Credit Management Policy On AB Bank LTD

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Credit Management Policy

of
AB bank Limited
Submitted by
WWW.ASSIGNMENP!IN.C!M
www.AssignmentPoint.com
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INTRODUCTION:
Risk is inherent in all aspects of a commercial operation, however for Banks and
financial institutions, credit risk is an essential factor that needs to be managed.
Credit risk is the possibility that a borrower or counter party will fail to meet its
obligations in accordance with agreed terms. Credit risk, therefore, arises from the
banks dealings with or lending to corporates, individuals, and other banks or
financial institutions.
Credit risk management needs to be a robust process that enables banks to
proactively manage loan portfolios in order to minimize losses and earn an
acceptable level of return for shareholders. Central to this is a Comprehensive IT
system, which should have the ability to capture all key customer data, risk
management and transaction information including trade & ore!. "iven the fast
changing, dynamic global economy and the increasing pressure of globalization,
liberalization, consolidation and dis# intermediation, it is essential that banks have
robust credit risk management policies and procedures that are sensitive and
responsive to these changes.
$he purpose of this document is to provide directional guidelines to the banking
sector that will improve the risk management culture, establish minimum standards
for segregation of duties and responsibilities, and assist in the ongoing improvement
of the banking sector in Bangladesh.
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ORIGINS OF THE REPORT:
$he Report $itled %Credit &anagement 'olicy( ) Case *tudy +n )B Bank ,s ) 'artial
Re-uirement +f $he BB) 'rogram. $he ,nternship 'rogram .as Carried +ut ,n Commercial
Credit /ivision &ain Branch +f )B Bank 0nder $he *upervisor. /uring $he ,nternship $he
*tudent )re Re-uired $o 'repare ) Report +n $he +rganization .here 1e 1as Been
)ttached.
)ssigned By $he "uide $eacher $his Report ,s 'repared )s 'artial fulfilment +f BB)
Re-uirement
OBJECTIVE OF THE REPORT
$he 'rincipal ,ntent +f $his Report ,s $o 2!amine Credit 'olicy 3f )b Bankltd. ,n 'articular
$he +b4ectives )re ollws5
6 $o 1ave ) "lance )t $he Commercial Banking *ystem ,n Bangladesh.
7 $o 2!amine $he 'resent Banking *ystem ,n Bangladesh.
8 $o "et )-uainted .ith $he 9oan *tructure *ize 'rofile +f *ector .ise +utstanding
'osition +f 9oans )nd *ystem +f 9oan Classification +f )B Bank .
: $o ;now $he /eposit Behavior +f <CBs CBs 'CBs )nd )B Bank )nd $o Cross 2!amine
)ny *tructural Changes Regarding /eposit Behavior.
= $o R>2!amine $he Credit +perations By +ur Commercial Banking *ystem
? $o 2!plain $he 'rocedures *ystems +f Credit &anagement )nd )ppraisal +f )b Bank.
@ $o ind +ut $he <ature )nd *ize +f 'roblem 9oans ,n )b Bank
A $o ind +ut $he Causes +f 'roblem 9oan
B $o )nalyze $he 2ffects +f 'roblems 9oan +n ,ncome +f )b Bank.
63 $o 2valuate $he Carious 9oans 'rograms +f )b Bank .hich ,ncludes ,ndustrial $rade
)nd Commerce $ransport 2tc.
66 $o ,nspect $he Recovery +f 9oans +f )B Bank
67 $o 2!amine .hether $he )ttributes +f "ook 'erformance )re +bserved ,n )B Bank.
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SCOPE OF THE STUDY
)B Bank 9td. ,s one of the leading and first commercial Bank in Bangladesh. $he
scope of the study is limited to the Board Bazar Branch#"azipur only. $he report
covers the organizational structure,background,functions and the performance of the
bank
LIMITATIONS OF THE STUDY
$he following limitations are apparent in the report5
/eficiencies in data re-uired for the study.
,naccurate or contradictory information.
ield practice varies with the standard practice that also created problem.
METHODOLOGY
To prepare the report following methodology is adopted: or the procedure of
different banking operations , had observed the operations and worked with the
officers at the same time , had interviewed the
)B bank officials for getting more information. or the analysis part data have been
collected from
/ifferent statement and the annual reports of the bank.
Carious files and documents of credit and industrial credit division of )B bank
9td.
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Bangladeshs <ew Banking *ystem
)fter the liberation, the banking system in Bangladesh was put back to life through
presedential +rder <o.7? titled Bangladesh Banks <ationalosation +rder,6B@7. )t
the same time another order known as Bangladesh Bank +rder,6B@7 was
promulgated to create the countrys central Bank#Bangladesh Bank# to take over the
assets,liabilities and responsibilities of the erstwhile *tate Bank of 'akistan.
,n the early 6BA3s began the dream run of the private sector that had long been
waiting in the wing to emulate their pre#liberation counterparts to get into the
lucrative business of Banking. 1owever,the first of the commercial banks set up in
the private sector was )rab Bangladesh Bank 9td on a 4pint venture basis in 6BA6#
A7.
$his was followed by three rounds of bank licensing creating the so called three
generations of commercial banks each corresponding to the period of rule of three
main political parties. )s e!pected, political patronages weighted heavily in the grant
of licenses
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<umber and $ypes of Banks
$he financial system of Bangladesh consists of Bangladesh Bank DBBE as the central
bank, : *tate +wned Commercial Banks DSCBE, = government owned specialized
banks, 83 domestic private banks, B foreign banks and 7B non#bank financial
institutions. &oreover, &R) has given license to 7BA &icro#credit +rganizations. $he
financial system also embraces insurance companies, stock e!changes and co#
operative banks.
Central Bank
Bangladesh Bank
'ursuant to Bangladesh Bank +rder, 6B@7 the "overnment of Bangladesh
reorganized the /haka branch of the *tate Bank of 'akistan as the central bank of
the country, and named it Bangladesh Bank with retrospective effect from 6?
/ecember 6B@6.
*tate#owned Commercial Banks
$he banking system of Bangladesh is dominated by the : <ationalized Commercial
Banks , which together controlled more than =:F of deposits and operated 88AA
branches D=:F of the totalE as of /ecember 86, 733:
G6H
. $he nationalized commercial
banks are5
*pecialised Bank of Bangladesh5
;armosangesthan Bank
Bangladesh ;rishi Bank
*onali Bank
Ianata Bank
)grani Bank
Rupali Bank
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'rivate Commercial Banks
'rivate banks are the highest growth sector due to the dismal performances of
government banks DaboveE. $hey tend to offer better service and products.
6. )B Bank 9td
7. BR)C Bank 9imited
8. 2astern Bank 9imited
:. /utch Bangla Bank 9imited
=. /haka Bank 9imited
?. ,slami Bank Bangladesh 9td
@. 'ubali Bank 9imited
A. 0ttara Bank 9imited
B. ,,C Bank 9imited
63. <ational Bank 9imited
66. $he City Bank 9imited
67. 0nited Commercial Bank 9imited
68. <CC Bank 9imited
6:. 'rime Bank 9imited
6=. *outh2ast Bank 9imited
6?. )l#)rafah ,slami Bank 9imited
6@. *ocial ,slami Bank 9imited
6A. *tandard Bank 9imited
6B. +ne Bank 9imited
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73. 2!im Bank 9imited
76. &ercantile Bank 9imited
77. Bangladesh Commerce Bank 9imited
78. &utual $rust Bank 9imited
7:. irst *ecurity ,slami Bank 9imited
7=. $he 'remier Bank 9imited
7?. Bank )sia 9imited
7@. $rust Bank 9imited
7A. *hah4alal ,slami Bank 9imited
7B. Iamuna Bank 9imited
83. ,CB ,slami Bank
86. &oon Bank 9imited
87. Bank 9imited
oreign Commercial Banks
1. Citibank na
2. 1*BC
3. *tandard Chartered Bank
4. Commercial Bank of Ceylon
5. *tate Bank of ,ndia
6. 1abib Bank
7. <ational Bank of 'akistan
8. .o Bank
9. Bank )lfalah
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*pecialized /evelopment Banks
+ut of the specialized banks, two DBangladesh ;rishi Bank and Ra4shahi ;rishi
0nnayan BankE were created to meet the credit needs of the agricultural sector while
the other two D Bangladesh *hilpa Bank DB*BE & Bangladesh *hilpa Rin *angtha
DB*R*E are for e!tending term loans to the industrial sector
G6H
. $he *pecialized banks
are5
"rameen Bank
$he /haka &ercantile Co#operative Bank ltd
Bangladesh ;rishi Bank
Bangladesh /evelopment Bank 9td
Ra4shahi ;rishi 0nnayan Bank
Basic Bank 9td DBank of *mall ,ndustries and CommerceE
Bangladesh *omobay Bank 9imitedDCooperative BankE
)nsar C/' 0nnyan Bank
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)B Bank 9imited, the first private sector bank was incorporated in Bangladesh on
86st /ecember 6BA6 as )rab Bangladesh Bank 9imited and started its operation
with effect from )pril 67, 6BA7.
)B Bank is known as one of leading bank of the country since its commencement 7A
years ago. ,t continues to remain updated with the latest products and services,
considering consumer and client perspectives. )B Bank has thus been able to keep
their consumers and clients trust while upholding their reliability, across time.
/uring the last 7A years, )B Bank 9imited has opened @@ Branches in different
Business Centers of the country, one foreign Branch in &umbai, ,ndia and also
established a wholly owned *ubsidiary inance Company in 1ong ;ong in the name
of )B ,nternational inance 9imited. $o facilitate cross border trade and payment
related services, the Bank has correspondent relationship with over 773 international
banks of repute across =A countries of the .orld.
,n spite of adverse market conditions, )B Bank 9imited which turned 7A this year,
concluded the 733A financial year with good results. $he Banks consolidated profit
after ta!es amounted to $aka 783 cr which is 76F higher than that of 733@. $he
asset base of )B grew by 87F from 733@ to stand at over $k A,:33 cr as at the end
of 733A.
$he Bank showed strong growth in loans and deposits. /eposit of the Bank rose by
$k. 6=6A cr ie., 7A.:=F while the diversified 9oan 'ortfolio grew by over 83F during
the year and recorded a $k 6=@B cr increase. oreign $rade Business handled was
$k B,ABA cr indicating a growth of over :3F in 733A.
$he Bank maintained its sound credit rating in 733A to that of the previous year. $he
Credit Rating )gency of Bangladesh 9imited DCR)BE awarded the Bank an )6 rating
in the long term and *$#7 rating in the short $erm.
)B Bank believes in modernization. $he bank took a conscious decision to
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re4uvenate its past identity J an identity that the bank carried as )rab Bangladesh
Bank 9imited for twenty five long years. )s a result of this decision, the bank chose
to rename itself as )B Bank 9imited and the Bangladesh Bank put its affirmative
stamp on <ovember 6:, 733@.
$he Bank decided to change its traditional color and logo to bring about a fresh
approach in the financial worldK an approach, which like its new logo is based on
bonding, and trust. $he bank has developed its logo considering the contemporary
time. $he new logo represents our cultural %*heetal pati( as it reflects the bonding
with its clientele and fulfilling their every need. $hus the new spirit of )B is %Bonding(.
$he 9ogo of the bank is primarily %red(, as red represents velocity of speed and
purity. +ur new logo innovates, bonding of affiliates that generate changes
considering its customer demand. )B Bank launched the new 9ogo on its 7=th
)nniversary year.
)B Bank commits to nation to take a lead in the Banking sector through not only its
strong financial position, but also through innovation of products and services. ,t also
ensures creating higher value for its respected customers and shareholders. $he
bank has focused to bring services at the doorstep of its customers, and to bring
millions into banking channels those who are outside the mainstream banking arena.
,nnovative products and services were introduced in the field of *mall and &edium
2nterprise D*&2E credit, .omens 2ntrepreneur, Consumer 9oans, /ebit and Credit
Cards D9ocal & ,nternationalE, )$&s, ,nternet and *&* Banking, Remittance
*ervices, $reasury 'roducts and *ervices, *tructured inance for Corporate,
strengthening and e!panding its ,slamic Banking activities, ,nvestment Banking,
specialized products and services for <RBs, 'riority Banking, and Customer Care.
$he Bank has successfully completed its automation pro4ect in mid 733A. ,t
envisages enabling customers to get banking services within the comfort of their
homes and offices.
)B Bank has continuously invests into its biggest asset, the human resource to drive
forward with its mission %to be the best performing bank in the country.( $he bank
has introduced /ress Code for its employees. &ale employees wear designed ties
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and females wear *haree or *alwar ;amiz, all the dresses are consisted with the
uni-ue )B Bank logo.
)B is recognized as the peoples choice, catering to the satisfaction of its cliental.
$heir satisfaction is )Bs success.
