Chapter - 1

Introduction
1.1 INTRODUCTION
Today’s modern banks are not only provides traditional banking, rather banks are
expanding the menu of financial services, banks are making the untouchable services
touchable for their customers. The changing and expanding role of banking has made the
banking business more complex and competitive. For survival and growth of this business
demands creativity, specialization and knowledge and adoption of new technology are
used. But technology, creativity, specialization all these cannot support a bank survive
unless the services are marketed in the right track. For this bank need expert who will
able to run the business even in against the after completion of BBA program of Faculty
of Business Studies, Department of Finance in Bangladesh University of Business &
Technology (BUBT), three months organizational attachment is mandatory. So, the
preparation and submission of the report is partial requirement for the completion of the
degree. The report is outcome of internship program conducted in Jamuna Bank Ltd.

1.2 SIGNIFICANCE OF THE STUDY

This report is designed on the topic “Credit Management of Jamuna Bank Limited”.
Jamuna Bank is one of the most elder members in banking industry in Bangladesh, which
I chose to complete my internship program that helped me to learn practical knowledge
and gather experience about financial task. This report is outcome of the three months
long internship program conducted in Jamuna Bank Limited at Mirpur-10 Branch. This
internship report is an important partial requirement of one year’s BBA graduation
program. This is because knowledge and learning become perfect when it is associated
with theory and practice. By this internship program student can establish contract and
network. Therefore, it is obvious that the significance of internship is clearly justified as
the crucial requirement of four year’s BBA graduation.

1.3 SCOPE OF THE STUDY

The study is focused on the following areas of the Jamuna Bank Limited (JBL).
 An overview of Jamuna Bank Limited
 Loan disbursement and recovery procedure of JBL.
 Loan disbursement and recovery performance of JBL.

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1.4 OBJECTIVES OF THE STUDY
1.4.1 Broad Objective:
Broad objective of this report is to analyze the Credit Management of Jamuna Bank
Limited.

1.4.2 Specific Objectives:

The specific objectives of the study are as follow:
 To know the lending and recovery procedure of JBL.
 To analyze the trend of credit disbursement of JBL for over the years.
 To assess the industry wise and geographical location wise loan and advances of
JBL.
 To analyze the trend of classified loans and advances of JBL.
 To evaluate the credit performance of JBL within the banking industry.

1.5 METHODOLOGY
To complete this report, the following methodology are adopted to collect, analyze and
reporting data and information.

1.5.1 Research Design

This is a descriptive research, which focuses on “Analysis of Credit Management of
Jamuna Bank Limited”. Secondary data are mainly used to prepare the report.

1.5.2. Sources of Data

To prepare this report the information has been collected through the following sources:
 Annual reports of Jamuna Bank Limited
 Websites and news portal are also used as major sources.

1.5.3 Data Analyzing and Reporting

To analyze and to prepare the report I have used several software like Microsoft Word
and Microsoft Excel. To analyze the loan disbursement and recovery performance of
Jamuna Bank Limited, I used trend analysis and also comparative analysis.

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1.6 LIMITATION OF THE STUDY
Three months is not enough to know about banking operations though I have been
received from maximum assistance from the very individuals of the Jamuna Bank
Limited of Mirpur-10 Branch. Though the study is completed sincerely, it might have
some major limitations, which may raise some question its readers. The notable
drawbacks of this study are:
 The main constraint of the study was insufficiency of current information, relevant
to the study.
 Consolidate data related to the study were not available in the mid of the year.
 All required information was not available in any specific branch of the bank and
there was also limited opportunity to visit more than one branch.
 Since I am not a professional researcher, the accuracy of the study may not have
been completely perfect.

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Chapter - 2
Organizational Profile
2.1 ORGANIZATIONAL OVERVIEW
Jamuna Bank Limited (JBL) is a Banking Company registered under the Companies Act,
1994 of Bangladesh with its Head Office currently at Chini Shilpa Bhaban, 3, Dilkusha
C/A, Dhaka-1000, and Bangladesh. The Bank started its operation from 3rd June 2001.
JBL undertakes all type of banking transactions to support the development of trade and
commerce in the country. JBL’s services are also available for the entrepreneurs to set up
new ventures and BMRE for industrial units. The Bank gives special emphasis on Export,
Import, Trade Finance, SME Finance, Retail Credit and Finance to Women
Entrepreneurs.
Jamuna Bank Ltd. the only Bengali named new generation private commercial bank was
established by a group of winning local entrepreneurs conceiving an idea of creating a
model banking institution with different outlook to offer the valued customers, a
comprehensive range of financial services and innovative products for sustainable mutual
growth and prosperity. The sponsors are reputed personalities in the field of trade,
commerce and industries.
The scenario of banking business is changing day by day, so the Bank’s responsibility is
to device strategy and new products to cope with the changing environment. Jamuna
Bank Ltd. has already achieved tremendous progress within only nine years. The bank
has already ranked at top of the quality service providers & is known for its reputation.
Jamuna Bank offers different types of Corporate and Personal Banking Services
involving all segments of the society within the purview of rules and regulations laid
down by the Central Bank and other regulatory authorities. As per the provisions of
Bangladesh Bank license, the Bank has offered initially its shares to public by Pre – IPO
and subsequently sold shares to the public through IPO in the year 2004. The shares of
the Bank are listed with both Dhaka Stock Exchange Ltd. & Chittagong Stock Exchange
Ltd.
At present the Bank has real-time Online banking branches (of both Urban and Rural
areas) network throughout the country having smart IT-backbone. Besides traditional
delivery points, the bank has ATMs of its own, sharing with other partner banks and
consortium throughout the country.
To provide clientele services in respect of International Trade it has established wide
correspondent banking relationship with local and foreign banks covering major trade and
financial center at home and abroad.

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2.2 JBL (VISION, MISSION, OBJECTIVES AND STRATEGIES)
Vision
To be in the forefront of national development by providing all the customers
inspirational strength, dependable support and the most comprehensive range of business
solutions, through our team of professionals who work passionately to be outstanding in
everything we do.

