEs letter of aut(orit$ or a firm contract alread$ in (and and

lodged wit( t(e banker. Suc( a credit facilit$ is allowed usuall$ b$ wa$ of

cas( credit to t(e e0tent of t(e contracted amount wit( or wit(out an$

securit$. T(e borrower submits t(e e0&ort bills to t(e banker in due course

and t(e banker ad"usts t(e ad#ance b$ negotiation of t(e documents. T(e

goods &urc(ased or &roduced from time to time ma$ be &ledged or

($&ot(ecated to t(e banker to co#er t(e ad#ance.

,


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Loan against Trust +eceipts:

>(en t(e banker (as to &art wit( t(e goods or t(e bill of lading wit(out

recei#ing t(e amount due from t(e customer9 it is essential t(at (e s(ould get

a Trust +ecei&t9 signed b$ (is customer9 agreeing to (old t(e goods or t(eir

sale &roceeds in trust for t(e banker so long as t(e entire amount9 due to t(e

banker is not &aid off.

Loan against >mported Merchandise:

;n man$ cases a 1ank (as to clear t(e goods im&orted under letter of credit

at t(e reuest of t(e im&orter. >(en t(e customer reuests for o&ening a

letter of credit9 t(e banks obtain from (im a agreement on stam&ed &a&er

w(ic( &ro#ides for financing and if necessar$ clearance and storage of goods

b$ debiting (is loan account.

Payment against #ocuments %PA#&:

a T(e im&orters are to o&en letter of credit t(oug( and bank for

im&orting goods. 'ost of t(e time9 t(e banks are to e0tend credit to

t(e im&orters9 if not &ro(ibited b$ 1anglades( 1ank9 for bu$ing

reuired foreign e0c(ange. T(is loan9 on recei&t of s(i&&ing

documents from t(e negotiation bank9 is transferred and lodged in

PA8.

b PA8 is associated wit( im&ort and im&ort financing. T(e bank

o&ening letter of bound to (onor its commitment to &a$ for im&ort

bills w(en t(ese are &resented for &a$ment &ro#ided t(at it is drown

strictl$ in terms of t(e letter of credit.

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c T(e foreign corres&ondent9 w(ic( negotiates t(e documentsH debits

t(e account of t(e o&ening bank and in fact9 t(e amount t(us stands

ad#anced on be(alf of t(e im&orter.

d T(e o&ening bank on recei&t will lodge t(e s(i&&ing documents to

t(eir book and will res&ond to t(e debit ad#ice originated b$ foreign

corres&ondent to t(e debit of ?Pa$ment against 8ocument 2PA8@

account and &resent t(e bill to t(e im&orter for &a$ment.

!oreign Bill Purchased:

Purc(asing of foreign bills of e0c(ange arising out of commercial

transactions is called foreign bill &urc(ased. 8etails (a#e been discussed in

;NLAN8 1;LL P=+C7AS/8.

!AC>L>T>)S !+ T") C$STM)+S

/#er$ bank gi#es some facilities for t(eir customers. Customer will be able

to take t(e &leasure of t(at benefit facilities b$ a#ailing an$ loan. Pubali

1ank also gi#es #arious facilities for t(eir customers. Some of t(ese are

gi#en below:

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0 ;n case of o#erdraft t(e facilit$ to t(e customer is t(at (e utiliGes t(e

ad#ance and &a$s interest on t(e actual amount a#ailed da$ to da$.

T(e customer ma$ &a$ in larger amounts wi&ing out t(e entire debit

balance and t(e account at times ma$ s(ow credit balance.

' ;n case of bills &urc(ase < discounted9 1anks &urc(ase outstation

c(eues of reliable customers. 1ank &urc(ase demand bill of

e0c(ange9 w(ic( are accom&anied b$ documents of title to goods suc(

as bills of lading9 +ailwa$ or Steamer recei&ts.

/ Packing credits facilit$ is allowed usuall$ b$ wa$ of cas( credit to t(e

e0tent of t(e contracted amount wit( or wit(out an$ securit$.

6 1ank also gi#e trust recei&t facilit$ is e0tended to first class &arties of

outstanding status and integrit$ < as a matter of obsolete necessit$.

T(ere are some ot(ers facilit$ t(at t(e bank gi#e to t(e customer like as no

&ersonal guarantee9 com&arati#e interest rate9 low &rocessing fees9 time of

re&a$ t(e loan is long9 etc.

