South Bangla Agriculture

& Commerce Bank Ltd

“A Critical Analysis of Credit Risk Management of

South Bangla Agriculture & Commerce Bank Limited”

A Critical Analysis of Credit Risk Management of South Bangla Agriculture & Commerce Bank Limited Page 1
 Internship Report on
“A Critical Analysis of Credit Risk Management of South
Bangla Agriculture & Commerce Bank Limited”

Submitted to:
Prof Dr. M Alimullah Miyan
Chair
College of Business Administration (CBA).

IUBAT

Submitted By:
Md. Tamjid Ahmed

ID# 13202039

Program# BBA

Date: 15 APRIL, 2017

 Acknowledgement

At first I would like to express my gratefulness to the Almighty Allah.

Then, I would like to convey my gratitude to South Bangla Agriculture & Commerce Bank
Limited, where I have complete my required internship program as a course curriculum to be
eligible to prepare this project paper. The experience gathered from the South Bangla Agriculture
& Commerce Bank Limited, truly has amplified my level of competency during my learning
period.

Special gratitude to Prof. Dr. M Alimullah Miyan who has versatile intelligence in him the
pioneer of non-government universities in Bangladesh who has broken the long standing
monopoly in higher education through facilitating establishment of non-government university in
the country thus concrete way for knowledge generating and dissemination enlargement access
to higher education to a more border strata of the society.

My special thanks to Mr. Tanvir H Dewan, Coordinator, College of Business Administration

(CBA) for helping to take right decision and his encouragement.

Special thanks to my supervisor, Mahamudul Hasan Faculty of College of Business

Administration for providing me the valuable suggestions and guidelines to make this report
from the very beginning to the end with a friendly behavior.

I would like to express thanks Muhammed Nizam Uddin (VP & Head of Uttara Branch) and Md.
khalequzzaman (AVP & Manager operation),of South Bangla Agriculture & Commerce Bank
Limited, and co-operate with me in doing my research. Without them all these wouldn’t have
been made possible.
 Letter of Transmittal

April 15, 2017

Prof Dr. M Alimullah Miyan
Chair
College of Business Administration
IUBAT- International University of Business Agriculture and Technology.

4 Embankment Drive Road, Sector-10, Uttara Model Town, Dhaka- 1230, Bangladesh.

Subject: Submission of the internship report.

Dear Sir,

It is a pleasure to me to submit the internship report under your supervision on “A Critical

Analysis of Credit Risk management of SBAC Bank Ltd. “This report contains the structure
& the materials as instructed by you. I have tried hard to do my best and fulfill your expectations.

I have been trying my best effort to gather all necessary information to the concern parts of the
report to enrich it. I believe that within my limited knowledge this report provides a core concept
about the credit risk management process of South Bangla Agriculture & Commerce Bank
Limited.

I hope that you would be kind enough to accept my report.

Thank You.

Sincerely yours,

Md. Tamjid Ahmed.

ID# 13202039

Program: BBA

Major in Finance & Banking

IUBAT
 Student Declaration

I am Md. Tamjid Ahmed, the student of Bachelor of Business Administration (BBA). My ID:
13202039 major in Finance & Banking from IUBAT- International University of Business
Agriculture & Technology. I would like to solemnly declare here that an internship report “A
Critical Analysis of Credit Risk management of SBAC Bank Ltd.” has been authentically
prepared by me. While preparing this internship report, I didn’t breach any copyright act
intentionally.

I hereby declare that this report has been solely prepared by me and to the best of my knowledge
under the guidance of Mahamudul Hasan (Faculty of CBA). It contains no materials previously
published or written by any other person which have been accepted for the degree at IUBAT-
International University of Business Agriculture & Technology or any other educational
institution, except the quotations and reference which have been duly acknowledged.

It has not been prepared for any other purpose or reward.

Md. Tamjid Ahmed.

ID# 13202039

Program: BBA

Major in Finance & Banking

IUBAT
 Supervisor’s Declaration

I am very pleased to declare that Md. Tamjid Ahmed, ID No 13202039,12th semester,

Department of CBA, IUBAT, Dhaka has been given with the topic “A Critical Analysis of
Credit Risk management of SBAC Bank Ltd.” for researching and writing an internship report
on the subject. He has reviewed all the relevant literature and has been surveyed practically in
South Bangla Agriculture & Commerce Bank Limited, for three months to collect both of
primary and secondary data. I have supervised him throughout the preparation of the internship
paper.

I also certify that the internship paper is an original one and has not been submitted elsewhere
previously for publication in any form.

He is wished all the best in his effort.

…………………………….

Mahamudul Hasan

Lecturer & Supervisor

Department of CBA

IUBAT, Dhaka
 Executive summary

This internship report is a partial requirement for the Bachelor of Business Administration
program. The report is based on working experience on South Bangla Agriculture & Commerce
Bank Limited. I was assigned in the Uttara Branch. This report gives a clear idea about the credit
risk management process of South Bangla Agriculture & Commerce Bank Limited.

The report consists of SBAC Bank Ltd overview, product and services, and company internal,
external environment, and measured financial performance of SBAC Bank Ltd. Here I also
explained what I learnt last 2 month 10 days from my job field. In this report my main concern is
on the credit risk management policy of SBAC Bank Ltd.

In the research part I have conducted a survey on credit risk management process of SBAC Bank
Ltd and tried my level best to get proper scenario of credit risk management process of SBAC
Bank Ltd and I recommend some suggestions.
I express my heartiest gratitude to all the parties related to make the work done.
 Table of Contents
SL Particular Page
No
Prefatory
1 Title Fly I
2 Title Page II
3 Letter of Transmittal III
4 Acknowledgement IV
5 Supervisor’s Declaration V
6 Student’s Declaration VI
7 Executive Summary VII

SL Chapter 01- Introduction Page

No
1. 1.1 Introduction of the Report 2
2. 1.2 Scope of the report 2
3. 1.3 Research Aims 3
4. 1.4 Objective of the Study 3
5. 1.4.1 Broad Objective 3
6. 1.4.2 Specific Objective 3
7. 1.5 Limitations of the study 4
8. 1.6 Ethical considerations 4

Chapter 02- Organizational Part

1. 2.2 Corporate Information of SBAC Bank 7
2. 2.3 Corporate Governance 8
3. 2.4 Operation & Services of South Bangla Agriculture & Commerce 10
Bank
Limited
4. 2.5 Operation Details 10
5. 2.5.1 General banking 10
6. 2.5.2 Foreign Exchange 11
7. 2.5.3 Credit Operations 12
8. 2.6 Product and services 12
9. 2.6.1 Deposit account 12-15
 10. 2.7 OTHER PRODUCTS 16-17
11. 2.8 AGRICULTURE BANKING 17-18
12. 2.9 OTHER SPECIAL SERVICES 18-19
13. 2.10 Corporate Social Responsibility (CSR) 19
14. 2.11 SBACBL Vision 20
15. 2.12 SBACBL Mission 20
16. 2.13 Porter’s Five Forces 21-203
17. 2.14 SWOT Analysis of SBAC Bank Ltd 23-24
18. 2.15 Internal Factor Analysis Summary (IFAS) 25
19. 2.16 External Factors Analysis Summary (EFAS) 26
20. 2.17 Strategic Factors Analysis Summary (SFAS) 27
21. 2.18 TOWS Matrix 28
22. 2.19 PEST Analysis of SBAC Bank 29-30
23. 2.20 Three Years Financial Performance of (SBACBL) Year-(2013- 31
2015)
24. 2.20.1 Total Asset 32
25. 2.20.2 Total paid up capital 32
26. 2.20.3 Net profit 33
27. 2.20.4 Total Investment 33
28. 2.21 Ratio Analysis 34
29. 2.21.1 Liquidity Ratio 34
30. 2.21.1.1Current ratio 34
31. 2.21.2 Financial Leverage Ratio 35
32. 2.21.2.1 Debt Equity Ratio 35
33. 2.21.3 Profitability Ratio 36
34. 2.21.3.1 Return on Asset (ROA) 36
35. 2.21.3.2 Return on Equity (ROE) 37
36. 2.21.3.3 Return on Investment (ROI) 38

Chapter 03- Topic Part

1. 3.0 Credit 40
2. 3.2 Procedure of loan distribution 41
3. 3.2.1 Steps SBAC Banks follows 41
4. 3.2.2 Disbursement 41
5. 3.3 Credit Risk 42
6. 3.4 Credit Risk Management 42
7. 3.5 Principal of credit Risk management 43
8. 3.6 Tools used in Credit Risk Management 43
9. 3.7 Credit Risk management authority in SBAC Bank 43
10. 3.8 Risk Management Department (RMD 44
11. 3.9 Credit risk management process 44
12. 3.9.1 Credit risk grading 45
13. 3.9.2 Mortgage 48
14. 3.9.3 Field Visit or Physical Observations of Organization 48
15. 3.9.4 Financial Spread Sheet (FSS) Analysis 48
16. 3.9.5 Other basic criteria’s for managing credit risk49 49
17. 3.10 Whole Process of secured loan 50

Chapter 04- Actual Task

1. 4.1 Introduction 52
2. 4.3 Learning outcome 53
3. 4.3.1 Primary Learning 54
4. 4.3.2 Secondary Learning 54
5. 4.5 General Banking Section 54
6. 4.5.1 Critical observation and recommendation 56
7. 4.6 Credit Department 57
8. 4.6.1 Critical observation and recommendation 58

Chapter 05- Research Part

1. 5.1 Problem Statement 60
2. 5.2 Project Timeline 60
3. 5.3 Budget Information 61
4. 5.4 Research Methodology 61
5. 5.4.1 Research Philosophy 61
6. 5.4.2 Research Approach 62
7. 5.4.3 Types of Research 62
8. 5.4.4 Method of Data Collection 62
9. 5.4.5 Population and Sampling Methods 62
10. 5.4.6 Research survey 63
11. 5.5 Research limitations 63
12. 5.6 Data Analysis 64
13. 5.6.1 Hypothesis Scale 64
14. 5.6.2 Hypothesis Development 65
15. 5.6.3 Hypothesis Tasting 65
16. 5.7 Analysis: Comparison of credit risk management between two 71
banks
17. 5.8 Findings 73
18. 5.9 Recommendations 74
19. 5.10 Conclusion 75
20. 5.11 References 76
21. APPENDIX 77
22. Questionnaire 78
Part One Introductory Part
1.1 Introduction of the Report:
Bangladesh is one of the developing countries in the world with the developing economy.
Therefore, in an economy like this, banking sector can play a vital role to improve the overall
social – economic condition of our country. The main motives of banks are profit-earning. The
word ‘Bank’ refers to the financial institution that deals with money transaction in case
collecting deposit like people’s idol money and investing other sectors or providing loans. Banks
collect deposits at the lowest possible cost and provide loans and advances at highest cost. The
spread between the two is the profit for the bank. Commercial banks are primary contributors to
the national development of the country. The revenue earning sources of banks are mainly loans
and advances. The credit facility can be two types: funded and non-funded. Funded credit can be
expensive for the banks, as the bank has to pay interests. Non-funded credit includes Letter of
Credit, Foreign Guarantee, Bank Guarantee, Remittance etc. These are the main source of
income for the foreign exchange business. If a bank can increase its import and export
transactions, its profit will obviously reach a higher level, as the costs are negligible here.