Mission
Jamuna Bank Ltd will become most caring, focused for equitable growth based on
diversified deployment of resources, and nevertheless would remain healthy and gainfully
profitable Bank.
Will become most caring, focused for equitable growth based on diversified deployment
resources, and nevertheless would remain healthy and gainfully profitable Bank. Jamuna
Bank Limited aims to become one of the leading banks in Bangladesh by prudence, flair
and quality of operations in their banking sector. The bank has some mission to achieve
the organizational goals. Some of them are as follows as:
 Jamuna Bank Limited provide high quality financial services to strengthen the
well-being and success of individual, industries and business communities.
 Its aim to ensure their competitive advantages by upgrading banking technology
and information system.
 JBL intends to play more important role in economic development of Bangladesh
and its financial relations with the rest of the world by interlining both modernistic
and international operations.
 JBL encourages investors to boost up share market.
 The bank creates wealth for the shareholders.
 The bank believes in strong capitalization.
 It maintains high standard of corporate and business ethics.
 Jamuna Bank Limited extend highest quality of services, which attracts the
customers to choose them first.
 The bank creates wealth for the shareholders.
 The bank maintains congenial atmosphere for which people are proud and eager to
word with Jamuna Bank Limited.
 Jamuna Bank Limited intend to provide better benefits to their customers and
good returns to their shareholders.
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  The bank intends to meet the needs of their clients and enhance their profitability
by creating corporate culture.
Jamuna Bank Ltd will become most caring, focused for equitable growth based on
diversified deployment of resources, and nevertheless would remain healthy and gainfully
profitable Bank.

Objectives
 To earn and maintain CAMEL Rating 'Strong'
 To establish relationship banking and improve service quality through
development of Strategic Marketing Plans.
 To remain one of the best banks in Bangladesh in terms of profitability and assets
quality.
 To introduce fully automated systems through integration of information
technology.
 To ensure an adequate rate of return on investment.
 To keep risk position at an acceptable range (including any off balance sheet risk).
 To maintain adequate liquidity to meet maturing obligations and commitments.
 To maintain a healthy growth of business with desired image.
 To maintain adequate control systems and transparency in procedures.
 To develop and retain a quality work-force through an effective human Resources
Management System.
 To ensure optimum utilization of all available resources.
 To pursue an effective system of management by ensuring compliance to ethical
norms, transparency and accountability at all levels.

Strategies
 To rise up to Tk. 1000.00 million by March 2006.
 To manage and corporate the Bank in the most efficient manner to enhance
financial performance and control cost of fund.
 To strive for General banking activities through quality control and delivery of
timely services.
 To identify customers’ credit and other banking needs and monitor their
perception towards our performance in meeting those requirements.

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  To review and update policies, procedures and practices to enhance the ability to
extend better services to customers.
 To train and develop all employees and provide them adequate resources so that
customers ‘can be reasonably addressed.
 To promote organizational effectiveness by openly communicating company
plans, policies, practices and procedures to employees in a timely fashion.
 To cultivate a working environment that fosters positive motivation for improved
performance.
 To diversify portfolio both in the retail and wholesale market.
 To increase direct contact with customers in order to cultivate a closer relationship
between the bank and its customers.

2.3 CORPORATE SLOGAN

“Your Partner for growth” is the slogan of Jamuna Bank Limited.

2.4 CORPORATE CULTURE OF JBL

Employees of JBL share certain common values, which help to create a JBL culture,
 The client comes first.
 Search for professional excellence.
 Openness of new ideas and new methods to encourage creativity.
 Flexibility and promote response.
 A sense of professional ethics.

2.5 Values

Customer Focus Integrity Quality Teamwork

Respect for the

Harmony Fairness Courtesy
individual

Respectable
Commitment Business Ethics Unique Culture
Citizenship

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2.6 ORGANIZATION STRUCTURE
The Management structure of Jamuna Bank Limited is given below with the chart: -

Managing Director (MD)

Deputy Managing Director

Senior Executive Vice Senior Executive Vice Senior Executive Vice

President President President

Executive Vice President Executive Vice President

SVP (Board SVP (HRD) SVP (Credit) SVP SVP

Secretary)

Vice

SAVP

Assistant Vice

First Assistant Vice President

Jr. Assistant Vice

Senior Executive

Executive officer

First executive officer

Officer

First Officer

Figure 01: The Organization Structure of Jamuna Bank Limited

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2.7 SERVICE & PRODUCT OF JBL
The Bank has an array of tailor-made financial products and services. Such, products are
DEPOSIT PRODUCT
 Transactional Accounts
▪ Current Deposit (CD) Account
▪ Short Notice Deposit (SND) Account
▪ Savings Bank (SB) Account
▪ Special Savings Bank Account
▪ Resident Foreign Currency Deposit (RFCD) Accounts

 Fixed Deposit Receipts

▪ Double Growth Deposit Schemes (DGDS)
▪ Triple Growth Deposit Schemes (TGDS)
▪ Monthly Benefit Scheme (MBS)

 Islamic Banking
▪ Mudaraba Monthly Savings Deposit Scheme
▪ Mudaraba Crorepoti Deposit Scheme
▪ Mudaraba Lakhopoti Deposit Scheme
▪ Mudaraba Double/Triple Growth Deposit Scheme
▪ Mudaraba Education Deposit Scheme
▪ Mudaraba Hajj Deposit Scheme
▪ Mudaraba Marriage Deposit Scheme
▪ Mudaraba Millionaire Deposit Scheme
▪ Mudaraba Monthly Benefit Deposit Scheme
▪ Mudaraba Rural Deposit Scheme
▪ Mudaraba Pension Deposit Scheme
▪ Mudaraba Car Deposit Scheme

 Deposit Schemes For NRB

▪ NRB Monthly Savings Scheme
▪ NRB Monthly Benefit Scheme
▪ NRB Double Growth Benefit Scheme(DBS)
▪ NRB Triple Growth Benefit Scheme (TBS)

