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8/13/2019 Saif's Internship Report on Credt Management of Janata Bank and Dhaka Bank Limited
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Credit Management of Commercial
Banks( A Comparative Study of Public andPrivate sector
banks.)
Prepared for:Mr. e!an Ma"bub #ossain
epartment of A$S%aculty of Business Studies
&niversity of "aka
Prepared by:
Md. Saiful $slam (Saif)BBA 't"Batc"
oll*++epartment of A$S&niversity of "aka
$nterns"ip eport
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Submitted ,o
Accounting and $nformation epartmentUNIVERSITY OF DHAKA
Mr. Dewan Mahbub Hossain
Department of AISFaculty of Business Studies
University of Dhaa
Subject: Letter regarding subissi!n !" Interns#i$ Re$!rt !n %redit &anageent !"
%!ercia' (an) *A %!$arati+e Stud, bet-een $ri+ate .
/!+ernent sect!r (an)s01
Dear Sir!
Here is the report on 2Credit Management of Commercial Bank (A Comparative Study
between private & Government sector Banks)3 you ased me to conduct on the
be"innin" of the Internship.
In this assi"nment! I have tried to focus some ey aspects of credit mana"ement of
Ban Services. Here I show how here I use different tools of credit mana"ement of
commercial Bans.
I appreciate havin" this assi"nment. I prepared this assi"nment with sincerity and
serious effort. #han you for providin" me the opportunity to prepare this. I am really"rateful to you for "ivin" me the scope to prepare this report under your observation. I
have en$oyed preparin" this report and presented it for your $ud"ment.
Sincerely yours!
&d0 Sai"u' Is'a *Sai"1
BBA %thBatch
&oll'())
Department of AISUniversity of Dhaa
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Ackno!ledgement
It*s a "reat pleasure for me to wor with the report based on a topic 2Credit
Management of Commercial Bank (A Comparative Study between private & Government
sector Banks)3which is very much si"nificant for economy. I hope worin" on this
topic will help me to "ather various e+posures to practical field. So! at the very
be"innin"! I would lie to e+press my "ratitude to almi"hty Allah for whose indness
I am sound mentally and physically enou"h to prepare this report.
I wish to e+press my heartiest sense of "ratitude! sincere appreciation to my
honorable teacher Mr. Dewan Mahbub Hossain! Associate ,rofessor! Faculty
of Business Studies whose support and advice was instrument in preparin" this
report.
#hen I would lie to than the Dhaa Ban -imited authority to "ive me this
opportunity to wor there. ithout their support as well as help this paper
could never have been completed.
I would lie offer a special than to Mr.Md.Abdul Basir Hasu! senior officer!
Advance Division Dhaa Ban -imited. Dhanmondi Branch.
Here I cannot but state some of the person*s name who really helped me lots while
preparin" the report with inspections and ideas. I would lie to than Mr. Abdullah
Al Mahmud Shawon. MBA(6th batch).DU. and Nilufar Yasmin.
BBA. (7thbatch).DU.
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-ecutive Summary
Internship pro"ram is the pre're/uisite for the "raduation in BBA. 0lassroom
discussion alone cannot mae a student perfect in handlin" the real business situation1
therefore! it is an opportunity for the students to now about the real life situation
throu"h this pro"ram. A report has to be built for the university and or"ani2ation
re/uirement. #he topic of my report is 30redit Mana"ement of 0ommercial Ban 4A
0omparative Study between private 5 6overnment sector Bans78. #he main purpose
of the report becomes very clear from the topic of the report. #he report discusses
about the credit mana"ement of private 5 6overnment sector commercial bans and
compare with each other. For comparin" between private and "overnment sector
commercial bans I use Dhaa Ban -imited as the sample of private sector
commercial bans and 9anata Ban as the sample of "overnment sector commercial
bans.
Both the bans 4public and private sector7 in our country are under some "eneral
special "uidelines of the central ban framed for the banin" system as a whole and
for bans of individual sectors. #he concept of private sector banin" in our country
is not so old and private sector bans are now "ivin" more emphasis to create a
constructive and meanin"ful competition with the nationali2ed commercial bans.
#his study maes an attempt to cover within its scope almost all the si"nificant
aspects of the credit operations of the selected bans. #he rest of the study is
or"ani2ed as follows'
0hapter: ;= branches in Ban"ladesh and also > branches out side of the
country and ((
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I*d lie to than all the employees of DB-! Dhanmondi and Head
Cffice for their wholehearted co'operation and arran"in" time to help
me to mae this report properly in all these days of my internship
period! when they were so busy. But as it was a new branch! they were
not able to provide me much documents and papers! as they and me
would lie. Cn the way of my study! I have faced the followin"
problems that may be terms as the limitations shortcomin" of the
study.
Budgeted times for t"e study)
#he first obstruct is time itself. Due to the time limitation! the scope
and dimension of the study has been curtailed. As the time limit was
assi"ned for submittin" the report was very short! it was not possible to
spend sufficient time for the study.
ata $nsufficiency)
It was very difficult to collect data! which is very essential for
interpretation! because this branch of DB- was newly established.
#herefore! it was not possible to supply my topic related data. Cn the
other hand 9anata Ban is very much restricted for provide sufficient
data for my study. #hey did not help me by "ivin" the sufficient data.