SBAC Bank Limited deals with money transaction as well as it deals with the customers. As the
banks provide finance or lending to its counter parts, there arises a risk of credit risk, which is the
possibility that a borrower or counter party will fail to meet its obligations in accordance with
agreed terms. Even at present, this problem is haunting many banks and poses a major threat
towards their sound performing. So it’s very important to have an effective and sound credit risk
management system in place which will help the bank minimize its risk level and carry out
successful financing service or lending.
With that issue in mind the topic “A Critical Analysis of Credit Risk Management of South
Bangla Agriculture & Commerce Bank Limited” has been undertaken as my internship report.

1.2 Scope of the report:

Scope means area of operations or field of the study. In my report I have highlighted the critical
part and procedure of credit risk management of South Bangla Agriculture & Commerce Bank
Limited. I have also discussed about the corporate information & structure, background, basic
functions & performance of the bank. With a view to completing the whole report, it was
required to concentrate on the overall banking process. However in this report, the presentation
of credit risk management procedure of South Bangla Agriculture & Commerce Bank Limited.
This report has been prepared on the basis of experience gathered during the period of internship.
From this report banker, student, researcher will benefited.

1.3 Research Aims

The aim of my research is to analyze the credit risk management process of South Bangla
Agriculture & Commerce Bank Limited. What are the factors have in credit risk management,
how they perform and how they manage and control the risk is the main focus of my research.

1.4 Objective of the Study

The report emphasizes on two types of objectives which are given below:

1.4.1 Broad Objective

The Broad objective of this internship report is to practically learn the activities of South Bangla
Agriculture & Commerce Bank Limited and mainly know the credit risk management process of
South Bangla Agriculture & Commerce Bank Ltd.

1.4.2 Specific Objective

Specific objectives of the report are:

 To know about overall banking practice of South Bangla Agriculture & Commerce Bank
Limited.
 To analyze the lending procedures maintained by the SBAC Bank Ltd.
 To analyze how SBAC bank manage their credit risk.
 To evaluate SBAC Bank limited loan grading evaluation and monitoring process.
 To analyze the extent of employee with the credit risk management laws of Bangladesh
bank by south bangle bank Ltd.
 To identify problems in credit operations of the SBAC Bank Ltd.
 To give suggestions for improving its credit risk management performance.
1.5 Limitations of the study:
After my internship when I am going to make this report, I have realized that, there are lacking
of information especially on my topic because Credit department is highly confidential
department bank is not willing to provide my all question answer in more specifically. Moreover
there is also having time limitation. What I have learn after a time being they thing that I am not
a trustworthy person not a permanent employee so they do not feel free to provide me all
information due to confidential.

 The duration of the internship is only 3 months (12 weeks) but before submitting my
report I got only 2 month 10 days only that is not enough for the study in detail.
 Data are not available in a systematic way and not well organized what I have found so
far due to they are very new bank.
 The authorities were unwilling to provide data because of credit department is the more
confidential of one organization.
 Since banks personals were very busy they could provide me very little time.
 Their website’s information is not updated.
 Most of new employees are not that much sure what information was providing to me.

1.6 Ethical considerations

Any type of communication in relation to the research has been done with honesty. The
researcher was actually advised not to apply by an acquaintance who had done it before. After
consulting with an academy Cain at the IUBAT University, the researcher was told it was not
necessary as long as the research was not regarding public matters.

This included the researcher's name and country, the name of the university, what the research
was about, that the questionnaire was anonymous, and that it was voluntary to participate.
Research participants have not been subjected to harm in any ways.
Part Two Organizational Part
 2.1 Background of SBAC Bank Ltd:
South Bangla Agriculture and Commerce Bank Limited was incorporated in Bangladesh as a
Public Limited Company with limited liability under the Bank Companies Act, 1991 on May 20,
1999 and commenced commercial operation on June 02, 1999. With the slogan “A Local Bank
with Global Vision” SBAC Bank Limited started its operation since April 28, 2013 obtaining
license from Bangladesh Bank with the firm commitment of excellent customer service with a
difference. The Bank has 54 branches spread all over the country. SBAC bank is a highly
capitalized new generation Bank with an Authorized Capital and paid-up Capital of Tk. 10
million and Tk. 4.08 million respectively and more than 592 employees, the bank has diversified
activities in retail banking, corporate banking and international trade. SBAC bank undertakes all
types of banking transactions to support the development of trade and commerce in the country.

SBAC‘s services are also available for the entrepreneurs to set up new ventures and industrial
units. The bank gives special emphasis on Export, Import, Trade Finance, SME Finance, Retail
Credit and Finance to women Entrepreneurs. 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 centers at home and abroad.

SBAC bank emerged as a new commercial bank to provide efficient banking services and to
contribute socio-economic development of the country. With the passage of time it has expanded
its number of branches and variety of services along with its core business of taking deposits and
granting loans. Rising trend of the bank‘s profitability over the last 3 years is also materialized.
The SBAC bank is committed to the delivery of the superior shareholders value. Foreign
Exchange Department of the bank is one of the most important departments. Now it has become
the backbone of the bank. With the aim to be the Bank of Choice‘, it is operating in the industry
with a team of devoted personnel to excel both their own career and the bank‘s future.
 2.2 Corporate Information of SBAC Bank Ltd:
Name of the Company South Bangla Agriculture & Commerce Bank Limited
Legal Form A public limited company incorporated in Bangladesh on
20th February 2013 under the companies Act 1994.
Date of incorporation 20th February 2013
Date of C. Business 20th February 2013
Corporate Slogan “A Local Bank With Global Vision”.
Banking A Scheduled Private Commercial Bank Licensed as per
Banking Companies Act 1991(amended up to 2013)
Head Office Sun Moon Star Tower 37, Dilkusha C/A, Dhaka - 1000
Telephone and Fax No. Phone: (02) 9577207-11 FAX +88 02 9577212
SWIFT Code SBACBDDH
Chairman Mr.S.M. Amzad Hossain
Managing Director Mr.Md. Rafiqul Islam
Auditors Muslh Muhith haque & Co, Chartered Accountants
Tex consultants Islam and Co,
Legal consultant Bhuiyan Islam and Zaidi
No. of Branches 54
No. of ATM Both 15
No. of Employees 592(31.12.15)
Stock Summary
Authorized capital Tk.10,000 million
Paid up Capital Tk. 4,089.6 million
Face Value per Share Tk. 10
Chairman’s Office Akram Tower(9th Floor), 199, Sayed Nazrul islam
Sarani15/5, Bijoy Nagar, Dhaka-1000
Email Lockpurgroup@gmail.com
Table 1: Company Profile
Source: SBAC Bank annual report
 2.3 Corporate Governance

The board of directors' key purpose is to ensure the company's prosperity by collectively
directing the company's affairs, whilst meeting the appropriate interests of its share holders and
stake holders. The board of the directors is responsible for approving company policy and is
responsible to shareholders for the company’s financial and operational performance.

Board of director of the bank is given below:

Chairman
Mr. S. M. Amzad Hossain

Vice -Chairman
Mr. Talukder Abdul Khaleque

Director
Mr.Maksudul Rahman (D&C, ECB)
Mr.Abdul Kader Molla (D&V-C, ECB)
Mr.A.Z.M Shofiuddin (D&C, ACB)
Engr.Md. Moklesur Rahman (D&C, RMC)
Captain M. Mozzam Hossain
Mr. Mahammad Mohsin
Begum Sufia Amjad
Mr. Hafizur Rahman Babu
Mr. Anwar Hussain
Mr.Md. Shakhawat Hossain
Mr. Md. Amzad Hossain
Ms. Tahmina Afroz
Ms. Kamrun Nahar
Mr. Khan Habibur Rahman
Mr. Mahammad Ayub
Mr. Mohammad Nawaz
Mr. Md. Mizanur Rahman
Mr. Sk. Shyed-Uj-Jaman

Managing Director& CEO

Mr.Md. Rafiqul Islam
Corporate Governance of SBAC Bank Ltd

Chairman
Mr. S. M. Amzad Hossain
 Mr. Talukder Mr. Abdul Kadir Capt. M. Moazzam Mr. Maksudur
Abdul Khaleque Molla Hossain Chairman, Rahman
Vice -Chairman Chairman, Executive Board Audit Chairman, Risk
Committee Committee Mgmt Committee

Mr. Md. Rafiqul

Islam
Managing Director
and CEO
2.4 Operation & Services of South Bangla Agriculture & Commerce Bank
Limited:

Banking Services

General banking Credit Operation Foreign exchange

 SME Finance Export

Account
 Lease Financing Import
Remittance
 Remittance
Clearing house

Transfer

Cash

Figure 1: Banking Service of

SBACBL

2.5 Operation Details:

The basic operations of South Bangla Agriculture and Commerce Bank Limited are classified
into following three categories:

2.5.1 General banking:

General banking department usually performs a lot of important banking activities. General
banking department is the department which is mostly exposed to the maximum number of bank
customers. It is the introductory department of the bank to its customers. All business concerns
earn a profit through selling either product or a service.
A bank does not produce any tangible product to sell but does offer a variety of financial services
to its customers. The Uttara branch of SBAC Bank has all the required sections of general
banking and this section are run by manpower with high quality banking knowledge. Hence a
touch of rich customer service is prevailing in the branch.

2.5.1.1 SBAC Bank General banking is divided into six sections:

 Account opening section.

 Bills Collection and Clearing section.
 Remittance section.
 Deposit section.
 Account Section
 Cash section.

2.5.2 Foreign Exchange:

Foreign exchange is the means and methods by which rights to wealth in a country’s currency
are converted into rights to wealth in another country’s currency. In banks when we talk of
foreign exchange, we refer to the general mechanism by which a bank converts currency of one
country into that of another. Foreign Exchange Department (FED) is the international department
so that Bangladesh Bank issues license to scheduled banks to deal with foreign exchange. These
banks are known as Authorized Dealers (AD). If the branch is authorized dealer in foreign
exchange market, it can remit foreign exchange from local country to foreign countries. So
SBAC Bank Ltd. Foreign Exchange branch is an authorized dealer.

There are three kinds of foreign exchange transaction:

1. Import
2. Export
3. Remittance
2.5.3 Credit Operations:

Bank’s basic work is to create a channel through depositing money from the surplus unit and
provide funding to borrowers. Thus the necessity of credit department in bank occurs. The credit
department is a very important department of a bank. The money mobilized from ultimate
surplus units are allocated through this department to the ultimate deficit unit (borrower). The
success of this department keeps a great influence over the profit of a bank. Failure of this
department may lead the bank to huge losses or even to bankruptcy. SBAC bank Ltd credit
department also tries to do their job perfectly with the following credit products.

1. SME Finance
2. Lease Financing

2.6 PRODUCT AND SERVICES

Here I described what are the products and services have and its offer for its customer.

