Report

Prime Bank Limited

Credit Operation Process Of Prime Bank Ltd

Chapter 1: Introduction1.1 Back ground of the study Banking Industry is one of the most promising industries of our country. The importance

of the sector revealed through its contribution in the economic growth of the country.

This sector accelerates economic growth through mobilizing funds from surplus unit to

the deficit unit. Banking Industry is moving towards rapid changes due to technological

innovation and diversified needs of its customers.

Banks deal with the most important factor of the economy i.e. Money. It flows funds

from surplus unit to deficit unit and through this it facilitated the efficient allocation of

the resources as well as accelerated economic growth. This sector is moving towards new

dimension as it is changing fast due to competition, deregulation, financial, reforms.

As the pace of globalization competition in banking sector is increasing very fast. Banks

are becoming more customers oriented and offer High tech customized products to its

target market to hold the market .Our central bank always keep monitoring banks

performances. Individual banks also need to assess their own performance to satisfy the

parties those are related to its growth.

For Shareholders.

For depositor.

For Bangladesh Bank.

For its own Assessment to view the future growth and profited.

1.2 Origin of the Report

This report is an outcome of twelve weeks’ Internship Program, a part of BBA

program of BRAC University. The topic of the report is “Credit Operations

Process of Prime Bank Limited.” Actually this is a feedback, which the Bank

accepts from the students who join in an organization after the completion of

theoretical part of the BBA program. And this report is prepared to fulfill the

finishing requirement of the BBA program.

As we know that the internship is an agreement between a University and an

organization that offers an opportunity for a student to undertake a temporary

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Prime Bank Limited


work assignment, which enables the student to have realistic exposure to

organizational conditions. My supervisor Mrs. Syeda Shaharbanu Shahbazi Ahmed Lecturer, BRAC Business School BRAC University authorized me to prepare

the report.

1.3 Objective Of The studyThe primary objective of this report is to use the theoretical concepts, gained in the

classroom situations, in analyzing real life scenarios. This is also a partial requirement of

the BBA program. The total report is based on the different credit operations

system of the Prime Bank Limited. Moreover an in-depth real life experience of

the banking sector in terms of Credit division. . In case of this report, the objectives

are:

Observing and understanding the activities of the different departments of the host

organization: Prime Bank Limited (PBL)

To know the enterprise selection criteria to provide different loan

To know the study’s and conditions of different loans

To know the expectations of customers of Prime Bank Ltd

To know the disbursement and recovery procedures of different loans

Prepare a Recommendation for developing an ideal platform for a proper Credit

Operation Process

1.4 Scope of the Study

The report is basically divided into two parts:

The Organization Part

The Project Part

The organization part of the report focuses upon the organizational structure and the

financial services offered by PBL. The study also concentrates upon the actual lending

activities of the company, its exposure to the various sectors and its performance.

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Prime Bank Limited


The project part of the report basically focuses on the Credit policy of Prime Bank Ltd. I

have also tried to focus the different types of credit facilities, documentation and the

procedure of the loan.

1.5 Sources of dataIn conducting the study, data and information have been collected from different sources.

All these data were collected from the secondary sources and very few from primary

sources. The sources of data include the following:

Primary Sources are as follows

Personal observation

Interview of managers and employees of the different (General Banking,

Credit and Foreign Exchange) departments of the bank

Desk work in different section/division

Secondary Sources are as follows

Annual report of Prime Bank Limited

Credit Manuals, Different Banking Circulars

Consultation of related books and publications

Vouchers, leaflets, loan files, of the bank

Files, balance sheet, Employee Training Guide, Loan Documents and various

documents of Prime Bank Limited

1.6 Methodology of The study

The total internship program is based on the credit scheme practice of Prime

Bank Limited. This report was written through extensive and meaningful group

discussions with the concerned persons of the Prime Bank Limited. The report is

Descriptive in nature. Data used in this report have been collected from both primary and

secondary sources. The study is a result of the discussion with my academic supervisor.

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Prime Bank Limited


1.7 Limitations of The study

The report is not free from limitations . Finally I want to talk about my limitations

that I had to face during the completion of the report. On the way of preparing of this

report, I have faced following problems that may be termed as the limitation of the study.

Time is the major obstacle here. I get only three months to cover a vast

area like credit operation of a bank; much information was overlooked

Employees especially the credit division remains too busy. It is tough to

have a break from their tight schedule, even though they are willing to

provide time

Limited service hour

Secrecy or confidentiality is a crucial matter in this organization. As an

intern it was not possible to reach those secret topics

It was difficult to find out the gap between rules and regulations and real

life practice. So, I went under a huge stress to find out those matters

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Prime Bank Limited


Chapter 2: Organization profile

2.1 Background of Prime Bank LtdDuring the booming years of the banking industry of Bangladesh a group of

highly successful local entrepreneurs conceived an idea of floating a commercial

bank with different outlook. As pre their views the idea was competence,

excellence and consistent delivery of reliable service with superior value

products. Consequently, Prime Bank Ltd. was created and commencement of

business started on 17 - April 1995. The founders are well reputed tycoons of

Bangladesh in the field of trade and commerce and their stake ranges from

diversified business sectors of the country.

So far as a full phased commercial bank, Prime Bank Ltd. is being managed by a

team of professional team with dedication and long experience in banking sector.

Prime Bank Ltd. constantly focuses on understanding and predicting customer

needs and tends to be very customer oriented. As the banking scenario undergoes

changes so is the bank and it repositions itself in the changed market condition to

adapt even after the ever changeable field.

The Bank offers almost all kinds of Commercial Corporate and Personal Banking

services covering all segments of society within the framework of Banking

Company Act and rules and regulations laid down by our central bank.

Diversification of products and services include Corporate Banking, Retail

Banking and Consumer Banking right from industry to Telecommunication,

RMG, FMCG and so on.

It has already made significant progress within a very short period of its

existence. The bank has been graded as a top class bank in the country through

internationally accepted CAMEL rating. The bank has already occupied an

enviable position among its competitors after achieving success in all areas of

business operations so far.

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Prime Bank Limited


Prime Bank Ltd. has consistently turned over good returns on Assets and Capital.

Until the year 2007, the bank has achieved an operating profit of Tk. 3257

million and its capital funds stood at Tk 6382 million. Out of this, Tk. 2659.21

million represents reserves and retained earnings and Tk. 2275 million consists

of paid up capital by shareholders. Even after the business environment and

default culture, quantum of classified loan in the bank is very insignificant and

stood at less than 1.35%. The bank’s current capital adequacy ratio of 11.50% is

in the market.

Since the opening of the Bank, it has attached more importance in technology

integration. To retain competitive edge, investment in technology is always a top

agenda and under constant focus. Keeping the network within a reasonable limit,

its strategy is to serve the customers through capacity building across multi

delivery channels. Prime Bank is better placed and poised to take its customers

through fast changing times and enable them compete more effectively and

efficiently. The Bank’s past performance gives an indication of the proper

development and implication of its strength.

Finally, Prime Bank Ltd. has already made significant progress within a very

short period of its existence. The bank has been graded as a top class bank in the

country through internationally accepted CAMEL (Capital, Asset, Management,

Earnings and Liquidity) rating. The bank has already occupied an enviable

position among its competitors after achieving success in all areas of business

operation.

2.2 Company VisionEvery Company has their own vision. By fixing vision they can set their future growth.

Prime Bank Ltd has its own vision to be leader in the banking industry.

To be the best Private Commercial Bank in Bangladesh in terms of efficiency, capital

adequacy, asset quality, sound management and profitability having strong liquidity.

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Prime Bank Limited


2.3 Company MissionTo build Prime Bank limited into an efficient, market driven, customer focused institution

with good corporate governance structure. Continuous improvement in business policies,

procedure and efficiency through integration of technology at all levels.

Brief Profile of Prime Bank Limited

1. Date of Incorporation : 12th February, 1995

2. Date of Inauguration of Operation : 17th April, 1995

3. Name of the Chairperson of the board : Mr. Ajam J Chowdhury

4. Name of the Managing director : Mr. M. Ehsanul Haque

5. Number of Branches : 71

6. Number of Employees : 1400

7. Publicly Traded Company : Share quoted daily in DSE & CSE

8. Credit Card : Member of Master Card

9. Banking Operation System : Both Conventional and Islamic

Banking System.

10. Technology Used : Member of SWIFT

On line Banking

UNIX based Computer System

11. Head Office : Adamjee Court Annex II, 119-120

Motijheel C/A, Dhaka-1000.

Phone: 9567265 (PABX)

Telex: 642459 PRIME BJ

671543 PBL MJ BJ

Fax: 88-02-9567230/9560977

E-mail:

[email protected]

Web Site: www.prime-bank.com

SWIFT: PRBLBDDH

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http://www.prime-bank.com/

mailto:[email protected]

http://www.prime-bank.com/management.htm#ehsanulhaque

Prime Bank Limited


2.4 Management HierarchyPrime Bank limited is a public limited company. The shareholders are the proprietors of

the banks. There are 22 members of the Board of Director who are managing the total

management & Human Resources of the bank. Among them 18 members are directly

elected by the shareholders for two years. At present, Mr. Ajam J. Chowdhury is the

chairperson of PBL & the Managing Director of this bank is Mr. M. Ehsanul Haque. The

chairperson & Managing Director both are the members of this bank. The chairman of

the bank is the head of the Board of Directors. The main function of the Board of

Directors is to formulate policy. From the top to the bottom management body of Prime

Bank Limited can be divided into four levels:

Top Level Management

Executive Level Management

Mid Level Management

Junior Level Management

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http://www.prime-bank.com/management.htm#ehsanulhaque

Prime Bank Limited


9

Chairperson

Board of Directors

Executive Committee

Managing Director

Executive Vice President

Senior Vice President

Assistant Vice President

First Asstt. Vice President

Senior Executive Officer

Executive Officer

Principle Officer

Senior Officer

Management Trainee Officer

Junior Officer

Deputy Managing Directors

Deputy Managing Directors

Senior Executive Vice President

Top Management

Executive Level Management

Mid Level Management

Junior Level

Figure 1: Management Hierarchy of PBL

Source: HRD, Head Office PBL

Assistant Officer

Trainee Assistant

Prime Bank Limited

Dhaka Zone Chittagong Zone

Jubliee Road Agrabad Khatungonj IBB Pahartoli FatikchariLaldighiHathazariCox’s Bazar Fani Comilla Raojan Offshore Banking Unit Prabartak More


2.5 Network of the Branch

The bank established its business on 17th April 1995. The first branch was opened at

Motijheel area in Dhaka. Now the total number of branches will be 71 at the end of the

year 2008. PBL divided its branches network into six zones i.e. Dhaka, Chittagong

Khulna, Rajshahi, Sylhet & Barisal Arena with 38, 14, 2, 6, 10 & 1 branch respectively

among these branches, 25 of them have been licensed by Bangladesh bank as Authorized

Dealers in Foreign Exchange.

Motijheel Foreigm Exchange IBB Dilkusha MohakhaliKawranbazarMouchak Elephant Road Gulshan Bangshal Narayangonj Gonakdari Moulvi Bazar Uttara Satmasjid RoadNew Eskaton Madhabdi Banani Islamic Banking Branch Pragatisarani Shimrail PanthapathDhanmondiAsad gate Tongi SBC Tower Mirpur- 01 TangailAsulia Bijoy Nagor Ring Road Pallabi Bashundhara Joypara Adamjee EPZBhairab Mynensingh

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Khulna Zone

Khulna Jessore

Rajshahi Zone

Rajshahi BograNaogaonRangpur Dinajpur Chapai Nawabgonj

Barisal Zone

Barisal

Sylhet Zone

Sylhet Islamic Banking Branch Court RoadBeani Bazar Tajpur Upashar BishwanathSreemangalSubid Bazar Bare Lekha

Network of

Branch

Prime Bank Limited


2.6 A Brief of Prime Bank Limited, Satmasjid Road BranchAmong the Seventy one Branches of Prime Bank, Satmasjid Road Branch is one of the

most reputed and respected Branches in all aspects. From the very beginning, this branch

is contributing a lot to the bank. A brief of Prime Bank Limited, Satmasjid Road Branch

is given below:

Manager: Md. Ehsan Habib, Senior Vice President

Manager (Operation): Md. Kamrul Islam, Assistant Vice President

Credit in Charge: Md. Nehal Hossain, Senior Executive Vice President

Foreign Exchange in Charge: Md. Nehal Hossain, Senior Executive Vice President

General Banking in Charge: Mr. Shaheen Alam Chowdhury

Total number of employees: 24

Prime Bank Satmasjid Road Branch has three main departments, which are -

General Banking Department

Credit Department

Foreign Exchange Department

2.7 Business ActivitiesPrime Bank Limited provides a full range of products and services to its customers, some

of which are mentioned below with a brief overview of the major business activities.

Consumer Finance

There are branches and finance centers under this division with a qualitative workforce of

employees. Some of the services provided by this division are unsecured personal loans,

credit cards, and vehicle related lease etc.

Personal Banking

There are branches with highly qualified workforce provide various kinds of loans,

various types of accounts, cheques, card money etc.