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Vision & Mission
Vision Stateent
L$o be the trendsetter for innovative banking with e!cellence & perfectionL
Mission Stateent
L$o be the best performing bank in the countryL
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Mana!eent Coittee
;aiser ). Chowdhury
'resident & &anaging /irector
azlur Rahman
)dditional &anaging /irector
&a4edur Rahman
)dditional &anaging /irector
aru- & )hmed
/eputy &anaging /irector
*hamim )hmed Chaudhury
/eputy &anaging /irector
Badrul 1. ;han
Chief inance +fficer
CORPORATE
INFORMATION OF AB
BAN"
Nae o# t$e Co%an&
)B Bank 9td
Le!a' Fo(: ) public limited company incorporated
on 86st /ecember, 6BA6 under the Companies )ct,
6B68 and listed in the /haka *tock 2!change 9td
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and Chittagong *tock 2!change 9td.
Coen)eent o# B*siness
7@th ebruary 6BA7
Re!iste(e+ O##i)e
BC,C Bhaban, 83#86, /ilkusha CM)
/haka 6333, Bangladesh.
$el5NAA#37#B=?3867 NAA#37#B=?3867
a!5 NAA#37#B=?:677, 78
*.,$5 )BB9B//1
2#mail5 infoOabbank.com.bd
.eb5 www.abbank.com.bd
A*+ito(s
*.. )hmed & Co.
Chartered )ccountants
Ta, Cons*'tant
;.&. 1assan & Co.
Chartered )ccountants
Le!a' Retaine(
). Rouf & )ssociates
C$itta!on! Re!iona' O##i)e
*pensers Building, 7? )grabad CM), Chittagong
$el5 @688A6#A8,@688A=#A?D386E
a!5 @688A: D386E
2#mail5 agrmgOabbank.com.bd
S&'$et Re!iona' O##i)e
Biswa Road, *hah4alal 0poshohor 'oint, *ylhet
8633
$el5 D3A76E@7=3:7 D3A76E@7=3:7, A6=3A=
a!5 @7=3:7
2#mail5 gdntmgOabbank.com.bd
"$*'na Re!iona' O##i)e
&ollick *hopping Comple! 9imited, BB ;han )
*abur Road, ;hulna
$el5 D3:6E @73866 D3:6E@73866, @783?7, @7:3B3
&obile5 366BB#??33@=
a!5 D3:6E @73866
2#mail5 khlnmgOabban
Ra-s$a$i Re!iona' O##i)e
637#638 *haheb Bazar, Ra4shahi
$el5 @@87?6, @@:7A8 D3@76Ea!5 @@87?6 D3@76E
Me()$ant Ban.in! /in! 0MB/1
BC,C Bhaban D@th loorE
83#86, /ilkusha CM), /haka 6333
$el5 NAA#37#B=???AA NAA#37#B=???AA
a!5 NAA#37#B=??AA
2#mail5 mbwOabbank.com.bd
AB Ban. Fo*n+ation 0ABBF1
BC,C Bhaban D@th loorE
83#86, /ilkusha CM), /haka 6333
$el5 NAA#37#B==8B8B NAA#37#B==8B8B
a!5 NAA#37#B==8@@8
2#mail5 abbfOabbank.com.bd
AB Ban. Liite+2 Is'ai Ban.in! B(an)$
A7, ;akrail, Ramna, /haka
$el5 NAA#37#A88778= NAA#37#A88778=, 8@, 8A
a!5 NAA#37#A88778?
2#mail5 ibbOabbank.com.bd
O3e(seas B(an)$
M*4ai B(an)$
9iberty Building
:6#:7, *ir Cithaldas, $hackerse &arg
<ew &arine 9ines, &umbai :33#373, ,ndia
$el5 733=8B7#8 D33B6E
*.,$5 )BB9,<BB
2#mail5 mumbaiOabbank.com.bd
S*4si+ia(& Co%an&
AB Inte(nationa' Finan)e Lt+
1ongkong
0nit 6736#B, 67M, )dmiralty Centre
$ower +ne, 6A 1arcourt Road, 1ongkong
$el5 7A?? A3B: D33A=7E
*.,$5 )B9<;11
2#mail5 aomrashedOabbank.com.bd
O%e(atin! Pe(#o(an)e
Board of /irectors of AB Ban. Liite+ 0ABBL1 takes immense pleasure in
presenting the 7=th )nnual Report of the Bank to you. ,t is also the privilege of the
Board to present the audited accounts of the Bank for the year ended 86st /ecember,
733? and the )uditorsP Report thereon.
Qour Bank reached a milestone on 56t$ o# A%(i'2 6757 when )B reached 7A years of
its 4ourney which started with a single Branch operation at ;arwan Bazar, /haka way
back in 6BA7. )B being the pioneer in private sector banking in Bangladesh will be the
first to achieve this milestone. +ver the years, your Bank has contributed in many
ways towards development of the private sector banking in the country. &any of the
big industries in different fields of the economy has )BPs name attached and your
Bank remains a proud development partner of these industrial houses over the years.
)B thrived on customer service and relationship banking which brought new
dimensions to this particular service sector and many more new entrants to banking
sector followed )B.
)BPs *ponsors set a vision for the Bank which reads5 8To 4e t$e T(en+sette( #o(
inno3ati3e 4an.in! 9it$ e,)e''en)e an+ %e(#e)tion8. $hroughout these 7A years
your Bank raised the bar for itself through services, initiatives, products, customer
support and performance towards that visionary path.
)t the beginning of the year 733=, Board took the mission for the year as La year of
consolidation and growthL. ,n line with that, &ea( 677: 9as i+enti#ie+ to 4e t$e &ea(
o# 8#inan)ia' (e;st(*)t*(in! an+ !(o9t$8. *ponsors of the Bank remain committed to
take )B into ne!t higher level of banking on a strong financial footing and with
appropriate systems and processes in place.
Being a financial institution, your Bank is e!posed to the entire gamut of economic
developments and activities both within and outside the country. 1ence to start with,
we will throw some brief insights in to the economic scenario of the year 733?.
G'o4a' E)ono&
.orld economic growth strengthened in the year 733? as the global gross domestic
product D"/'E registered a growth of 8.B percent compared to 8.= percent in 733=.
/espite rising oil prices Dthat topped R@= a barrel during the course of the yearE, rising
short#term interest rates, and a bout of volatility of financial market, the global growth
accelerated in the overall. $his strong global performance was driven by very rapid
e!pansion in developing economies, which grew by @ percent # more than twice as
fast as high income countries D8.6 percentE. ,n the overall, 8A percent of the increase
in global output originated in developing countries which far e!ceeded these
economies 77 percent share in world "/'.
)lthough broadly based, strong performance by China D63.: percent growthE played a
significant role in the recent e!pansion of developing economies which grew by @
percent. ,t is of significance that e!cluding China and ,ndia DA.@ percent growthE,
developing countries grew by =.= percent thereby playing important roles in the global
economic performance.
ast growth of developing countries over the past five years has been fueled by low
interest rates and abundant global li-uidity. $his has led to rising commodity prices
and over#heating in some high#income and developing countries. $his, in turn, has
provoked a tightening of monetary policy that is in part is responsible for slowdown at
the global level towards the later part of the year. 1owever, in most countries strong
productivity growth, due in part to the absorption of China and the former 2astern
Block countries into the global economy, has checked inflationary pressures.
,n the 0nited *tates, the acceleration of industrial output began at a torrid pace of =.?
percent during the year. )s a result 0* "/' had a positive growth in 733?. 1owever,
responding to higher short#term interest rates, spending in the housing sector declined
and also had a moderating effect on the consumer demand. $his resulted in the
slowing down of the economy to 6.? percent annualized growth rate in the third
-uarter of 733?. 1owever, profit, foreign investment and consumption remained robust
while inflation and unemployment remained low. Conse-uent upon all these factors,
0* economy is e!pected to grow by 8.7 percent as a whole.
2uropean economy also e!perienced growth in 733? after several years of weakness.
"rowth accelerated in the first half of the year as "/' e!panded by about 8.8 percent
over that period. $his is mostly driven by private consumption and increased
investment spending. 1owever, slower growth in the third -uarter for rance had an
impact on the overall growth but the full year "/' growth in 2urope is estimated to be
7.= percent.
,n Iapan, the "/' was estimated to have e!panded by 7.B percent in 733?. )
slowdown in e!ports contributed to weaker growth in the second -uarter of the year,
but growth rebounded in the third -uarter led by a surge in investment spending.
1igh oil prices and the rapid pace of global growth have contributed to a gradual
increase in inflation among developing countries. $hese countries e!perienced rising
inflation in response to higher oil prices, but it has since declined, reflecting both solid
productivity growth and the impact of more credible monetary policies. ,n contrast, in
high#income economies inflation rose to about 7.@ percent from 6.8 percent before
falling towards the end of the year matching with the falling oil prices.
,n the overall, limited inflationary pressures and high savings among oil e!porters and
in 2urope are e!pected to keep long term interest rates low. &oreover, improved
fundamentals have boosted growth rates in many developing countries. )ll these
factors cumulatively suggest the continuation of robust economic performance in 733@
barring unanticipated reversals.
So*t$ Asian E)ono&
*outh )sian region e!perienced A.7 percent growth during the year 733?. $his marked
the fourth year of consecutive "/' growth of over @.= percent for the region. 'rivate
sector # led growth backed#up by improved macro management and greater
integration in the economy were the contributing factors. 9oose monetary and fiscal
policies and strong remittance inflows also played a role, providing a boost to
domestic demand.
,ndia the largest economy in the region, led the way with a "/' growth of A.@ percent
during the year. 2lsewhere in the region, growth was less rapid compared to ,ndia but
nevertheless robust at ?.= percent. ,n 'akistan industrial output was up by 67 percent
partly reflecting improved sale of te!tiles and clothing.
,n Bangladesh, growth rebounded owing to stronger remittance inflows and by vibrant
services and manufacturing sector output. ,n *ri 9anka growth picked up to an
estimated @ percent due to a good harvest and recovery after tsunami. +ther smaller
economies like Bhutan and &aldives also e!perienced growth while in <epal
economic activity slowed due to political conflict.
$hroughout much of the region, supply was unable to keep up with demand, resulting
in rising inflation and rapidly growing imports. /uring the year, import volumes
increased by 7: percent e!ceeding the e!port growth of 77 percent for the region. )t
the same time, despite rapidly rising ta! revenues, fiscal deficits remained elevated at
@.6 percent of "/' in the region because of increased implicit subsidization of energy
costs and ma4or public sector investment programs and reconstruction e!penditures.
,nflation in the region has risen from 8.A percent in 7338 to @.A percent in the last
-uarter of 733?. Real "/' in *outh )sia is e!pected to slow down gradually from A.7
percent to still robust @ percent. .eaker e!ternal demand, tighter domestic monetary
and fiscal policies, and tighter international markets are all factors contributing to the
e!pected slowdown. 'rospects for individual countries will be affected by weather,
political developments, rising oil prices among others.
Ban!'a+es$ E)ono&
Bangladesh economy continued on the growth path in 733? and achieved a higher
growth compared to the year 733= mainly driven by a strong post#flood agriculture
recovery. "rowth was also fuelled by notable e!pansion of the manufacturing sector.
2conomic growth was also aided by strong growth of e!ports and remittances from
abroad. $his is a noteworthy performance in the face of rising oil price, rise in import
costs and also the phase out of the &ulti #iber )rrangement D&)E. "/' growth was
registered at ?.@ percent in the year 733?.
"rowth performance of the economy was led by the post#flood recovery of the
agriculture sector which was :.= percent in 733? compared to 7.7 percent in the year
before. *trong growth in crops, horticulture and fishing were mainly responsible for
such growth. )t the same time, industrial sector attained B.? percent growth during the
year which is way above the previous yearPs growth of A.8 percent. $his higher growth
rate was sustained through strong performances in the manufacturing arena facilitated
by strong and sustained growth in e!port oriented manufacturing activities and
e!pansion of domestic demands. ,n the overall, service sector of the economy grew
by ?.= percent. $he growth was fairly spread in different sub#sectors which in turn
were related to increase in industrial out put and increase in trade related activities.
*tructural transformation of economy was aimed at through giving new focus on the
development of the *mall & &edium 2nterprises D*&2sE sector. ) credit line was
established in the Bangladesh Bank with the support of the )sian /evelopment Bank
D)/BE and the .orld Bank D.BE, respectively. ,n the year 733?, *&2 sector
e!perienced sizeable growth in the field of rice mills, dairy products, knitwear, leather
products, paper and paper products, light engineering, etc.