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 ▪ NRB Kotipoti Deposit Scheme
▪ NRB Millionaire Deposit Scheme
▪ NRB Monthly Pension Deposit Scheme
▪ NRB Pension Term Deposit Scheme
▪ NRB Home Travel Deposit Scheme
▪ NRB Property Deposit Scheme (Land/ Apartment)
▪ NRB Wage Earners Deposit Scheme
▪ NRB Home Car Deposit Scheme
▪ NRB Education Saving Scheme
▪ NRB Student Deposit Scheme
▪ NRB Women/ Housewife Deposit Scheme
▪ NRB Future Plan Deposit Scheme

LOANS AND ADVANCES

 Continuous Loan Products Cash Credit
▪ Hypothecation Cash Credit Pledge
▪ Overdraft (General)
▪ Secured Overdraft

 Demand Loan Products

▪ Payment against Document (PAD)
▪ Loan against EDF
▪ Loan against Trust Receipt (LTR)
▪ Loan against Imported Merchandize (LIM)
▪ Work Order Finance
▪ Packing Credit
▪ Export Credit
▪ Loan under Cash Assistance
▪ Export Bill Purchase and Discounting
▪ Time Loan

 Term Loan Products

▪ Term Loan
▪ Hire Purchase Loan

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 ▪ Lease Finance
▪ Bridge Financing Loan
▪ Syndicated loan financing

 SME Products
▪ Jamuna Jantrik -Lease Finance
▪ Jamuna Green -Term Loan
▪ Jamuna Sommriddhi -Term Loan with 25%

 FDR
▪ Jamuna Shachchondo- Term Loan & SOD
▪ Jamuna NGO Shahojogi -Term Loan
▪ Jamuna Swabolombi-Term Loan
▪ Jamuna Chalantika- Term Loan & CC (Hypo)
▪ Jamuna NariUddog- Term Loan for Women
▪ Jamuna Bonik -LC & LTR

 Retail Loan Products

▪ Personal Loan
▪ Auto Loan
▪ Any Purpose Loan
▪ Salary Loan
▪ Doctors Loan
▪ Education Loan
▪ Overseas Job Loan

 Agriculture Loan Products

▪ Crop Loan
▪ Fish Culture Loan
▪ Crop Warehouse & Marketing
▪ Poverty Alleviation/Income generating activities
▪ Irrigation Tools
▪ Livestock Development
▪ Agricultural Tools
▪ Nursery & Horticulture

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 ▪ Income generating activities
▪ Other term loan activities

 Loan Schemes For NRB

▪ NRB SME
▪ NRB Agriculture
▪ NRB Real Estate Financing
▪ NRB Retail Loan

2.8 CORPORATE BANKING

Jamuna Bank Ltd. offers a complete range of advisory, financing and operational services
to its corporate client groups combining trade, treasury, investment and transactional
banking activities in one package. The corporate Banking specialists will render high
class service for speedy approvals and efficient processing to satisfy customer needs.
Corporate Banking business envelops a broad range of businesses and industries. You can
leverage on the know-how in the following sectors mainly –
 Agro processing industry
 Industry (Import Substitute / Export oriented)
 Textile Spinning, Dyeing / Printing
 Export Oriented Garments, Sweater.
 Food & Allied
 Paper & Paper Products
 Engineering, Steel Mills
 Chemical and chemical products etc.
 Telecommunications.
 Information Technology
 Real Estate & Construction ·
 Wholesale trade
 Transport · Hotels, Restaurants ·
 Non-Bank Financial Institutions
 Loan Syndication ·
 Project Finance. Investment Banking
 Lease Finance · Hire Purchase · International Banking

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2.9 OTHER HIGHLY CUSTOMIZED SERVICES OF JBL
Q-Cash Round the Clock Banking
Jamuna Bank Q-Cash ATM Card enables you to withdraw cash and do a variety of
banking transactions 24 hours a day. Q-Cash ATMs are conveniently located covering
major shopping centers, business and residential areas in Dhaka and Chittagong. ATMs in
Sylhet, Khulna and other cities will soon start be introduced. The network will expand to
cover the whole country within a short span of time.

With Jamuna Bank Q-Cash ATM card customer can:

▪ Cash withdrawal Round the Clock from any Q-Cash logo marked ATM booths.
▪ POS transaction (shopping malls, restaurants, jewelries etc.
▪ Enjoy overdraft facilities on the card (if approved)
▪ Utility Bill Payment facilities
▪ Cash transaction facilities for selective branches nationwide

Online Banking
Jamuna Bank Limited has introduced real-time any branch banking on December 31,
2010. Now, customers can withdraw and deposit money from any of its 65 branches
located at Dhaka, Chittagong, Sylhet, Gazipur, Bogra, Naogaon, Narayanganj, Dinajpur,
Kushtia, Rajshahi, Bashurhat, Sirajganj and Munshigonj. The valued customers can also
enjoy 24 hours banking service through ATM card from any of Q-cash ATMs located at
Dhaka, Chittagong, Khulna, Sylhet and Bogra.

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Chapter - 3
Theoretical Aspects
3.1. CREDIT
The word “Credit” is derived from Latin word “Credo”, which means, “I believe”.
It is usually defined as one’s ability to buy with a promise to pay. From a bank’s
point of view, credit is the confidence of the lender on the ability and willingness
of the borrower to repay the debts at a future date.

3.2. LOAN AND ADVANCES

These are the Assets based product of a bank and reflected in the assets side of the
balance sheet. There are various types of loan and advances offered by Jamuna
Bank Limited depending on the purpose of the borrowing customers.
 Loan: When an advice is made, with or without any security, in a lump
sum repayable either in fixed monthly installment or in lump sum and no
subsequent debit is cordially allowed except by the way of interest,
incidental charges etc., it is called a loan. A loan once repaid in full or in
part, cannot be drawn again by the borrower. It is given for a fixed period at
an agreed rate of interest. The whole amount of loan is debited to the
customer’s name on a loan account to be opened in the ledger and, is paid
to the borrower either in the form of cash or by the way of credit to his
current or savings account.
 Advance: An advance is a little bit different than loan. In advance, the
borrower is allowed and credit limit for a given period of time. In the given
period, the borrower can withdraw money as many times as he wants but he
cannot exceed the credit limit. Again, he can repay several times whenever
he wants.
According to Ramaswamy and Vasudevan (1985), “Advances are lending
of money by banks against promissory notes executed by the customers
with or without collateral security.”