-acs of records! sufficient boos! publications! facts and fi"ures
narrowed the scope of accurate analysis and interrupted the ways tomae the report more useful and attractive.
Poor 6ibrary %acility)
Most of the commercial bans have itsE own modern! rich and wealthy
collection of hu"e and various types of Banin" related Boos!
9ournals! Ma"a2ines! ,apers! 0ase Studies! #erm ,apers! Assi"nments
etc But the library of Dhaa Ban -imited is not well ornamented.
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C"apter:/1
Bank overvie! B6 7 8B
"aka Bank 6td. at a glance:
Dhaa Ban -imited is the leadin" private sector ban in Ban"ladesh offerin" full
ran"e of ,ersonal! 0orporate! International #rade! Forei"n +chan"e! -ease Finance
and 0apital Maret Services. DB- is the preferred choice in banin" for friendly 5
personali2ed services! cuttin" ed"e technolo"y! tailored solutions for business needs!
"lobal reach in trade 5 commerce and hi"h yield on investments! assurin" +cellence
in Banin" Services.
DB- is a scheduled ban that was incorporated under the 0ompany Act (>! started
its operation on 9uly () with a tar"et to play the vital role on the socio'economic
development of the country. Aimin" at offerin" commercial banin" service to the
customers* door around the country! the DB- established
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ithin this short time DB- has been successful in positionin" itself as pro"ressive
and dynamic financial institution in the country. #his is now widely acclaimed by the
business community! from small entrepreneur to bi" merchant and con"lomerates!
includin" top rated corporate and forei"n investors! for modern 5 innovative ideas
and financial solution.
Capital Base:
Authori2ed 0apital : DB# (;;;.;; million.
,aid up 0apital : DB# ??>.;; million 4=(.(7
Mission Statement:
#o be the premier financial institution in the country providin" hi"h /uality products
5 services baced by latest technolo"y and a team of hi"hly motivated personnel to
deliver +cellence in Banin".
9ision Statement:
At Dhaa Ban! we draw our inspiration from the distant stars. Cur term is committed
to assure a standard that maes every banin" transaction a pleasurable e+perience.
Cur endeavor is to offer you ra2or sharp sparle throu"h accuracy! reliability! timely
delivery! cuttin" ed"e technolo"y! and tailored solution for business needs! "lobal
reach in trade and commerce and hi"h yield on your investments.
Cur people! products and processes are ali"ned to meet the demand of our discernin"
customers. Cur "oal is to achieve a distinction lie the luminaries in the sy. Cur
prime ob$ective is to deliver a /uality that demonstrates a true reflection of our vision'
+cellence in Banin".
Slogan"+cellence in Banin".
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Motto:#he ban will be a confluence of the followin" three interests:
Cf the ban : ,rofit ma+imi2ation and sustained "rowth.
Cf the customer : Ma+imum benefit and satisfaction.
Cf the society : Ma+imi2ation of welfare.
DB- has
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Management $nformation System:
Since its $ourney as commercial ban in () DB- has been layin" "reat emphasis on
the use of technolo"y. It has "one to online operation system since = branches in Ban"ladesh and
also > branches out side of the country and ((
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4ationali2ation7 order (%
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#o be the lar"est! stron"est! innovative and service en"ineerin" commercial ban.
Motto:#he ban will be a confluence of the followin" three interests:
Cf the ban : ,rofit ma+imi2ation and sustained "rowth.
Cf the customer : Ma+imum benefit and satisfaction.
Cf the society : Ma+imi2ation of welfare.
Performance 2% 8B:
9anata Ban is the second lar"est commercial ban in Ban"ladesh. #he aim of is to
actively participate in the socio'economic development of the nation by operatin" a
commercially sound banin" system. It provides credit to deservin" borrowers and at
the same time protect depositor*s interest.
9alues of 8B:
0ustomer focus
Inte"rity
#eam wor
&espect for individual
Guality
&esponsible citi2enship.
%oreign correspondents:
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9anata Ban has already established a worldwide networ and relationship with
international banin" throu"h its > branches in u.a.e. two subsidiaries 3 9anata
+chan"e 0ompany s.r.l.8 in Italy and ((
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C"apter:4Credit isk Management
Policy B67 8B
Credit isk Management Policy of B6:
$,2&C,$2:
0redit &is Mana"ement ,olicy for Dhaa Ban -td. has been prepared in
accordance to the ,olicy 6uidelines of Ban"ladesh Ban*s Focus 6roup on 0redit 5&is Mana"ement with some chan"es to meet DB-*s internal needs.
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0redit &is means the un'certainty to meet financial obli"ations as per a"reed terms
by the borrowers durin" the tenure of the credit facilities. For maintainin" steady
"rowth rate and economical development of the country! Bans and financial
institutions are re/uired to man"e 0redit &is properly. 0redit ris arises from the
facilities e+tended to corporate 5 individuals by the financial institutions.
0redit &is to be mana"ed in such a process that the ban can minimi2e its losses for
payment of e+pected dividend to the shareholders. ith the introduction of Fle+ cube!
DB- has the ability to capture all ey customers* data! ris mana"ement and
transaction information includin" Forei"n #rade 5 Forei"n +chan"e.