>9?)STM)9T ! !$9#:

T(e tradeoff between &rofitabilit$ and liuidit$ is t(e basic &rinci&les of

banking business. /#er$ branc( s(owed (as to maintain sufficient cas( on

liuid assets to re&a$ t(e claims w(en t(e$ become due for &a$ment. At t(e

same time e#er$ branc( s(owed gi#e &ro&er attention to in#est its a#ailable

funds in a &rofitable manner. 1ecause9 e#er$ idle Taka will (a#e to incur a

cost to t(e bank. ;n#estment and liuidit$ &osition of Agrabad cor&orate

branc( of Pubali 1ank are mentioned in t(e following:


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;n#estment and liuidit$ &osition of Agrabad cor&orate branc(:

ear

#ariable

4--, 4--4 4--3 4-- 4--5

Ad#ances 56.5- 43 4,.-- 45.-- 5.--8e&osits 4.5- 36.3- 34.3- -.- 3.6-

AB8 ratio ,.34* -.633 -.654 -.64 ,.4-

;n t(e &receding sc(edule we obser#e t(at in 4--, and 4--5 ad#ance is more

t(an de&osit. ;t ma$ be seemed im&ossible. 1ut it is realit$. 1ecause it can

collect ot(er rural branc(es de&osit t(roug( (ead office and grants as loan.

1ut total de&osits of Pubali 1ank are ne#er less t(an ad#ances.

LA9 +)C?)+( P+C)#$+)

2, Letter issue

24 Legal notice

23 'ortgage Pro&ert$ Action.

2 Case ile.

Letter issue:

T(e first &rocedure of loan reco#er$ is to issue letter to t(e concerned &art$.

;t is gi#en wit(in 3 mont(s after maturit$. ;n t(is letter t(ere is a reuest to

re&a$ t(e loan to t(e &asties.

Legal 9otice:

Secondl$ bank sends a legal notice to t(e res&onse t(e letter of t(e bank t(en

suc( kind of legal notice is sent. ;t is said to t(e &art$.

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Mortgage Property Action:

After legal notice mortgage &ro&ert$ of t(e &art$ are made duct ion. After

mortgage &ro&ert$ auction if t(e total loan is not reco#ered t(en a case is file

life for remaining mone$.

Case !ile:

T(e last &rocedure of loan reco#er$ is to file a case9 w(en t(ere is no ot(er

alternati#e wa$ to reco#er loan t(em t(e bank is bounded to file a case.

9)C)SSA+( #C$M)9TS:

LT %Letter of >ntroduction&

Salary Certificate: ;t is considerable on t(e basis of last 3 mont(s

&rescribed.

$tility Bill: ;t is &re&ared on t(e 1ank statement for last 6 mont(.

Passport Copy: ;tJs also a necessar$ document for identified a &erson

for bank loan.

T>9 Certificate: Ta0 identification no. Certificate is considerable

also for bank loan.

Statement from other Bank: T(is statement is considerable

es&eciall$ for businessman9 w(o (as different ABC in different bank.

P+BL)M >9 LA9 +)C?)+(

T(at is t(e &roblem in loan reco#er$ &ro#es are t(e outcome of t(e default

&rocess in loan disbursement. T(e main reasons of &oor loan reco#er$ are

categoriGed in four broad t$&es as follows:

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C(anging in t(e management &attern c(anging of management

&atterns m$ dela$ t(e reco#er$ of matured loan.

!&eration of o&en market econom$ in our countr$ man$ industries

become stock and also close t(eir business on account of emerging of

o&en market.

+a&id /0&ansion of 1usiness T(ere is man$ com&anies9 w(ic(

e0&and t(eir business ra&idl$9 but t(e e0&ansion is for s(ort time. ;n

t(e long run9 t(e amount of classified loan increases.

Problems created by


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Lack of Pro&er 'onitoring of t(e 1orrowers: T(e res&onsibilities of

bank are not ended after disbursement of loan.

Lack of &ro&er #aluation of securit$ or mortgage &ro&ert$: ;n most of

t(e cases9 bank fails to determine t(e #alue of securit$ against t(e

loan.