CountryPs foreign e!change reserve crossed the 0* R :.3 billion mark for the first time
in the history at the beginning of the year 733@. 'resent level of reserves covers for
over three months of imports of the country. 2!ports and remittances from the <on#
resident Bangladeshis D<RBsE continued to achieve strong growth in the year 733?
while import growth slowed down to a sustainable level. 2!ports grew 76.? percent to
0*R 63,:77 million over the previous year. )t the same time, remittances by the <RBs
grew by 7:.A percent at 0*R :,A37 million. .hile, total import was registered at 0*R
68,836 million showing a growth of 67.6 percent during the year.
2!port earnings achieved more than e!pected growth in the post &) situation due to
higher e!port demand in the 0* and the 2uropean markets. ,mpressive growth of 8=.:
percent was achieved in the knitwear sector driven by a volume growth of 8@.:
percent. CountryPs e!port of raw Iute also e!perienced significant growth of =:
percent over the year 733=. &ore significantly, country is gradually shifting towards a
diversified e!port base. Bangladesh has been included in the Lne!t elevenL a group of
nations having economic growth potential by "oldman *achs.
Relative slowdown of total import was mainly attributable to the reduced import of food
grains, milk products, spices and most other edible products. 1owever, import of
industrial raw materials and capital machineries increased signifying the dynamism in
investment activities in the country. $he commodities whose import payments,
however, increased significantly include crude petroleum and '+9 reflecting the
volatile international market for those.
$he overall balance of payments recorded a significant surplus of 0*R 8?= million
D0*R?@ million in 733=E at the end of the year 733? reflecting a notable improvement
in the current account balance and a larger surplus in the capital account. /espite
noteworthy performance of the e!ternal sector, the foreign e!change market
e!perienced substantial pressure in the year 733?. 'ressures on $aka#0* /ollar
e!change rate generated by continued price hike for import of petroleum and many
other ma4or commodities coupled with higher growth of lending to the private sector
D6A.8 percentE created all such pressure situation. ,n 733?, the nominal $aka#0*
/ollar e!change rate depreciated by A.? percent in the overall. 1owever, the real
effective e!change rate of $aka depreciated by =.8 percent providing a boost to the
countryPs e!ternal competitiveness.
,nflation in the economy showed upward trend in 733?. 'ressures on consumer prices
emerged mainly through rising import prices of fuel, food items, other consumer items
and production inputs feeding into domestic prices. /epreciation of $aka further
contributed to rising consumer prices. $he annual average inflation increased to @.7
percent in Iune, 733?.
Bangladesh Bank continued to pursue a restrained monetary policy stance with a view
to curb e!cess demand from inflationary e!pectations while supporting the sustainable
real "/' growth. /uring the year, the Cash Reserve Re-uirement DCRRE and the
*tatutory 9i-uidity Ratio D*9RE were raised from :.= and 6?.3 percent respectively to
=.3 and 6A.3 percent towards slowing down of the growth of domestic credit. Besides,
repo and reverse repo interest rates and treasury bills M bond yield rates were kept at
an uptrend towards slowing down the credit growth rate.
Broad money D&7E grew by 6B.8 percent during the year which was much higher than
733= growth of 6?.@ percent and far e!ceeded the pro4ection of 6:.8 percent growth.
'ublic sector credit grew substantially by 83.? percent mainly to finance higher cost of
imports of fuel. $otal domestic credit grew by 76.6 percent, while credit to private
sector grew by 6A.8 percent reflecting acceleration of economic activities. $he
declining trend of interest rates that persisted over a period till year 733= reversed in
733? keeping pace with the tightened monetary policy. CountryPs revenue collection
scenario through the <ational Board of Revenue D<BRE remains much lower than the
pro4ection. )mong other factors low tariff rates on many importable items, lower import
volume due to political crisis were mainly responsible for such a situation.
/espite stronger growth of some macroeconomic indicators, Bangladesh economy
faced some challenges originating from price hike of oil, some imported commodities
in the international market causing fluctuations in real sector and foreign e!change
market. )s a result, the financial market was volatile during the year. $he call money
market was also volatile for a period of time due to increase of "overnment borrowing
from the banking system for financing higher priced imports. $ill /ecember 733?,
"overnment borrowing stood at $aka ?8.=3 billion. /ue to such a development, banks
and financial institutions were forced to mobilize deposit at a higher rate resulting in
higher pricing on credit and forcing restrains, at times.
O3e(a'' Ban.in! Se)to(
inancial sector reforms to strengthen the regulatory and supervisory framework for
banks made headway in 733? although at a slower than e!pected pace. +verall
health of the banking system showed improvement since 7337 as the gross <on#
performing 9oans D<'9E declined from 7A percent to 6: percent while net <'9 Dless
'rovisionE reduced to A percent from 76 percent. $his led significant improvement in
the profitability ratios. )lthough the 'rivate Commercial Banks D'CBE <'9 ratio
registered a record low of ? percent, the four <ationalized Commercial Banks D<CBE
position are still weak and showed very high <'9 at 7= percent. $he <CBs have large
capital shortfalls with a risk#weighted capital asset ratio of 4ust 3.= percent DIune 733?E
as against the re-uired B percent. or the 'CBs risk#weighted capital asset ratio stood
at 63 percent.
Bangladesh Bank issued a good number of prudential guidelines during the year 733?
and the first -uarter of 733@ which among others relate to DiE rationalization of
prudential norms for loan classification and provisioning, DiiE policy for rescheduling of
loans, DiiiE designing and enforcing an Lintegrated credit risk grading manualL, DivE
credit rating of the banks, and DvE revisions to the make#up of $ier#7 capital.
Besides, recent decision of the "overnment to corporatize the remaining three <CBs
along with the initiative to sale the Rupali Bank are bound to usher in changes in the
banking sector competitiveness aspect. Bangladesh Bank has also taken up the task
of implementing the Basel ,, capital accord. urther, the recent enactment of the
&icro#credit Regulatory )uthority )ct D&R))E for the regulation of the &icro inance
,nstitutions D&,E has been a ma4or development in the year 733?.
*ince 6BBA C)&29 rating of banks gradually improved and in 733? Bangladesh Bank
updated this rating model by incorporating the market risk and the new model is
known as C)&29*.
"etail Banking
Unse)*(e+ Loans
P(o+*)t Nae 'ersonal 9oan
Ta(!et C*stoe( 2mployees of reputed 9ocal Corporate, &<Cs, <"+s, )irlines, 'rivate
0niversities, *chools and Colleges, ,nternational )id )gencies and 0<
bodies, "overnment 2mployees, *elf#employed 'rofessionals D/octors,
2ngineers, Chartered )ccountants, )rchitects, ConsultantsE,
Businessmen.
P*(%ose &arriages in the family, 'urchase of office e-uipment M accessories,
'urchase of miscellaneous household appliances, 'urchase of 'ersonal
Computers, 'urchase of audio#video e-uipment, 'urchase of furniture.
Loan Ao*nt &inimum $k. 7=,333.33
&a!imum $k. =,33,333.33
C$a(!es )pplication fee5 $k. =33.33
'rocessing fee5 6F on the approved loan amount or $k. 7333.33
whichever is higher
Teno( &in 67 months
&a! 8? months
Rate o# Inte(est 6:.=3F p.a. # 6@.=3F p.a.
Se)*(it& 1ypothecation of the product to be purchased. $wo personal guarantees
Das per our list of eligible guarantorsE
P(o+*)t Nae )uto 9oan
Ta(!et C*stoe( 2mployees of reputed 9ocal Corporate, &<Cs, <"+s, )irlines, 'rivate
0niversities, *chools and Colleges, ,nternational )id )gencies and 0<
bodies, "overnment 2mployees, *elf#employed 'rofessionals D/octors,
2ngineers, Chartered )ccountants, )rchitects, ConsultantsE,
Businessmen
P*(%ose $o purchase Brand new vehicle, non#registered reconditioned vehicle
Loan Ao*nt @3F for the brand new car
?3F for the reconditioned car but must not e!ceed B/$ 63,33,333.33
'rocessing fee5 6F on the approved loan amount or $k. =333.33
whichever is higher
Teno( or Reconditioned Car5 &a! 8? months
or Brand new Car5 &a! ?3 months
Rate o# Inte(est 6:.=3F p.a. # 6@.=3F p.a.
Se)*(it& 1ypothecation of the vehicle to be purchased. $wo personal guarantees
Das per our list of eligible guarantorsE
P(o+*)t Nae 2asy 9oan Dor 2!ecutivesE
Ta(!et C*stoe( $he loan is specially designed for salaried people who are employed in
different reputed companies
Computers, 'urchase of audio#video e-uipment, 'urchase of furniture,
)dvance rental payment, $rips abroad, )dmissionM2ducation fee of
Children etc.
Loan Ao*nt &inimum $k. =3,333.33
&a!imum $k. 8,33,333.33
whichever is higher
Teno( &in 67 months
&a! 8? months
Rate o# Inte(est 6?.33F p.a.
Se)*(it& 9etter of confirmation from the employer. +ne personal guarantee Das
per our list of eligible guarantorsE
P(o+*)t Nae "old "race # Iewellery 9oan
Ta(!et C*stoe( Both female & male employees may apply viz. employees of reputed
Banks & 9easing companies, reputed 9ocal Corporate, &<Cs, <"+s,
)irlines, 'rivate 0niversities, *chools and Colleges, ,nternational )id
)gencies and 0< bodies. "overnment 2mployees. *elf#employed
'rofessionals D/octors, 2ngineers, Chartered )ccountants, )rchitects,
ConsultantsE. Businessmen with a reliable regular source of income.
P*(%ose $o purchase ornamentsMIewellery for personal use
&a!imum $k. 8,33,333.33
whichever is higher
Teno( &in 67 months
&a! 8? months
Rate o# Inte(est 6?.33F p.a.
Se)*(it& 9etter of confirmation from the employer. 'ersonal guarantee from the
parents and spouse Dif marriedE
P(o+*)t Nae 1ouseM+ffice urnishingMRenovation 9oan
Ta(!et C*stoe( 2!patriate Bangladeshi nationals who are in business or service
holders. 2mployees of reputed Banks & 9easing companies, reputed
9ocal Corporate, &<Cs, <"+s, )irlines, 'rivate 0niversities, *chools
and Colleges, ,nternational )id )gencies and 0< bodies. "overnment
2mployees. *elf#employed 'rofessionals D/octors, 2ngineers,
Chartered )ccountants, )rchitects, ConsultantsE. Reputed and highly
respectable Businessmen with a reliable source of income
P*(%ose 1ouseM+ffice urnishingM Renovation, or interior decoration M $itles
*tones, 2lectrical fittings, wooden cabinets M +verall furnishing and all
types of 1ouseM+ffice Renovation, purchaseMfurnishing of apartments
etc.
Loan Ao*nt &inimum $k. 6,33,333.33
&a!imum $k. 63,33,333.33
whichever is higher
Teno( &in 67 months
&a! :A months
Rate o# Inte(est 6?.=3F p.a.
Se)*(it& $itle deed of the 1ouseM+ffice to be furnishedMrenovated along with
memorandum of deposit of title deed duly supported by a notarized
power of attorney to be kept by the bank as a matter of comfort. $wo
personal guarantees Das per our list of eligible guarantorsE. Registered
mortgaged of the property if the loan amount is more than $k. =.33 lac
P(o+*)t Nae *taff 9oan
Ta(!et C*stoe( )ll permanent employees of )BB9
Computers, 'urchase of audio#video e-uipment, 'urchase of furniture
Loan Ao*nt )ccording to the debt burden ration and other criteria
C$a(!es 'rocessing fee5 6F on the approved loan amount
Teno( &in 67 months
&a! 8? months
Rate o# Inte(est 6=.=3F p.a.
Se)*(it& 1ypothecation of the product to be purchased
P(o+*)t Nae 2ducation 9oan
Ta(!et C*stoe( *tudents Criteria5
S *tudents of reputed 2ducational ,nstitutes, such as 'ublic & 'rivate
0niversities, &edical Colleges & 2ngineering ,nstitute.
S 0ndergraduate & 'ost graduate 9evel
S 'rofessionals degrees DChartered )ccountants DC)E, Cost &
management )ccountants DC&)E, &arine, &B&, &B)E
S /octorate degree D'h/E, C'* etc.
S +ccupation5 *tudent
S &inimum )ge5 6@ years
S &a!imum )ge5 :3 years
S 2ducational Tualification5 &inimum 1*CM)#9evel 'ass.
'arents Criteria5
*ervice 1older5
S ,ndividuals with ranks e-uivalent to *enior )ssistant *ecretary or
higher would -ualify guarantor
S Bank officials D2-uivalent to *enior 'rincipal +fficer of <CBs, )C' M
Branch &anager of 9ocal and oreign banksE and /epartment 1ead of
&ultinational Company or established 9ocal Corporate. "uarantors must
be accepted by the Branch &anager M 1ead +ffice.