#he purpose of this document is to provide directional "uidelines that will improve
the ris mana"ement culture! establish minimum standards for se"re"ation of duties
and responsibilities! and assist in the on"oin" improvement of DB-*s Ban.
#he "uidelines have been or"ani2ed into the followin":
*. P26$C;
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Approval ,rocess
0redit Administration
0redit Monitorin"
0redit &ecovery
#he "uidelines were prepared and endorsed by senior credit e+ecutives from private
sector! forei"n and nationali2ed commercial ban operatin" in Ban"ladesh. #hey are
intended for use in the corporatecommercial banin" businesses. DB- also su""est to
follow these "uidelines for DB-*s Ban.
All Branch Mana"ers and 0redit Cfficers must be conversant with the "uidelines and
ensure that the rules are strictly observed as hi"hli"hted in this policy.
*. P26$C;
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-oan Structure 4#enor! 0ovenants! &epayment Schedule! Interest7
Security Arran"ements
Any other riss or issue
&is tri""ers 5 action plan'condition prudent! etc.
isk
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Ban already has a se"re"ated internal auditcontrol department char"ed with
conductin" audits of all branches.
5. MAA
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#he followin" dia"ram illustrates the approval process:
ecommended elegated Approval Aut"ority
6evels:
Branch Mana"er #.().;; lac to #J.(.;; crore accordin"
to desi"nation of Branch Mana"er 5
ature of advances
0redit 0ommittee #.
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Disbursements under loan facilities are only to be made when all security
documentation is in place. 0IB report should reflectinclude the name of all the
lenders with facility! limit 5 outstandin". All formalities re"ardin" lar"e loans 5
loans to Directors should be "uided by Ban"ladesh Ban circulars 5 related section of
Banin" 0ompanies Act. All 0redit Approval terms have been met. A sample
documentation and disbursement checlist is attached asAppendi !! which ban will
use to control disbursements
Custodial uties:
Appropriate insurance covera"e is maintained 4and renewed on a timely basis7 on
assets pled"ed as collateral.
Security documentation to be held under strict control! preferably in loced
fireproof iron'safe at branches under dual custody.
Compliance e=uirements:
nsure all e+cess 5 e+ceptions are approved from the appropriate credit discretion
level.
All re/uired Ban"ladesh Ban returns are to be submitted in the correct format in
a timely manner.
Ban"ladesh Ban circularsre"ulations are to be maintained and advised to all
relevant departments to ensure compliance.
All third party service providers 4valuers! lawyers! insurers! 0,As etc.7 are to be
approved. -ist of -awyers to be enlisted and approved and circulated accordin"ly.
Credit Monitoring:
#o minimi2ed credit losses! monitorin" procedures and systems should be in place
that provide an early indication of the deterioratin" financial heath of borrower. At a
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minimum! systems should be in place to report the followin" e+ceptions to Head
Cffice! 0redit:
,ast due principal or inters payments! past due trade bills! account e+cesses! and
breach of loan covenants:
-oan terms and conditions are monitored! financial statements are received on a
re"ular basis! and any covenant breaches or e+ceptions are referred to HC 0redit
for timely follow'up.
#imely corrective action is taen to address findin"s of any internal! e+ternal or
re"ulator inspectionaudit.
All borrower relationshipsloan facilities are reviewed and approved throu"h the
submission of a 0redit Application at least annually.
Credit ecovery:
#he &ecovery Unit of Branch should directly mana"e accounts with sustained
deterioration 4a &is &atin" of Sub Standard or worse7.
#he &U*s primary functions are:
Determine Account Action ,lan&ecovery Strate"y
,ursue all options to ma+imi2e recovery! includin" placin" customers into
receivership or li/uidation as appropriate.
nsure ade/uate and timely loan loss provisions are made base o'n actual and
e+pected losses.
P6 Account Management:
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All ,-s should be assi"ned to an Account Mana"er within the &U! who is
responsible for coordinatin" the action planrecovery of the account! and should serve
as the primary customer contact after the account is down"raded to substandard.
Procedures:
&ecovery Units should ensure that the followin" is carried out when an account is
classified as Sub Standard or worse:
Facilities are withdrawn or repayment is demanded as appropriate. Any drawin"s
or advances should be restricted! and only approved after careful scrutiny and
approval from HC 0redit.
0IB reportin" is updated accordin" to Ban"ladesh Ban "uidelines and the
borrower*s &is 6rade is chan"ed as appropriate.
-oan loss provisions are taen based on Force Sale Kalue 4FSK7
-oans are only rescheduled in con$unction with the -ar"e -oan &eschedulin"
"uidelines of Ban"ladesh Ban. Any reschedulin" should be based on pro$ected
future cash flows! and should be strictly monitored.
,rompt le"al action is taen if the borrower is uncooperative.
on Performing 6oan (P6) Monitoring:
A 0lassified -oan review 40-&7 should be prepared by the &U Account Mana"er to
update the status of the actionrecovery plan! review and assess the ade/uacy of
provisions! and modify the ban*s strate"y as appropriate. #he proper authority
should approve the 0-& for ,-s.