2.6.1 Deposit account:

a. Current Account:

Current Deposit Account is the net flow of current transactions with no restrictions, including
services and interest payments. Types of Current Deposit Account:
 Individual, joint
 Proprietorship
 Partnership
 Club, Society, Trust, Autonomous Body, Govt. Dep’t., Directorate etc.

b. Savings Deposit Account:

A Saving Bank account (SB account) is offered to promote the habit of saving among the people
of their idol money. Types of Savings Deposit Account:
 Individual
 Joint
  Club
 Society
 Others

c. Monthly Savings Scheme:

Monthly 500 1000 2000 2500 3000 4000 5000

Installment
03 years
05 years
08 years
10 years

Table 2: Monthly Savings

Scheme

d. Benefits to the Monthly Saving s Scheme Accounts:

 Scheme Accounts can be maintained and deposit from any branch.

 On maturity MSS accounts will get profit with attractive interest rate or will get flexible
tenure benefit for pre-matured encashment.
 Standing Instructions facility will be free of charge.
 Secured Overdraft Loan facility is available against MSS accounts.

e. Monthly Benefit Scheme:

Product Name Interest Rate

3 years 9.00
5 years 9.00

Table 3: Monthly Benefit

Scheme
f. Short Term Deposit Account:
Short Term Deposit Account is the net flow of current transactions including services and
interest payments. Types of Short Term Deposit Account:

 Public Limited Co.

 Private Limited Co.
 Govt./ Semi Govt. / Autonomous / Corp
 Societies / Clubs. Etc
g. Fixed Deposit Account:

A fixed deposit is meant for those investors who want to deposit a lump sum of money for a
fixed period; say for a minimum period of 30 days to one year and above, thereby earning a
higher rate of interest in return. Investor gets a lump sum (principal + interest) at the maturity of
the deposit.

h. Fixed Deposit Receipt Products:

Product Name Interest Rate

FDR – 1 Month 6.00%
FDR – 3 Months 7.00%
FDR – 6 Months 7.00%
FDR – 12 Months 7.00%

Table 4: Fixed Deposit Receipt

Products
i. Benefits to the FDR Accounts:

 Money can grow with attractive interest rate and flexible tenure starting from 1 Month
FDR.
 FDR accounts can be opened with any amount.
 Auto renewal or profit transfer on maturity instruction can be facilitated and no need to
come at branch frequently for such reason.
 Secured Overdraft Loan facility is available against FDR accounts.
j. Special Benefit Scheme:

Product Name Year

Double Benefit Scheme 6 Years
Triple Benefit Scheme 10 Years

Table 5: SBS

k. Benefits to the DBS & TBS Accounts:

 Attractive and higher profit for the DBS and TBS Scheme products.
 Account can be opened at any working day by depositing only Tk .10,000/- or it’s
multiple.
 Special benefits scheme amount start from 50000 tk .
 Secured Overdraft Loan facility is available against DBS and TBS accounts.

l. Trust Smart Savers Scheme (TSS):

The name of the scheme is ‘Trust Smart Savers Scheme (TSS)’ and an Account holder
subscribing to this scheme will be called TSS Account holder.

m. SBAC bank Lakhopoti Scheme:

It is a benefit-rich Savings Scheme Account Product with Terminal Benefit of 1 Lac Taka for
any resident citizen of Bangladesh. The period of maturity for these accounts will be 3 Years, 5
Years, 10 Years or 15 Years regarding the Monthly Deposited amount.

2.6.2 Retail banking products:

Though SBAC Bank is a new comer in the banking sector so, till now it’s not providing all retail
services already other banks have launched, but there are trying to covering main services.
2.7 Corporate Banking:
2.7.1 Credit Card service:
Credit Card is going to designed to be a privileged card for anyone to enjoy benefits to make the
best of their lifestyles. This will not just a credit card; it is going to be the most modern solution
for financial situations that gives you prestige and respect for every transaction you make with
this card.

2.7.2 Debit Card service:

South Bangla Agriculture & Commerce Bank Limited is already offered the facilities of
ATM/Debit Card to all its account holders. From the starting of SBAC Bank, it has invested a
great deal on expansion of its A TM infrastructure. Apart from providing facilities through its
own channels, they also have come into terms with other major ATM service only to bring in
more area of coverage to provide ATM and POS service to SBAC bank clients. As a result
SBAC bank Customers can enjoy the facilities throughout the country.

2.7.3 24x7 service:

24x7 service packages are all about making your life easier, giving you the freedom and
flexibility to manage your banking requirements wherever and whenever you want. South
Bangla Agriculture and Commerce Bank Limited is working on opening 24 X 7 banking for you.

2.7.4 Off Shore Banking:

Off Shore Banking is a unique solution for Banks across the globe to carry out international banking
business involving Non-resident foreign currency denominated assets and liabilities taking the
advantages of low or nonexistent taxes/levies and higher return on investment. SBAC Bank Ltd. is
taking a strong step to extend its network in the special export processing zone created for foreign
investors and local entrepreneur engaged in 100 percent export based industry.

2.7.5 Lease Finance:

As a part of its strategy to ensure steady growth and add value to shareholders, SBAC Bank
diversified its business into Lease Finance for acquisition of all types of Industrial,
Manufacturing and Service Equipments.

2.7.6 Syndicate Finance:

SBAC Bank offerings syndicate finance for its valued customers. We are always for our
customer, so if you need a massive amount to invest and it has strong base for progress, we must
go for it and will take the necessary steps for making a syndicate with other bank.

2.8 AGRICULTURE BANKING:

SBAC Bank has provided financial services to the agricultural sector of Bangladesh and is
committed to the development of agriculture across the nation. They are the only one private
bank of Bangladesh who has main focus on agricultural sector, that’s why with the name of their
Bank, agriculture word is clearly included. They offer a wide range of finance, investment and
risk management solutions across a diverse range of agribusiness products and commodities, and
services to the agricultural value chain.

2.8.1 Livestock Loans:

The Livestock Loan program of SBAC Bank Ltd. facilitates growth of nations’ livestock
industry, including cattle, fisheries and sheep. The program provides producers with alternative
financing options to purchase livestock or construct or expand feedlot facilities. Some producers
also use the program as a management tool to generate cash flow through retained ownership of
livestock.
2.8.2 Agro Help Desk:
SBAC Bank Ltd. aims to provide Agricultural Support for farmers and growers of Bangladesh
and for this reason its every branch has special dedicated Agro Help Desk.

2.8.3 Farmers Deposit:

Bangladesh is an agriculture dependent country and farmers are its life. South Bangla
Agriculture and Commerce Bank Limited believe that farmers should get proper banking
coverage along with all banking facilities. That’s why SBAC Bank working on developing
various farmers deposits scheme and products to secure their life.

2.8.4 Machineries Loans:

SBAC Bank Ltd. has the facilities to provide financial support for purchasing, repairing and
expansion of the farmer’s machineries.

2.8.5 Grower Loans:

SBAC Bank Ltd. is working for the country’s grower’s prosperity. At this aim various products
and services are going to be introduced soon.

2.9 OTHER SPECIAL SERVICES

SBAC Bank Ltd. believes on customer’s satisfaction. We are aiming to provide all types of
Technology Banking and for the higher satisfaction of customer we are bringing Call Centre,
Evening Banking service and Utility Services. We are continuously working for improving our
services and our goal is to reach the top on customer services.

2.9.1 Technology Banking:

SBAC Bank’s Banking Technology services that makes managing your finances a pleasure,
letting you fulfill most of your banking needs online. Currently they are using Flora bank one of
the top most core banking software and updated software in our country for providing superior
customer service and very soon they are going to launch the entire IT related banking product
such as Internet Banking, Mobile Banking, and SMS Banking for our customers.

2.9.2 Evening Banking:

SBAC Bank Ltd. offers premium retail banking services to individual customers with a large
variety of deposit and loan products. Our Consumer Banking business continuously meets the
challenges of developing new products and services to match the specific requirements of
customers. At SBAC Bank, we know your time is precious; and that’s why we are going to
opening Evening Banking & Saturday Banking facility for you. Evening Banking will be
available after regular banking hour. This service will attractive for those like shopkeepers who
accumulate cash as sales proceeds in the afternoon when counters of Bank Branches usually
remain closed. The service will available at selective branches of our Bank.

2.9.3 Remittance Service:

To facilitate sending money in Bangladeshi Taka directly, South Bangla Agriculture and
Commerce Bank Limited is going to take drawing arrangement with many banks/exchange
companies in different countries. The expatriate Bangladeshis may send their money in BDT
(Bangladeshi Taka) through the branches/subsidiaries of SBAC Bank Ltd. and foreign
banks/exchange companies.

2.9.4 Utility Service:

SBAC Bank Ltd. provides different utility services to our valuable customers through severa
services. These entities work under respective departments. The services include various utility
services. Each service works under its own legal and business frame work. And the customers
have to pay to government according to their bills. Respective entities are responsible for
providing services and billing of the customers.

2.9.5 Call Center:

Call Center is an important part of modern banking system. It is almost impossible to believe
modern banking without a Call Center. It’s an important part of modern ban king customer care
service. SBAC Bank Ltd. from the beginning understands the need of call center for its valuable
customers. Call Center operation is going to be online for our customers soon.

2.10 Corporate Social Responsibility (CSR):

The ethos of SBAC Bank for pursuing its activities in social arena has got further momentum
with our enthusiasm and support. SBAC Bank Foundation is consistently pursuing its objective
of being active in those social areas where it is needed most. The Foundation carries out diverse
social and philanthropic activities in the field of education, health, conservation of nature,
creation of social awareness, rehabilitation of distressed people and such other programs to
redress human sufferings. It also promotes different socio-cultural and sports activities. Your
Board of Directors in order to discharge its corporate social responsibilities in a greater
perspective continued its contribution large amount of Bank’s profit after charging loan loss
provision to SBAC Bank Foundation.
SBAC Bank Limited Foundation has adopted various programs to make fruitful the aims and
objectives:
 Donation
 Education
 Information Technology
 Disaster
 Environment

2.11 Vision
Their vision is to build poverty free, pollution free, healthy Green Bangladesh through
sustainable development by app location of latest information technology. They want to be the
leading Private Commercial Bank in terms of efficiency, capital adequacy, asset quality, sound
management and Profitability with strong liquidity. Their cherished dream is to establish
ourselves firmly at home and abroad as a front ranking Bank of the country.
The SBAC Bank also, aiming to play a leading role in the economic activities of the country, is
firmly engaged in the development of trade, commerce, agriculture and industry by investing in
network expansion and new technology adoption to have competitive advantage.

2.12 Mission
The mission of SBAC Bank Ltd. is to provide a customer friendly environment by service
excellence for all of corporate, agro based SME and retail segments by twisting agriculture,
industrialization, trade & commerce and mobilization of foreign investment together as to foster
emerging economy of green Bangladesh with the help of advanced Information Technology
through different compatible delivery channels.
2.13 Porter’s Five Forces:
The five forces model of analysis was developed by Michael Porter to analyze the competitive
environment in which a product or company works.

Porter’s five forces analysis is a framework that attempts to analyze the level of competition
within an industry and business strategy development. It draws upon industrial organization
economics to derive five forces that determine the competitive intensity and therefore
attractiveness of an Industry.