Businessman5
S .ell reputed and widely respected *elf#employed professionals
P*(%ose $o inancially )ssist $he 'arents5 )dmissionM2ducation ees, *emester
ees, *tudy abroad
&a!imum $k. 8,33,333.33
whichever is higher
Teno( &in 67 months
&a! 8? months
Rate o# Inte(est 6:.=3F p.a. # 6?.33F p.a.
Se)*(it& +ne personal guarantees Das per our list of eligible guarantorsE
Se)*(e+ Loans
P(o+*)t Nae 'ersonal 9oan
Ta(!et C*stoe( )ll Clients of )BB9
P*(%ose $o meet personal re-uirement of fund
Loan Ao*nt &a!imum B=F of the present value of the security
C$a(!es 'rocessing fee5 $k. 6333.33
Teno( &in 67 months
&a! 8? months
Rate o# Inte(est 68.=3F p.a. # 6?.=3F p.a. Dsub4ect to type of the securityE. 7F spread
must be maintained in case of own bank /R
Se)*(it& 9ien over /R, B*', ,CB 0nit Certificate, RC/, <C/, C/ accountDsE
etc. +ne personal guarantee in case of third party cash collateral Das per
our list of eligible guarantorsE
P(o+*)t Nae 'ersonal +verdraft
Ta(!et C*stoe( )ll Clients of )BB9
P*(%ose $o meet personal re-uirement of fund
Loan Ao*nt &a!imum B=F of the present value of the security
C$a(!es 'rocessing fee5 $k. 6333.33
Teno( Revolving with annual review
Rate o# Inte(est 68.=3F p.a. # 6?.=3F p.a. Dsub4ect to type of the securityE. 7F spread
must be maintained in case of own bank /R
Se)*(it& 9ien over /R, B*', ,CB 0nit Certificate, RC/, <C/, C/ accountDsE
etc. +ne personal guarantee in case of third party cash collateral Das per
our list of eligible guarantorsE
Co(%o(ate Ban.in!
)t )B Bank we provide complete range of solutions to meet Corporate CustomersP
re-uirement. +ur Corporate Banking solutions include a broad spectrum of products
and services backed by proven, modern technologies.
Co(%o(ate Len+in!
+ur specialist teams offer a comprehensive service providing finance to large and
medium#sized businesses based in Bangladesh. or more information as to how we
might best meet your corporate debt needs, please contact us at our Corporate 1ead
+ffice.
St(*)t*(e+ Finan)e
.e have a specialist *tructured inance $eam who arrange and underwrite finance
solutions including /ebt and 2-uity *yndication for financial sponsors, management
teams and corporates. )lso we provide corporate advisory services.
.e aim to provide tailored financing solutions with a dedicated team who can rapidly
respond to client needs.
ollowing are some of the products and financial tools of Corporate Banking5
'ro4ect inance
.orking Capital inance
$rade inance
Cash &anagement
*yndicated inance, both onshore & off#shore
2-uity inance, both onshore & off#shore
Corporate )dvisory *ervices
SME Ban.in!
SME Loan
Considering the volume, role and contribution of the *&2s, in the last two decades )B
Bank has been patronizing this sector by e!tending credit facilities of different types
and tenor. )s of now =:F of the banks total loan portfolio is segmented to the *&2s
which deserve all out attention in our plans, pro4ections and forecasting.
)s such the bank has emphasized on the following issues5
$o provide the best services to the *&2 sector
$o increase the *&2 portfolio of )BB9 significantly
$o improve the -uality of )BB9s portfolio
*&2 *ectors in which )B Bank has participated so far5
)gro machinery
'oultry
)nimal eed
/airy 'roduct
ruit 'reservation
1otel & Restaurants
"arments )ccessories
9eather products
'lastic product
urniture 5 .ooden & &etal
,nk
'aint
'rinting & 'ackaging
.ire & Cable
)luminum
Cement and 9ime 'laster
Clinics and 1ospitals
2ngineering & *cientific ,nstruments
La(!e Loan & P(o-e)t Finan)e
,n order to cater the demand of client )B Bank has segmented its portfolio in
terms of loan size. )s per this segmentation any loan over $k. 63.33 Crore falls
under the purview of 9arge 9oan 0nit.
,n )B Bank, there is also a separate 'ro4ect inance unit who evaluate the
business. $he unit is entrusted to handle the portfolio in a focused manner. )B
Bank is always in fore front to support establishment of new pro4ects of
diverse nature which will help to broaden the manufacturing arena vis#U#vis to
generate to employment.
)t the moment )B Bank Vs e!posure in 9arge 9oan & 'ro4ect inance portfolio
is distributed in the following sectors5
SL Se)to( ABBL E,%os*(e
0Liit1
Dig. in 9ac $k.E
6 )gro# Business 67,@6@.=?
7 Cement 'ower, "lass 8A,?B6.B7
8 Consumer 'roducts 76,A==.33
: 2dible +il 8?,3=@.=8
= 2ngineering & Construction 6A,63?.:7
? inancial ,nstitution 6,:6:.@3
@ ood & Beverage 7@,3::.7:
A 1otel 7,=3=.7?
B 1ealth Care 8,B7A.?7
63 'rinting & 'ackaging 66,A?@.?6
66 Real 2state 63,:=6.:B
67 &icro#finance =,@?8.6=
68 2!port B,::6.?8
6: R&" & Backward 9inkage B:,A7?.68
6= *hip Breaking 6A,37B.73
6? *teel :7,A7:.B@
6@ $elecom & Computer )ccessories 66,:@B.AB
6A $rading @@,=@B.AB
Tota' D including s&n+i)ate+ e,%os*(eE :::,=A=.76
Less *yndicated 2!posure =6,=?3.7B
Tota' La(!e Loan & P(o-e)t Finan)e
%o(t#o'io 9it$o*t s&n+i)ate+ e,%os*(e
Balance sheet
AB Bank Limited & its Subsidiary
Consolidated Balance Sheet
As at 31 December !!"
<5=56=677> <5=56=677? Notes
Ta.a Ta.a
PROPERTY AND ASSETS
8DaE @2<@A2??52@B: A27>:27AA25@@ Cas$
8.6DaE :AB,BB8,367 ?@B,==?,6:B ,n hand Dincluding foreign
currenciesE
8.7DaE :,A?:,AAA,=?: 8,:6?,:AA,33? Balance with Bangladesh
Bank and its agent bankDsE
Dincluding foreign currenciesE
62A>A2<B52?A< 52A?62:7<2<A: Ba'an)e 9it$ ot$e( 4an.s an+
#inan)ia' instit*tions
:.6DaE 6,666,@66,3@B BB8,863,78: ,n Bangladesh
:.7DaE 6,8A7,??3,@?: :AB,7B8,667 +utside Bangladesh
=DaE :7727772777 525>72:7B2A77 Mone& at )a'' an+ on s$o(t
noti)e
?DaE 5:2<:>2<7<266: 552<>@2><:27:6 In3estents
?.6DaE B,?@=,:??,:?7 @,6=B,6A8,7?6 "overnment
?.7DaE ?,?B8,A8?,@?: :,78?,@=7,A36 +thers
B627:<26:<26@> @B2::52A:<2B7B Loans an+ a+3an)es
@DaE ?B,@87,==7,6B: =:,:67,8=A,7:B 9oans, cash credits,
overdrafts, etc
ADaE 7,883,@66,3?: 8,7:B,63=,:=A Bills purchased and
discounted
BDaE 62AA527<:2@?> 62AAA2B:52A:: Fi,e+ assets in)'*+in!
%(eises2 #*(nit*(e an+
#i,t*(es
63DaE B2BB725@72:>6 @2>5>2ABA2B>5 Ot$e( assets
# # Non;4an.in! assets
57B27><277B25?A ?A25>72?>72>6? Tota' Assets
LIABILITIES AND CAPITAL
Lia4i'ities
66DaE :25<:26?B2<7: <25><2<A<27<? Bo((o9in!s #(o ot$e(
4an.s2 #inan)ia'
instit*tions an+ a!ents
67DaE ?<27?62:6?2:?7 :?2@@?2>?>2<@A De%osits an+ ot$e(
a))o*nts
?,:@=,:A=,388 =,3?6,B8?,63@ Current deposits
7,=6:,766,8=: 7,=78,8@B,BB6 /emand deposits
6,7AB,A=@,686 6,6@?,?=6,3=? Bills payable
66,B33,AB@,:AB B,@7?,6@A,33A *avings bank deposits
6=,@A7,8BA,B7B =,3AB,?@?,?76 *hort#term deposits
8B,?B?,A=6,6B7 :3,@87,?=7,7B7 i!ed deposits
683,87=,333 683,87=,333 Bearer certificates of deposit
=,7B7,?37,==7 :,66A,6B3,7A3 +ther deposits
68DaE B2:@<2<7B2ABB @2:6526@62>A@ Ot$e( 'ia4i'ities
>:2?B6266<2A:A BB2<B<2@?@2<<: Tota' Lia4i'ities
Ca%ita'CS$a(e$o'+e(sD EE*it&
Tota' S$a(e$o'+e(sD EE*it& 5726672B?<2B67 :2?5B2<7@2@>6
6: 7,=?:,7=8,733 7,77B,@A=,:33 'aid#up capital
6= 8,636,73?,3B7 7,3??,676,7=A *tatutory reserve
6?DaE B6=,@B:,3?6 ?@8,=7A,A3B +ther reserve
6@DaE 8,?8B,=83,8?? 6,A:@,A@3,67= Retained earnings
57B27><277B25?A ?A25>72?>72>6? Tota' Lia4i'ities an+ S$a(e$o'+e(sD
EE*it&
'rofit and loss account
Consolidated Pro#t and Loss Account
$or the year ended 31 December !!"
!!" !!% &otes
'aka 'aka
(P)*A'+&, +&C(-)
Interest income 20(! 9"111"374"896 7"368"464"534
Interest #i$ on
$e#osits n$
%orro&in's" etc.
21(! (6"147"007"707! (5"347"854"381!
&et interest income ."/0.3/1.1%" .!!./1!.120
In(estment income 22(! 2"923"537"225 2"152"888"463
)ommission"
e*c+n'e n$
%ro,er'e
23(! 2"282"732"477 1"820"010"163
Ot+er o#ertin'
income
24(! 203"640"150 224"080"645
2.0!"."!".%2 0.1"/."1".1!
'otal o3erating income
4a5
%.310.11.!01 /.11.2%".00
(P)*A'+&, )6P)&S)S
-.r/ n$
..o&nces
25(! 1"218"368"066 1"028"859"386
Rent" t*es"
ins0rnce"
e.ectricit/" etc.
26(! 240"745"272 178"544"409
1e'. e*#enses 27(! 4"049"492 4"597"546
Post'e" stm#s"
te.ecomm0niction"
etc.
28(! 90"017"259 62"409"532
-ttioner/" #rintin'"
$(ertisement" etc.
29(! 120"877"254 65"255"938
)+ie2 e*ec0ti(e3s s.r/ n$
2ees
8"484"960 7"341"452
4irectors3 2ees 30(! 2"374"492 2"378"949
A0$itors3 2ees 31(! 2"396"811 1"739"946
)+r'es on .on .osses 5 5
4e#recition n$
re#irs o2 6n,3s
ssets
32(! 203"429"372 155"634"865
Ot+er e*#enses 33(! 613"908"448 380"720"539
'otal o3erating e73enses
4b5
.2!0./21.0/ 1.%%1.0%.2/!
Pro#t be8ore 3ro9ision 4c
: a;b5
2.%/"./2./12 0.33!.1!/.%/3
Pro(ision 'inst
.ons n$ $(nces
34(! 436"600"000 281"266"515
Pro(ision 2or
$imin0tion in (.0e
o2 in(estments
35(! 5 117"153"000
Ot+er #ro(isions 36(! 162"419"861 299"347"000
'otal 3ro9ision 4d5 2"".!1".%/1 /"1.1//.212
Pro#t be8ore ta7ation 4c;
d5
2.1!./!2.123 3./3.30!.30%
Pro(ision 2or t*tion 1"853"420"642 1"300"000"000
)0rrent t* 1"725"296"976 1"381"655"684
4e2erre$ t* 128"123"666 (81"655"684!
&et 3ro#t a8ter ta7ation 3.011.1%2.111 .33.30!.30%
A33ro3riations
-tt0tor/ reser(e 37 1"031"118"234 726"468"070
7ener. reser(e 5 5
4i(i$en$s" etc 5 5
1.!31.11%.30 1/.0/%.!1!
*etained sur3lus .3%/.!//.%11 1./!2.%1.1"
)arnings Per
Share 4)PS5
38(! 133./ "!."/
Cash flow statement
Consolidated Cash $low Statement
$or the year ended 31 December !!"
677>
!!% &otes
Ta.a
'aka
Cas$ F'o9s #(o O%e(atin! A)ti3ities
,nterest receipts
9"047"170"150 7"368"464"534
,nterest payments
(6"144"951"652! (5"347"854"381!