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Source: Branch Control Division

Figure 1: Branch Network of PBL

Prime Bank Limited


Islamic Banking

Prime Bank Ltd. works under the correspondence with Bangladesh Bank regarding

operation of Islamic Banking Branches through a Subsidiary.

Corporate Banking

Prime Bank Limited provides a wide range of services to institutional clients,

commercial, merchant and central banks; brokers and dealers; insurance companies;

funds and managers, and others. It provides relationship managers who are close to their

customers and speak local language. This wide network of corporate banking facilities

includes transaction, introduction, problem solving and renders advice and guidelines on

local trading condition.

International Trade Management

This division is operational throughout the group and PBL’s core strength is trade finance

and services. With an experience, Prime Bank has developed knowledge of trade finance,

which is world class. Principle services to importers include imports letter of credit,

import bills for collection and back-to-back letters of credit facilities. Services provide to

exporters include export letters of credit, direct export bills, bonds, and guarantees.

Cash Management

Prime Bank recognizes the importance of cash management to corporate and financial

institutional customers, and offers a comprehensive range of services and liquidity

management.

Treasury

Treasury operations had been consideration as an important avenue for income

generation purpose. The treasury division publishes daily and weekly currency

newsletters, which provide analysis of currency trends and related issues. Prime Bank is

one of the first local banks in Bangladesh to integrate treasury dealings of local money

market and foreign currency under one Treasury umbrella. Prime Bank's Dealing Room

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Prime Bank Limited


is connected with Automated Reuters Terminal facility, thus enabling the bank to provide

forward/future facilities to its corporate clients at a very competitive rate.

Electronic Banking

Electronic Banking provides various types of support through a wide range of operating

systems, sweeping transactions accession with the provisions of reporting features or

other special functions.

Foreign Exchange Business

Over the years, foreign trade operations of the bank played a crucial role in the overall

business development of the bank. The bank has established relationship with as many as

110 new foreign correspondents abroad thereby raising the total number of

correspondents to 350. The bank has also entered into remittance arrangements with

several banks and exchange houses and expects to handle increased volume of remittance

business over the near future.

Online Branch Banking

The bank has set up a Wide Area Network (WAN) across the country to provide online

branch banking facility to its valued clients. Under this scheme, clients of any branch

shall be able to do banking transaction at other branches of the bank.

Under this system a client will be able to do following type of transactions:

Cash withdrawal from his/her account at any branch of the bank.

Cash deposit in his/her account at any branch of the bank irrespective of the

location.

Cash deposit in other’s account at any branch of the bank irrespective of the

location.

Transfer of money from his/her account with any branch of the bank.

Swift

Prime Bank Limited has become member of SWIFT (Society for Worldwide Inter-bank

Financial Telecommunication) in 1999. SWIFT is a member-owned co-operative system,

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Prime Bank Limited


which provides a fast and accurate communication network for financial transactions

such as Letters of Credit, Fund Transfer etc. By becoming a member of SWIFT, the bank

has opened up possibilities for uninterrupted connectivity with over 5,700 user

institutions in 150 countries around the world.

Information Technology in Banking Operation

Prime Bank Limited adopted automation in banking operation from the first day of its

operation. The main objective of this automation is to provide efficient and prompt

services to the bank's clients. At present, all the branches of the bank are computerized.

At branch level, the bank is using server-based multi-user software under UNIX

operating system to provide best security of automation.

Profitability and Shareholder Satisfaction

Prime Bank Ltd. always tried to maintain strong customer relationship is of utmost

importance. By giving quality service, PBL ensures higher profitability. Even though the

capital market of the country has been suffering over the last few years, the good

performance of Prime Bank made sure that the banks share price remained in a

respectable position. Thus, they achieve greater shareholders satisfaction.

2.8 Products and ServicesPrime Bank Limited offers various kinds of deposit products and loan schemes. The bank

also has highly qualified professional staff members who have the capability to manage

and meet all the requirements of the bank. Every account is assigned to an account

manager who personally takes care of it and is available for discussion and inquiries,

whether one writes, telephones or calls.

Deposit Products

Contributory Savings Schemes (CSS)

Under this scheme Minimum size of the monthly installment is Tk.500.00 and multiples

of Tk.1000.00. Maximum installment size shall be 25000.00 for five year period. Lump

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Prime Bank Limited


sum amount shall be paid after maturity or monthly pension shall be paid for the next 5

years according to size of deposit.

Lackhopati Deposit Scheme

Under this scheme size of the monthly installments are Tk.250.00, Tk.500.00,

Tk1285.00, Tk.2400.00 depositor will receive Tk.1,00,000.00 after a number of period

depending on installment size .Higher the installment size lower will be the maturity

period .

Prime Millionaire Scheme

This scheme is similar as Lackhopati deposit scheme only the installment amounts is

larger and at maturity depositor will get 10, 00,000.00.

Education Savings Scheme (ESS)

Under this scheme parents can save for their children’s education by paying a certain

amount of monthly installment and Lump sum amount shall be paid after maturity.

Monthly Benefit Deposit Scheme (MBDS)

Under this scheme customer can deposit a fixed amount of money for five years .The

amount has to be 100,000 or multiple of 100,000 he / she will receive 900 per month as

interest on every lac during those five years.

Double Benefit Deposit Scheme (DBS)

Under this scheme a customer can keep a fixed amount of money for six year end of the

maturity period the amount will become double .The amount has to be multiple of 25000.

Fixed Deposit Receipt Scheme (FDR)

Under this scheme customer can devote a fixed amount of money for one month, three

months, six months or twelve months for interest rate of 7.5%, 11% or 11.5%.

Current Account

Current Account is a non interest bearing checkable deposit (Demand Deposit) which

allows the owner of the bank accounts to write checks to third parties.

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Prime Bank Limited


Savings account

Savings Account is an interest bearing checkable deposit (Negotiable order of

withdrawal) which allows the owner of the bank accounts to write checks to third parties.

Loan and Advances ProductsLoan and advances have primarily been divided into two major groups:

Fixed term

These are the loans made by the Bank with fixed repayment schedules. Fixed tern loans

are categorized into three based upon its tenure which is defined as follows:

Short term : Up to 12 months

Medium term : More than 12 and up to 36 months

Long Term : More than 36 month

Continuing Loans

These are the loans having no fixed repayment schedule, but have an expiry date at which

it is renewable on satisfactory performance of the customer. Furthermore, all categories

of loans are accommodated under the following prime sectors:

i. Agriculture: Credit facilities to the customers of doing agro business falls under

this category.

ii. Term Loan to Large & Medium Scale Industry: This category of advances

accommodate the medium and long term financing for capital formation of new

Industries or for an existing units who are engaged in manufacturing of goods and

services.

iii. Term Loans to Small & Cottage Industries: These are the medium and long term

loans allowed to small & cottage manufacturing industries. No short term or

continuous credits will be included in this category.

iv. Working Capital: Loans allowed to the manufacturing units to meet their working

capital requirements, irrespective of their size - big, medium or small, fall under

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Prime Bank Limited


this category. These are usually continuous credits and as such fall under the head

"Cash Credit"

v. Export Credit: Credit facilities allowed to facilitate export of all items against

Letter of Credit and/or confirmed export orders fall under this category. It is

accommodated under the heads "Export Cash Credit (ECC)", Packing Credit

(PC), Foreign Documentary Bill Purchased (FDBP) etc.

vi. Commercial Lending: Short term Loans and continuous credits allowed for

commercial purposes other than exports fall under this category. It includes

import financing for local trade, service establishment etc. No medium and long

term loans are accommodated here. This category of advance is allowed in the

form of (i) Loan against Imported Merchandise (LIM), (ii) Loan against Trust

Receipt (LTR), (iii) Payment against Documents (PAD), (iv) Secured Overdraft

(SOD), (v) Cash Credit etc. for commercial purposes.

Types of Credit FacilitiesDepending on the various nature of financing, all the credit facilities have been brought

under two major groups: (a) Funded Credit and (b) Non-funded Credit. Under non-

funded credit, there are basically two major products namely Letter of Credit and Letter

of Guarantee.

Under Funded Credit, there are the following products:

Loan (General)

Short, Medium & Long term loans allowed to individual/firm/industries for a specific

purpose but for a definite period and generally repayable by installments fall under this

type. These are mainly allowed to accommodate financing under the categories (I) Large

& Medium Scale Industry and (ii) Small & Cottage Industry.

Housing Loan (Commercial)

Loans allowed to individual/enterprises for construction of house for commercial

purpose only fall under this type. The amount is repayable by monthly/quarterly

installments within a specified period.

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Prime Bank Limited


Home Loan

Loans allowed to individuals for purchase of apartment or construction of house for

residential purpose fall under this type. The amount is repayable by monthly installments

within a specified period.

House Building Loan (Staff)

Loans allowed to the employees of PBL for purchase of apartment/construction of house

shall be known as House Building Loan (Staff) or HBL (Staff).

Lease Financing

Lease Financing is one of the most convenient sources of acquiring capital machinery

and equipment whereby a customer is given the opportunity to have an exclusive right to

use an asset usually for an agreed period of time against payment of rental.

Consumer Credit Scheme (CCS):

It is a special credit scheme of the Bank to finance purchase of consumer durable by the

fixed income group to raise their standard of living. The loans are allowed on soft terms

against personal guarantee and deposit of specified percentage of equity by the

customers. The loan is repayable by monthly installments within a fixed period.

SOD (Financial Obligation)

SOD (Financial Obligation) is allowed to individuals/firms against financial obligations

(FDR, MBDS, and Scheme Deposits of PBL or similar products of other banks). This is a

continuous loan having usual maturity period of 1 (one) year and renewable for further

periods at maturity.

SOD (General)

SOD (General) is allowed to individuals/firms for miscellaneous purpose. This is a

continuous loan having usual maturity period of 1 (one) year and renewable for further,

periods at maturity.

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Prime Bank Limited


SOD (Work Order)

Advances allowed against assignment of work order for execution of contractual works

falls under this type. This advance is generally allowed for a definite period and specific

purpose. It falls under the category "Others".

SOD (Export)

Advance allowed for purchasing foreign currency for payment of Back to Back (BTB)

L/C liability where the exports do not materialize before due the date of import payment.

This is an advance for temporary period and categorized "Export Finance".

PAD

Payment made by the Bank against lodgment of shipping documents of goods imported

through L/C falls under this type. It is an interim advance connected with import and is

generally liquidated against payments usually made by the customer for retirement of the

documents towards release of imported consignment from the customs authority.

LIM

This is funded credit facility allowed for retirement of shipping documents and release of

goods imported through L/C taking effective control over the goods by pledge in go

downs under Bank's lock & key. This is a temporary advance connected with import

which is known as post-import finance and falls under the category "Commercial

Lending".

LTR

Advance allowed for retirement of shipping documents and release of goods imported

through L/C falls under this type. The goods are handed over to the importer on trust with

the arrangement that sale proceeds will be deposited to liquidate the loan account within

the specific time.

ECC

Funded credit facility allowed to a customer for export of goods falls under this type and

is categorized as "Export Cash Credit". The advances must be liquidated out of export

proceeds within 180 days.

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Prime Bank Limited


Packing Credit (P.C.)

Advance allowed to a customer against bills under BTB L/C and/or firm contract for

processing/packing of goods to be exported falls under this type and is categorized as

"Export Credit". Packing Credit must be adjusted from proceeds of the relevant exports

within 180 days.

FBP

Payment made to a customer through Purchase or Foreign Currency Cheques/Drafts falls

under this type. This temporary advance is adjustable from the proceeds of the

cheque/draft.

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Prime Bank Limited


2.9 Performance

From the very beginning of its journey, PBL is growing immensely. Its capital base is as

solid as its profit is high. Not only these two, is almost every aspect of this bank very

strong in the context of our country. The following table will give a clear idea about the

strength of PBL and its continuous growth.