P6 Provisioning and 0rite 2ff:
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#he "uidelines established by Ban"ladesh Ban for 0IB reportin"! provisionin" and
write off of bad and doubtful debts! and suspension of interest should be followed in
all cases. &e"ardless of the len"th of time a loan is past due! provisions are to be
raised a"ainst the actual and e+pected losses at the time they are estimated. #he
approval to tae provisions! write offs! or release of provisionsup"rade of an account
should be restricted to the 0redit 0ommittee+ecute 0ommittee or Board.
Credit management policy of 8anataBank:
Accounting policies related to Advances:
4a7 Interest on advances
i. Interests is calculated on classified loans and advances as perBan"ladesh ban circulars and ept in interest suspense account and
credited to income on reali2ation.
ii. Interest is calculated on a daily product basis but debited to the party*s
loan account /uarterly. o interest is char"ed on bad and loss loans
advances from the date of filin" money suits a"ainst the borrowers.
4b7 ,rovision for bad and doubtful debt
6eneral and specific provisions a"ainst bad and doubtful loans and advances are
made in the boos of the Ban*s head office on the basis of information
furnished by the branches.
4c7 Interest and discount income
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Interest on loans and advances! investment and other assets and discount income are
stated at "ross amount as per re/uirement of B&,D circular L (> dated
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It is necessary to "rant credit to any individualfirm"roup more than ) of paid up
capital! syndication is necessary with other state owned ban and at least one private
ban.
6imit of credit of large sum:
0redit of () of ban total capital is called credit of lar"e sum. o ban can offer
more than () of its capital to any individual! firm or "roup.
isbursement of credit budget and sect oral
distribution:
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Credit Budget 5//4
Prevention of credit centrali?ation and
diversification of credit:
,articulars
Balance
as at
=(.((%(.)> ((;=.>% (;.% ((.?@ >@;;.;; >%>).;; (()@.>% (;.%
Import
-oan (()>.>; ?;>%.?@ ?(?%.; (;=>.(@ (;.( ?;;;.;; )?;.;; (;%>.(@ (;.(%
Industry
-oan (>>).) (@=.
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0redit should be distributed amon" various sectors and it should be diversified in the
followin" ways:
one based diversification:
More credit is distributin" in the sector of a"riculture! electricity and others in
underdeveloped 2one. Specially e+port oriented a"ro based industry is "iven priority.
Sector based diversification
0redit will be "iven to the conventional sectors as usual but ban will adopt cautious
step in "ivin" credit to the sectors which are unprofitable and risy. 0redit will not
concentrate in sin"le sectors.
0omparatively small and short term credit will be "iven priority.
A"ro based industries will be "iven priority. #he followin" a"ro based industries
are included in the prior list.
Bread and biscuits! Semai! -accha! chanachur! nuddles etc.
Ata! flour and su2y industry.
&ice! fried rice! beaten rice industry.
Mass room and spirulina processin" industry.
Starch! "lucose de+trose! producin" industry.
Mild processin" industry.
,aper processin" industry.
Shrimp and other fish processin" industries for e+port.
0old stora"e.
,ly wood.
A"ro product processin" industries.
-panding and organi?ing eport trading:
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+port treadin" will be "iven priority in distributin" credit interest rate has been
hu"ely reduced. #he present interest rate is %
Conventional sector:
,revailin" "eneral credit! import e+port loan! industrial credit! rural credit! a"ricultural
credit and other will be contained.
Sectors of priority:
A"riculture and rural sector.
+port oriented industries.
Industrial term loan.
e! sectors:
Fundin" facility to woman entrepreneurs.
9ob holders.
0yber cafe credit.
0omputer.
Disable credit.
asy &eceivable consumers credit loan.
Small power plant.
Banded Sectors:
Military e/uipmenteapons finance! hi"hly levera"ed transactions! finance of
speculative investments! lo""in"! mineral e+tractionminin" or other activity that is
ethically or environmentally sensitive! lendin" to companies listed on 0IB blac'list
or nown defaulters! counterparties in countries sub$ect to U sanctions! share
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leadin"! tain" an e/uity stae in borrowers! lendin" to holdin" companies! Brid"e
loans relyin" on e/uitydebt issuance as a source of repayment.
Competitive $nterest ate:
#o mae our e+portable product compete in the international maret! rate of interest
has been reduced. Moreover interest rate of all inds of credit has been reduced to
increase the flow of credit.
Assessment of credit c"aracteristics:
0redit should be analy2ed in term of its nature. -on" term credit would be reduced
"radually and term loan should be e+panded.
ecentrali?ation of aut"ority of credit
distributors proper monitoring:
0redit distribution authority has been decentrali2ed and as a result flow of credit has
increased.
2bservation and recovery of loan:
#o recover loan plan has been made in each branch. 0lassified loan will be reduced.
#he followin" steps are taen:
Seminar.
,aca"e reward.
#hreat for dissatisfactory result in credit handlin".
Mobile team.
,roper application of law.
arly alert process.
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C"apter:/+
%und $nvested By ,"e
Selected Banks
$ntroduction:
,roper utili2ation of fund is essential behind the success of a ban. #he nature! pattern
and allocation of the sample bans! invest able resources is the main point of my
interest in this chapter. #he classification of the bans advances in to! lon"! short and
medium! classification on the basis of allocation to various economic sectors and
economic purpose etc .0omparative analysis has been made with respect to their
recovery performances! pattern of default.