/ividend receipts
122"671"920 140"634"071
ee and commission receipts
1"860"530"448 1"820"010"163
Recoveries on loans previously
written off
43"203"720 63"229"802
'ayments to employees
(1"226"853"026! (1"028"859"386!
'ayments to suppliers
(123"087"216! (256"798"574!
,ncome ta!es paid
(1"330"452"291! (896"758"330!
Receipts from other
operating activities
8BDaE
3"445"645"368 2"518"909"953
'ayments for other
operating activities
:3DaE
(978"414"900! (642"835"747!
O%e(atin! %(o#it 4e#o(e
)$an!es in o%e(atin! assets &
'ia4i'ities
0.112.0/.21 3.13%.10.1!2
In)(easeC+e)(ease in o%e(atin! assets an+ 'ia4i'ities
9oans and advances to
customers
(14"401"799"551! (16"473"950"662!
+ther assets :6DaE
(1"469"815"516! (502"638"763!
/eposits from other banks
(5"061"482"546! 3"119"680"194
/eposits from customers
19"583"636"903 12"065"445"738
$rading liabilities Dshort#term
borrowingsE
2"835"940"291 1"129"199"203
+ther liabilities :7DaE
850"330"083 320"343"330
62<<:2?7>2::A
4301."!."2"5
Net )as$ #'o9 #(o o%e(atin!
a)ti3ities 0a1
1.!2.1.1%2 3.3"/.1.10/
Cas$ F'o9s #(o In3estin! A)ti3ities
D'urchaseEM sale of government
securities
(2"517"553"101! (1"114"457"700!
D'urchaseEM sale of trading
securities, shares, bonds, etc.
(2"457"083"963! (1"207"421"131!
D'urchaseEM sale of property,
plant and e-uipment
(90"771"297! (181"621"991!
Net )as$ *se+ in in3estin!
a)ti3ities 041
42.!/2.0!%.3/15 4.2!3.2!!.%5
Cas$ F'o9s #(o Finan)in! A)ti3ities
,ncreaseMDdecreaseE of long#term
borrowings
26"332"604 191"960"407
/ividend paid
(334"467"810! 5
Net )as$ 0*se+ in1C#'o9 #(o
#inan)in! a)ti3ities 0)1
43!%.132.!/5 1"1."/!.0!1
<et increase in cash DaNbNcE
1"678"728"618 1"084"680"731
2ffects of e!change rate changes
on cash and cash e-uivalents
5 5
Cash and cash e-uivalents at
beginning of the year
6"773"235"501 5"688"554"770
Cas$ an+ )as$ eE*i3a'ents at
en+ o# t$e &ea( 0F1
%.021."/0.11" /.113.32.2!1
DWE Cash and cash e-uivalents5
Cash
489"993"012 679"556"149
'rize bonds
2"710"700 3"980"600
&oney at call and on short notice
600"000"000 1"190"607"400
Balance with Bangladesh Bank
and its agent bankDsE
4"864"888"564 3"416"488"006
Balance with other banks and
financial institutions
2"494"371"843 1"482"603"346
?2A@52>:A255>
/.113.32.2!1
$he anne!ed notes form an integral part of the Consolidated Cash low *tatement.
$his is the Consolidated Cash low *tatement referred to in our report of even date.
/haka,
7B )pril 7363
')R$# +0R
"0,/29,<2* +R CR2/,$ R,*; &)<)"2&2<$
'R+C,/2/ BQ
B)<"9)/2*1 B)<;
P
A
R
T
8
O
9
R
5= POLICY GUIDELINES
$his section details fundamental credit risk management policies that are
recommended for adoption by all banks in Bangladesh. $he guidelines contained
herein outline general principles that are designed to govern the implementation of
more detailed lending procedures and risk grading systems within individual banks.
Len+in! G*i+e'ines
)ll banks should have established Credit 'olicies D%9ending "uidelines(E that clearly
outline the senior managements view of business development priorities and the
terms and conditions that should be adhered to in order for loans to be approved.
$he 9ending "uidelines should be updated at least annually to reflect changes in the
economic out look and the evolution of the banks loan portfolio, and be distributed to
all lendingMmarketing officers. $he 9ending "uidelines should be approved by the
&anaging /irectorMC2+ & Board of /irectors of the bank based on the endorsement
of the banks 1ead of Credit Risk &anagement and the 1ead of
CorporateMCommercial Banking. DSection 2.1 of these guidelines refersE
)ny departure or deviation from the 9ending "uidelines should be e!plicitly identified
in credit applications and a 4ustification for approval provided. )pproval of loans that
do not comply with 9ending "uidelines should be restricted to the banks 1ead of
Credit or &anaging /irectorMC2+ & Board of /irectors. $he 9ending "uidelines
should provide the key foundations for account officersMrelationship managers DR&E
to formulate their recommendations for approval, and should include the following5
In+*st(& an+ B*siness Se!ent Fo)*s
$he 9ending "uidelines should clearly identify the businessMindustry sectors that
should constitute the ma4ority of the banks loan portfolio. or each sector, a clear
indication of the banks appetite for growth should be indicated Das an e!ample,
$e!tiles5 "row, Cement5 &aintain, Construction5 *hrinkE. $his will provide necessary
direction to the banks marketing staff.

T&%es o# Loan Fa)i'ities
$he type of loans that are permitted should be clearly indicated, such as .orking
Capital, $rade inance, $erm 9oan, etc.
Sin!'e Bo((o9e(CG(o*% LiitsCS&n+i)ation
/etails of the banks *ingle BorrowerM"roup limits should be included as per
Bangladesh Bank guidelines. Banks may wish to establish more conservative criteria
in this regard. )ppendi!#8.:.8 provides brief description of financing under
syndicated arrangement.
Len+in! Ca%s
Banks should establish a specific industry sector e!posure cap to avoid over
concentration in any one industry sector.
Dis)o*(a!e+ B*siness T&%es
Banks should outline industries or lending activities that are discouraged. )s a
minimum, the following should be discouraged5
&ilitary 2-uipmentM.eapons inance
1ighly 9everaged $ransactions
inance of *peculative ,nvestments
9ogging, &ineral 2!tractionM&ining, or other activity that is
2thically or 2nvironmentally *ensitive
9ending to companies listed on C,B black list or known defaulters
Counterparties in countries sub4ect to 0< sanctions
*hare 9ending
$aking an 2-uity *take in Borrowers
9ending to 1olding Companies
Bridge 9oans relying on e-uityMdebt issuance as a source of repayment.
Loan Fa)i'it& Pa(aete(s
acility parameters De.g., ma!imum size, ma!imum tenor, and covenant and security
re-uirementsE should be clearly stated. )s a minimum, the following parameters
should be adopted5
Banks should not grant facilities where the banks security position is inferior
to that of any other financial institution.
)ssets pledged as security should be properly insured.
Caluations of property taken as security should be performed prior to loans
being granted. ) recognized 8rd party professional valuation firm should be
appointed to conduct valuations.
C(oss Bo(+e( Ris.
Risk associated with cross border lending. Borrowers of a particular country may be
unable or unwilling to fulfill principle andMor interest obligations. /istinguished from
ordinary credit risk because the difficulty arises from a political event, such as
suspension of e!ternal
payments
*ynonymous with political & sovereign risk
$hird world debt crisis
or e!ample, e!port documents negotiated for countries like <igeria.
C(e+it Assessent & Ris. G(a+in!
Credit )ssessment
) thorough credit and risk assessment should be conducted prior to the granting of
loans, and at least annually thereafter for all facilities. $he results of this assessment
should be presented in a Credit )pplication that originates from the relationship
managerMaccount officer D%R&(E, and is approved by Credit Risk &anagement
DCR&E. $he R& should be the owner of the customer relationship, and must be held
responsible to ensure the accuracy of the entire credit application submitted for
approval. R&s must be familiar with the banks 9ending "uidelines and should
conduct due diligence on new borrowers, principals, and guarantors.
,t is essential that R&s know their customers and conduct due diligence on new
borrowers, principals, and guarantors to ensure such parties are in fact who they
represent themselves to be. )ll banks should have established ;now Qour Customer
D;QCE and &oney 9aundering guidelines which should be adhered to at all times.
Credit )pplications should summaries the results of the R&s risk assessment and
include, as a minimum, the following details5
# )mount and type of loanDsE proposed.
# 'urpose of loans.
# 9oan *tructure D$enor, Covenants, Repayment *chedule, ,nterestE
# *ecurity )rrangements
,n addition, the following risk areas should be addressed5
; Bo((o9e( Ana'&sis. $he ma4ority shareholders, management team and group or
affiliate companies should be assessed. )ny issues regarding lack of management
depth, complicated ownership structures or intergroup transactions should be
addressed, and risks mitigated.
; In+*st(& Ana'&sis= $he key risk factors of the borrowers industry should be
assessed. )ny issues regarding the borrowers position in the industry, overall
industry concerns or competitive forces should be addressed and the strengths and
weaknesses of the borrower relative to its competition should be identified.
; S*%%'ie(CB*&e( Ana'&sis= )ny customer or supplier concentration should be
addressed, as these could have a significant impact on the future viability of the
borrower.
; Histo(i)a' Finan)ia' Ana'&sis. )n analysis of a minimum of 8 years, mhistorical
financial statements of the borrower should be presented. .here reliance is placed
on a corporate guarantor, guarantor financial statements should also be analysed.
$he analysis should address the -uality and sustainability of earnings, cash flow and
the strength of the borrowers balance sheet. *pecifically, cash flow, leverage and
profitability must be analyzed.
; P(o-e)te+ Finan)ia' Pe(#o(an)e= .here term facilities Dtenor X 6 yearE are being
proposed, a pro4ection of the borrowers future financial performance should be
provided, indicating an analysis of the sufficiency of cash flow to service debt
repayments. 9oans should not be granted if pro4ected cash flow is insufficient to
repay debts.
; A))o*nt Con+*)t= or e!isting borrowers, the historic performance in meeting
repayment obligations Dtrade payments, che-ues, interest and principal payments,
etcE should be assessed.
; A+$e(en)e to Len+in! G*i+e'ines. Credit )pplications should clearly state
whether or not the proposed application is in compliance with the banks 9ending
"uidelines. $he Banks 1ead of Credit or &anaging /irectorMC2+ should approve
Credit )pplications that do not adhere to the banks 9ending "uidelines.
; Miti!atin! Fa)to(s. &itigating factors for risks identified in the credit assessment
should be identified. 'ossible risks include, but are not limited to5 margin
sustainability andMor volatility, high debt load
DleverageMgearingE, overstocking or debtor issuesK rapid growth, ac-uisition or
e!pansionK new business lineMproduct e!pansionK management changes or
succession issuesK customer or supplier concentrationsK and lack of transparency or
industry issues.
; Loan St(*)t*(e= $he amounts and tenors of financing proposed should be 4ustified
based on the pro4ected repayment ability and loan purpose. 2!cessive tenor or
amount relative to business needs increases the risk of fund diversion and may
adversely impact the borrowers repayment ability.
; Se)*(it&. ) current valuation of collateral should be obtained and the -uality and
priority of security being proposed should be assessed. 9oans should not be granted
based solely on security. )de-uacy and the e!tent of the insurance coverage should
be assessed.
; Nae Len+in!= Credit proposals should not be unduly influenced by an over
reliance on the sponsoring principals reputation, reported independent means, or
their perceived willingness to in4ect funds into various business enterprises in case of
need. $hese situations should be discouraged and treated with great caution.
Rather, credit proposals and the granting of loans should be based on sound
fundamentals, supported by a thorough financial and risk analysis.
Risk "rading
)ll Banks should adopt a credit risk grading system. $he system should define the
risk profile of borrowers to ensure that account management, structure and pricing
are commensurate with the risk involved. Risk grading is a key measurement of a
Banks asset -uality, and as such, it is essential that grading is a robust process. )ll
facilities should be assigned a risk grade. .here deterioration in risk is noted, the
Risk "rade assigned to a borrower and its facilities should be immediately changed.
Borrower Risk "rades should be clearly stated on Credit )pplications. $he following
Risk "rade &atri! is provided as an e!ample. $he more conservative risk grade
DhigherE should be applied if there is a difference between the personal 4udgment and
the Risk "rade *corecard results. ,t is recognized that the banks may have more or
less Risk "radesK however, monitoring standards and account management must be
appropriate given the assigned Risk "rade5
Ris. Ratin! G(a+e De#inition
*uperior J
9ow Risk
6 acilities are fully secured by cash deposits, government
bonds or a counter guarantee from a top tier international
bank. )ll security documentation should be in place.
"ood J
*atisfactory
Risk
7 $he repayment capacity of the borrower is strong. $he
borrower should have e!cellent li-uidity and low leverage.