!t(er general causes of &oor loan reco#er$: A&art from t(e s&ecific

reasons creating &roblems to Sonali 1ank in t(e wa$ of recumbent of

loan mone$9 t(e e0ist some ot(er general cause w(ic( (a#e a great

im&act on creating t(e &roblems w(ic( are faced b$ Sonali 1ank in

loan reco#er$ &rocess. T(ese are

• /arl$ sanction and disbursement of loan to t(e borrowers

wit(out &ro&er ins&ection of t(e &ro"ect b$ t(e bank on

account of &ressure from lobbing grou&.

• Lack of e#aluation of tec(nical and economic feasibilit$

of t(e &rogram.

•

8ela$ in disbursement of credit.

• Credits are not allowed to actual entre&reneurs.

• Lack of &ro&er su&er#ision

• ;lliterac$ of borrowers.

• Negati#e attitude of borrowers to re&a$ t(e loan.

• 8eterioration of t(e #alue s$stem of t(e borrowers.

• Lack of com&etent and reuired e0&ertise creates a great

&roblem to t(e nonreco#er$ of loan.

• 'an$ borrowers use t(eir loanmone$ ot(er t(an

s&ecified &ro"ect i.e. if t(e loan is sanctioned for

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industrial &ur&oseH t(e$ use t(e mone$ in (ouse building

or &urc(ase or land for t(eir own &ur&ose.

• Sometimes borrowers in#est t(eir mone$ outside t(e

countr$. 'an$ borrowers transfer loanmone$ to abroad

w(ere t(e$ de&osited t(is mone$ in t(eir own account or

s&ent some ot(er &ur&ose.

• =ndue influence b$ borrowers Sometimes local

borrowers are found to be so muc( com&elled to grant

t(em loan wit(out &ro&er stud$ due to some une0&ected

reasons.

• S(ortage of com&etent e0&ertise: Lack of com&etent

e0&ertise creates a great &roblem to t(e nonreco#er$ of

loan b$ t(e bank.

Table:

)conomic Sector ise #istribution of advances:

2Tk. ;n crore

Sectors 4--, 4--4 4--3 4-- 4--5

Short Term

!t(er < oreign 1usiness ,5.35 5.,- .4, 6.55 63

Long Term

,. 7ouse building

4. !t(er trading business

3. Lease financing. Consume credit

5. !t(ers

.4-

3.4-

3.-5

.-

-.,-

,.*5

4.5-

-.35

-.,-

,

4.45

-.

-.,5

,5

-.354.4-

-.5

-.4--

*.3-

-.5,.45

-.%-

Total 56.5- 43.-- 4,.-- 45.-- 5.--

*


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9ote:

>e obser#e t(at in 4--, ma0imum loan in gi#en in ot(er trading business

and t(en in ot(er foreign business. Loan in ot(er foreign business was

decreased in t(e ne0t 3 $ears. 1ut it was increased tremendousl$ in 4--5 and

it was 63 crore.

TableRR: /conomic Performance of Pubali 1ank 2Cor&orate 1ranc( 2Pubali

1ank.

Particulars 4--, 4--4 4--3 4-- 4--5Total disbursement 3.54 5.4 3.,4 ,.45 65.34

8emand for +eco#er$

28+

5.44 *.5- ,.%5 .- 3.,-

+eco#er$ ,.-4 35.4 23.35 ,-.% -.*

!#erdue .* %*, ,.-5 3.,, ,.*%

+eco#er$ as *M of 8+ 4.46M 36M 236.-4M 46.%6M 3,.4*M

!#erdue as a ,--M 8+ **.5M *3.*M *.6,M 6.,M 63.%M

!utstanding balance 56.5- 43.-- 4,.-- 45.-- 5.--

Table RR: Sc(edule of loan classification < &ro#isioning &rogram:

,st stage 4nd stage 3rd stage t( stage 5t( stage

a T$&es of Period of Period of Period of Period of Period of

5-


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classification o#erdue o#erdue o#erdue o#erdue o#erdue

=nclassified

2=C

Less t(an

,%mont(s

Less t(an

,4mont(s

Less t(an

%mont(s

Less t(an

6 mont(s

Less t(an

3 mont(s

Substandard

2SS

,% mont(s

or more

but less

t(an 36

mont(s

,4 mont(s

or more

but less

t(an 4

mont(s

% mont(s

or more

but less

t(an 4

mont(s

6 mont(s

or more

but less

t(an ,4

mont(s

3 mont(s

or more

but less

t(an 6

mont(s

8oubtful

28

36 mont(s

or more

but lesst(an %

mont(s

4 mont(s

or more

but lesst(an 36

mont(s

,3

mont(s or

more butless t(an

4

mont(s

* mont(s

or more

but lesst(an ,4

mont(s

3 mont(s

or more

but lesst(an 6

mont(s

1ad loss 21L 'ore t(an

% mont(s

36 mont(s

or more

* mont(s

or more

4 mont(s

or more

,4 mont(s

or more

b +ate of

&ro#ision2=nclassified

,M ,M ,M ,M ,M

Substandard

2SS

4-M 4-M 4-M 4-M 4-M

8oubtful

28

5-M 5-M 5-M 5-M 5-M

1ad loss 21L ,--M ,--M ,--M ,--M ,--M

c Period of

classification.