Performance at a glance

Taka in Million

Particulars 2003 2004 2005 2006 2007

Income Statement Interest Income 2159 2641 3446 5199 7170Interest Expense 1408 1616 2271 3698 5267Net Interest Income 751 1025 1175 1500 1903Non-interest Income 841 946 1232 1732 2913Non-interest Expense 591 824 886 1101 1559Net Non-interest Income 250 121 346 631 1354Profit before provision and tax 1001 1146 1520 2131 3257Provision for loans and assets 232 82 320 390 910Profit after provision before tax 770 1064 1201 1741 2347Tax including deferred tax 394 452 633 689 946Profit after tax 375 612 568 1052 1401Balance Sheet Authorized Capital 1000 1000 4000 4000 4000Paid-up Capital 700 1000 1400 1750 2275Total Shareholder's equity 1732 2240 2808 3860 5273Deposits 20483 28069 36022 54724 70512Long-term liabilities 7052 7371 11406 16877 15267Loans and advances 16492 23220 31916 45010 57683Investments 2750 3084 3940 7844 12698Property, Plant and Equipment 256 322 372 412 660Earning Assets 19335 27131 36727 55458 72798

Net current assets583 (1299) 31 5286 1338

Total assets24249 32362 41506 60899 79588

Current ratio 0.96 1.06 1.00 0.88 0.97Debt equity ratio 8% 7% 7% 7% 7%Other Business

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Prime Bank Limited


Import 25441 36747 40303 52639 70617Export 16490 19502 28882 41801 51316Remittance 3063 2140 3688 15050 15905Guarantee Business 4248 4085 5303 5386 7033Inland letter of credit 3729 4267 5405 10174 11943Capital MeasuresTotal risk weighted assets 16455 23050 31890 44324 55485Core capital (Tier-I) 1782 2240 2808 3860 5273Supplementary capital (Tier-II) 176 236 369 549 1109Total Capital 1958 2476 3177 4409 6382Tier-I capital ratio 10.83 9.72 8.80 8.71 9.50Tier-II capital ratio 1.07% 1.02 1.16 1.24 2.00Total capital ratio 11.90% 10.74 9.96 9.95 11.50Credit Quality Non performing loans (NPLs) 326.53 352.73 308.21 367.15 777% of NPLs to total loans and advances 1.98% 1.52% 0.96% 0.82% 1.35%Provision for unclassified loans 171.73% 231.73 364.80 544.80 895Provision for classified loans 249.44 174 127.00 308.52 478Share Information Market price per share (Taka) 374.25 879.50 681.50 528.75 924No. of shares outstanding 7 10 14 17.50 22.75No. of shareholders at actual 1993 2620 4467 5262 7368Earning per share (Taka) 37.55 43.71 40.59 60.11 61.57Dividend 62.86% 40.00% 25.00% 30% 35%Cash 20.00% 0.00% 0.00% 0.00% 10%Bonus 42.86% 40.00% 25.00% 30% 25%Effective dividend ratio 67.70% 47.06% 29.17% 33% 40%Market capitalization 2619.75 8795.00 9541.00 9253.13 21021Net assets per share (Taka) 233.12 223.98 200.57 220.57% 232Price earning ratio (times) 9.97 20.12 16.79 8.80% 15.00Operating Performance RatioNet interest margin on average earning assets 4.36% 4.41% 3.68% 3.23% 2.97%

Net non-interest margin on average earning assets 1.45% 0.52% 1.08% 1.37% 2.11%

Earning base in assets (average) 79.02% 82.08% 86.45% 90.02% 91.29%Cost income raito 37.11% 41.83% 36.82% 34.07% 32.37%Credit deposit raito 80.52% 80.72% 88.60% 82.25% 81.81%Cost of funds on average deposits 7.62% 6.66% 7.09% 8.15% 8.41%Yield on average advance 14.80% 13.30% 12.50% 13.52% 13.96%Return on average assets 1.72% 2.16% 1.54% 2.05% 1.99%Return on average equity 22.70% 30.43% 22.51% 31.55% 30.68%Other information No of Branches 30 36 41 50 61

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Prime Bank Limited


No of employees 777 894 1024 1172 1400No of foreign correspondents 441 501 517 528 553Average earning assets 17230.13 23233.08 31929.08 46092.85 64128Average total assets 21804.03 28305.38 36933.96 51202.88 70244Average depostis 18482.42 24276.24 32045.85 45373.27 62618Average advance 14590 19856 27568 384634 51347Average equity 1654.14 2010.83 2523.90 3333.94 4567

Chapter 3: Credit Policy of Prime Bank Ltd.

3.1 Good Lending PrinciplesThe core of the banking business is the collection of funds from people who have more

funds on hand than they need at the moment and leading money to people who have more

need for funds than they have funds available. When that function is performed well,

productive activity and sensible consumption in the community are both encouraged.

Moreover, as the bank prospers, it is a source of employment for members of the

community, and other businesses around it flourish as its suppliers. Rarely do banks lose

money because of a mistake in a sophisticated analytical computation. Loan losses most

often occur when people decide to proceed with a loan despite the fact that it goes against

the basics. Rules (policies, procedures, guidelines, etc.) do not relieve anyone of the

obligation to exercise good judgment. If it is within a person’s authority to deviate from

the general rule, that persons is expected to use good judgment in either following the

general rule or making an exception, as good judgment indicates. If it is not within a

person’s authority to deviate from the rule, that person is expected to decide whether an

exception should be made and if so, to pursue (through appropriate channels) an approval

from someone who has that authority. The rules are there because it usually makes sense

to follow them. However, if there really is reason to make an exception, an exception

should be pursued.

Balance

Running a lending business is like riding a bicycle .It gets very unpleasant if you lose

your balance. In the case of lending, the balance that must be maintained is between

productivity (building loan volume at a reasonable cost to the bank) and quality (ensuring

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Prime Bank Limited


that the loans get paid back as agreed). There are practical cost limits on how much

investigation, analysis, documentation, and follow-up can be devoted to any particular

loan. A loan with poor credit quality, however, imposes a different kind of cost on the

bank. Loan losses are a cost. Loans that do not pay interest are a cost. The compensation

of officers working on problem loans is a cost. Fees paid to attorneys to collect problem

loans or resolve litigation are a cost (not to mention payment of settlements or

judgments).The bank that gets its credit process right finds the correct balance that puts

good loans on the books at reasonable cost without incurring later the disproportionate

costs caused by low credit quality.

Social Policy

Taking social policy into account when making lending decisions is simply responsible

behavior that promotes stability and prosperity and credit considerations tend to come

together. A bank will not want to make loans for purposes or to customers detrimental to

the interests of its home country. A bank should not make loans to individual or

companies whose business is illegal.

A bank should not engage in any transaction unless full and candid disclosure of the

transaction and the circumstances that surround it could be made to all relevant

regulatory agencies, including tax, foreign exchange control, banking, and securities law

regulators.

Nor should it take any actions that its officers and directors would be ashamed to see

described in the newspaper of the community concerned.

Only Cash Repays Loans

Only cash can repay a loan. Conceptually, there are only three sources of cash .A loan

can be repaid from future cash flow of a business or an individual; by the conversion of

other assets to cash, which is then used to pay off the loan; or from a refinancing when

the borrower obtains a loan from another source or raises money through the sale of

equity or some other form of financing. Repayment by a guarantor comes from one of the

same types of sources. For both consumer loans and commercial loans, a bank should

generally make loans only when the primary source of repayment is anticipated cash

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Prime Bank Limited


flow. It should not, for example, make home loans to consumers, when the lender expects

that they will be unable to make the payments and that the bank will have to foreclose on

the home to get the loan repaid. Similarly, a bank generally should not make loans to a

business when it expects to liquidate the assets of that business to obtain repayment of the

loan.

Exception to this policy should be very limited and restricted primarily to loans to

consumers or business secured by pledged bank deposits or pledged marketable securities

as the primary source of repayment. Loans to be businesses anticipating repayment from

refinancing should be made only when the lender reasonably anticipates that if the

refinancing did not take place, the loan would eventually be repaid from the proceeds of

the cash flow of the business or from liquidation of collateral with particularly large

safety margins to cover the loan.

Banks prefer to finance normal consumer needs and productive business. While banks do

make loans (generally secured by a pledge of securities with an appropriate safety

margin) to purchase marketable securities, they should be very cautious about financing

especially aggressive stock market investment, speculation in commodities, or

speculation in foreign exchange or other futures.

Years of experience in many countries have taught us that the sharp increases in value in

speculative booms (in stocks, real estate, and other assets) are always followed by sharp

declines in value.

Strategy

The loans a bank makes should be guided and constrained by its overall corporate

strategy. Banks are better able to protect the interests of their stakeholders –customers,

employees, shareholders, and communities where banks operate –if their credit portfolio

is widely distributed among different places and different industries, rather than

Concentrated with a few. This diversification reduces the volatility of loan losses and

makes for a higher quality earnings stream that reduces the cost of capital.

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Accountability

Someone who recommends a credit is fully responsible for that credit decision even

though the final authority to approve that credit rests elsewhere. Each officer signing a

credit memorandum should do so only if he or she fully supports the applications

recommended. Recommendations for action on individual credits or credit products in

both the commercial and consumer areas should be accurate, clear, concise, candid and

complete does not mean that it will contain a compilation of all the relevant raw data.

Rather, the person preparing the recommendation should sift through the data and confine

the write up to the important items of information. Material risks should be identified, as

should the purpose of the credit.

Executive officers and directors of the bank sometimes refer business opportunities to

account officers. These references must be subject to normal underwriting standards and

normal approval processes to ensure that the credit extension is prudent.

Post approval review, credit examinations, and audits are important aspects of ensuring

that the right things are done.

Administering / Monitoring

Proper analysis of credit proposals is a complex job and requires a high level of analytical

ability and common sense. To ensure proper evaluation of credit proposals, monitoring of

the end uses and recovery of the Bank's dues, proper staffing of the Credit Departments

shall be done through placement of qualified officials with right aptitude, formal training

in finance, credit risk analysis, bank credit procedures as well as experience.

Where the quality of a credit deteriorates it shall be identified at an early state and closely

monitored in order to avoid loan losses.

Loans/facilities, and where appropriate, related security, shall be monitored and reviewed

by a separate unit not connected with the credit approval process on a regular basis in

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Prime Bank Limited


order to assess the prospect of recovering the principal and interest on due dates and

quality and effectiveness of the security. This unit will report to the Managing Director or

his one designated executive by him.

3.2 CreditThe word ‘Credit’ is derived from the Latin word ‘Credo’ which means ‘I believe’

and is usually defined as the ability to buy with a promise to pay. It consists of actual

transfer of goods and services in exchange for a promise to pay in future. It is simply

the opposite of debt. Diversification of banking service has accelerated the use of

credit to expand their business.

3.3 Factors of Credit PolicyCredit policy of all line cannot be the same due to their different strategic policy. In

designing credit policy, the bank first of all consider total deposit resources of the

bank and rate of fluctuation. Secondly, trend growth in deposit and economic growth

rate. The most important factor to be considered is the capital reserve determined by

Bangladesh Bank (BB). All the bank are regularly monitored by the BB and required

to maintained Statutory Liquidity Reserve) as per stipulated ratio fixed by Bangladesh

Bank. Finally the investment structure of the bank which also has a role in the

determination.

3.4 Credit Policy of Prime Bank Limited, Satmasjid Road BranchPrime Bank Limited is a new generation bank. It is committed to provide high quality

financial services/ products to contribute to the growth of G.D.P. of the country

through stimulating trade and commerce, accelerating the pace of industrialization,

boosting up export, creating employment opportunity for the educated youth, poverty

alleviation, raising standard of living of limited income group and over all sustainable

socio-economic development of the country.

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Prime Bank Limited


In achieving the aforesaid objectives of the Bank, Credit Operation of the Bank is of

paramount importance as the greatest share of total revenue of the bank is generated

from it, maximum risk is centered in it and even the very existence of bank depends

on prudent management of its credit portfolio. The failure of a commercial Bank is

usually associated with the problem in credit port-folio and is less often the result of

shrinkage in the value of other assets, As such, credit port-folio not only features

dominant in the assets structure of the Bank, it is critically important to the success of

the Bank also.

1. Loans and advances shall normally be financed from customers’ deposits and

not out of temporary funds or borrowing from other banks.

2. Credit will be allowed in manner which will no way compromise the Bank’s

standards of excellence and to customers who will complement such standards.

3. All credit extension must comply with the requirements of Bank’s

Memorandum and Articles of Association, Banking Companies Act 1991 as

amended from time to time, Bangladesh Bank’s instruction and other

applicable rules and regulations.

4. Interest on various lending categories will depend on the level of risk and type

of security offered. It should be borne in mind that rate of interest is the

reflection of risk in the transaction. The higher the risk, the higher is the

interest rate.

5. Interest may be reviewed at least once in 6 month and more often when

appropriate. Fixed interest rate should be discouraged. Preferably all rates

should vary with cost of funds fluctuation based on a spread for profit.

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6. Effective yield can be enhanced to the extent the borrowers are required to

maintain deposits to support borrowing activities. Yield should be further

improved by commitment fee and Service charges where possible. All pricing

of loans should however have relevance with the market condition and be

approved by the Executive Committee/ managing Director.

7. Where repayment and Interest servicing performance of a credit deteriorates it

shall be identified at and early state and closely monitored in order to avoid

loan losses.

8. It is recognized that there will be exceptions to the stated policy which can be

justified. However, these should be approved by the Executive Committee or

by the Board and the circumstances must be fully documented in the credit

file.

9. The aggregate of all cash facilities shall not exceed 80% of customer deposits.

It is further governed by the statutory and liquidity reserve requirement of

Bangladesh Bank.

10. Aggregate Long Term facilities shall not exceed 20% of the total credit

portfolio. Facilities shall not be allowed for a period exceeding 5(five) year.

Any exceptions will require the approval of the Board of Directors.

11. Credit facilities in aggregate extended to any one customer group shall not

normally exceed 15% of the Capital Fund or TK 16.50 (Sixteen crore and 50

lac) crore whichever is lower. However, Board of Directors may relax this

limit in deserving cases. All proposals submitted to Head Office will also be

required to indicate the extent of the Bank’s global exposure to that customer

group.