3.3 LOAN CLASSIFICATION AND PROVISION

The Bank classifies its loan portfolio and maintains provision in a transparent way
and in accordance with the rule and regulations set by Bangladesh Bank from time
to time. In case of need the bank classifies some loans on qualitative judgment too.

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3.3.1 LOAN CLASSIFICATION AS PER BANGLADESH BANK
The classification of loan provided by different commercial banks can be shown
through the following table:
Types of Loan
Agricultural Term (Up to Term (> 5
Classification Continuous Demand
Short term 5 Years) Years)
12 months or Less than 6 Less than 6 Less than 6 Less than 12
Unclassified
below months months months months
If defaulted
If defaulted
Overdue amount of
amount of
more than 12 Overdue 6 installment
6 months to installment
Sub-standard months but months to 9 is equal to 6
9 months is equal to
less than 36 months months
12 months
months payable
payables
s
If defaulted
amount
Overdue of
more than 36 Overdue 9 installment
9 months to 18 months
Doubtful months but months to 12 is equal to
12 months or more
less than 60 months 12
months
months
payables
Overdue Overdue 12 Overdue of Overdue of
12 months
Bad/Loss more than months or 18 months 24 months
or more
60 months More payables payables
Table 3.1: Loan Classification as per Bangladesh Bank.

3.3.2 CREDIT PROVISIONING

To get real picture of the income, provisioning is made as under:
 1% for all loans
 5% for SMA
 20% for Sub-standard loans
 50% for Doubtful loans and
 100% for Bad loans

3.3.3 CREDIT RISK GRADING (CRG):

 The Credit Risk Grading (CRG) is a collective definition based on the pre-
specified scale and reflects the underlying credit-risk for a given exposure.
 A Credit Risk Grading deploys a number/ alphabet/ symbol as a primary

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 summary indicator of risks associated with a credit exposure.
 Credit Risk Grading is the basic module for developing a Credit Risk
Management system.

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Chapter - 4
Credit Disbursement and Recovery Procedure of JBL
4.1 CREDIT MANAGEMENT
Credit Management is a dynamic field in banking industry where a certain standard of
long-range planning is needed allocate the fund in different field and to minimize the risk
and maximize the return on the invested fund. While sanctioning of credit undertaken
with some steps like collecting of related documents and information filled-up credit
application form, scrutinizing, investigation, preparation of proposal, sanctioning, pre-
disbursement compliance, disbursement, supervision, monitoring. Continuous
supervision, monitoring and follow-up are highly required for ensuring the timely
repayment and minimizing the default of credit. Therefore, while analyzing the credit
management of JBL, it is required to analyses its credit policy, credit procedure and
quality of credit portfolio.

4.2 FACTORS OF CREDIT POLICY OF JBL

Credit policy of all banks cannot be developed on same lines because of differences in
their operational needs and resources structure. In designing a credit policy, consideration
should be given to following:
a) Deposit Structure
b) Total deposit resources of the bank and rate of fluctuation of resources.
c) Investment size of the bank and its nature.
d) Capital fund and other reserves. Large bank’s capital fund and secondary reserve
in investment can permit its loan policy to be liberal in respect of its limit of
lending in high risk, high-returns loan while a relatively new small bank would
stress more on liquid and highly secured loans at lower interest in its policy.
e) Capability of loan administration shall have to be given due weight in the credit
policy.

4.3 CREDIT APPROVAL PROCESS OF JBL

4.3.1 Acquisition/Credit Specific Customer
In acquisition/Credit specific customer identification Credit Administration Department
collect applications from the clients who must have an account with the bank and must
have necessary papers and documents. In case of new customers have to open an account
before apply for credit. After that Branch Manager or the Officer-in-Charge of the credit
department conducts the initial interview with the customer to know the customer and fill
up the application.

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4.3.2 Collecting and Review of Data
On proper analysis of the application, branch will inform the initial decision (acceptable
for processing/decline) to the applicant within 3 (three) months working days from the
date of receiving application. Applicant will submit the above dully field-in with the
following additional papers.

 National ID card of the applicant.

 Salary certificate for service holders
 Trade license and TIN certificate for businessman
 TIN certificate of applicants for vehicle loan
 Bank statement of last 6 months or 12months.
 Attested photocopies of current tax receipt, electric bill etc. and lease agreement
(if any) when the source of income in house rent as a landlord.
After collecting those additional papers, the client completes the Credit/ Loan application
with the assistance of the Branch Manager or his/her delegated officer as per the
suggested format. The form will help insure that adequate information about the borrower
is obtained. The application should be filled out as completely as possible to provide
sufficient information with which to begin the analytical process, from the basis for an
initial site visit and understand proposed collateral.

4.3.3 Credit Review

Jamuna Bank collects credit information about the applicant to determine the credit
worthiness of the borrower. The bank collects the information about the borrower from
the following sources.
 Personal Investigation
The banker has to identify three or four district areas of commercial credit analysis
related to the following questions:
1. What risks are inherent in the operation of the business?
2. What have managers done or failed do in mitigating those credits?
3. How can a lender structure and control its own risks in supplying funds?

