A Dissertation Report on

“Credit Risk Management of Bank Asia Limited: A Study on Ring Road Branch”
 A Dissertation Report on
“Credit Risk Management of Bank Asia Limited: A Study on Ring Road Branch”

Submitted by
Ms. Rafiunnahar Rahana
MPHRM Program
Roll-24-05-19-035
Batch 5, Session-2018-2019

Supervisor
Professor Dr. S.S. Karmaker
Faculty of Business Administration
University of Dhaka

Date of Submission
March 13, 2020
March 13, 2020

Dr. S.S. Karmaker

Professor
Department of Management
University of Dhaka

Subject: Dissertation Report submission on “Credit Risk Management of Bank Asia

Limited.”

Dear Sir:
I solicit your attention that I have completed my dissertation report on the topic of “Credit
Risk Management of Bank Asia Limited” I have intended to share the experience,
observation and learning during the dissertation to prepare the report on the credit risk
management of the whole bank. Here I have shown the activities under the credit department
of the Ring Road Branch of Bank Asia Limited. I would be grateful, if you accept this report
being kind enough to pardon the errors and mistakes of the report.

Sincerely yours,

------------------------------
Ms. Rafiunnahar Rahana
Masters of Professional Human Resource Management (MPHRM)
Faculty of Business Administration
University of Dhaka
Roll-24-05-19-035
Batch 5, Session-2018-2019
 Acknowledgement

First of all, I would like to express my gratefulness to Allah for giving me strength to survive.

At the very beginning, I would like to thank Professor Dr. Ataur Rahman, University of Dhaka,
for giving me her precious time and sincere guidance by pointing out the flows of my
Dissertation Report and by providing me the right direction.

I am also thankful to the branch for helping me in various ways by giving their valuable
information and thoughts. Also I would like to express my deepest thanks and appreciation to
Mohammad Munzur Rashid (FVP & Head of Branch), Bank Asia Limited, Ring Road Branch
for giving me his valuable time and thus enabling me to prepare the Dissertation report. In
addition I remain grateful to Mr. A.F.M. Tanvir Ahsan (FAVP and Manager Operations), Mr.
Mizanur Rahaman (SEO and Credit-In-Charge), Mrs Rubaida Iftakher (SEO & GB In-Charge),
Md. Rashel (SEO) & all other employees.
 Table of Contents

Executive Summary

Chapter 1: Introduction

1.1 Background of the report:

1.2 Objective of the Report:

1.3 Methodology of the Report:

Primary data

Secondary data

1.4 Limitation of the Report:

Chapter 2: Overview of the Organization

2.1 Profile of Bank Asia Limited:

2.2 Corporate Structure:

2.3 Vision & Mission:

Chapter 3: Work Experience

Chapter 4: Credit Overview of Ring Road Branch, Bank Asia Limited

4.1 Bank Asia Limited, Ring Road Branch: Background

4.2 Branch Structure

4.3 Products and Services Offered by Ring Road Branch, Bank Asia Limited

4.4 Credit Scenario of the Branch:

Chapter 5: Credit Facilities, Policies and Strategies

5.1 Credit Facility:

5.2 Credit Policy Statement:

5.2.1 General policy Guidelines:

 5.2.2 Credit Assessment:

Chapter 6: Credit Approval Process of Bank Asia Limited

6.1 Proposal origination

6.2 Appraisal & Processing

6.3 Recommending Authority

6.4 Approving Authority

Chapter 7: Credit Risk Grading

7.1 Unit Wise Responsibilities to Keep an Eye on the Credit Activities:

7.2 Credit Risk Grading:

7.3 Functions of CRG:

7.4 Credit Risk Grading Definitions:

Chapter 8: Financial Performance: Loans and Advances of Bank Asia Limited

8.1 Loan & Advance of Bank Asia Limited

8.2 Classified Loan

8.3 Non-Performing Loan

8.4 Loan Mix-2017:

8.5 Credit Risk Indicators Measurement of Bank Asia Limited:

8.5.1. Nonperforming Assets to Total Loans Ratio:

8.5.2. Loan Loss Provision to Total Loans Ratio:

8.5.3. Nonperforming Assets to Equity Capital:

8.5.4. Total Loans to Total Deposits:

Chapter 9: Concluding Statement

9.1 Findings:

9.2 Recommendations:
 9.3 Conclusion:

References

Appendix
 Chapter: Introduction

1.1 Background of the report:

Success and sustainability of a commercial bank is much depends on how it can manage its
risk exposure. Among all other risks credit risk is top ranked according to priorities as banks
fundamental function is to take deposits and give loans. So credit risk is natural with the
primary operations of commercial bank. For a commercial bank maximum revenue and
maximum risk both are linked with credit.