$he company should demonstrate consistently strong
earnings and cash flow and have an unblemished track
record. )ll security documentation should be in place.
)ggregate *core of B= or greater based on the Risk "rade
*corecard.
)cceptable J
air Risk
8 )de-uate financial condition though may not be able to
sustain any ma4or or continued setbacks. $hese borrowers
are not as strong as "rade 7 borrowers, but should still
demonstrate consistent earnings, cash flow and have a
good track record.
) borrower should not be graded better than 8 if realistic
audited financial statements are not received. $hese
assets would normally be secured by acceptable collateral
D6st charge over stocks M debtors M e-uipment M propertyE.
Borrowers should
have ade-uate li-uidity, cash flow and earnings. )n
)ggregate *core of @=#B: based on the Risk "rade
*corecard.
&arginal #
.atch
: "rade : assets warrant greater attention due to conditions
affecting the borrower, the industry or the economic
environment. $hese borrowers have an above average risk
due to strained li-uidity, higher than normal leverage, thin
cash flow andMor inconsistent earnings. acilities should be
downgraded to : if the borrower incurs a loss, loan
payments routinely fall past due, account conduct is poor,
or other untoward factors are present. )n )ggregate *core
of ?=#@: based on the Risk "rade
*corecard.
*pecial
&ention
= "rade = assets have potential weaknesses that deserve
managements close attention. ,f left uncorrected, these
weaknesses may result in a deterioration of the repayment
prospects of the borrower. acilities should be downgraded
to = if sustained deterioration in financial condition is noted
Dconsecutive losses, negative net worth, e!cessive
leverageE, if loan payments remain past due for 83#?3
days, or if a significant petition or claim is lodged against
the borrower. ull repayment of facilities is still e!pected
and interest can still be taken into profits. )n )ggregate
*core of ==#?: based on the Risk "rade *corecard.
*ubstandard ? inancial condition is weak and capacity or inclination to
repay is in doubt. $hese weaknesses 4eopardize the full
settlement of loans. 9oans should be downgraded to ? if
loan payments remain
past due for ?3#B3 days, if the customer intends to create a
lender group for debt restructuring
purposes, the operation has ceased trading or any
indication suggesting the winding up or closure of the
borrower is discovered. <ot yet considered non#performing
as the correction of the deficiencies may result in an
improved condition, and interest can still be taken into
profits. )n )ggregate *core of :=#=: based on the Risk
"rade *corecard.
/oubtful and
Bad
Dnon#
performingE
@ ull repayment of principal and interest is unlikely and the
possibility of loss is e!tremely high. 1owever, due to
specifically identifiable pending factors, such as litigation,
li-uidation procedures or capital in4ection, the asset is not
yet classified as 9oss. )ssets should be downgraded to @ if
loan
payments remain past due in e!cess of B3 days, and
interest income should be taken into suspense
DnonaccrualE. 9oan loss provisions must be raised against
the estimated unrealisable amount of all facilities. $he
ade-uacy of provisions must be
reviewed at least -uarterly on all non#performing loans,
and the bank should pursue legal options to enforce
security to obtain repayment or negotiate an appropriate
loan rescheduling. ,n all cases, the re-uirements of
Bangladesh Bank in C,B reporting,
loan rescheduling and provisioning must be followed. )n
)ggregate *core of 8=#:: based on the Risk "rade
*corecard
9oss
Dnon#
performingE
A )ssets graded A are long outstanding with no progress in
obtaining repayment Din e!cess of 6A3 days past dueE or in
the late stages of wind upMli-uidation. $he prospect of
recovery is poor and legal options have been pursued. $he
proceeds e!pected from the li-uidation or realization of
security may be awaited. $he continuance of the loan as a
bankable asset is not warranted, and the anticipated loss
should have been provided for. $his classification reflects
that it is not practical or desirable to defer writing off this
basically worthless asset even though partial recovery may
be effected in the future. Bangladesh Bank guidelines for
timely write off of bad loans must be adhered to.
)n )ggregate *core of 8= or less based on the Risk "rade
*corecard
)t least top twenty five clientsMobligors of the Bank may preferably be rated by an
outside
credit rating agency. $he 2arly )lert Report should be completed in a timely manner
by the R& and forwarded to CR& for approval to affect any downgrade. )fter
approval, the report should be forwarded to Credit )dministration, who is responsible
to ensure the correct facilityMborrower Risk "rades are updated on the system. $he
downgrading of an account should be done immediately when adverse information is
noted, and should not be postponed until the annual review process.
A%%(o3a' A*t$o(it&
$he authority to sanctionMapprove loans must be clearly delegated to senior credit
e!ecutives by the &anaging /irectorMC2+ & Board based on the e!ecutives
knowledge and e!perience. )pproval authority should be delegated to individual
e!ecutives and not to committees to ensure accountability in the approval process.
$he following guidelines should apply in the approvalMsanctioning of loans5
Credit approval authority must be delegated in writing from the &/MC2+ &
Board Das appropriateE, acknowledged by recipients, and records of all
delegation retained in CR&.
/elegated approval authorities must be reviewed annually by &/MC2+MBoard.
$he credit approval function should be separate from the
marketingMrelationship management DR&E function.
$he role of Credit Committee may be restricted to only review of proposals i.e.
recommendations or review of banks loan portfolios.
)pprovals must be evidenced in writing, or by electronic signature. )pproval
records must be kept on file with the Credit )pplications.
)ll credit risks must be authorized by e!ecutives within the authority limit
delegated to them by the &/MC2+. $he %pooling( or combining of authority
limits should not be permitted.
Credit approval should be centralized within the CR& function. Regional credit
centers may be established, however, all large loans must be approved by the
1ead of Credit and Risk &anagement or &anaging /irectorMC2+MBoard or
delegated 1ead +ffice credit e!ecutive.
$he aggregate e!posure to any borrower or borrowing group must be used to
determine the approval authority re-uired.
)ny credit proposal that does not comply with 9ending "uidelines, regardless
of amount, should be referred to 1ead +ffice for )pproval
&/M1ead of Credit Risk &anagement must approve and monitor any
crossborder e!posure risk.
)ny breaches of lending authority should be reported to &/MC2+, 1ead of
,nternal Control, and 1ead of CR&.
,t is essential that e!ecutives charged with approving loans have relevant training
and e!perience to carry out their responsibilities effectively. )s a minimum, approving
e!ecutives should have5
At least 5 years experience working in corporate/commercial banking as a
relationship manager or account executive.
raining and experience in financial statement! cash flow and risk analysis.
A thorough working knowledge of Accounting.
A good understanding of the local industry/market dynamics.
Successfully completed an assessment test demonstrating ade"uate
;nowledge of the following areas5
,ntroduction of accrual accounting.
,ndustry M Business Risk )nalysis
Borrowing Causes
inancial reporting and full disclosure
inancial *tatement )nalysis
$he )sset ConversionM$rade Cycle
Cash low )nalysis
'ro4ections
9oan *tructure and /ocumentation
9oan &anagement.
.
Y ) monthly summary of all new facilities approved, renewed, enhanced, and a
list of proposals declined stating reasons thereof should be reported by CR&
to the C2+M&/.
Se!(e!ation o# D*ties
Banks should aim to segregate the following lending functions5
# Credit )pprovalMRisk &anagement
# Relationship &anagementM&arketing
# Credit )dministration
$he purpose of the segregation is to improve the knowledge levels and e!pertise in
each department, to impose controls over the disbursement of authorized loan
facilities and obtain an ob4ective and independent 4udgment of credit proposals.
Inte(na' A*+it
Banks should have a segregated internal auditMcontrol department charged with
conducting audits of all departments. )udits should be carried out annually, and
should ensure compliance with regulatory guidelines, internal procedures, 9ending
"uidelines and Bangladesh Bank re-uirements.
PREFERRED ORGANISATIONAL STRUCTURE & RESPONSIBILITIES
$he appropriate organizational structure must be in place to support the adoption of
the policies detailed in *ection 6 of these guidelines. $he key feature is the
segregation of the
&arketingMRelationship &anagement function from )pprovalMRisk
&anagementM)dministration functions.
Credit approval should be centralized within the CR& function. Regional credit
centers may be established, however, all applications must be approved by the 1ead
of Credit and Risk &anagement or &anaging /irectorMC2+MBoard or delegated 1ead
+ffice credit e!ecutive.
P(e#e((e+ O(!anisationa' St(*)t*(e
$he following chart represents the preferred management structure5
:A;A7I;7 4IRE)TOR<)EO
"e& Res%onsi4i'ities
$he key responsibilities of the above functions are as follows. 'lease also refer to
Credit Risk &anagement DCR&E
+versight of the banks credit policies, procedures and controls relating to all
credit risks arising from corporateMcommercialMinstitutional banking, personal
banking, & treasury operations.
+versight of the banks asset -uality.
/irectly manage all *ubstandard, /oubtful & Bad and 9oss accounts to
ma!imize recovery and ensure that appropriate and timely loan loss
provisions have been made.
$o approve Dor declineE, within delegated authority, Credit )pplications
recommended by R&. .here aggregate borrower e!posure is in e!cess of
approval limits, to provide recommendation to &/MC2+ for approval.
$o provide adviceMassistance regarding all credit matters to line
managementMR&s.
$o ensure that lending e!ecutives have ade-uate e!perience andMor training
in order to carry out 4ob duties effectively.
Credit )dministration
$o ensure that all security documentation complies with the terms of approval
and is enforceable.
$o monitor insurance coverage to ensure appropriate coverage is in place
over assets pledged as collateral, and is properly assigned to the bank.
$o control loan disbursements only after all terms and conditions of approval
have been met, and all security documentation is in place.
$o maintain control over all security documentation.
$o monitor borrowers compliance with covenants and agreed terms and
conditions, and general monitoring of account conductMperformance.
PROCEDURAL GUIDELINES
$his section outlines of the main procedures that are needed to ensure compliance
with the
policies contained in *ection 6.3 of these guidelines.
A%%(o3a' P(o)ess
$he approval process must reinforce the segregation of Relationship
&anagementM&arketing from the approving authority. $he responsibility for preparing
the Credit )pplication should rest with the R& within the corporateMcommercial
banking department. Credit )pplications should be recommended for approval by the
R& team and forwarded to the approval team
within CR& and approved by individual e!ecutives. Banks may wish to establish
various thresholds, above which, the recommendation of the 1ead of
CorporateMCommercial Banking is re-uired prior to onward recommendation to CR&
for approval. ,n addition, banks may wish to establish regional credit centres within
the approval team to handle routine approvals. 2!ecutives in head office CR&
should approve all large loans. $he recommending or approving e!ecutives should
take responsibility for and be held accountable for their recommendations or
approval. /elegation of approval limits should be such that all proposals where the
facilities are up to 6=F of the banks capital should be approved at the CR& level,
facilities up to 7=F of capital should be approved by C2+M&/, with proposals in
e!cess of 7=F of capital to be approved by the 2CMBoard only after recommendation
of CR&, Corporate Banking and &/MC2+.
T$e #o''o9in! +ia!(a i''*st(ates t$e %(e#e((e+ a%%(o3a' %(o)ess:
6 7
8 :
= ?
@
Credit Application
Recommended By RM / Marketing
Zonal Credit Officer
(ZCO)
Head of Credit (HOC) &
Head of Corporate Banking (HOCB)
Managing Director
Eec!ti"e Committee/Board
6. )pplication forwarded to Zonal +ffice for approvedMdecline
7. )dvise the decision as per delegated authority Dapproved MdeclineE to
recommending branches. ) monthly summary of ZC+ approvals should be
sent to 1+C and 1+CB to report the previous months approvals sanctioned
at the Zonal +ffices. $he 1+C should review 63F of ZC+ approvals to
ensure adherence to 9ending "uidelines and Bank policies.
8. ZC+ supports & forwarded to 1ead of Corporate Banking D1+CBE or delegate
for endorsement, and 1ead of Credit D1+CE for approval or onward
recommendation.
:. 1+C advises the decision as per delegated authority to ZC+
=. 1+C & 1+CB supports & forwarded to &anaging /irector
?. &anaging /irector advises the decision as per delegated authority to 1+C &
1+CB.
@. &anaging /irector presents the proposal to 2CMBoard
A. 2CMBoard advises the decision to 1+C & 1+CB
WW Regardless of the delegated authority 1+C to advise the decision
DapprovalMdeclineE to marketing department through ZC+
Re)oen+e+ De'e!ate+ A%%(o3a' A*t$o(it& Le3e's
1+CMCR& 2!ecutives 0p to 6=F of Capital
&anaging /irectorMC2+ 0p to 7=F of Capital
2CMBoard all e!ceed 7=F of Capital
A%%ea' P(o)ess
)ny declined credit may be re#presented to the ne!t higher authority for
reassessmentMapproval. 1owever, there should be no appeal process beyond the
&anaging /irector.