Both the bans under study have been en"a"ed themselves in e+tendin" lon"! medium
and short term loans to various economic sector in the country. As a nationali2ed
0ommercial Ban 9anata Ban e+tend its credit pro"rams all over the economy such
as a"ricultural credit pro"ram! "eneral trade and commercial financin"! because
9anata Ban tries to achieve si"nificant profit from its operations and also to improve
the economic contributions of the "eneral public in the country. Cn the other handDhaa Ban -td. because of it*s absolutely profit earnin"s motive always e+tends its
credit pro"ram to profitable sectors only which are comparatively low ris and ris
free. #he comparative advance distributions of the both bans are "iven below.
-conomic Sector !ise distribution of 6oans
7 advances of 8anata bank:
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Followin" the "uidelines of Ban"ladesh Ban! credit facilities have been e+tended to
productive and priority sectors. #he outstandin" advance of the ban is t. (>?.%;
crore on =(stDecember
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Ec!n!ic sect!r -ise distributi!n !" '!ans and ad+ances during t#e ,ear *5664756681
9ANATA (ANK *N%(1
*Ta)a in cr!re1
Sources:
(. Statistic Department 9anata Ban
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-conomic Sector !ise distribution of 6oans
7 advances of "aka bank limited:#he outstandin" advance of the ban is t. ? crore on =( stDecember
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From the above tables we see that DB- was very much interested to "o throu"h on
short term commercial and trade loans and advances. #hey are also not e+tendin"
their credit co'operation in the a"ricultural sector as well as Industrial term lendin".
#he other*s classification of DB- credit pro"ramme includes mainly the credit for
+port e+pansion. Bedises! 9anata Ban too participation in all aspects of the
economy whether profitable sector or not.
ature !ise distribution of loans and
advances of 8B6 7 B6
Nature -ise distributi!n !" '!ans and ad+ances *5664756681
*Ta)a in cr!re1
Sources:
(. Statistic Department 9anata Ban.
>=;.?@ ?;(.== >%=.@%
DB- >.%@ (;=.? >).? %>. (?)=.;
@=%.>= ?%?.%; ?=?.%;
DB- @.?( (( 2199.46
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Both 9B and DB- +tend their credit pro"rammes under various terms and
conditions. 0ash credit refers to the "rantin" of credit by the bans to its customers
for a lon" period and for a lar"er amount. It is also a seasonal borrowin" renewed
each season of year. #he ban places the a"reed amount of advancer to the credit of
the customers account "ains some securities. ven thou"h the ma+imum amount to be
advanced is credited to the customers account! the ban chares interest only on the
amount actually withdrawn by the customers. Both the bans e+tend financial
accommodation to their customers who are already operatin" current accounts with
them throu"h overdraft1 -IM: and other facilities. Cther facilities includes bills
purchased and discounted both 4forei"n and local bills7 etc.
$nstitutional Sector !ise distribution of %und:
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F'!- !" L!ans and Ad+ances t! ub'ic and ri+ate Sect!r *5664756681
4#aa in 0ores7
Sources:
(. Statistic Department 9anata Ban.
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As a nationali2ed commercial ban 9anata Ban invests a lar"e portion of its funds to
public sector1 thou"h it has a notable participation in the private sector trade and
business also. Besides as a private ban and also a profit motive ban DB- always
avoids public sector investment as far as possible. From the above table we can see
that in avera"e >> of total advance of 9anata ban is in public sector and )? in
private sector. Cn the other hand in avera"e of total advance of Dhaa Ban
-imited is in public sector and ( in private sector. So from here we can say that
9anata Ban "ive more emphasis on the public sector. But in the recent years! DB-
taes some interest in public sector investment.
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ural Credit> Micro -nt. 7 Special program
financing
B; 8anata bank :
As nationali2ed commercial ban it has a social responsibility to improve the
financial condition of the poorunemployed people. ith a view to perform that
social responsibility! ban has initiated rural credit pro"ram since (%>. ow
under this rural credit portfolio there are == products. Information related to
important products under this pro"ram are shown below:
Sl ame of the products o. of -oanees Cutstandin"
#aa'.@;
;= 0redit pro"ram for
mployees
) Financin" oman
ntrepreneurship
@;.%;
;? 6haroa ,ro$ect
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&aj!r L!an r!gras !" 9anata (an) and D#a)a (an) Liited
C"apter:/@
9anata (an) D#a)a (an) Liited
ID% ID%
(. 9ute Miles
. #anneries. tc
A/RI%ULTURAL %REDIT A/RI%ULTURAL %REDIT(. Irri"ation e/uipment.
. Su"ar cane cultivation.
). Fertili2er Dealers -oan.
?. Salt 6rower*s -oan. tc.
(. Fisheries development.
. &eal state.
). Cverseas and Forei"n #rade and bills.
?. Cthers.
(. #rade and 0ommerce.
. ,ersonal and ,rivate -oans.
). Cthers.
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Credit Comparison 7
Analysis.
Percentage of ma3or credit program as
against total outstanding credit of
8anata Bank: As at 1*st ecember 5//+.