Significantly banks need to pay enough attention to manage credit risk and implement
strategies policies and set standards. Sources of credit risk are credit concentration,
inappropriate credit management and credit need assessment of the borrower. As it cannot be
avoided completely banks intention for all these efforts to keep in a tolerating level.

Banks implement their top most spirit in resolving credit risk related issues. As credit risk is so
vital for commercial banks that it can cause major financial disaster for the bank and people
related with bank as an internal personnel such as employees and external entities such as the
customers who deposited money and other stakeholders.

1.2 Objective of the Report:

 To gather knowledge about credit risk and its management procedures

 To have an idea about their financial performance relating to credit operations.
 To find out some recommendations that may help in solving those problems.

1.3 Methodology of the Report:

A well systemized data collection is prudent for making a report that reflect the actual
circumstances since finalizing the report topic to the presentation of complete report there was
best effort to maintain a systematic process.

Primary data

 Practical desk work.

 Conversation with officers.
 Files that was provided by related officials.
Secondary data

 Policies and CRM manual of Bank Asia Limited

 Website of Bank Asia Ltd ( www.bankasia-bd.com)
 Annual Report of Bank Asia
 Bangladesh Bank Circular (www.bangladesh-bank.org)

The interpretation of the analysis was performed with best efforts and presented in a
distinguishable manner. As a normal process to make a report more accurate few corrections
were made according to my honorable supervisor’s advice while preparing the final report.

1.4 Limitation of the Report:

Though I gave my best to make the report an explanatory one, obviously there was some
limitations both professional and personal during the preparation of the report.

I. Lack of Sufficient Relevant Information: Certainly the task of data collection is not
a simple task .I tried to collect data for my study that are relevant with the report. I had
to separate data from accurate and inaccurate data .performing the data collection task
is not always accurate and sometimes I could not get the data that was required .Another
thing is that due to maintaining business secrecy all information were not disclosed to
an intern.
II. New in this Field: Certainly there is difference in reports prepared by an experienced
and without experience people. As I did the research report for the first time, there is a
probability that there are some mistakes whether in the organization of the report or
presentation of the report. I tried my best to avoid any mistake. As I am new in this filed
there is a hope that my shortcomings will be considered.
 Chapter: Work Experience

I have started my career as a Junior Officer of Bank Asia Limited at 04-09-2011. During the
career of my job, I had great experience of working in a very friendly environment and with
some brilliant professionals of one of the country’s leading private commercial banks.

Everyday office starts at a specific time. Bank Asia Ring Road Branch opens at 10 a.m. in the
morning and shuts at 6 p.m. According to the prescribed rules and regulations we have to
maintain office time like a regular employee. We had to attend there by 9.45 a.m. After entering
into the office, I signed the attendance sheet and scanning the biometric attendance.

It took me about a week to get adapted with the working environment of Bank Asia Limited.
However, it is hard to become familiar with all the sectors and operations of the bank
completely within such a short period of three months. But I tried to gain knowledge about
almost all of them.