Figure 2: Porter’s Five Forces

2.13.1 Threat of New Entrants (Low):

Threat of new entrants refers to the possibility that the profits of established banks in the industry
may be eroded by new competitors. Threat from the competitors is very fierce in Banking
Industry. With so many new banks entering the market each year the threat of new entrants
should be extremely high. The services banks offer is more of homogenous which makes a bank
to offer the same service at a lower rate and eat their competitor’s market share. There are so
many banks and non-banking financial organization to fight for the same pie in the market.
However, due to the biggest barrier of entry for the banking industry which is trust, new banks
find it difficult to start up. Due to the nature of the industry people are more willing to place their
trust in big name, well known, major banks who they consider to be trust worthy. Ultimately the
barriers to entry are relatively low for the banking industry. So, beside that SBAC Bank Ltd also
has to be bound to perform in a way so that it can maintain its position in the market.

2.13.2 Bargaining Power of Suppliers:

In banking industries of Bangladesh suppliers of the Banks are depositors mainly. In the Banking
Industry of Bangladesh suppliers bargaining power is high. Whenever they want they can easily
switch to other banks if they get higher rate of return by depositing same amount of money.
Again, the suppliers of equipment’s like computer, cheque book, money counting machine,
photocopier, clearing machine, cheque checking machine, etc. are also the suppliers of banks.
Those suppliers also have so many options to supply their equipment’s but the suppliers are very
few in the market. So the banks as well as SBAC Bank are bound to go for a good understanding
with those suppliers for the sake of their business. In that case, suppliers bargaining power is
high.

2.13.3 Threat from Substitutes:

Some of the banking industry's largest threats of substitution are not from rival banks but from
non-financial competitors. There are substitute financial institutions that do many of the
activities and transactions of a bank in the leasing field Industrial Leasing and Development
Company Ltd. (IDLC), Industrial Promotion and Development Corporation (IPDC), United
Leasing Company are the key players. They provide industrial leasing to many companies in the
country. Vanik Bangladesh Ltd. (Lanka Bangla Finance Co.), a merchant bank, provides
investment counseling and credit services among its other financial activities. But some of the
operations of the banks like exporting/importing have no substitutes.

2.13.4 Bargaining Power of Buyers:

The bargaining power of the customer is much of a headache here because the rate of interest
barriers bank to bank. It depends on their profit. On the other hand customers have option to
switch to other bank if they get a little higher rate of return. Or they can invest their surplus in
the foreign banks, stock market, mutual fund, co-operative society or in the multilevel marketing
business. So the bargaining power of clients is also high.

2.13.5 Competitive Rivalry:

Recently Bangladesh Bank is going to permit the entry of total 11 new banks in the industry. In
the industry of shrinking economy like Bangladesh, starting a bank seems very easy. So, SBAC
Bank will have to compete with those new banks also. As a result, the threat from new
competitors is very high.

2.14 SWOT Analysis of SBAC Bank Ltd:

SWOT analysis is a tool that identifies the strengths, weaknesses, opportunities and threats of an
organization. The method of SWOT analysis is to take the information from an environmental
analysis and separate it into internal (strengths and weaknesses) and external issues
(opportunities and threats). Among them Strength & Opportunities are positive side for a
organization and Weakness & Threats are negative things.

Figure 3: SWOT Analysis of SBAC

Bank

Strength:
 Provide high-level customer service
 Strong Management Team
  Highest interest rate for FDR
 Product Diversity /Offering unique products in agriculture sector.
 Cut lowest service charge
 Using Flora software

Weakness:
 Limited ATM Booth
 Promotion
 New bank and new employees
 System is not well organized
 Lack of proper training
 Small number of Branches

Opportunities

 Country wide branches

 New Customers/market share
 From beginning using online banking
 Involve with the core economic activities like agricultural and related diversification
to ensure quality service.

Threats:
 Banking sector is highly competitive at present.
 Competitors product line
 Growth and profitability is very slow because of less different between interest
getting and giving.
2.15 Internal Factor Analysis Summary (IFAS):

IFAS: Weight Rating Weighted Comments

A. Internal Factors: Score

Strength:

1. Strong Management Team 25 5 125 Based on

powerful
management
skill

2. Product Diversity 25 4 100 Based on

different level
of customers
like agriculture
Weakness:

1. Limited ATM Booth 25 5 125 Less focus on

E-banking

2. Promotion 25 4 100 Lack of

marketing
activities

Table 6: Internal Factor Analysis

2.16 External Factors Analysis Summary (EFAS):

External Factor Weight Rating Weighted Comments

Analysis EFAS
Score

Opportunity:

1. Countrywide 25 5 125 Inauguration

branches
of new
branches.

2. New Customers 25 4 100 Increase

market share

Threats:

1. High competition. 25 5 125

2.Competitors 25 4 100 Product

Product
diversity by
Line/geographical
coverage other banks

Table 7: External Factor

Analysis
2.17 Strategic Factors Analysis Summary (SFAS)

Strategic Weight Rating Weighted Short Intermediary Long Comments

Factors Rating Term Strategy Term
Strategy Strategy

Strength

Strong 25 5 125  Followed by

Management powerful
Team management
skill
Product 25 4 100  Based on
Diversity different
level of
customers

Weakness

Limited 25 4 100  Less focus on

ATM Booth E-banking

Promotion 25 4 100  Lacking of

marketing
activities
Opportunities

Country wide 25 4 100  Focus on new

branches area

New 25 4 100  Increase

Customers market share
 Threat

High 25 5 125  Competitive

Competition market
Competitors 25 4 100  Product
Product Line diversity by
other banks

Table 8: Strategic Factors Analysis

Summary

2.18 TOWS Matrix

IFAS Strength(S) Weakness(W)

i. Strong Management i. Limited ATM
EFAS Team Booth
ii. Product Diversity ii. Promotion
Opportunity SO Strategies WO Strategies
i. Country wide 1) (S1,W1) 1) (W1,O1)
Branches As they have strong management By increasing ATM Booth in
ii. New Customers team so they can come up a decision different area SBACBL can
to increase more ATM Booth. spread their services which
2) (S2,W2) can boost the bank
As SBAC Bank ltd launched 2) (W2,O2)
different products for diversified By increasing promotional
people so they should increase their activities SBACBL can
promotional activities. capture new customers.
Threats ST Strategies WT Strategies
i. High 1) (S1,T1) 1) (W1,T1)
Competition By the powerful and efficient By increasing ATM Booth in
ii. Competitors management team the bank can different area SBAC Bank can
 Product Line survive in the high completion. survive in the high
2) (S2,T2) completion.
By their different types of product 2) (W2,T2)
they can attract more customers By increasing promotional
which will help to recover activities they can compete
competitor’s product. with competitor’s product
ine.

Table 9: TOWS Matrix

2.19 PEST Analysis of SBAC Bank:

PEST analysis is doing based on macro economy of a country or industry. PEST refers to
Political, Economical, Social and Technological factors of a country or industry. In below the
PEST analysis is applying for SBAC Bank Ltd.

Figure 3: PEST Analysis of SBAC

Bank
2.19.1 Political factors:
Generally a bank faces some political factors like tax policy, labor law, environmental law, trade
restriction, tariffs and political stability. SBAC bank also by fulfilling all criteria’s and agreeing
with all laws launched its journey in 28th April, 2013. So in case political factors here SBAC
bank is favorable, though have faced some problem due to political unstable situation in
Bangladesh.

2.19.2 Economical factors:

Economical factors are very important for any business. Strong economic condition can boost up
any business specially banking sector. Among economical factors some are highly related with
banking like central bank policy , monetary policy, FDI (foreign direct investment) policies,
GDP growth, inflation rate, saving and investment, interest rate etc. SBAC Bank is also facing
some problems as well as getting some benefits for over all economical condition of Bangladesh
at present.

2.19.3 Social factors:

Social factors of a country refer s to culture & tradition, life style, number of population, literacy
rate, religion, size of a country, major sector of economy etc. Now a day in Bangladesh most of
the banks are thinking for Shariah banking due to Muslim country. SABC bank also may be in
future they will think for Shariah banking. In Bangladesh agriculture is the main sector so SBAC
bank has main concern on agriculture sector.

2.19.4 Technological factors:

Technology plays a very important role in bank’s internal control mechanisms as well as services
offered by them. Through the technology new products and services are introduced. It include
technological aspects such as R&D (resource and development) activities, automation, online
banking, Automated Teller Machine (ATM) service, credit card service, mobile banking, 24x7
banking etc. Very beginning SBAC bank is more concern about technology. Therefore, they
have online banking; in one year life they have started ATM, and debit cards. Moreover they are
also planning credit card, mobile banking, evening banking very soon.

2.20 Three Years Financial Performance of (SBACBL) Year-(2013-

2015):
Year 2015 2014 2013
Million in BDT Million in BDT Million in BDT

Net profit 358.01 66.00 46.34

Total paid up 4.08 B 4.08 B 4.08 B

capital
Total asset 36,687.94 23,835.40 8,673.89

Total deposit 30,775.38 18,641.90 4,441.95

Total shareholder 4,880.21 4,242.1 4,137.70

equity

Earnings per share 0.88 0.16 0.11

Operating income 3881.22 1975.37 469.49

Operating Expense 3075.27 1656.95 330.33

Profit before tax 805.95 318.42 139.16

Total investment 4,670.23 4,130.67 13.06

Source: SBAC Bank Annual Report 2013-2015

Table 10: Financial Highlights (Figure in Millions)
2.20.1 Total Asset:

Total
4000 Asset 36687.
0
94
3000 23835.
0 4 Total
2000 8673.8 Asset
0 9
201320142015
1000
0
0

Figure 4: Total asset

Interpretation: According to balance sheet in 2013 total asset of SBAC Bank in an amount of
BDT 8673.89 million. In 2014 asset of SBAC Bank also increased to 23835.4. According to
balance sheet in 2015 it is reported that the total asset is BDT 36687.94 million and in 2014 total
asset was BDT 23835.4 million that is higher than 2014.

2.20.2 Total paid up capital:

Paid-up capital is the amount of money a company has received from shareholders in exchange
for shares of stock. Paid-up capital is only created when a company sells its shares on
the primary market directly to investors.

Paid up
5 4.0 Capital
4.0 4.0
4 8 8 8
3
2 Paid up
1 Capital
0
201320142015

Figure 5: Total paid up capital

Interpretation: In this graph we can see that paid up capital in 2013 to 2015 remain same 4.08
billion BDT.

2.20.3 Net profit:

Net
40 Profit 358.0
0
1
30
0 Net
10 Profit
20 46.3 6
0
0 4 6
0 201320142015

Figure 6: Net profit

Interpretation: In 2013 SBAC Bank net profit was BDT 46.34 in million. In 2014 the net profit
of SBAC Bank increased to an amount of BDT 66.00 in million. At the last year of 2015 the net
profit boosted up to an amount of BDT 358.01 in million. Here we are seeing that they increased
their net profit but how? SBAC bank increases its revenue by attracting more clients and
decreases its expenses.

2.20.4 Total Investment:

Total
500 Investment
0
400 4,670.23
0 4,130.67
Total
300 Investment
0
200 13.0
0 6
201320142015
100
0
0
Figure 7: Total Investment
Interpretation: In 2013 total investment of SBAC Bank is BDT 13.06 million. In 2014 the total
investment of SBAC Bank was increased to BDT 4130.67 million. In 2015 the investment also
increased to BDT 4670.23 million.