9ute industries' ?.@@
9ute trade' .;
#annery' =.;(
Steel 5 en"ineerin"' .@)
#ea(' .(;
Su"ar mills' .>
House buildin"' ?.>>
&ural credit' %.=%
Brics' .%;
0old stora"e' .(=
Food' (.;
+port credit' .;>
Import credit N
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Grap"ical presentation is given below#
ercentage !" aj!r credit $r!gra as against t!ta' !utstanding credit !" 9(
Percentage of ma3or credit program as
against total outstanding credit of
fig-6.1
1 2 3 4 5 6 7 8 9 10 11
12 13 14 15 16 17
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"aka Bank 6imited: As at 1*st
ecember 5//+.
A"riculture '.;@
Industrial term lendin"' ().;=
orin" capital'%.>=
+port '?.);
#rade and commercial lendin"'=(.;
Special pro"ram'(;.)(
Urban housin"').
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ercentage !" aj!r credit $r!gra as against t!ta' !utstanding credit !" D(L
eposit Advance atio:
ormally bans are directed to invest not more than %) of their total available li/uid
fund. But this is not a hard and fast rule in the sense that if Ban"ladesh Ban is
satisfied about their li/uidity position then the ban may invest more then that limit.#he deposit advance ratio indicates the bans usual performance in respect to their
fund utili2ation because idle fund always incurs costs. #he deposit advance ratios of
both the bans have decreased in the year as compared to the previous years.
Tabular presentation is given below:
De$!sit Ad+ance Re'ati!ns#i$s !" 9( and D(L
Ta)a in i''i!n
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>. Annual &eport ear ended
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-mployee Advance atio:
#his ratio shows human resource mana"ement efficiency as compared to the
utili2ation of available fund. #his is one of the most important measures of bans fund
allocation efficiency. #he ratio shows the proficiency in "eneral rather specific. #he
employee'advance ratio of both the selected bans is shown in the followin" table:
$abular presentation is given below#
E$'!,ee7Ad+ance Re'ati!ns#i$ !" 9( and D(L
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#aa in million
Grap"ical presentation is given below#
DB- /B
%ig @.4
emarks:
#he human resources 4H&7 of DB- are better set for the achievement of the
or"ani2ational "oals. #he position of per employee loans and advances is very much
Ban ,articulars () (;? (() )=< )?@ ?(?
&atio (=.==
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satisfactory and the ratio increased "radually. ,er employee advances of DB- in
#
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#aa in million
Grap"ical presentation is given below#
%ig: @.+
ame
of the
Ban
,articulars .?) ((.%@ (
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C"apter: /'ecovery of advances
$ntroduction:
#he most important part of sound credit mana"ement is of disclosin" the recovery of
loans and advances! problems thereon defaulter patterns! provisionin" a"ainst bad and
doubtful loans and advances etc. Usually ban*s credit mana"ement performance
represents the recovery performance of loans and advances as a"ainst the utili2ation
of funds. Because! it has substantial impact on the bans ultimate profit performance.
In this 0hapter the recovery performance of both the bans under study are critically
analy2ed from various socio'economic points in the county.
r!graes "!r '!an rec!+er,:
It is the subse/uent step of pro"rams for loan distribution. #he detailed pro"rammes
for loans recovery are stated within the terms and conditions of loans distribution. As
a result! it is not a new sub$ect in sound credit mana"ement. As the recovery
performance of commercial bans both public and private sector in Ban"ladesh
"radually decreasin" over time! "overnment as well as the board of directors of the
respective bans have taen some special pro"rammes in the area of recovery. As the
bi""est 0B in Ban"ladesh! 9anata Ban*s recovery performance is not in satisfactory
level. For increase the loan recovery performance 9anata Ban*s recovery pro"rams
are:
#o re'structure the loan sanctionin" and distributin" policy of the ban.
#o sanction loans and advances a"ainst sufficient securities as best as possible.
#o "ive more powers to the branch mana"er in credit mana"ement decisions
main" process.
#o offer a paca"e of incentives to the sound borrowers.
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#o "ive more emphasis on short term loans and advances.
#o impose restrictions on loans and advances for $ust manufacturin" and tradin"
business as also for te+tile industries.
#o tae le"al actions /uicly a"ainst un'sound borrowers as best as possiblewithin the period specified by the -aw of -imitations.
Rec!+er, $attern !" '!ans and ad+ances:
#hus is the actual focus of this chapter. As the bi""est 0B in the county! 9anata
Ban e+pands its credit pro"rammes in each and every corner of the economy. -oans
are approved and disbursed thorou"hly &ural 0redit Division 4&0D71 Industrial 0redit
Division 4I0D7 and 6eneral 0redit Division 460D7 in 9anata Ban. here as DB-
operates only one division i.e. Advance Division 4AD7 because of their limited
operational areas! before analy2in" the recovery performance of the bans under study
the meanin" of the followin" terms should be specific to us.
Disburseent
Hi"hest outstandin" balance on any date durin" the reportin" period minusoutstandin" balance at the end of the precedin" period.
Deand "!r Rec!+er,:
Cverdue at the end of the reportin" period plus recovery durin" the reportin" period.
Rec!+er,:
Hi"hest outstandin" balance on any date durin" the reportin" period minus
outstandin" balance at the end of the recovery period.