Within my career I gave an insight into almost all the operations of the bank, especially in the
areas of customer service, general banking, relation building with customers, iSteler software
works like customer's ID or account opening, credit and foreign trade such as remittance giving
etc. There is every week like Sunday, I attended all weekly meetings, knowledge sharing
sessions and events.
 Chapter: Credit Overview of Ring Road Branch, Bank Asia Limited

1 Bank Asia Limited, Ring Road Branch: Background

Name of the Branch : Ring Road Branch

Contact Number of Branch : Mobile:01877000011(HOB),

T&T Land Phone : 02-9122862-3

Date of opening of the Branch : 26.11.2014

Audit Period : 23.05.2018 to 21.01.2019

Report Date : 06.02.2019

Head of Branch during Audit Period : Mr. A.K.M. Iquebal, VP

Mentor of Branch : Mr. Md. Zahirul Alam, DMD, Small &

Retail Business

Total Number of Employee : 13

Number of Employee Posted Over 3 yrs. : 0

Name of the Employee Posted Over 3 yrs. : N/A

Number of Other Bank’s Functioning in : 9

the Command Area

Branch position in the Command Area : 2nd (in terms of profit)

2 Branch Structure

Manager

Sub-Manager

General Credit Foreign

Banking Department Exchange

Customer Credit Risk Credit Credit

Administration Import
Service Management Recovery

Teller Monitoring
Accounts Clearing & Export
Operation
Compliance

Receptions Remittance

Figure: Organogram of Ring Road Branch

3 Products and Services Offered by Ring Road Branch, Bank Asia Limited
Business Banking:

Overdraft Term loan

Secured Overdraft Lease Finance
Working capital finance Letter of Guarantee
Loan against Trust Receipt Letter of Credit
Bill discounting Back to back Letter of Credit (Local &
Foreign)
Loan Syndication and Structured Finance Agriculture Financing
Demand Loan Staff Loan ( Car Loan, House Building Loan,
Provident Fund Loan)
House Building Loan(Commercial)
Credit Card:

VISA Platinum Card (with Priority Pass) VISA Gold Dual Card
VISA Classic Local Card Hajj Card Travel Card (prepaid card)
VISA Classic Dual Card Virtual Card Master Silver Card
VISA Butterfly Card Master Gold Card
VISA Gold Local Card SME Credit Card

4 Credit Scenario of the Branch:

In 2018 I have collected data from the Credit Department Employees by verbal communication

Distribution Mix of Loan Portfolio (Amount)

Figure in Million Taka

Loan Portfolio
Corporate Sector SME Retail Sector

1400
1208
1200

1000

800 722 674

564 544
600 498 499
425
400
161
200 48 69
35
0
2015 2016 2017 2018

Figure : Loan Mix of the Branch

Interpretation: After analyzing 2015-2018 bar chart of loan portfolio of the branch, it is seen
that the corporate sector's rate has surprisingly increased and holds the largest position, SME
holds less than that and retail sector holds the lowest rate throughout those years.
 Chapter : Financial Performance: Loans and Advances of Bank Asia
Limited

1 Loan & Advance of Bank Asia Limited

Figure in Million Taka

Loan and Advance

10000 9262
8403
7450
8000 6588
6000
4000
2000
0
2015 2016 2017 2018

2015 2016 2017 2018

Figure : Loan & Advance of Bank Asia

Interpretation: Through analysis of 2014-2017 bar chart of loan and advance of the bank, the
result comes that the performance of loan and advance has positively increased.

2 Classified Loan
Figure in Million Taka

Classified Loan
10000 8847 8642
8000
6201 5809
6000

4000

2000

0
2014 2015 2016 2017

2014 2015 2016 2017

Figure : Classified Loan

Interpretation: The analysis result of 2014-2017 shows that the classified loans is being
increased more since 2016.
3 Non-Performing Loan
Figure in Million Taka

NPL
6.00% 5.31% 5.41%
5.00% 4.26% 4.38%
4.00%
3.00%
2.00%
1.00%
0.00%
2015 2016 2017 2018

2015 2016 2017 2018

Figure : Non-Performing Loan

Interpretation: The bar chart analysis result of 2015-2018 shows that the NPL is being
diversified every year.

4 Loan Mix-2017:
Figure in Million Taka

2018
General Coverage SME

9% 2%

89%

Figure : 2018 Loan Mix

Interpretation: The chart shows that in 2018, most of the loan amounts is covered by general-
SOD and term loans holding 89℅ rate of total loan amount of the year.
5 Credit Risk Indicators Measurement of Bank Asia Limited:
As we know, if the credit risk percentage of a bank is low, that is safer for the bank. Because
in that case risk of defaulting is less and the bank is safe. On the other hand, if the credit risk
percentage of a bank is high, that is risky for the bank. Because in that case risk of defaulting
is much and the bank is at stake. Here I describe some credit risk indicator by annual report
data.