2.21 Ratio Analysis:

2.21.1 Liquidity Ratio:

Liquidity ratios measure a company’s ability to pay debt obligations. The liquidity of a firm is
measured by its ability to satisfy its short _term obligations as they come due. The liquidity ratio
is a computation that is used to measure a company's ability to pay its short-term debts.

2.21.1.1Current ratio: The current ratio is a widely used measure for evaluating a
company’s liquidity and short –term debt paying ability.

Formula: Current ratio: Current Asset/ Current Liability

Year 2013 2014 2015

Current 1% 1% 1%
Ratio(Times)
Table 11: Current Ratio
Source: Annual report of SBAC Bank (2013-2015)
Graphical Presentation:

Current
2 Ratio
% 1 1 1
1 % % %
%
Current
1 Ratio
%
0
% 201 201 201
3 4 5

Figure 8: Current Ratio

Interpretation: Current Ratio of SBAC bank measures its ability to pay short-term and long-
term obligations. The higher current ratio indicates a greater degree of liquidity. Banking
Industries generally maintain 1:1 current ratio. In 2013 to 2015 the current ratio maintains by
SBAC Bank is 1:1 which is a really good sign of a bank ratio.

2.21.2 Financial Leverage Ratio:

2.21.2.1 Debt Equity Ratio:

Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage, calculated by
dividing a company’s total liabilities by its stockholders' equity. The D/E ratio indicates how
much debt a company is using to finance its assets relative to the amount of value represented in
shareholders’ equity

Year 2013 2014 2015

Debt Equity Ratio 2.9 5.62 7.52

Table 12: Debt Equity Ratio

Source: Annual report of SBACBL (2013-2015)

Formula: Debt Equity Ratio= Total Debt/ Total Equity

Graphical Presentation

Debt
8 Equity 7.5
2
5.6
6
2
4
2.0 Debt
2 9 Equity

0
201 201 201
3 4 5
Figure 9: Debt Equity ratio
Interpretation: The debt-to-equity ratio is the relationship between the capital contributed by
creditors and the capital contributed by owners. It also shows the extent to which shareholders'
equity can fulfill a company's obligations to creditors in the event of liquidation. This means that
for every TK of SBAC Bank owned by the shareholders, owes SBAC Bank 7.52 tk to creditors.

2.21.3 Profitability Ratio

2.21.3.1 Return on Asset (ROA):
The return on assets (ROA) measures the overall effectiveness of management in generating
profits with its available assets. So it can be said that the formula of ROA is:
Formula: ROA = Net Income /Total Asset
Year 2013 2014 2015
Return on Asset (ROA) 0.53% 0.41% 1.18%

Table 13: Return on Asset (ROA)

Source: Annual report of SBACBL (2013-2015)
Graphical Presentation:

Return on
1.50 Asset 1.18%
%

1.00 0.53%
0.41%
%

0.50 2013 2014 2015

%
Return on 0.53% 0.41% 1.18%
Asset
0.00
%
Figure 10: Return on Asset

Interpretation: ROA of SBAC Bank tells what earnings were generated from invested capital
(assets). This histogram bar shows that in 2013 South Bangla Agriculture & Commerce Bank has
generated 0.53% of its income from its invested capital. But after that the ROA tends to
decrease. That means using its invested capital; it was not earned enough in 2014.But In 2015
SBAC bank boosted up its return on asset. So it can be said that SBAC Bank is effectively
converting the money into net income which it has invested.

2.21.3.2 Return on Equity (ROE):

Return on equity ratio measures the return earned on the common stockholder’s investment in
the firm .Generally the higher this return, the better off are the owners. ROE is compressed as a
percentage.

Formula: ROE= Net income/ shareholder equity*100

Year 2013 2014 2015
Return on Equity(ROE) 1.92% 1.58% 7.85%

Table 14: Return on Equity (ROE)

Source: Annual report of SBAC Bank (2013-2015)

Graphical Presentation:

Return on
10.00 Equity 7.85%
%
5.00
1.92% 1.58%
%
0.00 2013 2014 2015
%
Return on 1.92% 1.58% 7.85%
Equity

Figure 11: Return on Equity

Interpretation: Return on equity (ROE) is the amount of net income returned as a percentage of
shareholders equity. In easy word, ROE measures the profitability that with 1 TK of
shareholder’s equity how many Takas the company earns as profit. For 2015, ROE of SBAC
Bank is 7.85% which means SBAC Bank generates .0785 TK of profit for every 1.00TK of
shareholder’s equity which is comparatively high against the previous years.
2.21.3.3 Return on Investment (ROI):
A performance measure used to evaluate the efficiency of an investment or to compare the
efficiency of a number of different investments. ROI measures the amount of return on an
investment relative to the investment’s cost. To calculate ROI, the benefit (or return) of an
investment is divided by the cost of the investment, and the result is expressed as a percentage or
a ratio.

Formula:

Year 2013 2014 2015

Return on Investment (ROI) 9.43% 11.50% 17.57%

Table 15: Return on Investment (ROI)

Source: Annual report of SBAC Bank (2013-2015)

Graphical Presentation:

Return on Investment
(ROI): 17.57
%
15.00
20.00% 11.50%
% 9.43%

10.00
%
2013 2014 2015
5.00%
Return on Investment 9.43% 11.50% 17.57%
(ROI): 0.00%

Figure 12: Return on Investment (ROI)

Part Three Topic Part
3.1 Credit
Generally terms Credit means a contractual agreement in which a borrower receives something
of value now and agrees to rep ay the lender at some date in the future, basically with interest.
The term also refers to the borrowing capacity of an individual or company.
Another way we can say that, the amount of money available to be borrowed by an individual or
a company is referred to as credit because it must be paid back to the lender at some point in the
future.

Now days this is much known in case of banking activities and in every bank there is a
department named Credit Department they manage the credit activities. I have mentioned before
providing loan is the only way to make profit for a bank therefore, credit department is a most
important department for a bank.

In formulating a credit judgment and making quality Credit Decisions, the lending officer must
be equipped with all information needed to evaluate a borrower’s character, transaction habit,
Management competence and capacity, capital, ability to provide collaterals and external
conditions which may affect his ability in meeting financial obligations.

Loan Type

Funded
Loan

Loan Type

Non-funded
loan
Funded Loan

 Corporate
 SM E and retail
 Personal
 Women Entrepreneur
 Term Loan

Non-funded Loan

 Letter of Credit
 Guarantee
 CC Loan

Though SBAC Bank Ltd. is a very new so, they are not well organized yet with their different
loan categorizes but they are providing different types of loans directly conducting with their
customers at own place, these are not published in their website yet. But very soon all types of
loan’s information will be available in details in their website.

3.2 Procedure of loan distribution

First Credit department personnel’s collect all information of clients like organization’s back
ground, their payment trends, transaction behavior, total loan amount, running loan amount,
assumption future condition etc. The primary factor determining the quality of the bank’s credit
portfolio is the ability of each borrower to honor, on a timely made to the bank. The authorizing
credit personnel prior to credit approval must accurately determine this. If the report of the
project appraisal is very satisfactory to approve the loan proposal, than the following steps
furnish the approval procedure and send proposal to the Head office for further consideration.

3.2.1 Steps SBAC Banks follows:

 Make a proposal by the client to the bank

 Give all the necessary documents
 Bank will send the parties statement to the Bangladesh Bank, their CIB (Credit
Information Bureau) will inquiry that whether this party is defaulter or a new one.
 Bank will take the collateral from the party and analysis that how much it will cover the
 total loans.
 Bank will send this proposal to the head office. In the head office the Board of Directors
and Managing Director will approve the loan.
 Head office will send the approval to the branch office.
 Branch office will give the sanction letter to the party.
 Bank will take the security and make it in their favor.

3.2.2 Disbursement:
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
money will transfer to the account interest will count from that time. That’s how a loan approved
by SBAC Bank.

3.3 Credit Risk:

Credit risk is the possibility that a borrower or a counter party will fail to meet its obligation in
accordance with agreed terms. Credit risk arises from the bank’s dealing with or lending to
corporate, individuals and other banks or financial institutions. Credit risk is an investor’s risk of
loss arising from a borrower who does not make payments as promised. Such an event is called a
default. Another term for credit risk is default risk.

3.4 Credit Risk Management:

Credit Risk Management The goal of credit risk management is to maximize a bank’s risk
adjusted rate of return by maintaining credit risk exposure within acceptable parameters. Bank
need to manage the credit risk exposure inherent in the entire portfolio as well as the risk in
individual credit or transactions. Bank should consider the relationship between credit risk and
other risk. The effective management of credit risk is a critical component of a comprehensive
approach to risk management and essential to the long term success of any banking organization.
Assessing credit risk an institution must consider three issues:
  Default Probability
 Credit Exposure
 Recovery Rate

3.5 Principal of credit Risk management

The management of credit risk is essential to a sound credit management process, the basic
principles a bank has to follow in its credit risk management are:

 Background,
 Character and ability of the borrowers
 Purpose of the facility
 Term of facility
 Safety and Security
 Profitability
 Source of repayment
 Diversity of loan portfolio

3.6 Tools used in Credit Risk Management

The quality of the credit portfolio of banks depends to large extent on the quality of its borrower.
To judge the quality of a borrower the bank s takes into consideration the following:

a) Character: It refers to the willingness of the customers to pay.

b) Capacity: The customer’s ability to meet credit obligations.
c) Capital: The customer’s financial reserves
d) Collateral: Adequate net worth to support for the loan
e) Conditions (economic) recent trends in borrower line of credit
f) Compliance (law & regulations)

3.7 Credit Risk management authority in SBAC Bank:

There is one important department in SBAC Bank that works for credit risk management for the
bank. This department is Risk Management Department (RMD).

Risk Management Committee of SBACBL

Chairman
Engr.Md. Moklesur Rahman

Secretary
Mr.Md. Mokaddess ali

Member Mr. Abu Zafar Member

Mohammod Shofiuddin Mr. Anwar Hussain

Figure 13: Risk Management Committee of

SBACBL

3.8 Risk Management Department (RMD):

RMD deals with credit risk grading, credit risk assessment. These departments basically
collects information from all the branches, then analyze the information, then grade different
type of loan and different industries, and finally make a portfolio regarding whether to invest
capital.

3.9 Credit risk management process:

 Credit risk grading

 Credit Information Bureau (CIB) Analysis
 Mortgage
 Field Visit or Physical Observations of Organization
 Financial Spread Sheet (FSS) Analysis
3.9.1 Credit risk grading:
Credit risk grading is an important tool for credit risk management as it helps the Banks &
financial institutions to understand various dimensions of risk involved in different credit
transactions. It is the technique of Bangladesh Bank (central bank) so it is same for all banks.
The aggregation of such grading across the borrowers, activities and the lines of business can
provide better assessment of the quality of credit portfolio of a bank or a branch. The credit risk
grading system is vital to take decisions both at the pre- sanction stage as well as post-sanction
stage.
At the pre-sanction stage, credit grading helps the sanctioning authority to decide whether to lend
or not to lend, what should be the loan price, what should be the extent of exposure what should
be the appropriate credit facility, what are the various facilities, what are the various risk
mitigation tools to put a cap on the risk level.