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12. Aggregate Bank advance to corporate or individual customers (i.e. other than

government or parasitical organizations) which are not secured by collateral

and are allowed on the strength of customer’s personal integrity and financial

standing or the corporate customer’s balance sheet, with or without

hypothecation stock shall not exceed 30% of the total credit port folio.

13. For the unsecured credit facilities extended to a business dominated by one or

two individuals, the Bank shall insist on taking life insurance Policies by the

principals which is sufficient to repay the Loan in the event of death or injury

of any one key individual. The policy to be assigned to the Bank and the

premium to be paid by the customer through the bank under suitable

arrangement.

14. Sector – wise allocation of Credit shall be made annually with the approval of

Executive Committee/ Board of Directors. This shall be reviewed from time to

time.

3.5 Functions of Credit Department Credit division mainly deals with loan processing, dealing with clients, achieving

target through proper utilization of customer’s deposit. Credit division is responsible

for receiving the credit information assembled and placed in the customers credit file

as well as controlling of securities and proper custody of documents. Interviewing the

Prospective borrower when they approach for loan. After several meetings they

started processing and sanctioning of credit facilities to the customer. Next, when they

get permission from the Head Office the disbursement of credit facilities to borrowers

in accordance with established procedures lies upon credit division of that branch.

Disbursement is the end of the department duty, after disbursement they need to keep

the recording of credit facilities properly. Preparing vouchers pertaining to credit

facilities disbursed and recording of relevant entries. The most important function of

the credit department is the analysis of credit and performance of the borrower. The

function of Credit department also contains Follow up and recovery of credit as per

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Prime Bank Limited


due date as well as computation and checking of interest accrued on loans, advances,

and recording entries thereof.

Credit Facilities of Prime Bank Ltd.

3.6 Interest on Loans and Advances

Bank will compete with other financial institutions in the country. So it cannot fix up its

interest rate unilaterally. As far as possible the terms and conditions and especially

interest rates of other banks should to be taken into consideration while fixing its rate of

interest on different types of advances and loans; Interest on various lending categories

will depend on the level of risks and types of security offered. It should be borne in mind

that rate of interest is the reflection of risks in the transaction. The higher the risk, the

higher should be the interest rate. Preferably all rates should be commensurate with the

cost of funds plus a reasonable margin of profit. Effective yield can be improved to the

extent the borrowers are required to maintain deposits to support borrowing activities. All

pricing of loans should however have relevance with the market condition and be

approved by the competent authority at H/O from time to time.

Lending

Term Loan (Project Loan) 13.00%

Other commercial 13.00%

Urban Housing 13.00%

Small & Cottage Ind. 16.00%

Other Special Scheme 16.00%

Consumers Credit Scheme 16.00%

Lease Financing 14.00%

SOD against Financial Obligation 16.00%

SOD against Share 16.00%

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Prime Bank Limited


SOD against FDR of Prime Bank

And above rate 3.50%

3.7 Different Types of Credit Facilities

32

Credit Facility

Funded Business

Industrial Finance and Other Project Loans

Consumer Credit Scheme (CCS)

Different Types of Overdrafts

Advance against Import Bills (BLC)

Advance against Imported Merchandise (LIM)

Advance against Trust Receipt (TR)

Advance against Export Bills Purchased / Discounted

Advance against Work Order

Advance against Other Securities

Non-Funded Business

Letter of Credit

Letter of Guarantee

Prime Bank Limited


Flow Chart 1: Credit Facilities

Funded Business

A funded credit facility that a bank offers to a customer result in actual disbursement

of cash to the customer or to any designated supplier of the customer.

Industrial Finance and Other Projections

Project loan normally has fixed maturity and it relates to term investment. As such it

requires appraisals of those proposals to have a rational decision. Appraisal may be

termed as assessment of viability over a period of time. These loans are usually made

for:

Setting up of industries and to meet working capital

Balancing, Modernization, Replacement and Expansion (BMRE) of

existing industries.

Construction of commercial / Residential Building / Warehousing etc.

Consumer Credit Scheme (CCS)

Objectives

The objective of this loan is to provide essential Household durables to the fixed

income group (Service holders) and other eligible borrowers under the scheme.

Items of Investment

i. Refrigerator / Deep Freeze

ii. Television / VCR / VCP / Dish Antenna

iii. Music Center

iv. Motor Car / Motor Cycle

v. Air –Cooler / Air – Conditioner

vi. Personal computer

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Prime Bank Limited


vii. Washing Machine

viii. Household Furniture & Fixtures

ix. Sewing Machine

x. Kitchen appliances like Oven, Toaster, Pressure Cooker, Blender

etc.

xi. Any other item not specified above but considered essential.

Eligibility

The criteria to become eligible for availing the facility under the scheme are given

below:

I. The borrower must be confirmed official of any of the following organizations:

a) Government Organization.

b) Semi-Government Organization / Autonomous body.

c) Multinational Organizations.

d) Banks & Insurance Companies.

e) Reputed Commercial Organizations.

f) Professions.

Entitlement

Eligibility borrower can avail the facility to purchase more than one article but the

amount of total loan shall not exceed the maximum limit fixed by Head office from

time to time. Further loan may be allowed to the same borrower if 50% of the

previous loan is recovered from him but the same shall not exceed the maximum

limit. Amount of bank’s investment will be fixed in such a manner that the monthly

deduction from borrower salary / income against payment of bank’s dues shall not

normally exceed 50% of his net income. Exceptional cases may be considered if the

bank is satisfied about the repayment capacity if the client.

Period of Investment: Maximum three years.

Client’s Equity

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Prime Bank Limited


Prescribed margin as fixed by Head Office from time to time on the total value of the

articles shall have to be deposited with the bank by the client as equity before

disbursement of loan.

Mode of Disbursement

Client will procure the specified articles from dealer / agent / shops acceptable to

Bank. All papers / Cash memos etc. related to the procurement of the goods will be in

the name of bank ensuring ownership of the goods. Wherever applicable, the

ownership shall be transferred of the client after full adjustment of Bank’s dues. The

client shall have to bear all the expenses of license, Registration, Insurance etc. of the

articles wherever necessary. The insurance will be with the Bank mortgage clause.

The premiums shall be paid by the borrower by debt to his account. The client shall

have to bear the cost of Repair & maintenance of the acquired articles.

Mode of Recovery

Dues shall be recoverable in equal monthly installments. The monthly installment

shall be payable by the 8th of every month, but the first installment shall be payable by

the 5th of the subsequent month of disbursement. In other way, deduction from the

monthly salary of the client wherever applicable, by his employer. In this regard the

concerned employee shall authorize irrevocably his employer to deduct the said

amount from his monthly salary. The client can only revoke this authority with the

concurrence of the bank.

Retail Loan

Objective:Other forms of Loan which are not categorized under CCS Loan fall under Retail

Loan.

Car Loan

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There are minimum criteria to get the loan. If the applicant is a service holder then the

applicant’s monthly income must be at least Tk.20000 and if the applicant is a business

man then the income must be at least TK.40000. The age limit of the borrower must be

between 25-60 years. The down payment of the loan must be 10%. Car Loan only

sanctioned for the cars manufactured in Japan. The car for which the loan will be

sanctioned must not be older than 2004 model Japanese Car. Bank generally does not

invest for the car exceeding 20 laces. Exceptional cases may be considered if the bank

is satisfied about the repayment capacity of the client as well as client’s social status.

The loan is sanctioned for six years at a maximum.

CNG Conversion Loan

There are some criteria to become eligible for availing the facility. First, if the applicant

is a service holder then the applicant’s monthly income must be at least Tk.12000 and if

the applicant is a business man then the income must be at least TK.25000 (Living on

rent house). Besides, In case of house owner, the service holder applicant’s monthly

income must be at least Tk.10000 and if the applicant is a business man then the income

must be at least TK.15000. Finally, The age limit of the borrower must be between 21-65

year.(at the time of repayment)Eligibility borrower can avail the facility to purchase more

than one article but the amount of total loan shall not exceed the maximum limit fixed by

Head office from time to time. Further loan may be allowed to the same borrower if 50%

of the previous loan is recovered from him but the same shall not exceed the maximum

limit. Like car loan, its down payment is also 10%. The loan is sanctioned for one and

half year at a maximum.

Doctor’s Loan

As part of the global phenomenon medical profession is changing fast. With ever

changing environment, ground breaking products and equipments are coming to the

market. Keeping that in mind and with a vision to support and promote medical

service PBL has introduced Doctor’s Loan. The applicant at least minimum graduate

in Allopathic medical science/ Dentistry. If the applicant doctor is employed then the

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Prime Bank Limited


monthly income of the borrower must be at least Tk.10000. In case of self employed

(Doctor Practicing independently having chamber or clinics), the applicant’s monthly

income must be at least Tk.25000. The age limit of the borrower must be between 25-

65 year (at the time of repayment). If the eligible borrower is a general practicing

Doctor then according to bank’s policy the loan limit is up to Tk. 5 lac. If the eligible

borrower is a post graduate Doctor (Specialist) then according to bank’s policy the

loan limit is up to Tk. 10 lac. Down payment is 10%. The maximum Loan Period is

five years.

Marriage Loan

Prime Bank’s marriage loan enables people to organize and celebrate the marriage in

style. Any self employed or service holder can be benefited under this loan scheme.

The maximum loan limit sanctioned for this purpose is Tk.300000. The eligible

applicant’s monthly income must be between Tk.10000-Tk. 25000. Besides, the age

limit of the borrower must be between 25-65 year (at the time of repayment). The

maximum Loan Period is three years.

Travel Loan

When planning an overseas vacation or making a trip to chosen exotic location,

financing may be an issue. This loan is to facilitate for those who loves to travel. For

travel purpose, any self employed or service holder can apply for this loan scheme. In

case of businessman the applicant must have at least five years of successful track

record. The eligible applicant’s monthly income must be between Tk.10000-Tk.

25000. The age limit of the borrower must be between 25-65 year (at the time of

Repayment). The maximum loan limit sanctioned for this purpose is Tk.200000.

Maximum Loan Period is three years.

Household Durable Loan

Necessity and needs are constantly changing phenomena in our efforts to improve the

quality of life. That necessity cannot always wait for savings to accumulate. Prime

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Prime Bank Limited


Bank has taken care of customer’s necessity when it comes to financing of utility

products. Household loan is sanctioned for household durables to purchase. The

maximum loan limit sanctioned for this purpose is Tk.500000. To be eligible the

applicant should have a bank account in any bank with in Bangladesh and should have

satisfactory transaction. Business man can also set up their business with the loan. In

that case, the applicant must have a business record of at least three years. If the

applicant is a service holder then the applicant’s monthly income must be minimum

Tk.10000 and if the applicant is self-employed then the applicant’s monthly income

must be Tk.25000 at a minimum. But if the applicant has own house in Dhaka then

the minimum monthly income would be Tk.15000. In case of service, the minimum

employment period is one year. The age limit of the borrower must be between 21-60

year (at the time of repayment). Maximum Loan Period is four years. Down payment

is 10%.

Loan against Salary

To face unpredictability in life PBL has introduced Loan against salary. This

produced is tailored to provide loan to fixed income people against their salary to

mitigate any emergency need. Any self employed or service holder can be benefited

under this loan scheme if the minimum employment period is one year. To be eligible

the applicant should have a bank account in any bank with in Bangladesh and should

have satisfactory transaction. The maximum loan limit sanctioned for this purpose is

Tk.300000. If the eligible applicant is a bank holder of PBL then he will get eight

times higher of his/her take total take home salary per month at a maximum. If the

applicant has maintaining account in different bank then he will get 6 times higher of

his/her total take home salary at maximum. The age limit of the borrower must be

between 21-65 year (at the time of repayment). Maximum Loan Period is three years.

Hospitalization Loan

For better treatment any self employed or service holder can apply under this loan

scheme if the minimum employment period is one year. In case of service holder then

the applicant’s monthly income must be minimum Tk.12000 and if the applicant is

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Prime Bank Limited


self-employed then the applicant’s monthly income must be Tk.25000 at a minimum

(Living in rental). If the applicant is self-employed and lives in own house then the

applicant’s monthly income must be Tk.15000 at a minimum. In case of

Government/Semi Government employee the minimum monthly income must be

Tk.10000. The age limit of the borrower must be between 25-65 year (at the time of

repayment). The maximum loan limit sanctioned for this purpose is Tk.500000.

Maximum Loan Period is two year.

Home Loan

Prime Bank offers an easy-to-avail home loan with convenient repayment options.

With maximum limit on loan amount, the applicant have unlimited options of making

their choice. Any self employed or service holder can be benefited under this loan

scheme if the minimum employment period is one year. To be eligible the applicant

should have a bank account in any bank with in Bangladesh and should have

satisfactory transaction. If the eligible applicant is a bank holder of PBL then he will

get eight times higher of his/her take total take home salary per month at a maximum.

If the applicant has maintaining account in different bank then he will get 6 times

higher of his/her total take home salary at maximum. The maximum loan limit

sanctioned for this purpose is Tk.300000. The age limit of the borrower must be

between 21-65 year (at the time of repayment). Maximum Loan Period is three year.