C(e+it A+inist(ation
$he Credit )dministration function is critical in ensuring that proper documentation
and approvals are in place prior to the disbursement of loan facilities. or this
reason, it is essential that the functions of Credit )dministration be strictly
segregated from Relationship &anagementM&arketing in order to avoid the possibility
of controls being compromised or issues not being highlighted at the appropriate
level. Credit )dministration procedures should be in place to ensure the following5
Dis4*(seent5
[ *ecurity documents are prepared in accordance with approval terms and are
legally enforceable. *tandard loan facility documentation that has been reviewed by
legal counsel should be used in all cases. 2!ceptions should be referred to legal
counsel for advice based on authorisation from an appropriate e!ecutive in CR&.
[ /isbursements under loan facilities are only be made when all security
documentation is in place. C,B report should reflectMinclude the name of all the
lenders with facility, limit & outstanding. )ll formalities regarding large loans & loans
to /irectors should be guided by Bangladesh Bank circulars & related section of
Banking Companies )ct. )ll Credit )pproval terms have been met.
C*sto+ia' D*ties5
9oan disbursements and the preparation and storage of security documents
should be centralised in the regional credit centres.
)ppropriate insurance coverage is maintained Dand renewed on a timely
basisE on assets pledged as collateral.
*ecurity documentation is held under strict control, preferably in locked
fireproof storage.
Co%'ian)e ReE*i(eents5
)ll re-uired Bangladesh Bank returns are submitted in the correct format in a
timely manner.
Bangladesh Bank circularsMregulations are maintained centrally, and advised
to all relevant departments to ensure compliance.
)ll third party service providers Dvaluers, lawyers, insurers, C')s etc.E are
approved and performance reviewed on an annual basis. Banks are referred
to Bangladesh Bank circular outlining approved e!ternal audit firms that are
acceptable.
C(e+it Monito(in!
$o minimise credit losses, monitoring procedures and systems should be in place
that provide an early indication of the deteriorating financial health of a borrower. )t a
minimum, systems should be in place to report the following e!ceptions to relevant
e!ecutives in CR& and R& team5
'ast due principal or interest payments, past due trade bills, account
e!cesses, and breach of loan covenantsK
9oan terms and conditions are monitored, financial statements are received
on a regular basis, and any covenant breaches or e!ceptions are referred to
CR& and the R& team for timely follow#up.
$imely corrective action is taken to address findings of any internal, e!ternal
or regulator inspectionMaudit.
)ll borrower relationshipsMloan facilities are reviewed and approved through
the submission of a Credit )pplication at least annually.
Computer systems must be able to produce the above information for centralMhead
office as well as local review. .here automated systems are not available, a manual
process should have the capability to produce accurate e!ception reports.
2!ceptions should be followed up on and corrective action taken in a timely manner
before the account deteriorates further.
C(e+it A+inist(ation F'o9)$a(t
PROCEDURE FOR GRANTING DIFFERENT TYPES OF ADVANCES
A= LOAN AGAINST HYPOTHECATION OF CARS2 BUSES2
TRUC"S2 SCOOTERS AND /ATER G CRAFTS :
6. .hile allowing loan against hypothecation of Cars, Buses, $rucks, *cooters or
.ater#Crafts, the following points should be taken into consideration sub4ect to credit
restriction imposed from time to time, by Bangladesh Bank.
a. $he trustworthiness of the borrower.
b. $he value of the vehicle.
c. .hether it is a brand new vehicle.
d. .hile importing vehicles, the total landed cost to be determined and import
bill retirement arrangement to be made beforehand.
e. .hether the repayment capacity of the borrower is satisfactory.
f. $he title of the borrower in respect of vehicle is absolute.
7. /+C0&2<$)$,+< )</ C+<$R+95
a. *ales receipt should be drawn in the 4oint name of )BB9 and the client.
/elivery of the vehicles to be taken under supervision of an officer of the
Branch.
b. Cehicles are to be registered under the supervision of an officer of the
Branch in the Ioint name of )BB9 and the client.
c. Comprehensive ,nsurance 'olicy to be obtained at clientPs cost in the Ioint
name of )BB9 and the client.
d. )greement of 1ypothecation to be e!ecuted on <on#Iudicial *tamp paper
duly filled in the blanks before e!ecution as per format )nne! # L)L.
2!ecution of the document to be vetted by 9egal )dviserMRetainer to suit in
each case.
e. )ll ta!es in respect of the vehicles are to be paid by the client.
f. ) photocopy of the Blue Book duly attested by an officer of the Branch
evidencing Ioint Registration is to be obtained.
8. C1)R"2 /+C0&2<$* $+ B2 +B$),<2/5
a. /emand 'romissory <ote D/. '. <oteE.
b. 9etter of )greement.
c. 9etter of ContinuityM/isbursement.
d. 9etter of Revival.
e. ,n case of 'artnership irms5
iE 'hotocopy of Registered 'artnership /eed duly certified by <otary
'ublic.
iiE )n undertaking in the prescribed form in case of firms not registered
with Registrar of firms. D)nne!ure # LCLE.
iiiE 'hotocopy of Registration Certificate duly certified by L<+$)RQ
'0B9,CL in case of firms registered with Registrar of firms.
ivE ,ndividual 'ersonal "uarantee of all the 'artners.
f. Certified copy of Resolution of the Board of /irectors in accordance with
corporate Borrowing 'ower laid down in the &emorandum and )rticles of
)ssociation of the Company, in case of 9imited concern and resolution of
the Board alongwith a copy of charter in case of corporation, to be vetted
by 9egal )dviserMRetainer.
g. ,ndividual 'ersonal "uarantee of all the /irectors in case of a 9imited
Company.
h. Charge to be created with the Registrar of Ioint *tock Companies for
hypothecation in case of 9imited concerns.
i. )greement of hypothecation to be obtained as per format D)nne!ure # L)LE
vetted by 9egal )dviserMRetainer.
7. LOAN AGAINST IMPORTED MERCHANDISE 0L=I=M=1:
6. 9oan against the security of merchandise imported through the Bank may be
allowed against pledge of goods, retaining margin prescribed on their 9anded
Cost, depending on their categories and credit restrictions imposed by the
Bangladesh bank. Branches shall also obtain letter of undertaking and
indemnity from the clients, before getting goods cleared through 9,& account.
7. Clearance of the goods should be taken through )pproved Clearing )gent of the
Bank.
8. $he following points must be taken into consideration while allowing advance
against the security of imported goods5
a. $hat the landed cost of the merchandise is properly worked out before the
goods are delivered to the customer against proportionate payments. $he
landed cost of the goods sub4ect to the credit restrictions imposed by
Bangladesh Bank is arrived at by taking into account5
iE $he invoice value of the merchandise including freight.
iiE Customs /uty.
iiiE *ales $a!.
ivE .harfage.
vE Clearing )gentPs charges.
viE Railway reight etc.
viiE ,nsurance premium.
viiiE /emurrage.
i!E +ther charge, if any.
b. $he landed cost of each item should be separately worked out that goods
are delivered to the customers against proportionate payment made for
each item. .hile making part delivery, it must be ensured that slow
moving items are also taken delivery simultaneously. Caluable and less
valuable items should not be averaged together.
c. .hile creating forced 9,& Branch manager should satisfy that forced sale
value will cover the outstanding 9,&, if not, arrangement should be made
to recover the liabilities through sale of documents. 'rior approval of 1ead
+ffice to be obtained for creating forced 9,&.
:. C1)R"2 /+C0&2<$*5
aE /emand 'romissory <ote D/. '. <oteE.
bE 9etter of )greement.
cE 9etter of 'ledge.
dE &erchandise to be duly insured with specific risk clauses alongwith BankPs
mortgage clause.
eE 9etter of disclaimer to be obtained from the owner of godown in case of
rented godown.
A= ADVANCE AGAINST SHARES 0LOANS & OVERDRAFTS1:
6. )dvance may be allowed against share of various Companies approved by 1ead
+ffice from time to time, -uoted on the *tock 2!change against re-uired margin
sub4ect to credit restriction imposed by Bangladesh Bank, & prior permission
from 1ead +ffice.
7. Before allowing the advance, obtain the delivery of the shares and their $ransfer
/eed forms duly signed by the share holders and verified by the companys
authority and thoroughly scrutinise them with regard to the following5
aE $hey are original share scripts and bear the seal of the Company.
bE $he shares are fully paid up. /o not allow advance against partly paid up
shares, unless approved by the 1ead +ffice.
cE $he shares are accompanied with blank $ransfer /eed duly signed by the
person in whose name those shares stand and witnessed by somebody
who is easily traceable.
dE $he transferorPs signature on the $ransfer /eed is verified by the Company
concerned under its stamp.
eE $he $ransfer /eeds are undated.
fE ) fresh set of $ransfer /eeds signed by the borrower, and witnessed by
somebody who is easily traceable is obtained and retained with the
branch, for all such shares which are to be sent to various companies for
registration in his name, before the closure of their books, if so re-uested
by him.
gE $hese shares are lodged with the companies concerned for registration
with their original $ransfer /eeds, duly completed in all respects, under a
covering letter from the branch, re-uesting them to return the shares to the
branch, as the Bank has its lien on them. $he $ransfer /eeds attached
with the shares are completed and signed by the borrower as transferee,
before these are dispatched to the companies.
hE ) receipt is obtained from the companies and retained with branch, duly
discharged by the share#holder, for e!change with the share certificates,
when ready for delivery.
iE $he borrowerPs signatures on the fresh set of $ransfer /eeds are verified
by the companies concerned and retained with branch along with their
respective share certificate when received back from them after
registration.
4E $he branch should obtain a letter of lien from the borrower in respect of all
such shares which stand in his name, or which have been sent to the
various companies for registration, in his name. .here advance has been
allowed to the borrower at the specific re-uest of a third party against
shares owned by them the letter of lien shall be obtained from third party,
in its own name.
kE $he branch shall not generally resort to transferring the shares registered
in the name of the borrower or any third party, in its own name.
lE ,n the event of transferring the shares in the name of the Bank with the
approval of the 1ead +ffice, branches shall take specific notice of any
declaration of /ividends, Bonus *hares or any offer of Right *hares made
by the companies concerned. $hey shall also ensure that all such
/ividends and Bonus *hares are duly received by them.
iE $he dividend is credited to the account of the borrowers and the
bonus shares are kept along with other shares of the borrower.
iiE ,n case of an offer of Right *hares, branches shall send an intimation
to the borrowers concerned en-uiring from them if they were
interested to ac-uire them for the value mentioned on the letter of
Right which should immediately be deposited by them with the Bank.
iiiE ,f the borrowers do not deposit the money from their own resources
or make any alternate arrangement in that behalf, the letter of rights
may be renounced with the permission of the 1ead +ffice and sold,
and the sale proceeds should be credited to the borrowerPs account
under intimation to him.
8. C)9C09)$,+< + /R).,<" '+.2R5
,f the branch manager is satisfied with the security offered, he will calculate the
drawing power of the borrower as per guidelines given by Bangladesh
BankM1ead +ffice from time to time.
:. R2*$R,C$,+<5
,n terms of *ection 7@D6Ea of the Banking Companies )ct. 6BB6, no banking
company shall make loans and advances against the security of its own shares.
=. C1)R"2 /+C0&2<$*5
)llow the advance on obtaining the following charge documents duly stamped5
aE /emand 'romissory <ote.
bE 9etter of lien or in case of advance to a third party, 9etter of )greement.
cE ,n case of 'artnership irms5
'ublic.
dE Certified copy of Resolution of the Board of /irectors in accordance with
)ssociation of the Company, in case of 9imited concern and resolution of
the Board along with a copy of charter in case of corporation, to be vetted
by 9egal )dviserMRetainer.
eE 9etter of +wnership.
fE $ransfer /eeds duly signed and verified.
gE 'ersonal "uarantee of /irectors De!cepting nominated /irectors by
"ovt.MCorporationsE in case of limited Companies.
hE or 9oans5 9etter of /isbursement.
iE or +verdrafts5 9etter of Continuity.
4E )n undertaking from the /irectors of the limited Company to obtain prior
clearance from the Bank before declaring any interimMfinal dividend.
A= ADVANCES AGAINST FIHEDCSHORT TERM DEPOSIT
RECEIPTS C BEARER CERTIFICATE OF DEPOSIT:
6. *crutinize the i!edM*hort $erm /eposit Receipts with regard to the following
points sub4ect to credit restriction imposed from time to time5
aE $he i!edM*hort $erm /eposit Receipt is not in the name of a minor.
bE ,t is duly discharged by the depositor on revenue stamp of ade-uate value
and his signature is verified.
cE ,f the receipt is issued in 4oint names andMor payable to either or survivor it
shall be discharged by all the depositors named in the receipt on revenue
stamp of ade-uate value and their signature, verified.