The first question forces the banker to generate a list of factors that indicate what
could harm a borrower’s ability to repay. The second recognizes that repayment is
largely a function of decision made by a borrower is management aware of the

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 important risk and has it responded? The last question forces the banker to specify
how risk can be controlled so that bank can structure an acceptable loan agreement.
Therefore, banker’s look into key risk factors or Qualitative Analysis which has been
classified according to the 5(five) Cs of credit.
1) Character: Character refers to the borrower’s honesty and trust worthiness.
JBL assess the borrower’s integrity and subsequent intent to repay. If there
are any serious doubts, loan should be rejected by the bank.
2) Capacity: Capacity involves both borrower’s legal standing and management
expertise in maintaining operations so the firm or individual can repay its
debt obligations. Under capacity an individual must be able to generate
income to repay the cash. JBL always consider the capacity of the borrower
in term of his income.
3) Capital: Capital refers to the borrower’s wealth position measured by
financial soundness and market standing. It helps cushion loses and reduces
the likelihood of bankruptcy.
4) Collateral: Collateral is the lender’s secondary sources of repayment or
security in the case of default. Having an asset that the bank can seize and
liquidate when a borrower defaults reduces loss, but does not justify lending
proceeds when the credit decision is originally made.
5) Condition: A condition refers to the economic environment or industry
specific supply, production and distribution factors influencing a firm’s
operations. Repayment sources of cash often vary with the business cycle or
consumer demand.

 Confidential Report from Other Bank HO/Branch/Chamber of Commerce

Under credit analysis Bank also does Quantitative Analysis which refers to the
analysis of financial statement ratios to know the past performance of a company.
Therefore, banks want financial statement of other bank to know the loan repayment
performance of the applicant with another bank. Bank confidentially collect that
information other bank Head Office, branch or from Chamber of Commerce.

 Collecting CIB Report from Bangladesh Bank

After receiving the application for loan or advances, Jamuna Bank Limited sends a
letter to Bangladesh Bank for obtaining a report from therefore collateral review. This

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 report is called Credit Information Bureau (CIB) report. JBL generally seeks this
report from the Head Office for all kinds of investment. The purpose of this report is
to begin informed that whether the borrower has taken loan from any other bank, if
“yes” then whether the party has any overdue amount or not.

4.3.4 Collateral and Risk Analysis

4.3.4.1 Collateral Evaluation
Jamuna Bank Ltd. is very cautious about valuation of the collateral. The bank officials
simultaneously evaluate the collateral of the party offered by the private firm. The
valuation of the collateral increases the accuracy of its value estimated. These types of
value of the collateral are assumed:
 Current market price
 Distressed price
 Probable price after five years.
 The legal officers/lowers of the bank check the document ascertain their
uncleanness. They give legal opinion about the collateral and relatedness of the
loan applicant.

4.3.5 Loan Documentation

Documentation is obtaining such agreement where all terms and condition and securities
are written and signed by the borrower. It specifies rights and liabilities of both the banker
and the borrower. In documentation each type of advance requires a different set of
documents. It also differs with the nature of securities. The documents should be stamped
according to the stamp Act. There are no hard and first rules of documentation and it
varies from bank to bank. Generally, the documents are taken in the case of a secured
advance by Jamuna Bank Limited. These are:
 Demand Promissory note: Here the borrower promises to pay the loan as and
when demand by bank to repay the loan.
 Letter of arrangement.
 Letter of continuity
 Letter of hypothecation of goods and capital machinery.
 Stock Report: This report is used for OD and CC. In this report, information about
the quality and quantity of goods hypothecated is furnished.
 Memorandum of deposit of title deed of property duly signed by the owners of the

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 property with resolution of Board of Director s of the company owning the landed.
 Personal guarantee of the owners of the property.
 Guarantee of all the directors of the company.
 Resolution of the board of directors to borrow fund to execute documents and
completes other formalities.
 For filling charges with the register of joint stock companies.
 Letter of Revival
 Letter of lien for advance against Fixed Deposit Receipt(FDR).
 Other (if any).

4.3.6 Loan Approval

Jamuna Bank Limited has a clearly established process in place for approving new credits
as well as the extension of existing credits. A thorough credit risk assessment is done
before granting loans. The Credit Risk Assessment includes borrower risk analysis,
industry risk analysis, historical financial analysis, projected financial performance, the
conduct of the account, and security against the proposed loan.

4.3.6.1 Head Office approval

The assessment originates from relationship manager/accounts officers and is review by
Head Office Credit Review Committee. The credit analyst or executive duly delegated by
proper authority (proper authority may be credit administrative head office, Assistant
Managing Director or Managing Director) approves the credit proposals. Executive
Committee of the board approves the proposal beyond the delegated authority limit of the
division and ensures adherence to approved terms and other requirements before limit
creation and disbursement. To minimize the credit losses, monitoring procedures and
systems is in place that provides an early indication of the deteriorating financial health of
a borrower.

4.3.6.2 Final Decision about the Project

If the loan decision remains with the branch level, that branch sanctions the loan and if in
approving authority of Head Office then the decision comes to the branch by telex, fax, or
mail. After that branch propose for limit creation to the Head of the Branch before loan
disbursement.

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4.3.6.3. Disbursement of the Loan
Disbursement under loan facilities are only be made when all security documentation is in
place. CIB report should reflect/include the name of all the lenders with facility, limit and
outstanding. All formalities regarding large loans to directors should be guided by
Bangladesh Bank circulars and related section of banking Companies Act. All Credit
Approval terms have been met. After completing all the necessary steps for sanctioning
loans bank will create a loan account by the name of the party and deposit the money to
that account. Bank will give cheque books to the party and advise them to draw the
money and use it as soon as possible, because whenever the working report on Credit
Operation and Management of Jamuna Bank Limited money will transfer to the account
and interest will count that time.

4.3.7 Implementation of the Credit Decision

Loan closings represent the end of an approval process and the beginning of a relationship
process, which involves many different activities on the part of borrower and lender,
which include, among other processes, repayment, monitoring and possibly collection
activity. All new loan and facilities must be evidenced by a signed agreement which is a
contract between the lender and the borrower. A borrower should know precisely what he
is receiving, how the loan is structured, how the bank intends to monitor and how it will
enforce any special terms and conditions of the contract. Also under the terms agreement,
the borrower acknowledges its responsibility to promptly advise the bank about any
inability to repay contractually and also of any material changes in circumstances which
could give rise to an event of default in an agreement.