Education Loan

For higher education parents of a student can apply for the loan. Here, the applicant

would be the guardian having income and the beneficiary would be the children of that

applicant. If the applicant is a service holder then the applicant’s monthly income must be

minimum Tk.12000 and if the applicant is self-employed then the applicant’s monthly

income must be Tk.25000 at a minimum. To be eligible the applicant should have a bank

account in any bank with in Bangladesh and should have satisfactory transaction. The age

limit of the applicant must be between 25-60 year (at the time of repayment). Maximum

loan sanctioned for this purpose is 5 lac. Maximum loan period is 4 year.

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Prime Bank Limited


Any Purpose Loan

Any purpose includes the type of loan which cannot be classified to any other

category. It can be going out, sending children abroad, shopping or any other need. To

become eligible for availing the facility the applicant’s monthly income must be

minimum Tk.10000-12000. In case of service, the service holder must have a

permanent job. The age limit of the borrower must be between 25-65 year. (at the

time of repayment). Maximum loan sanctioned for this purpose is 3 lac. Only this

loan is sanctioned in cash. Maximum loan period is 3 year.

Retail Loan Sector Wise

28%

2%

7%

2%

2%

14%

9%

2%

12%

3%

19%Car

Cng Conversion

Doctor's

Marriage

Travel

Household Durable

Loan Against Salary

Hospitalization

Home

Education

Any Purpose

Client’s Equity

Prescribed margin as fixed by Head Office from time to time on the total value of the

articles shall have to be deposited with the bank by the client as equity before

disbursement of loan.

Different Types of Overdrafts

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Prime Bank Limited


Arranged Overdrafts

In this case the customer is allowed on the basis of prior arrangements overdraw his

current account by drawing checks for amounts exceeding the balance up to an agreed

limit within certain period of time not exceeding one year. These facilities are

granting after the credit standing, financial ability and status of the customer as well

as the purpose have been established.

Overdrafts against Pledge of Goods/ Stocks

Under this arrangement, the credit facility is granted to the borrower against the

security of pledge of goods or produce in the form of raw materials or finished

products subject to credit /margin restrictions. The borrower signs a letter of pledge

and surrenders the physical possession of the goods / produce under banks effective

control but retains the ownership with himself. In case of default the bank can sell the

goods on serving proper notice to the borrower and adjust the outstanding out of sell

proceeds. Sometimes collateral securities by way of legal or equitable mortgage of

immovable properties are also obtained.

Advance against Import Bills (BLC)

Advance against Bills under Letter of Credit are originated from the lodgment of

shipping documents received from foreign banks against letter of credit established by

the bank.

Advance against Imported Merchandise (LIM)

Under loan against imported merchandise bank release the imported goods through

the nominated clearing agent of the bank. In this case bank holds the possession of the

goods. Importer takes delivery of the goods from the bank's go down against payment.

It is one type of forced loan.

Advance against Trust receipt (TR)

Advance against Trust Receipt to the client are to release shipping documents for

taking delivery of merchandise which is hypothecated to the bank.

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Advance against Export Bills Purchased/Discounted

Discount

Banks allow advances to the clients by discounting bill of Exchange / pro. Note which

matures after a fixed tenor. In this method, the bank calculates and realizes the interest at

a prefixed rate and credit the amount after deducting the interest from the amount of

instrument.

Purchase of bill

Banks also make advances by purchasing bills, instead of discounting, which are

accompanied by documents of title of goods such as bill of lading or railway receipts

etc. In this case the bank becomes the purchaser / owner of such bill which are treated

as security for the advance. This is allowed primarily relying on the credit worthiness

of the client.

Advance against Work Order

Advance can be made to a client perform work order. To sanction the advance the

banks look after the client’s management capability, equity strength, nature of the

scheduled. Work and feasibility study should be judiciously made to arrive at a

logical decision. Besides assignment bills receivables, additional collateral security

may be insisted upon. Disbursement should be made only after completion of

documentation formalities and fulfillment of arrangements by the client to undertake

the contract. The progress of work under contract is reviewed periodically.

Non-Funded Business

Non funded credit facility to a customer refers to a bank’s commitment to a third

party on behalf of the customer. The commitment itself constitutes facility but does

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not involve cash outflow from the bank. The bank’s commitment essentially states

that in the event of occurrence / non occurrence of a particular event, within a

particular date, due to a particular reason or reasons, a specific sum of money shall be

paid by the bank to the third party upon claim in a particular manner. Though these

types of facilities are primarily none funded in nature but at times it may turn into

funded facility. As such liabilities against these types of credit facilities are termed as

‘contingent liability’ and do not affect the balance sheet of the bank at the time of

commitment but contain the possibility. The non funded facilities are:

Letter of Credit

A banker’s documentary credit is an instrument or letter issued by a bank on behalf of

and for the account of the buyer of the merchandise. By this instrument the bank

undertakes that the bill(s) of exchange of the beneficiary (the seller of the

merchandise) drawn on the buyer, or on the issuing bank, or on another bank

designated in the instrument, strictly according to the conditions stipulated in the

instrument, will be duly honored by acceptance and /or payment depending upon the

issuance of the bill(s) of exchange in question.

Guarantee

In banking, it is an irrevocable obligation of a bank to pay a certain sum of money in

the event of non-performance of a contract by a third party. The basis of guarantee is

always a contractual relationship between principal debtor (account holder) and

creditor (beneficiary), which is either a contract that has been definitely concluded or

a relationship in its pre-contracted as is the case with the tender guarantee. This

relationship is referred to as the principal or underlying relationship or contract. The

contract of guarantee is independent of this underlying relationship.

3.8 Exception to loan policy

On occasions it may be necessary to deviate from the established norms to finance a

credit on its merits without unduly undermining the Bank's interest. If the branch itself is

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satisfied with the merit, these proposals along with supporting documents should be sent

to the Head Office for approval.

Documentation

3.9 Documentation against AdvancesDocument is the written statement of facts or evidence in regard to a particular

transaction, which on placement may bind the parties answerable and liable to the

court of law.

3.10 Importance of DocumentationDocumentation formalities against loans and advances should be properly completed

prior to extension of the facility to safeguard the Bank's interest. Several kinds of

covenants are important. In some covenants, the borrower agrees to do things that help

maintain its business in proper order and thereby help protect the loan. An example

would be a covenant to maintain insurance or to keep property in good condition. Other

covenants are promises by the borrower not to do certain things that might jeopardize the

loan.

Loan agreements also contain provisions that make it an event of default if a borrower

fails to meet certain financial tests such as demonstrating a certain ratio of total liabilities

to tangible net worth, a certain ratio of current ratio of current assets to current liabilities,

a minimum level of tangible net worth, or a minimum level of working capital. Financial

tests relating to cash flow are becoming more common and are encouraged. Finally it can

be said that, complete and correct documentation enables the Banker to take legal

recourse against the borrower in case of non-realization of dues.

3.11 Purpose of Documentation

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Every agreement to extend credit should be evidenced in writing. That written agreement

should spell out the mechanics of the transaction, such as interest rate and repayment

terms, and should also give the bank the right to demand immediate repayment in full on

an event of default. Events of default should include the filing of any bankruptcy or

insolvency proceeding, failure to make a payment to the bank when due, default under

other credit agreements (so that other lenders have a right to declare their credit due and

payable on demand) as well as breaches of warranties covenants in the bank’ s

agreements.

3.12 Types of DocumentationDocuments related to securing loans and advances are classified into the following 2

(Two) categories:

Charge documents are preformatted and printed required to create charge on

securities against loans and advances and the documents are provided by the

Bank to the client for execution.

Legal documents are legal papers provided by the client certifying the legal

status of the borrower, borrowing power, title to goods and property; legal

deeds and power of attorney related to creation of charge on securities.

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46

Documentation

Charge Document Legal Document

Demand Promissory note. Letter of Guarantee Borrowing Resolutions Letter of hypothecation Power of Attorney Letter of Arrangement Letter of Counter Guarantee. Letter of Continuity Letter of Revival Letter of Trust Receipt Letter of Lien Letter of Indemnity Letter of disclaimer Credit sanctions advice accepted by

the borrower.

Memorandum and Articles of Association (Limited Company).

Registered partnership deed (Partnership firm). Trade License. Board resolution covering corporate borrowing

power and execution of security documents (Limited Company).

Resolution of the partners for availing of credit facility and for execution of security documents.

Notarized irrevocable power of attorney.i. To sell hypothecated stock in trade /

machinery / equipment.ii. To receive payments against bills receivables

/ other receivables. For mortgage of property.

1. Original title deed.2. Parcha / Khatian.

3 Non - Encumbrance Certificate.4. Mutation certificate.

5. Rent Receipt.6. City Corporation / Municipality Tax payment

receipt.7. Valuation certificate.8. Power of Attorney (if necessary).9. Clearance from the Lawyer of the Bank (Legal

vetting). 10. Memorandum of deposit of title deed (For Equitable mortgage). 11. Registered mortgage deed (For Registered / Legal mortgage). 12. Certified copy of original title deed(in case of new purchase) 13. Original money receipt duly endorsed in favor of the bank (in case of new purchase).

Prime Bank Limited


Table: Documentation Types

Charge Documents

a) Demand Promissory Note

It is an unconditional written promise of the borrower made to the Bank to repay

debt(s) on demand or at a fixed or determinable future date along with interest at a

stated rate. The demand promissory note must be obtained while extending any type

of credit facilities.

b) Borrowing Resolutions

This is a certified copy of a resolution adopted by the Board of Directors of a

corporate body authorizing designated officers to borrow and pledge, hypothecate,

mortgage, etc. the assets of the corporate body for the purpose of securing the loan/

advance granted to them in accordance with the borrowing power laid down in the

Memorandum and Articles of Association of the organization.

c) Letter of hypothecation

The borrowers agree to Hypothecate to the bank goods and merchandise or any other

securities in consideration of credit facilities granted to them. They give the Bank the

right to sell the securities without notice to them and adjust their outstanding and

other expenses from the sale proceeds.

d) Power of Attorney

This document authorities the bank to sign or endorse documents on behalf of the

party executing the power. If it is given by a corporate body it must be accompanied

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by a corresponding copy of a resolution of the board of Directors authorizing the

execution.

e) Letter of Arrangement

The borrowers confirms the execution of charge / other documents and also

acknowledges the bank’s right to cancel the credit lines allowed at anytime with or

without notice and promises to repay on demand all outstanding including interest and

other charges.

f) Letter of Revival

This letter refers to and constitutes as an integral part of the loan documentation

executed by the borrowers including the promissory notes. The letter is obtained in

order to preclude any question of law of limitation.

g) Trust Receipt

Two different types of trust receipts will be in use to cover the following area of

credit lines:

Letter of trust receipt (For Release of shipping Documents)

This is executed by the borrowers to release shipping documents for taking delivery

of merchandise which is hypothecated to the bank. The Borrowers agree to take

delivery of merchandise as the Bank’s agents and acknowledges that the ban remains

owner of the goods and they will be holding the goods on behalf of the bank, as

Trustees until complete repayment of the debts to the bank.

Letter of Trust Receipt (For Pre-shipment Financing)

This is executed by the borrowers for availing pre-shipment finance by creating lien

on the original letter of credit. The borrower also undertakes that the credit facilities

will be utilized to purchase / process the merchandise for shipment as per terms of the

credit.

h) Counter Guarantee

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In consideration of the bank issuing guarantees / indemnities from time to time, the

borrower agrees to keep the bank indemnified from all liabilities, costs and legal

actions that may arise from the guarantee.

Procedure of Sanction a loan

3.13 Lending to consumers

Home loans, car loans, credit cards, and other types of consumer credit constitute a

significant part of the lending business.

Because there are so many transactions and the amounts are relatively small in each case,

the amount of time that can be spent on an individual decision is limited. For many types

of consumer lending, it has been found that a limited number of key items of information

allow the development of a credit score that can be instrumental in approving or declining

individual credit applications.

Most applications can be quickly approved or declined on the basis of the score and a

normal credit bureau report, with the judgment of experienced credit officers coming into

play in a relatively limited number of cases. Statistical analysis of the portfolio allows

good prediction from these credit scores on delinquency and loss rates. Sometimes it is

possible to supplement historic experience by running pilot tests on new products or new

scoring methods.

Special care is required to ensure full compliance with consumer protection and

nondiscrimination rules. As with business loans, the character of the borrower is of prime

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importance. A bank should not make loans to individuals in the face of evidence that

integrity is lacking.

Many consumer loans are collateralized by a security interest in a house, a car, or other

personal property. Sensible consumer lending requires taking into account the value of

the collateral compared with the value of the loan and also the likely volatility of the

value of the collateral. For example, the value of a house is affected by changes in

interest rates and the economy of the area where the house is located as well as the

physical characteristics of the house itself. The percent of cost advanced against the

collateral is important for another reason. The more the borrower’s own money is at

stake; the less likely the borrower is to walk away from an obligation.