Both the depositors have the right, so long they are alive, to the proceeds
of /R or *hort term deposit receipt and as such creation of liability on the
deposit by any one of the depositors is irregular.
dE ,f the /eposit Receipt is offered as a security for allowing advance to a
third party, a letter of lien shall be obtained from the depositors, on the
appropriate form.
eE ,f the /eposit Receipt has been issued by the same branch, lien against
that specific /eposit Receipt is marked in the i!ed /eposit andMor *hort
$erm /eposit Register of the branch.
fE )s far as possible advances against /RM*$/ receipts issued by other
banks should be avoided. 1owever, in case it is decided to make advance
against such /RM*$/ receipts, the branch concerned should re-uest the
,ssuing BankMBranch to register P9,2<P of the )rab Bangladesh Bank 9td.
against the /RM*$/ receipts and issue a letter confirming the registration
of P9,2<P in their books accounts under authorized signature. urther, the
branch where the advance is allowed shall directly get the signature of the
depositor on the letter of lien as well as his discharge on the back of the
./. ReceiptsM*.$./. Receipts duly verified from the ,ssuing BankMBranch
under authorized signature. $he borrower shall not be allowed, under any
circumstances, to have such verification done on his own.
gE $he discharged receipt, the letter of lien duly verified by the issuing branch
and the letter confirming registration of the lien on the /eposit Receipt
shall be kept along with other documents for the relative advance, duly
entered in the documentation check list.
hE 9ien on the partial amounts on i!edM*hort $erm /eposits shall not be
accepted.
iE $he lien of the Bank has to be marked in red inkMrubber stamp on the face
of the /eposit Receipt against which advance has been allowed. +n
ad4ustment of the advance, lien shall be released under signature of two
+fficers on the back of the /eposit Receipt.
4E )n undertaking from the borrowerMthird party Dif the deposit is in the name
of third partyE for encashment of the /RM*hort $erm /eposit and
appropriation of the proceeds thereof without reference to them be
obtained.
kE )n undertaking from the borrowerMthird party Dif the deposit is in the name
of third partyE for renewal of the i!ed and *hort $erm /eposits without
reference to them be obtained.
lE ,n case of Bearer Certificate of /eposit, lien to be marked on the face of
the certificate and margin to be calculated on the amount deposited.
7. C1)R"2 /+C0&2<$*5
)fter full satisfaction on the above referred points, obtain the following charge
documents duly stamped before allowing the advance5
bE i!edM*hort $erm /eposit Receipt duly discharged.
cE 9etter of 9ien D6st partyE
+r
9etter of 9ien along with a guarantee Dthird partyE
dE 9etter of )greement.
eE ,n case of 'artnership irms5
aE 'hotocopy of Registered 'artnership /eed duly certified by <otary
'ublic.
ivE 'ersonal "uarantee of all the 'artners.
fE Certified copy of Resolution of the Board of /irectors in accordance with
)ssociation of the Company and in case of Corporations, resolution of the
Board of /irectors along with charter to be vetted by 9egal
)dviserMRetainer.
gE 'ersonal "uarantee of all the /irectors in case of a limited Company.
iE or +verdrafts5 9etter of Continuity duly stamped.
B= ADVANCES AGAINST BALANCES IN SAVINGS
BAN" AND CURRENT DEPOSIT ACCOUNTS:
6. *ub4ect to the credit restrictions imposed, precautionary measures are to be
observed in allowing advances against balances lying in the *avings Bank
andMor Current /eposit )ccounts of the parties5
aE 2ar#mark the balance in the account.
bE &ake a note of it at the top of the ledger foliosMcard of the account#holder
in bold R2/ letters duly authenticated.
7. .hile allowing advance to the party against a credit balance ear#marked in
another account kept by him in his own name and in the same rights, whether
at the same branch or at some other branch of the Bank, take a letter of
authority from the account#holder to combine the two accounts Done having a
credit balance and the other a debit balanceE, at any time without notice, and to
return che-ues which, as a result of the Bank having taken such an action,
would overdraw the combined account. 1e should also agree not to close the
account and withdraw the balance, pending ad4ustment of the advance.
.here the advance is allowed against credit balance, ear#marked in the
account of a third party, whether at the same branch or at some other branch of
the Bank, take an irrevocable letter of authority from third party, authorizing the
Bank to appropriate the credit balance lying in their account to the e!tent of the
debit balance appearing in the account of the borrower, at any time, without any
reference to them. $his being an irrevocable letter of authority, they should
agree neither to close the account pending ad4ustment of the advance allowed
at their instance, nor to issue che-ues which would reduce that balance.
8. $he signature of the account#holder in whose account a credit balance is ear#
marked is verified on the irrevocable letter of authority given by him.
:. C1)R"2 /+C0&2<$*5
)llow the advance on obtaining the following charge documents duly stamped5
bE 9etter of 9ien D6st partyE
+r
9etter of 9ien D8rd partyE along with guarantee.
cE 9etter of )greement.
dE ,n case of 'artnership irms5
'ublic.
ivE 'ersonal "uarantee of all the 'artners.
eE Certified copy of Resolution of the Board of /irectors in accordance with
)ssociation of the Company and in case of Corporations, resolution of the
Board of /irectors along with charter to be vetted by 9egal
)dviserMRetainer.
fE 'ersonal "uarantee of all the /irectors in case of a 9imited Company.
gE 9etter of )uthority to set off or appropriate the balance.
iE or +verdrafts5 9etter of Continuity.
SET OF DOCUEMNTS TO BE OBTAINED AGAINST
DIFFERENT TYPES OF LOANS AND ADVANCES
$he following three documents are common for each type of 9oans and )dvances5
aE /ocuments common to all )dvances5
iE /. '. <ote signed on Revenue *tamps.
iiE 9etter of )greement.
iiiE )cceptance of the terms and conditions of sanction advice on
duplicate.
bE "eneral /ocuments5
iE /. '. <ote.
iiE 9etter of )greement.
iiiE 9etter of Continuity.
ivE 9etter of Revival.
+ther documents are to be obtained according to the types of advances, nature of
securities offered and status of the borrower as classified below, in consultation with
the 9egal )dviserMRetainer.
aE ,n case of 9imited Company5
iE ,ndividual 'ersonal guarantee of all /irectors.
iiE Boards resolution covering corporate borrowing power, authorising
the /irectorDsE to e!ecute the security documents. Resolutions must
be duly certified.
iiiE &emorandum and )rticles of )ssociation of the Company duly
certified by the Registrar, Ioint *tock Companies.
bE ,n case of 'artnership irms5
'ublic.
with Registrar of firms D)nne!ure J %C(E.
iiiE 'hotocopy of Registration Certificate duly certified by %<+$)RQ
'0B9,C( in case of firms registered with Registrar of
firmsDReference5 Credit ,nstruction <o.3:MA@ dated 7?.7.6BA@E.
vE Resolution of the partners for taking loanDsE and authorising
partnerDsE to e!ecute security documents.
Note:;
# 9oan to partnership#at#will should not be entertained.
# 2n-uiry should be made about income ta! liability. 'referably their $,<
number should be obtained.
cE ,n case of 'roprietorship5
iE &unicipal $rade 9icense to prove the ownership of the concern.
iiE $,< number to ascertain whether he is an income ta! assessee or
not.
A= PROCEDURES FOR SUBMISSION OF CREDIT PROPOSALS FOR
APPROVAL:
2very credit facilities e!tendable to customers is sub4ect to approval from
competent authority. /ue emphasis on the following points are re-uired in
sending Credit 'roposals to the *anctioning )uthority.
1. #e"uest for $redit %imit &#'$%(
2. $redit )nformation *ureau &$)*(
+. %ending #isk Analysis 'orm &%#A'(
,. )nspection #eport &)-2.(
5. /ocumentation $ompletion $ertificate
6. Submission of Renewal 0roposals
9ending Risk )nalysis D9R)E
$he inancial *ector Reform 'ro4ect D*R'E has been instituted in the early nineties
in Bangladesh with a view to bringing about financial discipline through undertaking
appropriate reform measures in the financial sector of our country. $he pro4ect has
been taken by the "overnment of Bangladesh D"+BE with combined support of the
.orld Bank and 0*),/ under the structural ad4ustment program. $he banking sector
constitutes the principal segment of the financial sector and hence the main thrust of
the reform activities rests on this sector. $he reform programs also gave freedom to
the banks to select the borrowers on the basis of their own 4udgement.
)mong the several reform measures that *R' has so far recommended. 9ending
Risk )nalysis D9R)E constitutes an important set of activities that has been
prescribed for minimising and averting risk in funds business of local banks Dpublic
and privateE. ,t has been identified by the e!perts and bankers that risk DhighE
involved in providing loan to a particular borrower is the main reason for failing to
recover the banks money and the issued of risk analysis remains as one of the main
factors in determining the status of a loanMinvestment in terms of recovery.
Len+in! Ris. Ana'&sis 0LRA1: Te(s & De#initions
9ending Risk )nalysis D9R)E is simply a loan processing manual. By going through
this manual the lending bankers can assess the creditworthiness of their prospective
borrowers. $herefore, 9R) is such an instrument which is definitely and directly
related with lending information to analyze the borrowers financial, marketing,
managerial and organisational aspects sub4ectively and ob4ectively. ,t also facilitates
the analyst to know the security risk of the credit.
9ending Risk )nalysis involves assessing the likelihood of repayment of loans to the
bank as per agreement on the basis of analysis of certain risks. $o analyze these
risks bankers will need to fill#up a 6? page 9R) orm. $he form leads to scoring
various risk factors involved in lending D$able )E, first of all, has divided the various
risks into two groups namely. Business Risk and *ecurity Risk.
Business Risk5
Business Risk is concerned with whether the borrowing company would fail to
generate sufficient cash out of business to repay the loan. Business Risk, the main
component of lending risk, consists of the ,ndustry Risk and the Company Risk.
). ,ndustry Risk5 /ue to some e!ternal reasons a business may fail and the risk
which arrives from e!ternal reasons of the business is called ,ndustry Risk. ,t
has two components5
DiE *upplies Risk5 .hen the business fails due to disruption in the supply of
inputs, the conse-uent risk which would arise is known as *upply Risk.
DiiE *ales Risk 5 t is another component of ,ndustry Risk. .hen the business
fails for disruption in sales, this type of risk would generate.
B. Company Risk5 Company Risk is shown for some internal reasons of the
business. ,t has also two main components and four sub#components.
DiE Company 'osition Risk5 2ach and every company holds a position within
an industry. $his position is very much competitive. /ue to weakness in
the companys position in its industry, a company may fail and the risk of
failure is called Company 'osition Risk. ,t depends on J
DaE 'erformance Risk5 ,f a company fails to perform well enough to repay
the loan because of its weakness under given e!pected e!ternal
conditions, the company is said to suffer from performance risk.
DbE Resilience Risk5 .hen a company fails due to lack of its resilience to
une!pected e!ternal conditions, the conditions, the resilience risk is
generated.
DiiE &anagement Risk5 ,f the management of a company fails to e!ploit the
companys position effectively, the company can fails and this risk of
failure is called management risk. ,t can be subdivided further.
DaE &anagement Competence Risk5 &anagement competence risk is the
risk that the company fails to repay its loan due to lack of
management integrity.
DbE &anagement ,ntegrity Risk5 &anagement integrity risk is the risk that
the company fails to repay its loan due to lack of management
integrity.
*ecurity Risk5
*ecurity Risk is the risk that the realized value of the security does not cover the
e!posure of loan. 2!posure means principal plus outstanding interest. *ecurity risk
can be divided into two parts5
DaE *ecurity Control Risk5 *ecurity Control Risk is the risk that the bank fails to
realize the security because of lack of banks control over the security offered
by the borrowers.
DbE *ecurity Cover Risk5 *ecurity cover risk is the risk that the realized security value
may not cover the full e!posure of loans.
P(o)ess o# Len+in! Ris. Ana'&sis:
or the purpose of risk analysis for either trading or manufacturing companies, the
credit officer or concerned persons who are involved to prepare the 9R) report
should first collect the information and data in respect of the loan proposal and the
borrower.
$he following steps are generally followed5
6. Collect all data available from published sources.
7. Cisit company to collect company specific data that is not published.
8. ,nterview management to assess their ability and integrity.
:. ,nvestigate the security.
=. 1ave an impression Dby the credit officerE of the companys operations.
)fter collecting the re-uired information and data5
6. 'repare financial spreadsheet which includes Balance *heet, ,ncome *tatement.
Cash low *tatement and inancial Ratios on the basis of at least 8 years
financial statement of the borrowers.
7. )nalysis of *preadsheet Ratios.
8. 'repare supplementary -uestions for company management, if necessary.

Credit Management Policy On AB Bank LTD

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Credit Management Policy

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