4.4 LOAN RENEWAL

Successive loans depend on track record of previous loan; usually repayment behavior of
the borrower is the main consideration for renewal and enhancement of the loan amount.
Loans which are length for more than one year requires loan renewal.

4.5 DISCOURAGED LOANS

According the guidelines of Bangladesh bank and its own policy Jamuna Bank Ltd. Does
not provide loan to individual or businesses for the following purpose:
 Highly leveraged transaction
 Military equipment/Weapons finance

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  Share lending
 Lending to holding companies
 Finance of speculating investment
 Mining or others activity that is ethically or environmentally sensitive
 Lending to companies listed on CIB black list or known defaulters.

4.6 Strategies for Credit Recovery

4.6.1 Steps against Defaulters
If a borrower fails to pay 3 (three) months installments consecutively he/she consider as a
defaulter. JBL usually follows the followings guidelines for treatment of its overdue
installments.
 Telephone contact
 Cheque bounce letter
 Overdue recover letter
 Legal notice to borrower and guarantor
 Suit notice

Recovery of loan can be made in the following 3 methods

1. Persuasive
2. Voluntarily
3. Legally

1. Persuasive recovery
If the borrower didn’t pay the due amount of loan in time, then the first step of bank is
private communication with him. It creates a mental pressure on borrower to repay the
loan amount. In this case bank can provide some advice to the borrower for repaying the
loan.

2. Voluntarily recovery:
In this method, some steps are followed for recovering loan. This are-
 Building Task Force
 Arranging seminar
 Loan rescheduling policy
 Waiver of interest rate

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3. Legal recovery:
When all steps fail to keep an account regular and the borrower does not pay the
installments and interests then bank take necessary legal steps against the borrower for
realization of its dues.

THESE STEPS ARE APPLIED IN THE BANK IN FOLLOWING WAYS:

Days Past Due (DPD) Collection Action

Letter, follow up and persuasion over phone
1-14 days
(Annexure III)
15-29 days 1st reminder letter
30-44 days 2ndreminder letter+ single visit
 3rd reminder letter (Annexure IV)
 Group visit by team member
 Follow up over phone
45-59 days
 Letter to guarantor, employer, and reference all
above effort follows.
 Warning on legal action be next 15 days.
 Call up loan (Annexure V)
 Final reminder and serve legal notice
60-89 days
 Legal proceedings begin
 Repossession start
 Telephone calls / Legal proceedings continue
90 and above days  Collection effort continues by officers and agent
 Letter to different bank/Association
Table 4.6: Loan Recovery Steps Applied by JBL.

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Chapter - 5
ANALYSIS OF CREDIT PERFORMANCE
5.1 LOANS AND ADVANCES OF JBL
Table 5.1: Loans and Advances Tk. In Million
Year 2013 2014 2015 2016 2017
Loans and Advances 67,669.38 77899.73 87252.25 1,17099.6 1,42,252.94
Growth Rate 23.29% 15.12% 12.01% 34.21% 21.48%
Source: Annual Report on JBL, 2013-2017

Graphical presentation:

Total Loans & Advances

160000 142252.94
140000 117099.6
120000
100000 87252.25
77899.73
67669.38
80000
60000
40000
20000
0
2013 2014 2015 2016 2017

Figure 5.1: Total Loans and advances

Growth rate of Loans & Advances

40.00%
34.21%
35.00%
30.00%
23.29%
25.00% 21.48%
20.00% 15.12%
15.00% 12.01%
10.00%
5.00%
0.00%
2013 2014 2015 2016 2017

Figure 5.2: Growth rate of Loans and Advances

Interpretation:
The graph shows that the loans and advances of JBL was increased over the years from
Tk.67,669.38 million in 2013 to Tk.1,42,252.94 million in 2017. Growth rate of loans
and advances was decreased from 23.29% in 2013 to 12.01% in 2015 and increased
21.48% in 2017, which indicates a good credit performance of JBL management.

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5.2 INDUSTRY WISE CREDIT DISBURSEMENT
Table 5.2: Industry Wise Credit Disbursement TK. In Million
Industry 2013 2014 2015 2016 2017
Agriculture, fisheries & forestry 1,201.30 1,172.82 1,816.38 1,326.65 1,631.32
12,836.8 27,545.3
Industry 18,273.87 35,871.70 53,900.88
0 8
Construction 2,745.38 3,686.84 4,779.61 13,788.72 8,575.68
Trade & Commerce 27834.90 32890.79 37020.03 46,906.92 59,361.30
Consumer Financing 3,789.98 3,865.80 4,194.25 4,759.36 4,912.10
Miscellaneous 4,987.92 4,582.97 3,926.25 3,247.18 3,535.74
Source: Annual Report on JBL, 2013-2017

Graphical Presentation:

Industry wise credit Disbursement

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Miscellaneous Consumer Financing Trade & Commerce Construction Industry Agriculture, fisheries & Forestry
2013 2014 2015 2016 2017

Figure 5.3: Industry Wise Credit Disbursement

Interpretation:
From the above figure we can see that JBL disbursed major portion of credit in trade &
commerce industry and lower portion of credit in agriculture, fisheries & forestry
industry.

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5.3 DIVISION WISE CREDIT DISBURSEMENT CREDIT DISBURSEMENT
Table 5.3: Division wise credit disbursement TK. In million
Division 2013 2014 2015 2016 2017
Dhaka 40,304.77 49,156.73 54,740.25 71,747.55 97,080.32
Chittagong 11,334.97 10,803.15 12,496.51 13,429.99 14,577.87
Khulna 719.45 1,189.61 1,310.81 2,973.24 2,583.38
Barisal 141.04 198.37 207.35 592.02 457.63
Rajshahi 7,191.07 6,968.36 7,043.09 10,573.71 7,830.74
Sylhet 460.72 838.13 864.63 867.81 859.13
Rangpur - 524.89 386.89 982.10 853.11
Mymensingh - - - 1,239.53 1,440.49
Source: Annual Report on JBL,2013-2017

Graphical Presentation:

Division wise credit Disbursement

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2013 2014 2015 2016 2017

Dhaka Chittagong Khulna Barisal

Rajshahi Sylhet Rangpur Mymensingh

Figure 5.4: Division wise credit disbursement

Interpretation:
The above shows that, Jamuna Bank Limited disbursed a large portion of credit in Dhaka
Division and lower portion of credit in Barisal Division for over the years of analysis.