Therefore, credit risk grading is most important tool to consider before and after loan stages. In
the below I have mention how it works.

a. Functions of Credit Grading:

Well-managed credit risk grading systems promote bank safety and soundness by facilitating
informed decision-making. Grading systems measure credit risk and differentiate individual
credits and groups of credits by the risk they pose. This allows bank management and examiners
to monitor changes and trends in risk levels. The process also allows bank management to
manage risk to optimize returns. Here all activities based on the risk score.

2. Use of Credit Risk Grading:

 It is policy structure applying by the Bangladesh Bank so it is same for all banks and
financial institutions.
 By CRG borrower is rated with the risk level and the other decisions would be related to
pricing & specific features of the credit policies. These would largely constitute obligor
level analysis.
  Risk grading would also be relevant for surveillance and monitoring, internal MIS and
assessing the aggregate risk profile of a Bank. It is also relevant for portfolio level
analysis.

3. Number and Short name off Used in the CRG:

For scoring the risk there are different status and different numbers by adding final score come
up.

 The proposed CRG scale consists of 8 categories with Short names and Numbers are
provided as follows:

Grading Short Name Number

Superior SUP 1
Good GD 2
Acceptable ACCPT 3
Marginal/Watch list MG/Wl 4
Special Mention SM 5
Sub standard SS 6
Doubtful DF 7
Bad & Loss BL 8

Table 16: Short name of

CRG

4. Credit Information Bureau (CIB) Analysis:

CIB report is a document of an individual, which contains the repayment history of liability. The
CIB is generated from central bank of Bangladesh which is Bangladesh Bank. In the previous
time, the CIB was generated manually which took about 15 to 20 days but now a days, it is
generated through online from the server of Central Bank which takes just a few seconds.
Therefore, CIB report is one of the most important analytical terms that help the sanctioning
authority to decide whether to lend or not to lend. In the below explained in detail.
5. Mandatory Information required for generating CIB:

 Applicant Name
 Parent’s Name
 Applied Amount
 Date of birth (DOB)
 District of birth
 National Id/Passport/Driving License number.
 Permanent Address

I have spent the last one month of my internship obtaining CIB reports of various clients who
have submitted an application for loans to the principal branch.

6. How works CIB:

CIB reports are confidential documents and clients are not supposed to have access to it. Within
two or three days the Bangladesh bank gives the feedback that this person already have default
loan or not. The banks from which the client has taken loans and advances are not mentioned but
the amounts due, defaults on loans, amounts outstanding on each loan are shown separately.

If the clients have not paid installments and have exceeded the time or amount limit, the loan’s
status is marked as below shown.

Loan Classification Status is as follows:

 UC (unclassified): regular payment status
 SMA (Special Mentioned Account): 2 to 6 months unpaid
 SS (Sub-Standard): 6 to 9 month unpaid
 DF (doubtful): 9 to 12 month unpaid
 BL (Bad and Loss): 12month or more unpaid
 BLW (Bad and Loss Written-off): Totally unpaid

If borrowers have classified account SS, DF, BL, BLW are treated as defaulters and bank not
going to give any loan to that client.
3.9.2 Mortgage:
SBAC Bank Also takes mortgage against loan and they count the value of that property only 50
percent because of if the loan interest increasing and on other side loan holder are not clearing
the due so that they can sell that property for their capital back up. SBAC Bank follows this rules
taking mortgage mostly against industrial loan.
 By taking mortgage SBAC Bank CRM authority reduce the credit risk.
 This system safety level is 80% above.

3.9.3 Field Visit or Physical Observations of Organization:

Physical observation is one of the most important parts of the analysis regarding loan. It is reflect
the present condition of the organization, show type of business, present assets available, areas of
business, whether the business has enough cash flow to meet the installments of the loan or not
etc.
The things to assess in a regular field visit:

 Assessment of the Sales Register of the applicant’s business.

 A stock report of the applicant’s business.
 Assessment and valuation of fixed assets which could be held collateral for the loan.

Assessment whether the business has enough cash flow to meet the installments of the loan.

3.9.4 Financial Spread Sheet (FSS) Analysis:

Basically, a bank using the financial spread sheet of a client they apply in different ratios to
check the financial condition, company’s growth rate, asset availability, profitability, payment
ability, cash or liquidity etc. By these ways SBAC Bank Ltd. analyzes the worthiness of their
clients to make the loans more secure and to minimize the risk level.
3.9.5 Other basic criteria’s for managing credit risk:
South Bangla Agriculture & Commerce Bank Ltd. judge their loan proposals according to
different criteria’s to make the loan more secured and to reduced their risk level. These are the
very basic things and mandatory for every bank to analyze before critical judgments. This how
SBAC Bank primary decide good or bad loan among their proposals. In the bellow some criteria
has been explained.

 Conditions: Understanding the present business and economic conditions. Try to

understand what will Change after the loan is made?
 Transaction Character: Make sure that the individual or company you are leading has
good financial transaction statues.
 Invested Capital: Need to know that, the individual or company you are leading to have
an appropriate level of investment in that company. Capital information should be more
specific and clearer.
 Repayment Capacity: Make sure that the individual or company you are leading to have
the capacity of repaying your loan.
 Collateral: Consider the collateral or “Second way out” of a credit with a good contract
with proper and valuable property.
 Proper Documents: Remember that documentation, follow up and consistent monitoring
Are essential to high quality loan portfolio.
 Communication: They Share credit objectives, credit decision making both vertically and
laterally within the bank’s related departments.
 Measuring Risk Level: Need to assume risk level as perfect as possible, particularly the
downside Possibilities and that the structure and price the loan consistently with that
understanding.
3.10 Whole Process of secured loan:
Application for loan Proposal

Credit Team scrutinizes the application &

necessary documents

No

Application
meets
basic Application is declined
criteria returned to customer

Security analysis and site visit

Credit officer recommends for loan and

sends
for credit approval
Application is sent back to
source
Documents
in
order

Completed proper Documentation

Application is sent back to

source
Credit
approva
Yes l No

Disbursement of loan

Figure 14: Whole Process of secured loan Source: A.M. Tamim

Ahmed .2014
Part Four Actual Task Part
4.1 Introduction:

I joined at South Bangla Agriculture & Commerce Bank Limited on 1st February, 2017 as an
intern which is situated at Uttara. In the period of my internship program, I got some duties in
South Bangla Agriculture & Commerce Bank Limited, Uttara Branch. As an intern my job
responsibilities was different than other job holder.

During my three month internship my responsibility was in different departments. That was a
great opportunity for me. On that time I mainly worked in Customer Service Department and
observed the banking rules and regulations (General banking department). Under general
banking there are three sections one is account opening (front desk also providing information to
the clients), second one is cash section and third one is cheque clearance section. I got chance to
work in one section under general banking. Besides that I also worked in credit department. I had
learned many primary things which were very new and necessary for me. The working
environment of SBAC bank was really nice. So it was a great experience for me to have chance
to work in different departments.
4.2 Management Structure of SBAC Bank Ltd Uttara Branch:

VP & Head of Branch

AVP & Operation Manager

Credit Foreign exchange

General Banking

Executive Officer Executive Officer Executive Officer

Senior Officer Senior Officer Senior Officer

Assistant Officer Assistant Officer Assistant Officer

Figure 15: Management Structure of SBAC

Bank Ltd
4.3 Learning outcome:
I have learnt so many things throughout my internship period. In South Bangla Agriculture &
Commerce Bank Limited, where I learned how to behave, maintain time, corporate culture, and
so on by working. Although all the Officers are busy with their work but besides their business I
learn from them lots of work which are given in below:
4.3.1 Primary Learning:
 Organizational Culture
 How to Behave with Clients
 How to Behave with Clients in a Challenging Situation
 Time Management
 How to Behave with Employees

4.3.2 Secondary Learning:

As an internee in the SBAC Bank Ltd (Uttara Branch) there are a number of activities in which I
was involved practically. The activities are given below:

4.5 General Banking Section:

There were several responsibilities carried out by me in general banking division of South
Bangla Agriculture & Commerce Bank Limited (Uttara Branch). Every day I used to start
my job at 10.00 am and ended at 04:00 pm. Within this time different types of jobs were done by
me and those are given below:

1. Accounts Opening:
Every day different type of people came to open their account. It’s the first stapes to be a
customer and also for making relationship, who is going to enjoying different services from the
bank. Before opening of any account it is very important to know the target customers of the
bank. I tasked them what types of account they want to open and did they brings all the
documents for opening new account. Based on their desire I provided that’s paper for opening
new account. Most of them open individual account, and little number of customers came for
partner, proprietorship, joins stock companies. I also asked them to know why the customer
wants to open account at this branch. Customer opens these sorts of account:
 Current Account
 Savings Account
 Fixed Term Deposit(FDR)
 Short Term Deposit (STD/DPS)
  Monthly Saving Scheme (MSS).

For opening one new Account I did these things. That was listed below:
 Fill up current accounts from
 Checking all required documents
 Make transaction portfolio
 Provide cheque books
 Provide voucher books
 Provide internet banking form and help to fill it up
 Scan signature card and photograph
 Fill up Scheduled Bank Statistics (SBS) and KYC form for each customer

b. Closing Accounts:
When the customers want or over the maturity of the account they wants to close their account at
that time I helped to closed accounts to the responsible officer who was sited besides me.

c. Card Issue:
VISA and debit card issue is a process for the customer who wants to have a new debit card for
the first time or who lost his or her card and want to have another. I help to issued debit card for
different customers.

n. Cheque Book Requisition:

Saving and current account holders need cheque book. Because those account holders deposit
and withdraw their money frequently. Without cheque book they cannot withdraw their money.
So, realistically those account holders need cheque book for their transaction, business and
personal purpose. When they opened their account there was a separate form for cheque book
requisition. I fill out those forms for their account activation.

o. Cheque Delivery:
After giving cheque requisition customers need to wait for their cheque book. After cheque
requisition normally it takes 5 working days to delivery cheque book to respective customers.
After that customers need to collect their cheque book from the branch. I delivered the cheque to
the clients’ different times.
p. Cheque Issue:
When customers came to the bank for collecting their cheque book, they need to sign it in a
register book. After that I help the authorized officer to issued their cheque book and gave it to
them. After issuing cheque book they can use their cheque book at any time when they wish. But
it has to be in between transaction hour, which is 10:00 am to 4:00 pm.

q. Inward Procedure:
Inward it’s a registry book. Banks got so important document by email and for this reason they
need to entry all the data in one book that’s called inward book which comes from outside and
business purpose. All the email or paper I entries last 2 month 10 days.

r. Outward Procedure:
Outward also a registry book before sending any email any document to another party or bank at
first bank keep the records their outward book. Last 2 month 10 days I did this job. This is
process like giving one code or serial no on the top of the paper if any kinds of mistake happen
so that they can find out easily or making their service secured.