One of the important distinctions in consumer lending concerns the business that comes

to the bank directly through the branch system or other means, often from existing

customers, and the business that comes in an indirect manner, often through people who

are brokers or dealers. In the case of the indirect business, attention needs to be given to

the incentives of brokers or dealers, since they may know more about the personal

characteristics of the consumer than the loan officer does. Sometimes recourse to the

broker or dealer can be obtained, but more often, the bank must depend on the

sophistication of its scoring system to compensate for the fact that the interest of the

person referring the loan is to get the sale made rather than to ensure that the bank makes

a good loan. The bank is safer, particularly as to possible fraud, if it has direct contact

with the borrower.

It is inevitable that with a large volume of loans, some borrowers will fail to pay as

agreed. A good collection process is, therefore, especially important. A good collection

process identifies problems early, sometimes aided by statistical performance scoring on

the behavior of individual loan, and acts promptly to get in touch with delinquent

borrowers to arrange for prompt payment or debt relief for those who need it. Technology

such as computerized telephone and record-keeping systems can be especially helpful.

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Tracking the performance of various consumer credit products is of special importance

because if delinquencies start growing, more recourse may need to be allocated to the

collection process. A bank may also want to change the criteria by which it grants credit

or the terms of the credit or even eliminate a product. Times of high growth require

special care because the new loans placed on the books tend to mask a growing

delinquency rate. Accordingly, special techniques are used to estimate what delinquency

rates would be without the growth.

3.14 Procedure of Sanction a loan

It is very important for a bank to proper utilize its cash flow that the financial institution

takes from its clients in the form of deposits. The bank takes the money in the form of

long term-deposits, short term deposits, double benefit deposit and other scheme. Since

bank has no investment of its own the profitability of the bank depends on loan sanction. .

While recommending advances, Managers should always bear in mind the fact that the

forced sale value of the security offered to secure an advance will be sufficient to cover

the outstanding. Now a days Bank industries become very competitive. Every bank offers

flexible loan rate for the loan takers. Generally the loan PBL offers to its clients is

divided into two categories: Retail Loan and CCS loan (Consumer Credit Scheme).

3.14.1 Application for Advance and its Evaluation

Application for a loan should be made by the intending borrower in writing normally in

the prescribed form stating interalia the purpose of the loan, the quantum of the loan

needed, the repayment program and the securities offered. To get the credit facility from

the PBL the interested client must approach to the authority through prescribed form.

Before processing of the advance proposal the dealing Officer/Manager should ascertain

the detailed information of applicant’s occupation/business and his assets and liabilities,

collect market report about him and assess his overall credit worthiness in order to be

reasonably sure that the borrower will conduct the loan account satisfactorily. The

borrowers in their applications for any credit facility should clearly indicate the purpose

for which such credit are required and it will be the responsibility of the dealing officer to

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satisfy himself that the facilities are required genuinely . Speculative deals and plans

which are not easy to implement should not be entertained. Besides the purpose for which

a facility is required and the borrower’s capacity to repay, his character, standing and

integrity are always the basic considerations for an advance. Borrowers who are not

known to be sincere in honoring their commitments or who indulge in over trading and

make commitments beyond their means usually prove troublesome for the Bank and

advance given to such parties, regardless of the purpose and the collateral security are

likely to turn into difficult cases.

If the officer is satisfied with the client and his/her ability to repay the loan then the

client’s proposal has taken to the branch credit committee for approval. In this stage the

client is required to submit latest one year bank statement, presence of two guarantors,

Balance sheet attested by Charter Accountant in case of business loan, service certificate

etc. Even though the applicant does not maintain any financial statement, to get the

loan they must fulfill the criteria. The applicants also have to show the value of his/her

own fixed/variable asset. After all the documentation if the branch Manager and thereof

higher authority is satisfied then he asked the loan division to process the loan request.

3.14.2 Credit Reports

The authorized loan officer send a letter to the Credit Information Bureau which requests

information on the borrower called CIB report. All officers dealing with loans and

advances should obtain Credit Investigation Report from Head Office C.I.B / C.I.B of

Bangladesh Bank. Credit proposal should invariably be accompanied by a Credit Report

in the prescribed form separately for the borrowers and guarantors, if any. Such reports,

however, will not be necessary in the case of temporary or short term clean overdraft and

advances against readily marketable securities such as Government Promissory Notes,

Savings Certificates and other Government Papers or Life Insurance Polices and Deposit

Receipts of our own or any other banks. Basically it has been done to find out the

previous record of the borrower. Normally no credit report will be necessary, for opening

Letter of Credit with 100% margin and for negotiation of export documents against Letter

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of Credit opened by a first class foreign Bank or correspondents of other banks. In the

case of Packing Credits against firm contracts a credit report on the foreign buyer should

invariably be collected.

Based on the investigation Officer’s report, report of CIB and his own

discussions with the applicants, the dealing officer will prepare credit report covering on

the Constitution of the firm, the prospective borrower's net worth which should be

calculated by taking into account his assets and liabilities . In case of proprietorship firms

which do not systematically maintain books of accounts, enquiries should me made with

his bankers, if necessary. The reports also consider the companies the applicant’s past

dealings with the Bank, if any.

3.14.3 Recommendation Letter to Head Office

If there is nothing found like if the borrower does not have any existing loan or has name

in default list etc. If the report found satisfactory then the loan officer send

recommendation letter for approval loan to the Head Office. The recommendation letter

contains loan detail, customer’s particulars, guarantor’s particular’s, customer’s bank A/C

performance that means customer’s debit turnover, credit turnover record. The letter also

includes customer’s liability position, monthly cash flow statement and ration analysis.

Managers will be personally responsible for ensuring that credit reports submitted to

Head Office are the result of thorough and proper enquiries. It will, therefore, be essential

for the Managers to obtain independent confirmation of all the information collected and

submitted by their officials and they are not to rely solely on the information of their

dealing Officers when advancing Bank’s money. After getting the recommendation letter

the Retail Division of Head Office also verify the loan applicant and documentation. If

the found everything fulfill their criteria then they send the approval for sanction of loan

favoring the client. Reports will be furnished to the Head Office on all borrowers

and co-obligates. Opinions will normally be typed in duplicate. One copy will be

forwarded to the Head Office and one copy should be retained by the Manager. If the

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party reported on is also having dealings with our other branches, copies of the relative

opinion sheets, should also be sent to the concerned branches of the Bank.

3.14.4 Process of Sanctioned Letter

With the sanction letter the Retail Banking Division department also stated the terms and

conditions which must be followed by the respective parties. They determine the service

charge (1% on loan amount plus 15% vat) & amount of risk fund (.5% in case of Home

loan % 1% in case of other categories). The Head Office gives specific instruction to the

branch manager regarding how they will disburse the loan and mode of repayment. In

case of mode of disbursement the office may ask the loan division to issue a pay order or

transfer to the loan A/C etc. The sanction letter then must be communicated by the loan

applicant in a separate sanction advice and such terms and conditions must be accepted

duly signed by the party in the duplicate copy of the sanction letter. With the acceptation

of sanction letter the clients agree to obtain the documents and securities as per indication

given in enclosed certificate of documentation in and additional document(s), if required

as per opinion of the bank’s panel lawyer to protect bank’s interest. Next, the loan

division of the branch send a copy of ‘Certificate of Documentation’ along with a copy of

‘Legal opinion plus Law year’s Satisfaction Certificate’ immediately to Credit

Administration Unit on completion of documentation and other formalities seeking

approval for disbursement of the facility. The loan division can only disburse after

obtaining the disbursement authorization from Credit Administrative Unit, Head Office.

Before disbursement, a declaration to be obtained from the customer to the effect that no

Director/ Sponsor of Prime Bank Ltd. or any of his family Member/Dependent has got

any direct or indirect interest in his business. An undertaking to be obtained from the

customer to the effect that he has no liabilities with any other bank(s) in his name or in

the name of his/her blood relative concern excepting the liabilities if any declared in the

loan application. After all these formalities the loan is ready to disburse. Client will

procure the specified articles from dealer / agent / shops acceptable to bank.

3.14.5 Disbursement Procedure

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After sanctioned of the loan both the client and loan division started disbursement

procedure. The officer stores documents to the safe custody and registered in the safe-

in-safe-out register. To get the loan to work, the customer’s need to submit all

papers / Cash memos etc. related to the procurement of the goods. The possession of

the goods will be in the name of bank and client itself ensuring ownership of the

goods. Like: if someone purchase a flat with the loan facility of the bank the

possession of the flat will remain as “favoring Mr.X a client of Prime Bank Ltd.

Satmasjid Road Branch”. Wherever applicable, the ownership shall be transferred in

the of the client after full adjustment of Bank’s dues. During the process of

disbursement, the client shall have to bear all the expenses of license, Registration,

Insurance etc. of the articles wherever necessary. The insurance will be with the Bank

mortgage clause. The premiums shall be paid by the borrower by debt to his account.

The client shall have to bear the cost of Repair & maintenance of the acquired

articles.

3.14.6 Credit Monitoring Process

Credit monitoring process starts immediately after disbursement of the facility. The

customers start repayment the loan from the next month. Simultaneously, Branch

relationship Officer starts monitoring the loan on site basis. If the officer finds any

deviation to the terms and conditions of the loan or borrower’s wealth, he/she sends

an Early Alert Report to the Corporate Banking Division. An Early Alert Account is

the one that has risks or potential weakness requires monitoring, supervision or close

attention of the management. After having the Early Alert Report, Credit

Administrative Division monitors the loan on an off-site basis and thereby reports the

Credit Risk Management Division to take necessary action. On the other hand, if any

clients fail to pay three monthly installments simultaneously, the Relationship officers

reminds the clients through phone calls, reminds later or visit in person where

necessary.

3.14.7 Mode of Recovery

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To remove the financial burden bank’s recovered the loan amount along with interest

through monthly installment. Generally these amounts are round figure and during the

determination of the installment amount bank consider the payment ability of the

client. The entire loan amount shall be paid into equal monthly installment throughout

the loan period. Any excess or shortage has adjusted with last installment. Dues shall

be recoverable in the following manners:

a) In equal monthly installments.

b) The monthly installment shall be payable by the 8 th of every month, but the

first installment shall be payable by the 8 th of the subsequent month of

disbursement.

c) Through deduction from the monthly salary of the client wherever

applicable, by his employer. In this regard the concerned employee shall

authorize irrevocably his employer to deduct the said amount from his

monthly salary. The client can only revoke this authority with the

concurrence of the bank.

If the customer fails to repay three monthly installments, bank reserves the right to

cancel or call back the entire outstanding loan liability of the concerned account

irrespective of the validity of the account and bank can also take initiative for legal

action under Artha Rin Adalot Ain Act-2003.

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Procedure of Sanction Loan:

57

Appraisal Interviewing the client’s CIB Preparing the credit proposal Landed property valuation

Pre-disbursement Issuing Sanction letter Acceptance from the client Completion of all documentation formalities

as per Head Office.

Disbursement Loan Input Voucher

Monitoring Ensure adjustment as per repayment Communicate with the clients. Physical visit. Obtain various reports regarding client’s

business.

Prime Bank Limited


Flowchart 2: Processing of Credit

3.15 SecuritySecurity accepted against credit facilities shall be properly valued and shall be effected in

accordance with the laws of the country in which the security is held. An appropriate

margin of security will be taken to reflect such factors as the disposal costs or potential

price movements of the underlying assets.

3.16 Collateral Loan SanctionPrime Bank Ltd. Sanctioned loan against different monthly deposit scheme and Fixed

Deposit. This type of loan is called Collateral Loan. But the deposit scheme must be

more than two years of old and the deposited amount must exceed tk.50000. To get

the loan the consumer has to lien the deposit scheme/ FDR to the bank. The maximum

amount sanctioned in the category must not exceed 80% of the total deposited amount

up to date. There is a Credit Committee exists in branch called Branch Credit

Committee (BCC). This Credit Committee could provide loan up to 50 (fifty) Lac

against collateral loan. In this case they don’t need to get sanction from Head Office.

Under this policy they receive FDR / Sanchayapatra / Wage earner certificates / Share

certificates and lien this to stop the payment.

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Repayment Installment realizes from the clients.

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59

Loan request letter received from the client

Prepared the credit proposal under BCC

Received FDR/Wage earner certificate/Share certificates

Completed the lien formalities

Sanction letter prepared

Disburse the loan

Prime Bank Limited


Flow Chart 3: The Process of Cash back loan:

Security

3.17 Security against AdvancesSecurity is a Cover against loans and advances. It ensures recovery of loans and

advances. Though now-a-days greater emphases are put on the purpose of the loan

rather than securities, nevertheless the securities play an extremely important role to

take a decision.

3.18 Types of SecurityThe types of securities offered vary from place to place. In metropolitan cities, it may

be Govt. bonds / share / assignment of Book debt / Bills receivable etc. whereas, in

the industrial area raw materials & finished goods etc. may be offered as securities.

Again agricultural produce is the principal securities in the agricultural centers.

Further, a bank also accepts moveable & immovable properties, life insurance policy

etc. as securities.