Annual

basis

7alf $ears

basis

7alf $ears

basis

Iuarterl$

basis

Iuarterl$

basis

Table RR: Classification of =nsound Credit:

5,


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8ate of ;ns&ection

Particular

4--, 4--4 4--3 4-- 4--5

!utstanding ad#ances

2!A

56.5- 43.-- 4,.-- 45.-- 5.--

Total classified amount 5.44 *.5 ,.%5 .- 3.,-

Classified as a M of

2!A

%-M ,.3-M -.,M ,6.4% .,3M

+eco#er$ Target -.%5 ,,.3-5 4.35 3.645 ,.,-,5

Amount +eco#er ,.-3 35.4 25.35 -.% -.*

+eco#er as a M of

Target

,4-M 3,5.*6M 245.46M 4*.3M *5.33M

Note: Pubali 1ank reco#er$ target is 45M of target amount.

Table HHH: Provisioning Pattern of Pubali Bank :

Particulars 4--, 4--4 4--3 4-- 4--5

Pro#isions s(ould be .65 %.% ,3.% 3.66 3.6-

Actual Pro#ision 3.%- 3.33 3.*5 ,.-% ,.,

T(e actual &ro#isions of Agrabad cor&orate branc( are not muc( lower t(an

its calculated &ro#ision according to t(e guidelines.

C9CL$S>9:

Agrabad cor&orate branc( is one of t(e most successful and branc(es of

Pubali 1ank. ;t is &l$ing an im&ortant role in our econom$ and it &ro#ides a

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trend of a&&ro&riate acti#ities and multi dimensional &rogress of banks. ;t is

e0&ected t(at t(e gi#en recommendations ma$ (el& &ositi#e im&act on loan

reco#er$ acti#ities of Pubai 1ank Agrabad cor&orate branc(:

,. T(e #alue of t(e securit$ must be #alued &ro&erl$ b$ t(e inde&endent

#aluer and constantl$ watc(ed so t(at t(e #alue of t(e mortgage

&ro&erl$ becomes sufficient to reco#er of default loan.

4. Sto&&ing t(e grant of loan to an$ organiGation b$ t(e ot(er banks9

w(ic( is defaulter to bank 'a$ of muc( (el& to &ressure t(e defaulters

to &a$ its outstanding loanK

3. Aged old loss to bank loan reco#er$ s(ould be c(anged.

. T(e new entre&reneurs s(ould be encouraged in disbursing loan and

t(ose w(o (a#e t(e records of regular re&a$ment s(ould be gi#en

&reference.

5. Ste&s s(ould be taken so t(at guarantors canEt a#oid t(eir

res&onsibilities.

PA+T @ B

CMPA+AT>?) A9AL(S>S A9# >9T)+P+)TAT>9

T(e main ob"ecti#e of t(is stud$ is to know t(e loan ser#ice9 i.e. to identif$

t(e &roblem and &osition of loan reco#er$ of some commercial bank in

1anglades(. T(ere are some factors9 w(ic( make t(e sanctioned loans as

classified. rom t(e abo#e anal$sis t(e following indings were detected.

>n case of 9ational Bank:

T(e ad#ance credit rations of t(e National 1ank are not bad. ;t is not uite

satisfactor$. Some reasons are gi#en below:

2i T(e ratio of unclassified loan of National 1ank is

6.*6M9 6%.4M9 6%.6M9 ,.%5M9 ,.,6M9 .%3M in

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,**%9 ,***9 4---9 4--,9 4--49 4--39 4--

res&ecti#el$.

2ii T(e ratio of classified loan of National bank is

34.-M9 ,.,6M in ,**%9 4-- res&ecti#el$.

>n case of "SBC Bank:

T(e loan reco#er$ le#el of t(e 7S1C 1ank is satisfactor$.