4.5.1 Critical observation and recommendation:

During, my internship time period I found there are some weakness in the accounting opening
section though SBAC Bank is new bank so their main target is hunting more customer therefore
they open account without fulfilling all requirements and documents. Therefore their pending
and dummy account is rising day by day.
 They use photo copy before original form so it is time consuming.
 Lots of dummy and incomplete account form
 As information desk there have to have more expert employees for better customer
service because there was one offices rest of them were trainee officer (TO)
4.6 Credit Department:
In credit department I learned how they work, how credit department runs their activity. In credit
department my responsibility was making/filliping CIB from.
A brief summary of how the credit division of SBAC bank works:

 Client comes for loan

 Client provides application for loan
 Client provides all the documents including financial statements
 Officers go on field visit for verification
 CIB (Credit information bureau) reports are taken from the Bangladesh Bank for farther
Analysis.
 A proposal is created which includes CRG (Credit Risk Grading), CIB and financial
statements analysis.
 The head office approves the loan

 A disbursement of the loan is created and the banking software is updated crediting the
loan amount in the loan/savings account

Besides working in GB section I also worked in credit Department. Mainly in credit department
my job was making credit information bureau (CIB) from. Basically if anyone wants to take loan
from bank at that time bank have to submit or for survey they makes one cib from and they sends
it the Head office, they send it to Bangladesh Bank. Bangladesh bank cheek this person have any
bad loan or not and they send to the branch by head office. By this process banks reduce their
credit risk. For making CIB form I collected the loan holder’s current account from for finding
the information. I collected the account holder’s national ID card, trade license, Tex
identification number. After collecting the entire document and filliping the CIB from in
Computer I print that documents and takes the responsible officers sign documents below and
register in Outward book after that the main copy goes to head office by courier and the
photocopy remains in bank for further steps.
The request for CIB report comes from:
  Banks and financial institutions.
 Central bank
 Government of Bangladesh.
The credit information bureau is committed to give CIB report on request within 72 hours of
receiving the request. The report is given to the users free of cost. Under existing laws CIB
report has been made mandatory for the lending banks/financial institutions before extending
lending or rescheduling facilities of any amount to any borrower.

4.6.1 Critical observation and recommendation:

In the credit department I have found there is lots of work pressure for preparing loans proposal.
There most worth thing was for me this department is more confidential so there are do not have
much work for me as intern. So in this case I have to collect my required information by asking
to officers of credit department and I also did some task what gave my supervisor to me. I have
found some good and bad things in this department.

 In CIB report total loan amount of client is given but here we did add up all
amount in excel sheet and I think it is time consuming.
 Disbursement time is around 1 month so it is really a huge time for a person which
creates customer dissatisfaction.

Working moment in SBAC Bank Ltd.

 Part Five
Research Part
 Survey Research on

“A Critical Analysis of Credit Risk Management of South Bangla Agriculture & Commerce
Bank limited”

5.1 Problem Statement:

Credit risk management is the most important part/management procedure of a bank. Success of
a bank mostly depends on bank, how good bank credit risk management is. As south Bangla
Agriculture & Commerce Bank Limited is a new bank so in order to succeed SBAC Bank Ltd
should have very good credit risk management. Therefore, I want to cheek that SBAC Bank Ltd
has sound credit risk management comparing to its competitor.

5.2 Project Timeline:

My internship period was 90 days. Before submitting my internship report I worked only 70 days
because of I got internship 1 month later. I have divided the whole internship period into several
phases. At the last 30 days I have conducted my research. And the research activities sequence
was in the following:

Graphically representation of my project work:

Task Feb Feb Feb Mar Mar Mar Apr
1-10 11-20 21-28 1-10 11-20 21-31 1-10
Gathered 26 Days
Information
Questionnaire
20 ays
Development
d
Survey and
19 days
Personal
Interview
Data Analysis 18 days
Report 40 ays
Preparation d
Error
Checking and 15 days
Submission

Table 17: Graphically representation of my

5.3 Budget Information:
For doing my survey I have some expenditure. There I had needed to print some paper for
tabling the questionnaire to the employee. I have some expenses for travelling our office, taking
the online help. I have needed to take the online help for that I have paid internet bill, I have
some mobile bill, printing, binding and also some others expenses. All the expenses are shown
below in the table.

Name Tk
Transportation cost 5000
Questionnaires 400
Internet 1200
Printing and binding of Report 1550
Others 300
Total 8450

Table 18: Budget and

Costing

5.4 Research Methodology:

Methodology is the most important component in any study proposal since it explains the
procedures and methods through which a particular study will be carried out. This includes
discussion on data requirements, sample selection, data analysis, limitations etc.
The study requires a systematic procedure from selection of the topic to preparation of the final
report. It is very difficult to collect relevant data from a person other than the regular employees
of the bank. The overall process of methodology has been given as below.
 The planned methodology is given below –

5.4.1 Research Philosophy:

Research philosophy is based on employees and loan holders of South bangle Agriculture &
Commerce Bank Limited. I was totally unbiased but I have tried try my level best to take their
opinion for fulfill my research so that credit risk management procedure of South bangle
Agriculture & Commerce Bank Limited can be developed. I followed realism for this research.

5.4.2 Research Approach:

For my research purpose I have used Quantitative (Survey) Research Approach to conduct my
primary research by questionnaire survey.

5.4.3 Types of Research:

 Exploratory

5.4.4 Method of Data Collection:

Information collected to furnish this report is both Primary and Secondary Sources.

a. Primary Data:
 Questionnaire: Some primary data are collected by taking interview and by discussion
with the executives and officer of SBAC Bank Ltd.
 Observation: Here primary data are collected through spending two month 10 days in the
SBAC Bank Ltd during the working hour. Here I observed the total banking process of
SBAC Bank.
b. Secondary Data:
 Website of South Bangla Agriculture & Commerce Bank Limited.
 Annual report of SBAC Bank Ltd (2013-2015)
 Hand note provided by the SBAC Bank Ltd.
 Internet

5.4.5 Population and Sampling Methods:

a. Population:
All employees of South bangle Agriculture & Commerce Bank Ltd Uttara Branch and my target
population were 350 loan holders/customer along with employee of SBAC bank Ltd.
b. Sampling Plan:
 Sample Unit:
Loan holders and Employees of the South bangle Agriculture & Commerce Bank
Limited.

 Sample Frame:
Sample frame of this study consists some of the loan holders in 2016/2017, and employee
of South bangle Agriculture & Commerce Bank Limited.

 Sample size:
 35 Clients and employees
 Sampling Procedure:
Simple Random Sampling

5.4.6 Research survey:

 Questionnaire Survey: See the appendix part for the survey questionnaires.

5.5 Research limitations:

During groundwork of this report some obstacles have come across, which can be termed as the
limitation of the project, these reasons did not allow this repot to go in depth of issues hence
several parts of the report is not concentrated. Therefore the limitations that were faced:

 Shortness of time.
 Their website’s information is not updated.
 The branch office is not providing the financial information.
 As this is my first report about Bank so I had to face some difficulties to preparing the
report.
 Most of new employees are not that much sure what information was providing to me.
5.6 Data Analysis:
 Result Findings: MS Excel
For analysis of data Microsoft Word, Microsoft Excel, different tables and graphs were used to
make the data meaningful.
 Hypotheses Test: Z test
Hypotheses were testing to derive a meaningful conclusion from the empirical data. In addition,
basic statistical techniques of different measures of central tendency have been used for
analyzing the data. As my sample size is more than 35, I have used Z test for the study. The
following formula has been followed:

X
Z test =
/ n
µ = mean value
n = sample size
σ = Standard deviation

X = Average
Based on my analyzed, I made findings, recommendations, and conclusion.

5.6.1 Hypothesis Scale

In order to analysis the data a 5 point Liker scale has been used. 1 stands for strongly disagreed
employee and clients , 2 stands for only disagreed employee and clients, 3 stands for the neither
agree nor disagreed employee and clients, 4 stands for agreed employee and clients, and 5stands
for strongly agreed employee and clients.
The scale has been shown below:
Employee/Loan holders Opinion Weighted
Strongly Disagree 1
Disagree 2
Neither Agree nor Disagree 3
Agree 4
Strongly Agree 5

Table 19: Hypothesis scale

5.6.2 Hypothesis Development:

With a view of fulfilling the objective some relevant hypothesis have been developed for this
study:
1. H1: SBAC Bank judges the loan holder before granting any credit.
2. H2: Guidelines of Bangladesh Bank are maintained in credit risk management.
3. H3: The Credit risk department has enough knowledge on risk management.
4. H4: CRM department give loan by fulfilling proper documents.
5. H5: SBAC Bank have customer oriented own credit risk management strategy.
6. H6: The CRM department employees of SBAC Bank are getting enough support from
SBAC bank authority.

5.6.3 Hypothesis Tasting:

Respondent H1 H2 H3 H4 H5 H6
1. Strongly 6 5 8 16 4 12
disagree
2. Disagree 2 4 6 10 7 8
3. Neither agree 7 6 5 6 8 4
nor disagree
4. Agree 9 8 9 2 8 6
5. Strongly 11 12 7 1 8 5
Agree
Total 122 123 106 67 114 78
Average 3.48 3.51 3.02 1.91 3.25 2.22
Variance 2.02 2.02 2.14 1.10 1.73 2.23
Standard 1.42 1.42 1.46 1.05 1.31 1.49
Deviation
Z-test value 4.08 4.02 2.08 -3.33 3.40 -1.12

Table20: Hypothesis
Tasting
Hypothesis #1

Ho: SBAC Bank doesn’t judges the loan holder before granting any credit.
HA: SBAC Bank judges the loan holder before granting any credit.

Ho: μ =2.5
HA: μ ≠2.5
n = 35
= 3.48
Standard Deviation σ = 1.42
Z cal= ( -μ)/ (σ/√n) =
4.08
At the 5% significant level, the value of Z in Z- distribution table is Z. 05=1.645. Since Z cal> Z
tab, null hypothesis is not accepted. So at 5 % significant level, I can say that, SBAC Bank
judges the loan holder before granting any credit.

16
H
32
% 1
% 5 Strongly disagree
%
Disagree
19
% Neither agree nor

27 disagree Agree
% Strongly Agree

Figure 15: Hypothesis

#1
Hypothesis # 2

Ho: Guidelines of Bangladesh Bank are not maintained in credit risk management.
HA: Guidelines of Bangladesh Bank are maintained in credit risk management.

Ho: μ =2.5
HA: μ ≠2.5
n = 35
= 3.51
Standard Deviation σ = 1.42
Z cal= ( -μ)/ (σ/√n) =
4.02
At the 5% significant level, the value of Z in Z- distribution table is Z. 05=1.645. Since Z cal> Z
tab, null hypothesis is not accepted. So at 5 % significant level, I can say that, Guidelines of
Bangladesh Bank are maintained in credit risk management in South Bangla Agriculture &
Commerce Bank Limited.

13
%
H
36 11
2 Strongly
% % disagree
Disagree
16 Neither agree nor
% disagree
Agree
24
% Strongly Agree
Figure 16: Hypothesis #2

Hypothesis # 3

Ho: The Credit risk department has not enough knowledge on risk management.
HA: The Credit risk department has enough knowledge on risk management.