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5.4 UNCLASSIFIED LOANS AND ADVANCES
Table 5.4: Unclassified Loans and Advances Tk. in million
Year 2013 2014 2015 2016 2017
Unclassified Loans and Advances 62535.62 73477.46 81412.59 112,356.10 136,527.83
Unclassified Loan Ratio 92.41% 94.32% 93.31% 95.95% 95.98%
Source: Annual Report on JBL, 2013-2017

Graphical Presentation:

Unclassified Loans and Advances

150000 136527.83
125000 112356.1
100000 81412.59
73477.46
62535.62
75000
50000
25000
0
2013 2014 2015 2016 2017

Figure 5.5: Unclassified loans & advances

Unclassified Loan Ratio

92.41% 94.32% 93.31% 95.95% 95.98%
100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
2013 2014 2015 2016 2017

Figure 5.6: Unclassified loan Ratio

Interpretation:
The graph shows that the unclassified loans & advances of JBL was increased over the
years from Tk. 62535.62 million 2013 to Tk. 136,527.83 million in 2017. Unclassified
loan ratio was also increased over the year 92.41%in 2013 to 95.98%in 2017, which
indicates a good credit performance of JBL.

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5.5 CLASSIFIED LOANS AND ADVANCES
Table 5.5: Classified Loans and Advances Tk. In Million
Year 2013 2014 2015 2016 2017
Classified Loans and Advances 5,133.70 4,422.14 5,839.68 4,734.50 5,725.09
Classified Loan Ratio 7.59% 5.68% 6.70% 4.05% 4.02%
Source: Annual Report on JBL,2013-2017

Graphical Presentation:

Classified Loans and Advances

7,000.00 5,839.68 5,725.09
6,000.00
5,133.70
4,422.14 4,734.50
5,000.00
4,000.00
3,000.00
2,000.00
1,000.00
0.00
2013 2014 2015 2016 2017
Figure 5.7: Classified loans and advance

Classified Loan Ratio

7.59%
8% 6.70%
7% 5.68%
6%
5% 4.05% 4.02%
4%
3%
2%
1%
0%
2013 2014 2015 2016 2017
Figure 5.8: Classified loans Ratio

Interpretation:
The first figure shows that the classified loans & advances of JBL was increased over the
years from Tk. 5,133.75 million 2013 to Tk. 5,725.09 million in 2017. However, the
classified ratio was decreased from 7.59% in 2013 to 4.02% in 2017, which refers that
the bank management was become efficient in recovering its classified credit.

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5.6 SUB STANDARD LOAN, DOUBTFUL LOAN, BAD/LOSSLOAN
Table 5.6: Sub Standard loan, Doubtful Loan, Bad/Loss Loan Tk. In Million

Particulars 2013 2014 2015 2016 2017

Sub-Standard Loan 238.25 387.59 1637.90 135.10 320.70
Doubtful Loan 571.64 331.89 580.18 185.60 294.99
Bad/Loss Loan 3323.85 3702.64 3621.59 4420.80 5109.41
Source: Annual Report on JBL,2013-2017

Graphical Presentation:

Sub-Standard, Doubtful, Bad & loss Loans

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2013 2014 2015 2016 2017

Sub-Standard Loan Doubtful Loan Bad/Loss Loan

Figure 5.9: Sub Standard loan, Doubtful loan, Bad/loss loan

Interpretation:
The above graph shows that, major portion of classified loan was in bad and loss category
in relative to other categories of classified loans and advances. This is an alarming sign of
credit operation performance of Jamuna Bank Ltd.

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5.7 CAPITAL ADEQUACY RATIO
Table 5.7: Capital Adequacy Ratio
Years 2013 2014 2015 2016 2017
11.10 12.83
Capital Adequacy Ratio 11.25% 10.93% 11.86%
% %
Source: Annual Report on JBL, 2013-2017

Graphical presentation:

Capital Adequacy Ratio

14.00% 12.83%
11.86%
11.10%
12.00% 11.25% 10.93%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
2013 2014 2015 2016 2017

Figure 5.10: Capital Adequacy Ratio

Interpretation:
The graph shows that capital adequacy ratio was fluctuated and increased over the year.
The ratio was increased from 11.14% in 2013 to 11.84% in 2017. However, the ratio was
above the minimum requirement of CAR.

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5.8 PROVISION FOR LOANS & ADVANCES
Table 5.8: Provision for Loans & Advances Tk. In Million
Years 2013 2014 2015 2016 2017
Provision for Loans & Advances 626.18 715.50 803.12 1,109.15 1,664.39
Source: Annual Report: 2013-2017, JBL

Graphical Presentation:

Provision for Loans & Advances

1800 1664.39
1600
1400
1200 1109.15

1000
803.12
800 715.5
626.18
600
400
200
0
2013 2014 2015 2016 2017

Figure 5.11: Provision for Loans& Advances

Interpretation:
The graph shows that provision for loans for advances was increased from Tk. 626.18
million in 2013 to Tk. 1,664.39 in 2017 due to increased amount of classified loans and
advances.

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5.9 CREDIT TO DEPOSIT RATIO
Table 5.9: Credit to Deposit Ratio

Year 2013 2014 2015 2016 2017

Credit to Deposit Ratio 69.41% 67.95% 73.41% 82.73% 84.90%
Source: Annual Report: 2013-2017, JBL

Graphical presentation:

Credit to Deposit Ratio

90.00% 82.73% 84.90%

80.00% 73.41%
69.41% 67.95%
70.00%

60.00%

50.00%

40.00%

30.00%

20.00%

10.00%

0.00%
2013 2014 2015 2016 2017

Figure 5.12: Credit to Deposit Ratio

Interpretation:
The graph shows that the credit to deposit ratio of JBL has fluctuated and increased over
the years from 69.41% in 2013 to 84.90% in 2017. It refers that the management was
became efficient enough in converting its deposit into credit.