1. Nonperforming Assets to Total Loans Ratio:

𝑁𝑜𝑛𝑝𝑒𝑟𝑓𝑜𝑟𝑚𝑖𝑛𝑔 𝑎𝑠𝑠𝑒𝑡𝑠
𝑇𝑜𝑡𝑎𝑙 𝐿𝑜𝑎𝑛𝑠
× 100

Calculation:

Figure in Million Taka

2015 2016 2017 2018

6201 5809 8847 8642
× 100 × 100 × 100 × 100
120,846 149,604 181,993 228,914
5.13% 3.88% 4.86% 3.78%

Credit Risk Indicator

2018 3.78%

2017 4.86%

2016 3.88%

2015 5.13%

0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00%

2015 2016 2017 2018

Figure : Nonperforming Assets to Total Loans Ratio

Interpretation: Through analysis of 2015-2018 bar chart of Nonperforming Assets to Total

Loans Ratio of the bank, the result comes that the performance of indicator has positively
decreased and bank overcome the risk year by year.
2. Loan Loss Provision to Total Loans Ratio:

𝐿𝑜𝑎𝑛 𝐿𝑜𝑠𝑠 𝑃𝑟𝑜𝑣𝑖𝑠𝑖𝑜𝑛

𝑇𝑜𝑡𝑎𝑙 𝐿𝑜𝑎𝑛𝑠
× 100

Calculation:

Figure in Million Taka

2015 2016 2017 2018

1,582 1,647 2,484 2,512
× 100 × 100 × 100 × 100
120,846 149,604 181,993 228,914
1.31% 1.10% 1.36% 1.09%

Credit Risk Indicator

2018 1.09%

2017 1.36%

2016 1.10%

2015 1.31%

0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60%

2015 2016 2017 2018

Figure : Loan Loss Provision to Total Loans Ratio

Interpretation: Through analysis of 2015-2018 bar chart of Loan Loss Provision to Total
Loans Ratio of the bank, the result comes that the performance of indicator has positively
decreased and bank overcome the risk year by year.
3. Nonperforming Assets to Equity Capital:

𝑁𝑜𝑛𝑝𝑒𝑟𝑓𝑜𝑟𝑚𝑖𝑛𝑔 𝑎𝑠𝑠𝑒𝑡𝑠
𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦
× 100

Calculation:

Figure in Million Taka

2015 2016 2017 2018

6201 5809 8847 8642

× 100 × 100 × 100 × 100
16,602 18,696 18,863 20,934

37.35% 31.97% 46.90% 41.28%

Credit Risk Indicator

2018 41.28%

2017 46.90%

2016 31.97%

2015 37.35%

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00% 50.00%

2015 2016 2017 2018

Figure: Nonperforming Assets to Equity Capital

Interpretation: Through analysis of 2015-2018 bar chart of Nonperforming Assets to Equity

Capital of the bank, the result comes that the performance of indicator has positively decreased
and bank overcome the risk year by year.
4. Total Loans to Total Deposits:

𝑇𝑜𝑡𝑎𝑙 𝐿𝑜𝑎𝑛𝑠
𝑇𝑜𝑡𝑎𝑙 𝐷𝑒𝑝𝑜𝑠𝑖𝑡𝑠
× 100

Calculation:

Figure in Million Taka

2015 2016 2017 2018

120846 149604 181993 188914
× 100 × 100 × 100 × 100
140666 170117 190551 205481
85.91% 87.94% 95.51% 91.93%

Credit Risk Indicator

2018 91.93%

2017 95.51%

2016 87.94%

2015 85.91%

80.00% 82.00% 84.00% 86.00% 88.00% 90.00% 92.00% 94.00% 96.00% 98.00%

2015 2016 2017 2018

Figure : Total Loans to Total Deposits Ratio

Interpretation: Interpretation: Through analysis of 2015-2018 bar chart of Total Loans to

Total Deposits of the bank, the result comes that the performance of indicator has positively
decreased by profit perspective and liquidity perspective negatively decreased year by year.