Ho: μ =2.5
HA: μ ≠2.5
n = 35
= 3.02
Standard Deviation σ = 1.46
Z cal= ( -μ)/ (σ/√n) =
2.08
At the 5% significant level, the value of Z in Z- distribution table is Z. 05=1.645. Since Z cal>Z
tab, null hypothesis is not accepted. So at 5 % significant level, I can say that, Guidelines of
Bangladesh Bank are maintained in credit risk management in South Bangla Agriculture &
Commerce Bank Limited.
 20 23
H
% % 3 Strongly
disagree
Disagree
Neither agree nor
26 17 disagree
% %
Agree
14 Strongly
% Agree

Figure 17: Hypothesis

#3

Hypothesis # 4

Ho: CRM department give loan by without fulfilling proper documents.

HA: CRM department give loan by fulfilling proper documents.

Ho: μ =2.5
HA: μ ≠2.5
n = 35
= 1.91
Standard Deviation σ = 1.05
Z cal= ( -μ)/ (σ/√n) = -3.33
At the 5% significant level, the value of Z in Z- distribution table is Z. 05=1.645. Since Z cal< Z
tab, null hypothesis is accepted. So at 5 % significant level, I can say that, CRM department give
loan without fulfilling proper documents of South Bangla Agriculture & Commerce Bank
Limited.

6%
3%
H Strongly disagree
17
46
4 Disagree
%
% Neither agree nor
disagree Agree
Strongly Agree
29
%
Figure 18: Hypothesis #4
Hypothesis # 5

Ho: SBAC Bank have not customer oriented own credit risk management strategy.
HA: SBAC Bank have customer oriented own credit risk management strategy.
Ho: μ =2.5
HA: μ ≠2.5
n = 35
= 3.25
Standard Deviation σ = 1.31
Z cal= ( -μ)/ (σ/√n) =
3.40

At the 5% significant level, the value of Z in Z- distribution table is Z. 05=1.645. Since Z cal> Z
tab, null hypothesis is not accepted. So at 5 % significant level, I can say that, SBAC Bank have
customer oriented own credit risk management strategy.

24
13
%
H
% 5 Strongly disagree
18
% Disagree

Neither agree nor

24
% disagree Agree
21 Strongly Agree
%

Figure 19: Hypothesis

#5
Hypothesis # 6

Ho: The CRM department employees of SBAC Bank are not getting enough support from
SBAC bank authority.
HA: The CRM department employees of SBAC Bank are getting enough support from SBAC
bank authority.
Ho: μ =2.5
HA: μ ≠2.5
n = 35
= 2.22

Standard Deviation σ = 1.49

Z cal= ( -μ)/ (σ/√n) = -1.12
At the 5% significant level, the value of Z in Z- distribution table is Z. 05=1.645. Since Z cal< Z
tab, null hypothesis is accepted. So at 5 % significant level, I can say that, The CRM department
employees of SBAC Bank are not getting enough support from SBAC bank authority.

14 H Strongly
%
34 6 disagree
Disagre
%
17 e
% Neither agree nor
disagree

11 Agree
% Strongly
23
% Agree

Figure 20: Hypothesis #6

5.7 Analysis: Comparison of credit risk management between two banks:
Banks gives first priority in credit section and also in credit risk management for this reason they
flow mostly same procedure what Bangladesh bank suggested to the entire bank in Bangladesh
for credit risk management and minimizing risk. Besides this bank follow some own policy for
credit risk management. Here I compared the credit risk management policy of South Bangla
Agriculture & Commerce Bank Ltd and Standard Chartered Bank Ltd.

5.7.1 Document Fulfilling:

Standard chartered bank takes the entire document before making loan and its makes their credit
secured. Without proper documentation all loan will be risky and it’s also increase risk level.
Survey results goes left sides that SBAC bank has lacking they are not fulfilling documents
before making any loan that’s increasing their risk and its making a long difference between two
bank in their credit risk management part also its effecting on their profit.

5.7.2 Through insurance:

Standard chartered bank following this for making more secured their loan and for reducing their
credit risk also .Insurance is added with each of the credit. The insurance premium is paid by the
borrower with his/her EMI (equated monthly installment). So if any borrower defaults or die
before closing of the loan the insurance company will provide loss to the bank. Otherwise the
total insurance amount will be kept by the insurance company. So Standard Chartered bank in
positive side in credit risks management procedure rather than SBAC bank.

5.7.3 Through PDC (Post Dated Cheque):

For credit risk management Standard chartered Bank follow PDC. Before the disbursement of
the loan, cheques /PDC of borrower’s maintained bank according to the number of equated
monthly installment (EMI) is collected from the borrower. As a result the borrower doesn’t need
to pay EMI to the bank. The bank collects the borrower’s EMI through PDC.
5.7.4 Training:

Training/seminar is the most important part for making/doing one things without doubt. Standard
Chartered bank makes every year training program for providing proper knowledge about credit
risk management and this makes strong in the competition market. Survey result said that SBAC
bank employee facing another lacking they are not getting enough support from higher authority
so they are backward part in credit risk management process and it’s another difference between
two bank.
 5.8 Findings

After interpretation the result, it is found that credit risk managing carefully by the SBAC Bank
Ltd. There are some difficulties in the process. After deeply analyzing the responses, it can be
mentioned that:
 Maximum 32% respondents are strongly agreed with the statement “SBAC Bank
judges the loan holder before granting any credit”. (Hipothesis-1)
 Maximum 36% respondents are strongly agreed with the statement “Guidelines of
Bangladesh Bank are maintained in credit risk management”. (Hipothesis-2)
 Maximum 26% respondents are agreed with the statement “The Credit risk department
has enough knowledge on risk management”. (Hipothesis-3)
 Maximum 46% respondents are strongly disagreed with the statement “CRM
department give loan by without fulfilling proper documents”.( Hipothesis-4)
 Maximum 24% respondents are in both strongly agreed and agree with the statement
“SBAC Bank have customer oriented own credit risk management strategy”.
(Hipothesis-5)
 Maximum 34% respondents are strongly disagreed with the statement “The CRM
department employees of SBAC Bank are not getting enough support from SBAC bank
authority”. (Hipothesis-6)

After making survey and comparing SBAC Bank credit risk management with Standard
Chartered bank I found some positive and negative side in:

 SBAC Bank has a positive growth rate in entire side.

 SBAC Bank has sound credit risk management ignoring one or two sides.
 The loan documentation is not fairly done by the SBAC Bank.
 SBAC bank are not giving training/making seminar to their employee for credit risk
management
 5.9 Recommendations

I have found there is lots of work pressure in the credit department for preparing loans proposal.
There most worth thing was for me this department is more confidential so there are not have
much work for me as intern. So in this case I have to collect my required information by asking
to officers of credit department and I also did some task what gave my supervisor to me. After
completing my internship I made some recommendation for SBAC Bank.

 In Bangladesh there is no risk measuring Model. Bangladesh Bank should take

immediate steps to introduce a risk measuring model by which all Banks can measure the
credit risk clearer.
 Although they are offering some services, retail loans etc but till now they are not
updating in the website so, they need to have more active marketing department.
 For making service easier SBAC Bank should establish New ATM machine.
 Till now they have only 54 branches all over the Bangladesh including principal branch.
So, they have to have more branches for their growth.
 SBAC Bank should adopt borrower insurance itself to make more secured loans.
 Authority should give their intention so that loan does not make without proper
documentation.
 SBAC bank should gives more concern about making seminar or training program for
their employee its will help to make more secured their credit and its will help to decrease
the risk level also.
 SBAC bank should increase their number of expert employees. Most of the not that much
expert so need to train up them very soon.
 SBAC Bank should have more loan categorizes to complete with other banks.
 5.10 Conclusion

In my point of view, success in the banking business largely depends on effective lending and
effective lending depends on successful credit risk management and also the minimizing risk
level, less the amount of loan losses, the more the income will be from lending etc. The more the
income from lending operations the more will be the profit of the bank. SBAC bank needs to
have more concern on profit making also to provide better services to the customers.

They are more concern about credit lending by this way they are able to minimize their risk level
in case of credit lending. Also right this position their risk management is on satisfaction level
but they should give more concern no lending procedure.

After my investigation I can say that, SBAC Bank’s products and services are satisfactory to
customers but they need more continuously support to meet the challenges of developing new
products and services to match the specific requirements of customers.

As a very new bank their growth is more than enough but to compete to other banks they have to
be faster to engage in every sector in the economy. They have very modern banking plan I hope
very near future they will meet their goal. After that their tagline “LOCAK BANK WITH
GLOBAL VISION” will be successful.
 5.11 References

 SBAC Bank Limited,2013.History of the Company.[online]Available at:<

http://www.sbacbank.com/index.php>[Accessed 10 February 2017]

 SBAC Bank Ltd,2013. Corporate Information.[online]Available at:<

http://www.sbacbank.com/bod.php>[Accessed 12 February 2017]

 SBAC Bank Ltd,2013.Product and services.[online]Available at:<

http://www.sbacbank.com/our_services.php>[Accessed 15 February 2017]

 SBAC Bank Ltd,2013.annual_report_2015.pdf .[online]Available at:<

http://www.sbacbank.com/downloads/annual_report_2015.pdf > [Accessed 20.February
2017]
 Collis, J. & Hussey, R. (2003) Business Research: a practical guide for undergraduate
and postgraduate students, second edition. Basingstoke: Palgrave Macmillan.

 A.M. Tamim Ahmed. (2014). Minimizing credit

Risk level.
[pdf]Availableat:<http://dspace.bracu.ac.bd/xmlui/bitstream/handle/10361/3352/092
04053.pdf?sequence=1>[Accessed 20 February 2017].

 Rifat Sharmin. (2014).1026413.pdf. [pdf]Available

at:<http://dspace.bracu.ac.bd/xmlui/bitstream/handle/10361/3215/10264013.pdf?sequenc
e=1.> [Accessed 15 March 2017].
Appendix
 Questionnaire:

Questionnaire for Loan holder & Employees of South bangle Agriculture & Commerce
Bank Limited.

I am a student of IUBAT—International University of Business Agriculture & Technology. My

Program is BBA (Major in Finance and Banking). I have undertaken a research project under the
name of “A Critical Analysis of Credit Risk management of South bangle Agriculture &
Commerce Bank Limited” for my BUS 490 Practicum Defense. I am appreciating your honest
answers to the questions. Thank you for your time.

Name of Respondent:

Gender: Male Female

Occupation:

1. SBAC Bank judges the loan holder before granting any credit-
o Strongly Disagree
o Disagree
o Neither Agree nor Disagree
o Agree
o Strongly agree

2. Guidelines of Bangladesh Bank are maintained in credit risk management-

o Strongly Disagree
o Disagree
o Neither Agree nor Disagree
o Agree
o Strongly agree
 3. The Credit risk department has enough knowledge on risk management -
o Strongly Disagree
o Disagree
o Neither Agree nor Disagree
o Agree
o Strongly agree

4. CRM department give loan by fulfilling proper documents -

o Strongly Disagree
o Disagree
o Neither Agree nor Disagree
o Agree
o Strongly agree

5. SBAC Bank have customer oriented own credit risk management strategy-
o Strongly Disagree
o Disagree
o Neither Agree nor Disagree
o Agree
o Strongly agree

6. The CRM department employees of SBAC Bank are getting enough support from SBAC
bank authority-
o Strongly Disagree
o Disagree
o Neither Agree nor Disagree
o Agree
o Strongly agree