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Chapter - 6
Comparative Analysis
6.1 COMPARISON OF CREDIT TO DEPOSIT RATIO
Table 6.1: Comparison of Credit to Deposit Ratio
Year 2013 2014 2015 2016 2017
Industry Average 85.45% 90.70% 87.60% 81.99% 84.25%
Jamuna Bank Limited 69.41% 67.95% 73.41% 82.73% 84.90%
Source: Annual Report of JBL and BB, 2013-2017

Graphical Presentation:

Comparison of Credit to Deposit Ratio

100.00%
90.70%
85.45% 87.60% 84.90%
90.00% 82.73%
81.99% 84.25%
80.00%
73.41%
70.00%
69.41% 67.95%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2013 2014 2015 2016 2017

Industry Average JBL

Figure 6.1: Comparison of Credit to Deposit Ratio

Interpretation:
The graph shows that credit to deposit ratio of JBL was lower than the industry average
except for the year of 2016 to 2017. It indicates that the performance of JBL greater
deposit in credit in comparison with most of the firms in the industry in last two years.

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6.2 COMPARISON OF NON PERFORMING LOAN
Table 6.2: Comparison of Non-Performing Loan
Years 2013 2014 2015 2016 2017
Industry Average 10% 8.9% 8.8% 9.2% 10.1%
Jamuna Bank Ltd 8.04% 7.89% 8.27% 7.76% 6.75%
Source: Annual Report of JBL and BB, 2013-2017

Graphical Presentation:

Non-Performing Loan
12%
10.00% 10.10%
10% 8.90% 9.20%
8.80%

8%
8.04% 8.27%
7.89% 7.76%
6% 6.75%

4%

2%

0%
2013 2014 2015 2016 2017

Industry Average Jamuna Bank Ltd

Figure 6.2: Non-Performing Loan

Interpretation:
The above graph shows that, in comparison with industry average NPL ratio of Jamuna
Bank Limited was lower than the other companies within the industry. It indicates that the
credit management and recovery performance of Jamuna Bank Limited was good enough
than the other banks with the industry.

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Chapter - 7
Findings, Recommendations, and Conclusions
7.1 FINDINGS
 Credit disbursement of Jamuna Bank Limited was increased over the year. Growth
rate of credit disbursement was fluctuated and increased over the year, which was
a good indicator of bank credit performance.
 Jamuna Bank Limited provided a major portion of loans & advances to Trade &
Commerce sector and lower portion of credit to Agriculture, fisheries & forestry
sector.
 JBL provided large portion of its loans and advances in Dhaka Division and lower
portion of Barisal Division.
 Classified loan ratio was fluctuated and decreased over the year. Bad/Loss loan
amount was too much high in relative to other categories of classified loans and
advances. In comparison with industry average NPL ratio of Jamuna Bank Ltd.
was higher than the other companies within the banking industry.
 Credit to deposit ratio was fluctuated and increased over the year. This indicates
that the bank was became efficient enough to utilize its deposit properly to
generate revenue by providing credit properly.

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7.2 RECOMMENDATIONS
 Jamuna Bank Ltd. should try to maintain the growth rate of loans & advances by
providing loans and advances in diversified sectors with attractive terms and
conditions.
 Concentration more in some specific sectors could cause risks & hamper the
sustainability of the bank.
 Concentrated credit disbursement of Jamuna Bank Ltd. to some selective divisions
could endanger the bank’s credit portfolio. So the bank management should
provide loans & advances to all the divisions for balanced economic growth.
 Jamuna Bank Ltd. should be more concern about controlling the classified loans
& advances. In order to minimize the amount of NPL the bank should provide
loans to creditworthy borrowers and effective monitoring and recovery system
should be developed.
 Jamuna Bank Ltd. indicates that the performance of JBL in converting its deposit
into credit was lower than the other banks within the industry.

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7.3 CONCLUSION
Jamuna Bank Ltd. Continues to play its leading role in banking sector of the country. The
success of a bank depends largely on the efficient credit management. A successful credit
management is not only need for a bank’s own performance but also it is needed for the
smooth development of an economy. In any strategy of economic development, it is
essential to emphasize the evaluation of a sound and well integrated credit management
system from the view point of both resource mobilization and efficient allocation of
funds. Credit disbursement of Jamuna Bank Ltd was increased over the year. Jamuna
Bank Ltd. should try to increase the growth rate of loans & advances by providing loans
and advances in diversified sectors with attractive terms and conditions. Jamuna Bank Ltd
concentrated credit disbursement to some selective division could endanger the bank’s
credit portfolio. So the bank management should provide loans & advances to all the
divisions for balanced economic growth Jamuna Bank Limited provided a major portion
of loans & advances to trade and commerce sector. But a lower portion of credit
Agriculture, fisheries & forestry sector. Concentration more in some specific sectors
could cause risks & hamper the sustainability of the bank. Jamuna Bank Ltd. should be
more concern about controlling the classified loans & advances. In order to minimize the
amount of NPL the bank should provide loans to creditworthy borrowers and effective
monitoring and recovery system should be developed. By following all the above
suggestion, the bank hopes to achieve a satisfactory level of progress in all areas of its
operations including target of profitability.

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 REFERENCE

 Gitman, L. J. 2003, “Principle of Managerial Finance”, 12 Edition.

 Jamuna Bank Limited (2018), Annual Report 2017.
 Jamuna Bank Limited (2017), Annual Report 2016.
 Jamuna Bank Limited (2016), Annual Report 2015.
 Jamuna Bank Limited (2015), Annual Report 2014.
 Jamuna Bank Limited (2014), Annual Report 2013.
 Scheduled Banks Statistics, BB, Annual Report 2013-17.
 Jamuna Bank Limited, types of Loan and Advances http://www.jblbd.com,
viewed on December 30, 2018.

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APPENDIX

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