Securities are classified into three broad categories:

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Collateral Securities

Guarantee

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Flow Chart 4: Types of Securities

Collateral Securities

The tangible securities pledged / assigned by the borrower to the bank and

additionally held by the bank to secure a loan are called Collateral Securities. In case

of advances against pledge / hypothecation of goods, bank may insist on immovable

properties as collateral. A good collateral security must be-tangible, transferable /

negotiable, easily marketable, price stability, and durability (not perishable), ascertain

ability of market value.

Guarantee

At times when the personal security of the borrower is not considered sufficient or

when the risk involved is a border line case and the borrower is not in a position to

offer sufficient collateral to the loan, the bank may ask for a guarantee of a third party

whose financial ability and credit standing is acceptable to the bank. A guarantee is an

undertaking given to the bank by a third party, called the guarantor to be answerable

to the bank for the debt of the borrower upon his default in repayment of the loan. It

should be remembered that such security for the loan depends on the continued

solvency of the guarantor. To safeguard the bank’s interest a continuing guarantee in

the bank’s standard form should be obtained.

Margin

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Margin

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The difference between the market value / asset valued of the goods, merchandise and

produces pledged / hypothecated to secure a loan / advances and the amount of the

loan / advance (normally the drawing power) is known as MARGIN. The margin to

be retained for each type of loan / advances will be in accordance with instructions

issued from time to time by Bangladesh bank / Head office of the bank. In case where

minimum margin is specified, the percentage may be increased according to market

conditions, salability / durability / storage capacity and inspection facility of the

goods.

3.19 Classified LoansA classified loan or commitment is one which is classified as substandard, Doubtful

or Loss as per policy of loan classification set by Bangladesh Bank or Head Office of

the bank.

Loan Classification means to categorize the debt information in a systematic manner.

But in true sense it is defined in terms of degree of risk associated with these loans.

The objectives/importance of loan classification are:

To find out Net Worth of a bank;

To assess financial soundness of a bank;

To calculate the required provision and the amount of interest suspense;

Strengthen credit discipline;

To improve loan recovery position and

To put the bank on sound footing in order to develop sound banking practice in

Bangladesh.

Position of classified loans and advances and other assets should be placed before the

Board of directors of the bank.

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The following are the broad definitions of the classified categories: however

instruction issued by Bangladesh bank / Head Office of the bank regarding basis of

loan classification and provisioning should be followed:

Flow Chart 5: Classified Loans

Substandard

A well defined weakness is present in loans f this category, which could affect the

ability of the borrower to repay. This is clearly a troubled situation, for one reason or

another, which requires immediate and intensive effort to correct and reduce the

possibility of loss.

Doubtful

A serious doubt must exist that full repayment will not be forthcoming but the exact

amount of the loss cannot be ascertained at the time of classification.

Loss

Advances, or portions of advances, which are determined to be uncollectible, based

on presently known factors.

3.20 Legal Action

Legal proceedings are lengthy and consuming and as such every effort must be made

to settle a defaulter’s outstanding out of court. However, if situation compels the bank

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Classified Loans

SUBSTANDARD DOUBTFULLOSS

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to take legal action for recovery of stuck up loans and advances; the same should be

done with prior approval of Head office. All legal process should be conducted by the

bank’s legal retainer, if necessary in consultation with Bank’s legal adviser.

Importance of Credit AnalysisCredit department of any bank is very much important. “A bank will collapse or not” this

important matter depends upon the performance of the bank’s credit department

Responsibilities of the credit department of PBL are huge. They have to go through a lot

of scrutiny factors. They have to use the deposit collected by the bank in a proper way by

giving loans to maintain the liquidity. A huge part of the revenue is generated from the

interest received from the loans and advances again if they give so many loans then

liquidity of the bank may decrease and risk will also increase in the market.

But ultimately this is the truth that if banks don’t give loan to their clients their revenue

generation will be slow and ultimately the bank will be collapsed. So bank must give

loans and advances to the business and the personnel.

Now the question arises that how effectively they can do it. They must have to take care

that the loan they are giving to the clients. Some questions must arise when Prime Bank

Ltd. gives loan to clients.

Is the client capable enough to repay the loan and interest?

How it will be measured?

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On what basis the bank will give the loan to the client?

If the loan is default how the Bank will recover it?

To get the answer of these questions and maintain the credit activities properly there is no

alternative of Credit Risk Analysis. Analyzing the risk associated with the loan gives a

clear idea about the quality of the loan.

Credit AnalysisCredit analysis is concerned with two things: judging the creditworthiness of the credit

taker and designing an appropriate structure for the credit.

Creditworthiness. Creditworthiness is a function of capacity to repay and willingness to

repay. There are not unrelated, since many people’s willingness to pay is a function to

how much it hurts.

The first step in analysis is to understand the environment in which the company

operates. Political, economic, technological and sociological trends can all have an

impact on the borrower’s business. After understanding this broader environment, the

loan officer must then understand the borrower’s industry, including such issues as

relative bargaining power between purchasers and suppliers, barriers to entry, substitute

products, and cyclicality. The availability of multiple sources of supply and the

company’s Labor relations are very important factors. The impact of international factors

such as changes in foreign exchange rates must not be neglected. Regulatory, legal, and

other factors must also be taken into account.

A Company’s financial capacity to repay a loan depends on producing a sufficient excess

of revenues over expenses year after year. Particular attention must be paid to the

company’s income statement and the trends not only in taka but also in percentages. A

Company with a profit margin that is narrowing every year is a company that may

eventually have difficulty. In conducting financial analysis a spread of at least three (and

preferably five) years of financial statements is required. The account officer should

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Prime Bank Limited


consider quality of earnings, that is the conservatism or aggressiveness of the borrower’s

accounting practices and the volatility of revenues and expenses. Trends and comparisons

with similar companies are very important. Unusual accounting practices should be

disclosed in the credit memorandum.

Structure. The loan should be structured appropriately for its purpose of repayment If a

company is borrowing to finance accounts receivable that are payable in 30 days, the loan

should generally be paid on receipt of the receivables. If the loan is for building a new

plant, the source of repayment may be the added revenues or expense savings by that

plant over a period of years, and accordingly, a loan of 5 or even 10 years may be

appropriate.

When extending credit for more than a year, it is generally advisable to have the credit

paid in periodic installments spread more or less equally over the life of the loan, rather

than in a single repayment at the end. Loan officers however need to be a cautious in

evaluating collateral because it may decline in value and there may be difficulties in

liquidating it. Loan officers need to be especially cautious regarding collateral that is

likely to decline in value at the same time that a borrower’s cash flow is also declining.

For example, a loan to a shipping company secured by ships suffers from the problem

that if the shipping industry does badly, the borrower’s cash flow will suffer. At the same

time, the price at which ships can be sold will decline.

Sometimes a loan is made on the strength of the guarantee of the owner of the borrowing

entity or some other party with an interest in the success of the borrower. Guarantees

strength a lenders position and should be taken wherever possible and collateralized

wherever possible. However, loan officers need to be realistic about the fact that

guarantors often resist paying when the day of reckoning comes.

Not least important in considering the structure of a credit is the price: what payment the

bank gets in return for the liquidity it provides and the risk it takes. Banking is a

competitive business, but it is also business that offers significant value.

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Chapter 4: Job Description

4.1 Description of My JobWith the vision to be the most efficient financial institution of the country Prime Bank

Ltd. It is now considered as one of the largest banking and financial services organization

in Bangladesh. It has made its place as the fastest growing bank. It was a great

opportunity for me to work in this renowned organization. I had the opportunity to

complete my internship from Prime Bank Ltd. As PBL has 71 branches, I was assigned

to perform my internship at Satmasjid Road branch. While working with different

sections banking, I got the opportunity to observe various principles and procedures

followed in banks for financial operation and control. I was able to grasp an elementary

knowledge on quite a few aspects of its operation. On completion of a period of three

month in the internship, I decided to start compilation of a report on my works, side by

side with my routine job assignments. Duration of my internship was from 22 January to

Aril 21, 2009. In PBL Bank, there are several departments. I had the opportunity to work

at two departments which are General banking department and credit division.

Accordingly, at first I was assigned to work in credit division (CD) department then in

General banking (GB) department. I worked for CD for eight weeks then I moved to

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General banking Division for the rest. The work experience gave me a good idea of the

overall banking system of Bangladesh and taught me the professionalism at work place.

4.2 Specific Responsibilities As I worked in credit division (CD) department then in General banking department

(GB). My specific responsibilities are describing below:

4.3 Credit DepartmentA department in the bank that evaluates the financial status of credit applicant it also

confirms that the applicant is capable of lending money from the bank or not. There are

some criteria by which a bank can accept or reject the application for sanction the

loan/advance proposal. The job description of this department is broadly discussed later

part. My specific job responsibilities are given below:

Provides Credit application form and Charge Documents

When a client approaches for the credit my supervisor at first interviewed him/her. If my

supervisor is satisfied then he requested me to provide the clients a credit form and

charge Documents thereby with the information I then fill up the credit application form

and sign the charge documents by the client.

Stamping

To get the legal facility in future bank must stamped the entire legal document like Letter

of hypothecation, Letter of guarantee etc. As an intern my duty was to stamp those

documents.

Make a file for applicant

It takes at least a month to process the whole loan applicant and thereby issuance

sanctioned letter where applicable. Before that the loan division must keep the record of

all the documents relevant with the process of loan. My duty was to open a loan file with

account number on behalf of the loan officer.

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Safe in Safe out register maintain

I maintain the safe in and safe out register. Here, what the customers has done for taking

loan like how many cheques the client has signed, the details of charge documents,

disbursement date, client’s name, loan account number is written here. When the loan is

closed then the client sign on it.

Making office note and Sanction Advice

I make office note and sanction advice. This two are nearly same thing. Here everything

is written about the loan like the terms and conditions of the loan, client’s name, address,

loan limit, sanction date, expiry date, interest rate, bank’s margin, loan objective.

Sanction advice is two copied. One copy is signed by the client which is kept by the

bank, another copy is given to the client. Office note is one copy. It is kept to the bank.

Data Entry for preparing CIB report After every three months CIB Report is sent to the Bangladesh Bank. For preparing CIB

Report at first borrower’s list is made and then matrix. For these different data is needed.

I gave data entry for preparing it.

Prepare CRG, FSS & Proposal

CRG means Credit Risk Grading and FSS means Financial Spread Sheet. When a client

comes for taking loan then his or her risk is measured for giving loan. Otherwise bank’s

risk increases. For it at first bank prepare financial spread Sheet then prepare Credit Risk

Grading and at last prepare a proposal. After that the client risk is measured. If the

client’s risk is high then the bank becomes conscious to provide the loan.

Preparing Defaulter List

Since my work period was in June when all the banks prepare half early and early annual

closing, I also helped my supervisor to make the defaulter list. Defaulter list is very

sensitive in such a way that it has been send directly not only the Hear Office but also to

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the Bangladesh Bank. Any mistake can damage the reputation of the client as well as the

reputation of the branch.

4.4 General Banking Department Account opening

As an intern at first I was taught how to deal with clients who are interested to open an

account. To open an account at first properly a form provided by the bank has to be

fulfilled. There are two types of account form categorized as savings account and current

account. To open an account client must have an introducer. In this bank introducer

means a person or organization who is currently maintaining an account with this bank.

The transaction of the account must at least three month. If the client’s have no introducer

in that sense Prime Bank’s own direct sales executive act as their introducer For personal

account valid personal identification document is required. For organization relevant

document is required. Like -for business organization trade license is required. To open a

savings account a person/persons must be adult and mentally sound. For Organizations

and institutions one or more authorized person from that organization will handle the

account. Person(s) will be selected by that respective organization/institution. My job was

to monitor the fulfillment of those conditions. After fulfill the required procedure if at

least two authorized officer satisfied and signed then an account is opened. An account

number and customer id is given.

Cheque book issue

Issuing cheques book was another work I was assigned for while working for GB

department. When a client opens an account then he/she gets a cheque book for

withdrawing money. For getting cheque book a client has to fill up the cheque requisition

slip. After filling up the cheque requisition slip, the client gave it to me. Then at first I

verify the signature from the authorized officer, when it is verified then I prepare the

cheque book. For preparing the cheque book I would match the series number of cheeque

book with the previous number. Then I write down the name and fall the account number

on the cheque book. After that the officer (Mrs. Lata or Mrs Masuma) put their initials on

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every leaves of the cheque book. At last I would write it on the cheque book register.

Then the client put his/her signature on the register.

Account close

For account close at first the client has to fill up an application form requesting to close

the account. After verification and authorization the account will be closed. The client

must surrender the cheque book at that time. My task was to help the clients to go

through the whole process.

Receive Clearing Cheques

I receive all the clearing cheques. For receiving it at first I would match the cheque

number, bank’s name branch name and amount with which is written in the deposit slip

by the client. Then if it is Prime Bank cheque then I use Transfer seal and if it is clearing

cheque then I use received for collection seal on the client’s copy. Then at last the officer

sign on the client’s copy. Then I send the cheques to the clearing officer.