Outstanding:
Cutstandin" fi"ures in the led"er at the end of the reportin" period.
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O+erdue:
Demand for recovery minus recovery. Demand for recovery 4DF&71 &ecovery1
Cverdues! and outstandin" amount includes both interests and principal amount.
#able shows the detail recovery position of 9anata Ban. Durin" the periods under
study 9B never could achieve ); recovery performance as a"ainst DF&. #his is an
indication of the bans inefficient credit mana"ement in respect to its outstandin"
loans recovery. #hou"h the position was improvin" slowly the year
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Rec!+er, er"!rance !" N%( *9(1
4#aa in 0rores7
Rec!+er, er"!rance !" S%( *D(L1
4#aa in 0rore7
,articulars ear
% %)>>
&ecovery ; >@ ); >
Cverdue as a
of DF&
)( ?; )
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ow a day banin" laws and financial re"ulations have introduced additional
uncertainty and new dimension of ris for banin" sector in credit operations. In
reviewin" the default riss! the bans both in public and private sector must also
consider the borrowers* current and potential cost of compliance with recent banin"
laws and re"ulations. For avoid the default loans! bans should not "ive loans to the
client without receivin" the 0lean &eport from the 0redit Information Bouro. 4%I(7
C"apter:/
ature of efault
,articulars ear
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$ntroduction:
#he causes of default are multifarious and they vary from sector to sector as
well as from institution to institution. #his chapter is intended to identify and
measure the impact of the poor loan recovery on the profit performances of the
commercial bans of Ban"ladesh.
0"at is default
ormally the term default refers to the non'repayment of loans and advances
within prescribed time limit. #hose who subse/uently default are termed as
defaulter. Before (@ there was no specific "uideline for commercial bans in
Ban"ladesh to identify their default borrowers. Durin" that time it was mostly
dependent on the discretionary power of respective ban and also on the
ODepartment Cf Banin" Inspection* 4DBI7.
Classified loan of 8anata Bank
%'assi"ied L!an !"9anata (an)
*Ta)a in cr!re1
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Rec!+er, *9(1:
Cut of #
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economy continuously increase over time! now a days it is an open secret that
0Bs in Ban"ladesh are under direct control of the respective ministry and the
private commercial bans in Ban"ladesh are "oin" ahead accordin" to the
directions of the directors! that is meanin" of the term Obanin" is beyond
considerations in both cases whether it is public sector or private sector ban.
In most cases sale of favour e+ist rather than banin". 0redit mana"ement of
the 0Bs in Ban"ladesh was so meanin"less and corrupted as it is now
assumed that more than #.;; crores has become unreali2able from the total
loans and advances disbursed within the previous years. Another source
reported that out of #(;; crores disbursed to various economic sectors by the0Bs in Ban"ladesh within the last () year! # N crores became unreali2able
and was considered as bad or loss. Cnly tow hundred lucy persons were
responsible for these over dues loans and advances of # );;; crores
C"apter:
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ecommendation and
conclusion
Summary and findings of t"e study:
As mentioned earlier the ob$ectives of the study is to mae a comparative evaluation
of the credit mana"ement performances between public and private sector bans in
Ban"ladesh as on a sample basis and the scope of the study was desi"ned in such a
manner to achieve the ultimate ob$ectives of the study and I thin that the results and
findin"s of the study which are stated below will coincide with the predetermined
ob$ectives of the study.
P From their historical bac"round and ori"in the two bans under study are
/uite different from each other with respect to their ob$ectives! or"ani2ation structure!
and operational areas and so on. As an 0B! the ob$ectives of 9anata ban are to earn
profit as well as to improve the economic welfae of the people as well to improve the
economic welfare of the people as a whole. Cn the other as a private ban! DB-J
always wants to earn satisfactory profit with little emphasis on all the variables of the
economic welfare of the people.
P #he nature and types of advances of the two bans shoe some diver"ences.
First! 9anata Ban has been e+tendin" a si2able amount of lon"'term pro$ect financin"
in both a"ricultural and industrial sectors! while DB- has an insi"nificant role in lon"'term financin" in any of these two sectors. Second! a ma$or proportion of 9anata
ban*s loan "oes to the a"ricultural sector for the rural farmers while DB- has no
contribution in a"ricultural financin". #he DB- loans and advances are dominated
financin" on a short'term basis to the industries mostly to international trade.
P ,rivate sector bans in Ban"ladesh were located in few metropolitan and
urban cities ne"lectin" the vast and potential rural areas unbaned. #he rural people
are almost outside the credit networ of DB-.
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P ,rivate sector banin" reminded confined to industry and trade business
i"norin" vital interests of priority and ne"lected sectored includin" a"riculture! small'
scale industries! etc
P conomic de"ree of connection on of economic power e+isted in the bans
both in public and private sector contrebuted to the enormous "rowth of only a few
persons fore a few persons for a few bi" business houses leadin" to concentration of
industrial and political monopolies.
P ith a view to implementin" "overnmental policies 9anata ban has been
maintainin" its pioneer position in e+istin" loans to "overnmental bodies. Sectors!
corporations and private enterpriners but DB- still now has an insi"nificant
contribution to public sector entrepreneurs in the country rather it has predominant
role in the private sector band individual persons.