2i T(e ratio of t(e unclassified loan of t(e 7S1C bank is **.*%M in 4--5

and .-4M is classified loan in 4--5. T(ere reco#er$ &osition of t(e 7S1C

1ank is satisfactor$.

>n case of Pubali Bank:

rom t(e abo#e anal$sis of t(e Pubali 1ank9 t(e following findings were

detected.

2i T(e ad#ance to credit ratio of t(e Pubali 1ank is not so

satisfactor$. T(e ratio of ad#anceB de&osits was ,.34*M in 4--,

and it became ,.4-M in 4--5.

2ii Pubali bank sanctioned more loans to &ri#ate sector9 and it is

increased $ear to $ear. T(e sanctioned loan of t(is loan was 35M in

4--, in Pubali sector but bank not sanctioned in 4--4 to 4--5.

Pubali bank sanctioned 4,.5M in 4--, and 5M in 4--5.

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2iii T(e reco#er$ &osition as a &ercentage of 8+ was 4.46M and

o#erdue as a &ercentage of 8+ was **.5M in 4--, and it came

to 3,.4*M and 63.%M in 4--5.

2i# T(e outstanding ad#ances were Tk. 56.5- core and 5.-- croes in

4--, < 4--5 res&ecti#el$. T(e classified &ercentages were %-M <

.,3M res&ecti#el$ and t(e amount reco#ered from t(e outstanding

ad#ances was Tk. ,.-4 crores < Tk. * crores.

2# T(e &ro#ision of Pubali 1ank s(ould be Tk. .65 crore < Tk. 3.6-

crore in t(e $ear 4--, < 4--5 res&ecti#el$ but t(e actual

&ro#isions were onl$ Tk. 3.%- crors < Tk. ,., crore res&ecti#el$.

+)CMM)9#AT>9S !+ T")S) T"+)) T(P)S !

BA98S

rom abo#e t(e re&ort m$ recommendations about loan o&erations of t(ose

1anks are:

,. 7S1C can launc( #arious loan &rograms on eas$ terms based on

economical affairs &eo&le of 1anglades(.

4. 7S1C s(ould reduce t(e interest rate for t(e &eo&le of 1anglades(.

3. National 1ank offers interest on instant loan amount.

. National 1ank e0&ands t(eir loan facilities for mass &eo&le.

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5. Pubali 1ank s(ould e0&and t(eir ca&ital to ser#e t(e loan recei#er.

6. Pubali 1ank s(ould offer #arious t$&es of loan facilit$.

APP)9#>I

List of Table: Page

,. Amount of loan gi#en to different sector during last $ears 2N1L : ,6

4. N.1.L. Pro#ides (ow muc( loan 2amount of loan in million : ,

3. =nclassified < Classified loan during ,**%4--42N1L : 4-

. Classification of loan according to status of reco#er$27S1C : 46

5. +e&a$ment sc(edule for different loan 27S1C : 4

6. 'ont(l$ installments in 18T ,.45M 2annual reducing balance : 4%

. 'ont(l$ installment for a loan of 18T 9---9---27S1C : 4%

%. Car loan : 4*

*. ;n#estment and liuidit$ &osition of Agrabad cor&orate branc(2P1 : 5

,-. /conomic Sector wise 8istribution of ad#ances :

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,,. /conomic Performance of Pubali 1ank : %

,4. Sc(edule of loan classification < &ro#isioning &rogram : 5,

,3. Classification of =nsound Credit : 54

,. Pro#isioning Pattern of Pubali 1ank : 53

List of C(art:

,. Loan gi#ing b$ N1L during 2,***4-- : ,

4. Com&arati#e c(art of total loan and recei#e loan2N1L : 4-

AC+9(MS

N1LRNational 1ank Limited.

7S1CR7ong Dong S(ang(ai 1anking Cor&oration.S!8RSecured !#er 8raft

PA8R Pa$ments Against 8ocument

LCR Letter of Credit

L;'RLoan against ;m&orted 'erc(andise

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LT+Rloan against trust recei#ed

/CCR/0&ort cas( credit

PC R&ersonal credit

/'LR/ual mont(l$ installment

T;NRTa0ation identification number

5%

Loan Services of Commercial Banks of Bangladesh a Case Study on Three Selected Banks

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Transcript of Loan Services of Commercial Banks of Bangladesh a Case Study on Three Selected Banks