Maintaining Incoming and Outgoing Register

Everyday lots of documents come to the branch. I receive those. Then I would mark it by

the operational manager and give an entry on the incoming register. If any document

sends to another bank or organization then those come to me and I give entry on the

outgoing register and fall a disperse number.

Issue Bank Solvency Certificate

For various reason clients sometimes need bank solvency certificate. I provide the

solvency certificate to the clients. When operational manager approved the application

form my job was to issue the certificate in the pad of PBL and collect signatures form the

operational manager.

Informing Clients about their balance and providing them statement

Some clients come to know their balance everyday. Then I would inform them about

their balance and some wants to collect statement. Then I gave them a form and help

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them to fill up the form. From the form I can know the client’s name, account type,

account number and the duration of the statement. Then I verify the signature from the

authorized officer. After that I provide them the statements according to their

requirements.

Pay order (PO) Issue

If the clients want to send money inside the Dhaka then he/she can do pay order. To do a

PO a client has to fill a prescribed pay order form which is given by the bank and deposit

the pay order amount and the necessary commission and vat to the cash. The clients can

deposit the money by cash or he/she can place a cheque. After that the client will come to

me with that prescribed pay order form. I will prepare a Pay order when it is authorized

by the cash officer. For preparing it I will write a PO from the pay order block and sign

the pay order by the P.A (Power Of Attorney) holders. For issuing pay order I have to

maintain a register When the Pay order is received by the client then he or she has to sign

in the particular area.

Demand Draft (DD) issue and responding

If the clients want to send money outside the Dhaka then he/she can do Demand Draft.

To do a demand draft a client has to fill a prescribed demand draft form which is given by

the bank and deposit the demand draft amount and the necessary commission and vat to

the cash. The clients can deposit the money by cash or he/she can place a cheque. After

that the client will come to me with that prescribed demand draft form. I will prepare a

DD when it is authorized by the cash officer. For preparing it I will write a demand draft

from the DD blocks then I write it down on the register and make a voucher and sign the

DD and Vouchers by two P.A (Power Of Attorney) holders. If we issue DD then we are

the originating branch, if another branch issue DD and we respond that then we will be

responding branch. For DD responding I will maintain register.

Issuing a pay slip

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For paying miscellaneous expenses bank issues pay slip. It is same as Pay Order. For

issuing a pay slip at first I got the voucher. Then I write it down on the pay slip block and

register giving the beneficiary name, amount, date and reason of expenses.

4.5 Card Division I worked on the card division for 1week, in absence of Sharmin Rahman, Principal

Officer who leads the responsibility of the card division.

Issuing of New ATM Card

At first all the Application form of ATM Card came to me those are filled by the clients.

Then I gave entry their name, address and account number. Then I would take a hard

copy of that and sign it by the operation manager. Then it is sent to the head office.

Within 10 days the cards came to the office and then I sorted them out and finally

distribute.

Sorting and Distribution

When the cards came then I sorted them out. The pin code paper is sent with the card.

The card holder name and card number is written on the pin code paper. I match that and

attach them with a pin and sorted them out alphabetically. It means that whose name

starts with ‘A’ I keep them in the A box, whose name starts with ‘M’, I keep them on the

M box. It is done because of finding out the card easily and least possible time. When the

clients come and ask for his/her card then I ask his/her name. If the client’s name is Talha

Mahmud, then I would go for the T box and search the card. I have to maintain a register.

After getting the card I would ask the client’s address that is written on the pin code

paper. If it is matched with the pin code paper, then I distributes the card to the client

after taking his/her signature on the register where the client’s account number is written.

Before giving the card I would also match the account number of the client. Because

same name clients can remain.

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Chapter 5: Comparison

5.1 Comparison with Other Bank

Dhaka Bank Ltd. Southeast Bank Ltd. Dutch Bangla Bank Ltd. Mercantile Bank Ltd. Export and Import Bank Ltd. Eastern Bank Ltd.

Comparison of Profit of Different Banks Main Office (source Manager’s conference 2008)Area 2007 2008 GrowthDhaka Bank 47.11 54.45 16Southeast Bank 42.01 43.85 4Exim Bank 40.35 43.66 8Mercantile Bank 42.40 52.00 23Dutch Bangla Bank 34.01 36.39 7Prime Bank 33.46 42.29 26

Deposits VS Advances of Different Banks-2008 (Source Manager’s conference 2008)

Banks Crore TakaDeposits 2008 Advances 2008

DBL 4958 3997

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SEB 5547 4816PBL 7054 5761

DBBL 4211 2940EXIM 4159 4020MBL 3933 3140EBL 3170 2910

4958

3997

5547

4816

7054

5761

4211

2940

415940203933314031702910

0

1000

2000

3000

4000

5000

6000

7000

8000

Crore Taka

DBL SEB PBL DBBL EXIM MBL EBL

Deposits & Advances 2008 of Different Banks

Deposits 2008

Advances 2008

Deposit Advance GAP-2008 of Different Banks (source Manager’s conference 2008)

Banks Crore Taka

DBL 956SEB 731DBL 1293

DBBL 1271EXIM 139MBL 793EBL 260

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Prime Bank Limited


956

731

1293

1271

139

793

260

0 200 400 600 800 1000 1200 1400

DBL

SEB

PBL

DBBL

EXIM

MBL

EBL

Deposits Advances Gap 2008

CRORE TAKA

Profit 2008 of Different Banks (Source Manager’s conference 2008)

Banks Crore Taka

DBL 205SEB 294

EXIM 205PBL 351EBL 190MBL 157DBBL 151

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205

294

205

351

190157 151

0

50

100

150

200

250

300

350

400

DBL SEB EXIM PBL EBL MBL DBBL

Profit 2008

Crore Taka

Import 2008 Of Different Banks (Source Manager’s conference 2008)

Banks Crore Taka

DBL 4950EXIM 6140PBL 7062MBL 4038EBL 3782SEB 3847

DBBL 3567

6140

7062

4038 3782 3847 3567

4950

0

1000

2000

3000

4000

5000

6000

7000

8000

EXIM PBL MBL EBL SEB DBBL DBL

Import 2008

Crore Taka

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Prime Bank Limited


Export 2008 Of Different Banks (Source Manager’s conference 2008)

Banks Crore Taka

EXIM 5579DBL 3108

DBBL 3406MBL 3267PBL 5132SEB 2877EBL 3357

5579

31083406 3267

5132

28773357

0

1000

2000

3000

4000

5000

6000

EXIM DBL DBBL MBL PBL SEB EBL

Export 2008

Crore Taka

Rate of Return on Advance 2008 of Different Banks (Source Manager’s conference 2008)

Banks Crore Taka

DBBL 3406DBL 3108EBL 3322

EXIM 5579MBL 3267PBL 5132SEB 2877

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34063108 3322

5579

3267

5132

2877

0

1000

2000

3000

4000

5000

6000

DBBL DBL EBL EXIM MBL PBL SEB

Rate of Return on Advance 2008

Rate(%)

Cost of Deposits 2008 of Different banks (Source Manager’s conference 2008)

Banks Crore taka

DBBL 3406DBL 3108

EXIM 5579MBL 3267PBL 5132SEB 2877

3406 3108

5579

3267

5132

2877

0

1000

2000

3000

4000

5000

6000

DBBL DBL EXIM MBL PBL SEB

Cost of Deposits 2008

Rate(%)t

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Chapter 6: SWOT Analysis Strength

o Prime bank Ltd has been stood first in CAMELS Ratings.

o One of the premier private sector banks in Bangladesh.

o A good number of experienced bankers in its management.

o PBL has good number of branches.

o Better customer service has been proved than other private sector banks.

o Prime bank has already established a favorable reputation in the banking industry

of the country.

o PBL has an interactive corporate culture.

Weakness

o Lack of modern information technology being practiced.

o Newer in the personal loan market.

o Low remuneration package.

Opportunities

o People are interested in getting personal loan with lower interest rate.

o New branches will be opened in different part of Bangladesh.

o New employees (fresh graduates and experienced) are recruited every year.

o Personal loan market is the most happening market in banking sector.

o In this competitive environment BBL must expand its product line to enhance its

sustainable competitive advantage.

Threats

o A loan default culture is still a major drawback for making advance/loan.

o New banks are coming up with new ideas, products and services.

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o The contemporary banks of PBL such as Dhaka bank, Eastern Bank and Dutch

bangla Bank are its major rivals.

Recommendations

As I have gone through some departments, I have come up with some points, which can

improve the efficiency as well as quality of the work. The points are as below;

Setting proper planning for each and every work as well as for the whole

department.

Increase the remuneration package for the employee.

Reduce the service charge for account and other service charge.

Designing jobs on priority basis.

Assigning necessary manpower for every job.

Proper Credit Planning and Management.

Borrower Selection carefully.

Follow Five Cs in Borrower Selection.

Appropriate Financial Analysis of Borrower’s Business.

Monitor the loan sanction process carefully.

Proper maintenance of files and necessary files and documents on daily basis.

Proper managerial observation and cooperation.

Avoiding duplication through accuracy and efficiency.

Developing motivational program and training program.

Ensure that every one working in Software knows it properly and giving them

personal ID.

And most of all change of managerial attitude and view point.

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ConclusionThis report is an effort to reflect a clear idea about the strategies, activities and

difference performances of Prime Bank Ltd. regarding its commercial activities with a

special reference to Credit management or Business. The researcher was assigned it in

the Satmasjid Road Branch of Prime Bank Limited (PBL) as an intern. I present this

report on the basis of the knowledge and experience gained during the internship

period of twelve weeks. Throughout the report my objective is to seek and find out

the main reasons of this prosperity / success of Prime Bank Limited. Lending is a

heart of a commercial Bank. It has two types of loans and advances. Both of

them are profitable assets for a bank to competitive in the market. But the

condition is that loan or advances must have the quality and quantity. It is

therefore, indispensable for a Bank to have a well thought policy for executive to

perform its lending operation. This report contains the overall policy and various

stages of Credit Operation and Credit Management.

To identify the success of any organization it is required to give keen sight in each

section of the work place. In any Bank there are three sectors these are general

banking, credit section and foreign exchange. Of them the most important sector is

credit and the main task is credit operation and credit management. The global

success or failure of the Bank as a whole depends on it. Also with this general

banking has got special importance, because without sufficient deposits no bank will

be able to sanction the credit facility to its various clients and earning profits. General

banking consists of customer services and deposits collection and credit section

consists of utilizing this huge amount of deposits properly. Credit section has gone

several frequent steps. Theses are: Credit Planning, Borrower Selection, Financial

Analysis of Borrower’s Business, Scoring, Sanction of Credit, Monitoring,

Classification, and Provision. With other things the main important part of credit

operation is borrower selection. There are five important factors to select the

borrower. These are known ad five Cs. These are Capital, Character, Collateral,

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Capacity, and condition of the borrower. The financial viability of the customer has

got significant importance. That’s why different techniques are used to justify the

borrower’s financial position.

Prime Bank is an emerging bank. The bank has only completed a decade of banking

services. At the initial stage of business, every institution has to go through the

difficult path of survival. To achieve the confidence of the customers, the bank must

execute some improvements in its marketing and operational areas – Prime Bank Ltd

should try to win customers faith by providing them efficient and dependable

services, credit facility and updating with user friendly modern technologies. The

bank should redesign all sorts of banking procedures to be more user-friendly,

attractive and impressive.

Prime Bank limited started with a vision to be the most efficient financial

intermediary in the country and it believes that the day is not far off when it will reach

its desired goal. Prime Bank Limited looks forward to a new horizon with a

distinctive mission to become a highly competitive modern and transparent institution

comparable to any of its kind at home and abroad.

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BibliographyBibliography1.Ahmed Nasiruddin. (1989), Banking And Finance Compendium: 1st edn. Standard Printing and Packages: Dhaka

2.Hill, Charles, W. & Jones, Gareth, R. (2007), Strategic Management: An Integrated Approach. 7th edn. Houghton Mifflin Company: Boston

3. Karajewski, Lee, J. & Ritzman, Larry, P... (2005), Operations Management: Process and Value Chain. 7th edn. Pearson Education Inc.: India

4. Wheelen, Thomas, L. & Hunger, J., David.(1995), Strategic Management and Business Policy. 5th edn. Addison-Wesley Publishing Company Inc: United States of America

5. Credit Rating Information and Services Limited. Retrieved August 5, 2008, from CRISL Official Web site: http://www.crislbd.org/

6. Star Business News. (2008). Prime Bank Launches Training Programme7. Prospectus of Prime Bank Ltd.8. Leaflet, Booklet and department published documents.9. Bangladesh Institute of Bank Management. “Appraisal of Customers Services of Scheduled Banks of Bangladesh”. Bank Parikrama, 2005.10. Report on “Banker – Customer Relationship”, of National Bank Training Institute. 11. Ahmed, Fariuquddin. “Nationalized Commercial Banks in Bangladesh – An analysis of their Operational and Functional Performance”. Bank PariKrama, Vol. XV & XVI (1990-91).12. InternetWebsite –www.prime-bank.comOther Reference

Brochures of products of Prime Bank LtdAnnual Report 2005-2009, Prime Bank Ltd

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http://www.crislbd.org/