P 0ontributions of 9anata ban in trade and commerce financin" decreased
"radually over time.
P Dhaa ban limited was comparatively efficient in processin" and e+ecutin"
le"al actions a"ainst defaulters for their non'repayment of loans and advances in due
time than that of 9anata ban! 9anata ban too more time in that respect and the
number of pendin" cases increased "radually over time that reason.
P #he credit mana"ement system both in public and private sector in Ban"ladesh
are far from the "uidelines stated by International Accountin" Standard L =; 4AIS L
=;7
P ,olitical misuse of credit pro"rams operated by 9anata ban was a common
phenomenon. Cn the other hand director*s misuse of loan pro"rams operated by
Dhaa ban was a continuous event. Accordin" to Ban"ladesh ban inspection report
loans are "iven to the directors beyond their limit.
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P So Ban"ladesh is an a"ricultural country that Dhaa ban limited should "ive
loan to the a"ricultural sector more and 9anata ban should provide lendin" facilities
more liberally.
P #he deposit advance ratio indicates the bans usual performance in respect to
their fund utili2ation. #he deposit advance ratio of Dhaa ban limited was'''''
566>085 ?@ 56647 8;0; ?@ 56667 860=;?0
Cn the other hand the deposit advance ratio of 9anata ban was '''''
566 ?@ 566=7 ;=056 ?@ 56657 ;404 ?@ 56647 ;8 ?0 So9anata ban utili2es more than%= of its inevitable fund as credit which are "uided by the Ban"ladesh Bans
standard notion in fund utili2ation. But the performance of Dhaa ban is not
satisfactory.
Conclusions and ecommendations:
Banin" sectors no more depends on only on a traditional method of banin". In this
competitive world banin" sector has stretched its win"s wide enou"h to cover any
ind of financial services. ot only from the local bans but also from the forei"n
bans! the bans of today face a tou"h competition. #he ma$or tass of bans for
bans to survive in this competitive environment are by mana"in" its assets and
liabilities in an efficient way. #o mae the assets especially loan and advances bans
must have to more cautious and otherwise these asset will became a burden for the
ban. #o have fruitful investment ban must have to do the credit appraisal perfectly.Ctherwise loan default culture will never end.
I have seen that DB- is not much different from other commercial ban of
Ban"ladesh. It follows the same practice and procedure which is followed by its
elders. But one thin" should be mentioned new loan reformation have sli"htly
chan"ed the appraisal procedure. #his -endin" &is Analysis maes the procedure
better than previous.
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I should say that the standard appraisal procedure is nearly perfect. But bans have to
practice this procedure rather followin" their own procedure. If ban follow the
standard appraisal hopefully the chances of failure will be decline in future.
-endin" policies in Ban"ladesh should be "eared to "rowth potential.
Improvement of credit mana"ement depends on the maintainin" and development
of relevant! ade/uate! proper and reliable data base both at private and public
sector commercial bans.
#he re"ional imbalance between private and public sector bans in respect to their
computational areas should be removed by enforcin" private sector bans to
e+pand their activities and loan pro"rams in the rural areas.
More trainin" should be conducted for the baners to improve their analytical
ability and professional standard re"ardin" the use of -&A and other tools and
techni/ues in selectin" the borrowers and analy2in" the loan proposals.
Bans should be dele"ated to the lower level with ade/uate measures for the
necessary control and follow'up for main" the lendin" decision and recovery
In case of both Bans one proper standard procedure should be developed for all
types of clients and no interpersonal relationship should be involved in approve a
loan
Bans should fi+ed'up specific types of client strate"y accordin" to the different
character of client.
Interest income occupies the ma$or part of the total earnin"s of a ban and ban*s
profitability mainly depends on interest earnin" capacity! so ban should establish
a research and development cell for the purpose of lendin" analysis and recovery
of loans.
For /uic information and proper monitorin" of client! private sector and public
sector commercial bans should e+pand computer based data base system. 9anata
ban use a software named O$b soft* which facility do not "et all the branches of
the ban.
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C"apter: */
Bibliograp"y
Annual 1!ort of Dha*a Ban* -imit!d.#3.
Annual 1!ort of Dha*a Ban* -imit!d.#0.
Annual 1!ort of /anata Ban*.#0.Annual 1!ort of /anata Ban*.#3.
8!b sit! of Dha*a Ban* -imit!d www.dha*aban*ltd.com
8!b sit! of /anata Ban*. www.9anataban*:bd.com
Cr!dit 1is* Mana'!m!nt olic of Dha*a Ban* ltd.
Cr!dit 1is* Mana'!m!nt olic of /anata Ban*.
Cr!dit ris* 'radin' manual. Ban'lad!sh Ban*.
Ban* Statistics. Ban'lad!sh Ban*.
1!s!arch 1!ort"
Md. Sar*!r 1ahman Ma*sudur. ACMA.: ;Cr!ditMana'!m!nt of Comm!rcial Ban*s.< " A
Comarati+! stud of ublic and ri+at! s!ctorban*s.
http://www.dhakabankltd.com/http://www.janatabank-bd.com/http://www.dhakabankltd.com/http://www.janatabank-bd.com/8/13/2019 Saif's Internship Report on Credt Management of Janata Bank and Dhaka Bank Limited
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